In Geier v. Mozido, No. 10931-VCS 2016 BL 321867, (Del. Ch. Sept. 29, 2016), the Court of Chancery of Delaware granted Mozido, LLC’s (“Mozido”) motion to dismiss Philip H. Geier’s (“Plaintiff”) breach of contract complaint against Mozido. The court found that Plaintiff failed to state a claim for breach of contract under Court of Chancery Ruel 12(b)(6), as he released all claims asserted in this actions as part of a previous settlement.
According to the allegations, representatives of Mozido had asked Plaintiff multiple times to join Mozido’s Board of Directors (the “Board”). In March 2012, Plaintiff agreed to join the Board in exchange for 1% of the then issued and outstanding membership units in Mozido (the “Options”). Plaintiff served on the Board until his resignation in May 2013. In July 2012, Modizo needed to raise capital, and Plaintiff had the Philip H. Geier Irrevocable Trust (the “Geier Irrevocable Trust”) and The Geier Group, LLC (the “Geier Group”) loan $3 million to Mozido. Upon default of the note, the Geier Group and the Geier Irrevocable Trust sought action against Mozido and members of the Board who had guaranteed the loan.
In November 2013, a General Release agreement was executed. Geier Irrevocable Trust and Geier Group were named releasors, and the agreement contained a carve out claim for any claims by Plaintiff with respect to the Options. Plaintiff alleged he demanded that Mozido issue his Options and was not able to exercise the Options since his departure from the Board. Plaintiff, however, only made a formal demand to exercise the Options in October 2014.
Plaintiff alleged the General Release was inapplicable to the claims regarding the Options. He asserted that the release should not apply to him because it related only to claims arising from the $3 million loan of the Geier Trust and the Geier Group. Alternatively, he was not “an intended releaser”.
A motion to dismiss under Rule 12(b)(6) should be denied if a plaintiff “could recover under any reasonably conceivable set of circumstances susceptible of proof.” Therefore, Plaintiff must sufficiently prove he can recover the Options with the court assuming the truth of all well-pled facts in the complaint and drawing reasonable inferences in Plaintiff’s favor.
The court found that the General Release agreement extended to Plaintiff as an individual and released his claims against Mozido related to the Options. The court first evaluated the General Release itself, and found when the language of the release was clear and unambiguous. In addition, the court declined to read the General Release in conjunction with the settlement. Instead, “[t]he General Release must be interpreted within its four corners.” As for the contention that Plaintiff was not subject to the release, the court concluded that he controlled the Geier Irrevocable Trust and the Geier Group. Moreover, even if he did not, he constituted an “affiliate” and was therefore covered by the General Release.
For the above reasons, the Court of Chancery of Delaware granted Mozido’s motion, dismissing Plaintiff’s claim.
The primary material for this case may be found on the DU Corporate Governance website.