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

Filing 31

MEMORANDUM ORDER re 2 MOTION to Expedite filed by Gimaex Holding Inc. IT IS ORDERED and ADJUDGED that Gimaexs motion for expedited proceedings for Count I of the complaint (D.I. 2) is GRANTED. Signed by Judge Mary Pat Thynge on 10/30/15. (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

MEMORANDUM ORDER
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 I) 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

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 USA is a wholly owned subsidiary of Spartan Motors, Inc.
(“Spartan Motors”). Id. at ¶ 1. Spartan Motors is a Michigan corporation with a principal office in
Michigan. Id. at ¶ 14. 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. Spartan
USA previously moved to dismiss the complaint for lack of subject matter jurisdiction based on its
argument that Spartan-Gimaex was not a nominal defendant and, thus, there was a lack of complete
diversity between the parties. This court recently issued a Report and Recommendation concerning that
motion recommending Spartan USA’s motion to dismiss be granted as to Counts III and IV of the
complaint and denied as to Counts I, II, and V. See D.I. 29.

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 Gimaex’s motion for
expedited proceedings and trial on Count I of its complaint.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
USA 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,

2

Id. at ¶¶ 124-145.
D.I. 2.
4
D.I. 1 at ¶¶ 1, 22; id., Ex. A (“Agreement”).
5
D.I. 2 at 2; D.I. 1 at ¶ 23.
6
D.I. 1 at ¶ 23.
7
D.I. 1 at ¶ 24; id., Agreement at ¶ 5.01(b); id., Agreement at Ex. A.
3

2

and manage the business and affairs of Spartan-Gimaex.8 The Agreement requires
Gimaex and Spartan USA to each “proceed with diligence to provide the services and
materials required of them” and support and promote Spartan-Gimaex’s projects.9
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 alleges the parties are deadlocked on the wind down process.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 Spartan-Gimaex, 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

8

Id. at ¶ 29; id., Agreement at ¶ 5.01(a).
Id. at ¶ 32; id., Agreement at ¶ 3.01(d).
10
Id. at ¶ 101.
11
Id. at ¶ 104.
12
Id. 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.
9

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and Delaware law.17
III.

GOVERNING LAW
Gimaex seeks expedition of the court’s consideration of Count I of its complaint

requesting appointment of a trustee or receiver to wind down Spartan-Gimaex.
“Although the burden is not high, a plaintiff seeking expedition must have ‘articulated a
sufficiently colorable claim and shown a sufficient possibility of a threatened irreparable
injury . . . .’”18 “The Court need not determine the merits of the case or ‘even the legal
sufficiency of the pleadings’ at this stage of the proceedings.”19 “This court traditionally
has acted with a certain solicitude for plaintiffs in this procedural setting and thus has
followed the practice of erring on the side of more hearings rather than fewer.”20 On the
other hand, “where there clearly is no demonstrable need for the remedy of preliminary
injunction or, in the rarer case when there is not even any colorable claim pleaded, . . .
we decline to impose the costs associated with such a proceeding.”21
IV.

DISCUSSION
Gimaex maintains its allegations provide sufficient grounds to expedite

consideration of Count I of the complaint. Gimaex contends it is undisputed that the

17

Id. at 28 (Prayer for Relief).
In re Ness Techs., Inc., C.A. No. 6569-VCN, 2011 WL 3444573, at *2 (Del. Ch. Aug. 3, 2011)
(quoting Police & Fire Ret. Sys. of the City of Detroit v. Bernal, C.A. No. 4663-CC, 2009 WL 1873144, at
*1 (Del. Ch. June 26, 2009)); see also Morton v. Am. Mktg. Indus. Holdings, Inc., C.A. No. 14550, 1995
WL 1791090, at *2 (Del. Ch. Oct. 5, 1995) (“In determining whether to grant a request for expedited
proceedings, the plaintiff must demonstrate a ‘sufficiently colorable claim and show a sufficient possibility
of a threatened irreparable injury’ to justify the costs involved.”) (quoting Giammargo v. Snapple Beverage
Corp., C.A. No. 13845, 1994 WL 672698, at *2 (Del. Ch. Nov. 15, 1994)).
19
Morton, 1995 WL 1791090, at *2 (quoting Giammargo, 1994 WL 672698, at *2).
20
Giammargo, 1994 WL 672698, at *2; see also Box v. Box, 697 A.2d 395, 399 (Del. 1997)
(“Delaware courts are always receptive to expediting any type of litigation in the interests of affording
justice to the parties.”).
21
Giammargo, 1994 WL 672698, at *2.
18

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parties agreed to dissolve the Joint Venture, and the sole remaining objective of the
Joint Venture is to wind down.22 It contends the complaint sets forth a more than
colorable claim of a deadlock among the parties and/or their respective directordesignees concerning the wind down process.23 Gimaex insists the appointment of a
trustee on an expedited basis is necessary to wind down the Joint Venture’s affairs and
liquidate its assets.24
Gimaex states, under these circumstances, Delaware law permits the
appointment of a trustee pursuant to statute and as a matter of equity.25 It also notes it
is “well established that a federal court, sitting as a court of equity, has inherent power
to order the liquidation of a solvent corporation, where there is no other course available
to remedy a situation which is inequitable to the stockholders.”26 “[T]he federal
decisional law of this circuit and the decisional law of Delaware on the question [of
whether to appoint a trustee or receiver] are in accord.”27 “Among other situations which
may warrant or require a court of equity to appoint a receiver to liquidate a solvent
corporation is a deadlock between contending factions seeking to control and manage a

22

D.I. 2 at 7.
Id.
24
Id.
25
Id. (citing 6 Del. C. § 18-803(a) (“Unless otherwise provided in a limited liability company
agreement, a manager who has not wrongfully dissolved a limited liability company or, if none, the
members or a person approved by the members, in either case, by members who own more than 50
percent of the then current percentage or other interest in the profits of the limited liability company owned
by all of the members, may wind up the limited liability company's affairs; but the Court of Chancery, upon
cause shown, may wind up the limited liability company's affairs upon application of any member or
manager, or the member's personal representative or assignee, and in connection therewith, may appoint
a liquidating trustee.”) (emphasis added); In re Carlisle Etcetera LLC, 114 A.3d 592, 601 (Del. Ch. 2015)
(“‘[T]his Court, as a court of equity, has the power to order the dissolution of a solvent company and
appoint a receiver to administer the winding up of those assets.’”) (alteration in original) (quoting Weir v.
JMACK, Inc., C.A. No. 3263-CC, 2008 WL 4379592, at *2 (Del. Ch. Sept. 23, 2008)).
26
Campbell v. Pennsylvania Indus., Inc., 99 F. Supp. 199, 204 (D. Del. 1951).
27
Id. at 204-05.
23

5

corporation . . . .”28
Gimaex asserts the complaint also sufficiently alleges the possibility of
irreparable injury.29 It maintains that absent expedition, Spartan-Gimaex will remain
deadlocked on the wind down issues, its assets will depreciate during the deadlock, and
the parties will be forced to remain members in a company they mutually decided to
dissolve.30
Gimaex also notes the Joint Venture Projects are comprised of property
belonging solely to Gimaex and that property is being unlawfully held by Spartan USA at
location(s) unknown to Gimaex.31 Being deprived of that property is allegedly another
reason Gimaex is being irreparably harmed if the deadlock continues and a trustee
cannot marshal that property.32
Spartan USA argues Gimaex is unable to show a sufficient possibility of
threatened irreparable harm to warrant expedition.33 It contends the alleged deadlock
cited as justification for expedited relief has been contrived by Gimaex.34 Additionally, it
maintains there is insufficient threat of irreparable harm because, if Gimaex prevails on
the merits of its claims, the court can fashion a monetary remedy fully compensating
Gimaex for any losses it suffered and Spartan USA will be capable of paying any

28

Id. at 205 (emphasis added); see also In re English Seafood (USA) Inc., 743 F. Supp. 281, 288
(D. Del. 1990) (“[T]his federal court has the equity power to grant the appropriate relief necessary to
protect [the petitioner’s] investment in the assets of English Seafood from depletion due to alleged
deadlock between the shareholders of that corporation.”) (emphasis added).
29
D.I. 2 at 8.
30
Id.
31
Id. (citing D.I. 1 at ¶¶ 31, 125-127).
32
Id.
33
D.I. 6 at 1.
34
Id. at 1-2.

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damages awarded to Gimaex.35
Contrary to Gimaex’s assertion that the Spartan-Gimaex board is deadlocked,
Spartan USA maintains that for several months Gimaex has refused to even discuss
what it seeks to have a court appointed trustee or receiver do.36 According to Spartan
USA, instead of discussing details of distributing the Joint Venture’s assets, Gimaex
initiated this litigation.37
In the meantime, Spartan USA states Gimaex entered into an agreement with
one of its competitors to pursue business opportunities that were the objective of the
Joint Venture.38 As a result, Spartan USA argues it is the party facing irreparable harm
if Gimaex obtains expedited relief, including the potential that confidential information of
Spartan USA and intellectual property in which it has an interest will be turned over to
its competitor with which Gimaex has partnered.39
Spartan USA maintains it would only be appropriate for the court to consider
appointment of a trustee or receiver if the parties truly cannot agree on a plan of
liquidation after bona fide negotiations.40 Even then, however, Spartan USA argues the

35

Id. at 2; Giammargo, 1994 WL 672698, at *2 (declining to grant expedition where, if plaintiffs
were successful on their claims, “the court will be in a position to shape a decree that will fully compensate
plaintiffs for any loss they may suffer” and noting another relevant consideration was “that among the
defendants are persons who will quite evidently be capable of responding in damages to any award that
might be made”). Spartan USA states that it is fully capable of paying any damages Gimaex may be
awarded in light of Spartan Motors being a publicly traded company that has been in operation since 1975
and notes Gimaex has not alleged Spartan USA’s inability to make such payment. D.I. 6 at 4.
36
D.I. 6 at 3 (citing D.I. 7 (Affidavit of Daryl M. Adams) at ¶¶ 2-9, Exs. B-F). Adams is the
President and Chief Executive Officer and Director of Spartan Motors, the ultimate parent company of
Spartan USA, and a Director of Spartan USA. D.I. 7 at ¶ 1.
37
D.I. 6 at 4; D.I. 7 at ¶ 2.
38
D.I. 6 at 4; D.I. 7 at ¶ 2, Ex. A.
39
D.I. 6 at 4.
40
Id.

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court would need to base any final resolution on a fully developed record.41
Despite Spartan USA’s assertion of a contrived deadlock, the court finds the
complaint sets forth a colorable claim regarding the purported deadlock.
The parties are each 50% members of Spartan-Gimaex.42 The Joint Venture is
managed by an eight member Board of Directors, with four directors designated by
each party.43 Certain actions by the Board of Directors require unanimous approval,
including, “[d]oing or permitting to be done any act or thing whereby the [Joint] Venture
may be wound up (whether voluntarily or compulsorily) . . . .”44 Due to failure of the
Joint Venture to achieve its goals and failure to approach its projections for each of its
projects, the Joint Venture was dissolved by mutual consent on February 19, 2015.45
Although the Agreement provides a procedure for resolving a deadlock prior to
dissolution, it provides no mechanism for resolving a deadlock of the Board of Directors
regarding the wind down process.46
According to the complaint and the affidavit of Daryl M. Adams (submitted with
Spartan USA’s opposition brief), after the dissolution and prior to the filing of this action,
the parties communicated about the Joint Venture’s wind down on, at least, February
27, 2015; March 4, 2015; March 5, 2015; March 25, 2015; May 11, 2015; and May 15,
2015, with each side offering several options and proposals to accomplish that goal.47

41

Id.
D.I. 1 at ¶¶ 1, 7, 10.
43
Id. at ¶ 24; id., Agreement at ¶ 5.01(b).
44
Id. at ¶ 30; id., Agreement at ¶ 5.06(b)(viii).
45
Id. at ¶¶ 101, 104.
46
Id. at ¶¶ 96, 100.
47
Id. at ¶¶ 113-116; D.I. 7 at ¶¶ 6-8. On August 21, 2015, Spartan USA again wrote to Gimaex
setting forth its proposals regarding two issues related to winding down the Joint Venture. D.I. 26, Ex. A.
Gimaex characterized the terms of those proposals as “commercially unreasonable.” D.I. 26 at 2.
42

8

Those communications did not result in the parties reaching an agreement on the Joint
Venture’s wind down.48 Based on the above alleged facts and communications, the
court finds Gimaex has set forth a colorable claim that the parties are deadlocked as to
how to wind down the Joint Venture.49
With regard to Spartan USA’s contention that Gimaex will not suffer irreparable
harm because it is “capable of responding in damages to any award that might be
made,”50 the court notes Gimaex is not seeking expedited consideration of Counts II-V,
which, should it prevail, could entitle Gimaex to monetary damages. Gimaex only seeks
expedited consideration of its request in Count I that a trustee or receiver be appointed
to oversee the wind down of Spartan-Gimaex.
In light of the purported ongoing deadlock on how to wind down the Joint

48

At this point, it does not seem likely that additional negotiations between the parties surrounding
the wind down process would prove productive. Gimaex maintains, as evidenced by the current lawsuit,
given the rupture in the parties’ relationship, an agreement between the parties on any of the issues at this
juncture, let alone all the issues involved in the wind down of Spartan-Gimaex, is implausible. D.I. 14 at 5.
It concludes any further negotiations between the parties would be fruitless precisely because the parties
are deadlocked. Id. Furthermore, due to changes of individuals designated by Spartan USA to the Board
of Directors, notice of which Gimaex was often not given, Gimaex alleges it is uncertain as to whom
Spartan USA has currently designated as representing its interest on the Board of Directors. D.I. 1 at
¶ 28.
49
Cf. Vila v. BVWebTies, C.A. No. 4308-VCS, 2010 WL 3866098, at *7 (Del. Ch. Oct. 1, 2010)
(“This case is one in which an LLC has two managers whose agreement is contractually required for
WebTies to move forward with a properly authorized strategy. Neither manager can act in isolation for
WebTies without the assent of the other. This sort of deadlock has classically provided the basis for a
dissolution in the corporate context when a joint venture with two coequal shareholders faces a deadlock;
indeed, a specific section of the DGCL, § 273, addresses that scenario.”).
50
D.I. 6 at 2 (citing Giammargo, 1994 WL 672698, at *3). In Giammargo, the plaintiffs sought
expedited treatment of a planned-for preliminary injunction motion to block a proposed merger at a share
price the plaintiffs considered too low and that was tainted with self-interest because certain board
members received side payments. Giammargo, 1994 WL 672698, at *1-2. It was in that setting the court
denied expedited treatment of the case when it determined that, if plaintiffs ultimately prevailed on their
claims, “the court will be in a position to shape a decree that will fully compensate plaintiffs for any loss
they may suffer” and noted that “among the defendants are persons who will quite evidently be capable of
responding in damages to any award that might be made.” Id. at *3. Unlike Giammargo, this case does
not involve a preliminary injunction proceeding; Gimaex is only seeking expedition regarding its request to
have a trustee or receiver appointed to wind down the Joint Venture.

9

Venture, Gimaex insists, absent expedition, that deadlock will continue indefinitely, the
Joint Venture’s assets will depreciate, and the parties will be forced to remain members
in a company they mutually decided to dissolve.51 According to Gimaex, such a
situation has been recognized in Delaware as irreparable harm, which cannot be
remedied by monetary award.52 It also maintains that Spartan USA’s possession of
Joint Venture assets, including property belonging solely to Gimaex, constitutes an
irreparable injury.53 The court determines these allegations show a sufficient possibility
of threatened irreparable injury.
As to Spartan USA’s expressed fears concerning its intellectual property and
confidential information being turned over to a competitor, Gimaex notes the Agreement
addresses the parties’ intellectual property rights and use of confidential information.54
Gimaex also points out the court is capable of entering a confidentiality/protective order
for discovery and pleadings in this case, and the court (with or without a
receiver/trustee) can address Spartan USA’s concerns post wind down.55 The court

51

D.I. 14 at 6. Significantly, Spartan USA’s August 21, 2015 letter to Gimaex acknowledges Joint
Venture asset depreciation. In one of its proposals, Spartan USA states: “[t]he inventory value of the four
units is $1.5 million. Spartan is proposing this step because the equipment was manufactured years ago
and the partially-completed units continue to depreciate.” D.I. 26, Ex. A at 1 (emphasis added).
52
D.I. 14 at 6-7 (citing Prior v. Prosser, C.A. No. 14443-NC, 1995 WL 1791086, at *1 (Del. Ch.
Aug. 3, 1995) (noting the “irreparable injury” caused “by continuing as the ‘status quo’ a deadlocked and
feuding Board of Directors factionalized by ‘joint’ or ‘co-CEOs’”); see also cf. Wagoman v. Dolan, C.A. No.
5564-MG, 2011 WL 684615, at *2-3 (Del. Ch. Jan. 26, 2011) (In determining whether dissolution of a two
member joint venture should occur, the count found, inter alia “an irreparable rupture of the business
relation [between the co-venturers]” warranted dissolution and instructed the parties to, shortly thereafter,
inform the court of any reasons it “should not appoint a trustee to gather the assets of [the joint venture]
and wind-up its affairs.”)).
53
Id. at 7 (citing Kuhns v. Bruce A. Hiler Del. QPRT, C.A. No. 7586-VCG, 2014 WL 1292860, at
*23 (Del. Ch. Feb. 24, 2014) (noting “this Court’s prior findings that ‘interference with a property right
constitutes irreparable harm’”) (quoting Vansant v. Ocean Dunes Condo. Council Inc., C.A. No. 8700VCG, 2014 WL 718058, at *1 (Del. Ch. Feb. 26, 2014)).
54
Id. (citing D.I. 1, Agreement at ¶ 3.02).
55
Id.

10

agrees with Gimaex that Spartan USA’s concerns can be addressed with an appropriate
confidentiality/protective order and those concerns, therefore, do not warrant denial of
Gimaex’s motion.
Finally, the court disagrees with Spartan USA that the court needs to base any
final resolution on a fully developed record.56 When considering whether to grant
expedition, “[t]he Court need not determine the merits of the case or ‘even the legal
sufficiency of the pleadings’ at this stage of the proceedings.”57 And, again, Gimaex
only seeks expedition on Count I of its complaint. Considering the narrow focus of
discovery with respect to that claim, i.e., whether a deadlock exists, the court finds
Gimaex’s request is reasonable and that an accelerated time line for the resolution of
that issue would not be unduly burdensome for Spartan USA under the circumstances
of this case.58
In light of a plaintiff’s burden in seeking expedition being “not high,”59 and that
Delaware courts “traditionally ha[ve] acted with a certain solicitude for plaintiffs in this
procedural setting and thus ha[ve] followed the practice of erring on the side of more
hearings rather than fewer,”60 the court determines Gimaex has “‘articulated a
sufficiently colorable claim and shown a sufficient possibility of a threatened irreparable
injury’”61 to warrant expedited consideration of Count I of the complaint.
56

D.I. 6 at 4.
Morton v. Am. Mktg. Indus. Holdings, Inc., C.A. No. 14550, 1995 WL 1791090, at *2 (Del. Ch.
Oct. 5, 1995) (quoting Giammargo, 1994 WL 672698, at *2).
58
See, e.g., Kone Corp. v. ThyssenKrupp USA, Inc., C.A. No. 11-465-LPS-CJB, 2011 WL
4478477, at *4 (D. Del. Sept. 26, 2011) (“[T]he party seeking [expedited] discovery [must] show ‘good
cause’ for its motion, such that the request is ‘reasonable’ in light of the relevant circumstances.”).
59
In re Ness Techs., Inc., C.A. No. 6569-VCN, 2011 WL 3444573, at *2. (Del. Ch. Aug. 3, 2011).
60
Giammargo, 1994 WL 672698, at *2.
61
In re Ness, 2011 WL 3444573, at *2 (quoting Police & Fire Ret. Sys. of the City of Detroit v.
Bernal, C.A. No. 4663-CC, 2009 WL 1873144, at *1 (Del. Ch. June 26, 2009)).
57

11

V.

DISPOSITION
Consistent with the findings herein,
IT IS ORDERED and ADJUDGED that Gimaex’s motion for expedited

proceedings for Count I of the complaint (D.I. 2) is GRANTED.
Pursuant to 28 U.S.C. § 636(b)(1)(A) and (B), FED. R. CIV. P. 72(a) and D. DEL.
LR 72.1, any objections to the Memorandum Order shall be filed within fourteen (14)
days limited to ten (10) pages after being served with the same. Any response is limited
to ten (10) pages.
The parties are directed to the Court’s Standing Order in Non-Pro Se matters for
Objections Filed under FED. R. CIV. P. 72 dated October 9, 2013, a copy of which is
available on the court’s website, www.ded.uscourts.gov.

Dated: October 30, 2015

/s/ Mary Pat Thynge
UNITED STATES MAGISTRATE JUDGE

12