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In re AETEA Information Technology, Inc.

Court of Chancery of Delaware

January 29, 2015

In re: AETEA Information Technology, Inc.

Submitted: October 23, 2014

Thad J. Bracegirdle, Esquire Wilks, Lukoff & Bracegirdle, LLC

Angela C. Whitesell, Esquire Potter Anderson & Corroon LLP

Dear Counsel:

Intervenor Lauren Sardis ("Intervenor" or "Ms. Sardis") has moved to compel discovery in a proceeding brought under 8 Del. C. § 279 for the appointment of a receiver for AETEA Information Technology, Inc. ("AETEA" or the "Company"), a dissolved Delaware corporation. Section 279 actions are generally narrowly focused statutory proceedings with limited discovery. However, this case is complicated by Intervenor's contention that Petitioner Jeffrey I. Sardis ("Petitioner" or "Mr. Sardis") is utilizing Delaware's statute to circumvent a New York State divorce judgment, which, according to Intervenor, forbids Mr. Sardis from self-dealing with AETEA.[1]

Mr. Sardis has indicated that he might purchase AETEA's assets from the receiver. While a sale by a Court-appointed receiver would generally be the antithesis of self-dealing, Intervenor asserts that in this case, such action would constitute the final step of an illicit scheme to eliminate her interest in the Company cheaply. She advances equitable defenses against a receiver's appointment, which, according to her, is a device attempting to "cleanse" Petitioner's inequitable conduct.

I. BACKGROUND

A. Petitioner Requests a Receiver for AETEA

AETEA was formed as a Delaware corporation on November 13, 2003. Petitioner is the Company's president and only director. The sole stockholder is a Delaware corporation, JLAJ Holding Corp. ("JLAJ"), of which Petitioner is also the president and single director. He owns JLAJ with Intervenor, who is his ex-wife. Petitioner and Intervenor own two-thirds and one-third of JLAJ's common stock, respectively. Their ownership percentages were established by a Stipulation of Settlement (the "Settlement") that resolved their divorce proceedings.

The parties were divorced in New York State in 2009, after having entered into the Settlement in September 2008. Along with the Settlement, they entered into the JLAJ Holding Corp. Stockholders Agreement (the "Stockholders Agreement"), which set forth terms and conditions regarding the operations of JLAJ and AETEA. Intervenor's rights under the Settlement and Stockholders Agreements were in lieu of alimony and maintenance. The Stockholders Agreement contemplates a sale of AETEA through which the Intervenor would receive the value of her interest.

On April 15, 2014, Petitioner filed the Verified Petition for Appointment of Receiver for AETEA with this Court. The parties do not dispute that AETEA was dissolved in technical compliance with the Delaware General Corporation Law ("DGCL"). In his capacity as AETEA's sole director, Petitioner acted by written consent to adopt resolutions to (i) dissolve the Company, (ii) approve a Plan of Liquidation and Dissolution (the "Plan"), and (iii) submit the Plan to the Company's sole stockholder, JLAJ, for approval. JLAJ approved the dissolution and the Plan based on Petitioner's action by written consent. AETEA's Certificate of Dissolution was filed with Delaware's Secretary of State on April 11, 2014.

The Plan directed Petitioner to seek the appointment of a receiver to negotiate the sale of AETEA's property and assets, potentially to an entity owned by or affiliated with him. Petitioner insists that an independent receiver will ensure that AETEA's winding up and liquidation are fair and equitable to all stakeholders.

B. Ms. Sardis Intervenes

Intervenor objects to the appointment of a receiver on the grounds that AETEA's dissolution, allegedly undertaken in violation of the Settlement and Stockholder Agreements, is invalid and unenforceable. She claims that any sale of AETEA's assets must be an "Approved Sale" as defined by the Stockholders Agreement, which prohibits a sale to Petitioner or any entity affiliated with him.[2]Intervenor charges Petitioner with attempting to avoid his contractual obligations and defrauding her of value to which she is entitled under the divorce agreements. Supposedly, Petitioner caused AETEA's financial condition to deteriorate so that he ...


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