COURT OF CHANCERY OF THE STATE OF DELAWARE KATHALEEN ST. JUDE MCCORMICK LEONARD L. WILLIAMS JUSTICE CENTER CHANCELLOR 500 N. KING STREET, SUITE 11400 WILMINGTON, DELAWARE 19801-3734
June 9, 2025
John M. Seaman Andrea S. Brooks Joseph A. Sparco Wilks Law, LLC Christopher Fitzpatrick Cannataro 4250 Lancaster Pike, Suite 200 Abrams & Bayliss LLP Wilmington, Delaware 19807 20 Montchanin Road, Suite 200 Wilmington, Delaware 19807
Re: Jones v. FON Holdings, LLC, C.A. No. 2023-0968-LM
Dear Counsel:
This letter opinion resolves the exceptions of Plaintiff Brian Jones (“Plaintiff”)
to Magistrate Loren Mitchell’s Final Report dated March 27, 2024 (the “Final
Report”).1
Plaintiff was a member of Defendant FON Holdings, LLC (“Defendant” or the
“Company”) until the Company redeemed his units in October 2023. Before the
Company redeemed his units, Plaintiff demanded inspection of the Company’s books
and records and sued to enforce his inspection rights. Plaintiff cited two sources of
inspection rights: 6 Del. C. § 18-305 and Section 7.1 of the Company’s governing LLC
Agreement. After Plaintiff filed suit, the parties resolved his claim to inspect
documents, and each side moved for attorneys’ fees under a prevailing party provision
of the LLC Agreement and the bad faith exception to the American Rule.
1 C.A. No. 2023-0968-LM, Docket (“Dkt.”) 26 (Final Report). C.A. No. 2023-0968-LM June 9, 2025 Page 2 of 8
Magistrate Mitchell resolved the cross motions for fees in the Final Report.
She deemed the lawsuit a draw with no prevailing party. She further concluded that
the circumstances of this case did not warrant fee shifting under the American rule.
Plaintiff sought exceptions on the Magistrate’s holding as to his entitlement to fees
under the LLC Agreement only.2 As required by the Delaware Supreme Court, I have
reviewed the record de novo,3 and reach a different outcome than the Magistrate on
the one issue on exceptions.
I. BACKGROUND
I do not repeat Magistrate Mitchell’s clearly written and thoughtfully
presented factual background.
The short story is that Plaintiff, the Chief Operating Officer of a division of the
Company, resigned in April 2023. Plaintiff’s resignation was a “Triggering Event”
under Section 10.2(a) of the LLC Agreement that granted the Company the option to
redeem Plaintiff’s equity for a contractually specified purchase price within 180 days
of a Triggering Event, which was October 10, 2023.4 The purchase price depended on
the “Fair Market Value,” a defined term in the LLC Agreement.5 In June 2023, the
Company redeemed the units of another employee who had resigned before Plaintiff.
2 Dkt. 32 (“Pl.’s Exceptions”). Defendant did not take exceptions but opposed Plaintiff’s. Dkt. 34. 3 See DiGiacobbe v. Sestak, 743 A.2d 180, 184 (Del. 1999) (“[T]he standard of review
for a master’s findings—both factual and legal—is de novo.”). 4 Dkt. 1 (“Compl.”), Ex. A (“LLC Agreement”) at 55; Pl.’s Exceptions, Appendix (“Appendix”) at A413. 5 See LLC Agreement § 10.2(b); see also id. § 1.1 at 6–7 (defining “Fair Market Value”). C.A. No. 2023-0968-LM June 9, 2025 Page 3 of 8
The former employee owned 28.22% of the Company. The Company took the position
that those units had no value. This concerned Plaintiff.
Plaintiff served a demand to inspect 13 categories of Company documents on
August 1, 2023.6 He listed many purposes, including valuing his units. To provide
his counsel with immediate access to the documents, Plaintiff offered to “treat any
documents produced as attorneys’ eyes only until the execution of a customary
confidentiality agreement.”7
The Company responded on August 15, 2023, agreeing to produce certain
documents on an attorneys’ eyes only basis until the parties agreed on terms of
confidentiality.8 The Company did not dispute Plaintiff’s purposes or entitlement to
inspection.
The Company made a small production of documents on September 6, 2023,
subject to the attorneys’ eyes only restriction that prohibited Plaintiff from viewing
the documents. Plaintiff sent the Company a proposed confidentiality agreement two
days later. Plaintiff requested Defendant’s “prompt attention . . . given that
[Plaintiff] has agreed to treat the documents as AEO until the [confidentiality
agreement] is executed.”9
6 Compl., Ex. B.
7 Id. at 6.
8 Compl., Ex. C.
9 Appendix at A193. C.A. No. 2023-0968-LM June 9, 2025 Page 4 of 8
When Defendant did not immediately respond, Plaintiff followed up on
September 13, 15, and 19.10 Defendant sent its proposed revisions to the
confidentiality stipulation on September 21, 2023.11 They were problematic from
Plaintiff’s perspective. For example, Defendant struck language allowing Plaintiff to
keep copies of documents. Defendant struck language protecting Plaintiff’s ability to
bring legal action relating to his demand or the documents produced in response to
it. Defendant struck the forum selection clause requiring any lawsuit relating to
Plaintiff’s demand to be brought in this court.12 And Defendant refused to lift the
attorneys’ eyes only restriction unless Plaintiff acceded to Defendant’s terms.
Plaintiff rejected the changes by email on Friday, September 22. Plaintiff demanded
that Defendant respond by Monday, September 25 to Plaintiff’s proposal. Because
September 25 was a religious holiday, defense counsel stated that the Company
would respond on September 26.
Plaintiff did not wait until September 26 to file suit, and that is
understandable. The October 10 deadline was fast approaching, Plaintiff believed he
was entitled to additional documents, and Plaintiff had not yet laid eyes on the
limited production the Company had made because of the attorneys’ eyes only
10 Id. at A192–193.
11 Id. at A198–204.
12 Id. C.A. No. 2023-0968-LM June 9, 2025 Page 5 of 8
designation that Defendant refused to lift. On September 25, Plaintiff filed his
Verified Complaint for Inspection of Books and Records (the “Complaint”).13
The Company responded to the Complaint by redeeming Plaintiff’s units. On
October 2, 2023, Defendant notified Plaintiff that it was “exercising its right to
repurchase all of [his] Preferred Unit[s]” for $150,000, with 20% paid at closing and
the balance paid over the next five years.14
On October 3, 2023, Plaintiff and Defendant entered into a confidentiality
agreement that removed the attorneys’ eyes only designation and allowed Plaintiff to
review the documents. On October 4, 2023, Defendant made its second production of
documents. After reviewing the documents, Plaintiff determined not to dispute the
purchase price.
Defendant filed its answer on October 10, 2023.15 That same day, Plaintiff
offered to resolve all disputes between the parties if Defendant agreed, among other
things, to pay Plaintiff’s attorneys’ fees and expenses. Defendant rejected Plaintiff’s
offer on October 12, 2023, and served discovery on Plaintiff, including interrogatories
and requests for production of documents.16 Plaintiff responded to the discovery
requests. On October 19, 2023, Defendant made a third production of documents.
13 Compl.
14 Appendix at A240; id. at A413.
15 Dkt. 7.
16 Dkt. 8. C.A. No. 2023-0968-LM June 9, 2025 Page 6 of 8
Free access — add to your briefcase to read the full text and ask questions with AI
COURT OF CHANCERY OF THE STATE OF DELAWARE KATHALEEN ST. JUDE MCCORMICK LEONARD L. WILLIAMS JUSTICE CENTER CHANCELLOR 500 N. KING STREET, SUITE 11400 WILMINGTON, DELAWARE 19801-3734
June 9, 2025
John M. Seaman Andrea S. Brooks Joseph A. Sparco Wilks Law, LLC Christopher Fitzpatrick Cannataro 4250 Lancaster Pike, Suite 200 Abrams & Bayliss LLP Wilmington, Delaware 19807 20 Montchanin Road, Suite 200 Wilmington, Delaware 19807
Re: Jones v. FON Holdings, LLC, C.A. No. 2023-0968-LM
Dear Counsel:
This letter opinion resolves the exceptions of Plaintiff Brian Jones (“Plaintiff”)
to Magistrate Loren Mitchell’s Final Report dated March 27, 2024 (the “Final
Report”).1
Plaintiff was a member of Defendant FON Holdings, LLC (“Defendant” or the
“Company”) until the Company redeemed his units in October 2023. Before the
Company redeemed his units, Plaintiff demanded inspection of the Company’s books
and records and sued to enforce his inspection rights. Plaintiff cited two sources of
inspection rights: 6 Del. C. § 18-305 and Section 7.1 of the Company’s governing LLC
Agreement. After Plaintiff filed suit, the parties resolved his claim to inspect
documents, and each side moved for attorneys’ fees under a prevailing party provision
of the LLC Agreement and the bad faith exception to the American Rule.
1 C.A. No. 2023-0968-LM, Docket (“Dkt.”) 26 (Final Report). C.A. No. 2023-0968-LM June 9, 2025 Page 2 of 8
Magistrate Mitchell resolved the cross motions for fees in the Final Report.
She deemed the lawsuit a draw with no prevailing party. She further concluded that
the circumstances of this case did not warrant fee shifting under the American rule.
Plaintiff sought exceptions on the Magistrate’s holding as to his entitlement to fees
under the LLC Agreement only.2 As required by the Delaware Supreme Court, I have
reviewed the record de novo,3 and reach a different outcome than the Magistrate on
the one issue on exceptions.
I. BACKGROUND
I do not repeat Magistrate Mitchell’s clearly written and thoughtfully
presented factual background.
The short story is that Plaintiff, the Chief Operating Officer of a division of the
Company, resigned in April 2023. Plaintiff’s resignation was a “Triggering Event”
under Section 10.2(a) of the LLC Agreement that granted the Company the option to
redeem Plaintiff’s equity for a contractually specified purchase price within 180 days
of a Triggering Event, which was October 10, 2023.4 The purchase price depended on
the “Fair Market Value,” a defined term in the LLC Agreement.5 In June 2023, the
Company redeemed the units of another employee who had resigned before Plaintiff.
2 Dkt. 32 (“Pl.’s Exceptions”). Defendant did not take exceptions but opposed Plaintiff’s. Dkt. 34. 3 See DiGiacobbe v. Sestak, 743 A.2d 180, 184 (Del. 1999) (“[T]he standard of review
for a master’s findings—both factual and legal—is de novo.”). 4 Dkt. 1 (“Compl.”), Ex. A (“LLC Agreement”) at 55; Pl.’s Exceptions, Appendix (“Appendix”) at A413. 5 See LLC Agreement § 10.2(b); see also id. § 1.1 at 6–7 (defining “Fair Market Value”). C.A. No. 2023-0968-LM June 9, 2025 Page 3 of 8
The former employee owned 28.22% of the Company. The Company took the position
that those units had no value. This concerned Plaintiff.
Plaintiff served a demand to inspect 13 categories of Company documents on
August 1, 2023.6 He listed many purposes, including valuing his units. To provide
his counsel with immediate access to the documents, Plaintiff offered to “treat any
documents produced as attorneys’ eyes only until the execution of a customary
confidentiality agreement.”7
The Company responded on August 15, 2023, agreeing to produce certain
documents on an attorneys’ eyes only basis until the parties agreed on terms of
confidentiality.8 The Company did not dispute Plaintiff’s purposes or entitlement to
inspection.
The Company made a small production of documents on September 6, 2023,
subject to the attorneys’ eyes only restriction that prohibited Plaintiff from viewing
the documents. Plaintiff sent the Company a proposed confidentiality agreement two
days later. Plaintiff requested Defendant’s “prompt attention . . . given that
[Plaintiff] has agreed to treat the documents as AEO until the [confidentiality
agreement] is executed.”9
6 Compl., Ex. B.
7 Id. at 6.
8 Compl., Ex. C.
9 Appendix at A193. C.A. No. 2023-0968-LM June 9, 2025 Page 4 of 8
When Defendant did not immediately respond, Plaintiff followed up on
September 13, 15, and 19.10 Defendant sent its proposed revisions to the
confidentiality stipulation on September 21, 2023.11 They were problematic from
Plaintiff’s perspective. For example, Defendant struck language allowing Plaintiff to
keep copies of documents. Defendant struck language protecting Plaintiff’s ability to
bring legal action relating to his demand or the documents produced in response to
it. Defendant struck the forum selection clause requiring any lawsuit relating to
Plaintiff’s demand to be brought in this court.12 And Defendant refused to lift the
attorneys’ eyes only restriction unless Plaintiff acceded to Defendant’s terms.
Plaintiff rejected the changes by email on Friday, September 22. Plaintiff demanded
that Defendant respond by Monday, September 25 to Plaintiff’s proposal. Because
September 25 was a religious holiday, defense counsel stated that the Company
would respond on September 26.
Plaintiff did not wait until September 26 to file suit, and that is
understandable. The October 10 deadline was fast approaching, Plaintiff believed he
was entitled to additional documents, and Plaintiff had not yet laid eyes on the
limited production the Company had made because of the attorneys’ eyes only
10 Id. at A192–193.
11 Id. at A198–204.
12 Id. C.A. No. 2023-0968-LM June 9, 2025 Page 5 of 8
designation that Defendant refused to lift. On September 25, Plaintiff filed his
Verified Complaint for Inspection of Books and Records (the “Complaint”).13
The Company responded to the Complaint by redeeming Plaintiff’s units. On
October 2, 2023, Defendant notified Plaintiff that it was “exercising its right to
repurchase all of [his] Preferred Unit[s]” for $150,000, with 20% paid at closing and
the balance paid over the next five years.14
On October 3, 2023, Plaintiff and Defendant entered into a confidentiality
agreement that removed the attorneys’ eyes only designation and allowed Plaintiff to
review the documents. On October 4, 2023, Defendant made its second production of
documents. After reviewing the documents, Plaintiff determined not to dispute the
purchase price.
Defendant filed its answer on October 10, 2023.15 That same day, Plaintiff
offered to resolve all disputes between the parties if Defendant agreed, among other
things, to pay Plaintiff’s attorneys’ fees and expenses. Defendant rejected Plaintiff’s
offer on October 12, 2023, and served discovery on Plaintiff, including interrogatories
and requests for production of documents.16 Plaintiff responded to the discovery
requests. On October 19, 2023, Defendant made a third production of documents.
13 Compl.
14 Appendix at A240; id. at A413.
15 Dkt. 7.
16 Dkt. 8. C.A. No. 2023-0968-LM June 9, 2025 Page 6 of 8
By late November 2023, the parties had reached agreement that the
documents produced resolved Plaintiff’s inspection demand (the “Stipulation”).17 The
Stipulation resolved the dispute over inspection but catalyzed a dispute regarding
fees. Each party claimed victory in the litigation and moved for fees on two grounds—
a prevailing party provision of the LLC Agreement and the bad faith exception to the
American rule.18 The Final Report denied both motions for fees, and Plaintiff filed
exceptions.
II. ANALYSIS
On exceptions, Plaintiff argues that he prevailed in the litigation and is
entitled to fees under the LLC Agreement. He asserts other legal arguments, and
Defendants counter with many. But Plaintiff’s simplest argument suffices. Plaintiff
is entitled to fees under the LLC Agreement because is the prevailing party.
Section 13.12 of the LLC Agreement mandates fee shifting to the “prevailing
party” “in case of any dispute relating to this agreement or the subject matter
hereof.”19 The LLC Agreement does not define the term “prevailing party,” so “the
parties can be presumed to have intended that that term would be applied by the
court as it has traditionally done so.”20
17 Dkt. 12 (Order entering Stipulation).
18 Dkts. 15, 19.
19 LLC Agreement § 13.12.
20 Bako Pathology LP v. Bakotic, 288 A.3d 252, 281 (Del. 2022) (quoting Brandin v.
Gottlieb, 2000 WL 1005954, at *28 (Del. Ch. July 13, 2000)) (internal quotation marks omitted). C.A. No. 2023-0968-LM June 9, 2025 Page 7 of 8
As this court has held, “[a]bsent any qualifying language that fees are to be
awarded claim-by-claim or on some other partial basis, a contractual provision
entitling the prevailing party to fees will usually be applied in an all-or-nothing
manner.”21 To identify a “prevailing party,” Delaware courts “evaluate the substance
of a litigation to determine which party predominated.”22 That usually means the
party who prevailed on “most of her claims.”23 Under another formulation by this
court, “to achieve predominance, a litigant should prevail on the case’s chief issue.”24
Plaintiff commenced this action to vindicate his inspection rights under Section
7.1 of the LLC Agreement, but the chief issue concerns the confidential treatment of
the documents. In Plaintiff’s view, Defendant had improperly demanded material
concessions of Plaintiff’s substantive rights as a precondition to his inspection of
books and records.25 Plaintiff prevailed on the confidentiality conditions, achieving,
by agreement, the terms Plaintiff sought from the court.
Defendant does not dispute that Plaintiff got what he wanted. Defendant’s
main argument is that Plaintiff did not need to file litigation to obtain this outcome.
In Defendant’s view, the parties were still negotiating terms when Plaintiff filed his
21 Aveta Inc. v. Bengoa, 2010 WL 3221823, at *6 (Del. Ch. Aug. 13, 2010) (quoting
West Willow-Bay Court, LLC v. Robino-Bay Court Plaza, LLC, 2009 WL 458779, at *8 (Del. Ch. Feb.23, 2009)) (internal quotation marks omitted). 22 World-Win Mktg., Inc. v. Ganley Mgmt. Co., 2009 WL 2534874, at *2 (Del. Ch. Aug.
18, 2009) (citations omitted). 23 Bako Pathology, 288 A.3d at 281 (citing Brandin, 2000 WL 1005954, at *27).
24 Id. (cleaned up) (citation omitted).
25 Appendix at A73–74; id. at A83–84. C.A. No. 2023-0968-LM June 9, 2025 Page 8 of 8
complaint on a religious holiday. But Plaintiff was under the gun. He sought
inspection mainly to value his units to inform their Fair Market Value. The deadline
for the Company to redeem Plaintiff’s units was October 10, 2023. The Company was
reticent to respond to Plaintiff before Plaintiff filed the litigation and imposed
atypical conditions on inspection. Had the Company redeemed Plaintiff’s units,
Plaintiff would have lost standing to pursue his inspection rights. Hence the rush.
In sum, it is hard to fault Plaintiff for filing when he did. And because Plaintiff
obtained everything he sought through the litigation, he won his case. He is the
prevailing party. He is entitled his fees under the LLC Agreement.
III. CONCLUSION
Plaintiff prevailed in the litigation and is entitled to costs and reasonable
attorneys’ fees.
Sincerely,
/s/ Kathaleen St. Jude McCormick
Chancellor
cc: All counsel of record (by File & ServeXpress)