IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

MEMORANDUM OPINION

Submitted: May 28, 2015

Decided: August 31, 2015 

Joseph B. Cicero, Esq., Stephanie Habelow, Esq., CHIPMAN, BROWN, CICERO & 

COLE, LLP, Wilmington, Delaware; Attorneys for Plaintiff, Israel Discount Bank of New 

York.

David A. Felice, Esq., BAILEY & GLASSER, LLP, Wilmington, Delaware; Attorneys 

for Defendants, Third-Party Plaintiffs, Robert Higgins and Certified Assets Management, 

Inc.

Thad J. Bracegirdle, Esq., Samuel L. Moultrie, Esq., WILKS, LUKOFF & 

BRACEGIRDLE, LLC, Wilmington, Delaware; Attorneys for Third-Party Defendants,

Republic National Business Credit LLC and Ned Fenton.

PARSONS, Vice Chancellor.

ISRAEL DISCOUNT BANK OF 

NEW YORK,

Plaintiff,

v.

ROBERT HIGGINS and CERTIFIED 

ASSETS MANAGEMENT, INC.,

Defendants/

Third-Party Plaintiffs,

v.

REPUBLIC NATIONAL BUSINESS 

CREDIT LLC and NED FENTON,

Third-Party 

Defendants.

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C.A. No. 9817-VCP
1

Before the Court is a motion by the third-party defendants to dismiss the amended 

third-party complaint under Court of Chancery Rules 9(b), 12(b)(2), and 12(b)(6). The 

third-party defendants advance a litany of arguments as to why the third-party complaint

should be dismissed. For the reasons that follow, I conclude that the third-party 

complaint makes out a prima facie case for personal jurisdiction, but that it must be 

dismissed because key determinations in a prior case have preclusive effect and the thirdparty plaintiffs cannot relitigate those issues here. 

I. BACKGROUND

In a prior decision issued May 29, 2013, Israel Discount Bank of New York v. First 

State Depository Co., LLC,

1

I determined the liability of First State Depository Co., LLC 

(“FSD”), and Certified Assets Management, Inc. (“CAMI”), to Israel Discount Bank 

(“IDB”). That case, which the parties have referred to as the “Related Action,” involved 

the mishandling of collateral—rare coins and bullion—that secured a $10 million loan. 

Ultimately, I concluded that FSD and CAMI were liable to IDB in the amount of roughly 

$7 million plus interest. In addition, I held that FSD and CAMI had engaged in bad faith 

litigation conduct, and ordered that they pay IDB‟s attorneys‟ fees.

To understand the present motion, it is necessary to restate some of the factual 

background from the Related Action. IDB is a bank. Republic National Business Credit 

LLC (“Republic”) is a limited liability company (“LLC”) organized under the laws of 

California. Republic‟s business included providing secured financing to facilitate the 

 

1

2013 WL 2326875 (Del. Ch. May 29, 2013) [hereinafter “IDB”].
2

acquisition and distribution of precious metals and jewelry. Ned Fenton is the managing 

director of Republic. One of IDB‟s loans was a revolving credit facility it provided to

Republic. In connection with that loan, IDB acquired an interest in all of Republic‟s 

collateral. 

Republic, in turn, made a loan to CAMI, a Delaware corporation that offered rare 

coin wholesaling and marketing services. That loan was secured by certain coins and 

metals (generally, the “Collateral”).

2

 IDB had imposed upon Republic several lending 

restrictions, such as a $5 million cap per client. CAMI sought to evade that cap through 

the use of sham borrowers. Here, it is important to understand the ownership of CAMI 

and FSD. Robert Higgins (“Higgins”), a non-party to the Related Action and a defendant 

in this action, owns both FSD and CAMI. “He is FSD‟s sole member and CAMI‟s 

president and sole stockholder.”3 Eric Higgins, Robert‟s son, was the head of customer 

service at FSD. Steven Higgins, another son of Robert, worked at CAMI. Vicki Lott 

Reid, an employee of FSD and former employee of CAMI, is Higgins‟s sister. Donald 

Ketterling was a former business partner of Higgins‟s and employee of CAMI. After 

CAMI hit its borrowing cap, Ketterling and Reid entered into borrowing agreements with 

Republic. These were sham agreements in that essentially they pertained to loans to 

 

2

IDB at *2.

3

Id.
3

CAMI and Higgins. CAMI pledged the underlying collateral and paid the interest for

both the Ketterling and Reid loans.

4

Fenton eventually received permission from IDB to have the Collateral moved to 

CAMI‟s affiliate FSD, a Delaware LLC that serves as a private depository and provides 

custody, shipping, and accounting services related to precious metals. In connection with 

that move, several important documents were signed. FSD, Republic, CAMI, Reid, and 

Ketterling entered into a series of Collateral Custody Account Agreements (the 

“CCAAs”) governing the deposit of the Collateral at FSD. Additionally, FSD, Republic, 

and IDB entered into a separate bailment agreement (the “Bailment Agreement”) 

designed to protect IDB‟s rights in Republic‟s Collateral.5 Section 6 of the Bailment 

Agreement provides, in pertinent part, that: 

6. Return Goods Upon Direction. Until Bailee [FSD] has 

received written notification to the contrary from an officer of 

Secured Party [IDB], Bailee may continue to release the 

Property in accordance with instructions issued by Company 

[Republic]. Upon written notice from an officer of Secured 

Party, Bailee agrees that it will hold all such Property subject 

only to Secured Party‟s written instructions, and that Bailee 

will release same to Secured Party on demand, provided that 

Secured Party tenders to Bailee payment of any accrued 

charges on the Property being released.6

 

4

Id. at *4.

5

Id. at *3.

6

T-P Defs.‟ Opening Br. Ex. D, at 2.
4

In the Related Action, I found as a fact that, pursuant to Section 6 of the Bailment 

Agreement, IDB had provided written instructions to FSD in December 2009 (the 

“December 2009 Notice”) not to release Republic‟s Collateral without IDB‟s written 

instructions to do so. In September 2011, FSD released the Collateral, without IDB‟s 

consent, so that CAMI could display it at coin collectibles shows. After the shows, the 

Collateral was not returned to FSD for storage; instead, Higgins deposited it into CAMI‟s 

safes.7 What followed next is only tangentially relevant here, but basically involved an 

increasingly concerned IDB attempting to inspect the Collateral and encountering 

extended stonewalling by FSD. In addition, the FBI ultimately seized some of the coins 

FSD was holding as collateral for Republic‟s loans. The Related Action ensued. In April 

2012, IDB obtained a consent judgment in New York, which concluded litigation it had 

brought against Republic, Fenton, and others. Roughly a year later, I issued the May 29, 

2013 decision in the Related Action.

In the Related Action, IDB had asserted claims for breach of contract and 

conversion against CAMI and FSD. In the course of ruling on those claims, I made 

several determinations of fact that are relevant and binding here. Those factual 

determinations were necessary for purposes of deciding some of the large number of 

affirmative defenses interposed by CAMI and FSD. With respect to IDB‟s breach of 

contract claim, I found that the “December 2009 Notice and the Bailment Agreement . . . 

 

7

Id. at *5.
5

limited FSD‟s ability to release the Collateral absent IDB‟s consent.”

8

 Thus, I concluded 

that by releasing the Collateral in September 2011 without IDB‟s permission, FSD 

breached the Bailment Agreement and the obligation imposed by the December 2009 

Notice. Much as Higgins and CAMI attempt to do in this action, CAMI and FSD 

attempted to make the CCAAs the focus of the Related Action. I concluded, however, 

that IDB‟s relationship with FSD was governed by the Bailment Agreement, not the 

CCAAs.9

IDB‟s second claim in the Related Action was for conversion against CAMI. As 

one of its five defenses, CAMI argued that “Republic authorized CAMI‟s use of the 

collateral.”10 I rejected that defense. First, I found that “CAMI‟s conduct on and after 

September 12, 2011 . . . was not in accordance with Republic‟s previous authorizations 

for CAMI to use the Collateral to be shown at trade shows and thereafter returned to the 

depository.”11 Second, I held that: “Defendants failed to prove either that Republic 

authorized an open-ended release or relinquishment in September 2011 or that such an 

authorization would have complied with the Bailment Agreement. Furthermore, and in 

 

8

Id. at *14.

9

Id. at *16-18.

10 Id. at *20.

11 Id. at *20.
6

any event, the September 2012 [sic: 2011] release had to be authorized by IDB, not just 

Republic.”12

After obtaining the judgment against CAMI and FSD, jointly and severally, IDB 

brought this action on June 24, 2014, against CAMI and Higgins, primarily in an effort to

attempt to recover from Higgins personally on the damages judgment IDB obtained 

against CAMI. Specifically, IDB‟s complaint seeks to pierce CAMI‟s corporate veil or,

alternatively, hold Higgins liable for actual or constructive fraudulent transfers. CAMI 

and Higgins (the “Third-Party Plaintiffs”) filed a third-party complaint against Republic 

and Fenton (the “Third-Party Defendants”) on September 16, 2014. That complaint

asserted counts for indemnification and contribution. After Republic and Fenton moved 

to dismiss, the Third-Party Plaintiffs filed an amended third-party complaint (the 

“Complaint”), which contains additional allegations intended to support personal 

jurisdiction and adds a count for fraud.

The gist of the Complaint is that Republic and Fenton owe CAMI and Higgins part 

or all of the final judgment amount imposed in the Related Action under theories of 

common law indemnification, contribution (both at common law and under 10 Del. C. 

§ 6301), and fraud. The key factual allegations underlying these claims are quite similar. 

Under both Count I, which seeks indemnification, and Count II, which seeks 

contribution, the Third-Party Plaintiffs allege that “CAMI (and potentially Higgins) 

would not be liable to IDB for conversion or their liability would not have been as much 

 

12 Id. (emphasis added).
7

as it was ultimately adjudicated to be had it not been for Republic and Fenton‟s 

conflicting, insufficient, false and misleading authorizations.”13 For the fraud claim in 

Count III, the Complaint alleges that these same “unfounded, insufficient, conflicting, 

false and misleading authorizations” were provided in an attempt “to induce CAMI to 

continue its conduct”14 and that CAMI “relied on Fenton‟s authorizations.”15 As this 

overview shows, the purported authorizations by Fenton, presumably as an agent of 

Republic, to release the Collateral represent an essential predicate for all three Counts of 

the Complaint. 

Fenton and Republic have moved to dismiss. Their chief argument is that all of 

the claims in the Complaint are barred by collateral estoppel. The Third-Party 

Defendants also deny that this Court has personal jurisdiction over them. Fenton is a 

California resident, and Republic is a California LLC. Additionally, Fenton and Republic 

make several ripeness arguments, and contend that the fraud claim is not pled with 

particularity as required by Rule 9(b).

After addressing personal jurisdiction, I turn to the Third-Party Defendants‟ 

collateral estoppel argument.

 

13 T-P Compl. ¶¶ 31, 34.

14 Id. ¶ 42.

15 Id. ¶ 40.
8

II. ANALYSIS

A. Personal Jurisdiction

1. Applicable Standard

On a motion to dismiss under Court of Chancery Rule 12(b)(2), the claimant has 

the burden of showing a basis for the Court‟s jurisdiction over the non-resident 

defendant.16 In resolving the issue of personal jurisdiction over a non-resident, Delaware 

courts apply a two-step analysis, determining: (1) whether a statute authorizes service of 

process on that defendant; and (2) whether subjecting the non-resident defendant to 

jurisdiction in Delaware comports with the Due Process Clause of the Fourteenth 

Amendment.17 In conducting this analysis, the Court may consider the pleadings, 

affidavits, and any discovery of record.18 If no evidentiary hearing has been held, as is 

the case here, the plaintiffs need only make a prima facie showing of personal 

jurisdiction, and are entitled to all reasonable inferences that can be drawn from the 

record.19

 

16 AeroGlobal Capital Mgmt., LLC v. Cirrus Indus., Inc., 871 A.2d 428, 437 (Del. 

2005); Albert v. Alex. Brown Mgmt. Servs., Inc., 2005 WL 2130607, at *14 (Del. 

Ch. Aug. 26, 2005).

17 Hercules Inc. v. Leu Trust & Banking (Bahamas) Ltd., 611 A.2d 476, 480 (Del. 

1992).

18 Ryan v. Gifford, 935 A.2d 258, 265 (Del. Ch. 2007). 

19 See id.
9

2. A Prima Facie Showing of Personal Jurisdiction Has Been Made

As noted, the Third-Party Plaintiffs must make only a prima facie showing of 

personal jurisdiction. Although a more developed factual and legal record ultimately 

might show that personal jurisdiction is lacking, I conclude that the Third-Party Plaintiffs 

have made a prima facie showing that such jurisdiction exists here as to both Republic 

and Fenton. Therefore, I deny their motion to dismiss to the extent it challenges 

jurisdiction.

a. There is no general jurisdiction

Higgins and CAMI argue that this Court has general personal jurisdiction over 

Republic and Fenton under Delaware‟s long-arm statute, which provides for general 

jurisdiction over a person that:

Causes tortious injury in the State or outside of the State by 

an act or omission outside the State if the person regularly 

does or solicits business, engages in any other persistent 

course of conduct in the State or derives substantial revenue 

from services, or things used or consumed in the State.

20

This contention lacks merit.

“General jurisdiction under subsection (c)(4) requires a greater, more continuous 

pattern of contacts with the forum than does „single act‟ jurisdiction under subsection 

(c)(1), (2), or (3).”

21

 Establishing general personal jurisdiction requires satisfying a 

significantly higher burden than is required for establishing specific personal jurisdiction. 

 

20 10 Del. C. § 3104(c)(4).

21 Computer People, Inc. v. Best Int’l Gp., Inc., 1999 WL 288119, at *5 (Del. Ch. 

Apr. 27, 1999).
10

Indeed, the United States Supreme Court has stated that general jurisdiction requires 

contacts “with the State [that] are so „continuous and systematic‟ as to render [the 

defendants] essentially at home in the forum State.”22 The facts alleged in the Complaint 

describe specific contacts with Delaware relating to one ongoing business relationship—

i.e., Republic‟s relationship with CAMI and its affiliates. Fenton and Republic are 

citizens of California. There are no allegations that either of them had current contacts

with Delaware when either IDB filed its complaint or the Third-Party Plaintiffs filed their 

Complaint, much less the sort of “substantial and continuous activity in Delaware” that 

would support a finding of general jurisdiction under Section 3104(c)(4).23 Thus, there is 

no basis for a finding of general personal jurisdiction over the Third-Party Defendants.

b. A prima facie showing of specific jurisdiction has been made

Higgins and CAMI also argue that jurisdiction is proper under Section 3104(c)(1), 

(2), or (3). These sections of Delaware‟s long-arm statute read as follows: 

As to a cause of action brought by any person arising from 

any of the acts enumerated in this section, a court may 

exercise personal jurisdiction over any nonresident, or a 

personal representative, who in person or through an agent:

(1) Transacts any business or performs any character of 

work or service in the State;

(2) Contracts to supply services or things in this State; [or]

(3) Causes tortious injury in the State by an act or 

omission in this State . . . .24

 

22 Goodyear Dunlop Tires Operators, S.A. v. Brown, 131 S. Ct. 2846, 2851 (2011) 

(quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 317 (1945)).

23 See HMG/Courtland Props., Inc. v. Gray, 729 A.2d 300, 310 (Del. Ch. 1999).

24 10 Del. C. § 3104(c)(1)-(3).
11

The statute itself makes clear that the cause of action must “aris[e] from” the acts 

enumerated in the subsections. Transacting business in Delaware will not create personal 

jurisdiction for suits alleging causes of action that do not arise from the relevant 

Delaware-centered business transaction(s). In this instance, Fenton and Republic contend 

that the Third-Party Plaintiffs‟ causes of action do not arise from any of the contacts 

those Third-Party Defendants had with Delaware. Higgins and CAMI counter by 

arguing, among other things, that the CCAAs provide a basis for personal jurisdiction. 

In my view, the dispute between the parties over jurisdiction centers on how 

closely the causes of action must relate to the alleged contacts with Delaware to qualify 

as “arising from” those contacts. Here, all of the Third-Party Plaintiffs‟ claims rest upon 

the purported authorizations Republic and Fenton gave CAMI and FSD to release the 

Collateral. These authorizations seem to have occurred by phone from California. The 

Third-Party Plaintiffs‟ position, however, is that those releases occurred only pursuant to 

the CCAAs, which were agreements that Republic entered into in Delaware for the 

purpose of storing collateral at FSD, a Delaware LLC physically located in Delaware. 

The Collateral, in fact, secured a loan from Republic to CAMI, a Delaware corporation

having its principal place of business in Delaware.

The causes of action relate to the Third-Party Defendants‟ release authorizations, 

and those release authorizations relate to the business relationships that the Third-Party 

Defendants had with CAMI and FSD, via their loan agreements and the CCAAs, in 

Delaware. At this stage, the Third-Party Plaintiffs have made a sufficiently strong 
12

showing that the authorizations at the heart of their claims against Republic and Fenton 

must be viewed within the context of the CCAAs and the actions of FSD. Those 

Delaware contacts are sufficient for purposes of, at least, Section 3104(c)(1), and 

possibly Section 3104(c)(2) as well. Fenton, as a representative of Republic, entered into 

loan agreements and the CCAAs with CAMI while he physically was present in 

Delaware. Fenton also was present in Delaware to conduct on-site inspections of the 

Collateral.25 Because these actions all related to Republic‟s loans to CAMI and the 

Collateral that secured those loans, I find that they constituted the transaction of business 

in Delaware, as required under Section 3104(c)(1). In addition, these actions arguably 

also constituted “[c]ontract[ing] to supply services” in Delaware under Section 

3104(c)(2), in that Republic or Fenton contracted to supply lending services to CAMI or 

FSD in Delaware, and provided cash to CAMI via their loan agreements. 

Although the contacts in this case may be limited, the Third-Party Plaintiffs at this 

stage only need to make a prima facie showing. I conclude that they have made a prima 

facie showing of specific jurisdiction under Sections 3104(c)(1) and (2). Because that is 

sufficient to justify the exercise of personal jurisdiction over Republic and Fenton under 

Delaware‟s long-arm statute, I need not address whether they also have met the 

requirements under Section 3104(c)(3).

Furthermore, on the present record, it appears that subjecting the Third-Party 

Defendants to personal jurisdiction in this Court would be consistent with due process. 

 

25 T-P Pls.‟ Answer Br. 27-28. 
13

The contacts the Third-Party Defendants have had with Delaware “relate to some act[s]

by which the defendant[s] ha[ve] deliberately created obligations between [themselves] 

and [this] forum” and are such that Fenton and Republic “should reasonably anticipate 

being required to defend [themselves] in Delaware‟s courts.”26 The Complaint alleges, 

for example, that Republic has received millions of dollars in interest income from the 

loans it has made to CAMI and its affiliated entities in Delaware. Thus, the Third-Party 

Plaintiffs have made a sufficient showing to defeat Republic and Fenton‟s motion to 

dismiss for lack of personal jurisdiction.

B. Collateral Estoppel

Having concluded that the Third-Party Plaintiffs have made out a prima facie case 

for personal jurisdiction, I turn to their collateral estoppel defense. Higgins and CAMI 

dispute all three elements of the collateral estoppel test. In addition, Higgins argues that, 

because he was not a party to the Related Action, he is not bound by it even if collateral 

estoppel applies to CAMI. Taking these arguments in turn, I conclude first that collateral 

estoppel bars CAMI from asserting all three of the Counts in the Complaint. Second, 

because I find that Higgins is in privity with CAMI, I conclude that he, too, is barred 

from pursuing the relief sought in the Complaint. 

 

26 Albert, 2005 WL 2130607, at *15 & n.70 (citing AeroGlobal Capital Mgmt., 871 

A.2d at 440; Int’l Shoe Co., 326 U.S. at 316).
14

1. Standard of Review

The Third-Party Defendants have moved to dismiss based on collateral estoppel 

under Rule 12(b)(6). Pursuant to Rule 12(b)(6), this Court may grant a motion to dismiss 

for failure to state a claim if a complaint does not assert sufficient facts that, if proven, 

would entitle the plaintiff to relief. “[T]he governing pleading standard in Delaware to 

survive a motion to dismiss is reasonable „conceivability.‟”27 That is, when considering 

such a motion, a court must “accept all well-pleaded factual allegations in the Complaint 

as true . . . , 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.”28 The court, however, need not “accept conclusory 

allegations unsupported by specific facts or . . . draw unreasonable inferences in favor of 

the non-moving party.”29

2. The Elements of Collateral Estoppel Are Satisfied

“Collateral estoppel, also known as issue preclusion, prevents a party who litigated 

an issue in one forum from later relitigating that issue in another forum.”30 “Collateral 

estoppel applies if: (1) the same issue is presented in both actions; (2) the issue was 

 

27 Cent. Mortg. Co. v. Morgan Stanley Mortg. Capital Hldgs. LLC, 27 A.3d 531, 537

(Del. 2011) (footnote omitted).

28 Id. at 536 (citing Savor, Inc. v. FMR Corp., 812 A.2d 894, 896-97 (Del. 2002)).

29 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)).

30 Yucaipa Am. Alliance Fund I, LP v. SBDRE LLC, 2014 WL 5509787, at *11 (Del. 

Ch. Oct. 31, 2014).
15

litigated and decided in the first action; and (3) the determination was essential to the 

prior judgment.”31 “The defendant in the second lawsuit may properly assert the defense 

of collateral estoppel to prevent the plaintiff from litigating issues that the plaintiff 

previously litigated and lost, even though the defendant himself was not a party to the 

first proceeding.”32

The Third-Party Plaintiffs contend that the “material issue raised in the 

[Complaint] is whether Republic and Fenton‟s authorizations were conflicting, 

insufficient, false or misleading when measured against their duties and obligations 

arising under the CCAA and common law.”33 By contrast, they assert that the issue 

presented in the Related Action was whether “CAMI could be held liable for conversion 

if Republic and Fenton authorized the Collateral‟s release „including removing it from the 

depository, marking it for sale, and selling it.‟”34

It is difficult to comprehend Higgins and CAMI‟s argument that the Related 

Action did not address the same issue. The decision in the Related Action includes a 

subsection that explicitly addresses the issue of “Republic‟s authorization of CAMI‟s use 

of the collateral.”35 That portion of the opinion discussed CAMI‟s assertion that 

 

31 Zutrau v. Jansing, 2014 WL 3772859, at *41 (Del. Ch. July 31, 2014), aff’d, __ 

WL __ (Del. Aug. 26, 2015).

32 Sanders v. Malik, 711 A.2d 32, 34 (Del. 1998).

33 T-P Pls.‟ Answering Br. 15.

34 Id. (quoting IDB at *20). 

35 IDB at *20.
16

“Republic authorized CAMI‟s use of the Collateral” and that its authorization constituted

a defense to IDB‟s conversion claim. In rejecting that defense, I found that the evidence 

showed that “CAMI‟s conduct . . . was not in accordance with Republic‟s previous 

authorizations for CAMI to use the Collateral to be shown at trade shows.”36 In addition, 

I held that the “Defendants [FSD and CAMI] failed to prove either that Republic 

authorized an open-ended release or relinquishment in September 2011 or that such an 

authorization and release would have complied with the Bailment Agreement.”37 

Here, CAMI and Higgins allege that they would not be liable to IDB for 

conversion or would not be liable to the same extent “had it not been for Republic and 

Fenton‟s conflicting, insufficient, false and misleading authorizations.”38 I squarely 

addressed the issue of whether Republic authorized FSD and CAMI to release the 

Collateral in the Related Action. The factual findings described above were pivotal to

my rejection of CAMI‟s “Republic consented” defense to conversion. That issue was 

litigated and decided in the Related Action; indeed, CAMI raised Republic‟s alleged 

authorizations as an affirmative defense there. In addition, those determinations were 

 

36 Id.

37 Id.

38 T-P Compl. ¶¶ 31, 34. The non-specific terms by which the Third-Party Plaintiffs 

describe the authorizations challenged in this action are repeated several times in 

the Complaint. On other occasions, the Third-Party Plaintiffs also have 

characterized the disputed authorizations as “unfounded.” T-P Compl. ¶¶ 13, 38, 

40, 41-43. All of these terms are general in nature and vague, and the lack of 

specificity makes it more difficult to analyze the Third-Party Plaintiffs‟ claims.
17

necessary to the prior ruling. Had I concluded otherwise and found that Republic‟s 

authorizations did provide an affirmative defense, CAMI might not have been found 

liable for conversion or might not have been liable in the same amount.

CAMI and Higgins argue that these determinations were not essential because the 

IDB opinion “only found that the authorizations had no place in a dispute involving rights 

derived from the Bailment Agreement and December 2009 Notice.”39 This argument 

reveals the fallacy of the Complaint‟s indemnification and contribution claims. CAMI 

and Higgins suggest that this Court must decide the parties‟ respective rights under the 

CCAAs because those rights exist independently of the Bailment Agreement. According 

to the Complaint, Republic and Fenton gave authorizations under the CCAAs and, but for 

those authorizations, Higgins and CAMI would not have been liable for conversion. But 

that argument is inconsistent with the holdings and findings I made in the Related Action.

Admittedly, the Related Action focused on the Bailment Agreement and the 

December 2009 Notice. At the conclusion of the discussion of Republic‟s consent,

however, I held: “Furthermore, and in any event, the September 2012 [sic: 2011] release 

had to be authorized by IDB, not just by Republic.”40 The opinion in the Related Action 

discussed repeatedly the fact that IDB‟s consent was required, and that Higgins, CAMI, 

and FSD all knew it was required. That is, notwithstanding the CCAAs, IDB‟s consent 

was necessary in order to release the Collateral. Absent IDB‟s consent, CAMI was liable 

 

39 T-P Pls.‟ Answering Br. 18.

40 IDB at *20.
18

for conversion regardless of whether, separately under the CCAAs, Republic or Fenton 

had authorized CAMI or FSD to release the Collateral. Nevertheless, CAMI and Higgins 

assert in this action that, but for Republic and Fenton‟s authorizations, they would not 

have been liable or would not have been liable to the same extent. This is incorrect. 

CAMI was held liable for conversion because it released the Collateral without IDB‟s 

consent. Thus, even assuming the general factual allegations in the Complaint regarding 

the authorizations are true, those authorizations are immaterial. No matter how many 

unfounded, conflicting, insufficient, false or misleading authorizations Republic and 

Fenton may or may not have issued, none of those authorizations would have changed the 

fact that IDB‟s consent was required to release the Collateral, and its consent was not 

given. I also note that the Complaint does not allege that Republic or Fenton ever 

represented to CAMI or Higgins: (1) that IDB had provided its consent; or (2) that IDB‟s 

consent was not necessary.

41

 

41 Based on the findings in the Related Action, such an allegation necessarily would 

include at least an implicit assertion that Republic or Fenton made false, 

fraudulent, or mistaken statements regarding IDB‟s consent. Under Rule 9(b), 

“[i]n all averments of fraud or mistake, the circumstances constituting fraud or 

mistake shall be stated with particularity.” Ct. Ch. R. 9(b). The Complaint, 

however, contains no such specific allegations regarding any explicit 

authorization. Indeed, the Complaint fails to meet the more relaxed pleading 

standards under Rule 8 because it fails to give the Third-Party Defendants fair 

notice of any allegation that Republic or Fenton ever expressly had advised either 

CAMI or FSD that IDB had given its consent, or that such consent was 

unnecessary.
19

a. The indemnification and contribution claims

Indemnification and contribution are derivative causes of action, in that there 

cannot be liability under these causes of action by Party C to Party B until Party B is 

found liable and pays money to Party A. In the Related Action, CAMI was found liable 

to IDB for conversion. That liability was based on a breach of the Bailment Agreement 

and the December 2009 Notice. CAMI now seeks indemnification and contribution from 

Republic and Fenton on the grounds that their authorizations—purportedly under the 

CCAAs—caused the liability. In the Related Action, however, I held that whether those 

authorizations were given or not had no effect on CAMI‟s liability. Thus, based on the 

findings in the Related Action—findings that are binding here because of collateral 

estoppel—I hold that Counts I and II of the Complaint are based upon a logically flawed 

premise and therefore are legally deficient.

In the Related Action, I held that CAMI‟s behavior exceeded Republic‟s 

authorizations. Furthermore, and more importantly, I found that IDB‟s consent was 

required before the Collateral could be released, and that Higgins, FSD, and CAMI knew 

it. CAMI‟s liability for conversion therefore was based on the failure to obtain IDB‟s

consent. Those findings have collateral estoppel effect here. Accordingly, the 

Complaint‟s indemnification and contribution counts fail to state a claim.

b. The fraud claim

The fraud claim is barred by collateral estoppel as well. According to the 

Complaint, the Third-Party Plaintiffs‟ claim for fraud also stems from the same 
20

“unfounded, insufficient, conflicting, false and misleading” authorizations given by 

Republic and Fenton.

42

 Fraud has five elements: 

(1) a false representation of material fact; (2) the defendant‟s 

knowledge of or belief as to the falsity of the representation 

or the defendant‟s reckless indifference to the truth of the 

representation; (3) the defendant‟s intent to induce the 

plaintiff to act or refrain from acting; (4) the plaintiff‟s action 

or inaction taken in justifiable reliance upon the 

representation; and (5) damages to the plaintiff as a result of 

such reliance.43

As to the first two elements, the Complaint either lacks specificity, and, therefore, 

fails to meet the pleading requirements of Rule 9(b), or the alleged authorizations are so 

general that the Third-Party Plaintiffs could not meet the justifiable reliance requirement 

in the fourth element for proving fraud. Because there does not appear to be any dispute 

that the third and fifth elements probably are satisfied, I need not discuss them further.

In terms of “a false representation of a material fact,” the Complaint only alleges 

that “Fenton‟s authorizations were statements of fact that he had the right and authority to 

authorize the release of collateral.”44 The Third-Party Plaintiffs also claim that the 

second element is satisfied because “Fenton knew or should have known that his 

authorizations were unfounded, insufficient, conflicting, false and potentially misleading 

to CAMI (as it relied upon the CCAA) because Republic and Fenton were aware of 

 

42 T-P Compl. ¶ 42.

43 CSH Theatres, LLC v. Nederlander of S.F. Assocs., 2015 WL 1839684, at *21 

(Del. Ch. Apr. 21, 2015) (internal quotations omitted).

44 T-P Compl. ¶ 37.
21

IDB‟s position that no collateral could be released without its approval . . . .”45 Viewing 

this allegation in the light most favorable to the Third-Party Plaintiffs, it might mean that 

Republic and Fenton implicitly suggested that they either: (1) had already secured IDB‟s 

authorization for the release; or (2) had concluded that their authorization was 

independently sufficient to release the Collateral. The Third-Party Plaintiffs do not allege 

anywhere in the Complaint that Fenton explicitly represented that he had secured IDB‟s 

authorization for the release or that IDB‟s authorization was unnecessary. Thus, the 

Third-Party Plaintiffs are asserting, at most, that Fenton‟s authorizations were false 

because he implied that his was the only authorization needed. Assuming that allegation 

is true, however, the question remains whether the Third-Party Plaintiffs justifiably could 

have relied on such a false representation.

On the issue of reliance, the Third-Party Defendants first assert that there is an 

open question whether there could have been any reliance on the alleged authorizations 

by CAMI and Higgins because the authorizations were given to FSD, not CAMI or

Higgins.

46

 This argument is unpersuasive because I held in the Related Action that FSD 

had a close relationship to CAMI, and that Higgins controlled the actions of both FSD 

and CAMI.

47

 

45 T-P Compl. ¶ 38.

46 T-P Defs.‟ Opening Br. 32.

47 IDB at *2, *19. 
22

Even assuming that CAMI and Higgins could prove reliance, however, they 

cannot show justifiable reliance. In the Related Action, I concluded from the evidence 

presented that the “most reasonable inference” was that “FSD received the December 

2009 Notice and that it was shown to at least Higgins. . . . The December 2009 Notice 

and the Bailment Agreement, therefore, limited FSD‟s ability to release the Collateral 

absent IDB‟s consent.”48 This finding was bolstered by an earlier finding that, on at least 

one occasion, FSD had conformed its conduct to the requirement of needing IDB‟s 

consent to release the Collateral.49 I also found that “the evidence show[ed] that Higgins 

controlled the actions of both FSD and CAMI as they relate[d] to the Collateral at all 

relevant times . . . .”50 Furthermore, these findings were necessary to my conclusion that 

CAMI had converted IDB‟s property. 

Based on the factual findings in the Related Action, CAMI and FSD needed IDB‟s 

consent to release the Collateral. Here, I conclude as a matter of law that it was not 

reasonable or justifiable for CAMI or Higgins to rely on Republic and Fenton‟s 

authorizations, even if they assumed those authorizations meant Republic and Fenton 

considered theirs to be the only authorization necessary, because CAMI and Higgins

 

48 IDB at *14.

49 Id. at *5.

50 Id. at *19.
23

knew that such authorizations were insufficient without IDB‟s permission.51 Thus, the 

fraud claim also is barred by collateral estoppel.

3. Higgins is in Privity with CAMI

The above holdings apply to CAMI because it was a party in the Related Action. I 

conclude that Higgins is in privity with CAMI and that the same holdings apply to him. 

Therefore, Higgins‟s claims are barred by collateral estoppel as well.

As noted, collateral estoppel can be applied against a plaintiff even though the 

defendant was not a party to the original action.52 In this instance, there is an additional 

twist in that Fenton and Republic, non-parties to the Related Action, seek to prevent 

Higgins, a non-party to the Related Action, from relitigating issues that CAMI litigated 

there. In these circumstances, the question is whether Higgins is barred by collateral 

estoppel from re-litigating those issues, and that depends upon whether Higgins is in 

privity with CAMI such that it is fair and equitable to bind him to the determinations in 

the Related Actions.

The relevant case law strongly supports the conclusion that Higgins was in privity 

with CAMI for purposes of issue preclusion.

53

 

 

51 See Ward v. Hildebrand, 1996 WL 422336, at *4 (Del. Ch. July 8, 1996) (“[T]he 

recipient of a fraudulent misrepresentation is not justified in relying upon its truth 

if he knows that it is false or if its falsity is obvious to him.”). 

52 Sanders, 711 A.2d at 34.

53 Indeed, the same facts and arguments support a conclusion that Higgins also is in 

privity with FSD, the other defendant in the Related Action.
24

Privity is a legal determination for the trial court with regard 

to whether the relationship between the parties is sufficiently 

close to support preclusion. . . . The term privity signifies that 

the relationship between two or more persons is such that a 

judgment involving one of them may justly be conclusive on 

the others, although those others were not party to the 

lawsuit.54

A recent case by Vice Chancellor Noble, Grunstein v. Silva,

55 addressed the issue of 

privity at some length. There, the Court surveyed the case law and concluded that the 

simplest “test for privity is whether there is a close or significant relationship” between 

the relevant entities or persons.56 Important factors in making the privity determination 

include “whether their interests were aligned,” whether it would be just that the finding 

would be conclusive on the non-party, and whether there is substantial identity between 

otherwise superficially separate parties.57

Other cases suggest that privity practically is assumed for sole-owner 

corporations. In Orange Bowl Corp. v. Jones,

58 the Superior Court found a wholly 

owned corporation in privity with the individual defendants.59 In that case, the individual 

 

54 Higgins v. Walls, 901 A.2d 122, 138 (Del. Super. 2005) (footnotes omitted) 

(quoting 18 JAMES WM. MOORE ET AL., MOORE‟S FEDERAL PRACTICE

132.04[1][b] (3d ed. 2004) (quotation marks omitted)).

55 2014 WL 4473641 (Del. Ch. Sept. 5, 2014).

56 Id. at *42.

57 Id. (citing Orloff v. Shulman, 2005 WL 3272355, at *5 (Del. Ch. Nov. 23, 2005)).

58 1986 WL 13095 (Del. Super. Oct. 16, 1986).

59 Id. at *3 (citing In re Gottheiner, 703 F.2d 1136, 1139 (9th Cir. 1983); Martino v. 

McDonald’s Sys., Inc., 598 F.2d 1079, 1083 n.7 (7th Cir. 1979)).
25

defendants, who were family members, owned all of the shares of the corporation, acted 

as its directors and officers, and exercised control over its day-to-day affairs. The Court 

accordingly concluded that there was “no factual or legal dispute that a sufficient 

commonality of interest exists between the [individual defendants] and [the corporation] 

for the bar of collateral estoppel to apply.”60

Here, Higgins is “CAMI‟s president and sole stockholder.”61 The evidence in the 

Related Action supported the conclusion that he controlled both CAMI and FSD. His 

interests were aligned with the interests of those entities. Indeed, in the Related Action, I 

found that “FSD engaged in a corporate shell game whereby Higgins, as the common 

owner of FSD and CAMI, abused the corporate form to avoid the technical requirements 

of the Bailment Agreement and the other relevant agreements.”62 Because Higgins 

controlled CAMI and had a strong, if not complete, commonality of interest with CAMI, 

there is nothing remotely unjust about making the factual findings in the Related Action

applicable to him, as well as CAMI. Accordingly, based on the findings in the Related 

Action and the factors considered by Delaware courts in determining whether privity 

exists, I conclude that Higgins is in privity with CAMI. Collateral estoppel, therefore, 

 

60 Id. at *3 n.1; see also Restatement (Second) of Judgments § 59(3) (1982) (“If the 

corporation is closely held, in that one or a few persons hold substantially the 

entire ownership in it, the judgment in an action by or against the corporation or 

the holder of ownership in it is conclusive upon the other of them as to issues 

determined therein . . . .”).

61 IDB at *2.

62 Id. at *15.
26

applies to Higgins as well, and prevents him from relitigating the issues decided in the 

Related Action.

III. CONCLUSION

For the reasons stated in this Memorandum Opinion, I deny the Third-Party 

Defendants‟ motion to dismiss the Complaint under Rule 12(b)(2) for lack of personal 

jurisdiction over them. I grant the motion to dismiss under Rules 9(b) and 12(b)(6) on 

the ground that all of the Counts in the Complaint are barred by collateral estoppel,

63 and 

therefore dismiss the Complaint with prejudice.64 Each party shall bear its own 

attorneys‟ fees and expenses.

IT IS SO ORDERED.

 

63 Higgins and CAMI have suggested that there is a fourth element to collateral 

estoppel, to wit: whether the party against whom the doctrine is asserted had a 

“„full and fair opportunity to litigate the issue in the prior action.‟” Betts v. 

Townsends, Inc., 765 A.2d 531, 535 (Del. 2000) (quoting State v. Machin, 642 

A.2d 1235, 1239 (Del. Super. 1993)). Even assuming such a fourth element does 

exist, it does not alter my analysis. CAMI and FSD, both of which are wholly 

owned and controlled by Higgins, furiously litigated the Related Action. In 

addition, FSD asserted at least six defenses to the breach of contract claim, and 

CAMI asserted at least five defenses to the conversion count and contested many 

of the underlying elements of IDB‟s claims. Finally, although he was not a party 

to the Related Action, Higgins directly participated in the litigation by 

“provid[ing] almost nine hours of deposition testimony.” IDB at *30. Thus, I 

conclude that CAMI and, by association, Higgins, did have a full and fair 

opportunity to litigate the relevant findings in the Related Action.

64 Based on my ruling as to collateral estoppel, I have not addressed the other 

grounds advanced for dismissal under Rule 12(b)(6).