Submitted: November 26, 2019
P. DiTomo, Elizabeth A. Mullin, and Emily Bryant-Alvarez of
MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington,
Delaware; OF COUNSEL: Michael C. Marsh, Ryan Roman, Donnie
King, and Chanelle Artiles, of AKERMAN LLP, Miami, Florida,
Attorneys for Plaintiff Joseph Stanco.
Timothy R. Dudderar and Robert J. Kumor, of POTTER ANDERSON
& CORROON LLP, Wilmington, Delaware, Attorneys for
Defendant Rallye Motors Holding LLC.
GLASSCOCK, Vice Chancellor
Plaintiff brings this Action for entity records under 6
Del. C. § 18-305- the analog of a DGCL Section
220 action applicable to limited liability companies- and the
entity's LLC agreement (the "LLC Agreement").
The Plaintiff is the former Managing Member of the Defendant,
Rallye Motors Holding LLC ("Rallye" or the
"Company"). The matter is scheduled for trial on
February 27, 2019. Rallye has moved to dismiss, pointing to
language in the LLC Agreement providing that disputes arising
therefrom "shall be venued" in the courts of two
counties of the State of New York. In the alternative, Rallye
points to a New York action by a plaintiff similarly situated
to the Plaintiff here, seeking, among other things, to compel
inspection of the same Rallye documents the Plaintiff seeks
in this litigation. Rallye argues that this Action should be
dismissed in favor of the first-filed New York action under
the rationale of McWane Cast Iron Pipe Corp. v.
McDowell-Wellman Engineering Co.
neither argument persuasive; accordingly, the Motion to
Dismiss is denied.
Rallye is a Delaware limited liability company that acts as a
holding company for five automobile dealerships on Long
Island, New York.
Joseph Stanco is a member of Rallye, and owns 5.5% of
Rallye's membership units.
founded in 1958, is composed of five auto dealerships on Long
Island, New York. The Plaintiff began working for the
Company around 1980. The Plaintiff first acquired an ownership
interest in Rallye in 2000, when one of the Company's
founders departed, selling a portion of his membership
interest to the Plaintiff. In 2006, the Plaintiff was promoted to
President and CEO of Rallye. In 2007, the Plaintiff
acquired additional membership units from a departing
employee, bringing him to his current ownership level of
5.5%. In 2011, the Plaintiff joined
Rallye's Board of Managers and became the Managing Member
of the Company.The Plaintiff's employment at Rallye
ended when Rallye fired the Plaintiff without cause in
August 27, 2019, the Plaintiff demanded inspection of
Rallye's books and records (the "Demand") under
§ 18-305 of Delaware's LLC Act and § 8.3 of the
LLC Agreement. The Plaintiff seeks to inspect
Rallye's books and records to evaluate: (1) the status of
his ownership interest in Rallye, (2) the value of his
ownership interest in Rallye, (3) the business and financial
condition of Rallye, (4) the performance of Rallye's
management after failing to make distributions to Stanco and
other shareholders, (5) the independence of Rallye's
management, (6) the propriety of Rallye's disclosures,
and (7) the current business being transacted by
noted, the Plaintiff made the Demand on August 27, 2019. On
September 19, 2019, the Plaintiff filed a Verified Complaint
for Inspection of Books and Records (the
"Complaint"). On October 2, 2019, Rallye filed its
Motion to Dismiss the Complaint. I heard Oral Argument on the
Motion to Dismiss on November 26, 2019 and considered the
Motion submitted for decision on that date.
has moved to dismiss this action under Chancery Court Rules
12(b)(3) and 12(b)(6). In considering such a motion:
(i) all well-pleaded factual allegations are accepted as
true; (ii) even vague allegations are well-pleaded if they
give the opposing party notice of the claim; (iii) the Court
must draw all reasonable inferences in favor of the nonmoving
party; and (iv) dismissal is inappropriate unless the
plaintiff would not be entitled to recover under any
reasonably conceivable set of circumstances susceptible of
reviewing a motion to dismiss, the Court may take into
consideration documents "incorporated into the pleadings
by reference and may take judicial notice of relevant public
The LLC Agreement Does Not Require the Plaintiff to Bring his
Dispute in New York
Plaintiff seeks to vindicate his right to books and records
under § 8.3 of the LLC Agreement and 6 Del. C.
§ 18-305(a). Section 8.3 of the LLC Agreement provides,
Each Member shall have the right, at all reasonable times
during usual business hours, to audit, examine and make
copies of; or extracts from, the books of account and other
financial records of the Company at its principal place of
business. Such right may be exercised through any agent or
employee of a Member designated by such Member or ...