Opinion
C.A. No. 05C-05-218-CLS.
Submitted: September 15, 2006.
Decided: October 31, 2006.
Upon Consideration of Plaintiff's Motion for Reargument Denied.
Jeffrey S. Goddess, Esquire, Rosenthal, Monhait, Gross Goddess, P.A., Wilmington, Delaware; Of Counsel: Kirk B. Hulett, Stephanie L. Dieringer, and Bridget Fogarty Gramme, Esquires, of Hulett Harper Stewart LLP, San Diego, California; Robert A. Goodin and Francine T. Radford, Esquires, of Goodin, MacBride, Squeri, Ritchie Day, LLP, San Francisco, California; Attorneys for Plaintiff.
Daniel V. Folt and Matt Neiderman, Esquires, of Duane Morris LLP, Wilmington, Delaware; Of Counsel: Matthew A. Taylor, James L. Beausoleil, Jr., and Seth A. Goldberg, Esquires, of Duane Morris LLP, Philadelphia, Pennsylvania; Jeffrey J. Bouslog, Esquire, Oppenheimer Wolff Donnelly LLP, Minneapolis, MN; Attorneys for Defendants.
ORDER
1. Michael D. Lesh M.D. ("Plaintiff") has filed a Motion for Reargument of a portion of the Court's decision dated June 21, 2006, which granted Defendants' Motion to Dismiss and held that Plaintiff did not have standing to sue either as a shareholder representative or in his individual capacity.
2. Plaintiff seeks reargument "of the Court's determination that because his pleadings contained alternate theories (claiming in both contract and in tort/fraud), his having pled a contract claim was fatal to his ability, or standing, to assert the tort/fraud claims individually."
Pl. Mot. Rearg., D.I. 22, at 1.
3. The purpose of reargument is to permit reconsideration of findings of fact, conclusions of law, or judgment in order to correct errors prior to appeal. Reargument usually will be denied unless the moving party demonstrates that the Court overlooked a precedent or legal principle that would have a controlling effect, or that it had misapprehended the law or the facts in a manner affecting the outcome of the decision. "A motion for reargument should not be used merely to rehash the arguments already decided by the court."
Hessler, Inc. v. Farrell, 260 A.2d 701, 702 (1969).
Wilmington Trust Co. v. Nix, 2002 WL 356371 (Del.Super.); Whitsett v. Capital School District, Del. Super., C.A. No. 97C-04-032, Vaughn, J. (Jan. 28, 1999); Monsanto Co. v. Aetna Casualty Surety Co., Del. Super., C.A. No. 88-JA-118, Ridgeley, P.J. (Jan. 14, 1994).
4. Superior Court Civil Rule 8(e)(2) provides in pertinent part:
A party may set forth two or more statements of a claim or defense alternately or hypothetically, either in one count or defense or in separate counts or defenses. When two or more statements are made in the alternative, and one of them if made independently would be sufficient, the pleading is not made insufficient by the insufficiency of one or more of the alternative statements. The party may also state as many separate claims or defenses as the party has regardless of consistency.
5. Candidly in the past the Court may not have been clear. The Court did not grant Defendant's Motion because Plaintiff's pleadings contained "alternate theories," as presented in Plaintiff's Motion for Reargument. It does not disagree that a plaintiff can proceed with various, or even inconsistent, theories of recoveries. Nonetheless, after hearing arguments on Defendants' Motion to Dismiss, the Court concluded that Plaintiff did not demonstrate that he had standing to sue either as a shareholder representative or in his individual capacity. The documents that control the rights of former shareholders of Appriva Medical, Inc., ("Appriva") and that govern the authority of the Shareholder Representatives preclude Plaintiff from establishing standing. Specifically, the Merger Agreement, which was signed on July 15, 2002, provided for the appointment of a Shareholder Representative. The representatives were Plaintiff and Erik van der Burg. Their role was more fully set out in the Shareholder Representative Agreement which was signed on August 10, 2002.
6. On a motion to dismiss, all well-pled allegations are to be taken as true. Such a motion cannot be granted if the plaintiff may not recover under any conceivable set of circumstances susceptible of proof under the complaint. If a motion to dismiss is accompanied by additional papers, it is to be converted to a summary judgment motion. The defendants' inclusion of the Shareholder Agreement, which neither party disputes as authentic, therefore, should have converted their motion to one for summary judgment. Applying principles applicable to motions for summary judgment, the moving party is entitled to summary judgment if there is not genuine issues of material fact and that party is entitled to judgment as a matter of law. The Court must view the evidence in a light most favorable to the non-moving party. In the present case this was Plaintiff.
Savor, Inc. v. FUR Corp., 812 A.2d 894, 896 (Del. 2002).
Lord v. Sonder, 748 A.2d 383, 398 (Del. 2000).
Chrysler Corp. v. Airtemp Corp., 426 A.2d 845, 847 (Del.Super.Ct. 1980).
Bershad v. Curtiss-Wright Corp., 535 A.2d 840, 844 (Del. 1987).
Alabi v. DHL Airways, Inc., 583 A.2d 1358, 1361 (Del.Super.Ct. 1990).
7. Plaintiff argued that the Shareholder Agreement was not properly before the Court on the motion to dismiss because it was not part of his allegation. Nonetheless, Plaintiff did not dispute that in part his "authority derives from that document but it is by no means the exclusive source of our authority to bring this case." Plaintiff has placed the Shareholder Agreement before the Court.
8. The former shareholders of Appriva, including Lesh, irrevocably relinquished and irrevocably and exclusively delegated their rights to act independently in bringing claims under the Agreement. Specifically, within that agreement is § 15.5 dealing with Shareholders' Agent:
By approving the Merger and adopting and approving this Agreement, each shareholder of the Company has designated, and approves the designation of Michael Lesh, M.D. and Erik van der Burg to jointly act as the agent for all shareholders of the Company and holders of Vested Options (the Shareholders' Agent) and as the attorney in fact and agent for and on behalf of the company shareholders and holders of Vested Options with respect to the taking any an all actions and the making of any decisions required or permitted to be taken by the Shareholders' Agent under this Agreement and Escrow Agreement, including without limitation the power to (i) arbitrate, resolve, settle, or compromise any dispute regarding indemnification claims or matters arising out of the calculation of the Cash Shortfall Amount and the Initial Per Share Amount and (ii) take all actions necessary in the judgment of the Shareholders' Agent for the accomplishment of the foregoing. Each shareholder of the Company and each holder of Vested Options will be bound by all actions taken and all documents executed by the Shareholders' Agent in connection with any of the foregoing matters. In performing the functions specified in this Agreement, the Shareholders' Agent will not be liable to any shareholder of the Company or holder of Vested Options in the absence of fraud or willful misconduct on the part of the Shareholders' Agent. If the Shareholders' Agent shall resign or become unable to fulfill his or her duties as such, then the Person with the then largest interest in the Contingent Payment Obligations who is willing to appoint a new Shareholders' Agent shall be entitled to make such appointment. Expenses of the Shareholders' Agent shall be the obligation of the holders of the Company Shares, provided, however, that the Surviving Corporation will, until the earlier of (i) the achievement of Milestone #1, or (ii) January 1, 2004, pay on such holders' behalf (up to a maximum of $250,000) to the Shareholders' Agent the actual, reasonable fees of such Shareholders' Agent as such fees are incurred, provided, further, that the Surviving Corporation shall be entitled to deduct any such advanced fees from any Contingent Payment due after the date of any such advance.
9. The Shareholder Agreement also contains key provisions relevant to the standing issue. Section 1.1 of the Shareholder Agreement empowers the shareholder representatives, Lesh and van der Burg. Section 1 provided:
1. Appointment of Shareholder Representative.
1. The approval and adoption of the Merger Agreement or this Agreement (or both) by the Shareholders shall result in each and all of the following actions being binding upon each of the Shareholders:
(a) the irrevocable authorization, direction and appointment of Michael Lesh and Erik van der Burg and any successor designated pursuant to Section 15.5 of the Merger Agreement jointly as "Shareholders' Agent" for purposes of the Merger Agreement and sole and exclusive agents, attorneys-in-fact and agents of each holder of outstanding shares of common stock of Appriva (the "Common Shares") and/or preferred stock of Appriva ("Preferred Shares" and, together with the Common Shares, the "Company Shares") and each holder of a Vested Option, and each such holder's heirs, agents and successors;
(b) the approval and authorization for all of the arrangements relating thereto, including: (i) the execution, delivery and performance of the Escrow Agreement by the "Shareholders' Agent"; (ii) the preparation and delivery of Payment Schedules with respect to the Merger Consideration as contemplated by Section 4.1(b) of the Merger Agreement by the "Shareholders' Agent"; (iii) the "Shareholders' Agent" performance of its obligations under the Merger Agreement and the Escrow Agreement and the Shareholder Representatives performance of their obligations under this Agreement, including, without limitation, taking any and all actions, incurring any costs and expenses for the account of the holders of Company Shares, hiring legal counsel to defend against any Claim made by Parent, hiring accountants to determine the allocation of Merger Consideration among the holders of Company Shares pursuant to the Merger Agreement and making any and all determinations which may be required or permitted to be taken by the "Shareholders' Agent" as contemplated by the Merger Agreement; and (v) the exercise of such rights, power and authority as are incidental to the foregoing; and
(c) the irrevocable relinquishment of the right of each holder of Company Shares to act independently and other than through the Shareholder Representatives with respect to the foregoing, any such rights being irrevocably and exclusively delegated to the Shareholder Representatives . . .;
It also contains another key provision, that the Shareholder Representatives are to act jointly. Section 2.3 provides:
The Shareholder Representatives shall together have full power and authority to represent the Shareholders, and their successors and assigns, within the scope of their appointment pursuant to Section 1, and all action jointly taken by the Shareholder Representatives hereunder shall be binding upon the holders of Company Shares and Vested Options, and their successors and assigns, as if expressly confirmed and ratified in writing by each of them. The appointment of the Shareholder Representatives under this Agreement shall survive the death, incapacity or any assignment of rights or assets of any such holder. Without limiting the generality of the foregoing, the Shareholder Representatives shall together have full power and authority on behalf of the holders of Company Shares and Vested Options to: (i) interpret all of the terms and provisions of this Agreement, the Merger Agreement and the Escrow Agreement; (ii) to the extent of the Escrow Deposit (as defined in the Escrow Agreement) and the total limit of liability set forth in Section 15.2(d) of the Merger Agreement, compromise or settle any claims asserted under the Merger Agreement or the Escrow Agreement or otherwise in connection with the transactions contemplated by the Merger Agreement; and (iii) authorize payments, delivery or issuance with respect thereto out of the Escrow Deposit, on behalf of the holders of Company Shares and Vested Options.
The Shareholder Representatives, Lesh and van der Burg, were fully empowered by the Shareholder Representative Agreement ("SRA"). However, both the Agreement and the SRA prohibit Lesh from acting independently from van der Burg. As Lesh and van der Burg each filed his own lawsuit, the Shareholder Representaitves have not acted jointly as authorized by the Agreement and SRA. Thus, after a careful review of this matter, the Court determines that it will not hear reargument limited to the issue of Plaintiff's standing to sue in his individual capacity.
1.1 The approval and adoption of the Merger Agreement or this Agreement (or both) by the Shareholders shall result in each and all of the following actions being binding upon each of the Shareholders:
(a) the irrevocable authorization, direction and appointment of Michael Lesh and Erik van der Burg and any successor designated pursuant to Section 15.5 of the Merger Agreement jointly as "Shareholders' Agent" for purposes of the Merger Agreement and sole and exclusive agents, attorneys-in-fact and agents of each holder of outstanding shares of common stock of Appriva (the "Common Shares") and/or preferred stock of Appriva ("Preferred Shares" and, together with the Common Shares, the "Company Shares") and each holder of a Vested Option, and each such holder's heirs, agents and successors . . .;
(c) the irrevocable relinquishment of the right of each holder of Company Shares to act independently and other than through the Shareholder Representatives with respect to the foregoing, any such rights being irrevocably and exclusively delegated to the Shareholder Representatives . . .;
2.3 The Shareholder Representatives shall together have full power and authority to represent the Shareholders, and their successors and assigns, within the scope of their appointment pursuant to Section 1, and all action jointly taken by the Shareholder Representatives hereunder shall be binding upon the holders of Company Shares and Vested Options, and their successors and assigns, as if expressly confirmed and ratified in writing by each of them.