ARC Global Investments II LLC v. Digital World Acquisition Corp.

CourtCourt of Chancery of Delaware
DecidedJuly 14, 2025
DocketC.A. No. 2024-0186-LWW
StatusPublished

This text of ARC Global Investments II LLC v. Digital World Acquisition Corp. (ARC Global Investments II LLC v. Digital World Acquisition Corp.) is published on Counsel Stack Legal Research, covering Court of Chancery of Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
ARC Global Investments II LLC v. Digital World Acquisition Corp., (Del. Ct. App. 2025).

Opinion

COURT OF CHANCERY OF THE STATE OF DELAWARE

LORI W. WILL LEONARD L. WILLIAMS JUSTICE CENTER VICE CHANCELLOR 500 N. KING STREET, SUITE 11400 WILMINGTON, DELAWARE 19801-3734

July 14, 2025

Matthew D. Perri, Esquire John L. Reed, Esquire Daniel E. Kaprow, Esquire Ronald N. Brown, III, Esquire Elizabeth J. Freud, Esquire DLA Piper LLC (US) Rae Ra, Esquire 1201 North Market Street, Suite 2100 Richards, Layton & Finger, P.A. Wilmington, Delaware 19801 920 North King Street Wilmington, Delaware 19801

RE: ARC Global Investments II LLC v. Digital World Acquisition Corp. et al., C.A. No. 2024-0186-LWW

Dear Counsel:

Plaintiff ARC Global Investments II LLC sued to resolve a dispute over the

proper conversion ratio of its stock in connection with a de-SPAC merger. After

trial, I found that the proper conversion ratio was more favorable to ARC than that

originally proposed. Now, ARC requests a $1 million fee award under the corporate

benefit doctrine.

ARC touts several purported corporate benefits. Most significantly, it asserts

that without this suit, the $6 billion business combination of Digital World

Acquisition Corp. (“DWAC”) and Trump Media & Technology Group Corp.

(“TMTG”) might have been jeopardized. But most of the claimed benefits are either C.A. No. 2024-0186-LWW July 14, 2025 Page 2 of 17

unattributable to ARC or yielded no benefit to DWAC. ARC is only entitled to a

$75,000 mootness fee for supplemental disclosures that its suit prompted. Its fee

request is otherwise denied.

I. RELEVANT FACTS

My September 16, 2024 post-trial memorandum opinion details the factual

background.1 A summary follows to provide context for my analysis of ARC’s fee

request.

A. The Conversion Ratio

ARC was the sponsor of DWAC—a Delaware corporation formed as a special

purpose acquisition company (SPAC).2 In early 2021, ARC purchased founder

shares of DWAC Class B common stock before DWAC’s initial public offering.3

The founder shares would comprise 20% of DWAC’s post-IPO outstanding shares.4

DWAC’s operative certificate of incorporation at the time of the de-SPAC

merger (the “Charter”) required DWAC to convert Class B common stock into Class

1 ARC Glob. Invs. II, LLC v. Digit. World Acq. Corp., 2024 WL 4212709 (Del. Ch. Sept. 16, 2024) (“Mem. Op.”); see Dkt. 205. 2 Mem. Op. *2. 3 Id. 4 Id. C.A. No. 2024-0186-LWW July 14, 2025 Page 3 of 17

A common stock at a minimum ratio of 1:1 upon the closing of a business

combination.5 But if DWAC issued more shares of Class A stock than those sold in

the IPO, an alternative formula would apply. Under that formula, Class B

stockholders would essentially receive one Class A share for every four Class A

shares otherwise issued or issuable (subject to specified exclusions) to limit

dilution.6

B. The Business Combination

In October 2021, DWAC entered into a merger agreement with legacy

TMTG.7 The agreement provided that TMTG stockholders would receive shares of

DWAC Class A common stock upon closing.8

The planned business combination stalled for some time before it was

renewed in early 2024.9 As closing neared, DWAC and ARC began to engage on

the conversion ratio for the Class B shares.

5 Id. 6 Id. at *2-3. 7 Id. at *3. 8 Id. 9 Id. at *3-4. C.A. No. 2024-0186-LWW July 14, 2025 Page 4 of 17

The parties agreed that the alternative conversion ratio formula had been

triggered by certain of DWAC’s post-IPO security issuances.10 But they disagreed

on which issuances should be included in the formula’s numerator. ARC initially

insisted that the correct conversion ratio was 1.58:1, which it later increased to

1.69:1.11 DWAC estimated a ratio of 1.34:1.12

C. The Proxy and This Litigation

On February 16, 2024, DWAC filed a proxy statement and prospectus (the

“Proxy”) with the Securities and Exchange Commission.13 The Proxy told DWAC

stockholders about an upcoming meeting to approve the TMTG business

combination.14 It also disclosed an anticipated Class B/Class A conversion ratio of

1.34:1, ARC’s higher proposed ratio, and that the final conversion ratio was yet to

be determined.15

10 See id. at *4 (describing the security issuances). 11 Id. at *5. In its initial filing of the present litigation, ARC again raised its proposed ratio to 1.78:1. Id. at *6. 12 Id. at *5. 13 See ARC Global Invs. II LLC’s Mot. for a Fee Award (Dkt. 208) (“Mot.”) Ex. B (“Proxy”). 14 Mem. Op. *5. 15 Id. at *5-6. C.A. No. 2024-0186-LWW July 14, 2025 Page 5 of 17

ARC filed this lawsuit on February 28.16 It advanced claims for breach of the

Charter, for declaratory relief regarding the proper conversion ratio, and for breach

of fiduciary duty based on alleged misstatements in the Proxy.17 DWAC issued a

Form 8-K on March 1 that mooted ARC’s disclosure claim.18 On March 8, the

parties agreed that if they “appl[ied] a conversion ratio applicable to DWAC Class

B common stock that [wa]s greater or less than 1.34:1, [DWAC would] escrow

shares equal to the difference between such conversion ratio and a conversion of

DWAC Class B common stock shares at a ratio of 2:1.”19

The business combination closed as planned on March 25.20

D. Procedural History

A one-day trial was held on July 29, 2024.21 After trial, I calculated a 1.4911:1

conversion ratio—resulting in 4,095,125 more shares accruing to ARC than under

16 Verified Compl. for Specific Performance, Declaratory J., and Breach of Fiduciary Duty (Dkt. 1) (“Compl.”). ARC filed an amended complaint on June 6. Dkt. 91. 17 Compl. ¶¶ 42-58. 18 See infra note 57 and accompanying text. 19 Stip. and [Proposed] Order Regarding Mot. to Expedite (Dkt. 24) ¶ 2; see infra note 46 and accompanying text. 20 Mem. Op. *6, 13. 21 Dkts. 198, 204. C.A. No. 2024-0186-LWW July 14, 2025 Page 6 of 17

DWAC’s proposed 1:34 ratio.22 In reaching that figure, I sided with ARC on three

of the six categories of disputed securities.23 I entered an order implementing that

decision on September 17.24

On October 23, ARC moved for a fee award.25 DWAC opposed ARC’s motion

on December 4.26 On January 8, 2025, ARC filed a reply in further support of its

motion.27 Although oral argument on the motion was set for April 29, I determined

that it was unnecessary and took the motion under advisement as of April 25.28

II. ANALYSIS

Delaware follows the American Rule that parties to litigation are generally

responsible for paying their own attorneys’ fees.29 “Delaware courts have been very

cautious in granting exceptions to th[is] rule.”30 One such exception is the corporate

benefit doctrine, which “allows a litigant to recover fees and expenses from a

22 Mem. Op. *13. 23 Id. 24 Dkt. 206. 25 Dkt. 208. 26 Def. DWAC’s Response in Opp’n to ARC’s Mot. for a Fee Award (Dkt. 213) (“Opp’n”). 27 Pl.’s Reply in Further Supp. of Mot. for a Fee Award (Dkt. 220) (“Reply”). 28 Dkt. 222. 29 See Tandycrafts, Inc. v. Initio P’rs, 562 A.2d 1162, 1164 (Del. 1989). 30 CM&M Grp., Inc. v. Carroll, 453 A.2d 788, 795 (Del. 1982). C.A. No. 2024-0186-LWW July 14, 2025 Page 7 of 17

corporation” where the lawsuit conferred a non-monetary “valuable benefit upon the

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ARC Global Investments II LLC v. Digital World Acquisition Corp., Counsel Stack Legal Research, https://law.counselstack.com/opinion/arc-global-investments-ii-llc-v-digital-world-acquisition-corp-delch-2025.