Eagle Force Holdings, LLC v. Stanely v. Campbell
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Opinion
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
EAGLE FORCE HOLDINGS, LLC, a ) Delaware limited liability company, ) and EF INVESTMENTS, LLC, a ) Delaware limited liability company, ) ) Plaintiffs, ) C.A. No. 10803-VCMR ) v. ) ) STANLEY V. CAMPBELL, ) ) Defendant. )
MEMORANDUM OPINION
Date Submitted: August 28, 2017 Date Decided: September 1, 2017
Frank E. Noyes, II, OFFIT KURMAN, P.A., Wilmington, Delaware; Harold M. Walter, OFFIT KURMAN, P.A., Baltimore, Maryland; Attorneys for Plaintiffs.
David L. Finger, FINGER & SLANINA, LLC, Wilmington, Delaware; Attorney for Defendant.
MONTGOMERY-REEVES, Vice Chancellor. In 2013, Richard Kay and Stanley Campbell decided to form a business
venture to market certain medical diagnosis and prescription technology that
Campbell had developed. The parties outlined the principal terms of the investment
through two letter agreements in November 2013 and April 2014. Under the
principal terms, Kay and Campbell would form a new limited liability company of
which they would each be 50% members. Campbell would contribute the stock of
EagleForce Associates, Inc., a Virginia corporation, (“EagleForce Associates”) and
the membership interests of EagleForce Health, LLC, a Virginia limited liability
company, (“EagleForce Health”) along with certain other intellectual property. Kay
would contribute cash. For many months, the parties negotiated several key terms
of the transaction documents for the new venture. In the meantime, Kay contributed
cash to EagleForce Associates without a formal agreement in place in order to keep
the company afloat.
On August 28, 2014, Kay and Campbell signed the transaction documents,
which included an operating agreement for Eagle Force Holdings, LLC, a Delaware
limited liability company, (“Eagle Force Holdings”) and a contribution agreement.
The parties dispute what occurred at the August 28 meeting. Plaintiffs assert that
the parties formed binding contracts at the August 28 meeting. Campbell contends
that his signature was meant to indicate receipt of the latest drafts of the agreements
but not to manifest his assent to their terms. Campbell also argues that the
1 transaction documents lack certain essential terms on which the parties had not yet
come to agreement, including representations regarding Campbell’s ownership of
the intellectual property, stock of EagleForce Associates, and membership interests
of EagleForce Health.
After a fact-intensive inquiry, this Court holds in this post-trial opinion that
the transaction documents do not represent an enforceable contract because the
parties failed to come to agreement on certain terms that the parties regarded as
essential. The only basis for this Court’s personal jurisdiction over the defendant is
consent through forum selection clauses in the contribution agreement and the
limited liability company agreement. Because Campbell is not bound by the forum
selection clauses, this case is dismissed for lack of personal jurisdiction.
I. BACKGROUND
The facts in this opinion are my findings based on the parties’ stipulations,
152 trial exhibits, including deposition transcripts, and the testimony of ten
witnesses presented at a five-day trial before this Court that began on February 6,
2017. Additionally, the Court considers Campbell’s testimony and the documentary
evidence presented at the evidentiary hearings that this Court held on August 31,
2 2016, September 8, 2016, May 5, 2017, and August 28, 2017. I grant the evidence
the weight and credibility that I find it deserves.1
A. Parties and Relevant Non-Parties
Richard Kay is a businessman and investor in the Washington, DC
metropolitan area. Since 2005, Kay has owned a government contracting company
called Sentrillion with other partners.2 Kay also controls Plaintiff EF Investments,
LLC, a Delaware limited liability company (“EF Investments”).
Defendant Stanley Campbell controls EagleForce Associates and EagleForce
Health. EagleForce Associates is a start-up company that Campbell intended to use
to market a pharmaceutical software system called PADRE.3 PADRE aggregates
medical information about patients to assist in determining which medications to
prescribe to those patients. It also monitors pharmaceutical sales for compliance
with federal law.4
1 Citations to testimony presented at trial are in the form “Tr. # (X)” with “X” representing the name of the speaker. After being identified initially, individuals are referenced herein by their surnames without regard to formal titles such as “Dr.” No disrespect is intended. Exhibits are cited as “JX #.” Unless otherwise indicated, citations to the parties’ briefs are to post-trial briefs, and citations to the oral argument transcript refer to the post-trial oral argument. 2 Tr. 18 (Offit). 3 Id. at 775 (Campbell). 4 Id. at 766.
3 Plaintiff Eagle Force Holdings is a Delaware limited liability company created
by Kay to serve as the holding company for the operating EagleForce businesses.
The Amended and Restated Limited Liability Company Agreement of Eagle Force
Holdings (the “LLC Agreement”) contemplates that Campbell and EF Investments
will each own 50% of the membership interests in Eagle Force Holdings.5 The
Contribution and Assignment Agreement that Kay and Campbell began to negotiate
(the “Contribution Agreement,” together with the LLC Agreement, the “Transaction
Documents”) contemplates that EagleForce Associates and EagleForce Health will
be subsidiaries of Eagle Force Holdings.6
Donald Rogers is an attorney who represented Campbell through key parts of
his negotiations with Kay.7
Theodore Offit is an attorney who represented Kay in the negotiations with
Campbell.8
5 See JX 79. 6 JX 78. 7 Tr. 817-18 (Rogers). 8 See id. at 19 (Offit).
4 Said S. Salah is the Vice President of Finance and CFO of EagleForce
Associates.9 From January 2016 until July 2017, he lived overseas and tapered off
his services to EagleForce Associates.10
General John W. Morgan III is a Senior Vice President of EagleForce
Associates and EagleForce Health.11
Christopher Cresswell is the General Manager of EagleForce Health.12
Jashuva Variganti is an employee of EagleForce Associates.13
Katrina Powers is an employee of Sentrilion.14
B. Facts
Campbell first met Kay through a mutual friend in 2005 or 2006 when
Campbell was seeking an investor for an earlier iteration of EagleForce Associates.15
Kay did not invest in the earlier EagleForce venture, but in 2009, Campbell
9 Id. at 1086 (Salah). 10 Id.; Aug. 28, 2017 Hr’g Tr. 27. 11 Tr. 1166 (Morgan). 12 May 5, 2017 Hr’g Ex. 6. 13 Tr. 716 (Variganti). 14 Id. at 246-47 (Powers). 15 Id. at 768 (Campbell).
5 approached Kay again about investing in a bomb detection technology. 16 Those
negotiations also did not lead to a deal.
In January 2013, Campbell needed capital to market his PADRE technology
through EagleForce Associates. Before approaching Kay again, Campbell met Said
Salah who had experience with government contracting.17 Campbell hired him to
work with EagleForce Associates, and in May 2013, Salah and Campbell negotiated
an employment agreement for Salah. Under Salah’s employment agreement, he is
“eligible to earn equity participation by demonstrating a sustained ability to attain
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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
EAGLE FORCE HOLDINGS, LLC, a ) Delaware limited liability company, ) and EF INVESTMENTS, LLC, a ) Delaware limited liability company, ) ) Plaintiffs, ) C.A. No. 10803-VCMR ) v. ) ) STANLEY V. CAMPBELL, ) ) Defendant. )
MEMORANDUM OPINION
Date Submitted: August 28, 2017 Date Decided: September 1, 2017
Frank E. Noyes, II, OFFIT KURMAN, P.A., Wilmington, Delaware; Harold M. Walter, OFFIT KURMAN, P.A., Baltimore, Maryland; Attorneys for Plaintiffs.
David L. Finger, FINGER & SLANINA, LLC, Wilmington, Delaware; Attorney for Defendant.
MONTGOMERY-REEVES, Vice Chancellor. In 2013, Richard Kay and Stanley Campbell decided to form a business
venture to market certain medical diagnosis and prescription technology that
Campbell had developed. The parties outlined the principal terms of the investment
through two letter agreements in November 2013 and April 2014. Under the
principal terms, Kay and Campbell would form a new limited liability company of
which they would each be 50% members. Campbell would contribute the stock of
EagleForce Associates, Inc., a Virginia corporation, (“EagleForce Associates”) and
the membership interests of EagleForce Health, LLC, a Virginia limited liability
company, (“EagleForce Health”) along with certain other intellectual property. Kay
would contribute cash. For many months, the parties negotiated several key terms
of the transaction documents for the new venture. In the meantime, Kay contributed
cash to EagleForce Associates without a formal agreement in place in order to keep
the company afloat.
On August 28, 2014, Kay and Campbell signed the transaction documents,
which included an operating agreement for Eagle Force Holdings, LLC, a Delaware
limited liability company, (“Eagle Force Holdings”) and a contribution agreement.
The parties dispute what occurred at the August 28 meeting. Plaintiffs assert that
the parties formed binding contracts at the August 28 meeting. Campbell contends
that his signature was meant to indicate receipt of the latest drafts of the agreements
but not to manifest his assent to their terms. Campbell also argues that the
1 transaction documents lack certain essential terms on which the parties had not yet
come to agreement, including representations regarding Campbell’s ownership of
the intellectual property, stock of EagleForce Associates, and membership interests
of EagleForce Health.
After a fact-intensive inquiry, this Court holds in this post-trial opinion that
the transaction documents do not represent an enforceable contract because the
parties failed to come to agreement on certain terms that the parties regarded as
essential. The only basis for this Court’s personal jurisdiction over the defendant is
consent through forum selection clauses in the contribution agreement and the
limited liability company agreement. Because Campbell is not bound by the forum
selection clauses, this case is dismissed for lack of personal jurisdiction.
I. BACKGROUND
The facts in this opinion are my findings based on the parties’ stipulations,
152 trial exhibits, including deposition transcripts, and the testimony of ten
witnesses presented at a five-day trial before this Court that began on February 6,
2017. Additionally, the Court considers Campbell’s testimony and the documentary
evidence presented at the evidentiary hearings that this Court held on August 31,
2 2016, September 8, 2016, May 5, 2017, and August 28, 2017. I grant the evidence
the weight and credibility that I find it deserves.1
A. Parties and Relevant Non-Parties
Richard Kay is a businessman and investor in the Washington, DC
metropolitan area. Since 2005, Kay has owned a government contracting company
called Sentrillion with other partners.2 Kay also controls Plaintiff EF Investments,
LLC, a Delaware limited liability company (“EF Investments”).
Defendant Stanley Campbell controls EagleForce Associates and EagleForce
Health. EagleForce Associates is a start-up company that Campbell intended to use
to market a pharmaceutical software system called PADRE.3 PADRE aggregates
medical information about patients to assist in determining which medications to
prescribe to those patients. It also monitors pharmaceutical sales for compliance
with federal law.4
1 Citations to testimony presented at trial are in the form “Tr. # (X)” with “X” representing the name of the speaker. After being identified initially, individuals are referenced herein by their surnames without regard to formal titles such as “Dr.” No disrespect is intended. Exhibits are cited as “JX #.” Unless otherwise indicated, citations to the parties’ briefs are to post-trial briefs, and citations to the oral argument transcript refer to the post-trial oral argument. 2 Tr. 18 (Offit). 3 Id. at 775 (Campbell). 4 Id. at 766.
3 Plaintiff Eagle Force Holdings is a Delaware limited liability company created
by Kay to serve as the holding company for the operating EagleForce businesses.
The Amended and Restated Limited Liability Company Agreement of Eagle Force
Holdings (the “LLC Agreement”) contemplates that Campbell and EF Investments
will each own 50% of the membership interests in Eagle Force Holdings.5 The
Contribution and Assignment Agreement that Kay and Campbell began to negotiate
(the “Contribution Agreement,” together with the LLC Agreement, the “Transaction
Documents”) contemplates that EagleForce Associates and EagleForce Health will
be subsidiaries of Eagle Force Holdings.6
Donald Rogers is an attorney who represented Campbell through key parts of
his negotiations with Kay.7
Theodore Offit is an attorney who represented Kay in the negotiations with
Campbell.8
5 See JX 79. 6 JX 78. 7 Tr. 817-18 (Rogers). 8 See id. at 19 (Offit).
4 Said S. Salah is the Vice President of Finance and CFO of EagleForce
Associates.9 From January 2016 until July 2017, he lived overseas and tapered off
his services to EagleForce Associates.10
General John W. Morgan III is a Senior Vice President of EagleForce
Associates and EagleForce Health.11
Christopher Cresswell is the General Manager of EagleForce Health.12
Jashuva Variganti is an employee of EagleForce Associates.13
Katrina Powers is an employee of Sentrilion.14
B. Facts
Campbell first met Kay through a mutual friend in 2005 or 2006 when
Campbell was seeking an investor for an earlier iteration of EagleForce Associates.15
Kay did not invest in the earlier EagleForce venture, but in 2009, Campbell
9 Id. at 1086 (Salah). 10 Id.; Aug. 28, 2017 Hr’g Tr. 27. 11 Tr. 1166 (Morgan). 12 May 5, 2017 Hr’g Ex. 6. 13 Tr. 716 (Variganti). 14 Id. at 246-47 (Powers). 15 Id. at 768 (Campbell).
5 approached Kay again about investing in a bomb detection technology. 16 Those
negotiations also did not lead to a deal.
In January 2013, Campbell needed capital to market his PADRE technology
through EagleForce Associates. Before approaching Kay again, Campbell met Said
Salah who had experience with government contracting.17 Campbell hired him to
work with EagleForce Associates, and in May 2013, Salah and Campbell negotiated
an employment agreement for Salah. Under Salah’s employment agreement, he is
“eligible to earn equity participation by demonstrating a sustained ability to attain
specific sales, operations, and management goals.”18 The only goal mentioned in
the employment agreement is to “generate prorated new business sales of at least
$6.0 million over the next two years.”19 The agreement states that Salah is eligible
to earn 2.5% of the equity of EagleForce Associates.20 Salah also loaned money to
EagleForce Associates and deferred collection of his salary to provide EagleForce
Associates with cash needed for its operations.21 In the same month, Salah’s brother,
16 Id. at 770-71. 17 Id. at 1094 (Salah). 18 May 5, 2017 Hr’g Ex. 6. 19 Id. 20 Tr. 1093-94 (Salah); May 5, 2017 Hr’g Ex. 6. 21 Tr. 1091, 1094-95 (Salah).
6 Haney Salah, signed an employment agreement to become the Chief Medical Officer
of EagleForce Associates. His employment agreement contains the same eligibility
requirements for equity participation, but Haney is entitled to 1.5% of the
EagleForce Associates equity upon satisfying those requirements.22
Campbell signed Salah’s employment agreement, and Salah testified that Kay
also saw the agreement and was aware of his claim to equity in EagleForce
Associates.23
1. The November 2013 letter agreement
In or around November 2013, Campbell approached Kay about investing in
EagleForce Associates for the purpose of marketing the PADRE software.24
EagleForce Associates recently had been denied a government contract, and
Campbell believed that with adequate capitalization, EagleForce Associates would
be more attractive as a government contractor.25
Kay was interested in investing in EagleForce Associates, and on November
27, 2013, Campbell and Kay signed a letter agreement dated November 15, 2013.26
22 May 5, 2017 Hr’g Ex. 6; Tr. 1097 (Salah). 23 Tr. 1094 (Salah). 24 Id. at 774-75 (Campbell). 25 Id. at 774. 26 JX 1.
7 Kay’s lawyers at the law firm Offit Kurman drafted an initial version of the
November letter agreement, but Campbell and Kay independently made changes to
it themselves before signing.27 The November letter agreement contemplates that
Campbell and Kay “will form a new LLC entity and/or a series of industry specific
LLC’s [sic] verticals in Virginia.”28 Campbell’s contribution “will be PADRE
source code and patents,”29 and Kay’s contribution will be at least $1.8 million in
cash with the goal of raising $7.8 million in total financing to be contributed by
either Kay or a mutually agreed upon investor.30 The November letter agreement
states that “[t]he company will be able to state that it has both the technology and
intellectual property rights for all software and applications.”31 It further provides
that both Campbell and Kay will own 50% of the new LLC and that they will “never
dilute [their combined stake to] less than 50.1% together in order to maintain control.
They will also agree that their vote will always be uniformly tied as a single vote
27 Tr. 131 (Offit). 28 JX 1, ¶ 2. 29 Id. ¶ 7. 30 Id. ¶ 6. 31 Id. ¶ 7.
8 thus protecting [Campbell] from complete loss of control.”32 Further, Campbell will
be entitled to a priority return of $1.8 million before Kay receives a distribution.33
Under the November letter agreement, both Campbell and Kay would be
involved in managing the new LLC and “will confer on all business and marketing
related activities as well as all capital needs.”34 The new LLC’s board will have two
Campbell designees, two Kay designees, and a fifth member upon which Kay and
Campbell will agree.35 All of the material terms of the November letter agreement
were subject to due diligence.36
2. The April 2014 letter agreement
After executing the November 2013 agreement, Kay and Campbell continued
to negotiate. On March 17, 2014, Kay filed a certificate of formation for Eagle Force
Holdings in Delaware.37 At that time, Kay did not tell Campbell he had formed the
Eagle Force Holdings entity; nor did he inform Campbell that the entity was
established in Delaware rather than Virginia, as the November letter agreement
32 Id. ¶ 5. 33 Id. ¶ 10. 34 Id. ¶ 4. 35 Id. ¶ 11. 36 Id. ¶¶ 6, 8, 10. 37 JX 7.
9 stated.38 But on April 4, 2014, Kay and Campbell signed an amendment to the
November letter agreement, which stated “[b]y April 21 it is anticipated that a new
LLC will be formed to serve as a parent entity (‘Holdco’) for Eagle Force Associates,
Inc. and the recently formed Eagle Force Health Solutions, LLC . . . .”39
Kay and Campbell signed the April 4, 2014 letter agreement without counsel
present.40 The April letter agreement “amends the letter agreement that [Campbell
and Kay] executed on November 27, 2013 that was dated as of November 15,
2013.”41 The April letter agreement maintained that Campbell and Kay would share
management responsibilities and confer regarding marketing and capital needs.42
But it also further defined Campbell’s and Kay’s roles in the anticipated parent
company, referred to as “Holdco.” The April letter agreement stated that
[Campbell] will have primary responsibility over all information technology, product development, R&D, and customer service and maintenance, in each case subject to an annual budget approved by the Holdco board. [Kay] will have primary responsibility over financial matters, personnel/HR, and management of outside accounting, legal, tax and other advisors and consultants as well as all other matters relating to the operation of the business of
38 Tr. 991-92 (Campbell). 39 JX 12, ¶ 2. 40 Tr. 380-81 (Kay). 41 JX 12. 42 Id. ¶ 4.
10 Holdco and its subsidiaries and will consult with [Campbell] on all decisions affecting these functions.43
The April letter agreement contemplated that Campbell would remain entitled
to a priority return of his capital,44 50% ownership of “Holdco,” and Kay’s
agreement that Kay and Campbell together would not be diluted below 51% of
“Holdco,” a slightly higher threshold than the 50.1% in the November letter
agreement.45 The parties referred to the more defined spheres of management
responsibility in the anticipated 50-50 partnership as “swim lanes.”46
Both the November 2013 and the April 2014 letter agreements contemplated
that Campbell and Kay would sign an operating agreement for the new LLC
“Holdco.”47 The April letter agreement provides that “[Campbell] will, at execution
of the Holdco LLC operating agreement, make customary representations to [Kay]
regarding Holdco’s free and clear right, title and interest to 100% of such Stanley
referenced IP . . . .”48 “Stanley IP” is defined in the letter agreement as “all software
and source code . . . invented, developed or created, directly or indirectly, by
43 Id. ¶ 3. 44 Id. ¶ 10. 45 Id. ¶ 5. 46 Tr. 319 (Kay). 47 JX 1, ¶ 8; JX 12, ¶ 8. 48 JX 12, ¶ 7.
11 [Campbell], in whole or in part, alone or in conjunction with others (including
specifically Eagle Force Associates, Inc. . . . .”49
Recognizing that Kay and Campbell had not yet agreed to a “Holdco”
operating agreement, the April letter agreement provides that Kay will advance
$500,000 to Eagle Force Holdings upon the execution of the letter agreement. And
“[t]his $500,000 will be evidenced by a demand promissory note issued to [Kay] by
Eagle Force Associates, Inc. and Eagle Force Health Solutions, LLC, jointly and
severally . . . .”50 The evidence does not show that Kay received such a note until
July 7, 2014, as discussed below. The April letter agreement also contemplates that
once Kay and Campbell agree to the “Holdco” LLC agreement, Kay will contribute
an additional $1,800,000 to equal the value of Campbell’s intellectual property,
$2,300,000.51 Also at that time, Campbell will receive a $500,000 distribution from
“Holdco” for his personal use.52
49 Id. 50 Id. ¶ 6. 51 Id. 52 Id.
12 3. The EagleForce businesses hire Cresswell and Morgan In May 2014, EagleForce Health entered an employment agreement with
Christopher Cresswell under which Cresswell became General Manager of
EagleForce Health.53 Cresswell’s employment agreement provides that he is
eligible for equity participation in EagleForce [Health] Stock Appreciation Rights (SAR’s) plan. [Cresswell] will be eligible to earn equity participation as granted by the Board of Directors in the amount of 5% non-voting interest in the company of which 2.5% will be authorized and not issued on execution of this agreement and the remaining 2.5% shall vest equally based on tenure on a prorated basis over the next 3 years. Any outstanding unauthorized SARs shall automatically vest for any change in control or termination without cause.54
Cresswell testified that he understood that his agreement provided him with a right
to 5% of the equity of EagleForce Health but that the equity would be expressed as
SARs for tax purposes.55 Cresswell had not seen a SARs plan but testified that Kay
told him that his equity would take the form of SARs.56
In the same month, EagleForce Associates and EagleForce Health hired
General John W. Morgan III as a Senior Vice President. Morgan’s employment
agreement provides that he is
53 May 5, 2017 Hr’g Ex. 6. 54 Id. 55 Tr. 652 (Cresswell). 56 Id. at 653.
13 eligible for equity participation in EagleForce Associates, Inc. Stock Appreciation Rights (SAR’s) plan. [Morgan] will be eligible to earn equity participation as granted by the Board of Directors in the amount of 300,000 SAR’s (150,000 each) valued [sic] one dollar ($1) per SAR. . . . SAR’s will vest based on both tenure and contribution/revenue achievements. Any sale of EagleForce prior to the 3 year vesting shall result in 100% of [Morgan’s] shares automatically vesting provided [that Morgan is] still employed by EagleForce or Terminated without “Cause.”57
As such, Cresswell and Morgan were both entitled to immediate vesting of any SARs
they had been granted upon a sale or change of control of the EagleForce businesses.
4. Kay becomes involved in the EagleForce Associates business
As Kay was conducting due diligence on the EagleForce Associates business,
he continued to provide funding to EagleForce Associates58 and became involved in
certain aspects of the day-to-day operations of the company. For example, Kay
suggested that Melinda Walker be hired as a secretary at EagleForce Associates.59
She was paid $75,000 per year, which concerned Campbell because it was a higher
salary than most EagleForce Associates employees earned at the time.60
Additionally, in October 2014, Katrina Powers, a Sentrillion employee, and Jashuva
57 May 5, 2017 Hr’g Ex. 6. 58 JX 106. 59 Tr. 436 (Kay). 60 Id. at 917-19 (Campbell).
14 Variganti, an EagleForce Associates employee, established a new account at
Paychex, a payroll service, for the EagleForce Associates payroll to which Campbell
did not have access.61
As Kay became more involved in EagleForce Associates, Kay and Campbell’s
relationship began to sour. In an April 30, 2014 email exchange, Kay advised
Campbell that Bryan Ackerman, Sentrillion’s General Counsel, would be involved
in all contracts into which EagleForce Associates entered. Campbell, in contrast,
wanted Salah to have a greater role. He wrote to Kay, “I am no longer enjoying
coming to work. I do not think this will work. Please tell me what I owe you and
how we can move forward independently.”62 Kay responded referring to the
November and April letter agreements and stating, “[m]y position is we are signed
partners . . . .”63 Additionally, Kay began to speak with EagleForce Associates
employees about embarrassing aspects of Campbell’s past. For example, at some
point between March and August of 2014, Kay met with Cresswell at a country club
in Potomac, Maryland and told Cresswell that Campbell had previously committed
61 Id. at 739-40 (Variganti); id. at 949-50 (Campbell). 62 JX 130. 63 Id.
15 fraud.64 And Kay did not get along personally with certain EagleForce employees,
particularly Salah.65
5. Campbell and Kay begin to negotiate the LLC Agreement and the Contribution Agreement Despite the fact that Kay and Campbell’s relationship had become strained,
they began to negotiate the LLC Agreement for Eagle Force Holdings—which
mirrored the structure of the “Holdco” entity referenced in the April 2014 letter
agreement—and the Contribution Agreement. In addition to Offit Kurman, Kay
engaged Latham & Watkins to advise him on investing in the EagleForce business.
Michael Schlesinger of Latham & Watkins advised Campbell that he should retain
his own counsel,66 and in or around April 2014, Campbell retained Donald Rogers
with the Schulman Rogers law firm.67
On May 13, 2014, Latham & Watkins presented a draft Contribution
Agreement and a draft LLC Agreement for Eagle Force Holdings to Campbell.68
The LLC Agreement referred to the March 17, 2014 certificate of formation for
64 Tr. 656-59 (Cresswell). 65 Id. at 1087-88 (Salah); id. at 1174 (Morgan). 66 Tr. 795 (Campbell). 67 Id. at 817 (Rogers). 68 JX 14; JX 15.
16 Eagle Force Holdings that was filed in Delaware.69 Campbell, thus, was aware that
Kay formed Eagle Force Holdings in Delaware at least by May 13, 2014. The
agreement included a forum selection clause consenting to personal jurisdiction in
the Delaware courts and an arbitration clause.70 The Latham & Watkins May 13,
2014 draft also included a first priority return of capital for any contributions made
after the date of the LLC Agreement.71
On June 30, 2014, Rogers sent revised drafts of the LLC Agreement and the
Contribution Agreement to Offit.72 The drafts included several notes indicating that
certain points needed to be discussed such as the distribution waterfall and the
structure of Campbell’s contribution of intellectual property. 73 It also added a
protection against dilution for Campbell arising from any additional capital
contributions until such contributions exceed $5.5 million.74 And the June 30 draft
69 JX 15 Recitals. 70 Id. art. XII. 71 Id. § 5.1. 72 JX 17. 73 JX 18, § 3.2.1; JX 19, § 5.1.2. 74 JX 18, § 3.2.
17 added the requirement that for the Eagle Force Holdings board to act, Campbell and
Kay both must vote in favor of the board action.75
Also on June 30, 2014, Campbell received an email from Kay that Campbell
believed contained a racial slur.76 Kay maintains that the word was a typographical
error.77 I need not find what the email was intended to say because I consider it only
for the fact that Campbell had reservations about Kay’s character, and from
Campbell’s perspective, his personal relationship with Kay continued to deteriorate.
Whether such reservations were justified has no bearing on this case. Despite
Campbell’s reservations, he continued his business relationship with Kay;
EagleForce Associates continued to receive funding from Kay; and the parties
continued to negotiate the Transaction Documents.
6. The July 7, 2014 meeting
On July 3, 2014, Offit sent Rogers an email confirming a meeting on July 7,
2014 at Rogers’s office to negotiate the Transaction Documents. Offit expressed his
and Kay’s concern that the negotiations were proceeding slowly, and Rogers
75 Id. § 4.1.3. 76 JX 16. 77 Tr. 444 (Kay).
18 responded that “[f]or the benefit of everyone, let’s make Monday [July 7] the day
we agree on all terms.”78
On July 7, 2014, Kay, Campbell, and their counsel met at Rogers’s office to
negotiate the unsettled terms of the Contribution Agreement and the LLC
Agreement.79 Offit believed that at the beginning of the meeting, three primary
issues remained to be negotiated. First, the parties had not come to agreement on
the scope of the intellectual property that Campbell would contribute and the extent
of the representation Campbell would make regarding his ownership of the
intellectual property and any third-party infringement.80 Second, because Campbell
believed that the EagleForce business required $7.8 million in cash to be successful,
and Kay planned to contribute only $2.3 million, the parties had to negotiate how
Kay and Campbell’s interests would be diluted by an additional $5.5 million
investment.81 Third, the structure of the Eagle Force Holdings board of directors
needed to be decided. The parties had not yet agreed whether Kay and Campbell
78 JX 24. 79 Tr. 476 (Kay). 80 Id. at 62 (Offit). 81 Id. at 63; see JX 18, § 3.2 (Schulman Rogers June 30, 2014 draft LLC Agreement).
19 would be the only directors or whether a third director would be elected to break
deadlock between the parties.82
The July 7 meeting went late into the night, and the parties resolved the three
issues that Offit understood to be outstanding. As to the scope of the intellectual
property Campbell would contribute, the parties agreed that he would contribute all
of the intellectual property he had created that was related to the EagleForce
business.83 They agreed that Campbell and Kay would not be diluted at the Eagle
Force Holdings level but that they would attempt to raise the additional $5.5 million
in capital by selling up to 20% of the equity of each subsidiary of Eagle Force
Holdings.84 And they agreed that Campbell and Kay would be the sole directors of
Eagle Force Holdings, but the subsidiaries would have a three-person board with an
additional independent director.85 While those issues were resolved at the July 7
meeting,86 a substantial new issue arose. During that meeting, Offit discovered for
the first time that Campbell had previously filed for bankruptcy, which made Offit
82 Tr. 63 (Offit). 83 Id. at 64-66; see JX 42, Sched. 2.2(b) (Schulman Rogers July 14, 2014 draft Contribution Agreement). 84 Tr. 64-66 (Offit). 85 Id. at 64-66; see JX 30, § 4.1.8 (Schulman Rogers July 9, 2014 draft LLC Agreement). 86 Tr. 63-64 (Offit).
20 concerned about Campbell’s title to the property he was planning to contribute to
Eagle Force Holdings.87 The next day, Offit discovered through consultation with a
bankruptcy attorney at his firm that debt had been discharged in Campbell’s
bankruptcy and that Campbell had not listed the PADRE intellectual property as an
asset on the schedules to his bankruptcy petition.88 Kay’s counsel wanted Campbell
to reopen his bankruptcy and amend the petition to include the intellectual property
that had previously been omitted.89 At trial, Campbell testified that he did not want
to reopen his bankruptcy after he learned that having two bankruptcy proceedings
on his record might make future investors uncomfortable with his participation in
EagleForce management.90
At the end of the July 7 meeting, Kay and Campbell signed signature pages,
which their attorneys kept in escrow and planned to exchange when Kay and
Campbell came to agreement.91 The purpose of the signature pages was to avoid the
need to reconvene to sign the Contribution Agreement and the LLC Agreement.92
87 Id. at 70. 88 Id. at 73; JX 32. 89 Tr. 79 (Offit). 90 Id. at 995-96 (Campbell). 91 Id. at 68 (Offit); JX 115. 92 Tr. 68 (Offit).
21 At the July 7 meeting, no one discussed whether the attorneys’ exchange of the
signature pages constituted the only means by which they could come to agreement
on this deal.93 Kay testified that he did not believe that an exchange of the signature
pages was the only way the parties could form a binding agreement.94
Also on July 7, Campbell signed an EagleForce Associates note payable to
Kay for the $700,000 that Kay had contributed to EagleForce Associates because
Kay and Campbell had not yet agreed to an operating agreement for Eagle Force
Holdings.95 Kay and Campbell agreed that the note would be canceled if they were
able to reach agreement on the Transaction Documents.96
7. Kay and Campbell continue to negotiate
On July 8, 2014, Offit sent Rogers a list of changes to the Contribution
Agreement based on the July 7 discussion.97 And an associate at Rogers’s firm sent
a redlined draft of the LLC Agreement to Offit and Kay on July 9, 2014
incorporating the negotiated terms from the July 7 meeting.98
93 Id. at 69; id. at 827 (Rogers). 94 Tr. 482-83 (Kay). 95 JX 34; JX 35. 96 JX 25. 97 JX 28. 98 JX 29.
22 On July 9, 2014, Campbell also sent an email to Morgan announcing that
EagleForce Associates and EagleForce Health had taken on Kay as their “first
Partner.”99 Morgan responded congratulating both Kay and Campbell and copying
several EagleForce employees.100 The same day, Campbell held a meeting at
EagleForce Associates’s offices with all of the office staff to introduce them to
Kay.101
Throughout July 2014, Kay and Campbell continued to negotiate, and on July
22, 2014, Kay sent an email to Campbell stating, “I am hearing that you may be
trying to change the deal and we now may not be consistent understanding based on
our agreemnt [sic].”102 Presumably, Kay was referring to the November and April
letter agreements. Kay and Campbell then met without their lawyers and discussed
open issues. On July 25, 2014, Campbell sent an email to Rogers, Offit, and Kay
informing the lawyers of what Campbell and Kay had discussed. In part, Campbell
wrote, “[a]s for the Issue related to Bankruptcy—I don’t think I have much of an
99 JX 33. Campbell testified that he did not send this email but that Melinda Walker sent it from his email account without his permission. Tr. 941-42 (Campbell). Regardless, this email does not alter the weight of the evidence. 100 JX 33. 101 Tr. 1188-89 (Morgan). 102 JX 43.
23 issue . . . what we discussed and agreed is that we will pay any amount owed. I will
change that to the point that we will pay any amount under $10,000.”103
But the bankruptcy issue was not actually resolved. On August 5, 2014,104
Campbell, Kay, Rogers, and Offit met to attempt to agree on outstanding issues.
Campbell testified that Kay and Offit would not drop the bankruptcy issue105 because
they were concerned about Campbell’s title to his intellectual property. To indicate
that Campbell was not willing to reopen his bankruptcy, he walked out of the
meeting. He testified, “I made it clear I wasn’t doing that. And the only way I could
make it any clearer was to leave.”106 When asked about the circumstances of that
meeting, Rogers testified “[i]t may not have been clear to me, but . . . I believe we
were discussing . . . the issue of the board of directors, the SARs, and the
bankruptcy.”107
On or around August 6, 2014, Kay and Campbell both signed a handwritten
sheet of paper that stated, “Campbell has rights to approve new investment.”108 Offit
103 JX 46. 104 Tr. 80 (Offit). 105 Id. at 808 (Campbell). 106 Id. 107 Id. at 820-21 (Rogers). 108 JX 54.
24 sent an email to Rogers to clarify what Kay meant in agreeing to the handwritten
note. He wrote, “[Campbell] told [Kay] he needed to be involved in all capital raise
decisions. [Kay] is obviously in agreement on [Campbell’s] need to be involved in
capital raise matters, but [Campbell] cannot have a blocking right or veto right. The
3 person board needs to approve capital raise matters.”109
On or before August 14, 2014, Kay and Campbell met and discussed thirteen
issues on which they came to agreement. Kay handwrote110 the thirteen points on a
sheet of paper that he scanned and sent to Campbell.111 The list of thirteen points
contemplated that any new equity capital would be raised by issuing up to 17% of
the equity of the Eagle Force Holdings subsidiaries, not through issuing equity of
Eagle Force Holdings.112 Eagle Force Holdings would own 80% of the subsidiaries’
equity, and the remaining 3% would be used for a new employee SARs program—
the details of which were still to be determined.113 The list stated that Campbell
cannot lose his salary or be fired. Further, the list provides that Campbell has no
veto on new investors but that the subsidiaries will have three-person boards with
109 Id. 110 Tr. 345 (Kay). 111 JX 56. 112 Id. 113 Id.
25 Mitchell Johnson as the third person.114 Another one of the thirteen points provided
that “[Salah] will be entitled to SAR only if [Campbell] wants to give non-voting
equity. It is from his side. [Salah] not a CFO. [Kay] is not obligated at all for
[Salah].”115 The other issues on the list were operational level issues such as
“[Campbell] & [Kay] will talk daily on big issues,” and “[Kay] & [Campbell] agree
we will push Chris Cresswell to close first 3 deals ASAP.”116
On August 19, 2014, Rogers, Campbell’s attorney, sent revised versions of
the Transaction Documents. The August 19 versions that Rogers circulated back
tracked on some of Campbell’s concessions in the thirteen-point list.117 For
example, it included a veto right for Campbell with regard to new investors by
requiring that “for any additional capital contribution that has been requested or
accepted by a majority of the members of the board of directors or board of managers
(as applicable) of a Subsidiary, Campbell must approve the terms and conditions of
such additional capital contribution.”118 Rogers’s August 19 draft did incorporate
some of Kay’s requests, however. For example, Rogers’s August 19 version of the
114 Id. 115 Id. 116 Id. 117 JX 59. 118 Id. § 4.1.8(a).
26 Contribution Agreement included for the first time a provision requiring that Kay
fund an escrow to pay any claims by Campbell’s former creditors and that Campbell
take the steps necessary to reopen his bankruptcy.119
On August 22, 2014, Campbell sent an email to Kay, Rogers, and Offit stating
that on the bankruptcy issue, he and Kay were each willing to commit up to $5,000
to retain Campbell’s personal bankruptcy lawyer and resolve the issue of his title to
the intellectual property.120 If that did not resolve the issue, Campbell agreed that
out of the $500,000 distribution he would take at closing, he would “retain up to
$250,000 in an attorney escrow of [his] choice for a period not to exceed 6
months.”121 Campbell was willing to set aside funds to pay any creditor claims, but
he did not want to reopen a bankruptcy proceeding.
Another issue that remained open in the negotiations at the end of August was
how to handle the equity rights of certain EagleForce Associates employees,
including Salah, Salah’s brother Haney, Cresswell, and Morgan.122 Offit proposed
that the EagleForce Associates employees with SARs or rights to equity be asked to
relinquish their rights by signing a waiver and that they be told that “[a]s part of the
119 JX 57; JX 58; JX 60; Tr. 894 (Rogers). 120 JX 66. 121 Id. 122 JX 67.
27 reorganization, we will be developing new and better defined executive incentive
benefits that will replace the commission program and/or stock appreciation rights
(SARS) plan in which you presently participate.”123 The evidence does not show
that either Campbell or Kay approached the EagleForce Associates employees to
resolve this issue, and as of October 2014, both Kay and Campbell wanted the other
to deal with the SARs issue.124 In the July 22, 2014 draft of the Contribution
Agreement, Offit included a specific reference to the SARs plan through adding
Campbell’s representation that “[e]xcept for the SARS Plan, there are no outstanding
options, warrants, calls, profit sharing rights, bonus plan rights, rights of conversion
or other rights, agreements, arrangements or commitments relating to Targeted
Companies Securities . . . .”125 Offit also added in the July 22 draft representations
that (1) Cresswell, Morgan, and five other EagleForce Associates employees had
executed releases for any profit sharing plan and (2) neither Salah, Cresswell, nor
any member of Salah’s family have any legal or equitable ownership interest in
EagleForce Associates or EagleForce Holdings.126 In Rogers’s August 19 draft, he
bolded and bracketed Offit’s additions and noted “[CAMPBELL] CANNOT
123 JX 72. 124 JX 92. 125 JX 52, § 4.3(b); JX 58, § 4.3(b); JX 78, § 4.3(b). 126 JX 50, §§ 4.3(d), 4.3(e).
28 GUARANTEE THIS. WE NEED TO DISCUSS.”127 I find that at least as of August
19, Offit and Kay were both aware of the fact that EagleForce Associates had not
received releases from the SARs holders.
On August 27, Offit sent another round of revisions to the LLC Agreement
and the Contribution Agreement to Rogers, Kay, and Campbell with a cover email
stating “[p]lease confirm your acceptance of the terms of these agreements. Please
commence preparation of schedules needed for closing.”128 The date on the front of
and in the first paragraph of the draft Contribution Agreement remained blank in the
August 27 version. And Section 3.1 of the agreement stated, “the closing of the
Transactions (the ‘Closing’) shall be held at the office of the Company, commencing
at 10:00am local time on the date hereof (the ‘Closing Date’) or at such other time
and place as the Parties may agree upon in writing.”129
The draft Contribution Agreement referenced schedules that supplemented
the representations and warranties in the agreement and that listed the property
Campbell was to contribute. And the draft stated in the recitals that “[t]he parties
hereto desire to set forth certain representations, warranties, and covenants made by
each to the others as an inducement to the consummation of such transactions, upon
127 JX 58, §§ 4.3(d), 4.3(e). 128 JX 68. 129 JX 71, § 3.1.
29 the terms and subject to the conditions set forth herein.”130 Schedule 2.2(b) listed
the intellectual property that Campbell planned to contribute. 131 But the other
schedules remained incomplete. The August 27 version of the Contribution
Agreement states, “Campbell shall assign to the Company, and the Company shall
be obligated to assume, and shall assume, those agreements set forth on Schedule
3.5 attached hereto . . . .”132 Sections 4.20(d) and 4.20(f) make clear that Schedule
3.5 includes all of Campbell’s intellectual property license agreements.133 But
Schedule 3.5 is blank.134 The agreement also states, “Schedule 4.3(a) sets forth, as
of the date hereof, (i) the number and class of authorized securities for each Targeted
Company, (ii) the number and class of Targeted Companies Securities for each
Targeted Company and (iii) the number and class of Targeted Companies Securities
held of record by Campbell for each Targeted Company.”135 But Schedule 4.3(a) is
blank except for one line of bracketed text, which states, “[Also describe SARS
130 Id. Recital D. 131 Id. Sched. 2.2(b). 132 Id. § 3.5. 133 Id. §§ 4.20(d), 4.20(f). 134 Id. Sched. 3.5. 135 Id. § 4.3(a).
30 Plan].”136 Section 4.12(c) of the August 27, 2014 Contribution Agreement states,
“[e]xcept as set forth on Schedule 4.12(c), neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, . . . will
. . . accelerate the vesting, funding or time of payment of any compensation, equity
award or other benefit . . . .”137 Schedule 4.12(c) is also blank.138
Many of Campbell’s representations, warranties, and covenants related to the
EagleForce businesses reference schedules that also are blank. The draft
Contribution Agreement refers to the “Campbell Disclosure Schedules.”139 And that
term is defined as “the schedules prepared and delivered by Campbell for and to the
Company and dated as of the Execution Date which modify (by setting forth
exceptions to) the representations and warranties contained herein and set forth
certain other information called for by this Agreement.”140 But none of those
schedules were ever completed. For example, Schedule 4.6 is supposed to list any
contractual liabilities outside the ordinary course of business for EagleForce
136 Id. Sched. 4.3(a). 137 Id. § 4.12(c). 138 Id. Sched. 4.12(c). 139 Id. Ex. A. 140 Id.
31 Associates and EagleForce Health;141 Schedule 4.9 is supposed to list all real
property leases, subleases, or licenses to which EagleForce Associates or EagleForce
Health is a party;142 and Schedule 4.15(a) is meant to set forth any pending legal
proceedings involving EagleForce Associates, EagleForce Health, or their affiliates,
including Campbell.143 All of those schedules are blank.
The version of the Contribution Agreement that Offit sent with his August 27
email stated “OK DRAFT 8-26-14” on the first page.144 The version of the LLC
Agreement that he sent did not have that notation, but the LLC Agreement was an
exhibit to the Contribution Agreement.145 Rogers was out of town when Offit sent
the August 27 draft Transaction Documents, and Offit received his out-of-office
reply.146
8. The events of August 28, 2014
On August 28, 2014, Kay and Campbell once again met without their lawyers.
Kay and Campbell both testified that Kay came to EagleForce Associates’s offices
141 Id. § 4.6. 142 Id. § 4.9. 143 Id. § 4.15(a). 144 JX 71. 145 JX 73; JX 71, Ex. B. 146 JX 74.
32 with Katrina Powers for the purpose of having Campbell and Kay sign the
Transaction Documents.147 Campbell was busy when they arrived but met with them
briefly.148 Because Campbell had to finish meeting with EagleForce developers,
Kay and Powers left to go to a restaurant five minutes away. 149 While Kay and
Powers were at the restaurant, Kay and Campbell sent several emails to each other.
First, Cresswell sent a non-disclosure agreement to Kay and Bryan Ackerman, the
Sentrillion general counsel, with Campbell on copy. 150 Campbell replied asking
Cresswell not to “forward this information outside of the company until I have had
a chance to review.”151 Kay responded, “[w]hat are you talking about outside the
company? We just talk [sic] 3 minutes ago. I will handle my swim lane.”152 About
ten minutes later, Kay wrote “1) Bryan is inside not outside. 2) For the record I will
handle all NDA contacts.”153 In reference to earlier emails regarding the NDA,
Campbell wrote to Kay, “[a]s you can see I am not on the mail routing and this is a
147 Tr. 329 (Kay); Tr. 988 (Campbell); Tr. 267 (Powers). 148 Tr. 329-30 (Kay). 149 Id. at 330. 150 JX 75. 151 Id. 152 Id. 153 Id.
33 bit troubling. Only you can make these folks know that we are equal partners.”154
Kay replied, “[e]veryone knows we are equal . . . . Please clarify w[ith] Chris and
Bryan that NDA are in buss lane [sic] and Rick will handle. And send me the signed
document if you want to go forward.”155 Around the same time, Cresswell sent an
email strategizing about how to “win” the Special Olympics as a client. Kay
responded only to Campbell, stating “[s]orry can’t do anything until the agreement
documents you have are signed. Did you sign?”156
At around 7:00 p.m., Kay and Powers returned to the EagleForce Associates
offices. Kay, Powers, and Campbell met for only a few minutes, and both Kay and
Campbell signed the versions of the LLC Agreement and the Contribution
Agreement that Offit had sent by email on August 27, 2014.157 Campbell testified
that before the signing, Kay told him that Rogers and Offit “were done” with the
agreements.158 Campbell testified that he tried to call Rogers but was unable to reach
him because Rogers was out of the office.159 He testified that Kay tried to call Offit
154 JX 76. 155 Id. 156 Id. 157 Tr. 294-95 (Powers); Tr. 332-35 (Kay). 158 Tr. 977 (Campbell). 159 Id.
34 but was also not able to reach him.160 Kay, in contrast, testified that he did not call
Offit or make any representations about Campbell’s lawyer.161
After Kay and Campbell signed the agreements, Campbell walked around his
desk and embraced Kay and Powers.162
9. The aftermath of the August 28 signing On August 31, 2014, Kay and Campbell had breakfast with Said Salah and
discussed his involvement in the EagleForce businesses going forward, but they did
not resolve the SARs issue.163 And after the meeting, on September 2, Salah wrote
in an email to Kay and Campbell, “I congratulate both of you on your commitments
in forging this partnership, and thank you again for recognizing the unwavering
commitments I have displayed towards the success of EagleForce.”164
On September 9, after Rogers returned from vacation, he sent revised drafts
of the Contribution Agreement and the LLC Agreement to Offit.165 Rogers did not
160 Id. at 978. 161 Id. at 334 (Kay). 162 Id. at 240 (Powers); id. at 332 (Kay). Kay and Powers testified that Campbell hugged each of them after signing the Transaction Documents. Campbell testified at trial that instead of a hug, he gave Kay a dap handshake. Id. at 988 (Campbell). 163 JX 80. 164 Id. 165 JX 83.
35 know that Kay and Campbell had signed the documents at that time,166 and Offit
never told Rogers that the escrow agreement for the signature pages was no longer
in effect because Kay and Campbell had signed the agreements.167 In his September
9 email, Rogers noted two outstanding issues related to the Contribution Agreement.
First, the new SARs plan remained undefined, and Rogers reiterated that Campbell
could not represent (1) that certain EagleForce Associates and EagleForce Health
employees had executed releases or (2) that neither Salah, Salah’s family members,
nor Cresswell had any legal or equitable interest in EagleForce Associates or
EagleForce Health.168 Rogers commented as follows:
THERE IS STILL MUCH THAT NEEDS TO BE CLARIFIED HERE: (1) We are not confident that we have all of the SAR Plan offers; (2) Burden of the SARs should not be solely on [Campbell] because [Kay] authored it; (3) Chris Cresswell’s offer was developed by [Kay]; (4) There was a discussion about the company taking responsibility for the SARs up to a certain level. We need to understand what percentage of SARs was originally granted to understand the ultimate impact on [Campbell].169
166 Tr. 827 (Rogers). 167 Id. at 831. 168 JX 84, §§ 4.3(d), 4.3(e). 169 Id. § 4.3(d).
36 Second, Rogers stated that financial representations in the Contribution Agreement
regarding the status of EagleForce Associates and EagleForce Health would be
“quite difficult to complete” because Rogers had no financial information regarding
the companies and believed that Kay had that information for the previous six
months.170 As to the LLC Agreement, Rogers removed the provision governing how
Mitchell Johnson’s successor as the third director on the subsidiary boards would be
chosen.171 And Rogers added a provision requiring that Campbell and Kay always
vote in favor of increasing Campbell’s salary to be commensurate with similarly
situated officers of similar companies.172 The record does not indicate that Campbell
had previously demanded that his salary be increased to reflect industry standards.
In September 2014, Kay and Campbell continued to discuss the missing
aspects to their agreement. On September 16, 2014, Campbell provided certain
EagleForce billing information to Kay in an email and wrote, “[a]ttached is the
invoice and summary related to outstanding billings as required from me related to
closing.”173 Campbell stated that Kay’s staff had access to all of the information
170 JX 83. 171 JX 86, § 4.1.8. 172 Id. § 4.1.8(b). 173 JX 88.
37 required to create a balance sheet and income statement.174 Kay responded asking
for clarification and wrote, “[w]e need to complete the paperwork so I can fully
fund.”175
Offit, Rogers, Kay, and Campbell had a conference call on September 17 to
discuss Rogers’s proposed changes to the August 28 agreements. 176 Offit testified
that Kay stated on the call that he was willing to discuss potential amendments to
the agreements but was not willing to rescind and re-execute them.177 But Rogers
did not remember the contents of that call.178
On October 7, 2014, Kay sent an email to Jashuva Variganti and Campbell
asking whether Variganti had distributed the paychecks issued October 6 to the
EagleForce Associates employees and asking that if they had not been distributed
that the checks be returned to Kay for him to distribute.179 Campbell responded,
requesting that Kay avoid communicating with the EagleForce staff and stating, “we
remain un-closed and this opportunity still does not have the remaining elements in
174 Id. 175 Id. 176 Tr. 106 (Offit). 177 Id. 178 Id. at 855-56 (Rogers). 179 JX 91.
38 agreement.”180 Kay responded on October 8, stating in part, “[w]e have signed our
agreements and are awaiting the exhibits. [Offit] told me that [Rogers] has 2 open
issues” related to the boards of directors of the subsidiaries and the SARs program.181
Campbell did not respond to the October 8 email.182
Negotiations stalled for much of the rest of October 2014. On October 15,
Rogers sent an email to Offit stating, “[i]t seems that the ‘stall’ in getting this deal
done is clearly the modification to Said’s and his brother’s deal. We can argue over
all the reasons as to why this isn’t happening, but the fact is that [Kay] wants
[Campbell] to deal with it, [Campbell] wants [Kay] to deal with it and, as a result,
nothing is happening.”183 Offit did not respond until October 21 when he wrote,
“Rick is away. I have a call into Rick and I’m looking for an update.”184
On October 28, Kay emailed Campbell, Rogers, and Offit stating, “[w]hat else
can we do together to get this done. I understand we have signed the deal but need
the exhibits.”185 Campbell responded, stating in part, “[t]he signatures on the drafts
180 Id. 181 Id. 182 Id. 183 JX 92. 184 Id. 185 JX 93.
39 did not represent the completed document which remains not completed given the
two or three remaining items.”186 He also wrote, “I have closed/settled the only item
that the Bankruptcy Atty indicated could cause any issue. . . . I would ask that the
responsibility for me to re-open the Bankruptcy be withdrawn from
consideration/requirement.”187
In November 2014, Kay and Campbell’s relationship became more
contentious, as Kay and Offit took the position that the August 28 Transaction
Documents were binding contracts and that Campbell was in breach by failing to
contribute his intellectual property and reopen his bankruptcy.188 Kay nevertheless
continued to fund the EagleForce Associates payroll into February 2015.189
Finally, on February 18, 2015, Campbell sent an email to Offit, Rogers, Kay,
and Cresswell stating as follows:
[W]e have reached an impass [sic] that we are unable to resolve. I would respectfully request that the atty’s get together to discuss the means and methods for us to close this matter and allow us to move on. We have booked the funding as a loan and will proceed with amending the
186 Id. 187 Id. 188 JX 97. 189 JX 106.
40 existing documentation in a means that is reasonable for us both.190
On March 17, 2015, Eagle Force Holdings and EF Investments filed this lawsuit to
enforce the August 28 Contribution Agreement and LLC Agreement.
C. This Litigation
Plaintiffs filed the original complaint in this case on March 17, 2015 and the
First Amended Complaint—the operative complaint—on June 5, 2015 (the
“Complaint”). Vice Chancellor Parsons entered an interim relief order on July 23,
2015 (the “Order”). The Order is designed to give EF Investments regular access to
information regarding EagleForce Associates and EagleForce Health during the
pendency of this litigation. Under the Order, Campbell must notify Plaintiffs ten
days before either EagleForce Associates or EagleForce Health enters certain
transactions, and Plaintiffs have a right to object in writing. If Plaintiffs object,
Campbell cannot engage in a transaction covered by the Order without an order of
this Court. The most expansive advanced notice provision of the Order requires ten
business days’ advanced notice for any transaction or series of transactions with a
single person over $5,000 in value in the aggregate. Any such advanced notice must
include the text “NOTICE TO PLAINTIFFS OF PROPOSED ACTION BY
DEFENDANT” in bold type under paragraph 4 of the Order. Further, the Order
190 JX 103.
41 requires regular reports regarding the EagleForce Associates and EagleForce Health
businesses. The reports include weekly reports describing all sales or distribution
leads regarding the Disputed IP, weekly bank statements, weekly accounts
receivable and payable reports, and payroll statements every two weeks.
On May 27, 2016, Plaintiffs moved to hold Campbell in contempt for
violations of the Order. The Court held an evidentiary hearing on the motion for
contempt on August 31, 2016. At the end of that day, the Court ordered the parties
to return the next day to complete the hearing. Plaintiffs’ attorneys appeared on
September 1, 2016, but Defendant did not appear. The Court rescheduled the
remainder of the hearing for September 8, 2016 and completed the hearing that day.
At the September 8, 2016 hearing, the Court held that Campbell failed to provide
Plaintiffs with advanced notice before withdrawing approximately $100,000 in
accrued unreimbursed expenses from EagleForce Associates and paying
approximately $38,000 in vendor fees. On December 15, 2016, the Court ordered
Campbell to pay Plaintiffs’ attorneys’ fees for their September 1, 2016 appearance
at this Court when Campbell did not appear as a partial remedy for Campbell’s
contempt. The Court deferred any further remedy until after the trial in this case in
part because the question of this Court’s jurisdiction over Campbell remained
undecided. Campbell was ordered to pay that portion of Plaintiffs’ attorneys’ fees
on or before December 23, 2016. Campbell deposited a check for the attorneys’ fees
42 into Kay’s personal bank account on December 27, 2016, the business day after
December 23, 2016.191
Beginning on February 6, 2017, this Court held a five-day trial in this case.
On March 6, 2017, Plaintiffs filed a supplemental motion to hold Campbell in
contempt for additional violations of the interim relief order. The parties filed post-
trial opening briefs on March 29, 2017. In connection with Campbell’s opening
post-trial brief, he also filed a motion to amend the pleadings to conform to the
evidence submitted at trial with respect to the defenses of unilateral and mutual
mistake. The parties filed post-trial answering briefs on April 7, 2017. On May 5,
2017, the Court heard post-trial oral argument and held an evidentiary hearing on
Plaintiffs’ supplemental motion to hold Campbell in further contempt of the interim
relief order. On May 24, 2017, Plaintiffs filed a second supplemental motion to hold
Campbell in contempt for an additional alleged violation of the Order. This Court
held an additional evidentiary hearing on Plaintiffs’ second supplemental motion for
contempt on August 28, 2017. This post-trial opinion also resolves all outstanding
motions in this case.
191 Letter to the Court from David Finger, Eagle Force Hldgs. LLC v. Campbell, C.A. No. 10803-VCMR, Ex. E (Del. Ch. Jan. 10, 2017).
43 II. ANALYSIS
Plaintiffs’ Complaint alleges claims for breach of contract and breach of
fiduciary duty. Plaintiffs seek an order requiring Campbell to specifically perform
his obligations under the Transaction Documents and granting monetary damages to
Plaintiffs. In the alternative, Plaintiffs assert claims for fraud and unjust enrichment.
Campbell is a resident of Virginia, and he has objected to the personal jurisdiction
of this Court throughout these proceedings. In this unusual case, a full trial was
necessary to resolve the question of personal jurisdiction because whether Campbell
consented to personal jurisdiction in Delaware depends on whether Campbell is
bound by the Transaction Documents.192
A. Standards of Review for Contract Formation
Plaintiffs have the burden of establishing by a preponderance of the evidence
that Campbell is bound by the Transaction Documents and, thus, is subject to
personal jurisdiction in Delaware.193 “Proof by a preponderance of the evidence
means proof that something is more likely than not. ‘By implication, the
192 Eagle Force Hldgs., LLC v. Campbell, C.A. No. 10803-VCP, at 48-49 (Del. Ch. July 9, 2015) (TRANSCRIPT). 193 Revolution Retail Sys., LLC v. Sentinel Techs., Inc., 2015 WL 6611601, at *9 (Del. Ch. Oct. 30, 2015).
44 preponderance of the evidence standard also means that if the evidence is in
equipoise, Plaintiffs lose.’”194
To enforce the Delaware forum selection clause, Plaintiffs must prove that
they formed a valid contract with Campbell.195 It is well-settled Delaware law that
“a valid contract exists when (1) the parties intended that the contract would bind
them, (2) the terms of the contract are sufficiently definite, and (3) the parties
exchange legal consideration.”196 “To determine whether a contract was formed, the
court must examine the parties’ objective manifestation of assent, not their
subjective understanding.”197 “If terms are left open or uncertain, this tends to
demonstrate that an offer and acceptance did not occur.”198
Chancellor Allen held in Leeds v. First Allied Connecticut Corp. that “[i]t is
when all of the terms that the parties themselves regard as important have been
194 Id. (quoting 2009 Caiola Family Tr. v. PWA, LLC, 2015 WL 6007596, at *12 (Del. Ch. Oct. 14, 2015)). 195 The parties raise the question of which jurisdiction’s law applies to this case, but they do not brief the choice of law issue. The briefing relies heavily on Delaware law, and neither of the parties asserts that the law of Delaware is in conflict with the law of any other jurisdiction whose law may apply. The Court, thus, will apply Delaware law to all issues addressed in this opinion. 196 Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1158 (Del. 2010). 197 Trexler v. Billingsley, 2017 WL 2665059, at *3 (Del. June 21, 2017). 198 Ramone v. Lang, 2006 WL 905347, at *11 (Del. Ch. Apr. 3, 2006).
45 negotiated that a contract is formed.”199 Under Delaware’s objective theory of
contract law, the Court must determine “whether agreements reached were meant to
address all of the terms that a reasonable negotiator should have understood that the
other party intended to address as important.”200 “Agreements made along the way
to a completed negotiation, even when reduced to writing, must necessarily be
treated as provisional and tentative. Negotiation of complex, multi-faceted
commercial transactions could hardly proceed in any other way.”201 To conduct such
an analysis, courts review “all of the surrounding circumstances, including the
course and substance of the negotiations, prior dealings between the parties,
customary practices in the trade or business involved and the formality and
completeness of the document (if there is a document) that is asserted as culminating
and concluding the negotiations.”202 “Until it is reasonable to conclude, in light of
all of these surrounding circumstances, that all of the points that the parties
199 Leeds v. First Allied Conn. Corp., 521 A.2d 1095, 1101 (Del. Ch. 1986); see also CSH Theatres, LLC v. Nederlander of San Francisco Assocs., 2015 WL 1839684, at *15 (Del. Ch. Apr. 21, 2015) (“[A]n enforceable contract must contain all material terms of the agreement and material provisions that are indefinite will not be enforced.” (quoting Gallagher v. E.I. DuPont De Nemours & Co., 2010 WL 1854131, at *3 (Del. Super. Ct. Apr. 30, 2010)) (internal quotation marks omitted)). 200 Leeds, 521 A.2d at 1102; see also Gillenardo v. Connor Broad. Del. Co., 1999 WL 1240837, at *4-5 (Del. Super. Ct. Oct. 27, 1999). 201 Leeds, 521 A.2d at 1102. 202 Id.
46 themselves regard as essential have been expressly or . . . implicitly resolved, the
parties have not finished their negotiations and have not formed a contract.”203
“Thus, determination of whether a binding contract was entered into will depend on
the materiality of the outstanding issues in the draft agreement and the circumstances
of the negotiations.”204
B. The Transaction Documents Lack Terms that Were Essential to the Parties’ Bargain Campbell asserts that certain material terms are missing from the Transaction
Documents, showing that the parties never came to agreement and rendering the
Transaction Documents unenforceable. In particular, Campbell argues that the
closing date, all schedules to the Transaction Documents except for Schedule 2.2(b),
definitions of the terms “Insurance Claim” and “IP Disclosure Schedule,” and
aggregate dollar figures for certain representations are missing from the Transaction
Documents.205
203 Id.; see also J.W. Childs Equity P’rs, L.P. v. Paragon Steakhouse Restaurants, Inc., 1998 WL 812405, at *4 (Del. Ch. Nov. 6, 1998) (finding that a letter agreement to sell at least 60 parcels of real property that listed only 17 sites in exhibit A was not a contract to sell property). 204 Greetham v. Sogima L-A Manager, LLC, 2008 WL 4767722, at *15 (Del. Ch. Nov. 3, 2008). 205 Def.’s Pre-Trial Br. 13-20.
47 1. Kay and Campbell failed to agree on terms regarding the consideration to be exchanged Campbell’s primary obligation under the text of the Contribution Agreement
would be to contribute the stock of EagleForce Associates, the membership interests
of EagleForce Health, certain intellectual property related to the EagleForce
businesses, and certain contractual rights and obligations. The precise scope of that
consideration was to be captured in Sections 2.2 and 3.5 of the Contribution
Agreement and Schedules 2.2(b), 3.5, 4.3(a), and 4.12(c). But those portions of the
Transaction Documents are either blank or inconsistent with the reality of which
Campbell, Kay, Offit, and Rogers were aware.
Section 2.2(a) of the Contribution Agreement states that part of Campbell’s
contribution shall be “all right, title and interest in the Targeted Companies
Securities, such that, after such contribution, the Company shall hold all of the
Targeted Companies Securities.”206 Section 4.3(a) of the Contribution Agreement
provides that “Schedule 4.3(a) sets forth, as of the date hereof, (i) the number and
class of authorized securities for each Targeted Company, (ii) the number and class
of Targeted Companies Securities for each Targeted Company and (iii) the number
and class of Targeted Companies Securities held of record by Campbell for each
206 JX 78, § 2.2(a).
48 Targeted Company.”207 But Schedule 4.3(a) is blank except for the bracketed text
“[Also describe SARS Plan].”208 Thus, the schedule that was meant to list an
important part of the consideration Campbell would provide under the agreement is
incomplete.
The objective evidence of the course of the parties’ negotiations shows that
whether Campbell owns all of the equity in EagleForce Health and EagleForce
Associates is not clear. Salah, Salah’s brother Haney, Cresswell, and Morgan all
have employment agreements that give them some form of equity in the EagleForce
businesses.209 Throughout the negotiation of the Transaction Documents, Kay and
Offit were concerned about employee claims for some of the equity of EagleForce
Associates or EagleForce Health. And the evidence shows that Kay knew of at least
Salah’s and Cresswell’s claims to EagleForce Health and EagleForce Associates
equity.210 Kay and Campbell’s list of thirteen points recognized the problem of the
SARs program and began to develop a solution under which Campbell and Kay
would each retain equal control,211 but that was never incorporated into the
207 Id. § 4.3(a). 208 JX 79, Sched. 4.3(a). 209 May 5, 2017 Hr’g Ex. 6. 210 Tr. 653 (Cresswell); Tr. 1094 (Salah). 211 JX 56.
49 Transaction Documents. Instead, Offit included representations from Campbell in
the Transaction Documents that Campbell had obtained releases from Cresswell,
Morgan, and five other EagleForce employees related to their revenue sharing or
profit sharing plans and that neither Salah, Salah’s family, nor Cresswell had any
interest in the EagleForce businesses. But Campbell never agreed to those
representations.212 To the contrary, in Rogers’s August 19 draft, Rogers commented
below the representation, “[CAMPBELL] CANNOT GUARANTEE THIS. WE
NEED TO DISCUSS.”213 Rogers’s comment was removed in Offit’s August 27
version, which Kay and Campbell signed on August 28 while Rogers was out of
town and unreachable.214
Even after the August 28 signing, Kay, Campbell, Offit, and Rogers knew
they had not come to agreement on the employee claims for equity and the SARs
plan. In the September 9 version of the Transaction Documents that Rogers sent
post-signing, Rogers again commented that Campbell could not agree to the
representation regarding the employee releases, stating:
THERE IS STILL MUCH THAT NEEDS TO BE CLARIFIED HERE: (1) We are not confident that we have all of the SAR Plan offers; (2) Burden of the SARs should not be solely on [Campbell] because [Kay]
212 JX 50, §§ 4.3(d), 4.3(e). 213 JX 58, § 4.3(d). 214 JX 78, § 4.3(d).
50 authored it; (3) Chris Cresswell’s offer was developed by [Kay]; (4) There was a discussion about the company taking responsibility for the SARs up to a certain level. We need to understand what percentage of SARs was originally granted to understand the ultimate impact on [Campbell].215
And Rogers included additional questions about the SARs Plan in his September 9
cover email.216 As such, both Kay and Campbell recognized that Campbell likely
does not own 100% of the equity of EagleForce Associates and EagleForce Health,
and Campbell had not obtained releases related to any employees’ potential
ownership of equity in the EagleForce businesses. Despite this knowledge, they did
not come to agreement on terms that addressed the reality.
Further, Section 4.12(c) of the Contribution Agreement states that “[e]xcept
as set forth on Schedule 4.12(c), neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, . . . will
. . . accelerate the vesting, funding or time of payment of any compensation, equity
award or other benefit . . . .”217 Cresswell and Morgan appear to have SARs rights
under their employment agreements that automatically vest upon a sale or change of
215 JX 84, § 4.3(d). 216 JX 83. 217 JX 78 § 4.12(c).
51 control,218 and Kay knew of that fact at least as to Cresswell’s SARs.219 But
regardless, schedule 4.12(c) is blank.220
Kay and Campbell also did not reach agreement on which contracts Campbell
would assign to Eagle Force Holdings as another part of the consideration in this
proposed deal. The Contribution Agreement that the parties signed states,
“Campbell shall assign to the Company, and the Company shall be obligated to
assume, and shall assume, those agreements set forth on Schedule 3.5 attached
hereto . . . .”221 Sections 4.20(d) and 4.20(f) make clear that Schedule 3.5 includes
all of Campbell’s intellectual property license agreements.222 But Schedule 3.5 also
is blank. Campbell’s intellectual property listed in Schedule 2.2(b) is the only
portion of Campbell’s consideration outlined in the Transaction Documents on
which the parties appear to have completed negotiations. Absent definite terms
regarding the remainder of the property to be contributed, I find that Campbell and
Kay did not come to agreement on the consideration that Campbell would provide
in the Transaction Documents.
218 May 5, 2017 Hr’g Ex. 6. 219 JX 84, § 4.3(d); Tr. 653 (Cresswell). 220 JX 79, Sched. 4.12(c). 221 JX 78, § 3.5. 222 Id. §§ 4.20(d), 4.20(f).
52 The precise consideration to be exchanged between Campbell and Eagle
Force Holdings was highly material to the parties here. Presumably, the
consideration that Campbell would provide to Eagle Force Holdings would directly
affect the number of units or the size of the capital account Eagle Force Holdings
would provide to Campbell. And division of the equity in Eagle Force Holdings was
extremely important to Campbell and Kay. From the beginning of Campbell and
Kay’s negotiations, they communicated to each other that it was very important that
they both be 50% owners of the ultimate holding company. The November 2013
letter agreement provides that both Campbell and Kay would own 50% of the new
LLC, and they agreed “to never dilute [their stakes to] less than 50.1% together in
order to maintain control. They will also agree that their vote will always be
uniformly tied as a single vote thus protecting [Campbell] from complete loss of
control.”223 Similarly, the April 2014 letter agreement also contemplated that
Campbell would own 50% of “Holdco,” and Kay and Campbell together would not
be diluted below 51% of “Holdco,” a slightly higher threshold than the 50.1% in the
November letter agreement.224
At the July 7, 2014 meeting at Rogers’s office that went late into the night,
the parties resolved that Eagle Force Holdings would not issue new equity capital
223 JX 1, ¶ 5. 224 JX 12, ¶ 5.
53 for the additional $5.5 million they wanted to raise. This would allow Campbell and
Kay to retain equal control of the entire EagleForce business.225 Instead, the
subsidiaries would issue equity in exchange for new capital, but Eagle Force
Holdings would retain 80% control of the subsidiaries.226 That term was reiterated
in the handwritten list of thirteen points to which Campbell and Kay agreed without
their lawyers present.227
Additionally, on August 28, 2014, approximately one hour before Kay and
Campbell signed the Transaction Documents, they exchanged emails that highlight
how important it was to both of them that Kay and Campbell both have equal control.
Cresswell sent a non-disclosure agreement to Kay and Bryan Ackerman, the
Sentrillion general counsel, with Campbell on copy. 228 Campbell replied asking
Cresswell not to “forward this information outside of the company until I have had
a chance to review.”229 Kay responded, “[w]hat are you talking about outside the
company? We just talk [sic] 3 minutes ago. I will handle my swim lane.”230 About
225 Tr. 64-66 (Offit). 226 Id. 227 JX 56. 228 JX 75. 229 Id. 230 Id.
54 ten minutes later, Kay wrote “1) Bryan is inside not outside. 2) For the record I will
handle all NDA contacts.”231 In reference to earlier emails regarding the NDA,
Campbell wrote to Kay, “[a]s you can see I am not on the mail routing and this is a
bit troubling. Only you can make these folks know that we are equal partners.”232
Kay replied, “[e]veryone knows we are equal . . . . Please clarify w[ith] Chris and
Bryan that NDA are in buss lane [sic] and Rick will handle. And send me the signed
document if you want to go forward.”233 Thus, just before signing, Campbell
reiterated that he and Kay must be equal partners. And Kay’s emails show that equal
control was a material term to Kay as well.234
231 Id. 232 JX 76. 233 Id. 234 Campbell and Kay were concerned about loss of control and dilution in part because they did not trust one another. See Tr. 803 (Campbell). On April 30, 2014, Campbell wrote to Kay, “I am no longer enjoying coming to work. I do not think this will work. Please tell me what I owe you and how we can move forward independently.” JX 130. And during the spring or summer of 2014, Kay met with Cresswell at a country club in Potomac, Maryland and told Cresswell that Campbell had previously committed fraud. Tr. 656-59 (Cresswell). Further, on June 30, 2014, Campbell received an email from Kay with what Campbell believed to be a racial slur. JX 16. Kay was also particularly concerned about Salah’s equity in the EagleForce businesses because he did not work well with Salah. Tr. 1087-88 (Salah); id. at 1174 (Morgan). Kay made clear in the handwritten list of thirteen points that “[Salah] will be entitled to SAR only if [Campbell] wants to give non- voting equity. It is from his side. [Salah] not a CFO. [Kay] is not obligated at all for [Salah].” JX 56.
55 Campbell and Kay planned for Kay to contribute $2,300,000 in cash because
$2,300,000 was the value of Campbell’s anticipated contribution. 235 To the extent
Campbell’s actual contribution was less than originally contemplated, the
negotiating parties would have to confront the issue of how the precise assets
Campbell contributes to Eagle Force Holdings would affect the number of units
Eagle Force Holdings issues to Campbell—and, in turn, which party obtains control
over Eagle Force Holdings. Campbell and Kay acknowledged this reality both
before and after the signing.236 As such, the objective circumstances of the parties’
negotiating history show that Sections 2.2(a) and 3.5 of the Contribution Agreement
and Schedules 4.3(a) and 4.12(c)—which would have listed Campbell’s holdings in
EagleForce Associates and EagleForce Health, any Cresswell, Morgan, or Said or
Haney Salah holdings in those companies, and any holdings associated with the
SARs Plan—and Schedule 3.5—which would have listed the contract rights and
liabilities Campbell planned to contribute—related to terms that the parties
considered essential and on which they had not completed negotiations.237
235 JX 12, ¶ 6. 236 JX 56; JX 84, § 4.3(d). 237 J.W. Childs Equity P’rs, L.P. v. Paragon Steakhouse Restaurants, Inc., 1998 WL 812405, at *3 (Del. Ch. Nov. 6, 1998); RESTATEMENT (SECOND) OF CONTRACTS § 33 (AM. LAW INST. 1981) (“The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy.”).
56 Plaintiffs contend that Campbell was obligated to provide the schedules. They
are referenced as the Campbell Disclosure Schedules in the Contribution
Agreement.238 And that term is defined as “the schedules prepared and delivered by
Campbell for and to the Company and dated as of the Execution Date which modify
(by setting forth exceptions to) the representations and warranties contained herein
and set forth certain other information called for by this Agreement.”239 But the
parties were still negotiating on Schedules 3.5, 4.3(a), and 4.12(c). And the evidence
indicates that Kay and Campbell had not agreed on who would create certain of the
schedules. While both Campbell and Kay appear to have worked slowly, or in some
cases not at all, on the Transaction Documents schedules other than Schedule 2.2(b),
the evidence does not indicate that they agreed to complete the Transaction
Documents without those schedules.240
238 JX 78, Ex. A. 239 Id. 240 This opinion does not address whether Campbell and Kay entered a binding contract (such as the letter agreements) that lacks a Delaware forum selection clause because the Court does not have jurisdiction to reach that question. It also does not address any other theory of liability that may arise from Kay and Campbell’s relationship.
57 2. The parties did not assent to the terms of the LLC Agreement separately from the Contribution Agreement As to the LLC Agreement, the evidence shows that Kay and Campbell did not
agree to the terms of the LLC Agreement separately from the closely related terms
of the Contribution Agreement. From the beginning of Campbell and Kay’s
discussions, the two parties sought to combine resources to market the PADRE
technology through a well capitalized business.241 As early as the November 2013
letter agreement, Campbell and Kay wanted to form a new limited liability company
in connection with that business venture.242 And the Transaction Documents that
Kay and Campbell signed on the same day repeatedly reference one another,243
indicating that neither agreement was designed to stand alone. The Contribution
Agreement that Kay and Campbell signed states, “[a]t the Closing, the Company,
Campbell and EFI shall enter into and deliver the Company LLC Agreement in the
form of Exhibit B.”244 Exhibit B to the Contribution Agreement is a placeholder for
the LLC Agreement.245 Unlike the Contribution Agreement, the LLC Agreement
that Campbell and Kay signed does not say “OK DRAFT 8-26-14” on the cover
241 Tr. 774 (Campbell); JX 1. 242 JX 1, ¶¶ 7-8. 243 JX 78, Recital C, § 2.3; JX 79, § 3.2.1. 244 JX 78, § 3.4. 245 Id. Ex. B.
58 page,246 which suggests that the cover page to the Contribution Agreement was
considered the cover page to the Transaction Documents as a whole, and the LLC
Agreement was an exhibit. And many of the blank schedules to the Contribution
Agreement are actually attached to the LLC Agreement.247 Further, no one asserts
that Campbell and Kay intended to enter into the LLC Agreement separate and apart
from a Contribution Agreement.248 Rather, “the parties intended these two
Agreements to operate as two halves of the same business transaction.”249 Thus, the
LLC Agreement and the Contribution Agreement rise and fall together. Kay and
Campbell did not intend to bind themselves to the written terms in the Transaction
Documents, and this Court does not have personal jurisdiction over Campbell
through his consent.
C. Absent Campbell’s Consent, This Court Lacks Personal Jurisdiction over Campbell Without Campbell’s consent, this Court cannot exercise personal jurisdiction
over Campbell. Plaintiffs do not argue that Campbell is subject to personal
jurisdiction in Delaware pursuant to the Delaware long-arm statute. They do
246 Compare JX 78, with JX 79. 247 See JX 79 (including Schedules 4.3(a) and 4.12(c)). 248 See Tr. 5; Pls.’ Opening Br. This does not mean that Campbell and Kay did not form a business entity. It simply means they had not completed negotiations on the Transaction Documents, which include the LLC Agreement. 249 E.I. DuPont de Nemours & Co. v. Shell Oil Co., 498 A.2d 1108, 1115 (Del. 1985).
59 contend that Campbell became a member and manager of Eagle Force Holdings by
executing the April 2014 letter agreement and, thus, impliedly consented to personal
jurisdiction in Delaware under Section 18-109(a) of the Delaware Limited Liability
Company Act.250 The April 2014 letter agreement “amends the letter agreement that
[Campbell and Kay] executed on November 27, 2013 that was dated as of November
15, 2013.”251 The November 2013 letter agreement states that Campbell and Kay
“will form a new LLC entity and/or a series of industry specific LLC’s [sic] verticals
in Virginia.”252 And the April 2014 letter agreement states that “a new LLC will be
formed to serve as a parent entity (‘Holdco’)”253 without any mention of Delaware.
Instead, it states, “[t]his letter agreement is legally binding upon the parties and shall
be governed by the laws of the State of Virginia.”254 Further, at the time of the April
2014 letter agreement, Campbell did not know that Kay had formed Eagle Force
Holdings in Delaware.255 The only agreements that mention a Delaware limited
liability company are the Transaction Documents, which are missing material terms
250 6 Del. C. § 18-109(a). 251 JX 12. 252 JX 1, ¶ 2. 253 JX 12, ¶ 2. 254 Id. ¶ 18. 255 Tr. 991-92 (Campbell).
60 and, thus, are not enforceable. The April letter agreement does not serve as implied
consent to jurisdiction in Delaware.
Plaintiffs also assert that Campbell actively participated in the management
of a Delaware limited liability company and, thus, impliedly consented to personal
jurisdiction in Delaware. The facts proven at trial, however, indicate that Campbell
managed only EagleForce Associates, a Virginia corporation, and EagleForce
Health, a Virginia limited liability company. The record does not show that
Campbell ever managed Eagle Force Holdings or any other Delaware entity. As
such, Campbell is not subject to personal jurisdiction under Section 18-109.
D. Campbell’s Motion to Conform the Pleadings to the Evidence is Moot Campbell also has moved under Court of Chancery Rule 15(b) to conform the
pleadings to the evidence presented at trial by adding the defenses of unilateral and
mutual mistake to his answer. But because this Court does not enforce the
Transaction Documents, the motion is moot.
E. The Interim Relief Order Does Not Bind Campbell
Plaintiffs’ three motions for contempt allege that Campbell violated the
interim relief order. “A party petitioning for a finding of contempt bears the burden
to show contempt by clear and convincing evidence; the burden then shifts to the
61 contemnors to show why they were unable to comply with the order.” 256 “To
establish civil contempt, [the petitioning party] must demonstrate that the
[contemnors] violated an order of this Court of which they had notice and by which
they were bound.”257
The party charged [with contempt] is always at liberty to defend his disregard of the court’s order by showing that the order was void for lack of jurisdiction. In a contempt proceeding based upon the violation of an injunction, the only legitimate inquiry to be made by the court is whether or not it had jurisdiction of the parties and of the subject matter. Subject to this limitation the court will not listen to an excuse for the contemptuous action based upon an argument that the order in question was imperfect or erroneous. No person may with impunity disregard an order of the court having jurisdiction over the subject matter and of the parties.258
Because this Court lacks personal jurisdiction over Campbell, he was not bound by
the Order and cannot have committed contempt by violating the Order. Plaintiffs’
motions for contempt are denied.
256 TR Inv’rs, LLC v. Genger, 2009 WL 4696062, at *15 (Del. Ch. Dec. 9, 2009). 257 Id. (quoting Arbitrium (Cayman Islands) Handels AG v. Johnston, 1997 WL 589030, at *3 (Del. Ch. Sept. 17, 1997)) (internal quotation marks omitted). 258 Mayer v. Mayer, 132 A.2d 617, 621 (Del. 1957), quoted in Cohen v. State ex rel. Stewart, 89 A.3d 65, 90 n.115 (Del. 2014).
62 III. CONCLUSION
For the reasons stated herein, this Court lacks personal jurisdiction over
Stanley Campbell, and the Complaint is dismissed. Defendant’s motion to conform
the pleadings to the evidence is denied as moot. Plaintiffs’ motions for contempt are
denied.
IT IS SO ORDERED.
Related
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Eagle Force Holdings, LLC v. Stanely v. Campbell, Counsel Stack Legal Research, https://law.counselstack.com/opinion/eagle-force-holdings-llc-v-stanely-v-campbell-delch-2017.