Sorenson Impact Foundation v. Continental Stock Transfer & Trust Co.

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

SORENSON IMPACT FOUNDATION )
and JAMES LEE SORENSON FAMILY )
FOUNDATION, )
)
Plaintiffs, )
)
v. ) C.A. No. 2021-0413-SG
)
CONTINENTAL STOCK TRANSFER )
& TRUST COMPANY, TASSEL )
PARENT INC., and GRADUATION )
ALLIANCE, INC., )
)
Defendants. )
)

MEMORANDUM OPINION

Date Submitted: December 9, 2021
Date Decided: April 1, 2022

Eric D. Selden and Anthony M. Calvano, of ROSS ARONSTAM & MORITZ LLP,
Wilmington, Delaware; OF COUNSEL: Cameron M. Hancock and Adam D.
Wahlquist, of KIRTON MCCONKIE, Salt Lake City, Utah, Attorneys for Plaintiffs
Sorenson Impact Foundation and James Lee Sorenson Family Foundation.

Peter B. Ladig, of BAYARD, P.A., Wilmington, Delaware; OF COUNSEL: Mark A.
Harmon and Erin N. Teske, of HODGSON RUSS LLP, New York, New York,
Attorneys for Defendant Continental Stock Transfer & Trust Company.

P. Clarkson Collins, Jr. and K. Tyler O’Connell, of MORRIS JAMES LLP,
Wilmington, Delaware; OF COUNSEL: Anna Rotman, of KIRKLAND & ELLIS
LLP, Houston, Texas, Attorneys for Defendants Tassel Parent Inc. and Graduation
Alliance, Inc.

GLASSCOCK, Vice Chancellor
 Two parties contract for the sale of a chattel; say, a statuette of a falcon

covered in black enamel.1 The payment is to be in cash. Neither wishes to make the

transfer in person. Accordingly, they agree that the buyer will hire an agent who is

to deliver the bird; once delivery is made, the agent is to receive cash from the buyer,

which he is then to pay over to the seller. The first part of the transaction is

completed without incident. The buyer immediately resells the dingus to new

buyers,2 who then take it aboard a ship and out of the jurisdiction.

The agent then departs with the cash. As he is approaching the seller’s home

to complete the payment, a gunsel accosts him, and robs him of the cabbage. This

mugger, despite the subsequent best efforts of the police, is never apprehended or

even identified. Who in this scenario must bear the loss?

A similar transaction noir is alleged in the matter before me. The Plaintiffs

are former stockholders (and a noteholder) of a company purchased via merger.

They tendered their shares as called for in the merger agreement. The Defendant

buyer accepted the shares and directed its agent, also a Defendant, to make the

required payment to the Plaintiffs. Before payment was made, the Plaintiffs

appeared to have indicated to the agent (through deal counsel) that they wished the

funds sent to a different payee and address, that of a Hong Kong company.

1
See generally THE MALTESE FALCON (Warner Bros. 1941).
2
A fat man and his minions.

1
Unfortunately, the Defendant agent was unaware that this communication was in

reality from hackers, who were ultimately successful in diverting the cash

consideration to persons unknown. Thus the buyer received the stock, presumably

cancelled as part of the merger, and has paid the cash consideration, but the sellers

have delivered their shares without receiving payment. The Plaintiff sellers have

sued the Defendant agent on grounds of tort and breach of contract. The Defendant

agent seeks to dismiss on grounds of lack of personal jurisdiction, however, and I

find that, indeed, in personam jurisdiction is lacking here.

The Plaintiffs also seek recovery for breach of contract by the Defendant

buyer.3 The buyer has moved to dismiss for failure to state a claim. It is true that

the Plaintiffs’ contractual complaint against the buyer is muddled and turbid. Under

our liberal notice pleading requirements, however, and in light of the plaintiff-

friendly stage of the proceedings, I find it reasonably conceivable that the buyer

breached a payment obligation to the Plaintiffs in this scenario, arising under the

merger agreement.

The buyer also seeks dismissal based upon failure to join a necessary party,

the law firm (per the Defendant buyer) purportedly representing the seller, 4 who

3
In addition, the Plaintiffs seek recovery against the Defendants buyer and acquired company on
an unjust enrichment theory. As explained below, the motion to dismiss that equitable cause of
action awaits a record.
4
The question of whom the law firm represented is a disputed issue. See Pls. Sorenson Impact
Foundation and James Lee Sorenson Family Foundation’s Verified Am. Compl. ¶ 37, Dkt. No. 6
[hereinafter “Compl.”] (identifying the law firm as counsel for the buyer); see also Opening Br.

2
allegedly communicated directly with the hackers. 5 Because I have dismissed the

Defendant agent on jurisdictional grounds, I will allow the parties to supplement

briefing regarding the absence of the agent, as well. In the meantime, decision on

that portion of the motion is continued.

For the foregoing reasons, the motions of the Defendant buyer and of the

Defendant acquired company to dismiss are denied, except as continued. If the

Plaintiffs are to recover against the Defendant agent,6 however, it must be in a forum

where jurisdiction exists. My reasoning follows.

I. BACKGROUND

The instant case deals with diverted merger consideration. Tassel Parent Inc.

sought to acquire Graduation Alliance, Inc. (the “Merger”).7 The Plaintiffs in the

action, Sorenson Impact Foundation and James Lee Sorenson Family Foundation

(the “Plaintiffs”) tendered Graduation Alliance, Inc. stock and convertible note

holdings, along with a transmittal document called a letter of transmittal, to a paying

Supp. Defs. Tassel Parent Inc. and Graduation Alliance, Inc.’s Mot. to Dismiss Verified Compl.
14, Dkt No. 14 [hereinafter “Company Def. OB”] (identifying the law firm as counsel for the
acquired company).
5
The Plaintiffs previously brought a lawsuit in Utah against this law firm in connection with this
same transaction; that suit has been voluntarily discontinued. See Opening Br. Supp. Def.
Continental Stock Transfer & Trust Co.’s Mot. to Dismiss Verified Compl. 4–5, Dkt. No. 16
[hereinafter “CST OB”].
6
The agent, I note, also moved to dismiss for failure to state a claim, a motion I do not reach based
on its demonstration that I am without jurisdiction.
7
Compl. ¶ 1.

3
agent responsible for paying out merger consideration following the Merger’s close.8

After the Plaintiffs transmitted their legitimate documents, hackers intercepted their

email communications, assuming the identity of the Plaintiffs, and communicated

via email with unsuspecting legal counsel, ultimately seeking to have the Plaintiffs’

letters of transmittal edited such that payment would be made to the hackers’ bank

accounts instead of the Plaintiffs’ accounts. 9 The hackers were successful.10

Following the failure to receive Merger consideration, the Plaintiffs bring suit

against the paying agent (Continental Stock Transfer & Trust Company), Tassel

Parent Inc., and Graduation Alliance, Inc. (together, the “Defendants”) for various

claims, including breach of contract, unjust enrichment, negligence, and breach of

fiduciary duty. 11 The Defendants have moved to dismiss in two separate motions.

This Memorandum Opinion grants the paying agent’s motion to dismiss, but denies

the joint motion of Tassel Parent Inc. and Graduation Alliance, Inc. A fuller

recitation of the facts is outlined below.

8
See id. ¶¶ 2–3.
9
Id. ¶ 5.
10
Id. ¶ 4.
11
See generally Compl.

4
 A. Factual Overview12

1. The Parties and Relevant Non-Parties

The Plaintiffs were stockholders of Graduation Alliance, Inc. at all pertinent

times.13 Plaintiff Sorenson Impact Foundation also held a convertible note issued

by Graduation Alliance, Inc. prior to the Merger.14

Defendant Graduation Alliance, Inc. (“Target”) was a Delaware corporation

purchased by Defendant Tassel Parent Inc., a Delaware corporation (“Parent” and,

together with Target, the “Company Defendants”), in the Merger. 15 Per the merger

agreement (the “Merger Agreement”), Target was merged into a subsidiary of Parent

and remains as the surviving corporation.16

Defendant Continental Stock Transfer & Trust Company (“CST” or the

“paying agent”) is the paying agent hired by Parent to help with certain logistics in

closing the Merger.17 CST is a New York corporation.18

12
Unless otherwise specified, the facts in this section are drawn from the verified amended
complaint (the “Complaint”) or exhibits attached to the Complaint. See generally id. I consider
the facts to be true as pled in the Complaint, in accordance with the applicable standard on a motion
to dismiss. This section therefore does not constitute formal findings of fact.
13
Id. ¶ 19.
14
Id. Although the Complaint here refers to plaintiff “Sorenson Impact,” I have assumed that this
discrepancy was a mere typographical error. See id.
15
Id. ¶¶ 14–15, 20.
16
Id. ¶ 20.
17
Id. ¶¶ 24–25.
18
Id. ¶ 13. The Complaint indicates that CST is a New York corporation “doing business in the
State of Utah.” Id.

5
 The conflict in the instant case was caused by certain hackers (the “Hackers”),

non-parties to this case, who intercepted the email communications of legal counsel

involved with the Merger, and provided fraudulent bank information for the receipt

of the Merger consideration.19

Exhibit A, attached hereto, provides a visual rendition of these relationships.

Non-party Holland & Knight LLP (“H&K”) was counsel for the Merger. 20

The entity H&K represented is subject to dispute.21

2. The Transaction Documentation

The Merger Agreement requires the Plaintiffs to surrender their existing stock

certificates to CST and to deliver an executed letter of transmittal (“LOT”) to CST

in order to receive their portion of the Merger consideration.22 The Merger

Agreement additionally specifies that Target is responsible for providing a

“[c]onsideration [s]preadsheet” (which would outline the expected payments) to

Parent three business days prior to the close of the Merger. 23

19
See id. ¶¶ 37–38, 45–49.
20
Id., Ex. A, § 13.7 [such exhibit hereinafter “MA”]. The Merger Agreement indicates that
Parent’s counsel (and Target’s counsel following the consummation of the Merger) was Kirkland
& Ellis LLP. See id.
21
See supra note 4.
22
Id. ¶ 22. The portion of the Merger Agreement discussed in the Complaint does not discuss the
procedure for receiving consideration for the outstanding convertible note, so I assume without
deciding that such process does not change the outcome here. See id.
23
MA § 3.1(b)(i)(B). I also note as a matter of curiosity that the LOT identifies the consideration
spreadsheet as the determinative document with respect to the amounts payable to the
stockholders, rather than “Schedule A” described in the Paying Agent Agreement. See Compl.,
Ex. C, at 4 [such exhibit hereinafter “LOT”].

6
 The Paying Agent Agreement includes a clause that disavows CST having

any knowledge of the contents of the Merger Agreement. 24 The clause in question

specifies that CST is “assumed to be wholly unfamiliar with, and not bound by” the

Merger Agreement.25

The LOT includes certain instructions, which the Plaintiffs contend were

“binding on the parties.”26 To repeat, Target stockholders were responsible for

submitting their stock certificates along with a completed LOT to receive Merger

consideration. The LOT additionally requires that, if a check or wire transfer were

to be received by a stockholder in a name other than the name on the certificate,

such certificate needed to be “properly endorsed,” and that signature needed to be

“medallion guaranteed” by a qualified guarantor.27 A medallion guarantee confirms

that “the signature authorizing the transaction is genuine and the signer has legal

capacity and authority to sign the document.”28

The LOT attaches the Merger Agreement as an exhibit,29 and the Paying

Agent Agreement, discussed below, attaches the LOT as an exhibit. 30

24
Compl., Ex. B, § 1.3 [such exhibit hereinafter “PAA”].
25
PAA § 1.3.
26
Compl. ¶ 31.
27
Id.
28
Id. ¶ 32.
29
See LOT, Ex. A.
30
See PAA, Ex. A. To be specific, the PAA attaches a “form of” the LOT. See id.

7
 Both the Merger Agreement and the LOT are governed by the laws of

Delaware and include forum selection clauses identifying Delaware courts as the

appropriate forum for any litigation. 31

In addition to the Merger Agreement and the LOT, another pertinent

transaction document is the Paying Agent Agreement (the “PAA”), which enshrines

the contractual duties owed to Parent by CST in its role as paying agent.32 The PAA

outlines that Parent will provide to CST “Schedule A,” which includes a list of

Target stockholders and noteholders to be paid in connection with the closing of the

Merger. 33 Per the Plaintiffs’ counsel at oral argument, this Schedule A was to be put

together by Parent and CST “[p]resumably based on what Graduation Alliance

provide[d]” in the consideration spreadsheet referenced above.34

The PAA specifies that, after Schedule A is provided to CST, Parent “shall

work” with CST “to ensure the accuracy and completeness of Schedule A.” 35 Any

edits to be made to Schedule A “are to be made by Parent and delivered” to CST.36

Section 2.2 of the PAA further indicates the ways in which CST ensures the

accuracy of the payment information:

31
MA § 13.8; LOT at 5–6.
32
See Compl. ¶ 24.
33
PAA § 1.2(a).
34
Tr. of 12.9.21 Oral Arg. on Defs.’ Mots. to Dismiss, 37:17–24, 38:1–15, Dkt. No. 39 [hereinafter
“Oral Arg.”]. I have assumed that “Schedule A” and the “consideration spreadsheet” are separate
documents based on this representation.
35
PAA § 1.2(b).
36
Id.

8
 The Paying Agent [CST] will examine the Letters of Transmittal,
the share certificates and/or book-entry positions for shares
delivered or mailed to the Paying Agent [CST] by [Graduation
Alliance] stockholders to ascertain that (i) the Letters of Transmittal
are properly completed and duly executed in accordance with the
instructions set forth therein . . . . In cases where the Letter of
Transmittal has been improperly completed or executed . . . or if
some other irregularity exists in connection with their surrender, the
Paying Agent [CST] shall consult with Parent on taking such actions
as are necessary to cause such irregularity to be corrected. 37

Section 2.2 also provides that CST can waive an irregularity after review of

the same with Parent and after approval in writing by certain designated officers or

agents of Parent.38 Per the Complaint, no such written approval was provided. 39

The PAA is governed by New York law.40

3. The Misdirected Merger Consideration

CST was provided with the funds owed to the Plaintiffs prior to January 30,

2020. 41 The Plaintiffs returned their copies of the LOT, pertinent stock certificates,

and convertible note to CST on or about January 30, 2020.42 The Plaintiffs also

provided the “Defendants” with wire instructions directing their consideration to be

paid to a bank account with Zions Bank in Utah.43

37
Id. § 2.2.
38
Id.
39
Compl. ¶ 64.
40
PAA § 4.11.
41
Compl. ¶ 36.
42
Id. ¶ 35.
43
Id. Defendants is included in scare quotes here as the Complaint is nonspecific with respect to
the recipient of the wire instructions and may not apply to the defined term “Defendants” as used
herein. See id. All further repetitions of the term “Defendants” in scare quotes are used in like
manner.

9
 After the Plaintiffs provided their legitimate LOTs to the “Defendants,” the

Hackers intercepted the email chains between the parties, sending fraudulent emails

posing as the Plaintiffs, who were unaware of the interception.44 The Hackers

emailed H&K asking to change the “pay out account” for the Plaintiffs to “an

international account in Hong Kong.” 45 About a week later, on February 7, 2020,

the Hackers sent an email containing a revised LOT, stock certificates, and an

authorization letter updating the payment information to be paid into the Hong Kong

bank account. 46 The new beneficiary to be paid out under the revised fraudulent

documents was “Hongkong Wemakos Furniture Trading Co. Limited”—clearly a

different name than either of the Sorenson holders. 47 Despite the instructions to the

LOT, a medallion guarantee was not provided. 48

On February 21, 2020, CST told H&K that the payment instructions required

a medallion signature guarantee with respect to “the Sorenson accounts that provided

different account names for the payment instructions.” 49 The Complaint avers that

the (nonspecific) “Defendants” discussed ways to circumvent the medallion

44
Id. ¶¶ 37, 38.
45
Id. ¶ 38 (quotations omitted).
46
Id. ¶ 51.
47
Id. ¶ 52. There were apparently multiple inconsistencies regarding the new name in the Hackers’
communications, to boot. See id. at ¶¶ 52, 53, 55.
48
Id. ¶ 54.
49
Id. ¶ 57.

10
guarantee requirement and “finalize the documentation necessary to meet the closing

date under the Merger Agreement.” 50 CST provided a few options:

(a) Affix a Signature Medallion Guarantee to the Letter of
Transmittal with banking instructions; (b) provide a letter of
instruction from the authorized signatories provided in the Paying
Agent agreement that will instruct to process the account and accept
instructions without a Signature Medallion Guarantee. Note, the
hold harmless language attached would need to be included in the
instruction letter; (c) Modification of the payment schedule to
change the name of the Sorenson accounts to be “Hongkong
Wemakos Furniture Trading Co. LTD” as listed in the banking
instructions. We would look to receive new IRS forms and complete
tax reporting to this entity if this is completed; (d) Otherwise, we
would look to make payment as the shares are registered. 51

The “Defendants” allegedly chose option (c), modifying the “payment

schedule” (presumably Schedule A) to change the name on the Plaintiffs’ accounts

to “Hongkong Wemakos Furniture Trading Co., LTD.”52 In support of their

argument that the “Defendants” were subject to a “time crunch” resulting in anti-

contractual behavior, the Plaintiffs point out that the “Defendants” did not even

consult the Hackers before making the change to the payment schedule. 53 They

further contend that editing Schedule A constituted an amendment to the Merger

Agreement itself, which was invalid.54

50
Id. ¶ 59. I note that the closing date identified in the Merger Agreement (February 17, 2020)
had already passed by the time CST raised this as an issue; the Merger Agreement also provided
for a later closing date within two business days of satisfaction of applicable conditions. See MA
§ 2.2.
51
Compl. ¶ 60.
52
Id. ¶ 67.
53
Id.
54
See id. ¶ 63; see also MA § 13.9.

11
 In summary, no medallion guarantee was procured and no instruction letter

was provided. Despite the instructions attached to the LOT, CST acquiesced and

did not require further assurances once the payment schedule was updated to match

the fraudulent LOT. 55 The Merger consideration due to the Plaintiffs was transferred

to the Hackers’ account on or around February 25, 2020. 56 To date, the funds have

not been recovered.57

B. Procedural History

The original complaint in this case was filed on May 11, 2021, with the

amended Complaint filed shortly after in June 2021. 58 The Defendants moved to

dismiss in two separate motions on July 27, 2021.59 CST filed a sworn declaration

by its President in support of its motion to dismiss. 60

I heard oral argument with respect to both motions to dismiss on December 9,

2021, and considered the matter fully submitted at that time. 61

55
See Compl. ¶ 69.
56
Id.
57
Id.
58
See Pls. Sorenson Impact Foundation and James Lee Sorenson Family Foundation’s Verified
Compl. for Breach of Merger Agreement and Related Contracts, Dkt. No. 1; see also Compl.
59
See Defs. Tassel Parent, Inc. and Graduation Alliance Inc.’s Mot. to Dismiss Verified Compl,
Dkt. No. 14; Def. Continental Stock Transfer & Trust Co.’s Mot. to Dismiss, Dkt. No. 15.
60
Decl. of Steven G. Nelson Pursuant to 10 Del. C. § 3927 Supp. Continental Stock Transfer &
Trust Company’s Mot. to Dismiss, Dkt. No. 16 [hereinafter “Nelson Decl.”].
61
See Oral Arg.

12
 II. ANALYSIS

The movants in the instant action raise differing bases for dismissal of the

claims against them. CST raises lack of personal jurisdiction under Rule 12(b)(2)

and failure to state a claim under Rule 12(b)(6). 62 The Company Defendants raise

failure to state a claim under Rule 12(b)(6) as well as failure to name an

indispensable party under Rule 12(b)(7). 63 CST “adopts and incorporates by

reference” the Company Defendants’ arguments under Rule 12(b)(7) per their

opening brief. 64

A. Personal Jurisdiction Over CST

CST raises as a predicate issue whether this court has personal jurisdiction

over it under Rule 12(b)(2). “Plaintiffs have the burden to make out a prima facie

case establishing jurisdiction over a non-resident.” 65 In considering a motion to

dismiss under Rule 12(b)(2), I am not restricted to considering merely the allegations

contained in the Complaint,66 and I may consider “extra-pleading material,” such as

affidavits and briefs, to make my ultimate determination.67

62
See generally CST OB.
63
See generally Company Def. OB.
64
CST OB 5 n.6.
65
Crescent/Mach I Partners, L.P. v. Turner, 846 A.2d 963, 974 (Del. Ch. 2000) (citing Hart
Holding Co. v. Drexel Burnham Lambert Inc., 593 A.2d 535, 539 (Del. Ch. 1991)).
66
Hart Holding Co., 593 A.2d at 538–39.
67
Crescent, 846 A.2d at 974.

13
 To establish jurisdiction over CST, the Plaintiffs must have pled specific facts

rather than relying on “conclusory assertions,” but the record is still construed in the

light most favorable to the Plaintiffs.68

The Plaintiffs have, in their answering brief, identified two avenues via which

they claim this Court has jurisdiction over CST: (1) they contend CST is bound by

the forum selection clauses contained in the Merger Agreement and LOT; and (2)

they contend CST is subject to the Court’s jurisdiction under Delaware’s long-arm

statute.69

If, per avenue (1), CST has consented to jurisdiction via contract, no due

process analysis is required, and the party is treated as if it has expressly consented

to personal jurisdiction. 70 If, per avenue (2), personal jurisdiction is predicated on a

Delaware statute, then the Court must also conduct a constitutional due process

analysis by applying the minimum contacts test. 71

68
Mobile Diagnostic Grp. Holdings, LLC v. Suer, 972 A.2d 799, 802 (Del. Ch. 2009) (citing Sprint
Nextel Corp. v. iPCS, Inc., 2008 WL 2737409, at *5 (Del. Ch. July 14, 2008)).
69
Pls.’ Answering Br. Opp’n Defs.’ Mots. to Dismiss Verified Am. Compl. 30–38, Dkt. No. 23
[hereinafter “AB”].
70
See Neurvana Med., LLC v. Balt USA, LLC, 2019 WL 4464268, at *3 (Del. Ch. Sept. 18, 2019).
71
See Hazout v. Tsang Mun Ting, 134 A.3d 274, 278 (Del. 2016).

14
 1. Personal Jurisdiction by Contract72

The Plaintiffs assert that CST is bound by the forum selection clauses in either

the Merger Agreement or the LOT, which require litigation in Delaware. However,

CST is not a party to the Merger Agreement, and is not a signatory to the LOT.

The Plaintiffs respond that the forum selection clauses in the Merger

Agreement and LOT can be imputed into the PAA, to which CST is a party, because

the PAA attaches the LOT as an exhibit.73 The LOT in turn attaches the Merger

Agreement as an exhibit. 74

This argument is unconvincing with respect to the Merger Agreement for at

least two reasons. First, as mentioned above, CST is not a party to the Merger

Agreement, and the parties have not identified any language in the PAA that

specifically “incorporate[s] by reference” the terms of the Merger Agreement

(though the Plaintiffs have argued that the Merger Agreement is, in fact,

incorporated by reference into the PAA). 75 Second, the PAA contains a provision

72
Importantly, my assessment, below, of contracts associated with the Merger is limited to a
discussion of whether personal jurisdiction exists over CST here. I make no finding as to whether
CST has some, or any, contractual duties arising from the Merger Agreement, the PAA, or the
LOT. I similarly make no finding as to whether CST has any fiduciary duties arising from its role
as paying agent, as enshrined in contract. Again, this assessment deals solely with the predicate
question of whether or not it is appropriate to subject CST to this Court’s jurisdiction.
73
See PAA, at Ex. A.
74
LOT, at Ex. A.
75
Town of Cheswold v. Cent. Del. Bus. Park, 188 A.3d 810, at 818–19 (Del. 2018) (internal
quotations omitted) (“Other documents or agreements can be incorporated by reference where a
contract is executed which refers to another instrument and makes the conditions of such other
instrument a part of it . . . . But . . . to incorporate one document into another, an explicit
manifestation of intent is required.”); see also AB 30. A fact also of some import is that, while the

15
expressly denying that CST is bound by any of the provisions of the Merger

Agreement:

Parent acknowledges that the Paying Agent is not a party to the
Merger Agreement and as such is assumed to be wholly unfamiliar
with, and not bound by, the terms contained therein. The rights and
obligations of the Paying Agent shall be governed solely by the
provisions of this [Paying Agent] Agreement. 76

Thus, the Merger Agreement’s forum selection clause cannot subject CST to

personal jurisdiction in Delaware.

This argument is also unsuccessful with respect to the LOT for similar

reasons. The LOT is only executed by the “Securityholder” per its terms and CST

is thus not a “party” thereto.77 Similarly to the Merger Agreement, the PAA does

not contain an “explicit manifestation of intent” to incorporate the LOT by reference

(though the Plaintiffs argue that it is in fact incorporated). 78 And finally, the LOT

itself does not actually constitute a contract. 79 Without more, I cannot find that CST

Merger Agreement was ultimately attached to the PAA, it was an exhibit to an exhibit (and the
question of whether CST saw the full gambit of exhibits prior to closing would almost certainly
be a disputed issue; the CST declaration indicates that they did in fact not see the Merger
Agreement before this litigation began). See Nelson Decl. ¶ 4; see also PAA, Ex. A, at Ex. A.
76
PAA § 1.3 (emphasis added).
77
See generally LOT. I do note that Section 11 of the LOT, which includes the forum selection
clause, references the term “Party”; however, such term is apparently undefined. See id. at 4–5;
see generally LOT. Moreover, introductory language prefacing the numbered paragraphs reads:
“In connection with the surrender of the above-described certificates, the Securityholder agrees as
follows:”, indicating that the following provisions bind purely the holder surrendering its shares.
See id. at 4 (emphasis added).
78
See generally PAA; Town of Cheswold, 188 A.3d at 818–19.
79
See, e.g., Cigna Health & Life Ins. Co. v. Audax Health Sols., Inc., 107 A.3d 1082, 1088–91
(Del. Ch. 2014) (determining that the letter of transmittal lacked consideration and therefore was
not an enforceable contract); Roam-Tel Partners v. AT&T Mobility Wireless Operations Holdings
Inc., 2010 WL 5276991, at *6 (Del. Ch. Dec. 17, 2010) (finding, in the context of appraisal, that

16
has consented to personal jurisdiction in Delaware by dint of contractual

arrangement. It is not dispositive, but is worthy of note, that CST is a New York

domiciliary and, with respect to the one contractual document to which it is

indisputably bound, the PAA, did not submit to Delaware jurisdiction but apparently

bargained for the application of New York law.80

2. Personal Jurisdiction by Statute

The Plaintiffs also argue that Delaware’s long-arm statute provides for

jurisdiction over CST. 81 If so, they will also need to show that CST has sufficient

minimum contacts with Delaware such that maintaining jurisdiction over CST here

would not offend due process. 82

Delaware’s long-arm statute (the “Long-Arm Statute”) allows a Delaware

court to exercise personal jurisdiction over any nonresident, or a personal

representative, who in person or through an agent “[t]ransacts any business or

performs any character of work or service in the State.”83

The Plaintiffs identify this subsection of the Long-Arm Statute as the basis for

personal jurisdiction, arguing that the PAA required CST to effectuate the Merger

between two Delaware companies in part by collecting stock certificates

there was no consideration for a stockholder’s “alleged promise to accept the merger
consideration,” and therefore no valid contract was formed).
80
See supra note 40 and accompanying text.
81
10 Del. C. § 3104; see also AB 35.
82
Neurvana, 2019 WL 4464268, at *2 (citations omitted).
83
10 Del. C. § 3104(c)(1).

17
(metaphysically based in Delaware) for the purpose of cancelling them.84 They

allege that, because cancelling stock certificates requires the filing of a Certificate

of Amendment with the Delaware Secretary of State, CST transacted business in

Delaware for purposes of the Long-Arm Statute.85 The Complaint does not

specifically aver that CST actually filed a Certificate of Amendment, however. 86 In

response, CST’s President has filed a declaration stating that every action CST took

in connection with the Merger occurred within the State of New York, including the

payment of funds and communications relating to the payments.87 That same

declaration verified that CST has never entered into any contract requiring it to act

in Delaware, including selling products, transacting business, or performing “any

other services” in Delaware. 88

At this stage, I am required to draw all inferences in favor of the Plaintiffs.89

Caselaw supports the theory that, if CST indeed sent a Certificate of Amendment to

be filed in Delaware, they would have “directly transacted business in Delaware for

purposes of Section 3104(c)(1).”90 The CST declaration—which I am permitted to

84
AB 37; see also PAA § 2.7.
85
AB 37.
86
See generally Compl.
87
Nelson Decl. ¶ 6.
88
Id. ¶ 9.
89
Sample v. Morgan, 935 A.2d 1046, 1056 (Del. Ch. 2007) (citation omitted).
90
See, e.g., id. at 1057 (citing Benihana of Tokyo, Inc. v. Benihana, Inc., 2005 WL 583828, at *6,
*8 (Del. Ch. Feb. 4, 2005); then citing Gibralt Cap. Corp. v. Smith, 2001 WL 647837, at *6 (Del.
Ch. May 9, 2001)); Hartsel v. Vanguard Grp., Inc., 2011 WL 2421003 (Del. Ch. June 15, 2011)

18
consider given the procedural posture of this motion 91—suggests no such filing was

made, though it does not precisely aver that CST did not make a filing with

Delaware.92 I need not directly resolve this issue, though, for I find in any event that

minimum contacts do not exist here so as to make exercise of personal jurisdiction

over CST appropriate.

Ohrstrom v. Harris Trust Company of New York is instructive. 93 This Court

of Chancery case dealt with an almost identical question of personal jurisdiction—

whether Delaware had personal jurisdiction that ought to extend over the Harris

Trust Company of New York, a New York corporation acting as a transfer agent,

exchange agent and stock registrar for two Delaware corporations.94 In that case,

due to certain bookkeeping difficulties, Harris Trust registered certain previously

issued shares, causing a share over-issue of 10,954 surplus shares, then cancelled

approximately 4,600 shares to remedy the over-issuance.95 The plaintiffs in

Ohrstrom argued that Harris Trust was really acting as the alter ego of a Delaware

(“Plaintiffs do not assert, however, that any Individual Defendant took any tangible action in
Delaware, such as . . . filing or helping to file any document in the State . . . .”).
91
Crescent, 846 A.2d at 974.
92
See id. (citing Hart Holding Co., 593 A.2d at 539) (“All allegations of fact concerning personal
jurisdiction are presumed true, unless contradicted by affidavit.”)
93
Ohrstrom v. Harris Tr. Co., 1998 WL 8849 (Del. Ch. Jan. 8, 1998).
94
Id. at *1. Harris Trust worked in different capacities for the two different Delaware entities. See
id.
95
Id.

19
corporation, and therefore the Long-Arm Statute ought to reach Harris Trust (and

due process would not be offended by its doing so). 96

The Court disagreed. 97 It declined to find that Harris Trust was the “alter ego”

of any Delaware corporation, citing the “unalterable fact” that Harris Trust

transferred and registered shares from its New York offices, and that therefore it did

not conduct business in Delaware. 98 The Court further opined that, even if the Long-

Arm Statute were satisfied, the plaintiffs’ arguments for due process would have

failed, as Harris Trust had never had “continuous and systematic general business

contacts with Delaware,” and Delaware had no especial interest in adjudicating a

dispute between the plaintiffs and the transfer agent, as it was “merely a commercial

dispute.”99 Further, Harris Trust had not purposely “availed itself” of the laws of

Delaware by entering a contract to perform transfer agent duties for a Delaware

corporation.100 The only connection between Harris Trust and Delaware was the

fact that the pertinent corporations were incorporated in Delaware. 101

96
Id. at *2.
97
Id.
98
Id. at *3. In support, the opinion also cites the fact that Harris Trust had no place of business in
Delaware, no telephone number in Delaware, no post office box or mailing address in Delaware,
and no agent for service of process in Delaware. See id. CST’s declaration avers the same, except
that it does not disavow having an agent for service of process in Delaware. See generally Nelson
Decl.
99
Ohrstrom, 1998 WL 8849, at *5 (internal quotations omitted).
100
See id.
101
Id.

20
 Much of this analysis is on point here. CST has submitted evidence that it

conducted all of its activities as paying agent from its offices in New York, and that

the contract retaining its services selected New York as its governing law and

directed notice to CST in New York. 102 Furthermore, CST has indicated that it does

not maintain any facility, property, or separate business in Delaware, has not held

any physical meetings of its board of directors or shareholders in Delaware, has not

entered into any contract requiring it to perform services in Delaware, and has never

had any telephone number, mailing address or bank account in Delaware.103 To the

extent there is any connection between CST and Delaware, it is due to its contract

with Parent, a Delaware corporation. This, as in Ohrstrom, is insufficient to confer

personal jurisdiction over CST, as it fails to establish business connections between

the agent and the State of Delaware. 104 The nature of the contract, being a

commonplace commercial contract, embodying New York law, bolsters this

conclusion, as the action does not seek to vindicate Delaware-specific law.105

102
See Nelson Decl. ¶¶ 6–7.
103
See id. ¶¶ 8–10.
104
See Ohrstrom, 1998 WL 8849, at *5; see also Hartsel, 2011 WL 2421003, at *14 (finding that
due process would have been offended had personal jurisdiction been exercised over the
defendants under similar circumstances).
105
See Ohrstrom, 1998 WL 8849, at *5; see also BAM Int’l, LLC v. MSBA Grp. Inc., 2021 WL
5905878, at *10 (Del. Ch. Dec. 14, 2021).

21
 CST’s motion to dismiss for lack of personal jurisdiction should be granted.

Because I so find, I do not reach the question of whether the Plaintiffs have stated a

viable claim against CST.

B. The Company Defendants’ 12(b)(6) Argument

The standard applicable to a Rule 12(b)(6) motion for failure to state a claim

is as follows: (1) all well-pled factual allegations are accepted as true; (2) even vague

allegations are well-pled if they put the opposing party on notice of the claim; (3) the

Court draws all reasonable inferences in favor of the non-moving party; and

(4) dismissal is only appropriate where the Plaintiffs are not entitled to recover under

“any reasonably conceivable set of circumstances susceptible of proof.”106

1. Breach of Contract Theory

This amended Complaint pushes the Court to the limits of the leniency

inherent in the modern doctrine of notice pleading. The Plaintiffs have pled in their

first cause of action in the Complaint a breach of contract theory against Parent.

Certain paragraphs of this count have been reproduced below:

72. The Merger Agreement, its associated and/or incorporated
agreements, forms and instructions, and Plaintiffs’ Written Consent
and Agreement of Stockholders are valid and enforceable contracts.
...
75. Instruction 4(a) of the Letter of Transmittal, which was
promulgated pursuant to Section 3.3(i) of the Merger Agreement,
required Tassel Parent and its agents to obtain a Medallion
Guarantee before wiring Merger consideration to a name different
than that on the relevant stock certificates.
...

106
In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d 162, 168 (Del. 2006) (citations omitted).

22
 77. Tassel Parent’s agents H&K and Continental willfully failed to
comply with the unambiguous terms of the [LOT], and transferred
Plaintiffs’ share of the Merger consideration to the Hackers’
Chinese account without obtaining a Medallion Guarantee. 107

As mentioned briefly above, the LOT is not a contract. The LOT represents,

pertinently, a procedural device for assigning payment, by CST to stockholders.

Parent was not a signatory or party to the LOT. Parent’s duties are defined in the

Merger Agreement negotiated with Target, by the Paying Agent Agreement, and by

Section 251 of the Delaware General Corporation Law.108 Delaware caselaw

supports the finding that the LOT itself is not an enforceable contract; the Court of

Chancery addressed this issue squarely109 in Cigna Health and Life Insurance

Company v. Audax Health Solutions, Inc. in 2014.110 Cigna argued that there was a

lack of consideration affiliated with the applicable letter of transmittal, and therefore

the basic elements of an enforceable contract (offer, acceptance, consideration) were

not satisfied.111 Cigna’s theory was that payment of the merger consideration was a

“pre-existing duty” that did not stem from the letter of transmittal, but was a statutory

107
See Compl. ¶¶ 72, 75, 77 (emphasis added).
108
I note that the Plaintiffs have not asserted a statutory claim under Section 251. 8 Del C. § 251.
109
I note that the issue in Cigna was whether the LOT imposed contractual duties on its signatory
stockholders; here, the issue is whether the LOT imposes rights on the stockholders, and duties
upon the non-signatory Parent. See generally 107 A.3d 1082 (Del. Ch. 2014).
110
See id.
111
Id. at 1088.

23
right under Section 251 following the consummation of the merger.112 The Court

agreed.113

Cigna relied on Roam-Tel Partners v. AT&T Mobility Wireless Operations

Holdings Inc., a 2010 Chancery case which similarly held that in the context of an

appraisal, a stockholder’s return of a letter of transmittal did not constitute a binding

and enforceable contract because of a lack of consideration.114

The Plaintiffs have pled that the “Merger Agreement, its associated and/or

incorporated agreements, forms and instructions,” which presumably encompasses

the LOT, were valid and enforceable contracts, 115 but I am not required to accept

this, as the statement is a legal conclusion rather than a recitation of fact. 116 Given

that there is no consideration associated with the LOT, unless its terms were adopted

in a separate agreement, it did not create duties enforceable in contract. In any event,

the Plaintiffs have failed to explain how the LOT bound Parent. It is of course true

that a contract can incorporate the terms of a non-contractual document, though as

discussed above, finding that such incorporation has occurred requires an explicit

manifestation of intent.117 But Parent is not charged in the Complaint with breach

112
Id. at 1088–89.
113
Id. at 1091.
114
2010 WL 5276991, at *6 (Del. Ch. Dec. 17, 2010).
115
Compl. ¶ 72 (emphasis added).
116
And in the remainder of this discussion, I make no finding as to whether the LOT, the Merger
Agreement, and the PAA are or are not incorporated into one another, or any variation on that fact
pattern.
117
See supra notes 75–78 and accompanying text.

24
of the PAA. 118 As the quoted portion of the Complaint, above, makes clear, the

Plaintiffs allege that Parent is liable for breach of the LOT by its agents, H&K and

CST.119 But vicarious liability does not attach for a non-tortious breach of contract,

as I explain below. The Plaintiffs’ arguments are predicated on the assumption that

Parent must be responsible for CST’s acts under an agency law theory, and that

CST’s acts breached the LOT. Although they fail to make the argument explicit in

the Complaint, the Plaintiffs in briefing and argument attempt to allege that Parent’s

agents breached other contractual provisions as well, including provisions in the

PAA. 120 However, assuming—which I do for purposes of this analysis—that an

agency relationship existed between principal Parent, agent CST, and non-party

H&K, the theory of vicarious liability in Delaware caselaw does not extend to breach

of contract. 121 This issue was addressed in Wenske v. Blue Bell Creameries, Inc., in

which the Court of Chancery found that “Delaware law recognizes no theory under

which a principal can be vicariously liable for its agent’s non-tortious breach of

contract.”122 The Wenske court, providing additional clarification on its finding

118
Compl. ¶¶ 70–79.
119
Id. ¶ 77.
120
AB 24–26; see also Oral Arg., 71:3–15 (stating that CST was required, under the PAA, to
ensure the medallion guarantee was complied with).
121
2018 WL 3337531, at *16 (Del. Ch. July 6, 2018).
122
Id. at *16, *16 n.132 (collecting cites). The Wenske opinion collected cites based on civil
conspiracy and ultimately summarized its finding as follows: “[t]hat is, if ‘[c]ivil conspiracy
[liability] is vicarious liability,’ . . . and a non-tortious ‘breach of contract . . . can[not] give rise to
a civil conspiracy claim,’ . . . it follows that a non-tortious breach of contract cannot give rise to
vicarious liability.” Id. at n.132 (citing Albert v. Alex. Brown Mgmt. Servs., Inc., 2005 WL

25
following a motion for reargument, pointed to the Restatement (Third) of Agency as

support for the proposition that “a principal may be liable for torts committed by an

agent . . . where the agent’s tortious conduct is undertaken pursuant to the agency

relationship.”123 That section of the Restatement does not posit contractual liability

befitting the scenario at hand, however, and “Delaware follows the Restatement of

Agency.”124

The Plaintiffs’ contract claims against Parent for its agents’ breach of the LOT

(or the PAA) fail.125 My analysis does not end there, however.

The Merger Agreement imposes duties on Parent, and it is reasonably

conceivable that it also provides rights to the Plaintiffs (as third-party beneficiaries)

here. The Plaintiffs’ “First Cause of Action (Breach of Contact—against Tassel

Parent)” recites generally that the Merger Agreement entitles Parent to receive the

2130607, at *11 (Del. Ch. Aug. 26, 2005); then citing NACCO Indus., Inc. v. Applica Inc., 997
A.2d 1, 35 (Del. Ch. 2009); and then citing Kuroda v. SPJS Holdings, L.L.C., 971 A.2d 872, 892
(Del. Ch. 2009)). In a later opinion addressing a motion for reargument, the Wenske court clarified
that its discussion of civil conspiracy liability was predicated on the fact that civil conspiracy
liability is a species of vicarious liability and was therefore instructive with respect to the broader
genus of vicarious liability. See Wenske v. Blue Bell Creameries, Inc., 2018 WL 5994971, at *3
n.26 (Del. Ch. Nov. 13, 2018). At least one Delaware Superior Court opinion has followed the
Wenske court’s holding. See B&B Fin. Servs., LLC v. RFGV Festivals, LLC, 2019 WL 5849770,
at *3 (Del. Super. Ct. Nov. 7, 2019).
123
Wenske v. Blue Bell Creameries, Inc., 2018 WL 5994971 (citing RESTATEMENT (THIRD) OF
AGENCY § 7.03 (2006)).
124
Wenske, 2018 WL 5994971, at *4 n.32 (citing Pisano v. Del. Solid Waste Auth., 2006 WL
3457686, at *9 (Del. Ch. Nov. 30, 2006)) (internal quotations omitted).
125
Notably, the Plaintiffs did plead a tort claim against CST, though they chose not to plead a
vicarious liability claim against Parent, CST’s principal, associated with the tort. The Complaint
fails to allege that Parent is liable by reason of CST’s negligence via the doctrine of vicarious
liability.

26
Plaintiffs’ stock (and note) “in exchange for payment as set forth in the Merger

Agreement,” 126 and further that the Plaintiffs had complied with the conditions

precedent in order to receive Merger consideration, and became “automatically

entitled to receive their pro rata portion of the Merger consideration . . . pursuant to

Section 3.3(i) of the Merger Agreement . . . .” 127

That Section of the Merger Agreement includes a provision explaining the

conditions precedent for consideration to be paid, to which the Plaintiffs cite in

averring that they have met those conditions precedent.128 Once that happens, under

Section 3.3(i), the stockholder is “entitled” to receive the Merger consideration.129

The Section goes on to explain the duties of Parent thereafter: to pay the sum due to

each such compliant stockholder to the Paying Agent. 130 Per the Complaint, it

appears that both the Plaintiffs’ conditions precedent to payment and Parent’s

payment obligation were completed. 131 Read holistically, is it reasonably

conceivable that the Merger Agreement imposes an obligation on Parent to do more

than make a payment to its agent, that is, to ensure payment to the “entitled”

stockholders and noteholders? The language can be read that way, so the answer at

the pleading stage is “yes.”

126
Compl. ¶ 71.
127
Id. ¶ 73 (emphasis added).
128
See MA § 3.3(i).
129
Id.
130
See id. (emphasis added).
131
See Compl. ¶¶ 35–36.

27
 The more difficult question remains: in light of the Plaintiffs’ pleading, basing

liability of Parent specifically (and unsuccessfully) on a vicarious breach of the LOT,

have the Plaintiffs nonetheless generally stated a breach of contract claim against

Parent for breach of the Merger Agreement? Delaware is a notice pleading

jurisdiction, and our Supreme Court has instructed that, in the particular context of

pleading a breach of contract case, a plaintiff can make out a sufficient claim “if [the

complaint] contains ‘a short and plain statement of the claim showing that the

pleader is entitled to relief.’”132 Specific facts need not be pled in order to make out

an “actionable claim,” and assessment of the stated claim should be “liberally

construed” so long as the defendant has “fair notice” of the claim. 133 Upon review

of the entire Complaint, as well as the language of the first cause of action, referring

generally to breach of all pertinent agreements and specifically citing Section 3.3(i)

of the Merger Agreement, I find that the Complaint gives sufficient notice to Parent

that it is being sued for failure to pay over the Merger consideration due the Plaintiffs

in violation of the Merger Agreement.134 Accordingly, Parent’s motion to dismiss

the first cause of action for breach of contract is denied.

132
VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 611 (Del. 2003) (citation omitted).
133
See id.; see also In re Infousa, Inc., 2007 WL 3325921, at *26 (Del. Ch. Aug. 13, 2007) (“Rule
8(a) does not demand, however, that plaintiffs present a paragon of the well-organized
complaint.”).
134
See Wood v. Rodeway Inn, 2015 WL 994855, at *2 (Del. Super. Ct. Mar. 4, 2015) (“Although
the sparseness of Plaintiffs’ pleading is readily apparent, their Complaint, barely, meets
Delaware’s notice pleading standard.”).

28
 2. Unjust Enrichment Theory

The Plaintiffs have pled an unjust enrichment claim against the Company

Defendants. 135 Unjust enrichment occurs where there is an “unjust retention of a

benefit to the loss of another, or the retention of money or property of another against

the fundamental principles of justice or equity and good conscience.”136

The elements of an unjust enrichment claim are as follows: “(1) an

enrichment, (2) an impoverishment, (3) a relation between the enrichment and

impoverishment, (4) the absence of justification, and (5) the absence of a remedy

provided by law.”137

It is difficult to see how Parent can have liability apart from breach of

contract here. However, mindful of the alternative nature of the claims, I repeat

my recent holding in Lockton v. Rogers, bow under the weight of precedent, and

decline to dismiss the unjust enrichment claim against the Company Defendants at

this time. 138

Accordingly, the Company Defendants’ motion to dismiss is denied, and the

equitable claim is left for consideration on a record.

135
See Compl. ¶¶ 80–86. This claim is pled in the alternative to the first cause of action, the breach
of contract claim against Parent, but this claim is also levied against Graduation Alliance. See id.
136
Nemec v. Shrader, 2009 WL 1204346, at *6 (Del. Ch. Apr. 30, 2009), aff’d, 991 A.2d 1120
(Del. 2010) (citation omitted).
137
Nemec v. Shrader, 991 A.2d 1120, 1130 (Del. 2010).
138
See Lockton v. Rogers, 2022 WL 604011, at *16–17 (Del. Ch. Mar. 1, 2022).

29
 C. The Company Defendants’ 12(b)(7) Argument

The Company Defendants have moved to dismiss for failure to join H&K,

allegedly a necessary party here. I expect that, having dismissed CST on

jurisdictional grounds, this argument should be supplemented regarding CST before

consideration. Accordingly, consideration of this issue is continued.

III. CONCLUSION

I have found above that the Complaint does not prima facie prove personal

jurisdiction over CST; CST’s motion to dismiss is accordingly GRANTED. The

Company Defendants’ motion to dismiss is DENIED IN PART and CONTINUED

IN PART. The parties should provide an appropriate form of order.

30
EXHIBIT A