Jung v. EL Tinieblo Int'l
| Decision Date | 31 October 2022 |
| Docket Number | C. A. 2021-0798-MTZ |
| Parties | JEEHYE JUNG, Plaintiff, v. EL TINIEBLO INTERNATIONAL, INC., TAMA IMPORTS, LLC, EDGAR D. MCKEAN, III, AND ALFREDO PEREZ-SALINAS TIJERINA, Defendants. |
| Court | Court of Chancery of Delaware |
Date Submitted: July 15, 2022
Gregory F. Birney, BIRNEY LAW, LLC, Claymont, Delaware; Matt Simmons, LAW OFFICES OF MATT SIMMONS, ESQ., Rockville Maryland, Attorneys for Plaintiff Jeehye Jung.
Robert K. Beste, SMITH, KATZENSTEIN & JENKINS LLP, Wilmington Delaware; Kimberly E. Blair and Deanna M. Williams, WILSON ELSER MOSKOWITZ EDELMAN & DICKER LLP, Chicago, Illinois Attorneys for Defendants El Tinieblo International, Inc., TAMA Imports, LLC, Edgar D. McKean, III, and Alfredo Perez-Salinas Tijerina.
ZURN, VICE CHANCELLOR.
In December 2017, the plaintiff in this action contracted to provide marketing services to a New Hampshire limited liability company operating in the mezcal market. In exchange, the plaintiff received an approximately 2% interest in the LLC and earned thousands of dollars in monthly pay and commissions. The LLC terminated the contract within six months. The plaintiff and two LLC members discussed buying the plaintiff out, but no money changed hands.
In April 2019, another entity formed by two members of the LLC purported to acquire 100% of the LLC's outstanding interests. The plaintiff alleges she still owned approximately 2% of the LLC, but received no consideration. She contends the acquisition was part of a conspiracy to repossess her stake in the LLC without compensation.
The plaintiff sued two of the former LLC members, the LLC, and the acquirer, seeking a declaration that she is still an LLC member or that she is entitled to compensation for her interest. The plaintiff also asserts breach of fiduciary duty claims for causing the purported transfer of her interest and breach of contract claims for the amounts owed under her contract with the LLC.
The defendants moved to dismiss, primarily arguing that this Court lacks subject matter jurisdiction because two provisions in the New Hampshire LLC Act confer exclusive jurisdiction on New Hampshire for LLC internal affairs claims "[u]nless the operating agreement provides otherwise."[1] That argument fails under the Full Faith and Credit Clause of the United States Constitution. To the extent the New Hampshire statutes purport to divest this Court of jurisdiction, the plaintiff's claims are not the sort of claims for which a state can seize exclusive jurisdiction.
The LLC also moved to dismiss the breach of contract count for lack of personal jurisdiction. Because the LLC has effectively consented to personal jurisdiction as to other sufficiently related claims, the Court may and will exercise personal jurisdiction over the LLC for the breach of contract claim as well.
Finally, the defendants challenged the merits of most of the plaintiff's claims. They have limited success.
Defendant TAMA Imports, LLC ("TAMA") is a New Hampshire limited liability company that operates a mezcal business in the United States. TAMA was founded by defendants Edgar McKean and Alfredo Perez-Salinas Tijerina, and nonparty Matthew McKean, in September 2016. Initially, Edgar held 25% of TAMA's units, Tijerina owned 70%, and Matthew owned 5%.[3]
In December 2017, Plaintiff Jeehye Jung and TAMA executed a services agreement (the "Services Agreement") by which Jung would assume the role of TAMA's Chief Marketing Officer and "provide input and expertise for digital strategy and commercialization."[4] TAMA agreed to pay Jung $3,000 each month plus commissions on certain sales. TAMA would also provide Jung "an interest in [TAMA] at the rate of 0.416/unit, per month, up to 5% total equity."[5] Jung was not given a copy of TAMA's operating agreement when she entered into the Services Agreement.
On April 13, 2018, TAMA notified Jung it was terminating the Services Agreement. By then, Jung had accrued a 2.08% interest in TAMA, and TAMA owed her $6,596 under the Services Agreement.
On April 15, TAMA's general counsel emailed Jung, acknowledging her 2.08% interest, and stating that "TAMA's shares are currently valued at $1,000.00 per unit," her units were collectively worth "approximately $2,080.00," and "[t]he value of the Company itself is well in the negative as of today."[6] This per unit valuation is consistent with TAMA's Limited Liability Company Agreement (the "Operating Agreement"), which states that each TAMA unit is valued at $1,000.[7]
Later that month, Jung met with Edgar and Matthew to discuss the acquisition of her interest in TAMA and payment of amounts owed to her under the Services Agreement. They discussed the possibility of Jung accepting a payment of $8,080 for both her equity and amounts owed. They did not agree on a date the payment would be made, and they did not sign any written agreements at the time. To date, no payments have been made pursuant to that conversation.
In 2019, defendant El Tinieblo International, Inc. ("ETI"), a Delaware corporation Tijerina and Edgar had formed in 2018, purportedly acquired all of TAMA's outstanding units, including Jung's interest. On April 13, 2019, ETI filed an offering memorandum with the SEC, which announced that ETI "purchased 100% interest [sic] in TAMA Imports, LLC April 3, 2019 [sic] using company stock."[8] According to the filing, the only outstanding company shares consisted of Class A Preferred Stock, of which Tijerina and Edgar collectively owned 95% at the time of the offering. The filing describes that Tijerina, Edgar, and Matthew "contributed 100% of their membership interest in TAMA . . . in exchange for a total of 675,000 shares of stock," and that TAMA became a wholly-owned ETI subsidiary.[9] Jung has not received any compensation for her TAMA units.
Jung filed her Complaint on September 15, 2021, asserting various claims against Tijerina, Edgar, ETI, and TAMA (collectively, "Defendants"). Count I, against all Defendants, seeks a declaratory judgment that she "is the rightful owner of 2.08% of TAMA" or that she is entitled to compensation for the deprivation of her interest.[10] In Count II, Jung asserts Tijerina, Edgar, and TAMA breached their fiduciary duties of care and loyalty owed to her as a TAMA member. Count III alleges ETI aided and abetted those breaches by paying Tijerina, Edgar, and Matthew 100% of the proceeds from its acquisition of TAMA despite knowing Tijerina, Edgar, and TAMA were breaching their fiduciary duties in entering into that acquisition. Count IV claims ETI was unjustly enriched because it "purchased 100% of TAMA but paid 2.08% of the consideration to the wrong persons," and nevertheless accepted the benefit of that transaction.[11] Count V is a conspiracy claim against all Defendants, alleging they "conspired to unlawfully cut [Jung] out of TAMA and to steal from the value of her interest in it."[12]Count VI asserts a breach of contract claim against TAMA for failure to pay Jung under the Services Agreement.
On December 6, 2021, Defendants moved to dismiss the Complaint (the "Motion").[13] Defendants primarily argue the Court lacks subject matter jurisdiction over all but one of Jung's claims, because the New Hampshire LLC Act (the "NH Act") mandates those claims be brought in New Hampshire. As to the remaining breach of contract claim, Defendants argue Delaware courts lack personal jurisdiction over TAMA. Defendants contend Tijerina and TAMA did not owe Jung fiduciary duties under New Hampshire law. Finally, Defendants assert Jung has failed to state claims for aiding and abetting and conspiracy.
The parties briefed the Motion, and I heard oral argument on June 2, 2022.[14] I asked Defendants to file the Operating Agreement, which they did on June 3.[15] I also asked for supplemental briefing characterizing Jung's claims for purposes of the NH Act's venue statute and addressing the Operating Agreement.[16] The parties submitted that briefing on July 15.[17]
Defendants argue the Complaint should be dismissed under Court of Chancery Rules 12(b)(1), (2), and (6).[18] I must first determine whether the Court has subject matter jurisdiction over each claim before considering whether personal jurisdiction exists.[19] After addressing subject matter jurisdiction and personal jurisdiction, I will determine whether the Complaint adequately pleads each claim Defendants moved to dismiss under Rule 12(b)(6).[20]
"The Court of Chancery is proudly a court of limited jurisdiction."[21] "The Court of Chancery can exercise subject matter jurisdiction only when a case falls into one of three buckets."[22] Those buckets contain cases in which (i) "a plaintiff states an equitable claim," (ii) "a plaintiff requests equitable relief and there is no adequate remedy at law," and (iii) "jurisdiction exists by statute."[23] Jung seeks to invoke this Court's subject matter jurisdiction under the first bucket through her breach of fiduciary duty claim, and contends the Court should exercise its equitable cleanup jurisdiction over the remaining claims.[24]
Defendants contend two provisions of the NH Act preclude this Court from exercising subject matter jurisdiction over claims concerning the internal affairs of New Hampshire LLCs. Defendants' opening brief described those provisions as "mandatory statutory provision[s]" that require this litigation to be brought in New Hampshire.[25] Jung argues that a state may not seize exclusive jurisdiction over claims that are doctrinally described as transitory, rather than local. She also argues that internal affairs and contract claims like hers are transitory. I agree with...
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