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Douglas Chrystall, Individually and Derivatively On Behalf of Serden v. Serden Tecnnologies

December 15, 2011

DOUGLAS CHRYSTALL, INDIVIDUALLY AND DERIVATIVELY ON BEHALF OF SERDEN TECHNOLOGIES, INC., PLAINTIFF
v.
SERDEN TECNNOLOGIES, INC., MARC DUTHOIT, AVITIS SAS, AND PERSYSTENT TECHNOLOGY CORPORATION, DEFENDANTS



The opinion of the court was delivered by: William C. Turnoff, U.S. Magistrate Judge

OMNIBUS ORDER DENYING DEFENDANTS' MOTIONS TO DISMISS COMPLAINT AND GRANTING PLAINTIFF'S MOTION FOR LEAVE TO AMEND

THIS MATTER is before me on Defendant Serden Technologies, Inc. and Marc Duthoit's Motion to Dismiss Complaint (ECF No. 20), Defendant Avitis S.A.S.'s Motion to Dismiss Count VI (ECF No. 40), and Plaintiff's Motion for Leave to File Amended Complaint (ECF No. 57). For the reasons provided in this Order, Defendant Serden Technologies, Inc. and Marc Duthoit's Motion is denied, Defendant Avitis SAS's Motion is granted, and Plaintiff's Motion is granted.

I. BACKGROUND

These facts are taken from the Plaintiff's Complaint (ECF No. 1). Plaintiff Douglas Chrystall ("Chrystall"), a Massachusetts resident, is a four-percent shareholder of Serden Technologies, Inc. ("Serden"). Serden, a Delaware corporation with its principal place of business in Florida, develops business-solutions computer software. Serden's primary asset and major source of revenue was its InterAct software, related software codes, and associated licensing fees. On June 6, 2008, Serden and Avitis SAS ("Avitis"), a French corporation, entered into a distribution agreement (the "Distribution Agreement" or the "Agreement"), through which Avitis became a distributor of the InterAct software within the European, Middle Eastern, and African markets.

The business relationship deteriorated, and, on January 15, 2010, Avitis sued Serden for breach of the Distribution Agreement, along with other claims. See Avitis SAS v. Serden Techs., Inc., et al.,No. 10-cv-60062-ASG (S.D. Fla.)). In or about February 2010, Avitis, Serden, and Duthoit settled the civil litigation. The Settlement Agreement contained provisions for, among other things, a technology transfer that resulted in both Serden and Avitis gaining equal rights to use the code to the InterAct software; a perpetual, irrevocable license granted to Avitis to use InterAct and the related object and source codes; and mutual releases by and between Serden, Avitis, and Duthoit. The Settlement Agreement provided that each party represented to the other that it had the corporate and legal authority to enter into the Settlement Agreement. For reasons unapparent from the pleadings, Avitis and Serden subsequently accused each other of violating the Settlement Agreement and agreed to modify it and accelerate its performance.

Chrystall claims that neither the Settlement Agreement nor the modification were put to a vote by Serden's board of directors nor presented to Serden's shareholders for approval. He claims that Duthoit profited at Serden's and its shareholders' expense by using Serden's principal assets as consideration to obtain a release from the claim against him in his individual capacity. Chrystall alleges that, as a result of the Settlement Agreement, his stock in Serden has been severely diluted, and that, after writing to counsel for Serden and Duthoit to inform them of Duthoit's improper conduct with respect to the Settlement Agreement and modification, neither Serden nor Duthoit took any remedial action.

On December 15, 2010, Persystent Technology Corporation ("Persystent"), a Delaware corporation with its principal place of business in Florida, submitted a Letter of Intent ("LOI") to Serden proposing to acquire Serden's remaining assets (the "Acquisition"). The potential Acquisition consisted of an asset purchase of Serden's customer and prospect list; all of Serden's intellectual property; customer contracts; and any other assets identified during Persystent's due diligence of Serden. Pursuant to the LOI, Serden represented and warranted that it had all corporate and legal authority to enter into the LOI and to consummate the Acquisition.

Chrystall alleges that Persystent offered Duthoit continued employment with Persystent as part of the Acquisition. Chrystall claims that Duthoit failed to deal fairly when he agreed to enter into the Acquisition, that Duthoit did not receive adequate consideration for entering into the Acquisition, and that, as a result, Duthoit breached his fiduciary duty to Serden and its shareholders.

On February 22, 2011, Chrystall filed a nine-count Verified Complaint against Serden, Duthoit, Avitis, and Persystent. Counts I through VI pertain to the deal with Avitis. Count I through IV, each brought derivatively on behalf of Serden, assert the following claims against Duthoit: (i) breach of fiduciary duty; (ii) violation of Del. Code Ann. tit. 8, § 271(a) (2010); (iii) mismanagement; and (iv) corporate waste. Count V, brought individually against Duthoit, accuses Duthoit of breach of fiduciary duty. Count VI seeks declaratory judgment pursuant to 28 U.S.C. §§ 2201, 2202 (2006), on what Chrystall labels the "Avitis claim." Chrystall does not clarify whether he brings this claim derivatively or individually. Counts VII-IX pertain to the deal with Persystent. Count VII through VIII, brought derivatively on behalf of Serden, assert the following claims against Duthoit: (i) breach of fiduciary duty; and (ii) corporate waste. Count IX seeks injunctive relief on what Chrystall labels the "Persystent claim." Chrystall does not clarify whether he brings this claim derivatively or individually. Chrystall seeks declaratory judgment, damages, injunctive relief, cost of the action, and attorney's fees. Defendants move to dismiss these claims for lack of subject matter and personal jurisdiction, for failure to state a claim upon which relief can be granted, and because Chrystall is not qualified to serve as a representative of Serden.

On April 15, 2011, Defendants Duthoit and Serden filed a Motion to Dismiss raising jurisdictional and sufficiency grounds. (ECF No. 20). On May 9, 2011, Defendant Avitis filed a Motion to Dismiss on jurisdictional and sufficiency grounds. (ECF No. 40). On July 14, 2011, Chrystall filed a Motion for Leave to Amend (ECF No. 57), to add new facts to his Complaint. Because I will grant Plaintiff's motion for leave to amend his complaint, and the amendment may alter this Court's analysis of the Complaint's sufficiency, I will not consider any arguments pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure at this stage so as to conserve judicial resources. I will address only Defendants' jurisdictional claims because Plaintiff's proposed amendment will not affect this Court's jurisdictional analysis.

II. LEGAL STANDARDS

A.Fed. R. Civ. P. 12(b)(1)

A district court is powerless to hear a matter where subject matter jurisdiction is lacking.

Bochese v. Town of Ponce Inlet, 405 F.3d 964, 974-75 (11th Cir. 2005) (citing Univ. of S. Ala. v. Am. Tobacco Co., 168 F.3d 405, 410 (11th Cir. 1999)). A plaintiff bears the burden of establishing subject matter jurisdiction. Sweet Pea Marine, Ltd. v. APJ Marine, Inc., 411 F.3d 1242, 1248 n.2 (11th Cir. 2005). A defendant bringing a motion to dismiss under Rule 12(b)(1) of the Federal Rules of Civil Procedure may assert a "facial attack" to jurisdiction whereupon the court will look to the complaint to determine whether the plaintiff has sufficiently alleged subject matter jurisdiction. Lawrence v. Dumbar, 919 F.2d 1525, 1529 (11th Cir. 1990). "On a facial attack, a plaintiff is afforded safeguards similar to those provided in opposing a Rule 12(b)(6) motion-the court must consider the allegations of the complaint to be true." Id. at 1529. A defendant may also bring a "factual ...


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