Patricia A. Robinson v. Michele Darbeau ( 2021 )

COURT OF CHANCERY
OF THE
STATE OF DELAWARE
KATHALEEN ST. JUDE MCCORMICK LEONARD L. WILLIAMS JUSTICE CENTER
VICE CHANCELLOR 500 N. KING STREET, SUITE 11400
WILMINGTON, DELAWARE 19801-3734
March 1, 2021
David L. Finger, Esquire Michele Darbeau
Finger & Slanina, LLC 7901 South Run View
One Commerce Center Springfield, VA 22153
1201 N. Orange Street, 7th Floor
Wilmington, DE 19801
Re: Patricia A. Robinson v. Michele Darbeau,
C.A. No. 2019-0853-KSJM
Dear Counsel and Ms. Darbeau:
This is my post-trial decision in the above-referenced action. Although this
decision takes the form of a letter opinion, it has the same force and effect as any
other form of opinion.
The plaintiff, Patricia A. Robinson, brought this action seeking a declaration
that the defendant, Michele Darbeau, is neither a member nor manager of the
nominal defendant, Little Foot Enrichment Learning Center, LLC (the “LLC”). The
certificate of formation of the LLC, however, identifies Darbeau as a member and
vests management of the LLC in the members, and Robinson presented no basis to
ignore this evidence. This post-trial decision therefore enters judgment in favor of
Darbeau. My factual findings and reasoning follow.
C.A. No. 2019-0853-KSJM
March 1, 2021
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I. FACTUAL BACKGROUND
A one-day trial was held on August 21, 2020. The record comprises 140 trial
exhibits, live testimony from three fact witnesses, deposition testimony from ten fact
witnesses, and 64 stipulations of fact.1
A. The Parties Form the LLC.
Robinson and Darbeau were domestic partners who considered themselves
married, but they were never legally married. Darbeau gave birth to their daughter
in 2001.2 They lived together from 1996 until 2017 in Prince George’s County,
Maryland.3
Robinson was a teacher in the Arlington public school system for twenty
years. 4 Around 2002, Robinson began operating out of her home a daycare that she
called Little Foot Daycare (“Little Foot”). 5 While operating Little Foot, Robinson
1
The background cites to: docket entries (by “Dkt.” number); trial exhibits (by “JX”
number); the trial transcript (Dkt. 72) (“Trial Tr.”); and stipulated facts set forth in the
Parties’ Revised Joint Pre-Trial Order (Dkt. 58) (“PTO”). The following persons were
deposed: Tawana Steward, Cleo Simpson, Michelle Darbeau, Janice Mitchell, Shawn
Gunn, Nesha Ramjewan-Maharajh, Patricia Robinson, Krystal Thomas, Brian Bell,
Charlena Best, Ashlee Goodman-Tabari, and the parties’ daughter. The transcripts of their
respective depositions are cited using the witnesses’ last names and “Dep. Tr.”
2
Trial Tr. at 124:2–10 (Robinson).
3
See PTO ¶¶ 8–9.
4
Trial Tr. at 7:16–24 (Robinson).
5
Id. at 9:12–10:19 (Robinson). The name of the business changed multiple times after
Robinson first began operating it, but throughout this decision the court will refer to the
daycare as “Little Foot.”
C.A. No. 2019-0853-KSJM
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filed a Schedule C (profit or loss from a sole-proprietor business) to her income tax
returns.6 She was also on Little Foot’s payroll. 7
Darbeau was employed as a chemical engineer when Robinson started Little
Foot, but she helped at the daycare part-time from July 2003 to August 2003.8
Darbeau devoted more time to Little Foot after leaving her engineering position in
2003. 9 Darbeau became a full-time teacher on Little Foot’s payroll in 2010. 10 Over
the years, Darbeau assumed various administrative duties, such as assisting with
emails, performing secretarial work, ordering supplies, and handling payroll.11
Darbeau also purchased books and toys for Little Foot.12
6
Trial Tr. at 155:14–16 (Darbeau); see also JX-66 (2013 letter from accountant); JX-80
(Robinson’s 2014 income tax return); JX-85 (Robinson’s 2015 income tax return); JX-97
(Robinson’s 2016 income tax return); JX-103 (Robinson’s 2017 income tax return).
According to the LLC’s accountant, a multi-member LLC would be required to fill out a
Form 1065. Simpson Dep. Tr. at 12:7–19. He acknowledged that he assumed Robinson
was the sole member of the LLC because “that’s what [he] was told,” and he filed the
necessary forms “based on what they [told] me.” Id. at 11:7–18.
7
See JX-80; JX-85; JX-97; JX-103.
8
See Trial Tr. at 197:18–24 (Darbeau).
9
See id. at 196:14–197:4 (Darbeau).
10
Id. at 36:21–37:3 (Robinson).
11
Id. at 37:23–39:19 (Robinson). An email confirmation for the filing of the LLC’s 2007
franchise tax and annual report was sent to Darbeau, suggesting that she may have also
been involved in preparing the LLC’s taxes. See JX-115 at DARBEAU0006010–02.
12
JX-4; JX-47; Trial Tr. at 193:21–196:4 (Darbeau).
C.A. No. 2019-0853-KSJM
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In 2005, Robinson and Darbeau formed the LLC under Delaware law to
operate the daycare.13 The parties used American Incorporators Ltd. (“American
Incorporators”) to form the LLC.14 Darbeau completed the online application with
American Incorporators while Robinson sat next to her. 15 Before submitting the
application, Darbeau showed Robinson the information that she had entered.16
B. Support for Darbeau’s Contention That She Is a Member and
Manager of the LLC
Darbeau claims that she is both a member and a manager of the LLC. The
following evidence supports her claim.
1. The Certificate of Formation
American Incorporators filed a Certificate of Formation for the LLC on
September 9, 2005.17 The Certificate of Formation stated that the “initial
member(s)” were Robinson and Darbeau and vested “[m]anagement of the limited
liability company . . . in the member(s) in accordance with their ownership interests,
13
PTO ¶¶ 3, 12–13; see Trial Tr. at 47:23–48:5 (Robinson); JX-19 (Little Foot’s September
2006 child-care-center license stating that it was operated by the LLC).
14
PTO ¶ 12; Trial Tr. at 49:16–23 (Robinson).
15
Trial Tr. at 49:22–50:7 (Robinson).
16
Id. at 50:4–6 (Robinson); see id. at 141:23–142:5 (Darbeau).
17
PTO ¶¶ 12–13; JX-115 at DARBEAU000607.
C.A. No. 2019-0853-KSJM
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unless this is varied by the operating agreement.”18 American Incorporators sent
Robinson a copy of the Certificate of Formation on September 14, 2005.19
2. Documents Describing Darbeau as a Co-Owner and Co-
Director
Robinson treated Darbeau as a co-equal in connection with the LLC at all
relevant times and the documentary record reflects this.
The Little Foot contract and handbook pre-dating the LLC formation referred
to the operator using singular pronouns (“I,” “me,” and “my”). 20 The Little Foot
handbook post-dating the LLC formation, however, was written using plural
pronouns (“we,” “us,” or “our”). 21
Little Foot business cards described Darbeau as an owner and director. The
cards she ordered in April 2006 stated that she was an “Owner/Director” of Little
Foot.22 The business cards that Darbeau ordered in March 2015, which were
18
JX-6; JX-115 at DARBEAU000607.
19
JX-7.
20
See, e.g., JX-1 at 5, 6, 8, 13, and 15.
21
JX-5 at i (“Throughout this document, the words ‘our,’ ‘we,’ or ‘us’ refer to the
providers, Ms. Patricia (Pat) Robinson and Ms. Michele (Darbeau) . . . .”). The 2011
version of the handbook used the same terminology. See JX-50 at iii (“[O]ur,” “we” or
“us” refer to the co-owners/co-directors of Little Foot Enrichment Learning Center,
Patricia Robinson and Michele Darbeau.”).
22
JX-14. Darbeau ordered another set of business cards in September 2007 that also
referred to her as a “Co-Owner/Director.” JX-25.
C.A. No. 2019-0853-KSJM
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displayed in Little Foot’s main lobby, referred to Robinson and Darbeau together as
“Owners and Directors.”23
Around 2005, Robinson and Darbeau began looking for a new location for
Little Foot, and they settled on a house at 15404 Livingston Road, Accokeek,
Maryland (the “Livingston Property”). 24 Robinson’s and Darbeau’s names are on
both the deed and the mortgage, although Robinson has made all of the mortgage
payments. 25
Throughout the process of converting the Livingston Property for commercial
use, Robinson and Darbeau presented themselves as “Co-Owners” of Little Foot. In
early 2006, Robinson and Darbeau began the process of converting the Livingston
Property from a “Residential Zone” to a “Special Exception” zone. 26 The invoices
from the contractors making improvements on the Livingston Property, as well as
related communications, were addressed to Darbeau. 27
23
See JX-78 at 1; Gunn Dep. Tr. at 30:11–31:14; Thomas Dep. Tr. at 37:13–39:24; Bell
Dep. Tr. at 32:15–35:21.
24
See Trial Tr. at 22:19–22 (Robinson); id. at 148:1–3 (Darbeau); id. 218:18–220:1 (Gunn).
Little Foot is still in operation on the Livingston Property. PTO ¶ 35.
25
See PTO ¶¶ 28–29; JX-10; JX-11; Trial Tr. at 26:12–22 (Robinson).
26
JX-50 at 7.
27
See JX-12; JX-13; JX-31; JX-33.
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In July 2007, Robinson and Darbeau gave a presentation to the Accokeek
Development Review, and the presentation referred to Robinson and Darbeau as
“Co-Owners/Co-Directors.”28 In various letters that Robinson and Darbeau sent to
state representatives in support of the zoning request, they referred to themselves as
“Co-Owners.”29 Further, Shawn Gunn and her husband—parents of a Little Foot
student—wrote a letter of support for Little Foot, in which they refer to Little Foot’s
program as one that “Ms. Robinson and Ms. Darbeau have put together.”30
When the Prince George’s County Planning Department Development
Review Division approved Little Foot’s zoning request to operate a day care center
for 50 children, it addressed Robinson and Darbeau as the “Applicant.” 31
When Little Foot set up online payroll services with SunTrust Bank in 2010,
the application listed Darbeau as “Company Payroll Administrator” and “Company
Payroll Approver,” and it listed Robinson as “Company Principal” and
“CoOwner [sic].”32 Also, when Little Foot applied for a credit card processing
service, Robinson and Darbeau each signed as a “Director/Owner.” 33 Little Foot’s
28
JX-22 at 1.
29
See JX-30; JX-88.
30
JX-15 at 26.
31
JX-29.
32
JX-44 at 1, 4.
33
JX-73 at 4.
C.A. No. 2019-0853-KSJM
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workers’ compensation plan similarly lists Robinson and Darbeau as “Partner[s]”
and states that they each own 50% of the LLC. 34
Robinson and Darbeau both interviewed potential employees and the parents
of potential students.35 Enrollment contracts between Little Foot and parents bore
either Robinson’s or Darbeau’s signature on behalf of Little Foot (but not both).36
Robinson and Darbeau jointly completed annual employee performance reviews,37
and they both signed offer letters sent to potential employees of Little Foot.38
In this litigation, Robinson took the position that she began referring to
Darbeau as a co-owner “around 2010” for the sole purpose of ensuring that parents
respected Darbeau.39 But Robinson’s testimony to this effect is not credible. The
evidence recounted above reflects that the practice was far more pervasive, dating
back to 2005 and extending to audiences other than Little Foot parents, such as the
zoning board.
34
JX-98.
See Mitchell Dep. at 11:11–13, 16:9–17:10, 29:18–21; Bell Dep. Tr. at 9:19–11:2; Gunn
35
Dep. Tr. at 10:3–23; Thomas Dep. Tr. at 8:18–11:20.
36
See JX-40 at 3 (Robinson’s signature); JX-51 at 4 (Robinson’s signature); JX-57 at 4
(Darbeau’s signature); JX-58 at 4 (Robinson’s signature); JX-62 at 4 (Darbeau’s signature).
37
See JX-81 at 1, 16; see also JX-83 at 1 (jointly writing to an applicant seeking
employment).
38
See JX-54 at 3; JX-90 at 3. The offer letters refer to Robinson and Darbeau as “Co-
Director[s] of Little Foot.” See JX-54 at 3; JX-90 at 3.
39
Trial. Tr. at 65:7–67:12 (Robinson).
C.A. No. 2019-0853-KSJM
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3. Financial Contributions to Little Foot
Darbeau made financial contributions to Little Foot. When Darbeau’s mother
passed away in August 2008, Robinson and Darbeau traveled to Trinidad for the
funeral. 40 Darbeau stayed in Trinidad longer than Robinson did.41 After Robinson
had left, Darbeau sent a wire transfer in the amount of $7,025 to Little Foot’s bank
account.42 On August 26, 2008, Darbeau sent an additional $10,025 to Little Foot’s
bank account. 43 On that same day, Darbeau transferred $3,000 to Robinson’s
personal account. 44 In addition, Darbeau purchased books and toys for Little Foot.45
40
Id. at 18:10–16 (Robinson); id. at 159:15–16 (Darbeau).
41
See id. at 18:10–16 (Robinson).
42
See JX-34; Trial Tr. at 17:6–19:21 (Robinson).
43
See JX-35; Trial Tr. at 17:6–19:21 (Robinson). Robinson contends that this money was
repaid and never used for Little Foot’s business, Trial Tr. at 18:17–21 (Robinson), but
Robinson can point to no document supporting that contention.
44
JX-37. Robinson suggests that this was repayment for Darbeau’s plane ticket to
Trinidad, see Trial Tr. at 19:1–18 (Robinson), but Robinson does not provide any
contemporaneous support for that contention. On February 1, 2013, Darbeau also wrote a
check in the amount of $7,000 to pay Little Foot’s 2012 taxes. JX-61. Robinson contends
that she was simply out of checks that day and repaid that amount to Darbeau. Trial Tr. at
12:13–24 (Robinson). On February 4, 2013, Robinson transferred $5,000 to Darbeau, and
Little Foot transferred $1,375 to Darbeau. See JX-138; JX-139; JX-140. At bottom,
numerous transfers were made from Darbeau to Little Foot’s bank account, but it is unclear
whether these funds were used to operate the business. Because the court finds Darbeau
to be the more credible witness overall, these payments and her testimony with respect to
them do weigh in her favor.
45
See supra note 12.
C.A. No. 2019-0853-KSJM
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C. Support for Robinson’s Contention That Darbeau Is Neither a
Member Nor a Manager
Robinson denies that Darbeau is a member or manager of the LLC. She relies
on two sets of facts.
1. The Tax Returns
Darbeau never reported her membership or claimed LLC revenues, expenses,
or other benefits on her personal tax returns, as one would expect of an LLC
member. 46 She reports a salary from Little Foot on her income taxes but does not
report any profit from the LLC.47 All revenues, expenses, and mortgage tax benefits
were listed solely on Robinson’s tax returns. 48 In fact, Robinson and Darbeau never
discussed the LLC’s annual profits.49
Robinson and Darbeau informed their accountant that Robinson “was the sole
owner” of Little Foot.50 Based on that information, their accountant prepared
46
See PTO ¶ 5; see Trial Tr. at 189:12–16 (Darbeau).
47
See Trial Tr. at 155:14–17, 189:12–16 (Darbeau); JX-79 (2014 income tax return); JX-
84 (2015 income tax return); JX-96 (2016 income tax return); JX-108 (2017 income tax
return).
48
See Trial Tr. at 155:14–17 (Darbeau); JX-66 (2013 letter from accountant); JX-80
(Robinson’s 2014 income tax return); JX-85 (Robinson’s 2015 income tax return); JX-97
(Robinson’s 2016 income tax return); JX-103 (Robinson’s 2017 income tax return).
49
Trial Tr. at 202:6–20 (Darbeau).
50
Simpson Dep. Tr. at 11:5–18. Their accountant acknowledged that he never verified this
with any documentary support. See id. at 11:13–21.
C.A. No. 2019-0853-KSJM
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Schedule C tax forms for Little Foot, which is proper for a single-member LLC but
would be improper for a multi-member LLC. 51
At trial, Darbeau explained that she was under the impression that Robinson
would report the LLC’s taxes on her income tax returns but that the parties would
share the profits. 52 She testified that she and Robinson co-mingled their business
and personal funds and that they did not accurately track profits or distributions.53
She explained: “That’s not how we, Ms. Robinson and I, operated the personal
relationship or the business relationship,” 54 and “[t]here was no separation of
personal and business funds.” 55 Darbeau’s testimony on this point was credible.
2. The Resolution
At trial, Robinson provided testimony concerning the events surrounding the
formation of the LLC and a subsequently drafted resolution intended to memorialize
Darbeau’s resignation.
Because Robinson did not have a computer at the time the LLC was formed,
Darbeau sat with Robinson and filled out the application for her. 56 According to
51
Id. at 12:1–19.
52
Trial Tr. at 200:14–202:20 (Darbeau); see also Darbeau Dep. Tr. at 108:3–7.
53
Trial Tr. at 189:12–196:4, 201:17–23 (Darbeau).
54
Id. 201:17–23 (Robinson).
55
Id. at 196:3–4 (Darbeau).
56
Id. at 49:22–50:3 (Robinson).
C.A. No. 2019-0853-KSJM
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Robinson, Darbeau stated that she needed a “resident agent” and that Darbeau would
be willing to act in that capacity for Little Foot.57 Robinson agreed, but she testified
that Darbeau instead listed herself as a member of the LLC. 58
Although American Incorporators sent the parties a copy of the Certificate of
Formation in September 2005, Robinson testified that she did not see this copy until
at least six months later.59 Robinson could not recall the exact timing, and her
testimony on this issue was vague.60 She testified that she confronted Darbeau after
reviewing the Certificate of Formation and that Darbeau told Robinson that she had
intended to make herself the registered agent rather than a member.61 Robinson
further recalls the parties contacting American Incorporators and American
Incorporators informing them that the parties would need to execute a resolution to
remove Darbeau from the LLC if that was the parties’ intent.62
57
Id. at 50:4–51:10 (Robinson).
58
Id. at 59:6–60:17 (Robinson).
59
Id. at 52:24–58:5 (Robinson).
60
See id. at 57:18–58:5 (“It had to be around the time I had my surgery. And so, if I go on
that -- because I wasn’t -- I hadn’t been not working. So I would have to say it was a period
of time. And it had to have been -- I know I had -- I did this before I went to have my
surgery and I was getting everything in order. So it could have been as much as nine
months, six months, I would say. Maybe even -- well, it depends if it had been a year. But
I know it was a period of time, time had gone by before I actually saw this from the date
that it actually had came [sic].”).
61
Id. at 59:2–61:7 (Robinson).
62
Id. at 60:11–62:11 (Robinson).
C.A. No. 2019-0853-KSJM
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Robinson then executed a document called “Resolution of Change of Member
of Little Foot Enrichment Learning Center LLC” (the “Resolution”).63 The
document is dated May 4, 2006, but this year could be a typo.64 Robinson testified
that she signed this document around the time that she changed the name of the LLC,
which bears a May 4, 2007 Secretary of State date stamp. 65
The Resolution states that Darbeau “resigns with immediate effect” and that
Robinson shall “be appointed as a sole Member of the Company.” 66 Only Robinson
executed the Resolution.67
Darbeau did not recall these events. She testified that, aside from Darbeau’s
involvement in forming the LLC, the events to which Robinson testified never
63
JX-16. Robinson testified that Darbeau drafted the document for her. Trial Tr. at 62:12–
13 (Robinson).
64
See JX-16.
65
In 2007, Robinson decided to change the name of the LLC to “Little Foot Enrichment
Learning Center LLC.” Trial Tr. 109:6–111:1 (Robinson). She filed a certificate of
amendment affecting that change with the Secretary of State (through American
Incorporators) on May 4, 2007. JX-115 at DARBEAU000600; PTO ¶ 14. (The Certificate
of Amendment itself is dated May 4, 2006. See JX-115 at DARBEAU000600. The parties
did not provide the court with an explanation regarding the one-year time difference
between the date of signing and the date of filing.) The document stated that the resolution
was adopted “at a meeting of the Board Of Members of Little Foot Academic Learning
Center LLC.” Id. Robinson signed that document, on which she was identified as
“President” of the LLC. Id.
66
JX-16. Darbeau denies that she agreed to resign as a member of the LLC. See Trial Tr.
at 146:21–147:3 (Darbeau).
67
JX-16.
C.A. No. 2019-0853-KSJM
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occurred. 68 Darbeau did not know that Robinson attempted unilaterally memorialize
Darbeau’s resignation until the Resolution was produced during legal proceedings
in 2019. 69 The court finds Darbeau’s testimony to be more credible on this point. 70
D. The Parties End Their Relationship.
In April 2017, Robinson contacted Charlena Best, a pastor from South
Carolina who refers to herself as a “prophet.” 71 Around April 26, 2017, Best visited
the parties’ residence and blessed the house and its occupants.72 After Robinson
informed Best that Darbeau’s mother was a “witch” and that the parties had engaged
68
Trial Tr. at 140:20–147:3 (Darbeau).
69
Id. at 142:6–147:3 (Darbeau).
70
Robinson also proffers the following categories of evidence as support for a finding that
Darbeau is not a member of the LLC: lack of capital contribution by Darbeau; Little Foot
handbooks from 2003 and 2005; and Little Foot certificates of registration from 2003.
Dkt. 77, Opening Post-Trial Br. of Pl. Patricia A. Robinson (“Pl’s Opening Br.”) at 34–38.
None carry weight. As to the lack of capital contribution, this fact does not speak to
whether Darbeau is a member or manager of the LLC because capital contribution is not a
requirement for either under the LLC Act. See 6 Del. C. §§ 18-301(d), 18-403. As to the
Little Foot handbooks from 2003 and 2005, the former implies that Robinson is the sole
operator, whereas the latter implies that Robinson and Darbeau are joint operators. See
supra notes 20–21. If anything, these documents support Darbeau’s argument that she was
a member of the LLC. As to the Little Foot certificates of registration, they are
unpersuasive because they were executed before the LLC was formed. See JX-2; JX-8.
71
See Darbeau Dep. Tr. at 59:11–64:3; Best Dep. Tr. at 23:17–18.
72
See Darbeau Dep. Tr. at 63:13–14; Best Dep. Tr. at 69:10–70:5.
C.A. No. 2019-0853-KSJM
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in an animal sacrifice ritual in Trinidad at her mother’s funeral, Best instructed
Darbeau to burn all of her mother’s belongings in order to break the curse.73
Text messages from Robinson to Darbeau suggest that Robinson believed that
there had been a “demon” inside of Darbeau and that the only way for Darbeau to
keep it from returning was to burn all pictures and belongings of her mother.74
Darbeau left the Brandywine Property with her daughter on May 2, 2017.75
She ceased communicating with Robinson. 76 That same day, Darbeau transferred
$16,000 from Little Foot’s bank account to her personal account, approximately half
of the money that had been in Little Foot’s account.77
On June 5, 2017, Robinson sent an email to the parents of current Little Foot
students, stating that “Ms. Darbeau is no longer working at Little Foot Enrichment
Learning Center.”78 The 2018 version of the Little Foot parent handbook reflected
that change, as it refers to Robinson by name but does not mention Darbeau. 79
73
See Best Dep. Tr. at 14:8–20; Trial Tr. at 90:19–94:8 (Robinson); id. at 160:14–167:10
(Darbeau).
74
See JX-91 at DARBEAU2126.
75
See Trial Tr. at 175:4–179:6 (Darbeau).
76
Id. at 175:16–179:6 (Darbeau).
77
Id. at 191:8–192:13 (Darbeau).
78
JX-101.
79
See JX-104.
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E. Litigation Ensues
In 2018, Darbeau filed a civil action against Robinson in Maryland state court
(the “Maryland Action”).80 The record of the Maryland Action is not entirely clear
from the documents submitted as evidence. It appears that Darbeau initially sought
to force a sale of the LLC and two parcels of property—the Livingston Property and
the parties’ personal residence—but Robinson successfully moved to remove the
issue concerning the sale of the LLC from the Maryland litigation. 81 Robinson also
filed counterclaims for embezzlement based on Darbeau’s May 2, 2017 transfer from
Little Foot’s bank account. 82 On December 4, 2019, the trial court ordered sale of
the properties and appointed a trustee to conduct the sale (the “Sale Order”).83
Robinson filed an interlocutory appeal of the Sale Order and a motion to stay
all proceedings pending the resolution of this action.84 The court denied that motion
80
PTO ¶ 58. In 2017, the parties were also involved in a Maryland state court proceeding
filed by Robinson seeking access to her daughter. See PTO ¶ 11; JX-99; JX-102.
81
See JX-105; JX-106.
82
See JX-105; JX-111; JX-113 ¶ 2.
PTO ¶ 61; JX-105 at DARBEAU001492. The court appointed Trustee Abigail Bruce-
83
Watson to sell both properties. PTO ¶ 62.
84
See JX-111; JX-113 ¶ 1.
C.A. No. 2019-0853-KSJM
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to stay, except with respect to Robinson’s embezzlement claim. 85 Robinson then
filed a motion to stay pending interlocutory appeal.86
In the Maryland Action, Darbeau has claimed that she is both a member and
manager of the LLC, as a defense to the claim of embezzlement.87 Robinson views
the claims at issue in the Maryland Action as factually intertwined with the issue of
whether Darbeau is a member and manager of the LLC.88
Accordingly, Robinson filed this litigation in October 2019, seeking a
declaration that Darbeau is neither a member nor manager of the LLC. 89 The parties
completed post-trial briefing on November 17, 2020.90 This is the court’s post-trial
decision.
85
See JX-111; JX-113 ¶ 1.
86
PTO ¶¶ 63–64.
87
See JX-106 ¶¶ 2, 8; JX-113 ¶ 19 n.5.
88
See JX-113 ¶ 18–19 & n.5.
89
Dkt. 1, Verified Compl. for Declaratory J. to Determine Management of and Membership
in a Limited Liability Company Pursuant to 6 Del. C. § 18-110. She amended her
complaint on November 22, 2019. Dkt. 4, First Am. Verified Compl. for Declaratory J. to
Determine Management of and Membership in a Limited Liability Company Pursuant to
6 Del. C. § 18-110. The Sale Order was issued in the Maryland Action while this litigation
was pending.
90
See Pl.’s Opening Br.; Dkt. 79, Def.’s Post-Trial Opening Br. (“Def.’s Opening Br.”);
Dkt. 80, Post-Trial Answering Br. of Pl. Patricia A. Robinson (“Pl.’s Answering Br.”);
Dkt. 81, Pro Se Def. Michele Darbeau’s Post-Trial Answering Br. (“Def.’s Answering
Br.”).
C.A. No. 2019-0853-KSJM
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II. LEGAL ANALYSIS 91
The Delaware Limited Liability Act (the “LLC Act”) establishes the legal
requirements for becoming a member and manager of a limited liability company.
To attain the status of a member of a Delaware limited liability company under
the LLC Act, “[a]dmission is necessary.” 92 A member may be admitted at the time
of formation or at a later time.93 The focus of this analysis is on the requirements
for admission at the time of formation, which are found in Section 18-301(a) of the
LLC Act.94
91
The parties dispute who bears the burden of proof in this action. Darbeau argues that
Robinson should bear the burden as the plaintiff because she is seeking declaratory relief,
for which recent case law provides support. See Def.’s Opening Br. at 55–59; State Farm
Mut. Auto. Ins. Co. v. Spine Care Del., LLC, 238 A.3d 850, 860 n.55 (Del. 2020) (observing
that “there is some debate on the burden of proof in declaratory judgment actions” and
holding that “[t]he better view is that a plaintiff in a declaratory judgment action should
always have the burden going forward” (quoting Rhone-Poulenc v. GAF Chems., 1993 WL
125512, at *3 (Del. Ch. Apr. 8, 1993)). Robinson argues that this is one of the limited
contexts in which the burden of proof should shift to the defendant. Pl.’s Opening Br. at
24–27. She acknowledges the Delaware Supreme Court’s recent directive in State Farm
but observes that the court disclaimed establishing any “hard and fast rule.” Id. at 24
(quoting State Farm, 238 at 860 n.55). In the end, “the Delaware Supreme Court has
explained that the real-world benefit of burden-shifting is ‘modest’ and only outcome-
determinative in the ‘very few cases’ where the ‘evidence is in equipoise.’” In re Dole
Food Co., Inc. S’holder Litig., 2015 WL 5052214, at *4 (Del. Ch. Aug. 27, 2015) (quoting
Ams. Mining Corp. v. Theriault, 51 A.3d 1213, 1242 (Del. 2012)). Because the evidence
in this case is not equipoise, this decision does not resolve the issue of burden allocation.
92
Robert L. Symonds, Jr. & Matthew J. O’Toole, Delaware Limited Liability Companies
§ 5.02[A], at 5-13 (2d ed. 2019); see also 6 Del. C. § 18-101(13) (defining “member”).
93
See 6 Del. C. § 18-301 (“Admission of Members”).
94
See id. § 18-301(a).
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Section 18-301(a) establishes two ways to admit a member in connection with
the formation of a limited liability company:
In connection with the formation of a limited liability
company, a person is admitted as a member . . . upon the
later to occur of: (1) [t]he formation of the limited liability
company; or (2) [t]he time provided in and upon
compliance with the limited liability company agreement
or, if the limited liability company agreement does not so
provide, when the person’s admission is reflected in the
records of the limited liability company or as otherwise
provided in the limited liability company agreement.95
Of the two options presented in Section 18-301(a), the second permits a person to
be admitted as a member “when the person’s admission is reflected in the records of
the limited liability company.”96 The records of a limited liability company at the
time of formation include, at a minimum, the certificate of formation, 97 and the LLC
Act provides that members may be identified at the time of formation in the
certificate of formation itself.98 Further, “[a] person may be admitted to a limited
95
Id. § 18-301(a).
96
Id. § 18-301(a)(2).
97
See Perry v. Neupert, 2019 WL 719000, at *31–32 (Del. Ch. Feb. 15, 2019) (referring
to a deed of assignment as a “record[]” under Section 18-301); In re Carlisle Etcetera LLC,
114 A.3d 592, 598–601 (Del. Ch. 2015) (referring to tax forms and draft agreements as
“records” under Section 18-301).
98
6 Del. C. § 18-102(2) (providing that certificates of formation “[m]ay contain the name
of a member or manager”).
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liability company as a member . . . without making a contribution or being obligated
to make a contribution to the limited liability company.”99
To attain the status of manager of a limited liability company, the LLC Act
provides:
“Manager” means a person who is named as a manager of
a limited liability company in, or designated as a manager
of a limited liability company pursuant to, a limited
liability company agreement or similar instrument under
which the limited liability company is formed . . . . 100
The language “similar instrument” includes a certificate of formation. Indeed, the
LLC Act leaves open the possibility that the certification of formation may serve as
the entire limited liability company agreement or that it supply portions of the
limited liability company agreement. 101
Putting it all together, a person may attain the status of member at the time of
formation if the member is identified in the certificate of incorporation. Similarly,
a person may attain the status of manager at the time of formation if that person is
identified as a manager in the certificate of formation.
99
Id. § 18-301(d).
100
Id. § 18-101(12); see also id. § 18-401 (providing that “[a] person may be named or
designated as a manager of the limited liability company as provided in § 18-101(12) of
this title”).
101
See Symonds, Jr. & O’Toole, supra note 92 § 4.02[C][1][a], at 4-20–24 (“The
Certificate of Formation as a Limited Liability Agreement”).
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In this case, the Certificate of Formation identifies Darbeau as a member and
provides that management is vested in the members. Article Fifth of the Certificate
of Formation states:
Management of the limited liability company is vested in
the members(s) in accordance with their ownership
interests, unless this is varied by the operating
agreement. . . . The initial members(s) of the limited
liability company shall be: Patricia Ann Robinson [and]
Michele Zelda Darbeau. 102
This language is sufficient to admit Darbeau as a member and manager of the LLC
under the LLC Act. Based on the Certificate of Incorporation, therefore, Darbeau is
both a member and manager of the LLC.
Robinson’s arguments to the contrary can be framed as follows: First,
Robinson argues that Darbeau tricked Robinson when forming the LLC and that
Robinson never intended for Darbeau to be a member or a manager. Second,
Robinson argues that the LLC was never properly formed because the parties never
agreed to an LLC agreement. Third, Robinson argues that even if Darbeau was a
member under the original Certificate of Incorporation, the Resolution constituted
Darbeau’s resignation from the LLC.103
102
JX-6 (formatting altered).
103
See Pl.’s Opening Br. at 27–38; Pl.’s Answering Br. at 6–15. Robinson’s arguments
were somewhat amorphous in briefing; this decision has framed them in a way intended to
give them as much force as possible.
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Robinson’s first argument lacks evidentiary support. Robinson relies
primarily on her own testimony, which was not persuasive. Robinson also relies on
the parties’ tax returns, but they do not determine this issue. The record shows that
the parties represented to their accountant that Robinson was the sole owner of the
LLC and that Little Foot filed tax forms that were appropriate for a single-member
LLC but not a multi-member LLC.104 Although the way in which an LLC is taxed
is often probative of its membership composition, it is not dispositive under
Delaware law and does not overcome the weight of the evidence reflecting that
Darbeau was a member of the LLC.
Robinson’s second argument is similarly unavailing. Robinson impliedly
argues that the LLC was not formed because there was no operating agreement.
According to Robinson, Darbeau therefore could not have been made a member or
manager at the time of formation. It is true that under the LLC Act, a limited liability
company agreement is a necessary condition to formation.105 It is also true that Little
104
See supra notes 50–51 and accompanying text.
105
6 Del. C. § 18-201(d) (“A limited liability company agreement shall be entered into or
otherwise existing either before, after or at the time of the filing of a certificate of formation
and, whether entered into or otherwise existing before, after or at the time of such filing,
may be made effective as of the effective time of such filing or at such other time or date
as provided in or reflected by the limited liability company agreement.”). Robinson fails
to address the fact that, if there was no operating agreement, the LLC was not properly
formed. Because the court finds that there was an implied operating agreement, it need not
tease out this hypothetical.
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Foot has never had a written limited liability company agreement. 106 Under the LLC
Act, however, such an agreement may be “written, oral, or implied.”107 The options
are not mutually exclusive—an agreement may be “partly written, partly oral and/or
partly implied.”108
There is sufficient evidence to find that the parties impliedly agreed to a
limited liability company agreement. The record supports Darbeau’s position that
she impliedly entered into an LLC agreement by operating Little Foot alongside
Robinson. 109 As discussed above, Robinson and Little Foot referred to Darbeau as
a “Co-Owner” and “Co-Director” in countless situations and presented Darbeau as
a co-equal to clients and the public, among other things.110 Darbeau contributed to
the LLC’s operations, performing various administrative tasks. She also contributed
financially to the LLC.
106
PTO ¶ 18.
107
6 Del. C. § 18-101(9).
108
Symonds, Jr. & O’Toole, supra note 92 § 4.02[A], at 4-13.
109
Darbeau cites In Matter of Dissolution of Arctic Ease, LLC and Phillips v. Hove for the
proposition that “[m]aterial participation in the management of a DLLC requires ‘control
or [a] decision-making role.’” Def.’s Opening Br. at 69 (citing 2016 WL 7174668(Del. Ch. Dec. 9, 2016); 2011 WL 4404034 (Del. Ch. Sept. 22, 2011)). But these cases are
referencing the definition of “manager” found in 6 Del. C. § 18-109, which governs
personal jurisdiction. See Arctic Ease, 2016 WL 7174668, at *3; Phillips, 2011 WL
4404043, at *22. The “participates materially” language found in 6 Del. C. § 18-109(a) is
not found in 6 Del. C. § 18-101 nor 6 Del. C. § 18-401.
110
See supra Section I.B.2.
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Robinson argues that there was no implied agreement because Darbeau did
not “know the specific terms of an operating agreement” and instead “only [knew]
what conduct [she] practiced at the daycare center at Little Foot.”111 But that conduct
is the type of evidence that this court looks to in determining whether an implied-in-
fact agreement existed.
Robinson also contends that “Darbeau’s position appears to be based on a
conflation of her personal relationship with Robinson with the idea of equal
ownership of everything,”112 but Darbeau’s testimony was specific to the operation
of the LLC. 113
111
Pl.’s Opening Br. at 30 (quoting Darbeau Dep. Tr. at 105:20–24).
112
Id. at 31.
113
Also, under the LLC Act, a certificate of formation may supply terms of a limited
liability agreement. See Symonds, Jr. & O’Toole, supra note 92 § 4.02[C][1][a][i], at 4-
20 (“The DLLC Act . . . does not require complete separation of the agreement and
certificate, nor does it disallow a total or partial overlap of those documents.”); see also id.
§ 4.02[C][1], at 4-19 (“[T]he DLLC Act does not dictate that a written limited liability
company agreement (or any written component of the agreement) must reside in a single
document.”). In this case, the Certificate of Formation contains terms that would ordinarily
be contained in a limited liability agreement by, for example, designating managers and
prohibiting the assignment of membership interests. See JX-6. Although the Certificate
of Formation refers to “the operating agreement,” see id., suggesting the existence of or
intent to prepare an independent operating agreement, this reference does not foreclose the
possibility that the Certificate of Formation was intended to supply certain terms.
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Robinson’s third argument based on the Resolution also does not warrant
judgment in her favor.114 The Resolution states that Darbeau “resigns with
immediate effect” and that Robinson shall “be appointed as a sole Member of the
Company.”115 Only Robinson signed the Resolution.116
There is a “fundamental principle under Delaware law that a majority of the
members . . . of [an LLC], unless expressly granted such power by contract, have no
right to take the property of other members.” 117 Thus, the LLC Act does not grant
members the right to resign prior to dissolution or winding up, nor does it provide
the right to remove or expel other members. The LLC Act broadly provides that
members may agree to such provisions in the limited liability company agreement.118
114
Robinson made this argument in the complaint but did not advance it in briefing.
Typically, a failure to brief an argument constitutes a waiver of the argument. See Emerald
P’rs v. Berlin, 726 A.2d 1215, 1224 (Del. 1999) (“Issues not briefed are deemed waived.”).
This decision addresses the issue in the interest of completeness.
115
JX-16; accord. JX-118 at 147–48. Darbeau denies that she agreed to resign as a member
of the LLC. Trial Tr. at 146:21–147:3 (Darbeau).
116
See JX-16.
117
Walker v. Res. Dev. Co., 791 A.2d 799, 815 (Del. Ch. 2000).
118
See Symonds, Jr. & O’Toole, supra note 92 § 5.04[E], at 5-58 (“The Delaware Court of
Chancery has stated that there is no basis at law, apart from a contract provision, for the
removal or expulsion of a member of a Delaware limited liability company by other
members.” (collecting cases)); 6 Del. C. § 18-603 (prior to the dissolution or winding up
of the LLC, “[a] member may resign from a limited liability company only at the time or
upon the happening of events specified in a limited liability company agreement and in
accordance with the limited liability company agreement”).
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Viewing Robinson’s arguments generously, she contends that the parties
effectively agreed to a resignation provision in their implied limited liability
company agreement. Thus, to remove Darbeau as a member of the LLC, Robinson
claims that she need only draft and sign a resolution removing Darbeau as a
member. 119 Robinson testified that Darbeau was present during the call with
American Incorporators, that Darbeau drafted the Resolution, and that Darbeau was
present when Robinson signed it. 120 But Darbeau testified that Robinson’s entire
narrative was fabricated and that she only learned of the existence of the Resolution
through litigation between the parties.121 Because the court finds Darbeau to be the
more credible witness, Robinson’s narrative is unhelpful.
Therefore, the Resolution did not have the effect of removing Darbeau as a
member or manager of the LLC. 122
119
See Trial Tr. at 60:12–62:13 (Robinson). It bears noting that reference to “resignation”
in the Resolution implies that Robinson viewed Darbeau as a member at the time she signed
the Resolution, which undermines aspects of Robinson’s testimony.
120
See Trial Tr. at 61:8–62:13 (Robinson).
121
See id. at 140:20–147:3 (Darbeau).
122
Even if the Resolution was effective as Darbeau’s “resignation” from the LLC and did
not trigger dissolution, Darbeau would still be entitled to payment of the fair value of her
membership interest in the LLC. See 6 Del. C. § 18-604 (“[U]pon resignation any resigning
member is entitled to receive any distribution to which such member is entitled under a
limited liability company agreement and, if not otherwise provided in a limited liability
company agreement, such member is entitled to receive, within a reasonable time after
resignation, the fair value of such member’s limited liability company interest as of the
date of resignation based upon such member’s right to share in distributions from the
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III. CONCLUSION
This decision finds that Darbeau was both a member and manager of the LLC.
The court enters judgment in favor of Darbeau. The parties advance arguments
regarding whether Darbeau holds a 50% interest in the LLC or some lower
percentage. 123 The parties, however, did not develop evidence at trial concerning
this issue, perhaps because the complaint does not affirmatively seek a declaration
concerning Darbeau’s ownership interests. This decision, therefore, does not resolve
the matter.124
Sincerely,
/s/ Kathaleen St. Jude McCormick
Kathaleen St. Jude McCormick
Vice Chancellor
cc: All counsel of record (by File & ServeXpress)
limited liability company.”); see also Domain Assocs., L.L.C. v. Shah, 2018 WL 3853531,
at *13–15 (Del. Ch. Aug. 13, 2018) (providing that Section 18-604 applies to both
voluntary and forced resignations or withdrawals).
123
See Pl.’s Opening Br. at 31, 34; Def.’s Opening Br. at 43, 47, 53, 72–73.
124
Robinson’s briefs cite almost exclusively to cases applying partnership law, and in
particular, Maryland precedent. The court acknowledges that the “LLC Act resembles its
partnership forebears.” See Feeley v. NHAOCG, LLC, 62 A.3d 649, 663 (Del. Ch. 2012).
That said, Delaware contains a detailed LLC Act and law interpreting that Act, which this
decision has applied. Accordingly, there is no reason to discuss or distinguish Robinson’s
partnership law authorities.