In his well-written and well-analyzed Memorandum Opinion, Vice Chancellor Glasscock of the Court of Chancery of the State of Delaware dismantles the arguments of Defendants Gentile, Lash, and Schneider. Scroll down to read the Memorandum Opinion.

From Vice Chancellor Glasscock’s Memorandum Opinion decided November 18, 2020:

This matter involves allegations that the controller of a general partner and his associates looted the general partner’s constituent partnerships. The Plaintiffs are limited partners; they seek to proceed derivatively on behalf of the partnerships. The individual Defendants are the alleged controller, David Gentile, and two alleged associates of Gentile, Jeffrey Lash and Jeffry Schneider. The Defendant General Partner is a Delaware LLC, GPB Capital Holdings (“GPB”). The Defendants have moved to dismiss; this Memorandum Opinion addresses those motions.

The primary contention of the individual Defendants is that only GPB owes fiduciary duties to the limited partnerships. Accordingly, Gentile cannot have breached such duties, and Lash and Schneider cannot have aided and abetted any breach, the allegations of which form the gravamen of the Complaint. I find, however, that the allegations of the Complaint, together with the reasonable inferences therefrom, are sufficient to sustain a claim that Gentile used his control over GPB to cause it to breach duties to the partnerships, that he used his control to usurp partnership assets, that this exercise of control imposed fiduciary duties on Gentile in way of the partnerships, which he breached, and that Lash and Schneider aided and abetted such breaches.

You can’t have your cake and eat it too: Defendants Gentile, Lash, and Schneider attempted to argue that only “GPB” owes a fiduciary duty to the limited partners while they do not.

David Gentile, a CPA from Long Island, apparently thought he could incorporate GPB Capital Holdings as an LLC; plunder it with his cohorts; and then walk away with no consequences because GPB is, after all, an LLC with escape clauses in its contracts that absolve him from all liability. This is how con artists think.

Vice Chancellor Glasscock cut right through this nonsense:

…I find none of these arguments persuasive and conclude that it is reasonably conceivable that GPB has breached its fiduciary duties to the Partnerships. I further find it reasonably conceivable that Gentile, as the undisputed controller of GPB, owes fiduciary duties to the Partnerships because it is reasonably conceivable that he exercised control over the Partnerships’ assets. Finally, I find it reasonably conceivable that Schneider and Lash knowingly participated in Gentile’s alleged breaches of fiduciary duty. Accordingly, the Defendants’ Motions to Dismiss the substantive counts are denied.

Escorted out of criminal court in New York City by US Marshals, Bernie Madoff realized the game was over. How soon before David Gentile and his associates take the same long walk?

The Memorandum Opinion: