Accelerant Twister, LLC v. Marjo, LLC and John T. Sullivan

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE ACCELERANT TWISTER, LLC, and ACCELERANT HOLDING, LLC, Plaintiffs, CONSOLIDATED v. C.A. No. 2023-0887-LWW MARJO, LLC and JOHN T. SULLIVAN, Defendants/Counter-Plaintiffs, v. ACCELERANT TWISTER, LLC, ACCELERANT HOLDING, LLC, ACCELERANT PARTNERS, LLC, MICHAEL BOROM, GRANT SCHUSTER, and ALAN ELLMAN, Counter-Defendants. MEMORANDUM OPINION Date Submitted: July 16, 2026 Date Decided: October 30, 2026 Richard L. Renck, Mackenzie M. Wrobel, D. Stuart Bartow, & Qingqing Zhang, DUANE MORRIS LLP, Wilmington, Delaware; Attorneys for Plaintiffs and Counter-Defendants Accelerant Twister, LLC, and Accelerant Holding, LLC, and Counter-Defendants Accelerant Partners, LLC, Michael Borom, Grant Schuster, and Alan Ellman Victoria K. Petrone & Mark A. Denney, Jr., BROCKSTEDT MANDALAS FEDERICO LLC, Wilmington, Delaware; Thomas C. Costello & Anne L. Preston, COSTELLO LAW GROUP, Towson, Maryland; Attorneys for Defendants/Counter- Plaintiffs Marjo, LLC, and John T. Sullivan WILL, Vice Chancellor  This post-trial decision resolves a dispute among the co-founders of Accelerant Twister, LLC, a company formed to design, build, and commercialize an automated cannabis cone-rolling machine. In 2019, engineer John T. Sullivan— acting through his entity, Marjo, LLC—joined with Michael Borom, Grant Schuster, and Alan Ellman to bring Sullivan’s machine concept to market. Marjo licensed its intellectual property and agreed to provide consulting services to Twister in exchange for milestone payments and a 15% non-dilutable membership interest. Early optimism soon gave way to engineering setbacks, mounting capital needs, and regret over Marjo’s anti-dilution protection. In 2021, Borom, Schuster, and Ellman formed a new entity—Accelerant Holding, LLC—into which every Twister member except Marjo exchanged its equity. From then on, the three founders raised capital at the Holding level by touting Twister’s machines and business model. They used those funds both to lend money back to Twister at 25% interest and to develop new product lines inside Holding. Twister later terminated the license agreement and refused to pay Marjo the $1 million minimum payment. This litigation followed. The parties have asserted numerous contract, governance, and tort claims against one another. After trial, neither side emerges unscathed. On the contract and governance claims, Marjo largely prevails. The license agreement is valid and enforceable, and Twister breached it by failing to pay Marjo 1 the final $1 million milestone. Marjo is entitled to $1 million in damages plus contractual interest and the return of the early prototype, demonstration unit, and original drawings. Marjo’s related demand for Twister’s commercial machines, along with the patent-ownership portion of Twister and Holding’s declaratory judgment claim, is dismissed for lack of subject matter jurisdiction. Under Twister’s limited liability company agreement, the managers validly approved the July 2021 unit exchange in which Holding acquired 83.7% of Twister. Yet Twister entered into a 25% revolving credit agreement and an intercompany services agreement with Holding without the required member vote. For their part, Marjo and Sullivan breached the agreement’s confidentiality provision by forwarding internal company information to third parties, warranting nominal damages. On the fiduciary duty claims, the outcome is likewise mixed. Acting as a conflicted majority of Twister’s board of managers, Borom, Schuster, and Ellman breached their duty of loyalty—aided and abetted by Holding—by charging Twister an unfair 25% interest rate under the revolving credit agreement and by usurping Twister’s capital-raising opportunities to build separate product lines in Holding. Because an entity-level recovery would return most of the funds to Holding and the breaching parties, Marjo is awarded direct, pro rata damages of $43,142.46 for the interest overcharge and $462,000 for the usurped opportunities. By contrast, 2 Twister’s guaranty of Holding’s credit line was fair, and Twister and Holding’s reciprocal fiduciary duty claim against Sullivan fails. Finally, the parties’ peripheral claims and fee-shifting requests are rejected. Twister and Holding’s conversion claim over software source code is preempted by the federal Copyright Act. And Marjo’s claim for breach of a consulting agreement is defeated by the contract’s plain terms. Each side will bear its own fees and costs. I. BACKGROUND Unless otherwise noted, the following facts were stipulated to by the parties or proven by a preponderance of the evidence at trial.1 A. The Cone-Rolling Machine John T. Sullivan is a commercial equipment inventor and designer with a background in electrical engineering.2 He is the managing member of Marjo, LLC, a Maryland limited liability company he formed.3 1 See Joint Pre-trial Stipulation and Order (Dkt. 294) (“PTO”). Trial occurred over three days, during which nine fact witnesses and four expert witnesses testified live. See Trial Tr. Vols. I-III (Dkts. 326-28). Trial testimony is cited as “[Name] Tr. __.” The trial record contains 1,033 joint exhibits and 18 deposition transcripts. Exhibits are cited by the numbers provided on the parties’ joint exhibit list as “JX __,” unless otherwise defined. See PTO Ex. A (Trial Exs. List) (Dkt. 294); Notice of Lodging of Dep. Trs. (Dkt. 306); Suppl. Notice of Lodging (Dkt. 314); Suppl. Notice of Lodging (Dkt. 334). Deposition transcripts are cited as “[Name] Dep. __.” 2 JX 825; PTO ¶ 54. 3 JX 825; PTO ¶¶ 53-54. 3  In February 2019, Sullivan contacted Grant Schuster, who then worked for cannabis company Curio Wellness.4 Sullivan was exploring opportunities involving automation devices in the cannabis market.5 On February 21, Sullivan met with Schuster, who told him that Curio was interested in a machine to automate the process of rolling marijuana cigarettes, which he called “pre-rolls” or “cones.”6 Although Sullivan had not yet developed any pre-roll automation machines, he agreed to consider the idea.7 After meeting with Sullivan, Schuster contacted his uncle, Alan Ellman, about a potential business venture in cone-rolling automation.8 Ellman had technology expertise and access to investors.9 Schuster and Ellman brought in a third partner, Michael Borom, who had business and marketing experience (together with Schuster and Ellman, the “Founders”).10 In late March 2019, Sullivan gave Schuster preliminary drawings and a $95,000 quote to develop a cone-rolling machine, which Sullivan described as 4 JX 8; Schuster Tr. 9-10; Sullivan Tr. 278; PTO ¶ 79. 5 PTO ¶¶ 54, 79. 6 Id. ¶¶ 79-80. 7 Schuster Dep. 17, 20; PTO ¶ 80. 8 Schuster Tr. 12; PTO ¶ 81. 9 Ellman Tr. 117, 143. 10 Schuster Tr. 12; Borom Tr. 441-42, 445-47; Sullivan Tr. 274; PTO ¶ 81. 4 “patent pending.”11 In early April, Schuster reported to Sullivan that “[t]he consensus was this is an interesting opportunity,” and that the Founders would like “to have a dialogue after [Sullivan] file[d] the provisional patent so we are all talking from the same basis of understanding of the invention.”12 The Founders offered to provide “a unique business model to scale and maximize return.”13 Later that month, the parties executed a non-disclosure agreement so that Sullivan could provide his design concepts.14 On July 23, 2019, Sullivan filed a provisional patent application with the United States Patent and Trademark Office (“USPTO”) for his cone-rolling design known as U.S. Provisional Patent Application No. 62/922,056, entitled “Automatic Cone Loading, Weighing and Twisting System” (the “Provisional Patent Application”).15 Six days later, Sullivan’s counsel sent a copy of the Provisional Patent Application to Borom.16 On July 30, 2019, the Founders (with Borom acting through his entity Accelerant Partners, LLC), Sullivan, and Marjo executed a letter of intent (“LOI”).17 11 JX 16; PTO ¶ 82. 12 JX 23. 13 Id. 14 JX 29; PTO ¶ 83. 15 JX 58; JX 759 at 1. 16 JX 58. 17 JX 64 (“LOI”); PTO ¶ 84. 5 Under the LOI, the Founders promised to give Sullivan and Marjo a 15% non- dilutable equity interest (plus a 5% dilutable interest) in a newly formed entity (“Newco”) upon its formation in exchange for an exclusive assignment of Sullivan and Marjo’s cone-rolling machine designs.18 The equity was not conditioned on development costs falling within a certain budget or on the machine meeting any performance benchmarks.19 The LOI also contemplated that a third-party software developer would be hired to develop the electro-mechanical control system software, and a third-party hardware designer would be hired to develop a prototype.20 The Founders could terminate the LOI if they determined, in their sole discretion, that the unit production costs quoted by the vendors were unacceptable.21 B. Twister’s Formation In August 2019, Sullivan sought out a software developer and hardware designer to build the cone-rolling machine. He considered two companies— Missouri Tooling and Automation (“MTA”) and PLC Paramedics, Inc. (“PLC”)— and entered into a non-disclosure agreement with each.22 Matthew Hess, PLC’s 18 LOI § (4)(a)-(b). 19 Id. 20 Id. § (6); see also id. at Recitals. 21 Id. § (3). 22 PTO ¶¶ 85-86. 6 founder, executed an agreement on August 14, 2019.23 MTA employee Bob Archer executed an agreement on August 19, 2019.24 On September 3, 2019, the Founders and Sullivan formed a Delaware limited liability company called Accelerant Manufacturing, LLC—later renamed Accelerant Twister, LLC (“Twister”)—to receive an exclusive license to use Marjo’s designs, intellectual property, and know-how to develop, manufacture, and sell cannabis cone-rolling machines.25 Two days after that, PLC and MTA submitted their respective quotes.26 Four days later, on September 9, Borom, Schuster, Ellman, and Sullivan executed Twister’s initial Operating Agreement (the “First LLC Agreement”).27 At this point, Sullivan and the three Founders identified themselves as Twister’s four managers.28 The Founders never interviewed or considered inventors other than Sullivan to design the cone-rolling machine.29 Nor did they ask a third-party expert, such as an engineer, to review Sullivan’s designs before executing the First LLC 23 Id. ¶¶ 61, 86. 24 Id. ¶¶ 64, 86. 25 JX 100 (“First LLC Agreement”); PTO ¶ 88. 26 PTO ¶ 87. 27 First LLC Agreement 1, 30. 28 Id. 29 Borom Tr. 502. 7 Agreement.30 After forming Twister, the Twister Board hired a third party to conduct a patent search regarding other cone-rolling machines in the marketplace. The search revealed nothing that would prevent Twister from pursuing patent protection of Sullivan’s designs.31 Under the First LLC Agreement, Sullivan received equity units equal to 20% of Twister’s equity.32 Consistent with the LOI, Sullivan’s equity consisted of a 15% membership interest that was protected from dilution (“Dilution Protected Units”) and a 5% membership interest that was not protected from dilution.33 None of the Founders received Dilution Protected Units. Each Founder contributed cash to Twister; Sullivan did not.34 As in the LOI, Sullivan’s equity was not contingent on performance metrics or development costs.35 The First LLC Agreement also contained no representations by Sullivan or Marjo regarding Sullivan’s expertise, experience, cone-rolling design, prototype development costs, or production capabilities.36 30 Id. 31 Id. at 502-03; JX 109; JX 111. 32 First LLC Agreement §§ 3.1-3.2, sched. A. 33 Id. §§ 3.1, 3.6(d), sched. A. 34 Id. § 3.2, sched. A; PTO ¶¶ 90-91; Schuster Tr. 88-89. 35 First LLC Agreement § 3.1, sched. A. 36 See generally id. 8  A month after entering into the First LLC Agreement, Twister moved forward with PLC. On October 2, 2019, Twister executed a $124,200 contract for PLC to provide the electrical design, programming, and mechanical assembly services to build a prototype cone-rolling machine (the “PLC Contract”).37 The PLC Contract provided that the parties understood the machine was “a prototype” and “some things may not work as designed and may need to be modified or redesigned.” 38 Even though custom software and schematics created by PLC were owned by Twister, the PLC Contract required PLC and its subcontractors to assign any improvements to the patent-pending invention to Marjo and Sullivan.39 PLC—working alongside its subcontractor, engineer Matthew Kelly of Cutting Edge Automation—then began its work.40 C. The Consulting Agreement, License Agreement, and Second LLC Agreement While the prototype was developed, the Founders sought to formalize Twister’s relationship with Sullivan and Marjo through several agreements.41 Ellman wanted these agreements to “explain[] the potential of the model and the 37 PTO ¶ 89; JX 125 (“PLC Contract”) 1, 7, 11, 14. 38 PLC Contract 7. 39 Id. at 12-13. 40 Id.; JX 141. 41 JXs 169-70. 9 business case” to Sullivan, predicting that the venture “could have an enterprise value of $72 million.”42 For Borom, it was important to formalize the relationship with Sullivan sooner rather than later, as he feared the Founders would be left with “no leverage” once the prototype was finished.43 1. The Consulting Agreement On February 3, 2020, Marjo and Twister signed a consulting agreement with an effective date of September 1, 2019 (the “Consulting Agreement”).44 Under the Consulting Agreement, Marjo would provide services reasonably requested by Twister and mutually agreed to for the development and completion of a prototype cannabis cone-rolling machine.45 After the prototype was completed, Marjo would provide any follow-on services requested by Twister that Marjo agreed to perform, including inventions, product roadmaps, and patent filings.46 Twister also agreed to pay Marjo hourly consulting fees of $200, as well as sales commissions and “milestone compensation.”47 The milestone compensation 42 JX 168 at 1. 43 JX 180 at 1 (Borom writing to Schuster on January 4, 2020: “Just want to get this thing done as the prototype is getting close to being done and then we have no leverage.”). 44 PTO ¶ 92; JX 206 (“Consulting Agreement”); see also JX 210 at 2-13. 45 Consulting Agreement § 2.1. 46 Id. §§ 1.4-1.7, 2.1(a)-(d). 47 Id. §§ 2.2(a), 2.3-2.4. 10 consisted of lump-sum payments in varying amounts contingent on the completion of set milestones in the development and production process.48 The Consulting Agreement expired after two years—on September 1, 2021— unless terminated beforehand under specified circumstances.49 Twister could unilaterally terminate the Consulting Agreement on 30 days’ written notice if it exited the cone-filling business because the machine failed to meet production and cost targets.50 Upon expiration or termination, for any reason, Marjo was entitled to payment of all base compensation and milestone compensation earned and to reimbursement of all approved expenses incurred.51 2. The License Agreement Around this same time, Twister and Marjo also entered into a License of Intellectual Property, Trade Secrets and Know-How Agreement effective February 2, 2020 (“License Agreement”).52 The License Agreement granted Twister a worldwide, perpetual, exclusive, royalty-free license to use Marjo’s “Patent-Related Technology”—defined as “all technology covered or claimed by” the provisional or formal patent filings, 48 Id. § 2.3. 49 Id. §§ 4.1-4.2. 50 Id. § 4.2(f). 51 Id. §§ 2.5(b), 4.3(a). 52 JX 201 (“License Agreement”); PTO ¶ 95. 11 “including without limitation its related Know-How and Trade Secrets”—for the cannabis cone-rolling process.53 In exchange, the agreement provided that Marjo would receive Dilution Protected Units and common units in Twister, fees earned under the Consulting Agreement, and aggregate payments of at least $1,000,000 before December 31, 2022, through member distributions or cash payments.54 Under the License Agreement, Marjo represented and warranted that Sullivan had “properly assigned all Inventor’s rights in the Patent Application/Patent to [Marjo],” that Marjo was the sole owner of all rights, title, and interest in the patent application and patent, that Marjo had the full power and authority to grant the license, and that Marjo had filed the Provisional Patent Application with the USPTO.55 Though Sullivan never executed a written assignment transferring the Provisional Patent Application to Marjo, he orally agreed with Marjo—of which he and his spouse were the sole members—that Marjo could use and license the patent rights.56 The License Agreement also required Twister to prosecute and maintain the patent applications at its own cost, and required each party to “provide the other 53 License Agreement, Recitals, art. II, § 1.6. 54 Id. §§ 5.1-5.3. 55 Id. §§ 3.1-3.3, 6.4. 56 Sullivan Tr. 340-41; PTO ¶¶ 53-54. 12 Party with copies of all filings and relevant documentation and an opportunity to comment thereon prior to their submission.”57 Upon termination of the License Agreement for any reason (including for an uncured material breach upon 30 days’ written notice), “any and all payment obligations of [Twister]” immediately became due “and payable with interest at the rate of 18% per annum on the balance due” if Twister failed to cure within 15 days of written notice of a late payment.58 Twister was also required to return to Marjo “all automatic cone machines, equipment or machinery (including without limitation any tooling, fixtures, software or drawings) created by Licensor or [Twister], or its affiliates, consultants, [and] contractors and provided to [Twister].”59 This obligation also applied if Twister failed to obtain at least four customer orders for “machines built using the Patent-Related Technology” within six months of the first prototype’s release.60 The License Agreement prohibited the disclosure of confidential information to third parties during the term of the agreement and for three years after its termination, and required that trade secrets be kept confidential indefinitely.61 It 57 License Agreement § 4.1. 58 Id. §§ 6.11(b), (d). 59 Id. §§ 6.11(d), (f). 60 Id. 61 Id. §§ 1.1-1.2, 1.7, 4.11. 13 prohibited Twister and its managers, founders, officers, and affiliated entities from competing in the “sale, licensing or renting of Cannabis cone rolling equipment” (other than through Twister or a wholly owned subsidiary) during its term and for three years after termination.62 3. The Second LLC Agreement The parties also executed an Amended and Restated Limited Liability Company Operating Agreement effective February 7, 2020 (“Second LLC Agreement”) to allow for the issuance of preferred and common equity units to outside investors.63 The Second LLC Agreement stated that Twister’s purpose was to engage in business activities related to automation and data tracking in the “cannabis and hemp space,” including cone-rolling equipment.64 Each member represented that it had conducted its own review of Twister’s business and prospects and could bear the financial risk of an investment in Twister.65 Under the Second LLC Agreement, Marjo held Dilution Protected Units equal to 15% of Twister’s common units, plus additional common units that totaled 62 Id. § 4.9. 63 JX 209 (“Second LLC Agreement”); Ellman Dep. 74; PTO ¶ 96. 64 Second LLC Agreement, Recitals (“WHEREAS, the purpose of the Company is to engage in business activities related to automation and production data accumulation and tracking in the cannabis and hemp space, including but not limited to automation of cannabis cone filling and production and all activities and services related thereto, and to take any other action not prohibited under the Act or other applicable law . . . .”). 65 Id. §§ 4.02(d)-(g). 14 19.51% of the common units.66 The agreement contemplated that Twister would be managed by a five-member Board of Managers (the “Board”)—initially consisting of Borom, Ellman, Schuster, Sullivan, and a designee of the preferred unitholders— which generally acted by majority vote.67 It also eliminated fiduciary duties for members, managers, and officers, except that each Board member remained subject to traditional fiduciary duties “while acting in such capacity.”68 The Second LLC Agreement included provisions that required certain actions to be approved by voting members holding at least 90% of the issued and outstanding voting units, including entering into any agreement or arrangement with a manager, member, or affiliate by which they would “receive compensation of any kind.”69 Section 10.04(a) authorized the Board to enter into an incorporation transaction involving the “restructuring of all or substantially all the assets or Units of the Company into a Corporate Entity,” provided that each member received equity securities in the new entity with “substantially equivalent economic, governance, priority and other rights and privileges.”70 Section 11.01 prohibited members from 66 Id. §§ 3.03-3.04, sched. A. 67 Id. §§ 8.01-8.02, 8.05(c); id. at 58. 68 Id. §§ 14.02(a)-(c). 69 Id. §§ 4.06(b), 4.07(a), 8.10(i), (iii)-(v). 70 Id. § 10.04(a). 15 disclosing or using Twister’s confidential information for personal or commercial advantage.71 D. Prototypical Issues As the parties were negotiating these agreements, the Founders used a copy of the Provisional Patent Application filed by Sullivan to solicit outside investors.72 In a January 2020 private placement memorandum, Twister touted Sullivan’s provisional patent filing and the production as a service (PaaS) model to raise $1.24 million from preferred investors, while warning that the machine’s parts or design could be “improperly built and the output of the device [might] not meet [Twister’s] expectations resulting in potential losses or additional capital requirements.”73 On March 18, 2020, Borom sent investors an update on the prototype.74 He stated that the “prototype [wa]s on track with all but a few final tweaks of the hardware assembled, the PLC programming [wa]s underway,” and that prototype testing would begin “in the next 2 weeks.”75 He noted that Sullivan “continue[d] to tweak the design and there w[ould] be some changes between the prototype . . . and 71 Id. § 11.01(a). 72 JX 210 at 1. 73 Id. at 57, 62, 72, 74; Second LLC Agreement, sched. A at 57. 74 JX 241 at 1. 75 Id. 16 the test version.”76 The next month, Twister’s patent counsel, Benjamin Urcia, filed a formal patent application with the USPTO converting Sullivan’s July 2019 Provisional Patent Application. That application resulted in U.S. Patent No. 11,937,627 (the “‘627 Patent”), which the USPTO issued in March 2024.77 On July 30, 2020, Borom told investors that “many fixes and improvements” had been made to the prototype “addressing many issues that would normally be considered post-prototype.”78 By this point, the Founders had contributed an additional $150,000 in capital to “fund development costs beyond what was anticipated originally.”79 Borom also claimed that the machine “(i) [wa]s working great, (ii) [wa]s running at about 700-730 [cones per hour] . . . with a bit more software tuning to go over the weekend, (iii) me[t] all of [their] criteria . . . , and (iv) [wa]s ready to go to beta next week.”80 Meanwhile, the Founders had grown frustrated with the mounting development costs. On July 31 and August 2, 2020, Borom told Sullivan that—apart from finishing a specific component—Twister would no longer authorize or pay him 76 Id. 77 Id. at 2; see also JX 759 at 1 (U.S. Patent No. 11,937,627, issued Mar. 26, 2024). 78 JX 427 at 2. 79 Id. at 2, 6. 80 Id. at 4. 17 to provide consulting services without prior approval.81 Borom explained to Sullivan that his output was inconsistent with what Sullivan had represented, given the costs to date.82 Borom feared that Twister would go out of business.83 On September 17, 2020, Sullivan and Urcia filed three additional provisional patent applications with the USPTO covering improvements to the cone-rolling design, and sent copies of the filings to Twister that same day rather than in advance.84 Later that month, on September 28, the prototype (referred to as “PRO Beta”) was installed at Curio’s facility in Maryland for beta testing.85 Borom reported positive early results to investors, but the machine experienced mechanical issues in late 2020—including vibrations that caused inconsistent weights, difficulties feeding cannabis into the cones, and imperfect twists.86 81 JX 359; JX 363; Borom Tr. 507-08. 82 Borom Tr. 467; see also Sullivan Tr. 295-96. 83 Borom Tr. 507. 84 JX 380; Sullivan Tr. 383-88. 85 JX 427 at 1, 6 (email dated Nov. 24, 2020, attaching Nov. 17, 2020 investor letter); PTO ¶ 101. 86 JX 427 at 1, 6; JX 929; JX 936; JX 942; JX 945; Schuster Tr. 14-22; Ellman Tr. 124-25. 18  E. Holding’s Formation On October 17, 2020, PLC sent Borom a quote to build “the first production ready” cone-rolling machine for $176,600.87 Borom forwarded Ellman and Schuster a copy of the quote with the message: “Time to figure out plan B.”88 In November 2020, to release the remainder of $1.24 million raised from preferred investors, Borom executed a certification to Twister’s escrow agent stating that the “prototype machine [wa]s operating in all material respects in a manner that support[ed] the business plan.”89 Borom testified that, around this time, Twister needed additional capital to fund the continued development of the machine and was concerned that Marjo’s Dilution Protected Units would impede a second capital raise.90 But the Founders never attempted a second capital raise in Twister, and there is no credible evidence that any prospective investor declined to invest due to Marjo’s Dilution Protected Units.91 87 JX 408 at 1, 8-10. 88 Id. at 1. 89 JX 818 (Escrow Certification); see also JX 210 § 4(c); JX 427 at 1, 7. 90 Schuster Tr. 78; Ellman Tr. 127; Borom Tr. 485-87. 91 Schuster Tr. 79-80; Ellman Tr. 144-50; Schinderle Tr. 242-43; see also Ellman Dep. 55, 182. 19  On November 23, 2020, Ellman sent an email to Schuster and Borom that proposed changing Sullivan’s “non-dil[u]tion” units “to a royalty,” explaining that because Twister had “spent the resources to refine the design,” a 3% royalty “ma[de] more sense, subject to the patent not getting rejected.”92 The next day, Borom told investors that Twister had “always anticipated possibly needing to” invest more funds “to complete the development and reach production” of the cone-rolling machine.93 On January 6, 2021, the Founders—Borom, Schuster, and Ellman—formed a new Delaware limited liability company called Accelerant Holding, LLC (“Holding”), of which they were managers and members.94 Sullivan had no role. The Founders executed a limited liability company agreement to govern Holding.95 That agreement listed $400,882 in capital contributions by the Founders (and another minor member), which reflected their prior contributions to Twister.96 At the time of its formation, Holding lacked capital or assets.97 92 JX 425. 93 JX 427 at 1, 6. 94 JX 443; JX 444 (“Holding LLC Agreement”) §§ 2.01(a), 8.02, sched. A; Borom Dep. 98. 95 See generally Holding LLC Agreement; PTO ¶ 104. 96 Holding LLC Agreement, sched. A at 55. 97 Schuster Tr. 88-89; Ellman Tr. 153-54; Borom Tr. 510-11. 20  On January 8 and 9, 2021, the Founders told Sullivan that they wished to restructure Twister by having each member transfer its Twister equity to Holding in exchange for Holding equity.98 In response to written questions from Sullivan on January 9, Ellman represented that Holding planned to develop “separate applications for the [c]annabis space,” that Holding could not “compete outside of [Twister] in the twister space,” and that “[a]ll contracts in [Twister] remain[ed] intact – consulting, license, etc. (this includes the $1M to Marjo).”99 On January 15, 2021, after a Twister Board meeting, Ellman emailed Sullivan a memorandum from Twister’s corporate counsel, Robert Schwartz (the “Schwartz Memo”). The Schwartz Memo stated that the purpose of Twister’s “restructuring” was to allow the members of Holding to participate in “future cannabis-related service and products” distinct from the “sale, licensing or renting of [c]annabis cone rolling equipment.”100 If Sullivan elected to move Marjo’s units to Holding, Marjo’s equity interest in Holding would not include the anti-dilution protection or the 90% protective provisions (which were reduced to a 67% threshold in Holding) that Marjo 98 JX 448; JX 449; JX 452. 99 JX 449 at 1-2; JX 452 at 1. 100 JX 459 at 1-2, 4; see also JX 460; Schuster Tr. 89; PTO ¶ 105. 21 had under the Second LLC Agreement.101 Marjo was the only member of Twister asked to forfeit existing contractual rights to join Holding.102 If Sullivan declined the exchange, the Schwartz Memo stated that the restructuring would not violate any of Sullivan or Marjo’s agreements with Twister and that Holding and its other subsidiaries would not operate in the cannabis cone- rolling business.103 It affirmed that Sullivan would “receiv[e] every penny of the economic benefits he [wa]s entitled to under the current agreements,” and that “any intercompany contracts and transactions between Twister and the other affiliated entities [could not] extract economic value from Twister.”104 On January 21, 2021, Sullivan confirmed that Marjo would not exchange its Twister equity units for Holding equity.105 F. Holding’s Capital Raises and Product Development Meanwhile, in February 2021, Curio asked Twister to remove the PRO Beta prototype from its facility due to dissatisfaction with the machine’s performance.106 After moving the machine to a newly leased facility in Maryland, the Founders 101 JX 459 at 4; Holding LLC Agreement §§ 3.01-3.03, 8.10; Second LLC Agreement §§ 3.04, 8.10; Schuster Tr. 93. 102 JX 459 at 4; Ellman Dep. 180; Schuster Tr. 93. 103 JX 459 at 4-5. 104 Id. at 5. 105 JX 463. 106 PTO ¶ 102; Schuster Tr. 27; Ellman Tr. 122-23. 22 pursued two parallel paths. First, they worked with engineer Matthew Kelly to modify the prototype’s programming and cone-loading mechanism (until abandoning those efforts in July 2021). Second, they engaged Bob Archer of MTA to design new cone-rolling machines (the “PRO2” and “PRO4”) in exchange for options in Holding.107 To fund these efforts, the Founders began marketing a 2021 Pre-Series A Convertible Notes financing through Holding, using materials that featured Twister’s name, business model, intellectual property, pending patents, and prior capital raises.108 In January 2021, for example, the Founders created a marketing document stating that “Accelerant Holding[] (‘Accelerant’) provides cannabis automation equipment at no cost to customers in exchange for a long term per unit contract” and “owns Accelerant Manufacturing [Twister], a PaaS pre-roll machine, The PRO.”109 It also asserted that the “joint machine” was “patent pending,” referring to Sullivan and Marjo’s licensed intellectual property.110 In other words, the Founders began to characterize Twister as Holding’s wholly owned subsidiary and to market Holding 107 Schuster Tr. 27-28; Ellman Tr. 123-25, 133-34; JX 498; JX 556 at 13. 108 JX 493 at 2, 12, 15, 18-19; JX 494 at 17; JX 497 at 5; JX 503 at 3, 7, 11, 18-19. 109 JX 461 at 1; see also Ellman Tr. 153. 110 JX 461 at 1. 23 as operating in the cone-rolling PaaS business. In reality, Holding and Twister had no legal relationship at the time.111 During an investor pitch in May 2021, Schuster represented that Twister was seeking to raise $1 million in convertible notes, though the actual term sheet and notes were for Holding.112 In June, Schuster and Borom again represented during an investor webinar that Twister was seeking to raise $1 million in convertible notes to put the new cone-rolling machines in the field, even though the convertible notes would be issued by Holding.113 On July 9, 2021, Schuster—signing on behalf of Holding and Twister— executed an Intercompany Services Agreement, which inaccurately represented that Holding was already the majority member of Twister.114 The agreement provided that Holding would “design, engineer, manufacture, assemble, test, repair, maintain and generally produce and supply equipment” ordered by Twister, and that Holding would invoice Twister for expenses incurred in providing services without mark- up.115 Such services were limited to the production of equipment and did not include 111 See PTO ¶¶ 104, 110; JX 443. 112 JX 497 at 1, 3, 5; JX 500 (June 13, 2021 email from Schuster to prospective investors attaching term sheet and purchase agreement); Schuster Dep. 136. 113 JX 503 at 1, 3, 7, 11, 18-19; JX 500 at 1-5; Schuster Dep. 136. 114 PTO ¶¶ 77, 107; JX 556 (“Intercompany Services Agreement”) 3-7. 115 Intercompany Services Agreement §§ 1, 3. 24 investor relations, fundraising, marketing, accounting, or bookkeeping.116 The Intercompany Services Agreement was never submitted to Twister’s members for a 90% vote under the Second LLC Agreement.117 One week later, on July 16, Schuster admitted by email to an investor that Holding allowed the Founders “to operate with less onerous restrictions insisted upon by” Sullivan in Twister.118 G. The July 2021 Board Meeting Twister’s Board met on July 27, 2021.119 At the meeting, the Founders, acting in their Board member capacities, approved three resolutions. The resolutions (1) permitted the transfer of their common units—and the preferred investors’ common units and warrants—in Twister to Holding, (2) changed Twister’s name from Accelerant Manufacturing, LLC to Accelerant Twister, LLC, and (3) approved a Revolving Credit Agreement under which Twister would borrow funds from Holding at a 25% annual interest rate.120 The meeting minutes, which were drafted by counsel and not circulated until months later, state that these resolutions passed 116 Id. § 1. 117 See Second LLC Agreement § 8.10(i); PTO ¶ 107. 118 JX 524 (Schuster email dated July 16, 2021). 119 PTO ¶ 109. 120 Id. ¶ 110; Schuster Tr. 107-09; Ellman Tr. 161-63; JX 528; JX 529. 25 “unanimously,” but only the approval of the name change was unanimous.121 Sullivan objected to both the unit transfer to Holding and the 25% Revolving Credit Agreement.122 As a result of the resolutions and unit exchange, Holding became the majority member of Twister (owning 83.7% of Twister’s equity, with Marjo holding the remaining 16.3%).123 The Founders served as managers of both Twister and Holding. For both entities, Borom served as lead managing member and Chairman, and Schuster served as Chief Executive Officer.124 On July 30, 2021, Schuster executed the Revolving Credit Agreement on behalf of Twister and Holding, the borrower and the lender respectively.125 Holding’s 2021 Pre-Series A Convertible Notes financing ultimately raised over $1.7 million, at an 8% interest rate.126 Pursuant to the Revolving Credit 121 JX 528; Ellman Tr. 160-61; Sullivan Tr. 311-12. 122 Sullivan Tr. 311-12; Sullivan Dep. 336-37; JXs 515-16; JX 522; JX 605; see also Ellman Dep. 228 (stating he was unable to recall whether Sullivan voted in favor). Schuster testified that the votes were unanimous. See Schuster Tr. 46-48, 101-02. Sullivan’s testimony is credible and supported by his contemporaneous objections. Schuster’s testimony, supported only by the belatedly prepared minutes (which misidentify Sullivan as “Mr. Archer” in describing his refusal to exchange his dilution-protected units), was not. JX 528 at 2. 123 Schuster Tr. 97; Ellman Tr. 117; Kirby Tr. 187; PTO ¶ 110; JX 804 (Expert Report of David Anderson) (“Anderson Report”) 12, 17. 124 Schuster Tr. 42; JX 494 at 17; JX 529 at 3. 125 JX 529 (“Revolving Credit Agreement”) 1, 3; see also JX 556 at 8, 10. 126 JX 760. 26 Agreement, Holding loaned a portion of the raised capital to Twister to fund operations and charged Twister 25% interest.127 Between August 31, 2021 and December 31, 2022, Holding charged Twister interest totaling $394,094.94.128 Holding’s actual interest expense to third-party lenders for those funds was $129,417.29—a spread of $264,677.65.129 H. Twister’s Termination of the License Agreement In January 2022, Twister notified Marjo that the Consulting Agreement had expired by its terms on September 1, 2021.130 Twister’s counsel privately reminded the Founders that the License Agreement—including Twister’s obligation to pay Marjo $1 million before December 31, 2022—remained in effect.131 In February 2022, Borom’s business partner, Michael Kirby, became the Chief Financial Officer of both Twister and Holding.132 Holding continued to hold itself out as a company marketing, selling, and installing cone-rolling machines.133 127 Revolving Credit Agreement §§ 1-2. 128