IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
ALLAN WAGAMON, et al.,
Petitioners,
v.
DAVID B. DOLAN, et al.,
Respondents.
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C. A. No. 5594-MG (Consolidated)
MASTER’S FINAL REPORT
(Motion to Dismiss)
Date Submitted: October 19, 2010
Draft Report Issued: January 26, 2011
Final Report Issued: February 17, 2011
Kashif I. Chowdhry, Esquire, of Parkowski Guerke & Swayze, P.A., Dover, Delaware;
Attorneys for Plaintiffs.
Davis B. Dolan, pro se, Defendant.
GLASSCOCK, Master
This consolidated matter concerns the winding-up of InterNetworking
Technologies, Inc. (“INT”), a joint venture corporation owned by David B. Dolan and
Allan Wagamon. Wagamon filed a complaint seeking dissolution of the corporation
under 8 Del. C. § 273. In a separate action, Dolan filed a complaint and an amended
complaint, seeking various remedies relating to INT. Those matters were consolidated
under this Civil Action. Wagamon has moved to dismiss the Dolan complaint; this is my
report on the Motion to Dismiss.
Facts
The following facts (except as noted ) are alleged in the Dolan complaint. Dolan
began the business now known as INT in 1995. In 1996, Wagamon joined Dolan as a
partner in the business, and INT was incorporated. Each partner owns 50% of the
corporation, which provided computer infrastructure management, networking and
repair.1 In 2008, Dolan was convicted of felony offenses and sentenced to 17 years
imprisonment. Following Dolan’s incarceration, Wagamon started a new business,
Wagamon Technology Group, LLC (“WTG”). Wagamon has diverted assets of INT to
WTG. William Kreig, an accountant for INT, has assisted Wagamon in this transfer of
assets and in producing a valuation of INT which severely understates its actual value,
which Wagamon has used as a basis to attempt to buy out Dolan’s interest.
1
W agamon complaint, at ¶¶ 3, 4.
2
Based upon these allegations, Dolan seeks declaratory judgment that the actions of
Wagamon and Kreig (the “Wagamon defendants”) are unlawful; injunctive relief barring
the dissolution of INT; compensatory and punitive damages; and the appointment of a
receiver to wind up the affairs of INT. The defendants seek dismissal2 of Dolan’s
complaint3 under Rule 12.
Standard
The standard for a motion to dismiss under Rule 12 (b)(6) is well known. I must
accept the well-pled factual allegations of the complaint, together with any reasonable
inferences therefrom, as true. Only where it appears that the plaintiff cannot prevail as a
matter of law, based upon those facts and inferences, is the movant entitled to a dismissal.
Chancery Court Rules, Rule 12 (b)(6); see, e.g., Carmody v. Toll Bros., Inc. Del. Ch., 723
A.2d. 1180, 1184 (1998).
2
The defendants named in the Dolan complaint (W agamon, Kreig and W TG) have moved collectively to
dismiss for failure to state a claim. The primary allegations of the complaint are against W agamon. Therefore, I
have considered the complaint to see if Dolan has pled a claim generally; and I have not considered whether the
complaint states a cause of action against Kreig or W TG, individually.
3
Dolan filed a request to amend the complaint, and before that request was acted upon, the motion to
dismiss the complaint was filed by Wagamon. Dolan then sought leave to file a second amended complaint. For the
sake of efficiency, given my decision here, I grant the request to file the second amended complaint, and I have
addressed the allegations of that complaint with regard to the motion to dismiss.
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Discussion
A. The Constitutional Claims.
Dolan seeks a declaratory judgment that the actions of Wagamon, Kreig and WTG
“have denied Dolan his Constitutional rights to due process of law guaranteed in
Amendments V, XIV [of the United States Constitution].” The complaint fails to allege
any state action, however. Dolan’s allegations are limited to actions of Wagamon and
Kreig as private citizens. Accordingly, Dolan’s claims based on denial of due process
must be dismissed. E.g., Swanson v. Wesley College, Inc., Del. Super., 402 A.2d 401,
403 (1979).
Dolan also alleges that Wagamon’s actions have deprived him of rights under
Section 10 of Article IV of the Delaware Constitution of 1897. That section simply
provides for the composition and jurisdiction of this Court; it does not provide an
independent cause of action. Accordingly, Dolan’s claims under the Delaware
Constitution must be dismissed.
B. Dolan’s Claims Under Title 8 of the Delaware Code.
Dolan’s complaint states that the actions of Wagamon “have violated the laws of
the State of Delaware-inclusive of but not limited to:” numerous Delaware statutes.4
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Dolan alleges the violation of the following sections of the Delaware Code, Chapter 8, Section 101;
Chapter 8, Section 144; Chapter 8, Section 151(a), (b)(2), (c), (d), (e); Chapter 8, Section 170(a); Chapter 8, Section
203; Chapter 8, Section 212(a), (c); Chapter 8, Section 216; Chapter 8, Section 220(b); Chapter 8, Section 226(a)(1),
(2), (3); Chapter 8, Section 251(a); Chapter 8, Section 254; Chapter 8, Section 266(a), (b); Chapter 8, Section 271(a);
Chapter 8, Section 273(a); Chapter 8, Section 275(a), (b), (c); Chapter 8, Section 282(a), (b), (c); Chapter 8, Section
325(a). Dolan’s complaint at ¶27.
4
Dolan is proceeding pro se in this matter. Nevertheless, he is bound to follow the
pleading requirements of this Court, which require “a short and plain statement of the
claim showing that the pleader is entitled to relief.” Court of Chancery Rules, Rule 8(a).
Here, Dolan has simply recited numerous sections of the Delaware General Corporation
Law without attempting to describe how the actions of the Wagamon defendants have
violated these code sections and given rise to a cause of action on behalf of Dolan.
Dolan’s complaint in this regard is purely conclusory. Moreover, Dolan has declined to
attempt to clarify these claims in briefing on this motion. Therefore, Dolan’s conclusory
statutory claims must be denied, without prejudice. See, MicroStrategy, Inc. v. Acacia
Research Corp., Del. Ch., No.5735, Parsons, V.C. (December 30, 2010)(Mem. Op.) at 3.
That must not end my analysis, however. I turn to the substantive factual allegations of
Dolan’s complaint to see whether he has stated a claim for injunctive relief or for
compensatory damages.5
C. Dolan’s allegations of conversion and breach of duty.
Dolan’s substantive allegations are that Wagamon has not permitted him to
participate in the business of INT since his incarceration; that he has not received his
share of corporate distributions since his incarceration; that Wagamon and Kreig have
improperly valued INT and that Wagamon has offered to acquire Dolan’s share in INT
for an “unconscionable” price; and that Wagamon and Kreig have converted assets of
5
Dolan’s complaint also seeks punitive damages, but punitive damages are not available (absent specific
legislation to the contrary) in this Court. E.g., Adams v. Calvarese Arms Maintenance Corp., Del. Ch., No. 4262,
Parsons, V.C. (September 17, 2010)(Mem. Op.) at 21, n. 204 .
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INT to WTG and have encumbered INT with debt to reduce its value, rather than for a
proper purpose. Broadly, Dolan alleges that Wagamon and Kreig have failed in their
fiduciary duties to him and to INT.
Wagamon argues that these claims belong to INT, and not Dolan individually.
Because Dolan has not attempted to bring this action derivatively, on behalf of INT, these
claims, according to Wagamon, must be dismissed. In addition to being owners of INT,
however, Dolan and Wagamon are joint venturers. Joint venturers stand in a fiduciary
relationship to one another; and a breach of that duty constitutes an individual claim. In
re Arthur Treacher’s Fish & Chips of Ft. Lauderdale, Inc., Del. Ch., 386 A.2d 1162, 1167
(1978). The breach of duty claims are made in the context of a request by Wagamon to
dissolve INT. While Dolan’s complaint seeks to enjoin the dissolution of INT, it appears
that the injunction request is only addressed to dissolution under Wagamon’s proposed
plan. In fact, Dolan asks that a Master be appointed to wind-up the affairs of INT.
It is abundantly clear from the pleadings in this matter that INT was a joint
venture, that Dolan can no longer participate in the joint venture due to his incarceration,
that the cause of that incarceration has lead to an irreparable rupture of the business
relation between Dolan and Wagamon and that either stockholder is entitled to a
dissolution under 8 Del. C. § 273(a). Dolan’s allegations that Wagamon breached his
fiduciary obligations by undermining the value of INT, and by converting assets from it
to WTG, are factors that may be considered in the wind-up and distribution of the assets
of INT, as well as via Dolan’s free-standing complaint. See, In re Arthur Teacher’s, 386
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A.2d at 1167. Therefore, the Wagamon defendants’ request to dismiss the fiduciary and
conversion claims must be denied.
Conclusion
For the reasons stated above, Dolan’s constitutional claims are dismissed with
prejudice. His statutory claims are dismissed without prejudice. The motion to dismiss
that portion of the complaint stating a claim for conversion and breach of duty is denied.
The parties should inform me within 20 days what reasons exist, if any, indicating that the
Court should not appoint a trustee to gather the assets of INT and wind-up its affairs.
/s/ Sam Glasscock, III
Master in Chancery
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