JPMORGAN CHASE BANK, N.A., individually, and on behalf of itself and other creditors similarly situated, Plaintiff,
Claudio BALLARD, Keith Delucia, Gary Knutsen, Shephard Lane, Peter Lupoli, Ira Leemon, John Kidd, Celestial Partners, LLC, Zaah Technologies, Inc., Veedims, LLC, Potens Partners LLC, and Datatreasury Corporation, Defendants.
ORDER DENYING DEFENDANTS MOTION FOR CERTIFICATION OF
AN INTERLOCUTORY APPEAL
June 2, 2015, the United States District Court for the
Eastern District of Texas entered a final judgment awarding
JPMorgan Chase Bank, N.A. ("J.P. Morgan") damages
of $69 million against Data Treasury Corporation
("DTC") for breach of a June 2005 licensing
agreement (the "Judgment"). On May 19, 2016, the
United States Court of Appeals for the Fifth Circuit affirmed
Morgan has filed two actions in the Court of Chancery in aid
of its efforts to collect on the Judgment. The two actions
are closely related as they both challenge DTCs payment of
dividends, albeit in different years, as unlawful under the
Delaware General Corporation Law (8 Del. C. § § 170-74).
the first action, filed on December 27, 2017, J.P. Morgan
challenges dividends DTC paid in 2011 and 2012. Defendants
answered the complaint in the first action, which is in
discovery and which is not the subject of this appeal.
second action, filed on April 12, 2018, is the subject of
this appeal. In this action, J.P. Morgan sued DTC, its
directors, and certain affiliates (collectively,
"Defendants") to recover two categories of
distributions that DTC allegedly made unlawfully to evade its
liability to J.P. Morgan: (i) dividends DTC paid from 2006 to
2010 and (ii) other individual payments DTC made to insiders
from 2011 to 2013.
Defendants moved to dismiss the complaint in this action,
arguing that J.P. Morgan lacked standing under Section 174 to
challenge the payment of dividends from 2006 to 2010 on the
theory that J.P. Morgan was not a creditor of DTC during that
period, and that J.P. Morgans unlawful dividend and
fraudulent transfer claims were untimely under two different
July 11, 2019, the court issued an opinion granting in part
and denying in part Defendants motion to dismiss (the
"Opinion"). On July 19, 2019, the court entered an
implementing order. The Opinion decided three issues of first
First, the court held that J.P. Morgan had standing to assert
a claim as a "creditor" of DTC within the meaning
of Section 174 to recover for itself and other creditors of
DTC dividends that it paid from 2006 to 2010 even though J.P.
Morgan did not obtain its Judgment against DTC until 2015.
Second, the court held that the six-year limitations period
in Section 174 is a statute of repose (to which tolling
principles do not apply) and not a statute of
limitations (to which tolling principles may be applied). As
a result, the court determined that J.P. Morgans unlawful
dividend claim with respect to dividends that were paid from
2006 to 2010 must be dismissed as untimely because J.P.
Morgan did not file this action until 2018, more than six
years after the payment period in question.
Third, the court held that the one-year discovery period in
Section 1309(1) of the Delaware Uniform Fraudulent Transfer
Act begins to run when the fraudulent
nature of an allegedly fraudulent transfer is or could
reasonably have been discovered, rather than when the mere
existence of the allegedly fraudulent transfer is or could
reasonably have been discovered. The court then determined
that J.P. Morgan had timely filed claims challenging as
fraudulent both the dividends paid from 2006 to 2010 and the
individual payments made to insiders from 2011 to 2013.
July 26, 2019, Defendants filed a motion to certify an
interlocutory appeal of the Opinion and implementing order.
Defendants focus their application on challenging the third
issue of first impression the court decided, i.e.,
that the one-year discovery period in Section 1309(1) of the
Delaware Uniform Fraudulent Transfer Act starts when the