COURT OF CHANCERY

OF THE 

STATE OF DELAWARE

 JOHN W. NOBLE 417 SOUTH STATE STREET

VICE CHANCELLOR DOVER, DELAWARE 19901

 TELEPHONE: (302) 739-4397

 FACSIMILE: (302) 739-6179

July 31, 2015

Jennifer L. Dering, Esquire Christopher Viceconte, Esquire 

Archer & Greiner, P.C. Gibbons P.C.

300 Delaware Avenue, Suite 1370 1000 N. West Street, Suite 1200

Wilmington, DE 19801 Wilmington, DE 19801

Re: Ross Holding and Management Company v.

Advance Realty Group, LLC

C.A. No. 4113-VCN

Date Submitted: April 16, 2015

Dear Counsel:

At the conclusion of its post-trial memorandum opinion, the Court, perhaps 

out of an excessive abundance of caution, invited briefing on two issues: “first, 

whether Plaintiffs were harmed by the Board’s layering of FARS’s and ARD’s 

loans on top of their units and, second, the question of attorneys’ fees and 

expenses.”1

 

1

Ross Hldg. & Mgmt. Co. v. Advance Realty Gp., LLC (“Ross II”), 2014 

WL 4374261, at *39 (Del. Ch. Sept. 4, 2014). The Court presumes familiarity 

with Ross II.
Ross Holding and Management Company, et al. v.

Advance Realty Group, LLC

C.A. No. 4113-VCN

July 31, 2015

Page 2

* * *

The “Layering”

The Court expressed concern about preferential loans that may have 

benefited FARS and ACP as part of the Reorganization. The Court speculated that 

the “most sensible remedy may be to unwind these preferential loans and set 

Plaintiffs, FARS, and ACP shoulder-to-shoulder in ARG.”2 The Court also 

recognized that such an effort might not accomplish anything because the interests 

are (and are likely to remain) without value. 

The Plaintiffs responded by seeking an order to require the Defendants to 

disgorge $5 million (or Plaintiffs’ proportionate share) in cash from interest 

payments made on the contested loans.3 Such damages would go “directly to 

Plaintiffs and not to ARG.”4 Their focus seems to be on finding a way to provide a 

meaningful remedy, that is, something of value. That would be more appealing 

 

2

Id. at *35.

3

Plaintiffs used $5 million in their brief, but the precise amount is not critical here. 

Plaintiffs held 11.52 percent of ARG’s units after the reorganization; they state that 

their proportionate share of that $5 million would be $576,000. Pls.’ Post-Trial 

Supplemental Mem. of Law. (“Pls.’ Mem.”) 12.

4

Id. at 12 n.3.
Ross Holding and Management Company, et al. v.

Advance Realty Group, LLC

C.A. No. 4113-VCN

July 31, 2015

Page 3

than unwinding preferential loan arrangements which seemingly would merely 

reallocate worthless obligations. They turn their attention to the interest paid 

because of their perspective that there was a wrongful extraction of funds from 

ARG and that it is a remedy that would carry the possibility of some benefit for 

them. 

In contrast, the Defendants reiterate that the Reorganization nominally 

benefited the Plaintiffs and, thus, no relief is warranted. Despite that assertion, 

they have offered reassignment of $1,952,400 of FARS and ACP’s senior debt to 

Plaintiffs to resolve the dispute. That assignment “would give Plaintiffs $25 of 

senior debt for each unit of equity, a deal tantamount to that given to FARS and 

putting Plaintiffs shoulder-to-shoulder with FARS and ACP.”5

The decline in the real estate market imposed a harsh price on the parties. 

The Reorganization, however, occurred shortly before the effects were felt. 

 

5 Defs.’ Supplemental Post-Trial Mem. Addressing Whether Pls. Were Harmed By 

Board’s Layering of FARS’s and ARD’s Loans on Top of Their Units and 

Question of Att’ys’ Fees and Expenses 3. Perhaps it should be noted that the 

Defendants do not oppose Plaintiffs retaining their equity. Id. at 8 n.2.
Ross Holding and Management Company, et al. v.

Advance Realty Group, LLC

C.A. No. 4113-VCN

July 31, 2015

Page 4

Whether the real estate professionals on both sides recognized the impending 

deterioration is uncertain. 

If the Reorganization caused actual damage to the Plaintiffs, they would be 

entitled to recover damages measured as of the time of the Reorganization, even if 

their interests would have become worthless not long thereafter. The proper 

comparison in this context is between the impact of the Reorganization and what 

would have happened if the Reorganization had not occurred. It does not involve 

assessment of hypothetical restructuring that the Court might prefer. Under either 

capital structure—before the Reorganization or after the Reorganization—there 

were entitlements, including those of certain Defendants, to the $5 million in 

interest payments that came ahead of the Plaintiffs. With or without the 

Reorganization, the Plaintiffs would not have shared in the $5 million. Thus, they 

cannot point to any damages actually suffered because of the interest payments.

Nevertheless, Defendants have offered to place Plaintiffs “shoulder-toshoulder” with FARS and ACP with respect to certain loans involving ARG. That 

is an opportunity that Plaintiffs should be able to pursue, if they so choose, and the 

Court is prepared to include their preference in the implementing order.
Ross Holding and Management Company, et al. v.

Advance Realty Group, LLC

C.A. No. 4113-VCN

July 31, 2015

Page 5

* * *

Attorneys’ Fees

On the question of fees, Defendants argue at the outset that Plaintiffs can no 

longer ask for fees because of law of the case, waiver, and judicial estoppel. The 

Amended Verified Complaint, in its Demand for Relief, asked for “[a]ttorneys’ 

fees and costs,” among other remedies.6 Defendants later moved for summary 

judgment on “the Plaintiffs’ claims for attorneys’ fees and costs because 

[Plaintiffs] have not demonstrated any basis for fee shifting.”7 In their opposition 

brief, Plaintiffs stated, “Defendants have moved for summary judgment as to 

discrete parts of Plaintiffs’ Amended Complaint, including the demand for 

attorneys’ fees in their ad damnum clause and their prayer for punitive damages. 

Plaintiffs concede both.”8 The Court subsequently dismissed the fees claims for 

 

6 Am. Verified Compl. 58.

7

Ross Hldg. & Mgmt. Co. v. Advance Realty Gp., LLC (“Ross I”), 2013 

WL 764688, at *1 (Del. Ch. Feb. 28, 2013, as revised, Mar. 7, 2013).

8 Br. in Opp’n to Defs.’ Mot. for Partial Summ. J. 5. 
Ross Holding and Management Company, et al. v.

Advance Realty Group, LLC

C.A. No. 4113-VCN

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Page 6

lack of opposition.9 In the pre-trial stipulation, Plaintiffs asked for costs (but not 

fees).10

Plaintiffs do not deny waiver of a “statutory” claim for attorneys’ fees.11 

Rather, they argue that the Court remains able to “exercise its equitable power . . . 

to either award Plaintiffs their attorneys’ fees or compensatory damages in an 

amount that takes into account Plaintiffs’ attorneys’ fees.”12 Under the American 

Rule, “litigants in Delaware are generally responsible for paying their own counsel 

fees.”13 Yet Plaintiffs cite cases such as SIGA Technologies, Inc. v. PharmAthene, 

Inc.14 and Cantor Fitzgerald, L.P. v. Cantor15 to emphasize that—regardless of 

their earlier concession—the Court can award attorneys’ fees through its power to 

fashion an equitable remedy or as an approximation of damages.

 

9

Ross I, 2013 WL 764688, at *1, *6.

10 Revised Pre-Trial Stipulation and Order § IV.

11 Pls.’ Mem. 9.

12 Pls.’ Post-Trial Reply Supplemental Mem. of Law 7 n.2.

13 Scion Breckenridge Managing Member, LLC v. ASB Allegiance Real Estate 

Fund, 68 A.3d 665, 686 (Del. 2013).

14 67 A.3d 330, 352 n.109 (Del. 2013) (“[W]e note [that] the Court of Chancery’s 

power to award attorneys’ fees in an appropriate case stems not from the statutory 

power to award costs embodied in 10 Del. C. § 5106, but rather from [its] inherent 

equitable authority.”).

15 2001 WL 536911, at *3 (Del. Ch. May 11, 2001).
Ross Holding and Management Company, et al. v.

Advance Realty Group, LLC

C.A. No. 4113-VCN

July 31, 2015

Page 7

Although Defendants may have violated their duty of loyalty, engaging in 

conduct that Delaware law discourages, Plaintiffs failed (without any effort to limit 

the scope of the options they were abandoning) to attempt to preserve a basis to 

pursue attorneys’ fees. Especially with a “nominally benefi[cial]”

16 or accretive

transaction, the Court is not inclined to search out a way to circumvent the 

Plaintiffs’ decision and commitment to forego attorneys’ fees.17 Thus, the Court 

declines to award attorneys’ fees and expenses.

* * *

Counsel are requested to submit an implementing form of order.18

Very truly yours,

/s/ John W. Noble

JWN/cap

cc: Tammy L. Mercer, Esquire

Register in Chancery-K

 

16 Ross II, 2014 WL 4374261, *39.

17 Moreover, the Court is not convinced that the circumstances and consequences 

at work here cry out for an effort to fashion some sort of equitable damages 

remedy. 

18 The Court does not understand its decision to interfere with any of the concerns 

expressed by the Intervenors. Letter from Tammy L. Mercer, Esq., Nov. 20, 2014. 

The remedy for the “layering” does not directly affect ARG.