COURT OF CHANCERY
OF THE
STATE OF DELAWARE
KATHALEEN ST. JUDE MCCORMICK LEONARD L. WILLIAMS JUSTICE CENTER
CHANCELLOR 500 N. KING STREET, SUITE 11400
WILMINGTON, DELAWARE 19801-3734
July 13, 2023
Richard I. G. Jones William M. Lafferty
John G. Harris Thomas W. Briggs, Jr.
Michael W. McDermott Miranda N. Gilbert
Harry W. Shenton IV Morris, Nichols, Arsht & Tunnel LLP
Berger Harris LLP 1201 North Market Street
1105 North Market Street, 11th Floor Wilmington, Delaware 19801
Wilmington, Delaware 19801
Re: HControl Holdings LLC et al. v. Antin Infrastructure Partners
S.A.S., C.A. No. 2023-0283-KSJM
Dear Counsel:
This letter decision resolves the plaintiffs’ motion for a new trial pursuant to Court
of Chancery Rule 59(a).1 The motion is denied.
As set out in greater detail in the May 29, 2023 Post-Trial Memorandum Opinion,
the plaintiffs (“Sellers”) own a group of Florida broadband companies collectively referred
to as “OpticalTel.” They filed this action to force Antin Infrastructure Partners S.A.S. and
affiliated entities (“Buyers”) to buy OpticalTel pursuant to a Merger Agreement. I entered
post-trial judgment in favor of Buyers, finding that they validly terminated the Merger
Agreement. The key finding was that one of Sellers’ former employees, Rafael Marquez,
owned “phantom equity” under a Software Agreement that required HControl Corporation
1
C.A. No. 2023-0283-KSJM, Docket (“Dkt.”) 154 (“Sellers’ Mot.”); see also HControl
Hldgs. LLC v. Antin Infrastructure P’rs S.A.S., 2023 WL 3698535 (Del. Ch. May 29, 2023)
(“Post-Trial Mem. Op.”). Defined terms used in this letter have the meaning ascribed to
them in the Post-Trial Memorandum Opinion.
C.A. No. 2023-0283-KSJM
July 13, 2023
Page 2 of 9
to pay Marquez “5% ownership of HControl Corporation to be distributed upon a
liquidation event.”2 Because of Marquez’s phantom equity, Sellers’ Capitalization
Representations were inaccurate, entitling Buyers to terminate the Merger Agreement.
This case proceeded at record pace, even for this court. Both sides requested
expedition. Sellers moved to expedite proceedings when they filed their complaint on
March 6, 2023, because they were “at risk of imminent harm and losing their bargained-
for rights each day that passes without the transaction closing.”3 Buyers requested final
resolution in advance of their debt financing commitment’s expiration on June 9, 2023.4
The parties’ agreed-upon schedule culminated in a three-day trial that took place from May
10 through 12, 2023.5 Post-trial briefing concluded on May 22, 2023.6 I issued the Post-
Trial Memorandum Opinion on May 29, 2023, and entered a final order and judgment on
May 31, 2023.7 I issued my decision on May 29 to permit Sellers time to seek appeal
before the June 9 expiration date. Instead, on June 5, 2023, Sellers moved for a new trial.8
2
Post-Trial Mem. Op. at *8.
3
Dkt. 2 ¶ 8.
4
See Dkt. 93 ¶ 135.
5
Dkts. 134–36.
6
Dkt. 137 (Sellers’ Opening Post-Trial Br.); Dkt. 138 (Buyers’ Opening Post-Trial Br.);
Dkt. 141 (Sellers’ Answering Post-Trial Br.); Dkt. 144 (Buyers’ Answering Post-Trial Br.).
7
Dkt. 153.
8
See Sellers’ Mot. Rule 59(b) requires that a motion for a new trial “shall be served not
later than 10 days after the entry of the judgment.” Ct. Ch. R. 59(b). Sellers’ motion was
thus timely, and Buyers do not dispute this point.
C.A. No. 2023-0283-KSJM
July 13, 2023
Page 3 of 9
Rule 59(a) allows this court to grant a new trial “on all or part of the issues for any
of the reasons for which rehearings have heretofore been granted in suits in equity.”9
Whether to grant a new trial lies in the trial court’s discretion.10 To obtain a new trial under
Rule 59(a), “the disappointed litigant must show that manifest injustice otherwise would
result.”11 “Requests for new factual findings are not considered routine.”12 This general
rule stems from the understanding that “while every litigant is required to make ‘the fullest
possible preparation of his case before trial . . . disappointment over the result [frequently]
spurs the applicant to that diligence which he should have exercised before trial.’” 13 A
movant cannot simply argue that they did not realize that they should have allocated more
trial preparation to an issue: “This type of strategic second-guessing is not a basis for a new
trial under Delaware law.”14
Sellers seek a new trial to present additional evidence on the definition of “phantom
equity.”15 They acknowledge that their motion is not based on newly “discovered”
evidence. Instead, Sellers contend that a new trial is necessary to prevent manifest injustice
9
Ct. Ch. R. 59(a).
10
Manichaean Cap., LLC v. SourceHOV Hldgs., Inc., 2020 WL 3097678, at *3 (Del. Ch.
June 11, 2020).
11
Zutrau v. Jansing, 2014 WL 6901461, at *2 (Del. Ch. Dec. 8, 2014) (quoting Adams v.
Calvarese Farms Maint. Corp., 2011 WL 383862, at *1 n.3 (Del. Ch. Jan. 13, 2011)).
12
St. Thomas v. Conference, 1996 WL 361513, at *1 (Del. Ch. June 24, 1996).
13
Cole v. Kershaw, 2000 WL 1336724, at *2 (Del. Ch. Sept. 5, 2000) (quoting In re
Missouri-Kansas Pipe Line Co., 2 A.2d 273, 277 (Del. 1938)).
14
Manichaean, 2020 WL 3097678, at *4.
15
Sellers’ Mot. ¶¶ 18–21.
C.A. No. 2023-0283-KSJM
July 13, 2023
Page 4 of 9
because “Buyers’ late-breaking injection of their phantom-equity argument deprived
Sellers of the chance to fully litigate the issue.”16
This court has addressed similar arguments under the “affirmative proof of
diligence” standard for newly discovered evidence. In Manichaean, for example, Vice
Chancellor Slights denied a Rule 59(a) motion based on a legal regulation discovered post-
trial, holding that the regulation did not give rise to “manifest injustice” where nothing
prevented the movant from “directing its expert to address the issue or otherwise making
this argument at trial.”17
Decisions of the federal district courts of the Third Circuit interpreting the
analogous Federal Rule are also instructive.18 Under Federal Rule 59(a), a motion for a
new trial in a nonjury case “should be based upon manifest error of law or mistake of fact,
and a judgment should not be set aside except for substantial reasons.”19 “In order to show
clear error or manifest injustice, the [movant] must base its motion on arguments that were
16
Dkt. 156 (“Sellers’ Reply”) ¶ 1.
17
2020 WL 3097678, at *4.
18
See Fed. R. Civ. P. 59(a)(1)(B) (“The court may, on motion, grant a new trial on all or
some of the issues—and to any party—as follows: . . . after a nonjury trial, for any reason
for which a re-hearing has heretofore been granted in a suit in equity in federal court”).
19
11 Charles A. Wright, Arthur R. Miller, and Mary Kay Kane, Federal Practice and
Procedure—Civil § 2804 (3d ed. 2012); see also Mala v. Crown Bay Marine, Inc., 2011
WL 4590788, at *2 (D.V.I. July 22, 2011) (“A motion for a new trial in a nonjury case
should be based upon error of law or mistake of fact on the face of the record.”); Sabinsa
Corp. v. Creative Compounds, LLC, 2012 WL 194123, at *2 (D.N.J. Jan., 23, 2012) (“In
non-jury cases, the granting of a new trial is usually reserved for instances in which the
trial was infected with manifest errors of law or fact.” (internal citations omitted)).
C.A. No. 2023-0283-KSJM
July 13, 2023
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previously raised but were overlooked by the court—parties are not free to relitigate issues
that the Court has already decided.”20
Nothing prevented Sellers from making arguments concerning phantom equity at
trial. Sellers were aware of Buyers’ theory that Marquez’s interest violated Section 4.02.
Sellers take issue with the fact that Buyers’ notices of breach and termination did not
expressly cite the phantom equity provision in Section 4.02. As the expedited timeline
suggests, however, Buyers responded to the Marquez situation as more facts became
available. The February 6, 2023 notice of breach informed Sellers that Buyers viewed
Marquez’s interest as violating Section 4.02.21 Buyers’ subsequent letters also cite Section
4.02 as the basis for Sellers’ breach.22 While Sellers correctly note that these notices do
not explicitly reference “phantom equity,” they placed Sellers on notice that Buyers viewed
Marquez’s interest as violating the Capitalization Representations.
On May 3, 2023, Buyers explicitly referenced phantom equity as a basis for breach
in their pretrial brief. Sellers should have been well-acquainted with Section 4.02 by this
point, and they had a full week (the same amount of time I took to write the Post-Trial
Memorandum Opinion after the close of post-trial briefing) to prepare additional evidence
related to phantom equity before trial.
20
Robertshaw v. Pudles, 2014 WL 1789307, at *4 (E.D. Pa. May 6, 2014) (quoting United
States v. Jasin, 292 F. Supp. 2d 670, 676 (E.D. Pa. 2003)).
21
See JX-344.
22
See JX-411; JX-492.
C.A. No. 2023-0283-KSJM
July 13, 2023
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It also seems that, at least to some extent, Sellers and their expert anticipated the
phantom equity theory before pre-trial briefing. In an earlier draft of his report, Professor
Steven Davidoff Solomon referenced other merger agreements that Greenberg had
prepared and how they defined similar equity securities.23 When Professor Solomon used
two examples that included the phrase “phantom stock,” Sellers’ counsel replied: “Section
4.02 of our agreement says phantom stock – so is highlighting use of that term in another
agreement as a distinguishing factor actually helpful to us?”24 In other words, phantom
equity’s presence in Section 4.02 was not a surprise to Sellers. They just decided to focus
their trial preparation efforts elsewhere.
Sellers did allocate some of their trial time to phantom equity. Sellers’ counsel
questioned their fact witness Ravi Purohit about his understanding of phantom equity. 25
Sellers’ counsel also asked Professor Solomon to explain his understanding of phantom
equity.26 On cross-examination, Sellers’ counsel asked both Christopher Turek and Marc
Reiser about Buyers’ claims related to phantom equity.27 Again, it is hard for Sellers’
counsel to claim injustice from surprise when they elicited topical testimony at trial.
23
JX-710.
24
Id. at 51; see also id. at 65 (counsel stating, “Same comment re phantom stock. That
phrase is in section 4.02. So I’m not sure highlighting it as a distinguishing factor of other
agreements is helpful.”).
25
Trial Tr. at 14:9–15:6 (Purohit).
26
Id. at 407:8–408:24 (Solomon).
27
Id. at 682:2–24 (Turek); id. at 797:10–15 (Reiser).
C.A. No. 2023-0283-KSJM
July 13, 2023
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Moreover, the court did not overlook Sellers’ arguments as to timing and waiver.
Sellers argued in post-trial briefing that Buyers waived any phantom equity theory by their
“late-breaking” introduction of the argument in pretrial briefing.28 I rejected this argument
in the Post-Trial Memorandum Opinion, noting that the highly expedited nature of this case
rendered Buyers’ phantom equity theory timely.29 Further, I acknowledged that Sellers
had the opportunity to respond to this theory at trial and through post-trial briefing, which
they did.30 Sellers cannot demonstrate manifest injustice by repackaging their prior
arguments on waiver just because they were unsuccessful the first time.
Precedent from this court favors rejecting Sellers’ motion. As discussed above, in
Manichaean, former Vice Chancellor Slights addressed a respondent’s motion for a new
trial in an appraisal proceeding.31 In his post-trial opinion, the Vice Chancellor found that
the petitioners won the expert battle, meaning that restricted stock units (“RSUs”) should
not be included in the total number of outstanding shares because their vesting was
speculative. The respondent moved for a new trial, arguing that additional evidence
regarding the treatment of vested but unsettled RSUs would require a different outcome.
The Vice Chancellor disagreed. He reasoned that the respondent’s proposed new evidence
28
Sellers’ Opening Post-Trial. Br. at 41; see also Sellers’ Answering Post-Trial Br. at 5.
29
See Post-Trial Mem. Op. at *27 (“This case revved up from filing to trial in under two
months—the complaint was filed on March 6, 2023, and the pretrial briefs were filed on
May 3, 2023. It is hard to fault Buyers for not formulating all of their legal theories
earlier.”).
30
Id.
31
Manichaean, 2020 WL 3097678, at *1.
C.A. No. 2023-0283-KSJM
July 13, 2023
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was neither new nor outcome-determinative. Since the respondent’s alleged manifest
injustice was merely that it “now wishes it had made a separate argument concerning
unsettled RSUs, rather than merely focusing on unvested RSUs, during its trial
presentations,” the respondent had failed to demonstrate the need for a new trial.32
This court similarly denied a motion for a new trial in Zutrau v. Jansing.33 There,
the plaintiff sued the president and sole director of the nominal defendant corporation.
While the plaintiff was an employee, the president granted her an equity interest. When
the plaintiff left the company, the president executed a reverse stock split that cashed out
the plaintiff’s interest. In its post-trial opinion, the court denied the plaintiff’s request for
rescission of the reverse stock split or dissolution of the company. The plaintiff moved for
a new trial, citing “new” evidence that the president had conditioned the equity grant on
her having a relationship with him. As the plaintiff admitted, however, her counsel already
knew about those underlying facts and made a tactical decision not to present the evidence
at trial. The court concluded that the plaintiff “may have a bone to pick with her attorneys
on that point, but it does not provide a legitimate basis for retrying this case.”34
The same outcome makes sense here. As reflected in their own discovery materials,
trial testimony, and post-trial briefing, Sellers’ counsel knew Buyers might argue that
Marquez’s interest fell within the definition of phantom equity. The need to move fast
32
Id. at *4.
33
2014 WL 6901461, at *1.
34
Id. at *4.
C.A. No. 2023-0283-KSJM
July 13, 2023
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required the litigants to make strategic decisions, and Sellers chose to focus on other issues.
That choice does not outweigh the interest of finality in a post-trial judgment.
Sellers’ motion for a new trial is denied.
Sincerely,
/s/ Kathaleen St. Jude McCormick
Kathaleen St. Jude McCormick
Chancellor
cc: All counsel of record (by File & ServeXpress)