The Gregory M. Raiff 2000 Trust v. Jenzabar, Inc.

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

THE GREGORY M. RAIFF 2000

TRUST,

Plaintiff, v.

JENZABAR, INC., a Delaware Corporation; ROBERT A MAGINN, JR.; DANIEL QUINN MILLS; JOSEPH SAN MIGUEL; LING CHAI; JAMISON BARR; TORRENCE HARDER, IV; THE CHAI-MAGINN FAMILY LIMITED PARTNERSHIP; THE CHAI-MAGINN FAMILY LLC; and JOHN and JANE DOES 1-5, Defendants,

and

JENZABAR INC.,

Nominal Defendant.

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C.A. No. 2024-0368-LWW

MEMORANDUM OPINION

Date Submitted: January 16, 2026 Date Decided: April 13, 2026 David H. Holloway, SHLANSKY LAW GROUP, LLP, Wilmington, Delaware; Colin R. Hagan, David J. Shlansky, SHLANSKY LAW GROUP, LLP, Chelsea, Massachusetts; Counsel for Plaintiffs Christopher Barry, Jared Snell, and Laurel Santmire

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Albert H. Manwaring, IV, Kirsten A. Zeberkiewicz, Aubrey J. Morin, MORRIS JAMES LLP, Wilmington, Delaware; Counsel for Defendant and Nominal Defendant Jenzabar, Inc.

Jody C. Barillare, Brian Loughnane, MORGAN, LEWIS & BOCKIUS LLP, Wilmington, Delaware; Michael D. Blanchard, Andrew M. Buttaro, MORGAN, LEWIS & BOCKIUS LLP, Boston, Massachusetts; Counsel for Defendants Robert A. Maginn, Jr. and The Chai-Maginn Family LLC

Thad J. Bracegirdle, Sarah T. Andrade, BAYARD, P.A., Wilmington, Delaware; Counsel for Defendants D. Quinn Mills and Olga Perera San Miguel, Independent Executor of the Estate of Joseph Girard San Miguel, Deceased John M. Seaman, Adam K. Schulman, ABRAMS & BAYLISS LLP, Wilmington, Delaware; Counsel for Defendant Torrence Harder

Jason A. Cincilla, Wade A. Bredin, MANNING GROSS + MASSENBURG LLP, Wilmington, Delaware; Counsel for Defendant The Chai-Maginn Family Limited Partnership

Ling Chai, Belmont, Massachusetts; Defendant, Pro Se

WILL, Vice Chancellor

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This action is one of several suits brought in the wake of a prior judgment against Jenzabar, Inc. founder Robert A. Maginn, Jr. In 2022, this court held that Maginn usurped a corporate opportunity belonging to a Jenzabar investment vehicle and ordered him to pay $30.7 million in damages. Now, stockholders of Jenzabar are suing Maginn and his fellow directors for advancing his legal fees and paying the prior judgment. They also seek relief for a separate purported scheme from 2010 to 2015 to overpay directors and officers while diluting minority stockholders. The complaint suffers from several threshold defects. First, the claims are derivative, despite being styled as dual-natured. Some claims are not yet ripe for adjudication; others are many years stale. The defendants' motions to dismiss are therefore granted.

I. BACKGROUND

The following facts are drawn from the First Amended Complaint ("Complaint") and the documents it incorporates by reference.¹

1 First Am. Compl. (Dkt. 31) ("Am. Compl."); see Freedman v. Adams, 2012 WL 1345638, at *5 (Del. Ch. Mar. 30, 2012) ("When a plaintiff expressly refers to and heavily relies upon documents in her complaint, these documents are considered to be incorporated by reference into the complaint[.]" (citation omitted)); In re Books-A-Million, Inc. S'holders Litig., 2016 WL 5874974, at *1 (Del. Ch. Oct. 10, 2016) (providing that the court may take judicial notice of "facts that are not subject to reasonable dispute" (citation omitted)), aff'd,

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A. Jenzabar

Jenzabar, Inc., a Delaware corporation, is a Massachusetts-based education technology company.²It was founded by former spouses Ling Chai and Robert A. Maginn, Jr.³At various times, Maginn served as the Chief Executive Officer and Chairman of Jenzabar. Chai also served as Chief Executive Officer. And both are members of Jenzabar's Board of Directors.⁴

The plaintiffs—Christopher Barry, Jared Snell, and Laurel Santmire—are Jenzabar stockholders who claim that former and current Jenzabar directors used

"aggressive methods" to increase insiders' ownership stakes at the minority's expense.⁵Such tactics included allegedly sharing "misleading information" to induce investors to sell Jenzabar securities, such as falsely stating that their stock options and warrants could not be exercised.⁶As a result, Jenzabar insiders

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accumulated most of Jenzabar's stock for themselves while other stockholders suffered dilution and financial losses.⁷

Two purported "patterns of misconduct" took place.⁸The first is a "pattern of breach of fiduciary duty and fraud" that allegedly stripped at least $81 million of value from Jenzabar, which was the subject of an earlier judgment in this court in Deane v. Maginn.⁹The second is a "previously-unknown pattern" of misconduct from 2012 to 2015 involving Jenzabar's Board of Directors and General Counsel, resulting in a "distribution of tens of millions of dollars in cash," the dilution of Jenzabar stock, and a loss of "hundreds of millions of dollars of value[.]"¹⁰

B. The Deane Litigation

The first "pattern" of alleged misconduct concerns Jenzabar's advancement of legal fees and payment of a judgment on Maginn's behalf.¹¹ In 2022, this court held in Deane that Maginn wrongfully usurped 19.09% of Jenzabar common stock worth approximately $81 million through various

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investment vehicles known as the "New Media" entities.¹²Maginn incurred $5 million in legal fees for the suit, and was ordered to pay $30.77 million in damages.¹³ Jenzabar advanced the fees and paid the damages on Maginn's behalf, purportedly pursuant to its certificate of incorporation and a separate indemnity agreement.¹⁴ The plaintiffs assert that these payments to Maginn constitute misconduct by Jenzabar's Board. They allege that the payments effectively indemnified Maginn, and that the Board "has no plans to recoup" them.¹⁵They believe that Chai, Maginn, and director Quinn Mills made "decisions and extensions of funds" during the Deane litigation "that aided and supported Maginn's actions in defrauding Jenzabar" while

"squander[ing] corporate assets."¹⁶There are no specific allegations pertaining to the nature of those "decisions and extensions of funds[,]" however.¹⁷ The plaintiffs also contend that Maginn misused the voting power flowing from his wrongfully acquired 19.09% stake to "install and maintain wayward fiduciaries" who approved additional salary, stock dividends, and bonuses for

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Maginn.¹⁸These allegations relate to the other purported scheme complained of by the plaintiffs.

C. The Alleged Dilution and Overcompensation Scheme

The second "pattern" of alleged misconduct concerns "concealed . . . giveaway[s]" to Maginn and Chai that purportedly increased their ownership stake.¹⁹ In 2010, Maginn, Chai, and their affiliates owned about 18% of Jenzabar's stock.²⁰By 2021, their ownership grew to 91%.²¹The plaintiffs assert that this increase was due to awards of unearned "bonuses" and "employee incentive"

programs enacted between 2012 and 2015.²²The cash bonuses were allegedly worth tens of millions of dollars, and the incentive programs awarded Jenzabar stock worth hundreds of millions of dollars.²³During this same period, other Jenzabar stockholders mysteriously disappeared from the capitalization table or lost their stock by "technical forfeitures . . . or fire-sales."²⁴

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The plaintiffs state that they learned of these issues in late March 2024. They allegedly pieced together evidence of "fixing" other stockholder percentages in dividend communications and the elimination of other stockholders from the Jenzabar capitalization tables.²⁵They rely on text messages, public sources, and their own investigation of "various dockets . . . , third-party interviews, counsel's statements, and disclosures by others familiar with the facts."²⁶

D. This Litigation

On April 5, 2024, the Gregory M. Raiff 2000 Trust (the "Trust") filed this lawsuit.²⁷The operative First Amended Complaint was filed on April 1, 2025, asserting thirteen causes of action, styled as both direct and derivative claims.²⁸It advances claims for breach of fiduciary duty (Counts I, II, III, IV), declaratory judgment (Count V), unjust enrichment (Count VI), corporate waste (Count VII),

"equitable indemnification" (Count VIII), misappropriation (Count IX), "bad faith"

(Count X), fraud (Count XI), "injunctive relief" (Count XII), and civil conspiracy (Count XIII). They seek a declaratory judgment regarding the extent of dilution of Jenzabar stock, indemnification, and injunctive relief.

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The defendants moved to dismiss the Complaint under Court of Chancery Rule 12(b)(6).²⁹Extensive briefing by various defendant groups ensued.³⁰Oral argument on the motions took place on September 23, 2025.³¹ A week after argument, on September 30, 2025, three Jenzabar stockholders—Barry, Snell, and Santmire (the "Intervenors")—moved to intervene, seeking to replace the Trust as plaintiff.³²I granted the motion on

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December 29, 2025, and directed the Intervenors to adopt the Complaint as their operative pleading to limit prejudice to the defendants.³³The Intervenors dropped the civil conspiracy claim (Count XIII).³⁴Submissions to supplement the prior motion to dismiss briefing were then filed, and the case was deemed under advisement as of January 16, 2026.³⁵

II. ANALYSIS

The defendants have moved to dismiss the Complaint under Court of Chancery Rule 12(b)(1) for lack of subject matter jurisdiction, Rule 12(b)(6) for failure to state a claim upon which relief can be granted, and Rule 23.1 for lack of standing to pursue derivative claims.³⁶The defendants raise numerous procedural and substantive bases to dismiss the case.

I need not reach the merits of this dispute, however.³⁷The plaintiffs' claims fail on three threshold grounds: the direct claims are exclusively derivative, the

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indemnification claims are unripe, and the remaining claims are untimely.³⁸This case is dismissed in full.

A. Direct or Derivative

I begin with the defendants' argument that the Complaint pleads only derivative claims. The determination of whether a claim is direct or derivative is a question of law assessed under Rule 12(b)(6).³⁹To resolve the Rule 12(b)(6) motion, I must "(1) accept all well pleaded factual allegations as true, (2) accept even vague allegations as 'well pleaded' if they give the opposing party notice of the claim, [and]

(3) draw all reasonable inferences in favor of the non-moving party."⁴⁰I need not entire fairness review for the underlying historical transactions. See Pls.' Opp'n to Mills and San Miguel 9-14 (defining the "Disputed Transactions" for which relief is sought). Because the plaintiffs do not assert these 2023 and 2024 events as independent bases for liability or standalone claims for relief, I do not address them further.

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"accept every strained interpretation of [the plaintiffs'] allegations"⁴¹or conclusory statements "unsupported by allegations of specific facts."⁴²A motion to dismiss should be granted where a plaintiff cannot recover "under any reasonably conceivable set of circumstances susceptible of proof."⁴³ In resolving whether a claim is direct or derivative, the court is not bound by a plaintiff's labels, but must independently look to the nature of the wrong alleged.⁴⁴ Delaware courts apply the test established in Tooley v. Donaldson, Lufkin & Jenrette, Inc., which asks: "(1) who suffered the alleged harm (the corporation or the suing stockholders, individually); and (2) who would receive the benefit of any recovery or other remedy (the corporation or the stockholders, individually)?"⁴⁵ The plaintiffs purport to plead several causes of action—Counts I, II, IV, V, VI, and X—as either direct or "both direct and derivative."⁴⁶The core harms alleged are that Maginn and Chai caused Jenzabar to issue them "tens of millions of dollars

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of unearned cash bonuses and hundreds of millions of dollars of stockholder value[.]"⁴⁷Through these issuances, Maginn and Chai allegedly inflated their ownership of Jenzabar "from 18% or less to 90.56% (or 90.62%)[.]"⁴⁸The plaintiffs argue that this conduct constituted a direct harm because it "impaired the [plaintiffs'] voting power by diluting [their] equity."⁴⁹

These are quintessential derivative claims. In Brookfield Asset Management, Inc. v. Rosson, the Delaware Supreme Court confirmed that "equity overpayment/dilution claims, absent more, are exclusively derivative."⁵⁰The harm alleged here—the improper extraction of corporate assets and equity—was suffered in the first instance by Jenzabar.⁵¹Any resulting dilution of the minority stockholders' voting power or economic interest is a secondary harm shared proportionally among all stockholders.⁵²The recovery for such claims flows to the corporation.⁵³

The plaintiffs attempt to evade Brookfield by shoehorning their allegations into two recognized exceptions. Both arguments are unavailing.

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First, the plaintiffs argue that the dilution claims are direct because the cumulative transactions "resulted in a . . . change in control" under Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc.⁵⁴Brookfield acknowledged that a dilution- based claim might be direct if it involves a transaction that shifts control from a diversified group of stockholders to a controlling interest, depriving the minority of a control premium.⁵⁵But a creeping accumulation of stock over a decade is not a Revlon transaction.⁵⁶There was no active bidding process, merger, or sale where Jenzabar's stockholders were wrongfully deprived of a control premium.⁵⁷ Second, the plaintiffs rely on In re Gaylord Container Corp. Shareholders Litigation to argue that the defendants' actions constituted a "wrongful impairment by fiduciaries of the stockholders' voting power."⁵⁸But Gaylord applied to the adoption of defensive measures—such as a poison pill—designed to entrench management and impede the stockholder franchise.⁵⁹Equity dilution resulting from

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an alleged corporate overpayment does not transform a derivative claim into a direct one.⁶⁰

Because these claims are exclusively derivative, they belong to Jenzabar and are subject to the standing and demand requirements of Court of Chancery Rule 23.1.⁶¹Furthermore, Count V and Count XII improperly name Jenzabar as a defendant.⁶²Jenzabar cannot logically be named as a direct defendant on claims brought on its own behalf.⁶³

Accordingly, the direct claims asserted in Counts I, II, IV, V, VI, and X are dismissed under Rule 12(b)(6), and Jenzabar is dismissed as a defendant.

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B. Ripeness

The plaintiffs seek a declaration that the defendants breached their fiduciary duties and committed corporate waste by "causing Jenzabar to indemnify Maginn for millions of dollars of defense fees" in Deane and "other" suits.⁶⁴The defendants counter that Jenzabar has only advanced Maginn's legal fees and posted an appeal bond as contractually required, and has yet to determine that those amounts are indemnifiable.⁶⁵Thus, they argue that the indemnification-related claims must be dismissed under Court of Chancery Rule 12(b)(1).⁶⁶

"Delaware courts decline to exercise jurisdiction over a case unless the underlying controversy is ripe, i.e., has 'matured to a point where judicial action is appropriate.'"⁶⁷A dispute is not ripe when "the claim is based on 'uncertain and contingent events' that may not occur, or where 'future events may obviate the need'

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for judicial intervention."⁶⁸This principle seeks to "conserve limited judicial resources and to avoid rendering a legally binding decision that could result in premature . . . lawmaking."⁶⁹The court maintains broad discretion in determining whether a claim is ripe.⁷⁰

The plaintiffs assert several claims regarding Jenzabar's indemnification of Maginn in Deane, and the extent to which other defendants are complicit in causing such indemnification.⁷¹They claim breach of fiduciary duty (Counts II and III), corporate waste (Count VII), and misappropriation (Count IX).⁷²They also ask that I order certain defendants to indemnify Jenzabar for the judgment entered against Maginn in Deane (Count VIII), declare that those defendants owe Jenzabar

"equitable indemnification" (Count V), and enjoin the same defendants from providing further indemnification (Count XII).⁷³

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None of these claims are ripe. The plaintiffs concede that no final indemnification decision has been made. Indeed, Count XII asks that I preemptively stop any such decision.⁷⁴

At bottom, the plaintiffs conflate two different legal concepts: advancement and indemnification.⁷⁵"Advancement is an especially important corollary to indemnification as an inducement for attracting capable individuals into corporate service."⁷⁶The right to advancement is distinct from the right to indemnification.⁷⁷ If a party meets the requirements for advancement, then the party's legal fees in defense of the action are advanced until the action is resolved.⁷⁸Only then can one determine whether the party is ultimately entitled to indemnification. Once the underlying legal action is complete, a separate process commences to determine

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whether a party is subject to indemnification or if any advanced sums must be repaid.⁷⁹

Here, Jenzabar advanced Maginn's legal fees and posted an appeal bond to secure the judgment in Deane.⁸⁰Maginn was contractually entitled to this advancement under both Jenzabar's certificate of incorporation and his indemnity agreement.⁸¹No legal determination has yet been made as to whether Maginn is entitled to indemnification.⁸²Maginn's indemnity agreement outlines a specific adjudicatory process for determining indemnification, which requires the appointment of independent counsel.⁸³That process is ongoing. In addition, an indemnification action is pending before this court regarding Maginn's losses and expenses incurred in Deane.⁸⁴There, the parties are litigating over the appointment of independent counsel as required by Maginn's indemnity agreement.⁸⁵Because Maginn's entitlement to indemnification is currently being

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litigated, there are "future events" that "'may obviate the need' for judicial intervention[.]"⁸⁶

"Under settled principles of Delaware law, 'indemnification claims do not typically ripen until after the merits of an action have been decided, and all appeals have been resolved.'"⁸⁷A cause of action regarding indemnification does not accrue until the party "can be confident any claim against him has been resolved with certainty."⁸⁸Jenzabar has only paid Maginn his contractually-owed advancement. It has not yet approved indemnification. Thus, the plaintiffs' claims challenging indemnification have not "matured to the point where the plaintiff has suffered or will imminently suffer an injury" and are unripe.⁸⁹

The motion to dismiss is granted without prejudice as to Counts III, VIII, and XII in their entirety, and as to Counts I, II, V, VII, IX, and X to the extent they are premised on the indemnification of Maginn.⁹⁰

No. 2025-0913-LWW (Del. Ch. Sept. 3, 2025); Pl.'s Reply to Def.'s Countercl., Maginn

v. Jenzabar, Inc., C.A. No. 2025-0913-LWW (Del. Ch. Sept. 23, 2025).

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C. Timeliness

Finally, the defendants assert that the plaintiffs' remaining claims are time-barred.⁹¹The plaintiffs allege that the purported misconduct took place "in and around 2010-2015[.]"⁹²But they sued many years later. To prevail, the defendants must demonstrate "that the plaintiff knew of the invasion of his rights, that he unreasonably delayed in bringing suit to vindicate those rights, and resulting prejudice to the defendant."⁹³They have met their burden.

1. Claim Accrual As a baseline matter, "a claim accrues as soon as the wrongful act occurs."⁹⁴ The relevant acts in this case concern purported dilution and overpayment between 2010 and 2015. To that end, the Complaint raises a "concealed pattern of the giveaway, apparently during 2012-2015, of tens of millions of dollars of unearned claim." Cent. Mortg., 27 A.3d at 535. The plaintiffs failed to identify any "other" lawsuit, which falls short of the notice pleading standard. Ct. Ch. R. 8.

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cash bonuses and hundreds of millions of dollars of stockholder value"⁹⁵and Jenzabar's purported removal of "investors and employees" from the Company's capitalization table from 2010 onward.⁹⁶The plaintiffs' claims therefore accrued no later than 2015.

2. Statute of Limitations When evaluating whether a claim is timely, the Court of Chancery looks to the statute of limitations by analogy.⁹⁷The plaintiffs' remaining claims—for breach of fiduciary duty (Counts I, II, and IV),⁹⁸unjust enrichment (Count VI),⁹⁹corporate

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waste (Count VII),¹⁰⁰misappropriation (Count IX),¹⁰¹"bad faith" (Count X),¹⁰²and fraud (Count XI)¹⁰³—are subject to a three-year limitations period.¹⁰⁴The plaintiffs' request for a declaratory judgment about the extent of dilution as a result of various defendants' breaches of fiduciary duty (Count V) is likewise subject to the three- year statute of limitations.¹⁰⁵

As explained above, these claims accrued between 2010 and 2015.¹⁰⁶ Accordingly, the three-year limitations period expired between 2013 and 2018. This lawsuit was filed in April 2024.¹⁰⁷Absent tolling, the claims are time-barred.

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3. Tolling Delaware courts "will toll the limitation period under certain circumstances[.]"¹⁰⁸There are three tolling doctrines that may apply: "(1) inherently unknowable injuries, (2) fraudulent concealment, and (3) equitable tolling following a breach of fiduciary duties."¹⁰⁹The plaintiff must plead facts supporting the application of a tolling doctrine.¹¹⁰"Mere ignorance of the facts by a plaintiff . . . is no obstacle to operation of the statute [of limitations]."¹¹¹

The plaintiffs invoke each of these three tolling doctrines.¹¹²None applies. A limitations period "is tolled only until the plaintiff discovers (or exercising reasonable diligence should have discovered) his injury. Thus, the limitations period

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begins to run when the plaintiff is . . . on inquiry notice."¹¹³"Inquiry notice does not require full knowledge of the material facts; rather, plaintiffs are on inquiry notice when they have sufficient knowledge to raise their suspicions to the point where persons of ordinary intelligence and prudence would commence an investigation that, if pursued[,] would lead to the discovery of the injury."¹¹⁴ As the Complaint itself reveals, the plaintiffs have been on notice of their claims since at least July 30, 2014, when the Court of Chancery resolved a motion to dismiss a lawsuit captioned In re Jenzabar, Inc. Derivative Litigation (the "2014 Opinion").¹¹⁵There, a plaintiff brought direct and derivative claims for breach of fiduciary duty based on allegedly questionable bonuses paid to Maginn and approved by Jenzabar's Board.¹¹⁶The publicly-filed 2014 Opinion dismissing the suit provided Jenzabar stockholders with notice of similar derivative claims

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pertaining to purportedly improper compensation practices and the potential appeasement of Maginn by the Jenzabar Board.¹¹⁷

The plaintiffs may have received actual notice even sooner. The 2014 Opinion notes that Jenzabar mailed a Notice of Stipulation and Petition of Dismissal (the "Notice") to Jenzabar stockholders on June 27, 2013, which described the lawsuit's claims and informed stockholders of their rights to intervene.¹¹⁸This Notice was mailed to all stockholders of record who held Jenzabar stock continuously from December 2008 to June 2013.¹¹⁹That would have included the Intervenors, who have been Jenzabar stockholders since 1999 and 2004.¹²⁰ Moreover, when the Trust—the original plaintiff in this action—sought to intervene in the 2014 lawsuit, its representatives publicly testified that they believed Maginn was "stealing from the company" and engaging in "malfeasance."¹²¹ Because the Intervenors stepped into the shoes of the Trust and adopted its

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Complaint as their own,¹²²they inherit these timeliness defects. Both the 2014 Opinion and Notice would have spurred a stockholder of "ordinary intelligence" to investigate further.¹²³

To the extent the plaintiffs argue that the "giveaway" pattern described in their Complaint persisted until 2015—after the 2014 Opinion was issued—it does not save their claims.¹²⁴Even if the post-2014 acts gave rise to a separate limitations period for the later acts,¹²⁵it expired in 2018. The plaintiffs then sat on their hands for over six years: the Trust until 2024 when it filed this suit, and the Intervenors until 2025.¹²⁶

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The plaintiffs' claims accrued between 2010 and 2015. They have been on inquiry notice of the overarching scheme giving rise to their claims since at least July 2014. Tolling doctrines are therefore inapplicable. Because this suit was filed over six years after the statute of limitations expired, it is time-barred.

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III. CONCLUSION

Counts I to II, IV to VI, and X are derivative in nature. Counts III, VIII, and XII are unripe in full, and Counts I to II, V, VII, IX, and X are unripe to the extent they are premised on the indemnification of Maginn. Counts I to II, IV to VII, and IX to XI are time-barred. The defendants' motion to dismiss is therefore granted. Counts III, VIII, and XII are dismissed without prejudice, and the portions of Counts I to II, V, VII, IX, and X pertaining to indemnification are dismissed without prejudice. The remainder of the Complaint is dismissed with prejudice.