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Manti Holdings, LLC v. Carlyle Grp. Inc.

Manti Holdings, LLC v. Carlyle Grp. Inc.

Court of Chancery of Delaware

February 18, 2022, Submitted; June 3, 2022, Decided

C.A. No. 2020-0657-SG

Opinion

MEMORANDUM OPINION

GLASSCOCK, Vice Chancellor

This is the latest scene in a long stage-play involving the sale of a Delaware corporation, Authentix Acquisition Company, Inc. ("Authentix"). As with a Broadway musical, the orchestra has played me many a tune, but a single melodic line tends to run throughout. Here, it was a stockholders agreement, entered by all stockholders to encourage investment by an entity that became a controller thereby; a subsidiary of The Carlyle Group, Inc.

The stockholders agreement required all stockholders to not oppose any sale of Authentix approved by the company board and by a majority of the outstanding shares—that is, by Carlyle. In [*2]  2017, Carlyle and the board approved a sale of Authentix to Blue Water Energy. The terms of the sale together with the stockholders agreement meant that holders of preferred equity—notably, Carlyle—would recoup their investment, but that common stockholders—including the Plaintiffs here—would receive little or nothing for their stock. Much litigation has ensued.1

Briefly, this action alleges that Carlyle and the directors breached fiduciary duties to the stockholders of Authentix in approving the sale to Blue Water Energy. I have found that the terms of the stockholders agreement did not preclude the Plaintiffs from bringing this action.2 Remaining before me is the Defendants' motion to dismiss under Rule 12(b)(6). While I agree with the Defendants that certain ancillary claims must be dismissed, I find that the gravamen of the Plaintiffs' complaint—its allegations that the Defendants breached fiduciary duties regarding the sale—does state claims upon which relief can be granted. My reasoning is below.

I. BACKGROUND3

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2022 Del. Ch. LEXIS 128 *; 2022 WL 1815759

MANTI HOLDINGS, LLC, MALONE MITCHELL, WINN INTERESTS, LTD., EQUINOX I. A TX, GREG PIPKIN, CRAIG JOHNSTONE, TRI-C AUTHENTIX, LTD., DAVID MOXAM, JOHN LAL PEARCE, and JIM RITTENBURG, Plaintiffs, v. THE CARLYLE GROUP INC., CARLYLE U.S. GROWTH FUND III, L.P., CARLYLE U.S. GROWTH FUND III AUTHENTIX HOLDINGS, L.P., CARLYLE INVESTMENT MANAGEMENT L.L.C., TCG VENTURES III, L.P., BERNARD C. BAILEY, STEPHEN W. BAILEY, and MICHAEL G. GOZYCKI, Defendants.

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

CORE TERMS

stockholders, alleges, unjust enrichment, Holdings, bid, fiduciary, renewal, bonus, motion to dismiss, contingent, enrichment, parties, preferred stock, stock, conceivable, voted, aiding and abetting, time of sale, impoverishment, conflicted, Holder, merger, shares, breach of fiduciary duty, derivative, contracts, holdbacks, revised, pled, principal place of business

Civil Procedure, Defenses, Demurrers & Objections, Motions to Dismiss, Failure to State Claim, Pleadings, Complaints, Requirements for Complaint, Business & Corporate Law, Management Duties & Liabilities, Fiduciary Duties, Duty of Care, Duty of Loyalty, Business Judgment Rule, Shareholder Duties & Liabilities, Controlling Shareholders, Fiduciary Duties, Shareholder Actions, Appraisal Actions & Dissent Rights, Fair Market Value, Causes of Action & Remedies, Breach of Fiduciary Duty, Burdens of Proof, Causes of Action, Self-Dealing, Negligent Acts of Directors & Officers, Duty of Good Faith, Corporations, Articles of Incorporation & Bylaws, Interpretation of Articles of Incorporation, Contracts Law, Remedies, Equitable Relief, Quantum Meruit, Equity, Maxims, Remedy Principle, Restitution, Actions Against Corporations, Direct Actions, Derivative Actions, Enforcement of Corporate Rights, Procedural Matters, Mergers & Acquisitions Law, Mergers, Duties & Liabilities of Directors & Officers, Duties & Liabilities of Shareholders, Defenses, Internal Corporate Affairs, Torts, Multiple Defendants, Concerted Action, Civil Aiding & Abetting, Civil Conspiracy, Elements, Intentional Torts