Vgs, Inc. v. Castiel

2000 WL 1277372 (Del.Ch.)

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Nature of the Case

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Facts

Castiel formed Virtual, an LLC, to pursue a license to operate a satellite system. The LLC had just one member, Virtual Geosatellite Holdings. Two days later, Ellipso joined the LLC as its second member. By the end of the month, Sahagen Satellite Technology Group LLC became the third member. Holdings got 660 membership units, Shagen got 260 units, and Ellipso got 120 units. Management of Virtual was vested in a board of managers. Castiel had the power to appoint, remove and replace two of the three existing members of the board. Castiel named himself and Quinn to the board. Castiel and Sahagen were immediately at odds with Sahagen offering to buy control. Sahagen claimed that Castiel was incompetent. Sahagen convinced Quinn that Castiel must be ousted. Many of the employees testified that it would be in the best interests if Castiel was removed. On April 14, 2000, without notice to Castiel, Quinn, and Sahagen merged the LCC into VGS, Inc. The LLC ceased to exist. Sahagen executed a promissory note to VGS for $10 million plus interest and got 2 million shares. VGS also issued 1,269,200 shares to Holdings, 230,800 shares to Ellipso and 500,000 shares to Sahagen Satellite. There is no dispute that Castiel was not notified of the merger plan. This lawsuit was taken.