Gimaex Holding Inc. v. Spartan Motors USA Inc. et al

Filing 29

REPORT AND RECOMMENDATIONS re 8 MOTION to Dismiss for Lack of Jurisdiction Over the Subject Matter filed by Spartan Motors USA Inc. Please note that when filing Objections pursuant to Federal Rule of Civil Procedure 72(b)(2), briefing consists sole ly of the Objections (no longer than ten (10) pages) and the Response to the Objections (no longer than ten (10) pages). No further briefing shall be permitted with respect to objections without leave of the Court. Objections to R&R due by 11/2/2015. Signed by Judge Mary Pat Thynge on 10/14/15. (cak)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
GIMAEX HOLDING, INC.,
Plaintiff,
v.
SPARTAN MOTORS USA, INC.,
f/k/a CRIMSON FIRE, INC.,
Defendant,
SPARTAN-GIMAEX
INNOVATIONS, LLC,
Nominal Defendant.

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C. A. No. 15-515-RGA

REPORT AND RECOMMENDATION
I.

INTRODUCTION
On June 19, 2015, Gimaex Holding, Inc. (“Gimaex”) filed this action against

Spartan Motors USA, Inc. (“Spartan USA”) seeking appointment of a liquidating
receiver/trustee (Count 1) over Spartan-Gimaex Innovations, LLC (the “Joint Venture” or
“Spartan-Gimaex”) in which Gimaex and Spartan USA are the sole and equal members
and which Gimaex characterizes as a “nominal defendant.”1 Gimaex also seeks
damages for conversion (Count II), breach of contract (Count III), breach of implied
covenant of good faith and fair dealing (Count IV), and tortious interference with
business relations (Count V).2 Currently before the court is Spartan USA’s motion to
1
D.I. 1 at ¶ 1. Gimaex is a Florida corporation with its principal place of business in Florida, and is
a 50% member of Spartan-Gimaex. Id. at ¶¶ 6-7. Spartan USA is a South Dakota corporation, with its
registered office in Pennsylvania, and a principal office in Michigan. Id. at ¶ 9. It is the other 50% member
of Spartan-Gimaex. Id. at ¶ 10. Spartan-Gimaex is a Delaware limited liability company with its principal
place of business in Michigan and has a registered agent and registered office in Delaware. Id. at ¶ 12.
2
Id. at ¶¶ 124-145.

dismiss the complaint for lack of subject matter jurisdiction pursuant to Federal Rule of
Civil Procedure 12(b)(1).3
II.

BACKGROUND
On or around November 8, 2012, Gimaex and Spartan USA executed a Venture

Agreement for Spartan-Gimaex Innovations, LLC (“Agreement”) creating SpartanGimaex, a joint venture in which Gimaex and Spartan USA each have a 50% ownership
interest.4 Spartan-Gimaex was created to combine the complementary skills,
technologies, resources, capabilities, and product portfolios of Gimaex and Spartan to
develop, manufacture, and distribute products to domestic and international fire service
markets.5 As a fire apparatus manufacturer, Gimaex was to provide its technology for
fire extinguishing systems to Spartan USA to be incorporated in its fire vehicles and
market those vehicles in North America, South America, Asia, and Europe.6
Under the Agreement, management of Spartan-Gimaex was vested in a board of
directors, composed of eight individuals, four of whom were designated by Gimaex and
four of whom were designated by Spartan USA (“Board of Directors”).7 The Board of
Directors has the sole and exclusive right, power, and authority to conduct, supervise,
and manage the business and affairs of Spartan-Gimaex.8 The Agreement requires
Gimaex and Spartan to each “proceed with diligence to provide the services and
materials required of them” and support and promote Spartan-Gimaex’s projects.9

3

D.I. 8.
D.I. 1 at ¶¶ 1, 22; id., Ex. A (“Agreement”).
5
D.I. 16 at 4; D.I. 1 at ¶ 23.
6
Id.
7
D.I. 1 at ¶ 24; id., Agreement at ¶ 5.01(b); id., Agreement at Ex. A.
8
Id. at ¶ 29; id., Agreement at ¶ 5.01(a).
9
Id. at ¶ 32; id., Agreement at ¶ 3.01(d).
4

2

Ultimately, Spartan-Gimaex did not achieve any of its goals and did not approach any of
its projections for each of its projects.10 On or around, February 19, 2015, SpartanGimaex was dissolved by mutual consent.11
Article XII of the Agreement provides procedures for winding up, liquidating, and
distributing the assets of Spartan-Gimaex upon dissolution, and authorizes the Board of
Directors to take certain actions.12 Unanimous board approval is required for the Board
of Directors to takes those actions.13 The Agreement provides a procedure for resolving
a deadlock prior to dissolution, but does not provide a mechanism for resolving a
deadlock among the Board of Directors regarding the wind down process.14
Gimaex’s complaint alleges the parties are deadlocked regarding how to liquidate
Spartan-Gimaex’s assets and wind down.15 Gimaex seeks appointment of a trustee or
receiver to resolve the alleged deadlock, liquidate Spartan-Gimaex’s assets, and wind
down the joint venture.16 Additionally, Gimaex requests an accounting from SpartanGimaex, and direction and approval of the disposition or sale of Spartan-Gimaex’s
assets in a manner that optimizes their value, with distribution of any proceeds in a
manner that complies with the Agreement and Delaware law.17
III.

GOVERNING LAW
Spartan USA moves to have the complaint dismissed pursuant to FED. R. CIV. P.
10

Id. at ¶ 101.
Id. at ¶ 104. Gimaex alleges the agreement to dissolve Spartan-Gimaex was the result of
Spartan USA’s purported misconduct and violations relating to Spartan-Gimaex, and the Joint Venture
failing to achieve any of its projected goals. D.I. 16 at 5.
12
D.I. 1 at ¶ 97; id., Agreement at ¶ 12.02.
13
Id. at ¶ 30; id., Agreement at ¶ 5.06.
14
Id. at ¶¶ 96, 100.
15
Id. at ¶ 4.
16
Id.
17
Id. at 28 (Prayer for Relief).
11

3

12(B)(1).18 It argues this court does not have 28 U.S.C. § 1332(a)(1) subject matter
jurisdiction because there is a lack of complete diversity of citizenship between Gimaex
and Spartan-Gimaex, each being a citizen of Florida.19 Also, the fact that SpartanGimaex is alleged to have been dissolved does not affect its citizenship. In Johnson v.
Smithkline Beecham Corp., the Third Circuit held a particular dissolved corporation was
a nominal party under the facts of that case.20 The court noted, however, “[w]e have
held that when . . . a state statue renders a dissolved corporation ‘sufficiently alive to
sue,’ the corporation also retains its citizenship for purposes of diversity.”21 Here, it is
alleged Spartan-Gimaex was dissolved on or around February 19, 2015.22 The
Delaware state statute concerning the winding up of a limited liability company provides:
Upon dissolution of a limited liability company and until the filing of a
certificate of cancellation as provided in § 18-203 of this title, the persons
winding up the limited liability company's affairs may, in the name of, and
for and on behalf of, the limited liability company, prosecute and defend
suits, whether civil, criminal or administrative . . . .23
Therefore, despite the dissolution of Spartan-Gimaex, it is sufficiently alive to sue
and retains its citizenship for purposes of diversity.
18

D.I. 9 at 1; FED. R. CIV. P. 12(b)(1) (“Every defense to a claim for relief in any pleading must be
asserted in the responsive pleading if one is required. But a party may assert the following defenses by
motion: (1) lack of subject-matter jurisdiction . . . .”).
19
D.I. 9 at 1. There is no dispute as to whether Spartan-Gimaex is a citizen of Florida. See
Zambelli Fireworks Mfg. Co., Inc. v. Wood, 592 F.3d 412, 420 (3d Cir. 2010) (“[T]he citizenship of an LLC
is determined by the citizenship of its members.”); In re PMTS Liquidating Corp., 490 B.R. 174, 184 (D.
Del. 2013) (“For purposes of determining diversity of citizenship, the citizenship of an LLC is equivalent to
all the states where its members are domiciled . . . .”) (citing Zambelli, 592 F.3d at 420). The dispute is
whether the Joint Venture is a real party in interest.
20
724 F.3d 337, 358-59 (3d Cir. 2013).
21
Id. at 359 (citing Stentor Elec. Mfg. Co. v. Klaxon Co., 115 F.2d 268, 271 (3d Cir. 1940), rev’d
on other grounds, 313 U.S. 487 (1941)). As further support, the Third Circuit cited Ripalda v. Am.
Operations Corp., 977 F.2d 1464, 1468 (D.C. Cir. 1992) (“[A] state statue extending the life of a dissolved
corporation for the purpose of being sued also preserves the corporation as a citizen of the state of
incorporation for the purpose of determining diversity of citizenship.”).
22
D.I. 1 at ¶ 104.
23
6 Del. C. § 18-803 (emphasis added).

4

When jurisdiction is challenged, the party asserting subject matter jurisdiction has
the burden of proving its existence.24 Pursuant to 28 U.S.C. § 1332(a)(1): “[t]he district
courts shall have original jurisdiction of all civil actions where the matter in controversy
exceeds the sum or value of $75,000, exclusive of interest and coasts, and is
between–(1) citizens of different States . . . .”25 “‘[D]iversity jurisdiction does not exist
unless each defendant is a citizen of a different State from each plaintiff.’”26
Nevertheless, “‘a federal court must disregard nominal or formal parties and rest
jurisdiction only upon the citizenship of real parties to the controversy.’”27 “Nominal
parties are generally those without a real interest in the litigation.”28 “Typically, they are
those ‘named to satisfy state pleading rules . . . joined only as [the] designated
performer of a ministerial act . . . or [who] otherwise ha[ve] no control of, impact on, or
stake in the controversy.’”29 “Stated differently, a nominal party is one who does not
have an enforceable right or duty under substantive law.”30
Whether Spartan-Gimaex is a real party in interest “turns on whether plaintiff’s
. . . claims are direct or derivative.”31 The issue of whether a claim is direct or derivative
“must turn solely on the following questions: (1) who suffered the alleged harm (the

24

See Carpet Group Int’l. v. Oriental Rug Importers Ass’n., Inc., 227 F.3d 62, 69 (3d Cir. 2000).
28 U.S.C. § 1332(a)(1). The court notes there is no argument that “the matter in controversy
exceeds the sum or value of $75,000” requirement is not met.
26
Bumberger v. Ins. Co. of N. Am., 952 F.2d 764, 767 (3d Cir. 1991) (alteration and emphasis in
original) (quoting Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 373 (1978)).
27
Id. (quoting Navarro Sav. Ass’n v. Lee, 446 U.S. 458, 461 (1980)).
28
Id. (citing Wolff v. Wolff, 768 F.2d 642, 645 (5th Cir. 1985)).
29
Weston v. Progressive Commercial Holdings, Inc., C.A. No. 10-980, 2011 WL 231709, at *2 (D.
Del. Jan. 24, 2011) (alterations and omission in original) (quoting Lincoln Property v. Roche, 546 U.S. 81,
92 (2005)).
30
Id. (citing Wm. Moore et al., Moore’s Federal Practice § 102.15 (3d ed. 2010)).
31
Polak v. Kobayashi, C.A. No 05-330-JJF, 2008 WL 4905519, at *7 (D. Del. Nov. 13, 2008)
(“Polak II”) (citing Ross v. Bernhard, 396 U.S. 531, 538 (1970))
25

5

corporation or the suing shareholders, individually); and (2) who would receive the
benefit of any recovery or other remedy (the corporation or the stockholders,
individually)?”32 “A direct claim seeks relief for injuries that fall distinctly upon the
individual participants in the business association or involve the participants’ contractual
rights.”33 “On the other hand, a derivative claim states injury against and seeks relief for
a business association as a whole. Any relief flowing to the association’s participants as
individuals only comes to them indirectly, but the way of their pro-rata stake in the
association.”34
IV.

DISCUSSION
Under the terms of the Agreement, the parties agreed “to submit to the exclusive

jurisdiction and venue of the United States District Court, District of Delaware, in
connection with any claim or controversy arising out of this Agreement,” and if this court
would not accept jurisdiction, then the jurisdiction of the Delaware Court of Chancery.35
Gimaex maintains, therefore, its choice of this forum was dictated by the Agreement.36
The parties’ Agreement, however, cannot vest this court with subject matter jurisdiction

32
33

Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031, 1033 (Del. 2004).
In re Cencom Cable Income Partners, No. C.A. 14634, 2000 WL 130629, at *3 (Del. Ch. Jan.

27, 2000).
34

Id.
D.I. 16 at 3; D.I. 1, Agreement at ¶ 13.09.
36
D.I. 16 at 3. Even though Gimaex insists this court has jurisdiction over this matter, it explains
that, on July 27, 2015, prior to filing its motion to dismiss, Gimaex sought an agreement from Spartan USA
for the transfer of its claims to the Delaware Court of Chancery. On July 29, 2015, Gimaex provided a
draft stipulation for Spartan USA’s review. Spartan USA would not agree to the stipulation. Id. at 3.
Spartan USA states that because the proposed stipulation included, inter alia, mischaracterizations of
contested facts and allegations in the complaint, it would not agree to the stipulation. D.I. 22 at 1-2.
Spartan USA also notes no stipulation was necessary for Gimaex to voluntarily dismiss its claims pursuant
to FED. R. CIV. P. 41(a)(1)(A). Id. at 1.
35

6

over Gimaex’s claims.37 It is whether Spartan-Gimaex is a nominal defendant, the sole
ground upon which Spartan USA bases its motion to dismiss, that determines whether
this court has subject matter jurisdiction.
Gimaex contends Spartan-Gimaex is not a real party in interest and, thus, is a
nominal defendant whose citizenship is not considered in determining diversity
jurisdiction.38 It argues a review of the asserted claims and actual interest of the parties
in those claims supports its position.39 In addition to arguing Spartan-Gimaex is a
nominal party with respect to Count I, Gimaex further insists Counts II-V are direct, not
derivative, claims as Spartan USA suggests, again establishing that Spartan-Gimaex is
a nominal party.40
In determining whether diversity of citizenship exists, “a court must first identify
the primary issue in controversy and then determine whether there is a real dispute by
opposing parties over that issue.”41 “[T]he ‘citizens’ upon whose diversity a plaintiff
grounds jurisdiction must be real and substantial parties to the controversy.”42 “Thus, a
federal court must disregard nominal or formal parties,”43 and the court can base its

37

See, e.g., Bd. of Educ. of Appoquinimink Sch. Dist. v. Johnson, 543 F. Supp. 2d 351, 354 (D.
Del. 2008) (“It is well-settled that an admission or consent to jurisdiction is insufficient to vest a federal
court with proper subject matter jurisdiction over a plaintiff’s claims.”) (citing Ins. Corp. of Ireland, Ltd. v.
Compagnie des Bauxites de Guinee, 456 U.S. 694, 702 (1982)); Ins. Corp. of Ireland, 456 U.S. at 702
(“[N]o action of the parties can confer subject matter-jurisdiction upon a federal court. Thus, the consent
of the parties is irrelevant . . . .”) (citation omitted).
38
D.I. 16 at 2.
39
Id.
40
Id. at 2-3.
41
Employers Ins. of Wausaue v. Crown Cork & Seal Co., 942 F.2d 862, 864 (3d Cir. 1991); see
also Polak II, 2008 WL 4905519, at *7 (In determining whether there is a real dispute by opposing parties,
“the court is to realign the parties according to their substantive interests in the litigation.”).
42
Navarro Sav. Ass’n v. Lee, 446 U.S. 458, 460-61 (1980).
43
Id. at 461.

7

jurisdiction only upon the citizenship of parties with “a real interest in the litigation.”44
“Nominal parties are generally those without a real interest in the litigation.”45
The court agrees with Gimaex that the primary issue in this litigation is the
purported deadlock between Gimaex and Spartan USA concerning the wind down of
Spartan-Gimaex and that Gimaex and Spartan USA oppose each other on that issue.46
Gimaex argues that the mere fact a trustee or receiver will decide the disposition of
Spartan-Gimaex’s assets does not render it “a real party in interest, with enforceable
rights and duties” as Spartan USA contends.47
Gimaex argues Spartan-Gimaex itself has no interest, control, or stake in the
liquidation and wind up of its assets as it is equally owned by Gimaex and Spartan USA.
All decisions relating to the liquidation of Spartan-Gimaex require unanimous approval
from its Board of Directors, equally split between Gimaex and Spartan USA, which has
purportedly led to a deadlock and the need for a receiver or trustee.48 Gimaex argues a
dissolved Spartan-Gimaex cannot take part in the litigation in any meaningful way and
its only role in this litigation is to have a receiver or trustee appointed over it.49
Gimaex states the relief it seeks, including appointment of a receiver or trustee,
accounting, distribution or sale of Spartan-Gimaex’s assets, and distribution of assets,
would not “inure to the benefit of Spartan-Gimaex” nor “bind Spartan-Gimaex.”50

44

Bumberger, 952 F.2d at 767 (citing Wolff, 768 at 645).
Id.
46
D.I. 16 at 2. Spartan USA does not appear to dispute Gimaex’s characterization.
47
Id. Because Spartan USA and Gimaex each own a 50% interest in the Joint Venture and the
Agreement does not yield managing control to either party, Gimaex insists the Joint Venture can take no
position on the issue of its winding down. Id. at 9-10.
48
Id. at 2.
49
Id. at 10.
50
D.I. 16 at 10 (quoting D.I. 9 at 5).
45

8

According to Gimaex, the relief it seeks would only inure to the benefit of its two
members because any relief received by Spartan-Gimaex would be conveyed to
Gimaex and Spartan USA.51 As such, Gimaex concludes Spartan-Gimaex is a nominal
defendant and not a real party in interest, and should be disregarded for the purpose of
determining diversity.52
Spartan USA argues this court does not have diversity jurisdiction over this
action pursuant to 28 U.S.C. § 1332(a)(1) because there is not complete diversity of
citizenship between plaintiff Gimaex and “nominal defendant” Spartan-Gimaex, both of
which are citizens of Florida.53
Spartan USA contends Spartan-Gimaex’s Florida citizenship cannot be
disregarded on the theory it is merely a nominal party,54 because Gimaex’s claims are
purportedly derivative in nature, and it seeks to have a trustee or receiver decide the
disposition of Spartan-Gimaex’s assets, thereby making Spartan-Gimaex a real party in
interest, with enforceable rights and duties under substantive law.55
Spartan USA states Gimaex and Spartan-Gimaex are both citizens of Florida
because, as an LLC, Spartan-Gimaex “resides” for diversity purposes in each of the
states in which the LLC’s members, i.e., Gimaex and Spartan USA, reside.56
Spartan USA further maintains that Gimaex alleges Spartan USA mismanaged
51

Id. In support of its position, Gimaex cites the Fifth Circuit’s opinion in Wolff v. Wolff, 768 F.2d
642, 646 (5th Cir. 1985) (“That partnership was either already dissolved, as Richard asserts, or was
dissolved as a result of the judgment in this suit. In either event, transfer of title to the partnership would
have been a formal and doubtless unnecessary act, requiring the partnership in dissolution to convey the
real estate in turn to the partners.”).
52
D.I. 16 at 10.
53
D.I. 9 at 1.
54
Id.
55
Id.
56
Id. at 2.

9

Spartan-Gimaex by failing to notify Sparta-Gimaex of changes in Spartan USA’s
designated members of the Sparta-Gimaex Board of Directors; failing to convene the
Spartan-Gimaex board at least four times each fiscal year; failing to provide SpartanGimaex’s monthly financial statement to Gimaex; failing to promote Spartan-Gimaex’s
projects; and failing to designate a senior management officer authorized to resolve
disputes about the management of Spartan-Gimaex.57
Spartan USA notes this court has previously recognized that “‘accusations of
improper management generally implicate the potential for substantial harm to the
limited liability company itself.’”58 In 2009 Caiola Family Trust, the plaintiff alleged, inter
alia, that defendant engaged in mismanagement of the LLC’s property and finances.59
That court found the alleged nominal defendant had an interest in the derivative claim
because it would receive any recovery won in the suit.60 The plaintiff in that case,
however, alleged breach of fiduciary duties owed to the plaintiff and the LLC, and the
complaint also sought monetary damages on behalf of the LLC,61 allegations and relief
not sought in this case.
Spartan USA disputes Gimaex’s assertion that Spartan-Gimaex is not a real
party in interest. It notes the complaint’s prayer for relief seeks appointment of a
trustee, an accounting, disposition or sale of the Joint Venture’s assets, and the
distribution of proceeds.62 Spartan USA maintains if such relief is granted it would inure

57

Id. (citing D.I. 1 at ¶¶ 88-91, 103).
Id. at 4 (quoting 2009 Caiola Family Trust v. PWA, LLC, C.A. No. 12-1583-GMS, 2013 WL
3753614, at *1 n.2 (D. Del. July 10, 2013)).
59
2009 Caiola, 2013 WL 3753614, at *1 n.2.
60
Id.
61
Id.
62
D.I. 9 at 5.
58

10

to the benefit of Spartan-Gimaex and certainly bind it.63 Spartan USA also contends if a
trustee or receiver is appointed to sell or distribute proceeds of the Joint Venture’s
assets, the actions of the trustee or receiver would impose enforceable rights and duties
on Spartan-Gimaex.64 With respect to the asset purchases, Spartan USA suggests
such rights and duties could include delivery, inspection, contract formation and
performance, good faith dealing, warranty obligations, and rights to collection of
payment.65 Spartan USA also maintains distribution of proceeds and any sale or
disposition to the Joint Venture’s members would also impose enforceable rights and
duties on the Joint Venture.66 Therefore, by surrendering control of its assets to the
trustee or receiver, Spartan USA argues the Joint Venture would be required to perform
more than “ministerial duties,” therefore demonstrating it a real party in interest.67
With respect to Count I, appointment of a liquidating trustee/receiver to wind
down Spartan-Gimaex, the court must determine whether the Joint Venture is a real
party in interest to that issue.
Ultimately, the court agrees with Gimaex the Spartan-Gimaex is not a real party
in interest with regard to the appointment of a receiver or trustee to wind down the Joint
Venture because it does not have a real interest in that issue.68 Nominal parties are
63

Id.
Id. at 5-6.
65
D.I. 22 at 4.
66
Id.
67
D.I. 9 at 6.
68
See Bumberger v. Ins. Co. of N. Am., 952 F.2d 764, 767 (3d Cir. 1991) (“Nominal parties are
generally those without a real interest in the litigation.”) (citing Wolff v. Wolff, 768 F.2d 642, 645 (5th Cir.
1985)); see also, e.g, Polak II, 2008 WL 4905519. at *6-7 (finding “the primary issue or claim in this case is
[the LLC’s] dissolution” and that “whereas plaintiff and defendant oppose each other on the issue of [the
LLC’s] dissolution, [the LLC] itself has no interest”); Polak v. Kobayashi, C.A. No. 05-330-JJF, 2005 WL
2008306, at *2-3 (D. Del. Aug. 22, 2005) (“Polak I”) (finding that the primary issue was dissolution of a
two-member LLC; that determination of title to land held in the name of one of the co-venturers was only
64

11

“[t]ypically, . . . those . . . [who] . . . ha[ve] no control of, impact on, or stake in the
controversy.’”69
The primary issue here is the wind down of the Joint Venture and liquidation and
dividing its assets between owners Gimaex and Spartan, an issue on which the parties
oppose each other. The previously-dissolved Joint Venture has no stake in that
liquidation and division of assets as it will simply act as a conduit for any funds received
in the liquidation to the Joint Venture’s owners.70 Because Spartan USA and Gimaex
each own a 50% interest in Spartan-Gimaex, and all liquidation decisions must be made
via unanimous approval of the equally-split, and allegedly deadlocked, Board of
Directors, the Joint Venture has no control of, or impact on, resolution of its winding
down and the appointment of a trustee or receiver to accomplish that goal.71
Consequently, the court finds Spartan-Gimaex is a nominal party, not a real party in
interest, with respect to Count I.
With regard to Counts II through V, Gimaex maintains each is a direct claim
asserted against Spartan USA.72 Count II, for conversion, alleges “Spartan USA is in
central to the LLC Agreement and fiduciary duty claims; and concluding that the LLC was not a real party
in interest to the issue of dissolution and, therefore, was a nominal defendant).
69
Weston v. Progressive Commercial Holdings, Inc., C.A. No. 10-980, 2011 WL 231709, at *2 (D.
Del. Jan. 24, 2011) (alterations in original) (quoting Lincoln Property v. Roche, 546 U.S. 81, 92 (2005)).
70
See Wolff v. Wolff, 768 F.2d 642, 646 (5th Cir. 1985) (“Th[e] partnership was either already
dissolved, as Richard asserts, or was dissolved as a result of the judgment in this suit. In either event,
transfer of title to the partnership would have been a formal and doubtless unnecessary act, requiring the
partnership in dissolution to convey the real estate in turn to the partners.”). Although the Fifth Circuit’s
opinion is not binding precedent, the court notes the Third Circuit cited this opinion in describing nominal
parties. See Bumberger, 952 F.2d at 767 (citing Wolff, 768 at 645).
71
Given the primary issue is the winding down of Spartan-Gimaex, and its lack of control, impact
on, or stake in that issue, the court is unconvinced that the potential actions the Joint Venture might take in
the process of winding down demonstrate it is a real party in interest regarding the appointment of a
trustee or receiver as Spartan USA argues.
72
D.I. 16 at 2. Gimaex also contends if the court finds the actions of Spartan USA also harmed
Spartan-Gimaex, it would be erroneous to characterize them as derivative because such characterization
would limit the recovery it would receive due to Spartan USA’s purported wrongful actions while granting

12

the possession of certain property belonging to Gimaex, which are not Joint Venture
assets” and that “[d]espite [Gimaex’s] repeated demands for the return of the Gimaex
Property, the Gimaex Property has not been delivered to [Gimaex], thereby depriving
[Gimaex] of its right to possess its property.”73 Failure to return that property has
caused Gimaex to suffer continued “damages in an amount to be proven at trial.”74
Count V, for tortious interference with business relations, alleges Spartan USA
interfered with a longstanding business relationship between Gimaex, not SpartanGimaex, and the Sao Paulo Fire Department and its Chief, a business relationship of
which Spartan USA was aware.75 Spartan USA allegedly interfered with that business
relationship by excluding Gimaex from a certain bidding process, not using Gimaex
technology on the product, and creating a situation where Spartan USA would be
competing with Gimaex in a market Spartan USA had access to because of Gimaex, as
well as the Sao Paulo Fire Department not receiving a product with Gimaex’s
technology.76 That interference caused continuing damage to Gimaex.77

partial recovery to Spartan USA for its alleged bad acts. Id. at 13. In support of that position, Gimaex
cites the Delaware Court of Chancery’s unpublished opinion in In re Cencom Cable Income Partners, No.
C.A. 14634, 2000 WL 130629 (Del. Ch. Jan. 27, 2000). In that case the court the court was asked to
determine whether claims of a breach of the duty of loyalty and of a partnership agreement brought by
limited partner plaintiff’s against the general partner were direct of derivative. Id. at *1. The court found
the claims were not derivative because “the only injured party that may recover on these claims is in fact a
class of all limited partners. It is an elementary principle of equity that defendants found liable for
breaches of either fiduciary duties or contractual arrangements should not benefit from any remedy for
these breaches.” Id. at *4 (emphasis in original). As Spartan USA notes, however, that case was
considered in a partnership context and the Third Circuit has pointed out that “Cencom involved a
partnership and not a corporation” in affirming dismissal of derivative breach of fiduciary duty and aiding
and abetting claims. Winer Family Trust v. Queen, 503 F.3d 319, 339 (3d Cir. 2007). Here SpartanGimaex is an LLC, not a partnership. As such, Gimaex’s reliance on that case is unconvincing.
73
D.I. 1 at ¶¶ 125-126.
74
Id. at ¶ 127.
75
Id. at ¶ 143.
76
Id. at ¶ 144.
77
Id. at ¶ 145.

13

Gimaex likewise contends this court has diversity jurisdiction with respect to its
breach of contract and breach of implied covenant of good faith and fair dealing as each
is allegedly direct and not derivative in nature because Spartan USA’s purported acts
and omission harmed Gimaex, not the Joint Venture.78
Count II, conversion, is clearly a direct claim as it alleges “Spartan USA is in the
possession of certain property belonging to Gimaex, which are not Joint Venture assets,
. . . (the ‘Gimaex Property’).”79 There the injury alleged was suffered exclusively by
Gimaex and any damages awarded for that injury would be recovered by Gimaex, not
Spartan-Gimaex. Therefore, Spartan-Gimaex is a nominal party with respect to this
claim.
Likewise, Count V, tortious interference with business relations, is also a direct
claim as it alleges Gimaex had a longstanding business relationship with the Sao Paulo
Fire Department and its Chief, of which Spartan USA was aware, and that Spartan USA
interfered with that relationship in various ways.80 Again, the injury alleged was suffered
exclusively by Gimaex and any damages awarded for that injury would be recovered by
Gimaex, not Spartan-Gimaex. Spartan-Gimaex, therefore, is a nominal party with
respect to this claim.81
Count III, breach of contract, alleges Spartan USA breached the Agreement by

78

D.I. 16 at 10-11.
D.I. 1 at ¶ 125 (emphasis added).
80
D.I. 1 at ¶¶ 143, 144.
81
Although Spartan USA is correct that in determining whether a claim is direct or derivative, “the
court looks beyond plaintiff[‘]s characterization of the claims,” Polak II, 2008 WL 4905519, at * 7, looking at
the facts of the complaint reveals Gimaex’s conversion claim and tortious interference with business
relations are direct claims.
79

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not fulfilling certain obligations required by Paragraph 3.01 of the Agreement.82 Gimaex
alleges it fully performed its obligations by producing and supplying its component parts
for certain products.83 It alleges Spartan USA breached the Agreement by failing to use
diligence in marketing and promoting the Joint Venture Projects.84 Here, it was the Joint
Venture that suffered the harm from Spartan USA’s alleged failure to diligently market
and promote the Joint Venture’s Projects in that it did not receive revenue that it
otherwise might have, had Spartan USA’s diligently fulfilled its obligations under the
Agreement. Gimaex was harmed indirectly by not receiving its portion of the hoped-for
additional revenue it would be due in light of its 50% ownership interest in the Joint
Venture. Therefore, Gimaex did not suffer harm distinct from the harm to SpartanGimaex to which damages would flow. Thus, Spartan-Gimaex is not a nominal party
with respect to this claim.
Count IV, breach of implied covenant of good faith and fair dealing, alleges
Spartan USA breached Paragraph 3.01 of the Agreement85 by failing to undertake in
good faith, commercially reasonable efforts to sell the Joint Venture Projects and
refusing to sell a certain product to a Canadian buyer.86 The failure to make that sale is
alleged “to advance Spartan USA’s interest over the interest of the Joint Venture.”87
The purported misconduct by Spartan USA is claimed “to have been taken to enrich

82
D.I. 1 at ¶ 130; Agreement at ¶ 3.01(d) (“Once the Venture shall have approved and adopted a
Project, the Venturers will proceed with diligence to provide the services and materials required of them
and will continuously support the Project, subject to the terms and conditions of the related Project Plan.”).
83
D.I. 1 at ¶ 131.
84
Id. at ¶ 132.
85
D.I. 1 at ¶ 139; Agreement at ¶ 3.01(a) (“The purpose of the Venture is to identify and bring
products to market segments for Venture profit by application of the Venturer’s expertise . . . .”).
86
D.I. 1 at ¶ 139.
87
Id. (emphasis added).

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Spartan USA to the detriment of the Joint Venture. As such, these acts and omissions
were taken in bad faith and without regard for the best interests of the Joint Venture
. . . .”88 Here, Gimaex specifically alleges the harm suffered was to Spartan-Gimaex, as
well as Gimaex itself, and damages would flow to the Joint Venture. Thus, SpartanGimaex is not a nominal party with respect to this claim.
Consequently, the court concludes it has subject matter jurisdiction over Counts
I, II, and V, but not over Counts III and IV.
V.

ORDER AND RECOMMENDED DISPOSITION
For the reasons contained herein, it is recommended that:
(1) Spartan USA’s motion to dismiss for lack of subject matter jurisdiction (D.I. 8)

be GRANTED as to Counts III and IV of the complaint and DENIED as to Counts I, II,
and V.
This Report and Recommendation is filed pursuant to 28 U.S.C. § 636(b)(1)(B),
FED. R. CIV. 72(b)(1), and D. Del. LR 72.1. The parties may serve and file specific
written objections within ten (10) days after being served with a copy of this Report and
Recommendation.
The parties are directed to the Court’s Standing Order in Non-Pro Se matters for
Objections Filed under FED. R. CIV. 72, dated October 9, 2013, a copy of which is
available on the Court’s website, www.ded.uscourts.gov.

Dated: October 14, 2015

88

/s/ Mary Pat Thynge
UNITED STATES MAGISTRATE JUDGE

Id. at ¶ 140 (emphasis added).

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