Andrew Berman v. Fortress Investment Group LLC, C.A. No. 2023-0611-SG

• Court: Court of Chancery of Delaware
• Decided: May 14, 2024
• Docket: CA No. 2023-0611-SG
• Status: Published

Opinion

COURT OF CHANCERY OF THE SAM GLASSCOCK III STATE OF DELAWARE COURT OF CHANCERY COURTHOUSE VICE CHANCELLOR 34 THE CIRCLE GEORGETOWN, DELAWARE 19947

Date Submitted: May 8, 2024 Date Decided: May 14, 2024

Ryan D. Stottman, Esq. Kevin R. Shannon, Esq. Kirk C. Andersen, Esq. Christopher N. Kelly, Esq. MORRIS, NICHOLS, ARSHT David A. Seal, Esq. & TUNNELL LLP POTTER ANDERSON & CORROON LLP 1201 North Market Street 1313 North Market Street Wilmington, Delaware 19801 Hercules Plaza, 6th Floor Wilmington, Delaware 19801

Re: Berman v. Fortress Investment Group LLC, et al., C.A. No. 2023-0611-SG

Dear Counsel:

Defendant Fortress Investment Group LLC (“Fortress”) is an investment-

management firm.1 Plaintiff Andrew Berman is a former employee and investment

portfolio manager of Fortress.2 Plaintiff’s compensation was made up partly of a

salary and partly through equity interests, known as “Points,” in the carried interest

received by Fortress in connection with its investment returns.3 After 2009, the

equity interests were placed in a Delaware LLC, Defendant Hybrid GP Holdings

LLC (“Hybrid”), to be managed, according to Plaintiff, for the benefit of himself

1 Verified Am. Compl. ¶¶ 1, 7, Dkt. No. 25 (“Am. Compl.”). 2 Id. ¶¶ 32–33. 3 Id. ¶¶ 3–7, 45. and similarly situated employees.4 Instead, according to the Amended Complaint,

Hybrid adopted policies adverse to Plaintiff’s interests.5 In 2016, Plaintiff left his

employment with Fortress.6

In 2021, Plaintiff brought suit in San Francisco Superior Court against

Fortress Investment Group, LLC, Marc Furstein, Dean Dakolias, and Peter Briger,

alleging the situation described above and that all named defendants in California

had breached their fiduciary duties owed to Plaintiff, or aided and abetted such

breach.7 In April 2022, the California complaint was dismissed in favor of

“mandatory arbitration” under a clause in a separation agreement between the parties

(the “Separation Agreement”).8 Plaintiff refiled the action as a JAMS arbitration in

June 2022.9 That case is still being litigated. On June 12, 2023, Plaintiff brought

this Delaware action against Fortress Investment Group LLC, Hybrid GP Holdings

LLC, Fortress Operating Entity I LP, FCO Fund GP LLC, FCO Fund II GP LLC,

FCO MA GP LLC, FCO MA II GP LLC, FCO Fund III GP LLC, FCO MA LSS GP

LLC, and FCO MA Maple Leaf GP LLC.10 Plaintiff alleges that the defendants in

4 Id. ¶ 37. 5 See id. ¶¶ 8–11. 6 Id. ¶ 47. 7 Id. ¶ 99; see also Defs.’ Mot. to Dismiss Verified Am. Compl., Ex. 3 ¶¶ 60–69, Dkt. No. 29. 8 Defs.’ Mot. to Dismiss Verified Am. Compl., Ex. 4 at Ex. B, Dkt. No. 29. 9 Defs.’ Mot. to Dismiss Verified Am. Compl., Ex. 7, Dkt. No. 29. 10 See Am. Compl. ¶¶ 18–27. 2 the Delaware action breached duties owed under the Hybrid LLC Agreement and

breached their fiduciary duties.11

The Separation Agreement has a mandatory venue provision in favor of

arbitration in California.12 The Hybrid LLC Agreement has a mandatory venue

provision favoring Delaware.13 Both contracts’ provisions are broad and robust.

Defendants here have moved to dismiss. This raises many complex issues of civil

procedure: Has Plaintiff impermissibly split his claim? Does the McWane doctrine14

indicate that all issues be heard in California? Has Plaintiff waived the Delaware

forum selection provision of the Hybrid LLC Agreement by filing the California

action? I find I need not address these questions at this stage of the proceeding. That

is because it is clear that the JAMS arbitration is well underway and will presumably

be decided quickly. While the parties to the Delaware action are not identical to the

parties in the JAMS arbitration, there is significant overlap of issues and the damages

sought by Plaintiff in the JAMS arbitration are coterminous with the damages sought

here. It is appropriate, I find, to exercise my discretion over my docket,15 and stay

this matter until resolution of the JAMS arbitration.

11 Id. ¶¶ 106–19. 12 See id. ¶ 100. 13 Defs.’ Mot. to Dismiss Verified Am. Compl., Ex. 2 § 12.1(b), Dkt. No. 29. 14 See McWane Cast Iron Pipe Corp. v. McDowell-Wellman Eng’g Co., 263 A.2d 281 (Del. 1970). 15 See In re TGM Enter., L.L.C., 2008 WL 4261035, at *1 (Del. Ch. Sept. 12, 2008) (“The Court’s right to grant a stay is within the exclusive discretion of the Court. The discretion to 3 There is a substantial possibility that some or all issues here will be resolved

or mooted by the JAMS arbitration. Therefore, I enter a stay. The parties should

submit a form of order that permits the parties in Delaware to review discovery

produced in California, so that if the Delaware action must proceed, it can do so with

alacrity. The form of order should also provide that any party may seek to lift the

stay, for cause shown.

To the extent the foregoing requires an Order to take effect, IT IS SO

ORDERED.

Sincerely,

/s/ Sam Glasscock III Vice Chancellor

issue a stay is inherent in every court and flows from its control over the disposition of causes on its docket.”) (internal citation and quotations omitted). 4