Zuoli Li v. Xu-Nuo Pharma.

• Decision Date: 13 December 2022
• Docket Number: C. A. N22C-08-417 PRW CCLD
• Parties: Zuoli Li v. Xu-Nuo Pharma, Inc. and Yinglin Mark Xu
• Court: Delaware Superior Court

Zuoli Li
v.
Xu-Nuo Pharma, Inc. and Yinglin Mark Xu

C. A. No. N22C-08-417 PRW CCLD

Superior Court of Delaware

December 13, 2022

Date Submitted: December 9, 2022

Defendant Yinglin Mark Xu's Motion to Dismiss Count II

John G. Harris, Esquire Berger Harris LLP

Eric M. Andersen, Esquire Andersen Sleater Sianni LLC

Angus F. Ni, Esquire AFN Law, PLLC

PAUL R. WALLACE, JUDGE

Dear Counsel:

This Letter Order resolves Defendant Yinglin Mark Xu's pending Motion to Dismiss Count II of Plaintiff Zuoli Li's Amended Complaint.

I. FACTUAL AND PROCEDURAL BACKGROUND

In January 2019, Plaintiff Zuoli Li entered into two contracts with non-party Xynomic Pharmaceuticals, Inc. ("Xynomic") for the purpose of helping Xynomic: (1) become a publicly-traded company, and (2) join the NASDAQ Index.^[1] The first

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agreement, entered into on January 1, 2019, was a consulting agreement, and the second, entered into on January 21, 2019, was a stock option agreement.^[2] The consulting agreement was to run between January 1, 2019 and December 31, 2020.^[3]As part of her consulting agreement, Ms. Li was awarded stock options.^[4]

On May 15, 2019, Xynomic became a public company through a SPAC merger, with the surviving public company named Xynomic Pharmaceuticals Holdings, Inc. ("Xynomic Holdings").^[5]

After the merger, "99.3% of all SPAC investors exercised their right to a return of their capital."^[6] And soon thereafter, because Xynomic Holdings could not "meet the minimum capital requirements" of the index, NASDAQ removed Xynomic Holdings from its index.^[7]

Xynomic Holdings blamed Ms. Li for this failure.^[8] So, on November 30, 2020 (a month before the consulting agreement was to end by its own terms), Xynomic Holdings-alleging Ms. Li materially breached its terms-terminated the consulting

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agreement for cause.^[9]

The stock option agreement provided that if Ms. Li was terminated for cause, then her stock option would immediately terminate.^[10]

Xynomic Holdings' CEO Yinglin Mark Xu notified Ms. Li on November 30^ththat the consulting agreement was terminated.^[11]

The next day, Ms. Li sought to exercise her options to purchase shares of Xynomic Holdings.^[12]

Just about two months later, Xynomic Holdings was acquired by co-defendant Xu-Nuo Pharma, Inc. ("Xu-Nuo Pharma") through a short-form merger.^[13] To effectuate this acquisition, shareholders were able to either transfer their shares or have their shares bought out.^[14] To cash-out those shareholders electing that option, Mr. Xu personally loaned his company, Xu-Nuo Pharma, the money through a non-interest-bearing promissory note.^[15]

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Xu-Nuo Pharma paid Ms. Li no consideration from this acquisition because it found she was not a proper shareholder of Xynomic Holdings.^[16]

Ms. Li later filed a complaint in the Court of Chancery to contest Xu-Nuo Pharma's actions.^[17] The Court of Chancery questioned whether it had jurisdiction over the action.^[18] And the parties then stipulated this Court was the appropriate forum to hear the action and asked for a transfer here.^[19] The Court of Chancery obliged.^[20]

Ms. Li filed-and soon thereafter amended-her Complaint here.^[21]

In Count I (breach of contract against Xu-Nuo Pharma), Ms. Li alleges Xynomic Holdings (and its successor Xu-Nuo Pharma) breached the consulting agreement and stock option agreement by not issuing her Xynomic Holdings shares

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pursuant to those agreements.^[22]

In Count II (tortious interference of a contract against Yinglin Mark Xu), Ms. Li alleges Mr. Xu tortiously interfered in the consulting and stock option agreements.^[23]

II. STANDARD OF REVIEW

A. Motion to Dismiss Under Rule 12(b)(2)

"A non-resident defendant may move to dismiss for lack of personal jurisdiction under this Court's Civil Rule 12(b)(2)."^[24] "Generally, a plaintiff does not have the burden to plead in its complaint facts establishing a court's personal jurisdiction over [a non-resident] defendant."^[25] But when 12(b)(2) is invoked, the plaintiff does carry this burden.^[26] Where no discovery has been conducted,

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plaintiff's burden is a prima facie one.^[27] As such, "the Court 'is not limited to the pleadings and can consider affidavits, briefs of the parties,' and the record as a whole."^[28] "Still, unless contradicted by affidavit, the Court must (1) accept as true all well-pleaded allegations in the complaint; and (2) construe the record in the light most favorable to the plaintiff."^[29]

B. Motion to Dismiss Under Rule 12(b)6)

"Under Superior Court Civil Rule 12(b)(6), the legal issue to be decided is, whether a plaintiff may recover under any reasonably conceivable set of circumstances susceptible of proof under the complaint."^[30] Under that Rule, the Court will

(1) accept all well pleaded factual allegations as true, (2) accept even vague allegations as "well pleaded" if they give the opposing party notice of the claim, (3) draw all reasonable inferences in favor of the non-moving party and (4) not dismiss the claims unless the plaintiff would not be entitled to recover under any reasonably conceivable set of circumstances.^[31]

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"If any reasonable conception can be formulated to allow Plaintiffs' recovery, the motion must be denied."^[32]

The Court must accept as true all well-pleaded allegations for Rule 12(b)(6) purposes.^[33] Every reasonable factual inference will be drawn in the non-moving...