Court Opinion

ID: 5141515
Source: CourtListenerOpinion
Date Created: 2021-12-30 00:02:25.652146+00
Date Added: 2024-06-11T08:24:29.515425
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

TERRANCE L. ERISMAN and                     )
DAVID FOUTS, individually and on            )
behalf of PERCONA, LLC,                     )
                                            )
                     Plaintiffs,            )
                                            )
         v.                                 )   C.A. No. 2020-0903-JRS
                                            )
PETER ZAITSEV and                           )
THOMAS BASIL,                               )
                                            )
                     Defendants,            )
                                            )
        and                                 )
                                            )
PERCONA, LLC, a Delaware limited            )
liability company,                          )
                                            )
                     Nominal Defendant.     )

                         MEMORANDUM OPINION

                     Date Submitted: September 23, 2021
                      Date Decided: December 29, 2021

Richard Jones, Esquire and Peter C. McGivney, Esquire of Berger Harris LLP,
Wilmington, Delaware and Brian M. Gottesman, Esquire of Gabell Beaver LLC,
Wilmington, Delaware, Attorneys for Plaintiffs Terrance L. Erisman and
David Fouts.

Daniel A. Griffith, Esquire and Quinn Griffith, Esquire of Whiteford Taylor &
Preston LLC, Wilmington, Delaware and William F. Ryan, Jr., Esquire of Whiteford
Taylor & Preston LLP, Baltimore, Maryland, Attorneys for Defendants
Peter Zaitsev, Thomas Basil and Percona, LLC.

SLIGHTS, Vice Chancellor
         Plaintiffs, Terrance L. Erisman and David Fouts, two members of Percona,

LLC (“Percona” or the “Company”), bring this action against the Company’s two

directors, Defendants, Peter Zaitsev and Thomas Basil, for breaches of contract and

fiduciary duties.1 The now-operative First Amended Complaint (the “Amended

Complaint”) consists of two counts.2

         In Count One, Plaintiffs assert that Defendants breached the Company’s LLC

Agreement (later defined) by (1) failing to make distributions to the Company’s

members (the “Members” or, individually, a “Member”) so that they could pay

themselves excessive “remuneration,” and (2) exposing the Members to actual and

potential adverse tax consequences by issuing inaccurate K-1s to each Member.3

The Amended Complaint also alleges that Defendants breached the LLC Agreement

and the Option Agreements (later defined) by redeeming select Members’ units at

inflated values.4

         In Count Two, Plaintiffs assert that Defendants breached their fiduciary duties

to the Company and its Members by (1) paying themselves excessive remuneration

while misstating the funds available to Members for tax distributions, (2) unfairly

1
    Pls.’ Verified First Am. Compl. (D.I. 12) (“Am. Compl.”) ¶¶ 1–4, 7–8.
2
    Am. Compl. ¶ 1.
3
    Am. Compl. ¶¶ 76–77.
4
    Am. Compl. ¶¶ 77–78.

                                             1
diluting certain Members’ interests when the Company acquired Tokutek, Inc.

(“Tokutek”), (3) falsely reporting Company valuations to the IRS to avoid paying

taxes, which resulted in the Company incurring fines, (4) manipulating financial

statements to misstate income and mispresent the Company’s revenue, which

resulted in inaccurate tax reporting for the Company and, by extension, the

Members, and (5) ignoring multiple opportunities to sell the Company at a price that

would have allowed Members to achieve a positive return on their investments.5

      Defendants have moved to dismiss the Amended Complaint under Chancery

Rule 12(b)(6) (the “Motion”).6 They argue the claims are subject to dismissal as a

matter of law for failure to state viable claims, failure to bring timely claims and, as

to the purported derivative claims, failure to well-plead demand futility as required

under Chancery Rule 23.1.7

      After careful consideration, I am satisfied the Motion must be granted in its

entirety. Plaintiffs’ breach of contract claims, as asserted in Count One, are not well-

pled. As for Count Two, Plaintiffs’ complaint fails to well plead non-exculpated

5
 Am. Compl. ¶¶ 84–87, 89–90. Accounting for overlapping claims, as discussed below,
Plaintiffs assert five distinct claims of wrongdoing against Defendants.
6
 Defs.’ Mot. to Dismiss Pls.’ First Am. Compl. (D.I. 16). I note that Defendants cite to
only Rule 12(b)(6) in their motion to dismiss but then argue for dismissal under both
Rule 12(b)(6) and Rule 23.1 in their briefs filed in support of the motion. (D.I. 16).
7
  Defs.’ Opening Br. in Supp. of their Mot. to Dismiss Pls.’ First Am. Compl. (D.I. 16)
(“DOB”) at 7–27.

                                           2
claims against either director. Because all claims are dismissed for failure to plead

viable claims, I need not address Defendants’ other theories for dismissal. For the

sake of completeness, however, I do briefly address why at least four of Plaintiffs’

five distinct claims could be dismissed as time-barred by laches.

                                  I. BACKGROUND

         I have drawn the facts from the well-pled allegations in the Amended

Complaint and documents properly incorporated by reference or integral to that

pleading.8 For purposes of this Motion, I accept as true the Amended Complaint’s

well-pled factual allegations and draw all reasonable inferences in Plaintiffs’ favor.9

      A. Parties and Relevant Non-Parties

         Plaintiffs and Defendants are Members of the Company.10 Plaintiff Erisman

is a resident of California,11 and Plaintiff Fouts is a resident of North Carolina.12

Fouts was the Company’s Chief Financial Officer from February 2012 to June 2014,

8
  Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 860 A.2d 312, 320 (Del. 2004) (noting that on
a motion to dismiss, the Court may consider documents that are “incorporated by
reference” or “integral” to the complaint).
9
    Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002).
10
     Am. Compl. ¶¶ 4, 8.
11
     Am. Compl. ¶ 2.
12
     Am. Compl. ¶ 3.

                                            3
its interim controller from March 2015 to September 2015, and remained with the

Company in various capacities through early 2016.13

         Defendant Basil is a resident of Maryland,14 and Defendant Zaitsev is a

resident of North Carolina.15         At all relevant times, Zaitsev and Basil were

(and remain) members of the Company’s board of directors (the “Board”) and

“Managers” of the Company as defined in the Company’s operating agreements and

the Delaware Limited Liability Company Act (the “LLC Act”).16

         Nominal Defendant, Percona, is a Delaware limited liability company formed

on August 21, 2012.17 The Company’s principal business is the development of

open-source electronic database solutions, including for a software platform known

as MySQL.18 Zaitsev and Basil are the only members of the Company’s Board and

generally have the power to manage the Company’s day-to-day affairs.19

13
     Am. Compl. ¶¶ 3, 36.
14
     Am. Compl. ¶ 7.
15
     Am. Compl. ¶ 6.
16
     Am. Compl. ¶ 8. See 6 Del. C. § 18-101, et seq.
17
     Am. Compl. ¶¶ 5, 11.
18
     Am. Compl. ¶ 12.
19
     Am. Compl. ¶ 18.

                                              4
           Non-party, Eileen Doody, is the Company’s Chief Executive Officer.20 Non-

parties, Bill Schuler, Todd Spain, Nikki Morton and Robert Young (collectively,

the “Departing Series B Members”) are all former officers of the Company.21 Upon

their departure from the Company, Defendants caused Percona to redeem the

Departing Series B Members’ units at above-market prices.22

           Before the Company’s April 2015 acquisition of its assets (the “Tokutek

Acquisition”), non-party, Tokutek, was a developer and distributor of enterprise-

class database solutions.23      The Tokutek Acquisition was memorialized in a

Contribution Agreement between the Company and Tokutek, dated April 7, 2015.24

      B. Equity Structure and Ownership of the Company

           As of April 7, 2015, the effective date of the First Amendment to Limited

Liability Company Agreement of Percona, LLC (the “First Amendment”),

20
  Am. Compl. ¶ 57. I note that Ms. Doody describes herself as the Company’s CFO in her
affidavit, attached as Exhibit 1 to Defendants’ Opening Brief (“Doody Aff.”).
21
     Am. Compl. ¶ 50.
22
     Id.
23
     Am. Compl. ¶ 31.
24
   Am. Compl. ¶ 32; see generally Doody Aff. at Ex. I (the “Contribution Agreement”).
Because the documents attached to the Doody Aff. are “integral to Plaintiff[s’] claims and
incorporated by reference into the [Amended] Complaint, [they are] properly before the
Court on Defendants’ motion to dismiss.” Calma v. Templeton, 2015 WL 1951930,
at *2 n.4 (Del. Ch. Apr. 30, 2015) (citing to In re Santa Fe Pac. Corp. S’holder Litig.,
669 A.2d 59, 69 (Del. 1995)).

                                            5
the Company had three classes of units—Series A, Series B and Series C.25

As discussed below, the different rights attached to each class are at the heart of

Plaintiffs claims and Defendants’ arguments in support of dismissal.

         1. Ownership of Units

         At all material times, Zaitsev has been the sole holder of Series A Units and,

as such, the only Series A Member.26 Likewise, Tokutek is the sole holder of

Series C Units and the only Series C Member.27 Plaintiffs Erisman and Fouts and

Defendant Basil are among several holders of Series B Units.28 The LLC Agreement

occasionally refers to the holders of the Company’s units as “Unitholders.”

         Zaitsev acquired his Series A Units before the original LLC Agreement was

executed on August 21, 2012.29 Erisman, Fouts and Basil, like all Series B Members,

received their Series B Units as a benefit of employment with the Company.30

25
     See generally Ex. A to Doody Aff. (together with all amendments,
the “LLC Agreement”). The Company’s initial Limited Liability Company Agreement
was dated August 21, 2012. See Am. Compl. ¶ 13. It was amended and restated by the
Limited Liability Company Agreement of Percona, LLC, dated November 13, 2013.
See Am. Compl. ¶ 14.
26
     Am. Compl. ¶ 17; see generally the LLC Agreement.
27
     First Amendment, Recitals.
28
     Am. Compl. ¶¶ 19–23.
29
     See the LLC Agreement.
30
     Am. Compl. ¶¶ 19–23.

                                            6
According to Plaintiffs, each Series B Member has executed substantially identical

Membership Interest Unit Option Agreements (“Option Agreements”).31

         Erisman was issued one million Series B Units in December 2012 and, at that

same time, executed an Option Agreement, which gave him an option, subject to

vesting and other requirements, to acquire an additional four million Series B Units

(the “Erisman Option Units”).32 Between January 1, 2013, and July 1, 2016,

Erisman became fully vested in 2,500,000 of the Erisman Option Units.33

         In August 2012, Fouts executed an Option Agreement that granted him an

option, subject to vesting and other requirements, to acquire a certain number of

Series B Units (the “Fouts Option Units”).34 Between April 1, 2013, and July 1,

31
     Am. Compl. ¶ 20.
32
     Am. Compl. ¶ 19.
33
     Am. Compl. ¶ 22.
34
   Am. Compl. ¶ 23. According to the Amended Complaint, Fouts executed his Option
Agreement in 2013. Yet, the executed copy of Fouts’ Option Agreement, attached as
Exhibit D to the Doody Aff., is dated as of August 30, 2012. Plaintiffs did not attach a
different version of Fouts’ Option Agreement bearing a 2013 execution date. In fact, the
only exhibit attached to the Amended Complaint is a blackline comparing the Amended
Complaint and the initial complaint. Without any evidence to support Plaintiffs’ proffered
execution date, it would appear Fouts entered into his Option Agreement in 2012.
Ultimately, however, the resolution of this factual dispute is unnecessary because the
outcome remains the same regardless of whether Fouts’ Option Agreement was executed
in 2012 or 2013.

                                            7
2014, Fouts exercised rights under his Option Agreement such that his total

ownership stake in the Company increased to 562,500 Series B Units.35

           Tokutek was issued three million Series C Units as partial compensation for

the Tokutek Acquisition.36 In addition to issuing the Series C Units, the Company

financed the Tokutek Acquisition by delivering a $2,000,000 promissory note to

Tokutek’s owners payable over five years and agreeing to pay Tokutek’s owners a

royalty stream based on future revenues derived from certain intellectual property

transferred in connection with the acquisition.37

           2. Rights and Privileges of the Different Classes of Units

           Under the LLC Agreement, the rights and privileges associated with the three

classes of units are nearly identical, with two critical exceptions: voting and

preferred payments.38 The first difference favors holders of Series A Units, while

the second favors holders of Series C Units.

              a. Voting Rights

           Under Section 3.1 of the LLC Agreement, each Series A Unit entitles its

holder to one vote. In contrast, Sections 3.1(c) and 8.2(a) provide that the holders

35
     Id.
36
   See generally the First Amendment to the LLC Agreement (explaining that the
Company’s primary purpose for adopting the First Amendment was to authorize, create
and issue the Series C Units in connection with the Contribution Agreement).
37
     Am. Compl. ¶ 32.
38
     Am. Compl. ¶¶ 16, 33.

                                             8
of Series B and Series C Units have no voting rights at all.39 Likewise, the LLC

Agreement does not provide any consent or approval rights to Series B Members.40

The LLC Agreement instead vests such rights primarily with the Series A Member

and, in a few circumstances, the Series C Member.41 In this regard, the Series A

Member is not obliged to provide any notice to the Series B Members before taking

any actions within the Series A Member’s authority.42

           According to the LLC Agreement, the Board and officers of the Company

“have full power and authority to do all things on such terms as they may deem

necessary or appropriate to conduct, or cause to be conducted, the business and

affairs of the Company.”43 The LLC Agreement confers broad oversight authority

39
     Id.
40
    Before the First Amendment, only the Series A Member’s approval was required to
amend, modify, supplement or restate the LLC Agreement. LLC Agreement §13.5.
The First Amendment added language that requires the Series C Member’s consent to any
amendments, modifications, supplements, restatements or waivers that would affect the
Series C Member or its rights while not affecting the other Members.
First Amendment ¶ 8. The First Amendment also provides that the Series C Member’s
consent is required for “any amendment, modification, supplement, restatement or waiver
of: (i) the number of authorized Series C Units under Section 3.1(a), (ii) Section 3.1(d),
(iii) Section 4.5, (iv) Section 6.1(e), (v) this Section 13.5, in each case as it relates to the
Series C Units or the Sole Series C Member, or (vi) any term or provision of Exhibit B.”
Id.
41
     LLC Agreement § 8.4.
42
     Id.
43
     LLC Agreement § 8.1.

                                               9
to the Series A Member, including the exclusive right to remove or replace any

director on the Board.44

         Section 8.4(b) of the LLC Agreement expressly provides that the

authorization and approval of certain actions may not be delegated to the Board or

the Company’s officers and may be taken only if approved by the Series A Member

(i.e., Zaitsev). These include, in pertinent part, (a) any agreement to acquire assets

with a purchase price or fair market value in excess of $100,000, (b) the issuance of

additional units, and (c) any potential sale of all or substantially all of the Company’s

assets.

            b. Economic Preferences

         The second key difference between the membership classes is that the holders

of Series C Units are afforded preferential economic benefits. As set forth on Exhibit

B to the First Amendment, only the Series C Units are entitled to (a) a preference

payment if the Company undergoes a change in control and (b) a royalty stream

related to the assets acquired in the Tokutek Acquisition.45

44
     LLC Agreement § 8.2(a).
45
     Am. Compl. ¶ 33.

                                           10
           C. Plaintiffs’ Allegations

           Plaintiffs’ assert a number of disjointed claims that may fairly be summarized

as follows:

      • Defendants breached the LLC Agreement and their fiduciary duties when they
        paid themselves excess remuneration instead of making distributions to the
        Members (the “Distribution Claim”);46

      • Defendants breached the LLC Agreement and their fiduciary duties when they
        manipulated financial statements to misstate income and misrepresent the
        Company’s financial situation, which resulted in inaccurate tax reporting by
        the Company and, by extension, by the Members (the “Tax Reporting
        Claim”);47

      • Defendants breached the LLC Agreement and Option Agreements when they
        failed to use the valuation method mandated in Section 3.2 of the Option
        Agreements and instead overpaid the Departing Series B Members
        (the “Redemption Claim”);48

      • Defendants breached their fiduciary duties by causing the Company to enter
        into the Tokutek Acquisition because the dilution the Series B Members
        suffered from the issuance of the Series C Units was disproportionate to the
        value the Company obtained by acquiring Tokutek’s assets (the “Dilution
        Claim”);49

      • Defendants breached their fiduciary duties when they caused the Company to
        falsely report Company valuations to the IRS in order to avoid paying taxes,
        which caused the Company to incur fines (the “Valuation Claim”);50 and

46
     Am. Compl. ¶¶ 77, 84–85.
47
     Id.
48
     Am. Compl. ¶ 77.
49
     Am. Compl. ¶ 84.
50
     Am. Compl. ¶¶ 84, 86–87.

                                             11
      • Defendants violated their fiduciary duties to the Company and its Members
        by ignoring multiple opportunities to sell the Company at fair market value to
        at least three different qualified buyers (the “Failure to Sell the Company
        Claims”).51

           Unsurprisingly, many of Plaintiffs’ allegations turn on contractual rights and

obligations under the LLC Agreement or Option Agreements. In addition to the

Members’ contractual rights described above, the following provisions of the

operative contracts are relevant to my analysis.

           1. The LLC Agreement

           Article 8 of the LLC Agreement sets out the Company’s governance structure

and the corresponding rights, responsibilities and procedures.52 As stated above,

Section 8.1 provides that, with a few exceptions listed in Section 8.4, the Company’s

business and affairs shall be managed by the Company’s directors (the “Directors”

or, individually, a “Director”).53 And, under the Board’s direction, the Company’s

officers shall carry out the Company’s day-to-day activities.54 Sections 8.2 and 8.3

address powers, responsibilities and procedures pertaining to the Directors and

51
     Am. Compl. ¶ 90.
52
     See generally LLC Agreement § 8.1.
53
     Id.
54
     Id.

                                             12
officers, respectively.55 Finally, Section 8.4 contains a list of all decisions that

require approval by the Series A Member, as discussed above.56

         Article 9 of the LLC Agreement provides for exculpation and indemnification.

Section 9.1 is of particular relevance here. Specifically, Section 9.1(a) exculpates

the Directors from liability in a manner that parallels the exculpation codified in

8 Del. C. § 102(b)(7) by providing that the Company’s Directors (here, Zaitsev and

Basil) shall not be subject to any monetary liability “to the Company or any

Member” for “any actions taken, or actions failed to be taken” in their capacity as a

director except for:

         (i) liability for acts or omissions not in good faith or which involve
         intentional misconduct or knowing violation of Law, (ii) liability with
         respect to any transaction from which such Person derived an improper
         personal benefit, and (iii) liability from any breach of such Person’s
         duty of loyalty to the Company, in each case described in clauses
         (i), (ii), and (iii) preceding, as determined by a final, nonappealable
         order of a court of competent jurisdiction.

55
  See generally LLC Agreement § 8.2 (providing for, among other things, the composition
requirements of the Board; that “[a]ny Director may be removed with or without cause
only by the majority vote of the Series A Unitholders”; the resignation procedure for
Directors; how vacancies on the Board are handled; quorum and voting requirements for
actions taken by the Board; the timing of general and special meetings of the Board; notice;
requirements for meetings of the Board; and compensation of Directors); see generally
LLC Agreement § 8.3 (providing for, among other things, the term, appointment, removal
and resignation of any officer of the Company; that the Board decides the compensation
for officers; and job descriptions for the Chief Executive Officer, Chief Financial Officer,
Chief Operating Officer, and Vice Presidents).
56
     See generally LLC Agreement § 8.4.

                                            13
The status of fiduciary duties under the LLC Agreement is further clarified in

Section 9.1(b), which states:

           To the extent that, at Law or in equity, a Director (or its Affiliate) has
           duties (including fiduciary duties) or liabilities relating thereto to the
           Company or the Members, such Persons acting in connection with the
           Company’ business or affairs shall not be liable to the Company or to
           any Member for its good faith reliance on the provisions of this
           Agreement. The provisions of this Agreement, to the extent that they
           restrict or eliminate or otherwise modify the duties (including fiduciary
           duties) and liabilities of a Director or its Affiliates otherwise existing at
           Law or in equity, are agreed by the Members to replace such other
           duties and liabilities of such Indemnitee.

           2. The Option Agreements

           Section 3 of the Option Agreements, including those executed by Plaintiffs

and the Departing Series B Members, governs the transferability of the underlying

option.57 In Section 3.1, the Option Agreements provide the Company with a right

to redeem a Member’s Series B Units in the event the units will pass to a spouse by

reason of the Member’s death or a decree of a divorce court. At Section 3.2, the

Option Agreements outline a specific method by which fair market value for the

redeemed securities must be determined.58

      D. The Inspection Demand

           On June 17, 2019, Erisman served a books and records demand

(the “Demand”) on the Company and Defendants under Section 18-305 of the

57
     Am. Compl. ¶ 21. See, e.g., Exs. B, D, E, F, G and H to Doody Aff.
58
     Id.

                                                14
LLC Act.59 Defendants responded by producing a relatively small number of

documents in late 2019, subject to Erisman entering into a Confidentiality

Agreement.60 Plaintiffs advised Defendants that Fouts, a financial professional,

would review the documents.61 Neither the Company nor Defendants objected and

Fouts proceeded to review the documents produced by the Company. 62

            Plaintiffs maintain they first became aware of the grounds for this action

during the course of Fouts’ review.63 In early 2020, Erisman sought additional

clarification from the Company regarding some of the documents.64 The Company

declined to provide a substantive response. Instead, on February 5, 2020, the

Company advised Plaintiffs that no further documents would be provided.65

      E. Procedural History

            On October 19, 2020, Plaintiffs, both individually and derivatively on behalf

of         the   Company,    filed   their   initial   complaint   against   Defendants.66

59
     Am. Compl. ¶ 71.
60
     Am. Compl. ¶¶ 72–73.
61
     Am. Compl. ¶ 73.
62
     Id.
63
     Am. Compl. ¶ 74.
64
     Id.
65
     Id.
66
     (D.I. 1).

                                               15
On November 30, 2020, Defendants moved to dismiss the initial complaint in its

entirety.67 Plaintiffs did not oppose the motion to dismiss, choosing instead to file

the Amended Complaint.68 On March 31, 2021, Defendants filed a motion to

dismiss the Amended Complaint in its entirety.69

                                     II. ANALYSIS

          On a motion to dismiss, the court takes well-pleaded factual allegations in the

complaint as true, draws reasonable inferences in the light most favorable to plaintiff

and dismisses a claim only when plaintiff could not “recover under any reasonably

conceivable set of circumstances susceptible of proof.”70 But a plaintiff cannot rest

on conclusory allegations.71 And “a claim may be dismissed if allegations in the

complaint or in the exhibits incorporated into the complaint effectively negate the

claim as a matter of law.”72 Accordingly, the question I must answer for each of

Plaintiffs’ claims is “whether, and to what extent, the well-pleaded facts (as distinct

67
     (D.I. 8).
68
     (D.I. 12).
69
     (D.I. 16).
70
  Renco Gp., Inc. v. MacAndrews AMG Hldgs. LLC, 2015 WL 394011, at *5 (Del. Ch.
Jan. 29, 2015) (quoting Savor, 812 A.2d at 896–977 (Del. 2002) (internal quotations marks
omitted)); Ch. Ct. R. 12(b)(6).
71
  Clinton v. Enter. Rent-A-Car Co., 977 A.2d 892, 895 (Del. 2009); see also Santa Fe Pac.
669 A.2d 59 at 65–66 (“Conclusory allegations will not be accepted as true without specific
supporting factual allegations.”).
72
     Malpiede v. Townson, 780 A.2d 1075, 1083 (Del. 2001).

                                             16
from conclusory statements), construed most favorably to the plaintiff[s], can be

found to state a claim.”73 When determining the answer to this question, I must

consider the extent to which Section 9.1 of the LLC Agreement—the exculpation

provision—affects Plaintiffs’ claims.

      A. The Exculpation Provision

         It is the explicit policy of the LLC Act “to give the maximum effect to the

principle of freedom of contract and to the enforceability of limited liability

company agreements.”74 “LLC agreements are contracts that are enforced according

to their terms, and all fiduciary duties, except for the implied contractual covenant

of good faith and fair dealing, can be waived in an LLC agreement.”75 This waiver

of duties, and related exculpation for breaches of duties, depending on the language

73
     Santa Fe Pac., 669 A.2d 59 at 62.
74
     6 Del. C. § 18-1101(b)
75
   Kahn v. Portnoy, 2008 WL 5197164, at *3 (Del. Ch. Dec. 11, 2008) (citing to 6 Del. C.
§ 18-1101(c)); Elf Atochem N. Am., Inc. v. Jaffari, 727 A.2d 286, 290 (Del. 1999)
(“The [LLC] Act can be characterized as a ‘flexible statute’ because it generally permits
members to engage in private ordering with substantial freedom of contract to govern their
relationship, provided they do not contravene any mandatory provisions of the Act.”);
Zimmerman v. Crothall, 62 A.3d 676, 702 (Del. Ch. 2013) (holding that “the fiduciary
duties of a member, manager, or other person that is a party to or bound by a limited liability
company agreement may be expanded or restricted or eliminated by provisions in the
limited liability company agreement”) (cleaned up); 6 Del. C. § 18–1101(c) (“To the extent
that, at law or in equity, a member or manager . . . has duties (including fiduciary duties)
to a limited liability company or to another member or manager . . . , the member’s or
manager’s . . . duties may be expanded or restricted or eliminated by provisions in the
limited liability company agreement . . . .”).

                                              17
of the operating agreement, can apply to both breach of fiduciary duty and breach of

contract claims.76

         As required under Delaware law, the drafters of the Company’s LLC

Agreement made “their intent to [modify] fiduciary duties plain and

unambiguous.”77       The language of Section 9.1(b) unmistakably modifies the

fiduciary duties owed by the Directors and their “affiliates” by “replacing” those

duties with a contractual standard of care that holds directors to account when

“acting in connection with the Company’s business or affairs” only when they fail

to rely on the provisions of the LLC Agreement in good faith.78                    Further,

Section 9.1(a) explicitly provides that Directors will not be held liable to the

Company or any Member for monetary damages arising from “any actions taken, or

failed to be taken, in its capacity as a Director” except for (i) “acts or omissions not

in good faith or which involve intentional misconduct or a knowing violation of

76
   See 6 Del. C. § 18-1101(e) (“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 or to another member or manager or to another person that is a party to
or is otherwise bound by a limited liability company agreement; provided, that a limited
liability company agreement may not limit or eliminate liability for any act or omission
that constitutes a bad faith violation of the implied contractual covenant of good faith and
fair dealing.”) (emphasis added); see generally LLC Agreement § 9.1.
77
  See Bay Ctr. Apartments Owner, LLC v. Emery Bay PKI, LLC, 2009 WL 1124451, at *9
(Del. Ch. Apr. 20, 2009) (holding that “the drafters of chartering documents must make
their intent to eliminate fiduciary duties plain and unambiguous.”); see also Ross Hldg.,
2014 WL 4374261, at *12 (same).
78
     LLC Agreement § 9.1(b).

                                            18
Law,” (ii) “with respect to any transaction from which such Person derived an

improper personal benefit,” and (iii) “any breach of such Person’s duty of loyalty to

the Company. . . .”79

         As noted, Plaintiffs organize their claims into two counts. Count One asserts

three breach of contract claims and Count Two asserts five claims styled as breaches

of fiduciary duties owed to the Company and its Members. With the contractual

standards governing manager conduct in mind, I address each in turn.

      B. Count One – Breach of Contract

         In Count One, Plaintiffs assert the Distribution Claims, Tax Reporting Claims,

and Redemption Claim. As discussed above, all three claims brought under Count

One rest on allegations that Defendants breached the LLC Agreement, and the

Redemption Claim also alleges a breach of the Option Agreements. Defendants

argue that each of these claims fails as a matter of law on two grounds. First,

Plaintiffs have failed to plead a cognizable claim. And second, the claims are time-

barred by laches. I agree on both fronts.

         Under Delaware law, to recover for breach of contract, a plaintiff must well

plead and then prove “a contractual obligation, whether express or implied, a breach

of that obligation by the defendant, and resulting damage to the plaintiff.”80

79
     LLC Agreement § 9.1(a).
80
  Moore Bus. Forms, Inc. v. Cordant Hldgs. Corp., 1995 WL 662685, at *7 (Del. Ch.
Nov. 2, 1995).

                                            19
“[Because] [t]he construction of a contract is a question of law,”81 it is well

understood that “a motion to dismiss is a proper framework for determining the

meaning of contract language.”82 Accordingly, when assessing whether the contract

claims survive Defendants’ Motion, it is appropriate to begin with a construction of

the contracts alleged to have been breached by employing well-worn canons of

contract construction.83 As previously noted, the LLC Agreement’s exculpation

provision will also affect the viability of the breach of contract claims.

      1. The Distribution Claim

      Plaintiffs allege that Defendants breached unidentified contractual

commitments by “diverting Company funds to themselves in the form of excess

remuneration,” in excess of market rates, instead of making appropriate distributions

to Members.84 Plaintiffs, however, fail to plead any facts regarding the amounts of

81
  77 Charters, Inc. v. Gould, 2020 WL 2520272, at *19 (Del. Ch. May 18, 2020) (internal
quotations omitted).
82
   Majkowski v. Am. Imaging Mgmt. Servs., LLC, 913 A.2d 572, 581 (Del. Ch. 2006);
see also MKE Hldgs. Ltd. v. Schwartz, 2019 WL 4723816, at *9 (Del. Ch. Sept. 26, 2019)
(stating “contractual duty (if any) created by an LLC operating agreement is a matter of
contract interpretation and therefore appropriate for review on a motion to dismiss.”).
83
  See, e.g., Touch of Italy Salumeria & Pasticceria, LLC v. Bascio, 2014 WL 108895, at *4
(Del. Ch. Jan. 13, 2014) (“Pursuant to this Court’s well-established principles of contract
interpretation, and recognizing that LLCs are creatures of contract, I must enforce LLC
agreements as written.”) (internal quotations omitted).
84
  Am. Compl. ¶¶ 49, 77. The failure to identify specific contractual provisions in the
Amended Complaint alleged to have been breached is serial throughout the pleading and
provides a further basis for dismissal. See Coca-Cola Beverages Fla. Hldgs, LLC v. Goins,
2019 WL 2366340, at *3 (Del. Ch. June 4, 2019) (“Count I fails to state a claim for relief
under the LLC Agreement because the Amended Counterclaims do not identify any
                                            20
the individual Defendant’s compensation, let alone any facts to support the assertion

that either of the individual Defendants was paid “excessive remuneration.”85

Further, a plain reading of Section 6.1 of the LLC Agreement unambiguously reveals

that a failure to make distributions to Members is not a breach of the

LLC Agreement.

         Section 6.1 of the LLC, which governs distributions, is broken down into four

subsections.86     Subsections (a) and (d) contain general information regarding

distributions, and subsections (b) and (c) split up the distributions into one of two

categories—tax distributions and distributions made for any other reason.87 More

specifically, subsections (b) and (c) outline what, if anything, triggers each type of

distribution and how the amount of the distribution is to be calculated.88

provision of that contract that allegedly was breached.”) (citing US Ecology, Inc. v. Allstate
Power Vac, Inc., 2018 WL 3025418, at *5–7 (Del. Ch. June 18, 2018), aff’d, 202 A.3d 510
(Del. 2019) (dismissing breach of contract claim under Rule 12(b)(6) for failing to identify
a contractual provision that was breached)).
85
  Am. Compl. ¶ 3. Cf. Kuroda v. SPJS Hldgs., L.L.C., 971 A.2d 872, 880 (Del. Ch. 2009)
(“Under [the Rule 12(b)(6)] standard, if [Plaintiff] pleads any set of facts that would entitle
him to relief, then the motion to dismiss must fail.”) (emphasis added).
86
     See generally LLC Agreement §6.1.
87
  Id. Specifically, Subsection (a) establishes that each distribution made by the Company
shall be made in accordance with Article 6 of the LLC Agreement and applicable law, and
subsection (d) states distributions shall be made to the Members of record or, in the absence
of a record date, to the Members owning the applicable units on the date of the distribution.
88
     LLC Agreement §6.1(b)–(c).

                                              21
As explained below, neither of these provisions provide a Member with an absolute

contractual right to receive a distribution.

           Section 6.1(b) provides in relevant part, “the Company shall make reasonable

efforts, subject to the availability of funds, to make distributions to each Member in

amounts” intended to cover the income taxes Members incur in respect of the

Company’s taxable income so allocated to them for the immediately prior fiscal year

(the “Tax Distributions”).89 Accordingly, the Tax Distributions will only occur if

the Company makes a profit and the Company has available cash to fund the

potential Tax Distribution.

           During the years when the Company operated at a loss, there would be no

distribution to cover the taxable income allocated to each Member because, again,

there would be no taxable income for a distribution to cover. Plaintiffs have

acknowledged “the Company operated at a loss almost every year that it has been in

operation.”90 According to Plaintiffs, the Company operated at a profit for tax

purposes only in fiscal years 2017 and 2019.91                Yet, the Company made

89
   LLC Agreement § 6.1(b). The amount of the Tax Distribution is calculated based on the
following formula: “the sum for the immediately preceding fiscal year and for all prior
fiscal years of (i) the amount of taxable income allocated to such Member for such fiscal
years, multiplied by (ii) the maximum marginal federal, state and local tax rate . . .
applicable to an individual taxpayer pursuant to the [tax] Code and the applicable state and
local laws and regulations in Durham, North Carolina in respect of income recognized
during such immediately preceding fiscal year.” Id.
90
     Am. Compl. ¶ 47.
91
     Id.

                                            22
“de minimums tax distributions” to the Members in these years, amounting to

“only 2.1% of each Member’s reported K-1 profits.”92 Even if true, that conclusory

allegation, standing alone, does not support a claim that Defendants breached a

contract by failing to make adequate distributions. Plaintiffs have pled no facts to

support an inference that the Company had sufficient funds to cover the Company’s

budgeted operational needs and make Tax Distributions equal to 100% of each

Member’s reported K-1 profits. Nor have they alleged how Defendants failed to

“make reasonable efforts.”93 Thus, even if the LLC Agreement did not provide for

exculpation, the facts pled by Plaintiffs would not be sufficient to support a claim

that Defendants breached Section 6.1(b) of the LLC Agreement.94

           Plaintiffs’ breach of contract claim for failure to make adequate general

distributions does not fare any better. Section 6.1(c), which covers any distribution

made by the Company that is not a Tax Distribution, expressly allows that

“[t]he Board shall have sole discretion to determine the timing of any other

distribution and the aggregate amounts available for such distribution.” Because

subsection (c) distributions are made at the Board’s sole discretion, it is within the

92
     Id.
93
     LLC Agreement § 6.1(b).
94
   Of course, the LLC Agreement does provide for exculpation, yet Plaintiffs have not even
attempted to plead that the failure to make distributions to Members was the product of bad
faith. This too is fatal to the claim.

                                            23
Board’s discretion to elect not to make distributions, so long as the Board exercised

its discretion in good faith.95 And Plaintiffs have not alleged any facts that would

support a reasonable inference that the Board acted in bad faith by electing not to

make subsection (c) distributions.96

       For the reasons just stated, Plaintiffs’ claim that Defendants committed a

breach of contract by not causing the Company to make adequate distributions to its

Members (whether tax or otherwise) fails under the express terms of the

LLC Agreement. Thus, the corresponding portions of Count One must be dismissed

for failure to state a claim.97

       2. The Tax Reporting Claim

       Plaintiffs next make the conclusory allegation that “the Defendants have

harmed Plaintiffs by . . . exposing Plaintiffs to actual and potential adverse tax

95
   See Airborne Health, Inc. v. Squid Soap, LP, 984 A.2d 126, 146–47 (Del. Ch. 2009)
(“When a contract confers discretion on one party, the implied covenant requires that the
discretion be used reasonably and in good faith.”).
96
   See In re Chelsea Therapeutics Int’l Ltd. S’holders Litig., 2016 WL 3044721, at *1
(Del. Ch. May 20, 2016) (explaining that a well-pled claim of bad faith “is a rara avis
[rare bird]” as it requires well pled facts of intentional fiduciary breaches the nature of
which must allow an inference that the fiduciary knew his “action can in no way be
understood as in the corporate interest”). Had Plaintiffs pled facts supporting a reasonable
inference that the Board acted in bad faith, those same facts would likely have been enough
to overcome the exculpation clause.
97
   See Fannin v. UMTH Land Dev., L.P., 2020 WL 4384230, at *21 (Del. Ch. Aug. 28,
2020) (“The Complaint does not allege facts sufficient to create a reasonable inference that
there was Cash Available for Distributions or that distributions were ceased . . . to fund the
Fiduciary Defendants’ own special interests.”).

                                             24
consequences.”98 According to Plaintiffs, in the exercise of their unchecked control

over the Company and its finances, Defendants have caused the Company to

misstate its revenue.99        Specifically, Plaintiffs allege Defendants caused the

Company to recognize up to 50% of the revenue from certain “support contracts”

upfront and thereby deviated from Generally Accepted Accounting Principles

(“GAAP”), which recommends the recognition of revenue from such contracts every

month over the lifetime of the contract.100 The deviation from GAAP, say Plaintiffs,

was intended to make the Company appear more financially fit than it actually was

to lenders, potential investors and existing Members.101 According to Plaintiffs, “by

engaging in this systemic mismanagement of the Company and through repeated

misstatements of revenue, the Defendants intentionally misled the Company’s

Members, the Company’s lenders and the IRS.”102

            While the Amended Complaint, once again, fails to identify any provision in

the LLC Agreement that requires the Company to maintain its financial books and

records in accordance with GAAP, in their Answering Brief,103 Plaintiffs point to

98
     Am. Compl. ¶ 77.
99
     Am. Compl. ¶ 65.
100
      Am. Compl. ¶¶ 66, 85.
101
      Id.
102
      Am. Compl. ¶ 69.
103
   Of course, asserting a claim or alleging a fact for the first time in a brief filed in
opposition to a motion to dismiss a complaint is no substitute for well-pled allegations in
                                             25
Section 10.3 of the LLC Agreement as reflecting this requirement.104 Plaintiffs’

Answering Brief then cites Section 11.1 of the LLC Agreement105 as support for the

allegation that “[b]ecause Defendants’ management of the Company’s finances did

the complaint itself. See Orman v. Cullman, 794 A.2d 5, 28 n.59 (Del. Ch. 2002); Feldman
v. AS Roma SPV GP, LLC, 2021 WL 3087042, at *7 (Del. Ch. July 22, 2021) (citing to
Sparton Corp. v. O’Neil, 2017 WL 3421076, at *5 n.36 (Del. Ch. Aug. 9, 2017) (observing
that a plaintiff “is bound to the factual allegations contained in its complaint [and] cannot
supplement the complaint through its brief.”)).
104
    Pls.’ Answering Br. in Opp’n to Defs.’ Mot. to Dismiss Pls.’ First Am. Compl. (D.I. 21)
(“PAB”) at 19; LLC Agreement § 10.3 (“The Company shall keep or cause to be kept at
its principal office complete and accurate books and records of the Company, supporting
documentation of the transactions with respect to the conduct of the Company’s business
and minutes of the proceedings of the Board, any committee thereof and any of the
Members. The Company’s financial books and records shall be maintained in accordance
with GAAP. The records shall include, but not be limited to, complete and accurate
information regarding the state of the business and financial conditions of the Company;
a copy of the Articles and the Agreement and all amendments thereto; a current list of the
names and last known business, residence, or mailing addresses of all Members; and the
Company’s federal, state, and local tax returns for the Company’s six most recent
tax years.”). The paragraph in Plaintiffs’ answering brief that points to Section 10.3 of the
LLC Agreement as evidence that the Company must maintain its books and records in
accordance with GAAP falls between Plaintiffs’ arguments addressing the Distribution
Claim and the Tax Reporting Claim. It appears Plaintiffs intended the reference to
Section 10.3 to bolster their Distribution Claim but, as best I can discern, that reference
would provide the only basis to infer that the Company’s alleged divergence from GAAP
would give rise to a breach of contract for purposes of the Tax Reporting Claim.
105
    Id. See also LLC Agreement §11.1 (“The Company shall prepare and timely file all
U.S. federal, state and local and foreign tax returns required to be filed by the Company.
Unless otherwise agreed by the Board, any income tax return of the Company shall be
prepared by an independent public accounting firm selected by the Board. Each Member
shall furnish to the Company all pertinent information in its possession relating to the
Company’s operations that is necessary to enable the Company’s tax returns to be timely
prepared and filed. The Company shall deliver to each Member as soon as practicable after
the end of the applicable fiscal year, a Schedule K-1 together with such additional
information as may be required by the Members in order to file their individual returns
reflecting the Company’s operations. The Company shall bear the costs of the preparation
and filings of its tax returns.”) (emphasis in original).

                                             26
not comply with [GAAP] standards, the K-1s issued to each Company member are

inaccurate or potentially inaccurate,”106 and thus, Defendants’ actions exposed

“Plaintiffs to actual and potential adverse tax consequences.”107 As discussed below,

what those “actual and potential adverse tax consequences” are remains a mystery.

            To reiterate, Plaintiffs were obliged to well plead the prima facie elements of

a breach of contract claim––a valid contract, breach of that contract and resulting

damages.108 There is no dispute that Plaintiffs have identified a valid contract––the

LLC Agreement.            In Defendants’ view, Plaintiffs have failed to sustain their

Tax Reporting Claims with well-pled allegations that Defendants actually breached

any provision of that contract.109 Given Plaintiffs’ failure to identify in their pleading

any provision of the LLC Agreement that Defendants allegedly breached,

Defendants’ argument that Plaintiffs have failed to well plead breach is

persuasive.110 But the Court need not rely on that ground for dismissal because

Plaintiffs have utterly failed to plead that they have suffered cognizable harm from

any breach, much less what that harm might be.

106
      Am. Compl. ¶ 58.
107
      Id.
108
      VLIW Tech., LLC v. Hewlett–Packard Co., 840 A.2d 606, 612 (Del. 2003).
109
      DOB at 14.
110
  See Coca-Cola Beverages Florida Hldgs., 2019 WL 2366340, at *3; US Ecology, Inc.,
2018 WL 3025418, at *5–7.

                                               27
            The only damages (or harm) alleged by Plaintiffs in connection with their

Tax Reporting Claim is that they were exposed to actual and potential adverse tax

consequences.111 Plaintiffs allegation “that all [M]embers have been inaccurately

reporting their personal taxes” is offered in the penultimate sentence of a paragraph

that walks through Plaintiffs’ assumptions regarding the ramifications of

Defendants’ actions described in the Tax Reporting Claim.112 But this paragraph,

and the entire Amended Complaint, are devoid of any facts to support the assumption

that Defendants have caused the Company to issue inaccurate K-1s, how any such

inaccuracies have caused the Members inaccurately to report their personal taxes, or

that Members have actually faced any harm flowing from their tax filings.113

Accordingly, because the Amended Complaint does not properly allege an essential

element of breach of contract (resulting harm) with respect to the Tax Reporting

Claim, that claim must be dismissed.114

111
   Am. Compl. ¶ 77. Plaintiffs have pled the Tax Reporting Claim as a direct claim. They
specifically allege “the Defendants have harmed Plaintiffs by: (i) failing to make
distributions in general, and adequate tax distributions in particular, instead diverting
Company funds to themselves in the form of excess remuneration; (ii) failing to follow the
applicable valuation method in the Operating Agreement when determining the buyout
amount to be paid to departing Series B Unitholders; and ([iii]) exposing Plaintiffs to actual
and potential adverse tax consequences.” Id.
112
      Am. Compl. ¶ 59.
113
      Id.
114
    Kuroda, 971 A.2d at 884. I note that, here again, Plaintiffs have ignored their burden
to plead a non-exculpated breach of contract. There are no facts pled that would support a
                                             28
         3. The Redemption Claim

         Plaintiffs’ final breach of contract claim alleges Defendants failed “to follow

the applicable valuation method in the Operating Agreement when determining the

buyout amount to be paid to departing Series B Unitholders.” 115 Specifically,

Plaintiffs maintain that Defendants caused the Departing Series B Members “to be

bought out at greatly inflated prices.”116 This claim misses the mark because

Plaintiffs fail to recognize that the valuation method set forth in the Option

Agreements is only triggered in certain circumstances, none of which were at play

in any of the Departing Series B Members’ redemptions.

         Sections 3.1 and 3.2 of the Option Agreements provide the Company with a

right to purchase Series B Units and unexercised options under a prescribed

valuation method in only two limited situations, neither of which are relevant here:

where the units or options “are transferred” on the holder’s death to a beneficiary

other than the holder’s spouse, or where the holder is living and the units or options

“are transferred” to the holder’s spouse “pursuant to a final judgment or decree of

reasonable inference that Defendants’ failure properly to report revenue was the product of
bad faith.
115
    Am. Compl. ¶ 77. While Plaintiffs purport to invoke a valuation methodology
prescribed in the “Operating Agreement,” their substantive allegations actually cite to a
methodology prescribed in “Section 3.2 of the Options Agreement.” See Am. Compl.
¶¶ 50(a)–(d).
116
      Am. Compl. ¶ 50.

                                            29
divorce.”117 Plaintiffs have not alleged that any of the referenced redemptions fall

within either of these circumstances.118 And while Plaintiffs allege that Schuler’s

redemption was “within the context of an impending divorce (which would have

triggered the calculation of the fair market value of the units under Section 3.2),”

as the allegation “impending” makes clear, Plaintiffs do not allege that Schuler’s

units were transferred to his spouse “pursuant to a final judgment or decree of

divorce” as required to trigger the prescribed valuation methodology. Thus, there is

no factual basis for Plaintiffs’ allegation that Defendants breached the Option

Agreements or the LLC Agreement by failing to use a valuation method that was not

triggered by the express terms of either contract.

         4. The Breach of Contract Claims Are Time-Barred

         Defendants argue in the alternative that Plaintiffs’ breach of contract claims

must be dismissed because all of the alleged wrongful conduct or practices giving

rise to those claims occurred or were in place long before the three years preceding

the filing of the original Complaint on October 19, 2020.119 This time period is

relevant because, when “determining whether an action is barred by laches, the Court

of Chancery will normally, but not invariably, apply the period of limitations by

117
      See, e.g., Exs. B & D to Doody Aff. at 3.1 & 3.2.
118
      See, e.g., Exs. E, F, G & H to Doody Aff.
119
      DOB at 36.

                                              30
analogy,”120 and a three-year statute of limitations applies to claims of breach of

contract (and breach of fiduciary duty).121

            “Under Delaware law, a cause of action accrues at the time of the wrongful

act, even if the plaintiff is ignorant of the cause of action.”122 Plaintiffs’ do not

dispute that their claims were brought after the three-year statute of limitations

expired; instead, they seek to invoke “equitable tolling.”123 Specifically, Plaintiffs

argue their claims are subject to equitable tolling because “Plaintiffs reasonably

relied upon the competence and good faith of Defendants as Fiduciaries of the

Company.”124 While they do not expressly invoke the doctrine, it appears Plaintiffs

may also be advancing a “time of discovery” argument separate from their equitable

tolling argument. Accordingly, I address both below.

            As this court has explained, equitable tolling is one of several tolling doctrines

recognized in Delaware:

            The equitable tolling doctrine is a subset of the time of discovery rule.
            Application of the time of discovery rule delays the starter’s gun for the
            statute of limitation in certain narrowly carved out limited
            circumstances when the facts at the heart of the claim are so hidden that
            a reasonable plaintiff could not timely discover them. These scenarios
            include instances: (1) where the defendant has fraudulently concealed

120
      Levey v. Brownstone Asset Mgmt., LP, 76 A.3d 764, 769 (Del. 2013).
121
      10 Del. C. § 8106; Fike v. Ruger, 754 A.2d 254, 260 (Del. Ch. 2009).
122
      Fannin, 2020 WL 4384230, at *11 (internal quotations omitted).
123
      PAB at 26.
124
      Id.

                                                31
         key facts; (2) where the injury was inherently unknowable such that
         discovery of its existence is a practical impossibility; and (3) where a
         plaintiff reasonably relies on the competence and good faith of a
         fiduciary who is alleged to have engaged in wrongful self-dealing
         (also referred to as the equitable tolling doctrine).125

According to Plaintiffs, “due to the Defendants’ unchecked and plenary control over

all aspects of the Company, Plaintiffs could not have become objectively aware of

the Defendants’ misconduct and breaches until they received responses to the

Demand and subsequently continued to learn of further misconduct through the

course of this ligation.”126

         Plaintiffs bear the burden of pleading facts that allow a reasonable inference

that the statute of limitations should be tolled,127 and, even then, relief from the

statute extends only to the point in time when Plaintiffs were put on inquiry notice.128

“That is to say, no theory will toll the statute beyond the point where the plaintiff

125
    AM Gen. Hldgs. LLC v. Renco Gp., Inc., 2016 WL 4440476, at *15 (Del. Ch. Aug. 22,
2016) (internal quotation marks omitted) (citing In re Dean Witter P’ship Litig.,
1998 WL 442456, at *6 (“Under the theory of equitable tolling, the statute of limitations is
tolled for claims of wrongful self-dealing, even in the absence of actual fraudulent
concealment, where a plaintiff reasonably relies on the competence and good faith of a
fiduciary.”)).
126
      PAB at 26.
127
    See Fike, 754 A.2d at 261 (“The plaintiffs bear the burden of proving that tolling is
available.”); AM Gen. Hldgs., 2016 WL 4440476, at *13 (holding plaintiff bears the burden
of pleading facts that allow a reasonable inference the statute of limitations should be
tolled).
128
   See In re Tyson Foods, 919 A.2d 563, 585; Fike, 754 A.2d at 260; AM Gen. Hldgs.,
2016 WL 4440476, at *13.

                                            32
was objectively aware, or should have been aware, of facts giving rise to the

wrong.”129 With these principles in mind, as the Court considers Plaintiffs’ tolling

arguments, it must address “three separate questions: (1) whether the discovery rule

applies because [Plaintiffs’] injury was inherently unknowable; (2) whether

[Defendants’] status as a fiduciary implicates equitable tolling; and (3) if the answer

to either of those questions is yes, when (if ever) [were Plaintiffs] on inquiry notice

of [their] claims?”130

         Under Delaware law, “[f]or the limitations period to be tolled under [the

inherently unknowable] doctrine, there must have been no observable or objective

factors to put a party on notice of an injury, and plaintiffs must show that they were

blamelessly ignorant of the act or omission and the injury.”131 As described above,

Plaintiffs enjoyed information rights under the LLC Agreement and could have

requested books and records at any time.132 When a plaintiff enjoys contractual

information rights and the ability to enforce those rights summarily in this court,133

the plaintiff’s challenge to demonstrate that he made reasonable inquiry is greater.134

129
      Tyson Foods, 919 A.2d at 585.
130
      AM Gen. Hldgs., 2016 WL 4440476, at *14.
131
      Dean Witter, 1998 WL 442456, at *5.
132
      LLC Agreement, § 10.5.
133
      See 6 Del. C. § 18-305.
134
   See Fike, 754 A.2d at 261; AM Gen. Hldgs., 2016 WL 4440476, at *13 (holding that
with inspection rights “in hand, [a plaintiff] cannot be heard to argue that discovery of the
                                             33
         The alleged wrongs that are the subjects of each of the breach of contract

claims advanced by Plaintiffs occurred well before the three years preceding the

October 2020 filing of Plaintiffs’ original complaint and Plaintiffs’ 2019 demand to

inspect Company books and records. Plaintiffs, therefore, were obliged to plead

facts that would justify their delay in pursuing their claims. As explained below,

they have not done so.

             a. The Distribution Claim Is Time-Barred

         The Amended Complaint makes clear that the alleged failures to make

distributions followed a practice that had been in place in the Company for far longer

than three years before Plaintiffs filed the original Complaint.135 Section 6 of the

LLC Agreement describes, in detail, when distributions shall be made, and Plaintiffs

were or should have been aware of any rights or obligations imposed by this scheme

since becoming Members. The Amended Complaint pleads no facts that would

allow an inference that Plaintiffs made a timely inquiry regarding Tax Distributions

even though they easily could have done so.136 Because tolling stops once a plaintiff

“knew or had reason to know of the facts constituting the wrong,”137 I am satisfied

facts supporting its breach claims . . . was a ‘practical impossibility’”) (citing Dean Witter,
1998 WL 442456, at *5–6 (holding that “the running of the statute of limitations is tolled
while the discovery of the existence of a cause of action is a practical impossibility”)).
135
      Am. Compl. ¶¶ 11, 19, 22, 23, 47; original Compl. ¶ 59.
136
      Am. Compl. ¶ 59.
137
      Dean Witter, 1998 WL 442456, at *6.

                                              34
that both Plaintiffs were on inquiry notice of the Company’s alleged failure to make

the requisite distributions to the Members well before three years from the filing of

the original complaint.

          That holds true as well for Plaintiffs’ attempt to invoke equitable tolling.

“[E]ven where defendant is a fiduciary, a plaintiff is on inquiry notice when the

information underlying plaintiff’s claim is readily available.”138 Once they became

Members, the information underlying the Distribution Claim was readily available

had Plaintiffs exercised their right to ask for it. By failing to do so under the

circumstances pled in the Amended Complaint, Plaintiffs cannot position

themselves to seek tolling of the otherwise expired statute of limitations as a matter

of law.

              b. The Tax Reporting Claims Are Time-Barred

          In the Tax Reporting Claims, Plaintiffs allege that the Members were provided

with misstated K-1s and therefore “all [m]embers have been inaccurately reporting

their personal taxes.”139 Plaintiffs have not alleged that the Company has recently,

or ever, altered its methodology for preparing K-1 statements. Accordingly, based

138
      Id. at *8.
139
   Am. Compl. ¶ 59. Fouts likely had actual notice of the Tax Reporting Claim once he
became the Chief Financial Officer of the Company in February 2012. Am. Compl. ¶¶ 3,
90. While I need not decide the laches question on that basis, I note that it comes with ill-
grace for the Company’s former CFO to feign ignorance of the Company’s accounting
practices when those practices had not meaningfully changed from the Company’s
inception to now.

                                             35
on the pleadings, it appears the Company’s practices that resulted in potentially

incorrect K-1 statements have been in place for longer than the presumptive three-

year statute of limitations.140 To the extent these practices raised questions, Plaintiffs

had a remedy––seek information from the Company as they were contractually

entitled to do. If, as they say, Plaintiffs lacked the information needed to assert

timely Tax Reporting Claims, that “lack of knowledge was due to [their] failure to

exercise [their] right[s] to obtain information, as provided by the [Limited Liability

Company Agreement] and by law. ‘Equity aids the vigilant, not those who slumber

on their rights.’”141

         As stated above, tolling stops once a plaintiff “knew or had reason to know of

the facts constituting the wrong.”142 I am satisfied that both Plaintiffs were on

inquiry notice of the Tax Reporting Claims for far longer than the statutory period

of three years. The Tax Reporting Claims are time-barred.

140
    Percona was formed in 2012 and Plaintiffs Erisman and Fouts have been Members since
2012 and 2013, respectively. Fouts served as the Company’s CFO from February 2012
through June 2014, a position that would typically afford Fouts with information related to
the Company’s accounting practices. Plaintiffs have not alleged that Percona has changed
its accounting practices, including the methods it uses to prepare K-1 statements for its
Members. Instead, Plaintiffs allege that “Percona has never issued corrected K-1
statements for any prior tax year.” Am. Compl. ¶ 59.
141
   See Fike, 754 A.2d at 262 (quoting Adams v. Jankouskas, 452 A.2d 148, 157
(Del. 1982)).
142
      Dean Witter, 1998 WL 442456, at *6.

                                            36
            c. The Redemption Claim Is Time-Barred

         Plaintiffs allege that Defendants caused the Departing Series B Members “to

be bought out at greatly inflated prices.”143 Specific dates have not been provided

for these redemptions, but the Amended Complaint does allege that the Company

bought out one of the Departing Series B Member’s options in August 2017.144

Given that Plaintiffs filed the original Complaint on October 19, 2020, under the

presumptive three-year statute of limitations, any claim resting on events that

occurred prior to October 19, 2017 would be considered untimely. Given that each

of these redemptions coincided with the departure of an officer and Member of the

Company, it would be logical that the remaining Members would be aware of such

departures and associated redemptions, especially in a closely held company such as

Percona. “A court of equity moves upon considerations of conscience, good faith,

and reasonable diligence.”145 I am satisfied that Plaintiffs have failed to act with

reasonable diligence, and so the Redemption Claim is likewise time-barred.

143
      Am. Compl. ¶ 50.
144
      Am. Compl. ¶ 50(b).
145
  Whittington v. Dragon Gp., L.L.C., 991 A.2d 1, 8–9 (Del. 2009) (quoting Fed. United
Corp. v. Havender, 11 A.2d 331, 343 (Del. 1940)).

                                          37
         C. Count Two – Breach of Fiduciary Duty

         Plaintiffs allege that “Defendants, as Managers of the Company and pursuant

to its LLC Agreement, owe a duty of loyalty to the Company and its Members” and

that “Defendants breached their fiduciary duties by engaging in a scheme over the

course of many years intended to enrich themselves at the expense of the

Plaintiffs.”146 For reasons explained above, these allegations against Defendants

must be analyzed in light of the terms of the LLC Agreement.

         In the Amended Complaint, Plaintiffs attempt to characterize what fiduciary

duties, if any, are still in play under the LLC Agreement by alleging that “the

Defendants are not exculpated for ‘liability for acts or omissions not in good faith or

which involve intentional misconduct or knowing violation of Law, (ii) liability with

respect to any transaction from which [Defendants] derived an improper personal

benefit, and (iii) liability from any breach of [Defendants’] duty of loyalty to the

Company.”147 That construction of Section 9.1 of the LLC Agreement ignores its

clear terms.

         Section 9.1(a), cited by Plaintiffs in an attempt to establish the applicable

fiduciary duties, provides the Directors and their “affiliates” with exculpation

against monetary liability for certain types of claims. “It does not restrict, modify,

146
      Am. Compl. ¶¶ 81, 83.
147
      Am. Compl. ¶ 81.

                                           38
or eliminate fiduciary duties.”148 But Section 9.1(b) of the LLC Agreement does

modify the fiduciary duties owed by the Directors and their “affiliates” by

“replacing” those duties with a contractual standard of care that holds directors to

account when “acting in connection with the Company’s business or affairs” only

when they fail to rely on the provisions of the LLC Agreement in good faith.149 This

requirement to act in good faith corresponds with the default standard of loyalty

under Delaware law.150 So, I will test the breach of fiduciary duty claims set forth

in Count Two against this framework.

         Count Two, styled as a breach of fiduciary duty count, recasts the previously

discussed Distribution Claim and Tax Reporting Claim as breaches of fiduciary duty,

and then asserts the Dilution Claim, Valuation Claim and Failure to Sell the

Company Claims.         For reasons set forth above, Plaintiffs fail to support the

Distribution Claim and Tax Reporting Claim with well-pled allegations of bad faith

and both are time-barred, so it follows that Plaintiffs cannot recycle those claims as

breach of fiduciary duty claims. I address each of the remaining three claims in turn.

148
      Feeley v. NHAOCG, LLC, 62 A.3d 649, 663 (Del. Ch. 2012).
149
      LLC Agreement § 9.1(b).
150
   “Bad faith” is another index for the fiduciary duty of loyalty. Stewart v. BF Bolthouse
Holdco, LLC, 2013 WL 5210220, at *11 (Del. Ch. Aug. 30, 2013) (“[T]he duty of loyalty
encompasses more than interested transactions and also covers director actions taken in
bad faith.”).

                                           39
            1. The Dilution Claim

            In the Dilution Claim, Plaintiffs allege that, as Series B Unitholders, they were

entitled to, but did not receive, prior notice of the issuance of the Series C Units in

connection with the Tokutek Acquisition and that the issuance resulted in the

improper dilution of their Series B Units.151 An unfair dilution claim belongs to the

entity whose equity is the subject of the claim.152 When a stockholder purports to

bring a dilution claim, he must satisfy the enhanced pleading requirements

embedded in Chancery Rule 23.1 and our jurisprudence applying that rule.153 Here,

Plaintiffs elected not to make a demand on the Board to bring their Dilution Claim

and are, therefore, required to plead facts that would support a “yes” answer to any

of the three questions posed in the now-settled three-part demand futility inquiry.154

Plaintiffs’ pleading falls well short of that mark. Nevertheless, the Court need not

undertake that analysis because the Dilution Claim, as pled, also fails to state a viable

claim under Chancery Rule 12(b)(6).

            According to Defendants, Plaintiffs have made three concessions, by

allegation or omission, that are fatal to their Dilution Claim. First, the Amended

151
      Am. Compl. ¶¶ 34, 37.
152
   See Brookfield Asset Mgmt. v. Rosson, 261 A.3d 1251, 1278 (Del. 2021) (holding that
dilution claims are “exclusively derivative”).
153
      Id.
154
  See United Food & Com. Workers Union v. Zuckerberg, 262 A.3d 1034 (Del. Sept. 23,
2021) (adopting “unified” three-part test for demand futility).

                                               40
Complaint acknowledges that Plaintiff Fouts was the Company’s Controller at the

time of the Tokutek Acquisition.155 Second, the Amended Complaint fails to allege

that the Series B Unitholders were entitled to prior notice of either the Tokutek

Acquisition or the issuance of the Series C Units to fund that acquisition; rather,

Plaintiffs simply allege they were not given notice. 156 And third, Plaintiffs do not

allege that they would have been entitled to exercise any consent or blocking rights

had they received advance notice of the Tokutek Acquisition.          According to

Defendants, for these reasons alone, all claims regarding the Tokutek Acquisition

and the related issuance of the Series C Units should be dismissed. I agree.

         The LLC Agreement did not require that the Series B Unitholders receive any

prior notice of the Tokutek Acquisition. In fact, the LLC Agreement expressly and

exclusively vests the Series A Member with the authority to cause and approve the

issuance of additional units and the admission of any additional Member, with no

provision for notice to, or approval by, Series B Members.157 Also, Section 8.4(b)

of the LLC Agreement expressly provides that the vote of the holders of a majority

of the Series A Units (here, Zaitsev) “shall constitute the act of the Members,” and

that any action permitted by the LLC Agreement may be taken without prior notice.

155
      Am. Compl. ¶ 3.
156
      Am. Compl. ¶ 37.
157
      LLC Agreement (Ex. A to Doody Aff.) at § 5.1.2 & 8.4(b)(iv).

                                             41
If Defendants had no duty to provide notice, there could be no breach of contractual

fiduciary duties for failing to provide such notice.

       By expressly empowering the Series A Member to authorize, create and issue

additional series of units, without any stated limitation (Section 5.1.2), the

LLC Agreement also expressly contemplates potential dilution of Series B Units

(and all units for that matter). Thus, even if Plaintiffs were diluted, such dilution

would not constitute a breach of fiduciary duty.158 This is especially so given the

Amended Complaint’s lack of any non-conclusory allegations that Defendants

engaged in the Tokutek Acquisition in bad faith or for self-interested purposes.159

158
   See U.S. Cellular Inv. Co. of Allentown v. Bell Atl. Mobile Sys., Inc., 677 A.2d 497, 504
(Del. 1996) (affirming the Court of Chancery’s dismissal of fiduciary duty claim against
general partner of limited partnership as “correct as a matter of law,” stating that while the
complaint alleged that the defendant acted intentionally, it “[did] not assert that
[Defendant] acted in knowing breach of the Agreement.”).
159
    See LLC Agreement. § 9.1(a) (providing that Directors will be liable only for failure to
exercise good faith in the execution of their obligations under the LLC Agreement);
LLC Agreement. § 9.1(b) (exculpating directors from liability except for allegations of bad
faith or breach of the duty of loyalty). Any suggestion in the Amended Complaint that
Basil, a Series B Member, acted against the interests of the Company and the other Series B
Members by “caus[ing] the Series B Unitholders to be diluted” rests on the unreasonable
inference that he would act against his own best interests. See Am. Compl. ¶ 84. The same
is also true with respect to Zaitsev and his Series A Unit holdings, as the Series C Units
had payment preferences to all existing units. See Am. Compl. ¶ 33. While this court will
afford a plaintiff all reasonable inferences flowing from well-pled facts, this court is not
obliged to make unreasonable inferences when assessing the strength of a pleading under
Rule 12(b)(6). See, e.g., Brehm v. Eisner, 746 A.2d 244, 257 (Del. 2000) (in affirming
Court of Chancery’s dismissal of derivative complaint for failure to set forth particularized
facts creating a reasonable doubt that the director defendants conduct was protected by the
business judgment rule, the Supreme Court agreed with this court’s finding that allegations
regarding Michael Eisner’s conduct “were illogical and counterintuitive” because the
alleged conduct “would dilute the value of Eisner’s own very substantial holdings.”);
Clinton, 977 A.2d, at 895 (holding that, in reviewing a complaint under Rule 12(b)(6), the
                                             42
         Plaintiffs also allege that “[u]pon information and belief, the degree of

dilution of the Series B Unitholders by the issuance of the Series C Units is far out

of proportion to the actual value of the Tokutek Acquisition.”160 This conclusory

allegation, however, stands untethered to any supporting facts and, as such, is

entitled to no weight.161

         2. The Valuation Claims

         Plaintiffs provide no specific factual allegations to support their claim that

“the Defendants . . . caused the Company to incur expense by providing false

information to the IRS in the 409A valuation created contemporaneously with the

Tokutek Acquisition.”162 This valuation purportedly was issued as of September 30,

court does not “simply accept conclusory allegations unsupported by specific facts [or]
draw unreasonable inferences in the plaintiff’s favor”); cf. In re Lukens Inc., 757 A.2d 720,
731–32 (Del. Ch. 1999) (“If a complaint merely alleges that the directors were grossly
negligent in performing their duties in selling the corporation, without some factual basis
to suspect their motivations, any subsequent finding of liability will, necessarily, depend
on finding breaches of the duty of care, not loyalty or good faith.”).
160
      Am. Compl. ¶ 39.
161
    See, e.g., Griffin Corp. Servs., LLC v. Jacobs, 2005 WL 2000775, at *6 (Del. Ch.
Aug. 11, 2005) (considering allegations made only on “information and belief,” and
finding that “[s]uch a bald statement, without further factual allegations to support it, is
merely conclusory and need not be accepted as true”); Neurvana Med., LLC v. Balt USA,
LLC, 2020 WL 949917 (Del. Ch. Feb. 27, 2020) (holding a claim for breach of
nondisparagement clause made merely “[u]pon information and belief” was unsupported
by well-pleaded facts) (citation omitted); Encite LLC v. Soni, 2008 WL 2973015, at *11
(Del. Ch. Aug. 1, 2008) (finding allegations “on information and belief” conclusory and
insufficient to support a claim of civil conspiracy).
162
      Am. Compl. ¶ 84.

                                             43
2014 (the “2014 409A Valuation”).163 Notably absent from the Amended Complaint

are any factual allegations regarding what either Zaitsev or Basil did to cause the

Company to submit the 2014 409A Valuation to the IRS, or what damages the

Company or Members incurred as a result of that submission. According to

Plaintiffs, Defendants “deliberately manipulated 409A valuations of the Company

Units and options to avoid paying taxes for employee compensation when issuing

LLC Unit options.”164 Yet, the Amended Complaint does not plead any facts to

support the conclusory allegation that Defendants knew the valuation contained false

information, let alone any facts regarding how Defendants deliberately manipulated

the valuation for a nefarious purpose.

         As best I can discern, Plaintiffs attempt to support an inference of wrongdoing

by sewing together a series of seemingly unrelated valuation “facts.” First, Plaintiffs

allege that the Units and Unit options “were valued at $0.001 at the inception of the

LLC,” but the same securities were valued at $0.00 in the 2014 409A Valuation.165

Plaintiffs next allege that valuations “between $0.105 and $0.191 per Unit and Unit

option were created in the time frame from 2015 through 2017 but ultimately would

not be certified by independent, outside professional services firms because of the

163
      Am. Compl. ¶ 53.
164
      Am. Compl. ¶ 52.
165
      Am. Compl. ¶ 53.

                                            44
Company’s myriad [of] accounting issues, especially regarding revenue

recognition.”166 Of course, the higher valuations recited by Plaintiffs would support

their allegation that the 2014 409A Valuation was intentionally deceptive only to the

extent these other valuations covered the same time period as the 2014 409A

Valuation. Based on the facts pled in the Amended Complaint, however, that

connection cannot reasonably be drawn because it appears the higher valuations

were created sometime between 2015 and 2017, and it is not clear from Plaintiffs’

pleading what time periods are addressed by these valuations. The fact that the

Company’s Units and Unit options increased in value after the 2014 409A Valuation

was prepared does not support an inference that the 2014 409A Valuation was

somehow knowingly manipulated. For that reason alone, the Valuation Claims fail

as a matter of law.

         Even if the Amended Complaint had adequately pled that Defendants

deliberately manipulated the 2014 409A Valuation, Plaintiffs have failed to allege

how this conduct caused any harm. According to Plaintiffs, as “a result of the

deceptive and illegal 409A valuations commissioned by the Defendants and intended

to defraud the IRS, the IRS ultimately collected approximately $90,000 in unpaid

taxes for the past issued options, based upon the knowingly incorrect $0.065

166
      Am. Compl. ¶ 54.

                                         45
valuation that was ultimately negotiated.”167     As pled by Plaintiffs, the IRS’

investigation resulted in the Company having to pay the IRS for unpaid but accrued

taxes.168 In other words, these were taxes that should have been paid by the

Company but were not; the taxes were not enhanced as a result of an inaccurate or

manipulated 409A valuation. Indeed, the Amended Complaint affirmatively pleads

that the IRS did not cause the Company to pay any fines in connection with the

unpaid employment taxes.169 There is simply no factual basis to infer causally

related harm.170

            3. The Failure to Sell the Company Claims

            According to Plaintiffs, Defendants breached their fiduciary duties

“by ignoring multiple opportunities to sell the Company at fair market value to at

least three different qualified buyers.”171 As a result of these alleged breaches of

fiduciary duty, Plaintiffs claim the Company and the Series B Unitholders missed

out on lucrative opportunities.172

167
      Am. Compl. ¶ 55.
168
      Id.
169
      Am. Compl. ¶ 51.
170
      Malpiede, 780 A.2d at 1094.
171
      Am. Compl. ¶ 90.
172
      Am. Compl. ¶ 43.

                                          46
         One of the potential acquisition opportunities allegedly involved Oracle

Corporation (“Oracle”) and occurred sometime in 2013 or 2014, but the facts pled

about the other two potential opportunities are sparse.173 As for Oracle, Plaintiffs

allege that Defendants or their agents advised Oracle that the value of the Company

was $250 million.174         When Oracle responded with a due diligence request,

Defendants allegedly caused the Company to terminate the acquisition

discussions.175 Subsequently, between 2015 and the filing of the initial complaint,

the Company was approached by two different unidentified private equity firms that

were interested in acquiring the business.176 Plaintiffs assert that both transactions

failed when “the venture capitalists refused to invest in the business because of the

incompetence of the management team.”177

         While Plaintiffs recognize that the LLC Agreement provides the Series A

Member, Zaitsev, sole voting authority with respect to any sale of the Company,

they argue they are entitled to discover whether Zaitsev withheld his voting authority

in violation of his fiduciary duty of loyalty to the Company.178 Of course, the

173
      Am. Compl. ¶ 40.
174
      Am. Compl. ¶ 41.
175
      Am. Compl. ¶¶ 41–42.
176
      Am. Compl. ¶¶ 60–61.
177
      Am. Compl. ¶ 61.
178
      PAB at 25.

                                           47
Amended Complaint is devoid of factual allegations to support Plaintiffs’ conclusory

premise that the Company missed “out on a lucrative opportunity.”179 But even if I

were to accept the conclusory allegation as fact, the best that could be said is that

Plaintiffs have pled facts sufficient to support an inference that Defendants caused

the Company to decline acquisition overtures. This is not enough to support a breach

of fiduciary duty claim, particularly given the LLC Agreement’s contractual

standard of conduct and exculpation clause, both of which require bad faith or other

disloyalty to expose a director to potential liability.180

         4. The Majority of the Claims in Count Two Are Time-Barred

         For the reasons explained above, the Distribution and the Tax Reporting

Claims are time-barred. As explained below, the Dilution Claim is time-barred as

179
      PAB 8; Am. Compl. ¶ 43.
180
    See Desimone v. Barrows, 924 A.2d 908, 933 (Del. Ch. 2007) (holding that “because
[directors] are protected by the exculpation clause, the directors can only be held liable if
they act with a state of mind that is disloyal to their obligations to the corporation.”). I note
that a board’s decision to sell or not to sell a company is typically subject to the business
judgment rule’s presumption that the directors “acted on an informed basis, in good faith
and in the honest belief that the action was taken in the best interests of the company.”
See Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984), overruled on other grounds, Brehm
v. Eisner, 746 A.2d 244 (Del. 2000); Kahn v. MSB Bancorp, Inc., 1998 WL 409355, at *3
(Del. Ch. July 16, 1998); Gantler v. Stephens, 965 A.2d 695, 706–07 (Del. Ch. 2009)
(holding that plaintiffs had pled sufficient facts to rebut the business judgment rule
presumption by well-pleading that defendant board members terminated discussions to sell
the company for self-interested reasons). Plaintiffs have pled no facts that would allow
even a pleading stage inference that the business judgment rule presumptions might be
rebutted here.

                                               48
to both Plaintiffs, and the Failure to Sell the Company Claims is time-barred as to

Fouts.

             a. The Dilution Claim Is Time-Barred

         The claims arising from the Tokutek Acquisition were known or readily

knowable as of the time the terms of that transaction were publicly announced in

April 2015.181 Yet, according to the Amended Complaint, Plaintiffs did not take any

actions to rectify the alleged harm they (or the Company) suffered as a result of the

Tokutek Acquisition until Erisman instructed his counsel to serve the Company with

the Demand in June 2019.182 This court has observed that “a [complaint] fil[ed] after

the analogous statute of limitations has run cannot be justified except in the ‘rare’

and ‘unusual’ circumstance that a recognized tolling doctrine excuses the late

filing.”183 Here, there are no rare or unusual circumstances that would excuse the

late filing. Accordingly, in addition to being deficient as a matter of pleading, the

Dilution Claim is also time-barred.

         b. The Failure to Sell the Company Claims Are Time-Barred as to
            Fouts

         The discussions with Oracle occurred at least six years before the initial

complaint was filed. Fouts was the Company’s CFO from February 2012 through

181
      Am. Compl. ¶¶ 31, 32.
182
      Am. Compl. ¶ 71.
183
      In re Sirius XM S’holder Litig., 2013 WL 5411268, at *4 (Del. Ch. Sept. 27, 2013).

                                              49
June 2014, and the Oracle discussions occurred sometime in 2013 or 2014.

Accordingly, it is likely that Fouts was the Company’s Chief Financial officer during

the time the Company was discussing potential transactions with Oracle. Potential

acquisitions are certainly the type of information that Fouts would have known or

would have had reason to know in real-time.184 Fouts’ attempt to bring the Failure

to Sell the Company Claims outside the statute of limitations, therefore, cannot be

countenanced.185

                                 III.   CONCLUSION

       For the foregoing reasons, Defendants’ motion to dismiss must be

GRANTED.

       IT IS SO ORDERED.

184
    See Dean Witter, 1998 WL 442456, at *7 (“Inquiry notice does not require actual
discovery of the reason for the injury. Nor does it require plaintiffs’ awareness of all of
the aspects of the alleged wrongful conduct. Rather, the statute of limitations begins to run
when plaintiffs should have discovered the general fraudulent scheme”).
185
   See Tyson Foods, 919 A.2d at 585 (holding that “no theory will toll the statute beyond
the point where the plaintiff was objectively aware, or should have been aware, of facts
giving rise to the wrong.”).

                                             50