COMPOSECURE, L.L.C., Plaintiff/Counterclaim Defendant-Below, Appellant,
CARDUX, LLC f/k/a Affluent Card, LLC, Defendants/Counterclaim Plaintiff- Below, Appellee.
July 17, 2019
Below: Court of Chancery of the State of Delaware, C.A. No.
remand to the Court of Chancery. AFFIRMED.
T. Steele, Esquire, Arthur L. Dent, Esquire, Andrew H.
Sauder, Esquire, Potter Anderson & Corroon LLP, Wilmington,
Delaware. Of Counsel: Steven M. Coren, Esquire, David M.
DeVito, Esquire, Kaufman, Coren & Ress, P.C., Philadelphia,
Pennsylvania for Appellants.
J. Margules, Esquire, Elizabeth A. Sloan, Esquire, Jessica C.
Watt, Esquire, Ballard Spahr LLP, Wilmington, Delaware; Burt
M. Rublin, Esquire, Ballard Spahr LLP, Philadelphia,
Pennsylvania for Appellees.
VALIHURA, VAUGHN, and SEITZ, Justices.
CompoSecure, L.L.C., a manufacturer of metal credit cards,
has been seeking to invalidate the Sales Representative
Agreement (the "Sales Agreement") it signed with
CardUX, LLC. The Court of Chancery held in a February 1, 2018
post-trial decision that the Sales Agreement had not been
properly approved under CompoSecures Amended and Restated
Limited Liability Company Agreement (the "LLC
Agreement"), but that CompoSecure had impliedly ratified
the Sales Agreement by its conduct. CompoSecure appealed.
November 7, 2018 opinion, we agreed with the trial courts
analysis as far as it went, but we remanded to the trial
court to answer a potentially outcome-determinative question
that it had not answered: whether the Sales Agreement is a
"Restricted Activity" under the LLC Agreement. If
it is a Restricted Activity, we noted that the Sales
Agreement would be void and unenforceable. We retained
jurisdiction. In its report on remand (the
"Report"), the Court of Chancery held that the
Sales Agreement was not a Restricted Activity, and thus, the
Sales Agreement is not void. For the reasons below, we agree
with the Court of Chancerys conclusions.
was co-founded by a CompoSecure director, Kevin Kleinschmidt,
the metal cards that CompoSecure manufactures. The Sales
Agreement, which CompoSecure and CardUX executed on November
9, 2015, provides CardUX with a fifteen percent commission of
the net sales price of any order from a list of
"Approved Prospects." On January 19, 2016, Amazon
agreed with its co-branding partner, Chase, to order
CompoSecures metal cards. Although CardUXs marketing
efforts did not lead to the Amazon deal, CardUX, nonetheless,
was entitled to fifteen percent of the net sales price
because Amazon was an Approved Prospect. Without paying any
commissions to CardUX, CompoSecure removed Kleinschmidt from
the CompoSecure Board in May 2016 ...