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Tuesday, November 12, 2019

Delaware court sees 'several problems' with plaintiff's math in case over Hawk Systems shares

State Court

By Charmaine Little | Sep 13, 2019

Vice Chancellor Joseph R. Slights

WILMINGTON, Del. (Legal Newsline) – A Florida man’s attempt to get a Delaware court to declare that he’s a majority stockholder in a Delaware corporation based in Palm Beach County, Florida, was denied.

The Court of Chancery of the State of Delaware determined on Sept. 4 that petitioner Mark Spanakos has not provided enough proof that he should be a majority stockholder, sole director and CEO of Hawk Systems Inc. Spanakos also sought a declaration that he owned 68.7 million of the roughly 75 million issued shares.

Spanakos filed the request shortly after Hawk Systems allegedly committed fraud and mismanagement “at the expense of stockholders” such as Spanakos, resulting in the company closing down, the ruling states. Spanakos alleged company insiders purchased and sold stock with very little thought of how it would impact related parties. 

Vice Chancellor Joseph R. Slights wrote that Spanakos' allegations focus on two orders issued by Florida courts, which he claims indicates that he is a majority owner, or at minimum has the right to vote a majority of Hawk Systems’ common shares.

“The orders do not clearly say what Spanakos says they say, nor has Spanakos sought to clarify, enforce them in Florida in a manner that would allow this court to declare that he owns or controls the disputed shares," Slights wrote. "And, of course, the company’s stock ledger does not support his claim because that record has been neglected for years.”

While Slights acknowledged that Spanakos has reason to be upset after investing his own money into the now-fallen company, he simply can’t acquire leadership the way he had hoped.

Slights first noted that Spanakos has failed to prove he’s the majority stockholder, or even sole director of the company. The ruling notes that Hawk System's most-recent stock ledger indicates Spanakos purchase 8 million common shares before he received 2 million in the open market, and then an additional 8 million shares, plus 4.4 million shares thanks to a transfer from his sister. 

Slights noted that because of this, Spanakos owns 22.6 million shares, which is less than the majority.

As for the Florida orders, Slights wrote Spanakos failed to take "steps in Florida to execute on the partial final judgment” that awarded him $3 million in damages amid the fallout. Spanakos alleged this canceled out 20 million shares of the stock and insisted he owns more than 68,721,332 of the shares. 

"There are several problems with Spanakos' math," Slights wrote. 

"If petitioner obtains clarification from the Florida courts regarding the meaning and scope of the partial final judgment and/or the summary judgment order, and properly executes on those orders, he may return to this court to obtain appropriate relief under Section 225 or Section 223.91," the ruling states.

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Delaware Court of Chancery

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