Court Opinion

ID: 9353707
Source: CourtListenerOpinion
Date Created: 2023-01-12 17:04:31.180537+00
Date Added: 2024-06-11T17:10:58.762037
License: Public Domain

IN THE SUPREME COURT OF THE STATE OF DELAWARE

 JOHN BETTS,                   §
                               §
      Defendant Below,         §             No. 440, 2022
      Appellant,               §
                               §             Court Below—Court of Chancery
 and                           §             of the State of Delaware
                               §
 NOBLE TALENTS LLC,            §             C.A. No. 2020-0455
                               §
      Nominal Defendant Below, §
      Appellant,               §
                               §
      v.                       §
                               §
 ELUTIONS CAPITAL VENTURES §
 S.A.R.L., NBL FUND I, LP, and §
 HAMSHINE LLC,                 §
                               §
      Plaintiffs Below,        §
      Appellees.               §

                           Submitted: November 23, 2022
                           Decided:   January 12, 2023

Before SEITZ, Chief Justice; VAUGHN and TRAYNOR, Justices.

                                          ORDER

      After consideration of the notice of appeal from an interlocutory order and its

exhibits, it appears to the Court that:

      (1)    Nominal defendant-appellant Noble Talents LLC (the “Company”) is a

Delaware limited liability company.        The plaintiffs-appellees, Elutions Capital

Ventures S.A.R.L., NBL Fund I, LP, and Hamshine LLC (the “Plaintiffs”), are
holders of Series A Preferred Units in the Company. They filed a derivative action

in the Court of Chancery alleging that defendant-appellant John Betts breached his

fiduciary duties to the Company by engaging in self-dealing and by interfering with

and ultimately scuttling a sale of the Company’s wholly owned subsidiary, Noble

International Bank, LLC (“Noble Bank”), to Alpha Global Fintech LLC because

Betts was unable to extract personal benefits from the sale. The Plaintiffs also

asserted a claim for tortious interference based on Betts’s alleged interference with

the prospective sale. On March 30, 2021, Betts filed an answer and counterclaims

asserting claims for breach of fiduciary duty, breach of contract, misappropriation

of trade secrets, and tortious interference.1

       (2)     In April 2021, Betts moved to dismiss the complaint for failure to

adequately plead demand futility under Court of Chancery Rule 23.12 and moved for

judgment on the pleadings, and the Plaintiffs moved to dismiss the counterclaims.

In June 2021, while briefing on the parties’ motions was proceeding, Betts issued

1
  The pleading asserted the counterclaim for breach of fiduciary duty on behalf of both Betts and
the Company. For simplicity, this order refers only to Betts as asserting, and opposing dismissal
of, the counterclaims and as the appellant here.
2
  See DEL. CT. CH. R. 23.1 (providing that in a derivative action the complaint must “allege with
particularity the efforts, if any, made by the plaintiff to obtain the action the plaintiff desires from
the directors or comparable authority and the reasons for the plaintiff’s failure to obtain the action
or for not making the effort”); see also 6 Del. C. § 18-1001 (“A member or an assignee of a limited
liability company interest may bring an action in the Court of Chancery in the right of a limited
liability company to recover a judgment in its favor if managers or members with authority to do
have refused to bring the action or if an effort to cause those managers or members to bring the
action is not likely to succeed.”).

                                                   2
numerous subpoenas, including to the custodian of the Company’s electronic

records.3 The custodian produced documents during the first week of October 2021

(the “October Records”). The court heard argument on the motions to dismiss and

for judgment on the pleadings on November 8, 2021. Betts did not refer to the

October Records during the hearing or at any time between the hearing and when

the court ruled on the motions.

       (3)     On February 2, 2022, the Court of Chancery denied Betts’s motion to

dismiss under Rule 23.1, concluding that demand was excused as futile because

Betts was the sole member of the board of managers when the complaint was filed

and the Plaintiffs had pleaded with particularity that Betts received or attempted to

receive material personal benefits from the misconduct alleged in the complaint.4

The Court of Chancery also denied Betts’s motion for judgment on the pleadings,

concluding that the allegations in the complaint supported reasonable inferences that

Betts breached fiduciary duties that he owed to the Company during the relevant

3
  Elutions Capital Ventures S.A.R.L. v. Betts, C.A. No. 2020-0455, Docket Entry No. 135,
Transcript of Oct. 24, 2022 Bench Ruling, at 4-5 (Del. Ch.) [hereinafter Interlocutory Bench
Ruling]; see also Elutions Capital Ventures S.A.R.L. v. Betts, 2022 WL 17075692, at *1 (Del. Ch.
Nov. 18, 2022).
4
  Elutions Capital Ventures S.A.R.L. v. Betts, C.A. No. 2020-0455, Docket Entry No. 78, Transcript
of Feb. 2, 2022 Bench Ruling, at 20-21 (Del. Ch.) (quoting three-part test for demand futility
adopted in United Food & Commercial Workers Union & Participating Food Industry Employers
Tri-State Pension Fund v. Zuckerberg, 262 A.3d 1034, 1058 (Del. 2021)).

                                                3
time periods and that he tortiously interfered with the prospective sale of Noble Bank

to Alpha Global.5

        (4)       As for the Plaintiffs’ motion to dismiss Betts’s counterclaims, the court

held that Betts failed to state a claim for breach of fiduciary duty because he did not

adequately plead that the Plaintiffs owed the Company fiduciary duties, either by

controlling the Company generally or by exercising control with regard to the Alpha

Global deal.6 The court held that Betts failed to state a claim for breach of contract

because he did not allege that the Plaintiffs were parties to any of the contracts at

issue.7 The court held that Betts failed to state a claim for misappropriation of trade

secrets because he did not adequately plead, even under a notice pleading standard,

what trade secrets the Plaintiffs allegedly misappropriated.8 Finally, the court held

that Betts failed to state a claim that the Plaintiffs tortiously interfered with contracts

between the Company and Betts or with the prospective sale of Noble Bank.9 The

court therefore dismissed all of the counterclaims.10

        (5)       On February 9, 2022, Betts moved for reargument. He also sought

leave to amend his counterclaims, stating that he could further clarify the facts

5
  Id. at 21-29.
6
  Id. at 29-32.
7
  Id. at 32-33.
8
  Id. at 33-36.
9
  Id. at 36-39.
10
   Id. 39.

                                               4
alleged and indicating that he had received information from a former Company

executive to support his counterclaims. He still did not refer to the October Records.

On March 1, 2022, the Court of Chancery denied reargument and the request for

leave to amend.

         (6)     On July 1, 2022, Betts again moved for leave to amend the answer and

to add six counterclaims—two that would reassert two of the dismissed

counterclaims and four that were purportedly new. For the first time, Betts pointed

to the October Records, arguing that they contained “new evidence” that supported

the counterclaims that he was seeking to assert. The Plaintiffs opposed the motion

on the grounds that the proposed counterclaims were barred by Court of Chancery

Rule 15(aaa) and that amendment would be futile under Rule 15(a).

         (7)     The court denied the motion to add the previously dismissed

counterclaims, holding that the court had previously dismissed those claims with

prejudice and that Betts’s failure to bring the October Records to the court’s attention

earlier barred him from relying on those records in an effort to revive those claims.11

The court also denied the motion to add the purportedly new counterclaims,

concluding that because those claims simply repackaged the dismissed

counterclaims, Rule 15(aaa) barred the amendment.12 The court granted the motion

11
     Interlocutory Bench Ruling, supra note 3, at 7-11.
12
     Id. at 11-15.

                                                  5
to amend the answer because the Plaintiffs did not argue that the amendments would

be prejudicial and the court therefore was “‘required to exercise discretion in favor

of granting leave to amend.’”13

       (8)     Betts then asked the Court of Chancery to certify an interlocutory

appeal under Supreme Court Rule 42. He argued that the Court of Chancery should

not have applied Rule 15(aaa) to deny the motion to add the counterclaims because

two of them were based on newly discovered evidence that was not available at the

time of the original answer and counterclaims, and the other four contained

additional elements that were not the subject of the original motion to dismiss. Betts

argued that the court’s order decided a substantial issue of material importance

because it “alter[ed] the balance of procedural rights between plaintiffs and

defendants” in the Court of Chancery.14 Addressing the Rule 42(b)(iii) factors, Betts

argued that (i) the order involves a question of first impression;15 (ii) the order “is in

tension with” governing law;16 and (iii) interlocutory review would serve

considerations of justice.17

13
   Id. at 15-16 (quoting Mullen v. Alarmguard of Delmarva, Inc., 625 A.2d 258, 263 (Del. 1993)).
14
   Application for Certification of Interlocutory Appeal at 6.
15
   DEL. SUPR. CT. R. 42(b)(iii)(A).
16
   Application for Certification of Interlocutory Appeal at 13. Cf. DEL. SUPR. CT. R. 42(b)(iii)(B)
(stating that the trial court should consider whether the “decisions of the trial courts are conflicting
upon the question of law” presented by the interlocutory order).
17
   DEL. SUPR. CT. R. 42(b)(iii)(H).

                                                   6
       (9)    The Court of Chancery denied the application for certification. The

court determined that the order did not decide a substantial issue of material

importance because a “decision granting or denying leave to amend is not part of a

merits determination” but rather “collateral to a merits determination.”18 The court

also concluded that the Rule 42(b)(iii) factors do not support interlocutory review.

First, the court determined that the order at issue did not resolve a novel question of

law but rather “applied settled Rule 15(aaa) precedent to a tattered procedural history

involving parties who repeatedly tried to revive counterclaims that were dismissed

with prejudice.”19 The court similarly determined that the order did not conflict with

governing law, but rather applied settled law to the circumstances of the case.20

Finally, the court concluded that interlocutory review would not serve considerations

of justice, particularly because Betts waited so long to argue that the October

Records supported his claims.21

       (10) We agree with the Court of Chancery that interlocutory review is not

warranted in this case. Applications for interlocutory review are addressed to the

sound discretion of this Court.22 In the exercise of its discretion and giving great

18
   Elutions Capital Ventures S.A.R.L. v. Betts, 2022 WL 17075692, at *4 (Del. Ch. Nov. 18, 2022);
see also id. (“A decision holding otherwise would endorse immediate appeals from any adverse
outcome on a Rule 12(b)(6) motion that does not result in a final judgment.”).
19
   Id. at *5.
20
   Id. at *5-7.
21
   Id. at *7.
22
   DEL. SUPR. CT. R. 42(d)(v).

                                               7
weight to the trial court’s view, this Court has concluded that the application for

interlocutory review does not meet the strict standards for certification under

Supreme Court Rule 42(b).          Exceptional circumstances that would merit

interlocutory review of the decision of the Court of Chancery do not exist in this

case,23 and the potential benefits of interlocutory review do not outweigh the

inefficiency, disruption, and probable costs caused by an interlocutory appeal. Betts

did not bring the October Records to the Court of Chancery’s attention at the hearing

on the motion to dismiss; in the three months between that hearing and the court’s

decision on the motion; or when he sought reargument and leave to amend his

counterclaims following that decision. Interlocutory review of the results of that

strategy is not warranted.

          NOW, THEREFORE, IT IS ORDERED that the interlocutory appeal is

REFUSED.

                                       BY THE COURT:

                                       /s/ Gary F. Traynor
                                       Justice

23
     Id. R. 42(b)(ii).

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