IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
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`OUTLAW BEVERAGE, INC.,
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`Plaintiff,
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`v.
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`LANCE COLLINS, and A SHOC
`BEVERAGE, LLC,
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`Defendants.
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`C.A. No. 2019-0342-AGB
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`PUBLIC VERSION
`MAY 10, 2019
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`
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`MOTION FOR EXPEDITED PROCEEDINGS
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`Outlaw Beverage, Inc.,1 through its undersigned counsel, hereby moves this
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`Court for an Order, in the form attached hereto, expediting proceedings in the above-
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`captioned action. The grounds for this motion are as follows:
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`INTRODUCTION
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`1.
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`Outlaw develops, markets, and distributes its own line of energy drink
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`beverages. (¶ 16). Outlaw’s energy beverage formulas are Outlaw’s confidential
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`and proprietary formulations. (¶ 16).
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`1 Unless otherwise defined herein, all capitalized terms shall have the same meaning
`as set forth in the Complaint. All references to “¶” and “¶¶” are citations to
`Plaintiff’s Verified Complaint (“Complaint”).
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`EFiled: May 10 2019 03:04PM EDT
`Transaction ID 63253672
`Case No. 2019-0342-AGB
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`OUTLAW BEVERAGE, INC.,
`
`Plaintiff,
`
`
`v.
`
`LANCE COLLINS, and A SHOC
`BEVERAGE, LLC,
`
`
`Defendants.
`
`
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`
`C.A. No. 2019-0342-AGB
`
`PUBLIC VERSION
`MAY 10, 2019
`
`
`
`MOTION FOR EXPEDITED PROCEEDINGS
`
`Outlaw Beverage, Inc.,1 through its undersigned counsel, hereby moves this
`
`Court for an Order, in the form attached hereto, expediting proceedings in the above-
`
`captioned action. The grounds for this motion are as follows:
`
`INTRODUCTION
`
`1.
`
`Outlaw develops, markets, and distributes its own line of energy drink
`
`beverages. (¶ 16). Outlaw’s energy beverage formulas are Outlaw’s confidential
`
`and proprietary formulations. (¶ 16).
`
`
`1 Unless otherwise defined herein, all capitalized terms shall have the same meaning
`as set forth in the Complaint. All references to “¶” and “¶¶” are citations to
`Plaintiff’s Verified Complaint (“Complaint”).
`
`EFiled: May 10 2019 03:04PM EDT
`Transaction ID 63253672
`Case No. 2019-0342-AGB
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`2.
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`Lance Collins, along with Doug Weekes, founded Outlaw in 2014. (¶
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`14). Collins served as a member of Outlaw’s Board of Directors from July 1, 2014
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`to November 9, 2018. (¶¶ 15, 29).
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`3.
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`As alleged more fully in the Complaint, the allegations of which are
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`incorporated herein by reference, in August 2018, Outlaw began developing a highly
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`caffeinated, all natural energy drink as a result of a large retail chain’s stated interest
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`in such a drink. (¶ 18). In August 2018, Collins attended a meeting on behalf of
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`Outlaw, with other Outlaw representatives and representatives of that retailer, to
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`discuss this promising business opportunity. (¶ 18). As a direct result of that
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`retailer’s demonstrated interest at that August meeting, Outlaw immediately began
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`development of a new energy drink, expending significant resources for this
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`particular purpose over the next several weeks. (¶¶ 19-20).
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`4.
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`On September 26, at another meeting between the retailer and Outlaw,
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`Outlaw presented the retailer with a confidential presentation demonstrating
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`Outlaw’s “Adrenaline Shoc” product. (¶21). The retailer then mandated that Outlaw
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`“move as fast as possible to get [Adrenaline Shoc] to market.” (¶ 21).
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`5. Meanwhile, unbeknownst to Outlaw, Collins all the while was
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`orchestrating a scheme to divert the Adrenaline Shoc opportunity from Outlaw—the
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`company he co-founded and then-served as a director—and steal it for himself. (¶¶
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`25-28). Collins took steps to (i) form a new entity, A Shoc Beverage, LLC, a
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`2
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`Delaware limited liability company, for the sole purpose of competing with Outlaw
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`and exploiting the Adrenaline Shoc opportunity, (ii) register a trademark application
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`for “Adrenaline Shoc” in the name of his separate company, Chez Isabelle, LLC,
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`and (iii) launch his competing Adrenaline Shoc energy drink, misappropriating and
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`using Outlaw’s confidential and proprietary information. (¶¶ 25-28). Defendants
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`intend to launch their wrongfully developed and misappropriated energy drink in
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`June 2019. (¶ 31).
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`ARGUMENT
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`6.
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`To warrant expedited treatment, Outlaw needs only show “a
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`‘sufficiently colorable claim and . . . a sufficient possibility of a threatened
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`irreparable injury.’” Laborers Local 235 Benefit Funds v. Starent Networks, Corp.
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`2009 WL 4725866, at *1 (Del. Ch.) (quoting Giammargo v. Snapple Beverage
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`Corp., 1994 WL 672698, at *2 (Del. Ch.)). In applying this standard, this Court
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`“traditionally has acted with a certain solicitude” for expedited proceedings and “has
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`followed the practice of erring on the side of more [expedited] hearings rather than
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`fewer.” Renco Grp., Inc. v. MacAndrews AMG Holdings LLC, 2013 WL 209124, at
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`*1 n.10 (Del. Ch.) (“The burden on a plaintiff in seeking an expedited proceeding is
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`not high.”); see also In re Int’l Jensen Inc. S’holders Litig., 1996 WL 422345, at *1
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`(Del. Ch. July 16, 1996) (“A party’s request to schedule an application for a
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`3
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`preliminary injunction, and to expedite the discovery related thereto, is normally
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`routinely granted. Exceptions to that norm are rare.”).
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`7.
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`The Court should expedite this action because the Complaint alleges
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`colorable breach of fiduciary duty, aiding and abetting, theft of trade secrets, and
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`unjust enrichment claims and shows a sufficient possibility of irreparable injury. See
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`Gomi Investors, LLC v. Schimmell Holdings, Inc., at *1 (Del. Ch. July 27, 2006)
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`(Good cause to grant a motion to expedite exists where “a plaintiff … articulate[s] a
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`sufficiently colorable claim and show[s] a sufficient possibility of a threatened
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`irreparable injury”); see also Box v. Box, 697 A.2d 395, 399 (Del. 1997) (“Delaware
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`courts are always receptive to expediting any type of litigation in the interests of
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`affording justice to the parties.”).
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`8.
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`Outlaw Has Alleged Colorable Claims. Outlaw has alleged colorable
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`claims that: (i) Collins, as an Outlaw director, breached his fiduciary duties to
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`Outlaw, (ii) A Shoc Beverage, LLC, aided and abetted those breaches, (iii)
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`Defendants engaged in theft of Outlaw’s trade secrets, and (iv) Defendants have
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`been unjustly enriched by their misconduct. A complaint alleges colorable breach
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`of duty claims when it alleges (i) the existence of a fiduciary relationship, and (ii) a
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`breach of the fiduciary duty. See Auriga Capital Corp. v. Gatz Props., 40 A.3d 839,
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`850 (Del. Ch. 2012). “A breach of fiduciary duty occurs when a fiduciary commits
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`an unfair, fraudulent, or wrongful act, including ... a misuse of confidential
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`4
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`information[,] ... or usurpation of the [company’s] business opportunity.” Beard
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`Research, Inc. v. Kates, 8 A.3d 573, 601 (Del. Ch. 2010).
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`9.
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`Here, Collins, as a director of Outlaw owed fiduciary duties. Collins
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`breached his fiduciary duties by orchestrating a scheme to put his own self interests
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`ahead of Outlaw’s, misusing Outlaw’s proprietary and confidential information to
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`steal the A Shoc Beverage opportunity from Outlaw. Collins, in his role as a director
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`of Outlaw, was privy to confidential and proprietary information, and used that
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`information to start a new company, A Shoc Beverage, LLC, designed to usurp
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`Outlaw’s business and divert opportunity from Outlaw. Collins similarly caused
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`Chez Isabelle, LLC to register the misappropriated Adrenaline Shoc design
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`trademark in its own name after stealing it from Outlaw. Defendants, as part of this
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`unfairly competing venture, stand to profit from the misappropriated Adrenaline
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`Shoc beverage’s success, to the exclusive detriment of Outlaw. These allegations
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`clearly state a claim for breach of fiduciary duty. See Feely v. NHAOCG, LLC, 62
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`A.3d 649 (Del. Ch. 2012) (allegations that fiduciary acted secretively and profited
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`at the expense of the company sufficient to state a claim for breach of fiduciary duty);
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`PT China LLC v. PT Korea LLC, 2010 WL 761145, at *7 (Del. Ch. Feb. 26, 2010)
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`5
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`(allegations of misappropriation are sufficient to state a claim for the breach of the
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`duty of loyalty).
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`10.
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`In addition, Collins breached his fiduciary duty to act in good faith in
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`his decisions affecting Outlaw. See e.g., In re Walt Disney Co. Derivative Litig.,
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`906 A.2d 27, 64 (Del. 2006). Directors can act in bad faith through (i) conduct
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`motivated by subjective bad intent, (ii) conduct resulting from gross negligence, and
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`(iii) a conscious disregard for their responsibilities. Id. at 64-66. Collins’ actions to
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`wrongfully divert Outlaw’s business opportunity to A Shoc Beverage, LLC, was
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`motivated by bad intent, and his formation of A Shoc Beverage, LLC for the sole
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`purpose to divert Outlaw’s business opportunity was intentional and harmful to
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`Outlaw’s business. Collins’ misconduct demonstrates a brazen disregard for his
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`fiduciary responsibilities to Outlaw, and A Shoc Beverage, LLC aided and abetted
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`these breaches because it knowingly participated in Collins’ misconduct with the
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`intent of stealing for itself Outlaw’s confidential and proprietary information and
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`corporate opportunity in the Adrenaline Shoc energy drink.
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`11. Third, Defendants have misappropriated Outlaw’s trade secrets under
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`6 Del. C. § 2001 (Delaware’s Uniform Trade Secrets Act). Under Delaware’s
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`Uniform Trade Secrets Act, Defendants are liable for “the communication of a trade
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`secret ... improperly used or disclosed by the defendant to harm the plaintiff.” Dow
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`Chemical Canada, Inc., v. HRD Corp., 909 F.Supp.2d 340, 346 (D. Del. 2012).
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`6
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`Here, Outlaw’s branding, labeling and formulations for its “Adrenaline Shoc”
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`energy drink are a trade secret. Collins, as a director of Outlaw, had a duty to
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`maintain the confidentiality of Outlaw’s Adrenaline Shoc trade secret. Instead,
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`Collins, and A Shoc, have knowingly disclosed the Adrenaline Shoc trade secret and
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`have benefitted from the misappropriation of the Adrenaline Shoc trade secret to the
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`detriment of Outlaw.
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`12. Finally, Defendants have unjustly profited from their usurpation of
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`Outlaw’s business to Outlaw’s detriment. Defendants’ benefits and profits are
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`unjust. Accordingly, Outlaw requires injunctive relief to prevent Defendants from
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`furthering their scheme to divert Outlaw’s business.
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`13. Outlaw Faces A Threat of Irreparable Injury. Outlaw faces a
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`sufficient possibility of a threatened irreparable injury if Defendants are able to go
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`to market first with the stolen Adrenaline Shoc drink product so as to justify
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`expedited proceedings. Under Delaware law, “[i]t is not that the injury must be
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`beyond the possibility of repair by money compensation but it must be of such a
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`nature that no fair and reasonable redress may be had in a court of law and that to
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`refuse the injunction would be a denial of justice.” State v. Del. State Educ. Ass’n,
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`326 A.2d 868, 875 (Del. Ch. 1974). The danger of losing market share and valuable
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`revenue-generating relationships (such as the one with the large national retailer) is
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`irreparable harm that may not be compensable in any manner other than injunctive
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`7
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`relief. See Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Price, 1989 WL 108412,
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`at *2-4 (Del. Ch. Sept. 13, 1989). Here, Defendants are depriving Outlaw of its
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`prospective revenue-generating relationships through their scheme to misuse
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`Outlaw’s proprietary and confidential information for their own personal gain.
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`Absent an injunction, Outlaw will be irreparably harmed through the substantial
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`losses caused by Defendants’ actions. See Accountable Care Associates, Inc. v.
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`Gaziano, 2015 WL 534499, at *1 (Del. Ch. Jan. 29, 2015) (granting motion to
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`expedite and temporary restraining order based on allegations of breach of fiduciary
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`duty and usurpation of corporate opportunity).
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`14. The Balance of Hardships Favors Expedited Proceedings. The
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`balance of hardships favors the entry of an order granting Outlaw’s request for
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`expedited proceedings. Defendants’ breaches of fiduciary duty, aiding and abetting,
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`and other misconduct in connection with the A Shoc Beverage opportunity will
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`forever deprive Outlaw of the promising business opportunity and its right to obtain
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`the full value for its Adrenaline Shoc product. By contrast, Defendants will suffer
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`no undue harm if Outlaw is granted expedited relief.
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`REQUESTED RELIEF
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`15.
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`Expedition is necessary to allow the parties to develop an adequate
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`record for the Court to consider in connection with a request for preliminary
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`injunctive relief preventing Defendants from moving forward with
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`their
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`8
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`misappropriated Adrenaline Shoc product. Defendants plan to launch their
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`misappropriated product no later than the end of June 2019. Plaintiff will engage
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`with Defendants promptly to negotiate an appropriate schedule leading to a
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`preliminary injunction prior to Defendants’ intended product launch. Subject to
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`Plaintiff’s discussions with Defendants regarding an expedited schedule, Plaintiff
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`requests that the Court enter the proposed form of expedited scheduling order
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`enclosed herewith.
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`OF COUNSEL:
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`Paul F. Beckwith
`Andrew T. O’Connor
`Goulston & Storrs PC
`400 Atlantic Avenue
`Boston, MA 02110
`(617) 482-1776
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`Dated: May 7, 2019
`6197205
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`POTTER ANDERSON & CORROON
`LLP
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`
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`/s/ Christopher N. Kelly
`Christopher N. Kelly (No. 5717)
`Callan R. Jackson (No. 6292)
`1313 N. Market Street
`Hercules Plaza, 6th Floor
`Wilmington, DE 19899
`(302) 984-6000
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`Attorneys for Plaintiff Outlaw
`Beverage, Inc.
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`WORDS: 1,760
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`9
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