In Grimm v. Beach Fries, Inc., et al., C.A. No. 931-VCN (Del. Ch. April 21, 2010), read decision here, the Court issued this post-trial decision in an action for dissolution of a Delaware corporation.

Kevin Brady of the Connolly Bove firm prepared this summary.

In 1999, defendant Little became involved in a mobile concession business that plaintiff Grimm had started a few years earlier. The business involved mobile trailers, fitted out with fryers and other cooking equipment, where French fries and other foods would be sold. Grimm and Little incorporated the business as Beach Fries, Inc., with each owning fifty percent of the stock. As is typical in many start-up companies, one party (Grimm in this case) contributes most of the equity to the venture and the other party (Little in this case) provides the labor.

The business (and their relationship) eventually collapsed and Grimm brought an action for dissolution of the company. Grimm asked the Court to distribute the assets in proportion to the capital contributions of its two owners but the Court denied that request stating the “once the assets were contributed to the Company, they became equally held by the Company and each shareholder owned fifty percent.”

The principal disagreement between the parties that the Court addressed in this decision dealt with which property, if any, currently in each other’s possession is corporate property and, thus, subject to division on dissolution. However, there was little documentary evidence as to the corporate records to support the claims presented by the parties, so the Court was faced with a “he said/she said” trial. After reviewing all of the evidence, the Court determined which property was subject to division and who should get which assets. In the end, the Court dissolved Beach Fries, Inc., awarded Grimm the use of the name Beach Fries, its logo, and the name The Original Beach Fries, as well as one-half of the proceeds of the sale of the certain assets. The Court said that Little may engage in a similar business under a different name and that she was entitled to 50% of the proceeds from the sale of certain of the corporation’s assets and equipment.