Mitchell Partners, L.P. v. AMFI Corp. ( 2024 )

COURT OF CHANCERY
OF THE
STATE OF DELAWARE
KATHALEEN ST. JUDE MCCORMICK LEONARD L. WILLIAMS JUSTICE CENTER
CHANCELLOR 500 N. KING STREET, SUITE 11400
WILMINGTON, DELAWARE 19801-3734
August 5, 2024
R. Bruce McNew Lisa M. Zwally
Cooch and Taylor, P.A. Bryan T. Reed
The Brandywine Building Greenberg Traurig, LLP
1000 N. West Street, Suite 1500 222 Delaware Avenue, Suite 1600
Wilmington, DE 19801 Wilmington, DE 19801
Re: Mitchell Partners, L.P. v. AMFI Corp. et al.,
C.A. No. 2020-0985-KSJM (“AMFI I”);
Mitchell Partners, L.P. v. AMFI Corp.,
C.A. No. 2020-0986-KSJM (“AMFI II”)
Dear Counsel:
This letter resolves the plaintiff’s Rule 59(f) motion seeking partial reargument
of my July 3, 2024 decision (the “Decision”) on the defendants’ motion to dismiss
Counts III through V of the Second Amended Complaint in AMFI I.1 Specifically,
Mitchell Partners seeks reargument of the portion of the Decision concluding that it
waived its waste claim by failing to brief it.2
Under Court of Chancery Rule 59(f), “[t]he Court will deny a motion for
reargument ‘unless the Court has overlooked a decision or principle of law that would
have a controlling effect or the Court has misapprehended the law or the facts so that
1 C.A. No. 2020-0985-KSJM, Docket (“Dkt.”) 133 (“Mot.”); Mitchell P’rs, L.P. v. AMFI
Corp., 2024 WL 3289389, at *1 n.5 (Del. Ch. July 3, 2024).
2 Mot. ¶ 1 (quoting Mitchell P’rs, 2024 WL 3289389, at *1 n.5 (“Under the alternative
theory, Mitchell Partners claims that any transfer constituted waste. But Mitchell
Partners does not discuss waste in its answering brief, so that theory is waived.”)).
C.A. Nos. 2020-0985-KSJM, 2020-0986-KSJM
August 5, 2024
Page 2 of 4
the outcome of the decision would be affected.’”3 If a motion for reargument “merely
rehashes arguments already made by the parties and considered by the Court” in
rendering the decision for which reargument is sought, the motion must be denied. 4
On a motion for reargument, the movant bears a “heavy burden.” 5
Mitchell Partners argues that it did, in fact, brief its waste claim, and that I
missed that fact.6 To be clear, Mitchell Partners’ answering brief contained no
analysis of a waste claim. It did not state, much less apply, any legal standard
pertaining to waste. Mitchell Partners’ waste theory was mushed together with two
other claims found in Count III,7 but Mitchell Partners’ Answering Brief made no
mention of waste in the three times that it described Count III.8
3 Nguyen v. View, Inc., 2017 WL 3169051, at *2 (Del. Ch. July 26, 2017) (quoting Stein
v. Orloff, 1985 WL 21136, at *2 (Del. Ch. Sept. 26, 1985)).
4 Wong v. USES Hldg. Corp., 2016 WL 1436594, at *1 (Del. Ch. Apr. 5, 2016) (citation
omitted).
5 In re ML/EQ Real Est. P’ship Litig., 2000 WL 364188, at *1 (Del. Ch. Mar. 22, 2000).
6 Mot. ¶ 4.
7 Mitchell P’rs, 2024 WL 3289389, at *1. In that one Count, Mitchell Partners sought:
(i) “a declaratory judgment that no Class B shares of AMFI are issued or
outstanding;” (ii) “in the alternative,” a declaration “that if the Class B shares were
validly issued, then only 100 shares were issued and they are owned by AFL;” and
(iii) again in the alternative, “that any transfer [of Class B shares to the Subsidiary
Defendants] constituted waste.” Id.8 See Dkt. 115 at 2 (“Count III seeking declaratory relief that no Class B shares have
ever been issued, or alternatively, if issued, are only in the amount of 100 shares and
are owned by AMFI’s wholly owned subsidiary AFL.”); id. at 8 (“Count III seeks a
declaration that no Class B shares are currently outstanding. It relies on numerous
facts, including documents Defendants themselves prepared, i.e. tax returns,
regulatory filings and AMFI self-described ‘stock ledger,’ and the unchallenged
testimony of Corporaal, AMFI’s registrar and transfer agent, all of which state
C.A. Nos. 2020-0985-KSJM, 2020-0986-KSJM
August 5, 2024
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In support of reargument, Mitchell Partners points to page 27 of its answering
brief, which contains the word “waste.” The relevant language states: “As a result,
these purported transfers conveyed a material benefit, specifically ownership of the
vast majority of AMFI’s equity without any benefit being provided to AMFI’s
shareholders, the purported transactions were void, invalid, in breach of the duties
of AMFI’s directors and constituted waste.”9
unequivocally that no Class B shares have ever been issued. It does not, as
Defendants claim, challenge the AMFI/AFL Reorganization which was implemented
without any Class B shares being issued. It seeks no recovery for AMFI and if
successful the relief will not affect AMFI in any manner beyond requiring it return to
the reporting shareholders’ equity consisting of only Class A shares, consistent with
its practice over almost four decades. That relief will benefit only the Class A
shareholders and will only affect the Class A shareholders and the Subsidiary
Defendants (defined below) who claim to own Class B shares. Alternatively, Count
III seeks a declaration that in the event the Court determines anyone has a right to
Class B shares, that right would be for AFL to have 100 Class B shares. This also is
not a challenge to the AMFI/AFL Reorganization, and any recovery will only affect
the Class A shareholders, the Subsidiary Defendants and AFL.”); id. at 29 (“Count
III seeks a declaratory judgment that no Class B shares were ever issued.
Alternatively, it seeks a declaration that if issued, such action was without proper
board authorization, that even if properly is authorized, only 100 shares were
authorized to AFL and that there was no valid transfer of those shares by AFL. While,
as detailed below, there are multiple facts to support the requested relief, two alone
should be dispositive of this motion. First, AMFI’s registrar and transfer agent
testified that AMFI has no record, in AMFI’s self-described (albeit improperly
maintained) stock ledger or elsewhere, of any Class B shares ever being issued and
that the purported Class B share certificate AMFI provided in the 220 Action is not
a validly issued certificate. Second, the Report finds that there is no record of any
Class B shares in AMFI’s self-described stock ledger. A stock ledger is the definitive
source as to ‘all issuances and transfers of shares.’ Whatever other ‘facts’ Defendants
might think exist, at a minimum, these are sufficient to defeat the motion given the
Plaintiff favorable inferences.” (emphasis omitted) (citations omitted)).
9 Mot. ¶ 2 (emphasis in original) (quoting Answering Br. at 27).
C.A. Nos. 2020-0985-KSJM, 2020-0986-KSJM
August 5, 2024
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Although it would have been easy to overlook this passing reference, I did not.
It just was not enough to preserve the claim.10 The motion for reargument is denied.
IT IS SO ORDERED.
Sincerely,
/s/ Kathaleen St. Jude McCormick
Chancellor
cc: All counsel of record (by File & ServeXpress)
10 See Merck & Co., Inc. v. Bayer AG, 2023 WL 2751590, at *15 (Del. Ch. Apr. 3, 2023)
(If a party “intended to preserve [an] argument, it should have addressed it in a more
meaningful way.” (citation omitted)), aff’d, 308 A.3d 1190 (Del. 2023) (TABLE);
Macrophage Therapeutics, Inc. v. Goldberg, 2021 WL 2585429, at *4 (Del. Ch. June
23, 2021) (finding that the defendant’s failure to cite any authority in support of his
legal argument constituted a waiver of the issue).