Enzolytics, Inc. v. Empire Stock Transfer Inc. and Dimitar Savov ( 2023 )

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
ENZOLYTICS, INC., )
)
Plaintiff, )
)
v. )
) C.A. No. 2021-0612-NAC
EMPIRE STOCK TRANSFER INC., )
and DIMITAR SAVOV, )
)
Defendants. )
ORDER GRANTING IN PART DEFENDANT DIMITAR SAVOV’S
MOTION FOR JUDGMENT ON THE PLEADINGS
AND DISMISSING COUNT II AS MOOT
WHEREAS:
1. Plaintiff Enzolytics, Inc. (the “Company”) is a publicly traded
Delaware corporation. 1 At some point in 2018, the Company purportedly sold
unidentified assets to a nondescript third party under a contract (the “Contract”).
The Company has not produced the Contract, explained the circumstances of its
formation, or cited to any provisions in it.
1
The Company issues penny stocks that trade over the counter for less than $0.05 per share.
See ENZC, OTC Mkts. Gp., https://www.otcmarkets.com/stock/ENZC/overview; see
generally Hamilton P’rs, L.P. v. Englard, 11 A.3d 1180, 1189 n.3 (Del. Ch. 2010) (“I use
the term ‘penny stock’ colloquially to refer to a speculative security, typically trading on
the pink sheets . . . often for less than $3 per share . . . and for which little information is
available to investors. Penny stocks have long provided opportunities for the unscrupulous
to engage in fraud.”).
2. “In conjunction with” the Contract, the Company allegedly issued stock
to a Bulgarian resident, Defendant Dimitar Savov. Dkt. 20 ¶ 26. The Company does
not allege that Mr. Savov is a party to the Contract or describe his relationship to it.
3. As “consideration” for the stock issued to him “in conjunction with”
the Contract, Mr. Savov allegedly agreed to perform “incidental” tasks. Id. ¶ 31.
The stock issued to Mr. Savov allegedly could not be transferred unless he completed
the incidental tasks. Id. ¶ 30.
4. “Shortly after the consummation” of the Contract, Mr. Savov allegedly
failed to perform the incidental tasks. Id. Then he tried to transfer the stock. So the
Company sued him.
5. The Company brought this putative expedited action in July 2021. Its
original complaint attached a summons directing service on Mr. Savov “at [his]
address in accordance with the Hague Convention[.]” Dkt. 1. That instruction was
invalid, because Bulgaria does not accept service under the Hague Convention
unless the summons is translated to Bulgarian and processed through a central
authority. 2 Company counsel did not recognize the error until almost six months
later when he filed a “motion for alternate service of process by personal delivery”
that, if granted, would have violated the Hague Convention. See Dkt. 32–33, 38.
2
See Declaration/Reservation/Notification of Republic of Bulgaria, in Status Table, Hague
Conf. on Priv. Int’l L. (HCCH), https://www.hcch.net/en/instruments/conventions/status-
table/notifications/?csid=28&disp=resdn.
2
6. Before Mr. Savov received any service of process, the Company sought
to block his trades through three separate motions for an ex parte TRO. The first
motion was denied because the Company failed to establish jurisdiction to enjoin an
international party and did not allege an imminent trade. Dkt. 27 at 3:15–17. The
second motion, which was misfiled as a “motion for a protective order,” Dkt. 21,
was denied for multiple reasons, including that it was brought against Defendant
Empire Stock Transfer Inc., which lacked a property interest in the disputed stock,
Dkt. 27 at 4–6. And the third motion was withdrawn without explanation. Dkt. 41.
7. By the time it filed its second motion for an ex parte TRO, the Company
had amended its complaint. The Amended Complaint alleges four counts against Mr.
Savov: (i) “declaratory judgment and injunctive relief” (“Count I”); (ii) unjust
enrichment (“Count III”); (iii) tortious interference with contractual relations
(“Count IV”); and (iv) defamation (“Count V”). See Dkt. 20 ¶¶ 34–40, 52–80.
8. The Company also alleges a claim against Empire (“Count II”). Count
II requests an order enjoining Empire from executing a stock transfer “on the 31st
day after September 2, 2021.” Id. ¶ 44. Count II thus seeks injunctive relief from
action that occurred 1.5 years ago and which was denied in the second TRO motion.
9. It appears Mr. Savov was served with the Amended Complaint at some
point in early 2022. Mr. Savov answered the Amended Complaint and then moved
pro se to dismiss it under Rule 12(b)(6). Given that he filed an answer, the Court
3
construed his motion as a motion for judgment on the pleadings. At the Company’s
request, the Court entered a briefing schedule on the motion. See Dkt. 50.
10. Approximately two weeks after obtaining the briefing schedule it
requested, the Company filed an “emergency motion to stay briefing[.]” Dkt. 51.
The motion sounded in forum non conveniens and observed that Mr. Savov had
recently filed a lawsuit in federal court against a transfer agent. The Company thus
counterintuitively sought to freeze a preexisting case in which it had requested
expedition and filed three ex parte TRO motions to prevent what it believed to be
irreparably harmful trades on the ground that Mr. Savov sued someone else
somewhere else. The Court denied the motion, rebuffing the Company’s bid for
further delay. See Dkt. 55 (“This case was filed nearly a year ago . . . . It has
proceeded in fits and starts since then . . . . The court will not, however, allow . . .
briefing to linger while a separate, later-filed action is litigated in federal court.”).
11. The parties appeared electronically for oral argument on December 7,
2022. Before the hearing began, I was informed for the first time that Mr. Savov
does not speak English. Company counsel represented that he was unaware of this
fact, despite having litigated against Mr. Savov for well over a year. Regardless, I
adjourned the hearing due to the absence of a court-certified translator. At Mr.
Savov’s request, and without objection from the Company, I deemed the motion
submitted as of the hearing date. Dkt. 68. The motion is now ripe for decision.
4
NOW, THEREFORE, the Court having carefully considered the parties’
arguments, IT IS HEREBY ORDERED, this 16th day of March 2023, as follows:
1. This Court will grant judgment on the pleadings if no material facts are
in dispute and the movant is entitled to judgment as a matter of law. Ct. Ch. R. 12(c).
In considering a Rule 12(c) motion, the Court accords the non-movant “the same
benefits as a party defending a motion to dismiss.” Baldwin v. New Wood Res., LLC,
283 A.3d 1099, 1121 (Del. 2022). As a result, the Court accepts all well-pleaded
allegations as true and draws all reasonable factual inferences in favor of the non-
movant. See Desert Equities, Inc. v. Morgan Stanley Leveraged Equity Fund, II,
L.P., 624 A.2d 1199, 1205 (Del. 1993). The Court, however, need not accept “every
strained interpretation of the allegations, credit conclusory allegations . . .
[un]supported by specific facts, or draw unreasonable inferences in the [non-
movant’s] favor.” City of Fort Myers Gen. Emps.’ Pension Fund v. Haley, 235 A.3d
702, 716 (Del. 2020) (internal quotation marks and citations omitted).
2. Mr. Savov challenges the Amended Complaint on numerous grounds,
including that the Company has failed to produce the Contract or “any documents to
serve as proof that [he] made any commitments in conjunction with” the Contract.
Dkt. 43 ¶ 49. Mr. Savov titled this argument as “denial of fair trial.” Id. ¶¶ 48–58.
Seizing on that formulation, the Company blithely counters that “no trial has been
scheduled.” Dkt. 56 at 31. It does not address the merits of Mr. Savov’s argument.
5
3. The Company’s formalistic response runs contrary to principles of
liberal construction applicable to pro se filings. Pro se filings are “judged by a less
stringent standard than a pleading or document filed by an attorney.” Johnson v.
State, 442 A.2d 1362, 1364 (Del. 1982) (internal quotation marks omitted). As a
result, “Delaware courts, at their discretion, look to the underlying substance of a
pro se litigant’s filings rather than rejecting [the] filings for formal defects[.]” Sloan
v. Segal, 2008 WL 81513, at *7 (Del. Ch. Jan. 3, 2008) (Strine, V.C.). Put
differently, this Court “may look beyond a pro se litigant’s uncounseled [argument]
classifications to ensure his case is ‘fully and fairly heard.’” Mikkilineni v. PayPal,
Inc., 2021 WL 2763903, at *7 (Del. Super. July 1, 2021) (quoting Durham v.
Grapetree, LLC, 2014 WL 1980335, at *5 (Del. Ch. May 16, 2014)).
4. Here, Mr. Savov’s “fair trial” argument, at its core, is an insufficient
notice argument under Court of Chancery Rule 8. As explained below, that
argument is dispositive of Counts I and III. Without Counts I and III, I lack
jurisdiction to consider Count IV. And, under any analysis, I lack jurisdiction to
consider Count V. 3 Accordingly, Mr. Savov’s motion is granted in part. Separately,
I dismiss Count II sua sponte as moot.
3
Given these conclusions, I need not reach Mr. Savov’s other arguments.
6
Count I Fails To State A Claim
5. Count I alleges that Mr. Savov “failed to provide the agreed upon
consideration . . . as he was obligated to do in conjunction with” the Contract. Dkt.
20 ¶ 36. That allegation asserts a breach of contract.4 At the pleading stage of a
written contract dispute, Rule 8 requires the plaintiff to take the basic and customary
step of producing the agreement and citing to the provisions alleged to have been
breached.5 Failure to do so “is not a technical foot fault; it reflects, instead, a
fundamental failure to give the [defendant] fair notice of the claim asserted against
[him] as required by [] Rule 8.” Ryan v. Buckeye P’rs, L.P., 2022 WL 389827, at
*6 (Del. Ch. Feb. 9, 2022), aff’d, 285 A.3d 459 (Del. 2022) (TABLE). This fair
notice principle seems even more logical where, as here, a counseled entity has sued
a pro se individual who does not speak English and resides in a foreign country.
6. The Company has not alleged that Mr. Savov’s “incidental tasks” were
oral obligations or memorialized in any written agreement other than the Contract.
4
Although Count I is framed as a claim for a declaratory judgment, the “Declaratory
Judgment Act does not create substantive rights of any sort; it merely offers a procedural
means for securing judicial relief[.]” 250 Exec., LLC v. Christina Sch. Dist., 2022 WL
588078, at *4 (Del. Ch. Feb. 28, 2022) (internal quotation marks omitted). So the Court
must focus on the substance of the allegations to determine what type of “rights” or “status”
the claimant seeks declared. 10 Del. C. § 6501. Here, the rights and status are contractual.
5
See Ryan v. Buckeye P’rs, L.P., 2022 WL 389827, at *6 (Del. Ch. Feb. 9, 2022), aff’d,
285 A.3d 459 (Del. 2022) (TABLE); Erisman v. Zaitsev, 2021 WL 6134034, at *8 & n.84
(Del. Ch. Dec. 29, 2021); Coca-Cola Beverages Fla. Hldgs., LLC v. Goins, 2019 WL
2366340, at *3 (Del. Ch. June 4, 2019); US Ecology, Inc. v. Allstate Power Vac, Inc., 2018
WL 3025418, at *5–7 (Del. Ch. June 18, 2018), aff’d, 202 A.3d 510 (Del. 2019) (TABLE).
7
To the contrary, the Company repeatedly alleges that Mr. Savov’s duties were
imposed “in conjunction with” the Contract. Yet, the Company has not produced
the Contract, explained the circumstances of its formation, or cited to any provisions
in it that Mr. Savov allegedly breached. Accordingly, Count I fails under Rule 8.
7. This result should not be shocking. At the hearing on the Company’s
second motion for an ex parte TRO, the Court cautioned Company counsel that the
Amended Complaint contained virtually no detail about the Contract or the source
or nature of Mr. Savov’s duties:
I . . . have significant concerns about entering an ex parte TRO here, where I
have almost no information about the obligations that the [Company] says
were violated, whether Delaware law applies, and so forth. Frankly, I’m left
more confused after today’s call about the nature of the claim here and where
Mr. Savov’s obligations were created . . . .
[Company] counsel should continue to update me on efforts to serve Mr.
Savov . . . . But if that happens, [the Company will] need to show me . . . what
the claims are. And for now, that seems to be a hurdle for the [Company].
Dkt. 27 at 5:5–12, 6:1–9. At that point in the case, the Company could have amended
its complaint or at least sought to introduce exhibits raising a reasonable inference
of a contract’s existence. It did neither. Instead, the Company continued to press
for interim injunctive relief, filed dilatory motions, and ultimately, elected to stand
on the Amended Complaint when Mr. Savov moved to dismiss it. The Company’s
“serial” reliance on “unidentified contractual commitments” renders Count I
deficient as a matter of law. Erisman v. Zaitsev, 2021 WL 6134034, at *8 & n.84
8
(Del. Ch. Dec. 29, 2021) (first citing Coca-Cola Beverages Fla. Hldgs., LLC v.
Goins, 2019 WL 2366340, at *3 (Del. Ch. June 4, 2019); and then citing US Ecology,
Inc. v. Allstate Power Vac, Inc., 2018 WL 3025418, at *5–7 (Del. Ch. June 18,
2018), aff’d, 202 A.3d 510 (Del. 2019) (TABLE)).
8. The Company replies in two odd ways. First, the Company faults Mr.
Savov for not “explain[ing] how he has been prejudiced.” Dkt. 56 at 30. One might
have supposed the Company would be arguing that Mr. Savov does have notice,
rather than that his lack of notice does not matter. Even so, the burden is on the
plaintiff—not the defendant—to “demonstrate the existence of the contract.” VLIW
Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003). And, as
explained, “prejudice” is presumed under Rule 8 if a contract claimant utterly fails
to produce any documents providing notice of a breach.
9. Second, the Company attaches a declaration to its brief that purports to
verify the Contract. See Dkt. 56 (Decl. of Harry Zhabilov). One might have thought
the Company would have attached the Contract itself, rather than testimony on it.
Either way, the Company’s bolstering is too little and too late. A party “cannot
supplement the complaint through its brief.” MCG Cap. Corp. v. Maginn, 2010 WL
1782271, at *5 (Del. Ch. May 5, 2010). And briefs do not amend pleadings. 6 If the
6
See, e.g., Akrout v. Jarkoy, 2018 WL 3361401, at *3 n.23 (Del. Ch. July 10, 2018); Anglo
Am. Sec. Fund, L.P. v. S.R. Glob. Int’l Fund, L.P., 829 A.2d 143, 155 (Del. Ch. 2003);
Orman v. Cullman, 794 A.2d 5, 28 n.59 (Del. Ch. 2002); Cal. Pub. Emps.’ Ret. Sys. v.
9
Company had more information about Count I, it should have amended its pleadings.
It did not.
10. Moreover, in ruling on a Rule 12(c) motion, the Court cannot consider
documents attached to briefs without converting the motion to a motion for summary
judgment. See Jiménez v. Palacios, 250 A.3d 814, 841 (Del. Ch. 2019), aff’d, 237
A.3d 68 (Del. 2020) (TABLE). I decline to do so here. The Company ignored
multiple opportunities to amend Count I and has been playing hide the ball for almost
two years. There is no need to wait anymore. Count I is dismissed.
Count III Fails To State A Claim
11. Count III asserts a claim for unjust enrichment. This claim fails too.
12. “Courts developed unjust enrichment as a theory of recovery to remedy
the absence of a formal contract.” Stone & Paper Invs., LLC v. Blanch, 2020 WL
3496694, at *12 (Del. Ch. June 29, 2020). So “[a] party cannot seek recovery under
an unjust enrichment theory if a contract ‘is the measure of the [party’s] right.’” ID
Biomedical Corp. v. TM Techs., Inc., 1995 WL 130743, at *15 (Del. Ch. Mar. 16,
1995) (alteration omitted) (quoting Wood v. Coastal States Gas Corp., 401 A.2d
932, 942 (Del. 1979)). 7
Coulter, 2002 WL 31888343, at *12 (Del. Ch. Dec. 18, 2002); Intermec IP Corp. v.
TransCore, LP, 2021 WL 3620435, at *24 n.214, *25 n.231 (Del. Super. Aug. 16, 2021).
7
Accord BAE Sys. Info. & Elec. Sys. Integration v. Lockheed Martin Corp., 2009 WL
264088, at *7 (Del. Ch. Feb. 3, 2009); MetCap Sec. LLC v. Pearl Senior Care, Inc., 2007
WL 1498989, at *5 (Del. Ch. May 16, 2007); Bakerman v. Sidney Frank Importing Co.,
10
13. The Company claims that Mr. Savov has been unjustly enriched by his
retention of Company stock. But Mr. Savov allegedly received that stock “in
conjunction with” the Contract. Indeed, the Company claims that any unjust
enrichment resulted from “breaches [of his] obligations in conjunction with” the
Contract. Dkt. 20 ¶ 53. “A claim for unjust enrichment is not available if there is a
contract that governs the relationship between the parties that gives rise to the unjust
enrichment claim.” Kuroda v. SPJS Hldgs., L.L.C., 971 A.2d 872, 891 (Del. Ch.
2009). Accordingly, Count III must be dismissed.
14. True, parties may plead unjust enrichment alternatively to an express
breach of contract claim. But alternative pleading “does not obviate the obligation
to provide factual support for each theory.” Great Hill Equity P’rs IV, LP v. SIG
Growth Equity Fund I, LLLP, 2014 WL 6703980, at *27 (Del. Ch. Nov. 26, 2014)
(internal quotation marks omitted). In my view, allowing a party to avoid dismissal
by never producing a contract it has relied on for years would create dangerous
2006 WL 3927242, at *18 (Del. Ch. Oct. 10, 2006); see Doberstein v. G-P Indus., 2015
WL 6606484, at *6 (Del. Ch. Oct. 30, 2015) (dismissing unjust enrichment claim where
party failed to allege facts independent of allegations supporting an express breach of
contract); Veloric v. J.G. Wentworth, Inc., 2014 WL 4639217, at *18 (Del. Ch. Sept. 18,
2014) (“‘[W]here a dispute arises from obligations that are expressly addressed by contract,
that dispute will be treated as a breach of contract claim[.]’” (quoting Nemec v. Shrader,
991 A.2d 1120, 1129 (Del. 2010))); see also Garfield v. Allen, 277 A.3d 296, 361 (Del. Ch.
2022) (declining to apply contract preclusion doctrine to unjust enrichment claim where,
unlike here, the plaintiff alleged facts to support a breach of contract claim and dismissing
the unjust enrichment claim would not have simplified the issues, but acknowledging that
there “have been and will continue to be cases where it is beneficial” to apply the doctrine).
11
incentives and subvert the purpose of the unjust enrichment doctrine, which is to
avoid injustice. Here, then, the Company cannot conceal the Contract from Mr.
Savov and the Court and then argue that the Contract caused unjust enrichment.
15. The Company’s failure to produce the Contract springs additional traps.
For example, unjust enrichment claims cannot be used to extend contractual
obligations to persons who are not parties to the contract. See Kuroda, 971 A.2d at891–92. The Company does not allege Mr. Savov is a party to the Contract or
specify the source of the obligations flowing “in conjunction with” it. The Company
cannot elude dismissal by preventing me from determining if Count III improperly
tries to capture a non-party. No matter how sliced, Count III does not make the cut.
This Court Lacks Jurisdiction Over Count IV
16. Count IV alleges tortious interference with a contract between the
Company and a third party. Tortious interference claims are not equitable claims.
And this one requests damages, not equitable relief. So Count IV depended on clean-
up jurisdiction stemming from Counts I and III. Because I have dismissed those, I
now lack jurisdiction over Count IV. See FirstString Rsch., Inc. v. JSS Med. Rsch.
Inc., 2021 WL 2182829, at *6 (Del. Ch. May 28, 2021) (“[O]nce having acquired
jurisdiction over part of a controversy,” the Court may “continue to exercise
jurisdiction over the entire controversy, even over those portions where there is an
adequate remedy at law[.]” (emphasis added) (internal quotation marks omitted)).
12
This Court Lacks Jurisdiction Over Count V
17. Count V alleges defamation. This Court categorically lacks jurisdiction
over these allegations, even under the clean-up doctrine. See, e.g., Smith v. Scott,
2021 WL 1592463, at *14 & n.143 (Del. Ch. Apr. 23, 2021) (summarizing
governing principles, collecting authority, and noting limited exceptions not
applicable here). So I will not consider Count V further.
Count II Is Moot
18. Separately and finally, Count II sought to block a stock transfer that
was set to occur “on the 31st day after September 2, 2021.” Dkt. 20 ¶ 44. So Count
II is moot. Because mootness is a question of subject matter jurisdiction,8 and the
Company has not alleged facts suggesting that a transfer completed more than a year
ago is “capable of repetition, but evad[ing] review,” 9 I dismiss Count II sua sponte.10
8
See, e.g., NAMA Hldgs., LLC v. Related World Mkt. Ctr., LLC, 922 A.2d 417, 435 n.43
(Del. Ch. 2007).
9
Cal. Pub. Emps.’ Ret. Sys. v. Coulter, 2005 WL 1074354, at *3 (Del. Ch. Apr. 21, 2005)
(quoting Gen. Motors Corp. v. New Castle Cnty., 701 A.2d 819, 823 n.5 (Del. 1997)).
10
See Ct. Ch. R. 12(h)(3). The Company perplexingly sought the same relief contemplated
under Count II in its second motion for an ex parte TRO. See Dkt. 21 ¶ 17. That motion
was denied on the merits. See Dkt. 27 at 4:11–19. So I am satisfied that the Company had
notice of the possibility of Count II’s dismissal.
13
19. In sum, Mr. Savov’s motion for judgment on the pleadings is
GRANTED as to Counts I and III. Accordingly, Counts I and III are DISMISSED
WITH PREJUDICE. Although I lack equitable jurisdiction over Counts IV and V,
the Company may elect to transfer them to a Delaware court of law.
See 10 Del. C. § 1902. 11 Finally, Count II is DISMISSED as MOOT.
/s/ Nathan A. Cook
Vice Chancellor Nathan A. Cook
11
Failure to transfer Counts IV and V in conformity with the procedural requirements and
time limitations of Section 1902 will result in dismissal of Counts IV and V with prejudice.
14