Viant Technology Holding Inc. v. Vanderhook

Background

Viant Technology Holding Inc. sued Chris Vanderhook and Timothy Vanderhook for breach of contract. The parties are members and owners of Xumo JV Holdings LLC. Under the LLC Agreement, Viant held a 60% ownership interest, and each Vanderhook held a 20% interest.

Section 2.2 of the LLC Agreement allows Xumo’s Board of Managers to require members to make additional capital contributions, in proportion to their ownership interests, to pay operating, capital, or other expenses related to Xumo’s business. The agreement also provides for specific enforcement of a member’s obligations and permits related legal actions in this District or in New York County Supreme Court. Delaware law governs the agreement.

Xumo retained Gibson, Dunn & Crutcher LLP for legal and advisory work related to a proposed sale of Xumo’s internet television service. Gibson Dunn billed approximately $793,377.80, and neither Xumo nor the Vanderhooks paid the invoices. Gibson Dunn later obtained an arbitration award against Xumo, which a California state court confirmed as a judgment. DDM, acting for Xumo, later paid Gibson Dunn $900,000 to settle Xumo’s obligations, and Gibson Dunn filed a satisfaction of judgment.

In November 2022, Xumo’s Board notified the members that DDM’s settlement payment was an expense related to Xumo and required each member to make an additional capital contribution based on its ownership share. The notice directed the members to pay their amounts to DDM. Viant alleged that it satisfied its contribution through intercompany accounting procedures, but that neither Vanderhook paid the amount attributed to him.

Motion to Dismiss

The Vanderhooks moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. At this stage, the court accepts well-pleaded factual allegations as true and asks whether they plausibly show that the defendants may be liable.

Viant alleged that the Vanderhooks breached Section 2.2 by failing to pay their respective 20% shares of the settlement payment. Viant sought specific enforcement of the agreement, including payment to DDM of 20% of the settlement payment from each Vanderhook.

The Vanderhooks presented three principal arguments. First, they argued that DDM’s settlement with Gibson Dunn did not bind Xumo because DDM was not acting as Xumo’s agent and lacked authority to bind it. The court concluded that this argument did not defeat Viant’s allegations because the agreement expressly authorized Xumo’s Board—not an individual member—to require additional capital contributions when the contractual conditions were met.

Second, the Vanderhooks argued that the Board lacked authority to ratify DDM’s settlement agreement. The court found that this argument also did not justify dismissal because the contractual authority to issue a capital call did not depend on the agency or ratification principles invoked by the defendants.

Third, the Vanderhooks argued that Xumo’s sale of its sole asset triggered a dissolution event and winding-up process that relieved them of any obligation to contribute additional capital. The court rejected that interpretation of the agreement. It read the winding-up provision as continuing the members’ contractual obligations until Xumo’s certificate of formation was formally canceled. It read the separate deficit-account provision as applying only after all required contributions, distributions, and allocations had been addressed.

Ruling

Judge J. Paul Oetken concluded that Viant adequately pleaded each element of a Delaware breach-of-contract claim: an agreement, a breach of an obligation under that agreement, and damages. The court therefore denied the Vanderhooks’ Rule 12(b)(6) motion to dismiss.

The defendants must file an answer to the complaint within 21 days of the opinion and order. The court also directed the Clerk of Court to close the motions listed at ECF Numbers 16 and 18.