IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE JOSEPH C. BAMFORD and YOUNG MIN BAN, ) ) Plaintiffs, ) ) v. ) ) C.A. No. 2019-0005-JTL PENFOLD, L.P.; DELAWARE VALLEY ) REGIONAL CENTER, LLC; WEST 36TH, INC.; ) JOSEPH MANHEIM; and REATH & CO., LLC; ) ) Defendants. ) MEMORANDUM OPINION Date Submitted: December 4, 2019 Date Decided: February 28, 2020 David J. Margules, Elizabeth A. Sloan, Brittany M. Giusini, BALLARD SPAHR LLP, Wilmington, Delaware, Wallace G. Hilke, Mark S. Enslin, BALLARD SPAHR LLP, Minneapolis, Minnesota; Counsel for Plaintiff Joseph C. Bamford. Jeffrey S. Cianciulli, WEIR & PARTNERS, Wilmington, Delaware, Peter N. Kessler, KUTAK ROCK LLP, Philadelphia, Pennsylvania; Counsel for Plaintiff Young Min Ban. John G. Day, PRICKETT, JONES & ELLIOT, P.A., Wilmington, Delaware; Marc R. Rosen, Joshua K. Bromberg, KLEINBERG, KAPLAN, WOLFF & COHEN, P.C., New York, New York; Counsel for Defendants West 36th, Inc., Joseph Manheim, and Reath & Co., LLC. William B. Chandler III, Bradley D. Sorrels, Shannon E. German, Daniyal M. Iqbal, WILSON SONSINI GOODRICH & ROSATI, P.C., Wilmington, Delaware; Counsel for Defendants Penfold, L.P. and Delaware Valley Regional Center, LLC. LASTER, V.C. Before the events giving rise to this litigation, defendant Joseph Manheim and plaintiff Joseph Bamford were close friends for over twenty years. For at least a decade, Manheim served as Bamford’s trusted financial and business advisor. In 2012, at Manheim’s request, Bamford provided startup capital for Delaware Valley Regional Center, LLC (“DVRC”), a company co-founded by Manheim and plaintiff Young Min Ban. DVRC facilitates investments by foreign nationals in infrastructure projects in the United States, thereby helping the foreign nationals qualify for specialized visas. In 2015, Bamford made an additional investment in DVRC. In connection with the 2015 investment, Manheim, Ban, and Bamford documented that each held a 30% membership interest in DVRC. Defendant West 36th, Inc. (“WestCo”) held the remaining 10% membership interest and served as DVRC’s manager. Manheim, Ban, and Bamford comprised WestCo’s board of directors (the “WestCo Board”). Manheim controlled WestCo and had the power to name the members of the WestCo Board, but Manheim’s control over WestCo was not inviolate. A portion of Bamford’s investment in DVRC took the form of a loan to WestCo that was convertible into a majority stake. By 2016, DVRC was thriving, and Manheim wanted to solidify his control over the entity. To achieve this outcome, Manheim needed to neuter Bamford and Ban’s rights as holders of a majority of the membership interests in DVRC. He also needed to prevent the convertible debt from providing a path to control over WestCo. Manheim achieved both goals by convincing Bamford and Ban to go along with a restructuring of their interests (the “Reorganization”). He told Bamford and Ban that it was advisable from a tax standpoint to create a holding company structure. To accomplish this, they would contribute their 90% membership interest in DVRC to defendant Penfold, L.P., a newly created Delaware limited partnership, and each of them would receive a one-third equity interest ...
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