BV Advisory Partners, LLC v. Quantum Computing, Inc.

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

BV ADVISORY PARTNERS, LLC, )
)
Plaintiff, )
)
v. ) C.A. No. 2022-0719-SG
)
QUANTUM COMPUTING INC., )
QPHOTON, LLC, YUPING HUANG, )
XIAO PAN, ROBERT LISCOUSKI, )
WILLIAM McGANN, CHRIS )
ROBERTS, JOSEPH MICHAEL )
SALVANI, GREGORY OSBORN, and )
DAN WALSH, )
)
Defendants. )

MEMORANDUM OPINION

Date Submitted: January 12, 2024
Date Decided: May 28, 2024

Thaddeus J. Weaver, DILWORTH PAXSON LLP, Wilmington, Delaware; Thomas
S. Biemer and Patrick M. Northen, DILWORTH PAXSON LLP, Philadelphia,
Pennsylvania, Attorneys for Plaintiff.

Robert L. Burns and Kyle H. Lachmund, RICHARDS LAYTON & FINGER, P.A.,
Wilmington, Delaware, Attorneys for Defendants Quantum Computing, Inc.,
QPhoton, LLC, Robert Liscouski, William McGann, Chris Roberts, Joseph Michael
Salvani, Greogary Osborn, and Dan Walsh.

Thomas A. Uebler, MCCOLLOM D’EMILIO SMITH UEBLER LLC, Wilmington,
Delaware; OF COUNSEL: Steven M. Hecht, ROLNICK KRAMER SADIGHI LLP,
New York, New York, Attorneys for Defendants Yuping Huang and Xiao Pan.

GLASSCOCK, Vice Chancellor
Stevens Institute of Technology is a research university in Hoboken, New

Jersey. Defendant Yuping Huang is a professor at the university. In 2020, Huang

founded (and solely owned) QPhoton, now a Delaware entity.1 QPhoton was

intended to develop quantum computing.

Shortly thereafter, Plaintiff, BV Advisory LLC, became interested in

investing in QPhoton. It “brokered” a lease of IP from the university to QPhoton,

then, in March 2021, purchased 10% of QPhoton’s equity pursuant to a stock

purchase agreement (the “SPA”). Relatedly, Plaintiff, Huang, and QPhoton entered

a voting agreement (the “Voting Agreement”), which required Huang to create a

three-person board of directors and appoint Plaintiff’s designee, Michael Kotlarz, to

the board.

At about the same time, Plaintiff and QPhoton entered a Note Purchase

Agreement (the “NPA”), under which Plaintiff purchased $500,000 worth of notes

convertible to equity in QPhoton. The central—but by no means only—issue in this

litigation is the effect on those convertible notes of a merger of QPhoton with

Defendant Quantum Computing, Inc. in 2022.

In October of 2021, two entities allied with Plaintiff’s principals signed a letter

of intent (the “October LOI”) with QPhoton, which contemplated investment in

QPhoton in exchange for convertible preferred stock; investment that, if

1
See n.21, infra.

1
consummated, would represent “investor financing” that would cause conversion of

Plaintiff’s QPhoton notes to equity. This would result in Plaintiff holding 45% of

QPhoton’s equity. Subsequently, certain of the lenders’ rights under the October

LOI were transferred to Plaintiff.

This litigation, broadly, arises out of the May 2022 acquisition of QPhoton by

Defendant Quantum Computing Inc., and its aftermath, allegedly in derogation of

rights held by Plaintiff under the contracts just discussed, as well as fiduciary duties.

The merger, originally negotiated on QPhoton’s behalf by Plaintiff’s principal, Keith

Barksdale, contemplated a stock-for-stock merger which would leave QPhoton

equity holders in the minority. The term sheet created at this negotiation phase also

anticipated a role (and salary) for Huang in the merged entity. During the pendency

of the negotiations, however, Plaintiff (or Barksdale) objected to certain actions of

the buyer, including Quantum’s taking on $8 million in debt. Huang took over the

negotiations, bargained for a salaried role for himself in the post-merger entity, and

a merger agreement was reached at the same exchange ratio as contemplated before

Quantum’s assumption of debt. The acquirer’s stock was volatile, and the exchange

ratio implied a lower value for Quantum than that implied at the time of the term

sheet.2 Plaintiff’s principal, Barksdale, threatened suit over the merger, and a special

2
According to the Complaint, Barksdale and his Quantum counterparties agreed to a different
exchange ratio at some undisclosed point in time, but the term sheet was not amended in writing.
See Verified Second Am. Compl. ¶ 95, Dkt. No. 61 (“SAC”).

2
committee was formed to address potential litigation.3 The Special Committee

excluded Plaintiff’s designee, Kotlarz, which Plaintiff alleges violated the Voting

Agreement.

The merger closed, and the successor entity attempted to redeem Plaintiff’s

convertible notes, at face value, plus interest. Plaintiff brought an appraisal action,

and also filed this suit. This action alleges breach of the Voting Agreement, the

NPA, the BV Notes and the October LOI (and associated tortious interference

claims), breach of fiduciary duty (and associated aiding-and-abetting claims), and

fraudulent transfer and unjust enrichment. Defendants include Quantum and

QPhoton, and also Huang and other fiduciaries of Quantum and QPhoton. The

Complaint makes vehement and frequent, but non-specific and conclusory,

assertions that individuals associated with the buyer and seller conspired to deprive

Plaintiff of value. All Defendants have moved to dismiss under Rule 12(b)(6);

certain individual defendants associated with the buyer (the “Individual

Defendants”) contest personal jurisdiction, as well. The motions to dismiss are

partial; no party has moved to dismiss the core contract claim, that certain

Defendants have breached the NPA.

3
According to the Complaint, the Special Committee was formed to negotiate the merger. SAC
¶¶ 113, 165, 191. Since the Special Committee was created after the merger agreement was
entered, the directionality of time would seem to preclude this, I note.

3
Below, I attempt in more detail to set out the facts as alleged in the complaint;

following that contractual and equitable Brunswick stew of allegations is my

analysis, in which I determine that the Individual Defendants must be dismissed

under Rule 12(b)(2), and that the Motions under Rule 12(b)(6) compel mixed results.

I. BACKGROUND

A. Factual Background4

1. The Parties

Plaintiff, BV Advisory Partners, LLC (“BV Advisory” or “Plaintiff”) is a New

Jersey limited liability company, with its principal place of business in Hoboken,

New Jersey.5

Non-party Keith Barksdale is the founder and Chief Executive Officer of BV

Advisory.6

Non-party Michael Kotlarz served as BV Advisory’s board designee on

QPhoton, Inc.’s board of directors.7

Non-party Stevens Institute of Technology (“Stevens”) employs Defendant

Yuping Huang and was a stockholder in QPhoton, Inc.8

4
The facts that follow are limited to those necessary for my decision.
5
SAC ¶ 29.
6
Id. ¶ 30.
7
Id. ¶ 31.
8
Id. ¶¶ 35, 63.

4
Defendant Yuping Huang is the Gallaher Associate Professor of Physics and

Director of the Center of for Quantum Science and Engineering at Stevens.9 Huang

founded QPhoton, Inc., held a majority of QPhoton Inc.’s stock and served as

QPhoton, Inc.’s President, Chief Executive Officer, and Chair of its board of

directors.10

Defendant Xiao Pan (with Huang, the “Founders”) is married to Huang and

served as a director on QPhoton, Inc.’s board of directors.11

Defendant QPhoton, LLC, is a Delaware limited liability company and the

successor of the former Delaware corporation QPhoton, Inc.12 QPhoton, Inc. was

initially formed as a New Jersey limited liability company.13 For simplicity’s sake,

I will refer to all iterations of Defendant QPhoton, LLC as “QPhoton.”

Defendant Quantum Computing, Inc. (“Quantum”) is a Delaware corporation

with its principal place of business in Virginia.14

Defendant Robert Liscouski was Quantum’s Chief Executive Officer,

President, and chairman of Quantum’s board of directors during all relevant times.15

9
Id. ¶ 32; Opening Br. of Yuping Huang and Xiao Pan Supp. Mot. Dismiss SAC 1, Dkt. No. 65
(“Founders’ OB”).
10
SAC ¶ 33.
11
Id. ¶ 36.
12
Id. ¶ 38.
13
Id. ¶ 60.
14
Id. ¶ 40.
15
Id. ¶ 41.

5
Defendant Joseph Michael Salvani was a consultant to Quantum during all

relevant times.16

Defendant Gregory Osborn was a sales consultant for Quantum during all

relevant times.17

Defendant William McGann is Quantum’s Chief Operating Officer and Chief

Technology Officer.18

Defendant Chris Roberts is Quantum’s Chief Financial Officer.19

Defendant Dan Walsh (together with Liscouski, McGann, Roberts, Salvani,

and Osborn, the “Individual Defendants”) is a securities broker with experience in

capital markets who serves as a consultant to Quantum.20

2. Huang Founds QPhoton, Inc., and BV Advisory and Stevens Invest

On January 23, 2020, Huang formed QPhoton.21 Huang solely owned

QPhoton.22 In early 2020, Stevens introduced Huang to Barksdale and Kotlarz, of

BV Advisory.23 On January 27, 2020, BV Advisory sent Huang an “Indication of

16
See id. ¶ 43; Entity Defs.’ and Individual Defs.’ Opening Br. Supp. Mot. Dismiss Counts I, III–
VI, and VIII–X of the SAC 12, Dkt. No. 62 (“Quantum’s OB”).
17
See SAC ¶ 48; Quantum’s OB 12.
18
SAC ¶ 50.
19
Id. ¶ 53.
20
See SAC ¶ 56; Quantum’s OB 12.
21
SAC ¶ 60. QPhoton was initially formed as a New Jersey limited liability company and later
merged into a Delaware corporation. Id. ¶¶ 3, 60. Because this distinction is irrelevant to the
claims brought by Plaintiff, I will simply refer to the New Jersey limited liability company and
Delaware corporation interchangeably as “QPhoton.”
22
Id. ¶ 60.
23
Id. ¶ 58.

6
Interest” and term sheet that contemplated a potential investment by BV Advisory

into QPhoton in exchange for convertible equity.24

By December 2020, Barksdale and Kotlarz brokered a transaction whereby

QPhoton acquired a thirty-year license to use seven patents held by Stevens,

pursuant to a license agreement (the “Licensed Stevens IP”).25 In exchange, Stevens

received equity in QPhoton, as well as various payments and royalties.26

In March 2021, QPhoton executed stock purchase agreements with Stevens

and BV Advisory.27 Stevens purchased 555,556 shares of QPhoton’s common stock,

which represented 9% of QPhoton’s equity.28 BV Advisory purchased 617,284

shares of QPhoton’s common stock, representing 10% of QPhoton’s equity, pursuant

to a stock purchase agreement (the “SPA”).29 During this time, Huang, QPhoton,

and BV Advisory also entered into a voting agreement (the “Voting Agreement”).30

Under the terms of the Voting Agreement, Huang and BV Advisory agreed to vote

their QPhoton shares to (1) set the size of the board to three directors and (2) appoint

one director designated by BV Advisory and two directors designated by a majority

of the common stock.31 To effectuate the Voting Agreement, QPhoton’s board of

24
Id. ¶ 61; SAC, Ex. 1.
25
Id. ¶ 63.
26
Id.
27
Id. ¶ 65; SAC, Exs. 3–4.
28
SAC, Ex. 3.
29
SAC ¶ 70; SAC, Ex. 4.
30
SAC ¶ 65; SAC, Ex. 5.
31
SAC ¶ 71; SAC, Ex. 5 §§ 1.1, 1.2.

7
directors at the time, consisting solely of Huang, executed a written director consent

to expand QPhoton’s board of directors to three directors and appoint Kotlarz to

serve as BV Advisory’s board designee and Pan to serve as the other common-stock

director.32 At that time, Kotlarz became QPhoton’s Chief Operating Officer.33

3. The Note Purchase Agreement

On March 1, 2021, QPhoton and BV Advisory executed a note purchase

agreement (the “NPA”).34 Under the terms of the NPA, QPhoton authorized the

issuance and sale of up to $500,000 in aggregate principal amount of convertible

promissory notes to BV Advisory.35 From March through July 2021, QPhoton

issued three convertible notes under the NPA with the collective principal of

approximately $500,000 (the “BV Notes”).36

4. The October 2021 Letter of Intent

On October 31, 2021, non-parties Barksdale Global Holdings, LLC (“BGH”),

Inference Ventures, LLC (“Inference”), and QPhoton executed a letter of intent and

accompanying term sheet (the “October LOI”).37 Barksdale signed on behalf of

BGH as its managing member while Kotlarz signed on behalf of Inference as its

32
SAC ¶ 66; SAC, Ex. 7.
33
SAC ¶ 4.
34
Id. ¶ 65; SAC, Ex. 6.
35
SAC, Ex. 6 at 5.
36
SAC ¶ 72; SAC, Ex. 6.
37
SAC ¶ 127; SAC, Ex. 8.

8
managing member.38 The October LOI contemplated that BGH and Inference would

provide $2.5 million to QPhoton in “Bridge Financing” in exchange for Series A

Senior Convertible Preferred Stock.39 This financing was to occur in at least three

tranches: (a) in the first tranche, BGH and Inference would invest $500,000; (b) in

the second tranche, another $500,000 would be funded, payable after 60 days and

only if QPhoton achieved enumerated milestones; and (c) other subsequent tranches

that would be provided “based on mutual agreement of parties pursuant to draw

down requests provided by Dr. Huang, including updates to the business plan and

mutually agreed product and business milestones.”40 In exchange for this

investment, the October LOI provided that BGH and Inference would receive Series

A Preferred Stock in QPhoton.41 The October LOI further provided that, once

funded, the October LOI would constitute an “Investor Financing” under the NPA

that would trigger the conversion of BV’s Notes into equity such that BV Advisory

would hold a 45% equity stake in QPhoton.42 The financing contemplated within

the October LOI valued QPhoton at a post-money valuation of $10 million.43

On July 31, 2022, after QPhoton was acquired by Quantum, BGH and

Inference entered into an Assignment and Assumption Agreement with BV

38
SAC, Ex. 8.
39
Id.
40
Id.
41
Id.
42
Id.
43
Id.

9
Advisory that assigned certain enumerated financial documents related to BGH and

Inference’s investments in QPhoton to BV Advisory.44

5. Quantum and QPhoton Began Merger Discussions

In fall 2021, BV Advisory identified Quantum as a potential counterparty to

acquire QPhoton.45 Initially, Barksdale and Kotlarz led the merger negotiations with

Quantum on behalf of QPhoton.46 On November 10, 2021, Barksdale and Kotlarz

met with some of the Individual Defendants, including Salvani, Osborn, Liscouski,

and McGann.47 At that time, Barksdale and Kotlarz agreed on behalf of QPhoton to

a stock-for-stock merger with an exchange ratio resulting in QPhoton’s stockholders

owning 49% of the post-merger company and Quantum’s stockholders owning the

remaining 51% of the post-merger company.48 These terms were memorialized in a

non-binding merger term sheet that was executed on November 15, 2021 (the

“Merger Term Sheet”).49

6. Negotiations with Barksdale and Kotlarz Break Down

Sometime in November 2021, BV Advisory informed Defendants that BV

Advisory planned on appointing an unnamed individual referred to as the “Former

44
See Transmittal Aff. of Julie M. O’Dell Supp. Pl.’s Answering Br. in Opp’n to Entity Defs.’ and
Individual Defs.’ Mot. to Dismiss, Ex. A, Dkt. No. 68 (the “Assignment and Assumption
Agreement”).
45
SAC ¶ 87.
46
See id. ¶¶ 87–95.
47
Id. ¶ 91.
48
Id. ¶¶ 91–92.
49
Id. ¶ 12.

10
Apple Executive” to the post-merger company’s board of directors.50 Shortly before

Thanksgiving, BV Advisory hosted a videoconference with the Former Apple

Executive, Huang, Liscouski, McGann, and Kotlarz to discuss the prospect of the

Former Apple Executive joining the post-merger company’s board of directors.51

Around this same time, Quantum took out an $8 million loan. 52 When BV

Advisory learned about the loan in December 2021, BV Advisory raised concerns

about Quantum’s acceptance of the loan and Quantum’s subsequent offer to extend

a loan to QPhoton during merger negotiations.53 Thereafter, the Individual

Defendants, on behalf of Quantum, stopped returning BV Advisory’s calls and

instead began to negotiate the potential merger with Stevens and Huang directly.54

By this time, BV Advisory had flagged just two remaining issues to be resolved

before QPhoton could sign a definitive merger agreement: (1) Quantum’s $8 million

loan and (2) a potential reverse break-up fee for the benefit of QPhoton.55

7. Huang Negotiates with Quantum and the Merger is Finalized

On January 2, 2022, Liscouski informed BV Advisory that Quantum was no

longer interested in acquiring QPhoton.56 The next day, however, Huang informed

50
Id. ¶ 97.
51
Id. ¶ 98.
52
See id. ¶ 100.
53
Id. ¶ 102.
54
Id. ¶ 105.
55
Id. ¶ 106.
56
Id. ¶ 108.

11
BV Advisory that Quantum was in fact still interested in consummating a merger.57

At this point, Huang took over the direct negotiations with Quantum, and BV

Advisory was excluded from the discussions.58

During the merger negotiations, Quantum and QPhoton agreed that Quantum

would provide QPhoton with interim financing pursuant to a note purchase

agreement (the “Quantum NPA”).59 Quantum purchased two $1.25 million notes

from QPhoton (the “Quantum Notes”).60 A portion of these proceeds was used to

pay Huang an annual salary of approximately $240,000, when Huang had previously

not received a salary from QPhoton.61

On May 19, 2022, Quantum, QPhoton, Huang, and two Quantum merger

subsidiaries entered into a merger agreement (the “Merger Agreement”).62 The

terms of the Merger Agreement tracked the Merger Term Sheet executed in

November 2021, including that the merger would be a stock-for-stock merger with

QPhoton’s stockholders receiving 49% of the combined company’s outstanding

shares.63 Based upon the closing price of Quantum’s stock on May 26, 2022, the

total cash value of the merger consideration was worth approximately $62.1

57
Id. ¶ 109.
58
Id.
59
Id. ¶ 115.
60
See id. ¶ 35; Quantum’s OB, Ex. J.
61
SAC ¶¶ 115–16.
62
Id. ¶¶ 39, 138.
63
Quantum’s OB, Ex. K at § 3.01(b).

12
million.64 In connection with the merger, Huang was extended an employment

agreement to serve as the Chief Quantum Officer65 (“CQO”) of Quantum.66 As the

CQO, Huang was to receive a $400,000 annual salary and stock options to purchase

up to 400,000 shares of Quantum common stock.67 Huang also received $300,000

worth of Quantum stock awards in connection with the merger.68

Upon learning that the Merger Agreement had been approved, Barksdale

began sending emails objecting to the merger and threatening litigation.69 After

receiving these emails, QPhoton retained Rolnick Kramer Sadighi LLP (“Rolnick

Kramer”) as special counsel to defend against litigation brought in connection with

the merger.70 On May 26, 2022, Huang emailed Pan and Kotlarz to notice a special

board meeting.71 Attached to the email was a proposed board resolution concerning

the formation of a special committee to address any pending or threatened legal

action in connection with the Merger Agreement.72 The next day, QPhoton’s board

of directors held a meeting, at which the special committee (“Special Committee”)

64
SAC, Ex. 10.
65
Chief Quantum Officer: to quote President Biden, “not kidding.”
66
SAC ¶ 133; SAC, Ex. 9.
67
SAC ¶ 133.
68
Id. ¶ 117.
69
Quantum’s OB, Ex. M.
70
Entity Defs.’ and Individual Defs.’ Reply Br. Supp. Mot. Dismiss (“Quantum’s RB”), Ex. A.
71
See SAC ¶ 114; Quantum’s RB, Ex. B.
72
See id.

13
was formed.73 The meeting minutes reflect that Kotlarz was in attendance.74 Kotlarz

explained that his understanding of the Voting Agreement allowed him to serve on

all committees formed by QPhoton’s board of directors.75 Counsel from Rolnick

Kramer explained that, because Kotlarz was the board designee of the stockholder

threatening the litigation to which the Special Committee was formed to respond,

any such provision in the Voting Agreement was waived because Kotlarz’s service

on the Special Committee would be a conflict of interest.76 The formation of the

Special Committee, consisting of Huang and Pan, was approved on May 27, 2022,

with Huang and Pan voting in favor and Kotlarz voting against the resolution.77

With reference to the facts regarding the Special Committee just disclosed,

they are taken from the Complaint, documents referenced therein, and from a

stipulated timeline provided at my request, once I proved unable at oral argument to

comprehend78 a linear account of the facts. Plaintiff agrees in that timeline that the

Special Committee was created post-merger-agreement but does not concede the

purpose I have described above; the timeline, however, belies the assertion of the

Complaint that the purpose of the Special Committee was to exclude Plaintiff’s

73
Quantum’s RB, Ex. A.
74
Id.
75
Id.
76
Id.
77
Id.
78
Not, alas, a unique experience.

14
designee from negotiation of a merger agreement. In conducting my analysis under

Rule 12(b)(6), below, I assume the facts are as I have relayed them here.

8. Merger Closes, QPhoton Pays the BV Notes, and BV Advisory
Seeks Appraisal

On June 2, 2022, QPhoton sent its stockholders a notice of appraisal rights

(the “Notice”).79 The Notice stated that the stockholders would not be issued their

portion of the merger consideration until the stockholders executed and delivered

certain documents, including a joinder agreement (“Joinder Agreement”) whereby

the stockholder agreed to be bound by the terms of the Merger Agreement.80 The

Joinder Agreement also included a general release for the benefit of QPhoton,

Quantum, and their directors and officers.81 BV Advisory did not execute the

Joinder Agreement and did not accept its portion of the merger consideration.82

Instead, BV Advisory filed an appraisal petition in the Court of Chancery.83

On June 16, 2022, the merger between Quantum and QPhoton closed.84 As a

result of the merger, QPhoton became a wholly-owned subsidiary of Quantum.85 In

anticipation of the merger’s closing, Stevens agreed to assign the Licensed Stevens

79
SAC ¶ 160; SAC, Ex. 10.
80
SAC, Ex. 10.
81
Id.
82
SAC ¶ 160.
83
Id.; see also Pet. for Appraisal, BV Advisory P’rs, LLC v. QPhoton, LLC, C.A. No. 2022-0923-
SG, Dkt. No. 1.
84
SAC ¶ 17.
85
Id. ¶¶ 38–39.

15
IP to the post-merger company upon the consummation of the merger.86 Also in

connection with the closing of the merger, QPhoton sent a cashier’s check in the

amount of $535,684.28 to BV Advisory.87 The letter enclosing the cashier’s check

informed BV Advisory that the cashier’s check was paid pursuant to Section 5(d) of

the NPA and was meant to fully satisfy the BV Notes purchased from QPhoton.88

To support the amount paid via the cashier’s check, the letter included the interest

calculations for the BV Notes.89

B. Procedural History

BV Advisory initiated this action on August 15, 2022.90 On December 13,

2022, BV Advisory filed its first amended complaint.91 BV Advisory filed a motion

for leave to file a second amended complaint on March 17, 2023, 92 and I entered a

stipulated order granting the requested leave.93 The second amended complaint (the

“Complaint”) was filed on March 24, 2023.94 The Complaint asserts claims for (1)

breach of the Voting Agreement; (2) breach of the NPA and the BV Notes; (3) breach

86
Quantum’s OB, Ex. O at 9.
87
SAC, Ex. 11.
88
Jan. 12, 2024 Letter from Counsel for the Parties re Requested Timeline (the “Stipulated
Timeline”), Defs.’ Ex. A to Timeline of Allegations in Pl.’s SAC, Dkt. No. 101.
89
Stipulated Timeline, Ex. A.
90
See Verified Compl. for Breach of Fiduciary Duty, Aiding and Abetting, Breach of Contract,
and Other Relief, Dkt. No. 1.
91
See Verified Am. Compl. for Breach of Fiduciary Duty, Aiding and Abetting, Breach of
Contract, and Other Relief, Dkt. No. 39.
92
See Pl.’s Mot. for Leave to File Second Am. Compl., Dkt. No. 56.
93
See Granted (Stipulation and [Proposed]) Order Permitting Filing of Second Am. Compl., Dkt.
No. 60.
94
See SAC.

16
of the October LOI; (4) tortious interference with the Voting Agreement; (5) tortious

interference with the NPA and the BV Notes; (6) tortious interference with the

October LOI; (7) breach of fiduciary duty; (8) aiding and abetting breach of fiduciary

duty; (9) fraudulent transfer; and (10) unjust enrichment.95

Quantum, QPhoton, and the Individual Defendants moved to dismiss counts

I, III–VI, and VIII–X of the Complaint on March 31, 2023, under Rule 12(b)(6).96

There was no motion to dismiss the claim for breach of NPA. The Individual

Defendants also moved to dismiss the claims asserted against them, under Rule

12(b)(2) for lack of personal jurisdiction.97 That same day, the Founders filed a

motion to dismiss the Complaint under Rule 12(b)(6), seeking to dismiss the

fiduciary duty breach claims in Count VII.98 The briefing on the motions to dismiss

was completed on May 19, 2023.99 I heard oral argument on the motions on October

11, 2023.100 At the hearing, I advised the parties I would not consider the matter

submitted until the parties provided the Court with a stipulated timeline of events.101

95
Id. ¶¶ 163–208.
96
See Quantum’s OB.
97
Id. at 48–51.
98
See Founders’ OB.
99
See Quantum’s RB; Reply Br. of Yuping Huang and Xiao Pan Supp. Mot. to Dismiss, Dkt. No.
79 (“Founders’ RB”).
100
See Judicial Action Form re Oral Argument before Vice Chancellor Sam Glasscock dated
10.11.23, Dkt. No. 90.
101
Tr. of 10-11-2023 Oral Argument on Mots. to Dismiss and Mot. to Expedite 49:24–50:7, Dkt.
No. 91.

17
The stipulated timeline was submitted to the Court on January 12, 2024, and I

consider the matter submitted as of that date.102

II. ANALYSIS

While the facts are laid out above in weary detail, I find that a brief

recapitulation of the facts is helpful to orient the reader before analyzing the instant

motions. Put simply, Plaintiff sought to make an investment in QPhoton. To

effectuate that investment, Plaintiff entered into a Voting Agreement with Huang

and QPhoton that caused Huang to increase QPhoton’s board size and appoint

Plaintiff’s designee as a director. Plaintiff’s board designee was to be given the right

to participate in all committees formed by QPhoton’s board of directors. Thereafter,

Plaintiff and QPhoton entered a Note Purchase Agreement whereby Plaintiff could,

and did, purchase $500,000 worth of convertible promissory notes from QPhoton,

which would convert to equity upon an “Investor Financing;” such conversion would

result in BV Advisory owning 45% of QPhoton’s equity. Months later, QPhoton

and affiliates of Plaintiff executed the October LOI that contemplated an “Investor

Financing” of $2.5 million investment in QPhoton, which never materialized. Rights

under this October LOI was allegedly assigned to Plaintiff in July 2022, after

QPhoton’s merger with Quantum.

102
See Stipulated Timeline.

18
Plaintiff’s Complaint centers on that merger. According to Plaintiff, Plaintiff

identified Quantum as a potential merger partner. Plaintiff103 then led the merger

negotiations and entered the Merger Term Sheet with Quantum on behalf of

QPhoton. It was at this time, however, that Plaintiff began to raise concerns about

certain aspects of Quantum’s business. Upon Plaintiff raising these concerns,

Quantum stopped negotiating with Plaintiff and instead negotiated directly with

Huang. Plaintiff alleges Quantum was able to strong-arm Huang into entering an

unfair merger transaction that undervalued QPhoton to the detriment of Plaintiff, and

that QPhoton breached Plaintiff’s contractual right to accelerate the October LOI

“Investor Financing” to acquire 45% of QPhoton’s equity, as promised under the

Note Purchase Agreement. After Huang caused QPhoton to enter the merger

agreement with Quantum, Barksdale threatened to sue; the QPhoton Board then

formed the Special Committee to deal with these threats. Plaintiff’s board designee,

Kotlarz, was excluded from the Special Committee, an act which, per Plaintiff,

breached the Voting Agreement.104

103
I use “Plaintiff” here to designate BV Advisory’s principal, Barksdale, and its nominee to the
QPhoton Board, Kotlarz.
104
The SAC asserts that this Special Committee was formed to exclude Kotlarz from the merger
negotiations. See SAC ¶¶ 36, 113–14. However, in response to my request for the parties to create
a stipulated timeline of facts, Plaintiff now contends that the Special Committee was formed a
week after the merger agreement was signed. See Stipulated Timeline 10. Despite agreeing to
this timeline of events, Plaintiff asserts that the purpose and actual function of the Special
Committee remain disputed issues of fact. See id. at 11 n.8.

19
All defendants have moved to dismiss the Complaint under Rule 12(b)(6) for

failure to state a claim. The Individual Defendants also oppose this Court asserting

personal jurisdiction over them, moving to dismiss the Complaint under Rule

12(b)(2). Before I turn to whether the Complaint states cognizable claims, I will

first deal with the threshold matter of whether this Court has personal jurisdiction

over the Individual Defendants. It is undisputed that none of the Individual

Defendants is a resident of Delaware.

A. Rule 12(b)(2) – Personal Jurisdiction Over the Individual Defendants

“When personal jurisdiction is challenged by a motion to dismiss pursuant to

Court of Chancery Rule 12(b)(2), the plaintiff bears the burden of showing a basis

for the court’s exercise of jurisdiction over the nonresident defendant.”105 “If the

court has not conducted an evidentiary hearing, then a plaintiff ‘need only make a

prima facie showing, in the allegations of the complaint, of personal jurisdiction and

the record is construed in the light most favorable to the plaintiff.’”106 The Court

invokes a two-step test to determine whether it can exercise personal jurisdiction

over a nonresident defendant. “First, the court must consider whether the Delaware

Long Arm Statute applies[.]”107 Second, the Court must conduct a due process

105
Werner v. Miller Tech. Mgmt., L.P., 831 A.2d 318, 326 (Del. Ch. 2003).
106
Harris v. Harris, 289 A.3d 310, 326 (Del. Ch. 2023) (quoting Spring Nextel Corp. v. iPCS,
Inc., 2008 WL 2737409, at *5 (Del. Ch. July 14, 2008)).
107
Werner, 831 A.2d at 326.

20
inquiry to determine if the “nonresident defendant has sufficient minimum contacts

with Delaware” such that she could foresee being haled into our courts.108

The Individual Defendants are not residents of Delaware. They are all

affiliated with Quantum, the acquirer in the merger. The Individual Defendants

consist of Liscouski, Quantum’s CEO, President, and Chairman of the board;

Salvani, a consultant to Quantum; Osborn, a sales consultant for Quantum; McGann,

Quantum’s COO and CTO; Roberts, Quantum’s CFO; and Walsh, a securities

broker who serves a consultant to Quantum.109 Quantum itself is a Delaware

corporation with its principal place of business in Virginia.110 At all relevant times

for purposes of this portion of this analysis, QPhoton was a Delaware corporation

with its principal place of business in New Jersey.111 Plaintiff has but one theory of

jurisdiction; it contends that the Individual Defendants are subject to personal

jurisdiction in Delaware “because they conspired with the Delaware entities and took

actions in Delaware to further their plan to steal from [BV Advisory].”112 The

Individual Defendants may be subject to personal jurisdiction in Delaware under the

conspiracy theory of jurisdiction upon a factual showing that:

(1) a conspiracy to defraud existed; (2) the defendant was a member of
that conspiracy; (3) a substantial act or substantial effect in furtherance

108
Eagle Force Hldgs., LLC v. Campbell, 187 A.3d 1209, 1228 (Del. 2018).
109
See supra Section I.A.1.
110
See id.
111
See id.
112
SAC ¶ 158.

21
of the conspiracy occurred in the forum state; (4) the defendant knew
or had reason to know of the act in the forum state or that acts outside
the forum state would have an effect in the forum state; and (5) the act
in, or effect on, the forum state was a direct and foreseeable result of
the conduct in furtherance of the conspiracy.113

At the motion to dismiss stage, an inference of conspiracy requires that the plaintiff

plead “facts supporting: (i) the existence of a confederation or combination of two

or more persons; (ii) that an unlawful act was done in furtherance of the conspiracy

[in this state]; and (iii) that the conspirators caused actual damage to the plaintiff.”114

The conspiracy theory of jurisdiction “is not an independent jurisdictional

basis.”115 Rather, “it is a shorthand reference to an analytical framework where a

defendant’s conduct that either occurred or had a substantial effect in Delaware is

attributed to a defendant who would not otherwise be amenable to jurisdiction in

Delaware.”116 “[T]he conspiracy theory of personal jurisdiction is very narrowly

construed to prevent plaintiffs from circumventing the minimum contacts

requirement.”117 There must still be a statutory basis for personal jurisdiction over

at least one conspirator before this Court will assert personal jurisdiction over fellow

conspirators.118 Since Delaware’s long-arm statute “confers specific, not general,

113
Istituto Bancario Italiano SpA v. Hunter Eng’g Co., Inc., 449 A.2d 210, 225 (Del. 1982).
114
Harris, 289 A.3d at 339 (citation omitted).
115
Crescent/Mach I P’rs, L.P. v. Turner, 846 A.2d 963, 976 (Del. Ch. 2000)
116
Id. (internal quotations and citation omitted).
117
Morrison v. Berry, 2020 WL 2843514, at *13 (Del. Ch. June 1, 2020) (alterations and quotations
omitted).
118
See Lacey v. Mota-Velasco, 2020 WL 5902590, at *6 (Del. Ch. Oct. 6, 2020).

22
jurisdiction, formation of a Delaware entity may only serve as the basis for personal

jurisdiction where there is a sufficient nexus between that formation and the alleged

wrongful conduct.”119

Plaintiff asserts that the Individual Defendants conspired with Quantum and

QPhoton, both Delaware entities, to exclude Plaintiff from merger negotiations after

Plaintiff began to ask questions about Quantum’s business practices.120 As a result

of this conspiracy to exclude Plaintiff from the merger negotiations, Plaintiff alleges

that the Founders wrongfully retained a 35% interest in QPhoton that Plaintiff asserts

belonged to it.121 According to Plaintiff, in consideration of these ill-gotten gains,

the Founders were willing to enable Quantum to acquire QPhoton for significantly

less than “every valuation to date.”122 Plaintiff contends that the central act that

resulted in the alleged harm Plaintiff suffered was the subsequent merger, which was

structured as a triangular merger that utilized two Quantum subsidiaries, both

Delaware entities.123 Liscouski signed the Merger Agreement on behalf of the two

Quantum subsidiaries.124

119
Lone Pine Res., LP v. Dickey, 2021 WL 2311954, at *5 (Del. Ch. June 7, 2021) (citations
omitted).
120
Pl.’s Answering Br. Opp’n to Entity Defs.’ and Individual Defs.’ Mot. to Dismiss SAC 47–48,
Dkt. No. 68 (“Pl.’s AB Opp’n Quantum’s MTD”).
121
Id. at 48.
122
Id.
123
Id. at 48–49.
124
Id. at 49 n.8.

23
The Individual Defendants submit that the allegations in the Complaint are

insufficient to establish personal jurisdiction over them under the conspiracy theory

of jurisdiction. Specifically, the Individual Defendants assert that the Complaint

fails to plead a meeting of the minds related to any wrongful conduct because

Plaintiff failed to assert any well-pled allegations that the merger negotiations were

anything other than arm’s-length.125 Moreover, according to the Individual

Defendants, the Complaint fails to allege any action taken by any of the Individual

Defendants in furtherance of the alleged conspiracy that occurred in Delaware, let

alone an action that was a vital step in the alleged conspiracy.126 At most, the

Complaint alleges that Liscouski filed a “certificate of merger” with the Delaware

Secretary of State, but that occurred (per the Complaint) on December 16, 2021, at

a time when Plaintiff’s principal, Barksdale, and its board designee Kotlarz, were

still negotiating the merger with Quantum.127 The filing of the Certificate was not

in furtherance of any conspiracy to cut BV Advisory out of the negotiation, in other

words. The QPhoton-Quantum merger did not close until six months later in June

125
Quantum’s OB 49.
126
Id. at 50; Quantum’s RB 28 (citing Reid v. Siniscalchi, 2014 WL 6589342, at *11 (Del. Ch.
Nov. 20, 2014)).
127
See SAC ¶ 42. I suspect the Complaint means to aver that Liscouski filed a Certificate of
Incorporation in Delaware, to create an entity to facilitate the merger. But the then-contemplated
merger is not the subject of the alleged conspiracy; under Plaintiff’s theory, it was not until after
Plaintiff questioned Quantum’s business decisions, during the negotiations, that Plaintiff was
wrongly frozen out of the negotiations. Whatever torts inhere in that action, they are not related
to the filing of the “Certificate of Merger” in Delaware.

24
2022.128 The Individual Defendants contend that the filing of the Certificate in

Delaware, without more and under these facts, cannot form the basis for personal

jurisdiction over them.129 I agree.

While Plaintiff is only required to make a prima facie showing that this Court

can assert personal jurisdiction over the Individual Defendants, Plaintiff has failed

to do so. Throughout the Complaint, Plaintiff summarily states that its exclusion

from the merger negotiation was a “conspiracy.”130 The Complaint, however, does

not allege any action taken by any Individual Defendant or any of their alleged co-

conspirators taken in furtherance of this alleged conspiracy to freeze Plaintiff out of

the merger negotiations, in Delaware. At most, Plaintiff states that the two Quantum

subsidiaries used to effectuate the merger were both Delaware entities. This fact,

standing alone, is insufficient to support an inference that the creation of the

Delaware subsidiaries was a necessary step to complete the conspiracy or done as

part of a wrongful scheme.131 The harm that Plaintiff alleges it suffered did not occur

128
Quantum’s OB 50–51 & n.23. Roberts is also alleged to have filed Quantum’s 2018 amended
articles of incorporation and a November 2021 certificate of designation with the Delaware
Secretary of State. SAC ¶ 54.
129
Quantum’s OB 51.
130
See SAC ¶¶ 15, 18, 28, 31, 112, 119, 144 (asserting that Quantum and the Individual Defendants
conspired with QPhoton and the Founders to harm Plaintiff).
131
See, e.g., Microsoft Corp. v. Amphus, 2013 WL 5899003, at *9 (Del. Ch. Oct. 31, 2013) (finding
personal jurisdiction over a director who proposed the creation of a Delaware entity of which he
would be the founder, director, and CEO and hold a 20% stake in the new entity, representing
threefold increase in his personal interest gained at an unfair price because the director had
purposefully misled his fellow directors to achieve his goal); Virtus Cap. L.P. v. Eastman Chem.
Co., 2015 WL 580553, at *14 (Del. Ch. Feb. 11, 2015) (finding personal jurisdiction over a
defendant who caused the creation of liquidating vehicles to allegedly maintain voting control of

25
because a merger was effectuated using Delaware entities; rather, the harm alleged

by Plaintiff arises from being deprived of its alleged contractual rights under the

Voting Agreement, NPA, and October LOI, once its principals were excluded from

the merger negotiations in early 2022.132 Subjecting any of the Individual

Defendants to personal jurisdiction based on their unspecified actions as buyer’s

agents in the merger would also offend due process.133 Accordingly, I find that this

Court lacks personal jurisdiction over the Individual Defendants.

B. Rule 12(b)(6) – Failure to State a Claim

“On a motion to dismiss, the court applies a plaintiff-friendly standard of

review, under which a plaintiff need only establish that its claims are reasonably

conceivable.”134 However, the Court is only required to accept “well-pleaded factual

allegations in the Complaint” and only draws “reasonable inferences in favor of the

plaintiff.”135 Because Delaware is a notice-pleading jurisdiction, “[a]n allegation,

though vague or lacking in detail, is nevertheless ‘well-pleaded’ if it puts the

an entity in extreme financial distress as part of his efforts to obtain liquidity for another group of
entities that the defendant controlled).
132
See, e.g., SAC ¶¶ 18, 31, 119, 144 (alleging BV Advisory was deprived of its contractual rights).
133
As noted by the Individual Defendants in their reply brief, the Complaint fails to make any
person-by-person allegation as to the actions that the Individual Defendants took in concert to
conspire against Plaintiff. Quantum’s RB 27. This group pleading is impermissible and further
supports dismissal because “there are no well-pled facts to suggest any wrongdoing by [any
individual] defendant.” NuVasive, Inc. v. Miles, 2020 WL 5106554, at *8 (Del. Ch. Aug. 31,
2020).
134
Firefighters’ Pension Sys. of City of Kan. City, Mo. Tr. v. Presidio, 251 A.3d 212, 262 (Del.
Ch. 2021).
135
City of Fort Myers Gen. Emps.’ Pension Fund v. Haley, 235 A.3d 702, 706 (Del. 2020).

26
opposing party on notice of the claim brought against it.”136 However, the Court

should not “accept every strained interpretation of the allegations, credit conclusory

allegations that are not supported by specific facts, or draw unreasonable inferences

in the plaintiff’s favor.”137 A “claim may be dismissed if allegations in the complaint

or in the exhibits incorporated into the complaint effectively negate the claim as a

matter of law.”138

1. Counts I and III: Breach of Contract

“In order to survive a motion to dismiss for failure to state a breach of contract

claim, the plaintiff must demonstrate: first, the existence of the contract, whether

express or implied; second, the breach of an obligation imposed by that contract; and

third, the resultant damage to the plaintiff.”139 “When interpreting a contract,

Delaware courts read the agreement as a whole and enforce the plain meaning of

clear and unambiguous language.”140 “[A] contract’s construction should that which

would be understood by an objective, reasonable third party.”141

136
VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 611 (Del. 2003).
137
City of Fort Myers Gen. Emps.’ Pension Fund, 235 A.3d at 706; see also Crescent/Mach I P’rs,
L.P., 846 A.2d at 972 (the Court must “disregard allegations which are merely conclusory and lack
factual support.”).
138
Malpiede v. Townson, 780 A.2d 1075, 1083 (Del. 2001).
139
VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003).
140
Manti Hldgs., LLC v. Authentix Acq. Co., 261 A.3d 1199, 1208 (Del. 2021).
141
Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010).

27
a. Count I: Breach of the Voting Agreement

Plaintiff alleges that QPhoton and Huang breached the Voting Agreement by

proceeding with merger negotiations and the subsequent merger transaction without

informing BV Advisory’s board designee, Kotlarz; forming the Special Committee

(sans Kotlarz) to proceed with a potential merger; and excluding Kotlarz from all

information and governance decisions involved in entering the Merger Agreement

and closing the merger.142 In response, QPhoton and Huang assert that Section 1.7

of the Voting Agreement is not a self-executing provision; the Voting Agreement

requires Huang to cause QPhoton to put in place a three-director board, and that one

of those directors be BV Advisory’s designee. This provision was complied with.

Defendants also argue BV Advisory’s board designee had a right to affirmatively

seek appointment to any board committees, which the Complaint does not

adequately plead Kotlarz sought to do with respect to the Special Committee,143 and

points out that the only “special committee” formed was created after the merger

agreement was entered, to deal with Barksdale’s litigation threats. QPhoton and

Huang also contend that the Voting Agreement only obligated Huang to cause

Kotlarz to be appointed to QPhoton’s board of directors; it did not provide BV

142
Pls.’ AB Opp’n Quantum’s MTD 22–23.
143
Quantum’s OB 23.

28
Advisory with information rights.144 The two sections of the Voting Agreement that

undergird Count I are Sections 1.7 and 2.1.145

i. Section 1.7 of the Voting Agreement

Section 1.7 is entitled “Board Committees” and states: “The BV Advisory

Director shall be entitled in such person’s discretion to be a member of any Board

committee.”146 Plaintiff alleges that QPhoton and Huang formed the Special

Committee for one purpose: to exclude Kotlarz from merger negotiations with

Quantum.147 According to the Complaint, neither Plaintiff nor Kotlarz learned of

the Special Committee until May 26, 2022, a week after the Merger Agreement was

executed.148 Upon learning of the Special Committee, Plaintiff objected to Kotlarz’s

exclusion.149

Under the incorporation-by-reference doctrine, at the pleading stage, “the

Court may consider . . . documents that are ‘integral’ to the complaint” and those

documents that are incorporated by reference in the complaint.150 Since the

formation of the Special Committee is a key aspect of BV Advisory’s breach of

contract claim as it pertains to Section 1.7 of the Voting Agreement, I will consider

144
Id. at 24.
145
Pls.’ AB Opp’n Quantum’s MTD 23–26.
146
SAC, Ex. 5 § 1.7 (emphasis added).
147
Pls.’ AB Opp’n Quantum’s MTD 23.
148
Id.
149
Id. at 24.
150
Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 860 A.2d 312, 320 (Del. 2004).

29
the meeting minutes for the board meeting during which the Special Committee was

formed.151 The meeting minutes for the special meeting of QPhoton’s board of

directors (the “Meeting Minutes”) states that Huang, Pan, and Kotlarz were all in

attendance at the May 27, 2022 board meeting.152 Per the agenda for the special

meeting, QPhoton’s board of directors considered and voted on whether to form a

special committee of the board.153 The Meeting Minutes further reflect that Kotlarz

was present for and voted against the formation of the Special Committee.154

The Meeting Minutes confirm Plaintiff’s allegation that neither Plaintiff nor

Kotlarz knew of the Special Committee before May 26, 2022; that is because, as the

Meeting Minutes also reflect, the Special Committee had not yet been considered,

voted on, or formed until May 27, 2022.155 Plaintiff cannot succeed on their breach

of contract claim for QPhoton’s alleged failure to inform Plaintiff or Kotlarz of the

existence of the Special Committee because Plaintiff and Kotlarz were informed

prior to the creation of the Special Committee, an act that Kotlarz himself voted

151
I also note that Plaintiff has seemingly acquiesced to my consideration of the meeting minutes
because Plaintiff has not objected to the minutes’ inclusion in the Stipulated Timeline. Plaintiff’s
objection in the Stipulated Timeline is limited to what the true purpose and actual function of the
Special Committee were; however, Plaintiff failed to plead and brief this aspect of their claim.
Compare Stipulated Timeline 11 n.8, with SAC ¶¶ 163–68, and Pl.’s AB Opp’n Quantum’s MTD
23–24.
152
Quantum’s RB, Ex. A.
153
Id.
154
Id.
155
Id.

30
against.156 Plaintiff’s core argument is that Kotlarz was denied a seat on the Special

Committee, which allowed the Special Committee to negotiate an unfair merger

without Plaintiff’s involvement, via Kotlarz, in violation of BV Advisory’s

contractual right. At oral argument on the motion to dismiss, it became clear that

the parties were in fundamental disagreement about the timing and purpose of the

formation of the Special Committee. I asked the parties to stipulate to a timeline,

which they helpfully did. This shows that Plaintiff’s assertion that the Special

Committee was formed to negotiate the merger with Quantum cannot be well-pled:

Plaintiff also alleges that Quantum and QPhoton had already executed the Merger

Agreement on May 19, 2022, a week prior to the board resolution that formed the

Special Committee.157 It is unreasonable to infer that the Special Committee, created

after the Merger Agreement was executed, was intended to freeze Plaintiff and

Kotlarz out of the merger negotiations. To the extent that Count I relies on a breach

of Section 1.7 of the Voting Agreement, Plaintiff has failed to state a cognizable

claim for breach of contract.

ii. Section 2.1 of the Voting Agreement

Section 2.1 of the Voting Agreement is entitled “Covenants of the Company”

and provides the following:

156
Id.
157
Compare SAC ¶ 113, with SAC ¶ 39.

31
The Company agrees to use its best efforts, within the requirements of
applicable law, to ensure that the rights granted under this Agreement
are effective and that the parties enjoy the benefits of this Agreement.
Such actions include, without limitation, the use of the Company’s best
efforts to cause the nomination and election of the directors as provided
in this Agreement.158

Plaintiff contends that QPhoton breached Section 2.1 of the Voting

Agreement by failing to use its best efforts to ensure that Plaintiff’s rights to

participate in QPhoton’s governance through its appointed director were

effectuated.159 Specifically, Plaintiff asserts that Kotlarz was cut out of QPhoton’s

governance decisions because QPhoton failed to provide Kotlarz with information

that he was entitled to as a director.160 QPhoton and Huang aver that the Voting

Agreement only obligated Huang to cause Kotlarz to be appointed as a director to

QPhoton’s board of directors, which Huang did.161

Plaintiff is correct that as a director of a Delaware corporation, Kotlarz had

statutory rights to receive information under 8 Del. C. § 220 and could assert his

rights thereunder if he was not receiving the information to which he was statutorily

entitled.162 However, the Voting Agreement could have, but did not, provide

158
SAC, Ex. 5 § 2.1.
159
Pl.’s AB Opp’n Quantum’s MTD 24.
160
Id. at 24–26.
161
Quantum’s OB 24.
162
See Chammas v. NavLink, Inc., 2016 WL 767714, at *6 (Del. Ch. Feb. 1, 2016) (explaining
that, as a fiduciary to the corporation, a director has “virtually unfettered” access to the
corporation’s books and records in order to fulfill their fiduciary obligations owed to the
corporation).

32
Plaintiff with information rights consonant with or beyond those of any director.

Neither did the Voting Agreement grant Plaintiff standing to assert Kotlarz’s

information rights as a director. The Voting Agreement gave Plaintiff the right to

have its director nominee appointed to QPhoton’s board of directors, which he was.

Plaintiff cannot assert statutory rights to information that belong to Kotlarz, rather

than Plaintiff itself.163 While Section 2.1 of the Voting Agreement provides that

QPhoton would use its best efforts to ensure “the rights granted under” the Voting

Agreement, the Voting Agreement did not provide Plaintiff the right to participate

in merger negotiations.164 To the extent Plaintiff’s breach of contract claim relies

upon its allegations of a breach of Section 2.1 of the Voting Agreement, Plaintiff has

failed to state a claim.

Plaintiff has failed to state a claim for breach of the Voting Agreement.

Accordingly, Count I is dismissed.

I note that a breach of duty claim against two of the three members of the

QPhoton Board survives the motion to dismiss, as discussed infra. The fact that I

have dismissed this contract claim based on the allegations that Kotlarz was

163
See Latesco, L.P. v. Wayport, Inc., 2009 WL 2246793, at *9 n.33 (Del. Ch. July 24, 2009)
(information rights “are routinely negotiated for, and are not a proper subject for a claim for breach
of” contract claim. “Absent contractual information rights, the stockholder must rely on 8 Del. C.
§ 220 as a basis for rights to certain information.”)
164
See, e.g., Huff Energy Fund, L.P. v. Gershen, 2016 WL 5462958, at *10–11 (Del. Ch. Sept. 29,
2016) (dismissing a claim for breach of contract based on a comparable provision in a shareholders
agreement where plaintiff did not allege that the contract provided for the “right” in question).

33
excluded from the merger negotiations does not exclude these allegations from

consideration as a part of the breach of duty cause of action, as appropriate.

b. Count III: Breach of the October LOI

Plaintiff next asserts that QPhoton breached the October LOI by refusing to

honor Plaintiff’s rights to purchase equity, despite Plaintiff being ready, willing, and

able to fund the October LOI.165 Plaintiff, BV Advisory, was not a party to the

October LOI, however. QPhoton advances two arguments in favor of dismissing

Count III, arguing that (a) BV Advisory lacks standing to enforce the October LOI;

and (b) QPhoton did not breach an obligation contained in the October LOI.166

The parties to the October LOI are QPhoton, BGH, and Inference.167 The

October LOI contemplated that BGH and Inference (the “Investors”) would invest

$2.5 million in QPhoton in exchange for Series A Senior Convertible Stock, to be

funded in a series of at least three tranches.168 The first two tranches are each for

$500,000 and any subsequent tranches were to be based on mutual agreement of the

parties to the October LOI pursuant to requests made on behalf of QPhoton by

Huang.169 The October LOI also provides that “[t]he full $2,500,000 Bridge

165
SAC ¶ 175.
166
Quantum’s OB 25–31; Quantum’s RB 7 n.3 (dropping its argument that the October LOI was
not a contract because of lack of acceptance as Plaintiff has produced a fully executed version of
the October 2021).
167
See SAC, Ex. 8.
168
Id.
169
Id.

34
Financing Round will be at a post-money valuation of $10,000,000 . . . and any

remaining tranches of the investment round may be accelerated at any time at the

sole discretion of Investors at this agreed post money valuation.”170 “Investors” is a

defined term that includes BGH, Inference, and “a group of certain Qualified

Investors [(the “Investors”)], individually or through BGI Finance Corp., a special

purpose vehicle[.]”171 It does not include Plaintiff. None of the Investors is a party

to this litigation.

Plaintiff alleges, and a plaintiff-friendly reading would support,172 that the

Investors had the right to initiate the timing of financing of the October LOI. The

Complaint is silent to the Investors’ attempts to fund the October LOI, however.

Instead, the Complaint alleges that BV Advisory, a non-party to the October LOI,

repeatedly attempted to exercise the Investors’ rights under the October LOI. BV

Advisory points out that it is the beneficiary of the Assignment and Assumption

agreement it entered with the Investors. Its attempts to exercise rights under the

October LOI, however, occurred in December 2021 and continued into January

2022, starting and ending well before the Assignment and Assumption Agreement

was executed, in July 2022.173 There are no non-conclusory allegations in the

170
Id.
171
Id.
172
Defendants read the contract differently; given my decision here, I need not address the dispute.
173
See SAC ¶¶ 127, 142–43.

35
Complaint that BV Advisory had the authority to exercise rights belonging to the

Investors. Plaintiff has not adequately alleged that QPhoton refused to cooperate

with the Investors, nor are there any other allegations that QPhoton frustrated the

Investors’ rights under the October LOI before the merger. Plaintiff has not alleged

that the October LOI survived the merger.174 In fact, Plaintiff’s whole theory for this

claim is that the merger terminated the rights under the October LOI, in frustration

of the Investors’ purpose when entering the October LOI.

Subsequent to the merger, Plaintiff alleges it received the assignment of the

Investors’ rights under the October LOI. Plaintiff alleges that, while it was not an

original party to the October LOI, BGH and Inference assigned their rights under the

October LOI to Plaintiff pursuant to the Assignment and Assumption Agreement on

July 31, 2022.175 Even assuming that such a post-merger assignment is relevant

here, there are discrepancies between the Assignment and the rights Plaintiff seeks

now to vindicate. The Assignment and Assumption Agreement refers to BGH and

Inference together as “the Assignor;” BV Advisory as “Assignee”; and QPhoton as

“Borrower,” “Guarantors,” and “Debtors.”176 It further defines “Notes” as two

174
Nowhere does Plaintiff assert that the October LOI is still an executory contract.
175
SAC ¶¶ 10 n.2, 127.
176
Assignment and Assumption Agreement 1–2. Because Plaintiff relies on the Assignment and
Assumption Agreement to establish its standing to enforce the October LOI, the incorporation by
reference doctrine allows me to review the Assignment and Assumption Agreement to confirm
that this agreement states what Plaintiff purports that it does.

36
“Convertible Promissory Debenture[s] due March 21, 2023.”177 The Assignment

and Assumption Agreement provides in its recital that:

the Assignor is the holder and beneficial owner of a binding Letter of
Intent to invest $2,500,000 in the form of convertible promissory
notes/debentures and common shares of QPhoton, Inc. dated and signed
on October 30, 2021 identified in Section 7 below (each a “Note” and/or
“Shares” . . . ) of Borrower [ ], each of which Notes was purchased by
Assignor pursuant to a Securities Purchase Agreement dated as of
March 21, 2021 between Borrower, the Assignor, and the other Persons
. . . .178

While the Assignment and Assumption Agreement references “a binding

Letter of Intent to invest $2,500,000 . . . dated and signed on October 30, 2021,” the

description of the security to be acquired thereunder is in “the form of convertible

promissory notes/debentures and common shares of QPhoton.” This differs from

the October LOI itself, which Plaintiff seeks to enforce, in that the October LOI

states that the security to be acquired would take the form of Series A Senior

Convertible Stock.179 This discrepancy is compounded because the securities

identified in Section 7 of the Assignment and Assumption Agreement are listed as

two debentures, each valued at $1,250,000, due on March 21, 2023; one is allegedly

177
Id. at 2.
178
Id. at 1.
179
SAC, Ex. 8.

37
held by BGH and the other is held by Inference.180 These debentures are not

reflected in the October LOI.181

Exacerbating these discrepancies, Exhibit A attached to the Assignment and

Assumption Agreement lists the financing documents that were to be reassigned

from BGH and Inference to BV Advisory.182 The list is limited to:

[(1)] Securities Purchase Agreement, between QPhoton, Inc., (the
“Company”), and purchase agreements other investors each purchaser
identified on the signature pages thereto [ ][; (2)] Schedules to the
Securities Purchase Agreement or Notes[; (3)] Original Issue
Convertible Promissory Debenture of the Company due March 21
2023[; (4)] Debenture Schedules[; (5)] Registration Rights Agreement
among the Company and the Purchasers. [(6)] Secretary’s Certificate,
executed by the Company[; and (7)] Officers’ Certificate, executed by
the Company[.]183

By its own terms, the Assignment and Assumption Agreement did not transfer

BGH and Inference’s rights under the October LOI to Plaintiff. Plaintiff’s position

is frustrated by the fact that there are fundamental discrepancies between the

Assignment and Assumption Agreement and the October LOI itself. I need not rely

on these discrepancies in dismissing this claim, however. Plaintiff’s allegation of

being “ready, willing, and able” to go forward is insufficient to state a claim for

breach of the October LOI in the face of the failure to allege that the Investors took

180
Assignment and Assumption Agreement § 7.
181
See SAC, Ex. 8.
182
Assignment and Assumption Agreement, Ex. A.
183
Id.

38
any initiative to exercise those rights. Until that occurred, there was no duty on

QPhoton’s part, and thus a claim for the breach of the October LOI has not been

stated. Therefore, Count III for breach of the October LOI is dismissed.

Again, I note that a breach of fiduciary duty claim survives the motion to

dismiss. Nothing in this dismissal of the October LOI contract claim precludes any

consideration of the facts surrounding the treatment of Plaintiff’s attempt to exercise

rights under the October LOI in that equitable claim, as appropriate. Likewise, the

claim for breach of the NPA and the BV Notes in Count II is not subject to motions

to dismiss: Plaintiffs are not precluded from arguing or demonstrating that the

existence of the October LOI or its treatment by the parties is relevant to whether an

Investor Financing event occurred under the NPA, or is otherwise pertinent to its

NPA claim.

2. Counts IV–VI: Tortious Interference with Contract

Plaintiff next asserts three claims for tortious interference with three separate

contracts. To state a claim for tortious interference with a contract, a plaintiff must

plead that “(1) there was a contract, (2) about which the particular defendant knew,

(3) an intentional act that was a significant factor in causing the breach of contract,

(4) the act was without justification, and (5) it caused injury.”184 “Knowledge of the

contract itself is insufficient to establish a tortious interference claim; the actor must

184
WaveDivision Hldgs., LLC v. Highland Cap. Mgmt., L.P., 49 A.3d 1168, 1174 (Del. 2012).

39
also intend to interfere.”185 To establish intent to tortiously interfere with a contract,

plaintiff must plead at least “‘an interference that is incidental to the actor’s

independent purpose and desire but known to him to be a necessary consequence of

his action.’”186

“[W]here the claim for the underlying breach of contract has been dismissed,

a claim for tortious interference with the same contract must also be dismissed.”187

Because I have dismissed Counts I and III for failure to state a claim for breach of

the Voting Agreement and the October LOI, respectively,188 Counts IV and VI must

also be dismissed because there is no underlying breach to support Plaintiff’s claims

for tortious interference with the Voting Agreement and the October LOI,

respectively. Plaintiff’s remaining claim for tortious interference with a contract is

Count V, which pertains to the NPA and BV Notes.189

Plaintiff alleges that Quantum and Pan knew of the existence of the NPA and

BV Notes but tortiously interfered with QPhoton’s performance under these

185
NAMA Hldgs., LLC v. Related WMC LLC, 2014 WL 6436647, at *28 (Del. Ch. Nov. 17, 2014)
(internal quotations omitted).
186
Id. (quoting RESTATEMENT (SECOND) OF TORTS § 766 cmt. j; accord Grunstein v. Silva, 2009
WL 4698541, at *16 (Del. Ch. Dec. 8, 2009)).
187
Fletcher Int’l, Ltd. v. ION Geophysical Corp., 2011 WL 1167088, at *6 (Del. Ch. Mar. 29,
2011).
188
See supra Section II.B.1.
189
I note that Quantum and the Founders did not move to dismiss Count II, which is the underlying
breach of contract related to the NPA and BV Notes. Quantum OB 9 (explaining that the parties
did not move to dismiss Count II because those parties believe that “discovery will show that
QPhoton tendered payment in full.”).

40
contracts by, inter alia, failing to pay the “Corporate Transaction Conversion

Amount,” with no justification, causing Plaintiff no less than $13 million in injury.190

Quantum and Pan contend that Plaintiff has failed to plead that these Defendants

engaged in any intentional act that was a significant factor in causing a breach of the

NPA and BV Notes.191

Plaintiff points to five allegations in the Complaint as sufficient to allege that

Quantum and Pan intentionally interfered with Plaintiff’s rights under the NPA and

BV Notes.192 These allegations fall into two theories: first, that Quantum and Pan

collaborated to freeze Plaintiff out of the merger negotiations to strike a deal that

would circumvent Plaintiff’s rights under the NPA, as evidenced by Quantum and

Pan ignoring Plaintiff’s attempts to exercise its rights under the NPA and the October

LOI to purchase $2.5 million in Series A Senior Convertible Stock that would grant

Plaintiff a 45% stake in QPhoton.193 The second theory is that Quantum refused to

cause QPhoton to honor Plaintiff’s “right” to a 45% interest in QPhoton and refused

190
SAC ¶¶ 182–85.
191
Quantum’s OB 32, 34. Pan is a director, and is not liable for causing QPhoton’s breach of
contract. See Goldman v. Pogo.com, Inc., 2002 WL 1358760, at *8 (Del. Ch. June 14, 2002)
(internal alterations, citations, and quotations omitted) (emphasis added) (explaining that “it is also
generally accepted that . . . directors may be held personally liable for tortious interference with a
contract of the corporation if and only if they exceed the scope of their agency in so doing”); see
also Dieckman v. Regency GP LP, 2018 WL 1006558, at *5 (Del. Ch. 20, 2018) (“Simply alleging
that . . . [a] director caused his company to breach its contract, . . . without more, is insufficient for
a tortious interference claim.”).
192
Pl.’s AB Opp’n Quantum’s MTD 34–35.
193
SAC ¶¶ 14, 16, 119.

41
to pay Plaintiff $13 million, the value Plaintiff asserts it is owed as the “Corporate

Transaction Conversion Amount” promised in the NPA.194

The problem with the first theory against Quantum and Pan is that it is entirely

conclusory. Plaintiff’s allegation of a conspiracy among all defendants is made

frequently and vehemently throughout the Complaint, but only in a conclusory way.

Plaintiff fails to aver how the merger’s structure was manipulated so as to frustrate

Plaintiff’s contract rights. It does not suggest a merger structure that would have

vindicated those rights, and how either party intentionally avoided it. In fact, in its

breach of contract claim, as I understand it, Plaintiff avers it will show that those

rights arising under the NPA are still enforceable. It does not allege specific acts by

specific Defendants.

This is, of course, a notice pleading jurisdiction. A plain statement that puts

the defendant on notice of the claim is sufficient. But this pleading fails that most

basic of thresholds. “Even in an era of notice pleading, conclusory allegations of

conspiracy have regularly been rejected.”195 While Plaintiff states that Quantum and

Pan “collaborated to freeze [Plaintiff] out of merger negotiations,” this allegation is

conclusory and, more fundamentally, is not a breach of either the NPA or the BV

194
Id. ¶ 145.
195
Greenfield v. Tele-Commc’ns, 1989 WL 48738, at *3 (Del. Ch. May 10, 1989) (dismissing
claim for failure to plead civil conspiracy where plaintiff alleged that a merger agreement was a
“plan and scheme”).

42
Notes. Furthermore, Plaintiff has not explained how any action taken by Quantum

and Pan were an intentional act that played a significant role in the alleged breach of

the NPA by QPhoton.196 At best, Plaintiff alleges that unnamed Defendants

encouraged QPhoton to breach its obligations; this is quintessential conclusory

pleading. Plaintiff asserts that Pan was involved in the formation of the Special

Committee with the specific intent of excluding Plaintiff’s board designee from

negotiating the merger, thereby depriving Plaintiff of its contractual rights under the

NPA.197 Again, this is contradicted by the fact that the Special Committee was

formed a week after the Merger Agreement was finalized by Quantum and

QPhoton.198

Plaintiffs second theory is that QPhoton failed to pay the correct amount owed

to Plaintiff under the NPA after consummating the merger. If true, this supports a

claim for breach of contract, which is not the subject of the motion to dismiss and

for which this litigation will proceed. While Plaintiff avers in the Complaint that

Quantum failed to cause QPhoton to pay the amount Plaintiff contends it is owed,

Plaintiff clarified in its answering brief that Plaintiff is referring to Quantum’s

actions, pre-merger, that, at most, continued after the merger.199 Plaintiff has simply

196
See Pl.’s AB Opp’n Quantum’s MTD 34–35 (summarizing the allegations without arguing how
these allegations support a reasonable inference that the allegations were intentional acts that were
a significant factor in QPhoton’s alleged breach).
197
Id. at 17.
198
SAC ¶ 39; Quantum’s RB, Ex. A; Stipulated Timeline 11–12.
199
Pl.’s AB Opp’n Quantum’s MTD 36.

43
failed to allege an action by which Quantum was a significant factor causing

QPhoton to breach the NPA. Accordingly, Plaintiff has failed to adequately allege

that Quantum or Pan tortiously interfered with the NPA and BV Notes. Count V is

dismissed.

3. Counts VII–VIII: Fiduciary Duty Claims

a. Count VII: Breach of Fiduciary Duty

In Count VII, Plaintiff contends that the Founders breached their fiduciary

duties of care and loyalty owed to Plaintiff by failing to retain professionals to assist

QPhoton in the merger negotiations; failing to obtain an independent valuation of

QPhoton; failing to obtain a fairness opinion for the Merger; excluding Kotlarz from

the merger negotiations; accepting a loan from Quantum; negotiating post-merger

employment in the post-merger combined entity on behalf of Huang; and approving

the merger.200 Plaintiff argues that the merger was a conflicted transaction that

should be reviewed under the entire fairness standard, thereby precluding

dismissal.201

“Delaware’s default standard of review is the business judgment rule[.]”202 A

plaintiff bringing suit, however, may rebut the presumption of business judgment if,

for example, the plaintiff adequately alleges that the corporation’s controlling

200
Id. ¶ 191.
201
Pl. BV Advisory’s Answering Br. Oppp’n Huang and Pan’s Mot. to Dismiss the SAC 4–10,
Dkt. No. 69 (“Pl.’s AB Opp’n Founders’ MTD”).
202
In re MultiPlan Corp. S’holders Litig., 289 A.3d 784, 809 (Del. Ch. 2022).

44
stockholder has engaged in a conflicted transaction.203 Where a controlling

stockholder stands on only one side of the transaction, the transaction is considered

conflicted if the controlling stockholder “receives a unique benefit by extracting

something uniquely valuable to the controller, even if the controller nominally

receives the same consideration as all other stockholders to the detriment of the

minority.”204

Plaintiff avers that the Founders received a “panoply” of consideration at

Plaintiff’s detriment.205 That panoply, according to Plaintiff, consists primarily of

(1) the Founders’ allegedly wrongful retention of a 35% equity stake in QPhoton

that Plaintiff asserts belonged to it under the terms of the NPA as it would have been

triggered under October LOI, and (2) Huang’s post-merger employment and related

compensation package.206 In response, the Founders argue (1) the October LOI was

unrelated to the merger and an alleged breach thereof cannot be conflated with a

breach of fiduciary duty; (2) Plaintiff is estopped from asserting Huang is interested

in the merger based on his post-merger employment because Plaintiff knew of and

agreed to Huang receiving post-merger employment; (3) even if Plaintiff is not

estopped, Huang’s employment agreement does not amount to a disabling interest;

203
Id.
204
Id. at 810.
205
Pl.’s AB Opp’n Founders’ MTD 6.
206
Id. at 6–10.

45
and (4) given Huang’s large equity holdings in QPhoton, his interests were aligned

with that of the minority.207

Plaintiff cannot state a claim for breach of fiduciary duty with respect to

Plaintiff’s contention that the Founders wrongfully retained the 35% equity stake in

QPhoton that Plaintiff asserts rightfully belongs to it. Plaintiff’s claim to this 35%

equity stake arises solely from the contractual relationship between Plaintiff and

Huang and QPhoton, as laid out in the NPA and the October LOI. Whether the

Founders wrongfully retained equity in QPhoton that belonged to Plaintiff under

such agreements would be subject to a breach of contract analysis, not a breach of

fiduciary duty analysis.208 As such, to the extent Plaintiff’s breach of fiduciary duty

claim relies on the Founders’ alleged breaches of the NPA and the October LOI,

such claim is properly dismissed as impermissible bootstrapping.

Plaintiff next contends that the merger was a conflicted transaction because

Huang received post-merger employment that was accompanied by a compensation

package consisting of (a) a $400,000 annual salary; (b) a stock issuance upon the

merger’s close worth $300,000; (c) a potential cash bonus worth up to $120,000; (d)

an option to purchase an additional 400,000 shares in Quantum with accelerated

207
Founders’ OB 4–10; Founders’ RB 9–10.
208
See Nemec v. Shrader, 2009 WL 1204346, at *4 (Del. Ch. Apr. 30, 2009), aff’d, 991 A.2d 1120
(Del. 2010) (internal quotations omitted) (explaining that where “the fiduciary claims relate to
obligations that are expressly treated by contract then this Court will review those claims as breach
of contract claims and any fiduciary claims will be dismissed.”).

46
vesting; (e) severance payments equal to one year’s salary; (f) unlimited fully-paid

annual leave; (g) full expense reimbursement; and (h) fringe benefits including

various insurance plans and retirement accounts.209 In response, the Founders note

that Huang held over 80% of the QPhoton’s common stock, thereby that aligning his

interests with Plaintiff, a minority stockholder.210 Moreover, the Merger Term Sheet

that Plaintiff itself negotiated on behalf of QPhoton in November 2021 contemplated

that Huang would receive a post-merger employment agreement.211

“Stockholders generally are presumed to have an incentive to seek the highest

price for their shares.”212 This “presumption is even stronger in the case of large

stockholders.”213 While Plaintiff seeks to have the Court infer that Huang was

“bribed” with post-merger employment and its related compensation package,

Plaintiff has not alleged any theories or facts under which I should ignore Huang’s

ownership of a majority QPhoton stock and his self-interested incentive to maximize

his stock’s value in the merger, in evaluating whether he received a non-ratable

benefit. To accept Plaintiff’s assertion would require the Court to infer that Huang

209
Pl.’s AB Opp’n Founders’ MTD (citing SAC ¶ 133).
210
Founders’ OB 7–8; Founders’ RB 5–6.
211
SAC ¶ 94; SAC, Ex. 9 at 3.
212
In re Crimson Expl. Inc. S’holder Litig., 2014 WL 5449419, at *17 (Del. Ch. Oct. 24, 2014).
213
Id. (declining to apply entire fairness where a plaintiff failed to allege persuasive facts or
theories as to why a 33.7% stockholder would approve a merger “against their self-interests
incentives as stockholders to maximize value.”); see also In re CompuCom Sys., Inc. S’holders
Litig., 2005 WL 2481325, at *6 (“as the owner of a majority share, the controlling shareholder’s
interest in maximizing value is directly aligned with that of the minority.”)

47
acted against his own economic interests by leaving tens millions of dollars in

merger consideration at the bargaining table in favor of an employment agreement,

the value of which is not material in comparison.214 Such an inference is

unreasonable. Accordingly, Plaintiff has not sufficiently alleged that the Founders

received a non-ratable benefit from the merger to the detriment of Plaintiff.

Thus, Plaintiff has not alleged that the merger was a conflicted transaction that

requires this Court to apply the entire fairness standard of review to the merger, with

respect to the claims of breach of the duty of loyalty by Huang and Pan as interested

fiduciaries.215

That does not end the analysis, however. Huang and Pan were directors of

QPhoton. They have not pled the existence of an exculpation clause. Huang was

also the CEO and corporate controller. He and Pan took over the merger negotiations

once Plaintiff raised concerns about Quantum’s actions. Per the Complaint, Huang

and Pan did not cause QPhoton to obtain competent, non-conflicted professionals to

assist QPhoton in the merger negotiations, nor did they cause QPhoton to obtain a

214
According to Plaintiff’s theory, Quantum “bribed” Huang into accepting an artificially-low
valuation of QPhoton of $62 million when Plaintiff valued QPhoton between $100 and $210
million. See SAC ¶¶ 11, 17, 92, 96, 137, 139, 145. If I were to accept Plaintiff’s valuations as
true, Huang would be positioned to receive an additional $18 million to as much as $106 million
in merger consideration, in return for a $400,000 annual salary. Plaintiff has not explained why
Huang would thus act against his own economic interest to maximize his portion of the merger
consideration. See Pl.’s AB Opp’n Founders’ MTD 7–10.
215
See Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984).

48
fairness opinion for the merger. Allegedly, they did not keep their fellow director,

Kotlarz, informed of negotiations.

Has Plaintiff stated a claim for breach of the fiduciary duty, at least with

respect to the duty of care? If so, per Defendants, the claim is underwhelming, given

the fact that Plaintiff itself shared financial data with Huang and QPhoton, 216 the

merger agreed to was stock-for-stock at the same ratio proposed in Plaintiff’s own

term sheet, and the October LOI suggested a valuation far more modest than the

merger consideration. Given the allegations, however, I cannot say at the pleadings

stage that Huang and Pan were not grossly negligent. That will require a record.

The allegations are sufficient, and the motion to dismiss the Count VII is denied.

b. Count VIII: Aiding and Abetting Breach of Fiduciary Duty

Plaintiff contends that Quantum aided and abetted the Founders’ breach of

fiduciary duty. To state a claim for aiding and abetting of fiduciary duty, a plaintiff

must allege “(i) the existence of a fiduciary relationship, (ii) a breach of the

fiduciary’s duty, (iii) knowing participation in the breach, and (iv) damages

proximately caused by the breach.”217 The aiding and abetting claim must, under

these facts and to be viable, allege that Quantum knew that Huang was acting with

gross negligence or disloyalty, and that Quantum, with scienter, caused Huang to

216
SAC ¶ 125.
217
In re Dole Food Co. S’holder Litig., 2015 WL 5052214, at *4 (Del. Ch. Aug. 27, 2015).

49
breach his duties. The actual pleading is entirely conclusory—Plaintiff repeats its

allegation that the Quantum and its fiduciaries conspired with QPhoton to cause

Huang and Pan to breach as fiduciaries, and is once again silent as to the details of

the conspiracy. A successful pleading must aver with specificity how each

defendant participated in the breach, with scienter. By contrast, the Complaint fails

to plead specific facts that, if true, demonstrate less than an arms-length negotiation.

Plaintiff does allege that Quantum quit negotiation with BV Advisory

personnel in favor of negotiating with Huang, the CEO, Chairman, founder and

controller of QPhoton.218 This occurred as negotiations with BV Advisory stalled

because Barksdale questioned the $8 million in debt taken out by Quantum. I assume

Quantum took this action because they believed negotiating with Huang would lead

to a more favorable outcome for Quantum than negotiating with Barksdale.

Standing alone, however, this falls short of a sufficient allegation of aiding and

abetting. Accordingly, Count VIII for aiding and abetting a breach of fiduciary duty

must be dismissed.

218
The facts alleged in the Complaint are deficient in comparison to the facts resulting in a finding
of liability for aiding and abetting in In re Columbia Pipeline Group. In that case, the acquirer
was aware that CEO and CFO of the target entity held personal motivations to complete a sale of
the entity by a date certain. In re Columbia Pipeline Group, 299 A.3d 393, 476–77 (Del. Ch.
2023). The acquirer also knew that these officers were naive negotiators. Id. The acquirer
exploited this information, ultimately, to renege on an agreement in principle; it threatened to
lower its bid and made a coercive threat to publicly announce that the negotiations were dead, in
violation of a non-disclosure agreement. Id. at 477–78. While “a bidder is entitled to negotiate
aggressively,” the cumulation of acquirer’s actions caused the acquirer to “topple[] over the line
into liability” for aiding and abetting. Id. at 478, 481.

50
4. Count IX: Fraudulent Transfer

Plaintiff alleges that Defendants in this action worked together to strip

QPhoton of its only significant asset, the Licensed Stevens IP, to avoid the capacity

to pay QPhoton’s liabilities owed to Plaintiff.219 Plaintiff’s fraudulent transfer claim

is governed by the Delaware Uniform Fraudulent Transfer Act (“DUFTA”).220

DUFTA protects a “creditor” from two types of fraudulent transfers.
First, 6 Del. C. § 1304(a)(1) prohibits “transfer[s]” by debtors that are
made “with actual intent to hinder, delay or defraud” (“actual fraudulent
transfers”). Second, 6 Del. C. § 1304(a)(2) prohibits “transfer[s]” by
debtors where the debtor (i) did not receive “reasonably equivalent
value” and (ii) was rendered insolvent (“constructively fraudulent
transfers”).221

According to Plaintiff, this transfer rendered QPhoton insolvent.222 Because

this is an attempt to state a 1304(a)(2) claim, I analyze the matter under that rubric.

a. Constructive Fraudulent Transfer

To plead a claim for constructive fraudulent transfer under DUFTA, a plaintiff

must plead that the debtor “(i) did not receive ‘reasonably equivalent value’ and (ii)

was rendered insolvent.”223

The Fraud Defendants submit that Plaintiff has failed to plead insolvency

under DUFTA, which requires allegations that “the sum of the debtor’s debts is

219
SAC ¶¶ 198–202.
220
6 Del. C. §§ 1301–11.
221
Burkhart v. Genworth Fin., Inc., 250 A.3d 842, 854 (Del. Ch. 2020) (alterations in original)
(citations omitted).
222
SAC ¶ 201.
223
Burkhart, 250 A.3d at 854 (alterations in original) (citations omitted).

51
greater than all of the debtor’s assets, at a fair valuation.”224 I agree. Plaintiff has

not adequately alleged that QPhoton’s liabilities are in excess of a reasonable market

value of its assets.225 Plaintiff’s assertions of insolvency are merely conclusory.

While Plaintiff alleges I may infer that QPhoton was insolvent because a cashier’s

check sent by QPhoton as an intended repayment of the BV Notes lists Huang as the

remitter,226 this does not, without more, support a reasonable inference that QPhoton

was insolvent.227 Huang was the CEO and chairman of QPhoton’s board of

directors; his remittance of a check to satisfy a corporate obligation for QPhoton is

insufficient to imply insolvency or actual intent to defraud Plaintiff.

Fundamentally, I note, the transfer of Licensed Stevens IP itself was part of a

merger transaction in which QPhoton was sold to Quantum in return for tens of

millions of dollars in Quantum stock, running to QPhoton stockholders. The

Complaint does not attempt to demonstrate that this was not an arm’s-length

transaction. The facts pled do not support a claim under DUFTA.

224
Quantum’s OB 44–46 (quoting 6 Del. C. § 1302(a)).
225
See Quadrant Structured Prods. Co., Ltd. v. Vertin, 102 A.3d 155, 197 (Del. Ch. 2014)
(explaining that the insolvency test under DUFTA “is the same as Delaware’s common law
balance sheet test.”); see also Trenwick Am. Litig. Tr. v. Ernest & Young, L.L.P., 906 A.2d 168,
195 n.74 (Del. Ch. 2006) (internal quotations omitted) (“Insolvency in fact occurs at the moment
when the entity has liabilities in the excess of a reasonable market value of assets held.”).
226
SAC ¶¶ 157–58 (citing SAC, Ex. 11).
227
6 Del. C. § 1304(b)(9). DUFTA explains how insolvency may be established: “(A) A debtor
is insolvent if the sum of the debtor’s debts is greater than all of the debtor’s assets, at a fair
valuation. (B) A debtor who is generally not paying debts as they become due is presumed to be
insolvent.” 6 Del. C. § 1302.

52
Plaintiff has not stated a claim for constructive fraudulent transfer under

Section 1304(a)(2). Therefore, Count IX is for fraudulent transfer is dismissed.

5. Count X: Unjust Enrichment

Plaintiff asserts that Quantum, QPhoton, and the Founders have been unjustly

enriched at Plaintiff’s expense as a result of actions that resulted in (1) Quantum

acquiring QPhoton for less than fair value and (2) the Founders receiving

compensation and an alleged windfall resulting from Huang holding, wrongfully,

81% of the equity in QPhoton at the time of the merger.228

To state a claim for unjust enrichment, the plaintiff must plead “(1) an

enrichment, (2) an impoverishment, (3) a relation between the enrichment and

impoverishment, (4) the absence of justification, and (5) the absence of a remedy

provided by law.”229 Unjust enrichment is not generally supported if a contract

“governs the relationship between parties that gives rise to the unjust enrichment

claim.”230

The claims remaining, after this decision, against the Founders and QPhoton,

are largely contractual, and to that extent, the unjust enrichment claim must be

dismissed. I have allowed a breach of fiduciary duty claim against the Founders,

228
Pl.’s AB Opp’n Quantum’s MTD 44 (citing SAC ¶¶ 203–08).
229
Nemec v. Shrader, 991 A.2d 1120, 1130 (Del. 2010). Garfield ex rel. ODP Corporation v.
Allen explains that the last element has puissance only in regard to subject matter jurisdiction. 277
A.3d 296, 346–51 (Del. Ch. 2022).
230
Kuroda v. SPJS Hldgs., L.L.C., 971 A.2d 872, 891 (Del. Ch. 2009).

53
who will be liable to Plaintiff for damages or injunctive relief, should the allegations

be proved—that relief would be as broad or broader than the relief conferred under

an unjust enrichment theory. In addition, the portion of the breach-of-duty claim

that was well pled was for gross negligence in the negotiation of the merger—that is

unlikely to have enriched those defendants, Huang and Pan. I have dismissed the

aiding-and-abetting claim against Quantum, and to nevertheless preserve the unjust

enrichment claim against it would be to allow an improper bootstrap—if Quantum

bargained at arm’s length, it has received no unjustified enrichment.

Because I find that Plaintiff has either failed to plead an unjust enrichment

claim, or is simply recasting a tort or contract claim, against each Defendant, Count

X is properly dismissed.

III. CONCLUSION

The Individual Defendants’ motion to dismiss under Rule 12(b)(2) for lack of

personal jurisdiction is GRANTED. Quantum and the Founders’ motions to dismiss

under Rule 12(b)(6) are GRANTED in part and DENIED in part. The parties should

submit a form of order consistent with this Memorandum Opinion.

54