In Re Straight Path Communications Inc. Consol. Stockholder Litigation

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN RE STRAIGHT PATH )
COMMUNICATIONS INC. ) C.A. No. 2017-0486-SG
CONSOLIDATED STOCKHOLDER )
LITIGATION )

MEMORANDUM OPINION

Date Submitted: May 3, 2023
Date Decided: October 3, 2023

Ned Weinberger and Mark Richardson, LABATON SUCHAROW LLP,
Wilmington, Delaware; OF COUNSEL: Jeroen van Kwawegen, Edward G. Timlin,
and Eric J. Riedel, BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP,
New York, New York, Attorneys for Lead Plaintiff Ardell Howard.

Rudolf Koch, Kevin M. Gallagher, Daniel E. Kaprow, and John M. O’Toole,
RICHARDS, LAYTON & FINGER, P.A., Wilmington, Delaware; Thomas Uebler,
MCCOLLOM D’EMILIO SMITH UEBLER LLC, Wilmington, Delaware; OF
COUNSEL: Jason Cyrulnik, Paul Fattaruso, and Matthew Henken, CYRULNIK
FATTARUSO LLP, New York, New York, Attorneys for Defendants IDT
Corporation, Howard Jonas, and The Patrick Henry Trust.

GLASSCOCK, Vice Chancellor
 A recurring theme of our corporate law involves stockholders with voting

control of an entity using that control to influence a transaction in which the

controller’s interests diverge from that of the minority stockholders. Our law has

developed mechanisms whereby such controllers may insulate themselves from the

conflicted transactions.1 Even where they do not, controller-driven transactions are

not prohibited, but the controller bears the burden to demonstrate that the transaction

was entirely fair to the minority. Under our controlling caselaw,2 this court must

undertake a unified fairness review, considering both price and process, to determine

whether a transaction featuring a conflicted controller was entirely fair. If not, the

controller has breached a fiduciary duty, for which damages, if any, may be awarded.

This post-trial opinion finds that the controller here, Howard Jonas, drove an

unfair transaction in breach of fiduciary duty, but that no damages flowed therefrom.

The litigation involves two Delaware public corporations, IDT Corporation

(“IDT”) and Straight Path Communications Inc. (“Straight Path” or “SPCI” or the

“Company”). IDT was founded by Defendant Howard Jonas,3 who continues to own

a controlling interest in IDT. IDT was founded in 1990 and became the Jonas family

1
In re MFW S'holders Litig., 67 A.3d 496 (Del. Ch. 2013), aff'd sub nom. Kahn v. M & F
Worldwide Corp., 88 A.3d 635 (Del. 2014).
2
E.g., In re Tesla Motors, Inc. S’holder Litig., 298 A.3d 667 (Del. 2023).
3
I refer to members of the Jonas family throughout by first names to avoid confusion. No
familiarity or disrespect is intended.

1
business. It became a public corporation in 1996. As of 2013, Howard was the

chairman of the IDT board of directors and had installed his son, Shmuel, as CEO.

If the controller scenario here was paradigmatic, the transaction at issue was

unique. Briefly, among IDT’s assets were choses in action relating to patent

infringement. IDT was reluctant to monetize these through litigation because of

concerns about potential counterclaims against it. Accordingly, in 2013, IDT spun

off Straight Path as a vehicle to pursue intellectual property litigation. Because stock

in Straight Path was distributed pro rata to IDT stockholders, Howard became the

majority stockholder in Straight Path as well as IDT. In the spin-off, Straight Path

received the intellectual property assets from IDT (the “IP Assets”). For various tax

reasons, IDT also transferred a portfolio of broadcast spectrum licenses (the

“Spectrum Licenses”) to Straight Path in the same transaction. These were mostly

moribund, but a few licenses were leased to third parties and did bring in some

income. Howard did not become a director of Straight Path. However, he installed

another son, Davidi, as Chairman and CEO of the new company. He also recruited

three outside directors to the board: K. Christopher Todd, William Weld, and Fred

Zeidman.

As part of the spin-off, IDT and Straight Path entered a separation and

distribution agreement. At issue here are indemnification rights under that

agreement. Much of this litigation concerned the extent of those rights; it is

2
sufficient here to note that in some circumstances IDT was bound to indemnify

Straight Path for certain losses.

As described above, the Spectrum Licenses were not considered by the parties

involved to be particularly valuable. Changes in Federal Communications

Commission (“FCC”) regulations and the growing need for cellular spectrum

changed that. After a bidding war that ran from 2017 to 2018, Verizon ultimately

bought Straight Path—absent the IP Assets, which were sold to Howard—for

approximately $3.1 billion. This amounted to roughly $184 per share, a huge

windfall for Straight Path stockholders.

Prior to the sale, Straight Path and its Spectrum Licenses had become the

subject of an FCC investigation, as had IDT itself. A requirement for holding such

licenses is that the holder demonstrate substantial service—that is, that the license

holder must be able to broadcast over the spectrum. When IDT renewed the licenses

with the FCC prior to the spin-off, IDT was required to demonstrate the viability of

each license. To do so, IDT permitted a technician to go from location to location,

temporarily installing broadcast equipment, establishing transmission, then

removing it for use in the next temporary installation. IDT then submitted these tests

as substantial service demonstrations to the FCC.

Post-spin-off, Straight Path continued to fail to establish or maintain broadcast

capabilities at most of the locations. In the investigation, the FCC maintained that

3
this procedure was not in compliance with its regulations. Ultimately, Straight Path

entered a settlement with the FCC, under which it paid an upfront fine of $15 million.

It also forfeited 196 Spectrum Licenses and was required to either give up all

remaining licenses, sell the remaining spectrum assets, or pay an additional fine of

$85 million. If Straight Path chose to sell the spectrum assets, it would pay a 20%-

of-sale-proceeds penalty to the FCC. Straight Path determined that its best course

of action was to sell the company. Once the IP Assets were sold separately, a sale

of Straight Path was effectively a sale of the Spectrum Licenses, the sole remaining

assets of the company.

The independent directors of Straight Path believed that the company could

seek indemnification from IDT for the penalties under the settlement with the FCC

(the “Indemnification Claim”). Because they believed that the Indemnification

Claim was unlikely to be valued by a purchaser, they explored ways to preserve the

claim as a stockholder asset, post-sale, including by creating a trust to hold the claim

on the stockholders’ behalf. Howard, however, got wind of this plan. He used his

position as controller to cause the independent directors to release the

Indemnification Claim, for $10 million and a contingent right to profits from the IP

Assets. If the company sale had closed at the high bid as of the date the parties

agreed to the release of the Indemnification Claim, the aggregate fine paid by

4
Straight Path would have amounted to $175 million (not counting the Spectrum

Licenses forfeited).

This suit was brought on behalf of the class of minority stockholders of

Straight Path, alleging that IDT and Howard had unfairly diverted merger

consideration to themselves by stripping the right of stockholders to receive, through

indemnification, the value turned over to the FCC as penalties. After much

convoluted litigation, the matter was tried in the fall and winter of 2022. This is my

post-trial decision.

It is clear that Howard used his control to seize the corporate machinery,

causing the release of the Indemnification Claim in an unfair process. Howard, I

note, because of his interests in Straight Path, appears to have individual interests

aligned with the minority stockholders—maximizing the value of the

Indemnification Claim. Howard’s family interests, however, are aligned with IDT.

Complicated financial and familial issues occupied much of the litigation. In the

end, however, I find that Howard settled the Indemnification Claim in a manifestly

unfair manner, in breach of his duties as a fiduciary.

The remaining question is damages. The Indemnification Claim was, in many

ways, a flawed asset. It was contractually questionable, as will be explained below.

Its existence was also rightfully considered a potential impediment to getting the

best price for Straight Path in the auction. Considering all the evidence at trial, I

5
conclude that the price paid for the release of the Indemnification Claim was higher

than would have resulted, absent the controller’s intervention. Accordingly, I award

the class nominal damages from Howard. My reasoning follows a recitation of the

facts, below.

I. BACKGROUND4

A. Factual Background

1. The Parties and Relevant Non-Parties

Ardell Howard is the lead Plaintiff in this suit.5 Ms. Howard acquired three

shares of Straight Path Class B common stock in October 2016, which she

beneficially owned at the time of the merger with Verizon.6

Defendant IDT is a publicly traded Delaware corporation with its principal

place of business in Newark, New Jersey.7 IDT is the prior parent of non-party

Straight Path.

Defendant Howard Jonas is IDT’s founder and chairman.8

4
Facts drawn from the exhibits jointly submitted by the parties are referred to by the numbers
provided on the parties’ joint exhibit list (cited as “JX__” unless otherwise defined). Trial
testimony is cited as “TT (Name) __:__.” The parties’ Joint Pretrial Order, Dkt. No. 665, is cited
as “PTO ¶ __.”
5
PTO ¶ 79.
6
Id.
7
Id. ¶ 83.
8
Id. ¶ 80.

6
 Defendant The Patrick Henry Trust was a trust established on July 31, 2013,

to hold shares of Class A and Class B Straight Path stock for its sole beneficiary,

Howard Jonas.9

Straight Path was a public company spun off from IDT on July 31, 2013.10 In

the spin-off, it received all of IDT’s outstanding stock in Straight Path Spectrum,

Inc. (formerly known as IDT Spectrum) as well as SPIP (formerly known as ICTI).11

Straight Path was acquired by Verizon in a merger that closed on February 28,

2018.12

Shmuel Jonas is Howard’s son. He serves as IDT’s CEO.13

Davidi Jonas is another of Howard’s sons. He served as Straight Path’s CEO

and chairman of the board from the spin-off until the merger with Verizon.14

K. Christopher Todd was a director of Straight Path from the spin-off through

the merger.15 Todd is a former prosecutor in the Southern District of New York and

a named partner at the law firm Kellogg Hansen Todd Figel & Frederick.16

9
Id. ¶¶ 81–82.
10
Id. ¶ 91.
11
Id. ¶¶ 91, 93.
12
Id. ¶¶ 178, 180.
13
Id. ¶ 86.
14
Id. ¶ 92.
15
Id. ¶ 100.
16
TT (Todd) 1339:9–1340:7.

7
 William Weld was a director of Straight Path from the spin-off through the

merger.17 Weld is a former governor of Massachusetts and previously served as both

a U.S. Attorney for the District of Massachusetts and the Head of the Criminal

Division of the U.S. Department of Justice.18

Fred Zeidman was a director of Straight Path from the spin-off through the

merger.19 Zeidman is a businessman with a background in restructuring who has

served as chairman and CEO of multiple companies.20

2. Founding of IDT/Jonas Family Control

Howard Jonas founded IDT in 1990.21 The company started out distributing

brochures to hotels, eventually expanding into telecommunications via the

international phone business.22 IDT went public in 1996.23 Howard has served as

the company’s chairman since its founding and was its CEO through 2013, when he

was replaced by his son, Shmuel.24 Howard continues to serve as an officer of IDT.25

As described below, IDT has grown into a large enterprise, but in many ways it

continues to be run like a family business.

17
PTO ¶ 101.
18
TT (Weld) 1893:19–1894:6.
19
PTO ¶ 102.
20
TT (Zeidman) 1593:13–1595:21.
21
PTO ¶ 80.
22
TT (Howard) 970:15–972:9.
23
Id. at 972:11–973:10.
24
PTO ¶ 80; TT (Shmuel) 606:2–18; JX120.0060.
25
JX237.0046.

8
 Howard and his family play an outsized role in the management of IDT. In

addition to Howard’s and Shmuel’s roles at the company, Howard’s sister, Joyce

Mason, is IDT’s general counsel.26 Collectively, the Jonas family held 25.52% of

IDT’s outstanding shares and 74.98% of its voting power.27

a. Spectrum Licenses Background

IDT purchased the Spectrum Licenses for approximately $30 million during

the 2001 bankruptcy of Winstar Communications.28 The FCC requires that licenses

in the 28 and 29 GHz frequency bands, including the Spectrum Licenses, be renewed

every ten years.29 The Spectrum Licenses came to rest with IDT Spectrum, where

they were written down to zero on the company’s balance sheet.30

In mid-2009, Michael Rapaport, then President and CEO of IDT Spectrum,

an IDT subsidiary, recognized the Spectrum Licenses’ potential value.31 In 2010,

with the renewal period fast approaching, Rapaport negotiated an agreement with

the Jonases, who were initially skeptical of the future value of the Spectrum

Licenses, under which Rapaport and IDT would share both the costs and potential

profits of renewal.32 In addition to licensing fees, renewal required the licensee to

26
JX827.0020–21.
27
JX739.0060 (demonstrating 69% of IDT’s voting power was held by Howard alone).
28
TT (Shmuel) 563:3–21; TT (Howard) 978:23–980:23.
29
TT (McDowell) 3056:11–21; TT (Davidi) 29:11–16.
30
JX84.0002.
31
Id.
32
Id.

9
demonstrate that it had constructed equipment capable of providing users with

“substantial service.”33

From 2010 to 2012, IDT Spectrum, led by Rapaport, carried out an ambitious

scheme to provide service demonstrations on a shoestring budget.34 Rapaport began

by engaging FCC regulatory counsel, including his brother, Max. 35 He also hired a

wireless engineer, Douglas Lockie, to carry out the service demonstrations.36

Constructing a permanent installation at each location where the company needed to

demonstrate substantial service would have cost millions.37 Instead, Rapaport’s

strategy involved having Lockie obtain access to suitable rooftops, sometimes

through bribes, where he would set up a homemade radio transmitter he built for

$450.38 Lockie would only stay long enough to demonstrate signal viability,

typically an hour or less, before breaking down the transmitter and moving to the

next site.39

IDT consistently represented to the FCC, in both the renewal applications and

subsequent document submissions, that it had constructed equipment capable of

33
TT (McDowell) 3056:11–3057:8; JX749.0008 (citing 47 C.F.R. § 30.104 (2018)); JX187.0006.
34
TT (McDowell) 3058:5–22; TT (Davidi) 213:11–22, 254:10–13; JX215.0135–148; JX136.001;
JX187.0013.
35
TT (Lamancusa) 466:14–467:20; TT (Shmuel) 565:21–566:7; TT (Ash) 811:20–812:7, TT
853:1-9.
36
TT (Davidi) 30:24–31:2.
37
JX136.0001.
38
Id.; JX187.0013.
39
JX187.0013.

10
transmitting at appropriate locations.40 For example, one such substantial service

submission claims that “IDT Spectrum has recently completed construction of a

point-to-multipoint hub facility[.]”41 The hub “deploys 1 foot antennas mounted on

an Az-El positioner” and is “located at 200 Harbor Drive, San Diego,” where it

“provides fixed wireless coverage” to more than a million individuals.42 Notably,

these representations contained no caveats for the present-tense language or

explanations of the ephemeral nature of Lockie’s “construction.”

The applications, subsequently granted, that IDT submitted to transfer the

licenses to Straight Path took similar liberties in claiming that transmitting

equipment had been “[c]onstructed” for each license.43 Howard, Joyce Mason, and

Michael Rapaport signed each of these applications, certifying their veracity.44

3. The Spin-Off of Straight Path

In March 2013, Howard led IDT’s board in a discussion of the spin-off of an

IP portfolio held by IDT subsidiary Innovative Communications Technologies, Inc.

(“ICTI”).45 The portfolio in question included patents widely used in internet and

video communications, which could be used to launch potentially lucrative patent

40
See, e.g., JX749:0015–16.
41
Id. (emphasis added).
42
Id. (emphasis added).
43
JX215.0037–74.
44
JX215.0037, -0087, -0104.
45
JX86.0006–07.

11
infringement litigation.46 However, this type of infringement litigation brought with

it significant risks that targets would respond by asserting their own counter

infringement claims against ICTI or IDT.47 A spin-off to IDT’s stockholders would

allow the new company to pursue the infringement claims while shielding IDT’s

assets from these countersuits.

The new company, Straight Path, would hold two primary assets: the IP

Assets, communications-related intellectual property, and the Spectrum Licenses,

wireless spectrum licenses regulated by the FCC.48 The Spectrum Licenses, along

with the limited business they generated,49 were added to the nascent company for

two main reasons: (i) due to a favorable piece of the tax code, adding the Spectrum

Licenses made the spin-off tax free; and (ii) losses from the spectrum business could

offset patent profits, again for tax purposes.50

In order to mitigate counter-assertion litigation risks associated with his dual

control of IDT and Straight Path, Howard created The Patrick Henry Trust (the

“Trust”) to hold his stake in Straight Path.51 As a blind trust, the trust agreement

46
Id.
47
See TT (Ash) 750:9–751:3; TT (Davidi) 11:3–18, 14:16–16:5 (discussing counterclaim risk if
Howard maintained joint direct control of both Straight Path and IDT).
48
PTO ¶ 95.
49
TT (Davidi) 16:22–18:1, 21:14–23:6; TT (Shmuel) 559:22–560:21; TT (Ash) 748:11–24,
749:1–8; TT (Howard) 986:19–987:13.
50
TT (Davidi) 16:22–18:1; TT (Shmuel) 559:22–560:21; TT (Ash) 748:11–24, 749:1–8;
TT (Howard) 986:19–987:13.
51
TT (Ash) 750:9–751:3; TT (Davidi) 11:3–18, 14:16–16:5; JX366.

12
delegated complete decision making authority to the trustee, including over how to

exercise the rights associated with Howard’s Straight Path shares.52 The trust

agreement also included a specific carveout from this delegation: Howard would

retain discretion over decisions relating to any merger or sale of the company.53

Pursuant to a tax separation agreement, transition services agreement, and

separation and distribution agreement (the “S&DA”),54 Straight Path spun-off from

IDT on July 31, 2013.55 Every IDT stockholder received one share of Straight Path

stock for every two shares of IDT that they owned.56

B. Period 2: Post-Spin-Off

Post-spin-off, Straight Path formed a board of directors composed of Davidi,

K. Christopher Todd, William Weld, and Fred Zeidman.57 In addition to his

directorial role, Davidi also served as the company’s CEO.58

1. FiberTower Alleges Misconduct

Shortly after the spin-off, a competing spectrum company, FiberTower

Corporation, first raised the question of the sufficiency of the methods IDT Spectrum

had employed in renewing the Spectrum Licenses.59 FiberTower argued that it

52
JX366.0002.
53
Id. at -0006.
54
See JX107 (the “S&DA”).
55
PTO ¶ 91.
56
Id. ¶ 94.
57
Id. ¶¶ 92, 100–02.
58
Id. ¶ 92.
59
See JX103.0011–15.

13
should not be required to meet its FCC-imposed buildout deadlines because the

companies that had completed buildout, most notably IDT Spectrum, had done so

through “save builds” that did not provide meaningful service. 60 As evidence,

FiberTower submitted a photograph taken on May 29, 2013, showing that the site of

a purported IDT installation in Washington, D.C., was in fact, empty.61 In February

2014, the FCC denied FiberTower’s request, stating that approval of IDT’s

substantial service demonstrations was a “final action.”62 However, the FCC left

open the question of whether IDT’s licenses were “subject to cancellation for

permanent discontinuance of operation[.]”63

Straight Path followed FiberTower’s allegations and, on the advice of counsel,

began taking remedial steps before the FCC issued its February decision.64 Thus,

when the FCC sent IDT65 a letter the following month inquiring about the status of

Straight Path’s operations in the Washington D.C. area,66 IDT and Straight Path were

able to respond promptly.67 Their response, issued by Joyce Mason in her capacity

as IDT Capital’s secretary,68 reported that the D.C. hub in question had “been

60
Id.
61
Id. at -0013–14.
62
JX113.0007.
63
Id.
64
JX918; JX919.
65
JX114. Because the licenses were still in the process of being transferred, the letter was sent to
IDT Capital, Inc., rather than Straight Path. TT (Davidi) 34:4–35:5; TT (Weld) 1973:12–1974:11.
66
JX114.
67
TT (Weld) 1863:6–1864:20.
68
Mason is IDT’s general counsel, Howard’s sister, and Davidi’s aunt.

14
operational” between “March 28, 2011 and the present.”69 The FCC subsequently

expressed that it was satisfied with the response.70

2. The Spectrum Licenses Appreciate, A Whistleblower Emerges

By 2015, it was becoming increasingly clear that the Spectrum Licenses had

the potential to become a valuable component of a future 5G wireless network.71

Fed by speculation around this upside, Straight Path’s stock price more than doubled

between August 31 and October 23, 2015.72 On November 5, 2015, an anonymous

short seller published a report (the “Sinclair Upton Report” or the “Report”) alleging

that IDT Spectrum had “likely committed over 150+ counts of fraud against the US

government” because its transmission equipment was “never built on the sites as

specified in the filings.”73 Per the Sinclair Upton Report, Straight Path stock, which

had been trading at almost $50 per share in October,74 had a fair value of just a dollar

or two.75 On the day the Report was published, Straight Path’s stock price dropped

by over 50%.76

69
JX116.001.
70
TT (Weld) 1873:12–1874:10.
71
TT (Davidi) 39:15–41:4.
72
JX916.0011–12.
73
JX137.0001.
74
JX916.0011–12.
75
JX137.0001.
76
JX916.0012.

15
 a. Fallout from the Report

At a Straight Path board meeting held the next day, Davidi noted that the

Report referred exclusively to pre-spin-off violations and that Straight Path had

relied on representations that all licensing requirements were met, which were

supported by IDT records of expenses for equipment purchases, FCC counsel, and

engineering services.77 Indeed, prior to the Sinclair Upton Report, neither Davidi

nor the rest of the Straight Path board was aware of the methods that IDT Spectrum

had employed in renewing the Spectrum Licenses.78 The board then resolved to

have management retain counsel to investigate the Report’s allegations,79 eventually

settling on Morgan Lewis & Bockius LLP (“Morgan Lewis”).80

A week later, a Straight Path stockholder filed a federal securities fraud class

action (the “Zacharia action”) in response to the drop in stock price, citing

inconsistencies between Straight Path’s securities filings and the allegations of the

Sinclair Upton Report.81 On December 1, 2015, Straight Path filed an 8-K in which

it publicly acknowledged the Report’s allegations, admitted that much of the

equipment from the substantial service demonstrations was “no longer present at the

77
JX141.0001.
78
TT (Weld) 1912:10–17; TT (Davidi) 218:10–21, 248:5–23, 316:23–317:18.
79
JX141.0002.
80
PTO ¶¶ 105, 124; TT (Davidi) 58:12–59:2.
81
See JX150. Straight Path settled the Zacharia action in January 2017 for approximately $9.5
million. TT (Breau) 2369:6–14.

16
original locations[,]” but nonetheless stuck to its position that renewal requirements

had been met.82

In January 2016, Straight Path retained Boies Schiller Flexner LLP (“Boies

Schiller”) as litigation counsel in the Zacharia matter.83 On February 26, Davidi

sent an email to his brother Shmuel (IDT’s CEO), Menachem Ash (IDT’s in-house

counsel), and Jason Cyrulnik (outside counsel to both IDT and Straight Path, then at

Boies Schiller).84 In the email, Davidi asked to set up a call with Ash and Shmuel,

noting that “[a]ccording to a clause in the [S&DA], IDT indemnifies [Straight Path]

for activities prior to separation.”85 He went on to state that “[g]iven the posture of

the claims against [Straight Path] to date[,] that clause may be implicated.”86 Though

Ash agreed to a call,87 none of the parties to the email could remember a call

happening or explain why it did not.88 There is no evidence that either Davidi or

David Breau (Straight Path’s general counsel, copied on the email) ever followed up

on the email.89

82
JX152.0002.
83
PTO ¶ 112.
84
JX161.
85
Id.
86
Id.
87
JX163.0001.
88
TT (Davidi) 275:10–276:15; TT (Ash) 918:10–919:7; TT (Schwell) 2861:20–2862:8; TT
(Breau) 2418:6–14; TT (Shmuel) 698:7–11.
89
See TT (Davidi) 278:22–279:8; TT (Breau) 2419:1–17.

17
 3. Morgan Lewis Memo, Straight Path White Paper

On July 21, 2016, Morgan Lewis delivered a memo (the “Memo”)

summarizing the findings of its internal investigation into the allegations of the

Sinclair Upton Report.90 The Memo concluded that no transmission equipment was

in place at any site visited, nor had such equipment ever been permanently

installed.91 However, the Memo further concluded that evidence of Doug Lockie’s

string of temporary installations contradicted claims in the Sinclair Upton Report

that the demonstrations were merely a “paper exercise,” with no construction ever

actually occurring.92 Finally, Morgan Lewis concluded that, prior to the Report,

Straight Path itself was unaware of the lack of permanent equipment.93 The next

day, Straight Path filed another 8-K in which it updated stockholders on these broad

conclusions.94

On August 1, Morgan Lewis partner Frank Lamancusa met with the FCC and

provided the Commission with a redacted copy of the Memo.95 The following day

Lamancusa followed up by email seeking to set up a discussion of “the particulars

of the [FCC’s] desired legal analysis[.]”96 This legal analysis eventually took the

90
JX178.
91
Id. at -0001.
92
Id.
93
Id.
94
JX182.0003.
95
JX185; JX187.0001, 05; PTO ¶128.
96
JX186.0001–02.

18
form of a white paper authored by Straight Path’s FCC counsel (the “White Paper”)

and submitted to the FCC on August 19, 2016.97 The White Paper advanced an

interlocking series of arguments against Straight Path’s liability: first, that the FCC’s

2011 and 2012 substantial service determinations were correct and are now final;

second, that the FCC’s Discontinuance Rule does not apply; third, that even if that

rule applied, it has not been violated; and finally, even if there has been a violation,

enforcement would undermine the public interest.98 These arguments would form

the basis for both Straight Path’s settlement negotiations with the FCC, as well as

some of the parties’ contentions here.99

4. The FCC Investigation

On September 20, 2016, the FCC launched parallel inquiries into Straight Path

and IDT’s handling of the Spectrum Licenses.100 The letter of inquiry sent to

Straight Path cited potential violations of FCC rules governing candor, substantial

service demonstrations, and permanent discontinuance of service.101 IDT and

Straight Path coordinated their response to the FCC inquiries through shared legal

97
JX192.
98
See id. at -0004–06.
99
TT (Davidi) 95:18–97:10 (arguing it was in IDT’s best interests to settle in order to avoid losing
maximization of the Spectrum Licenses).
100
JX198; JX199. The FCC closed its inquiry into IDT with a “no further action” letter in August
2022. JX906.
101
JX199.0002–03.

19
counsel.102 On October 11, both companies sent the FCC their initial responses to

their respective letters of inquiry.103 Similar to its position in the White Paper,

Straight Path argued that it was not liable for violations that took place before it

controlled the licenses in question.104 Straight Path’s response also noted that “IDT

is obligated to reimburse Straight Path for the payment of any liabilities arising or

related to the period prior to the Spin-Off.”105 In its response, IDT admitted that any

construction or service demonstrations occurred under the auspices of IDT

Spectrum.106 On October 14, IDT acknowledged in its annual 10-K that, “should

the FCC impose liability on Straight Path, [IDT] could be the subject of a claim from

Straight Path related to that liability.”107

As early as June 2016, Straight Path had begun to receive unsolicited attention

from third-parties interested in purchasing the Spectrum Licenses.108 However, it

became clear that some of these offers were contingent on the resolution of, or were

otherwise negatively impacted by, the FCC investigation.109 This encouraged

Straight Path to take an active approach to resolving the FCC inquiry with the goal

102
JX683.0064, 78; JX678.0002, 04 (IDT Privilege Log); JX680 (Straight Path Privilege Log)
Entry Nos. 3586–87, 3828, 3831, 3929, 4224, 4292, 4772, 4799, 4858.
103
JX214; JX216.
104
JX214.0015–16.
105
Id. at -0009.
106
JX216.0010–11.
107
JX237.0014.
108
JX577.0065; TT (Davidi) 110:12–111:13; TT (Todd) 1208:22–1209:2.
109
See, e.g., JX248.0002 (discussing communications from an interested party, in which the FCC
inquiry weighed heavily).

20
of getting “a clean bill of health” for its licenses.110 On October 28, the board

retained Evercore Group LLC (“Evercore”) as financial advisers to aid in

“evaluation of unsolicited offers received by the Company.”111 The company

subsequently retained Weil, Gotshal & Manges LLP (“Weil”) as legal advisers on

the same matters.112

On November 2, Frank Lamancusa of Morgan Lewis reached out to the FCC

expressing a desire to discuss “next steps” or a “mutually agreed upon solution.”113

Following a meeting between Straight Path counsel and the FCC on November 10,114

Lamancusa reached back out to inquire when the Commission “would know a

timeline for the investigation.”115 The FCC responded on November 15 that, unless

Straight Path had “a specific proposal” on how to proceed, the FCC would “need

time to review the documents” Straight Path had produced before it could “respond

on what the next steps would be and the associated timing for their completion.”116

The next day, Lamancusa replied that Straight Path would gladly meet “to discuss

the scope and scale of a consent decree.”117

110
TT (Weld) 1716:16–1717:12, 1717:14–17; TT (Todd) 1212:5–1213:2; TT (Zeidman) 1512:21–
1513:17; TT (Breau) 2370:17–2371:14.
111
PTO ¶¶ 103, 138.
112
Id. ¶¶ 104, 139.
113
JX243.
114
See JX249.0002 (referencing a meeting “last Thursday” in an email dated November 14, 2016).
115
Id. at -0003.
116
Id. at -0002.
117
Id. at -0001.

21
 On November 28, Lamancusa sent the FCC a document outlining the

proposed terms of a consent decree,118 sparking a round of rapid negotiations.119

Following a meeting on Wednesday, November 30, Straight Path provided a revised

proposed term sheet on December 2, ahead of a second meeting scheduled for

Wednesday, December 5.120 Roughly contemporaneous with these negotiations,

Davidi met with Howard and informed his father that the FCC had proposed a

settlement in which Straight Path would give up half of the proceeds it obtained from

selling the Spectrum Licenses.121 Howard told his son that “this is a first offer […]

you should keep negotiating […] because you can do much better.”122

Negotiations between Straight Path and the FCC continued throughout

December 2016.123 In the second half of the month, Howard began to take a more

active role in the deal, with a particular focus on the impact the impending change

in presidential administration might bring.124 In a December 18 email discussing

deal progress, one of Straight Path’s advisors at Evercore noted that Straight Path’s

general counsel, David Breau, had informed him that “Howard Jonas and/or IDT

118
JX256.
119
TT (Davidi) 116:23–117:20.
120
JX259.0001.
121
TT (Howard) 990:6–14 (discussing a conversation that occurred six weeks before the consent
decree of January 11, 2017).
122
TT (Howard) 992:1–6.
123
JX263; JX265; JX266; JX268; JX276; JX277; JX279; JX280; JX281; JX282.
124
TT (Howard) 989:19–996:9.

22
would contribute a lot towards funding [any FCC penalty.]”125 Just four days later,

Breau and Straight Path’s outside counsel participated in a call with Howard and

Shmuel to discuss “the deal overall,”126 including the impact of the changing

administrations.127

In early January 2017, Howard and Davidi met to discuss the FCC’s most

recent offer.128 Unlike their previous meeting the month before, Howard did not

explicitly tell his son to renegotiate, instead indicating that he would reach out to his

political contacts to assess what a deal might look like under the new

administration.129 On January 8, Howard flew to the Dominican Republic to meet

with Straight Path director William Weld, whose tenure as governor of

Massachusetts had left him with contacts in Washington, D.C..130 The two discussed

the pros and cons of waiting for the new administration versus settling with the

current one.131 Weld believed that settling with the present administration was the

prudent choice.132 The conversation also touched on the topic of indemnity, but it

125
JX275.
126
JX282; JX572.0199–205; JX836.0001.
127
TT (Howard) 1117:13–1119:2.
128
Id. at 992:12–23 (discussing a conversation that took place about a month after the previous
one).
129
Id. at 992:12–994:10.
130
Id. at 996:23–997:17; TT (Weld) 1940:5–12.
131
TT (Howard) 1000:2–1001:2; TT (Weld) 1940:5–9, 1941:12–22.
132
TT (Howard) 1001:3–1004:3, 1122:17–22; TT (Weld) 1943:12–1945:14.

23
was not a focus.133 Ultimately, Howard took the position that it would be more

favorable to wait for the new administration.134

On January 11, 2017, Straight Path officially entered a settlement with the

FCC in the form of a consent decree (the “Consent Decree”).135 In exchange for the

resolution of potential violations of FCC rules governing candor, substantial service,

and permanent discontinuance, Straight Path made an initial payment of $15 million

and gave up 196 of its Spectrum Licenses for termination.136 The Consent Decree

did not require Straight Path to admit to any violations.137 The FCC also agreed not

to pursue further investigation of Straight Path “in the absence of new material

evidence.”138 Because Straight Path was given leeway to choose which licenses

would be terminated, it strategically chose those with the least impact on the

portfolio’s ultimate sale value.139

The Consent Decree also required Straight Path to choose one of three

additional penalties: (1) an additional penalty of $85 million, due within 12 months;

(2) termination of the remaining Spectrum Licenses; or (3) forfeiture of 20% of the

proceeds from a sale of the remaining Spectrum Licenses.140

133
TT (Weld) 1947:13–24.
134
TT (Davidi) 307:4–308:6.
135
JX825; JX314.0002; JX322.0001.
136
PTO ¶ 135.
137
TT (Furchtgott-Roth) 347:20–24.
138
JX322.0006.
139
TT (Davidi) 129:3–131:13; TT (Zeidman) 1583:2–1585:6; TT (Weld) 1927:16–23.
140
JX322.0001.

24
 5. The Indemnification Claim and the Sale

The Consent Decree cleared the way for Straight Path to sell the Spectrum

Licenses.141 However, the independent directors worried that an acquirer would not

be interested in pursuing the company’s Indemnification Claim against Howard and

IDT for pre-spin-off activities giving rise to the FCC investigation the

Indemnification Claim.142 Because the independent directors believed the

Indemnification Claim was valuable to Straight Path stockholders, they began to

explore opportunities to preserve the claim as Straight Path worked towards an

acquisition.143

a. Bidding Begins, The Special Committee is Formed

On January 31, 2017, the Straight Path board met with Evercore and Weil by

telephone.144 The board authorized Evercore to work with management to identify

potential bidders and begin outreach.145 Early the next month, Evercore contacted

20 potential bidders, 11 of which eventually executed confidentiality agreements

with Straight Path.146

On February 6, the board formed a special committee (the “Special

Committee”) consisting of the three independent directors: Todd, Weld, and

141
TT (Davidi) 131:22–132:13.
142
TT (Weld) 1952:17–1953:9; TT (Fortinsky) 2238:18–2239:8.
143
TT (Weld) 1767:8–10; TT (Todd) 1377:9–17; TT (Fortinsky) 2238:2–13.
144
PTO ¶ 140.
145
Id.
146
Id. ¶ 141.

25
Zeidman.147 The initial purpose of the Special Committee was to explore the

possibility of monetizing Straight Path’s IP Assets, which the board believed should

be sold separately in order to maximize stockholder value.148 The Special

Committee was necessary because IDT was a potential buyer for the IP Assets,

creating a conflict for Davidi.149

Though it was not initially in the explicit scope of the Special Committee’s

responsibilities,150 evaluation of Straight Path’s options regarding the

Indemnification Claim quickly became the independent directors’ main focus.151

The independent directors had begun interviewing potential legal advisors as early

as December 2016,152 eventually settling on Shearman & Sterling LLP

(“Shearman”).153 Shearman understood from the outset that its role involved

advising on the Indemnification Claim.154

The Special Committee met for the first time on February 14, 2017.155 At that

meeting, Shearman attorneys discussed preservation of the Indemnification Claim

with the Special Committee.156 The Special Committee then unanimously expressed

147
Id. ¶ 152.
148
JX358.0002; TT (Weld) 1726:14–1727:1.
149
JX349.0001; TT (Davidi) 143:22–144:21.
150
See JX349.
151
TT (Fortinsky) 2224:7–14, 2228:18–23; TT (Weld) 1939:9–22.
152
TT (Fortinsky) 2219:16–2220:7.
153
PTO ¶ 109.
154
TT (Fortinsky) 2056:11–13.
155
PTO ¶ 153.
156
JX357.0001.

26
interest in preserving and pursuing the Indemnification Claim.157 This decision was

motivated by the Special Committee’s desire to ensure that Straight Path

stockholders receive fair value for the Indemnification Claim, which might be

undervalued by an acquirer.158 On February 24, the Special Committee formalized

its relationship with Shearman in an engagement letter.159 On February 28,

Shearman informed Weil that the Special Committee intended to preserve the

Indemnification Claim, potentially by assigning the claim to a litigation trust.160

The S&DA contains a provision precluding the assignment of rights or

delegation of duties under that agreement without the prior written consent of the

other party.161 Apparently, the Special Committee did not contemplate that IDT

would give its consent; accordingly, in March the Special Committee asked its

advisors at Shearman and Morris, Nichols, Arsht & Tunnell LLP (“MNAT”) to

develop potential litigation trust structures that could preserve the Indemnification

Claim without assignment.162

157
Id.
158
TT (Weld) 1949:23–1950:2; TT (Fortinsky) 2238:14–17.
159
PTO ¶ 154.
160
JX577.0068.
161
JX107.0030.
162
TT (Weld) 1978:18–1979:7; see PTO ¶ 108.

27
 b. The Special Committee Decides to Preserve the
Indemnification Claim

On March 2, Evercore received preliminary bids ranging from $435 million

to $602 million from AT&T, Verizon, Sprint, and T-Mobile.163 The following week

on March 8, the Special Committee held a meeting attended by Breau as well as

attorneys from Shearman and Weil.164 Representatives from Weil expressed that

both they and Evercore were concerned about the risk that separating the

Indemnification Claim would negatively impact the sale process.165 The Special

Committee unanimously agreed that settlement of the Indemnification Claim would

benefit the Straight Path stockholders, but that it was worth considering additional

options.166 One option discussed was the creation of a trust to preserve the

Indemnification Claim.167 In the interests of exploring a settlement, Weld agreed to

reach out to Howard for a discussion.168

Following this meeting, Breau, Straight Path’s general counsel, informed

Shmuel, IDT’s CEO, about the Special Committee’s plan to preserve or pursue the

Indemnification Claim.169 Shmuel passed this information on to Howard.170 Shortly

163
PTO ¶ 143.
164
JX390.0001; JX389.0001.
165
TT (Fortinsky) 2085:24–2087:3, 2089:13–2090:10.
166
Id.; TT (Weld) 1960:14–1962:4; TT (Fortinsky) 2244:6–17.
167
JX390.0001.
168
JX389.0002.
169
TT (Shmuel) 595:4–596:1, 690:2–18.
170
Id. at 690:19–21.

28
thereafter,171 Howard received the call from Weld to discuss the potential settlement

of the Indemnification Claim.172 Howard asked that the Special Committee put their

rationale for pursuing the claim into writing and he would raise it with Shmuel, who

was skeptical of the claim’s value.173

On March 10, the Special Committee resolved that an upcoming process letter

being sent to bidders would disclose that the Indemnification Claim would be

excluded from the transaction.174 Three days later, Evercore reported to Straight

Path that Verizon had expressed a willingness to preempt the auction process on an

accelerated basis, unilaterally raising its bid to $750 million.175 That day, the Special

Committee met again and heard a presentation from Weil advocating against

including a statement about the Indemnification Claim in the process letter.176

Nonetheless, at the end of the meeting the Special Committee remained in favor of

including the statement.177

171
See TT (Howard) 1016:6–24 (testifying that he first heard about the Indemnification Claim
from Shmuel).
172
Id. at 1018:11–1020:5.
173
Id.
174
JX392.0001.
175
PTO ¶ 144.
176
JX405.0001; JX720.0141:15–142:20; TT (Weld) 1754:6–13, 1890:13–1891:6.
177
JX405.0001.

29
 c. Howard Reacts

Howard was quickly informed of the Special Committee’s intentions,178

which upset him.179 Breau tried to set up a discussion between Howard and the

Special Committee members180 but had been informed by Shearman that it was

inappropriate for the independent directors to speak to Howard without counsel.181

This angered Howard further and, over the next two days, he made multiple

unsuccessful attempts to contact each of Special Committee members.182 On March

14, Straight Path’s full board instructed Evercore to send out the process letter for

the second-round bid,183 including a statement expressing the company’s intent to

exclude the Indemnification Claim from the sale.184

From the evening of March 14 through the morning of March 15, Howard

called Weld around a dozen times.185 Though Weld initially resisted, he eventually

answered because he knew Howard was distraught.186 During that call, Howard

expressed anger with the Special Committee’s decision to pursue the

Indemnification Claim, potentially impacting the auction process, which he thought

178
TT (Howard) 1023:18–1024:7.
179
Id. at 1141:23–1142:18.
180
TT (Fortinsky) 2256:22–2257:16.
181
Id. at 2264:20–2265:10.
182
TT (Howard) 1026:4–1027:17.
183
JX588.0061.
184
JX410.0004; TT (Weld) 1963:18–1964:22; PTO ¶¶ 145, 161–62.
185
TT (Weld) 1965:11–1966:12.
186
Id. at 1966:2–1967:3.

30
was in Straight Path’s best interests.187 When Howard’s efforts to pressure Weld to

drop the Indemnification Claim proved unsuccessful, Howard raised the possibility

that he was “going to put it all on Mintz [Levin,]”188 the law firm where Weld was a

partner and which had served as FCC counsel to both IDT and Straight Path.189 Weld

took this as a serious threat that Howard wanted the Indemnification Claim settled,

“or else.”190

Following Howard’s call with Weld, Shearman instructed the Special

Committee members not to communicate directly with Howard.191 Accordingly,

Howard’s subsequent attempts to reach Zeidman and Todd were unsuccessful.192

Howard thought that it was “insane” for Shearman “not to let the controlling

shareholder speak to his own directors” “in the middle of what could be a billion

dollar deal[.]”193

On March 15, Jason Cyrulnik of Boies Schiller contacted Breau seeking a

conflict waiver that would allow his firm to represent IDT with regard to the

Indemnification Claim, despite its substantial previous representation of Straight

Path.194 Breau provided a waiver on March 17, requesting that Boies Schiller engage

187
Id. at 1967:7–18, 2053:16–18.
188
Id. at 1967:19–1968:1; TT (Howard) 1144:9–1145:23.
189
TT (Weld) 1838:20–23; PTO ¶ 106.
190
TT (Weld) 1968:7–1969:4, 1968:18–24, 1969:1–4.
191
Id. at 1958:8–21.
192
TT (Howard) 1030:4–1031:7.
193
Id. at 1146:10–23.
194
PTO ¶ 163.

31
directly with the Special Committee’s attorneys at Shearman.195 On March 19 or 20,

Cyrulnik had a call with Fortinsky of Shearman in which he communicated that

Howard was not prepared to support a transaction that preserved the Indemnification

Claim.196 The Special Committee understood this to mean that Howard’s support

for a the sale of Straight Path would be conditional on the resolution of the Indemnity

Claim.197 Due to Howard’s voting control of Straight Path, his support was

necessary to a sale of the company.198

On March 19, Shearman reached out to Weil and Breau to propose a March

23 meeting between Howard and the Special Committee.199 That meeting was

eventually scheduled for March 29.200 Though Shearman had floated the idea of a

neutral mediator to Howard, suggesting former Chancellor Chandler or former Vice

Chancellor Lamb as options,201 Cyrulnik rejected the proposal on behalf of Howard

and IDT.202

On March 28, the Special Committee met to discuss the upcoming meeting.203

The independent directors noted that the litigation trust term sheet and description

195
Id. ¶ 164.
196
JX588.0062; TT (Fortinsky) 2245:21–2246:6; see TT (Fortinsky) 2272:5–15 (discussing which
day the call occurred on).
197
TT (Fortinsky) 2274:9–16, 2346:6–14.
198
Id. at 2273:16–2274:8.
199
JX421.0001–02.
200
PTO ¶ 167.
201
TT (Fortinsky) 2279:16–2280:21, 2283:4–2284:12.
202
JX449.0002.
203
JX453.0001.

32
of the Indemnification Claim had not been circulated to the bidders, which the

Special Committee had requested, resolving that these documents should be added

to the deal’s data room no later than March 31.204

The auction process continued as negotiations around the Indemnification

Claim ramped up. Following the March 14 process letter, which contained a

statement that the Indemnification Claim would be excluded from any contemplated

transaction, bidders had questions about the nature of the Indemnification Claim.205

AT&T expressed a preference for the claim to be resolved prior to closing.206

However, no bidder ever withdrew, lowered its bid, or expressed concern about the

Indemnification Claim’s impact on the validity of the Spectrum Licenses.207 Indeed,

from March 21 to 23, the four largest bidders all raised their bids, each indicating a

willingness to pay $750 million or more.208

d. The Lead-Up to the March 29 Meeting

Going into the March 29 meeting, the Special Committee faced a number of

competing considerations. Though they were convinced of the Indemnification

204
Id.
205
TT (Evercore) 3010:16–3013:18; TT (Breau) 2376:21–2377:4; JX688; TT (Verizon
Designations) 94:17–95:18 (“We wanted to understand what it was.”).
206
JX454.0006.
207
TT (Davidi) 312:7–11; TT (Evercore) 3013:23–3015:6; TT (Fortinsky) 2253:1–2254:15;
JX720.0166 (Weil Designations) 166:3–25; TT (Breau) 2470:15–2471:13; see also JX688.0177
(Verizon Designations) 177:08–14; TT (Evercore) 3015:2–9; JX720.0166 (Weil Designations)
166:7–12; TT (Breau) 2473:5–2474:9; see also JX688.0173 (Verizon Designations) 173:10–22.
208
PTO ¶¶ 146–49; TT (Evercore) 3015:16–3017:20.

33
Claim’s value,209 the Special Committee members were aware that resolution of the

claim may well lead to a smoother process in the ongoing sale of the company.210 In

addition, Howard had injected a further element of time pressure by threatening to

withhold his support for any sale unless the Indemnification Claim was resolved by

the end of March.211 Accordingly, the Special Committee felt that the weight of

these asymmetrical negotiating positions put pressure on them to resolve the claim

at the March 29 meeting.212

Howard had also been preparing for the meeting. Following lobbying from

Davidi, in which he “begged” his brother to settle the claim,213 Shmuel and Howard

resolved that IDT would settle the Indemnification Claim for $10 million and “not a

penny more[.]”214 Howard would make this up to Shmuel by purchasing an

equivalent sum in IDT stock,215 in light of Shmuel’s emphatic position that Straight

Path was owed nothing.216 Howard communicated this $10 million cap to Weld

ahead of the meeting.217

209
TT (Howard) 2238:21–2239:8, 2240:2–10.
210
TT (Zeidman) 1564:1–5; TT (Todd) 1412:6–14; TT (Weld) 1804:6–13.
211
TT (Fortinsky) 2276:6–2277:11.
212
TT (Weld) 1993:10–1994:4; see also TT (Weld) 1994:17–1995:11; TT (Todd) 1388:6–21;
TT (Fortinsky) 2242:3–18.
213
TT (Davidi) 153:11–154:16; TT (Shmuel) 597:11–598:23.
214
TT (Shmuel) 725:16–726:1; TT (Howard) 1085:1–20.
215
TT (Shmuel) 598:24–602:11, 725:7–726:1; TT (Howard) 1157:12–1158:18.
216
At trial, Shmuel compared the Special Committee’s position to ingrates disparaging the gift of
a “golden chicken.” TT (Shmuel) 581:21–583:7.
217
TT (Weld) 1985:21–1987:14.

34
 Howard took additional steps to ensure that he could exercise his control of

Straight Path with regard to both a settlement and sale.218 Acting on Howard’s

behalf, Cyrulnik obtained a dissolution agreement of The Patrick Henry Trust on

March 28.219 This agreement, already signed by the trustor, would enable Howard,

upon signing, to immediately regain control of his voting control of Straight Path.220

e. The Meeting

On March 29, 2017, Howard, IDT representatives, the Special Committee,

and their respective counsel met at Weil’s offices in New York.221 Shmuel kicked

off the initial large group session with a declaration that “‘I have a figure for how

much I’d be willing to pay for the indemnification claim, and that’s zero.’”222

Howard followed on, angrily describing the Special Committee as “bullshit

directors” who had failed at their job to “look out for Davidi.”223 Cyrulnik then took

to the floor to argue that the Indemnification Claim was not valuable for a variety of

218
See TT (Howard) 1158:19–1159:16.
219
JX451.0001; TT (Howard) 1158:19–1159:16.
220
JX451.0004.
221
PTO ¶ 167.
222
TT (Weld) 1990:6–1991:13, 1799:20–1800:3 (emphasis added).
223
TT (Fortinsky) 2302:4–7; see also TT (Todd) 1313:1–13, 1392:14–1393:23; TT (Zeidman)
1649:23–1650:8.

35
reasons.224 Shearman responded with a presentation that valued the Indemnification

Claim in the range of $60 million.225

The discussion then moved to a breakout session consisting of Howard,

Cyrulnik, Weld, Todd, Zeidman (by telephone), and Creighton Condon of

Shearman.226 In the hallway between the two sessions, Howard flashed The Patrick

Henry Trust’s dissolution agreement to Weld, saying “Bill, look at this … [i]t’s

already been dissolved.”227 When Weld described the exchange to the other

independent directors, prior to entering the small group meeting,228 they realized that

the dissolution of the Trust meant that Howard had the power to remove them as

directors.229

This realization added to the intense pressure on the Special Committee to

come to an agreement.230 Seeking to secure something for the Straight Path

stockholders,231 the Special Committee capitulated to Howard’s $10 million figure

224
See, e.g., TT (Todd) 1266:7–1267:23; TT (Fortinsky) 2304:6–2305:2 (describing the arguments
raised).
225
While only Howard recalls a specific number, recollections generally agree upon this range.
See TT (Fortinsky) 2149:7–14 (recalling a figure in the range of $50–70 million); TT (Ash)
831:8–832:7 (recalling $60 or $70 million); TT (Howard) 1078:16–22 (recalling $60 million);
TT (Todd) 1307:11–1308:7, 1403:5–12 (recalling a number “probably considerably below” $100
million).
226
PTO ¶ 168.
227
TT (Weld) 2000:15–2001:1.
228
Id. at 2002:3–5.
229
Id. at 2001:2–18.
230
Id. at 2007:6–9 (describing how the Special Committee felt it had no “realistic choice other
than to take the deal Howard presented”); TT (Todd) 1313:14–1314:3.
231
See TT (Weld) 1835:16–1836:2, 2004:7–15; see also TT (Todd) 1312:2–24, 1313:1–13,
1387:23–1389:5, 1389:18–1390:12.

36
during the breakout session.232 The parties also agreed that IDT would purchase the

IP Assets for $6 million, with Straight Path receiving a 22% contingent payment

right (the “CPR”) in net profits from those assets.233 IDT’s valuation of the IP Assets

was pegged to the highest bid that Straight Path had received for those assets.234

f. The Aftermath

On April 2, Evercore notified bidders that Straight Path and IDT had reached

an agreement in principle regarding the Indemnification Claim.235 On April 3, 2017,

Straight Path’s full board executed a unanimous written consent ratifying the Special

Committee’s power and authority to pursue and preserve the Indemnification Claim

on behalf of Straight Path.236 That document aimed to make this approval

retroactive.237

On April 6, Straight Path agreed to an initial term sheet memorializing the

settlement with Howard and IDT.238 That day, Evercore received revised bids from

AT&T and Verizon of $951.2 million and $1.028 billion, respectively.239 The

232
PTO ¶ 169.
233
Id.; JX517.0006. Despite the Special Committee’s disinterest in non-cash consideration,
Howard would not budge from $10 million, leading to the CPR as a “deal-closer.” TT (Fortinsky)
2322:20–22, 2323:8–11.
234
TT (Weld) 1806:11–22; TT (Todd) 1257:20–1258:5.
235
JX472.0003.
236
JX476.0001–02.
237
Id. at -0002.
238
JX492.
239
PTO ¶ 173.

37
following day, as bids continued to increase,240 IDT requested that the term sheet be

made binding in case a more detailed settlement was never reached.241 The Special

Committee sought additional consideration based on their belief that the increasing

bids for Straight Path were driving up the value of the Indemnification Claim. 242

Cyrulnik’s response, which threatened the Committee members and their counsel

with malpractice and director liability,243 led the Special Committee to give in once

more.244 Straight Path publicly announced the terms of the settlement in an 8-K filed

April 9.245

g. The Acquisition

Straight Path announced a final deal with AT&T on April 10 at a price of $1.6

billion.246 However, ten days later, Verizon made an unsolicited offer of $1.8 billion,

leading to a bidding war between the telecom giants.247 Verizon eventually prevailed

with a bid of $3.1 billion.248 The sale premium of over 400% represented an

extraordinary windfall for Straight Path stockholders.249

240
Id. ¶ 174.
241
JX588.0066; TT (Fortinsky) 2327:19–2328:11.
242
JX509; PTO ¶ 176.
243
JX509.
244
JX517; PTO ¶ 177.
245
JX535.
246
See JX531.0001–02.
247
JX577.0077–80.
248
Id.; JX560.
249
JX564.0003.

38
 On May 11, 2017, Straight Path and Verizon executed a merger agreement.250

That agreement required Straight Path to use reasonable best efforts to consummate

the settlement term sheet it had entered with IDT.251 That was achieved through a

long-form settlement agreement entered on October 24, 2017.252

C. Procedural History

The original complaint in this matter was filed on July 5, 2017.253 On July 24,

2017, I denied expedition and consolidated related matters into this action.254 On

July 26, Plaintiffs dismissed the Special Committee members without prejudice.255

Plaintiffs filed an amended complaint on August 29, bringing four causes of action

against Howard, Davidi, IDT, and the Trust.256 A confidential mediation took place

on June 14, 2018.257 The Defendants moved to dismiss and, following briefing, I

heard argument on those motions on November 3, 2017.258 In my November 20,

250
JX566.
251
Id. at -0049.
252
JX625.
253
Verified Class Action and Deriv. Compl. for Breach of Fiduciary Duties, Dkt. No. 1.
254
See July 24, 2017 Telephonic Oral Arg. Pls.’ Mot. for Expedited Proceedings and Rulings of
the Ct., 14:13–22 (granting consolidation), 37:9–11 (denying expedition), Dkt. No. 44.
255
Granted (Stipulation and [Proposed] Order of Dismissal of Certain Defs. Without Prejudice),
Dkt. No. 37.
256
See Verified Consolidated Am. Class Action and Deriv. Compl., Dkt. No. 62. (“Compl.”)
257
Transmittal Decl. of Daniel E. Kaprow, Esq., pursuant to 10 Del. C. § 3927 in Supp. of IDT
Defs.’ Opp’n to Pls.’ Mot. for Class Certification, Ex. 8, Dkt. No. 434.
258
Judicial Action Form. Oral Arg. Held 11-3-17 on Defs.’ Mot. to Dismiss, Dkt. No. 98.

39
2017 Letter Opinion, I held that the matter was not ripe pending the merger

closing.259 On March 2, 2018, Plaintiffs informed me that the merger had closed.260

On June 25, 2018, Straight Path I dismissed as moot an alternative cause of

action for declaratory judgment and imposition of a constructive trust but allowed

the three fiduciary duty claims to proceed.261 This decision was affirmed on

February 22, 2019, by the Delaware Supreme Court following an interlocutory

appeal by the Defendants.262

Plaintiff Ardell Howard moved to intervene on October 14, 2020.263

Following briefing and oral argument I granted that motion.264

The IDT Defendants (comprised of Howard, IDT, and The Patrick Henry

Trust) and Davidi filed separate motions for summary judgment on July 6, 2021.265

Briefing for those motions was completed in late August.266 Briefing on class

certification was completed in October 2021.267 I heard combined oral argument on

259
In re Straight Path Commc’ns Inc. Consol. S’holder Litig., 2017 WL 5565264, at *3 (Del. Ch.
Nov. 20, 2017).
260
Letter to Vice Chancellor Sam Glasscock III from Ned Weinberger, Esq., Dkt. No. 105.
261
See In re Straight Path Commc’ns Inc. Consol. S’holder Litig., 2018 WL 3120804, at *13–20
(Del. Ch. June 25, 2018), aff’d sub nom. IDT Corp. v. JDS1, LLC, 206 A.3d 260 (Del. 2019)
(“Straight Path I”).
262
See IDT Corp. v. JDS1, LLC, 206 A.3d 260 (Del. 2019).
263
See Mot. to Intervene or for Permissive Joinder with Certificate of Service, Dkt. No. 339.
264
Tr. of 7.20.21 Ct.’s Ruling on Mot. to Intervene and Scheduling Conference 4:2–6:16, Dkt. No.
498.
265
See Def. Davidi Jonas’s Mot. for Summ. J., Dkt. No. 439; IDT Defs.’ Mot. for Summ J., Dkt.
No. 440.
266
See Reply Br. in Supp. of Def. Davidi Jonas’s Mot. for Summ. J., Dkt. No. 508; see also Reply
Br. in Further Supp. of IDT Defs.’ Mot. for Summ. J., Dkt. No. 509.
267
See Pls.’ Sur-Sur-Reply Br. in Further Supp. of Mot. for Class Certification, Dkt. No. 525.

40
both class certification and summary judgment on November 9, 2021.268 My

decisions in Straight Path II269 and III270 denied the summary judgment motions in

full and approved class certification, respectively. On August 12, 2022, Plaintiff

reached a settlement with Davidi,271 which I subsequently approved.272 Trial was

split into two five-day segments beginning on August 29 and December 5, 2022.273

Post-trial briefing was completed on April 28, 2023274 and, following oral argument

on May 3, 2023, I took the matter under advisement.275

II. ANALYSIS

Following motion practice and settlement, two causes of action remain before

me: a claim for breach of the duty of loyalty against Howard and The Patrick Henry

Trust as Straight Path’s controlling stockholders (Count I);276 and a claim for aiding

and abetting that breach of duty pled against IDT (Count III).277

268
See Tr. of 11.9.21 Oral Arg. re Mot. for Class Certification, Class Representatives, and Mots.
for Summ. J., Dkt. No. 531.
269
In re Straight Path Commc’ns Inc. Consol. S’holder Litig., 2022 WL 484420 (Del. Ch. Feb. 17,
2022) (“Straight Path II”).
270
In re Straight Path Commc’ns Inc. Consol. S’holder Litig., 2022 WL 2236192 (Del. Ch. June
14, 2022) (“Straight Path III”).
271
See Stipulation and Agreement of Settlement, Compromise, and Release with Def. Davidi
Jonas, Dkt. No. 648.
272
See Tr. of 12-22-2022 Partial Settlement Hrg. and Rulings of the Ct., Dkt. No. 751.
273
See 8-29-2022 Trial Tr., Dkt. No. 702; Trial dated 12.5.22, 12.6.22, 12.8.22, 12.9.22, 12.12.12,
Dkt. No. 735.
274
See IDT Defs.’ Corrected Answering Post-Tr. Br., Dkt. No. 773.
275
Post Trial Oral Arg., Dkt. No. 776.
276
Compl. ¶¶ 120–24; PTO ¶ 3.
277
Compl. ¶¶ 130–33; PTO ¶ 3.

41
 The central theory of Plaintiff’s case is that the FCC investigation of Straight

Path is attributable to pre-spin-off violations of FCC rules by IDT, making the

penalties paid under the Consent Decree indemnifiable under the terms of the

S&DA. Per Plaintiff, Howard recognized this as a threat to his family’s substantial

interest in IDT and used his control of Straight Path to wrest the Indemnification

Claim away at an unfair price. While much of Plaintiff’s theory is vindicated on the

post-trial record, recovery is ultimately undermined by the Indemnification Claim’s

lack of viability.

A. Defendants’ Attack on Direct Standing Fails

Defendants begin by challenging Plaintiff’s standing to assert direct claims.278

The wrongful selling of a corporate asset too cheaply is a classic claim

belonging to the company; if it is to be asserted by a stockholder, it must be

derivatively. And such a litigation asset would typically belong to a buyer after a

corporate sale. I will not repeat here my pleadings-stage analysis that this case

represented a material diversion of sales proceeds, and thus that Plaintiff’s claims

278
Defendants challenge the direct nature of Plaintiff’s claims around both the IP Assets and the
Indemnification Claim. IDT Defs.’ Opening Post-Trial Br. 142–43, Dkt. No. 759 (“DF PTOB”).
While Plaintiff’s answering brief provides a compelling defense of the Indemnification Claim, it
is silent as to the IP Assets. See Pl.’s Post-Trial Answering Br. 10–22, Dkt. No. 768 (“PL PTAB”).
Accordingly, I find that Plaintiff has waived argument as to the IP Assets. Emerald P’rs v. Berlin,
726 A.2d 1215, 1224 (Del. 1999) (“Issues not briefed are deemed waived.”) (citation omitted).
My remaining analysis therefore focuses exclusively on the Indemnification Claim.

42
were direct under Parnes; those interested should consult Straight Path I.279 On

Defendants’ interlocutory appeal, the Supreme Court affirmed this holding.280 That

finding is now the law of the case.281 However, this doctrine “is neither inflexible

nor an absolute bar to reconsideration of a prior decision that is ‘clearly wrong,

produces an injustice, or should be revisited because of changed circumstances.’”282

Defendants’ principal argument is that trial showed that the S&DA’s anti-

assignment provision made the proposed litigation trust structure a legal

impossibility.283 Because, per Defendants, the trust structure was not viable, the

Indemnification Claim could not have been withheld in the merger, and could not

represent a viable diversion of merger proceeds. No party has asserted that the

indemnification asset could have been monetized in the sale of the Company. It

follows that the claim’s sale to Howard did not impact the total merger consideration,

undermining the basis for Plaintiff’s direct standing under Parnes.284

279
Straight Path I, 2018 WL 3120804, at *13; see Parnes v. Bally Ent. Corp., 722 A.2d 1243 (Del.
1999).
280
See IDT Corp., 206 A.3d 260.
281
See Carlyle Inv. Mgmt. L.L.C. v. Moonmouth Co. S.A., 2015 WL 5278913, at *7 (Del. Ch. Sept.
10, 2015) (describing law of the case doctrine in the context of a proceeding before one court,
rather than on remand).
282
Id. (quoting Advanced Litig., LLC v. Herzka, 2006 WL 2338044, at *5 (Del. Ch. Aug. 10,
2006)).
283
See DF PTOB 142–43. Defendants also argue that the trust structure was a practical
impossibility. DF PTOB 143–44; IDT Defs.’ Corrected Answering Post-Trial Br. at 10–22, Dkt.
No. 773 (“DF PTAB”). However, law of the case doctrine applies to legal, rather than factual
issues. Advanced Litig., LLC, 2006 WL 2338044, at *5. Accordingly, I will address these factual
arguments in my entire fairness analysis, to which they are pertinent.
284
See In re Straight Path Commc'ns Inc. Consol. S’holder Litig., 2018 WL 3599809, at *2 (Del.
Ch. July 26, 2018).

43
 Because the anti-assignment provision does not preclude the litigation trust

structure, Defendants’ argument fails as a matter of law. Section 11.05(b) of the

S&DA states that neither Straight Path nor IDT “may assign its rights or delegate

any of its duties under this Agreement without the prior written consent of the other

Party.”285 Defendants’ argument that this language is dispositive boldly cites no

legal authority.286 In doing so, it ignores that Delaware courts, following the

Restatement (Second) of Contracts, “generally construe such [anti-assignment]

provisions narrowly” by “distinguish[ing] between the power to assign and the right

to assign.”287 In order to prohibit a party’s power to assign, a provision must

expressly state that subsequent assignments will be void or invalid.288 Because the

anti-assignment provision in the S&DA contains no such statement,289 it does not

preclude the litigation trust structure as a matter of law.290 The matter of IDT’s

probable refusal to consent to any assignment, and whether that would have

prevented recovery against IDT, does figure in the analysis of fair price, infra.

285
JX107.0030.
286
See DF PTOB 142–43.
287
Se. Chester Cnty. Refuse Auth. v. BFI Waste Servs. of Pa., LLC, 2017 WL 2799160, at *5 (Del.
2017) (emphasis in original).
288
Id. (holding that absent such a provision, parties retain the power to assign, though assignments
may result in a breach of contract action by their counterparty).
289
JX107.0030.
290
See Pl.’s Post-Trial Answering Br. at 13–15, Dkt. No. 769 (“PL PTAB”) (arguing that the
contemplated structure involved a contractual arrangement with the acquirer, rather than an
assignment of rights or duties).

44
 B. Entire Fairness Review Applies

Defendants effectively concede that Howard was Straight Path’s controlling

stockholder and, putting aside their argument on standing, that entire fairness review

applies.291 Given that Howard controlled more than 70% of Straight Path’s voting

power as of the March 29 meeting,292 and given his involvement in the process, I

find that he was a controller owing fiduciary duties to the company’s minority

stockholders.293 Plaintiff alleges that Howard breached his duty of loyalty to the

minority stockholders by coercing the Special Committee into an unfair settlement

of the Indemnification Claim, resulting in a non-ratable benefit to Howard.294

Though Howard’s personal stake in Straight Path was smaller than in IDT, the Jonas

family collectively owned a larger stake in IDT, as of March 29, 2017.295 I find that

IDT’s status as Howard’s flagship company,296 his family’s larger ownership stake,

and ongoing interest in IDT post-merger are sufficient to establish a non-ratable

benefit.297

291
See DF PTOB 144–73; DF PTAB 22–119 (failing to contest the issue of control or the
application of entire fairness).
292
JX739.0064.
293
See Williamson v. Cox Commc'ns, Inc., 2006 WL 1586375, at *4 (Del. Ch. June 5, 2006) (citing
Kahn v. Lynch Commc'n Sys., Inc., 638 A.2d 1110, 1113–14 (Del. 1994)) (holding that an
individual or entity holding 50% or more of a corporation’s voting power is a controller); Ivanhoe
P’rs v. Newmont Mining Corp., 535 A.2d 1334, 1344 (Del. 1987) (holding that controllers owe
fiduciary duties). Given Defendants’ waiver of the control argument, I need not assess whether
the existence of the Patrick Henry Trust impacts this analysis.
294
PL PTOB 69.
295
JX739.0060–67.
296
TT (Howard) 970:13–972:9; see also TT (Weld) 1740:10–11; TT (Todd) 1272:19–1273:11.
297
TT (Atkins) 2644:21–2648:6; JX0739.0035–48.

45
 Accordingly, entire fairness review applies,298 with the burden on Defendants

to demonstrate both fair process and fair price.299

1. Fair Process

Fair process “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 and the stockholders were obtained.” 300 This Court is

frequently asked to make findings of controller overreach based on only

circumstantial evidence, cryptic communications, or inference.301 This is not one of

those cases. Here, Howard, directly and through Cyrulnik, made every effort to

bully the Special Committee towards his desired outcome.

Howard did not want the Indemnification Claim preserved.302 In order to push

his agenda, he bombarded the Special Committee members with phone calls.303 He

described as “insane” Shearman’s reasonable precaution of walling off “the

controlling shareholder” from communicating with “his own directors” about a

pending self-interested transaction.304 He threatened to “put it all on Mintz

298
See Straight Path I, 2018 WL 3120804, at *15.
299
In re Tesla Motors, Inc. S’holder Litig., 298 A.3d at 700.
300
Weinberger v. UOP, Inc., 457 A.2d 701, 711 (Del. 1983).
301
See, e.g., In re Oracle Corp. Deriv. Litig., 2023 WL 3408772 (Del. Ch. May 12, 2023).
302
See, e.g., JX588.0062 (describing, in a signed SEC disclosure, how Cyrulnik told Fortinsky that
Howard was not prepared to support a potential transaction in which the Indemnification Claim
was preserved); TT (Fortinsky) 2272:5–15 (confirming the conversation); see also TT (Howard)
1177:20–1178:20.
303
TT (Howard) 1026:4–1027:17; TT (Weld) 1965:11–1966:12.
304
TT (Howard) 1146:4–23.

46
[Levin]”—the law firm where Weld was a partner—when Weld didn’t cave in to his

demands.305 He verbally abused the Special Committee during negotiations, calling

them “bullshit directors.”306 He made sure that the Special Committee knew, as they

went into final negotiations, that he had dissolved his blind trust and retaken direct

voting control of Straight Path.307 Finally, he made the Special Committee believe

that he would torpedo the lucrative sale of the Company, if the Special Committee

did not quickly settle the Indemnification Claim.308 This campaign of abuse and

coercion led the Special Committee to reasonably conclude that it had to settle the

Indemnification Claim on Howard’s terms or risk an even less favorable outcome

for the Company.309

In response to this overwhelming evidence of unfair process, Defendants

attempt to turn the tables by putting the blame on the Special Committee.

Defendants’ argument, as I understand it, is essentially that the Special Committee

went rogue and sought to preserve the Indemnification Claim despite blinding

evidence that it was not in the company’s best interests.310 Per Defendants, Howard

305
TT (Weld) 1967:11–1969:11.
306
Id. at 1991:18–21; TT (Fortinsky) 2301:23–2302:7.
307
TT (Weld) 2000:15–2001:1.
308
JX588.0062 (describing Cyrulnik’s conversation with Fortinsky); TT (Fortinsky) 2245:21–
2246:6; TT (Fortinsky) 2274:9–12; see also TT (Fortinsky) 2271:17–2272:2; TT (Weld) 1985:21–
1987:14.
309
TT (Weld) 1818:16–23, 1994:17–1995:11, 2007:6–9; TT (Todd) 1386:21–1387:11, 1390:2–
1392:3, 1437:2–24; TT (Zeidman) 1671:23–1672:12.
310
DF PTOB 169–73; DF PTAB 45–70.

47
was in fact defending minority stockholder interests by steamrolling the Special

Committee.311 I find that this fulsome312 defense of Howard’s clear interference with

the Special Committee is facially inconsistent with both Delaware law and the

factual record.

This Court presumes directors’ fidelity to their fiduciary duties.313 Defendants

seek, explicitly or not, to justify the forceable substitution of Howard’s business

judgment for the Special Committee’s own. The burden is therefore on Defendants

to establish facts rebutting this presumption of fidelity and justifying Howard’s

intervention.314 I find that they fall far short. The record is replete with evidence

that the Special Committee labored zealously to maximize stockholder value based

on the members’ good faith belief that the Indemnification Claim would be

undervalued in a merger, as well as their understanding of Howard’s

intransigence.315

311
See, e.g., DF PTOB 170 (arguing that Howard acted to benefit Straight Path, never threatened
anyone, and sought no non-ratable benefit).
312
Fulsome, in the traditional sense. See Jeter v. RevolutionWear, Inc., 2016 WL 3947951, at *9
n.90 (Del. Ch. July 19, 2016); see also Cyrulnik’s impassioned closing defense of Howard at post-
trial oral argument. Post Trial Oral Arg. Tr. 158:2–62:3, Dkt. No. 780.
313
See Orman v. Cullman, 794 A.2d 5, 19–20 (Del. Ch. 2002); see also Beam ex rel. Martha
Stewart Living Omnimedia, Inc. v. Stewart, 845 A.2d 1040, 1049–50 (Del. 2004) (applying this
principle in the context of demand futility).
314
Orman, 794 A.2d at 19–20.
315
See, e.g., TT (Todd) 1380:19–1381:16 (stating that eliminating the Indemnification Claim
would be beneficial for the sales process); TT (Weld) 1952:2–1953:13 (expressing that potential
buyers would not have interest in the Indemnification Claim); TT (Fortinsky) 2238:18–2239:8
(asserting that the Special Committee stated “buyers would not pay anything for the
Indemnification Claim”); TT (Weld) 1835:16–1836:2, 1836:12–21, 1994:17–21, 2004:7–15

48
 Defendants’ principal argument to the contrary is that Howard’s actions were

taken in good faith and were consistent with advice from Straight Path’s deal

advisors at Weil and Evercore.316 As a threshold matter, it is irrelevant whether

Howard had a subjective good faith belief that coercing the Special Committee into

a settlement was in Straight Path’s best interest.317 Instead, Defendants’ only

relevant contention is that the advice of Weil and Evercore rebuts the presumption

that the Special Committee was carrying out its duties in good faith, necessitating

Howard’s intervention.318 However, this argument is not borne out by the evidence.

(revealing the committee needed to settle the Indemnification Claim or the transaction would not
go forward and that stockholders would receive little for the claim if Howard removed independent
directors from the board); TT (Todd) 1312:2–24, 1313:1–13, 1387:23–1389:5, 1389:18–1390:12
(stating that the financial interests of all stockholders were going to be negatively impacted); TT
(Fortinsky) 2298:17–2299:13 (expressing that he did not believe Howard would allow the
Indemnification Claim to survive a Straight Path transaction); TT (Weld) 2008:19–2009:12
(asserting that the Indemnification Claim was sacrificed to allow the transaction to go forward);
see also TT (Weld) 2007:10–12, 1962:5–12 (stating the Indemnification Claim was settled for a
low amount).
316
DF PTOB 169–71. I have found, supra, that Howard had a large and compelling familial
interest in IDT, I need not address further Defendants’ arguments that Howard’s financial interests
aligned with those of the minority. See DF PTOB 172–73. I also defer until the next section
consideration of Defendants’ fair price arguments, which they attempt to inject into the fair process
analysis. See DF PTAB 26–40.
317
See In re Primedia, Inc. S’holders Litig., 67 A.3d 455, 489 (Del. Ch. 2013) (holding that
fiduciaries are liable for unfair self-dealing, regardless of whether they acted in subjective good
faith). Indeed, the idea that “fair process” can be fulfilled by a controller’s “good faith”
steamrolling of a functioning special committee is non-intuitive and deviant from our doctrine.
Perhaps this is why Defendants cite no relevant precedent in arguing fair process. See DF PTOB
169–73 (citing only two cases, both inapposite); DF PTAB 40–68 (citing only a single case, also
inapposite, in almost 30 pages of argument).
318
Defendants attempt to cast doubt on the Special Committee’s understanding of its duties
through artfully selected and ordered selections of trial testimony. DF PTAB 35–37. I find,
however, that this evidence does little to rebut the presumption of the Special Committee’s
adherence to its fiduciary duties. As such, I decline to address these arguments further.

49
Neither Straight Path’s deal advisors nor the bidders ever intimated that preservation

of the Indemnification Claim would “imperil[] the auction[.]”319 Weil and

Evercore’s belief that resolving the Indemnification Claim would make for a

smoother auction process is insufficient to impugn the Special Committee or justify

Howard’s interference.

Accordingly, I find that Defendants failed to demonstrate fair process.

2. Fair Price and the Value of the Indemnification Claim Based on the
Trial Record

In assessing fair price, the Court must determine whether Defendants have

proved that the price paid for the Indemnification Claim “falls within a range of

fairness.”320 Contrary to Defendants’ contentions, the price in question is the

consideration Howard paid in exchange for settlement of the Indemnification Claim,

not the $3.1 billion Verizon paid for Straight Path.321 Plaintiff accurately

summarizes the analysis as follows: “[t]o determine ‘fair price,’ the Court must

decide whether Defendants proved that the Indemni[fication] Claim was worthless

or of so little value that $10 million fails within a range of fairness for this massive

319
DF PTOB 169; see TT (Evercore) 3013:23–3015:9; TT (Breau) 2469:11–2474:9; JX720.0166
(Weil Designations) 166:3–25; JX688.0187 (Verizon Designations) 187:22–188:07, 194:06–
195:06; 215:09–23.
320
In re Dole Food Co., Inc. S’holder Litig., 2015 WL 5052214, at *33 (Del. Ch. Aug. 27, 2015).
321
DF PTOB 145.

50
shortfall.”322 The following section, accordingly, addresses a counterfactual: if IDT

had not obtained a release of the Claim, what would its value be to the Plaintiff class?

Because I find that Straight Path’s failure to fulfill the notice and consent

requirements of Section 6.07 of the S&DA is dispositive in determining that the

Indemnification Claim was economically worthless, I need not rule on many of the

parties’ other threshold arguments.323 In order to give the reader context, I briefly

outline these arguments before analyzing the issue of notice and consent in detail. I

then address Plaintiff’s arguments around contribution, which she contends provides

an equitable path towards recovery not subject to the notice and consent

requirements of S&DA Section 6.07. Because Plaintiff’s arguments are not

supported by equity, they do not sway my finding that the $10 million paid by

Defendants was fair. My reasoning follows.

a. SPCI Liability, Pre- or Post-Spin-Off, Indemnifiable Loss,
Limitation on Liability

Defendants field a host of arguments that the price paid was more than fair

because the Indemnification Claim was not viable. For the purposes of the fair price

analysis, I either find or assume that Plaintiff prevails on each of the arguments

discussed in this subsection.

322
PL PTAB 61.
323
Accordingly, because I find that the $10 million paid was economically fair, I need not assess
the value of the CPR that stockholders obtained in the settlement with Howard and IDT.

51
 i. Indemnifiable Loss

Section 6.02 of the S&DA governs IDT indemnification of Straight Path (or

“SPCI”) and is the basis for the Indemnification Claim. That section reads:

On and after the Distribution Date, IDT shall indemnify, defend and
hold harmless SPCI and its subsidiaries and each of their respective
directors, officers, employees and agents (the “SPCI Indemnitees”)
from and against any and all Indemnifiable Losses incurred or suffered
by any of the SPCI Indemnitees and arising out of, or due to, (a) the
failure of IDT or any member of the IDT Group to pay, perform or
otherwise discharge, any of the IDT Liabilities, and (b) any breach by
IDT or any member of the IDT Group of this Agreement.324

Defendants argue that, because Straight Path received the Spectrum Licenses for free

in the spin-off, there can be no Indemnifiable Loss,325 which is defined as “any and

all damage, loss, liability, and expense. . . in connection with any and all”326 actual

or threatened claims, proceedings, or investigations before any court or government

agency.327 Defendants cite no authority, legal or otherwise, nor do they attempt to

reconcile their position’s clear conflict with the language of the S&DA.

Accordingly, I find that the Consent Decree gave rise to an Indemnifiable Loss under

the S&DA.

ii. Limitation of Liability

324
JX107.0019.
325
DF PTOB 155–56.
326
JX107.0006.
327
Id. (defining “Action”).

52
 Section 11.12 of the S&DA contains a provision limiting indemnitors’

liability for “any special, indirect, incidental, punitive, consequential, exemplary,

statutorily enhanced or similar damages in excess of compensatory damages[.]”328

Defendants contend that the damages here are consequential and that there can be

no compensatory damages, given that Straight Path received the Spectrum Licenses

for free.329 In doing so, Defendants ignore the subsequent parenthetical noting that

“any such liability with respect to a Third Party Claim shall be considered direct

damages.”330 As Plaintiff notes, “[a] plain reading of [Section] 11.12 and the

S&DA’s definitions confirm that liability resulting from a Consent Decree is the

result of a ‘Third Party Claim[.]’”331 Accordingly, Defendants’ limitation of liability

argument fails.

iii. SPCI Liabilities

The parties next dispute whether Plaintiff’s claimed losses are “SPCI

Liabilities” as defined in the S&DA.332 This is relevant because SPCI Liabilities are

specifically carved out from IDT’s indemnification obligations in Section 6.02.333

The definition of “SPCI Liabilities” is complex, involving seven subparts and

328
JX107.0032.
329
DF PTOB 156–58.
330
JX107.0032.
331
PL PTAB 98.
332
PL PTOB 105–10; PL PTAB 69–80; DF PTOB 150–55; DF PTAB 88–97.
333
JX107.0005 (carving “SPCI Liabilities” out from “IDT Liabilities”), -0030 (linking one
category of indemnity to IDT Liabilities).

53
ambiguity resulting from an obvious drafting error.334 Of these seven subparts, only

numbers (ii), (iv), and (vii) are the subject of the parties’ post-trial arguments.

Subpart (ii) attempts to use time-based limitations to determine whether a

given liability is an SPCI Liability.335 While the first half of the provision336

allocates liabilities arising after the spin-off to Straight Path, the second half appears

to also allocate pre-spin-off liabilities to Straight Path, but the language is

ambiguous due to a missing parenthesis and the use of what appears to have been

intended as a defined term, “Effective Date,” that appears nowhere else in the

S&DA.337 I assume for the purpose of this fair price analysis that Plaintiff’s

preferred reading of subpart (ii), allocating to Straight Path only those liabilities

arising from post-spin-off conduct,338 is correct.

I found on summary judgment review that the language of subpart (iv) (which

excludes from indemnification liabilities arising from “a sale”) was unambiguous

334
Id. at -0009–10.
335
Straight Path II, 2022 WL 484420, at *9–11.
336
“[A]ny and all Liabilities of IDT, SPCI, or any of their respective Affiliates, primarily relating
to, arising out of or resulting from the operation or conduct of the SPCI Business or any other
business, or the ownership or use of the Assets of SPCI, as conducted at any time on or after the
Effective Time.” JX107.0009.
337
Id.
338
PL PTOB 105–10 (emphasis added).

54
but inapplicable to Plaintiff’s claims.339 I reject as inadequate Defendants’ attempts

here to overcome the law of the case.340

Finally, Defendants argue that subpart (vii), which governs liabilities relating

to post-spin legal actions, controls Plaintiff’s claims.341 Subpart (vii) includes a

time-based limitation similar to subpart (ii) and applies to liabilities relating to the

operation of the SPCI Business and any SPCI Action.342 The S&DA defines “any

SPCI Action” as “any current or future Action relating primarily to the SPCI

Business in which one or more members of the IDT Group is a defendant or the party

against whom a claim or investigation is directed. . . .”343 Defendants contend subpart

(vii) applies to Plaintiff’s claims since Plaintiff asserts the FCC Straight Path Inquiry

was directed against IDT’s conduct.344 Based on this interpretation, Defendants

argue subpart (vii) designates the FCC Straight Path Inquiry as an “SPCI Action,”

and, as a consequence, allocates liability to Straight Path.345 I assume for the

purposes of this analysis that Plaintiff’s position—that subpart (vii) is inapplicable

339
See Straight Path II, 2022 WL 484420 at *10.
340
See, e.g., DF PTAB 99–101 (seemingly arguing that trial introduced new evidence inconsistent
with my prior decision, but failing to explain how this overcomes the law of the case doctrine);
see also Section III.A (discussing law of the case doctrine).
341
DF PTOB 153–55.
342
“[A]ny and all Liabilities relating to, resulting from, or arising out of any Action that is
primarily related to the operation of the SPCI Business following the Effective Time, including
any SPCI Action.” JX107.0010.
343
Id. at -0008.
344
DF PTOB 153.
345
Id.

55
because it allocates liability to Straight Path for IDT’s post-spin-off conduct and not

pre-spin-off violations—is correct.346

iv. Pre- or Post-Spin-Off

Defendants next argue that, even under Plaintiff’s reading of the S&DA, the

penalties Straight Path paid under the Consent Decree are not indemnifiable because

they are attributable to post-spin-off conduct,347 putting them on the wrong side of

subpart (ii)’s time-based liability allocations. As the facts recited above indicate,

most—but not all—of the actions cited by the FCC in its investigation involve pre-

spin activity. I once again assume without finding that Plaintiff’s position—that the

FCC investigation and subsequent Consent Decree arose from IDT’s pre-spin-off

violations—is correct.

b. Notice & Consent

I turn, then, to whether Straight Path created a viable indemnification

obligation on the part of IDT, under the terms of the S&DA. Defendants contend

that the Indemnification Claim was worthless because it was barred by Section 6.07

of the S&DA, governing notice and defense of third-party claims.348 At summary

judgment, I warned that Plaintiff’s theory of implied consent “may prove difficult to

vindicate on the facts alleged.”349 On a post-trial record, I find that Defendants

346
PL PTAB 82–83 (emphasis added).
347
Id. at 158–65.
348
PTOB 145–49; JX107.00021–22.
349
Straight Path II, 2022 WL 484420, at *11.

56
proved that the notice and consent requirements of Section 6.07 were not met and

that Plaintiff’s theories were not tenable.

i. Requirements under Section 6.07

Section 6.07 provides:

Promptly following the earlier of (a) receipt of notice of the
commencement by a third party of any Action against or otherwise
involving any Indemnified Party or (b) receipt of information from a
third party alleging the existence of a claim against an Indemnified
Party, in either case, with respect to which indemnification may be
sought pursuant to this Agreement (a "Third Party Claim"), the
Indemnified Party shall give the Indemnifying Party written notice
thereof. The failure of the Indemnified Party to give notice as provided
in this Section 6.07 shall not relieve the Indemnifying Party of its
obligations under this Agreement, except to the extent that the
Indemnifying Party is materially prejudiced by such failure to give
notice. Within thirty (30) days after receipt of such notice, the
Indemnifying Party shall, by giving written notice thereof to the
Indemnified Party, (a) acknowledge, as between the parties hereto,
liability for, and at its option elect to assume the defense of such Third
Party Claim at its sole cost and expense or (b) object to the claim of
indemnification set forth in the notice delivered by the Indemnified
Party pursuant to the first sentence of this Section 6.07 setting forth the
grounds therefor; provided that if the Indemnifying Party does not
within the same thirty (30) day period give the Indemnified Party
written notice acknowledging liability or objecting to such claim and
setting forth the grounds therefor, the Indemnifying Party shall be
deemed to have acknowledged, as between the parties hereto, its
liability to the Indemnified Party for such Third Party Claim. . . . If the
Indemnifying Party assumes the defense of a Third Party Claim, the
Indemnifying Party may settle or compromise the claim without the
prior written consent of the Indemnified Party if such settlement or
compromise is solely for monetary damages for which the
Indemnifying Party shall be responsible for; in all other events, the
Indemnifying Party may not agree to any settlement or compromise
without the prior written consent of the Indemnified Party, which
consent shall not be unreasonably withheld or delayed. If the

57
 Indemnifying Party does not assume the defense of a Third Party Claim
for which it has acknowledged liability for indemnification under
Article VI, the Indemnified Party may require the Indemnifying Party
to reimburse it on a current basis for its reasonable expenses of
investigation, reasonable attorney's fees and reasonable out-of-pocket
expenses incurred in defending against such Third Party Claim, and the
Indemnifying Party shall be bound by the result obtained with respect
thereto by the Indemnified Party; provided that the Indemnifying Party
shall not be liable for any settlement effected without its consent, which
consent shall not be unreasonably withheld or delayed.350

The Section requires the “Indemnified Party” (here, Straight Path) to promptly

notify the Indemnifying Party, IDT, in writing, upon receiving notice that a third

party (a) has commenced an Action against or involving Straight Path or (b) has

alleged the existence of such a claim.351 Both (a) and (b) only apply to claims for

“which indemnification may be sought” under the S&DA.352 Failure to adhere to

this notice requirement “shall not relieve [IDT] of its obligations under [the

S&DA],” except to the extent such a failure materially prejudices IDT (the “Material

Prejudice Carveout”).353

Section 6.07 further requires IDT, within 30 days of receiving “such notice,”

to notify Straight Path in writing that IDT either (x) acknowledges its liability to

Straight Path354 or (y) objects to Straight Path’s indemnification claim.355 If IDT

350
JX107.00021–22.
351
Id. at -0021.
352
Id.
353
Id.
354
This option, which only acknowledges liability “as between the parties,” also gives IDT the
option to assume the defense of the claim at its own expense. Id.
355
IDT is also required to provide the grounds for rejection. Id.

58
does not provide this written notice within the 30-day period specified, it is deemed

to have acknowledged its liability to Straight Path for the claim.356

Section 6.07 also provides that IDT, if it assumes the defense of the underlying

claim by the third party, can settle that claim without consulting Straight Path where

the settlement involves only money damages to be paid by IDT.357 Otherwise, IDT

may not settle a claim without Straight Path’s prior written consent, which “shall not

be unreasonably withheld or delayed.”358 Similarly, for claims where IDT has

acknowledged liability but not assumed the defense, IDT “shall be bound by the

result” obtained by Straight Path but will not be liable for settlements entered

without its consent, which “shall not be unreasonably withheld or delayed.”359

Here, Plaintiff seeks to recover for fines and license terminations under the

Consent Decree Straight Path entered—settled—with the FCC.360 It is largely

undisputed that Straight Path did not follow the process described in Section 6.07

prior to entering the Consent Decree.361 The operative question is therefore whether

356
Id.
357
Id.
358
Id. at -0021–22.
359
Id. at -0022.
360
See PL PTOB 98–99.
361
Plaintiff argues that Davidi provided written notice on behalf of Straight Path in a February
2016 email. PL PTOB 112. However, this email predates the FCC investigation that resulted in
the Consent Decree. See JX199.0002 (FCC letter of inquiry dated September 20, 2016). I
therefore find that it could not have fulfilled the requirements of Section 6.07 with regard to that
settlement.

59
Plaintiff’s alternative theories of notice and consent are permissible under the

S&DA.

ii. Notice Requirement

Reading Section 6.07 as a whole, the notice requirement serves two functions:

to let IDT know that (1) a claim potentially giving rise to an indemnification

obligation exists and (2) Straight Path intends to seek indemnification for that claim.

An indemnitor can suffer material prejudice if it is held liable for a claim where it

had notice of (1) but not (2). This is because the indemnitor’s interest in defending

against a given claim corresponds directly to the probability that it will be liable for

payment. That probability is based on both the merits of the underlying claim and

the likelihood that the indemnitee will seek indemnification. Thus (2) serves the

important function of eliminating uncertainty around whether the indemnitee will

seek indemnification, aligning the interests between indemnitee and indemnitor.

Plaintiff contends that Straight Path provided IDT with the contractually

required notice of the FCC’s impending inquiry and Straight Path’s intention to seek

indemnification from IDT in the event Straight Path was made to pay fines as a result

of the FCC inquiry.362 On February 26, 2016, Davidi sent an email to Schmuel,

IDT’s in-house counsel, and Cyrulnik, which stated, in relevant part, “According to

a clause in the separation agreement (6.07 I believe) between [Straight Path] and

362
PL PTOB 112–13.

60
IDT, IDT indemnifies [Straight Path] for activities prior to separation. Given the

posture of the claims against [Straight Path] to date that clause may be

implicated.”363 While Davidi requested a call in this email to discuss the issue

further, no testifying witness recalled whether the requested call occurred.364 It is

unclear from the text of the email whether Davidi’s email was referencing

indemnification from IDT for the ongoing Zacharia lawsuit Straight Path was a party

to365 or Straight Path’s potential liability for the not-yet-opened FCC Straight Path

Inquiry.366 I note that the latter was not a “claim[]. . . to date.”367

Though Plaintiff points to IDT’s October 2016 SEC filing that acknowledges

“should the FCC impose liability on Straight Path, we could be the subject of a claim

from Straight Path related to that liability”368 as confirmation that IDT was properly

put on notice by Straight Path, Plaintiff has been unable to adduce anything

attributable to Straight Path which clearly puts IDT on notice that Straight Path

would be seeking indemnification from IDT for any liabilities Straight Path incurred

from the FCC Straight Path Inquiry.369 At best, the language in IDT’s October 2016

SEC filing is evidence that IDT knew of the FCC Straight Path Inquiry and was

363
JX0161.0001.
364
TT (Davidi) 275:10–76:15; TT (Ash) 918:10–19:7; TT (Schwell) 2861:20–62:8; TT (Breau)
2418:6–14; TT (Schmuel) 2419:1–17.
365
TT (Davidi) 55:1–5, 56:1–57:20, 269:23–271:9.
366
See JX199 (September 2016 FCC Letter of Intent).
367
Id.
368
JX0237.0014, -0021, -0043 (emphasis added).
369
See PL PTOB; PL PTAB.

61
anticipating Straight Path might provide IDT with notice for indemnification in the

future.

The presence of function (2)—that Straight Path may seek indemnification—

in Section 6.07’s notice requirements is apparent in the option for the IDT to assume

the defense of the claim and the requirement that the Straight Path obtain the IDT’s

consent before settling. These provisions would not make sense if notice included

notice of a claim but not intent to demand indemnification, because IDT’s decisions

around the appropriateness of defense or settlement hinge on Straight Path’s intent

to seek indemnification. I find that Plaintiff’s evidence fails demonstrate that IDT

was aware Straight Path intended to seek indemnification for FCC-imposed liability.

Plaintiff argues next that the Material Prejudice Carveout excuses the lack of

written notice. Per Plaintiff, the fact that IDT already had constructive and actual

notice that Straight Path was planning to settle with the FCC, potentially opening the

door to an indemnification claim, “preclude[s] a finding of material prejudice.”370 I

find that this interpretation is inconsistent with the text of Section 6.07, as well as

the facts of record.

It is indisputable that Howard, a conflicted fiduciary, was aware of and

cooperated in Straight Path’s response to and eventual settlement of the FCC

370
PL PTAB 85.

62
investigation.371 However, there is no evidence that, prior to that settlement, Straight

Path provided appropriate notice to IDT that it was asserting its right to

indemnification for the resulting liability. Deeming IDT to have notice of this

Indemnification Claim would result in material prejudice to IDT because it did not

have an opportunity to defend against the investigation or negotiate the settlement

with the full knowledge of its liability.

At the time Straight Path agreed to this settlement with the FCC, 372 Straight

Path was already preparing for a potential sale of its licenses after having been

approached by potential buyers.373 It strains credulity that IDT, being on notice of

its need to potentially indemnify Straight Path, would have negotiated a settlement

opting to remit to the FCC 20% of the proceeds from the sale of Straight Path’s

license portfolio without requiring any cap on the amount remittable to the FCC.

Ultimately, Straight Path’s liability to the FCC ballooned to a point that the face

value of the Indemnification Claim exceeded not only IDT’s ability to pay, but also

IDT’s liquidation value.374

Accordingly, I find that Defendants have shown that Straight Path failed to

comply with the written notice requirement of Section 6.07, materially prejudicing

371
See, e.g., TT (Weld) 1947:11–23; JX0357.0001; TT (Fortinsky) 2234:5–35:22; TT (Davidi)
307:4–9:9; TT (Howard) 1001:3–1004:3, 1122:17–22.
372
JX825.
373
JX577.0065; TT (Weld) 1716:12–15.
374
TT (Atkins) 2680:13–20.

63
IDT. Therefore, IDT cannot be deemed to have been on contractual notice of

Straight Path’s intention to seek indemnification for the FCC Straight Path Inquiry.

iii. Consent

My finding that Straight Path failed to fulfill Section 6.07’s notice

requirement effectively moots the need to evaluate the parties’ consent arguments.

This is because the consent requirement is predicated on IDT’s acknowledgement of

liability, which itself requires notice.375 However, for the sake of completeness, I

briefly address the consent arguments here, which would independently negate the

Indemnification Claim.

Plaintiff’s principal argument on consent is that IDT impliedly consented to

indemnification.376 Per Plaintiff, because “[t]he S&DA does not proscribe any

formal requirements for the indemnifying party’s consent to a settlement,” Howard’s

knowledge of and lack of objection to Straight Path’s settlement with the FCC is

375
JX107.0021–22.
376
PL PTOB 114–17. Plaintiff also contends that IDT “relinquished any consent right” by denying
that it had any indemnity obligations relating to the Consent Decree. Id. at 113–14. This argument
is based on a strained reading of Section 6.07, which deems the indemnitor to acknowledge liability
if it doesn’t respond to the indemnitee’s notice within 30 days. JX107.0021. Plaintiff takes this
to mean that, by not responding, the indemnitor waives its consent right. PL PTAB 86–87.
However, Section 6.07 deems the unresponsive indemnitor to have “acknowledged. . . liability[,]”
which is precisely the phrase used when describing the scenario in which the consent right arises.
JX107.0021–22. Thus, it is clear that the parties intended that an unresponsive indemnitor could
be deemed to have acknowledged liability but retain its consent right when it came to subsequent
settlements. In any event, I have found contractual notice lacking here, and only “such notice”
triggers IDT’s obligation to “acknowledge” the obligation to indemnify.

64
sufficient to constitute consent.377 In further support of this argument, Plaintiff

points to Straight Path and IDT’s allegedly overlapping legal teams that coordinated

the response to the FCC.378 At most, this evidence indicates that IDT had knowledge

of Straight Path’s response to the FCC inquiry; it does not indicate that IDT was

aware that Straight Path would seek indemnification or that IDT was consenting to

indemnifying Straight Path. This argument fails for the same reasons as the

Plaintiff’s contentions around notice.

Alternatively, Plaintiff argues that IDT waived its right to consent to any

settlement Straight Path reached in resolving the FCC Straight Path Inquiry.379 In

asserting this argument, Plaintiff is trying to have her cake and eat it too. Plaintiff

has asked that this Court eliminate the requirement in Section 6.07 that Straight

Path’s notice be in writing because the notice was implied, while also asking that

this Court to find that IDT waived its consent right for not strictly adhering to the

S&DA’s requirement that IDT respond in writing within 30 days of receiving

377
PL PTOB 114–16. Plaintiff asserts that Howard’s alleged willingness to help Straight Path
finance any penalty assessed by the FCC as further evidence of IDT consenting to indemnify
Straight Path. PL PTAB 84, 92. While Howard is IDT’s controlling stockholder, Howard lacks
the authority to unilaterally consent to indemnifying Straight Path. TT (Ash) 825:24–826:22
(explaining that indemnifying Straight Path qualified as a related-party transaction and would
therefore require independent board approval by IDT).
378
See PL PTOB 115–16 (pointing out that (i) Cyrulnik reviewed the draft Consent Decree while
simultaneously representing both Straight Path and IDT and (ii) Cyrulnik and Schwell attended
the Straight Path board members where the negotiations with the FCC were discussed and the
Consent Decree was ultimately approved, as evidence that IDT had impliedly consented); PL
PTAB 90.
379
Id. at 113–14; PL PTAB 86–89.

65
notice.380 Under Plaintiff’s reading of the S&DA, if IDT did not acknowledge

liability, IDT would waive its right to consent, but Straight Path could still seek

indemnification from IDT for any settlement, even a settlement reached without

IDT’s receipt of written notice.381 Plaintiff further argues that IDT’s alleged failure

to acknowledge liability meant “that IDT disclaimed indemnity and thereby

relinquished any consent right.”382

Despite Plaintiff’s best efforts to force IDT into strict compliance with the

S&DA’s requirements while simultaneously holding Straight Path to a lesser

standard, I find Plaintiff’s interpretation of the S&DA untenable. It is only Straight

Path’s written notice that can trigger IDT’s concomitant responding obligation, but

IDT never received a writing that met S&DA’s requirements. Here, there could be

no waiver of IDT’s consent right and, as discussed supra in Section II.B.2.b.ii., the

argument that IDT would sit on its consent rights while Straight Path settled the FCC

Straight Path Inquiry for an unknown amount that was inherently connected with the

sale of Straight Path’s licenses, which quickly skyrocketed to a record sale premium,

is unfounded.

My decision not to defer to Plaintiff’s interpretation of Section 6.07 is further

supported by the record, which I find is replete with evidence that Straight Path was

380
JX0107.0021–22.
381
PL PTOB 113.
382
Id. at 114.

66
impatient to resolve the FCC inquiry by entering the Consent Decree, at the expense

of running afoul of Section 6.07 in the S&DA. For instance, Weld, Straight Path’s

director, agreed it was “preferable to get a clean bill of health from the FCC for its

licenses before it was going to entertain serious discussions with anyone about

buying the company.”383 Additionally, Todd, another Straight Path director,

expressed “the idea was, we needed to get this resolved as quickly as we could,

because any buyer is going to be hesitant to buy something that’s flawed.”384

Zeidman, yet another Straight Path director, declared “. . . if they had revoked all our

licenses, there would have been nothing to transfer to an AT&T or anybody else.

So[,] I think it was sort of mandatory that we resolve the issue.” 385 Finally, Breau,

Straight Path’s General Counsel, stated Straight Path was “very focused on resolving

the FCC’s inquiry.”386

Further, I find that the record also demonstrates that Straight Path deliberately

avoided the formalities of Section 6.07, by failing to provide IDT with adequate

notice as required by the S&DA. For example, Davidi, Straight Path’s CEO and a

director, asserted that Straight Path considered involving IDT in the FCC

negotiations, but Straight Path eventually determined “it would be likely fatal to our

383
TT (Weld) 1716:16–1717:12.
384
TT (Todd) 1212:5–1213:2.
385
TT (Zeidman) 1513:3–6.
386
TT (Breau) 2370:19–21.

67
objective of achieving resolution with the FCC to invite IDT to participate; and so[,]

we did not.”387 Zeidman also expressed that Straight Path did not seek IDT’s consent

for the FCC settlement because Straight Path “felt that it was an independent

decision by Straight Path, and we had no reason to get consent of anyone – of anyone

other than the board, if you will, of Straight Path.”388 Further, Frank Lamancusa,

Straight Path’s outside counsel, stated he did not “have any recollection that. . . [IDT

was]. . . aware of the settlement discussion.”389

In short, Straight Path failed to provide IDT with written notice pursuant to

the S&DA. While IDT was well aware of the FCC’s inquiry into Straight Path, it

was unaware that Straight Path intended to seek indemnification. IDT was not on

notice and, therefore, was not given the opportunity to exercise its contractual right

to take over the defense of the inquiry nor allowed to meaningfully participate in the

negotiations with the FCC. Even after Straight Path negotiated a settlement with the

FCC, I find, Straight Path failed to provide IDT the option of approving the terms of

the settlement because it was not in Straight Path’s interest to do so. Straight Path

much preferred to allow the “golden chicken” (to use Shmuel’s memorable phrase)

that was the sales auction to keep laying, instead of allowing IDT the ability to

assume the defense of claim or change the terms of the settlement, interfering with

387
TT (Davidi) 120:12–22.
388
TT (Zeidman) 1525:24-1527:6.
389
TT (Lamancua) 478:10–14.

68
the ovulatory process. Allowing IDT to have a say in the FCC Straight Path Inquiry

risked delaying or harming the highly lucrative sales process. This was a reasonable

decision on the part of Straight Path, and paid off handsomely for its stockholders,

but it is inconsistent with indemnification.

Straight Path’s failure to comply with the notice and consent requirements of

Section 6.07 of the S&DA fatally undermines the Indemnification Claim. Without

proper notice or consent, there was no viable claim for the Special Committee to

pursue or preserve. Because the Indemnification Claim was not viable, it had no

economic value. In other words, had the Special Committee successfully placed the

claim in trust for Straight Path’s stockholders, that asset would have had no value.

Based on the post-trial record, the $10 million Defendants paid was therefore not

unfair.

c. Contribution under Section 6.03

Plaintiff contends that Section 6.03 of the S&DA provides an equitable means

of bypassing the notice and consent defects discussed above.390 Section 6.03

provides:

In circumstances in which the indemnity agreements provided for in
Sections 6.01 and 6.02 are unavailable or insufficient, for any reason,
to hold harmless an Indemnified Party in respect of any Indemnifiable
Losses arising thereunder, each Indemnifying Party, in order to provide
for just and equitable contribution, shall contribute to the amount paid
or payable by such Indemnified Party as a result of such Indemnifiable

390
PL PTOB 117–19; PL PTAB 94–95.

69
 Losses, in proportion to the relative fault of the Indemnifying Party or
Parties on the one hand and the Indemnified Party or Parties on the other
in connection with the statements or omissions or alleged statements or
omissions that resulted in such Indemnifiable Losses, as well as any
other relevant equitable considerations. The relative fault of the parties
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the alleged
omission to state a material fact relates to information supplied by SPCI
or IDT, the Parties’ relative intents, knowledge, access to information
and opportunity to correct or prevent such statement or omission, and
any other equitable considerations appropriate in the circumstances.391

Even assuming Plaintiff is correct in reading this provision as an equitable backstop,

I find that equity does not support Plaintiff’s claims.

Plaintiff seeks to force contribution from IDT for the penalties Straight Path

paid under the Consent Decree based on the parties’ relative fault. However, even

assuming the FCC investigation of Straight Path was attributable to pre-spin-off

violations by IDT, it would be inequitable to pin the liability on IDT stockholders.

Straight Path rushed into the Consent Decree out of self-interest.392 It did so without

providing IDT with the contractually mandated notice that it would be seeking

indemnity for the penalties under that settlement.393 This interfered with IDT’s

exercise of its contractual right to protect its interests by withholding its consent for

a settlement from which Straight Path enjoyed the benefits, while foisting the

391
JX107.0019.
392
See JX243; JX249.0002 (pressing the FCC toward an early resolution); TT (Davidi) 131:22–
132:13; TT (Todd) 1367:7–15; TT (Zeidman) 1462:19–1463:18.
393
Again, excluding Davidi’s February 2016 email, which predated the FCC investigation.
Compare JX161.0001, with JX199.0002 (FCC letter of inquiry dated September 20, 2016).

70
liabilities onto IDT. That is, it would be inequitable to allow Straight Path, through

Plaintiff, to breach its contractual obligations in bypassing the S&DA’s notice and

consent requirements, to put in place a contingent settlement amount, so that the

indemnification asset grew in concert with increasing value of the company sale.

This would saddle IDT with liabilities that Straight Path willingly incurred, that grew

as the windfall of the sale grew. This was all upside to Straight Path, and all

downside to IDT.

The underlying equities do not support a transfer payment from IDT to

Straight Path’s former stockholders. Straight Path was a vessel intended to allow

monetization of the IP Assets. The Spectrum Licenses were included in the spin-off

for tax reasons. They were not considered to be particularly valuable. That

changed—to Straight Path’s great benefit—with a change in law and technology.

Straight Path’s settlement with the FCC allowed the sale of these assets for an eye-

popping price, and as the auction value grew, so did the value of an indemnification

claim, if viable. Accordingly, Plaintiff seeks damages that far exceed IDT’s ability

to pay or its liquidation value. These are not considerations if the question is one of

contract. But to the extent that the question is one of equity, bankrupting IDT in

light of the windfall to Plaintiff is not supported. Plaintiff’s contribution arguments

fail.

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 3. Unified Analysis and Damages

I have found that, based on the record at trial, the Indemnification Claim was

not viable, and the price paid to release the claim was not unfair, because if the asset

had been held in trust for the minority, it would be valueless. That does not end my

analysis. The question is one of entire fairness, and what the stockholders could

have achieved, absent the iniquities. Below, I examine what a reasonable sale

process for a release of the Indemnification Claim would have achieved, absent the

controller imposing an unfair process. That value is greater than zero, because it

involves the value of the claim, given its uncertainty, in a negotiation over its release

at the time of the transaction. “[T]his court has held that a fair price ‘does not

ameliorate a process that was beyond unfair.’”394 “Both aspects of the entire fairness

test — fair dealing and fair price — must be satisfied.”395 In order to determine

whether the settlement of the Indemnification Claim was entirely fair, I analyze

whether Howard’s flagrant process violations caused IDT to pay less than “the value

that the stockholders would have received if the defendants had followed a

reasonable process to obtain the best transaction reasonably available[.]”396 This

assessment provides an opportunity to evaluate the transaction holistically and

394
In re Tesla Motors, Inc. S’holder Litig., 2022 WL 1237185, at *32 (Del. Ch. Apr. 27, 2022),
aff'd, 298 A.3d 667 (Del. 2023) (quoting In re Nine Sys. Corp. S'holders Litig., 2014 WL 4383127,
at *1 (Del. Ch. Sept. 4, 2014)).
395
In re Tesla Motors, Inc. S’holder Litig., 298 A.3d at 715.
396
Goldstein v. Denner, 2022 WL 1797224, at *3 (Del. Ch. June 2, 2022).

72
“eliminate the ability of the defendants to profit from their breaches of the duty of

loyalty.”397

The facts of record demonstrate that Straight Path had a genuine interest in

settling the Indemnification Claim in order to provide the Spectrum Licenses with

clear title ahead of a sale.398 Similarly, even in an alternate reality in which Howard

had adhered to a reasonable process, IDT’s interest in settling the Indemnification

Claim would have remained. The Special Committee, recognizing the frictions that

the Indemnification Claim brought to the sale process,399 was open to the possibility

of settling the Indemnification Claim for a fair price.400 Accordingly, I assess the

reasonable value of an arms-length settlement, negotiated on March 29, 2017.401

397
See In re Dole Food Co., Inc. S’holder Litig., 2015 WL 5052214, at *2.
398
TT (Todd) 1224:10–14.
399
TT (Todd) 1380:19–1381:16; TT (Weld) 1835:16–1836:2, 1836:12–21, 1994:17–21, 2004:7–
15.
400
TT (Fortinsky) 2244:6–17.
401
Plaintiff invites me to evaluate the fair value of the Indemnification Claim as of the date the
Verizon merger was announced. PL PTAB 106. As support, she cites only to Bomarko. Id. (citing
Bomarko, Inc. v. Int'l Telecharge, Inc., 794 A.2d 1161, 1189 (Del. Ch. 1999), aff'd, 766 A.2d 437
(Del. 2000)). But Bomarko does not advocate for such adjustments. Indeed, then-Vice Chancellor
Lamb warns against such “rank speculation” in precisely the passage Plaintiff cites. Id. at 1189
n.14. Accordingly, I find the best solution available is to evaluate the fair value as of the date of
the original settlement. This is consistent with Delaware courts’ approach to evaluating fair price
in the merger context. See Cede & Co. v. Technicolor, Inc., 542 A.2d 1182, 1186–87 (Del. 1988)
(discussing how the evaluation of fair price is appropriately conducted as of the day of the
transaction in question, including all relevant information then available). Importantly, in this
counterfactual, I need to evaluate how arms-length parties would have valued the claim. I find
that the highest, but as yet unconsummated and unsecured, offer at the time of the negotiation
would have informed a willing arms-length buyer and seller as to the value of the Indemnification
Claim.

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 a. The Framework402

I begin my analysis by calculating the facial value of the Indemnification

Claim, assuming its viability, based on the highest bid as of the date of the

settlement. I then adjust that figure downward to account for the expense Straight

Path would incur litigating the claim against IDT, yielding a baseline value. Taking

this baseline, I apply further discounts to account for the claim-dispositive risks

associated with the parties’ contentions around whether: (i) the claim is a SPCI

Liability, (ii) the liability is attributable to pre- or post-spin-off actions, (iii) notice

and consent was fulfilled, and (iv) the proposed trust structure was viable. This

yields a risk-adjusted value that would have been apparent to reasonable parties as

of March 29, 2017, that I then compare with the lowest estimate of the amount paid,

$10 million.

b. The Unadjusted Value of the Indemnification Claim

A viable Indemnification Claim against IDT for the penalties paid under the

Consent Decree has three components: the $15 million upfront cash penalty, the 196

forfeited licenses, and the 20% of sale proceeds payable to the FCC.403 It is

402
While in some respects the methodology I use to assess the reasonable settlement value of the
Indemnification Claim mirrors that used by Professor Hamermesh in his expert report, I do not
rely on that report, its analysis, or its conclusions. This approach is broadly similar to that used to
value a litigation asset in Bomarko, in which then Vice Chancellor Lamb discounted the claim
based on his assessment of the probability of success before subtracting the reasonable costs of
prosecuting the claim. Bomarko, 794 A.2d at 1189–90.
403
JX316.

74
undisputed that the highest bid as of March 29, 2017, was $800 million.404 To

determine the value of the forfeited licenses, I draw on the expert report, largely

unrebutted, of Plaintiff’s valuation expert, J. Armand Musey. 405 After making

adjustments for license geography and overlap,406 Mr. Musey determined that that

the forfeited licenses accounted for 14.8% of the value of the total portfolio.407

Applying this to the highest prevailing bid of March 29, 2017, yields an unadjusted

forfeited license value of $118.4 million. The same manipulation using the 20%

payable to the FCC results in $160 million.

Adding up the three components, I find that a viable Indemnification Claim

had an unadjusted value of $293.4 million as of March 29, 2017.

c. Cost of Litigation

The first adjustment I make to this number is for the projected expense that

Straight Path would incur by prosecuting the Indemnification Claim through to

recovery. Defendants suggest an adjustment of $30 million,408 based on the amount

the Special Committee projected it would need to fund the litigation trust.409 Plaintiff

404
PTO ¶ 151.
405
JX732.
406
Id.; TT (Musey) 2983:6–7.
407
See PL PTOB 95 (converting Mr. Musey’s dollar figure conclusion into a percentage of the
portfolio value).
408
DF PTOB 165.
409
See, e.g., JX433 (outlining the litigation trust structure for bidders, including its proposed
funding amounts and sources).

75
suggests a flat 15% adjustment consistent with this Court’s decision in Bomarko.410

Because the Special Committee did not discuss hiring a plaintiff’s firm to pursue the

Indemnification Claim on contingency411—the main scenario in which a flat

percentage adjustment makes sense—I find that Defendants’ suggested adjustment

of $30 million is consistent with what the Special Committee reasonably would have

assumed at the time of the settlement.

Thus, the baseline value of a viable Indemnification Claim was $263.4 million

after incorporating the estimated cost of litigation but before adjusting for litigation

risk.

d. Necessary Adjustments

As discussed in Section II.B.2, Straight Path’s prosecution of the

Indemnification Claim faced numerous claim-dispositive hurdles to collection. As

Plaintiff notes, Bomarko “is the most analogous authority” when it comes to valuing

a litigation asset.412 There, the Court applied a 20% discount to the value of the

claim based on its “assessment of the probability of success on the merits[,]” which

were “unusually strong[.]”413 While I adopt Bomarko’s intuitive approach, I cannot

410
PL PTAB 106; Bomarko, 794 A.2d at 1189–90. It appears that the Bomarko Court estimated
that 15% yielded a figure that was appropriate to the facts and circumstances of the claim in that
case, rather than assuming contingent representation. Id.
411
TT (Fortinksy) 2112:24–2113:12.
412
PL PTAB 106.
413
Bomarko, 794 A.2d at 1189.

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do as the Plaintiff asks and import that decision’s adjustments wholesale.414 Instead,

in order to assess the Indemnification Claim’s probability of success on the merits,

I calculate an overall discount based on the aggregate probability that the claim could

survive all four of the dispositive hurdles it faced. Although I have determined, on

a trial record, that the Indemnification Claim—if preserved—would not have value,

here I base the assessment of value in light of the risk of non-viability, as it would

have appeared based on the information available to the Special Committee and its

counsel—and its IDT counterparties—as of March 29, 2017.

i. SPCI Liability under Subpart (ii) – 50%

The first hurdle to prosecution of the Indemnification Claim is whether the

penalties under the Consent Decree are carved out from indemnification as SPCI

Liabilities. Specifically, the language of subpart (ii) of the SPCI Liabilities

definition creates ambiguity as to whether liabilities traceable to pre-spin-off activity

are allocated to Straight Path or IDT.415 The Special Committee was aware of this

ambiguity prior to settlement and understood that it was detrimental to the

Indemnification Claim.416 Resolving this ambiguity, the Special Committee could

414
See PL PTAB 106 (seeking to apply Bomarko’s methodology to utilize litigation discounts in
valuing the Indemnification Claim).
415
JX107.0009. I decline to address the impact of subpart (iv), given my finding that the language
is unambiguous. Straight Path II, 2022 WL 484420, at *11. In any event, its exclusion does not
change the result of this analysis.
416
See, e.g., TT (Todd) 1230:6–9 (acknowledging that he thought the language was ambiguous
from the first read), 1231:8–1232:2 (describing Weld’s concern about the language); TT (Weld)

77
anticipate, with the necessity of developing a trial record of the drafters’ intent,417

creating real uncertainty as to which interpretation would prevail. Accordingly, I

find that the Special Committee could have reasonably assigned Plaintiff’s

interpretation of subpart (ii) a 50% probability of success on the merits.

ii. Attributable to Post-Spin-Off Actions – 80%

Assuming a favorable ruling on subpart (ii), Straight Path would have next

needed to show that the penalties under the Consent Decree were attributable to pre-

spin-off violations. The Special Committee believed that the penalties related to pre-

spin-off conduct.418 Documentation around the Consent Decree supports this belief,

making mention of buildout issues associated with substantial service

demonstrations,419 which occurred pre-spin-off. However, the Special Committee

would also need to balance this belief against the possibility that Straight Path’s

conduct, including both its response to the FiberTower allegations and lack of post-

spin-off remediation,420 played a role in the FCC’s investigation. Accordingly, I find

1729:10–1731:23 (describing how the language of subpart (ii) “undercuts” the Indemnification
Claim, leading Weld to believe the language had potentially been altered). Given that the language
of subpart (ii) dates back to the first draft of the S&DA, I need not address the alteration theory
further. See JX92.0010 (using the same language, including the drafting errors).
417
Indeed, I denied summary judgment as to subpart (ii) for this very reason. Straight Path II,
2022 WL 484420, at *11.
418
See TT (Todd) 1278:20–1280:3, 1360:1–10; TT (Weld) 1929:8–17.
419
JX316.0002.
420
See, e.g., TT (Weld) 1871:10–18 (describing Straight Path’s response as “a bit fast”); TT
(Zeidman) 1505:21–1506:13 (admitting that Straight Path was not necessarily in full compliance
with FCC requirements).

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that, as of March 29, 2017, the Special Committee could have reasonably assigned

an 80% probability to vindication of its belief that the FCC investigation related to

IDT’s pre-spin-off conduct.

iii. Notice & Consent Fulfilled – 20%

Though it was aware of the notice and consent requirements under Section

6.07 of the S&DA,421 the Special Committee operated under the assumption that it

did not need to provide written notice to or obtain explicit consent from IDT prior

to settling with the FCC.422 Instead, the independent directors believed that IDT’s

actual notice of the settlement was sufficient.423 Given the plain text of Section 6.07,

I find that this belief was unreasonable. Thus, given the lack of written notice and

explicit consent, Plaintiff could only advance a theory that an indemnification claim

could be brought against IDT post-settlement without material prejudice, based only

on implied consent.424 The flaws in this theory were clear at the summary judgment

stage, when it only narrowly avoided dismissal.425 I therefore find, upon review of

Section 6.07, that a reasonable Special Committee could only assume a 20%

probability that the notice and consent requirements had been met.

421
TT (Zeidman) 1525:24–1527:6.
422
TT (Todd) 1220:13–1221:16, 1223:12–24; TT (Zeidman) 1526:17–1527:6, 1529:24–1530:13
(testifying that the Special Committee did not believe it needed IDT’s consent to settle with the
FCC or to pursue an indemnification claim).
423
TT (Todd) 1220:13–1221:16.
424
PL PTOB 112–17.
425
Straight Path II, 2022 WL 484420, at *11.

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 iv. Trust Viable – 40%

Finally, I turn to the viability of the trust that would preserve the

Indemnification Claim. As a threshold matter, the Special Committee believed, on

the advice of counsel, that the structure of the trust was feasible.426 I therefore apply

only a minimal 10% discount representing the uncertainty of litigation around

contractual permissibility and the possibility that Defendants’ anti-assignment

arguments might succeed.427

The proposed structure involved Straight Path—which would be owned by

the acquiror, not the former stockholders—nominally retaining the Indemnification

Claim in a trust post-merger.428 The buyer would fund the trust from the merger

proceeds,429 but would otherwise be walled off from all decision-making around the

Indemnification Claim.430 Any proceeds from the litigation would flow to the former

Straight Path stockholders as beneficiaries.431

The problem with this proposed structure is that it would likely require the

acquirer to be involved in litigation around the Indemnification Claim, with little or

no upside. Straight Path’s new owner would not have control over the litigation or

426
TT (Fortinsky) 2286:15–2287:6, 2293:15–18.
427
Accord Bomarko, 794 A.2d at 1189 (applying a 20% discount to an “unusually strong” claim,
based on the same factors).
428
JX394.0001.
429
Id.
430
TT (Todd) 1380:19–1381:16; TT (Zeidman) 1539:8–17.
431
JX432.0016–23; TT (Fortinsky) 2105:10–2106:6.

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partake in any recovery but would nonetheless be on the hook for any counterclaims

brought by IDT.432 Though these risks could perhaps be mitigated through further

contractual allocations,433 I find that the Special Committee should reasonably have

assumed probability of at least 50% that the acquirer would not be interested in

preserving the Indemnification Claim. Reducing this 50% by the earlier 10%

discount results in a total combined risk adjustment of 40% for trust viability.434

e. Comparison with Price Paid

Combining these various adjustments for claim-dispositive risks yields an

overall risk adjustment to 3.2% of the potential value of the claim.435 Multiplying

this by the baseline of $263.4 million results in a risk-adjusted value for a viable

Indemnification Claim of $8.4288 million as of March 29, 2017.436 A settlement in

that vicinity would have been a reasonable result of a fair, uncontrolled negotiation

of a release of the Indemnification Claim. Plaintiff and the class therefore suffered

no damages as a result of the coerced settlement at $10 million.

432
TT (Fortinsky) 2119:19–2121:12.
433
Id. at 2119:8–22.
434
Again, this analysis attempts to look at the hypothetical negotiating position of an Independent
Committee unconstrained by an unfair process. Because I found, supra, that the Indemnification
Claim would not have had value had it been preserved, due to failure of Straight Path to comply
with its duties of notice and consent, I did not reach the question of actual viability in light of
assignability and the infelicities of any attempt to have a buyer act as a trustee for the stockholders
regarding the claim. It is worth noting the I find the latter a formidable barrier to viability,
however.
435
(0.5 * 0.8 * 0.2 * 0.4 = 0.032).
436
Because this figure falls below the $10 million paid, I decline to address the issue of IDT’s
ability to pay.

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 f. Unified Fairness Conclusion

Howard used his controller position to bully the Special Committee into

release of the Indemnification Claim at a price he unilaterally determined to be

proper. Absent that bullying, the Committee would have retained the Claim as a

stockholder asset or engaged in a fair negotiation for a release. Instead, it was forced

to capitulate to Howard’s demands. While the price was fair, the transaction was

tainted by Howard’s flagrant breach of duty, and was not entirely fair.

C. Plaintiff’s Claims

Despite the lack of damages, I find that Howard breached his duty of loyalty

to the minority stockholders through his coercion of the Special Committee.437

However, the aiding and abetting claim against IDT requires a showing of

damages.438 Accordingly, this secondary claim fails.

III. CONCLUSION

Consistent with the above, I find Howard Jonas liable to pay the class nominal

damages. Plaintiff’s remaining claims are dismissed. The parties should inform me

as to the form of nominal damages should take and submit a suitable form of order.

437
See Beard Rsch., Inc. v. Kates, 8 A.3d 573, 601 (Del. Ch. 2010), aff’d sub nom. Asdi, Inc. v.
Beard Rsch., Inc., 11 A.3d 749 (Del. 2010) (“A claim for breach of fiduciary duty requires proof
of two elements: (1) that a fiduciary duty existed and (2) that the defendant breached that duty”).
438
See RBC Cap. Markets, LLC v. Jervis, 129 A.3d 816, 861 (Del. 2015) (reciting the elements of
aiding and abetting breach of fiduciary duty, including damages).

82