Fairstead Capital Management LLC v. Blodgett

• Court: Court of Chancery of Delaware
• Decided: May 13, 2026
• Docket: C.A. No. 2022-0673-JTL
• Status: Published

Opinion

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

FAIRSTEAD CAPITAL MANAGEMENT LLC and FCM AFFORDABLE LLC,

Plaintiffs,

v. C.A. No. 2022-0673-JTL

WILLIAM BLODGETT,

Defendant.

OPINION ADDRESSING MOTIONS FOR SUMMARY JUDGMENT

Date Submitted: January 20, 2026 Date Decided: May 13, 2026

Ryan D. Stottmann, Thomas P. Will, Alec F. Hoeschel, Phillip Reytan, MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, Delaware; Rollo C. Baker, Jared Ruocco, Edgar Aliferov, ELSBERG BAKER & MARURI PLLC, New York, New York; Michael B. Carlinsky, Evan Forbes, QUINN EMANUEL URQUHART & SULLIVAN LLP, New York, New York; Attorneys for Plaintiffs/Counterclaim-Defendants.

David E. Ross, Roger S. Stronach, Holly E. Newell, A. Gage Whirley, ROSS ARONSTAM & MORITZ LLP; Wilmington, Delaware; Jacob W. Buchdahl, Elisha B. Barron, Zach Fields SUSMAN GODFREY LLP, New York, New York; Attorneys for Defendant/Counterclaim-Plaintiff.

LASTER, V.C. Two long-time business associates—a hedge fund manager and his personal

attorney—teamed up with William Blodgett, an expert in affordable housing. They

formed a fund complex to invest in affordable housing projects.

The business grew, and Blodgett expanded his team to include John Tatum.

Together, they created a new arm of the business that invested in deals funded in

part by affordable-housing tax credits. The attorney nominally oversaw their work.

The hedge fund manager remained in the background.

As the business became more successful, Blodgett and Tatum decided that they

deserved a bigger piece of the pie. The attorney encouraged them to develop an equity

restructuring plan, but warned them that the hedge fund manager needed to recover

his capital before he gave them a larger stake in the firm.

Blodgett and Tatum grew impatient. They developed two plans: one involved

restructuring the business to give them control; the other involved them leaving and

starting a competing company. When developing the plans, Blodgett shared

confidential information with members of his family and their advisors.

The hedge fund manager rejected the restructuring plan, so Blodgett and

Tatum decided to leave. They began negotiating the terms of their departures.

Meanwhile, the attorney had started monitoring Blodgett’s emails. The

attorney spotted an invoice from an outside law firm for “Newco Formation.” The

attorney concluded that Blodgett did not intend to leave on good terms, and the hedge

fund manager promptly terminated Blodgett for cause. The termination letter

purported to cancel all of Blodgett’s equity. Blodgett filed an arbitration for breach of his employment agreement. The

hedge fund manager and the attorney caused two affiliates to sue Blodgett in this

court for breach of the affiliates’ LLC agreements. Blodgett counterclaimed against

the affiliates, contending they breached their LLC agreements by improperly

cancelling his equity.

After the arbitrator issued an award, the parties cross-moved for summary

judgment. Based on the arbitrator’s findings, Blodgett is entitled to summary

judgment.

Blodgett is entitled to summary judgment on the affiliates’ claims for breach

of their LLC agreements because Blodgett acted as an employee, not as a member.

His employment agreement governed his conduct as an employee. He did nothing as

a member that could implicate the restrictions on member activity in the LLC

agreements.

The court previously granted summary judgment for Blodgett on whether the

affiliates breached their LLC agreements by purporting to cancel Blodgett’s equity.

He remains entitled to summary judgment on that issue. The arbitrator found that

Blodgett’s employment agreement authorized the cancellation of his equity interests

in pending deals, but not Blodgett’s equity interests in non-pending deals. The LLC

agreements do not contain any language giving the affiliates a separate right to

cancel Blodgett’s equity interests. They establish a window that permits cancellations

under the employment agreement, but do not contain an independent cancellation

right. By purporting to rely on the LLC agreements as a basis for cancellation, and

2 by cancelling Blodgett’s equity interests in non-pending deals, the affiliates breached

their LLC agreements.

I. FACTUAL BACKGROUND

The facts are drawn from findings made in a related arbitration between the

parties (the “Award”),1 findings made in a related litigation involving Tatum,2 and

the submissions made in support of the parties’ cross-motions for summary

judgment.3 Principles of issue preclusion make the findings in the arbitration and the

Tatum litigation binding on the parties.4

1 See Blodgett v. Fairstead Cap. Mgmt. LLC, et. al., Interim Award, No. 5425000366 (JAMS Apr. 2, 2025) (Roberts, Arb.). Citations in the form “Award at __” refer to the arbitral award. The award styles itself as an “Interim Award,” but the parties have treated it as a final award for preclusion purposes.

2 Tatum v. Fairstead Affordable LLC, 347 A.3d 1221 (Del. Ch. 2025).

3 Citations in the form “Fairstead OBX __ at __” and “Fairstead RBX __ at __”

refer to exhibits that Fairstead submitted with its opening brief or reply brief. Dkts. 213, 221. Citations in the form “Blodgett OBX __ at __” and “Blodgett RBX __ at __” refer to exhibits that Blodgett submitted with his opening brief and reply brief. Dkts. 219, 226. Citations in the form “Ruling Tr. __” are to the transcript of the telephonic ruling on February 11, 2025. Dkt. 238.

4 Restatement (Second) of Judgments § 27 (A.L.I. 1982); see Messick v. Star

Enter., 655 A.2d 1209, 1211 (Del. 1995) (“Under the doctrine of collateral estoppel, if a court has decided an issue of fact necessary to its judgment, that decision precludes relitigation of the issue in a suit on a different cause of action involving a party to the first case.”). Delaware courts frequently rely on the Restatement when analyzing issue preclusion. See In re Columbia Pipeline Gp., Inc., 2021 WL 772562, at *16 (Del. Ch. Mar. 1, 2021) (collecting authorities).

Blodgett was not a party to the Tatum litigation, and a judgment ordinarily does not bind a non-party. Restatement (Second) of Judgments, supra, § 34(3). It can, however, if the party and non-party are in privity. That elusive term means they have

3 A. Fairstead’s Origins

In October 2013, Blodgett, Jeffrey Goldberg, and Stuart Feldman started an

affordable housing business. Operating under the trade name “Fairstead,” they would

source, develop, own, and manage a portfolio of real estate investments.5

Feldman, a hedge fund manager, served as Fairstead’s primary source of

capital. He exercised ultimate decision-making authority over the business.

Goldberg, Feldman’s personal attorney, acted as CEO. Goldberg was nominally

in charge of day-to-day operations, but he did not know much about affordable

a pre-existing legal relationship, outside of the prior litigation, that is sufficient to cause the adjudication to be binding. See Columbia Pipeline, 2021 WL 772562, at *17. Partners in a common law partnership are in privity as to the subject matter of the partnership. See Bradshaw v. Trover, 1999 WL 463847, at *2 (Del. Ch. Apr. 30, 1999) (“As at common law, partnerships may still sue and be sued by use of the names of individual partners without naming the partnership itself.”). Blodgett and Tatum formed a common law partnership and operated as joint venturers for purposes of their plan to negotiate for a controlling interest in Fairstead’s affordable housing business and, if Fairstead refused, leave Fairstead to start a new business. See Award at 15, 18; Tatum, 347 A.3d at 1235 n.12. Blodgett is therefore in privity with Tatum for purposes of factual findings in the Tatum litigation to the extent those issues were (i) “actually litigated and determined” in the Tatum Litigation, (ii) “essential to the judgment,” and (iii) concerned the period when Blodgett and Tatum were in privity, i.e., through the point when Fairstead terminated Blodgett. Columbia Pipeline, 2021 WL 772562, at *16.

5 The fund complex comprised a variety of entities, including Fairstead Capital

Management LLC, FSC Realty Management LLC, FCM Affordable LLC, Fortitude Realty Management LLC, FSC EF&F LLC, Fortitude Properties LLC, FSC-JD2 Member LLC, FCM-JD2 LLC, and other special purpose vehicles for each project. For simplicity, this decision uses the term “Fairstead” to refer to the business collectively unless the individual entity name is relevant.

4 housing before the disputes that led to this litigation. Until then, he relied on Blodgett

to run the business.

Blodgett provided the vision and the energy. He ran the day-to-day operations

and assembled a team that included Tatum, Billy Kreinik, Tyler McIntyre, and Adam

Sussi. Initially, Blodgett focused on acquiring market-rate, rent-stabilized housing

units in New York City. 6 After Tatum joined, the team also sourced transactions

funded in part by tax credits.7

B. Blodgett’s Employment Agreement

Blodgett entered into an employment agreement with Fairstead dated October

25, 2013 (the “Employment Agreement”).8 The specific counterparty was Fortitude

Realty Management, LLC (“Fortitude”), an entity in the Fairstead fund complex.

The Employment Agreement contemplated that Blodgett would provide

investment advisory services to Fortitude and its affiliates. As compensation, he

would receive (a) a base salary of $150,000; (b) a discretionary bonus equal to not less

than one-third of base salary; and (c) 15% of the carried interest that Fairstead

received in each deal.

6 See Tatum, 347 A.3d at 1236.

7 See id. at 1237–39 (explaining the tax credit business).

8 See Fairstead OBX 2 (cited as “EA”).

5 Section 6 of the Employment Agreement imposed a broad confidentiality

obligation on Blodgett.9 Section 11 required that Blodgett comply with all company

policies.10

The Employment Agreement specified what would happen to the carried

interest if Blodgett and Fairstead parted ways. As interpreted in the Award, the

Employment Agreement gave Fairstead a limited right to cancel Blodgett’s interests

in still-pending deals if Blodgett was terminated for breaching either Section 6 or

Section 11 of the Employment Agreement.11 Otherwise, Fairstead did not have the

right to cancel Blodgett’s interests.

C. The Spoils Of Success

Fairstead enjoyed considerable success, and Blodgett and Tatum believed they

were chiefly responsible for it. That was true. Blodgett and Tatum also believed they

had created tremendous value for Feldman and Goldberg. That was also true.

Blodgett and Tatum decided that because they had built a valuable business,

they deserved a greater equity stake in it. They also wanted their team members and

future employees to have more equity participation. They spoke with Goldberg about

the issue, and Goldberg agreed that something needed to be done. But Goldberg didn’t

9 Id. § 6.

10 Id. § 11.

11 Award at 29.

6 have the final say. He needed to convince Feldman, and he wanted to proceed

carefully.

Blodgett and Tatum grew frustrated with Goldberg’s lack of progress. By early

2020, they decided that they needed to force the issue. At this point, they wanted

Feldman and Goldberg to give Blodgett control over Fairstead and to reallocate the

bulk of the equity to Blodgett, Tatum, and their team.12 They also knew that to be

able to negotiate effectively, they needed a credible alternative. To that end, they

pursued a two-part strategy. Their preferred outcome—Plan A—involved

restructuring Fairstead so they would hold the bulk of the equity and control the

business (the “Restructured Fairstead Option”).13 Their alternative—Plan B—was to

start their own business if Feldman and Goldberg did not agree (the “Separate

Company Option”).

When planning and preparing, Blodgett and Tatum used their personal email

accounts to communicate. 14 Blodgett also used his personal email account to

communicate with his advisors.15

12 Id. at 15 (“[B]y 2020, if not earlier, Blodgett viewed Fairstead as ‘his company,’ and became determined, if not obsessed with obtaining ‘control’ of Fairstead . . .”).

13 See Tatum, 347 A.3d at 1240.

14 Award at 16, 18.

15 Id. at 15–19.

7 Blodgett had married into two billionaire families, and each has a family office.

One is the Sussman Office. The other is the Tisch Office.

In February 2020, Blodgett contacted Ophir Barone, the Chief Investment

Officer for the Sussman Office, to solicit help with his plans. Almost immediately,

Blodgett began sending Barone confidential Fairstead information. 16 Over the

following months, Blodgett communicated regularly with Barone about both the

Restructured Fairstead Option and the Separate Company Option. Later, Blodgett

would bring in the Tisch Office.

D. The Initial Plan For The Restructured Fairstead Option

On March 31, 2020, Tatum sent Goldberg a memorandum outlining a business

plan for the Restructured Fairstead Option. The plan contemplated a new capital

infusion from outside investors, a return of capital to Fairstead’s original partners,

and future distributions of Fairstead profits. Most significantly, it contemplated that

the entity contributing the capital—”NewCo”—would hold a controlling stake.

Blodgett and Tatum would jointly own 50% of NewCo and allocate a portion to key

employees. Feldman would own the other 50%.17 The next day, Blodgett forwarded

the plan to Barone.

Goldberg had supported Blodgett and Tatum’s desire for a restructuring, but

he did not want to antagonize Feldman. He also did not want to create evidence of his

16 Id. at 16.

17 See Tatum, 347 A.3d at 1240.

8 support for Blodgett and Tatum. To that end, he never responded to their proposal in

writing, and he advised Blodgett and Tatum to communicate using an ephemeral

messaging platform.18

Goldberg told Blodgett and Tatum that he would not present their plan to

Feldman, but that they should develop their idea further.19 Over the next few months,

Goldberg, Blodgett, and Tatum spoke repeatedly about the restructuring. Each time,

Blodgett and Tatum emphasized that providing equity was a necessary next step to

attract and retain employees. Goldberg agreed, but he told Blodgett and Tatum that

a restructuring could not happen until Feldman had recovered all of his initial

investment. That would be in 2021 at the earliest.20

Blodgett and Tatum initially accepted that timeline. But they soon decided to

push for change faster. They resolved that if they could not achieve the Restructured

Fairstead Option in the near term, they would leave Fairstead and pursue the

Separate Company Option.21

E. More Planning

As spring turned to summer, Tatum and Blodgett retained the law firm of

Rodriguez & Wright to advise them. They asked Rodriguez & Wright to prepare a

18 See Award at 17 n.4.

19 See Tatum, 347 A.3d at 1240.

20 See id. at 1241.

21 See id. at 1242.

9 proposal for the Restructured Fairstead Option that they could share with

Goldberg.22

Later that summer, Tatum and Blodgett met with Barone to discuss their

options. On August 27, 2020, Barone sent Blodgett a list of key points for “Fairstead

2.0.” On September 3, Barone forwarded the proposal to Donald Sussman, Blodgett’s

father-in-law. Barone noted that ideally the Sussman Office would fund 100% of the

new business, but that Blodgett wanted to have Feldman remain involved and

provide 50% of the funding.23 At this point, Blodgett “clearly preferred to attempt to

negotiate a ‘Fairstead 2.0’ reorganization of Fairstead that provided him

substantially more equity and control,” but he was also “seriously exploring the option

of leaving Fairstead and forming a new entity.”24 In other words, the Restructured

Fairstead Option remained Plan A.

That fall, Blodgett reached out to the Tisch Office. He and Tatum explored

whether the Tisch Office would provide capital for either the Restructured Fairstead

Option or the Separate Company Option.25

22 Award at 18; Tatum, 347 A.3d at 1243.

23 Tatum, 347 A.3d at 1243.

24 Award at 18.

25 Tatum, 347 A.3d at 1244.

10 F. A Revised Plan For The Restructured Fairstead Option

By early 2021, Blodgett and Tatum had a new proposal. On February 25, they

sent it to Goldberg. In addition to restructuring the equity, it contemplated Blodgett

replacing Goldberg as Chief Executive Officer and Tatum becoming Chief Operating

Officer. Goldberg rejected it.

Based on Goldberg’s reaction, Blodgett and Tatum concluded that he was only

interested in tweaking the status quo. 26 Blodgett and Tatum decided that they

needed to develop the Separate Company Option. They still preferred the

Restructured Fairstead Option, but they felt they needed a meaningful alternative

for negotiation purposes and in case they had to pursue it.

In April 2021, Blodgett secretly forwarded confidential Fairstead information

to the Tisch and Sussman Offices. The materials included an internal valuation of

the tax-credit business and financial projections for the properties owned by

Fairstead. 27 Around the same time, Blodgett forwarded a confidential investment

opportunity to both the Tisch and Sussman Offices. He was not trying to divert the

opportunity, but rather to “show his potential backers what an average team’s

affordable housing deal looked like with the expectation that ‘we would do far

better.’”28 Although that conduct was not as bad as if Blodgett had tried to usurp the

26 Award at 19.

27 Id.

28 Tatum, 347 A.3d at 1244–45 (quoting Blodgett’s trial testimony).

11 opportunity, he was still using Fairstead’s confidential information to secure backing

for his plans.

Both the Sussman and Tisch Offices stood ready to support Blodgett.29 The

Tisch Office connected Blodgett with a real estate development attorney, and

Blodgett sent the attorney confidential Fairstead information. Blodgett downloaded

other confidential Fairstead information to a folder that he labeled “Affordable

Education.”

In May 2021, Blodgett tasked his two junior team members—Kreinik and

Sussi—with creating a financial model for the Separate Company Option. Kreinik

downloaded several templates from Fairstead’s server to use in creating the model.

Kreinik and Sussi secretly worked on the model from May until June 2021. During

this period, Blodgett, Kreinik, and Sussi communicated secretly using text messages,

personal email, and personal Dropbox accounts.30

G. Blodgett’s Face-To-Face Meetings With Feldman

Blodgett finally met with Feldman on May 21, 2021. In pitching his case for

the Restructured Fairstead Option, Blodgett told Feldman that Goldberg was

mismanaging the business, that employees disliked Goldberg, and that many

employees planned to depart unless leadership changed. Blodgett also told Feldman

that he would leave without a restructuring. He demanded that the restructuring

29 Award at 19.

30 Id. at 20.

12 make him a managing member with veto rights, 40% of the equity, and “a path to full

control in 10 years.”31

Feldman thought that was outrageous. When Tatum heard about Feldman’s

reaction, he panicked. He downloaded 2,300 files from Fairstead’s server, including

the personal net worth statements for Feldman and Goldberg. 32 To his credit,

however, he later realized his mistake and never misused any of it.33

A week later, Blodgett downloaded 1,100 more Fairstead files, including

pricing models and due diligence checklists. 34 Unlike Tatum, Blodgett had been

misusing confidential Fairstead information and sharing it with the Tisch and

Sussman Offices.

On June 2, 2021, Blodgett met with Feldman again. He pitched a version of

the Restructured Fairstead Option that contemplated Blodgett receiving 80-90% of

the new venture, which he would share with other “key employees.”35 That meant

Feldman would be reduced from majority holder to a 10-20% holder and receive “no

31 See Tatum, 347 A.3d at 1246.

32 Award at 21.

33 Tatum, 347 A.3d at 1247 (finding that “Tatum made an error in judgment

when downloading the information, but he later realized his mistake and did not misuse any of it”).

34 Award at 21.

35 Id.

13 additional consideration.” 36 Even that equity stake would “sunset over time.” 37

Goldberg would get nothing.38

Feldman was shocked. He told Blodgett that he was “not getting the

company.”39

After Feldman’s refusal, Blodgett, Tatum, Kreinik, and Sussi decided to leave.

The Sussman Office set up a meeting for them with an employment lawyer.40

On June 10, 2021, Tatum emailed Goldberg explaining that he planned to leave

Fairstead. After getting it, Goldberg instructed Fairstead’s IT department to monitor

the company’s systems for any suspicious downloading activity.41 On June 16, 2021

Kreinik downloaded 2,800 files from Fairstead’s server.

On June 23, 2021, Blodgett sent the Tisch Office the financial model that

Kreinik and Sussi had prepared. It contemplated four operating partners: Blodgett,

Tatum, Kreinik, and Sussi.42

36 Id.

37 Id.

38 Id.

39 Id.

40 Id. at 22.

41 See Tatum, 347 A.3d at 1247.

42 Award at 21.

14 Blodgett met with Feldman a third time on June 29, 2021. He told Feldman he

planned to leave. Feldman responded, “[Y]ou can’t have conversations with people in

the company about leaving and starting your own company,” and “you can’t take any

employee to work with you including [Tatum].”43 After the meeting, Goldberg hired

Jones Day to investigate what Blodgett and Tatum had been doing.44

H. Transition Planning

Over the next two months, Blodgett, Tatum, Sussi, and Kreinik worked with

Fairstead on developing transition plans. 45 Tatum, Sussi, and Kreinik had non-

compete provisions in their employment agreements. Blodgett did not. While the

discussions over transition plans were proceeding, Goldberg and Feldman explored

how Fairstead might participate in Blodgett’s new venture.

On August 4, 2021, Blodgett and Feldman met for a fourth time. They

discussed a possible joint venture between Fairstead and Blodgett’s new firm.46

After the meeting, Blodgett was optimistic that he and his team would depart

on good terms. But Feldman and Goldberg refused to make any firm commitments

and stalled on finalizing the transition plans. Kreinik, for example, thought there was

an agreement for him to resign on September 5, 2021, and be released from his

43 Id. at 22; Tatum, 347 A.3d at 1248.

44 Tatum, 347 A.3d at 1248.

45 Id.

46 Id.

15 restrictive covenants, but Goldberg told him Fairstead had not definitively agreed to

that.47

I. Fairstead Terminates Blodgett.

Matters came to a head on September 12, 2021, when Rodriguez & Wright

mistakenly sent an invoice to Blodgett’s Fairstead email account. The invoice referred

to “Newco Formation.”

Goldberg had been monitoring Blodgett’s emails since August, and the invoice

immediately came to his attention. He inferred that Blodgett intended to start a new

company imminently and was not serious about completing a transition plan.

On September 14, 2021, Feldman and Goldberg met with Blodgett. They

handed him a letter that terminated him for cause. They also handed him a term

sheet for a joint venture between his new entity and Fairstead, but with terms heavily

slanted toward Feldman.48 Blodgett rejected the term sheet and viewed himself as

terminated for cause. Even then, Blodgett and Feldman proceeded to negotiate over

a potential settlement for months. They never reached agreement.49

Blodgett’s official termination letter purported to terminate him for “material

breaches, which include, without limitation, noncompliance of the Company’s policies

47 Id.

48 Id. at 1249.

49 Id.

16 (including the breach of Sections 6 and 11 of the Employment Agreement).”50 The

letter did not provide any specifics. The letter also purported to cancel Blodgett’s

equity. It only referred to his Employment Agreement. It did not refer to or allege any

breach of the LLC agreements governing the various Fairstead entities.

On November 3, 2021, Blodgett launched a new affordable housing venture.

Two days later, he informed Fairstead he had started the competing business.

Kreinik and Sussi joined Blodgett in his new business. Tatum did not.

J. This Litigation

On May 24, 2022, Blodgett filed an arbitration under his Employment

Agreement. He sought determinations that he had not breached his Employment

Agreement and that Fairstead did not have the right to cancel his equity interests.51

Blodgett contended that Feldman, Goldberg, and various Fairstead entities breached

his Employment Agreement by: (i) terminating him for purported violations of

Sections 6 and 11; (ii) canceling his equity interests; and (iii) engaging in a pretextual

termination. Blodgett argued that the LLC agreements governing the various

Fairstead entities did not authorize the cancellation of his interests. He asserted

claims for conversion and unjust enrichment based on the wrongful cancellation of

his interests.

50 See Blodgett OBX 5.

51 See Blodgett OBX 6.

17 Feldman, Goldberg, and Fairstead replied on June 10, 2022 and indicated they

planned to litigate the arbitrability of Blodgett’s claims in this court. For nearly two

months, however, they did nothing. At the end of July, Blodgett moved to compel

arbitration in New York state court to get a response.52

On August 1, 2022, two Fairstead entities—Fairstead Capital Management

LLC (the “Management Company”) and Fairstead Affordable LLC (the “Tax-Credit

Company”)—filed this lawsuit. The Management Company served as the general

partner for special purpose vehicles that deployed capital into affordable housing

deals. The Tax-Credit Company operated the tax credit business. Both are Delaware

limited liability companies.

To implement Blodgett’s right under the Employment Agreement to 15% of

Fairstead’s carried interest in its deals, Fairstead awarded Blodgett member

interests in both the Management Company and the Tax-Credit Company. Fairstead

purported to cancel those interests when terminating Blodgett.

Fairstead asserted four counts. Count I contended that Blodgett breached the

Management Company’s LLC agreement by disclosing and misusing confidential

information. Count II sought a declaration that the Management Company properly

canceled Blodgett’s member interests. Counts III and IV sought similar relief on

behalf of the Tax-Credit Company.

52 See Blodgett OBX 7.

18 Initially, the parties disputed whether Fairstead’s claims should proceed here

or in arbitration. The court held that disputes arising under the Employment

Agreement had to be arbitrated but that any claims under their LLC agreements had

to proceed in this court. The court stayed this litigation so that the arbitration could

go first.

In the arbitration, the parties conducted extensive discovery, and the

arbitrator presided over a four-day evidentiary hearing. The parties presented closing

arguments in August 2024. Over the course of the arbitration, the parties narrowed

their claims. Blodgett ultimately pursued claims for (1) breach of the Employment

Agreement; (2) a declaratory judgment that he did not violate Sections 6 and 11 of

the Employment Agreement; and (3) breach of the implied covenant of good faith and

fair dealing. 53 Fairstead pursued counterclaims for (1) breach of the Employment

Agreement; (2) a declaratory judgment that Blodgett was terminated for cause; (3)

breach of fiduciary duty; (4) faithless servant; (5) aiding and abetting breaches of

fiduciary duty by Tatum and Kreinik; (6) misuse of confidential information; (7) trade

secret misappropriation; and (8) tortious interference with Fairstead’s employment

relationships with Tatum and Kreinik.54

53 See Award at 2. Blodgett declined to pursue his claim for conversion. See id.

54 Fairstead initially asserted the following additional counterclaims: (1) unlawful trade practices; (2) conversion; (3) unjust enrichment; (4) tortious interference with prospective economic advantage; (5) a claim under the Stored Communications Act; (6) a claim under the Computer Fraud and Abuse Act; and (7) a claim for constructive trust. See Blodgett OBX 12. Fairstead confirmed it would no

19 On November 6, 2024, Blodgett moved for summary judgment on Counts II

and IV. In a bench ruling issued on February 11, 2025, the court held that the LLC

agreements did not authorize the cancellation of Blodgett’s equity interests.55 The

court based that interpretation in part on its conclusion that Section 4(d)(2) of the

Employment Agreement did not contain affirmative language authorizing the

cancellation of Blodgett’s equity interests.

K. The Award

On April 2, 2025, the arbitrator issued the Award. The arbitrator ruled that

the “evidence presented . . . overwhelmingly establishes that Blodgett breached

Sections 6(a) and 11 of the Employment Agreement.” 56 The arbitrator found that

Blodgett did so by “repeatedly and covertly sending (via personal email) Fairstead’s

confidential or internal information to [the Tisch and Sussman Offices] for what

Blodgett called ‘private advice’ without obtaining the contractually mandated ‘prior

written consent’ and outside the ‘ordinary course of his employment . . . .’” 57 The

arbitrator concluded Blodgett shared Fairstead’s information for the purpose of either

longer pursue those claims and the arbitrator held those claims were withdrawn with prejudice. See Award at 2.

55 See Ruling Tr. at 17:6–12.

56 Award at 25.

57 Id. at 26.

20 taking over Fairstead or securing investments for his new venture, not for Fairstead’s

benefit or for official Fairstead business.58

The arbitrator ruled that Blodgett breached Section 11 of the Employment

Agreement by sharing internal Fairstead documents.59 The arbitrator also ruled that

Blodgett violated Section 11 through “mass downloading [of] Fairstead materials . . .

outside the ‘ordinary course of employment’ and contrary to [Fairstead’s] interests.”60

The arbitrator ruled that Blodgett violated Section 6 of the Employment Agreement

because the materials he forwarded via personal email included “internal business

plans, internal valuations and financial projections, internal equity plans, and

training materials . . . .”61

Blodgett had argued that he shared confidential Fairstead information with

the Tisch Office on a regular basis such that his actions were not outside the ordinary

course. 62 The arbitrator ruled that the “Employment Agreement contains no

exception to Sections 6 and 11” that would have permitted those disclosures.63

58 Id.

59 Id.

60 Id. at 27 (cleaned up).

61 Id.

62 Id. at 28.

63 Id. at 27–28 (“Even assuming some implicit expectation that Blodgett would

share information with his Family Offices for purposes of managing his financial affairs, it is inconceivable that the parties understood the Employment Agreement to

21 The Award also addressed Fairstead’s ability to cancel Blodgett’s equity

interests under Section 4 of the Employment Agreement. The arbitrator declared that

“the Employment Agreement does not entitle [Fairstead] to cancel Blodgett’s entire

interests, but, based upon his termination for breach of Sections 6 and 11, may under

the Employment Agreement only forfeit his interests in pending transactions.”64

The Award further held that Blodgett breached his fiduciary duties as an

employee by improperly soliciting Tatum, Kreinik, and Sussi to join in his effort to

take over Fairstead and by misappropriating Fairstead’s proprietary and confidential

information. 65 Otherwise, the arbitrator held that Fairstead failed to prove its

counterclaims.66

The arbitrator rejected Fairstead’s request for damages of $34 million based

on Blodgett’s failure to pursue a business opportunity.67 The arbitrator also denied

Fairstead’s request for damages of $433,989 for fees paid to public relations firms.68

permit Blodgett to share Fairstead information with his Family Offices or anyone else, without prior authorization and secretly, for the purpose of effecting Blodgett’s control of Fairstead or developing proposals for a potentially competing venture.” (emphasis in original)).

64 Id. at 29 (emphasis in original).

65 Id. at 29–30.

66 Id. at 30–31.

67 Id. at 32.

68 Id. at 33.

22 And the arbitrator denied Fairstead’s request for disgorgement of Blodgett’s

compensation.69

L. The Cross-Motions For Summary Judgment

After the issuance of the Award, the parties returned to this court. They cross-

moved for summary judgment on Counts I and III, where Fairstead claims that

Blodgett breached the LLC agreements. Fairstead also asks the court to revisit its

earlier interlocutory grant of summary judgment for Blodgett on Counts II and IV,

where Fairstead sought declarations that they validly cancelled Blodgett’s equity.

II. LEGAL ANALYSIS

A court may grant summary judgment only when “there is no genuine issue as

to any material fact,” and the “moving party is entitled to judgement as a matter of

law.”70

Fairstead seeks summary judgment on the theory that the arbitrator’s findings

about Blodgett’s conduct under the Employment Agreement are preclusive and

warrant entering summary judgment on Counts I and III. Fairstead also contends

that those findings warrant revisiting the court’s prior grant of summary judgment

for Blodgett on Counts II and IV.

69 Id. at 30.

70 Ct. Ch. R. 56(a).

23 A. Issue Preclusion

The gating issue is whether factual findings in the Award are preclusive. “Issue

preclusion (or collateral estoppel) . . . prohibit[s] re-litigation of factual issues

previously adjudicated.”71 Under that doctrine, “where a question of fact essential to

the judgment is litigated and determined by a valid and final judgment, the

determination is conclusive between the same parties in a subsequent case on a

different cause of action.”72 An arbitral award operates as a judgment for purposes of

issue preclusion.73

Under Delaware law, issue preclusion can apply to “rights, questions, or

facts.”74 Establishing issue preclusion requires meeting a four-part test: “(1) the issue

71 Laborers’ Dist. Council Constr. Indus. Pens. Fund v. Bensoussan, 2016 WL

3407708, at *6 (Del. Ch. June 14, 2016) (cleaned up).

72 Columbia Cas. Co. v. Playtex FP, Inc., 584 A.2d 1214, 1216 (Del. 1991) (quoting Tyndall v. Tyndall, 238 A.2d 343, 346 (Del. 1968)); accord Restatement (Second) of Judgments, supra, § 27; see Messick, 655 A.2d at 1211 (“Under the doctrine of collateral estoppel, if a court has decided an issue of fact necessary to its judgment, that decision precludes relitigation of the issue in a suit on a different cause of action involving a party to the first case.”). Delaware courts frequently rely on the Restatement when analyzing issue preclusion. See Columbia Pipeline, 2021 WL 772562, at *16 (collecting authorities).

73 See LG Elec., Inc. v. InterDigital Commc’ns, Inc., 98 A.3d 135, 138–39 (Del.

Ch. 2014) (collecting authorities), aff’d, 114 A.3d 1246 (Del. 2015). Technically, the Award should be confirmed as a judgment before it has preclusive effect. The parties have not insisted on this procedural step and treat the Award as a final judgment.

74 PVP Aston, LLC v. Fin. Structures Ltd., 2023 WL 2728775, at *7 (Del. Super.

Mar. 31, 2023) (quoting Hercules Inc. v. AIU Ins. Co., 783 A.2d 1275, 1276 (Del. 2000) (emphasis added)).

24 previously decided is identical with the one presented in the action in question, (2)

the prior action has been finally adjudicated on the merits, (3) the party against whom

the doctrine is invoked was a party or in privity with a party to the prior adjudication,

and (4) the party against whom the doctrine is raised had a full and fair opportunity

to litigate the issue in the prior action.”75

The parties do not meaningfully dispute the second, third, or fourth elements.76

On the first issue, Fairstead argues that the Award is broadly preclusive. Blodgett

responds that Fairstead arbitrated against him in his capacity as an employee and

that the Award only addressed disputes under the Employment Agreement. He

contends that the arbitrator’s findings cannot bind him in his capacity as a member

for disputes under the LLC agreements.

The first requirement for issue preclusion demands that the issue to which

preclusion applies be identical to the issue previously litigated. 77 A ruling on a

question of fact or issue of law that is actually and necessarily adjudicated has

preclusive effect even in a subsequent suit “based on a different cause of action.”78

75 Norman v. State, 976 A.2d 843, 868 (Del. 2009).

76 See Fairstead OB at 25–27; Blodgett OB at 58.

77 Betts v. Townsends, Inc., 765 A.2d 531, 535 (Del. 2000).

78 PVP Aston, LLC, 2023 WL 2728775, at *8 (citing Neoplan USA Corp. v.

Taylor, 604 F. Supp. 1540 (D. Del. 1985)).

25 Betts offers insight. There, an employee who injured his knee while on the job

sought worker’s compensation. The employee argued that the injury caused

temporary total disability, and the review board agreed. One year later, after his

condition worsened, the employee sought additional compensation. This time he

argued that the injury had caused permanent partial disability. The review board

rejected his claim, concluding that arthritis, not the workplace injury, caused his

worsened condition. The employee challenged the ruling, claiming the review board

was precluded from revisiting its prior finding that the injury caused his disability.

The Superior Court rejected that argument, and the Delaware Supreme Court

affirmed. The justices explained that “[w]hether an industrial accident caused

temporary total disability or permanent partial disability are two totally distinct

questions.”79 While the original knee injury was the same, the condition of the knee

was different, the connection between the injury and the knee’s condition was

different, and the resulting determinations were different.

By contrast in Brown, an individual charged with federal offenses sought to

suppress the government’s evidence as resulting from an unconstitutional search.80

The federal court denied the motion, and the individual was convicted. He later filed

a civil petition under state law for the return of money seized during his arrest, again

arguing that the search was unconstitutional. The Delaware Supreme Court held

79 Betts, 765 A.2d at 535.

80 Brown v. State, 721 A.2d 1263, 1264 (Del. 1998).

26 that the district court’s ruling on the lawfulness of the search was preclusive for

purposes of the civil action for return of property.81 Even though the causes of action

were different—one civil and one criminal—the issue was the same.

Goldman Sachs is another illustrative decision.82 There, the Territory for the

United States Virgin Islands sought to recover damages for a polluted aquifer. The

Territory first sued a defunct corporation and two of its officers and directors in

federal court. During that litigation, the federal court held that the time to sue the

defunct corporation had expired. The Territory later sued Goldman Sachs in state

court for unjust enrichment. The Court of Chancery held that the unjust enrichment

theory required a threshold claim against the defunct entity and that the federal

ruling on the Territory’s ability to sue precluded that claim. The Territory had been

too late to sue on behalf of the defunct corporation in federal court, and the same was

true for purposes of a different claim against a different defendant in state court.83

The legal issue was identical, even though the claims were different.

81 Id. at 1265.

82 Territory of U.S. Virgin Islands v. Goldman, Sachs & Co., 937 A.2d 760 (Del.

Ch. 2007), aff’d, 956 A.2d 32 (Del. 2008)

83 Id. at 787 (explaining that the prior judgement has “a preclusive effect as to

the narrower, and less controversial, issue of whether a judgment can be obtained against Panex. As to that narrow issue, the Virgin Islands had its turn at bat and swung and missed. The holding of the Third Circuit that Panex’s ability to be sued expired three years after its dissolution, per the clear and unambiguous words of § 278, is binding against the Virgin Islands.”).

27 In this case, the factual determinations that the arbitrator made are binding.

The parties arbitrated whether Blodgett acted in his own self-interest, took

confidential information, disclosed it to third parties, and improperly solicited

Fairstead employees. Those determinations turned on what Blodgett did and why.

They bind the parties to the arbitration and have preclusive effect in later

proceedings, including this one.

The implications of those factual findings depend on the claim being asserted.

The same facts may generate liability under one cause of action but not another. A

party’s later suit on a different cause of action, however, does not allow a court to

revisit a binding factual finding. The factual issues in the arbitration and in this case

are identical, so preclusion applies.

To argue for a different result, Blodgett points to the Tatum decision, where

the court distinguished between actions Tatum took as an employee and actions he

took as a member. That distinction mattered in Tatum for purposes of the legal

implications of the findings. The distinction did not affect the findings about what

Tatum did.

The same is true here. The arbitrator’s legal conclusion that Blodgett breached

Sections 6 and 11 of the Employment Agreement is not preclusive for purposes of

whether he breached provisions in the LLC agreements. The arbitrator’s factual

findings, however, are preclusive and must form the basis of the court’s analysis of

breach.

28 B. Counts I And III: Breach Of The LLC Agreements

Fairstead contends that Blodgett breached provisions in the LLC agreements.

The agreements are substantively identical, so this decision refers singularly to the

Management Company’s LLC agreement. The facts found in the Award do not

establish breach for two reasons. First, they show that Blodgett acted as an employee,

not as a member. Second, they show that Fairstead is not entitled to any additional

remedy.

To prevail on a breach of contract claim, the claimant must prove “(i) a

contractual obligation, (ii) a breach of that obligation by the defendant, and (iii) a

causally related injury that warrants a remedy, such as damages . . . .” 84 When

determining the scope of a contractual obligation, “the role of a court is to effectuate

the parties’ intent.”85 Absent ambiguity, the court “will give priority to the parties’

intentions as reflected in the four corners of the agreement, construing the agreement

as a whole and giving effect to all its provisions.” 86 “Unless there is ambiguity,

Delaware courts interpret contract terms according to their plain, ordinary

meaning.”87

84 AB Stable VIII LLC v. Maps Hotels and Resorts One LLC, 2020 WL 7024929,

at *47 (Del. Ch. Nov. 30, 2020), aff’d, 268 A.3d 198 (Del. 2021).

85 Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 739 (Del. 2006).

86 In re Viking Pump, Inc., 148 A.3d 633, 648 (Del. 2016) (citations omitted).

87 Alta Berkeley VI C.V. v. Omneon, Inc., 41 A.3d 381, 385 (Del. 2012) (citations

omitted).

29 1. The Confidentiality Provision.

Fairstead argues Blodgett breached Section 8.3(b) of the LLC agreement (the

“Confidentiality Provision”) by sharing information with the Tisch and Sussman

Offices. The factual findings in the Award establish that Blodgett shared information,

but they also establish that he did so as an employee, not as a member. Blodgett did

not take any separate or additional action as a member that could implicate his

member-related obligations.

The Confidentiality Provision states:

At all times after the date hereof, no Member or any of its Affiliates shall disclose or use any confidential information of or with respect to the Company or its business; provided that such obligation shall not apply to any information (i) to the extent that it legally is or becomes part of public or industry knowledge from authorized sources other than a Member or any affiliate of any Member; (ii) which the Member or any of its Affiliates is required by law to disclose . . ., or (iii) in case of any use by the Members, such use is necessary or appropriate in the conduct of the Company’s business.88

The Confidentiality Provision does not define “confidential information.” If the LLC

agreement stood in isolation, the court would interpret the Confidentiality Provision

in accordance with its plain meaning.89 Here, however, the Confidentiality Provision

exists and operates in conjunction with the Employment Agreement, so principles of

88 Blodgett OBX 4 (cited as LLCA) § 8.3(b).

89 Zurich Am. Ins. Co. v. Syngenta Crop Protection LLC, 314 A.3d 665, 675–76

(Del. 2024) (“Absent ambiguity, contract terms should be accorded their plain and ordinary meaning.”).

30 contract law call for giving the term a consistent reading. 90 The Employment

Agreement defines “confidential information” in exceedingly broad terms. 91 Using

the Employment Agreement’s definition maintains consistency across the

interrelated agreements.

The arbitrator found that Blodgett downloaded and shared materials falling

within the Employment Agreement’s definition of confidential. That finding has

preclusive effect.

Blodgett argues initially that he did not breach the Confidentiality Provision

because exception (iii) permits a member to use confidential information if “such use

90 CA, Inc. v. Ingres Corp., 2009 WL 4575009, at *47 (Del. Ch. Dec. 7, 2009)

(“Traditionally, courts try to give a consistent reading to interrelated agreements.”).

91 EA § 6(a) (“[A]ll information, whether oral or written, which is indicated to

be confidential by Employer when it is disclosed to the Employee or, even if not so indicated, information, whether oral or written, respecting Employer’s or its affiliates’ or related entities’ business including, but not limited to, purchase strategies, financing strategies, joint venture terms, pending deals, partners and joint venturers, its trading and/or order execution techniques, methods and/or strategies; computer programs, software and data; computational algorithms, procedures, methods and/or techniques; training procedures; clearing operations; business plans and ideas; marketing techniques or strategies; products and product lines; pricing policies; trade secrets; cost information; commercial relationships; customers; financial results and projections (including, without limitation, the profitability of Employer’s products and product lines); research and development activities and results; the identity and/or profitability of Employer’s traders and/or any other information that could reasonably be expected to prove harmful to Employer if disclosed to third parties (including, but not limited to, any formation that could reasonably be expected to aid a competitor of Employer vis a vis Employer, its affiliates or related entities). “Confidential Information” also includes all information as to which Employer owes an obligation of confidentiality to a third party (including, but not limited to, computer-related vendors (hardware and software)).”).

31 is necessary or appropriate in the conduct of the Company’s business” (the

“Necessary-Or-Appropriate Exception”). Unlike the Confidentiality Provision, the

Employment Agreement only permits sharing with Fairstead’s consent. When

holding that Blodgett breached the confidentiality restrictions in the Employment

Agreement, the arbitrator emphasized that Blodgett shared confidential information

without Fairstead’s consent. That is not dispositive for the Confidentiality Provision.

The factual findings in the Award nevertheless preclude Blodgett from relying

on the Necessary-Or-Appropriate Exception. Blodgett argued that he routinely

discussed and shared Fairstead information with the Tisch Office because that office

managed his finances, oversaw his personal investments, and prepared his tax

returns.92 That argument does not address sharing with the Sussman Office. It also

does not meet the test set forth in the Necessary-Or-Appropriate Exception. That

exception requires that the use be necessary or appropriate for Fairstead’s business,

not necessary or appropriate for Blodgett.

At any rate, the arbitrator found that the record did not support Blodgett’s

claim about routine communications with the Tisch Office. 93 The arbitrator also

found that Blodgett did not share information because it was necessary or

92 Award at 27–28.

93 Id. at 28.

32 appropriate for Fairstead’s business, but in furtherance of his own plans and not in

the ordinary course of business.94

Blodgett fares better, however, when arguing that he did not disclose or use

any confidential information in his capacity as a member. The LLC agreement defines

“Member” as simply “the members set forth on Schedule I attached hereto . . . and

each other Person who becomes a Member in accordance with this Agreement.”95

Although the LLC agreement states that “[t]he property, business and affairs of the

Company shall be managed by the Members,” the LLC agreement requires that “[a]ll

actions of the Company shall be authorized in accordance with Section 6.5(d) below.”96

That section provides that “if a quorum is present, the affirmative vote of a Majority

in Interest present and entitled to vote on, or take action with respect to, any matter

shall be the act of the Members.” 97 The prior subsection states that unless the

agreement provides otherwise, “the presence of a Majority in Interest . . . shall

constitute a quorum . . . .” 98 As the holder of a 15% interest, Blodgett could not

establish a quorum or take action as a member.

94 See id. at 26.

95 LLCA Preamble.

96 Id. § 5.1.

97 Id. § 6.5(d).

98 Id. § 6.5(c).

33 Instead, the LLC agreement contemplates that the members “may from time

to time designate such officers, agents and managers as they may deem necessary to

carry out the day-to-day operations of the Company.”99 Blodgett was empowered as

an employee to act as the Management Company’s agent. The actions he took were

therefore governed by his Employment Agreement, not the LLC agreement.

That is not only true as a legal matter, but also as a factual matter. Everything

Blodgett did on which Fairstead now relies was conduct he took as an employee. In

his capacity as a member, Blodgett was a minority owner in a holding company. He

did not obtain, generate, or share information in his capacity as a minority investor

in a holding company, such as by seeking and obtaining books and records. He

obtained, generated, and shared information in his capacity as an employee

responsible for the day-to-day operation of Fairstead’s business.

Drawing this type of distinction is critical to the integrity of Delaware law.

Lawyers have developed and deployed a now-widespread technology of inserting

employment-related terms into the internal governance documents of Delaware

entities. Businesses and their lawyers do that so they can invoke Delaware’s

contractarian regime and argue that the terms override how other jurisdictions

regulate employment relationships. That legal technology calls on Delaware courts

to adjudicate employment disputes for the country and potentially the world. For

example, in the past five years alone, the Court of Chancery has issued written

99 Id. § 5.2.

34 decisions addressing disputes over restrictive covenants for companies located in or

with employees working in Hong Kong, 100 Italy, 101 Alabama, 102 California, 103

Florida, 104 Idaho, 105 Illinois, 106 Louisiana, 107 New York, 108 Oklahoma, 109

100 Ainslie v. Cantor Fitzgerald, L.P., 2023 WL 106924 (Del. Ch. Jan. 4, 2023),

rev’d and remanded, 312 A.3d 674 (Del. 2024).

101 AlixPartners, LLP v. Mori, 2022 WL 1111404 (Del. Ch. Apr. 14, 2022).

102 Daxco, LLC v. Timm, 2026 WL 172862 (Del. Ch. Jan. 22, 2026); HighTower

Hldg., LLC v. Gibson, 2023 WL 1856651 (Del. Ch. Feb. 9, 2023).

103 Gener8,LLC v. Castanon, 2023 WL 6381635 (Del. Ch. Sept. 29, 2023); Sorrento Therapeutics, Inc. v. Mack, 2023 WL 5670689 (Del. Ch. Sept. 1, 2023); UBEO Hldgs., LLC v. Drakulic, 2021 WL 1716966 (Del. Ch. Apr. 30, 2021).

104 BankUnited, N.A. v. Shulick, 2026 WL 21637 (Del. Ch. Jan. 2, 2026); Naples

Ctr. For Dermatology & Cosmetic Surgery, PA v. Trisan, 2025 WL 1276207 (Del. Ch. May 2, 2025).

105 Kodiak Bldg. P’rs, LLC v. Adams, 2022 WL 5240507 (Del. Ch. Oct. 6, 2022).

106 Hub Gp., Inc. v. Knoll, 2024 WL 3453863 (Del. Ch. July 18, 2024); Centurion

Serv. Gp., LLC v. Wilensky, 2023 WL 5624156 (Del. Ch. Aug. 31, 2023).

107 AG Res. Hldgs., LLC v. Terral, 2021 WL 486831 (Del. Ch. Feb. 10, 2021).

108 N. Am. Fire Ultimate Hldgs., LP v. Doorly, 2025 WL 736624 (Del. Ch. Mar.

7, 2025); Kuramo Cap. Mgmt., LLC v. Seruma, 2024 WL 1888216 (Del. Ch. Apr. 30, 2024); Brown v. Ct. Square Cap. Mgmt., L.P., 2023 WL 8665122 (Dec. 15, 2023); Intertek Testing Servs. NA, Inc. v. Eastman, 2023 WL 2544236 (Del. Ch. Mar. 16, 2023).

109 Parks v. Horizon Hldgs., LLC, 2022 WL 2821337 (Del. Ch. July 20, 2022).

35 Pennsylvania, 110 South Carolina, 111 Texas, 112 Utah, 113 Washington, 114 and

Wisconsin. 115 That list excludes orders and transcript rulings. 116 It also excludes

decisions addressing restrictive covenants related to sales of businesses.

For Delaware courts to address these matters is problematic because the

Delaware franchise depends on other states deferring to Delaware law to govern the

internal affairs of the entities that Delaware charters. Delaware risks jeopardizing

that deference if it accommodates efforts to use the internal governance documents

of Delaware entities to override the law of other states on issues of great importance

to them.117

110 Frontline Techs. Parent, LLC v. Murphy, 2023 WL 5424802 (Del. Ch. Aug.

23, 2023).

111 Fortiline, Inc. v. McCall, 341 A.3d 1027 (Del. Ch. 2025), aff’d, — A.3d —,

2026 WL 369934 (Del. Feb. 10, 2026).

112 Kalkomey Enters., LLC v. Strobl, 2026 WL 129295 (Del. Ch. Jan. 16, 2026);

Sunder Energy, LLC v. Jackson, 305 A.3d 723 (Del. Ch. 2023), aff’d in part, rev’d in part, 332 A.3d 472 (Del. 2024); U.S. Legal Support, Inc. v. Lucido, 2021 WL 4940823 (Del. Ch. Oct. 22, 2021).

113 ZAGG, Inc. v. Keogh, 2025 WL 1025013 (Del. Ch. Apr. 7, 2025).

114 Payscale Inc. v. Norman, 2025 WL 1622341 (Del. Ch. June 9, 2025), rev’d

and remanded, 2026 WL 774876 (Del. Mar. 19, 2026).

115 Weil Hldgs. II, LLC v. Alexander, 2025 WL 689191 (Del. Ch. Mar. 4, 2025),

aff’d, 350 A.3d 640 (Del. 2025).

116 A search for non-compete! non-solicit! and “restrictive covenant” limited to

Court of Chancery cases between 2021 and 2026 generates 180 results.

117 See Diedenhofen-Lennartz v. Diedenhofen, 931 A.2d 439, 451–52 (Del. Ch.

2007) (“If we expect that other sovereigns will respect our state’s overriding interest

36 Delaware can stay within its lane by carefully distinguishing between

(1) conduct by employees in their capacities as employees that should not implicate

restrictions in constitutive entity agreements and (2) conduct by investors in their

capacities as investors that properly implicates those restrictions.118 There inevitably

in the interpretation and enforcement of our entity laws, we must show reciprocal respect.”).

118 E.g., Focus Fin. P’rs, LLC v. Holsopple, 241 A.3d 784, 809 (Del. Ch. 2020)

(distinguishing between provisions in unit agreement that govern transfer of units and other equity-related features and employment-related provisions that ordinarily would be found in an employment agreement); cf. Carr v. Glob. Payments Inc., 2019 WL 6726214, at *6 (Del. Ch. Dec. 11, 2019) (making capacity distinctions for purposes of advancement), aff’d, 227 A.3d 555 (Del. 2020); James v. Williams, 2017 WL 5900953, at *3–4 (Del. Super. Nov. 30, 2017) (assessing whether defendant acted in a “managerial capacity”); Vichi v. Koninklijke Philips Elecs. N.V., 2009 WL 4345724, at *6 (Del. Ch. Dec. 1, 2009) (evaluating existence of personal jurisdiction based on whether individual acted as an employee or in a different capacity); see generally Ann M. Lipton, Inside Out (or, One State to Rule Them All): New Challenges to the Internal Affairs Doctrine, 58 Wake Forest L. Rev. 321, 369–91 (2023) (discussing complications of using entity agreements to regulate employment relationships and dangers of invoking Delaware law and the internal affairs doctrine for that purpose); Mohsen Manesh, The Corporate Contract and the Internal Affairs Doctrine, 71 Am. U. L. Rev. 501, 556–57 (2021) (“The use of the corporate contract to regulate the employer- employee relationship, for example by restricting an employee- shareholder’s right to compete against the corporation’s business, would represent a paradigm shift in the reach of corporate law. Moreover, it would create an insoluble conflict between Delaware law and the law of other jurisdictions that strictly limit the scope and enforceability of non-compete covenants (most notably California, where many Delaware corporations are headquartered). If Delaware courts were to enforce such employment-related provisions in the corporate contract against employee- shareholders, despite the conflict it would pose to the laws of other states, it could prompt a regulatory turf war among states that might ultimately undermine the ‘protective boundaries’ of the internal affairs doctrine. Delaware courts, however, could avoid such conflicts. Because employment-related provisions lie within the Outer Band and beyond the internal affairs doctrine, Delaware courts, deploying traditional choice-of-law analysis, could defer to the laws of other states when evaluating employment-related provisions. Doing so would effectively limit the scope

37 will be borderline cases that require judgment. Envision, for example, a small

business that elects to operate as a member-managed LLC, builds all of the internal-

governance mechanics and employment-related provisions into the LLC, and then

operates under the LLC agreement, without entering into separate employment

agreements or other more specific contracts. In that setting, there would be no reason

to parse the roles or capacities in which the principals acted, and employment-related

provisions in an LLC agreement could well apply.

This is not that case. Blodgett entered into the LLC agreement with Feldman

and Goldberg (through their affiliates), but Fairstead separately entered into the

Employment Agreement with Blodgett to govern his actions as an employee.

Fairstead has not pointed to anything that Blodgett did as a member as opposed to

as an employee. The arbitrator addressed conduct that Blodgett took as an employee

under the agreement that specifically governed his actions as an employee.

Blodgett did not engage in any activity that implicates the LLC agreement.

Blodgett therefore did not breach the Confidentiality Provision.

2. The Good Faith Provision.

Fairstead separately argues that Blodgett breached Section 6.11 of the LLC

agreement (the “Good Faith Provision”) by developing the Restructured Fairstead

of the Outer Band as it applies to employee matters and avoid a heedless clash with the laws of other states.” (footnotes omitted)); Mohsen Manesh, The Contested Edges of Internal Affairs, 87 Tenn. L. Rev. 251, 252 (2020) (explaining that an expansive approach to the internal affairs doctrine “could have disastrous consequences for Delaware corporate law”).

38 and Separate Company Options for his own benefit. The distinction between

Blodgett’s actions as an employee and his actions as a member again forecloses

Fairstead’s claim.

The Good Faith Provision addresses the duties that members owe to each other

and to the LLC. The LLC agreement first strips away all fiduciary duties. It then

substitutes a contractual commitment under which each member must “act honestly

and in good faith in its dealings with the Company and its Members . . .”119 In its

entirety, the provision states:

6.11 No Fiduciary Duty; No Duty of Loyalty.

(a) Except as expressly provided elsewhere in this Agreement or required by the Act or other applicable law, a Member is permitted to act solely in the best interests of such Member and shall not have any fiduciary duty (including any duty of loyalty) or other obligation to act in the best interests of the Company or its Members as a whole.

(b) Notwithstanding the provisions of Section 6.11(a), each Member shall: (i) act honestly and in good faith in its dealings with the Company and the Members; (ii) account to the Company, and hold as its trustee, any property, profit or benefit derived in the conduct or winding up of the Company’s business or from the use of Company property, including the appropriation of Company properties; and (iii) refrain from dealing with the Company in the conduct or winding up of the Company’s business as or on behalf of a party having an interest adverse to the Company.120

The resulting obligation to act in good faith is a contractual one. Even when a court

looks to fiduciary duties to give content to what it means to act in good faith, the

119 LLCA § 6.11(b).

120 Id. § 6.11.

39 obligation remains contractual. 121 The plaintiff must prove a claim for breach of

contract; fiduciary standards of review do not apply.122

“[W]hen a contract’s express terms incorporate a good faith requirement, the

trial court should focus on the meaning of that express contractual duty.”123 When

interpreting an unadorned obligation to act in good faith, Delaware decisions apply a

subjective test.124 When the agreement uses an objective modifier like “reasonable,”

121 See, e.g., CelestialRX Invs., LLC v. Krivulka, 2017 WL 416990, at *16 (Del.

Ch. Jan. 31, 2017) (where LLC agreement eliminated fiduciary duties but imposed liability for bad faith actions and improper self-dealing, “[t]hose duties are contractual in nature, but to the extent they employ undefined terms such as ‘bad faith,’ the common law fiduciary duties are instructive in supplying the definition”).

122 In re El Paso Pipeline P’rs, L.P. Deriv. Litig., 2014 WL 2768782, at *19 (Del.

Ch. June 12, 2014) (“Because the LP Agreement eliminates all fiduciary duties, the fiduciary duty precedents do not control.”).

123 ev3, Inc. v. Lesh, 114 A.3d 527, 539 (Del. 2014).

124 See Exit Strategy, LLC v. Festival Retail Fund BH, L.P., 2023 WL 4571932,

at *9 (Del. Ch. July 17, 2023) (“When a partnership agreement replaces fiduciary duties with a contractual duty to act with a ‘good faith belief’ that the challenged action is in the partnership’s best interests, the standard governing breach is ‘subjective bad faith.’”); Dieckman v. Regency GP LP, 2021 WL 537325, at *17 (Del. Ch. Feb. 15, 2021), aff’d, 264 A.3d 641 (Del. 2021) (“As our case law makes clear, the use of the unmodified verb ‘believe’ in the definition of ‘good faith’ in [the LP agreement] means that the good faith standard in the LP Agreement is subjective and not objective.”); Morris v. Spectra Energy P’rs (De) GP, LP, 2017 WL 2774559, at *6 (Del. Ch. June 27, 2017) (interpreting a limited partnership agreement’s good faith obligation to require “the person acting [to] believe that the determination or other action is in the best interests of the Partnership” and concluding that creates a “subjective good faith” standard); Fox v. CDX Hldgs., Inc., 2015 WL 4571398, at *25 (Del. Ch. July 28, 2015) (“When a contract governed by Delaware law calls upon a party to act or make a determination in good faith, without any qualifier, it means that the party must act in subjective good faith.”), aff’d, 141 A.3d 1037 (Del. 2016); see also Mehra v. Teller, 2021 WL 300352, at *24 (Del. Ch. Jan. 29, 2021) (citations

40 then decisions require subjective good faith that is objectively reasonable.125 Here,

there is no qualifying language, so the standard is subjective.

To satisfy a subjective good faith standard, a member must act to promote the

best interests of the company and must believe that he is doing so.126 But the LLC

agreement contains another, more specific provision that authorizes members to

compete with the Company (the “Competition Provision”). It states:

The Members shall not be required to devote their full time to the business of the Company and shall only be required to devote such time as they deem appropriate in their discretion. The Members and their Affiliates, and their respective officers, directors, employees, stockholders, members (including managing members) and partners may have other business interests and may engage in other activities in addition to those relating to the Company, in each case, whether or not those businesses or activities compete with the business of the Company, and (i) the pursuit of those businesses or activities shall not constitute a breach of this Agreement or result in a breach of any duties or obligations to the Members hereunder, (ii) and there shall be no obligation on the part of any such Person to provide the Company or any Member with the opportunity to participate in such business or activity. Neither the Company nor any Member shall have any right, by virtue of this Agreement, to share or participate in such other investments or

omitted) (“The Delaware Supreme Court has held that contractual good faith is a subjective standard applied at the time the decision was made.”).

125 Brinckerhoff v. Enbridge Energy Co., Inc., 159 A.3d 242, 260 (Del. 2017)

(explaining that “the use of the qualifier ‘reasonably’ imposes an objective standard of good faith”); accord Norton v. K-Sea Transp. P’rs L.P., 67 A.3d 354, 361 n.34 (Del. 2013) (“The LP Agreement’s addition of the term ‘reasonably’ distinguishes it from limited partnership agreements that Delaware courts have interpreted as establishing a purely subjective good faith standard.”); In re Kinder Morgan Inc. Corp. Reorg. Litig., 2015 WL 4975270, at *5 (Del. Ch. Aug. 20, 2015) (same).

126 Exit Strategy, LLC, 2023 WL 4571932, at *9 (citing Allen v. Encore Energy

P’rs, L.P., 72 A.3d 93, 106 (Del. 2013)).

41 activities of any other Member or any income or revenues derived therefrom.127

The Competition Provision necessarily limits the Good Faith Provision, because a

member who pursues a business that competes with the company would have

difficulty believing that those actions served the best interests of the company.

The interactions between the Good Faith Provision and the Competition

Provision reinforce the distinction, discussed in the prior section, between what a

member can do qua member and what an employee can do qua employee. An

employee is an agent who owes fiduciary duties to the company and must serve the

company’s best interests.128 The Good Faith Provision makes clear that members are

not fiduciaries, and the Competition Provision shows that members need not always

pursue the Company’s best interests.

127 LLCA § 8.3(a) (recognizing that members are “not required to devote their

full time to the business”).

128 Restatement (Third) of Agency § 7.07(3)(a) (A.L.I. 2006), Westlaw (database

updated Oct. 2024) (“[A]n employee is an agent whose principal controls or has the right to control the manner and means of the agent’s performance of work . . . .”); accord Restatement (Second) of Agency § 429 (A.L.I. 1958), Westlaw (database updated Oct. 2024) (“The rules as to the duties and liabilities to the principal of agents who are not servants apply to servants.”); Restatement (First) of Agency § 2 cmt. a (A.L.I. 1933), Westlaw (database updated Oct. 2024) (“A master is a species of principal, and a servant is a species of agent. The words ‘master’ and ‘servant’ are herein used to indicate the relationship from which arises the tort liability of an employer to third persons for the tort of an employee . . . .”). See Restatement (Second) of Agency, supra, Index M100 (“A master is a principal; a servant is an agent with special powers and rights additional to those of agents not servants. Hence all the rules applicable to principal and agent apply to master and servant . . . .”).

42 As with the Confidentiality Provision, analyzing whether Blodgett breached

the Good Faith Provision requires assessing whether he acted as a Fairstead

employee or as a minority investor in the LLC. When Blodgett directed his

subordinates—Kreinik and Sussi—to prepare a financial model for the Separate

Company Option, he gave them instructions as an employee who supervised more

junior employees. When Blodgett used Fairstead information to develop the

Restructured Fairstead Option and the Separate Company Option, he accessed that

information as an employee. Blodgett’s actions did not implicate his role as the holder

of a 15% member interest.

Even as an employee, much of Blodgett’s conduct would not be problematic

under Delaware law. Delaware law does not regard it as a breach of duty for

employees to threaten to resign if their demands are not met, even if they warn that

their resignations could ruin the business. 129 Delaware courts also recognize a

privilege for departing employees to “prepare or make arrangements to compete with

their employers prior to leaving . . . without fear of incurring liability for breach of

their fiduciary duty of loyalty.” 130 Exceptions to this privilege include situations

“where the employee has committed some fraudulent, unfair or wrongful act.” 131

129 See Lazard Debt Recovery GP v. Weinstock, 864 A.2d 955, 958–59 (Del. Ch.

2004).

130 Sci. Accessories Corp. v. Summagraphics Corp., 425 A.2d 957, 963, 965 (Del.

1980) (citations omitted).

131 Id. at 965 (citations and quotation marks omitted).

43 Examples include misappropriating trade secrets, misusing confidential information,

soliciting customers before ceasing employment, conspiring to bring about mass

resignation of key employees, or usurping an employer’s business opportunity.132 And

Delaware courts have reached those holdings when viewing conduct through the

prism of the duty of loyalty, which is more protective than contract law.133

Here, however, Blodgett used confidential Fairstead information and resources

to prepare to compete and when instructing his subordinates to develop a financial

model. Even under Delaware law, therefore, Blodgett would have breached his

fiduciary duties as an employee. But those principles govern Blodgett’s conduct as an

employee, not his conduct as a member. Blodgett did not engage in any activity that

implicates the LLC agreement. He therefore did not breach the Good Faith Provision.

3. Remedies

Fairstead’s claim for breach also fails because Fairstead has not pointed to a

separate harm that Fairstead suffered. Any remedy would be duplicative of what

Fairstead obtained in the arbitration.

Fairstead argues that Blodgett’s alleged breaches of the Confidentiality

Provision and the Good Faith Provision should result in meaningful remedies,

including disgorgement and restitution, in addition to what the arbitrator awarded,

132 Id. (citations omitted).

133 Lonergan v. EPE Hldgs., LLC, 5 A.3d 1008, 1018 (Del. Ch. 2010) (“When

parties exercise the authority provided by [statute] to eliminate fiduciary duties, they take away the most powerful of a court’s remedial and gap-filling powers.”).

44 but Fairstead was only harmed once by Blodgett’s actions. The arbitrator already

addressed that harm by parsing the remedies that Fairstead requested, awarding

some, and denying others. Fairstead has not pointed to any separate or additional

injury Fairstead could have suffered from a breach of the LLC agreement that is

distinct from the already-remedied injuries that Blodgett caused as an employee.

Blodgett did not take action as an employee who inflicted some quantum of harm,

then as a member that inflicted a different quantum of harm. Blodgett acted, and the

Award addressed the harm Blodgett’s conduct caused.

To recover in this action, Fairstead would have to prove that Blodgett’s conduct

as a member resulted in some distinct and compensable injury separate and apart

from Blodgett’s conduct as an employee. Or Fairstead would have to show that a

breach of the LLC agreement triggered some specific, non-duplicative contractual

remedy. Fairstead has done neither.

4. Summing Up Counts I And III

Summary judgment is granted in favor of Blodgett on Counts I and III.

Blodgett did not take any action as a member that could support a breach of the

Confidentiality Provision or the Good Faith Provision. Nor is there any separate harm

requiring a remedy.

C. Counts II And IV: Forfeiture Of Blodgett’s Equity Interests

Fairstead next argues that the Award compels a different outcome on Counts

II and IV, where Fairstead seeks a ruling confirming that they properly cancelled all

45 of Blodgett’s equity interests.134 The court previously held that Section 3.6(b) of the

LLC agreement does not permit forfeiture.135 In reaching that conclusion, the court

reasoned in part that Section 4(d)(2) of the Employment Agreement contained no

affirmative language authorizing forfeiture. The arbitrator has now determined that

Section 4(d)(2) of the Employment Agreement permits the forfeiture of Blodgett’s

interests in pending transactions, but not Blodgett’s other interests.136 This court’s

interpretation of the LLC agreement already accommodates that outcome. To the

extent there is any doubt, the court modifies its prior holding to make that

accommodation explicit.

Section 3.6 of the LLC agreement first states that “[t]he interest held by

William Blodgett as of the date hereof shall be treated as a ‘promote’ or ‘carried

interest’ in exchange for his services as any employee to one or more Affiliates of the

Company.”137 The section then addresses what happens to the interests if Blodgett

departs from Fairstead.

Notwithstanding anything contained in this Section 3.6 to the contrary, (a) solely if Mr. Blodgett terminates his employment with any Affiliate of the Company for any reason within 12 months following the closing of the acquisition of any real property by an Affiliate of the Company,

134 Counterclaims I and II are the inverse of Counts II and IV. By securing a

ruling in his favor on Counts II and IV, Blodgett also prevailed on Counterclaims I and II.

135 See generally Ruling Tr.

136 Award at 29.

137 See LLCA § 3.6.

46 then the Company has the option, not the obligation, to cancel any portion of or all Interests then held by Mr. Blodgett effective as of the date of such termination of employment or any date thereafter such that no Net Profits and Net Losses attributable to such property would be allocated and no distributions attributable to such property would be made to Mr. Blodgett, and (b) if any Affiliate of the Company terminates Mr. Blodgett’s employment for any reason other than as a result of his unauthorized disclosure of certain proprietary information of such Affiliate or his noncompliance of such Affiliate’s policies (including, for the avoidance of doubt, his breach of Section 6 or 11 of that certain Employment Agreement dated as of October 25, 2013 by and between Fortitude Realty Management LLC and Mr. Blodgett), no Interest held by Mr. Blodgett shall be forfeited or canceled. Any distributions to which Mr. Blodgett would otherwise have been entitled pursuant to any canceled Interest shall be allocated to all other Interest Holders, pro rata, based on their Interests (excluding Mr. Blodgett). For the avoidance of doubt, (i) if Mr. Blodgett acquires any additional Interest as a result of Additional Capital Contributions or a Transfer by another Member, such Interest shall not be subject to the provisions in this Section 3.6, and (ii) this Section 3.6 shall not in any way restrict the repurchase right of a Majority in Interest set forth in Section 8.7.138

The LLC agreement defines “Interest” as “any of an Economic Interest, Management

Interest and/or Membership Interest.”139

The applicable language appears in subpart (b). That subpart establishes a

general rule of non-forfeiture by stating: “[I]f any Affiliate of the Company terminates

Mr. Blodgett’s employment for any reason . . ., no Interest held by Mr. Blodgett shall

be forfeited or canceled.” Nested within the general rule of non-forfeiture is an

exception that applies if he is terminated “as a result of his unauthorized disclosure

of certain proprietary information of such Affiliate or his noncompliance of such

138 Id.

139 Id. Art. II.

47 Affiliate’s policies (including, for the avoidance of doubt, his breach of Section 6 or 11

of that certain Employment Agreement dated as of October 25, 2013 by and between

Fortitude Realty Management LLC and Mr. Blodgett).”

Notably, the exception to the non-forfeiture principle does not give Fairstead

an affirmative forfeiture right. Ther is no language in Section 3.6(b) that says in

words or substance that “the Company can forfeit Mr. Blodgett’s interests under the

following circumstances.” Instead, the exception recognizes a situation in which the

general rule of non-forfeiture does not apply. That exception creates space for some

other forfeiture right—to the extent one exists—to operate. Without that space, a

forfeiture right that existed under some different source of authority or other

agreement would collide with the general rule of non-forfeiture.

The court previously granted summary judgment for Blodgett on Counts II and

IV, holding that Section 3.6(b) did not contain an affirmative forfeiture right. That

remains true. The plain language of that provision does not contain an affirmative

forfeiture right.

In reaching this conclusion, the court observed that Section 4(d)(2) of the

Employment Agreement also lacks any language giving Fairstead an affirmative

forfeiture right. The arbitrator has now held that Section 4(d)(2) of the Employment

Agreement “does not entitle [Fairstead] to cancel Blodgett’s entire interests,” but

Fairstead could “forfeit his interests in pending transactions.”140

140 Award at 29.

48 That holding is binding on the parties and has issue preclusive effect for

purposes of the Employment Agreement. It means that in the scenario contemplated

by the exception to the non-forfeiture principle, the Employment Agreement’s limited

forfeiture right can operate. The general non-forfeiture principle in Section 3.6(b) of

the LLC agreement does not conflict with or foreclose that limited forfeiture right.

Section 4 of the Employment Agreement and Section 3.6(b) of the LLC agreement

thus work together harmoniously.

Fairstead wants the court to go further and hold that Section 3.6(b) of the LLC

agreement grants Fairstead the right to forfeit all of Blodgett’s equity interests in

their entirety, beyond what the Award construes Section 4 of the Employment

Agreement to permit. There is no basis for such a ruling. To reiterate, Section 3.6(b)

of the LLC agreement lacks any affirmative language empowering Fairstead to cancel

or forfeit Blodgett’s interests in the event of termination. The agreement contains an

exception to the non-forfeiture principle for certain types of terminations, but that

exception only creates a window through which some other forfeiture right—like the

right under the Employment Agreement—can operate. It does not give rise to an

independent forfeiture right.

Fairstead points out that the court viewed the Employment Agreement as not

containing any affirmative forfeiture language either, and the arbitrator has now

ruled otherwise. That is the arbitrator’s purview. The arbitrator lacks jurisdiction to

interpret the LLC agreement. Nor can the arbitrator’s interpretation of the

Employment Agreement revise the LLC agreement to supply the type of affirmative

49 forfeiture language that would be necessary to establish an independent forfeiture

right under the LLC agreement.

The court does not believe that its earlier ruling conflicts with the Award. The

court ruled on the scope of Section 3.6(b) of the LLC agreement. The Employment

Agreement has always been the arbitrator’s domain. That the court held that Section

3.6(b) of the LLC agreement did not give rise to a forfeiture right did not foreclose the

arbitrator from interpreting the Employment Agreement to establish a forfeiture

right. The window-creating exception to Section 3.6(b) of the LLC agreement allows

that right to operate. To the extent there is confusion about whether the court’s prior

ruling conflicts with the Award’s conclusion, the court has now made the

interrelationship plain. The same reasoning applies to the Tax-Benefit Company’s

LLC agreement.

III. CONCLUSION

Summary judgment is granted in Blodgett’s favor. Within thirty days, the

parties must submit a form of order implementing this decision. The court believes

that the next step in the litigation involves crafting a remedy for Fairstead’s improper

forfeiture of Blodgett’s interests in non-pending deals. The parties must prepare a

joint letter that either proposes a schedule for litigating the remedy or identifies other

issues that must be addressed and proposes a schedule for litigating them as well.