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INTRODUCTION
This is the latest in a series of meritless and harassing lawsuits that POSCO Energy Co.,
Ltd. (“POSCO”) has brought against FuelCell Energy, Inc. (“FuelCell”) in retaliation for referring
the parties’ true dispute to arbitration (the “breach-of-contract arbitration”). Notwithstanding
POSCO’s irrelevant and false allegations regarding the nature of the parties’ communications, this
is a straightforward matter subject to straightforward grounds for dismissal. POSCO’s allegations
— which are simply one claim repackaged four ways — amount to a complaint that FuelCell did
not act quickly enough in removing a restrictive legend from POSCO’s unregistered stock
certificates, causing POSCO to lose out on the opportunity to sell its shares while stock prices were
relatively higher. But the Complaint, which is premised on FuelCell’s alleged delay in acceding
to POSCO’s request, cannot support POSCO’s claims because it omits when POSCO “met all of
the statutory prerequisites for removal of the restrictive legend, triggering FuelCell’s duty to
remove [it].”1
See Compl. ¶¶ 67–68, ECF No. 8.
Careful to plead around the relevant timeline, the Complaint alleges that (i) POSCO asked
FuelCell on June 4, 2018 to remove the restrictive legend from POSCO’s stock certificates, and
(ii) on some unspecified date in the future, POSCO satisfied the statutory prerequisites for its
removal — namely, presenting FuelCell with the stock certificates, themselves, and providing a
letter representing that FuelCell could lawfully remove the restrictive legend because POSCO was
exempt from registration under the securities laws. See id. ¶¶ 38, 45, 67–68. That is insufficient
to demonstrate POSCO’s plausible entitlement to relief.
To begin with, the Complaint makes clear that POSCO did not satisfy the contractual or
statutory prerequisites for removal of the restrictive legend from its shares as of its June 4, 2018
1 For clarity, this Brief has substituted “FuelCell” for “FCE” and “POSCO” for “PE” when
quoting the allegations in the Complaint.
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request, which forecloses POSCO’s demands for relief as of that date. Furthermore, because the
Complaint conspicuously omits when POSCO allegedly satisfied those prerequisites, the
Complaint cannot demonstrate that FuelCell “unreasonably delayed” in fulfilling POSCO’s
request. A plaintiff does not adequately plead a plausible claim for “unreasonable delay” when it
fails to plead the dates of the critical events to establish liability. Finally, there is a reason that
POSCO attempts to plead around the critical dates. As documents integral to the Complaint and
referenced therein demonstrate,
2 POSCO, in fact, did not satisfy either prerequisite until late
August 2018, with the issuance of new, unrestricted shares following just four days later.
Because the Complaint does not allege sufficient facts to support the conclusion that
FuelCell “unreasonably delayed” in reissuing POSCO’s stock certificates — the basis for all four
counts — POSCO’s Complaint must be dismissed.
BACKGROUND
A. The POSCO-FuelCell Relationship and Breach-of-Contract Arbitration
FuelCell is an industry leader in providing clean, efficient, and affordable energy through
fuel cell solutions. Fuel cells are sources of energy that resemble batteries — except that, unlike
batteries, a fuel cell will continue to generate electricity as long as fuel is supplied (subject to
2
“In considering a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6), a
district court may consider the facts alleged in the complaint, documents attached to the complaint
as exhibits, and documents incorporated by reference in the complaint.” DiFolco v. MSNBC Cable
LLC, 622 F.3d 104, 111 (2d Cir. 2010). Furthermore, “matters judicially noticed by the District
Court are not considered matters outside the pleadings.” Staehr v. Hartford Fin. Servs. Grp., Inc.,
547 F.3d 406, 426 (2d Cir. 2008). “Where a document is not incorporated by reference, the court
may nevertheless consider it where the complaint relies heavily upon its terms and effect, thereby
rendering the document integral to the complaint.” DiFolco, 622 F.3d at 111 (internal quotation
omitted). “If a plaintiff chooses not to attach to the complaint or incorporate by reference a
document upon which it implicitly relies and which is integral to the complaint, the defendant may
proffer that document when attacking the complaint for its failure to state a claim.” Baraliu v.
Vinya Capital, L.P., No. 07-4626, 2009 WL 959578, at *4 (S.D.N.Y. Mar. 31, 2009).
Case 1:20-cv-07509-MKV Document 25 Filed 10/21/20 Page 8 of 33
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degradation over time). Fuel cells create almost no pollutants, are vastly more efficient than
similarly sized combustion engines, provide continuous energy (unlike intermittent solar and wind
power), and have a very small footprint compared with other clean energy technologies.
In 2005, POSCO approached FuelCell to facilitate the sale of FuelCell’s first three power
plants in the Republic of South Korea (“Korea”). Two years later, POSCO proposed a strategic
partnership to market FuelCell’s power plants directly. The basis of the partnership was for
FuelCell to license its technology and know-how to POSCO and for POSCO, in turn, to receive
the exclusive right to sell, service, and eventually manufacture FuelCell’s technology and products
throughout all of Asia. In exchange for these grants and licenses and for the tens of thousands of
hours that FuelCell spent training POSCO to use, build, and sell FuelCell’s proprietary power
plants, the parties agreed that FuelCell would receive royalties on POSCO’s resulting sales.3
Between 2007 and 2012, FuelCell and POSCO memorialized their relationship in four
licensing and related agreements (collectively, the “Transaction Agreements”). In the same
timeframe, they also executed three Securities Purchase Agreements (“SPAs”), through which
POSCO purchased more than 30 million FuelCell shares. Compl. ¶ 2. Because POSCO purchased
the shares directly from FuelCell, and the shares were not registered with the Securities and
Exchange Commission (“SEC”), the stock certificates representing POSCO’s shares bore a
common restrictive legend that limited the circumstances under which POSCO could transfer
them. See id. ¶¶ 2–3, 20.
Initially, the POSCO-FuelCell partnership was productive. Together, POSCO and
FuelCell opened and expanded the Korean fuel cell market, and POSCO realized hundreds of
3 See FuelCell Energy, Inc., Current Report, Item 8.01 (Form 8-K) (Apr. 7, 2020),
https://sec.report/Document/0001564590-20-015607/.
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millions of dollars in FuelCell sales. But in 2015, POSCO abruptly announced its intention to exit
the fuel cell sector. That year, POSCO completed work on its own manufacturing facility —
meaning that, from that point on, POSCO could apply the knowledge it had received from FuelCell
and manufacture FuelCell’s technology for itself. Although customers continued to contact
POSCO, and POSCO was still under a contractual duty to commercialize FuelCell’s technology,
POSCO refused to make any sales. During the same period, POSCO also attempted to coerce
FuelCell into granting POSCO perpetual, royalty-free rights to all of FuelCell’s intellectual
property, including intellectual property for products not encompassed in the original license.
POSCO was explicit about its strategy: if FuelCell failed to convey an unlimited technology
transfer, POSCO would bring unfounded litigations and arbitrations against FuelCell until
FuelCell gave in to POSCO’s demands.
FuelCell refused to give in. In February 2020, FuelCell formally notified POSCO that it
was in material breach of the Transaction Agreements.4
Because POSCO refused to cure its
material breaches, on June 28, 2020, FuelCell terminated the Transaction Agreements and initiated
parallel arbitration proceedings seated in London and Singapore, pursuant to the parties’ relevant
agreements and the rules of the International Chamber of Commerce.
5
Consistent with its threats,
POSCO immediately initiated two suits in the U.S. Courts against FuelCell in retaliation.
B. POSCO’s Delaware Lawsuit
A little over one month after FuelCell initiated arbitration proceedings and terminated the
parties’ Transaction Agreements, POSCO submitted a baseless demand to inspect FuelCell’s
4 See FuelCell Form 8-K, Item 8.01 (Apr. 7, 2020).
5 See GARRIGUES, International Arbitration Newsletter – July 2020 (July 30, 2020),
https://www.garrigues.com/en_GB/new/international-arbitration-newsletter-july-2020-regionaloverview-asia-pacific.
Case 1:20-cv-07509-MKV Document 25 Filed 10/21/20 Page 10 of 33
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books and records under Section 220 of the Delaware General Corporation Law (“DGCL”). See
POSCO Energy Co., Ltd. v. FuelCell Energy, Inc., No. 2020-07-13-MTZ, Dkt. 1 (Del. Ch. Aug.
28, 2020) (“Del. Compl.”).
6 POSCO’s demand focuses primarily on a SEC investigation that
(i) arose out of a self-disclosure by FuelCell regarding certain omissions it discovered in past
securities filings and (ii) resulted in no penalties or fines to the company — largely because the
SEC confirmed that FuelCell had relied on the advice of outside securities counsel to prepare the
at-issue statements. See Del. Compl. Ex. A; In the Matter of FuelCell Energy, Inc., No. 3-19957,
Order Instituting Cease-And-Desist Proceedings Pursuant To Section 8A Of The Securities Act
Of 1933, Making Findings, And Imposing A Cease-And-Desist Order, ¶ 15 (SEC, Sep. 3, 2020),
https://www.sec.gov/litigation/admin/2020/33-10831.pdf. POSCO’s demand also seeks
information about FuelCell’s use of Paycheck Protection Program loans, its debts, and inquiries
by any government or regulatory agency, in an obvious fishing expedition to identify “potential
breaches of fiduciary duty.” Del. Compl. Ex. A.
While FuelCell considered POSCO’s request — in particular, how POSCO could make
such a request when FuelCell’s records and POSCO’s public statements indicated that POSCO
had sold all of its shares7 — POSCO filed a complaint with the Delaware Court of Chancery to
compel the requested inspection under DGCL 220. Having sold virtually all of its shares,
announced its intention to exit the fuel cell industry, and sought information that could not possibly
support a breach of fiduciary duty claim — weeks after FuelCell initiated the arbitrations — it is
clear that POSCO’s demand is not related to its “interests as a stockholder” or otherwise intended
6 The Court may take judicial notice of documents filed on the Delaware docket because
they are “publicly available and [their] accuracy cannot reasonably be questioned.” Apotex Inc. v.
Acorda Therapeutics, Inc., 823 F.3d 51, 60 (2d Cir. 2016).
7 See Park Jae-hyk, POSCO Energy to Sell 2.9% stake in FuelCell Energy, THE KOREA
TIMES, http://m.koreatimes.co.kr/pages/article.asp?newsIdx=258700 (last visited Oct. 1, 2020).
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for a “proper purpose,” see 8 Del. C. § 220, and was intended instead to harass FuelCell and to
improperly solicit documents for use in the arbitrations.
C. POSCO’s New York Lawsuit
Two weeks after POSCO filed the Delaware lawsuit and as part of its campaign to harass
and retaliate, POSCO filed the present meritless litigation, based on stale conduct more than two
years in the past. After POSCO announced its intention to leave the fuel cell business, POSCO
asked FuelCell to remove the restrictive legend from POSCO’s shares so that POSCO could sell
its FuelCell stock. Compl. ¶ 36. The SPAs and POSCO’s stock certificates anticipated that
POSCO would eventually seek to sell its shares and explained how POSCO should initiate that
process. The SPAs provided:
Following the time a legend is no longer required for any Shares hereunder, the
Company will, no later than five (5) Business Days following the delivery by the
Purchaser to the Company or the Company’s transfer agent of a legended certificate
representing such Shares, accompanied by such additional information as the
Company or the Company’s transfer agent may reasonably request, deliver or cause
to be delivered to the Purchaser a certificate representing such Shares that is free
from all restrictive and other legends.
Id. ¶ 21 (quoting SPA § 3.8(b)). The restrictive legend on POSCO’s stock certificates provided
that POSCO’s shares could not be resold or offered for sale unless registered with the SEC or
“pursuant to an available exemption from . . . the Securities Act . . . as evidenced by a legal opinion
of counsel to the transferor to such effect.” Id. ¶ 20 (quoting restrictive legend).
In other words, as POSCO concedes in its Complaint, before FuelCell could replace
POSCO’s restricted shares with unrestricted shares, POSCO had to (i) provide FuelCell with the
physical stock certificates to be replaced, and (ii) provide a letter from POSCO’s counsel,
confirming that POSCO was exempt from the registration requirements imposed by the securities
laws, such that FuelCell could lawfully delegend POSCO’s shares. Id. ¶¶ 67–68. Because POSCO
claimed an exemption from registration under SEC Rule 144, it refers to the latter requirement as
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providing a “Rule 144 opinion letter.” See, e.g., id. ¶¶ 36, 45, 68. The law echoes both
requirements. See UCC § 8–401 (adopted by both Delaware and New York).
POSCO’s June 4, 2018 request did not provide any of the required materials. See Compl.
¶ 38 (alleging POSCO submitted a delegending request on June 4, 2018), ¶ 45 (alleging separately
that POSCO submitted “a Rule 144 opinion letter from counsel, and the original share certificates”
“n the hopes of moving things forward”); see also Ex. 1, POSCO Delegending Request (June 4,
2018). In fact, POSCO did not provide the required letter from counsel until August 17, 2018.
See Compl. ¶ 51; Ex. 2, Email from Korean Counsel for POSCO (Aug. 17, 2018). And POSCO
did not locate or provide its stock certificates to FuelCell until August 24, 2018. See Compl. ¶ 45;
Ex. 3, Email from POSCO’s Transfer Agent (Aug. 23, 2018) (“The stock certificate has just been
arrived. I’ll keep some record and send it to the agent tonight or early tomorrow morning.”); Ex.
4 at 7, Email from FuelCell (Aug. 24, 2018) (“Copied on this email is Jae Ryu, POSCO Energy’s
broker. . . . I have a courier headed to Jae’s office right now to pick up the share certificate and
deliver it to AST [FuelCell’s transfer agent].”).
After POSCO satisfied those contractual and statutory prerequisites, FuelCell’s transfer
agent promptly delegended POSCO’s shares on August 28, 2018. Ex. 5, Direct Registration BookEntry Advice (Aug. 28, 2018). POSCO received the shares on September 11, 2018, following its
own delay to complete additional steps to comply with Korean law. See Compl. ¶ 53; Ex. 4 at 1,
Email from POSCO’s Transfer Agent (Sept. 11, 2018) (“A FedEx messenger service will deliver
the medallion stock power to the address given around 11:00~12:00pm.”); id. at 6, Email from
POSCO’s Transfer Agent (Aug. 24, 2018) (“POSCO needs to finish some paper works required
by the Korean regulator to receive the shares. . . . It can’t be done [in] just one or two days.”). Put
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differently, POSCO did not submit a valid delegending request until August 24, 2018, and clean,
delegended stock certificates were available to POSCO four days later.
D. Extraneous Material in the Complaint
The Complaint includes a host of extraneous allegations regarding the parties’
communications about POSCO’s delegending request, which culminated in POSCO’s decision to
waive certain “bargained-for rights” at the advice of its own counsel. See, e.g., Compl. ¶¶ 5, 48–
50 (alleging FuelCell “forced POSCO to waive its bargained-for right to appoint a board designee”
and “strong-armed POSCO into surrendering its pro rata rights”). Because those allegations (i) do
not form the basis for any count in the Complaint and (ii) precede the date when FuelCell’s duty
to delegend POSCO’s shares arose, they are irrelevant. But, to the extent that the Court considers
them, they demonstrate that POSCO’s June 4, 2018 delegending request was not only incomplete
— because it did not include a Rule 144 opinion letter or POSCO’s legended stock certificates —
but also was not “rightful,” as the law independently requires. See 6 Del. C. § 8–401(a)(7).
A stock issuer like FuelCell may not delegend shares in connection with a sale that it knows
would violate the Securities Act of 1933 (the “1933 Act”), and is justified in requesting information
to show that the contemplated transfer can be made in accordance with the law. See, e.g., Catizone
v. Memry Corp., 897 F. Supp. 732, 736 (S.D.N.Y. 1995) (“Since the transfer violated the 1933 act,
it cannot be considered rightful, and defendants . . . were under no duty to register the transfer.”);
Bender v. Memory Metals, Inc., 514 A.2d 1109, 1116 (Del. Ch. 1986) (“A transfer is not ‘rightful’
if it would violate the 1933 Act.”); Charter Oak Bank & Tr. Co. v. Registrar & Transfer Co., 141
N.J. Super. 425, 434 (N.J. Super. Ct. Law Div. 1976) (applying UCC § 8–401) (“A transfer agent
cannot be required by state law to transfer stock in violation of the Securities Act. Therefore, when
a transfer agent has reasonable cause to believe that a transfer will be in violation of the Securities
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Act, it has a right to refuse to make the transfer until it has received an explanation or showing that
the proposed transfer would not violate the Securities Act.”).
Here, POSCO’s June 4, 2018 delegending request raised concerns as to whether POSCO
was, in fact, free to sell unregistered shares pursuant to an SEC exemption. In particular, while
POSCO purported to fall within a safe harbor provided by SEC Rule 144 for non-affiliates, see
Compl. ¶ 36, an “affiliate” for purposes of the Rule presumptively includes both large shareholders
and officers or directors, see, e.g., Sec. & Exch. Comm’n, “Rule 144: Selling Restricted and
Control Securities” (Jan. 16, 2013)8
(“An affiliate is a person, such as an executive officer, a
director or large shareholder, in a relationship of control with the issuer.”).9
Because POSCO
was a longtime, large shareholder with appointment rights to a seat on FuelCell’s board, Compl.
¶¶ 2, 25, POSCO’s own counsel was concerned as to whether POSCO “could be deemed an
affiliate because of its right to appoint a member to the board,” see id. ¶¶ 42–43, 48.
Ultimately — consistent with its stated intention to exit the fuel cell sector, discontinue its
selling relationship with FuelCell, and divest itself of FuelCell stock — POSCO opted to waive its
right to a seat on FuelCell’s board, which FuelCell accepted as a reasonable solution to the issue
of whether POSCO would be deemed an affiliate. See Compl. ¶ 50.
LEGAL STANDARD
A complaint must give a defendant “fair notice of what the . . . claim is and the grounds
upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citation omitted). A
plaintiff cannot discharge this obligation by reciting “labels and conclusions,” or by providing a
“formulaic recitation of the elements of a cause of action.” Id. Rather, a plaintiff must allege
8
https://www.sec.gov/reportspubs/investor-publications/investorpubsrule144htm.html.
9 Unless otherwise noted, all emphasis in this Brief has been added.
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“sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”
Bautista v. CytoSport, Inc., 223 F. Supp. 3d 182, 187 (S.D.N.Y. 2016) (quoting Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009)). “Where a complaint pleads facts that are ‘merely consistent with’ a
defendant’s liability, it ‘stops short of the line between possibility and plausibility of entitlement
to relief.’” Elias v. Rolling Stone LLC, 872 F.3d 97, 104 (2d Cir. 2017) (quoting Twombly, 550
U.S. at 557).
ARGUMENT
As POSCO’s Complaint necessarily acknowledges, there were two prerequisites (among
others) that POSCO was required to satisfy before FuelCell could remove the restrictive legends
from POSCO’s shares. First, pursuant to Delaware’s Uniform Commercial Code (the “Delaware
UCC”) and the express terms of the parties’ SPAs, POSCO had to provide FuelCell with its
original, legended stock certificates before FuelCell could replace them with new, unrestricted
shares. See 6 Del. C. § 8–401; Compl. ¶ 21 (quoting SPA § 3.8(b)). Second, pursuant to the
Delaware UCC and the language printed on the certificates themselves, POSCO was also required
to provide a letter from counsel, opining that FuelCell’s removal of the restrictive legends from
POSCO’s unregistered shares was appropriate under applicable securities laws. See 6 Del. C. §§
8–401(a)(5), 8–204; Compl. ¶ 20 (quoting restrictive legends).
It is clear from the face of the Complaint that POSCO failed to satisfy either prerequisite
with its June 4, 2018 request. See Compl. ¶¶ 38, 45. As a result, FuelCell was not under a duty to
delegend POSCO’s certificates on June 4, 2018, and the Complaint on its face forecloses POSCO’s
demands for relief as of that date. See, e.g., Utica Mut. Ins. Co. v. Clearwater Ins. Co., 906 F.3d
12, 22 (2d Cir. 2018) (“A condition precedent . . . must occur before a duty to perform a promise
in the agreement arises.” (quoting Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co., 86
N.Y.2d 685, 690 (N.Y. 1995))); 6 Del. C. § 8–401 cmt. 1 (“If any of the preconditions do not exist,
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there is no duty to register transfer.”).
Furthermore, because the Complaint conspicuously fails to allege when POSCO satisfied
the relevant prerequisites, it has not alleged sufficient facts to support the conclusion that FuelCell
“unreasonably delayed” in acting on POSCO’s request. See Planète Bleue Télévision, Inc. v. A&E
Television Networks, LLC, No. 16-9317, 2018 WL 10579873, at *12–13 (S.D.N.Y. Sept. 19, 2018)
(dismissing breach-of-contract claims based on delayed performance because complaint’s failure
to plead when plaintiff satisfied conditions precedent rendered its “allegations regarding the
delayed royalty payments [] too conclusory to defeat [defendant’s] motion to dismiss”); Jing Jing
v. Weyland Tech, Inc., No. 17-446, 2017 WL 2618753, at *3 (D. Del. June 15, 2017) (dismissing
§ 8–401 claim because Iqbal does not permit the Court to “infer compliance with the statute’s
requirements”); see also Baraliu, 2009 WL 959578, at *5 (dismissing breach-of-contract claim
because plaintiff failed to adequately allege conditions precedent had occurred).
Finally, documents integral to the Complaint, and referenced therein, confirm that POSCO,
in fact, did not satisfy either prerequisite until late August 2018, and that FuelCell’s transfer agent
delegended POSCO’s shares just four days later. Cf. Landmark Ventures, Inc. v. Wave Sys. Corp.,
No. 11-8440, 2012 WL 3822624, at *3 n.5 (S.D.N.Y. Sept. 4, 2012), aff’d, 513 F. App’x 109 (2d
Cir. 2013) (holding breach-of-contract claim was “premature” when email attached to motion to
dismiss showed that condition precedent had not yet occurred); Leggat v. Equifax Info. Servs., Inc.,
No. 3:09-263, 2009 WL 2432371, at *2 (E.D. Va. Aug. 6, 2009) (“The Complaint — whether
intentionally or inadvertently — omits the dates of repossession and sale of the vehicle at issue.
However, these dates are central to Plaintiff’s claim, and Chase’s affidavit provides this critical
information.”). Because the Complaint does not adequately allege that FuelCell unreasonably
delayed in reissuing POSCO’s stock certificates, all four claims must be dismissed.
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Counts Three and Four of the Complaint suffer from additional, fundamental defects,
which independently require their dismissal. Count Three, which seeks damages under Section
158 of the DGCL, is untenable because Section 158 offers equitable relief alone — specifically,
the power to compel a corporation to issue appropriate stock certificates. See 8 Del. C. § 158; 1
Corp. & Com. Prac. in Del. Ch. § 9.03 (“[A]n action will lie under Section 158 to compel a
corporation to issue a certificate where one has not theretofore been issued.”). Because POSCO
does not seek equitable relief and, in any event, has already received the delegended certificates
that Section 158 provides for, Section 158 can offer POSCO no further relief as a standalone claim.
Count Four, which alleges that FuelCell tortiously interfered with POSCO’s prospective
business advantage, is duplicative of POSCO’s remaining claims and patently fails to state a claim
under New York law. In New York, tortious interference with prospective business advantage
requires intentional interference with “a specific business relationship with an identified third
party.” Mehrhof v. Monroe-Woodbury Cent. Sch. Dist., 168 A.D.3d 713, 714 (N.Y. App. Div.
2019). Count Four must also be dismissed because the Complaint does not allege “a specific
business relationship with an identified third party,” but rather is based only on the possibility that
POSCO could have sold its shares earlier, but for FuelCell’s alleged delay.
I. THE COMPLAINT FAILS TO STATE A CLAIM FOR BREACH OF CONTRACT.
Count One of the Complaint alleges that FuelCell breached the SPAs because it failed to
use “reasonable best efforts” to reissue POSCO clean, delegended stock certificates following
POSCO’s June 4, 2018 request. Compl. ¶¶ 58–64. In support, the Complaint alleges that each of
the parties’ SPAs “contained an identical § 3.8(b), which states that POSCO may request that
FuelCell remove, and that FuelCell agrees to remove, the restrictive legends ‘if such Shares are
eligible for sale without restrictions under Rule 144 or under any no-action letter issued by the
SEC.’” Id. ¶ 21 (quoting SPA § 3.8(b)). The same provision describes the process by which
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POSCO could effect such removal:
Following the time a legend is no longer required for any Shares hereunder, the
Company will, no later than five (5) Business Days following the delivery by the
Purchaser to the Company or the Company’s transfer agent of a legended
certificate representing such Shares, accompanied by such additional information
as the Company or the Company’s transfer agent may reasonably request, deliver
or cause to be delivered to the Purchaser a certificate representing such Shares that
is free from all restrictive and other legends.
Id. (quoting SPA § 3.8(b)).
As the SPAs make clear, a condition precedent to FuelCell’s removal of the restrictive
legends was “delivery by [POSCO]” of the actual “legended certificate[s] representing [POSCO’s]
shares.” Id. As discussed below, with respect to Count Two, presentment of the legended shares
was also a statutory prerequisite to removal of the restrictive legend. See 6 Del. C. § 8–401; 7
Frederick H. Miller, Hawkland Unif. Com. Code Series § 8–401:02 (2013) (“Perhaps the most
obvious requirement that must be satisfied before the issuer’s duty to register a transfer arises, is
that the certificate be presented.”); see also Nash v. Coram Healthcare Corp., No.
96-0298, 1996 WL 363166, at *3 (S.D.N.Y. June 28, 1996) (“[U]nder New York law, a
corporation’s duty to register a transfer of restricted stock arises when the stockholder submits to
the issuer (i) the certificates evidencing the restricted shares; and (ii) a ‘no action’ letter from the
SEC.”). The SPAs and relevant securities laws impose this requirement because, “f a new
certificate was registered and issued without the old one being surrendered, the issuer could find
itself subject to claims based upon both.” 7 Miller, § 8–401:02.
It is axiomatic that a contractual duty to act does not arise until conditions precedent are
met. Utica Mut. Ins. Co., 906 F.3d at 22 (“A condition precedent . . . must occur before a duty to
perform a promise in the agreement arises.” (quoting Oppenheimer & Co., 86 N.Y.2d at 690)).
Consequently, FuelCell was not under a duty to remove the restrictive legend from POSCO’s
shares — and indeed could not have properly removed the restrictive legend — until POSCO
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surrendered its legended stock certificates. See Compl. ¶ 21.
The Complaint does not allege that POSCO satisfied the contractual conditions precedent
to POSCO’s delegending request. See Compl. ¶¶ 58–64; cf. Fed. R. Civ. P. 9(c); Baraliu, 2009
WL 959578, at *5 (“Under the Federal Rules, a plaintiff is required to ‘allege generally that all
conditions precedent have occurred or been performed.’ Plaintiff fails to do so . . . hence this claim
must be dismissed.” (quoting Fed. R. Civ. P. 9(c)). At best, the Complaint alleges that FuelCell
invoked Section 3.8(b) of the parties’ SPAs on June 4, 2018, and that — at some point in the future
— “n the hopes of moving things forward, POSCO provided FuelCell with all other
documentation FuelCell requested, including a Rule 144 opinion letter from counsel, and the
original share certificates.” Compl. ¶¶ 38, 45. That is not enough to state a claim based on
FuelCell’s alleged unreasonable delay.
On its face, the Complaint thus forecloses any suggestion that FuelCell’s duty to act arose
on June 4, 2018. That is, the Complaint is explicit that POSCO had not satisfied the conditions
precedent by that date.
Moreover, by omitting when POSCO presented its stock certificates to FuelCell, the
Complaint has not plausibly alleged that FuelCell failed to exercise “reasonable best efforts” on
account of its “unjustified and unlawful delays.” See Redwing Constr. Co. v. Sexton, 181 A.D.3d
1027, 1028 (N.Y. App. Div. 2020) (“[N]o action for breach of contract lies where the party seeking
to enforce the contract has failed to perform a specified condition precedent.” (internal quotation
omitted)). A plaintiff cannot plausibly allege unreasonable delay without alleging when the duty
to act actually arose. See Planète Bleue, 2018 WL 10579873, at *12–13 (holding breach-ofcontract claim based on delayed payment “too conclusory” to withstand dismissal when
defendant’s obligation to pay was “contingent on Plaintiff having performed” and complaint failed
Case 1:20-cv-07509-MKV Document 25 Filed 10/21/20 Page 20 of 33
15
to allege “when Plaintiff completed the necessary performance”); see also Robb Evans & Assocs.
LLC v. Sun Am. Life Ins., No. 10-5999, 2012 WL 488257, at *2 (S.D.N.Y. Feb. 14, 2012) (“The
Receiver cannot escape dismissal by omitting the relevant payment dates from its second
complaint and simply pleading the legal conclusion that the payments occurred within the
limitations period. While legal conclusions can provide the framework for a complaint, they are
not entitled to an assumption of truth, and must be supported by factual allegations.”).
Finally, documents that are integral to the Complaint and referenced therein demonstrate
that POSCO, in fact, did not provide its stock certificates to FuelCell until August 24, 2018. See
Compl. ¶ 21 (alleging FuelCell had a duty to delegend POSCO’s shares “following the delivery
by [POSCO] . . . of a legended certificate representing such shares”), ¶ 45 (alleging POSCO
“provided FuelCell with . . . the original share certificates”); Ex. 4 (demonstrating POSCO did not
provide FuelCell with the original share certificates until August 24, 2018). FuelCell’s transfer
agent removed the restriction from POSCO’s shares four days later, Ex. 5, and the delegended
shares were available to POSCO on September 11, 2018, to accommodate POSCO’s “need to
finish some paper works required by the Korean regulator to receive the shares,” Ex. 4 at 1, 6; see
also Compl. ¶ 53 (alleging “FuelCell’s stock transfer agent finally notified POSCO on or about
September 11, 2018 that the stock could now be transferred”).
Because FuelCell could not have delegended POSCO’s shares until POSCO provided its
original share certificates, Count One — which is based on FuelCell’s allegedly unreasonable
delay and consequent failure to exercise reasonable best efforts — “must fail based on the terms
of the contract and [POSCO’s] implicit admission in the complaint that the conditions precedent
were not satisfied” when it demanded action. See Baraliu, 2009 WL 959578, at *4.
Case 1:20-cv-07509-MKV Document 25 Filed 10/21/20 Page 21 of 33
16
II. THE COMPLAINT FAILS TO STATE A CLAIM UNDER DGCL § 8–401.
Count Two fails for the same reasons and others. Count Two alleges that FuelCell’s
“unreasonable delay” in reissuing POSCO’s stock certificates also violated Section 8–401 of the
DGCL, which requires a stock issuer to reissue a certificated security upon request and provides
damages for losses to the stockholder resulting from unreasonable delay. See 6 Del. C. § 8–401.
The Complaint fails to plead a Section 8–401 claim for three reasons. First, as noted above,
presenting a certificated security to the issuer was not only a contractual condition precedent, but
also a statutory prerequisite to a Section 8–401 demand. Second, Section 8–401 further required
POSCO to provide a valid Rule 144 letter before FuelCell could reissue POSCO’s shares. Third,
and relatedly, the Complaint does not allege that POSCO met the other prerequisites imposed by
Section 8–401, including the requirement that “the transfer is in fact rightful.” See id. POSCO
consequently cannot demonstrate that FuelCell “unreasonably delayed” in delegending POSCO’s
stock certificates, or that POSCO suffered damages as a result.
It is well-established that a threshold requirement for a Section 8–401 demand is the actual
presentment of the certificated securities, as the Complaint necessarily acknowledges. See 7
Miller, § 8–401:02 (“Perhaps the most obvious requirement that must be satisfied before the
issuer’s duty to register a transfer arises, is that the certificate be presented.”); Compl. ¶¶ 67–68;
see also Nash, 1996 WL 363166, at *3 (dismissing DGCL § 8–401 claim when, “nlike the cited
cases, and in contravention of the UCC’s requirements, the shares in this instance were neither in
registered form nor presented to the issuer”). Without surrendering the original stock certificates
to the issuer, the issuance of new, delegended certificates would result in the existence of duplicate
shares. 7 Miller, § 8–401:02; Jing Jing, 2017 WL 2618753, at *3 (“Presenting the certificated
security is not a technicality. . . . Without presenting the security, duplicate shares would exist, and
the issuer would be liable for litigation arising out of both the re-issued shares and the old shares.”).
Case 1:20-cv-07509-MKV Document 25 Filed 10/21/20 Page 22 of 33
17
For the reasons discussed above, the Complaint (i) does not allege that POSCO met this
threshold requirement on June 4, 2018, and (ii) does not plausibly allege delay because it fails to
specify when POSCO provided the certificates to FuelCell. Moreover, POSCO, in fact, did not
provide its stock certificates to FuelCell until late August 2018, at which point FuelCell promptly
reissued POSCO’s stock certificates just four days later. See Exs. 4, 5.
POSCO was subject to a second statutory prerequisite, which it also did not satisfy until
August 2018. Specifically, before FuelCell could remove the restrictive legend from POSCO’s
stock certificates, POSCO was required to provide a letter from counsel, confirming that POSCO
was exempt from registering its shares under SEC Rule 144.
DGCL Section 8–204 provides an issuer’s right to impose restrictions on transfer if they
are “noted conspicuously on the security certificate.” 6 Del. C. § 8–204. Section 8–401 only
applies if the contemplated sale “does not violate any restriction on transfer imposed by the issuer
in accordance with Section 8–204.” 6 Del. C. § 8–401(a)(5); see also 6 Del. C.
§ 8–401 cmt. 1 (“If any of the preconditions do not exist, there is no duty to register transfer.”).
Here, POSCO’s stock certificates stated that, before POSCO could sell or offer to sell its shares,
POSCO was required to provide a “legal opinion of counsel” that the contemplated sale was
exempt from the registration requirements of applicable securities laws. Compl. ¶ 20 (quoting
restrictive legends); see also id. ¶¶ 67–68 (recognizing that “provid[ing] a Rule 144 opinion letter”
was a “statutory prerequisite for removal of the restrictive legend”).
The Complaint alleges that POSCO intended to sell its shares pursuant to a Rule 144
exemption from registration, and that POSCO provided FuelCell with a letter from counsel to that
effect. Id. ¶¶ 36, 45. But, foreclosing the possibility that POSCO satisfied this second prerequisite
as of June 4, 2018, the Complaint alleges that POSCO did not provide a Rule 144 letter to FuelCell
Case 1:20-cv-07509-MKV Document 25 Filed 10/21/20 Page 23 of 33
18
until August 17, 2018. See Compl. ¶ 51. Because the Complaint does not adequately allege that
FuelCell’s removal of the restrictive legend was “unreasonably delayed” following POSCO’s
satisfaction of this second statutory prerequisite, and documents integral to the Complaint confirm
that it was not, see Exs. 2, 5, Count Two must be dismissed for this independent reason, see Kolber
v. Body Cent. Corp., 967 F. Supp. 2d 1061, 1066 (D. Del. 2013) (“As the Court has already ruled,
there was no duty for Defendants to respond to Plaintiffs’ inquiries before the Rule 144 opinion
was issued.”).
Finally, the Complaint does not adequately allege that POSCO satisfied any of the other
Section 8–401 requirements, including demonstrating that the contemplated stock sale was “in fact
rightful.” See 6 Del. C. § 8–401(a). Section 8–401 lists seven statutory prerequisites that must be
satisfied to trigger a stock issuer’s duty to reissue a stock certificate. See id. A plaintiff pursuing
a Section 8–401 claim bears the burden of demonstrating that all seven requirements — in addition
to the presentment requirement — have been met. See CAPM Corp. Advisors AB v. Protegrity,
Inc., No. 18676, 2001 WL 1360122, at *6 (Del. Ch. Oct. 30, 2001) (“[I]n order for CAPM to
establish that Protegrity breached its duty to register the transfer under § 8–401, it must further
establish that no material issue of fact exists regarding whether the seven additional conditions
were met.”); see also Campbell v. Liberty Transfer Co., No. 02-3084, 2006 WL 3751529, at *11
(E.D.N.Y. Dec. 19, 2006) (“To determine whether plaintiff has satisfied his burden of showing
that the requested transfer of PMWP shares was ‘rightful,’ thus satisfying UCC § 8-401(a)(7),
requires reference to the [1933 Act] and to regulation 17 C.F.R. § 230.144 (‘Rule 144’).”).
For purposes of Section 8–401, a “rightful” stock transfer must comply with the registration
requirements of the 1933 Act. See Bender, 514 A.2d at 1116 (“A transfer is not ‘rightful’ if it
would violate the 1933 Act.”). Thus, a transfer agent is under no obligation to issue stock
Case 1:20-cv-07509-MKV Document 25 Filed 10/21/20 Page 24 of 33
19
certificates pursuant to DGCL Section 8–401 to facilitate a transfer that would violate the Act.
See, e.g., JW Acquisitions, LLC v. Shulman, No. 1712-N, 2006 WL 4782399, at *1 (Del. Ch. Oct.
25, 2006) (“According to the Uniform Commercial Code provision at issue, the LLC’s entitlement
to relief [under §§ 8–401 and 158] depends on whether the ‘transfer [was] in fact rightful.’”);
Catizone, 897 F. Supp. at 736 (“Since the transfer violated the 1933 act, it cannot be considered
rightful, and defendants Memry and AST&T were under no duty to register the transfer.”
(collecting cases)).
The Complaint does not allege that POSCO’s prospective sale of unregistered shares was
“rightful,” as Section 8–401 requires. Nor does it plead sufficient factual matter from which the
Court could so conclude. To the contrary — the Complaint explains that POSCO was a longtime,
large FuelCell shareholder with a perpetual right to appoint a director to FuelCell’s board. See
Compl. ¶¶ 2, 25. POSCO, in other words, fell squarely within the SEC’s presumptive definition
of an “affiliate.” See, e.g., PWP Xerion Holdings III LLC v. Red Leaf Res., Inc., No. 2017-0235,
2019 WL 5424778, at *8 (Del. Ch. Oct. 23, 2019) (“As customarily interpreted, an officer or
director of an entity is affiliated with that entity.”); United States v. Shkreli, No. 15-637, 2018 WL
9539774, at *14 (E.D.N.Y. Feb. 26, 2018), aff’d, 779 F. App’x 38 (2d Cir. 2019) (reciting expert
testimony defining a Rule 144 affiliate as “someone who can exert a certain amount of control
over a company, either they are an officer or director or they own a large amount of shares”).
Consequently, the Complaint fails to allege that POSCO’s Section 8–401 demand was
“rightful” at least until POSCO entered into a waiver letter on August 22, 2018, waiving its seat
on FuelCell’s board. See Compl. ¶ 52; see also SEC v. Lybrand, 200 F. Supp. 2d 384, 396
(S.D.N.Y. 2002) (“[T]o accept [defendants’] argument that the literal transfer of majority
ownership constitutes the moment at which a former affiliate may sell freely into the market is to
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20
ignore the guiding purpose of the Securities Act — the protection of ‘those who do not know
market conditions from the overreachings of those who do.’” (internal quotations omitted)).
Because POSCO has not pleaded a plausible Section 8–401 claim, Count Two must be
dismissed.
III. THE COMPLAINT FAILS TO STATE A DGCL § 158 CLAIM.
The Complaint also fails to state a claim under 8 Del. C. § 158. To the extent Section 158
supports an independent cause of action apart from Section 8–401,
10 it provides equitable relief
alone — which POSCO does not seek and, in any event, has already received.
Section 158 of the DGCL provides that “[e]very holder of stock represented by certificates
shall be entitled to have a certificate signed by, or in the name of, the corporation by any 2
authorized officers of the corporation representing the number of shares registered in certificate
form.” Compl. ¶ 33 (quoting 8 Del. C. § 158). Delaware courts have clarified that, “y necessary
implication this includes the right to a proper certificate without a legend or restriction, where
such a legend is no longer appropriate.” Leonard, 2000 WL 1528909, at *8 (quoting Bender,
514 A.2d at 1115 (alterations omitted)). Count Three of the Complaint alleges that, by delaying
the removal of the restrictive legend from POSCO’s shares, FuelCell denied POSCO the
certificates to which it was entitled under Section 158 and caused POSCO over $1 million in losses
as a result. Id. ¶¶ 77–80. POSCO seeks an award of monetary damages to redress its alleged loss.
Id. at 17 (Prayer for Relief).
Unlike Section 8–401, which provides for damages under appropriate circumstances, see
10 The rights POSCO seeks to enforce under Sections 8–401 and 158 are coextensive. Often,
they are pleaded together as single claim. See, e.g., Leonard Loventhal Acct. v. Hilton Hotels
Corp., No. 17803, 2000 WL 1528909, at *8 (Del. Ch. Oct. 10, 2000), aff’d sub nom. Account v.
Hilton Hotels Corp., 780 A.2d 245 (Del. 2001); Klita v. Cyclo3pss Corp., No. 15374, 1997 WL
33174421, at *1 (Del. Ch. Apr. 8, 1997); Bender, 514 A.2d at 1115.
Case 1:20-cv-07509-MKV Document 25 Filed 10/21/20 Page 26 of 33
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6 Del. C. § 8–401(b), Section 158 provides injunctive relief alone. In particular, “an action will
lie under Section 158 to compel a corporation to issue a certificate where one has not theretofore
been issued.” 1 Corp. & Com. Prac. in Del. Ch. § 9.03; accord Graham v. Com. Credit Co., 200
A.2d 828, 831 (Del. 1964) (“[T]his action was brought to compel the issuance to the appellant of
new certificates for 11,600 shares pursuant to 8 Del. C. § 158.”); Caravias v. Interpath Commc’ns,
Inc., No. 3301, 2008 WL 2268355, at *3 (Del. Ch. May 28, 2008) (“[Plaintiff] seeks an order
compelling Interpath to issue the Deficiency Shares in accordance with the requirements of 8 Del.
C. § 158.”); Klita, 1997 WL 33174421, at *1–2 (“Count V seeks to compel Cyclo3pss to issue to
plaintiff unrestricted shares of common stock in accordance with 6 Del. C. § 8–401 and 8 Del. C.
§ 158. . . . [P]laintiff’s right under section 158 to a ‘clean’ certificate is no different than the specific
performance claim under Count I.”).
POSCO does not seek injunctive relief in this case. See Compl. at 17. And, in any event,
POSCO has already received the delegended stock certificates to which it was allegedly entitled.
Id. ¶ 53. Count Three thus seeks relief that is not authorized by the statute, and is moot as to the
only relief that Section 158 could provide. See, e.g., In re Fisher for DNAinfo, 722 F. App’x 40,
41 (2d Cir. 2018) (“A case becomes moot, at any stage of litigation, when there is no longer a live
case or controversy for a court to decide, such as when the plaintiff has already received the relief
sought.”); Schlenger v. Fid. Emp. Servs. Co., LLC, 785 F. Supp. 2d 317, 336–37 (S.D.N.Y. 2011)
(granting summary judgment as to ERISA claim seeking monetary damages when statute provided
only equitable relief).
Even if that were not the case, however, POSCO’s Section 158 claim would fail for the
same reasons as its claim under Section 8–401. Section 158 entitles a stockholder to a delegended
stock certificate only “where such a legend is no longer appropriate.” Compl. ¶ 33 (quoting
Case 1:20-cv-07509-MKV Document 25 Filed 10/21/20 Page 27 of 33
22
Bender, 514 A.2d at 1115). For the same reasons that the Complaint has not adequately pleaded
a claim under Section 8–401, it has not adequately alleged that FuelCell failed to remove a
restrictive legend that was no longer appropriate. Namely, the complaint does not allege when the
restrictive legend was no longer appropriate — i.e., when POSCO satisfied all the preconditions
for its removal. And documents integral to the Complaint and referenced therein demonstrate that
FuelCell, in fact, removed the restrictive legend from POSCO’s shares promptly after POSCO
fulfilled its statutory and contractual conditions precedent. See Exs. 2, 4, 5; see also Leonard,
2000 WL 1528909, at *8–9 (dismissing claim under both §§ 8–401 and 158 when plaintiff failed
to show restrictive legend was “no longer appropriate”). For all of these reasons, Count Three
must be dismissed.
IV. THE COMPLAINT FAILS TO STATE A CLAIM FOR TORTIOUS INTERFERENCE WITH
PROSPECTIVE BUSINESS ADVANTAGE UNDER NEW YORK LAW.
Count Four, alleging tortious interference with POSCO’s prospective business advantage,
is duplicative of Counts One through Three and fails to state a claim in any event. “Under New
York law, claims are duplicative [and are properly dismissed as such] when both ‘arise from the
same facts and seek the identical damages for each alleged breach.’” Deutsche Bank Nat. Tr. Co.
v. Quicken Loans Inc., 810 F.3d 861, 869 (2d Cir. 2015) (quoting Amcan Holdings, Inc. v.
Canadian Imperial Bank of Com., 70 A.D.3d 423, 426 (N.Y. App. Div. 2010)). A tortious
interference claim is duplicative of a breach of contract claim when “the conduct that allegedly
constitutes tortious interference . . . is exactly the same conduct [p]laintiffs assign as a breach of
contract.” Norte v. Worldbusiness Capital, Inc., No. 14-10143, 2015 WL 7730980, at *12
(S.D.N.Y. Nov. 24, 2015), aff’d sub nom. Maricultura Del Norte, S. de R.L. de C.V. v. Umami
Sustainable Seafood, Inc., 769 F. App’x 44 (2d Cir. 2019). Likewise, a common law claim is
duplicative of a statutory claim when the former “rise[s] and fall[s]” with the latter. In re Novartis
Case 1:20-cv-07509-MKV Document 25 Filed 10/21/20 Page 28 of 33
23
& Par Antitrust Litig., No. 18-11835, 2019 WL 3841711, at *7 (S.D.N.Y. Aug. 15, 2019). That
is precisely the case here.
The Complaint alleges that FuelCell tortiously interfered with the prospective sale of
POSCO’s shares by “failing to reasonably and timely respond to POSCO’s request,” causing
POSCO to suffer “damages in excess of over $1,000,000.00.” Compl. ¶¶ 81–88. POSCO’s
tortious interference claim, in other words, rests on exactly the same facts, and seeks exactly the
same damages, as the three claims before it. See id. ¶¶ 58–64 (Count One) (“POSCO realized a
loss of over $1,000,000.00 from its inability to sell its shares due to FuelCell’s unjustified and
unlawful delays.”); ¶¶ 65–74 (Count Two) (“POSCO realized a loss of over $1,000,000.00 from
its inability to sell its shares due to FuelCell’s unjustified and unlawful delays.”); ¶¶ 75–80 (Count
Three) (“POSCO realized a loss of over $1,000,000.00 from its inability to sell its shares due to
FuelCell’s unjustified and unlawful delays.”). Because Count Four arises from the same facts and
seeks the same damages as Counts One through Three, it should be dismissed as duplicative. See
Deutsche Bank, 810 F.3d at 869; Rinaldi v. SCA La Goutte, D’Or, No. 16-1901, 2020 WL
5441290, at *6 (S.D.N.Y. Sept. 9, 2020) (dismissing unfair competition and breach of fiduciary
duty claims as duplicative of breach of contract claim); Ethelberth v. Choice Sec. Co., 91 F. Supp.
3d 339, 362 (E.D.N.Y. 2015) (dismissing common law claims seeking the same recovery and
“premised on the same facts” as statutory claims).
In any event, however, Count Four must be dismissed because the Complaint fails
completely to state a tortious interference claim. Under New York law, a claim for tortious
interference with prospective economic advantage lies only when “(1) [the plaintiff] had a business
relationship with a third party; (2) the defendant knew of that relationship and intentionally
interfered with it; (3) the defendant acted solely out of malice, or used dishonest, unfair, or
Case 1:20-cv-07509-MKV Document 25 Filed 10/21/20 Page 29 of 33
24
improper means; and (4) the defendant’s interference caused injury to the relationship.” Kirch v.
Liberty Media Corp., 449 F.3d 388, 400 (2d Cir. 2006) (citation omitted). “The failure to identify
a specific business relationship renders a plaintiff’s allegations to the speculative level and, thus,
insufficient.” AYDM Assocs., LLC v. Town of Pamelia, 205 F. Supp. 3d 252, 276 (N.D.N.Y. 2016),
aff’d, 692 F. App’x 78 (2d Cir. 2017); see also Mehrhof, 168 A.D.3d at 714 (“In order to state a
cause of action to recover for tortious interference with prospective economic advantage, the
plaintiff must allege a specific business relationship with an identified third party with which the
defendants interfered.”).
POSCO has not identified a specific business relationship, or a third party to whom it would
have sold its shares, but for FuelCell’s alleged interference. Instead, Count Four — and, indeed,
the Complaint as a whole — rests on the possibility that POSCO could have sold its shares earlier
and for a greater sum if FuelCell had delegended them more quickly.
11
See Compl. ¶ 82. That is
not enough to state a claim under New York law. See, e.g., Allocco Recycling, Ltd. v. Doherty,
378 F. Supp. 2d 348, 375 (S.D.N.Y. 2005) (“Plaintiff does not allege that it had any specific
business relationship with which Defendants interfered and therefore has failed to plead that but
for [Defendants’] actions it would have consummated a business relationship.” (internal quotation
omitted)); see also AYDM Assocs., LLC, 205 F. Supp. 3d at 276 (“Tortious inference with a
business relationship is, by definition, conduct directed not at the plaintiff itself, but at the party
with which the plaintiff has or seeks to have a relationship. Therefore, any conduct alleged to be
tortious interference must be directed at the third party.” (internal quotations and citation omitted)).
11 Notably, POSCO’s own public announcement demonstrates that POSCO’s board did not
even approve the decision to sell POSCO’s stake in FuelCell until November 15, 2018. See
Yonhap News Agency, POSCO Energy Board OKs Sale of Stake in U.S. Fuel Cell Firm (Nov. 15,
2018), https://en.yna.co.kr/view/AEN20181115009200320.
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25
Nor does the Complaint adequately allege that FuelCell’s alleged interference was
“dishonest, unfair, or improper,” as the third element requires. See Kirch, 449 F.3d at 400. “In all
but the most egregious circumstances, ‘dishonest, unfair, or improper means’ must amount to
misconduct that constitutes either a crime or an independent tort.” PKG Grp., LLC v. Gamma
Croma, S.p.A., 446 F. Supp. 2d 249, 251 (S.D.N.Y. 2006). As discussed above, FuelCell was not
under any duty to remove the restrictive legend from POSCO’s stock certificates until POSCO
satisfied the prerequisites for removal, which FuelCell promptly did upon their satisfaction. See
Compl. ¶¶ 21, 67–68; 6 Del. C. § 8–401 cmt. 1 (“A duty exists only if certain preconditions exist.
If any of the preconditions do not exist, there is no duty to register transfer.”). Because the
Complaint fails to adequately plead the elements of a tortious interference claim, Count Four must
likewise be dismissed.
CONCLUSION
For the foregoing reasons, the Complaint should be dismissed with prejudice
NOTICE OF FUELCELL ENERGY, INC.’S MOTION TO DISMISS
PLEASE TAKE NOTICE that, upon the filing of the accompanying Memorandum of
Law in Support of FuelCell Energy Inc.’s Motion to Dismiss the Complaint, Defendant FuelCell
Energy, Inc. (“Defendant”), by the undersigned counsel, will move this Court, before the
Honorable Mary Kay Vyskocil, United States District Judge, at the Daniel Patrick Moynihan
United States Courthouse, located at 500 Pearl Street, Room 2230, New York, New York 10007,
for an Order dismissing with prejudice all claims against it under Rule 12(b)(6) of the Federal
Rules of Civil Procedure, and granting such other and further relief as this Court deems proper.
PLEASE TAKE FURTHER NOTICE that Defendant respectfully requests oral
argument on this Motion.
LMAO! The "investors in general" don't hold the majority.
The shares were already set aside for this purpose and they are restricted.
xplanation of Responses:
(1) Deferred common stock units issued to the reporting person pursuant to the FuelCell Energy, Inc. Directors Deferred Compensation Plan. In accordance with elections made by the reporting person under the Directors Deferred Compensation Plan, each common stock unit is the economic equivalent of one share of FuelCell Energy common stock, payable to the reporting person in stock upon separation from service as a director.
No. It's a proceed to submit a motion to dismiss.
21
Filed & Entered: 10/14/2020
Memo Endorsement
Docket Text: MEMO ENDORSEMENT on re: [19] Letter filed by FuelCell Energy, Inc. ENDORSEMENT: Defendant's request for a pre-motion conference is DENIED. The Court hereby GRANTS Defendant leave to file the motion to dismiss. IT IS HEREBY ORDERED that on or before October 19, 2020, the parties shall file via ECF a letter proposing a briefing schedule. (Signed by Judge Mary Kay Vyskocil on 10/14/2020) (mro)
Doc.
No. Dates Description
22
Filed & Entered: 10/15/2020
Letter
Docket Text: LETTER addressed to Judge Mary Kay Vyskocil from Gregory M. Williams dated October 15, 2020 re: Motion to Dismiss Briefing Schedule. Document filed by FuelCell Energy, Inc...(Williams, Gregory)
23
Filed & Entered: 10/15/2020
Memo Endorsement
Docket Text: MEMO ENDORSEMENT on re: [22] Letter filed by FuelCell Energy, Inc. ENDORSEMENT: The Court hereby adopts the parties' proposed briefing schedule for Defendant's Motion to Dismiss. SO ORDERED. (Motions due by 10/21/2020., Responses due by 11/18/2020, Replies due by 12/2/2020.) (Signed by Judge Mary Kay Vyskocil on 10/15/2020) (jca)
October 7, 2020
VIA ECF FILING
Hon. Mary Kay Vyskocil
United States District Court
Southern District of New York
500 Pearl Street, Room 2230
New York, NY 10007
Re: POSCO Energy Co., Ltd. v. FuelCell Energy, Inc., Case No. 1:20-cv-07509
Dear Judge Vyskocil:
Defendant FuelCell Energy, Inc. (“FuelCell”) respectfully requests a pre-motion
conference to seek leave to file a motion to dismiss the Complaint (ECF 1 and, as corrected, ECF
8) filed by POSCO Energy Co., Ltd. f/k/a POSCO Power (“POSCO”) on September 14, 2020.
POSCO’s Complaint advances four duplicative claims that seek the same relief for the
same alleged injury. On June 4, 2018, POSCO asked FuelCell to remove a restrictive legend from
POSCO’s unregistered stock certificates, so that POSCO could sell its FuelCell shares on the
public market. Compl. ¶ 38. The Complaint alleges that FuelCell did not act quickly enough in
fulfilling POSCO’s request, causing POSCO to lose out on the opportunity to sell its shares while
stock prices were relatively higher. Id. ¶¶ 53, 55–57. The Complaint contends that FuelCell’s
“unreasonable delay” in satisfying POSCO’s request constituted (1) a breach of contract under
New York law, (2) a violation of Delaware General Corporation Law (“DGCL”) § 8–401, (3) a
violation of DGCL § 158, and (4) tortious interference with POSCO’s prospective business
advantage. As to each count, the Complaint alleges that POSCO “realized a loss of over
$1,000,000.00 from its inability to sell its shares due to F[uelCell]’s unjustified and unlawful
delays,” for which POSCO seeks monetary damages. See id. ¶¶ 63, 70, 79, 88.
POSCO’s Complaint fails to state a plausible claimfor relief. As the Complaint necessarily
acknowledges, there were two prerequisites (among others) that POSCO was required to satisfy
before FuelCell could remove the restrictive legends from POSCO’s stock certificates. See Compl.
¶¶ 67–68. POSCO did not satisfy either at the time of its delegending request. See id. ¶¶ 38, 45.
First, pursuant to DGCL § 8–401 and the express terms of the parties’ Stock Purchase
Agreements (“SPAs”), POSCO was required to provide FuelCell with the original, legended
certificates before FuelCell could replace them with new, unrestricted shares. See Compl. ¶ 21
(acknowledging that FuelCell’s contractual obligation to delegend POSCO’s shares arose
“following the delivery by the Purchaser to the Company or the Company’s transfer agent of a
legended certificate” (quoting SPAs; emphasis added)); see also 6 Del. C. § 8–401; 7 Frederick
H. Miller, Hawkland Unif. Com. Code Series § 8–401:02 (2013) (“Perhaps the most obvious
Case 1:20-cv-07509-MKV Document 19 Filed 10/07/20 Page 1 of 3
2
requirement that must be satisfied before the issuer’s duty to register a transfer arises, is that the
certificate be presented.”). The SPAs and relevant securities laws impose this requirement
because, “f a new certificate was registered and issued without the old one being surrendered,
the issuer could find itself subject to claims based upon both.” 7 Miller, § 8–401:02.
Second, pursuant to the stock certificates themselves and DGCL §§ 8–401 and 8–204,
POSCO was also required to provide a representation letter from counsel, verifying that POSCO’s
contemplated sale was exempt from the registration requirements of the Securities Act of 1933.
POSCO’s stock certificates stated that POSCO’s shares had not been registered with the SEC and,
consequently, could not be sold “except pursuant to an effective registration statement . . . or
pursuant to an available exemption from . . . the registration requirements of the Securities Act and
in accordance with applicable state securities laws as evidenced by a legal opinion of counsel to
the Transferor to such effect, the substance of which shall be reasonably acceptable to the
Company.” Compl. ¶ 20 (quoting restrictive legends; emphasis added). DGCL § 8–401 requires
a stockholder to comply with all restrictions on the face of its stock certificates before a stock
issuer is required to delegend the stockholder’sshares. See 6 Del. C. §§ 8–204, 8–401(a)(5).
The Complaint acknowledges, as it must, that presenting POSCO’s stock certificates and
providing a representation letter from counsel were “prerequisites” for removal of the restrictive
legends, and that FuelCell’s alleged duty to replace POSCO’s shares did not arise until those
prerequisites were met. See Compl. ¶¶ 67–68 (alleging POSCO “met all of the statutory
prerequisites for removal of the restrictive legend” because it “presented the shares and provided
a Rule 144 opinion letter . . . triggering F[uelCell]’s duty to remove the restrictive legends”);
accord Del. Code Ann. tit. 6, § 8–401 cmt. 1 (West) (“If any of the preconditions do not exist,
there is no duty to register transfer.”).
It is also clear from the face of the Complaint that POSCO did not satisfy either prerequisite
for delegending as of its June 4, 2018 demand. Purposefully vague as to chronology, the
Complaint alleges that POSCO demanded removal of the restrictive legends from its shares on
June 4, 2018 and that, on some unspecified date(s), POSCO then provided the required
representation letter and original share certificates “n the hopes of moving things forward.” Id.
¶¶ 38, 45; see also id. ¶ 51 (conceding POSCO did not provide the representation letter until August
17, 2018). POSCO’s omission regarding when it provided FuelCell with the legended stock
certificates and representation letter is fatal to its claims.
To begin with, the Complaint makes clear that POSCO did not satisfy the contractual or
statutory prerequisites for removal of the restrictive legends from its shares as of June 4, 2018,
which forecloses POSCO’s demands for relief as of that date. Furthermore, because the Complaint
conspicuously omits when POSCO allegedly satisfied those prerequisites, the Complaint cannot
demonstrate that FuelCell “unreasonably delayed” in acting on POSCO’s request. A plaintiff does
not adequately plead a plausible claim for “unreasonable delay” when it purposefully fails to plead
the dates of the critical events to establish liability. See Dejesus v. HF Mgmt. Servs., LLC, 726
F.3d 85, 87 (2d Cir. 2013) (“A complaint must therefore contain more than ‘naked assertion[s]’
devoid of ‘further factual enhancement.’” (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009))).
Finally, there is a reason that POSCO attempts to plead around the critical dates. Documents
integral to the Complaint and referenced therein demonstrate that POSCO, in fact, did not satisfy
Case 1:20-cv-07509-MKV Document 19 Filed 10/07/20 Page 2 of 3
3
either prerequisite until late August 2018 and that FuelCell’s transfer agent immediately removed
the restrictive legends from POSCO’s shares thereafter.
Because the Complaint does not allege sufficient facts to support the conclusion that
FuelCell “unreasonably delayed” in reissuing POSCO’s stock certificates — the basis for all four
counts — and documents integral to the Complaint confirm that FuelCell, in fact, delegended
POSCO’s shares immediately after it satisfied the requisite conditions precedent, Counts One
through Four must be dismissed.
Counts Three and Four suffer from additional, fundamental defects, which independently
require their dismissal. Count Three, which seeks damages under DGCL § 158, is untenable
because Section 158 offers equitable relief alone —specifically, the power to compel a corporation
to issue appropriate stock certificates. See 8 Del. C. § 158; 1 Corp. & Com. Prac. in Del. Ch. §
9.03 (“[A]n action will lie under Section 158 to compel a corporation to issue a certificate where
one has not theretofore been issued.”). POSCO does not seek equitable relief. And it has already
received the delegended certificates that Section 158 could provide. Count Three thus seeks relief
that is not authorized by the statute, and is moot as to the only relief that Section 158 could provide.
Count Fouris duplicative of POSCO’s other claims and patently fails to state a claim under
New York law. See Deutsche Bank Nat’l Tr. Co. v. Quicken Loans Inc., 810 F.3d 861, 869 (2d
Cir. 2015) (“Under New York law, claims are duplicative [and are properly dismissed as such]
when both ‘arise from the same facts and seek the identical damages for each alleged breach.’”
(citation omitted)). Under New York law, tortious interference with prospective business
advantage requires intentional interference with “a specific business relationship with an identified
third party.” Mehrhof v. Monroe-Woodbury Cent. Sch. Dist., 168 A.D.3d 713, 714 (N.Y. App.
Div. 2019) (emphasis added). Count Four must also be dismissed because the Complaint does not
allege “a specific business relationship with an identified third party,” but rather is based only on
the possibility that POSCO could have sold its shares earlier, but for FuelCell’s alleged delay. See
Compl. ¶¶ 82, 84, 87–88.
FuelCell therefore respectfully requests leave to file a motion to dismiss the Complaint.
Pursuant to Rule 4(A)(i) of the Court’s Individual Rules of Practice in Civil Cases, FuelCell has
conferred with POSCO, which has no objection to FuelCell’s request but will oppose the motion
and respond to this letter accordingly.
Respectfully submitted,
Gregory M. Williams
Let's see how long it takes to get a PR on this.
Solid Oxide Electrolysis Demonstration - Under this proposal, FuelCell Energy Inc. (Danbury, CT) is teaming with Idaho National Laboratory on a solid oxide electrolysis cell (SOEC) system demonstration and validation project to deliver a 250 kW SOEC turn-key sub-scale system with ultra-high efficiency and low cost. The system will be critically verified and validated through collaboration with INL such that it will be ready to integrate into the nuclear environment. These efforts will enable modular 200 to 500 MW SOEC utility scale systems to be available to the market and demonstrate how nuclear-hydrogen production operations can help nuclear plants diversify and increase their profitability by switching between electricity production and hydrogen generation. Total Award Value: $12,500,000
FuelCell Energy Successfully Raises Capital to Advance Business Goals
October 07, 2020 18:58 ET | Source: FuelCell Energy, Inc.
DANBURY, Conn., Oct. 07, 2020 (GLOBE NEWSWIRE) -- FuelCell Energy, Inc. (Nasdaq: FCEL), a global leader in fuel cell technology utilizing its proprietary, state-of-the-art fuel cell platforms to enable a world empowered by clean energy, announced that, between June 2020 and October 2020, it raised approximately US$177.35 million in gross proceeds from multiple offerings of its common stock, including both at the market and underwritten offerings. Gross proceeds are calculated before deducting sales commissions, underwriting discounts and offering expenses.
Jason Few, CEO and President of FuelCell Energy said, “We are very pleased with the success of our capital raising efforts and the strong investor demand for our common stock. With this additional financing, FuelCell Energy is well-positioned to advance our business growth goals, including developing projects and growing our presence in South Korea. We have significantly strengthened the Company’s balance sheet and increased our financial flexibility. Importantly, FuelCell Energy is enhancing our global operations and leadership in clean tech energy while fulfilling our commitments to our customers and remaining focused on delivering value for our shareholders.”
FuelCell Energy is dedicated to growing its platform and sales pipeline of opportunities in South Korea and other Asian markets by providing excellent service and reliable power, thermal energy, hydrogen, and carbon capture directly to utilities and other customers. FuelCell Energy embraces a customer-focused and customer-driven culture.
FuelCell Energy continues to advance innovative technologies that it believes will enable hydrogen-powered cars and trucks to cleanly operate globally. In the U.S., FuelCell Energy is deploying its tri-generation hydrogen technology platform at a new facility at the Port of Long Beach, California to meet the power needs of Toyota at the port, providing hot water for car washing and the hydrogen needed to power the Toyota Mirai fuel cell passenger vehicle, the Toyota FCET/Kenworth T680 and Toyota Uno heavy duty trucks. As FuelCell Energy continues to advance its innovative technologies, the Company intends to deliver electrolysis and hydrogen based long duration energy storage to support intermittent technologies such as wind and solar, and enable hydrogen to repower existing combustion engines, transforming existing assets into zero carbon power and potentially extending the economic life of current power generation assets.
This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any offer, solicitation or sale of any securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
About FuelCell Energy
FuelCell Energy, Inc. (NASDAQ: FCEL) is a global leader in developing environmentally responsible distributed baseload power solutions through our proprietary, molten-carbonate fuel cell technology. We develop turn-key distributed power generation solutions and operate and provide comprehensive service for the life of the power plant. We are working to expand the proprietary technologies that we have developed over the past five decades into new products, applications, markets and geographies. Our mission and purpose remains to utilize our proprietary, state-of-the-art fuel cell platforms to reduce the global environmental footprint of baseload power generation by providing environmentally responsible solutions for reliable electrical power, hot water, steam, chilling, distributed hydrogen, microgrid applications, electrolysis, long-duration hydrogen-based energy storage and carbon capture and, in so doing, drive demand for our products and services, thus realizing positive stockholder returns. Our fuel cell solution is a clean, efficient alternative to traditional combustion-based power generation and is complementary to an energy mix consisting of intermittent sources of energy, such as solar and wind turbines. Our systems answer the needs of diverse customers across several markets, including utility companies, municipalities, universities, hospitals, government entities and a variety of industrial and commercial enterprises. We provide solutions for various applications, including utility-scale distributed generation, on-site power generation and combined heat and power, with the differentiating ability to do so utilizing multiple sources of fuel including natural gas, renewable biogas (i.e., landfill gas, anaerobic digester gas), propane and various blends of such fuels. Our multi-fuel source capability is significantly enhanced by our proprietary gas-clean-up skid.
For more information please visit www.fuelcellenergy.com
SureSource, SureSource 1500, SureSource 3000, SureSource 4000, SureSource Recovery, SureSource Capture, SureSource Hydrogen, SureSource Storage, SureSource Service, SureSource Capital, FuelCell Energy, and FuelCell Energy logo are all trademarks of FuelCell Energy, Inc.
Forward-Looking Statements
This news release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements with respect to the Company’s anticipated financial results and statements regarding the Company’s plans and expectations regarding the continuing development, commercialization and financing of its fuel cell technology and its business plans and strategies. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Factors that could cause such a difference include, without limitation, changes to projected deliveries and order flow, changes to production rate and product costs, general risks associated with product development, manufacturing, changes in the regulatory environment, customer strategies, ability to access certain markets, unanticipated manufacturing issues that impact power plant performance, changes in critical accounting policies, access to and ability to raise capital and attract financing, potential volatility of energy prices, rapid technological change, competition, the Company’s ability to successfully implement its new business strategies and achieve its goals, the Company’s ability to achieve its sales plans and cost reduction targets, changes by the U.S. Small Business Administration or other governmental authorities to, or with respect to the implementation or interpretation of, the Coronavirus Aid, Relief, and Economic Security Act, the Payroll Protection Program or related administrative matters, and concerns with, threats of, or the consequences of, pandemics, contagious diseases or health epidemics, including the novel coronavirus, and resulting supply chain disruptions, shifts in clean energy demand, impacts to customers’ capital budgets and investment plans, impacts to the Company’s project schedules, impacts to the Company’s ability to service existing projects, and impacts on the demand for the Company’s products, as well as other risks set forth in the Company’s filings with the Securities and Exchange Commission. The forward-looking statements contained herein speak only as of the date of this press release. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statement to reflect any change in the Company’s expectations or any change in events, conditions or circumstances on which any such statement is based.
Media and Investor Relations Contact:
FuelCell Energy, Inc.
ir@fce.com
+1 203-205-2491
Source: FuelCell Energy
Miscommunications or what? Why is this different?
DANBURY, Conn., Sept. 29, 2020 (GLOBE NEWSWIRE) -- FuelCell Energy, Inc. (Nasdaq: FCEL) (“FuelCell Energy†or the “Companyâ€) today announced the pricing of its underwritten public offering of 43,500,000 shares of its common stock (the “Offeringâ€), at a public offering price of $2.10 per share, for gross proceeds of approximately $91,350,000. The Offering is expected to close on or about October 2, 2020, subject to customary closing conditions. FuelCell Energy has also granted the underwriters a 30-day option to purchase up to 6,525,000 additional shares of its common stock.]]>
The Offering
Issuer
FuelCell Energy, Inc.
Common stock offered by us
31,000,000 shares (or 35,650,000 shares if the underwriters option to purchase additional shares is exercised in full)
Common stock outstanding after
this offering
270,374,041 shares (or 275,024,041 shares if the underwriters option to purchase additional shares is exercised in full)
Use of proceeds
We estimate that the net proceeds from this offering will be approximately $million (or approximately $million if the underwriters option to purchase additional shares is exercised in full), after deducting underwriting discounts and commissions and our expenses.
We intend to use the net proceeds from this offering for project development, project financing, working capital support and general corporate purposes. Additionally, we may also use a portion of the net proceeds of this offering to pay all or a portion of the principal redemption price of the issued and outstanding ClassA Preferred Shares of FCE FuelCell Energy Ltd., together with accrued and unpaid dividends thereon. Finally, we may also use a portion of the net proceeds of this offering to make certain other payments to lenders, including to (i)Orion (as defined below) under the Orion Facility (as defined below), (ii)the Connecticut Green Bank, and/or (iii)Liberty Bank for amounts received under the PPP Note (as defined below) to the extent that the PPP Note is not forgiven. See Use of Proceeds on page S-8 for additional information.
Nasdaq Global Market symbol
FCEL
Looks like POSCO is trying to get about $25M.
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
Case No.:
COMPLAINT FOR DAMAGES
DEMAND FOR JURY TRIAL
Plaintiff POSCO Energy Co., Ltd. (“PE” or “Plaintiff”), by its attorneys, Arnold & Porter Kaye Scholer LLP (“Arnold & Porter”), for its complaint against defendant FuelCell Energy, Inc. (“FCE” or “Defendant”) alleges, on information as to itself and on information and belief as to others, as follows:
NATURE OF THE ACTION
1. PE was at one time one of FCE’s largest outside stockholders. This action arises out of FCE’s unjustified delay in removing restrictive legends on shares owned by PE, thereby preventing PE from selling its FCE shares.
2. Between 2007 and 2012, pursuant to three Securities Purchase Agreements (“SPAs”), PE purchased a total of 30,786,418 restricted shares in FCE in the aggregate amount of $84,121,624.80 (Eighty four million one hundred twenty one thousand six hundred twenty four dollars and eighty cents).
3. The stock certificates bore restrictive legends that restricted PE’s ability to sell its FCE shares.
4. Each of the SPAs contained certain representations, warranties, and covenants obligating FCE to facilitate the removal of the restrictive legend from the stock certificates sold pursuant to the SPAs in the event that PE desires to transfer its shares.
5. In an attempt to deny PE of its rights under the SPAs and statutory and common law, FCE continually and wrongfully delayed its removal of restrictive legends on PE’s stock certificates, including by unreasonably demanding that PE give up certain of its bargained- for rights under the SPAs in exchange for FCE’s agreement to remove the restrictive legends.
6. As a result of FCE’s misconduct and delay, PE was unable to sell its shares as planned, resulting in a loss exceeding $1,000,000.00 (One million dollars).
JURISDICTION AND VENUE
7. This Court has federal diversity jurisdiction under 28 U.S.C. § 1332. FCE is incorporated in Delaware. Its principal place of business is Connecticut. PE is incorporated in Korea. Its principal place of business is Korea. Therefore, complete diversity of citizenship exists. The amount in controversy, exclusive of interest and costs, exceeds the sum or value of
$75,000.
8. Venue is proper in this Court pursuant to 28 U.S.C. § 1391. Acts and transactions complained of below have occurred in this District.
9. This action arises out of the transaction of business, commission of tortious injury, and other activities within the Southern District of New York and elsewhere. PE’s claims in this action arise out of PE’s acquisition and ownership of its shares of FCE.
10. FCE purposefully invoked the protections of New York law in the New York choice of law clause in the SPAs. See SPA § 7.3.
11. Extensive negotiations and drafting of the SPAs took place between FCE and PE through their respective lawyers located in Manhattan. The relevant transactions closed in the offices of FCE’s law firm or PE’s law firm, which were located in Manhattan, and each
2
party was required to deliver to the other certain necessary documents at the closing in Manhattan. Representatives of PE and FCE traveled to Manhattan to attend the closing from Korea and Connecticut, respectively. Furthermore, FCE’s annual stockholders’ meeting takes place in New York, to which PE was invited to attend and did on occasion attend. Also, FCE’s common stock is listed on the NASDAQ, which is located in New York. FCE’s stock transfer agent, American Stock Transfer, was, at all relevant times, located in New York City.
THE PARTIES
12. Plaintiff POSCO Energy Co., Ltd. engages in a wide range of business activities in the energy sector, including the supply of energy, off-gas combined cycle power generation, coal-fired power generation, fuel cell development, renewable energy, and the recycling of resources. POSCO Energy Co., Ltd was previously named POSCO Power until it changed its name in February of 2012. PE is Korea’s largest independent power producer.
13. According to its filings with the U.S. Securities and Exchange Commission, Defendant FuelCell Energy, Inc., together with its subsidiaries, is an integrated fuel cell company with a global presence in delivering environmentally responsible distributed baseload power solutions through its proprietary, molten-carbonate fuel cell technology. FCE develops turn-key distributed power generation solutions and operates and provides comprehensive service for the life of the power plant.
BACKGROUND
A. PE Purchases Shares in FCE
14. Pursuant to three SPAs dated February 7, 2007, June 9, 2009, and April 30, 2012, PE purchased a total of 30,786,418 restricted shares in FCE.
15. Pursuant to the 2007 SPA, in February 2008, PE purchased 3,822,630 shares in FCE at $7.60 per share at a cost of $29,051,900.00.
16. Pursuant to the 2009 SPA, in October 2009, PE purchased 6,963,788 shares in FCE at $3.60 per share at a cost of $25,069,638.80.
17. Pursuant to the 2012 SPA, in April 2012, PE purchased 20,000,000 shares in FCE at $1.50 per share at a cost of $30,000,000.00.
18. All three agreements are “governed by and interpreted in accordance with the laws of the State of New York.” SPA § 7.3.
19. Each of the agreements contained certain representations and warranties relating to the fact that the stock certificates will bear a restrictive legend because the underlying securities were sold in reliance upon an exemption from registration under the Securities Act, or Regulation S thereunder. The SPAs also contained representations, warranties, and covenants requiring FCE to facilitate the removal of such legend in the event that PE desires to transfer its shares. See, e.g., SPA §§ 3.8, 4.8.
20. Each of the three SPAs contained an identical § 3.8(a), which states that the certificates representing the shares will bear restrictive legends in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OF THE UNITED STATES IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR REGULATIONS THEREUNDER, AND ACCORDINGLY, MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, TRANSFERRED OR ASSIGNED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
21. Each of the three SPAs also contained an identical § 3.8(b), which states that PE may request that FCE remove, and that FCE agrees to remove, the restrictive legends “if such Shares are eligible for sale without restrictions under Rule 144 or under any no-action letter issued by the SEC.” The same provision further states that “[f]ollowing the time a legend is no longer required for any Shares hereunder, the Company will, no later than five (5) Business Days following the delivery by the Purchaser to the Company or the Company’s transfer agent of a legended certificate representing such Shares, accompanied by such additional information as the Company or the Company’s transfer agent may reasonably request, deliver or cause to be delivered to the Purchaser a certificate representing such Shares that is free from all restrictive and other legends.”
22. Each of the three SPAs also contained an identical § 6.6(1), which provides that FCE “shall cooperate” with PE “to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities to be offered pursuant to a Registration Statement and enable such certificates to be in such denominations or amounts, as the case may be, as such Holder may reasonably request and registered in such names as such Holder may request.”
23. Each of the three SPAs also contained an identical § 4.8, pursuant to which FCE covenanted that “[f]rom and after the date hereof, the Company shall use its reasonable best efforts to obtain as promptly as practicable any consent or approval of any Person, including any regulatory authority, required in connection with the transactions contemplated hereby.” Accordingly, SPA § 4.8 requires FCE to “use its reasonable best efforts to obtain as promptly as practicable” any consents or approvals required to remove the restrictive legend from the stock certificates upon PE’s request, as the SPAs expressly contemplated that the stock PE purchased pursuant to the agreements would eventually be resold.
24. In addition to the representations, warranties, and covenants relating to the restrictive legends and FCE’s obligation to facilitate the removal of such legend in the event that PE desires to transfer its shares, the SPAs also provided PE with certain rights relating to PE’s ownership of shares.
25. Section 4.17 of the 2012 SPA entitles PE to appoint an individual to the Board of Directors of FCE, provided that PE owns a certain number of FCE shares, and that PE’s nominee meets the criteria for nomination as a director as set forth in FCE’s Nominating and Corporate Governance Committee Charter.
26. Section 4.15 of the 2012 SPA and 2009 SPA grants PE the right to subscribe to new issuances of FCE’s securities, at the price and on the terms stated in any such New Issue Notice. Section 4.15 further provides notice requirements of the new issuance and sets forth the number of shares of new issuances that PE may purchase.
27. In addition, each of the three SPAs also expressly state that “covenants contained herein shall survive the execution of this Agreement and the Closing of the
transactions contemplated hereby (except to the extent expressly provided in this Agreement).”
See SPA § 7.13.
28. As a result of a 1-for-12 reverse stock split in December 2015, PE’s
ownership interest of 30,786,418 shares was converted into 2,565,534 shares.
29. In May 2019, FCE executed another 1-for-12 reverse stock split, such that
PE currently holds 63,794 shares.
B. Delaware Law Requires Issuers to Remove Restrictive Legends Upon Request of the Stockholder
30. A stockholder that is issued stock certificates displaying restrictive legends must request the issuance of replacement certificates with the legends removed before the stock can be sold.
31. Because FCE is incorporated in Delaware, claims made under the Uniform Commercial Code (“UCC”) proceed under Delaware law.
32. Under Delaware law, the rights of stockholders to obtain certificates without restrictive legends are established in 6 Del. C. § 8-401 and 8 Del. C. § 158.
33. Section 158 provides that “[e]very holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of, the corporation by any 2 authorized officers of the corporation representing the number of shares registered in certificate form.” “By necessary implication this includes the right to a proper certificate without a legend or restriction, where such a legend is no longer appropriate.” Bender v. Memory Metals, Inc., 514 A.2d 1109, 1115 (Del. Ch. 1986).
34. Section 8-401(a) provides for an issuer’s obligation to, upon request of a stockholder, register transfer of a security. Section 8-401 also applies to removal of a restrictive legend because a removal is deemed a registered transfer. Id.
35. Section 8-401(b) provides for damages for “loss resulting from unreasonable delay in registration or failure or refusal to register the transfer.”
C. PE Seeks to Sell Certain of Its Shares and FCE Refuses to Remove the Restrictive Legends
36. In early 2018, PE became interested in selling certain shares that it had acquired, pursuant to an exemption from registration provided under Rule 144 of the Securities Act of 1933.
37. The removal of restrictive legends typically occurs quickly and in a matter of days, but FCE delayed the process for months and would not agree to remove the restrictive legends pursuant to its obligations under 6 Del. C. § 8-401 and 8 Del. C. § 158 and the SPAs, until PE caved to its unreasonable demands, as set forth more fully below.
38. On June 4, 2018, PE requested that FCE remove the restrictive legends on
PE’s shares per SPA § 3.8.
39. On June 5, 2018, FCE informed PE that it had forwarded PE’s request to FCE’s external counsel for review.
40. On June 11, 2018, PE again requested that FCE remove the restrictive legends and requested that FCE provide PE with any necessary procedures to remove the restrictive legends.
41. On June 14, 2018, PE followed up once more by asking FCE to share any documentation required by FCE to remove the restrictive legend.
42. In response, FCE refused to remove the restrictive legends, despite its obligations to do so under UCC § 8-401, as implemented in Delaware at 6 Del. C. § 8-401, and the SPAs. Instead, FCE peppered PE with a variety of unreasonable and irrelevant requests.
43. As conditions for removing the restrictive legends, FCE insisted that PE
provide written representation that it was not an affiliate of FCE and that PE did not possess
material non-public information.
44. Given that any misuse of material non-public information by a stockholder
does not involve the issuer, or create a risk of liability for the issuer, the issuer has no legitimate
basis for requiring a representation that a stockholder does not possess any material non-public
In any event, there is no authority supporting the requirement of such information
as a pre-condition of removal. FCE’s request regarding confirmation that PE did not possess
material non-public information was clearly a fabricated excuse to delay removal of the
restrictive legends.
45. In the hopes of moving things forward, PE provided FCE with all other documentation FCE requested, including a Rule 144 opinion letter from counsel, and the original share certificates. FCE still refused to comply with its obligations to remove the restrictive legends.
1 Indeed, trading on the basis of material non-public information is not illegal unless obtained in a breach of duty owed to the source of the information. Regardless, PE was not attempting to trade
based on material non-public information.
46. Despite PE’s cooperation, FCE continued to take the wrongful and unreasonable position that it could not remove the restrictive legends unless PE verified that it did not possess material non-public information. Such an inquiry and condition are completely irrelevant to an issuer being asked to remove a restrictive legend, as an issuer has no duty to police the trades of its shareholders. FCE used this wrongful and unreasonable condition, and the ensuing dispute over the issue, to continue to delay the removal of the restrictive legends.
47. PE was eager to proceed with the sales of FCE stock that it had planned
to $16.20. Over the next two months, the price continued to fall, plummeting to $12.72 on
September 11, 2018.
48. Repeatedly insisting that PE could be deemed an affiliate because of its right
2009 and 2012 SPAs.
49. Despite PE’s grave reservations about giving up its bargained-for rights without receiving any additional consideration, it believed it had little choice but to agree to FCE’s unreasonable terms in order to salvage what little value remained in its investment.
50. On July 20, 2018, PE agreed to permanently waive its board appointment rights under Section 4.17 of the 2012 SPA. PE also reiterated its position that it is a non-affiliate of FCE and had not been an affiliate in the previous 90 days.
51. FCE continued to drag its feet. Eager to sell its shares, on August 17, 2018, PE sent FCE a draft waiver letter and a representation letter. PE removed a representation relating to FCE’s request for confirmation that PE is not in possession of material non-public information, due to the fact that such a representation was neither a necessary nor an appropriate condition for the removal of restrictive legends. Despite its earlier insistence on this representation, FCE did not object to this omission, thereby admitting that this request was a sham.
52. On August 22, 2018, PE entered into a Waiver Letter (the “Waiver Letter”), pursuant to which it acceded to FCE’s demands in order to effectuate the removal of the restrictive legends as expeditiously as possible.
53. FCE engaged in further dilatory tactics, and failed to remove the restrictive
legend from PE’s stock certificates for yet another two weeks after the Waiver Letter was signed.
FCE’s stock transfer agent finally notified PE on or about September 11, 2018 that the stock
could now be transferred. In the end, FCE took at least three months to fulfill its obligations as
an issuer when honoring PE’s bargained-for and statutory rights should have taken it a matter of
days.
54. FCE’s motive all along was to delay and discourage PE from selling its
shares in FCE.
55. Following the removal of the restrictive legends, PE sold a total of
1,800,000 shares at prices ranging from $6.72 to $8.51, as soon as it was able to, reducing the
number of shares it held to 765,534.
56. From June 4, 2018 to September 11, 2018, FCE’s stock price decreased by
over 45%, from $23.28 to $12.72 (adjusted for splits).
57. As a result, PE realized a loss of over $1,000,000.00 from its inability to
sell its shares due to FCE’s unjustified and unlawful delays.
COUNT I
(Breach of Covenant Under New York Law)
58. PE repeats and realleges the allegations of paragraphs 1-57 of this Complaint as if fully set forth herein.
59. Paragraph 4.8, which is identical in all three SPAs, provides that “[f]rom and after the date hereof, the Company shall use its reasonable best efforts to obtain as promptly as practicable any consent or approval of any Person, including any regulatory authority, required in connection with the transactions contemplated here-by.”
60. One of the transactions contemplated under the SPAs is the potential transfer of the shares it purchased pursuant to the agreement.
61. FCE failed to use its “reasonable best efforts” to obtain the consent or approval of removal of the restrictive legends.
62. Had FCE exercised its “reasonable best efforts” to remove the restrictive legends, PE would have been able to sell the shares earlier.
63. From June 4, 2018 to September 11, 2018, FCE’s stock price decreased by
over 45%, from $23.28 to $12.724 (adjusted for splits). As a result, PE realized a loss of over
$1,000,000.00 from its inability to sell its shares due to FCE’s unjustified and unlawful delays.
64. Accordingly, PE has been substantially damaged as a direct and proximate result of FCE’s aforementioned conduct.
COUNT II
(Violation of 6 Del. C. § 8-401)
65. PE repeats and realleges the allegations of paragraphs 1-64 of this Complaint as if fully set forth herein.
66. FCE was the issuer of the shares of common stock to PE.
67. PE met all of the statutory prerequisites for removal of the restrictive legend, triggering FCE’s duty to remove the restrictive legend.
68. PE presented the shares and provided a Rule 144 opinion letter, incorporating any revisions requested by FCE, and all of the requested documentation in order to have the restrictive legend removed from the shares, triggering FCE’s duty to remove the restrictive legends.
69. After PE followed up and communicated with FCE, it became obvious that there was no justification for FCE’s delay in removing the restrictive legends, and FCE’s delay was unreasonable.
70. From June 4, 2018 to September 11, 2018, FCE’s stock price decreased by over 45%, from $23.28 to $12.72 (adjusted for splits). As a result, PE realized a loss of over
$1,000,000.00 from its inability to sell its shares due to FCE’s unjustified and unlawful delays.
71. As a result of FCE’s unreasonable delay, PE was unable to sell the shares it owned in a timely manner, and was forced to sell its shares later at a substantially reduced price.
72. FCE is liable for any and all loss incurred by PE resulting from preventing the removal of the restrictive legend contained on the share certificate owned by PE.
73. Had FCE removed the restrictive legend, PE would have been able to sell the shares earlier and at a significantly higher price.
74. Accordingly, PE has been substantially damaged as a direct and proximate result of FCE’s aforementioned conduct.
COUNT III
(Violation of 8 Del. C. § 158)
75. PE repeats and realleges the allegations of paragraphs 1-74 of this Complaint as if fully set forth herein.
76. As a holder of FCE shares, PE is entitled to have a certificate signed by, or in the name of, the corporation by any two authorized officers of the corporation representing the number of shares registered in certificate form.
77. By delaying the removal of the restrictive legend, FCE denied PE the certificates to which it was entitled under 8 Del. C. § 158.
78. Had FCE provided PE the certificates to which it was entitled under 8 Del.
C. § 158, PE would have sold its FCE shares earlier, and at a higher price.
79. From June 4, 2018 to September 11, 2018, FCE’s stock price decreased by over 45%, from $23.28 to $12.72 (adjusted for splits). As a result, PE realized a loss of over
$1,000,000.00 from its inability to sell its shares due to FCE’s unjustified and unlawful delays.
80. Accordingly, PE has been substantially damaged as a direct and proximate result of FCE’s aforementioned conduct.
COUNT IV
(Tortious Interference With Prospective Business Advantage)
81. PE repeats and realleges each and every allegation contained in paragraphs 1-80 above as if fully set forth herein.
82. PE had a reasonable expectation of economic advantage from a prospective contractual relationship through the intended sale of its shares of common stock of FCE to third party purchasers in the trading market for FCE’s common stock.
83. FCE knew, or should have known, that PE intended to sell its shares of common stock of FCE in light of PE’s repeated requests for information concerning the process for the removal of the restrictive legends.
84. FCE interfered with this prospective contractual relationship between PE and third party purchasers of PE’s shares of FCE stock by intentionally and deliberately failing to reasonably and timely respond to PE’s request regarding the removal of restrictive legends.
85. FCE’s delay was dishonest, unfair, and/or improper.
86. FCE’s failure to reasonably and timely respond to PE’s requests regarding the removal of restrictive legends or reasonably and timely advise as to the manner in which FCE intended to effectuate the necessary actions to remove the restrictive legends contained on the share certificates owned by PE was intentional and without justification or excuse.
87. As a result of FCE’s failure, PE lost the prospective economic advantage with third party purchasers of the shares on the desired terms when PE first expected to be able to sell its shares.
88. As a result of the loss of this prospective economic advantage with third party purchasers on the desired terms as available in the public trading market, PE suffered damages in excess of over $1,000,000.00, as the per share price of FCE declined from $23.28 per share to $12.72 per share between June 4, 2018 and September 11, 2018.
PRAYER FOR RELIEF
WHEREFORE, plaintiff PE respectfully requests that this Court enter an order:
(a) Awarding all damages and losses suffered by PE as a result of FCE’s conduct in an amount to be determined at trial, which exceed $1,000,000.00, as well as compensatory damages, consequential damages, punitive damages, interest, costs of suit, attorney’s fees and any other relief deemed equitable by this Court as a result of FCE’s tortious conduct; and
(b) Granting such other and further relief as the Court may deem just and proper.
JURY DEMAND
Plaintiff demands a trial by jury.
Dated: September 14, 2020 ARNOLD & PORTER KAYE SCHOLER LLP
By: /s/ James D. Herschlein James D. Herschlein
Jonathan E. Green 250 West 55th Street
New York, New York 10019-9710 Telephone: (212) 836-8000
Facsimile: (212) 836-8689
Email: james.herschlein@arnoldporter.com jonathan.green@arnoldporter.com
James K. Lee
44th Floor, 777 South Figueroa Street Los Angeles, CA 90017-5844 Telephone: (213) 243-4000
Facsimile: (212) 243-4199
Email: james.lee@arnoldporter.com
Pro hac vice forthcoming Attorneys for POSCO Energy Co., Ltd.
That article says it won’t be operational until early next year Of course it’s dated oct 2019
Friday must have been frijoles night at Gay Louy's again. Big run on toilet paper?
No this is good. It's resolution in favor of the company. They identified it months ago and this is the outcome they hoped for.
LMAO. Not surprised at that one. Bruce probably spent weeks researching and submitting that form.....for a 2 second smack down.
So he gets $1400, living with daddy, but he spends $400 on food and $100 on gas. Where's the rest of it? I hear there's space available at the covid hotel.
Doesn't surprise me. I'm waiting for the Hooscal Roundup to begin.
He ought to be happy it wasn't the full original amount.
Good possibility
Good! 60 days they can arrest them all for non compliance.
Any news on POSCO?
Sorry. I didn't realize it was such a difficult question to answer.
They're not to me. That's why I'm asking.
So what are you saying?
LOL! There's a shortage of toilet paper in Gaymanisville, Mex.
Never said it wasn't. Has nothing to do with fuel cell.
This interview was for NRG and was from 2017.
Looks like that final judgement is just for Treaty. Thinking there should be a few more. Whittley not there either.
Guess the shouldn't have pissed the judge off with their stupid antics. Pretty much doubled the amounts with the civil penalty. Bullshine should have paid my money back.
Btw it's $5,080,359.67 for Treaty due in 30 days!
Wonder if the Canoli buys have enough empty korona bottles to cover it.
Doesn't surprise me.
Smells like the dead clownfish are stinkin up the place again.
Wondered how long it would take for treaty’s clownfish to start floating to the surface.
Didn't even bother to write a response. DENIED!
LMAO!!!
Looks like about $6.5 million in interest and disgorgement. Plus penalties!
Blackburn’s penalty can range from $0 up to $1,512,059.96 (the gross amount of his pecuniary gain) per violation. Reid’s penalty can range from $0 up to $525,030.52 (the gross amount of his pecuniary gain) per violation. Mulshine’s penalty can range from $0 to $150,000 (statutory maximum) per violation. Gwyn’s penalty can range from $0 to $772,434.90 (the gross amount of his pecuniary gain) per violation.
Almost missed this. I'm sure Treaty's little helpers will chip in!
The penalty range for Treaty is $0 to $2,270,561.60 (the full gain, netting out what the Officer Defendants received) per violation.
LOL! I bet the Clownfish spawn will be crying in their Coronas tonight! Funnier than the TESDAC scam.
Should see some good stuff by Tuesday.
They'll be able to stay listed on the Nasdaq a won't have to worry about delisting for another year.