Tuesday, September 26, 2023
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Defense Firm May Press Conspiracy Claims

(CN) - The CEO of a military weapons manufacturer may have violated with a merger agreement when she took a suitor's money, and then sought other potential partners, a federal judge ruled.

Global Digital Solutions Inc. sued Merriellyn Kett Murphy, the former CEO and sole shareholder of Airtronic, for tortuous interference with its business contract, civil conspiracies, and fraudulent inducement.

According to the complaint, Murphy, who used her maiden name, Merriellyn Kett, in business, approached GDSI, a defense technology company, in 2012, and asked if it would be interested in buying the assets of her company, which had gone bankrupt.

Airtronic was a small arms manufacturer that supplies weapons for the U.S. military and federal agencies.

Eventually, GDSI agreed to fund Airtronic's reorganization, in exchange for a 70 percent stake in the company. The merger was scheduled to close at the end of 2013.

But during negotiations, Murphy told GDSI that Airtronic would need additional funds as working capital in order to carry it through the closing.

GDSI said that in light of Murphy's stated commitment to the merger, it decided to wire Airtronic more than $1.4 million. A portion of that money ultimately paid for Murphy's salary, the complaint says.

Despite the apparent goodwill between the parties at this stage of the negotiations, the solidarity wasn't to last.

GDSI said that just as it was finalizing its employment agreement with Murphy in August 2013, she suddenly became unhappy with her prospective partner and began to seek other merger partners.

Then, in November 2014, Murphy's attorney announced Airtronic was not going through with the GDSI merger, the complaint said.

The plaintiff claimed Murphy never intended to merge with it, and only used GSDI as a means of funding her company until she found a more lucrative deal.

Murphy moved to dismiss GDSI's claims on the grounds the court lacked personal jurisdiction, and that the plaintiff had failed to state a proper claim.

.U.S. District Judge Daniel Hurley found Florida, where GDSI is headquartered, to be a suitable jurisdiction to try the case, and denied Murphy's request to move the trial to Northern Illinois.

Hurley also denied Murphy's motions to dismiss GDSI's claims of civil conspiracy, fraudulent inducement and tortuous interference.

In doing so he said GDSI had alleged sufficient fact to suggest Murphy and her "team" engaged in continuous email, phone and in-person discussions about how to break the pending merger.

"With this background, the complaint alleges sufficient facts to show that Kett and her co-conspirators conspired to commit several individual independent torts (tortuous interference, fraudulent concealment) relating to the Merger Agreement, and adequately states a valid cause of action for civil conspiracy, he wrote.

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