Document: In re Mobilactive Media, LLC, C.A., No. 5725-VCP (Del. Ch. Jan. 25, 2013)
The Delaware Court of Chancery found that a party to a joint venture usurped corporate opportunities belonging to the joint venture and therefore breached its fiduciary duty of loyalty. In so finding, the Court held that plaintiff did not need to establish two of the four elements of a corporate opportunity claim based on a provision in the parties’ joint venture agreement.
In 2007, Terry Bienstock, the former general counsel of Comcast Cable Communications, formed a joint venture (Mobilactive Media, LLC (“Mobilactive”)) with Silverback Media, PLC, a UK listed company (“Silverback”), for the purpose of developing and licensing technology for the enhancement of advertising content. Section 13.5 of Mobilactive’s limited liability company prohibited the parties from pursing outside business ventures in Mobilactive’s line of business:
The members agree that the Company and its subsidiaries shall be the only means through which any member or any of its Affiliates engage in the Business and that any opportunity for new or expanded Business that any Member or its affiliates learn shall be presented to the Company as an opportunity for the Company.
By 2010, Silverback desired to renegotiate Section 13.5 or terminate the joint venture to pursue competing business ventures. After Bienstock rejected Silverback’s proposals, Silverback filed a complaint in the Delaware Court of Chancery for the dissolution of Mobilactive. In response, Bienstock filed the complaint in this action, which alleged that Silverback had already consummated a number of business development transactions that breached Section 13.5.
In a decision after trial, the Court found that Silverback usurped corporate opportunities in breach of Section 13.5 and in violation of Silverback’s fiduciary duty of loyalty. The Court held that the parties’ agreement permitted the Court to presume two of the four elements of a corporate opportunity claim—that Mobilactive had an interest or expectancy in the opportunities and was financially able to exploit the opportunities. Based on the facts before it, the Court also was able to conclude that the opportunities were within Mobileactive’s line of business and that, by taking the opportunity, Silverback acted contrary to its fiduciary duties, the remaining elements of a corporate opportunity claim. The Court awarded Bienstock $3 million in damages.