IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
KEN MCALLISTER,
ELEVATUS BRAND
PARTNERS LLC,
Plaintiffs,
C.A. No. 2023-1127-CDW
v.
ROBERT STIDHAM, JOE
LEWIS,
Defendants,
and
ELEVATUS BRAND
PARTNERS LLC,
Nominal Defendant.
ORDER GRANTING DEFENDANT
JOE LEWIS’S MOTION TO DISMISS
WHEREAS:
A. Plaintiff Ken McAllister is a member of Elevatus Brand Partners
LLC, a Delaware limited liability company (“Company”), and brings this
action in part derivatively on the Company’s behalf.1 McAllister and
defendant Robert Stidham each own a 45% membership interest in the
1
Pl.’s 2d Am. Verified Compl. ¶¶ 1, 3, Dkt. 164 (“Second Amended Complaint” and cited as “Second Am. Compl.”).
Company and served as its two 50/50 managers. 2 Pelican Franchise
Consulting, LLC owns the remaining 10% membership interest.3 McAllister
alleges that defendant Joe Lewis controls Pelican, 4 and that Lewis’
involvement with the Company was at Stidham’s behest. 5
B. For several months Lewis allegedly served as president of the
Company.6 The Second Amended Complaint alleges Lewis assisted Stidham
in diverting Company employees and assets, making unauthorized
withdrawals of Company funds, and pursuing business opportunities allegedly
belonging to the Company.7 McAllister asserts three claims against Lewis:
aiding and abetting Stidham’s alleged breaches of fiduciary duty, civil
conspiracy relating to the alleged misappropriation of Company funds, and
unjust enrichment relating to business opportunities allegedly belonging to the
Company.8
C. McAllister made no pre-suit demand. In fact, the Second
Amended Complaint alleges demand was futile because “the Members are
2
Id. ¶ 14.
3
Id.
4
Id. ¶ 34.
5
Id. ¶ 14.
6
Id. ¶ 35.
7
Id. ¶¶ 40, 41, 43–47, 52.
8
Id. ¶¶ 115, 119, 123.
-2-hopelessly deadlocked, Lewis was hired at Stidham’s behest, and Lewis was
Stidham’s co-conspirator.” 9
D. McAllister commenced this action on November 7, 2023.10 The
original complaint asserted claims against Stidham but did not name Lewis as
a defendant.11
E. On October 14, 2024, the court appointed a liquidating trustee
for the Company and ordered that “[t]he Liquidating Trustee shall be the sole
Manager of the Company and no other person or entity shall have power or
authority to act as Manager of the Company from this date forth without Order
of this Court.”12
F. On July 25, 2025, McAllister filed an Amended Verified
Complaint naming Lewis as a defendant for the first time. 13 On September 5,
Lewis moved to dismiss, 14 and filed an opening brief in support on December
12.15
9
Id. ¶ 84.
10
Verified Compl., Dkt. 1.
See Opening Br. in Support of Joe Lewis’s Mot. to Dismiss Pls.’ 2d Am. Verified 11
Compl. 3, Dkt. 165 (“Opening Br.”).
12
Order Appointing Liquid. Tr. ¶ 4, Dkt. 68.
13
Am. Verified Compl., Dkt. 99.
14
Mot. to Dismiss, Dkt. 119.
15
Opening Br. in Support of Joe Lewis’s Mot. to Dismiss Pls.’ Am. Verified Compl., Dkt. 152.
-3-G. McAllister filed the operative Second Amended Verified
Complaint on January 22, 2026. 16 As relevant here, the Second Amended
Complaint newly alleges that Lewis was hired at Stidham’s behest and was
Stidham’s co-conspirator. 17
H. Lewis moved to dismiss the Second Amended Complaint on
January 23, and filed his opening brief.18 On February 2, McAllister filed his
answering brief, 19 and on February 6, Lewis filed his reply. 20 On March 26,
the court heard argument on the motion.21
IT IS ORDERED, this 8th day of September, 2026, that:
1. The court recommends the Motion to Dismiss be GRANTED
and counts VIII, IX, and X of the Second Amended Complaint be dismissed
with prejudice as to Lewis.
2. McAllister’s claims are derivative because the alleged harm was
suffered by the Company, and any recovery on those claims would flow to the
16
Second Am. Compl.
17
Id. ¶ 84; see also Opening Br. 4.
18
Opening Br.
19
Pl.’s Ans. Br. in Opp’n to Def. Joe Lewis’s Mot. to Dismiss, Dkt. 167 (“Ans. Br.”).
20
Reply Br. in Support of Joe Lewis’s Mot. to Dismiss Pls.’ 2d Am. Verified Compl., Dkt. 172 (“Reply Br.”).
21
Dkt. 190.
-4-Company.22 McAllister therefore was required to comply with Court of
Chancery Rule 23.1 before pursuing those claims derivatively.23 The Second
Amended Complaint does not allege that McAllister made a pre-suit demand
on the Company’s board of directors, nor does it plead with particularity facts
establishing a basis for demand excusal. The claims therefore should be
dismissed under Rule 23.1.
3. In determining whether a claim is derivative, the court considers
(1) who suffered the harm and (2) who receives the benefit of recovery.
Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031, 1033 (Del.
2004). A plaintiff’s characterization of its claims is afforded “little weight.”
Protas v. Cavanagh, 2012 WL 1580969, at *5 (Del. Ch. May 4, 2012). The
Tooley framework and Delaware’s derivative-demand jurisprudence apply
equally in the LLC context, including to an LLC with only two members.
Clifford Paper, Inc. v. WPP Inv’rs, LLC, 2021 WL 2211694, at *6 (Del. Ch.
June 1, 2021).
22
Second Am. Compl. ¶¶ 35–48 (alleging “Misappropriation of Company Assets”); ¶¶ 49–57 (alleging usurpation of business opportunities).
23
Ct. Ch. R. 23.1(a) (requiring derivative plaintiff to state with particularity any effort to obtain desired action from entity and reasons for not obtaining action or not making effort).
-5-4. The alleged harms—misappropriation of Company funds and
diversion of Company opportunities—are injuries to the Company.24 The
Complaint itself further pleads that any harm to McAllister is “by
extension.”25 McAllister’s claims are derivative under Tooley.
5. Demand was thus required to be made on the liquidating trustee
and was not made or excused. The liquidating trustee has been “the sole
Manager of the Company” since October 14, 2024.26 The Second Amended
Complaint’s only excusal allegations 27—50/50 manager deadlock and
Lewis’s hiring at Stidham’s behest—are addressed to a governance structure
that ceased to exist roughly nine months before Lewis was first sued, and are
contradicted by the court’s own order.28 No demand on the liquidating trustee
is alleged, and no particularized futility allegations are directed at the neutral,
court-appointed fiduciary.
24
Second Am. Compl. ¶¶ 35–48 (alleging “Misappropriation of Company Assets”); ¶¶ 49–57 (alleging usurpation of business opportunities).
25
Id. ¶ 1; see Prod. Res. Gp., L.L.C. v. NCT Gp., Inc., 863 A.2d 772, 776 (Del. Ch. 2004) (explaining that claims are derivative where the entity is injured “in the first instance” and any resulting harm to its stakeholders is indirect). 26
Order Appointing Liquid. Tr., Dkt. 68 ¶ 4.
27
Second Am. Compl. ¶¶ 34, 84.
28
Order Appointing Liquid. Tr., Dkt. 68 ¶ 4.
-6-6. When an amended derivative complaint is filed after a new board
has taken office, the new board is relevant to the Rule 23.1 demand inquiry
only as to claims that are not already “validly in litigation.” Braddock v.
Zimmerman, 906 A.2d 776, 786 (Del. 2006). A claim asserted in the amended
complaint remains validly in litigation where “(1) the original complaint was
well pleaded as a derivative action; (2) the original complaint satisfied the
legal test for demand excusal; and (3) the act or transaction complained of in
the amendment is essentially the same as the act or transaction challenged in
the original complaint.” Id. Under Saito v. McCall, however, a claim asserted
against a new defendant is treated as a separate claim for purposes of the
demand inquiry, even where the defendants may be liable for the same harm,
because “[t]he identity of the defendant certainly influences a board’s decision
as to whether to initiate litigation.” 2004 WL 3029876, at *9–10 (Del. Ch.
Dec. 20, 2004), overruled on other grounds by Lambrecht v. O’Neal, 3 A.3d
277 (Del. 2010).29
29
See also RESTATEMENT (SECOND) OF JUDGMENTS § 49 cmt. a (A.L.I. 1982) (claims against others liable for the same harm are separate). Plaintiff characterizes Saito as “questionable” because it predates Braddock. See Ans. Br. 9 n.1. But Braddock expressly endorsed Harris’s reasoning—the premise on which Saito relied—and did not involve, much less address, claims against newly added defendants. See Reply Br. 9–12. Braddock therefore does not undermine Saito’s conclusion that adding a new defendant implicates a distinct demand inquiry. Cf. OTK Assocs., LLC v. Friedman, 85 A.3d 696, 718 (Del. Ch. 2014) (treating newly
-7-7. Thus the claims against Lewis do not fall into Braddock’s
framework. Lewis was not named as a defendant until July 2025,
approximately nine months after the liquidating trustee became the
Company’s sole manager. Thus, the claims against Lewis were not validly in
litigation when authority to consider a demand vested exclusively in the
liquidating trustee. Because McAllister thereafter asserted new claims against
Lewis without first making a demand on the liquidating trustee, Braddock
does not excuse McAllister’s failure to make demand.
8. The court also declines McAllister’s “practicality exception” in
lieu of demand.30 The Supreme Court’s observation in Braddock—that a new
board retains “several legal options” to control derivative litigation 31—
describes the consequences of the three-condition rule; it does not create a
general exception whenever the new manager has notice. Accepting
McAllister’s theory—that File & ServeXpress service on the liquidating
trustee suffices—would substitute litigation notice for a formal demand and
swallow Rule 23.1.32
asserted claims as validly in litigation where they arose from existing claims against the same defendants).
30
Ans. Br. 11.
31
906 A.2d at 785–86.
32
See Reply Br. 12–13.
-8-9. Dismissal is with prejudice. McAllister has pleaded against
Lewis multiple times and responded to Lewis’s first motion to dismiss by
amending rather than answering. Under Rule 15(a)(5), dismissal under
Rule 23.1 in these circumstances is with prejudice absent a showing of good
cause, and none appears.
10. Because McAllister’s failure to satisfy Rule 23.1 independently
warrants dismissal of the Second Amended Complaint, the court does not
reach Lewis’ alternative arguments that the Second Amended Complaint fails
to state a claim under Rule 12(b)(6).
11. This is a Report under Court of Chancery Rule 144(b)(1). Under
Court of Chancery Rule 144(c)(2)(A), exceptions to this Report are stayed
pending issuance of a Final Report in this action.
/s/ Christian Douglas Wright
Magistrate in Chancery
-9-