Court Opinion

ID: 9387040
Source: CourtListenerOpinion
Date Created: 2023-04-14 16:03:42.929252+00
Date Added: 2024-06-11T17:18:10.813303
License: Public Domain

COURT OF CHANCERY
                                        OF THE
                                  STATE OF DELAWARE
PAUL A. FIORAVANTI, JR.                                           LEONARD L. WILLIAMS JUSTICE CENTER
  VICE CHANCELLOR                                                    500 N. KING STREET, SUITE 11400
                                                                    WILMINGTON, DELAWARE 19801-3734

                               Date Submitted: January 13, 2023
                                Date Decided: April 13, 2023

  Gregory W. Hauswirth, Esquire
  Carothers & Hauswirth LLP
  1007 North Orange Street, 4th Fl.
  Wilmington, DE 19801

                 Re:      D. Jackson Milhollan v. Live Ventures, Inc.,
                          C.A. No. 2022-0915-PAF

  Dear Counsel:

          On October 10, 2022, plaintiff D. Jackson Milhollan (“Plaintiff”) filed a one-

  count complaint (the “Complaint”) asserting a breach of contract claim against

  defendant Live Ventures, Incorporated (“LVI” or “Defendant”). 1 The Complaint

  seeks money damages. On December 26, 2022, Plaintiff filed a motion for a default

  judgment (the “Motion”) due to the Defendant’s failure to respond to the

  Complaint.2

  1
   Citations to the docket in this action are in the form of “Dkt. [#].” In citations, the
  Complaint in this action, Dkt. 1, will be cited as “Compl.”
  2
    On October 28, 2022, Plaintiff requested that the Register in Chancery issue a summons
  to be served on Defendant by special process server. Dkt. 3. The letter indicated that
  service would be made on the Defendant’s registered agent in Delaware, Corporation Trust
  Company. Id. at 2. The Register in Chancery issued a summons to a special process server
  on November 1, 2022. Dkt. 4. The court has no way to verify through the filings in this
D. Jackson Milhollan v. Live Ventures, Inc.,
C.A. No. 2022-0915-PAF
April 13, 2023
Page 2 of 7

        On December 28, 2022, the court issued a letter order that questioned whether

this court has subject matter jurisdiction over this action.3 The court deferred

consideration on the Motion and requested a supplemental submission to address

subject matter jurisdiction. On January 13, 2023, Plaintiff filed an eight-page

memorandum of law responding to the court’s request (the “Memorandum”). 4 The

Memorandum maintains that this court has subject matter over this dispute. Having

carefully reviewed the Memorandum, the court must dismiss this action for lack of

subject matter jurisdiction.

        I.     BACKGROUND

        Precision Industries, Inc. (“Precision”), a Pennsylvania corporation, and LVI

are parties to a merger agreement, dated as of July 14, 2020 (the “Merger

case whether LVI, a Nevada corporation, has a registered agent in Delaware. Assuming
that it does, there is no return of service on the docket indicating that LVI’s registered agent
was ever served with the summons and Complaint.
3
  Dkt. 6. See Ct. Ch. R. 12(h)(3) (“Whenever it appears by suggestion of the parties or
otherwise that the Court lacks jurisdiction of the subject matter, the Court shall dismiss the
action.” (emphasis added)); Envo, Inc. v. Walters, 2009 WL 5173807, at *4 n.10 (Del. Ch.
Dec. 30, 2009) (“The issue of subject matter jurisdiction is so crucial that it may be raised
. . . by the court sua sponte.”), aff’d, 2013 WL 1283533 (Del. Mar. 28,
2013) (TABLE); Int’l Bus. Machs. Corp. v. Comdisco, Inc., 602 A.2d 74, 77 n.5 (Del. Ch.
1991) (“[U]nlike many jurisdictions, judges in the Delaware Court of Chancery are
obligated to decide whether a matter comes within the equitable jurisdiction of this Court
regardless of whether the issue has been raised by the parties.”).
4
    Dkt. 7. The Memorandum is cited as “Mem.”
D. Jackson Milhollan v. Live Ventures, Inc.,
C.A. No. 2022-0915-PAF
April 13, 2023
Page 3 of 7

Agreement”). Compl. Ex. A. Pursuant to the Merger Agreement, LVI acquired

Precision. Plaintiff is the representative of the stockholders of Precision under the

Merger Agreement.        The Merger Agreement contemplated that part of the

consideration to be paid in the merger would be held back and paid at a later date.

The Merger Agreement refers to this as the “Indemnity Holdback Amount” of $2.5

million. Id. at 8. Plaintiff alleges that the Indemnity Holdback Amount was due and

owing in full to the Plaintiff by January 31, 2022. Compl. ¶¶ 8–10. LVI has

informed Plaintiff that LVI will not pay the Indemnity Holdback Amount and, in

fact, has not paid it. Id. ¶¶ 11–12.

      The Complaint alleges that LVI’s failure to pay the Indemnity Holdback

Amount breached the Merger Agreement. Plaintiff alleges that he “has and will

continue to suffer direct and indirect damages as a result of the Defendant’s breach

of the Merger Agreement, in the amount of the [Indemnity] Holdback [Amount] and

consequential or special damages, in addition to interest, the costs of litigation, and

reasonable attorney fees.” Id. ¶ 16.

      II.    ANALYSIS

      The Court of Chancery is “proudly a court of limited subject matter

jurisdiction.” Crown Castle Fiber LLC v. City of Wilm., 2021 WL 2838425, at *1

(Del. Ch. July 8, 2021). This court may acquire subject matter jurisdiction in any
D. Jackson Milhollan v. Live Ventures, Inc.,
C.A. No. 2022-0915-PAF
April 13, 2023
Page 4 of 7

one of three ways: (i) the assertion of an equitable claim; (ii) a request for equitable

relief; and (iii) by statutory grant. Candlewood Timber Gp., LLC v. Pan Am. Energy,

LLC, 859 A.2d 989, 997 (Del. 2004). Plaintiff does not contend that the Complaint

asserts an equitable claim or that there is a statutory basis for jurisdiction.5

      The Complaint alleges that the Merger Agreement itself establishes exclusive

jurisdiction in this court. Section 11.12 of the Merger Agreement provides that any

claims, actions, and proceedings that arise from or relate to the Merger Agreement

“shall be heard and determined exclusively in the Court of Chancery of Delaware”

and that the parties submit to the exclusive jurisdiction of this court. Compl. Ex. A

§11.12. This provision does not establish subject matter jurisdiction in this court.

“It is . . . well-established Delaware law that parties cannot confer subject matter

jurisdiction upon a court.” Butler v. Grant, 714 A.2d 747, 749–50 (Del. 1998); see

also Bruno v. W. Pac. R.R. Co., 498 A.2d 171, 172 (Del. Ch. 1985) (“The parties to

5
  Section 111 of the Delaware General Corporation Law does not provide a basis for
statutory jurisdiction because none of the parties to the merger agreement is a Delaware
entity. See Darby Emerging Mkts. Fund, L.P. v. Ryan, 2013 WL 6401131, at *7 (Del. Ch.
Nov. 27, 2013) (“To the extent Section 111 is ambiguous with respect to its application to
foreign entities, the synopsis appears to resolve that ambiguity by limiting Section 111’s
application to Delaware corporations.”); 1 Robert S. Saunders et al., Folk on the Delaware
General Corporation Law § 111.01 (7th ed. 2022) (“The application of section 111 is
limited to Delaware corporations.”).
D. Jackson Milhollan v. Live Ventures, Inc.,
C.A. No. 2022-0915-PAF
April 13, 2023
Page 5 of 7

an action may not confer subject matter jurisdiction by agreement.”), aff’d, 508 A.2d

72 (Del. 1986) (TABLE).

      The Complaint asserts a claim for breach of contract and seeks money

damages, a classic legal claim where there exists an adequate remedy at law. See

Candlewood Timber Gp., LLC v. Pan Am. Energy, LLC, 2003 WL 22417235, at *2

(Del. Ch. Oct. 22, 2003) (holding the Court of Chancery lacked subject matter

jurisdiction over a breach of contract claim seeking money damages), aff’d in

pertinent part and rev’d in part, 859 A.2d 989 (Del. 2004); Prestancia Mgmt. Gp.,

Inc. v. Va. Heritage Found., II LLC, 2005 WL 1364616, at *4 (Del. Ch. May 27,

2005) (“Damages for breach of a contract . . . are available at law.”). The Complaint

does not allege that the Plaintiff lacks an adequate remedy at law.

      In an attempt to establish a jurisdictional hook, Plaintiff points to the

Complaint’s catchall phrase seeking “other relief as the Court deems equitable, just,

and proper.” Compl. at 5 (Prayer for Relief (ii)). Plaintiff then tries to leverage this

vague and nonspecific plea for other equitable relief as encompassing a prayer for a

constructive trust. Mem. 2–3 (“[I]t is readily apparent that the Complaint plausibly

sets forth the facts necessary to support claims for the legal remedy of a constructive

trust based upon a breach of trust.”). There is no merit to this argument. First, the

words “constructive” and “trust” are nowhere to be found in the Complaint. Plaintiff
D. Jackson Milhollan v. Live Ventures, Inc.,
C.A. No. 2022-0915-PAF
April 13, 2023
Page 6 of 7

cannot insert those words or a request for equitable relief into the Complaint through

his Memorandum. See Parseghian v. Frequency Therapeutics, Inc., 2022 WL

2208899, at *8 n.75 (Del. Ch. June 21, 2022) (“Plaintiffs cannot amend their

Complaint through their brief.”). Second, the mere request for a form of equitable

relief does not confer equity jurisdiction where, as here, the Plaintiff has an adequate

remedy at law. “‘[W]hen there exists an adequate and sufficient remedy at law, a

claim cannot be converted to a cause in equity by the mere invocation of a formulaic

prayer for traditional equitable relief.’” Intel Corp. v. Fortress Inv. Gp., LLC, 2021

WL 4470091, at *5 (Del. Ch. Sept. 30, 2021) (quoting 1 Donald J. Wolfe, Jr. &

Michael A. Pittenger, Corporate and Commercial Practice in the Delaware Court

of Chancery § 2.03[a], at 2–3 (2021)); see also, e.g., Yu v. GSM Nation, LLC, 2017

WL 2889515, at *4 (Del. Ch. July 7, 2017) (dismissing complaint that included a

request for constructive trust and other equitable remedies where the complaint’s

primary remedy sought money damages and plaintiff did not allege or argue that a

money judgment from the Superior Court would not provide a full, fair, and

complete remedy).

      III.   CONCLUSION

      The Complaint alleges a claim for breach of contract claim and seeks money

damages. Plaintiff has asserted a legal claim seeking relief that is compensable at
D. Jackson Milhollan v. Live Ventures, Inc.,
C.A. No. 2022-0915-PAF
April 13, 2023
Page 7 of 7

law by way of money damages. Plaintiff does not allege or argue otherwise.

Accordingly, this court lacks subject matter jurisdiction over this action, and the

Complaint must be dismissed.

      IT IS SO ORDERED.

                                               Very truly yours,

                                               /s/ Paul A. Fioravanti, Jr.

                                               Vice Chancellor