IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
`ASTRIA VENTURES, LLC, Individually :
`and Derivatively on Behalf of FloatCare, :
`Inc., :
`:
`Plaintiffs, :
`:
`v. :
`: C.A. No. 2024-0861-NAC
`SUMIT SIKKA, SKS SOLUTIONS, LLC :
`d/b/a FUSION TECH PARTNERS and :
`JOHN KEGEL, :
`:
`Defendants, :
` and :
`:
`FLOATCARE, INC., :
`:
`Nominal Defendant. :
`OPENING BRIEF IN SUPPORT OF DEFENDANT JOHN KEGEL’S
`MOTION TO DISMISS FIRST AMENDED COMPLAINT
`Dated: June 5, 2025
`OF COUNSEL:
`Julie Countiss
`Melissa N. Sternfels
`CONKLIN COUNTISS STERNFELS, PLLC
`901 Heights Blvd
`Houston, TX 77008
`Phone:713-997-2416
`CHIPMAN BROWN CICERO & COLE, LLP
`Paul D. Brown (#3903)
`Joseph B. Cicero (#4388)
`Kelly E. Rowe (#6199)
`Hercules Plaza
`1313 North Market Street, Suite 5400
`Wilmington, Delaware 19801
`(302) 295-0191
`brown@chipmanbrown.com
`cicero@chipmanbrown.com
`rowe@chipmanbrown.com
`EFiled: Jun 05 2025 04:29PM EDT
`Transaction ID 76406562
`Case No. 2024-0861-NAC
`
`
`
`
`
`
`
`i
`TABLE OF CONTENTS
`PRELIMINARY STATEMENT....................................................................................1
`STATEMENT OF FACTS ............................................................................................2
`ARGUMENT.................................................................................................................4
`I. THE COURT LACKS PERSONAL JURISDICTION
`OVER KEGEL ................................................................................................4
`A. Kegel Lacks Minimum Contacts with Delaware. ..................................4
`B. Conspiracy Jurisdiction is Not Applicable to Kegel. .............................5
`II. PLAINTIFF LACKS STANDING TO ASSERT
`DERIVATIVE CLAIMS..................................................................................7
`III. PLAINTIFF FAILS TO STATE A CLAIM AGAINST KEGEL ..................11
`A. Plaintiff Fails to Plead Fraud with the Requisite Particularity
`under Court of Chancery Rule 9(b) ......................................................11
`B. Plaintiff Fails to State a Claim for Civil Conspiracy ..........................14
`C. Plaintiff Fails to State a Claim for Aiding and Abetting
`Breach of Fiduciary Duty......................................................................17
`1. Plaintiff Fails to Establish an Underlying Claim for
`Breach of Fiduciary Duties ........................................................17
`2. Astria Fails to Establish Kegel’s Knowing Participation
` in any Breach ...........................................................................19
`3. Plaintiff Fails to Allege Any Damage Proximately Caused
`by the Breach..............................................................................20
`D. Astria Fails to State a Claim for Breach of the Duty of Good
`Faith & Fair Dealing ............................................................................20
`CONCLUSION ...........................................................................................................23
`
`
`
`
`
`
`
`ii
`TABLE OF AUTHORITIES
`Page(s)
`Cases
`Abry Partners V., L.P. v. F & W Acq., LLC,
`891 A.2d 1032 (Del Ch. 2006).................................................................................12
`Airborne Health, Inc. v. Squid Soap, LP,
`984 A.2d 126 (Del. Ch. 2009)..................................................................................22
`Albert v. Alex. Brown Mgmt. Servs., Inc.,
`2005 WL 2130607 (Del. Ch. Aug. 26, 2005)...........................................................18
`Allen v. El Paso Pipeline GP Co., L.L.C.,
`113 A.3d 167 (Del. Ch. 2014)..................................................................................22
`Allied Capital Corp. v. GC-Sun Hldgs., L.P.,
`910 A.2d 1020 (Del. Ch. 2006)..........................................................................14, 16
`Brevet Capital Special Opportunities Fund LP v. Fourth Third, LLC,
`2011 WL 3452821 (Del. Super. Aug. 5, 2011)........................................................16
`Brookfield Asset Mgmt., Inc. v. Rosson,
`261 A.3d 1251 (Del. 2021).........................................................................................8
`Burger King Corp. v. Rudzewicz,
`471 U.S. 462 (1985)...................................................................................................4
`Central Mortg. Co. v. Morgan Stanley Capital Hldgs., LLC,
`27 A.3d 531 (Del. 2011)...........................................................................................11
`Computer People Inc. v. Best International Group, Inc.,
`1999 WL 288119 (Del. Ch. April 27, 1999) ..............................................................6
`Dent v. Ramtron Int’l Corp.,
`2014 WL 2931180 (Del. Ch. June 30, 2014) ..........................................................20
`Dunlap v. State Farm & Cas. Co.,
`878 A.2d 434 (Del. 2005).........................................................................................22
`EBG Holdings LLC v. Vredezicht's Gravenhage 109,
`2008 WL 4057745 (Del. Ch. Sept. 2, 2008) ..............................................................7
`
`
`
`
`
`
`
`iii
`English v. Narang,
`2019 WL 1300855 (Del. Ch. Mar. 20, 2019)...........................................................19
`Firefighters' Pension Sys. of City of Kansas City, Missouri Tr. v. Presidio, Inc.,
`251 A.3d 212 (Del. Ch. 2021)..................................................................................17
`Fortis Advisors LLC v. Dialog Semiconductor PLC,
`2015 WL 401371 (Del. Ch. Jan. 30, 2015) .............................................................11
`Frederick Hsu Living Tr. v. ODN Holding Corp.,
`2017 WL 1437308 (Del. Ch. Apr. 14, 2017) ...........................................................17
`Gea Sys. N. Am. LLC v. Golden State Foods Corp.,
`2020 WL 3047207 (Del. Super. June 8, 2020).......................................................13
`In re General Motors (Hughes) Shareholder Litigation,
`897 A.2d 162 (Del. 2006)...........................................................................................1
`Gentile v. Rossette,
`906 A.2d 91 (Del. 2006).............................................................................................8
`Gerber v. EPE Holdings, LLC,
`2013 WL 209658 (Del. Ch. Jan. 18, 2013) .............................................................21
`Hampshire Gp. Ltd. v. Kuttner,
` 2010 WL 2739995 (Del. Ch. July 12, 2010)............................................................18
`Hart Holding Co. v. Drexel Burnham Lambert, Inc.,
`1992 WL 127567 (Del. Ch. May 28, 1992) ...............................................................4
`Istituto Bancario Italiano, SpA v. Hunter Engineering Co., Inc.,
` 449 A.2d 210 (Del. 1982) ..........................................................................................6
`KnighTek, LLC v. Jive Commc'ns, Inc.,
`225 A.3d 343 (Del. 2020).........................................................................................12
`Kofron v. Amoco Chems. Corp.,
`441 A.2d 226 (Del. 1982).........................................................................................11
`Kuroda v. SPJS Holdings, L.L.C.,
`971 A.2d 872 (Del. Ch. 2009)..................................................................................22
`Lonergan v. EPE Holdings, LLC,
`5 A.3d 1008 (Del. Ch. 2010)..............................................................................21, 22
`
`
`
`
`
`
`
`iv
`Malpiede v. Townson,
`780 A.2d 1075 (Del. 2001).................................................................................17, 19
`Matrix Parent, Inc. v. Audax Management Company, LLC,
`319 A.3d 909 (Del. Super. 2024)...............................................................................7
`Metro Storage Int’l LLC v. Harron,
`275 A.3d 810 (Del. Ch. 2022)..................................................................................18
`In re Mindbody, Inc., Stockholder Litig.,
`332 A.3d 349 (Del. 2024).........................................................................................20
`Mogul Corp. v. UTi, United States, Inc.,
`45 N.Y.S.3d 401 (N.Y.A.D. 1 Dept. 2017) ..............................................................15
`Neurvana Med., LLC v. Balt USA, LLC,
`2020 WL 949917 (Del. Ch. Feb. 27, 2020) .............................................................12
`Nicolet, Inc. v. Nutt,
`525 A.2d 146 (Del. 1987).........................................................................................14
`O’Gara v. Coleman,
`2020 WL 752070 (Del. Ch. Feb. 14, 2020) .............................................................14
`OneScreen Inc. v. Hudgens,
`2010 WL 1223937 (Del. Ch. Mar. 30, 2010).............................................................4
`Rammano v. Cawley,
`705 A.2d 1029 (Del. 1998).......................................................................................15
`RBC Capital Markets, LLC v. Jervis,
`129 A.3d 816 (Del. 2015).........................................................................................19
`Rivera v. Angkor Capital Ltd., et al.,
`2024 WL 3873050 (Del. Ch. Aug. 20, 2024)...........................................................10
`Ryan v. Buckeye Partners, L.P.,
`2022 WL 389827 (Del. Ch. Feb. 9, 2022) ...............................................................21
`Savor, Inc. v. FMR Corp.,
`812 A.2d 894 (Del. 2002).........................................................................................11
`Shaffer v. Heitner,
`433 U.S. 186 (1977)...................................................................................................4
`
`
`
`
`
`
`
`v
`Solash v. Telex Corp.,
`1988 WL 3587 (Del. Ch. Jan. 19, 1988) .................................................................19
`Sussex Farm Ltd. v. Mbanefo,
`2022 WL 2126228 (Del. Super. June 9, 2022) .........................................................6
`In re Swervepay Acquisition, LLC,
`2022 WL 3701723 (Del. Ch. Aug 26, 2022)..............................................................7
`Tomczak v. Morton Thiokol, Inc.,
`1990 WL 42607 (Del. Ch. Apr. 5, 1990) .................................................................18
`Tooley v. Donaldson, Lufkin & Jenrette, Inc.,
`845 A.2d 1031 (Del. 2004).........................................................................................8
`Trenwick America Litigation Trust v. Ernst & Young, L.L.P.,
`906 A.2d 168 (Del. Ch. 2006)............................................................................13, 14
`In re Tri-Star Pictures,
`634 A.2d 319 (Del. 1993).........................................................................................11
`VLIW Tech., LLC v. Hewlett-Packard Co.,
`840 A.2d 606 (Del. 2003).........................................................................................11
`Wood v. Baum,
`953 A.2d 136 (Del. 2008).........................................................................................19
`Statutes
`6 Del. C. §2708..............................................................................................................5
`8 Del. C. §122(2) .........................................................................................................10
`8 Del. C. §510..........................................................................................................9, 10
`8 Del. C. § 513.............................................................................................................10
`10 Del. C. §3104(c)........................................................................................................4
`
`
`
`
`
`
`
`vi
`Rules
`Court of Chancery Rule 9(b)11...........................................................................passim
`Court of Chancery Rule 12(b)(6)................................................................................11
`Delaware Rule of Evidence 201 ...................................................................................1
`
`
`
`
`
`
`
`PRELIMINARY STATEMENT
`Among the most fundamental tenets of litigation is that a defendant is
`entitled to know the claims against him. Rule 9(b) brings this to a finer point for
`allegations of fraud, requiring the particularity of the who, what, when, where and
`with respect to knowledge, the why. The Court can spend endless hours repeatedly
`reading the Amended Complaint, and the Amended Complaint will remain as
`opaque as it started as to the actual claims against Defendant John Kegel (“Kegel”).
`While Kegel’s name is mentioned numerous times in the Amended Complaint, his
`purported actions remain a mystery. There is not a single factual allegation against
`Kegel in the Amended Complaint that rises to the level of particularity required to
`sustain a fraud or conspiracy claim. Kegel is functionally a stranger to this action—
`Plaintiff does not allege ever having even spoken to him; in fact, it cannot even
`identify his relationship with Defendant Sumit Sikka ( “Sikka”).1 Further, Kegel is
`a stranger to the State of Delaware, having committed no acts that would subject
`him to the personal jurisdiction of this Court. Astria’s sole claim as to Kegel relates
`to his relationship with FTP, a company that also is not a resident of Delaware, and
`also did not commit, and is not alleged to have committed, any acts in Delaware.
`Finally, and equally fundamental, Plaintiff purports to bring derivative claims
`1 Kegel is alleged to be Sikka’s “partner” in Fusion Tech Partners, (the d/b/a of SKS
`Solutions LLC) a separate entity from FloatCare. (Am. Compl. ¶ 11). The Court may take
`judicial notice of the Certificate of Formation and Assumed Name Filing publicly filed with
`the Texas Secretary of State showing that Kegel is not a member or manager of SKS
`Solutions or Fusion Tech Partners. See In re General Motors (Hughes) Shareholder
`Litigation, 897 A.2d 162, 169 (Del. 2006) (citing Delaware Rule of Evidence 201). (See Ex. 1
`to Kelly Rowe Transmittal Affidavit, cited herein as “Rowe Aff.”).
`
`
`
`
`
`
`
`2
`against Kegel, but the entity on whose behalf the claims have been asserted was
`voided by the Delaware Secretary of State and therefore has no legal existence or
`corporate power. Kegel therefore moves under Rules 9(b), 12(b)(1), 12(b)(2), and
`Rule 12(b)(6) to dismiss the Amended Complaint against him.
`STATEMENT OF FACTS
`The Plaintiff, Astria Ventures LLC (“Astria”), alleges a vague scheme by co-
`defendant Sumit Sikka (“Sikka”) to induce it, or its principals, non-parties Anish
`and Ashay Bavishi (the “Bavishis”), to invest in FloatCare, Inc. (“FloatCare”). (Am.
`Compl., Dkt. 16, ¶2). FloatCare is a Delaware corporation founded by Sikka to
`develop healthcare software. (Id. ¶19). Sikka is a director of FloatCare. (See Rowe
`Aff. Ex. 1).
`Kegel is not alleged to be an officer, director, owner, or manager of FloatCare.
`Rather, Kegel, a California resident, is alleged to be Sikka’s “partner” in Fusion
`Tech Partners (“FTP”), the d/b/a of SKS Solutions LLC, a Texas entity (which as an
`LLC has no partners) and is alleged to be part of the FloatCare leadership team.
`(Am. Compl. ¶11). However, as seen in the public filings, Sikka is the sole member
`and manager of FTP. (See Rowe Aff. Ex. 2).
`The full extent of Kegel’s actions alleged in this matter consists of
`“participating in the conspiracy by creating sham prototypes to induce initial and
`subsequent funding from the Bavishis.” (Am. Compl. ¶25). No further details are
`provided about these prototypes, their purported sham-like nature, the expectations
`for the prototypes, when or if the prototypes were shared with the Bavishis, or the
`circumstances surrounding the sharing of the prototypes.
`
`
`
`
`
`
`
`3
`The Amended Complaint also alleges that Kegel (i) “aided and assisted,” (ii)
`“was aware of Sikka’s plan,” (iii) “knew that Sikka was incorporating FloatCare in
`Delaware with the intent to defraud,” (iv) “was working with Sikka from the
`beginning of the scheme … and actively participating in Sikka’s plan to defraud the
`Bavishis,” (v) “knowingly working with Sikka to unlawfully divert FloatCare funds,
`labor and resources, and other FloatCare property,” (vi) “knowingly participated in
`[Sikka’s] breach [of fiduciary duty] and, along with Sikka, benefitted from the
`misappropriation of Plaintiff’s multi-million-dollar debt and equity investment,”
`and (vii) was “substantially enriched by Sikka’s wrongful conduct.” (Am. Compl. ¶¶
`11, 16, 18, 19, 44, 51). When it comes to Kegel, these wholly conclusory allegations,
`which primarily parrot the descriptive language of the legal elements of each claim,
`are all there is. The remainder of the Amended Complaint makes various
`allegations about Sikka’s actions or failures, money invested by the Bavishis and
`their dramatic trip to India, and later takeover of the company for the supposed
`purpose of saving it, but the Amended Complaint does not contain a single
`additional factual allegation against Kegel.
`
`
`
`
`
`
`
`4
`ARGUMENT
`I. THE COURT LACKS PERSONAL JURISDICTION OVER KEGEL
`A. Kegel Lacks Minimum Contacts with Delaware.
`“[T]he exercise of personal jurisdiction over a nonresident defendant is
`permissible only when the defendant has sufficient minimum contacts with the
`forum state such that allowing suit to proceed in that state does not offend
`traditional notions of fair play and substantial justice.” OneScreen Inc. v. Hudgens,
`2010 WL 1223937, at *4 (Del. Ch. Mar. 30, 2010) (internal citations omitted); see
`also Hart Holding Co. v. Drexel Burnham Lambert, Inc., 1992 WL 127567, at *3
`(Del. Ch. May 28, 1992) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474
`(1985) (‘[t]he “constitutional touchstone” of a court’s exercise of personal jurisdiction
`is “whether the defendant purposefully established minimum contacts in the forum
`State.”). The minimum contacts requirement applies to “‘all assertions of state
`court jurisdiction’” over non-Delaware defendants such as Kegel. OneScreen, 2010
`WL 1223937, at *4 (quoting Shaffer v. Heitner, 433 U.S. 186, 212 (1977)).
`As demonstrated in paragraph 2 of the Jurisdictional Affidavit of John Kegel
`in Support of Motion to Dismiss First Amended Verified Complaint, attached
`herewith, Kegel is a resident of California. He does not conduct business in
`Delaware, nor does he have other contacts with Delaware that would meet the
`requirements of Delaware’s long-arm statute such that it would be reasonable for
`him to expect to be haled into a Delaware court. (Id., ¶¶3-7, see also 10 Del. C.
`§3104(c)).
`
`
`
`
`
`
`
`5
`While consent to personal jurisdiction can alternatively be created
`contractually under 6 Del. C. §2708, Kegel did not do so. Paragraph 14 of the
`Amended Complaint cites to the Series Seed Preferred Stock Purchase Agreement
`(“Agreement”) as a source of personal jurisdiction over Sikka and FloatCare as
`signatories to the Agreement, which contains a consent to jurisdiction provision.
`(See Rowe Aff. Ex. 3). The Amended Complaint does not assert this provision as a
`basis for the assertion of personal jurisdiction over Kegel, a non-signatory to the
`Agreement, nor could it.
`Lastly, even if Astria could demonstrate that Kegel was a manager of FTP (it
`cannot), it would not matter, because FTP is not a Delaware resident and is not
`alleged to have undertaken any actions in Delaware.
`B. Conspiracy Jurisdiction is Not Applicable to Kegel.
`Astria alleges in conclusory fashion a handful of circumstances that it
`contends supports the assertion of personal jurisdiction over Kegel. (Am. Compl.
`¶16). Specifically, Astria alleges:
`This Court has jurisdiction over Kegel, because Kegel was aware of and
`participated in Sikka’s plan to defraud the Bavishis. Kegel (1) was
`aware of Sikka’s plan before Sikka established FloatCare in Delaware,
`(2) actively participated in the conspiracy throughout its duration by,
`among other things, creating sham prototypes of FloatCare’s software,
`and (3) knew that Sikka was incorporating FloatCare in Delaware with
`the intent to defraud and solely for the purpose of defrauding investors,
`which was a direct and foreseeable result in furtherance of the
`conspiracy.
`(Id.)
`Presumably, Astria intends to invoke the conspiracy theory of jurisdiction.
`While Delaware courts recognize the potential assertion of jurisdiction under this
`
`
`
`
`
`
`
`6
`theory, Astria’s vague and conclusory allegations fall short. In Istituto Bancario
`Italiano, SpA v. Hunter Engineering Co., Inc., the Delaware Supreme Court laid out
`a five-part test for conspiracy jurisdiction:
`[A] conspirator who is absent from the forum state is subject to the
`jurisdiction of the court, assuming he is properly served under state
`law, if the plaintiff can make a factual showing that: (1) a conspiracy
`to defraud existed; (2) the defendant was a member of that conspiracy;
`(3) a substantial act or substantial effect in furtherance of the
`conspiracy occurred in the forum state; (4) the defendant knew or had
`reason to know of the act in the forum state or that acts outside the
`forum state would have an effect in the forum state; and (5) the act in,
`or effect on, the forum state was a direct and foreseeable result of the
`conduct in furtherance of the conspiracy.
`449 A.2d 210, 225 (Del. 1982). While a defendant must assert the lack of personal
`jurisdiction, once asserted, the burden then shifts to the plaintiff to demonstrate
`that such jurisdiction exists. See Sussex Farm Ltd. v. Mbanefo, 2022 WL 2126228
`at *3 (Del. Super. June 9, 2022). “The conspiracy theory of jurisdiction is narrowly
`and strictly construed; otherwise, that theory would become a facile way for a
`plaintiff to circumvent the minimum contacts requirement of International Shoe Co.
`v. Washington.” Computer People Inc. v. Best International Group, Inc., 1999 WL
`288119 at *6 (Del. Ch. April 27, 1999). Astria cannot meet the requirements to
`establish conspiracy jurisdiction, because as discussed in Section III.B. below, it has
`failed to state a claim for civil conspiracy, as well as for the fraud alleged to form
`the basis of the conspiracy. Even if Astria could state a claim for conspiracy,
`personal jurisdiction over Kegel on that basis would still fail, because Astria has
`failed to allege any connection of that purported conspiracy to Delaware, as required
`under the third, fourth, and fifth elements of the conspiracy jurisdiction test.
`
`
`
`
`
`
`
`7
`Most tellingly, Astria fails to allege that Kegel undertook any forum-directed
`act in Delaware. Even with respect to Sikka, the only thing he is alleged to have
`done in Delaware is to form FloatCare. (Am. Compl. ¶ 20). Conclusory allegations
`that the incorporation of FloatCare was a step in a conspiracy and that Kegel was
`aware of a plan to defraud when Sikka purportedly incorporated FloatCare are
`insufficient to sustain personal jurisdiction over nonresidents of this State. See
`Matrix Parent, Inc. v. Audax Management Company, LLC 319 A.3d 909, 929 (Del.
`Super. 2024) (finding that another party’s formation of a Delaware entity could not
`be imputed to the individual defendants for jurisdictional purposes and citing EBG
`Holdings LLC v. Vredezicht's Gravenhage 109, 2008 WL 4057745 at *6 (Del. Ch.
`Sept. 2, 2008) wherein the Dutch parent of an entity that participated in forming a
`Delaware LLC was too attenuated to be subject to Delaware jurisdiction); In re
`Swervepay Acquisition, LLC, 2022 WL 3701723 at *15 (Del. Ch. Aug 26, 2022)
`(finding no jurisdiction when Complaint did not allege the defendant played any
`role in forming the Delaware entities).
`In the event the Court does not dismiss for lack of personal jurisdiction, the
`action should also be dismissed for lack of standing and/or failure to state a claim.
`II.PLAINTIFF LACKS STANDING TO ASSERT DERIVATIVE
`CLAIMS
`Half of Astria’s ill-pled claims are alleged to be asserted both directly and
`derivatively. (See Am. Compl., Counts II and III). However, the Delaware Supreme
`Court has done away with so-called dual character claims previously deemed
`cognizable under Gentile and its progeny. See Brookfield Asset Mgmt., Inc. v.
`
`
`
`
`
`
`
`8
`Rosson, 261 A.3d 1251, 1267 (Del. 2021) (discussing the tension between Gentile v.
`Rossette, 906 A.2d 91 (Del. 2006) and Tooley v. Donaldson, Lufkin & Jenrette, Inc.,
`845 A.2d 1031 (Del. 2004) before overruling Gentile). Rather, claims are now either
`direct or derivative under Tooley—they cannot be both. See Brookfield Asset Mgmt.,
`Inc. v. Rosson, 261 A.3d 1251, 1277 (Del. 2021) (“Permitting such ‘dual’ claims
`unnecessarily complicates fashioning a remedy for such claims. Tooley
`appropriately sought to simplify the law, not complicate it.”).
`This, in turn, creates two subsidiary problems for Astria. First, are its claims
`direct or derivative? It was Astria’s obligation to undertake the Tooley analysis and
`to plead its claims accordingly.
`At its core, Count II is predicated on accusations of duty of loyalty breaches
`by siphoning corporate funds for personal benefit, duty of care breaches by
`improperly accounting for corporate funds, and on accusations waste by using
`corporate funds to pay unqualified personnel. (Am. Compl. ¶¶ 48-50). Count III is
`similarly predicated on accusations that stockholder money was improperly
`siphoned by Defendants and was used to compensate the employees of another
`company for the benefit of that company instead of FloatCare. (Id. ¶56). These
`counts are pled as archetypical derivative claims.
`Second, to the extent any of its claims are derivative, which, at a minimum,
`Counts II and III must be, including claims alleging that Kegel is complicit in or
`aided and abetted Sikka’s purported breaches, Astria lacks standing because
`FloatCare’s certificate of incorporation was proclaimed void for failure to pay
`franchise taxes and file franchise tax returns in March 2024. (See Rowe Aff. Ex. 4).
`
`
`
`
`
`
`
`9
`Because a corporation whose certificate of incorporation is void under 8 Del. C. §510
`lacks the power to sue or be sued, it follows of necessity that a purported stockholder
`does not have standing to assert a derivative claim on behalf of corporation that is
`now a legal nullity.
`FloatCare was incorporated by the filing of its certificate of incorporation on
`November 8, 2019. (See Rowe Aff. Ex. 5).2 The corporation only filed franchise tax
`reports and paid associated franchise taxes for three years. (Rowe Aff. Ex. 1). Based
`on that failure, as dictated by 8 Del. C. §510, the Secretary of State declared the
`corporation “inoperative and void” as of March 1, 2024. (See Rowe Aff. Ex. 4).
`Section 510 provides:
`If any corporation, accepting the Constitution of this State and coming
`under Chapter 1 of this title, or any corporation which has heretofore
`filed or may hereafter file a certificate of incorporation under said
`chapter, neglects or refuses for 1 year to pay the State any franchise
`tax or taxes, which has or have been, or shall be assessed against it, or
`which it is required to pay under this chapter, or shall neglect or refuse
`to file a complete annual franchise tax report, the charter of the
`corporation shall be void, and all powers conferred by law upon the
`corporation are declared inoperative . . . .
`8 Del. C. §510 (emphasis added). Among the powers conferred by law upon the
`corporation that become inoperative are the powers to “[s]ue and be sued in all
`courts and participate, as a party or otherwise, in any judicial, administrative,
`arbitrative or other proceeding, in its corporate name.” 8 Del. C. §122(2).
`The lack of a Delaware corporation’s corporate power, including the power to
`sue or be sued, as a result of its certificate of incorporation having been voided by
`2 An amended and restated certificate was filed on December 31, 2019, but is not
`germane to the present analysis.
`
`
`
`
`
`
`
`10
`the Secretary of State, recently has been confirmed by the Court in Rivera v. Angkor
`Capital Ltd., et al., 2024 WL 3873050 (Del. Ch. Aug. 20, 2024). In that case, Vice
`Chancellor Zurn responded to the Delaware Supreme Court, which queried about
`the consequences of the Court discovering after the entry of a final judgment that
`one of the plaintiffs (a Delaware corporation) had been voided prior to the
`commencement of the litigation. The Vice Chancellor’s answer was clear: “Taking
`Kalibrr’s certificate and Section 510 at their plain meaning, all Kalibrr’s powers,
`including the powers to sue, be sued, dissolve, or wind up, have been ‘declared
`inoperative.’” Id., at *2 (emphasis added). This conclusion was bolstered by a
`detailed analysis of common law and legislative history.3
`A corollary that flows of logical necessity from the foregoing is that if a
`corporation cannot sue or be sued, a purported stockholder cannot have standing to
`maintain derivative claims, which, definitionally, are by or in the right of the very
`same corporation that is inoperative and without power to sue. Accordingly, even
`if any claims against Kegel are pled sufficiently, which they are not, to the extent
`they are derivative, Plaintiff lacks standing to assert them.
`III. PLAINTIFF FAILS TO STATE A CLAIM AGAINST KEGEL
`Under Court of Chancery Rule 12(b)(6), a Complaint should be dismissed for
`failure to state a claim where a “‘plaintiff would not be entitled to recover under any
`3 Indeed, the General Assembly takes the voiding of a Delaware corporation so
`seriously that it made the attempt to exercise the powers of a voided corporation a
`criminal action. See 8 Del. C. § 513 (“Whoever exercises or attempts to exercise any
`powers under the certificate of incorporation of any corporation which has been
`proclaimed by the Governor, after the issuance of the proclamation, shall be fined
`not more than $1,000 or imprisoned not more than one than 1 year, or both.”)
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`reasonably conceivable set of circumstances susceptible of proof.’” Savor, Inc. v.
`FMR Corp., 812 A.2d 894, 897 (Del. 2002) (quoting Kofron v. Amoco Chems. Corp.,
`441 A.2d 226, 227 (Del. 1982)); see also Central Mortg. Co. v. Morgan Stanley Capital
`Hldgs., LLC, 27 A.3d 531, 535 (Del. 2011); VLIW Tech., LLC v. Hewlett-Packard Co.,
`840 A.2d 606, 610-611 (Del. 2003). In addition, the Court need not accept conclusory
`allegations as true without specific allegations of fact to support them. In re Tri-
`Star Pictures, 634 A.2d 319, 326 (Del. 1993). “In order for a fraud claim to survive
`a motion to dismiss, a plaintiff needs to allege: (1) that defendant made a false
`representation, usually one of fact; (2) with the knowledge or belief that the
`representation was false, or with reckless indifference to the truth; (3) with an
`intent to induce the plaintiff to act or refrain from acting; (4) that plaintiff's action
`or inaction was taken in justifiable reliance upon the representation; and (5)
`damage to the plaintiff as a result of her reliance on the representation.” Fortis
`Advisors LLC v. Dialog Semiconductor PLC 2015 WL 401371 at *6 (Del. Ch. Jan.
`30, 2015).
`A. Plaintiff Fails to Plead Fraud with the Requisite Particularity
`under Court of Chancery Rule 9(b)
`Court of Chancery Rule 9(b) requires that “[i]n all averments of fraud the
`circumstances constituting fraud ... be stated with particularity.” “To satisfy Rule
`9(b), a complaint must allege: (1) the time, place, and contents of the false
`representation; (2) the identity of the person making the representation; and (3)
`what the person intended to gain by making the representations.” Fortis Advisors
`LLC, at *6 (citing Abry Partners V., L.P. v. F & W Acq., LLC, 891 A.2d 1032, 1050
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`(Del Ch. 2006)). A complaint like this one is what Rule 9(b) was written for. Astria
`throws around conclusory allegations that Kegel assisted, knew, aided, participated,
`and was enriched, but when it comes to facts, supplies none that would allow a
`defendant to understand the claims against him. The only semi-factual allegation
`against Kegel is that he “created sham prototypes to induce initial and subsequent
`funding from the Bavishis” (Am. Compl. ¶25)—and even that does not identify
`where or when he created these prototypes or showed them to the Bavishis, if he
`even showed them to the Bavishis at all, what about them was false or misleading,
`and what he intended to gain by doing so. Putting the word “sham” in front of
`something does not actually make it false without more detailed allegations. In
`fact, nowhere in the Amended Complaint does the Astria identify what was wrong
`with the software it purports is at the heart of this conspiracy.
`Moreover, Astria’s allegations of fraud are based entirely on forward-looking
`statements regarding FloatCare’s intentions, none of which support a claim for
`fraud. See Neurvana Med., LLC v. Balt USA, LLC, 2020 WL 949917, at *25 (Del.
`Ch. Feb. 27, 2020) (c