ADGS, LLC v. Emery Silfurtun, Inc.

Superior Court of Delaware·Decided May 11, 2022·No. N20C-08-101 EMD CCLD·Published

Opinion

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

ADGS, LLC )

)

Plaintiffs, )

)

v. ) C.A. No. N20C-08-101 EMD CCLD )

EMERY SILFURTUN, INC., EMERY ) SILFURTUN, EHF, BRØDRENE ) HARTMANN A/S, as a successor in ) interest to EMERY SILFURTUN, INC., ) HARTMANN CANADA INC. d/b/a ) HARTMANN NORTH AMERICA, as a ) successor in interest to EMERY ) SILFURTUN, INC. and JONSSON ) & COMPANY, EHF, )

)

Defendants. )

Submitted: February 21, 2022 Decided: May 11, 2022

Upon Defendants Brødrene Hartmann A/S and Hartmann Canada Inc., d/b/a Hartmann North America’s Motion to Dismiss or Stay GRANTED

Christian J. Singewald, Esquire, Kelly E. Rowe, Esquire, White and Williams LLP, Wilmington, Delaware. Counsel for Plaintiff ADGS, Inc.

Blake Rohrbacher, Esquire, Kelly E. Farnan, Esquire, Valerie A. Caras, Esquire, Richards, Layton & Finger, P.A., Wilmington, Delaware. Counsel for Defendants Brødrene Hartmann A/S and Hartmann Canada Inc., d/b/a Hartmann North America

DAVIS, J.

I. INTRODUCTION

This is a breach of contract case assigned to the Court’s Complex Commercial Litigation Division. Plaintiff ADGS, LLC (“ADGS”) deposited $2 million with the Emery Defendants (as defined below) to fund their development of a particular product for ADGS. The Emery

Defendants failed to deliver, so ADGS filed this action to recover the deposit. ADGS subsequently amended its complaint to add Defendants Brødrene Hartmann A/S (“Hartman A/S”) and Hartmann Canada Inc., d/b/a Hartmann North America (“Hartman N.A.,” and, together with Hartman A/S, the “Hartmann Defendants”) as parties, claiming the Hartman Defendants are liable for the debts and obligations of the Emery Defendants. On or about November 24, 2021, the Hartmann Defendants filed their Motion to Dismiss or Stay (the “Motion”). For the reasons explained below, the Motion is GRANTED for lack of personal jurisdiction.

II. FACTUAL BACKGROUND A. THE PARTIES ADGS is a Texas limited liability company “in the business of industrial and commercial operations.”1 ADGS’s principal place of business is in Houston, Texas.2 Defendant Emery Silfurtun, Inc. (“ESI”) is a Canadian corporation with its principal place of business in Ontario, Canada.3 Defendant Emery Silfurtun, ehf (“ESE,” and, together with ESI, the “Emery Defendants”) is an Icelandic corporation with its principal place of business in Reykjavik, Iceland.4 ESI and ESE are in the business of manufacturing packaging equipment.5 The CEO for both ESI and ESE is Fridrik Jonsson.6

1 Second Am. Compl. at ¶ 1 (D.I. No. 55). 2 Id. 3 Id. at ¶ 2. 4 Id. at ¶¶ 2–3. 5 Id. at ¶¶ 2–3. 6 Id. at ¶ 18.

Hartmann A/S is a Danish corporation with its principal place of business of Gentofte, Denmark.7 Hartmann N.A. is a Canadian corporation with its principal place of business in Ontario, Canada.8 Both are in the business of manufacturing molded fiber packaging.9 Finally, Defendant Jonsson & Company ehf. is an Icelandic corporation in the business of manufacturing packaging equipment with its principal place of business in Reykjavik, Iceland.10 B. ADGS’S DEALINGS WITH THE EMERY DEFENDANTS ADGS, ESE, and ESI entered into a Purchase Agreement on February 4, 2019 (the “February Agreement”).11 Under the February Agreement, ESE agreed to design, manufacture, and sell to ADGS a unique piece of equipment called the Digital Fiber Forming Production Line DFF 1700 (the “DFF 1700”).12 ADGS paid deposits to ESE totaling $1,000,000 to fund the work on the DFF 1700.13 ESE was to apply the deposits against the anticipated final purchase price of $3,750,000.14 ESI was a party to the February Agreement as a Guarantor.15 Mr. Jonsson, as CEO, executed the February Agreement on behalf of both ESI and ESE.16 The parties entered into a second contract on July 18, 2019 (the “July Agreement”) after ESE failed to meet various deadlines and obligations under the February Agreement.17 Mr. Jonsson signed on behalf of ESE.18 The July Agreement set new deadlines and schedules for the design, manufacture, and delivery of the DFF 1700.19 ADGS paid ESE another deposit of

7 Id. at ¶ 4. 8 Id. at ¶ 5. 9 Id. at ¶¶ 4–5. 10 Id. at ¶ 6. 11 Id. at ¶ 12. 12 Id. at ¶¶ 12–14. 13 Id. at ¶¶ 14, 19. 14 Id. 15 Id. at ¶¶ 15–16. 16 Id. at ¶ 18. 17 Id. at ¶¶ 20–21. 18 Id. at ¶ 22. 19 Id. at ¶ 25.

$1,000,000.20 ESE failed to meet the July Agreements’ design, manufacture, and delivery deadlines.21 On February 4, 2020, ADGS’s representatives met with Mr. Jonsson in Texas to discuss ESE’s non-performance.22 ADGS provided Mr. Jonsson with a formal written notice of ESE’s default under the Agreements.23 During the meeting, the parties agreed that ESE would sell the “non-compliant and non-operating alleged existing DFF 1700 machine” to a third party and that the proceeds from the sale would be placed in an escrow account under the control of ADGS and at a bank of ADGS’s choosing.24 ESE represented that “Hunter Emery, located in Ontario” would purchase the device.25 The sale never occurred.26 Moreover, ESE and ESI have refused to return the $2 million deposit to ADGS.27 C. INITIAL LITIGATION ADGS filed this action on August 12, 2020.28 ADGS’s initial complaint brought claims for breach of contract and unjust enrichment against just the Emery Defendants.29 The Emery Defendants filed an answer on December 7, 2020.30 Counsel for the Emery Defendants moved to withdraw shortly thereafter,31 which the Court allowed on April 15, 2021.32 ADGS moved for a default judgment against the Emery Defendants on July 1, 2021, citing their failure to secure

20 Id. at ¶ 23. 21 Id. at ¶ 25. 22 Id. at ¶ 26. 23 Id. at ¶ 27. 24 Id. at ¶ 28. 25 Id. at ¶ 29. 26 Id. at ¶¶ 29–31. 27 Id. 28 D.I. 1. 29 Id. 30 D.I. 6. 31 D.I. 12. 32 D.I. 19.

substitute counsel and to respond to ADGS’s initial discovery requests.33 The Court granted ADGS’s motion on July 30, 2021.34 ADGS added the Hartmann Defendants as defendants in its First Amended Complaint, filed June 3, 2021.35 The First Amended Complaint alleged that Hartmann A/S and/or Hartmann N.A. had acquired ESI in February 2021.36 ADGS based this claim on an announcement posted to the website of the International Molded Fiber Association (“IMFA”).37 The Hartmann Defendants informed ADGS and the IMFA that the announcement on the IMFA website was incorrect.38 In reality, Hartmann A/S and ESE had entered into a limited Asset Purchase Agreement (the “APA”).39 ADGS then filed a Second Amended Complaint with the Hartmann Defendants’ consent on October 25, 2021.40 The Second Amended Complaint added Jonsson & Company as a defendant and updated the allegations against the Hartmann Defendants to reflect the information in the APA.41 The Hartman Defendants were not otherwise idle. The Hartmann Defendants filed an action against ADGS in Denmark on May 31, 2021 (the “Danish Action”).42 The Hartman Defendants did this after the Court granted ADGS’s motion to file the First Amended Complaint (on May 14),43 but before ADGS could formally file it (on June 3).44 In the Danish Action, the Hartmann Defendants sought declarations that: (i) ADGS does not possess any rights over assets

33 ADGS’s Mot. for Default J. (D.I. 29). 34 D.I. 34. 35 First Am. Compl. (D.I. 24). 36 Id. at ¶ 31. 37 Id. at ¶ 32 (“On February 27, 2021, the [IMFA] website announced that ‘the Hartmann Company of Gentofte, Denmark, manufacturer of molded fiber products, has purchased molding machine manufacturer Emery-Silfurtun of Toronto, Canada.’”). 38 Hartmann Defs.’ Mot. to Dismiss at 5–6. 39 Id. 40 Id. at 6–7. 41 Id. 42 ADGS’s Opp. to Mot. to Dismiss, Ex. E. 43 D.I. 23. 44 D.I. 24.

Hartmann bought from ESI; (ii) ADGS has no claim against the Hartmann Defendants; and (iii) ADGS is liable for any losses the Hartmann Defendants sustain as a result of the pending Delaware action.45 The Hartmann Defendants obtained a default judgment against ADGS in the Danish Action on December 3, 2021.46

D. THE SECOND AMENDED COMPLAINT’S ALLEGATIONS CONCERNING THE HARTMANN DEFENDANTS

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ADGS, LLC v. Emery Silfurtun, Inc., (Del. Ct. App. 2022).

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