Valhalla Partners II, L.P. v. Vistar Media, Inc.

• Court: Court of Chancery of Delaware
• Decided: July 14, 2022
• Docket: CA No. 2019-0202-SG
• Status: Published

Opinion

COURT OF CHANCERY OF THE SAM GLASSCOCK III VICE CHANCELLOR STATE OF DELAWARE COURT OF CHANCERY COURTHOUSE 34 THE CIRCLE GEORGETOWN, DELAWARE 19947

July 14, 2022

Steven L. Caponi, Esquire Rudolf Koch, Esquire Matthew B. Goeller, Esquire John O’Toole, Esquire K&L Gates LLP Richards Layton & Finger P.A. 600 N. King Street, Suite 901 920 N. King Street Wilmington, DE 19801 Wilmington, DE 19801

RE: Valhalla Partners II, LP., et al. v. Vistar Media, Inc. C.A. No. 2019-0202-SG

Dear Counsel:

This brief Letter Opinion resolves the Plaintiffs’ “Renewed Motion for Leave

to File Second Amended Complaint.”1 The matter has been fully briefed.2 For the

reasons that follow, the motion is granted.

The action involves a dispute over the Plaintiffs’ rights as holders of

convertible notes (the “Notes”). The proposed amendment would present two new

theories. One is that a “conversion event” affecting the Notes occurred in July 2021.3

1 Pls.’ Renewed Mot. for Leave to File Second Am. Compl., Dkt. No. 190 [hereinafter “Pls. Mot.”]. 2 See id.; Def.-Countercl. Pl. Vistar Media, Inc.’s Opp’n to Pls.’ Renewed Mot. for Leave to File Second Am. Compl., Dkt. No. 194 [hereinafter “Opp’n”]; Pls.’ Reply Supp. Renewed Mot. for Leave to File Second Am. Compl., Dkt. No. 196. 3 Pls. Mot. at 5. The Defendant has not specifically opposed this amendment, 4 and consistent with

this Court’s liberal amendment policy, 5 the proposed amendment is permitted.

More problematic is the Plaintiffs’ proposal to add a claim for reformation of

the Notes. The Plaintiffs had earlier proposed an amendment raising this claim,6

which I found to lack any pleading specificity as required to justify reformation.7

Accordingly, I denied the amendment as futile, without prejudice to the Plaintiffs’

seeking to renew the motion with a more particularized pleading. 8 They have done

so here.

The Defendant again opposes the amendment on grounds of futility.9 They

suggest that I apply, essentially, a motion-to-dismiss analysis here. I decline to do

so, noting that the pleadings have been supplemented so that the Defendant is aware

of the factual circumstances that the Plaintiffs will rely on to substantiate that

reformation is justified. In other words, the Defendant is on notice of the claim that

it must defend. The notice pleading function is satisfied, and I decline to convert the

response to a motion to dismiss given the state of litigation, which is far advanced.

4 See generally Opp’n. 5 See, e.g., Houseman v. Sagerman, 2022 WL 598977, at *3 (Del. Ch. Mar. 1, 2022) (citations omitted). 6 See Pls.’ Mot. for Leave to File a Second Am. Compl., Dkt. No. 103. 7 2-24-2021 Oral Arg. Regarding Pls.’ Mot. to Amend and the Ct.’s Ruling, Pls.’ Mot. to Compel Produc. of Docs., and Pls.’ Mot. to Compel Docs. Withheld as Privileged 31:1–32:11, Dkt. No. 124. 8 See id. 9 See Opp’n 6–14. 2 The latter fact underscores the Defendant’s second ground for objection:

undue delay and resulting prejudice. 10 It is true that the amendment comes late in

the process, and that discovery has closed. 11 This must be balanced against the

overarching purpose of the Court, which is to do justice on a full record. Cogent

here is that the Defendant was aware of the reformation theory via the initial motion

to amend, which sought to add reformation to the complaint. 12 The parties dispute

whether, subsequently, the matter of reformation was adequately addressed in

discovery.

In my view, the outcome most consistent with justice is to allow the

amendment to the complaint, and to (1) allow the Defendant—to the extent it finds

it appropriate—to seek leave to reopen discovery, which shall be granted upon a

showing that the amendment so requires, and (2) to allow the Defendant to seek to

shift fees for discovery costs that would have been avoided had the Plaintiffs acted

with appropriate alacrity. I note that any such latter request will require a showing

that (1) delay was unreasonable, (2) the Defendant was not on notice of the need for

the discovery, and (3) avoidable costs were incurred, accordingly.

10 Id. at 5–6. 11 Id. at 1. 12 See, e.g., Pls.’ Mot. for Leave to File a Second Am. Compl., Dkt. No. 103. 3 To the extent the foregoing requires an order to take effect, IT IS SO

ORDERED. An order permitting the amendment is attached.

Sincerely,

/s/ Sam Glasscock III

Vice Chancellor

4 IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

Valhalla Partners II, L.P., James J. Pallotta, Great Oaks Venture Fund LP, Scott Becker, Advancit Capital I, LP, C.A. No. 2019-0202-SG Eniac Ventures II, L.P., Eniac Ventures, L.P., DFJ Mercury II, L.P., DFJ Mercury II Affiliates Fund, L.P., Occam’s Razor, LLC, Gordon Su, Brent Buntin, Ocean Assets LLC, Draper Associates Riskmasters III, LLC, and Robert Horwitz,

Plaintiffs/Counterclaim Defendants,

v.

Vistar Media, Inc.,

Defendant/Counterclaim Plaintiff.

ORDER

This 14th day of July 2022, upon consideration of the Renewed Motion for

Leave to File Second Amended Complaint (the “Motion”) filed by Plaintiffs

Valhalla Partners II, L.P., James J. Pallotta, Great Oaks Venture Fund LP, Scott

Becker, Advancit Capital I, LP, Eniac Ventures II, L.P., Eniac Ventures, L.P., DFJ

Mercury II, L.P., DFJ Mercury II Affiliates Fund, L.P., Occam’s Razor, LLC,

Gordon Su, Brent Buntin, Ocean Assets LLC, Draper Associates Riskmasters III,

LLC, and Robert Horwitz (“Plaintiffs”), and finding good cause for the relief sought

therein, IT IS HEREBY ORDERED THAT: 1. The Motion is GRANTED; and

2. Plaintiffs shall file the amended pleading, which was attached as

Exhibit A to the Motion, within 3 business days of entry of this Order.

/s/ Sam Glasscock III Vice Chancellor Sam Glasscock III