In Re BGC Partners, Inc. Derivative Litigation

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN RE BGC PARTNERS, INC. ) CONSOLIDATED
DERIVATIVE LITIGATION ) C.A. No. 2018-0722-LWW

MEMORANDUM OPINION
Date Submitted: May 13, 2022
Date Decided: August 19, 2022

Christine M. Mackintosh, Michael D. Bell, and Vivek Upadhya, GRANT &
EISENHOFER P.A., Wilmington, Delaware; Gregory V. Varallo and Andrew E.
Blumberg, BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP,
Wilmington, Delaware; Jeroen van Kwawegen and Christopher J. Orrico,
BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP, New York, New York;
Counsel for Plaintiffs Roofers Local 149 Pension Fund and Northern California
Pipe Trades Trust Funds
Raymond J. DiCamillo and Kevin M. Gallagher, RICHARDS, LAYTON &
FINGER, P.A., Wilmington, Delaware; Joseph De Simone, Michelle J. Annunziata,
and Michael Rayfield, MAYER BROWN LLP, New York, New York; Matthew E.
Fenn, MAYER BROWN LLP, Chicago, Illinois; Counsel for Defendants Linda Bell,
Stephen Curwood, and William Moran

C. Barr Flinn, Paul Loughman, and Alberto E. Chávez, YOUNG CONAWAY
STARGATT & TAYLOR, LLP, Wilmington, Delaware; Eric Leon and Nathan
Taylor, LATHAM & WATKINS LLP, New York, New York; Counsel for
Defendants Howard Lutnick, CF Group Management, Inc., and Cantor
Fitzgerald, L.P.

WILL, Vice Chancellor
 This is a derivative action challenging the fairness of nominal defendant BGC

Partners, Inc.’s acquisition of Berkeley Point Financial, LLC from an affiliate of

Cantor Fitzgerald, L.P. BGC purchased the entity for $875 million and

simultaneously invested $100 million in a Cantor affiliate’s mortgage-backed

securities business. The theory of the lawsuit is that Howard Lutnick—the

controlling stockholder of both BGC and Cantor—caused BGC to undertake a deal

that benefitted him at the expense of BGC’s stockholders. The plaintiffs maintain

that the transaction was not entirely fair to BGC and cannot pass muster in terms of

price or process.

The plaintiffs originally sued Lutnick, two Cantor entities, and the four special

committee members who approved the transaction—Dr. Linda Bell, Stephen

Curwood, Secretary John Dalton, and William Moran. At the pleadings stage, the

court denied motions to dismiss for failure to establish demand futility and failure to

state a claim. At summary judgment, the court reiterated that demand was

excused but dismissed the special committee members other than Moran, whose

actions and uncertain independence created triable questions of fact. The remaining

claims to be tried were breach of fiduciary duty claims against Lutnick (and the

Cantor entities he controlled) and Moran. The question of demand futility was also

presented for resolution at trial. This is the court’s post-trial decision.

1
 Going into trial, the plaintiffs highlighted a series of problems with the

potential to fatally undermine the fairness of the transaction. They asserted that the

transaction was a fait accompli constructed by Lutnick. They painted the special

committee as ineffective, repeatedly acceding to Lutnick’s whims. They accused

Cantor of withholding valuation information from the special committee. In terms

of the economics, they argued that the special committee accepted an inflated price

for Berkeley Point designed to cover Cantor’s tax liability despite a lower figure

being floated months before. And they described the $100 million investment as

money losing.

The plaintiffs scored some points at trial. Lutnick initiated the deal. He had

a financial incentive to cause BGC to overpay for Berkeley Point. He overstepped

in identifying advisors for the special committee and asking its co-chairs to serve.

Moran had one-off discussions with Lutnick that should never have happened.

When it came time for the final negotiations, the special committee’s written

counterproposal did not reflect its preferred structure. And there remains some

mystery around how the ultimate deal was reached.

The evidence presented by the defendants, however, carried the day. The

special committee and its advisors were independent. Though the process was

marred by Lutnick and Moran’s actions, Lutnick extracted himself from the special

committee’s deliberations after it was fully empowered. Moran pushed back on

2
Lutnick when needed and worked tirelessly on the committee’s behalf. The special

committee’s diligence requests were met and it had the information it needed to

negotiate on a fully informed basis. The committee members—each engaged and

diligent—bargained with Cantor and obtained meaningful concessions.

Berkeley Point was, by all accounts, a unique asset particularly appealing to

BGC. The price the Special Committee agreed to pay for Berkeley Point was in line

with what its financial advisor determined to be appropriate and falls within what I

conclude to be the range of fairness. The size of the additional investment was cut

by a third while retaining its strategic benefits to BGC.

I therefore find that the Berkeley Point acquisition and associated investment

were entirely fair to BGC and its minority stockholders. Lutnick and the Cantor

entities did not breach their fiduciary duties. Nor did Moran, who did not act

disloyally. Judgment is for the defendants.

3
I. FACTUAL BACKGROUND

The following factual findings were stipulated to by the parties or proven by

a preponderance of the evidence at trial.1 Trial lasted five days, during which eleven

fact witnesses and two expert witnesses testified live.2 The parties introduced 1,260

exhibits including eighteen deposition transcripts.3

A. BGC, Cantor, and Lutnick

The nominal defendant in this case is BGC Partners, Inc., a brokerage and

financial technology company incorporated in Delaware and headquartered in New

York that trades on the NASDAQ.4 Its predecessor entity, BGC Partners L.P., was

formed in 2004 when it was spun off from defendant Cantor Fitzgerald, L.P., a

privately-owned financial services and brokerage firm. BGC became a public

company as the result of a merger with eSpeed Inc. in 2008.5

At the time of the transaction at issue in this litigation, defendant Howard

Lutnick was the Chairman and Chief Executive Officer of both Cantor and BGC.6

1
Dkt. 243 (“PTO”). Where facts are drawn from exhibits jointly submitted by the parties
at trial, they are referred to according to the numbers provided on the parties’ joint exhibit
list and cited as “JX __” unless defined. Pin cites refer to the page numbering overlaid on
each joint exhibit. Trial testimony is cited as “[Name] Tr.” Deposition transcripts are cited
as “[Name] Dep.”
2
Dkts. 252-57.
3
Dkt. 251.
4
PTO ¶¶ 53, 55.
5
Id. ¶ 54.
6
Id. ¶¶ 24-25.

4
He was also the sole stockholder of Cantor’s managing partner, defendant CF Group

Management, Inc. (“CFGM”).7 Lutnick had voting control of BGC through CFGM

and his indirect ownership of about 55% of Cantor.8 For purposes of this decision,

Cantor, CFGM, and Lutnick are together referred to as the “Cantor Defendants.”

In 2011, BGC began to build up its real estate platform. It acquired

commercial real estate services company Newmark (then-Newmark Grubb Knight

Frank).9 In 2014, Newmark acquired Apartment Realty Advisors (“ARA”), a

brokerage company that brokered the sale of multifamily properties.10

Still, Newmark was not a full service platform that could broker the sale of

properties, originate loans, and service those loans. In particular, it lacked a so-

called “agency lender” to pair with its brokerage services.11 This gap in Newmark’s

business put it at a disadvantage relative to its competitors.12

Agency lenders are real estate finance companies that are pre-approved to

originate and sell multifamily and commercial real estate loans on behalf of

government-sponsored enterprises (“GSEs”) such as Fannie Mae and Freddie Mac.13

7
Id. ¶ 27.
8
Id. ¶¶ 26-28.
9
JX 880 at 7; see Gosin Tr. 970, 974.
10
JX 880 at 7; see Okland Tr. 94-96.
11
Okland Tr. 99-101, 105-07.
12
Id.; Day Tr. 31-32; Sterling Tr. 233-34.
13
PTO ¶ 56; JX 911 (“Bacon Report”) at 4.

5
They serve as intermediaries that can originate and underwrite loans for the GSEs

across the entire market.14

Historically, Fannie Mae and Freddie Mac have provided financing at lower

yields compared to other financial institutions. As a result, the volume of GSE loans

dwarfs the volume of loans from other potential funding sources, making agency

lenders particularly valuable.15 Agency lenders are also rare because GSEs limit the

number of lending licenses they issue. For example, Freddie Mac had 22 licensed

pre-approved lenders as of 2020.16

B. Berkeley Point

Before the transaction at issue in this litigation, Berkeley Point Financial LLC

was a private commercial real estate finance company. It was (and remains) one of

the few pre-approved agency lenders.17 It also services commercial real estate loans,

including those it originated.18

In April 2014, at a time when GSE loan origination volumes were falling

industry-wide, Berkeley Point was acquired by Cantor Commercial Real Estate

14
Bacon Report at 7.
15
Id. at 5.
16
Id. at 12-13.
17
PTO ¶ 56.
18
Id.

6
Company, LP (“CCRE”) for $259.3 million.19 CCRE was then owned by Cantor

and various outside investors.20

CCRE invested heavily in Berkeley Point and worked to integrate it into

Cantor’s commercial real estate platform. Between 2014 and 2016, Berkeley Point

experienced growth driven by factors including a strengthening multifamily real

estate market and certain synergies with Cantor-affiliated entities.21

In terms of the market, Berkeley Point’s growth coincided with an increase in

GSE loan origination volumes. For example, from 2014 to 2016, Fannie Mae and

Freddie Mac multifamily loan origination volumes grew roughly 96%22 and

Berkeley Point’s revenue and EBITDA grew by 80% and 73%, respectively.23

Berkeley Point’s market share of Fannie Mae and Freddie Mac loans increased from

5.4% to 6.0% during this time.24

In terms of synergies, Berkeley Point flourished in part due to its ties to other

Cantor affiliates, including Newmark and ARA.25 BGC, lacking agency lending

19
Id. ¶ 75.
20
Id. ¶¶ 76-77.
21
JX 405 at 22; Day Tr. 24.
22
JX 928 (“Hubbard Rebuttal Report”) at 60.
23
See JX 912 (“d’Almeida Opening Report”) ¶ 64; JX 611 at 14. Berkeley Point’s
calculation of EBITDA is discussed in greater depth in Section II.B.2.a.iii below.
24
JX 792 at 30.
25
JX 405 at 22.

7
abilities, tried to fill the gap in its platform through a referral relationship with

Berkeley Point. Newmark and ARA brokers would refer potential borrowers to

Berkeley Point originators for GSE financing.26 Berkeley Point became increasingly

reliant on referrals from these BGC subsidiaries, which accounted for a steadily

growing proportion of Berkeley Point’s overall origination volume between 2014

and 2016.27

Both Newmark and Berkeley Point’s executives found this referral

relationship imperfect. The offering was not streamlined and the lack of integration

stood in contrast to Newmark and Berkeley Point’s competitors. 28 Newmark also

worried that, without in-house agency lending capabilities, it might lose ARA

brokers when it came time to renegotiate their contracts, imperiling its multifamily

platform.29 The only way for Newmark to secure the in-house GSE lending

capabilities it desired was by acquiring an agency lender like Berkeley Point.30

26
Okland Tr. 98.
27
JX 448 at 2, 4; Okland Tr. 123-24.
28
Day Tr. 30-31; Okland Tr. 98-99.
29
See Okland Tr. 101-02.
30
Bacon Tr. 156-57; see Day Tr. 31-32; Sterling Tr. 233-34.

8
 C. The CCRE Investor Buyout

In 2016, Cantor commenced buyout discussions with the other CCRE

investors.31 At this point, CCRE was made up of two businesses: Berkeley Point

and a commercial mortgage-backed securities (“CMBS”) business.32 CCRE’s

CMBS business originates, underwrites, pools, securitizes, and sells commercial real

estate loans and securities.33

Lutnick had reached agreements in principle with each of CCRE’s investors

by February 2017.34 Cantor agreed to pay approximately $1.1 billion in the

aggregate for the 88% of CCRE it did not own.35 Cantor considered a sale of

Berkeley Point as a second step in a chain of transaction. If Cantor owned CCRE

outright, it could facilitate a sale of Berkeley Point to BGC, where it could be

combined with Newmark before taking Newmark public.36

On February 9, 2017, BGC announced that it had filed a confidential

registration statement with the SEC for an initial public offering of Newmark.37 The

next day, a representative of investment bank Sandler O’Neill + Partners, L.P.

31
PTO ¶ 76.
32
Id. ¶ 58.
33
Id.
34
PTO ¶ 77.
35
Id. ¶¶ 76-77.
36
Lutnick Dep. 30-33.
37
JX 235.

9
reached out to BGC’s Chief Financial Officer, Steve Bisgay, about a potential

underwriting role in the IPO.38 Sandler partner Brian Sterling had told his colleagues

that the bank’s “best access” to the IPO was through Bisgay.39 It is not clear whether

Bisgay ever responded. Sandler was not given a role in the IPO.

D. The Special Committee’s Formation

On February 11, 2017, the Audit Committee of BGC’s board of directors (the

“Board”) held a meeting.40 The Audit Committee consisted of the entire BGC board

of directors (the “Board”) save Lutnick—non-parties Dr. Linda A. Bell, Stephen T.

Curwood, Secretary John H. Dalton, and defendant William J. Moran.41 Bell is the

Provost, Dean of Faculty, and Claire Tow Professor of Economics at Barnard

College.42 Curwood is a Pulitzer-prize winning journalist who focuses on issues of

environmental justice.43 Dalton is a former Secretary of the Navy and president of

Ginnie Mae.44 Moran is a former General Auditor of JPMorgan Chase & Co.45

38
JX 240.
39
JX 237.
40
JX 241.
41
Id.
42
Bell Tr. 535.
43
Curwood Tr. 715, 721-22.
44
Dalton Dep. 24; Bell Tr. 575-76.
45
Moran Tr. 796.

10
 At the meeting, Lutnick informed the Audit Committee that BGC

management was considering “a substantial acquisition.”46 He explained that Cantor

had come to an agreement in principle to buy out the other CCRE investors, which

“was expected to allow Cantor to sell Berkeley Point to [BGC]” and give BGC an

“[agency lending] business of scale to compete with” its competitors.47 He

“proposed that the Company be authorized to attempt to resolve terms and close the

transactions by the end of the quarter.”48

Lutnick commented “on [a] potential purchase price” for Berkeley Point “in

the low $700 million range.”49 At trial, he testified that the “low $700 million range”

was not based on any type of valuation modeling but a back-of-the-envelope

estimate.50 The other Board members did not view his comment during the meeting

as an offer.51

46
PTO ¶ 79.
47
JX 241.
48
Id.
49
Id.
50
Lutnick Tr. 1274-75; see Edelman Tr. 411-12.
51
See Bell Tr. 539; Moran Tr. 811-12.

11
 Lutnick also “discussed related party considerations” for the potential

acquisition, given that he was an officer and controlling stockholder of both BGC

and Cantor.52 A special committee was formed as a result.53

The members of the Audit Committee—Moran, Bell, Curwood, and Dalton—

“unanimously authorized that the Audit Committee act as a special committee” (the

“Special Committee”) on BGC’s behalf with respect to the proposed transactions.54

They “approved the engagement of appropriate legal and financial advisors to

provide independent services to the Committee; and authorized management to

negotiate the transactions as generally discussed, with specific details to be

approved.”55

The full Board met after the Audit Committee meeting concluded.56 The

Board ratified the Audit Committee’s authorization to act as a Special Committee.

And it unanimously “authorized management to proceed to negotiate the

transactions as generally discussed.”57

52
JX 241.
53
Id.; see Moran Dep. 174.
54
JX 241.
55
Id.
56
Id.
57
Id.

12
 Cantor began analyzing a workable deal structure for the sale of Berkeley

Point following the meeting. Cantor’s internal team, led by Charles Edelman (its

Head of Mergers & Acquisitions), modeled a transaction in which BGC purchased

“100% of Berkeley Point for ~$[700] million” and made a “~$[125] million

investment into CCRE[‘s] CMBS business.”58 The price and size of the investment

were rough approximations, as evidenced by the brackets.59

E. Advisor Outreach

Shortly after the February 11 Board meeting, Moran and Lutnick discussed

the Special Committee.60 Lutnick asked Moran if he would be willing to serve as

the Special Committee’s chair; Moran agreed.61 Days later (on February 22),

Lutnick asked Bell to act as Moran’s co-chair. She also agreed.62

After Moran spoke with Lutnick, Moran began seeking out advisors for the

Special Committee with the assistance of Caroline Koster, BGC’s Chief Counsel

and Cantor’s Associate General Counsel.63

58
JX 1228 at 5.
59
Edelman Tr. 410-11.
60
JX 249.
61
Moran Dep. 171-73.
62
JX 283.
63
PTO ¶ 65.

13
 Moran hoped to engage Debevoise & Plimpton LLP to serve as the Special

Committee’s legal advisor. On February 13, Koster told Moran, “I let Howard know

you wanted to retain [William] Regner [of Debevoise], and he was generally fine

with that and wants me to help you connect with him.”64 Moran felt that it was a

“good business practice” to run the retention of advisors past Lutnick.65 Moran also

ran the retention of Regner by the other Special Committee members, who were

“fine” with the selection.66 Bell was not aware that Moran had raised the retention

of Debevoise with Lutnick.67

Moran also worked to identify a financial advisor for the Special Committee.

On February 14, he asked Koster to “send [him] info on bankers”—specifically,

Houlihan Lokey and Sandler.68 Sandler had performed some prior work for BGC,

overwhelmingly advising special committees against Lutnick and Cantor.69

Koster sent Moran contact information for individuals at Houlihan and told

Moran “[m]aybe I should ask [Lutnick] if this is who he had in mind or if there is

another name.”70 Koster wrote to Moran, “[Lutnick] says it’s fine for YOU to

64
JX 256.
65
Moran Tr. 895-96.
66
JX 266.
67
Bell Tr. 663-64, 666.
68
JX 266.
69
Sterling Tr. 389-390.
70
JX 266.

14
contact the banks and start talking to them—[h]e thinks it should not be the lawyer,

but should be you. So, feel free to reach out to them. I separately sent you the

Sandler info.”71

On February 16, Koster sent Moran a contact list that included information

for Houlihan, Brian Sterling at Sandler, and Ralph “Trey” Taylor III of the Taylor

Companies, who Dalton had suggested.72 Moran asked, “[h]ave you [run] [T]rey

past [Lutnick]?”73 Koster suggested that Moran “call [Taylor Companies] last . . .

I’m sure they are very reputable, and [Dalton’s] endorsement says a lot, but since

we don’t know them, let’s see if [Lutnick] wants to discuss first.” 74 Moran

“[a]gree[d].”75

Moran began his outreach to Sandler and Houlihan, first contacting Sandler.76

On February 16, 2017, Sterling wrote to Moran and Regner to reiterate his interest

in working with the Special Committee. Sterling relayed his understanding that the

engagement would include Sandler “providing financial advisory services to the

Special Committee, including negotiation of a transaction, and then delivering a

71
JX 268.
72
JX 269.
73
Id. (lightly edited for clarity).
74
Id.
75
Id.
76
See JX 270.

15
fairness opinion if the Special Committee determine[d] to enter into a deal.”77

Moran forwarded the email to Koster and Lutnick, asking, “are we going to want

them to negotiate price????”78 A few hours later, Lutnick wrote to Moran with the

subject line “Negotiate” and one word in the body: “Yes.”79

F. The Special Committee’s Reestablishment and Retention of
Advisors

In early March, Sandler and Houlihan were interviewed as prospective

financial advisors to the Special Committee.80 Moran was the only Special

Committee member that participated in the telephonic meetings. Regner and

Lutnick joined.81 Bell was not made aware that Lutnick was involved in these

meetings.82

The meeting with Sandler was held on March 2. The next day, Sandler sent

Moran and Regner a draft engagement letter contemplating a total fee of $1 million,

with $350,000 contingent on the deal closing.83 Houlihan also provided a draft

77
Id.
78
Id.
79
JX 274.
80
See JX 290; JX 298; Bell Tr. 680.
81
See JX 290; JX 298.
82
Bell Tr. 680.
83
JX 299; JX 300.

16
engagement letter after its meeting with Moran and Lutnick that proposed a $3.5

million fee.84

On March 14, the Board met and formally reestablished the Special

Committee.85 The resolutions provided that the Special Committee was delegated

the “full and exclusive power and authority of the Board” to “evaluate and, if

appropriate, negotiate the terms of any Proposed Transaction and to make any

recommendations to the Board” that it “determine[d] in its sole discretion to be

advisable.”86 The Special Committee was also authorized to retain any advisors it

deemed appropriate.87

The Special Committee met the next day.88 Lutnick was not present. It voted

to designate Moran and Bell as its co-chairs. It then considered “two potential

financial advisors”: Sandler and Houlihan.89 Materials had been circulated to the

Committee in advance that detailed the bankers’ qualifications and proposed fees.

After discussing the “qualifications and experience” of each, the Committee voted

84
JX 305.
85
JX 313.
86
Id.
87
Id.
88
JX 319.
89
Id.

17
to retain Sandler—led by Sterling—as its financial advisor.90 It then voted to retain

Debevoise as legal counsel to the Committee.91

G. Diligence Begins
The Special Committee’s process was underway by mid-March 2017.

Between March and June, the Special Committee met at least nine times.92

On March 17, Sterling emailed Moran to provide the data room index for the

materials received from Cantor. Moran forwarded the email to Lutnick, pressing

him for additional data.93 He also stated that he had expressed to Regner and Sterling

“that we are running a clock [] on this deal.”94 Bell testified that she did not believe

that the Special Committee was “running any clock.”95

Any apparent timeline shifted in late March. On March 21, Sandler sent its

initial due diligence requests to Cantor.96 A week later, Sterling emailed Cantor to

“check[] in on the status of [their] information requests and the process generally.”97

Still without the information requested, Regner sent a follow-up email on April 6.

90
Id.
91
Id.
92
See PTO ¶¶ 83-98.
93
JX 331.
94
Id.
95
Bell Tr. 685-86.
96
JX 377.
97
Id.

18
Cantor responded that the diligence requests were “in progress” and that materials

would be made available via the data room when ready.98

Moran forwarded the chain to Lutnick, asking whether Lutnick had “changed

our original timetable for execution???”99 Lutnick responded four days later, saying

that the deal “[s]hould start to move quickly [at the] end of th[at] week as we will

send lawyer and banker the full desk outline and structure.” “Structure,” he wrote,

“became the driver.”100 By that, Lutnick meant that Cantor was focused on devising

a transaction structure that would be more tax efficient for Cantor.101

Cantor had begun to assess the tax implications of possible transaction

structures and asked Kirkland & Ellis LLP and KMPG to conduct an analysis.102 On

April 13, Kirkland sent a “summary of the pros and cons from a tax perspective” of

various deal scenarios with an analysis from KPMG.103 Kirkland opined that an

outright sale of Berkeley Point to BGC “in a fully taxable transaction for $[725]

million” would cause Cantor to incur an immediate cash tax liability of $70

million.104

98
Id.
99
Id.
100
Id.
101
Lutnick Tr. 1375.
102
See JX 379; Lutnick Tr. 1375-78; Edelman Tr. 415-16.
103
JX 379.
104
Id.

19
 Kirkland also considered a structure whereby BGC would invest in CCRE,

entitling it to 98% of the future profits from Berkeley Point’s business with Cantor

receiving the remaining 2%.105 Unlike the immediate tax liability triggered by the

first scenario, the investment would give rise to taxes recognizable over time.106

Cantor viewed this tax-efficient structure, through which it retained a small equity

interest in Berkeley Point, as its preferred option.107

Thus, Cantor settled on a structure involving a sale to BGC of a 95% economic

interest in Berkeley Point rather than an outright purchase.108

H. The April 21 Meeting and Term Sheet

The Board met on April 21, 2017. Lutnick provided an update on the

transaction. According to the minutes, he “indicated that [BGC] management would

distribute a term sheet to the directors to facilitate discussion on the Company’s

proposed investment in CCRE in a tax-efficient structure.”109 He explained that

Cantor’s proposed structure would have BGC would own “virtually all of CCRE’s

105
Id.
106
Id.
107
Edelman Tr. 416-17.
108
Id.
109
JX 383.

20
Berkeley Point business (with Cantor maintaining a small ownership percentage),

and make a $150 million investment in CCRE’s CMBS business.”110

In terms of next steps, Lutnick said that he (on behalf of Cantor) would

provide the Special Committee with “a presentation indicating valuation of the

CCRE business.”111 According to the minutes, Lutnick indicated that Newmark’s

Chief Executive Officer Barry Gosin “would consider Cantor’s valuation analysis

and respond with an analysis based on the Company’s perspective of value.”112 “The

Special Committee could then discuss, consult its financial and legal advisors, and

negotiate the framework for a transaction.”113

That night, Koster sent Cantor’s proposed term sheet to the Special

Committee members and Regner.114 The term sheet contemplated the structure that

Lutnick had described during the Board meeting. Under Cantor’s proposal, BGC

would purchase a 95% interest in Berkeley Point for $850 million and would have

the option to purchase the remaining 5% of Berkeley Point for $30 million no sooner

than five years after closing. BGC would also invest $150 million in CCRE’s CMBS

business with a preferred return and an option to exit the investment after five

110
Id.
111
Id.
112
Id.
113
Id.
114
JX 385; JX 386.

21
years.115 Cantor viewed the April 21 term sheet as the first true offer for Berkeley

Point—earlier discussions were “more of a concept.”116

When Sandler and Debevoise spoke to Cantor representatives about the

proposal several days later, they “expressed surprise” at the change in structure.117

Until that point, the parties had discussed BGC acquiring 100% of Berkeley Point.118

Cantor representatives told Lutnick that, after discussion, Sandler and Debevoise

“appear[ed] to appreciate the tax deferral aspect and to understand the general

structure.”119

Lutnick and Edelman formally presented Cantor’s proposal to the Special

Committee on May 11, 2017.120 Their presentation included Cantor’s view on

Berkeley Point’s value.121

I. Due Diligence Continues

Due diligence continued through late April and into May 2017. By April 21,

Cantor had provided responses to many of Sandler’s diligence questions and had

115
JX 386; Edelman Tr. 418-20.
116
Edelman Tr. 422.
117
JX 397.
118
See Sterling Tr. 221-28.
119
JX 397.
120
JX 465; JX 406.
121
See, e.g., JX 406 at 8, 17-18.

22
uploaded corresponding materials to the data room.122 By April 23, Lutnick said that

the data room “ha[d] been properly populated and information requests

answered.”123

On May 2, Lutnick attended an Audit Committee meeting. According to the

minutes, Lutnick discussed the timing of the transaction and said that “the plan was

for [BGC] and Cantor to work towards an agreement by the end of the month of May

with an announcement of the deal negotiated.”124 Koster recounted to Edelman that

“[Lutnick] [had] lit a fire under” the Special Committee during the meeting.125

The Special Committee pressed forward with its information requests. On

May 5, Sandler sent Cantor a list of outstanding diligence requests, including the

terms of Berkley Point’s acquisition by CCRE in 2014 and of Cantor’s buyouts of

CCRE’s outside investors in 2017.126 The list was forwarded to Lutnick, who asked,

“[h]ow are we working on [this] and deciding what to give them[?]”127 Edelman

responded that some of the information, “for example, the terms of the CCRE

122
JX 387.
123
JX 389.
124
JX 412.
125
JX 423.
126
JX 445.
127
Id.

23
investor buy-outs” were “not [the Special Committee’s] concern.”128 “Agreed,” said

Lutnick. “Choose what to tell them. You decide.”129

Edelman did not initially send the information. He felt that the information

about the 2014 acquisition of Berkeley Point “was essentially irrelevant and likely

to obfuscate the value of the company” and that the details of the 2017 buyouts were

likewise “irrelevant” and could “be used against [Cantor] in the negotiations.”130

J. Berkeley Point Projections

Sandler had also requested multi-year projections for Berkeley Point’s

business.131 Berkeley Point did not create projections in the ordinary course.132

Cantor directed Berkeley Point’s Chief Financial Officer Ira Strassberg to develop a

set in connection with the 2017 transaction.133 Strassberg proceeded to review

Berkeley Point’s historical financial performance, analyze its pipeline of future

business, and meet with Berkeley Point employees as well as the Cantor deal team.134

He developed a set of projections that he felt were “conservative.”135

128
Id.
129
Id.
130
Edelman Tr. 425-26.
131
JX 422; JX 445.
132
Strassberg Tr. 1121, 1165-66.
133
Id. at 1121-22.
134
Id. at 1122-23.
135
Id. at 1140-41.

24
 On May 1, Strassberg sent Lutnick the draft projections.136 Strassberg

expressed a view that “there [was] an opportunity to increase [Berkeley Point’s]

capture rate” in the future.137 The “capture rate” referred to is the share of ARA

investment sales Berkeley Point converted into loan originations.138 Lutnick agreed,

writing that the capture rate was “way too low” and asked Strassberg to run a

sensitivity analysis with a series of higher capture rates for 2017 and 2018.139

Separately, Strassberg increased certain other figures from his May 1 draft

after he received more granular forecasts for April and May 2017 and spoke to more

individuals.140 For example, the May 8 version he sent to Cantor included roughly

6% higher revenue and origination volume projections, which were hard-coded in

by a series of increases.141 The adjustments were not made at Lutnick’s request.142

Sandler received Strassberg’s final projections on May 19, discussed them

with Cantor, provided them to the Special Committee, and later considered the

projections when concluding that the acquisition was fair.143

136
JX 408; JX 416.
137
JX 416.
138
Strassberg 1132-34; see JX 408.
139
JX 416.
140
Strassberg Tr. 1133-35, 1137-38.
141
Id. at 1138-40; JX 976 (“Origination volumes” tab at cells B6-B14).
142
Strassberg Tr. 1138.
143
See JX 491; JX 451; JX 663; JX 1223; see Sterling Tr. 288-89; Bell Tr. 695-96;
Moran Tr. 926-27.

25
 K. Gosin’s Meeting with the Committee

On May 4, Koster emailed Gosin, “[t]he Special Committee is asking for a

meeting/presentation from you regarding your interest in the [Berkeley Point] and

CMBS business, etc. Howard said he would speak with you about this today.”144

Gosin subsequently contacted Shekar Narasimhan, the Managing Partner of

Beekman Advisors, for input. Beekman had advised CCRE in its 2014 acquisition

of Berkeley Point and ARA in connection with its sale to BGC.145

Narasimhan sent Gosin “a background piece on the multifamily debt market

and the GSE multifamily business in particular.”146 In a later communication,

Narasimhan told Gosin that that he believed that Berkeley Point’s value was

“probably $462M-$672M.”147 Gosin testified that he questioned the reliability of

Narasimhan’s analysis.148

On May 19, Gosin met with the Special Committee as planned and provided

it with a qualitative assessment of the potential Berkeley Point transaction. 149 He

relayed his perspective that an acquisition of a majority interest in Berkeley Point

144
JX 443.
145
JX 454.
146
JX 457.
147
JX 490.
148
Gosin Tr. 1096-97.
149
JX 488; Bell Tr. 605-06.

26
could be “transformative” for BGC due to “potential future growth opportunities and

synergies with Newmark’s existing business.”150 He did not provide any

quantitative analysis of value—nor did the Special Committee expect him to.151

Gosin also did not relay Narasimhan’s views.152

L. Negotiations Proceed

On May 21, Lutnick sent Bell and Moran an instant message to “check[]

in.”153 A few days later, Moran told Lutnick that the Special Committee was “[i]n

full support of [the] deal” so long as the “price [was] right.”154

Meanwhile, Sandler continued to request information about the terms of the

2017 buyout and of CCRE’s 2014 acquisition of Berkeley Point.155 At a May 25

meeting, the Special Committee expressed “the need to better understand the

economic terms, including valuation, of CCRE’s acquisition of Berkeley Point in

2014, and the prices at which CCRE’s outside investors invested and will exit.”156

150
JX 488; Gosin Tr. 997-98.
151
Bell Tr. 606-07; see Moran 961-62.
152
Bell Tr. 610-11; Gosin Tr. 1089-90.
153
JX 496.
154
JX 509.
155
JX 515.
156
JX 510.

27
 Also during its May 25 meeting, the Special Committee discussed an updated

term sheet that Cantor had sent dated May 23.157 The term sheet continued to

contemplate a $1 billion total investment by BGC across Berkeley Point and the

CMBS business.158

On May 30, Cantor provided Sandler with the information it had been

requesting about the terms of the 2014 transaction and 2017 buyouts.159 On June 1,

Sandler told the Special Committee that several diligence items remained

outstanding and that it “would be in a position to discuss valuation with the

Committee” after receiving them.160 Sandler was eventually “successful in getting

the due diligence materials it needed.”161 The Special Committee understood that it

was “important to take the time it need[ed] to digest the diligence items and better

understand the strategic rationale for the Proposed Investment and valuation of

Berkeley Point before responding to Cantor.”162

157
JX 510; JX 514.
158
JX 503.
159
JX 521.
160
JX 526.
161
Sterling Tr. 219-220.
162
JX 526; see Bell Tr. 559-60.

28
 M. The Special Committee’s Counterproposal

Sandler worked to prepare a presentation for the Special Committee that

summarized its views on Berkeley Point and responded to Cantor’s May 23

proposal. Sandler’s presentation was shared with the Special Committee at a June 4

meeting.163 The presentation included an “advocacy piece” intended for use against

Cantor at the bargaining table.164 That advocacy piece was sent to Cantor on the

morning of June 6, with a note that the deck contained “valuation considerations and

the response to the Cantor proposal.”165

The deck explained why the Special Committee believed Berkeley Point was

not worth the $880 million Cantor had offered (which reflected an $850 million

initial payment for 95% of Berkeley Point, plus BGC’s $30 million put option on

the remaining 5% that could be exercised in five years).166 It proposed that the price

be reduced from $880 million to $720 million, which it said “represent[ed] an

appropriate value for Berkeley Point.”167 The $720 million price was based on a

163
JX 553; JX 554.
164
JX 554 at 29-44; see Bell Tr. 562-66.
165
JX 571.
166
JX 554 at 13; JX 566; see Edelman Tr. 443.
167
JX 566 at 11.

29
number of considerations, including that a 25% illiquidity discount to the $880

million ask could be warranted.168

In terms of the CMBS investment, the presentation stated that an investment

in CCRE’s CMBS business could be “helpful to Newmark strategically” but was

“not compelling” for BGC on the terms Cantor had proposed.169 It explained that

Cantor had “provided no support or justification for the investment to be sized at

$150 million.”170 The Special Committee therefore proposed that the investment

size be reduced to $100 million.171

N. The June 6 Meeting

Later on June 6, the Special Committee, Cantor, and their representatives met

to negotiate a potential deal.172 According to the minutes, Cantor’s proposal going

into the meeting was for BGC “to acquire a majority interest in Berkeley Point for

$880 million, or acquire all of Berkeley Point for $1 billion, and invest $150 million

in the CMBS Business.”173

168
JX 566 at 11; Sterling Tr. 262; see Bell Tr. 564, 703.
169
JX 566 at 13.
170
Id. at 14.
171
Id. at 15.
172
JX 570.
173
Id.

30
 The Special Committee members and advisors testified at trial that acquiring

100% of Berkeley Point had become their top priority as the process unfolded and

would be a walkaway point for them in final negotiations without a major concession

on price.174 As Bell explained, they “believed strongly in the value of liquidity and

control.”175 Before the meeting, Sandler had expressed to Cantor the Committee’s

preference for the outright purchase structure.176 Cantor made its $1 billion proposal

for BGC to acquire 100% of Berkeley Point as an “alternative proposal and

structure” in response.177

At trial, Cantor witnesses testified that the $1 billion price reflected what

Cantor thought it could get for Berkeley Point on the open market.178 Edelman

testified that the disproportionately large jump in price for the final 5% of Berkeley

Point was intended to cover the additional tax liability that would be incurred by an

outright sale.179

The minutes of the June 6 meeting provide that Sterling began by walking the

meeting participants through the Special Committee’s response to Cantor’s proposal

174
Sterling Tr. 220-22; Bell Tr. 569-70; Curwood Tr. 744-45; Moran Tr. 836-37; see
Edelman 521-24.
175
Bell Tr. 572.
176
Sterling Tr. 220-21, 225-26, 368; Edelman Tr. 433-34.
177
JX 565.
178
Edelman 434-45; Lutnick Tr. 1244-45.
179
Edelman Tr. 434-35; Sterling Tr. 368-69; see JX 379; Lutnick Tr. 1285.

31
using the advocacy piece.180 He next conveyed the Special Committee’s

counteroffer: “to acquire a majority interest in Berkeley Point for $720 million and

invest $100 million in the CMBS Business, with several additional changes to the

security proposed by Cantor.”181

Cantor was displeased with the Special Committee’s $720 million

counteroffer.182 The Special Committee indicated it could get closer to Cantor’s

price if they could buy the business outright.183 After discussion, Cantor’s

representatives and outside counsel left the meeting to caucus.184 The Special

Committee dispatched Moran, then Bell, to meet with Lutnick and his advisors

separately.185 Moran told Lutnick that the deal would not happen as Cantor had

constructed it.186 Bell hoped to come to terms since she viewed the transaction as a

good opportunity for BGC and Newmark.187

180
JX 570; see Bell Tr. 627.
181
JX 570; see Bell Tr. 627.
182
Edelman Tr. 522; Moran Tr. 823-44.
183
Edelman Tr. 521-24.
184
JX 570; see Sterling Tr. 403-05.
185
Sterling Tr. 270; Bell Tr. 571-72; Moran Tr. 944-45.
186
Moran Tr. 844.
187
Bell Tr. 632.

32
 At 3:15 p.m., Cantor rejoined the meeting and “conveyed Cantor’s

counterproposal.”188 No witness at trial could recall what exactly Cantor counter-

proposed.189 The minutes provide that approximately thirty minutes of “discussion,

debate and negotiation over the terms of the transaction ensued.”190

The two sides subsequently reached a handshake agreement. BGC was to

purchase Berkeley Point outright for $875 million and invest $100 million into

CCRE’s CMBS business for a five-year period.191 BGC would receive a preferred

5% return on the CMBS investment, with Cantor prohibited from receiving

distributions from the business until the preferred return was met.192 The parties also

agreed that Berkeley Point would be delivered to BGC at closing with a book value

as of March 31, 2017.193

188
JX 570 at 2.
189
See, e.g., Sterling Tr. 264, 404-05; Bell Tr. 630-31; Lutnick 1405-06.
190
JX 570.
191
Id.
192
Id.
193
JX 572; Edelman Tr. 482-84.

33
 O. Sandler’s Fairness Opinion and the Special Committee’s Approval

The parties’ June 6 agreement was “subject to the completion of due diligence

and negotiation of definitive agreements.”194 Sterling took the next five weeks to

complete diligence and analyze the potential deal.195

On July 13, 2017, Sandler presented its fairness opinion for the Berkeley Point

acquisition and reasonableness opinion for the CMBS investment to the Special

Committee.196 It concluded that the Berkeley Point acquisition was fair to BGC and

that the terms of the CMBS investment were reasonable.197

Sandler’s presentation included slides comparing the implied multiples for the

Berkeley Point acquisition to market multiples of a number of companies, focusing

in particular on Walker & Dunlop, a real estate finance company with a business

“very comparable to Berkeley Point.”198 Sandler opined that the comparison

demonstrated that a price of $875 million for Berkeley Point was “well within [the]

imputed valuations.”199

194
JX 570.
195
JX 658; JX 659.
196
JX 658; JX 659; JX 663.
197
PTO ¶ 106; JX 658; JX 659.
198
JX 663 at 19-20; Strassberg Dep. 314.
199
JX 663 at 21; Sterling Tr. 284-85.

34
 Sandler did not conduct a comparable transactions analysis or a discounted

cash flow analysis. With respect to the former, Sterling testified that Sandler could

not find a comparable transaction with publicly available metrics.200 As to the latter,

Sterling explained that a discounted cash flow analysis was not useful in valuing real

estate finance companies.201

In terms of the $100 million CMBS investment, Sandler opined that it was

reasonable after reviewing various scenarios surrounding the investment’s potential

returns and comparing the investment’s terms to comparable secured debt

offerings.202 Sandler observed that although comparable market offerings had yields

to maturity of 2-5%, BGC was effectively “getting a [set] 5% coupon” along with

other upside.203

That same day, the Special Committee unanimously resolved that the

transaction was in the best interest of BGC and recommended to the Board that it

approve the Transaction.204 On July 16, the Board adopted the Special Committee’s

200
Sterling Tr. 396.
201
Id. at 395.
202
JX 663 at 2, 23-25.
203
Id. at 24; Sterling Tr. 286-87.
204
PTO ¶ 107.

35
recommendation and voted to approve the transaction.205 The transaction

agreements were executed the next day.206

P. Deal Announcement and Closing
On July 18, 2017, BGC publicly disclosed the transaction.207 Its press release

included projections of Berkeley Point’s 2017 and 2018 revenues, pre-tax GAAP

income, and adjusted pre-tax income. On July 21, BGC filed a Form 8-K with the

Securities and Exchange Commission that included the transaction agreements.208

The Berkeley Point acquisition and CMBS investment closed on September 8,

2017.209 Cantor invested about $267 million into the CMBS business alongside

BGC.210 That same day—prior to closing—Berkeley Point paid CCRE roughly

$66.8 million in order to adjust its estimated GAAP equity back to its value as of

March 31, 2017, as required by the transaction agreement’s terms.211 Similarly,

BGC paid Cantor an additional $22.4 million true-up in November 2017.212

205
Id. ¶ 108.
206
Id. ¶ 109.
207
Id. ¶ 110. The press release noted that the total consideration for Berkeley Point was
$875 million and that Berkeley Point would be purchased at a book value of approximately
$509 million. JX 685. It also stated that BGC would invest $100 million for roughly 27%
of CCRE’s CMBS business. Id.
208
PTO ¶ 111.
209
Id. ¶ 114.
210
Lutnick Tr. 1289-91; JX 916 (“Hubbard Opening Report”) at 64.
211
PTO ¶ 113; JX 739.
212
PTO ¶ 115; see JX 750.

36
 Q. Procedural History

On October 5, 2018 and November 5, 2019, respectively, plaintiffs Roofers

Local 149 Pension Fund and Northern California Pipe Trades Trust Funds—both

BGC stockholders—filed verified stockholder derivative complaints against

Lutnick, Bell, Curwood, Moran, Dalton, CFGM, and Cantor.213 The actions were

consolidated on December 4, 2018.214 The plaintiffs filed the operative Amended

Verified Stockholder Derivative Complaint on February 12, 2019.215

The Complaint alleges that the Cantor Defendants (in their capacity as

controlling stockholders of BGC) and Lutnick (in his capacity as an officer and

director) breached their fiduciary duties by causing BGC to enter into the transaction

to their gain and BGC stockholders’ detriment.216 The Special Committee

members—Moran, Bell, Curwood, and Dalton—were also charged with breaching

their fiduciary duties.217

On March 19, 2019, the Special Committee defendants and the Cantor

Defendants filed separate motions to dismiss pursuant to Court of Chancery Rules

213
Dkt. 1; PTO ¶¶ 4-5; see Dkt. 6.
214
PTO ¶ 6.
215
Id.
216
Am. Compl. ¶¶ 140-148.
217
Id. ¶¶ 136-138.

37
23.1 and 12(b)(6).218 Chancellor Bouchard denied the motions on September 30,

2019.219

On February 10, 2021, the Special Committee defendants and the Cantor

Defendants moved for summary judgment.220 On April 20, 2021, the plaintiffs

voluntarily dismissed the claims against Dalton with prejudice.221

After the case was transferred to me upon Chancellor Bouchard’s retirement

from the bench, I granted in part and denied in part the director defendants’ motion

and denied the Cantor Defendants’ motion.222 Specifically, summary judgment was

entered in Bell and Curwood’s favor but otherwise denied.

Trial was held from October 11 to October 15, 2021.223 Post-trial arguments

took place on March 2, 2022.224

Following post-trial argument, I requested supplemental briefing on matters

related to the valuation of Berkeley Point.225 The parties’ supplemental submissions

218
PTO ¶ 8.
219
In re BGC P’rs, Inc. Deriv. Litig., 2019 WL 4745121, at *1 (Del. Ch. Sept. 30, 2019).
220
PTO ¶ 16.
221
Id. ¶ 17.
222
In re BGC P’rs, Inc. Deriv. Litig., 2021 WL 4271788, at *10 (Del. Ch. Sept. 20, 2021).
223
Dkt. 252.
224
Dkt. 278.
225
Dkt. 280. The plaintiffs Cantor Defendants were asked to address issues related to
whether Berkeley Point’s GAAP net income required adjustment in the context of their
experts’ valuation models. Id.

38
were filed on May 13, 2022.226 The case was deemed submitted for decision as of

that date.

II. LEGAL CONCLUSIONS
Derivative breach of fiduciary duty claims against the Cantor Defendants and

Moran remain post trial. I begin by considering the question of whether the demand

requirement was excused. I then address the claims against the Cantor Defendants,

which I assess under the entire fairness standard of review, and the claim against

Moran.

A. Demand Futility

Demand futility is a fundamental issue in derivative litigation. It flows from

a core tenet of Delaware corporate law: “[t]he decision whether to initiate or pursue

a lawsuit on behalf of the corporation is generally within the power and

responsibility of the board of directors.”227 As a threshold question, it is often

litigated in connection with the procedural requirements of Court of Chancery Rule

23.1 at the pleading stage. Still, demand futility can remain as an issue to be litigated

later in the case.228 That is the situation here.

226
Dkts. 283, 284.
227
In re Citigroup Inc. S’holder Deriv. Litig., 964 A.2d 106, 120 (Del. Ch. 2009); see 8
Del. C. § 141(a).
228
See In re BGC P’rs, 2021 WL 4271788, at *5-6; see Rales v. Blasband, 634 A.2d 927,
932 (Del. 1993) (noting that Rule 23.1 “constitutes the procedural embodiment” of a
“substantive principle of corporation law”).

39
 At the summary judgment stage, I dismissed Bell and Curwood due to a dearth

of evidence supporting a non-exculpated claim against them. Given remaining

issues of material fact regarding Curwood and Moran’s independence and Moran’s

potential liability, however, the Cantor Defendants’ motion for summary judgment

on the basis of demand futility was denied.229 The defendants ask me to reconsider

that conclusion with the benefit of the evidence presented at trial. If I find either

Curwood or Moran to be disinterested and independent, they maintain I must hold

that the demand requirement was not excused and rule in the defendants’ favor.

A director is disqualified from exercising judgment about a litigation demand

if she “lacks independence from someone who received a material personal benefit

from the alleged misconduct that would be the subject of the litigation demand or

who would face a substantial likelihood of liability on any of the claims that are the

subject of the litigation demand.”230 Facts pertaining to a director’s independence

are considered in their totality.231 An independent director may also be disqualified

229
Moran, Curwood, and Lutnick formed a majority of the demand board. See In re
Zimmer Biomet Hldgs., Inc. Deriv. Litig., 2021 WL 3779155, at *10 (Del. Ch. Aug. 25,
2021) (explaining that the court “counts heads” to determine whether a majority of a
board’s members could have impartially considered a demand), aff’d, 2022 WL 2165342
(Del. June 16, 2022) (ORDER).
230
United Food & Com. Workers Union v. Zuckerberg, 262 A.3d 1034, 1059 (Del. 2021).
231
See, e.g., In re Oracle Corp. Deriv. Litig., 824 A.2d 917, 937 (Del. Ch. 2003);
Marchand v. Barnhill, 212 A.3d 805, 818 (Del. 2019) (noting that “things other than
money, such as ‘love, friendship, and collegiality’” can be considered (quoting In re
Oracle, 824 A.2d at 938)); Del. Cty. Empls. Ret. Fund v. Sanchez, 124 A.3d 1017, 1019
40
when faced with “a substantial likelihood of liability on any of the claims that would

be the subject of the litigation demand.”232

The plaintiffs acknowledge that they had the burden of proving demand

futility at trial.233 They say they met that burden because the record demonstrates

that Curwood and Moran not only lacked independence from Lutnick but also faced

a substantial likelihood of liability. On the latter point, the plaintiffs argue that

Curwood and Moran are not disinterested because the claims against them survived

a motion to dismiss and, in Moran’s case, a motion for summary judgment.234

The parties have cited no case where the court ruled for the defendants at trial

because demand was not excused (and I am aware of none). In the usual course, the

plaintiffs are right. Yet I am not as sanguine as the plaintiffs that a claim surviving

the pleadings stage is the final word on demand futility for the remainder of the

action. One can imagine a situation where, for example, claims survived a motion

to dismiss based on allegations in a complaint that proved baseless after discovery.

In that scenario, why should the defendant be barred from asking the court to revisit

(Del. 2015) (explaining that a demand futility analysis considers alleged facts “in their
totality and not in isolation from each other”).
232
Zuckerberg, 262 A.3d at 1059.
233
Post-trial Hr’g Tr. March 2, 2022, at 97 (Dkt. 279).
234
Pls.’ Post-trial Br. 104, 107 (Dkt. 268). The plaintiffs also assert that “Bell was
incapable of considering a demand.” Pls.’ Post-trial Br. 104 n.476. The law of the case
held otherwise. In re BGC P’rs, 2021 WL 4271788, at *7-8.

41
demand excusal with the benefit of a developed record? The defendant surely did

not face a substantial likelihood of liability in that scenario.

This is, however, not such a case. The needle did not move meaningfully on

the question of demand futility between summary judgment and trial. I find that

Curwood could not have impartially considered a demand to sue Lutnick. Though

the plaintiffs have not met their burden of showing that Moran lacked independence,

I conclude that he faced a substantial likelihood of liability on claims that would

have been implicated in a hypothetical litigation demand. Consistent with earlier

decisions in this case, I hold that demand was excused.

1. Stephen Curwood

The plaintiffs contend that Curwood could not have impartially considered

whether to authorize a lawsuit against Lutnick because he is financially dependent

on Lutnick.235 Curwood’s service on the BGC Board provided him with more than

half of his household income from 2010 to 2017.236

The defendants assert that Curwood’s personal beliefs “push[] him ‘towards

simplicity’” while noting that he has sizeable pensions and owns properties in

Maine, New Hampshire, and South Africa.237 They maintain that Curwood is

235
Pls.’ Post-trial Br. 107.
236
PTO ¶ 45. The portion of his annual income attributable to his Board position steadily
increased from 47% to 64% from 2014 to 2017. Id.
237
Cantor Defs.’ Post-trial Br. 3-4 (Dkt. 265).

42
independent regardless of the relative importance of his BGC income because he

could have pursued other avenues of work.238 I do not doubt that is true. But I

cannot conclude that Curwood’s desire to continue in his role as a BGC director

would not have clouded his judgment had he been faced with a demand to sue

Lutnick for breach of fiduciary duty.

“[T]he existence of some financial ties between the interested party and the

director, without more, is not disqualifying.”239 The question is “whether, applying

a subjective standard, those [financial] ties were material, in the sense that the

alleged ties could have affected the impartiality of the individual director.”240 Even

then, the court has rightly questioned whether a director should be viewed as

dominated by another fiduciary “merely because of the relatively substantial

compensation provided by the board membership compared to their outside

salaries.”241

238
See Moran Post-trial Br. 58 (Dkt. 265).
239
Kahn v. M & F Worldwide Corp., 88 A.3d 635, 649 (Del. 2014), overruled on other
grounds by Flood v. Synutra Int’l, Inc., 195 A.3d 754 (Del. 2018).
240
Kahn, 88 A.3d at 649.
241
In re Walt Disney Co. Deriv. Litig., 731 A.2d 342, 360 (Del. Ch. 1998) (explaining that
to find otherwise would “discourage the membership on corporate boards of people of less-
than extraordinary means” because “[s]uch ‘regular folks’ would face allegations of being
dominated by other board members”); see Chester Cty. Empls’ Ret. Fund v. New
Residential Inv. Corp., 2017 WL 4461131, at *8 (Del. Ch. Oct. 6, 2017); In re BGC P’rs,
2021 WL 4271788, at *8 (recognizing “the public policy concerns at play when wealth is
used as a factor in analyzing independence”).

43
 The factors that lead me to conclude that Curwood is not independent for

demand futility purposes are not a mere matter of dollars. My analysis is not driven

solely by rote assessment of a percentage of one’s director fees relative to other

income. Rather, I look to subjective factors to assess how Curwood might behave

based upon the information I have about him.242

In his deposition testimony, Curwood acknowledged that he “was grateful that

[the director position] would allow [him] to both feed [his] family and [continue his

career in] public radio.”243 That testimony was confirmed at trial.244 The plaintiffs

presented evidence that Curwood viewed Lutnick and the opportunity Lutnick gave

him “to serve on his board and to make the money that [Curwood] needed to support

[his] family for the last three years” as a “blessing.”245

“It is difficult to imagine more personally motivating factors” than supporting

one’s family and pursuing one’s passions.246 These are among the most important

things in life and, to my mind, would likely bear on one’s decision-making. That is

242
Oracle, 824 A.2d at 942 (discussing the so-called “subjective ‘actual person’ standard’”
(quoting Cinerama, Inc. v. Technicolor, Inc., 663 A.2d 1156, 1167 (Del. 1995))).
243
Curwood Dep. 124.
244
Curwood Tr. 773-74.
245
JX 66.
246
In re BGC P’rs, 2021 WL 4271788, at *8; see In re Student Loan Corp. Deriv. Litig.,
2002 WL 75479, at *3 n.3 (Del. Ch. Jan. 8, 2002) (describing the renumeration “by which
bills get paid, health insurance is affordably procured, children's educations are funded,
and retirement savings are accumulated” as “typically of great consequence” to the
recipient).

44
not to critique Curwood, whose strength of character is obvious. It is a matter of

human nature coupled with the lack of precision inherent in assessing how one might

respond to a demand that was never, in fact, made.247

Curwood understood that Lutnick had the power to remove him from his

position on the Board.248 In view of the stability and personal freedom that his Board

position created, I conclude that Curwood’s partiality would likely have been

impaired had he been asked to accuse Lutnick of breaching his fiduciary duties and

to authorize litigation against him.

It must be emphasized that this conclusion does not resolve the question of

whether there is sufficient evidence that Curwood lacked independence from

Lutnick during the Special Committee’s negotiations with Cantor. As the court

explained in Sciabacucchi v. Liberty Broadband Corporation, there are meaningful

distinctions between an independence inquiry in the contexts of a special litigation

committee, demand futility, and with respect to voting on a deal or corporate

247
See Del. Cty. Empls. Ret. Fund v. Sanchez, 124 A.3d 1017, 1020-21 (Del. 2015)
(considering whether director compensation was material where it allegedly constituted
30% to 40% of defendant’s total annual income as part of a holistic analysis of “[h]uman
relationships”); In re Oracle, 824 A.2d at 938 (noting that although “Delaware law should
not be based on a reductionist view of human nature that simplifies human motivations on
the lines of the least sophisticated notions of the law and economics movement,” it should
not “ignore the social nature of humans”).
248
Curwood Dep. 119-21.

45
governance matter.249 The lens through which I analyze the evidence differs

between demand futility and the ultimate claims about the transaction. The latter is

addressed later in this decision.250

2. William Moran
At summary judgment, I found that Moran does not rely on his BGC Board

compensation and lacks close social or other ties to Lutnick that would call his

independence into question.251 No new evidence was introduced that causes me to

reconsider that view. In terms of Moran’s independence, the remaining question for

trial was whether his admiration for Lutnick would sterilize his discretion if faced

with a demand.

The plaintiffs had argued earlier in this case that Moran’s “teary-eyed”

deposition testimony about his respect for Lutnick casts doubt on Moran’s ability to

consider a demand to sue him.252 Stripped of the inference favoring their position

and with the burden of proof upon them, the plaintiffs’ argument falls flat. I am

convinced that Moran’s emotional testimony was driven by his own connection to

249
2022 WL 1301859, at *14 (Del. Ch. May 2, 2022).
250
See infra Section II.B.1.b.i.
251
See In re BGC P’rs, 2021 WL 4271788, at *9 (noting that Moran earns a pension of
roughly a million dollars a year from his past employer and has a net worth of nearly $20
million).
252
See In re BGC P’rs, 2021 WL 4271788, at *9 (quoting Moran Dep. 86, 99).

46
the 9/11 tragedy.253 Nothing in the record suggests that Moran’s respect for Lutnick

was so personal or of such a “bias producing” nature that it would have clouded

Moran’s judgment were he asked to sue Lutnick.254

After trial, the plaintiffs also argue that Moran should not be viewed as

independent for demand futility purposes due to evidence that he failed to act

independently during the deal process.255 As I address later in this decision in greater

detail, some of Moran’s actions during negotiations raise questions. Moran, at times,

lost his place and had interactions with Lutnick that are far from ideal. But when it

came to substantive negotiations, Moran consistently advocated to achieve the best

deal for the minority stockholders—even when it was not the deal Lutnick desired.256

Under these circumstances, I cannot find that Moran would have been

disabled from assessing a demand to sue Lutnick because of a lack of independence.

253
Moran Tr. 875-76.
254
See Beam v. Stewart, 845 A.2d 1040, 1050 (Del. 2004). For example, the plaintiffs
relied on the fact that Moran’s partner kept a picture of herself, Lutnick, and Moran on her
shelf. They also point out that Lutnick arranged for Moran and his partner to enjoy a private
tour of the Tate Modern in London. This may evidence a friendship of sorts—but hardly
one that is bias producing. See In re Kraft Heinz Co. Deriv. Litig., 2012 WL 6012632, at
*10 (Del. Ch. Dec. 15, 2021) (“Allegations that individuals ‘moved in the same social
circles,’ ‘developed business relationships before joining the board,’ or described each
other as ‘friends’ are insufficient, without more, to rebut the presumption of
independence.” (quoting Beam, 845 A.2d at 1051)), aff’d, 2022 WL 3022353 (Del. Aug.
1, 2022) (TABLE).
255
Pls.’ Post-trial Br. 107.
256
See infra Section II.B.1.b.i.

47
He does not have a close personal relationship to Lutnick; they are business

acquaintances.257 He is not financially dependent on Lutnick. And he was unafraid

to “tangle[]” with Lutnick when it became necessary.258

I nonetheless conclude that Moran could not have impartially considered a

demand because he faced a substantial likelihood of liability on certain claims that

would have been the subject of the demand. Moran was—despite moving for

dismissal and for summary judgment—a defendant at a trial on whether he breached

his duty of loyalty. Though Moran is ultimately adjudged not liable for a non-

exculpated claim, this case’s record proves that the claim easily “ha[d] some

merit.”259 It is reasonable to think that Moran would have paused on whether he

could authorize a suit against Lutnick concerning the Berkeley Point deal given some

of Moran’s peculiar behavior during the deal process.

B. Entire Fairness

“When a transaction involving self-dealing by a controlling shareholder is

challenged, the applicable standard of judicial review is entire fairness.”260 It is

257
Moran Tr. 805.
258
Moran Dep. 55-57.
259
In re CBS Corp. S’holder Deriv. Litig., 2021 WL 268779, at *31 (Del. Ch. Jan. 27,
2021), as corrected (Feb. 4, 2021) (quoting United Food & Com. Workers Union v.
Zuckerberg, 2020 WL 6266162, at *16 (Del. Ch. Oct. 26, 2020), aff’d, 262 A.3d 1034
(Del. 2021)).
260
Ams. Mining Corp. v. Theriault, 51 A.3d 1213, 1239 (Del. 2012); see Kahn v. Tremont
Corp., 694 A.2d 422, 428 n.3 (Del. 1997).

48
undisputed that Lutnick (and the other Cantor Defendants) stood on both sides of the

transaction. Given his relative ownership of Berkeley Point and BGC (54% and 23%

respectively), Lutnick had an incentive to cause BGC to overpay for Berkeley

Point.261

The seminal case of Weinberger v. UOP, Inc. pronounced that “[t]he concept

of fairness has two basic aspects: fair dealing and fair price.” 262 “In making a

determination as to the entire fairness of a transaction, the Court does not focus on

one component over the other, but examines all aspects of the issue as a whole.”263

The party bearing the burden of persuasion must establish “to the court’s satisfaction

that the transaction was the product of both fair dealing and fair price.”264

The Cantor Defendants had the initial burden of proving that the transaction

was entirely fair at trial.265 In their summary judgment motion, the Cantor

261
The Cantor Defendants argue that, because BGC represented Lutnick’s “single most
valuable asset in terms of his personal wealth,” Lutnick had no economic incentive to cause
it to overpay for Berkeley Point. See Cantor Defs.’ Post-trial Br. 1-2. Not so. The
incentives are driven by share of ownership, not absolute terms. If Lutnick owned 23% of
BGC and 54% of Berkeley Point, Lutnick “earns” $0.31 for every dollar transferred from
BGC to Berkeley Point. And if a market that initially views a deal as fair corrects for an
overpayment in this type of scenario, the amount of the gain decreases—it is not negated.
262
457 A.2d 701, 711 (Del. 1983).
Bomarko, Inc. v. Int’l Telecharge, Inc., 794 A.2d 1161, 1180 (Del. Ch. 1999) (citing
263

Weinberger, 457 A.2d at 711).
264
Cede & Co. v. Technicolor, Inc., 634 A.2d 345, 361 (Del. 1993).
265
That is, the breach of fiduciary duty claims against them are subject to the entire fairness
standard of review and they will be found liable if they do not carry their burden under the
standard.

49
Defendants advocated for a pre-trial burden shift under the Lynch doctrine, which

provides that controlling stockholders may shift the burden of persuasion by “an

approval of the transaction by an independent committee of directors.” 266 Because

I found genuine issues of material fact regarding the independence of a majority of

the Special Committee, I held that the defendants were not entitled to a pre-trial

determination on burden shifting.267

After trial, the defendants did not again ask to shift the burden of proving

entire fairness to the plaintiffs.268 I ultimately conclude, however, that the Special

Committee was independent, fully empowered, and well-functioning, warranting a

burden shift under the Lynch doctrine.269 This determination does not affect my

conclusions on entire fairness; the issue of fairness is not in equipoise.270 Regardless

of who has the burden, I conclude that the transaction was entirely fair to BGC and

its minority stockholders.

266
Kahn v. Lynch Commc’n Sys., Inc., 638 A.2d 1110, 1117 (Del. 1994).
267
In re BGC P’rs, 2021 WL 4271788, at *10.
268
See Post-trial Hr’g Tr. Mar. 2, 2022 at 62.
269
See Tremont, 694 A.2d at 428-29.
270
In re S. Peru Copper Corp. S’holder Deriv. Litig., 52 A.3d 761, 793 (Del. Ch. 2011),
aff’d, 51 A.3d 1213 (Del. 2012) (“[T]he burden becomes relevant only when a judge is
rooted on the fence post and thus in equipoise.”); see In re Cysive, Inc. S’holders Litig.,
836 A.2d 531, 548 (Del. Ch. 2003) (explaining that the “practical effect of the Lynch
doctrine’s burden shift is slight”).

50
 1. Fair Dealing

The Weinberger opinion explained that a consideration of fair dealing

“embraces questions of when the transaction was timed, how it was initiated,

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

directors . . . were obtained.”271 The plaintiffs assert that the answers to these

questions are indicative of an unfair process. Their argument goes as follows:

Lutnick presented the transaction to the Board as a fait accompli; he dictated the deal

timing and terms; he co-opted the Special Committee, which was ineffective; and he

withheld valuation information. The defendants refute each point.

My fair dealing analysis identifies some defects in the process. Lutnick’s

presence loomed large at times. He had a hand in selecting the Special Committee’s

co-chairs and its advisors. Information was slow rolled to the Special Committee.

Final negotiations unfolded over a compressed time period. But “[p]erfection is an

unattainable standard that Delaware law does not require, even in a transaction with

a controller.”272 Considering the evidence in its totality, I conclude that the

process—albeit imperfect—was ultimately fair.

271
Weinberger, 457 A.2d at 711; Kahn v. Lynch Comm’cn Sys., 669 A.2d 79, 83
(Del. 1995).
272
Brinckerhoff v. Tex. E. Prod. Pipeline Co., 986 A.2d 370, 395 (Del. Ch. 2010); see
Cinerama, 663 A.2d at 1179 (explaining that “perfection is not possible, or expected” in
applying the entire fairness standard (quoting Weinberger, 457 A.2d at 709 n.7)).

51
 I base that assessment on a review of the relevant Weinberger factors—timing

and initiation, structure, negotiations and approval. The deal was not timed to

benefit Cantor. At least a majority of the Special Committee members was

independent throughout the negotiations. The Special Committee devoted

substantial time to its work and retained independent advisors. And, after months of

due diligence, a deal was reached following arm’s length bargaining where the

Special Committee obtained its desired structure and a favorable price.273 Each of

these factors supports a legal conclusion of fair dealing.

a. Transaction Initiation and Timing

The timing and initiation of a transaction can evidence a lack of fair dealing

where it favors the controller to the minority’s detriment.274 In this case, it is obvious

that the deal was initiated by Lutnick. He first raised it with the Board in February

2017 after reaching agreements in principle to buy out CCRE’s other investors.275

273
See Weinberger, 457 A.2d at 709 n.7; Kahn v. Lynch, 638 A.2d at 1121; Ams. Mining
Corp., 51 A.3d at 1241.
274
Weinberger, 457 A.2d at 711; see Jedwab v. MGM Grand Hotels, Inc., 509 A.2d 584,
599 (Del. Ch. 1986) (“The timing of such a transaction, we have been authoritatively
reminded, may be such as to constitute a breach of a fiduciary’s duty to deal fairly with
minority shareholders.”).
275
The plaintiffs suggest that this timing reveals the deal was a fait accompli. Pls.’ Post-
trial Br. 55. I disagree. Lutnick flatly rejected the notion that the Berkeley Point
acquisition was needed to fund the buyout. Lutnick Dep. 29-30. Furthermore, the Special
Committee approved the transaction only after months diligence, negotiations, and Cantor
making concessions.

52
 It is also apparent that Lutnick sought to drive the timeline. Lutnick initially

hoped to reach a deal by the end of the first quarter.276 The process was slowed in

order to allow Cantor to assess its potential tax liability.277 Lutnick then “lit a fire”

under the Special Committee once the tax analysis was complete.278

He was not successful. Despite Lutnick’s prodding, the deal was not

completed on any of the time frames he proposed. The final negotiations came

together quickly but they followed several months of diligence and discussions

between the Special Committee and its advisors, on one hand, and Cantor, on the

other. And after the June 6 meeting where a deal was reached, the Special

Committee took over a month to diligence the transaction and achieve a fairness

opinion.279

Even if Lutnick had achieved his preferred timeline, “[m]ore must be shown .

. . than that a majority shareholder controlled the timing of the transaction” to

evidence a lack of fair dealing.280 Parties to a transaction will typically have a

preferred timeline. Expressing those preferences to a counterparty or slowing

276
JX 1202.
277
See JX 377.
278
JX 423.
279
JX 679; JX 681; JX 627; JX 683; JX 684.
280
Jedwab, 509 A.2d at 599; see Dieckman v. Regency GP LP, 2021 WL 537325, at *27
(Del. Ch. Feb. 15, 2021) (“Controlling the timing of a merger is not sufficient by itself,
however, to demonstrate unfair dealing by a controller.”).

53
negotiations to carefully analyze a deal it is not evidence of unfair dealing. More

often, it means that the timing of the transaction was itself the product of arm’s

length bargaining.

The record must, instead, demonstrate that the deal “as timed, financially

injured the minority shareholders or enabled [the controller] to receive value at the

minority’s expense” to indicate unfairness.281 Here, it does not. The Special

Committee and Cantor agreed that if BGC was going to acquire Berkeley Point, it

should do so in advance of the Newmark IPO scheduled for late 2017.282 There is

no suggestion that this timing disadvantaged BGC’s minority stockholders.

b. Transaction Structure

Whether a transaction was structured to include procedural protections—such

as requiring the approval of an independent board negotiating committee or a

majority of the minority vote—is another important indicium of fairness.283 Here, a

281
Van de Walle v. Unimation, Inc., 1991 WL 29303, at *12 (Del. Ch. Mar. 7, 1991)
(finding a process fair where the controller dictated timing because “the defendants had a
valid reason to believe that postponing a sale of Unimation would create a significant risk
that any future sale would be at a much lower price”); see In re Emerging Commc’ns, Inc.
S’holders Litig., 2004 WL 1305745, at *32 (Del. Ch. May 3, 2004) (“Another circumstance
that evidences the absence of fair dealing is where the transaction is timed in a manner that
is financially disadvantageous to the stockholders and that enables the majority stockholder
to gain correspondingly.”); Jedwab, 509 A.2d at 599.
282
Moran Tr. 889-90; Lutnick Tr. 1291-92; Bell Tr. 552-53.
283
See, e.g., Gesoff, 902 A.2d at 1145 (“The Supreme Court observed as early as
Weinberger that the establishment of an independent special committee can serve as
powerful evidence of fair dealing.”); Jedwab, 509 A.2d at 599 (“As to the fact that the
transaction was not structured to accord minority shareholders a veto, nor was an
54
fully empowered Special Committee of independent directors, advised by

independent advisors, negotiated the transaction on BGC’s behalf and voted to

approve it.

i. The Special Committee’s Composition

“[A]n independent negotiating committee of [] outside directors” that deals

with a controller at arm’sthe length can evidence fair dealing.284 The special

committee’s composition is “of central importance” when evaluating the fairness of

its process.285

Lutnick had a role in selecting the Special Committee’s chairs. He reached

out to Moran almost immediately after proposing the deal to the Board and contacted

Bell several weeks later to ask about their willingness to serve in the positions. This

is obviously not a process strength. The misstep was, however, largely remedied

after the Special Committee was fully empowered and voted to designate Bell and

independent board committee established to negotiate the apportionment of merger
consideration on behalf of the minority, these are pertinent factors in assessing whether
fairness was accorded to the minority.”); Sealy Mattress Co. of N.J. v. Sealy, Inc., 532 A.2d
1324, 1336 (Del. Ch. 1987) (“A second indicium of fair dealing, or its absence, is whether
the process by which the merger terms were arrived at involved procedural protections that
would have tended to assure a fair result.”).
284
Weinberger, 457 A.2d at 709 n.7.
285
Gesoff, 902 A.2d at 1145-46.

55
Moran as co-chairs.286 Lutnick did not attend the meeting where that vote occurred

and there is no evidence that he influenced it.

Lutnick did not dictate the Special Committee’s membership more broadly.

All outside Board members—that is, BGC’s directors other than Lutnick—were put

on the Committee as a matter of course.287 Moreover, at least a majority of its

members were independent for purposes of a fair dealing analysis.

By the time trial began, two Committee members had been dismissed from

this action. The plaintiffs conceded Dalton’s independence.288 And I found on

summary judgment that Bell was both independent and had not acted to advance

Lutnick’s interests.289

Regarding Curwood, I explained earlier in this decision that I could not find

him independent for purposes of demand futility. That conclusion concerned how

Curwood might view a theoretical demand, which is not determinative of whether

he was independent during real-world negotiations with Cantor. The two contexts

286
JX 319; Bell Tr. 546; Moran Tr. 818. Witnesses at trial testified that Moran’s leadership
role was driven by his experience as the lead general auditor for JPMorgan Chase and
“deep knowledge of the financial structures involved,” his status as the chair of the Board’s
Audit Committee, his work ethic, and his availability given that he was retired. Bell Tr.
546; see Sterling Tr. 230-32. Bell was selected in great part due to her quantitative
background. Moran Tr. 818; see Curwood Tr. 791.
287
See Moran Dep. 174-75.
288
See In re BGC P’rs, 2021 WL 4271788, at *4.
289
In re BGC P’rs, 2021 WL 4271788, at *10.

56
necessarily require separate analyses.290 “[P]recedent recognizes that the nature of

the decision at issue must be considered in determining whether a director is

independent.”291

“A director’s objectivity concerning a hypothetical demand could be

compromised even if her actions in evaluating a transaction were beyond

reproach.”292 That is so because it is more difficult for a director to decide a “fellow

director has committed serious wrongdoing” and to sue him than to push back in

negotiations over a conflicted transaction.293 Thus, “[s]uccessfully impugning a

director’s independence with respect to voting on transactions . . . should be more

difficult than challenging the same independence with respect to assessing a

demand.”294

Curwood exemplifies this scenario. The personal importance of his

directorship could have colored his thinking had he been faced with a demand to

accuse Lutnick of wrongdoing and pursue litigation against Lutnick. But there is no

evidence that Curwood lacked independence while negotiating against Lutnick

about Berkeley Point and the CMBS investment.

290
See supra notes 248-550 and accompanying text.
291
Marchand, 212 A.3d at 819.
292
In re BGC P’rs, 2021 WL 4271788, at *10.
293
Id. (quoting Oracle, 824 A.2d at 940).
294
Sciabacucchi, 2022 WL 1301859, at *14.

57
 Curwood credibly testified that he was committed to walking away from the

deal if he felt the “finances” were “not appropriate” for BGC and its minority

stockholders.295 He emphasized that the loss of his Board seat was never a

consideration during negotiations.296 I have no basis to doubt that Curwood was

independent—and acted independently—throughout the negotiations.297

That leaves Moran, who is the more complicated piece of the puzzle. My

demand futility analysis led to the conclusion that Moran was independent of

Lutnick (though unable to impartially considered a demand because he faced a

substantial likelihood of liability through trial). Given that finding, there is little

basis to question Moran’s independence here insofar as he lacked meaningful ties to

Lutnick. But during the deal process, Moran acted at times in a way that Bell

acknowledged at trial was “not best practice.”298

Moran agreed to act as the Special Committee’s chair at Lutnick’s request.

He worked with Lutnick to identify advisors for the Special Committee (albeit before

it was formally reestablished and fully empowered) and asked Lutnick whether

295
Curwood Tr. 744, 746.
296
Curwood Tr. 732-33.
297
See In re BGC P’rs, 2021 WL 4271788, at *11 (explaining that the court must “assess
the director’s real-world actions (or inactions) in the context of her lack of independence”);
In re Oracle, 824 A.2d at 940; Marchand, 212 A.3d at 820 & n.95; see also Sciabacucchi,
2022 WL 1301859, at *13-15.
298
Bell Tr. 675.

58
Sandler would negotiate the deal price. He communicated with Lutnick about

diligence and timing. He did not tell his fellow Special Committee members about

those early interactions with Lutnick.299 He indicated to Lutnick that the Committee

supported the deal before Sandler had formed a view on value—albeit with the

important caveat that the “price [be] right.”300 These instances of questionable

behavior marred the deal process.

Yet, I cannot conclude that Moran was beholden to Lutnick or blinded by a

“controlled mindset.”301 When it came to substantive negotiations, Moran pushed

back firmly on Lutnick on multiple occasions. Sterling, for example, testified that

it was Moran who told him to “go at [the negotiation with Cantor] hard” and

“negotiate from . . . a zealous or aggressive standpoint on behalf of the independent

directors and independent shareholders.”302 Moran told Lutnick that Cantor’s

proposals at the final negotiation were problematic and inconsistent with BGC’s

structural objectives, expressing his willingness to end the negotiations.303 Though

he provided confusing testimony about whether Lutnick could negotiate for himself,

299
See Bell 663-64, 666.
300
JX 509; Moran Tr. 955-56.
301
See In re S. Peru Copper, 52 A.3d at 800 (finding that a special committee was
ineffective for purposes of an entire fairness analysis where it “was trapped in the
controlled mindset, where the only options to be considered are those proposed by the
controlling stockholder”).
302
Sterling Tr. 263.
303
See Moran Tr. 836-37, 843-44; Lutnick Tr. 1408-10.

59
the evidence shows that Moran knew his job was to advocate for the stockholders

and that he was a positive force when it came to the ultimate price and terms

reached.304

Moreover, there is no evidence that Moran jeopardized the substance of the

Special Committee’s independent process.305 In Van de Walle v. Unimation, Inc.,

then-Vice Chancellor Jacobs considered a scenario where one director allegedly

labored under a disabling conflict that rendered the process unfair.306 The court

explained that even “assuming without deciding that [the director] had a disabling

conflict of interest, there was no showing that his participation in the merger

304
The plaintiffs highlight Moran’s muddled deposition testimony that appeared to suggest
Lutnick could negotiate for himself as both BGC and Cantor. Moran Dep. 160-61; see
Moran Tr. 890. After hearing Moran’s testimony at trial, I believe that Moran did not mean
to say that Lutnick was permitted to negotiate on BGC’s behalf against Cantor. Instead, it
was a clumsy way of saying that Lutnick was on both sides of the deal. Moran Tr. 953-54;
see Moran Dep. 161.
305
The facts here are nothing like those in the cases plaintiffs rely on for their argument
that Moran “infected” the process. Pls.’ Post-trial Br. 67. In In re Loral Space &
Communications Inc., for example, a chair of a two-person committee maintained
“important ties” with the controller and forwarded the controller an email from the
committee’s legal advisor “summarizing the Committee’s discussion” of open issues
“including its ‘fall-back’ position.” 2008 WL 4293781, at *17 (Del. Ch. Sept. 19, 2008).
Moran had no ties to Lutnick and there is no evidence he sent anything substantive about
the Special Committee’s negotiating strategy to Lutnick. In Kahn v. Tremont, a special
committee chairman “conducted all negotiations over price and ancillary terms of the
proposed purchase with [the controlling shareholder], and did so without the participation
of the remaining two directors.” 694 A.2d at 430. Here, Dalton, Bell, and Curwood
consistently attended meetings, remained engaged, and were active participants in
negotiations over the transaction price and terms.
306
1991 WL 29303, at *10-11.

60
negotiations and decision-making caused any actionable wrong or harm.”307 The

conflicted director did not “dominate[] or control[] any of the remaining four

[directors]” or “otherwise influence[] the . . . board to act other than in the minority

stockholders’ best interest.”308 As in Unimation, Moran did not dominate the other

three Special Committee members or influence them to act against the interests of

BGC and its minority stockholders.309

ii. The Special Committee’s Advisors

“Another critical factor in assessing the reliability and independence of the

process employed by a special committee, is the committee’s financial and legal

307
Id. at *14.
308
Id.
309
The record also does not support the conclusion that Dalton, Bell, and Curwood fell
victim to a controlled mindset. Moran’s counsel argues that the plaintiffs’ allegations
otherwise “cannot be squared with their voluntary dismissal of Dalton, or with the Court’s
finding that Bell is independent and Curwood did not act to advance the interests of
Lutnick.” Moran Post-trial Reply Br. n.1. I cannot credit that argument given that, in
Southern Peru, the court found that the special committee’s controlled mindset evidenced
a lack of fair dealing despite the fact that the special committee members had been
dismissed from the case at the summary judgment stage. See In re S. Peru Copper, 52
A.3d at 785; id., C.A. No. 961-VCS, at 123-29 (Del. Ch. Dec. 21, 2010) (TRANSCRIPT).
Here, however, the evidence shows that Dalton, Bell, and Curwood engaged in arm’s
length negotiations to reach an optimal outcome for the minority stockholders. Unlike in
Southern Peru, the Special Committee (including Moran) got “reasoned updates” from
their financial advisor, obtained meaningful concessions from their counterparty, and
pushed back on the controller’s preferred approach. See In re S. Peru Copper, 52 A.3d at
773-74, 809-810. The Special Committee members’ careful process and good faith pursuit
of the minority stockholders’ interests underpins my determination that the process was
fair. See Cinerama, 663 A.2d at 1141 (“The overall judgment of fairness to shareholders
that the court must make can, and in my opinion should, take into account the good faith
of the directors when it considers the ‘process’ element of the evaluation.”).

61
advisors and how they were selected.”310 The plaintiffs do not dispute that Sandler

and Debevoise were qualified or that Debevoise is independent. They question

Sandler’s independence and point to Lutnick’s role in selecting the Special

Committee’s advisors as evidence of unfairness.311 By the time that the Special

Committee was reconstituted and empowered, Moran and Lutnick had already

discussed retaining Debevoise and had met with Sandler, negotiated the scope of its

role, and received a draft engagement letter. This is a flaw in the process—Lutnick

should have had no involvement in selecting the Committee’s advisors.

The court’s decision in Gesoff v. IIC Industries, Inc. is instructive in assessing

the effect of Lutnick’s involvement on the fairness of the process. 312 There, a one-

person special committee had “no real authority” to choose his own advisors.313 A

legal advisor with a history of working with the conflicted board and controller was

“presented to [the director]” as the conflicted parties’ choice, which the director

310
Kahn v. Dairy Mart Convenience Stores, Inc., 1996 WL 159628, n.6 (Del. Ch. Mar. 29,
1996).
311
See id. (declining to shift the pre-trial burden of entire fairness because, among other
things, the controlling stockholder’s attorney had recommended the special committee’s
advisors); Tremont, 694 A.2d at 429 (questioning the propriety of the controlled entities’
general counsel suggesting a legal advisor that had strong connections to the controlling
stockholder, which the special committee promptly retained).
312
902 A.2d 1130 (Del. Ch. 2006).
313
Id. at 1138.

62
accepted. The financial advisor, who had all but been promised the role by a

conflicted executive, was also pressed upon the director.314

Here, unlike in Gesoff, the Special Committee members had the authority to

choose their own advisors. After discussion and a unanimous vote (without Lutnick

present), the Special Committee chose Sandler based (at least in part) on Moran,

Curwood, and Dalton’s prior work with and high regard for the firm.315 Debevoise

was likewise retained because Regner had worked with certain Committee members

as a legal advisor in the past and they were confident in his abilities.316

There is an even greater distinction from Gesoff: the record demonstrates that

Sandler (like Debevoise) was not conflicted.317 Sandler’s prior work for Lutnick-

affiliated companies was overwhelmingly in representing special committees that

were negotiating against Lutnick318—meaning that Sandler was not accountable to

or hired by the Cantor Defendants.319 There is also no evidence that Sandler’s desire

314
Id. at 1139.
315
See Bell Tr. 547; Sterling Tr. 308-09.
316
Bell Tr. 547-48.
317
Gesoff, 902 A.2d at 1150-51 (detailing ways in which the special committee’s financial
advisor was “actively and persistently disloyal to the special committee and to its aims of
assuring a fair transaction for [the company’s] minority stockholders”).
318
Sterling Tr. 389-90.
319
See In re Cysive, 836 A.2d at 554 (“Though the plaintiffs challenge the special
committee’s decision to engage Broadview, I do not perceive Broadview as having been
conflicted due to their prior engagement working for Cysive to sell the company. In that
role, Broadview was accountable to and was hired by Cysive’s board.”).

63
for a role in Newmark’s IPO, which went only as far as a pair of emails in early

February before it was hired by the Special Committee, impaired its independence.

Ultimately, Sandler and Debevoise understood their roles and advocated on the

Special Committee’s behalf.

The record is devoid of evidence indicating that Lutnick benefitted from

Sandler’s retention or that BGC’s minority stockholders were harmed. Sandler

plainly advocated for the Special Committee against Cantor. For example, it,

pressed Cantor for information that Cantor was initially hesitant to provide and

questioned Cantor’s changes to the deal structure. Most importantly, it bargained

hard on the Special Committee’s behalf—especially during the June 6 meeting.320

Thus, the retention of Sandler and Debevoise supports fair dealing—despite

Lutnick’s role in their retention. The advisors were qualified, independent, and not

beholden to Cantor.321

320
The plaintiffs also question Sandler’s independence because it requested a $1 million
fee that included a $350,000 contingent fee. Pls.’ Post-trial Br. 58. “Contingency clauses
are standard in financial advisor agreements and seldom create a conflict of interest.” In re
Panera Bread Co., 2020 WL 506684, at *32 (Del. Ch. Jan. 31, 2020); see In re Oracle
Corp. Deriv. Litig., 2018 WL 1381331, at *14 (Del. Ch. Mar. 19, 2018).
321
See In re Tesla Motors, Inc. S’holder Litig., 2022 WL 1237185, at *34 n.413 (Del. Ch.
Apr. 27, 2022) (finding that although the alleged controller “should not have been involved
in the selection of counsel to advise the Tesla Board,” the advisor chosen was “qualified,
independent . . . [and] not beholden”).

64
 c. Transaction Negotiation and Approval

Under Weinberger, a fair dealing analysis includes how the transaction was

negotiated and “how, and for what reasons, the approvals of the various directors

themselves were obtained.”322 It is here that the strength of the Special Committee’s

process is most visible.

The Special Committee was well informed of the material facts when it voted

to approve the transaction. During the three-month negotiation period, the Special

Committee met at least nine times, with Sandler sharing three presentations

containing information about Berkeley Point and the CMBS business.323 The

Committee members were “deeply engaged” and “very hardworking.”324 They

exerted their bargaining power against Lutnick and prevailed in obtaining

consequential concessions.

The plaintiffs argue otherwise on two principal grounds. First, they say that

Lutnick and Cantor withheld material valuation information from the Special

Committee that prevented it from negotiating effectively. Second, they argue that

322
In re Digex Inc. S’holders Litig., 789 A.2d 1176, 1207 (Del. Ch. 2000).
323
JX 514; JX 528; JX 571; see In re Cysive, 836 A.2d at 554 (finding that a process was
fair where the evidence showed each committee member “devoted substantial time to the
committee’s work” and “took its responsibilities seriously”); In re MFW S’holders Litig.,
67 A.3d 496, 499 (Del. Ch. 2013) (explaining that a special committee was effective where
it “met eight times during the course of three months” and negotiated a price increase),
aff’d sub nom., Kahn v. M & F Worldwide Corp., 88 A.3d 635 (Del. 2014).
324
Sterling Tr. 262-63.

65
the Special Committee “acceded to Cantor’s demands” rather than prevailed in

negotiations.325 The evidence presented by the defendants critically undermines

both positions.

i. Disclosure of Information

“[T]o make a special committee structure work it is necessary that a

‘controlling stockholder . . . disclose fully all the material facts and circumstances

surrounding the transaction.’”326 That includes the disclosure of (1) “all of the

material terms of the proposed transaction,” (2) “all material facts relating to the use

or value of the assets in question,” and (3) “all material facts which [the fiduciary]

knows relating to the market value of the subject matter of the proposed

transaction.”327 The information must be disclosed fully and accurately.328

Some of the information that the Special Committee viewed as most important

to its process—regarding the 2014 Berkeley Point transaction and the terms of the

2017 CCRE investor buyouts—was initially held back. Had that information not

made its way to the Special Committee, it might have evidenced a lack of fair

325
Pls.’ Post-trial Br. 48.
326
Kahn v. Tremont Corp., 1996 WL 145452, at *15 (Del. Ch. Mar. 21, 1996) (quoting
Lynch, 669 A.2d at 88 (Del. 1995)), rev’d on other grounds, 694 A.2d 422 (Del. 1997).
327
Id. at *16.
328
See In re Dole Food Co., Inc. S’holder Litig., 2015 WL 5052215, at *30 (“Implicit in
the expectation that the controller disclose this information is . . . that the controller disclose
it accurately and completely.”).

66
dealing. But, as the plaintiffs acknowledged after trial, Cantor eventually answered

the Special Committee’s repeated requests for it.329 Sterling testified that Sandler

“[h]ad received all the information, had analyzed it, and had discussed it with the

committee several times” before the parties engaged in face-to-face negotiations.330

The plaintiffs nonetheless assert that Lutnick and Cantor failed to satisfy their

obligations to disclose complete and correct information to the Special Committee.

That argument focuses on (1) Gosin, (2) Strassberg’s projections, and (3) Cantor’s

tax information.

Gosin. First, the plaintiffs claim that the Gosin’s involvement skewed the

Special Committee’s perception of Berkeley Point’s value because Lutnick told

them that Gosin would provide BGC’s thoughts on Berkeley Point’s valuation and

then coordinated with Gosin on what he would say.331 The record shows, however,

that neither the Special Committee members nor Gosin felt that Gosin had been

tasked with providing a quantitative assessment of Berkeley Point to the

Committee.332 He instead provided a qualitative view. More generally, it is not clear

329
Edelman Tr. 425-27; see JX 521.
330
Sterling Tr. 219, 350; see Bell Tr. 559 (testifying that the Special Committee took the
time they needed to “digest the diligence and understand the strategic rationale” of the
transaction).
331
Pls.’ Post-trial Br. 60.
332
Gosin Tr. 167-69 (noting that he would not have been the Newmark executive to handle
the numbers); Bell Tr. 605-06.

67
how Gosin could have manipulated the Special Committee’s views on Berkeley

Point’s value if he did not offer a view on valuation in the first place.

The plaintiffs call attention to the email Gosin received from Narasimhan

opining on Berkeley Point’s valuation in arguing that Gosin withheld crucial

information from the Special Committee.333 But I have no basis to attribute illicit

motives to Gosin’s decision to withhold the email from the Special Committee.

Setting aside that his decision is not attributable to Cantor in any event, I believe that

Gosin made the reasoned choice not to share it because he felt that it was

unrealistic.334

Gosin testified (in response to my asking him why he failed to share the

document) that Narasimhan’s conclusions were unsound.335 In particular, he

questioned how the low end of Narasimhan’s range ($426 million) could

appropriately be below Berkeley Point’s book value (which exceeded $500

333
Pls.’ Post-trial Br. 60. They also argue that Lutnick and Cantor prevented Narasimhan
from participating in a “critical diligence meeting” because his correspondence indicated
that he was joining a May Special Committee meeting and he did not show. JX 490. There
is no evidence that Narasimhan was prevented from attending the meeting or uninvited.
Gosin had no memory of inviting him. Gosin Tr. 1082-83.
334
See In re Cysive, 836 A.3d at 554-55 (finding that a CFO’s failure to turn over a revised
budget to a special committee where he did not “place[] confidence” in the budget did not
“materially impair the effectiveness of the negotiation and approval process because the
document . . . did not contain any reliable information that would have changed the
outcome of the committee’s deliberations”).
335
Gosin Tr. 1096-97.

68
million).336 That testimony is unrebutted. In fact, I have no evidence that would

allow me to understand how Narasimhan reached his conclusions. Narasimhan was

not deposed and did not testify.337

Projections. Second, the plaintiffs maintain that the projections prepared by

Strassberg and considered by Sandler were manipulated. That position does not hold

up to scrutiny. To start, Cantor never represented that the projections were prepared

in the ordinary course; no existing projections for Berkeley Point were withheld from

the Special Committee.338

The evidence indicates that Strassberg attempted to create two-year

projections that he felt were “conservative” after gathering and analyzing the

relevant information.339 The plaintiffs argue that aspects of Strassberg’s efforts, such

as hard-coding increases to certain metrics in his projections, prove otherwise. But

I do not attribute any ill intent to Strassberg’s doing so—much less attribute these

changes to Lutnick.

336
Id.
337
See ACP Master, Ltd. v. Sprint Corp., 2017 WL 3421142, at *39 (Del. Ch. July 21,
2017) (rejecting “unsupported valuation” contained in “a single email” where there was
“no evidence in the record as to how the [author] reached” his figures), aff’d, 184 A.3d
1291 (Del. 2018).
338
See In re Emerging Commc’ns, 2004 WL 1305745, at *35.
339
Strassberg Tr. 1124-25, 1133-34; see supra Section I.J.

69
 Rather than demonstrate that Strassberg set out to mislead the Special

Committee or inflate values he knew were unsupported, the evidence shows that the

projections were his best estimate. Strassberg increased certain figures from his

original projections after reviewing updated forecasts that projected net income for

April and May significantly higher than that recorded in 2016. He forcefully rejected

any notion that his projections were “misleading,” “false,” or “artificially

inflated.”340 Nothing indicates that he increased projections based on Lutnick’s say

so. By all accounts, Berkeley Point’s business is challenging to reliably project.341

Lutnick asked Strassberg to run a sensitivity analysis by varying the capture

rate—the quantum of loan originations Berkeley Point could “capture” on ARA’s

investment sales. But Strassberg, who raised the idea of adjusting the capture rate

up himself, planned to “vet the[] #s with the business.”342

In short, this is not the stuff of doctored projections or fraud.343

340
Strassberg Tr. 1150-51. Tied to plaintiffs’ contention that Berkeley Point’s projections
were artificially inflated is the argument that the Cantor Defendants used their “superior”
(i.e., undisclosed) knowledge about Berkeley Point’s performance in 2017 to raise the cost
of the acquisition by setting Berkeley Point’s book value as of March 31, 2017. See Pls.’
Post-trial Br. 60-61. There is no reason that BGC should not have paid for Berkeley Point’s
growth between the set date and closing.
341
See infra notes 417-19 and accompanying text. Sterling testified that Sandler
understood that projections were of little use in the real estate finance sector. Sterling Tr.
289.
342
JX 416.
343
Compare In re Dole, 2015 WL 5052214, at *1, *31 (concluding that projections
supplied by an officer described as the controller’s “right-hand man” were “knowingly
70
 Tax Information. The plaintiffs further argue that Lutnick failed to fulfill his

disclosure obligations because he never turned over tax information supporting his

$1 billion ask.344 This has little bearing on my analysis because Cantor’s tax

information is not materially related to the value of Berkeley Point. It is only

relevant to Cantor’s consideration of the price at which it was willing to sell Berkeley

Point. A controller is not required to disclose “information that relates only to its

consideration of the price at which it will buy or sell and how it would finance a

purchase or invest the proceeds of a sale.”345

ii. Arm’s Length Negotiations

The most compelling evidence that the transaction resulted from a fair process

is the Special Committee’s achievement of a deal to acquire 100% of Berkeley

Point—the structure it preferred and the Cantor Defendants disfavored. The

plaintiffs refute that point, asserting that Lutnick abused his control to influence

negotiations to Cantor’s advantage. Despite some of Lutnick’s early meddling,

however, he appropriately separated himself from the Special Committee’s process

false” and intentionally prepared to mislead a special committee for the controller’s
benefit).
344
Pls.’ Post-trial Br. 62.
345
In re Dole, 2015 WL 5052214, at *29 (quoting Tremont, 1996 WL 145452, at *16),
rev’d on other grounds, 694 A.2d 422 (Del. 1997)).

71
after it was reestablished and fully empowered. There is no evidence that he failed

to properly recuse himself from its substantive deliberations.346

That culmination of the Special Committee’s process was the June 6 meeting.

Before the meeting, the Committee had met numerous times, discussed the valuation

“two or three times” with Sandler, and approved an advocacy presentation to

persuade Cantor to lower its price.347 Bell, in particular, reviewed the numbers

closely given her background as an economics professor.348

There are certainly questions surrounding how the parties’ final negotiations

on June 6 progressed from a structure whereby the BGC would invest in Berkeley

Point to one where BGC purchased it outright. The Special Committee’s sole written

counterproposal going into the meeting adopted the tax-efficient structure Cantor

desired. The minutes are no help; they speak of a Cantor counterproposal but do not

specify what it was.349 No witness could remember the details. This deficiency in

346
The plaintiffs assert that Lutnick influenced the deal process by conversing with Sterling
(once or twice) and attending certain Board and Audit Committee meetings during the
negotiations. Pls.’ Post-trial Br. 26-27, 32-33; see JX 383; JX 400; JX 412; JX 476. It
appears from the minutes that Lutnick was sharing information with the Board and Audit
Committee or interacting with the Special Committee as a counterparty—not involving
himself in the Special Committee’s process. See In re Tesla Motors, 2022 WL 1237185,
at *34-36 (finding fair process and discussing the controller’s “apparent inability to
acknowledge his clear conflict of interest and separate himself from Tesla’s consideration
of the Acquisition”).
347
Sterling Tr. 262-63.
348
Sterling Tr. 298; Curwood Tr. 791; Moran Tr. 818.
349
JX 570.

72
the record caused me to question how the deliberations unfolded. What is not in

doubt, though, is the following.

First, the structure of the Berkeley Point acquisition clearly became the

sticking point. The Special Committee members testified consistently and credibly

that they became focused on an outright purchase of Berkeley Point during the

course of the parties’ negotiations.350 The Committee’s desire for that structure is

consistent with Cantor entering the June 6 negotiations with two proposals: one for

a purchase of 95% of Berkeley Point for $880 million and another for an outright

purchase for $1 billion.351 Cantor, of course, preferred the investment structure that

benefitted its tax position.352

The Special Committee and Sandler bargained hard on the structure of the

deal.353 The negotiations became heated and required multiple sidebars to

350
Sterling Tr. 220-222; Bell Tr. 569-70; Curwood Tr. 744-45; Moran Tr. 836-37.
351
The $1 billion offer was never put in writing but was made after the Special Committee
expressed its desire to buy 100% of Berkeley Point. See Edelman Tr. 433-35. Edelman
testified that the Special Committee refused to accept Cantor’s views on the $1 billion
price, which Cantor felt would allow it to receive sufficient proceeds to “make it whole for
the loss of the tax structuring.” See Edelman Tr. 434-35; see also id. 524 (describing how
the Special Committee team made clear to Cantor multiples times that taxes were “[their]
problem”).
352
See Edelman Tr. 416-17.
353
In re Cysive, 836 A.2d at 554 (explaining the “[m]ost important” aspect of fair dealing
as the committee “[b]argain[ing] hard” with its counterpart).

73
progress.354 The Special Committee was prepared to walk away if Cantor did not

agree to a deal that was attractive to the Committee.355 The Committee prevailed.356

Further, the Special Committee ended up with its preferred structure at a price

in line with what Cantor had offered for 95% of Berkeley Point in its April and May

term sheets.357 The plaintiffs maintain that the $875 million price for Berkeley Point

was $150 million more than what Lutnick had discussed in February.358 But I cannot

conclude that Lutnick’s early mentions of a deal in the “mid 700s” or $725 million

were true offers.359 The trial testimony consistently provides that those involved in

the negotiations—including the Special Committee—felt otherwise.360 The

documentary evidence is consistent with their understanding. For example, Cantor’s

early modeling bracketed the figures in this range.

The plaintiffs also suggest that the negotiations moved backwards because the

Special Committee’s $720 million counteroffer was for 100% of Berkeley Point

354
Sterling Tr. 269-71; Bell Tr. 570-72; Moran Tr. 943-45; see Gesoff, 902 A.2d at 1148
(explaining that “vigorous and spirited” negotiations are evidence of a fair process).
355
Sterling Tr. 271-72; Moran Tr. 944-45; Curwood Tr. 744, 746.
356
Sterling Tr. 405 (stating in response to the court’s questions that, “at the very end” of
negotiations, Cantor “conceded”).
357
JX 386; JX 503.
358
Pls.’ Post-trial Br. 64.
359
See Lutnick Tr. 1274-75; see Edelman Tr. 411-12.
360
Sterling Tr. 216-20; Edelman Tr. 411, 521-24; Bell Tr. 539-40; Moran Tr. 811-12
(describing the $700 million figure as “not a real number,” less a “formal offer” than an
“order of magnitude”).

74
rather than 95%.361 This contention is belied by the record. It is apparent from

Sandler’s June 5 presentation that it was considering $720 million for 95% of

Berkeley Point.362 The final deal price of $875 million is directly in line with what

Sandler was advising the Committee: a 20% increase in value for the last 5% of

Berkeley Point, full control, and liquidity. That outcome is persuasive evidence that

the Berkeley Point acquisition resulted from a fair process.

In addition, the Special Committee successfully reduced the size of the CMBS

investment from the $150 million Cantor proposed to $100 million. The Special

Committee, advised by Sandler, concluded that an investment of this size would give

BGC all the upsides it desired (such as data access) at a 33% savings.363 The Special

Committee also obtained more favorable terms for the investment than what Cantor

had proposed. For example, Cantor agreed to the Special Committee’s request for a

“catch-up” provision under which BGC’s following-years’ returns would

supplement any shortfall if its yearly return on the CMBS investment fell under

5%.364

* * *

361
See Pls.’ Post-trial Br. 44.
362
JX 566 at 10-11.
363
See JX 566 at 13-14; Sterling Tr. 266-67; Edelman Tr. 443-44.
364
JX 570.

75
 Taken together, a consideration of the relevant Weinberger factors leads to

the conclusion that the Berkeley Point acquisition and CMBS investment were the

product of fair dealing. That is so regardless of which party bears the burden of

persuasion. Nonetheless, I note that the Special Committee process was sufficient

to merit a shift of the burden of proving unfairness to the plaintiffs under the Lynch

doctrine.

2. Fair Price

Fair price “relate[s] to the economic and financial considerations of the

[transaction], including all relevant factors: assets, market value, earnings, future

prospects, and any other elements that affect the intrinsic or inherent value of [the

asset].”365 A fair price analysis can draw upon valuation techniques or methods that

are generally recognized as acceptable in the financial community.366 Although the

economic inquiry in a fair price analysis is often equated to that applied under the

appraisal statute, it is not a remedial calculation.367 “[T]he court’s task is not to pick

365
Weinberger, 457 A.2d at 711.
366
See Weinberger, 457 A.2d at 711, 713 (noting that a fair price analysis requires use of
“techniques or methods which are generally considered acceptable in the financial
community”); Lynch, 669 A.2d at 87-88 (discussing that a fair price analysis applies
“recognized valuation standards”); eBay Domestic Hldgs., Inc. v. Newmark, 16 A.3d 1, 42
(Del. Ch. 2010) (“The analysis of price can draw on any valuation methods or techniques
generally accepted in the financial community.”).
367
See ACP Master, 2017 WL 3421142, at *18; Cede & Co. v. Technicolor, Inc., 2003
WL 23700218, at *2 (Del. Ch. Dec. 31, 2003) (“The value of a corporation is not a point
on a line, but a range of reasonable values . . . .”), aff’d in part, rev’d in part on other
grounds, 884 A.2d 26 (Del.2005); see also Bershad v. Curtiss-Wright Corp., 535 A.2d 840,
76
a single number, but to determine whether the transaction price falls within a range

of fairness.”368

Because the entire fairness test is unitary, the court does not consider price in

a vacuum. The fair price analysis gives “some degree of deference to fiduciaries

who have acted properly” but does not operate as a “a rigid rule that permits

controllers to impose barely fair transactions.”369 A fair process paired with an unfair

price may therefore cause the court to conclude that defendants have breached their

fiduciary duties.370 “Price,” however, is often “the paramount consideration because

procedural aspects of the deal are circumstantial evidence of whether the price is

fair.”371

The evidence presented to address fair price centered on the parties’ experts’

opinions and Sandler’s fairness opinion, which address both the Berkeley Point

acquisition and the CMBS investment. I first assess whether the price paid for

Berkeley Point is “a price that is within a range that reasonable men and women with

845 (Del. 1987) (explaining that fair price aspect of entire fairness standard “flow[s] from
the statutory provisions . . . designed to ensure fair value by an appraisal, 8 Del. C. § 262”);
Rosenblatt v. Getty Oil Co., 493 A.2d 929, 940 (Del. 1985).
368
In re Dole, 2015 WL 5052214, at *33.
369
Reis vs. Hazelett Strip-Casting Corp., 28 A.3d 442, 466 (Del. Ch. 2011).
370
See, e.g., In re Trados Inc. S’holder Litig., 73 A.3d 17, 78 (Del. Ch. 2013) (noting, while
making a finding of fair price, “the fact the directors did not follow a fair process does not
constitute a separate breach of duty”).
371
eBay, 16 A.3d at 42; see Ams. Mining Corp., 51 A.3d at 1244.

77
access to relevant information might [have paid].”372 I go on to assess the fairness

of the CMBS investment and find that it, too, was financially fair.

a. The Berkeley Point Acquisition

The plaintiffs purchased Berkeley Point for $964.2 million in total: the $875

million initial deal price, a pre-closing $66.8 million adjustment to Berkeley Point’s

book value, and a $22.4 million true-up payment post-closing. The $875 million

figure is the focus of my fairness analysis.373 Naturally, the parties debate whether

that price is fair.

The Cantor Defendants argue that the Special Committee’s efforts and

Sandler’s analysis demonstrate the fairness of the $875 million BGC paid for

Berkeley Point. They offer the expert opinion of Glenn Hubbard in support of that

contention. Hubbard assessed the economic fairness of the Berkeley Point

372
Tremont, 1996 WL 145452, at *1; see Cinerama, 663 A.2d at 1143 (“A fair price does
not mean the highest price financeable or the highest price that fiduciary could afford to
pay. At least in the non-self-dealing context, it means a price that is one that a reasonable
seller, under all of the circumstances, would regard as within a range of fair value; one that
such a seller could reasonably accept.”).
373
The plaintiffs stress that what they have termed an $89.2 million “dividend” (the final
two payments BGC made for Berkeley Point) was an “unwitting concession” from the
Special Committee. See, e.g., Pls.’ Post-trial Br. 48 & n.257. They do not contend,
however, that damages should be assessed from the $964.2 million figure and both parties’
experts evaluated the Berkeley Point acquisition against the $875 million price. D’Almeida
Opening Report at 2; Hubbard Opening Report at 6. Moreover, I see no reason why BGC
should not have had to pay for the value that Berkeley Point generated before closing. The
Special Committee was aware that it had agreed to delivering Berkeley Point at closing
with a book value as of March 31, 2017 and that significant increases in Berkeley Point’s
book value were projected for 2017. See JX 663 at 16-18; Curwood Tr. 783-84.

78
acquisition using an event study, a comparable company analysis, and a dividend

discount model. From these analyses, Hubbard generated a Berkeley Point valuation

range of $772 million to $1,489 million.374

The plaintiffs assert that, at the very least, the Special Committee should have

paid no more than $725 million—a figure discussed early in negotiations. To

buttress their position that the price was unfair, they offer the expert opinion of Jamie

d’Almeida. D’Almeida conducted a guideline transaction analysis cross-checked

with a study of the 2017 CCRE buyouts.375 D’Almeida testified that the price BGC

paid for Berkeley Point was nearly $300 million over its market value.376

The Cantor Defendants have the more persuasive argument when it comes to

the fairness of the $875 million price. With respect to the low “$700 millions” price

Lutnick raised when the transaction was first being contemplated, I have already

found that it was not a true offer. Cantor’s first proposal to the Special Committee

was for $850 million for just 95% of Berkeley Point. The $875 million price agreed

on for 100% of Berkeley Point came after months of arm’s length negotiations. “The

fact that a transaction price was forged in the crucible of objective market reality (as

374
Hubbard Opening Report at 104.
375
D’Almeida Opening Report at 49, 66.
376
D’Almeida Tr. 1585.

79
distinguished from the unavoidably subjective thought process of a valuation expert)

is viewed as strong evidence that the price is fair.”377

The fairness of that $875 million price was also endorsed by Sandler in a

detailed fairness opinion after more than a month of additional diligence.378 Sandler

analyzed the transaction using a variety of methods, including a comparison to

Berkely Point’s 2014 multiples and an analysis against Walker & Dunlop.379

Looking at eight different Walker & Dunlop multiples, for example, Sandler found

that seven of the eight were substantially higher than the equivalent Berkeley Point

multiples implied by the deal price.380

The fairness of the acquisition price is further confirmed by a review of the

expert opinions and testimony offered by each side. I begin by assessing each of

Hubbard’s three analyses. First, I view the event study as an indication that the

market viewed the overall deal as well priced but attribute little weight to it as a

measure of Berkeley Point’s value. Second, I find that one of Hubbard’s

comparable companies analyses provides persuasive evidence that Berkeley Point’s

377
Unimation, 1991 WL 29303, at *17.
378
See, e.g. In re Tesla Motors, 2022 WL 1237185, at *46 (“The fairness opinion is further
evidence of fair price.”); Lynch, 669 A.2d at 87-89 (affirming a finding of fair price based
in part because of fairness opinions);
379
JX 663; see In re Sunbelt Beverage Corp. S’holder Litig., 2010 WL 26539, at *5
(Del. Ch. Jan. 5, 2010) (calling a fairness opinion a “mere afterthought” in part because it
was “produced in approximately one week”).
380
JX 663 at 21.

80
value could have been as high as $942 million or $1,164 million. Third, I review

and decline to attribute weight to Hubbard’s dividend discount model.

After considering Hubbard’s methods, I turn to d’Almeida’s guideline

transaction analysis, which is based on CCRE’s 2014 acquisition of Berkeley Point.

D’Almeida values Berkeley Point at $586 million by averaging four valuations

generated by applying different multiples from the 2014 transaction to Berkeley

Point in 2017.381 He does not adjust any of the 2014 multiples.382 I conclude that

only one of the multiples—with adjustments—can provide an appropriate measure

of Berkeley Point’s value. That multiple indicates a value of $805 million for

Berkeley Point.

The outcome of my assessment is that the evidence I find reliable supports a

range of fair values for Berkeley Point of $805 million to $1,164 million. The $875

million acquisition price falls towards the lower end of that range. Thus, the price

paid by BGC for Berkeley Point was economically fair.

381
D’Almeida Opening Report at 116. This valuation assumes that BGC pays for future
referrals. See [part discussing referrals]. The plaintiffs seek damages based on this
valuation. Pls.’ Post-trial Br. 70.
382
D’Almeida Opening Report at 51-53.

81
 i. Hubbard’s Event Study

The Cantor Defendants cite Hubbard’s event study as a “particularly

compelling evidence of a fair price.”383 Event studies are an “accepted method[] of

analysis” in this court.384 Of course, market evidence is only as good as the

information that is known to the market.385 The utility of an event study therefore

depends whether all material information was disclosed to the market.386

Hubbard considered how BGC’s stock price reacted to the announcement of

the transaction, its closing, and related financial reporting—controlling for broader

market and industry factors that would have simultaneously affected the stock

price.387 He concluded that there was an absence of “statistically significant stock

price declines on both the announcement date and the closing date” that provide

383
Cantor Defs.’ Post-trial Br. 49.
384
In re Walt Disney Co. Deriv. Litig., 907 A.2d 693, 745 (Del. Ch. 2005).
385
Applebaum v. Avaya, Inc., 812 A.2d 880, 890 (Del. 2002) (remarking that “a well-
informed, liquid trading market will provide a measure of fair value”).
386
See Bandera Master Fund LP v. Boardwalk Pipeline P’rs, 2021 WL 5267734, at *83
(Del. Ch. Nov. 12, 2021) (rejecting reliance on market price where the market lacked
material information); Verition P’rs Master Fund Ltd. v. Aruba Networks, Inc., 210 A.3d
128, 139 (Del. 2019) (explaining it is inappropriate to rely on market price when there is
“material, nonpublic information “ that “could not have been baked into the public trading
price).
387
Hubbard Opening Report at 15. Hubbard also considered the possibility of the news
being leaked between February 11, 2017 (when Lutnick first informed BGC’s Audit
Committee of a possible acquisition of Berkeley Point) and the transaction announcement
date of July 18, 2017. Id. at 17-18.

82
evidence that BGC did not overpay for Berkeley Point.388 He explains that “[i]f

BGC had overpaid for [Berkeley Point] . . . and public stockholders of BGC had the

information necessary to independently assess the value of [Berkeley Point], then

the stock price of BGC should [have] decline[d]” when the transaction was

announced.389

The plaintiffs argue that the market did not have sufficient information to

assess the transaction, making the market’s reaction to the various events studied by

Hubbard a poor indicator of value. For example, they point to what they contend

were unreliable projections included in the announcement of the transaction and the

fact that the disclosures lacked historical data for Berkeley Point or the CMBS

business.390 Still, much of this information was provided in the Form 8-K BGC filed

when the acquisition was completed.

As the plaintiffs also note, however, the market was unaware that Berkeley

Point did not create forecasts in the ordinary course or that the projections were

prepared for purposes of the transaction’s negotiations.391 More importantly,

because the Berkeley Point acquisition and CMBS investment were announced

388
Id. at 24. In reaching that conclusion, Hubbard also established that BGC’s stock trades
in an efficient market. Id.at 147-150.
389
Id. at 20.
390
JX 927 (“d’Almeida Rebuttal Report”) at 33-66; see JX 685 at 4; JX 690.
391
See generally JX 685; JX 690; JX 713.

83
together, it is difficult to separate out the market’s reaction to each individually.

Investors could hypothetically have viewed one as overpriced and the other as

underpriced in a manner that cumulatively did not register as a statistically

significant stock price reaction for the purposes of an event study.

Overall, the event study may be of some use in confirming that the market felt

the overall transaction was favorable to BGC. But it is an imperfect method for

assessing the value of Berkeley Point. I afford it little weight given the more reliable

methods available.

ii. Hubbard’s Comparable Company Analysis

Hubbard also values Berkeley Point using a comparable company analysis.

This is a standard valuation technique whereby financial ratios of public companies

similar to the one being valued are applied to a subject company.392

Hubbard takes a trio of approaches. First, he conducts a comparable company

analysis based on the eight companies Sandler considered. Second, he runs a

regression on a broader range of companies in Berkeley Point’s sector to estimate

Berkeley Point’s value. Third, he examines a single comparable: Walker &

392
See Aswath Damodaran, Investment Valuation: Tools and Techniques for Determining
the Value of Any Asset 38-39 (3d ed. 2012); Hubbard Opening Report at 49; see
Kleinwort Benson Ltd. v. Silgan Corp., 1995 WL 376911, at *4 (Del. Ch. June 15, 1995)
(recognizing the reliability of comparable company analyses).

84
Dunlop.393 After considering each, I conclude that only the third provides a reliable

assessment of Berkeley Point’s value.

Sandler Peer Companies Analysis. Hubbard starts by comparing Berkeley

Point to a group of eight companies that he says were “identified by Sandler” as

peers.394 He did not, however, further justify their use in his comparable company

analysis. Hubbard acknowledged at trial that he did not go “beyond whether [the

companies] were in the other set[s] of comparables” to assess whether the companies

in the comparable company analysis were good comparables.395 He did not, for

instance, conduct an independent review of the comparable companies’

fundamentals.396

Under these circumstances, the analysis cannot be relied upon.397 “For

obvious reasons, market-based method[s] depend[] on actually having companies

393
Hubbard Opening Report at 18-20.
394
Id. at 52; see JX 554 at 8. These same companies were considered in Cantor’s internal
documents analyzing the transaction. See JX 469 at 18. It is unclear whether Sandler
independently determined that the companies were good comparables for Berkeley Point
or copied the list of companies from Cantor’s materials. See In re Jarden Corp., 2019 WL
3244085, at *33 (Del. Ch. July 19, 2019) (noting that “the financial literature advises
against relying on peers provided by the target company’s management”), aff’d sub nom.
Fir Tree Value Master Fund, LP v. Jarden Corp., 236 A.3d 313 (Del. 2020).
395
Hubbard Tr. 1522.
396
See id. 1521-23.
397
ONTI, Inc. v. Integra Bank, 751 A.2d 904, 916 (Del. Ch. 1999) (“The burden of proof
on the question whether the comparables are truly comparable lies with the party making
that assertion . . . .”).

85
that are sufficiently comparable that their trading multiples provide a relevant insight

into the subject company’s own growth prospects.”398 This court has observed that

“[w]here an expert defers to a peer set without conduct a ‘meaningful, independent

assessment of comparability’ between the seller’s business and the business of its

peer companies it ‘is not useful and frankly, not credible.’”399

Regression-Based Analysis. The regression-based comparables analysis is

also uninformative. Hubbard created a basic model by regressing price-to-book

multiples on return on equity for companies within the “Thrifts and Mortgage

Finance” industry.400 As with the eight-company-set comparable analysis, Hubbard

did not adequately justify the choice of companies that make it into the regression

398
In re Orchard Enters., 2012 WL 2923305, at *9 (Del. Ch. July 18, 2012).
399
In re Panera Bread, 2020 WL 506684, at *42 (quoting Jarden, 2019 WL 3244085, at
*34). The Cantor Defendants argue that the comparables provide valuable insight because
“Hubbard’s comparable companies are the same ones that market analysts identified as
‘competitors’” to Newmark and Walker & Dunlop. Cantor Defs.’ Post-trial Reply Br. 30.
But a company can compete with another while being a poor comparable in terms of
valuation. Notably, certain of the analyzed companies are multiple times larger than
Berkeley Point. Others’ values are derived largely from services different than those
offered by Berkeley Point. See JX 554 at 8 (listing actual market capitalizations of
comparables with several over two times—and one more than ten times—larger than
Berkeley Point); Day Tr. (describing how three of the comparable companies relied much
less on their GSE platform for revenue than Berkeley Point or Walker & Dunlop).
400
Hubbard Tr. 1473-74.

86
analysis.401 Furthermore, Hubbard’s inaccurate calculation of Berkeley Point’s

return on equity calculation (discussed below) renders this analysis unreliable.402

Walker & Dunlop. That leaves Hubbard’s comparable company analysis of

Walker & Dunlop, which is free from the problems identified with the other two

approaches.403

The plaintiffs emphasize that Berkeley Point differed from Walker & Dunlop

in various ways. For example, Walker & Dunlop had a broader product mix,

including a successful debt brokerage business.404 Berkley Point was also more

401
The Cantor Defendants mention the sector regression analysis only in passing in both
their pre- and post-trial briefs. See generally Cantor Defs.’ Pre-trial Br (Dkt. 244); Cantor
Defs.’ Post-trial Br.
402
See infra Section II.B.2.iii (explaining Hubbard’s double counting).
403
This court has noted that a comparable company analysis may have limited value if only
one comparable is used. See, e.g., Gray v. Cytokine Pharmasciences, Inc., 2002 WL
853549, at *9 (Del. Ch. Apr. 25, 2002); In re AT&T Mobility Wireless Operations Hldgs.
Appraisal Litig., 2013 WL 3865099, at *2 (Del. Ch. June 24, 2013) (“Where there is a lack
of comparable companies, the analysis is not particularly meaningful and should not be
used.”); Gholl v. Emachines, Inc., 2004 WL 2847865, at *6 (Del. Ch. Nov. 24, 2004)
(“When a market analysis is based on only one ‘comparable’ company and yields such a
wide range of results, the Court seriously questions its usefulness.”). This is a circumstance
where a single comparable generates meaningful evidence of value. See In re AT&T, 2013
WL 3865099, at *2 (“[C]ircumstances might be envisioned when a Court could rely on a
single comparable . . . .”). The links between Berkeley Point and Walker & Dunlop were
such that one would benchmark itself against the other and market analysts analyzed the
acquisition by looking at Walker & Dunlop’s multiples. See infra notes 407-11 and
accompanying text.
404
Strassberg Tr. 1225-27; see JX 1224 at 3.

87
reliant on GSE loans and generated less of its revenue from origination fees than

Walker & Dunlop.405

But a comparable company analysis need not rely on perfectly comparable

companies to be insightful. Rather, a party must establish some meaningful

similarities between the entity at issue and the alleged comparable. 406 The evidence

supports such a finding here.

There is general agreement between the parties that Walker & Dunlop was the

closest public company comparable to Berkeley Point. Sandler compared Berkeley

Point to Walker & Dunlop in depth,407 d’Almeida stated that “Walker & Dunlop is

the closest publicly traded company to Berkeley Point,”408 and Berkeley Point’s

CEO agreed.409 Strassberg—who had been the CFO of both Berkeley Point and

Walker & Dunlop—described Walker & Dunlop’s business model as “very

comparable to Berkeley Point” and testified that Berkeley Point would benchmark

405
D’Almeida Opening Report at 124.
406
See IQ Hldgs., Inv. v. Am. Comm. Lines Inc., 2013 WL 4056207, at *1-2 (Del. Ch.
Mar. 18, 2013) (discussing “sufficient” and “insufficient” similarity when considering
comparable company analyses).
407
See, e.g., JX 661 at 19-20.
408
D’Almeida Opening Report at 54.
409
Day Tr. 21-22.

88
itself against Walker & Dunlop.410 Market analysts also evaluated the Berkeley

Point acquisition by comparing it to Walker & Dunlop.411

As of July 17, 2017, Walker & Dunlop was trading at a price-to-earnings

multiple of 10.2x and a price-to-book multiple of 2.3x.412 Applying Walker &

Dunlop’s price-to-earnings and price-to-book multiples, respectively, leads to

Berkeley Point valuations of $924 million and $1,164 million.413 I view those

figures as reliable indicators of Berkeley Point’s value at the time of the acquisition.

iii. Hubbard’s Dividend Discount Model

Hubbard’s final method of valuing Berkeley Point relies on a dividend

discount model, which is a “simpler variant” of a discounted cash flow model

(“DCF”).414 Specifically, Hubbard uses a type of dividend discount model known

410
Strassberg Tr. 1159-61; Strassberg Dep. 314.
411
JX 686 at 2.
412
Hubbard Opening Report at 53-54. Although the financial data for both multiples is as
of March 31, 2017 (the day to which the book value BGC had purchased for $875 million
was pegged), the market data is as of July 17, 2017. Id. at 53 n.176. Hubbard’s multiples
are in line with those used in Sandler’s fairness opinion, which considered market data as
of July 12, 2017. JX 661 at 20 (calculating a price-to-book multiple of 2.54 and price-to-
earnings multiple of 11.5).
413
Id. at 53-54, 96. The multiple is as of March 31, 2017 (the day to which the book value
BGC had purchased for $875 million was pegged). The multiple in Sandler’s fairness
opinion, based on 2017 expected earnings per share, was 11.9x. JX 661 at 20.
414
Hubbard Opening Report 33; see Damodaran, supra note 392, at 324 (“[T]he Gordon
growth model provides a simple approach to valuing equity, its use is limited to firms that
are growing at a stable growth rate.”); DFC Glob. Corp. v. Muirfield Value P’rs, L.P., 172
A.3d 346, 379 (Del. 2017) (recognizing a Gordon Growth Model as an “appropriate tool”
for valuation).

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as a Gordon Growth Model (“GGM”). A GGM estimates the equity value of a

company by assuming a dividend stream that grows in perpetuity at a stable rate and

discounting back those cash flows at a given cost of equity.415 Using the GGM,

Hubbard valued Berkeley Point at a range of $1.159 billion to $1.489 billion.416

The GGM is unreliable evidence of Berkeley Point’s fair value for several

reasons. First, it is not a particularly dependable valuation methodology with respect

to real estate finance companies.417 An informative DCF valuation requires reliable

projections. Preparing projections for companies in the real estate finance industry,

though, is challenging because they rely on absolute and relative (to the past) interest

rates. Sterling explained at trial that mortgage banking businesses like Berkeley

Point are “almost entirely dependent on interest rate[s] and interest rate projections,”

415
Hubbard Opening Report at 33.
416
Id. at 104.
417
D’Almeida Opening Report at 73-74 (describing a Bank of America analysis that
mentions that DCF analysis is used only 6% of the time when valuation methodologies are
used to value real estate services companies and 0% of the time when used to value real
estate finance companies).

90
making a DCF analysis “of limited value.”418 Moreover, as has been discussed,

Berkeley Point lacked ordinary course projections.419

Various parties involved in the deal recognized a DCF analysis was not a

useful tool to value Berkeley Point. None of Berkley Point, Cantor, CCRE, BGC,

or Sandler valued Berkeley Point using a DCF method.420 Even Hubbard

acknowledged that companies in Berkeley Point’s industry are not ideal subjects for

a DCF analysis and indicated that other analyses might be more compelling.421

Second, dividend discount models are best suited for valuing businesses with

“well-established dividend payout policies that they intend to continue into the

future.”422 Berkeley Point did not have a dividend payout policy or issue

418
Sterling Tr. 289; see Sterling Tr. 395 (“When you try to project mortgage banking
companies, they are inherently and ultimately almost entirely based on the shape and levels
of the interest rate curve and where interest rates are in the future. Those are very difficult
to predict and end up being estimates.”); Sterling Dep. 119-20 (“In the mortgage business[],
projections have limited use, because the businesses are inherently tied to interest rates . . .
these businesses are difficult to predict or project over the long term or even the near term
because they’re so dependent on not only absolute interest rates but movements in interest
rates. So in [a] mortgage banking business[] like th[is], [projections] are less applicable.”).
419
Hubbard Opening Report at 30 n.102; Strassberg Dep. at 124-25.
420
See d’Almeida Opening Report at 74.
421
Hubbard Tr. 1578-79.
422
Damodaran, supra note 392, at 250; see Jerald E. Pinto et al., Equity Asset Valuation
134 (2d ed. 2010) (“A discounted dividend approach is most suitable for dividend-paying
stocks in which the company has a discernible dividend policy that has an understandable
relationship to the company’s profitability . . . .”).

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dividends.423 Hubbard thus had to estimate Berkeley Point’s capacity to pay a

dividend.

Looking beyond the rather dubious applicability of the GGM to Berkeley

Point, a consideration of the model’s inputs reveals that it does not account for

certain nuances of the mortgage loan origination and servicing business. Three

inputs make up Hubbard’s GGM: a stable growth rate,424 an expected dividend,425

and cost of equity.426 Hubbard’s calculation of Berkeley Point’s return on equity is

crucial to his GGM valuation—it is an input in the calculation of both the growth

rate and the expected dividend. He divided net income by book value to find

Berkeley Point’s return on equity in perpetuity.427

But the plaintiffs note that using net income rather than cash flows to calculate

return on equity is problematic. It has been recognized as “one of the most common

mistakes” that valuation practitioners make because using net income can

423
Hubbard Tr. 1551-52; d’Almeida Rebuttal Report at 30-31.
424
The growth rate is equivalent to the product of a retention ratio (the share of earnings a
company retains instead of paying out to stockholders) and return on equity. Hubbard
Opening Report at 34-35.
425
The expected dividend is set equal to Berkeley Point’s book value of equity multiplied
by both its return on equity and Berkeley Point’s payout ratio (one minus the retention
ratio). Id. at 34-35.
426
Hubbard calculated the cost of equity using a standard capital asset pricing model. Id.
at 36-42.
427
Id. at 82.

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overestimate cash and, in turn, value.428 When it comes to Berkeley Point,

d’Almeida argues that net income is an especially poor estimate of cash flow because

its income statement includes a line item for “[g]ains from mortgage banking

activities, net” (or mortgage service rights, “MSRs”), a non-cash item required to be

included by general accepted accounting principles.429 After considering the issue

and reviewing the parties’ supplemental submissions addressing it, I agree.

MSRs are contractual agreements to service a mortgage.430 Cash from an

MSR is received over its lifetime,431 but GAAP requires the estimated present value

of that future MSR income to be recognized as net income in the year the MSR is

originated.432 The MSR is also recorded on the balance sheet as an asset that is

amortized over its lifetime “in proportion to, and over the period of, the project net

servicing income.”433

Over the life of the MSR, the amortization equals to the estimated fair value

of the MSR as debited on the balance sheet. But it sums up to less than the servicing

428
Shannon Pratt & Roger Grabowski, Cost of Capital: Applications and Examples 1189
(5th ed. 2014) (noting that net cash flow “usually is less than net income”).
429
D’Almeida Rebuttal Report at 19-20; see, e.g., JX 713 at 304.
430
Sterling Tr. 280; Hubbard Opening Report at 11-12.
431
This is shown as “servicing fees” on the income statement. See, e.g., JX 713.
432
D’Almeida Rebuttal Report at 19-20; d’Almeida Tr. 1612-15.
433
JX 195 at 11.

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income generated by the MSR.434 As a result, d’Almeida identified that Berkeley

Point’s unadjusted net income—that is, net income that includes MSRs and

amortization—overstates its distributable income.435 In other words, Hubbard’s

inclusion of MSRs in Berkeley Point’s net income resulted in “a measure of net

income that is not truly reflective of income.”436 The decision leads to a double

counting of certain MSR income in Hubbard’s GGM model.437 Hubbard’s use of

434
Pls.’ Post-trial Suppl. Br. 6 (Dkt. 283); Cantor Defs.’ Suppl. Br. 4 (Dkt. 284).
435
D’Almeida Rebuttal at 10-14. This is because of the discounted value of the MSR when
it is put on the balance sheet—the amortization nets against servicing fees in future years
at a discounted rate. To take an overly simplified example, consider a MSR worth $10 in
estimated servicing fees due in one year’s time and a discount rate of 25%. When the MSR
is first registered as net income in year zero, it would be at the present value of $8. In year
one, those $8 would be amortized and $10 of servicing fee income would be recorded. The
present value of the MSR is $8 (the payment in one year discounted back), not $9.60 (the
$8 registered at year zero plus the $2 net income in year one discounted back). Not
removing MSRs and amortization from net income leads to overvaluation (just consider a
second, identical MSR recorded at year one). The Cantor Defendants effectively concede
this point. See Cantor Defs.’ Suppl. Br. 4 (“Total amortization, however, does not
necessarily converge to total collected servicing fees.”).
436
D’Almeida Rebuttal Report 20.
437
The Cantor Defendants attempt to refute this view by arguing that, because Berkeley
Point could sell its MSRs, they are effectively distributable cash. Cantor Defs.’ Post-trial
Reply Br. 31-32; Cantor Defs.’ Suppl. Br. 8-9. As a result, they claim that no adjustments
are necessary to Berkeley Point’s net income to calculate a reliable return on equity. See
Hubbard Tr. 1498-99, 1556-57. But selling MSRs in a given year would necessarily
decrease servicing income in future years. See Pls.’ Suppl. Post-trial Br. 7. It would also
eventually lead to no amortization on the income statement. In such a hypothetical
scenario, Berkeley Point would eventually not receive any servicing income as MSRs from
before the valuation year expired and MSRs were sold at their estimated present value
every year. It is not tenable to suggest that Berkeley Point could have repeated its net
income (as calculated in the base year for Hubbard’s GGM model) in perpetuity while
selling its MSRs.

94
unadjusted net income to calculated return on equity correspondingly overstates

Berkeley Point’s return on equity.

Net income adjusting for MSRs and amortization is, instead, an appropriate

way to understand Berkeley Point’s operating earnings (and distributable cash).

BGC itself adjusted GAAP net income to calculate Berkeley Point’s distributable

earnings and adjusted EBITDA following the acquisition.438 Walker & Dunlop does

the same.439

For all of these reasons, I decline to credit the GGM as evidence of fair value.

The clarity it provides on how to assess Berkeley Point’s adjusted net income,

however, helps inform the following consideration of d’Almeida’s analysis.

438
JX 690 at 110, 113 (“BGC believes that distributable earnings best reflect the operating
earnings generated by [Berkeley Point] on a consolidated basis and are the earnings which
management considers available for, among other things, distribution to BGC Partners,
Inc. and its common stockholders . . . .”); JX 988 at 22 (explaining that following the
transaction, “BGC’s calculation of [Berkeley Point’s] pre-tax distributable earnings and
adjusted EBITDA will exclude the net impact of [non-cash GAAP gains attributable to
originated MSRs and non-cash GAAP amortization of MSRs]”).
439
See Cantor Defs.’ Suppl. Br. 13-14; JX 814 at 47. Although the defendants are correct
that both Berkeley Point and Walker & Dunlop note that these adjusted metrics are meant
to supplement (rather than replace) GAAP net income as operating metrics, that point is
unresponsive to the fact that Hubbard’s GGM double counts distributable income. See JX
792 at 6; JX 814 at 47. It also does not address the fact that BGC believed distributable
earnings (adjusted for MSRs and amortizations) “best reflect[ed]” money available to
distribute to stockholders. JX 690 at 113-14.

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 iv. D’Almeida’s Guideline Transaction Analysis

The plaintiffs presented a single valuation approach: d’Almeida’s analysis

using the guideline transactions method. The method estimates the value of a

business based on financial ratios from comparable transactions.440 D’Almeida

identified one transaction he concluded was an appropriately comparable: CCRE’s

2014 acquisition of Berkeley Point.441

D’Almeida considered whether any adjustments to the multiples from the

2014 transaction were needed to value Berkeley Point in 2017. He concluded that

they were not. For example, d’Almeida posits that Berkeley Point fared worse in

2017 than in 2014 in terms of fees earned per dollar of loans originated, origination

fees as a share of origination volume, EBITDA margin, and risk (due to a relative

shift away from safer GSE loans).442

440
D’Almeida Opening Report at 49-50; Highfields Cap., Ltd. v. AXA Fin., Inc., 939 A.2d
34, 54 (Del. Ch. 2007) (describing a comparable transactions analysis as “identifying
similar transactions, quantifying those transactions through financial metrics, and then
applying the metrics to the company at issue to ascertain a value”).
441
D’Almeida began his guideline transactions analysis by attempting to identify potential
comparable transactions based on various criteria, resulting in a list of twenty transactions
including CCRE’s 2014 acquisition of Berkeley Point. Of the nineteen potential guideline
transactions not involving the subject company, fifteen involved private target companies
and, correspondingly, do not have publicly available metrics for analysis. Of the four
remaining potential guideline transactions, d’Almeida excluded those transactions
involving target companies not sufficiently similar to Berkeley Point. Following this last
step, the 2014 CCRE-Berkeley Point deal was the sole transaction remaining. D’Almeida
Opening Report at 50-51.
442
Id. at 51-56. D’Almeida also claims that Berkeley Point would not receive as much of
a boost to its loan origination volume from the acquisition when compared to its entry into
96
 D’Almeida then selected four multiples from the 2014 transaction to estimate

the value of Berkeley Point. Each of the four transaction multiples d’Almeida used

was included in the materials Sandler prepared to aid the Special Committee’s

consideration of the 2017 transaction: two EBITDA multiples, a book value

multiple, and a sector-specific multiple.443 Applying these multiples results in an

average Berkeley Point value of $586 million.444

The Cantor Defendants question the soundness of that valuation on several

grounds. The threshold issue is that d’Almeida employed a single methodology.

This court generally prefers that valuation experts employ multiple methodologies

“to triangulate a value range.”445 But that is not necessarily a sufficient reason to set

d’Almeida’s valuation aside.446

a referral relationship with Newmark because the latter amounted to a greater shift. Id. at
53-54. And looking more generally at the real estate industry, d’Almeida claims that
EV/EBITDA multiples fell over the relevant time period. d’Almeida Opening Report at
55-56. Specifically, d’Almeida looked at the industry classification of “Real Estate
(Operations & Services) in a database maintained by New York University professor
Aswath Damodaran. See Aswath Damodaran, Enterprise Value Multiples by Sector (US),
NYU STERN, https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/-
vebitda.html (last updated Jan. 2022).
443
D’Almeida Opening Report at 56.
444
Id. at 116.
445
S. Muoio & Co. v. Hallmark Ent. Invs. Co., 2011 WL 863007, at *20 (Del. Ch. Mar. 9,
2011), aff’d, 35 A.3d 419 (Del. 2011) (ORDER).
446
Id. at *7 (acknowledging that there “may be circumstances where using only one
valuation methodology is appropriate and reliable”); DFC Glob. Corp., 172 A.3d at 388
(recognizing that “[i]n some cases, it may be that a single valuation metric is the most
97
 Compounding the problem of using a lone method, the Cantor Defendants

say, is the fact that d’Almeida used just one comparable transaction.447 And that

transaction was more than three years old at the time that BGC acquired Berkeley

Point.448 Even still, I might be willing to adopt the myopic approach the plaintiffs

advocate for if they had applied their methodology sensibly.

But the next deficiency the defendants highlight seriously calls into question

the reliability of d’Almeida’s approach. Specifically, the primary assumption

underlying d’Almeida’s methodology—that the market would have assigned the

same multiples to Berkeley Point in 2014 as it would in 2017—does not hold up to

scrutiny.

D’Almeida acknowledged that multiples are often adjusted to account for

differences between the comparator and the company being valued (such as size,

growth, profitability, risk, and return on investment) before being applied to the

reliable evidence of fair value and that giving weight to another factor will do nothing but
distort that best estimate”).
447
See LongPath Cap., LLC v. Ramtron Int’l Corp., 2015 WL 4540443, at *1 (Del. Ch.
June 30, 2015) (rejecting a comparable transactions approach because its “two-observation
data set d[id] not provide a reasonable basis to determine fair value”).
448
See Kruse v. Synapse Wireless, Inc., 2020 WL 3969386, at *9 (Del. Ch. July 14, 2020)
(finding that a 2012 merger “was not probative” of the subject company’s value at the time
of a 2016 merger because the precedent transaction was “stale”).

98
subject.449 His decision not to adjust the 2014 transaction multiples to value

Berkeley Point in 2017 is unpersuasive for several reasons including that:

• Berkeley Point was coming off of multiple years of significant growth
in 2017, as opposed to a year of steep decline in 2014. It is therefore
unlikely that the market would view Berkeley Point’s future prospects
equivalently in 2014 and 2017.450

• Two of the metrics d’Almeida used to justify his approach—fees earned
per dollar of loans originated and origination fees as a share of
origination volume—are considered only in terms of revenue (not
profitability).451 If one takes into account expenses and looks at a
traditional profitability metric like net income margin, she would
conclude that Berkeley Point not only grew, but also became more
profitable in the time between the two transactions. Its net income
margin increased from 12.4% in 2013 to 42.7% in 2016 (and to 38.4%
for LTM June 2017).452

• Though d’Almeida looked to “Real Estate (Operations & Services)”
metrics to support his view of general market trends, the database from
which d’Almeida took his figures classifies Berkeley Point as a
“Financial Services (Non-bank & Insurance)” company. In that
industry class, a range of financial metrics increased meaningfully
between 2014 and 2017.453

• Berkeley Point experienced an extremely limited shift away from GSE
loans from 2014 to 2017. GSE loans accounted for at least 95% of
Berkeley Point’s loan production volume in every interim year.
Although forecasted growth in multifamily loan origination was lower
449
D’Almeida Opening Report at 49.
450
See JX 949 at 3; Day Tr. 17-19.
451
Hubbard Rebuttal Report at 9-10.
452
Id. at 40; JX 792 at 6; JX 661 at 14-15. This net income calculation includes MSR
originations and amortization. The metric is informative here (unlike in the GGM) because
the future income generated at a particular expense level is indicative of a certain form of
profitability. Further, the inflation in the margin caused by not adjusting net income is
present in both years; it is a like-to-like comparison.

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 in 2017 than in 2014, an industry-wide trend towards GSE loans during
the relevant period favored Berkeley Point.454
I therefore reject d’Almeida’s assumption that Berkeley Point’s multiples remained

stagnant between 2014 and 2017.

In terms of the four specific multiples d’Almeida assessed, I conclude that

only one—the “Price/Book Value” multiple, with adjustments—provides an

appropriate measure of Berkeley Point’s value. The other three—the two

“EV/EBITDA” multiples and “Price less MSR Equity/Originations”—do not.

EV/EBITDA and Price less MSR Equity/Originations. An EV/EBITDA

multiple is a commonly used valuation multiple that compares the enterprise value

of a company to its EBITDA.455 Recognizing that EBITDA is not a GAAP measure

and can be calculated differently, d’Almeida analyzed two approaches: (1) Berkeley

Point’s internal approach to calculating EBITDA, which he calls the “BP Method”;

and (2) Walker & Dunlop’s approach, termed the “WD Method.” Applying

Berkeley Point’s EV/EBITDA multiple from the 2014 CCRE acquisition to its 2017

adjusted EBITDA, d’Almeida generates Berkeley Point valuations of $589 million

and $598 million using the BP Method and WD Method, respectively.456

454
Id. at 10-13.
455
D’Almeida Opening Report at 56.
456
These figures are of July 16, 2017 (the day the Board approved the transaction and one
day before signing). Id. at 116. D’Almeida’s report puts forward two values for each
multiple; one assuming BGC pays for its referrals and the other assuming it does not. The
plaintiffs ask for damages based on the former scenario, and all the valuations discussed in
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 As Hubbard explained, however, enterprise-based multiples like EV/EBITDA

are generally unsuitable for financial services firms like Berkeley Point.457 Indeed,

the data d’Almeida relied on to justify his decision not to adjust the 2014 multiples

lacks EV/EBITDA ratios for firms categorized as “Financial Services (Non-bank &

Insurance),” which includes Berkeley Point. And even if equity-based multiples

were applicable for a company like Berkeley Point, the 2014 Berkeley Point

transaction multiples could not reasonably be applied to Berkeley Point in 2017

without significant upward adjustment, as discussed above.

There are similar reasons to question the applicability of the Price less MSR

Equity/Originations multiple. That multiple “effectively treats the value of loans,

loan originations, and the servicing of new loans as a function of the volume of loan

originations, adding this value to the book value of existing mortgage servicing

rights.”458 D’Almeida generated a Berkeley Point valuation of $567.0 million using

the 2014 Price less MSR Equity/Originations multiple.459

this section are those that d’Almeida calculated assuming BGC pays for its referrals.
Compare Pls.’ Post-trial Br. 76-77, with d’Almeida Opening Report at 116. I find it
reasonable to include the value of affiliate loan referrals when considering the value of
Berkeley Point. Servicing revenues from referrals already on Berkeley Point’s books are
effectively guaranteed, Berkeley Point generated the value and would continue to do so as
part of BGC, and there is reason to believe that a third-party buyer would not have offered
a similarly productive referral relationship. See Hubbard Opening Report at 11.
457
Hubbard Opening Report at 50.
458
D’Almeida Opening Report at 57-58.
459
Id. at 116.

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 Hubbard noted that experts on investment valuation generally “caution[]

against the use of price-to-sales multiples because sales are not readily measurable

for financial services firms” such as Berkeley Point.460 Price less MSR

Equity/Originations is sector-specific and relatively removed from cash flow. And

it does not seem to be widely used in the industry.461

Price/Book Value. That leaves d’Almeida’s valuation based on the

Price/Book Value multiple. Price/Book Value multiples are used when a company’s

balance sheet is closely representative of market value, as is the case with financing

companies like Berkeley Point.462 Berkeley Point, for example, marks its loans and

mortgage servicing rights at market value, making this multiple particularly apt.

There is also agreement between the experts that the Price/Book Value

multiple can reasonably be applied to value Berkeley Point.463 The work of a leading

corporate valuation expert confirms that price-to-earnings and price-to-book

multiples are “by far the most popular ones for the valuation of financial

institutions.”464

460
Hubbard Rebuttal Report at 17.
461
Id. at 11-12.
462
D’Almeida Opening Report at 57.
463
Id. at 57; Hubbard Rebuttal Report at 26-27.
464
Damodaran, supra note 392, at 582, 600; see Mario Massari et al., The Valuation of
Financial Companies 126 (2014) (“We stress[] that the valuation of financial companies
should be equity-side.”).

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 D’Almeida values Berkeley Point at $590.5 million using the Price/Book

Value multiple from the 2014 Berkeley Point transaction. He observes that this

figure may be high because Berkeley Point has typically booked its MSRs

aggressively when compared to third-party appraisers.465

The problem with d’Almeida’s approach, once again, is that it does not

properly adjust for the differences between 2014 and 2017. Price/Book Value

multiples increased by 20.3% in the “Financial Services (Non-bank & Insurance”)

sector as a whole across that three-year period.466 As for Walker & Dunlop, that

increase was even larger at 51.5%.467

I find it reasonable to value Berkeley Point by taking the average of these

figures (a conservative approach given Berkeley Point’s similarity to Walker &

Dunlop and the tailwinds described above),468 applying it to Berkeley Point’s 2014

Price/Book multiple (generating a multiple of 1.64), and multiplying Berkeley

Point’s 2017 Book Value by that adjusted multiple. Doing so indicates a value for

Berkeley Point of $805 million. I view that figure as a reliable indicator of Berkeley

Point’s value at the time of the acquisition.

465
D’Almeida Opening Report at 62-63.
466
Hubbard Rebuttal Report at 42.
467
Id. at 41.
468
See supra notes 250-54.

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 2017 Buyout Cross-check. The last of d’Almeida’s analyses is a “cross-

check” of his guideline transaction analysis via a consideration of the 2017 CCRE

buyouts. By backing out the book value of the CMBS business from the average

value of CCRE implied by the prices Cantor paid to the other investors, d’Almeida

calculated a Berkeley Point valuation of $624 million.469

Cantor’s CCRE buyouts were governed by a limited partner agreement that

included a preferred rate of return for the limited partners that were bought out (and

considered as part of d’Almeida’s valuation).470 As a result, the buyout of the limited

partners’ interests in CCRE was less about the value of Berkeley Point (and the

CMBS business) than the limited partners’ expected returns and the relative

illiquidity of their stakes.471 A rough calculation of the limited partners’ returns

shows that their buyout prices aligned with the preferred returns in the agreement.472

The cross-check cannot serve as a reliable indicator of Berkeley Point’s value given

that fact.

* * *

469
D’Almeida Opening Report at 72.
470
See JX 95 §§ 8.3, 11.1; id. at 18, 92-93; see d’Almeida Opening Report at 112-13.
471
See Lutnick Tr. 1248-52.
472
For example, Ohio State Teachers Retirement System’s 2 million units, purchased for
$200 million in August 2011, was bought out for about $354 million, as agreed in February
2017. JX 95 at 93; PTO ¶ 77. A 11.5% annual return on a $200 million investment over
five-and-a-half years would be worth about $364 million (about 3% off the actual buyout
price).

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 The reasonable and reliable analyses put forward by the experts creates a

fairness range for Berkeley Point of $805 million (using an adjusted Price/Book

Value multiple) to $924 million and $1,164 million (using Walker & Dunlop’s price-

to-earnings and price-to-book multiples, respectively). The $875 million acquisition

price falls within that range. The price was therefore fair.

b. The CMBS Investment

BGC’s $100 million investment into CCRE for 27.3% of the remaining

CMBS business received considerably less attention from the parties than the

Berkeley Point acquisition. Nonetheless, I must assess whether BGC’s investment

in the CMBS business was financially fair.

The investment’s terms included a preferred 5% yearly return that prohibited

Cantor from receiving distributions from the CMBS business until that 5% return

was achieved.473 BGC earned 60% of any difference between BGC’s preferred 5%

return and the CMBS business’s percentage return.474 The terms also allowed BGC

to redeem the entirety of its $100 million investment at the end of the five year

investment period and Cantor provided BGC downside protection by taking on

473
JX 570.
474
D’Almeida Opening Report at 87-88.

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liability for the first $36.7 million in any losses.475 Cantor invested $266 million

into the CMBS business alongside BGC.476

The fact that the Special Committee negotiated the cost of the investment

down from $150 million to $100 million is evidence of fairness. BGC was able to

obtain the same strategically valuable data with a significantly lower investment.

The final terms also reflected the Special Committee’s efforts to obtain additional

downside protections while maintaining BGC’s preferred return. After analyzing

the investment from a variety of angles, including comparing it to similarly

structured debt offerings in the market, Sandler concluded that the terms were

reasonable to BGC.477

The Cantor Defendants offered Hubbard’s testimony in further support of the

financial fairness of the CMBS investment. Hubbard evaluated the fairness of the

CMBS investment by estimating BGC’s weighted average cost of financing the

investment and comparing it to BGC’s expected rate of return in the investment.478

Hubbard calculated the weighted average cost of financing as 5.2%.479 He

considered the actual credit agreements that financed the transaction to calculate the

475
Id. at 64.
476
Lutnick Tr. 1289-90.
477
JX 658; JX 663 at 23-26; Sterling Tr. 240-42.
478
See Hubbard Opening Report at 60, 67-68.
479
Id. at 67.

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cost of debt, and he calculated the cost of equity using a standard capital asset pricing

model, estimating BGC’s beta by taking the median beta for Newmark’s peer

group.480 By looking at the actual proceeds raised in Newmark’s IPO—which were

used to pay off some of the debt raised to finance the investment—Hubbard

estimated that the transaction’s financing was split 31.2% to 68.8% between equity

and debt.481

Hubbard then concluded that the CMBS business had to generate 8.7% or

more in returns (given the intricacies of how returns in the joint venture were shared

between BGC and Cantor) in order for BGC to satisfy the implied 5.2% hurdle

rate.482 To calculate the expected return of the CMBS investment (and therefore

determine whether 8.7% or higher returns were reasonable), Hubbard looked at

“industry benchmarks.”483 Justifying his approach on the general mandate given to

the CMBS business, Hubbard looked at the median returns on equity for two broad

480
Hubbard Opening Report at 66-67. The risk-free rate and equity risk premium were
equated to the return on a 20-year U.S. Treasury bond and the average of historical and
supply-side equity risk premium published by Duff & Phelps, respectively. Id. at 39, 41-
42.
481
Id. at 65.
482
Id. at 67.
483
Id. at 68.

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Standard & Poor’s industry classifications—“Thrifts & Mortgage Finance” and

“Real Estate”—finding returns of 8.1% and 7.6% respectively.484

Hubbard concluded that an 8.7% return could be reasonably expected because

8.7% was in the interquartile range for both classifications. Any estimate of

expected returns tilts conservative as it ignores the added value the CMBS

investment brought to BGC in terms of providing it access to proprietary real estate

information and data.485 It also does not account for the value of the downside risk

that Cantor bore on any potential first losses.

Hubbard discounted the fact that the CMBS business had not been profitable

in the several years before the transaction because the “infusion of new capital into

the JV” from BGC and Cantor created a transformed entity with a broad mandate to

engage in “any acts or activities (including investments) in any real estate related

business or asset-backed securities related business.”486 The plaintiffs and

d’Almeida dispute Hubbard’s valuation primarily on this basis—that is, they

contend that projected returns for the CMBS investment are unrealistic because it

had lost money in the years before the transaction.487 But one must only look to the

484
Id. The interquartile ranges for Thrifts & Mortgage Finance and Real Estate were 4.8-
12% and 3.5-11.3%. Id.
485
Id.; see JX 983 at 2 (noting the value of CMBS’s “substantial database” as a reason for
investing into the business).
486
Hubbard Opening Report at 63-64 (quoting JX 713 at 23).
487
D’Almeida Rebuttal Report at 51-52; Pls.’ Post-trial Br. 88-90.

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years from 2011 to 2014 to see that the CMBS business had the potential to be

profitable.488 It is also unclear why Cantor would itself invest hundreds of millions

of dollars into what it thought would be a losing enterprise.489

Accordingly, I conclude that the CMBS investment was economically fair.

3. Unitary Fairness Analysis

Although fairness has two component parts—price and process—the court

must make a “single judgment that considers each of these aspects.”490 “A strong

record of fair dealing can influence the fair price inquiry, reinforcing the unitary

nature of the entire fairness test. The converse is equally true: process can infect

price.”491

The transaction was fair in all respects to BGC and its minority stockholders.

There were certainly flaws—namely, Lutnick’s involvement in selecting the Special

Committee’s chairs and advisors and Moran’s interactions with Lutnick, which were

withheld from his fellow Special Committee members. But there is no evidence that

those problems rendered the process unfair. The record demonstrates that the

Special Committee undertook good faith, arm’s length negotiations with the

488
Cantor Defs.’ Pre-trial Br. 55-56. For the last three quarters of 2014, for example, the
CMBS business’s annualized quarterly return on equity were 17.1%, 8.7%, and 2%.
JX 950.
489
See Pls.’ Post-trial Br. 89.
490
Cinerama, 663 A.2d at 1139-40.
491
Reis, 28 A.3d at 467.

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guidance of independent advisors that resulted in a deal with a favorable structure

and a fair price.492

C. Claim Against Moran

Finally, I consider the claim against Moran—the sole claim that remained

against an outside director at trial. The plaintiffs allege that Moran breached his

duty of loyalty under the second prong of Cornerstone. Given my findings earlier

in this decision, I hold that he did not.

Under Cornerstone, a non-independent director who acts “to advance the self-

interest of an interested party” can be held liable for a non-exculpated claim.493 That

is, as this court explained at the summary judgment stage, the plaintiffs can only

prevail if they show both that Moran is not independent of Lutnick and that he

actively furthered his interests.494

Moran is independent of Lutnick for purposes of evaluating demand futility.

He is likewise independent for purposes of assessing the plaintiff’s fiduciary duty

492
Cinerama, 663 A.2d at 1444 (concluding that despite the process being “flawed,” the
transaction was fair where “the board was insufficiently informed to make a judgment
worthy of presumptive deference, nevertheless considering the whole course of events,
including the process that was followed, the price that was achieved, and the honest
motivation of the board to achieve the most financially beneficial transaction available”).
493
In re Cornerstone Therapeutics Inc. S’holder Litig., 115 A.3d 1173, 1179-80 (Del.
2015).
In re BGC P’rs, 2021 WL 4271788, at *10; see In re Oracle Corp. Deriv. Litig., 2021
494

WL 2530961, at *7, *9 (Del. Ch. June 21, 2021) (describing the second prong of
Cornerstone as a “two-prong test”).

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claim. Moran was not so “beholden” to Lutnick or “under [Lutnick’s] influence that

his discretion [in the transaction] was sterilized.”495

Moran also did not act to substantially further Lutnick’s interests in the

transaction. Moran’s behavior was not perfect, as detailed in this decision. He

certainly should not have discussed advisors for the Special Committee with Lutnick

and he should have kept his fellow Committee members apprised of those actions.

This was negligent behavior on his part—perhaps even grossly so. Moran

was a longtime director and must have known better. But I do not believe that Moran

acted disloyally.

Moran worked tirelessly on behalf of the Special Committee. He participated

in numerous meetings and dug in to understand the potential transaction. He worked

closely with independent advisors.496 He advocated for a deal structure that

furthered BGC’s minority stockholders over Cantor. He was prepared to say no to

Lutnick and walk away if the deal was not to the Special Committee’s liking.

On these facts, and given his independence from Lutnick, he is not liable for

breaching his fiduciary duties.

495
In re MFW, 67 A.3d at 509.
496
See McMillan v. Intercargo Corp., 768 A.2d 492, 505 n.55 (Del. Ch. 2000) (explaining
that “[t]he board’s reliance upon an investment banker . . . is another factor weighing
against the plaintiffs’ ability to state an actionable claim that the defendant directors”).

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III. CONCLUSION

BGC’s acquisition of Berkeley Point and investment in CCRE’s CMBS

business was entirely fair. Therefore, the Cantor Defendants are not liable for

breaching their fiduciary duties. In addition, Moran is not liable for breaching his

duty of loyalty. Judgment after trial is for the defendants. The parties shall submit

within thirty days a stipulated form of final judgment.

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