Court Opinion

ID: 4698485
Source: CourtListenerOpinion
Date Created: 2021-06-24 21:04:04.238062+00
Date Added: 2024-06-11T08:05:53.639327
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

SIMPLE GLOBAL, INC.,                        )
                                            )
                Plaintiff/Counterclaim      )
                Defendant,                  )
           v.                               ) C.A. No. 2018-0809-PAF
                                            )
DARIUS BANASIK,                             )
                                            )
                Defendant/Counterclaim      )
                Plaintiff.                  )
                                            )

                      MEMORANDUM OPINION
                      Date Submitted: March 4, 2021
                       Date Decided: June 24, 2021

Thomas G. Macauley, MACAULEY LLC, Wilmington, Delaware; Attorney for
Simple Global, Inc.

Peter K. Schaeffer, Jr., AVENUE LAW, Dover, Delaware; Attorney for Darius
Banasik.

FIORAVANTI, Vice Chancellor
         The narrow issue to be decided in this post-trial opinion is whether Defendant

Darius Banasik was validly removed as a director of Plaintiff Simple Global, Inc.

(“Simple Global” or the “Company”) at a special meeting of stockholders on July

31, 2018.       To decide that issue, the court must determine whether the two

stockholders that voted to remove Banasik owned a majority of the Company’s

outstanding common stock on that date. The court concludes that they did and that

Banasik was validly removed as director on July 31, 2018.

I.            BACKGROUND

         The following recitation reflects the facts as the court finds them after trial.1

         A.     The Creation of Simple Global

         In 2012, Defendant Darius Banasik worked for Logos Logistics, a logistics

company based in Michigan and owned by Jonguk “James” Kim. 2 That same year,

after obtaining a Master’s Degree in Business Administration from the University of

Michigan, Banasik and James Kim’s brother, Jongik “Justin” Kim3 decided to form

Simple Global, a logistics business for e-commerce.4                   The Company was

1
 The trial testimony is cited as “Tr.”; deposition testimony is cited as “Dep.”; Trial Exhibits
are cited as “JX”; and stipulated facts are cited as “PTO”, each followed by the relevant
page, paragraph, or exhibit number.
2
    Tr. 5-6, 59 (Banasik).
3
 In their briefing and at trial, the parties have referred to Jonguk “James” Kim and Jongik
“Justin” Kim as James and Justin, respectively. This Opinion adopts those references. No
disrespect is intended.
4
    Tr. 5-7 (Banasik); PTO ¶ II.1.
                                              2
incorporated as a Delaware corporation on October 17, 2012.5 On the date of its

incorporation, and at all times thereafter, the Company had 5,000,000 authorized

shares of common stock.6

           Banasik and Justin were selected as the Company’s original directors on

October 19, 2012.7 They held their first board meeting on October 24, 2012 at 10:00

a.m. at the Logos Logistics offices in Taylor, Michigan. The “original”8 minutes of

that meeting reflect that Banasik was elected President of the Company, and Justin

was elected Secretary, Chief Financial Officer, and Treasurer.9 The original board

minutes state that the board authorized the issuance of 4,280,500 shares to Banasik

and 719,500 shares to Justin.10 The minutes also reflect that based upon that

issuance, Banasik owned 85.61% of the Company’s equity and Justin owned 14.39%

of the equity.11 The minutes refer to a “proposed form of Share Certificate to be

used by the Corporation” as being attached as Exhibit C, but no form of stock

5
    PTO ¶ II.1. The Company is based in New Castle, Delaware. Id.
6
    JX A (Certificate of Incorporation); PTO ¶ II.2.
7
    JX B (Resolutions of Incorporator).
8
  The use of the word “original” is intentional. As will soon be apparent, Justin created
subsequent versions of these and other minutes of stockholder and board meetings that
reflect the same stock ownership percentages as in the original minutes, but with only
1,000,000 shares outstanding.
9
    JX C-1 at 4.
10
     JX C-1 at 7.
11
     Id.
                                               3
certificate is attached.12 There is no evidence that any stock certificates were ever

issued, and the Company did not maintain a stock ledger.13 The original October 24,

2012 board minutes contain a signature line for Justin as Secretary, but it is unsigned.

There is a separate signature page attached to those minutes containing the signatures

of Banasik and Justin as having accepted their appointments as officers.14

          The Simple Global stockholders also held their first meeting on October 24,

2012.15 The minutes of that meeting reflect that the meeting began at 10:00 a.m.,

the same time as the first meeting of the board. The original October 24, 2012

stockholder meeting minutes, signed by Justin, depict the same share holdings and

ownership percentages as the original October 24, 2012 board meeting minutes.

Those same share holdings and ownership percentages are recited in the original

minutes of the following year’s stockholders meeting dated March 21, 2013.16

          Shortly after forming the Company, Banasik left Michigan and established the

Company’s operations at a warehouse in New Castle, Delaware.17 Justin departed

for Korea where he owned and operated a software company called IMEX.18 Simple

12
     Id. at 3.
13
     Tr. 34 (Banasik); Tr. 93 (Justin).
14
     JX C-1 at 9.
15
     JX C at 1.
16
     JX D at 2.
17
     Tr. 7 (Banasik).
18
     Tr. 123-24 (Justin).
                                            4
Global and Logos Logistics were IMEX clients.19 Justin devoted half of his time to

Simple Global.20

         B.      Banasik and James Enter into a Loan Agreement.

         Banasik and James entered into a one-page “Personal Loan Contract,” dated

March 21, 2013 (the “PLC”).21 The PLC bears the same date as the annual meetings

of the Simple Global board and stockholders that year.22 Banasik drafted the PLC.23

The terms of the PLC provide for James to make an interest-free loan of $50,000 to

Banasik, with repayment due on or before May 30, 2015. The PLC provides that

James “has the right to ask for loan repayment in Simple Global, Inc. common stock

and agrees that 828,948 shares of common stock will be sufficient compensation for

the loan. This common stock is owned by Darius Banasik as of this date.”24

         The PLC also contains representations about the Company’s then-current

equity structure and an illustrative post-repayment equity structure that is entirely

inconsistent with the figures stated in the Company’s original 2012 and 2013 board

19
     Tr. 124 (Justin); Tr. 133-34 (James).
20
     Tr. 123 (Justin).
21
     JX E.
22
     JX D.
23
     Tr. 127 (Justin); Tr. 139 (James).
24
   JX E. Banasik claims that the agreement gave Banasik the option to repay in cash or
stock. Tr. 30 (Banasik); see also id. 60 (Banasik) (“This agreement allows me the right to
repay James Kim with stock.”).

                                             5
and stockholder meeting minutes. The PLC states that there were 2,000,000 “total

Simple Global Shares Authorized and Allocated,” and that Banasik owned

1,219,280 shares, with a stated ownership percentage of 61%. The PLC next

provides the following illustration:

                      Simple Global Equity – Post Loan Repayment

         Darius Banasik, Post Repayment
         Shares Remaining                                                390,332
         Percent Ownership                                               19.52%
         Jonguk (James) Kim, Post Repayment
         Shares Remaining                                                828,948
         Percent Ownership                                               41.45%
         Jongik (Justin) Kim, Post Repayment (UNCHANGED)
         Shares [R]emaining                                              780,720
         Percent Ownership                                               39.04%

         James and Banasik signed the PLC.25 Immediately above the signature

blocks, the PLC states: “By signing below, all parties are in agreement on the terms

stated above.”26

         On the same day that Banasik entered into the PLC, he entered into a separate

Personal Loan Contract with the Company (the “Banasik Loan”).27 The Banasik

25
     JX E; Tr. 30 (Banasik).
26
     JX E.
27
     JX F.
                                           6
Loan is a one-page document, which Banasik executed both in his personal capacity

and as co-Founder and CEO of the Company.28 The terms of the Banasik Loan are

similar to those of the PLC: (a) $50,000 loan, interest free; (b) loan repayment to

take place on or before May 30, 2015; (c) the lender (Banasik) has the right to

repayment in Simple Global common stock; and (d) 828,948 shares “will be

sufficient compensation for the loan.”29 The Banasik Loan required delivery of the

loan amount to the Company by September 1, 2013. James and Justin testified that

they were unaware that Banasik had entered into this loan with the Company,30 and

there is no evidence that the board authorized the Company to enter into the Banasik

Loan. There is no dispute, however, that Banasik deposited $50,000 into the

Company’s bank account in July 2013.31

           According to minutes of the Company’s March 21, 2014 stockholders

meeting, the Company’s stock ownership was as follows:32

            Name                          % of Ownership      Share Owned
      Jonguk (James) Kim                      66.09%            3,304,509
        Darius Banasik                        19.52%             975,911
      Jongik (Justin) Kim                     14.39%             719,580

28
     Id.
29
     Id.
30
     Tr. 109 (Justin); Tr. 159 (James).
31
  See JX G (image of a $50,000 check from Banasik’s personal account payable to the
Company and showing a deposit on July 19, 2013); JX H (Simple Global bank statement
showing a $50,000 deposit on July 19, 2013).
32
     JX I at 2.
                                                7
           The minutes indicate that Banasik called the meeting to order as President and

that all three stockholders were present. The minutes also state: “The chairman

noted 3,304,509 shares of Darius Banasik was transferred to [James] by converting

loan amount of $50,000 to shares.”33 The minutes do not identify the “chairman,”

but Banasik acknowledges that the chairman “appears to have been Banasik at that

point.”34 The minutes are signed by Justin as Secretary.35 Banasik denies that any

meeting of the board or stockholders occurred on March 21, 2014.36

           On September 14, 2015, Banasik sent a one-sentence email to James and

Justin stating simply: “The conversion happened on 3/21/14.”37 Banasik wrote in

the subject line: “Personal Loan Agreement & Cap Table that includes Transfer.”38

Banasik testified “[t]he only conversion that it could have been referring to would

be that of the [PLC] and subsequently my loan agreement thereafter.39 But Banasik

later admitted that he has never been repaid on the Banasik Loan in either cash or

Simple Global stock.40          Therefore, the only conversion to which Banasik’s

33
     Id.
34
     Def.’s Post-Tr. Opening Br. 19.
35
     Id.
36
     Tr. 39 (Banasik) (“This meeting didn’t take place.”).
37
     JX J-1
38
     Id.
39
     Tr. 42 (Banasik).
40
     Tr. 42 (Banasik).
                                               8
September 14, 2015 email could have referred was the conversion of James’s PLC

debt into Simple Global stock held by Banasik.

         The documentary record, including emails from Banasik to James, Justin, and

third parties is consistent with Banasik’s having transferred a majority of his Simple

Global stock to James in repayment of the PLC on March 21, 2014. First, the

Company’s federal tax return for 2015,41 which Banasik signed as President under

penalty of perjury on September 15, 2016,42 stated that Banasik owned 19.52% of

the Company’s common stock.43 Second, Banasik sent an email to Citizens Bank

on January 31, 2017 in connection with the Company’s application for a line of

credit, stating: “Since I am a 19.52% shareholder, I have not been asked to provide

this information previously. Moreover, since I am under the 20% threshold I will

not be signing as a guarantor. A separate email will be going out to introduce you

to Jonguk (James) Kim with the information you requested and he will get the

information to you directly.”44 Third, Banasik sent an email to James that same day,

forwarding the loan application and copying Citizens Bank, stating: “Hi James, Per

our discussion we are in the process of obtaining a line of credit from Citizen’s Bank.

41
     JX J-2.
42
     JX J-3.
43
     JX J-2 at 6 & 14.
44
     JX J-4.
                                          9
Due to your majority shareholder status, Citizen will require the following

information: . . .”45

         Banasik tried to avoid the import of his own emails with a story that is simply

incredible. According to Banasik, the PLC was a document that contemplated a

future stock issuance by the Company.46 That story is belied by Banasik’s own trial

testimony that the PLC was a private contract between him and James.47 As to the

federal tax return, Banasik testified he did not know whether he signed the

authorization form before he reviewed the return, and even if he did, he said his

“review of the tax returns were around the concept of revenue, expense, income, and

taxable income.”48 Banasik disagrees with the IRS schedule that listed his ownership

at 19.52%.49

45
     JX J-5.
46
     Tr. 83-84 (Banasik).
47
     Tr. 32 (Banasik).
48
     Tr. 66 (Banasik).
49
   Tr. 44 (Banasik). Banasik argues that the Company objected to and did not produce
copies of its tax returns for other years and, therefore, the court should draw an adverse
inference that they would contradict the 2015 tax return’s statement of his stock ownership.
I decline to do so. Banasik could have moved to compel the production of the tax returns
for other years and did not do so. Furthermore, Banasik was the President and/or CEO
until his removal in 2018 and the Company objected to producing additional years of
returns because Banasik was responsible for communicating with the Company’s
accountant and signing the tax return, and presumably possessed or had the ability to obtain
them. Banasik did not raise this issue in the pretrial order.
                                            10
         Banasik’s explanation for his representations to Citizens Bank is even less

credible than his explanation concerning the tax return. Banasik claims the Citizens

Bank loan was a loan to fund the Company’s “Korean entity.” Banasik testified that

the Citizens Bank loan was:

         part of the larger agreement that we had made with James and Justin
         regarding the Korean entity, the agreement being that the Korean entity
         was in need of money and we would secure some financing for this
         entity with a combination of things. And the first thing would be the
         collateral of Simple Global’s accounts receivable. That collateral would
         be used as an asset towards this financing, as well as James’ personal
         guarantee of the $600,000 line of credit.

                The intention here was that this money was to be used for the
         Korean entity. There were all of these irregularities with the Korean
         entity. There were, you know, all these -- the money laundering
         accusations, the tax avoidance accusations, and I wanted nothing to do
         with any of that. And the intent here was to secure this line of credit
         under the Korean entity, which I was a minority shareholder of.50

         Banasik’s entire testimony on this issue lacks any documentary support.

There are no documents even suggesting that the Company had a Korean subsidiary

or any subsidiary at all. Banasik offered no evidence of any equity ownership in

such an entity. Nor are there any documents in the record supporting Banasik’s

allegations of money laundering or tax avoidance. Beyond lacking documentary

support, Banasik’s testimony at trial was unconvincing and vague. Banasik’s

testimony does not jibe with the tax return that he signed under penalty of perjury as

50
     Tr. 45–46 (Banasik).
                                           11
Simple Global’s President and his communications to Citizens Bank, which clearly

and unequivocally represented that Banasik was a 19.52% stockholder of Simple

Global. And if all of that were not enough, Banasik told James, in connection with

the Company’s loan application, that James was the “majority shareholder.”51

         C.    The Mystery of the Minutes and the Outstanding Shares

         In or around early 2017, Simple Global sought to obtain additional funds. The

directors and stockholders pursued two sources: (1) the above-discussed bank loan;

and (2) additional equity investment. Justin testified that he, James, and Banasik

were concerned that various documents, including the PLC, created ambiguity about

the Company’s capital structure, which could create problems in trying to raise

additional capital. Thus, at a 2017 meeting in Michigan, James, Justin, and Banasik

agreed to reduce the number of outstanding shares from 5,000,000 to 1,000,000, and

adjust each stockholder’s holdings in a proportional amount. In Justin’s words:

         So on 2017, sometime 2017, we decided to do the fundraising, and then
         the number of the shares somehow was not consistent. Like, some were
         saying 5 million, some were saying 2 million, so -- and also everything
         was on the percentage, not the actual number of shares. So we decided
         to make it easier for the investors. Let’s change to 1 million. So we all
         agreed that, you know, [unintelligible] we sat, like, together in the
         room, and then we all said, Let’s change it to 1 million.52

51
     JX J-5.
52
  Tr. 94 (Justin); see also Tr. 165 (James) (“We end up to agree let’s start from 1 million.
That’s why Darius, if you see his cap table proposal, he put 1 million.”).
                                            12
          As noted earlier in this opinion, there are different versions of signed board

and stockholder meeting minutes, dating back to the Company’s inception. The

minutes are nearly identical in all respects,53 with the exception being the number of

shares held by each of James, Justin, and Banasik. The “original” minutes of the

board and/or stockholder meetings of October 24, 2012,54 March 21, 2013,55 and

March 21, 201456 all reflect that 5,000,000 shares were issued and outstanding.57

The “new” minutes, as I refer to them, show 1,000,000 shares issued and

outstanding. Although the number of shares held by each of the three stockholders

is different, their percentage ownership as stated in the new minutes is identical to

what is represented in the original minutes.58

          Justin, the corporate secretary and drafter of those minutes, offered a simple

and credible explanation that solved the duplicate-meeting-minute mystery. After

the 2017 agreement to reduce the number of issued and outstanding shares to

1,000,000, Justin created new minutes from the originals that were on his computer:

53
  The “new” minutes of the October 24, 2012 stockholders meeting contains a resolution
electing James, Justin, and Banasik as directors. See JX C-2. The original minutes of that
meeting contain no such resolution. See JX C.
54
     JX C; JX C-1 at 7.
55
     JX D at 2.
56
     JX I at 2.
57
     JX C-2 and C-3 at 6; JX D-1 at 2; JX J at 2.
58
     There are no board or stockholders meeting minutes from 2015 or 2016.
                                              13
          So I have the old Word document in my file. So I just, you know, pulled
          it out and then changed the number of the shares. And that's all I
          changed, from old document to new document.59

          The decision to reduce the number of issued and outstanding shares from

5,000,000 to 1,000,000 is not reflected in any formal board or stockholder resolution

or written consents. Nevertheless, it is entirely consistent with the documentary

evidence, including an email that Banasik sent to James and Justin on June 8, 2017,

which stated the following:

          Hi James/Justin,
          I know that with this new fundraising round we still need to clean up
          the CAP table and % allocations. We should do this between us to
          make sure everything is documented and clear for any outside investor
          that would be looking in.60

          Banasik’s June 8, 2017 email attached a table depicting share holdings at prior

points in time. Notably, under a column entitled “Initial Ownership,” the table

reflects 1,000,000 shares initially outstanding, with Banasik holding 856,100 shares,

Justin holding 143,900 shares, and James holding no shares.61 The table then

displays share holdings on March 21, 2014 based on “Debt to Equity Conversion,”

with James owning 660,902 shares, Justin owning 143,916 shares, and Banasik

59
     Tr. 95 (Justin).
60
     JX J-6.
61
   Id. The table contains a typographical error indicating that the shares listed were owned
on March 21, 2012, because the Company was incorporated on October 17, 2012. PTO ¶
II.1.
                                            14
owning 195,182 shares. The rest of the table shows share holdings on December 31,

2014, 2015, and 2016 after conversion of accounts payable and loans into equity62

and the issuance of performance shares to Banasik and his brother. Notably, even

under Banasik’s calculations as of December 31, 2016, James would be the

Company’s majority stockholder, with 57.47% of the total 1,232,137 shares

outstanding.

         At trial, Banasik gave contradictory testimony about the capitalization table

attached to his June 8, 2017 email. On direct examination he testified that it had “no

relevance to the ownership and control of Simple Global.”63                  Yet on cross-

examination, he testified that the document was his proposal “to issue additional

equity in Simple Global to account for the Korean operations.”64

         The Company held its 2017 annual meeting of stockholders on July 6, 2017.

The minutes of the meeting state that James was the chairman of the Company.65

62
   In his post-trial briefing, Banasik claims the table’s references to the conversion of
accounts payable and loans into equity issuances to IMEX and Logos Logistics are
references to the “Korean entity” that he says is the subsidiary about which all of the equity
ownership calculations in the documentary record refer. See Def.’s Post-Tr. Reply Br. 9–
10. That story, which is inconsistent with the documentary record and was raised for the
first time at trial, is incredible. Furthermore, IMEX is owned by Justin, and Logos
Logistics is owned by James. There is no evidence that Simple Global or Banasik had any
ownership interest in either of those entities.
63
     Tr. 49 (Banasik).
64
  Tr. 74 (Banasik); see also id. at 75 (Banasik) (Q: “We’re talking about equity in Simple
Global. Are we clear on that? A: “Yes. This is for additional equity.”).
65
     JX K.
                                             15
The minutes, which were digitally signed using DocuSign66 by each of James, Justin,

and Banasik, contain the following resolution:

         RESOLVED, that all shareholders agree and approve all of the
         transactions related to the deferred compensation for Jonguk Kim,
         Jongik Kim, and Darius Banasik and equity convert related thereto
         occurred from 2012 to 2016. All shareholders agree that the shares of
         ownership as of the end of the year 2016 as presented below by
         reflecting all of the transactions related with the deferred compensation
         and equity convert.67

             Name                      % of Ownership                    Shares
                                                                         Owned
        Darius Banasik                        26%
        Jongik (Justin)                       15%
             Kim
        Jonguk (James)                        59%
             Kim

         Justin testified that he believed that he left the “Shares Owned” column blank

because there was “some conflict” with the numbers that were in Banasik’s June 8,

2017 table, but they “all agree[d] on the percentage of the shares at that time.”68

Despite his DocuSign signature on the July 6, 2017 board minutes that refer to his

66
   DocuSign is an electronic signature service that allows parties to enter into written
contracts. See IO Moonwalkers, Inc. v. Banc of Am. Merch. Servs., LLC, 814 S.E.2d 583
(N.C. Ct. App. 2018). “DocuSign gives each [agreement] an identifying number, which
then appears on each page of the document. DocuSign sends an email with an electronic
link to a copy of the agreement. Through DocuSign, the party viewing the contract can sign
it using a digital signature. DocuSign tracks the date and time when the contract is sent,
viewed, and signed by each party.” Id. at 619–20.
67
     JX K.
68
     Tr. 104 (Justin).
                                            16
owning 26% of the Company’s outstanding stock, Banasik tried to cast doubt as to

whether he signed the minutes. He testified that the Company had one DocuSign

account which was tied to his email account and that “everybody had access to” it.69

He did not deny authorizing his signature on the July 6, 2017 minutes, but testified

that he “d[id] not remember authorizing my signature to this particular document.”70

Yet Banasik admitted to sending the July 6, 2017 stockholder meeting minutes

containing his signature to Citizens Bank on May 14, 2018 in connection with

seeking a line of credit for the Company.71 In his email to Citizens Bank, Banasik

wrote: “I wanted to share with you are [sic] cap table as well as my tax returns for

the line of credit extension. . . . The Docusign agreement shows the share

percentages.”72 The “Docusign agreement” refers to the July 6, 2017 stockholder

meeting minutes, showing Banasik owning 26% of the Company’s outstanding

stock, and James and Justin collectively owning 74%.73

          The board, consisting of Banasik, James, and Justin, met immediately after

the stockholders meeting on July 6, 2017. The minutes of that meeting contain

several board resolutions, but none of them concern the issuance of stock or the

69
     Tr. 51-52 (Banasik).
70
     Tr. 52 (Banasik).
71
     Tr. 53 (Banasik); JX K-3.
72
     JX K-3 at 1.
73
     Id. at 5–6.
                                          17
reduction or increase in the number of authorized shares.74 The board meeting

minutes also do not indicate the number of shares outstanding or the number of

shares held by any stockholder of the Company. According to the board meeting

minutes, the board elected officers “to serve for the ensuing year and until their

successors are elected and qualified,” which included Banasik as Chief Executive

Officer.75

           In a July 9, 2017 email to James and Justin, Banasik wrote that “we have

decided to settle on new percentages as follows: Darius 26% Justin 15% James

59%”76 These percentages are consistent with the July 6, 2017 stockholders meeting

minutes, but neither the meeting minutes nor Banasik’s July 9, 2017 email indicated

the number of shares that each stockholder owned. Banasik also wrote: “We will

have to check on how to incorporate these into minutes so as to minimize tax

implications.”77

           On March 23, 2018, Banasik sent an email to the Company’s accountant,

copying James and Justin, and attaching an “updated Cap table.”78 Banasik’s email

also indicated that it was being sent to the bank that was assisting the Company in

74
     Id. at 2–4.
75
     Id. at 2.
76
     JX K-1.
77
     Id.
78
     JX K-2.
                                          18
fundraising.79       The attached capitalization table depicted the same ownership

percentages as was represented in the July 6, 2017 stockholders meeting minutes and

Banasik’s July 9, 2017 email, but the March 23, 2018 capitalization table showed

that an additional 120,150 shares had been issued in 2015: 96,039 to Banasik and

24,111 to Justin.80 Thus, the total number of outstanding shares was purported to be

1,120,150.

         D.      Banasik Is Removed as an Officer and Director

         At a special meeting of the board on June 18, 2018, Banasik was removed as

the Company’s CEO.81 Banasik did not contest his removal as an officer at that time,

and he does not contest his removal as an officer in this action.

         The Company held its annual stockholders meeting on July 9, 2018. The

minutes of that meeting, signed by Justin as Secretary, indicate that only James and

Justin attended.82        According to the minutes, there were 1,000,000 shares

outstanding, with James owning 66.09% and Justin owning 14.39%. The minutes

state that the stockholders elected James, Justin, Banasik, and Nishi Mohen as

79
     Id.; Tr. 73 (Banasik).
80
     JX K-2.
81
  PTO ¶ II.6. There are no minutes of a June 18, 2018 board meeting in the record. There
are, however, minutes of an August 7, 2018 board meeting, indicating that the CEO had
been previously terminated and that, in lieu of electing a new Chief Executive Officer, the
board elected James to serve as President and Treasurer and Justin to serve as Secretary.
JX N.
82
     JX L.
                                            19
directors “to serve until the next annual meeting of Shareholders and until their

successors are duly elected and qualify.”83 The minutes refer to a discussion about

the Company’s financial struggles and a resolution authorizing the board to offer

convertible debt or equity to potential investors.84

           Just three weeks after the 2018 annual stockholders meeting, James, as

Chairman, called a special meeting of stockholders on July 31, 2018, which

convened at 10:00 a.m. as a “[c]onference call by internet access.”85 The minutes of

that meeting state that James, Justin, and Banasik, collectively owning 100% of the

outstanding stock, attended.

           According to the July 31, 2018 stockholders meeting minutes, the

stockholders adopted two resolutions. The first resolution approved the sale of “new

shares [to] be sold to the current shareholder [sic] in proportion to the percentage of

shares they currently own in the Corporation.”86 The resolution provided that any

shares that remained unsubscribed by August 15, 2018 could be purchased by any

of the other stockholders that had fully subscribed to the offering. According to the

minutes, James and Justin voted in favor of the resolution, and Banasik voted against

83
     Id.
84
     Id.
85
  JX M. The minutes state that the stockholders meeting was held “[r]ight after the
meeting of the board of directors,”85 but there are no minutes of a July 31, 2018 board
meeting in the trial record.
86
     Id.
                                          20
it. The second resolution was “to re-elect the directors” consisting of Nishi Mohan,87

James, and Justin. That resolution was also approved with James and Justin voting

in favor and Banasik voting no.88 The stockholders meeting minutes do not indicate

a vote having been taken to remove Banasik as a director, but the parties have

stipulated that Banasik was removed as a director at this meeting.89

           E.      The Company Issues Additional Shares

           On August 1, 2018, James sent an email to the stockholders and directors

attaching a subscription agreement to purchase Simple Global common stock for

$0.30 per share. The email stated, in pertinent part, “Through the meeting of

shareholders and board of directors held on July 31, 2018, Simple Global is approved

and authorized to offers [sic] for all shareholders to subscribe to purchase the new

issued shares at $0.30 per share by ownership percentage in order to increase

$1,000,000 of the working capital for immediate cash injection . . . .”90 The form of

subscription agreement was not mentioned in or attached to the minutes of the July

31, 2018 stockholder meeting minutes, and the resolution in those minutes

87
   Nishi Mohan’s name is spelled differently in the July 9, 2018 stockholders meeting
minutes as compared to the spelling of his name in the July 31, 2018 stockholders meeting
minutes. Compare JX L (spelling the name as “Nishi Mohen”), with JX M (spelling the
name as “Nishi Mohan”). It is not clear from the record which spelling is accurate. No
disrespect is intended.
88
     Id.
89
     PTO ¶ II.8.
90
     JX M-1.
                                           21
authorizing the sale of shares does not recite any of the price terms. James’s August

1, 2018 email also attached a capitalization table, showing 1,120,150 shares

outstanding (which was inconsistent with the minutes of the July 8, 2018

stockholders meeting), and that 3,333,333 shares were being made available for

purchase in the offering.91 The table also indicated each stockholder’s allotted

number of shares available for purchase in the offering.

         James executed a subscription agreement on August 1, 2018 to purchase all

1,966,701 shares available to him in the offering, for a total purchase price of

$590,000.92 James was the only stockholder to subscribe to the offering. On August

21, 2018, James executed another subscription agreement to acquire the remaining

1,366,632 unsubscribed shares for a total purchase price of $410,000. 93 Thus,

accounting for all of the shares sold in the August 2018 offering, the Company

reports that there were 5,000,000 authorized shares, with 4,453,483 shares issued

and outstanding as of August 23, 2018.94

         According to the Company’s capitalization table, as of August 22, 2018,

James owned 3,994,233 shares (89.69% of the outstanding shares), Banasik owned

91
     JX M-2 at 6.
92
     JX M-2.
93
     JX O.
94
     JX P.
                                         22
291,239 shares (6.54% of the outstanding shares), and Justin owned 168,011 shares

(3.77% of the outstanding shares).95

           F.   The Litigation

           On November 7, 2018, Simple Global filed a verified complaint against

Banasik for breach of fiduciary duty owed to Company and for conversion and waste

of corporate assets.96 On April 1, 2019, Banasik answered the complaint and filed a

counterclaim challenging his removal under 8 Del. C. § 225.97 He admitted that he

only raised the counterclaim in response to the Company’s complaint against him.98

Along with his answer and counterclaim, Banasik filed a third-party complaint

against Justin and James alleging misappropriation and waste of corporate assets,

and breach of the duty of good faith and fair dealing.99

           On March 23, 2020, after briefing and oral argument on the Company’s

motion to dismiss Banasik’s counterclaim and third-party complaint, the court

dismissed all of Banasik’s third-party claims against James and Justin. The court

severed the Section 225 counterclaim challenging Banasik’s removal as a director

95
     Id.
96
     Dkt. 1.
97
     Dkt. 13.
98
     Tr. 15-16 (Banasik)
99
     Dkt. 13.
                                         23
from the plenary action and directed the parties to proceed with discovery and trial

on the counterclaim.

      Trial on the Section 225 claim was conducted remotely via Zoom technology

on September 2, 2020. After post-trial briefing and argument, the parties submitted

supplemental briefing on the Company’s submission of the new minutes of the

March 21, 2013 stockholders meeting from the minute book.100 The one-page

document reflects a total of 1,000,000 outstanding shares, with Banasik owning

865,100 and Justin owning 143,900, and the signatures appearing on the same

page.101 Following post-trial argument, the Company offered what it contends is the

hand-signed version of JX D-1 at 2 from the minute book to refute Banasik’s trial

testimony that he “did not sign this document”102 even though it bears his signature.

100
    Justin signed twice—in his capacity as Secretary and as a stockholder. Banasik’s
signature is sandwiched between Justin’s signatures. All three signatures are in black ink,
but Banasik continues to question the authenticity of his signature. See Dkt. 60.
101
   The new minutes from other meetings also contain signature pages with Banasik’s
signature, but the signatures do not appear on the same page as the purported share
holdings.
102
   Tr. 68 (Banasik). Upon questioning from the court, Banasik at first seemed equivocal,
but was then emphatic that he did not sign the document:
      THE COURT: So is it your testimony that the signature was – this document
      is forged?
      THE WITNESS: I – I don’t know when this document was filled out and
      how these signatures got onto it, Your Honor. I don’t know. I cannot say. I
      did not sign this document.
      THE COURT: You cannot say that you did not sign it?
      THE WITNESS: No. I did not sign this document.

Tr. 89 (Banasik).
                                            24
The court has reviewed the hand-signed version from the minute book. For purposes

of this opinion, the court need not decide the admissibility or authenticity of

Banasik’s signature on that document. Nevertheless, a finding that Banasik signed

the new minutes of the March 21, 2013 stockholders meeting would be entirely

consistent with the documentary record and the testimony of Justin and James.

II.   ANALYSIS

      A.     Section 225 and Scope of this Proceeding

      Under Section 225 of the Delaware General Corporation Law (“DGCL”),

“[u]pon application of any stockholder or director . . . whose title to office is

contested, the Court of Chancery may hear and determine the validity of any

election, appointment, removal or resignation of any director or officer of any

corporation . . . .” 8 Del. C. § 225(a). Section 225 is typically utilized to resolve

election disputes, including the removal of officers and directors of Delaware

corporations, on an accelerated basis. In re Data Processing Consultants, Ltd., 1987

WL 25360, at *5 (Del. Ch. Nov. 25, 1987). This case has been anything but

accelerated. Banasik did not assert his Section 225 claim until eight months after

his removal and did not press it. The record shows that Banasik is not so much

motivated to resume his position as a director, but rather to undermine the authority

of James and Justin to institute the Company’s claims against him. As Banasik

testified at trial: “I walked away from what was essentially a company that wasn’t

                                         25
worth anything and . . . said, you know, this isn’t working for me. I said, I’m leaving

. . . . I went to Asia on vacation, and then, all of a sudden, I received . . . a lawsuit

from Simple Global that says that, you know, James and Justin are now suing me,

that my company is now suing me.”103

      Banasik contends that he owns a majority of the Company’s outstanding stock

and, therefore, his removal as a director was invalid. Under Delaware law, “[a]ny

director . . . may be removed, with or without cause, by the holders of a majority of

the shares then entitled to vote at an election of directors” except in circumstances

not applicable here. 8 Del. C. § 141(k). Thus, the central issue in this case is whether

Banasik held a majority of the Company’s outstanding stock on July 31, 2018.

      Section 227 of the DGCL empowers this court, in any proceeding under

Section 225, to “determine the right and power of persons claiming to own stock to

vote at any meeting of the stockholders.” 8 Del. C. § 227(a). In exercising that

power, “the court may determine any legal or factual issue, the resolution of which

could affect the outcome of a corporate election or of any other stockholder vote.

That includes deciding beneficial ownership.” Zohar II 2005-1, Ltd. v. FSAR Hldgs.,

Inc., 2017 WL 5956877, at *25 (Del. Ch. Nov. 30, 2017) (internal quotations

103
    Tr. 15 (Banasik); see also Dkt. 13 (Answer and Counterclaims (Lack of Standing
Defense) (contending the Company’s claims against Banasik are “barred because [the
Company] was not duly authorized by a majority in interest of its shareholders and
directors to bring this suit against Defendant, pursuant to [the Company’s] corporate
bylaws”)).
                                           26
omitted); accord In re Hawk Sys., Inc., 2019 WL 4187452, at *6 (Del. Ch. Sept. 4,

2019).

         The parties have not engaged directly on whether the court may resolve the

dispute over actual share ownership of Simple Global in this proceeding. Generally,

the court’s authority in a Section 225 proceeding is narrow, and it should not inject

issues purely collateral to the determination of a disputed election. Genger v. TR

Investors, LLC, 26 A.3d 180, 199 & n.83 (Del. 2011).             Nevertheless, issues

concerning stock ownership may necessarily need to be determined. As the court

noted in Byrne v. Lord, 1996 WL 361503 (Del. Ch. June 11, 1996), in determining

who has the right to vote stock in the context of a Section 225 proceeding, the court

should also determine who owns it, but a question of ownership “is not binding on

the owner unless the owner is served with process and made a part of the Section

225 proceeding.” Id. at *2; see Zohar, 2017 WL 5956877, at *24–26 (analyzing the

history of Section 225, case law, and the court’s authority to determine stock

ownership in a Section 225 proceeding).

         In this case, at least as of August 31, 2018, James, Justin, and Banasik were

the only stockholders of the Company.104           James and Justin were joined as

defendants in Banasik’s third-party complaint and were served with process. All

104
      JX M; see also JX K, JX K-1, JX K-2, JX K-3, JX L.
                                            27
claims against James and Justin in the third-party complaint, however, were

dismissed on March 23, 2020.105 James and Justin, as directors of the Company, are

presumably directing the Company’s defense.           They also testified at trial.

Nevertheless, they were not individually represented by counsel at trial. In addition,

the Company’s requested relief is limited to a determination that “Banasik is not the

majority shareholder of [Simple Global], and that the Company’s shareholders

properly removed Banasik as a [Simple Global] director at a special shareholders’

meeting on July 31, 2018.” PTO § IV.B. As discussed below, the court does not

need to decide the precise number of shares held by James, Justin, and Banasik to

determine whether Banasik was validly removed. The court need only determine

whether James and Justin collectively had sufficient votes to remove Banasik. See,

e.g., Boris v. Schaheen, 2013 WL 6331287, at *3 (Del. Ch. Dec. 2, 2013) (declining

to decide in a Section 225 action whether certain shares had been validly issued

because, regardless of that outcome, the plaintiffs would have owned a majority of

the outstanding shares).

105
      Dkt. 31.
                                         28
         B.       Banasik’s Removal as a Director

         The parties have stipulated that “Banasik was removed as a [Simple Global]

director at the special shareholders’ meeting on July 31, 2018.”106 This stipulated

fact is “admitted by the parties and require[s] no proof.”107 The court construes this

stipulated fact to mean that the Simple Global stockholders considered and voted

upon a resolution to remove Banasik at the July 31, 2018 special meeting. Because

the parties have stipulated that the act of removal occurred at the July 31, 2018

stockholders meeting, the only issue for decision is whether Justin and James had

sufficient votes to remove Banasik from the position to which he had been elected

just three weeks earlier.108

         C.       Stock Ownership

         There is no dispute that the Company has, at all times, had 5,000,000

authorized shares of common stock. To determine stock ownership, the first, and

frequently the only, source to consult is the stock ledger. The DGCL “implies ‘an

affirmative duty to maintain a stock ledger’” to which the court may look in

106
   PTO ¶ II.8. This was one of two additional stipulated facts that were included in an
Amended Joint Pre-Trial Stipulation and Order filed on October 29, 2020, which the court
entered that same day. See Dkt. 51 & 52.
107
      PTO ¶ II.
108
    See Boris, 2013 WL 6331287, at *16 (“Because the parties agreed by pre-trial
stipulation that [certain stockholders] were issued the stock reflected on the NC Stock
Ledger, the validity of that stock is not in dispute.”).
                                          29
determining stockholders entitled to vote or act by written consent. Boris, 2013 WL

6331287, at *13 (quoting Rainbow Navigation, Inc. v. Pan Ocean Navigation, Inc.,

535 A.2d 1357, 1359 (Del. 1987)); 8 Del. C. § 219(c) (“The stock ledger shall be the

only evidence as to who are the stockholders entitled by this section . . . to vote in

person or by proxy at any meeting of stockholders.”). In this case, however, the

Company has no stock ledger and has issued no stock certificates.109 “[W]hen the

stock ledger is blank or non-existent, the Court of Chancery has the power to

consider other evidence to ascertain and establish stockholder status.” Rainbow

Navigation, 535 A.2d at 1359; accord Boris, 2013 WL 6331287, at *13.

         The minutes of the Company’s first meeting of the board of directors on

October 24, 2012 state that the board authorized the issuance of 4,280,500 shares to

Banasik and 719,500 shares to Justin. The minutes also reflect that based upon that

issuance, Banasik owned 85.61% of the Company’s equity and Justin owned 14.39%

of the equity.110 The original October 24, 2012 stockholder meeting minutes, signed

by Justin, show the same share holdings and ownership percentages as the original

October 24, 2012 board meeting minutes. I find that as of October 24, 2012, all

5,000,000 shares of Simple Global’s authorized stock had been issued and

outstanding in the amounts stated in the original minutes of the October 24, 2012

109
      Tr. 34 (Banasik); Tr. 93 (Justin).
110
      JX C.
                                           30
board and stockholders meetings. Figuring out Simple Global’s capital structure

after that, however, is not so simple.

               1.    The 2013 PLC

         The March 21, 2013 PLC is a contract between Banasik and James.111 In that

agreement, James agreed to loan Banasik $50,000. The PLC gave James the right

to elect repayment in Simple Global stock held by Banasik. The PLC inaccurately

depicted the Company’s then-current capital structure. It incorrectly stated that the

Company had only 2,000,000 shares issued and outstanding, when in fact there were

5,000,000 shares issued and outstanding. It also incorrectly stated that Banasik

owned 1,219,280 or 61% of the outstanding shares. The only reasonable explanation

for this obvious mistake is that it was a drafting error.112 The evidence presented

demonstrates that the clear intent of that agreement is reflected in the ownership

percentages to be held by each stockholder after Banasik transferred a portion of his

Simple Global shares to James to repay the PLC debt.

111
      JX E.
112
     See Def.’s Pretrial Br. 4 (“[T]he statement of the amount of authorized and allocated
shares of [Simple Global] is misstated in the [PLC] as 2,000,000, a difference of 3,000,000
as supported by [the certificate of incorporation and the original minutes of the 2012 and
2013 board and stockholder meetings], and misstates/contradicts prior records as to amount
and percentages of Banasik’s stock position.”); Tr. 121:7-9 (Justin) (“this 2 million amount
. . . you know Darius made this document and somehow he had a mistake”); Tr. 139:21-24
(James) (“So my focus was [on Banasik’s] 19.52%. I didn’t . . . at that time, I didn’t look
at the 2 million, 5 million thing. And then, you know, that was the main intent of this
loan.”).
                                            31
      If contract language is ambiguous, the court may consider extrinsic evidence

to resolve any ambiguity. Salamone v. Gorman, 106 A.3d 354, 374 (Del. 2014).

Permissible sources of extrinsic evidence include “overt statements and acts of the

parties, the business context, prior dealings between the parties, [and] business

custom and usage in the industry.” Id. (internal quotations omitted). “When the

terms of an agreement are ambiguous, ‘any course of performance accepted or

acquiesced in without objection is given great weight in the interpretation of the

agreement.’” Sun-Times Media Gp. v. Black, 954 A.2d 380, 398 (Del. Ch. 2008)

(quoting Restatement (Second) of Contracts § 202); see also Julian v. Julian, 2010

WL 1068192, at *5 (Del. Ch. Mar. 22, 2010) (observing that in search of the parties’

intent “courts should consider the parties’ course of performance as ‘the most

persuasive evidence of the [meaning of the] parties’ agreement.’”) (quoting Pers.

Decisions, Inc. v. Bus. Planning Sys., Inc., 2008 WL 1932404, at *6 n.29 (Del. Ch.

May 5, 2008) (citing Restatement (Second) of Contracts § 202 cmt. g)).

      The PLC reflects that after repayment through conversion into equity, Banasik

would own 390,332 shares or 19.52%, Justin would own 780,720 shares or 39.04%,

and James would own 828,948 shares or 41.45% of the Company’s outstanding

stock. When the PLC is viewed as the parties intended, with 5,000,000 total

outstanding shares, each of the share figures should be multiplied by 2.5. Thus, upon

                                         32
repayment and transfer of shares from Banasik to James, and multiplying the figures

in the PLC by 2.5, the share ownership structure would be as follows:

           Stockholder              Shares Owned                  % Ownership
             Banasik                   975,830                      19.52%
              James                   2,072,370                     41.45%
              Justin                  1,951,800                     39.04%
              Total                   5,000,000                      100%

          This is entirely consistent with Banasik’s representations to his fellow

stockholders and numerous other authorities.          Banasik confirmed that “[t]he

conversion happened on 3/21/14.”113          The minutes of the March 21, 2014

stockholders meeting state that Banasik transferred shares to James through the loan

conversion and that Banasik then owned 19.52% of the total outstanding shares.114

Thereafter, Banasik told James and Justin,115 Citizens Bank,116 and the Internal

Revenue Service117 that he owned 19.52% of the Company’s outstanding common

stock following the PLC loan conversion repayment.

113
      JX J-1.
114
   JX I at 2. These minutes indicate that Banasik transferred 3,304,509 shares to James
upon conversion. They also report Banasik owning 975,911 shares. While the share
numbers differ from the straightforward calculation of shares derived from the figures in
the PLC, I find that the parties intended that Banasik would own 19.52% of the Company’s
outstanding shares upon conversion.
115
      JX J-6 at 2.
116
      JX J-4.
117
      JX J-2 at 14.
                                           33
            In July 2017, the stockholders approved deferred compensation for each of

James, Justin, and Banasik for the years 2012-2016 to be converted into equity.118

The minutes do not state the actual number of shares held by each stockholder, but

they do state that as a result of the stockholders’ action, Banasik owned 26% of the

outstanding stock, James owned 59%, and Justin owned 15%.119 The minutes are

electronically initialed and signed by all three stockholders using DocuSign. In

March 2018, Banasik informed the Company’s accountant and its investment banker

that Banasik owned 26% of the Company’s outstanding common stock, James

owned 59%, and there were 1,120,150 shares outstanding.120 He communicated

those same ownership percentages to Citizens Bank in May 2018, attaching minutes

of the July 6, 2017 stockholders meeting that he executed with DocuSign.121 I find

by clear and convincing evidence that the parties to the PLC intended that upon

repayment, Banasik’s stock ownership in the Company would be reduced to 19.52%

of the outstanding common stock and that the remaining shares would be owned by

James and Justin. I also find, by clear and convincing evidence, that Banasik

transferred shares to James on March 21, 2014 pursuant to the PLC and that upon

118
      JX K.
119
      Id.
120
      JX K-2.
121
     JX K-3. Banasik also incredibly testified that the board and stockholders meeting
minutes that refer to Simple Global are inaccurate and were “meant to record the activity .
. . of the Korean entity and not the U.S. entity.” Tr. 24 (Banasik).
                                            34
completion of the transfer, Banasik owned 19.52% of the Company’s outstanding

stock and that, as of that date, James and Justin collectively owned the remaining

80.48%.

            Banasik argues that any purported transfer of stock to James under the PLC

was statutorily void because the board did not authorize the issuance of those shares

to James.122 This argument is without merit. The PLC is a private contract, and

Banasik testified the PLC “is a personal loan agreement with me and James.”123 The

Company was not a party, and Banasik acknowledged that he did not sign it on

behalf of the Company.124 The PLC documented the terms of a loan from James to

Banasik, for which James could elect to receive repayment in the form of Banasik’s

Simple Global stock. The contract did not provide for the Company to issue shares.

Indeed, the March 21, 2014 stockholders’ meeting minutes state that “3,304,509

shares of Darius Banasik [were] transferred to [James] by converting loan amount

of $50,000 to shares.”125 Thus, the transfer of shares from Banasik to James pursuant

to the terms of the PLC was not a transaction involving the Company’s issuance of

stock. Therefore, the transaction did not require board action. Cf. Balin v. Amerimar

Realty Co., 1996 WL 684377, at *5 (Del. Ch. Nov. 15, 1996) (“Under the Delaware

122
      Def.’s Pretrial Br. 19.
123
      Tr. 32 (Banasik).
124
      Id.
125
      JX I at 2.
                                            35
General Corporation Law, the board of directors must formally authorize any

issuance of stock by the corporation.”); Box v. Box, 1996 WL 73575, at *8 (Del. Ch.

Feb. 15, 1996) (citing 8 Del. C. §§ 141, 152, 153), aff’d, 687 A.2d 572 (Del.

1996); Brandner Corp. v. Stelnick, 1996 WL 82461, at *7 (Del. Ch. Feb. 22, 1996)

(same).

             2.    Banasik’s Challenge to His Share Transfer to James Under
                   the PLC Is Barred by the Doctrine of Acquiescence.

      The Company argues that Banasik acquiesced to the share transfer to James

under the PLC and cannot be heard to challenge that transfer now. To prove

acquiescence, the Company must demonstrate that Banasik had full knowledge of

his rights and material facts surrounding the transfer of shares to James under the

PLC and “‘(1) remain[ed] inactive for a considerable time; or (2) freely d[id] what

amounts to recognition of the complained act; or (3) act[ed] in a manner inconsistent

with the subsequent repudiation, which leads the other party to believe the act has

been approved.’” Nevins v. Bryan, 885 A.2d 233, 246 (Del. Ch. 2005) (alteration in

original) (quoting Cantor Fitzgerald, L.P. v. Cantor, 2000 WL 307370, at *24 (Del.

Ch. Mar. 13, 2000)). “For the defense of acquiescence to apply, conscious intent to

approve the act is not required, nor is a change of position or resulting prejudice.”

Klaassen v. Allegro Dev. Corp., 106 A.3d 1035, 1047 (Del. 2014). I conclude that

Banasik acquiesced to the Company’s recognition of Banasik’s transfer of 3,304,509

                                         36
of his shares to James and the resulting reduction of his ownership to 975,911 shares,

or 19.52% of the Company’s outstanding common stock. 126

          Banasik was fully aware of the transfer of his stock to James under the PLC

on March 21, 2014 and that the Company acknowledged the transfer. He did not

raise any challenge to the stock transfer until asserting his counterclaim in this action

on April 1, 2019.127 In his communications to James, Justin, the Company’s

accountant, its banker, Citizens Bank, and the IRS, Banasik held himself out as a

minority stockholder, thus demonstrating that he freely recognized the act about

which he now complains.128 His conduct in this action is inconsistent with his prior

acceptance of the stock transfer under the PLC. His prior conduct led the Company

to believe that he had approved and was in full agreement with the share transfer.

For example, Banasik swore under penalty of perjury as the Company’s president

that he owned 19.52% of the Company’s outstanding common stock when he signed

the Company’s 2015 tax return. He disclaimed being a majority stockholder to

Citizens Bank in order to avoid signing a personal guarantee on a loan application

126
      JX I at 2.
127
      Dkt. 13.
128
    See JX J-6 at 2 (June 8, 2017 email to James and Justin attaching a capitalization table
reflecting Banasik’s minority stockholder status); JX J-4 (January 31, 2017 email to
Citizens Bank stating “I am a 19.52% shareholder); JX J-2 at 14 (tax return filed by Banasik
indicating that Banasik owns 19.52% of the common stock of Simple Global, Inc.); JX K-
2 (email to accountant with capitalization table reflecting minority stockholder status and
stating that the same email was to be sent to a bank assisting Simple Global with financing).
                                             37
that the Company was pursing to obtain financing; instead, he held out James as the

majority stockholder and the person obligated to personally guarantee the line of

credit. Banasik also informed the Company’s banker, which was assisting with

efforts to raise equity investment, that it was James, not Banasik, who was the

Company’s controlling stockholder.             Collectively, these acts convincingly

demonstrate that Banasik remained inactive for a considerable time, freely did what

amounts to recognition of the stock transfer under the PLC, and acted in a manner

inconsistent with his belated repudiation of the stock transfer, which led James,

Justin, and the Company to believe the act had been approved. Therefore, Banasik

acquiesced to the Company’s recognition that he had transferred 3,304,509 of his

shares to James under the PLC.

             3.     Banasik’s Challenge to His Removal Is Barred by Laches.

      Banasik’s claims are barred by laches for two separate reasons. First, his

direct challenge to his removal as a director is time barred. Second, his indirect

effort to invalidate the PLC through his Section 225 claim, which he did not assert

until this action, is also barred by laches.

      “The equitable defense of laches is based on the theory that upon a person’s

acquiring knowledge of a wrong affecting his rights, any unreasonable delay in

asserting an equitable remedy will bar such form of relief.” Skouras v. Admiralty

Enters., Inc., 386 A.2d 674, 682 (Del. Ch. 1978) (citations omitted). To prove the

                                           38
affirmative defense of laches, the Company must show Banasik had knowledge of

his rights or his claim, that Banasik unreasonably delayed in asserting his claim, and

that “the [Company] or third parties were injured by the delay.” Stengel v. Rotman,

2001 WL 221512, at *6 (Del. Ch. Feb. 26, 2011).

      In assessing a defense of laches, the court normally applies the applicable

statute of limitations by analogy. See Levey v. Brownstone Asset Mgm’t, LP, 76

A.3d 764, 768 (Del. 2013). If the plaintiff asserts its claim after the expiration of the

analogous statute of limitations, the delay is presumptively unreasonable. Id.

“Absent a tolling of the limitations period, a party's failure to file within the

analogous period of limitations will be given great weight in deciding whether the

claims are barred by laches.” Whittington v. Dragon Group, L.L.C., 991 A.2d 1, 9

(Del. 2009). The doctrine of laches also recognizes, however, that a party seeking

an equitable remedy may need to assert its rights “with greater alacrity than is

required by the analogous statute of limitations to preserve entitlement to relief.”

Klaassen v. Allegro Dev. Corp., 2013 WL 5739680, at *20 (Del. Ch. Oct. 11, 2013)

(quoting In re Sirius XM S’holder Litig., 2013 WL 5411268, at *4 (Del. Ch. Sept.

27, 2013)), aff’d, 106 A.3d 1035 (Del. 2014).

      In the Section 225 context, even a delay of a month and a half has been held

sufficient to bar a claim under the doctrine of laches. See, e.g., Stengel, 2001 WL

221512, at *7; see also Klaassen, 2013 WL 5739680, at *20 (holding plaintiff’s

                                           39
seven-month delay in challenging his removal was barred by laches). “The reasons

for the delay are more critical than the amount of time that has elapsed.” Klaassen,

2013 WL 5739680, at *20.

         Banasik does not claim that he lacked knowledge that he was removed as a

director on July 31, 2018, or that he lacked full knowledge of either his rights or

material facts. He candidly accepted that he had been removed and “walked away

from what was essentially a company that wasn’t worth anything.”129 Banasik failed

to assert his rights to contest his removal until filing his counterclaim on April 1,

2019, a full eight months after his removal. His only excuse for waiting that long

was that he filed his counterclaim in response to the Company’s plenary action

against him and that he asserted his Section 225 claim as a means to challenge James

and Justin’s authority to cause the Company to file the plenary action.130

         The Company has established prejudice resulting from Banasik’s

unreasonable delay. In the wake of his removal as a director, the Company obtained

desperately needed funds through a subscription offer to its stockholders. James

subscribed to the offer and made an additional $1,000,000 capital investment in the

Company, with the knowledge that Banasik was not a controlling stockholder and

129
      Tr. 15 (Banasik).
130
   See Dkt. 13, Counterclaims (“Most importantly, the purported authorization of Plaintiff
to bring this action against Defendant was not valid.”).
                                           40
was no longer a director. At this late date, a recognition that Banasik is a controlling

stockholder, would threaten to “throw [Simple Global] into chaos.” Klaasen, 2013

WL 5739680, at *20. Indeed, Banasik himself acknowledged that his Section 225

claim was both tactical and designed to undo a wide range of corporate action. See

Dkt. 13, Counterclaim ¶ 18 (“James Kim’s election as a director was not valid.

Therefore, all actions taken by [the Company] since the date of his purported election

as a director that would have required director approval, but were not consented to

by Defendant, are not the properly authorized actions of Plaintiff.”); id. ¶ 19

(“Various other actions of [the Company] subsequent to James Kim’s purportedly

becoming a majority shareholder and director—including but not limited to the

purported issuance of additional shares of Plaintiff’s stock supposedly diluting

Plaintiff’s equity position even further—were not valid. Most importantly, the

purported authorization of Plaintiff to bring this action against Defendant was not

valid.”). Had Banasik complained of his removal sooner, the Company could have

sought to file its own Section 225 action to confirm his removal. See Stengel, 2001

WL 221512, at *7 (holding Section 225 claim was barred by laches where plaintiff’s

challenge was “purely [a] tactical move designed to preserve the value of any claim

for back pay his client may possess”). Banasik’s Section 225 claim is barred by

laches.

                                          41
         Banasik’s challenge to the transfer of his stock under the PLC—the linchpin

of his case—is also barred by laches. His challenge to the PLC is one sounding in

contract. The analogous statute of limitations is 10 Del. C. § 8106, under which a

breach of contract action must be brought within three years from the date that the

cause of action accrued. Levey, 76 A.3d at 768. The transfer of shares under the

PLC occurred on March 21, 2014.131                    Thus, under the analogous statute of

limitations, Banasik was required to assert his challenge to the transfer of shares

under the PLC no later than March 21, 2017. Banasik did not assert his challenge to

the share transfer under the PLC until the filing of his counterclaims on April 1,

2019. Accordingly, Banasik’s delay is presumptively unreasonable and prejudice is

presumed. See Sirius XM, 2013 WL 5411268, at *4 (“After the statute of limitations

has run, [the Company is] entitled to repose and [is] exposed to prejudice as a matter

of law by a suit by a late-filing plaintiff who had a fair opportunity to file within the

limitations period.”); Baier v. Upper New York Investment Co. LLC, 2018 WL

1791996, at *12 (Del. Ch. Apr. 16, 2018) (same); see also Kraft v. WisdomTree Invs.,

Inc., 145 A.3d 969, 979 (Del. Ch. 2016) (analyzing the application of laches in

various contexts).132 Accordingly, Banasik’s indirect challenge to the PLC and

resulting share transfer is time barred.

131
      See JX I at 2; JX J-1; Tr. 42 (Banasik).
132
      The Company has also established prejudice as discussed in the preceding paragraph.
                                                 42
                4.        The Banasik Loan Did Not Convert into Simple Global
                          Equity.

         Banasik argues that if the PLC resulted in the transfer of his Simple Global

shares to James, then the “two loans should have essentially offset each other as to

share ownership, leaving Banasik in the established initial position as majority

shareholder.”133 This argument fails for two reasons. First, Banasik admitted that

he had not been repaid for the Banasik Loan in either stock or cash.134 Second,

unlike the PLC, which is a private contract between Banasik and James, the Banasik

Loan agreement is between Banasik and the Company. Any repayment to Banasik

in the form of Simple Global stock would require the issuance of shares and,

therefore, board action. Balin, 1996 WL 684377, at *5 (“Under the Delaware

General Corporation Law, the board of directors must formally authorize any

issuance of stock by the corporation.”); Box, 1996 WL 73575, at *8 (citing 8 Del.

C. §§ 141, 152, 153); Brandner, 1996 WL 82461, at *7 (same). Therefore, Banasik

did not own a majority of the Company’s outstanding stock by virtue of the Banasik

Loan agreement.

133
      Def.’s Post-Tr. Reply Br. 8.
134
      Tr. 42 (Banasik).
                                          43
                 5.      How Many Shares Are Issued and Outstanding?

          After the transfer of shares from Banasik to James under the PLC, Banasik

owned only 19.52% of the Company’s common stock. A much more confounding

question is how many shares did he own at the time of his purported removal from

the board on July 31, 2018? The answer to that question turns on the answer to two

other questions. First, were all 5,000,000 of the Company’s authorized shares issued

and outstanding on July 31, 2018? Second, did the Company validly reduce the

number of outstanding shares from 5,000,000 to 1,000,000? The Company contends

that all of the directors and stockholders (i.e., James, Justin, and Banasik) agreed in

2017 to “clean up the cap table” in order to raise additional funds through debt or

equity. The board and stockholders were concerned that confusion over the capital

structure would inhibit the Company’s ability to attract investors. The evidence

clearly and convincingly shows that all three stockholders and directors in 2017

intended that the Company would reduce the total number of outstanding shares

from 5,000,000 to 1,000,000.135

          Although I find that the Simple Global board and stockholders intended to

reduce the number of the Company’s outstanding shares from 5,000,000 to

1,000,000, it is not readily apparent from the trial evidence that the board and

135
      See, e.g., JX J-6; Tr. 94 (Justin).
                                            44
stockholders did so in compliance with Delaware law.136 For purposes of this

opinion, however, I need not decide whether the Simple Global board and

stockholders reduced the number of issued and outstanding shares from 5,000,000

to 1,000,000 in compliance with Delaware law. Regardless of whether the Company

had 5,000,000 or 1,000,000 issued and outstanding shares on July 31, 2018, James

and Justin owned a majority of the Company’s outstanding shares entitled to vote in

an election of directors on that date and validly removed Banasik as a director.137

136
    Section 242(a)(3) of the DGCL provides that “a corporation may amend its certificate
of incorporation . . . to “subdivid[e] or combin[e] the outstanding shares . . . into a greater
or lesser number of shares.” If the Simple Global board and stockholders intended to effect
a reverse stock split under Section 242(a)(3), then a certificate amendment would have
been required. See Blades v. Wisehart, 2010 WL 4638603, at *8 n.66 (Del. Ch. Nov. 17,
2010) (“‘The final clause of Section 242(a)(3) was added by amendment in 1996 to make
clear that an amendment of the certificate of incorporation is necessary in order to effect a
forward stock split.’” (quoting 1 R. Franklin Balotti & Jesse A. Finkelstein, The Delaware
Law of Corporations and Business Organizations § 8.4 n.35 (3d ed. 2009)); 1996 Del.
Laws Ch. 349, Synopsis (observing that amendments to Section 242(a) and 242(a)(3)
“make clear that an amendment to the certificate of incorporation is necessary in
connection with a forward or reverse stock split”); see also Boris, 2013 WL 6331287, at
*16 (“The . . . board may well have informally decided to issue stock, and the directors and
purported stockholders may have conducted themselves as if the stock had been issued.
But, even a shared understanding of what was intended is insufficient to satisfy the DGCL’s
strict requirement of a written instrument [to issue stock].”). There is no evidence in the
record that the board and stockholders effected an amendment to the Company’s certificate
of incorporation in accordance with Section 242(a)(3) of the DGCL.
137
   Because I find that Banasik was validly removed even if he is correct that all 5,000,000
shares were issued and outstanding at the time of his removal, I do not reach the Company’s
arguments that Banasik acquiesced to or is estopped from challenging the reduction in
shares from 5,000,000 to 1,000,000. See Pl.’s Answering Post-Tr. Br. 20–24; cf. STAAR
Surgical Co. v. Waggoner, 558 A.2d 1130, 1137 (Del. 1991) (holding stock not issued in
compliance with the DGCL is void and not subject to equitable defenses (citing Waggoner
v. Laster, 581 A.2d 1127 (Del. 1990)); accord Boris, 2013 WL 6331287, at *14 (citing
cases); Superwire.com, Inc. v. Hampton, 805 A.2d 904, 909 n.17 (Del. Ch. 2002) (rejecting
                                              45
         If, as the Company contends, it had validly reduced the number of outstanding

shares from 5,000,000 to 1,000,000, then, as the record shows, Banasik owned either

19.52% or 26% of the outstanding shares, with James and Justin owning the

remainder. Under that scenario, James and Justin still had a majority of the

outstanding shares, and sufficient votes to remove Banasik as a director on July 31,

2018.

         On the other hand, if, as Banasik contends, the Company at all times had

5,000,000 issued and outstanding shares, he would fare no better. Assuming for

purposes of this decision that Banasik is correct, then the Company was without

authority to issue any additional shares after the initial issuance of all 5,000,000

authorized shares on October 24, 2012.138 Upon repayment of the PLC loan to

James, Banasik transferred 3,304,509 of his shares to James, reducing Banasik’s

ownership to 975,911 shares, or 19.52% of the Company’s outstanding common

stock.139 Thus, as of the March 21, 2014 stock transfer, James and Justin collectively

owned 80.48% of the Company’s outstanding common stock.                      Because the

Company could not issue any more shares,140 and there is no evidence that James or

equitable defenses on the grounds that the court “cannot give any effect to void shares even
in the context of an equitable defense” (emphasis in original)).
138
      JX C.
139
      JX I.
140
   See Liebermann v. Frangiosa, 844 A.2d 992, 1009 (Del. Ch. 2002) (finding preferred
stock sold to investors, including board members, to be invalid because the issuance
                                            46
Justin had transferred any of their shares to Banasik, at the time of the July 31, 2018

special meeting of stockholders, James and Justin owned a sufficient number of

shares to remove Banasik as a director.

      Banasik’s walking away from the Company after his removal as an officer in

June 2018 and his removal as a director in July 2018 is inconsistent with what would

be expected from someone who owns, or believes he owns, a majority of the

Company’s outstanding stock. He did not object to his removal as an officer or

director when those events occurred, and he did not initiate litigation to contest his

removal. Indeed, he was seemingly satisfied with having been removed until the

Company instituted litigation against him.

      There is not a single document in the trial record evidencing that Banasik, or

anyone else for that matter, believed that Banasik owned a majority of Simple

Global’s outstanding stock at any time after March 21, 2014.                 Indeed, the

overwhelming evidence shows that he did not, and Banasik’s conflicting trial

testimony to the contrary was not credible.

exceeded the number of shares authorized in the certificate of incorporation). The parties
have not raised, and the court does not consider, whether any purported issuance of shares
beyond the 5,000,000 authorized in the certificate could be ratified or validated under 8
Del. C. §§ 204 or 205.
                                           47
III.   CONCLUSION

       For the reasons discussed above, the court finds that Banasik was validly

removed as a director of Simple Global at the July 31, 2018 special meeting of

stockholders by a vote of the majority of the Company’s outstanding shares, which

were held by James and Justin. An implementing order pursuant to Court of

Chancery Rule 54(b) is entered simultaneously herewith.

                                       48