ORDER DENYING MOTION TO DISMISS VERIFIED
Montgomery-Reeves Vice Chancellor
on February 1, 2016, Plaintiff Village Green Holding LLC
("VG Holding"), Defendant Village Green Residential
Properties, LLC ("Village Green Residential"),
Defendant VGM Clearing, LLC ("VGM Clearing"), and
Defendant Jonathan Holtzman entered into a Redemption
Agreement (the "Redemption Agreement");
on January 17, 2017, Village Green Residential filed a
complaint against CCI Historic, Compatriot Capital Inc., VG
ECU Holdings LLC, and Morrow Park Holding LLC (the
on April 20, 2017, VG Holding filed the Verified Complaint
against Village Green Residential, VGM Clearing, Holtzman,
and City Club Apartments, LLC ("City Club") in a
separate action (the "Second Action");
on May 16, 2017, Village Green Residential moved under Court
of Chancery Rule 12(b)(1) to dismiss or transfer to the
Superior Court the complaint in the Second Action;
on October 10, 2017, the Court consolidated the First Action
and the Second Action;
on December 13, 2017, the Court heard oral argument on the
THEREFORE, THE COURT HEREBY FINDS AND ORDERS AS FOLLOWS:
Court has reviewed the parties' briefs, supporting
submissions, and the applicable law.
Motion to Dismiss or Transfer is DENIED because I find that
the Court has subject matter jurisdiction over Counts I and
II of the complaint in the Second Action under 6 Del.
C. § 18-111 ("Section 18-111"), and I
exercise my discretion to retain jurisdiction over Counts III
and IV under the clean-up doctrine.
Court of Chancery "can acquire subject matter
jurisdiction over a case in three ways: (1) the invocation of
an equitable right; (2) the request for an equitable remedy
when there is no adequate remedy at law; or (3) a statutory
delegation of subject matter jurisdiction." Testa v.
Nixon Unif. Serv., Inc., 2008 WL 4958861, at *2 (Del.
Ch. Nov. 21, 2008) (quoting Medek v. Medek, 2008 WL
4261017, at *3 (Del. Ch. Sept. 10, 2008)).
Holding contends that the Court has jurisdiction over Counts
I and II, under Section 18-111 of the Limited Liability
Company Act, which grants the Court of Chancery subject
matter jurisdiction over:
Any action to interpret, apply or enforce the provisions of a
limited liability company agreement, or the duties,
obligations or liabilities of a limited liability company to
the members or managers of the limited liability company, or
the duties, obligations or liabilities among members or
managers and of members or managers to the limited liability
company, or the rights or powers of, or restrictions on, the
limited liability company, members or managers, or any
provision of this chapter, or any other instrument, document,
agreement or certificate contemplated by any provision of
this chapter, may be brought in the Court of Chancery.
6 Del. C. § 18-111. Relying on Duff v.
Innovative Discovery LLC, 2012 WL 6096586 (Del. Ch. Dec.
7, 2012), VG Holding argues that interpretation of rights and
obligations under a redemption agreement fall under Section
18-111. In Duff, the parties entered into an equity
redemption agreement to sell their interest back to the
company. Id. at *1. The agreement included terms and
conditions, including a warranty that the LLC would cover the
members' tax liability for 2011 and 2012. Id.
The plaintiffs in Duff brought a breach of contract
claim related to the tax warranty in the redemption agreement
and argued that the Court of Chancery had jurisdiction over
the claim under Section 18-111. Id. at *3, *4. The
Court of Chancery held that "Section 18-702 [of the
Limited Liability Act] explicitly contemplates that
redemption agreements may be entered into by members or
managers of an LLC as part of their internal dealings with
the LLC." Id. at *6. A redemption agreement
"is technically an agreement among current members of an
LLC and the LLC as to how they are going to order their
business in connection with and after the repurchase of the
members' interests." Id. at *7. Therefore,
the Court "conclude[d] that redemption agreements are
agreements contemplated by the LLC Act[, ]"
id., and "[t]hus, Section 18-111 confers
jurisdiction on this court to hear an 'action to
interpret, apply or enforce' the Redemption Agreement at
issue in this case." Id. Here, Counts I and II
of the complaint in the Second Action relate to alleged
breaches of the Redemption Agreement, which was entered into