In Re AMC Entertainment Holdings, Inc. Stockholder Litigation

COURT OF CHANCERY
OF THE
STATE OF DELAWARE
MORGAN T. ZURN LEONARD L. WILLIAMS JUSTICE CENTER
VICE CHANCELLOR 500 N. KING STREET, SUITE 11400
WILMINGTON, DELAWARE 19801-3734
March 15, 2023
Michael J. Barry, Esquire Raymond J. DiCamillo, Esquire
Grant & Eisenhofer P.A. Richards, Layton & Finger, P.A.
123 Justison Street, 7th Floor 920 North King Street
Wilmington, DE 19801 Wilmington, DE 19801
Thomas Curry, Esquire Via Electronic Mail:
Saxena White P.A. Frank Iacono
824 North Market Street, Suite 1003 6 Donald Court West
Wilmington, DE 19801 Blue Point, NY 11715
fiacono@fiacono.com
Gregory V. Varallo, Esquire
Bernstein Litowitz Berger & Grossman LLP
500 Delaware Avenue, Suite 901
Wilmington, DE 19801
RE: In re AMC Entertainment Holdings, Inc. Stockholder Litigation,
Consol. Civil Action No. 2023-0215-MTZ
Dear Counsel and Mr. Iacono:
I write to resolve Mr. Iacono’s motion to intervene.1 As you are aware, the
plaintiffs in this matter sought to enjoin voting by holders of AMC Preferred
Equity Units (“APEs”) at a March 14, 2023, special meeting (the “Special
Meeting”) of AMC Entertainment Holdings, Inc. (“AMC” or the “Company”).2 At
the Special Meeting, AMC common and preferred stockholders were to consider
1
Citations in the form of “2023-0216, D.I. —” refer to docket items in Usbaldo Munoz,
et al. v. Adam M. Aron, et al., C.A. No. 2023-0216-MTZ (Del. Ch.). Citations in the
form of “2023-0215, D.I. —” refer to docket items in In re AMC Entertainment Holdings,
Inc. Stockholder Litigation, C.A. No. 2023-0215-MTZ (Del. Ch.), formerly Allegheny
County Employees’ Retirement System v. AMC Entertainment Holdings, Inc., et al., C.A.
No 2023-0215-MTZ (Del. Ch.).
2
2023-0216, D.I. 1; 2023-0215, D.I. 20 ¶ 7.
In re AMC Entertainment Holdings, Inc. Stockholder Litigation,
Consol. Civil Action No. 2023-0215-MTZ
March 15, 2023
Page 2 of 11
proposals that would effectively convert all APEs into common stock. The
plaintiffs alleged the proposals would be approved, and dispute the validity of that
vote. On February 27, the plaintiffs and defendant AMC directors stipulated and
agreed that AMC would hold the Special Meeting and tabulate votes, but that the
directors would not effectuate the conversion as a result of any votes of, or
adjournment of, the Special Meeting pending a ruling by the Court on the
plaintiffs’ motion for a preliminary injunction (the “Stipulation”).3 The Court
accepted the Stipulation by order that same day.4 The parties are preparing for a
preliminary injunction hearing to be held on April 27.
On March 1, Frank Iacono filed an “Emergency Motion to Intervene” (the
“Motion”) asserting that the Stipulation delaying any conversion nullified the
protective effect of put options he purchased that expire April 21.5 Mr. Iacono has
held APEs since October 2022. In response to the Company’s December 22, 2022,
disclosure that it planned to hold a vote on converting APEs into common stock,
Mr. Iacono purchased more APEs in a transaction he describes as “large (for
me).”6 As he describes his strategy:
3
2023-0215, D.I. 9; 2023-0216, D.I. 9.
4
2023-0215, D.I. 10; 2023-0216, D.I. 10.
5
2023-0215, D.I. 15; 2023-0216, D.I. 21. The Motion was docketed in both actions.
This letter cites them together as “Mot.”
6
Mot. at 2.
In re AMC Entertainment Holdings, Inc. Stockholder Litigation,
Consol. Civil Action No. 2023-0215-MTZ
March 15, 2023
Page 3 of 11
Reasonably expecting the conversion to be completed by late March
or early April, the latest, contemporaneously with these APE
purchases in January, I purchased put options on AMC with
expiration date April 21, 2023. The size of the AMC put position
acquired in January, as measured by number of underlying shares,
closely matched the number of additional APE shares I purchased in
January. With APE expected to convert into common shares of AMC,
the put options were purchased to protect the value of my stock
investment against a possible decline in value shortly after the
conversion, which, according to the December 22 8-K, was to take
place in March 2023, early April the absolute latest. There were (and
are) no traded options based solely on the APE shares. In the event
APE had converted by the end of March, or even in early April, the
put options would have served their intended purpose. Should the
conversion be delayed pending the result of the preliminary injunction
hearing currently scheduled for April 27, 2023, however, my put
option hedges will be rendered completely ineffective.7
To restore some of the intended efficacy of his put options, Mr. Iacono seeks to
intervene in this action both as of right and permissively under Court of Chancery
Rule 24. If his Motion is granted, he intends to seek dismissal of the claims
seeking equitable relief, or vacatur of the order accepting the stipulated delay of
the conversion, on the grounds that the plaintiffs unreasonably delayed in bringing
this action.8 He seeks this relief in hopes that the defendant directors will then
effectuate the conversion before his options expire.
On March 2, the Court entered an order of consolidation and appointment of
lead plaintiffs and lead counsel that the parties had proposed on February 28.9 On
7
Mot. at 2–3.
8
2023-0215, D.I. 31.
9
2023-0215, D.I. 14; 2023-0215, D.I. 20; 2023-0216, D.I. 19; 2023-0216, D.I. 26.
In re AMC Entertainment Holdings, Inc. Stockholder Litigation,
Consol. Civil Action No. 2023-0215-MTZ
March 15, 2023
Page 4 of 11
March 8, the plaintiffs opposed the Motion, and Mr. Iacono replied and filed a
proposed “Intervenor Complaint” on March 13.10
Rule 24 governs intervention by nonparties. Rules 24(a) and (b) govern
intervention of right and permissive intervention, respectively:
(a) Intervention of Right. Upon timely application anyone shall be
permitted to intervene in an action: (1) When a statute confers an
unconditional right to intervene; or (2) when the applicant claims
an interest relating to the property or transaction which is the
subject of the action and the applicant is so situated that the
disposition of the action may as a practical matter impair or
impede the applicant’s ability to protect that interest, unless the
applicant’s interest is adequately represented by existing parties.
(b) Permissive Intervention. Upon timely application anyone may be
permitted to intervene in an action: (1) When a statute confers a
conditional right to intervene; or (2) when an applicant’s claim or
defense and the main action have a question of law or fact in
common. In exercising its discretion the Court shall consider
whether the intervention will unduly delay or prejudice the
adjudication of the rights of the original parties.11
I begin with Mr. Iacono’s request to intervene as of right. He does not press
10
2023-0215, D.I. 26; 2023-0215, D.I. 29; 2023-0215, D.I. 30; 2023-0215, D.I. 31. Mr.
Iacono’s reply was initially rejected by the Register in Chancery, but given that he is self-
represented, I still consider it timely filed. The plaintiffs’ opposition was late under the
ordered briefing schedule, but given that Mr. Iacono was able to timely respond, I have
considered it as well. 2023-0215, D.I. 23. Given Mr. Iacono’s status as a self-
represented litigant, I accept the “Intervenor Complaint” filed with his reply brief as the
“pleading setting forth the claim or defense for which intervention is sought” required by
Court of Chancery Rule 24, thereby assuaging one of the plaintiffs’ procedural concerns.
See Southpaw Credit Opp. Master Fund LP v. Adv. Battery Techs., Inc., 2015 WL
915486, at *12 (Del. Ch. Feb. 26, 2015) (contemplating a party seeking to intervene
could supplement the record with a proposed pleading and satisfy Rule 24).
11
Ct. Ch. R. 24.
In re AMC Entertainment Holdings, Inc. Stockholder Litigation,
Consol. Civil Action No. 2023-0215-MTZ
March 15, 2023
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any statutory right. In the absence of an unconditional statutory right to intervene,
a proposed intervenor “must make a timely application to the Court that (1) asserts
some significant, legally protectable interest which relates to the transaction or the
property which forms the subject matter of the main action, and (2) the interest
must be such that, as a practical matter, the disposition of the pending lawsuit may
impede or impair the intervenor’s ability to protect that interest, and (3) the
intervenor must show that the existing parties to the lawsuit are not adequately
presenting the intervenor’s interest.”12 “In order to constitute a protectable interest
under Rule 24(a)(2), the intervenor’s claim must bear a sufficiently close
relationship to the dispute between the original litigants. Thus, the alleged interest
must be ‘direct’ and not ‘remote’ or ‘contingent.’”13 “[T]he Court must focus on
the particular facts and procedural posture of the application.”14
[A] mere general interest in the litigation, or an interest in an issue
that is collateral to the basic issues in the case, or an indirect
economic interest or motive with respect to the litigation, is not a
sufficient basis for intervention pursuant to the “legally enforceable
interest” standard. The fact that a civil proceeding may in some way
affect a proposed intervenor is not sufficient to invoke a “legally
enforceable interest” entitling such person to intervention.15
Subsumed within the Court’s analysis of whether the applicant claims a
sufficient interest is the inquiry of standing.16 “Consideration of an interven[o]r’s
standing is implicit in the court’s analysis of the elements of Rule 24, and ‘if the
intervenor lacks standing to assert the claim, ipso facto, the interven[o]r’s interest
12
Allstate Ins. Co. v. Speight, 1992 WL 354091, at *2 (Del. Super. Nov. 10, 1992) (citing
Jet Traders Inv. Corp. v. Tekair, Ltd., 89 F.R.D. 560, 568 (D. Del. 1981), and Pennamco,
Inc. v. Nardo Mgmt. Co., Inc., 435 A.2d 726 (Del. Super. 1981)).
13
Id. (quoting 3B James Wm. Moore et al., Moore’s Federal Practice § 24.07[2] (2d ed.
1992)).
14
Wilm. Tr. Co. v. Lucks, 1999 WL 743255, at *6 (Del. Super. June 18, 1999).
15
Surf’s Up Legacy P’rs, LLC v. Virgin Fest, LLC, 2021 WL 6012782, at *3 (Del. Super.
Dec. 16, 2021) (internal citations omitted) (quoting 7 Goodrich-Amram 2d § 2327:8
(2021)).
16
Id.
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March 15, 2023
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cannot be recognized.’”17 Standing is a requirement for both mandatory and
permissive intervention.18 “Although the Delaware courts embrace a liberal policy
of allowing intervention, mere incantations of equitable principles will not stave
off denial of a motion to intervene if the intervenor lacks standing to bring the
claim . . . .”19
Scholars have noted that the common law describing what qualifies as an
interest supporting mandatory intervention is thin.20 Delaware courts have held
that a judgment creditor lacking any direct interest in ongoing litigation involving
the debtor, but wishing to intervene to ensure payment out of any recovery, does
not have a legally enforceable interest in the litigation supporting mandatory
intervention.21 And in Rollins Cablevue, Inc. v. Saienni Enterprises, the United
States District Court for the District of Delaware considered what qualifies as an
adequate interest under Federal Rule of Civil Procedure 24.22 There, a business
partner of the defendant sought to intervene in an action to determine the validity
17
United Rentals, Inc. v. RAM Hldgs., Inc., 2007 WL 4327770, at *1 (Del. Ch.
Nov. 29, 2007) (quoting Flynn v. Bachow, 1998 WL 671273, at *4 n.15 (Del. Ch.
Sept. 18, 1998)).
18
Noe v. Kropf, 2008 WL 46035577, at *3 (Del. Ch. Oct. 15, 2008); see also Surf’s Up
Legacy, 2021 WL 6012782, at *2–3.
19
Franklin Balance Sheet Inv. Fund v. Crowley, 2006 WL 3095952, at *3 (Del. Ch.
Oct. 19, 2006) (citing Bachow, 1998 WL 671273, at *4).
20
See Allstate, 1992 WL 354091, at *2 (“There is not as yet any clear definition, either
from the Supreme Court or from the lower courts, of the nature of the ‘interest relating to
the property or transaction which is the subject of action’ that is required for intervention
of right.” (quoting 7C Alan Wright, Arthur Miller & Mary Kay Kane, Federal Practice
and Procedure § 1908 (2d ed. 1987))).
21
Surf’s Up Legacy, 2021 WL 6012782, at *2–4; Follieri Gp., LLC v. Follieri/Yucaipa
Invs., LLC, 2007 WL 2459226 (Del. Ch. Aug. 23, 2007).
22
115 F.R.D. 484 (D. Del. 1986). Delaware courts give authorities applying the Federal
Rules of Civil Procedure “great persuasive weight” in the construction of a parallel
Delaware Rule. Cede & Co. v. Technicolor, Inc., 758 A.2d 485, 490 (Del. 2000) (quoting
Cede & Co. v. Technicolor, Inc., 542 A.2d 1182, 1191 n.11 (Del. 1988), and then citing
Leon N. Weiner & Assocs. v. Krapf, 584 A.2d 1220, 1223–24 (Del. 1991), and Hoffman
v. Cohen, 538 A.2d 1096, 1097–98 (Del. 1988)).
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Consol. Civil Action No. 2023-0215-MTZ
March 15, 2023
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of a contract between the defendant and the plaintiff: if the contract was invalid,
the business partner would receive the defendant’s business instead of the plaintiff.
The District Court held that “such a conditional interest in the validity of the
subject matter of litigation which, if held valid, will affect the profitability of other
business interests of the would-be intervenor, has been held to be speculative and
inadequate to permit intervention under Rule 24(a)(2).”23 It went on: “The use of
intervention to ratify an independent transaction, which is not the subject matter of
the litigation in which intervention is sought, does not fall within the ‘relating to
the property or transaction which is the subject of the action’ standard of Rule
24(a)(2).”24
Other federal courts charged with interpreting Federal Rule of Civil
Procedure 24 are in accord. Generally, the intervenor’s interest must be in the
claims in the action in which they wish to intervene, not in the effects that action
might have on the intervenor’s economic interests.25 Federal cases also hold the
interest of a judgment creditor seeking to intervene in an action involving the
23
Rollins, 115 F.R.D. at 487 (citing Paine, Webber, Jackson & Curtis, Inc. v. Merrill
Lynch, Pierce, Fenner & Smith, Inc., 564 F. Supp. 1358, 1372 (D. Del. 1983) (holding an
interest in patent litigation based on losing customers if the patent is valid to be too
speculative to support intervention under Rule 24(a)(2)).
24
Id.25
E.g., Trans Chem. Ltd. v. China Nat. Machinery Import & Export Corp., 332 F.3d 815,
823 (5th Cir. 2003) (holding that stockholders seeking to intervene in the corporation’s
action to confirm an arbitration award to determine whether they were still stockholders
and owners of the corporation held an “economic interest” that was inadequate to support
intervention given the “wholly separate” underlying cause of action); Rosebud Coal Sales
Co. v. Andrus, 644 F.2d 849, 850–51 (9th Cir. 1981) (finding that even though a royalty
rate paid to a lessor was set by the rate the lessee paid under a different contract, the
lessor could not intervene into a dispute about that second contract’s royalty rate; and
noting that permitting intervention would open the door to “unknown thousands of
interests,” and “[w]hatever may be the ultimate contours of a Rule 24(a)(2) ‘interest,’ it
cannot have been intended to include one so tenuous or so increasingly universal”);
Nikon Corp. v. ASM Lithography B.V., 222 F.R.D. 647, 650–51 (N.D. Cal. 2004)
(concluding a manufacturer’s economic interest in the continued viability of its only
customer did not constitute a legally protectable interest in a patent infringement action
brought against that customer to support intervention as of right).
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Consol. Civil Action No. 2023-0215-MTZ
March 15, 2023
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debtor in furtherance of collecting on its judgment does not support intervention
because it is not related to the underlying subject matter of the action.26
Mr. Iacono’s interest is not sufficiently related to the transaction at the heart
of this matter. His interest is not in the merits of the plaintiffs’ claims: he does not
seek to contest that the defendants violated 8 Del. C. § 242 or that they would
violate their fiduciary duties in effectuating the conversion and other aspects of the
transaction. He seeks to restore the conversion to AMC’s corporate agenda on the
timeframe he expected not because he believes the plaintiffs’ claims are meritless,
but because his investment strategy depends on it. His more specific interest,
which he asserts he uniquely holds, is even more attenuated: he objects to the
Stipulation’s delay of the conversion until after his options expire. Put another
way, Mr. Iacono’s interest is not in the claims themselves, but in the parties’
procedural response to them. Mr. Iacono’s collateral and indirect economic
interest is not a sufficient basis for intervention as of right.
Nor do I see a basis to grant permissive intervention. Under Rule 24(b),
permissive intervention is available at the Court’s discretion “when an applicant’s
claim or defense and the main action” have a common question of law or fact.27
The Court should not grant intervention when it will “unduly delay or prejudice the
26
United States v. Alisal Water Corp., 370 F.3d 915, 919–21 (9th Cir. 2004) (concluding
a creditor’s interest in collecting its debt “is several degrees removed from the overriding
public health and environmental policies that are the backbone of this [Safe Drinking
Water Act] litigation,” and “[t]o hold otherwise would create an open invitation for
virtually any creditor of a defendant to intervene in a lawsuit where damages might be
awarded” (citing S. Cal. Edison Co. v. Lynch, 307 F.3d 794 (9th Cir. 2002))); Fin. Co. of
Am. v. Park Hldg. Corp., 60 F.R.D. 504, 506 (W.D. Pa. 1973) (“The complaint of the
original plaintiff asserts a claim of debt against the defendants. Likewise, the intervening
plaintiffs and the proposed intervenors assert claims of debt against the defendants. But
the transactions and the instruments on which the intervening plaintiffs seek to recover
are completely separate from and unrelated to the transactions and instruments on which
the original action is based.”); S.E.C. v. Falor, 270 F.R.D. 372, 375–77 (N.D. Ill. 2010)
(noting that Seventh Circuit authority provides “a mere ‘economic interest’ is not
enough” to support intervention (quoting Flying J, Inc. v. Van Hollen, 578 F.3d 568 (7th
Cir. 2009))).
27
Ct. Ch. R. 24(b).
In re AMC Entertainment Holdings, Inc. Stockholder Litigation,
Consol. Civil Action No. 2023-0215-MTZ
March 15, 2023
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adjudication of the rights of the original parties.”28 Mr. Iacono seeks to intervene
for the sole purpose of protecting his tangential economic interests in put options
from the parties’ Stipulation to reschedule the conversion. The legal and factual
questions the original parties raised derive from their pleadings and any responses
thereto—not the subsequent stipulated timing of the litigation.
On its face, I recognize Mr. Iacono’s application to dismiss the plaintiffs’
complaint on the basis of laches might appear to share common questions of law or
fact with the defendants’ motion to dismiss, the grounds of which are not yet
briefed.29 But Mr. Iacono lacks standing to press the defense of laches against the
plaintiffs. “Laches is an unreasonable delay by a party, without any specific
reference to duration, in the enforcement of a right, and resulting in prejudice to
the adverse party.”30 The plaintiffs have not asserted a claim or enforced a right
against Mr. Iacono: they do not seek to wield equity against him. It follows that
he is not an adverse party that can cry out from prejudicial delay. Mr. Iacono
28
Ct. Ch. R. 24(b)(2); see Allstate, 1992 WL 354091, at *3 (considering “two potentially
conflicting goals: to achieve judicial economies of scale by resolving related issues in a
single lawsuit, and to prevent the single lawsuit from becoming fruitlessly complex or
unending” (quoting Smuck v. Hobson, 408 F.2d 175, 179–80 (D.C. Cir. 1969))).
29
The defendants’ counsel hinted they would raise a laches defense in the February 23,
2023, telephonic scheduling conference. 2023-0215, D.I. 25 at 11; 2023-0216, D.I. 27 at
11.
30
Whittington v. Dragon Gp, LLC, 991 A.2d 1, 7 (Del. 2009) (citing Reid v. Spazio, 970
A.2d 176, 183 (Del. 2009)); 27A AM. JUR. 2D Equity § 124 (2023) (defining the elements
of laches as including prejudice to “respondents,” “defendant[s],” or “adverse part[ies]”);
2 John Norton Pomeroy, Pomeroy Equity Jurisprudence § 419, at 171–72 (5th ed. 1941)
(defining laches as “such neglect or omission to assert a right as, taken in conjunction
with the lapse of time, more or less great, and other circumstances causing prejudice to an
adverse party, operates as a bar in a court of equity”); id. § 419(d), at 179 (“The question
as to whether relief shall be granted is to be determined in view of the showing as to
whether the situation of the adverse party underwent a change during the period which
elapsed which the complainant delayed institution of suit.”).
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March 15, 2023
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ha[s] not demonstrated any standing to assert the doctrine of laches.
That doctrine is normally available as a defense to bar a claimant from
invoking the aid of equity, due to his unreasonable and prejudicial
delay in asserting a claim. Here the party asserting laches is the . . .
the [i]ntervenor[], not the defendant[s] . . ., which [are] the part[ies]
normally entitled to assert laches. To permit the [i]ntervenor[] to
assert a laches defense offensively in this novel fashion would stand
the doctrine on its head.31
Mr. Iacono lacks standing to assert laches against the plaintiffs.32 Accordingly,
Mr. Iacono cannot assert any “claim or defense” that “shares a common question
or law or fact with any of the parties or the events involved in this action.”33 He
31
Two S. Corp. v. City of Wilm., 1989 WL 76291, at *7 (Del. Ch. July 11, 1989).
32
Viewed more broadly, Mr. Iacono seeks to intervene to make space for the defendant
directors to effectuate the conversion sooner. From that perspective, Mr. Iacono also
lacks standing to compel the defendant directors to restore the efficacy of his options in
his investment strategy. His interest in intervening comes not from his status as an AMC
stockholder, to whom the directors owe fiduciary duties, but rather from his status as a
holder of put options, which inspires no such duty. Bocock v. INNOVATE Corp., 2022
WL 15800273, at *27 n.171 (Del. Ch. Oct. 28, 2022) (“A ‘holder of an option to
purchase stock is not an equitable stockholder of the corporation.’ Therefore, ‘the option
feature of these instruments does not qualify for the protections that flow from a fiduciary
duty.’” (quoting Harff v. Kerkorian, 324 A.2d 215, 219 (Del. Ch. 1974), rev’d on other
grounds, 347 A.2d 133 (Del. 1975), and then Glinert v. Wickes, 1990 WL 34703, at *9
(Del. Ch. Mar. 27, 1990), aff’d, 586 A.2d 1201 (Del. 1990))). The defendants do not owe
Mr. Iacono, as an optionholder, a duty to consummate the proposed transaction before his
options expire. It is unclear that they would necessarily do so if the plaintiffs’ claims
were dismissed. And certainly the plaintiffs, Mr. Iacono’s fellow stockholders, owe him
no duties with regard to the bets he placed on the conversion of APEs into common stock
consistent with his expectations.
33
See Surf’s Up Legacy, 2021 WL 6012782, at *5; Wier v. Howard Hughes Med. Inst.,
404 A.2d 140, 145–46 (Del. Ch. 1979) (denying permissive intervention where “the
principal motivation behind movant’s application for leave to intervene in this litigation
at the present time actually centers around his desire to attempt to see to it that the
defendant Institute continues to make generous contributions to the University of Miami
Medical Center, a concern which is not directly related to the basic issue next to be
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March 15, 2023
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cannot meet Rule 24(b)’s requirements for permissive intervention.
In sum, Mr. Iacono lacks an interest that supports intervention, and lacks
standing to assert the defense of laches against the plaintiffs. His motion to
intervene is DENIED. IT IS SO ORDERED.
Sincerely,
/s/ Morgan T. Zurn
Vice Chancellor
MTZ/ms
cc: All Counsel of Record, via File & ServeXpress
decided in this litigation, namely whether or not the defendant should continue to be
managed and controlled by an Executive Committee rather than by a successor Trustee”).