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LVI Grp. Invs., LLC v. NCM Grp. Holdings, LLC

Court of Chancery of Delaware

June 5, 2017, Submitted; September 7, 2017, Decided

Civil Action No. 12067-VCG

Opinion

In April of 2014, two demolition firms, LVI Group Investments, LLC ("LVI") and NCM Group Holdings, LLC ("NCM") combined to form NorthStar Group Holdings, LLC ("NorthStar"). This suit was filed by LVI in 2016, accusing NCM, generally speaking, of committing fraud against LVI in the inducement of the combination of the entities. Subsequently, NCM made mirror image allegations against LVI via the Counterclaim at issue in this Letter Opinion.

As part of its Counterclaim, NCM attempts to state a claim of fraud against Paul Cutrone, former Chief Financial Officer of LVI. Cutrone is not a Delaware resident. He has moved to dismiss this action against him, asserting that this Court lacks personal jurisdiction. This Letter Opinion deals [*2]  with that limited issue. For the following reasons, I find that this Court lacks personal jurisdiction over Cutrone; accordingly, his motion to dismiss is granted. My rationale follows.

I. BRIEF BACKGROUND

This matter involves two competing fraud claims between two Delaware LLCs—LVI and NCM—that merged their businesses into a single entity—NorthStar (the "Merger").1 The Counterclaim alleges five counts against the various Counterclaim Defendants, including four against Counterclaim Defendant Paul Cutrone and others: Counts I and II for fraud and fraudulent inducement with respect to LVI's financial statements and certain representations concerning those statements in the "contribution agreement" that governs the parties' respective ownership in NorthStar; and direct and derivative claims in Counts IV and V for breach of fiduciary duties owed to LVI or NorthStar.2 Cutrone was a Vice President and the Chief Financial Officer of LVI, as well as the Chief Financial Officer of NorthStar.3 Cutrone was also the "Vice-President and CFO" of several LVI "subsidiaries (including Delaware subsidiaries) and a member of their boards."4 He is also alleged to be an owner of LVI.5 During his tenure as an [*3]  officer for LVI and NorthStar, Cutrone's offices were in New York, and he has never lived in Delaware.6 While the Counterclaim fails to allege NCM's principal place of business, the LVI entity that merged with NCM was headquartered in Connecticut.7

In a Letter Opinion issued on March 29, 2017, I denied LVI's motion to dismiss with respect to NCM's fraud claims but granted the motion as to NCM's fiduciary duty claims in Counts IV and V.8 I reserved decision on Cutrone's motion to dismiss for lack of personal jurisdiction under Court of Chancery Rule 12(b)(2).9 My decision on that issue—personal jurisdiction over Cutrone—follows.

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2017 Del. Ch. LEXIS 164 *; 2017 WL 3912632

LVI Group Investments, LLC v. NCM Group Holdings, LLC et al.

Notice: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL.

Prior History: LVI Grp. Invs., LLC v. NCM Grp. Holdings, LLC, 2017 Del. Ch. LEXIS 49 (Del. Ch., Mar. 29, 2017)

CORE TERMS

personal jurisdiction, Certificate, Merger, transaction of business, allegations, motion to dismiss, entity, nexus, conspiracy theory, cause of action, forum state, conspiracy, fiduciary, Counts, limited liability company, financial statement, nonresident, conspired, signing, argues

Civil Procedure, In Rem & Personal Jurisdiction, In Personam Actions, Challenges, Responses, Defenses, Demurrers & Objections, Motions to Dismiss, Pleading & Practice, Pleadings, Rule Application & Interpretation, Evidence, Burdens of Proof, Allocation, Due Process, Business & Corporate Law, Limited Liability Companies, Management Duties & Liabilities, Jurisdiction, In Personam Actions, Torts, Multiple Defendants, Concerted Action, Civil Conspiracy, Procedural Matters, Commencement & Prosecution, In Personam Jurisdiction, Corporate Formation, Corporate Existence, Powers & Purpose, Powers, Long Arm Jurisdiction, Doing Business, Corporate Governance, Directors & Officers, Scope of Authority, Inferences & Presumptions, Presumptions, Effects, Powers, Acts Through Agents