Jing Jing v. Weyland Tech, Inc. et al
MEMORANDUM re 20 . Signed by Judge Mark A. Kearney on 7/27/17. (bkb)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
WEYLAND TECH, INC., et al
July 27, 2017
As Delaware's public policy codified in Title 8 of the Delaware Code, shareholders
attempting to sell restricted shares of a Delaware corporation may sue the corporation and
transfer agent to remove the restrictive legend. To compel corporate action, the shareholder must
meet specific statutory obligations including presenting the original stock certificate with her
demand. We already dismissed one attempt by this shareholder to compel the corporation to
remove the legend based on a March 201 7 attempt without presenting the stock certificate as
required by statute. In her amended complaint, the shareholder now alleges she presented the
same stock certificate with a proper demand in January 2017 but the corporation refused to
remove the restrictive legend and permit the transfer based on a variety of defenses concerning
the legality of the shareholder's ownership. The corporation and transfer agent now move to
dismiss seemingly ignoring allegations detailing the January 2017 demand, which if proven true,
may state a violation of the Delaware Code and a claim for conversion. The defenses must wait
for a later day, as we are only evaluating whether the shareholder states a claim.
In April 2016, Duan Jing Jing bought 800,000 shares of Weyland Tech, Inc. ("Weyland")
from Ms. Lee Gaik Hong.
Jing Jing's purchase.
Weyland issued stock Certificate Number 1397 to memorialize Ms.
Certificate 1397 included a restrictive legend preventing the shares from
being sold during a six-month holding period. 4 Ms. Jing Jing would need Weyland to remove
the restrictive legend attached to the certificate to sell her shares.
Ms. Jing Jing emailed
Weyland's CEO, Brent Suen, and asked if she would be able to remove the restrictive legend. 5
Mr. Suen replied Weyland would attempt to remove the restrictive legend and re-issue the shares
as non-restricted after the mandatory holding period. 6
Ms. Jing Jing attempts to remove the restrictive legend the first time.
Ms. Jing Jing hired an attorney, David Claiborne, to issue the legal opinion required to
initiate the process of removing the restrictive legend per Weyland's instructions. 7 On January
18, 2017, Attorney Claiborne sent his opinion letter to Nevada Agency and Transfer Company
(the "Transfer Company"). 8 On January 18, 2017, Ms. Jing Jing mailed the required documents
to the Transfer Company, including the original share certificate, via FedEx. 9 On February 7,
2017, Weyland's attorney, Scott Kline, told Attorney Claiborne Weyland did not believe the
shares qualified to have the restrictive legend removed because the shares had previously been
On February 13, 2017, Attorney Claiborne sent a revised opinion letter concluding the
shares could still be re-issued without the restrictive legend. 11 Two days later, on February 15th,
Ms. Jing Jing asked to have the original stock certificate returned, and Weyland complied with
this request on the same day. 12
Ms. Jing Jing attempts to remove the restrictive legend a second time.
Ms. Jing Jing then engaged new counsel, Matheau Stout, to attempt to have the restrictive
legend removed once again.
On March 2, 2017, Attorney Stout sent the required opinion letter
to the Transfer Company, along with the documents required under Rule 144 of the Securities
Act of 1933.
He included a copy of the share certificate as an attachment to his email opinion
letter, but he did not resend the original certificate. 15
Weyland declined to remove the restrictive legend from the certificate. 16 It cited a
complaint from a foreign court ("the Singapore Complaint") claiming the shares originally issued
to Ms. Lee Gaik Hong had been canceled. 17 This cancellation rendered Ms. Jing Jing's
ownership invalid, because she purchased the shares from Ms. Lee Gaik Hong. 18 Attorney Stout
agreed the removal of the restrictive legend would be improper if Weyland's allegations were
true and offered to withdraw his request to have the legend removed if Weyland provided
Ms. Jing Jing alleges Weyland did not provide satisfactory documents to support the
Singapore Complaint. 20 Attorney Stout did not find the Singapore Complaint supported in any
of Weyland's filings with the Securities and Exchange Commission. 21 On April 13, 2017,
Weyland issued an 8-K to its shareholders, which mentioned the Singapore Complaint, but Ms.
Jing Jing alleges the 8-K did not sufficiently support those claims. 22 Weyland also did not
oppose Attorney Stout's Rule 144 opinion letter. 23 Attorney Stout renewed efforts to remove the
restrictive legend by requesting guidance from the Transfer Company. 24 The Transfer Company
refused to comment without the certificate presented. 25 On two further occasions, the Transfer
Company refused, absent "actual presentment" of the certificate, to provide guidance beyond
The Transfer Company did not comment about Ms. Jing Jing's having
previously sent in and recalled the certificate. 27
Ms. Jing Jing alleges she did not send the certificate a second time because she feared
Weyland would seize it.
She cited another lawsuit in which Weyland allegedly refused to
return an original share certificate, and the owner is now suing to obtain its return. 29 Fearing the
same fate, she declined to submit the original certificate with her request to remove the legend. 30
We dismissed Ms. Jing Jing's original complaint for failure to state a claim because she
did not allege she presented the certificate along with her request to remove the restrictive legend.
Ms. Jing Jing's amended complaint alleges a unique situation: she sent her original request to
remove the restrictive legend with her certificate, and on January 18, 2017, after Weyland
refused to remove the restrictive legend, she requested her certificate be returned.
Weyland and the Transfer Company now move to dismiss Ms. Jing Jing's amended
complaint for failure to state a claim because she did not allege presenting the certificate "in
connection with" Attorney Stout's March 2017 request for removal. 31 Ms. Jing Jing argued
initially sending the certificate on January 18, 2017 through Attorney Claiborne is sufficient to
trigger Weyland's duty to remove the restrictive legend, even though she later recalled the
certificate. 32 She alleged she did not send the certificate a second time because of the possibility
Weyland would seize it.
In our June 15, 2017 Memorandum, we found the Delaware Code requires Ms. Jing Jing
present Certificate 1397 before Weyland or the Transfer Company has a duty to register
transfer. 33 Ms. Jing Jing's amended complaint properly alleges presenting the certificate on
January 18, 2017. 34 There may be questions of fact regarding her recalling the demand but as
she cured the defect in her original complaint, we find she pleads the elements of a Delaware
Code violation and conversion.
We deny Weyland and the Transfer Company's motion to
dismiss for failure to state a claim.
Ms. Jing Jing stated a claim Weyland and the Transfer Company violated §§
8-401 and 8-407.
Under§ 8-401, "[i]f a certificated security in registered form is presented to an issuer with
a request to register transfer ... the issuer shall register the transfer as requested," if the transfer
satisfies various requirements. Ms. Jing Jing alleged her attorney, David Claiborne, sent a proper
request to the Transfer Company to register transfer on January 18, 2017. Ms. Jing Jing also sent
her certificated security via FedEx to the Transfer Company.
If true, when the Transfer
Company received both the security and the request, Weyland and the Transfer Company had a
duty under§ 8-401 to remove the restrictive legend. They did not do so. Instead, Weyland told
Ms. Jing Jing she did not qualify for removal because of "potential securities laws violations in
connection with [her] stock issuance and ownership."35 These are defenses not before us on a
motion to dismiss.
An issuer may only delay registering transfer if it does so under § 8-403, which permits
delay if the issuer has notice of an adverse claim against the stock from "an appropriate person to
make an endorsement or originate an instruction."36 Such an adverse claim may not be raised by
Weyland. 37 Concerns about the validity of Ms. Jing Jing's ownership, such as those raised by
the Singapore Complaint, do not relieve the issuer from the statutory duty to register transfer
imposed by § 8-401. 38
Accepting Ms. Jing Jing's allegations as true, she states a claim she properly submitted
her request with her certificate and triggered Weyland's duty in January 2017 to remove the
restrictive legend. Weyland and the Transfer Company refused to remove it. We deny the
motion to dismiss Ms. Jing Jing's claim for a violation of§§ 8-401 and 8-407.
Ms. Jing Jing states a claim for conversion.
Ms. Jing Jing also alleged conversion, claiming Weyland and the Transfer Company's
refusal to remove the restrictive legend constituted improper control over the shares because it
denied her the right to resell them. 39 Under Delaware law, conversion requires a "distinct act of
dominion wrongfully exerted over the property of another, in denial of his right, or inconsistent
Conversion applies to securities. 41
Because conversion is a tort, it requires
Defendants' "intentional wrongful act." 42 "A stockholder's shares are converted by 'any of
control or dominion . . . without the [stockholder's] authority or consent, and in disregard,
violation, or denial of his rights as a stockholder of the company." 43
Ms. Jing Jing alleges Weyland and the Transfer Company wrongfully refused to remove
the restrictive legend when they had a statutory duty to do so. She alleges Weyland and the
Transfer Company's refusal to remove the restrictive legend converted of her property by
depriving her right to sell her shares.
Ms. Jing Jing also seeks injunctive relief asking us to compel the removal of the restrictive
legend from her shares. Delaware courts allow a shareholder to seek damages for the market
value of the shares or compel the company to record its shares but not both. 44 Although not
before us today, Ms. Jing Jing "must elect [her] remedy whether to proceed at law for the value
of the stock ... or to proceed in equity seeking to compel recordation and ancillary damages. "
We deny Weyland and the Transfer Company's motion to dismiss because Ms. Jing Jing states a
claim for conversion but she cannot proceed on both her remedies and must elect one going
We deny Weyland's motion to dismiss because Ms. Jing Jing states a claim Weyland and
the Transfer Company violated§§ 8-401, 8-403, and 8-407. We also deny Weyland's motion to
dismiss because Ms. Jing Jing states a claim for conversion. Defendants will now answer the
Amended Complaint and we expect the Transfer Company and Ms. Jing Jing will agree as to the
disposition of Case No. 17-999 now also pending in this Court.
ECF Doc. No. 19 ii 12.
Id. ii 26.
17 C.F.R. § 230.144.
EFC Doc. No. 19 ii 49.
EFC Doc. No. 19, ii 84. "Form 8-K is the 'current report' companies must file with the
[Securities and Exchange Commission] to announce major events that shareholders should know
about. An 8-K is a form issued by [a Securities and Exchange Commission] company notifying
investors of specific events." U.S. Securities and Exchange Commission: Form 8-K,
ii 72, 75.
EFC Doc. No. 21 p. 6. The Transfer Company, already a Defendant in this case, just filed a
complaint in interpleader on July 21, 2017 at No. 17-999 seeking to have the same rights
adjudicated in a second case. We see no present need for two cases and suggest the experienced
counsel reach an agreement in the next ten days to ensure the rights of all parties are protected
until a final Order in this case and consistent with Fed. R. Civ. P. 1. Otherwise, we will issue an
order to show cause by August 15, 2017 in the second case (No. 17-999) as to why we should
proceed with two cases.
EFC Doc. No. 19 ii 89.
Jing Jing v. Weyland Tech, Inc., No. 17-446, 2017 WL 2618753 (D. Del. June 15, 2017).
As alleged in the second case at No. 17-999, Ms. Jing Jing again presented her demand with
original Certificate 1397 to the Transfer Company in mid-July 2017. Weyland again instructed
Transfer Company not to remove the legend.
EFC Doc. No. 19 'if 41.
See CAPM Corp. v. Protegrity, Inc., No. 18676, 2001 WL 1360122 at *5-6 (Del. Ch. Oct. 30,
See CAPM Corp., 2001WL1360122 at *5-6; Bender v. Memory Metals, Inc., 514 A.2d 1109,
114-17 (Del. Ch. 1986).
ECF Doc. No. 19 'if 106-14.
°Kuroda v. SPJS Holdings, L.L.C., 971 A.2d 872, 889 (Del. Ch. 2009) (quoting Drug, Inc.
Hunt, 168 A. 87, 93 (Del. 1933)).
See Arnold v. Society for Savings Bancorp, Inc., 678 A.2d 533, 536 (Del. 1996).
Petroplast Petrofisa Plasticos S.A. v. Ameron Intern. Corp., No. 4304, 2009 WL 3465984 at
*9 (Del. Ch. Oct. 28, 2009).
Arnold, 678 A.2d at 536 (internal citations omitted).
See Loretto Literary & Benev. Inst. v. Blue Diamond Coal Co., 444 A.2d 256, 259 (Del. Ch.
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?