Court Opinion

ID: 4688946
Source: CourtListenerOpinion
Date Created: 2021-05-21 14:02:29.72558+00
Date Added: 2024-06-11T08:04:51.169129
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

    LEON A. MALCA,                   )
                                     )
                     Plaintiff,      )
                                     )
              v.                     ) C.A. No. 2020-0152-MTZ
                                     )
    RAPPI, INC. and SEBASTIAN MEJIA, )
                                     )
                     Defendants.     )

      ORDER DENYING DEFENDANTS’ MOTIONS TO DISMISS FIRST
                AMENDED VERIFIED COMPLAINT

        WHEREAS, the Court having duly considered the allegations in Plaintiff

Leon A. Malca’s First Amended Verified Complaint (the “Amended Complaint”)

and Defendants Sebastian Mejia and Rappi, Inc.’s Motions to Dismiss the Amended

Complaint (the “Motions”), as well as the briefs submitted in support thereof and in

opposition thereto, it appears that:1

        A.    Plaintiff Leon Malca is a known art collector and businessman.

Defendant Sebastian Mejia is an executive officer and director of two Delaware

corporations: (1) nonparty Grability, Inc. (“Grability”), and (2) Defendant Rappi,

Inc. (“Rappi,” and together with Mejia, “Defendants”), which spun off from

Grability in 2016. Grability originally launched as a grocery delivery mobile app,

1
 Citations in the form of “Am. Compl. —” refer to the Amended Complaint, available at
Docket Item (“D.I.”) 40. Citations in the form of “Hr’g Tr.—” refer to the transcript of the
December 3, 2020 argument on the Motions, available at D.I. 73.

                                             1
and, through Rappi, has evolved into a platform for the delivery of “everything” for

Latin American consumers.2

          B.    Malca and Mejia met in 2010 and developed a close friendship. In

2011, Mejia contemplated investing in Grability—at the time an emerging

technology platform in Colombia that was majority owned and controlled—and

using it to create a grocery delivery service. Without means of his own, Mejia sought

Malca’s financial backing. Malca agreed and helped Mejia develop a business plan

and finance the investment.

          C.    The 2011 idea took shape in early 2013. Malca and Mejia negotiated

the size of the equity stake and its price. Mejia emphasized “that Malca’s investment

would finance the company’s software development and the initial operations of the

company and was of critical importance.”3        Mejia explained Grability would

eventually be incorporated in Delaware.       On March 23, Mejia gave Malca a

“Business Proposition” for the new company that reflected the terms of Malca’s

investment, which I refer to as the “Investment Agreement.”4 They agreed that

Malca would contribute $300,000 in two parts: (1) the first $150,000 as a loan from

Malca to Mejia, so that Mejia could purchase his own Grability shares upon its

2
    Am. Compl. ¶ 3.
3
    Id. ¶ 34.
4
    Id. ¶ 42.

                                          2
incorporation; and (2) the other $150,000 as Malca’s investment for his own

Grability shares. Malca and Mejia agreed to register all the Grability shares in

Mejia’s name, and that Mejia would hold Malca’s Grability shares “as Malca’s

agent, nominee and/or fiduciary.”5 Mejia told Malca, “My success will be yours and

I assume this as a great responsibility and commitment to you.”6

          D.     The parties performed under the Investment Agreement.       Malca

transferred $300,000 to Mejia. Mejia used Malca’s $150,000 loan to purchase

22.5% of Grability’s shares for himself. Mejia then used the remaining $150,000 to

purchase an additional 11.2% for Malca.

          E.     As Grability grew, Mejia acknowledged the significance of Malca’s

investment. Mejia routinely consulted with Malca about Grability’s business;

provided Malca with detailed reports about Grability’s progress and clients; and

affirmed that he continued acting as Malca’s agent, nominee and/or fiduciary. The

men also worked together to raise additional funding. As other investors supplied

funding, Mejia and Malca’s Grability positions were diluted. Mejia kept Malca

apprised of the dilutions and continued to acknowledge that he held Malca’s position

for him. On December 7, 2015, Mejia acknowledged Malca’s equity in Grability as

diluted to 8.95%.

5
    Id. ¶ 6; accord id. ¶¶ 11, 14, 49.
6
    Id. ¶ 7.

                                           3
         F.     In February of 2016, as Grability’s Executive Officer and Director,

Mejia      announced      Grability   was    spun    off   and   converted   into     Rappi

(the “Conversion”). Mejia told Grability’s shareholders:

         What does this mean for you? You are now a shareholder in Rappi Inc.
         Why? Grability Inc. was the majority shareholder in Rappi Colombia
         and Rappi Mexico.

         How much of Rappi Inc do you own? Grability Inc shareholders own
         86.8% of the combined Rappi Colombia and Rappi Mexico entities,
         which means that you will own a slightly lower percentage of Rappi
         Inc than what you now own in Grability Inc. . . . Your ownership in
         Grability Inc will be slightly diluted? Why? Rappi Colombia and
         Rappi Mexico were not wholly owned subsidiaries. Other (non-
         Grability) shareholders in those entities have agreed to roll-up their
         ownership in the Rappi entities into Grability Inc. Total dilution is
         6.9%. . . .

         What do you need to do? We are sending you paperwork to sign for
         Rappi Inc. . . . Please find attached the new fully-diluted cap tables for
         Rappi Inc.7

Malca alleges that through the Conversion, Grability shareholders became Rappi

shareholders in what Mejia described to Malca as a “Roll-Up.”8 Malca alleges his

Grability shares converted into proportionate Rappi shares in the Roll-Up, and that

Mejia affirmed to Malca that he held a stake in Rappi.9

7
    Id. ¶ 53 (omissions in original) (emphasis omitted).
8
    Id. ¶¶ 54–55.
9
  Id. ¶ 55. Defendants dispute whether the Roll-Up occurred as alleged. Defendants
contend the Grability shares did not simply convert into Rappi shares, but that some
Grability stockholders had the option to capitalize Rappi and receive equity ownership in
return. See D.I. 61 at 3–5; Hr’g Tr. 11–17. Malca has pled that the Roll-Up occurred and
that Mejia acknowledged his ownership in Rappi. See Am. Compl. ¶¶ 53–56; Hr’g Tr. 37–

                                               4
      G.     In April 2019, SoftBank Group Corp. (“SoftBank”) announced an

investment of up to $1 billion in Rappi, including the purchase of $400 million in

Rappi shares and the buyback of $600 million in shares from existing Rappi

shareholders (the “SoftBank Tender”).           Malca informed Rappi he wanted to

participate in the SoftBank Tender, but Rappi evaded Malca’s requests. Even still,

Rappi and Mejia continued to acknowledge that Malca held a stake in Rappi.

      H.     In July, Mejia, allegedly acting on Rappi’s behalf, claimed Malca did

not own any Rappi shares, beneficially or otherwise. Rappi did not renounce Mejia’s

assertion. Sidelined, Malca was unable to participate in the SoftBank Tender, which

closed in August. Malca claims the loss of this opportunity cost him $30 million.

Malca also claims Mejia has taken Malca’s Rappi shares for himself, depriving

Malca of the ability to sell or realize the future value of his shares.

      I.     There is no meaningful dispute about Malca’s ownership of Grability

shares. Rather, the dispute is limited to whether and how the Grability shares

afforded Malca the opportunity to hold Rappi shares through the Conversion and

Roll-Up.    Malca alleges that, as a Grability stockholder via the Investment

Agreement, the Roll-Up automatically secured him equity in Rappi. Specifically,

43. I take Plaintiff’s factual allegations as true, as I must at this stage. Whether the
Grability shares simply converted into Rappi shares, or whether Malca was wrongly
deprived of the opportunity to acquire Rappi shares by virtue of his beneficial ownership
of Grability shares, are questions of fact to be borne out in discovery.

                                            5
Malca alleges he is entitled to 33.2%, or 600,256, of the Rappi shares that Mejia

purports to own, adjusted upward for transfers or sales.

          J.       Malca filed this action in March 2020.10 On July 7, he filed the

Amended Complaint.11 Count I seeks a declaratory judgment that Malca owns at

least 600,256 Rappi shares. Count II seeks a declaratory judgment that Mejia

breached the Investment Agreement. Count III seeks a declaratory judgment that

Mejia and Rappi committed conversion “by failing to keep accurate books and

records, refusing to acknowledge Plaintiff Malca’s ownership interest, intentionally

blocking Malca from using his shares in the SoftBank Tender, and continuing to

intentionally block Malca from accessing his shares from when the SoftBank Tender

closed up to today.”12 Count IV asserts that Mejia was unjustly enriched “[b]y

keeping all of the Rappi shares acquired in the Rappi Conversion for himself.”13

And Count V seeks a declaratory judgment that Mejia breached his fiduciary duties

to Malca, both in his fiduciary role under the Investment Agreement and in his

fiduciary role as an officer and director of Rappi. In addition to various declaratory

judgments, Malca seeks a permanent injunction requiring Rappi and Mejia to

register and/or issue shares in Malca’s (or his designee’s) name; to update Rappi’s

10
     See D.I. 1.
11
     See generally Am. Compl.
12
     Id. ¶ 91.
13
     Id. ¶ 96.

                                            6
books and records to reflect Malca’s (or his designee’s) ownership interest and

correct Mejia’s ownership stake accordingly; and preventing Mejia and Rappi from

selling, transferring, or hypothecating Malca’s Rappi shares. Malca also requests

that the Court impose a constructive trust on at least 600,256 Rappi shares that Mejia

is holding out as his own. Finally, Malca seeks fees and costs.

         K.      Both Defendants moved to dismiss on August 31.14 The parties briefed

the Motions,15 and I heard oral argument on December 3.16

         L.      The standard for dismissal pursuant to Rule 12(b)(6) for failure to state

a claim upon which relief can be granted is well established.17 In considering the

Motions, I must accept as true all well-pled facts and inferences that can reasonably

be drawn therefrom. “[D]ismissal is inappropriate unless the plaintiff would not be

entitled to recover under any reasonably conceivable set of circumstances

susceptible of proof.”18 A motion to dismiss will be granted only if “it appears with

reasonable certainty that the plaintiff could not prevail on any set of facts that can

be inferred from the pleading.”19

14
     See D.I. 46; D.I. 47.
15
     See D.I. 46; D.I. 48; D.I. 53; D.I. 60; D.I. 61.
16
     See generally Hr’g Tr.; D.I. 72.
17
     See Feldman v. Cutaia, 2006 WL 920420, at *7 (Del. Ch. Apr. 5, 2006).
18
  Savor, Inc. v. FMR Corp., 812 A.2d 894, 897 (Del. 2002) (internal quotation marks
omitted) (quoting Kofron v. Amoco Chems. Corp., 441 A.2d 226, 227 (Del. 1982)).
19
     Feldman, 2006 WL 920420, at *7.

                                                 7
      IT IS HEREBY ORDERED this 20th day of May, 2021, that:

      1.    The Motions are DENIED as to Count I. Malca has pled facts making

it reasonably conceivable that he is entitled to a declaratory judgment that he owns

at least 600,256 Rappi shares.

             a.    Mejia argues this count should be dismissed as to him because

the declaratory judgment is concerned with Malca’s shares “of Rappi,” so only Rappi

is capable of providing relief. But as alleged, Mejia is presently and wrongfully

holding Malca’s Rappi shares for himself, and a declaratory judgment against Mejia

would affect if and how he may continue to possess those shares.

             b.    Both Defendants contend Count I is duplicative of Plaintiff’s

breach of contract and conversion claims. It is not. Count I does not invoke any

breach of contract and may stand even if Mejia’s actions did not explicitly breach

the Investment Agreement.        Count I focuses on Malca’s Grability equity as

converted through the Roll-Up. Thus, Count I turns on the Conversion and Roll-

Up’s mechanics, through which Malca alleges his Grability shares were

automatically converted into Rappi shares.

             c.     Defendants also contend Count I must be dismissed because it

attempts to adjudicate past conduct. Count I seeks a declaratory judgment as to

present ownership, based on the Investment Agreement and Roll-Up. Plaintiff seeks

a declaration that he has title to the shares now and going forward. This Court

                                         8
frequently issues declaratory judgments as to present and future ownership based on

past conduct or agreement.20

         2.     The Motions are DENIED as to Count II. Malca has stated a claim for

breach of contract. To state a viable breach of contract claim, a plaintiff must allege

a (1) a contractual obligation; (2) a breach of that obligation by the defendant; and

(3) a resulting damage to the plaintiff.21 In order to adequately allege the first

element of the claim, there must exist a valid contract. Under Delaware law, a valid

contract exists where “(1) the parties intended that the contract would bind them, (2)

the terms of the contract are sufficiently definite, and (3) the parties exchange legal

consideration.”22

                a.    Mejia contends Malca has failed to adequately allege the

existence of an enforceable contract because the Investment Agreement lacked

essential terms. In particular, he contends it lacks essential terms with respect to

(1) the $150,000 loan, such as the loan’s duration, interest rate, payment method,

and security; (2) when the purchase of Malca’s shares should occur and any

20
   See, e.g., McAllister v. Kallop, 1995 WL 462210, at *20 (Del. Ch. July 28, 1995)
(assessing the plaintiff’s entitlement to a declaratory judgment that the defendant owned
certain shares of company stock); see also Lynch v. Gonzalez, 2020 WL 4381604, at *39
(Del. Ch. July 31, 2020) (granting a declaratory judgment as to company ownership); Bata
v. Hill, 139 A.2d 159 (Del. Ch. 1958) (granting a declaratory judgment as to ownership of
certain shares of corporate stock).
21
     E.g., H-M Wexford LLC v. Encorp, Inc., 832 A.2d 129, 140 (Del. Ch. 2003).
22
     Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1158 (Del. 2010).

                                             9
restrictions on those purchases; (3) who would be entitled to receive distribution of

those shares; and (4) what rights, if any, Malca might hold for Mejia’s later-acquired

Grability shares if Mejia had to contribute additional funds to secure those shares.

               b.    “What [contract] terms are material [or essential] is determined

on a case-by-case basis, depending on the subject matter of the agreement and on

the contemporaneous evidence of what terms the parties considered essential.”23

The issue of “materiality” in the breach of contract context raises “predominantly a

question of fact.”24 Therefore, at this stage, Malca need only allege “a rough

skeleton of definite obligations” to “escort this claim past [Mejia’s] motion.”25

               c.    “[I]t is reasonably conceivable that [Malca] could prove, based

on the facts alleged in the Complaint, the [Investment Agremment] contained all

material and essential terms. . . .”26 This is all that is required to survive Mejia’s

23
   Eagle Force Hldgs., LLC v. Campbell, 187 A.3d 1209, 1230 (Del. 2018); see Leeds v.
First Allied Conn. Corp., 521 A.2d 1095, 1097 (Del. Ch. 1986) (“[O]ur task is to determine
the factual setting in which the document that is here claimed to constitute a contract was
negotiated and executed and to decide the factual question whether a reasonable negotiator
in the position of one asserting the existence of a contract would have concluded, in that
setting, that the agreement reached constituted agreement on all of the terms that the parties
themselves regarded as essential and thus that that agreement concluded the negotiations
and formed a contract.”).
24
  Matthew v. Laudamiel, 2012 WL 2580572, at *10 (Del. Ch. June 29, 2012) (quoting
Branson v. Exide Elecs. Corp., 645 A.2d 568 (Del. 1994) (TABLE)).
25
  BAE Sys. Info. & Elec. Sys. Integration, Inc. v. Lockheed Martin Corp., 2009 WL
264088, at *5 (Del. Ch. Feb. 3, 2009).
26
   Pharmathene, Inc. v. SIGA Techs., Inc., 2008 WL 151855, at *13 (Del. Ch.
Jan. 16, 2008).

                                             10
Motion. Malca’s Complaint pleads the “essential terms for th[e] agreement, which

were quite simple: Malca gave Mejia $150,000 in exchange for an 11.2% stake in

Grability, and Mejia held those shares for Malca’s benefit.”27 The essential terms at

the time of contracting were those that established the terms of Malca’s investment:

the amount of his contribution, the amount of shares received, and that Mejia would

purchase and hold those shares for Malca’s benefit.

                  d.   The additional terms Mejia conjures up are not essential to the

Investment Agreement as pled. For example, Malca is not seeking to enforce the

loan itself, so more detailed loan terms are not essential. As for the terms of Malca’s

investment, at the time of contracting and the initial investment, Grability had not

been incorporated, and nothing suggests the parties thought rights pertinent to

potential future corporate acquisitions, changes of control, or spinoffs were essential.

To declare such terms essential at the pleading stage would undermine and eviscerate

many legitimate contracts that bear simple terms, and would impose on contracting

parties the burden of carrying a crystal ball at the start-up stage of business

development. Whether Mejia’s suggested additional terms are essential is a question

of fact to be fleshed out in discovery.28

27
     D.I. 53 at 14.
28
  See, e.g., Matthew, 2012 WL 2580572, at *10; see also Pharmathene, Inc., 2008 WL
151855, at *14 (“[Defendant]’s argument is too conclusory to be convincing. [Defendant]
did not cite any legal authority for its contention the [agreement] lacks certain material or
essential terms . . . . . Hence, the issue is primarily one of fact. At this early stage in the

                                              11
                  e.   Mejia next attacks Count II on the basis that the terms Plaintiff

did allege are not sufficiently definite to form the basis of an enforceable contract.

“This is mostly, if not entirely, a question of law.”29 Essential terms are “sufficiently

definite and certain to be enforceable” “if they provide a basis for determining the

existence of a breach and for giving an appropriate remedy.”30 Mejia contends the

Investment Agreement’s terms offer no way to determine whether there are any

limitations on what Mejia could do with Plaintiff’s Grability shares; whether and

how Mejia was required to re-register the shares in Plaintiff’s name; what Mejia

could do with Plaintiff’s shares; and whether Plaintiff would obtain interest in shares

of another company (such as Rappi).31

proceeding, however, the facts remain to be developed. Moreover, [Defendant] has failed
to cite anything in the Complaint and its related documents that would enable me to
conclude [Plaintiff] could not conceivably show from the facts alleged that the [agreement]
addresses all the material and essential terms . . . . It certainly is open to question whether
the terms mentioned in the [agreement] constitute all of the material and essential terms
. . . , but resolution of that issue must await further development of the record.” (emphasis
in original)).
29
     Eagle Force Hldgs., 187 A.3d at 1232.
30
  Id. (explaining that if a court can understand what obligations parties hold “based upon
the agreement’s terms, and applying proper rules of construction and principles of equity,”
the contract’s terms are sufficiently definite).
31
     D.I. 46 at 20.

                                              12
                f.    The Investment Agreement’s terms are not vague or subject to

more than one meaning.32 As long as the Court can “ascertain what the parties have

agreed to do” in light of the terms alleged, a contract’s terms are not so vague as to

make it unenforceable.33 The terms as alleged “manifest a mutual assent between

the parties as to the essential terms, including what was to be transferred under the

agreement, how, and to whom.”34

                g.    At this stage, Plaintiff has sufficiently pled terms establishing he

and Mejia agreed Plaintiff owns certain Grability shares. As alleged, Plaintiff agreed

to transfer $150,000 to Mejia, and Mejia agreed to use that money to purchase the

shares and hold them in his name for Plaintiff, the beneficial owner. That Mejia

abided by these terms from 2013 until 2019 “further supports this conclusion” that

the parties knew to what they were agreeing and understood the contract sufficiently

to perform.35 It is reasonably conceivable that Plaintiff’s rights in the Grability

shares under the Investment Agreement would include any right as a Grability

32
  See, e.g., Alta Berkeley VI C.V. v. Omneon, Inc., 41 A.3d 381, 385–86 (Del. 2012) (“To
be ambiguous, a disputed contract term must be fairly or reasonably susceptible to more
than one meaning.”).
33
     Eagle Force Hldgs., 187 A.3d at 1232.
34
  Black Horse Cap., LP v. Xstelos Hldgs., Inc., 2014 WL 5025926, at *10, *12 (Del. Ch.
Sept. 30, 2014) (agreeing with the defendant’s argument as stated and holding that the
plaintiff failed to plead facts demonstrating the parties formed a contract).
35
   Pharmathene, Inc., 2008 WL 151855, at *14 (concluding that “[t]he parties’ conduct, as
alleged in the Complaint,” supported the findings that the plaintiff had pled the subject
agreement included all material and essential terms).

                                             13
stockholder to purchase or otherwise obtain Rappi shares, which in turn would afford

the attendant right to cash out those Rappi shares in the Softbank Tender. That the

Investment Agreement did not foresee the specific events that unfolded in the future

does not render its terms vague.

               h.    Finally, Mejia contends Plaintiff failed to state a viable claim for

breach of contract because he has failed to allege Mejia breached any provision of

the Investment Agreement. The Investment Agreement required Mejia to hold

Grability shares for Malca’s benefit, and action counter to that obligation constitutes

breach. As alleged, it is reasonably conceivable that Mejia breached the Investment

Agreement by declaring the Rappi shares derived from Malca’s Grability shares

were not Malca’s. Whether a breach actually occurred is ultimately a question of

fact.36

          3.   The Motions are DENIED as to Count III. “Generally speaking, any

distinct act of dominion wrongfully exerted over the property of another, in denial

36
   See, e.g., State v. Cahill, 443 A.2d 497, 500 (Del. 1982) (“The simplest contract case
makes our point regarding this view of factual issues. If a defendant refuses to convey a
chattel pursuant to a contract, and the plaintiff claims the chattel is unique and subject to
specific performance, the factual issue of the breach is precisely the same in equity as it
would be in a damage action at law.”); Matthew v. Laudamiel, 2014 WL 5499989, at *2
(Del. Ch. Oct. 30, 2014) (suggesting that breach is an issue of fact); Saienni v. G & C Cap.
Gp., Inc., 1997 WL 363919, at *3 (Del. Super. May 1, 1997) (explaining that where facts
are disputed, “the issue of whether a material breach of a contract has occurred is ordinarily
a question of fact”).

                                             14
of his right, or inconsistent with it, is a conversion.”37 A plaintiff states a viable

claim for conversion where he alleges (1) he had a property interest in equipment or

other property; (2) he had a right to possession of the property; and (3) the property

was converted, in that the defendants wrongfully possess or disposed of the property

as if it were their own.38 “[C]onversion may be alleged either in the proper general

terms or by setting out specific facts that clearly establish it.”39 But “[b]efore

bringing an action for conversion, a plaintiff must demonstrate that it made a demand

that the property be returned and the defendant refused the demand.                      This

requirement is excused, however, when the alleged wrongful act amounts to a denial

of the rights of the real owner.”40

                a.     “A stockholder’s shares are converted by any act of control or

dominion without the stockholder’s authority or consent, and in disregard, violation,

37
     Drug, Inc. v. Hunt, 168 A. 87, 93 (Del. 1933).
38
  E.g., Israel Disc. Bank of N.Y. v. First State Depository Co., 2013 WL 2326875, at *19
(Del. Ch. May 29, 2013).
39
   Drug, Inc., 168 A. at 94; see also In re Happy Child World, Inc., 2020 WL 5793156, at
*11 (Del. Ch. Sept. 29, 2020) (“As for conversion, that claim rests on any distinct act of
dominion wrongfully exerted over the property of another, in denial of the plaintiff’s right,
or inconsistent with it. In order to state a claim for conversion, the plaintiff must generally
allege that the defendant violated an independent legal duty.” (alterations, footnotes, and
internal quotation marks omitted) (quoting Drug, Inc., 168 A. at 93, and also quoting
Kuroda v. SPJS Hldgs., L.L.C., 971 A.2d 872, 889 (Del. Ch. 2009))).
40
  Triton Constr. Co. v. E. Shore Elec. Servs., Inc., 2009 WL 1387115, at *24 (Del. Ch.
May 18, 2009) (footnote omitted), aff’d, 988 A.2d 938 (Del. 2010); accord Drug, Inc.,
168 A. at 94.

                                              15
or denial of his rights as a stockholder of the company.”41 “An action for conversion

lies whenever an individual or entity interferes with a stockholder’s right to shares

of stock, which represent a property interest in the company.”42             Thus, “[a]

corporation itself may interfere with the rights of the stockholder by simply denying

them, and thus become liable for conversion.”43 Here, Malca has stated a viable

conversion claim against Mejia and Rappi, as they allegedly denied his rightful

ownership of 600,256 Rappi shares.

                b.     Though Defendants raise the argument that “[u]nder Delaware

law, a plaintiff bringing a claim based entirely upon a breach of the terms of a

contract generally must sue in contract, and not in tort,”44 there is room for an

alternative tort claim here. Malca’s conversion claim against Mejia does not arise

solely from a breach of contract;45 the Investment Agreement may prove to lack

material terms, or its Grability-centric terms may not have been breached. There is

room for a nonduplicative, alternative tort claim that Mejia took Malca’s Rappi

41
   Arnold v. Soc’y For Sav. Bancorp, Inc., 678 A.2d 533, 536 (Del. 1996) (alterations and
internal quotation marks omitted) (quoting Drug, Inc., 168 A. at 93–94).
42
  Triton Constr. Co., 2009 WL 1387115, at *24 n.150 (citing and discussing Drug, Inc.,
168 A. at 93).
43
     Drug, Inc., 168 A. at 93.
44
  West v. Access Control Related Enters., LLC, 2019 WL 2385863, at *4 (Del. Super. Ct.
June 5, 2019) (quoting Data Mgmt. Internationale, Inc. v. Saraga, 2007 WL 2142848, at
*1 (Del. Super. Ct. July 25, 2007)).
45
   Kuroda, 971 A.2d at 889 (internal quotation marks omitted) (quoting Data Mgmt.
Internationale, Inc. v. Saraga, 2007 WL 2142848, at *3 (Del. Super. July 25, 2007)).

                                           16
shares. And as to Rappi, Plaintiff did not bring any potentially overlapping breach

of contract claim.46 Thus, the existence of a breach of contract claim against Mejia

does not foreclose Count III against the Defendants.

               c.    Malca adequately pleads each element of conversion against

Mejia and Rappi. Throughout his complaint, Malca alleges (1) his property interest

as beneficial owner in the Rappi shares as a consequence of the Roll-Up (or his

interest in the opportunity to acquire Rappi shares as a result of his Grability equity

ownership); (2) his right to possess, tender, or otherwise control those Rappi shares;

and (3) Mejia’s conversion by claiming Malca’s shares as his own and denying

Malca the benefit of his rightful ownership. As alleged, Mejia took Plaintiff’s shares

as Rappi’s agent or at least leveraged his role as a Rappi officer and directors in

denying Malca’s ownership.

               d.    Admittedly, Malca’s conversion allegations against Rappi are

more sparse. Paragraph 57 of the Amended Complaint alleges “Rappi suddenly

declared that Malca owned no Rappi shares,” but “Rappi had repeatedly represented

to Malca that his status as a shareholder of Rappi was secure.” 47 Paragraph 58

identifies Mejia as Rappi’s alleged agent in this misdeed, alleging that “because

46
   Rappi was not a party to the Investment Agreement, so Malca would not be able to
recover from Rappi under a breach of contract theory.
47
     Am. Compl. ¶ 57 (emphasis added).

                                          17
Mejia is an Executive Officer and Director of Rappi and claimed Malca’s shares as

his own, Rappi and Mejia had no trouble effectuating the false claim that Malca

owns no shares in Rappi.”48 Plaintiff contends both “Rappi and Mejia excluded

Malca from the SoftBank Tender.”49 Plaintiff has therefore alleged that Rappi,

through Mejia and otherwise, withheld shares from Plaintiff by misrepresenting their

rightful ownership in Rappi’s books and records, and by blocking Malca from

tendering those shares in the Softbank Tender. Therefore, Plaintiff has stated a claim

that Rappi, through Mejia, and Mejia, individually, “wrongfully possessed or

disposed of such [shares] as if [they] were [Mejia’s] own.”50 Count III therefore

proceeds against both Mejia and Rappi.

           4.    The Motions are DENIED as to Count IV. “Unjust enrichment is the

unjust retention of a benefit to the loss of another, or the retention of money or

property of another against the fundamental principles of justice or equity and good

conscience.”51 In order to state a claim for unjust enrichment, a plaintiff must

sufficiently allege: “(1) an enrichment, (2) an impoverishment, (3) a relation

48
     Id. ¶ 58.
49
     Id.
50
     Israel Disc. Bank of N.Y., 2013 WL 2326875, at *19.
51
  E.g., Boulden v. Albiorix, Inc., 2013 WL 396254, at *14 (Del. Ch. Jan. 31, 2013) (internal
quotation marks omitted) (quoting MetCap Sec. LLC v. Pearl Senior Care, Inc., 2007 WL
1498989, at *5 (Del. Ch. May 16, 2007)).

                                            18
between the enrichment and impoverishment, (4) the absence of justification, and

(5) the absence of a remedy provided by law.”52

              a.     Mejia moves to dismiss this claim as duplicative in light of

Malca’s breach of contract claim. But Plaintiff has explicitly stated he only intends

to pursue this claim if Defendants succeed in disarming the Investment Agreement.53

Such an alternative unjust enrichment claim need not be supported by an

independent factual basis.54

              b.     Malca has sufficiently pled unjust enrichment. The Complaint

alleges Mejia held some Grability shares for himself and some for Plaintiff, but used

all of these Grability shares to obtain the corresponding Rappi shares. Plaintiff

52
  E.g., BAE Sys. Info. & Elec. Sys. Integration, Inc., 2009 WL 264088, at *7–8 (quoting
Jackson Nat’l Life Ins. Co. v. Kennedy, 741 A.2d 377, 393–94 (Del. Ch. 1999)).
53
   See Boulden, 2013 WL 396254, at *14 (“As is typical, [Plaintiff] has pleaded this claim
in the alternative. In some circumstances, alternative pleading allows a party to seek
recovery under theories of contract or quasi-contract. This is generally so, however, only
when there is doubt surrounding the enforceability or the existence of the contract. Courts
generally dismiss claims for quantum meruit on the pleadings when it is clear from the face
of the complaint that there exists an express contract that controls. Where, as here, doubt
exists surrounding the existence of a contract, the Court will allow [Plaintiff] to seek
recovery under this theory provided the requisite elements are adequately pleaded.”
(footnote omitted) (quoting Albert v. Alex. Brown Mgmt. Servs., Inc., 2005 WL 2130607,
at *8 (Del. Ch. Aug. 26, 2005))).
54
  See, e.g., id. (concluding the plaintiff properly based an alternative claim for unjust
enrichment upon the same factual basis as a claim for breach of contract where there was
doubt about the existence or enforceability of the contract).

                                            19
contends 33.2% of Mejia’s Rappi shares belong to him.55 Plaintiff alleges Mejia has

been enriched by taking Plaintiff’s shares, and that Plaintiff has suffered an

impoverishment from his lost shares.            Plaintiff has also pled an absence of

justification for Mejia’s exclusion of Plaintiff from the alleged Roll-Up into Rappi

and the Softbank Tender.

         5.     The Motions are DENIED as to Count V. To state a claim for breach

of fiduciary duty, a plaintiff must allege “(i) that a fiduciary duty exists; and (ii) that

a fiduciary breached that duty.”56 “The core principle of a fiduciary duty is that one

who controls property of another may not, without implied or express agreement,

intentionally use that property in a way that benefits the holder of the control to the

detriment of the property or its beneficial owner.”57 And “[t]he duties of care and

loyalty flow from that ‘central aspect’ of the fiduciary relationship.”58 If a plaintiff

reasonably alleges facts that suggest such an agency relationship is present and the

alleged fiduciary acted contrary to that core principle, the plaintiff has successfully

stated a claim upon which relief may be granted.

55
  Malca seeks relief with respect to “33.2% of the shares that Mejia currently owns in
Rappi adjusted upward for any transfers or sales of shares in which Mejia may have
participated prior to, in connection with, or after the Rappi Conversion.” Am. Compl. ¶ 61.
56
     E.g., Heller v. Kiernan, 2002 WL 385545, at *3 (Del. Ch. Feb. 27, 2002).
57
  Stewart v. Wilm. Tr. SP Servs., Inc., 112 A.3d 271, 297 (Del. Ch. 2015) (internal
quotation marks omitted) (quoting In re USACafes, L.P. Litig., 600 A.2d 43, 48 (Del. Ch.
1991)).
58
     Id. (quoting USACafes, 600 A.2d at 48).

                                               20
                a.     Here, Plaintiff has alleged that Mejia owed Malca fiduciary

duties through two sources: (1) as his nominee or agent under the Investment

Agreement, and (2) as an officer and director of Rappi. Plaintiff has alleged facts

making it reasonably conceivable that Mejia breached his duties in both capacities.

                b.     It is reasonably conceivable that Mejia owed Plaintiff fiduciary

duties as the holder of Plaintiff’s beneficially owned shares. Plaintiff specifically

pleads that Mejia held shares as an agent or nominee for Plaintiff’s benefit, and that

Mejia explicitly acknowledged that role.59 That agency relationship was created by

the Investment Agreement.60         Though an arms-length contract alone may be

insufficient to establish an agency relationship,61 the facts pled suggest that Malca

and Mejia’s relationship was not forged in an arm’s-length commercial setting;

rather, Malca has alleged that he and Mejia have a close personal relationship; Mejia

was dependent on Malca’s funding; and that Malca was dependent on Mejia for the

specific purpose of holding the stock for his benefit. These allegations are sufficient

59
     See, e.g., Am. Compl. ¶ 49.
60
     See id. ¶¶ 6–7.
61
  See Forsythe v. ESC Fund Mgmt. Co. (U.S.), Inc., 2007 WL 2982247, at *10 (Del. Ch.
Oct. 9, 2007) (“[A] straightforward, arm’s-length commercial relationship arising from
contract does not give rise to fiduciary duties.”).

                                            21
at this stage: “[t]he determination of whether an agency relationship exists is

normally a question of fact.”62

                  c.   As Malca’s agent, Mejia was constrained by several duties,

including “a duty to carry out [Malca’s] instructions promptly and accurately,” a

duty to “act in [Malca’s] best interests,” and a duty to “refrain from self-dealing.”63

Specifically as a “nominee,” Mejia, “as [an] agent[] of the beneficial owner[], owe[d]

a duty to take the necessary steps to afford the true owners the opportunity to realize

the benefits of [a p]roposed [t]ransaction.”64 Mejia allegedly acknowledged these

duties: at the time of the Investment Agreement, Mejia stated his success would be

Malca’s, and he assumed this “as a great responsibility and commitment to

[Malca].”65 Malca has pled a fiduciary relationship.

                  d.   Malca has also pled a breach of the duty of loyalty. Malca alleges

Mejia “intentionally block[ed] Malca from using his shares in the SoftBank Tender”

to Plaintiff’s detriment.66 Plaintiff also alleges Mejia engaged in self-dealing at

62
  WaveDivision Hldgs., LLC v. Highland Cap. Mgmt., L.P., 49 A.3d 1168, 1177 (Del.
2012) (quoting Fisher v. Townsends, Inc., 695 A.2d 53, 61 (Del. 1997)).
63
   O’Malley v. Boris, 742 A.2d 845, 849 (Del. 1999) (“These obligations at times are
described as fiduciary duties of good faith, fair dealing, and loyalty. They are comparable
to the fiduciary duties of corporate directors, and are limited only by the scope of the
agency.” (footnote omitted)).
64
  Applebaum v. Avaya, Inc., 812 A.2d 880, 889 (Del. 2002) (citing O’Malley, 742 A.2d at
849).
65
     Am. Compl. ¶ 7.
66
     Id. ¶ 101.

                                            22
Plaintiff’s expense by failing to acknowledge Plaintiff’s interest in Rappi, and

instead taking that interest as his own.

                e.    Plaintiff’s remaining allegations center on Mejia’s additional

fiduciary role as a Rappi officer and director. Count V specifically alleges that “[b]y

failing to keep accurate books and records, refusing to acknowledge Plaintiff

Malca’s ownership interest in Defendant Rappi, and intentionally blocking Malca

from using his shares in the SoftBank Tender, Defendant Mejia failed to fulfill his

duties as an Executive Officer and Director of Rappi and personally enriched

himself, all at Malca’s expense.”67 Plaintiff alleges classic self-dealing: Mejia

leveraged his position as a Rappi fiduciary to reject a proper stockholder’s ownership

on Rappi’s behalf in order to retain that equity for himself. Paragraph 58 alleges

that Mejia rejected Malca’s ownership as a Rappi officer and director. Those

positions afforded Mejia the ability to foreclose Malca’s participation in the

Softbank Tender; prevent Malca’s rightful ownership from being documented in

Rappi’s books and records; and ensure Mejia would keep record title to those shares.

Accordingly, Plaintiff has alleged that Malca breached his fiduciary duties as an

officer and director of Rappi.

           6.   Finally, Defendants’ Motions on the grounds that Counts II, III, IV, and

V are untimely are DENIED. Defendants mischaracterize Malca’s claims. Malca

67
     Id.

                                            23
alleges breach occurred when Mejia declared the Rappi shares did not belong to

Malca, not in any initial failure to register Grability shares at the time of the

Investment Agreement. The wrong underlying Malca’s claims occurred in 2019,

when Mejia first disavowed Plaintiff’s interest in Rappi. Thus, the three-year statute

of limitations has not run.

                                               /s/ Morgan T. Zurn
                                         Vice Chancellor Morgan T. Zurn

                                         24