IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

ROBERT W. SEIDEN ESQ. in his capacity :

as Receiver for Southern China Livestock, Inc., :

:

Plaintiff, :

:

v. : C.A. No. 9861-VCS

:

SHU KANEKO a/k/a JOSEPH KANEKO, :

LIQIANG SONG a/k/a LIQUANG SONG :

a/k/a LI SONG a/k/a SONG LIQIANG :

a/k/a LI QIANG SONG a/k/a RICHARD LEE, :

:

Defendants. :

MEMORANDUM OPINION

Date Submitted: February 13, 2017

Date Decided: March 22, 2017

Jonathan M. Stemerman, Esquire of Elliott Greenleaf, P.C., Wilmington, Delaware 

and Douglas E. Spelfogel, Esquire and Katherine R. Catanese, Esquire of Foley & 

Lardner LLP, New York, New York, Attorneys for Plaintiff.

Andrew D. Cordo, Esquire and Toni-Ann Platia, Esquire of Ashby & Geddes, 

Wilmington, Delaware and Adrienne M. Ward, Esquire and John B. Horgan, Esquire 

of Ellenoff Grossman & Schole LLP, New York, New York, Attorneys for 

Defendants.

SLIGHTS, Vice Chancellor

EFiled: Mar 22 2017 02:36PM EDT 

Transaction ID 60372889

Case No. 9861-VCS
1

After accepting a capital infusion from United States-based investors through 

a private placement, Southern China Livestock, Inc. (“SCLI” or “the Company”), a 

Delaware holding company that owned a non-public, China-based operating 

company, “went dark” leaving its investors scrambling to recover their money. 

Unfortunately, this is a scenario that has been played out all too frequently in this 

court. In this case, the investors tracked down the Company’s former President, Shu 

Kaneko, here in the United States. A receiver was appointed for the Company and 

the receiver initiated this action against Kaneko and others to recover, inter alia, 

amounts that Kaneko allegedly diverted from Company accounts. 

According to Kaneko, after he resigned from the Company but prior to the 

initiation of this litigation, the Company gave him a general release of claims (the 

“Release”) in exchange for his commitment to assist the Company in taking certain 

steps to firm up its capital structure in anticipation of a potential sale of the Company

to a private equity firm. Kaneko has moved for summary judgment, inter alia, on 

the ground that the receiver’s claims are barred by the Release. In response, the 

receiver argues that the release fails for lack of consideration. After carefully 

considering the undisputed evidence in the record, I am satisfied that the Release is 

binding and enforceable and that it releases Kaneko from all claims asserted against 

him in this litigation. Accordingly, Kaneko’s motion for summary judgment must 

be GRANTED. Kaneko’s counterclaim for indemnification under 8 Del. C. §145(c) 
2

is STAYED. His request for fee shifting is DENIED. A determination of Kaneko’s 

entitlement to mandatory indemnification for his fees and expenses will await a final, 

non-appealable judgment. 

I. BACKGROUND

The summary judgment record is extensive; it is comprised of deposition 

testimony and exhibits presented by both parties. For purposes of this Memorandum 

Opinion, I have focused on the facts relevant to the dispute concerning the validity

of the Release.1

A. The Parties and Relevant Non-Parties

Robert W. Seiden, Esq. (the “Receiver”) was appointed as receiver over SCLI 

by order of this Court dated January 17, 2014, following the entry of a default 

judgment and subsequent contempt citation against SCLI in consolidated 

Section 220 actions. Defendant, Shu Kaneko, a resident of California, was 

previously President, Treasurer, Director, Secretary, and Chief Financial Officer of 

Southern China Livestock International, Inc. (“SCL International”) and the 

President, Treasurer, Director of Business Development and Secretary of SCLI. 

 

1 The Court provided an extensive discussion of the background of this dispute in its 

decision on Kaneko’s motion to dismiss. Seiden v. Kaneko, 2015 WL 7289338 (Del. Ch. 

Nov. 3, 2015). 
3

SCLI, formerly known as Expedite 4, Inc., is a Delaware corporation that 

wholly owns SCL International. SCL International, in turn, is the holding company 

for Beijing Huaxin Tianying Livestock Technology, Limited, which holds the equity 

interests of its operating subsidiary, Jiangxi Yingtan Huaxin Livestock Limited. At 

all relevant times, these entities were engaged in various capacities in the business 

of breeding, raising and selling live hogs in the People’s Republic of China. 

B. The Company Seeks to Recover Lost Shares

In 2012, the Company entered in a Business Services Agreement with HF 

Capital Advisors, LLC (“HF Capital”) (defined in the agreement as “the Agent”). 

HF Capital is controlled by Alan Lewis. It performs advisory services for clients 

Lewis served through his employment with Hickey Freihofner, a division of Brill 

Securities.2 Lewis had been previously engaged by the Company through Hickey 

Freihofner when the Company was looking to mitigate the financial consequences 

of its failure to consummate an initial public offering. His charge then was to solicit 

a private equity buyer for the interests of the Company’s U.S. shareholders or, 

alternatively, to help the company become listed on a foreign stock exchange.3 That 

engagement was ultimately unsuccessful. In 2012, hope sprang anew when the 

 

2 Aff. of Adrienne M. Ward in Supp. of Def. Shu Kaneko’s Mot. for Summ. J. (“Ward 

Aff.”) Ex. 32 (“Lewis Dep.”) 47:10–48:14. 

3 Lewis Dep. 21:19–22:25. 
4

Company contacted Lewis again to assist in the Company’s renewed efforts to 

provide an exit for its U.S investors. The Company had been approached by two 

separate China-based private equity firms that were interested in making a sizeable 

investment and then taking SCLI public on the Chinese Main Board exchange.4 

Lewis was interested in the business opportunity the Company was proposing, 

particularly because his prior contingent fee arrangement with the Company had not 

paid off. He was told that the focus of the engagement would be to address concerns 

raised by the potential private equity investors that the Company needed “to fix [its]

structure with respect to . . . the [so-called] ‘management shares’ that were tied up 

in a ‘Slow Walk Offshore Structure.’”5 Lewis offered to assist the Company in 

securing the return of the management shares (at times referred to by the parties as 

the “Song Held Shares”) in hopes that he might be given the opportunity to serve as 

a broker-dealer on the capital raise from the two private equity firms.

6

 

4 Lewis Dep. 43:17–44:2. 

5 Lewis Dep. 44:8–16. The management shares represented 90% of the shares issued in 

the reverse merger transaction between SCLI and SCL International, which were to be held 

by Liquang Song pursuant to a lockup agreement. Song agreed to hold the shares because 

the Chinese stockholders could not acquire them directly due to certain Chinese laws and 

regulations by the State Administration of the Foreign Exchange. The stockholders, 

therefore, entered into earn-in agreements with Song which gave them the option to 

purchase the shares from Song for nominal consideration subject to the fulfillment of 

certain conditions. Ward Aff. Ex. 6 at 36. 

6 Lewis Dep. 45:22–46:3. 
5

Once engaged by SCLI, Lewis reached out to Kaneko to see if he might assist 

in securing the return of the management shares.

7

 During the course of their initial 

discussion, Kaneko made clear to Lewis that he had done nothing wrong and owed 

the Company nothing.8 Nevertheless, according to Lewis, Kaneko appeared “eager 

to cooperate and help clear his name.”9 After the call, Kaneko made contact with 

the various parties who held the management shares in order to secure their 

signatures on the paperwork the Company needed to secure the lost shares.10 

When Lewis and Kaneko spoke again, Kaneko advised Lewis that “because 

[the shareholders] knew that various parties, including the company, were alleging 

that they had—that Shu in particular, had misappropriated funds, they all requested 

a liability waiver. . . .”

11

 In response, Lewis directed Darren Ofsink, an attorney who 

had been retained by the Company to handle the legal issues associated with the 

return of the management shares, to “begin preparing the paperwork for the transfer 

of the shares and the liability waiver in connection with that.”12 

 

7 Lewis Dep. 63:12–65:4; Ward Aff. Ex. 31 (“Kaneko Dep.”) 346:13–20.

8 Lewis Dep. 70:17–71:1. 

9 Lewis Dep. 71:2–11.

10 Lewis Dep. 71:13–19. 

11 Lewis Dep. 72:11–18. 

12 Lewis Dep. 72:21–23. 
6

The agreements—both the signed Release and the signed agreements from the 

shareholders evidencing the transfer of the shares back to the Company—were held 

in escrow by Ofsink and then released once all signed agreements had been 

obtained.13 The board of directors of SCLI executed a written consent five months 

later in July 2013 resolving that “it is in the best interest of the Company to enter 

into the Settlement Agreement, the Kaneko Agreement, the Escrow Agreement and 

the Business Services Agreement . . . and each of the Agreements be, and hereby is, 

approved, ratified, and confirmed in all respects . . .”14

C. Procedural History 

The Receiver filed the original complaint in this action on July 7, 2014, almost 

one year after the Company had signed the Release. He filed the First Amended 

Complaint (“FAC”) on December 19, 2014, in which he asserted seventeen causes 

of action against Kaneko and others including, inter alia, breach of fiduciary duty, 

aiding and abetting breach of fiduciary duty, conversion, fraudulent transfer, unjust 

enrichment and corporate waste. On January 30, 2015, Kaneko filed a motion to 

dismiss the FAC. That motion was granted in part and denied in part in the Court’s 

Memorandum Opinion and Order dated November 3, 2015. Kaneko answered the 

 

13 Lewis Dep. 74:14–75:2. 

14 Ward Aff. Ex. 27
7

FAC on November 18, 2015, and asserted a Verified Third Party Claim against SCLI 

for indemnification pursuant to 8 Del. C. §145(c). Kaneko has now moved for 

summary judgment. 

II. LEGAL ANALYSIS

“The function of summary judgment is the avoidance of a useless trial where 

there is no genuine issue as to any material fact.”15“[T]he moving party initially 

bears the burden of showing that [no material issues of fact] are present.”16 If the 

“motion [] is ‘supported’ by such a showing, then the burden shifts to the nonmoving party to demonstrate that there are material issues of fact.”17

 The court must 

view the evidence most favorably to the non-moving party, but may not look to the 

allegations or denials in the pleadings when determining whether a material issue of 

fact remains for trial.18 Any such determination must be made from competent 

evidence in the summary judgment record.19 

 

15 Emmert v. Prade, 711 A.2d 1217, 1219 (Del. Ch. 1997).

16 Moore v. Sizemore, 405 A.2d 679, 680 (Del. 1979). 

17 Id. at 681 (internal citation omitted). 

18 Fike v. Ruger, 754 A.2d 254, 260 (Del. Ch. 1999), aff’d, 752 A.2d 112 (Del. 2000).

19 Id.
8

A. The Release 

Delaware law recognizes that general releases serve as an “important tool for 

settling disputes precisely because they are designed to provide complete peace.”20 

“[A]n effective release terminates the rights of the party executing and delivering 

the release and . . . is a bar to recovery on the claim released.”21 “When determining 

whether a release covers a claim, ‘the intent of the parties as to its scope and effect 

are controlling, and the court will attempt to ascertain their intent from the overall 

language of the document.’”22 “Delaware courts recognize the validity of general 

releases,”23 and acknowledge that the standard language of such releases is 

“intended to cover everything—what the parties presently have in mind, as well as 

what they do not have in mind.”24“If [a subsequent] claim falls within the plain 

 

20

 Seven Invs. LLC v. AD Captial LLC, 32 A.3d 391, 397 (Del. Ch. 2011). 

21 Id. at 396 (quoting Hicks v. Soroka, 188 A.2d 133, 138 (Del. Super. Ct. 1963)). 

22 Id. See also Adams v. Jankouskas, 452 A.2d 148, 155–156 (Del. 1982) (where “the 

language of the release is clear and unambiguous, it will not lightly be set aside.”) (internal 

citations omitted). 

22 Riverbend Cmty., LLC v. Green Stone Eng’g LLC, 2012 WL 1409013, at *6 (Del. Super. 

Ct. Apr. 4), aff’d, 55 A.3d 330 (Del. 2012).

23 Deuly v. DynCorp Int’l, Inc., 8 A.3d 1156, 1163 (Del. 2010), cert denied, 563 U.S. 938 

(2011).

24 Corp. Prop. Assocs. 6 v. Hallwood Gp., Inc., 817 A.2d 777, 779 (Del. 2003) (quoting 

Adams, 452 A.2d at 156 (Del. 1982)). 
9

language of [a] release, then the claim should be dismissed.”25 The only 

circumstances in which a release would be set aside are “fraud, duress, coercion, or 

mutual mistake. . . .”

26

 And “the party seeking to nullify the release bears the burden 

of demonstrating by clear and convincing evidence that the release is invalid.”27

If the Release is valid and applies to the conduct alleged in the FAC, then any 

factual disputes that may exist regarding Kaneko’s conduct are irrelevant because 

the claims would be barred as a matter of law. I address the release issue in two 

parts: (1) does the language of the Release bar the Receiver’s claims?; and, if so 

(2) is the Release supported by adequate consideration and otherwise valid and 

binding upon the parties? 

1. The Scope of the General Release

The Release contains a mutual release of liability for both the Company and 

Kaneko. In releasing Kaneko, the Company represented, inter alia, that it:

hereby forever releases and discharges each Shu Release Party (defined 

to include Kaneko) from all actions, any causes of action, suits, dues, 

sums of money, accounts, reckonings, bonds, bills, specialties, 

covenants, contracts, controversies, agreements, promises, variances, 

trespasses, damages, judgments, extents, executions, claims, and 

demands whatsoever, in law, admiralty or equity, which against any 

Shu Release Party, any Company Release Party ever had, now have or 

hereafter can, shall or may, have for, upon, or by reason of any matters, 

 

25 Id. 

26 Riverbend Cmty., LLC, 2012 WL 1409013, at *6.

27 Id.
10

cause or thing whatsoever from the beginning of the world to the day 

of the date of this Agreement.28

This is standard general release language. It reflects the Company’s intent to 

release all accrued claims the Company may have had against Kaneko sounding in 

law or in equity.29 Kaneko gave identical covenants in favor of the Company. I 

need not parse through this language because, on its face, it clearly and

unambiguously captures the alleged wrongdoing contained in the FAC. 

2. The General Release Is Valid 

Before considering whether any material factual disputes exist concerning the 

validity of the Release, I must first address the Receiver’s argument that this Court 

has already determined that the Release is invalid for lack of consideration when 

ruling on Kaneko’s motion to dismiss. The Receiver is wrong. In its decision on 

the motion to dismiss, the Court made clear that it was drawing all reasonable 

inferences that logically flow from the well-pled facts in the plaintiff’s favor, as it is 

required to do on a Rule 12(b)(6) motion.30 In opposing the motion to dismiss, the 

Receiver pointed to his complaint and argued that because the Song Held Shares 

 

28 Ward Aff. Ex 26. 

29 Seven Invs, 32 A.3d at 397 (“[General releases] are an important tool for settling disputes 

precisely because they are designed to provide ‘complete peace.’”) (quoting In re Phila.

Stock Exch., Inc., 945 A.2d 1123, 1137 (Del. 2008)). 

30 Cent. Mortg. Co. v. Morgan Stanley Mortg. Capital Hldgs. LLC, 27 A.3d 531, 536 (Del. 

2011). 
11

were not permitted to be transferred under a lockup agreement, SCLI was already 

entitled to a return of those shares and therefore their return to the Company did not 

constitute consideration to support the Release. Kaneko argued in response that the 

Company approached him with the idea of the Release and that it would not have 

done so if it saw no value in what it was seeking in return. On this point, Vice 

Chancellor Noble concluded that “[p]laintiff’s allegations regarding Kaneko’s 

extended control over SCLI and SCL International, however, cast doubt on this 

reasoning and, with all reasonable inferences drawn in Plaintiff’s favor, suggest that 

the Company may have offered this deal intending to insulate Kaneko from liability 

for his alleged fraudulent scheme . . .”31 

Because Vice Chancellor Noble did not make definitive findings of fact on 

the motion to dismiss, but appropriately accepted all well-pled facts as true and drew 

all reasonable inferences in the Receiver’s favor, his conclusion regarding the lack 

of consideration for the Release cannot be the law of the case. While it is 

“established that a trial court’s previous decision in a case will form the law of the 

case for the issue decided,” our Supreme Court has explained that the doctrine only 

applies “provided the facts underlying the ruling do not change.”32 In this instance, 

 

31 Seiden, 2015 WL 7289338, at *6 (emphasis added). 

32 State v. Wright, 131 A.3d 310, 321–22 (Del. 2016).
12

the law of the case doctrine is inapplicable not because the facts have changed, but 

because the underlying facts were never conclusively determined. 

Turning to the merits, the Receiver raises three grounds upon which the Court 

can disregard the claim preclusive effects of the Release, each of which, according 

to the Receiver, implicate disputed issues of material fact: (a) the Release should be 

disregarded because Kaneko’s control over SCLI prevented SCLI from entering into 

an arm-length agreement with him; (b) the Release was not supported by valid 

consideration; and (c) Lewis lacked authority to enter into the Release on behalf of 

the Company. Having now thoroughly reviewed the evidentiary record, I am 

satisfied that no such material factual disputes exist and that the Receiver’s 

arguments with respect to the Release fail as a matter of law. 

a. No Evidence That Kaneko Controlled SCLI at the Time of the 

Release 

 The Receiver argues that the extent to which Kaneko exercised control over 

SLCI is a contested issue of fact that precludes summary judgment. The record 

reveals no such dispute. While the Receiver has pointed to evidence that Kaneko

may have exercised some control of the Company’s bank accounts while serving as 

CFO, and perhaps for some time after he left that position in 2010, the Receiver has 

failed to identify any evidence that Kaneko exercised any control over the Company 

(and particularly its board of directors) at the time Lewis negotiated and the 

Company entered into the Release in 2013. In fact, the Receiver admits as much 
13

when it argues that “Kaneko is contorting the facts showing he had control well into 

March, 2012.”33 The Receiver’s evidence of Kaneko’s purported control, even if 

present in the record, stops approximately ten months short of the relevant time 

frame. 

In what can fairly be characterized as a Hail Mary, the Receiver argues that 

an issue of material fact concerning Kaneko’s control at the time of the Release 

exists because “[a]t the time the Release was signed, Kaneko was the only one who 

could facilitate the return of the Song Held Shares, supporting that he maintained 

control, either directly or indirectly, even after he no longer worked directly for 

SCLI, and was an officer of Yu Shu Mei, one of the entities that held the Song Held 

Shares.”34 This logic is hard to follow. The fact that Kaneko was positioned to 

secure the return of the Song Held shares, the very consideration he brought to the 

bargain, is hardly evidence that he controlled the Company, directly or indirectly, at 

the time of the Release. 

b. The Release Is Legally Valid 

The Receiver’s next argument is that disputed issues of material fact exist 

concerning whether the Release was supported by consideration and otherwise 

 

33 Answering Br. of Pl. in Opp’n to Def.’s Mot. for Summ. J. (“Answering Br.”) 22.

34 Answering Br. 20.
14

enforceable. “It is the blackest of black-letter law that an enforceable contract 

requires an offer, acceptance, and consideration.”35 As our Supreme Court has 

explained, “it is well settled that consideration for a contract can consist of either a 

benefit to the promiser or a detriment to the promisee.”36 

The Receiver raises several arguments to convince the Court that disputed 

issues of material fact exist for trial concerning both the facial validity of the Release 

and the adequacy of the consideration supporting the Release. None is persuasive. 

First, the Receiver lists several markers that suggest the Release is facially 

invalid, including that the Release lacks the Company “Chop,” that it was not 

translated into Chinese (the native language of the Company’s CEO), that Lewis was 

conflicted because his compensation (approximately $110,000) was tied to the return 

of the Song Held Shares, that Lewis did not tell the investors about the Release and

that the Company’s CEO was not included on the email chain between Lewis and 

Kaneko when they discussed the Release. None of these observations, either alone 

or together, provides any basis to invalidate the Release. 

While the record reflects that in China a company’s “chop” (seal) acts as a 

signature, the record also reveals that SCLI and other Chinese companies do not 

 

35 James J. Gory Mech. Contracting, Inc. v. BPG Residential P’rs V, LLC, 2011 

WL 6935279, at *2 (Del. Ch. Dec. 30, 2011) (internal citation omitted). 

36 First Mortg. Co. of Pa. v. Fed. Leasing Corp., 456 A.2d 794, 795–96 (Del. 1982) (citing 

Affiliated Enters. v. Waller, 5 A.2d 257 (Del. 1937)). 
15

always affix the corporate seal to all corporate documents. As Lewis explained, 

“sometimes the companies in China use chop; sometimes they don’t.”37 As for the 

translation issue, while the record suggests that the Release was not translated into 

Chinese,38 the Receiver has pointed to nothing—no testimony, no legal authority—

that suggests that the lack of translation will affect that validity of the Release. As 

discussed below, the fact that the full board of directors of SCLI, including the CEO, 

subsequently ratified the Release is powerful, undisputed evidence that the Company 

knew what it had agreed to.

39

 With regard to the argument that Lewis had a conflict 

of interest because he was compensated, the Receiver has failed to explain how the 

fact that the Company agreed to compensate Lewis if he was successful in securing 

the lost shares supports an argument that Lewis was conflicted or lacked authority 

to do what the Company expressly engaged him to do. Finally, the Receiver has 

failed to articulate how the validity of the Release depends in any way upon Lewis 

copying the Company’s CEO on email correspondence or the Company discussing 

 

37 Lewis Dep. 167:10–11.

38 Lewis Dep. 165:23–166:4 (Q. “Also would you agree that the release agreement—the 

settlement and release agreement signed by Kaneko and by Pan was not translated into 

Chinese, correct?” A. “I’m not aware of either way. I don’t know whether Meng orally or 

in writing translated that for them.”).

39 Lewis Dep. 85:16–19 (Q. “And so—and at the time that you e-mailed Mr. Kaneko, the 

concept of entering into a settlement agreement had already been approved by the 

company?” A. “Yeah, uh-huh.”); Ward Aff. Ex. 27
16

the document with the investors. The board of directors was empowered to manage 

the Company and the undisputed evidence clearly demonstrates that the board was 

aware of and ultimately approved of the Release.40 The Receiver has not presented 

any evidence to the contrary.

The Receiver’s attempts to gin up issues of fact relating to the adequacy of 

the consideration supporting the Release fare no better.41 First, the Receiver argues 

that the Release is unsupported by consideration on its face because “there is no 

enforceable provision that states that Kaneko facilitating the return of the Song Held 

Shares was the consideration for SCLI releasing its valuable claims against 

Kaneko . . .”42 This, of course, assumes that parties to a contract must explicitly 

detail the precise consideration they are exchanging. The law makes no such 

 

40 This argument also completely ignores the fact that the only investor deposed in the case

acknowledged that he was not challenging the Company’s decision to offer Kaneko the 

Release and had no reaction upon learning of it. Ward Aff. Ex. 33 (“Hinds Dep.”) 151:18–

152:8. 

41 To be sure, whether a contract is supported by adequate consideration is a mixed question 

of law and fact. Wilm. Hospitality, LLC v. New Castle Cnty., 2007 WL 1248513 (Del. 

Super. Ct. Apr. 26, 2007) (finding that a factual dispute existed as to whether a prohibition 

contained in a contract was a pre-existing duty or consideration and therefore summary 

judgment was inappropriate). In this case, however, the Receiver has advanced neither a 

valid legal argument nor disputed issues of material fact that would support his contention 

that the Release fails for lack of consideration.

42 Answering Br. 42. 
17

requirement.43 Moreover, the undisputed evidence makes clear that everyone 

involved in the negotiation and execution of the Release understood the overarching 

purpose for the Release and the specifics of what each party was giving and getting.

44

 

Next, the Receiver argues that any consideration given to support the Release 

might in fact be “past consideration.”

45

 Nothing in the Release supports this 

supposition.46 Moreover, the testimony in the record reveals that both parties held 

their signed copies of the Release in escrow until all mutual covenants were fully 

 

43 Equitable Trust Co. v. Gallagher, 99 A.2d 490, 492–93 (Del. 1953) (“[C]onsideration is 

to be detected if it is present anywhere in the transaction in question, regardless of whether 

any label was put on it, and regardless of whether it was spelled out in the paper-writing”). 

44 Ward Aff. Ex 24 (January 5, 2013 email from Lewis to Kaneko in which Lewis says 

“I’ve talked to the company and management seems open to offering you both a full 

liability waiver and drop the lawsuit re: the misplaced company funds so that you can move 

on with your life, in exchange for your cooperation in turning over the management shares 

that you/Liqiang hold in trust, along with the consultant shares held by Shing Wing 

Development, Yu Shumei, Gao Suhua and Alexandria Captial. More than anything, I 

believe the company owners really just want to collapse their offshore US structure and go 

back to being pig farmers in China without the headache of dealing with demanding US 

investors.”). 

45 Answering Br. 43 (“Further, while Kaneko argues that he had no obligation to assist in 

returning the shares, the Release unequivocally states that Kaneko had already provided 

the facilitation of the return of the Song Held Shares prior to the Release being entered 

into . . . . [t]his is further supported because the so called board vote to approve the Release 

occurred over five months after the Release was entered into . . .”). 

46 This argument also ignores the fact that the Company and Kaneko entered into a mutual 

release within the Release itself. This mutual release of all claims would itself be sufficient 

to constitute adequate consideration. Fuller v. Gemini Ventures, LLC, 2006 WL 2811708, 

at *4 (Del. Super. Ct. Oct. 2, 2006) (“The Release recites mutual promises and agreement 

which support consideration for a valid release.”). 
18

performed, a fact that reveals the parties’ belief that their performance obligations 

were ongoing and not yet satisfied.

47

 The consideration was very much “present” 

consideration. 

In a final attempt to raise a disputed issue of material fact concerning 

consideration, the Receiver says that a dispute exists with regard to whether SCLI 

received something more than it was already entitled to receive. Essentially, the

Receiver says that the Song Held Shares never should have been transferred in the 

first place and that SCLI was already entitled to them at the time of the Release. 

While the Receiver may well be correct that the Song Held Shares should not have 

been transferred, the fact remains that the Company did not, in fact, have the shares 

when it needed them to begin serious negotiations with the private equity company

that was potentially willing to provide an exit for the US investors.

48

 Kaneko was 

 

47 Lewis Dep. 74:14–75:2 (“And then Shu—Shu wanted to make sure that he had the 

company’s signature on the liability waiver in connection with—you know, before 

tendering—you know, getting all the shares, and so we had those escrowed with Darren, 

you know, the signatures, and both parties signed, and that transaction was done in that 

sense.” Q. “And so if I understand correctly, the company signed the documents before 

you had obtained the signature from Mr. Kaneko, and those signed pages were being held 

in escrow by Darren Ofsink?” A. “I can’t remember who signed first, but both parties were 

okay with giving them into escrow with Darren.”). 

48 Lewis Dep. 168:8–10 (“[T]he U.S. investors were very upset with being stranded, so to 

speak, without liquidity . . .”); see also Hinds Dep. 87:9–15 (“He [Lewis] wanted to 

reengage with the company to try to find a buyer, and we were trying to figure a way to do 

that because it seemed to me at the time that was the only way that we were – as investors 

in this company, was the only way that we were going to be able to get any cash out or 

return of cash on our investment.”). 
19

the person best positioned to help retrieve the shares so that the Company could 

pursue this transaction.

49

 Given these facts, there can be no bona fide dispute that 

the Company considered the return of the Song Held Shares to be valuable 

consideration.50 The fact that the transaction did not ultimately close subsequent to 

the return of the Song Held Shares provides no basis to mount an after-the-fact attack 

on the adequacy of the Release’s consideration.

c. Lewis Was Authorized to Negotiate and Sign the Release

The Receiver’s final ground collaterally to attack the Release is that a material 

factual dispute exists with respect to whether Lewis had the proper authority to 

negotiate the Release on behalf of the Company. This argument can be disposed of 

summarily. First, the record shows that Lewis entered into a business services 

agreement with the Company in which the parties agreed that Lewis would “obtain 

the assignment, conveyance, cancellation or similar transfer of the Company 

4,386,438 shares held by Shu Mei Yu, Ltd. (the “Management Shares”) and 

(iii) obtain the assignment, conveyance, cancellation or similar transfer of as many 

Company shares held by the four consultants as possible (the “Consultant 

 

49 Kaneko Dep. 361:2–8 (Q. “So how come you, of all people in the whole world, were 

somebody that [Lewis] reached out to, to try and get these shares back?” A. “Oh, because 

I had a relationship, I know people who needs [sic] to sign, stuff like that.”). 

50 See, e.g. Lewis Dep. 84:19–23 (“[T]he company was very embarrassed and concerned 

and just frightened by all this. They had received you know, lawsuit threats from U.S. 

investors, such as Will Hector, and they were frustrated that things hadn’t worked out . . .”). 
20

Shares”).”51 While the business services agreement did not define the specific steps

Lewis was authorized to take to achieve that goal, the undisputed evidence in the

record demonstrates that the Release was approved by the Company prior to its 

execution.

52

 Lewis presented the idea to the Company and then explained the 

reasons the Company should consider pursuing this course with Kaneko to ensure 

the return of the lost shares.53 Thereafter, the full board of directors of SCLI ratified 

 

51 Ward Aff. Ex 21. 

52 Lewis Dep. 85:2–85:19 (A. “[T]here was a lot of disagreement about, ‘Do we sue to 

show the investors’—and this is per Meng Qinghuan—‘Do we sue to show the investors 

that we’re trying to recover funds, or do we try go this route of recovering the shares and 

trying to raise capital through the PRC firms?’ So there were some big debates. And I told 

him, you know, in order for me to get the shares back, that they would have to wait to sue 

and this if they were to sign a liability waiver, then they wouldn’t have the ability to sue.” 

Q. “Okay. And do you believe that Meng understood that concept?” A. “Yeah.” Q. “And 

so—at the time you e-mailed Mr. Kaneko, the concept of entering into a settlement 

agreement had already been approved by the company?” A. “Yeah, uh-huh.”).

53 Lewis Dep. 86:1–23 (Q. “And so, to your memory, Mr. Kaneko is not the one who 

suggested entering into a settlement agreement?” A. “No. Yeah, I indicated at some point, 

whether it was in connection with the negotiations for the business services agreement 

engagement or thereafter, that if I were to get—if I was successful in getting ahold of Shu 

or Song, that I didn’t think that they would—that they wouldn’t have any incentive to 

cooperate in getting the shares back without having a liability waiver, just because, you 

know, that would be what I would ask for if I were in Shu’s shoes . . . [the Company] 

wanted me to try to attempt to get an admission of guilt and get some funds back . . . on 

my first phone conversation with Shu, he denied that and any wrongdoing on his part, and 

so I indicated to the company that that would not happen. I told them I’d try. And so then 

at that point they were fine with just the liability waiver and the – in exchange for the 

shares.”) (emphasis added); see also Ward Aff. Ex 24 (“I’ve talked to the company and 

management seems open to offering you both a full liability waiver . . .”); Kaneko Dep. 

359:11–360:3 (Q. “Okay. So then he goes on to say, two paragraphs down, he says: I was 

able to convince the company that it’s in their best interest for a peaceful resolution . . . . 

[d]id he talk about that further with you?” A. “Oh, yeah, he talked about—well he, talked 
21

the decision to enter into the Release.54 Thus, while the undisputed evidence raises 

no question regarding Lewis’ authority to negotiate the Release, even if it did, the 

fact that the board subsequently ratified the corporate act moots any argument that 

the Release is voidable. 

B. Kaneko’s Claims for Indemnification Will Be Stayed

Kaneko has moved for summary judgment on his counterclaim for mandatory 

indemnification pursuant to 8 Del. C. § 145(c). Kaneko’s logic is that if he is 

successful on his motion for summary judgment with respect to the Receiver’s 

claims, he has then been successful on the merits in defense of claims brought by 

reason of the fact that he was an officer of SCLI. Kaneko’s logic neglects one critical 

consideration, however. This opinion is not a final, non-appealable judgment. This 

Court has been clear that “[i]t is generally premature to consider indemnification 

prior to the final disposition of the underlying action.”55 Considerations of “litigative 

efficiency” and the conservation of judicial resources lend support to this outcome.56 

 

about the recent agreement, said if I can help the company to get the shares back . . . the 

company will agree to set—or, to the Settlement Agreement.”). 

54 Ward Aff. Ex 27. 

55 Paolino v. Mace Sec. Int’l., Inc., 2009 WL 4652894, at *4 (Del. Ch. Dec. 8, 2009). 

56 Simon v. Navellier Series Fund, 2000 WL 1597890, at *9 (Del Ch. Oct. 19, 2000) (“As 

a general matter, similar considerations would seem to counsel against the adjudication of 

an indemnification claim until a definitive outcome is reached in the underlying matter. In 

the absence of a showing of undue hardship, such an approach will reduce the chance that 
22

For this reason, the counterclaim for indemnification will be stayed pending a final, 

non-appealable judgment.57 

C. Kaneko is not Entitled to Fee Shifting

Kaneko requests that this Court shift fees based on the bad faith exception to 

the American Rule. According to Kaneko, the Receiver knew of the Release at the 

time it initiated this litigation and yet it pursued its claims anyway. As this court has 

made clear, “[t]he bad faith exception is not lightly invoked.”58 “The party seeking 

to invoke the [bad faith] exception must demonstrate by clear evidence that the party 

from whom fees are sought acted in subjected bad faith.”59 

Kaneko argues he has presented clear evidence of bad faith because the 

Receiver’s arguments attacking the Release had no basis in fact from the outset of 

the litigation. I disagree. The Receiver pled facts based on what he knew prior to 

discovery. The claims he asserted based on these facts, for the most part, survived 

 

the court will engage in a wasteful exercise in predictive justice, only to see its work undone 

by a reversal of the trial court's judgment in the underlying matter.”). 

57 Paolino, 2009 WL 4652894, at *4–5 (considering sua sponte whether indemnification 

claim should be stayed pending final disposition and stating that “[t]his Court possesses 

the inherent power to manage its own docket, including the power to stay litigation on the 

basis of comity, efficiency, or simple common sense.”). The Court has determined that 

there is “no just reason for delay” of the entry of judgment on the Receiver’s claims 

pursuant to Court of Chancery Rule 54(b). This judgment, therefore, is appealable now.

58 Auriga Capital Corp. v. Gatz Props., 40 A.3d 839, 880 (Del. Ch. 2012) (internal 

quotation omitted).

59 RBC Capital Mkts., LLC v. Jervis, 129 A.3d 816, 877 (Del. 2015). 
23

a motion to dismiss. Now that discovery has run its course, the facts make clear that 

the Receiver’s claims, while potentially valid on the merits, are barred by the 

Release. This series of events falls well short of providing any basis to conclude 

that the Receiver acted in subjective bad faith in bringing the FAC against Kaneko.60 

Kaneko may ultimately be entitled to reimbursement of his fees and expenses 

through the mechanism of mandatory statutory indemnification, but he is not entitled 

to them based on a shifting of fees as a result of bad faith litigation conduct. 

III. CONCLUSION

In this case, it is clear from the undisputed evidence of the record that the 

Release is a binding and enforceable obligation of the Company entered into with 

Kaneko at a time when the Company was in need of his help. The merits of the 

allegations concerning his potential misappropriation of funds or other corporate 

wrongdoing became moot the instant the Release was signed. The Release was 

negotiated at arms-length, supported by consideration, entered into with proper 

authority and subsequently ratified by the Company’s board of directors. 

 

60 In re Grupo Dos Chiles, LLC, 2006 WL 2507044, at *2 (Del. Ch. Aug. 17, 2006) 

(denying to award fees for bad faith conduct when such an award would punish a party 

“merely for making an ultimately unsuccessful argument”). 
24

For the foregoing reasons, Kaneko’s motion for summary judgment is 

GRANTED. Kaneko’s counterclaim for indemnification under 8 Del. C. § 145(c) is 

STAYED. His request for fee shifting is DENIED. 

IT IS SO ORDERED.