Jonathan Govette v. Electronic Referral Manager, Inc. ( 2021 )

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
JONATHAN GOVETTE, )
)
Plaintiff, )
)
v. ) C.A. No. 2019-0139-SG
)
ELECTRONIC REFERRAL )
MANAGER, INC., DAVID )
BONGIOVANI, RICK HAMMER, AND )
JOSEPH MACALUSO, )
)
Defendants. )
MEMORANDUM OPINION
Date Submitted: January 26, 2021
Date Decided: June 7, 2021
Jonathan Govette, Pro Se.
Paul Brown, of CHIPMAN BROWN CICERO & COLE, LLP, Wilmington,
Delaware; OF COUNSEL: Hank Burgoyne, of BURGOYNE LAW GROUP, San
Francisco, California, Attorneys for Defendants.
GLASSCOCK, Vice Chancellor
In Delaware, the right to proceed pro se in criminal matters is constitutional.1
I can find no corresponding constitutional or statutory right regarding civil self-
representation. However, competent natural persons in Delaware have a right to
self-represent in civil matters as well. 2 This right is protected by our common law,
apparently as adjunct to a right of access to justice; 3 the right extends to equitable
proceedings. Pro se litigation appears to be a relatively modern phenomenon in
Chancery, however; most of the early cases I reviewed involved court appointed
receivers and the like appearing pro se, and not independent parties.4 The first
example I can locate involving a corporate dispute with a true pro se litigant was the
1957 case In re North European Oil Corporation. 5
1
Del. Const. Art. I §7 (1897).
2
See, e. g., Green v. Cty. Council, 508 A.2d 882 (Del. Ch. 1986) (describing right to proceed pro
se in Chancery, without identifying the source of the right); Pullin v. Davis, 2016 WL 4679246 at
*1 (Del. Ch. Sept. 7, 2016) (same). Non-natural juridical persons—trusts, corporations, etc.—
have limited or no right to representation by an agent pro se. See, e.g., Weber v. Kirchner, 2003
WL 23190392, at *1 (Del. Ch. Dec. 31, 2003) (citing Transpolymer Indus., Inc. v. Chapel Mail
Corp., 582 A.2d 936 (Del. 1990)).
3
This conflation of access with self-representation is interestingly criticized by Rabeea Assy in
Revisiting the Right to Self-Representation in Civil Proceedings, Oxford Student Legal Research
Paper Series 2/2012.
4
E.g., Veeder v. Public Service Holding Co. 51 A2d. 321 (Del. Ch. 1947).
5
129 A.2d 259 (Del. Ch. 1957). The pro se party there contended with such giants of the Delaware
bar as Alexander Nichols and Edmund Carpenter. See generally id. There were undoubtedly many
other pro se cases in the jurisdiction of the Orphans Court, later assumed by Chancery.
1
Whatever its contribution to access to justice, pro se litigation in this Court
tends to impose extra costs on society and the other litigants, 6 and decreases the
opportunity for success of the self-represented litigant as well. In my experience at
least, pro se cases of a particular nature are on the rise in this Court: cases involving
corporate and entity law that also appear to involve self-representation by choice,
rather than circumstance.7 I cite a few such cases from my docket in recent years
illustrative of one or both criteria, below.8 Such cases themselves are counter to the
preconception of a feisty but poor pro se litigant gamely standing up for her rights.
Delaware judges traditionally (and naturally) treat self-represented
individuals with some degree of latitude when it comes to procedure in order to do
6
Assy, supra note 3, at 19 (quoting Drew A. Swank, In Defense of Rules and Roles: The Need to
Curb Extreme Forms of Pro Se Assistance and Accommodation in Litigation 54 Am. U. L. Rev.
1537, 1547 n.3 (2005)).
7
The Plaintiff in this corporate dispute, I note, is proceeding in forma pauperis.
8
See, e.g., Wollard v. Yoder & Sons Constr., LLC, 2021 WL 141984 (Del. Ch. Jan. 15, 2021);
Villette v. MondoBrain, Inc., 2020 WL 7706961 (Del. Ch. Dec. 29, 2020); Stimwave Techs. Inc. v.
Perryman, 2020 WL 6735700 (Del. Ch. Nov. 17, 2020) (dismissing certain pro se individual
defendants, who later elected to file a separate action); In re Swisher Hygiene, Inc., 2020 WL
5268067 (Del. Ch. Sept. 4, 2020); Zachman v. Real Time Cloud Services, LLC, 2020 WL 1522840(Del. Ch. March 31, 2020); Henlopen Landing Homeowners Ass’n, Inc. v. Vester, 2019 WL
3484254 (Del. Ch. Aug. 1, 2019); Pullin v. Davis, 2016 WL 4679246 (Del. Ch. Sept. 7, 2016);
Lechliter v. Delaware Dep’t of Nat. Res., 2016 WL 878121 (Del. Ch. Mar. 8, 2016); Greenspan v.
News Corp., 2016 WL 279944 (Del Ch. Jan. 22, 2016); Alfred v. Walt Disney Co., 2015 WL
177434 (Del. Ch. Jan. 14, 2015); GMF ELCM Fund L.P. v. ELCM HCRE GP LLC., 2019 WL
3713844 (Del. Ch. Aug. 7, 2019); c.f. Benjamin Lord’s Br. in Supp. of Cross-Mot. to Allow, GMF
ELCM Fund L.P. v. ELCM HCRE GP LLC, C.A. No. 2018-0840, Dkt. No. 386 (March 4, 2021);
see also Durham v. Grapetree, LLC, 246 A.3d 566 (Del. 2021); Special Master’s Report, Durham
v. Grapetree, LLC, C.A. No. 2019-0366-SG, Dkt. No. 68 (Jan. 19, 2021); Durham v. Grapetree,
LLC, 2021 WL 82338 (Del. Ch. Jan. 11, 2021); Durham v. Grapetree, LLC, 2020 WL 5960941(Del. Ch. Oct. 8, 2020), aff’d, 246 A.3d 566 (Del. 2021); Durham v. Grapetree, LLC, 2014 WL
3565980 (Del. Ch. July 21, 2014); Durham v. Grapetree, LLC, 2013 WL 3817465 (Del. Ch. July
23, 2013).
2
justice on the merits.9 Conversely, we also encounter situations when the cost of a
party’s pro se status begins to be imposed on the party opponent in a material way.
When such a party opponent to a pro se litigant seeks relief, a balancing of these
interests results, within the judge’s discretion. Such balances are often described by
jurists in terms of allowing a “certain leeway” for the pro se, 10 but not a “blank
check” for failure to comply with rules and procedures; 11 language that is no doubt
descriptive of the process but unhelpful as a template. One such situation is before
me here.
This matter involves the Defendants’ Motion to Dismiss the Second Amended
Verified Complaint. The Plaintiff has been at times represented by counsel in this
litigation, which involves a contested issuance of equity in a Delaware corporation.
The Plaintiff is now pro se. The Motion to Dismiss turns in part on failure to
properly prosecute this action. For the reasons that follow, the Motion is denied.
9
See, e.g., Sloan v. Segal, 2008 WL 81513, at *7 (Del. Ch. Jan. 3, 2008) (“An analysis of the
leniency granted to pro se litigants in other situations suggests that Delaware courts, at their
discretion, look to the underlying substance of a pro se litigant’s filings rather than rejecting filings
for formal defects and hold those pro se filings to ‘a somewhat less stringent technical standard’
than those drafted by lawyers.” (citations omitted)).
10
Beck v. Greim, 2016 WL 3962053, at *2 (Del. Ch. July 22, 2016) (quoting Taglialatela v. Galvin,
2016 WL 3752185, at * 3 (Del. Ch. July. 8, 2016)).
11
See, e.g., Sloan v. Segal, 2008 WL 81513, at *7 (quoting Quereguan v. New Castle Cnty., 2006
WL 2925411, at *4 (Del. Ch. 2006)).
3
I. BACKGROUND 12
The Plaintiff founded Electronic Referral Manager, Inc. (“ERM” or the
“Company”) in 2011 as the sole director and Chief Executive Officer (“CEO”), an
arrangement that continued until 2018.13 In 2012, the Plaintiff and ERM executed a
Common Stock Purchase Agreement. 14 Pursuant to the Agreement, the Company,
acting through the Plaintiff, purported to sell the Plaintiff 5,000,000 of the
Company’s 10,000,000 authorized shares (the “Contested Shares”) in exchange for
$20,000.15 In connection with the Agreement, the Plaintiff also executed and
conveyed to the Company an “Acknowledgment of Cancellation of Indebtedness,”
by which he purported to cancel $20,000 of debt owed to him by the Company as
payment for the Contested Shares.16 As sole director, he also executed a written
consent on behalf of the Company permitting payment in the above described
manner and filed a notice pursuant to California law reporting the transaction.17 The
12
Unless otherwise noted, the facts in this Background section are drawn from the Plaintiff’s
Second Amended Verified Complaint (the “Operative Complaint”) for context and do not
constitute factual findings by the Court. See generally Second Am. Verified Compl. for Summ.
Proceeding, Dkt. No. 30 [hereinafter Second Am. Compl.].
13
See id. ¶¶ 10, 17. He was also ERM’s sole employee. Id. ¶¶ 11.
14
Id. ¶ 14.
15
Id.
16
Id. ¶¶ 13, 16. It is unclear what the Plaintiff alleges that he actually paid for the shares. He has
asserted at various times that he paid cash, deposited a check, deferred compensation, and/or
cancelled a debt owed to him by ERM in exchange. See, e.g., id. Part of the challenge in recreating
the Plaintiff’s contributions to ERM is caused by the Plaintiff’s alleged practice of paying the
Company’s expenses through a bank account that he also used for his consulting business. See,
e.g., id. ¶ 12.
17
See id. ¶¶ 13, 19.
4
Plaintiff also submits that he paid for his shares in other ways—by working without
a salary or via a combination of several deposits into the Company’s accounts and
purchases made on its behalf. 18 In previous pleadings, the Plaintiff alleged other
potential methods of payment, including a $25,000 check from his uncle.19
Regardless of how they were paid for, the Plaintiff’s purported ownership of the
Contested Shares went unchallenged until August 2018, when defendants
Bongiovanni and Hammer joined the board.20 Within the month, the Plaintiff,
allegedly under pressure from Bongiovanni and Hammer, resigned as CEO 21 and
was purportedly removed from the Company’s board of directors.22 Bongiovanni
and Hammer, now acting as the sole board members, also voted to rescind the Stock
Purchase Agreement and cancel the Plaintiff’s shares. 23 The Plaintiff initiated this
action under 8 Del. C. §§ 205 and 225 to confirm his ownership of the Contested
Shares and invalidate his removal from the board of directors.
The Plaintiff filed his first complaint on February 21, 2019. 24 The Defendants
answered this “Initial Complaint” on March 20, 2019.25 I granted the parties’
18
See generally, e.g., Pl.’s Ltr. Answer, Dkt. No. 45 (although the Plaintiff labeled this filing an
“Answer,” I treat it as a brief in opposition to the Defendants’ Motion to Dismiss the Second
Amended Complaint).
19
See First Am. Compl. ¶ 13, Dkt. No. 24.
20
Second Am. Compl. ¶ 25.
21
Id. ¶ 26–27.
22
Id. ¶ 33. He was ultimately fired as well. Id. ¶ 35.
23
Id. ¶ 30.
24
Verified Compl. for Summ. Proceeding, Dkt No. 1.
25
Defs.’ First Answer, Dkt. No. 12.
5
stipulated status quo order on March 21, 2019, which required advance notice to the
Plaintiff and this Court before the Defendants take or cause the Company to take any
“material action out of the ordinary course of business.”26
The Plaintiff amended the Initial Complaint on July 31, 2019 (the “First
Amended Complaint”). 27 The Defendants answered on August 21, 2019. 28 The
Plaintiff amended his complaint a second time on September 16, 2019 but neglected
to include the required verification.29 Shortly after filing the Second Amended
Verified Complaint (the “Operative Complaint”), Plaintiff’s Counsel moved to
withdraw representation, citing irreconcilable differences.30 At a teleconference on
Plaintiff’s Counsel’s Motion, the Court instructed Plaintiff’s Counsel to advise the
Plaintiff of upcoming court deadlines. 31 On October 24, 2019, Counsel docketed a
letter to the Plaintiff informing him that a letter explaining why the Status Quo Order
should be maintained was due to the Court by October 31.32 By this time, the
Director Defendants had also moved to dismiss or strike the Operative Complaint.33
26
Status Quo Order ¶ 2, Dkt. No. 14.
27
First Am. Compl., Dkt. No. 24.
28
Defs.’ Second Answer, Dkt. No. 29.
29
See Second Am. Compl., Dkt. No 30 (missing verification).
30
See Mot. to Withdraw, Dkt. No. 32.
31
Judicial Action Form, Dkt. No. 37.
32
See Ltr. to Jonathan Govette, Dkt. No. 36.
33
See Mot. to Dismiss, Dkt. No. 33.
6
The Court, through Plaintiff’s Counsel’s letter, also requested a response to the
Motion to Dismiss by November 13, 2019. 34
The Plaintiff submitted a letter on October 29, 2019 that indicated he would
continue to litigate this matter on his own behalf. 35 The letter requested that the
Status Quo Order remain in place “to protect the company against [Bongiovanni]
selling it to the lowest bidder, or his friends,” but did not noticeably respond to the
Motion to Dismiss. 36 After the Court granted Plaintiff’s Counsel’s Motion to
Withdraw, the Plaintiff was granted leave to proceed in forma pauperis.37 The
Plaintiff did not respond further to the Motion to Dismiss by the due date, November
13. The Defendants submitted a Reply in further support of their Motion to Dismiss
on December 12, 2019.38 Because it was not readily apparent that the Plaintiff’s
letter of October 29, 2019 opposed the Motion to Dismiss, and in consideration of
the Plaintiff’s newly pro se status, I granted the Plaintiff an extension until February
28, 2020 to submit a response. 39 The Plaintiff responded on February 27, 2020.40
In lieu of oral argument on the outstanding motion, I requested the parties facilitate
a decision on a paper record by providing supplemental submissions as to what
34
See Ltr. to Jonathan Govette, Dkt. No. 36.
35
See Ltr. from Jonathan Govette, Dkt. No. 38.
36
See id. 8. The letter also offered new factual allegations, particularly against defendant
Bongiovanni, that I do not address further here.
37
See Order on Appl. to Proceed In Forma Pauperis, Dkt. No. 41.
38
Defs.’ Reply Br., Dkt. No. 42.
39
See Ltr. to Mr. Govette, Dkt. No. 44.
40
See Pl.’s Ltr. Answer, Dkt. No. 45.
7
issues remained to be decided. 41 The Defendants timely submitted their letter on
October 12, 2020.42 Although I had instructed the Plaintiff, via teleconference, that
he would have one week to respond to the Defendants’ submission, he did not
respond until November 2, 2020.43
In my Letter Opinion of December 8, 2020, I granted the Defendants’ Motion
to Strike the Plaintiff’s Second Amended Verified Complaint and instructed the
Plaintiff to file a properly verified pleading with the Court by December 22, 2020,
at which time I would consider the Motion to Dismiss submitted. 44 The Plaintiff
timely submitted the requested verification on December 17, 2020. 45 I requested by
email that the Defendants file any response by January 22, 2021, which they did on
January 21, 2021. 46 I accordingly consider the Motion to Dismiss and the request to
vacate the Status Quo Order fully submitted as of January 21, 2021 on the record as
it existed on October 27, 2020. 47
41
See Judicial Action Form, Dkt. No. 54.
42
See Ltr. from Paul D. Brown, Dkt. No. 55.
43
See Faxed Ltr. from Jonathan Govette, Dkt. No. 58. Although the Plaintiff’s letter wasn’t posted
to the docket until November 9, it had previously been emailed to the Court on November 2. The
Defendants requested that I reject the Plaintiff’s letter as untimely and noncompliant. See Ltr.
from Paul D. Brown Responding to Pl.’s Nov. 2, 2020 Submission to the Court, Dkt. No. 57.
44
Ltr. Op., Dkt. No. 60.
45
See Verification to Second Am. Compl., Dkt. No. 61.
46
See Ltr. to the Honorable Sam Glasscock, III from Paul D. Brown, Esquire, Dkt. No. 62.
47
In my previous Letter Opinion, I noted that the Plaintiff’s filings of November 2 and November
12, 2020 were untimely and would not be considered further. Ltr. Op. 3, Dkt. No. 60.
8
II. ANALYSIS
A. The Motion to Dismiss
The Defendants have moved to dismiss the Plaintiff’s Second Amended
Complaint under a combination of Court of Chancery Rules 3(aa) and 41(b). Under
Rule 41(b), a defendant may move for dismissal “[f]or failure of the plaintiff to
prosecute or to comply with these Rules or any order of court.”48 Rule 3(aa) requires
that “[a]ll complaints . . . and any amendments thereto, shall be verified by each of
the parties filing such pleading.” 49 Thus, “if a plaintiff fails to comply with Rule
3(aa), Rule 41(b) permits the defendant to move for dismissal of the action.”50
Dismissal on this basis is considered a “harsh sanction” and is proper “when a party
knowingly misleads a court of equity in order to secure an unfair tactical
advantage.”51 At the pleading stage, such a dismissal is particularly rare. 52
As grounds for the Motion, the Defendants point to purportedly false
allegations in the Plaintiff’s prior pleadings and the Plaintiff’s failure to follow Court
rules. They submit that the Plaintiff, in his Initial Complaint, falsely alleged that
48
Ct. Ch. R. 41(b).
49
Ct. Ch. R. 3(aa).
50
Bessenyei v. Vermillion, Inc., 2012 WL 5830214, at *2 (Del. Ch. Nov. 16, 2012) (quoting Parfi
Holdings AB v. Mirror Image Internet, Inc., 954 A.2d 911, 932–33 (Del. Ch. 2008)), aff’d, 67 A.3d
1022 (Del. 2013).
51
Parfi Holdings AB v. Mirror Image Internet, Inc., 954 A.2d 911 (Del. Ch.2008); see also Gross
v. Biogen Inc., 2021 WL 1399282, at *5 (Del. Ch. Apr. 14, 2021).
52
See, e.g., Charter Commc’ns Operating, LLC v. Optymyze, LLC, 2021 WL 1811627, at *24
(Del. Ch. Jan. 4, 2021).
9
they coerced him into naming them to the Board in August 2018. Per the
Defendants, the Plaintiff, acknowledging the weakness and falsity of the Initial
Complaint, then withdrew it in favor of the First Amended Complaint, which
contained additional false allegations. The First Amended Complaint attached
documents purporting to be “two slightly different versions of minutes” of a July 18,
2012 meeting of ERM’s board of directors at which the Plaintiff allegedly approved
his own purchase of the Contested Shares on the Company’s behalf (the “July 18
Minutes”). 53 The Defendants submitted an expert report contending that the July 18
Minutes had been falsified. 54 They deem the Plaintiff’s choice to amend the First
Amended Complaint—removing the July 18 Minutes—“yet another tacit admission
of falsity.” 55 They also note that the Operative Complaint did not comply with rule
3(aa) because it was not verified when filed. In subsequent letter submissions, the
Defendants also aver that this case “has not been prosecuted in a summary fashion—
in part due to multiple iterations of [the Plaintiff’s] complaint and the eventual
withdrawal of his counsel.”56 They profess that they “have been forced to parry an
ever-morphing complaint”57 and urge me to find that the Plaintiff’s “ever-shifting
53
See First Am. Compl. ¶ 13.
54
See Defs.’ Opening Br., Ex. B 4–5. The report concluded that the July 18 Minutes may have
been falsified. Id. The Defendants also cite the Plaintiff’s deposition, in which the Plaintiff could
not say whether he prepared them before, during, or after the alleged meeting. See Defs.’ Opening
Br. 15–16.
55
Defs.’ Opening Br. 11.
56
See Ltr. re Court’s Ltr. of August 28, 2020 at 1, Dkt. No. 53.
57
Ltr. re Pending Mot., Dkt. No. 43.
10
theories and allegations . . . lack veracity or are suspicious enough to warrant
discretionary dismissal under the combination of Court of Chancery Rules 3(aa) and
41(b).”58
The Plaintiff’s responses to the Motion, which are confusingly spread out over
multiple letter submissions, describe his service to the Company, the many ways he
paid for his shares, and how he was forced out by the Defendants, including
numerous factual allegations that do not appear in the Operative Complaint.59 These
submissions are not always obviously responsive to the outstanding Motion to
Dismiss. I can, however, state with certainty that the Plaintiff opposes the Motion
and requests that the Status Quo Order remain in place.
To support their Motion, the Defendants cite Bessenyei v. Vermillion, Inc.60
In Bessenyei, Vice Chancellor Noble granted a motion to dismiss based on Court of
Chancery Rules 3(aa) and 41(b), after finding that verifications to multiple filings in
the case were improperly notarized. 61 Three separate verifications (to the initial
complaint, the amended complaint, and a response to interrogatories) had been
notarized in Pennsylvania despite discovery revealing that one of the plaintiffs had
58
Ltr. re Issues to Resolve on Paper Record 3, Dkt. No. 55.
59
E.g., Ltr. from Jonathan Govette, Dkt No. 38. The Defendants, I note, respond to the Plaintiff’s
additional arguments with their own contentions as to his purported mismanagement of the
Company. I do not consider either parties’ conduct outside of this litigation to be properly before
me for purposes of this Motion to Dismiss. Accordingly, I do not address those arguments here.
60
2012 WL 5830214 (Del. Ch. Nov. 16, 2012).
61
See generally id.11
not been in the United States on those dates. 62 Under Pennsylvania law, “[the
plaintiff’s] failure to appear before [the notary] at the time the notarizations took
place render[ed] the notarizations invalid.” 63 The Vice Chancellor found that the
verifications were thus invalid for purposes of Rule 3(aa) and, further, that the failure
to have the documents properly notarized was “not incidental or technical,” and
dismissed the case under Rule 41(b). 64
The Defendants argue that Bessenyei supports dismissal here; I disagree.
First, the Defendants ask me to find that the Plaintiff knowingly included false
allegations in the Original Complaint because board minutes cited by the Defendants
in their answer (1) were approved by the Plaintiff without mention of the alleged
coercion and (2) show that the meeting at which they were appointed occurred in
March, rather than August. The Plaintiff has not further contested the Defendants’
proffered alternative date for the meeting, but such an inaccuracy could easily have
been an oversight. More importantly, I do not perceive, and the Defendants do not
argue, that the Plaintiff gained any tactical advantage from his lack of precision. I
also think it unlikely that coercion of a board member, if successful, would appear
in the meeting minutes. Its absence is, therefore, unremarkable. In any event, these
allegations do not appear in the Operative Complaint.
62
Id. at *1–*2.
63
Id. at *4.
64
Id. at *9.
12
The Defendants next take issue with the First Amended Complaint. Although
the allegations complained of above were absent from this pleading, they were
replaced by allegations relying on the July 18 Minutes which did not appear in the
Initial Complaint. 65 An expert report attached to the Defendants’ Opening Brief
contends that, despite the July 18 Minutes being dated to 2012, their meta-data
suggested they had been created no earlier than 2017. 66 The Defendants also cite
the Plaintiff’s deposition, in which the Plaintiff could not say whether he prepared
the July 18 Minutes before, during, or after the alleged meeting. 67 The Defendants
submit that these “circumstances all but conclusively establish [the July 18 Minutes]
to have been fabricated by Plaintiff for purposes of misleading the Court.” 68 This
serious charge I am unable to evaluate on this record. As with the coercion
allegations in the Initial Complaint, these allegations regarding minutes are absent
from the now-Operative Complaint. As the Defendants note, this cuts both ways:
the Defendants must aim at an ever-moving target.
As to the Operative Complaint, the Defendants primarily take issue with the
absence of verification. 69 As discussed above, I permitted the Plaintiff to correct his
defective pleading by submitting the required verification. The Defendants have not
65
See First Am. Compl. ¶ 13.
66
See, e.g., Opening Br. 15; Opening Br., Ex. B 4–5.
67
Opening Br. 15–16.
68
Opening Br. 16.
69
Opening Br. 18–19; Ltr. re Remaining Issues 3, Dkt. No. 55.
13
argued that the verification filed in response is invalid. Again, however, the lax
method by which the Plaintiff has grudgingly obeyed our Rules is not cost free to
the Defendants or, for that matter, the Court. I nonetheless treat the Operative
Complaint as verified. Other than verification, the Defendants reiterate their
overarching argument that the “ever-shifting” and “false and/or unreliable
allegations” of the pleadings are grounds for dismissal of the Operative Complaint. 70
Other cases applying 41(b), including Bessenyei and Parfi, on which
Bessenyei relies, involved developed factual records that revealed either calculated
tactical maneuvers, patent falsehoods, or, in one case, witness tampering. 71 In
Bessenyei, there were three separate invalid notarizations and the Court also noted
that “the requirement that the person whose signature is to be notarized personally
appeared before the notary is both clear and readily accessible to anyone who
undertakes any sort of effort to find out;”72 and that the plaintiff whose signature was
improperly notarized appeared to have been aware of the problem.73 Here, the
Defendants argue that the Plaintiff’s allegations in previous pleadings that are no
longer operative were false.
70
Ltr. re Remaining Issues 3.
71
See Stone & Paper Invs., LLC v. Blanch, 2019 WL 2374005, at *9–10 (Del. Ch. May 31, 2019)
(collecting cases).
72
Bessenyei v. Vermillion, Inc., 2012 WL 5830214 at *8.
73
Id. at *8–9.
14
If the Defendants are correct that the Plaintiff knowingly submitted falsified
corporate records to this Court, that conduct would violate the oath requirement of
Rule 3(aa). I am unable to make such a finding on the limited record before me,
however. I note as well that the allegations the Defendants assert are false, including
those referencing the purportedly falsified July 18 Minutes, are absent from the
Operative Complaint and will therefore not be at issue as the litigation moves
forward. Relatedly, parties are generally permitted to amend their pleadings. While
there may be a lack of reliability and consistency in the Plaintiff’s pleadings in
general, and absent a finding of perjury unavailable on this record, I do not conclude
that the two amendments in this case so clearly demonstrate misconduct or tactical
maneuvering that dismissal is compelled.
The Defendants’ remaining argument for dismissal is based on the Plaintiff’s
repeated failure to meet court-ordered deadlines, as outlined above. This is, I note a
summary matter; a statutory cheetah proceeding at a pace that would not tax a sloth.
If well prosecuted, it could and should have been resolved expeditiously. But I am
not convinced that the harshest of sanctions is warranted; the Plaintiff here is without
counsel and has also made efforts to correct his procedural mistakes. In the letter
accompanying the verification to the Operative Complaint, the Plaintiff apologized
for his failure to verify the amended pleading, which was submitted as his then-
15
Counsel was in the process of withdrawing representation.74 He also apologized for
his tardiness in opposing the Motion to Dismiss over a year prior, which he contends
was due to him not being aware of the deadline. 75
It is not, to my mind, obvious that the Plaintiff has attempted to manipulate
this Court to secure a tactical advantage76 or otherwise “undercut[] the integrity of
the judicial process.”77 And whatever his intent, I do not discern that the Defendants
have suffered the kind of harm that warrants dismissal. Accordingly, I decline to
dismiss on these grounds. I do so, however, without prejudice to the Defendants’
right to renew the motion in the event the Plaintiff fails to prosecute or an appropriate
evidentiary proceeding reveals that the Plaintiff falsified documents or otherwise
engaged in severe misconduct to achieve an advantage in this litigation.
B. The Status Quo Order
The Defendants have also asked that I lift the Status Quo Order, which
prevents the Company from taking any “material action out of the ordinary course
of business,” without prior notice to the Plaintiff and to the Court. 78
74
See Ltr. Response to Ltr. Op. 1, Dkt. No. 61.
75
See id.76
Especially considering that, since becoming pro se, the Plaintiff appears to have never filed a
motion or served a discovery request.
77
Bessenyei v. Vermillion, Inc., 2012 WL 5830214 at *8.
78
Status Quo Order ¶ 2, Dkt. No 14.
16
“Once [a] status quo order is in place, the party seeking modification bears
the burden of showing why it should be modified.” 79 “In deciding whether to modify
or vacate a status quo order, it is proper for the court to assess whether the facts or
circumstances justifying the initial restraint have changed.”80 In particular, I must
here evaluate whether the balance of the equities has changed due to the dilatory and
procedurally deficient actions of the Plaintiff.
This is a two-and-a-half-year-old summary proceeding involving a nine-year-
old stock purchase agreement. The Status Quo Order was granted early in the
litigation, in the interest of preserving the Court’s ability to summarily and promptly
resolve the questions of stock ownership and the proper composition of the
Company’s board of directors. That intent has proved naive. Although I decline to
revisit my finding that the Plaintiff has adequately alleged irreparable harm if he
prevails on his claim that his removal from the board was ultra vires, two-odd years
later, the balance of the equities may well be different. The Defendants contend that
the Status Quo Order “has created a cloud over the effective and efficient operation
of the Company.”81 Nonetheless, because I mean to move this matter forward with
alacrity, and because, frankly, the Defendants’ rationale for lifting the order is based
79
R&R Capital LLC v. Merritt, 2013 WL 1008593, at *8 (Del. Ch. Mar. 13, 2013) (citing Conn.
Gen. Life Ins. Co. v. Pinkas, 2010 WL 4925832, at *2 (Del. Ch. Nov. 18, 2010)).
80
Germaninvestments AG v. Allomet Corp., 2019 WL 2236844, at *10 (Del. Ch. May 23, 2019),
aff’d in part, rev’d in part on other grounds and remanded, 225 A.3d 316 (Del. 2020).
81
Ltr. re Pending Mot., Dkt. No. 43.
17
on the passage of time rather than concrete hardship, I will leave the status quo order
in place. Again, this is without prejudice to any party’s motion, should
circumstances change.
III. CONCLUSION
The Defendants Motion to Dismiss the Second Amended Complaint is denied
without prejudice. My decision here should not be read to convey satisfaction with
the pace or trajectory of this litigation. The Plaintiff must comply with Court rules
going forward. The parties should submit suggested orders governing the
preparation of this matter for trial or case dispositive motions, consistent with its
summary nature, by June 15; I will impose an Order, including a trial date, thereafter.
An appropriate Order implementing this Memorandum Opinion is attached.
18
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
JONATHAN GOVETTE, )
)
Plaintiff, )
)
v. ) C.A. No. 2019-0139-SG
)
ELECTRONIC REFERRAL )
MANAGER, INC., DAVID )
BONGIOVANI, RICK HAMMER, AND )
JOSEPH MACALUSO, )
)
Defendants. )
ORDER
For the reasons stated in the accompanying Memorandum Opinion, IT IS
HEREBY ORDERED, this 7th day of June, 2021
1. The Motion to Dismiss is DENIED.
IT IS SO ORDERED.
/s/ Sam Glasscock III
Vice Chancellor