Court Opinion

ID: 4691811
Source: CourtListenerOpinion
Date Created: 2021-06-01 18:03:56.454328+00
Date Added: 2024-06-11T08:05:11.814707
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

 IN RE TILRAY, INC.                         Consolidated
 REORGANIZATION LITIGATION                  C.A. No. 2020-0137-KSJM

                            MEMORANDUM OPINION

                           Date Submitted: February 5, 2021
                             Date Decided: June 1, 2021

Peter B. Andrews, Craig J. Springer, Jessica Zeldin, David M. Sborz, ANDREWS &
SPRINGER LLC, Wilmington, DE; Gregory V. Varallo, BERNSTEIN LITOWITZ
BERGER & GROSSMANN LLP, Wilmington, DE; Jeffrey M. Gorris, Christopher M.
Foulds, FRIEDLANDER & GORRIS, P.A., Wilmington, DE; Jeremy S. Friedman, David
F.E. Tejtel, FRIEDMAN OSTER & TEJTEL PLLC, Bedford Hills, NY; Mark Lebovitch,
David Wales, Andrew Blumberg, BERNSTEIN LITOWITZ BERGER & GROSSMAN
LLP, New York, NY; D. Seamus Kaskela, KASKELA LAW LLC, Newtown Square, PA;
Counsel for Plaintiffs.

Michael A. Pittenger, Matthew F. Davis, David A. Seal, Caneel Radinson-Blasucci,
POTTER ANDERSON & CORROON LLP, Wilmington, DE; Counsel for Nominal
Defendant Tilray, Inc.

Michael P. Kelly, Daniel M. Silver, Sarah E. Delia, MCCARTER & ENGLISH, LLP,
Wilmington, DE; Counsel for Defendants Brendan Kennedy and Privateer Evolution, LLC.

Carl N. Kunz, III, K. Tyler O’Connell, Albert J. Carroll, MORRIS JAMES LLP,
Wilmington, DE; Ronald L. Berenstain, Sean C. Knowles, PERKINS COIE LLP, Seattle,
WA; Counsel for Defendants Christian Groh and Michael Blue.

Susan W. Waesco, John P. DiTomo, Daniel T. Menken, MORRIS, NICHOLS, ARSHT &
TUNNELL LLP, Wilmington, DE; Counsel for Defendant Maryscott Greenwood.

Blake Rohrbacher, Matthew W. Murphy, Elizabeth A. Heise, RICHARDS, LAYTON &
FINGER, P.A., Wilmington, DE; Counsel for Defendant Michael Auerbach.

McCORMICK, C.
         Bucking the advice of Keep Your Day Job, to “keep [your day job] on ice while

you’re lining up your long shot,” 1 three friends quit their jobs nearly a decade ago to

capitalize on the expansion of the legal cannabis industry.           They created Privateer

Holdings, Inc. (“Privateer”) to facilitate their investments. Through Privateer, they formed

Tilray, Inc. (“Tilray” or the “Company”), a cannabis research, cultivation, processing, and

distribution company.

         The long shot paid off, and the founders successfully took Tilray public in July 2018,

which caused the value of Privateer’s investment to skyrocket. This, in turn, prompted the

founders to explore ways to reorganize the business to avoid federal tax consequences

resulting from capital gains. The founders settled on a downstream merger in which the

Company cancelled Privateer’s Tilray stock and then issued Tilray stock to Privateer’s

stockholders.

         The plaintiffs are Tilray stockholders. They claim that Privateer and the founders

controlled Tilray and used that control to obtain tax benefits through the reorganization

without adequately compensating the Company and its minority stockholders. They assert

derivative claims against Privateer, the founders, and certain Tilray directors. To meet the

demand requirement, they contend that the majority of Tilray’s board of directors were

interested in or lacked independence as to the challenged reorganization, such that demand

was excused as futile.

1
    R. Hunter, J. Garcia, Keep Your Day Job (1982).
        The defendants moved to dismiss the complaint pursuant to Court of Chancery Rule

12(b)(6), arguing that the complaint fails to adequately allege that the founders comprised

a control group or that the reorganization was a self-dealing transaction subject to the entire

fairness standard. They have also moved to dismiss the complaint pursuant to Court of

Chancery Rule 23.1, arguing that the complaint fails to allege with particularity that pre-

suit demand should be excused as futile. This decision denies both motions, holding that

the complaint adequately alleges the existence of a control group, that the reorganization

was a conflicted transaction, and that demand is excused.

        This decision also denies a motion to dismiss for lack of personal jurisdiction raised

by two of the founders. Because it is reasonably conceivable that the founders were

members of a control group with concomitant fiduciary obligations, the plaintiffs allege a

prima facie basis for exercising personal jurisdiction under the conspiracy theory.

I.      FACTUAL BACKGROUND

        The facts are drawn from the First Amended Consolidated Verified Stockholder

Class Action and Derivative Complaint (the “Amended Complaint”) 2 and documents it

incorporates by reference, including public filings and documents obtained in response to

the plaintiffs’ 8 Del. C. § 220 demands.

        A.     Kennedy, Groh, and Blue Form Privateer and Its Subsidiary, Tilray.

        While working as an investment banker in 2010, Defendant Brendan Kennedy came

to believe that the legalization of marijuana in the U.S. was inevitable and “realized that he

2
    See C.A. No. 2020-0137-KSJM, Docket (“Dkt.”) 73 (“Am. Compl.”).

                                              2
could make more money selling pot than as a banker.” 3 He voiced his hopes to a friend

and coworker, Defendant Christian Groh, and the two decided to quit their investment

banking jobs to pursue this goal. Kennedy also brought the idea to his former business

school classmate, Defendant Michael Blue. In December 2010, Kennedy, Groh, and Blue

(the “Founders”) created Privateer, a private equity firm focused on investments in the

cannabis industry.

       The Founders held over 70% of Privateer’s voting power, with Kennedy, Groh, and

Blue holding 41%, 16%, and 16% respectively. Kennedy was Privateer’s CEO and later

became the Executive Chair of Privateer’s Board of Directors.

       Through Privateer, the Founders first pooled their assets and raised capital to acquire

Leafly Holdings, Inc. (“Leafly”), a marijuana dispensary review site that published ratings

on cannabis types (think “Yelp” for cannabis strains). 4

       Privateer’s acquisition of Leafly put it on the Canadian government’s radar—in a

good way. At the time, the Canadian government was in the process of professionalizing

a medical marijuana processing industry and it approached the Founders with investment

opportunities. Rather than invest in others’ processing operations, the Founders again

3
  Id. ¶ 44 (quoting Chris Kornelis, A CEO Tries to Navigate the Legal Cannabis Sector’s
Bad Trip, Wall St. J. (Mar. 6, 2020, 1:08 P.M.), https://www.wsj.com/articles/a-ceo-tries-
to-navigate-the-legal-cannabis-sectors-bad-trip-11583518019).
4
  See Jen Wieczner, The Marijuana Billionaire Who Doesn’t Smoke Weed, Fortune (Jan.
16, 2019, 6:30 A.M.), https://fortune.com/longform/marijuana-weed-cannabis-tilray-
stock/.

                                              3
decided to start their own. They formed Tilray in 2013 as a subsidiary of Privateer to

conduct cannabis research, cultivation, processing, and distribution, primarily in Canada. 5

         To grow cannabis, the Founders needed seeds. Using the Leafly data, the founders

identified desirable cannabis strains in Canada. Acquiring the seeds posed unique risks.

As Kennedy once described to Fortune magazine, the Founders “would go and meet people

at” a chain coffee shop, “follow them down a road,” “[t]hen . . . ditch a car” and enter

“rooms with a lot of cash and weapons,” where “a lot of people suspected that [the

Founders] were federal narcotics agents.” 6

         B.     The Founders Take Tilray Public.

         Privateer’s initial investment in Tilray was approximately $31.7 million. At first,

the Founders struggled to obtain additional funding given public perception of the cannabis

industry and the uncertain future of its legality in the U.S. By mid-2018, however, Tilray

was on its way to becoming the first cannabis company to complete a public offering on

an American stock exchange.

         On July 19, 2018, Privateer took Tilray public through an initial public offering (the

“IPO”) at $17 per share. At the time, Privateer held 75 million shares of Tilray stock.

Based on their initial investment of $31.7 million, Privateer’s Tilray holdings were valued

at approximately $0.42 per share. Tilray’s IPO valuation of $17 per share brought the

5
 The Founders initially incorporated as Tilray Canada, Ltd., a predecessor to Tilray. See
Am. Compl. ¶ 48.
6
    Id. ¶ 47 (quoting Wieczner, supra note 4).

                                                 4
value of Privateer’s 75 million shares up to $1.275 billion. Privateer had realized a gain of

approximately forty times its initial investment.

         At the time of the IPO, Tilray had two classes of stock issued and outstanding:

Class 1 common stock, entitling its holders to ten votes per share, and Class 2 common

stock, entitling its holders to one vote per share. Through the IPO, Tilray offered 9 million

shares of Class 2 common stock to the public. Privateer’s pre-IPO Tilray shares converted

into approximately 16.67 million shares of Class 1 common stock and 58.3 million shares

of Class 2 common stock. Post-IPO, Privateer held a 75% economic interest in Tilray and

controlled over 90% of Tilray’s voting power.

         C.    The Founders Propose a Reorganization of Tilray and Privateer.

         The IPO made Privateer’s stockholders “Tillionaires.” 7 Yet the Founders were

unable to access this wealth without incurring significant tax liabilities. And Privateer’s

controlling stake in Tilray resulted in an overhang effect exerting downward pressure on

the trading price of Tilray’s stock.

         Although the Founders desired liquidity, they feared that selling large blocks of

Privateer’s holdings would cause Tilray’s stock to plummet. To temporarily eliminate that

threat in connection with the IPO, Privateer executed a lock-up agreement in which it

agreed not to sell its Tilray stock for 180 days. That period was set to expire on

January 15, 2019.

7
    See Wieczner, supra note 4.

                                             5
       In early January 2019, the Founders explored different ways to obtain greater

liquidity and eliminate the overhang of Privateer’s control stake while avoiding the

potential tax consequences associated with dissolving Privateer. Privateer sought advice

from its tax advisor Andersen Tax (“Andersen”). The Founders considered a spin-off of

Tilray but determined that it would result in significant tax exposure in excess of $2 billion.

       As an alternative, Andersen recommended a two-step reorganization, which this

decision refers to as the “Reorganization.” The first step involved a spin-off of Privateer’s

portfolio companies. At the time, Privateer owned four portfolio companies: Leafly,

Tilray, Docklight Brands, Inc. (“Docklight”), and Left Coast Ventures, Inc. (“LCV”).

Andersen recommended that Privateer spin-off the three non-Tilray portfolio companies,

leaving Tilray stock as Privateer’s only asset.

       The second step involved a downstream merger, in which the Company would

cancel Privateer’s Tilray stock and issue Tilray stock to Privateer’s stockholders. Under

this approach, the IRS would treat the share cancellation and subsequent stock issuance as

a tax-free reorganization, allowing the Founders to avoid the tax consequences of a sale or

distribution of its Tilray stock while maintaining control over the Company.

       Privateer proposed the Reorganization to Tilray in a January 9, 2019 non-binding

letter of intent.

       On January 11, 2019, Privateer announced that it did not intend to sell its Tilray

shares during the first half of 2019 but left open the possibility that Privateer would begin

sales after that time.

                                              6
         After multiple discussions with Tilray regarding the Reorganization, Privateer sent

a revised draft of the letter of intent to Tilray on January 14, 2019 (the “Draft Letter of

Intent”).

         The Draft Letter of Intent “outline[d] the preliminary understanding” between

Privateer and Tilray regarding Privateer’s 75 million shares of Tilray Class 1 stock. 8 It

further identified benefits of the Reorganization to Tilray, including an extended lock-up

agreement preventing Privateer from unloading Tilray stock in the public market.

         D.     Tilray Forms a Special Committee.

         The Tilray Board of Directors (the “Board”) met on January 19, 2019, to discuss the

Draft Letter of Intent. At the time, the five-person Board comprised Kennedy, Defendants

Michael Auerbach and Maryscott Greenwood (with Auerbach and Kennedy, the “Director

Defendants”), and non-parties Rebekah Dopp and Christine St. Clare.

         During the January 19 meeting, the Board discussed forming a special committee

and hiring advisors. The independent directors of the Board decided at the meeting to hire

Paul Hastings LLP as their legal advisor and executed the engagement letter on

January 30, 2019. 9

         The Chair of Paul Hastings’ New York office, Barry Brooks, had previously

represented Tilray in connection with various joint ventures and had previously represented

Kennedy in connection with his employment agreement. Brooks was also a Privateer

8
    Am. Compl. ¶ 85 (alteration in original).
9
 Prior to its retention by Tilray, Paul Hastings had engaged in conversations with Cooley
LLP, the Founders’ outside counsel. Id. ¶ 94.

                                                7
stockholder.     Due to these connections, Paul Hastings walled-off Brooks from the

engagement. Luke Iovine, another partner in Paul Hasting’s New York office, would

instead serve as Tilray’s counsel.

          Although Tilray had not yet formed a special committee by February 14, 2019, the

Founders commenced the first step of the Reorganization. That day, Privateer spun off

Leafly, Docklight, and LCV by making in-kind taxable distributions to its stockholders,

completing the first step in the Reorganization. The Founders agreed that Groh and Blue

would take the lead managing these entities, while Kennedy would continue to take the

lead managing Tilray.

          The next day, the Board created a special committee to address conflicts arising

from Board members with ties to Privateer (the “Special Committee”). Privateer and Tilray

recognized the presence of a controller on both sides of the Reorganization and the

resulting conflict it presented. One copy of the Draft Letter of Intent referenced in the

Amended Complaint bears a note—with no author attributed—stating that the “biggest

concern relates to board independence” and expressing the need to “ensure the board comes

to the conclusion that this is in the best interest of Tilray on its own.” 10 Auerbach held

Privateer stock and served on the Privateer board of directors, and so he was excluded from

the committee along with Kennedy.

10
     Id. ¶ 90.

                                              8
       The Board selected Greenwood, Dopp, and St. Clare to serve on the Special

Committee and named Greenwood as its Chair. Dopp and St. Clare were indisputably

independent with respect to the Founders, Privateer, and the Reorganization.

       Greenwood had long-standing ties to Kennedy and Privateer. Greenwood is a

cannabis lobbyist and has long-standing business relationships with Kennedy, Privateer,

and Tilray. As the executive and eventual CEO of the Canadian American Business

Council (the “CABC”), Greenwood advocated to deregulate cannabis on behalf of

Privateer, hosted Kennedy as a guest of honor at the CABC annual dinner, and introduced

Kennedy to U.S. state legislators at a national event. Greenwood worked for the Founders

as a lobbyist since 2015. Greenwood was head of Dentons’ U.S. Public Policy practice in

late 2015, when Privateer hired Dentons to lobby on its behalf regarding the federal

regulation of cannabis for medical use. That engagement continued until 2017. Kennedy

recruited her to join the Tilray Board in 2018.

       The Special Committee met to select financial and tax advisors on March 6, 2019. 11

During that meeting, it selected Imperial Capital, LLC (“Imperial”) as its financial advisor

and Crowe LLP as its tax advisor. It did not formally retain Imperial and Crowe until

March 27 and June 21, 2019, respectively.

11
  See id. ¶ 101. The Amended Complaint states that this meeting occurred on March 6,
2020. Id. Given the timing of the Reorganization and the contextual chronology of the
narrative in the Amended Complaint, this decision assumes that the year “2020” was a typo
and infers that the date of this Special Committee meeting was March 6, 2019.

                                             9
       E.     The Letter of Intent

       The Special Committee and Privateer negotiated toward a final letter of intent

through the first half of 2019. The Special Committee, however, did not prepare minutes

of these meetings, such that it is unclear what the Special Committee did and when.

       There was a flurry of Special Committee activity in March 2019. Meetings took

place on March 1 and March 12, though no records are available detailing the participants

of or the topics covered by those conversations. Representatives from Privateer gave a

presentation to Tilray’s Board on March 13, 2019, but there are no minutes of that meeting.

The following day, the Board met to discuss Privateer’s Draft Letter of Intent. Paul

Hastings did not attend the meeting.

       Also during that March 14 meeting, the Board discussed and approved a services

agreement with Ten Eleven Management LLC (“Ten Eleven”), a company Groh and Blue

formed to provide administrative and corporate consulting services to Tilray for $25,000

per month.

       The Special Committee met with Paul Hastings on March 28, 2019, to discuss its

advisors’ fees and was then inactive until at least late May 2019. On May 20, 2019, Tilray,

Privateer, and their respective outside counsel, Paul Hastings and Cooley, met to discuss

the structure of the downstream merger. The Special Committee members did not attend,

and there are no minutes of the meeting.

       On May 21, 2019, Kennedy and Greenwood met without advisors or the other

Special Committee members to discuss the status of negotiations. There are no minutes or

other corporate documents reflecting discussions at that meeting.

                                            10
       On June 2, 2019, Kennedy again met with Greenwood to discuss the transaction and

its terms, this time with counsel for Tilray and Privateer present.

       Around this time, lobbyist group Crestview Strategy (“Crestview”) hired

Greenwood as a Managing Director to lead its U.S. practice. The Amended Complaint

alleges that Crestview was Greenwood’s primary source of income and Tilray and

Privateer were two of Crestview’s most important clients. Ten of Crestview’s forty-one

employees have lobbied on behalf of Tilray at some point since 2016, and five Crestview

employees have done work for Privateer. Crestview has highlighted its relationship with

Tilray in multiple social media posts, and news articles have publicly identified Tilray as

one of Crestview’s clients.

       In June 2019, the Special Committee demanded that the Reorganization be

conditioned on approval by a majority of Tilray’s minority stockholders. Paul Hastings

conveyed this demand in a June 5, 2019 redline to the Draft Letter of Intent by adding a

requirement that a majority-of-the-minority of Tilray’s stockholders consent to the

Reorganization. That day, Privateer rejected the majority-of-the-minority requirement.

None of the minutes of the Special Committee meetings reflect any discussions of the

majority-of-the-minority approval condition.

       Before the Special Committee received a fairness opinion from either of its financial

advisors, Greenwood signed a final, non-binding letter of intent on June 8, 2019 (the

“Letter of Intent”).

                                             11
       The Letter of Intent memorialized three core aspects of the parties’ agreement.

       •      A downstream merger and stock cancellation. The parties
              agreed that Privateer would merge into a wholly-owned
              subsidiary of Tilray, Privateer’s Tilray shares would be
              cancelled, and Tilray would issue to Privateer stockholders
              newly registered shares of Tilray common stock in an
              aggregate amount equal to the number of Tilray common
              shares held by Privateer. Tilray would allocate the newly
              issued shares to Privateer stockholders in accordance with the
              Privateer certificate of incorporation in effect prior to closing.

       •      Charter amendments intended to remove exceptions to the
              transfer restrictions and facilitate the elimination of “high
              vote” Class 1 stock. The parties agreed that Tilray’s
              certificate of incorporation would be amended to remove a
              provision favorable to the Founders, which allowed them to
              transfer their Class 1 stock to one another without triggering
              automatic conversion to Class 2 stock. This decision refers to
              the original exemption as the “transfer restriction exemptions”
              and the charter amendments to eliminate them as the “transfer
              restriction exemption amendments.”

       •      A new lock-up agreement. The parties agreed that shares of
              Tilray stock distributed to Privateer stockholders in the
              Reorganization would be subject to a lock-up allowing for the
              sale of such shares only under certain circumstances over a
              two-year period. Privateer also agreed to a lock-up of its Tilray
              shares during the negotiating period for the definitive merger
              agreement.

       Tilray publicly announced the Letter of Intent on June 10, 2019. Kennedy posted a

tweet that day touting the tax-efficient nature of the Reorganization and the accompanying

lock-up agreement that would “provide for an orderly release of Privateer’s stake in

Tilray.” 12

12
  Id. ¶ 121 (quoting Brendan Kennedy (@BrendanTKennedy), Twitter (Jun. 10, 2019,
10:22 A.M.), https://twitter.com/BrendanTKennedy/status/1138089006619451397).

                                             12
       F.     The Merger Agreement

       Cooley sent Paul Hastings an initial draft of the merger agreement on June 17, 2019,

and the parties and their advisors met around this time to discuss the draft and the timing

of the transaction. The parties exchanged nearly twenty drafts of the merger agreement

before the Special Committee approved it on September 9, 2019.

       During negotiations, Privateer requested a termination right relating to action by

Privateer stockholders. As discussed above, Tilray intended to allocate the newly issued

shares to Privateer stockholders in accordance with the Privateer certificate of

incorporation in effect prior to closing. Privateer’s certificate of incorporation prior to

closing, however, involved a dual-class structure that granted the Founders voting control

over Privateer but required that distributions be made based on economic interests rather

than voting rights. To extend the Founders’ collective voting control over Tilray, the

Founders proposed an amendment to Privateer’s certificate of incorporation that would

allocate Tilray’s Class 1 stock only to the Founders instead of pari passu to all Privateer

investors. If Privateer’s stockholders did not approve the Privateer charter amendment, the

Founders wanted to be able to terminate the agreement.

       The Special Committee agreed to include such a termination right if Privateer

agreed to a six-month lock-up following the occurrence of such termination.

       The Special Committee also demanded an escrow arrangement through which

Privateer would indemnify Tilray for any liability resulting from the Reorganization. The

escrow would contain some of the Tilray stock that otherwise would have been distributed

to Privateer stockholders in the Reorganization. Paul Hastings, on behalf of the Special

                                            13
Committee, proposed an escrow fund comprising both Class 1 stock and Class 2 stock.

According to Paul Hastings, Tilray would not “approve the transaction if the escrow

arrangements would inadvertently or intentionally increase the voting power” of the

Founders by holding only Class 2 stock in escrow while distributing the high vote Class 1

stock to the Founders. 13

           When Paul Hastings proposed the six-month lock-up condition and escrow

arrangement, Kennedy threatened to terminate negotiations.         In a July 12 email to

Greenwood, Kennedy stated that Groh and Blue “won’t budge” and were “planning to send

a notice of termination on Monday and sell/dividend the first batch of shares as soon as

Friday.” 14 He noted his disappointment with that outcome, which he viewed as “a bad

result for Tilray and for [himself].” 15

           Negotiations continued, and the Special Committee secured a four-and-a-half-

month lock-up condition and an expense reimbursement of up to $3 million in the event of

termination. The Special Committee also approved of an escrow fund comprising only

Class 2 stock.

           Kennedy called a Board meeting on July 26, 2019, to discuss the Reorganization,

though Paul Hastings representatives did not attend and there are no minutes of the

meeting. On July 27, the Special Committee received its first oral fairness opinion from

Imperial. The Special Committee approved the Merger Agreement that day.

13
     Id. ¶ 129.
14
     Dkt. 88 (“Seal Decl.”) Ex. 11 at 1.
15
     Id.

                                              14
         In the weeks following the Special Committee’s approval, the Founders

communicated some additional demands to the Special Committee through the Company’s

CFO. Specifically, Privateer wanted Tilray to conduct an “at the market [public] offering”

and use the cash proceeds to finance a portion of the Reorganization. 16 The Special

Committee brought Privateer’s demand to the Board, which then incorporated the

possibility of an “at the market” offering into the Reorganization’s terms. 17

         The Board approved and executed the Agreement and Plan of Merger and

Reorganization (the “Merger Agreement”) at a September 9, 2019 Board meeting. 18 The

Merger Agreement incorporates the provisions contemplated in the Letter of Intent and the

additional provisions negotiated by the parties.

         The minutes from the September 9 Board meeting highlight four primary benefits

of the merger to Tilray:

         •     Elimination of the stock overhang issues;

         •     The elimination of the transfer restriction exemptions;

         •     The lock-up agreements; and

         •     The escrow and indemnification provisions. 19

16
     Am. Compl. ¶¶ 138–39.
17
   Id.; see id. ¶ 150 (“Tilray may apply cash from an [at the market offering] as
consideration for up to 20% of the Privateer holders’ Class 2 Stock.”).
18
  Id. ¶ 143. In the days leading up to the Board’s approval, the Special Committee received
both a tax diligence presentation from Crowe and a final written fairness opinion from
Imperial. See id. ¶¶ 140–43.
19
  Seal Decl. Ex. 13 at 1–2 (formatting altered). Reference to the above-quoted “benefits
of the [Reorganization] to Tilray” appear verbatim in the minutes from the Special
Committee’s July 27, 2019 meeting. Compare id. with Seal Decl. Ex. 24 at 1–2.

                                             15
       Blue signed the Merger Agreement on Privateer’s behalf and all three Founders

signed agreements (a) assuming Privateer’s obligations under a prior agreement with non-

party Marley Green, LLC (the “Guarantee Agreement”); (b) restricting their ability to sell

their Tilray stock for two years after the Reorganization (the “Lock-Up Agreement”); and

(c) promising to vote their respective Privateer shares in favor of the Reorganization (the

“Support Agreement”). 20

       On November 12, 2019, Tilray filed a Form S-4 disclosing the terms of the Merger

Agreement. 21 The S-4 noticed a special meeting of Tilray stockholders to be held on

December 6, 2019, to vote on the Merger Agreement and the transfer restriction exemption

amendment.

       Tilray’s stockholders approved the Merger Agreement and transfer restriction

exemption amendment on December 6, 2019, and the Reorganization closed on

December 12, 2019. Privateer merged into Privateer Evolution, LLC, a subsidiary formed

by Tilray for the purpose of acquiring Privateer in the Reorganization.

20
  Am. Compl. ¶ 154; see also Seal Decl. Ex. 14 (attaching the form of Lock-Up
Agreement); Dkt. 108 (“Zeldin Decl.”) Ex. 5 (attaching the form of Support Agreement).
21
   Seal Decl. Ex. 1 (Tilray Nov. 11, 2019 Form S-4). Plaintiffs contend that the Form S-4
failed to include the prior relationships and engagements that they argue rendered
Greenwood and Paul Hastings conflicted, as well as information regarding Imperial’s
fairness opinion, which Plaintiffs contend failed to properly analyze the “give” and “get”
for Tilray in the Reorganization. See Am. Compl. ¶¶ 155–57.

                                            16
         G.     This Litigation

         Plaintiffs each own shares of Tilray Class 2 stock. 22 Each filed claims challenging

the Reorganization. The court consolidated the actions on March 20, 2020, and Plaintiffs

filed their Amended Complaint on July 17, 2020, asserting two Counts.

         In Count I, Plaintiffs assert a direct claim against Privateer and the Founders for

breaching their fiduciary duties as controllers. 23 Plaintiffs claim that the Founders, working

as a control group with Privateer, breached their fiduciary duties in two ways.

         First, Plaintiffs claim that the Founders used the Reorganization to perpetuate their

control over Tilray. This decision refers to this theory as the “control-based theory.”

         Second, Plaintiffs claim that the Founders used the Reorganization to extract non-

ratable tax benefits from Tilray and its minority stockholders.

         In Count II, Plaintiffs assert a derivative claim that Kennedy, Auerbach, and

Greenwood breached their fiduciary duties as directors. 24

         Privateer and the Founders moved to dismiss Count I pursuant to Court of Chancery

Rule 12(b)(6). Tilray and the Director Defendants moved to dismiss Count II pursuant to

Court of Chancery Rule 23.1, arguing that demand was not made and is not excused as

22
  The plaintiffs are Deborah R. Braun, Nader Noorian, Catherine Bouvier, James Hawkins,
and Stephanie Hawkins (collectively, “Plaintiffs”). Plaintiffs Braun and Noorian filed a
complaint on February 27, 2020. Plaintiffs Catherine Bouvier, James Hawkins, and
Stephanie Hawkins filed a similar action on March 2, 2020. See C.A. No. 2020-0154-
KSJM, Dkt. 1.
23
     See Am. Compl. ¶¶ 187–92.
24
     See id. ¶¶ 193–99.

                                              17
futile. 25 Groh and Blue separately moved to dismiss themselves as defendants pursuant to

Court of Chancery Rules 12(b)(2) and 12(b)(5) for lack of personal jurisdiction and

insufficient service of process. 26 The parties fully briefed the motions and the court heard

oral argument on February 5, 2021. 27

         H.      Dual Class Elimination

         Tilray’s amended charter contains another new provision for automatic conversion

of all Tilray’s Class 1 stock into Class 2 stock at

                 5:00 p.m . . . on the first Trading Day falling after the date on
                 which, at all times on such date, the outstanding shares of Class
                 1 [stock] represent less than ten percent (10%) of the aggregate
                 number of shares of the then outstanding Class 1 [stock] and
                 Class 2 [stock]. 28

         Neither the Plaintiffs nor Tilray’s November 11, 2019 Form S-4 discuss the

automatic conversion provision, and it is unclear when it was negotiated. This amendment

provided an otherwise nonexistent runway for the eventual and automatic elimination of

Tilray’s Class 1 stock.

25
  Dkt. 77; see Dkt. 88 (“Tilray Opening Br.”). Defendants have all joined in this motion.
See Dkts. 79–82 (joining in Tilray’s motion to dismiss pursuant to Rule 23.1).
26
     Dkt. 78; see Dkt. 89 (“Groh & Blue Opening Br.”) at 16–35.
27
  See Tilray Opening Br.; Groh & Blue Opening Br.; Dkt. 90 (“Auerbach Opening Br.”);
Dkt. 92 (“Greenwood Opening Br.”); Dkt. 93 (“Kennedy & Privateer Opening Br.”);
Dkt. 108 (“Pls.’ Answering Br.”); Dkt. 114 (“Auerbach Reply Br.”); Dkt. 115 (“Kennedy
& Privateer Reply. Br.”); Dkt. 116 (“Groh & Blue Reply Br.”); Dkt. 117 (“Greenwood
Reply Br.”); Dkt. 118 (“Tilray Reply. Br.”); Dkt. 137 (“Oral Arg. Tr.”).
28
     Zeldin Decl. Ex. 3 Art. IV ¶ D(1)(f); id. Art. IV ¶ D(5)(a)(i).

                                                18
         By operation of the automatic conversion provision, on September 30, 2020,

Tilray’s Class 1 stock converted to Class 2 stock. 29 As a result, the Founders’ voting power

now equals their economic stake in Tilray. 30

         Plaintiffs premised their control-based theory of Count I on the notion that the

Founders sought to perpetuate their control over Tilray’s super-voting Class 1 stock after

the Reorganization. Plaintiffs concede that the automatic conversion mooted their Count I

control-based theory. 31

II.      LEGAL ANALYSIS

         This analysis first addresses Privateer’s and the Founders’ motions to dismiss

Count I pursuant to Rule 12(b)(6). Next, it addresses the Director Defendants’ motion to

dismiss Count II pursuant to Rule 23.1. Last, it addresses Groh and Blue’s motion to

dismiss for lack of personal jurisdiction.

         A.     Motion to Dismiss Count I Pursuant to Rule 12(b)(6)

         “[T]he governing pleading standard in Delaware to survive a motion to dismiss is

reasonable ‘conceivability.’” 32 When considering a motion to dismiss under Rule 12(b)(6),

the court must “accept all well-pleaded factual allegations in the [c]omplaint as true . . . ,

29
   Dkt. 120 (“Radinson-Blasucci Decl.”) Ex. 1 at 2; see Zeldin Decl. Ex. 3 Art. IV
¶ D(1)(a)(f); id. Art. IV ¶ D(5)(a)(i).
30
     Radinson-Blasucci Decl. Ex. 1 at 2.
31
   See Oral Arg. Tr. at 15:20–16:7 (Plaintiffs’ Counsel) (“We’re not going to contend that
any direct claim is before the Court today. They have been mooted. . . . [W]e’ve only got
derivative claims at this point.”); see also Dkt. 120 (“Defs.’ Mootness Br.”) (arguing that
the elimination of Class 1 stock mooted Plaintiffs’ perpetuation-of-control claims).
32
  Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27 A.3d 531, 537 (Del.
2011).

                                             19
draw all reasonable inferences in favor of the plaintiff, and deny the motion unless the

plaintiff could not recover under any reasonably conceivable set of circumstances

susceptible of proof.” 33 The court, however, need not “accept conclusory allegations

unsupported by specific facts or . . . draw unreasonable inferences in favor of the non-

moving party.” 34

         In Count I, Plaintiffs claim that the Founders comprised a control group and that

they used their control to unfairly extract unique, non-ratable tax benefits through the

Reorganization. Defendants dispute that the Founders, individually or collectively, were

controllers with concomitant fiduciary obligations.         They further dispute that the

Reorganization was a self-dealing transaction subject to review under the entire fairness

standard.

                1.     Plaintiffs Adequately Allege That the Founders Comprised a
                       Control Group.

         Plaintiffs claim that the Founders controlled Tilray indirectly through their control

over Privateer. Defendants do not dispute that Privateer controlled Tilray. 35 Defendants

also do not dispute that if the Founders comprised a group, that group controlled Privateer

33
     Id. at 536 (citing Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002)).
34
  Price v. E.I. DuPont de Nemours & Co., Inc., 26 A.3d 162, 166 (Del. 2011) (citing
Clinton v. Enter. Rent-A-Car Co., 977 A.2d 892, 895 (Del. 2009)), overruled on other
grounds by Ramsey v. Ga. S. Univ. Advanced Dev. Ctr., 189 A.3d 1255 (Del. 2018).
35
  See Tilray Opening Br. at 6 (noting that “[b]efore the Reorganization, Privateer held . . .
90% of [Tilray’s] voting power”); see also Am. Compl. ¶ 54 (“Tilray describes itself as a
‘controlled company’ in its public filings.”).

                                              20
by virtue of the Founders’ collective 73% voting power. 36 Defendants further do not

dispute that if the Founders controlled Privateer as a group, then the Founders controlled

Tilray, and thus owed fiduciary obligations to Tilray and its minority stockholders in

connection with the Reorganization. 37 Defendants argue that the Founders did not form a

control group.

       The Delaware Supreme Court addressed the requirements for pleading a control

group in Sheldon v. Pinto Technology Ventures, L.P., adopting the “legally significant

connection” standard applied in multiple decisions of this court:

              To demonstrate that a group of stockholders exercises control
              collectively, the [Plaintiffs] must establish that they are
              connected in some legally significant way—such as by
              contract, common ownership, agreement, or other
              arrangement—to work together toward a shared goal. To show
              a legally significant connection, the [Plaintiffs] must allege that
              there was more than a mere concurrence of self-interest among
              certain stockholders. Rather, there must be some indication of
              an actual agreement, although it need not be formal or
              written. 38

36
  Before the Reorganization, Kennedy, Blue, and Groh respectively controlled 41%, 16%,
and 16% and collectively controlled 73% of Privateer’s voting power. See Am. Compl.
¶¶ 16–18.
37
   See Pls.’ Answering Br. at 27–28 (quoting In re Ezcorp Inc. Consulting Ag. Deriv. Litig.,
2016 WL 301245, at *9 (Del. Ch. Jan. 25, 2016) for the proposition that “[a]n ultimate
human controller who engages directly or indirectly in an interested transaction with a
corporation is potentially liable for breach of duty, even if other corporate actors made the
formal decision on behalf of the corporation, and even if the controller participated in the
transaction through intervening entities”)); Kennedy & Privateer Reply Br. (no discussion
of Ezcorp.); Groh & Blue Reply Br. (no discussion of Ezcorp.).
38
   Sheldon v. Pinto Tech. Ventures, L.P., 220 A.3d 245, 251–52 (Del. 2019) (cleaned up)
(first quoting In re Crimson Expl. Inc. S’holder Litig., 2014 WL 5449419, at *15 (Del. Ch.
Oct. 24, 2014) and then quoting Carr v. New Enter. Assocs., Inc., 2018 WL 1472336, at
*10 (Del. Ch. Mar. 26, 2018)); see also Dubroff v. Wren Hldgs., LLC, 2009 WL 1478697,
                                              21
           In applying this standard, the Sheldon court compared the allegations at issue to two

cases of this court that sit “on opposite ends of the [control group] spectrum” 39—van der

Fluit v. Yates 40 and In re Hansen Medical, Inc. Stockholders Litigation. 41

           In Yates, the court found that the plaintiff failed to adequately allege facts sufficient

to identify a legally significant connection between two venture capital investors and the

company’s co-founders. 42 There, the plaintiffs relied on two agreements to show the

required “legally significant” connection between the investors and the founders. 43 The

first was an investors’ rights agreement that gave information rights to early-stage

investors. That agreement was executed by all investors in the financing round, not only

the alleged control group members, and had nothing to do with the challenged

transaction. 44 The second was a tender and support agreement executed in connection with

the challenged merger. That agreement was executed by some, but not all, of the control

group members. 45 The court concluded that the two agreements failed to “evidence the

at *4–5 (Del. Ch. May 22, 2009) (dismissing a complaint where the only allegations of a
“legally significant” agreement were unsupported by the facts as pled).
39
     Sheldon, 220 A.3d at 250.
40
     2017 WL 5953514 (Del. Ch. Nov. 30, 2017).
41
     2018 WL 3025525 (Del. Ch. June 18, 2018).
42
     2017 WL 5953514, at *7.
43
     Id. at *6.
44
     Id.
45
     Id.

                                                  22
presence of a control group rather than a ‘concurrence of self-interest among certain

stockholders.’” 46

         In Hansen, by contrast, the court found that the plaintiffs adequately alleged facts

sufficient to infer the existence of a control group among stockholders who agreed to

rollover their equity in the challenged merger. 47 The plaintiffs pled “more than mere

concurrence of self-interest” by identifying an array of plus factors that allowed the court

to infer “some indication of an actual agreement.” 48 These factors included both historical

ties and transaction-specific ties.

         As historical ties, the plaintiffs identified: the group members’ twenty-one-year

history of investing in the same entities; self-designation as a “group” in historical SEC

filings unrelated to Hansen; the group members’ exclusive right to participate in the private

placement that made them Hansen’s largest stockholders; and Hansen’s historical

designation of the group members as “Principal Purchasers” in subsequent private

placements, which gave the group members special rights concerning the private

placements. 49

         As transaction-specific ties, the plaintiffs identified:   the acquiring company

identifying the group members as “Key Stockholders,” and allowing the “Key

46
     Id. (quoting Crimson, 2014 WL 5449419, at *15).
47
     2018 WL 3025525, at *8–9.
48
  Id. at *6–7; see also Sheldon, 220 A.3d at 252 (describing the analysis in Hansen
approvingly).
49
     Hansen, 2018 WL 3025525, at *7.

                                              23
Stockholders, but only the Key Stockholders, to negotiate directly with” the acquiring

company; the group members entering into contemporaneous voting agreements that

required the members to vote in favor of the transaction; and the group members entering

into stock purchase agreements requiring that they rollover their stakes in the surviving

entity. 50

           In Sheldon, the plaintiff argued that the alleged control group members entered into

a stockholder agreement that did not relate to the challenged transaction, and some (but not

all) of them had a “long and close relationship of investing together for their mutual

benefit.” 51 The high Court affirmed the trial court’s holding that the plaintiffs’ control-

group allegations were more similar to the allegations in Yates than to those in Hansen and

thus were insufficient to establish a legally significant connection. 52

           In this case, the control-group allegations as to the Founders veer far toward the

Hansen side of the spectrum and perhaps state a stronger case than the allegations in

Hansen. Plaintiffs have alleged a concurrence of interests among the Founders—the desire

to avoid massive tax liability associated with the substantial increase on Privateer’s initial

investment in Tilray. This interest is not shared by other Tilray stockholders—it is unique

to the Founders. The plaintiffs have also alleged “plus” factors in the form of historically

and currently significant ties and transaction-specific ties among the Founders.

50
     Id.
51
     Sheldon, 220 A.3d at 253.
52
     Id. at 255.

                                                24
          As historical and current ties, Plaintiffs allege that the Founders are former

classmates and long-time friends. They have been friends for a long time. They co-

founded Privateer, served together on the Privateer board, and jointly managed Tilray and

other Privateer portfolio companies as executives and through management agreements.

They jointly engaged in the “follow . . . down a road” and “ditch a car” start-up risks unique

to Tilray’s business. 53 They held each other out as “partners” 54 and defined themselves in

Privateer’s charter collectively as the “Founders.” 55 Currently, they share an office space

and “work on their various co-ventures just down the hall from each other.” 56

          As transaction-specific ties, the plaintiffs allege that Tilray’s proxy describing the

Reorganization adopts the definition of “Founders” and uses it to describe Kennedy, Groh,

and Blue’s collective influence over Tilray. 57 In connection with the Reorganization, they

jointly retained tax advisors through Privateer. 58 Kennedy and Blue led negotiations on

behalf of Privateer, referring to themselves as a voting block of Founders and objecting to

terms that would diminish their collective voting position. 59 The Founders agreed to

53
     Supra note 6 and accompanying text.
54
     Am. Compl. ¶ 19.
55
     Id. ¶¶ 55–56.
56
     Id. ¶ 22.
57
     Id. ¶¶ 58–59.
58
     See id. ¶ 68.
59
   Id. ¶ 129 (“‘Privateer was not comfortable with [the proposed escrow arrangement]
because the voting power of the founders could . . . be reduced by .2%.’ In other words,
the Control Group (which was acting, and being treated, as a group) was so fixated on
maintaining its control that it had balked at any mechanism that would reduce its collective
voting power by .2%.” (ellipses in original)); see also id. ¶ 134 (alleging that “Blue spoke
                                                25
distribute Privateer’s Class 1 stock only to themselves—and not Privateer’s other

stockholders—in the Reorganization. 60      To maintain their control of Tilray through

exclusive ownership of its Class 1 stock, the Founders both amended the distribution

provision in Privateer’s charter and rejected the Special Committee’s proposal to withhold

some Class 1 stock for the escrow fund. 61 The Founders reached an understanding that

they would divide managerial authority and responsibility over Privateer’s various

portfolio companies.

         These allegations make it reasonably conceivable that the desire to avoid massive

tax liabilities through the Reorganization was more than merely a concurrent interest, but

rather, a shared goal that the Founders agreed or arranged to work toward.

         Groh and Blue argue that Kennedy, standing alone, constituted a controller of

Privateer and Tilray, and that there is no basis to infer that Kennedy included Groh and

Blue in a control group. For this point, Groh and Blue rely primarily on two recent

decisions of this court—Almond v. Glenhill Advisors, LLC 62 and Gilbert v. Perlman. 63

         In Almond, the plaintiffs alleged that a number of minority stockholder defendants

formed a control group with a stockholder that owned 92.8% of the company’s outstanding

with Tilray’s CFO Mark Castaneda regarding certain issues relating to the merger and
stockholder lock-up agreement”).
60
     See id. ¶¶ 80, 120, 153.
61
     See id. ¶¶ 129, 151.
62
     2018 WL 3954733 (Del. Ch. Aug. 17, 2018), aff’d, 224 A.3d 200 (Del. 2019) (TABLE)
63
     2020 WL 2062285 (Del. Ch. Apr. 29, 2020).

                                             26
stock. 64 Then-Chancellor Bouchard referred to this as a “glom on” theory, explaining that

the plaintiff sought to “glom on to a preexisting controlling stockholder additional

stockholders to give them the status of a control group.” 65 In rejecting the theory, the

Chancellor explained that, “[g]iven that the controller already is the proverbial 800-pound

gorilla imbued with fiduciary obligations to guard against acting selfishly to the detriment

of the corporation’s minority stockholders, it is not readily apparent why this scenario

would arise.” 66

           Vice Chancellor Glasscock expressed a similar sentiment in Gilbert. 67 There,

Francisco Partners held a 56% ownership stake in the company, but the plaintiff alleged

that it was not the sole controller—instead, the plaintiff alleged that Francisco Partners

formed a control group with two other defendants that owned approximately 11% and

0.02% of the company. 68 The court adopted the Chancellor’s reasoning in Almond and

rejected the control group theory because it was not reasonably conceivable that the pre-

existing controller “need[ed] to include the minority holders to accomplish the goal, so that

it has ceded some material attribute of its control to achieve their assistance.” 69

64
     2018 WL 3954733, at *25.
65
     Id. at *26 (internal quotation marks omitted).
66
     Id. (internal quotation marks omitted).
67
     See 2020 WL 2062285, at *6–10.
68
     Id. at *7.
69
     Id.

                                               27
       In this case, unlike in Almond and Gilbert, it is reasonably conceivable that Kennedy

needed Groh and Blue to accomplish the Reorganization even if he independently

controlled aspects of Privateer or Tilray. Plaintiffs allege that Founders reached an

understanding that they would divide managerial authority and responsibility over

Privateer’s various portfolio companies as part of the Reorganization. It is reasonably

conceivable that Kennedy needed his long-time friends and trusted colleagues who had

been with Privateer since 2010 to keep the rapidly growing businesses afloat.

       “In the end, ‘[b]ecause the analysis for whether a control group exists is fact

intensive, it is particularly difficult to ascertain at the motion to dismiss stage.’” 70 Because

the Amended Complaint has pled facts from which it is reasonably conceivable that the

Founders had a concurrence of interest as well as historically significant and transaction-

specific ties, it is reasonably conceivable that they comprised a control group over Privateer

and, through Privateer, Tilray.

              2.      Plaintiffs Adequately Allege That the Reorganization Was a
                      Conflicted Transaction and Is Subject to Entire Fairness
                      Review.

       When a plaintiff challenges a transaction involving self-dealing by a controller or

control group, the default standard of judicial review is entire fairness with the burden of

persuasion on the defendants. 71 Defendants do not argue that the Reorganization employed

70
  Garfield v. BlackRock Mortg. Ventures, LLC, 2019 WL 7168004, at *11 (Del Ch. Dec.
20, 2019) (alteration in original) (quoting Hanson, 2018 WL 3025525, at *6).
71
  Ezcorp, 2016 WL 301245, at *11 (quoting Ams. Mining Corp. v. Theriault, 51 A.3d
1213, 1239 (Del. 2012)).

                                               28
any procedural protections to restore the business judgment standard. Rather, Defendants

seek to avoid entire fairness review by contending that the Reorganization did not involve

self-dealing. 72 Defendants rely primarily on a 1971 decision of the Delaware Supreme

Court, Sinclair Oil Corporation v. Levien. 73

           In Sinclair, Sinclair owned 97% of the stock of Sinven. 74 Sinclair needed cash and

caused Sinven to issue excessive dividends, ultimately forcing Sinven to dissolve. 75 One

of Sinven’s minority stockholders challenged the dividend payments as a breach of

fiduciary duties by Sinclair and its directors. 76 The trial court analyzed the claims under

the entire fairness standard and entered judgment against Sinclair. 77 On appeal, the high

Court reversed on the grounds that the challenged dividend payments were subject to the

business judgment standard. 78 Although the high Court agreed with the trial court’s ruling

that the entire fairness standard applies to self-dealing transactions with a controlling

stockholder, the court concluded that the dividend payments were not self-dealing

transactions. 79

72
   See Auerbach Opening Br. at 7–16; Auerbach Reply Br. at 6–11; Groh & Blue Reply Br.
at 16–19; Tilray Opening Br. at 61–62.
73
     280 A.2d 717 (Del. 1971).
74
     Id. at 719.
75
     Id.
76
     Id.
77
     Id. at 719–20.
78
     Id. at 722.
79
     Id.

                                               29
          In reaching this conclusion, the Sinclair court described the nature of “self-dealing”

transactions as follows:

                   A parent does indeed owe a fiduciary duty to its subsidiary
                   when there are parent-subsidiary dealings. However, this
                   alone will not evoke the intrinsic fairness standard. This
                   standard will be applied only when the fiduciary duty is
                   accompanied by self-dealing—the situation when a parent is
                   on both sides of a transaction with its subsidiary. Self-dealing
                   occurs when the parent, by virtue of its domination of the
                   subsidiary, causes the subsidiary to act in such a way that the
                   parent receives something from the subsidiary to the exclusion
                   of, and detriment to, the minority stockholders of the
                   subsidiary. 80

The high Court went on to conclude that although the “dividends resulted in great sums of

money being transferred from Sinven to Sinclair . . . a proportionate share of this money

was received by the minority shareholders,” and “Sinclair received nothing from Sinven to

the exclusion of its minority stockholders.” 81 As such, these dividends were not self-

dealing.

          Defendants cite Sinclair for the proposition that, when a controller causes the

controlled corporation to enter into a transaction outside of the squeeze-out merger context,

self-dealing sufficient to give rise to entire fairness review requires a benefit “to the

exclusion of, and detriment to, the minority stockholders.” 82 Defendants reduce this

holding to a three-part test, arguing that “self-dealing requires three elements: (1) an

exclusive benefit to the fiduciary (2) that causes (3) a detriment to the minority

80
     Id. at 720.
81
     Id. at 721–22.
82
     Id. at 720.

                                                 30
stockholders.” 83 Defendants concede that the Reorganization conveyed a non-ratable

benefit exclusively to Privateer and the Founders but argue that because the tax benefits

available to Privateer’s stockholders in the Reorganization were not extracted from and

were never available to Tilray’s minority stockholders, the controller caused no detriment

to the minority. 84

       Multiple decisions of this court have impliedly rejected Defendants’ argument,

finding that entire fairness presumptively applies whenever a controller extracts a non-

ratable or unique benefit. 85 This rule acknowledges that, absent procedural protections not

invoked here, “an ‘800-pound gorilla’ in the board room . . . has retributive capacities that

83
   Auerbach Opening Br. at 7 (emphasis added); see also Groh & Blue’s Reply Br. at 16
(arguing that “Sinclair . . . provides that to state a breach-of-fiduciary duty claim based on
alleged self-dealing, any benefit obtained by the parent company (or the parent’s alleged
controller) must be received ‘from the subsidiary’”).
84
   See Groh & Blue Reply Br. at 17–18; Auerbach Opening Br. at 10; Auerbach Reply Br.
at 12–14.
85
   See Ezcorp, 2016 WL 301245, at *11–15 (collecting cases standing for the proposition
that entire fairness is appropriate when evaluating bilateral transactions “between a
controller or its affiliate and the controlled entity” and not just for squeeze-out mergers);
Garfield, 2019 WL 7168004, at *7–8 (applying the entire fairness standard to claims
challenging a corporate reorganization that conferred benefits on a control group not shared
by the minority because where “a controlling stockholder . . . extracts personal benefits
from [a] transaction . . . the controller’s presence is said to exert inherent coercion on both
corporate decision-making bodies to which Delaware courts ardently defer—the board of
directors and disinterested voting stockholders” (cleaned up)); IRA Tr. FBO Bobbie Ahmed
v. Crane, 2017 WL 7053964, at *6–9 (Del. Ch. Dec. 11, 2017) (holding that the entire
fairness standard presumptively applied to claims challenging a reclassification where,
although nominally ratable, the controller stood to gain a unique benefit by perpetuating
its control); In re Digex Inc. S’holders Litig., 789 A.2d 1176, 1206–14 (Del. Ch. 2000)
(applying the entire fairness standard to claims challenging a controller’s request that its
subsidiary waive anti-takeover protections under Section 203 of the Delaware General
Corporation Law).

                                              31
lead our courts to question whether independent directors or voting shareholders can freely

exercise their judgment in approving transactions sponsored by the controller.” 86 In these

circumstances, the minority stockholders are entitled to entire fairness review.

         To the extent that Sinclair requires that a plaintiff plead the existence of a detriment

to minority stockholders to give rise to entire fairness review, the power dynamics in

negotiations between a controller and its controlled corporation render a detriment

reasonably conceivable.

         On this point, Digex is instructive. There, the minority stockholders of Digex, Inc.

sought to enjoin a merger between Digex’s parent-controller, Intermedia Communications,

Inc., and third-party WorldCom, Inc. 87 To consummate the merger, WorldCom and

Intermedia requested that Digex waive the anti-takeover protections afforded under

Section 203 of the Delaware General Corporation Law. 88 The majority of the Digex

directors, who also sat on the board of Intermedia and had “direct, personal financial

interests in the proposed transaction,” approved the waiver. 89 The plaintiffs claimed that

the interested directors breached their fiduciary obligations by approving the waiver. On

a preliminary injunction record, the court applied the entire fairness standard to the

plaintiffs’ Section 203 claim and found that the plaintiffs were likely to succeed on the

86
     In re Tesla Motors, Inc. S’holder Litig., 2020 WL 553902, at *6 (Del. Ch. Feb. 4, 2020).
87
     Digex, 789 A.2d at 1179–80.
88
     Id. at 1197–98.
89
     Id. at 1207.

                                                32
claim. 90     The court reasoned that the request for the waiver presented “Digex with

bargaining leverage against Intermedia and WorldCom,” and that the “leverage simply was

not used.” 91 The failure to use leverage on behalf of the minority, standing alone,

constituted a detriment to the minority.

         In this case, as in Digex, the Founders stood to gain a unique benefit from Tilray.

As Intermedia and WorldCom needed the Digex board’s approval of the Section 203

waiver to complete the merger, the Founders needed the Board’s approval of the

downstream merger, stock cancellation, and stock issuance to effectuate the second step of

the Reorganization and obtain the corresponding tax benefits. Based on these unique

benefits alone, Plaintiffs are entitled to entire fairness review. To the extent Sinclair

requires that Plaintiffs allege a detriment, they have done so: it is reasonably conceivable

that the Tilray board failed to exert leverage over Privateer and the Founders in the

Reorganization negotiations to the detriment of Tilray and its minority stockholders.

         B.         Motion to Dismiss Count II Pursuant to Rule 23.1

         “A cardinal precept of [Delaware law] is that directors, rather than shareholders,

manage the business and affairs of the corporation.” 92 “In a derivative suit, a stockholder

90
     Id. at 1206–14.
91
     Id. at 1214.
92
   Aronson v. Lewis, 473 A.2d 805, 811 (Del. 1984) (citing 8 Del. C. § 141(a)), overruled
on other grounds by Brehm v. Eisner, 746 A.2d 244 (Del. 2000). In Brehm, 746 A.2d at
253–54, the Delaware Supreme Court overruled seven precedents, including Aronson, to
the extent those precedents reviewed a Rule 23.1 decision by the Court of Chancery under
an abuse of discretion standard or otherwise suggested a deferential appellate review. See
id. at 253 & n.13 (overruling in part on this issue Scattered Corp. v. Chi. Stock Exch., Inc.,
701 A.2d 70, 72–73 (Del. 1997); Grimes v. Donald, 673 A.2d 1207, 1217 n.15 (Del. 1996);
                                               33
seeks to displace the board’s authority over a litigation asset and assert the corporation’s

claim.” 93 Because derivative litigation impinges on the managerial freedom of directors in

this way, “a stockholder only can pursue a cause of action belonging to the corporation if

(i) the stockholder demanded that the directors pursue the corporate claim and they

wrongfully refused to do so or (ii) demand is excused because the directors are incapable

of making an impartial decision regarding the litigation.” 94 The demand requirement is a

substantive principle under Delaware law. 95 Rule 23.1 is the “procedural embodiment of

this substantive principle.” 96

           Under Rule 23.1, stockholder plaintiffs 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.” 97 Stockholders choosing to allege demand futility must meet the

Heineman v. Datapoint Corp., 611 A.2d 950, 952 (Del. 1992); Levine v. Smith, 591 A.2d
194, 207 (Del. 1991); Grobow v. Perot, 539 A.2d 180, 186 (Del. 1988); Pogostin v. Rice,
480 A.2d 619, 624–25 (Del. 1984); and Aronson, 473 A.2d at 814). The Brehm Court held
that going forward, appellate review of a Rule 23.1 determination would be de novo and
plenary. 746 A.2d at 253-54. The seven partially overruled precedents otherwise remain
good law. This decision does not rely on any of them for the standard of appellate review.
Although the technical rules of legal citation would require noting that each was reversed
on other grounds by Brehm, this decision omits the subsequent history, which creates the
misimpression that Brehm rejected core elements of the Rule 23.1 canon.
93
  United Food and Com. Workers Union v. Zuckerberg, 2020 WL 6266162, at *7 (Del.
Ch. Oct. 26, 2020).
94
     Id.
95
     Id.; see Ct. Ch. R. 23.1(a).
96
     Rales v. Blasband, 634 A.2d 927, 932 (Del. 1993).
97
     Ct. Ch. R. 23.1(a).

                                                34
“heightened pleading requirements,” 98 alleging “particularized factual statements that are

essential to the claim.” 99 “Plaintiffs are entitled to all reasonable factual inferences that

logically flow from the particularized facts alleged, but conclusory allegations are not

considered as expressly pleaded facts or factual inferences.” 100

          Delaware courts apply one of two tests in evaluating whether demand is futile. As

the Delaware Supreme Court has held:

                    Demand futility under Rule 23.1 must be determined pursuant
                    to either the standards articulated in Aronson v. Lewis or those
                    set forth in Rales v. Blasband. . . . In Rales v. Blasband, this
                    Court identified three circumstances in which the Aronson
                    standard will not be applied: “(1) where a business decision
                    was made by the board of a company, but a majority of the
                    directors making the decision has been replaced; (2) where the
                    subject of the derivative suit is not a business decision of the
                    board; and (3) where . . . the decision being challenged was
                    made by the board of a different corporation.” 101

          Given developments in Delaware jurisprudence since Aronson was decided in 1983,

the soundness of its theoretical justifications is questionable. 102 Still, the Aronson test

remains binding law, and because Tilray’s Board composition at the time the Amended

98
     Zuckerberg, 2020 WL 6266162, at *8.
99
     Brehm, 746 A.2d at 254.
100
      Id. at 255.
101
    Braddock v. Zimmerman, 906 A.2d 776, 784–85 (Del. 2006) (second ellipses in original)
(first citing Aronson, 473 A.2d at 813, and then quoting Rales, 634 A.2d at 934).
102
   See generally Zuckerberg, 2020 WL 6266162, at *9–19 (assessing the obsolescence of
Aronson and concluding that Rales articulates a more “broad and flexible” test that
“encompasses the Aronson test as a special case”).

                                                  35
Complaint was filed is identical to its composition at the time of the Reorganization, the

Aronson test governs this analysis. 103

         “Under the two-part Aronson test, demand will be excused if the derivative

complaint pleads particularized facts creating a reasonable doubt that ‘(1) the directors are

disinterested and independent or (2) the challenged transaction was otherwise the product

of a valid exercise of business judgment.’” 104

         The first inquiry looks to the independence and disinterestedness of the directors

with respect to the challenged transaction. 105 The second inquiry has been interpreted to

“requir[e] both that a standard more onerous than the business judgment applies and that a

majority of the directors face a substantial likelihood of liability on a non-exculpated

claim.” 106

         This court evaluates demand futility on a director-by-director basis, determining

whether a majority of the board of directors could consider a demand by “count[ing]

heads.” 107 Because five directors comprise the Board, the Amended Complaint “must

103
   See Tilray Opening Br. at 38 (noting that “the composition of the Board at the time of
the filing of the Amended Complaint is the same as it was when Tilray approved the
Reorganization”).
104
      Braddock, 906 A.2d at 784 (quoting Rales, 634 A.2d at 933).
105
      Hughes v. Xiaoming Hu, 2020 WL 1987029, at *11 (Del. Ch. Apr. 27, 2020).
106
    See Zuckerberg, 2020 WL 6266162, at *15 (emphasis added); see also id. at *9–16
(explaining that this is likely not what the Aronson court had in mind when fashioning the
rule).
107
      Ezcorp, 2016 WL 301245, at *34.

                                             36
plead facts that create a reason to doubt that at least three of these five individuals are

disinterested or independent.” 108

         Defendants do not contest that Kennedy is conflicted for demand excusal purposes,

nor could they—as the largest stockholder of Privateer and as CEO and Chairman of both

Privateer’s and Tilray’s boards, it is reasonable to doubt his ability to impartially consider

a demand. 109 Plaintiffs do not contest that Dopp and St. Clare were independent and

disinterested for demand excusal purposes. Thus, this analysis focuses on Auerbach and

Greenwood.

         Plaintiffs advance many theories challenging Auerbach’s disinterest and

independence. One does the trick. Plaintiffs allege that Auerbach served as a director of

both Privateer and Tilray. 110 As a Privateer director, Auerbach owed fiduciary obligations

to Privateer and its stockholders. 111 “[I]ndividuals who act in a dual capacity as directors

of two corporations, one of whom is parent and the other subsidiary,” owe the same

fiduciary duties to both corporations and must act “in light of what is best for both

108
    See In re BGC P’rs., Inc., 2019 WL 4745121, at *9 (Del. Ch. Sept. 30, 2019) (finding
that demand was excused where the majority of a five-person board lacked independence
from a controller); see also Ezcorp, 2016 WL 301245, at *34 (“To determine whether the
Board could properly consider a demand, a court counts heads. If the board of directors
lacks a majority comprising independent and disinterested directors, then demand is
futile.”).
109
      See Am. Compl. ¶ 16; Tilray Opening Br. at 39.
110
      Am. Compl. ¶ 177.
111
   N. Am. Catholic Educ. Programming Found., Inc. v. Gheewalla, 930 A.2d 92, 101 (“It
is well settled that directors owe fiduciary duties to the corporation.” (citing Guth v. Loft,
Inc., 5 A.2d 503, 510 (Del. 1939))).

                                             37
companies.” 112 Where those corporations negotiate on opposite sides of a transaction, and

thus have divergent interests, the dual fiduciary faces an inherent conflict of interest with

respect to that transaction. 113 In this case, Privateer and Tilray were on opposite sides of

the negotiating table, rendering Auerbach conflicted with respect to the Reorganization.

         Plaintiffs likewise advance multiple theories challenging Greenwood’s disinterest

and independence. Again, one does the trick. The Amended Complaint adequately alleges

that Greenwood was beholden to the Founders and Privateer due to her employment with

Crestview. Plaintiffs allege that the Founders controlled Privateer and indirectly Tilray,

both of which generated substantial business for Crestview. Specifically, the Amended

Complaint notes that Privateer and Tilray have engaged Crestview since at least 2015 and

that Crestview has lobbied on Tilray’s behalf in favor of legalized and regulated

recreational and medical cannabis. 114

         Plaintiffs support their allegation that Privateer and Tilray generated substantial

business for Crestview’s Canadian operations by pointing to the number of lobbying

registrations filed by Crestview with the Canadian government. 115            It is reasonably

112
   Weinberger v. UOP, Inc., 457 A.2d 701, 710–11 (Del. 1983) (citing Warshaw v.
Calhoun, 221 A.2d 487, 492 (Del. 1966)).
113
    See, e.g., Frederick Hsu Living Tr. v. ODN Hldg. Corp., 2017 WL 1437308, at *25–33
(Del. Ch. Apr. 14, 2017) (finding that because the “allegations support a reasonable
inference that the” dual fiduciaries furthered one entity’s interests over the other, they could
not “be considered disinterested or independent for purposes of determining the standard
of review”).
114
      See Am. Compl. ¶¶ 34, 36, 38.
115
      See id. ¶¶ 36–38.

                                              38
conceivable, based on these filings, that Crestview “depends on the patronage of Tilray and

Privateer” as important clients. 116 If Crestview depends on the patronage of entities

controlled by the Founders, it is reasonably conceivable that the head of Crestview’s U.S.

office felt beholden to the Founders.

          Defendants dispute this conclusion, arguing that Plaintiffs have not sufficiently

alleged that the Founders’ business is material to Crestview. 117 Yet, on this Rule 23.1

pleadings-stage motion, Plaintiffs are entitled to the reasonable inferences that logically

flow from particularized facts pled in the Amended Complaint. 118 Given the volume of

work performed by Crestview on behalf of Privateer and Tilray, it is reasonable to infer

that Privateer and Tilray were material clients for Crestview and Greenwood.

          In light of the particularized facts pled as to Auerbach and Greenwood, and because

Defendants do not dispute that Kennedy also could not impartially consider a demand, the

Amended Complaint has adequately pled that demand on the Board would have been futile.

Demand is therefore excused and Defendants’ motions to dismiss pursuant to Court of

Chancery Rule 23.1 is denied.

116
      Id. ¶¶ 39.
117
      See Greenwood Opening Br. at 33–40; Tilray Opening Br. at 40–47.
118
   See Marchand v. Barnhill, 212 A.3d 805, 819–20 (Del. 2019) (stating that this court is
“bound to accord the plaintiff the benefit of all reasonable inferences” at the pleading stage
and finding that a significant business relationship supported a pleading-stage inference
that a director was incapable of impartially considering demand).

                                              39
            C.    Motion to Dismiss Groh and Blue for Lack of Personal Jurisdiction

            “When a defendant moves to dismiss a complaint pursuant to Court of Chancery

Rule 12(b)(2), the plaintiff bears the burden of showing a basis for the court’s exercise of

jurisdiction over the defendant.” 119 “In ruling on a 12(b)(2) motion, the court may consider

the pleadings, affidavits, and any discovery of record,” but where “no evidentiary hearing

has been held, plaintiffs need only make a prima facie showing of personal jurisdiction”

on a record construed “in the light most favorable to the plaintiff.” 120

            Delaware courts use a two-step analysis to resolve questions of personal

jurisdiction. 121 First, the court must “determine that service of process is authorized by

statute.” 122 Second, the defendant must have certain minimum contacts with Delaware

such that the exercise of personal jurisdiction “does not offend traditional notions of fair

play and substantial justice.” 123

            Plaintiffs argue that this court has personal jurisdiction over Groh and Blue under

Delaware’s Long-Arm Statute based on the conspiracy theory of jurisdiction. 124

  Ryan v. Gifford, 935 A.2d 258, 265 (Del. Ch. 2007) (citing Werner v. Miller Tech.
119

Mgmt., L.P., 831 A.2d 318 (Del. Ch. 2003))
120
   Focus Fin. P’rs, LLC v. Holsopple, 241 A.3d 784, 800–01 (Del. Ch. 2020) (quoting
Ryan, 935 A.2d at 265).
121
      Ryan, 935 A.2d at 265.
122
      Id.
123
   Matthew v. FläktWoods Gp. SA, 56 A.3d 1023, 1027 (Del. 2012) (quoting Int’l Shoe
Co. v. Washington, 326 U.S. 310, 316 (1945) (internal quotation marks omitted)).
124
      Pls.’ Answering Br. at 54–59.

                                                40
         Delaware’s Long-Arm statute provides jurisdiction over a nonresident “who in

person or through an agent . . . [t]ransacts any business or performs any character of work

or service in the State . . . [or] [c]auses tortious injury in the State by an act or omission in

this State.” 125 “[A] single transaction is sufficient to confer jurisdiction where the claim is

based on that transaction.” 126 “Under the plain language of the Long-Arm Statute, forum-

directed activity can be accomplished ‘through an agent.’” 127

         The Delaware Supreme Court has adopted the conspiracy theory of jurisdiction,

under which a person’s co-conspirators are their agents, such that forum-directed activities

by the co-conspirator can give rise to personal jurisdiction over all conspiracy members. 128

At the pleading stage, a plaintiff need not “produce direct evidence of a conspiracy” but

must assert “specific facts from which one can reasonably infer that a conspiracy

existed.” 129

         The Delaware Supreme Court established the elements of the conspiracy theory of

jurisdiction in Istituto Bancario Italiano SpA v. Hunter Engineering Co.:

                [A] conspirator who is absent from the forum state is subject
                to the jurisdiction of the court . . . if the plaintiff can make a
                factual showing that: (1) a conspiracy . . . existed; (2) the
                defendant was a member of that conspiracy; (3) a substantial
                act or substantial effect in furtherance of the conspiracy
                occurred in the forum state; (4) the defendant knew or had

125
      10 Del. C. § 3014(c).
126
      Crescent/Mach I P’rs, L.P. v. Turner, 846 A.2d 963, 978 (Del. Ch. 2000).
127
   Virtus Cap. L.P. v. Eastman Chem. Co., 2015 WL 580553, at *11 (Del. Ch. Feb. 11,
2015) (quoting 10 Del. C. § 3104(c)).
128
      Istituto Bancario Italiano SpA v. Hunter Eng’g Co., 449 A.2d 210, 222 (Del. 1982).
129
      Reid v. Siniscalchi, 2014 WL 6589342, at *6 (Del. Ch. Nov. 20, 2014).

                                               41
                    reason to know of the act in the forum state or that acts outside
                    the forum state would have an effect in the forum state; and (5)
                    the act in, or effect on, the forum state was a direct and
                    foreseeable result of the conduct in furtherance of the
                    conspiracy. 130

            The five elements of the Istituto Bancario test “functionally encompass both prongs

of the jurisdictional test.” 131 “The first three . . . elements address the statutory prong . . . .

The fourth and fifth . . . elements address the constitutional prong . . . .” 132

            The first and second Istituto Bancario elements ask whether a conspiracy existed

and whether the nonresidents were members of the conspiracy.                   “Although Istituto

Bancario literally speaks in terms of a ‘conspiracy to defraud,’ the principle is not limited

to that particular tort.” 133 This court has recognized that a breach of fiduciary duty can

supply the relevant tort, and that control group theories—like aiding and abetting claims—

are a “context-specific application of civil conspiracy law.” 134             Where a complaint

adequately alleges the legally significant connection required to support a control group

claim, then the first and second elements of the Istituto Bancario test will be met as to the

control group members. 135 Because the Amended Complaint adequately alleges that Groh

and Blue are control group members, the first Istituto Bancario elements are met here.

  Perry v. Neupert, 2019 WL 719000, at *22 (Del. Ch. Feb. 15, 2019) (quoting Istituto
130

Bancario, 449 A.2d at 225).
131
      Virtus, 2015 WL 580553, at *12.
132
      Id.
133
      Id. at *13.
134
      Allied Cap. Corp. v. GC-Sun Hldgs., L.P., 910 A.2d 1020, 1038 (Del. Ch. 2006).
135
   See, e.g., Virtus, 2015 WL 580553, at *13–14 (exercising personal jurisdiction over the
“top dog and ring leader” under the conspiracy theory but noting that “[s]ufficiently
                                                   42
         Groh and Blue dispute that the formation of a control group is sufficient to establish

a conspiracy under Istituto Bancario. 136 They base their argument on the case law

providing that “[a] corporation cannot conspire with itself.” 137 But Defendants cite to no

case endorsing the intra-corporate immunity doctrine as a basis for a fiduciary to avoid

personal jurisdiction. And multiple cases of this court have implicitly rejected the notion

by exercising jurisdiction over control group members under the conspiracy theory. The

intra-corporate immunity principle is typically invoked to shield directors and officers of a

corporation from contract and tort claims asserted by third parties, where public policy

favors shielding fiduciaries from damages taken in their relevant capacities. 138 That policy

pleading a claim for breach of fiduciary duty and a related claim for aiding and abetting a
breach of fiduciary duty satisfies the first and second elements of the Istituto Bancario
test”); Perry v. Neupert, 2017 WL 6033498, at *16–17 (Del. Ch. Dec. 6, 2017) (finding the
first two Istituto Bancario elements met where there was a “sufficient basis to believe that
[the defendants] conspired to engage in tortious conduct” by “act[ing] in concert” and
“receiv[ing] the benefit of [the co-conspirator’s] actions”); Gilbralt Cap. Corp. v. Smith,
2001 WL 647837, at *6 (Del. Ch. May 9, 2001) (applying the Istituto Bancario test to a
“member of the conspiracy” who “fil[ed] a certificate of designation” that “allowed the
defendants to take other wrongful acts”); see also RCS Cred. Tr. v. Schorsch, 2018 WL
1640169, at *6 & n.72 (Del. Ch. Apr. 5, 2018) (collecting authorities and finding a claim
for aiding and abetting, pled in the alternative to a control group claim, reasonably
conceivable given the factual overlap of both analyses).
136
      See Groh & Blue Reply Br. at 24–27.
137
    Id. at 24–25 (quoting Anschultz Corp. v. Brown Robin Cap., LLC, 2020 WL 3096744,
at *17 (Del. Ch. June 11, 2020)).
138
   See, e.g., Anschultz, 2020 WL 3096744, at *17–18 (dismissing an aiding and abetting
claim against corporate officers who acted collectively to fraudulently “inflat[e] the value
of OnRamp for their principal” because “as a general rule, agents of a corporation cannot
conspire with one another or aid and abet each other’s torts” when acting on behalf of the
corporate entity, which is inapplicable only “when a corporate officer ‘steps out of a her
corporate role and acts pursuant to personal motives’” (quoting In re Transamerica
Airlines, Inc., 2006 WL 587846, at *6 (Del. Ch. Feb. 28, 2006))).

                                               43
does not translate to internal affairs claims where stockholders seek to hold fiduciaries

accountable, and this decision declines to import it to that context.

         The third element of the Istituto Bancario test requires a substantial act in the forum

state. 139 “The formation of a Delaware entity or the filing of a corporate instrument in

Delaware to facilitate the challenged transaction satisfies [the third Istituto Bancario

factor].” 140 Blue filed Privateer’s charter amendment, a corporate instrument, in Delaware

and that filing is attributable to Blue’s co-conspirators. 141 Blue signed an amendment to

Privateer’s Charter, an amendment that allowed the Founders—including Groh and Blue—

to obtain all of Tilray’s Class 1 stock in the Reorganization. The Amended Complaint

sufficiently alleges that this filing was integral to the challenged transaction, as the

Founders conditioned the transaction on its approval. 142

139
      Istituto Bancario, 449 A.2d at 225.
140
    Dubroff v. Wren Hldgs., LLC, 2011 WL 5137175, at *14 (Del. Ch. Oct. 28, 2011)
(alteration in original); see also Hamilton P’rs, L.P. v. Englard, 11 A.3d 1180, 1196 (Del.
Ch. 2010) (“Forming a Delaware entity for the purpose of engaging in a transaction
constitutes the “transaction of business” within the State of Delaware sufficient to confer
specific personal jurisdiction over the party forming the entity under Section 3104(c)(1).”).
141
    See Virtus, 2015 WL 580553, at *15 (collecting cases in which “[t]he Delaware
Supreme Court has held . . . that one conspirator’s acts are attributable to the other
conspirators” and attributing the filing of a certificate of merger by one actor to their co-
conspirators (internal quotation marks omitted)). Plaintiffs cite to “three such documents,”
including Privateer’s charter amendment signed by Blue, the merger certificate signed by
Kennedy, and Tilray’s charter amendment, also signed by Kennedy. Pls.’ Opening Br.
at 57; see Crescent/Mach, 846 A.2d at 977 (“The act of merger, itself, was a substantial act
in furtherance of the plan and it occurred in Delaware.”).
142
   See Am. Compl. ¶¶ 10, 80, 125, 153. The filing of the amended charters was a condition
to closing. See Seal Decl. Ex. 12 § 6.6.

                                               44
         The fourth and fifth Istituto Bancario elements require that Groh and Blue knew or

had reason to know of the filing of the corporate instruments in Delaware and that the filing

was a direct and foreseeable result of the conduct in furtherance of the Reorganization. 143

The Amended Complaint satisfies these two factors.            Blue personally signed the

amendment to Privateer’s charter, which inferably furthered the Founders’ interests in the

Reorganization. As members of the control group, it is reasonably conceivable that both

Groh and Blue knew or had reason to know that those corporate instruments were filed in

Delaware in connection with the Reorganization.

         Plaintiffs have adequately pled each factor of the Istituto Bancario test, thus

establishing personal jurisdiction over Groh and Blue under Istituto Bancario. 144

III.     CONCLUSION

         For the foregoing reasons, Defendants’ motions to dismiss the Amended Complaint

are DENIED.

143
      See Istituto Bancario, 449 A.2d at 225.
144
   Having found an adequate basis for personal jurisdiction, the court need not address
Plaintiffs’ additional theories. Groh and Blue additionally argue that Plaintiffs’ service of
process upon them was insufficient. Groh & Blue Opening Br. at 34. Their argument
depends entirely on Plaintiffs’ alleged failure to satisfy “the statutory and constitutional
requirements to establish personal jurisdiction on Groh and Blue.” Id. Because the court
has personal jurisdiction over Groh and Blue, their sufficiency of process argument fails.

                                                45