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Touch of Italy Salumeria & Pasticceria, LLC v. Bascio

Court of Chancery of Delaware

January 13, 2014

TOUCH OF ITALY SALUMERIA & PASTICCERIA, LLC, a Delaware Limited Liability Company, ROBERT CIPRIETTI and JOSEPH CURZI, III, Plaintiffs,
v.
LOUIS BASCIO and FRANK BASCIO, Trading as FRANK AND LOUIE'S ITALIAN STORE, Defendants.

Submitted: November 18, 2013

Larry W. Fifer, of LAW OFFICE OF LARRY W. FIFER, Lewes, Delaware, Attorney for Plaintiffs.

David C. Hutt, Dennis L. Schrader, and Thomas E. Hanson, Jr., of MORRIS JAMES WILSON HALBROOK & BAYARD LLP, Georgetown, Delaware, Attorneys for Defendants.

MEMORANDUM OPINION

GLASSCOCK, Vice Chancellor

A lie can be an insidious thing. It can destroy friendships and business relationships. It can also be the basis for a successful lawsuit, where it is in aid of fraud or conceals actionable wrongdoing. But sometimes a lie, no matter how morally problematic, is just a lie. This case, as pled, involves such a lie.

In 2009, several individuals formed an LLC, Touch of Italy Salumeria & Pasticceria, [1] LLC ("Touch of Italy") which operates a specialty Italian grocery in Rehoboth Beach. One member, Robert Ciprietti, provided cash in exchange for his membership; at least one other member, Louis Bascio, [2] a defendant here, provided business goodwill and sweat equity. The business was successful, and an additional member entered, while others left. Eventually, Louis decided to leave the business. He gave notice, as specified in the LLC agreement, and withdrew as a member on December 15, 2012.

The lie alleged is this: Louis told the other members that he was moving to Pennsylvania, perhaps to open a business there. Although he told them he would not compete with Touch of Italy after his withdrawal, ten weeks later Louis and his brother, Frank Bascio, also a defendant here, formed their own LLC, Bascio Bros. Italy, LLC ("Bascio Bros."), [3] which then opened a competing Italian grocery, doing business as Frank and Louie's Italian Store ("Frank and Louie's"). Frank and Louie's is located on the same block in Rehoboth Beach as Touch of Italy. Louis' former partners, understandably, feel betrayed. Those partners, however, chose to associate themselves with Louis under an LLC agreement. Delaware's law with respect to LLCs, as this Court has repeatedly noted, is explicitly contractarian; it allows those associating under this business format to structure their relationship in the way they believe best suits them and their business. This particular LLC agreement was written to allow members to readily withdraw, without triggering any obligation to forgo competition thereafter. Thus, Louis faced no legal impediment to withdrawing and opening Frank and Louie's as a competing grocery. Given this fact, had his fellow members known his true intentions—that is, had the lie as alleged never occurred—they would have been contractually powerless to change the course of events. The Plaintiffs can point to no acts or omissions of their own, taken in reliance on the lie. They allege that Louis breached fiduciary duties, but fail to allege a single act undertaken before his withdrawal, other than the lie, in furtherance of his competing business or in derogation of any duty to Touch of Italy. In reality, this complaint is an attempt to achieve a result—restraint on post-withdrawal competition—that the members could have but chose not to forestall by contract. The Defendants have moved to dismiss the Plaintiffs' Verified Complaint for Permanent Mandatory Injunction (the "Complaint").[4] For the reasons below, the Complaint fails to state a claim, and must be dismissed.

I. BACKGROUND

The following facts are taken from the Complaint. In February 2009, Robert Ciprietti, Diane Bascio, Frank Bascio, and Louis Bascio entered into an LLC agreement "to establish and operate a retail food business specializing in Italian foods and food products at 33A Baltimore Avenue, Rehoboth Beach, " thereby establishing Touch of Italy.[5] In support of this venture, Ciprietti provided $100, 000 in initial capital, while Louis provided labor and goodwill.[6]

In March 2011, Ciprietti, Louis, and Joseph Curzi III entered into an Amended and Restated Limited Liability Company Agreement of Touch of Italy Salumeria & Pasticceria, LLC (the "Amended LLC Agreement").[7] In exchange for an initial contribution of $17, 000 "and other consideration, " Curzi received a one-third interest in Touch of Italy.[8] After entering into the Amended LLC Agreement, both Ciprietti and Louis held a one-third interest in the LLC.[9] To facilitate this arrangement, Frank and Diane Bascio "sold and conveyed all of their interest in Touch of Italy to the remaining three members."[10]

As of October 2012, the business had been "successful and profitable."[11] Nevertheless, that month, Louis provided his fellow members with notice of his withdrawal from the LLC, to occur "on or about January 1, 2013."[12] Pursuant to Section 19(b) of the Amended LLC Agreement:

Any member may give written notice to the other members of that members election [sic] to cease as a member and quit the company and the remaining members shall have sixty (60) days from the receipt of said notice during which to elect to purchase the quitting member's interest in the company. The purchase price under such circumstances shall be fair market value of that member's interest as determined hereafter.[13]

The Plaintiffs allege that, after receiving notice of Louis' impending resignation, "there were various discussions between the three members of the limited liability company and their accountant concerning what should be done in order to honor the original agreement between the parties whereby Robert Ciprietti was to receive payment of $100, 000.00 for his initial capital contribution as set forth in the original agreement."[14] Section 9(b) of the Amended LLC Agreement, which governs the relationship among the parties before me, provides that:

Upon the expiration of five years after October 3, 2009, after thirty days advance written notice, Robert Ciprietti may request reimbursement of the $100, 000.00 at which time the company shall make such distribution to Ciprietti, provided however, that said distribution shall be made in [sic] over a period of ten months in monthly ...

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