Chancery Court Rule 12(b)(6) – Page 8

Kostyszyn v. Martuscelli, et al., C.A. No. 8828-MA (July 14, 2014)

Jul 16 2014

On July 14, 2014, Master in Chancery Kim E. Ayvazian issued her draft report in Kostyszn v. Martuscelli, a dispute between the purchasers (“Plaintiffs”) and sellers (“Defendants”) of Paciugo Gelato and Café (the “Business”), an ongoing business which Plaintiffs purchased in December 2011 for a purchase price of $272,500.00. According to Plaintiffs, their decision to purchase the Business and the purchase price were based on sales information provided to them by Defendants, as well as subsequent statements made by Defendants regarding, among other things, business earnings, on-site sales, catering sales and profits.

In August 2013, Plaintiffs commenced a lawsuit against Defendants in the Delaware Chancery Court alleging that this information and Defendants’ statements were false and misleading, and directly resulted in Plaintiffs both calculating a purchase price that was more than they otherwise would have been willing to pay for the Business and entering into a long-term lease exposing the assets of the Business to risk and the Plaintiffs to personal liability if the Business ultimately failed. In their amended complaint (the “Amended Complaint”), Plaintiffs asserted claims against Defendants for breach of contract, breach of warranty, indemnification, equitable fraud, fraud, negligent misrepresentation, intentional misrepresentation and breach of the covenant of good faith and fair dealing, and sought indemnification and monetary damages from Defendants, as well as cancellation of the agreement to purchase the Business. Defendants moved to dismiss the Amended Complaint on grounds that the Chancery Court lacked subject matter jurisdiction over Plaintiffs’ claims. In her draft report, Master Ayvazian recommended that the Court dismiss Plaintiffs’ equitable claim (for equitable fraud) with prejudice, decline to apply the “clean up” doctrine to address Plaintiffs’ remaining legal claims and to allow Plaintiffs to transfer those remaining legal claims to a court of law.

Lucas v. Hanson, C.A. No. 9424-ML (July 1, 2014)

Jul 11 2014

By Eric Feldman and Claire White

Lucas v. Hanson involves two procedural questions – standing and personal jurisdiction – with respect to the plaintiff’s claims for declaratory and injunction relief against the forced distribution of assets of a limited partnership, Covenant Investment Fund LP (“Covenant”), to its limited partners. Prosapia Capital Management LLC (“Prosapia Capital”) is the general partner and limited partner of Covenant, and a wholly owned subsidiary of Prosapia Financial LLC (“Prosapia Financial”). The plaintiff, Alan Lucas, is a member of Prosapia Financial and the manager of both Prosapia Capital and Prosapia Financial. The defendants are limited partners of Covenant, none of whom are residents of Delaware or involved in the management of Covenant. Following Mr. Lucas’ criminal conviction in Iowa for theft involving expenditures and the liquidation of Covenant’s funds and assets, the Iowa courts declared that the cash held in Covenant’s accounts was the property of its limited partners and should have been distributed to the defendants.

Catagory:Chancery Court Rule 12(b)(6)