## Facts

- Touch of Italy Salumeria & Pasticceria, LLC operated a specialty Italian grocery in Rehoboth Beach, Delaware.
- The LLC was formed with multiple members, including Robert Ciprietti and Louis Bascio; Ciprietti contributed cash, and Bascio contributed goodwill and services.
- The LLC agreement permitted a member to withdraw on 30 days’ written notice and contained no post-withdrawal noncompetition restriction.
- Louis Bascio withdrew from the LLC, allegedly telling other members he planned to move to Pennsylvania and would not compete.
- About ten weeks after the withdrawal became effective, Louis Bascio and his brother Frank formed Bascio Bros. Italian Store, LLC and opened “Frank and Louie’s Italian Store,” a competing Italian grocery.

## Issues

1. Whether alleged statements about future plans and an intent not to compete stated a claim for common-law fraud when plaintiffs did not plead detrimental reliance or cognizable injury caused by the statements.
2. Whether an LLC member’s withdrawal and post-withdrawal competition could constitute breach of fiduciary duty given an LLC agreement permitting withdrawal and containing no noncompete.
3. Whether related claims against a non-member participant (Frank Bascio) could survive absent a well-pleaded underlying wrong by Louis Bascio.

## Decision

- The Court of Chancery granted defendants’ Rule 12(b)(6) motion to dismiss in full.
- The court held the fraud claim was not adequately pleaded because the complaint did not allege actions or forbearance taken in reliance on the alleged misstatements, or injury caused by such reliance.
- The court held the fiduciary-duty theory failed because the LLC agreement allowed withdrawal and imposed no post-withdrawal restriction on competition, and the pleaded competitive conduct occurred after withdrawal.
- The court dismissed derivative and participation-based claims against Frank Bascio because they depended on an actionable primary claim against Louis Bascio.

## Legal Principles

- Delaware LLCs are governed primarily by their operating agreements; courts enforce the parties’ contractual allocation of rights and obligations.
- Common-law fraud requires, among other elements, pleaded reliance and causation of a legally cognizable injury; an intentional misstatement is insufficient without a plausible allegation that the plaintiff changed position to its detriment because of it.
- When an LLC agreement permits member withdrawal and does not restrict post-withdrawal competition, post-withdrawal competition generally does not, by itself, support a fiduciary-duty claim absent well-pleaded pre-withdrawal misconduct (e.g., misuse of confidential information, solicitation, or diversion of opportunities).
- Aiding-and-abetting or related secondary-liability claims fail when the complaint does not plead an underlying actionable wrong.

## Conclusion

The court dismissed all claims because the LLC agreement permitted the member’s withdrawal without a noncompete, the alleged misstatements about future intentions did not plead reliance-based injury, and the complaint did not allege pre-withdrawal misconduct that could transform lawful withdrawal and subsequent competition into fraud or a fiduciary breach.


Touch of Italy Salumeria & Pasticceria, LLC v. Bascio, C.A. No. 8602-VCG (Del. Ch. Jan. 13, 2014)