Theodore Barr v. Genesis CMG Holdings, LLC

• Court: Court of Chancery of Delaware
• Decided: December 23, 2025
• Docket: 2025-0981-SEM
• Status: Published

Opinion

COURT OF CHANCERY OF THE STATE OF DELAWARE SELENA E. MOLINA LEONARD L. WILLIAMS JUSTICE CENTER SENIOR MAGISTRATE IN CHANCERY 500 NORTH KING STREET, SUITE 11400 WILMINGTON, DE 19801-3734

December 23, 2025

Nicholas D. Mozal Sean J. Bellew Adriane M. Kappauf Bellew LLC Potter Anderson & Corroon LLP 2961 Centerville Road, Suite 302 1313 N. Market Street, 6th Floor Wilmington, DE 19808 Wilmington, DE 19801

Re: Theodore Barr v. Genesis CMG Holdings, LLC, C.A. No. 2025-0981-SEM

Dear Counsel:

As authorized by the LLC Act, the company before me promised to advance

its directors’ and officers’ expenses incurred defending litigation relating to or

arising out of their performance of their duties on behalf of the company. The

company concedes, to some extent, that advancement was triggered when it sued a

former officer and director for alleged breaches of an employment agreement. It

argues, however, that it has amended its complaint and removed the triggering

allegations and claims. I disagree. As more fully explained in this letter decision, the

amended complaint did not extinguish advancement; the plaintiff is entitled to

advancement and is awarded fees on fees. The plaintiff’s motion for summary

judgment is granted, and the defendant’s motion to dismiss is denied.

I. BACKGROUND C.A. No. 2025-0981-SEM December 23, 2025 Page 2

Theodore Barr (the “Plaintiff”) initiated this action seeking to enforce his right

to advancement from Genesis CMG Holdings, LLC (the “Defendant”). The matter

proceeded before me on an expedited basis; it was reassigned to me on October 1,

2025,1 an amended complaint was filed on October 7, 2025,2 and I heard oral

argument on the parties’ competing motions on December 3, 2025.3

The material facts are not in dispute.

A. The Agreements

The Plaintiff co-founded Converze Media Group, LLC (“Converse”) a

California-based media agency that developed and executed direct response

advertising strategies for its clients.4 In 2023, the Plaintiff sold his 45% equity

interest in Converze to the Defendant,5 and as part of that transaction, the parties

entered into the Amended and Restated Limited Liability Company Agreement of

the Defendant (the “LLC Agreement”).6

1 Docket item (“D.I.”) 8. 2 D.I. 10. 3 D.I. 22. 4 D.I. 10 (“Am. Compl.”) at ¶ 15. 5 Am. Compl. ¶ 16–17. 6 See Am. Compl. Ex. A (the LLC Agreement). The Plaintiff also, to some extent, argued entitlement through a “Converze Agreement.” See D.I. 15 Ex. 2. But the Plaintiff relied solely on the LLC Agreement in the pending motions, thus, I need not address the Converze Agreement herein. C.A. No. 2025-0981-SEM December 23, 2025 Page 3

Section 12.5 of the LLC Agreement governs advancement, and provides:

To the fullest extent permitted by applicable law, Losses incurred by a Covered Person in defending any Actions relating to or arising out of their performance of their duties on behalf of the Company shall, from time to time, be advanced by the Company prior to the final disposition of such Actions upon receipt by the Company of an undertaking by or on behalf of the Covered Person to repay such amount if it shall ultimately be determined by a court of competent jurisdiction that the Covered Person is not entitled to be indemnified as authorized in Section 12.4.

A “Covered Person” is defined in Section 1.1, which provides:

“Covered Person” means a current or former Member or Director, an Affiliate of a current or former Member or Director, Tax Matters Partner, Partnership Representative, any officer, director, shareholder, partner, member, employee, representative or agent of a current or former Member or Director or any of their respective Affiliates, or any current or former director, officer, manager, employee or agent of the Company or any of its Affiliates.

Several of the other defined terms used in Section 12.5 are defined in the

indemnification section of the LLC Agreement, Section 12.4. Within Section 12.4,

“Losses” is defined to include: “any . . . cost or expense (including reasonable

attorneys’ and accounting fees and expenses and costs of investigation)[.]”

“Actions” is defined as “any threatened, pending or completed demands, claims,

actions, suits or proceedings, whether civil, criminal, administrative, investigative,

arbitrative or otherwise, including an action by or in the right of the” Defendant. C.A. No. 2025-0981-SEM December 23, 2025 Page 4

Under the LLC Agreement, the Plaintiff was named as an initial director of

the Defendant. The Plaintiff also remained responsible for client relationships, and

to that end, entered into an employment agreement with the Defendant to serve as

the Chief Client Officer (“CCO”). To that end, the Plaintiff executed a “Restrictive

Covenants Agreement” (the “RCA”). Therein, the Plaintiff acknowledged that he

had intimate knowledge of Converze’s business, acquired by the Defendant, and

exploitation of that would adversely affect the Defendant’s ability to continue with

that business post-sale. The parties, thus, agreed to several restrictions to protect the

Defendant’s goodwill, relationships with customers and employees, and confidential

information. Specifically, the RCA contains a non-competition provision, non-

solicitation provisions for employees and customers, and restrictions on confidential

information (among other provisions).

B. The Dispute and Demand

Less than two years after the 2023 sale, the Plaintiff resigned from his position

with the Defendant. The Defendant has since sued the Plaintiff in this Court alleging

breaches of the RCA (the “Underlying Action”).7 In the Underlying Action, filed on

June 16, 2025, the Defendant alleged the Plaintiff breached the RCA by directly

7 Genesis CMG Holdings, LLC v. Simplicity Media, LLC, C.A. No. 2025-0676-SEM [hereinafter “Underlying Action”], D.I. 1. C.A. No. 2025-0981-SEM December 23, 2025 Page 5

competing with the Defendant, and actively soliciting the Defendant’s clients with

the benefit of the Defendant’s confidential information (the “Initial Complaint”).8

After moving to dismiss the Initial Complaint, the Plaintiff, on August 7,

2025, submitted a written demand for the advancement of legal fees incurred in

defending the Underlying Action (the “Demand”).9 The Defendant did not respond

to the Demand, and, on August 27, 2025, the Plaintiff initiated this action. On

September 29, 2025, the Defendant answered the complaint in this action, closing

the initial pleadings.

But on the same day it answered the complaint in this action, the Defendant

amended its complaint in the Underlying Action (the “Amended Complaint”).10 The

redline for the Amended Complaint contains few substantive changes. First, in the

Amended Complaint, the Defendant removed any explicit reference to the Plaintiff’s

alleged use of “confidential information” as defined in the RCA.11 Second, through

the Amended Complaint, the Defendant added detail about the Plaintiff’s resignation

and the employees and clients the Plaintiff allegedly solicited.12

8 Underlying Action, D.I. 1 ¶ 27. 9 Am. Compl. ¶ 6. The Plaintiff included with the Demand the required undertaking. 10 Underlying Action, D.I. 13. 11 See Underlying Action, D.I. 13 ([REDLINE VERSION] Plaintiff’s First Amended Complaint). 12 The sufficiency of these allegations, and whether they state a reasonably conceivable claim for relief is pending before me in the Underlying Action The parties have, as of C.A. No. 2025-0981-SEM December 23, 2025 Page 6

The Defendant has conceded that it amended the Initial Complaint, replacing

it with the Amended Complaint, in direct response to, and to limit or foreclose, the

Plaintiff’s advancement rights. Undeterred, the Plaintiff, on September 29, 2025,

sent a second demand for advancement in response to the Amended Complaint (the

“Second Demand”).13 Like with the Demand, the Defendant never responded to the

Second Demand and the Plaintiff amended his complaint in this action, on October

7, 2025, to plead as much.

While some of this played out, this action was still assigned to Vice

Chancellor Fioravanti. On October 1, 2025, it was reassigned to me.14 The parties

quickly agreed to submit this action to me for a final decision under 10 Del. C. § 350

and Court of Chancery Rule 144(g).15 In doing so, the parties waived the right to

seek judicial review of my decision at the trial court level and agreed that my final

decision will constitute a decision of the Court of Chancery, appealable to the

Delaware Supreme Court subject to the same procedural and substantive standards

as are applicable to appeals from decisions of the Chancellor or a Vice Chancellor.

November 25, 2025, fully briefed the Plaintiff’s motion to dismiss to dismiss the Amended Complaint. Underlying Action, D.I. 17, 19, 20. 13 Am. Compl. ¶ 9. 14 The Underlying Action and another related action, C.A. No. 2024-1317 were also pending before Vice Chancellor Fioravanti but were reassigned to me on October 6, 2025. 15 D.I. 9, 11. C.A. No. 2025-0981-SEM December 23, 2025 Page 7

With that streamlining stipulation, the parties expeditiously briefed the

Defendant’s October 17, 2025 motion to dismiss and the Plaintiff’s October 20, 2025

motion for summary judgment.16 I heard argument on December 3, 2025 and took

both motions under advisement.

II. ANALYSIS

The parties’ competing motions differ in procedural posture. But the standards

of review “largely converge where, like here, a dispute turns on issues of contract

interpretation. In both cases, a moving party is generally only entitled to a claim-

dispositive order on its motion—either for summary judgment or dismissal—where

the contract is unambiguous.”17 As such, in determining the proper interpretation of

the LLC Agreement, I must “‘initially focus solely on the language of the contract

itself,’ and if the contract language in dispute is unambiguous, then its ‘plain

meaning alone dictates the outcome.’”18

Section 12.5 of the LLC Agreement is unambiguous. It provides:

To the fullest extent permitted by applicable law, Losses incurred by a Covered Person in defending any Actions relating to or arising out of their performance of their duties on behalf of the Company shall, from time to time, be advanced by the Company prior to the final disposition of such Actions upon receipt by the Company of an undertaking by or

16 See D.I. 14, 15. 17 Stockman v. Heartland Indus. P’rs, L.P., 2009 WL 2096213, at *4 (Del. Ch. July 14, 2009) (citing VLIW Tech, LLC v. Hewlett-Packard Co., 840 A.2d 606, 615 (Del. 2003)). 18 DeLucca v. KKAT Mgmt., LLC, 2006 WL 224058, at *6 (Del. Ch. Jan. 23, 2006). C.A. No. 2025-0981-SEM December 23, 2025 Page 8

on behalf of the Covered Person to repay such amount if it shall ultimately be determined by a court of competent jurisdiction that the Covered Person is not entitled to be indemnified as authorized in Section 12.4.

Weaving in the defined terms, the Defendant is required to advance expenses

incurred by a director or officer (or former director or officer) in defending any

actions, suits, or proceedings, even those brought by the Defendant, if (1) the action

relates to or arises out of the director or officer’s “performance of their duties on

behalf of the” Defendant and (2) the Defendant receives a suitable undertaking.

Here, there is no dispute that the Plaintiff is a former director and officer and

that he is incurring expenses in connection with the Underlying Action, an action

brought by the Defendant. The Plaintiff has also provided the requisite undertaking.

The only question before me is whether the Underlying Action relates to or arises

out the Plaintiff’s performance of his duties on behalf of the Defendant.

At oral argument, the Defendant conceded that, to some extent, the Initial

Complaint in the Underlying Action was drafted in such a way that it could be

interpreted as related to or arising out of the Plaintiff’s performance of his duties on

behalf of the Defendant. But the Defendant contends that the Amended Complaint

fixed the issue and cut off any post-amendment advancement. I disagree.

A. The Initial Complaint triggered the Plaintiff’s advancement. C.A. No. 2025-0981-SEM December 23, 2025 Page 9

Section 18-108 of the LLC Act grants LLCs broad authority to provide

advancement in their operating agreements and I must “give maximum effect to the

principal of freedom of contract and to the enforceability of limited liability

company agreements.”19

Here, the Defendant used broad language in dictating the required connection

between the action at issue and the covered person’s duties relevant to the

Defendant’s business. The provision covers all actions related to or arising out of the

director or officer’s performance of their duties on behalf of the Defendant.

“Delaware courts recognize the phrases ‘relating to’ and ‘arising out of’ as

‘paradigmatically broad terms.’ This Court has also described the phrase ‘relating

to’ as one of the far-reaching terms often used by lawyers when they wish to capture

the broadest possible universe.”20 That far reach unquestionably implicates the

Underlying Action, as formed by the Initial Complaint.

B. The Amended Complaint did not extinguish the Plaintiff’s right to advancement.

The primary dispute is whether the Defendant removed the advanceable

claims or issues through the Amended Complaint. It did not.

19 Senior Tour Players 207 Mgmt. Co. LLC v. Golftown 207 Hldg. Co. LLC, 2004 WL 550743, at *2 (Del. Ch. Mar. 10, 2004). 20 Vortex Infrastructure Holdco LLC v. Kane, 2024 WL 3887117, at *4 (Del. Ch. Aug. 21, 2024), exceptions denied, (Del. Ch. 2024), aff’d, 345 A.3d 959 (Del. 2025) (cleaned up). C.A. No. 2025-0981-SEM December 23, 2025 Page 10

“Delaware law recognizes the ability of a defendant corporation to moot an

advancement dispute by removing any [claims] that would trigger an advancement

right . . . .”21 But, this Court looks to substance over form. “The mere relabeling of

claims will not support [denying advancement] when the underlying litigation

remains substantially the same.”22 “And so, our courts focus not on what label is

ascribed to a claim, but rather the conduct underlying it.”23 Here, amendments aside,

the underlying conduct complained of in the Amended Complaint still relates to or

arises out of the Plaintiff’s performance of his duties on behalf of the Defendant. I

hold as much for a few reasons.

First, the LLC Agreement expressly includes in the definition of “Covered

Persons” former officers and directors. This undermines the Defendant’s attempt to

draw a firm line between actions arising from pre- versus post-separation conduct.

No such line is drawn in the four corners of the LLC Agreement.

Second, even the more limited “by reason of the fact” standard does not

support the pre- versus post-separation line the Defendant attempts to draw.

21 Mooney v. Echo Therapeutics, Inc., 2015 WL 3413272, at *6 (Del. Ch. May 28, 2015); see also Xu Hong Bin v. Heckmann Corp., 2010 WL 187018, at *2 (Del. Ch. Jan. 8, 2010) (concluding that a corporation could avoid advancement by representing that it “is not pursuing, and will not pursue” certain pre-merger claims). 22 Carr v. Global Payments Inc., 2019 WL 6726214, at *4 (Del. Ch. Dec. 11, 2019). 23 Keller v. Steep Hill, Inc., 2023 WL 5624215, at *9 (Del. Ch. Aug. 31, 2023). C.A. No. 2025-0981-SEM December 23, 2025 Page 11

Although the language here is bespoke, the parties agree that the “by reason of the

fact” language of 8 Del. C. § 145 is comparable.24 Under that standard, “if there is

a nexus or causal connection between any of the underlying proceedings . . . and

one’s official corporate capacity, those proceedings are ‘by reason of the fact’ . . .

without regard to one’s motivation for engaging in that conduct.”25 That can include

post-separation conduct if it is rooted in pre-separation responsibilities.

For example, in Centrella v. Avantor, Inc., the plaintiff sought advancement

of his expenses in defending an action brought by the company to enforce certain

restrictive covenants and enjoin his use of confidential information.26 The defendant

there argued that it did not sue the plaintiff in a covered capacity but instead sued

for alleged breaches of personal contracts.27 This Court rejected that argument,

finding it “belie[d] reason” because the restrictive covenants were “inextricably

intertwined” with the plaintiff’s employment; “[h]aving brought suit to enjoin [the

former employee’s] use of confidential information that he learned as a . . .

employee, and consistent with our law’s broad reading of the ‘by reason of’

24 See, e.g., Charney v. Am. Apparel, Inc., 2015 WL 5313769, at *12 (Del. Ch. Sept. 11, 2015) (“I construe the phrase ‘related to the fact’ to be equivalent to the recognized meaning of ‘by reason of the fact’ [found in Section 145.]”). 25 In re Genelux Corp., 2015 WL 6390232, at *4 (Del. Ch. Oct. 22, 2015). 26 2024 WL 3249274, at *4 (Del. Ch. July 1, 2024), aff’d, 341 A.3d 505 (Del. 2025), and judgment entered, (Del. Ch. 2024). 27 Id. at *13. C.A. No. 2025-0981-SEM December 23, 2025 Page 12

language, . . . [the former employee] was threatened to be made a party, or was made

a party, to the Underlying Action by reason of his employment[.]”28 The same is true

here under the broad arising or relating language in the LLC Agreement.

Third, the cosmetic amendments reflected in the Amended Complaint fall

short of extinguishing the Plaintiff’s rights. Whether amendments are sufficient to

extinguish advancement rights requires a substantive review of those amendments.

Where the amendments are “largely cosmetic, doing little more than removing

language that would tie the claims temporally to the plaintiff’s employment[,]”29 this

Court is unlikely to cut off advancement.

Such was the case in Brown v. LiveOps, Inc., where a corporation moved to

dismiss a claim for advancement based on proposed amendments. The corporation

had sued a former officer and director for violating “its contractual and intellectual

property rights by operating a competing business” formed after the individual left

the corporation.30 In doing so, it pled that many of the competitive acts occurred

before the individual left the corporation. But, when faced with an advancement

28 Id. at *14. 29 Carr, 2019 WL 6726214, at *8. 30 Brown v. LiveOps, Inc., 903 A.2d 324, 325 (Del. Ch. 2006). C.A. No. 2025-0981-SEM December 23, 2025 Page 13

demand, the corporation proposed to amend its complaint in the underlying action

to remove all mention of pre-separation conduct from its claims.31

This Court conducted a careful review and comparison of the initial and

proposed amended complaint. In doing so, it was “clear that the claims alleged []

[we]re inextricably intertwined with [the individual’s] position as an officer and

director of the company.”32 When discussing the effect that the amended complaint

had on advancement, this Court noted that “it would be inequitable to allow [the

corporation] to evade advancement by simply crossing out the phrases ‘by virtue of

his position,’ ‘through [the individual’s] position within [the corporation’s] employ,’

[and] ‘which [the corporation] acquired or maintained during the scope of [the

individual’s] employment[.]”33 Because “[t]he gravamen of the underlying

complaint [was] that [the individual] had access to proprietary information by reason

of the fact that he was a director and officer [] and that he wrongly used that

information for his personal benefit,” this Court denied the corporation’s motion to

dismiss the individual’s advancement claim.34

31 Id. at 326. 32 Id. at 328. 33 Id. at 329. 34 Id. at 330. C.A. No. 2025-0981-SEM December 23, 2025 Page 14

But substantive amendments can make the difference. For example, in Carr

v. Global Payments Inc., this Court cutoff advancement after significant

amendments were made in the underlying complaint.35 Those amendments included

removing the entire confidentiality cause of action and any reliance upon the

allegedly breached confidentiality agreement. By doing so, the company “explicitly

eschew[ed] allegations of a breach of the confidentiality portion of [the contract],

and focuse[d] solely on [the individual’s] post-employment competition and

solicitation activity.”36 The removal of an entire cause of action and abandonment

of a separate theory of liability distinguished the matter from LiveOps.

Here, the amendments are more akin to LiveOps than Carr.37 As previously

discussed, the Amended Complaint removed any reference to the Plaintiff’s alleged

use of “confidential information.” But it opted, instead, to support its allegations by

naming the specific employees and clients the Plaintiff is purported to have solicited

from the Defendant. Although the Amended Complaint purports to clarify that the

Defendant is “alleging no pre-separation misconduct,”38 the solicitation of specific

35 Carr, 2019 WL 6726214, at *1. 36 Id. at *7. 37 See also Groshoff v. Ayana Bio, LLC, C.A. No. 2025-0568-SEM, at 58 (Del. Ch. Sept. 3, 2025) (TRANSCRIPT) (“I find this creative pleading fails to take the claims out of the broad advancement provided to Mr. Groshoff. The claims still indirectly arise from the activities of Mr. Groshoff as a covered person under the LLC agreement”). 38 Underlying Action, D.I. 13 ¶ 17. C.A. No. 2025-0981-SEM December 23, 2025 Page 15

employees and clients of the Defendant implicates as much. The Defendant alleges

that the Plaintiff, swiftly after leaving his official role with the Defendant, solicited

and induced fourteen employees and more than three dozen clients.39 It defies logic

to suggest that the Plaintiff did not learn of, form relationships with, or otherwise

gain knowledge of these parties through his official capacity with the Defendant. As

such, the allegations of solicitation of specific clients and employees are inextricably

intertwined with the Plaintiff’s former position.

Far from the concessions made in Carr, the amendments in the Underlying

Action are largely cosmetic. By carefully removing any mention of “confidential

information” learned during employment, the Defendant has done “little more than

remov[e] the language that would tie the claims temporally to the Plaintiff’s

employment[.]”40 Unlike the defendant in Carr, the Defendant has not removed any

cause of action, abandoned any theory of liability, or added new facts inconsistent

with advancement.

The gravamen of the Amended Complaint continues to be that the Plaintiff

exploited the access and relationships to clients and employees that he had arising

out of the performance of his duties on behalf of the Defendant. Thus, the Underlying

39 Id. at ¶¶ 18–19. 40 Carr, 2019 WL 6726214, at *8. C.A. No. 2025-0981-SEM December 23, 2025 Page 16

Action, even as limited by the Amended Complaint, is still an “Action” covered

under the LLC Agreement’s advancement provision; it relates to or arises out of the

Plaintiff’s performance of his duties on behalf of the Defendant. The Plaintiff is

entitled to advancement of his expenses incurred in connection therewith.

C. The Plaintiff is entitled to fees on fees.

The Plaintiff also seeks fees on fees. “This Court awards fees on fees when a

plaintiff successfully shows an entitlement to advancement that wrongfully was

withheld by the defendant corporation.”41 Here, the LLC Agreement guaranteed the

Plaintiff broad advancement, which the Defendant wrongfully withheld. The

Plaintiff is entitled to fees on fees incurred in connection with this proceeding, and

for interest thereon under Delaware law.

III. CONCLUSION

For the foregoing reasons, the Plaintiff is entitled to advancement under the

LLC Agreement and is awarded fees on fees. The Plaintiff’s motion for summary

judgment is granted and the Defendant’s motion to dismiss is denied. The parties

shall meet and confer promptly on an implementing order and procedures consistent

with Danenberg v. Fitracks, Inc.42

41 In re Genelux Corp., 2015 WL 6390232, at *6. 42 58 A.3d 991 (Del. Ch. 2012).