efiled: dec 27 2016 04:20pm est transaction id 59995776 case … · 2016-12-29 · defendant paul...

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

DESTRA TARGETED INCOME UNIT INVESTMENT TRUST, ON BEHALF OF UNITHOLDERS, a Delaware Statutory Trust; CONSTELLATION HEALTH GROUP, LLC, a Delaware Limited Liability Company; CONSTELLATION HEALTH, LLC, a Delaware Limited Liability Company,

Plaintiffs,

v. PARMJIT SINGH PARMAR (A.K.A. PAUL PARMAR); NAYA CONSTELLATION HEALTH LLC, a Delaware Limited Liability Company; ALPHA CEPHEUS, LLC, a Delaware Limited Liability Company; CONSTELLATION HEALTH INVESTMENT, LLC, a Delaware Limited Liability Company; FIRST UNITED HEALTH, LLC, a Delaware Limited Liability Company; JOEL PLASCO; and SOTIRIOS ZAHARIS (A.K.A. SAM ZAHARIS),

Defendants,

and CONSTELLATION HEALTH GROUP, LLC and CONSTELLATION HEALTH, LLC, Nominal Defendants.

:::::::::: : : : : : : : : : : : : : : :: : : : : : : : : : :

C.A. No. __________

EFiled: Dec 27 2016 04:20PM EST Transaction ID 59995776

Case No. 13006-

2

VERIFIED COMPLAINT

Plaintiffs, Destra Targeted Income Unit Investment Trust, on behalf of

unitholders (“Master Trust”), Constellation Health Group, LLC (“CH Group”), and

Constellation Health, LLC, (“Constellation Health”) by and through their

attorneys, Morris, Nichols, Arsht & Tunnell LLP, make the following allegations

in this Verified Complaint against: Parmjit Singh Parmar (a.k.a. Paul Parmar),

Naya Constellation Health LLC (“Naya”), Alpha Cepheus, LLC (“Alpha

Cepheus”), Constellation Health Investment, LLC (“Constellation Investment”),

First United Health, LLC (“First United”), Joel Plasco, and Sotirios Zaharis (a.k.a.

Sam Zaharis).

The allegations in this Verified Complaint are based on the knowledge of

Plaintiffs themselves and their own actions, and on information and belief,

including the investigation of counsel and review of publically available

information, as to all other matters.

INTRODUCTION AND NATURE OF THE ACTION

1. Plaintiffs are the ultimate beneficial owners of 37,862,074 publically

traded shares of Constellation Healthcare Technologies, Inc. (“CHT”), which are

worth approximately $73 million according to CHT’s publically released

information (“CHT Shares”).

3

2. Defendant Paul Parmar, however, has diverted these CHT Shares, and

other interests representing the CHT Shares, to himself, through a series of at least

three sham corporate transactions by and among a labyrinth of Delaware limited

liability companies that he formed and/or controls.

3. The first sham transaction occurred on June 9, 2014, when Parmar

conspired to cause Plaintiff CH Group to transfer its indirect interest in the CHT

Shares to Naya, a Delaware limited liability company wholly owned and controlled

by Parmar.

4. The second sham transaction occurred on November 25, 2016, when

Parmar conspired to cause Plaintiff Constellation Health to transfer its direct

interest in the CHT Shares to Alpha Cepheus, a Delaware limited liability company

wholly owned and controlled by Parmar, and to CHT Holdco, LLC (“CHT

Holdco”), another Delaware limited liability company in which he holds a

substantial interest.

5. The third sham transaction occurred on December 7, 2016, when

Parmar caused Naya to transfer the interests it received in the first sham transaction

to an unknown party for an unknown price. Notably, this transfer occurred the day

before Naya was obligated to pay Plaintiff CH Group the “fair market value” of

those interests from the first sham transaction.

4

6. Parmar’s conduct, and the conduct of the other Defendants,

constitutes repeated breaches of fiduciary duty, bad faith, breaches of certain

limited liability company operating agreements, fraudulent transfer, civil

conspiracy, conversion, fraud, and unjust enrichment.

7. Time is of the essence in this action. On November 25, 2016, CHT

announced a proposed merger and plan to privatize the company (“Merger”).

Parmar, not coincidently, is chief executive officer (“CEO”) of CHT and stands to

benefit greatly from the Merger, to the detriment of Plaintiffs.

8. To date, Plaintiffs know very little about the terms of the Merger, and

the conflicts Parmar has in connection with it, because CHT and its affiliates have

provided very little disclosure; however, the transactions connected with the

Merger that Plaintiffs are aware of are tainted by acts of disloyalty and bad faith.

9. While Plaintiffs do not presently seek to stop the Merger, Plaintiffs

fear that if the Merger closes without interim relief protecting their rights, Plaintiffs

will be unable to recover their ultimate beneficial interest in the CHT Shares and

proceeds.

10. As set forth below, Parmar has a list of outstanding judgments

obtained against him in connection with his prior business dealings. In addition, he

has an extensive litigation history and has been sanctioned for filing and

perpetuating vexatious litigation.

5

11. For these reasons, as well as those set forth below, Plaintiffs seek,

among other things, injunctive relief prohibiting further transfers, encumbrances,

or voting of the Constellation Health Units (defined below) and the underlying

CHT Shares attributable to CH Group’s interests, as well as the imposition of a

constructive trust on such units and shares, including any proceeds thereof.

PARTIES

PLAINTIFFS

12. Plaintiff Destra Targeted Income Unit Investment Trust, on behalf

of unitholders (defined above as “Master Trust”) is a Delaware statutory trust.

U.S. Bank Trust National Association is trustee for the Master Trust.

13. Direct and Derivative Plaintiff Constellation Health Group LLC

(defined above as “CH Group”) is a Delaware limited liability company with its

principal place of business in Wilmington, Delaware. As of the date of this

Complaint, the Master Trust is the sole Class A member of CH Group.

14. Non-parties the Honorable Karen Weldin Stewart, CIR-ML, Insurance

Commissioner of the State of Delaware, in her capacity as Receiver of Freestone

Insurance Company in Liquidation (“Freestone”) and Blue Cross Blue Shield of

South Carolina, as successor in interest to Companion Property and Casualty

Insurance Company (“BCBS”) hold the vast majority of units issued by the Master

6

Trust and are entitled to any distributions allocable to the Class B membership

interests of CH Group.

15. Derivative Plaintiff Constellation Health, LLC (defined above as

“Constellation Health”) is a Delaware limited liability company with its principal

place of business in New York.

DEFENDANTS

16. Defendant Parmjit Singh Parmar (a.k.a. Paul Parmar and herein

referred to as “Parmar”), upon information and belief, is a resident of the State of

New Jersey.

17. Defendant Naya Constellation Health LLC (defined above as

“Naya”) is a Delaware limited liability company.

18. Naya is wholly owned and controlled by Parmar.

19. Defendant Constellation Health Investment, LLC (defined above as

“Constellation Investment”) is a Delaware limited liability company.

20. Constellation Investment is wholly owned and controlled by Parmar.

21. Defendant First United Health, LLC (defined above as “First

United”) is a Delaware limited liability company.

22. First United is wholly owned and controlled by Parmar.

23. Defendant Alpha Cepheus, LLC (defined above as “Alpha Cepheus”)

is a Delaware limited liability company.

7

24. Alpha Cepheus is wholly owned and controlled by Constellation

Health and First United, which in turn are controlled by Parmar.

25. Defendant Joel Plasco, upon information and belief, is a resident of

the State of New York.

26. Defendant Sotirios Zaharis (a.k.a. Sam Zaharis), upon information

and belief, is a resident of the State of New Jersey and an Australian Citizen.

27. Nominal Defendants CH Group and Constellation Health are both

Delaware limited liability companies.

RELEVANT ENTITIES NOT NAMED AS PARTIES

28. Constellation Healthcare Technologies, Inc. (defined above as

“CHT”) is a Delaware corporation, publically traded on the London Stock

Exchange. Parmar sits on CHT’s board of directors, is CHT’s chief executive

officer, and exercises control over CHT’s operations.

JURISDICTION, VENUE, AND STANDING

29. This Court has jurisdiction to hear disputes over the management of

Delaware limited liability companies, including jurisdiction over the companies’

members and managers, pursuant to 6 Del. C. §§ 18-109 and 18-110.

30. This Court has jurisdiction to interpret, apply, or enforce Delaware

limited liability company agreements and the related duties, obligations, and

liabilities pursuant to 6 Del. C. § 18-111.

8

31. This Court has jurisdiction over Parmar, Plasco, and Zaharis pursuant

to 6 Del. C. §§ 18-109 and 18-110 because this litigation brings claims for breach

of fiduciary duty and breach of agreement in their capacities as managers and

officers of Delaware limited liability companies.

32. All Defendants are subject to the jurisdiction of the Court of Delaware

as a result of their wrongful conduct in forming Delaware entities and using the

laws of Delaware in furtherance of their conspiracy to steal the assets of CH Group

to the detriment of its interest-holders.

33. Plaintiff CH Group has the right to sue derivatively on behalf of

Constellation Health pursuant to 6 Del. C. §§ 18-1001 through 1004 because (a)

Parmar is a manager and president of Constellation Health; (b) First United and

Constellation Investment, Parmar-controlled entities, are members of Constellation

Health; (c) Naya, a Parmar-controlled entity, formerly purported to hold the

Constellation Health Units (as defined below); (d) CH Group is the rightful owner

of the Constellation Health Units; (e) Parmar and other known, unknown, or

purported managers and/or officers of Constellation Health are engaged in an

unlawful scheme to convert and divert for their ultimate benefit assets rightfully

belonging to the Master Trust, CH Group’s Class A unitholder; and (f) it would be

futile to demand that Defendants sue themselves to stop their own unlawful

scheme.

9

PARMAR AND SOUTHPORT ACQUIRE CHT IN 2012

34. Parmar is an investor and financier. Since the early 1990s, Parmar has

founded, invested in, and/or acquired numerous companies.

35. Southport Lane Management, LLC and its numerous affiliated entities

(collectively, “Southport”) was a private equity firm founded by Alexander

Chatfield Burns. Southport was run by Burns, Plasco, Andrew Scherr, and others

(collectively, “Southport Actors”).

36. In 2012, Parmar and Southport entered into a joint business venture to

acquire 100% of the equity in Orion Healthcorp, Inc. (“Orion”), a privately held

company.

37. Orion was later merged into CHT. For ease of readability, Orion,

both pre- and post-merger, will be referred to interchangeably as CHT throughout

this Complaint.

38. CHT offered medical billing, collection, and practice management

services.

39. To effectuate the CHT acquisition, Parmar and Southport formed CH

Group, Constellation Health, Constellation Investment, and First United, to serve

as holding companies for their respective interests in CHT.

40. Immediately after the CHT acquisition closed, Constellation Health

wholly owned CHT.

10

41. Constellation Health’s initial members were CH Group—which was

controlled by Southport—and Constellation Investment and First United—which

were, and still are, controlled by Parmar.

42. CH Group held 58 Class A units and 22 Class B-1 units in

Constellation Health.

43. Constellation Investment held, and continues to hold as of the date of

this Complaint, 30 Class B-1 units in Constellation Health.

44. First United held, and continues to hold as of the date of this

Complaint, 8 Class B-1 units and 82 Class B-2 units in Constellation Health.

45. As of at least March 31, 2014, Constellation Health’s directors were

Parmar, Plasco, Scherr, and Hugh Hill. And at all relevant times, including as of

the date of this Complaint, Parmar was and is Constellation Health’s president.

46. CH Group’s initial members were three Southport-controlled entities:

Southport Asset Finance held the sole Class A interest, and Dallas National

Insurance Company and DNIC-Companion held the Class B interests.1

47. As of at least August 1, 2013, CH Group’s directors were Parmar,

Plasco, Burns, and Scherr. 1 As of the date of this complaint, the CH Group Class A interest held by Southport Asset Finance is now owned by the Master Trust. Freestone and BCBS hold the vast majority of units issued by the Master Trust. Freestone and BCBS also are entitled to any distributions allocable to the Class B membership interests of CH Group.

11

48. The below diagram is a representation of the structure of CHT from

2012 to 2014, after it was acquired by Parmar and Southport:

49. In 2012 through early 2014, Parmar and the Southport Actors were

close business associates as a result of the CHT acquisition. The parties exchanged

numerous emails and phone calls, and met in person on multiple occasions.

50. Moreover, when the CHT acquisition closed, the Southport Actors

gave Parmar a “closing gift”—round trip first class airfare for two to South Africa,

seven nights at five-star hotels, private car and driver service, two rounds of golf,

and multiple safaris.

12

51. Additionally, the parties interacted socially. In January 2014, for

example, Burns invited Parmar to a “black tie event.” Also in January 2014,

Parmar invited Burns, Scherr, Plasco, and their significant others to his home for

dinner.

52. The parties also diverted prospective business deals to one another. In

April 2013, for example, Parmar helped Plasco, Burns, and Southport get involved

in a deal to provide a secured loan to a traffic light company.

2014 DEMISE OF SOUTHPORT

53. In January 2014, Southport began to unravel.2

54. First, founder Burns checked himself into a mental health ward,

leaving behind an affidavit detailing “unusual transactions.”

55. Then, on April 28, 2014, one of Southport’s largest portfolio

companies, Freestone (formerly Dallas National Insurance Company), commenced

delinquency proceedings in Delaware.

56. Prior to commencing delinquency proceedings, Freestone’s non-

Southport directors formed a special committee, which in turn hired Duff & Phelps 2 The demise of Southport is well-documented in other court actions, including the liquidation proceeding for Freestone Insurance Company pending in this court. In re Liquidation of Freestone Insurance Company, Case No. 9574-VCL, Delaware Court of Chancery. As set forth therein, Southport acquired at least six insurance companies, merged them into the “Southport” collection, and began liquidating conventional assets through transactions that looked conventional, but ultimately were not. Many of those insurers are now in liquidation.

13

Corp. (“Duff & Phelps”) to produce a report assessing the financial state of the

company, the value of the company’s investments, and Southport’s role in the

company’s insolvency.

57. The Duff & Phelps report revealed that Southport sold most of

Freestone’s valuable assets, and acquired assets having questionable value.

58. The report further stated that one of Freestone’s remaining valuable

assets was its indirect interest in CHT.

59. Southport’s misconduct also caused millions of dollars in damages to

Plaintiff Master Trust.

JUNE 9, 2014 TRANSFER OF CONSTELLATION HEALTH UNITS PURSUANT TO THE “INSTRUMENT”

60. On June 9, 2014, a little over one month after Freestone entered

delinquency and the Duff & Phelps report was issued, Parmar and what was left of

Southport (“Residual Southport Entities”) conspired to place their interests in CHT

beyond the reach of Freestone and Southport’s other creditors and victims.

61. On that date, Parmar and Plasco executed a document entitled

“Instrument,” a sham contract intended solely to benefit Parmar and Southport.

62. A copy of the “Instrument” is attached hereto as Exhibit A.

63. Under the “Instrument,” Plasco, in his capacity as “Director” and

“Managing Member” of CH Group, purported to cause CH Group to transfer its

interest in Constellation Health—58 Class A units and 22 Class B-1 units

14

(collectively “Constellation Health Units”)—to Naya, a company wholly owned

and controlled by Parmar.

64. Upon information and belief, at the time of the transfer or just prior to

it, Parmar was a director and/or manager of CH Group.

65. As a result of the transfer, Parmar-controlled entities purported to own

100% of Constellation Health. This also meant that Parmar, in turn, owned a

supermajority of the equity in CHT.

66. The below diagram is a representation of the parties’ interests in

Constellation Health and CHT assuming implementation of the “Instrument”:

15

67. Naya had only three payment obligations to CH Group under the

“Instrument”:

a. Pay CH Group any dividends it received on account of the Constellation Health Units;

b. Pay CH Group any amounts it received if it sold the Constellation Health Units to an unaffiliated party; and

c. Pay CH Group the fair market value of the Constellation Health Units that Naya still held on the second anniversary of CHT’s initial public offering (“IPO”) date, if CHT in fact went public.

68. The “Instrument” and resulting transfer had many indicia of a

fraudulent act.

69. First, upon information and belief, Parmar was on both sides of the

deal—as the managing member of Naya and a director for CH Group.

70. Second, Parmar formed Naya only eleven days before the transfer.

71. Third, Naya did not provide fair consideration for the Constellation

Health Units at the time of the transfer, and as of the date of this Complaint, Naya

still has not provided fair consideration for the Constellation Health Units.

72. Fourth, as noted above, Naya is permitted to sell the Constellation

Health Units to a third party, and the “Instrument” does not set limits or

requirements for the price and fairness of such a sale.

73. Fifth, all of the indicia of ownership in the Constellation Health Units

remained with CH Group; Naya only took legal title.

16

74. CH Group retained all voting rights, the right to receive dividends and

distributions, and the right to receive the proceeds from a sale of the Constellation

Health Units, for a period of approximately 2.5 years (none of which was ever

received).

75. Outside observers who were unaware that the “Instrument” existed

would not have been able to tell that the Constellation Health Units had been

transferred.

76. Sixth, in executing the “Instrument,” Plasco and/or Parmar, in their

capacities as directors of CH Group, violated CH Group’s Amended and Restated

Operating Agreement (“CH Group Operating Agreement”) and their fiduciary

duties thereunder.

77. A copy of the CH Group Operating Agreement is attached hereto as

Exhibit B.

78. Section 13.1 of the CH Group Operating Agreement requires that any

Members, Directors, and any officers, employees and agents appointed pursuant to this Agreement, including without limitation the Executive Officers, shall perform their duties in good faith, in a manner they reasonably believe to be in the best interests of the Company, with such care as an ordinarily prudent person in a like position would use under those circumstances.

79. By executing an insider transaction that diverted CH Group’s interest

in the Constellation Health Units (and thus, CHT) to Parmar and away from CH

17

Group’s equity holders, Parmar and Plasco acted without good faith, against the

best interests of CH Group, and without proper disclosure of conflicts, in a manner

tainted by disloyalty, and intentionally for a purpose other than that of advancing

the interests of CH Group.

80. Seventh, the “Instrument” mirrored Southport’s fraudulent modus

operandi. As described in the Duff & Phelps report, Southport typically structured

its investments to:

include multiple intermediate holding vehicles that do not appear to contribute any economic value . . . and whose sole purpose, with respect to the Investments, is to transfer the general control rights over the ultimate underlying investments to Southport, thereby diminishing (destroying) the value of consideration tendered . . . for the Investments.

81. Here, the “Instrument” purported to transfer the Constellation Health

Units to Naya, a holding company, for no upfront consideration, in order to place

them outside the reach of Plaintiff CH Group and its equity owners, including

Plaintiff Master Trust and its predecessors in interest.

82. The “Instrument” was accordingly a sham transaction and an invalid

contract, and Plaintiff CH Group is still the rightful owner of the Constellation

Health Units.

18

CHT GOES PUBLIC ON DECEMBER 8, 2014

83. On December 8, 2014, six months after executing the “Instrument,”

Parmar caused CHT to go public.

84. CHT’s stock is publically traded on the London Stock Exchange.

85. On the date of CHT’s IPO, Constellation Health—now allegedly

wholly controlled by Parmar because of the “Instrument”—owned 37,862,074

common shares of CHT stock (defined above as “CHT Shares”).

86. The CHT Shares represented approximately 68.08% of the issued and

outstanding shares of CHT as of the IPO date. Parmar thus held a controlling

interest in the voting rights of CHT’s stock.

87. Parmar also installed himself as CHT’s CEO and obtained a seat on

CHT’s board of directors, positions he still holds as of the date of this Complaint.

CHT ANNOUNCES MERGER AND PLAN TO PRIVATIZE ON NOVEMBER 25, 2016

88. As noted above, under the Instrument, Naya was required to pay CH

Group the fair market value of the Constellation Health Units on the second

anniversary of CHT’s IPO date. Because CHT went public on December 8, 2014,

Naya’s payment was accordingly due on December 8, 2016.

89. However, because the Instrument was a sham, created to siphon assets

away from Plaintiff CH Group and into the pocket of Parmar, Parmar and Naya

19

never intended to pay CH Group the reasonable equivalent value of the

Constellation Health Units.

90. On November 25, 2016, less than two weeks before the payment date,

CHT announced that its board recommended approval of a merger and related

transactions that would result in CHT going private (defined above as “Merger”).

91. A copy of the Merger announcement is attached hereto as Exhibit D.

92. The Merger requires majority and majority-of-the-minority

shareholder approval, and has a “go shop” provision that expires on December 25,

2016. The date of the shareholder vote is unknown, and no shareholder proxy

statement or disclosures have been filed. All closing conditions must be satisfied

by February 15, 2017.

93. Under the Merger, CHT will be wholly owned by a newly formed

entity, CHT Holdco.

94. CHT Holdco, in turn, will be 49.3% owned by Alpha Cepheus, an

entity wholly controlled by Constellation Health and First United, which are both

Parmar-controlled entities.

95. The remaining 50.7% will be owned by CC Capital Management,

LLC (“CC Capital”), a private investment firm formed under the laws of the State

of Delaware.

20

96. According to public disclosures, to finance the Merger, CC Capital

will make an equity subscription of approximately $88.7 million to CHT Holdco,

Bank of America Merrill Lynch will provide a $145 million senior credit facility to

CHT Holdco, and CHT and/or CHT Holdco will issue unsecured promissory notes.

97. Also according to public disclosures, such as they are, Parmar is

making little to no financial contribution to the Merger besides causing First

United to contribute a $12 million loan agreement and promissory note to CHT

Holdco.

98. Public filings relating to the Merger valued CHT at $309.4 million, or

$3.36 per share.

99. If the Merger closes, CH Group should be entitled to receive

approximately $73 million for its indirect interest in the CHT Shares, calculated as

follows:

a. Prior to the Merger announcement, Constellation Health directly owned the CHT Shares (37,862,074 common shares of CHT) and, upon information and belief, Constellation Health had no significant creditors.

b. CH Group is the rightful owner of the Constellation Health Units—58 Class A units and 22 Class B-1 units—which represents 55% of all outstanding membership units issued by Constellation Health.

c. The 58 Class A units are entitled to a preferred return equal to approximately $2.8 million.

21

d. CH Group is accordingly entitled to the preferred return, plus 55% of the value of the CHT Shares, at $3.36 per share (after deduction of the preferred return), which equals approximately $73 million.

100. Parmar and his numerous entities, however, are attempting to prevent

CH Group from realizing the proceeds of its investment.

NOVEMBER 24, 2016 TRANSFER OF CHT SHARES TO ALPHA CEPHEUS

101. Specifically, on November 14, 2016, prior to the announcement of the

Merger, Parmar caused Constellation Health and First United—entities under his

control—to jointly form Alpha Cepheus.

102. Then, on November 24, 2016, Parmar caused Constellation Health to

transfer 17,862,074 shares of the CHT Shares to Alpha Cepheus. As of the date of

this Complaint, Plaintiffs do not know what, if anything, Constellation Health

received as consideration from Alpha Cepheus for these shares.

103. A copy of CHT’s public filing disclosing the November 24, 2016

transfer is attached hereto as Exhibit E.

104. Alpha Cepheus, in turn, has or will eventually transfer these shares to

CHT Holdco. And according to public disclosures, Constellation Health will sell

its remaining 20,000,000 CHT Shares to CHT Holdco upon the closing of the

Merger.

105. The below diagram is a representation of the apparent structure of the

November 24, 2016 transfer and the planned Merger:

22

106. These transactions and transfers are but another attempt by Parmar to

divert the CHT Shares, or their value, away from Plaintiffs and to himself.

107. They also constitute breaches of Constellation Health’s First

Amended and Restated Operating Agreement (“Constellation Health Operating

Agreement”) and breaches of fiduciary duties owed to Plaintiff Constellation

Health and its members, including Plaintiff CH Group.

108. A copy of the Constellation Health Operating Agreement is attached

hereto as Exhibit C.

109. Section 3.1(d) of the Constellation Health Operating Agreement

includes a list of actions that the company cannot take without prior approval from

a majority of the company’s board of managers, including at least one minority

manager (“Significant Actions”). The following are Significant Actions:

23

(i) s[ell] or dispos[e] of any material asset of [Constellation Health] . . . other than in the ordinary course of business or as provided in the Board Approved Budget;

(ii) . . . liquidat[e], recapitalize[e], reclassify[y] or reorganize[e] in any form of transaction, or any sale of a material portion of [Constellation Health’s] assets other than in the . . . ordinary course of business;

. . . . (iv) authoriz[e], issu[e] or agree[] to issue

(contingent or otherwise) new securities of the Company or any subsidiary including equity interests, options, warrants, or any notes or debt securities; direct or indirect redemption, purchase or other acquisition, of any of [Constellation Health’s] or any subsidiary’s shares or other equity interest (including, without limitation, warrants, options and other rights to acquire Units);

(v) engage in any transaction resulting in the . . . sale of all or substantially all of the Company’s assets;

(vi) acquir[e] any interest in any company or business (whether by a purchase of assets, purchase of stock, merger or otherwise); [and]

. . . . (ix) enter into in [sic] any partnership, joint

venture, acquisition, strategic alliance or other association of any kind with any third party.

110. Additionally, Section 3.1(f) of the Constellation Health Operating

Agreement provides that CH Group has the right to appoint at least two and as

many as three managers, depending on certain distribution calculations.

111. And Section 3.1(e) of the Constellation Health Operating Agreement

requires that all managers “perform their duties in good faith, in a manner they

reasonably believe to be in the best interests of the Company, and with such care as

an ordinarily prudent person in the like position.”

24

112. Parmar, to the extent he was a manager and president of Constellation

Health in November of 2016; Plasco, to the extent he was a manager of

Constellation Health in November of 2016; and Constellation Investment and First

United, in their capacities as members of Constellation Health, breached the

Constellation Health Operating Agreement and fiduciary duties that they owed to

Plaintiffs Constellation Health and the Master Trust by causing Constellation

Health to take the following Significant Actions:

a. Partner with First United to form Alpha Cepheus;

b. Transfer 17,862,074 of the CHT Shares to Alpha Cepheus;

c. Commit to selling Constellation Health’s remaining 20,000,000 CHT Shares to CHT Holdco upon closing of the Merger;

d. Acquire an interest Alpha Cepheus and CHT Holdco; and

e. Partner with other entities in connection with the Merger.

113. For each of the above Significant Actions, Parmar and/or the other

Defendants failed to first obtain the approval of a disinterested manager appointed

by CH Group, failed to ensure that CH Group’s interests were fairly represented,

and/or acted without adhering to corporate and board-composition formalities.

114. Instead, Parmar and/or the other Defendants acted in bad faith and

against the best interests of Constellation Health and its members, and were

complicit in Parmar’s self-dealing scheme to divert assets to himself for his own

benefit.

25

115. Plaintiff CH Group and its members, including Plaintiff Master Trust,

have suffered and will continue to suffer substantial damage.

116. First, as a result of the November 24, 2016 transfer, CH Group’s

beneficial interest in the CHT Shares has been diluted—its interest now flows

through multiple Parmar entities, including Constellation Health, Alpha Cepheus,

and CHT Holdco.

117. Second, if the Merger closes, it will be virtually impossible to ascribe

a value to CH Group’s beneficial interest in the CHT Shares because the

intermediary Parmar entities have opaque capital structures and governance rights,

and the ultimate asset, CHT, will be privately held.

118. Third, if the Merger closes, CHT Holdco will take on a $145 million

senior credit facility from Bank of America Merrill Lynch, and CHT Holdco and

CHT will issue unsecured promissory notes. This debt further dilutes and threatens

to prevent CH Group from ever recovering any value from its interest in the CHT

Shares.

119. Parmar, meanwhile, will realize the full upside of the Merger, at

Plaintiff CH Group’s expense. All of the CHT Shares formerly held by

Constellation Health are or will be held by Parmar entities Alpha Cepheus and

CHT Holdco.

26

DECEMBER 7, 2016 TRANSFER OF CONSTELLATION UNITS TO AN UNKNOWN THIRD PARTY

120. Parmar’s fraudulent conduct and self-dealing did not end with the

June 2014 transfer to Naya and the November 2016 transfer to Alpha Cepheus.

121. On December 8, 2016, the day that Naya’s payment to CH Group

under the “Instrument” was due, the Master Trust’s counsel received an email from

Sam Zaharis (“Email”).

122. A copy of the Email is attached hereto as Exhibit F.

123. Zaharis is CHT’s chief financial officer, a CHT board member, and a

close business associate of Parmar’s for almost twenty (20) years.

124. Parmar and Zaharis have formed multiple companies together, and are

co-parties in a number of business ventures, including the co-production of at least

four feature length films.

125. Zaharis sent the Email using an email address with a domain name

linking him to CH Group: [email protected].

126. The Master Trust had no knowledge that Zaharis had any affiliation

with CH Group.

127. In the Email, Zaharis disclosed that Naya—an entity wholly

controlled by Parmar—sold the Constellation Health Units to a third party the

previous day, on December 7, 2016, via a “Membership Interest Purchase

27

Agreement.” The Email, however, did not disclose the buyer or the terms of the

sale.

128. The purported sale is another attempt by Parmar to place the

Constellation Health Units and CHT Shares outside the reach of Plaintiff CH

Group and its members, including Plaintiff Master Trust.

129. The below diagram is a representation of the apparent structure of the

purported December 7, 2016 transfer:

130. Zaharis’s Email, in addition to disclosing the purported sale of the

Constellation Health Units, referenced alleged “phone calls emails and letters” sent

28

to the Master Trust’s counsel apprising the Master Trust of “extensive

negotiations” concerning the sale.

131. The Master Trust’s counsel, however, never received such phone

calls, emails, or letters.

132. The only communications that the Master Trust is aware of regarding

a possible sale of the Constellation Health Units are two letters sent by a David

Goldwasser, managing member of Mercer Financial Group (“Mercer”), to Scherr,

the principal equity owner of the Residual Southport Entities, and to Parmar,

respectively.

133. In the first letter (“First Mercer Letter”), sent to Scherr on November

15, 2016, Goldwasser and Mercer offered to purchase the Constellation Health

Units for $10,000,000.

134. In the second letter (“Second Mercer Letter”), sent to Parmar on

November 25, 2016, Goldwasser and Mercer offered to pay Naya $11,700,000 for

the Constellation Health Units.

135. The two offers undervalued the Constellation Health Units by

approximately $60 million.

136. The Master Trust did not solicit these letters, and had no knowledge

of any negotiations regarding a sale of the Constellation Health Units.

29

137. The Master Trust confirmed with management for the Residual

Southport Entities that they had no discussions with Goldwasser or Mercer.

138. The Master Trust has had no prior dealings with Goldwasser or

Mercer.

139. In researching Goldwasser, the Master Trust discovered that

Goldwasser is a convicted felon who pleaded guilty to bank fraud and was

sentenced to 27 months in federal prison.

140. Accordingly, the Master Trust, in consultation with the Master Trust’s

beneficiaries, did not to respond to either unsolicited offer.

141. On December 9, 2016, the Master Trust’s counsel responded to

Zaharis’s Email.

142. The Master Trust’s counsel informed Zaharis that it was unaware of

any negotiations regarding the Constellation Health Units, the Master Trust did not

consent to any sale of the Constellation Health Units, and any purported sale of the

Constellation Health Units was invalid.

143. As of the date of this Complaint, Plaintiffs do not know the identity of

the alleged purchaser of the Constellation Health Units or the price the alleged

purchaser paid for the Constellation Health Units. Nor have Plaintiffs seen a copy

of any purported purchase agreement related to the Constellation Health Units,

despite repeated requests to Zaharis to provide a copy.

30

PARMAR’S HISTORY OF PENDING JUDGMENTS AND LITIGIOUS CONDUCT

144. Plaintiffs seek to recover the value of Plaintiff CH Group’s investment

in Constellation Health and the CHT Shares.

145. However, Parmar’s extensive self-dealing—described above—as well

as his history of litigious business disputes and judgments, raises serious concerns

that even if Plaintiffs prevail in this action, they will be unable to collect any

judgment from Parmar or the other Defendants, his alter-ego entities.

146. Lien search reports indicate that there are over $335,000 federal and

state tax liens pending against Parmar.

147. In addition, Parmar has at least six outstanding judgments against him

in favor of creditors, totaling over $25 million.

148. With respect to a $16.7 million civil judgment against Parmar in favor

of Red Line Air, LLC, Parmar claims to have entered into a standstill agreement

with the holder of the judgment until 2023. However, the terms of such agreement

are unknown.

149. Court records from actions brought throughout the United States

indicate a pattern by Parmar of disputed business transactions, of refusing to pay

amounts due until lawsuits are initiated and judgments obtained against him, and

then seeking to negotiate judgment amounts down after the fact. Parmar has been

sanctioned for filing baseless allegations, and has abused the litigation process by

31

using court proceedings to intimidate opponents and delay paying his obligations.

Parmar’s record of extensive heated litigation matters bears this out.

150. For example, in a New Jersey litigation arising out of an asset

purchase transaction involving Parmar affiliate MD Tablet, LLC, the trial court

sanctioned Parmar for over $175,000 for vexatious bad faith litigation, noting

“[t]his was a shakedown . . . of the defendants.” Grange Consulting Grp. v.

Gangar, No. A-1753-12T1, 2014 WL 3749145, at *4 (N.J. Super. Ct. App. Div.

July 23, 2014). This included frivolous litigation claims against a former

employee, which the court found were commenced, used, or continued in bad faith

solely for the purpose of harassment, delay or malicious injury, and having no

reasonable, legal or equitable basis. Id. On appeal, the appellate court observed:

Apparently, the initial filing of the action against [the employee] was envisioned by Parmar as the first step in an expanding web of expensive and time-consuming litigation against a litany of defendants, as evidenced by an email from Parmar to his counsel. In the email, which includes a forwarded discussion of the underlying agreements, Parmar states, “the first step was the [Order to Show Cause] against [the employee] and expand from there, but also we need to keep the[m] busy and engaged with us.”

Id. at *2. Parmar was engaged in litigation related to the above business

transaction in at least three separate jurisdictions and states. In one of the suits, he

added claims against his adversary’s lawyer. Grange Consulting Grp. v. Bergstein,

13-cv-06768-PSG-LHG (D.N.J. Nov. 6, 2013).

32

151. In a California action relating to Parmar and Southport’s acquisition

of CHT, a federal court granted summary judgment to a CHT employee on a

number of claims for refusal to pay amounts due him; the court sent other claims

and the issue of punitive damages to trial. Mathews v. Orion HealthCorp, Inc., No.

C-13-04378, 2014 WL 4245986 (N.D. Cal. 2014). In that action, the court noted

that Parmar emailed the company’s CEO about the employee’s complaints, stating

“No problems. We will take care of him. Stop all checks and payments to him and

cancel his benefits immediately.” Id. at *5.

152. And in an action in Kansas by a finance company against Parmar on a

personal guarantee for a total of $13,032,500, a federal court noted that Parmar had

“effectively controverted” only 1 out of 42 paragraphs of material facts asserted

against him, and granted summary judgment against him on the claimed debt.

Cessna Fin. Corp. v. VYWB, LLC & Parmjit S. Parmar, No. 13-1311, 2014 WL

5325782, at *1 (D. Kan. 2014); see also Oberon Sec., LLC v. Parmar, Index

653654/2013 (N.Y. Sup. Ct. 2013) (suit over amounts claimed due from Parmar

for investment banking fee and Parmar $32 million counterclaim for

disparagement).

153. As the above record demonstrates, in the event that Parmar is not

prohibited from further efforts to convert Plaintiffs’ indirect interest in the CHT

Shares into securities or funds controlled by him, Plaintiffs’ ability to later

33

segregate those funds and/or enforce a judgment for their return will be seriously

jeopardized.

CLAIMS

COUNT I – DECLARATORY JUDGMENT (All Defendants)

154. Plaintiffs re-allege and incorporate by reference Paragraphs 1 through

153 of their Complaint.

155. 10 Del C. §§ 6501 et seq. and 6 Del. C. § 18-111 empower the Court

of Chancery to make declaratory judgments on the rightful interpretation of

contracts, including Delaware LLC agreements. 6 Del. C. § 18-110 empowers the

Court of Chancery to resolve management disputes of Delaware LLCs through any

just and proper order, including a declaratory judgment. Under the Delaware

Declaratory Judgment Act, in addition to a declaratory judgment, “[f]urther relief

based on a declaratory judgment or decree may [also] be granted whenever

necessary or proper.” 10 Del. C. § 6508.

156. There is a real, present, and justiciable controversy between the

parties over who has the lawful right to title and control of the Constellation Health

Units, of the 17,862,074 shares in CHT transferred on November 24, 2016, and of

the 20,000,000 CHT Shares that Constellation Health still holds.

157. Plaintiffs hereby plea for a declaratory judgment that:

34

a. Plaintiff CH Group is the rightful owner of the Constellation Health Units—58 Class A units and 22 Class B-1 units in Constellation Health—and holds all rights and indicia of ownership with respect thereto;

b. The purported transfer of title to the Constellation Health Units on

June 9, 2014 to Naya is invalid, null and void; c. Plaintiff Constellation Health is the rightful owner of the 17,862,074

shares in CHT transferred on November 24, 2016, and holds all rights and indicia of ownership with respect thereto;

d. Any sale, transfer or encumbrance by Constellation Health of the

CHT Shares must be approved by Constellation Health members and directors having no affiliation with any of the Defendants of any kind;

e. The purported transfer by Constellation Health of the 17,862,074

shares in CHT to Alpha Cepheus on November 24, 2016 is invalid, null and void;

f. The purported transfer by Naya of the Constellation Health Units

pursuant to an alleged “Membership Interest Purchase Agreement” on December 7, 2016, is invalid and null and void;

g. Any action taken by the Defendants whatsoever with respect to the

Constellation Health Units to the extent those actions purport to further convey, transfer or encumber the rights associated with them to persons other than the Plaintiffs, are also null and void; and

h. Any other declaration the Court finds appropriate to effect justice.

158. Plaintiffs do not have an adequate remedy at law.

COUNT II – BREACH OF FIDUCIARY DUTY TO CH GROUP AND ITS MEMBERS

(Directly and derivatively against Parmar, Plasco, and Zaharis)


158 of their complaint.

35

160. As of August 1, 2013, and, upon information and belief, on or just

prior to the June 9, 2014 purported transaction between CH Group and Naya,

Parmar was a manager and/or director of CH Group. In addition, Parmar exercised

control over CH Group.

161. As of at least June of 2014, Plasco served as the Managing Member

and Director of CH Group. In addition, as of at least March of 2014, Plasco served

as a CH Group appointed Manager to Constellation Health.

162. As manager and/or director of CH Group, Parmar owed fiduciary

duties of loyalty and care to its members.

163. As Managing Member and Director of CH Group, Plasco owed

fiduciary duties of loyalty and care to its members.

164. Zaharis, to the extent he purported to serve as a director, manager,

and/or officer of CH Group, owed fiduciary duties of loyalty and care to CH

Group’s members, including Plaintiff Master Trust and its predecessors in interest.

165. Plasco breached his fiduciary duties of loyalty and care to the

members of CH Group by purporting to transfer to a friend, Parmar, the only asset

that CH Group held—the Constellation Health Units—on terms that provided no

value to CH Group’s members, and lacked any reasonable basis other than as an

attempt to evade creditors.

36

166. In the event that Plasco continued to serve as a CH Group-appointed

Manager to Constellation Health in or around November of 2016, Plasco further

violated his fiduciary duty to CH Group by approving and/or allowing the sale by

Constellation Health of 17,862,074 of the CHT Shares to Alpha Cepheus.

167. Parmar’s breaches include orchestrating the June 8, 2014 Naya

transfer with his friend and colleague Joel Plasco in an attempt to transfer to

himself control, title to and the ultimate value of CH Group’s asset, the

Constellation Health Units, which were in turn valuable because of Constellation

Health’s ownership of the CHT Shares. In doing so, Parmar caused CH Group to

transfer to himself and away from its members one of the most valuable (and for

CH Group, the only) assets it had.

168. By these acts and breaches, Parmar benefitted himself, while

simultaneously harming the interests of Plaintiff CH Group and its members,

including Plaintiff Master Trust.

169. Zaharis—Parmar’s close business associate—breached his fiduciary

duties by helping to orchestrate the December 7, 2016 transfer of the Constellation

Health Units from Naya to an unknown buyer for a purchase price that, upon

information and belief, was woefully inadequate. In facilitating this transfer,

Zaharis helped to further divert and dilute Plaintiff CH Group’s interest in the

37

Constellation Health Units and the CHT Shares, to the detriment of its members,

including Plaintiff Master Trust.

170. The scheme to divert value from the Plaintiffs and to Parmar is further

evidenced by the woefully inadequate purported offer price of $11.7 million set

forth in the Second Mercer Letter in connection with the purported December 7,

2016 transfer. CHT’s own public disclosures show that CHT’s total issued and

outstanding shares were worth approximately $309.4 million, and that

Constellation Health owned approximately 41.1% of those shares. Accordingly,

the Constellation Health Units, which represent a 55% interest in Constellation

Health, are worth far more than $11.7 million. In light of these facts, the $11.7

million offer in the Second Mercer Letter was unreasonable on its face, as was any

purported sale on December 7, 2016 to an unknown party on any such terms.

171. All of these acts evidence a scheme to divert and defraud the Plaintiffs

in order to transfer to Parmar as many shares as possible in order to exchange them

for cash in connection with the proposed Merger and going private transaction.

172. Parmar, Plasco and Zaharis have not acted in good faith, with honesty

in fact, or observed reasonable standards of fair dealing.

173. Parmar, Plasco and Zaharis’s acts, and substantial undisclosed

conflicts of interest, constitute corporate waste, self-dealing, breach of their duties

38

of disclosure and loyalty, and improper control of transaction negotiations by

insiders.


COUNT III – AIDING AND ABETTING BREACHES OF FIDUCIARY DUTY TO CH GROUP AND ITS MEMBERS

(Directly and derivatively against Parmar and Naya)



176. To the extent Parmar was not a manager and/or director of CH Group

on June 9, 2014, Parmar, by virtue of the above, aided and abetted Plasco’s

breaches of fiduciary duty to CH Group in connection with the June 9, 2014 Naya

transfer.

177. By virtue of the above, Naya, a Parmar alter ego, also aided and

abetted Plasco’s breaches of fiduciary duty to CH Group in connection with the

June 9, 2014 Naya transfer.

178. If in fact Zaharis was purporting to act as a director, manager, and/or

officer of CH Group on December 7, 2016, then Parmar and Naya aided and

abetted Zaharis’s breaches of duty to CH Group in connection with the purported

December 7, 2016 transfer.


39

COUNT IV – BREACH OF THE CH GROUP OPERATING AGREEMENT

(Directly and derivatively against Parmar and Plasco)



181. Plasco was a director and managing member of CH Group on June 9,

2014. On information and belief, Parmar was also a director of CH Group on June

9, 2014.

182. As managers and/or officers of CH Group, Parmar and Plasco were

bound by the terms of the CH Group Operating Agreement.

183. In executing the Instrument, Plasco and/or Parmar, in their capacities

as directors and/or managers of CH Group, and/or acting at the behest of Southport

Asset Finance, LLC, the Class A unit holder of CH Group through June 20, 2015,

violated the CH Group Operating Agreement.

184. Section 13.1 of the CH Group Operating Agreement requires that any

Members, Directors, and any officers, employees and agents appointed pursuant to this Agreement, including without limitation the Executive Officers, shall perform their duties in good faith, in a manner they reasonably believe to be in the best interests of the Company, with such care as an ordinarily prudent person in a like position would use under those circumstances.

185. By executing an insider transaction that diverted Plaintiff CH Group’s

interest in the Constellation Health Units (and thus, CHT Shares) to Parmar and

40

away from CH Group’s equity holders, Parmar and Plasco failed to act in good

faith and in the best interests of CH Group and violated the operating agreement.

186. In addition, Parmar and Plasco breached or caused the breach of

numerous other provisions of the CH Group Operating Agreement, including but

not limited to the failure to have the approval of a disinterested board, including

minority members, for transactions that resulted in a change of control and the

disposition of all or substantially all of the company’s assets.


COUNT V – BREACH OF FIDUCIARY DUTY TO CONSTELLATION HEALTH AND ITS MEMBERS

(Directly and derivatively against Parmar and Plasco)



189. Parmar owed fiduciary duties to Constellation Health and its

members, including CH Group, as Parmar was the President and Board Manager of

Constellation Health at relevant times hereto.

190. At least as of March of 2014, Plasco was Manager of Constellation

Health, appointed by CH Group.

191. Parmar, individually and through Constellation Health, breached his

fiduciary duties of loyalty and care to CH Group, a member of Constellation

Health, by causing Constellation Health to transfer 17,862,074 of the CHT Shares

41

to Alpha Cepheus, a corporation Parmar owned and set up solely for this purpose,

for an unknown price, on November 24, 2016.

192. Again, Parmar was on both sides of the transaction, benefitting wholly

from the transfer, and likely diluting the interests held in CHT by Constellation

Health. The transaction reflects clear, and improper, control of transaction

negotiations by insiders. These evidence the furtherance of a scheme to defraud

the Plaintiffs and divert their interests to Parmar, and to enable Parmar to

maximize his proceeds from the Merger.

193. Parmar’s acts constitute bad faith, reflect substantial undisclosed

conflicts of interest, and constitute corporate waste, self-dealing, breaches of the

duties of loyalty and to make adequate disclosures.

194. In the event that Plasco remained a Manager of Constellation Health

in November of 2016, Plasco similarly breached his fiduciary duties to

Constellation Health by approving the above transactions and allowing them to go

forward.


COUNT VI – AIDING AND ABETTING BREACHES OF FIDUCIARY DUTY TO CONSTELLATION HEALTH AND ITS MEMBERS

(Directly and derivatively against Constellation Investment, First United, and Alpha Cepheus)



42

197. Constellation Investment, First United, and Alpha Cepheus are

Parmar’s alter egos.

198. Constellation Investment and First United hold Class B interests in

Constellation Health.

199. By virtue of the above, Constellation Investment, First United, and

Alpha Cepheus aided and abetted Parmar and Plasco’s breach of fiduciary duties

with respect to the November 24, 2016 transfer 17,862,074 of the CHT Shares

from Constellation Health to Alpha Cepheus.


COUNT VII – BREACH OF CONSTELLATION HEALTH OPERATING AGREEMENT

(Directly and derivatively against Parmar, First United, Constellation Investment, and Plasco)



202. First United and Constellation Investment are Members of

Constellation Health and Parmar is a signatory to the Constellation Health

Operating Agreement, both as President for Constellation Health and as Manager

of both members First United and Constellation Investment.

203. According to the Constellation Health Operating Agreement, at least

as of March of 2014, the Managers of Constellation Health were Plasco, Scherr,

Hill and Parmar.

43

204. As members, managers, and/or officers of Constellation Health,

Parmar, First United, Constellation Investment, and Plasco (to the extent he

remained a manager in November of 2016) are bound by the terms of the

Constellation Health Operating Agreement.

205. These parties breached the Constellation Health Operating

Agreement.

206. The Constellation Health Operating Agreement requires that all

managers “perform their duties in good faith, in a manner they reasonably believe

to be in the best interests of the Company, and with such care as an ordinarily

prudent person in a like position would use under similar circumstances.”

207. The following Significant Actions purportedly taken by the company,

Constellation Health, and caused by Parmar and the other Defendants, were neither

in the best interests of the company, nor in the best interests of Plaintiff CH Group:

a. Constellation Health’s transfer of 17,862,074 of the CHT Shares to Alpha Cepheus;

b. Constellation Health’s acquisition of interests in Alpha Cepheus and

CHT Holdco in connection with the Proposed Merger; c. Constellation Health’s partnering, jointly venturing, strategically

aligning, and associating with other entities in connection with the Merger, including First United, Alpha Cepheus, CHT Holdco, CHT MergerSub, LLC, and CC Capital. At least two of these entities—First United and Alpha Cepheus—are wholly controlled by Parmar, as is Constellation Health itself; and

44

d. Constellation Health’s impending sale of the remainder of its CHT Shares to CHT Holdco upon the closing of the Merger.

208. Parmar and the other Defendants caused Constellation Health to enter

into and/or approve these actions without first obtaining the approval of a

disinterested manager appointed by CH Group and without CH Group’s interests

fairly represented. Indeed, upon information and belief, Parmar and the other

Defendants caused these transactions to go forward knowing that the CH Group

Class A membership in Constellation Health was in the process of being formally

assigned to the Master Trust, but went forward nonetheless without any disclosure

to the Master Trust or CH Group.

209. Parmar, First United, Constellation Investment, and Plasco, as well as

any unnamed parties who were managers at the time of the above-referenced

transactions, breached their duties to the Company and to CH Group under the

Operating Agreement by approving and entering into the above-referenced

transactions.


COUNT VIII – FRAUDULENT TRANSFER (All Defendants)



45

212. Plaintiff Master Trust was a creditor of Southport when CH Group

and Naya executed the “Instrument,” and the Master Trust remains the largest

creditor of the Residual Southport Entities, including CH Group, as of the date of

this Complaint.

213. One of Southport’s most valuable assets was its interest in CH Group,

whose only valuable assets were the Constellation Health Units.

214. CH Group did not receive reasonable equivalent value for the

Constellation Health Units under the “Instrument,” and CH Group was insolvent

when it executed the “Instrument.”

215. CH Group and Naya entered into the “Instrument” with actual intent

to hinder, delay, and defraud Southport’s creditors by placing the Constellation

Health Units beyond their reach.

216. Accordingly, the transfer of the Constellation Health Units pursuant to

the “Instrument” was in violation of the Delaware Uniform Fraudulent Transfer

Act, 6 Del. C. § 1301 et seq. (the “DUFTA”).

217. Through his complicated and self-dealing schemes, Parmar and his

Defendant alter-ego entities orchestrated at least two subsequent transfers of the

Constellation Health Units, and CHT Shares, each in violation of the DUFTA.

218. Each of the following transfers constitutes a fraudulent transfer under

the DUFTA.

46

a. CH Group’s purported transfer of title of the Constellation Health Units, orchestrated by Plasco and Parmar in the Naya “Instrument” on June 9, 2014;

b. Constellation Health’s “sale” of 17,862,074 of the CHT Shares to Parmar’s Alpha Cepheus on November 24, 2016—one day before the Merger announcement; and

c. The purported “sale” by Naya on December 7, 2016 of the Constellation Health Units to an unknown party.

219. By orchestrating these transfers, Parmar effectively divested Plaintiffs

CH Group and Constellation Health of their assets and on each occasion did so in

an effort to hinder, delay, and defraud Plaintiffs by depriving them of the value of

the CHT Shares that CH Group and Constellation Health indirectly owned.


COUNT IX – CONVERSION (Directly and derivatively against all Defendants)



222. For the reasons set forth above, and through the purported transfers on

November 29, 2016 and December 7, 2016, Parmar and the Defendants have

actively converted assets rightfully belonging to the Plaintiffs.

223. This exercise of dominion and control over the Plaintiffs’ property

was wrongful and in disregard of Plaintiffs’ rights.

47

224. Upon information and belief, the Defendants intend to further convert

the Plaintiffs’ interests to avoid and evade their legal obligations to the Plaintiffs to

the greatest extent possible.


COUNT X – UNJUST ENRICHMENT (Directly and derivatively against all Defendants)



227. As a result of their scheme, Defendants, and in particular Parmar,

have been unjustly enriched.

228. Due to the above-referenced transfers, Parmar has wrongfully diverted

to himself and entities he controls assets currently worth approximately $73

million, based on public filings from CHT, of which Parmar is CEO.

229. Parmar and the Defendants’ actions have and/or threaten to

substantially impoverish Plaintiffs CH Group, Constellation Health, and their

respective members.

230. There is no justification for these actions, other than the ultimate

enrichment of Parmar himself.

231. Plaintiffs have no remedy at law for this harm as Parmar and the other

Defendants have orchestrated the continual movement and shifting of these assets

through a line of sham transactions and shell corporations that hold no assets.

48

COUNT XI – CIVIL CONSPIRACY AND FRAUD (Directly and derivatively against all Defendants)



233. Defendants collaborated in a scheme to avoid obligations owed to

Plaintiffs, in violation of their fiduciary and contractual duties. Parmar and Plasco

together took control of CH Group and knowingly effectuated a sham transfer of

the Constellation Health Units to Naya, which is wholly owned and controlled by

Parmar and was formed just before the transfer. Defendants then caused

Constellation Health to transfer 17,862,074 of the CHT Shares to Alpha Cepheus,

also an entity wholly owned and controlled by Parmar, who caused Constellation

Health and First United to form Alpha Cepheus just before that transfer. Under the

Merger, Alpha Cepheus will then transfer the shares to CHT Holdco, and

Constellation Health will transfer the remainder of its CHT Shares to CHT

Holdco.

234. Zaharis further collaborated with Parmar in causing the transfer of the

Constellation Health Units from Naya to a third party, as reflected by Zaharis’s

Email to the Master Trust’s counsel, sent on December 8, 2016. Parmar is the alter

ego of Defendants Naya, Constellation Investment, First United and Alpha

Cepheus, as he wholly controls those entities and they functioned as a façade for

Parmar to undertake sham transactions in confederation with the other defendants.

49

235. Defendants’ actions, through repeated breaches of fiduciary and

contractual duties, and sham transactions engineered for the purpose of evading

obligations to the Plaintiffs, constitute a civil conspiracy and willful, intentional,

concerted plan to defraud the Plaintiffs and convert to themselves Plaintiffs’

interests and assets.


PRAYER FOR RELIEF

WHEREFORE, the Plaintiffs respectfully request that the Court award it the

following relief:

A. A declaratory judgment that:

a. Plaintiff CH Group is the rightful owner of the Constellation Health Units and holds all rights and indicia of ownership with respect thereto;

b. The purported transfer of title to the Constellation Health Units on

June 9, 2014 to Naya is invalid, null and void; c. Plaintiff Constellation Health is the rightful owner of the 17,862,074

shares in CHT transferred on November 24, 2016, and holds all rights and indicia of ownership with respect thereto;

d. Any sale, transfer or encumbrance by Constellation Health of the

CHT Shares must be approved by Constellation Health members and directors having no affiliation of any kind with any of the Defendants;

e. The purported transfer by Constellation Health of the 17,862,074

shares in CHT to Alpha Cepheus on November 24, 2016 is invalid, null and void;

50

f. The purported transfer by Naya of the Constellation Health Units pursuant to an alleged “Membership Interest Purchase Agreement” on December 7, 2016, is invalid and null and void;

g. Any action taken by the Defendants whatsoever with respect to the

Constellation Health Units to the extent those actions purport to further convey, transfer or encumber the rights associated with them to persons other than the Plaintiffs, are also null and void; and

h. Any other declaration the Court finds appropriate to effect justice.

B. Preliminary injunctive relief enjoining Parmar or any entity with which he is affiliated, or any of the other named Defendants, from transferring, pledging, encumbering, comingling, voting or in any other way transacting business in connection with or respect to:

a. any direct or indirect interests in CH Group or purported to have been

transferred from CH Group;

b. any direct or indirect interests in Constellation Health or purported to have been transferred from Constellation Health;

c. any equity interests of CHT derived from the transactions and

purported transfers set forth above on June 9, 2014, November 24, 2016 or December 7, 2016, pending the outcome of this litigation.

C. Imposition of a constructive trust upon all investments and/or the proceeds

thereof derived from the Constellation Health Units and/or the CHT Shares;

D. Compensatory damages equal to the fair value of any interests wrongfully transferred and not returned;

E. Disgorgement of any profits and equity from Defendants’ misappropriation of corporate assets;

F. Statutory and/or contractual rates of interest as applicable;

G. An award of costs, expenses, disbursements, and attorneys’ fees incurred in

the prosecution of this action, including indemnification as appropriate for derivative claims; and

51

H. Any and all other relief to which Plaintiffs may be justly entitled.

MORRIS, NICHOLS, ARSHT & TUNNELL LLP

/s/ David J. Teklits David J. Teklits (#3221) Thomas W. Briggs, Jr. (#4076) Zi-Xiang Shen (#6072) 1201 N. Market Street P.O. Box 1347 Wilmington, DE 19899-1347 (302) 658-9200

Attorneys for Plaintiffs OF COUNSEL:

FAEGRE BAKER DANIELS LLP Terri L. Combs Elizabeth J. Carter 801 Grand Ave, Floor 33 Des Moines, IA 50309 (515) 248-9000 Michael B. Fisco Michael F. Doty Peter D. Kieselbach 2200 Wells Fargo Center 90 S. Seventh Street Minneapolis, MN 55402 (612) 766-7000 December 27, 2016

efiled: dec 27 2016 04:20pm est transaction id 59995776 case … · 2016-12-29 · defendant paul...

Documents