The Ravenswood Investment Company, L.P. v. The Estate of Bassett S. Winmill

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

THE RAVENSWOOD INVESTMENT :
COMPANY, L.P., individually, :
derivatively and on behalf of a class of :
similarly situated persons, :
:
Plaintiff, :
:
v. : C.A. No. 3730-VCS and
: C.A. No. 7048-VCS
THE ESTATE OF BASSETT S. :
WINMILL, THOMAS B. WINMILL, :
and MARK C. WINMILL, :
:
Defendants, :
:
and :
:
WINMILL & CO., INCORPORATED, :
:
Nominal Defendant. :

MEMORANDUM OPINION

Date Submitted: December 13, 2017
Date Decided: March 21, 2018

R. Bruce McNew, Esquire and Scott B. Czerwonka, Esquire of Wilks, Lukoff &
Bracegirdle, LLC, Wilmington, Delaware, Attorneys for Plaintiff.

David A. Jenkins, Esquire and Kelly A. Green, Esquire of Smith, Katzenstein &
Jenkins LLP, Wilmington, Delaware, Attorneys for Defendants.

SLIGHTS, Vice Chancellor
 The Ravenswood Investment Company, L.P., a stockholder of nominal

defendant, Winmill & Co., Incorporated (“Winmill & Co.” or the “Company”), has

brought derivative claims on behalf of the Company against the Company’s board

of directors, comprising Bassett Winmill and his two sons, Thomas and Mark

Winmill, alleging they breached their fiduciary duties in two respects. First, they

granted overly generous stock options to themselves (as Company officers). Second,

they caused the Company both to forgo audits of the Company’s financials and to

stop disseminating information to the Company’s stockholders in retaliation for

Plaintiff’s assertion of its inspection rights pursuant to 8 Del. C. § 220. The claims

have been tried and the parties’ arguments fully briefed.

One of the pillars of our law with regard to public companies is that they must

be run for the benefit of their stockholders. That goal, at times, can be difficult to

square with the managers’ desire to compensate the company’s executives

generously for their hard work and commitment to the business. To be sure, it is

right and proper to incentivize executives to stay with a company and to work hard

for its success. But how much incentive compensation is proper? In many

companies, this question can be decided by board members who have no personal

interest in the matter and aim to fulfill their fiduciary duties to make informed

decisions in the company’s best interest. In these instances, the independent

directors’ disinterested decision generally is entitled to deference under the business

1
judgment rule. But, as is often the case in small, family-run businesses, those

making the compensation decisions and those receiving the compensation are one

and the same. That dynamic can be problematic. It is made even more so when the

self-interested decisions are made without proper documentation (in the form of

board minutes or otherwise) and without objective evidence supporting them.

Unfortunately, that is how the events giving rise to this litigation unfolded.

The Company’s board decided it needed to incentivize its officers and pay

compensation closer to that of their investment management industry peers.

Accordingly, the board decided to grant stock options to certain officers. In doing

so, however, the board members granted stock options to themselves, as each board

member also served in an executive capacity and each was granted stock options in

that capacity. When deciding the terms of the option awards, the board chose not to

hire a compensation consultant, used a comparable companies analysis that was

neither well-documented nor well-substantiated, agreed that a portion of the

consideration for the options could be paid over time as evidenced by promissory

notes, and then forgave those notes long before they were paid in full.

The contemporaneous evidence of the board’s “process” with respect to the

stock option grants is, in a word, thin. Consequently, the Court was left to view the

process through a retrospective lens ground in the after-the-fact testimony of the

conflicted fiduciaries who made the decisions. As conflicted fiduciaries, Defendants

2
were obliged to prove that the stock options they granted themselves were entirely

fair; that is, their burden was to prove that the grant was the product of a fair process

that yielded a fair result. They failed to carry that burden. Consequently, I find that

Defendants breached their fiduciary duty of loyalty with respect to the option grants.

But there is another important lesson to be learned from this case. While this

court endeavors always to remedy breaches of fiduciary duty, especially breaches of

the duty of loyalty, and has broad discretion in fashioning such remedies, it cannot

create what does not exist in the evidentiary record, and cannot reach beyond that

record when it finds the evidence lacking. Equity is not a license to make stuff up.

After a decade of litigation, Plaintiff has failed to develop any evidence

supporting cancellation, rescission, rescissory damages or some other form of

damages as possible remedies for the proven breaches of fiduciary duty. The

overwhelming evidence reveals that there is no basis for cancellation. Rescission,

likewise, does not work because the Company lacks sufficient funds to repay

Defendants what they have already paid for the options—a necessary step if

rescission is to perform its function of returning all parties to the status quo before

the wrongful conduct occurred. For this same reason, rescissory damages are not

viable either. And Plaintiff has failed to present any evidence upon which the Court

could fashion a damages award in some other form. Specific performance of the

promissory notes that were forgiven might be an option, but Plaintiff has not sought

3
specific performance in any of its several pleadings nor has it even attempted to

demonstrate that the remedy is appropriate. Indeed, if anything, Plaintiff put

Defendants on notice that it was seeking the opposite of specific performance,

namely rescission or cancellation. Consequently, all that can be awarded is a

declaration that Defendants breached their fiduciary duties and an assessment of

nominal damages against each Defendant in the spirit of equity.

As for Plaintiff’s claims relating to the Company’s record keeping and

dissemination practices, those claims fail for lack of proof and because, as presented,

they reflect an improper attempt to repackage claims already dismissed by the Court.

This is the Court’s post-trial opinion.

I. BACKGROUND

The Court held a two-day trial during which it received 99 trial exhibits and

heard live testimony from five witnesses. The Court heard post-trial argument on

December 13, 2017. All facts are drawn from the stipulated facts, admitted

allegations in the pleadings, evidence admitted at trial and those matters of which

the Court may take judicial notice. 1 The following facts were proven by a

preponderance of the evidence unless otherwise indicated.

1
Citations to the Joint Pre-Trial Stipulation and Order are referenced “PTO ¶”; to the joint
trial exhibits “JX #”; to the trial transcript “Tr. #” and to the post-trial oral argument
transcript “OA Tr. #.”

4
 A. The Parties

Nominal Defendant, Winmill & Co., is a Delaware holding company that

“conducts an investment management operation” through its affiliates (in which it

has ownership interests of varying degrees).2 Winmill & Co.’s affiliates manage the

assets of several registered investment companies and mutual funds and receive fees

in return for those services.3 At the time of the transactions in question, Winmill &

Co.’s stock was traded “in the over-the-counter market formerly known as Pink

Sheets.” 4 As of 2005, it had approximately $142 million in assets under

management.5

2
Tr. 20:18–23 (Thomas Winmill Testimony). Prior to 1999, the Company’s name was
Bull & Bear Group, Inc. Tr. 251:2–252:7; 254:17–24 (Mark Winmill Testimony). In 1999,
the Company sold its discount brokerage subsidiary, Bull & Bear Securities, to the Royal
Bank of Canada and changed its name to “Winmill & Company Inc.” Tr. 251:23–252:8
(Mark Winmill Testimony).
3
Tr. 126:8–20; 20:18–23 (Thomas Winmill Testimony). Winmill & Co. has varying
ownership interests in the affiliated companies. JX 19 (Winmill & Co. 2005 Annual
Report), at 1 (explaining the Company owns 25% of Brexil Corp. and 24% of Tuxis Corp.).
The Company’s financial health depends on “how well [management] [is] selecting the
underlying portfolio securities, how well [it is] marketing [its] track record, and how well
[it is] executing on the underlying operating requirements of a mutual fund business.”
Tr. 126:15–20 (Thomas Winmill Testimony).
4
Tr. 23:4–5 (Thomas Winmill Testimony).
5
JX 19 (Winmill & Co. 2005 Annual Report).

5
 Plaintiff, The Ravenswood Investment Company, L.P. is, and at all relevant

times was, a holder of Winmill & Co.’s Class A non-voting common stock. 6

It brings these claims derivatively on behalf of the Company.

Defendants are the Estate of Bassett Winmill (the “Estate”), Thomas Winmill

and Mark Winmill. 7 Bassett, Thomas and Mark comprised the entirety of the

Company’s board of directors (the “Board”) at all times relevant to the proceedings.8

The Estate was substituted as a party for Bassett in May 2015 following

Bassett’s passing.9 Bassett was the founder of Winmill & Co.’s predecessor and

served as the Company’s Chairman.10 Prior to his passing, he owned shares of the

Company’s Class A non-voting common stock and all of its 20,000 shares of Class B

voting common stock (the only voting stock).11 Bassett’s Class B stock was placed

6
PTO ¶ 1.
7
PTO ¶ 3. I use first names (from time to time) for clarity; I intend no disrespect.
8
PTO ¶ 3.
9
PTO ¶ 4; D.I. 132 (C.A. No. 3730-VCS). Bassett died on May 15, 2012. D.I. 132
(C.A. No. 3730-VCS).
10
PTO ¶ 4.
11
PTO ¶¶ 7–8.

6
into the Winmill Family Trust (the “Trust”) upon his passing.12 Defendants, Thomas

and Mark Winmill (Bassett’s sons), serve as the trustees for the Trust.13

Defendant, Thomas Winmill, served (and still serves) as the Company’s

President and CEO.14 He has been the general counsel of Winmill & Co. and a

member of the Board since the mid-1990s.15 Thomas was also employed by several

Winmill & Co. affiliates during the relevant time period.16

Defendant, Mark Winmill, served (and still serves) as the Company’s

Executive Vice President.17 Mark worked at the Company and served on its Board

from 1987 to 1999; he returned to the Company in 2004.18 Like his brother, he also

12
PTO ¶¶ 3, 7.
13
PTO ¶¶ 3, 7.
14
Tr. 18:3–6, 16–20.
15
Tr. 18:10–19:3.
16
Tr. 223:18–24 (Thomas Winmill Testimony). Specifically, Thomas was employed by
Brexil Corp. and Tuxis Corp. Id.
17
PTO ¶¶ 4–6.
18
Tr. 254:17–255:1 (Mark Winmill Testimony). Mark left the Company in 1999 as part
of the Company’s discount brokerage sale. Tr. 250:21–251:22 (Mark Winmill Testimony).
He rejoined the Company in 2004 when his three-year contract with the Royal Bank of
Canada ended. Id.

7
worked for Winmill & Co. affiliates at all relevant times.19 Both Thomas and Mark

own Class A common stock.20

B. Compensation of the Company’s Officers

Since the early 1990s, Winmill & Co.’s Board has determined the proper

compensation of its officers on an annual basis by reviewing the compensation

structure of companies the Board identifies as the Company’s peers.21 To receive

relevant information for this process, the Board would cause the Company to acquire

small equity stakes in peer companies. Thereafter, the Board would review those

companies’ public filings and stockholder disclosures so that it could evaluate the

compensation paid to their executives.22

The Board considers as comparable those companies “that [are] competing

with [Winmill & Co.] in the investment management business.”23 The evidence

revealed, and Defendants acknowledge, that the “comparable companies” routinely

identified by the Board are considerably larger than Winmill & Co. when measured

by any relevant metric; e.g., outstanding shares, market capitalization, assets under

19
Tr. 252:23–254:3 (Mark Winmill Testimony).
20
PTO ¶ 8.
21
Tr. 89:23–90:6 (Thomas Winmill Testimony).
22
Tr. 89:2–19 (Thomas Winmill Testimony); 262:14–19 (Mark Winmill Testimony).
23
Tr. 93:6–10 (Thomas Winmill Testimony).

8
management, revenues, profitability, etc. Nevertheless, in the Board’s view,

Winmill & Co. was “competing [with these companies] for the same people and [for

the same] edge,” making the identified peers proper subjects for comparison.24

1. Thomas, Mark and Bassett’s Salaries

As best I can discern from the often-contradictory trial evidence, the three

Defendants received the following compensation from Winmill & Co. during the

relevant timeframe:

Thomas Mark Bassett
Year
(President and CEO) (Executive VP) (Chairman)
$12,250 $5,833.33 $27,666.67
2005
(for the year)25 (for the year)26 (for the year)27
$8,333.33 $1,666
2006 ???
(per month)28 (per month)29

24
Tr. 94:1–17 (Thomas Winmill Testimony).
25
JX 59 (Compensation Chart), at WIN-0547.
26
JX 59 (Compensation Chart), at WIN-0547.
27
JX 59 (Compensation Chart), at WIN-0547.
28
JX 18 (Nov. 10, 2005 Written Consent). I note that JX 59 (Compensation Chart) appears
to indicate that Thomas actually received an annual salary of $12,583.33 in 2006. This is
one of several instances where the Company’s records are not clear, contradictory and
generally not helpful.
29
JX 10 (May 23, 2005 Written Consent); JX 31 (Dec. 3, 2007 Written Consent). Here
again, pursuant to JX 59 (Compensation Chart), Mark may have actually received an
annual salary of $9,950.15 in 2006.

9
 $10,000
2007 ??? ???
(per month)30
$25,000 $1,666 $15,000
2008
(per month) 31 (per month)32 (per month) 33
$6,500
2009 ??? ???
(per month)34
$15,000
2010 ??? ???
(per month)35

As President and CEO, Thomas’ duties at Winmill & Co. include oversight of

operating areas such as legal and compliance, portfolio management, administrative

and personnel.36 “[I]n terms of an allocation of [his] total time spent,” Thomas does

not consider his position at Winmill & Co. a full-time position and, in the relevant

years, he derived the majority of his income from Company affiliates.37

30
JX 22 (Nov. 29, 2006 Written Consent), at WIN-0381.
31
JX 31 (Dec. 3, 2007 Written Consent), at WIN-0391.
32
JX 10 (May 23, 2005 Written Consent); JX 31 (Dec. 3, 2007 Written Consent). Mark
testified that he received an annual salary of $20,000 in 2008. Tr. 275:9–12 (Mark Winmill
Testimony).
33
JX 31 (Dec. 3, 2007 Written Consent), at WIN-0391.
34
Tr. 275:9–276:21 (Mark Winmill Testimony).
35
Tr. 275:9–276:21 (Mark Winmill Testimony).
36
Tr. 19:11–17 (Thomas Winmill Testimony).
37
Tr. 223:18–24; Tr. 224:24–225:3 (Thomas Winmill Testimony). See JX 59
(Compensation Chart).

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 Mark’s responsibilities as the Company’s Executive Vice President include

general oversight of investment and operating companies, serving as chief

investment strategist of certain funds partially owned and advised by the Company

through its affiliates, and conducting financial operations, principally of one of the

Company’s wholly-owned operating entities.38 Like his brother, Mark also received

a majority of his salary from the Company’s affiliates during the years leading up to

the stock option grants at issue here.39

Finally, Bassett served as the Company’s Chairman. The parties did not

address his responsibilities in that capacity in any detail and I have found no job

description or similar evidence in the trial record.

2. The 2005 Performance Equity Plan

Winmill & Co. had adopted a stock option plan in 1995 that was to expire in

December 2005.40 With the expiration of the prior plan approaching, in May 2005,

the Board (and the Company’s sole voting stockholder, Bassett) adopted the 2005

38
JX 46 (Winmill & Co. 2011 Annual Report), at WFIN-0071; Tr. 276:22–227:8 (Mark
Winmill Testimony).
39
Tr. 277:17–278:3 (Mark Winmill Testimony). See JX 59 (Compensation Chart);
Tr. 277:9–278:3 (Mark Winmill Testimony) (“About how much of your time were you
devoting to Winmill & Company from the years 2008 to 2010? A. It was approximately
25 percent. It’s fluctuated since then. It’s probably less than that from time to time. Q. So,
presumably, in the year that you got paid just over $6,000 from Winmill & Company, you
were getting compensated by other entities? A. Yes.”).
40
Tr. 24:17–25:10 (Thomas Winmill Testimony).

11
Performance Equity Plan (the “PEP”) by written consent.41 The PEP was meant to

allow the Company to reward its employees (especially those employees most

directly responsible for the Company’s success) “for past services by way of current

compensation and also to provide an incentive for future exertions on behalf of the

corporation.”42

The PEP authorized “granting of a maximum of 500,000 options” 43 on

Winmill & Co.’s then approximately 1.5 million outstanding shares of Class A

common stock (“Stock”). 44 This 500,000 figure was chosen to ensure that an

adequate number of shares would be available for future grants of incentive stock

options in compliance with Internal Revenue Service (“IRS”) rules.45

The price of the options granted under the PEP was to be “determined by the

[Board] at the time of the grant and [][was] not [to] be less than 110% of the Fair

41
PTO ¶ 9.
42
Tr. 97:6–13 (Thomas Winmill Testimony). The Board also saw the PEP as a way to
“align the interest of employees with shareholders[’],” thus benefiting the shareholders.
Tr. 257:11–19 (Mark Winmill Testimony).
43
PTO ¶ 9.
44
PTO ¶ 11.
45
Tr. 85:5–86:2 (Thomas Winmill Testimony); 260:2–13 (Mark Winmill Testimony).
Pursuant to federal tax law, only $100,000 in face value (the number of options multiplied
by the exercise price) of incentive stock options may vest per year. See 26 U.S.C.
§ 422(d)(1).

12
Market Value on the date of grant.”46 Nevertheless, in its 2005 Annual Report, the

Company stated that stock options would be granted at “fair value,” rather than at

“fair market value.”47 This disclosure to stockholders was never corrected. The

Board determined that plan beneficiaries could pay for the Stock “in cash to the

extent of par value of the Common Stock acquired and by delivery of a promissory

note in a form satisfactory to the [Board].”48

C. The Disputed Option Grants

Immediately following the adoption of the PEP, on May 23, 2005, the Board

authorized option awards to Bassett, Thomas and Mark pursuant to the PEP after

comparing their compensation with the compensation paid to executives at Board-

46
JX 79 (PEP) § 5.2(a). Pursuant to the PEP, the Fair Market Value for shares “traded in
the over-the-counter market” was “the last sale price of the Common Stock on such date,
as reported by the Pink Sheets LLC . . . or if no sale was reported on that date, then on the
last preceding date on which such sale took place.” Id. § 1.2(k) (Fair Market Value
definition). Pursuant to federal tax law, incentive options must be priced at no less than
fair market value. 26 U.S.C. § 422(b)(4). When a recipient owns 10% or more of a
company’s total combined voting power of all classes of stock, the stock option must be
priced at a minimum of 110% of the fair market value. Id. § 422(c)(5). Plaintiff continues
to argue that the PEP in fact required an option price of “fair value.” See Pl.’s Post-Trial
Opening Br. 14–16. For reasons explained below, I find that the PEP required pricing at
“fair market value” despite the faulty disclosure to stockholders.
47
JX 19 (Winmill & Co. 2005 Annual Report), at 14. See also JX 29 (Winmill & Co. 2006
Annual Report), at 10 (still disclosing the stock options to be priced at “fair value”).
48
JX 79 (PEP) § 5.2(d). The PEP provides that “the Committee” will set the price, but
recognizes that “the Committee” means the Board if no committee is designated.
Id. § 1.2(d) (Committee definition).

13
designated “peer” companies. 49 The Board resolution authorizing the awards

reveals that Bassett, Thomas and Mark each received options to purchase 100,000

shares of Stock at $2.948 per share.50 At the time of the grant (May 23), the Stock

traded at $2.68 per share. 51 The options were to expire in five years if not

exercised. 52 The Board set the vesting schedule in accordance with IRS rules

limiting incentive stock options to a value of $100,000 a year (for each recipient).53

Since the Board estimated that the 100,000 options granted to each Defendant had

49
PTO ¶¶ 9, 12. For example, the Board considered the compensation of officers of BKF
Capital Group, Inc. (“BKF”). In the eyes of the Board, BKF was a comparable company
although the Board acknowledged that BKF had “significantly larger assets under
management and . . . their revenues were larger.” Tr. 130:03–131:18 (Thomas Winmill
Testimony). Based on the fact that BKF officers with similar titles earned significantly
higher salaries (around $4.8 million per year), the Board found it appropriate to bring the
Company’s officer salaries “closer towards the industry averages.” Tr. 129:5–21; 130:22–
131:12 (Thomas Winmill Testimony).
50
PTO ¶ 12; JX 15 (May 23, 2005 Written Consent). Thomas O’Malley, the Company’s
CFO, received 5,000 stock options as part of his recruitment in June 2005. Tr. 282:11–16
(Mark Winmill Testimony).
51
JX 58 (Stock Price Chart May 23–June 30, 2005). Plaintiff argues that the price
contained in the agreements could not have represented the stock option price as of the
close of business because the e-mail with the attached documents was sent to the Board at
2:39 p.m. prior to close of the stock market. Pl.’s Post-Trial Opening Br. 13 (citing JX 9
(E-Mail Chain)). It is reasonable to believe, however, that the Company’s stock price
would not change within a matter of a few hours given that the stock was thinly traded. In
fact, the stock continued to trade at that price until May 26, 2005. JX 58 (Stock Price Chart
May 23–June 30, 2005).
52
PTO ¶ 12; JX 15 (May 23, 2005 Written Consent).
53
Tr. 97:19–98:12 (Thomas Winmill Testimony); 261:15–262:6 (Mark Winmill
Testimony).

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an approximate value of $200,000 to $300,000 (per recipient), it set a three-year

vesting schedule, with one third of the options vesting in each of those years.54

D. The Exercise of the Options

On December 12, 2006, Bassett and Thomas exercised their respective options

to purchase 66,666 shares of Stock each.55 Mark followed suit on January 5, 2007.56

Each Defendant paid $1,532.39 in cash and gave a $195,000 promissory note (the

“Notes”) to the Company for the remainder of the exercise price.57 The interest rate

for each promissory note was fixed at the federal rate set by the IRS. 58 After

54
JX 15 (May 23, 2005 Written Consent), at W-0005; Tr. 97:23–98:17 (Thomas Winmill
Testimony). The first 33,333 options vested at the time of the grant. JX 15 (May 23, 2005
Written Consent), at W-0005.
55
PTO ¶ 14.
56
PTO ¶ 15. At the time of the exercise, the second vesting period had begun and, thus,
each Defendant could exercise up to 66,666 options. JX 15 (May 23, 2005 Written
Consent), at W-0005.
57
PTO ¶ 16; JX 12 (Stock Option Agreement Bassett Winmill) § 8.3; JX 13 (Stock Option
Agreement Mark Winmill) § 8.3; JX 14 (Stock Option Agreement Thomas Winmill) § 8.3;
Tr. 263:22–264:5 (Mark Winmill Testimony). The Board resolved, by written consent,
that all three Notes were satisfactory. JX 82 (Dec. 12, 2006 Written Consent); JX 83
(Jan. 5, 2007 Written Consent). The December 12, 2006 written consent submitted as
evidence was not signed by Mark Winmill. JX 82 (Dec. 12, 2006 Written Consent). In my
view, however, the lack of a signature is not evidence that the Board did not actually accept
the Notes as adequate to reflect the amounts due from Bassett, Thomas and Mark. Mark
testified credibly that he recognized the written consent and related documents and that he
approved them. This testimony is sufficient to authenticate the document and to satisfy me
that Mark approved the matters set forth in the consent in his capacity as director.
Tr. 268:21–269:7 (Mark Winmill Testimony). See D.R.E 901.
58
Tr. 245:5–246:6 (Thomas Winmill Testimony); 268:13–16 (Mark Winmill Testimony).
The interest rate for Thomas and Bassett’s Notes was 4.75% and the interest rate for Mark’s
15
Defendants executed the Notes, they paid interest on those Notes, mainly through

payroll deductions.59 None of the remaining options were exercised prior to their

expiration.60

E. The Forgiveness of the Notes

In February 2008, less than three months after approving a Company-wide

employee bonus of four weeks’ salary,61 the Board resolved to forgive the Notes as

Note was 4.58%. JX 24; JX 26; JX 28. The difference in interest rates corresponds with
the difference in IRS interest rates for the specific dates on which the Notes were given.
Tr. 301:18–24 (Thomas O’Malley Testimony).
59
JX 93 (Interest Due on Promissory Notes); Tr. 271:10–19 (Mark Winmill Testimony).
Plaintiff continues to argue that JX 93 only shows the interest that is due to the Company
and does not show the interest paid. Pl.’s Post-Trial Reply Br. 4. That is not correct. As
explained by the Company’s CFO, Thomas O’Malley, and as demonstrated by the actual
document, the document tracks both: the interest due and, with the designation “p/r
deduction,” the interest paid by Defendants via payroll deduction. See JX 93 (Interest Due
on Promissory Notes); Tr. 303:3–16; 340:3–5 (Thomas O’Malley Testimony). The
O’Malley testimony to which Plaintiff refers in support of its argument that the document
only represents accrued amounts actually addressed aspects of the Company’s general
ledger. Pl.’s Post-Trial Reply Br. 4; Tr. 315:14–20 (Thomas O’Malley Testimony).
O’Malley testified convincingly that the Company documented the received interest
payments monthly on the chart designated as JX 93. Tr. 314:9–317:1 (Thomas O’Malley
Testimony).
60
Tr. 103:8–23 (Thomas Winmill Testimony); Tr. 267:1–9 (Mark Winmill Testimony).
Defendants maintain that the remaining options were not exercised for tax reasons.
Tr. 103:8–104:18 (Thomas Winmill Testimony); 267:5–9 (Mark Winmill Testimony).
Plaintiff asserts that Defendants did not exercise the remaining options because of this
litigation. Pl.’s Pre-Trial Br. 14. In my view, the reason(s) are immaterial.
61
JX 31 (Dec. 3, 2007 Written Consent), at WIN-0388. Thomas characterized the
Company-wide bonus as a “profit share.” Tr. 201:21–24 (Thomas Winmill Testimony).

16
a special bonus for the Company’s exceptionally good performance in 2007.62 Once

again, the Board based its determination to reward management on an ad hoc

comparable companies analysis.63 Ultimately, the Company recognized and booked

the forgiveness of the Notes in 2008 rather than in 2007 so that the beneficiaries

could “avoid the immediate requirement to come up with cash to pay for the tax on

the forgiveness income.”64

62
Tr. 129:5–10; 242:13–23 (Thomas Winmill Testimony); JX 32 (Feb. 29, 2008 Written
Consent). Plaintiff takes issue with Defendants’ characterization of 2007 as an exceptional
year, pointing to the Company’s 2007 and 2008 financial results showing that Winmill &
Co. “earned a before tax income of $274,013.” Pl.’s Post-Trial Opening Br. 21 (citing
JX 35 (Winmill & Co. Inc. 2007 and 2008 Audit Report), at WFIN-0005). Defendants
argue that 2007 was deemed financially successful because the Company’s revenues went
from approximately $1.4 million in 2005 to approximately $3.3 million in 2007. Defs.’
Post-Trial Answering Br. 47. According to Defendants, the marked increase in revenue
must be attributed to the efforts of management because the “primary driver” was “assets
under management” which, in turn, depended upon “how well [management is] selecting
the underlying portfolio securities, how well [it is] marketing [its] track record, and how
well [it is] executing on the underlying operating requirements of a mutual fund business.”
Tr. 126:5–20 (Thomas Winmill Testimony). After reviewing the evidence, I agree with
Defendants that 2007 was a successful year for the Company. I also agree with Plaintiff,
however, that there is no evidence in the record to support the contention that the improved
performance was attributable to any specific contribution by any of the Defendants. See
JX 29 (Winmill & Co. 2006 Annual Report), at 5; JX 35 (Winmill & Co. Inc. 2007 and
2008 Audit Report), at WFIN-0005; Tr. 123:18–128:6 (Thomas Winmill Testimony).
63
Tr. 129:11–21; 132:6–133:4 (Thomas explaining that he saw his position comparable to
that of the Senior Portfolio Manager of BKF who earned around $4.8 million in 2006).
Again, no compensation consultant was hired in connection with the Note forgiveness and
the same process of reviewing “peer” information informed the Board’s decision. Tr.
242:5–243:12 (Thomas Winmill Testimony).
64
Tr. 135:20–24 (Thomas Winmill Testimony).

17
 In April 2008, the Board rescinded the forgiveness of the Notes when it

realized that the Company would immediately have to “mak[e] withholding tax

deductions from payroll” for each beneficiary.65 Soon after, the Board resolved to

forgive the entirety of Thomas’ Note (who had sufficient funds to “shoulder the

additional withholding”), and to forgive Mark’s Note in three tranches over three

years (to ease the tax burden on Mark).66 By the time the Board resolved to forgive

the Notes, Thomas had paid approximately $12,000 in interest and Mark

approximately $20,000.67

Upon his request, the Board decided not to forgive Bassett’s Note after it

rescinded the initial forgiveness.68 In December 2011, Bassett was unable to pay the

Note when due.69 Accordingly, the Board accepted a new note from Bassett that

65
Tr. 135:24–136:24 (Thomas Winmill Testimony).
66
Tr. 136:6–137:23 (Thomas Winmill Testimony); JX 84 (Apr. 24, 2008 Written Consent).
Mark’s Note was forgiven in three increments: $50,000 in 2008, $50,000 in 2009 and the
remaining $95,000 in 2010. JX 84 (Apr. 24, 2008 Written Consent); JX 85 (Feb. 23, 2009
Written Consent); JX 86 (Jan. 12, 2010 Written Consent). Plaintiff argues that the final
forgiveness (in 2010) was not valid because the written consent was not properly signed.
Defs.’ Post-Trial Opening Br. 24. I addressed that argument during trial, Tr. 4:16–5:16;
14:11–15:3, and, in any event, since I find in favor of Plaintiff on this claim, I see no need
to consider Plaintiff’s evidentiary objection further.
67
Tr. 304:12–305:17 (Thomas O’Malley Testimony). See also JX 93 (Interest Due on
Promissory Notes).
68
Tr. 140:22–141:6 (Thomas Winmill Testimony).
69
Tr. 142:4–16 (Thomas Winmill Testimony); 325:3–15 (Thomas O’Malley Testimony).

18
extended the maturity by an additional five years.70 The Estate paid off this note

following Bassett’s death.71 By that time, Bassett had already paid around $31,000

in interest. The total interest paid by Bassett (and the Estate) was $49,000.72

F. Plaintiff’s Expert

At trial, Plaintiff presented expert testimony from Audrey Croley

(“Croley”). 73 In her prior work, Croley was employed by or collaborated with

companies to develop incentive compensation plans. In her report and trial

testimony, Croley addressed the reasonableness of the number of shares authorized

under the PEP and the number of shares granted to the plan’s beneficiaries in May

2005. 74 With respect to the number of shares authorized, she looked at the

70
Tr. 141:11–142:16 (Thomas Winmill Testimony); JX 39 (Bassett Winmill’s 2011
Promissory Note). This new note had an interest rate of 1.27%. JX 39 (Bassett Winmill’s
2011 Promissory Note).
71
Tr. 140:22–141:6; 142:17–146:11 (Thomas Winmill Testimony); 306:14–307:16
(Thomas O’Malley Testimony); JX 87 (Morgan Stanley Account Statement); JX 88 (Letter
from Thomas Winmill ordering wire transfer on behalf of the Estate); JX 93 (Interest Due
on Promissory Notes).
72
Tr. 306:14–307:16 (Thomas O’Malley Testimony). See also JX 93 (Interest Due on
Promissory Notes).
73
Tr. 352:13–353:9 (Croley Testimony).
74
JX 55 (Expert Report of Audrey K. Croley (“Croley Report”)), at 4. Defendants argue
that Croley stated in her deposition testimony that she would opine only on the shares
authorized. The confusion over shares authorized versus shares granted was a theme
throughout the deposition and at trial. After reviewing Croley’s report and deposition, I am
satisfied that Defendants were on notice that she would testify at trial regarding the
19
Company’s business cycle and compared the number of shares authorized under the

PEP to the number of shares authorized in the plans of the Company’s peers. She

explained that a company’s business cycle is relevant because, in her experience,

start-up companies will “set-aside” a higher percentage of shares for incentive plans

than companies that have passed beyond their growth period. 75

According to Croley, Winmill & Co. was long past its growth period given

that it was established several decades ago.76 Since start-up volatility was not an

impediment to attracting and keeping talent, Croley concluded that Winmill & Co.’s

33% “set aside” was excessive and unreasonable. 77 In her deposition testimony,

Croley opined that 10-15% would have been an appropriate “set-aside” for a

company in Winmill & Co.’s position.78 She based this opinion on her experience,

propriety of both the shares authorized and the shares granted. See id.; JX 5 (Croley
Deposition) at 27:9–15; 28:19–29:3; 52:11–53:19.
75
Croley Report 7, 10; JX 5 (Croley Deposition) at 43:12–44:7.
76
Croley Report 10. Croley stated in her report that the Company was formed in 1971 but
then corrected that testimony at trial to confirm that the Company was actually formed in
1974. Tr. 381:23–24 (Croley Testimony). In arriving at her business cycle conclusion,
Croley did not consider whether the Company had changed its business throughout its
existence or any information relating to its financial condition that might suggest the
Company had not reached a “steady state.” Tr. 381:4–383:19 (Croley Testimony).
77
Croley Report 10. According to Croley, the fact that Winmill & Co. had moved past its
growth period was demonstrated by its competitive base salaries. Id.
78
JX 5 (Croley Deposition) at 48:14–22.

20
what “the thinking” is typically at conferences she attends and what she has picked

up from “discussions with people.”79

For her peer analysis, Croley used a list of 28 companies developed by the

Board in 2003.80 Although she found “the makeup of the [Board’s identified] peer

companies . . . [to be] inappropriate,” she did not independently attempt to determine

an appropriate peer group.81 She explained that while the Board’s chosen companies

were comparable in mission and operations, they were not truly comparable because

the “size of the vast majority of the organizations [was] significantly larger than

Winmill [& Co.].”82 She determined that a four-company subset of the identified

companies would provide a more appropriate compensation benchmark.83 In that

subset, she included companies with assets under management of less than

$2 billion.84 She found no indication among the companies in her chosen subset that

79
JX 5 (Croley Deposition) at 50:17–52:4. Croley was unable to identify those people.
She did not consult any publications or literature. Id. at 50:17–51:10.
80
Croley Report 7; Tr. 355:12–20 (Croley Testimony).
81
JX 5 (Croley Deposition) at 44:13–15; 69:5–18.
82
Croley Report 7.
83
Croley Report 8.
84
Croley was unaware what type of assets Winmill & Co. managed. Nevertheless, she
concluded that assets under management generally was the most important metric by which
to measure comparability since it was the first metric identified by most investment
management companies in their public filings. JX 5 (Croley Deposition) at 47:23–48:8;
62:20–63:11; 64:9–66:12. Croley chose the $2 billion benchmark because it was the
21
any “had a stock option plan that set aside as high an equity percentage as Winmill

[& Co.].”85

As of her report and deposition, Croley had not calculated the percentage of

shares set aside for option plans within the companies comprising her chosen

subset.86 By the time of trial, however, she had determined that, among her four

company subset, two companies had set aside and granted a greater percentage of

stock options than Winmill & Co., thus placing “Winmill & Co[.] in the middle . . .

[with] two above and two below.”87

Turning to the grant of stock options, Croley’s opinion was less clear. This

partially stemmed from her tendency to use the terms “set-aside,” “authorized” and

biggest jump in assets under management among the purported peers and “looked like it
could be an appropriate break.” Id. at 68:13–19.
85
Croley Report 9. Croley also took issue with the fact that the PEP did not link option
grants to performance. JX 5 (Croley Deposition) at 86:12–24.
86
JX 5 (Croley Deposition) at 79:18–80:18.
87
Tr. 402:3–15 (Croley Testimony) (“Q. . . . As of the deposition, you hadn’t looked at
the percentage of stock authorized by any of the companies that had less than $2 billion
assets under management; correct? A. That’s correct. Q. When did you do the work you
have just described? A. Between last week and yesterday. Q. Why did you do that work?
A. Because during the deposition that was one of the questions that you asked me. I mean,
I assumed that was appropriate. I could be incorrect.”); Tr. 411:13–22 (Croley Testimony)
(“A. The other ones that I looked at that was within that less-than-two-billion, they were
less than these two. Q. But we have at least two that were greater than Winmill &
Company? A. We have two. We have two of each. Q. Which would put Winmill &
Company in the middle; right, two above and two below? A. Yeah. You could look at it
that way, yes.”).

22
“granted” interchangeably.88 Moreover, it appeared that the focus of her opinion

shifted from options “authorized” in her report and deposition to options “granted”

at trial.89

With regard to the option grant, Croley first identified Thomas, Mark and

Bassett’s salaries90 and then compared them and the share option grants to the plans

approved by the Company’s peers.91 Finding Defendants’ salaries competitive, she

concluded that the option grants were unreasonable and excessive.92 She opined that

the “300,000 options [granted pursuant to the PEP] would be fine” had they been

spread across all of the key employees of the Company.93 Confining the grants to

only Bassett, Thomas and Mark, however, could not be justified.94

88
See, e.g., Tr. 385:12–387:19 (Croley Testimony); JX 5 (Croley Deposition) at 91:5–13.
89
See, e.g., Tr. 360:15–364:3 (Croley Testimony); JX 5 (Croley Deposition) at 91:5–13.
90
Croley determined that for 2005, in addition to the stock options, Bassett received
$338,333 in base pay and $26,026 in bonuses, Thomas received $400,000 in base pay and
$30,769 in bonuses and Mark received $20,000 in base pay and $1,538 in bonuses. Croley
Report 6. These calculations included salaries received from Winmill & Co. affiliates.
See JX 59 (Compensation Chart).
91
Tr. 354:18–355:20; 359:16–360:8 (Croley Testimony).
92
Croley Report 10. Croley also criticized the Board for not employing an independent
compensation committee to determine proper compensation. Id.
93
Tr. 364:5–13 (Croley Testimony). Croley did not know how many employees or key
employees Winmill & Co. had in 2005. Tr. 393:12–394:16 (Croley Testimony).
94
Tr. 364:5–13; 369:20–371:15 (Croley Testimony).

23
 G. Winmill & Co.’s Financial Reporting

Prior to 2004, the Company was listed on the NASDAQ Stock Exchange and,

thus, was obligated to prepare audited financial statements and send regular financial

information to its stockholders.95 In the fall of 2012, the Company ceased preparing

audited financial statements. 96 According to Thomas, his father had wished to

continue the auditing process after 2004 even though audited financials were no

longer required.97 When Bassett passed in 2012, Thomas and Mark, for cost reasons,

decided not to engage in further audits after completing the 2011 audit that was

already in progress.98 The Company stopped distributing its financial information

to stockholders in February 2010.99 Here again, the decision was driven by costs, a

desire for more efficient allocation of resources and a determination that there was

no business purpose to be served by regular dissemination of unaudited financials to

stockholders when measured against the risk of litigation.100

95
Tr. 155:12–22 (Thomas Winmill Testimony). The Company delisted from NASDAQ in
August 2004. JX 8 (letter to stockholders).
96
Tr. 155:23–156:5; 225:10–16 (Thomas Winmill Testimony); PTO ¶ 21.
97
Tr. 156:6–15 (Thomas Winmill Testimony).
98
Tr. 156:16–157:13 (Thomas Winmill Testimony).
99
PTO ¶ 21.
100
Tr. 154:10–155:11 (Thomas Winmill Testimony); JX 4 (Mark Winmill Deposition) at
45:10–46:10; 48:7–20. O’Malley explained that the Company paid approximately $20,000
for the audit in 2011 even though the Company did not have reporting responsibilities to
regulators or creditors that would require or justify audited financial statements.
24
 H. Procedural History

This litigation has a long, complex history. I reluctantly recite this history at

some length in order to explain how Plaintiff’s wide-ranging complaints were

funneled down to only two discrete claims for trial. Plaintiff’s claims were first

stated in two separate actions: (1) a fiduciary duty action filed on April 30, 2008 (the

“2008 Action”), and (2) a Section 220 action, including a fiduciary duty claim, filed

on November 17, 2011 (the “Section 220 Action”). The 2008 Action and the

fiduciary duty component of the Section 220 Action were consolidated for purposes

of discovery and motion practice and were tried sequentially.101

Plaintiff’s complaint in the 2008 Action set forth two counts (one derivative

and one direct), both of which alleged that Defendants breached their fiduciary

duties by adopting a stock buyback plan, adopting the PEP, issuing the stock options

(the “Issuance Claim”), and voting the Company’s stock in favor of a transaction

involving the sale of Winmill & Co.’s affilitate’s interest in a third entity (the “Brexil

Tr. 312:24–313:17 (Thomas O’Malley Testimony). Plaintiff quotes testimony of both
Thomas and Mark as acknowledging that the decision to discontinue the audit process was
made in hopes of avoiding litigation. The testimony cited, however, concerned the decision
not to send financial disclosures to stockholders for fear of litigation based on claims of
inadequate or misleading disclosures. See, e.g., JX 2 (Thomas Winmill Deposition)
at 63:12–66:6; JX 4 (Mark Winmill Deposition) at 48:7–51:21.
101
See JX 52 (Ravenswood Inv. Co., L.P. v. Winmill & Co., Inc., C.A. No. 3730-VCS (Del.
Ch. May 12, 2016) (TRANSCRIPT)), at 116 (consolidating the cases for discovery); see
also Defs.’ Opening Br. in Supp. of their Mot. for Summ. J. 1 (“These two cases were
consolidated for discovery and tried sequentially”).

25
Claim”).102 On July 9, 2010, Defendants filed a motion to dismiss all claims, except

the Issuance Claim.103 The Court granted the motion in part, denying it only with

regard to the Brexil Claim.104 Thus, after resolution of the motion to dismiss, only

the Issuance Claim and the Brexil Claim remained in the 2008 Action.105 Plaintiff

thereafter filed a motion for partial summary judgment (pertaining to the Issuance

Claim only), in which it argued that the stock options were invalid because the PEP

was not adopted in compliance with Delaware law.106 That motion was denied.107

Plaintiff’s complaint in the Section 220 Action set forth two counts. 108

Count I, against the Company, asked the Court to order the Company to produce

certain documents. Count II, against the Company and Defendants, alleged that

102
Ravenswood Inv. Co., L.P. v. Winmill & Co., Inc., 2011 WL 2176478, at *1 (Del. Ch.
May 31, 2011) (hereinafter Ravenswood I).
103
D.I. 24 (C.A. No. 3730-VCS).
104
Ravenswood I, 2011 WL 2176478, at *1, *7.
105
Plaintiff brought motions to alter or amend the May 31 Order, which the Court denied
on November 30, 2011. Ravenswood I, 2011 WL 2176478, at *4.
106
D.I. 74 (C.A. No. 3730-VCS). The motion challenged the written consent adopting the
PEP and granting the stock options as well as the PEP itself based on technical deficiencies,
arguing that those deficiencies caused the PEP to be invalid from inception. Id.
107
Ravenswood Inv. Co., L.P. v. Winmill, 2013 WL 6228805, at *3 (Del. Ch. Nov. 27,
2013) (hereinafter Ravenswood II).
108
This was the second books and records action brought by Plaintiff. The first was
commenced in 2008. Ravenswood Inv. Co., L.P. v. Winmill & Co. Inc., C.A. No. 3724-
VCN. Plaintiff voluntarily dismissed that action on November 16, 2011. D.I. 10 (C.A.
No. 3724-VCN).

26
Defendants breached their fiduciary duties in connection with their “refusal to have

[the Company] provide [its] shareholders reasonable and regular financial

information,” and asked the Court to order the Company to (1) provide all

shareholders with its financial statements for the prior two years and (2) continue to

provide “prompt regular disclosure [to shareholders] of financial information about

the Company.”109 Defendants filed a motion to dismiss Count II, arguing that a

breach of fiduciary duty claim is not properly presented in a Section 220 action and

that the claim fails in any event because Delaware does not impose free-standing

reporting or disclosure obligations on a corporation’s board of directors.110 The

Court heard the motion on October 11, 2012 and determined to (1) separate the

fiduciary duty claim from the Section 220 claim and (2) defer resolution of the

fiduciary duty claim until after resolution of the Section 220 claim. 111 The

109
Verified Compl. Under 8 Del. C. § 220 and for Breach of Fiduciary Duty 6–7;
PTO ¶¶ 19–20. Plaintiff sent its inspection demand to the Company on September 11,
2011. PTO ¶ 19.
110
D.I. 28 (C.A. No. 7048-VCS). Defendants had filed a prior motion to dismiss in
response to which Plaintiff amended its complaint. D.I. 12 (C.A. No. 7048-VCS); D.I. 20
(C.A. No. 7048-VCS).
111
D.I. 58 (C.A. No. 7048-VCS); Ravenswood II, 2013 WL 396178, at *1–2.

27
Section 220 claim was resolved on May 30, 2014, with an order requiring the

Company to produce certain records to Plaintiff.112

Thereafter, on December 15, 2015, the Court heard oral argument on

Defendants’ motion to dismiss the fiduciary duty claim.113 In the Court’s bench

ruling on that motion, the Court explained that “the failure to provide financial

reporting, by itself, does not state a claim.”114 The Court also found, however, that

a fiduciary duty breach might occur where a board “decides not to prepare financial

reporting, . . . which it has provided in the past, . . . because of a troublesome

shareholder’s use of its Section 220 rights.”115 Thus, “the fiduciary duty claims

asserted by [Plaintiff] [did] not survive in as broad a fashion as they ha[d] been

brought, but an aspect [did] survive. That involves the timing or potential motivation

112
Ravenswood Inv. Co., L.P. v. Winmill & Co. Inc., 2014 WL 2445776 (Del. Ch. May 30,
2014).
113
D.I. 120 (C.A. No. 7048-VCS). Plaintiff presented its motion to amend at the same time
Defendants presented their motion to dismiss. Id.
114
JX 51 (Ravenswood Inv. Co., L.P. v. Winmill & Co. Inc., C.A. No. 7048-VCN (Del. Ch.
Feb. 25, 2016) (TRANSCRIPT) (hereinafter Ravenswood III)), at 7.
115
Id. at 9. The Court explained that the fiduciary duty claim could not be dismissed
because “[t]he directors are family members and controlling shareholders [and there] are
allegations of decisions by those directors to benefit themselves at the expense of the
minority shareholders. The argument is whether the decision not to prepare the financial
reports, or the audited reports, was an effort to save money for the company. And that
might well be justified under the business judgment rule. But that can also be contrasted
with the decision not to prepare such records in an effort to keep the shareholders in the
dark.” Id.

28
for stopping the preparation of [] audited financial reports and perhaps other

financial information” (the “Financial Reporting Claim”).116

On February 2, 2016, Plaintiff filed a motion to amend its complaint in the

2008 Action. 117 The Court partially granted that motion 118 and, as noted,

consolidated the 2008 Action and the Financial Reporting Claim from the

Section 220 Action for purposes of discovery and motion practice.119

On February 3, 2017, Defendants filed a motion for summary judgment

challenging the remaining claims—the Issuance Claim, the Brexil Claim and the

Financial Reporting Claim.120 The Court granted that motion with respect to the

116
Id. at 10.
117
Plaintiff had filed a prior motion to amend on June 13, 2012, which was never briefed
or argued. See D.I. 51 (C.A. No. 3730-VCS); Pl.’s Opening Br. in Supp. of its Mot. for
Leave to Supplement and Amend 2, D.I. 138 (C.A. No. 3730-VCS).
118
JX 52 (Ravenswood Inv. Co., L.P.v. Estate of Bassett N. Winmill, C.A. No. 3730-VCS
(Del. Ch. May 12, 2016) (TRANSCRIPT)), at 111–114. The Court refused to allow the
addition of previously resolved claims and the addition of a claim questioning date
discrepancies of certain written consents. Id. The Court also heard (and denied) Plaintiff’s
motion to compel and Defendants’ motion to quash. Id. at 115. Plaintiff thereafter filed a
motion to amend that judgment or for reargument. D.I. 178 (C.A. No. 3730-VCS). The
Court denied that motion. JX 52 (Ravenswood, C.A. No. 3730-VCS (Del. Ch. May 12,
2016) (TRANSCRIPT)).
119
JX 52 (Ravenswood, C.A. No. 3730-VCS (Del. Ch. May 12, 2016) (TRANSCRIPT)),
at 116. Plaintiff filed its Amended Verified Class and Derivative Complaint (the
“Complaint”) in the 2008 Action on August 4, 2016 and Defendants answered on
August 25, 2016. D.I. 198 (C.A. No. 3730-VCS); D.I. 204 (C.A. No. 3730-VCS).
120
D.I. 212 (C.A. No. 3730-VCS; C.A. No. 7048-VCS).

29
Brexil Claim, but denied it with respect to the Issuance Claim and the Financial

Reporting Claim.121 The parties tried these latter two claims in mid-May.122

II. ANALYSIS

As explained, following the Court’s various rulings in the two actions, two

claims remained for trial: (1) whether Defendants breached their fiduciary duties by

authorizing and granting stock options to themselves (the Issuance Claim)123; and

(2) whether the Board’s decision to cease preparing audited financial statements and

distributing financial information to stockholders was an improper decision in

retaliation against Plaintiff for its Section 220 Action (the Financial Reporting

Claim). I address each claim in turn.

A. The Issuance Claim

Plaintiff maintains that entire fairness review applies to the Issuance Claim

because Defendants’ grant of stock options to themselves is a clear instance of self-

dealing. Applying that standard, Plaintiff contends that Defendants have failed to

121
JX 57 (Ravenswood Inv. Co., L.P. v. Winmill, C.A. No. 3730-VCS, C.A. No. 7048-VCS
(Del. Ch. Apr. 27, 2017) (TRANSCRIPT) (“Summary Judgment Bench Ruling”)).
122
Id.
123
The parties are in agreement that the 2008 Action raises claims that are derivative, such
that the direct claim(s) in Count I of the 2008 Action can be dismissed. See Defs.’ Post-
Trial Answering Br. 1 n.1; Pl.’s Post-Trial Opening Br. 60 (“Defendants are liable to
Winmill & Co. . . .”). Thus, the defined term “Issuance Claim” refers only to the derivative
claim (Count II of the 2008 Action).

30
prove that the process of authorizing and granting the options was entirely fair

because (1) they have not proven the actual terms, much less the proper adoption or

implementation, of the PEP; (2) the number of options authorized under the PEP was

not fair; and (3) the number of options granted was not fair. Plaintiff further argues

that the price paid for the options was not fair because the price selection was

improper and Defendants paid for the options, in part, with notes they later

inexplicably determined, as a Board, should be forgiven.

Defendants counter that the business judgment rule should apply to the

Issuance Claim because Plaintiff “has not put forth sufficient evidence to subject this

to entire fairness.”124 Even if entire fairness does apply, however, Defendants assert

that the number of options authorized is irrelevant, that Defendants’ process was fair

and that the number of options granted, according even to Plaintiff’s expert, was fair

when compared to grants under similar plans adopted by the Company’s peers. The

grants were at a fair price, according to Defendants, because they were set at 110%

of the fair market value in accordance with IRS rules, Defendants had no reason to

believe the Notes would be forgiven at the time the grants were made and, in any

event, the forgiveness of the Notes was fair when considered in the context of

Defendants’ overall compensation package.

124
OA Tr. 48:21–49:3. See Defs.’ Post-Trial Answering Br. 26–28.

31
 I agree with Plaintiff that entire fairness review applies and that Defendants

have failed to meet their burden under that standard of review. Accordingly, I find

that Defendants breached their fiduciary duty of loyalty to the Company. How to

remedy that breach, however, presents a more perplexing question.

1. Entire Fairness Is the Standard of Review

“Directors who stand on both sides of a transaction have the burden of

establishing its entire fairness.” 125
Here, there is no question that, in

2005, Winmill & Co.’s directors were Bassett, Thomas and Mark Winmill and that

they also were the three officers receiving option grants under the PEP. Under these

circumstances, the business judgment presumption must give way to entire fairness

review.126

Entire fairness requires a showing that the directors acted with “utmost good

faith and the most scrupulous inherent fairness of the bargain.”127 To demonstrate

125
Valeant Pharm. Int’l v. Jerney, 921 A.2d 732, 746 (Del. Ch. 2007). Defendants
correctly argue that, in order to trigger entire fairness review, Plaintiff was obliged to offer
evidence at trial to rebut the business judgment rule presumption. Defs.’ Post-Trial
Answering Br. 26–27. See Solomon v. Armstrong, 747 A.2d 1089, 1111–12 (Del. Ch.
1999). By proving that Defendants stood on both sides of the transaction at issue, Plaintiff
met its threshold burden. Valeant, 921 A.2d at 745.
126
See Calma ex rel. Citrix Sys., Inc. v. Templeton, 114 A.3d 563, 578 (Del. Ch. 2015).
127
Valeant, 921 A.2d at 746.

32
entire fairness, Defendants were required to prove both fair dealing and fair price.128

The fair dealing analysis concentrates on “when the transaction was timed, how it

was initiated, structured, negotiated, disclosed to the directors and how approvals of

the directors and the shareholders were obtained.”129 In the fair price analysis, the

court looks at the economic and financial considerations of the transaction to

determine if it was substantively fair.130 I will take up the elements of entire fairness

in turn, but first must address Plaintiff’s argument that Defendants have failed to

present competent evidence to prove the terms of the PEP.

a. The Terms of the PEP were Adequately Proven

Plaintiff contends that Defendants have been unable adequately to

demonstrate the PEP’s terms and that this evidentiary gap somehow precludes a

finding that Defendants have met their burden of proof on the Issuance Claim.131

128
Id. See also In re Sunbelt Beverage Corp. S’holder Litig., 2010 WL 26539, at *5 (Del.
Ch. Feb. 15, 2010) (explaining that defendants “bear the burden of demonstrating” entire
fairness because they “did not use any of the procedural devices that could temper the
application of the entire fairness standard”).
129
Valeant, 921 A.2d at 746 (quoting Weinberger v. UOP, Inc., 457 A.2d 701, 710 (Del.
1983)).
130
Id.
131
Pl.’s Post-Trial Opening Br. 36, 43. I confess that Plaintiff’s dogged pressing of this
argument is perplexing to me. Specifically, it is not clear what Plaintiff would have me do
with respect to its breach of fiduciary duty claim in the event I determine that the terms of
the PEP have not been established in the evidence. With no terms to review, it is not clear
how Plaintiff would have me determine that the PEP was not properly conceived or
33
I disagreed at trial and disagree now. 132 The PEP offered as an exhibit at trial

demonstrates its terms and the consents approving the PEP demonstrate that the

Board, in fact, approved the plan.

b. Fair Process

The PEP authorized the issuance of 500,000 stock options. While it is, at best,

unclear whether Plaintiff ever fairly raised a complaint regarding the number of

shares authorized in the PEP, 133 at this point, with the PEP long expired, it is no

implemented. I need not ponder this dilemma further, however, as I find the terms of the
PEP to be as Defendants presented them.
132
Plaintiff’s argument that Defendants have failed adequately to demonstrate the terms of
the PEP boils down to an authenticity objection. On this point, the Court engaged in a
rather lengthy exchange with Plaintiff’s counsel during trial at the end of which I found the
proffered foundation sufficient to authenticate both the PEP and the consents approving
the PEP. Tr. 83:6–84:9. I do not find anything in the post-trial arguments or the evidentiary
record that raises a legitimate question regarding the authenticity or credibility of the
documents and thus refer back to my ruling at trial with respect to this issue. Id.
133
See, e.g., Compl. ¶¶ 65–74 (Counts I and II challenging “the issuance of stock options
and the exercise thereof”); Pl.’s Answering Br. in Opp’n to the Individual Defs.’ Mot. for
Summ. J. 25 (“The Amended Complaint therefore properly pleads a claim regarding both
the number of options and the price paid for the options.”); Pl.’s Pre-Trial Br. 35 (“Even
assuming that Defendants could satisfy their threshold evidentiary burden, however, they
still cannot satisfy their primary burden that the amount of options granted was entirely
fair.”); Defs.’ Pre-Trial Opening Br. 25 n.17, 26 (explaining that the number of options
authorized is irrelevant and that the court should concentrate on the options exercised);
Pl.’s Answering Br. in Opp’n to the Individual Defs.’ Mot. for Summ. J. 25 (referencing
the shares authorized only to support their unfair grant argument); Compl. ¶¶ 65–74
(Counts I and II) (alleging breaches of fiduciary duty “in connection with the issuance of
stock options and the exercise thereof” not mentioning the number of shares authorized);
OA Tr. 29:3–4 (Plaintiff’s counsel explaining that it appears Defendants chose to authorize
500,000 options under the PEP in order to accommodate their already-made decision to
grant themselves 300,000 options).

34
longer relevant how many shares were authorized.134 The litigation has outlived the

PEP. The focus now must be on the options granted when the PEP was in force.

As mentioned, the same day the Company adopted the PEP (and authorized

the 500,000 stock options), the Board granted Defendants 100,000 stock options

each. Thomas testified that the option grants were awarded to “reward for past

services by way of current compensation and also to provide an incentive for future

exertions on behalf of the corporation,” 135 and that the number of options was

determined in accordance with the Company’s usual compensation practices.136

There are several indications that the Board’s process in deciding to grant

options and then determining the terms of those grants was not fair. At the outset,

I note that the term “process” does not really fit here; the evidence reveals that there

really was no process. There are no Board minutes or any other contemporaneous

records reflecting specifically why the Board decided that a grant of options was

appropriate or how the Board determined the number of options to be granted. There

is no indication that the Board sought out the advice of outside legal, financial or

134
JX 79 (PEP) § 12.2 (stating that incentive options can only be granted pursuant to the
PEP for ten years from May 23, 2005).
135
Tr. 97:3–13 (Thomas Winmill Testimony). The Board chose to award stock options
instead of compensation increases to preserve the Company’s cash resources. Tr. 26:15–
27:20 (Thomas Winmill Testimony).
136
Tr. 98:2–17 (Thomas Winmill Testimony).

35
compensation consultants.137 Nor is there evidence that the Board consulted any

literature or other authoritative sources with regard to incentive compensation.

Indeed, Defendants were hard-pressed to recall any of the specifics of their

deliberative process more than ten years ago and, instead, were forced to rely upon

their likely compliance with usual practices with respect to compensation issues.138

Beyond the troubling lack of any contemporaneous evidence of process, the

sole analytical tool on which Defendants “usually” relied (and, therefore,

presumably relied in this instance) is severely flawed. Defendants testified that the

Board used its customary comparable companies analysis when it determined to

authorize and grant the stock options (and when it decided to forgive the Notes in

2008).139 With respect to that analysis, Defendants were unable to produce the 2005

137
Tr. 176:14–18 (Thomas Winmill Testimony).
138
See, e.g., Tr. 29:14–20; 39:4–14 (Thomas explaining his customary practice with regard
to handling his consents, acknowledging that he could not testify from memory); Tr. 89:2–
90:20 (Thomas explaining the general compensation practices of the Board); Tr. 186:19–
187:20 (Thomas explaining that he could not recollect the 2005 comparable companies);
188:18–189:1 (Thomas stating he “think[s] there might have been one or two” comparable
companies in 2005 that had at least as many shares authorized, explaining that “BKF might
be one”); 223:18–24 (Thomas unable to remember which companies he received salaries
from in 2005); 286:6–14 (Mark unable to remember if he ever received certain documents,
assuming he must have received them at some point since he signed them).
139
To characterize the Board’s process as a “comparable companies” analysis is, at best,
charitable. As noted, the Board caused the Company to buy stock in companies it deemed,
on an ad hoc basis, to be peer companies. The Board members then reviewed those
companies’ public filings and stockholder disclosures to learn what they could about the
companies’ compensation practices. Tr. 89:2–90:20 (Thomas Winmill Testimony).
Defendants presented no evidence to support the notion that this is a proper framework by
36
comparable companies list they used and could not otherwise confirm the companies

they considered in 2005 with any certainty.140 The only list they were able to offer

(a 2003 list) compiled a group of companies that did not resemble Winmill & Co.

beyond the fact that they also engaged in investment management activities.141 Yet

Defendants presented no evidence (contemporaneous or otherwise) that they fully

appreciated, much less accounted for, this significant disconnect when making

decisions regarding the implementation of the PEP.142

While it may be true, as Defendants maintain, that companies of comparable

size did not exist, that would be all the more reason to enlist independent, expert

which to conduct a reliable comparable companies analysis and I very much doubt that an
expert in such analyses would endorse this approach.
140
See, e.g., Tr. 281:10–17 (Mark Winmill Testimony). The only list produced was one
from 2003. JX 6 (2003 Comparable Companies List); Tr. 185:22–188:3. Thus, it is
impossible to determine from the record whether the companies considered in 2005 were,
in fact, comparable.
141
Tr. 93:22–94:17; 220:12–221:15 (Thomas Winmill Testimony); 355:1–12 (Croley
Testimony).
142
See, e.g., Tr. 93:22–94:17 (Thomas explaining that the companies “vary in size
considerably” from Winmill & Co. but that “in the big picture” they all compete for the
same employees and, thus, that the Company had to “pay competitive salaries”). Thomas
did testify that the Board “had to take [the size difference] into account in trying to
determine cash compensation . . . and equity compensation,” but offered no explanation of
exactly how the Board took that information into account. Tr. 220:12–221:15 (Thomas
Winmill Testimony). He also explained that he did not ask for the same compensation as
his “equivalent” at a “peer” company ($4.8 million) because “[t]he [C]ompany doesn’t
have 4.8 million.” Tr. 133:11–14 (Thomas Winmill Testimony). This again indicates that
the comparable companies approach undertaken by the Board was misguided.

37
guidance in determining proper compensation, or at least to consult appropriate

industry materials when making compensation decisions, particularly given the

conflicted status of the decision makers.143 The fact that each Defendant received

the exact same number of options despite differences in job responsibilities and

income (without explanation) further supports a conclusion of an unfair process.144

Moreover, the reason offered by Defendants for their choice of peer

companies is simply not credible. Specifically, I cannot believe that the Board

actually viewed the selected peer companies as comparable because they were

“competing for the same people.”145 Given that the designated peer companies were

so much larger in size than Winmill & Co. (when measured by any relevant metric),

the Board could not reasonably have believed that it was competing (or could have

143
See, e.g., Valeant, 921 A.2d at 747–48 (“The committee did not examine afresh the
question of whether any bonus arrangement was appropriate and, if so, how much and what
form of bonus to award.”). Defendants explained that they did not find it necessary to hire
a compensation consultant. According to Defendants, the cost was not justified and the
Board had made compensation determinations as part of its regular course of business for
years. Tr. 240:18–243:12 (Thomas Winmill Testimony). Regardless of the Board’s past
practices, avoiding the cost of a consultant is not a proper justification for a process that is
unfair to the Company and its stockholders and that may result in excessive compensation.
144
The February 28, 2008 written consent does state that the Board considered the “total
compensation packages, and employee responsibilities and performance, relative to
employees with comparable responsibilities at similar companies.” No evidence was
presented to enlighten the Court as to exactly what the Board considered as justification
for the awards apart from the vague reference to “performance . . . in 2007.” JX 32
(Feb. 28, 2008 Written Consent); Tr. 203:4–204:20 (Thomas Winmill Testimony).
145
Tr. 94:9–17 (Thomas Winmill Testimony); 276:22–277:16 (Mark Winmill Testimony).

38
competed) with these companies to recruit the same people to fill senior management

positions.146 It also is not credible that any of the Defendants actually considered

leaving their family company because they were not receiving adequate

compensation.147 As of 2005, all Defendants had been with the Company for years

and were personally invested in the Company’s success. 148 Bassett, in fact,

146
Defendants’ counsel acknowledged as much, explaining that it “is not a perfect analogy
but it’s the best you can do.” OA Tr. 67:7–8.
147
Defendants’ compensation from the Company was not per se excessive. Nevertheless,
there is evidence in the record indicating that Defendants did receive significant fees from
Winmill & Co.’s affiliates while working for the Company. See JX 59 (Compensation
Chart); Tr. 278:10–279:7 (Mark Winmill Testimony). Their compensation by Company
affiliates was a point of much contention at post-trial oral argument, during which Plaintiff
urged the Court to conclude that Defendants were overcompensated, taking into account
compensation they received from Winmill & Co. affiliates. OA Tr. 6:11–7:2; 11:22–15:8.
Defendants were quick to respond that Plaintiff did not bring an “excessive compensation
case” and that Plaintiff’s post-trial arguments amounted to unfair sandbagging. OA Tr.
72:11–75:9. I agree that Plaintiff did not plead or present an “excessive compensation
case” and I do not entertain that claim here. See Compl. ¶¶ 21, 65–79 (none of the
allegations suggest that Defendants, in the aggregate, received compensation that was
excessive); Pl.’s Answering Br. in Opp’n to the Individual Defs.’ Mot. for Summ. J. 1 (only
reference to compensation refers to Defendants having the burden of proof on the Issuance
Claim because “the challenged options involve self-interested compensations decisions”);
see also Ravenswood I, 2011 WL 2176478, at *3 n.31 (“Ravenswood has not advanced
this claim either in its brief or at oral argument, and the Complaint alleges no facts
suggesting that the Company, as contrasted with Midas or Bexil, paid compensation to the
Defendants. To the extent that Ravenswood maintains a claim that the Defendants received
improper compensation from the Company, that claim is dismissed under Court of
Chancery Rule 12(b)(6) for failure to state a claim.”). While I have not considered an
excessive compensation claim, given Defendants’ proffered explanation for the option
awards, I do find that evidence of the Defendants’ compensation from Winmill & Co.
affiliates is relevant to whether they would actually leave the Company to compete in the
market and, if they were to leave, what the market for their services would be.

Tr. 277:9–17 (Mark Winmill Testimony) (“Q. Why were you willing to work for
148

Winmill for that level of cash compensation? A. Well, I was perfectly aware that Winmill,
39
established the Company in the 1970s, attached his family name to the business in

the late 1990s, and brought on his sons, Thomas and Mark, to work for the Company

very early in their professional careers.149 And each of Bassett, Thomas and Mark

received significant compensation from the Company’s affiliates, making their

departure even less likely.150

Even if the Board that made these executive compensation decisions had been

disinterested, the lack of process would be problematic. But this Board was not

disinterested; each of its members was a beneficiary (indeed they were the only

beneficiaries) of the option grants in May 2005. The need to employ conflict

neutralizing measures was omnipresent here and yet the Board did nothing

meaningful to ensure that the decisions it made were fair to Winmill & Co.

In a final attempt to justify the option grants, Defendants point to Plaintiff’s

expert, Croley, and characterize her testimony as proof that the option grants were

or any company, couldn’t possibly retain the services of someone with my education, work
experience, et cetera, but I was very interested in Winmill & Company’s success. It was a
part-time part of my employment and I was very interested in the stock.”).

In this regard, I did not find Thomas’ testimony, that he considered leaving the
149

Company “[f]rom time to time,” particularly convincing. Tr. 161:16–162:4 (Thomas
Winmill Testimony).
150
See, e.g., JX 59 (Compensation Chart); Tr. 223:18–24 (Thomas testifying to receiving
compensation from Brexil Co. and Tuxis Co. in 2005); Tr. 278:10–279:14 (Mark
explaining that he spends 75% of his time working for affiliate Tuxis Co. for which he was
compensated).

40
fair.151 According to Defendants, Croley conceded that two companies within her

chosen peer subset authorized and granted more shares under their plans than

Winmill & Co. authorized and granted under the PEP.152 Setting aside the fact that

I did not find Croley’s testimony to be helpful on any issue, I note that Croley did

not offer any specific opinions regarding the processes by which the Board made

decisions with respect to the PEP. Rather, her opinions focused on the outcomes of

those decision-making “processes,” such as they were.153 Simply stated, Croley’s

testimony was no more helpful to Defendants than it was to Plaintiff.

151
Defs.’ Post-Trial Answering Br. 37–39, 41–43. Defendants otherwise vigorously attack
Croley’s testimony and credentials. See id. at 37 (“Prior to her involvement in this case,
she had never determined an appropriate peer group for an asset management company,
and she had no experience in that industry. [] Indeed, when she drafted her report and at
her deposition, Ms. Croley did not understand what type of assets Winmill & Co. was
managing. [] She does not consider herself an expert on what companies are correct peers
of Winmill & Co., nor whether the companies on Winmill & Co.’s ‘list’ were proper
peers.”); id. at 42 (“Croley also acknowledged that a purpose of a stock option plan is to
reward key employees of a business. [] She did not know, however, how many ‘key
employees’ Winmill & Co. had in 2005. [] Indeed Croley did not know the number of total
employees in 2005, but was ‘thinking it was like a hundred or something.’ []; in reality, it
was approximately 12.”). As the absence of any reference to Croley’s opinions in my
analysis of fair process suggests, I did not find her testimony particularly useful. The lack
of precision, foundation and consistency undermined the credibility of her opinions at
every stage of the litigation in which she was involved (from report, to deposition, to trial).
152
Id. at 39, 42.
153
See, e.g., Croley Report 10 (addressing option grants but making no reference to
process); JX 5 (Croley Deposition) at 91:5–13 (stating she would not opine on the shares
granted); Tr. 360:19–364:13 (Croley addressing option grants but making no reference to
process); Tr. 369:13–371:23 (Croley acknowledging that her report was not clear regarding
her opinion with respect to option grants); Tr. 386:3–387:1 (Croley addressing option
grants but making no reference to process); Tr. 411:2–22 (same).

41
 The Board’s decisions to grant options, to fix the number of options granted,

and to fix the terms of those options were arbitrary and not justified as providing any

commensurate benefit to the Company or its stockholders. Consequently,

Defendants failed to prove fair process.154 Given this finding, I arguably could end

the analysis here.155 For the sake of completeness, however, I address Defendants’

arguments and evidence regarding the fairness of the price below.

c. Fair Price

Plaintiff argues that the price set for the options was unfair and that the price

paid (according to Plaintiff: nothing) was also unfair. Defendants counter that the

price paid for the options was fair because (1) the Court has already determined that

the price set by the Board in devising the PEP was fair; (2) the price paid was based

on the compensation Defendants received in comparison to market compensation;

153
Tr. 386:3–387:1 (Croley Testimony).
154
Valeant, 921 A.2d at 748 (“It simply cannot be said that an independent board advised
by independent experts would have employed a similar process in negotiating or approving
bonuses of this kind.”).
155
See Oliver v. Boston Univ., 2006 WL 1064169, at *25 (Del. Ch. Apr. 14, 2006) (finding
a breach of duty upon concluding that defendant did not prove fair process despite the
court’s finding that the price was fair); Weinberger v. UOP, Inc., 1984 WL 478433, at *6
(Del. Ch. Apr. 24, 1984) (“Since the test of entire fairness is comprised of two elements,
fair dealing and fair price, the defendants have already flunked the test since they have not
passed the fair dealing requirement.”). Cf. Valeant, 921 A.2d at 748 (noting that fair price
might render transaction entirely fair notwithstanding unfair process, but observing that
proving as much would be “exceptionally difficult”) (citing Oliver, 2006 WL 1064169, at
*25).

42
and (3) Defendants took seriously their obligations under the Notes and paid interest

thereon until the Board determined that the Notes should be forgiven (a decision

justified by the Company’s exceptional performance in 2007).

I agree with Defendants that the Court previously determined the price set for

the options in the PEP was fair.156 I see no basis to revisit that finding. But that is

not the end of the fair price inquiry. The Court still must assess the fairness of what

Defendants actually paid for their stock options. That is where Defendants’ case

falls short.

Defendants each were granted options valued at approximately $300,000. Yet

they each paid less than $2,000 in cash (the par value) to exercise those options and

then, in lieu of cash, made a promise to pay the substantial balance owed with interest

as reflected in the Notes.157 As discussed above, the Board forgave those Notes long

before the principal balance was even touched. 158 Under these circumstances, the

fair price analysis must turn on the fairness of Defendants’ collective decision (as a

156
JX 57 (Summary Judgment Bench Ruling), at 9–10.
157
Plaintiff takes issue with the interest rates set for the Notes stating that they “bore the
absolute minimum interest required to avoid having the IRS impute income.” Pl.’s Post-
Trial Opening Br. 51. Had the options otherwise been properly granted as incentive
compensation, that interest rate selection would not be problematic.
158
While Bassett ultimately chose not to have his Note forgiven, the Board had already
forgiven the Note and would have done so again had Bassett so desired. Tr. 274:24–275:8
(Mark Winmill Testimony).

43
Board) to forgive the Notes as purported compensation for the Company’s success

in 2007.159

Defendants testified that their compensation was consistently below the

industry average and that, in light of the Company’s strong performance in 2007

(because of their hard work), they determined it was appropriate to forgive the Notes.

They purportedly made this determination after once again employing their ad hoc

comparable companies analysis. Aside from pointing to the positive revenue results

of 2007 (which Plaintiff vigorously challenges), however, Defendants have failed to

show why such significant compensation was justified, especially considering the

Company-wide bonus that was awarded to each of the Defendants (along with the

Company’s other employees) less than three months prior. Here again, there was no

attempt to document the specific efforts or initiatives undertaken by Defendants in

2007 that would justify the forgiveness of their substantial debt to the Company, no

documented attempt to compare 2007 to past years as a means to justify the

extraordinary level of additional compensation paid only to Defendants and, of

course, no expert analysis of the propriety of the Board’s self-interested decision or

its impact on the Company. In light of the very limited time Defendants spent

159
Bassett is not considered for this part of the fair price analysis since his estate paid the
entirety of his Note. Since all three Defendants were found to have facilitated an unfair
process, however, this exclusion does not alter the finding of Bassett’s liability.

44
working on behalf of Winmill & Co. during the relevant years, the compensation

Defendants received from other Company affiliates and the lack of objective

evidence supporting Defendants’ claim of inadequate compensation, I cannot find

that Defendants carried their burden of proving that the amount they paid for their

stock options was fair.160

Finally, I am satisfied that the Board’s failure to implement a fair process

when granting the option awards and when deciding to forgive the Notes ultimately

“infect[ed] the fairness of the price.”161 In addition to the process infirmities already

discussed, it cannot be ignored that the Board remained focused on the personal

interests of the individual beneficiaries of the option grants (themselves) throughout

160
See Valeant, 921 A.2d at 748–49 (“The court’s finding that ICN’s management and
board used an unfair process to authorize the bonuses does not end the court’s inquiry
because it is possible that the pricing terms were so fair as to render the transaction entirely
fair. Nevertheless, where the pricing terms of a transaction that is the product of an unfair
process cannot be justified by reference to reliable markets or by comparison to substantial
and dependable precedent transactions, the burden of persuading the court of the fairness
of the terms will be exceptionally difficult. Relatedly, where an entire fairness review is
required in such a case of pricing terms that, if negotiated and approved at arm’s-length,
would involve a broad exercise of discretion or judgment by the directors, common sense
suggests that proof of fair price will generally require a showing that the terms of the
transaction fit comfortably within the narrow range of that discretion, not at its outer
boundaries.”). On the fair price question, Defendants renew their argument that this case
was never about compensation (or at least not compensation received from Winmill & Co.
affiliates). See, e.g., OA Tr. 68:5–70:10; 86:12–87:24. To analyze the fairness of the price
paid for the options, however, I must assess Defendants’ work for the Company, the work
they performed elsewhere and the compensation they received from all sources.
161
Bomarko, Inc. v. Int’l Telecharge, Inc., 794 A.2d 1161, 1183 (Del. Ch. 1999) (“[T]he
unfairness of the process also infects the fairness of the price.”); Reis v. Hazelett Strip-
Casting Corp., 28 A.3d 442, 467 (Del. Ch. 2011) (“[P]rocess can infect price.”).

45
its decision making with respect to the PEP. Recall, for example, that the Board

initially forgave the Notes in February 2008 but then rescinded that decision when

the debtors determined they were not prepared to deal with the tax consequences of

loan forgiveness. Once the tax issues were addressed, the Board caused Thomas and

Mark’s Notes to be forgiven again but honored Bassett’s request to keep his Note in

place. When Bassett could not pay upon the Note’s maturity, the Board extended

the maturity of his payment obligation without consideration. These decisions might

make perfect sense if this “family business” was, actually, a “family business” where

the members of the Winmill family were the only stakeholders. But there were other

stakeholders here, namely the public stockholders. Defendants owed those

stockholders fiduciary duties of care and loyalty; they could not make decisions just

because those decisions suited their needs or interests. By acting only out of self-

interest, Defendants have diminished any confidence that the price they actually paid

for their stock options was fair.162

162
See, e.g., Bomarko, 794 A.2d at 1183 (quoting Kahn v. Tremont Corp., 694 A.2d 422,
432 (Del. 1997)) (explaining that process and price can be “so intertwined” that even a
finding that the price “might have been fair does not save the result”).

46
 2. The Remedy

Having found that Defendants breached their duty of loyalty, I turn next to the

difficult question of what relief is appropriate to remedy the breach.163 With regard

to the Issuance Claim, Plaintiff requested in the Complaint that the Court award

damages “in an amount to be determined at trial,” cancel “the options and all shares

acquired using the options” and award “such other further relief” as might be

justified.164 In the Pre-Trial Order and its pre-trial opening brief, Plaintiff requested

“[r]escission of all of the challenged Stock issued to the Individual Defendants in

2005.”165 In its post-trial opening brief, Plaintiff again requested cancellation of the

“options issued under the [] PEP,” but additionally requested that the Court not

return to Defendants the money they paid to exercise their options.166

At trial, Plaintiff failed to present any evidence in support of its prayers for

relief. When the Court expressed its concern during closing arguments that the

163
I note that Plaintiff did not try or argue a breach of the duty of care with respect to the
Issuance Claim.
164
Compl. ¶ 73. The unexercised options expired after five years. See JX 15 (May 23,
2015 Written Consent), at W-0005. As noted, due to the length of time that has passed
since the initiation of the 2008 Action, the unexercised options had expired by the time of
trial.
165
PTO 10. Plaintiff also requested rescission of “all options issued to Defendants in
connection with the PEP” in its pre-trial brief. Pl.’s Pre-Trial Br. 3.
166
Pl.’s Post-Trial Opening Br. 60.

47
evidentiary foundation for Plaintiff’s requested remedies was lacking, counsel

appealed to the Court’s sense of equity and urged the Court to employ its broad

discretion in fashioning relief to remedy a loyalty breach.167 Of course, Plaintiff is

correct in asserting that this court has “significant discretion . . . in fashioning an

appropriate remedy.”168 Indeed, “[i]n determining damages, the Court’s ‘powers are

complete to fashion any form of equitable and monetary relief as may be

appropriate.’”169 And, in cases where the court has found a breach of the duty of

loyalty, recovery is “not to be determined narrowly.” 170 To be sure, in these

167
See OA Tr. 41:17–42:5. See also Pl.’s Post-Trial Reply Br. 11 (“The suggestion that a
court of equity could not fashion an appropriate remedy if it found a breach of fiduciary
duty by self-dealing fiduciaries is one without precedent in Delaware.”). When pressed at
post-trial oral argument to point to evidence or offer guidance with respect to remedies,
Plaintiff suggested that the Court could and should convene a separate hearing to address
remedies. OA Tr. 42:1–42:5. With a decade of litigation under our collective belts, and
ample opportunity for Plaintiff to develop and present its best evidence, I decline to hold
additional evidentiary hearings in this case.
168
Bomarko, 794 A.2d at 1184.
169
Id. (quoting Weinberger, 457 A.2d at 714); Zutrau v. Jansing, 2014 WL 3772859, at
*40 (Del. Ch. July 31, 2014) (“Among the factors a Court will consider in determining an
appropriate remedy is whether there is evidence of ‘fraud, misrepresentation, self-dealing,
deliberate waste of corporate assets, or gross and palpable overreaching.’” (quoting
Weinberger, 457 A.2d at 714)).
170
Thorpe v. CERBCO, Inc., 676 A.2d 436, 445 (Del. 1996) (“Delaware law dictates that
the scope of recovery for a breach of the duty of loyalty is not to be determined narrowly.”
(quoting In re Tri-Star Pictures, Inc., Litig., 634 A.2d 319, 334 (Del. 1993)). See also
Gesoff v. IIC Indus., Inc., 902 A.2d 1130, 1154 (Del. Ch. 2006) (“[T]he Court of Chancery
has greater discretion when fashioning an award of damages in an action for a breach of
the duty of loyalty”) (internal quotation omitted); Int’l Telecharge, Inc. v. Bomarko, Inc.,
776 A.2d 437, 440 (Del. 2000) (“[T]he powers of the Court of Chancery are very broad in
48
circumstances, “potentially harsher rules come into play.”171 But the Court still must

have some basis in the evidence upon which to grant relief. 172 After carefully

reviewing the record, I am satisfied that there is no legal or evidentiary basis to grant

a remedy to the Company beyond nominal damages.

a. There is No Evidentiary Basis for Granting Compensatory
Damages
As a general matter, I agree with Plaintiff that compensatory damages are an

appropriate means by which to remedy a breach of the duty of loyalty. 173 Plaintiff,

however, presented absolutely no evidence upon which the Court could justify an

award of compensatory damages to the Company. 174 Thus, any award of

fashioning equitable and monetary relief under the entire fairness standard as may be
appropriate, including rescissory damages.”).
171
Bomarko, 794 A.2d at 1184.
172
See Arnold v. Soc’y for Sav. Bancorp, Inc., 678 A.2d 533, 541 (Del. 1996) (“While it is
often thought to be axiomatic that a wrong must have a correlative remedy, this is not
always the case.”); PharmAthene, Inc. v. SIGA Tech., Inc., 2011 WL 6392906, at *3 (Del.
Ch. Dec. 16, 2011) (“[T]his Court enjoys remedial flexibility to depart from strict
application of the ordinary forms of relief where circumstances require. Nevertheless,
courts of equity should attempt to balance that flexibility by a measure of concomitant
restraint to minimize uncertainty.”); In re Fuqua Indus., Inc., 2005 WL 1138744, at *7
(Del. Ch. May 6, 2005) (even a court of equity should award damages only when they are
“susceptible of proof and appropriate to all the issues of fairness”).
173
See OptimisCorp v. Waite, 2015 WL 5147038, at *82 (Del. Ch. Aug. 26, 2015); Triton
Const. Co., Inc. v. E. Shore Elec. Servs., Inc., 2009 WL 1387115, at *28 (Del. Ch. May 18,
2009).
174
In its post-trial opening brief, Plaintiff requested “expenses related to the 2005 PEP.”
See Pl.’s Post-Trial Opening Br. 60. That remedy was not requested in the Complaint and,
in any event, no evidence was presented with respect to that request at trial. As Plaintiff’s
49
compensatory damages would be the product of rank speculation and, as a matter of

law, improper.175

b. Neither Cancellation nor Equitable Rescission nor Rescissory
Damages are Warranted
With respect to Plaintiff’s request for cancellation of the shares, Defendants

argue that (1) Plaintiff provided no basis for cancellation without the return of both

Plaintiff and Defendants to the status quo176; and (2) the Pre-Trial Order should

govern and Plaintiff requested rescission in the Pre-Trial Order, not cancellation.177

To the extent the Court considers rescission, Defendants point out that this remedy

would harm rather than help the Company since the Company cannot afford to repay

Defendants the amounts they paid for their options.178 Once again, Plaintiff offered

little by way of guidance in response to this argument.179

counsel acknowledged during closing arguments, “this court has always fashioned
remedies based on the evidence presented at trial and the [c]ourt’s
conclusions.” OA Tr. 102:13–15. Without evidence presented at trial, I cannot award
Plaintiff’s requested compensatory damages.
175
OptimisCorp, 2015 WL 5147038, at *82 (holding that the court cannot award
speculative damages); Ivize of Milwaukee, LLC v. Compex Litig. Supp., LLC, 2009
WL 1111179, at *11 (Del. Ch. Apr. 27, 2009) (same); Am. Gen. Corp. v. Cont’l Airlines
Corp., 622 A.2d 1, 12 (Del. Ch. 1992) (same); Twardowski v. Jester, 163 A.2d 242, 224
(Del. Ch. 1960) (same).
176
OA Tr. 98:22–99:8; Defs.’ Post-Trial Answering Br. 57.
177
PTO 10.
178
Defs.’ Post-Trial Answering Br. 57–59.
179
OA Tr. 102:10–15.

50
 Based on the record presented, I agree with Defendants that (1) Plaintiff has

not presented a basis for cancellation without a mutual return to the status quo;

(2) equitable rescission would not be in the Company’s best interest under the unique

circumstances presented here180; and (3) Plaintiff has failed to present evidence upon

which I could fashion an award of rescissory damages.181 I explain each of these

findings below.

To start, it is important to understand what the terms “cancellation” and

“rescission” mean under Delaware law. Rescission can be sought at law or in

180
I acknowledge that the remedy question, with regard to rescission, presents a rather
unique issue due to the derivative nature of this action. Generally, plaintiffs do not request
relief that will not provide a benefit to them. In derivative actions, however, the plaintiff
ostensibly seeks a remedy for the company but may not have the same ability or incentives
to ensure that what he is asking for will actually provide a net benefit to the real party in
interest. This dynamic apparently is at work here. The Court’s focus, nevertheless, must
remain on fashioning a remedy that is supported in law, in the evidence and in the practical
realities confronting the Company. See Great Hill Equity P’rs IV, L.P. v. SIG Growth
Equity Fund I, LLLP, 2014 WL 6703980, at *29 n.274 (Del. Ch. Nov. 26, 2014)
(“Rescission is a remedy available only where facts indicate equity so requires.” (quoting
ENI Hldgs., LLC v. KBR Gp. Hldgs., LLC, 2013 WL 6186326, at *24 (Del. Ch. Nov. 27,
2013)); Sunbelt, 2010 WL 26539, at *14 (“[R]escission is an equitable remedy that a court
of equity will only grant, as an exercise of discretion, when that remedy is clearly
warranted.”); Keenan v. Eshleman, 2 A.2d 904, 912 (Del. 1938) (explaining that the proper
remedy in a derivative action must be determined by preserving “the fiction of corporate
entity” and that the action must be “considered as though the corporation itself were suing
the defendants”); 12A C.J.S. Cancellation of Inst. § 11 (2018) (“Where the cancellation of
an instrument is sought but it appears that such decree would in no way help the party
seeking it, the court will not perform the vain act of decreeing the cancellation.”).
181
See Oliver, 2006 WL 1064169, at *25.

51
equity.182 By ordering rescission, whether at law or in equity, the court endeavors

to unwind the transaction and thereby restore both parties to the status quo.183 While

rescission at law refers to the “judicial declaration that a contract is invalid and a

judicial award of money or property,”184 equitable rescission offers a platform to

provide additional equitable relief, such as cancellation of a valid instrument—the

formal annulment or setting aside of an instrument or obligation.185 In this form,

182
Schlosser & Dennis, LLC v. Traders Alley, LLC, 2017 WL 2894845, at *9 (Del. Super.
July 6, 2017); E.I. du Pont de Nemours & Co. v. HEM Research, Inc., 1989 WL 122053,
at *3 (Del. Ch. Oct. 13, 1989); 12A C.J.S. Cancellation of Instr. § 2 (2018).
183
Hegart v. Am. Commonwealths Power Corp., 163 A. 616, 619 (Del. Ch. 1932) (“[I]t is
fundamental that if the choice be made of rescission, there must be a restoration of the
status quo ante, not only of the complainant but as well of the defendant. It is therefore
necessary that the rescinding party should offer or tender such a restoration to the other,
and that the court should be able to effectuate it by decree.”). Craft v. Bariglio, 1984 WL
8207, at *12 (Del. Ch. Nov. 1, 1984) (“It is settled law that if a plaintiff chooses the remedy
of rescission, there must be a restoration of the status quo ante, not only of the plaintiff but
of the defendant as well, and if under the facts of the particular case ‘a just and equitable
restoration of the substantial status quo ante’ cannot be accomplished, rescission will be
denied.”).
184
E.I. du Pont, 1989 WL 122053, at *3.
185
Id. (“This additional aspect, the “equitable” ingredient in rescission, is necessitated, for
example, in circumstances in which if an instrument, document, obligation, or other matter
were not cancelled, plaintiff would be exposed to liability to third parties not appearing in
the action. If plaintiff is fraudulently induced to execute a note in favor of defendant, the
only remedy that is adequate for plaintiff is cancellation of the note to ensure that defendant
does not transfer the note to a bona fide purchaser, who could then recover from plaintiff
under the note.”). See also MBKS Co. Ltd. v. Reddy, 924 A.2d 965, 976 (Del. Ch. 2007)
(finding cancellation of stock appropriate and ordering the return of “all monies paid by
[the stockholder] for th[e] shares”).

52
equitable rescission is often referred to as cancellation,186 although it is generally

accompanied by further relief (such as restitution)187 in order to achieve a complete

restoration to the status quo ante.188

In its Complaint and post-trial briefing, Plaintiff clearly requested cancellation

of the shares.189 It has not presented, however, a basis in law or the trial evidence

to warrant cancellation of the shares without a corresponding requirement that the

186
E.I. du Pont, 1989 WL 122053, at *3; Donald J. Wolfe & Michael A. Pittenger,
Corporate and Commercial Practice in the Delaware Court of Chancery § 12.04[a], at 12-
58 (2017) (“[R]escission refers to the avoidance of a transaction or the cancellation of the
deal.”)
187
Restitution is “the return of that which one or both parties gained through an avoided
transaction to prevent unjust enrichment.” Wolfe & Pittenger, supra, § 12.04[a], at 12-58.
188
Wolfe & Pittenger, supra, § 12.04[a], at 12-58 (“As a remedy, rescission seeks to
‘unmake’ an agreement; it ‘calls the deal off’ and seeks to return the parties to the status
quo ante. Rescission is, therefore, less a remedy and more a matter of conceptual apparatus
that leads to the remedy; because the contract is being unmade, the exchange of
consideration has to be reversed, and if it is not possible to restore such consideration in
kind, the plaintiff may be entitled to the monetary equivalent of what he gave up in
damages.”); E.I. du Pont, 1989 WL 122053, at *3; 12A C.J.S. Cancellation of Inst. § 2
(2018) (“Generally, cancellation or rescission of a written instrument are one and the same
remedy . . . The terms ‘cancellation’ and ‘rescission’ are frequently regarded as being
interchangeable or synonymous. . . . If there is a distinction between cancellation and
rescission, it is only that ‘rescission’ is the general undoing of the original agreement while
‘cancellation’ is a more formal annulment or rendering of an instrument ineffective as a
legal obligation. Thus, while rescission and cancellation usually go together, still, insofar
as the physical cancellation of a written instrument is concerned, they are not
inseparable. Although a decree for rescission alone might amount to a judicial annulment
of the contract, whether oral or written, in its strictest sense, cancellation can ordinarily
apply only to written instruments.”).
189
Compl. ¶ 47; Pl.’s Post-Trial Opening Br. 2–3, 60.

53
Company return to Defendants the funds they expended to exercise their options.

Generally, cancellation without restitution is only warranted where there has been a

total failure of consideration (including as a result of fraud). 190 The court has,

however, denied cancellation without restitution even in cases of fraud and

misrepresentation where there has been some exchange of consideration.191 Here,

Defendants’ exercise of the stock options is supported by some consideration (the

payment of par value and some interest) and Plaintiff has not alleged, much less

proven, any fraudulent conduct on Defendants’ part. Because I have determined that

there is no support for “pure” cancellation, I need not—and do not—address

Defendants’ argument that Plaintiff waived any right to cancellation by not

requesting it in the Pre-Trial Order.

That leaves the question of whether Plaintiff is entitled to cancellation of the

shares accompanied by a return of the funds to Defendants—an award of true

190
See, e.g., Diamond State Brewery v. De La Rigaudiere, 17 A.2d 313, 318 (Del. Ch.
1941) (finding cancellation proper where the facts indicated gross overvaluation and
fraudulent concealment of a total failure of consideration). Blair v. F. H. Smith Co., 156
A. 207, 213 (Del. Ch. 1931) (granting cancellation without restitution after finding that
“not a particle of consideration was given”); Gillette v. Oberholtzer, 264 P. 229, 230 (Idaho
1928) (referring to “the general requirement that a grantor procuring the cancellation of an
instrument, even for duress or fraud, must place the grantee in statu[s] quo, a rule so
elementary as to require no citation of authority”); Rogers v. Hale, 218 N.W. 264, 266
(Iowa 1928) (finding that even where fraud was proven, rescission had to accompany
cancellation).
191
Cf. Craft, 1984 WL 8207, at *11–12 (denying equitable rescission of fraudulently
procured transaction where the transaction was supported by consideration).

54
equitable rescission. There is no question that equitable rescission is generally an

effective remedy for a breach of the duty of loyalty.192 Even so, “a court of equity

will only grant rescission, as an exercise of discretion, when that remedy is clearly

warranted.”193 The remedy is not warranted here for the simple reason that the Court

cannot “restore the parties substantially to the position which they occupied before”

the option grants were made.194

As discussed, the restoration of the status quo would require the cancellation

of the stock as well as the Company’s return to Defendants of the funds they paid to

exercise the stock options. While Defendants’ stock is voidable and could, therefore,

be cancelled,195 the Company’s return of the funds Defendants paid for their options

192
Schlosser, 2017 WL 2894845, at *10; In re Orchard Enters., Inc. S’holder Litig.,
88 A.3d 1, 38 (Del. Ch. 2014) (“The remedy is available for an adjudicated breach of the
duty of loyalty, such as cases involving self-dealing or where a fiduciary puts personal
interests ahead of the interests of its beneficiary.”).
193
Sunbelt, 2010 WL 26539, at *14. See also Zutrau, 2014 WL 3772859, at *40 (declining
to grant rescission because it was not shown that the self-interested transaction was
completed with “conscious intent to deprive [] of the fair value of [] shares, or deny []
access to benefits of pending corporate opportunities”); Diamond State Brewery, 17 A.2d
at 318 (When stock is not void but “merely voidable, then that form of relief is to be
adopted which would seem to be most in accord with all the equities of the case. I find
nothing in the position of respondents which would justify allowing them to retain the []
stock.”) (internal quotation omitted).
194
Craft, 1984 WL 8207, at *12. See also id. (“[I]f under the facts of the particular case a
just and equitable restoration of the substantial status quo ante cannot be accomplished,
rescission will be denied.”).
195
Here, the stock is voidable rather than void because “[t]here is nothing in the record []
suggesting that the action of the Board of Directors [], in [granting] the stock option[s],
was actually fraudulent or of such illegality as to be absolutely void. The interested
55
would significantly reduce (if not completely eliminate) the Company’s available

cash resources.196 Under these circumstances, because rescission would afford no

benefit to the Company, the Court cannot conclude that the remedy is “warranted.”197

For the same reasons rescission is not warranted, rescissory damages, “the

monetary equivalent of rescission,”198 are also inappropriate. To start, Plaintiff did

not request rescissory damages.199 Regardless, that remedy is only available in cases

where rescission is warranted but not feasible. 200 Here, because rescission is not

warranted, rescissory damages also are not warranted.

character of the directors who voted for the [grant, however,] makes their action voidable.”
Kerbs v. Ca. E. Airways, 90 A.2d 652, 655 (Del. 1952). Voidable stock is subject to
cancellation as a matter of equity. See STAAR, 588 A.2d at 1137 (citing Diamond State
Brewery, 17 A.2d at 318).
196
Defendants presented credible testimony that equitable rescission would not be in the
best interest of the Company. Tr. 146:15–150:7 (Thomas Winmill Testimony). The
Company would have to return the par value, interest and (for Bassett) the Note principal
paid in full. In exchange, the Company would be receiving stock worth substantially less
now than it was in 2006 or 2007. Tr. 23:7–11 (Thomas Winmill Testimony). Thus,
rescission would result in a windfall for Defendants rather than a benefit to the Company.
197
Sunbelt, 2010 WL 26539, at *14.
198
Orchard, 88 A.3d at 38 (internal citation omitted).
199
Compl. ¶¶ 69, 74; PTO 10.
200
Gotham P’rs, L.P. v. Hallwood Realty P’rs, L.P., 855 A.2d 1059, 1072 (Del. Ch. 2003)
(“Because rescission was practicable, I—as the Supreme Court found—denied that remedy
as unwarranted. Because rescission was found to be unwarranted, an award of rescissory
damages was also unwarranted. The reason that is so is simple. Rescissory damages are
designed to be the economic equivalent of rescission in a circumstance in which rescission
is warranted, but not practicable. A solid body of case law so holds.”); Catamaran Acq.
Corp. v. Spherion Corp., 2001 WL 755387, at *4 (Del. Super. Ct. May 31, 2001)
(“Rescissory damages may be appropriate when the equitable remedy of rescission is
56
 Assuming, arguendo, that rescission were warranted (but somehow not

feasible), rescissory damages would still not be an available remedy because there

is no adequate basis on which to calculate them.

In a case where a disloyal fiduciary wrongfully deprives its
beneficiary of property, the rescissory damages measure seeks (i) to
restore the plaintiff-beneficiary to the position it could have been in
had the plaintiff or a faithful fiduciary exercised control over the
property in the interim and (ii) to force the defendant to disgorge
profits that the defendant may have achieved through the wrongful
retention of the plaintiff’s property. In a case involving corporate
stock, rescissory damages can be measured at the time of judgment,
the time of resale, or at an intervening point when the stock had a
higher value and remained in control of the disloyal fiduciary.201
When awarding rescissory damages, “[t]he law does not require certainty in

the award” but allows, instead, “[r]easonable estimates that lack mathematical

certainty . . . so long as the court has a basis to make a responsible estimate of

damages.”202 But even rescissory damages “may only be considered if they are

susceptible of proof and appropriate to all the issues of fairness.”203

impractical” but otherwise warranted.”) (internal quotation omitted); Cinerama, Inc. v.
Technicolor, Inc., 663 A.2d 1134, 1144 (Del. Ch. 1994) (holding that rescissory damages
are “applied when equitable rescission of a transaction would be appropriate, but is not
feasible.”); Weinberger, 1984 WL 478433, at *5 (same).
201
Orchard, 88 A.3d at 38–39 (internal citation omitted).
202
Reis, 28 A.3d at 466.
203
In re Fuqua, 2005 WL 1138744, at *7 (internal quotation omitted). See also
Weinberger v. UOP, Inc., 1985 WL 11546, at *2–3 (Del. Ch. Jan. 30, 1985) (finding
rescissory damages “inappropriate as a remedy because of the speculative nature of the
offered proof”).

57
 The problem here is that Plaintiff again has provided no evidentiary basis for

even a “responsible estimate” of rescissory damages.204 The trial evidence suggests

that the current value of Winmill & Co. stock (approximately $1 per share) is

eclipsed by the sum(s) Defendants have already paid to the Company (in the form

of par value and interest payments). A grant of rescissory damages based on this

share value, given the need to award appropriate offsets to Defendants for amounts

paid for their options, would cause a net loss for the Company.

There is evidence in the record that the trading price of the Stock at the time

the stock options were granted was $2.68 per share.205 That marker might provide a

basis upon which to formulate a principled rescissory damages award (e.g., by

awarding the difference between the “the highest intervening [per share] value” of

the Stock since the time of the wrong and the current value of the Stock) if the Court

could conclude that the Company “could have disposed of [the stock] at the higher

intervening price.”206 But there is no evidence in the record that would support the

204
In re MAXXAM, Inc., 659 A.2d 760, 775–76 (Del. Ch. 1995) (explaining that calculating
rescissory damages requires evidence of the present value of the assets (as of the time of
judgment) and that the evidence presented was insufficient to determine that value);
Weinberger, 1985 WL 11546, at *7 (“I find rescissory damages to be inappropriate as a
remedy because of the speculative nature of the offered proof.”).
205
JX 58 (Stock Price Chart May 23–June 30, 2005).
206
Reis, 28 A.3d at 467–68 (“[R]escissory damages . . . [may] reflect . . . the highest
intervening value [of wrongfully taken corporate stock] between the time of the wrong and
58
conclusion that the Company “could have disposed of” 199,998 shares of Stock at

$2.68 per share at any time between May 23, 2005 and now. Consequently, any

award of rescissory damages based on that marker would be unduly speculative and,

thus, inappropriate.207

That leaves the Court to its own imagination as to what remedy to award. One

could imagine a scenario where Bassett’s estate (having paid the entirety of Bassett’s

Note principal) keeps its stock and rescission is ordered as to Thomas and Mark

only. This scenario might eliminate the “net loss” problem in that the value of the

shares would exceed the amount due back to Thomas and Mark. But there are still

too many unknowns with regard to a rescission remedy that targets only the Winmill

brothers. Are the Company’s current cash resources sufficient to pay Thomas and

Mark their expended funds? Even if the Company has sufficient funds, would it

benefit the Company to receive back shares that are worth significantly less now

the time of judgment if the beneficiary or a faithful fiduciary could have disposed of
wrongfully taken [stock] at the higher intervening price.”) (citations omitted).
207
See Gaffin v. Teledyne, Inc., 1990 WL 195914, at *16–17 (Del. Ch. Dec. 4, 1990)
(declining to award rescissory damages when plaintiff’s expert testimony and plaintiff’s
remaining evidence were “speculative and not persuasive”), aff’d in part, rev’d in part on
other grounds, 611 A.2d 467 (Del. 1992); Weinberger, 1985 WL 11546, at *7 (“I find
rescissory damages to be inappropriate as a remedy because of the speculative nature of
the offered proof.”). That same exhibit also shows values of up to $2.85 per share on
several dates in June 2005. JX 58 (Stock Price Chart May 23–June 30, 2005). Those
values fail as markers for the same reason as the price on the day of grant.

59
than when the share options were granted? Again, Plaintiff has not presented

evidence or argument in support of this approach and I have no basis to know

whether the approach offers any remedy at all to the Company.208

In attempting to fill the gap left by Plaintiff’s failure to plead, prove or argue

for appropriate remedies, the Court has also considered the possibility of ordering

specific performance of the promissory notes given by Thomas and Mark that were

forgiven by the Board.209 Plaintiff did not ask for specific performance in any of its

pleadings. Nevertheless, as a general matter, a prayer within a complaint for “such

other further relief as justified,” such as the one included in the Complaint, could

encompass, in an appropriate case, an award of specific performance. 210 But this is

not that case. Not only did Plaintiff not seek specific performance in any of its

complaints, it did not do so in the Pre-Trial Order, in its Pre-Trial Brief, at trial, in

208
Weinberger, 1985 WL 11546, at *2 (declining a form of damages based on its
speculative nature).
209
Specific performance as to Bassett is unnecessary since he (and his estate) paid the Note
principal.
210
Compl. 33. See, e.g. Int’l Union of Elevator Constructors, AFL-CIO v. Reg’l Elevator
Co., 847 F. Supp. 2d 691, 701 (D. Del. 2012) (“Because Plaintiffs’ Complaint did request
that the Court grant other such relief deemed just and proper, Plaintiffs’ claim for specific
performance is appropriately raised.”) (internal quotation omitted); Sheet Metal Workers’
Int’l Ass’n Local 19 v. Herre Bros., Inc., 201 F.3d 231, 248–49 (3d Cir. 1999) (“In its
amended complaint, the Union requested money damages representing lost wages and
fringe benefits, a declaratory judgment, and such other relief as the Court deems just and
reasonable . . . As a result, we believe that the request for relief in the amended complaint
is broad enough to encompass a request for specific performance, especially in light of the
actual request made in a post-trial brief.”) (internal quotation omitted).

60
its Post-Trial Briefs or during Post-Trial argument.211 Indeed, Plaintiff sought the

opposite of specific performance; it sought rescission or cancellation of the option

grants (without any assessment, apparently, of whether that remedy would actually

benefit the Company).212

“The essence of due process is the requirement that a person in jeopardy of

serious loss be given notice of the case against him and opportunity to meet it.” 213

Plaintiff’s basic failure meaningfully to address the remedy question at any stage of

these proceedings has created a vacuum that the Court cannot fill, even in the spirit

of equity, without offending fundamental notions of due process. This case has been

pending for almost ten years. Both sides have had more than ample opportunity to

formulate their positions, develop supporting evidence and make their case at trial.

Under these circumstances, it is not appropriate to re-open the trial record to allow

Plaintiff to do what it should have done in the first place.

211
Cf. Sheet Metal Workers, 201 F.3d at 248–29 (court found specific performance
available when complaint included reference to “such other relief as the Court deems just
and reasonable” and Plaintiff requested the relief after trial thereby affording defendant the
opportunity to respond); Int’l Union of Elevator Constructors, 847 F.Supp. 2d at 701
(same).
212
Compl. ¶ 74 (requesting cancellation); PTO 10 (requesting rescission); Pl.’s Pre-Trial
Br. 43 (requesting rescission); Pl.’s Post-Trial Opening Br. 60 (requesting cancellation).
213
Mathews v. Eldridge, 424 U.S. 319, 348–49 (1976). See also Watson v. Div. of Family
Servs., 813 A.2d 1101, 1107 (Del. 2002) (“[T]his Court’s construction of the Delaware
Constitution’s mandate for due process . . . has been consistent with the flexible standards
of due process enunciated by the United States Supreme Court in Mathews v. Eldridge.”).

61
 c. An Award of Nominal Damages is Appropriate

Since I have found a breach of the duty of loyalty but am unable to award any

other form of relief, I find that Plaintiff is entitled to nominal damages.214

Nominal damages are not given as an equivalent for the wrong, but
rather merely in recognition of a[n] [] injury and by way of declaring
the rights of the plaintiff. Nominal damages are usually assessed in a
trivial amount, selected simply for the purpose of declaring an
infraction of the Plaintiff’s rights and the commission of a wrong.215

In recognition that these Defendants acted disloyally to the Company, I grant

nominal damages in the amount of $1.216

B. The Financial Reporting Claim

As previously noted, Plaintiff’s Financial Reporting Claim derived from a

combined Section 220 and breach of fiduciary duty action.217 By the time of trial,

214
Ivize, 2009 WL 1111179, at *12; Oliver, 2006 WL 1064169, at *25 (“Therefore,
although the BU Defendants did breach their duty of loyalty and were unable to
demonstrate the entire fairness of the Series B and C transactions, for purposes of assessing
the fiduciaries’ treatment of these claims in the context of negotiating the Accord
Agreement, the Court does not find it appropriate to assign anything but nominal damages
to these breaches.”).
215
Oliver, 2006 WL 1064169, at *34 (quoting Penn Mart Supermarkets, Inc. v. New Castle
Shopping LLC, 2005 WL 3502054, at *15 (Del. Ch. Dec. 15, 2005)).
216
Ivize, 2009 WL 1111179, at *12 (“[T]he court holds that Ivize is entitled to nominal
damages in the amount of one dollar.”); Oliver, 2006 WL 1064169, at *34–35 (“[F]or the
purpose of declaring an infraction of the Plaintiffs’ rights and the commission of a wrong,
the Court awards the Plaintiffs, and the prevailing class they represent, one dollar in
nominal damages.”) (internal citation omitted).
217
By way of reminder, the Section 220 claim and the Financial Reporting Claim were
severed early on in that case. JX 51 (Ravenswood III), at 3–4.

62
the Section 220 claim had been decided and prior rulings of the Court had

significantly narrowed the breach of fiduciary duty claim.218 The only aspect of the

initial claim that survived Defendants’ motion practice was whether Defendants

stopped “the preparation of [the] audited financial reports and perhaps other

financial information” because of “a troublesome shareholder’s use of its

Section 220 rights.”219

In post-trial briefing and during closing arguments, Plaintiff attempted to

revive claims based on a general obligation to disclose information to

stockholders.220 Those claims no longer are part of the Financial Reporting Claim,

assuming they ever were viable.221 With regard to the claim that was tried, the

gravamen of Plaintiff’s argument is that Defendants’ decision to stop the Company’s

preparation of financial statements, in the form prepared for years, constitutes a

breach of their fiduciary duty of loyalty because Defendants made that decision in

218
Id. at 10.
219
Id. See also JX 57 (Summary Judgment Bench Ruling), at 21.
220
See, e.g., Pl.’s Post-Trial Reply Br. 12–13 (explaining that stockholders have no way of
receiving financial information and that footnotes to financial statements are important for
stockholder understanding of Company financials); OA Tr. 37:7–38:22 (arguing that the
Defendants have not run the Company for the benefit of the stockholders and that it could
have provided financials and corresponding footnotes without an audit).
221
JX 51 (Ravenswood III), at 10. See also JX 57 (Summary Judgment Bench Ruling),
at 21.

63
order to punish Plaintiff for exercising its inspection rights under 8 Del. C. § 220.

Defendants argue that Plaintiff failed to present any evidence to support its claim of

vindictive motive or to counter their explanation that the Company chose not to

continue preparing financial statements because of cost, time commitment, lack of

necessity and risks of meritless litigation.

Our law presumes that the directors of Delaware corporations make business

decisions on an informed basis and in the honest belief their decision is in the

corporation’s best interest.222 To overcome this presumption, as Plaintiff seeks to

do here, Plaintiff bears the burden of proving that the Defendant directors “appeared

on both sides of the transaction or derived a personal benefit from a transaction in

the sense of self-dealing.”223 No such proof exists in the trial record with respect to

the Financial Reporting Claim.224

The evidence at trial showed that the Company’s last financial audit was

completed in October 2012.225 Around that same time, the parties were involved in

motion practice in Plaintiff’s Section 220 Action. Plaintiff argues it was that

222
Cede & Co. v. Technicolor, Inc., 634 A.2d 345, 360–61 (Del. 1993); Zoren v. Genesis
Energy, L.P., 836 A.2d 521, 528 (Del. Ch. 2003).
223
Zoren, 836 A.2d at 528; Cede, 634 A.2d at 361.
224
See Cede, 634 A.2d at 361.
225
JX 46 (Winmill & Co. 2011 Annual Report), at WFIN-0066.

64
litigation that prompted Defendants’ decision to stop the Company’s preparation of

financial statements. As support, Plaintiff points to evidence that the Court heard

oral argument on Plaintiff’s motion to compel and for sanctions in the Section 220

Action the day after the last audit report was issued.226 It then points to testimony

of Thomas and Mark indicating that one reason for their decision to stop the

Company’s preparation of financial statements was the anticipation of further

litigation.227

Plaintiff’s circumstantial evidence of temporal connection is insufficient to

reveal the kind of improper motive or self-interested decision making that would

justify a finding that the business judgment presumption does not apply here. First,

the 2012 hearing to which Plaintiff refers concerned, inter alia, a motion to compel

the attendance of one of the Defendants at a deposition as a Company witness.228

226
Tr. 239:2–13 (Thomas Winmill Testimony). See JX 46 (Winmill & Co. 2011 Annual
Report); D.I. 59 (C.A. No. 7048-VCS); see also Ravenswood II, 2013 WL 396178.
Plaintiff also argued, in its pre-trial briefing, that the parties were involved in ongoing
disputes over confidentiality agreements in the Section 220 Action. Pl.’s Pre-Trial Br. 44.
Plaintiff did not mention this argument in its post-trial briefing. See Pl.’s Post-Trial
Opening Br. 54–59; Pl.’s Post-Trial Reply Br. 12–14.
227
JX 4 (Mark Winmill Deposition) at 45:10–46:11; 48:24–51:21. Mark testified that the
Delaware litigation was not the cause but that it was, instead, the “general feeling about
the avoidance of expensive litigation.” Tr. 50:3–13. (Thomas Winmill Testimony)
228
Ravenswood II, 2013 WL 396178, at *1.

65
That motion was resolved, in January 2013, in Defendants’ favor, when the Court

held that Defendants could pick their Company witness.229

Second, the testimony upon which Plaintiff relies likewise does not reveal any

desire to punish Plaintiff for its Section 220 Action. Both Thomas and Mark testified

that the decision to discontinue the Company’s preparation of audited financial

statements was made to save the Company time and money and reduce the risk of

disclosure-related litigation (which is also costly and time consuming) without any

commensurate benefit to the Company. They also credibly explained that the timing

corresponded with the passing of their father who had insisted on continuing the

practice of preparing audited financials and disseminating them to stockholders after

2004 (when the Company deregistered and delisted from NASDAQ). I am satisfied

that Defendants decided to discontinue auditing and disseminating financial

information based on valid business considerations rather than to punish Plaintiff for

its Section 220 Action.230 Having failed to rebut the business judgment presumption,

Plaintiff’s Financial Reporting Claim fails.

Id. at *2 (“at least for purposes of initial discovery, the corporate officer selected by
229

Winmill should suffice”).
230
There is no evidence that the Board failed to provide information to stockholders when
seeking stockholder approval of Board decisions or that the Board was presented with other
circumstances where it was legally obligated to provide information to stockholders (under
the Delaware General Corporation Law or otherwise) but refused to do so.

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 III. CONCLUSION

For the foregoing reasons, judgment will be entered for Plaintiff on the

Issuance Claim (Count II of the 2008 Action) and nominal damages in the amount

of one dollar per Defendant are awarded to the Company. Judgment will be entered

for Defendants on the Financial Reporting Claim (the only remaining claim from the

Section 220 Action).

I acknowledge that Plaintiff has requested attorneys’ fees and expenses.231

That request has not yet been addressed by the parties and will, therefore, be taken

up separately. The parties shall confer and submit a proposed schedule for prompt

presentation of the request for fees. The Court will enter its final order and judgment

following resolution of the attorneys’ fee issue.

231
Compl. 33 (Prayer for Relief).

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