IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

THERMOPYLAE CAPITAL 

PARTNERS, L.P. and M. SCOTT 

CONLEY,

Plaintiffs,

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C.A. No. 10619-VCG

SIMBOL, INC., JOSHUA L. GREEN, 

PAUL B. CLEVELAND, WILLIAM 

ERICSON, MOHR DAVIDOW 

VENTURES, MDV IX, L.P., TAKASHI 

SUNADA, ITOCHU CORPORATION, 

JOHN ASHBURN, MARTIN L. 

LAGOD, FIRELAKE STRATEGIC 

TECHNOLOGY FUND, II, L.P., 

FIRELAKE INVESTORS FUND, II, 

L.P., FIRELAKE CAPITAL 

MANAGEMENT LLC, and JOHN 

BURBA,

Defendants.

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MEMORANDUM OPINION

Date Submitted: October 28, 2015

Date Decided: January 29, 2016

Sidney S. Liebesman, Lisa Zwally Brown, and Chad Flores, of MONTGOMERY,

McCRACKEN, WALKER & RHOADS, LLP, Wilmington, Delaware, Attorneys for 

Plaintiffs.

Peter J. Walsh and Tyler J. Leavengood, of POTTER ANDERSON & CORROON 

LLP, Wilmington, Delaware; OF COUNSEL: Matthew Rawlinson and James H. 

Moon, of LATHAM & WATKINS LLP, Menlo Park, California, Attorneys for 

Defendants Martin Lagod, Firelake Strategic Technology Fund, II, L.P., Firelake 

Investors Fund, II, L.P., and Firelake Capital Management LLC.
Rudolf Koch, Susan M. Hannigan, and Matthew D. Perri, of RICHARDS, LAYTON 

& FINGER, P.A., Wilmington, Delaware, Attorneys for Defendants Takashi Sunada

and Itochu Corporation.

Elena C. Norman, James M. Yoch, and Lakshmi A. Muthu, of YOUNG CONAWAY 

STARGATT & TAYLOR, LLP, Wilmington, Delaware; OF COUNSEL: J. Daniel 

Sharp, of CROWELL & MORING LLP, San Francisco, California, Attorneys for 

Defendants Mohr Davidow Ventures, MDV IX, L.P., Joshua L. Green, Paul B. 

Cleveland, and William Ericson.

Patricia R. Urban, of PINCKNEY, WEIDINGER, URBAN & JOYCE LLC, 

Greenville, Delaware; OF COUNSEL: Alan J. Stone and Hailey DeKraker, of 

MILBANK, TWEED, HADLEY & McCLOY LLP, New York, New York, Attorneys 

for Defendants John Ashburn and John Burba.

Patricia L. Enerio and Aaron M. Nelson, of PROCTOR HEYMAN ENERIO LLP, 

Wilmington, Delaware, Attorneys for Defendant Simbol, Inc.

GLASSCOCK, Vice Chancellor
1

The Plaintiffs here are M. Scott Conley—a founder and stockholder of 

Simbol, Inc., (“Simbol” or the “Company”)—and stockholder Thermopylae Capital 

Partners, LP (“Thermopylae”), an entity that Conley controls. This matter involves 

a dilution claim by the Plaintiffs. They allege that the Simbol board, as directed by 

a controller of the corporation, Defendant Mohr Davidow Ventures (“MDV”), and

aided by other defendants, breached fiduciary duties to the common stockholders by 

issuing stock to the CEO; and that that stock was ill-gotten, in that it was acquired 

by Simbol from a former CEO who was contractually bound by a right of first refusal 

in favor of the Plaintiffs, which the ex-CEO breached in selling the stock back to the 

Company. This transaction, according to the Plaintiffs, was wrongfully dilutive of 

their interests. The Plaintiffs also allege that those controlling Simbol authorized a 

reduction of the share price for a preferred stock offering, in a way the Plaintiffs 

contend diluted their ownership. In addition, the Plaintiffs allege much past 

wrongdoing by MDV and other defendants in the many years since Simbol’s 

founding, which they contend demonstrates the controlling nature of MDV’s interest 

in Simbol. The Plaintiffs, however, conceded at oral argument that those earlier 

incidents alleged wrongs to the Company, which they have not attempted to pursue 

derivatively. The Plaintiffs therefore seek redress here only for the dilution claims.

The matter is before me on motions to dismiss. Because the claims brought 

are direct, the Plaintiffs are held only to the low notice pleading standard of Rule 
2

12(b)(6). The complaint was brought without full recourse to document production 

available under Section 220 of the Delaware General Corporation Law (“DGCL”).

1

 

The Plaintiffs have pleaded a complaint that omits pertinent facts to which they 

would have been entitled as stockholders under Section 220. The complaint 

therefore tests the limits of “reasonable conceivability” under Rule 12(b)(6), by

asking that I speculate as to fundamental facts necessary for the Plaintiffs to prevail. 

The situation the Plaintiffs describe excites equitable antennae, because at least some 

of the directors had dual loyalties to the Company and to those with whom it 

transacted. Nonetheless, for the following reasons, I find the Plaintiffs’ complaint 

deficient, and dismiss the action, without prejudice to any stockholder availing itself 

of the tools at hand to bring a properly pled derivative action, should that prove 

appropriate.

I. BACKGROUND2

The following facts are taken from the Plaintiffs’ Verified Complaint. They 

go far beyond the two transactions that are alleged to give rise to liability here, and 

include earlier transactions that, according to the Plaintiffs, demonstrate MDV’s 

control of Simbol and willingness to use that control for its own benefit.

 

1 The Plaintiffs made a Section 220 demand on Simbol but did not litigate the matter when faced 

with Simbol’s allegedly incomplete document production, instead relying on what they contend is 

“more than sufficient detail in this complaint.” See Oral Argument Tr. 57:6–17.

2 The facts, drawn from the Plaintiffs’ Verified Complaint (the “Complaint” or “Compl.”), are 

presumed true for purposes of evaluating the Defendants’ Motions to Dismiss.
3

A. The Parties

Plaintiff M. Scott Conley is a “substantial” common stockholder of Simbol, 

holding 444,400 shares.

3

 He served on Simbol’s board of directors (the “Board”) 

from in or about January 2012 to in or about December 2012,4and served as “COO 

and senior most executive” to Simbol as of January 15, 2013.5 Conley and non-party 

Luka Erceg are the co-founders of Simbol.6 Plaintiff Thermopylae is another

“substantial” common stockholder of Simbol, holding 666,600 shares, and is 

controlled by Conley.7

Defendant Simbol is a Delaware corporation with its principal place of 

business in Pleasanton, California.8 Defendants Joshua Green, Paul B. Cleveland, 

William Ericson, Martin L. Lagod, Takashi Sunada, John Burba, and John Ashburn 

are all current or former Board members (collectively, the “Director Defendants”). 

Green is a general partner of Defendant Mohr Davidow Ventures (“MDV”) and 

 

3 Compl. ¶¶ 1, 10. I note that this is around 1% of the total 45,954,905 shares of common stock 

that are authorized under Simbol’s 2012 Amended and Restated Certificate of Incorporation. 

Transmittal Aff. of James M. Yoch, Jr., Ex. A (“Am. and Restated Cert. of Incorp.”), at Art. IV. 

The Amended and Restated Certificate of Incorporation is incorporated by reference and integral 

to the Complaint, as the Plaintiffs’ claims are based in part on the contents therein. See Trenwick 

Am. Litig. Trust v. Ernst & Young, L.L.P., 906 A.2d 168, 188 (Del. Ch. 2006) (“In evaluating the 

complaint, the court may also consider the unambiguous terms of those documents incorporated 

by reference in the complaint . . . .”). The Complaint does not allege the total number of 

outstanding common shares or the total number of stockholders with holdings in Simbol.

4 Compl. ¶ 10.

5

Id. at ¶ 95.

6

Id. at ¶¶ 1, 10, 23.

7

Id. at ¶ 9. Thermopylae is described as “a limited partnership in which Conley is involved.” Id.

at ¶ 1.

8

Id. at ¶¶ 1, 11.
4

served on the Board “at all material times,” allegedly representing MDV’s interests.9 

Cleveland served on the Board from in or about February 2012 to in or about 

December 2012, allegedly representing MDV’s interests, and previously was a 

general partner and the chief operating officer of MDV.10 Ericson served on the 

Board from in or about January 2013 to in or about February 2013, allegedly 

representing MDV’s interests, and is a general partner of MDV.11 Lagod is a 

managing director and co-founder of Defendant Firelake Capital Management LLC, 

and served on the Board from in or about May 2011 to in or about January 2012, 

allegedly representing the interests of Firelake Capital Management LLC and the 

other Firelake entitles controlled by it.12 Sunada has been at “all material times” a 

member of the Board, serves as the Chief Financial Officer of Simbol, and 

previously served as a manager for Itochu Corporation (“Itochu”).13 Burba joined 

the Board in or about August 2013 and currently serves as Simbol’s President and 

Chief Executive Officer.14 Finally, Ashburn joined the Board in or about December 

2013 and serves as the Chief Legal Officer of Simbol.15

Defendant MDV is a Delaware limited partnership and venture capital firm 

 

9

Id. at ¶ 12.

10 Id. at ¶ 13.

11 Id. at ¶ 14.

12 Id. at ¶ 16.

13 Id. at ¶ 18.

14 Id. at ¶ 20.

15 Id. at ¶ 21.
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with its principal place of business in Menlo Park, California.16 MDV operates 

through various limited partnerships, including Defendant MDV IX, L.P. (“MDV 

IX”), a Delaware limited partnership and preferred shareholder of Simbol that is 

controlled by MDV.17 (MDV and MDV IX are collectively referred to as “MDV.”) 

MDV holds a majority of Simbol’s Series A preferred stock.

18

Defendants Firelake Strategic Technology Fund, II, L.P. and Firelake 

Investors Fund, II, L.P. are Delaware limited partnerships and preferred stockholders

of Simbol, both under the control of Defendant Firelake Capital Management LLC, 

a Delaware limited liability company headquartered in Palo Alto, California

(collectively, “Firelake”).

19

 Firelake was founded in 2002 and invests in early-stage 

venture capital companies focused on cleantech and renewable energy.20

Non-party Itochu,

21 a preferred stockholder of Simbol, is a multinational 

corporation headquartered in Tokyo, Japan that operates various businesses,

including importing and exporting and international trading of metals, minerals, 

energy, and other goods and services.

22

B. Facts

 

16 Id. at ¶ 15.

17 Id.

18 Id.

19 Id. at ¶ 17.

20 Id.

21 The Plaintiffs voluntarily dismissed Itochu from this action on October 28, 2015, prior to oral 

argument.

22 Compl. ¶ 19.
6

Simbol was founded in 2007 by Conley and Erceg, and specializes in 

sustainable materials technology.23 Looking to take advantage of the increasing 

need for lithium in the production of electronic vehicles, Conley and Erceg

developed a business model for extracting lithium and other valuable battery metals 

from geothermal brine using an environmentally friendly production process.

24

 

Simbol commenced operations in July 2008.25

1. The Series A Financing

In February 2008, five months before officially commencing operations, 

Simbol participated in the CleanTech Forum in San Francisco, California26—an 

annual gathering of clean tech entrepreneurs, venture capital firms, investors, and 

policy makers from around the world—where it was awarded the CleanTech Group 

Most Promising Technology Award.27 While at this conference on behalf of Simbol,

Conley and Erceg first met Green and began discussing a potential investment by 

MDV in Simbol.

28

 This and subsequent conversations over the next few months 

culminated in Simbol’s Series A round of financing.

29

 The financing was led by 

MDV and Firelake, with other individual investors participating, and was completed 

 

23 Id. at ¶¶ 1, 23.

24 Id. at ¶¶ 24–25.

25 Id. at ¶ 26.

26 Id. at ¶ 27.

27 Id.

28 Id. at ¶ 28.

29 Id. at ¶ 29.
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in July 2008, raising a total $6.7 million and resulting in a post-money valuation of 

Simbol of approximately $14 million.

30

 With their investments, MDV and Firelake

retained the right to make further investments in Simbol on a pro rata basis to prevent 

dilution from any later rounds of financing (the “Pro Rata Rights”), and Green 

became a member of the Board.31 The funds raised in the Series A Financing were 

used to start the development of Simbol’s processes for extracting lithium and 

producing lithium carbonate.32

2. The Series B Financing

Between July 2008 and June 2010, Simbol continued to meet and exceed 

operational milestones, garnering the interest of another potential investor, Itochu.

33

 

During the latter part of 2009, Itochu began having discussions with Simbol about 

making an investment in the Company,34 and in June 2010, after months of diligence, 

Itochu led Simbol’s Series B capital raise of $35 million—itself investing 

approximately $17 million—with the participation of other existing investors, 

including MDV and Firelake.35 

 

30 Id. at ¶¶ 30, 33. The Complaint omits the amount of each investor’s contribution and the number 

of Series A Preferred shares held by each investor, alleging only that MDV holds the “majority” 

of Simbol’s Series A stock. Id. at ¶ 30.

31 Id. at ¶ 32.

32 Id. at ¶ 30.

33 Id. at ¶¶ 34–35.

34 Id. at ¶ 35.

35 Id. at ¶ 36. The Complaint does not allege the number of Series B shares held by, or the 

percentage of Simbol’s total equity owned by, any individual investor.
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At the anticipated close of the Series B financing, Simbol had a pre-money 

valuation of approximately $53 million.36 Though the $35 million already raised 

exceeded Simbol’s planned $28 million target,

37 Board members disagreed over 

whether to keep the financing open.38 The Plaintiffs allege that Green and Lagod 

insisted that Simbol required another “venture-styled investor,” and so should seek 

further investment,39 while Erceg recommended to the Board that it close the Series 

B round.40 Ultimately, the Series B round was extended in May 2011 with a new 

goal of raising $66 million in capital to support Simbol’s operations.41 This 

continuation of the Series B round has “extended over the past 43 months” leading 

up to the filing of this lawsuit, without attracting the investment capital required to 

close the round.42

3. The Eramet Financing

In early 2011, Eramet, S.A. (“Eramet”), a French multinational mining and 

metallurgy company, expressed interest in investing in Simbol.43 After the Series B 

 

36 Id. at ¶ 37.

37 Id. at ¶ 38.

38 Id. at ¶¶ 39–40.

39 Id. at ¶ 39. The Complaint alleges that Lagod and Green were “personally concerned that given 

the current levels of investment, Itochu would exert too much control over Simbol at MDV and 

[Firelake’s] expense,” but provides no support for this contention. Id. Presumably the Pro Rata 

Rights bargained for by MDV and Firelake in connection with the Series A financing gave them 

the means to prevent Itochu’s investment from diluting their respective interests in Simbol.

40 Id. at ¶ 38. 

41 Id. at ¶¶ 40, 43. In October 2012, Itochu and MDV contributed 10% of this amount, $6.6 million, 

at $5.50 per share. Id. at ¶ 85. 

42 Id. at ¶¶ 40, 43.

43 Id. at ¶ 41. 
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round of financing was extended in May 2011, Erceg, as CEO, was directed by the 

Board to attempt to negotiate financing with Eramet.44 By August, a term sheet had 

been negotiated, with a proposed investment by Eramet of $42 million in equity 

($20.4 million at $3.50 per share and $21.6 million at $4.50 per share) and a 

construction loan of $50 million from Itochu (the “Eramet Financing”).45 The 

Plaintiffs allege that the Eramet Financing would have resulted in Simbol’s postmoney valuation of $180 to $240 million, “based on a series of three investment 

tranches,” and would have been “accretive to all shareholders.”46 The Plaintiffs 

allege that “Eramet was the only new investor capable of making the requisite size 

of investment and could rapidly close [on the] final Series B investment in 

Simbol,”47 and that this fact was “well known” to Green and Lagod.48

The Plaintiffs further allege that MDV and Firelake became concerned that 

Eramet would conspire with Itochu to dilute their investments in the Company,

leading them to coordinate efforts to collapse the Eramet Financing.

49

 By way of

example, the Plaintiffs highlight that Eramet sought a right of “co-sale”

50 from all of 

Simbol’s key investors and stockholders and that, while Green had once supported 

 

44 Id. at ¶ 43.

45 Id. at ¶ 44. 

46 Id. at ¶ 46.

47 Id. at ¶ 41.

48 Id. at ¶ 43.

49 Id. at ¶ 42.

50 The right of “co-sale” is not further explained in the Complaint.
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this provision, he retracted this position “so as to further undermine and prevent the 

closing of the Eramet financing,”

51 and because he “reasoned that MDV’s own 

ability to achieve liquidity would be impaired.”52

Between August and September 2011, Erceg repeatedly counseled the Board 

to move forward with the Eramet Financing, given Simbol’s then-urgent need for 

additional capital.53 The Plaintiffs allege that Erceg’s advice was met with threats 

from Green and MDV to “block the transaction based on their own self-interests,”

54

and a warning from Green to the Board that it should not vote for the Eramet 

Financing without first obtaining approval from MDV.55 The Plaintiffs allege that, 

though MDV and Firelake retained their Pro Rata Rights during this period—which 

would enable them to prevent any dilution resulting from an investment by Eramet—

it was their fear that they would not be able to contribute equity in the future that 

drove their opposition to the Eramet Financing.56 

The Complaint also describes several alleged machinations by Green to 

 

51 Compl. ¶ 42.

52 Id. at ¶ 60.

53 Id. at ¶¶ 48–52. For example, the Board Book for the September 2, 2011 Board meeting, 

prepared by Erceg, disclosed that “[w]alking from the Eramet deals kills Simbol” and explained 

that the Eramet Financing “would meet the Company’s Series B financing objectives and provide 

a runway to the Company’s Series C financing for the building of a commercial plant.” Id. at ¶ 

50. The Complaint does not allege, however, that the Board was ever called upon to vote on any 

investment proposal involving Eramet.

54 Id. at ¶ 48.

55 Id. at ¶ 58.

56 Id. at ¶ 60.
11

destabilize Simbol and its Board during this period. First, the Plaintiffs allege that

Green sought Erceg’s termination as CEO at the Board’s September 15, 2011 

meeting by accusing him of failing to meet certain corporate milestones.57 Next, the 

Plaintiffs allege that Green “willfully manipulated the Board by arguing for a 

continuation of utilizing corporate funds to make progress while simultaneously 

act[ing] to block” any financing by Eramet.58 Green and MDV’s goal, the Plaintiffs 

allege, was to choke Simbol financially so that the Company would be forced to 

obtain additional financing from MDV under terms unfavorable to Simbol and its 

stockholders.59 Finally, the Plaintiffs assert that Green orchestrated a series of events 

to pit Lagod against Erceg. For example, during the Eramet Financing negotiations, 

Green sent a proposed term sheet pursuant to which Lagod was removed from the 

Board, but indicated to Lagod that Erceg was behind the action.

60

 This led “to 

immense levels of distrust amongst the members of the Board such that the board 

became dysfunctional” and failed to formally vote on the Eramet Financing.61

In October 2011, to exploit the worsening financial condition of Simbol, 

MDV allegedly submitted a proposal to Itochu demanding that it work with MDV 

 

57 Id. at ¶ 53. These accusations related to the timing of an initial public offering of Simbol stock 

and the failure to close the Series B financing. Id.

58 Id. at ¶ 47.

59 Id. I note that this argument runs contrary to MDV’s alleged “fear” that lack of liquidity would 

prevent it from exercising its Pro Rata Rights, described above. See supra note 56 and 

accompanying text.

60 Id. at ¶ 55.

61 Id.
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and Firelake to remove Erceg as CEO, wipe out the other stockholders, and invest 

an additional $10 million or, in the alternative, that it purchase MDV’s and 

Firelake’s equity interests for $245 million (or $635 million if certain metals were 

found at Simbol’s production facility).

62

 By November 2011, Erceg’s relationship 

with MDV and Firelake had deteriorated, leading Erceg to accuse MDV and Firelake 

of bad faith, hindering Simbol’s ability to raise capital, and acting in their own selfinterest rather than in the best interests of the Company.63

4. The “Extorted Rights”

The Plaintiffs allege that from late 2011 until March 2012, Green and MDV 

continued to act in a manner “damaging to all other shareholders,” and that in March 

2012, they forced the Company and other shareholders into an agreement giving 

MDV and Firelake more favorable terms with respect to their investments in the 

Company (the “Extorted Rights”).64 These Extorted Rights were secured through 

the execution of “a series of corporate documents and agreements on March 13, 2012 

and the filing of an Amended and Restated Certificate of Incorporation [“Amended 

Certificate”] for Simbol filed with the Delaware Secretary of State on the same day 

relating to the Proposed B2/B3/B4 Financing.”

65 Besides the Amended Certificate, 

 

62 Id. at ¶ 57. The Complaint alleges that a failure to agree to either of these options would lead 

MDV and Firelake to “exact a recapitalization of Simbol” and to “force out all shareholders, 

including Itochu.” Id.

63 Id. at ¶ 61.

64 Id. at ¶ 63.

65 Id. at ¶ 67.
13

the Complaint references two specific agreements executed on March 12, 2012 as 

noteable: an Amended and Restated Voting Rights Agreement and a Right of First 

Refusal Agreement (“ROFR”).66 Conley was party to, and voluntarily executed, 

both of these agreements.67 At the time, the Board consisted of Conley, Erceg, 

Green, Cleveland, and Sunada.68

The series of agreements executed that day granted two “Extorted Rights” to 

MDV and Firelake. The “Put Option” granted MDV and Firelake the right to “[s]ell 

their stock to Simbol at their original purchase price with an eight percent (8%) 

simple return for a thirty (30) day[] period immediately after formal commercial 

operations date of the first lithium production plant.”69 The “Blocking Right” 

allowed MDV and Firelake to “[v]eto any financing that was valued at a pre-money 

valuation less than $300 million, all subsequent to an Eramet financing.”70

The Plaintiffs allege that only after securing these rights did MDV and 

 

66 Id.

67 Id. at ¶¶ 96, 104.

68 Id. at ¶ 67. I note, however, that the Complaint subsequently alleges that the “three remaining 

directors” on the Board after the December 2012 resignations of Cleveland and Green were unable 

to act for “lack of a quorum,” so presumably the Board was composed of at least six directors. See

8 Del. C. § 141(b) (“A majority of the total number of directors shall constitute a quorum for the 

transaction of business unless the certificate of incorporation or the bylaws require a greater 

number”). Additionally, the Amended and Restated Voting Rights Agreement, incorporated by 

reference in the Complaint, indicates that the Board was to consist of seven directors. See Itochu 

and Sunada Defs’ Opening Br., Ex. A (the “Voting Agreement”), at § 2(e). Nonetheless, the 

Complaint fails to allege the size of the Board.

69 Compl. ¶ 68.

70 Id. The Complaint does not allege that MDV or Firelake attempted to exercise these alleged 

rights, or that the conditions precedent to their exercise ever occurred.
14

Firelake allow the Company to engage in sincere discussions with Eramet; however, 

by this time the original Eramet Financing deal had expired, and any subsequent deal 

would have to be renegotiated.71 The Company’s financial condition “continued to 

stress and the urgency in getting new investors increased significantly.”72 The 

Company began considering investments from alternative sources and approved the 

engagement of Byron Capital Markets Ltd. to serve as a financial advisor to 

Simbol.73 Eramet, though it continued to express interest in Simbol, ultimately 

found that the Extorted Rights were, in Plaintiffs’ words, “too complicated” and 

failed to close any financing.74

In October 2012, Itochu and MDV made a $6.6 million equity contribution at 

a price per share of $5.50.75 The Plaintiffs allege that, as a requirement to close, 

MDV demanded additional amendments to the Extorted Rights, “whereby [Firelake]

was granted the same rights though [Firelake] had not contributed to the B1, B2 or 

B3 rounds of financing,” and that such amendments were detrimental to Simbol and 

its stockholders.76

 

71 Id. at ¶ 69.

72 Id. at ¶ 72.

73 Id. at ¶¶ 72, 74.

74 Id. at ¶¶ 74–75.

75 Id. at ¶ 85.

76 Id. The Complaint does not further describe this “furtherance of exacting terms” or explain how 

Firelake’s rights changed between March and October 2012.
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5. The Bridge Loans and Other Financing

In December 2011, Simbol accepted a $5 million bridge loan from Itochu (the 

“First Itochu Bridge”) in order to delay insolvency.77 Then, in November 2012, 

Simbol began negotiations regarding another $5 million debt facility with Itochu to 

close by the end of the year (the “New Itochu Bridge Facility”).78 At that time, the 

Company’s “cash position worsened to the point of insolvency.”79 The closing of 

the New Itochu Bridge Facility was delayed, however, by Cleveland’s permanent 

and Green’s apparently temporary resignations from the Board in December 2012, 

which left the Board without the quorum necessary to approve a financing.80 Due to 

its growing and urgent need for cash, Simbol was forced to sell approximately 80 

metric tons of high purity lithium carbonate warehoused in Brawley, California to 

Itochu at a price roughly 50% below the market rate.81

The Plaintiffs allege that, sometime prior to the close of the New Itochu 

Bridge Facility, Itochu and MDV “unilaterally re-priced” two series of stock, the 

 

77 Id. at ¶ 62.

78 Id. at ¶¶ 85–86.

79 Id. at ¶ 79.

80 Id. at ¶ 87. The Plaintiffs allege that Green and Cleveland tendered their resignations in “an 

attempt to reduce their personal liability as Simbol directors and MDV’s concomitant liability so 

that Green and Cleveland could continue to act in MDV’s sole interest as a shareholder.” I note 

that the Complaint is internally inconsistent with respect to Green’s tenure on the Board; it states 

here that Green resigned in December 2012, but notes elsewhere that Green served on the Board 

“at all material times,” including in July 2013, after his purported resignation. See id. at ¶¶ 12, 

116.

81 Id. at ¶ 91.
16

Series B1 Preferred and the Series B2 Preferred from $4.50 and $5.50 per share, 

respectively, to $3.50 per share.82 The Plaintiffs allege that this re-pricing resulted 

in a loss of value of $2.00 per share and dilution, due to the issuance of further shares 

to account for the re-pricing.83 Finally, the Plaintiffs assert that MDV “denied”

Simbol management an opportunity to discuss the New Itochu Bridge Facility with 

“funding investors.”84 

The New Itochu Bridge Facility ultimately closed in March 2013.85 The 

Plaintiffs allege that, in connection with this bridge facility, MDV and Itochu also

entered into a side agreement, under which MDV assigned its right to select a second 

Board designee to Itochu, thereby “granting Itochu control of the Board” and

“circumventing the Voting Agreement” entered into in March 2012, which requires 

the majority of common stockholders to expressly agree to any amendment of the 

Voting Agreement.86

In May 2013, Simbol again borrowed $5 million from various parties, 

including Itochu, MDV, Firelake, an entity called “WS Investment Company,” and 

others, to extend the Company’s operations.

87

 Finally, between June and August 

2013, “Simbol granted a restructuring of approximately $11.8 million in debt held 

 

82 Id. at ¶ 99.

83 Id.

84 Id. at ¶ 93.

85 Id. at ¶ 97.

86 Id, at ¶¶ 96–98.

87 Id. at ¶ 101.
17

by Itochu and MDV at a 90% conversion to the current $3.50 per share conversion 

price,” with the result that “the outstanding debt held the right to convert at $0.35 

per share.”88 This transaction is not further explained in the Complaint. The 

Plaintiffs allege only that this debt financing “did not alleviate nor provide the 

needed cash to continue the operations of Simbol and, instead, placed the Company 

in a further precarious financial condition.”89 Additionally, the Complaint does not 

allege that either Itochu or MDV exercised this alleged right to convert debt to 

equity, and does not seem to bring a claim for relief on this ground.

6. The Erceg Settlement and Right of First Refusal

In March 2012, Simbol and certain investors—including MDV, Itochu, 

Firelake, Erceg, and the Plaintiffs—executed a Right of First Refusal Agreement 

(the “ROFR”) in connection with the Proposed B2/B3/B4 Financing.

90

 Pursuant to 

the ROFR, any investor transferring Simbol shares must provide advance written 

notice of the transfer, and then “Significant Holders,” defined to include the 

Plaintiffs, “shall have the right to purchase a portion of the Offered Shares equal to 

such Significant Holders’ ROFR Pro Rata Portion . . . .”91 Section 5 of the ROFR 

provides that “[a]ny attempt by any Seller to Transfer any Shares in violation of any 

 

88 Id. at ¶ 102. 

89 Id. at ¶ 103.

90 Id. at ¶ 104.

91 Id. at ¶¶ 105–06.
18

provision of this Agreement will be void.”92

The Plaintiffs allege that, due to the actions of MDV and Green (not further 

described in the Complaint), Erceg was forced to resign as CEO and Director of 

Simbol in January 2013.93 In July 2013, Simbol settled claims (also undescribed) 

asserted by Erceg (the “Erceg Settlement”).94 At least Sunada, Nishio, and Green 

allegedly sat on the Board at the time.95 As a part of the settlement, Erceg transferred 

his 2,109,468 shares of Simbol common stock (the “Erceg Shares”) back to the 

Company, but neither he nor Simbol provided a transfer notice to the Plaintiffs.96 

The Plaintiffs assert that, because they did not receive a transfer notice from the 

investor, as required under the ROFR, the transfer was void.97 They assert further 

that this failure to act in accordance with the ROFR was part of a larger scheme to

defraud key common stockholders, including the Plaintiffs, of “special rights and 

economic benefits.”

98

 The Plaintiffs insist that they are not “asserting a claim for 

breach of contract against any party,” but rather are alleging that the breach of the 

 

92 Id. at ¶ 107.

93 Id. at ¶ 94. 

94 Id. at ¶ 108. The bases of Erceg’s claims against Simbol are not identified and are allegedly 

confidential pursuant to the terms of the Erceg Settlement. See Oral Argument Tr. 59:3–18.

95 Compl. ¶ 116. I note again, however, that it is unclear, based on the Complaint, whether Green 

or others sat on the Board in January 2013. See supra notes 68, 80. 

96 Compl. ¶ 108.

97 Id. at ¶ 109.

98 Id. at ¶ 112.
19

ROFR is relevant to “the Defendants’ scheme to breach their fiduciary duties.”99

Also in connection with the Erceg Settlement, “Itochu and MDV made equity 

contributions or conversion notes in Simbol.”100 The Plaintiffs allege that these 

equity contributions “further diluted Plaintiffs’ ownership interest in Simbol which 

could have been averted had the parties settled the claims individually.”101 

7. Issuance of Shares to Burba 

Erceg’s replacement, John Burba, was hired at some time in or before April 

2013.102 Burba holds approximately 2,274,200 common shares of Simbol, of which 

174,200 were granted “as a result of activities related to the licensing of technology 

to Simbol prior to Burba’s appointment as CEO.”103 The remaining approximately 

2,100,000 shares that Burba was granted, the Plaintiffs stress, almost exactly equals

the number of shares that were transferred by Erceg back to Simbol as a part of the 

Erceg Settlement, which are described as “void” immediately upon their transfer.104 

 

99 Id. at ¶ 109 n.1. At Oral Argument, the Plaintiffs conceded that the duty to provide notice of the 

transfer under the ROFR rested with Erceg, and not Simbol, but argued that, because the 

Defendants knew there was a right of first refusal that should have been offered to Conley, they 

breached their fiduciary duties by not “proceed[ing] according to the contract, in furtherance of 

[their] scheme to dilute Mr. Conley and to minimize his voting power.” Oral Argument Tr. 

63:13–20.

100 Compl. ¶ 116.

101 Id. No further information is provided about the magnitude, circumstances, or effect of these 

equity contributions.

102 Id. at ¶ 100.

103 Id. at ¶ 110.

104 Id. I note that it would be the transaction, not the shares of stock, which arguably became void 

due to Erceg’s contractual breach. There is no allegation identifying when Burba received these

shares, though he must have received them prior to August 9, 2013, the date on which Burba voted 

the shares in favor of his appointment to the Board. See id. at ¶ 115.
20

The Complaint treats the 2.1 million shares Burba received as if they were the Erceg 

Shares—though it never expressly states as much—by, for example, alleging that 

the shares issued to Burba were void for Erceg’s failure to comply with the ROFR, 

and that the “entire scheme to ultimately put those shares in Burba’s hands evidenced 

a conspiracy to defraud common stockholders, including the Plaintiffs.”

105

 Burba 

was placed on the Board by a written consent of the common stockholders dated 

August 9, 2013, which consent was based necessarily on Burba voting his own 

shares in favor of his appointment to the Board.106 This action was taken, the 

Plaintiffs allege, despite the fact that Burba knew the written consent relied upon the 

“void” Erceg Shares, and therefore was an improper, ultra vires act by the 

Company.107

The Plaintiffs allege that Simbol transferred these 2,100,000 shares to Burba 

to help “effect a change in control of the majority common voting structure 

beneficial to the preferred shareholders at the expense of key common stockholder[s]

including Plaintiffs.”

108

 Finally, the Plaintiffs assert that the failure to act in 

accordance with the ROFR was part of a conspiracy to improperly enrich and 

empower Burba without regard to the rights of Simbol stockholders.

109

 

105 See id. at ¶ 112 (emphasis added). 

106 Id. at ¶ 115.

107 Id.

108 Id. at ¶ 111.

109 Id. at ¶ 112.
21

8. Other Factual Allegations

The Complaint contains various other factual allegations that are not easily

linked to the alleged damages to the Plaintiffs. For example, the Plaintiffs allege 

that between July and August of 2012, Green caused “executive insubordination” by 

encouraging Simbol’s Vice President of Business Development to pursue financing 

from DuPont.110 The Plaintiffs also allege that the Board failed to perform proper 

due diligence in hiring Burba as CEO, pointing to his previous performance results 

at Molycorp, Inc. prior to joining Simbol.111 They allege that Itochu thwarted

potential investments in Simbol by Chinese firms that held dominant positions in the 

Chinese lithium market relative to Itochu.112 And, finally, the Plaintiffs allege

conflicts of interest of the Company’s outside corporate counsel, who are not parties 

to this action.

113

C. Procedural History

The Plaintiffs filed a Verified Complaint on February 2, 2015 asserting (1) a 

breach of fiduciary duty claim against the Director Defendants and MDV;114 and (2) 

aiding and abetting a breach of fiduciary duty claim against Firelake, Itochu, and 

MDV. In response, the Defendants filed four Motions to Dismiss, and full briefing 

 

110 Id. at ¶¶ 76–77. 

111 Id. at ¶ 114.

112 Id. at ¶¶ 81–83.

113 Id. at ¶¶ 118–22.

114 To the extent the Complaint purports to plead a breach of duty claim against Simbol itself, it 

must be dismissed; Simbol does not owe any Plaintiff fiduciary duties.
22

of the motions followed. I heard oral argument on October 28, 2015 (the “Oral 

Argument”), at which time I reserved judgment. This Opinion resolves those 

motions.

II. STANDARD OF REVIEW AND STANDING

The standard of review under Court of Chancery Rule 12(b)(6) is well-settled. 

The Court will grant a motion to dismiss for failure to state a claim where the 

complaint does not assert sufficient facts that, if proven, would entitle the plaintiff 

to relief.115 In its analysis, the Court must

accept all well-pleaded factual allegations in the Complaint as true, 

accept even vague allegations in the Complaint as “well-pleaded” if 

they provided the defendant notice of the claim, draw all reasonable 

inferences in favor of the plaintiff, and deny the motion unless the 

plaintiff could not recover under any reasonably conceivable set of 

circumstances susceptible of proof.116

However, the Court need not “accept conclusory allegations unsupported by specific 

facts or . . . draw unreasonable inferences in favor of the non-moving party.”117

The Complaint surveys the actions of the parties over the course of an almost 

eight-year period, spanning the formation of the Company, its financing, the 

beginning of its financial woes, and the installation of a new CEO. The Complaint 

 

115 Lucas v. Hanson, 2014 WL 7235462, at *2 (Del. Ch. Dec. 19, 2014).

116 Cent. Mortg. Co. v. Morgan Stanley Mortg. Capital Hldgs. LLC, 27 A.3d 531, 537 (Del. 2011) 

(citing Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002)).

117 Price v. E.I. duPont de Nemours & Co., Inc., 26 A.3d 162, 166 (Del. 2011) (citing Clinton v. 

Enter. Rent–A–Car Co., 977 A.2d 892, 895 (Del. 2009)).
23

then asserts two counts—one for breach of fiduciary duty against the Director 

Defendants and MDV; and the other for aiding and abetting a breach of fiduciary 

duty against Firelake, Itochu, and, in the alternative to Count I, against MDV—

seeking in relief an accounting to the Plaintiffs for “all damages suffered and to be 

suffered by [the Plaintiffs] as a result of the wrongs complained of,” and costs of the 

action.

In Count I of the Complaint, the Plaintiffs list twelve ways in which MDV 

and the Director Defendants allegedly breached their fiduciary duties, primarily 

concerning three events: the Company’s efforts to obtain financing from Eramet in 

or around May 2011 through April 2012; the March 2012 adoption of the Amended 

and Restated Certificate of Incorporation and related documents, which the Plaintiffs 

have termed the “Extorted Rights”; and the Erceg Settlement and issuance of shares 

to Burba. In their respective Motions to Dismiss, the Director Defendants, MDV, 

and Firelake argue that the Plaintiffs’ claims are derivative in nature and that, as the 

Plaintiffs have neither sought corrective action from the Company nor pled demand 

futility, the Complaint should be dismissed for failure to comply with Court of 

Chancery Rule 23.1.118 The Plaintiffs have insisted, however, that they seek relief 

 

118 Court of Chancery Rule 23.1 imposes “stringent requirements of factual particularity” on a 

plaintiff pursuing a derivative suit, Brehm v. Eisner, 746 A.2d 244, 254 (Del. 2000), requiring the 

plaintiff to “allege with particularity the efforts, if any,” made to obtain corrective action from the 

corporation “and the reasons for the plaintiff’s failure to obtain the action or for not making the 

effort,” Ct. Ch. R. 23.1. The plaintiff must show, with particularity, that demand on the board to 

take corrective action was either wrongfully refused or futile. White v. Panic, 783 A.2d 543, 550 
24

only for direct harm to them.

119

Under Delaware law, whether a claim is derivative or direct “turn[s] solely on 

the following questions: (1) who suffered the alleged harm (the corporation or the 

suing stockholders, individually); and (2) who would receive the benefit of any 

recovery or other remedy (the corporation or the stockholders, individually).”

120

 

“Although each question is framed in terms of exclusive alternatives (either the 

corporation or the Stockholders), some injuries affect both the corporation and the 

stockholders” and in such a case, the plaintiffs may choose to sue individually.121 

Claims based on the diminution in value of the stock held by plaintiffs are 

generally derivative in nature.

122

 However, the Delaware Supreme Court recognized

a limited exception to this rule—on which the Plaintiffs rely here—in Gentile v. 

Rossette.

123

 Recognizing the “dual character of dilutive issuances,”124 the Court held

in Gentile that “[t]here is . . . at least one transactional paradigm—a species of 

corporate overpayment claim—that Delaware case law recognizes as being both 

 

(Del. 2001).

119 See Oral Argument Tr. 9:10–12 (“We are pursuing [the claims] as direct. We are not arguing—

we’re not arguing that demand is excused.”).

120 Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031, 1033 (Del. 2004) (emphasis in 

original).

121 Carsanaro v. Bloodhound Tech., Inc., 65 A.3d 618, 655 (Del. Ch. 2013) (citations omitted).

122 See Feldman v. Cutaia, 951 A.2d 727, 733 (Del. 2008) (“Where all of a corporation’s 

stockholders are harmed and would recover pro rata in proportion with their ownership of the 

corporation’s stock solely because they are stockholders, then the claim is derivative in nature.”).

123 906 A.2d 91 (Del. 2006).

124 Carsanaro, 65 A.3d at 657.
25

derivative and direct in character.”125 The Court explained:

A breach of fiduciary duty claim having this dual character arises 

where: (1) a stockholder having majority or effective control causes the 

corporation to issue “excessive” shares of its stock in exchange for 

assets of the controlling stockholder that have a lesser value; and (2) 

the exchange causes an increase in the percentage of the outstanding 

shares owned by the controlling stockholder, and a corresponding 

decrease in the share percentage owned by the public (minority) 

shareholders. Because the means used to achieve that result is an 

overpayment (or “over-issuance”) of shares to the controlling 

stockholder, the corporation is harmed and has a claim to compel the 

restoration of the value of the overpayment. That claim, by definition, 

is derivative.

But, the public (or minority) stockholders also have a separate, 

and direct, claim arising out of that same transaction. Because the 

shares representing the “overpayment” embody both economic value 

and voting power, the end result of this type of transaction is an 

improper transfer—or expropriation—of economic value and voting 

power from the public shareholders to the majority or controlling 

stockholder. For that reason, the harm resulting from the overpayment 

is not confined to an equal dilution of the economic value and voting 

power of each of the corporation's outstanding shares. A separate harm 

also results: an extraction from the public shareholders, and a 

redistribution to the controlling shareholder, of a portion of the 

economic value and voting power embodied in the minority interest. As 

a consequence, the public shareholders are harmed, uniquely and 

individually, to the same extent that the controlling shareholder is 

(correspondingly) benefited. In such circumstances, the public 

shareholders are entitled to recover the value represented by that 

overpayment—an entitlement that may be claimed by the public 

shareholders directly and without regard to any claim the corporation 

may have.126

This Court has suggested that, under this limited exception, standing will exist “if a 

 

125 Gentile, 906 A.2d at 99.

126 Id. at 99–100.
26

controlling stockholder [stands] on both sides of the transaction,” or “if the board 

that effectuated the transaction lacked a disinterested and independent majority.”127 

However, standing will not exist “if there is no reason to infer disloyal expropriation, 

such as when stock is issued to an unaffiliated third party, as part of an employment 

compensation plan, or when a majority of disinterested and independent directors 

approves the terms.”128 That is, “[t]he expropriation principle operates only when 

defendant fiduciaries (i) had the ability to use the levers of corporate control to 

benefit themselves and (ii) took advantage of the opportunity.”129

The Plaintiffs acknowledged at the Oral Argument that the alleged wrongful 

acts leading up to the Erceg Settlement are derivative in nature, but insist that these 

acts are nonetheless significant as evidence of an overarching “scheme” to bring 

Simbol to the brink of disaster, which scheme ultimately resulted in the direct harm 

for which the Plaintiffs now seek relief.130 Because of the atypical way in which this 

 

127 Carsanaro, 65 A.3d at 658.

128 Id.

129 Id. at 658–59.

130 See Oral Argument Tr. 68:13–20 (The Court: “Your argument is these investors were 

fiduciaries for the company who engaged in the scheme and used their power over a period of 

years to advance their own interest, to the detriment of the company and its stockholders, and that 

entire scheme and its execution is what is the breach of duty, the actionable breach of duty? 

Plaintiffs’ Counsel: “Yes, Your Honor.”); id. at 69:1–4 (Plaintiffs’ Counsel: “So I will say that up 

until the Erceg settlement, there are breaches of fiduciary duty. They are derivative in nature. 

What changes is with the Erceg settlement. Now, I think an argument can be made that some of 

the acts prior to the Erceg settlement could be—could be direct claims. I’m not—I don’t even have 

to go there for purposes of today, or in the future.”).
27

Complaint was drafted131—and the slew of breaches of fiduciary duty alleged in the 

Complaint that the Plaintiffs have conceded are derivative in nature—the direct harm 

allegedly suffered by the Plaintiffs is quite difficult to discern from the face of the 

Complaint. The Plaintiffs clarified at Oral Argument, however, that the direct harm 

to the Plaintiffs allegedly resulted from: (1) the re-pricing of shares by Itochu and 

MDV, and (2) the Erceg Settlement and the issuance of shares to Burba.

132

 I 

therefore examine these two transactions for breaches of fiduciary duty, in light of 

the overarching factual history pled.133

III. ANALYSIS

Before turning to the relief sought, I first consider those causes of action 

notably not asserted here for relief. The Complaint alleges that Erceg violated the

 

131 Unlike the typical complaint alleging a breach of fiduciary duty by a company’s board 

members—which would center on a particular transaction, and the various board members’ 

failures to satisfy their fiduciary duties with respect to that transaction—the Complaint here 

suggests that it is a scheme to advance the Defendants’ interests, consisting of events over a period 

of years, that caused actionable detriment to Simbol and the Plaintiffs’ interests. 

132 Oral Argument Tr. 69:9–18 (“Where the direct harm comes into play is when MDV begins to 

effectuate its plan to rid themselves of the founders, and did it with Erceg and with the 

settlement. . . . They bring in Burba to replace Erceg, an MDV guy. You know, selected by MDV. 

And that’s where the direct harm begins to take place, when they transfer the 2.1 million shares.”); 

id. at 74:2–9 (“And the only other element of the direct harm related to the transaction, as alleged 

in the complaint, is the repricing of the stock in early 2013. Again, this was all around the same 

time, in 2013, when MDV and Itochu repriced shares, issued it to themselves at $2.50 a share when 

the stock had been priced at $4.50 and 5.50 a share.”).

133 Because, prior to the Plaintiffs’ clarification at Oral Argument, they seemed to be alleging 

actionable breaches of duty pre-dating the Erceg Settlement of 2013, the briefing concentrated 

heavily on the defenses of laches, waiver, and acquiescence with regard to these earlier 

transactions. Because the Plaintiffs now concede that these earlier transactions give rise only to 

claims on behalf of the Company, for which they do not seek redress, I have not considered the 

defenses described in this footnote further.
28

ROFR agreement, giving the Plaintiffs a contract claim against Erceg, but they have

chosen not to pursue that claim here. They also allege what appears to be intentional 

interference with that contract right, by various Defendants, but have specifically 

eschewed pursuing a recovery in contract, or specific performance of the contract. 

Finally, they have alleged many actions they describe as breaches of duty to the 

Company, by a controller and a captured Board, but they have forgone a derivative 

action in vindication of those wrongs, choosing instead to pursue a pair of direct 

dilution claims. With that in mind, I turn to the analysis of those claims the Plaintiffs 

have chosen to present.

A. Re-pricing of Simbol Stock

The first instance of alleged direct harm for which the Plaintiffs seek relief is 

the “re-pricing” of Simbol Stock. The Plaintiffs allege only that,

[p]rior to the closing of the New Itochu Bridge Facility, Itochu and 

MDV colluded to re-price the company stock in a self-interested and 

dilutive transaction at the expense of the Company’s other 

shareholders. Itochu and MDV unilaterally re-priced two series of 

stock, the Series B1 Preferred and the Series B2 Preferred from $4.50 

and $5.50 per share, respectively, to $3.50 per share. This action 

described in the Exchange Agreement (“Exchange”) favored Itochu and 

MDV exclusively and was presented under the auspices of an 

inducement to invest. The control of Simbol’s Board granted the repricing that resulted in a loss of value of $2.00 per share, and dilution 

due to the issuance of further shares to account for the re-pricing.134

 

134 Compl. ¶ 99. With respect to the relief sought, the complaint is similarly non-specific; it seeks 

accounting for “all” damages, incurred or future, arising from all allegations of wrongdoing.
29

The New Itochu Bridge Facility “concluded in March 2013,” indicating that the 

re-pricing occurred at some time between January and March 2013. The Complaint 

references Board action but does not explain when that Board meeting took place. 

At Oral Argument, the Plaintiffs clarified that this claim should be treated as direct 

because “they diluted Mr. Conley’s value of the stock by issuing—repricing and 

issuing themselves stock at a significantly discounted amount.”135

Under Delaware law, at the motion to dismiss stage of a proceeding, the Court 

must deny the motion unless, drawing all reasonable inferences in favor of the 

plaintiff, the plaintiff could not recover under “any reasonably conceivable set of 

circumstances susceptible of proof.”136 For the “reasonableness” part of the standard 

to have meaning, a complaint, in this context, that omits necessary facts available 

pre-discovery to a plaintiff—relying instead on mere conclusory assertions—cannot 

survive a motion under Rule 12(b)(6).137 I find that this claim for relief is properly 

dismissed under the “reasonable conceivability” standard, as the Complaint alleges 

insufficient facts to allow me to both understand the claim being asserted and to 

conclude that, assuming those facts as true, Simbol was controlled by MDV or that 

a majority of the Directors lacked independence or disinterest with respect to the 

 

135 Oral Argument Tr. 74:13–15.

136 Central Mortg. Co., 27 A.3d at 537 (citing Savor, 812 A.2d at 896–97) (emphasis added).

137 See generally In re Morton’s Restaurant Grp., Inc. S’holders Litig., 74 A.3d 656 (Del. Ch. 

2014) (finding that conclusory allegations of the exercise of actual domination and control by 

minority stockholder insufficient to withstand motion to dismiss under Rule 12(b)(6)).
30

repricing.

A factually sparse Complaint such as this—“sparse” in the sense that it omits 

many pertinent facts, which presumably were available to stockholders, leaving the 

Court to speculate as to these facts or attempt to supply them through conclusory 

allegations—in essence invites the Court to both state a claim and then analyze it. I 

presume that the claim runs as follows: MDV, as controlling stockholder, controlled 

the corporate machinery of Simbol with respect to the pricing of certain series “B” 

offerings, and conspired with Itochu to use that machinery to create and reap the 

benefit of an option to purchase preferred shares below market price. Finally, these 

actions resulted in the issuance of additional shares to acquire the financing

undertaken in the offering, diluting the interest of the Plaintiffs. If this is in fact the 

Plaintiffs’ claim, the Plaintiffs have properly asserted it as a direct claim;138 to find 

that such a cause of action has been adequately pled, however, would require me to 

assume the existence of many facts not alleged in the Complaint. The Complaint, 

for example, is silent as to precisely when the alleged re-pricing took place. The 

Complaint does indicate that the Board membership and size were in flux throughout

this period. It does not provide how many Board members were authorized by 

 

138 See generally Gentile, 906 A.2d 91. Of course, the same scenario presents a wrong to the 

Company, which a stockholder could pursue derivatively as well.
31

Simbol’s bylaws, or who sat on the Board at the time of the re-pricing.139 It fails to 

disclose whether the decision to allow the re-pricing was put to a vote of the Board, 

and if so, how the Directors voted. Conversely, if the re-pricing was done pursuant 

to a contractual right held by MDV, the Complaint omits to state when the Board 

granted that right, and why that decision was wrongful. In addition, the Complaint 

fails to explain the relationship between the various classes of shares,140 or how the 

re-pricing was dilutive to the common stockholders, among other facts that would 

aid my analysis.141

Most critically, the Plaintiffs have failed to allege facts that, if true,

demonstrate that MDV is a controlling stockholder, and without such a showing, 

MDV cannot be held liable for a breach of fiduciary duty under Count I. Under 

Delaware law, a “shareholder owes a fiduciary duty only if it owns a majority interest 

in or exercises control over the business affairs of the corporation.”142 “A 

shareholder will be considered ‘controlling’ if it either owns more than 50% of the 

 

139 The Complaint alleges only that the re-pricing took place prior to the close of the New Itochu 

Bridge Facility in March 2013. Compl. ¶¶ 97, 99; Oral Argument Tr. 74:2–9. From my 

examination of the Complaint, I assume that Green and Sunada sat on the Board during this whole 

time period, but it is unclear if the Board also included Ericson, Nishio, or both, as well. I note, 

again, that the Complaint suggests that the number of directors called for by the Company’s bylaws

is at least six, and that the Voting Agreement suggests that the Board had seven seats. See supra 

note 68.

140 These facts would aid in a determination of whether, for example, an additional issuance of 

preferred shares had a substantial or merely de minimis effect on the Plaintiffs’ ownership interests 

in Simbol.

141 I list these factual lacunae not to imply that any one alone is a fatal defect, but to put what is 

pled in context.

142 Ivanhoe Partners v. Newmont Mining Corp., 535 A.2d 1334, 1344 (Del. 1987).
32

voting power of the company, or exercises ‘actual control’ over the board of 

directors during the course of a particular transaction.”143 With respect to the control 

requirement, “[t]he bare conclusory allegation that a minority stockholder possessed 

control is insufficient.”

144

 Rather, “the Complaint must contain well-pled facts 

showing that the minority stockholder ‘exercised actual domination and control 

over . . . [the] directors.’”145 To survive a motion to dismiss, these facts must 

“demonstrat[e] actual control with regard to the particular transaction that is being 

challenged.”146

The Complaint does not allege that MDV holds a majority of the shares. It 

alleges only that MDV “held and controlled a majority of Simbol’s Series A 

preferred stock.”147 As the Complaint is silent as to the relationship between the 

Series A and other classes of stock, and to the voting rights of each, there is no 

allegation or reasonable inference that MDV was a majority stockholder. Therefore, 

I can only find that MDV owed a fiduciary duty if I determine that it exercised 

control over the corporate machinery with respect to the transaction at issue. 

The focus of that analysis is on allegations of actual control—not merely 

 

143 Zimmerman v. Crothall, 62 A.3d 676, 699–700 (Del. Ch. 2013) (citations omitted).

144 Morton’s Rest. Grp., 74 A.3d at 664–65 (citation omitted).

145 Id.

146 In re KKR Fin. Holdings LLC S’holder Litig., 101 A.3d 980, 991 (Del. Ch. 2014).

147

 Compl. ¶ 15 (emphasis added). 
33

potential control.

148

 This prong applies only to stockholders “who, although lacking 

a clear majority, have such formidable voting and managerial power that they, as a 

practical matter, are no differently situated than if they had majority voting 

control.”149 “[T]he minority blockholder’s power must be so potent that independent 

directors . . . cannot freely exercise their judgment . . . .”

150 Without allegations 

regarding the number of directors at the time of the transaction, their identity, facts 

showing control by MDV, and details regarding the terms of the transaction itself, I 

am unable to find sufficient allegations that MDV controlled the corporate 

machinery and used it to enrich itself.151

The Plaintiffs do not rely on specific allegations of control of the corporate 

machinery here; instead, they point to MDV’s contractual rights as providing 

leverage over the company. They assert that that MDV acquired “blocking rights” 

in connection with its Series A preferred stock, and that such blocking rights “put 

MDV in a controlling position over the Company.”152 Under Delaware law, 

however, contractual rights held by a non-majority stockholder do not equate to 

control, even where the contractual rights allegedly are exercised by the minority 

 

148 See In re Sea-Land Corp. S’holders Litig., 1987 WL 11283, at *5 (Del. Ch. May 22, 1987) (“As 

this Court has previously recognized, the potential ability to exercise control is not equivalent to 

the actual exercise of the ability.”) (citation omitted) (emphasis in original).

149 In re PNB Holding Co. S’holders Litig., 2006 WL 2403999, at *9 (Del. Ch. Aug. 18, 2006).

150 Morton’s Rest. Grp., 74 A.3d at 665 (citation omitted).

151 The Complaint does specifically allege that Green was a fiduciary for MDV, and thus had 

divided loyalties. It makes conclusory allegations about other directors, as well.

152 Compl. at ¶ 8.
34

stockholder to further its own goals. For example, in Superior Vision Servs., Inc. v. 

ReliaStar Life Ins. Co.153 an investor company, ReliaStar, a 44% stockholder, was 

accused of breaching controlling-stockholder fiduciary duties because it exercised a 

contractual right in a stock purchase agreement to block the corporation, SVS, from 

paying dividends.154 Despite the plaintiff’s allegation that ReliaStar withheld its 

consent in bad faith “in order to strong-arm individual stockholders or SVS to further 

its own agenda,” this Court dismissed the breach of fiduciary duty claim, holding 

that the Court would not impose additional duties on ReliaStar that had not been 

negotiated in the contract, and that ReliaStar’s contractual rights did not transform 

it into a “controlling shareholder.”155 That is, a stockholder does not become a 

controlling stockholder merely by “exercise[ing] a duly-obtained contractual right 

that . . . limits or restricts the actions that a corporation otherwise would take.”156 

The Plaintiffs here have alleged the existence of a contractual right, which permitted 

MDV to restrict corporate action, thus giving it leverage over the Board. Holding, 

even exercising, this right does not make MDV a controller owing fiduciary duties

to the Plaintiffs.157

 

153 2006 WL 2521436 (Del. Ch. Aug. 25, 2006).

154 Id. at *1–2.

155 Id. at *1, *5.

156 Id. at *5.

157 The Complaint does not allege that MDV controlled the Board at the time the blocking rights 

were granted. The Complaint alleges that the Board consisted of Plaintiff Conley together with 

Erceg, Green, Cleveland, and Sunada at this time. Compl. ¶ 67. Green and Cleveland are the only 

two members of the Board who are alleged to have any connection to MDV.
35

Put another way, a stockholder who—via majority stock ownership or through 

control of the board—operates the decision-making machinery of the corporation, is 

a classic fiduciary; in controlling the company he controls the property of others—

he controls the property of the non-controlling stockholders. Conversely, an 

individual who owns a contractual right, and who exploits that right—even in a way 

that forces a reaction by a corporation—is simply exercising his own property rights, 

not that of others, and is no fiduciary.

It is, of course, conceivable that MDV was a fiduciary controller at the time 

of the re-pricing transaction, assuming it had achieved control or influence over a 

majority of directors through non-contractual means, such as affiliation or aligned 

self-interest. If such had been adequately pled, the burden would be on MDV and 

those directors to establish the entire fairness of the transaction. It is not reasonably

conceivable, however, based upon the non-conclusory facts pled, that such control 

in fact existed. The Complaint is simply insufficient in this regard.

To the extent these allegations also attempt to assert a claim against the 

Director Defendants sitting on the Board at the time of the re-pricing, this claim fails

as well. Under Delaware law, the business judgment rule establishes a “presumption 

that in making a business decision the directors of a corporation acted on an informed 

basis, in good faith and in the honest belief that the action taken was in the best 
36

interests of the company.”158 This presumption can be rebutted if the plaintiff 

“shows that the directors breached their fiduciary duty of care or of loyalty or acted 

in bad faith.”159 The allegation that a director was appointed by a stockholder to the 

board, alone, is not enough to defeat this presumption.

160

 Green and Ericson, 

through their positions as both general partners of MDV and members of the Simbol 

Board, had dual loyalties to Simbol and MDV. However, without knowing the 

complete composition of the Board at the time of the alleged re-pricing,161 I cannot 

determine the effect of those dual loyalties—that is, whether a majority of the 

Directors were not independent and disinterested.

Thus, because the Plaintiffs have failed to include key facts, including those 

which, if true, demonstrate that MDV was a controlling stockholder with respect to 

the re-pricing transaction or that a majority of the directors involved with the repricing were not independent and disinterested, I dismiss this claim in Count I as to 

MDV and, to the extent these allegations assert a claim against various Directors, as 

to those Director Defendants as well.

I note that the Plaintiffs, in their papers and at Oral Argument, relied heavily 

 

158 Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984), overruled in part on other grounds by Bream 

v. Eisner, 746 A.2d 244, 253 (Del. 2000).

159 In re Walt Disney Co. Deriv. Litig., 906 A.2d 27, 52 (Del. 2006).

160 See In re W. Nat. Corp. S'holders Litig., 2000 WL 710192, at *15 (Del. Ch. May 22, 2000) 

(“The fact that a company's executive chairman or a large shareholder played some role in the 

nomination process should not, without additional evidence, automatically foreclose a director's 

potential independence.”).

161 See supra note 139.
37

on this Court’s decision in Carsanaro v. Bloodhound Technologies, Inc.162 To me, 

however, the depth of pleading here stands in stark contrast to that in Carsanaro. 

The action in Carsanaro was brought by a founder, common stockholder, and former 

CEO of Bloodhound Technologies, Inc., Mr. Carsanaro. After two rounds of venture 

capital financing, Carsanaro was ousted as CEO and removed from board. Three 

more rounds of financing followed, the terms of which were not shared with 

Carsanaro, and which were conducted without contacting third parties or canvassing 

the market. In connection with the final round of financing, an investor proposed to 

purchase 30,000,000 shares of preferred stock. To keep the conversion rights of this 

preferred stock equivalent, the company’s directors approved a 10-for-1 reverse split 

of the company’s outstanding common stock and filed an amended and restated 

charter authorizing the preferred shares. In so doing, the board did not adjust the 

conversion prices of the earlier rounds of preferred shares to account for the reverse 

split, thereby making the conversion rights for the newest shares ten times more 

valuable than those held by the founders. The company then entered into separate 

agreements with certain other investors to protect them from the dilution. When the 

company was ultimately acquired, the Plaintiffs learned, for the first time, that as a 

result of the several rounds of financing and the failure to adjust the preferred stock 

conversion prices in connection with the reverse split, that the aggregate ownership 

 

162 65 A.3d 613 (Del. Ch. 2013).
38

interest of all the common stockholders had been diluted significantly.

The Court, in addressing the plaintiffs’ claims regarding the final two rounds 

of financing, found that the plaintiffs had overcome the business judgment rule’s 

presumption of loyalty by alleging facts supporting a reasonable inference that there 

were not enough independent and disinterested individuals among the directors 

making the decision to comprise a board majority. The Court also found that the 

plaintiffs had properly asserted a claim that the Company did not comply with the 

statutory requirements of Sections 242(b)(1) and 228 of the DGCL in adopting the 

reverse split and amended and restated charter. The Court then held that these claims 

were not barred by laches, though brought outside the analogous statute of 

limitations period, because the terms of the financings and the reverse stock split 

were either not publicly available or not available to a stockholder exercising 

reasonable diligence. It was only after the sale of the company, the Court held, that 

the series of fiduciary breaches became apparent to the plaintiffs and other common 

stockholders.

The case before me now is distinct from Carsanaro on several key grounds. 

In Carsanaro, the plaintiffs identified discrete actions that were taken by the board 

that caused dilution—the various rounds of financing after the founders were ousted 

from the board, and the reverse stock split—and pled the directors involved in each 

interested transaction and facts which, if true, demonstrated that they were 
39

controlled. Conversely, here, it is impossible for me to determine the complete 

composition of the Board at the time of the alleged direct harms, or even the number 

of directors composing the Board. Just as fundamentally, as discussed above, the 

Plaintiffs have failed to plead sufficient facts surrounding the alleged dilutive direct 

harm—there is nothing which, if true, demonstrates that sufficient re-priced shares 

were taken up, compared with those authorized before the re-pricing, so as to cause 

dilution of the Plaintiffs’ holdings. The Plaintiffs appear to rely on the purported 

“scheme” of MDV to oust the Company’s ownership, bring the Company to the 

brink of disaster, then wrest control for itself, as a means of lowering their pleading 

burden regarding the distinct, direct harms for which they seek relief.163 However, 

the Court’s recognition of an overarching series of events that ousted the founders 

in Carsanaro did not lessen the plaintiffs’ pleading burden; the Court analyzed the 

composition and decision-making of the board with respect to each series of 

financing alleged to have constituted a breach of fiduciary duty, finding only that the 

lack of transparency to the common stockholders regarding the board’s actions in 

 

163 See Oral Argument Tr. 78:16–21 (“It’s a series of events. It’s not ‘Here’s the action.’ It is a 

series of actions that led to the ultimate knife, and in Carsanaro it was the sale of the company. In 

this case, Your Honor, it’s the Erceg settlement leading to the Burba shares, which diluted the 

plaintiff’s.”); id. at 68:9–20 (“So just so I understand, there’s no discrete act here that you’re able 

to say to me, ‘This is a controlling shareholder using its rights to enter or do some transaction or 

deal that has caused damage to the company.’ Your argument is these investors were fiduciaries 

for the company who engaged in the scheme and used their power over a period of years to advance 

their own interest, to the detriment of the company and its stockholders, and that the entire scheme 

and its execution is what is the breach of duty, the actionable breach of duty?” “Yes, Your 

Honor.”).
40

this series of transactions weighed in favor of equitable tolling of the statute of 

limitations analogous to the laches defense. Here, conclusory allegations of a 

“scheme” are insufficient, and do not excuse the Plaintiffs from their burden of 

properly stating a claim upon which relief may be granted.

B. The Erceg Settlement and the Issuance of Shares to Burba

I turn next to the allegations surrounding the Erceg Settlement and the 

subsequent issuance of shares to Burba,164 which the Plaintiffs urge me to consider 

as one dilutive transaction. The Plaintiffs have alleged that, “[o]n March 13, 2012, 

Simbol and certain investors, including MDV, Itochu, [Firelake], Erceg and 

Plaintiffs, executed a Right of First Refusal Agreement . . . in connection with the 

SPA (the Proposed B2/B3/B4 Financing).”165 Under the terms of this agreement, “a 

transferring investor was required to provide advance written notice of a transfer of 

Simbol shares (the “Transfer Notice”),”

166 and “Significant Holders”—defined to 

include Plaintiffs—“shall have the right to purchase a portion of the Offered Shares 

equal to such Significant Holders’ ROFR Pro Rata Portion on the same terms and 

conditions as specified in the Transfer Notice.”167 Section 5 of the ROFR provides 

that “[a]ny attempt by any Seller to Transfer any Shares in violation of any provision 

 

164 See id. at 69:9–12 (“Where the direct harm comes into play is when MDV begins to effectuate 

its plan to rid themselves of the founders, and did it with Erceg and with the settlement.”).

165 Compl. ¶ 104.

166 Id. at ¶ 105.

167 Id.
41

of this Agreement will be void.”168 

“In July 2013, Simbol settled claims asserted by Erceg (the “Erceg 

Settlement”),” pursuant to which Erceg transferred his approximately 2,108,468 

shares of Simbol common stock (the “Erceg Shares”) back to Simbol.169 At the time, 

the Board consisted of Sunada, Nishio, and Green.170 No other facts surrounding the 

Erceg Settlement are alleged,171 except that, as a part of the Erceg Settlement, 

“Itochu and MDV made equity contributions or conversion notes in Simbol to settle 

the claims,” which contributions “further diluted Plaintiffs’ ownership interest in 

Simbol which could have been averted had the parties settled the claims 

individually.”

172

 The Plaintiffs allege that, in transferring his shares pursuant to the 

Erceg Settlement, “Erceg had an obligation under the ROFR to inform Plaintiffs of 

the transfer of his shares in sufficient detail to permit Plaintiffs time to contemplate 

exercising their rights to purchase, on a pro rata basis, their interest of the Erceg 

Shares.”173 They assert that, “[d]espite the failure to give Plaintiffs notice under the 

ROFR, Erceg and Simbol closed the sale of the Erceg Shares” and that, “[b]ecause 

Plaintiffs did not receive a Transfer Notice as required, the transfer was, by operation 

 

168 Id. at ¶ 107.

169 Id. at ¶ 108.

170 Id. at ¶ 116. But see supra note 68.

171 The bases of Erceg’s claims against Simbol are not identified and are allegedly confidential 

pursuant to the terms of the Erceg Settlement. See Oral Argument Tr. 59:3–18.

172 Compl. ¶ 116. 

173 Id. at ¶ 109.
42

of the ROFR, void.”174

The Plaintiffs further allege that, due to the actions of MDV and Green, Erceg 

was forced to resign as CEO and Director of Simbol in January 2013,175 and that 

“[b]y April 2013 . . . the Board had recently hired a new CEO, John Burba.”176 

“Burba holds approximately 2,274,200 common shares of Simbol,” of which 

“174,200 shares were granted as a result of activities related to licensing of 

technology to Simbol prior to Burba’s appointment as CEO.”177 The remaining 

approximately 2,100,000 common shares sold or transferred to Burba, the Plaintiffs 

stress, “represented almost exactly the number of Erceg Shares which became void 

immediately upon the transfer from Erceg to the Company.”178 “After becoming 

Simbol’s CEO, Burba was placed on the Board by way of a written consent of 

common stockholder dated August 9, 2013. The written consent was based in large 

part on Burba voting his own shares in favor of the appointment to the Board.”179 

The Plaintiffs urge me to examine this series of events as a single 

transaction—a scheme designed specifically to dilute Conley’s interest in Simbol

and to reduce the influence of the founders, Conley and Erceg.180 The Plaintiffs’ 

 

174 Id.

175 Id. at ¶ 94. 

176 Id. at ¶ 100.

177 Id. at ¶ 110.

178 Id.

179 Id. at ¶ 115.

180 I note that, standing alone, the allegations regarding the Erceg Settlement fail to state a direct 

dilutive claim. The Plaintiffs attempted to salvage this claim, arguing in response to my question 
43

cause of action, as I understand it, is this: MDV, aided by various members of the 

Board, conspired to defraud certain of the common stockholders and consolidate

control of Simbol by, first, failing to disclose Erceg’s breach of the ROFR in selling 

his shares back to Simbol and, second, taking those shares thus improperly returned 

to the Company and issuing them to Burba, a new CEO, who was beholden to or 

controlled by MDV in some (unknown) manner.181 In other words, all of these 

actions were part of a scheme to put Erceg’s shares with an individual friendly to 

MDV and to dilute the Plaintiffs’ ownership interests in Simbol. Again, it is 

 

at Oral Argument as to how the allegations regarding Erceg’s failure to give notice under the ROFR 

constitutes a breach of fiduciary duty claim, rather than a contract claim, that “the breach of 

fiduciary duty is in the defendants knowing that there’s a right of first refusal, that it should have 

been offered to Mr. Conley to have his right to exercise his right of first refusal, and they 

intentionally did not proceed according to the contract, in furtherance of this scheme to dilute Mr. 

Conley and to minimize his voting power,” presumably by issuing the shares to Burba. Oral 

Argument Tr. 63:13–20. 

181 See Compl. ¶¶ 5, 111–12, 132. I note two other claims related to the Erceg Settlement and 

Burba share issuance that were not specifically asserted as direct dilution claims at Oral Argument. 

First, the Plaintiffs allege that “Burba had knowledge that the written consent included the void 

Erceg Shares to vote himself on the Board. Green and MDV knew the Erceg Shares were void but 

still allowed Burba to vote those shares to get himself on the Board. Consequently, Burba’s 

placement on the Board was an ultra vires act by the Company and improper.” Id. at ¶ 115. To 

the extent the Plaintiffs still pursue this claim, I find that these allegations form the basis for a 

derivative claim, for which demand futility should have been pled. See SEPTA v. Volgenau, 2012 

WL 4038509, at *3 n.17 (Del. Ch. Aug. 31, 2012) (“Any harm from a director’s ultra vires action 

during a corporation’s on-going operations would likely inure to the corporation itself, and thus, 

would only provide a basis for a derivative claim.” (citing Tooley, 845 A.2d at 1033)). Second, 

the Plaintiffs argue, with respect to the “equity contributions” made by Itochu and MDV as part of 

the Erceg Settlement, that “Itochu and MDV breached their fiduciary duties by forcing the 

Company to assume liability and then investing in the Company as part of the Erceg Settlement—

thus, gaining further stock ownership at the expense of other investors while simultaneously 

absolving their own liability and conspiring to defraud other parties to the ROFR in a series of step 

transactions.” Compl. ¶ 117. I do not understand this allegation, and in any event, the Plaintiffs 

have failed to allege facts to demonstrate that MDV owes fiduciary duties as a controlling 

stockholder.
44

important to note that, although the Plaintiffs allege that Erceg violated his 

contractual rights to give notice to Conley and others of the sale, the Plaintiffs have

not brought an action against Erceg, nor have they sought a contract remedy to 

specifically enforce their contractual rights with respect to the allegedly “void”

shares.182 Instead, they seek only a claim for breach of duty against MDV and certain 

of the Director Defendants, for not insuring that the Plaintiffs received notice and 

also for reissuing the shares to the new CEO. Again, for relief, the Complaint seeks 

“all” past and future damages relating to all wrongdoing alleged in the complaint as 

a whole.

Because I have found that the Plaintiffs failed to demonstrate MDV is a 

controlling stockholder, as discussed above, I dismiss this claim with respect to 

MDV.183 That leaves for my consideration whether the Plaintiffs have properly 

stated a claim against two Director Defendants alleged to have been a part of the 

Board at the time: Sunada and Green. Even considering the allegations above as a 

scheme, I find that the Complaint lacks specific allegations necessary for me to 

evaluate the claim. I do not know, because the Complaint fails to allege, for 

 

182 Or, looked at properly, to seek a declaration that the transaction is void and that the shares 

remain with Erceg. See supra note 99 and accompanying text.

183 In fact, the Plaintiffs have essentially admitted that MDV did not control the Board at the time 

of the Erceg Settlement or issuance of shares to Burba. The Complaint alleges that, in March 

2013, MDV and Itochu entered into a side agreement, under which MDV assigned its right to 

select a second Board designee to Itochu, thereby “granting Itochu control of the Board.” Compl. 

¶ 97 (emphasis added).
45

example, whether Conley or any of the other contractual parties to the ROFR knew 

about the repurchase of the Erceg Shares before it occurred; whether Conley, if given 

notice, would have in fact repurchased shares, or to how many shares he would have 

been entitled; the complete composition of the Board at the time of the issuance of 

shares to Burba;

184 the date on which that issuance was approved; that the shares 

granted to Burba were the same shares sold back to the Company by Erceg;

185 that 

no treasury shares were available from which to issue shares to Burba;

186 or that 

Burba was controlled by or beholden to MDV.

187

 The Complaint only alleges that a 

 

184 Though the Complaint alleges that Sunada, Nishio, and Green sat on the Board at the time of 

the Erceg Settlement, I presume based on earlier allegations in the Complaint that this is not the 

complete composition of the Board at the time. See supra note 68. Additionally, the Complaint 

does not specify the date on which Burba was awarded shares, except to suggest that the award 

took place at some time between the Erceg Settlement in July 2013 and August 9, 2013, the date 

on which Burba was placed on the Board by way of written consent of the common stockholders. 

From these allegations, I cannot determine with certainty whether Nishio sat on the Board when 

Burba was awarded the roughly 2.1 million additional shares. 

185 The Plaintiffs insisted at Oral Argument that these are the same shares, but this was not pled 

clearly in the Complaint. See supra note 105 and accompanying text; Oral Argument Tr. 60:7–17

(“So here’s the take-away from the Erceg settlement, Your Honor, and the only take-away that’s 

relevant here today. And that is the shares of Erceg that were transferred, eventually, to Burba. 

And it’s, you know, 2.1 million shares. It’s the same shares. And we allege something, I think, 

akin to that in the complaint. You don’t come up with a number of 2.1 million, you know, being 

transferred from Erceg and then finding its way into Burba’s pocket. And that’s the only takeaway, Your Honor.”) (emphasis added).

186 As I find that the Plaintiffs have not clearly alleged that Burba was in fact issued the Erceg 

shares, without knowing whether the Company held any treasury stock, it is impossible to 

determine whether Burba was issued the Erceg shares, which had previously been returned to the 

Company (via the allegedly void Erceg Settlement), or whether the Erceg shares were merely 

returned to a pool of treasury stock, from which Burba was issued distinct “issued,” but not 

“outstanding,” shares, untainted by a breach of the ROFR rights.

187 I find insufficient the Plaintiffs’ conclusory allegation that the Defendants sought to “[f]orce 

out CEO who attempted to resist Defendants’ breach of fiduciary duty and replace him with one 

who they knew they could control and give them what they want.” Compl. ¶ 5. Once again, I list 

these absent factual allegations here to provide context, not to suggest that any one alone is 

dispositive.
46

Director with divided loyalties to MDV (Green) was on the Board when Burba 

received the shares.188 Plaintiff could have obtained pertinent factsthrough an action 

under Section 220, instead of suggesting that the Court speculate as to the existence 

of a claim. Finally, I note that the Plaintiffs are alleged to have held the same

ownership percentage in Simbol before and after this transaction; thus, on the facts 

before me, even considering the Erceg Settlement and Burba share issuance as one 

nefarious transaction, it is not reasonably conceivable that the Plaintiffs suffered 

dilution of their interests, although they may have lost a contractual opportunity to 

increase their interests.

Accordingly, I also dismiss this claim in Count I as to the remaining Director 

Defendants for failure to state a claim.

C. Aiding and Abetting a Breach of Fiduciary Duty

Finally, I turn to the aiding and abetting claim in Count II. To plead an aiding 

and abetting claim, a plaintiff must allege: “(1) the existence of a fiduciary 

relationship, (2) a breach of the fiduciary’s duty, . . . (3) knowing participation in 

that breach by the defendants, and (4) damages proximately caused by the breach.”189 

In other words, an aiding and abetting claim is predicated on an underlying breach

 

188 The Complaint, however, also alleges that Green had resigned prior to this point. See supra 

note 80.

189 Malpiede v. Townson, 780 A.2d 1075, 1096 (Del. 2001) (emphasis added).
47

of fiduciary duties.190 Here, because I find that Count I fails to adequately allege a 

breach of duty, I must also dismiss Count II for failure to state a claim.191

D. Plaintiffs’ Request to Dismiss Without Prejudice

At Oral Argument, the Plaintiffs asked that any dismissal be without 

prejudice, to allow them to re-plead with sufficient facts to support their claims. 

Rule 15(aaa) bars such a dismissal here. The Motionsto Dismiss and their associated 

opening briefs pointed out the fundamental pleading deficiencies here, and pointed 

out that the Defendants were unclear what wrongs had been pled against them that 

they must defend, as well as how direct (as opposed to derivative) claims had been 

pled. The Plaintiffs at that point had the opportunity to elect to re-plead, and instead 

filed an answering brief. It was not until Oral Argument that the Plaintiffs defined 

clearly the transactions that they believe have caused them direct harm. 

The Plaintiffs’ election to brief and argue the Motions to Dismiss, rather than 

re-plead, is binding here.

IV. CONCLUSION

The Plaintiffs have alleged numerous bad acts over the course of several years, 

which conduct, they argue, has had the cumulative effect of bringing the Company

 

190 See Globis Partners, L.P. v. Plumtree Software, Inc., 2007 WL 4292024, at *15 (Del. Ch. Nov. 

30, 2007) (stating that a valid claim for aiding and abetting a breach of fiduciary duty requires a 

primary fiduciary to have breached its duty).

191 See Weil v. Morgan Stanley DW, Inc., 877 A.2d 1024, 1039 (Del. Ch. 2005) (dismissing aiding 

and abetting claim where the underlying breach of fiduciary duty claim failed to state a claim).
48

to the brink of financial disaster and which, in two instances, have harmed the 

Plaintiffs individually as well as the Company. These allegations, if true, will go 

unremedied here. I am consoled, however, by the fact that any stockholder may still

bring a derivative suit if, after pursuing the rights granted to her under Section 220, 

she can properly state a claim. For the foregoing reasons, I grant the Defendants’ 

Motions to Dismiss. An appropriate order accompanies this Memorandum Opinion.
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

THERMOPYLAE CAPITAL 

PARTNERS, L.P. and M. SCOTT 

CONLEY,

Plaintiffs,

)

)

)

)

)

v.

)

)

)

C.A. No. 10619-VCG

SIMBOL, INC., JOSHUA L. GREEN, 

PAUL B. CLEVELAND, WILLIAM 

ERICSON, MOHR DAVIDOW 

VENTURES, MDV IX, L.P., TAKASHI 

SUNADA, ITOCHU CORPORATION, 

JOHN ASHBURN, MARTIN L. 

LAGOD, FIRELAKE STRATEGIC 

TECHNOLOGY FUND, II, L.P., 

FIRELAKE INVESTORS FUND, II, 

L.P., FIRELAKE CAPITAL 

MANAGEMENT LLC, and JOHN 

BURBA,

Defendants.

)

)

)

)

)

)

)

)

)

)

)

)

)

)

ORDER

AND NOW, this 29th day of January, 2016,

The Court having considered the Defendants’ Motions to Dismiss, and for the 

reasons set forth in the Memorandum Opinion dated January 29, 2016, IT IS 

HEREBY ORDERED that the Motions to Dismiss are GRANTED. 

SO ORDERED:

/s/ Sam Glasscock III

Vice Chancellor