Perry v. Dieter Walter Neupert & Côte D'Azur Estate Corp.

Decision Date15 February 2019
Docket NumberC.A. No. 2017-0290-JTL
PartiesLILLY LEA PERRY, Plaintiff, v. DIETER WALTER NEUPERT and CÔTE D'AZUR ESTATE CORPORATION, Defendants, and THE BGO FOUNDATION, Relief Defendant. CÔTE D'AZUR ESTATE CORPORATION, Counterclaim Plaintiff, v. LILLY LEA PERRY, Counterclaim Defendant.
CourtCourt of Chancery of Delaware
MEMORANDUM OPINION

Jeremy D. Anderson, FISH & RICHARDSON P.C., Wilmington, Delaware; Counsel for Lilly Lea Perry.

Norris P. Wright, William M. Kelleher, Phillip A. Giordano, GORDON, FOURNARIS & MAMMARELLA, P.A., Wilmington, Delaware; Counsel for The BGO Foundation.

Douglas D. Hermann, James H. S. Levine, PEPPER HAMILTON LLP; Counsel for Côte d'Azur Estate Corporation.

Dieter Walter Neupert, pro se.

LASTER, V.C.

The parties dispute who owns the equity of defendant Côte D'Azur Estate Corporation. The entity came into existence in 2001 as a single-member, member-managed, Delaware limited liability company named Côte D'Azur Estate LLC. Non-party Israel Igo Perry was its sole member. Israel died in 2015, survived by plaintiff Lilly Lea Perry (his wife) and non-parties Tamar and Yael Perry (their daughters).1 Lilly contends that Israel was the LLC's sole member when he died and that his interest in the LLC passed to his estate. The disposition of the estate is currently subject to probate proceedings in the United Kingdom.

In 2016, as part of the events giving rise to this litigation, defendant Dieter Walter Neupert filed a certificate of conversion with the Delaware Secretary of State that converted the company into a corporation. For simplicity, this decision refers to the entity in both manifestations as the "Company." Neupert also filed a new certificate of incorporation for the Company that authorized 10,000 shares of stock, and he prepared minutes and a share certificate which purported to document the fact that all of the Company's shares were owned by The BGO Foundation (the "Foundation").2 Lilly assertsthat Neupert had no authority to take these actions.

The Foundation is a private Liechtenstein foundation, which is an entity roughly analogous to a Delaware statutory trust. The Foundation is one of over thirty entities comprising Israel's complex estate plan, which he and his advisors called "the Structure." Neupert, a Swiss attorney, was the chief architect of the Structure. Non-party Lopag Trust, a Swiss commercial trust company, formed and manages many of the entities in the Structure, including the Foundation. Principals and employees of Lopag, including non-party Dominik Naeff, served on the Foundation's governing board of trustees and acted on its behalf. Neupert was a co-founder of Lopag, and he served on its governing board when he took the actions that Lilly challenges.

Lilly originally sued the Company and Neupert, seeking to invalidate the conversion and establish her beneficial ownership of the Company's equity in her capacity as Israel's sole heir under his last will and testament. She subsequently moved for and received leave to add the Foundation as a relief defendant. The Foundation responded by moving to dismiss the complaint for lack of personal jurisdiction. I deferred ruling on the Foundation's motion, holding that an evidentiary hearing was necessary to resolve whether personal jurisdiction existed.

A Delaware court can exercise personal jurisdiction over a non-resident co-conspirator who knew or had reason to know that the conspiracy had a Delaware nexus. Lilly proved that the Foundation and Neupert conspired to seize the Company's equity, thereby extinguishing her beneficial interest and engaging in the tort of conversion. Lilly proved that as part of that conspiracy, Neupert caused corporate documents to be filed withthe Delaware Secretary of State, establishing the necessary Delaware nexus. Lilly proved that Naeff and his colleagues at Lopag, acting on behalf of the Foundation, helped Neupert develop his plan and assisted him in his efforts. These activities support the exercise of personal jurisdiction over the Foundation as Neupert's co-conspirator.

In response to Lilly's contentions, the Foundation and its co-defendants claim they could not have engaged in a conspiracy because (i) the Foundation already owned all of the equity in the Company long before Neupert acted in 2016, and (ii) the Foundation granted Neupert a power of attorney in February 2016, executed in its capacity as the Company's sole member, which authorized Neupert to act as he did. The defendants ground their claim on a deed of assignment that Israel executed on May 1, 2013 (the "Deed of Assignment"), which recites that he was assigning his equity interest in the Company and three other entities to the Foundation.

The Deed of Assignment did not effectuate a transfer of Israel's member interests to the Foundation, nor could it have resulted in the Foundation becoming the Company's sole member. The Deed of Assignment documented Israel's intent to make an inter vivos gift. Israel never completed the gift, both because he never delivered his member interests to the Foundation, and because the Deed of Assignment was not an effective donative instrument. When signing the Deed of Assignment, Israel did not intend to accomplish an immediate transfer of his equity; he wanted to evaluate the tax implications of the move before completing it. The transfer was never completed. Instead, Israel revoked the gift in December 2013 when he decided not to complete the transfer because of adverse tax consequences in France.

Assuming counterfactually that Israel had intended for the transfer of interests to be immediately effective, the transaction could not have resulted in the Foundation becoming the Company's sole member. The transfer at most would have resulted in the Foundation becoming an assignee. Moreover, under the Delaware Limited Liability Company Act (the "LLC Act") as it existed in May 2013, the transfer would have resulted in the Company having no members, causing it to dissolve. Along this alternative timeline, the Foundation could not have become the Company's sole member and could not have authorized Neupert's actions.

The evidence proves that the Foundation's representatives knew that the Deed of Assignment was never implemented. Despite this knowledge, they caused the Foundation to participate fully in Neupert's scheme to assert control over the Company. They did so in an effort to coerce Lilly into accepting the disposition of Israel's property that Neupert and Lopag wanted to implement. As part of that scheme, the Lopag representatives helped Neupert manufacture documents to substantiate the Foundation's claim of ownership. Naeff and his colleagues at Lopag also sought to obtain a legal opinion attesting to the valid issuance of the shares. In an effort to secure a favorable opinion, Naeff and a Lopag colleague misled the law firm by withholding material information. When the law firm balked at issuing the opinion, Neupert claimed he could provide a power of attorney from the Foundation that gave him the power to act. In late September or October 2016, Lopag and Neupert manufactured the power of attorney and backdated it to February 5, 2016, ostensibly before Neupert filed the certificate of conversion and certificate of incorporation. In this court and elsewhere, the Foundation has aligned itself with Neupert,asserted that it owns all of the Company's equity, and argued in favor of the effectiveness of the Deed of Assignment, the power of attorney, the conversion, and other manufactured corporate documents. The evidence shows that these claims are false.

Under the conspiracy theory of jurisdiction, the Foundation is properly subject to personal jurisdiction in this court as a relief defendant for purposes of claims challenging its ownership of the Company's equity. The Foundation's motion to dismiss for lack of personal jurisdiction is denied.

I. FACTUAL BACKGROUND

During a two-day evidentiary hearing, the parties introduced a total of 234 exhibits, and two fact witnesses testified live. The parties lodged two depositions and stipulated to the introduction of two affidavits from a third witness in lieu of live testimony. They submitted thirty stipulations of undisputed fact.3

For purposes of the hearing, two competing adverse inferences were in play. Because Neupert refused to be deposed and declined to appear at the hearing, I ruled that Icould draw inferences in Lilly's favor and adverse to the Foundation based on any relevant testimony that Neupert reasonably could have offered.4 Because Lilly failed to timely review Israel's home computer and to produce responsive documents that it contained, I ruled that I could draw inferences in the Foundation's favor and adverse to Lilly based on information that the computer reasonably could have contained.5

The burden of proof to establish facts supporting jurisdiction rests with the party asserting that jurisdiction exists.6 The standard of proof is more flexible. "If the motion is decided on affidavits, the court should require only that plaintiff make out a prima facie case."7 Eventually, however, the plaintiff must prove the facts necessary to establishpersonal jurisdiction "by a preponderance of the evidence."8 If the court holds an evidentiary hearing on jurisdictional issues, then the court may make findings based on a preponderance of the evidence standard, or a court may use a less onerous "likelihood of success" standard.9 In my view, a court would use the lower standard if the record presented at the evidentiary hearing provided some support for the assertion of jurisdiction but fell short of a preponderance. By asserting jurisdiction on a preliminary basis under the likelihood-of-success test, the court permits the case to proceed through discovery so that the court can make more definitive findings at trial.

This decision makes findings of fact based on a preponderance of the evidence. Using this standard is...

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