IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

THERMOPYLAE CAPITAL PARTNERS, L.P. and M. SCOTT CONLEY , Plaintiffs , ) ) ) ) )

v. ) ) ) C.A. No. 1061 9

- VCG SIMBOL, INC., JOSHUA L. GREEN, PAUL B. CLEVELAND , WILLIAM ERICSON, MOHR DAVIDO W VENTURES, MDV IX, L.P., TAKASHI SUNADA, ITOCHU CORPO RATION, JOHN ASHBURN, MARTIN L. LAGOD, FIRELAKE STRA TEGIC TECHNOLOGY FUND, II, L.P., FIRELAKE INVESTORS F UND, II, L.P., FIRELAKE CAPIT AL MANAGEMENT LLC , and JOHN BURBA , Defendants

. ) ) ) ) ) ) ) ) ) ) ) ) ) )

MEM ORANDUM OPINION
Date Submitted : October 28, 2015 Date Decided : January 29, 2016 Sidney S. Liebesman, Lisa Zwally Brown, and Chad Flores , of MONTGOMERY, Mc CRACKEN, WALKER & RH OADS, LLP , Wilmington, Delaware , Attorneys for Plai ntiffs

. Peter J. Walsh and Tyler J. Leavengood , of POTTER ANDERSON & CO RROON LLP , Wilmington, Delaware ; OF COUNSEL: Matthew Rawlinson and James H. Moon , of LATHAM & WATKINS LLP , Menlo Park, California, Attorneys for Defendants Martin Lagod, Firelake Stra tegic 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, L LP , Wilmington, Delaware ; OF COUNSEL: J. Daniel Sharp , of CROWELL & MORING LLP , San Francisco, California, Attorneys for Defendants Mohr D avidow Ventures, MDV I X , L.P., Joshua L. Green, Paul B. Cleveland, and William Ericson

. Patricia R. Urban , of PINCKNEY , WEIDINGER, URBAN & J OYCE LLC , Greenville , Delaware ; OF COUNSEL: Alan J. Stone and Hailey DeKraker , of MILBANK, TWEED, HADL EY & Mc CLOY L LP, 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, Attorney s for Defendant Simbol, Inc

.

GLASSCOCK, Vice Chancellor1

The Plaintiffs here are M. Scott Conley

— a founder and stockholder of Simbol, Inc., (“S i mbol” 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 stockhold ers by issuing stock to the CEO; and t hat 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
C ompany. This transaction, ac cording to the Plaintiffs, was wrongfully dilutive of
their interests. The Plaintiff s also allege that those controlling Simbol authorized a reduction of the share price for a preferred stock offering, in a way the Plaintiff s contend diluted their ownersh ip. In addition, t he Plaintiff s allege much past wrongdoing by MDV and other defendants in the many years since Simbol’s founding, which t he y contend demonstrates the controlling nat ure of MDV’s interest
in Simbol. The Plaintiffs , however, conceded at ora l argument th at those earlier
incidents alleged wrongs to the C ompany, which t he y have not attempted to pursue derivatively. The Plaintiffs therefor e seek redress here only for the dilution claim s
. The matter is before me on motion s to dismiss. Because the claims brought are direct, the Plaintiffs are held only to the low notice pleading standard of Rule2

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
T he 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 t hat I speculate as to fundamental facts necessary for the Plaintiff s to prevail.
The situation the Plaintiffs describe excites equitable antennae , because at least some
of the direc tors had dual loyalties to the C ompany and to those with whom it

transacte d. Nonetheless, f or 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 appropri ate. I. BACKGROUND 2 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, demonst rate MDV’s

c ontrol of S i mbol 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 p roduction, 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 “Boar d”) from in or about January 20 12 to in or about December 2012, 4 and served as “COO and senior most executive” to Simbol as of January 15, 2013. 5 Conley and non

- party Luk a Erceg are the co

- founders of Simbol. 6 Plaintiff Thermopylae is another

“ substantia l ” common stockholder of Simbol, holding 666,600 shares, and is controlled by Conley. 7 Defendant Simbol is a Delaware corporation with its princip al place of
business in Pleasanton , California. 8 Defendants Joshua Green, Paul B. Clevelan d , William Ericson , Martin L. Lagod, Takashi Sunada, John Burba, and John As h burn
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 ther ein. 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 C omplaint 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 wh ich Conley is involved.” Id. at ¶ 1. 8 Id. at ¶¶ 1, 11.4

served on the Board “at all materi al 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 L LC,
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 C hief F inancial O fficer 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 ¶ 21.5

with its principal place of business in Menlo Park, California. 16 MDV ope rates 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 ma

jority 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 partnership s 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 Itoch u , 21 a preferred stockholder of Simbol , is a multinational corporation headquartered in Tokyo, Japan that operates various businesses , in cluding importing and exporting and international trading of metals, minerals, energy, and other goods a nd 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 specialize s in sustainable materials technology. 23 L ooking 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
fr om 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 bef ore officially commencing operations,
Si mbol participated in the CleanTech Forum in San Francisco, California 26

— an annual gathering of clean tech entrepreneurs, venture capital firms, investors, and policy makers from around the world

— where it was awarded t he 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 poten tial 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 l ed 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 ¶ 29.7

in July 2008 , raising a total $6.7 million and resulting in a post

- money valuation of
Simbol o f 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 o f the Board. 31 The funds raised in the Series A Financing were

us ed to start the development of Simbol’s processes for extract ing lithium and
p roduc ing 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 i n June 2010, after months of di ligence, Itochu led Simbol’s Series B capital raise of $35 million

— itself inve sting 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 cont ribution 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.8

At the anticipated close of the Series B financing, Simbol ha d a pre
- mo ney valuation of approximately $ 53 million. 36 T hough t he $35 million already raise d exceeded Simbol’s planned $28 million target , 37 Board members disagreed over whether to keep the financing open. 38 The Plaintiffs allege that G reen and Lagod
insiste d that Simbol required another “ v enture

- styled investor, ” and so should seek further investment, 39 while E rceg 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 $6 6 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 F inancing In early 2011 , Eramet, S.A. (“Eramet”), a French multinational mining and metallurgy company, expressed interest in investing in Simbol. 43 A fter 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 “personall y 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 i n 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 milli on, at $5.50 per share. Id. at ¶ 85. 42 Id. at ¶¶ 40, 43. 43 Id . at ¶ 41.9

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 loa n of $5 0 million from Itochu ( the “Eramet Financing”). 45 The Plaintiffs allege that t he Eramet Financing would have resulted in Simbol’s post

money valuation of $180 to $240 million, “ based on a series of three investment tranches, ” and would have been “ac cretive 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 G reen and Lagod. 48
The Plaintiff s 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
examp le, the Plaintiff

s 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.10

this provision, he retracted this position “so as to further undermine and prevent the
closin g 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 fo rward with the Eramet F inancing , given Simbol’s then

- ur gent need for
additional capital. 53 T he Plaintiffs allege that Erceg’s advice was met with threats
from Green and MD V to “block the transaction based on their own se lf

- interests, ” 54 and a warning from Green to the Board that it should not vote for the Erame t
F inancing 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 the ir fear that they would not be able to contribute equity in the future that
drove their opposition to the Eramet F inancing. 56 The Complaint also describes several alleged machinations by Green to

51 Compl. ¶ 42. 52 I d. 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 . Firs t , 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 ar guing 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
ob tain 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, d uring 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” an d failed to formally vote on the Eramet Financing. 61
In October 20 11, to exploit the worsening financial condition of Simbol, MDV allegedly submitted a proposal to Itoch u 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.12

and Firelake to remove Erceg as CEO, wipe out the othe r stockholders, and invest an additional $10 million or, in the alternative, that it purchase MDV’s and Firelake’s eq uity 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 MD V and Firelake had deteriorated, leading Erceg to accuse MDV and Firelake of bad faith, hindering Simbol’s ability to raise capita l, and acting in their own self

interest rather than in the best interests of the Company. 63

4. The “Exto rted 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 an d Firelake more favorable terms with respect to their investments in the Company (the “ Extorted Rights”). 64 The se Extorted Rights were secured through
the execution of “a series of corporate documents and agreements on March 13, 2012 and the filing of an A mended and Restated Certificate of Incorporation [“Amended Certificate”] for Simbol filed with the Delaware Sec retary 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 spe cific 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 co nsisted of Conley, Erceg, Green, Cleveland, and Sunada. 68 The series of agreements executed that day granted two “Extorted R ights ” to MDV and Firelake. The “Put Option ” granted MDV and Firelake the right to “[s]ell their stock to Simbol at their original p urchase 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 o nly after securing these rights did MDV and

66 Id. 67 Id. at ¶¶ 96, 10 4. 68 Id. at ¶ 67. I note , however, that the Complaint subsequently alleges that the “three remaining directors” on the Board after the Decemb er 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 ”). Addition ally, th e 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,
b y 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 beg an 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 a dditional 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 2012.15 5

. The Bridge Loans and Other Financing
I n December 2011, Simbol accepted a $5 million bridge loan from Itochu (the

“ First Itochu Bridge”) in order to delay insolvency. 77 Then, i n 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 permane nt 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 ton s 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 C leveland 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 Complain t 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 resignati on. 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 t his 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
I n 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, b etween 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 Ito chu 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 t his 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, t he Complaint does not allege that either Itoc hu 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
I n 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 “ S ignificant H olders , ” 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, Si m bol s ettled 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 th e settlement , Erceg transferred his 2,109,4 68 shares of Simbol common sto ck (the “ Erceg Shares”) back to the Company , but neither he nor Simbol provided a t ransfer n otice to the Plaintiffs. 96
The Plaintiffs assert that , because they did not receive a transfer notice from the investor, as required u nder the ROFR, the transfer was void. 97 They assert further
that this f ailure to act in accordance with the ROFR was part of a larger scheme to defraud key common stockholders, including the P laintiffs, of “ special rights and
economic benefits. ” 98 The Plai ntiffs 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 bas es 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 note s 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 duti es.” 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 th e claims individually.” 101

7

. Issuance of S hares 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 acti vities related to the licensing of technology to Simbol prior to Burba’s appointment as CEO.” 103 T he remaining approximately 2,100,000 shares that Burba was granted , the Plaintiffs stress, almost exactly equal s 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 c onceded 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 , ci rcumstances, 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

T he Complaint treats the 2.1 million shares Burba received as if they were the Erceg
S hares

— 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
Pla intiffs allege, despite the fact that Burb a 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 alle ged dama ges 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 performan ce results at Molycorp, Inc

. prior to joining Simbol. 111 They allege that Itochu thwarted potential investments in Simbol by Chinese firms that held dominant position s 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 Plainti ffs filed a Verified Complaint on February 2, 2015 asserting (1) a
breach o f 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 De fendants filed four Motions to Dismiss , and f ull 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 Plaintif f 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 A ND STANDI NG 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 rel ief. 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 infere nces in favor of the non

- moving party.” 117 The Complaint surveys the actions of the parties ove r the course of an almost eight

- year period, spanning the formation of the Company, its financing, the beginning of its financial w oes , 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 Pric e 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 Plai ntiffs 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 ad option 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 . I n their respective Motions to Dismiss, the Director D efendants , 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 wi t h Court of Chancery Rule 23.1. 118 The Plaintiff s 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, 55024

only for direct harm to them

. 119 Under Delaware law, w hether a claim is derivative or direct “turn[s] solely on the following questions: (1) who suffered the allege d 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 alternat ives ( either the corporation or the Stockholders), some injuries af fect both the corporation and the
stockholders ” and in such a case, the plaintiffs may choose to sue individually. 121
C laims based on the diminution in value of the stock held by plaintiffs are generally derivative in nature

. 122 However, the D elaware 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 Ge ntile 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 Argu ment 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 Tec h., 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 explain ed :

A breach of fiduciary duty claim having th is 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 caus es 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 overpayme nt (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 cor poration'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 conseq uence, 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 o verpayment

— 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 [st ands] 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 is sued 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 t he ability to use the levers of corporate control to benefit themselves and (ii) took advantage of the opportunity.” 129
The Plaintiffs acknowledge d at the Oral A rgument that the alleged wrongful acts leading up to the Erceg Settlement are derivative in natu re, but insist that the se
acts are nonetheless significant as evidence of an overarching “scheme” to bring Simbol to the brink of disaster, which sch eme ultimately resulted in the direct harm
for which the Plaintiffs now seek relief. 130 Because of the atypi cal way in w hich this

127 Carsanaro , 65 A.3d at 658. 128 Id. 129 Id. at 658

– 59. 130 See Oral Argu ment 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 fiduc iary 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 purp oses of today, or in the future.”).27

Complaint was drafted 131

— 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 f rom 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 consid er those causes of action

not ably not asser ted 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 wi th 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 Pla intiffs 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 inte ntional
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
C ompany, by a controller and a captured B oard, 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, Ito chu 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 Prefe rred 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 re

pricing 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 sou ght, the complaint is similarly non

- specific; it seeks accounting for “all” damages, in curred or future, arising from all allegations of wrongdoing.29

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

re
- prici ng occurred at some time betw een 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 d iluted Mr. Conley’s value of the stock by issuing

— repricing and issuing themselves stock at a significantly discounted amount.” 135 Under Delaware law, a t the motion to dismiss stage of a proceeding, the Court must deny the motion unless, drawing all reasonab le inferences in favor of the plaintiff, the plaintiff could not recover under “any reasonably conceivable set of circumstances susceptible of proof.” 136 F or 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 t he 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 re spect 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) (emph asis 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 t o 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 s eries “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 issu ance 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 requi re me to

assume the existence of many facts not alleged in the Complaint. The Complaint, for example, is silent as to precisely when th e 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

- pricin g 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 expl ain 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, t h e Plaintiffs have failed to allege facts that, if true,
demonstrat e 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 contr ol 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 unc lear if the Board also included Ericson, Nish i o, 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 fact s 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 alon e 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 particu lar 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 ‘exer cised 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
alle ges 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 reason able 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 o n 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

– 6 5 (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 Thi s 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 minori ty 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 tr ansaction, their identity , facts showing control by MDV, and details regarding the terms of the transaction itself, I am unable to find sufficient allegation s that MDV controlled the corporate machinery and used it to enrich itself. 151
T he Plaintiffs do not rely on specific allegation s 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 exerc ised 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 pr eviously 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 becaus e 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 tr ansform 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 restr ict corporate action, thus g iving it leverage over the Board

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

t o 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 Conle y 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 throug h
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 oth ers

— 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 t hat 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 aligne d
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

- co n clusory facts pled, that such control
in fact existed

. The C omplaint 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 fai ls
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 bes t36

interests of the company.” 158 Th is 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
bo ard, 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, b ecause the Plaintiffs have failed t o include key facts, incl uding 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 re

pricing 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 t he Plaintiff s, in their papers and at Oral A rgument, relied heavily

158 Aronson v. Lewis , 473 A.2d 805, 812 (Del. 1984), overruled in part o n 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 ex ecutive 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. B loodhound 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 can vassing 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 reve rse 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 revers e 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
compan y 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 (D el. Ch. 2013).38

in terest 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 c laim 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 co mpany, 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, demonstra ted that they were39

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 B oard. 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 plead ing 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

c omposition and decision

- making of the board with respect to each series of financing alleged to have constitute d a breach of fiduciary duty, finding o nly 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 p laintiff’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 transact ion 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 stockho lders, 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 clai m upon which relief may be granted. B. The Erceg Settlement and the Issuance of Shares to Burba
I turn next to the allegation s surrounding the Erceg Settlement and the subsequ ent issuance of shares to Burba, 164 which the Plaintiffs urge me to consider

as on e dilutive transaction. The Plaintiffs have allege d 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 Propos ed 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 h ave 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 ri d 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 s ettled claims asserted by Erceg (the “Erceg
Se ttlement”),” 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 contribu tions 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, i n transf erring 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 requ ired, 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 agains t 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 Dir ector of Simbol in January 2013, 175 and that

“ [b] y April 2013 . . . the Board had rece ntly 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 rem aining 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 e xamine 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 not e 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 question4 3

cause of action, as I understand it, is this: MDV, a ided 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, a ll of t hese 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 f ailure 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 Bur ba. 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 alle ge 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 for cing 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 othe r 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 ha ve not bro ught an action against Erceg , nor hav e 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 C omplaint seeks “all” past and future damages relating to all wrongdoing alleged in the complaint as
a whole.
Becau se 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 t he
Board at the time: Sunada and Green. Even considering th e allegations above as a scheme , I find that the Complaint lacks specific allegation s necessary for me to
evaluate the claim. I do not know, b ecause the Complaint fails to allege , for

182 Or, loo ked 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 n ot 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 Itoch u, 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 th e date on w hich 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, Nishi o, and Green sat on the Board at the time of the Erceg Settlement, I presume based on earlier allegations in the Complaint t hat 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, th e 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 Nishi o sat on the Board when Burba was awarded the roughly 2.1 million a dditional 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 alle ge 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 take

away, 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 previous ly 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

rece ived the shares. 188 Plaintiff could have obtained pertinent fact s through 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 issuanc e as one nefarious transaction, it is not reasonably conceivable that the Plaintiffs suffered
dilution of th eir 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
Defendan ts 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 plea d 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 breac h.” 189 In other words, an aiding and abetting cl aim is predicated on an underlying breach

188 The Complaint, ho w ever, also alleges that Green had resigned prior to this point. See supra note 80

. 189 Malpiede v. Townson , 780 A.2d 1075, 1096 (De l. 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 O ral A rgument, the Plaintiffs asked that any dismissal be without prejudice, to allow them to re

- plead with sufficient fact s to support their claims. Rule 15(aaa) bars such a dismissal here. The M otions to D ismiss 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 d erivative) 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 O ral A rgument that the Plaintiffs defined clearly the transactions that they believe have cause d 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 h ad 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 abet ting 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,

s he can properly state a claim

. For the foregoing reasons, I grant the Def endants ’
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 , WILLI AM ERICSON, MOHR DAVIDO W VENTURES, MDV IX, L. P., TAKASHI SUNADA, ITOCHU CORPO RATION, JOHN ASHBURN, MARTIN L. LAGOD, FIRELAKE STRA TEGIC TECHNOLOGY FUND, II, L.P., FIRELAKE INVESTORS F UND, II, L.P., FIRELAKE CAPIT AL MANAGEMENT LLC , and JOHN BURBA,
Defendant s. ) ) ) ) ) ) ) ) ) ) ) ) ) )
ORDER AND NOW, this 2 9 th 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 I S
HEREBY ORDERED tha t the Motions to Dismiss are GRANTED.
SO ORD ERED:
/ s/ Sam Glasscock III
Vice Chancellor