Feldman v. Marks

CourtSuperior Court of Delaware
DecidedSeptember 23, 2024
DocketN21C-09-206 DJB
StatusPublished

This text of Feldman v. Marks (Feldman v. Marks) is published on Counsel Stack Legal Research, covering Superior Court of Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Feldman v. Marks, (Del. Ct. App. 2024).

Opinion

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

LEE FELDMAN, MATS ) LEDERHAUSEN, ) and DOV SEIDMAN, ) Plaintiff(s), ) ) C.A. No. N21C-09-206 DJB v. ) ) HOWARD MARKS, ) Defendant. ) )

Date Submitted: June 18, 2024 Date Decided: September 23, 2024

Memorandum Opinion on Defendant’s Motion to Dismiss and the Cross Motions for Summary Judgment

On Defendant’s Motion to Dismiss - DENIED On Defendant’s Motion for Summary Judgment – DENIED On Plaintiff’s Motion for Summary Judgment – GRANTED

Brian E. Farnan, Esquire, Michael Farnan, Esquire, and Rosemary J. Piergiovanni, Esquire, Farnan LLP, Wilmington, Delaware, and Stephen Shackelford, Esquire, Susman Godfrey L.L.P., New York, New York, admitted pro hac vice, Counsel for Plaintiffs

Joe P. Yeager, Esquire, Margolis Edelstein, Wilmington, Delaware, Counsel for Defendant

BRENNAN, J. I. INTRODUCTION

This defamation case is rooted in the jurisdiction of both the Court of

Chancery and Superior Court of Delaware. In this Court, Plaintiffs sue Defendant

Howard Marks (“Marks”) for sending a verified court filing to The Financial Times

that allegedly contained false and defamatory statements relating to Marks’s

decision to sell his shares of LRN Corporation (“LRN”). In their suit, Plaintiffs Lee

Feldman (“Feldman”), Mats Lederhausen (“Lederhausen”), and Dov Seidman

(“Seidman”) allege one count of defamation per se.1

Initially, Marks moved to dismiss this action. Following a brief stay, cross-

motions for summary judgment were filed. Because Marks’s published statement to

The Financial Times about Plaintiffs was false and can only be interpreted to malign

Plaintiff’s business or profession, Plaintiffs’ Motion for Partial Summary Judgment

is GRANTED. Marks’s Motion to Dismiss is DENIED, as jurisdiction is proper.

Marks’s Motion for Summary Judgment is DENIED.

II. FACTS

Seidman founded LRN in 1994 and served as LRN’s CEO until 2019.2 LRN

provides ethics compliance education and other related services.3 Currently,

1 See Feldman, et. al. v. Marks, N21C-09-206 DJB, Complaint (“Compl.”) D.I. 1. 2 Compl. ¶ 15. 3 Id. at ¶ 1. 1 Seidman serves as the chairman of LRN’s board and resides in Florida.4 LRN, a

Delaware corporation, asserts it “has helped hundreds of companies and their

employees translate ethical corporate behavior into superior performance and

sustainable economic value.”5 Feldman, a New York resident, served as director of

LRN from 2004 through 2018.6 Lederhausen, resides in Illinois, and has been a

director of LRN since 2012.7 Marks, a 20-year investor in LRN, sold the entirety of

his LRN shares in October 2017.8 Currently, Marks is the “CEO and Co-founder of

StartEngine, the self-proclaimed largest equity crowdfunding platform, valued at

hundreds of millions of dollars.”9

Tender Offer

In October 2017, LRN issued an Offer to Purchase (“OTP”) up to 7,407,407

shares of its stock from existing shareholders. This “Tender Officer” was open and

available to shareholders through November 17, 2017.10 Despite initially informing

Plaintiffs he only intended to tender one million of his shares, Marks, his wife, and

his various trusts tendered all 3,029,174 of their collective shares on October 29,

4 Id. at ¶ 11. 5 Id. at ¶ 15. 6 Id. at ¶ 12. 7 Id. at ¶ 13. 8 Id. at ¶¶ 14, 23. 9 Id. at ¶ 14. 10 Id. at ¶¶ 20, 24. 2 2017.11 Due to the detrimental effect to LRN of Marks’s tender of the entirety of his

shares, Seidman, on behalf of the Board, repeatedly asked Marks to reduce the

number of shares he intended to tender.12 Even after the time frame passed for the

Tender Offer, Seidman again approached Marks and asked him to reduce the number

of shares he was tendering.13 Marks declined. The Board increased the cap on its

Tender Offer, and repurchased 9,092,248 shares in the Tender Offer, to avoid

disappointing “numerous smaller longtime investors who had expressed their strong

desire for a complete exit.”14 Approximately one year after the Tender Offer, on

November 27, 2018, LRN was sold to Leeds Equity Partners. 15 As Marks sold all

his shares in LRN, and no longer had an interest in the company, he was not informed

of, nor did he profit from, the sale.16

On February 25, 2019, a former LRN shareholder, Robert Davidow, filed

shareholder litigation in the Court of Chancery.17 The Chancery litigation was filed,

“on behalf of a punitive class of LRN shareholders who tendered their shares in the

Tender Offer.”18 On May 14, 2020, Marks moved to intervene in the Court of

11 Id. at ¶¶ 21, 23. 12 Id. at ¶ 22, 24. 13 Id. 14 Id. at ¶ 22. 15 Id. at ¶ 26. 16 Id. 17 Davidow v. Seidman. C.A. No. 2019-0150-MTZ, D.I. 372-374. 18 Id. at ¶ 27. 3 Chancery shareholder action.19 Marks’s motion included allegations, “specific to

Marks, which accused Seidman and his fellow directors of ‘cheating’ a longtime

friend and investor through trickery, to prevent him from discovering Plaintiffs’

‘scheme.’”20 Specifically, Marks’s supplemental filing included the following

statement (the “Statement”):

Marks’ tender included the 8,581 shares held in the Marks Irrevocable Living Trust on November 29, 2017. Marks did not realize that his tender of these shares missed the November 17, 2017 deadline to tender. The Individual Defendants21 knew that if they did not accept these 8,581 shares, Marks would continue to be a LRN stockholder and would subsequently learn of a sale of the entire Company at a premium price. As one of the largest individual tenderer of shares, the Individual Defendants did not want Marks to learn that he had been cheated by the Individual Defendants on almost all of his LRN stock and all of his wife’s stock. As a result, the Individual Defendants accepted these 8,581 shares even though the Tender Offer had already closed, so that Marks was no longer a stockholder and would never discover their scheme. As they intended, after Marks’ shares were accepted in the Tender Offer, he no longer received information concerning LRN and was unaware that the Company was sold to Leeds for 5.2x more than he received in the Tender Offer.22

Around September 28, 2020, Marks and his Chancery counsel determined the

“allegation in the first five sentences of Paragraph 6 of the Supplement and the

19 Id. at ¶ 28. 20 Id. at ¶ 30. 21 As noted above, the “Defendants” in the Court of Chancery action are the Plaintiffs in this litigation. 22 Id. at ¶ 31 (quoted directly, without correction, from Complaint; emphasis omitted). 4 inferences drawn therefrom were incorrect.”23 Marks then informed Plaintiffs, on

September 28, 2020, “that he would be amending and supplementing his response

to the interrogatory directed at paragraph 6 to correct them.”24 On September 28,

2020, one day after acknowledging the incorrect statement, Marks, through

Chancery counsel, sent the reporters of The Financial Times a complete set of the

court filings of the shareholder litigation.25 An article was published on October 4,

2020, which, according to Plaintiffs, “echoed Marks’ false and defamatory

allegations” that Plaintiffs “schemed” and “cheated” him.26

Plaintiffs repeatedly demanded Marks withdraw the Statement from his

Chancery pleadings and correct the record. On October 13, 2020, Marks filed a

Motion to Amend and removed the first five sentences of the Statement.27 Marks

never provided The Financial Times with the Amendment.

This suit was filed on September 27, 2021.28 In lieu of an Answer, Marks

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Feldman v. Marks, Counsel Stack Legal Research, https://law.counselstack.com/opinion/feldman-v-marks-delsuperct-2024.