In the recent decision of Trascent Management Consulting, Inc. v. Bouri, C.A. No. 10915-VCMR (Del. Ch. Sept. 10, 2018), the Delaware Court of Chancery rescinded an operating agreement of a Delaware limited liability company.  In the 75-page opinion, Vice Chancellor Montgomery Reeves found that defendant George Bouri fraudulently induced the formation of the limited liability company and his employment agreement.  In addition, the Court found that defendant also made false statements during the litigation.

In so ruling, the Court held that Bouri lied in order to induce Trascent to hire him and to give him an equity position in the company, lied about his prior employment experience at Time Warner, and lied about his prior title, salary, and bonus structure.  Bouri had falsely claimed that he voluntarily resigned from Time Warner.  As a result of Bouri’s fraud, the Court rescinded Bouri’s employment agreement and declared the Trascent operating agreement unenforceable by Bouri.

To remedy the misconduct, the Court rescinded the employment agreement and declared the operating agreement unenforceable.  The court also awarded attorneys’ fees and costs as a penalty for defendant’s litigation misconduct, specifically awarding Trascent its attorneys’ fees and costs incurred in bringing the motion for sanctions and 40% of all fees Trascent incurred throughout the litigation.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  Carl is admitted in the State of Delaware and regularly practices before the Delaware Court of Chancery, with an emphasis on shareholder disputes. You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.