Scott et al v. Vantage Corporation et al

Filing 135

MEMORANDUM re: 33 Plaintiffs/Counterclaim Defendants' motion to dismiss Counts I, II, III and V and IV, VI, VII, and VIII. Signed by Judge Mary Pat Thynge on 11/13/18. (cak)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
TARA SCOTT and WILSON CARTER,
INDIVIDUALLY AND AS TRUSTEE OF
THE BAILEY MIDDLETON CARTER 2009
TRUST, THE MARY WILSON CARTER
2009 TRUST, and THE WILSON M.
CARTER 1998 TRUST,
Plaintiffs,
v.
VANTAGE CORPORATION, VANTAGE
ADVISORY MANAGEMENT, LLC, VF(X)
LP, TRADELOGIX, LLC, BRIAN ASKEW
and GERALD FINEGOLD,
Defendants.

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C.A. No. 17-448-MPT

MEMORANDUM
I.

Introduction
Defendants/counterclaim-plaintiffs Vantage Corporation (“Vantage”), Brian

Askew (“Askew”), and Gerald Finegold (“Finegold”) filed their counterclaims pursuant to
FED. R. CIV. P. 13 against plaintiffs/counterclaim-defendants Tara Scott (“Scott), and
Wilson Carter (“Carter”), both individually and as Trustee of the Bailey Middleton Carter
2009 Trust, the Mary Wilson Carter 2009 Trust, and the Wilson M. Carter 1988 Trust.
Currently before the court are plaintiffs’ motion to dismiss defendants’ counterclaims
pursuant to FED. R. CIV. P. 12(b)(6).1

1

D.I. 26 and D.I. 33.

II.

BACKGROUND
Vantage, a privately-held Delaware corporation, maintains its principal office in

Alpharetta, Georgia.2 Askew, Finegold, and Carter are citizens of Georgia, while Scott
is a resident of Colorado.3
Since the early 1990s, defendants have invested and worked together to create
and enhance sophisticated proprietary trading software.4 In March 2014, defendants
formed Vantage and TradeLogix LLC (“TradeLogix”), a wholly owned subsidiary of
Vantage that engages in trading using their proprietary trading software.5
In late 2015, Carter approached Askew to become a potential investor, and also
introducing Scott.6 Scott made clear she spoke with Carter about investing and
expressed the ability and desire to fund a substantial dollar investment.7 Carter and his
advisors sought investing information from Vantage, who provided documentation
concerning investments, including documents seeking confirmation that each was an
accredited, sophisticated investor with the ability to invest.8 Plaintiffs represented an
understanding and acumen to assess the investments, and represented an
understanding they would receive shares of Vantage which had no public market for
resale and were illiquid.9
Plaintiffs were informed their investments would be utilized for Vantage
2

D.I. 26 at ¶ 1.
Id. at ¶ 3-5.
4
Id. at ¶ 8.
5
Id. at ¶ 9-10.
6
Id. at ¶ 11.
7
Id. at ¶ 12.
8
Id.
9
Id.
3

2

operations, a portion of which would be placed in Vantage’s trading account to
generate additional funds utilizing its proprietary trading technology.10 Those funds
would operate its business if needed.11
Plaintiffs received and executed a Stock Subscription Agreement, advising: (1)
the number of shares of Class A common stock acquired and price per share of
$2,096.60; (2) the investor’s recognition that the stock was not registered and could not
be sold or distributed without registration; (3) there was no public market for the shares
and no assurance there would be; and (4) the company had no obligation to register the
shares.12
Further, the Stock Subscription Agreement represented and warranted that
plaintiffs: (1) understood the nature of the investments; (2) had sufficient financial
resources to bear the risk of their investment in Vantage stock; (3) were sufficiently
experienced in financial and business matters to understand the merits and risks of
investing in a private company; and (4) were purchasing the Stock for investment
purposes and understood that their shares could not be sold without registration.13
Defendants relied on plaintiffs’ representations and warranties when they sold shares of
Vantage stock to them.14 Critical to Vantage were investors that shared the same
long-term views and would not have near-term liquidity needs inconsistent with its
goals.15
10

Id. at ¶ 13.
Id.
12
Id. at ¶ 14.
13
Id. at ¶ 15.
14
Id. at ¶ 16.
15
Id.
11

3

Plaintiffs also signed individual Joinder Agreements, whereby they were joined
and became a party to the Amended and Restated Stockholders Agreement dated
January 1, 2016, between Vantage and the other shareholders.16 The Stockholders
Agreement contained a general restriction on the transfer of plaintiffs’ shares, along with
a clause titled “Further Assurances”, in which plaintiffs agreed to “cooperate and take
such action as may be reasonably requested in order to carry out the provisions and
purposes of this Agreement and the transactions contemplated by this Agreement.”17
Additionally, plaintiffs agreed to a remedies clause in the Stockholders
Agreement, which provided that “if any party to this Agreement breaches or threatens to
commit a breach . . . such Stockholder shall pay, indemnify and hold the Company
harmless from all reasonable costs, damages, and expenses, including attorneys’ fees,
expended or incurred by the Company.”18
Plaintiffs received a Term Sheet with their investments made in an offering of $5
to $15 million of shares of class A common stock in Vantage.19 The price was
$2,096.60 per share and the “[s]hares [were] being offered only to accredited
investors.”20 The Term Sheet described the “Use of Proceeds” of the January 2016
Offering as: “[p]roceeds from the investment will be used to execute proprietary trading
strategy and for working capital and other general corporate purposes.”21 Investors,

16

Id. at ¶ 17.
Id. and D.I. 35-1 at 10-11.
18
D.I. 26 at ¶ 18; D.I. 35-1 at 11.
19
D.I. 26 at ¶ 19.
20
Id.
21
Id.
17

4

including plaintiffs, received share certificates each time they purchased stock.22
In 2016, Vantage formed an additional subsidiary, Vantage Advisory
Management, LLC (“Advisory”). Advisory is the general partner of a hedge fund, VF(x)
LP, also formed in 2016, and utilized Vantage’s proprietary trading software.23
Defendants claim investors, including Scott, desired to become limited partners and
invest in the VF(x) LP hedge fund.24 After making four separate purchases of stock in
Vantage totaling $2 million, Scott invested $250,000 in the hedge fund.25 VF(x) had a
liquidity provision requiring a one-year commitment with a 90-day notification as a
condition precedent for redemption.26 Scott received quarterly statements from Trident
Fund Services, the fund administrator, detailing the activity of her investment after
active trading began in September 2016.27
Within six months of her purchase, Scott sought liquidity.28 Her initial requests
were to discuss Vantage's daily business activity.29 However, Scott soon escalated to
demanding that $1 million of her $2 million investment be moved from Vantage to VF(x),
which had liquidity rights.30 These requests were made notwithstanding documentation
provided to her, and other communications reiterating that she held stock in a privately
held corporation that had no ready market and no redemption rights.31 Scott was made
22

Id. at ¶ 20.
Id. at ¶ 22.
24
Id. at ¶ 23.
25
Id.
26
Id.
27
Id.
28
Id. at ¶ 24.
29
Id.
30
Id.
31
Id. at ¶ 25.
23

5

aware that her investment was already being used as part of the operational reserve for
Vantage.32 If granted, Scott’s demands to redeem her stock would allegedly deplete
Vantage’s operations reserves.33
However, Vantage acquiesced in the Fall 2016 to Scott’s demands, selling half of
the $1 million in funds Scott was seeking to redeem.34 Scott re-sold a portion of her
Vantage Class A shares to new investors for a total of $500,000.35 She then expanded
her demands, requesting Vantage buy back her shares for the remainder of her $2
million investment.36 Defendants claim her unrelenting communications became so
distracting to daily operations and management that even Carter reminded her that the
investment in Vantage was a long term endeavor requiring patience, that no promises
were made to repay her investment or a rate of return in the short term, and chastised
her for attempting to extract a premium for an unanticipated very early redemption.37
Askew suggested that there was liquidity in VF(x) LP and her commitment of a
one year and 90-day redemption notice could be waived to provide liquidity.38 Scott
refused, stating she wanted to keep her investment in the hedge fund, VF(x), but
wanted a return of the monies she paid for shares in Vantage.39 Since her interests
were not aligned with other investors, and after notice, Advisory exercised its right to

32

Id.
Id. at ¶ 26.
34
Id.
35
Id.
36
Id. at ¶ 27.
37
Id.
38
Id. at ¶ 28.
39
Id.
33

6

redeem Scott’s interest in the hedge fund.40 Advisory directed the fund administrator to
return Scott’s principal and interest investments in VF(x) LP, in which she received the
amount of $250,000 and profit of $6,639.47.41
In mid-December 2016, Carter told Askew he was in urgent need of liquidity
because his spending had outstripped his income.42 Carter was reminded there was no
ready market for his Vantage shares and no immediate buyer.43 Carter asked if he
could remove at least $1 million which he needed in a few days.44 He then became
increasingly hostile when he was unable to liquidate or sell his stock.45 Plaintiffs were
aware that their stock in Vantage was illiquid and they had no right to seek redemption
of their shares.46 Further, they were informed that redeeming their shares would result
in substantial diminution of the remaining capital reserves and risked on-going viability
and ability to succeed on its strategic plans. As a result, Vantage could not redeem
their shares.47
Plaintiffs were informed that Vantage had been engaged in discussions with
potential investors for over a year and were close to completing another deal that would
benefit Vantage shareholders, in that this business dealing created a potential
opportunity for an investor to purchase their shares.48 Despite this information, plaintiffs

40

Id. at ¶ 29.
Id.
42
Id. at ¶ 30.
43
Id. at ¶ 31.
44
Id.
45
Id.
46
Id. at ¶ 32.
47
Id.
48
Id. at ¶ 34.
41

7

allegedly accelerated their demands and threats to force Vantage to acquiesce, and to
capitulate to their redemption demands for all of their stock.49
Defendants maintain plaintiffs, through legal counsel, threatened to involve
governmental authorities unless their shares were redeemed immediately, as well as a
lawsuit.50 Vantage made clear that if plaintiffs engaged in such action, it would
detrimentally affect on-going, long-developed dealings meant for the benefit of all
shareholders, including investments in Vantage and its hedge fund and other significant
opportunities involving Vantage’s proprietary trading technology.51
Plaintiffs filed this lawsuit, naming defendants.52 Plaintiffs’ actions allegedly
damaged Vantage’s ability to conduct business and proceed with business
opportunities, to the detriment of Vantage and its other shareholders, diminished the
value of Vantage shares, and cost Vantage significant legal expenses in its defense.53
Defendants purport the threats and actions of plaintiffs breached the Stockholder
Agreement.
III.

Governing Law
A.

Motion to Dismiss

In analyzing a motion to dismiss under FED. R. CIV. P. 12(b)(6), a review of Rule
8(a)(2) is necessary. It requires that a pleading contain a “short and plain statement of
the claim showing that the pleader is entitled to relief.”54 That standard “does not
49

Id. at ¶ 35.
Id. at ¶ 36.
51
Id. at ¶ 37.
52
Id. at ¶ 38.
53
Id. at ¶ 40.
54
FED. R. CIV. P. 8(a)(2).
50

8

require ‘detailed factual allegations,’ but . . . demands more than an unadorned, thedefendant-unlawfully-harmed me accusation.”55 Thus, to survive a motion to dismiss
under Rule 12(b)(6), a complaint “must contain sufficient factual matter, accepted as
true, to ‘state a claim for relief that is plausible on its face.”56 The purpose of a Rule
12(b)(6) motion to dismiss is to test the sufficiency of the complaint, not to resolve
disputed facts or decide the merits of the case.57 Evaluating a motion to dismiss under
Rule 12(b)(6) requires the court to accept as true all material allegations of the
complaint.58 “The issue is not whether a plaintiff will ultimately prevail, but whether the
complaintant is entitled to offer evidence to support the claims.”59 A motion to dismiss
may be granted only if, after, “accepting all well-pleaded allegations in the complaint as
true, and viewing them in the light most favorable to the plaintiff, plaintiff is not entitled to
relief.”60
To survive a motion to dismiss under Rule 12(b)(6), the factual allegations must
be sufficient to “raise a right to relief above the speculative level, on the assumption that
all the allegations in the complaint are true (even if doubtful in fact).”61 A plaintiff is
obliged “to provide the ‘grounds’ of his entitle[ment] to relief” beyond “labels and

55

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007)).
56
Id. (quoting Twombly, 550 U.S. at 570); see also Fed R. Civ. P. 12(b)(6).
57
Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993).
58
Spruill v. Gillis, 372 F.3d 218, 223 (3d Cir. 2004).
59
In re Burlington Coat Factory Secs. Litig., 114 F.3d 1410, 1420 (3d Cir. 1997)
(internal quotation marks and citations omitted).
60
Maio v. Aetna, Inc., 221 F.3d 472, 481-82 (3d Cir. 2000) (internal quotation
marks and citations omitted).
61
Twombly, 550 U.S. at 555; see also Victaulic Co. v. Tieman, 499 F.3d 227, 234
(3d Cir. 2007).
9

conclusions.”62 Heightened fact pleading is not required: rather “enough facts to state
a claim to relief that is plausible on its face” must be alleged.63 Rejected are
unsupported allegations, “bald assertions,” or “legal conclusion.”64 Further, “the tenet
that a court must accept as true all of the allegations contained in the complaint is
inapplicable to legal conclusions.”65 The analysis is a “context-specific task that requires
the reviewing court to draw on its judicial experience and common sense.”66 Well-pled
facts which only infer the “mere possibility of misconduct” do not show that “the pleader
is entitled to relief” under Rule 8(a)(2).67 “When there are well-pleaded factual
allegations, a court should assume their veracity and then determine whether they
plausibly give rise to an entitlement of relief.”68
IV.

Analysis
A.

Motion to Dismiss Defendants’ Counterclaims (D.I. 33)
1.

Breach of Contract (Count I)

In order to succeed on a breach of contract claim under Delaware law,

62

Twombly, 550 U.S. at 555.
Id. at 570.
64
Iqbal, 556 U.S. at 678 (“Threadbare recitals of the elements of a cause of
action, supported by mere conclusory statements do not suffice.”); see also Morse v.
Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997) (“[A] court need not credit a
complaint’s ‘bald assertions’ or ‘legal conclusions’ when deciding a motion to dismiss.”)
(citations omitted); Schuylkill Energy Res., Inc. v. Pennsylvania Power & Light Co., 113
F.3d 405, 417 (3d Cir. 1997) (“unsupported conclusions and unwarranted inferences”
are insufficient.); Nami v. Fauver, 82 F.3d 63, 69 (3d Cir. 1996) (allegations that are
“self evidently false” are not accepted.).
65
Iqbal, 556 U.S. at 678; see also Twombly, 550 U.S. at 555 (A court is “not
bound to accept as true a legal conclusion couched as a factual allegation.”).
66
Iqbal, 556 U.S. at 679.
67
Id.
68
Id.
63

10

defendants must plead: “(1) a contractual obligation; (2) a breach of that obligation by
plaintiffs; and (3) resulting damage to defendants.”69 In the instant case, plaintiffs
contend defendants’ breach of contract claim fails as a matter of law, because
defendants cannot demonstrate the existence of an enforceable contractual obligation
not to seek rescission.
Plaintiffs maintain any provision that preemptively bars this action is an illegal
waiver of their rights in violation of federal securities laws, and the agreements are
unenforceable under Georgia securities statutes.70 Further, any provision that bars an
investor from exercising his or her statutory rights has been deemed illegal since the
adoption of the Securities Act of 1933 and the Securities Exchange Act of 1934.
Section 29 of the 1934 Securities Exchange Act “is not intended to protect
substantive rights created by contract. It is designed to protect rights created by the
Exchange Act, and it expressly forecloses contracting parties from ‘defin[ing] the
boundaries of the[ir] transaction’ in a way that relieves a party of the duties imposed by
that Act.”71
Section 29 further provides that: “every contract made in violation of any
provision of this chapter or of any rule or regulation thereunder, . . . [or] the performance
of which involves the violation of, or the continuance of any relationship or practice in
violation of, any provision of this chapter or any rule or regulation thereunder, shall be

69

Freudenberg Spunweb Co. v. Fibervisions L.P., 2006 WL 1064173, at *18 (Del
Super. 2006), quoting H-M Wexford LLC v. Encorp, Inc., 832 A.2d 129, 140 (Del. Ch.
2003).
70
D.I. 34.
71
AES Corp. v. Dow Chem. Co., 325 F.3d 174, 183 (3d Cir. 2003).
11

void.”
However, “Section 29 itself does not define a substantive violation of the
securities laws; rather, it is the vehicle through which private parties may rescind
contracts that were made or performed in violation of other substantive provisions.”72
Although the word "void" is contained in the statute, the Supreme Court has read
Section 29(b) to be "merely voidable at the option of the innocent party."73
To void the Agreement under Section 29, plaintiffs must establish: “(1) the
contract involved a prohibited transaction; (2) they are in contractual privity with
defendants; and (3) plaintiff is in the class of persons that the securities acts were
designed to protect.74 Plaintiffs must demonstrate “a direct relationship between the
violation at issue and the performance of the contract; i.e., the violation must be
‘inseparable from the performance of the contract’ rather than ‘collateral or tangential to
the contract.’”75
Plaintiffs assert that they are entitled to rescind the Agreement under Section 29
of the Exchange Act based upon a violation of the Securities Act. The Agreements
however, do not involve prohibited transactions. The Agreements are detailed outlines
regarding nature and understanding of the investments, the investment goals, and binds
the parties to act in furtherance of those goals.

72

1989).

See National Union Fire Ins. Co. v. Turtur, 892 F.2d 199, 206 n.4 (2d Cir.

73

Mills v. Elec. Auto-Lite Co., 396 U.S. 375, 387-88, 90 S. Ct. 616, 24 L. Ed. 2d
593 (1970).
74
Regional Properties, Inc. v. Financial and Real Estate Consulting Co., 678 F.2d
552, 559 (5th Cir. 1982); see also, Pompano-Windy City Partners, Ltd. v. Bear Stearns
& Co., Inc., 794 F. Supp. 1265, 1288 (S.D.N.Y. 1992).
75
GFL Advantage Fund, Ltd. v. Colkitt, 272 F.3d 189, 201 (3d Cir. 2001).
12

Defendants pleaded sufficient facts to establish a contractual obligation.
Defendants claim plaintiffs breached the Stock Subscription Agreement and
Stockholders Agreement when they invested based upon stated and agreed investment
goals, liquidity needs, investment knowledge and understanding of the stock
investments purchased.

Defendants further claim, plaintiffs improperly demanded

refunds of their investments contrary to the agreed terms of their investment and
attempted to tender back their Vantage stock. Defendants further purport plaintiffs
failed and refused to cooperate with Vantage in contravention of the terms of the
Stockholders Agreement, and instead demanded redemption of their shares, threatened
Vantage and others with legal action, and filed this lawsuit. As a result, defendants
allege sufficient facts to show a breach of Section 5.10 of the Stockholders Agreement.
2.

Breach of Express Warranty (Count II)

To succeed on a breach of express warranty claim, defendants must plead that a
warranty existed, breach of the warranty, and resulting damages. An express warranty
is created by: (1) an affirmation of fact or promise made by the seller (2) to the buyer
(3) which relates to the goods and (4) becomes part of the basis of the bargain.76
Defendants maintain plaintiffs breached their representations and warranties
contained in the Stock Subscription Agreement. Defendants argue that plaintiffs knew
at this time of their investments how they would be used, and understood they would be
unable to liquidate or sell their stock. However, plaintiffs demanded redemption of their
shares of Vantage stock, threatened legal action, and filed this action seeking rescission

76

Freudenberg Spunweb Co. v. Fibervisions L.P., 2006 WL 1064173, at *17-18
(Del. Super 2006).
13

of their purchases of Vantage stock and return of their consideration, plus interest.
Defendants further allege that they relied on each and every representation by
plaintiffs when agreeing to issue Vantage stock and are entitled to damages as a result.
Plaintiffs contend defendants are attempting to restate their breach of contract
claim as breach of express warranty. As evident from the extent to which defendants
explained the bases of their breach of express warranty claim, they satisfy the pleadings
requirements of Rules 8 and 12(b)(6).
3.

Implied Covenant of Good Faith & Fair Dealing (Count III)

Under Delaware law, an implied duty of good faith and fair dealing
is interwoven into every contract. When used in conjunction with an
implied covenant, the term 'good faith' contemplates 'faithfulness to the
scope, purpose, and terms of the parties' contract.' In order to plead
successfully a breach of an implied covenant of good faith and fair
dealing, the plaintiff must allege a specific implied contractual obligation, a
breach of that obligation by the defendant, and resulting damage to the
plaintiff.77
A court focuses on "the parties' reasonable expectations at the time of
contracting. However, the express terms of the contract, and not an implied covenant of
good faith and fair dealing, will govern the parties' relations when the terms expressly
address the issue . . . [T]he plaintiff must advance provisions of the agreement that
support this finding in order to allege sufficiently a specific implied contractual
obligation."78
When presented with an implied covenant claim, a court first must
engage in the process of contract construction to determine whether there
is a gap that needs to be filled. If a gap exists, the court must determine
whether the implied covenant should be used to supply a term to fill the

77
78

Walgreen v. Theranos, Inc., 2017 WL 3189006, at *5 (D. Del. 2017).
Id.
14

gap. Delaware courts will only imply contract terms when "the party
asserting the implied covenant proves that the other party has acted
arbitrarily or unreasonably, thereby frustrating the fruits of the bargain that
the asserting party reasonably expected. Thus, parties are liable . . .
when their conduct frustrates the 'overarching purpose' of the contract . . .
.79
Defendants claim by entering into the Stockholders Agreement and the Stock
Subscription Agreement, plaintiffs are subject to an implied covenant of good faith and
fair dealing in their relationship with defendants. Therefore, plaintiffs are required to
refrain from unreasonable and arbitrary conduct that prevents defendants from receiving
the fruits of the bargain under the Agreements.
Defendants have pled sufficient facts to assert claims for breach of implied
covenant of good faith and fair dealing, by alleging facts that show plaintiffs’ conduct
frustrated the overarching purpose of the Agreements.
4.

Negligent Misrepresentation (Count IV)

Under Delaware law, "in order to assert a tort claim along with a contract claim, a
plaintiff must generally allege that a defendant violated an independent legal duty, apart
from the duty imposed by contract.”80 “Negligent misrepresentation arises when a
representation made is false, of which the actor knew or should have known, and upon
which the plaintiff reasonably and detrimentally relied.”81
Defendants claim plaintiffs made negligent misrepresentations when entering into
the Agreements. Plaintiffs represented to defendants that they had sufficient financial

79

Id. at 5-6.
Hiller & Assocs., LLC v. Garden Fresh Rests., LLC, 2018 WL 3768989, at *12
(D. Del. 2018).
81
RAIT P'ship, L.P. v. Fieldstone Lester Shear & Denberg, LLP, 2009 WL
3297310, at *7 (D. Del. 2009), report and recommendation adopted 2010 WL 786551
(D. Del. 2010).
80

15

resources to be able to bear the risk of their investment in Vantage; had evaluated the
merits and risks of investing in Vantage, a private company; were committed to
purchase of shares that could not be sold without registration and subject to transfer
restrictions; agreed investments would be used for operational functions of Vantage;
and agreed to cooperate in order to carry out the provisions and purposes of the
Stockholders Agreement.
Plaintiffs contend defendants fail to plead their claim of negligent
misrepresentation with particularity, and this claim is barred by the economic loss
doctrine. "The economic loss doctrine is a judicially created doctrine that allows a party
to recover in tort only if losses are accompanied by bodily harm or property damage; in
other words, the doctrine prevents plaintiffs from recovering in tort for losses suffered
that are solely economic in nature."82 This court recognizes that “a plaintiff may plead a
negligent misrepresentation claim by showing the defendant supplied information for
use in transactions with third parties and is in the business of supplying information.”83
Defendants fail to adequately plead a claim for negligent misrepresentation
against plaintiffs. Defendants did not sufficiently allege that plaintiffs were in the
business of supplying information nor did they allege sufficient facts that demonstrate
plaintiffs violated an independent legal duty, outside from their obligations imposed by
the Agreements.
5.

Individual Breach of Contract (Count V)

82

Cavi v. Evolving Sys., Inc., 2017 WL 658470, at *7 (D. Del. 2017), report and
recommendation adopted in part, 245 F. Supp. 3d 604 (D. Del. 2017).
83
Id.
16

“To survive a motion to dismiss for failure to state a breach of contract claim, a
plaintiff must demonstrate the existence of the contract, the breach of an obligation
imposed by that contract, and the resultant damage to the plaintiff. Clear and
unambiguous language found in a contract is to be given its ordinary and usual
meaning."84
Defendants claim Scott individually breached the Release Agreement executed
on October 24, 2016. She executed a stock transfer, a power of attorney to transfer the
stock and a release agreement, whereby she agreed to and acknowledged to “release,
remise, acquit and forever discharge [Vantage] . . . from any and all rights, demands,
claims, damages, losses, costs, expenses, actions and causes of action whatsoever
. . . .” She further agreed to “giving up rights, if any, which Transferor may have under
federal, state, or municipal law, and is hereby covenanting not to file complaints or
lawsuits or to assert any claims against the releases arising hereunder.”
Scott contends her claim only applies to the sale of 119.240675 shares of
Vantage to David Lawrence, and maintains she did not release defendants from liability
for the claims brought in the instant matter. As noted above, defendants pled sufficient
facts to state a claim for breach of the individual contract by Scott pertaining to the
release agreement.

6.

Breach of Fiduciary Duties (Count VI)

“In order to assert a claim of breach of fiduciary duty, a plaintiff must show that a

84

Walgreen, Co. v. Theranos, Inc., 2017 WL 3189006, at *5 (D. Del. July 27,

2017).
17

fiduciary duty exists and the defendant breached that duty. Upon showing of a fiduciary
relationship, Delaware law recognizes a ‘triad of fiduciary duties to uphold: the duty of
care, loyalty and good faith.’"85 Defendants failed plead to adequate facts that would
indicate a partnership existed.
Defendants dispute the truth and validity of the existence of any partnership
agreement, oral or written in its counterclaims. However, they maintain, if this court
were to find that defendants agreed to a partnership, plaintiffs would become general
partners, and owe defendants all of the duties and obligations imposed by law.
Defendants alleged that plaintiffs conspired to develop a scheme to obtain
money or take control of their business, and further assert that plaintiffs claimed to be
general partners, and to own defendants’ companies, intellectual property, and the
revenue streams.
Defendants contend Scott voluntarily elected to join Carter’s conspiracy to steal
their property, or alternatively, was fraudulently induced by Carter to join in his efforts to
obtain money and items of value from defendants. Defendants further allege plaintiffs
kept their scheme secret, disparaged defendants and their businesses, and deprived
them from being able to attract needed capital investment, starving defendants until
they acquiesced to plaintiffs’ demands.
Plaintiffs maintain that this counterclaim by defendants does not establish the
existence of a fiduciary duty, because it fails to establish a partnership. They further
assert that defendants incorrectly claim that plaintiffs somehow attempted to become

85

Cavi v. Evolving Sys., Inc., 2017 WL 658470, at *5 (D. Del. 2017), report and
recommendation adopted in part, 245 F. Supp. 3d 604 (D. Del. 2017).
18

general partners. Plaintiffs purport they clearly stated that although defendants falsely
represented to plaintiffs that they would become general partners upon the purchase of
stock, plaintiffs never became general partners of any Vantage related entity.
Defendants fail to plead adequate facts that would establish a partnership
agreement, therefore, fail to establish the existence of a fiduciary duty. Defendants
claim for breach of fiduciary duty is dismissed.
7.

Prima Facie Tort Claim (Count VII)

A prima facie tort claim requires "(1) an intentional lawful act by the defendant;
(2) defendant's intent to injure plaintiff; (3) an absence of justification or an insufficient
justification for defendant's act; and (4) injury to plaintiff."86
A prima facie tort claim exists “for persons harmed by acts that are intentional
and malicious but otherwise lawful which fall outside of the rigid traditional intentional
tort categories."87 Here, defendants allege plaintiffs’ conspiring actions were intentional,
done without excuse or justification, but with malice and intent to cause harm and injury,
and, as a natural, direct and proximate result of the plaintiffs' tortious actions,
defendants sustained actual, incidental and consequential damages in a presently
undetermined amount. Defendants have not pled enough facts to state a claim for relief
that is plausible on its face. Defendants’ allegations are unsupported legal conclusions.
8.

Alternative Recovery (Count VIII)

Defendants maintain they are entitled to recover against plaintiffs under theories

86

Hornsby v. Thomasville Noteholder, LLC, 2014 WL 3810665, at *3 (M.D. Ga.
Aug. 1, 2014).
87
Id.
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of contract, implied contract, quasi-contract, unjust enrichment and quantum meruit.
However, defendants failed to plead sufficient facts to establish these claims.
Defendants argue that they devoted personal time, effort and incurred significant
expense to create the entities, intellectual property and assets involved, which plaintiffs
claim to own. Defendants further maintain that, if a partnership exists between
defendants and plaintiffs, then defendants conferred a benefit upon this alleged
partnership. However, defendants have not alleged facts to support these theories,
and because defendants failed to plead sufficient facts to establish the aforementioned
partnership, their alternative recovery argument is insufficiently pled.
A Judgement Order consistent with this Memorandum shall follow.

Dated: November 13, 2018

/s/ Mary Pat Thynge
Chief U.S. Magistrate Judge

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