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Perry v. Neupert

Court of Chancery of Delaware

February 15, 2019

LILLY LEA PERRY, Plaintiff,
v.
DIETER WALTER NEUPERT and CÔTE D'AZUR ESTATE CORPORATION, Defendants, and THE BGO FOUNDATION, Relief Defendant. CÔTE D'AZUR ESTATE CORPORATION, Counterclaim Plaintiff,
v.
LILLY LEA PERRY, Counterclaim Defendant.

          Date Submitted: February 5, 2019

          Jeremy D. Anderson, FISH & RICHARDSON P.C., Wilmington, Delaware; Counsel for Lilly Lea Perry.

          Norris P. Wright, William M. Kelleher, Phillip A. Giordano, GORDON, FOURNARIS & MAMMARELLA, P.A., Wilmington, Delaware; Counsel for The BGO Foundation.

          Douglas D. Hermann, James H. S. Levine, PEPPER HAMILTON LLP; Counsel for Côte d'Azur Estate Corporation.

          Dieter Walter Neupert, pro se.

          MEMORANDUM OPINION

          LASTER, V.C.

         The parties dispute who owns the equity of defendant Côte D'Azur Estate Corporation. The entity came into existence in 2001 as a single-member, member-managed, Delaware limited liability company named Côte D'Azur Estate LLC. Non-party Israel Igo Perry was its sole member. Israel died in 2015, survived by plaintiff Lilly Lea Perry (his wife) and non-parties Tamar and Yael Perry (their daughters).[1] Lilly contends that Israel was the LLC's sole member when he died and that his interest in the LLC passed to his estate. The disposition of the estate is currently subject to probate proceedings in the United Kingdom.

         In 2016, as part of the events giving rise to this litigation, defendant Dieter Walter Neupert filed a certificate of conversion with the Delaware Secretary of State that converted the company into a corporation. For simplicity, this decision refers to the entity in both manifestations as the "Company." Neupert also filed a new certificate of incorporation for the Company that authorized 10, 000 shares of stock, and he prepared minutes and a share certificate which purported to document the fact that all of the Company's shares were owned by The BGO Foundation (the "Foundation").[2] Lilly asserts that Neupert had no authority to take these actions.

         The Foundation is a private Liechtenstein foundation, which is an entity roughly analogous to a Delaware statutory trust. The Foundation is one of over thirty entities comprising Israel's complex estate plan, which he and his advisors called "the Structure." Neupert, a Swiss attorney, was the chief architect of the Structure. Non-party Lopag Trust, a Swiss commercial trust company, formed and manages many of the entities in the Structure, including the Foundation. Principals and employees of Lopag, including non-party Dominik Naeff, served on the Foundation's governing board of trustees and acted on its behalf. Neupert was a co-founder of Lopag, and he served on its governing board when he took the actions that Lilly challenges.

         Lilly originally sued the Company and Neupert, seeking to invalidate the conversion and establish her beneficial ownership of the Company's equity in her capacity as Israel's sole heir under his last will and testament. She subsequently moved for and received leave to add the Foundation as a relief defendant. The Foundation responded by moving to dismiss the complaint for lack of personal jurisdiction. I deferred ruling on the Foundation's motion, holding that an evidentiary hearing was necessary to resolve whether personal jurisdiction existed.

         A Delaware court can exercise personal jurisdiction over a non-resident co-conspirator who knew or had reason to know that the conspiracy had a Delaware nexus. Lilly proved that the Foundation and Neupert conspired to seize the Company's equity, thereby extinguishing her beneficial interest and engaging in the tort of conversion. Lilly proved that as part of that conspiracy, Neupert caused corporate documents to be filed with the Delaware Secretary of State, establishing the necessary Delaware nexus. Lilly proved that Naeff and his colleagues at Lopag, acting on behalf of the Foundation, helped Neupert develop his plan and assisted him in his efforts. These activities support the exercise of personal jurisdiction over the Foundation as Neupert's co-conspirator.

         In response to Lilly's contentions, the Foundation and its co-defendants claim they could not have engaged in a conspiracy because (i) the Foundation already owned all of the equity in the Company long before Neupert acted in 2016, and (ii) the Foundation granted Neupert a power of attorney in February 2016, executed in its capacity as the Company's sole member, which authorized Neupert to act as he did. The defendants ground their claim on a deed of assignment that Israel executed on May 1, 2013 (the "Deed of Assignment"), which recites that he was assigning his equity interest in the Company and three other entities to the Foundation.

         The Deed of Assignment did not effectuate a transfer of Israel's member interests to the Foundation, nor could it have resulted in the Foundation becoming the Company's sole member. The Deed of Assignment documented Israel's intent to make an inter vivos gift. Israel never completed the gift, both because he never delivered his member interests to the Foundation, and because the Deed of Assignment was not an effective donative instrument. When signing the Deed of Assignment, Israel did not intend to accomplish an immediate transfer of his equity; he wanted to evaluate the tax implications of the move before completing it. The transfer was never completed. Instead, Israel revoked the gift in December 2013 when he decided not to complete the transfer because of adverse tax consequences in France.

         Assuming counterfactually that Israel had intended for the transfer of interests to be immediately effective, the transaction could not have resulted in the Foundation becoming the Company's sole member. The transfer at most would have resulted in the Foundation becoming an assignee. Moreover, under the Delaware Limited Liability Company Act (the "LLC Act") as it existed in May 2013, the transfer would have resulted in the Company having no members, causing it to dissolve. Along this alternative timeline, the Foundation could not have become the Company's sole member and could not have authorized Neupert's actions.

         The evidence proves that the Foundation's representatives knew that the Deed of Assignment was never implemented. Despite this knowledge, they caused the Foundation to participate fully in Neupert's scheme to assert control over the Company. They did so in an effort to coerce Lilly into accepting the disposition of Israel's property that Neupert and Lopag wanted to implement. As part of that scheme, the Lopag representatives helped Neupert manufacture documents to substantiate the Foundation's claim of ownership. Naeff and his colleagues at Lopag also sought to obtain a legal opinion attesting to the valid issuance of the shares. In an effort to secure a favorable opinion, Naeff and a Lopag colleague misled the law firm by withholding material information. When the law firm balked at issuing the opinion, Neupert claimed he could provide a power of attorney from the Foundation that gave him the power to act. In late September or October 2016, Lopag and Neupert manufactured the power of attorney and backdated it to February 5, 2016, ostensibly before Neupert filed the certificate of conversion and certificate of incorporation. In this court and elsewhere, the Foundation has aligned itself with Neupert, asserted that it owns all of the Company's equity, and argued in favor of the effectiveness of the Deed of Assignment, the power of attorney, the conversion, and other manufactured corporate documents. The evidence shows that these claims are false.

         Under the conspiracy theory of jurisdiction, the Foundation is properly subject to personal jurisdiction in this court as a relief defendant for purposes of claims challenging its ownership of the Company's equity. The Foundation's motion to dismiss for lack of personal jurisdiction is denied.

         I. FACTUAL BACKGROUND

         During a two-day evidentiary hearing, the parties introduced a total of 234 exhibits, and two fact witnesses testified live. The parties lodged two depositions and stipulated to the introduction of two affidavits from a third witness in lieu of live testimony. They submitted thirty stipulations of undisputed fact.[3]

         For purposes of the hearing, two competing adverse inferences were in play. Because Neupert refused to be deposed and declined to appear at the hearing, I ruled that I could draw inferences in Lilly's favor and adverse to the Foundation based on any relevant testimony that Neupert reasonably could have offered.[4] Because Lilly failed to timely review Israel's home computer and to produce responsive documents that it contained, I ruled that I could draw inferences in the Foundation's favor and adverse to Lilly based on information that the computer reasonably could have contained.[5]

         The burden of proof to establish facts supporting jurisdiction rests with the party asserting that jurisdiction exists.[6] The standard of proof is more flexible. "If the motion is decided on affidavits, the court should require only that plaintiff make out a prima facie case."[7] Eventually, however, the plaintiff must prove the facts necessary to establish personal jurisdiction "by a preponderance of the evidence."[8] If the court holds an evidentiary hearing on jurisdictional issues, then the court may make findings based on a preponderance of the evidence standard, or a court may use a less onerous "likelihood of success" standard.[9] In my view, a court would use the lower standard if the record presented at the evidentiary hearing provided some support for the assertion of jurisdiction but fell short of a preponderance. By asserting jurisdiction on a preliminary basis under the likelihood-of-success test, the court permits the case to proceed through discovery so that the court can make more definitive findings at trial.

         This decision makes findings of fact based on a preponderance of the evidence. Using this standard is warranted given the thoroughness and persuasiveness of the factual record, which predominantly consists of contemporaneous emails that provide a detailed account of the parties' actions. Its use also recognizes the substantial overlap between key facts relevant to the personal jurisdiction analysis, such as the validity of the Deed of Assignment, and the ultimate merits of the case. It is fair to the parties to apply this standard because, except for Neupert, all of the parties participated fully in the evidentiary hearing and in the discovery leading up to it. Applying this standard is also fair to Neupert, because he could have participated, but chose not to. Moreover, for purposes of the issues litigated at the evidentiary hearing, Neupert's interests aligned with those of the other defendants. In addition, the law firm that represented the Company at the hearing had represented Neupert from the start of the case until April 6, 2018, seven weeks before the evidentiary hearing, and on May 11, 2018, submitted a letter to the court from Neupert.

         As the party asserting that the Foundation is subject to jurisdiction, Lilly bore the burden to prove the necessary jurisdictional facts. Because the Deed of Assignment reflected an inter vivos gift, the Foundation, as donee, bore "the burden of establishing, by clear and convincing evidence, all facts essential to the validity of the purported gift."[10]

         A. The Structure, The Villa, And The Company

         During his lifetime, Israel accumulated significant wealth. To protect his wealth and minimize its tax burden, Israel moved the bulk of his assets into the Structure-a web of more than thirty entities domiciled in jurisdictions around the world.[11]

         The chief architect of the Structure was Neupert, a Swiss attorney and senior partner at Neupert Vuille Partners, a law firm based in Zurich, Switzerland.[12] Neupert describes himself as "an advocate specializing in aviation, banking, tax and cross-jurisdictional corporate law in Switzerland."[13]

         Other key contributors to the Structure included Dominik Naeff, Louis Oehri, and Ann Naeff-Oehri. They are principals of Lopag, which is an acronym for Louis Oehri and Partners AG.[14] Neupert co-founded Lopag, held shares in the firm, and served as a member of its governing board until November 18, 2016, when he resigned from the board and sold his interest.[15]

         One of Israel's assets was La Treille, a villa in the south of France (the "Villa"). To acquire the Villa and hold title to it, Israel caused the Company to be formed on May 1, 2001.[16] Its limited liability company agreement, also dated May 1, 2001, established a single-member, member-managed, Delaware limited liability company.[17] Israel was its sole member.[18] Later in May 2001, the Company acquired the Villa.[19]

         B. The Deed Of Assignment

         In mid-April 2013, Israel asked Neupert, Naeff, and Oehri to meet in Tel Aviv "in order to discuss the reorganization of the [F]oundation" and other estate-planning issues.[20]Israel was living under house arrest, so the meeting had to take place at his apartment.[21]According to public documents, Israel had been convicted of "embezzl[ing] more than £110m from a pension and insurance scheme that he set up in Israel in 1983."[22]

         In preparation for the meeting, Lopag updated the governing documents of the Foundation.[23] At the time, the members of the Foundation's board of trustees were Naeff, Oehri, and Markus Giger, a financial officer with Lopag.[24] Also in preparation for the meeting, Lopag prepared a series of documents for Israel to sign. Many of them would transfer aspects of his property to or among the various entities comprising the Structure.[25]

         In one of the anticipated moves, Israel would transfer the Company's equity to the Foundation.[26] In preparation for the Tel Aviv meeting, tax counsel warned Neupert and Naeff that if the Foundation became the owner of the Company on or before June 15, 2013, it would have adverse tax consequences in France for the 2013 tax year.[27]

         Neupert, Naeff, and Oehri flew to Tel Aviv on April 30, 2013.[28] On May 1, Neupert, Naeff, and Oehri met with Israel in his apartment.[29]

         During the meeting, Israel signed a document titled "Deed of Assignment." In its entirety, it stated:

The Undersigned, Israel I. Perry, born 23 April 1942, Israeli Passport No. 10922443 herewith assigns the entire share capital of the following companies
1. Greetnwin.com Inc, Delaware/USA
2. Solid Virgin Islands Ltd, BVI
3. Cote d'Azur Estate LLC, Delaware/USA
4. The Heritage Collection
as well as
all the pieces of art listed in the ARTLID List (pending approval by SOCA of the items contained in their Chattel List)
to the LUDWIG POLZER-HODITZ FOUNDATION, LI-9491 Ruggell
a Foundation according to Liechtenstein Law
The assignee herewith accepts the aforementioned assignment
Ruggell, 1st May 2013[30]

         Naeff and Oehri signed for the Foundation.[31]

         After the meeting ended, Naeff took the original back to Liechtenstein and kept it in his office.[32] On May 14, Naeff's secretary emailed Israel a copy of the executed Deed of Assignment along with other documents signed during the meeting in Tel Aviv.[33]

         Although Naeff testified during the evidentiary hearing and Oehri averred in an affidavit that they believed the Deed of Assignment effected an immediate transfer of the member interests in the Company from Israel to the Foundation, [34] the contemporaneous evidence tells a different story. Those documents show that Israel, Neupert, Naeff, and Oehri did not intend for the signing of the Deed of Assignment to implement an immediate transfer, because they wanted to avoid any adverse tax consequences for the Foundation during the 2013 tax year.[35] They believed that completing the transfer would require additional steps, and they planned to complete those steps after June 15.

         C. Israel Decides Not To Complete The Transfer.

         On June 14, 2013, just before the key date for tax reporting in France, Naeff emailed Israel to start the process of formally effectuating the transfers contemplated by the Deed of Assignment.[36] He explained that he needed a "direct contact to the local representative (Trust Company or lawyer) that can assist us in doing the necessary [sic]."[37]

         After not hearing back from Israel, Naeff sent the same email on June 25, 2013, to Jennifer Risse, Israel's assistant in the United States.[38] He followed up on July 1, then again on July 16.[39] On August 8, Naeff asked Risse to have the Company's registered agent "provide the necessary documents (e.g. share transfer agreement)" to complete the transfer.[40]

         On October 1, 2013, Risse put Naeff in touch with Augustin Partners, Israel's tax counsel in the United States.[41] Naeff asked them for help completing the transfers.[42] They "resigned shortly thereafter."[43]

         Later that month, Risse told Naeff that she was "going to need the Trust Documents regarding . . . Cote D'Azur" and the other entities "in order to do the share transfer."[44]Naeff replied that his assistant would provide the information.[45] Risse arranged for the law firm of Wiggin and Dana LLP to begin representing Israel "in connection with the transfer of [his] ownership interests in Cote D'Azure" and the other entities addressed in the Deed of Assignment.[46] No one at the Wiggin firm ever spoke directly with Israel.[47] The Wiggin firm eventually prepared a set of draft documents to implement the transfer of the Company's equity, consisting of (i) a statement of assignment of Israel's member interest to the Foundation, (ii) a letter to the Company from Israel advising the Company about the Deed of Assignment and the statement of assignment, and (iii) an amendment to the Company's LLC agreement to reflect the Foundation as a new member.[48]

         On November 5, 2013, Naeff checked in with Risse about the status of the transfer, which still had not been completed.[49] When Naeff followed up a week later, Risse told him that she was giving the attorneys "all the information" and that "[i]t's going to take some time."[50] Throughout November and early December 2013, Naeff continued to follow up with Risse.[51]

         Finally, on December 6, 2013, Risse circulated the documents from the Wiggin firm to both Naeff and Israel. She asked Israel to "look them over and let me know if they are good."[52]

         Israel never executed the documents.[53] Naeff followed up with Risse on December 11, 2013, but Israel still had not approved them.[54] On December 23, Naeff emailed Israel directly: "Based on the Deed of Assignment, signed on 01 May 2013, both, Greetnwin.com INC and Cote D'Azur Estate [sic] should have been transferred to [the Foundation]. Is there any reason from your side not to execute this transactions [sic]?"[55] Israel seemed to approve transferring the Company's equity, responding: "There is no reason why not to transfer the cote d'azure [sic] shares. We are checking now, weather [sic] the transfer of GnW shares would be considered as a tax event in the USA."[56] But subsequent documents establish that Israel decided not to complete the transfer to avoid adverse tax consequences in France.[57]

         D. The Status Of The Company At Israel's Death

         Israel died on March 18, 2015. At the time of his death, no further action had been taken to implement the transfer of the Company's equity. As noted, Israel had decided not to complete the transfer to avoid tax consequences in France, and he never signed the documents that the Wiggin firm prepared.

         When Israel died, his immediate family consisted of his wife Lilly and their two daughters, Tamar and Yael.[58] Israel named Lilly as his sole heir in his will, and his estate would be subject to probate in the United Kingdom (the "UK Estate"). Israel's will named Neupert as his executor, [59] but because of disputes that later arose between Neupert and Lilly, Neupert was never appointed to that role.[60]

         Under Israel's complex estate plan, only personal property that Israel owned at his death would pass under his will. Israel had transferred all of his other property to the Structure. Control over the transferred property rested with the advisors who controlled the entities in the Structure. To specify what he hoped they would do with the property, Israel dictated a document called the "Letter of Wishes."[61] The advisors were not legally bound to follow the Letter of Wishes, but as a business matter they would attempt to fulfill their client's requests.[62]

         After Israel's death, Lilly, Tamar, and Yael wanted to know what would happen to the Villa, which represented approximately twenty percent of the family's wealth.[63] In the Letter of Wishes, Israel had expressed a desire for the Villa to be transferred to a trust for Lilly's benefit.[64] Approximately one week after Israel's death, however, a lawyer representing Tamar found a copy of the Deed of Assignment. He asked Naeff about it.[65] On March 28, 2015, Naeff responded, copying Neupert:

This is [sic] assignment is known to us, but it was never executed as far as we are aware. And I'm glad about it with respect to Cote d Azure since reporting obligations in France (relevant due to the Villa in France) became very strict in the meantime and we have to plan the transfer into THE LIZA TRUST carefully now. Who can inform us about the actual shareholders/directors of Cote d Azure?[66]

         At the evidentiary hearing, Naeff testified that by "never executed" he meant "that this transfer has not been completed or finalized."[67] That is consistent with the evidentiary record before Israel's death.

         Shortly thereafter, Naeff circulated a chart of the Structure. He did not know where to put the Company, writing "??? TRUST."[68] He did not assert that the Foundation owned the Company's equity. In August 2015, Naeff circulated an updated version of the chart. This time he listed the Company as owned by "IIP (personally}."[69]

         Based on their conclusion that Israel owned the Company's equity when he died and that it passed to the UK Estate, Lopag representatives repeatedly told Lilly that the Villa was her responsibility. While alive, Israel personally paid for the maintenance expenses of the Villa.[70] After his death, Lilly asked Naeff and other Lopag representatives to have the Foundation cover the maintenance expenses.[71] They consistently told her that the Foundation did not own the Company, could not take any action with respect to the Villa, and would not cover any expenses.[72]

         E. The Threat Posed By The UK Probate Proceedings

         After Israel's death, Neupert and the principals of Lopag attempted to carry out the desires that Israel expressed in the Letter of Wishes.[73] They hoped to broker a global settlement among Lilly, Tamar, and Yael that would achieve that result.[74] But Neupert recognized that the probate process threatened the family's ownership of the Villa. Because Israel had owned the Company's equity personally when he died, the equity was part of the UK Estate and subject to the claims of Israel's creditors, including a class action seeking to recover millions on behalf of the pension funds that Israel had been convicted of defrauding.[75] Having the Company's equity pass through the UK Estate would also result in significant tax liabilities.

         Neupert wanted to claim that the Company's equity was not part of the UK Estate but rather part of the Structure. In August 2015, he asked Naeff to find documents that would enable Neupert to "show that [the Company] was somewhere in the [S]tructure."[76]Later that month, Neupert told Naeff that they needed documentation that would enable them to appoint a new director for the Company who could issue equity to show that the Company was part of the Structure.[77] Naeff agreed that they needed someone with authority to issue equity, and he asked whether Neupert could sign the necessary documents as Israel's executor under the will.[78] Neupert responded that if he signed the necessary documents in his capacity as executor, then they could not avoid having the equity become part of the UK Estate.[79]

         At this point, Naeff remembered the Deed of Assignment and suggested that it provided a way to create a document trail that would place the Company within the Structure:

I see a starting point here. On [May 1, 2013], IIP signed an assignment of Côte d'Azure Estates LLC to the Foundation. Therefore, the Foundation could also appoint a new director. However, I believe that that would have tax consequences in France. It is well known that the rules there are very strict.[80]

         Neupert agreed that Israel had never implemented the transfer because of the tax consequences in France.[81] But he thought using the Deed of Assignment seemed promising and asked for a copy. [82] Naeff sent him a .pdf version.[83]

         After this exchange, Naeff and Neupert evaluated how to use the Deed of Assignment to claim that the Company was not part of the UK Estate. As part of this process, in September 2015, Naeff obtained from Risse the documents that the Wiggin firm had prepared to effectuate the transfer of the Company's equity. Risse confirmed that the transfer had not been completed:

I have attached the documentation that I have passed around for Cote d'Azur. There wasn't a director, Mr. Perry was the sole member and this was done for tax reasons.
If you recall, I had spoken to someone at Wiggin and Dana, Mark Kaduboski, in December of 2013. Regarding transferring the shares to the Trust. I have attached his draft documents which we never went any further with per IP.[84]

         Naeff immediately forwarded Risse's email and the attachments to Neupert. The Foundation redacted the text of Naeff's email.

         Naeff and Neupert also evaluated what ownership options within the Structure would be optimal from a tax perspective. They believed that once they deployed the Deed of Assignment to remove the shares from the UK Estate, then they could document whatever internal ownership allocation they wished, as long as the family members agreed.[85]

         F. Interactions With The French Lawyers

         For help on the tax questions, Naeff and Neupert contacted Julien Monsenego, a lawyer with Olswang France LLP, who had advised Israel on tax matters involving the Company.[86] Naeff described various ownership allocations that Israel's surviving family members might agree to and asked about the tax consequences. He wrote:

         With respect to the ownership of the LLC the situation is as follows:

IIP was the sole member of the LLC according to the LLC - documentation available to us. But there is an assignment agreement from 01.05.2013 as well in which IIP assigned his shares in the LLC to a foundation. From my point of view we should focus on the feasible future options now and then decide what needs to be done to document the transfer properly.
Starting point: until his demise IIP was reported as the UBO ["Ultimate Beneficial Owner"] of the LLC
What would be the one-off and future (tax-) consequences if the ownership of the LLC would change to:
a) The heirs (e.g. 40% to his wife and 30% / 30% to his both children)
b) To the foundation or to a Trust (discretionary)
c) To the foundation or to a Trust (with named beneficiaries)
I think these are ultimately the options. Furthermore would there be a benefit to transfer ownership of La Treille from the LLC to a SCI [i.e. a French real estate investment company]? At the end we need a solution that is 100% compliant to the legislation in France.[87]

         Notably, Naeff proposed taking a malleable approach towards ownership. He felt the advisors should "focus on the feasible future options now and then decide what needs to be done to document the transfer properly."

         Unlike Naeff and Neupert, Monsenego and his colleagues at Olswang cared about the historical facts and were not comfortable manufacturing a different ownership allocation. After receiving Naeff's email, the Olswang lawyers asked for confirmation that the Company's equity had been transferred to and registered with the Foundation.[88] Naeff drafted a proposed response, which he sent to Neupert. It stated: "IIP assigned on 01 May 2013 the LLC to the foundation but the transfer has never been registered in a register of members or similar according to our knowledge."[89] After consulting with Neupert, Naeff did not send his response. Instead he told Olswang that he would respond to their questions after consulting with Lopag's lawyers.[90]

         One month later, on October 20, 2015, Naeff finally responded to Olswang. He abandoned any reliance on the Deed of Assignment, stating flatly: "IIP was the sole shareholder of Cote D'Azur Estates LLC until his demise in March 2015."[91] On October 26, 2015, Neupert followed up with Olswang and confirmed Naeff's representation.[92]

         G. The French Tax Audit

         In March 2016, French tax authorities began auditing the Company. Olswang represented the Company.

         The Company's tax filings in France had always identified Israel as the ultimate beneficial owner of the Company's equity. To respond to the French government's inquiries, Olswang needed a certification confirming that this representation had been true in 2013 and 2014. [93] Neupert claimed that it was impossible to certify that Israel had owned the Company's equity because the "files were lost (hidden somewhere in a bankruptcy courthouse)."[94] As a solution, he proposed obtaining a certificate under false pretenses from a Delaware registered agent:

[A]s I do not have the grant of authorisation from the British Probate Court, the only way around was to convince the new registered agent in Delaware, The Company Corporation, that I am the Executor of the Last Will and therefore the legitimate new Director of Cote d'Azur (fortunately in Delaware they do not know anything about UK probate procedure).[95]

         Neupert had started this process in September 2015 when he reached out to the registered agent to obtain a Certificate of Good Standing.[96] When doing so, he claimed to be the "executor of the Last Will of Mr Israel Perry," even though this issue was being contested in the probate proceedings and Neupert had never been (and never was) appointed to that role.[97] In March 2016, he again approached the registered agent and again claimed falsely that he was the "Executor of Mr Perry's Last Will."[98]

         Olswang needed to respond to the French tax authorities by the end of March 2016, but Neupert expected it would be a few weeks before he could obtain documentation from Delaware. As a substitute, Neupert offered to provide "a letter from me addressed to [Monsenego] in my capacity as the Executor of the Last Will that IP was the only shareholder of Cote d'Azur Estate LLC from its incorporation until [his] death."[99] After Monsenego expressed concern about alerting the French tax authorities to Israel's death, Neupert offered to provide "a confirmation of the ownership of Mr Perry in my capacity as Director of Cote D'Azur Estate LLC, "[100] even though he knew that he did not have any role with the Company. Facing the deadline, Monsenego sent the tax authorities a letter from Neupert stating that Israel owned the Company's equity during 2013 and 2014.[101]

         As part of this process, Neupert circulated a document he had received from the registered agent in Delaware.[102] It was a resolution appointing Neupert as manager of the Company (he claimed it appointed him as a director).[103] The signature line read, "Lilly Perry[, ] Member."[104]

         Tamar objected, complaining that Neupert had no authority to declare that Lilly owned the Company.[105] Neupert told her that Lilly had to be listed as the owner because she was the sole heir under Israel's will.[106] The dispute continued for more than a week, during which Neupert maintained that the Company's equity was part of the UK Estate.[107]

         H. The Rift Between Neupert And Lilly

         Ever since Israel's death, Neupert and Lopag worked to broker an agreement among Lilly, Tamar, and Yael that would resolve their competing claims to Israel's assets and fulfill as nearly as possible the desires Israel expressed in the Letter of Wishes.[108] By spring 2016, a division had emerged among the members of Israel's immediate family, with Yael on one side and Lilly and Tamar on the other. Neupert and Lopag aligned themselves with Yael. Other advisors sided with Lilly and Tamar.[109]

         To resolve one part of the dispute, Neupert tried to reach agreement on the Company's ownership. In substance, he proposed that Lilly receive title to the Villa, but commit that ownership would pass equally to Tamar and Yael when she died. The family members' use of the Villa and their responsibility for maintenance costs would be governed by the Letter of Wishes.[110]

         As part of his efforts to advance this proposal, Neupert repeatedly asked Lilly to sign the resolution from the Delaware registered agent in which she purported to act as sole member of the Company to appoint Neupert as manager.[111] Lilly refused to sign.[112]

         I. Neupert Takes Control Of The Company.

         After Lilly's refusal, Neupert seized control of the Company. He first emailed the registered agent, telling them: "We would like to transform the LLC into a corporation, so instead of a member we would have a 100% shareholder. Would you be so kind as to prepare the necessary forms?"[113]

         On June 30, 2016, Neupert caused a certificate of conversion to be filed with the Delaware Secretary of State that converted the Company from an LLC into a corporation.[114] He also caused a certificate of incorporation for the Company to be filed that authorized the issuance of up to 10, 000 shares of common stock.[115]

         Neupert next informed Olswang that the family members and their advisors "were not able to decide whether Lilly Perry should be the Sole shareholder of [the Company]."[116] He then sent Olswang "extracts of the Delaware Commercial Registry showing that the LLC has been transformed into a Corporation."[117] He added: "[A]ll the shares are held by me as Executor of the Last Will (until the UK probate procedure has come to an end)."[118]

         Monsenego questioned Neupert's claims:

You stated that you are starting with the probate procedure now. In other words, you have not currently been confirmed as executor of late Mr Perry. I simply do not have the information that would be required to mention you as the sole shareholder of the LLC. In addition, to mention you personally as shareholder of the LLC would contradict the declaration that Lilly Perry is the sole shareholder of the LLC which we already made to the French tax authorities for the purposes of the 3% tax. Should you insist to be mentioned as sole shareholder I would have to consult with beneficiaries.[119]

         Neupert threatened Monsenego that if he filed a tax declaration listing Lilly or Tamar as the owner of the Company, "this will be considered as a criminal act."[120]

         J. Neupert And Naeff "Discover" The Deed Of Assignment.

         Neupert believed that he could coerce Lilly into going along with the actions he had taken. On July 15, 2016, he summarized the plan in an email to Yael, Naeff, and other advisors in their faction: "We have to convince Lilly . . . that If [sic] she does not cooperate she might get the Assets (Bank Accounts in London, La Treille shares) minus Liabilities (NIS 69mio Class Action) but nothing from the [Letter of Wishes]."[121] At the evidentiary hearing, Lilly testified that Neupert had threatened to deprive her of any money from the Structure.[122]

         On July 18, 2016, a lawyer representing Lilly and Tamar emailed Naeff, copying Neupert, to complain about Neupert's actions.[123] Naeff forwarded the letter to Hugo Sele, a lawyer who represented various entities in the Structure, and explained that Israel had owned the Company's equity when he died:

Just for the sake of completeness. Until his death the settlor was the sole shareholder of Côte d'Azur LLC, Delaware, an entity that holds a property in France. At some point the plan was to bring this company into one of the trusts (and the [Letter of Wishes] also provided for that). Since France does its best (taxes, reporting etc.) to torpedo such structures, this idea was dismissed. As I see it, Côte d'Azur LLC is clearly part of the estate, and Dr. Neupert, as the executor, surely has the task of taking care of it. I don't see any reason for LOPAG to respond to [the lawyer's] (threatening) letter.[124] Sele agreed that the Company's equity was part of the UK Estate, making Lilly and Tamar's objections an issue for Neupert rather than for Lopag and the Foundation.[125]

         On August 5, 2016, Lilly and Tamar's attorney sent another letter to Neupert, threatening to hold him responsible for any damages resulting from "the transformation of the LLC in a Corp which you directed and your apprehension of the shares were made without power and without authorization."[126] Neupert conferred with Naeff and Sele about whether he could rely on the Letter of Wishes as a source of authority for his actions, but they agreed that it would not suffice.[127]

         Without any other options, on the morning of August 10, 2016, Neupert asked Naeff about the Deed of Assignment.[128] Naeff told him that Israel had signed the Deed of Assignment, but that it had never been implemented because of the "consequences in France."[129] Neupert proposed to invoke it anyway.[130]

         Later that afternoon, Neupert emailed Yael and Gal Levita, an attorney for the Foundation.[131] His email read:

Surprise - we just found the Original of the Assignment from May 2013 (I remember that I typed it myself, because IPs PC wanted to write from right to left)
So the situation with the Delaware Corp is now clear:
1.The shares belong to the Foundation and I am acting as CEO (nothing to do with the Executor - Therefore not falling under the UK probate)
2. As the Foundation has no Protector the Trustee may act as they think fit
3. Based on the LoW wie [sic] might offer Lilly some sort of usufruct and continue to pay the Maintenance, if she fulfills the conditions of the settlement (to be renegotiated) - such a Solution would also be in line with the French 3% Tax Declaration that Lilly is the Beneficiary
4. If the shares remain with the Foundation there will be no adverse Tax Consequences in France Until Lilly passes away
The beauty is that Yossi will immediately realize that Lilly may not expect any favours from Tami but only from Dominik - which will probably make her shift her loyalty to the Board of the Foundation (The Body that decides when she might use the property).[132]

         Neupert copied Naeff on the email, and Naeff remained complicitly silent regarding Neupert's counterfactual claim that the Deed of Assignment had just been discovered. At the evidentiary hearing, Naeff could not explain why Neupert would claim they had just discovered the Deed of Assignment when Naeff had it in his possession since Israel signed it, and when Neupert and Naeff had discussed it repeatedly during the ensuing years.[133]

         K. The Legal Opinion

         To bolster their newly embraced claim that the Deed of Assignment had validly transferred the equity of the Company to the Foundation, Neupert and Naeff sought a legal opinion from Zeichner Ellman & Krause LLP ("ZEK"), a New York law firm with an office in Israel. Daniel Rubel, a partner at ZEK, led the team.

         Michael Weiser, a Lopag employee, provided Rubel with a package of documents consisting of the Company's certificate of formation, its LLC agreement, the certificate of conversion, the certificate of incorporation, the purchase agreement for the Villa, and a power of attorney.[134] Weiser told the firm that Risse might possess other documents, but that "it is currently not advisable to contact [her] from a strategic perspective."[135] ZEK never received any of the many documents indicating that the Deed of Assignment was never implemented before Israel's death. ZEK also did not receive the French tax filings or the interactions regarding the Villa which evidenced that the Foundation's representatives at Lopag did not believe that the Foundation owned the Company's equity.

         Notably, the package did not include minutes of a board meeting which supposedly took place on July 1, 2016, during which Neupert and his secretary purportedly acted as directors to issue shares of stock to the Foundation. It also did not include a stock certificate in the name of the Foundation that purportedly was signed on July 1.[136] The record convinces me that those documents were created in December 2016, then backdated in an effort to create a more persuasive paper trail.

         As noted, the package of documents that Weiser provided included a power of attorney. The defendants claim that it was a power of attorney ostensibly dated February 5, 2016, in which the Foundation granted Neupert the authority to execute all legal acts "concerning Cote d'Azur Estate LLC/Corp., Delaware" (the "Foundation Power of Attorney").[137] The evidence convinces me that the power of attorney that Weiser provided was a different power of attorney that the Company granted to two agents in May 2001 to authorize them to acquire the Villa on the Company's behalf.[138] The evidence convinces me that Neupert and Naeff created the Foundation Power of Attorney in late September or October 2016, after Rubel identified a series of problems with Neupert's authority to act on behalf of the Company. Neupert and Naeff backdated the Foundation Power of Attorney to February to create the impression that the Foundation gave Neupert the authority to act.

         Rubel did not believe that the documents Weiser provided would enable him to opine that the Deed of Assignment validly transferred the equity in the Company. After conferring with Neupert, Weiser falsely told Rubel that there were no additional documents.[139] No one mentioned the documents that the Wiggin firm had prepared, the exchanges involving the French tax authorities, or the documents relating to the management of the Villa.[140]

         On August 31, 2016, Rubel asked Weiser a series of critical questions:

[T]he LLC Agreement states that Israel Perry was the sole shareholder. Can you confirm that he remained the sole shareholder?
A certificate of conversion you provided us lists Dieter Neupert as president. Do you have any documentation regarding his appointment?
When were the assignment of shares registered with the books of the company?
Was his estate involved at all with the assignment or registration?[141]

         Weiser responded:

Yes, Mr. Perry was the sole shareholder and remained the sole shareholder.
To our knowledge, Mr. Neupert is the president of the company, however we do not have any further documents other than already provided to you.
The assignment of shares was never registered in the books of the company, as the administering law firm filed bankruptcy.
Could you please explain your questions regarding the involvement of Mr. Perry's estate in the assignment or registration?
The assignment was signed before the demise of Mr. Perry, thus we can only answer your question after we receive your conclusion whether this assignment was valid or not?[142]

         Eighteen minutes later, Naeff forwarded the email exchange to Neupert and warned him that the validity of the assignment was "not clear."[143] Neupert responded that he had the power to effectuate the changes as the executor of Israel's estate (even though he was never appointed to that role). He suggested that "if necessary, we might still have to document" that he acted "on the basis of a power of attorney by the [Foundation]."[144] This appears to be the first appearance in the record to what became the Foundation Power of Attorney.

         On September 2, 2016, after receiving Neupert's response to Naeff, Weiser asked Neupert whether he could represent to ZEK that Neupert had "acted as the executor" when converting the Company into a corporation.[145] Neupert agreed: "[Y]es, definitely - you can report this as stated (but keep it away from Tami since it would otherwise be inconsistent with my actions related to the [Deed of Assignment] (but as stated previously, this could be remedied with a power of attorney)."[146] Neupert did not reference a specific power of attorney. He spoke of a potential solution ("could be remedied"). If the Foundation Power of Attorney already existed, either Neupert or the Lopag representatives would have mentioned it.

         Weiser did not take up the reference to a power of attorney. Instead, he promptly told Rubel that Neupert claimed authority to effectuate the conversion as the executor of Israel's estate.[147] In a follow-up email, Weiser told Rubel that Neupert agreed that he had never been appointed as a director or president of the Company and had only acted as executor of Israel's estate.[148]

         On September 9, 2016, Rubel concluded that "Neupert did not have authority to sign the certificate of conversion dated March 2016 converting the LLC to a corporation" and that consequently the filing either needed to be ratified or cancelled.[149] Neupert was furious that ZEK was "questioning his authority."[150] Neupert told Naeff that the solution was for the Foundation "approve my actions retroactively."[151]

         Frustrated that Rubel was not going along with his plan, Neupert contacted him directly, claiming there were "two phases" to his actions:

1. Phase I (before the Original of the Assignment was discovered)
a) In my capacity as Executor / Trustee of the late Israel Perry all his membership Rights were automatically vested in me according to § 18-705 of the Delaware LLC Code (Code)
b) as there was already a draft on the table how the shares should be allocated among the heirs (Lilly 40 %, the daughters each 30 %) I had complete authority to convert the LLC into a Corporation and to become its Director
2. Phase II (After the Original Deed of Assignment was discovered)
a) according § 18-301 and 18-702/4 of the Code the Late Israel Perry lost his membership by assigning his entire interest to BGO Foundation (Ludwig Poltzer at the time) and BGO became the Sole new Member
b) BGO Foundation has approved my actions by Special Power of Attorney and I recognized as Executor / Trustee of the Last Will that Cote d'Azur LLC (now Corp) belongs to BGO Foundation (by issuing the entire Share Capital to BGO)
So all you have to do is checking the quoted provisions in the Code and sign off my opinion - If you are not familiar with the Delaware precedents/ jurisprudence I suggest we ask a Collegue [sic] from Wilmington to give his opinion
The validity of the Assignment has become a rather urgent issue as the French Tax Adviser is not even copying me (as Director) in but just acts on the instructions of Tami Perry - I have to replace him as soon as possible![152]

         Neupert's description of the discovery of the Deed of Assignment was false. He and Naeff had known about it since 2013 and had discussed it in 2014 and 2015. This email marks the first time that anyone suggested to ZEK that the Foundation had authorized Neupert's actions with a power of attorney.

         On September 12, 2016, Neupert spoke directly with Rubel.[153] Later that day, Rubel emailed Naeff, Weiser, and Neupert about another problem with Neupert's story:

[I]n Delaware, when a sole shareholder of an LLC assigns all of his shares, then he is no longer a member. However, the assignee cannot become a member of the LLC until his shares are registered, which did not occur here. There is a special analysis that may be applied to this type of situation. However, the analysis is further complicated by the filing of the certificate of conversion, its potential impact and the question of its validity.[154]

         Neupert turned to a power of attorney as the solution: "If you think that there is a missing link in the chain of documents please tell us and we shall let you have . . . a PoA by BGO in my favour to convert the LLC into a Corp, become its Director and to issue a Share Certificate in favour of BGO."[155] Neupert again did not refer to a specific power of attorney. He was contemplating creating a document to fill in "a missing link in the chain."

         Once again, the Lopag representatives did not back up Neupert's reference to a power of attorney. Naeff separately wrote Rubel to confirm that "Neupert is the Executor / Trustee of the late IIP."[156] Naeff's statement was false in its own right: Neupert had never been made executor of Israel's estate.

         On October 31, 2016, Neupert asked Monsenego for the Company's tax-related documents, declaring that he was "chairman of the [Company]" and asserting that his authority was "legitimized" by the Foundation.[157] Neupert attached the Deed of Assignment and the Foundation Power of Attorney. This is the first time the Foundation Power of Attorney appears in the record as part of a communication among the parties. Based on the contemporaneous documents, I find that Neupert and Naeff created the Foundation Power of Attorney after September 12 and before October 31. They backdated it to February 2, 2016, to make it appear that the Foundation had prospectively authorized the actions Neupert took in June.

         On December 5, 2016, one of Neupert's secretaries contacted the Company's registered agent to request "a Corporation Kit . . . i.e., a seal of the company, the share certificates and the minutes Book or whatever."[158] By email dated December 28, another one of Neupert's secretaries, Tanja Tandler, sent him the share certificate and a draft set of minutes.[159] Tandler asked whether to sign the documents. Neupert told her to sign, then "affix the seal!"[160]

         The minutes purported to document a meeting that took place on July 1, 2016, during which Neupert and Tandler acted as the board of directors of the Company, appointed themselves as president and secretary, and issued all of the Company's shares to the Foundation.[161] The stock certificate reflected the Foundation's ownership of 10, 000 shares of stock.[162] I find that these documents were drafted in December 2016 and backdated to July 1. At the evidentiary hearing, Naeff testified that he did not receive them until December 2016 and agreed it was "certainly odd" that they were dated July 1.[163]

         On February 14, 2017, ZEK finally delivered its legal opinion. In a single, non-reasoned paragraph, it stated:

COTE D'AZUR ESTATE LLC . . . was converted into the Corporation; BGO Foundation is the owner of all of the authorized and outstanding shares of the Corporation and can thereby exercise control of the Corporation; the duly elected directors of the Corporation are Dr. Dieter Neupert and Ms. Tanja Tandler; and the duly appointed officers of the Corporation are Dr. Neupert, President, [and] Ms. Tandler, Secretary . . . .[164]

         Rubel did not sign the opinion. Another ZEK partner signed it.

         L. This Litigation

         On April 14, 2017, Lilly filed this action against Neupert and the Company. She seeks a declaration that the conversion was invalid. Neupert and the Company answered and asserted affirmative defenses in which they relied on the validity of the Deed of Assignment.

         After Lilly filed this litigation, the Foundation commenced a lawsuit of its own in the Princely District Court of Lichtenstein. The Foundation's complaint named Lilly, Tamar, and Yael as defendants and sought a declaration that the Foundation owned the Company's equity based on the effectiveness of the Deed of Assignment.[165]

         Recognizing that she needed to challenge the validity of the assignment of the Company's equity to the Foundation, Lilly moved to join the Foundation as an involuntary counterclaim plaintiff pursuant to Court of Chancery Rule 19.[166] By memorandum opinion dated December 6, 2017, I joined the Foundation as a relief defendant.[167] Once served, the Foundation moved to dismiss Lilly's complaint pursuant to Court of Chancery Rule 12(b)(2).[168]

         II. LEGAL ANALYSIS

         The Foundation contends that this court cannot exercise personal jurisdiction over it under the Delaware Long-Arm Statute.[169] Determining whether a Delaware court can exercise personal jurisdiction over a non-resident defendant under the Long-Arm Statute requires a two-step analysis.[170] In the first step, the court determines whether the plaintiff has satisfied the statutory requirements.[171] In the second step, the court determines whether exercising personal jurisdiction over the defendant passes muster under the Due Process Clause of the United States Constitution.[172] To satisfy due process, "'a nonresident defendant must have sufficient 'minimum contacts with [the forum state] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.'"[173]

         The Delaware Supreme Court has adopted what is known as the conspiracy theory of ...


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