Simon Ogus v. SportTechie, Inc.

• Court: Court of Chancery of Delaware
• Decided: January 31, 2020
• Docket: C.A. No. 2018-0869-AGB
• Status: Published

Opinion

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

SIMON OGUS, ) ) Plaintiff, ) ) v. ) C.A. No. 2018-0869-AGB ) SPORTTECHIE, INC., TAYLOR ) BLOOM, FRANCESCA BODIE ) (A.K.A. FRANCESCA LEIWEKE- ) BODIE), DANIEL KAUFMAN, AND ) OAK VIEW GROUP, LLC, ) ) Defendants. )

MEMORANDUM OPINION

Date Submitted: October 10, 2019 Date Decided: January 31, 2020

T. Brad Davey and Mathew A. Golden, POTTER ANDERSON & CORROON LLP, Wilmington, Delaware; Gregory A. Markel, SEYFARTH SHAW LLP, New York, New York; Tonya M. Esposito, SEYFARTH SHAW LLP, Washington D.C.; Attorneys for Plaintiff Simon Ogus.

Art C. Aranilla, MARSHALL DENNEHEY WARNER COLEMAN & GOGGIN, P.C., Wilmington, Delaware; Attorney for Defendants Taylor Bloom, Francesca Bodie, and Daniel Kaufman.

Brian M. Rostocki, Benjamin P. Chapple, and Justin M. Forcier, REED SMITH LLP, Wilmington Delaware; Michael S. Leib, REED SMITH LLP, Chicago, Illinois; Attorneys for Defendants SportTechie, Inc. and Oak View Group, LLC.

BOUCHARD, C. In this action, Simon Ogus asserts that defendants conspired to remove him

from SportTechie, Inc., a company he co-founded, eliminate his 44.5% interest in

the company through a multi-step plan in order to enrich themselves, and transfer

control of the company to Oak View Group, LLC, a private equity and venture fund.

Pending before the court is defendants’ motion to dismiss seven claims for fraud,

breach of fiduciary duty, aiding and abetting, civil conspiracy, and breach of

contract. For the reasons explained below, the court grants the motion in part and

denies it in part.

I. BACKGROUND

The facts recited in this opinion come from the Verified Amended Complaint

(the “Complaint”) and documents incorporated therein. Any additional facts are

either not subject to reasonable dispute or are subject to judicial notice.

A. The Parties

SportTechie, Inc. (“SportTechie” or the “Company”) is a Delaware

corporation with its principal place of business in Washington, D.C.1 SportTechie

is a news source that reports on the technology aspects of sports. Plaintiff Simon

Ogus is a founder of SportTechie and was its Chief Operating Officer until March

8, 2017.

1 Unless otherwise noted, the court refers to SportTechie, Inc. and its predecessor entities as “SportTechie” or the “Company” for simplicity. 1 Defendant Taylor Bloom is a founder, stockholder, director, and officer of

SportTechie. He is currently the Chief Executive Officer of SportTechie.

Defendant Daniel Kaufman is an employee, officer, and stockholder of

SportTechie. He was the sole in-house attorney at SportTechie at all relevant times

and currently serves as Managing Director of SportTechie.

Defendant Oak View Group, LLC (“Oak View”) is a Delaware limited

liability company that is a controlling investor in SportTechie.2 Defendant

Francesca Bodie is a director of SportTechie as a designee of Oak View, and is

currently the President of Business Development for Oak View.3

B. The Origins of SportTechie

In early 2012, Ogus founded the predecessor of SportTechie with Josh Folk,

who left the Company in 2014.4 In April 2012, Ogus hired defendant Bloom to write

content for the company.5

In August 2013, SportTechie became a District of Columbia limited liability

company.6 Around this time, Bloom received an ownership share in SportTechie.7

2 Am. Verified Compl. (“Compl.”) ¶ 21 (Dkt. 30). 3 Id. ¶ 19, 140. 4 Id. ¶¶ 22, 24. 5 Id. ¶ 23. 6 Id. ¶ 24. 7 Id.

2 In October 2015, SportTechie became a Delaware limited liability company.8

In 2016, Bloom and Ogus revised SportTechie’s Operating Agreement (the “2016

Operating Agreement”) and renegotiated their ownership of the Company so that

Bloom would receive 55.5% of the units and Ogus would receive 44.5% of the units

of SportTechie.9

Under the 2016 Operating Agreement, Ogus was the sole manager of

SportTechie and had a right as a member to block “Major Decisions” by the

Company (the “Veto Right”), which needed “the approval of all the Members.”10

The 2016 Operating Agreement also provided that a member, including Ogus, only

could be expelled if a court found that such member engaged in certain acts of

serious misconduct:

A Member may be expelled only if such Member has been found by a court of competent jurisdiction to: (a) be guilty of wrongful conduct that adversely and materially affects the business or affairs of the Company; (b) have willfully or persistently committed a material breach of the articles of the organization of the Company or this Agreement; or (c) have otherwise breached a duty owed to the Company or to the other Members to the extent that it is not reasonably practicable to carry on the business or affairs of the Company with the Member.11

8 Id. ¶ 27. 9 Id. ¶ 28. 10 Id. ¶ 6, 29; id. Ex. A §§ 6.1, 6.5. 11 Id. Ex. A § 8.2.

3 In July 2016, SportTechie hired defendant Daniel Kaufman as a Managing

Director.12 Kaufman became the sole in-house attorney for SportTechie in which

capacity he advised Ogus and Bloom on legal issues.13

In August 2016, Vintage Capital invested $75,000 in SportTechie in the form

of a convertible note.14 Kai Sato, a friend of Bloom, had formed Vintage Capital as

a venture capital company.15 Sato introduced the Company to Francesca Bodie, Vice

President of Business Development of the Oak View, a large venture capital firm.16

In October 2016, Oak View invested $675,000 in SportTechie in the form of

a note convertible into common stock.17 One condition of Oak View’s investment

was that it would have the “right to [have] a representative on SportTechie’s yet-to-

be formed Board.”18 Ogus consented to Oak View’s investment in SportTechie,

although the precise form of that consent and what Ogus knew when he did so is

unclear from the Complaint.19

12 Compl. ¶ 33. 13 Id. 14 Id. ¶ 38. 15 Id. ¶ 36. 16 Id. ¶ 39. 17 Id. ¶ 41. 18 Id. 19 See id. ¶ 42.

4 C. SportTechie Converts Into a Delaware Corporation and the Shareholders Agreement is Executed

In October 2016, Kaufman, Bloom, and Bodie started an internal campaign to

convert SportTechie from an LLC to a Delaware corporation and to create a board

of directors (the “Board”) with Bloom and Bodie making up a majority of the

Board.20 Ogus’ approval of the conversion was necessary given his Veto Right under

the 2016 Operating Agreement.21

On or about December 29, 2016, Kaufman sent Ogus certain documents to

implement the conversion.22 On December 31, 2016, Ogus signed the conversion

documents, and SportTechie became a Delaware corporation.23 Also on December

31, Ogus signed a written consent of the stockholders of the new corporation

“establishing the Board and appointing Mr. Bloom as the first director.”24 The

Complaint contains no allegations suggesting that the Company’s certificate of

incorporation contained any provisions limiting the ability of the Board to manage

the business and affairs of the corporation, including its authority to hire and fire

20 Id. ¶ 44. 21 Id. 22 Id. ¶ 50. 23 Id. ¶ 52. 24 Id. ¶ 122.

5 officers and employees.25 From December 31, 2016 until February 1, 2017, Bloom

was the only member of the Board.26

On February 1, 2017, Ogus signed a written consent of stockholders

appointing Bodie and Sato to the Board, which expanded the Board to three

members.27 Bloom had nominated Sato to serve on the Board and Bodie joined as

the designee of Oak View under its convertible note agreement.28

On January 31, 2017, Bloom and Ogus executed a Shareholders Agreement.29

The Shareholders Agreement gave SportTechie an option to purchase Ogus’ shares

within ninety days after the termination of his employment—“for any reason or for

no reason”—at a purchase price “equal to the fair market value (as determined in

good faith by the Board) of the Shares sold.”30

The day after Ogus executed the Shareholders Agreement, Kaufman entered

into a Restricted Stock Purchase Agreement with SportTechie to purchase 611,112

shares of the Company on the terms that allegedly were very favorable to Kaufman.31

25 After oral argument, Ogus submitted a copy of the Company’s certificate of incorporation and confirmed that it “did not contain relevant provisions limiting the Board’s authority to manage the business and affairs of the Company.” Dkt. 59 at 3. 26 Compl. ¶ 53. 27 Id. ¶ 122. 28 Id. ¶¶ 58-59. 29 Id. ¶ 67. 30 Id. Ex. C. §§ 6.1, 6.2. 31 Compl. ¶ 69.

6 D. Ogus’ Employment is Terminated and SportTechie Repurchases His Shares

In February 2017, Bloom and Kaufman engaged a valuation service provider,

Derivitas LLC, to determine the fair market value of Ogus’ shares in SportTechie to

facilitate a potential buyout of his shares.32 On March 8, 2017, Bloom and Bodie,

acting by written consent on behalf of the Board, removed Ogus from his position

as an officer of the Company and terminated his employment without cause.33 The

next day, Bloom handed Ogus a termination letter and several other documents,

including an agreement to purchase Ogus’ stock.34 The termination letter stated that

the value of the Company was $2.2 million, which “was at the low end of the

Derivatas range of values.”35

On May 9, 2017, SportTechie purported to repurchase all of Ogus’ shares in

the Company for a total of $819,951.35, with a check for ten percent of the

consideration ($82,000) and a promissory note for the remaining balance

($737,951.35).36 Ogus has not accepted any payments for his shares.37

32 Id. ¶ 72. 33 Id. ¶¶ 88, 93, 158; see id. Ex. F. 34 Compl. ¶¶ 90-91. 35 Id. ¶ 94. 36 Id. ¶¶ 99, 102; see id. Ex. G. 37 Compl. ¶ 102.

7 II. PROCEDURAL HISTORY

On November 30, 2018, Ogus filed his original complaint in this action, which

he amended on March 5, 2019 (as defined above, the “Complaint”). The Complaint

asserts ten claims, for fraud (Count I), breach of fiduciary duty (Counts III and IV),

aiding and abetting (Counts II and V), civil conspiracy (Count VI), wrongful

termination (Count VII), declaratory relief (Count VIII), breach of contract (Count

IX), and breach of the implied covenant of good faith and fair dealing (Count X).

On March 19, 2019, defendants filed a motion to dismiss the Complaint in its

entirety under Court of Chancery Rule 12(b)(6) for failure to state a claim for relief.

In connection with briefing and argument of the motion to dismiss, Ogus dropped

three of his claims: Counts VII, VIII, and X.38

III. ANALYSIS

The standards governing a motion to dismiss under Court of Chancery Rule

12(b)(6) for failure to state a claim for relief are well settled:

(i) all well-pleaded factual allegations are accepted as true; (ii) even vague allegations are “well-pleaded” if they give the opposing party notice of the claim; (iii) the Court must draw all reasonable inferences in favor of the non-moving party; and ([iv]) dismissal is inappropriate unless the “plaintiff would not be entitled to recover under any reasonably conceivable set of circumstances susceptible to proof.”39

38 Pl.’s Opp’n Br. 57 n.11 (Dkt. 43); Dkt. 59 at 5. 39 Savor, Inc. v. FMR Corp., 812 A.2d 894, 896-97 (Del. 2002) (internal citations omitted).

8 A. Count I: Fraud Against Bloom and Kaufman

Count I of the Complaint asserts a claim for fraud in the inducement against

Bloom and Kaufman for making “misrepresentations and omissions of material facts

in order to induce [Ogus] to (1) agree to converting SportTechie from an LLC to a

corporation, (2) agree to a five-person Board, initially comprised of Bloom, Sato,

and Bodie, and (3) execute the Shareholders Agreement.”40 During briefing, Ogus

identified ten misrepresentations and six omissions that allegedly were part of this

scheme.41

To state a claim for fraud in the inducement, a plaintiff must allege: “(i) a

false representation, (ii) the defendant’s knowledge of or belief in its falsity or the

defendant’s reckless indifference to its truth, (iii) the defendant’s intention to induce

action based on the representation, (iv) reasonable reliance by the plaintiff on the

representation, and (v) causally related damages.”42

Under Court of Chancery Rule 9(b), “[i]n all averments of fraud or mistake,

the circumstances constituting fraud or mistake shall be stated with particularity.” 43

“The relevant circumstances are ‘the time, place, and contents of the false

40 Compl. ¶ 107. 41 See Pl.’s Opp’n Br. 18-20. 42 Prairie Capital III, L.P. v. Double E Hldg. Corp., 132 A.3d 35, 49 (Del. Ch. Nov. 24, 2015) (citing Stephenson v. Capano Dev., Inc., 462 A.2d 1069, 1074 (Del. 1983)). 43 Ch. Ct. R. 9(b).

9 representations; the facts misrepresented; the identity of the person(s) making the

misrepresentation; and what that person(s) gained from making the

misrepresentation.’”44 The key to determining whether a plaintiff has alleged

circumstances with particularity to satisfy Rule 9(b) is that “the plaintiff must allege

circumstances to fairly apprise the defendant of the basis of the claim.”45

Defendants argue that Count I should be dismissed because Ogus failed to

plead fraud with particularity under Rule 9(b). They further contend that certain

alleged misrepresentations are non-actionable statements of opinions and that Ogus

has failed to allege facts sufficient to establish justifiable reliance given that the

Shareholders Agreement he signed “contains express provisions allowing

SportTechie to repurchase Ogus’ shares following his termination as an employee

of the Company for ‘any reason or no reason.’”46

Ogus’ fraud claim relies on essentially three separate actions: (i) converting

the LLC into a corporation on December 31, 2016, which eliminated Ogus’ ability

to veto major corporate actions and gave the Board the authority to terminate officers

and employees, including Ogus; (ii) creating and expanding the Board from

44 Prairie Capital, 132 A.3d at 62 (quoting Trenwick Am. Litig. Tr. v. Ernst & Young LLP, 906 A.2d 168, 207-08 (Del. Ch. 2006), aff’d sub nom. Trenwick Am. Litig. Tr. v. Billett, 931 A.2d 438 (Del. 2007)). 45 H-M Wexford LLC v. Encorp, Inc., 832 A.2d 129, 145 (Del. Ch. 2003). 46 Defs.’ Opening Br. 16 (Dkt. 36).

10 December 31, 2016 to February 1, 2017, which excluded Ogus and deprived him of

having a voice in Board decisions; and (iii) executing the Shareholders Agreement

on January 31, 2017, where Bloom and Ogus agreed that the Company could

repurchase their shares upon the termination of their employment from the

Company.

Although these three actions allegedly were conceived as part of an overall

plan to eliminate Ogus’ ownership interest in the Company, they can be considered

separately in analyzing Ogus’ fraud claim because they were not necessarily

dependent on each other and had different consequences. For example, even after

agreeing to convert the LLC into a corporation, which resulted in the elimination of

Ogus’ Veto Right, Ogus could have refused to enter into the Shareholders

Agreement and prevented the Company from having the ability to purchase his

shares after termination of his employment. For the reasons discussed next, the court

finds that the Complaint states a reasonably conceivable claim of fraud against

Bloom and Kaufman with respect to the first two actions described above but fails

to do so with respect to the third.

First, the Complaint alleges specific facts demonstrating that Bloom and

Kaufman induced Ogus to approve converting SportTechie from an LLC to a

corporation by promising him—falsely—that he would retain the managerial role he

11 had with the Company as an LLC and the Veto Right he had under the 2016

Operating Agreement:

On or about noon on December 29, 2016, Mr. Kaufman sent Mr. Ogus the conversion documents. At this time, during conversations with Mr. Bloom and Mr. Kaufman, Mr. Ogus was told that he would retain his managerial authority as COO, and remain involved in the day-to-day management of the Company. As co-founder and one of the two stockholders, Mr. Ogus was told he would retain the Veto Right over major Company decisions he had possessed before the conversion. . . . Mr. Kaufman further pressured Mr. Ogus by asserting that (i) Mr. Ogus would inhibit Company business if he did not approve the conversion documents in the short turn-around time, and (ii) Mr. Ogus would be personally responsible for any fall-out caused by his delay in giving his consent.47

The court disagrees with defendants’ contention that this aspect of the alleged

fraudulent scheme is not plead with particularity. The allegations quoted above and

other allegations in the Complaint48 provide sufficient details to apprise the

defendants of the basis for this aspect of Ogus’ fraud claim. Specifically, the

allegations detail the content of the false representations; the time frame in which

they were made; the identity of the persons making them; and what Bloom and

47 Compl. ¶ 50. 48 See id. ¶¶ 46 (“Mr. Kaufman lied to Mr. Ogus by telling him that, under the proposed structural change, Mr. Ogus and Mr. Bloom would continue to lead SportTechie from a creative and operational standpoint after the conversion to a corporation and as a stockholder, Mr. Ogus would continue to maintain his Veto Right.”); 47 (“Mr. Kaufman misrepresented to Mr. Ogus that under the proposed structure, any major business decision would require unanimous approval of all stockholders, including Mr. Ogus. Mr. Kaufman also advised Mr. Ogus that outside counsel agreed with him on the meaning and effect of the conversion documents.”).

12 Kaufman gained from making the statements, i.e., to terminate Ogus’ employment

with the Company and, assuming Ogus later would sign the Shareholders

Agreement, to force him “to sell his equity interest at a price far below fair market

value.”49

Second, the Complaint alleges that Bloom and Kaufman falsely assured Ogus

from November 2016 to February 2017 that he would be added to the Board of the

Company shortly after the conversion:

In November 2016, Mr. Kaufman and Mr. Bloom had initially proposed a three-person Board consisting of Mr. Bloom, Ms. Bodie and Mr. Sato. Mr. Ogus resisted being excluded from the Board which had a majority of Company outsiders. . . . Importantly, Mr. Kaufman promised Mr. Ogus that he would be added to the Board shortly after the conversion.50

In January 2017, Mr. Bloom and Mr. Kaufman again falsely promised Mr. Ogus that he would become a member of the Board and would soon be joining Mr. Sato, Ms. Bodie, and Mr. Bloom as members of the Board.51

In January 2017, Bloom and Kaufman promised Mr. Ogus for at least the third time that he would become a member of the Board and maintain his Veto Right.52

In February 2017, Mr. Ogus asked Mr. Kaufman and Mr. Bloom who would be a good fit to be the fifth member of the SportTechie Board, assuming that based on prior promises, Mr. Ogus would be the fourth directors (the existing three seats were occupied by Mr. Bloom, Ms. 49 Id. ¶ 2. 50 Id. ¶¶ 47-48. 51 Id. ¶ 54. 52 Id. ¶ 60.

13 Bodie, and Mr. Sato). In response, Mr. Kaufman and Mr. Bloom continued to misrepresent that Mr. Ogus would be made a member of the Board.53

The practical effect to Ogus of this aspect of his fraud claim is unclear given that the

Complaint contemplates that Ogus would be only one member of a five-member

Board, which could out vote him on any given matter, including the termination of

his employment. Nonetheless, this aspect of the claim is pled with sufficient

particularity to apprise the defendants of the basis for the claim.

With respect to the procuring Ogus’ approval of the conversion and his

exclusion from the Board, the Complaint goes on to plead the other elements of

fraud. Specifically, the Complaint sufficiently alleges (i) that Bloom and Kaufman

knew the above-referenced statements were false because they intended to fire Ogus

and to eliminate his Veto Right and they did not intend to place Ogus on the Board;

(ii) that Bloom and Kaufman nevertheless made the statements to induce Ogus to

approve the conversion and to sign written consents approving appointments to the

Board; (iii) that Ogus reasonably relied on their representations, which “were made

by the Company attorney Mr. Kaufman and by [Ogus’] longtime partner Mr. Bloom”

and, insofar as his Veto Right was concerned, because “the approval of stockholders

for major decisions was consistent with the then-operative LLC agreement;” and

53 Id. ¶ 71.

14 (iv) that these representations harmed Ogus by facilitating his termination from the

Company and, ultimately, the repurchase of his shares at an allegedly unfair price.54

Focusing on the third action making up the alleged fraudulent scheme—

execution of the Shareholders Agreement—Ogus has failed to state a reasonably

conceivable claim for fraud. Although the Complaint is not a model of clarity, Ogus’

grievance appears to be that Kaufman “withheld the fact that the purpose of the

Shareholders Agreement was to make it possible for . . . the Board to terminate Mr.

Ogus without cause and repurchase his shares.”55

As an initial matter, the Shareholders Agreement did not “make it possible”

for the Board to terminate Ogus as an officer or employee of the Company—with or

without cause. The Board’s authority to take such action post-conversion arose from

its authority under the Delaware General Corporation Law and the Company’s

certificate of incorporation and bylaws.56 The Shareholders Agreement simply

54 Id. ¶¶ 110-11, 114-15, 117-18, 121-23. 55 Id. ¶ 65. The Complaint further alleges that “Mr. Kaufman conveyed to Mr. Ogus that he needed the new Shareholders Agreement to ‘button up’ as SportTechie progressed as a Company.” Id. This statement is not actionable because it is vague and, at most, is an expression of opinion. See Vichi v. Koninklijke Philips Elecs., N.V., 85 A.3d 725, 775 (Del. Ch. 2014) (“[P]laintiff generally cannot rely . . . on . . . expressions of mere opinion.”) (citations omitted). 56 See, e.g., 8 Del. C. § 141(a) (“The business and affairs of every corporation . . . shall be managed by or under the direction of a board of directors, except as may be otherwise provided in this chapter or in its certificate of incorporation.”)

15 provides that “[u]pon the termination of [Ogus’] employment from the Company . . .

(for any reason or for no reason),” the Company shall have the option to purchase

his shares on the terms and conditions specified therein.57 By its plain terms, this

provision means that the Company could repurchase Ogus’ shares once his

employment was terminated, however that termination came about (e.g., if the Board

fired Ogus or if he resigned voluntarily), but does not create the right of the Board

to terminate Ogus’ employment.

More to the point, insofar as Ogus contends that Kaufman concealed that the

Shareholders Agreement permitted the Company to repurchase his shares, such a

contention cannot support a claim for fraud because this right is expressly set forth

in the Shareholders Agreement that Ogus signed. As this court has held, “[i]t is

unreasonable to rely on oral representations when they are expressly contradicted by

the parties’ written agreement.”58 The same logically holds true when purporting to

rely on an alleged omission that contradicts the plain language of the contract at

issue. Here, to repeat, the Shareholders Agreement expressly allowed the Company

to repurchase Ogus’ shares upon the termination of his employment with the

57 Compl. Ex. C § 6.1 (emphasis added). 58 Flores v. Strauss Water, Ltd., 2016 WL 5243950, at *7 (Del. Ch. Sept. 22, 2016) (quoting Carrow v. Arnold, 2006 WL 3289582, at *11 (Del. Ch. Oct. 31, 2006), aff’d, 993 A.2d 1249 (Del. 2007)); see also MicroStrategy Inc. v. Acacia Research Corp., 2010 WL 5550455, at *14 (Del. Ch. Dec. 30, 2010) (granting motion to dismiss fraud claim based on three oral statements that were expressly contradicted by a later contract).

16 Company. Thus, Ogus cannot complain that he was fraudulently induced to enter

into the Shareholders Agreement based on Kaufman’s alleged failure to disclose that

his shares could be repurchased.

*****

In sum, the motion to dismiss Count I is granted in part and denied in part in

the manner explained above.

B. Count II: Aiding and Abetting Fraud Against Bodie and Oak View

Count II is an aiding and abetting claim against Bodie and Oak View for

“substantially assist[ing] Defendants Bloom and Kaufman’s fraudulent conduct”

“[a]s set forth in Count I.”59 The elements of aiding and abetting fraud are: “(i)

underlying tortious conduct, (ii) knowledge, and (iii) substantial assistance.”60

Ogus has satisfied the first element for the reasons discussed in the previous

section. More specifically, Ogus sufficiently has pled two underlying instances of

fraud: “misrepresentations and omissions of material facts in order to induce Mr.

Ogus to (1) agree to converting SportTechie from an LLC to a corporation [and] (2)

agree to a five-person Board, initially comprised of Bloom, Sato, and Bodie.”61 Ogus

has failed, however, to plead sufficient facts to satisfy the second element of the

59 Compl. ¶¶ 131, 142. 60 PR Acqs., LLC v. Midland Funding LLC, 2018 WL 2041521, at *15 (Del. Ch. Apr. 30, 2018) (internal citations and quotation marks omitted). 61 Compl. ¶ 107.

17 claim, i.e., that either Bodie or Oak View had knowledge of the alleged

misrepresentations and omissions that form the basis of the fraud claim alleged

against Bloom and Kaufman.

Citing paragraph 133 of the Complaint, Ogus asserts that “Count II alleges

that Bodie and Oak View were aware of and participated in the entirety of

Defendants’ fraudulent conduct from October 2016 through March 2017.”62 The

text of paragraph 133, however, is conclusory. It does not allege any facts

demonstrating that Bodie or Oak View were aware of any false representations that

Bloom and/or Kaufman made to Ogus or of any material omissions arising from

their discussions. Rather, paragraph 133 states, in its entirety, that: “During the

period from October 2016 through March 2017, Bodie and Oak View Group had

knowledge of and actively participated in the fraudulent scheme detailed above and

summarized in this count.”63

Ogus argues that the “terms of the [convertible] note Bodie signed expose part

of Bodie’s and Oak View’s knowledge and participation in the fraudulent scheme,

as it specifically refers to the Board seat she would occupy . . . as well as the equity

award to Kaufman.”64 But signing a document reflecting that Oak View would have

62 Pl.’s Opp’n Br. 26-27. 63 Compl. ¶ 133; see also id. ¶ 137 (asserting without supporting facts that “Bodie and Oak View Group were consulted often about managing the details of the fraudulent scheme”). 64 Pl.’s Opp’n Br. 27.

18 a representative on the Board as a condition of its investment in the Company—an

unremarkable provision for a private equity firm investing in a startup—and that

Kaufman would receive an equity award does not equate to knowledge of fraudulent

conduct.65

At bottom, Ogus argues the court should infer that Bodie and Oak View were

aware of the fraud that Bloom and Kaufman allegedly perpetrated because Oak View

wanted to “obtain a controlling financial interest” in the Company.66 Oak View

allegedly accomplished this objective through a plan that involved (i) the conversion

of the Company from an LLC to a corporation, (ii) the creation of a new Board that

excluded Ogus, and (iii) the implementation of the Shareholders Agreement.

Once again, the flaw in Ogus’ aiding and abetting theory is the absence of any

well-plead facts demonstrating that Bodie or Oak View had knowledge of the alleged

misrepresentations and omissions that form the basis of the fraud claim in Count I.

Defendants contend, and perhaps the record will show, that the steps that ultimately

65 Ogus contends that Kaufman’s receipt of an equity award “the day after the Shareholders Agreement was fraudulently procured is more than sufficient at the pleadings stage to support an inference of knowledge and substantial assistance.” Pl.’s Opp’n Br. 27 (emphasis in original). In support of this contention, Ogus cites Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, 2018 WL 6311829, at *23-24 (Del. Ch. Dec. 3, 2018). Putting aside that Ogus has not sufficiently alleged a claim of fraud with respect to his execution of the Shareholders Agreement for the reasons discussed previously, the cited section of Great Hill addresses the issue of substantial participation and not the issue of knowledge. See 2018 WL 6311829, at *23-24. 66 Pl.’s Opp’n Br. 28 (citing Compl. ¶¶ 137-38).

19 led to Ogus’ termination from the Company and the repurchase of his shares

occurred in a completely above board manner. Insofar as Bodie and Oak View are

concerned, Ogus simply fails to plead facts demonstrating that they were aware of

the allegedly fraudulent conduct by Bloom and Kaufman that states a claim for relief

under Count I.67 Accordingly, Count II fails to state a claim for relief.

C. Count III: Breach of Fiduciary Duty Against Kaufman

Count III asserts that Kaufman breached his fiduciary duty as an officer and

the in-house attorney of SportTechie in two ways. First, Ogus asserts that Kaufman

“pressured and threatened [Ogus] to cause him to execute conversion and other key

documents under arbitrary time constraints and without the advice of independent

counsel.”68 Second, Ogus asserts that Kaufman “intentionally misrepresented

information and omitted material information . . . regarding what the effect was on

Mr. Ogus of documents he was asking Ogus to sign relating to [his] role at the

Company.”69

The second aspect of Count III is a reprise of the fraud claim against Kaufman

and states a claim for relief to the same extent that fraud claim survived as to him.

67 Given the court’s conclusion that Count II fails based on the element of knowledge, the court does not consider whether the Complaint sufficiently pleads “substantial assistance.” 68 Compl. ¶ 149. 69 Id. ¶ 150.

20 More specifically, Ogus has pled sufficiently that Kaufman breached his fiduciary

duty by making misrepresentations and omitting material facts when asking Ogus to

sign documents approving (i) the conversion of SportTechie from an LLC to a

corporation and (ii) the appointment of directors to the Board.70 Count III, however,

fails to state a claim for breach of fiduciary duty insofar as it asserts that Kaufman

defrauded Ogus concerning the effect the Shareholders Agreement could have on

his interests. This is because, as discussed previously, the plain terms of the

Shareholders Agreement made it clear that the Company had the option to

repurchase Ogus’ shares upon the termination of his employment with the Company.

As to the first aspect of Count III, the Complaint alleges that (i) Kaufman sent

Ogus documents to implement the conversion around noon on December 29, 2016

and demanded that he sign them by 2:30 p.m. the next day, (ii) Kaufman (and

Bloom) told Ogus “[a]t this time . . . that he would retain his managerial authority as

70 See Part III.A. Defendants cite York Linings v. Roach, 1999 WL 608850 (Del. Ch. July 28, 1999) for the proposition that the portion of a fiduciary duty claim based on fraud must be pled with particularity. As discussed above, the two aspects of the fraud claim that survive here were pled with particularity. Defendants also ask the court to dismiss the fiduciary duty claim to the extent that it is duplicative of the fraud claim. Although the misrepresentation and omission component of the breach of fiduciary duty claim overlaps with the fraud claim in Count I, the court will allow both claims to proceed. See Bay Center Apartments Owner, LLC v. Emery Bay PKI, LLC, 2009 WL 1124451, at *11 n.59 (Del Ch. 2009) (“I recognize that allowing a fraud claim to proceed because of a fiduciary duty claim generates redundancy[,] . . . [but] this sort of redundancy has been permitted in our jurisprudence.”) (citing Zirn v. VLI Corp., 621 A.2d 773 (Del. 1993); Shamrock Hldgs. of Cal., Inc. v. Iger, 2005 WL 1377490 (Del. Ch. June 6, 2005)).

21 COO, and remain involved in the day-to-day management of the Company,” (iii)

Ogus also was told he “would retain the Veto Right over major Company decisions

he had possessed before the conversion,” (iv) Kaufman told Ogus he “would inhibit

Company business if he did not approve the conversion documents in the short turn-

around time” and that “Ogus would be personally responsible for any fall-out caused

by his delay in giving his consent,” (v) the conversion was the first step in a three-

step plan that culminated with Ogus’ execution of the Shareholders Agreement, and

(vi) the day after the Shareholders Agreement was signed, Kaufman entered into an

agreement to purchase 611,112 shares of the Company’s common stock “on very

favorable terms” that Bloom signed on behalf of the Company.71 Based on these

allegations, it is reasonably conceivable that Kaufman, motivated by obtaining a

personal benefit if the alleged plan to eliminate Ogus was consummated, breached

his fiduciary duty of loyalty by making threats against and bringing undue pressure

on Ogus so that he would sign the documents to implement the critical first step of

that plan.

Defendants argue that Ogus fails to state a claim with respect to the first aspect

of the fiduciary duty claim because “Ogus admits that he was aware of the fact of

the proposed conversion at least two months before it occurred” which “contradicts

71 Compl. ¶¶ 45, 50, 69, 157.

22 his allegation of being ‘pressured and threatened’ to convert the Company.” 72 In

particular, defendants focus on how in October 2016, “Mr. Kaufman told Mr. Ogus

that the 2016 Operating Agreement was inadequate and urged Mr. Ogus to agree to

. . . convert[] [SportTechie] to a Delaware corporation,”73 and in November 2016,

Kaufman and Ogus continued to discuss the potential conversion.74 But these

discussions of a “conversion” are described in vague terms that do not explain the

significance of the potential change in the Company’s form. Thus, they do not

negate the reasonable conceivability of a claim that Kaufman improperly threatened

and pressured Ogus to approve the conversion shortly after he provided documents

to Ogus presumably reflecting the actual terms and potential implications of the

transaction.

The motion to dismiss Count III is granted in part and denied in part in the

manner stated above.

D. Count IV: Breach of Fiduciary Duty Against Bodie and Bloom

Count IV asserts that Bodie and Bloom breached their fiduciary duties as

directors of SportTechie in essentially three respects, by (i) “withholding

72 Defs.’ Opening Br. 23 (emphasis in original). 73 Compl. ¶ 44-45 74 See id. ¶ 47.

23 information about their plan to strip [Ogus] of authority within the Company,”

(ii) “improperly purporting to terminate [Ogus’] employment,” and (iii) purporting

“to repurchase his shares at a price well below fair market value.”75 The court

addresses each of these three components of Count IV, in turn, below.

1. Withholding Information

The first component of Count IV—withholding information—is a second

reprise of the fraud claim, this time against Bloom, which states a claim for breach

of fiduciary duty against Bloom for the same reasons and to the same extent that this

claim survived against Kaufman.76 In other words, it is reasonably conceivable that

Bloom breached his fiduciary duty by making misrepresentations and omitting

material facts in connection with asking Ogus to approve the conversion of

SportTechie from an LLC to a corporation and the appointment of directors to the

Board, but Count IV fails to state a claim concerning Ogus’ execution of the

Shareholders Agreement.

75 Id. ¶ 156. The header for Count IV asserts a breach of fiduciary duty claim only against Bodie and Bloom but the body of this section of the Complaint references Kaufman several times. See id. ¶¶ 155-57, 159. Ogus explains in his opposition brief that whether Kaufman’s “conduct is considered as part of Count III or Count IV is of no substantive moment.” Pl.’s Opp’n Br. 37. The court analyzed the allegations concerning Kaufman’s alleged breach of fiduciary duty in discussing Count III above, and will not repeat that analysis here. 76 See Part III.C.

24 As to Bodie, Count IV fails to state a claim for breach of fiduciary duty

because the alleged withholding of information from Ogus with respect to his

approval of the conversion and of the appointment of directors to the Board—

including the appointment of Bodie—occurred before Bodie became a director of

the Company on February 1, 2017.77 Relying on Noerr v. Greenwood,78 Ogus argues

that “[p]rospective directors . . . can be liable for disclosure violations committed in

connection with solicitation of equity-holder approval of their election to the

board.”79 Although one of the defendants in Noerr had been nominated but not yet

elected as a director when the challenged proxy statement was circulated,80 the court

did not address whether a director can be subject to fiduciary duties before actually

becoming a director. In the absence of any such analysis, the court declines to find

that Bodie owed fiduciary duties before her appointment to the Board when she had

no legal authority to serve as a director of the Company at that time.

2. The Termination of Ogus’ Employment

The second component of Count IV asserts that “Bodie and Bloom breached

their fiduciary duties to Ogus by signing the consents to terminate [Ogus] without

77 See In re Walt Disney Co. Deriv. Litig., 907 A.2d 693, 758 (Del. Ch. 2005) (“Delaware law does not require directors-to-be to comply with their fiduciary duties.”). 78 1997 WL 419633 (Del. Ch. July 16, 1997). 79 Pl.’s Opp’n Br. 38. 80 1997 WL 419633, at *1 n.2.

25 cause.”81 Citing Dweck v. Nasser,82 defendants argue that this conduct “cannot be a

breach of fiduciary duty” because, “[t]o the extent Ogus claims his termination was

wrongful, that is a wrongful termination claim, not a breach of fiduciary duty

claim.”83 The court does not read Dweck to provide such a categorical rule.

In Dweck, the court held that Gila Dweck’s allegations of wrongdoing

concerning her termination as president and CEO of Kids International Corporation

by the company’s director and controlling stockholder (Nasser) “are insufficient to

support a claim for breach of fiduciary duty.” 84 In reaching this conclusion,

however, the court seemed to rely on the lack of any allegations suggesting that

Nasser or any other director of the company was acting against the company’s best

interests in firing Dweck such that there was no reason to interfere with their ability

to change the management of the company. As the court stated: “Apart from the

unenforceable stockholders agreement, there is nothing to suggest that Nasser or any

director of Kids’ had a fiduciary obligation to leave the management of the business

to Dweck.”85

81 Compl. ¶ 158. 82 2005 WL 5756499 (Del. Ch. Nov. 23, 2005). 83 Defs.’ Reply Br. 22 (Dkt. 49). 84 2005 WL 5756499, at *5. 85 Id. The “unenforceable stockholders agreement” refers to a draft agreement governing Dweck’s rights as an officer and director of the company that the court found to be unenforceable. Id. at *2.

26 The court’s analysis concerning another personnel decision in that case

supports this reading of Dweck. Specifically, the court declined to dismiss a claim

for breach of fiduciary duty against Nasser for hiring his nephew (Djemal) to replace

Dweck. Based on allegations that Djemal was “unsuited to the job,” “ha[d] caused

substantial disruption at the company,” and “ha[d] injured the company’s business

and prospects,” the court concluded that “the complaint sufficiently pleads that the

controller did not act in the best interest of the company when he replaced the

plaintiff with his allegedly unfit nephew.”86

Here, the Complaint alleges that Ogus “never received a negative review of

his work from his fellow employees nor was he otherwise notified that his

performance was lacking,” never received “any further explanation for his

termination,” and was fired “for the sole and improper purpose” of “buy[ing] his

shares at a below market price.”87 Ogus also alleges that his “efforts led to increased

visibility for the Company, increased readership and partnerships, such as with

Sports Illustrated.”88 Based on these allegations, and giving Ogus all reasonable

inferences as the court must at this stage of the proceedings, it is reasonably

conceivable that Bloom and Bodie terminated Ogus’ employment in bad faith simply

86 Id at *1, 6. 87 Compl. ¶¶ 93, 179(k), 188, 191; see also id. ¶¶ 71, 88. 88 Id. ¶ 189.

27 to eliminate his ownership position in the Company for unfair value. This states a

claim for breach of fiduciary duty.

3. The Repurchase of Ogus’ Shares

The third component of Count IV asserts that Bodie and Bloom breached their

fiduciary duty by “repurchas[ing] [Ogus’] shares at a price well below fair market

value.”89 Defendants argue that the gravamen of this aspect of Count IV is that Ogus

received less than fair value for his shares, which should be dismissed because the

theory “is precisely the same as” Ogus breach of contract claim in Count IX.90 The

court agrees.

In Nemec v. Shrader, our Supreme Court affirmed the dismissal of a breach

of fiduciary duty claim involving the redemption of two former officers’ shares of

the company, finding that the claim was foreclosed by a contract that expressly

addressed the parties’ dispute even though the company’s directors made the

decision to redeem the shares:

It is a well-settled principle that where a dispute arises from obligations that are expressly addressed by contract, that dispute will be treated as a breach of contract claim. In that specific context, any fiduciary claims arising out of the same facts that underlie the contract obligations would be foreclosed as superfluous.

89 Id. ¶ 156. 90 Defs.’ Opening Br. 28.

28 Even though the Directors caused the Company to redeem the plaintiffs’ shares when it did, the fiduciary duty claim still arises from a dispute relating to the exercise of a contractual right—the Company’s right to redeem the shares of retired nonworking stockholders. That right was not one that attached to or devolved upon all the Company’s common shares generally, irrespective of a contract. Rather, that right was solely a creature of contract, and attached only to those shares that retired stockholders acquired under the Stock Plan. As a consequence, the nature and scope of the Directors’ duties when causing the Company to exercise its right to redeem shares covered by the Stock Plan were intended to be defined solely by reference to that contract. Any separate fiduciary duty claims that might arise out of the Company’s exercise of its contract right, therefore, were foreclosed.91

Here, Section 6 of the Shareholders Agreement expressly provides that upon

the termination of Ogus’ employment from SportTechie, the Company has the

option to purchase his shares for “an amount equal to the fair market value (as

determined in good faith by the Board) of the Shares.”92 The alleged breach of this

contractual obligation is the subject of Count IX, discussed below. This is not to say

that the Board’s decision to terminate Ogus’ employment cannot form the basis of a

fiduciary duty claim. As discussed in the previous section, Ogus has stated such a

claim. Insofar as the question is whether Ogus received fair value for his shares,

however, that dispute is squarely addressed by the terms of the Shareholders

Agreement—which has a built in requirement that the directors determine fair value

91 Nemec v. Shrader, 991 A.2d 1120, 1129 (Del. 2010) (citations omitted, emphasis in original). 92 Compl. Ex. C § 6.2.

29 in good faith—and cannot form the basis of a separate fiduciary duty claim under

the reasoning of Nemec.93 For this reason, this aspect of Count IV fails to state a

claim for relief.

The motion to dismiss Count IV is granted in part and denied in part in the

E. Count V: Aiding and Abetting Against Oak View

Count V of the Complaint asserts that Oak View aided and abetted Bodie in

breaching her fiduciary duties in the manner set forth in Count IV.94 The elements

93 See also Gale v. Bershad, 1998 WL 118022, at *5 (Del. Ch. Mar. 4, 1998) (“[B]ecause the contract claim addresses the alleged wrongdoing by the Board, any fiduciary duty claim arising out of the same conduct is superfluous.”); Madison Realty Partners 7, LLC v. Ag ISA, LLC, 2001 WL 406268, at *6 (Del. Ch. Apr. 7, 2001) (dismissing a fiduciary duty claim because “the contract and fiduciary claims overlap completely since they are based on the same underlying conduct . . . [and] ‘relate[s] to obligations ‘expressly treated . . . ’ by contract’”); Blue Chip Capital Fund II Ltd. P’ship v. Tubergen, 906 A.2d 827, 833-34 (Del. Ch. 2006) (dismissing a fiduciary duty claim when “the complaint asserts contractual and fiduciary duty claims that arise from the same alleged facts and underlying conduct” because “contract, and not fiduciary, principles should govern the analysis”); Stewart v. BF Bolthouse Holdco, LLC, 2013 WL 5210220, at *13-15 (Del. Ch. Aug. 30, 2013) (dismissing a fiduciary duty claim because it is “duplicative of, and foreclosed by, their breach of contract claims”). 94 In its opposition brief, Ogus asserts that Oak View “participated in the breaches by Kaufman and Bloom as well—including encouraging Kaufman’s misconduct by promising him a cut of the benefits in the 2016 note.” Pl.’s Opp’n Br. 46. Fairly read, the allegations of Count V focus only on Bodie’s conduct and seeks to impute only her conduct to Oak View. See, e.g., Compl. ¶¶ 165 (“Bodie breached her fiduciary duties to Plaintiff.”), 166 (“The actions and knowledge of Ms. Bodie is imputed to Oak View for the reasons detailed earlier herein. Thus, Oak View actively participated in the breach of fiduciary duty.”).

30 of a claim for aiding and abetting a breach of fiduciary duty are: “(1) the existence

of a fiduciary relationship, (2) a breach of the fiduciary’s duty, (3) knowing

participation in that breach by the defendants, and (4) damages proximately caused

by the breach.”95

As previously discussed, Count IV contains three components: (i) the

withholding of information, (ii) the termination of Ogus’ employment, and (iii) the

Company’s repurchase of Ogus’ shares. Because Count IV fails to state a claim for

breach of fiduciary duty against Bodie with respect to the first and third

components,96 Count V fails to state a claim for aiding and abetting against Oak

View as to those two components as well.

With respect to the second component, for which Ogus has stated a claim

against Bodie for breach of fiduciary duty for the reasons discussed in Part III.D and

for which defendants do not contest the element of damages,97 the only open question

is whether the Complaint sufficiently alleges that Oak View knowingly participated

Accordingly, the court analyzes Count V only with respect to Bodie’s alleged breach of fiduciary duty. 95 Malpiede v. Townson, 780 A.2d 1075, 1096 (Del. 2001) (citations, internal quotations, and alterations in original omitted). 96 See Part III.D. 97 Because defendants did not challenge the damages element of the aiding and abetting claim in their briefs, they have waived the issue. See Emerald Partners v. Berlin, 726 A.2d 1215, 1224 (Del. 1999) (issues not briefed are deemed waived).

31 in Bodie’s alleged breach of fiduciary duty. “A claim of knowing participation need

not be pled with particularity,” but “there must be factual allegations in the complaint

from which knowing participation can be reasonably inferred.”98

The Complaint sufficiently alleges that Bodie knowingly participated in the

termination of Ogus’ employment by signing a written consent of the Board to

remove Ogus as an officer of the Company effective March 8, 2017.99 “A director’s

knowledge and participation in a breach may be imputed to a non-fiduciary entity

for which that director also serves in a fiduciary capacity.” 100 Ogus alleges, and

defendants do not dispute, that Bodie was serving in a fiduciary capacity at Oak

View when she signed the written consent, which follows from the Complaint’s

allegations that Bodie “served as an officer” of Oak View and was its Vice President

of Business Development in 2017.101 Accordingly, Bodie’s knowing participation

in the termination of Ogus’ employment may be imputed to Oak View. Count V

thus states a claim against Oak View for aiding and abetting Bodie’s breach of

fiduciary duty with respect to terminating Ogus’ employment at SportTechie.

98 In re Gen. Motors (Hughes) S'holder Litig., 2005 WL 1089021, at *24 (Del. Ch. May 4, 2005) (citation and internal quotation marks omitted). 99 Compl. ¶¶ 88, 93; see id. Ex. F. 100 Carr v. New Enter. Assocs., Inc., 2018 WL 1472336, at *16 (Del. Ch. Mar. 26, 2018) (citing Carlson v. Hallinan, 925 A.2d 506, 542 (Del. Ch. 2006); Khanna v. McMinn, 2006 WL 1388744, at *27 (Del. Ch. May 9, 2006)). 101 Compl. ¶¶ 19, 162.

32 *****

The motion to dismiss Count V is granted in part and denied in part in the

F. Count VI: Civil Conspiracy Against Bodie, Bloom, Kaufman and Oak View

Count VI asserts that Bodie, Bloom, Kaufman, and Oak View engaged in a

civil conspiracy to allow Oak View to gain control of SportTechie through Oak

View’s purchase of a secured convertible note and the subsequent implementation

of a multi-step plan that forced Ogus out of the Company and allowed it to

repurchase his shares “at below market price.”102 The elements for civil conspiracy

are: “(i) a confederation or combination of two or more persons; (ii) an unlawful act

done in furtherance of the conspiracy; and (iii) damages resulting from the action of

the conspiracy parties.”103

With respect to the first element, “[e]ven to prevail at trial the [plaintiff does]

not need to prove the existence of an explicit agreement; a conspiracy can be inferred

from the pled behavior of the alleged conspirators.”104 “[T]o survive a motion to

102 Id. ¶¶ 178-80. 103 Great Hill, 2014 WL 6703980, at *20. 104 In re Am. Int’l Grp., Inc., 965 A.2d 763, 806 (Del. Ch. 2009) (citing Empire Fin. Servs., Inc. v. Bank of N.Y., 900 A.2d 92, 97 n.16 (Del. 2006)); see also LVI Grp. Invs., LLC v. NCM Grp. Holdings, LLC, 2018 WL 1559936, at *16 (Del. Ch. Mar. 28, 2018).

33 dismiss, all that is needed is a reasonable inference that [the defendant] was part of

this conspiracy.”105

Here, the Complaint alleges, in sum, that: (i) Oak View, through Bodie,

invested in SportTechie in October 2016 expecting to make a further investment in

and obtain control of the Company;106 (ii) Bodie publicly stated in November 2016

that members of Oak View would have “first dibs” on SportTechie;107 (iii) Bloom,

Kaufman, and Bodie (acting together in various combinations) thereafter (a)

converted the LLC into a corporation, which eliminated Ogus’ Veto Right and gave

the Board the authority to terminate Ogus’ employment; (b) created a Board friendly

to Oak View that excluded Ogus; (c) procured a Shareholders Agreement allowing

the Company to repurchase Ogus’ shares upon the termination of his employment;

(d) terminated Ogus’ employment; and (e) repurchased his shares at an allegedly

unfair price.108 These allegations, and the rather rapid pace at which the sequence of

events necessary to implement the alleged plan occurred, support a reasonable

inference of a confederation among Bodie, Bloom, Kaufman, and Oak View.109

105 Am. Int’l Grp, 965 A.2d at 806. 106 Compl. ¶¶ 40-41, 77. 107 Id. Ex. B at 5. 108 Compl. ¶¶ 45, 47, 48, 65, 67, 88, 94, 102. 109 Defendants devote several pages downplaying the significance of certain events, asking the court to draw different inferences about them, and challenging the alleged conspiracy as “nonsensical” and “farfetched.” See Defs.’ Reply Br. 28-30. Defendants make many

34 The second element of a civil conspiracy claim—an unlawful act in

furtherance of the conspiracy—also has been pled sufficiently. As discussed above,

Ogus has stated claims for fraud and/or breach of fiduciary duty against each of the

three individual defendants concerning various acts they each took (acting together

in various combinations) in furtherance of the alleged conspiracy.110 Finally, Ogus

alleges he has suffered damages as a result of the conspiracy,111 which defendants

do not challenge in their briefs.112

For the foregoing reasons, the motion to dismiss Count VI of the Complaint

is denied.

G. Count IX: Breach of the Shareholders Agreement Against SportTechie

Count IX asserts that the Company “breached the Shareholders Agreement by

failing to determine in good faith the fair market value of the Company in connection

valid points. The procedural posture of the motion, however, only requires that Ogus plead facts to support a reasonable inference of a confederation, which he need not do with particularity. Great Hill, 2014 WL 6703980, at *20 (“The existence of a confederation may be pled by inference; it is not subject to the specificity requirement of Rule 9(b).”). Ogus has satisfied that hurdle, albeit not overwhelmingly. 110 See Parts III.A, C, D. 111 Ogus alleges he “has suffered, and will continue to suffer, harm” as a result of the conspiracy, which led to his termination and the resulting acquisition of his 44.5% equity interest in SportTechie “at below market prices.” Compl. ¶¶ 177, 183. 112 See Emerald Partners, 726 A.2d at 1224 (issues not briefed are deemed waived).

35 with the . . . repurchase of [Ogus’] shares.”113 Focusing on the Derivatas report, the

Complaint alleges that it “contained notations and assumptions that were

inconsistent with Defendants’ own representations regarding the treatment of

$750,000 of convertible notes, SportTechie’s relationship with Oak View Group and

its future investments, and the overall value of the Company.”114

As discussed above, under Section 6 of the Shareholders Agreement, the

Company had the option to purchase Ogus’ shares upon the termination of his

employment from the Company for “an amount equal to the fair market value (as

determined in good faith by the Board).”115 Noting that the Complaint refers to the

Derivatas report that set the price for Ogus’ shares, defendants argue that Count IX

should be dismissed because, even if there were flaws in the report, the Board

members were entitled to rely on it under 8 Del. C. § 141(e).116

By invoking Section 141(e), which can protect directors of Delaware

corporations from liability if the directors reasonably rely in good faith on the

opinion of expert advisers,117 the Company essentially is asserting an affirmative

113 Compl. ¶ 214. Count IX is asserted in the alternative “if the Shareholders Agreement is found not have been induced by fraud.” Id. 114 Id. ¶ 218. 115 Id. Ex. C § 6.2 (emphasis added). 116 Defs.’ Opening Br. 49-50. 117 Section 141(e) provides, in relevant part, that “[a] member of the board of directors . . . shall, in the performance of such member’s duties, be fully protected in relying in good

36 defense against its own potential liability under the Shareholders Agreement. The

Company thus should bear the burden of proof to demonstrate that the directors’

reliance on the Derivatas report was reasonable and done in good faith.118

Defendants have not put forward evidence to make this showing, which is a fact-

intensive inquiry that is not appropriate for disposition in the context of a motion to

dismiss under Court of Chancery Rule 12(b)(6).

On the issue of the Board’s good faith in determining the purchase price for

his shares, Ogus alleges that the Derivitas report stated that “there has been no

contact with any potential investors” to raise additional funds but that the defendants

knew that this assumption was false.119 This is so, according to Ogus, because

“Derivatas had been told that there had been no contact with investors or

arrangements with them for investments after the investments made in October

2016,” when in fact, “between 2017 and 2018 [SportTechie] had discussions with

faith upon the . . . opinions, reports or statements presented to the corporation by any . . . person as to matters the member reasonably believes are within such . . . person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the corporation.” 8 Del. C. § 141(e). 118 See Medek v. Medek, 2008 WL 4261017, at *10 n.88 (Del. Ch. Sept. 10, 2008) (“Defendants have the burden of proof on each of their affirmative defenses.”) (citing Penn Mart Supermarkets, Inc. v. New Castle Shopping LLC, 2005 WL 3502054, at *5 n.40 (Del. Ch. Dec. 15, 2005)). 119 Compl. ¶ 74.

37 ‘numerous potential investors.’”120 The omission of this information allegedly

“lowered the valuation.”121 Based on these allegations, it is reasonably conceivable

that the Board knew that the Derivatas report contained a false assumption such that

the Company’s purchase of Ogus’ shares did not satisfy the good faith standard

embedded in Section 6 of the Shareholders Agreement.122 Accordingly, Count IX

states a claim for relief.

IV. CONCLUSION

For the foregoing reasons, the court grants in part and denies in part

defendants’ motion to dismiss the seven claims in the Complaint discussed above.

Counsel are directed to confer and to submit a form of implementing order consistent

with this decision within five business days.

IT IS SO ORDERED.

120 Id. ¶¶ 74, 80. Although the Complaint is not a model of clarity, the court infers that this assumption came from discussions Bloom and/or Kaufman had with Derivatas. See id. 121 Id. ¶ 80. 122 Defendants contend that Ogus’ allegations that the Company had been in contact with investors is erroneous because a complaint the Company filed in the United States District Court for the District of Maryland, which is cited in paragraph 74 of the Complaint as factual support for Ogus’ allegations, only refers to contacts with investors occurring after Ogus’ termination. See Defs.’ Opening Br. 33-34. This assertion presents a factual dispute that cannot be resolved at this stage of the case because it is unclear from the Complaint that this was the only source for Ogus’ allegations of contacts with investors.