Motion for Order to Post in EDWARD DEANE, ET AL VS. ROBERT A. MAGINN, JR.| Trellis.Law

On May 05, 2017 a No Value was filed involving a dispute between Deane, Edward, and Maginn Jr., Robert A., for CIVIL ACTIONS in the District Court of Court of Chancery.

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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

EDWARD DEANE, GEORGE WIHBEY, )
and JASON CUNNINGHAM IN HIS )
CAPACITY AS ATTORNEY-IN-FACT )
FOR WILLIAM CUNNINGHAM, for )
themselves and in the right and for the )
benefit of New Media Investors II-B, LLC )
and New Media II-B, LLC )
)
Plaintiffs, )
)
v. ) C.A. No. 2017-0346-LWW
)
ROBERT A. MAGINN, JUNIOR, )
)
Defendant, )
)
and )
)
NEW MEDIA INVESTORS II-C, LLC )
)
Nominal Defendant. )

MEMORANDUM OPINION

Date Submitted: July 14, 2022
Date Decided: November 1, 2022

David H. Holloway, SHLANSKY LAW GROUP, LLP, Wilmington, Delaware;
David J. Shlansky & Colin R. Hagan, SHLANSKY LAW GROUP, LLP, Chelsea,
Massachusetts; Counsel for Plaintiffs Edward Deane, George Wihbey,
& Jason Cunningham

Jody C. Barillare, Amy M. Dudash, & Kelsey A. Bomar, MORGAN LEWIS &
BOCKIUS LLP, Wilmington, Delaware; Jane M. Manchisi, Karen Pieslak
Pohlmann, & Laura Hughes McNally, MORGAN LEWIS & BOCKIUS LLP,
Philadelphia, Pennsylvania; Michael D. Blanchard of MORGAN LEWIS &
BOCKIUS LLP, Boston, Massachusetts; Counsel for Defendant Robert A.
Maginn, Jr.

WILL, Vice Chancellor
This is the post-trial decision in a long-running dispute that seeks to hold

defendant Robert A. Maginn, Jr. liable for breaches of fiduciary duty. Although the

plaintiffs’ legal theories have shifted during the five years that this case has been

pending, their beliefs that Maginn acted to advantage himself at the expense of the

members of New Media Investors II-B, LLC have remained constant. The plaintiffs’

charges have ultimately been validated.

Maginn was the managing member of New Media II-B, a vehicle formed to

facilitate investments in Jenzabar, Inc.—a private company that Maginn and his

spouse founded. The plaintiffs are members of New Media II-B.

Due to a restructuring, New Media II-B held warrants giving it rights to

purchase shares of Jenzabar common stock. The warrants were set to expire in June

2011. Because the value of Jenzabar common stock remained below the warrants’

exercise price, there was a risk that the warrants would expire unexercised. A special

committee of Jenzabar directors extended the expiration deadline, based on

Maginn’s expressed desire to find a solution for New Media II-B and its members.

At the same time, Jenzabar’s special committee was working to streamline the

company’s bloated capital structure. If New Media II-B’s members were able to

invest directly in Jenzabar, further complications could arise. Maginn proposed a

solution: an additional set of warrants could be issued for the benefit of New Media

II-B but held by a new entity in which New Media II-B’s members could then invest.

1
When the original warrants expired, the special committee approved the

issuance of new warrants to what it believed was New Media II-B’s successor entity.

But the warrants were given to New Media Investors II-C, LLC—an entity that

Maginn and his spouse had created in 2009 and solely owned.

Maginn borrowed money from New Media II-B to purchase the then-recently

approved warrants for New Media II-C. But Maginn did not tell New Media II-B’s

members about the investment opportunity at that time. When these warrants neared

expiration, Maginn used $3 million of personal funds to exercise them.

Six months later, Maginn sent a vague letter to New Media II-B’s members to

tell them that their investments would conclude upon the cashing of a “final check”

and that they could learn about a “new” Jenzabar opportunity if they signed a non-

disclosure agreement and release. Certain members, including the plaintiffs, neither

cashed their checks nor signed the NDA.

Maginn maintained his silence about having purchased and exercised the new

warrants for years. It was not until 2021, during discovery on a separate claim in

this litigation, that the plaintiffs learned about Maginn’s actions. Meanwhile, the

shares of Jenzabar common stock that Maginn obtained through exercising the

warrants have grown in value.

After trial, I find that Maginn breached his duty of loyalty when he usurped

from New Media II-B the opportunity to obtain the new warrants. I award rescissory

2
damages to remedy that harm. Given the nature of New Media II-B’s business and

Maginn’s ongoing involvement, I determine that a pro rata recovery to the members

of New Media II-B (excluding Maginn) is appropriate. A subsequent decision will

address the method for distributing damages to New Media II-B’s members.

I. FACTUAL BACKGROUND

Unless otherwise noted, the following facts were stipulated to by the parties,1

proven by a preponderance of the evidence at trial,2 or set forth in this court’s

March 2, 2022 summary judgment opinion (the “Summary Judgment Opinion”). 3

Trial was conducted over three days during which four fact witnesses and two expert

witnesses testified.4 The parties introduced 271 exhibits and three deposition

transcripts.5 To the extent that any conflicting evidence was presented, I have

weighed it and made findings of fact accordingly.

A. Maginn, Jenzabar, and New Media

In 1998, defendant Robert A. Maginn, Jr. and his spouse founded Jenzabar,

Inc., a private Delaware corporation that provides software and services for the

1
Joint Pre-trial Stipulation and Proposed Order (Dkt. 266) (“PTO”).
2
Where facts are drawn from exhibits jointly submitted by the parties at trial, they are
referred to according to the numbers provided on the parties’ joint exhibit list and cited as
“JX__” unless otherwise defined. Deposition transcripts are cited as “[Name] Dep.” Trial
testimony is cited as “[Name] Tr.”
3
Deane v. Maginn, 2022 WL 624415, at *2 (Del. Ch. Mar. 2, 2022) (“Summ. J. Op.”).
4
See Dkt. 299.
5
See Dkt. 264.

3
education sector.6 Maginn served as Jenzabar’s Chief Executive Officer from its

inception until 2019.7

In 1999 and 2000, respectively, Maginn formed New Media Investors II, LLC

(“New Media II”) and New Media Investors II-B, LLC (“New Media II-B”). Both

entities are Delaware limited liability companies formed to serve as “pass-the-hat”

vehicles for investing in Jenzabar.8 New Media II-B is governed by a Limited

Liability Company Agreement (the “LLC Agreement”). 9 Maginn served as the

Managing Member of New Media II-B from 2000 until 2013. 10

Plaintiffs Edward Deane, George Wihbey, and William Cunningham are

members of New Media II-B.11 The plaintiffs were not members of New Media II.12

B. The Series A Junior Warrants

In 2004, following litigation between Jenzabar and an investor, Jenzabar

recapitalized to satisfy certain repayment obligations. 13 As part of that restructuring,

6
Maginn Tr. 15; Summ. J. Op. at *2.
7
Summ. J. Op. at *2.
8
Maginn Tr. 15-17; Summ. J. Op. at *2.
9
JX 1 (“LLC Agreement”).
10
Summ. J. Op. at *2.
11
Id.
12
See JX 72 at 13-16.
13
Summ. J. Op. at *2.

4
New Media II-B received 4,647 shares of Series A Junior Preferred stock and Series

A Junior warrants for 1,129,275 shares of Jenzabar common stock. 14

Jenzabar was to redeem the Series A Junior Preferred shares for a total of $4.7

million over the next six years beginning on June 30, 2005, provided that certain

financial metrics were achieved at the time of each redemption. 15 New Media II-B

held 4,647 of the outstanding 8,700 shares (53%) of Series A Junior Preferred

stock.16 The Series A Junior warrants had an exercise price of $0.89 per share and

a cashless exercise option, which would allow New Media II-B to exercise the

warrants with foregone shares (the value of which would be determined in “good

faith” by the board of directors of Jenzabar). 17

New Media II held 2,451,466 Series A Junior warrants and New Media II-B

held 1,129,275.18 Other investors—including Bain & Company Inc., FSC Corp.,

and Simon Worldwide, Inc.—also held Series A Junior warrants.19

14
PTO ¶ 4; Summ. J. Op. at *2; see JX 195; JX 10.
15
JX 194 § V.A.4(c)(ii); JX 195 at 1 n.1; see JX 15; JX 16; JX 19; JX 22; JX 30; JX 35;
JX 48.
16
JX 196 at 1. New Media II held 2,172 shares (24.97%). Id. Various other investors
held the other shares. Id.
17
JX 7 Preamble § 1(b); Maginn Tr. 53-55.
18
JX 167 at 18; JX 243; see supra note 14.
19
JX 243. On or around October 21, 2011, these investors allowed their Series A Junior
warrants to expire. JX 177 at 11; JX 59; JX 60; JX 66; see JX 72 at 8; JX 76 at 1.
5
The Series A Junior warrants were set to expire on June 30, 2011.20 The final

tranche of redemption payments for Series A Junior Preferred shares (amounting to

just under $1 million for New Media II-B) was also due to be paid at this time. 21

This forthcoming redemption payment and the Series A Junior warrants were the

only assets held by New Media II-B.22

According to Maginn, using the cash from the redemption payments to

exercise the Series A Junior warrants was infeasible.23 Similarly, the cashless

exercise option seemed impossible. An April 26, 2011 409A valuation by KPMG

concluded that the fair value of Jenzabar’s common stock as of the end of 2010 was

$0.66 per share—below the $0.89 per share strike price.24

As Maginn examined these options, he asked a special committee of

Jenzabar’s board of directors (the “Special Committee”)25 to grant a series of

extensions to the June 30 expiration of the Series A Junior warrants.26 The Special

20
JX 7 § 1(a)(i).
21
Maginn Tr. 52-53; see JX 48.
22
Maginn Tr. 55-57, 81.
23
Id.; but see infra at notes 178-94 and accompanying text (finding Maginn’s
characterization to be unsupported and self-serving).
24
JX 26 at 2; Maginn Tr. 57-58.
25
The Special Committee was established to simplify Jenzabar’s capital structure and
address any conflicts arising out of the fact that Maginn and his spouse Ling Chai Maginn
were major stockholders and executives of Jenzabar. Maginn Tr. 59.
26
Id. at 70-72.

6
Committee, composed of Dr. Joseph San Miguel and Dr. D. Quinn Mills, believed

that Maginn requested the extensions so that he could seek out further opportunities

for New Media II and New Media II-B members to invest in Jenzabar.27 The Special

Committee agreed to extend the expiration date to December 30, 2011. 28 It charged

New Media II and New Media II-B $3,580.74 for this final extension to

disincentivize Maginn from making further requests.29

On July 11, 2011, Jenzabar’s Special Committee decided to reassess the

feasibility of the cashless exercise option for the Series A Junior warrants, engaging

Bulger Capital Partners to review KPMG’s 2010 409A valuation.30 In September,

Bulger confirmed KPMG’s view that the value of Jenzabar common stock was

below the $0.89 strike price.31 The Special Committee concluded that a cashless

exercise of the Series A Junior warrants was not possible.32

27
Mills Dep. 226.
28
The expiration date was first extended from June 30, 2011 to September 30, 2011, and
then extended to October 21, 2011. JX 54. Finally, the expiration date was extended to
December 30, 2011. JX 67; JX 68 at 1-2.
29
JX 67; JX 68 at 1-2; Mills Dep. 225-26. This extension to December 30 only applied to
the Series A Junior warrants held by New Media II and New Media II-B. See supra note
19.
30
JX 51 at 1.
31
Id.; JX 56 at 5.
32
JX 51 at 2. The board of directors of Jenzabar agreed with the Special Committee and
delegated full power and authority to the Special Committee to proceed accordingly.
JX 53 at 1; JX 55 at 1.
7
C. Maginn’s Proposal

With the expiration of the Series A Junior warrants looming, Maginn assessed

another approach. It involved new warrants being issued to an investment vehicle

that—like New Media II and New Media II-B—would serve as a “pass-the-hat”

opportunity. The members of New Media II and New Media II-B could then make

“individual decisions” about whether to invest.33 Maginn considered whether such

warrants could be given to an entity called New Media Investors II-C, LLC (“New

Media II-C”).34

On October 15, 2011, Maginn wrote to Jenzabar’s General Counsel Jamison

Barr to raise this proposal.35 Maginn suggested that the “complexity” surrounding

the exercise of the Series A Junior warrants “could be solved by simply offering new

shares of Jenzabar Common stock in the same number and at the same $0.89 strike

price as the current warrants” to a “new” New Media entity.36 “If this were offered,”

Maginn explained, “the members of New Media [II and New Media II-B] that

wished to purchase shares could do so as a new New Media IIC [investor]

33
Maginn Tr. 56-57, 145, 168.
34
Id. at 69, 89, 197 (“[I]f we could get a new deal at a strike price of whether it’s 25 cents,
60 cents, whatever, that’s better than the 89 cents, then we’d form the new entity, II-C, and
offer it to everybody.”).
35
JX 61.
36
Id.

8
establishing new capital accounts to reflect their ownership percentages while

allowing the current warrants to expire unexercised.” 37

In December, Barr relayed to Maginn that he had spoken to San Miguel and

the Special Committee’s outside counsel about Maginn’s proposal.38 Barr told

Maginn that “the Special Committee believe[d] the better approach [w]as for the

[Series A Junior] warrants to terminate,” allowing “the right to buy stock” to be

offered to “[New] Media members at a later date.” 39

The Special Committee was concerned with simplifying Jenzabar’s capital

structure, which had become “too complex and constituted an almost

insurmountable barrier to further investment,” mergers and acquisitions, or an initial

public offering.40 In an email to San Miguel and outside counsel, Mills raised this

problem in light of the possibility that the Series A Junior warrants would be

exercised by individual New Media investors. Because it “appear[ed]” that “the

New Media group[] wishe[d] to exercise some or all of the [Series A] warrants,”

Mills cautioned that it would be “important to avoid replacing New Media as an

ent[ity] which owns warrants in [Jenzabar] with instead a whole group of new

37
Id.
38
JX 75; see Mills Dep. 40-41; JX 69 at 1.
39
JX 75.
40
JX 70.

9
shareholders (New Media participants).”41 Similarly, Maginn told Barr and the

Special Committee that a “failure” to organize the warrants under an LLC would

“expose the company to massive litigation risk and violate the very charter of the

Special Committee to simplify the capital structure.”42

The Series A Junior warrants expired unexercised at the end of 2011.43

D. The II-C Warrant

On June 21, 2012, the Special Committee met “to consider the proposal

received by Mr. Maginn and from [New Media II and New Media II-B] for a

successor entity, New Media Investors II-C, . . . to purchase new equity in the

Company.”44 The Special Committee resolved to “accept the proposal” made by

Maginn: that Jenzabar sell to “successor entity” New Media II-C “a warrant or

warrants, in substantially the form of warrants issued on June 30, 2004, to purchase

an aggregate of 6,500,000 shares of [Jenzabar] Common Stock.” 45 The exercise

price would be equal to one share of Jenzabar common stock on June 30, 2012, as

determined by an independent valuation. 46

41
Id. (Mills remarking that allowing the New Media participants to individually invest in
Jenzabar could “further complicate” Jenzabar’s capital structure); see Mills Dep. 206.
42
JX 68 at 1.
43
PTO ¶ 6.
44
JX 87.
45
Id.
46
Id.

10
The Special Committee hoped to encourage the New Media members’

continued investment in Jenzabar by approving Maginn’s proposal.47 Though the

sale would technically be made to New Media II-C, the expectation was that New

Media II-C would, in turn, offer the investment opportunity to the members of New

Media II and New Media II-B.48 Consistent with that goal, Barr explained to

Jenzabar’s outside counsel that the plan approved by the Special Committee would

have Jenzabar “sell warrants to purchase up to 6.5 million shares to [New Media II

and New Media II-B].”49

On June 29, 2012, the Special Committee issued warrants to purchase

Jenzabar common stock (the “II-C Warrant”) to New Media Investors II-C.50

Although the Special Committee believed that the II-C Warrant was being issued to

a new “successor entity” to New Media II and New Media II-B,51 Maginn had

formed New Media II-C in 2009.52 New Media II-C was solely owned by Maginn

and his spouse and it held no assets until it received the II-C Warrant.53

47
Mills Dep. 202-03.
48
Maginn Tr. 276-77.
49
JX 137 (Barr email to Donald Board, copying Adolfo Garcia); Maginn Tr. 275-76
(explaining that Garcia was outside counsel to Jenzabar).
50
JX 89; JX 91; see JX 87.
51
JX 87; see also JX 61 (Maginn referring to New Media II-C as a “new” entity).
52
Maginn Tr. 189-92.
53
Id.

11
The II-C Warrant was issued for 6,500,000 shares of Jenzabar common

stock.54 Each individual warrant had “a[n exercise] price per share equal to the fair

market value per share of Common Stock as determined by KPMG, LLP on an

illiquid basis as of June 30, 2012.”55 By its terms, the II-C Warrant would expire

within one year.56

Maginn used funds from New Media II and New Media II-B to pay the

$65,000 purchase price for the II-C Warrant.57 He testified that he did so because

he intended to procure the II-C Warrant for the benefit of New Media II and New

Media II-B members. 58 He eventually reimbursed $65,000 to New Media II and

New Media II-B in December 2013.59

E. The II-C Solicitation

On March 5, 2013, KPMG completed its valuation of Jenzabar common stock,

setting the exercise price for the II-C Warrant at $0.47 per share.60 New Media II

54
JX 89 Preamble, § 1(a).
55
Id.
56
Id.
57
Maginn Tr. 154.
58
Id. at 270-71; see JX 107.
59
Maginn Tr. 93, 104-05; JX 130. Maginn reimbursed the funds because he later realized
that “in order to send their [New Media II and New Media II-B members’] final redemption
payment . . . [h]e needed to [reimburse] the [$]65,000.” Maginn Tr. 105.
60
JX 99 at 3; JX 103.

12
and New Media II-B members had yet to learn that Maginn had procured the II-C

Warrant.

In May 2013, Maginn began drafting a letter to New Media II and New Media

II-B members to invite them to join New Media II-C and inform them about the

investment opportunity provided by the II-C Warrant.61 The initial draft explained

that the Series A Junior warrants had expired unexercised and recounted the origins

of the II-C Warrant. 62 It described the II-C Warrant, comparing the $0.47 per share

strike price to the higher $0.89 per share strike price of the Series A Junior

warrants.63 The draft also expressed confidence in Jenzabar’s future performance.64

In May, Maginn shared his initial draft with Barr, who revised the letter from

two pages to five sentences.65 The revised draft informed New Media II and New

Media II-B members of “another Jenzabar opportunity” but required those interested

to sign a non-disclosure agreement to learn about it. 66 At trial, Maginn testified that

61
Maginn Tr. 95.
62
JX 102 at 2-3.
63
Id.; Maginn Tr. 95-97. This draft also attached the 2012 KPMG valuation that set the
exercise price at $0.47 per share. JX 102.
64
JX 102 at 2; Maginn Tr. 95-97.
65
Maginn Tr. 97-99; see JX 102; JX 107; JX 108; JX 109.
66
JX 108.

13
the revisions were intended to “protect Jenzabar’s confidential information,” though

he could not identify what was confidential about the initial draft. 67

Maginn, with Barr’s assistance, finalized his correspondence to New Media

II and New Media II-B members by May 2013.68 But he did not send the letter (and

waited until December to do so). Maginn testified that “pedestrian administrative”

difficulties—such as locating the addresses of the 103 New Media II and 88 New

Media II-B members, ordering new checks, and turnover among administrative

personnel—caused delay.69 Maginn further testified that he asked the Special

Committee for an extension of the II-C Warrant, but the Special Committee

refused.70

On June 29, 2013, Maginn paid $3,055,000 to exercise the II-C Warrant.71 He

paid the exercise price with funds from New Media SP, LLC, an investment vehicle

owned by Maginn and his spouse to make personal investments.72

67
Maginn Tr. 131-32, 242-44.
68
Id. at 100; see JX 102; JX 107; JX 108; JX 109.
69
Maginn Tr. 101-02, 181-84, 264-69; see JX 124; JX 130; JX 153.
70
Maginn Tr. 101-02. There is no contemporaneous evidence of that request in the record.
71
JX 110.
72
Maginn Tr. 102-03, 152-53, 191; JX 121.

14
Six months later, on December 19, 2013, Maginn sent the correspondence he

had drafted in May to New Media II and New Media II-B members.73 That letter

(the “II-C Solicitation”) read:

Dear New Media Investor:

I write to you on the conclusion of your New Media
Investment either via New Media Investors II LLC or New
Media Investor II-B LLC. Enclosed please find your final
check(s) for you [sic] investments in New Media together
with a payment acknowledgement that indicates these
checks complete your New Media II and/or New Media
IIB investments.

I would also like to inform you that New Media Investors
has formed a new New Media entity, New Media Investors
II[-]C, LLC, to invest in another Jenzabar opportunity. As
a New Media Investor, we would like to invite you to
participate in this investment. If you would like to
participate in this investment, please sign and return the
attached non-disclosure agreement, and we will contact
you to provide you with information regarding this new
opportunity.

Sincerely,

Robert A. Maginn, Junior
Managing Member74

The II-C Warrant was not mentioned.75

73
Maginn Tr. 135; JX 133.
74
JX 133 at 1.
75
Id.

15
The II-C Solicitation was accompanied by a distribution of redemption

payments to New Media II-B members, which were described as their “final

checks.”76 Maginn also enclosed a “Payment Acknowledgement and Release”

agreement and a non-disclosure agreement (the “NDA”). 77 The Payment

Acknowledgement and Release provided that acceptance of the redemption payment

would represent a repurchase of the members’ equity and termination of their

membership in New Media II-B.78 It included a broad release of claims against New

Media II-B, and Jenzabar, and their directors, officers, and managing members. 79

New Media II-B members were required to sign the NDA to receive further details

about the “new opportunity.”80

F. Reactions to the II-C Solicitation

Of the 88 members of New Media II-B, the three plaintiffs (and perhaps

others) neither cashed their redemption checks nor signed the Payment

76
Id.; Maginn Tr. 128. This payment was for the final tranche of redemption payments on
the Series A Junior Preferred stock (see supra note 21 and accompanying text) and a
reimbursement of the $65,000 that Maginn used to purchase the II-C Warrant (see supra
note 59 and accompanying text).
77
JX 133 at 2-4.
78
Id. at 2.
79
Id. at 2.
80
Id. at 1; Maginn Tr. 121.

16
Acknowledgement and Release.81 Jason Cunningham (acting as attorney-in-fact for

his father, William Cunningham) testified that he did not sign the NDA because it

required a release of the New Media II-B investment.82 From December 2013 to

April 2014, 10 members of New Media II-B (and 14 members of New Media II, of

which 10 were also members of New Media II-B) signed and returned NDAs.83

Little evidence exists concerning what (if any) information was conveyed to

the members who signed NDAs. Maginn testified that his communications with

these members occurred orally by phone or in person.84 He further testified that he

“d[idn’t] know [and] may have” provided financial details about the II-C Warrant to

those members he talked with.85

Charles Farkas, a member of New Media II, wrote to Maginn on January 2014

to say that he was “happy to grant the release and w[ould] return the non-disclosure

81
See Maginn Tr. 238-42 (“[I]f you’re asking whether there are other people who didn’t
cash their checks, the answer is yes. We lost a few. Of the 150 people, we couldn’t find
their addresses and apparently couldn’t get them their checks, or if we did, they didn’t cash
them.”); JX 191; JX 192.
82
Cunningham Tr. 613-15.
83
JX 197; see JX 72 at 13-16.
84
Maginn Tr. 106-08, 122-24, 152; see JX 136.
85
Maginn Tr. 123.

17
as [he] was interested in New Media II-C.”86 Farkas signed an NDA but did not

receive any information about New Media II-C or the II-C Warrant.87

Ultimately, none of the members of New Media II or New Media II-B became

investors in New Media II-C.88

In December 2017, Maginn dissolved New Media II. 89 In December 2020,

Maginn sought to dissolve New Media II-B.90 On March 29, 2021, however, Deane

filed a certificate of correction with the Delaware Secretary of State, providing that

the certificate of cancellation filed in 2020 was “null and void.”91 In April 2021, the

plaintiffs purported to act by written consent to remove Maginn as Managing

Member and declare themselves the managers of New Media II-B.92

86
JX 138.
87
Farkas Dep. 13, 16, 43. Farkas testified, however, that he was “eager to exit.” Id. at
23-25; see Maginn Tr. 123.
88
Maginn Tr. 154.
89
Pls.’ Post-trial Br. (Dkt. 311) Ex. A.
90
JX 172; Maginn Tr. 236-37.
91
JX 179.
92
JX 181.

18
G. This Litigation

The plaintiffs first filed claims against Maginn in Delaware Superior Court on

December 6, 2016.93 On May 5, 2017, the plaintiffs filed the present action in this

court.94

On June 15, 2021, after being granted leave, the plaintiffs filed the operative

Amended Complaint. 95 The plaintiffs purport to bring their claims directly for

themselves and for the benefit of any other New Media II-B members and

derivatively on behalf of New Media II-B.

Count I of the Amended Complaint is for breach of fiduciary duty against

Maginn.96 Three distinct theories were advanced within that count. One concerned

whether Maginn caused the Series A Junior warrants to go unexercised despite being

“in the money” (the “Warrant Claim”).97 Another provided that Maginn caused

various securities held by New Media II-B to “disappear” (the “Disappearing

Securities Claim”).98 The third concerned whether Maginn “usurp[ed]” an

93
Summ. J. Op. at *3.
94
Verified Compl. (Dkt. 1).
95
Am. Compl. (Dkt. 99).
96
Id. ¶¶ 124-67; Summ. J. Op. at *4.
97
Am. Compl. ¶ 124.
98
Id.

19
investment opportunity—the II-C Warrant—belonging to New Media II-B (the

“II-C Claim”).99

Count II seeks a declaration that the plaintiffs are the sole members of New

Media II-B, have been elected its managers, and that Maginn is no longer a manager

or member of New Media II-B.100

Count III is an unjust enrichment claim.101 It is pleaded “in the alternative, to

the extent it is not entailed or cognizable in [the plaintiffs’] theories for breach of

fiduciary duty.”102

In the March 2, 2022 Summary Judgment Opinion, this court held that the

Warrant Claim and Disappearing Securities Claim were time-barred and granted

summary judgment with respect to those claims in Count I.103 As to the II-C Claim

and unjust enrichment claim, genuine issues of material fact remained as to their

timeliness.104 Summary judgment was denied with respect to the II-C Claim in

Count I, Count II, and Count III.

99
Id. ¶ 166.
100
Id. ¶¶ 168-83.
101
Id. ¶ 195.
102
Id. ¶ 185.
103
Summ. J. Op. at *5.
104
Id. at *11.

20
A three-day trial was held beginning on March 28, 2022. 105 After post-trial

briefing, this matter was submitted for decision as of July 12.106

II. LEGAL ANALYSIS

The plaintiffs’ claims at the time of trial were: the portion of Count I described

as the II-C Claim; the declaratory judgment claim in Count II; and the unjust

enrichment claim in Count III. The proponent of a claim has the burden of proving

each element of a cause of action by a preponderance of the evidence. 107 Proof by a

preponderance of the evidence means that something is more likely than not.108

I begin by discussing the plaintiffs’ remaining breach of fiduciary duty claims

in Count I. The plaintiffs’ post-trial briefs argued various forms of possible breaches

by Maginn, including matters that had been resolved in the Summary Judgment

Opinion.109 At post-trial argument, the plaintiffs clarified that they sought to prove

105
See Dkt. 299.
106
Dkt. 317.
107
Physiotherapy Corp. v. Moncure, 2018 WL 1256492, at *3 (Del. Ch. Mar. 12, 20

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No Value: EDWARD DEANE, ET AL VS. ROBERT A. MAGINN, JR.

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No Value: EDWARD DEANE, ET AL VS. ROBERT A. MAGINN, JR.

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