Court Opinion

ID: 9892120
Source: CourtListenerOpinion
Date Created: 2023-10-20 17:04:35.229215+00
Date Added: 2024-06-11T14:17:48.912127
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

RAMCO ASSET MANAGEMENT,                 )
LLC, US TRADING COMPANY                 )
METALS RE, LLC and DINSHA               )
DYNASTY TRUST,                          )
                                        )
                  Plaintiffs,           )
                                        )
      v.                                ) C.A. No. 2022-0665-SG
                                        )
USA RARE EARTH, LLC, MORZEV             )
PTY LTD., MORDECHAI GUTNICK             )
ATF THE MORZEV TRUST,                   )
MORDECHAI GUTNICK, and PINI             )
ALTHAUS,                                )
                                        )
                  Defendants.           )

                        MEMORANDUM OPINION

                        Date Submitted: July 3, 2023
                       Date Decided: October 20, 2023

David A. Felice, BAILEY & GLASSER, LLP, Wilmington, Delaware; OF
COUNSEL: Andrew St. Laurent, HARRIS ST. LAURENT & WECHSLER LLP,
New York, New York, Attorneys for Plaintiffs Ramco Asset Management, LLC, US
Trading Company Metals Re, LLC, and the Dinsha Dynasty Trust.

John M. Seaman and E. Wade Houston, ABRAMS & BAYLISS LLP, Wilmington,
Delaware; OF COUNSEL: Chelsea Corey, KING & SPALDING LLP, Charlotte,
North Carolina, Attorneys for Defendant USA Rare Earth, LLC.

Carl D. Neff, FISHERBROYLES, LLP, Wilmington, Delaware; OF COUNSEL:
Aurora Cassirer and Christina H. Bost Seaton, FISHERBROYLES, LLP, New York,
New York, Attorneys for Defendant Pini Althaus.

Karen E. Keller, Andrew E. Russell, and Nathan R. Hoeschen, SHAW KELLER
LLP, Wilmington, Delaware; OF COUNSEL: Justin L. Ormand, ALLEN & OVERY,
New York, New York; Patrick W. Pearsall, ALLEN & OVERY, Washington, D.C.,
Attorneys for Defendants Mordechai Gutnick ATF the Morzev Trust, Morzev Pty Ltd.,
and Mordechai Gutnick.

GLASSCOCK, Vice Chancellor
       This matter involves a misleadingly-complex set of causes of action, arising

out of a rather simple alleged set of facts, and posing what is, at its heart, a contract

and fraud action. Plaintiffs are former equity holders in an Australian rare-earth

mining company, Morzev Pty Ltd. (“Morzev”). Its primary asset was interest in a

mining project in West Texas. Defendant Mordechai Gutnick was the founder,

controller, and a director of Morzev. He decided to transfer the assets of Morzev to

a to-be-created Delaware entity.           Defendant Pini Althaus, whom Plaintiffs

characterize as Morzev’s CEO,1 created a Delaware LLC to facilitate this

transaction. Plaintiffs were told by Gutnick that if they agreed to roll over their

interests in Morzev to the new Delaware LLC, Defendant USA Rare Earth, LLC

(“USARE”), their ownership in USARE would be the same as it had been in Morzev.

Each Plaintiff signed a transfer agreement with that understanding, under which their

Morzev interests were transferred to a trust, the Defendant Morzev Trust (the

“Trust”), and then exchanged for units in USARE. Instead of getting the same

percentage of ownership of USARE each had previously held in Morzev, as they

expected, they received the same or similar number of units, which represented a

materially smaller ownership in USARE than they had enjoyed in Morzev; in other

words, their interests were diluted.         According to Plaintiffs, the transactions

1
 Althaus contests the allegation that he was an officer of Morzev. Reply Br. Def. Pini Althaus
Supp. Mot. to Dismiss Am. Compl. 3, Dkt. No. 42 (“Althaus RB”).
                                              1
represented a conspiracy by Althaus, Gutnik, and the entity Defendants to dilute their

interest wrongfully.2 They assert claims for breach of fiduciary duty, as well as fraud

and breach of contract, along with a large number of other claims.

      Defendants have moved to dismiss for failure to state a claim and on forum

non conveniens grounds. Those motions await supplemental briefing. Before

turning to that, however, I must consider first the various Defendants’ motions to

dismiss for lack of personal jurisdiction. The result follows.

                                 I. BACKGROUND

      Plaintiffs bring fourteen causes of action governed by the laws of various

jurisdictions against five defendants. All five defendants have moved to dismiss

under Court of Chancery Rule 12(b)(6). However, prior to assessing the merits of

these motions, I must first assess the 12(b)(2) motions filed by four of the

defendants.3 The fifth defendant is the Delaware LLC, which does not contest

personal jurisdiction, for obvious reasons.

      Ramco Asset Management, LLC (“Ramco”), US Trading Company Metals

Re, LLC (“US Trading”), and DinSha Dynasty Trust (“Dinsha”, and together with

Ramco and US Trading, the “Plaintiffs”) exchanged their interests in an Australian

proprietary limited company, Defendant Morzev Pty Ltd. (“Morzev”), for interests

2
  The Amended Complaint does not explain to whom the “excess” shares were issued. See Am.
Verified Compl. Breach of Contract and Breach of Fiduciary Duties, Dkt. No. 29 (“Compl.”).
3
  See Werner v. Miller Tech. Mgmt., L.P., 831 A.2d 318, 327 (Del. Ch. 2003).
                                            2
in a Delaware entity, Defendant USA Rare Earth, LLC (“USARE”), through a series

of transactions. Plaintiffs’ fourteen causes of action allege that Defendants promised

that Plaintiffs would each receive an equivalent amount of equity in USARE as each

Plaintiff previously held in Morzev, however, the transactions allegedly diminished

Plaintiffs’ ownership interests instead.

       Defendants were the counterparties to, or aided in, the effectuation of the

conversion transactions. Specifically, each Plaintiff transferred their shares to

Defendant Mordechai Gutnick ATF the Morzev Trust (the “Trust”), a trust organized

under the laws of Australia.4 Defendant Morzev, the Australian entity in which the

Plaintiffs originally held interests, “entered into a binding and enforceable

agreement to transfer over [Plaintiffs’] interest[s] in Morzev to USARE[.]”5

Defendant Mordechai Gutnick, a resident of New York, was a manager of USARE,

a director of Morzev, and “authorized to act on behalf of the [Trust].”6 Defendant

Pini Althaus, a resident of New York, was the chief executive officer of Morzev and

the chief executive officer of USARE and a manager of that company.7

4
  Compl. ¶¶ 10, 26.
5
  Id. ¶¶ 62, 67, 71, 76, 80, 86.
6
  Id. ¶¶ 8–11.
7
  Id. ¶¶ 1, 12. Althaus contends that he was an independent contractor, and not an officer, of
Morzev. Tr. 5-4-2023 Oral Arg. Defs.’ Mot. to Dismiss 35:20–36:3, 41:1–4, Dkt. No. 56 (“Oral
Arg. Tr.”).
                                              3
                                      II. ANALYSIS

       All Defendants have moved to dismiss the Amended Complaint under Rule

12(b)(6). With the exceptions of USARE as to all counts and Gutnick regarding

Counts VII and VIII, all Defendants oppose personal jurisdiction under Rule

12(b)(2). My analysis starts with the threshold issue of personal jurisdiction before

turning to the choice of law issues inherent in the Amended Complaint. Because the

Defendants are all foreign, this Court lacks general jurisdiction over them; I must

thus determine whether specific jurisdiction exists on a count-by-count basis.8

       A. Rule 12(b)(2) – Personal Jurisdiction

       Though a plaintiff need not state a basis for personal jurisdiction in a

complaint, once a Rule 12(b)(2) motion has been raised, the plaintiff must overcome

the evidentiary burden of showing personal jurisdiction exists.9 “If the court has not

conducted an evidentiary hearing, then a plaintiff ‘need only make a prima facie

showing, in the allegations of the complaint, of personal jurisdiction and the record

is construed in the light most favorable to the plaintiff.’”10 To aid in the Court’s

determination of whether personal jurisdiction exists, “the court may consider the

pleadings, affidavits, and any discovery of record.”11

8
  See Marten v. Godwin, 499 F.3d 290, 296 (3d Cir. 2007); Remick v. Manfredy, 238 F.3d 248,
255–56 (3d Cir. 2001).
9
  Harris v. Harris, 289 A.3d 277, 295–96 (Del. Ch. 2023).
10
   Id. at 296 (quoting Sprint Nextel Corp. v. iPCS, Inc., 2008 WL 2737409, at *5 (Del. Ch. July
14, 2008)).
11
   Ryan v. Gifford, 935 A.2d 258, 265 (Del. Ch. 2007).
                                              4
       To determine whether this Court has personal jurisdiction over a defendant,

the Court invokes a two-step test. In step one, the Court examines if there is “a

legally cognizable basis for asserting jurisdiction over the defendant.”12 “Typically

this involves identifying and meeting the requirements of a statute, such as

Delaware’s long-arm statute.”13 In step two, the Court performs a due process

inquiry to determine if the “nonresident defendant has sufficient minimum contacts

with Delaware” such that she could foresee being haled to our courts.14 However,

“[w]here a party commits to the jurisdiction of a particular court or forum by

contract, such as through a forum selection clause, a ‘minimum contacts’ analysis is

not required as it should clearly anticipate being required to litigate in that forum.”15

       Plaintiffs contend that Morzev and the Trust “are current or former Members

of USARE.”16 Similarly, they contend that Gutnick, through his Vested Incentive

Units, is a Member of USARE.17 USARE’s Third Amended and Restated Company

Agreement, which was attached as an exhibit to the Amended Complaint, provides:

       Any Proceeding arising out of or relating to this Agreement or the
       Company’s activities or properties may be brought only in the

12
   Pacira BioSciences, Inc. v. Fortis Advisors LLC, 2021 WL 4949179, at *19 (Del. Ch. Oct. 25,
2021).
13
   Id. (citation omitted).
14
   Eagle Force Hldgs., LLC v. Campbell, 187 A.3d 1209, 1228 (Del. 2018).
15
   Id.
16
   [Corrected] Pls.’ Answering Br. Opp’n Defs.’ Mot. to Dismiss 10, Dkt. No. 39 (citing Compl.
¶¶ 9–10) (“Pls.’ AB”).
17
   Id. (citing Compl. ¶ 11). Gutnick contests that he was a member at the relevant time. See
Opening Br. of Defs. Morzev Pty Ltd., Mordechai Gutnick ATF The Morzev Trust, and Mordechai
Gutnick in Supp. of the Mot. to Dismiss 12, Dkt. No. 32 (the “Morzev Defs.’ OB”).
                                              5
       Delaware Court of Chancery as provided in the [Delaware Limited
       Liability Company] Act, in the state courts of the county where the
       Company’s principal office is located, or, if it has or can acquire
       jurisdiction, in the United States District Court for the district in which
       the Company’s principal office is located. Each Member and Assignee
       irrevocably submits to the exclusive jurisdiction of each such court in
       any such Proceeding, waives any objection it may now or hereafter
       have to venue or to convenience of forum, agrees that all claims in
       respect of the Proceeding shall be heard and determined only in any
       such court, and agrees not to bring any such Proceeding in any other
       court. . . .18

       Since Defendants Morzev and the Trust are allegedly Members of USARE, it

is reasonably conceivable at this stage of litigation that there is personal jurisdiction

over them for all matters “arising out of or relating to this Agreement or the

Company’s activities or properties.” The question is whether the allegations so arise

or relate.

               1. Personal Jurisdiction over Morzev and the Trust

       Plaintiffs’ ten causes of action against Morzev and the Trust —Counts I–VI

and IX–XIV—flow from alleged breaches of contract, negligent misrepresentation,

and fraud.19

       Morzev and the Trust contend that the tort and contract claims do not “‘arise

out of or relate to’ USARE’s LLC agreement, activities, or properties” and therefore

personal jurisdiction is lacking.20 They assert—and I find—that the “claims, instead,

18
   Compl. Ex. A at § 15.3.
19
   Compl. ¶¶ 61–88, 102–58.
20
   Morzev Defs.’ OB 12.
                                           6
arise out of the Australian law and New Jersey law govern[ing] Transfer Agreements

involving Plaintiffs’ investments in an Australian company, Morzev.”21 The causes

of action asserted, in other words, arise out of promises made in contracts to

exchange the Plaintiffs’ interest in Morzev for USARE units—Plaintiffs’ complaint

against these Defendants is that Plaintiffs received insufficient units to satisfy the

promises, resulting in breaches of contracts or torts. These common-law legal claims

do not arise as part of the internal affairs of USARE or from the LLC agreement

itself, and the jurisdictional waiver in that entities’ LLC agreement cannot confer

personal jurisdiction here. The counts against Defendants Morzev and the Trust are

dismissed for lack of personal jurisdiction.

              2. Personal Jurisdiction with Regard to Althaus

       Plaintiffs bring two causes of action against Defendant Althaus. Specifically,

they allege that Althaus breached his fiduciary duties and duty of good faith and fair

dealing under the USARE LLC agreement.22 Though a New York resident,23

Althaus was a manager of USARE,24 and personal jurisdiction therefore may inhere

21
   Id.
22
   Compl. ¶¶ 89–101. Though Plaintiffs allege that Althaus is a member of USARE through his
ownership of vested incentive units and personal jurisdiction therefore inheres by virtue of
USARE’s forum selection provision, I need not assess whether Althaus was a member of USARE
at this time as Althaus’s role as a manager is sufficient for deciding his Rule 12(b)(2) motion.
23
   Id. ¶ 12.
24
   Id.
                                               7
under statute.25 Specifically, 6 Del. C. § 18-109 provides the statutory basis for

personal jurisdiction. In pertinent part, it reads:

       A manager . . . of a limited liability company may be served with
       process in the manner prescribed in this section in all civil actions or
       proceedings brought in the State of Delaware involving or relating to
       the business of the limited liability company or a violation by the
       manager . . . of a duty to the limited liability company or any member
       of the limited liability company, whether or not the manager . . . is a
       manager . . . at the time suit is commenced. A manager’s . . . serving
       as such constitutes such person’s consent to the appointment of the
       registered agent of the limited liability company (or, if there is none,
       the Secretary of State) as such person’s agent upon whom service of
       process may be made as provided in this section. Such service as a
       manager . . . shall signify the consent of such manager . . . that any
       process when so served shall be of the same legal force and validity as
       if served upon such manager . . . within the State of Delaware and such
       appointment of the registered agent (or, if there is none, the Secretary
       of State) shall be irrevocable.

       Althaus contends that, under our caselaw, 6 Del. C. § 18-109 must be narrowly

construed. Specifically, he argues that 6 Del. C. § 18-109 does not provide personal

jurisdiction for claims against a manager if those claims are unrelated to internal

affairs or corporate governance.26 As such, 6 Del. C. § 18-109, per Althaus, cannot

provide jurisdiction over tort and contract claims that do not pertain to his duties as

a manager.27 He further argues that his actions were “ministerial” and thus not

25
   6 Del. C. § 18-109(a).
26
   Opening Br. Def. Pini Althaus Supp. Mot. to Dismiss the Am. Compl. 7, Dkt. No. 33 (“Althaus
OB”); Althaus RB 6.
27
   Althaus OB 7–8; Althaus RB 6.
                                              8
integral to the causes of action.28 Neither of these arguments persuade me in the

context of the counts at issue. Plaintiffs’ causes of action are for breach of fiduciary

duty and breach of the duty of good faith and fair dealing inhering in the USARE

LLC agreement. If those causes of action state claims on which relief may be

granted, they are within the ambit of 6 Del. C. § 18-109.

       Plaintiffs’ claims against Althaus are for breach of duties owed to USARE or

Plaintiffs directly, not for tort claims or breaches independent of the LLC. This is

true of both Counts VII and VIII. Though the Amended Complaint fails to specify

whether the underlying breaches are related to the duty of care or duty of loyalty,

Count VII alleges breaches of fiduciary duty in the issuance of equity to members.

This is squarely within the purview of 6 Del. C. § 18-109, which permits service of

process for “violation[s] by the manager . . . of a duty to the limited liability company

or any member of the limited liability company[.]”29 The same may be said of Count

VIII as it alleges a breach of the non-waivable duty of good faith and fair dealing

inherent in USARE’s LLC agreement. As pled, Althaus’s actions in connection with

USARE satisfy the statutory component of personal jurisdiction.

28
    Oral Arg. Tr. 37:10–14, 38:1–2.
29
    “A manager . . . of a limited liability company may be served with process in the manner
prescribed in this section in all civil actions or proceedings brought in the State of Delaware
involving or relating to the business of the limited liability company or a violation by the manager
. . . of a duty to the limited liability company or any member of the limited liability company[.]” 6
Del. C. § 18-109.
                                                 9
       Of course, Althaus has moved to dismiss these claims on sufficiency grounds,

which I will address in a subsequent opinion. The claims strike me as unlikely, but

I defer that decision.

       Plaintiffs also contend that personal jurisdiction exists for Althaus under the

“conspiracy” jurisdiction rubric—I address that in connection with similar

allegations concerning Gutnick, below.

              3. Personal Jurisdiction with Regard to Gutnick

       Plaintiffs bring eight causes of action against Defendant Gutnick that embody

four legal theories. They allege that Gutnick, similar to Althaus, breached his

fiduciary duties and the duty of good faith and fair dealing inhering in the USARE

LLC agreement, and also committed fraud by negligently or intentionally

misrepresenting the interests each Plaintiff would receive. Gutnick does not contest

personal jurisdiction over Counts VII and VIII—breach of fiduciary duties and

breach of the duty of good faith and fair dealing.30 However, he contends this Court

does not have personal jurisdiction over him for the other six counts. Plaintiffs aver

that personal jurisdiction exists because Gutnick was a member and manager of

USARE and, in those roles, he acted to further the alleged conspiracy underlying the

Amended Complaint.

30
  Defs. Morzev Pty Ltd., Mordechai Gutnick ATF The Morzev Trust, and Mordechai Gutnick
Reply Br. Supp. Mot. Dismiss Pls.’ Am. Compl. 9 (“Morzev Defs.’ RB”); Oral Arg. Tr. 26:18–20.
                                             10
       Gutnick is a manager of the LLC; he contends that he “has never been a

Member of USARE” and, therefore, he is not bound by the jurisdictional waiver in

the LLC Agreement.31 He argues that while 6 Del. C. § 18-109 provides a basis for

jurisdiction in Counts VII32 and VIII, it cannot serve as the basis of jurisdiction for

the other counts against him because those counts “have nothing to do with

USARE’s internal affairs or corporate governance.”33 Finally, he argues that the

allegations in the Amended Complaint do not satisfy the requirements of conspiracy

jurisdiction.34

                       a. Jurisdiction under 6 Del. C. § 18-109

       Though Plaintiffs contend that Gutnick is currently a member of USARE by

virtue of the “Vested Incentive Units he holds[,]”35 I find that he was not a member

of USARE at the time of the acts complained of. Aside from the verification of the

31
   Morzev Defs.’ OB 12.
32
   With respect to Count VII, both Gutnick and Althaus contend that USARE’s LLC agreement
waives all waivable fiduciary duties and, as such, Count VII fails to state a claim. Althaus OB 19–
20; Morzev Defs.’ OB 19–21; Althaus RB 15–16; Morzev Defs.’ RB 16–18. Plaintiffs argue that
the waiver was not put into place until three months after they received their interests, by which
time their injury was incurred. Pls.’ AB 44–46. Oral argument suggested that this was a simple
evidentiary dispute and that the original USARE LLC agreement somehow did not find its way to
Plaintiffs. Oral Arg. Tr. 51:6–18. I have received and reviewed the parties’ joint letter containing
their respective positions on the operative LLC agreement for USARE. Letter to The Honorable
Sam Glasscock III, Dkt. No. 58. However, I am unable to determine the authenticity of the July
2019 LLC agreement and, therefore unable to determine when USARE waived fiduciary duties
owed by its managers to its members. While development of the factual record in this case may
make the issue ripe for summary judgment, I decline to dismiss Count VII at this time.
33
   Oral Arg. Tr. 27:18–28:8; Morzev Defs.’ RB 9–10.
34
   Morzev Defs.’ RB 10–12.
35
   Compl. ¶ 11.
                                                11
Amended Complaint, Plaintiffs provide no evidence that Gutnick was a member at

the time of the challenged transactions. Gutnick, however, affirmed that he has

“never been a member or unitholder of [USARE], and never held any incentive units

in [USARE].”36 Gutnick’s affirmation is admissible,37 and even considering the

facts in the light most favorable to Plaintiffs, I cannot find that Gutnick was a

member of USARE or that the jurisdictional waiver of the LLC agreement applies.

       Plaintiffs’ arguments on the use of 6 Del. C. § 18-109 as the statutory hook

with which to land Plaintiffs’ fraud and negligent misrepresentation counts against

Gutnick in Delaware similarly fail. Under the statute, managers impliedly consent

to personal jurisdiction for actions “involving or relating to the business of the

limited liability company.”38 In order to invoke that clause of 6 Del. C. § 18-109, I

must consider whether the allegations are consistent with the statutory waiver and

construed sufficiently narrowly to comply with due process, as when the allegations

against managers “refer to corporate governance and the internal affairs of [the]

LLC.”39 To be applicable, the allegations against the manager must focus on her

36
   Decl. of Mordechai Gutnick Supp. Morvez Defs.’ Mot. to Dismiss ¶ 6, Dkt. No. 32.
37
   See Ryan, 935 A.2d at 265 (“In ruling on a Rule 12(b)(2) motion, the court may consider the
pleadings, affidavits, and any discovery of record.”).
38
   6 Del. C. § 18-109(a).
39
   Endowment Rsch. Grp., LLC, 2021 WL 841049, at *5 (Del Ch. Mar. 5, 2021). While there is
debate whether 6 Del. C. § 18-109 should be construed narrowly or if it should be construed
broadly and then limited by due process, the difference is immaterial to my analysis and would not
change my conclusion. Compare Endowment Rsch. Grp., LLC, 2021 WL 841049, at *5
(explaining that 6 Del. C. § 18-109 is interpreted narrowly), with Next Level Ventures, LLC v.
AVID USA Techs. LLC, C.A. No. 2022-0699-MTZ, at 13:12–20:1 (Del. Ch. Mar. 16, 2023)
                                               12
“‘rights, duties and obligations’” as a manager, be “‘inextricably bound up in

Delaware law,’” and provide a strong basis for Delaware to serve as the forum for

adjudicating the disputes.40 The contract and fraud claims here claims here bear no

relationship to the duties of managers, and do not involve the internal affairs of

USARE. They cannot support imposing personal jurisdiction here over those legal

claims, as a matter of due process.41

                      b. “Conspiracy” Jurisdiction

       Plaintiffs also argued that this Court can exercise personal jurisdiction over

Gutnick and Althaus regarding the legal claims, under the conspiracy theory of

jurisdiction.42 As prescribed by the Delaware Supreme Court in Istituto Bancario, a

properly-served defendant-conspirator is subject to the jurisdiction of this Court on

a factual showing that:

(TRANSCRIPT) (examining first whether there was a statutory basis under 6 Del. C. § 18-109 to
assert personal jurisdiction over the defendants before then analyzing whether exercising personal
jurisdiction comported with due process).
40
   Id. at *5 (quoting Vichi v. Koninklijke Phillips Elecs. N.V., 2009 WL 4345724, at *7 (Del. Ch.
Dec. 1, 2009)).
41
   See supra note 39. Moreover, the questions here are not “inextricably bound up in Delaware
law[.]” Endowment Rsch. Grp., LLC, 2021 WL 841049, at *5 (quoting Vichi, 2009 WL 4345724,
at *8). Plaintiffs contend that this Court should respect the laws selected by the parties in their
various conversion agreements. Pls.’ AB 19–21. Specifically, they argue that the laws of New
Jersey govern the Ramco conversion agreement and thus the tort claims arising from those
agreements—Counts IX and X—while the laws of Western Australia govern the DinSha and US
Trading conversion agreements and thus the tort claims arising from those agreements—Counts
XI to XIV. Id. at 20. The Morzev Defendants argue that under a choice of law analysis, Western
Australian law governs all of the fraud and negligent misrepresentation claims—Counts IX to XIV.
Morzev Defs.’ OB 10. I fail to see how these claims could be linked, let alone inextricably, with
the laws of Delaware.
42
   Pls.’ AB 12–14.
                                               13
       (1) a conspiracy to defraud existed; (2) the defendant was a member of
       that conspiracy; (3) a substantial act or substantial effect in furtherance
       of the conspiracy occurred in the forum state; (4) the defendant knew
       or had reason to know of the act in the forum state or that acts outside
       the forum state would have an effect in the forum state; and (5) the act
       in, or effect on, the forum state was a direct and foreseeable result of
       the conduct in furtherance of the conspiracy.43

“Although Istituto Bancario literally speaks in terms of a ‘conspiracy to defraud,’

the principle is not limited to that particular tort.”44 At this stage in litigation, an

inference of conspiracy requires the pleading of “facts supporting: (i) the existence

of a confederation or combination of two or more persons; (ii) that an unlawful act

was done in furtherance of the conspiracy; and (iii) that the conspirators caused

actual damage to the plaintiff.”45

       Conspiracy jurisdiction is a method of analysis, not an independent basis for

jurisdiction.46 “While a valid path to jurisdiction, the conspiracy theory of personal

jurisdiction is very narrowly construed to prevent plaintiffs from circumventing the

minimum contacts requirement.”47 Thus, there must be a statutory basis, such as

Delaware’s long-arm statute, for extending personal jurisdiction over at least one

43
   Istituto Bancario Italiano SpA v. Hunter Eng’g Co., Inc., 449 A.2d 210, 225 (Del. 1982).
44
   Harris v. Harris, 289 A.3d 310, 339 (Del. Ch. 2023) (citations omitted).
45
   Id. (citation omitted).
46
   Crescent/Mach I P’rs, L.P. v. Turner, 846 A.2d 963, 976 (Del. Ch. 2000); see also, e.g., Lacey
v. Mota-Velasco, 2020 WL 5902590 (Del. Ch. Oct. 6, 2020); Fortis Advisors LLC v. Johnson &
Johnson, 2021 WL 5893997 (Del. Ch. Dec. 13, 2021).
47
   Morrison v. Berry, 2020 WL 2843514, at *13 (Del. Ch. June 1, 2020) (quotations and alterations
omitted).
                                               14
conspirator before fellow conspirators are similarly subject.48 Because Delaware’s

long-arm statute “confers specific, not general, jurisdiction, formation of a Delaware

entity may only serve as the basis for personal jurisdiction where there is a sufficient

nexus between that formation and the alleged wrongful conduct.”49

      Here, the Morzev Defendants made representations to Plaintiffs that Plaintiffs

would receive interests in USARE equivalent to the interests they held in Morzev.

The Morzev Defendants knew of Plaintiffs’ reliance and the interests Plaintiffs

expected to receive.     Although not specifically pled, I may infer that these

Defendants had a pecuniary interest to the extent that they supposedly benefited from

using these transactions to diminish Plaintiffs’ ownership interests. Plaintiffs further

allege that the Morzev Defendants took no steps to correct Plaintiffs’ apparent

misapprehension, causing Plaintiffs to receive lesser interests than what was

promised. Thus, as alleged, the Morzev Defendants acted in concert to defraud or

misrepresent facts to Plaintiffs, and Plaintiffs were harmed by receiving lesser

interests than they were promised. Under the applicable plaintiff-friendly pleading

standard, I find that element one of Istituto Bancario is satisfied. I assume without

deciding that a sufficient pleading is made that USARE, over which jurisdiction lies

in this Court, was a part of the conspiracy.

48
  See Lacey, 2020 WL 5902590, at *6.
49
  Lone Pine Res., LP v. Dickey, 2021 WL 2311954, at *5 (Del. Ch. June 7, 2021) (citations
omitted).
                                           15
         The remaining Istituto Bancario elements are elusive here. Plaintiffs plead

that the creation of USARE and the shifting of Morzev assets to the new LLC were

intended to facilitate access to U.S. capital markets.50 The Amended Complaint does

not allege that USARE was created for the purpose of facilitating the conspiracy.

No other act is alleged to have happened in Delaware, nor was such an act

foreseeable. This cannot be sufficient to convey personal jurisdiction on those who

allegedly contemplated the breach of contract or fraud taking place outside of this

State.51

         B. Remaining Issues

         With respect to the remaining Defendants and Counts, I now turn my attention

to the motion to dismiss on forum non conveniens grounds and Defendants’ Rule

12(b)(6) motions to dismiss. Before addressing these, it would be helpful to have

supplemental briefing on the effect of my decision here with respect to personal

jurisdiction on the forum non conveniens analysis and whether conflict of laws issues

exist with regard to the remaining 12(b)(6) issues.

                                     III. CONCLUSION

         The causes of action pled against Morzev and the Trust are dismissed for lack

of personal jurisdiction. The causes of action pled against Gutnick in Counts I –VI

50
     Compl. ¶ 22.
51
     See, e.g., Lacey, 2020 WL 5902590, at *7; Fortis Advisors LLC, 2021 WL 5893997, at *7.
                                               16
and IX–XIV are dismissed for lack of personal jurisdiction.      The balance of

Defendants’ Motions to Dismiss for lack of personal jurisdiction are DENIED. I

reserve decision on the balance of Defendants’ Motions to Dismiss for purposes of

forum non conveniens and Rule 12(b)(6). The Parties should supply an appropriate

form of order.

                                       17