Jain v. Unilodgers, Inc.

Background

Unilodgers, Inc. entered into a Stock Agreement and a Vesting Agreement with Shipra Jain in 2019. Jain and Vaibhav Verma each received 2,253,472 shares of Unilodgers common stock. The Vesting Agreement gave Unilodgers a 90-day option to repurchase Jain’s unvested shares if her service to the company ended, and it allowed Unilodgers to assign that option to certain other people or organizations.

Jain alleged that Defendants pushed her out of Unilodgers, that she was removed from the board, and that Unilodgers claimed it had repurchased all of her shares effective February 2020. She alleged that the repurchase was invalid because her service had not ended at that time or because Unilodgers had not provided the required notice and payment within the required period. Her First Amended Complaint asserted claims for breach of contract, tortious interference with contractual relations, breach of fiduciary duty, conversion, and declaratory relief.

Legal standard

The defendants moved under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint contains enough factual allegations to state a legally sufficient claim. The court generally accepts well-pleaded factual allegations as true but does not accept conclusory statements without supporting facts. When a claim is dismissed, courts generally allow amendment unless additional facts could not possibly cure the problem.

Rulings on the challenged claims

Tortious interference against Verma

The court granted the motion to dismiss the second cause of action for tortious interference against Verma. Applying Delaware law, the court explained that the complaint needed facts showing that Verma’s alleged interference was unjustified and motivated by a malicious or other bad-faith purpose. The court found that allegations that Verma authorized the share repurchase and signed corporate documents that increased his ownership and control were conclusory and did not show how those actions were motivated by bad faith.

Fiduciary-duty claim against Verma

The court granted the motion to dismiss the third cause of action for breach of fiduciary duty against Verma. The court held that the claim was based on the same facts as Jain’s contract claim and that the Vesting Agreement specifically addressed Unilodgers’ authority to repurchase the shares. Because the alleged conduct was covered by the contract, the fiduciary-duty claim was duplicative.

Fiduciary-duty claim against Unilodgers

The court granted the motion to dismiss the third cause of action for breach of fiduciary duty against Unilodgers. Jain asserted that Unilodgers aided and abetted a breach of fiduciary duty. The court held that the complaint did not sufficiently plead a fiduciary-duty breach by Verma, and without a well-pleaded underlying breach, the aiding-and-abetting claim against Unilodgers could not proceed.

Conversion claim

The court granted the motion to dismiss the fourth cause of action for conversion. Conversion is a claim that someone wrongfully took or exercised control over another person’s property. The court found that Jain’s claim concerned the defendants’ authority to repurchase her shares under the Stock Agreement and Vesting Agreement. The complaint did not adequately allege that Defendants violated an independent legal duty separate from their alleged contractual duties.

Declaratory-relief claim

The court denied the motion to dismiss the fifth cause of action for declaratory relief. Jain sought a determination of her rights and Unilodgers’ obligations under the Vesting Agreement, including whether Unilodgers validly exercised its repurchase option or whether that option had expired. The court found that the contract claim might be resolved without deciding ownership of the shares and that the requested declaration could resolve additional contractual issues.

Disposition

The court granted in part and denied in part Defendants’ motion to dismiss with leave to amend. The court ordered Jain to file a second amended complaint by June 22, 2022. Judge Thomas S. Hixson signed the order on June 8, 2022.