Bryan Dorsey v. Robert T. Jones

• Court: Court of Chancery of Delaware
• Decided: March 27, 2026
• Docket: C.A. No. 2024-0134-CDW
• Status: Published

Opinion

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

BRYAN DORSEY, derivatively on behalf ) of ROOTS FOODS HOLDINGS, INC. ) (f/k/a ROOTS FOOD GROUP ) HOLDINGS, INC.), ROOTS GROUP ) HOLDINGS, INC., ROOTS GROUP ) HOLDINGS LLC, and ROOTS FOOD ) GROUP MANAGEMENT LLC, ) ) Plaintiffs, ) ) v. ) C.A. No. 2024-0134-CDW ) ROBERT T. JONES, ) ) Defendant, ) ) and ) ) ROOTS FOODS HOLDINGS, INC. ) (f/k/a ROOTS FOOD GROUP ) HOLDINGS, INC.), ) ) Nominal Defendant. ) ROBERT T. JONES, ) ) Counterclaim Plaintiff, ) ) v. ) ) BRYAN DORSEY, ROOTS GROUP ) HOLDINGS LLC, and ROOTS FOOD ) GROUP MANAGEMENT LLC, ) ) Counterclaim Defendants. )

REPORT DENYING DEFENDANT’S MOTIONS AND RESOLVING COUNTERCLAIM DEFENDANTS’ MOTION TO DISMISS COUNTERCLAIMS Date Submitted: December 29, 2025 Date Decided: March 27, 2026

Rudolf Koch, Travis S. Hunter, Gabriela Z. Monasterio, RICHARDS, LAYTON & FINGER, P.A., Wilmington, Delaware; Counsel for Plaintiffs and Counterclaim Defendants

Robert T. Jones, Dallas, Texas; Defendant and Counterclaim Plaintiff Pro Se

WRIGHT, M. By the court’s count, this litigation has already required the assigned

judicial officers to decide 13 substantive motions, including a motion for a

temporary restraining order, three motions to dismiss, two motions relating to

the interpleading of disputed funds, a motion for default judgment, a motion for

summary judgment, and a motion to disqualify counsel. This report resolves

eight more, bringing the total to 21—most of them filed by the self-represented

defendant and counterclaim plaintiff. Defendant’s motions, at least some

prepared using generative artificial intelligence, have failed at every turn.

That result continues with defendant’s current batch of motions.

Centered on a single event—a general assignment for the benefit of creditors

executed by one of the plaintiffs—defendant insists that the assignee must be

substituted as a party, the plaintiffs all lack standing, their pleadings must be

struck from the docket, their claims dismissed, their defense against his

counterclaim defaulted, and their counsel sanctioned. On the contrary, the

assignment does not have the talismanic effect defendant claims—the

assignment does not require substitution, the entity plaintiffs are in good

standing with the Delaware Secretary of State, the individual plaintiff has

standing as a derivative plaintiff, and there is no reason to reject plaintiffs’

pleadings, preclude them from defending against the counterclaim, or sanction

their counsel. This report recommends that all of defendant’s motions be

denied. Nearly all of defendant’s 13-count counterclaim meets a similar fate in

this report. One count is dismissed because the court has already ruled on the

issue; another is dismissed because this court cannot grant the relief it seeks;

seven are dismissed because they are derivative claims and defendant does not

plead the necessary elements for derivative standing; three others are dismissed

because they do not plead fraud with particularity; and one half of one more is

dismissed because, although it states a direct claim, it does not contain any

well-pleaded allegations showing there is a reasonably conceivable basis upon

which defendant could recover. This court looks at pleadings filed by self-

represented litigants with forgiving eyes; it does not shut them entirely. One

half of one count, pleading a statutory violation of Section 109(a) of the

Delaware General Corporation Law, survives. This report recommends

dismissal of the rest of the counterclaim.

I. BACKGROUND As with the court’s September 8, 2025 letter decision, this report

dispenses with a general recitation of the facts of this case and focuses only on

the alleged facts on which defendant and counterclaim plaintiff Robert Jones

(“Jones”) bases his latest batch of motions.

A. The Assignment for the Benefit of Creditors

On December 31, 2024, plaintiff and counterclaim defendant Roots

Group Holdings LLC (“HoldCo”) executed a general assignment for the benefit

-2- of creditors (“ABC”), naming RFG Liquidation, LLC (“Assignee”) as

assignee.1 Through the ABC, HoldCo “grant[ed], assign[ed] and transfer[red]

to Assignee, in trust, for the benefit of [HoldCo]’s creditors, all of [HoldCo]’s

assignable property and assets of every kind and nature, . . . whether owned by

[HoldCo] or in which [HoldCo] has an interest[.]”2

Section 6 of the General Assignment gives Assignee “the right to

institute and prosecute legal proceedings or actions in the name of [HoldCo],

the same as if [HoldCo] had instituted and prosecuted such proceedings or

actions.”3 Section 6 also authorizes Assignee to “defend against any action

instituted against [HoldCo] and to appear on behalf of [HoldCo] in any

proceedings . . . in which [HoldCo] is a party but that would be done at

[HoldCo]’s sole and absolute discretion[.]”4

B. The Forfeiture and Revival Events

On May 10, 2025, the State of Delaware cancelled HoldCo for “[f]ailure

to appoint a [registered agent].”5 On June 14, Roots Food Group Holdings, Inc.

(“Roots”) was forfeited for “[f]ailure to appoint a [registered agent].”6 On

1 See Dkt. 104 Ex. A (“General Assignment”).

2 Id. § 1.

3 Id. § 6.

4 Id.

5 Dkt. 113 Ex. D.

6 Id. Ex. C.

-3- October 8, Assignee revived HoldCo.7 On October 27, Dorsey revived Roots.8

The State confirmed both entities are in good standing as of October 27.9

In seeming objection to this, Jones wrote to the Delaware Secretary of

State, alleging that “the authority for the filing [of HoldCo’s certificate of

revival] is unclear” and that “only the Assignee may lawfully act on behalf of

[HoldCo] following the ABC[.]”10 Jones asked the Delaware Division of

Corporations to “[p]lace an administrative hold or notation on [HoldCo’s]

record indicating that the authority for the October 8, 2025 filing [of the

certificate of revival] is in dispute, and . . . [p]ermit[ting] clarification of the

filing attorney’s authority, so that the record remains accurate while this issue is

resolved.”11 In response, on October 29, Assignee’s counsel wrote to Jones,

informing him that Assignee “caused the filing of the Certificate of Revival for

[HoldCo] with the Delaware Secretary of State[.]”12

7 Dkt. 136 Ex. C.

8 See Pls.’ Omnibus Answering Br. in Opp’n to Def.’s Mots. (“First Omnibus Br.”),

Dkt. 130 Ex D. Roots changed its name from “Roots Food Group Holdings, Inc.” to “Roots Foods Holdings, Inc.” after Jones reserved the former name with the Delaware Division of Corporations. See First Omnibus Br. Ex. C; First Omnibus Br. 5. 9 See First Omnibus Br. Exs. A, B.

10 Dkt. 136 Ex. C Ex. 2 at 1.

11 Id. at 2.

12 Dkt. 136 Ex. C.

-4- II. ANALYSIS Jones has filed eight motions since the court issued its September 8, 2025

letter report resolving eight prior motions from Jones.13 The court has already

denied one of the new motions, so seven remain.14 In addition, the

Counterclaim Defendants have moved for dismissal15 of Jones’ counterclaim.16

I begin with Jones’ motions.

A. Motion for Substitution of Parties Under Rule 25(c) (Dkt. 102)

Jones moves for “an order substituting [Assignee] . . . as the real party in

interest in place of [HoldCo] . . . and Roots Food Group Management, LLC”

(“OpCo”).17 Jones states that, “[o]n December 31, 2024, [HoldCo] and [OpCo]

executed a General Assignment for the Benefit of Creditors . . . , pursuant to

which all of their property, assets, causes of action, and rights were assigned to

the Assignee[.]”18 Jones argues that the ABC stripped HoldCo and OpCo of

“authority to prosecute, defend, or otherwise participate in litigation[,]” because

“[u]nder well-settled Delaware law, once a general assignment is executed,

13 See Dorsey v. Jones, 2025 WL 2589095 (Del. Ch. Sept. 8, 2025).

14 See Dkts. 103, 105.

15 Dkt. 85.

16 Countercl. & Deriv. Action, Dkt. 84 (“Countercl.”).

17 Dkt. 102 at 1.

18 Id.

-5- only the Assignee may control litigation on behalf of the assignor entities.”19

Jones provides no citation for this proposition.

Jones also notes that HoldCo “is listed by the Delaware Secretary of

State as ‘Not in Good Standing,’” and that this “further confirm[s] their lack of

capacity to sue or defend in this Court.”20 He argues that, although substitution

is only permissive when a transfer of interest occurs, substitution should be

mandatory here because “the Assignors no longer possess any legal

authority.”21

Plaintiffs argue that, under Rule 25(c), even where an interest has been

transferred, as in an ABC, “[t]he action may be continued by or against the

original party, and the judgment will be binding on the successor in interest

even though the successor is not named.”22 Plaintiffs note the discretionary

nature of substitution under Rule 25. They cite to this court’s decision in

Manubay v. Autumnwood Associates, L.P.23 for the proposition that “[w]here

there is no transfer of an ownership of a company itself, but merely ‘an

ownership interest in property that once belonged to [the company], there is no

19 Id. at 1–2.

20 Id. at 2.

21 Id.

22 First Omnibus Br. 8 (citing 7C WRIGHT & MILLER’S FEDERAL PRACTICE &

PROCEDURE § 1958 (3d ed. 1998) (“WRIGHT & MILLER”); Luxliner P.L. Exp., Co. v. RDI/Luxliner, Inc., 13 F.3d 69, 71–72 (3d Cir. 1993)). 23 1997 WL 383020 (Del. Ch. June 9, 1997).

-6- basis for maintaining that it is a successor in interest to [the company] such that

it should be substituted for [the company] in this litigation.”24 Finally,

plaintiffs argue that substituting Assignee for HoldCo would be immaterial

because “any final judgment would be binding on [Assignee].”25

1. The ABC Does Not Requires Substitution

Plaintiffs are correct that substitution is permissive, not mandatory, under

Court of Chancery Rule 25(c). Rule 25(c) provides that “[i]f an interest is

transferred, the action may be continued by or against the original party unless

the Court, on motion, orders the transferee to be substituted in the action or

joined with the original party.” Ct. Ch. R. 25(c). “A ‘transfer of interest’ in the

corporate context takes place when one corporation becomes the successor,

typically by merger, to the interest the original corporate party had in the

proceeding.” First Am. Fin. Mgmt. Co. v. Royal Sovereign Grp., L.L.C., 2010

WL 2734226, at *1 n.1 (Del. Ch. July 9, 2010) (citing Melton v. Bank of

Lexington, 2008 WL 867896, at *1 (W.D. Tenn. Mar. 28, 2008)).

I see no compelling reason to substitute either HoldCo or OpCo for

Assignee. Jones’ argument that the ABC stripped HoldCo and OpCo is

unsupported by the Assignment Agreement and Rule 25(c). First, the General

Assignment expressly gives Assignee the discretion—not obligation—to enter,

24 First Omnibus Br. 9 (quoting Manubay, 1997 WL 383020, at *3).

25 Id. at 10 (citing WRIGHT & MILLER § 1958).

-7- defend, or prosecute actions on HoldCo’s behalf. Additionally, OpCo is not

implicated in the ABC whatsoever; HoldCo initiated the ABC and is the only

plaintiff entity that is a party to the General Assignment.26 Assignee also stated

it has no intention of participating in this action.27

Under Rule 25(c), an action can continue against the original party

despite a transfer of an interest to a successor party. Thus, even if an interest

transfer did occur between HoldCo and Assignee, HoldCo can continue its

participation in this action. The ABC alone does not warrant substitution of

parties under Rule 25(c).

2. The Entity Plaintiffs are in Good Standing and Can Proceed

Jones is correct that, for a time, Roots was listed as forfeited and HoldCo

was listed as cancelled.28 But on October 27, 2025, the Delaware Secretary of

State issued a certificate of good standing for both Roots and HoldCo.29 Under

Section 312 of the Delaware General Corporation Law,30 Roots can continue in

26 See General Assignment 1 (“This General Assignment . . . is made and entered into

this 31st day of December of 2024, by and among, RFG Liquidation, LLC . . . , on the one hand, and Roots Group Holdings LLC . . . , on the other hand[.]”). 27 See Dkt. 104 Ex. B at 2.

28 See Dkt. 113 Exs. C, D.

29 See First Omnibus Br. Ex. B; see also id. Ex. C (name change).

30 8 Del. C. §§ 101–398 (“DGCL”).

-8- this action as a plaintiff, and Dorsey maintains his standing as a derivative

plaintiff.31

Because it was revived, Roots’ past forfeited status does not strip it of

standing as a plaintiff. So, too, with Dorsey’s derivative standing.32 I deny the

Motion to Substitute under Rule 25(c).

B. Motion to Strike Plaintiffs’ Opening Brief and Filing as Void (Dkt. 110)

Jones moves to strike Plaintiffs’ Opening Brief in Support of Motion to

Dismiss Counterclaims.33 Essentially reasserting the arguments from his

Motion for Substitution, Jones argues that striking the brief is appropriate

because Roots’ “forfeited its charter” and because the ABC was filed for

HoldCo and OpCo. and thus none of these entities can “sue or be sued.”34 Not

31 See Paul Rivera & Kalibrr, Inc. v. Angkor Cap. Ltd., 2024 WL 3873050, at *9 n.90

(Del. Ch. Aug. 20, 2024) (stating revival “retroactively validate[s] all actions that occurred since it became void”) (citing 8 Del. C. § 312); 8 Del. C. § 312(e) (revival validates “acts . . . done and performed within the scope of its certificate of incorporation by the corporation, its directors or members of its governing body, officers, agents, and stockholders or members during the time when its certificate of incorporation was forfeited or void pursuant to this title, with the same force and effect and to all intents and purposes as if the certificate of incorporation had at all times remained in full force and effect.”) (emphasis added). Cf. Neem Int’l CV v. Shulman, 2025 WL 3778917, at *14 (Del. Ch. Dec. 31, 2025) (“Rather than proceeding on behalf of a void entity, the plaintiffs could have restored the Company’s capacity by paying the past-due franchise taxes and penalties. Having not done so, Pathway remains void and the plaintiffs lack derivative standing to press claims on its behalf.”) (internal citation omitted). 32 Cf. Neem, 2025 WL 3778917, at *14.

33 Dkt. 110 at 2.

34 Id.

-9- stopping there, Jones argues that because the entity plaintiffs cannot sue or be

sued, the entire action should be dismissed because Dorsey cannot proceed in

this action as a standalone, derivative plaintiff.35 Jones argues that the opening

brief is “void” and, because the briefing schedule has passed, plaintiffs are

unable to file a new opening brief.36

This motion fails for the reasons addressed in resolving the previous

motions. The entity plaintiffs were returned to good standing and can proceed

in this action as plaintiffs. Dorsey can proceed as a derivative plaintiff for the

same reason. I deny this motion.

C. Motion to Dismiss Derivative Claims (Dkt. 111)

Jones moves to dismiss the derivative claims brought against him. He

rehashes his arguments from the Motion for Substitution and Motion to

Strike.37 For the reasons previously explained, Jones’ forfeiture and ABC

arguments fail. Dorsey is a proper derivative plaintiff,38 and this motion is

denied.

D. Motion for Entry of Default under Rule 55(a) (Dkt. 112)

Jones moves for entry of default judgment under Court of Chancery Rule

55(a), a non-existent rule. His argument here mirrors the argument presented in

35 Id. at 3.

36 Id.

37 Compare Dkt. 111 at 2–3, with Dkts. 102 at 1–2, 110 at 2–3.

38 See supra note 30.

- 10 - the last three motions addressed. Jones argues that, because Assignee “has not

appeared or defended [the counterclaim Jones filed] at all[,]” Jones is entitled to

“default.”39 Jones also argues that Dorsey and OpCo needed to file individual

opening briefs by the briefing deadline.40

I deny this motion. For the reasons previously explained, Assignee is not

obligated to substitute the entity plaintiffs here. Moreover, plaintiffs often file

motions collectively. This motion is unsupported by the law and is denied.

E. Motion for Order to Show Cause Regarding Plaintiffs’ Authority to Prosecute or Defend Claims (Dkt. 126)

Through this motion, Jones seeks “an Order requiring Plaintiffs and their

counsel, Richards, Layton & Finger, P.A. [(‘Counsel’)], to file sworn affidavits

and supporting documentation demonstrating who, if anyone, has lawful

authority to prosecute or defend this action.”41 Jones presents three arguments

in the motion.

First, Jones argues that Assignee holds “sole discretion to ‘institute and

prosecute legal proceedings or actions in the name of Assignor’ and to ‘appear

on behalf of Assignor in any proceedings,’ including the decision whether to

continue, defend, settle, or abandon litigation.”42 Jones asserts that, despite

39 Dkt. 112 at 1.

40 Id. at 3.

41 Def.’s Mot. for Order to Show Cause Regarding Pls.’ Auth. to Prosecute or Defend

Claims (“Show Cause Mot.”), Dkt. 126 at 1. 42 Id. at 3 (citing General Assignment § 6).

- 11 - this, Counsel “has continued litigating despite actual written notice that only the

Assignee holds authority.”43

Second, Jones states that Roots was “only a minority, non-controlling”

member of HoldCo and its subsidiary, OpCo.44 Jones argues that the Roots’

lack of control over either entity means that Dorsey, a Roots stockholder,

cannot sue derivatively on behalf of those entities.45 Third, and finally, Jones

argues that Counsel cannot continue to represent plaintiffs because only

Assignee can continue or defend claims against the entity plaintiffs.46

Plaintiffs argue in turn that this motion is meritless.47 They note that

Jones’ arguments are “rehashes of his prior motions.”48 For this reason,

plaintiffs argue that this motion, as well as Jones’ Motion to Compel and

Motion for Sanctions, “should be treated as motions for reargument under Rule

59, and be denied, as they were not ‘served and filed within 5 days after the

filing of the Court’s opinion or receipt of the Court’s decision.’”49

Alternatively, plaintiffs argue that “the Court can deny the Motion to Show

43 Id. at 3–4 (citing Show Cause Mot. Ex. B).

44 Id. at 4.

45 See id.

46 Id. at 5.

47 Opp’n to Def.’s Mots. for Sanctions, to Show Cause, and to Compel (“Second

Omnibus Br.”), Dkt. 141 at 12. 48 Id. at 12–13 (citation omitted).

49 Id. at 13 (citing Ct. Ch. R. 59(f)).

- 12 - Cause as another improper motion to compel documents which Jones has not

actually requested.”50

Specifically addressing Jones’ arguments supporting this motion,

plaintiffs again maintain that “[Roots’] forfeiture does not make its actions

void, as it has been properly revived.”51 They next argue derivative standing is

present here because plaintiffs “are suing Jones for recovery of potentially

millions in damages Jones caused . . . through his breaches of fiduciary duty,”

which is “certainly an economic interest befitting a derivative claim.”52

Touching on their previous arguments, plaintiffs again argue that OpCo’s

interests “were not transferred such that [Assignee] may intervene or replace

it[.]”53

As explained, plaintiffs are correct that Assignee need not replace any of

them in this action and that plaintiffs possess proper standing to proceed. There

is no basis to rule in favor of Jones’ request that plaintiffs and their counsel

“file sworn affidavits and supporting documentation demonstrating who, if

anyone, has lawful authority to prosecute or defend this action.”54

50 Id. (citation omitted).

51 Id. at 13–14 (citing Dkt. 130; Paul Rivera, 2024 WL 3873050, at *9 n.90).

52 Id. at 14 (citing Blaustein v. Lord Balt. Cap. Corp., 2013 WL 1810956, at *18 (Del.

Ch. Apr. 30, 2013), aff’d, 84 A.3d 954 (Del. 2014)). 53 Id. (citing Dkt. 126 Ex. B).

54 Show Cause Mot. 1.

- 13 - Additionally, Dorsey is only acting as a derivative plaintiff on behalf of Roots,

not HoldCo and OpCo.55 I deny this motion.

F. Motion to Compel Identification of Privilege Holders and Litigation Authority (Dkt. 129)

Through this motion, Jones “does not seek a privilege log[;]” instead,

Jones “seeks only identification of the holder of privilege and authority to

litigate, which is a threshold question of standing and jurisdiction, not merits or

discovery.”56 Jones asserts that Counsel “is litigating in the name of entities

without identifying who directed them to do so.”57 Jones supports this request

with case law that appears to have been hallucinated by generative artificial

intelligence, which the court addressed in its December 16, 2025 letter and

accompanying order to the parties.58

Relatedly, on October 29, Jones wrote to Counsel and requested a

“privilege log.”59 The letter requests a privilege log under Court of Chancery

Rule 26(b)(5), a rule that does not exist.60 The letter states the request is made

55 See, e.g., Verified Am. Compl. for Breach of Fiduciary Duty, Unjust Enrichment,

and Conversion, Dkt. 20 ¶ 91. 56 Def.’s Mot. to Compel Identification of Privilege Holder and Litig. Auth. (“Mot. to

Compel”), Dkt. 129 at 1–2. 57 Id. at 3.

58 See Dkts. 139–40.

59 Mot. to Compel Ex. A.

60 Id. at 2.

- 14 - “in connection with” Jones’ Show Cause Motion.61 There, Jones asked the

court to order plaintiffs’ production of numerous categories of documents.62

The October 29 letter requests from Counsel a privilege log that includes

“communications between [Counsel]” and 11 other parties, including five other

law firms.63 Counsel rejected Jones’ request.64

Jones is using the term “privilege” both in the attorney-client privilege

sense and in the “privilege to litigate” sense.65 To the extent Jones’ motion to

compel production of a privilege log is sought in connection with the Show

Cause Motion’s requested relief, the motion to compel is denied because the

Show Cause Motion is denied. To the extent the privilege log is a standalone

request, the motion is denied because a privilege log follows an assertion of

privilege in response to a discovery request.66 To the extent the motion to

61 Id. at 1.

62 Show Cause Mot. 9 (requests for supporting documents for categories including

(1) “corporate resolutions or documents establishing such authority at the time of initial appearance of RLF”; (2) “the source(s) of payment for RLF’s representation;” (3) “the person or entity that paid the Delaware franchise tax and revival fees (approximately $142,000) for [Roots’] revival, and . . . documentation of that payment”). 63 Mot. to Compel Ex. A at 3.

64 Id. Ex. B.

65 See Mot. to Compel 1 (requesting identification of “the person(s) or entity(ies) who

presently hold and control attorney client privilege” and also “the person(s) who authorized the initiation and continuation of this litigation in their names”). 66 See, e.g., In re ExamWorks, Inc. S’holder Appraisal Litig., 2018 WL 1008439, at

*12 (Del. Ch. Feb. 21, 2018) (“The privilege log enables the party that requested documents to evaluate the producing party’s claim of privilege.”) (emphasis added).

- 15 - compel seeks an order compelling Counsel’s disclosure of who “authorized”

them to initiate and continue this litigation, the motion is again denied.

This specific request is based upon Jones’ mistaken assumption that the

ABC strips HoldCo of its standing and that the revival event does not cure any

defects in same.67 Because Roots and HoldCo are in good standing and their

revival ratified the actions taken that preceded the revival, i.e., their continued

participation in this action, Jones’ suspicions are baseless. Additionally, the

October 29 letter only requests a privilege log accompanying plaintiffs’

potential production of documents. Jones’ new request for the identities of who

“authorized and directs [Counsel] to prosecute or defend this litigation in their

names” was never made in the October 29 letter. Motions to compel discovery,

as here, are predicated on a failure to answer or respond to a discovery request

or a failure to abide by an earlier court order regarding discovery.68 There was

no discovery request for these specific “authorization” materials, so the motion

to compel is also denied on this basis.

67 Mot. to Compel 2 (“[HoldCo] and [OpCo] were assigned to [Assignee] under a

California Assignment for the Benefit of Creditors on December 31, 2024. * * * RLF’s October 27, 2025 correspondence confirms that RLF does not represent RFG Liquidation LLC, the assignee that holds legal control over those entities. * * * [Roots] was forfeited on June 14, 2025 and revived on October 27, 2025 after Defendant filed counterclaims. * * * Plaintiff Dorsey is a named Defendant in this case and others, and cannot control corporate privilege as an adverse litigant. * * * Thus, the core issue is: * * * Who, if anyone, authorized and directs RLF to file pleadings and assert claims in the names of these entities?”) 68 See, e.g., Ct. Ch. R. 37(a)(2), (b).

- 16 - G. Motion for Sanctions Under Rule 11(b) (Dkt. 136)

Through this motion, Jones seeks sanctions against Counsel, Dorsey, and

10 unidentified “John Doe” individuals.69 Jones argues that the ABC removed

plaintiffs’ standing in this action,70 and that the entity plaintiffs’ revival was

executed by an attorney that represents the “Chapter 7 Trustee” in a bankruptcy

proceeding where an entity allegedly owned by Assignee is a creditor.71 Jones

requests various relief, including a declaration that Assignee is the real party of

interest under Rule 25(c) and a referral of this matter to “disciplinary

authorities” to investigate Dorsey and Counsel’s conduct.72

Plaintiffs present multiple arguments against this motion. First, plaintiffs

argue that “the Rule 11 Motion that Jones served on [p]laintiffs was a

completely different motion than what he filed with the Court.”73 Plaintiffs

argue that they “were not afforded the twenty-one-day period that the Rule

requires to review the motion and take corrective action.”74 Second, plaintiffs

rebut Jones’ argument regarding plaintiffs’ lack of standing. They again argue

that Roots’ return to good standing means that Dorsey has retained “continuous

69 Def.’s Mot. for Sanctions under Rule 11(b) (“Mot. for Sanctions”), Dkt. 136 at 1.

70 See id. at 2–5, 10.

71 See id. at 3, 9.

72 See id. at 1.

73 Second Omnibus Br. 6.

74 Id. (citing Ct. Ch. R. 11).

- 17 - ownership of his shares” in Roots, so that “he retains standing to pursue

derivative action on its behalf.”75 They next point to federal and Delaware

authority for the proposition that actions can continue against an original entity

and bind its successor, and therefore “[t]he fact that [the entity] no longer exists

as a distinct entity is of little consequence’ when entering a judgment for or

against it[.]”76

I agree with plaintiffs’ first argument. Under Rule 11, a motion for

sanctions “must be served under Rule 5, but it must not be filed or be presented

to the Court if the challenged paper, claim, defense, contention, or denial is

withdrawn or appropriately corrected within 21 days after service or within

another time the Court sets.” Ct. Ch. R. 11(c)(2). Jones makes no

representation that he abided by Rule 11’s 21-day curative period. The “Safe

Harbor” Jones sent to plaintiffs’ counsel is not his Rule 11 Motion.77

Accordingly, Jones failed to abide by Rule 11(c)’s 21-day curative period.78

The motion is denied on this basis.

75 Id. at 7.

76 Id. at 9 (citations omitted).

77 Compare Mot. for Sanctions, with id. Ex. D.

78 See Magna-D Glob. Healthcare No. 1 Priv. Equity Fund v. Colmmune, Inc., 2025

WL 1568186, at *4 (Del. Ch. June 3, 2025) (“The Plaintiff did not serve the motion on the Defendant before filing it with the Court. The Defendant, thus, did not have the 21-day corrective period provided in Rule 11(c)(2) . . . . I decline to disregard the procedural, safe harbor requirements of Rule 11. The Plaintiff’s failure to provide the required notice and wait the curative period renders the application under Rule 11 misplaced and unripe.”).

- 18 - H. Plaintiffs’ Motion to Dismiss Jones’ Counterclaim

Jones filed a 13-count counterclaim against Dorsey, HoldCo, and OpCo

(“Counterclaim Defendants”).79 The court addresses them below, out of order.

1. The Law of the Case Claim (Count IV)

Count IV of the counterclaim is entitled “REQUEST FOR COURT TO

SECURE INTERPLEADED FUNDS.” This court previously denied Jones’

request for interpleader.80 The ruling is law of the case, so it “will not be

disturbed by th[e] court unless compelling reason to do so appears.”81

Departures from the law-of-the-case doctrine are “rare” and generally require

“a showing of clear error, injustice, or a change in circumstances.”82 What

facts the counterclaim does plead do not establish any clear error, injustice, or

change in circumstances that would justify departing from the law-of-the-case

79 See generally Countercl. & Deriv. Action, Dkt. 84 (“Countercl.”). There are 13 numbered counts in the counterclaim, but Count I is a mashup of two claims alleging violations of Sections 271 and 109 of the DGCL. 80 See Dorsey v. Jones, 2025 WL 2589095, at *5 (Del. Ch. Sept. 8, 2025) (“The

upshot of all this activity—including Jones’ representations—is that Jones understood and agreed he would no longer be able to assert control over the funds in the JPMorgan Chase account. This interpleader motion is inconsistent with that activity, and the court will not entertain Jones’ requests regarding JPMorgan Chase’s interpleader any further.”). Jones filed the counterclaim before the court issued the September 8 letter decision. 81 Sciabacucchi v. Malone, 2021 WL 3662394, at *4 (Del. Ch. Aug. 18, 2021)

(quoting Guy v. State, 913 A.2d 558, 562 n.2 (Del. 2006); Zirn v. VLI Corp., 1994 WL 548938, at *2 (Del. Ch. Sept. 23, 1994)). 82 Id. (citations omitted).

- 19 - doctrine, so Count IV must be dismissed for the reasons the court explained in

its September 8, 2025 letter decision.

2. The Subject Matter Jurisdiction Claim (Count XII)

Count XII purports to assert a standalone claim for punitive damages.83

Punitive damages “are not available in the Court of Chancery.”84 Count XII

must be dismissed for lack of subject matter jurisdiction under Court of

Chancery Rule 12(b)(1).85

3. The Derivative Claims (Counts II, III, V, VII, X, XI, and XIII)

Jones characterizes the counterclaim as presenting both direct and

derivative causes of action, but does not specify which counts are derivative

and which are direct.86 Under Tooley v. Donaldson, Lufkin & Jenrette, Inc.,

determining whether a claim is direct or derivative requires the court to answer

two questions: “Who suffered the alleged harm—the corporation or the suing

stockholder individually—and who would receive the benefit of the recovery or

other remedy?” 845 A.2d 1031, 1035 (Del. 2004). “In making this assessment,

83 Countercl. ¶¶ 51–52.

84 Carlson v. Rodriguez, 2026 WL 183378, at *2 (Del. Ch. Jan. 22, 2026); see also

Read v. Del. Camera Club, 1980 WL 6410, at *2 (Del. Ch. 1980) (“[A] court of equity such as this does not grant punitive damages.”). 85 See Touch of It. Salumeria & Pasticceria, LLC v. Bascio, 2014 WL 108895, at *8

(Del. Ch. Jan. 13, 2014) (dismissing punitive damages as a remedy because “this Court has only that jurisdiction enjoyed by the English Court of Chancery in 1776, as supplemented by the General Assembly, and neither source permits the Court to award exemplary or punitive damages”). 86 Countercl. at 1.

- 20 - I must examine the ‘body of the complaint and consider[] the nature of the

wrong alleged and the relief requested.’ If the plaintiff ‘can prevail without

showing an injury to the corporation[,]’ then the claim is direct. If it cannot,

then the claim is derivative.” In re New Media Invs. II, LLC, 2026 WL 208698,

at *4 (Del. Ch. Jan. 27, 2026) (citations omitted).

Jones begins the counterclaim with general allegations. Jones alleges

that the Counterclaim Defendants have taken wrongful actions, “including

bylaw amendments, improper asset transfers and fraudulent financial

transactions,” and that the Counterclaim Defendants “have caused significant

harm to [Roots], depriving it of its rightful assets and stripping shareholders of

their legal protections.”87 Jones alleges that he “seeks to unwind these

fraudulent transactions, restore corporate governance protections, and hold all

responsible parties accountable for irreparable harm caused to [Roots] and

shareholders.”88

Jones also alleges that Dorsey “unilaterally amended Section 7.6 of

[Roots’] Bylaws to remove the rights of shareholders to adopt, amend, or repeal

bylaws, consolidating absolute control over corporate governance in the Board

87 Id. ¶ 2.

88 Id. ¶ 3.

- 21 - of Directors[.]”89 Jones alleges that “Dorsey engaged in self-dealing and

knowingly violated [Roots’] governance protections[.]”90

The general allegations support a finding that many, but not all, of the

counts in the counterclaim are derivative. They expressly refer to damage to

Roots and, as alleged, “[a]ny injury borne by the [stockholders] is indirect,

resulting ‘only because of their [interest]’ in [Roots] and harms otherwise

inflicted upon it.” Id. at *5 (quoting In re J.P. Morgan Chase & Co. S’holder

Litig., 906 A.2d 808, 819 (Del. Ch. 2005), aff’d, 906 A.2d 766 (Del. 2006)).

The specific causes of action asserted do not veer far from the counterclaim’s

general allegations.

a. Count II

Count II, a breach of fiduciary duty claim, alleges that Counterclaim

Defendants breached their fiduciary duties of loyalty and care owed to Roots

and its stockholders.91 Count II further alleges that Counterclaim Defendants

took actions “at the expense of [Roots] and its [stockholders].”92 Count II

requests “appropriate equitable and monetary relief.” Count II is derivative

because it alleges damage against Roots and damage to stockholders that only

stems from their interest in Roots.

89 Id. ¶ 7.

90 Id. ¶ 13.

91 Id. ¶ 21.

92 Id. ¶ 22.

- 22 - b. Count III

Count III is a claim of “Corporate Waste & Unjust Enrichment.”93 It

alleges that Counterclaim Defendants engaged in corporate waste and that the

alleged fraudulent transactions unjustly enriched them “at the expense of

[Roots] and its [stockholders].”94 Count III seeks an order of “full restitution of

all misappropriated funds and assets and disgorgement of any benefits derived

from the wrongful transactions.”95 “Waste claims are ‘classically derivative’

because squandering corporate assets injures the entity directly and the

investors directly.” Id. (quoting J.P. Morgan Chase & Co. S’holder Litig., 906

A.2d 766, 771 (Del. 2006)). As alleged, Count III follows that script and is

thus derivative.

c. Count V

Count V is a claim of civil conspiracy.96 “Civil conspiracy is not an

independent cause of action; it must be predicated on an underlying wrong.”

Blue v. Fireman, 2022 WL 593899, at *15 (Del. Ch. Feb. 28, 2022) (quoting

Kuroda v. SPJS Hldgs., L.L.C., 971 A.2d 872, 892 (Del. Ch. 2009)). Count V

alleges that Counterclaim Defendants “conspired to unlawfully strip [Roots] of

its assets, entrench themselves in positions of control, and eliminate shareholder

93 Id. ¶¶ 24–26.

94 Id. ¶ 25.

95 Id.

96 Id. ¶¶ 30–32.

- 23 - protections to facilitate their fraudulent transactions.”97 Count V specifies the

specific “coordinated actions” that the Counterclaim Defendants took; these

include “governance manipulations, financial misconduct, and fraudulent loan

agreements[.]”98 Thus, the underlying wrongs that predicate Count V are based

on alleged damage to the corporation and only indirect harm to its stockholders.

Count V is accordingly derivative.

d. Count VII

Count VII asserts a claim for aiding and abetting “fraud and breach of

fiduciary duty.”99 It alleges that certain Counterclaim Defendants “aided and

abetted, and concealed Dorsey’s misconduct, ensuring that fraudulent

transactions were executed while circumventing shareholder rights.”100 Count

VII calls back to Count II, the breach of fiduciary duty claim, by alleging that

“[t]he fraudulent acts of [Counterclaim Defendants] were integral in allowing

the improper governance amendments, financial misconduct, and self-

enrichment to continue unchecked.”101

“Prior decisions of this court have validated the unsurprising proposition

that an aiding and abetting claim premised on a derivative cause of action is

97 Id. ¶ 30.

98 Id. ¶ 31.

99 Id. ¶¶ 35–37.

100 Id. ¶ 35.

101 Id. ¶ 36. Compare id., with id. ¶ 22.

- 24 - necessarily derivative itself.” Sheldon v. Pinto Tech. Ventures, L.P., 2019 WL

336985, at *13 (Del. Ch. Jan. 25, 2019) (quoting Feldman v. Cutaia, 956 A.2d

644, 662 (Del. Ch. 2007)). Count VII is an aiding and abetting claim premised

on a derivative action and is, thus, “necessarily derivative itself.”

e. Count X

Count X is a claim of unjust enrichment and restitution.102 It alleges that

Counterclaim Defendants “fraudulently structur[ed] self-serving transactions,

us[ed] company funds for personal defense, and eliminat[ed] shareholder

rights[.]”103 Count X seeks “restitution and [a] return of all misappropriated

funds and assets.”104 Pleaded similarly as Count IX, Count X is derivative

because it alleges direct harm to Roots and the benefit of relief would flow to

the corporation.105

102 Id. ¶¶ 42–43.

103 Id. ¶ 42.

104 Id. ¶ 43.

105 Cf. Reith v. Lichtenstein, 2019 WL 2714065, at *21 (Del. Ch. June 28, 2019)

(“Plaintiff alleges the same ‘grossly unfair’ terms of the Preferred Stock and ‘unauthorized financial benefits’ from the Equity Grants, as its breach of fiduciary duty claims. I therefore reach the same conclusion as I did for the breach of fiduciary duty claim: Plaintiff’s unjust enrichment claim is derivative under Tooley.”) (citing Reiter v. Fairbank, 2016 WL 6081823, at *14 (Del. Ch. Oct. 18, 2016); Metro. Life Ins. Co. v. Tremont Grp. Hldgs., Inc., 2012 WL 6632681, at *9 (Del. Ch. Dec. 20, 2012); MCG Cap. Corp. v. Maginn, 2010 WL 1782271, at *23–24 (Del. Ch. May 5, 2010)).

- 25 - f. Count XI

Count XI asserts a claim of tortious interference with business

relations.106 True to name, it alleges that Counterclaim Defendants tortiously

interfered with Roots’ business relations.107 Count XI alleges that, “[a]s a

direct and proximate result of these unlawful actions, [Roots] suffered

significant financial losses, including lost investment capital, missed business

opportunities, and reputational damage.”108 Count XI seeks damages and

issuance of “an injunction preventing further interference in [Roots’] business

affairs.”109 Count XI is derivative because it alleges direct harm to Roots and

seeks relief that would flow to Roots.

g. Count XIII

Count XIII asserts a claim of misappropriation of Roots’ funds.110 It

states that the alleged misappropriation “constitutes corporate waste and further

breaches of fiduciary duty,” and warrants “immediate court intervention to

freeze any further expenditure [of Roots’ funds].”111 Count XIII is derivative

because it alleges injury to the corporation and the relief requested would flow

to the corporation. 106 Countercl. ¶¶ 44–50.

107 See id. ¶¶ 44–47.

108 Id. ¶ 49.

109 Id. ¶ 50.

110 Id. ¶¶ 53–57.

111 Id. ¶ 56.

- 26 - * * *

In sum, under Tooley, counts II, III, V, VII, X, XI, and XIII are

derivative claims. Plaintiffs argue that the derivative counts of the

counterclaim “should be dismissed for failure to adhere to the pleading

requirements in Rule 23.1.”112 I agree. The derivative counts must be

dismissed because Jones (1) failed to adequately plead his derivative standing;

and (2) pleaded no facts pertaining to a demand made to Roots or the futility of

such a demand.

Section 327 of the Delaware General Corporation law specifies the

requirement for derivative standing. It states that a derivative plaintiff shall

“aver[] in the complaint that the plaintiff was a stockholder of the corporation

at the time of the transaction of which such stockholder complains or that such

stockholder’s stock thereafter devolved upon such stockholder by operation of

law.” 10 Del. C. § 327. “Court of Chancery Rule 23.1 implements Section 327

procedurally by requiring that a stockholder plaintiff plead compliance with the

statute.” Quadrant Structured Prods. Co., Ltd. v. Vertin, 102 A.3d 155, 178

(Del. Ch. 2024).

112 Opening Br. in Supp. of Pls./Countercl. Defs.’ Mot. to Dismiss Countercls.

(“Countercl. Opening Br.”), Dkt. 108 at 8.

- 27 - Rule 23.1(a) pertinently states that a derivative plaintiff113 must “allege

facts supporting a reasonable inference that the derivative plaintiff has standing

to sue derivatively under the law governing the entity.” Ct. Ch. R. 23.1(a).

Rule 23.1 requires a stockholder plaintiff to “allege that the plaintiff was a

shareholder . . . at the time of the transaction of which the plaintiff complains or

that the plaintiff’s shares . . . devolved on the plaintiff by operation of law.” Id.

Moreover, Rule 23.1 “implements the substantive requirements of demand

futility and demand refusal as pleading requirements by providing that ‘[t]he

complaint shall also allege with particularity the efforts, if any, made by the

plaintiff to obtain the action the plaintiff desires from the directors or

comparable authority and the reasons for the plaintiff’s failure to obtain the

action or for not making the effort.’” Quadrant, 102 A.3d at 181 (quoting Ct.

Ch. R. 23.1(a)). The counterclaim fails to satisfy these requirements.

First, the counterclaim merely alleges Jones’ ownership in passing, and

without placing any sort of temporal qualification upon it. The counterclaim

only alleges that Jones “has standing to bring this action both individually and

derivatively on behalf of [Roots], as the challenged actions have caused direct

harm to him as a shareholder and to [Roots] as a whole.”114 This statement

neither establishes nor alleges that Jones “was a stockholder of the corporation

113 A counterclaim plaintiff can plead derivative claims. See, e.g., JER Hudson GP XXI LLC v. DLE Invs., LP, 275 A.3d 755, 781 (Del. Ch. 2022). 114 Countercl. ¶ 6.

- 28 - at the time of the transaction of which such stockholder complains or that such

stockholder’s stock thereafter devolved upon such stockholder by operation of

law.” The derivative counts accordingly fail to satisfy Rule 23.1.

Second, Jones has pleaded no facts relating to his making of a demand or

explaining why demand would be futile. No reasonable inference can be

drawn, then, in either direction. Accordingly, the derivative counts fail to

comply with Rule 23.1 on this basis also. For all these reasons, the derivative

counts of the counterclaim—Counts II–III, V, VII, X–XI, and XIII—must be

dismissed.

4. The Fraud-Based Claims (Counts VI, VIII, and IX)

Seven counts asserted in the counterclaim—Counts III, V, VI, VII, VIII,

IX, and X—appear to be fraud-based, as they refer, albeit in vague and

conclusory fashion, to purportedly fraudulent actions by Counterclaim

Defendants.115 Counts III, V, VII, and X are, for the reasons discussed in Part

II.H.3. of this report, clearly derivative claims for which Jones has failed to

plead derivative standing. The court therefore limits discussion in this section

to Counts VI, VIII, and IX.

115 See id. ¶¶ 24 (Count III) (“by approving fraudulent transactions”), 31 (Count V)

(“fraudulent loan agreements”), 33 (Count VI) (“engaged in fraudulent transfers”), 35 (Count VII) (“fraudulent transactions”), 38 (Count VIII) (“wrongful conduct . . . with the intent to mislead shareholders”); 40 (Count IX) (“fraudulent indemnifications, fraudulent transactions, and the fraudulent Assignment for the Benefit of Creditors”); 42 (Count X) (“fraudulently structure[ed] transactions”).

- 29 - a. Count VI

Count VI asserts a claim for fraudulent transfer.116 It alleges that

Counterclaim Defendants “knowingly and intentionally engaged in fraudulent

transfers, including the transfer of [Roots’] assets into newly formed entities

designed to shield those assets from creditors and shareholders.”117 It further

alleges that “[t]hese fraudulent transfers were executed without consideration

and were designed to unjustly benefit [Counterclaim Defendants] while leaving

[Roots] insolvent.”118

Whether Count VI states a derivative or a direct claim is not entirely

clear. It should be a direct claim. “[T]he law of fraudulent conveyance exists

specifically to protect creditors.” Prod. Res. Grp., L.L.C. v. NCT Grp., Inc.,

863 A.2d 772, 774 (Del. Ch. 2004). Accordingly, “[f]raudulent transfer claims

are direct, not derivative, because the creditors suffered the harm caused by the

fraudulent transfer, and the remedy benefits the creditors, not the business

entity.” In re FairPoint Ins. Coverage Appeals, 311 A.3d 760, 768 (Del. 2023)

(citing Prod. Resources Grp., 863 A.2d at 774). But Jones seems to plead it as

a derivative claim, asking the court to “unwind all fraudulent transfers and

restore [Roots’] rightful assets.”119 As a direct claim, Count VI would fail to

116 Id. ¶¶ 33–34. There are two paragraphs 33. 117 Id. ¶ 32.

118 Id. ¶ 33.

119 Id. ¶ 34.

- 30 - state a claim because Jones does not plead he is a creditor and thus cannot plead

a direct injury. And as a derivative claim, Count VI would fail to state a claim

for the same reason as Jones’ other derivative claims—a complete failure to

plead derivative standing.

But the court need not resolve that issue because Count VI asserts a

claim for intentional fraud. Under Court of Chancery Rule 9(b), when alleging

fraud, “a party must state with particularity the circumstances constituting

fraud[.]” Ct. Ch. R. 9(b). “Essentially, the plaintiff is required to allege the

circumstances of the fraud with detail sufficient to apprise the defendant of the

basis for the claim.” Abry P’rs V, L.P. v. F&W Acq. LLC, 891 A.2d 1032, 1050

(Del. Ch. 2006). This applies both to claims for common law fraud and claims

for intentional (as opposed to constructive) fraudulent transfer. The

counterclaim manifestly fails to meet this heightened pleading standard so

Count VI (and other fraud-based counts) must be dismissed.

b. Count VIII

Count VIII purports to assert a claim for constructive fraud.120 It alleges

Counterclaim Defendants “engaged in wrongful conduct that, while appearing

legitimate, was executed with the intent to mislead shareholders and avoid

regulatory scrutiny.”121 It asks the court to “exercise its equitable powers to

120 Id. ¶¶ 38–39.

121 Id. ¶ 38.

- 31 - rescind all unlawful transactions and restore full shareholder rights.”122 As

pleaded, Count VIII alleges that Counterclaim Defendants defrauded

stockholders, generally, as well as some undefined regulatory body.123

Whether Count VIII states a derivative or a direct claim is unclear

because it is so threadbare as to be unintelligible. But the court need not

resolve that question because Count VIII, like Count VI, asserts a claim for

intentional fraud. Count VIII alleges (vaguely) that Counterclaim Defendants

engaged in unspecified “wrongful conduct” as part of a scheme (i.e., “executed

with the intent to mislead shareholders and avoid regulatory scrutiny”).124 So

Count VIII must be dismissed for the same fraud-based reason as Count VI—

failure to meet Rule 9(b)’s heightened pleading standard.

c. Count IX

Count IX is a claim of fraudulent concealment.125 It alleges (vaguely,

once again) that Counterclaim Defendants “actively concealed material facts

from shareholders, including but not limited to the governance changes,

fraudulent indemnifications, fraudulent transactions, and the fraudulent

122 Id. ¶ 39.

123 Id. ¶ 38.

124 Jones denominates Count VIII as a “constructive fraud” claim, but that does not

make it so. Constructive fraud is “[u]nintentional deception or misrepresentation that causes injury to another.” Constructive Fraud, BLACK’S LAW DICTIONARY (12th ed. 2024). What Jones alleges is not “unintentional.” 125 Countercl. ¶¶ 40–41.

- 32 - Assignment for the Benefit of Creditors.”126 It requests “disgorgement of ill-

gotten gains and invalidation of concealed agreements.”127 Because it is

another fraud-based claim, Count IX must be dismissed because the

counterclaim fails to meet Rule 9(b)’s heightened pleading standard.128

5. The Stockholder Rights Claim (Count I)

The final count to resolve is Count I. It seeks a declaratory judgment that

Counterclaim Defendants violated Sections 271 and 109 of the DGCL by

transferring assets without stockholder approval (“Section 271 Claim”) and

“unlawfully amending [Roots’] bylaws” (“Section 109 Claim”).129 Count I

further alleges that those “actions deprived shareholders of their legal rights and

led to self-dealing transactions that unfairly benefited the [Counterclaim

Defendants] at the expense of [Roots].”130 Count I’s request for relief is that

the court “declare all such transactions void ab initio and restore shareholder

rights.”131 Because the two halves of Count I involve two difference sections of

126 Id. ¶ 40.

127 Id. ¶ 41.

128 Count IX could also be dismissed because “fraudulent concealment” is a tolling

doctrine, not an independent cause of action. See Lecates v. Hertrich Pontiac Buick Co., 515 A.2d 163, 176 (Del. Super. 1986) (“A defendant’s fraudulent concealment of a cause of action may toll the statute of limitations.”) (footnote omitted). 129 Countercl. ¶ 18.

130 Id. ¶ 19.

131 Id. ¶ 20.

- 33 - the DGCL and different allegations in the counterclaim, I deal with them

separately.

a. The Section 271 Claim

Counterclaim Defendants suggest Count I is a derivative claim,132 but

this is wrong, for both halves of Count I. Statutory provisions under the DGCL

that confer a right to vote on stockholders are a “classic example” of a direct

claim. Neem Int’l CV v. Shulman, 2025 WL 3778917, at *15 n.224 (Del. Ch.

Dec. 31, 2025) (citing In re Activision Blizzard, Inc. S’holder Litig., 124 A.3d

1025, 1049–50 (Del. Ch. 2015)). The “voting right belongs to the stockholders

individually—not to the corporation.” Id. A Section 271 claim based on the

failure to seek and obtain stockholder approval of a transaction involving the

sale, lease, or exchange of all or substantially all of the corporation’s assets133 is

a direct claim because “[t]he alleged harm is the stockholders’

disenfranchisement by depriving them of their statutory right to approve or

disapprove of a qualifying asset sale.” Id.

But even as a direct claim, the Section 271 Claim must be dismissed.

The counterclaim does not allege, even in conclusory fashion, that any of the

transactions about which Jones vaguely complains were a sale, lease, or

exchange of “all or substantially all” of Roots’ assets. The counterclaim does

132 See Countercl. Opening Br. 8 n.3.

133 See 8 Del. C. § 271.

- 34 - not sufficiently plead, even under Court of Chancery Rule 8’s generous notice

pleading standard, the most basic elements needed to state a claim under

Section 271. Jones does not identify the transactions, what kind of transactions

they were, or when they happened, nor does he identify what assets were

involved in those transactions or the value of those assets in relation to Roots’

overall asset base.134 Without such information, the court cannot assess

whether there is even a reasonably conceivable basis to think that “the

quantitative and qualitative importance of the transaction[s] at issue”135 might

be such that the transactions “strike at the heart of the corporate existence and

purpose”136 and thus required a stockholder vote under Section 271. The first

half of Count I, the Section 271 Claim, should therefore be dismissed.

b. The Section 109 Claim

As with the Section 271 Claim, I find that Counterclaim Defendants are

incorrect to suggest that the Section 109 Claim is a derivative claim.137 Jones’

argument for the Section 109 Claim is that Counterclaim Defendants violated

134 The 11 exhibits attached to the counterclaim, all of which the court reviewed, are

no help. None of them identifies any transaction that alone, or together with other identified transactions, would constitute the sale, lease, or exchange of all or substantially all of Roots’ assets. In fact, the exhibits identify only one specific transaction, a purported loan for $600,000 in which Roots was the borrower. See Countercl. Ex. E. 135 Neem, 2025 WL 3778917, at *15 (quoting Hollinger Inc. v. Hollinger Int’l, Inc.,

858 A.2d 342, 379 (Del. Ch. 2004)). 136 Id. (cleaned up).

137 See Countercl. Opening Br. 8 n.3.

- 35 - Section 109 of the DGCL by purporting to amend Roots’ bylaws to deny

Roots’ stockholders any ability to alter or amend those bylaws.138 This clearly

strikes at an important, statutory stockholder right—the ability to change the

bylaws139—and thus works a direct injury on Roots’ stockholders.140

But, unlike the Section 271 Claim, I conclude the Section 109 Claim

alleges facts demonstrating a reasonably conceivable claim that Section 109 of

the DGCL was violated. According to Jones, prior to the challenged

amendment Section 7.6 of Roots’ bylaws stated:

These bylaws may be amended or repealed, and new bylaws adopted, by the Board of Directors. The stockholders entitled to vote, however, retain the right to adopt additional bylaws and may amend or repeal any bylaw whether or not adopted by them.141

138 Countercl. ¶¶ 7 (“Dorsey unilaterally amended Section 7.6 of [Roots’] Bylaws to

remove the rights of shareholders to adopt, amend, or repeal bylaws, consolidating absolute control over corporate governance in the Board of Directors and concealed this from all shareholders.”), 9 (“This change stripped shareholders of their statutory and contractual rights, violating Delaware General Corporation Law (DGCL) § 109(a), which reserves the power to amend bylaws to shareholders unless otherwise explicitly stated in the certificate of incorporation.”). 139 See DAVID A. DREXLER, ET AL., DELAWARE CORPORATION LAW & PRACTICE

§ 9.02 (2025) (examining historical practice and explaining “[t]he right to adopt, amend or repeal bylaws had generally been considered by most general Delaware practitioners to be an inherent right of the stockholders entitled to vote.”) 140 See In re MultiPlan Corp. S’holders Litig., 268 A.3d 784, 802 (Del. Ch. 2022)

(“Assuming the truth of the well-pleaded allegations in the Complaint and drawing all reasonable inferences in favor of the plaintiffs, the plaintiffs have brought a direct claim stemming from the defendants’ interference with a personal right of stockholders.”). 141 Countercl. Ex. A § 7.6.

- 36 - The counterclaim, fairly read, then alleges that on December 7, 2023, the Roots

board (Dorsey being its only member) signed a unanimous written consent to

delete Section 7.6 of Roots’ bylaws in its entirety and replace it with this:

These Bylaws may be amended or repealed, and new bylaws adopted, solely by the Board of Directors.142

Counterclaim Defendants insist this is much ado about nothing. They

criticize Jones for “mak[ing] no mention of [Roots’] Certificate of

Incorporation or who was empowered to make amendments to the bylaws

under the then-current organizational documents of [Roots].”143 They say

“[t]here is nothing improper about the bylaw amendment: Dorsey, as the

Company’s director, used the power granted by the Company’s Certificate of

Incorporation to amend the bylaws.”144 They also say Jones does not have

standing to challenge the bylaw amendment because he “fails to plead that he is

a stockholder” and seeks relief beyond what would be permissible for a Section

109 violation.145

Counterclaim Defendants mischaracterize the Section 109 Claim. The

dispute is not whether the Roots board had the power to make an amendment to

Roots’ bylaws, it is whether the Roots board had the power to make this

142 Id. Ex. B at 1 (emphasis added).

143 Countercl. Opening Br. 17.

144 Id.

145 Id. at 17–18.

- 37 - amendment. And for more than half a century, the Delaware General

Corporation Law has been clear that the Roots board did not:

After a corporation . . . has received any payment for any of its stock, the power to adopt, amend or repeal bylaws shall be in the stockholders entitled to vote . . . . The fact that such power has been so conferred upon the directors . . . shall not divest the stockholders . . . of the power, nor limit their power to adopt, amend or repeal bylaws.146

Case law confirms this.147 As do treatises.148 Counterclaim Defendants’

argument that there is nothing to see here falls flat.

146 8 Del. C. § 109(a); see also 59 Del. Laws ch. 437, § 1 (1974).

147 See Boilermakers Loc. 154 Ret. Fund v. Chevron Corp., 73 A.3d 934, 956 (Del.

Ch. 2013) (“Section 109(a) vests in the shareholders a power to adopt, amend or repeal bylaws that is legally sacrosanct, i.e., the power cannot be non-consensually eliminated or limited by anyone other than the legislature itself.”) (quoting CA, Inc. v. AFSCME Emps. Pension Plan, 953 A.2d 227, 232 (Del. 2008)); Kellner v. AIM ImmunoTech Inc., 320 A.3d 239, 257 n.130 (Del. 2024) (“Regardless of the authority vested in the board, stockholders retain the power to adopt and amend bylaws[.]”) (citing Boilermakers, 73 A.3d at 956). 148 See, e.g., ROBERT S. SAUNDERS, ET AL., FOLK ON THE DELAWARE GENERAL

CORPORATION LAW § 109.11 (7th ed. 2026) (explaining that after the 1974 amendments to Section 109, “stockholders or members of a corporation always have the power to adopt, amend, or repeal bylaws, even when such power has also been granted to the directors or governing body by the certificate of incorporation”); R. FRANKLIN BALOTTI & JESSE A. FINKELSTEIN, THE DELAWARE LAW OF CORPORATIONS & BUSINESS ORGANIZATIONS § 1.11 (4th ed. 2026) (“After a corporation receives payment for any of its stock, the power to adopt, amend, or repeal by-laws resides exclusively ‘in the stockholders entitled to vote’ unless the certificate of incorporation confers a concurrent power on the board . . . . Section 109 further provides, however, that the grant of such concurrent power to the board in the certificate of incorporation does not divest the stockholders of their power nor limit their rights with respect to adoption and amendment of the by-laws.”) (internal citations omitted); DAVID A. DREXLER, ET AL., DELAWARE CORPORATION LAW & PRACTICE § 9.02 (2025) (“Even where the certificate of incorporation grants authority over bylaws to directors, the stockholders continue to have power over the bylaws.”).

- 38 - So, too, does Counterclaim Defendants’ argument that Jones “fails to

plead he is a stockholder.”149 Jones alleges he is a stockholder in paragraph 6

of the counterclaim: “[T]he challenged actions have caused direct harm to him

as a shareholder and to [Roots] as a whole.”150 Whether Jones would be able to

prove up this terse statement is not an appropriate inquiry at the motion to

dismiss stage.151 A stockholder’s direct statutory claim is not subject to the

same stringent pleading-stage burden as are derivative claims under Rule 23.1

and Section 327 of the DGCL.152

149 Countercl. Opening Br. at 17.

150 Countercl. ¶ 6.

151 I reject Counterclaim Defendants’ argument that a list of stockholders Jones

attached to a motion he filed after filing his counterclaim, which does not list him as a stockholder, is fatal to Jones’ assertion that he is a stockholder. See Countercl. Opening Br. 17–18 (citing Dkt. 92 Ex. A). That list is an exhibit to an April 2020 stockholders agreement, and the purportedly unlawful bylaw amendment occurred in December 2023. Counterclaim Defendants offer no reason why the court is allowed, let alone required, to decide as a matter of law that Roots’ stockholder base could not possibly have changed in the 44 months between those two events. Indeed, the stockholders agreement itself appears to contemplate other persons could become stockholders. See Dkt. 92 Ex. A at 1. 152 See Loudon v. Archer-Daniels-Midland Co., 700 A.2d 135, 140 (Del. Ch. 1997)

(“In asserting direct claims, as distinct from stockholder derivative claims, the complaint need give only general notice of the claim asserted.”) (citing Rabkin v. Philip A. Hunt Chem. Corp., 498 A.2d 1099, 1104 (Del. 1985)); see also Brookfield Asset Mgmt., Inc. v. Rosson, 261 A.3d 1251, 1263 n.42 (Del. 2021) (“Derivative claims are also subject to higher pleading standards than direct claims.”); Telxon Corp. v. Bogomolny, 792 A.2d 964, 974 (Del. Ch. 2001) (“[Rule 23.1] pleadings must comply with stringent requirements of factual particularity that differ substantially from the permissive notice pleading.”) (quoting Brehm v. Eisner, 746 A.2d 244, 254 (Del. 2000)).

- 39 - Counterclaim Defendants’ third argument against the Section 109 Claim

also fails. A Rule 12(b)(6) motion “does not target the types of relief that a

plaintiff might obtain.” DBMP LLC v. Del. Claims Processing Facility, LLC,

349 A.3d 663, 700 (Del. Ch. 2025). “A court determines remedies after trial, so

a pleading-stage assessment is usually premature.” Id. (citations omitted).

Such is the case here. Counterclaim Defendants argue that the only remedy this

court can grant for the adoption of an invalid bylaw amendment is to void the

amendment,153 but the one case they cite for this proposition, Crown EMAK

Partners, LLC v. Kurz,154 does not say that. In Crown EMAK Partners the

Supreme Court said that “a bylaw provision that conflicts with the DGCL is

void.” 992 A.2d at 398. It did not say that voiding an invalid bylaw

amendment is the only permissible form of relief regardless of the particular

facts and circumstances of a given case.155

153 Countercl. Opening Br. 18.

154 992 A.2d 377 (Del. 2010).

155 Counterclaim Defendants also argue the entire counterclaim should be dismissed

because Jones waived his claims by not responding to any of the arguments made in Counterclaim Defendants’ opening brief. See Reply Br. in Supp. of Plfs./Countercl. Defs.’ Mot. to Dismiss the Countercl., Dkt. 134 at 3–5 (citing Emerald P’rs v. Berlin, 726 A.2d 1215, 1224 (Del. 1999) and other authorities). I acknowledge this is the general rule, but I decline to follow it here, as there is evidence in the record, more recent than Jones’ answering brief, indicating Jones was not intending to abandon the Section 109 Claim. See Consol. Final Reply Br., Dkt. 143 at 3 (“Sole director Bryan Dorsey: . . . amended § 7.6 to vest bylaw authority solely in the board, consisting only of himself; in violation of DGCL §§ (sic) 109(a)[.]”). Cf. State v. Lawrie, 1995 WL 818511, at *17 (Del. Super. Nov. 28, 1995) (“While the opinions of the Delaware Supreme Court teach that issues not briefed are deemed waived and this rule satisfies

- 40 - For these reasons, I find that the Section 109 Claim in Count I survives

the motion to dismiss.156

III. CONCLUSION For the reasons explained above, the court denies each of Jones’ motions,

grants Counterclaim Defendants’ motion to dismiss as to Counts II through

XIII of the counterclaim, and grants in part and denies in part Counterclaim

Defendants’ motion to dismiss as to Count I of the counterclaim. This is a

Report under Court of Chancery Rule 144(b)(1). Under Court of Chancery

Rule 144(c)(2)(A), exceptions to this Report are stayed pending issuance of a

final report in this case.

the intent of judicial economy, I will consider each of these claims so that there is a full adjudication of [defendant’s] assertions.”). 156 In declining to dismiss the Section 109 Claim, I am not expressing a view as to

whether there should be any limits on the scope or sequencing of discovery on this claim.

- 41 -