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Marshal T. Simpson Trust v. Invicta Networks, Inc.

United States District Court, D. Delaware

April 19, 2017

MARSHAL T. SIMPSON TRUST, DONALD S. SIMPSON TRUST, and CHRISTOPHER BOYD, Plaintiffs,
v.
INVICTA NETWORKS, INC., VICTOR SHEYMOV, WILLIAM ESREY, ROBERT J. HALLMAN, and R. JAMES WOOLSEY, Defendants.

          Peter B. Andrews, Esquire, Craig J. Springer, Esquire, and David M. Sborz, Esquire of Andrews & Springer LLC, Wilmington, Delaware. Counsel for Plaintiffs. Of Counsel: Matthew L. Dameron, Esquire of Williams Dirks Dameron LLC, Kansas City, Missouri.

          Kurt M. Heyman, Esquire and Dominick T. Gattuso, Esquire of Proctor Heyman Enerio LLP, Wilmington, Delaware. Counsel for Defendants. Of Counsel: Mark A. Thornhill, Esquire and Angus Dwyer, Esquire of Spencer Fane LLP, Kansas City, Missouri.

          MEMORANDUM OPINION

          Robinson, Senior District Judge

         I. INTRODUCTION

         Plaintiffs Marshal T. Simpson Trust, Donald S. Simpson Trust, and Christopher Boyd (collectively, "plaintiffs") are shareholders of Invicta Networks, Inc. ("Invicta"), a company in the field of cyber-security technology no longer operating as a going concern. (D.I. 1 ¶ 66; Dl. 51 at 1) During some or all of the relevant time period, Invicta's board of directors was comprised of defendants Victor Sheymov ("Sheymov"), William Esrey ("Esrey"), Robert J. Hallman ("Hallman"), and R. James Woolsey ("Woolsey").[1] (D.I. 51 at 1) Sheymov also served as Invicta's president, chief executive officer, and chairman of the board. (D.I. 1 ¶ 7).

         Perceiving Invicta to be a "failed" business, plaintiffs filed a complaint on November 14, 2014 asserting various claims against different combinations of defendants. (D.I. 1) Defendants Esrey, Hallman, and Woolsey (collectively, the "director defendants") have moved to dismiss any claims or parts of claims asserted against them. (D.I. 50) Those claims include count 1 against all defendants for breach of fiduciary duty, count 2 against all defendants for negligence, count 7 against Esrey for fraud, and count 8 against Esrey for negligent misrepresentation. (D.I. 1 ¶¶ 93-104, 137-52) The court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1332(a). For the reasons discussed below, the director defendants' motion to dismiss is granted.

         II. BACKGROUND

         Invicta's initial product InvisiLAN provided network computer security technology that Invicta intended to market to government and corporate clients. (D.I. 1 ¶¶ 13-14) Invicta developed a similar product called WizArmor intended for individual consumers. (Id. at ¶ 15) In 2006, representatives of Invicta, including Sheymov, solicited Marshal Simpson for investments in the company. (Id. at ¶ 19) Marshal Simpson shared the information he received with Donald Simpson and Christopher Boyd. (Id. at ¶ 34) After receiving additional information about Invicta, Donald Simpson, on behalf of the Donald S. Simpson Trust, invested in Invicta in January 2007. (Id. at ¶ 44) Marshal Simpson, on behalf of the Marshal T. Simpson Trust, and Christopher Boyd invested in Invicta in January 2009. (Id. at ¶ 61 -62)

         Throughout 2011, plaintiffs received various updates about Invicta's product development, marketing, and sales. (Id. at ¶¶ 65-70) Sheymov stated that the past year had been "very disappointing." (Id. at ¶ 68) In May 2013, Sheymov emailed Marshal Simpson that Invicta continued to be ignored, and he was considering leasing or selling the company's intellectual property. (Id. at ¶ 75) In September 2013, Sheymov emailed Marshal Simpson that WizArmor was no longer available due to lack of funds to support distribution. (Id. at ¶ 76) Sheymov added that he was in discussions with a buyer for Invicta. (Id.) In October 2013, Sheymov emailed Marshal Simpson that he was still working on a sale of Invicta and there were no other activities at the company at that time. (Id. at ¶ 80) Plaintiffs filed their complaint almost a year later alleging fraud, negligent misrepresentation, and breach of fiduciary duty. (D.I. 1)

         III. STANDARD OF REVIEW

         To survive a motion to dismiss under Fed.R.Civ.P. 12(b)(6), a plaintiff must plead facts sufficient to "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The factual allegations do not have to be detailed, but they must provide more than labels, conclusions, or a "formulaic recitation" of the claim elements. Id. at 678. Finally, the court must accept "as true the factual allegations in the complaint and all reasonable inferences that can be drawn therefrom." Trump Hotels & Casino Resorts, Inc. v. Mirage Resorts Inc., 140 F.3d 478, 483 (3d Cir. 1998).

         IV. DISCUSSION

         The director defendants have moved to dismiss the counts asserted against them based on the failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6), the failure to join an indispensable party pursuant to Fed.R.Civ.P. 12(b)(7), the failure to plead demand futility pursuant to Fed.R.Civ.P. 23.1, and untimeliness under the applicable statute of limitations. (D.I. 51) The court need not address each of these arguments as it is sufficient grounds to dismiss counts 1 and 2 for failure to plead demand futility and counts 7 and 8 for failure to state a claim.

         A. Counts 1 and 2: ...


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