United States District Court, D. Delaware
A. Meluney, BERGER HARRIS LLP, Wilmington, DE; Alan L. Frank,
ALAN L. FRANK LAW ASSOCIATES, Jenkintown, PA.
Attorneys for Plaintiff Herbert W. Mondros, Diane M. Coffey,
MARQOLIS EDELSTEIN, Wilmington, DE; Paul N. Silverstein,
Brian M. Clarke, ANDREWS KURTH KENYON LLP, New York, NY.
Attorneys for Defendants
ANDREWS, U.S. DISTRICT JUDGE.
Lars Cavi filed this action on December 28, 2015. (D.I. 1).
He filed an amended complaint on April 20, 2016. (D.I. 24).
The amended complaint asserts various tort, contract, and
quasi-contract claims against Defendants Evolving Systems,
Inc., Evolving Systems NC, Inc. ("NC"),
Ratelntegration, Inc. ("RII"), and Thomas
Thekkethala. (See generally id.). In light of my
Memorandum Order of March 27, 2017, Evolving Systems, Inc. is
no longer a defendant in this case. (D.I. 42 at 3).
before the Court is Defendants' Motion for Summary
Judgment (D.I. 98) and related briefing (D.I. 99, 104, 113).
For the reasons set forth herein, Defendants' motion is
granted in part and denied in part.
suit arises out of Plaintiff s recruitment to and subsequent
employment with Defendant RII. RII is a Delaware corporation
in the business of "mobile marketing." (D.I. 24
¶ 4). Its principal place of business is in North
Carolina. (Id.). RII is a subsidiary of Defendant
NC. (Id. ¶ 8). Defendant Thekkethala is the
former CEO and President of RII and was a member of its board
of directors. (Id. ¶ 5).
facts underlying this dispute are well-known to the parties
and are fully set forth in the February 17, 2017 Report and
Recommendations issued by United States Magistrate Judge Mary
Pat Thynge. (See D.I. 37).
filed a motion to dismiss the amended complaint as to all
counts but Count V on May 31, 2016. (D.I. 28). The motion was
referred to Judge Thynge (D.I. 36), who issued a Report and
Recommendations (D.I. 37). On March 27, 2017, 1 adopted the
Report and Recommendations except as to sections G, H, and I.
(D.I. 42 at 3). Accordingly, I dismissed Count VI and all
counts against Evolving Systems, Inc. (Id.).
counts remain. Plaintiff seeks to recover unpaid sales
commissions and damages for Defendants' misrepresenting
the value of Plaintiff s RII shares and concealing stock
liquidation preferences. (D.I. 24 ¶ 12).
court shall grant summary judgment if the movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law."
Fed.R.Civ.P. 56(a). The moving party has the initial burden
of proving the absence of a genuinely disputed material fact
relative to the claims in question. Celotex Corp. v.
Catrett, 477 U.S. 317, 330 (1986). Material facts are
those "that could affect the outcome" of the
proceeding, and "a dispute about a material fact is
'genuine' if the evidence is sufficient to permit a
reasonable jury to return a verdict for the nonmoving
party." Lamont v. New Jersey, 637 F.3d 177, 181
(3d Cir. 2011) (quoting Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986)). When determining
whether a genuine issue of material fact exists, the court
must view the evidence in the light most favorable to the
non-moving party and draw all reasonable inferences in that
party's favor. Scott v. Harris, 550 U.S. 372,
380 (2007); Wishkin v. Potter, 476 F.3d 180, 184 (3d
their motion, Defendants seek summary judgment on Plaintiffs
counts for breach of fiduciary duty (Count I), common law
fraud (Counts II, III), securities fraud (Count XIII), breach
of the covenant of good faith and fair dealing (Counts VII
and VIII), quantum meruit (Count IX), promissory
estoppel (Counts X, XI), and unjust enrichment (Count XII).
(See generally D.I. 99).
Count I: Breach of Fiduciary Duty
Defendants move for summary judgment on Count I, which
alleges breach of fiduciary duty against Defendant
Thekkethala. (D.I. 24 ¶¶ 161-77). More
specifically, Count I alleges that Thekkethala breached his
fiduciary duties of loyalty, care, and good faith by making
misrepresentations and omissions to Plaintiff in regard to
the value of RII's shares, the value of Plaintiffs stock
options and ownership interest in RII, and the "payout
structure in the case of a sale of RII." (Id.).
argue summary judgment is appropriate as to Count I because
there are no material facts in dispute in regard to the
duties of care or loyalty owed to Plaintiff by Thekkethala.
(D.I. 99 at 22-23). Defendants point to the exculpation
provision in RII's Certificate of Incorporation, which
shields the company's directors from liability for
breaches of the duty of care. (Id. at 22). They
maintain also that Plaintiff has failed to rebut the
presumption of the business judgment rule. (Id. at
responds by arguing essentially that neither the exculpation
clause nor the business judgment rule protects Thekkethala in
this case because neither shields liability for acts done in
bad faith. (D.I. 104 at 21). Here, Plaintiff alleges that
Thekkethala did not act in good faith because "he
intentionally deceived Cavi about the value of the stock and
actively concealed liquidation preferences and management
with Plaintiff and thus will deny Defendants' motion for
summary judgment as to Count I.
Delaware law, "directors owe a duty not to speak
falsely" when communicating with shareholders. In re
Allergan, Inc. Stockholder Litig., 2014 WL 5791350, at
*10 (Del. Ch. Nov. 7, 2014) (citing Malone v.
Brincat, 722 A.2d 5, 10 (Del. 1998)). The Delaware
Supreme Court has stated:
Whenever directors communicate publicly or directly with
shareholders about the corporation's affairs, with or
without a request for shareholder action, directors have a
fiduciary duty to shareholders to exercise due care, good
faith and loyalty. It follows a fortiori that when
directors communicate publicly or directly with shareholders