Carlos Eduardo Lorefice Lynch v. R. Angel Gonzalez Gonzalez ( 2020 )

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
CARLOS EDUARDO LOREFICE )
LYNCH and GRUPO BELLEVILLE )
HOLDINGS, LLC, a Delaware Limited )
Liability Company, )
)
Plaintiffs, )
)
v. ) C.A. No. 2019-0356-MTZ
)
R. ANGEL GONZALEZ GONZALEZ, )
TELEVIDEO SERVICES, INC., a )
Florida Corporation, JUAN PABLO )
ALVIZ and FERNANDO GUIDO )
CONTRERAS LOPEZ, )
)
Defendants. )
MEMORANDUM OPINION
Date Submitted: April 23, 2020
Date Decided: July 31, 2020
Theodore A. Kittila and James G. McMillan, III, HALLORAN FARKAS &
KITTILA, LLP, Wilmington, Delaware; Jeffrey M. Greilsheimer and Shaelyn
Gambino-Morrison, FOX HORAN & CAMERINI LLP, New York, New York,
Attorneys for Plaintiffs Carlos Eduardo Lorefice Lynch and Grupo Belleville
Holdings, LLC.
William E. Gamgort and Jennifer M. Kinkus, YOUNG CONAWAY STARGATT
& TAYLOR, LLP, Wilmington, Delaware; Omar Ortega, Rey Dorta, Valerie M.
Hassan, and Evelyn Ferriol, DORTA & ORTEGA, P.A., Coral Gables, Florida,
Attorneys for Defendants R. Angel Gonzalez Gonzalez, Televideo Services, Inc.,
Juan Pablo Alviz, and Fernando Guido Contreras Lopez.
ZURN, Vice Chancellor.
Trust is an asset that is often misappropriated. The risk of such
misappropriation is higher when the trust one instills in another is so great that the
trusted agent has the freedom to run rampant. In this case, the Court addresses such
a misappropriation of trust after a successful media businessman expanded his
operations to Argentina. To do so, he created a Delaware limited liability company
to hold valuable media assets, including numerous subsidiaries created and operating
in Argentina. A young attorney at the firm advising on the initial expansion efforts
developed a rapport with the businessman and eventually became his right-hand man
in Argentina. The attorney advised the businessman on Argentine law and served
as the holding company’s formal legal representative in Argentina, quickly gaining
the businessman’s unwavering trust.
To the businessman, the attorney was loyal and dedicated to doing right by
the businessman and his company. But appearances can be deceiving. In the early
days of their working relationship, the attorney identified and seized the opportunity
to misappropriate the businessman’s trust for his own gain. The attorney knew that
the businessman trusted that the attorney’s representations were accurate and,
therefore, that the businessman would sign documents the attorney presented to him.
Using his position of confidence, the attorney induced the businessman to sign
documents stating that the attorney, not the businessman or his affiliate, was the
company’s majority member.
1
Shortly after those documents were signed, a new Argentine law required that
an Argentine hold the majority interest in media companies operating in Argentina.
This inspired the attorney to make his paper trail more elaborate. He informed the
businessman that it was necessary to ensconce the attorney as the holding company’s
majority member to satisfy the new law. The attorney assured the businessman that
the businessman would remain the company’s true majority member and that the
attorney was simply a placeholder in a larger scheme to facially satisfy Argentine
holding regulations. The businessman agreed, subject to a secret agreement
memorialized in a “counterdocument,” which stated that the attorney would hold the
majority interest in name only and for the businessman’s benefit, and that he would
return the majority interest to its true owner upon request. The attorney assured the
businessman that he would execute the counterdocument and that it would be
effective. The businessman took the attorney’s word and believed the attorney
would honor their agreement. The attorney did not.
After establishing himself as the company’s majority member, the attorney
deserted his placeholder role to seize actual control over the company. Now, the
attorney seeks this Court’s blessing, pointing to the paper trail that he carefully
created to corroborate his control over the Company. But again, appearances can be
deceiving. In this post-trial opinion determining the company’s ownership and
management structure, I find that the documents in the paper trail are not binding
2
contracts, and that if they were, the attorney fraudulently induced the businessman
to execute those documents and has proceeded with unclean hands and in bad faith.
I hold that the businessman and his deputy are the company’s managers and that the
businessman’s affiliate is the company’s majority member.
I. BACKGROUND
This opinion determines the ownership and management of Plaintiff Grupo
Belleville Holdings (“GBH,” “Belleville,” or the “Company”), a Delaware limited
liability company.1 On May 14, 2019, Plaintiff Carlos Eduardo Lorefice Lynch
(“CLL,” “Lorefice,” or “Lynch,” and together with Belleville, “Plaintiffs”) filed this
action against defendants Remigio Angel Gonzalez Gonzalez, the businessman,
(“RAGG” or “Gonzalez”), Televideo Services, Inc. (“Televideo”), Juan Pablo Alviz
(“Alviz”), and Fernando Guido Contreras Lopez (“Lopez”) (collectively,
“Defendants”).2 The Complaint seeks injunctive and declaratory relief arising from
Defendants’ allegedly fraudulent attempt to strip Lynch, the attorney, of his
ownership interest in Belleville.
1
Citations in the form of “[Name] Tr. ––” refer to witness testimony from the trial
transcripts. Citations in the form of “[Name] Dep. ––” refer to deposition transcripts in the
record. Citations in the form of “PTO ¶ ––” refer to stipulated facts in the pre-trial order.
See Docket Item (“D.I.”) 179 [hereinafter “PTO”]. Citations in the form of “JX –– at ––”
refer to a trial exhibit.
2
D.I. 1 [hereinafter “Compl.”]. Witnesses and documents in the record refer to the parties
by various monikers and surnames. I intend no disrespect to the parties by referring to
them as “Lynch” and “Gonzalez” throughout.
3
Count I seeks declaratory relief pursuant to 6 Del. C. § 18-110.3 Count II
seeks declaratory relief pursuant to 10 Del. C. § 6501.4 Count III seeks injunctive
relief.5 Pursuant to those Counts, Plaintiffs sought a declaratory judgment that (1)
Lynch holds 65% of Belleville, (2) Gonzalez holds 5% of Belleville, (3) Televideo
holds 30% of Belleville, (4) Lynch is Belleville’s sole manager, and (5) all contrary
actions taken by Gonzalez and Televideo are null and void.6 Count IV asserts a
3
Compl. ¶¶ 92–102.
4
Id. ¶¶ 103–13.
5
Id. ¶¶ 114–27.
6
PTO at 2. In addition, Plaintiffs seek a declaratory judgment that (1) Lynch is Belleville’s
legal representative in Argentina; (2) Alviz is not Belleville’s manager, president, or legal
representative; (3) Lopez is not Belleville’s manager or legal representative; (4) any and
all acts taken by Alviz in connection with Belleville are null and void; (5) any and all taken
by Lopez in connection with Belleville are null and void; (6) the Certificate of Amendment
of Grupo Belleville Holdings, LLC filed with the Delaware Secretary of State on April 12,
2019 is null and void; and (7) the Certificate of Correction of Grupo Belleville Holdings,
LLC filed with the Delaware Secretary of State on May 9, 2019 is null and void. Plaintiffs
also seek an order directing the Delaware Secretary of State to strike from the record (1) the
Certificate of Amendment of Grupo Belleville Holdings, LLC filed with the Delaware
Secretary of State on April 12, 2019; and (2) the Certificate of Correction of Grupo
Belleville Holdings, LLC filed with the Delaware Secretary of State on May 9, 2019.
Finally, Plaintiffs seek injunctive relief barring Defendants from (1) interfering with
Lynch’s ownership interest in Belleville and Lynch’s status as Belleville’s sole manager
and legal representative; (2) making any statement to any governmental agency that is
contrary to Lynch’s status as Belleville’s 65% owner, sole manager, and legal
representative; (3) taking action, direct or indirect, without the express consent of Lynch,
on behalf of Belleville, including, without limitation, with respect to Belleville’s
ownership, management, business operations, or assets. Id. at 2–3. To the extent Plaintiffs
request relief pertaining to any litigant’s status as Belleville’s legal representative in
Argentina, I decline to address the issue. That is a matter for Argentine authorities.
4
claim for conversion.7 Lynch also seeks damages for Defendants’ alleged
conversion.8
On May 24, I granted expedition, to which the parties agreed.9 On June 5, I
entered a status quo order, mandating that the parties maintain the status quo
concerning Belleville’s operations and management during the pendency of the
litigation.10
On June 14, Defendants filed an Answer and Affirmative Defenses to the
Complaint.11 Defendants raised as affirmative defenses unclean hands, fraudulent
inducement, misrepresentation, failure of valuable consideration, equitable estoppel,
and promissory estoppel.12 Defendants Televideo and Gonzalez—Televideo’s
owner and president13—also asserted counterclaims against Lynch.14 In respect to
the counterclaims, I refer to Gonzalez and Televideo collectively as the “Televideo
7
Compl. ¶¶ 128–37.
8
PTO at 3. Plaintiffs also seek an order awarding such other and further relief to Lynch as
the Court deems just and proper. Id.
9
See D.I. 37.
10
D.I. 33.
11
D.I. 39.
12
Id. at 32–34.
13
At all times, Televideo acted through Gonzalez. To the extent that Gonzalez took any
action with respect to the disputed 65% membership interest in Belleville, discussed infra,
he did so on Televideo’s behalf.
14
See D.I. 39 at 34–57 [hereinafter “Countercl.”].
5
Defendants.” Count I of the counterclaim seeks declaratory relief pursuant to 6 Del.
C. § 18-110.15 Counts II and III seek declaratory relief pursuant to 10 Del. C. §
6501.16 With respect to Counts I, II, and II, Defendants sought a declaratory
judgment and order that (1) Gonzalez holds 5% of Belleville, (2) Televideo holds
95% of Belleville, (3) Gonzalez is Belleville’s sole manager, (4) any actions Lynch
has taken on Belleville’s behalf are null and void.17 In addition, Count IV asserts a
claim for conversion.18 Count V asserts a claim for fraud in the inducement.19
Finally, Count VI asserts a claim for fraudulent misrepresentation.20 Defendants
also sought damages for Lynch’s fraudulent conduct.21 On July 5, Lynch answered
the counterclaims and asserted several affirmative defenses, including unclean hands
and judicial estoppel.22
The case proceeded through expedited and contentious discovery, spats over
the breadth of the status quo order, and a motion to dismiss Lopez for lack of
15
Countercl. ¶¶ 53–63.
16
Id. ¶¶ 64–82.
17
See id. at 55–56; D.I. 189 at 51.
18
Id. ¶¶ 83–91.
19
Id. ¶¶ 92–107.
20
Id. ¶¶ 108–17.
21
See id. at 56; D.I. 189 at 51. Defendants also seek an order granting Defendants such
other relief that the Court deems equitable.
22
See D.I. 49 at 28–29.
6
personal jurisdiction.23 I held trial from January 27 through January 29, 2020.24 At
trial, ten witnesses testified primarily in Spanish: Lynch, Gonzalez, Ariel Dario
Lambert, Morelia Gonzalez, Marcos Landaburu, Jose Ramon Gomez, Herber
Damian Martinez,25 Silvia Susana Curutchet, Guillermo Jorge Candeo White, and
Liliana Silvia Casaleggio.26 The parties also designated for the record the deposition
testimony of two witnesses: Adriana Maleplate and Fernando Contreras Lopez.27
In addition to witness testimony, the parties submitted 163 joint exhibits, most of
which were translated from Spanish.28
23
See, e.g., D.I. 30, 34, 37, 40, 69, 74, 92, 107, 111, 121, 125, 146, 150, 162, 166, 168,
169, 182, 205, 213, 231, 237, 239, 240, 241. The parties agreed that I would defer ruling
on Lopez’s motion to dismiss for lack of personal jurisdiction, D.I. 40, until after trial so
that I could assess the motion with the benefit of a fully developed record. Accordingly,
the parties addressed the motion in post-trial briefing and at post-trial argument. On June 8,
2020, I issued my decision dismissing Lopez, without prejudice, for lack of in personam
jurisdiction with respect to all counts of the Complaint except Count I pursuant to Section
18-110. Because this Court has in rem jurisdiction over Belleville, I retain the authority to
determine whether Lopez is a member or manager of Belleville under Section 18-110. See
D.I. 237, 239.
24
See D.I. 193, 194, 195.
25
Plaintiffs called Martinez as a rebuttal witness. For reasons explained at trial, I struck
Martinez’s testimony. See Martinez Tr. 581–82.
26
See D.I. 193, 194, 195. The Court is grateful for the expertise and proficiency of
Sebastian Beale, who translated from English to Spanish and vice versa, and the Chancery
court reporters, whose remarkable RealTime skills were invaluable.
27
See D.I. 196, 197, 198, 199.
28
See JX 1–163; D.I. 218, Ex. 3 [hereinafter “Schedule of Evidence”].
7
The parties completed post-trial briefing as of March 26.29 I held post-trial
argument on April 8.30 In post-trial briefing and at argument, the parties addressed
(1) their competing declaratory judgment claims pursuant to Section 18-110 and
Section 6501; (2) their competing conversion claims; (3) their competing unclean
hands defenses; (4) the Televideo Defendants’ fraudulent misrepresentation and
fraudulent inducement Counterclaims and Defendants’ corresponding affirmative
defenses; (5) Defendants’ failure of consideration and promissory estoppel defenses;
and (6) Lynch’s judicial estoppel defense. Accordingly, this opinion is cabined to
those claims and defenses, and all others are deemed waived.31
The factual findings in this case are outcome-determinative. My duty is to
make findings of fact based on the preponderance of the evidence the parties present.
“The side on which the greater weight of the evidence is found is the side on which
the preponderance of the evidence exists.”32
29
D.I. 189, 190, 204, 206.
30
D.I. 212, 219.
31
See Oxbow Carbon & Minerals Hldgs., Inc. v. Crestview-Oxbow Acq., LLC, 202 A.3d
482, 502 n.77 (Del. 2019) (“The practice in the Court of Chancery is to find that an
issue not raised in post-trial briefing has been waived, even if it was properly raised pre-
trial.”).
32
Reynolds v. Reynolds, 237 A.2d 708, 711 (Del. 1967); accord Taylor v. State, 748 A.2d
914 (Del. 2000) (TABLE) (“The phrase ‘preponderance of the evidence’ has been defined
to mean the side on which ‘the greater weight of the evidence’ is found.”).
8
Here, this task has proven onerous. This case presents a he said-he said
dichotomy of the starkest form. According to Lynch, he and Gonzalez agreed Lynch
would purchase 65% of Belleville, and iteratively documented that purchase and
adjusted its terms. The documentary evidence—namely a series of documents and
public filings identifying Lynch as 65% owner and signed by Gonzalez—facially
supports Lynch’s account. If one accepts Lynch’s story as true and discredits the
testimony of numerous witnesses, then those documents speak for themselves and
this ownership dispute is easily resolved.
According to Defendants, these documents should not be taken at face value.
Instead, Defendants contend that Lynch induced Gonzalez to execute a series of
documents to create a paper trail presenting Lynch as Belleville’s 65% majority
owner, in name only, for the purported purpose of satisfying Argentine regulations;
and after Lynch completed that paper trail, he wrongfully claimed control of the
Company. If one accepts Defendants’ theory of the case as true, then the volume of
documentary evidence in Lynch’s favor is predictable and meaningless: the point
of the sham was to create a paper trail naming Lynch as Belleville’s majority owner
to satisfy Argentine regulators.
Testimony and other corroborating evidence support Gonzalez’s account. In
2007, Lynch began working as Belleville’s attorney and Gonzalez’s personal
9
advisor.33 Gonzalez trusted Lynch and his advice regarding Belleville’s Argentine
operations, and he signed documents Lynch presented as solving Belleville’s legal
and regulatory issues.34 Between September 2007 and January 2008, Lynch papered
the foundation for his long-term plan to appropriate 65% of Televideo’s interest in
Belleville. To do so, he advised Gonzalez to execute a series of documents to
facilitate the final steps of Gonzalez’s foray into Argentina; those included public
filings that fabricated Lynch’s ownership stake in Belleville. Gonzalez complied,
relying on Lynch’s representations about their contents and necessity; admittedly,
Gonzalez did not meaningfully read or review those documents on his own. 35
Facially, those documents gave Lynch what he wanted: a majority 65% position in
Belleville, and Gonzalez’s ignorance. At that time, the parties had not discussed,
negotiated, or agreed to transfer Televideo’s 65% interest to Lynch.
Eventually, however, a serendipitous change in Argentine law gave Lynch a
foothold to induce Gonzalez to execute more documents naming Lynch as
Belleville’s 65% member, and legitimized the documents Gonzalez signed and
Lynch filed in September 2007 and January 2008. In late 2008, Lynch advised
33
See, e.g., Lynch Tr. 103, 121–122, 132–33, 143; M. Gonzalez Tr. 271, 279; A. Gonzalez
Tr. 459, 462–63, 464, 468, 471, 476, 478, 480, 481, 482, 483, 485, 488, 490, 499, 501, 507,
508.
34
See, e.g., A. Gonzalez Tr. 459, 462–63, 464, 468, 471, 476, 478, 480, 481.
35
See, e.g., id. at 490, 507.
10
Gonzalez of the new law requiring Televideo to transfer Belleville’s majority
position to an Argentine citizen. Lynch, as an Argentine citizen, proposed that he
fill this role. To ensure Gonzalez would agree to the “transfer,” Lynch proposed that
they create a paper trail fabricating Lynch’s 65% ownership to satisfy Argentine
holding laws, but also sign a secret contract providing that Lynch would hold the
interest in name only, and Televideo would remain Belleville’s true owner. Lynch
assured Gonzalez that he would prepare a “counterdocument” that memorialized the
secret terms.36
Accordingly, in 2009, Lynch and his team drafted backdated purchase
agreements to fabricate a 5% transfer in September 2007 and a 60% transfer in
January 2008, among other documents. And as promised, Lynch prepared and
presented to Gonzalez the counterdocument providing that Televideo beneficially
owned the 65% interest, and that Lynch would return the interest to Televideo upon
Gonzalez’s request. Lynch assured Gonzalez that he would execute it. The
36
The parties refer to the counterdocument using multiple terms, including
“contradocumento,” “declaracion jurada,” “DDJJ,” “sworn statement,” “sworn
declaration,” and “control document,” and sometimes referred to Gonzalez as the “ultimate
beneficial owner,” or “UBO,” in the context of this ownership structure. See, e.g., D.I. 190
at 3 (identifying alternative names for the counterdocument); Lynch Tr. 197 (referring to
Gonzalez as the “UBO” in the context of a counterdocument), 214 (same), 218 (noting that
the “sworn declaration,” or counterdocument, was referred to as a “control document[]”);
M. Landaburu Tr. 433 (acknowledging that the counterdocument is also referred to as a
“contradocumento”); JX 102 (clarifying that “DDJJ” refers to a counterdocument, like that
attached at JX 103).
11
counterdocument was the only document in the entire suite that the parties
objectively intended to have any binding effect or otherwise evidence a legitimate
agreement. They intended the rest to be a sham.
Trusting Lynch’s representation that he would execute the counterdocument
and return the interest, Gonzalez agreed to transfer 65% of Belleville to Lynch, in
name only, to satisfy Argentine law. But Lynch never intended to sign the
counterdocument or return the interest. Lynch did not sign the Counterdocument,
and ultimately concealed or destroyed the copy Gonzalez signed, leaving only those
crumbs in the trail that named him as Belleville’s 65% owner. Lynch then came to
this Court, relying on that paper trail, in an attempt to obtain final control over
Belleville.
In view of the conflicting testimony and theories of the case, my credibility
assessments of the witnesses tip the scales here. “[T]he relative weight given to any
particular piece of evidence, and particularly witness testimony, is a matter for the
court to determine as the trier of fact.”37 “In my role as the trier of fact, I must assess
the credibility of the witnesses, supported by the record. My credibility
determinations are based on the testimony and evidence submitted to make up the
37
Hockessin Cmty. Ctr., Inc. v. Swift, 59 A.3d 437, 453 (Del. Ch. 2012) (quoting In re
IAC/InterActive Corp., 948 A.2d 471, 493 (Del. Ch. 2008)).
12
record.”38 Accordingly, I may “‘determine the weight and credibility to be accorded
any witness,’ and [am] responsible for resolving conflicts in the evidence.”39 “The
rule is that in determining the weight and the credibility of the testimony, the
apparent fairness, interest or bias of the witnesses, their opportunity to see and know
of the circumstances, their recollections connected therewith, and all other facts and
circumstances that go to test the accuracy of their testimony, are to be considered.”40
At trial, I had ample opportunity to observe Lynch and Gonzalez and to assess
their credibility. After listening to Gonzalez’s testimony, and that of multiple
corroborating witnesses, I find him to be credible concerning the regulatory scheme
and private agreement.41 I place more weight on Gonzalez’s testimony when it
conflicts with Lynch’s. Consequently, I view the record, including the paper trail,
38
Eagle Force Hldgs., LLC v. Campbell, 2019 WL 4072124, at *13 (Del. Ch.
Aug. 29, 2019) (citing Gatz Props., LLC v. Auriga Capital Corp., 59 A.3d 1206, 1221 (Del.
2012) (“The law requires the trial judge to weigh the evidence, including the credibility of
live witness testimony.”)), aff’d in part, rev’d in part, 2020 WL 3866620 (Del.
July 8, 2020).
39
Johnson v. Wagner, 2003 WL 1870365, at *4 (quoting Jones v. Lang, 591 A.2d 185, 188
(Del. 1990)).
40
Matter of Langmeier, 466 A.2d 386, 405 (Del. Ch. 1983) (citing Benson v. Wilm. City
Ry. Co., 75 A. 793 (Del. Super. Ct. 1910)).
41
I particularly find his testimony credible with respect to the parties’ intentions when
executing each document in the paper trail. See Johnson, 2003 WL 1870365, at *4 (“Where
‘state of mind’ or ‘consciousness and conscious’ is involved, credibility–a [fact-finder]
determination–is often central to the case.” (alteration in original) (quoting Scott v. Bosari,
1994 WL 682615, at *8 (Del. Super. Oct. 26, 1994)).
13
through the prism of the parties’ scheme: the documents Lynch presents identify
him as Belleville’s 65% member only because the parties agreed to create a paper
trail evidencing that ownership structure in order to satisfy regulators, and agreed
Lynch did not actually purchase or beneficially hold that interest. The nature of the
scheme explains the scant documentary evidence supporting Defendants’ position.
Having weighed the evidence and evaluated the credibility of the witnesses, I find
that the following facts were proven by the preponderance of the evidence.42
A. Gonzalez Acquires The Argentine Media Assets.
Gonzalez is an experienced acquirer and owner of media assets throughout
Latin America.43 He owns and controls “Albavision,” the name for an informal
conglomerate of Latin American media companies, including Televideo.44 Over
nearly forty years in the industry, Gonzalez amassed over thirty radio and television
stations in at least twelve countries.45 He solely owned all of these assets, except for
42
The parties did not brief any evidentiary objections in post-trial briefing. Any objections
are waived.
43
See A. Gonzalez Tr. 453, 457.
44
See D.I. 218, Ex. 1 at 1 [hereinafter “Glossary of Stipulated Terms”]; M. Gonzalez Tr.
261–62.
45
See A. Gonzalez Tr. 453, 457, 468.
14
one station he owned with a partner.46 Once Gonzalez acquired those assets, he did
not sell them.47
In 2006, Gonzalez sought to expand the Albavision brand into Argentina by
acquiring an Argentine media conglomerate, Inversora de Medios y Comunicaciones
Sociedad Anónima (“IMC”), owned by Gerardo Daniel Hadad.48 The IMC
acquisition would expand Gonzalez’s asset portfolio to include a number of
associated and subsidiary companies operating in Argentina, including IMC,
Sebrumax Sociedad Anónima (“Sebrumax”) and Telearte Sociedad Anónima
(“Telearte”).49 At the time, IMC operated Canal 9, a well-known television station
in Argentina. Canal 9 was the primary motivation for the purchase.50
Gonzalez contacted Hadad about potentially acquiring IMC.51 With
discussions underway, Gonzalez retained an Argentine law firm, Santiago Lynch, to
assist with negotiation and due diligence.52 Lynch’s uncle, a partner at the firm, was
46
See id. at 456–57.
47
See id. Gonzalez has only ever sold one media asset: a Puerto Rican radio station, sold
twenty-one years ago. See id. at 459.
48
See JX 2; Lynch Tr. 17–18, 100; M. Gonzalez Tr. 262–63; A. Gonzalez Tr. 452–53;
Casaleggio Tr. 544.
49
See Glossary of Stipulated Terms at 1.
50
See id.; PTO ¶¶ 7–8; see also White Tr. 528.
51
See M. Gonzalez Tr. 262.
52
See Lynch Tr. 17, 100; M. Gonzalez Tr. 262–63; Landaburu Tr. 415; A. Gonzalez Tr.
452–53. Lopez first retained the firm on Gonzalez’s behalf. See M. Gonzalez Tr. 263.
15
in charge of the firm’s relationship with Gonzalez.53 Lynch was a junior attorney at
the firm.54 His primary role was to hand deliver documents to Gonzalez that required
his signature.55 He did not have a meaningful role in the IMC acquisition.56 Hadad
assigned Liliana Casaleggio, then head of Telearte’s legal department, to “take
charge in Telearte with regards to the purchase and sale.”57
53
See Lynch Tr. 101.
54
See M. Gonzalez Tr. 263; A. Gonzalez Tr. 452–53; Casaleggio Tr. 545; White Tr. 528.
55
See A. Gonzalez Tr. 452–53. Lynch testified that he was lead counsel who negotiated
the IMC purchase on Gonzalez’s behalf. See Lynch Tr. 100–01, 109. Lynch’s testimony
is not credible on this point. Although negotiations began in 2006, Lynch did not meet
Gonzalez until January 2007, when he took Gonzalez paperwork that needed to be signed.
See id. at 101–02. Gonzalez and Casaleggio credibly testified that Lynch was not involved
in negotiating the terms of the sale or responsible for drafting any of the documents
involved in the transaction. See A. Gonzalez Tr. 452–53; Casaleggio Tr. 544–45; see also
White Tr. 528. I find that, at the time of the IMC purchase, Lynch’s role was limited to
delivering documents to Gonzalez for his signature. See Lynch Tr. 101; A. Gonzalez Tr.
452–53; Casaleggio Tr. 544–45.
56
See Lynch Tr. 101; A. Gonzalez Tr. 452–53; Casaleggio Tr. 544–45.
57
Casaleggio Tr. 544. Alejandro Massot, counsel for Gonzalez and Televideo, asked
Casaleggio to testify on Defendants’ behalf. See id. at 550–51, 552. She worked as an
attorney for Telearte and Canal 9 for seventeen years: from 2000, under Hadad’s
ownership, through 2017, under Gonzalez’s control. See id. at 543. She worked as a senior
attorney, chief legal consultant, and manager of the Telearte’s judicial apartment. See id.
Eventually, Casaleggio began reporting to Lynch. Gonzalez terminated her employment
in 2017. See id. at 559–60, 561. At that time, Lynch was her immediate superior. See id.
550. Plaintiffs tried to impeach her credibility, suggesting that she was improperly coerced
and coached to testify. See id. at 558–59. Plaintiffs’ attempt was unsuccessful. See id. at
562. Casaleggio was not coached before taking the stand, and she was not offered anything
in exchange for her testimony. See id. at 558–59, 562. She is familiar with the transactions
in dispute in this litigation, including the parties’ intent with respect to the
Counterdocument. See id. at 543–49. She testified, and I believe, that she testified to share
facts she personally knows and because “the justice system require[d] [her] to” with respect
to “a conflict between the ownership.” Id. at 552. I find Casaleggio’s testimony credible.
16
To facilitate the IMC acquisition, on December 12, 2006, Gonzalez formed
Belleville as a Delaware limited liability company to hold Canal 9 and IMC’s other
Argentine assets.58 At that time, 95% of Belleville was owned by Televideo, a
Florida corporation owned and controlled by Gonzalez and his two daughters, Jani
Gonzalez and Morelia Gonzalez.59 Gonzalez personally owned the remaining 5%
of Belleville.60
In January 2007, Gonzalez purchased 84.21% of IMC from Hadad for $24.2
million.61 He did so “on commission” for Belleville, the ultimate purchaser, and was
required to timely identify Belleville as IMC’s acquirer to the Argentine media
regulators.62 To do so, Belleville needed a representative to appear on its behalf
before the Argentine government.63 So in April 2007, Gonzalez granted Lynch a
special power of attorney and designated him as Belleville’s legal representative in
58
See JX 1; PTO ¶6.
59
See M. Gonzalez Tr. 261:5–8; A. Gonzalez Tr. 477–78; PTO ¶ 11.
60
It is undisputed that today, Televideo still owns 30% and Gonzalez personally holds at
least 5% of Belleville. See PTO ¶¶ 10, 38, 44.
61
See JX 2; Lynch Tr. 17–18, 100; M. Gonzalez Tr. 262–63; Casaleggio Tr. 544.
62
Lynch Tr. 18. Lynch’s firm advised Gonzalez that the IMC acquisition needed to be
structured in compliance with Argentine law and documented with Argentine regulators.
See Casaleggio Tr. 545–46.
63
See Lynch Tr. 18; A. Gonzalez Tr. 453; JX 3 at 10, 19, 29, 42, 51, 61, 63.
17
Argentina.64 Belleville also adopted a resolution to hold equity in Argentine
companies, which Lynch filed on Belleville’s behalf with the Argentine regulatory
body Argentina Inspección General del Justicia (“IGJ”).65
After the initial 84.21% sale to Belleville, Hadad still held an interest in
IMC.66 Belleville eventually acquired Hadad’s remaining interest to own 100% of
the company by causing IMC to make a capital call.67 Through Gonzalez, Belleville
injected the requested capital; Hadad did not participate, and his interest was diluted
to 4.1%.68 Thereafter, Lynch negotiated for Belleville’s purchase of Hadad’s
64
See JX 3 at 10, 19, 29, 42, 51, 61, 63. When Belleville designated Lynch as its legal
representative in April 2007, he was still employed at his uncle’s law firm. See Lynch Tr.
103. The resolution also identifies other individuals with authority to act on Belleville’s
behalf in Argentina. See JX 3 at 9, 19, 29, 41, 51, 63.
65
See JX 3. The filed paperwork certified that Lynch was Belleville’s legal representative
and formally assigned to Belleville Gonzalez’s 84.21% ownership interest in IMC. See
Lynch Tr. 18; JX 3 at 10, 19, 29, 52, 61, 63.
66
See Lynch Tr. 18, 20.
67
See id. at 20, 116–17; A. Gonzalez Tr. 456.
68
See Lynch Tr. 20, 116–17. At the time of the capital call, Lynch held 5% of IMC, which
he received from Belleville through Gonzalez. Lynch acquired this interest in connection
with the efforts to squeeze out Hadad. He claims that he purchased 5% of IMC on the
“same conditions” as his claimed purchase of 65% of Belleville. Lynch Tr. 117. Although
Lynch held himself out as the genuine holder of 5% of IMC, he did not inject any funds
through the capital call. According to Lynch, this is because his shares had not been
“completely integrated” or “completely paid off” at the time of the call. Id. at 116–17. I
do not find Lynch’s testimony credible as to his genuine purchase and ownership of 5% of
IMC. Rather, I find that Gonzalez permitted Lynch to hold 5% of IMC in name only, that
Lynch never paid valuable consideration for that interest, and that the parties never
intended for Lynch to be the true owner of that interest. I find that Lynch held 5% of IMC
for Gonzalez’s benefit and pursuant to a similar agreement under which he held 65% of
18
remaining interest.69 Belleville acquired it for $1 million in December 2007.70 In
total, Gonzalez, through Belleville, paid a total of $27.345 million for the IMC
acquisition.71 By completing the acquisition, Belleville expanded the Albavision
portfolio to include ownership interests in Argentine media companies, such as
Canal 9 and FM Aspen 102.3, and Argentine real estate holdings.72
B. Gonzalez Hires Lynch As An Employee And Advisor.
At all times, Gonzalez controlled and financed Belleville’s operations.73
Gonzalez made Belleville’s decisions.74 Consequently, Lynch was required to, and
did, consult with Gonzalez and seek his approval before making decisions.75
Gonzalez did not, and would never, allow Lynch to dictate what Gonzalez did with
Belleville’s business.76 He had the final say over the operations of Belleville and its
Belleville, discussed at length infra. See, e.g., JX 117 at 161 (noting that Lynch held shares
in IMC subject to a counterdocument).
69
See Lynch Tr. 20.
70
See id. at 20, 111.
71
See id. at 20.
72
See, e.g., PTO ¶¶ 7, 8; JX 161. Telearte operates Canal 9. Telearte is financed by
Producciones Dragon, which was formed for this purpose in 2007. See Lynch Tr. 65;
Curutchet Tr. 514.
73
See, e.g., A. Gonzalez Tr. 456–57, 459–60; Gomez Tr. 448–49; Curutchet Tr. 514–15;
Casaleggio Tr. 548–49; Maleplate Dep. 30, 31.
The parties have presented no formal document naming Gonzalez as Belleville’s sole
74
manager prior to 2009, but they do not meaningfully dispute this point.
75
See, e.g., A. Gonzalez Tr. 457; Curutchet Tr. 514–15.
76
See, e.g., A. Gonzalez Tr. 457, 460.
19
subsidiaries, and could not be overridden by Lynch.77 As late as February 2018,
other advisors and employees of Belleville and its subsidiaries—including Lynch’s
subordinates—understood the same: Gonzalez, as Belleville’s owner, controlled,
directed, and financed the Belleville family’s operations.78
Gonzalez delegated many tasks to Lynch and his other employees and
advisors, and relied on their advice when making decisions for Belleville.79
Gonzalez’s reliance on and trust in Lynch grew as Lynch became more involved in
the Company. From February 2007 through July 2007, Lynch provided legal advice
to Gonzalez and Telearte as an outside attorney.80 In August 2007, Gonzalez hired
Lynch as a Telearte employee.81 Initially, he had no formal title.82 Lynch advised
IMC and Belleville’s other subsidiaries, served in-house as local Argentine counsel
with respect to Belleville’s Argentine assets, and worked closely with Canal 9.83
77
See, e.g., id.
78
See Landaburu Tr. 428–29; Gomez Tr. 441; A. Gonzalez Tr. 457, 459–60; Curutchet Tr.
514–157; Casaleggio Tr. 547–49.
79
See, e.g., A. Gonzalez Tr. 486, 490, 492, 493.
80
See Lynch Tr. 103. Prior to that time, Lynch had not worked in television or radio. See
A. Gonzalez Tr. 453.
81
See Lynch Tr. at 102; A. Gonzalez Tr. 453.
82
See Lynch Tr. 102.
83
See id. at. 18; M. Gonzalez Tr. 263; A. Gonzalez Tr. 453. Occasionally, Lynch assisted
with Gonzalez’s companies in other countries. See Lynch Tr. 18.
20
Lynch initially worked alongside Casaleggio, but quickly rose to be the
primary lawyer advising Gonzalez as to Belleville’s operations in Argentina. 84
Because Gonzalez ran Belleville’s operations from afar, he relied on Lynch to advise
on Argentine law and compliance, to act on Belleville’s behalf before the IGJ and
other regulators, and to assist with Belleville’s subsidiaries and other operations.85
Eventually, Lynch directed the local operations of Belleville and its subsidiaries and
was designated as Gonzalez’s co-manager.86 And by mid-2009, he developed
significant influence in the Belleville family and had “tak[en] charge of the legal
aspect at [Canal 9].”87 He was eventually named as Canal 9’s President, and he was
named Telearte’s President in 2011.88 In these positions, Lynch cultivated trust and
influence over others in the Belleville family—including Ariel Lambert, Marcos
Landaburu, Hernan Birencwajg, and Fernando Banus—who would later assist in or
derive benefit from Lynch’s scheme to divest Televideo of its interest in Belleville.89
84
See A. Gonzalez Tr. 454, 462–63; White Tr. 528; Casaleggio Tr. 545.
85
See, e.g., A. Gonzalez Tr. 454, 459, 461, 462–63, 464, 468, 471, 476, 478, 480, 481, 482,
483, 485, 488, 490, 499, 501, 507, 508. Gonzalez’s primary residence is in Miami.
See, e.g., JX 25.
86
See, e.g., PTO ¶ 28; JX 16; M. Gonzalez Tr. 263; A. Gonzalez Tr. 454; Casaleggio Tr.
545.
87
A. Gonzalez Tr. 454; see also M. Gonzalez Tr. 263; Casaleggio Tr. 545.
88
See Casaleggio Tr. 545.
89
See, e.g., White Tr. 531 (noting that Lynch demanded golden parachutes for these
individuals when he held the Company for ransom).
21
Lynch became Gonzalez’s “right-hand man” in Argentina.90 Gonzalez trusted
Lynch and relied on him as his employee and attorney for both Belleville and
Gonzalez’s interest in the Company.91 Accordingly, Gonzalez tasked Lynch with
conveying information and documents regarding Belleville’s Argentine operations
for Gonzalez’s final approval.92 Morelia, Gonzalez’s daughter, facilitated Lynch’s
written and email communications with Gonzalez; she received Lynch’s messages
on her father’s behalf, then relayed the information to him.93 When working with
Lynch, Gonzalez expected and assumed that Lynch had prepared all necessary
documents, that they were complete, and that Lynch had properly handled all legal
issues.94 When Lynch brought Gonzalez legal documents to sign, Lynch would
summarize them briefly and offer legal and business explanations as to why
90
White Tr. 528.
91
See, e.g., A. Gonzalez Tr. 508 (“Mr. Lynch was the attorney for the company and also
personal.”); M. Gonzalez Tr. 263 (“Q. And from 2007 and onward, did Mr. Lorefice Lynch
provide legal advice to you and your father with regards to the company? A. Yes, he did.”);
see also A. Gonzalez Tr. 454–56, 459, 468, 471, 478, 480–81, 482, 485, 486, 490, 508.
Plaintiffs attempted to impeach Gonzalez on this point in an effort to establish that Lynch
was not, in fact, Gonzalez’s personal counsel. See A. Gonzalez Tr. at 508–10. At his
deposition, Gonzalez testified that Lynch was not his personal attorney, but only the
attorney for the Company. See id. at 509–10. The preponderance of the evidence presented
at trial demonstrates that Gonzalez understood Lynch to advise him on an array of
Belleville issues, as well as with respect to his own personal stake in the Company.
See, e.g., Lynch Tr. 122.
92
See, e.g., A. Gonzalez Tr. 454–56, 459, 468, 471, 478, 480–81, 482, 485, 486, 490, 508.
93
See Lynch Tr. 133; M. Gonzalez Tr. 263–64.
94
See, e.g., A. Gonzalez Tr. 454–56, 459, 468, 471, 478, 480–81, 482, 485, 486, 490, 508.
22
Gonzalez’s signature was required.95 Lynch often assured Gonzalez that “he had
already taken care of everything and not to worry about it.” 96 Gonzalez trusted
Lynch’s representations that the documents were necessary to further a Belleville
business objective and were complete, and then signed upon Lynch’s advice.97
C. In September 2007, Lynch Strategizes To Seize Belleville.
After Lynch established himself as Gonzalez’s right-hand man in Argentina,
Gonzalez transferred 65% of Televideo’s interest in Belleville to Lynch in name
only, believing that Televideo would remain the actual beneficial owner of that
interest.98 The parties offer competing stories as to how Lynch came to hold the
interest.
According to Lynch, he negotiated for and purchased the interest outright
between September 2007 and January 2008 pursuant to two “verbal agreement[s].”99
Lynch contends that in exchange for his efforts to negotiate Hadad’s exit from IMC,
and consideration that evidently took the form of a debt assumption, Gonzalez
agreed to transfer most of Televideo’s interest in Belleville to Lynch in two blocks:
95
See, e.g., id. at 455–56, 507.
96
Id. at 456.
97
See, e.g., id. at 454–56, 459, 468, 471, 478, 480–81, 482, 485, 486, 490, 507, 508.
98
See, e.g., id. at 455, 459, 463, 483, 485.
99
E.g., Lynch Tr. 112, 125, 173.
23
5% in September 2007, and 60% in January 2008.100 Collectively, these two alleged
“purchases” would have resulted in a 65% transfer of Belleville. No
contemporaneous documents support Lynch’s testimony; instead, Lynch points to a
series of either inconsistently timed or backdated documents. I do not find Lynch’s
account credible.101
100
See, e.g., id. at 18–19, 110–11.
101
See id. at 18–19. Lynch testified that Gonzalez initially agreed to transfer 5% of
Belleville to Lynch for roughly $1.2 million, and that transfer was completed in September
2007. See id. at 107, 123. Lynch contends Gonzalez “willingly just gave [him] 5 percent
of his company . . . under a verbal agreement” just after Gonzalez had purchased IMC for
over $27 million. Id. at 112, 115. Lynch further testified that, during the same month, he
began negotiating with Gonzalez to purchase an additional 60% of Televideo’s interest in
Belleville. See id. at 18–19. According to Lynch, if he was able to squeeze out Hadad “in
an economical way or a more affordable way,” Gonzalez agreed to “transfer his 60 percent
to [Lynch] with the same terms and conditions that were negotiated with the acquisition of
the 5 percent.” Id. at 111. Belleville purchased Hadad’s remaining IMC interest in
December 2007, and Lynch contends his 60% acquisition finalized in January 2008. See
id. Together, the September 2007 and January 2008 “sales” would have established Lynch
as Belleville’s majority holder as of January 2008. Lynch admits that he did not pay for
the interests at the time of purchase. See id. at 108.
Lynch has presented no contemporaneous contract, communication, or other
document evidencing the alleged agreement or sale between Gonzalez and Lynch for the
65% transfer. See id. at 108, 109, 123; JX 5; JX 7; JX 8; JX 10; JX 11. According to
Lynch, both transfers were pursuant to “verbal” “personal” agreements. See Lynch Tr.
107, 11, 112, 123. As will be explained infra, Lynch later caused Gonzalez to execute a
series of backdated documents in 2009 to create a paper trail corroborating the “sales” that
never, in fact, occurred.
Curiously, at the time of these alleged transfers, Gonzalez and Lynch had only
known each other for nine months. See id. at 112. In addition, Lynch was providing
Gonzalez with legal advice at the time, but testified that he did not encourage Gonzalez to
seek independent counsel with respect to the purported sale. See id. at 121–24. In contrast,
for the IMC acquisition, Gonzalez insisted upon counsel and lengthy, contemporaneous
documentation. See JX 2. Lynch justifies these differences by stating that, in the IMC
acquisition, “the buyer did not know the company.” Lynch Tr. 124–25. But because he
24
Rather, I find that, in 2007, Lynch used the final steps of the IMC acquisition
as a platform to obtain Gonzalez’s signature on a document naming Lynch as
Belleville’s majority member: Lynch’s first step in subverting Televideo’s 65%
interest in Belleville.102 That document, which appears at Joint Exhibit (“JX”) 7 and
JX 8, is a “Certificate of Amendment of Grupo Belleville Holdings, LLC” that
Gonzalez executed and Lynch filed with the Delaware Secretary of State on October
18, 2007.103 It states that Gonzalez owns 5% of Belleville, Televideo owns 30%,
and Lynch owns 65%.104 Lynch presented the document to Gonzalez, who signed it
at Lynch’s direction, and then Lynch filed the document in Delaware.105
“knew the company exactly -- very well,” Lynch posits that Gonzalez did not insist upon
the same protections. Id. at 124–25. Nor did Lynch secure written contractual protections
for himself until 2009. See id. at 109. Lynch did not “see that it was necessary” to
document anything until 2009” because he “had different documents issued by Mr.
Gonzalez that confirmed [his] ownership of 65 percent.” Id. at 108. As I will explain,
these documents—signed by Gonzalez, and drafted and filed at Lynch’s discretion while
he served as Belleville’s legal representative and Gonzalez’s advisor—are riddled with
inconsistencies. Lynch’s testimony that he purchased 5% and then 60% of Belleville from
Televideo in 2007 and 2008 is not credible and not supported by the preponderance of
credible evidence.
102
See Lynch Tr. 110 (testifying that a document purportedly corroborating Lynch’s
timeline for his purportedly genuine 65% purchase was executed under the guise of the
final Hadad acquisition).
103
JX 7; JX 8 at 5; see also A. Gonzalez Tr. 475–76. For clarity, I refer to it only as JX 7,
even where testimony as to the document was elicited in response to JX 8.
104
See JX 7; accord JX 8 at 5.
105
See A. Gonzalez Tr. 475–76.
25
Lynch acknowledges that he did not actually hold 65% of Belleville at the
time JX 7 was signed and filed, and testified that its terms were “wrong.”106 Lynch
contends that because Gonzalez signed JX 7 and acknowledged that it was filed with
the Delaware Secretary of State, JX 7 is evidence of the supposed agreement to “sell”
Lynch 65% of Belleville between September 2007 and January 2008.107 But the
purported “sales” never happened, and the fact that JX 7 was filed months before the
purported 60% sale supports that conclusion.108 Further, Lynch’s explanation as to
why JX 7 was executed months before the purchase it purportedly documents does
not hold together. 109
106
Lynch Tr. 110.
107
See id. at 19–20, 110.
108
JX 7 was executed and filed in October 2007 before Gonzalez and Lynch allegedly
agreed to transfer the second 60% block of Belleville to Lynch in January 2008. See JX 7;
JX 8 at 5; Lynch Tr. 19.
109
When asked whether JX 7 and JX 8 “reflect[ed] your terms and conditions that you
agreed with Mr. Gonzalez,” Lynch responded, “No. . . . [T]his document reflects that Mr.
Gonzalez, in name of Televideo Services, transferred 65 percent of interest in Grupo
Belleville to me of Televideo.” Lynch Tr. 110. He then agreed that “this document is
wrong” because JX 7 was executed before Hadad sold his remaining interest in IMC and
before Lynch came to hold Televideo’s 65% interest in Belleville. Id.
Lynch explained that JX 7 was executed as an incentive or aid for Lynch to squeeze
Hadad out. According to Lynch, “this document was previously done so that I could
perform the exclusion of Mr. Hadad and that that could generate the transfer of the 65
percent.” Id. JX 7 was “signed before [Lynch] could exclude Mr. Hadad, which seemed
to be in a bit of a rush.” Id. at 19. Lynch testified that Gonzalez offered Lynch an additional
60% of Belleville if Lynch could successfully acquire Hadad’s remaining interest in IMC,
and that “Gonzalez made [him] work harder in order to achieve the objective.” Id. at 19–
20. Lynch did not succeed in negotiating for Hadad’s remaining interest until December
2007. See id. at 20, 111. Lynch paid nothing to Gonzalez or Televideo before JX 7 was
26
The preponderance of credible evidence demonstrates that Lynch drafted and
filed JX 7 in the context of the final Hadad acquisition, and presented it to Gonzalez
under the guise that it was needed to carry out the final steps of that transaction.110
Gonzalez trusted Lynch’s advice that Gonzalez’s signature was required to further
that business objective.111 Gonzalez credibly testified that, aside from signing JX 7
at Lynch’s direction, he had no involvement with its preparation or filing.112 And
Morelia testified that she did not receive JX 7 or any other paperwork indicating that
there had been a 65% transfer in 2007.113 She did not see a copy of JX 7 until 2008
or 2009, when Lynch informed her and Gonzalez that they needed to alter
Belleville’s ownership structure to comply with Argentine law.114
filed in October 2007, and there was no discussion, by email or in person, of the terms of
any purchase for the total 65%, including the price at which Lynch would acquire it. Lynch
has offered no credible explanation as to why it would have been necessary or helpful to
file this document with the Delaware Secretary of State before the Hadad squeeze-out and
transfer of his interests in IMC to Belleville closed.
110
See Lynch Tr. 110; A. Gonzalez Tr. 475–76; M. Gonzalez Tr. 264–66.
111
See, e.g., Lynch Tr. 110; A. Gonzalez Tr. 459, 463, 464, 466, 467, 468, 471, 472, 478,
480–81, 482, 483, 485, 486, 487, 488, 490, 493, 494, 469, 499, 516; see also White Tr.
528.
112
See A. Gonzalez Tr. 475–76.
113
See M. Gonzalez Tr. 264–66.
114
See id. at 265–66.
27
I find that JX 7 is inaccurate: Lynch did not purchase or otherwise acquire
65% of Belleville at the time Gonzalez executed it and Lynch filed it.115 Lynch
prepared and filed JX 7 with the Delaware Secretary of State for his own benefit,
knowing that Gonzalez would sign the document believing it was needed for the
Hadad acquisition and remaining ignorant as to the facts.116 I conclude that JX 7
was Lynch’s first test run to determine the extent to which Gonzalez would trust his
advice and sign documents at his request.
Lynch did not stop with JX 7. The next step in his paper trail was submitted
as JX 10.117 JX 10 is an affidavit that Lynch signed and filed in his capacity as
Belleville’s legal representative on November 26, 2007 with the Argentine IGJ.118
It is not signed by Gonzalez.119 While Lynch represented that he owned 65% of
Belleville when he filed JX 7 in October 2007, one month later, in JX 10, he
represented that he owned just 5%.120 Only Lynch testified about JX 10, and he has
115
These problematic documents support my finding that the September 2007 and January
2008 “verbal agreements” never happened.
116
See Lynch Tr. 110; A. Gonzalez Tr. 475–76; M. Gonzalez Tr. 264–66.
117
See JX 10. This document also appears in JX 3. See JX 3 at 24. Lynch points to JX 10
to corroborate the purported September 2007 and January 2008 transfers. However, I find
that JX 10 further refutes the authenticity of JX 7 and the alleged verbal agreements
between Lynch and Gonzalez.
118
See JX 10; see also JX 3 at 24, 25; Lynch Tr. 120–22.
119
JX 10.
120
See JX 10; Lynch Tr. 20–21, 120–22.
28
offered no testimony credibly explaining this discrepancy.121 The preponderance of
credible evidence suggests that Lynch prepared and filed JX 10 without Gonzalez’s
knowledge or approval, using his position as Belleville’s legal representative to
tinker with the record of Belleville’s ownership for his own benefit. 122 Taken
together, JX 10 and JX 7 were the first steps in Lynch’s scheme.
D. Lynch Devises A Strategy To Both Accommodate Argentine
Legislation And Pad His File; Gonzalez Agrees To
Conditionally Transfer 65% Of Belleville To Lynch In Name
Only; And Lynch Prepares A Suite Of Documents To Paper The
65% Transfer.
Before 2009, Argentine law did not limit the ability of an American company
to hold an interest in an Argentine media company.123 In late 2008, Casaleggio
informed Lynch of an upcoming change in Argentine law that would prevent a
foreigner from holding more than 30% of an Argentine media company unless the
foreign country had a reciprocal agreement with Argentina.124 Gonzalez and
Televideo did not have the benefit of such an agreement.125
121
See Lynch Tr. 20–21, 120–22.
122
See JX 10; Lynch Tr. 20–21, 120–22. Hereafter, Lynch doggedly pursued a paper trail
that pegged his interest at 65% or higher. One reasonable inference is that Lynch was not
yet ready to paper his full scheme with Argentine regulators. That day would quickly
arrive.
123
See Lynch Tr. 132.
124
See Casaleggio Tr. 547–48.
125
See id.
29
Lynch proposed a solution that would allow Gonzalez and Televideo to
remain Belleville’s actual beneficial owners, while simultaneously complying with
Argentine law.126 Lynch volunteered that, as an Argentine citizen, he take 65%
majority membership in Belleville in name only.127 When Casaleggio doubted
whether Gonzalez would approve that plan, Lynch told her that he and Gonzalez
would also execute a counterdocument: “a contract . . . established to depict the real
situation of the owners” and evidencing that “Gonzalez was still going to be the
owner of what he had purchased.”128
Lynch approached Gonzalez in late 2008 and informed him “[t]hat possibly
the law might change where ownership would have to be held by an Argentine
citizen at 65 percent of it.”129 At that time, Lynch “had already been taking charge
of the legal aspect of the station,” and suggested that “[they] needed to change the
ownership to be able to apply to the corresponding institutions in Argentina and to
agree with what is mandated by the law.”130
126
See A. Gonzalez Tr. 454–55, 463; Casaleggio Tr. 547–48.
127
See A. Gonzalez Tr. 454–55, 463; Casaleggio Tr. 547–48.
128
Casaleggio Tr. 548; accord Lynch Tr. 145.
129
A. Gonzalez Tr. 453–54.
130
Id. at 454.
30
Aware that Gonzalez would never agree to actually give Lynch 65% of
Belleville, Lynch assured Gonzalez that he would prepare a counterdocument
acknowledging Televideo would retain actual, beneficial ownership of that interest
and that Lynch would return it to Televideo upon request.131 As Gonzalez testified,
“he offered a document and he personally informed me and said not to worry and so
that I could be calm, that he will create a counter document.”132
According to the witnesses, counterdocuments are commonly used for
business transactions throughout Latin America.133 They reflect an understanding
between assignor and assignee that, upon the assignor’s request, the assignee will
return the subject property to the assignor.134 As Lynch explained it, the
counterdocument was “a guarantee that the company being held in someone else’s
name would go back to Mr. Gonzalez.”135 Gonzalez used counterdocuments for his
operations in other countries;136 in particular, Lynch drafted counterdocuments for
131
See, e.g., id. at 453–55, 456, 457, 459, 463, 472, 474; Casaleggio Tr. 457–58; see also
Lynch Tr. 146–56; JX 24; JX 25.
132
A. Gonzalez Tr. 455.
133
See, e.g., Lynch Tr. 82–83, 84, 145, 146; Landaburu Tr. 433; A. Gonzalez 474;
Casaleggio Tr. 548.
134
See, e.g., Lynch Tr. 145; Casaleggio Tr. 548.
135
Lynch Tr. 145.
136
See, e.g., id. at 82–83, 105, 145, 157; Lambert Tr. 354; JX 98; JX 99; JX 106; JX 107;
JX 109; JX 110; JX 113; JX 116; JX 117.
31
Belleville Investments in the Bahamas and Worldwide Features, Inc. in Panama.137
In those cases, Lynch drafted, executed, and performed under the counterdocuments’
terms, ultimately returning the subject interests to Gonzalez as required.138
Lynch assured Gonzalez that this solution would ensure compliance with
governing law and protect Gonzalez’s and Televideo’s collective 100% interest in
Belleville, just as it had protected Gonzalez’s interest in other companies in the
past.139 Trusting Lynch’s advice that the transfer was necessary to maintain
Belleville’s holdings in Argentina, Gonzalez agreed to transfer 65% of Belleville to
Lynch in name only.140
The parties agreed to the following terms: (1) Gonzalez would transfer 65%
of Televideo’s interest in Belleville to Lynch, in name only, for the purpose of
satisfying Argentine regulations; (2) Lynch would never have or otherwise hold full
beneficial ownership of the 65%; (3) Televideo would remain the actual beneficial
owner of the interest, and the parties would memorialize that understanding in a
counterdocument; (4) the parties would paper this sham transfer, naming Lynch as
Belleville’s 65% member in public and private documents, for presentation to
137
See Lynch Tr. 88, 105, 145, 156–57; Landaburu Tr. 433–34, 436.
138
See Lynch Tr. 88, 105, 145, 156–57, 240–49; Landaburu Tr. 433–34, 436.
139
See, e.g., A. Gonzalez Tr. 455, 459, 463.
140
See, e.g., id. at 454, 455, 459, 463.
32
regulators; and (5) Lynch would return the 65% interest to Televideo upon
Gonzalez’s request.141
There was no intent to transfer actual beneficial ownership of the interest to
Lynch: “the idea or the spirit was never that [Lynch] was going to be a shareholder.
The idea was that in order to be able to comply with the legal needs of Argentina,
[documents] would be signed but [Gonzalez and Televideo] would still be the
owners.”142 Gonzalez credibly testified that he would not have agreed to the transfer,
or to sign any document evidencing it, if he was not protected by the
counterdocument memorializing Televideo’s true ownership.143 Despite his plans to
the contrary, Lynch told Gonzalez that he agreed to this arrangement.144
After Gonzalez agreed to Lynch’s plan, Lynch prepared, and Gonzalez and
Morelia executed, paperwork to be presented to the Argentine regulator Comite
Federal de Radiofusion (“COMFER”), reflecting that Televideo transferred 65% of
Belleville to Lynch.145 JX 37 is a “Certificate of the Secretary of Grupo Belleville
141
See, e.g., id. at 454, 455, 459, 463; JX 24; JX 25.
142
A. Gonzalez Tr. 463.
143
Id. at 459:20–23 (“Q. Would you have signed any of those documents if you did not
have the counterdocument? A. No. First of all, we wanted to make sure that the property
would still be ours.”).
144
See, e.g., JX 24; M. Gonzalez Tr. 265–66, 279; A. Gonzalez Tr. 455, 463, 485.
145
See M. Gonzalez Tr. 266–67; Casaleggio Tr. 546.
33
Holdings” filed with COMFER on December 31, 2008, to demonstrate that an
Argentine owned a majority stake in Belleville.146
The document is signed by Gonzalez and his daughter, Morelia, in her
capacity as Belleville’s secretary.147 Morelia certified that Lynch held 65% of
Belleville, Televideo held 30%, and Gonzalez held 5%.148 Morelia signed the
document “[b]ecause Lorefice had told [her] to sign it” in his capacity as Belleville’s
attorney.149 Likewise, Gonzalez testified that “[n]either Morelia or myself [were]
the ones preparing the documents,” and that “[a]ll these things Carlos brought over
and he asked for our signatures.”150 Gonzalez “was just signing what Lorefice told
him to sign.”151 Gonzalez and Morelia executed JX 37 because Lynch informed
them that it was needed to comply with Argentine law and assured Gonzalez that
146
See JX 37; Lynch Tr. 21–22. During the relevant years, the Argentine government
agency responsible for oversight control of broadcasting companies had several names:
Comite Federal de Radiodifusion (“COMFER”), Autoridad Federal de Servicios de
Comunicación Audiovisual (“AFSCA”) and Ente Nacional de Comunicaciones
(“ENACOM”). See Glossary of Stipulated Terms at 1, 3.
147
JX 37. There was a dispute as to whether Morelia was, in fact, Belleville’s secretary at
the time this document was executed and filed, but that dispute has no bearing on my
findings. See M. Gonzalez Tr. 266–67, 294–96; A. Gonzalez Tr. 498–99, 501–02.
148
See JX 37.
149
M. Gonzalez Tr. 267.
150
A. Gonzalez Tr. 499, 501.
151
M. Gonzalez Tr. 294; see A. Gonzalez Tr. 499, 501.
34
there would be a counterdocument.152 In view of the agreement that Lynch would
hold the 65% in name only, JX 37’s certification that Lynch was the owner of 65%
of Belleville Holdings was “correct.”153 And on the heels of JX 37, the parties
further padded their scheme by designating Lynch as Belleville’s co-manager,
alongside Gonzalez, in January 2009.154
Thereafter, the parties created several additional documents in order to present
a cohesive and consistent picture to regulators, and to legitimize the hastily executed
JX 37 in the event regulators would request the “transfer” documents.155 Gonzalez
signed each document, believing that each was necessary to further the parties’
mutual scheme to facially satisfy Argentine law and that, therefore, each was a sham
152
See M. Gonzalez Tr. 267, 294; A. Gonzalez Tr. 454, 498–501.
153
See M. Gonzalez Tr. 295. Lynch points to JX 37 as evidence of the purported September
2007 and January 2008 verbal agreements. While JX 37 is consistent with Lynch’s
preferred timeline of events, as it was signed and filed after the 60% “sale” closed in
January 2008, the preponderance of the evidence shows that JX 37 was executed in
December 2008 based on the parties’ true agreement that the 65% transfer was in name
only to satisfy regulations.
154
See PTO ¶ 28; JX 16. The parties stipulated to this fact, and post-trial, Defendants do
not appear to refute Lynch’s designation as co-manager. However, I note my reservations
about the accuracy and authenticity of this designation. JX 16 is dated January 20, 2009,
but was signed and notarized on November 9, 2009. See JX 16. To me, it appears to be
one of many documents that Lynch prepared for Gonzalez’s signature, supposedly in
furtherance of the sham transaction discussed infra. I also note that JX 16 is notarized by
Marco Cuono, Gonzalez’s son-in-law. See JX 16; M. Gonzalez Tr. 273. This is one of
many documents in the record that Cuono notarized after the fact. See, e.g., JX 5, JX 11;
JX 12.
155
See, e.g., JX 5; JX 6; JX 11; JX 12; JX 13; JX 14; JX 15; JX 24; JX 25; JX 26; JX 27;
JX 28; JX 29; JX 30; JX 31; JX 32; JX 35; JX 64; JX 66; JX 67; JX 68.
35
document with meaningless, non-binding terms.156 Lynch would eventually
weaponize these documents to claim he actually purchased and held 65% of
Belleville.157
For example, Belleville’s tax returns from 2008 on reflected that Lynch
owned 65% of Belleville.158 Those returns included a Form K-1.159 In May 2009,
Lynch sent his accountant a K-1 for 2008 that identified him as Belleville’s 65%
owner.160 He also provided a copy of JX 7 as “proof of [his] ownership” because he
“bought the shares without paying for them.”161 He annotated the copy: “NRA”
appears beside Lynch’s name, and “Class ‘B’, N/V; Profits interest” appears beside
his membership interest.162 I understand these notes to indicate that Lynch is a
“nonresident alien” that holds a “non-voting” interest in Belleville.163 This is
consistent with Gonzalez’s testimony that Lynch never had the full rights and
156
The only exception to this belief was the Counterdocument, JX 25, which evidenced the
parties’ agreement that Televideo remained the beneficial owner of the 65% membership
interest, despite papering a sham transaction to satisfy Argentine law.
157
See, e.g., White Tr. 530–33.
158
See JX 17; Gomez Tr. 440–41.
159
See JX 17; Gomez Tr. 440–41.
160
See JX 17 at 3.
161
Id. at 1, 2.
162
See id. at 4; JX 7. These handwritten notes do not appear on the copy of this document
that appears as JX 8. Compare JX 7, and JX 17 at 4, with JX 8.
163
See Lynch Tr. 119–20. Lynch testified that he could not recall the meaning of these
notes; I am unpersuaded by his hedging.
36
benefits of Belleville ownership, and with the actual timeline of events.164 At trial,
Lynch testified that he could not recall what these annotations meant, and touted his
65% ownership as genuine.165
In view of the new Argentine law, on October 15, 2009, Lynch advised
Gonzalez that they needed to execute additional documents to memorialize the 65%
transfer.166 He explained:
In the year 2009, the media law in Argentina was modified because it
differed to what was in effect up to 2009. The regulating entity did not
only see the American company as an owner of the rights, but it looked
for the ultimate beneficial owner of this case, who was the final owner,
not the ultimate beneficial owner but, rather, the final owner, the
ultimate owner.167
164
As discussed infra, this 2009 email, the K-1, and the markings on JX 7, are consistent
with Gonzalez’s timeline of events. Gonzalez first agreed to “transfer” 65% to Lynch in
name only in December 2008, so Lynch received a Form K-1 for calendar year 2008 in
connection with Belleville’s U.S. tax filings, stating that he was Belleville’s 65% owner.
See JX 17 at 2. Lynch provided that document to his personal accountant, and attached JX
7 to document his ownership in view of the absent payment. See id. at 1; Lynch Tr. 21–
22. Lynch’s “purchase” was logged through a series of documents Lynch created in 2009,
2010, and 2016. See, e.g., JX 5; JX 6; JX 11; JX 12; JX 13; JX 14; JX 15; JX 24; JX 25;
JX 26; JX 27; JX 28; JX 29; JX 30; JX 31; JX 32; JX 35; JX 64; JX 66; JX 67; JX 68. The
fact that Lynch’s ownership was flagged as “N/V” is consistent with the actual terms of
the parties’ agreement to create a sham ownership structure.
165
See Lynch Tr. 119–20; JX 17 at 1.
166
See JX 18; A. Gonzalez Tr. 454–55.
167
Lynch Tr. 107.
37
Lynch also advised that his stake should be increased from 65% to 70% pursuant to
a new Argentine law.168
Also on October 15, Lynch emailed Marco Cuono, an attorney and Gonzalez’s
son-in-law, stating they needed to “modify the corporate composition of [Belleville]
as follows and on February 2, 2009 (this is so it doesn’t contradict with what was
reported in January 2008, which was the latest that was presented).”169 Lynch
suggested increasing his holdings in Belleville to 70%, eliminating Gonzalez’s
personal 5% holding in Belleville but allowing Televideo to remain at 30%.170
Lynch pushed to backdate the document, stating that “[t]he certification date must
be February 2, 2009.”171
That same day, Lynch also emailed Morelia:
168
See JX 18; Lynch Tr. 131–33. He informed Gonzalez that they “need[ed] to perform a
new transfer . . . for [Lynch] to acquire a major percentage than the one [he] already had at
the time.” Lynch Tr. 132. Lynch needed “to acquire a greater percentage in order to
complete that 70 percent because, at that time, I did not have 70 percent.” Id. at 133. Lynch
proposed several solutions, including further shuffling shares around in his name. See JX
18 at 1–2. He stated that “an important issue to solve would be the price of the shares given
the fact that the sale would be carried out by an American resident.” Id. at 2.
169
JX 20 at 1. As stated, Cuono was the parties’ preferred notary for backdated documents.
See supra note 154.
170
See JX 20 at 1.
171
Id.
38
I spoke with your father today, to whom I explained the situation in
Argentina regarding the shareholding structure. Your father told me to
take his shareholding in GBH. According to our conversation by
phone, in principle it would be taking the 5% that he had personally,
leaving my stake in Telearte indirectly as follows . . . .172
Lynch informed Morelia that he would be sending documents for Gonzalez to sign
in order to further document the 65% transfer and to increase his holdings to 70%.173
Those documents would reflect “acquisition of 65% of GBH from Televideo
(Clarifying that is really to assume the debt with the companies),” “acquisition of
5% of GBH from RAGG,” and “acquisition of 5% of [IMC] from GBH.”174 The
proposed 5% transfer of Gonzalez’s personal Belleville interest never materialized
and was never documented.175
In order to further document the fake 65% transfer, Lynch prepared a series
of eight documents for Gonzalez to execute in Miami.176 He emailed them to
Morelia on October 22, 2009 (the “October 22 Email”); she then conveyed them to
Gonzalez.177 Lynch informed Gonzalez and Morelia that the documents needed to
172
JX 21 at 1–2.
173
See id. at 2.
174
Id.
175
Lynch Tr. 135–36.
176
See, e.g., JX 24; JX 25; JX 26; JX 27; JX 28; JX 29; JX 30; JX 31; JX 32.
177
See JX 24; M. Gonzalez Tr. 276–77, 303.
39
be promptly executed.178 Lynch said that, once Gonzalez executed the documents,
Lynch would take the signed documents back to Buenos Aires for completion.179
The October 22 Email attached documents “regarding the operations that
made [Lynch] acquire 65% of GBH.”180 As described by Lynch, the attached
documents were (1) a purchase agreement for 5% of Belleville, dated September
2007 (the “First Purchase Agreement”); (2) a notification letter to Belleville of the
5% transfer; (3) a purchase agreement for 60% of Belleville, dated January 2008 (the
“Second Purchase Agreement”); (4) a notification letter to Belleville of the 60%
transfer (together with the 5% notification letter, the “Notices”); (5) a debt
assumption agreement for $16 million of Televideo’s debt (the “Addenda”);181 (6) a
dation-in-payment; and (7) a blank transfer notice.182 Of particular importance,
178
See JX 24 at 2.
179
See id. at 1–2.
180
Id. at 1.
181
The email reflects that the price was not based on the value of the 65%, but instead on
the readily calculable amount of debt. See id. at 2; M. Gonzalez Tr. 300–01. Gomez, the
accountant for both Gonzalez and Belleville, was involved in reviewing the documentation
to ensure that Televideo’s debt could properly be removed from its books. See M.
Gonzalez Tr. 301.
182
See JX 24; JX 26; JX 27; JX 28; JX 29; JX 30; JX 31; JX 32; see also JX 5; JX 6; JX 11;
JX 12; JX 13; JX 15.
40
consistent with other transactions Lynch previously devised for Gonzalez, Lynch
provided (8) a sworn statement (the “Counterdocument”).183
Lynch advised Gonzalez that these documents were necessary to comply with
Argentine law, and that they documented the transfer for public record purposes
only, such that Gonzalez and Televideo would remain the actual and beneficial
owners of all membership interests in Belleville.184 Lynch informed Gonzalez that
he “urgently need[ed]” the First and Second Purchase Agreements (together, the
“Purchase Agreements”) and their accompanying Notices to memorialize Lynch’s
proposed plan.185 But Lynch intended those documents to bolster his story that he
had purchased the 65% interest in September 2007 and January 2008. Morelia
printed each document, and gave them to Gonzalez for his signature. He executed
each of them, including the Counterdocument.186
The First Purchase Agreement, JX 5, transferred a 5% membership interest in
Belleville from Televideo to Lynch.187 It is backdated to September 7, 2007, but
183
JX 25; see also JX 23.
184
See, e.g., JX 24; Lynch Tr. 132–33; A. Gonzalez Tr. 454, 455, 459, 463, 466–68, 472,
474.
185
JX 24 at 2.
186
See M. Gonzalez Tr. 276–77, 303.
187
JX 5; accord JX 26.
41
was signed in October 2009.188 The Second Purchase Agreement, JX 11, transferred
a 60% membership interest in Belleville from Televideo to Lynch.189 It is backdated
to January 8, 2008, but was signed in October 2009.190 The Purchase Agreements
contain similar language.191 And both Purchase Agreements were accompanied by
a notice from Televideo to Belleville of the subject transfer.192
Because the Purchase Agreements memorialized a sham transaction that no
party intended to perform, the Purchase Agreements’ substantive terms were
188
See JX 5; JX 24; Lambert Tr. 320; M. Gonzalez Tr. 276–77, 303.
189
JX 11; accord JX 28.
190
Lynch chose these fictitious dates to bolster his story that he purchased the 65% interest
at those times. See Lynch Tr. 130–31; M. Gonzalez Tr. 275–76; see also JX 21 (directing
Morelia to backdate documents); JX 24 (providing Purchase Agreements backdated to
September 2007 and January 2008). Still, the chosen dates are inconsistent with JX 7,
which Lynch filed in October 2007 to identify himself as Belleville’s 65% member.
191
Compare JX 5, with JX 11. The First Purchase Agreement states: “It is [Televideo’s]
intention to sell, assign and transfer to [Lynch] FIVE PERCENT (5%) of [Belleville’s]
capital stock, as well as all irrevocable contributions made or pending to be made to
[Belleville] on account of the future issue of shares, all ownership rights, and all profits
corresponding to said ownership.” JX 5 at 12, ¶ c. The Second Purchase Agreement
contains identical language with respect to the 60% transfer. See JX 11 at 12, ¶ c.
192
Compare JX 6, with JX 13. The 5% Notice states: “We are writing to you in order to
inform that on the date hereof Televideo Services Inc. has transferred to Carlos Eduardo
Lorefice Lynch an [interest] equivalent to FIVE PERCENT (5%) in Grupo Belleville
Holdings, L.L.C., including the whole voting and economic rights arising from said
beneficial ownership.” JX 6 at 5. The Notice associated with the Second Purchase
Agreement states contains identical language with respect to the 60% transfer. See JX 13
at 5.
42
immaterial. Gonzalez allowed Lynch to arbitrarily set their terms.193 The Purchase
Agreement provided that the total purchase price for 65% of Belleville was $16
million.194 The Purchase Agreements required Lynch to pay interest annually,195 but
Lynch was not required to pay principal until January 8, 2013.196 Lynch’s principal
payments were divided into ten equal installments totaling $16 million.197 Lynch
did not deliver any cash when the parties executed the Purchase Agreements.198
Lynch also drafted an Addenda, JX 30, framing the consideration as a debt
assumption.199 Backdated to January 2008, the Addenda provided that Lynch would
assume $16 million of Televideo’s debt incurred through the IMC acquisition.200
This artifice was consistent with Lynch’s October 22 Email, conjuring up a purchase
193
See, e.g., A. Gonzalez Tr. 471, 485; JX 24 (tethering purchase price to arbitrary debt
amounts without mention of any negotiated price term). Lynch claims “negotiations” took
place for the transfer. They did not. See supra notes 98–101 and accompanying text.
194
See, e.g., JX 5 § 2.1; JX 11 § 2.1; JX 12 § 1.1.
195
See JX 5 § 2.2; JX 11 § 2.2.
196
See JX 5 §§ 2.1, 2.2; JX 11 §§ 2.1, 2.2.
197
See JX 5 §§ 2.1, 2.2; JX 11 §§ 2.1, 2.2.
198
See, e.g., Lynch Tr. 95, 107–08, 117.
199
See JX 12; accord JX 30. The Addenda did not alter Lynch’s payment schedule from
the Purchase Agreements. See JX 12 § 3. Pursuant the Addenda, the “Parties agree[d]
that, as payment for the Membership Interest, [Lynch] undertakes and is obligated to pay
liabilities that [Televideo] owes to [Televideo’s] Creditors, for up to an amount equivalent
to the price agreed in the Purchase Agreements for the transfer of the Membership Interest,
that is SIXTEEN MILLION US DOLLARS.” Id. § 1.1. Televideo’s creditors conferred
and expressly agreed to release Televideo from $16 million of its debt. See id. § 1.2.
200
See JX 30.
43
price based not on the actual value of the 65% interest, but instead on the readily
calculable amount of debt.201 The Addenda specified that, because Lynch assumed
Televideo’s debts, Lynch’s payments under the Purchase Agreements were to be
made to Televideo creditors.202
Lynch successfully convinced Gonzalez to execute the suite of Purchase
Agreements, Notices, and the Addenda to legitimize the sham transfer, effectuate
Lynch’s plan to circumvent Argentine holding restrictions, and ultimately seize the
opportunity to run off with the Company. And Belleville continued to enshrine
Lynch’s ownership in its public filings and private documents so as not to tip off
Argentine regulators regarding Belleville’s actual ownership.203
E. Gonzalez Executed Sham Documents Because Lynch
Represented That He Would, And Did, Execute The
Counterdocument.
In accordance with their plan, Gonzalez believed, because Lynch indicated,
that the Purchase Agreements, Notices, and Addenda facially identified Lynch as
holding 65% of Belleville and the associated voting and economic rights, but that
201
See JX 24 at 1 (stating that under the Addenda “CLL assumes the debt for US $16M
that Televideo Services holds with (Interamericana, Belleville, Prolasa and EFG
Worldwide (at this point we have to confirm the amounts and people that would sign for
each of the companies)”).
202
See JX 30 §§ 1.2, 2; accord JX 12 §§ 1.2, 2.
203
For example, Belleville’s tax returns from 2008 through 2017 name Lynch as
Belleville’s 65% owner. See Gomez Tr. 440–47, 448. Gonzalez signed them.
44
Televideo would remain the interest’s true beneficial holder via the
Counterdocument.204 The Counterdocument reflects the understanding that Lynch
held only record title to the 65% interest and that Gonzalez (through Televideo) was
its actual, beneficial owner.205 It expressly provided that Lynch would return record
ownership to Televideo upon request.206 And it made clear that Gonzalez would
provide all funds used to “acquir[e]” Lynch’s holdings.207
Gonzalez focused on completing the Counterdocument to reflect the same,
with little focus on the sham documents’ terms.208 At all times, Gonzalez operated
under the belief that Lynch would, and did, execute the Counterdocument as
promised.209 Gonzalez agreed to the 65% transfer in 2008 because Lynch promised
to execute a counterdocument, and he signed the suite of documents in 2009 because
Lynch’s October 22 Email included the Counterdocument and Lynch represented
that he would execute it.210 Gonzalez would not have executed any other
204
See, e.g., A. Gonzalez Tr. 453–55, 456, 457, 459, 463, 472, 474, 485.
205
See, e.g., JX 25; Lynch Tr. 145; Casaleggio Tr. 548.
206
See JX 25 ¶ 6.
207
Id. ¶ 2.
208
See, e.g., A. Gonzalez Tr. 453–55, 456, 457, 459, 463, 472, 474, 485.
209
See, e.g., id. at 455, 456, 459, 463, 472, 474, 483, 485, 494; see also M. Gonzalez Tr.
277–78, 279–80, 289–90; White Tr. 451.
210
See A. Gonzalez Tr. 455, 459.
45
documentation, including the remaining attachments, without it.211 Lynch knew
this.212
Lynch drafted the Counterdocument and sent it to Gonzalez.213 He promised
Gonzalez that he and his wife would execute the Counterdocument to ensure
Gonzalez would sign the other documents papering the 65% transfer.214 Lynch
suggested a number of ways they could arrange his wife’s signature, then “insist[ed]
that this [Counterdocument] should be signed tomorrow.”215
Gonzalez signed the Counterdocument shortly after receiving the October 22
Email.216 Lynch then retrieved the Counterdocument from Gonzalez, and took it
with him to Argentina under the guise that he needed his wife’s signature.217
Gonzalez always believed that Lynch and his wife signed the Counterdocument
211
See id. at 459 (“Q. Now, going back to the counterdocument, you signed a number of
documents with Mr. Lorefice concerning GBH; correct? A. Definitely, yes. Because he
was my employee and my attorney, I completely trusted in him. Q. Would you have signed
any of those documents if you did not have the counterdocument? A. No. First of all, we
wanted to make sure that the property would still be ours.”).
212
See Lynch Tr. 146–153; JX 24; JX 25.
213
See Lynch Tr. 145–54; A. Gonzalez Tr. 455.
214
See Lynch Tr. 145–54; A. Gonzalez Tr. 455.
215
JX 24 at 2.
216
See, e.g., Morelia Tr. 303.
217
See JX 24 at 2.
46
provided in the October 22 Email; he never agreed or suggested that Lynch need not
sign it.218
218
See, e.g., A. Gonzalez Tr. 456 (“Q. Did you ever agree with Mr. Lynch to get rid of the
counterdocument? A. Never.”), 463 (“Everything that I signed for, there was always a
counterdocument. And he will prepare them. I completely trusted in Mr. Lorefice.”); see
also Lynch Tr. 129–30; Morelia Tr. 303; White Tr. 541.
Lynch testified that while he never intended to sign the Counterdocument, he told
Gonzalez he would sign it in order to secure a meeting with Gonzalez to negotiate the terms
of the Purchase Agreements. See Lynch Tr. 129–30, 148, 152, 153–54. Lynch testified
that he hoped that, once the promise of a Counterdocument gave Gonzalez a sense of
security, Gonzalez would agree to a meeting with him to further negotiate the terms of his
ownership stake. See, e.g., id. at 153–54, 251; JX 24.
According to Lynch, soon after sending the October 22 Email, he met with Gonzalez
in Miami. See, e.g., Lynch Tr. 26, 251. Lynch testified that he and Gonzalez were the only
two people at the meeting. See id. at 26; M. Gonzalez Tr. 303. He contends that at that
meeting, they signed at least four documents: the two Purchase Agreements and the two
purchase notifications. See id. at 27–28 (stating Gonzalez signed the Purchase Agreements
at the supposed meeting); but see M. Gonzalez Tr. 303 (stating Morelia printed the
Purchase Agreements and gave them to Gonzalez to sign as directed in the October 22
Email, JX 24).
Lynch further contends that, at that meeting, he told Gonzalez that he would not
execute the Counterdocument, dation-in-payment, or blank transfer notice, and that
Gonzalez agreed. See, e.g., Lynch Tr. 26–28, 148, 149, 251–53. According to Lynch, they
“agreed to replace the reviewed documents as affidavit or sworn statement, the dation of
payment, and the transfer for a security interest.” Id. at 27. Lynch says they then “modified
the security interest” and agreed to do away with the Counterdocument because “it’s totally
excessive. It does not reflect reality. . . . That’s why [Lynch] never wanted to sign it, and
that’s why it was replaced by another document that . . . does reflect a security interest.”
Id. at 152, 153. To support this contention, Lynch points out that none of the witnesses
who saw the Counterdocument testified to seeing executed copies of the dation-in-payment
or blank transfer notice. See D.I. 190 at 6.
I am unpersuaded. Only Lynch’s own testimony supports his position that he told
Gonzalez he would not sign the Counterdocument, and that Gonzalez agreed. See, e.g.,
Lynch Tr. 149. I do not find Lynch’s testimony credible, and the preponderance of the
evidence shows no such in-person meeting or negotiations occurred. No document has
been presented reflecting such negotiations. The terms of Lynch’s “purchase” or “security
interest” were meaningless because, as explained, Lynch never “purchased” any interest in
47
At trial, Lynch testified that he lied when he promised to execute the
Counterdocument.219 He never intended to sign it.220 He testified that the
Counterdocument is “a draft I sent and that I never thought of signing” and that “it
was never my intention to sign it, nor the intention of having my wife sign it.” 221
And consistent therewith, he adamantly testified that he never signed the
Counterdocument.222 This remarkable admission was the most credible piece of
Belleville. Therefore, as I will explain, the terms of that “purchase” were never performed.
The only “security” that serves as a logical counterpart for a sham purchase is a document
clarifying no true transfer ever occurred. Lynch’s contention that Gonzalez agreed to
eliminate the Counterdocument is unsupported and inconsistent with the record. If
Gonzalez and Lynch met in person, I find they did not negotiate the terms of Lynch’s
“purchase” or agree to—or even discuss—doing away with the Counterdocument that was
so important to Gonzalez. See A. Gonzalez Tr. 456, 462–63.
219
See Lynch Tr. 145–54.
220
See, e.g., id. at 146 (Q. Were you ever going to sign item 1 that you’ve listed and given
to Morelia? A. No, it was never my intention to sign it, nor the intention of having my
wife sign it.”), 147 (“[W]hat I was saying was I was going to do something that it wasn’t
my intention to do. It could be a lie.”), 150 (“[M]y intention was never to sign them.”),
155–56 (“What I’m saying is that, to Mr. Gonzalez’s understanding, the documents
numbered 1, 7, and 8 served as a security interest. To my point of view, the way I see it,
it’s totally excessive. It does not reflect reality. . . . That’s why I never wanted to sign
it . . . .”), 158 (“It’s a draft I sent and that I never thought of signing.”), 159 (“It was a draft
of a sworn statement that I was not going to sign -- of an affidavit that I was not going to
sign. . . . I told the Court that it was never my intention to sign it.”), 160 (“A. The whole
document is something that I was not willing to sign. Q. And even though the whole
document was something you were not willing to sign, you sent it to Morelia, asking her -
- telling her that you were going to sign it and get your wife to sign it; right? A. Correct.
Something that never took place. Q. So you never signed it; correct? You never signed
the counterdocument? A. I never signed it.”).
221
Id. at 146, 158.
222
See, e.g., id. at 160.
48
Lynch’s testimony over nearly two days. Accordingly, on this point, I take Lynch
at his word. Lynch never signed the Counterdocument, and an executed version was
never produced.223
Still, sometime after taking the Counterdocument to Argentina, Lynch
returned the Counterdocument, signed only by Gonzalez, to Belleville’s offices in
Miami.224 Both Morelia and Gonzalez saw it.225 Morelia then placed the original
Counterdocument in a safety deposit box in Miami for safekeeping.226 Eventually,
Morelia moved the Counterdocument from one safety deposit box to another, and
then to Televideo’s offices in Miami.227 The Counterdocument had to be kept a
secret from Argentine regulators in order to be effective, and in order for Lynch’s
solution to satisfy those regulators.228 Thereafter, Lynch communicated with
Morelia about the Counterdocument, fortifying the belief that he signed it as
promised.229 Just as Lynch had used the Counterdocument to soothe Gonzalez’s
223
See id.
224
No witness testified to the specific chain of custody. I make this determination from
the preponderance of the evidence presented.
225
See M. Gonzalez Tr. 281; A. Gonzalez Tr. 455.
226
See M. Gonzalez Tr. 281–82.
227
Id.
228
See id. at 278 (stating the Counterdocument “was going to be a private document that
was going to modify a previous document”), 282 (stating the Counter document was “a
document that we didn’t want anyone to read, so we kept it private”).
229
See id. at 278–79.
49
concerns, he “always told [Morelia] that this [counter]document should give [her]
peace of mind; that if he would go crazy or something would happen to him, [her]
dad’s investment would be protected.”230
Sometime in 2011, a package of documents arrived in Argentina in
preparation for completing a regulatory filing before AFSCA.231 Lynch explained
to Curutchet that the paperwork was necessary “in order to comply with the
Argentine law,” and that “he would create a counterdocument to look after the
230
Id. at 279. The parties dispute whether Lynch and his wife ever signed the
Counterdocument. Some witness who saw the Counterdocument could not recall whether
the Counterdocument was signed when they saw it. See Lambert Tr. 371; Curutchet Tr.
519; White Tr. 540; Casaleggio Tr. 557. But Gonzalez testified that he saw the
Counterdocument, and it was signed by Lynch and his wife. See A. Gonzalez Tr. 455. So
did Morelia. See M. Gonzalez Tr. 281. She also claims that she put the only executed
copy of the Counterdocument in the safe deposit boxes, and did not remove it until 2016.
See id. at 281–83.
Morelia and Gonzalez’s testimony on these points is inconsistent with Lynch’s
position that he did not sign the Counterdocument. And if Lynch did not sign it, Morelia
and Gonzalez presumably would have had the opportunity to discover that fact when they
physically saw the Counterdocument when Lynch returned it to Miami. This has gone
unquestioned and unexplained, and reasonable minds can differ in explaining this
discrepancy.
On this point, I take Lynch at his word that he did not. Lynch prepared the
Counterdocument, presented it to Gonzalez, and falsely promised that he would execute it,
while never intending to do so or to perform under it. Gonzalez and Morelia genuinely
believed that Lynch signed it, and Lynch’s conduct continued to fortify that belief. See,
e.g., id. at 279; A. Gonzalez Tr. 459, 463, 472, 474, 483; JX 141. For those reasons,
Gonzalez agreed to document the 65% transfer. Lynch eventually took measures to do
away with the Counterdocument, signed or not, and Morelia testified about circumstances
that gave Lynch the opportunity to take and destroy any signed Counterdocument. See
infra Section I.H.
231
See Curutchet Tr. 515–17; Casaleggio Tr. 555–58.
50
interest of Mr. Angel Gonzalez.”232 Curutchet received the package and saw a copy
of the Counterdocument therein.233 In 2014, a copy of the Counterdocument
surfaced again when Lynch presented “a complete copy of a docket[,] in his own
hands at his office,” of AFSCA paperwork.234 The witnesses who saw it could not
confirm whether it was, in fact, signed by Lynch.235
F. The Parties Extend The Paper Trail.
The parties did not perform under the Purchase Agreements or Addenda
because the 65% transfer was a sham. Because Lynch did not make the required
“payments” for a transaction that supposedly closed in January 2008, the paper
record reflected that he was in arrears, threatening the apparent authenticity of the
65% transfer. So beginning in 2010, Lynch drafted a series of instruments
restructuring the debt he purportedly assumed, and advised Gonzalez to execute
them. Lynch did so to identify credible creditors, legitimize the transfer, and erode
the significance of the Counterdocument. He papered the file for his benefit.236
232
See Curutchet Tr. 516.
233
See id. at 515–17; Casaleggio Tr. 555–58.
234
Casaleggio Tr. 558.
235
See id. at 557; Curutchet Tr. 519.
236
See JX 12; JX 14; JX 35; JX 66; JX 67; JX 68.
51
1. The Revised Addenda And Complement
In February 2010, Lynch sent Gonzalez a revised Addenda, JX 12, noting that
when they executed the original they “did not know what credits were going to be
assigned,” that the chosen January 2008 date on the documents “could be modified,”
and that a number of loose ends remained in the sham.237 Those revisions identified
two particular Televideo creditors to which Lynch was supposed to “pay” the
required installments under the Purchase Agreements: Interamerican Services
Limited and EFG Worldwide.238 Aside from identifying those creditors, the revised
Addenda was substantively identical to the original, JX 30.239
Lynch also directed Lambert to draft a document intended to work alongside
the revised Addenda and further legitimize the fake debt assignment.240 So at the
same time he prepared the revised Addenda, Lambert prepared a complement to the
237
JX 33 at 48; Lynch Tr. 32–33, 172. Because he did not provide an updated
Counterdocument along with the revised Addenda and Complement, Lynch contends that
this email supports his position that the parties agreed to eliminate the Counterdocument.
I disagree. The absence of a counterdocument from the February documents supports
Gonzalez’s position that the Counterdocument was executed as expected and stored for
safekeeping.
238
See JX 33 at 48; Lynch Tr. 33, 171–72. The records reflect that the parties refer to
“EFG Worldwide” in various ways. For example, Plaintiffs also refer to EFG Worldwide
as Worldwide Features, Inc. See D.I. 190 at 1. From these references, I deduce that
Televideo’s creditor, EFG Worldwide, a company in the Belleville family that Lynch held
in name only, subject to a counterdocument. See Lynch Tr. 88, 105, 145, 156–57.
239
Compare JX 12, with JX 30.
240
See JX 14; JX 33.
52
Addenda, JX 14 (the “Complement”).241 Backdated to January 2008, the
Complement provided that “Interamerican Services Limited and EFG Worldwide
accept the assignment of Televideo Services Inc.’s credit to CLL.”242 The
Complement securitized the 65% transfer, appointed Televideo as collection agent
for Televideo’s creditors, and authorized Televideo to negotiate and agree to
modifications of Lynch’s debt.243 The Complement appointed Televideo as
collection agent for certain of Televideo’s creditors and authorized Televideo to
negotiate and agree to modifications of Lynch’s debt.244
Gonzalez executed the revised Addenda and Complement.245 Lynch did not
deliver any cash when the parties executed those documents.246
241
See JX 14; Lambert Tr. 335. Lambert and Lynch testified they drafted the Complement
to document Lynch and Gonzalez’s alleged Miami agreement to replace the unexecuted
Counterdocument, dation-in-payment, and transfer letter with a traditional security interest.
See Lynch Tr. 252–53; Lambert Tr. 327–30, 334–36. This testimony is not credible
because there was never such an agreement.
242
JX 33 at 48; see also JX 14 § 3.
243
JX 14 §§ 1.2, 3. It provides that “[Lynch] secures to [Televideo’s] Creditors the
payment of the Price with the Membership Interest, such security is accepted in this act by
[Televideo’s] Creditors.” Id. § 1.2.
244
See JX 14 § 3.
245
See JX 12; JX 14. He did so on behalf of Televideo. See A. Gonzalez Tr. 476, 480.
246
See, e.g., Lynch Tr. 95, 107–08, 117.
53
2. The 2010 Restructuring Agreement
Lynch did not pay the interest required by the First Purchase Agreement,
Second Purchase Agreement, and Addenda, so Company records reflected that
Lynch was in arrears.247 Lynch suggested that he and Gonzalez restructure his
“debt” to keep up with appearances.248 Accordingly, Lynch prepared the 2010
Restructuring Agreement, which he and Gonzalez executed on September 15,
2010.249 It purported to restructure the debt from the Second Purchase Agreement.250
Lynch pitched the 2010 Restructuring Agreement as minimizing the amount of funds
Gonzalez would have to front to Lynch, so that Lynch could return them as
“payment;” Gonzalez believed him.251
The 2010 Restructuring Agreement waived Lynch’s default upon payment of
penalty interest and accelerated Lynch’s principal payments.252 Other adjustments
to Lynch’s payment obligations included changing the number of installment
payments from ten to twelve, and making the first payment due on November 15,
247
See id. at 35–36, 108.
248
See id.
249
See JX 35 at 7. The 2010 Restructuring Agreement was drafted at Lynch’s discretion.
250
See id.
251
See Lynch Tr. 35–37; A. Gonzalez Tr. 480–83, 486.
252
See JX 35 § 2.3.
54
2010 instead of the original January 8, 2013.253 Lynch’s first payment pursuant to
the 2010 Restructuring Agreement was comprised of $800,000 of principal and
$119,536.42 of interest.254
Lynch paid the first required installment payment by wire transfer in the
amount of $919,536.42 on November 12, 2010.255 He paid the second installment
of $819,549.68 on June 17, 2011.256 At the end of October 2011, Argentina imposed
a series of currency controls barring the export of US dollars.257 Despite the currency
controls, Lynch used his US bank account to make an “advance payment” in
November 2011.258 The payments appeared to come from Lynch, but Gonzalez
provided the funding.259 After November 2011, Lynch stopped “paying” and again
fell into “default.”260
253
Compare JX 5 and JX 11, with JX 35 § 1.
254
See JX 36 (wire transfer of $919,536.42).
255
See id.; Lynch Tr. 52.
256
See JX 41 (wire transfer of $819,549.68).
257
See Lynch Tr. 37.
258
See JX 42; Lynch Tr. 53. A new government lifted the currency restrictions at the end
of 2015. See JX 64 at 2.
259
See, e.g., JX 36; JX 41; JX 42; JX 69; JX 74; JX 122; JX 123; JX 124; JX 162; M.
Gonzalez Tr. 297, 299; A. Gonzalez Tr. 483, 486.
260
See Lynch Tr. 37; JX 64 (“As a consequence of the exchange restrictions in force in
Argentina until early 2016, CLL did not have access to a single and free exchange market
to transfer the balance of the due amounts under the sale and purchase agreement.”).
55
3. The May 2016 Restructuring Agreements
Lynch’s purported debt remained unpaid for years. In 2017, Lynch and
Gonzalez agreed that they again needed to address Lynch’s default to maintain the
transfer’s apparent legitimacy.261 Lynch advised Gonzalez to execute a series of new
debt restructuring agreements: the May 2nd Restructuring Agreement, the May 3rd
Restructuring Agreement, and the May 4th Restructuring Agreement (collectively,
the “May 2016 Restructuring Agreements”).262 Each was drafted at Lynch’s
direction after September 2016, and backdated to May 2016.263
The May 2016 Restructuring Agreements were simply the latest documents
that Lynch prepared, or directed to be prepared, and advised Gonzalez to sign in
furtherance of their agreed-upon “solution” to satisfy Argentine laws.264 Nearing
261
See JX 64; JX 66; JX 67; JX 68.
262
See JX 64; JX 66; JX 67; JX 68.
263
See JX 64; JX 65; JX 66; JX 68. The Beccar Varela law firm drafted, and Lambert
reviewed, the May 2016 Restructuring Agreements at Lynch’s direction. See Lambert Tr.
359. Lambert testified “those are the dates that Mr. Lynch asked me to put in the
documents.” Id. at 361.
264
Lynch contends that Gonzalez agreed to relieve Lynch of some of his repayment
obligations because Lynch performed four “extraordinary” tasks for Gonzalez after 2011.
See, e.g., Lynch Tr. 37–42, 174–82. According to Lynch, he performed these services
outside the scope of his normal work responsibilities and “undertook them at substantial
personal risk,” D.I. 190 at 12, but Gonzalez did not immediately compensate Lynch for his
efforts. See Lynch Tr. 37, 41. In particular, Lynch claims he (1) assisted Gonzalez in
covertly using Company funds to purchase a piece of Florida real estate for Gonzalez’s
female friend; (2) helped resolve problems Lynch and Gonzalez were having with the
Argentine government by identifying and recruiting sympathetic businessmen; (3)
smuggled Gonzalez’s wife from Italy to Nicaragua, and ultimately Florida, when there was
56
the end of his paper trail, Lynch also used the May 2016 Restructuring Agreements
to record and legitimize the Counterdocument’s destruction.
In September or October of 2016, Lynch prepared the May 2nd Restructuring
Agreement and backdated it to May 2, 2016.265 It lowered the purported purchase
price of the membership interest and forgave Lynch’s past-due principal and interest
payments.266 Specifically, the May 2nd Restructuring Agreement (1) cured Lynch’s
payment default caused by the Argentine currency export restrictions;267 (2) waived
$272,739.18 of interest that had accrued during the currency export restrictions; 268
and (3) reduced Lynch’s principal obligation by 30% from $14,223,714.10 to
$9,946,599.87.269
an Interpol red notice issued for her arrest, based on her alleged interference with the
Guatemalan presidential election; and (4) made payments on Gonzalez’s behalf that
Gonzalez did not want to make directly. See, e.g., id. at 37–42, 174–82. But the
preponderance of the evidence demonstrates Lynch did not participate in these services to
the extent he contends. See, e.g., id. at 174–82 (cross examination of Lynch as to his
purported “extraordinary” tasks); White Tr. 534–39 (explaining that Lynch had minimal
involvement in smuggling Mrs. Gonzalez from Italy). And even if Lynch played a key
role, the services were rendered before the May 2016 Restructuring Agreements were
prepared and executed in 2017. See Lynch Tr. 179, 180, 181, 182; Lambert Tr. 360–61.
The May 2016 Restructuring Agreements were not consideration for services rendered.
265
See JX 64; Lynch Tr. 174; Lambert Tr. 360.
266
See JX 64 §§ 2.03, 2.04; Lynch Tr. 36–37.
267
See JX 64 § 2.03.
268
See id. §§ 2.02(b), 2.04(c).
269
See id. §§ 2.02(a), 2.04(b).
57
The May 2nd Restructuring Agreement required Lynch to make three
payments to satisfy his debt. The first payment of $1,000,000 was due by May 17,
2016.270 The second payment of $500,000.00 was due by September 15, 2016.271
Lynch supposedly made these payments, but could not have done so on the specified
dates because the Agreement was not executed before those dates.272 The balance
of $8,456,599.87 is due on or before December 31, 2021.273
After drafting the May 2nd Restructuring Agreement, in 2017, Lynch
prepared a second restructuring agreement.274 The May 3rd Restructuring
Agreement restructured the debt addressed in the May 2nd Restructuring
Agreement.275 It provided Lynch’s creditors with a payment of $350,000 before
December 31, 2017, four years before it had been due under the May 2nd
Agreement.276 It also reduced the interest rate from 5% to 4%,277 and removed
Lynch’s pledge to secure his debt.278 Again, at the time Gonzalez was signing these
270
See id. § 2.04(d).
271
See id.
272
See JX 69; JX 74.
273
See JX 64 § 2.04(e).
274
See JX 66; Lambert Tr. 360–61.
275
See JX 66. Lambert drafted the May 3rd Restructuring Agreement at Lynch’s direction.
276
Compare JX 64 §§ 2.04(d), (e), with JX 66 § 2.04(d).
277
Compare JX 64 § 2.04(j), with JX 66 § 2.04(j).
278
Compare JX 64, Article VII, with JX 66, Article VI.
58
Agreements at Lynch’s direction, he was indifferent to their written terms because
he always understood the 65% “purchase” to be a mutual farce to satisfy Argentine
holding restrictions. He signed the agreements Lynch brought to him, taking
Lynch’s word that they were necessary and therefore taking little to no time to
review their terms.
Even with Gonzalez’s signatures, Lynch’s plan remained encumbered by the
Counterdocument. Gonzalez believed the Counterdocument evidenced the parties’
actual agreement, and believed it would supersede any of the documents identifying
Lynch as Belleville’s 65% member. Gonzalez was under the impression that Lynch
and his wife had executed it and that it was stored safely in Miami. 279 Lynch was
aware that Gonzalez would eventually point to the Counterdocument, and expected
Lynch to return the 65% interest to its true owner, Televideo, as he had done on at
least two other occasions.280 The documents executed to date did not do enough to
minimize or eliminate this risk.
So, later in 2017, Lynch prepared the May 4th Restructuring Agreement and
presented it to Gonzalez for his signature.281 As with the May 2nd and May 3rd
Cf. JX 141 (email chain dated October 2018 evidencing Gonzalez’s belief that the
279
Counterdocument was signed by Lynch and his wife and safely stored in Miami); Lopez
Dep. 57–59 (discussing JX 141).
280
See Lynch Tr. 88, 105, 145, 156–57; Landaburu Tr. 433–34, 436.
281
See JX 67; JX 68.
59
Restructuring Agreements, the May 4th Restructuring Agreement is backdated to
2016.282 It is identical to the May 3rd Restructuring Agreement, except for an
additional clause that purports to invalidate the Counterdocument:283
282
See JX 67; JX 68.
283
See Lynch Tr. 47 (“The May 4th agreement has an additional clause, 2.05 . . . such
clause provides certain declarations and guarantees on warranties signed by Mr. Gonzalez
in representation of Televideo Services in my favor, to my benefit, that will be used to, for
example, avoid trials like this.”), 203 (“[T]he only thing that is added on to the May 4th
agreement is clause 2.05, which is the protection clause that would prevent for us to be in
this trial, this lawsuit.”).
60
Section 2.05 Acknowledgement. Televideo establishes and
acknowledges:
(a) The full and legitimate possession of CLL of 65% of Grupo
Belleville Holdings L.L.C.
(b) That any public or private instrument that the Parties or any of the
Parties has signed regarding the property of 65% of Grupo
Belleville Holdings L.L.C. with any individual other than CLL
shall be null and void.
(c) That any document fully or partially signed by CLL,
acknowledging and/or transferring the property of the 65% of
Grupo Belleville Holdings L.L.C in favor of Televideo and/or
Remigio Ángel González González shall be void and null and shall
be destroyed by Televideo and/or Remigio Ángel González
González pursuant to which Televideo and Remigio Ángel
González González shall be liable before CLL and shall hold him
entirely harmless from any damage that the exhibition and/or
execution of the aforementioned documents may involve.284
Knowing that Gonzalez “did not want to respond to uncomfortable questioning,”
Lynch presented the May 4th Restructuring Agreement and Section 2.05 to Gonzalez
as an escape valve in the event regulators came close to uncovering their scheme:
Section 2.05 would falsely evidence that the Counterdocument did not govern
Belleville’s membership structure.285 Because the May 4th Restructuring
Agreement referred to the Counterdocument, it was to be a “secret” document
between Lynch and Gonzalez “that would not be presented or brought before the
284
JX 67 § 2.05; accord JX 68 § 2.05.
285
See Lynch Tr. 48–50, 203–11.
61
regulators.”286 This was consistent with the Counterdocument’s secret nature, as
public disclosure or mention of it would reveal Belleville’s true owners, and would
defeat the scheme to satisfy Argentine regulators.287 If regulators requested
documentation, but were not tipped off about the Counterdocument, Lynch proposed
they produce the May 3rd Restructuring Agreement.288 But in the event regulators
began to inquire about the Counterdocument, Lynch suggested they rely on the May
4th Restructuring Agreement and Section 2.05 “in order to avoid any inconvenience
or uncomfortable questioning, on behalf of the regulators”289 and so that “there
[would not] be any doubts about” the sham transfer.290
286
See id. at 48, 49–50, 203–11, 256–58.
287
See D.I. 219 at 69–72, 111, 114; Casaleggio Tr. 553.
288
See Lynch Tr. at 203 (“The May 3rd agreement was for any issue to present before any
public organization or, better said, any regulatory body or regulator because clause 2.05
has issues that neither one of the parties would like the regulator to ask about them,
although we knew that nothing had been signed.”).
289
Id. at 203–04 (“But in order to avoid any inconvenience or uncomfortable questioning,
on behalf of the regulators, we asked -- or, rather, we agreed to [the May 4th Restructuring
Agreement]. . . . It was an agreement that would not be presented or brought before the
regulators.”)
290
Id. at 48 (Lynch stating that he included Section 2.05 “[b]ecause, to me, the purchase of
65 percent is an important event, and I don’t want there to be any doubts about it”).
62
This elaborate explanation was a ruse. Lynch included Section 2.05 to justify
the Counterdocument’s eventual destruction and absence, and to protect himself in
the event it resurfaced.291
G. Lynch “Pays” For The Belleville Membership Interests.
From the time Lynch was introduced to Belleville in 2007 through 2017,
Lynch did not inject any capital into the Company.292 Between 2007 and 2010,
Lynch could not afford to purchase 65% of Belleville.293 And despite Lynch’s
contention that he negotiated the purchase of 65% of Belleville as early as 2007, he
did not make any payments until 2010.294
291
Even though Lynch disputes that he signed the Counterdocument and that he was bound
by it, he claims he needed to include Section 2.05 as “protection” for two reasons. I do not
find these reasons credible. First, Lynch claimed he needed to be protected from litigation
of the sort presented in the instant case. See, e.g., Lynch Tr. 43, 47. Lynch filed this action
himself. Second, Lynch claims Gonzalez used forged documents in connection with the
wind-down of Gonzalez’s brother’s estate after his brother passed away unexpectedly, to
the detriment of his brother’s widow. See id. at 257. Lynch was concerned that Gonzalez
might attempt the same type of forgery via the Counterdocument to take what Lynch touted
as his genuine 65% ownership in the Company. See id. This attenuated and speculative
rationale yields to the much simpler and more supported explanation that Lynch drafted
Section 2.05 to protect himself from the Counterdocument he had promised Gonzalez he
would execute.
292
See Gomez Tr. 448.
293
See Casaleggio Tr. 554–55.
294
See JX 36; Lynch Tr. 52, 107–08, 177; Maleplate Dep. 97–98.
63
Gonzalez would not have waited over two years to be paid for such a valuable
asset.295 Nor would he have agreed to sell full beneficial ownership of 65% of
Belleville to Lynch for less than he had just paid for the interest.296 The diminished
purchase price and Lynch’s late payments did not matter because Gonzalez funded
the sham sale.297 The Counterdocument provides as much: “all of the funds and
money used for the acquisition of the Equity interest were and will be provided to
[Lynch] by [Gonzalez].”298
295
See Lynch Tr. 107–108; A. Gonzalez Tr. 456.
296
See A. Gonzalez Tr. 455, 456, 459, 463.
297
See, e.g., M. Gonzalez Tr. 280 (“[W]hose money was to be used to purchase the 65
percent interest in GBH? A. My dad’s. . . . Q. What is your understanding as to where he
got the money to pay for the 65 percent interest of the GBH shares? A. From the TV
channel in Argentina.”), 290 (“Q. And what are you instructing Ms. Maleplate to do? A. To
please give Lorefice the sum of $100,000. Q. And who authorized that transfer to Mr.
Lorefice in the amount of $100,000 on the 14th of January 2015? A. My dad. Q. Did Mr.
Lorefice have the ability to transfer money on his own? A. No. Q. Who is the one that’s
in charge of transferring money for all the Albavision entities? A. My dad needs to give
the instructions.”), 291–92 (“A. Yes. Q. Now, with regards to the email to Ms. Maleplate,
what are you instructing her to do? A. To give Lorefice the sum of $300,000. Q. And was
this -- who authorized this transfer of $300,000 on the 7th of August 2015. A. My dad.”),
292 (“A. It’s Lorefice’s bonus. Q. Who determined Mr. Lorefice’s bonus? A. My dad.
Q. And the email, what does it instruct Ms. Maleplate to do? A. To give Lorefice the sum
of $300,000. Q. And who authorized that? A. My dad.”), 297 (“Q. Are you aware of any
transfer from any bank used by your father to Mr. Lynch for the purpose of paying for Mr.
Lynch’s holdings in Grupo Belleville? A. The only thing I know of, that the money would
come from the channel. I don’t know how they structured that, how they did that. I don’t
know the details.”); see also JX 36; JX 41; JX 42; JX 51; JX 58; JX 60; JX 69; JX 74;
JX 123; JX 124; JX 162.
298
JX 25 ¶ 2.
64
All funds transferred for the “purchase” of the subject 65% interest came
either directly or indirectly from Gonzalez’s personal or business accounts,
including from the accounts of Belleville and its subsidiaries.299 Lynch devised a
process whereby employees of Belleville or its subsidiaries credited Lynch’s
account, and created accounting entries for “advanced fees” (supposedly for Lynch’s
director and legal services) that he did not actually earn; Gonzalez authorized those
amounts.300 He then returned the amounts as purported payments owed for the
65%.301 Maleplate documented these fees and payments in detailed charts.302
Shortly before each of Lynch’s purported payments, he received an
“advancement” of nearly the exact same amount.303 In 2010, Lynch received a $1
million “advance payment” from one of Gonzalez’s companies, and shortly
thereafter, Lynch paid $919,536.42 to Televideo pursuant to the 2010 Restructuring
Agreement.304 In June 2011, Lynch paid $819,548 to Televideo after receiving
$817,500 from another of Gonzalez’s companies.305 And in November 2011, Lynch
299
See M. Gonzalez Tr. 280, 290, 291–92, 297.
300
See id. at 280, 290, 291–92, 297; A. Gonzalez Tr. 486; Maleplate Dep. 133.
301
See, e.g., Lynch Tr. 227–28; Maleplate Dep. 55–56, 61–62, 64–68, 72–77, 80, 83–83,
124–26, 128–31, 133–34.
302
See, e.g., JX 122; JX 162; Lynch Tr. 225, 226–29, 235, 236, 239–40.
303
See JX 122; JX 162.
304
See JX 36; JX 122; JX 162; Lynch Tr. 52.
305
See JX 41; JX 122; JX 162.
65
received a transfer from Gonzalez’s company for $209,720; Lynch paid Televideo
the exact same dollar amount a few days later.306
Even assuming that Interamerican Services Limited and EFG Worldwide
were genuine Belleville creditors, nothing in the record suggests that either creditor
complained or otherwise objected to Lynch’s late payments. This fortifies the
conclusion that Lynch’s purported assumption of Televideo’s debt was just another
fabrication.307 Televideo collected the funds from Lynch “on behalf of [Televideo]’s
creditors”308 because the debt assumption documents were part of a circular scheme
of fraudulent “payments” for 65% of Belleville.
H. Lynch Continues To Misrepresent His Intentions About, And
Ultimately Conceals Or Destroys, The Counterdocument.
Lynch obtained the instruments he sought by representing to Gonzalez that an
executed Counterdocument existed.309 Those documents could be used to show a
legitimate transfer only in the absence of the Counterdocument. While I have taken
Lynch at his word that he did not execute the Counterdocument, a copy signed by
306
See JX 41; JX 122; JX 162.
307
See JX 36; JX 41; JX 42; JX 69; JX 74; JX 124; JX 162.
308
JX 14.
309
See, e.g., JX 24; JX 141; A. Gonzalez Tr. 455, 456, 459, 463, 472, 474, 483, 485, 494;
see also M. Gonzalez Tr. 277–78, 279–80, 289–90; White Tr. 451.
66
Gonzalez existed. Multiple witnesses verified that they saw it.310 So at the end of
the paper trail, Lynch built space to destroy the Counterdocument in the May 4th
Restructuring Agreement. He also took measures to ensure it would not physically
appear.
In April 2016, Lynch, Landaburu, and Lambert were tasked with preparing an
inventory of all sensitive Belleville documents that were maintained in safety deposit
boxes and that were not referenced elsewhere in Belleville’s files.311 The
Counterdocument was one such document. As part of this inventory, the original
Counterdocument was removed from the safety deposit box and supposedly
delivered to Belleville’s office for Lynch and his team to inventory.312 The
Counterdocument was never seen again, and no signed original or signed copy was
produced in this action.313 Lynch hid or destroyed the Counterdocument as
contemplated by Section 2.05 of the May 4th Restructuring Agreement.314
310
See, e.g., M. Gonzalez Tr. 281; A. Gonzalez Tr. 455; Casaleggio Tr. 577; Curutchet Tr.
519.
311
See JX 62; JX 72; M. Gonzalez Tr. 283–90; Lambert Tr. 349–51.
312
See M. Gonzalez Tr. 284.
313
See id. at 283–90; Lambert Tr. 345–47, 349–51.
314
See JX 67 § 2.05; M. Gonzalez Tr. 283–90; Lambert Tr. 348–51.
67
Thereafter, Lynch continued to propound that the Counterdocument existed,
fortifying Gonzalez’s belief that Lynch would abide by its terms.315 Around the time
the parties executed the May 2016 Restructuring Agreements, the parties explored a
management buyout of Gonzalez’s media empire, including Belleville.316 The
parties refer to this transaction as the Magnus Project.317 Gonzalez retained and paid
for Greenberg Traurig, LLP (“Greenberg”), Ernst & Young LLP (“E&Y”), and Bank
of America to conduct due diligence and to advise on the deal’s potential structure
and the best manner in which to market the project to potential suitors.318 Lynch,
315
See, e.g., A. Gonzalez Tr. 455, 456, 459, 463, 472, 474, 483, 485, 494; see also Lynch
Tr. 221–23; Lambert Tr. 356–59; JX 117.
316
See, e.g., Glossary of Stipulated Terms at 2; Lynch Tr. 212–14; Lambert Tr. 341–42.
Indeed, the attention on Company affairs due to the buyout attempt may have inspired the
May 4th Restructuring Agreement. See Lynch. Tr. 51 (noting that the May 4th
Restructuring Agreement was signed at the end of 2017, “in the middle of a negotiation
with the advice or the consulting from Bank of America and the law firm Greenberg
Traurig and Ernst & Young for the possible sale and the management buyout of the totality
of the operations”), 211 (noting May 4th Restructuring Agreement was executed as “the
Magnus Project falls apart”); Lambert Tr. 345 (noting that Lynch and his confederates
removed the Counterdocument form the Magus Project presentations out of fear “[t]hat it
may have caused that the project might not be able to be carried out”).
317
See Glossary of Stipulated Terms; JX 92; JX 93; JX 94; JX 95; JX 96; JX 97; JX 98;
JX 99; JX 100; JX 101; JX 102; JX 103; JX 104; JX 105; JX 106; JX 107; JX 108; JX 109;
JX 110; JX 111; JX 112; JX 113; JX 114; JX 115; JX 116; JX 117; JX 118; JX 119; JX 120.
The parties also referred to iterations of the Magnus Project as “Project Magnetico.”
See, e.g., JX 100. The parties did not explicitly rely on or include all of the Magnus Project
documents in the Schedule of Evidence. But because the Court learned of the Magnus
Project’s importance for the first time at trial and because testimony regarding the Magnus
Project was limited, the Court relies on the above listed JXs in the record for context.
318
See Lynch Tr. 214; Lambert Tr. 342–43. Lynch did not contribute financially to the
Magnus Project. See Lynch Tr. 214.
68
Lambert, and Landaburu assisted by providing the relevant information regarding
Belleville’s ownership.319
A majority of the Magnus Project documents in the record were prepared by
third party advisors, including Greenberg and E&Y.320 Those documents reflect the
advisors’ understanding that Argentine law forbids foreign individuals and entities
from owning more than 30% of media companies, and that Lynch held 65% of
Belleville in name only and subject to the Counterdocument.321 Early iterations of
the advisors’ decks discuss that the “holding structure considerations” in Argentina
include “US Ultimate Beneficial Owners,” or “UBOs,” a term Lynch used to refer
to Gonzalez’s actual ownership under other counterdocuments.322 Second, in
discussing Argentina’s “contribution plan,” the decks show that after Gonzalez and
Televideo contributed their respective 5% and 30%, Lynch would “contribute[]”
65% of Belleville, in exchange for “LP interests” in the new entity.323 Importantly,
the final step in the transaction mandated that “CLL sign[] Control Documents with
319
See, e.g., Lynch Tr. 214–15; Lambert Tr. 345–46.
320
See JX 92; JX 93; JX 94; JX 95; JX 96; JX 97; JX 98; JX 100; JX 101; JX 102; JX 103;
JX 104; JX 105; JX 107; JX 108; JX 109; JX 110; JX 111; JX 112; JX 113; JX 114; JX 115;
JX 116; JX 117; JX 118; JX 119; JX 120.
321
See, e.g., JX 117.
322
See JX 93 at 23; Lynch Tr. 105, 122, 197.
323
E.g., JX 95 at 9.
69
respect to those LP interests,” meaning a counterdocument.324 Even without explicit
mention of the Belleville Counterdocument, the early drafts promised continuity of
Gonzalez’s preferred ownership structure, under which Lynch held the membership
interest in name only to facially satisfy regulators.325
Third, the Magnus Project categorized the transaction’s participants into two
groups: the “Gonzalez Family” and “Other Shareholders.”326 Lynch is listed among
over thirty Other Shareholders, who held interests in Gonzalez’s entities subject to
a “DDJJ” or counterdocument.327 The advisors on the Magnus Project also identified
subsets of holders: “B Asset Holders,” who were “independent owners,” and
“Strategic Partners” like Lynch, who were not.328 Lynch was categorized as a
Strategic Partner because he held the 65% interest in name only and for Televideo’s
benefit.329
The Magnus Project advisors pressed for information about what control
documents governed the ownership structure for each of Gonzalez’s companies,
324
E.g., id.
325
See, e.g., JX 95 at 9; JX 96 at 12; JX 97 at 9, 11.
326
E.g., JX 99 at 13–15.
327
Compare JX 99 at 14–15 (listing Lynch among the “Other Shareholders”), with JX 98
(listing Lynch among “individuals with interests in the group entities” that held subject to
counterdocuments).
328
See JX 99 at 21; JX 104 at 1–3.
329
See, e.g., JX 99; JX 104.
70
including Belleville.330 Later iterations of the decks explicitly and repeatedly
reflected Belleville’s ownership under “current control documents” as follows:
“Sworn declaration stating that the true owner of the shares is [Gonzalez].”331 The
advisors had been told that Gonzalez was the true owner of all Belleville’s interests,
as memorialized by the Counterdocument.332
At one point, based on information provided by Lynch’s confederates, the
Argentine law firm assisting with the project crossed out the “control documents”
content identifying the Counterdocument.333 According to Lambert, the firm did so
upon reviewing the corporate documentation for Belleville, as they could not locate
a Counterdocument.334 But the decks consistently referred to Lynch as a Strategic
Partner, not an independent owner.335 And despite the efforts to cross out reference
to the Counterdocument, later versions of the Magnus Project deck rejected that edit
and explicitly referenced the Counterdocument.336
330
See, e.g., JX 101; JX 104.
331
See, e.g., JX 98; JX 99; JX 106; JX 107; JX 109; JX 110; JX 113; JX 116; JX 117.
332
See, e.g., JX 110 at 147; Lambert Tr. 345–46, 356–57.
333
See JX 99 at 23; JX 106 at 23; Lambert Tr. 345–46, 348–49, 356–57.
334
See Lambert Tr. 348–49.
335
See JX 99 at 21; JX 106 at 21.
336
See, e.g., JX 107; JX 109; JX 110; JX 113; JX 116; JX 117.
71
Lynch and Lambert unsuccessfully attempted to explain away the Magnus
Project’s persistent references to the Counterdocument.337 Even though they tried to
cross out the references, Lynch and Lambert contend they purposefully permitted
“erroneous[]” references to the Counterdocument to keep up the impression that
Gonzalez owned 65% of Belleville, so as to avoid alarm within the Belleville
family.338 And Lynch indicated he lied to protect Gonzalez’s reputation, but later
planned to disclose (albeit falsely) that he was the actual, beneficial owner of the
65% membership interest.339 I do not find this explanation credible. The
preponderance of the evidence suggests that Lynch, Lambert, and Landaburu tried
to remove the Magnus Project’s references to the Counterdocument, as part of their
337
See Lynch Tr. 221–23; Lambert Tr. 356–59.
338
See Lynch Tr. 221–23; see also Lambert Tr. 356–59.
339
See Lynch Tr. 222–23 (“I did it to prevent Mr. Gonzalez from giving explanations or
receive complaints from certain people of his realm of his work environment. . . . Q. But
when you say that you wanted -that Mr. Gonzalez -- that you did this for Mr. Gonzalez so
that if people in his realm found out about this, they would be misled. Correct? A. I don’t
know if they were going to have access. I did it in the case that they would have access.
Q. Mr. Gonzalez didn’t ask you to do this. Correct? A. Correct. Q. So you took it out of
your own volition to add, in a document in 2017, the fact that you had a sworn declaration
in favor of Mr. Gonzalez. Correct? A. I did it on a draft, not in a final document. Q. Well,
but were you going to change the final document so that if the other people found out, then
all of a sudden now they do know? A. I cannot talk about the future. I don’t know what I
would have done. We never reached a point of finishing the project.”).
72
larger effort to expunge it from Belleville’s files and history, but were simply
unsuccessful.340
The Magnus Project never came to fruition and was ultimately called off at
the end of 2017, in part due to complications involving the Foreign Corrupt Practices
Act.341
I. Lynch Holds The 65% Interest For Ransom.
After sufficiently papering the file and eliminating the Counterdocument,
Lynch felt secure that his plan had worked. The record indisputably reflected that
Lynch owned 65% of Belleville, and Gonzalez was in the dark as to Lynch’s true
intentions and the Counterdocument’s absence. Lynch decided that it was time to
make his final move.
In February 2018, Lynch called Gonzalez’s trusted advisor, White.342 Lynch
told White to convey the following message to Gonzalez: “[A]s of this date,
Argentina will no longer answer to Miami. It’s going to be handled as an
independent operation, and he [Gonzalez] will be treated as any of the other
340
Lynch, Lambert, and Landaburu had an opportunity to review and comment on earlier
versions of this Magnus Project presentation, and admit that they retained the reference to
the Counterdocument. See Lambert Tr. 345–47.
341
See Lynch Tr. 211, 215; Lambert Tr. 342–43.
342
See White Tr. 528–29.
73
shareholders.”343 Gonzalez asked White to meet with Lynch in Argentina and
request return of 65% of Belleville to Televideo, as he and Lynch agreed.344 Lynch
had previously relinquished record ownership of other companies that he held as
Gonzalez’s nominee without any exchange of valuable consideration.345 He did so
even when their relationship soured.346 But Belleville was different because Lynch
had already papered his coup and success seemed imminent; the reward from his
final stand—65% of a successful media parent company—greatly outweighed the
risk.
So at the meeting, Lynch held 65% of Belleville for “ransom.”347 He
demanded that Gonzalez do the following before he would agree to return record
ownership: (1) transfer between $15 to $25 million to Lynch to cover potential tax
liability for the return; (2) provide a golden parachute of approximately $12 million
for Lynch’s friends and confidants, Lambert, Landaburu, Birencwajg, and Banus;
(3) set up a bank account in the United States funded with $10 million that Lynch
343
Id. at 529.
344
See id. at 529–30 (“Q. So did you ever meet with Mr. Lorefice Lynch in Argentina? A.
Yes, I did so on two occasions. The first one it was during the lunch. He didn’t look very
good. He had apparently suffered some injuries because he had fell from a horse. It looked
like he was in pain.”).
345
See Lynch Tr. 88, 105, 145, 156–57, 240–49; Landaburu Tr. 433–34, 436.
346
See Lynch Tr. 88, 105, 122, 145, 156–57, 240–49; Landaburu Tr. 433–34, 436.
347
White Tr. 532.
74
could draw upon as a legal defense fund in the event he was sued for any of the
transactions he implemented for Gonzalez; and (4) issue a severance payment to
Lynch of approximately $20 million.348 Gonzalez refused Lynch’s demands. Lynch
went on the offensive.
J. Lynch And Gonzalez Make Competing Filings That Lead To
This Action.
In February 2018, Lynch drafted a new limited liability company agreement
for Belleville, naming himself as Belleville’s sole manager (the “2018 LLC
Agreement”).349 That document is signed solely by Lynch.350 Then, on March 2,
Lynch changed Belleville’s registered agent in Delaware through an amendment to
Belleville’s Certificate of Formation, filed as the “Certificate of Amendment
Changing Only the Register Office or Registered Agent of Grupo Belleville
Holdings, LLC” with the Delaware Secretary of State.351
On April 11, 2019, Gonzalez responded. Unbeknownst to Lynch, he signed
a “Certificate of Amendment of Grupo Belleville Holdings, LLC” in which he
claimed that Televideo owned 95% of the membership interests in Belleville and
348
See id. at 530–32.
349
See JX 132. This is the first LLC agreement for Belleville that appears in the record.
350
See id.
351
PTO ¶ 29.
75
Gonzalez owned 5% (the “April 2019 Certificate”).352 The April 2019 Certificate
named Alviz as Belleville’s President and Manager.353 Gonzalez caused the April
2019 Certificate to be filed with the Delaware Secretary of State on April 12.354
Gonzalez also caused Belleville to represent to the Argentine Telecommunications
Agency, Ente Nacional de Comunicaciones (“ENACOM”), that Televideo had
assumed all of the ownership interest Lynch previously held and that Lynch was no
longer a Belleville equity holder.355
In addition, Alviz submitted a Certificate of Resolution, dated April 12, to the
IGJ and ENACOM on Belleville’s behalf (the “Alviz Certificate”).356 The Alviz
Certificate purported to revoke Lynch’s appointment as Belleville’s legal
representative in Argentina and appointed Lopez to represent Belleville in his
stead.357 Also on April 12, Alviz granted a special power of attorney for Belleville
to Lopez and a group of Argentine lawyers (collectively, the “Argentine
352
Id. ¶ 30; JX 143.
353
PTO ¶ 32; JX 143.
354
PTO ¶ 31.
355
Id. ¶ 37.
356
See JX 146; JX 147; PTO ¶ 33. The stipulated fact states that Alejandro Massot filed
the Alviz Certificate. See PTO ¶ 33. But the record clearly demonstrates that Alviz signed
and filed the Alviz Certificate. See JX 146; JX 147. The stipulated fact contains a
scrivener’s error.
357
PTO ¶ 34.
76
Attorneys”).358 On April 26, Lopez sent Lynch a series of notifications stating that
Belleville had removed Lynch as Belleville’s legal representative in Argentina and
had revoked all powers granted to Lynch.359 The notifications also stated that Lopez
was Belleville’s legal representative and was “therefore the only person with enough
capacity to represent [Belleville] before the Shareholder Meeting” of IMC and
Sebrumax, two of Belleville’s Argentine companies.360
Lynch retaliated on May 7. First, Lynch filed a “Certificate of Correction of
Grupo Belleville Holdings, LLC” with the Delaware Secretary of State, stating
Belleville’s membership interests were held as follows: 5% by Gonzalez, 30% by
Televideo, and 65% by Lynch.361 It also named Lynch as Belleville’s sole manager
and legal representative.362 Second, Lynch reappointed Belleville’s former
registered agent in Delaware.363 Third, he executed a “Revocation of Powers of
Attorney,” pursuant to which he purported to revoke the powers of attorney Alviz
purportedly granted to the Argentine Attorneys through the Alviz Certificate.364 And
358
Id. ¶ 35. Those attorneys included Massot, Ignacio Juan Randle, Gastón Arcal, and
Marcos Patricio Hermann. Id.
359
Id. ¶ 36.
360
Id.
361
Id. ¶ 38.
362
Id. ¶ 39.
363
Id. ¶ 41.
364
Id. ¶ 40.
77
on May 8, Lynch submitted a filing to the IGJ purporting to restore himself as
Belleville’s legal representative in Argentina.365 Lynch did not consult with
Gonzalez in taking any of these actions.366
Gonzalez responded. On May 9, Gonzalez, on behalf of Televideo, and Alviz,
purportedly on behalf of Belleville, signed and filed another “Certificate of
Correction of Grupo Belleville Holdings, LLC” with the Delaware Secretary of
State.367 That certificate named Televideo and Gonzalez as Belleville’s members.368
Then, on May 13, Lynch submitted a filing with ENACOM stating that he held a
65% membership interest in Belleville.369 And in a final blow, on May 14, Lynch
filed a “Certificate of Correction of Grupo Belleville Holdings, LLC” with the
Delaware Secretary of State stating the same.370 This action followed.371
365
Id. ¶ 42.
366
See id. ¶¶ 38–41.
367
Id. ¶ 43; JX 153. The Certificate of Correction stated that Televideo owns 95% of
Belleville and Gonzalez owns 5%.
368
See JX 153.
369
PTO ¶ 44.
370
Id. ¶ 45.
371
Cf. Lynch Tr. 162 (“I filed this lawsuit because Mr. Gonzalez filed before the Secretary
of Delaware a certificate of amendment where it was erasing my interest, and he was
putting it under the name of Televideo Services.”); Lambert Tr. 338 (stating Lynch “was
obligated to start a legal lawsuit against Mr. Gonzalez and other people so that he would
be recognized as 65 percent owner of Grupo Belleville and the only manager”).
78
II. ANALYSIS
The parties have the burden of proving their respective claims by a
preponderance of the evidence.372 “Proof by a preponderance of the evidence means
proof that something is more likely than not.”373 This “means that certain evidence,
when compared to the evidence opposed to it, has the more convincing force and
makes you believe that something is more likely true than not. By implication, the
preponderance of the evidence standard also means that if the evidence is in
equipoise, Plaintiffs lose.” 374 For the viable claims in this case, I am satisfied that
the greater weight of the evidence rests on Defendants’ side of the scale.
A. Defendants Are Entitled To Declaratory Judgments In Their
Favor.
Both Lynch and Gonzalez pled claims under 6 Del. C. § 18-110 and 10 Del.
C. § 6501 seeking declarations regarding Belleville’s ownership and control. This
Court has the authority under 6 Del. C. § 18-110(a) to “hear and determine . . . the
372
Martin v. Med-Dev Corp., 2015 WL 6472597, at *10 (Del. Ch. Oct. 27, 2015); see also
Williams Field Servs. Gp., LLC v. Caiman Energy II, LLC, 2019 WL 4668350, at *15–16
(Del. Ch. Sept. 25, 2019) (applying preponderance of the evidence standard in context of
competing claims for declaratory relief); In re IAC/InterActive Corp., 948 A.2d at 493(“[T]he plaintiff in the [18-110] Action[] bears the burden of proving by a preponderance
of the evidence that it is entitled to relief.”).
373
Martin, 2015 WL 6472597, at *10 (quoting Agilent Techs., Inc. v. Kirkland, 2010 WL
610725, at *13 (Del. Ch. Feb. 18, 2010)).
374
Id. (internal quotation marks and footnotes omitted) (quoting Agilent Techs., Inc., 2010
WL 610725, at *13, and then quoting OptimisCorp v. Waite, 2015 WL 5147038, at *55
(Del. Ch. Aug. 26, 2015)).
79
right of any person to become or continue to be a manager of a limited liability
company.”375 “In determining what claims are cognizable in a [Section 18-110]
action, the most important question that must be answered is whether the claims, if
meritorious, would help the court decide the proper composition of the [company’s]
board or management team.”376 Here, the parties’ additional claims pursuant to
Section 6501,377 their tort claims, and their affirmative defenses related to ownership
and control, assist the Court in deciding which individuals are Belleville’s rightful
owners, managers, and members.
Lynch seeks to hold Gonzalez to the terms of the documents he signed naming
Lynch as Belleville’s 65% owner. But doing so requires concluding that Lynch’s
paper trail represents a series of bargained-for, binding contracts for Lynch’s
purchase of 65% of Belleville, supported by consideration and the parties’ mutual
assent. Defendants contend the documents do not evidence any genuine and binding
375
MPT of Hoboken TRS, LLC v. HUMC Holdco, LLC, 2014 WL 3611674, at *8 (Del. Ch.
July 22, 2014) (quoting 6 Del. C. § 18-110).
376
Agranoff v. Miller, 1999 WL 219650, at *17 (Del. Ch. July 28, 1999); accord Genger
v. TR Inv’rs, LLC, 26 A.3d 180, 199 (Del. 2011).
377
See MPT of Hoboken TRS, LLC, 2014 WL 3611674, at *8. “To exercise its statutory
authority to hear a claim seeking a declaratory judgment, the Court must find four
elements: (1) [i]t must be a controversy involving the rights or other legal relations of the
party seeking declaratory relief; (2) it must be a controversy in which the claim of right or
other legal interest is asserted against one who has an interest in contesting the claim; (3)
the controversy must be between parties whose interests are real and adverse; (4) the issue
involved in the controversy must be ripe for judicial determination.” Id. The parties do
not dispute that these elements are met here.
80
contract, but rather are the effluence of Gonzalez’s agreement to create the
appearance that Lynch owned 65% of Belleville to satisfy Argentine regulators, in
reliance on Lynch’s purported agreement to return the interest upon Gonzalez’s
demand. Defendants contend Lynch then refused to do what he had promised. Thus,
Belleville’s rightful ownership and management depend on a threshold issue:
whether documents showing Lynch holds 65% of Televideo’s interest in Belleville
reflect a genuine contract between Lynch and Gonzalez. The preponderance of the
credible evidence suggests that they do not.
Under Delaware law, “the formation of a contract requires a bargain in which
there is a manifestation of mutual assent to the exchange and a consideration.”378 A
valid contract exists only if “the parties have manifested mutual assent to be bound
by that bargain.”379 Parties may be bound by an oral or written agreement only where
“evidence reveals ‘[m]anifestations of assent that are in themselves sufficient to
conclude a contract.’”380
378
Sarissa Capital Domestic Fund LP v. Innoviva, Inc., 2017 WL 6209597, at *21 (Del.
Ch. Dec. 8, 2017) (quoting Wood v. State, 2003 WL 168455, at *2 (Del. Jan. 23, 2003)
(ORDER)).
379
Id. (citing Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1158 (Del. 2010)).
380
Id. (alteration in original) (quoting Loppert v. WindsorTech, Inc., 865 A.2d 1282, 1288
(Del. Ch. 2004)).
81
“[M]anifestation of mutual assent is an ‘external or objective standard for
interpreting conduct.”381 A party “manifests an intention [to be bound] if he believes
or has reason to believe that the promisee will infer that intention from his words or
conduct.”382 The “relevant inquiry” is
[w]hether a reasonable negotiator in the position of one asserting the
existence of a contract would have concluded, in that setting, that the
agreement reached constituted agreement on all of the terms that the
parties themselves regarded as essential and thus that agreement
concluded the negotiations . . . .383
“Where the objective, contemporaneous evidence indicates that the parties have
reached an agreement, they are bound by it, regardless of its form or the manner in
which it was manifested.”384
Mutual assent “means the external expression of intention as distinguished
from undisclosed intention.”385 The Court determines whether there has been mutual
assent “based upon the[ ] [parties’] expressed words and deeds as manifested at the
381
Chemours Co. v. DowDuPont Inc., 2020 WL 1527783, at *10 n.130 (Del. Ch.
Mar. 30, 2020) (quoting Restatement (Second) of Contracts § 2 cmt. b (1981)).
382
Restatement (Second) of Contracts § 2 cmt. b (1981).
383
Innoviva, Inc., 2017 WL 6209597, at *21 (quoting Leeds v. First Allied Conn. Corp.,
521 A.2d 1095, 1097 (Del. Ch. 1986)).
384
Id. (quoting Debbs v. Berman, 1986 WL 1243, at *7 (Del. Ch. Jan. 29, 1986)); see also
Restatement (Second) of Contracts §§ 18, 19 (noting that party may assent by conduct,
rather than words, promise, or performance).
385
Restatement (Second) of Contracts § 2 cmt. b (1981).
82
time rather than by their after-the-fact professed subjective intent[.]”386 A party’s
subjective intent to eschew the objective terms of the agreement does not prevent
formation, but may render the contract voidable.387
Further, mutual assent is a question of fact that the Court resolves by
considering all credible evidence.388
386
Innoviva, Inc., 2017 WL 6209597, at *21 (alterations in original) (quoting Debbs, 1986
WL 1243, at *7).
387
Compare Restatement (Second) of Contracts § 164 (1981) (“If a party’s manifestation
of assent is induced by either a fraudulent or a material misrepresentation by the other party
upon which the recipient is justified in relying, the contract is voidable by the recipient.”),
with id. § 163 (“If a misrepresentation as to the character or essential terms of a proposed
contract induces conduct that appears to be a manifestation of assent by one who neither
knows nor has reasonable opportunity to know of the character or essential terms of the
proposed contract, his conduct is not effective as a manifestation of assent), and id. cmt. b
(“This Section involves an application of that principle where a misrepresentation goes to
what is sometimes called the ‘factum’ or the ‘execution’ rather than merely the
‘inducement.’”); see 1 Voss on Delaware Contract Law, § 2.05[2][b] (Lexis 2020) (noting
that “[o]vert manifestations of assent control over subjective intent” (quoting IMO John T.
Landon J. Estate, 2017 WL 2492044, at *3 (Del. Ch. June 8, 2017)).
388
See Kotler v. Shipman Assocs., LLC, 2019 WL 4025634, at *17 (Del. Ch. Aug. 21,
2019); see also Eagle Force Hldgs., LLC v. Campbell, 187 A.3d 1209, 1230 (Del. 2018)
(“[W]here the putative contract is in the form of a signed writing, that document generally
offers the most powerful and persuasive evidence of the parties’ intent to be bound.
However, Delaware courts have also said that, in resolving this issue of fact, the court may
consider evidence of the parties’ prior or contemporaneous agreements and negotiations in
evaluating whether the parties intended to be bound by the agreement.” (footnotes
omitted)).
83
At first glance, a wet ink, signed version of a contract looks to be solid
evidence of a meeting of minds. But it is not evidence so powerful that
it negates all other evidence to the contrary. Put another way, even if a
purported agreement is executed by both parties, when the parties’
“understandings of [a contractual] prohibition or permission are
incompatible,” and where the plaintiff “offered no further evidence
indicating” a meeting of the minds, “no enforceable agreement [is]
created.”389
And “[w]here all the parties to what would otherwise be a bargain manifest an
intention that the transaction is not to be taken seriously, there is no such
manifestation of assent to the exchange as is required . . . .”390 This is especially true
where “the setting makes it clear that there is no contract,” unless the party rejecting
the existence of a sham “has no reason to know of” the sham.391
1. The Parties Objectively Agreed To A Sham
Transfer In Which Lynch Held The 65% In Name
Only For Televideo’s Benefit; Gonzalez Is Not
Bound By The Documents Naming Lynch As
Belleville’s 65% Owner.
Based on the parties’ expressed words and deeds as manifested at the time and
viewed objectively from the standpoint of a reasonable negotiator, Lynch and
389
Kotler, 2019 WL 4025634, at *17 (quoting Prince of Peace Enters., Inc. v. Top Quality
Food Mkt., LLC, 760 F. Supp. 2d 384, 398–99 (S.D.N.Y. 2011)).
390
Restatement (Second) of Contracts § 18 cmt. c (1981); see also E. Allen Farnsworth,
Farnsworth on Contracts § 3.07, at 3-28 to 3-39 & 3-30 to 3-31 (2019); 1 Voss on
Delaware Contract Law, §§ 2.05[1][c], 2.07[1][a] (noting that there is no mutual assent
where the parties do not intend to be bound).
391
Restatement (Second) of Contracts § 18 cmt. c (1981).
84
Gonzalez manifested assent to an agreement under which Lynch would hold
Televideo’s 65% interest in name only, return it upon Gonzalez’s request,
memorialize Televideo’s beneficial ownership in the Counterdocument, and prepare
and execute sham documents to satisfy regulators.392 Gonzalez credibly testified
that these terms governed the parties’ agreement and that he intended to adhere to
them.393 And the preponderance of the evidence demonstrates that Gonzalez, in the
position of a reasonable negotiator, would have objectively concluded that Lynch
agreed these terms were “essential” in furtherance of their common scheme and
manifested assent to the same.394
The scheme and its component parts were Lynch’s idea. Lynch flagged the
new Argentine law and proposed these terms, the sham transfer documents, and the
Counterdocument as a solution. Lynch presented the terms to Gonzalez,
representing that the solution would simultaneously protect Gonzalez’s assets and
allow Belleville to continue operating in Argentina. Lynch prepared a series of
documents naming Lynch as Belleville’s 65% member.395 Gonzalez executed those
documents in furtherance of the parties’ agreement to satisfy Argentine holding
392
See, e.g., A. Gonzalez Tr. 463; Innoviva, Inc., 2017 WL 6209597, at *21.
393
See, e.g., A. Gonzalez Tr. 463.
394
Innoviva, Inc., 2017 WL 6209597, at *21 (quoting Leeds, 521 A.2d at 1097).
395
See JX 5; JX 6; JX 7; JX 8; JX 10; JX 11; JX 12; JX 13; JX 14; JX 15; JX 26; JX 27;
JX 28; JX 29; JX 30; JX 31; JX 32; JX 35; JX 37; JX 64; JX 66; JX 67; JX 68.
85
regulations, and, believing they were sham documents, never intended to be bound
by their terms. And Lynch suggested, drafted, and presented to Gonzalez the
Counterdocument that memorialized and protected Televideo’s beneficial
ownership and evidenced the parties’ private agreement. Lynch assured Gonzalez
that he and his wife would execute it and then performed as though he had, including
by drafting additional sham language that he told Gonzalez would address the
Counterdocument,396 and by permitting advisors to reference the Counterdocument
in business presentations.397 And Lynch performed under counterdocuments
governing interests in other entities.
Gonzalez had no reason to believe that Lynch’s objective assent was
inconsistent with his subjective intent until Lynch declared he was holding 65% of
Belleville for ransom.398 Lynch never told Gonzalez that he did not execute the
Counterdocument and that he did not intend to return the 65% to Televideo. A
reasonable negotiator in Gonzalez’s position would have objectively believed Lynch
assented to the terms of their agreement. Although Lynch never intended to perform
under those terms, the preponderance of objective evidence demonstrates that both
396
See JX 67 § 2.05; JX 68 § 2.05.
397
See, e.g., JX 92; JX 93; JX 94; JX 95; JX 96; JX 97; JX 98; JX 100; JX 101; JX 102;
JX 103; JX 104; JX 105; JX 107; JX 108; JX 109; JX 110; JX 111; JX 112; JX 113; JX
114; JX 115; JX 116; JX 117; JX 118; JX 119; JX 120.
398
See, e.g., A. Gonzalez Tr. 485.
86
Lynch and Gonzalez mutually assented to the terms of the sham transfer, which
included their agreement to execute sham documents to create the appearance of a
transfer, together with a Counterdocument precluding transfer of any actual
beneficial interest.
Lynch and Gonzalez did not manifest mutual assent to any contract, oral or
written, pursuant to which Lynch purchased 65% of Televideo’s interest in
Belleville. Despite Lynch’s contention that he and Gonzalez entered into “verbal
agreement[s]” for a “purchase” in September 2007 and January 2008, the
preponderance of the evidence demonstrates that no such “agreements” occurred.399
Nor did Lynch and Gonzalez agree to actually transfer Televideo’s interest in
Belleville to Lynch in December 2008 or thereafter.400
More specifically, the parties did not mutually assent to the terms of the sham
documents themselves, which the parties objectively intended would have no
binding effect.401 In the context of the parties’ objective agreement to paper the
sham transaction, a reasonable negotiator in Lynch’s position could not have
concluded that Gonzalez intended to be bound by the terms of documents they
399
See supra notes 98–122 and accompanying text.
400
See supra Section I.B.
401
See Restatement (Second) of Contracts § 18 cmt. c (1981).
87
created only to facially satisfy Argentine regulators.402 The documents Gonzalez
and Lynch executed, which named Lynch as Belleville’s 65% member, evidence not
a binding contract between the parties to transfer Lynch 65% of Belleville, but rather
the parties’ objective agreement to create documents supporting the appearance of
that transfer, and to terms by which Lynch would hold the interest in name only and
return it to Televideo upon Gonzalez’ request.
Accordingly, the parties never manifested an intent to be bound by any
document naming Lynch as Belleville’s majority member.403 In the absence of an
actual agreement to sell Lynch 65% of Belleville, no “expressed words and deeds as
manifested at the time” support Lynch’s “after-the-fact professed subjective intent”
to retain 65% of Belleville for himself.404 Gonzalez is not bound by the terms of any
document naming Lynch as Belleville’s 65% member.405
402
See Innoviva, Inc., 2017 WL 6209597, at *21.
403
See id.; Restatement (Second) of Contracts § 18 cmt. c (1981).
404
Innoviva, Inc., 2017 WL 6209597, at *21 (quoting Debbs, 1986 WL 1243, at *7).
405
Defendants also raise failure of consideration as an affirmative defense. I need not reach
that defense because the purported agreement Lynch seeks to enforce fails for lack of
mutual assent.
88
2. If Gonzalez Were Bound By The Sham Documents,
Lynch Fraudulently Induced Gonzalez Into Signing
Them And Is Estopped; Lynch’s Machinations Are
Void.
Even if Gonzalez were bound by the terms of the documents naming Lynch
as Belleville’s majority member, Defendants’ affirmative defenses of fraudulent
inducement and promissory estoppel would bar Plaintiffs’ claims and mandate
judgment in Defendants’ favor.
Delaware is a contractarian state. As such, a party who enters into a
contract governed by Delaware law will be charged with knowledge of
the contents of the instrument and will be deemed to have knowingly
agreed to the plain terms of the instrument absent some well-pled
reason to infer otherwise. And this same party will face an uphill climb
when it seeks to prosecute claims that it relied on promises that are
explicitly contradicted by its own clear and unambiguous written
contract.406
But in the case of fraud or misrepresentation and in the absence of clear anti-reliance
language, the Court may look beyond the language of the four corners of the
document to determine the parties’ intent, and a party cannot escape responsibility
for his own fraudulent representations and misstatements made outside of the
agreement’s four corners.407 More broadly, in the context of a statutory claim
addressing disputed management, this Court has held that the action of a director or
406
Chapter 7 Tr. Constantino Flores v. Strauss Water Ltd., 2016 WL 5243950, at *6 (Del.
Ch. Sept. 22, 2016).
407
Abry P’rs V, L.P. v. F & W Acq. LLC, 891 A.2d 1032, 1059 (Del. Ch. 2006).
89
manager “will be deemed invalid if obtained through trickery or
misrepresentation,”408 even where he had an opportunity to “simply read” the
relevant document to discover an alleged misrepresentation.409 In such cases, the
subject transaction is voidable.410
408
Martin, 2015 WL 6472597, at *12–14 (quoting Hockessin Cmty. Ctr., Inc., 59 A.3d at
458 (comparing ineffective resignations obtained by trickery or misrepresentation to other
non-contractual board actions invalidated by such conduct), and citing Fogel v. U.S.
Energy Sys., Inc., 2007 WL 4438978, at *3 (Del. Ch. Dec. 13, 2007) (“Where a director is
tricked or deceived about the true purpose of a [special] board meeting, and where that
director subsequently does not participate in that meeting, any action purportedly taken
there is invalid and void.”), and then citing Schroder v. Scotten, Dillon Co., 299 A.2d 431,
436 (Del. Ch. 1972) (“A quorum obtained by trickery is invalid and the reasoning which
forbids trickery in securing a quorum applies equally well to securing the absence of
opposing directors from a meeting by representing that such a meeting will not be held.”),
and also citing Naughty Monkey LLC v. MarineMax Ne. LLC, 2011 WL 4091851, at *3
(Del. Ch. Aug. 31, 2011) (“[A] party may escape a contract which it was induced to enter
by the other party’s fraudulent or material misrepresentation . . .”)).
409
Martin, 2015 WL 6472597, at *13–14 (noting that a director’s reliance on
misrepresentation may be reasonable under the circumstances, even if he could have
discovered the truth by “simply read[ing]” the documents at issue).
410
See id. at *12; see also Restatement (Second) of Contracts § 164 (1981).
90
Looking at this case as both a contract dispute and a control dispute, I turn to
Defendants’ affirmative defenses of promissory estoppel and fraudulent inducement.
Both defenses seek to unwind transactions obtained through a false promise or
statement on which the counterparty relied to his detriment. If Gonzalez had been
bound to the terms of the sham documents, these defenses would relieve him of those
obligations. And working through the elements of these defenses leads to the
conclusion that Lynch strove to obtain a 65% interest in Belleville by trickery and
misrepresentations, so if the documents reflecting that holding were valid, they
would be void.411
“If a party’s manifestation of assent is induced by either a fraudulent or a
material misrepresentation by the other party upon which the recipient is justified in
relying, the contract is voidable by the recipient.”412 To prevail on a fraudulent
inducement defense, the asserting party must prove, among other things, reasonable
reliance on a false representation:
411
See Martin, 2015 WL 6472597, at *12–14.
412
Restatement (Second) of Contracts § 164 (1981).
91
1) a false representation, usually one of fact, made by the defendant; 2)
the defendant’s knowledge or belief that the representation was false,
or was made with reckless indifference to the truth; 3) an intent to
induce the plaintiff to act or to refrain from acting; [and] 4) the
plaintiff’s action or inaction taken in justifiable reliance upon the
representation . . . .413
“A misrepresentation is an assertion that is not in accordance with the facts, either
because it is false or because even if it is literally true, it creates a false impression
as to the true state of affairs.”414 “In addition, fraud does not consist merely of overt
misrepresentations, but may also occur through deliberate concealment of material
facts, or by silence in the face of a duty to speak.”415 Still, Delaware law finds it
“unreasonable to rely on oral representations when they are expressly contradicted
by the parties’ written agreement.”416 And fraudulent inducement is “not available
as a defense when one had the opportunity to read the contract and by doing so could
413
Standard Gen. L.P. v. Charney, 2017 WL 6498063, at *12 (Del. Ch. Dec. 19, 2017)
(emphasis omitted) (quoting Lord v. Souder, 748 A.2d 393, 402 (Del. 2000)), aff’d, 195
A.3d 16 (Del. 2018); see also Martin, 2015 WL 6472597, at *12.
414
Berdel, Inc. v. Berman Real Estate Mgmt., Inc., 1997 WL 793088, at *8 (Del. Ch.
Dec. 15, 1997).
415
Martin, 2015 WL 6472597, at *12 (internal quotation marks omitted) (quoting Gaffin
v. Teledyne, Inc., 611 A.2d 467, 472 (Del. 1992)).
Carrow v. Arnold, 2006 WL 3289582, at *11 (Del. Ch. Oct. 31, 2006), aff’d, 933 A.2d
4161249 (Del. 2007); accord Charney, 2017 WL 6498063, at *12; Strauss Water Ltd., 2016
WL 5243950, at *7.
92
have discovered the misrepresentation.”417 But “[t]he reasonableness of [a party]’s
reliance on [another]’s alleged misrepresentations . . . must be considered in the
context of the surrounding circumstances including [their] prior
communications.”418
As for promissory estoppel, it is, “at base, an equitable remedy.”419 Under the
doctrine of promissory estoppel, the asserting party must prove by clear and
convincing evidence that “(1) a promise was made; (2) it was the reasonable
expectation of the promisor to induce action or forbearance on the part of the
promisee; (3) the promisee reasonably relied on the promise and took action to his
detriment; and (4) such promise is binding because injustice can be avoided only by
enforcement of the promise.”420 “A promise is a manifestation of intention to act or
417
Carrow, 2006 WL 3289582, at *11 (quoting 17A Am. Jur. 2d Contracts § 214 (2006)),
aff’d, 933 A.2d 1249 (Del. 2007); accord Charney, 2017 WL 6498063, at *12; Strauss
Water Ltd., 2016 WL 5243950, at *7.
418
Martin, 2015 WL 6472597, at *13.
419
Donald J. Wolfe, Jr. & Michael A. Pittenger, Corporate and Commercial Practice in
the Delaware Court of Chancery § 15.02[c], at 15-12 (2018) (quoting Grunstein v. Silva,
2009 WL 4698541, at *10 (Del. Ch. Dec. 8, 2009)).
420
See Grunstein, 2009 WL 4698541, at *7; see also Restatement (Second) of Contracts
§ 90 (1981) (“A promise which the promisor should reasonably expect to induce action or
forbearance on the part of the promisee or a third person and which does induce such action
or forbearance is binding if injustice can be avoided only by enforcement of the promise.”).
The clear and convincing standard requires “proof that is highly probable, and free from
serious doubt.” PharmA-thene v. SIGA Techs., Inc., 2011 WL 4390726, at *13 (Del. Ch.
Sept. 22, 2011) (quoting Utz v. Utz, 2003 WL 22952579, at *2 n.11 (Del. Ch. Dec. 5, 2003),
rev’d on other grounds, 67 A.3d 330 (Del. 2013)).
93
refrain from acting in a specified way, so made as to justify a promisee in
understanding that a commitment has been made.”421
Here, both defenses yield the same result: Gonzalez is released from the terms
of the documents naming Lynch as Belleville’s 65% owner. Lynch made several
misrepresentations upon which Gonzalez relied: (1) that Gonzalez needed to sign
JX 7 to facilitate the final steps of the Hadad acquisition, when Lynch subjectively
intended that document to lay the foundation for his misappropriation; (2) that
Gonzalez had to execute the Purchase Agreements and the other sham documents to
comply with Argentine law, when Lynch subjectively intended for Gonzalez to sign
those documents to pad the file naming him as Belleville’s majority member;422 (3)
that Lynch would hold the 65% in trust for Televideo, when Lynch never
subjectively intended to return the interest to its rightful owner; and (4) that Lynch
intended to sign and perform under the Counterdocument, when Lynch never
421
Restatement (Second) of Contracts § 2 & cmt. a (1981); see also 1 Voss on Delaware
Contract Law, § 2.65[2][a] (noting that “the alleged [] promise should not be viewed in a
vacuum” (alterations in original) (quoting Konitzer v. Carpenter, 1993 WL 562194, at *9
(Del. Super. Ct. Dec. 29, 1993)).
422
While Lynch’s representation that Argentine law required him to hold a majority stake
in Belleville was true, it gave Gonzalez a false impression as to the true motivating factor,
which Lynch artfully and diligently concealed: Lynch’s plan to strip Televideo of its
majority interest. See Berdel, Inc., 1997 WL 793088, at *8.
94
subjectively intended the same. Items two through four can also be characterized as
sufficiently definite false promises.423
Plaintiffs contend that Lynch and Gonzalez agreed to transfer 65% of
Belleville to Lynch “long before it was required by Argentine law.”424 As explained,
they agreed to no such transfer. Lynch obtained Gonzalez’s signature on each
document naming Lynch as Belleville’s 65% member through false pretenses,
misrepresentations, and knowing silence; Lynch communicated and acted in
accordance with his objective intentions, while subjectively intending to eschew his
promises and conceal the truth from Gonzalez.425 Thus, the first and second
elements of fraudulent inducement, as well as the first element of promissory
estoppel, are satisfied.426
Likewise, the second element of promissory estoppel and the third element of
fraudulent inducement—the intention or reasonable expectation of inducing the
423
See Charney, 2017 WL 6498063, at *25 (declining to invoke promissory estoppel where
“the alleged ‘promise’ is too amorphous to be enforced”); Restatement (Second) of
Contracts § 2 & cmt. a (1981).
424
D.I. 190 at 38.
425
See Martin, 2015 WL 6472597, at *13–14.
426
See Charney, 2017 WL 6498063, at *12 (requiring “a false representation, usually one
of fact, made by the defendant” and “the defendant’s knowledge or belief that the
representation was false, or was made with reckless indifference to the truth”); Grunstein,
2009 WL 4698541, at *7 (requiring that “a promise was made”).
95
counterparty to act—are met.427 Lynch knew Gonzalez trusted him and would
follow or sign Lynch’s proposed means of executing Gonzalez’s business objectives.
Consistent with Lynch’s appointment as Belleville’s legal representative in
Argentina and attorney for the Company, Gonzalez trusted Lynch’s advice regarding
Belleville’s operations and compliance with Argentine law. But from the early days
of their working relationship, as early as 2007, Lynch planned to strip Televideo of
its majority interest. Lynch adamantly testified that he never intended to execute the
Counterdocument or hold the 65% in trust for Televideo as he represented to
Gonzalez.428 Lynch conjured a seemingly legitimate legal impetus for each
document along his paper trail and presented each document to Gonzalez under the
guise that it furthered some corporate goal. Lynch knew his misrepresentations and
false promises were essential: in particular, he knew that without the promised
Counterdocument, Gonzalez would not execute the Purchase Agreements, the
Notices, or the Addenda. Lynch intended his false promises and misrepresentations
to induce Gonzalez to sign documents Lynch could use to seize Televideo’s control
over Belleville.
427
See Charney, 2017 WL 6498063, at *12 (requiring “an intent to induce the plaintiff to
act or to refrain from acting”); Grunstein, 2009 WL 4698541, at *7 (requiring that “it was
the reasonable expectation of the promisor to induce action or forbearance on the part of
the promisee”).
428
See Lynch Tr. 146, 147, 150, 155, 158, 159, 160.
96
The fourth element of fraudulent inducement and the third element of
promissory estoppel, based in reliance, are also met. To his detriment, Gonzalez
signed each document naming Lynch as Belleville’s 65% member in justifiable and
reasonable reliance on Lynch’s representations and promises. Those included public
filings and private “agreements,” which Gonzalez executed believing they
legitimized the sham transfer and furthered what he believed to be their mutual
scheme to facially satisfy Argentine law.429 Gonzalez did so notwithstanding the
documents’ meaningless terms, because Lynch told him that each document was
necessary for the parties’ mutual scheme to continue Belleville’s operations.
Objectively viewing Lynch’s actions in the context of the sham transaction,
Gonzalez had no reason to think Lynch would lead him astray.
Lynch contends that Defendants cannot demonstrate justifiable reliance
because the “clear and unambiguous terms of the written contracts between the
parties” contradict Gonzalez’s assertion that Lynch held the 65% interest as a
nominee, and that those “written agreements” trump any document to the contrary,
like the October 22 Email.430 The Court must consider the reasonableness of
Gonzalez’s reliance on Lynch’s misrepresentations and false promises in the context
429
See JX 5; JX 6; JX 8; JX 11; JX 12; JX 13; JX 14; JX 15; JX 26; JX 27; JX 28; JX 29;
JX 30; JX 31; JX 32; JX 35; JX 37; JX 64; JX 66; JX 67; JX 68.
430
D.I. 190 at 38–37 (quoting Strauss Water Ltd., 2016 WL 5243950, at *1, *7).
97
of the surrounding circumstances, including his prior communications with
Lynch.431 This context supports Gonzalez’s reliance.
The parties objectively agreed to facially name Lynch as Belleville’s 65%
owner to satisfy Argentine laws, and to protect Televideo’s interest with the
Counterdocument, the only document intended to be legitimate and have binding
effect. In accordance with that agreement, Lynch prepared and executed the sham
documents and represented that he and his wife would sign the Counterdocument.
Aside from the Counterdocument, Gonzalez did not believe the other documents and
their terms mattered; they were only needed to paper the sham transfer. Gonzalez
never intended, either subjectively or objectively, to be bound by their terms.432 By
signing those documents in furtherance of their joint scheme, Gonzalez did not
choose to “accept the benefits of those agreements” and “disregard” Lynch’s false
representations and promises; his trickery was undetectable from the meaningless
terms of the sham documents.433 Because the “clear and unambiguous terms of the
431
See Martin, 2015 WL 6472597, at *13 (finding that a party’s similar argument failed
after analyzing reliance “in the context of the surrounding circumstances including [the
parties’] prior communications” (citing Carrow, 2006 WL 3289582, at *11)).
432
See supra Section I.D.
433
See D.I. 190 at 41 (“Having chosen to execute the restructuring agreements and accept
the benefits of those agreements, Gonzalez cannot avoid the consequences of the Purchase
Agreements on a fraudulent inducement theory.”).
98
written [documents] between the parties” were arbitrary and intended only as a
sham, Plaintiffs’ argument fails.
More specifically, Lynch argues that Defendants’ affirmative defenses fail
because Lynch told Gonzalez he was not going to sign the Counterdocument and
because Section 2.05 of the May 4th Restructuring Agreement evidences Gonzalez’s
agreement to “revoke and destroy” any Counterdocument.434 Lynch posits that from
Section 2.05 alone, Gonzalez could have discovered the truth and, therefore, could
not have justifiably relied on Lynch’s representations regarding the
Counterdocument. These positions are not supported by the record.
Lynch never told Gonzalez, and Gonzalez never agreed, that Lynch would not
sign or perform under the Counterdocument as he initially represented.435 Lynch
proceeded as though he had carried out his promise, but covertly destroyed or
concealed the Counterdocument. Gonzalez believed that Lynch executed the
Counterdocument, that it still existed in Belleville’s files, and that Lynch intended
to give the interest back upon demand.436 The parties were careful to conceal the
Counterdocument’s existence from the public and regulators, as necessary to
effectuate the sham transfer.
434
D.I. 190 at 42–43.
435
See supra note 218 and accompanying text.
436
See, e.g., A. Gonzalez Tr. 456, 463, 485; JX 141.
99
Lynch presented the May 4th Restructuring Agreement to Gonzalez as
another fake document he needed to sign to paper the sham transfer. In particular,
he presented it as protecting Belleville in the event regulators found the
Counterdocument. But to Lynch, the May 4th Restructuring Agreement was the
perfect insurance for his plan: Section 2.05 stated that the Counterdocument could
be nullified and destroyed.437 Gonzalez viewed it as another sham document to
further their mutual scheme, and signed. Thereafter, Lynch and his comrades
continued to perpetuate the myth of the Counterdocument, including to Belleville’s
legal and financial advisors, despite knowing Lynch destroyed or concealed it and
despite opportunities to disclose the truth.
Clear and convincing evidence demonstrates that Section 2.05 did not alert
Gonzalez that Lynch never signed the Counterdocument, or that he concealed or
destroyed the copy Gonzalez signed.438 Lynch presented the May 4th Restructuring
Agreement to Gonzalez for his signature under false pretenses.439 To the extent
437
See JX 67 § 2.05; JX 68 § 2.05; Lynch Tr. 48, 49–50, 203–11, 256–58.
438
See Martin, 2015 WL 6472597, at *14 (“Thus, despite Martin’s careless failure to
compare the terms of the first resignation letter to the second resignation letter, his reliance
on Tomasek’s material misrepresentation by silence in the face of a duty to speak as to the
conditionality of Martin’s resignation was reasonable.”).
439
See id. at *13–14; see also Hockessin Cmty. Ctr., Inc., 59 A.3d at 458; Naughty Monkey
LLC, 2011 WL 4091851, at *3; Fogel, 2007 WL 4438978, at *3; Schroder, 299 A.2d at
436.
100
Lynch discussed Section 2.05 with Gonzalez, “the evidence shows that he more than
likely implied it was a mere formality” in furtherance of their joint scheme.440 In
view of the parties’ mutual scheme, it was reasonable for Gonzalez to rely on
Lynch’s false representations and promises.
Defendants have met each element of fraudulent inducement and promissory
estoppel by clear and convincing evidence.441 Lynch falsely promised to perform
under the parties’ objective agreement, and misled Gonzalez regarding each
document, in order to induce Gonzalez to certify a paper trail naming Lynch as
Belleville’s 65% member. Gonzalez justifiably relied on Lynch’s
misrepresentations and false promises and signed various documents, believing that
the documents’ terms were meaningless, that his signature was necessary to satisfy
Argentine regulators, and that Televideo’s interest was secured by the
Counterdocument. Until Lynch held the Company for ransom, Gonzalez believed
that Lynch was loyal to their objective agreement and had signed the
440
Martin, 2015 WL 6472597, at *14.
441
“There is some uncertainty in our law as to whether a party asserting fraud must prove
the claim by clear and convincing evidence or whether a preponderance of the evidence
will suffice.” Project Boat Hldgs., LLC v. Bass Pro Gp., LLC, 2019 WL 2295684, at *23
(Del. Ch. May 29, 2019) (comparing Ross Hldg. & Mgmt. Co. v. Advance Realty Gp., LLC,
2014 WL 4374201, at *37 (Del. Ch. Sept. 4, 2014) (requiring plaintiffs to prove fraud by
clear and convincing evidence), with Trascent Mgmt. Consulting, LLC v. Bouri, 2018 Wl
4293359, at *17 (Del. Ch. Sept. 10, 2018) (requiring plaintiff to prove fraudulent
inducement by a preponderance of the evidence)). I need not decide the question, however,
because Defendants prevail under either standard.
101
Counterdocument as promised.442 Aware of Gonzalez’s belief, Lynch “had a duty
fully and fairly to disclose” the truth to Gonzalez, and he failed to do so.443
Lynch obtained Gonzalez’s signatures with misrepresentations and false
promises. Injustice can only be avoided by holding Lynch to the consequences of
his actions.444 Accordingly, even if Gonzalez were bound to the terms of the
documents he signed, his affirmative defenses of fraudulent inducement and
promissory estoppel would relieve him of those obligations.
Defendants are entitled to a declaratory judgment under 10 Del. C. § 6501 that
(1) Gonzalez holds 5% of Belleville, (2) Televideo holds 95% of Belleville, and (3)
Lynch holds no interest in Belleville.
3. Gonzalez And Alviz Are Belleville’s Managers.
At the outset of this case, Lynch and Gonzalez brought competing claims to
Belleville’s management pursuant to Section 18-110: each sought a declaration that
442
See, e.g., A. Gonzalez Tr. 485 (“Mr. Lynch had all of our trust until he notified that he
was separating the property of Argentina. And all the paperwork in order to do that he had
created throughout all the years for everything. There was no problem. And he was
counting on my complete trust. I cannot answer for what he made me sign. I know that I
signed and I am responsible, but he created everything.”); JX 141 (evidencing Gonzalez’s
continued belief that Lynch executed the Counterdocument).
443
Martin, 2015 WL 6472597, at *14.
444
See Chrysler Corp. v. Chaplake Hldgs., Ltd., 822 A.2d 1024, 1033–34 (Del. 2003);
Grunstein, 2009 WL 4698541, at *7; see also 1 Voss on Delaware Contract Law, §§
2.64[1], 2.64[4][b].
102
he is Belleville’s sole manager.445 Throughout this contentious dispute, Plaintiffs
represented that their Section 18-110 claim was the driving force behind this
litigation.446 Yet, Plaintiffs did not address Lynch’s purported status as Belleville’s
sole manager in their post-trial briefing; nor did they refute Defendants’ claim that
Gonzalez is Belleville’s sole manager.447 As a result, Plaintiffs have waived that
claim and any argument that Lynch is Belleville’s manager pursuant to Section
18-110.448
I only consider the Televideo Defendants’ Section 18-110 counterclaim,
seeking a declaration that Gonzalez is Belleville’s sole manager, which Defendants
445
Notably, Defendants do not seek a declaration that either Defendants Lopez or Alviz is
a Belleville manager.
446
See, e.g., Compl. ¶¶ 92–102; D.I. 37.
447
See generally D.I. 190 (only mentioning “manager” in the context of a personal
jurisdiction analysis); D.I. 206 (failing to respond to argument in Defendants’ opening brief
that Gonzalez is Belleville’s sole manager).
448
See In re IBP, Inc. S’holders Litig., 789 A.2d 14, 62 (Del. Ch. 2001) (“In its opening
post-trial brief, Tyson did not argue that these issues would in themselves be sufficient . . . .
As a result, I consider Tyson to have waived any arguments about these issues.”); see also
Barret v. Am. Country Hldgs., Inc., 951 A.2d 735, 745 (Del. Ch. 2008) (noting that if a part
“pull[s] out” its “argument for the first time in its post-trial answering brief,” “it was
therefore not fairly presented”); Franklin Balance Sheet Inv. Fund v. Crowley, 2006 WL
3095952, at *4 (Del. Ch. Oct. 19, 2006) (explaining that, “under the briefing rules, a party
is obliged in its motion and opening brief to set forth all of the grounds, authorities and
arguments supporting its motion” and “should not hold matters in reserve for reply briefs”);
In re Asbestos Litig., 2007 WL 2410879, at *4 (Del. Super. Aug. 27, 2007) (noting that it
is “well-settled in Delaware” that a legal issue not raised in an opening brief is generally
deemed waived and “[m]oving parties must provide adequate factual and legal support for
their positions in their moving papers in order to put the opposing parties and the court on
notice of the issues to be decided.”).
103
briefed post-trial. Under Section 18-110, the Court may “hear and determine . . . the
right of any person to become or continue to be a manager of a limited liability
company.”449
Section 18-109(a) defines the term “manager” as encompassing two
categories of persons: first, a person formally named as a manager
pursuant to the governing LLC agreement; and second, a person not
formally named as a manager pursuant to the governing LLC
agreement but who nevertheless “participates materially in the
management of the limited liability company.450
An individual “participate[d] materially” in the LLC’s business where he “acted as
president of the Compan[y], ran [its] day-to-day operations, and took binding action
on [its] behalf.”451
The preponderance of the evidence presented demonstrates that both
Gonzalez and Alviz are Belleville’s managers: Gonzalez by way of material
participation in Belleville’s business, and Alviz by way of formal designation in the
April 2019 Certificate. Although no document in the record initially formalized his
role as manager, Gonzalez participated materially in Belleville’s management from
its inception. He formally served as Belleville’s President, solely controlled
Belleville’s management and business, and made the ultimate decisions for the
449
MPT of Hoboken TRS, LLC, 2014 WL 3611674, at *8 (quoting 6 Del. C. § 18-110(a)).
450
Metro Storage Int’l LLC v. Harron, 2019 WL 3282613, at *1 (Del. Ch. July 19, 2019)
(citing 6 Del. C. § 18-109(a)).
451
Id. at *9 (citing Phillips v. Hove, 2011 WL 4404034 (Del. Ch. Sept. 22, 2011)).
104
Company. Employees of Belleville and its subsidiaries understood that Gonzalez
was in charge, even when he delegated tasks to others. And in January 2009,
Gonzalez was formally designated as a Belleville manager.452 He removed himself
from this formal managerial role in April 2019, when he named Alviz as Belleville’s
sole manager and president under the April 2019 Certificate.453 Still, Gonzalez
continued to participate materially in Belleville’s management and operations by
directing its day-to-day operations and taking binding action on its behalf; this is
undisputed.
Although neither the Televideo Defendants or Alviz seek a declaration that
Alviz is a Belleville manager, the preponderance of the evidence, namely the
representation in the April 2019 Certificate filed with the Delaware Secretary of
State, demonstrates that Alviz is Belleville’s President and manager.454 The record
demonstrates that, notwithstanding Alviz’s formal designation, Gonzalez retained
See JX 16. Again, Defendants do not appear to refute Lynch’s designation as co-
452
manager.
453
See PTO ¶ 32; JX 143.
454
Lynch’s only dispute as to the validity of the April 2019 Certificate depends on his
flawed position that he, not Televideo, holds 65% of Belleville. Having resolved that issue
in Gonzalez’ favor, there appears to be no dispute that he had the authority to issue the
April 2019 Certificate as Belleville’s manager and as president of Televideo, Belleville’s
controlling member. No valid operating agreement for Belleville appears in the record. I
conclude that the April 2019 Certificate nullified and replaced the document naming Lynch
as Gonzalez’s co-manager in 2009. I conclude from that act, the language of the April
2019 Certificate, and Lynch’s waiver of his Section 18-110 claim, see supra Section II.A.3,
that the April 2019 Certificate displaced Lynch’s 2009 nomination as co-manager.
105
actual managerial control over Belleville. Accordingly, Defendants are entitled to a
declaratory judgment under 6 Del. C. § 18-110 that Gonzalez and Alviz are
Belleville’s co-managers.
B. All Parties’ Tort Claims Fail.
The parties assert numerous tort claims. The Televideo Defendants assert
Lynch is liable for fraudulent inducement and fraudulent misrepresentation, or
common law fraud, and conversion.455 The Televideo Defendants’ tortious fraud
claims are based on Lynch’s scheme to induce Gonzalez to execute a suite of sham
documents naming Lynch as Belleville’s 65% owner. Lynch asserts a mirroring
conversion claim against the Televideo Defendants, asserting they took his interest
in Belleville.456
Each of these claims requires proof of damages by the preponderance of the
evidence.457 “The law does not permit a recovery of damages which is merely
455
Countercl. ¶¶ 92–107, 108–117.
456
Compl. ¶¶ 128–37.
457
See Great Hill Equity P’rs IV, LP v. SIG Growth Equity Fund I, LLLP, 2020 WL
948513, at *16 (Del. Ch. Feb. 27, 2020); Martin, 2015 WL 6472597, at *10 (“Plaintiffs
have the burden of proving each element, including damages, of each of their causes of
action against each Defendant by a preponderance of the evidence.” (quoting OptimisCorp,
2015 WL 5147038, at *55)).
On a claim of fraud, the plaintiff must prove (1) a false representation; (2) the
defendant’s knowledge or belief that the representation was false, or was made with
reckless indifference to the truth; (3) an intent to induce the plaintiff to act or to refrain
from acting; (4) the plaintiff's action or inaction taken in justifiable reliance upon the
representation; and (5) resulting damage to the plaintiff. See Lorenzetti v. Hodges, 62 A.3d
106speculative or conjectural.”458 “[T]o support a finding of a specific sum as damages
there should generally be other evidence than that which merely shows the nature of
plaintiff’s injuries[.]”459 At trial, neither party put on evidence of damages.
The Televideo Defendants seek an order “granting Defendants an award of
monetary damages for CLL’s fraudulent conduct.”460 The Televideo Defendants did
not put on an expert or otherwise attempt to quantify the amount of damages suffered
as a result of Lynch’s fraudulent conduct. For their conversion claim, the Televideo
1224 (Del. 2013) (TABLE); H–M Wexford LLC v. Encorp, Inc., 832 A.2d 129, 144 (Del.
Ch. 2003); Gaffin, 611 A.2d at 472. Further, the misrepresentation or omission must be
material in nature and concern an essential element of the subject transaction. See
Princeton Ins. Co. v. Vergano, 883 A.2d 44, 54 (Del. Ch. 2005).
The elements of fraudulent inducement are identical to those of common law fraud,
except that the party must demonstrate that the subject representation was intended to
induce action and that the party was, in fact, induced. See Gloucester Hldg. Corp. v. U.S.
Tape & Sticky Prods., LLC, 832 A.2d 116, 124 (Del. Ch. 2003) (“To establish fraud in the
inducement . . . the elements of common law deceit, which include ‘misrepresentation of a
material fact, made to induce action, and reasonable reliance on the false statement to the
detriment of the person relying.”).
Under Delaware law, conversion is “any distinct act of dominion wrongfully exerted
over the property of another, in denial of [the plaintiff’s] right, or inconsistent with it.”
Kuroda v. SPJS Hldgs., LLC, 971 A.2d 872, 889 (Del. Ch. 2009) (citing Drug, Inc. v. Hunt,
168 A. 87, 93 (Del. 1933)); see also 18 Am. Jur. 2d Conversion § 1 (2020). To prove
conversion, the party must show that (1) the plaintiff had a property interest; (2) the plaintiff
had a right to possession of the property; (3) the defendant deprived the plaintiff of
possession or use of the property; and, (4) the plaintiff sustained damages. See Facciolo
Constr. Co. v. Bank of Del., 514 A.2d 413, 413 (Del. 1986) (TABLE).
458
Henne v. Balick, 146 A.2d 394, 396 (1958) (quotation omitted).
459
Id.460
D.I. 189 at 51; accord D.I. 204 at 29.
107
Defendants suggest that they are entitled to the “full value of the property” that
Lynch held for ransom and attempted to take via filings with Delawarean and
Argentine authorities.461 But the Televideo Defendants failed to put on any evidence
quantifying that value.462
On Lynch’s part, in support of conversion, he argues that “Telearte expended
considerable effort . . . but nonetheless suffered meaningful financial losses through
expenditures on professional fees,” so “[t]he Court must enter judgment on this
claim in favor of Plaintiffs.”463 Putting aside that Telearte is not a plaintiff in this
action, Lynch did not present evidence at trial quantifying the “financial losses” or
“expenditures” that resulted from Defendants’ alleged misconduct. His conversion
claim fails. It also fails for another reason: having concluded that Lynch never
actually held 65% of Belleville and that interest rightfully belongs to Televideo,
Lynch cannot establish that he had a property interest or a right to possess the
property in question.464
461
D.I. 189 at 38 n.4. The Televideo Defendants also bring the conversion claim against
Lynch as an alternative to their claim for declaratory relief with respect to the 65% interest.
See Countercl. ¶¶ 83-91; D.I. 189 at 37.
462
In any event, this opinion provides that Lynch never possessed what he purported to
take.
463
D.I. 190 at 45.
464
See Facciolo Constr. Co., 514 A.2d at 413.
108
Accordingly, all parties have failed to prove damages by the preponderance
of the evidence and cannot prevail on their tort claims.
C. Plaintiffs Do Not Prevail On Their Affirmative Defenses.
Having concluded that Defendants have prevailed on all viable claims, I now
consider Plaintiffs’ affirmative defenses that were addressed post-trial: judicial
estoppel and unclean hands.465 I conclude that those defenses do not bar Defendants’
entitlement to a judgment declaring that Televideo holds 95% of Belleville’s
membership interests, and that Lynch does not own any interest in Belleville.
1. Estoppel
Plaintiffs’ pleadings and opening post-trial brief explicitly pursued judicial
estoppel, but not any other estoppel defense.466 With the benefit of the analysis in
Defendants’ opening post-trial brief, Plaintiffs backpedaled in their answering brief,
contending that “Plaintiffs . . . are not seeking the application of judicial estoppel.
Instead, Plaintiffs seek to estop Defendants from taking a position inconsistent with
their prior sworn statements that Lynch is the 65 percent owner of GBH.” 467 They
465
All other affirmative defenses Plaintiffs pled but failed to brief post-trial are waived.
466
See D.I. 190 at 28–31; D.I. 49 at 28–29.
467
D.I. 206 at 15.
109
pointed to the equitable estoppel and quasi-estoppel doctrines as the source of their
defense.468
Plaintiffs did not raise equitable estoppel or quasi-estoppel as an affirmative
defense in their answer to the Televideo Defendants’ counterclaim.469 Nor did they
brief equitable estoppel or quasi-estoppel in their opening brief.470 Equitable and
quasi-estoppel were not properly raised and are therefore waived.471 And Plaintiffs
withdrew their judicial estoppel defense, so I need not consider it either.472
Even if I were to consider Plaintiffs’ judicial estoppel defense, it would fail.
“[J]udicial estoppel may prevent a party from assuming a position in a legal
proceeding based on prior, contradictory, or inconsistent positions asserted in the
same or another proceeding.”473 The doctrine is “intended fundamentally to preserve
the integrity of the courts and prevent miscarriages of justice by focusing in the
468
See id. at 15–16.
469
See D.I. 49 at 28–29.
470
See generally D.I. 190.
471
See Barret, 951 A.2d at 745; Crowley, 2006 WL 3095952, at *4; In re Asbestos Litig.,
2007 WL 2410879, at *4.
472
D.I. 206 at 15.
473
Wolfe & Pittenger, supra note 419, § 15.02[d], at 15-12 (citing In re First Interstate
Bancorp S’holders Litig., 729 A.2d 851, 859 n.8 (Del. Ch. 1998) (“The doctrine of judicial
estoppel precludes a party “from asserting in a legal proceeding, a position inconsistent
with a position previously taken by him in the same or in an earlier proceeding.”)); see also
Motorola Inc. v. Amkor Tech., Inc., 958 A.2d 852, 859 (Del. 2008) (holding that judicial
estoppel precludes “a party from asserting a position inconsistent with a position previously
taken in the same or earlier legal proceeding”).
110
relationship of the parties to the judicial system.”474 Accordingly, Delaware’s
judicial estoppel doctrine is limited to statements made in prior judicial proceedings,
and requires that the asserting party establish six elements: (1) the inconsistent
position must have been successfully maintained when first asserted; (2) a judgment
must have been rendered; (3) the positions must be clearly inconsistent; (4) the
parties and issues must be identical; (5) the party claiming estoppel must have been
misled and changed his position; and (6) it must appear to the court unjust for one
party to permit the other to change its position.475 The Court will not invoke estoppel
where its enforcement would frustrate public policy.476
Plaintiffs contended that statements under penalty of perjury are binding, and
because “Gonzalez repeatedly made statements under penalty of perjury to both the
United States Internal Revenue Service and the State of Florida that Lynch is the 65
percent owner of GBH,” judicial estoppel bars Gonzalez’s claims for relief.477 In
474
Wolfe & Pittenger, supra note 419, § 15.02[d], at 15-12 (citing Amaysing Techs. Corp.
v. CyberAir Commc’ns, 2005 WL 578972, at *4 (Del. Ch. Mar. 3, 2005) (“Judicial estoppel
is an equitable doctrine designed to protect the integrity of the judicial process. . . .”)).
475
See id. (citing Norman v. Paco Pharm. Servs., Inc., 1992 WL 301362, at *3–4 (Del. Ch.
Oct. 21, 1992), aff’d, 625 A.2d 279 (Del. 1993)).
476
See id. § 15.02[d], at 15-8 (citing Harmon v. State, 2011 WL 5966717 (Del. Super. Ct.
Nov. 17, 2011) (noting that “the Delaware Supreme Court remarked strongly against the
use of estoppel in the government context”), rev’d on other grounds, 62 A.3d 1198 (Del.
2013)).
477
D.I. 190 at 28.
111
particular, Plaintiffs relied on Belleville’s tax returns from 2008 through 2017 that
name Lynch as Belleville’s 65% owner, which Gonzalez approved and signed under
penalty of perjury. They contended that Defendants’ position in this proceeding is
clearly inconsistent with those filings, and so Defendants are precluded from
deviating from their prior certification that Lynch owned 65% of the Company.
Even assuming the statement in Belleville’s tax returns is inconsistent with
Defendants’ position in this action, that statement was not made in a prior
proceeding. And Plaintiffs cited no Delaware authority for the proposition that
judicial estoppel bars parties from taking a position in a judicial proceeding that is
contrary to a position taken on their income tax return. Rather, Plaintiffs ask me to
adopt the reasoning of other courts.478 In view of the narrow contours of Delaware’s
judicial estoppel doctrine, and Plaintiffs’ waiver, I decline to extend the doctrine
beyond the scope of judicial proceedings to reach statements made in tax returns.
2. Unclean Hands
Both Plaintiffs and Defendants claim the other faction comes to this Court
with unclean hands. Having determined that Defendants prevailed on the viable
claims and counterclaims in this matter, I must determine whether unclean hands
478
Id. at 28–29 (“This Court should follow those well-reasoned decisions.” (citing
Mahoney-Buntzman v. Buntzman, 12 N.Y.3d 415, 422 (2009), and S & D Envtl. Servs., Inc.
v. Rosenberg Rich Baker Berman & Co., P.A., 334 N.J. Super. 305, 317 (Law. Div. 1999),
and In re Robb, 23 F.3d 895, 898–99 (4th Cir. 1994))).
112
bars Defendants’ affirmative claims for relief. In view of the preponderance of the
evidence presented, I decline to apply the unclean hands doctrine to bar Defendants’
relief. I also conclude the doctrine would bar Plaintiffs’ relief, as to award Plaintiffs
relief would yield an inequitable result that runs contrary to public policy.
The equitable doctrine of unclean hands “provides that ‘a litigant who engages
in reprehensible conduct in relation to the matter in controversy . . . forfeits his right
to have the court hear his claim.’”479 “[I]t is designed primarily to protect courts of
equity from being misused by a party who has not acted fairly and without fraud or
deceit as to the controversy in issue.”480 This principle rings true in equity regardless
of whether the “inequitable action” is “legally possible.”481
“The doctrine should not be seen as a means to aid a party who faces an
unscrupulous opponent . . . .”482 Rather, the operative question is “whether [a
party’s] conduct is so offensive to the integrity of the court that his claims should be
479
Portnoy v. Cryo-Cell Intern., Inc., 940 A.2d 43, 80–81 (Del. Ch. 2008) (quoting
Nakahara v. NS 1991 Am. Tr., 739 A.2d 770, 791–92 (Del. Ch. 1998)).
480
Patel v. Dimple, 2007 WL 2353155, at *12 (Del. Ch. Aug. 16, 2007); see also Portnoy,
940 A.2d at 81 (“‘[T]he purpose of the clean hands maxim is to protect the court against
misuse by one who, because of his conduct, has forfeited his right to have the court consider
his claims . . . .’” (quoting Skoglund v. Ormand Indus., Inc., 372 A.2d 204, 213 (Del. Ch.
1976)).
481
Brown v. Kellar, 2018 WL 6721263, at *6–7 (Del. Ch. Dec. 21, 2018) (holding that
actions under 8 Del. C. § 225 “permit[] the adjudication of inequitable conduct” (citing
Schnell v. Chris-Craft Indus., Inc., 285 A.2d 437, 439 (Del. 1971))).
482
Nakahara, 718 A.2d at 522.
113
denied, regardless of their merit.”483 “[T]he inequitable conduct must have an
‘immediate and necessary’ relation to the claims under which relief is sought.”484
But because the doctrine is considered a “‘rule of public policy’ and ‘not a matter of
defense to be applied on behalf of a litigant,’” this Court has “latitude to apply the
doctrine to avoid becoming complicit in a [party’s] fraudulent act.”485 The “greatest
limitation on the doctrine is the widely accepted exception that since it is ultimately
based on public policy, countervailing public policy which points in the direction of
reaching the case on the merits can preclude its operation.”486 “This court has
consistently refused to apply the doctrine of unclean hands to bar an otherwise valid
claim of relief where the doctrine would work an inequitable result.”487
In their opening post-trial brief, Defendants contended that Plaintiffs’ claims
are barred by unclean hands because Lynch’s “improper and misleading conduct
with respect to the subject purchase agreements and refinancing agreements and
483
Portnoy, 940 A.2d at 81 (internal quotations omitted) (quoting Gallagher v. Holcomb
& Salter, 1991 WL 158969, at *4 (Del. Ch. 1991)).
484
Nakahara, 718 A.2d at 523.
485
Morente v. Morente, 2000 WL 264329, at *3 (Del. Ch. Feb. 29, 2000) (quoting
Nakahara, 739 A.2d at 522–23); see also Nakahara, 718 A.2d at 522 (“[T]he decisional
authority is almost universal in its acceptance in that courts of equity have extraordinarily
broad discretion in application of the doctrine.”).
486
Nakahara, 718 A.2d at 523.
487
Portnoy, 940 A.2d at 81 (internal quotation marks omitted) (quoting Dittrick v.
Chalfant, 2007 WL 1039548, at *5 n.18 (Del. Ch. Apr. 4, 2007)).
114
admitted lie with respect to the Counter-document relate directly to the ownership
and management dispute this Court must resolve.”488
Plaintiffs responded in their answering brief, claiming that Defendants
misplace their reliance on the doctrine.489 In that response, Plaintiffs argued for the
first time post-trial that the doctrine bars Defendants’ claims because “Gonzalez
seeks to enforce a purported bargain wherein Lynch would hold Gonzalez’s
beneficial ownership of GBH as a nominee in order to deceive the Argentine Media
Regulator and circumvent Argentine law.”490 Because Lynch’s failings were in the
context of “an illicit bargain,” Plaintiffs contend that this Court cannot enforce the
arrangement.491 Plaintiffs did not raise this argument in their post-trial opening
brief.492 “As a result, I consider [Plaintiffs] to have waived any arguments about
488
D.I. 189 at 47.
489
See D.I. 206 at 19–24.
490
Id. at 16. Lynch raised unclean hands as an affirmative defense in his answer to the
Televideo Defendants’ Counterclaims. See D.I. 49 at 28.
491
Id. at 17 (quoting Morente, 2000 WL 264329, at *3).
492
See generally D.I. 190. Plaintiffs’ opening brief cites a case that invokes the unclean
hands doctrine, but does not explicitly brief an unclean hands defense. See id. at 32
(“Assuming arguendo, that Lynch held the Argentine operations as a nominee for Gonzalez
(he did not) instead of as record and beneficial owner, Defendants’ claims still fail. The
Chancery Court has held: ‘When parties enter into legal relationships in an effort to mask
their illicit arrangements and to deceive regulatory authorities into allowing the parties to
carry out their illicit business, they will be left to lie in the bed they have made.’ Patel v.
Dimple, Inc., 2007 WL 2353155, at *12 (Del. Ch. Aug. 16, 2007).”).
115
these issues.”493 Still, I address the defense from both sides.494 I decline to apply
unclean hands to bar Defendants’ claims for relief, but find that Lynch came to this
Court with unclean hands.
The doctrine’s application is made more difficult by the fact that the parties’
dispute was born from a mutual scheme to paper an alternate reality for the benefit
of Argentine regulators. As stated in Patel v. Dimple, “[w]hen parties enter into
legal relationships in an effort to mask their illicit arrangements and to deceive
regulatory authorities into allowing the parties to carry out their illicit business, they
will be left to lie in the bed they have made.”495 And in Morente v. Morente, this
Court refused to “use the power entrusted it by the people of Delaware to compel
specific performance of an aspect of an illegal contract.”496 Indeed, “it is not the
task of this court to aid parties in implementing schemes to avoid the law.”497
493
In re IBP, Inc. S’holders Litig., 789 A.2d at 62; see also Barret, 951 A.2d at 745;
Crowley, 2006 WL 3095952, at *4; In re Asbestos Litig., 2007 WL 2410879, at *4.
494
See In re IBP, Inc. S’holders Litig., 789 A.2d at 62.
495
2007 WL 2353155, at *12.
496
2000 WL 264329, at *3.
497
Patel, 2007 WL 2353155, at *12 (citing Morente, 2000 WL 264329, at *3); see also
Restatement (Second) of Contracts § 18 cmt. c (1981) (“Where the parties to a sham
transaction intend to deceive third parties, considerations of public policy may sometimes
preclude a defense of sham.”).
116
In Patel, two former friends challenged the legal ownership of a parcel of
land.498 The plaintiff had record ownership of the land and the defendant was the
sole stockholder of a liquor store on that parcel.499 The Patel parties had executed
two lease agreements, which evidenced the only legal relationship that existed
between the parties. The defendant contended that the leases were a front designed
to mislead Delaware authorities, and that the parties intended a 50-50 split of the
land and the liquor store.500 Despite the parties’ alleged intention, the defendant
sought an order declaring he owned 50% of the land and 100% of the liquor store.501
Unpersuaded by the defendant’s position, then-Vice Chancellor Strine noted:
[T]here is no equitable basis for the relief [the defendant] seeks. . . .
That is, [the defendant] is trying to exploit [the plaintiff’s] legal
predicament—a predicament [the defendant] was aware of from the
beginning—to reap a financial boon from his, how shall I say it, co-
conspirator. [The defendant] is trying to use the powers of an equity
court to extract an undeserved windfall.502
498
Patel, 2007 WL 2353155, at *1.
499
See id.500
See id. at *1–2 (“The reason they set up the arrangement on paper the way they did was
because Vinod was not legally allowed to own an interest in the Store . . . [u]nder 4 Del C.
§ 546 . . . .”).
501
See id. at *2.
502
Id.
117
Morente v. Morente also invokes this logic.503 There, the plaintiff sought a
judicial determination that he engaged in a “sham” stock transfer to help the
defendant, his son, obtain financing for the construction of a home.504 To
“convinc[e] lenders that [the defendant] owned valuable assets,”505 the plaintiff
executed a stock certificate evidencing that the defendant owned fifty shares of the
family business, purportedly upon the condition that the son promised to eventually
return the stock or “tear up the certificate.”506 The defendant reneged on his alleged
promise to return the shares, in view of his parents’ impending divorce. The
plaintiff—motivated by the family schism—sued, seeking a declaration that the
stock transfer was, in fact, a “sham” and that the defendant was, therefore, not the
true owner of the shares.507 The stock certificate was the only document
memorializing the agreement, and no evidence was presented to corroborate the
plaintiff’s story that the transfer was a sham. Refusing to “compel specific
performance of an aspect of an illegal contract,” the Court concluded that unclean
503
2000 WL 264329.
504
Id. at *1.
505
Id.
506
Id.
507
Id.
118
hands barred the plaintiff’s claim.508 As in Patel, the plaintiff was left to bear the
consequence of his co-conspirator’s betrayal.
A superficial reading of these cases might support leaving Gonzalez to suffer
the consequences of entering into an illicit bargain with Lynch. But I believe these
cases teach two deeper principles that direct the opposite result. First, unclean hands
will bar relief to prevent the offending party from “reap[ing] a financial boon from
his . . . co-conspirator” or “extract[ing] an undeserved windfall.”509 Second, under
fundamental public policy and equitable principles, the Court must avoid being
complicit in an illicit scheme. Here, Gonzalez and Lynch agreed to identify Lynch
as Belleville’s 65% member—in both private and public documents—in a mutual
scheme to end-run Argentine regulations and deceive Argentine regulators.510 But
invoking unclean hands to leave Gonzalez to deal with the aftermath of his
agreement with Lynch would yield two inequitable and unsound results: giving
508
Id. at *3.
509
Patel, 2007 WL 2353155, at *2.
510
The parties quibbled over whether their sham arrangement would be considered illegal
in Argentina or would otherwise require corrective action by Argentine regulators.
Whether this scheme would, in fact, be fraudulent or even criminal under Argentine law
has no bearing here, and I make no such determination, as that matter is reserved for the
Argentine authorities. The parties agree that they needed to keep their arrangement a secret
from Argentine regulators because the sham ownership structure would not have satisfied
Argentine law if the Counterdocument were known. See D.I. 219 at 69–72, 111, 114.
Whether this arrangement was legally possible does not foreclose the Court from
considering whether it amounts to inequitable conduct, in the form of an illicit agreement,
that may trigger unclean hands. See Brown, 2018 WL 6721263, at *6.
119
Lynch an undeserved windfall, and forcing the Court’s implicit blessing of a
deceptive scheme.
Enforcing Gonzalez’s understanding of the 65% transfer would not “reap a
financial boon from his . . . co-conspirator” or “extract an undeserved windfall.”511
As evidenced by the Counterdocument and related testimony, the full, beneficial
ownership of 65% of Belleville never belonged to Lynch. Televideo was always the
rightful owner. By granting Defendants relief and returning Televideo to its position
as Belleville’s majority member, Televideo does not receive a windfall.
Rather, enforcing Lynch’s paper trail and decreeing Lynch as Belleville’s
65% owner would facilitate the undeserved windfall that Patel warns against. Lynch
fraudulently induced Gonzalez to execute a series of documents to strip Televideo
of its majority interest, under the guise of purportedly sound legal advice. He
assured Gonzalez that he would hold the interest in name only, as reflected in to the
Counterdocument. Because the transfer was a sham, Lynch paid no consideration,
and Gonzalez funded all payments to maintain the transfer’s apparent propriety.
Giving Lynch the benefit of his deception—65% of and control over a successful
media company—would allow him “to reap a financial boon from” Gonzalez and
permit Lynch to “exploit [Gonzalez and Televideo’s] legal predicament—a
511
Patel, 2007 WL 2353155, at *2.
120
predicament [Lynch] was aware of from the beginning” because he curated it.512 I
decline to apply the unclean hands doctrine to yield such an inequitable result.513
Finally, I decline to apply unclean hands to bar Defendants’ claims because
doing so would conflict with public policy.514 “[I]t is not the task of this court to aid
parties in implementing schemes to avoid the law.”515 If I were to conclude that
unclean hands bars a declaration that Televideo is Belleville’s 65% owner, then I
would effectively permit Lynch to hold that interest and give significance to the
series of sham documents the parties executed, which do not represent Belleville’s
actual or intended ownership structure because they were intended to deceive
Argentine regulators. This would render this Court complicit in the parties’ deceit.
I do not condone the parties’ scheme, and accordingly, I do not—and cannot—apply
unclean hands to prevent Televideo from reclaiming its 65% interest.
Rather, the equities of this case mandate that Belleville’s ownership revert to
the status quo ante, before Lynch papered his false 65% ownership, as that represents
Belleville’s true and intended ownership structure: Televideo owns 95% of
Belleville, and Gonzalez owns 5%. And as Patel and Morente advise, the parties
512
Id.513
See Portnoy, 940 A.2d at 81.
514
See Nakahara, 718 A.2d at 523.
515
Patel, 2007 WL 2353155, at *12 (citing Morente, 2000 WL 264329, at *3).
121
must accept the consequences of this conclusion, including any that may arise under
Argentine law (which is for the Argentine regulators to decide) and other governing
authorities, such as the Delaware Secretary of State and Attorney General.516
Turning to the cleanliness of Lynch’s hands, I find that Lynch has engaged in
reprehensible conduct that threatens the integrity of this Court and “offend[s] the
very sense of equity to which he appeals.”517 Declining to apply unclean hands as a
bar to Plaintiffs’ relief would allow this Court and its equitable power to be “misused
by a party who has not acted fairly and without fraud or deceit as to the controversy
in issue.”518
“When one [who] files a bill of complaint seeking to set the judicial
machinery in operation and to obtain some remedy has violated
conscience or good faith or other equitable principles in his conduct,
then the doors of the court of equity should be shut against him.” In
such cases, “the court will refuse to interfere on his behalf, to
acknowledge his right, or to award him any remedy.”519
516
See State v. Parretti, 1995 WL 269889, at *1 (Del. Super. Apr. 17, 1995) (establishing
that the Court may refer litigant misconduct to the attention of the Attorney General in
extraordinary cases).
517
Metcap Sec. LLC v. Pearl Senior Care, Inc., 2009 WL 513756, at *6 (Del. Ch.
Feb. 27, 2009) (quoting Nakahara 718 A.2d at 522), aff’d sub nom., 977 A.2d 899 (Del.
2009); see Portnoy, 940 A.2d at 80–81.
518
Patel, 2007 WL 2353155, at *12; see also Portnoy, 940 A.2d at 81 (quoting Skoglund,
372 A.2d at 213).
519
In re Silver Leaf, L.L.C., 2005 WL 2045641, at *11 (Del. Ch. Aug. 18, 2005) (alteration
in original) (quoting Bodley v. Jones, 59 A.2d 463, 469 (Del. 1947), and then quoting
Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240, 245 (1933)).
122
Lynch conjured a scheme that deceived Gonzalez, Argentine regulators, and
this State’s corporate governance officials, and he attempted to deceive this Court.
Since Lynch began working for Gonzalez, he intended to defraud Televideo of its
majority membership in Belleville. Building off of a regulatory issue, Lynch
proposed the sham transfer and induced Gonzalez to execute documents naming
Gonzalez as Belleville’s 65% member under the guise that they would be used to
facially satisfy Argentine laws, while knowing and intending he would use them to
attempt to seize that stake for himself.
Lynch’s premeditated plan upends any conclusion that Lynch and Gonzalez
entered the sham transaction on equal footing. Rather than starting down the
scheme’s path together, Lynch used pretextual reasons and false promises to induce
Gonzalez to follow him; and unbeknownst to Gonzalez, Lynch was always steps
ahead. And when Lynch reached the end of that path, he turned to this Court and its
statutory mandate to attempt to finalize his wrongful control over Belleville, based
on documents he knew to be false, and offered incredible testimony in support.
Lynch has abused this Court and undertaken to make it “complicit in [his] fraudulent
act[s].”520 The doors of equity are shut against him.521
520
Morente, 2000 WL 264329, at *3 (quoting Nakahara, 739 A.2d at 522–23); see also
Nakahara, 718 A.2d at 522.
521
See In re Silver Leaf, L.L.C., 2005 WL 2045641, at *11.
123
D. Defendants Are Entitled To Costs And Fees.
Defendants contend that that “because the evidence demonstrates that [Lynch]
acted egregiously fraudulent and in bad faith, Defendants are also entitled to an
award shifting Defendants’ attorneys’ fees and costs incurred in this litigation as a
component of the judgment.”522 “Under the American Rule and Delaware law,
litigants are normally responsible for paying their own litigation costs.”523 The Court
recognizes an exception to this rule where the Court finds that the litigation was
brought in bad faith or that a party has acted with bad faith during the course of
litigation.524
The party invoking the bad faith exception bears the stringent
evidentiary burden of producing clear evidence of bad-faith conduct by
the opposing party. The standard is arduous: situations in which a party
acted vexatiously, wantonly, or for oppressive reasons.525
522
D.I. 189 at 42.
523
Mahani v. Edix Media Gp., Inc., 935 A.2d 242, 245 (Del. 2007).
524
Wolfe & Pittenger, supra note 419, § 17.03[e], at 17-13.
525
Marra v. Brandywine Sch. Dist., 2012 WL 4847083, at *4 (Del. Ch. Sept. 28, 2012)
(quotations omitted).
124
“The bad faith exception is not lightly invoked,”526 and only “is applied in
extraordinary circumstances primarily to deter abusive litigation and protect the
integrity of the judicial process.”527
“There is no single standard of bad faith that justifies an award of attorneys’
fees—whether a party’s conduct warrants fee shifting under the bad faith exception
is a fact-intensive inquiry.”528 “Delaware courts have previously awarded attorneys’
fees where (for example) parties have unnecessarily prolonged or delayed litigation,
falsified records or knowingly asserted frivolous claims,”529 and where the party’s
underlying, pre-litigation and litigation conduct has been fraudulent and where the
party’s misconduct was intentional.530 “In all cases, to merit such an award, the
applicant must show by clear evidence that the party from who fees are sought has
acted in subjective bad faith.”531
526
Ravenswood Inv. Co., L.P. v. Winmill & Co., 2014 WL 2445776 at *4 (Del. Ch.
May 30, 2014).
527
Nichols v. Chrysler Gp., LLC, 2010 WL 5549048, at * 3 (Del. Ch. Dec. 29, 2010).
528
Auriga Capital Corp. v. Gatz Props., LLC, 40 A.3d 839, 880–81 (Del. Ch. 2012).
529
Montgomery Cellular Hldg. Co. v. Dobler, 880 A.2d 206, 227 (Del. 2005) (internal
quotation marks omitted) (quoting Johnston v. Arbitrium (Cayman Is.) Handels AG, 720
A.2d 542, 546 (Del. 1998)).
530
See Wolfe & Pittenger, supra note 419, § 17.03[e], at 17-16.
531
Id. at 17-17.
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Defendants have met this onerous burden here. I find that Lynch brought his
claims in bad faith and, in litigating those claims, engaged in intentional misconduct.
Lynch hatched his scheme to divest Televideo of 65% of Belleville in 2007. In
pursuit of that objective, he fraudulently induced Gonzalez to execute multiple sham
documents naming Lynch as Belleville’s 65% member. After he sufficiently
papered the file, Lynch saw two routes to triumph: cash out by holding the Company
for ransom, or utilize the Delaware court system to obtain actual ownership of 65%
of Belleville. In February 2018, Lynch informed Gonzalez, with dramatic flair, that
“Argentina will no longer answer to Miami.”532 On February 2, Lynch engaged Fox
Horan & Camerini, LLP—trial counsel in this action—for “advice and services . . .
in connection with drafting” the 2018 LLC Agreement.533 And on February 19,
Lynch sent Gonzalez the 2018 LLC Agreement, knowingly misrepresenting that
Lynch was Belleville’s 65% member and sole manager.534 Gonzalez did not sign it,
and instead set out to reclaim Televideo’s rightful property.535
532
White Tr. 529.
533
JX 133. The parties did not include JX 133 in the Schedule of Evidence. However,
Defendants cited JX 133 in their post-trial argument demonstratives, and Plaintiffs did not
object to the demonstratives on that ground. I consider JX 133 to have been relied on by
the parties.
534
See JX 132.
535
See id.
126
Having failed to use the false documents to extract a ransom, Lynch then
turned to the Delaware court system for a declaration ratifying his fraudulent
misconduct.536 Lynch, individually and purportedly speaking for Belleville, initiated
this action to complete his grab at Televideo’s 65% of Belleville, which he started
back in 2007. Casting his complaint under Section 18-110, he ostensibly sought to
confirm ownership in Belleville based on documents he knew were false, and never
intended to be true, because he had drafted them as part of a sham. Lynch used this
Court’s statutory mandate as a framework to litigate his position based on lies, false
documents intended to end-run regulators, and misrepresentations. And Lynch used
the fact that he sought relief under Section
18-110 as an affirmative weapon to fend off Gonzalez’s good faith counterclaims
and defenses.537
536
Cf. Lambert Tr. 338 (stating Lynch “was obligated to start a legal lawsuit against Mr.
Gonzalez and other people so that he would be recognized as 65 percent owner of Grupo
Belleville and the only manager”).
537
See D.I. 37 at 16–17 (“I appreciate the fact that we’re dealing with some complicated
discovery involving foreign parties and that sort of thing. But I would say that, in my
experience with these corporate control proceedings, that the concept of having
counterclaims and additional claims and lots of different things, ancillary issues popping
up in these cases, is usually pretty curtailed by the Court. The Court -- we do have an entity
that is sort of without a captain, and the interest of the State of Delaware is making sure
that this issue is resolved very quickly to protect the entity. So I’ve had similar issues
where people have wanted to bring in a lot of different issues and then want to try the
panoply of claims they think that they have and make sure that every ox that's been gored
gets put before the Court. I just don’t think that that’s appropriate. I think it’s a very
127
When he did not prevail in that effort, Lynch pressed on, continuing to falsely
represent that he was Belleville’s 65% owner and sole manager based on the sham
documents. And at trial, Lynch falsely testified that he was substantively
instrumental in the IMC acquisition; that he negotiated for and purchased 65% of
Belleville in 2007 and 2008; that he and Gonzalez negotiated security for that
purchase and agreed not to execute the Counterdocument; and that he owed
Televideo a debt that was restructured in exchange for valuable consideration. He
relied on the sham documents in support of this false testimony.
In the final chapter of this litigation, Lynch waived his ostensibly motivating
core claim under Section 18-110, as well as his primary affirmative defenses.538 At
bottom, his entire case was an attempt to hold Gonzalez to sham documents he knew
presented lies. The Court will not be complicit in an illicit scheme, nor will it stand
to be a pawn in one. And while Gonzalez himself was engaged in some duplicity
with Argentine regulators, he acted in good faith before this Court to defend what
he knew to be the true ownership and management of the Company. Clear evidence
supports a finding that Lynch initiated this action, brought his claims, and ultimately
limited action to make a determination on who owns it, and that’s it. So I don’t see this
thing turning into tons and tons and tons of discovery on every known issue.”).
538
See supra Section II.A.3.
128
litigated those claims in bad faith. Defendants are entitled to fees and costs under
the bad faith exception.
III. CONCLUSION
Plaintiffs failed on all counts. The Televideo Defendants are entitled to a
judgment in their favor with respect to Counts I, II, and III of their counterclaim.
The Court will enter a declaratory judgment that (1) Televideo owns 85% of
Belleville, (2) Gonzalez owns 5% of Belleville, (3) Gonzalez and Alviz are
Belleville co-managers, and (4) Lynch owns 0% of Belleville and is not a Belleville
member or manager. The Televideo Defendants’ tort claims fail.
Defendants are entitled to reasonable costs and fees incurred in defending this
action. Within twenty days, Defendants shall submit an affidavit, with a form of
order, stating the amount of attorneys’ fees incurred, pursuant to Chancery Court
Rule 88. Plaintiffs may respond regarding the reasonableness of such fees. Once
the amount of expenses, including attorneys’ fees, and costs has been determined,
the parties shall submit an implementing final order and judgment.
129