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Composecure, L.L.C. v. Cardux, LLC

Supreme Court of Delaware

July 24, 2019

COMPOSECURE, L.L.C., Plaintiff/Counterclaim Defendant-Below, Appellant,
v.
CARDUX, LLC f/k/a Affluent Card, LLC, Defendants/Counterclaim Plaintiff- Below, Appellee.

         Submitted: July 17, 2019

Page 1205

          Case Below: Court of Chancery of the State of Delaware, C.A. No. 12524-VCL

         Following remand to the Court of Chancery. AFFIRMED.

         Myron 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.

         David 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.

         Before VALIHURA, VAUGHN, and SEITZ, Justices.

          OPINION

         VALIHURA, Justice:

          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 CompoSecure’s Amended and Restated Limited Liability Company Agreement (the "LLC Agreement"), but that CompoSecure had impliedly ratified the Sales Agreement by its conduct. CompoSecure appealed.

          In our November 7, 2018 opinion, we agreed with the trial court’s 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 Chancery’s conclusions.

          I.

          CardUX was co-founded by a CompoSecure director, Kevin Kleinschmidt, to market

Page 1206

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 CompoSecure’s metal cards. Although CardUX’s 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 ...


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