Court Opinion

ID: 4708108
Source: CourtListenerOpinion
Date Created: 2021-07-30 21:04:22.832437+00
Date Added: 2024-06-11T08:06:48.483108
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

STONE & PAPER INVESTORS, LLC,                  )
individually and derivatively on behalf of     )
CLOVIS HOLDINGS LLC,                           )
                                               )
                     Plaintiff,                )
                                               )
       v.                                      ) C.A. No. 2018-0394-PAF
                                               )
RICHARD BLANCH, VIVIANNA BLANCH,               )
RED BRIDGE & STONE, LLC, BRIAN                 )
SKINNER and SKINNER CAPITAL, LLC,              )
                                               )
                    Defendants,                )
                                               )
       v.                                      )
                                               )
CLOVIS HOLDINGS LLC,                           )
                                               )
               Nominal Defendant.              )
_______________________________________        )
RICHARD BLANCH, RED BRIDGE &                   )
STONE, LLC, and CLOVIS HOLDINGS,               )
LLC,                                           )
                                               )
    Counterclaim and Third-Party Plaintiffs,   )
                                               )
       v.                                      )
                                               )
STONE & PAPER INVESTORS, LLC,                  )
EISENBERG & BLAU, CPAS, P.C., DDK &            )
COMPANY, LLP, and RICHARD                      )
EISENBERG,                                     )
                                               )
  Counterclaim and Third-Party Defendants.     )
_______________________________________
                           MEMORANDUM OPINION

                           Date Submitted: April 6, 2021
                           Date Decided: July 30, 2021

Richard I. G. Jones, Jr., David B. Anthony, BERGER HARRIS LLP, Wilmington,
Delaware; David Lackowitz, Zaid Shukri, MOSES & SINGER LLP, New York,
New York; Attorneys for Plaintiff and Counterclaim Defendant Stone & Paper
Investors, LLC.

Catherine Damavandi, NURICK LAW GROUP, LLC, Wilmington, Delaware;
Attorney for Defendants and Counterclaim and Third-Party Plaintiffs Richard
Blanch, Vivianna Blanch, and Red Bridge & Stone, LLC.

John A. Elzufon, ELZUFON AUSTIN & MONDELL, P.A., Wilmington, Delaware;
Attorney for Third-Party Defendants Eisenberg & Blau CPAS, P.C., Richard
Eisenberg, and DDK & Company, LLP.

Richard Skinner, pro se.

FIORAVANTI, Vice Chancellor
      This case presents a dispute among the members and managers of Clovis

Holdings, LLC (“Clovis” or the “Company”), which was created in 2014 to acquire

a business that sold stone-based paper products. The Company’s non-managing

preferred member, Stone & Paper Investors, LLC (“Stone & Paper”), alleges that

the Company’s two managers, Richard Blanch and Brian Skinner, fraudulently

induced Stone & Paper to invest $3.5 million in the Company and then spent the

Company’s capital on themselves while doing nothing to advance the Company.

Stone & Paper alleges that Blanch and Skinner’s conduct breached their fiduciary

duties and the Company’s limited liability company agreement. 1     Stone & Paper

claims that affiliates of Blanch and Skinner aided and abetted the managers’

breaches of fiduciary duty and were unjustly enriched through receipt of

unauthorized payments. The Company, at the direction of Blanch and Skinner, has

asserted counterclaims alleging that Stone & Paper breached the LLC Agreement

and was unjustly enriched when it received over $100,000 in Company funds and

caused Clovis to pay unauthorized expenses charged to a credit card held in the name

of one of Stone & Paper’s principals.

      The LLC Agreement required Blanch and Skinner to devote the Company’s

resources to acquiring the stone paper business of Tier1 International, Inc. d/b/a

1
 See JX 36 (Limited Liability Company Operating Agreement of Clovis Holdings, LLC,
dated as of January 1, 2014) (the “LLC Agreement”).
ViaStone (“ViaStone”). ViaStone has a distribution agreement with stone paper

manufacturer Taiwan Lung Meng (“TLM”) to distribute its product in the United

States. The LLC Agreement required Stone & Paper’s approval if the Company

engaged in any business other than the ViaStone business. The LLC Agreement also

contained restrictions and disclosure requirements on interested transactions, as the

term is defined in the LLC Agreement. The evidence shows that Blanch and Skinner

initially devoted their time, effort, and the Company’s resources to acquiring

ViaStone, but later changed course.       By no later than late November 2015,

unbeknownst to Stone & Paper, Blanch and Skinner abandoned the effort to acquire

ViaStone and sought alternative pathways to enter the stone paper business. All the

while, Blanch and Skinner were paying themselves $20,000 per month from Clovis’s

funds, which were deposited into accounts of their affiliates, Red Bridge & Stone,

LLC (“Red Bridge”) and Skinner Capital, LLC (“Skinner Capital”). Stone &

Paper’s principal, John Diamond, initially agreed to the payments to Skinner, but not

to Blanch.

      After abandoning efforts to acquire ViaStone, Skinner and Blanch embarked

on draining nearly all of ViaStone’s remaining funds and sought to conceal their

activity by trying to recharacterize the payments to them as loans. By May 2018,

when this action was filed, Skinner and Blanch had transferred approximately $2.5

                                         2
million from Clovis to themselves or their affiliates, ultimately leaving Clovis with

just $6,500 remaining in its bank account.

      In this post-trial opinion, I find that Skinner and Blanch did not fraudulently

induce Stone & Paper to invest in Clovis. The managers did, however, breach the

LLC Agreement, violate their fiduciary duties to Clovis, and fraudulently conceal

their conduct from Stone & Paper. I also find that Skinner’s affiliate, Defendant

Skinner Capital, and Blanch’s affiliates, Defendants Vivianna Blanch and Red

Bridge, are liable for civil conspiracy and aiding and abetting the managers’

breaches of fiduciary duty and fraudulent concealment.

      I find that Clovis’s claim alleging that Stone & Paper received $100,000 in

unauthorized payments is time-barred, but that Clovis prevails with respect to

$21,000 paid for a newsletter subscription. I also find that Skinner, not Stone &

Paper, caused Clovis to pay credit card expenses that were not reasonable Clovis

expenses. Skinner is therefore liable to Clovis for the credit card payments.

                                         3
I.       BACKGROUND

         The following recitation reflects the facts as the court finds them after trial.2

The facts discussed herein have been proven by a preponderance of the evidence.

There were 689 trial exhibits submitted into evidence. Six witnesses testified at the

four-day trial,3 with testimony from two more witnesses presented through video

clips of their depositions. Some witnesses were more credible than others. Among

the key players, Blanch was the least credible witness. I have therefore afforded his

testimony minimal weight. Skinner’s testimony was reliable at times, but overall he

was willing to testify falsely when necessary to support his own self-interests.

Vivianna Blanch was more reliable than Blanch or Skinner. I found her to be

credible on many issues but evasive on others, particularly those implicating her

husband’s wrongdoing. John Diamond, a principal of Stone & Paper, was a

generally reliable witness, but at times his recollection was vague. Because the

parties’ testimony is often in direct conflict, I have generally afforded

contemporaneous documents and disinterested witness testimony the greatest weight

in making my factual findings.

2
 The trial testimony is cited as “Tr.”; deposition testimony is cited as “Dep.”; trial exhibits
are cited as “JX” or “PX”; and stipulated facts in the pre-trial order are cited as “PTO,”
with each followed by the relevant page, paragraph, or exhibit number.
3
    Trial was held remotely via Zoom technology.

                                              4
           A.    The Members and Managers of Clovis Holdings, LLC

           Clovis is a Delaware limited liability company, with its principal place of

business in New York. 4 Defendants Richard Blanch and Brian Skinner are the

Company’s sole managers. 5 Skinner was in charge of Clovis’s finances.6

           Clovis has two common members and one preferred member.7 The common

members are Defendant Red Bridge and Defendant Skinner Capital, with each

owning 37,500 common units of Clovis. 8             Red Bridge and Skinner Capital

collectively control 75% of Clovis’s total voting units.9 Red Bridge is a Delaware

limited liability company with its principal place of business in New York.10

Defendant Vivianna Blanch, who is married to Blanch,11 was the sole member at

Red Bridge’s formation.12 Defendants Red Bridge, Richard Blanch, and Vivianna

Blanch are collectively referred to herein as the “Blanch Defendants.” Skinner

4
    PTO ¶ 2.
5
    Id. ¶¶ 3 & 6.
6
    Tr. 404:20–23 (Skinner).
7
    LLC Agreement at A-1.
8
    Id.; PTO ¶¶ 4 & 5.
9
    PTO ¶ 5.
10
     Id.
11
  Id. ¶ 7. To avoid confusion, Richard Blanch will be referred to as “Blanch” and Vivianna
Blanch will be referred to as “Vivianna Blanch.” No disrespect is intended.
12
     Tr. 929:23–930:9 (V. Blanch).

                                            5
Capital is a Delaware limited liability company.13 Brian Skinner is the principal of

Skinner Capital. 14 Brian Skinner represented himself pro se at trial in this action.

          Plaintiff Stone & Paper is a Delaware limited liability company and Clovis’s

sole preferred member. 15 Stone & Paper holds 25,000 preferred units of Clovis and

25% of the Company’s voting power. John Diamond and Albert Carter formed

Stone & Paper to invest in Clovis. 16

          B.    The Parties’ Relations Before Clovis

          Diamond and Carter were long-term business partners who founded Diamond

Carter Trading, LLC (“Diamond Carter Trading”).17 Diamond Carter Trading

engaged in the business of market making in options and exchange traded funds. 18

          Skinner joined Diamond Carter Trading in 2001 after graduating from

college.19 Skinner distinguished himself in his work, impressed Diamond and

Carter, and rose to become a junior partner and Chief Operating Officer of Diamond

Carter Trading. 20 Diamond, Carter, and Skinner became as close as family, with

13
     PTO ¶ 4.
14
     Id. ¶ 3.
15
     Id. ¶ 1.
16
     Tr. 17:19–22 (Diamond).
17
     Tr. 7:24–8:9 (Diamond).
18
     Tr. 9:21–10:2 (Diamond).
19
     Tr. 8:13–23 (Diamond).
20
     Tr. 9:11–19 (Diamond).

                                            6
Carter describing Skinner as a “brother” and Diamond describing Skinner as a

“son.”21 Diamond testified repeatedly that he previously harbored a great deal of

trust in Skinner. 22

         Blanch and Skinner met in 2003.23 Blanch is a self-described “entrepreneur”24

who previously founded a marketing consultancy named Masters of Branding.

Blanch was also the CEO of a company known as Metier Tribeca LLC d/b/a Le

Metier de Beaute (“Metier”), described as a “a beauty company that sold in retail.”25

Diamond and Carter met Blanch around 2007, and Skinner reintroduced Blanch to

them in or around 2011 or 2012.26 Diamond testified that he did not know Blanch

well prior to getting involved in business together.27

         On July 3, 2013, investors in Metier filed litigation against Blanch and Metier

in the Southern District of New York (the “Metier Action”).28 The plaintiffs in the

21
   Tr. 8:13–23 (Diamond) & 9:8–17 (Diamond) (“[Carter] used to say that [Skinner] was
like a brother to him. I used to say that he was like a son to me.”).
22
  See Tr. 23:1–5 (Diamond) (“Brian Skinner and I had worked closely together for more
than a decade. He was my right-hand man in business. I worked more closely with him
than I did with [Carter]. I trusted him.”); Tr. 118:3–12 (Diamond) (testifying that he trusted
Skinner); Tr. 126:7–12 (Diamond) (same); Tr. 257:24–259:10 (Diamond) (same).
23
     Blanch Dep. 50:12–19.
24
     Blanch Defs.’ Pre-Tr. Br. 7.
25
   Tr. 512:23–513:18 (R. Blanch); see also Tr. 154:11–157:1 (Diamond) (explaining the
history of Metier).
26
     Tr. 9:1–7 (Diamond); Tr. 945:13–19 (Carter).
27
     Tr. 9:10–13 (Diamond).
28
     JX 7.

                                              7
Metier Action alleged that they had invested approximately $5 million in Metier

based on representations and contractual guarantees that the investments would

generally fund the working capital requirements of the company. They alleged that

Blanch “wired hundreds of thousands of dollars from the Company’s accounts to his

personal bank account, and to the bank accounts of other insiders, only hours after

receiving Plaintiffs’ investment monies.”29 According to the complaint in the Metier

Action, Blanch “then altered the books and records of the Company to post

backdated amounts due,” and later characterized it as an accounting error. 30

           C.    Blanch and Skinner Encourage Diamond and Carter to Invest in
                 the Stone Paper Business.

           On May 16, 2013, Blanch sent Skinner an email with advice on how to further

maximize his profits from his relationship with Diamond Carter Trading, Diamond,

and Carter. 31 Blanch created a list of priorities “for how [Skinner] need[ed] to focus

[his] negotiations” with Diamond and Carter in order to achieve “$330,000 in annual

salary with $7MM of their capital at risk.” 32 To do so, Blanch laid out a multi-step

plan, which included Skinner asking Carter and Diamond to give Skinner $5 million

29
     Id. ¶ 2.
30
     Id.
31
   JX 4 (“Based on the conversations that we are having, I have come up with the following
list of priorities for how you need to focus your negotiations with [Carter] and
[Diamond].”).
32
     JX 4.

                                            8
to “fund future deals.”33 Blanch reiterated that acting on his plan in full would enable

Skinner to “put $7MM into play in the next 6 months, make yourself $330,000

annually, and give yourself piece [sic] of mind for at least three years.”34

           Skinner then presented to Diamond a potential investment in ViaStone.

ViaStone was an entity jointly owned and managed by Jeff and Christine Chow.35

ViaStone held a distribution agreement with TLM, a stone paper manufacturer in

China.36 In an email dated May 20, 2013, Skinner exhorted Diamond to focus on

the ViaStone opportunity: “ViaStone . . . is something we really need to look at”

even though “this is not our normal thing.” 37 Skinner worked on the prospect of

having Carter and Diamond invest in the ViaStone entity during ViaStone’s Series

A financing round through Henry Kang, an investment banker at the Ajia Group

(“Ajia”). On Blanch’s side, Blanch introduced Kang to Drew Aaron, a close friend

of Blanch. 38 Aaron’s family business, The Aaron Group, is one of the world’s

largest paper brokers. 39

33
     Id.
34
     Id.
35
  PTO ¶ 8. Because Jeff Chow was more involved in the events underlying this dispute
than his wife, Christine Chow, references to “Chow” herein refer to Jeff Chow.
36
     Id.
37
     JX 5; Tr. 222:19–223:14 (Diamond).
38
     Tr. 517:17–519:1 (R. Blanch).
39
     Tr. 289:8–16 (Skinner).

                                           9
           In or around July 2013, ViaStone and Ajia circulated a draft stock purchase

agreement.40       Although the stock purchase agreement was purportedly never

executed, Ajia made a deposit payment to ViaStone of at least $250,000.41 On

September 9, 2013, Kang sent Skinner a draft of an email to Diamond and Carter

regarding the status of their prospective investment in ViaStone, which Skinner

approved. 42 Kang sent the email to Diamond and Carter, and on September 11, 2013,

Carter responded, stating that “our Diamond Carter group continues to maintain its

desire to be included in this ViaStone investment round.”43 Carter requested that

Ajia “continue to work closely with Mr. Brian Skinner so that we may be included

in the ViaStone venture.” 44

           Later the same day, Skinner and Kang exchanged a series of contentious

emails. Skinner accused Kang of withholding information from him and making

false representations regarding the status of another key investor’s investment.45

Skinner aggressively demanded information regarding the purchase price of

ViaStone and how much money Kang had personally invested in the Series A

40
     PTO ¶ 8; see also JX 19.
41
     PTO ¶ 8; JX 19, JX 20, JX 21.
42
     JX 588.
43
     JX 14.
44
     Id.
45
     JX 15 at S0018203–5.

                                            10
financing.46 Kang took offense, and in response informed Skinner that the parties

had “lost trust in each other” and that it was “time for us to move on.”47

           On September 14, 2013, Blanch emailed Skinner regarding “how to play this

thing out.”48 Blanch schemed to cut Ajia and Henry Kang out of the deal by

purchasing ViaStone through a new limited liability company, using funding from

Diamond, Carter, and Aaron.49 Blanch and Skinner persuaded ViaStone’s founder,

Chow, to end his negotiations with Ajia. 50 On September 20, 2013, Chow did just

that, by having ViaStone’s counsel notify Ajia’s counsel that ViaStone was ending

further negotiations with Ajia.51 The next month, Blanch, Skinner, and Diamond

attended a dinner with Chow and Aaron at The Aaron Group’s corporate

headquarters.52 Diamond testified that this dinner lent significant credibility to

46
     Id.
47
     Id. at S0018203.
48
     JX 17.
49
     Id.
50
     Tr. 1052:17–1053:12 (Chow).
51
  JX 19 & 20. ViaStone and Ajia disputed the import of the July stock purchase agreement.
PTO ¶ 8. ViaStone represented that it would return the $250,000 deposit and a $200,000
loan, and it took the position that ViaStone and Ajia had never validly entered into any
agreement for the purchase of ViaStone. JX 19. Kang disagreed, and considered litigation
against ViaStone. See JX 55. Blanch never notified Diamond of this dispute. Tr. 26:11–
27:1 (Diamond).
52
     Tr. 19:13–20:6 (Diamond).

                                           11
Blanch both in the stone paper industry and in others areas, such as the cosmetics

industry. 53 Shortly thereafter, Diamond committed to invest in acquiring ViaStone.

           On November 2, 2013, just as Blanch’s and Skinner’s negotiations with

ViaStone were ramping up, Chow suddenly ceased conversations with Blanch and

Skinner until they agreed to execute a confidentiality agreement. 54 In an email to

Skinner, Blanch recommended that they not sign the confidentiality agreement.

Blanch indicated that he planned to ignore the request and to proceed with attempting

to finish the transaction. Blanch also indicated that, eventually, he and Skinner could

potentially seek to “go straight to China and buy direct”:

           Seems that this is [ViaStone’s lawyer] trying to get some control in the
           negotiations. This is common stuff. I would let it glide at this point.
           Next steps are to get the transaction done for Diamond and Drew into
           the new LLC and for us to get the paperwork done between that LLC
           to the Ajia/Stone Paper LLC. Then for the Stone Paper/Ajia LLC to
           get paperwork with Tier 1.

           [The ViaStone managers] are not very bright. They are amateurs and
           do not seem to understand that if for any reason we pull the plug, they
           are back to dealing with Ajia and a lawsuit.

           Aaron Paper will NOT work with them if we walk away. And we do
           NOT sign anything here . . . as we might need to go straight to China
           and buy direct. Signing this kind of crap could give them ammunition
           to challenge us in that situation. 55

53
     Id.
54
     JX 29.
55
     Id. (ellipsis in original).

                                             12
Skinner agreed, and stated, “[a]s for China we spoke about going direct a while ago

but easier said than done but I’m sure we can pull it off if what we have been told is

true.” 56

           Negotiations with ViaStone resumed.      On December 22, 2013, Blanch

notified ViaStone’s managers, Michael Cheng and Jeff Chow, that “Brian and I were

able to get the deal done with Drew [Aaron] and Jo[h]n Diamond.” 57 According to

Blanch, he “hope[d] to have paperwork” submitted to ViaStone’s managers “before

January 1st.”58 By this time, ViaStone’s managers trusted Blanch enough to have

provided him with a “viastone.net” email address.59

           D.    The Parties Form Clovis to Purchase ViaStone.

           In early 2014, Diamond, Carter, Skinner, and Blanch began preparing for the

formation of Clovis to purchase ViaStone. In January 2014, Blanch and Aaron

discussed Aaron’s future involvement, including by investing in ViaStone and

distributing its stone paper product through Aaron’s entity, The Aaron Group.60

During the same period, Blanch began holding himself out as the successful owner

56
     Id.
57
     JX 33.
58
     Id.
59
     Id.
60
  JX 592. This is an email from Aaron to Blanch, copied within an email from Skinner to
Christopher Ezold, an attorney involved in the formation of Stone & Paper. JX 590. It is
not clear from the record how the email was transmitted from Blanch to Skinner.

                                            13
of an “environmentally friendly paper company.”61 In an email dated January 17,

2014, Blanch wrote to a friend with an update regarding his life:

           I started a private equity fund with an old friend of mine and we have
           bought a[n] environmentally friendly paper company. We hold patents
           that allow us to make paper from limestone (calcium carbonate), with
           NO pulp or water required in its production, and the paper is
           competitive with any pulp based product on the market (the Chinese
           government just built us a $250MM plant in China that produces
           360MM tons annually). 62

Blanch’s autobiographical update was pure fiction. When Blanch sent this email, he

was not: (1) the cofounder of a private equity fund, (2) the purchaser of an

environmentally friendly paper company, (3) the holder of patents relating to stone

paper, or (4) the recipient of a $250MM paper plant in China that the Chinese

government had built for his non-existent private equity fund. At trial, Blanch

characterized his email’s statement regarding his ownership of an “environmentally

friendly paper company” as “shorthand,” called the statement that the “Chinese

government . . . built us a $250MM plant in China” an “embellishment,” and

confessed to being “embarrassed” about it. 63 In the same January 17, 2014 email,

Blanch further represented to his friend that Metier had become a “powerful brand

61
     JX 40.
62
     Id.
63
     Tr. 714:24–19:7 (R. Blanch).

                                            14
with industry credibility.” 64      Less than one month later, Metier filed for

bankruptcy.65

           In February 2014, Diamond sent Skinner an email indicating that he wanted

to include contractual limitations on the use of funds invested in Clovis. He sought

“[c]lear language” in any limited liability company agreement “limiting the use of

the capital provided by [Stone & Paper] solely to investment in the ‘Viastone

Business,’” defined as “the acquiring of the equity or assets of Tier1 International.”66

Skinner responded and said, “Fine with me.” 67 Skinner forwarded Diamond’s email

to Blanch and their attorney, Robert Okulski. Blanch indicated to Skinner and

Okulski that the contractual limitation was acceptable to him.68 Okulski cautioned

that Diamond’s proposed language might be “too restrictive,” because “a large

portion of the capital is also going to be used to fund the operations of the Viastone

business post-closing” and that “the funds are also to be used to cover the formation

and ongoing operating costs of Clovis.”69 In response, Blanch noted that “they want

to ensure the money is used for what we have stated – notably to purchase and run

64
  JX 40 (writing regarding Metier and stating that “Many call us the Rolls Royce or
Hermes of the Beauty Industry – its nice to hear.”).
65
     Tr. 155:21–156:9 (Diamond).
66
     JX 47.
67
     Id.
68
     JX 48 at SA026515.
69
     Id. at SA026514.

                                           15
Tier1/ViaStone,” and proposed “a small carve out regarding Clovis expenses,” but

otherwise providing that “money is for purchase and ongoing working capital for

[ViaStone].”70

         Blanch told Diamond that it was necessary to finalize the Clovis LLC

Agreement by early March 2014 so that Clovis could purchase ViaStone before

Aaron Paper issued ViaStone a “20,000 ton commitment” as its “opening order.”71

There is no evidence that Aaron or any entity affiliated with Aaron ever purchased

paper from ViaStone. 72

         On or about April 4, 2014, the parties executed Clovis’s LLC Agreement.73

The LLC Agreement restricts the ability of Clovis to take any action defined as a

“Major Decision” without approval in writing by Clovis’s board of managers and

“the Preferred Members.” 74 Clovis’s board of managers consisted of the two

Managers, Blanch and Skinner, and Clovis’s only Preferred Member was Stone &

70
     Id.; PTO ¶ 10.
71
     JX 44.
72
  See Tr. 721:4–22 (R. Blanch) (acknowledging that Aaron Paper did not submit any
purchase order to purchase paper from Clovis).
73
   PTO ¶ 11. Blanch and Skinner signed the LLC Agreement as Managers of Clovis,
Vivianna Blanch signed on behalf of Red Bridge, Skinner signed on behalf of Skinner
Capital, and Diamond signed on behalf of Stone & Paper. LLC Agreement, Signature
Page. The parties stipulated that, even though the LLC Agreement is dated “as of January
1, 2014,” it was, in fact, executed on or about April 4, 2014. PTO ¶ 11.
74
     LLC Agreement § 5.1.

                                          16
Paper.75 Thus, any “Major Decision” required Stone & Paper’s written consent.

Section 5.1(c) of the LLC Agreement provides that the “Major Decisions” include

“[e]ngaging in any business other than the Viastone Business, including, but not

limited to, the funding and purchase and operations thereof through a subsidiary.”76

“Viastone Business” is defined in the LLC Agreement as “the paper business

currently conducted by Tier1 International, Inc., a California corporation that the

Company is seeking to acquire through a subsidiary either pursuant to a stock or

asset purchase.”77

          The LLC Agreement contains limitations on transactions between the

Company and its members and managers. Section 5.2 provides that the Company

may not:

          enter into an Interested Transaction . . . unless it has first fully disclosed
          the terms and conditions of such Interested Transaction to the Board
          and the Members and the Board determines that the Interested
          Transaction is fair and reasonable to the Company and the terms and
          conditions are at least as favorable to the Company as those that are
          generally available from persons capable of similarly performing them
          and in similar transactions between parties operating at arm’s length. 78

The LLC Agreement defines “Interested Transaction” as “any transaction between

a Member, a Manager or a member of the Board, or any Affiliate thereof, on the one

75
     PTO ¶¶ 1, 3, 6.
76
     LLC Agreement § 5.1(c).
77
     Id. § 1.1(kk).
78
     Id. § 5.2.

                                               17
hand, and the Company, on the other hand.” 79 The LLC Agreement then provides

that, “in the event that the Company acquires the Viastone business through a stock

or asset purchase, the current Managers, directly or through their Member entities,

will be actively involved in the management thereof and will receive a fee or like

compensation therefor.” 80

           E.     Skinner and Stone & Paper Take a “Salary” from Clovis.

           Stone & Paper initially capitalized Clovis with $3.5 million on April 8, 2014.81

Clovis maintained a single bank account at Citibank, with Blanch, Skinner, and

Diamond as the sole signers on the account. 82 Later that month, Skinner began

wiring regular payments from Clovis to Stone & Paper, Skinner Capital, and Red

Bridge.83

           Skinner requested permission from Diamond to draw a salary of $20,000 per

month for work relating to Clovis. Though Diamond did not recall specifically when

he gave permission for Skinner to draw a salary from Clovis, Diamond testified that,

“a few months after we had funded Clovis,” he approved Skinner’s requested salary

 Id. § 5.2. “Member” is defined to mean “each of the Preferred Members and Common
79

Members listed on Schedule A hereto,” in addition to any future members. Id. § 1.1(w).
80
     Id. § 5.2.
81
     PTO ¶ 12.
82
     Id.
83
     Id.; JX 503.

                                              18
in the “spring, summer, or fall” of 2014, and he never withdrew his approval for

Skinner’s salary. 84 Skinner began wiring $20,000 per month from Clovis to Skinner

Capital beginning on April 18, 2014.85 Diamond testified that his “understanding”

was that Skinner would not draw a salary for very long because he believed that the

“purchase of ViaStone was imminent.”86 Nevertheless, in July 2015, although

Clovis still had not acquired ViaStone, Skinner notified Diamond that Skinner was

being paid $20,000 per month by Clovis, and Diamond did not object. 87

         At around the same time that Skinner requested a salary, he and Diamond

agreed that Clovis would make regular payments to Stone & Paper. Diamond

testified that Skinner approached him to propose paying Plaintiff $10,000 per month

in exchange for Diamond’s providing computer programming services. 88 Diamond

testified that he would have performed the computer programming services for free,

but that Skinner insisted on paying the $10,000 salary to him. 89 Diamond was never

84
     Tr. 45:18–46:14 (Diamond); Tr. 121:16–122:10 (Diamond).
85
     PTO ¶ 12.
86
     Tr. 46:6–14 (Diamond).
87
  JX 597; JX 604. These documents are ambiguous, but Diamond testified that he was
asking Skinner regarding his projected income from Clovis and that he did not object to
Skinner’s withdrawal of $20,000 per month because Skinner told him that he was working
on Clovis matters. Tr. 61:6–62:10 (Diamond).
88
     Tr. 48:6–49:11 (Diamond).
89
     Tr. 48:6–49:11 (Diamond).

                                          19
asked to perform—and never performed—any computer programming for Clovis.90

Skinner testified that Diamond requested to take money out of Clovis, and Skinner

agreed to $10,000 per month.91 Between April and December 2014, Skinner wired

ten equal payments of $10,000 to Stone & Paper, until Skinner informed Diamond

that Aaron wanted the payments to stop.92

         Blanch and Skinner agreed to make $20,000 monthly payments from Clovis

to Blanch as well. But before Skinner could wire the funds, Blanch needed to create

an account and a cover story. On April 16, 2014, Blanch sent Vivianna Blanch an

email directing her to open a bank account based on the following details:

         Red Bridge & Stone LLC is a consulting business: Marketing
         Consulting. You have one client which will be Stone Paper Holdings
         LLC, a manufacturer of Paper in Asia and a DE based LLC. You will
         be assisting in the building of a new brand for the business. You will
         receive $20,000/month in consulting fees per a contract with Stone
         Paper Holdings LLC. You need a business bank account for Red
         Bridge & Stone that allows for bank wires. You will also need a
         checkbook and a debit card for the account under your name.93

Blanch’s instructions to his wife were founded on pure fabrication. There was no

contract between Red Bridge or Vivianna and “Stone Paper Holdings LLC” pursuant

90
     Tr. 96:7–21 (Diamond).
91
     Tr. 323:22–324:11 (Skinner).
92
     Tr. 48:6–49:11 (Diamond).
93
     JX 76 (formatted).

                                          20
to which Red Bridge would receive $20,000 per month in consulting fees. 94 And

Vivianna Blanch admitted that she never “assist[ed] in the building of a new brand

for the business.” 95

           Vivianna Blanch followed her husband’s instructions that day.96 She sent an

email to First Republic Bank with the subject line “Vivianna Blanch Business

Account,” and requested “next steps in creating a business account.” 97 Vivianna

Blanch informed the bank that she had “started a Marketing Consulting company,”

that she had “a client that will start to wire me $20,000/month in consulting fees,”

and that she wanted to get her account “set up as soon as possible.” 98 Blanch emailed

their family accountant, Spencer Barback, stating that “Viv has created a consulting

company (Red Bridge & Stone, LLC) that will be working with an Asian paper

manufacturer to market paper built from stone (calcium carbonate) in the US market

place.”99 Blanch wrote that “Viv also has been given equity in the company,” and

94
     Tr. 796:21–797:1 (R. Blanch); Tr. 895:3–9 (V. Blanch).
95
     Tr. 894:15–23 (V. Blanch).
96
  Richard testified that he sent this email from his joint email account with his wife. Tr.
644:7–645:11 (R. Blanch). see also Tr. 888:23–889:1 (V. Blanch). Richard’s testimony
regarding this issue is not credible. Even if it were credible, it is not legally significant
because, as detailed further herein, there is other evidence that Vivianna Blanch knowingly
participated in her husband’s efforts to shelter funds from scrutiny.
97
     JX 74.
98
     Id.
99
     JX 77.

                                             21
that “she will be receiving $20,000/month in payments per a contract to assist in

marketing.”100 Blanch copied a joint email account held by himself and Vivianna

on the email.101

            The following day, on April 17, 2014, Vivianna wrote to the bank, reiterating

that she had a “client . . . ready to wire my monthly fee of $20k in. Once I send

them the bank information, they will wire it (can be done today if possible to get

account opened up that fast).”102 The same day, Vivianna went to First Republic

Bank to open up the account through a Master Signature Card and Agreement to

Open Account. In the agreement, Vivianna wrote that Red Bridge was in the

business of “management consulting (including HR and Marketing).” 103 Vivianna

knew that she would not be performing any services for Red Bridge.104 In fact,

Vivianna believed that Red Bridge had been formed to “mitigate any risks” from the

Metier Action and “didn’t ask too many questions.” 105 That evening, Blanch

emailed Skinner asking him to “please send that wire tonight,” noting that “[w]e

have everything set up with First Republic and that wire confirms the account.”106

100
      Id.
101
      Id.
102
      JX 81.
103
      JX 78.
104
      Tr. 895:22–896:17 (V. Blanch).
105
      Tr. 881:5–18 (V. Blanch).
106
      JX 79.

                                              22
            On April 18, 2014, Skinner wired $20,000 of Clovis’s funds to Red Bridge.

Clovis continued to wire $20,000 to Red Bridge almost every month over the

following two years.107 Between April 18, 2014 and October 5, 2016, Skinner wired

a total of $797,000 to Red Bridge. 108 Red Bridge had no other sources of revenue.109

There is no evidence in the record that Stone & Paper—through Diamond or

Carter—approved the payments to Red Bridge, or that Red Bridge or Vivianna ever

performed any consulting services for Clovis. Blanch and Vivianna used the funds

wired from Clovis to Red Bridge for their personal expenses, including for payment

of their American Express credit card, day care, babysitters, and private school.110

Despite never having performed any services for Red Bridge or Clovis, Vivianna

testified that using Red Bridge’s funds for child care constituted “legitimate business

expenses.”111

            In May 2014, after having made several loans to Metier, Dimaco purchased

Metier out of bankruptcy and assigned its assets to a new entity named Le Maison

107
      PTO ¶ 12.
108
      Id.
109
      Red Bridge Rule 30(b)(6) Dep. 45:8–11.
110
      Tr. 932:17–936:3 (V. Blanch); JX 522; JX 140.
111
   Tr. 933:18–934:5 (V. Blanch). Richard Blanch and Vivianna Blanch often equivocated
on the subject of the use of Red Bridge’s funds during their testimony. See Tr. 923:20–
926:3 (V. Blanch); Red Bridge Rule 30(b)(6) Dep. 45:21–52:19.

                                            23
de Beaute (“Maison”). 112 After the acquisition, Blanch and Skinner both worked for

Maison in addition to being managers of Clovis.

            F.   Richard Blanch, Brian Skinner, and Their Foray into the Stone
                 Paper Business.

            Once Clovis was formed, Blanch and Skinner indicated to Chow that their

purchase of ViaStone was imminent. On April 14, 2014, Blanch emailed Chow and

Skinner with an outline of the terms of the deal with ViaStone.113 The subject line

of the email was “Via Stone | Deal Overview.”114 According to Blanch, his attorneys

were working on an asset purchase agreement through which “Stone & Paper

Holdings LLC will buy the assets of Tier 1 for $1.25mm,” Chow would receive 20%

of the equity in Stone & Paper Holdings, LLC, Ajia would receive 8% of the equity

in Stone & Paper Holdings, LLC, and Chow and ViaStone would make various

payments to Ajia.115 Blanch wrote, “[w]e are close here gentlem[e]n. Let’s close

this deal and go forward.” After Chow responded that he and his wife “tentatively

agree[d] to the outlined overview below,” Blanch responded that his “hope” was to

have “legal paperwork for all next week.”116

112
      Tr. 155:21–156:14 (Diamond).
113
      JX 83.
114
      Id.
115
      Id.
116
      Id.

                                           24
         Even though Blanch and Skinner represented to Chow that the purchase of

ViaStone was imminent, Blanch and Skinner were chary of sharing any future power

or control and were still considering the possibility of supplanting ViaStone as

TLM’s distributor. Only one month after Stone & Paper funded Clovis for the

purpose of purchasing ViaStone, Blanch wrote to Okulski indicating that he was

prepared to abandon the deal and “go direct to the plant” in Taiwan:

         We are not interested in giving anyone anything but passive rights. As
         far as I am concerned, we are being overly generous in the current deal.
         It is take it or leave it in regards to rights in the new company.

         We do not need any assets from the Chows or Henry [Kang] to make
         this business work. In short, we are willing to use our $1.25mm to start
         our own entity and go direct to the plant without the assistance of
         Jeff/Mike.117

Thus, although Blanch and Skinner continued to act as though they were interested

in purchasing ViaStone, 118 they were willing to go it alone.

         In June 2014, Blanch connected with Michael Fruhling, a longstanding

acquaintance who specialized in business development and R&D innovation.119

Blanch asked Fruhling for help finding a supply chain into which they could insert

and scale their stone paper product.120 Fruhling contacted Procter & Gamble,

117
      JX 96.
118
      See, e.g., JX 91 (draft asset purchase agreement dated May 7, 2014).
119
      Tr. 555:21–556:21 (R. Blanch).
120
      Tr. 556:7–557:17 (R. Blanch).

                                              25
Church & Dwight, Crayola, Unilever, Bayer, and Pfizer on Blanch’s behalf.121

During this process, Blanch repeatedly lied about who he was, who he represented,

and his ability to distribute stone paper:

                • In June 2014, Blanch copied Aaron on an email to Crayola proposing

                   a meeting, representing that “[Aaron] is the head of Aaron Paper and

                   the co-owner of Via Stone with me.”122

                • In a June 2014 email to the United States Playing Card Company,

                   Blanch represented himself as the “CEO” of “Via Stone.”123

                • On July 14, 2014, Blanch signed a non-disclosure agreement with Fort

                   Dearborn, a company involved in the business of corrugated

                   packaging, as the CEO of “Tier 1 Corporation.”124

                • In September 2014, after having been put in contact with Procter &

                   Gamble by Fruhling,125 Blanch indicated to Proctor & Gamble that he

                   was the “CEO” of “Via Stone/Tier 1.” 126

121
      Fruhling Dep. 34:16–19.
122
      JX 653.
123
      PX 1.
124
      PX 6.
125
      Fruhling Dep. 30:14–31:19.
126
      PX 4.

                                             26
               • In December 2014, Fruhling drafted an email for Blanch’s approval

                  indicating that “Stone and Paper Operations, LLC . . . represents the

                  consolidation of a dozen or more tiny brands . . . that had dotted the

                  marketplace until Blanch assumed the rights for worldwide

                  distribution of the material from TLM.” 127 According to that email,

                  “[Blanch] purchased the Via Stone Company, whose technical and

                  warehousing operations are based in California. He then purchased the

                  individual distributors (and their brands) and has, in effect, shut them

                  down.”128 Fruhling testified that he believed Blanch gave him the

                  information contained in his draft email. 129

            Blanch’s misrepresentations continued to mount. In emails addressed to Fort

Dearborn discussing Unilever’s supply chain, Blanch indicated that he was the CEO

of “Via Stone & AaronStone.” 130 Blanch was never the CEO of AaronStone.131

Blanch told Fort Dearborn that “[t]here are over 40 patents in place that we own the

rights to and we own the manufacturing in mainland China.” 132 According to

127
      PX 7.
128
      Id.
129
      Fruhling Dep. 38:7–23.
130
      JX 201 at S0006615.
131
      Tr. 823:20–23 (R. Blanch).
132
      JX 201 at S0006612.

                                              27
Blanch, “We are the mill owners. We are the brand owners.”133 All of this was

untrue.

            To prepare for a series of meetings with prospective clients, Blanch had Clovis

pay $150,000 to purchase stone paper inventory from a company named Design and

Source Production a/k/a Terraskin. The paper was to be used to make samples for

prospective clients. 134 Chow advised Blanch not to purchase the paper because it

was not coated and was unsuitable for printing.135 Chow testified at his deposition,

on behalf of ViaStone, that the stone paper purchased from Terraskin could not be

sold, that it could only be used as a sample because it could damage presses, and that

most of it was ultimately warehoused and recycled at his expense. 136 The Blanch

Defendants submitted samples of the purchased stone paper inventory as trial

exhibits.

            Blanch leveraged his relationship with Fruhling into meetings with several

large companies to pitch potential applications for stone paper. In doing so, Blanch

made misrepresentations to his direct business contacts. Fruhling testified that he

believed that Blanch was the CEO of ViaStone. 137 Blanch also lied to Aaron. In

133
      Id.
134
      PTO ¶ 18; Tr. 588:15–593:14 (R. Blanch).
135
      ViaStone Rule 30(b)(6) Dep. 48:10–51:14.
136
      Id. at 163:14 –169:6.
137
      Fruhling Dep. 31:13–19.

                                              28
November 2014, Aaron sent Blanch and Skinner a list of questions regarding the

source of Blanch’s funds and his relationship to TLM. As to the source of funds,

Blanch represented that “$3.5MM was invested by [Skinner] and myself and is given

to John Diamond as a preferred return.” 138

         Fruhling’s efforts on behalf of Blanch led to Blanch and Skinner embarking

on trial runs for stone paper products in 2015. According to Skinner:

            • In or about January 2015, Blanch, Skinner, Aaron, and Chow met to

               run trials of stone paper for Procter & Gamble.

            • In or about May 2015, Blanch, Skinner, and Chow met to run trials of

               stone paper for Pfizer.

            • In or about July 2015, Skinner ran a trial of stone paper for Biersdorf in

               Germany.

            • In or about October 2015, Blanch and Aaron conducted trials for a

               company named Dogan Group in Turkey.139

         These trials and sales pitches were Blanch and Skinner’s primary focus, and

the acquisition of ViaStone was a secondary objective. When their attention finally

returned to ViaStone, their concept of the deal had become unrealistic. On February

138
      JX 152 at S0007558.
  Skinner Opening Br. at 17–19. See also ViaStone Rule 30(b)(6) Dep. 63:6–7 (“Brian
139

was at most all of the meetings more than Richard.”).

                                           29
11, 2015, Blanch informed Okulski that Blanch had refused to negotiate a settlement

agreement with Kang regarding the stock purchase agreement between ViaStone and

Ajia as part of Clovis’s acquisition of ViaStone.140 On May 7, 2015, a year after

Blanch had told Chow that they were on the verge of closing, Blanch sent Okulski

an email with new deal terms, describing them as “the deal points that make

sense.”141 Blanch’s new terms contained no cash consideration for the purchase of

ViaStone—a significant departure from the $1.25 million in cash consideration

contemplated the prior year. Okulski cautioned that the deal would make no sense

for ViaStone to accept and recommended that Blanch not convey the new terms to

Chow:

            1. The structure calls for acquiring certain assets of Tierl pursuant to
            the existing Asset Purchase Agreement and the melding of that business
            into Operations. I would recommend against delivering the term sheet
            to Jeff [Chow] without some prefatory explanation - from a cash
            perspective, the Chows are going from receiving $1,000,000 (after
            payment of the $250,000 to [Ajia]) for the business to receiving nothing
            other than the additional percentage participation in the net profits of
            his existing accounts. 142

            It is not clear from the record whether Blanch ultimately submitted these terms

to Chow, but it is apparent that Chow had come to distrust Blanch. Chow testified

140
      JX 181.
141
      JX 191.
142
      Id.

                                              30
that Blanch was “not a trustworthy guy [the] more you get to know him.”143 By

August 2014, Chow believed the deal with Blanch was a “scam” and that Blanch

and Skinner were “a couple of scammers.” 144 Chow continued to engage with

Blanch and Skinner based on his desire to maintain friendly contact with Skinner.145

Based on the record, it is also apparent that Chow sought to leverage Blanch’s and

Skinner’s efforts to contact customers into opportunities for ViaStone.

            In October 2015, a TLM representative informed Blanch that “[t]he president

of TLM” was unhappy with him because he felt that Blanch had been dishonest with

them. 146 TLM informed Blanch that he should discuss any further business with

Chow before any further meetings with TLM. 147 Even though Blanch’s relationship

with Chow had soured, he reached out to Chow for help in dealing with TLM.

Blanch forwarded TLM’s email to Chow and asked him how he would “like to

proceed regarding the email chain between TLM and us.” 148 Blanch wrote: “I know

you were disappointed in our conversation a few months ago and see me as the

143
      ViaStone Rule 30(b)(6) Dep. 129:7–19.
144
      Id. at 55:5–20.
145
      Id. at 55:5–57:5.
146
      JX 262 at S0005803.
147
      Id.
148
      Id. at S0005801.

                                              31
reason for that disappointment . . . . Just want to move things forward and want us

all working together. We can be a large contributor to the success of VS.” 149

            Just one month later, however, Blanch had concluded that an acquisition of

ViaStone “wasn’t going to happen.” 150 Rather than pursue selling stone paper by

acquiring and operating ViaStone, which was to be the focus of Clovis, Blanch

attempted to cut out Chow and ViaStone and establish a direct relationship with

TLM. 151 In November 2015, Blanch reached out to TLM directly, copying Chow

and Aaron, informing TLM that he was “unable to meet [Chow]’s demands for the

sale price of his company” but that Aaron Paper wanted to market TLM’s product

in Turkey as “AaronStone Paper.” 152 Blanch had made a tremendous miscalculation

by underestimating TLM’s loyalty to its U.S. distributor.

            TLM rejected Blanch’s attempt to circumvent Chow and ViaStone. TLM told

Blanch that it wanted to “keep this business relationship simple” and would “only

work via ViaStone as the single window contact for our business relationship.”153

In response, Blanch attempted to leverage his relationship with Aaron, arguing that

149
      Id.
150
   Tr. 816:4–8 (R. Blanch) (testifying that, by November 29, 2015, he had “determined
that the acquisition of ViaStone wasn’t going to happen”).
151
      JX 266.
152
      JX 267.
153
      JX 274 at S0005310.

                                            32
working through ViaStone was impossible because Chow had “no interest in selling

product to us, or assisting us in achieving our stated goals.” 154 Blanch requested a

meeting to discuss the matter further, but TLM again rejected Blanch, writing that it

had a “strong relationship” with ViaStone, “so if ViaStone can not meet your needs,

it would be no different for TLM.”155 In a final effort, Blanch threatened TLM in a

December 22, 2015 email. Blanch stated that his business relationships at “Aaron

Paper, Beiersdorf, Dogan, Pfizer, Unilever, Heinzel (through Aaron Paper) and

many other respective clients working on stone paper trials will be put on permanent

hold until further word from me.”156 He requested that TLM and Chow “rethink”

their position.157 Neither TLM nor Chow responded. 158

            Blanch, Skinner, and Aaron continued to search for potential customers to buy

stone paper products.159 The record is devoid of any indication that Blanch or

Skinner ever successfully sold any material amount of stone paper. During the

December 8, 2020 pre-trial conference, the Blanch Defendants argued for the first

time that they had a customer for a stone paper product, therefore indicating that

154
      Id. at S0005309.
155
      Id. at S0005308.
156
      Id.
157
      Id.
158
      ViaStone Rule 30(b)(6) Dep. 60:4–6.
159
      JX 291.

                                              33
Blanch’s and Skinner’s efforts were legitimate.           According to the Blanch

Defendants’ counsel, they possessed a purchase order dated November 4, 2020

regarding a purchase of stone paper from their “first client,” and they attempted to

condition its production to Plaintiff before trial on Plaintiff’s entry into

confidentiality agreement. 160       There is no confidentiality order governing the

treatment of discovery material in this action. At the pre-trial conference on

December 8, 2020, the Court ordered production of the newly touted purchase order.

The purchase order is for $6,810 of corrugated sheets of stone paper from an entity

named Custom Liners, Inc.161 At trial, Blanch testified that the customer reached

out to him in February 2020 and purchased a trial order. 162 The Blanch Defendants

argued that it was not required to produce any documents relating to this order

because the discovery cutoff for requests for production was in 2020. 163

         G.     Clovis Never Acquires ViaStone, and Skinner and Blanch Drain
                Clovis’s Funds.

         Blanch and Skinner often used Clovis’s funds for personal expenses. In

November 2014, Blanch invested $75,000 of Clovis funds in a company named

160
      Pre-Trial Conference Tr. 16–18.
161
      JX 499.
162
      Tr. 847:8–848:2 (R. Blanch).
163
      Tr. 767:1–22 (R. Blanch).

                                            34
Spangler Scientific, LLC (“Spangler”). 164 Blanch testified that he told Diamond that

he would be investing in Spangler and that Clovis would pay the funds to Spangler

Scientific “in lieu of [Blanch] receiving management fees.”165 Skinner and Diamond

testified that neither Diamond nor Carter (i.e., Stone & Paper) approved the use of

Clovis’s funds to invest in Spangler.166 Blanch also used $105,000 of Clovis funds

to pay his personal attorneys at the Roth Law Firm.167 Blanch testified that this

payment was out of “convenience” and that the payment was made to “replace . . .

management fees that I was being paid.”168 Blanch and Skinner also caused Clovis

to pay $11,510 on a bill for the Blanch Defendants’ American Express card.169

Skinner effected all of these transfers from Clovis’s account. 170

         Blanch testified that, by November 29, 2015, he had “determined that the

acquisition of ViaStone wasn’t going to happen.”171 And by then, his effort to

develop a relationship directly with TLM had also failed. At that point, Skinner and

Blanch turned their attention to draining Clovis’s bank account. On December 1,

164
      JX 503 at CITIBANK_1724; JX 510 at Spangler_40.
165
      Tr. 646:21–648:15 (R. Blanch).
166
      Tr. 63:21–64:4 (Diamond); Tr. 428:17–22 (Skinner).
167
      PTO ¶ 15; Tr. 733:5–734:1 (R. Blanch).
168
      Tr. 645:19–646:20 (R. Blanch).
169
      PTO ¶ 17.
170
      Id. ¶¶ 15 & 17.
171
      Tr. 816:4–8 (R. Blanch).

                                               35
2015, Skinner wired Red Bridge and Skinner Capital $240,000 each.172 Skinner and

Blanch testified that this wire was made because Clovis’s accountant, Richard

Eisenberg, instructed Skinner to treat the following year’s “management fees” as a

single lump sum loan. 173 Eisenberg testified that he “received specific instructions”

from both Blanch and Skinner “to treat those disbursements of $240,000 as loans”

to Blanch and Skinner. 174 Eisenberg categorically denied ever instructing Blanch

that “he should advance himself $240,000 as a loan rather than take 12 equal monthly

loans of $20,000 from Clovis Holdings.”175

         The documentary evidence supports Eisenberg’s testimony, which I find

credible. On October 11, 2016, in preparation for filing Clovis’s 2015 tax returns,

Skinner instructed Eisenberg that “[a]ll cash to Red Bridge and Stone in 2015 and

2016 (this year for next year’s taxes) should be a loan.”176 Eisenberg was concerned

because he had been instructed to treat the regular $20,000 payments in 2015 as

“guaranteed payments” and that he was being separately instructed to treat the

$240,000 payment as a loan. He wrote, “Are you sure about this? There were

payments during the year that were called guaranteed payments, and then a payment

172
      PTO ¶ 12.
173
      Tr. 418:3–13 (Skinner); Tr. 635:21–637:15 (R. Blanch).
174
      Tr. 1065:14–21 (Eisenberg).
175
      Tr. 1066:12–20 (Eisenberg).
176
      JX 321.

                                             36
in December of $240K apiece that was called a loan. Were all payments made

during the year meant to be loans?” 177 Skinner responded by stating, “Red Bridge

should all be loans[,] for Skinner Capital you can leave as is. Unless you think they

need to be the same.”178

            Eisenberg grew concerned. On November 20, 2016, he emailed Diamond

indicating that one issue “that we never fully resolved is a request to treat the money

sent by [Clovis] to [Red Bridge] during the year as a loan instead of a guaranteed

payment.”179 Eisenberg notified Diamond that the payments totaled $280,000 and

were made in increments of $20,000, and that Skinner was asking to recharacterize

the payments as loans rather than as guaranteed payments. Eisenberg further

notified Diamond that there had been another “$240,000 payment in December 2015

that has been booked as a loan.”180 Diamond responded: “If Brian wants to treat it

as a loan I have no problem with it. I[s] there something something [sic] else that I

am missing here?” 181

            Blanch and Skinner testified that the $240,000 was intended as an “advance”

for management fees in 2016, yet they continued to wire themselves Clovis funds at

177
      Id.
178
      Id.
179
      JX 317.
180
      Id. (emphasis in original).
181
      Id.

                                             37
an accelerated rate in the following year. Between July 13 and November 5, 2016,

Skinner wired $780,000 of Clovis funds to Skinner Capital. 182 In July 2016, Skinner

wired $170,000 to Red Bridge.183 Defendants characterize the 2016 payments as

loans. In total, between 2014 and 2016, Skinner wired $797,000 to Red Bridge and

$1,482,500 to Skinner Capital from Clovis’s bank account. 184

            H.    The Accounting Treatment of the Payments to Skinner Capital and
                  Red Bridge Raises Questions and Triggers Litigation.

            In 2017, Skinner directed Eisenberg to treat the $1,020,000 disbursed in 2016

to Red Bridge and Skinner Capital as loans. 185 Eisenberg requested “loan documents

evidencing the loans and the repayment terms,” and documentation of the “pre-2016

loans.”186 Skinner then sent Eisenberg three unsigned promissory notes (the

“Promissory Notes”). The first Promissory Note is between “Clovis, LLC” and Red

Bridge, is dated December 31, 2015, and provides for a loan of $240,000 to Red

Bridge with 2% interest due on the last business day of 2030. 187 The second

Promissory Note is between “Clovis, LLC” and Red Bridge, is dated December 31,

182
      PTO ¶ 12.
183
      Id.
184
      Id.
185
      JX 370.
186
   Id. Eisenberg also inquired as to the credit card expenditures from the AMEX Account.
Id. Skinner advised that all of the credit card expenditures were “all business related,” JX
375.
187
      JX 402.

                                              38
2016, and provides for a loan of $360,000 to Red Bridge with the same interest rates

and maturity date as the first Promissory Note.188 The third Promissory Note is

between “Clovis, LLC” and Skinner Capital, is dated December 31, 2016, and

appears to provide for a loan of $660,000 to Skinner Capital with the same interest

rates and maturity date as the first Promissory Note. 189 This Promissory Note

contains an unedited remnant from the second Promissory Note because it provides

for a loan with the principal sum of “THREE HUNDRED SIXTY THOUSAND

DOLLARS ($660,000.00).”190

            Eisenberg’s accounting firm refused to prepare Clovis’s 2016 tax returns and

terminated Clovis as a client.191 Skinner attempted to work with Citrin Cooperman,

a different accounting firm, in order to file Clovis’s 2016 tax return. In doing so, he

forwarded the Promissory Notes he had sent to Eisenberg and advised Citrin

Cooperman to “[dis]regard the note for Skinner Capital” because “the note is wrong

as some of it is income not a note.” 192 Skinner also informed Citrin Cooperman that

the 2015 tax returns were erroneous and indicated that $310,000 of the payments

188
      JX 403.
189
      JX 401.
190
      Id.
191
      JX 380.
192
      JX 391.

                                             39
previously labeled as loans should have been income. 193 Diamond testified that, in

February and March 2018, in connection with preparing Clovis’s 2017 tax return,

Citrin Cooperman notified Diamond that Skinner was attempting to recharacterize

an additional $295,000 in loans from Clovis to Skinner Capital as income.194

         In February 2018, in connection with preparing Clovis’s 2017 tax return,

Skinner instructed Citrin Cooperman to convert half of Skinner Capital’s loans into

guaranteed payments. 195           To Skinner’s and Blanch’s consternation, Citrin

Cooperman copied Diamond on the response. 196 Diamond objected to Skinner’s

directions, and he requested that Citrin Cooperman provide him financials and loan

documentation and that they not file any tax returns until he had had a chance to

review the documents. 197 On May 18, 2018, Diamond made a formal request on

behalf of Stone & Paper to inspect Clovis’s books and records under the LLC

Agreement and 6 Del. C. § 18-305. 198 Rather than waiting to receive any documents,

however, Stone & Paper filed the complaint in this action on May 31, 2018.

193
      JX 406.
194
      Tr. 86:10–88:23 (Diamond).
195
      JX 413.
196
   JX 414 (email from Blanch to Skinner: “FYI, [Citrin Cooperman] add[ed] John
Diamond. I will take that up with [Citrin Cooperman].”).
197
      JX 416.
198
      JX 435.

                                            40
         I.     Skinner Uses the Diamond Carter Trading American Express
                Account and Causes Clovis to Pay for the Milton Berg Newsletter.

         Diamond Carter Trading had a credit card account with American Express

(the “AMEX Account”). The AMEX Account was in Carter’s name and was

guaranteed by Carter personally, 199 but Diamond, Carter, and Skinner each had

individual cards on the account.200 As COO of Diamond Carter Trading, Skinner

processed the bulk of the transactions with his card.201 Soon after Clovis was

formed, Skinner asked to use the AMEX Account for Clovis expenses. Diamond

and Carter permitted Skinner to use his card on the AMEX Account for Clovis

expenses on the condition that Clovis pay for its share of the charges on the AMEX

Account. 202 This agreement was not made in writing.203

         The monthly AMEX Account statements all generally display similar

spending patterns by the three cardholders. Diamond charged his monthly internet

bill to the AMEX Account and made occasional smaller transactions. In one outlier

purchase, from November 2016, Diamond spent $1,695.98 to buy a laptop computer

199
      Tr. 307:7–308:9 (Skinner).
200
      Tr. 437:19–23 (Skinner).
201
      Tr. 171:5–21 (Diamond); Tr. 213:15–215:24 (Diamond); Tr. 994:2–995:21 (Carter).
202
      Tr. 14:5–15:16 (Diamond); Tr. 235:2–11 (Diamond).
203
      Tr. 995:18–21 (Carter).

                                           41
at Best Buy. 204 Diamond testified that all of these expenses were related to his

trading business and that he never put personal expenses on the AMEX Account. 205

         Carter also used his card for miscellaneous transactions. He also used the card

to pay $28,000 to his personal accountant in October 2016. Carter testified that the

charge to the accountant and all other charges on his card were business expenses.206

         The vast majority of the expenses on the AMEX Account were Skinner’s.

While Diamond’s and Carter’s monthly purchase totals varied from a few hundred

to a few thousand dollars, Skinner routinely charged tens of thousands of dollars to

the AMEX Account. Skinner’s more frequent usage was not unexpected to the

parties, as he was the COO of Diamond Carter Trading and a managing member of

Clovis. Some of Skinner’s transactions appear to have been business-related, such

as subscriptions for domain names, trading services, and the Amazon servers that

Diamond’s entities shared. 207 Most of Skinner’s transactions related to travel,

transportation, restaurants, and entertainment.208 Skinner testified that some of these

latter transactions were business expenses that he incurred while visiting employees

204
      JX 565.
205
      Tr. 174:9–175:10 (Diamond).
206
      Tr. 996:4–19 & 1015:20–1016:11 (Carter).
207
      Tr. 296–302 (Skinner); Tr. 439–40 (Skinner).
208
    See generally JXs 531–579 (AMEX Account monthly statements from January 2, 2014
to January 2, 2018).

                                             42
of ViaStone or Maison de Beaute.209 He also testified that high-level employees of

Maison de Beaute charged their Uber rides to the AMEX Account. 210 Other

transactions, however, are not defensible as business expenses. For example, in

2014 alone, Skinner spent over $100,000 going to strip clubs by himself.211

Nevertheless, Skinner testified, “I kind of put whatever I wanted on the card. [The

accountant] expensed it as a business expense, so it’s a business expense.”212

         Skinner testified that he was the only cardholder to put charges for Clovis on

the AMEX Account.213 Because the AMEX Account was being used for both Clovis

and Diamond Carter Trading business, Skinner would inform the accountants each

year of how the charges should be allocated between the two entities. 214 For fiscal

year 2014, Skinner sent to Eisenberg a spreadsheet entitled “clovis expenses on dct

card.xls”.215 In a tab labeled “Total Clovis”, the spreadsheet listed 169 transactions

209
      Tr. 302:5–303:24 (Skinner).
210
      Tr. 304:1–19 (Skinner).
211
   On April 12, 2014, Skinner charged $37,306.81 to the AMEX Account on behalf of
Clovis. JX 649. The AMEX Account records for 2014 indicate that Skinner incurred an
additional $26,616.73 at strip clubs between January 7, 2014 and April 5, 2014. Id.
Skinner testified that he frequented the strip clubs by himself. Tr. 452:13–16 (Skinner).
212
      Tr. 438:2–5 (Skinner).
213
      Tr. 436:16–437:3 (Skinner).
214
   Tr. 305:3–306:9 (Skinner) (“[W]e really didn’t itemize all the charges as to which entity
they went to until it was time to work with Mr. Eisenberg at the end of the year.”).
215
      JX 648.

                                            43
made by Skinner in 2014, totaling $175,103.97.216            Many of the transactions

predated Clovis’s April 2014 capitalization. For fiscal year 2016, Skinner informed

the accountants that the charges on the AMEX Account totaled approximately

$407,000, with “$308,650.90 going to Clovis [and] $98,163.84 going to DCT.”217

Skinner then followed up with a spreadsheet reflecting similar totals for each of

Clovis and Diamond Carter Trading, broken down into specific categories.218 For

fiscal year 2017, Skinner sent his accountants a year-end summary for Clovis from

American Express.219       The summary shows that total charges in 2017 were

$51,698.61, a significant decline from prior years.220 Not including fiscal year

2015, 221 Skinner told Clovis’s accountants to allocate a total of $535,453.48 of the

charges on the AMEX Account to Clovis.

216
      JX 649.
217
      JX 362.
218
      JX 363.
  JX 408 (“[A]attached is tax year 2017 Clovis Amex . . . . All of the Amex charges here
219

were paid by Clovis NOT Diamond Carter Trading for 2017.”).
220
      JX 409.
221
   The record does not indicate that Skinner or anyone else instructed Clovis’s accountants
as to how the 2015 AMEX Account charges should be allocated between Clovis and
Diamond Carter Trading. The AMEX Account statements from 2015 generally follow the
pattern as the charges in other years, with Skinner charging tens of thousands of dollars
each month and with most transactions relating to travel, transportation, and restaurants.
See JXs 544–555.

                                            44
         Skinner testified that the allocation of charges on the AMEX Account did not

always reflect the allocation of payments to the AMEX Account. For example, when

Diamond Carter Trading’s checking account was low on funds after its brokerage

account closed in 2016,222 Skinner paid for all charges out of Clovis’s checking

account.223 Diamond testified that Diamond Carter Trading should have incurred

very few charges after its brokerage account closed. 224         Skinner testified that

Clovis’s funds were used to pay Diamond Carter Trading’s American Express card

because Diamond did not care which entity paid it, because all the money originated

from Diamond. 225 In total, from August 6, 2014 through September 21, 2017, Clovis

paid $510,124.35 to the AMEX Account. 226

         In 2016, Skinner also used Clovis’s funds to pay for the Milton Berg

newsletter,       an   investment       newsletter   that   provided   stock   trading

recommendations. 227 Skinner and Diamond reviewed the newsletter as part of their

trading business. 228 In 2016, Diamond Carter Trading had a bill from the publisher

222
      See Tr. 236:4–237:24 (Diamond).
223
   JX 408 (“All of the Amex charges here were paid by Clovis NOT Diamond Carter
Trading for 2017.”); Tr. 305:3–306:9 (Skinner).
224
      Tr. 237:2–8 (Diamond).
225
      Tr. 305:3–306:9 (Skinner).
226
      PTO ¶ 16.
227
      Tr. 89:15–90:16 (Diamond).
228
      Tr. 163:3–18 (Diamond).

                                             45
of the Milton Berg newsletter for $21,000.229 At the same time, Clovis purportedly

owed money to Diamond Carter Trading for having underpaid its share of the

charges on the AMEX Account.230 Diamond and Skinner decided that Clovis would

pay the bill for the Milton Berg newsletter as a way to reduce Clovis’s debt to

Diamond Carter Trading. 231 Skinner caused Clovis to pay the $21,000 bill on

August 31, 2016.232

         J.     Procedural History

         On May 31, 2018, Stone & Paper filed the Complaint initiating this action

against the Blanch Defendants, Skinner, and Skinner Capital. 233 The defendants

moved to dismiss the Complaint, and this court denied the defendants’ motion to

dismiss in a May 31, 2019 Memorandum Opinion (the “2019 Memorandum

Opinion”). 234      On July 24, 2019, the Blanch Defendants and Clovis filed

counterclaims against Stone & Paper and third-party claims against a plethora of

defendants: Diamond Carter Trading, JAD Trading, LLC, (another entity associated

229
      Tr. 424:23–426:10 (Skinner).
230
      Tr. 89:24–90:10 (Diamond).
231
   They dispute who first raised the idea. Diamond testified that Skinner proposed that
Clovis pay the bill, while Skinner testified that Diamond asked him to pay the bill.
Compare Tr. 90:2–16 (Diamond), with id. 425:4–426:10 (Skinner).
232
      JX 503 at CITIBANK_001767.
233
      Dkt. 1.
234
      See Stone & Paper Inv’rs, LLC v. Blanch, 2019 WL 2374005 (Del. Ch. May 31, 2019).

                                           46
with Diamond), Diamond and his wife, Kanokpan Khumpoo, and Carter and his

wife, Elizabeth Carter (collectively, the “Diamond Carter Defendants”); as well as

Eisenberg, the accounting firm Eisenberg & Blau, CPAs, P.C., and its successor

firm, DDK & Company, LLP (collectively, the “Eisenberg Defendants”).235 On

August 23, 2019, Stone & Paper and the Diamond Carter Defendants moved to

dismiss the counterclaims and third-party claims. In a June 29, 2020 Memorandum

Opinion (the “2020 Memorandum Opinion”), the court dismissed all third-party

claims and all counterclaims except for the claims of breach of the LLC Agreement

and unjust enrichment (in part) against Stone & Paper.236

          Shortly before trial, on September 22, 2020, the defendants again amended

their complaint to assert new counterclaims and third-party claims. 237 On November

18, 2020, the court entered an order dismissing two of those claims and severing

four others from trial.238 Those claims are not considered in this opinion.

II.      ANALYSIS

         This opinion first addresses Stone & Paper’s claims, followed by Clovis’s

remaining counterclaims.

235
   Dkt. 64. The Eisenberg Defendants were not served with the counterclaim and third-
party complaint.
236
      See Stone & Paper Inv’rs, LLC v. Blanch, 2020 WL 3496694 (Del. Ch. June 29, 2020).
237
      Dkt. 221.
238
      See Dkt. 293.

                                            47
         A.     Plaintiff’s Affirmative Claims

         Plaintiff’s post-trial briefing focuses on five claims: (1) breach of the LLC

Agreement by Blanch and Skinner; (2) breach of fiduciary duties by Blanch and

Skinner as managers of Clovis; (3) fraudulent inducement and fraudulent

concealment of misconduct by Skinner, Red Bridge, and Skinner Capital; (4) civil

conspiracy by Skinner Capital, Red Bridge, and Vivianna Blanch; and (5) aiding and

abetting breach of fiduciary duty and fraud by Skinner Capital, Red Bridge, and

Vivianna Blanch. Plaintiff further argues that Vivianna Blanch should be held liable

for any judgment against Red Bridge on an alter ego theory. Based on these claims,

in total, Plaintiff seeks an award of $3.4 million plus pre- and post-judgment interest

and an order denying Defendants the ability to share in any recovery by Clovis.239

                1.     Breach of Contract

          Plaintiff alleges that Blanch and Skinner, as managers of Clovis, breached

the LLC Agreement. The elements of a breach of contract claim are: (1) the

existence of a contract; (2) the breach of an obligation imposed by the contract; and

(3) damages arising from the breach.240 Plaintiff must demonstrate each element by

a preponderance of the evidence. Dieckman v. Regency GP LP, 2021 WL 537325,

239
      Pl.’s Post-Tr. Opening Br. 60.
  Zayo Group, LLC v. Latisys Hldgs., LLC, 2018 WL 6177174, at *10 (Del. Ch. Nov. 26,
240

2018); VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003).

                                            48
at *18 (Del. Ch. Feb. 15, 2021). “Proof by a preponderance of the evidence means

proof that something is more likely than not.” Trascent Mgmt. Consulting, LLC v.

Bouri, 2018 WL 4293359, at *12 (Del. Ch. Sept. 10, 2018) (internal citations

omitted). Defendants bear the burden of proof on affirmative defenses to the breach

of contract claim and must prove them by a preponderance of the evidence. Basho

Techs. Holdco B, LLC v. Georgetown Basho Inv., LLC, 2018 WL 3326693, at *2

(Del. Ch. July 6, 2018), aff’d sub nom. Davenport v. Basho Techs. Holdco B, LLC,

221 A.3d 100 (Del. 2019). Defendants do not dispute that the LLC Agreement is a

valid contract, and the first element is satisfied.

      When construing and interpreting a limited liability company agreement, a

court applies the same principles that are used when construing and interpreting

other contracts. Godden v. Franco, 2018 WL 3998431, at *8 (Del. Ch. Aug. 21,

2018). “‘Delaware adheres to the objective theory of contracts, i.e., a contract’s

construction should be that which would be understood by an objective, reasonable

third party.’” Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010) (quoting NBC

Universal v. Paxson Commc’ns Corp., 2005 WL 1038997, at *5 (Del. Ch. Apr. 29,

2005)); accord Salamone v. Gorman, 106 A.3d 354, 367–68 (Del. 2014). When a

contract’s language is clear and unambiguous, the Court will give effect to the plain

meaning of the contract’s terms and provisions. Osborn, 991 A.2d at 1159–60. The

                                           49
contract is to be read as a whole, giving effect to each term and provision, so as not

to render any part of the contract mere surplusage. Id. at 1159.

                       a.    Section 5.1

          Section 5.1 of the LLC Agreement provides that “no action shall be taken with

respect to a [‘Major Decision’] without approval in writing by the Board and the

Preferred Members.” 241 One of the Major Decisions is defined to be “[e]ngaging in

any business other than the Viastone Business, including, but not limited to, the

funding of the purchase and operations thereof through a subsidiary.” 242 “Viastone

Business” is defined as “the paper business currently conducted by Tier1

International, Inc., a California corporation that the Company is seeking to acquire

through a subsidiary either pursuant to a stock or asset purchase.” 243 This definition

of “Viastone Business” differed from Diamond’s original proposal, which would

have defined the term more narrowly to mean “the acquiring of the equity or assets

of Tier1 International.” 244

          Plaintiff claims that Blanch and Skinner breached Section 5.1 of the LLC

Agreement by conducting stone paper trials, working to develop a stone paper

market in Turkey, purchasing Terraskin paper inventory, seeking to work directly

241
      LLC Agreement § 5.1.
242
      Id. § 5.1(c).
243
      Id. § 1.1(kk).
244
      JX 47.

                                            50
with TLM, and working on behalf of a separate entity named AaronStone without

obtaining Plaintiff’s written consent.245 Plaintiff construes the contract too narrowly.

The LLC Agreement required Plaintiff’s written consent if the managers of Clovis

engaged in any business other than the paper business “currently conducted by”

ViaStone. 246 The LLC Agreement does not require that Clovis must purchase

ViaStone by a certain date or that Clovis’s funds must first be spent on the purchase

of ViaStone. The terms of the LLC Agreement do not require consent to engage in

activities in furtherance of ViaStone’s business.        Before Blanch and Skinner

determined that purchasing ViaStone was no longer possible, they were attempting

to create demand for ViaStone’s stone paper products with a number of prospective

customers. 247 ViaStone’s manager, Chow, was directly involved in Blanch’s and

Skinner’s efforts to increase customer demand for ViaStone’s products.248 Blanch

told Diamond that Blanch and Skinner were working on paper trials, and Diamond

245
      Pl.’s Opening Post-Tr. Br. 26–27.
246
      LLC Agreement § 1.1(kk).
247
      See JX 653, PX 1, PX 4, PX 6, PX 7.
248
   For example, Chow “would constantly introduce [Skinner] to new players” in the stone
paper industry. Tr. 271:23–272:1 (Skinner). Chow also attended a meeting at a stone paper
mill in China with Blanch, Skinner, a representative of Aaron Paper, and potential
customers from Turkey. Tr. 528:1–5 (R. Blanch); Tr. 534:13–21 (R. Blanch); Tr. 270:24–
271:2 (Skinner).

                                            51
did not object. 249 That conduct readily constituted “engaging” in the “paper business

[then] currently conducted by . . . [the] corporation that [Clovis] is seeking to

acquire.” 250 Plaintiff has not proven that Blanch and Skinner, from the outset, never

intended for Clovis to purchase ViaStone. I find that for at least some period of time

before and after Clovis’s formation, Blanch and Skinner engaged in genuine—

though failed—negotiations with Chow to acquire the ViaStone business.251

Plaintiff has therefore not proven by a preponderance of the evidence that the entirety

of Blanch’s and Skinner’s general business conduct in the furtherance of ViaStone’s

business breached Section 5.1.

         The analysis is different with respect to Blanch’s and Skinner’s work relating

to stone paper products after November 2015. Although Blanch and Skinner started

out with the purpose of having Clovis acquire ViaStone, there came a point in time

when they no longer harbored a legitimate interest in purchasing ViaStone. That

evolution is well documented, as Blanch attempted an end run around Chow and

ViaStone, seeking to develop a direct pipeline to TLM with the ambitious goal of

establishing their own entity with the assistance of Aaron. It is difficult to precisely

249
   See JX 170 (May 5, 2015 email from Blanch to Diamond, noting that “Skinner and I are
in VA the next few days working on paper trials for Crayola, P&G, Pfizer and a slew of
other clients”).
250
      LLC Agreement §§ 1.1(kk), 5.1(c).
251
   See, e.g., JX 191 (May 6, 2015 email from Blanch to Okulski, proposing terms for an
acquisition of ViaStone).

                                           52
pinpoint when Blanch and Skinner were no longer devoting their time, and spending

Clovis’s funds, to acquire the ViaStone business. But the record conclusively

establishes, by Blanch’s own admission, that by November 29, 2015 he had

“determined that the acquisition of ViaStone wasn’t going to happen.” 252 On

November 29, 2015, Blanch and Skinner sent an email to TLM, in which they sought

to work directly with TLM to distribute TLM’s stone paper in Turkey under the

name “AaronStone Paper.”253 The email also noted that they and ViaStone had

“agreed to not work together at this time.” 254 That email constituted a breach of

Section 5.1. At that point, Blanch and Skinner were using the Company and its

resources to “[e]ngag[e] in [a] business other than the Viastone Business”—namely,

the AaronStone business.255 The AaronStone business was not the “Viastone

Business.” Once Blanch and Skinner knew that purchasing ViaStone was no longer

an option, any action or commitment of Clovis resources to any business was action

that required Stone & Paper’s written approval. Blanch admitted that he had no

written approval from Stone & Paper to do any business other than to buy

ViaStone. 256 Plaintiff has therefore proven by a preponderance of the evidence that

252
      Tr. 816:4–8 (R. Blanch).
253
      JX 267.
254
      Id.
255
      LLC Agreement § 5.1(c).
256
      Tr. 731:7–13 (R. Blanch).

                                        53
Blanch and Skinner breached Section 5.1 of the LLC Agreement to the extent

discussed herein.

                      b.     Section 5.2

          Section 5.2 governs transactions between Clovis and its managers and

members, defined as “Interested Transactions.” An Interested Transaction is “any

transaction[]” between Clovis and its own managers, members, or their affiliates,

“including, without limitation, . . . any transaction evidencing a loan (or the

forgiveness of a loan).” 257 Interested Transactions are prohibited under the LLC

Agreement unless (1) the Company “first fully disclose[s] the terms and conditions”

of the transaction to the Board and the members, and (2) the “Board determines that

the Interested Transaction is fair and reasonable to the Company and the terms and

conditions are at least as favorable to the Company as those that are generally

available from persons capable of similarly performing them and in similar

transactions between parties operating at arm’s length.”258 The court previously held

that Plaintiff’s claims under Section 5.2 are direct claims. 259

          Plaintiff argues that every payment from Clovis to Skinner Capital and Red

Bridge was an impermissible Interested Transaction under Section 5.2 of the LLC

257
      LLC Agreement § 5.2.
258
      Id. § 5.2.
259
      2019 Memorandum Opinion, 2019 WL 2374005, at *4.

                                           54
Agreement.      Defendants generally characterize these payments as either

management fees or loans.       The record lacks reliable documentary evidence

supporting these characterizations. On the contrary, Blanch and Skinner attempted

to characterize payments from Clovis to Red Bridge and Skinner Capital with

whatever label would be most advantageous to them at the moment. Regardless,

because the purported management fees (or salaries) and loans present different legal

and factual issues, this opinion addresses Defendants’ contentions regarding the

purported management fees first, followed by the loans.

                          i.     The Management Fees

      Blanch and Skinner contend that Red Bridge and Skinner Capital were entitled

to the $20,000 per month they took from Clovis beginning in April 2014 (the

“Management Fees”). The record reflects that Clovis paid Skinner Capital and Red

Bridge the Management Fees for twenty months, from April 2014 through

November 2015, for a total of approximately $400,000 each. 260           Defendants’

assertion that the Management Fees were part of a “salary” or a “guaranteed

payment” is not justified by reference to any contract between Clovis and Skinner

Capital or Red Bridge. An Interested Transaction is “any transaction between a

260
   PTO ¶ 12. The regular monthly payments were occasionally interspersed with extra
payments, and there were a few months were Red Bridge received less than $20,000. To
be exact, between April 2014 and November 2015, Skinner Capital received $462,500 and
Red Bridge received $387,000. Id. As discussed below, the wires to Red Bridge were not
the only Management Fees that the Blanch Defendants received.

                                         55
member, a manager, . . . or any Affiliate thereof, on the one hand, and the Company,

on the other.”261 Furthermore, Section 5.2 of the LLC Agreement specifically

provides that, “in the event that the Company acquires the Viastone business . . . ,

the current managers, directly or through their respective Member entities, will be

actively involved in the management thereof and will receive a fee or like

compensation therefor.” 262 Because Clovis did not acquire ViaStone, Blanch and

Skinner would have been entitled to the Management Fees only if they had satisfied

the approval requirements of Section 5.2.

            Defendants argue that the Management Fees were fully disclosed and that

Plaintiff otherwise acquiesced to the Management Fees. To prove their affirmative

defense of acquiescence, Defendants must prove by a preponderance of the evidence

that Plaintiff had “full knowledge of [its] rights and the material facts,” and “(1)

remain[ed] inactive for a considerable time; (2) freely [did] what amount[ed] to

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

subsequent repudiation, which le[d] the other party to believe the act ha[d] been

approved.” Basho, 2018 WL 3326693, at *41 (internal citations omitted).

            Payments to Red Bridge. The Blanch Defendants did not “first fully

disclose[] the terms and conditions” to Plaintiff before sending the Management

261
      LLC Agreement § 5.2.
262
      Id.

                                           56
Fees to Red Bridge, as required by Section 5.2.263 The Blanch Defendants failed to

cite any documentary evidence indicating that Plaintiff approved the Management

Fees to Red Bridge before the Management Fees were paid. Diamond, Plaintiff’s

principal, did not recall discussing a salary for Blanch and said he did not approve

one. 264 The Blanch Defendants argue that Diamond was aware of the Management

Fees to Red Bridge because Eisenberg emailed Diamond about the Management

Fees on November 20, 2016, 265 but the email does not suggest that Diamond had at

any time previously approved the Management Fees to Red Bridge. Diamond

credibly testified that he would not have approved a salary to Blanch in the amount

of $20,000 per month because Diamond did not have any relationship with Blanch,

and Blanch was already drawing a full-time salary as CEO of Metier, which

Diamond had purchased out of bankruptcy.266 The Management Fees to Red Bridge

were therefore not “first fully disclosed” to Plaintiff, as required by Section 5.2.

            The record lacks any evidence that Blanch and Skinner, as managers of

Clovis, met the other procedural requirements of Section 5.2. Blanch and Skinner

never determined that the Management Fees were “fair and reasonable to the

263
      Id.
264
   Diamond Dep. 86:23–87:5; Stone & Paper Rule 30(b)(6) Dep. (Diamond) (“I don’t
recall being told or asked for Mr. Blanch to be paid a salary because I would not have
approved it.”).
265
      JX 317.
266
      Tr. 46:15–47:11 (Diamond).

                                          57
Company,” or that “the terms and conditions” of the Management Fees were “at least

as favorable to the Company as those that are generally available from persons

capable of similarly performing them and in similar transactions between parties

operating at arm’s length.”267 Defendants do not argue otherwise. Indeed, the record

reflects that Blanch and Skinner were generally unconcerned with corporate

formalities or fairness to Clovis. Thus, because the Management Fees were paid to

Red Bridge before disclosure to Plaintiff as a member of Clovis and without any

determination that the Management Fees were “fair and reasonable,” Plaintiff has

proven by a preponderance of the evidence that the Management Fees to Red Bridge

breached Section 5.2 of the LLC Agreement.268

         The Blanch Defendants have not proven that Plaintiff acquiesced to the

Management Fees to Red Bridge. The only evidence cited by the Blanch Defendants

in support of this argument is the November 2016 email between Eisenberg and

Diamond. In that email, Eisenberg notified Diamond that Clovis had paid $280,000

to Red Bridge in 2015; that the payments were principally made through monthly

disbursements of $20,000; that they were previously treated as “guaranteed

payments”; and that Skinner had requested that the payments be recharacterized as

267
      LLC Agreement § 5.2.
268
   There is no evidence that the Management Fees deposited in Red Bridge’s new checking
account were paid pursuant to an unwritten consulting agreement with Vivianna Blanch,
as Blanch and Vivianna Blanch represented to others. See JX 81.

                                          58
“loans.”269 Eisenberg also notified Diamond about a December 2015 payment of

$240,000 that had already been booked as a loan. Diamond agreed with Skinner’s

requested treatment of the payments, stating that if “Brian wants to treat it as a loan

I have no problem with it.”270 Diamond testified that Skinner sought to affirmatively

dissuade him from confronting Blanch about the payments.271

            For at least two reasons, the November 2016 email does not support a

conclusion that Plaintiff acquiesced to the Management Fees paid to Red Bridge

because Plaintiff did not have full knowledge of the material facts about the

payments. First, Diamond did not have full knowledge of the material facts about

the purpose of the payments or the fact that the payments began back in April 2014.

Diamond’s email indicates that he lacked knowledge when he added, “[is] there

something [] else that I am missing here?” 272 The November 2016 email exchange

occurred almost a year after the last of the Management Fees were paid, which

further suggests that Diamond was not kept informed of the material facts.

            Second, Eisenberg’s November 2016 email cannot establish that Diamond

had full knowledge of the material facts because the $240,000 paid to Red Bridge

was not, in fact, a loan. Apart from after-the-fact justifications for payment of the

269
      JX 317.
270
      Id.
271
      Tr. 124:9–125:24 (Diamond).
272
      JX 317.

                                          59
Management Fees, there is no indication that Clovis can contractually demand

repayment of the Management Fees from Red Bridge or that the $240,000 paid to

Red Bridge or the Management Fees were otherwise loans. There is no indication

as to what the loan terms would be with respect to the Management Fees. That is

because recharacterizing the Management Fees as a loan was a fabrication. Plaintiff

could not validly acquiesce to a loan that was not a loan. Nor did Diamond know at

the time of the November 2016 email that Skinner and Blanch had abandoned efforts

to acquire ViaStone and had breached the LLC Agreement. Because Plaintiff did

not have “full knowledge of [its] rights and the material facts,”273 Plaintiff could not

have acquiesced to the payment of the Management Fees to Red Bridge through the

November 2016 email.

         The Management Fees to Red Bridge also include Clovis’s $75,000 payment

to Spangler and Clovis’s $105,000 payment to the Roth Law Firm. The investment

in Spangler was made on behalf of Blanch, and Blanch and Skinner both testified

that they used Clovis’s funds to make the investment “in lieu of [Blanch] receiving

management fees.” 274 Similarly, the payment to the Roth Law Firm was to pay for

Blanch’s personal attorney, and Blanch and Skinner both testified that they paid

Blanch’s legal bills with Clovis’s funds “in []place of management fees that [Blanch]

273
      Basho, 2018 WL 3326693, at *41.
274
      Tr. 414:11–24 (Skinner); Tr. 646:21–648:15 (R. Blanch).

                                            60
was being paid.”275 Thus, both of these payments were among the Management Fees

to Red Bridge that violated Section 5.2.

         Payments to Skinner Capital. Diamond testified that, in the spring or

summer of 2014, he approved a salary to Skinner in the amount of $20,000 per month

after Skinner informed him that operating Clovis had effectively “turned into . . . a

full time job.”276 The Management Fees to Skinner Capital began on April 18, 2014,

just two weeks after Clovis was funded.277 As with the payments to Red Bridge,

however, there is no evidence that Clovis’s Board determined that the Management

Fees paid to Skinner Capital were fair and reasonable to Clovis.

         Even if payment of the Management Fees to Skinner Capital would have

breached Section 5.2, Skinner has proven that Plaintiff acquiesced to the payment of

the Management Fees to Skinner Capital. Plaintiff’s principal, Diamond, consented

to their payment shortly after Clovis was funded. In its post-trial briefing, Plaintiff

acknowledges that “Diamond agreed to a request by Skinner to temporarily be paid

a monthly salary from Clovis.”278 In addition, in July 2015, Skinner notified

Diamond that his income from Clovis was $20,000 per month,279 and there is no

275
      Tr. 326:19–327:1 (Skinner); Tr. 645:19–646:20 (R. Blanch).
276
      Tr. 45:18–46:14 (Diamond); Tr. 121:16–122:10 (Diamond); Diamond Dep. 85:8–86:22.
277
      PTO ¶ 12.
278
      Pl.’s Post-Tr. Opening Br. 21.
279
      JX 595; JX 597; JX 604.

                                            61
indication that Diamond ever objected to the payment of the Management Fees to

Skinner. Plaintiff argues that Diamond’s agreement to the Management Fees to

Skinner was made in “reasonable reliance on Skinner’s knowingly false

representations that the ViaStone acquisition was imminent and that Skinner was

working ‘full time’ for Clovis.” 280 Plaintiff’s argument fails because there is no

indication that Diamond lacked knowledge of the material facts regarding the

monthly payments to Skinner. At least through July 2015, Diamond knew that

Skinner was receiving Management Fees even though ViaStone had not been

acquired, and he never sought to end regular payment of Management Fees to

Skinner Capital. Thus, Plaintiff had “full knowledge of [its] rights and the material

facts” regarding the Management Fees payments to Skinner Capital and nevertheless

“remain[ed] inactive for a considerable time.” Basho, 2018 WL 3326693, at *41.

Skinner has therefore proven by a preponderance of the evidence that Plaintiff

acquiesced to the payment of $400,000 to Skinner Capital in Management Fees. 281

280
      Pl.’s Post-Tr. Opening Br. 21.
281
   PTO ¶ 12. Although Skinner Capital received $462,500 in Management Fees between
April 2014 and November 2015, the record only supports a finding that Diamond
acquiesced to payments of $20,000 per month, for a total of $400,000 over the twenty-
month period.

                                         62
                              ii.   The Purported Loans

            In December 2015, after Blanch and Skinner had determined that purchasing

ViaStone was no longer possible, Clovis ceased to wire the monthly Management

Fees and instead wired Red Bridge and Skinner Capital $240,000 each. 282 In 2016,

Skinner wired $780,000 to Skinner Capital, consisting of six wires of $120,000 each

and one wire of $60,000.283 Skinner also wired $170,000 to Red Bridge in two

payments of $120,000 and $50,000, respectively. 284 Collectively, these payments

are described in this opinion as the “Purported Loans” because Defendants

characterize these payments as loans or advances of management fees.

            The Purported Loans are breaches of Section 5.2 of the LLC Agreement.

They are impermissible Interested Transactions because they are transactions

between Clovis and its own managers. Section 5.2 defines “Interested Transaction”

to include “any transaction evidencing a loan” to a manager or a manager’s affiliate.

Defendants cite no evidence indicating that the Purported Loans were pre-approved

by Clovis’s members, including Plaintiff. Blanch and Skinner cite no evidence that

they ever made any determination regarding the fairness and reasonableness of the

282
      PTO ¶ 12.
283
      Id.
284
      Id.

                                            63
Purported Loans as required by Section 5.2 of the LLC Agreement. Defendants do

not argue that the Purported Loans complied with Section 5.2.

          The Blanch Defendants argue, without citation to legal authority, that

Plaintiff’s claims regarding the Purported Loans are not ripe because the Promissory

Notes are not due until 2030.285 They also argue that Diamond acquiesced to the

Purported Loans through his November 2016 email exchange with Eisenberg.286

Both arguments fail. The Promissory Notes are no defense to Plaintiff’s claim for

breach of the LLC Agreement. They are sham documents that were generated in

response to Eisenberg’s request for loan documentation. The Promissory Notes

purport to reflect loans from Clovis to Red Bridge in the amount of $240,000 and

$360,000, and a loan from Clovis to Skinner Capital in the amount of $660,000, with

2% interest rates and a maturity date at the end of 2030.287 The Promissory Notes

are not executed. 288 Skinner testified that he prepared the Promissory Notes after

the funds had already been paid to Skinner Capital and Red Bridge.             289
                                                                                     The

Promissory Notes bear dates indicating they were created after the Purported Loans

285
   Blanch Defs.’ Post-Tr. Ans. Br. 12, 28. The Blanch Defendants did not raise a ripeness
defense on the Purported Loans prior to their post-trial answering brief.
286
      Id. 32.
287
      JX 401; JX 402; JX 403.
288
      JX 401; JX 402; JX 403.
289
      Tr. 492:6–12 (Skinner).

                                           64
were made because they are dated December 31, 2015 and December 31, 2016.290

The loan amounts in the Promissory Notes do not match the amounts paid to Skinner

Capital and Red Bridge after November 2015. Also, for similar reasons as described

above with respect to the Management Fees, the Blanch Defendants’ argument that

Diamond acquiesced to the Purported Loans through his November 2016 email to

Eisenberg fails: Diamond could not have acquiesced to loans that were not, in fact,

loans. 291 Indeed, as of November 2015, the Promissory Notes did not even exist and

therefore Diamond could not have acquiesced to them. 292

         Even if the Promissory Notes were not sham documents, there is no evidence

that Blanch or Skinner disclosed the Promissory Notes to Plaintiff as required by the

LLC Agreement. Diamond testified that he first saw the Promissory Notes during

this litigation.293 There is also no evidence that the terms of the Promissory Notes

were determined to be fair and reasonable pursuant to the requirements of the LLC

Agreement. Defendants did not present any experts. Skinner testified that he

believed that the Promissory Notes to Skinner Capital were commercially

290
      JX 401; JX 402; JX 403.
291
      See JX 317.
292
   To the extent that Defendants imply that any difference between the Promissory Notes
and the payments to Skinner Capital and Red Bridge resulted from a purported advance of
management fees, the November 2016 email between Diamond and Eisenberg makes no
mention of advances of management fees or guaranteed payments, and Diamond therefore
could not have consented to any such advance. Id.
293
      Tr. 141:3–10 (Diamond).

                                          65
reasonable.294 This testimony is not credible because the terms of the Promissory

Notes are facially not commercially reasonable. They are 2% notes with a 15-year

maturity date, for hundreds of thousands of dollars, and there are no factual

circumstances warranting their issuance. The Purported Loans were breaches of

Section 5.2 of the LLC Agreement.

                                iii.   Defendants’ General Acquiescence and Unclean
                                       Hands Defenses

         Skinner argues that he did not commit any breach of the LLC Agreement

because all of his actions in controlling Clovis’s finances were purportedly done at

the “direction” of Diamond.295 At trial, Skinner testified that Diamond “knew what

payments were going on” and had “access to the checking [account].”296 In his post-

trial brief, Skinner contended that Diamond and Carter treated all of Diamond’s

entities as a single entity, that Diamond was able to monitor Clovis’s tax returns

through Eisenberg, that Skinner and Diamond spoke regularly, and that Diamond

“had complete control of Brian Skinner.”297 Skinner’s arguments are not supported

by any specific evidence and they are no defense to Plaintiff’s claim for breach of

the LLC Agreement. The evidence does not support Skinner’s claim that Diamond

294
      Tr. 484:1–8 (Skinner).
295
      Skinner’s Post-Tr. Br. 24.
296
      Tr. 340:4–20 (Skinner).
297
      Skinner’s Post-Tr. Br. 24.

                                              66
directly controlled his actions. The connections between Diamond Carter Trading,

Clovis, and Maison do not support Skinner’s claim that they were all treated as a

singular entity.298 Apart from the Management Fees, as discussed above, Skinner

has cited no documentary evidence establishing that Diamond knew of any of the

other payments from Clovis to Skinner Capital or for Skinner’s personal expenses

before the payments occurred or that Diamond subsequently ratified them.

            Most fundamental, the documentary evidence indicates that, rather than act

under Diamond’s control, Skinner sought to control and conceal financial

information regarding Clovis from Diamond. In 2015, Diamond asked Skinner to

“go over” some questions from Eisenberg relating to Clovis’s tax treatment of

payments to Richard and Skinner.299 In response, Skinner wrote “[Eisenberg] should

direct questions about Clovis to me.           Makes no sense to relay the answers.

Everything below is wrong.”300 Skinner provided Schedule K-1s to Plaintiff that did

298
    Skinner cites joint trial exhibits 598 and 627 in support of his argument that Clovis “was
an extension of Diamond Carter Trading, LLC.” Skinner’s Post-Tr. Br. 24. JX 598 is a
life insurance policy for Skinner. JX 627 is an email chain between Skinner and an attorney,
Christopher Ezold, regarding a telephonic conversation about ViaStone with Diamond and
Skinner’s direction to Ezold to create a limited liability company for the purchase of
ViaStone. The email chain is dated in the summer of 2013, before Clovis was created.
Neither document demonstrates that Clovis “was an extension of Diamond Carter Trading,
LLC,” as Skinner claims. Nor does Skinner provide legal support to treat the entities as
one.
299
      JX 233.
300
      Id.

                                             67
not accurately reflect the Company’s actual assets and cash.301 In 2018, Skinner

directed Citrin Cooperman to send Diamond only Stone & Paper’s K-1, rather than

“the whole Clovis Tax Return.”302 Skinner even tacitly acknowledged in testimony

that his characterizations of treatment of payments from Clovis were inconsistent

and could raise potential tax liability issues. 303 At bottom, Skinner’s argument that

he acted in deference to Diamond is ultimately not credible because his actions—

including making payments to himself and Blanch from Clovis’s funds and

attempting to recharacterize the payments back and forth between salaries and

loans—are consistent with a course of conduct intended to profit himself at Stone &

Paper’s, and indirectly Diamond’s, expense.

         The Blanch Defendants argue that any recovery by Plaintiff as to the

Management Fees should be barred by the doctrine of unclean hands. “The doctrine

of unclean hands is based on the long-established rule that if a party who seeks relief

in a Court of Equity ‘has violated conscience or good faith or other equitable

principles in his conduct, then the doors of the Court of Equity should be shut against

301
   Compare JX 524 at P00211 (showing that Plaintiff’s capital account for Clovis held
approximately $1.7 million in assets at the end of 2016) and JX 523 at P0038 (showing
that Plaintiff’s capital account for Clovis held approximately $1.4 million in assets at the
end of 2017) with JX 503 at CITIBANK_001773, CITIBANK__001797 (showing that
Clovis only had approximately $194,000 in its only bank account at the end of 2016 and
$17,000 in its only bank account at the end of 2017).
302
      JX 411.
303
      Tr. 491:5–492:5 (Skinner).

                                            68
him.’” Universal Enter. Gp., LP v. Duncan Petroleum Corp., 2014 WL 1760023, at

*7 (Del. Ch. Apr. 29, 2014) (quoting Bodley v. Jones, 50 A.2d 463, 469 (Del. 1947)),

aff’d, 99 A.3d 228 (Del. 2014) (ORDER). “[C]ourts of equity have extraordinarily

broad discretion in application of the [unclean hands] doctrine.” Nakahara v. NS

1991 Am. Tr., 718 A.2d 518, 522 (Del. Ch. 1998); SmithKline Beecham Pharm. Co.

v. Merck & Co., Inc., 766 A.2d 442, 448 (Del. 2000) (“The Court of Chancery has

broad discretion in determining whether to apply the doctrine of unclean hands.”).

For the doctrine of unclean hands to apply, Plaintiff’s inequitable conduct must

generally have an “immediate and necessary” relationship to its claims. Nakahara,

718 A.2d at 523. In applying the doctrine, the court must “‘examine the particular

transactions and circumstances involved . . . which are alleged to taint [the subject

of the suit.’” Id. at 523–24 (quoting Johnson v. Yellow Cab Transit Co., 321 U.S.

383, 388 (1944)).

      The Blanch Defendants argue that Plaintiff’s recovery should be barred by the

doctrine of unclean hands defense based on the purported salary of $100,000 paid to

John Diamond and payments from Clovis to the AMEX Account that allegedly

benefited Diamond and Carter. Neither argument is persuasive. Diamond testified

that Skinner wanted to pay him the $100,000 salary in exchange for computer

programming services, and this testimony was credible. Diamond did not demand

the salary. There was no reason why he would have done so: the $100,000 repaid

                                         69
to Plaintiff was money that Diamond had invested in Clovis just days earlier, and

Diamond did not behave inequitably by accepting Skinner’s representation that

Clovis would need his computer programming services.304 I find more credible

Plaintiff’s theory that Skinner offered monthly payments to Diamond to later justify

any objections to the monthly payments to Skinner Capital and Red Bridge. With

respect to the AMEX Account, Skinner was responsible for all of the charges

allocated to Clovis on the AMEX Account, 305 and Defendants have not established

that any of Skinner’s allocations resulted from inequitable conduct by Plaintiff.

      The Defendants bear the burden of persuasion to establish unclean hands by a

preponderance of the evidence. I am not persuaded that the conduct of Plaintiff or

its principals warrants denial of relief. Plaintiff received $100,000 in unauthorized

payments from Clovis. I find that Skinner proposed those payments, which equated

304
   Tr. 48:6–49:11 (Diamond) (“I said to him, you know, we just put in 3 1/2 million. You
don’t have to give any money back. I don’t understand. If you have computer
programming to do, I’ll do it for free. I don’t care.”).
305
    Tr. 444:16–449:17 (Skinner). Skinner testified that he discussed allocating AMEX
Account charges between Diamond Carter Trading and Clovis with Diamond and that
Diamond would “ultimately approve the Diamond Carter Trading tax return.” Tr. 458:4–
11 (Skinner); Tr. 441:3–442:13 (Skinner). Skinner’s testimony does not prove that
Diamond knew that Skinner was misallocating funds between the entities, and Skinner’s
own description of the process suggests that Skinner was primarily responsible for the
allocation. See Tr. 446:21–23 (Skinner) (testifying that he would allocate charges between
the entities “quickly, talk to John, tell him what we’re going to do, and give it to the
accountants”); Tr. 442:6–8 (Skinner) (“Did John and I sit down and go through with a fine-
tooth comb every charge? No. Most of the time we just looked at the year-end
summary.”); see also Tr. 459:20–460:8 (Skinner) (testifying that “there was no rhyme or
reason” as to how charges were allocated between entities).

                                           70
to a fraction of Plaintiff’s $3.5 million investment in the Company, which Skinner

and Blanch control as its managers. Skinner was also the manager responsible for

allocating expenses charged to the AMEX account. There is no evidence that

Plaintiff or Diamond transferred any funds from Clovis or attempted to conceal the

payments that Skinner made to Plaintiff. “This court has consistently refused to

apply the doctrine of unclean hands to bar an otherwise valid claim of relief where

the doctrine would work an inequitable result.” Portnoy v. Cryo-Cell Int’l, Inc., 940

A.2d 43, 81 (Del. Ch. 2008) (quoting Dittrick v. Chalfant, 948 A.2d 400, 408 n.18

(Del. Ch. 2007)). Applying the doctrine in these circumstances would also work an

inequitable result, allowing the Defendants to keep their ill-gotten gains through

breaches of loyalty and deception, to the detriment of Plaintiff and the Company.

      As the court held at the motion to dismiss stage, Plaintiff’s claim for breach

of contract pursuant to Section 5.2 states a direct claim against Blanch and Skinner

because it is a “personal right belonging to the members” of Clovis.           2019

Memorandum Opinion, 2019 WL 2374005, at *4. Accordingly, Stone & Paper is

entitled to recover directly from Blanch and Skinner with respect to the claim for

breach of Section 5.2 of the LLC Agreement.

                   c.     Sections 4.10 and 10.7

      Section 4.10 requires Clovis to provide the Members with annual financial

disclosures in the form of a statement of cash flows, a report setting forth the

                                         71
Members’ closing capital accounts, and a copy of each Member’s Schedule K-1.306

Section 10.7 requires Clovis to “maintain records and accounts of all operations and

expenditures of the Company.”307

          Skinner did not maintain any financial records for Clovis, including cash flow

statements, general ledgers, or profit and loss statements.308 The only financial

records available for Clovis are its bank account statement from Citibank and its tax

records. The Blanch Defendants argue that Eisenberg kept Clovis’s books and

records. 309 This argument is unsupported by any citation to the factual record or

legal authority, and it does not absolve Skinner and Blanch from their contractual

obligation to maintain books and records or provide them to members consistent

with the terms of the LLC Agreement. Skinner’s and Blanch’s failure to maintain

any financial records for Clovis constituted a breach of Sections 4.10 and 10.7 of the

LLC Agreement.

                    2.   Breach of Fiduciary Duties

          Plaintiff claims that Blanch and Skinner, as managers of Clovis, breached

their fiduciary duties of loyalty and care “by improperly diverting the bulk of the

306
      LLC Agreement § 4.10.
307
      Id. § 10.7.
308
      Tr. 404:18–406:12 (Skinner).
309
      Blanch Defs.’ Ans. Br. 39.

                                            72
Company’s capital to their member-affiliates.” 310 Clovis is a Delaware limited

liability company.        Under Delaware law, “LLC agreements import corporate

fiduciary duties by default, unless the pertinent agreement provides to the contrary.”

Marubeni Spar One, LLC v. Williams Field Servs. - Gulf Coast Co., L.P., 2020 WL

64761, at *10 (Del. Ch. Jan. 7, 2020); see also Beach to Bay Real Estate Ctr. LLC

v. Beach to Bay Realtors Inc., 2017 WL 2928033, at *5 (Del. Ch. July 10, 2017)

(“Delaware LLCs are known for their contractual flexibility; however, our Courts

have interpreted the Delaware LLC Act to imply default fiduciary duties

to managers of a LLC unless such duties are clearly disclaimed.”) (emphasis in

original). Section 18-1101(e) of the Delaware Limited Liability Company Act (the

“Act”) provides that “a limited liability company agreement may provide for the

limitation or elimination of any and all liabilities for breach of contract and breach

of duties (including fiduciary duties) of a member, manager or other person to a

limited liability company” except with respect to “bad faith violation[s] of the

implied contractual covenant of good faith and fair dealing.” 311

         Section 4.3 of the LLC Agreement, titled “Fiduciary Duties of the Managers,”

provides, in its entirety, that “A Manager shall perform his duties hereunder in good

310
      Pl.’s Post-Trial Opening Br. 29.
311
      6 Del. C. § 18-1101(e).

                                          73
faith and in a manner consistent with the requirements of the Act.” 312 The LLC

Agreement does, however, contain a limitation on personal liability. Section 7.1(a)

provides that the managers “shall not have personal liability to the Company or its

Members for any breach of duty in such capacity, provided that nothing in this

Section 7.1(a) shall eliminate or limit the liability of any such Manager or Officer if

a judgment . . . establishes that his or her acts or omissions were in bad faith or

involved intentional misconduct or a knowing violation of law or that he or she

personally gained in fact a financial benefit to which he or she is not entitled.”313

The LLC Agreement does not expressly disclaim fiduciary duties, and Defendants

do not argue otherwise.

          This court recently elaborated on the fiduciary duties of a manager of a

Delaware limited liability company:

          In the limited liability context, as in the corporate context, the duty of
          loyalty mandates that the best interest of the company and its
          stakeholders take precedence over any interest possessed by the
          manager and not shared by the stakeholders generally. A manager is
          not permitted to use their position of trust and confidence to further
          their private interests. Nor can fiduciaries intentionally act with a
          purpose other than that of advancing the best interests of the
          corporation. Specifically, and very pertinently to this case, such
          fiduciary duties include the duty not to cause the corporation to effect
          a transaction that would benefit the fiduciary at the expense of the
          minority stockholders.

312
      LLC Agreement § 4.3.
313
      Id. § 7.1(a).

                                             74
Largo Legacy Grp., LLC v. Charles, 2021 WL 2692426, at *13 (Del. Ch. June 30,

2021) (internal quotations omitted). In addition, “[a] failure to act in good faith may

be shown . . . where the fiduciary intentionally acts with a purpose other than that of

advancing the best interests of the corporation.” In re Walt Disney Co. Deriv. Litig.,

907 A.2d 693, 755 (Del. Ch. 2005), aff’d, 906 A.2d 27 (Del. 2006).

      Blanch and Skinner breached their fiduciary duties of loyalty to the Company.

Blanch and Skinner acted in bad faith by approving the Management Fees and the

Purported Loans as payments to Red Bridge and Skinner Capital. Those transactions

were designed to enrich Blanch and Skinner at Clovis’s expense and were not

intended to “advance[e] the best interests” of Clovis. As described above, these

payments were not authorized in the manner required by the LLC Agreement, did

not advance Clovis’s interests, and were often made to support Blanch’s and

Skinner’s personal expenses. The record reflects that Blanch and Skinner were

conscious of their wrongdoing because each engaged in acts of subterfuge designed

to conceal their conduct. Blanch, with Vivianna’s assistance, attempted to create a

misleading paper trail regarding Red Bridge and the source of its funds, and

attempted to shelter payments from Clovis to Red Bridge through Vivianna

Blanch. 314   After abandoning an acquisition of ViaStone, Skinner accelerated

314
   JX 74; JX 77; JX 81; see also Tr. 881:5–18 (V. Blanch). Vivianna testified that she
assumed that the misrepresentations regarding Red Bridge were intended to assist in
sheltering assets from claimants in the Metier Action. This assumption does not affect my

                                           75
payments from Clovis to Skinner Capital, attempted to disguise them as loans

through the sham Promissory Notes, and then later attempted to recharacterize them

as guaranteed payments to Clovis’s accountants. These acts demonstrate that

Blanch’s and Skinner’s breaches were intentional. Further, for the reasons described

above, Blanch and Skinner breached their fiduciary duty of loyalty. Thus, apart from

Diamond’s acquiescence to Skinner paying Skinner Capital $400,000 in

Management Fees, the Management Fees and the Purported Loans constitute

breaches of Blanch’s and Skinner’s fiduciary duties of loyalty.315

       Plaintiff has also established that Skinner breached his fiduciary duties with

respect to the payments to the AMEX Account.316 From 2014 to 2017, Skinner

allocated over $535,000 of AMEX Account charges to Clovis. During that same

time period, Skinner paid approximately $510,000 to the AMEX Account from

determination. Blanch’s actions are consistent with a motive to shelter unauthorized
payments from Clovis from any scrutiny, not just from claimants in the Metier Action.
315
    Because Plaintiff’s breach of fiduciary duty claim and breach of contract claim may
affect the measure of damages, it is necessary to adjudicate both claims. Backer v.
Palisades Growth Cap. II, L.P., 246 A.3d 81, 109 (Del. 2021) (“The bootstrapping case
law only requires dismissal where a fiduciary duty claim wholly overlaps with a concurrent
breach of contract claim,” and recognizing that this court may decline to treat such claims
as duplicative where different remedies may result). See also 2019 Memorandum Opinion,
2019 WL 2374005, at *6 n.57 (Del. Ch. May 31, 2019) (holding, at the motion to dismiss
stage, that the breach of fiduciary duty and breach of contract claims could proceed because
they were grounded in distinct factual allegations).
316
    Plaintiff generally argues that both Skinner and Blanch breached their fiduciary duties
with respect to the AMEX Account payments, but Plaintiff has not established that Blanch
is or should be responsible for those payments, which were processed only by Skinner.

                                            76
Clovis’s funds. Plaintiff has established that many, if not most, of the charges that

Skinner allocated to Clovis (and then paid for with Clovis’s funds) were in Skinner’s

self-interest rather than in Clovis’s interest. For example, in 2014, over $100,000 of

the $175,104 that Skinner allocated to Clovis were for strip clubs that Skinner

frequented alone.317 Although some of the charges that Skinner allocated to Clovis

may have had legitimate Clovis-related purposes, Skinner did not allocate the

charges between Diamond Carter Trading and Clovis on any principled basis.

Skinner testified that there was “no rhyme or reason exactly how they got

allocated.”318 Skinner’s inability to properly account for the charges on the AMEX

Account with any specificity cannot be not a defense to Plaintiff’s allegation that

Skinner used Clovis’s funds to pay the AMEX Account in bad faith. By continually

allocating his personal expenses to Clovis and then using Clovis’s funds to pay for

those expenses, Skinner acted in bad faith as a manager of Clovis with respect to

payments to the AMEX Account.

         The LLC Agreement’s limitation on liability provides that “[t]he Managers

and Officers shall not have personal liability to the Company or its Members for any

breach of duty in such capacity, provided that nothing in this Section 7.1(a) shall

317
      JX 649; Tr. 452:13–16 (Skinner).
  Tr. 459:24–8 (Skinner) (“Sometimes it was accurate and sometimes it was just, hey, put
318

some on this entity, put some on that entity.”).

                                          77
eliminate or limit the liability of any such Manager or Officer if a judgment . . .

establishes that his or her acts or omissions were in bad faith or involved intentional

misconduct or a knowing violation of law or that he or she personally gained in fact

a financial benefit to which he or she is not entitled.”319 In this case, the limitation

of liability does not apply because Blanch and Skinner’s conduct was intentional and

because they each, through their respective LLCs, gained a financial benefit to which

they were not entitled. Blanch and Skinner are personally liable for their breaches

of fiduciary duty.

               3.    Fraud

         Plaintiff claims that Blanch, Skinner, Red Bridge, and Skinner Capital

committed fraud in two respects.          First, Plaintiff argues that the defendants

fraudulently induced Plaintiff to invest $3.5 million into Clovis. Second, Plaintiff

argues that the defendants fraudulently concealed their draining of Clovis’s funds.

Under Delaware law, a plaintiff must prove fraud by a preponderance of the

evidence. In re IBP, Inc. S’holders Litig., 789 A.2d 14, 54 (Del. Ch. 2001).320

319
      LLC Agreement § 7.1(a).
320
    Some parties have argued that the standard for fraud in Delaware is clear and convincing
evidence. Cf. Ross Hldg. & Mgmt. Co. v. Advance Realty Grp., LLC, 2014 WL 4374261,
at *37 (Del. Ch. Sept. 4, 2014) (applying clear and convincing evidence standard to a fraud
in the inducement claim). Ross did not state the burden for a common law fraud claim
under Delaware law. Instead, the case involved a fraud claim under New Jersey law. See
id. at *37 & n.283 (citing Liberty Mut. Ins. Co. v. Land, 892 A.2d 1240, 1247 (N.J. 2006),
for the applicable standard). In an earlier opinion in that case, the court observed: “The
parties agree that New Jersey law governs the substantive issues in this case.” Ross Hldg.

                                            78
                      a.     Fraudulent Inducement

       “The elements of fraudulent inducement are the same as those of common law

fraud.” Trascent Mgmt. Consulting, LLC v. Bouri, 2018 WL 4293359, at *12 (Del.

Ch. Sept. 10, 2018) (internal citations omitted). The elements of fraud are:

       (1) a false representation, usually one of fact, made by the defendant;
       (2) the defendant’s knowledge or belief that the representation was
       false, or was made with reckless indifference to the truth; (3) an intent
       to induce the plaintiff to act or to refrain from acting; (4) the plaintiff’s
       action or inaction taken in justifiable reliance upon the representation;
       and (5) damage to the plaintiff as a result of such reliance.

Id. (quoting E.I. DuPont de Nemours & Co. v. Fla. Evergreen Foliage, 744 A.2d

457, 461-62 (Del. 1999)).           Fraud can be committed through “(1) an overt

misrepresentation; (2) silence in the face of a duty to speak; or (3) active

concealment of material facts.” In re Am. Int’l Grp., Inc., 965 A.2d 763, 804 (Del.

Ch.    2009),     aff’d    sub    nom.     Teachers’     Ret.    Sys.    of    Louisiana     v.

PricewaterhouseCoopers LLP, 11 A.3d 228 (Del. 2011).                     A party that owes

common law fiduciary duties owes a duty to speak. Bay Ctr. Apartments Owner,

LLC v. Emery Bay PKI, LLC, 2009 WL 1124451, at *11 (Del. Ch. Apr. 20, 2009).

& Mgmt. Co. v. Advance Realty Grp., LLC, 2010 WL 1838608, at *5 n.10 (Del. Ch. Apr.
28, 2010). In addition, the post-trial briefs addressed the fraud claim under New Jersey
law. See Ross Hldg. & Mgmt. Co. v. Advance Realty Grp., LLC, C.A. No. 4113-VCN
(Dkt. 278), Defendant’s Post-Trial Brief at 78 (“A cause of action in legal fraud in New
Jersey requires the proof of five elements by clear and convincing evidence . . . .” (emphasis
in original)); id. (Dkt. 248), Plaintiffs’ Trial Brief at 39 (citing New Jersey case law for the
elements of fraud). The parties here have briefed the fraud claims under Delaware law and
none of them have argued that any other state’s law applies.

                                              79
As discussed above, the LLC Agreement does not eliminate Blanch’s and Skinner’s

fiduciary duties.

            Plaintiff claims that Blanch, Skinner, Red Bridge, and Skinner Capital

“fraudulently induced Plaintiff to invest in Clovis.” 321 In support of their fraud

theory, Plaintiff argues that Skinner and Blanch “knowingly and falsely represented

that: (1) Clovis was a legitimate business being formed to purchase ViaStone; (2)

Plaintiff’s capital investment would be used solely to fund the purchase and

operations of ViaStone; (3) the purchase of ViaStone was imminent; and (4) Drew

Aaron would be involved in providing order flow for the post-acquisition

ViaStone.”322 Plaintiff therefore seeks all of its $3.4 million invested—$3.5 million

minus the $100,000 previously paid to Plaintiff—as a damages award from Skinner

and Blanch.

            Plaintiff’s fraud claim proceeds from the premise that Clovis was a sham

entity ab initio. Plaintiff cites an email between Skinner and Blanch prior to the

formation of Clovis in which Blanch urges Skinner to persuade Diamond and Carter

to set aside funds under Skinner’s control for Skinner to invest on their behalf.323

This email does not establish that Clovis was an illegitimate business or not intended

321
      Pl.’s Post-Tr. Opening Br. 35.
322
      Id.
323
      JX 4.

                                           80
to acquire ViaStone. Blanch’s email proposes a course of action to enable Skinner

to leverage Diamond’s and Carter’s money to enrich himself through salary and

equity through various deals (including a deal with Metier). 324 Blanch speculates

that Skinner will be able to obtain significant returns from Diamond’s and Carter’s

investments and that this will be “lucrative, long term, for all parties,” including

Diamond and Carter.325 In a similar vein, Plaintiff cites an email between Skinner

and Blanch prior to the formation of Clovis in which Blanch and Skinner discuss the

possibility of working directly with TLM rather than acquiring ViaStone.326 The

email indicates that Skinner and Blanch consider this a secondary plan—a Plan B—

to the acquisition of ViaStone. Though Blanch states “we might need to go straight

to China and buy direct,” he also sets out “next steps” for the acquisition of ViaStone

and demeans the ViaStone managers for purportedly failing to understand the

benefits that Clovis purchasing ViaStone will provide to them. 327

            I am not persuaded that Blanch and Skinner never intended for Clovis to

acquire ViaStone. For more than a year after forming Clovis, Blanch and Skinner

324
   JX 4 (advising Skinner to “secure your $180,000 base salary,” to “participate in the
upside of D+C deals,” and to “utilize D+C capital to slowly diversify the business into
other categories of finance”).
325
    Id. (“Meantime, you are building a track record for D+C, for Brian Skinner and doing
it at a rather low commitment. Much more lucrative, long term, for all parties, then having
$10MM in an underfunded hedge fund.”).
326
      JX 29.
327
      Id.

                                            81
performed work on behalf of Clovis to generate interest for ViaStone’s stone paper

products, including by meeting with Chow and potential stone paper customers.328

Blanch and Skinner directed their attorney, Okulski, to take an aggressive position

with Chow during negotiations to purchase ViaStone.329               But this course of

conduct—however mendacious—contradicts Plaintiff’s theory that Clovis was a

sham designed to defraud it into handing over $3.5 million to Defendants. At least

initially, Blanch and Skinner acted to maximize leverage for the possible acquisition

of ViaStone and to lay the groundwork for the possibility of lucrative customer

relationships after the acquisition. The fact that their initial strategy did not succeed

does not mean that Blanch’s and Skinner’s intent at Clovis’s formation was to

defraud Plaintiff.

         Plaintiff contends that it was told that the purchase of ViaStone was

“imminent,” that Aaron was going to supply ViaStone with paper orders, and that

its investment would only be used “to fund the purchase and operations of

328
    Tr. 626:9–627:13 (R. Blanch) (testifying that Clovis spent “four years doing nonstop
testing, due diligence, paper trials, [and] client meetings.”). Though Plaintiff faults
Defendants for failing to secure any agreements or benefits to Clovis through this work,
Pl.’s Opening Br. 32, Plaintiff does not contest that these meetings and this work actually
occurred. The evidence indicates Blanch and Skinner performed work regarding the
subjects listed by Blanch in his testimony at least nominally on behalf of Clovis for some
period after its formation. See PX 1; PX 4, PX 6; PX 7; JX 201; see ViaStone Rule 30(b)(6)
Dep. 63:6–7 (“Brian was at most all of the meetings more than Richard.”).
329
      JX 191.

                                            82
ViaStone.”330 Plaintiff has failed to establish fraudulent inducement based on these

representations. Plaintiff cites Diamond’s testimony that he was repeatedly told that

everything was “going well” with the stone paper business and that in August 2014,

he was told that an acquisition of ViaStone was imminent.331 These statements post-

date Clovis’s formation and Plaintiff has not proven by a preponderance of the

evidence that these statements were knowingly false or made with a reckless

indifference to the truth at the time that they were made.

         Plaintiff’s evidence regarding representations by Blanch to Diamond

regarding Aaron’s involvement in Clovis do not prove that Clovis was intended to

defraud Plaintiff from the outset. Plaintiff cites a February 2014 email from Blanch

to Diamond and others pressuring them to invest sooner to take advantage of a

prospective 20,000 ton order from Aaron. 332        The contemporaneous evidence,

however, indicates that Blanch believed that Aaron was going to make an order from

ViaStone. In December 2013, Blanch advised his attorney that Aaron would not be

investing in the acquisition entity for ViaStone, but that he would be providing a

“$23MM opening order for paper” “through Tier 1/ViaStone.” 333 Blanch stated that

Aaron’s anticipated 20,000 ton “order automatically makes our company legitimate

330
      Pl.’s Post-Tr. Opening Br. 35.
331
      Tr. 59:12–21 (Diamond); Tr. 118:13–119:1 (Diamond).
332
      JX 44.
333
      JX 35.

                                           83
and makes us all money.” 334 Diamond met with Blanch, Skinner, and Aaron in

October 2013, which convinced Diamond to invest in ViaStone. 335 In January 2014,

Blanch and Aaron were actively discussing the possibility of Aaron making a 20,000

ton order from ViaStone. 336 Aaron did not testify in this action. There is no evidence

from which the Court can determine that Blanch’s statement was knowingly false or

made with a reckless indifference to the truth. Plaintiff’s arguments that Blanch and

Skinner falsely represented that its investment would only be used “to fund the

purchase and operations of ViaStone” fail because the contract does not expressly

require Blanch and Skinner to exclusively use Clovis’s investment to first purchase

and then operate ViaStone.337 It is also contradicted by Diamond’s agreement to

allow Skinner to take a $20,000 monthly fee starting in April 2014 and Diamond’s

acceptance of $10,000 in monthly payments to Plaintiff. Plaintiff therefore has not

proven that Blanch and Skinner fraudulently induced Plaintiff to invest in Clovis.

                      b.    Fraudulent Concealment

         To establish a claim for fraudulent concealment, Plaintiff must prove the

following elements: “(1) [d]eliberate concealment by the defendant of a material

past or present fact, or silence in the face of a duty to speak; (2) [t]hat the defendant

334
      JX 44.
335
      Tr. 19:13–20:6 (Diamond).
336
      JX 592.
337
      LLC Agreement §§ 1.1(kk), 5.2.

                                           84
acted with scienter; (3) [a]n intent to induce plaintiff’s reliance upon the

concealment; (4) [c]ausation; and (5) [d]amages resulting from the concealment.”

DG BF, LLC v. Ray, 2021 WL 776742, at *20 (Del. Ch. Mar. 1, 2021) (quoting

Nicolet, Inc. v. Nutt, 525 A.2d 146, 149 (Del. 1987)).

         The record is replete with evidence that Skinner and Blanch purposefully

aimed to conceal their self-dealing from Plaintiff. Blanch’s and Skinner’s

communications with Clovis’s accountants, characterizing payments from Clovis to

Skinner Capital and Red Bridge as loans, worked a fraud on the Plaintiff because

they were not loans. 338 Skinner’s instructions in 2018 to Citrin Cooperman to

recharacterize certain loans as guaranteed payments was a further intentional act to

conceal the nature of the payments, as were the Promissory Notes themselves. 339 In

addition, the Schedule K-1s that Skinner provided to Plaintiff indicated that

Plaintiff’s capital account was worth $1.7 million at the end of 2016 and $1.4 million

at the end of 2017,340 while Clovis held only $193,000 in its bank account at the end

of 2016 and $16,000 in its bank account at the end of 2017.341 Skinner and Blanch

338
    See Tr. 1065:14–21 (Eisenberg) (testifying that Richard and Skinner instructed him to
treat $240,000 disbursements as loans); JX 233 (Skinner informing Diamond that only he
should communicate with Eisenberg).
339
      JX 406.
340
      JX 524 at P00211; JX 523 at P0038.
341
      JX 503 at CITIBANK_1773.

                                           85
sought to keep Diamond uninformed about Clovis’s financial status,342 and they

were    frustrated   when     their   accountants    notified   Diamond      about    the

recharacterization of the loans.343

       These acts constituted “overt misrepresentation[s]” and “active concealment

of material facts,” and I find that they were knowingly false. Am. Int’l Grp., Inc.,

965 A.2d at 804. Skinner and Blanch engaged in a broad scheme intended to induce

Plaintiff into inaction regarding their misappropriation of funds from Clovis,

Plaintiff was induced into inaction, and Plaintiff’s interests were damaged as a result.

Id.    For the foregoing reasons, Blanch and Skinner are liable for fraudulent

concealment. Their fraudulent concealment, however, does not support a damages

award beyond the damages awardable from Skinner’s and Blanch’s breaches of

contract and fiduciary duty. In its briefing, Plaintiff argues that Blanch and Skinner

intended to prevent Plaintiff from requesting an early return of its capital. But the

LLC Agreement prevented Plaintiff from obtaining a return of capital without the

managers’ approval, so Plaintiff was not harmed in that manner. Plaintiff’s damages

resulting from Blanch’s and Skinner’s fraudulent concealment are already subject to

  In an email, Skinner instructed Citrin Cooperman to send Diamond “only the Stone and
342

Paper Investors K-1,” stating that “he does not need the whole Clovis Tax Return.” JX
411. Skinner carefully added, “[i]f this is not possible please let me know.” Id.
343
   When a Citrin Cooperman accountant copied Diamond on her response to Skinner’s
request to convert part of the loan to a guaranteed payment, Skinner sent a separate email
to Blanch: “FYI, Spencer had her add John Diamond. I will take that up with Spencer.”
JX 414.

                                           86
recovery by Plaintiff through its breach of contract and breach of fiduciary duty

claims.

             4.     Civil Conspiracy and Aiding and Abetting

      Plaintiff also asserts claims that Defendants engaged in civil conspiracy and

that Vivianna Blanch, Red Bridge, and Skinner Capital aided and abetted the

breaches of fiduciary duty and contract by Blanch and Skinner. “[C]ivil conspiracy

and aiding and abetting are quite similar.” Great Hill Equity Partners IV, LP v. SIG

Growth Equity Fund I, LLLP, 2014 WL 6703980, at *22 (Del. Ch. Nov. 26, 2014).

“The two theories differ in their emphasis: ‘[A]iding and abetting is a cause of action

that focuses on the wrongful act of providing assistance, unlike civil conspiracy that

focuses on the agreement.’” Firefighters’ Pension Sys. of City of Kansas City,

Missouri Tr. v. Presidio, Inc., 251 A.3d 212, 282 (Del. Ch. 2021) (quoting

WaveDivision Hldgs., LLC v. Highland Cap. Mgmt. L.P., 2011 WL 5314507, at *17

(Del. Super. Nov. 2, 2011), aff’d, 49 A.3d 1168 (Del. 2012)). “This court largely

has equated claims for aiding and abetting and civil conspiracy, noting that the two

theories often cover the same ground and that the distinctions usually are not

material.” Id.

      The elements for civil conspiracy are “(i) a confederation or combination of

two or more persons; (ii) an unlawful act done in furtherance of the conspiracy; and

(iii) damages resulting from the action of the conspiracy parties.” Agspring Holdco,

                                          87
LLC v. NGP X US Hldgs., L.P., 2020 WL 4355555, at *21 (Del. Ch. July 30, 2020)

(internal citations omitted). A plaintiff need not “prove the existence of an explicit

agreement; a conspiracy can be inferred from the pled behavior of the alleged

conspirators.” Am. Int’l Group, 965 A.2d at 806.

         Plaintiff has proven by a preponderance of the evidence that Defendants

engaged in a civil conspiracy to misappropriate Clovis’s funds. For the reasons

described above, I find that all of the Defendants formed part of the conspiracy to

misappropriate Clovis’s funds because Blanch, Vivianna Blanch, and Skinner acted

in concert to misappropriate funds from Clovis. Blanch and Skinner paid themselves

Management Fees in breach of the LLC Agreement. They directed the payment of

those fees to Skinner Capital and Red Bridge. After definitively deciding not to

acquire ViaStone, Blanch and Skinner turned to looting Clovis. They accelerated

payments to Red Bridge and Skinner Capital for their personal use and acted jointly

to instruct Eisenberg to recharacterize the $240,000 disbursements to Red Bridge

and Skinner Capital as loans rather than guaranteed payments.344 Skinner interceded

with Diamond to avoid scrutiny of payments to Red Bridge. 345 Blanch and Skinner

each relied on the sham Promissory Notes to disguise their self-dealing. Blanch and

344
      Tr. 1065:14–24 (Eisenberg).
345
      Tr. 124:9–125:25 (Diamond).

                                         88
Skinner regularly communicated with each other, both before and after they formed

Clovis, and they excluded Diamond from most of their communications. 346

       Vivianna Blanch participated in the conspiracy. She is Red Bridge’s sole

member. She established a bank account for the purpose of receiving Blanch’s

Management Fees, under false pretenses. She then used the money flowing into Red

Bridge to pay for personal expenses.347 Vivianna Blanch testified that she knew that

Red Bridge was being formed to shield payments from recovery. 348

346
   See, e.g., JX 414 (February 23, 2018 email from Blanch to Skinner, informing Skinner
that, to their chagrin, Clovis’s accountants had copied Diamond on an email chain about
Clovis forgiving loans made to Skinner Capital).
347
   Tr. 930:7–9 (V. Blanch). There is no credible evidence adduced at trial that any person
other than Vivianna Blanch was ever a member of Red Bridge, and Vivianna Blanch was
repeatedly held out as Red Bridge’s sole member. See, e.g., JX 42 (Blanch stating that Red
Bridge “is my wife’s company”); JX 78 (agreement to open an account at First Republic
Bank listing Vivianna as the sole signer); JX 353 (June 3, 2017 email from Blanch to
Diamond, Carter, and Skinner, stating that Red Bridge is “an LLC owned by Vivianna
Blanch”). During discovery, the Blanch Defendants produced an operating agreement of
Red Bridge dated April 18, 2014 purporting to reduce Vivianna’s ownership of Red Bridge
to 1%. The operating agreement is not a credible document. The document was produced
with no metadata, it is inconsistent with other documents, and Vivianna testified at her
deposition that she did not know when she signed the document. V. Blanch Dep. 102:16–
103:2. Vivianna’s testimony regarding this issue at trial was disjointed and unreliable. Tr.
916:19–22 (V. Blanch) (“Q. And when did you sign this document? A. In April. Q. Of
this year? A. I think it was dated 2014.”). It was a conscious attempt to avoid damaging
testimony regarding the provenance of the document. In their opening post-trial brief,
Plaintiff argued that the operating agreement was a sham document. Pl.’s Opening Post-
Tr. Br. 51–53. The Blanch Defendants did not respond to this argument or make any
argument regarding Red Bridge’s purported operating agreement, and any such argument
is waived.
348
    Tr. 881:5–18 (V. Blanch) (“I made the assumption that it was to help mitigate any risk
from the previous lawsuit . . . . So I didn’t ask too many questions. I just said, sure. Just
let me know what I need to do.”).

                                             89
      Blanch and Skinner misappropriated funds from Clovis in breach of their

fiduciary duty of loyalty and, in so doing, committed fraud. They did so with the

aid of Vivianna Blanch, Red Bridge, and Skinner Capital. These unlawful acts

caused damage to Clovis, and so each of the elements of civil conspiracy has been

proven by a preponderance of the evidence.

      Plaintiff further claims that Defendants Vivianna Blanch, Red Bridge, and

Skinner Capital aided and abetted Blanch’s and Skinner’s breaches of fiduciary duty.

To prove aiding and abetting a breach of fiduciary duty, a plaintiff must prove “(i)

the existence of a fiduciary relationship, (ii) a breach of the fiduciary's duty, (iii)

knowing participation in that breach by the defendants, and (iv) damages

proximately caused by the breach.” RBC Capital Markets, LLC v. Jervis, 129 A.3d

816, 862 (Del. 2015). Claims for aiding and abetting breaches of fiduciary duty and

civil conspiracy “often rise and fall together.” In re Pattern Energy Group Inc.

S’holders Litig., 2021 WL 1812674, at *76 (Del. Ch. May 6, 2021).

      For the reasons described above, Blanch and Skinner breached their fiduciary

duties owed to Clovis.      Vivianna Blanch, Red Bridge, and Skinner Capital

knowingly participated in those breaches. They were mechanisms through which

Blanch and Skinner obtained and funneled the misappropriated assets. Vivianna

Blanch actively participated in creating a bank account for Red Bridge for receipt of

the funds from Clovis, falsely representing that the funds were the product of a

                                          90
consulting agreement she had with the Company. She provided no services to the

Company. She was the sole member of Red Bridge, and her “knowing behavior . .

. and her knowledge can be imputed to Red Bridge.” 2019 Memorandum Opinion,

2019 WL 2374005, at 7. Similarly, Skinner’s knowledge of his improper conduct

can be imputed to Skinner Capital.

       “[T]he receipt of improper benefits suffices to prove their participation in the

alleged breaches of fiduciary duties.” Carlton Investments v. TLC Beatrice Int’l

Hldgs., Inc., 1995 WL 694397, at *16 (Del. Ch. Nov. 21, 1995); see also 2019

Memorandum Opinion, 2019 WL 2374005, at *7 (holding, at the motion to dismiss

stage, that Plaintiff’s Complaint stated a claim for aiding and abetting fiduciary duty

liability because Vivianna Blanch and Skinner Capital accepted “large monetary

payments directly from the Company for an extended period of time” without

performing substantial work or conferring other benefits to Clovis).                   The

misappropriations proximately caused damage to Clovis. Plaintiff has therefore

proven its claim for aiding and abetting breaches of fiduciary duty against Vivianna

Blanch, Red Bridge, and Skinner Capital.349

349
   Because I find that Vivianna Blanch, Red Bridge, and Skinner Capital are liable for civil
conspiracy and aiding and abetting breaches of fiduciary duty, I need not reach Plaintiff’s
veil-piercing claim that Blanch, Vivianna Blanch, and Red Bridge are each separately
liable for damages against the Blanch Defendants.

                                            91
          B.     Nominal Defendant Clovis’s Affirmative Counterclaims

          The crux of Clovis’s counterclaims is that Stone & Paper breached the LLC

Agreement. Clovis alleges that Stone & Paper violated two provisions of the LLC

Agreement. The first provision is Section 4.9, which governs reimbursement of

expenses from Clovis:          “The Managers will receive from the Company

reimbursement for all reasonable out-of-pocket expenses incurred upon submission

of receipts for such expenses; provided that the reimbursement of any expense item

in excess of $5,000 shall require Board approval.”350 The managers of Clovis are

Skinner and Blanch; 351 Stone & Paper is a passive investor, not a manager.352 As

the Court held in the 2020 Memorandum Opinion, Section 4.9 “only govern[s] the

relationship between the between the managers and the Company and do[es] not

impose any obligations on Stone & Paper.” 2020 Memorandum Opinion, 2020 WL

3496694, at *7 n.29. Because Section 4.9 does not impose any obligation on Stone

& Paper, Stone & Paper did not breach Section 4.9. See Lavender v. Koenig, 2017

WL 443696, at *6 (Del. Super. Ct. Feb. 1, 2017) (“Defendants must have owed

Plaintiffs a contractual obligation in order for Plaintiffs to assert successfully a

350
      LLC Agreement § 4.9.
351
      Id. §§ 1.1(v), 4.1(a).
352
      Tr. 120:3–121:15 (Diamond).

                                          92
breach of contract claim.”) (citing H–M Wexford LLC v. Encorp, Inc., 832 A.2d 129,

140 (Del. Ch. 2003)), aff’d, 171 A.3d 1117 (Del. 2017).

         The second provision is Section 9.6, which governs withdrawal of capital:

               A Member shall not be entitled to demand or receive from the
         Company the liquidation of his or its Membership Interest in the
         Company until the Company is dissolved . . . . Notwithstanding the
         foregoing . . . , [Stone & Paper] may request the return of its initial
         Capital Contribution, provided such amounts are available and
         approved by the Board consisting of at least two (2) Managers.353

Clovis argues that Stone & Paper received a return of its initial capital contribution

without approval of both managers, in violation of Section 9.6 of the LLC

Agreement, when Clovis (1) paid ten $10,000 monthly payments to Diamond in

2014 (the “2014 Payments”), (2) paid $510,124.35 to the AMEX Account, and (3)

paid $21,000 for the Milton Berg newsletter.

               1.     The 2014 Payments

         In early 2014, Skinner proposed paying $10,000 each month to Stone & Paper

in exchange for Diamond performing computer programming services for Clovis.354

From April 2014 to December 2014, Clovis sent to Stone & Paper a total of $100,000

over ten payments. 355         Skinner authorized and processed these payments.356

353
      LLC Agreement § 9.6.
354
      Tr. 48:6–49:11 (Diamond).
355
      JX 643 at P06297.
356
      Tr. 49:2–11 (Diamond).

                                           93
Diamond received the last payment in December 2014, after Aaron learned about

the payments and asked that they be stopped.357 Diamond never performed any

computer programming for Clovis. 358 Diamond considered the $100,000 to be a

return of capital to Stone & Paper,359 and he kept $70,000 for himself and transferred

$30,000 to Carter, per their ownership shares in Stone & Paper.360

            Clovis argues that the $100,000 was an improper return of capital to Stone &

Paper, in violation of Section 9.6 of the LLC Agreement, which permits return of

Stone & Paper’s initial capital contribution only upon request with approval of the

managers. Clovis also argues that Stone & Paper was unjustly enriched by the

$100,000 payment. 361         The 2014 Payments form the basis for the only portion of

Clovis’s claim for unjust enrichment that survived Stone & Paper’s motion to

dismiss. 362

357
      Id.
358
      Tr. 99:16–21 (Diamond).
359
   Tr. 108:18–109:17 (Diamond) (“The plaintiff, Stone & Paper Investors, who had
invested $3.5 million, received $100,000 back of its initial capital contribution.”).
360
      Tr. 96:10–97:10 (Diamond).
361
    In its post-trial briefing, Clovis generally states that Stone & Paper was unjustly
enriched by all three actions, but the substance of the briefing only focused on the aspects
of the unjust enrichment claim that were previously dismissed in the 2020 Memorandum
Opinion. Def.’s Opening Post-Tr. Br. 13–14. Stone & Paper argues that Clovis abandoned
its unjust enrichment claim as to the 2014 Payments by not substantively addressing it in
post-trial briefing. Pl.’s Ans. Post-Tr. Br. 34. Because I am denying Clovis’s
counterclaims on other grounds, it is not necessary to determine whether Clovis has waived
this argument by only making a mere mention of it in its brief.
362
      2020 Memorandum Opinion, 2020 WL 3496694, at *13.

                                             94
      Clovis’s claims with regard to the 2014 Payments are barred by laches.

“[Laches] is generally defined as an unreasonable delay by the plaintiff in bringing

suit after the plaintiff learned of an infringement of his rights, thereby resulting in

material prejudice to the defendant.” Reid v. Spazio, 970 A.2d 176, 182 (Del. 2009).

“Under ordinary circumstances, a suit in equity will not be stayed for laches before,

and will be stayed after, the time fixed by the analogous statute of limitations at law.”

Id. at 183 (quoting Wright v. Scotton, 121 A. 69, 72–73 (Del. 1923)). “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 Grp., L.L.C., 991 A.2d 1, 9 (Del. 2009). For

Clovis’s contract claims, “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 v. Brownstone Asset Mgmt., LP, 76

A.3d 764, 768 (Del. 2013). Similarly, “Delaware law sets a three[-]year statute of

limitations for claims for unjust enrichment.” Vichi v. Koninklijke Philips Elecs.

N.V., 2009 WL 4345724, at *15 (Del. Ch. Dec. 1, 2009).

      “Typically, the statute of limitations begins to run when the cause of action

accrues, not when the injury is discovered.” Weiss v. Swanson, 948 A.2d 433, 451

(Del. Ch. 2008). Clovis’s claims accrued when the last of the 2014 Payments was

made in December 2014. The three-year statute of limitations for the breach of

                                           95
contract and unjust enrichment claims expired in December 2017. Clovis did not

assert its counterclaims until July 2019. If the plaintiff asserts its claim after the

expiration of the analogous statute of limitations, the delay is presumptively

unreasonable. Levey, 76 A.3d at 768; In re Sirius XM S’holder Litig., 2013 WL

5411268, at *4 (Del. Ch. Sept. 27, 2013) (“After the statute of limitations has run,

defendants are entitled to repose and are 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 Inv. Co. LLC, 2018 WL 1791996, at *12 (Del.

Ch. Apr. 16, 2018) (same).

      Two circumstances in which the statute of limitations will be equitably tolled

are (1) when the defendant affirmatively acted to prevent the plaintiff from gaining

knowledge of the facts (i.e., fraudulent concealment) or (2) when the plaintiff

“reasonably relies on the competence and good faith of a fiduciary.” Weiss, 948

A.2d at 451. The 2014 Payments do not present circumstances that would toll the

statute of limitations or justify Clovis’s delay in bringing its claims. Stone & Paper

does not owe fiduciary duties to Clovis, and Stone & Paper has taken no action to

conceal the existence of the payments from Clovis. From the very beginning,

Skinner had knowledge of the 2014 Payments, as he was the one who proposed and

processed the payments.         Furthermore, Skinner is a signatory of the LLC

                                            96
Agreement, 363 and thus had knowledge of Section 9.6’s limitation on the return of

capital. As a manager of Clovis with authority over Clovis’s finances, Skinner’s

knowledge is attributed to Clovis.364

         The Blanch Defendants contend that Clovis’s claim challenging the payment

of $100,000 to Stone & Paper is not barred by laches because Blanch was unaware

of it until 2018. Blanch’s testimony regarding this issue was not credible, and the

circumstances of the payments to Stone & Paper further discredits his testimony.365

It is undisputed that Skinner, the other Manager, was aware of the payments. Skinner

made them, and there is no evidence that he tried to conceal those payments from

363
      JX 36 at 28.
364
    See LLC Agreement § 4.1(b)–(d) (providing that management of the business, affairs,
and day-to-day operations of Clovis shall be vested in each of the Managers); In re Am.
Int’l Grp., Inc., Consol. Deriv. Litig., 976 A.2d 872, 887 (Del. Ch. 2009) (“When a
corporation empowers managers with the discretion to handle certain matters and to deal
with third parties, the corporation is charged with the knowledge of those managers when
the corporation is sued by innocent parties.”), aff’d sub nom. Teachers’ Ret. Sys. of
Louisiana v. Gen. Re Corp., 11 A.3d 228 (Del. 2010); Albert v. Alex. Brown Mgmt. Servs.,
Inc., 2005 WL 2130607, at *11 (Del. Ch. Aug. 26, 2005) (“Delaware law states the
knowledge of an agent acquired while acting within the scope of his or her authority is
imputed to the principal.”).
365
   Blanch Defs.’ Ans. Br. 11 (citing Tr. 48:6–22 & 90:3–10 (Diamond) and Tr. 607:2–21
& 608:17–23 (Blanch)). The cited testimony does not address Blanch’s knowledge of the
$10,000 payments to Plaintiff. Blanch did, however, testify that he was not aware that
money was being wired back to Plaintiff. Tr. 658:5–8 (R. Blanch). Obviously, Blanch
became aware of the payments at some point, but he did not indicate when he became
aware of the payments.

                                          97
anyone.366 The payments are reflected in Clovis’s 2015 tax return. 367 Furthermore,

the payments ceased after Skinner told Diamond that Aaron, a non-member of

Clovis, told Skinner “not to send any more money back to Stone & Paper

Investors.”368 Given that Aaron, Blanch’s friend,369 was aware of the payments to

Stone & Paper as of December 2014, it is not credible that Blanch was unaware of

them in 2014.370 More important, it is not credible that Clovis was unaware of the

payments in 2014. Clovis had knowledge of the payments to Plaintiff as far back as

April in 2014. Clovis’s five-year delay in bringing its claim is presumptively not

reasonable. Therefore, Clovis’s claim pertaining to the 2014 Payments is time-

barred by laches. 371

366
    Tr. 324:19–20 (Skinner) (“[Diamond] never told me to specifically - - he never said
don’t mention [the $10,000 monthly payments].”). Skinner testified that “Blanch didn’t
know about the payments.” Tr. 473:14–15. Skinner did not indicate when Blanch first
learned of the payments.
367
      PTO ¶ 20.
368
      Tr. 49:7–8 (Diamond).
369
    Tr. 518:24–519:1 (R. Blanch) (“Drew [Aaron] and I had been close friends, pretty good
friends, for years, since 2006, 2007.”).
370
   Blanch is “designated as the Tax Matters Partner of the Company for purposes of
Chapter 63 of the [Internal Revenue] Code and Treasury Regulations thereunder.” LLC
Agreement § 10.9. Blanch understood this to mean that he would “liaison between . . . the
IRS and the members in the entity.” Tr. 697:13–17 (R. Blanch).
371
   Clovis has not directly asserted any claims against Skinner for approving or making
these payments to Stone & Paper.

                                           98
                  2.    AMEX Account Payments

            Clovis argues that “[Stone & Paper] knowingly violated Section 9.6 of the

LLC Agreement when Clovis Holdings’ funds were used to pay the American

Express card account.” 372 This breach of contract claim fails. Stone & Paper took

no affirmative action that amounted to a breach of a contractual obligation. It was

Skinner, acting on behalf of Clovis, who requested to use Diamond Carter Trading’s

AMEX Account for Clovis’s own expenses. 373 Diamond and Carter, who were the

principals of both Stone & Paper and Diamond Carter Trading, permitted Clovis to

use the AMEX Account on the condition that Skinner allocate the charges between

the two entities and have Clovis pay for its own expenses.374 Diamond and Carter

did not ask Clovis to apply its funds towards any non-Clovis charges on the AMEX

Account, much less any charges that would amount to a return of capital to Stone &

Paper. Although the AMEX Account belonged to Carter, Skinner had the sign-in

credentials for the AMEX Account and regularly made payments.375 It was Skinner

who was responsible for allocating charges between Clovis and Diamond Carter

Trading, and it was Skinner who processed every dollar that left Clovis’s checking

372
      Def.’s Opening Post-Tr. Br. 11.
373
      Tr. 14:20–15:16 (Diamond).
374
      Id.
375
   Tr. 171:5–21 (Diamond) (testifying that, prior to Clovis, Skinner was responsible for
paying the AMEX Account out of DCT’s accounts); Tr. 440:12–441:2 (Skinner) (testifying
that Skinner would log in with Carter’s credentials and make payments).

                                            99
account, including payments to the AMEX Account.376 Clovis has not factually or

legally established that Stone & Paper is liable for Skinner’s actions regarding the

payments to the AMEX Account. For this reason, Clovis has not established that

Stone & Paper breached the LLC Agreement with respect to Clovis’s AMEX

Account payments.

                3.     Milton Berg Newsletter

         Clovis argues that Stone & Paper breached Section 9.6 of the LLC Agreement

by allowing Clovis to pay $21,000 for the Milton Berg investment newsletter. The

Milton Berg newsletter is an investment newsletter that provided stock trading

recommendations. 377 In 2016, Diamond Carter Trading had a bill from the publisher

of the Milton Berg newsletter for $21,000.378 At the same time, Clovis owed money

to Diamond Carter for having underpaid its share of the AMEX Account charges.379

Diamond and Skinner conferred and decided that Clovis would pay the bill for the

Milton Berg newsletter as a way to reduce Clovis’s debt to Diamond Carter

Trading. 380

376
      Tr. 348 (Skinner).
377
      Tr. 89 (Diamond).
378
      Tr. 426 (Skinner).
379
      Tr. 90 (Diamond).
380
   Diamond testified that Skinner proposed that Clovis pay the bill, while Skinner testified
that Diamond asked him to pay the bill. Compare Tr. 90:2–16 (Diamond), with id. 425:4–
426:10 (Skinner).

                                           100
         Stone & Paper argues that Section 9.6 of the LLC Agreement is inapplicable

to the payment for the Milton Berg newsletter because it was not a return of

capital.381 Stone & Paper, however, is prevented from making this argument due to

judicial estoppel. “Judicial estoppel acts to preclude a party from asserting a position

inconsistent with a position previously taken in the same or earlier legal proceeding.”

Motorola Inc. v. Amkor Tech., Inc., 958 A.2d 852, 859 (Del. 2008). The doctrine is

appropriate in “lengthy litigation such as this.” Id. “Judicial estoppel operates only

where the litigant’s [position] contradicts another position that the litigant

previously took and that the Court was successfully induced to adopt in a judicial

ruling.” Id. at 859–60 (internal quotation omitted and emphasis in original).

         In moving to dismiss Clovis’s original counterclaims, Stone & Paper argued

that Clovis’s unjust enrichment claim, including Clovis’s allegation that the payment

for the Milton Berg newsletter unjustly enriched Stone & Paper, “[relied] on the

same factual basis, and [sought] the same damages, as the breach of contract

claim.”382 Stone & Paper argued that the claim, which was “premised on allegations

that Stone & Paper ‘misappropriated’ funds of Clovis by receiving a return of some

[of] its initial capital contribution,” should be dismissed because the alleged

381
      Pl.’s Ans. Post-Tr. Br. 22–23 (citing Def.’s Opening Post-Tr. Br. 8, 10).
382
      Pl.’s Opening Br. in Supp. of Mot. to Dismiss at 34 (Dkt. 83).

                                              101
wrongdoing was governed by Section 9.6 of the Operating Agreement.383 Stone &

Paper now argues that the very same allegations are not governed by Section 9.6.

Stone & Paper’s new position is inconsistent with its previous position. The Court

relied on Stone & Paper’s earlier position when it ruled in Stone & Paper’s favor and

dismissed the unjust enrichment claim as to the AMEX Account and the Milton Berg

newsletter, because the claim had no basis “independent of the allegations

supporting the breach of contract claim.” 2020 Memorandum Opinion, 2020 WL

34996694, at *13; id. at *7 n.30 (citing Stone & Paper’s brief). For this reason,

Stone & Paper is estopped from now contending that Section 9.6 is inapplicable to

the payment for the Milton Berg newsletter.

            Clovis has established that payment for the Milton Berg newsletter was an

improper return of capital to Stone & Paper. As of 2016, Clovis has not generated

any revenue and had no other source of funding. All of Clovis’s funds came from

Stone & Paper’s initial $3.5 million capital contribution. Thus, the $21,000 that left

Clovis to pay for the Milton Berg newsletter necessarily came from Stone & Paper’s

capital contribution. The subscription for the Milton Berg newsletter benefitted

Stone & Paper’s principals, Diamond and Carter, by substituting for a payment that

they would have otherwise needed to pay with funds from Diamond Carter Trading,

383
      Id.

                                           102
another company of theirs. 384 Furthermore, Diamond knew that Clovis would be

paying for a Diamond Carter Trading expense. Stone & Paper’s prior knowledge of

the arrangement undermines the argument that Clovis, through Skinner, unilaterally

made unrequested returns of capital. Under these circumstances, the $21,000

payment for the Milton Berg newsletter was effectively a return of Stone & Paper’s

initial capital contribution.

         Under Section 9.6 of the Operating Agreement, Stone & Paper needed

approval from both Clovis managers to receive a return of its initial capital

contribution. Although Skinner was complicit in the payment, Blanch was unaware

of the Milton Berg newsletter or any payment therefor until this litigation.385

Because Stone & Paper did not have approval of both Clovis managers, the return

of capital by way of payment for the Milton Berg newsletter was a violation of the

Operating Agreement.

         C.     Damages

         “Where the injured party has proven the fact of damages . . . less certainty is

required of the proof establishing the amount of damages. In other words, the injured

384
   The fact that Clovis potentially received the benefit of reducing its debt to Diamond
Carter Trading does not negate the fact that the payment was a return of capital to Stone &
Paper’s principals. The companies’ cash-on hand took on particular significance in late
2016, after Diamond Carter Trading had closed its brokerage account and Clovis was
running low on funds.
385
      Tr. 659:18–660:13 (R. Blanch).

                                           103
party need not establish the amount of damages with precise certainty ‘where the

wrong has been proven and injury established.’” Siga Techs., Inc. v. PharmAthene,

Inc., 132 A.3d 1108, 1131 (Del. 2015) (quoting Delaware Exp. Shuttle, Inc. v. Older,

2002 WL 31458243, at *15 (Del. Ch. Oct. 23, 2002)); see also Older, 2002 WL

31458243, at *15 (“Responsible estimates that lack mathematical certainty are

permissible so long as the court has a basis to make a responsible estimate of

damages.”). For the foregoing reasons, I find that damages are as follows:

         1.     The Blanch Defendants are liable for $988,510. This amount is derived

from (1) the payments from Clovis to Red Bridge; 386 (2) the payments from Clovis

to Spangler and the Roth Law Firm; 387 and (3) the payments from Clovis for personal

expenses of Richard Blanch and Vivianna Blanch.388 These payments all resulted

from Interested Transactions that violated Section 5.2 of the LLC Agreement.

Because these are direct claims, these damages are to be paid to Plaintiff.

         2.     Skinner and Skinner Capital are liable for $1,082,500. This amount is

derived from the payments from Clovis to Skinner Capital, 389 minus the amount of

386
      PTO ¶ 12 ($797,000).
387
      Id. ¶ 15 ($75,000 to Spangler and $105,000 to the Roth Law Firm)
388
      Id. ¶ 17 ($11,510 to the Blanch Defendants’ American Express card)
389
      Id. ¶ 12 ($1,482,500).

                                            104
Management Fees to which Diamond acquiesced.390 These payments also resulted

from breaches of Section 5.2. Accordingly, these damages are to be paid to Plaintiff.

         3.       Skinner is additionally liable to the Company for $510,124.35. This

amount is derived from the amount paid by Clovis to the AMEX Account.391 This

payment breached Skinner’s fiduciary duties, giving rise to a derivative claim on

behalf of Clovis. 2019 Memorandum Opinion, 2019 WL 2374005, at *4 (“Any

recovery related to improperly paid expenses would flow to the Company.”).

Plaintiff has argued that Defendants, as wrongdoers in control of the Company and

indirect owners of a majority of its equity, should be prohibited from sharing in any

derivative recovery by Clovis. 392 The parties have not meaningfully briefed this

issue, and additional briefing would be helpful to the court. The parties should

submit supplemental briefing on whether the $510,124.35 should be paid to Plaintiff,

to Clovis, or to the members of Clovis.

         4.       Stone & Paper is liable for $21,000 to Clovis. This amount is derived

from the amount paid by Clovis for the Milton Berg newsletter.

         The Blanch Defendants, Skinner, and Skinner Capital are jointly and severally

liable for the damages in paragraphs 1 and 2. See In re Rural/Metro Corp. S’holders

390
      Supra section II.A.1.a.i ($400,000).
391
      PTO ¶ 16.
392
      Pl.’s Opening Post-Tr. Br. 31.

                                             105
Litig., 102 A.3d 205, 221 (Del. Ch. 2014) (“A defendant who aids and abets a breach

of fiduciary duty is jointly and severally liable for the damages resulting from the

breach.”).

       Each of the damages awards described above is subject to the payment of pre-

and post-judgment interest. The damages shall accrue pre- and post-judgment

interest at the legal rate, compounded quarterly.             See, e.g., 6 Del. C. §

2301(a); Narayanan v. Sutherland Glob. Hldgs., Inc., 2016 WL 3682617, at *15

(Del. Ch. Jul. 5, 2016) (“In Delaware, pre-judgment interest accrues at the legal rate

set forth in 6 Del. C. § 2301(a) and is compounded quarterly.”); Avande, Inc. v.

Evans, 2019 WL 3800168, at *19 (Aug. 13, 2019) (awarding pre- and post-judgment

interest at the legal rate).

       Further, given that Plaintiff has indicated that it will not consent to the

Company engaging in any business other than the purchase of ViaStone, and because

the purchase of ViaStone is no longer viable, the parties should confer regarding

whether dissolution of Clovis is appropriate. See In re Silver Leaf L.L.C., 2005 WL

2045641, at *11 (Del. Ch. Aug. 18, 2005) (ordering dissolution of an LLC because

the company was no longer able to “carry on its business in a reasonably practicable

manner”). If there is any dispute, the parties shall submit supplemental briefing on

that subject.

                                         106
      D.     Request for Fee-Shifting

      Stone & Paper has sought an award of its attorneys’ fees and expenses to be

paid by the Blanch Defendants. The Blanch Defendants, in turn, seek an award of

their attorneys’ fees and expenses from Stone & Paper. This court follows what is

commonly known as the American Rule. “Under the American Rule, absent express

statutory language to the contrary, each party is normally obliged to pay only his or

her own attorneys’ fees, whatever the outcome of the litigation.”          Johnston v.

Arbitrium (Cayman Islands) Handels AG, 720 A.2d 542, 545 (Del. 1998). There are

exceptions to the American Rule, one being the bad faith exception. Id. While there

is no single definition of bad faith conduct, “courts have found bad faith where

parties have unnecessarily prolonged or delayed litigation, falsified records or

knowingly asserted frivolous claims.” Id.; accord Pettry v. Gilead Scis., Inc., 2021

WL 3087027, at *1 (Del. Ch. July 22, 2021). Other “behavior that has been found

to constitute bad faith in litigation includes misleading the court, altering testimony,

or changing position on an issue.” Beck v. Atl. Coast PLC, 868 A.2d 840, 851 (Del.

Ch. 2005).

      The court defers ruling on the competing requests to shift fees. The court

requests that the Blanch Defendants and Plaintiff submit supplemental briefing on

the fee requests in light of the conclusions reached in this opinion on liability and

damages.

                                          107
III.   CONCLUSION

       Plaintiff has failed to carry its burden of proving fraud in the inducement to

invest in Clovis. Plaintiff has carried its burden of proving fraudulent concealment,

and that Skinner and Blanch breached Sections 5.1, 5.2, 4.10, and 10.7 of the LLC

Agreement and their fiduciary duties. Plaintiff has also carried its burden of proving

that Red Bridge, Skinner, and Vivianna Blanch aided and abetted Blanch and

Skinner’s breaches of fiduciary duty and engaged in a civil conspiracy.

       Clovis’s counterclaim for breach of the LLC Agreement and unjust

enrichment as to $100,000 in payments to Plaintiff in 2014 is barred by laches.

Clovis has proved is claim for breach of contract concerning payment for the Milton

Berg Newsletter. Clovis failed to prove its counterclaims in all other respects.

       Plaintiff is awarded $988,510 in damages against the Blanch Defendants and

$1,082,500 from Skinner and Skinner Capital, for which Defendants are jointly and

severally liable. Clovis is awarded damages in the amount of $510,124.35 from

Skinner. Clovis is also awarded damages in the amount of $21,000 from Plaintiff.

       The parties are to confer and submit a schedule for supplemental briefing on

the remaining issues of allocation of damages owed to Clovis and the competing

applications for fee-shifting under the bad faith exception to the American Rule.

Briefing shall be completed within 45 days of this opinion.

                                         108