Southpaw Credit Opportunity Master Fund, LP v. Roma Restaurant Holdings, Inc.

• Court: Court of Chancery of Delaware
• Decided: August 22, 2017
• Docket: 2017-0059-TMR
• Status: Published

Opinion

COURT OF CHANCERY OF THE STATE OF DELAWARE

TAMIKA R. MONTGOMERY-REEVES Leonard L. Williams Justice Center VICE CHANCELLOR 500 N. King Street, Suite 11400 Wilmington, Delaware 19801-3734

August 22, 2017

Martin S. Lessner, Esquire Kevin G. Abrams, Esquire James P. Hughes, Esquire John M. Seaman, Esquire Tammy L. Mercer, Esquire E. Wade Houston, Esquire Richard J. Thomas, Esquire Abrams & Bayliss LLP Young Conaway Stargatt & Taylor, LLP 20 Montchanin Road, Suite 200 1000 North King Street Wilmington, DE 19807 Wilmington, DE 19801 Brock E. Czeschin, Esquire Nicholas R. Rodriguez, Esquire Anthony M. Calvano, Esquire Richards Layton & Finger, P.A. 920 North King Street Wilmington, DE 19801

RE: Southpaw Credit Opportunity Master Fund, L.P. v. Roma Restaurant Holdings, Inc. et al., C.A. No. 2017-0432-TMR

Dear Counsel:

Plaintiffs move under Court of Chancery Rule 60(b) for relief from this

Court’s May 30, 2017 order in light of intervening facts since that date. On May

30, 2017, this Court ordered that the properly constituted board of Roma

Restaurant Holdings, Inc. (“Roma”) included Howard Golden, Bradley Scher, and

Stephen K. Judge. The Court did not decide the validity of the Roma 2016 Long Southpaw Credit v. Roma Restaurant C.A. No. 2017-0059 August 22, 2017 Page 2 of 4

Term Incentive Plan (“LTIP”) or the challenged stock grants associated with that

plan because Defendants refused to defend the validity of the plan. In the May 30,

2017 order, the Court “retain[ed] jurisdiction to hear any application or claim for

attorneys’ fees on a schedule to be agreed upon by the parties or ordered by the

Court.” On July 20, 2017, Roma stockholder Highland Select Equity Fund, L.P.

(“Highland”), whose appointees to the Roma board included Defendants, filed a

separate action under Section 225 of the DGCL disputing the current membership

of the Roma board and presenting the issue of the validity of the LTIP to the Court

again (the “Highland Action”).

Defendants assert that the May 30, 2017 order was not a final judgment or

order and that Rule 60(b) does not apply because the Court retained jurisdiction to

hear an application or claim for attorneys’ fees. I agree. See In re Appraisal of

Dell Inc., 2016 WL 6069017, at *18 (Del. Ch. Oct. 17, 2016) (“The Delaware

Supreme Court ‘consistently has held that a judgment on the merits is not final

until an outstanding related application for an award of attorneys fees has been

decided.’” (quoting Del. Bay Surgical Servs., P.A. v. Swier, 869 A.2d 327 (Del.

2005) (Table))). Under Court of Chancery Rule 54(b), an order of this Court that

does not dispose of all of the claims and the rights and liabilities of all of the Southpaw Credit v. Roma Restaurant C.A. No. 2017-0059 August 22, 2017 Page 3 of 4

parties “is subject to revision at any time before the entry of judgment adjudicating

all the claims and the rights and liabilities of all the parties.” Ct. Ch. R. 54(b). A

federal court interpreting the nearly identical federal rule stated that “[t]he standard

for granting a motion to vacate under Rule 54(b) is less rigid than that under Rule

60(b) . . . .” Gallant v. Telebrands Corp., 35 F. Supp. 2d 378, 394 n.16 (D.N.J.

1998). While orders should not be modified without good cause (see Washington

v. Preferred Commc’n Sys., Inc., C.A. No. 10810-VCL (Sept. 10, 2015) (ORDER)

(granting a Rule 54(b) motion and noting that good cause existed to modify the

order)), the Court is “under no stricture to comply with the requirements of Rule

60(b)” in modifying an interlocutory order. Farr Man & Co. v. M/V Rozita, 903

F.2d 871, 875 (1st Cir. 1990).

Highland—whose managing director is Defendant Scott Wilson and whose

other appointee to the Roma board is Defendant Kenneth Reimer—now seeks to

place Reimer and Wilson on the Roma board in a separate action by relying on the

validity of the LTIP. This Court relied on Wilson and Reimer’s refusal to defend

the LTIP in entering the May 30, 2017 order. Further, determining the validity of

the LTIP in this litigation as opposed to the Highland Action will conserve both the

parties’ and the Court’s resources. Thus, the Court vacates the May 30, 2017 order Southpaw Credit v. Roma Restaurant C.A. No. 2017-0059 August 22, 2017 Page 4 of 4

under Rule 54(b) for good cause. The parties may stipulate to a trial on a paper

record regarding the validity of the LTIP.

Sincerely, /s/ Tamika R. Montgomery-Reeves Tamika R. Montgomery-Reeves Vice Chancellor TMR/jp