Catalyst Advisors Investors Global Inc. v. Catalyst Advisors, L.P.

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

CATALYST ADVISORS )
INVESTORS GLOBAL INC. and )
CHRISTOS RICHARDS, )
)
Plaintiffs, )
)
v. ) C.A. No. N20C-06-080 AML CCLD
)
CATALYST ADVISORS, L.P., )
)
Defendant. )

Submitted: December 7, 2023
Decided: March 28, 2024

POST-TRIAL MEMORANDUM OPINION

Neil R. Lapinski, Esquire, Phillip A. Giordano, Esquire, Madeline R. Silverman,
Esquire, GORDON, FOURNARIS & MAMMARELLA, P.A., Wilmington,
Delaware, Attorneys for Plaintiffs Catalyst Advisors Investors Global Inc. and
Christos Richards.

Lisa Zwally Brown, Esquire, Samuel L. Moultrie, Esquire, GREENBERG
TRAURIG, LLP, Wilmington, Delaware, Richard Angowski, Jr., Esquire, Sean
Rose, Esquire, OLENDER FELDMAN LLP, Summit, New Jersey, Attorneys for
Defendant Catalyst Advisors, L.P.

LEGROW, Justice1

1
Sitting as a Judge of the Superior Court of the State of Delaware by special designation of the
Chief Justice of the Supreme Court of Delaware pursuant to Del. Const. Art. IV § 13(2).
 Two former partners in a limited partnership that operates as a boutique

recruiting firm challenge the partnership’s calculation of their share of the profits in

the year that they left the partnership and the price they are entitled to receive for

their partnership units. Both calculations are based on bespoke contractual language

contained in the limited partnership agreement and the partners’ profit-sharing

policy.

There are two primary issues in this case. First, do certain changes to the

profit-sharing policy adopted in the weeks leading up to the plaintiffs’ dissociation

from the partnership apply to the plaintiffs, who argue they left the partnership

before the changes were fully implemented? As to this issue, the plaintiffs’ attempt

to avoid the policy modifications would require the Court to eschew the partnership

agreement’s unambiguous language in favor of extrinsic evidence. That result

contradicts fundamental, uncontroverted legal principles, and the plaintiffs therefore

failed to carry their burden regarding this aspect of their breach of contract claim.

The second primary issue requires the Court to determine the partnership’s

Enterprise Valuation, a contractually defined term used to calculate the buyout price

for partnership units. The partnership had commissioned just such a valuation seven

months before the plaintiffs’ exit, and all the partners accepted and relied on that

valuation to determine a new partner’s buy-in. A reasonable course might have been

for the parties to rely on that valuation to determine the plaintiffs’ buyout price.
But—perhaps predictably given the level of animosity between the parties—that is

not the course that either side selected. Instead, each side obtained a valuation that

failed to follow the contractual definition of Enterprise Valuation, resulting in

unreliable figures that artificially inflated or depressed the partnership’s value.

Because neither litigation valuation follows the contractually agreed methodology,

the Court instead adopts the valuation the parties obtained before the plaintiffs’

departure.

For the reasons that follow, the Court finds that the partnership properly

calculated the plaintiffs’ share of the 2019 profits but erred in calculating the

plaintiffs’ buyout price.

I. FACTUAL BACKGROUND2

The Court conducted a five-day bench trial. During trial, the Court heard from

and considered the testimony of the following witnesses: Simon Bartholomew,

Christos Richards, John Archer, Francis P. Egan, Randall Martin Paulikens, Alyson

Archer, and Tom Theurkauf. The parties also submitted 100 joint trial exhibits.3

2
This post-trial decision cites: C.A. No. N20C-06-080 AML CCLD docket entries (by “D.I.”
number); trial exhibits (by “JX” number); the trial transcript (“Trial Tr.” by day “I–V”); deposition
transcripts lodged by the parties (by witness last name); stipulated facts set forth in the parties’
Joint Pre-Trial Order (“PTO”), D.I. No. 88; and the parties’ Post-Trial Opening Briefs (“Opening
Br.”) and Post-Trial Answering Briefs (“Answering Br.”).
3
To the extent the parties raised objections in the joint exhibit list that were not raised at trial or
in post-trial briefing, those objections are deemed waived.

2
These are the facts as the Court finds them after weighing the testimony and exhibits

admitted during trial.4

A. The Parties and Relevant Non-Parties

Defendant Catalyst Advisors, L.P. (“Catalyst” or the “Company”) is a

Delaware limited partnership with its principal place of business in New York, NY.5

Plaintiff Catalyst Advisors Investors Global, Inc. (“CAIG”) is a Delaware

corporation.6 Plaintiff Christos Richards (“Richards” and collectively with CAIG,

“Plaintiffs”) is an individual and a resident of California.7 Richards was a limited

partner of Catalyst from 2014 to October 4, 2019.8

CAIG’s sole shareholder is a United Kingdom company, Bartholomew

Advisors Ltd. (“Bartholomew Advisors”).9 Simon Bartholomew, who resides in

4
In reaching its verdict, the Court has examined all exhibits submitted and has considered the
testimony of all witnesses, both direct and cross, live and by deposition. The Court has also
considered the applicable Delaware case law that has defined the legal precepts applicable to the
claims and defenses the parties have raised. The Court has applied the Delaware Rules of Evidence
to the testimony and exhibits and only relied on evidence that would be allowed under those
rules—consistent with the Court’s knowledge of those rules and the specific rulings that may have
been made and articulated both pre-trial and during the trial proceedings. And, of course, the Court
has considered each party’s respective arguments on the weight to be accorded the testimony and
evidence.
5
PTO § II(A)(1).
6
PTO § II(A)(4).
7
PTO § II(A)(2).
8
PTO § II(A)(3).
9
PTO § II(A)(5).

3
London, England, is the majority shareholder of Bartholomew Advisors and holds

100% of its voting rights.10

B. Catalyst’s formation and growth

Catalyst is an executive recruiting and assessment firm specializing in

recruiting senior executives and board members to companies in the

biopharmaceutical and medical technology industries.11 John Archer founded the

business as Catalyst Advisors, LLC in 2008, and the company employed three

people at its inception.12 In 2014, Catalyst Advisors, LLC converted to Catalyst (the

limited partnership).13 Catalyst’s limited partners included John Archer, Alyson

Archer (John Archer’s spouse), Stephen Williams, Richards, and CAIG (represented

by Bartholomew).14 A substantial portion of the partners’ compensation came from

the annual distribution of the company’s profits. The company’s End-of-Year Bonus

Policy defined how that compensation was calculated and apportioned among the

partners.

10
PTO § II(A)(6).
11
Trial Tr. II at 181.
12
Id. at 182–84.
13
Id. at 188.
14
Trial Tr. I at 20, 165–66; Trial Tr. II at 188.

4
C. Catalyst’s Limited Partners Execute the LPA in 2018

In 2018, Catalyst added two limited partners: Arnaldo De Lisio and Sara

Hager.15 Upon their admission, a new limited partnership agreement (the “LPA”)

was executed with a January 1, 2018 effective date.16 The LPA governed the

relationship between the limited partners and Catalyst and is the operative document

in this litigation.17

Before the partners signed the LPA, Alyson Archer created and circulated a

PowerPoint presentation that purported to explain the agreement’s key terms (the

“LPA Slide Deck”).18 At trial and in post-trial briefing, Plaintiffs relied on a bullet

point on one slide, which referred to a resigning partner being “grandfathered” into

the End-of-Year Bonus Policy that was in place at the time of the partner’s departure.

The parties dispute the relevance of this slide deck, which was admitted into

evidence at trial.19

D. Gilbert Forest Joins Catalyst in 2019

In 2019, Gilbert Forest joined Catalyst, buying in as a limited partner.20

Contemporaneously with Forest’s admission into the partnership, Alyson Archer

15
Trial Tr. I at 21, 166.
16
Id. at 21–22, 167; JX 1.
17
JX 1 § 3.1.
18
JX 46; Trial Tr. I at 23–24, 169–70.
19
See JX 46.
20
Trial Tr. I at 35, 50, 166.

5
presented a slide deck entitled “Overview for Gilbert Forest,” which outlined

founding equity partner compensation.21 The slide deck made no mention of

“grandfathering.”22

E. Valuation Reports

Before the partners executed the LPA, Sun Business Valuations, LLC (“Sun”)

conducted multiple valuation analyses for Catalyst.23 In January and February 2018,

after the LPA went into effect, Sun prepared another series of valuation analyses.24

These reports were created to value the Company at the time it was formed and to

account for the investment capital contributions of two partners, Sarah Hagar and

Arnaldo De Lisio.25 In May 2019, the summer before CAIG and Richards’

dissociations, Sun prepared a further valuation analysis which had an effective date

of December 31, 2018.26 The May 2019 Sun Reports were prepared to update the

Company’s value in connection with Gilbert Forest’s buy-in.27 After CAIG and

Richards dissociated, Sun prepared another series of valuations in August and

21
The slide deck is dated February 12, 2018, but facts suggest it was presented in 2019 based on
when Gilbert joined the partnership. JX 68; Trial Tr. I at 50–51.
22
JX 68.
23
JX 11; JX 12.
24
JX 16; JX 17; JX 19.
25
See Trial Tr. I at 34–35; Trial Tr. III at 14–15, 24, 268.
26
The Report dated May 16, 2019, was a draft. JX 21. The Report dated May 25, 2019, was the
final version. JX 22.
27
See Trial Tr. I at 35; Trial Tr. III at 14–15, 198, 206, 269–71; Trial Tr. IV at 176.

6
September 2020.28 These valuations purported to value Catalyst as of the date of

Plaintiffs’ respective dissociations.

In addition to those valuations, Wipfli LLP, under the direction of Plaintiffs’

expert, Francis Egan, conducted a fair market value business valuation of Catalyst

after CAIG and Richards dissociated (the “Egan Report”).29 The Egan Report is

dated September 1, 2021, but purported to establish Catalyst’s Enterprise Valuation

using the Adjusted Book Value Method as of October 31, 2019.30

F. Key Provisions in the LPA

The LPA contains several provisions relevant to the current litigation. The

LPA established an Operating Committee (“Committee”) that managed Catalyst

alongside its Managing Partner, John Archer.31 The only members of the Committee

28
See JX 26 (calculating the buyout price for Richards on October 4, 2019 at $1,480,798.47 and
the buyout price for Bartholomew on October 21, 2019 at $776,613.91); JX 27 (calculating the
buyout price for Richards on October 4, 2019 at $1,607,068 and the buyout price for Bartholomew
on October 21, 2019 at $925,946). The September 10, 2020 Sun Report calculated the Enterprise
Value of Catalyst as of October 4, 2019 at $871,016 and a Buyout Price of $1,745,170 for Richards
and as of October 21, 2019 an Enterprise Value of $817,811 and a Buyout Price of $833,767 for
Bartholomew. JX 28. The September 11, 2020 Sun Report calculated the same Enterprise Value
and Buyout Prices as the September 10 Report. JX 29. The September 15, 2020 Sun Report
calculated the same Enterprise Value of Catalyst as the two prior reports but had a Buyout Price
of $1,745,151 for Richards and $833,779 for Bartholomew. JX 30. At trial, Theurkauf did not
coherently explain the differences between these valuations, stating instead that the valuations
resulted from an “iterative process” by which he would work with an attorney and an accountant
when completing the report. Trial Tr. IV at 188–89. See also Trial Tr. III at 271 (explaining which
reports reflect the “final report”).
29
JX 61.
30
Id.
31
JX 1 § 4.2(a).

7
were Catalyst’s limited partners, and, as such, there was no distinction between a

“partner meeting” and a “Committee meeting.”32

The LPA defines when a partner dissociates and establishes the formula to

determine a partner’s buyout price following dissociation.33 Section 8.1 “embodies

the [] intentions” when a partner dissociates.34 Section 8.2 describes the ways that a

partner may dissociate, stating:

A Partner shall cease to be a Partner upon the earliest of any of the
following events (each, a “Dissociation”, with the Partner that is the
subject of the Dissociation begin referred to as the “Dissociating
Partner”): (1) Disability, (2) death, (3) resignation/retirement, (4)
termination for Cause, (5) termination for Other Cause; or (6)
termination without Cause. . . .35

Once a partner dissociates, a buyout of the partner’s units is not automatic.

Section 8.4 explains the purchase of partnership units following a partner’s

dissociation.36 Section 8.4 states: “[t]he Company shall have the ongoing right to

purchase the Dissociated Partner’s Units as set forth in this Section 8.4.” 37 In the

instance of dissociation upon resignation, as occurred in the instant case, Section

32
See JX 1 § 4.2(a)(1); Trial Tr. II at 237.
33
See JX 1 § 8 et seq.
34
JX 1 § 8.1.
35
JX 1 § 8.2.
36
JX 1 § 8.4.
37
Id.

8
8.4(a) allows, but does not require, Catalyst or its remaining partners to purchase the

dissociated partner’s units at the “Buyout Price.”38

Section 8.4(e) specifies the process by which a buyout is initiated:

The Company, or the Partners, as applicable, shall exercise its right to
purchase the Dissociating Partner’s Units by written notice to the
Dissociating Partner specifying: (i) the Buyout Price, and any
adjustments thereto; (ii) the date of closing on the purchase; and (iii)
any other conditions applicable to such purchase as are permitted
herein. Upon receipt of such notice the Dissociating Partner shall have
the absolute obligation to sell such Units of the Company, or the
Partners, as applicable.39

Section 8.4(f) goes on to describe the “Notice of Exercise” and states that:

The Company shall have the first right to exercise the right to purchase
the Dissociating Partner’s Units, which shall be triggered by any
Partner making written demand upon the Company to do so. If the
Company fails to provide written notice of its exercise of such right
within thirty (30) days of the written demand by a Partner, then the
Partners shall have the right to exercise the right to purchase the
Dissociating Partner’s Units on a pro-rata basis.40

The LPA also establishes a formula for the buyout price of a partner’s units.

Section 8.2 states that “[t]he purchase price for a Partner’s equity following a

Dissociation will be determined in accordance with Section 8.5.”41 Section 8.5(a)

states that “[t]he Buyout Price shall be calculated in accordance with Exhibit C,

38
JX 1 § 8.4(a).
39
JX 1 § 8.4(e).
40
JX 1 § 8.4(f).
41
JX 1 § 8.2.

9
subject to adjustment as set forth in Section 8.4 and this Section 8.5.” 42 Exhibit C

contains the following Buyout Price Formula:

The Buyout Price of a Partner’s Units shall be calculated by multiplying
the Enterprise Valuation by the Partner’s Participation Percentage.

* “Enterprise Valuation” is determined as set forth in the
Agreement.

* “Partner’s Participation Percentage” is calculated by
taking the average of the Partner’s Profit Distribution
Percentage over the immediately prior 5 years (or such
shorter time if the dissociating Partner has dissociated
prior to the 5th anniversary of becoming a Partner at the
Company) from the date of dissociation.

* “Profit Distribution Percentage” means the percentage of
Partner Distributable Income (as set forth in the Policy)
that is distributed to a Partner pursuant to the End of Year
Bonus Policy (“Policy”).43

The LPA defines “End-of-Year Bonus Policy” as “the policy adopted by the

Company that determines the allocation and distribution of Profit to the Partners.”44

The End-of-Year Bonus Policy is used to calculate each limited partner’s Partner

Distributable Income (“PDI”), which is part of the Profit Distribution Percentage

that is used to calculate the Partner’s Participation Percentage (“PPP”).45

42
JX 1 § 8.5(a).
43
JX 1, Ex. C.
44
JX 1 § 2.29.
45
PTO § II(B)(15).

10
 The other part of the buyout equation, Catalyst’s Enterprise Valuation, also is

defined in the LPA. The LPA states that “Enterprise Valuation”:

means the appraised value of the Company, as illustrated by and in
accordance with the methodology set forth in the Sun Valuation report
on file with the Company, as may be updated from time to time, or as
may be superseded by an appraisal report following the same
methodology issued by another appraisal Company. 46

G. The August 2019 Committee Meeting

In 2019, as certain partners left the partnership and new partners joined, the

partnership began discussing changes to its compensation structure. According to

Catalyst’s position in this litigation, the changes were at least partially driven by a

concern that certain partners, including Plaintiffs, were operating in a manner that

maximized their individual compensation at the expense of Catalyst’s profitability.

On August 8, 2019, Catalyst’s limited partners47 and its counsel, Kurt Olender

of OlenderFeldman LLP, attended a Committee/Partner meeting.48 At the meeting,

the partners received and discussed a PowerPoint presentation addressing certain

compensation issues.49 It was Alyson Archer’s practice to edit a PowerPoint during

partner meetings to capture discussions that took place; these edits were highlighted

46
JX 1 § 2.30.
47
Catalyst’s limited partners and the Committee consisted of: Christos Richards, CAIG
(Bartholomew), John Archer, Alyson Archer, Stephen Williams, Gilbert Forest, and Arnaldo De
Lisio. PTO § II(B)(14).
48
PTO § II(C)(31); Trial Tr. I at 87, 94, 201.
49
JX 34; Trial Tr. I at 85–86, 201–02; Trial Tr. IV at 77.

11
in green and circulated to the partners after the meeting.50 Guided by the

PowerPoint, the partners discussed a series of changes to the End-of-Year Bonus

Policy. Relevant to the current dispute, the partners discussed three changes to the

End-of-Year Bonus Policy that were intended to address: (1) long-in-the-tooth

(“LIT”) searches, (2) difficult searches, and (3) unpaid invoices. According to the

LPA, changes to the End-of-Year Bonus Policy required approval from a majority

of the Committee including the Managing Partner.51

1. The LIT Modification

The proposed LIT Modification would take a deduction from a recruiting

partner’s origination credit (an input for the PDI calculation) for LIT searches.52 LIT

search projects were search projects open past the guaranteed limit in Catalyst’s

proposal letter with its clients, and the deduction would apply to all searches open

as of August 8, 2019, as well as any new searches started after that date.53 The

50
See e.g., JX 34; Trial Tr. I at 85–87, 203–04; Trial Tr. IV at 5, 83–84.
51
JX 1 § 4.3(f) (“Decisions Requiring Approval of a Majority of the Committee including the
Managing Partner. The Company shall not take any of the following actions without the majority
approval of the Committee which shall include the approval of the Managing Partner: . . . (f)
Changing the End-of-Year Bonus Policy.”).
52
See JX 34 at CATALYST003308; Defendant’s Opening Br. at 14.
53
JX 34 at CATALYST003308; Trial Tr. I at 90–95, 203–06; Trial Tr. II at 227.

12
Committee passed the LIT Modification by a 4-3 vote.54 Richards and Bartholomew

voted against the LIT modification.55

The partners agreed to a two-step implementation process for the

modification.56 In step one, a subcommittee—excluding the originating partner—

would identify searches that would be considered LIT.57 In step two, a final decision

would be reached regarding how that LIT search should be addressed (e.g.,

cancelled, charge-back to the originating partner, or permitted to continue).58

2. Difficult Searches

“Difficult Searches” were defined as: “broken searches” (a search that did not

succeed previously with a different recruiting firm); a search project with a retainer

or final fee under Catalyst’s minimum requirements; a search project open for more

than a year; or a search project with a company that had particular issues that would

make the search challenging.59 The proposed Difficult Search Modification would

re-allocate a portion of the recruiting partner’s profit share (their total PDI) from the

54
JX 34 at CATALYST003308 (“No= Simon, Christos, Arnaldo. Yes= Steve, Gilbert, John,
Alyson.”).
55
Id.
56
Id.
57
Id.; Trial Tr. I at 90–95, 203–11; Trial Tr. II at 227; Trial Tr. IV at 5–15, 153–55, 164–66.
58
JX 34 at CATALYST003308; Trial Tr. I at 90–95, 203–11; Trial Tr. II at 227; Trial Tr. IV at
5–15, 153–55, 164–66.
59
JX 34 at CATALYST003314; Trial Tr. I at 97–99, 210; Trial Tr. II at 45–46, 242–44; Trial Tr.
IV at 98–101.

13
originating partner to non-partners who were assigned to work on “Difficult

Searches.”60 The Committee passed the Difficult Search Modification by a 7-0

vote.61

3. Unpaid Invoice Deduction

The proposed Unpaid Invoice Deduction effectively required Partners to

guarantee payment of their client’s invoices.62 The proposal called for a deduction

from the originating partner’s PDI for unpaid invoices.63 The Committee passed the

Unpaid Invoice Deduction by a 7-0 vote.64

H. September Meetings

The Partners convened another meeting on September 3, 2019, to discuss:

“YTD Overview of Firm Performance, Review of Decisions from [August] Meeting,

[and] Searches to Be Reviewed.”65 A subcommittee was formed and met on

September 6, 2019, to review changes to the Operating Agreement, discuss

60
JX 34 at CATALYST003315; Trial Tr. I at 97–99, 210; Trial Tr. II at 45–46, 242–44; Trial Tr.
IV at 98–101.
61
JX 34 at CATALYST003314–15.
62
JX 34 at CATALYST003310.
63
Id.
64
Id.; Trial Tr. II at 232–35.
65
JX 35 at CATALYST000151; Trial Tr. II at 249–52; Trial Tr. IV at 103–07.

14
proposals, and review searches.66 The Committee met again on September 16, 2019,

and reviewed the subcommittee’s work.67

I. The Plaintiffs’ dissociations and the October 2019 Committee Meeting

The parties stipulated before trial that Richards dissociated from Catalyst on

October 4, 2019.68

The Committee held another meeting on October 21, 2019.69 At this meeting,

the Committee discussed implementing a policy requiring recruiting partners to

achieve a certain minimum origination credit in order to participate in the Partner

Compensation Plan.70 The Committee discussed a proposal that would measure a

partner’s origination metrics over a three-year period. If a recruiting partner failed

to meet the minimum origination criteria, he or she only would be compensated

based on their individual performance (the “Minimum Origination Requirement”).71

The parties dispute what occurred during the vote on this revision to the End-of-Year

Bonus Policy. Having received testimony and reviewed the evidence, the Court

concludes that Bartholomew—who was participating remotely—disconnected from

66
JX 36 at CATALYST000110; Trial Tr. II at 256–58; Trial Tr. IV at 108–11.
67
JX 37 at CATALYST000139–43; Trial Tr. I at 102–04; 223Trial Tr. II at 258–59; Trial Tr. IV
at 114–15.
68
PTO § II(A)(3); Trial Tr. I at 174, 193; JX 79.
69
JX 43.
70
Id. at CATALYST000972.
71
Id. at CATALYST000976.

15
the meeting in the middle of the vote.72 The record does not show by a

preponderance of the evidence that Bartholomew announced that CAIG was

dissociating from the partnership “effective immediately.” Even if he made such a

pronouncement, however, it was not an effective means of dissociating before the

policy modification was approved, as explained in the analysis section below.

On October 28, 2019, Bartholomew, on behalf of CAIG, sent the Partners a

letter requesting that Catalyst purchase CAIG’s partnership units.73 The letter stated

that CAIG resigned on October 21, 2019.74 Bartholomew sought a buyout under

Section 8.5 of the LPA.

Three days later, on October 31, 2019, Richards sent a letter requesting that

the partners or Catalyst purchase his units under Section 8.5 of the LPA.75 The letter

noted that this “formal request” followed his October 4, 2019 resignation.76

In two letters dated April 30, 2020, Catalyst provided proposals to Richards77

and Bartholomew (on behalf of CAIG)78 to buy out their ownership units in Catalyst

and pay 2019 PDI due under the LPA. Plaintiffs rejected Catalyst’s buyout because

72
Trial Tr. I at 113; Trial Tr. II at 263, 270.
73
Trial Tr. I at 28; JX 78.
74
JX 78.
75
Trial Tr. I at 174; JX 79.
76
JX 79.
77
JX 33.
78
JX 42.

16
they disagreed with the price calculations.79 In May 2020, Catalyst responded to

both Richards80 and Bartholomew81 with another letter. Each letter outlined the

recipient’s respective PDI for fiscal year 2019 according to Catalyst.82 Following

receipt of these letters and amidst ongoing disagreements as to the buyout price, the

Plaintiffs initiated this action.

J. CAIG and Richards File This Action

CAIG and Richards filed their complaint on June 5, 2020, asserting one count

for breach of contract.83 On September 22, 2020, Plaintiffs filed for an Entry of

Default Judgment against Catalyst under to Superior Court Rule 55(b)(1).84 On

October 1, 2020 Plaintiffs dismissed all claims against Catalyst Advisors, LLC under

Superior Court Rule 41(a)(1)(I) because the complaint incorrectly identified that

entity as the general partner of Catalyst Advisors, L.P.85

On October 6, 2020 Catalyst moved to vacate the default judgment under

Superior Court Civil Rule 60(b).86 Plaintiffs responded to Catalyst’s motion on

79
Trial Tr. I at 29, 175.
80
JX 69.
81
JX 70.
82
JX 69; JX 70; Trial Tr. I at 28–31.
83
D.I. No. 1.
84
D.I. No.7.
85
D.I. No. 8.
86
D.I. No. 10.

17
October 23, 2020.87 On October 29, 2020, the Court heard argument,88 granted the

motion with amendments, and issued an order vacating the default judgment.89

Catalyst filed a Motion for Partial Summary Judgment on October 29, 2021,

which the Court denied on February 10, 2022.90 The Court held a five-day virtual

bench trial from December 12, 2022 through December 15, 2022, with a final day

of trial on January 27, 2023.91 Plaintiffs and Defendant filed their respective Post-

Trial Opening Briefs on June 27, 2023,92 and their respective Post-Trial Answering

Briefs on August 1, 2023.93 The Court heard post-trial oral argument on December

7, 2023.94

II. PARTIES’ CONTENTIONS

The parties dispute what amounts are owed to Richards and CAIG as a result

of their respective dissociations, including the 2019 compensation and the Buyout

Price. Those disputes generally fall into two categories: (1) the proper calculation

of Partner Distributable Income (“PDI”) and Partner’s Participation Percentage

87
D.I. No. 13.
88
D.I. No. 18.
89
D.I. No. 19.
90
PTO § XI(13); D.I. Nos. 63, 78.
91
D.I. Nos. 115–18.
92
D.I. No. 106, 107.
93
D.I. Nos. 111, 112.
94
D.I. No. 121.

18
(“PPP”), and (2) the meaning and calculation of Enterprise Valuation. The parties

also dispute whether CAIG had a positive capital account balance and whether

Plaintiffs are entitled to an award of attorneys’ fees.

A. The Parties’ Contentions Regarding PDI and PPP

Plaintiffs raise three issues related to calculating PDI and PPP. First, Plaintiffs

argue that there is no evidence that the policy changes adopted during the August 8,

2019 or October 21, 2019 Committee meetings were finalized and implemented,

and, as such, they should not be included in the End-of-Year Bonus Policy.95

Second, and relatedly, Plaintiffs argue that they are “grandfathered” into the End-of-

Year Bonus Policy that existed before any modifications, such that any changes

approved but not fully implemented at the time of Plaintiffs’ dissociation did not

apply to them.96 Third, Plaintiffs contend that in calculating PPP, the phrase

“immediately prior 5 years” does not include the year the partner dissociated.97

Plaintiffs therefore argue that their PPP should be calculated based on their

respective Partner Profit Distribution Percentage in 2014-2018.98

Catalyst responds that the policy changes considered during the August 8,

2019 and October 21, 2019 Committee meetings were approved in accordance with

95
Plaintiffs’ Opening Br. at 56–57.
96
Id. at 50–51.
97
PTO § II (B)(25)(a).
98
Id.

19
the LPA.99 Catalyst asserts that the LPA does not require any additional steps to

modify the Policy, and those changes therefore should be reflected in the End-of-

Year Bonus Policy and PDI calculations even if the policy modifications were not

fully “implemented” at the time the Plaintiffs dissociated. In response to Plaintiffs’

“grandfathering” argument, Catalyst argues that the term “grandfather” is not

located in the LPA and only appears on one slide in the LPA Slide Deck,100 which

was circulated before the LPA’s execution and was not integrated into the LPA.101

Finally, Catalyst states that the phrase “immediately prior 5 years” is inclusive of the

year when the Partner dissociates, and Plaintiffs’ PPP therefore should be calculated

based on the years 2015 through 2019.102

B. The Parties’ Contentions Regarding Enterprise Valuation

As to Enterprise Valuation, the parties vigorously dispute the meaning of

Enterprise Valuation within the LPA and which of the proffered valuation reports

fits that definition. Unfortunately, neither party’s position on this issue engages with

the contractual language or the factual record in a satisfactory way. The parties

disagree as to which experts the Court should rely on, which report should be used

99
Defendant’s Answering Br. at 10–11, 15, 18–19.
100
JX 68 at CATALYST000031.
101
Defendant’s Answering Br. at 13–14.
102
PTO § II (B)(25)(b).

20
when calculating Enterprise Valuation, and what report was “on file” with the

Company for purposes of Plaintiffs’ claim.

Plaintiffs contend that under the LPA’s definition of Enterprise Value, the

report “on file” at the time of their dissociation is the May 16, 2019 Sun Valuation

Report.103 Catalyst argues that the report “on file” is the September 15, 2020 Sun

Valuation Report (the “2020 Report”).104

Plaintiffs further argue that the Court should rely on the Egan Report when

calculating Enterprise Valuation for purposes of the breach of contract claim.105

Catalyst counters that Plaintiffs fail to identify support in the evidentiary record or

under the LPA for their proposed Enterprise Valuation and reiterate that Enterprise

Valuation should be calculated using the 2020 Report that Catalyst offered at trial.106

Plaintiffs argue that the Court should not consider Randall Paulikens’ expert

report and testimony with respect to any calculation of Enterprise Valuation because

he was a rebuttal expert.107 Catalyst argues that Paulikens offered admissible

evidence that opined on the issues to which Plaintiffs’ expert (Egan) testified.

103
Plaintiffs’ Opening Br. at 18, 27.
104
Defendant’s Answering Br. at 20.
105
Plaintiffs’ Opening Br. at 26.
106
Defendant’s Answering Br. at 20; JX 30.
107
Plaintiffs’ Opening Br. at 41–47; PTO § XI(19).

21
Catalyst contends that Paulikens did not seek to provide any expert opinion as to

Catalyst’s Enterprise Valuation.108

C. The Parties’ Contentions Regarding Positive Capital Account Balance

Plaintiffs argue that Catalyst failed to credit CAIG with the balance in his

capital account, arguing the account contained $79,181 based on a statement to that

effect in the 2020 Report.109 Catalyst, on the other hand, asserts that CAIG’s 2019

Schedule K-1 confirms that CAIG did not possess a positive balance in its capital

account upon its dissociation and that tax documents are the most reliable indicator

of CAIG’s account balance.110 Further, Catalyst argues that Plaintiffs fail to meet

their burden to establish that CAIG possessed a positive balance in his capital

account.111

D. The Parties’ Contentions Regarding Fee Shifting

Finally, Plaintiffs contend that Catalyst engaged in bad faith litigation that

warrants fee shifting.112 In Plaintiffs’ view, the logic that permits fee shifting when

a party “knowingly assert[s] frivolous claims” should extend to the assertion of

frivolous defenses, which is how Plaintiffs categorize Catalyst’s defense of the

108
Defendant’s Answering Br. at 28–31; PTO § XI(20).
109
Plaintiffs’ Opening Br. at 19–20; Plaintiffs’ Answering Br. at 2; JX 30 at 18.
110
Defendant’s Answering Br. at 32–33.
111
Id.
112
Plaintiffs’ Opening Br. at 37–40.

22
claims in this case.113 Catalyst disputes that it engaged in bad faith litigation, arguing

that normal litigation strategy and opposing Plaintiffs’ claim does not amount to

conduct that rises to the level of bad faith.114

III. ANALYSIS

The parties’ dispute focuses on the 2019 compensation and Buyout Price to

which CAIG and Richards are entitled. Their disputes challenge—and the Court’s

analysis addresses—the correct inputs for the Buyout Price Formula established in

Exhibit C to the LPA. A visual graphic of this formula provides that:

𝐵𝑢𝑦𝑜𝑢𝑡 𝑃𝑟𝑖𝑐𝑒 = 𝐸𝑛𝑡𝑒𝑟𝑝𝑟𝑖𝑠𝑒 𝑉𝑎𝑙𝑢𝑎𝑡𝑖𝑜𝑛 𝑥 𝑃𝑎𝑟𝑡𝑛𝑒𝑟 𝑃𝑎𝑟𝑡𝑖𝑐𝑖𝑝𝑎𝑡𝑖𝑜𝑛 𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒

𝑠𝑢𝑚 𝑜𝑓 𝑃𝑃𝐷𝑃115 𝑓𝑟𝑜𝑚 𝑙𝑎𝑠𝑡 5 𝑦𝑒𝑎𝑟𝑠
𝑃𝑎𝑟𝑡𝑛𝑒𝑟 𝑃𝑎𝑟𝑡𝑖𝑐𝑖𝑝𝑎𝑡𝑖𝑜𝑛 𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 =
5

𝑃𝑃𝐷𝑃 = % 𝑜𝑓 𝑃𝐷𝐼116 𝑑𝑖𝑠𝑡𝑟𝑖𝑏𝑢𝑡𝑒𝑑 𝑝𝑢𝑟𝑠𝑢𝑎𝑛𝑡 𝑡𝑜 𝑡ℎ𝑒 𝐸𝑛𝑑 − 𝑜𝑓
− 𝑌𝑒𝑎𝑟 𝐵𝑜𝑛𝑢𝑠 𝑃𝑜𝑙𝑖𝑐𝑦

A. Partner’s Profit Distribution Percentage over the immediately prior 5
years

The parties disagree about the share of Catalyst’s 2019 profits to which CAIG

and Richards are entitled as well as the proper method for calculating PPP.117 To

reiterate, PPP is an input to the Buyout Price Formula and “is calculated by taking

113
Johnston v. Arbitrium (Cayman Is.) Handels AG, 720 A.2d 542, 546 (Del. 1998).
114
Defendant’s Opening Br. at 38.
115
Partner’s Profit Distribution Percentage.
116
Partner Distributable Income.
117
PTO §II(B)(9).

23
the average of the Partner’s Profit Distribution Percentage over the immediately

prior 5 years (or such shorter time if the dissociating Partner has dissociated prior to

the 5th anniversary of becoming a Partner at the Company) from the date of

dissociation.”118 The “‘Profit Distribution Percentage’ means the percentage of PDI

(as set forth in the Policy) that is distributed to a Partner pursuant to the End-of-Year

Bonus Policy (‘Policy’).”119

For purposes of this formula, the parties disagree as to the calculation of

Plaintiffs’ 2019 PDI and the meaning of the phrase “the immediately prior 5 years”

in the definition of PPP. Although Catalyst alternatively argues that it “is entitled to

a directed verdict on the calculations of 2019 PDI because Plaintiffs failed to provide

competent testimony establishing the amount they claim entitlement to[,]” the Court

does not reach that issue because, as explained below, the Court does not agree with

Plaintiffs that Catalyst erred in calculating 2019 PDI.120

1. Catalyst properly calculated Plaintiffs’ 2019 PDI with the changes
to the Policy adopted at the August 9, 2019 and October 21, 2019
Committee meetings.

CAIG and Richards assert claims for their “share of Profits in the year of

Dissociation as of the date of Dissociation,” and they contend that the calculation of

118
JX 1, Ex. C.
119
Id.
120
Defendant’s Opening Br. at 30.

24
those profits, i.e., PDI, should not reflect the Policy modifications the partners

adopted in August and October 2019.121 Plaintiffs make this argument without any

apparent regard for the contractual confines of their partnership agreement. The

LPA places very few limits on how Catalyst’s partners may adopt and amend the

Policy. Specifically, the LPA provides that “‘End-of-Year Bonus Policy’ means

the policy adopted by the Company that determines the allocation and distribution

of Profit to the Partners.”122 The End-of-Year Bonus Policy can be changed by a

vote of a simple majority of the Committee, provided that the Managing Partner is

within the majority.123 The LPA provides: “Decisions Requiring Approval of a

Majority of the Committee including the Managing Partner. The Company shall

not take any of the following actions without the majority approval of the Committee

which shall include the approval of the Managing Partner: . . . (f) Changing the End-

of-Year Bonus Policy.”124

With respect to the End-of-Year Bonus Policy, Plaintiffs argue that there is no

evidence that the policy changes voted on during the August 8, 2019 or October 21,

2019 Committee meetings were finalized and implemented before their respective

121
JX 1 §8.5(a).
122
JX 1 § 2.29.
123
JX 1 § 4.3(f).
124
Id.

25
dissociations.125 Catalyst contends that there is sufficient evidence to demonstrate

that the policy changes were adopted upon voting, which is all that the LPA

requires.126 In addition, Catalyst argues that the record shows that the partners

implemented the modifications in accordance with their agreed-upon procedure.127

a. The LIT and Difficult Search Modifications.128

Both the LIT and Difficult Search Modifications adopted by the Committee

in August 2019 had the potential to reduce a partner’s distributable income if the

partner consistently relied on less-profitable searches. The LIT Modification

reduced a recruiting partner’s origination credit (an input for the PDI calculation)

for LIT searches.129 The Difficult Search Modification reallocated to non-partners a

125
Plaintiffs’ Opening Br. at 56–57.
126
Defendant’s Opening Br. at 38–40.
127
Defendant’s Answering Br. at 12–13 (citing JX 34; JX 35; JX 36; JX 37; Trial Tr. II at 250,
256; Trial Tr. IV at 103–04, 108, 110, 114, 116, 121–26).
128
It is Plaintiffs’ burden to prove that the LIT and Difficult Search Modifications were not
applicable. See Plaintiffs’ Opening Br. at 54 (citing Tanyous v. Happy Child World, Inc., 2008
WL 2780357, at *1, *8 (Del. Ch. July 17, 2008) (“Because there is no signed writing detailing
exactly what was agreed to, the Court must ascertain the shared intent of the parties to determine
what, if any, changes were made to the End-of-Year Bonus Policy.”). Catalyst notes that Plaintiffs’
reliance on Tanyous is misplaced because the facts are distinguishable from the present case.
Catalyst asserts that “[h]ere, the Court has the benefit of the one plaintiff and two defendants’
testimony and Catalyst PowerPoints which confirm there were votes taken to modify the Policy[,]”
and as such there is no burden shifting. Defendant’s Answering Br. at 10 n.3. There is no factual
dispute as to the occurrence of the vote and the Court therefore holds that it is the Plaintiffs’ burden
to prove their claim.
129
See JX 34 at CATALYST003308; Defendant’s Opening Br. at 14.

26
portion of a recruiting partner’s profit share (their total PDI) for searches categorized

as “difficult.”130

Catalyst argues that the LIT Modification was an effort by Catalyst “to

incentivize more equitable conduct” and encourage partners to seek out projects that

would benefit all in the partnership.131 Catalyst notes that the LIT and Difficult

Search Modifications “resulted in multiple partners, not just Richards, receiving

deductions consistent with the modifications for search projects that met the

criteria.”132

Plaintiffs assert that the LIT Modification was a policy “meant to penalize Mr.

Richards.”133 Plaintiffs further contend that “the policy was never implemented

prior to Mr. Richard’s dissociation” because the “two-step process” was not

completed before he dissociated. Plaintiffs therefore argue that the LIT Modification

cannot be considered when calculating Richards’ and CAIG’s 2019 PDI.134

Similarly, Plaintiffs argue that “a subcommittee was never formed” as called for in

the notes added to the PowerPoint slide regarding the Difficult Search Modification.

130
JX 34 at CATALYST003315; Trial Tr. I at 97–99, 210; Trial Tr. II at 45–46, 242–44; Trial Tr.
IV at 98–101.
131
Defendant’s Answering Br. at 15.
132
Id.
133
Plaintiffs’ Opening Br. at 7.
134
Id. at 8 (“[A] subcommittee was never formed nor was a meeting held by September 7, 2019.
And prior to Richards’ dissociation, there was never a discussion among the partners as to what
percentage charge-back to allocate against the originator on LIT searches.”).

27
Accordingly, Plaintiffs maintain that the Difficult Search Modification was never

implemented and cannot be considered when calculating their PDI.135

Catalyst responds that the Committee passed both modifications at the August

8, 2019 Committee meeting in accordance with the LPA.136 Catalyst asserts that the

facts presented at trial demonstrate that “Catalyst (a) took a vote to modify the Policy

to implement the Difficult Search Modification and LIT Modification, (b)

implemented those Modifications immediately by forming a subcommittee which

met on September 6th and identified qualifying search projects which were discussed

over the next several Committee meetings.”137 Given these facts, Catalyst argues

that the LIT Modification and Difficult Search Modification were adopted on August

8, 2019, before Plaintiffs dissociated, and those modifications appropriately were

reflected in Catalyst’s calculation of Plaintiffs’ 2019 PDI.

The Court finds that both the LIT Modification and the Difficult Search

Modification were properly included in Plaintiffs’ 2019 PDI calculation. According

to the LPA, changes to the End-of-Year Bonus Policy required approval from a

majority of the Committee, including the Managing Partner.138 At the August 8,

135
Id. at 9.
136
Defendant’s Answering Br. at 11.
137
Id. at 12.
138
JX 1 § 4.3(f) (“Decisions Requiring Approval of a Majority of the Committee including
the Managing Partner. The Company shall not take any of the following actions without the
28
2019 Committee meeting, the Committee passed the LIT Modification by a 4-3 vote

and the Difficult Search Modification by a 7-0 vote.139 The Managing Partner voted

in favor of both modifications.140 No further steps were required under the LPA to

modify the Policy.

The fact that the policy changes could not be “implemented” immediately

does not preclude their application to Plaintiffs because the operative vote occurred

before they dissociated from the partnership. The LPA does not require

“implementation” for a change to the End-of-Year Bonus Policy to take effect, and

any such limitation would not be logical in the context of Catalyst’s business. The

record shows that Catalyst finalizes annual partner compensation under the Policy

after the calendar year closes.141 In that sense, Catalyst could never “implement” a

Policy modification before the end of the year. Nothing in the LPA, the Policy, or

the parties’ testimony suggests that a partner could avoid the effect of Policy

modifications by resigning at any time before the annual compensation was

finalized.

majority approval of the Committee which shall include the approval of the Managing Partner: . .
. (f) Changing the End-of-Year Bonus Policy.”).
139
JX 34 at CATALYST003308, CATALYST003314–15.
140
Id.
141
Trial Tr. IV at 135–36; JX 38.

29
 To the extent Plaintiffs rely on the implementation process agreed upon at the

August 2019 meeting as a prerequisite to the modifications becoming effective, the

record similarly does not support that position. At the August 2019 meeting, the

parties agreed to a method to identify LIT or difficult searches.142 There is nothing

in the record to suggest approval or effectiveness was contingent on that process or

that the partners could not later change the process by agreement. If the partners

deviated from that process, there is no record that Plaintiffs objected to that deviation

at the time. And, to the extent any purported deviation occurred after their

dissociation, Plaintiffs forfeited the opportunity to challenge the implementation by

dissociating before the process was complete. In any event, the record shows by a

preponderance of the evidence that the Committee took the agreed-upon steps

toward implementation.143

b. Unpaid Invoice Deduction.

The Unpaid Invoice Deduction ensured that partners guaranteed payment by

their clients.144 The policy introduced the following two changes:

[1] If a client fails to pay a retainer or final fee after one year, the
payment will be deducted from a Partner’s PDI (and credited once
client payment is received)
142
JX 34 at CATALYST003308, CATALYST003314–15; Trial Tr. I at 90–95, 203–11; Trial Tr.
II at 227; Trial Tr. IV at 5–15, 153–55, 164–66.
143
JX 34; JX 35 at CATALYST000176–79; JX 36 at CATALYST000126–29; JX 37 at
CATALYST 000139–43; Trial Tr. I at 94–102, 152–53, 204–05; Trial Tr. II at 92, 227–29, 256,
259–61, 291; Trial Tr. IV at 7–8, 14, 16–23, 61, 103–04, 108, 110, 114–117, 121–26.
144
JX 34 at CATALYST003310.

30
 [2] If a client fails to pay an expense for 6 months, the expense will be
allocated to a Partner’s [business development] account (and credited
once client payment is received).145

The Committee passed the Unpaid Invoice Deduction by a 7-0 vote.146

Plaintiffs nevertheless assert that the “partners discussed guaranteeing client

payments on a going-forward basis[]” and the policy had not been implemented

when Plaintiffs dissociated.147 Catalyst counters that all that was needed to pass the

Unpaid Invoice Deduction was a majority vote that included the Managing Partner,

and that voting requirement indisputably was met.148 As such, Catalyst contends

that the Unpaid Invoice Deduction was in effect upon Richards’ dissociation and a

$467,996.42 deduction therefore properly was taken from his PDI.149

Like his argument regarding the LIT and Difficult Search Modifications,

Richards’ interpretation of the record and the LPA is not persuasive. The LPA does

not require implementation for the policy modification to be in effect. There is no

dispute that the modification was approved by a vote consistent with the LPA.150

Richards’ trial testimony regarding prospective application finds no support in the

145
Id.
146
Id.; Trial Tr. II at 232–35.
147
Plaintiffs’ Opening Br. at 10.
148
Defendant’s Answering Br. at 15.
149
Id. at 16; JX 38; JX 40.
150
JX 34 at CATALYST003310; Trial Tr. II at 232–35.

31
record and was unconvincing. Richards’ contention that he could have paid the

unpaid invoices himself to avoid at least a portion of this penalty misses the point;

Richards voluntarily dissociated and in so doing surrendered the opportunity to blunt

the modifications’ effect.151 The Court finds that the Unpaid Invoice Deduction was

in effect when Richards and CAIG dissociated, and Catalyst properly included those

deductions in calculating Plaintiffs’ 2019 PDI.

c. Minimum Origination Requirement

At the October 21, 2019 Committee meeting, the Committee approved the

adoption of a minimum origination requirement for recruiting partners to participate

in the Partner Compensation Plan.152 The Minimum Origination Requirement set

certain metrics to measure origination over a three-year period.153 If a recruiting

partner failed to meet the minimum origination criteria, they would be compensated

based only on their individual performance.154

Plaintiffs argue that the “proposed changes to the End-of-Year Bonus Policy

discussed at the October 21, 2019 meeting related to underperforming partners

[were] never actually implemented. . . and [were] contrived to force CAIG to

151
Richards also testified that some of the invoices in question were actually paid or not pursued
in good faith by Catalyst. This convoluted testimony was neither convincing nor adequately
supported by Catalyst’s contemporaneous records.
152
JX 43 at CATALYST000972.
153
JX 43.
154
Id.

32
resign.”155 Plaintiffs contend that this is evidenced by the fact that Catalyst did not

apply the modification to Alyson Archer.156

Catalyst argues that CAIG’s reliance on Alyson Archer’s compensation is

unavailing because—as the firm’s sole non-recruiting partner—she always was

compensated differently under the Policy.157 Further, Catalyst asserts that the

Plaintiffs fail to “identify a cognizable basis under the LPA or in the evidentiary

record to show that the Minimum Origination Requirement is invalid or inapplicable

. . . and the Court must conclude that CAIG’s 2019 PDI is $430,332.”158

To resolve this aspect of the parties’ dispute, the Court must determine

whether CAIG’s mid-meeting verbal dissociation exempts it from the Minimum

Origination Requirement’s application. Neither party’s argument is compelling on

this issue, leaving the Court to consider the LPA without the benefit of the parties’

considered input.

The LPA’s plain language does not expressly state how a partner dissociates

or, relatedly, when such dissociation becomes effective. In the absence of specific

language creating a dissociation procedure, the Court considers Delaware’s Limited

Partnership Act and the LPA’s more general provisions. To begin, Delaware law

155
Plaintiffs’ Opening Br. at 55; Plaintiffs’ Answering Br. at 18–19.
156
Plaintiffs’ Opening Br. at 54–55; Plaintiffs’ Answering Br. at 18–19.
157
Defendant’s Opening Br. at 38–40; Defendant’s Answering Br. at 17–18.
158
Defendant’s Opening Br. at 38–40; Defendant’s Answering Br. at 19.

33
prohibits a limited partner from withdrawing from the partnership before dissolution

and winding up, except as provided in the partnership agreement.159 The LPA

plainly contemplates that Catalyst’s partners may dissociate, but it does not specify

how a partner may do so.160 The LPA does, however, require that all notices and

communications required or provided for by the LPA be in writing.161

Although the LPA does not expressly say so, a partner necessarily would need

to communicate his or her dissociation to the partnership. But under the LPA,

verbally announcing dissociation, as CAIG claims it did on the October 21, 2019

call, would not be a sufficient method of communication.162 CAIG’s dissociation

was not effective until it sent written notice, which occurred after the meeting and

the vote adopting the policy change.163 As such, the Minimum Origination

159
See also 8 Del. C. § 17-603 (“A limited partner may withdraw from a limited partnership only
at the time or upon the happening of events specified in the partnership agreement and in
accordance with the partnership agreement. Notwithstanding anything to the contrary under
applicable law, unless a partnership agreement provides otherwise, a limited partner may not
withdraw from a limited partnership prior to the dissolution and winding up of the limited
partnership. Notwithstanding anything to the contrary under applicable law, a partnership
agreement may provide that a partnership interest may not be assigned prior to the dissolution and
winding up of the limited partnership.”).
160
See JX 1 §§ 8.1, 8.2, 8.4, 5.3.
161
See JX 1 § 11.1 (“Notices. All notices, demands, and communications (each, a “Notice”)
required or provided for in this Agreement must be in writing.”).
162
Although CAIG did not prove by a preponderance of the evidence that it announced its
dissociation before terminating the call, the Court assumes this occurred for purposes of this
analysis.
163
JX 78.

34
Requirements were in effect before CAIG’s dissociation, and Catalyst properly

applied the requirement to CAIG’s 2019 PDI.

Finally, the Court finds unavailing Plaintiffs argument that the Minimum

Origination Requirement is invalid because Catalyst did not apply it to Alyson

Archer. Alyson Archer never originated or executed search projects for Catalyst

because that was not part of her job responsibilities. She served Catalyst in a

management capacity and was not eligible to receive performance-based

compensation as its other partners were.164 It logically follows that policy changes

related to search projects would not affect her compensation, and the absence of

application of those changes to her compensation is not evidence that the Minimum

Origination Requirement never took effect.

d. The LPA does not contemplate a partner being “grandfathered” into
any policies.

In an argument that is more or less derivative and duplicative of the arguments

addressed above, Plaintiffs further contend that they are “grandfathered” into the

End-of-Year Bonus Policy that was in effect before adoption of the LIT

Modification, the Difficult Search Modification, the Unpaid Invoice Deduction, and

the Minimum Origination Policy. 165 Plaintiffs seem to contend that the LPA is

ambiguous and that it reasonably can be read to provide that any changes to the

164
JX 38; JX 68; Trial Tr. II at 270.
165
Plaintiffs’ Opening Br. at 50–51.

35
Policy that were not fully implemented at the time of Plaintiffs’ dissociation did not

apply to them.166 In support of this theory, Plaintiffs point to extrinsic evidence in

the LPA Slide Deck.167 The slide Plaintiffs identify states that a majority of the

Committee is required to “[c]hang[e] the End-of-Year Bonus Policy (When a partner

leaves, they are grandfathered in to the plan that was in place as of the date of

dissociation)[.]”168 Further, Plaintiffs argue that “[b]ecause there is no signed

writing detailing exactly what was agreed to, the Court must ascertain the shared

intent of the parties to determine what, if any, changes were made to the End-of-

Year Bonus Policy.”169

Catalyst points out that the term “grandfather” is not located in the LPA and

only appears in the LPA Slide Deck.170 Catalyst contends that because the

PowerPoint “was circulated prior to the execution of a full[y] integrated document,

the LPA, the PowerPoint is irrelevant to Plaintiffs’ claims.”171

For all the reasons previously discussed, the Court disagrees with Plaintiffs’

interpretation of the record and the LPA. The Court can discern no ambiguity in the

relevant contractual language, and the Court may not look to extrinsic evidence to

166
Id.
167
Id. at 57 (citing JX 46).
168
JX 46 at CATALYST000031.
169
Plaintiffs’ Opening Br. at 54.
170
Defendant’s Answering Br. at 13.
171
Id. at 14.

36
find an ambiguity. The LPA expressly requires a Committee vote to approve

changes to the End-of-Year Bonus Policy.172 The LPA does not contain any other

requirements for those changes to become effective. As previously discussed,

because PDI could not be calculated until after the close of Catalyst’s fiscal year, no

policy change ever could be fully “implemented” until such time. If the partners

intended Policy changes to be effective only upon full implementation, they would

have expressly provided for that in the LPA. In the absence of such language, Policy

modifications became effective upon approval and properly applied to partners who

dissociated after approval.

The Court cannot revise contract terms after the fact, especially when the

parties are sophisticated and willingly negotiated and accepted the terms of the

LPA.173 Further, “[t]he parol evidence rule bars the admission of evidence extrinsic

172
JX 1 § 4.3(f) (“Decisions Requiring Approval of a Majority of the Committee including
the Managing Partner. The Company shall not take any of the following actions without the
majority approval of the Committee which shall include the approval of the Managing Partner: . .
. (f) Changing the End-of-Year Bonus Policy.”).
173
E.g., W. Willow-Bay Ct., LLC v. Robino-Bay Ct. Plaza, LLC, 2007 WL 3317551, at *9 (Del.
Ch. Nov. 2, 2007) (“The presumption that the parties are bound by the language of the agreement
they negotiated applies with even greater force when the parties are sophisticated entities that
have engaged in arms-length negotiations.”) (emphasis added), aff'd, 2009 WL 4154356, 985 A.2d
391 (Del. Nov. 24, 2009); NAMA Holdings, LLC v. World Mkt. Ctr. Venture, LLC, 948 A.2d 411,
419 (Del. Ch. 2007) (“Contractual interpretation operates under the assumption that the parties
never include superfluous verbiage in their agreement, and that each word should be given
meaning and effect by the court.”), aff'd, 2008 WL 571543, 945 A.2d 594 (Del. Mar. 4,
2008); DeLucca v. KKAT Mgmt., L.L.C., 2006 WL 224058, at *2 (Del. Ch. Jan. 23, 2006) (“[I]t is
not the job of a court to relieve sophisticated parties of the burdens of contracts they wish they
had drafted differently but in fact did not.”) (emphasis added); see also Lorillard Tobacco Co. v.
Am. Legacy Found., 903 A.2d 728, 740 (Del. 2006) (“A court must accept and apply the plain
37
to an unambiguous, integrated written contract for the purpose of varying or

contradicting the terms of that contract.”174 Nothing in Delaware law or the record

permits this Court to conclude that the “grandfathering” mentioned on the slide

overrides the LPA’s unambiguous language. Accordingly, the Court finds that the

End-of-Year Bonus Policy changes approved at the August 8, 2019 and October 21,

2019 meetings were effective upon approval by the Committee in compliance with

the requirements of the LPA.

2. For purposes of Plaintiffs’ PPP, “immediately prior 5 years”
comprises 2015-2019.

The parties’ final dispute regarding the PPP/PDI portion of the Buyout

Formula relates to the proper time frame used to set a partner’s PPP. Under the LPA,

the PPP “is calculated by taking the average of the Partner’s Profit Distribution

Percentage over the immediately prior 5 years (or such shorter time if the

dissociating Partner has dissociated prior to the 5th anniversary of becoming a Partner

meaning of an unambiguous term . . . in the contract language . . ., insofar as the parties would
have agreed ex ante.”).
174
Phillips v. Wilks, Lukoff & Bracegirdle, LLC, 2014 WL 4930693, at *3 (Del. Oct. 1, 2014), as
corrected (Oct. 7, 2014) (quoting Galantino v. Baffone, 46 A.3d 1076, 1081 (Del. 2012)); see
also Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997) (“If a
contract is unambiguous, extrinsic evidence may not be used to interpret the intent of the parties,
to vary the terms of the contract or to create an ambiguity.”); Restatement of Contracts (Second),
§ 213, cmt. (a) (“[The parol evidence rule] renders inoperative prior written agreements as well as
prior oral agreements.”).

38
at the Company) from the date of dissociation.”175 The parties disagree as to the

meaning of “the immediately prior 5 years.”

Plaintiffs contend that their PPP should be the average of their Partner’s Profit

Distribution Percentage for the years 2014 through 2018 and should not include the

year the partner dissociated because the year of dissociation typically would not

reflect a full year of a partner’s profit share. That calculation results in the following

values:176

CAIG
2014 12.27%
2015 5.94%
2016 10.57%
2017 8.74%
2018 5.87%
Average 8.68%

Richards
2014 35.39%
2015 40.99%
2016 33.05%
2017 33.44%
2018 33.38%
Average 35.25%

175
JX 1, Ex. C (emphasis added).
176
PTO § II (B)(25)(a).

39
 Catalyst, in contrast, argues that Plaintiffs’ PPP should be the average of their

Partner’s Profit Distribution Percentage for the years 2015 through 2019, including

the year the partner dissociated, resulting in the following values:177

CAIG
2015 5.94%
2016 10.57%
2017 8.74%
2018 5.87%
2019 3.83%
Average 6.99%

Richards
2015 40.99%
2016 33.05%
2017 33.44%
2018 33.38%
2019 10.90%
Average 30.35%

This Court finds that the plain meaning of “the immediately prior 5 years” is

the most recent five years of a partner’s Profit Distribution Percentage, which in this

case means 2015-2019. Limited partnership agreements are a type of contract that

courts construe “in accordance with their terms to give effect to the parties’ intent.

We give words their plain meaning unless it appears that the parties intended a

177
PTO § II (B)(25)(b).

40
special meaning.”178 Nothing in the text or structure of the LPA suggests that the

parties intended the phrase “the immediately prior 5 years” to have any special

meaning.

“Under well-settled case law, Delaware courts look to dictionaries for

assistance in determining the plain meaning of terms which are not defined in a

contract.”179 “Immediately” is given its usual meaning of “without interval of

time.”180 By its plain meaning, “immediately” encompasses the year that a partner

dissociates. To exclude the year of dissociation would permit an “interval of time”

inconsistent with the meaning of the adverb “immediately.”

Moreover, that interpretation is consistent with the Delaware courts’

preference to adopt “an interpretation that harmonizes the provisions in a contract as

opposed to one that creates an inconsistency or surplusage.”181 The LPA expressly

178
Norton v. K-Sea Transp. Partners L.P., 67 A.3d 354, 360 (Del. 2013) (citing In re Nantucket
Is. Assocs. Ltd. P'ship Unitholders Litig., 810 A.2d 351, 361 (Del. Ch. 2002); AT&T Corp. v.
Lillis, 953 A.2d 241, 252 (Del. 2008)).
179
Lorillard Tobacco, 903 A.2d at 738 (citing Northwestern National Ins. Co. v. Esmark, Inc., 672
A.2d 41, 44 (Del. 1996) (using AMERICAN HERITAGE DICTIONARY (1969) to define “under” as
“within the group or classification of” without further comment); Hibbert v. Hollywood Park,
Inc., 457 A.2d 339, 343 n.3 (Del. 1983) (using Webster's New International Dictionary (2d ed.
unabr.1951) to define “party” without further comment); The Cove on Herring Creek
Homeowners' Ass'n v. Riggs, 2005 WL 1252399, at *2 (Del. Ch. May 19, 2005) (applying
definition from WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY (1993) to unambiguous, but
disputed, language in a contract)).
180
Immediately, Merriam-Webster (2024) https://www.merriam-
webster.com/dictionary/immediately (Feb. 2, 2024).
181
GRT Inc. v. Marathon GTF Tech., Ltd., 2012 WL 2356489, at *4 (Del. Ch. June 12,
2012) (citing Eagle Indus., Inc., 702 A.2d at 1232).

41
permits PPP to be calculated based on a shorter time period if a partner dissociates

before the “5th anniversary of becoming a Partner.” 182 Although the parties included

this clarification, they did not specify that the shortened time period would include

only the years in which the dissociated partner served a complete year. In the

absence of any indication otherwise, the Court assumes that the parties intended to

give the word “immediately” its ordinary meaning.

Plaintiffs complain that this result unfairly reduces a partner’s historical profit

share if the partner dissociates before the end of Catalyst’s fiscal year.183 A few brief

responses suffice. First, the Court is charged with interpreting the contract’s plain

meaning, not with assessing the comparative fairness of the proffered interpretations.

Second, the unfairness about which Plaintiffs complain is less than apparent to the

Court. Under the LPA, a partner could choose when in the fiscal year to dissociate

and could weigh within that analysis the benefits of dissociating mid-year against

the downside of an incremental reduction to PPP. In contrast, Catalyst could not

prevent a partner from dissociating and likely would need to adjust its business and

compensation to accommodate that partner’s exit. Therefore, it is reasonable to

conclude that, in adopting the LPA, the partners intended to include within the

182
JX 1, Ex. C.
183
Plaintiffs’ Answering Br. at 32.

42
calculation of PPP the lower Partner’s Profit Distribution Percentage associated with

a partial year’s profit.

B. Enterprise Valuation

In addition to the parties’ disagreements about calculating PDI and PPP, the

parties also dispute the Buyout Formula’s other input: Enterprise Valuation. The

parties disagree as to the meaning of Enterprise Valuation and which of their experts’

calculations was proper under the LPA.

1. Neither party’s expert provided a reliable valuation.

Plaintiffs argue that Catalyst breached the LPA by improperly calculating

Plaintiffs’ buyout price based on a purported Enterprise Valuation that Plaintiffs

argue is inconsistent with the LPA.184 Plaintiffs assert that the Enterprise Valuation

for both Richards and CAIG should be $6,400,000 as set forth in the Egan Report.185

Catalyst argues that Plaintiffs fail to identify support in the evidentiary record

or under the LPA for their proposed Enterprise Valuation.186 Catalyst contends that

calculations for Enterprise Valuation should be based on the 2020 Report, which

184
Plaintiffs’ Opening Br. at 26.
185
JX 61.
186
Defendant’s Answering Br. at 20.

43
valued Catalyst at $871,016 as of the date Richards dissociated and $817,811 as of

the date CAIG dissociated.187

Although neither party focused on the issue, it would be reasonable to

conclude that Plaintiffs bear the burden of proof with respect to Enterprise

Valuation. Plaintiffs advanced this claim as a breach of contract claim, and a

plaintiff generally bears the burden of proving all elements of a breach of contract

claim, including damages.188 On the other hand, the contract itself contemplates that

Catalyst will participate in setting the Buyout Price.189 Plaintiffs therefore could

have argued that the parties shared the burden with respect to Enterprise Valuation,

as in an appraisal case conducted under 8 Del. C. § 262.190 But the question largely

JX 30. The 2020 Report states that Richards’ date of dissociation was October 4, 2019 and
187

CAIG’s date of dissociation was October 21, 2019. Id.
188
In re Cellular Tel. P'ship Litig., 2021 WL 4438046, at *41 (Del. Ch. Sept. 28, 2021) (“The
plaintiffs bore the burden of proving each element of the claim by a preponderance of the
evidence.”); First State Constr., Inc. v. Thoro-Good's Concrete Co., 2010 WL 1782410, at *3 (Del.
Super. May 3, 2010) (“In any breach of contract action, a plaintiff must prove each element by a
preponderance of the evidence.”).
189
JX 1 § 8.4(e).
190
Highfields Capital, Ltd. v. AXA Fin., Inc., 939 A.2d 34, 42 (Del. Ch. 2007) (quoting M.G.
Bancorp., Inc. v. Le Beau, 737 A.2d 513, 520 (Del. 1999)). See also Merion Cap. L.P. v. Lender
Processing Servs., Inc., 2016 WL 7324170, at *12 (Del. Ch. Dec. 16, 2016) (“Each party also
bears the burden of proving the constituent elements of its valuation position by a preponderance
of the evidence, including the propriety of a particular method, modification, discount, or
premium. If both parties fail to meet the preponderance standard on the ultimate question of fair
value, the Court is required under the statute to make its own determination.”) (quoting Jesse A.
Finkelstein & John D. Hendershot, Appraisal Rights in Mergers & Consolidations, 38–5th C.P.S.
§§ IV(H)(3), at A–89 to A–90 (BNA)).

44
is academic because, as explained below, neither side provided a persuasive expert

valuation.

a. The May 25, 2019 Sun Report is the report “on file” for
purposes of Section 2.30, and an Enterprise Valuation must
follow the methodologies in that report.

Before addressing the specifics of each side’s proffered appraisal report, I first

address the meaning of Enterprise Valuation under the LPA. Recall that a

dissociated partner’s buyout price is calculated by multiplying Catalyst’s Enterprise

Valuation and the partner’s PPP. Enterprise Valuation means:

. . . the appraised value of the Company, as illustrated by and in
accordance with the methodology set forth in the Sun Valuation report
on file with the Company, as may be updated from time to time, or as
may be superseded by an appraisal report following the same
methodology issued by another appraisal Company. 191

Given this definition, it is necessary to identify what valuation report was “on file

with the Company” for purposes of this case.192

Catalyst essentially argues the 2020 Report was “on file” because it is the

most recent report prepared by Sun. Catalyst further contends that under the LPA,

Sun was not required to follow its past methodologies when it “updated” its report.193

This interpretation is not a reasonable one. Specifically, it is unreasonable to think

191
JX 1 § 2.30.
192
Id.
193
Defendant’s Opening Br. at 41–43; Defendant’s Answering Br. at 20.

45
that the partners would have agreed to allow Catalyst to obtain a new report after a

partner’s dissociation and use that as the report “on file,” thereby permitting Catalyst

to change valuation methodologies without restraint as long as Sun prepared the new

report.194

The 2020 Sun Report is not the report “on file” because Section 2.30 and

Exhibit C of the LPA, read in conjunction, require the report to be “on file” at the

time of a partner’s dissociation.195 The LPA’s plain language supports this

conclusion, and it is the only reasonable interpretation of the parties’ agreement,

which the Court must read as a whole.196 In Exhibit C, PPP is calculated as 5 years

immediately before the “date of dissociation.”197 This is the only date mentioned in

the Buyout Formula, and it is sensible and consistent to apply the same date to all

elements in the buyout calculation. This is not to say that either side could not obtain

a new valuation for purposes of calculating a buyout. But that new valuation—

whether prepared by Sun or another appraisal company—must follow the same

methodology as the report on file at the date of dissociation.

194
See e.g., Defendant’s Opening Br. at 41–42.
195
JX 1 § 2.30, Ex. C.
196
Norton, 67 A.3d at 360; In re Nantucket Is. Assocs. Ltd. P'ship Unitholders Litig., 810 A.2d at
361; Lillis, 953 A.2d at 252.
197
JX 1, Ex. C.

46
 Perhaps even more unreasonably, Plaintiffs argue that an appraisal report

prepared by any appraisal company other than Sun need not follow with the same

degree of precision the methodology employed in the Sun Report “on file.”

Plaintiffs arrive at this interpretation by distinguishing between the LPA’s use of “by

and in accordance with” as compared to its use of “following the same

methodology.” Plaintiffs failed to coherently explain in their briefs and at oral

argument the actual difference they ask this Court to distill from that language.198

Perhaps realizing the hollowness of the proposed distinction, Plaintiffs go on to

contend that the Egan Report nevertheless was prepared in accordance with Sun’s

May 2019 report.199

Accordingly, the report “on file” for purposes of Section 2.30 was the May

25, 2019 Report, which was the most recent Sun valuation prepared before Plaintiffs’

dissociation. Plaintiffs argue that the report “on file” should be the May 16, 2019

draft report, but all the partners agreed to the May 25, 2019 Report and that valuation

was used to calculate partner buy-in at the time. Given these facts, Sun’s May 25,

2019 Report was the report “on file” at the time of dissociation and established the

methodology to be applied to Catalyst’s Enterprise Valuation for purposes of

Plaintiffs’ buyout.

198
Plaintiffs’ Opening Br. at 29–33.
199
Id. at 33–34. Plaintiffs contend that the report on file at the time of dissociation is the draft
May 16, 2019 Sun Valuation Report. Id. at 18, 27.

47
 b. The 2020 Report is not reliable.

Catalyst urges the Court to adopt as Catalyst’s Enterprise Valuation the 2020

Report prepared by Sun and supported by the testimony of Thomas Theurkauf,

Catalyst’s expert at trial.200 Catalyst asserts that the 2020 Report is the appropriate

valuation for purposes of Plaintiffs’ buyout for four primary reasons.201 First,

Catalyst contends that the 2020 Report was issued by Sun, and the LPA allows the

report “on file” with Catalyst to be updated from “time to time.”202 Second, Catalyst

asserts that the 2020 Report “appraises Catalyst consistent with the methodology of

previous reports Sun issued because all the Sun reports valued Catalyst utilizing the

Adjusted Book Value Method.”203 Third, Catalyst argues that only the 2020 Report

“accounts for Plaintiffs’ respective dissociations and the buyout and profit

distribution related to the dissociations and bonuses owed to the remaining limited

partners.”204 Finally, and with no small degree of ipse dixit, Catalyst argues that the

2020 Report is “on file” because Archer, the Managing Partner, says it is.205

200
Defendant’s Opening Br. at 41–42.
201
Id.
202
Id. at 41 (citing JX1; JX 30).
203
Id. (citing JX 19; JX 22; JX 30). Catalyst argues the 2020 Report follows Sun’s past
methodologies while also arguing that the LPA does not require Sun to adhere to its past
methodologies, even if it prepares an Enterprise Valuation report after a partner dissociates. As
discussed above, that is not a reasonable reading of the LPA.
204
Id. at 41–42 (citing JX 30).
205
Id. at 42 (citing Trial Tr. III at 267–68).

48
 The Court finds that the 2020 Report is not reliable for purposes of

determining Catalyst’s Enterprise Valuation for Plaintiffs’ buyout.206 The 2020

Report is litigation-driven. Plaintiffs filed their Complaint on June 5, 2020,207 and

the 2020 Report was prepared well after it was clear that the parties’ business

separation would not be an amicable one. The deductions and manipulations to

Sun’s valuation reflect this reality and ultimately render the report unreliable. Those

deviations are not consistent with the partners’ past practices for valuing Catalyst.

Three primary examples illustrate the point that the 2020 Report is not

consistent with Sun’s past methodology or the LPA. First, the 2020 Report reduces

Catalyst’s projected revenue to account for Plaintiffs’ dissociation, which was not

done in past valuations relied upon by the partners over the course of their

association.208 Theurkauf’s and Catalyst’s attempt to explain this change is

unconvincing, and, more importantly, the deduction is inconsistent with the LPA’s

requirement that Enterprise Valuation follow the methodology of the report “on

file.” Second, the 2020 Report compounds this error by failing to account for

goodwill and Catalyst’s ability to bring in new partners to make up for revenue

206
See JX 30.
207
D.I. No. 1.
208
Plaintiffs’ Opening Br. at 36–37; Trial Tr. IV at 189–99. Compare JX 17 and JX 19 (February
2018 Sun Reports, which did not contemplate any discount for a downward effect due to a partner’s
dissociation), with JX 30 (the 2020 Report, which adjusts Enterprise Valuation downward for lost
revenue attributable to the dissociating partners).

49
attributable to a dissociating partner.209 The record supports the conclusion that there

was a million dollars in goodwill on Catalyst’s books that the 2020 Report did not

consider when concluding that the brand had no intangible value.210 Instead, the

2020 Report entirely discounts the likelihood that when a partner dissociates, new

partners will join. Third, the 2020 Report treats Plaintiffs’ buyout price as an

accrued liability of the partnership, but that treatment is inconsistent with the LPA.

Under the LPA’s terms, Catalyst had no obligation to buy Plaintiffs’ units.211 Its

choice to do so does not mean it can treat the buyout as a company liability that

reduces the price of Plaintiffs’ units.

c. The Egan Report also is not reliable.

Egan’s report (the “Egan Report”)—which Plaintiffs ask the Court to rely on

in calculating Enterprise Valuation—likewise is not a reliable valuation for several

distinct reasons.212

First, Plaintiffs’ position regarding Catalyst’s Enterprise Valuation has shifted

dramatically over the course of this litigation. Although perhaps not unusual, the

209
Plaintiffs’ Opening Br. at 37–38 (citing Trial Tr. III at 235–40; JX 43; JX 63).
210
Trial Tr. III at 233–235.
211
Plaintiffs’ Opening Br. at 39–40 (citing Trial Tr. IV at 174–76, Trial Tr. III at 213–24, 229–32,
Trial Tr. V at 189–90, 200); Plaintiffs’ Answering Br. at 26–27. See JX 69 at CATALYST003997
and JX 70 at CATALYST004015 (emails dated April 30, 2020 to Richards and Bartholomew,
respectively, expressing for the first time Catalyst’s intent/agreement to buy back Plaintiffs’ units).
See also JX 1 § 8.4(a) (LPA which states that “[i]n the event of the . . . resignation[] of a Partner,
the Company is entitled to, but not required, purchase the Partner’s equity at the Buyout Price.”).
212
See JX 61.

50
shift—particularly the doubling of Plaintiffs’ valuation, undermines confidence in

the reliability of Plaintiffs’ expert’s methodology and conclusion. Plaintiffs’

original complaint relied on the May 25, 2019 Sun Report for Enterprise

Valuation.213 At trial, however, Plaintiffs relied on Egan’s valuation, which

concludes Catalyst’s Enterprise Value at the time of Plaintiffs’ dissociation was

$6,400,000, more than double Plaintiffs’ original allegations.214

Moreover, the Egan Report does not, as it must under Section 2.30, follow the

May 25, 2019 Sun Report’s methodology.215 The term “methodology” does not

require a valuation company to ascribe the same weight to the different valuation

approaches as Sun did in its reports. But Section 2.30’s plain terms require the

valuation company to consider the same valuation approaches and to adopt a

consistent approach for deductions and projections. As with the 2020 Report, Egan

fails to follow this requirement of the LPA.

For example, Egan failed to treat the partners’ 2019 PDI as a liability that

Catalyst owed to its partners. Accounting for liabilities that Catalyst owed to the

partners was an element used by Sun in the past when determining Catalyst’s

213
D.I. 1 at ¶ 26 (“According to the Sun Valuation, Enterprise Valuation is $3,000,000.”); JX 22.
214
JX 61. In post-trial briefing and argument, Plaintiffs obliquely offered the May 16, 2019 Sun
valuation as an alternative figure. See, e.g., Plaintiffs’ Opening Br. at 27.
215
See JX 1 § 2.30 (“the appraised value of the Company, as illustrated by and in accordance with
the methodology set forth in the Sun Valuation report on file with the Company. . .”).

51
Enterprise Valuation.216 But because Plaintiffs contend that a report conducted by

another appraisal company is not required to strictly follow Sun’s past methodology,

Plaintiffs excuse Egan’s omission of this deduction without any principled

explanation as to its appropriateness. The Court finds that the Egan Report violates

the LPA by failing to deduct 2019 PDI as a liability even though past reports had

done so.217

Egan also included within his valuation a “reasonable compensation

adjustment” that he failed to reliably justify in the context of Catalyst’s business or

Sun’s past appraisal methodologies. “The reasonable compensation adjustment

seeks to adjust owner compensation (the limited partners) to a hypothetical amount

intended to represent what the company would pay to a non-owner performing the

same task with the same background.”218 The Egan Report used a lower reasonable

compensation number than that which Sun used in the past, which had the effect of

inflating Catalyst’s appraised value.219 Catalyst is “a small boutique firm,” but the

Egan Report’s reasonable compensation adjustment relied on five publicly traded

216
Defendant’s Opening Br. at 45; JX 19; JX 22. This is distinct from treating a partner’s buyout
as a liability which, as previously explained, was not consistent with the LPA.
217
See JX 19; JX 22.
218
Defendant’s Opening Br. at 52 (citing JX 63 at 9) (“Generally, the lower the reasonable
compensation number, the higher the value of the company as the EBITDA multiple is conversely
related to the valuation analysis’s adjustment for reasonable compensation.”).
219
Id. at 53 (citing JX 61 at 17).

52
companies that were 8 to 290 times Catalyst’s size.220 The Egan Report’s reasonable

compensation adjustment artificially inflates Catalyst’s Enterprise Valuation and, as

such, contributes to the Report’s lack of reliability.

d. The May 25, 2019 appraisal was accepted by all partners
and represents Catalyst’s “market” valuation.

Having concluded that neither party provided persuasive expert testimony

supporting their proposed Enterprise Valuation, the Court is left to determine how

to reliably calculate Catalyst’s Enterprise Valuation for purposes of Plaintiffs’

buyout price. The most reliable figure is Sun’s May 25, 2019 valuation because: (i)

all Catalyst’s partners accepted it and relied upon it for purposes of determining a

new partner’s buy-in, (ii) it was obtained close in time to Plaintiffs’ dissociations,

and (iii) it was not manipulated by the parties’ unreasonable litigation-driven

positions.

Reliance on this market-tested valuation is consistent with Delaware

precedent. The Delaware Supreme Court provides guidance “and regularly rests its

appraisal analysis on the premise that when a transaction price represents an

unhindered, informed and competitive market valuation, that price ‘is at least first

among equals of valuation methodologies in deciding fair value.’”221 Although this

220
JX 61 at 17; Defendant’s Opening Br. at 52.
221
In re Appraisal of Jarden Corp., 2019 WL 3244085, at *23 (Del. Ch. July 19, 2019), on
reargument in part sub nom. In re Jarden Corp., 2019 WL 4464636 (Del. Ch. Sept. 16, 2019), and
aff'd sub nom. Fir Tree Value Master Fund, LP v. Jarden Corp., 236 A.3d 313 (Del. 2020) (quoting
53
is not an appraisal case, the principle holds; a recent valuation on which the parties

relied to make business decisions before the litigation arose is representative of a

“competitive market valuation” existing at the time Plaintiffs dissociated. Neither

party has offered a more reliable calculation of Catalyst’s Enterprise Valuation.

Reliance on this report also is in harmony with the LPA, which defines

Enterprise Valuation as the Company’s appraised value as “illustrated by” the

“report on file with the Company, as may be updated from time to time, or as may

be superseded by” another company’s report “following the same methodology.” 222

For the reasons explained above, the 2020 Report did not properly update the report

on file, and Egan’s Report did not supersede the report on file. Therefore, under the

LPA’s plain terms, Enterprise Valuation for purposes of Plaintiffs’ buyout is the

figure in the May 25, 2019 Report.

2. The Court does not need to resolve Plaintiffs’ objection to
Paulikens’ report and testimony.

Plaintiffs objected before and during trial to the report and testimony of

Catalyst’s rebuttal expert, Randall Paulikens, “to the extent he offer[ed] a calculation

of Enterprise Valuation or attempt[ed] to analyze the [2020 Report] because he [was]

and citing In re Appraisal of AOL Inc., 2018 WL 1037450, at *1 (Del. Ch. Feb. 23, 2018); In re
Appraisal of PetSmart, Inc., 2017 WL 2303599, at *27 (Del. Ch. May 26, 2017) (collecting
cases)).
222
JX 1 § 2.30.

54
a rebuttal expert who offered no opinion by the applicable deadline in the CMO.”223

Catalyst responded that Paulikens’ report and testimony should be considered in full

because his testimony was offered to rebut Egan’s valuation and testimony.224

Further, Catalyst contended that Paulikens did not provide any expert opinion as to

Catalyst’s Enterprise Valuation.225 The Court reserved decision and allowed

Paulikens to testify. Now, this issue is moot because the Court does not rely on

either of the parties’ experts or on any separate valuation Paulikens purported to

offer.

3. CAIG’s Capital Account Balance

In addition to buyout price, CAIG contends it had a positive capital account

balance at the time it dissociated and that Catalyst is required to pay that amount

under Section 8.5(a)(1)(ii) of the LPA. Because the parties do not dispute the

balance in Richards’ capital account when he dissociated,226 only CAIG’s account

balance is at issue. Unlike the determination of buyout price, this dispute requires a

straightforward determination of whether CAIG’s capital account balance was

greater than zero when it dissociated from Catalyst.227 Like the other forms of

223
Plaintiffs’ Opening Br. at 41–47; PTO § XI(19).
224
Defendant’s Answering Br. at 28–31; PTO § XI(20).
225
Defendant’s Answering Br. at 28–31.
226
PTO § II(B)(30).
227
JX 1 § 8.5(a)(1)(ii) (“Determination of Buyout Price. The Buyout Price shall be calculated in
accordance with Exhibit C, subject to adjustment as set forth in Section 8.4 and this Section 8.5:
55
recovery sought in this action, CAIG must prove by a preponderance of evidence

that it is entitled to the positive balance that it demands.

The parties disagree as to what evidence the Court should rely on to determine

whether CAIG possessed a positive balance in its capital account at the time of its

dissociation. CAIG encourages this Court to adopt the account balance reflected in

the 2020 Sun Report—$79,181.228 According to CAIG, because Sun attributed a

positive balance to CAIG’s capital account, and because Catalyst relies on the 2020

Sun Report in other respects, Catalyst effectively admitted that CAIG possessed a

positive capital account balance upon dissociation.229 Catalyst, on the other hand,

points to CAIG’s 2019 Schedule K-1, which reflects a capital account balance of

$0.230

Delaware courts previously have relied on a company’s tax returns to resolve

similar questions. In re Dissolution of Jeffco Management, LLC231 is instructive.

There, the Court of Chancery held that a company’s Schedule K-1 was a “reliable

indicator” as to whether a partner possessed a capital account balance.232 That is so

(1) With respect to an Initial Partner . . . (ii) the Initial Partner’s positive capital account balance
(excluding the Original Capital Contribution) as of the date of Dissociation[.]”).
228
JX 30 at 18.
229
Plaintiffs’ Answering Br. at 2.
230
Defendant’s Opening Br. at 27; JX 90 at 1.
231
In re Dissolution of Jeffco Mgmt., LLC, 2021 WL 3611788, at *6 (Del. Ch. Aug. 16, 2021).
232
Id.

56
because tax returns are signed and submitted under penalty of perjury.233 Moreover,

although the partnership itself may be responsible for preparing Schedule K-1s,

unless a partner can show that it was denied access to the tax documents, any failure

to dispute the information within the document signals a partner’s acknowledgment

that the information is accurate.234 CAIG offers no caselaw to the contrary.

The facts here are analogous to those in Jeffco. CAIG’s 2019 Schedule K-1

confirms that CAIG did not possess a positive capital account balance upon its

dissociation in 2019.235 Testimony at trial also established that CAIG never: (i)

disputed the contents of the 2019 K-1, (ii) sought to amend the 2019 K-1, or (iii)

notified Catalyst’s accountants that it believed the 2019 K-1 was incorrect.236

Although Bartholomew testified that he relied on Catalyst to prepare CAIG’s K-

1s,237 this position is unconvincing because, as explained above, if CAIG believed

the K-1 reflected incorrect information, it should have requested changes to the

information.

CAIG also contends that because Catalyst relies on the 2020 Sun Report for

its Enterprise Valuation argument, it should not be able to distance itself from the

233
Id.
234
Id.
235
JX 90 at 1; Trial Tr. IV at 142–143.
236
Trial Tr. I at 118.
237
JX 90; see also Trial Tr. I at 116–118.

57
same document’s account balance information.238 But this argument misses the

mark for two reasons. First, this Court already has declined to rely on the 2020

Report. Second, CAIG argues that the positive capital account balance listed in the

2020 Sun Report is an admission by a party opponent and therefore sufficient to

satisfy CAIG’s burden of proof.239 A party opponent’s admission may make a piece

of evidence admissible under the hearsay rules, but it does not address how relevant,

probative, or ultimately convincing a piece of evidence is in meeting the burden of

proof.240

Accordingly, this Court follows the Court of Chancery’s sound reasoning in

Jeffco.241 CAIG’s failure to amend or request an amendment to the 2019 K-1 belies

CAIG’s argument that the K-1 is inaccurate. Because CAIG’s 2019 K-1 confirms

that CAIG did not possess a positive balance upon its dissociation from Catalyst,

and CAIG fails to convincingly identify other evidence that could serve to refute the

K-1, this Court adopts the 2019 K-1 as the most reliable evidence of whether CAIG

possessed a positive balance upon dissociation. Accordingly, CAIG has failed to

prove that it is entitled to any additional funds relating to this claim.

238
Plaintiffs’ Answering Br. at 2.
239
Id.
240
D.R.E. 801(d)(2)(A).
241
Cede & Co. v. Technicolor, Inc., 1990 WL 161084, at *25 (Del. Ch. Oct. 19, 1990).

58
 4. Fee Shifting

Finally, Plaintiffs advance several reasons to support their argument that

Catalyst engaged in bad faith litigation that warrants fee shifting.242 First, Plaintiffs

argue that because Catalyst’s buyout letters failed to provide an Enterprise Valuation

and buyout calculation, Catalyst acted in bad faith.243 Catalyst avers that the “bad

faith” exception cannot apply because it sent Plaintiffs the buyout letters nearly two

months before litigation commenced.244 Second, Plaintiffs contend that Catalyst

acted in bad faith because it obtained and relied upon the 2020 Sun Report.245 In

response, Catalyst asserts that its reliance on the 2020 Sun Report merely reflects

the two sides’ disagreement regarding the merits of this suit.246 Third, Plaintiffs

argue that Catalyst deliberately created the LIT and Difficult Search Modifications

in bad faith to target Richards.247 Catalyst contends that this argument is

“disingenuous” because Plaintiffs participated in all relevant meetings and votes.248

Further, Catalyst asserts that its implementation of modifications permitted by the

242
Plaintiffs’ Opening Br. at 37–40.
243
Id.
244
Defendant’s Opening Br. at 36.
245
Plaintiffs’ Opening Br. at 48.
246
Defendant’s Opening Br. at 37.
247
Plaintiffs’ Opening Br. at 48–49.
248
Defendant’s Opening Br. at 37–38.

59
LPA cannot result in a finding of bad faith.249 Finally, Plaintiffs assert that John and

Alyson Archer testified insincerely, pointing to differences between Richards’ and

John Archer’s testimony regarding the “Genocea” search status report.250

None of Plaintiffs’ arguments offers a convincing basis for fee shifting.

Delaware follows the American Rule, under which litigants generally are

responsible for paying their own litigation costs.251 Courts recognize “limited

equitable exceptions” to the American Rule, including one for a party’s “bad faith”

conduct throughout litigation.252 Although there exists no all-encompassing

definition of “bad faith” conduct, Delaware courts have awarded attorneys’ fees

where a party has “unnecessarily prolonged or delayed litigation, falsified records,

or knowingly asserted frivolous claims.”253 In Delaware, the “bad faith” exception

applies only in “extraordinary cases.”254 Its purpose is “to deter abusive litigation

and protect the integrity of the judicial process.”255 To prevent the exception from

249
Id. at 38.
250
Plaintiffs’ Opening Br. at 49.
251
Mahani v. Edix Media Group, Inc., 935 A.2d 242, 245 (Del. 2007).
252
Montgomery Cellular Holding Co., Inc. v. Dobler, 880 A.2d 206, 227 (Del. 2005).
253
Johnston, 720 A.2d at 546.
254
Brice v. State Dept. of Correction, 704 A.2d 1176, 1179 (Del. 1998).
255
Montgomery, 880 A.2d at 227.

60
swallowing the rule, Delaware courts require a moving party to prove bad faith with

“clear evidence.”256

Plaintiffs have failed to present clear evidence that Catalyst’s conduct rose to

the level of bad-faith litigation tactics. Plaintiffs and Catalyst each prevailed in

different portions of this litigation. Plaintiffs’ arguments reflect nothing more than

each party taking opposing positions throughout litigation and do not bring this case

within the scope of “extraordinary cases” that support a finding of bad faith.

Accordingly, Plaintiffs’ request for attorneys’ fees is denied.

IV. CONCLUSION

This Court enters judgment in favor of Plaintiffs to the extent and on the basis

set forth herein. If there are any open issues not addressed by this post-trial opinion,

the parties shall notify the Court by letter within five days. If no such letter is filed,

the parties shall confer and prepare a proposed form of final order within 20 days,

setting forth the principal amount to which each Plaintiff is entitled based on the

Court’s rulings, along with pre- and post-judgment interest. The appeal period for

this post-trial opinion shall not begin to run until the final order is entered as an order

of the Court.

256
Arbitrium (Cayman Is.) Handels AG v. Johnston, 705 A.2d 225, 232 (Del. Ch. 1997).

61