IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

MARION COSTER,

Plaintiff,

v.

UIP COMPANIES, INC., STEVEN 

SCHWAT, and SCHWAT REALTY 

LLC,

Defendants.

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C.A. No. 2018-0440-KSJM

CONSOLIDATED

MEMORANDUM OPINION

Date Submitted: October 25, 2019

Date Decided: January 28, 2020

Max B. Walton, Kyle Evans Gay, CONNOLLY GALLAGHER LLP, Wilmington, 

Delaware; Michael K. Ross, Thomas Shakow, Serine Consolino, Sean Roberts,

AEGIS LAW GROUP LLP, Washington, D.C.; Counsel for Plaintiff Marion Coster.

Stephen B. Brauerman, Elizabeth A. Powers, BAYARD, P.A., Wilmington, 

Delaware; Deborah B. Baum, PILLSBURY WINTHROP SHAW PITTMAN LLP,

Washington, D.C.; Counsel for Defendants Steven Schwat, Schwat Realty, LLC, 

Peter Bonnell, Bonnell Realty, LLC, and Stephen Cox.

Neal C. Belgam, Kelly A. Green, Jason Z. Miller, SMITH KATZENSTEIN & 

JENKINS LLP, Wilmington, Delaware, Counsel for Defendant UIP Companies, 

Inc.

McCORMICK, V.C.
1

This post-trial decision resolves a dispute over the control and ownership of 

Defendant UIP Companies, Inc. (“UIP” or the “Company”). Prior to the events that 

led to this litigation, UIP was owned equally by two of its founding principals, 

Defendant Steven Schwat and the late husband of Plaintiff Marion Coster. After 

inheriting her fifty percent interest in UIP, Coster first pushed for a buyout of her 

interest. When those efforts failed, she called a special stockholders meeting to elect 

directors to fill vacant board seats. When Coster and Schwat could not agree on

director nominees, Coster commenced this litigation seeking the appointment of a 

custodian to break the deadlock. 

In response to Coster’s first lawsuit, Schwat caused UIP to sell a third of UIP’s 

outstanding but unissued voting equity to Defendant Peter Bonnell, a UIP employee 

to whom equity had been long-promised. Although Bonnell’s stock ownership 

resolved the stockholder voting deadlock between the plaintiff and Schwat, it raised 

other concerns for the plaintiff. To invalidate the sale of stock to Bonnell, Coster filed 

a second lawsuit that was then consolidated with the first one.

At trial, Coster proved facts sufficient to trigger entire fairness as the standard

of review applicable to the sale of stock. This post-trial decision finds, however, that 

the defendants met their burden under that standard. That finding has ripple effects 

on Coster’s other claims, requiring judgment on all counts in favor of the defendants.
2

I. FACTUAL BACKGROUND

Trial took place over two days. As reflected in the Schedule of Evidence

submitted by the parties,

1

the record comprises 336 trial exhibits, live testimony from 

eight fact and three expert witnesses,2 deposition testimony from ten fact and three 

expert witnesses, and twenty-nine stipulations of fact.3 These are the facts as the 

Court finds them after trial.

A. UIP

UIP is a real estate investment services company formed under Delaware law 

in 2007 by Wout Coster, Cornelius Bruggen, and Schwat.4 UIP comprises three 

subsidiaries—UIP Asset Management, Inc., UIP General Contracting, Inc., and UIP 

Property Management, Inc.—that provide property management, general 

contracting, and asset management services, respectively, to properties in the 

Washington, D.C. metropolitan area.5

 

1 See C.A. No. 2018-0440-KSJM, Docket (“Dkt.”) 155, Joint Schedule of Evid. Ex. A.

2 Of these eleven trial witnesses, one, Heath Wilkinson, was introduced exclusively by 

video excerpts from his deposition.

3 The Factual Background cites to: docket entries (by docket “Dkt.” number); trial exhibits 

(by “JX” number); the trial transcript (Dkts. 123, 124) (“Trial Tr.”); and stipulated facts set 

forth in the Parties’ Revised Joint Pre-trial Order (Dkt. 116) (“PTO”). The parties called 

Pete Bonnell, Marion Coster, Steve Cox, Dr. Brett Margolin, Steve Schwat, Iver Scott, 

Andrew Smith, Heath Wilkinson, and Jeffrey Zell by deposition. The transcripts of their 

respective depositions are cited using the witnesses’ last names and “Dep. Tr.”

4 PTO ¶ 6.

5

Id. ¶ 4.
3

The Company primarily serves the real estate investments of special purpose 

entities (“SPEs”), sometimes referred to as “promotes,” in which UIP principals 

invest their own capital alongside third-party equity sponsors.6 The SPEs are high 

risk, high reward investments, typically requiring the UIP principals to tie up their 

own capital for long periods of time and to personally guarantee the investment to 

their lenders.

7

 These risks were justified by the rewards of investing in the SPEs, 

which one principal characterized as “the golden ring.”

8

 In order to mitigate the 

risks of the SPE investments while still chasing the reward, UIP principals formed 

UIP and its subsidiaries to control the management and development of the SPE 

properties.9 The principals did not envision that UIP would independently create 

value, but rather that it would “create[] promote interests to the owner that are [a]

multiple value of the operating companies.”

10

 

6 Trial Tr. at 306:9–308:18 (Schwat); id. at 25:23–26:16 (Pace).

7

Id. at 308:7–18 (Schwat describing how sponsors required principals to put “skin in the 

game” and “secur[e] the bank debt”); Zell Dep. Tr. at 33:14–35:14.

8 Trial Tr. at 321:7–322:12 (Schwat).

9

Id. at 309:5–311:18 (Schwat); see also id. at 495:23–496:19 (Zell).

10 JX-3 (Wout emailing in 2014 that “the only real value of UIP [Asset Management] is 

that it creates promote interests to the owner that are a multiple value of the operating 

companies”).
4

Defendants11 introduced an industry expert, Jeffrey Zell, who credibly 

testified that this type of structure is typical for the real estate industry.12 With 

respect to UIP in particular, Zell testified that “with this family of services of 

businesses being provided up into the SPE through the operating company, those 

[operating] companies fully rely on the principals getting more buildings to continue 

the operations of the companies down below. The reality behind that is if for some 

reason [the principals] stopped providing opportunities, the three operating 

companies down below would ultimately run out of business and actually not be able 

to continue.”

13

Upon UIP’s formation in 2007, the Company issued 33 1/3 shares of UIP 

stock each to entities respectively controlled by Wout,14 Bruggen, and Schwat.15 In

2011, Bruggen left UIP, tendered his shares back to UIP at no cost, and resigned his 

directorship.16 Bruggen’s departure left Wout and Schwat each controlling one-half 

of UIP’s outstanding shares.17

 

11 “Defendants” means Schwat, Schwat Realty LLC, Peter Bonnell, Bonnell Realty, LLC, 

Stephen Cox, and the Company. 

12 Trial Tr. at 495:1–14 (Zell). 

13 Id. at 492:6–14 (Zell).

14 This decision refers to Mr. Coster by his first name, Wout, for clarity only. No disrespect 

is intended.

15 PTO ¶ 6.

16 Id. ¶ 8.

17 Id.
5

Upon UIP’s formation, UIP’s five-member Board of Directors (the “Board”) 

comprised the three principals—Wout, Bruggen, and Schwat—and two UIP 

employees—Bonnell and Cox.18 As an employee of UIP, Bonnell’s original position 

was “office and project manager.”

19

 Over the years, Bonnell grew under the 

mentorship of the principals, in particular Wout,

20 and acquired additional 

responsibilities in the Company.21 He is currently Principal of UIP Asset 

Management.

22

 Cox began at UIP as a “real estate analyst.”

23

 His responsibilities 

also grew, and he is currently the Chief Financial Officer at UIP Asset 

Management.24 At trial, Cox testified that as the owner of over twenty pizza shop 

franchises and a diversified investment portfolio of stocks and real estate holdings,

he is independently wealthy outside of the earnings he derives from his role at UIP.25

 

18 Id. ¶ 7.

19 Trial Tr. at 415:6–9 (Bonnell).

20 See id. at 417:6–420:5 (Bonnell).

21 Id. at 416:7–417:5 (Bonnell). 

22 Bonnell Dep. Tr. at 11:20–12:1.

23 Trial Tr. at 182:23 (Cox).

24 Id. at 181:5–10 (Cox).

25 Id. at 183:1–9 (Cox).
6

B. Failed Efforts to Buy Out Wout

In late 2013, Wout informed Schwat and Bonnell that he had been diagnosed 

with leukemia.26 Around this same time, Heath Wilkinson, then-president of UIP 

General Contracting, threatened to resign.

27

 Bonnell testified at trial that he was 

exploring opportunities with other real estate investment firms at that time.

28

 To 

retain talent and in light of Wout’s condition, the UIP principals began formulating

a succession plan that included de-equitizing Wout.

29

In early 2014, Wout began negotiations with Schwat for an eventual buyout 

of his shares by Bonnell and Wilkinson.

30

 In emails around the time of the 

negotiations, Schwat expressed a concern that there was no market for Wout’s shares 

and that the operating companies were only valuable to UIP executives like Bonnell 

and Wilkinson.31 Schwat seemed in a rush to reach a compromise in view of these 

factors.

32

 

26 Id. at 323:13–19 (Schwat); id. at 334:13–22 (Schwat); id. at 428:5–23 (Bonnell). 

27 Id. at 428:17–23 (Bonnell).

28 Id. at 428:5–23 (Bonnell); see JX-10 at 1–2 (Schwat explaining his belief that if Bonnell 

were to leave UIP, “it’s over as far as [he is] concerned”). 

29 Trial Tr. at 323:11–325:10 (Schwat). 

30 See JX-6; JX-3; JX-10; JX-98; Trial Tr. at 325:11–328:22 (Schwat); id. at 332:19–335:4 

(Schwat); id. at 460:9–461:11 (Bonnell).

31 JX-98 at 5 (Schwat explaining that UIP “is only worth something to those that want to 

own it and that is limited to Heath and Pete.”).

32 See id. at 3 (Schwat writing to Wout: “Now is not the time to slow things down or we 

will lose the whole thing”); id. at 5 (Schwat adding: “Feel free to call you[r] guy and get 
7

The negotiations resulted in a term sheet (the “Term Sheet”) dated April 11,

2014, executed by Wout, Schwat, Bonnell, and Wilkinson.

33

 The Term Sheet 

contemplated that Wout would wind down his role at the company and take a 

decreased salary.34 It further stated that “the value of the UIPCos is $4,250,000 on 

today’s date,” and provided for the gradual transfer of Wout’s fifty percent 

ownership in UIP, as well as portions of his promote interests, to Bonnell and 

Wilkinson for a note worth $2.125 million.35 Schwat would also transfer part of his

UIP stock and promote interests in exchange for a note in the same amount.36

The Term Sheet further provided that Wout’s wife, Coster (or “Plaintiff”),

would receive lifelong health insurance and an undetermined future salary.37 The 

Term Sheet remained subject to “definitive agreement[s]” and review by tax 

counsel.38 The Term Sheet set a deadline of May 31, 2014, for reaching a final 

agreement and closing the contemplated transactions.

39

 

some numbers but either way, we do not have the time to wait. We need to sign a deal 

with [Wilkinson] (and [Bonnell]) this week.”).

33 JX-11.

34 Id. at 3.

35 Id. at 1–3.

36 Id.

37 Id. at 4.

38 Id. at 1.

39 Id. at 1–2.
8

The parties forwarded the Term Sheet to UIP’s then-in-house accountant, 

Michael Rinaldi, and UIP’s outside counsel, Michael Sloan of the law firm Davis 

Wright Tremaine LLP.

40

 As Schwat testified at trial, Rinaldi and Sloan viewed the 

Term Sheet as unworkable.41 The parties quickly abandoned the initial terms in 

search of a “simpler deal” that was more tax efficient.42 The parties scheduled a 

meeting to continue negotiations with the aid of Rinaldi and Sloan on May 2, 2014.43

Wout expressed additional reasons for abandoning the initial terms. On 

April 21, 2014, Wout told his counterparts that he did not believe the Term Sheet 

captured the essence of their deal and that he planned to seek advice from his 

personal legal counsel, Robert Gottlieb of the law firm Venable LLP.44 After 

meeting with Gottlieb on April 30, Wout advised Schwat, Bonnell, and Wilkinson 

that he had “serious issues” with the Term Sheet.45 Sloan attempted to reassure Wout

that a deal could be structured “in a way that is best for everyone.”

46

 

40 Trial Tr. at 336:4–14 (Schwat). Neither Rinaldi nor Sloan is a tax attorney, and the deal 

remained subject to review by “tax counsel.” JX-11 at 1; see JX-14 at 1 (Sloan stating: “I 

am not tax counsel.”)

41 Trial Tr. at 336:16–18 (Schwat testifying that Rinaldi and Sloan “were just shocked that 

we could have assembled something so tax inefficient”).

42 Id. at 337:1–2 (Schwat). 

43 JX-109.

44 JX-103 at 2.

45 JX-109 at 1.

46 Id.
9

After continued negotiations through early May, Sloan circulated a memo on 

May 12 summarizing revised terms, but he cautioned that the terms were not “primetime yet.”

47

 On May 25, 2014, Sloan sent a revised draft of the terms that he prepared 

with Rinaldi.

48

 The terms had still not been reviewed by tax counsel.49

Wout rejected the May 25 terms because he perceived them as granting him 

only a non-recourse note in exchange for his interests.

50

 Schwat grew increasingly 

frustrated.51 Revised term sheets and conference calls peppered the summer 

months.52

On July 11, 2014, prior to a conference call, Schwat emailed Wout, Bonnell, 

Wilkinson, Rinaldi, and Sloan a spreadsheet hoping to clarify various economic 

terms of the negotiation.53 Sloan responded that he did not have time to fill out the 

spreadsheet as requested but expressed concern regarding the stated valuation of 

UIP.54 The parties originally valued UIP at $4.25 million.

55 By July, the parties all 

 

47 JX-14 at 1.

48 JX-15.

49 Id. at 1.

50 JX-138 at 1.

51 Id. (Schwat writing to Bonnell: “[Wout is] going to tank this deal. . . . I am over this 

crap.”).

52 JX-18; JX-157.

53 JX-157 at 2.

54 Id. at 1.

55 JX-11 at 1; JX-157 at 1.
10

agreed that figure was “way too high” given an estimated $2 million book value of 

the operating companies.56 Sloan explained that “[a]ny increment above book value 

is personal good will.”

57

 Sloan suggested a valuation of $2.5 million in an “attempt[] 

to reconcile competing objectives.”

58

The parties continued their back and forth, with Wout remaining skeptical of 

the deal terms.59 Come early August 2014, the principals seemed to have again 

reached a deal in principle but argued further over who should paper the terms.60

By August 21, 2014, Rinaldi had papered the terms and delivered them to the 

parties.61 Wout again derailed consensus. On August 23, he described his payout 

terms as a “non starter.”

62

 As of September 30, Wout continued to express “there is 

 

56 JX-157 at 1.

57 Id.

58 Id. The notes to be paid to Schwat and Wout were “a function of the value of the 

company.” Id. The higher the value of the company, “the more pressure it puts on the 

business to satisfy future obligations to Wout (and [Schwat]).” Id.

59 JX-22 at 2 (Wout stating in an email to Schwat, Bonnell, and Wilkinson: “To be very 

clear, I still don’t know what I get from this deal.”).

60 JX-336 at 4 (Sloan emailing the parties: “I haven’t heard from you all in a while, but I 

understand from [Schwat] that we are good-to-go on the basic structure . . . and I know 

Wout wants to see a deal memo that he can take to this personal lawyer.”); id. at 2 (Schwat 

renewing suggestion that Bonnell draft a term sheet); id. at 1 (Wout objecting to Schwat’s 

suggestion because “Bonnell is a beneficiary in the deal, hence he has a conflict writing 

these”); id. (Schwat disagreeing with Wout and Wout standing firm in his belief that they 

were “better off having a neutral third party” draft the terms). 

61 See JX-23 at 7.

62 Id. at 1.
11

nothing in it for me.”

63

 Bonnell continued to attempt to get the parties on the “same 

page,” attributing Wout’s misunderstanding to the tax treatment of his payout.64 

By October 10, 2014, Sloan had concluded that “the deal is still just a concept 

at this point, at best.”

65

 Through the end of the year, Wout continued to disagree 

with various aspects of this round of terms.66 On January 4, 2015, Wout emailed

that the terms were “no longer a palatable deal.”

67

 No deal was ever finalized.

C. Plaintiff Inherits UIP Stock

Wout became increasingly ill over the course of 2014. He passed away on 

April 8, 2015.68 After Wout’s death, Plaintiff inherited ownership of both Wout’s 

interests in UIP and certain promote entities.

69

 Prior to Wout’s death, Plaintiff was 

minimally aware of Wout’s business dealings.70

 

63 JX-173 at 2.

64 JX-174 (Bonnell explaining the tax benefits and asking: “Are we on the same page now? 

Can we start having the documents drafted?”).

65 JX-177 at 1.

66 JX-178; JX-25; JX-181; JX-183; JX-189; JX-187; JX-188.

67 JX-26 at 1.

68 PTO ¶ 9.

69 Id.

70 Trial Tr. at 130:3–11 (Plaintiff testifying that she never had any conversations with Wout 

about business or the value of UIP); id. at 155:5–18 (Plaintiff testifying that she had no 

recollection of whether Wout received profit sharing from UIP or whether any of the 

operating companies ever made a profit); Coster Dep. Tr. at 13:8–13 (Plaintiff testifying

that she “never looked into it” when asked if she had “access to tax information and other 

financial information from [UIP]” when Wout was alive); id. at 18:8–13 (Plaintiff 

testifying that in her capacity as a 50% stockholder, she “[didn’t] know anything about this 

business”); id. at 34:1–10 (Plaintiff testifying that she chose not to participate in additional 
12

The day after Wout’s death, Schwat emailed Gottlieb about purchasing 

Plaintiff’s then-fifty percent interest in the Company.71 He inquired about taking the 

necessary steps to “complete the deal the way we all envisioned (assuming [Plaintiff]

agrees).”

72

 Much was made in Plaintiff’s briefing concerning the seemingly callous 

timing of this email, but the record reflects that it was Wout himself, through 

Gottlieb, who initiated this last attempt at reaching a deal. Just before his death, 

Wout met with Gottlieb in Plaintiff’s presence.

73

 On the day before Wout died, 

Gottlieb reached out to Schwat, Bonnell, Wilkinson, and Sloan by email to inform 

them that “as some or all of you may know, Wout consulted with me almost a year 

ago with respect to your discussions addressing the transitioning of his ownership in 

UIP. . . . With Wout’s health on the decline, he has reached out to me to see if we 

can accelerate the process of completing the necessary documentation.”

74

 Schwat 

forwarded that email to Plaintiff to keep her “in the loop.”

75

 Thus, Plaintiff was 

 

SPE investments because she “[did] not know anything about this business”); id. at 96:20–

22 (Plaintiff testifying that she never spoke with Wout about “being paid for his goodwill 

in the companies”); id. at 99:3–8 (Plaintiff testifying that she never discussed with Wout 

how to value the 50% interest in UIP).

71 JX-33 at 2.

72 Id. at 3.

73 Trial Tr. at 150:24–151:15 (Plaintiff testifying that she was present at the meeting 

between Gottlieb and Wout).

74 JX-29 at 2.

75 Id. at 1; Trial Tr. at 348:4–22 (Schwat testifying that “I was there on Monday. And Wout 

had been home from the hospital on hospice care, you know, for a week or two, and . . .

looking back, Wout was bedridden, and I knew not to send this to Wout. I had no idea he 
13

aware of Wout’s last-minute attempts to effectuate a transfer of his UIP stock, and 

Schwat was not exploiting her vulnerabilities in the days after Wout’s death.

The conversation picked up again in June 2015 when Gottlieb indicated to 

Schwat that “[t]he Estate is prepared to move forward with the reorganization—can 

you suggest the next steps?”

76

 Schwat responded inquiring whether the Term Sheet 

should be modified to effect the deal in a more “tax advantaged way” for Wout’s 

estate.77 In a separate email, Gottlieb forwarded Schwat’s response to Rinaldi and 

asked “whether Wout’s passing suggests any additional restructuring.”

78

 Rinaldi 

responded with an idea to simplify the buyout proposal.79 On June 4, 2015, Bonnell 

sent to Plaintiff the Term Sheet and suggested that they meet along with Gottlieb.80

At some point between June and October 2015, Gottlieb met with Schwat and 

Bonnell, although the record does not reflect precisely when this meeting occurred. 

 

was going to die that day or that evening or the next day. But I got that email from Robert 

Gottlieb and, in a good faith gesture, had sent it out to [Plaintiff]. We had tried to have 

conversations with [Plaintiff] prior to Wout dying, and Pete and I visited Wout in the 

hospital and also visited him a lot at home. And so. . . we were just keeping [Plaintiff] in 

the loop and letting her know we had received this email and that we were ready to move 

forward as well.”).

76 JX-35 at 2. Before that time, there were intermittent emails between UIP principals and

attorneys handling Wout’s estate. See, e.g., JX-33; JX-208; JX-328; JX-34.

77 JX-35 at 1.

78 Id.

79 JX-209 at 1 (“I think . . . that a simple stock purchase transaction for the S corps works 

and is much simpler.”). 

80 JX-210.
14

On October 2, 2015, Gottlieb emailed Rinaldi a summary of that meeting, during 

which the parties discussed the Term Sheet and Schwat’s belief that it had been 

superseded by future agreements.81 Gottlieb requested proof of the future 

agreements and sought to better understand the proposal then contemplated.82

In December 2015, Plaintiff sought assistance from Michael Pace, a retired 

attorney and friend of Plaintiff. Pace’s wife, Anne, was the executor of Wout’s 

estate,

83 and Pace and his wife had been helping Plaintiff navigate the complicated 

process of sorting through her late husband’s affairs.84 Pace emailed Gottlieb to 

explain that Plaintiff was “very distressed about her financial situation and now must 

sell her home.”

85

During early 2016, Gottlieb met with Bonnell and Schwat to negotiate and try 

to understand the terms of any buyout of Plaintiff’s stake.

86

 Schwat emailed Plaintiff

directly in March 2016 to persuade to her to accept his terms.87 

 

81 JX-213 at 1 (Gottlieb stating: “[Schwat’s] view is that [the Term Sheet] has been 

superseded by the 6/16 and 6/18 restructuring memos.”).

82 Id. (Gottlieb writing to Rinaldi: “I could not understand how the math worked and 

explicitly told him that.”). 

83 Trial Tr. at 16:7–23 (Pace).

84 Id.

85 JX-214 at 1.

86 See JX-217 at 2 (Schwat writing: “Pete and I have met with Robert Gottlieb several 

times.”); JX-331 at 2 (Gottlieb’s Venable counsel writing: “I just met with Robert Gottlieb. 

He has had several ‘frustrating conversations’ with Steve Schwat about the ‘Agreement.’”).

87 JX-217 at 1–5.
15

By May 2016, Plaintiff seemed primarily interested in a lump-sum buyout or 

an arrangement that would provide her with a steady income stream.88 But 

negotiations stalled due to what Pace described as a “personality conflict” between 

Gottlieb and Schwat.89 Pace suggested that Plaintiff and the Paces meet separately 

with Bonnell, and Plaintiff arranged that meeting.90 They first met in July 2016 and 

then twice subsequently in September and October.91 These meetings were “very 

cordial discussions” and according to Pace, Bonnell was interested in achieving a 

globally amicable solution.92

In the July meeting, Bonnell identified “three possible avenues” for buying 

out Plaintiff’s interests in UIP.93 Pace forwarded these options to Rinaldi, who was 

by then no longer employed by UIP and was serving Plaintiff in his individual 

capacity.94 Rinaldi advised Pace to “push for accounting records on [the operating] 

companies and exercise all rights as a shareholder.”

95

 Pace then requested 

 

88 Trial Tr. at 142:9–16 (Plaintiff).

89 Id. at 29:5–8 (Pace).

90 Id. at 29:9–21 (Pace).

91 Id. at 29:23–30:1 (Pace); id. at 38:16–24 (Pace).

92 Id. at 30:16–17 (Pace); id. at 40:1–11 (Pace).

93 JX-36 at 1; id. at 4 (identifying a “[d]raw option,” a “straight lump sum buyout at a 

discounted value,” and a “buyout at a discounted value spread out in yearly installment 

payments”).

94 Id. at 1.

95 Id. at 3.
16

information on the profitability of the operating companies from Bonnell.96 Bonnell 

responded that “these companies operate close to even” and “there hasn’t been much 

positive revenue generated” since Wout had passed.97 Pace did not believe that 

Bonnell was forthcoming about the operating companies’ true profitability.98

Discussions paused while Bonnell was on vacation in August 2016.99 On 

September 25, 2016, Bonnell emailed Plaintiff a spreadsheet and three proposals that 

he had developed with Schwat to buy out her stake in the Company.100 Bonnell

prefaced the proposals by explaining his belief that it was in Plaintiff’s best interest 

not to walk away from UIP entirely, but to “stay[] in the projects for the full ride, to 

earn the promotes and thus capture the greatest cash flow.”

101

 Plaintiff sought 

Rinaldi’s advice on the proposals102 before Plaintiff, Bonnell, and the Paces, met in 

person in September 2016.103

 

96 JX-38 at 2.

97 Id. at 1.

98 Id.; JX-39 at 1; JX-219 at 1.

99 See JX-40.

100 JX-221 at 2.

101 Id.

102 JX-42.

103 Trial Tr. at 38:14–39:12 (Pace); see JX-222 at 2.
17

At the September meeting, Bonnell offered to buy out Plaintiff’s interests in 

UIP while Plaintiff would retain her interests in the promotes.104 After the meeting, 

Plaintiff asked Rinaldi to estimate the value of UIP.

105 Rinaldi responded that a 

reasonable starting point would be $2.125 million since it was his belief that is what 

was used in the original Term Sheet, even though the Term Sheet included promote 

interests.

106

 Plaintiff later asked Rinaldi to perform a valuation of UIP in 

November 2016,107 and Rinaldi engaged Iver Scott for that purpose.108

UIP was aware that Plaintiff and Rinaldi had engaged Scott to perform a 

valuation. Pace testified that UIP cooperated with Rinaldi, who then liaised with 

Scott.109 As the parties awaited Scott’s valuation, Bonnell continued to engage 

Plaintiff in negotiations. In March 2017, Bonnell sent to Plaintiff financial data and 

again tried to persuade her to take the original deal papered on the Term Sheet.110 

On June 9, 2017, Plaintiff wrote to Bonnell that she would be willing to sell her UIP 

 

104 JX-222 at 3.

105 Id. at 1.

106 Id. The actual value used in the original term sheet was $4.25 million, which Sloan later 

revised downward to $2.5 million. See supra note 58 and accompanying text.

107 Trial Tr. at 44:22–45:19 (Pace).

108 Id. at 48:11–22 (Pace). 

109 Id. at 51:18–24 (Pace).

110 JX-43 at 1 (Bonnell writing: “This is very uncomfortable for me, as I am sure it is for 

you, but I must say that as I think about all this, I am beginning to get upset. I begin to feel 

that you are searching for something that does not exist.”).
18

interests at 50% of the valuation price arrived at by Scott.111 On July 10, 2017, 

Bonnell emailed Rinaldi asking for an update.112

Scott finalized his valuation in June 2017.113 On August 17, 2017, Plaintiff’s 

counsel, Michael Ross of Aegis Law Group, LLP (“Aegis”), sent a letter to Schwat, 

Bonnell, and Wilkinson enclosing Scott’s valuation of UIP and refuting the repeated 

assertions that the Term Sheet constituted an enforceable agreement.114

D. Plaintiff Demands Information.

Plaintiff signaled her intent to begin exercising her rights as a UIP stockholder

as a point of leverage as early as November 2016,115 but she did not implement that 

strategy until August 2017. In the August 2017 letter attaching the Scott valuation, 

Plaintiff demanded to inspect UIP books and records.116 

It is unclear whether the Company responded timely, or at all, to Plaintiff’s 

initial demand to inspect books and records. The record reflects that Bonnell and 

Schwat exchanged a draft of a response to Plaintiff’s letter in September 2017, but 

 

111 JX-227.

112 JX-228.

113 JX-227; Trial Tr. at 54:14–16 (Pace).

114 JX-45.

115 JX-223 at 1 (Pace explaining to Bonnell that Plaintiff sought from her counsel “a listing 

of her full 50% shareholders rights . . . , rights she and the estate will fully intend to 

exercise”).

116 JX-45.
19

nothing in the record informs whether it was ever sent.

117

 On October 11, 2017, 

Plaintiff, through counsel, sent another demand to inspect UIP’s books and 

records.

118

UIP replied to Plaintiff’s second demand through counsel on October 18, 

2017, requesting time to gather profit-and-loss statements for each UIP entity for 

2015, 2016, and 2017.119 The parties then engaged in settlement discussions,120 but 

they remained at an impasse as of March 2018.121

In March 2018, Plaintiff’s counsel, Ross, stated that he would appear at UIP’s 

office to inspect documents at a date certain unless he heard otherwise from UIP.

122

 

That spurred a further letter exchange.123 On April 11, 2018, UIP’s counsel, Deborah 

Baum of the law firm Pillsbury Winthrop Shaw Pittman LLP (“Pillsbury”), 

transmitted documents in response to the books and records request with a promise 

that additional documents would be coming soon.124 Through counsel, the parties 

 

117 JX-229.

118 JX-46; JX-231.

119 JX-232.

120 See JX-233 at 3.

121 Id. at 1.

122 JX-234.

123 See JX-233; JX-234; JX-48.

124 JX-49 at 1; JX-236 at 1.
20

continued to dispute the sufficiency of UIP’s response to the demand for 

inspection.125

E. Plaintiff Calls for a Special Meeting of Stockholders.

On April 4, 2018, in the midst of counsel’s letter exchange concerning 

Plaintiff’s inspection demands, Plaintiff called for a special meeting of the 

stockholders of UIP to elect new members of the Board.126 No election of directors 

or annual stockholder meetings had been held since December 2007, and the 

Company had not acted to fill the vacant Board seats.

127 Thus the director seats once 

held by Bruggen and Wout remained unoccupied.

128

Plaintiff was within her rights to call the special meeting. The UIP bylaws

provide that special meetings of the stockholders, “for any purpose or purposes,”

may be called upon the written request of stockholders holding more than 25% of 

the voting stock of the Company.129 Accordingly, on May 11, 2018, UIP issued a 

 

125 On April 18, 2018, Ross wrote to Baum explaining that UIP’s production was still 

incomplete and insisting on an in-person inspection of books and records at the UIP offices. 

JX-236 at 1. Baum did not respond. On April 27, 2018, after not receiving a response to 

their April 18 letter, representatives of Aegis appeared at the UIP offices to inspect books 

and records. JX-237 at 1. Schwat turned them away. Id. Later that same day, Baum 

responded to Ross disputing his characterization of events and claiming that UIP had 

responded adequately to the inspection demand. JX-82 at 2–3. Ross replied to Baum on 

May 4, 2018, attaching a chart identifying the deficiencies in UIP’s response. Id. at 6–22.

126 PTO ¶ 13.

127 Id. ¶ 10.

128 Id.

129 JX-83 at 1–2.
21

notice of special meeting of stockholders “[t]o vote on the election of directors of 

the Corporation.”

130

 The stockholders meeting was held on May 22, 2018.131

F. The May 22 Stockholders Meeting

The May 22, 2018 meeting was noticed “[t]o vote on the election of directors 

of the Corporation.”

132

 Plaintiff’s attorney, Thomas Shakow of Aegis, attended the 

meeting as Plaintiff’s proxy.

133

 Attorney Serine Consolino of Aegis also attended 

for Plaintiff.134 Schwat attended as a representative of the entity through which he 

holds his UIP stock, Schwat Realty, LLC.135 Attorney Jeffrey B. Grill of Pillsbury

attended as counsel to the Company and served as secretary and inspector of 

elections.136 

At the meeting, Shakow raised three motions on behalf of Plaintiff.

137

 In the

first motion, Shakow moved to reduce the Board seats from five to four.138 Schwat 

voted against the motion, so it failed.

139

 

 

130 PTO ¶ 14.

131 Id.

132 Id.

133 JX-50 at 1.

134 Id.

135 Id.

136 Id.

137 PTO ¶¶ 15–17; JX-50.

138 PTO ¶ 15; JX-50.

139 PTO ¶ 15; JX-50.
22

In the second motion, Shakow moved to fill the seats formerly held by 

Bruggen and Wout with two of Plaintiff’s designated representatives, Brian 

Henderson and Dr. Veronica Hall.140 Henderson is Plaintiff’s son-in-law and has a 

background in insurance sales.141 Hall is Plaintiff’s daughter-in-law and has a 

background in medical research.142 Schwat believed that Plaintiff’s two nominees 

“knew nothing about [UIP’s] business.”

143

 Schwat voted against the motion, and so 

it failed.144 

In the third motion, Shakow moved to vote on the entire five-member board, 

nominating Henderson, Hall, Plaintiff, Schwat, and Bonnell.145 Schwat objected to 

consideration of the third motion because “correspondence from Aegis Law Group 

suggested two proposals to be taken at the special meeting.”

146

 Schwat ultimately 

adjourned the meeting after voting on the second motion, but he “noted that the 

Company would be happy to consider a request for another special meeting.”

147

 

140 PTO ¶ 16; JX-50.

141 JX-295; Trial Tr. at 146:18–147:21 (Plaintiff).

142 JX-296; Trial Tr. at 147:22–148:13 (Plaintiff).

143 Trial Tr. at 356:16–20 (Schwat). 

144 PTO ¶ 16; JX-50.

145 PTO ¶ 17; JX-50.

146 JX-50 at 2.

147 Id.
23

That same day, Plaintiff called for another special meeting to vote on the holdover director seats.148

 While agreeing to the meeting, the Company informed 

Plaintiff’s attorneys that the Board had acted by unanimous written consent to reduce 

the number of seats to three.149 Plaintiff did not challenge this decision through this 

lawsuit.

G. The June 4 Stockholders Meeting

The next stockholders meeting occurred on June 4, 2018.150 Shakow and 

Schwat again attended as representatives for the Company’s stockholders.151 Grill 

again served as secretary and inspector of elections.152 Consolino again attended.153

Three votes were taken at the meeting. Schwat proposed the first vote, which

sought approval of the election of Schwat, Bonnell, and Cox to serve as directors 

until UIP’s next annual meeting or until their successors are duly elected and 

qualified.154 Plaintiff, by proxy, voted against, so it did not pass.155

 

148 PTO ¶ 18.

149 Id.; JX-51.

150 PTO ¶ 19.

151 JX-52 at 2.

152 Id.

153 Id.

154 PTO ¶ 20; JX-52 at 3.

155 PTO ¶ 20; JX-52 at 3.
24

Shakow proposed the second vote, which sought approval to increase the size 

of the Board to five seats and to elect Henderson, Hall, Plaintiff, Schwat, and Bonnell 

to serve as directors until UIP’s next annual meeting or until their successors are 

duly elected and qualified.156 Schwat voted against, so it did not pass.

Shakow proposed the third vote, which sought approval to elect Henderson, 

Hall, and Schwat to serve as directors until UIP’s next annual meeting or until their 

successors are duly elected and qualified.157 Schwat voted against, so it failed to 

pass.158

Following the June 4 stockholders meeting, the Board continued to comprise

three holdover directors appointed in 2007: Schwat, Bonnell, and Cox.159

H. Plaintiff Commences Litigation Seeking the Appointment of a 

Custodian.

On June 15, 2018, Plaintiff filed a complaint in this Court naming Schwat, 

Schwat Realty LLC, and the Company as defendants and seeking the appointment 

of a custodian pursuant to 8 Del. C. § 226(a)(1) (the “Custodian Action”).160 

 

156 PTO ¶ 21; JX-52 at 3.

157 PTO ¶ 22; JX-52 at 3.

158 PTO ¶ 22; JX-52 at 3.

159 PTO ¶ 23; JX-52 at 3.

160 PTO ¶ 24; Dkt. 1, Verified Compl. for Appointment of a Custodian Pursuant to 8 Del. 

C. § 226(a)(1) (“Custodian Compl.”).
25

Plaintiff requested the appointment of a custodian to break the stockholder 

deadlock between her and Schwat.

161

 The complaint mainly sought to impose a 

neutral tie-breaker to facilitate director elections, but it also lodged allegations 

against Schwat. Plaintiff asserted that Schwat “ha[d] received a generous salary 

from the Company and [was] enjoying significant benefit from his 50% stake.”

162

 

Plaintiff alleged that Schwat “prevented Mrs. Coster from gaining a meaningful view 

into the Company’s financial affairs” and “barred her from any representation on the 

Board.”

163

 Plaintiff desired representation on the Board because, according to her, 

Schwat was “making decisions . . . in which [she] ha[d] a right to participate.”

164

 As 

relief, Plaintiff sought the appointment of a custodian with broad oversight and 

managerial powers.165

I. Defendants Moot the Custodian Action by Selling Stock to 

Bonnell.

Almost a month after Plaintiff commenced the Custodian Action, on July 10, 

2019, Defendants reached out to Andy Smith of McLean Group LLC to perform a 

 

161 Custodian Compl. ¶¶ 1, 16, 51–68, 72.

162 Id. ¶ 2. 

163 Id.

164 Id. ¶ 71.

165 Id. ¶¶ 73–74 (requesting a custodian with the power to “exercise full authority and 

control over the Company, its operations, and management”).
26

valuation of UIP.

166 McLean was engaged as of July 16, 2019.167 To conduct a 

conflicts check, Smith requested names of the parties.168 In response, counsel for 

Defendants replied that “[t]he adverse party is Marion Coster and a related entity, 

Coster Realty.”

169

 

Defendants in the Custodian Action obtained an extension of the deadline for 

responding to the complaint to July 27, 2018,170 and they initially pushed Smith to 

prepare the valuation prior to that date.

171

 In a July 25, 2018 email to the McLean 

Group, Schwat emphasized that he was “in a rush for the valuation.”

172

 Then, on the 

advice of counsel, Defendants in the Custodian Action determined to answer the 

complaint and then subsequently amend the answer after the sale of stock to Bonnell

 

166 PTO ¶ 25; JX-241 at 1–2.

167 JX-57; Trial Tr. at 540:5–9 (Smith).

168 JX-244 at 1.

169 Id.

170 JX-257 at 1–2.

171 JX-58 at 1 (July 25, 2018 email from Baum to Schwat, Bonnell, and the McLean Group 

explaining that “if the share issuance and purchase isn’t complete by [July 27, 2017],” the 

parties would need to respond to the complaint in the Custodian Action).

172 Id.
27

was completed.173 On July 27, 2018, Defendants answered the complaint, objecting 

to the appointment of a custodian.174

The McLean Group transmitted its valuation on July 27, 2018.175 By the time 

the McLean Group transmitted thisinitial report, Defendantsto the Custodian Action

were in less of a rush, having determined to file and then amend their answer. 

Schwat thus replied to the email attaching the valuation instructing the McLean 

Group not to hurry the project “in any way,” even if it meant taking additional time 

to arrive at “the value [they] think is truly fair.”

176

 He then further suggested adding 

additional commentary to the report that could justify a lower valuation.177

Schwat and the McLean Group participated in a call on the morning of 

July 27, 2018 to discuss the report.

178

 The McLean Group then had a follow-up call 

with counsel for Custodian Defendants that same day.

179

 Smith testified that he 

 

173 JX-59 at 2 (Baum advising: “[W]e need to be prepared to file an answer on Friday. 

Under the DE rules we can amend as of right within 20 days. So we can amend as soon as 

the transaction is done. . . . I don’t want you to have to hire separate counsel to represent 

the company if we are just going to fix the problem via stock issuance.”).

174 PTO ¶ 26; Dkt. 11, Answer to Verified Compl. for Appointment of a Custodian.

175 JX-62 at 2.

176 Id. at 1.

177 JX-262 at 2 (“I think there could be more editorial about the company and some of the 

details that limit using certain types of valuations and affect the value from a qualitative 

aspect.”). 

178 JX-265.

179 JX-62.
28

incorporated “some additional comments” from these calls and issued a “follow-up 

report” where “[t]he numbers didn’t change” but “some of the language in the report 

changed.”

180

On August 14, 2018, the McLean Group sent to Schwat a final valuation, and 

for simplicity this decision refers to the final valuation as the McLean Valuation.

181

 

The McLean Valuation determined the fair market value of a 100-percent, 

noncontrolling equity interest in UIP to be $123,869.182 That same day, Schwat 

forwarded the final valuation to Bonnell and offered to sell him one-third of UIP’s

authorized but unissued shares at a price equal to one-third of the valuation.183

Bonnell agreed, and on August 15, the Board acted by unanimous written consent to 

sell 33 1/3 shares of UIP stock to Bonnell Realty LLC for $41,289.67 (the “Stock 

Sale”).

184

 With this purchase, Bonnell became a one-third owner of UIP alongside 

Schwat and Plaintiff.

 

180 Trial Tr. at 511:6–14 (Smith). In briefing, Plaintiff points out that the earlier draft of 

the valuation contained the following language that did not appear in the final draft: “Based 

on information provided by management, [the UIP] business structure is designed to 

provide breakeven profits at the UIP Companies level in order for the underlying real estate 

investments to realize more profits.” JX-67 at 7. Plaintiff failed to prove that Schwat 

suggested this revision or that even if he did, the revision was of consequence. Indeed, 

Plaintiff also failed to elicit testimony regarding the nature of Schwat’s comments or 

whether any were incorporated into the final valuation report.

181 JX-288.

182 JX-66 at 4.

183 JX-288.

184 PTO ¶ 27.
29

Also on August 15, 2018, Defendants in the Custodian Action filed an 

amended answer, which stated an intention to move for judgment on the pleadings 

because the Custodian Action had been mooted by the Stock Sale.

185

The parties debate the purpose of the Stock Sale. To argue that such purpose

triggers and fails under enhanced scrutiny, Plaintiff contends that the Stock Sale’s 

primary purpose was to disenfranchise her. Defendants deny that enhanced scrutiny 

applies or that disenfranchisement was their primary purpose. Because this decision 

applies the entire fairness standard, the issue is largely moot. Yet because it was a 

focal point of many pages of briefing, this decision digresses briefly to render factual 

findings.

Defendants offered many justifications for the Stock Sale throughout the case. 

Defendants obviously desired to eliminate Plaintiff’s ability to block stockholder 

action, including the election of directors, and the leverage that accompanied those 

rights. Yet the timing of the sale, emails from counsel to Defendants during that 

time period,186 trial testimony reflecting that Defendants viewed the appointment of 

 

185 Id. ¶ 28; Dkt. 12, Amended Answer to Verified Compl. for Appointment of a Custodian 

(“Amended Answer”).

186 Compare JX-58 at 1 (Baum requesting an update on the status of the McLean Group 

valuation because “[Defendants] need to respond (and probably should have a second 

counsel answer for the company) if the share issuance and purchase isn’t complete by 

Friday”), with JX-59 at 2 (Baum advising Schwat and Bonnell that there was no need to 

hire separate counsel to represent UIP because the stock issuance would “fix the problem”).
30

a custodian as deleterious to UIP,187 and Defendants’ own Amended Answer188 make 

clear that the Stock Sale was significantly motivated by a desire to moot the 

Custodian Action. Defendants effectively admitted this much in post-trial 

briefing.189 And Defendants further demonstrate that the Custodian Action was 

deleterious to UIP for reasons unrelated to Plaintiff. Schwat testified and Bonnell 

corroborated that the appointment of a custodian constituted an event of default 

under various SPE contracts.190 Thus, the appointment of a custodian threatened to 

 

187 Trial Tr. at 358:2–5 (Schwat testifying that his own concerns were that “if somebody 

were to appoint a custodian to come in and manage the company in place of [Bonnell] and 

I, our JV partners would likely terminate the agreements they have with us”). Bonnell 

corroborated this testimony. Id. at 456:13–17 (Bonnell testifying that “many of the 

operating agreements are specific that the appointment of a custodian is a default”).

188 PTO ¶ 28 (Amended Answer stating that “UIP has issued the remaining 33 1/3 shares 

of its stock and sold it at fair market value to Mr. Bonnell’s entity, Bonnell Realty, LLC”

and that “Defendants expect to move for judgment on the pleadings” on account of the 

affirmative defense that “[t]he Complaint is moot”).

189 Dkt. 142, Individual Defs.’ Opening Post-trial Br. (“Defs.’ Post-trial Opening Br.”) 

at 21 (summarizing concerns “about keeping the Company together, in terms of the 

potential impact of the custodian action on the Company’s operations, the need to keep 

Mr. Bonnell motivated to continue to stay at the Company . . . , and the potential for a 

devastating exodus of approximately 100 employees due to fears surrounding this 

litigation”).

190 Trial Tr. at 358:2–5 (Schwat testifying that “if somebody were to appoint a custodian 

to come in and manage the company in place of Pete and I, our [equity] partners would 

likely terminate the agreements they have with [UIP]”); id. at 457:10–19 (Bonnell 

testifying that “the primary investor . . . has broad authority to terminate . . . those 

agreements”). Defendant’s expert, Zell testified that such termination provisions are 

typical within the real estate industry. Id. at 496:20–497:19 (Zell). Plaintiff does not 

dispute the existence of broad termination rights and clauses identifying the appointment 

of a custodian as a default in various of the Company’s services contracts with SPEs. 

Plaintiff argues instead that this is not a real threat because Defendants did not show that 

their lending parties would actually exercise their termination rights, but it is not 
31

cut off a substantial amount of UIP’s revenue streams, justifying Defendants’ efforts 

to moot the Custodian Action.

Also at trial, Schwat and Cox testified that, as much as anything, the Stock 

Sale was motivated by their desire to keep their promise to Bonnell. Cox testified 

that he approved the Stock Sale because it “effectuated the purpose of the [T]erm 

[S]heet,”

191 and Schwat testified that they agreed to the Stock Sale because they “had 

promised” Bonnell that they would do so.192 This testimony also rang true, as 

Bonnell was viewed as essential to the Company’s survival.193

 

unreasonable for a party to believe that a counterparty would exercise its contractually 

granted rights and thus harm the Company.

191 Trial Tr. at 201:8 (Cox).

192 Id. at 359:11–13 (Schwat).

193 As far back as 2014, prior to any litigation, Schwat wrote to Wout that retaining Bonnell 

was crucial to UIP’s business model: “Without Heath we can survive but without Pete; it’s 

over as far as I am concerned.” JX-10 at 1–2. Zell’s trial testimony confirmed that both 

principals, Schwat and Bonnell, were critical to the survival of UIP’s business model 

because they were the sole originators of the investment deals from which UIP derived its 

revenue. Trial Tr. at 500:9–501:12 (Zell testifying that if Schwat or Bonnell were to “leave 

or if anything happens, [the operating companies] have no value”). The McLean Valuation 

corroborates Zell’s observation that SPE equity investors, and in some cases the lenders, 

could cut ties with UIP in the event Schwat or Bonnell is no longer with UIP. JX-66 at 54. 

Further, the Stock Sale incentivized Bonnell to remain at UIP because his 33% voting rights 

afford him incrementally greater influence at UIP. This control is important to Bonnell 

because the directors manage the affairs of the operating companies, which exist to service 

the SPEs that generate the lion’s share of Bonnell’s revenue. Trial Tr. at 310:20–311:5 

(Schwat explaining that “third-party property management clients are not going to get 

treated as well as if I own it. And so really, the goal is control.”).
32

Thus, although the issue is somewhat beside the point in light of the legal 

framework applied in the below legal analysis, Plaintiff did not succeed in proving 

her theories regarding Defendants’ purposes or justifications.

J. Plaintiff Files New Litigation Seeking to Cancel the Stock Sale.

On August 22, 2018, Plaintiff, individually and derivatively on behalf of UIP, 

filed a Verified Complaint for Cancellation of Stock Issue or Imposition of 

Constructive Trust (the “Cancellation Action”) against Schwat, Bonnell, Bonnell 

Realty, LLC, and Cox.194 Upon stipulation of the parties, the Court consolidated the 

Cancellation Action with the previously-filed Custodian Action.195 Trial took place 

on April 17 and 18, 2019.196 Post-trial briefing concluded on August 26, 2019.197

The Court held post-trial arguments on October 17, 2019.198

 

194 PTO ¶ 29.

195 Id. The consolidation order adopted the caption of the first-filed case, the Custodian 

Action, which did not name Bonnell or Bonnell Realty, LLC as a defendant. See Dkt. 16, 

Stipulation and Order to Consolidate Cases ¶ 3. To be clear, Bonnell and Bonnell Realty, 

LLC are defendants in this consolidated action despite the absence of their names in the 

caption.

196 Dkt. 117.

197 Dkt. 99, Individual Defs.’ Pre-trial Br. (“Defs.’ Pre-trial Br.”); Dkt. 100, Pl. Marion 

Coster’s Pre-trial Br. (“Pl.’s Pre-trial Br.”); Defs.’ Post-trial Opening Br.; Dkt. 143, 

Corrected Pl.’s Post-trial Br. (“Pl.’s Post-trial Opening Br.”); Dkt. 148, Individual Defs.’ 

Post-trial Answering Br. (“Defs.’ Post-trial Answering Br.”); Dkt. 149, Pl.’s Post-trial 

Answering Br.

198 Dkt. 156.
33

II. LEGAL ANALYSIS

In post-trial briefing, the parties focused their arguments on Plaintiff’s claim 

to cancel the Stock Sale. Plaintiff contends that in the event the Stock Sale is 

cancelled, the Court should appoint a custodian pursuant to Section 226(a)(1) of the 

Delaware General Corporation Law, which empowers the Court to appoint 

custodians to break stockholder deadlock. Plaintiff further argues that any custodian 

appointed by the Court should have broad powers in view of what she describes as 

“numerous financial irregularities that have been uncovered in discovery” relating 

to Schwat’s management of UIP.199 Defendants respond that because the Stock Sale

did not constitute a breach of fiduciary duty, no relief is warranted.200 This decision 

follows the parties’ lead, focusing first on Plaintiff’s challenges to the Stock Sale, 

and then addressing the ramifications of those rulings on the remaining claims and 

issues.

A. The Stock Sale

At the threshold, the parties dispute the standard of review that the Court 

should apply to the Stock Sale. “[I]dentification of the correct analytical framework 

 

199 Pl.’s Post-trial Opening Br. at 45.

200 In making these arguments, the parties cut to the heart of the matter, glossing over 

numerous legal defenses often raised in response to claims challenging stock issuances. 

For example, Defendants do not argue that Plaintiff lacks standing to pursue what is in 

essence a derivative claim. For the most part, this decision joins the parties on the 

battlefield they have selected, resolving the issues they have raised, and ignoring the issues 

they have avoided.
34

is essential to a proper judicial review of challenges to the decision-making process 

of a corporation’s board of directors.”

201

“Delaware has three tiers of review for 

evaluating director decision-making: the business judgment rule, enhanced scrutiny, 

and entire fairness.”

202

 Plaintiff argues that entire fairness or enhanced scrutiny

ought to apply. Defendants argue that they are entitled to the presumption of the 

business judgment rule and, alternatively, that the transaction passes entire fairness 

review and enhanced scrutiny.

203

Delaware’s default standard of review, the business judgment rule, “posits a 

powerful presumption in favor of actions taken by directors in that a decision made 

by a loyal and informed board will not be overturned by the courts unless it cannot 

be attributed to any rational business purpose.”

204

 If “the business judgment rule 

attaches to protect corporate officers and directors and the decisions they make, our 

courts will not second-guess these business judgments.”

205

 “Only when a decision 

 

201 MM Cos. v. Liquid Audio, Inc., 813 A.2d 1118, 1127 (Del. 2003) (citing Unitrin, Inc. v. 

Am. Gen. Corp., 651 A.2d 1361, 1374 (Del. 1995)).

202 Reis v. Hazlett Strip–Casting Corp., 28 A.3d 442, 457 (Del. Ch. 2011).

203 Defs.’ Post-trial Opening Br. at 31–42; Defs.’ Post-trial Answering Br. at 17–37.

204 Cede & Co. v. Technicolor, Inc., 634 A.2d 345, 361 (Del. 1993) (citing Sinclair Oil 

Corp. v. Levien, 280 A.2d 717, 720 (Del. 1971)).

205 Id. (citing Citron v. Fairchild Camera & Instrument Corp., 569 A.2d 53, 64 (Del. 1989); 

Smith v. Van Gorkom, 488 A.2d 858, 872 (Del. 1985)).
35

lacks any rationally conceivable basis will a court infer bad faith and a breach of 

duty.”

206

A plaintiff can negate the presumption of the business judgment rule and shift 

the burden of proving entire fairness to the defendants if the plaintiff can show that 

the action in question was not “taken by a board majority comprised of disinterested 

and independent directors.”

207

 Entire fairness “is the highest standard of review in 

corporate law”

208 and requires the defendants to establish that the underlying 

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

209

In between these standards lies enhanced scrutiny, or the Unocal210 doctrine,

which “rests in part on an ‘assiduous . . . concern about defensive actions designed 

to thwart the essence of corporate democracy by disenfranchising shareholders.’”

211

 

“The Unocal standard is a flexible paradigm that jurists can apply to the myriad of 

‘fact scenarios’ that confront corporate boards.”

212

 Unocal applies where “the record 

 

206 In re Trados Inc. S’holder Litig., 73 A.3d 17, 43 (Del. Ch. 2013).

207 In re Crimson Expl. Inc. S’holder Litig., 2014 WL 5449419, at *9 (Del. Ch. Oct. 24, 

2014) (citing Aronson v. Lewis, 473 A.2d 805, 814 (Del. 1984)).

208 Kahn v. M & F Worldwide Corp., 88 A.3d 635, 644 (Del. 2014).

209 Cede & Co. v. Technicolor, Inc., 634 A.2d at 361 (citing Nixon v. Blackwell, 626 A.2d 

1366, 1376 (Del. 1993)).

210 Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985).

211 In re Santa Fe Pac. Corp. S’holder Litig., 669 A.2d 59, 67 (Del. 1995) (quoting Unitrin, 

651 A.2d at 1378). 

212 Unitrin, 651 A.2d at 1374 (citing Paramount Commc’ns, Inc. v. Time, Inc., 571 A.2d 

1140, 1153 (Del. 1990)). 
36

reflects that a board of directors took defensive measures in response to a perceived 

threat to corporate policy and effectiveness which touches upon issues of control.”

213

 

Under Blasius,

214 where the challenged defensive measures were for the “primary

purpose of impeding or interfering with the effectiveness of a shareholder vote,” the 

Unocal analysis ratchets up to require defendants to demonstrate a “compelling 

justification” for such action.215

This decision first concludes that entire fairness applies to the Stock Sale, and 

that the Stock Sale passes entire fairness review. Because the Stock Sale satisfies 

Delaware’s most onerous standard of review, this decision does not reach Plaintiff’s 

alternative arguments.216

 

213 Id. at 1372 n.9 (Del. 1995) (citing Stroud v. Grace, 606 A.2d 75, 82 (Del. 1992)).

214 Blasius Indus., Inc. v. Atlas Corp., 564 A.2d 651 (Del. 1988).

215 Liquid Audio, 813 A.2d at 1128 (citing Blasius, 564 A.2d at 659–60).

216 See Unitrin, 651 A.2d at 1377 n.18 (holding that a director can pass Unocal review by 

demonstrating that the challenged transaction meets entire fairness because “the directors’ 

failure to carry their initial burden under Unocal does not, ipso facto, invalidate the board’s 

actions” and “once the Court of Chancery finds the business judgment rule does not apply, 

the burden remains on directors to prove ‘entire fairness’” (emphasis added)); In re 

Gaylord Container Corp. S’holders Litig., 753 A.2d 462, 476 (Del. Ch. 2000) (noting that 

“a board that fails to meet its Unocal burden may still prevail by demonstrating that its 

actions satisfied the exacting entire fairness test”); Chesapeake Corp. v. Shore, 771 A.2d 

293, 333 (Del. Ch. 2000) (noting that “under Unocal, it putatively remains open to the 

defendants to demonstrate that the [board action] was ‘entirely fair’ even though their threat 

analysis . . . was inadequate”).
37

1. The Stock Sale Is Subject to Entire Fairness Review.

To invoke entire fairness review of the Stock Sale, Plaintiff argues that a 

majority of the Board that approved the transaction was interested or lacked 

independence from a party who was interested in the transaction.

The concept of “interestedness” encompasses a wide variety of personal 

motivations. A personal financial benefit derived from the transaction can certainly 

give rise to an improper interest.217 The personal financial benefit must be of 

“sufficiently material importance, in the context of the director’s economic 

circumstances, as to have made it improbable that the director could perform her 

fiduciary duties to the [company] shareholders without being influenced by her 

overriding personal interest.”

218

 But the concept of interestedness is not limited to 

financial considerations. “Human relations and motivations are complex,”

219 or to 

use a millennial generation catch phrase, “it’s complicated.” As this Court explained 

in RJR Nabisco, “[g]reed is not the only human emotion that can pull one from the 

path of propriety; so might hatred, lust, envy, revenge, or, as is here alleged, shame 

 

217 A “director is interested in a transaction if ‘he or she will receive a personal financial 

benefit from a transaction that is not equally shared by the stockholders’ or if ‘a corporate 

decision will have a materially detrimental impact on a director, but not on the corporation 

and the stockholders.’” In re Trados Inc. S’holder Litig., 2009 WL 2225958, at *6 (Del. 

Ch. July 24, 2009) (quoting Rales v. Blasband, 634 A.2d 927, 936 (Del. 1993)).

218 In re Gen. Motors Class H S’holders Litig., 734 A.2d 611, 617 (Del. Ch. 1999).

219 In re S. Peru Copper Corp. S’holder Deriv. Litig., 52 A.3d 761, 778 (Del. Ch. 2011).
38

or pride.”

220

 “Indeed any human emotion may cause a director to place his own 

interests, preferences or appetites before the welfare of the corporation.”

221

 “A 

special case arises when the claimed financial interest is not in the transaction itself, 

but is an interest in maintaining the present board in power.”

222

 Specifically, this 

Court has reasoned that it is reasonable to infer that incumbents would not place 

effective control of a company in the hands of a third party “without having some 

confidence that [the third party] would support their bid for continued 

incumbency.”

223

“Independence means that a director’s decision is based on the corporate 

merits of the subject before the board rather than extraneous considerations or 

influences.”

224

 “This inquiry may include the subject of whether some or all 

directors are ‘beholden’ to or under the control, domination or strong influence of a 

party with a material financial interest in the transaction under attack, which interest 

is adverse to that of the corporation.”

225

 

220 In re RJR Nabisco, Inc. S’holders Litig., 1989 WL 7036, at *15 (Del. Ch. Jan. 31, 1999).

221 Id.

222 Id. at *14. 

223 Packer v. Yampol, 1986 WL 4748, at *10 (Del. Ch. Apr. 18, 1996).

224 Aronson, 473 A.2d at 816.

225 Friedman v. Beningson, 1995 WL 716762, at *4 (Del. Ch. Dec. 4, 1995) (citing Rales, 

634 A.2d at 936).
39

The board that approved the Stock Sale comprised Schwat, Bonnell, and 

Cox.226 Defendants concede that Bonnell was interested because he received a 

benefit as the recipient of the stock that was approved.227 Thus, if either Schwat or

Cox was interested or lacked independence from an interested person, the entire 

fairness standard applies.

As to Schwat, Plaintiff’s primary theory is that he was interested in the Stock 

Sale because it allowed him to preserve his managerial control over the Company.

228

 

By “neutralizing the Custodian Action that was pending against [Schwat]

personally,” Schwat eliminated that concern.229 Defendants respond that Schwat 

gained no disabling benefit from the Stock Sale, which diluted Schwat’s own 

holdings, harmed his financial interests, and weakened his ability to block 

stockholder action.

230

While Defendants’ arguments are true in form, the facts reveal that Schwat in 

fact had reasons to support the transaction beyond the beneficial business effects 

discussed supra Section I.I. This reasoning starts with an obvious observation: the 

 

226 PTO ¶ 27.

227 Defs.’ Pre-trial Br. at 31.

228 Pl.’s Post-trial Opening Br. at 28 (“By definition, all three of the Board members were 

interested in the issuance of stock to Mr. Bonnell: the custodian lawsuit threatened to 

extinguish their complete control over the Company.”).

229 Id. at 28–29.

230 Defs.’ Post-trial Opening Br. at 37; Defs.’ Post-trial Answering Br. at 26.
40

relief sought in the Custodian Action was invasive from Schwat’s perspective. At 

the time Plaintiff filed the Custodian Action, Plaintiff could not reduce Schwat’s 

control, terminate his employment, or effect change to any member of Schwat’s 

team. The original complaint in the Custodian Action sought to change that by 

requesting, among other things, the appointment of a custodian to “exercise full 

authority and control over the Company, its operations, and management” and 

“continue or terminate the services to the Company of anyone, including present 

employees, agents, officers, and directors, as he or she deems appropriate.”

231

 Put 

differently, Plaintiff wanted to give an unknown person all of Schwat’s management 

power along with the power to fire Schwat and any UIP employee. Schwat wished 

to avoid that.

The next observation is equally uncontroversial: Schwat and Bonnell are good 

friends. Schwat testified that “[Bonnell] and I have a relationship that can only be 

described as being similar to my marriage.”

232

 He further testified that he takes 

“huge pleasure in [his] ability to leave for three weeks” because he trusts Bonnell’s 

stewardship in his absence.233 Bonnell confirmed that their relationship had evolved

 

231 Custodian Compl. at 13–14.

232 Trial Tr. at 361:7–8 (Schwat).

233 Id. at 320:16–22 (Schwat).
41

from employer-employee to “partner[s].”

234

 At the June 4 stockholder meeting, 

Schwat included Bonnell on his slate of proposed directors.

235

 Further, from the 

inception of Wout’s transition planning negotiation, Schwat and Bonnell appeared 

to be aligned in negotiations against Wout.

236

 They also worked together to develop 

the plan to moot the Custodian Action and neutralize the threat of Plaintiff 

controlling the Company.237 

In the end, Schwat faced a choice between the lesser of evils. He could dilute 

his economic and voting power by placing stock in Bonnell’s friendly hands or risk 

surrendering power over UIP to an unknown custodian.238 The Stock Sale most 

effectively served his personal interest. By placing stock in the hands of his friend, 

Schwat quashed any risk, however minimal, of this Court ordering the expansive 

 

234 Id. at 423:4–15 (Bonnell); see also id. at 423:16–425:23 (Bonnell describing comanagement style with Schwat).

235 PTO ¶ 20; JX-52 at 3.

236 See, e.g., JX-6 (Schwat emailing Wout in April 2014 that “[Bonnell] and [Wilkinson] 

and I are the best buyers of your shares, and [i]f you wait too long, no one will buy them”); 

JX-138 at 1 (Schwat emailing Bonnell separately in June 2014 complaining that Wout was 

“going to tank this deal”); JX-23 at 1 (Schwat emailing Bonnell in August 2014 that Wout’s 

complaints were “a real problem”).

237 See, e.g., JX-58 (Schwat emailing Bonnell, Smith, Baum and other counsel to discuss 

timeline for McLean Valuation); JX-59 at 2 (Baum emailing Schwat and Bonnell, copying 

her Pillsbury colleagues, regarding strategy for filing amended answer).

238 See Packer, 1986 WL 4748, at *10 (“[H]uman experience makes it unlikely that [a 

company’s] current directors . . . would have conferred significant voting and ‘transaction 

blocking’ rights upon [a third party], without having some confidence that [the third party] 

would support their bid for continued incumbency.”)
42

relief Plaintiff sought in the Custodian Action and mitigated any pressure from 

Plaintiff at the Board level. For these reasons, the Court finds that Schwat was 

interested in the Stock Sale.

Whether Cox was interested for the same reasons as Schwat presents a closer 

call. He, too, was an officer and an employee of UIP and thus was inclined to favor 

the status quo threatened by the Custodian Action. Yet, Cox was not a founder of 

UIP, so his desire to maintain power within the Company differed from Schwat’s by 

degrees. Further, Plaintiff did not prove that Cox’s personal assets were tied up in 

the SPEs serviced by UIP such that control over the operating companies mattered 

as much to him. And at trial, Defendants elicited testimony to show that Cox is 

independently wealthy such that his financial interests in UIP might not be material 

to him, undercutting Plaintiff’s arguments that Cox was beholden to Schwat.

239

 In 

the end, the record is clear as to the conflict of Bonnell and Schwat, and thus, this 

decision need not reach a conclusion as to Cox.

Because a majority of the Board was interested in the Stock Sale, Defendants 

bear the burden of proving that the Stock Sale passes muster under the entire fairness 

standard of review.

 

239 Trial Tr. at 183:1–9 (Cox describing ownership of 22 Papa John’s pizza stores and a 

diversified investment portfolio of stocks and other real estate ventures).
43

2. The Stock Sale Passes Entire Fairness Review.

“The concept of fairness has two basic aspects: fair dealing and fair price.”

240

 

The fair dealing inquiry “embraces questions of when the transaction was timed, 

how it was initiated, structured, negotiated, disclosed to the directors, and how the 

approvals of the directors and the stockholders were obtained.”

241

 While “the test 

for fairness is not a bifurcated one as between fair dealing and price . . . in a nonfraudulent transaction we recognize that price may be the preponderant 

consideration outweighing other features of the merger.”

242

 A finding that the 

directors “did not follow a fair process does not constitute a separate breach of duty,”

and thus does not compel a finding of fiduciary breach because the inquiry is unitary 

in nature.243

a. Fair Process

Plaintiff identifies several defects in the process that she argues compel a 

finding of unfairness.244 Certain of these criticisms are more straightforward than 

the rest. First, Plaintiff takes issue with the timing of the McLean Valuation because 

 

240 Weinberger v. UIP, Inc., 457 A.2d 701, 711 (Del. 1983). 

241 Id.

242 Id.

243 Trados, 73 A.3d at 78 (finding post-trial that transaction ascribing zero value to common 

stock was entirely fair despite unfair process). Cf. Kahn v. Tremont Corp., 694 A.2d 422, 

432 (Del. 1997) (holding that process was “so intertwined with price” that a finding of fair 

price would not allow the defendants to prevail).

244 Pl.’s Post-trial Opening Br. at 30–35.
44

Smith arrived at his valuation over a span of approximately two weeks. To recap, 

Defendants engaged Smith and the McLean Group to value UIP on July 16, 2019.245 

Smith first issued his valuation of the Company on July 27, 2019,246 before issuing 

an updated report on August 14, 2019.247 Other than unsubstantiated assertions by 

Margolin that a forensic accounting was essential to valuing UIP,248 Plaintiff has not 

cited to evidence that the timing alone detracted from the McLean Valuation’s 

accuracy.

Next, Plaintiff points out that the stock was offered only to a single buyer and

that UIP did not conduct a market check. But Zell credibly summarized the effects 

of UIP’s corporate structure: “Given the lack of certainty of income flow and the 

short-term, terminable status of the contracts, the service companies have little or no 

value to an independent investor or potential purchaser.”249 Given this reality, 

Plaintiff’s failure to conduct a “market check” is not a process defect.

 

245 JX-57; Trial Tr. at 540:5–12 (Smith).

246 JX-262; JX-67.

247 JX-288; JX-66.

248 Margolin opines that a forensic accounting is essential for all fair value determinations, 

Trial Tr. at 243:19–244:15 (Margolin), but that overstates Delaware law. Instead, as 

discussed below, Plaintiff bears the burden of demonstrating an evidentiary basis from 

which the Court can conclude that normalizing adjustments to the cash flow model’s inputs 

are necessary. See, e.g., Laidler v. Hesco Bastion Envtl., Inc., 2014 WL 1877536, at *10–

11 (Del. Ch. May 12, 2014) (adopting capitalized cash flow methodology in absence of 

forensic accounting). 

249 JX-78 at 4; accord id. at 4 (“The UIP Companies owns service companies that were 

formed to provide services to investment properties in which UIP’s principals have 
45

Further, Plaintiff criticizes that there was no official Board meeting held to 

consider the Stock Sale.

250

 Although this is a genuine concern, it is one with little 

heft here. It is doubtful that a meeting of a majority of conflicted directors would 

have cured any defects in the process. 

Last, Plaintiff attacks Smith’s credibility, arguing that he viewed Plaintiff as 

an adversary from the outset, which caused him to issue a results-driven valuation 

that artificially suppresses the value of the Company.251 Because the fair price

 

interests and do not typically provide such services to third-party owners.”); JX-66 at 47, 

54 (explaining extent of key person risk inherent in UIP’s business model); Trial Tr. at 

495:23–496:19 (Zell testifying: “The issue here is you want to create the most value for 

your real estate investment, and so people want to control the property management people 

so that they rent the units at the highest possible value. They want the people doing it to 

be the people they choose to do it, versus third parties. . . . [UIP] chose to do it themselves, 

because they believe that if they could perform better and utilize their [operating] 

companies to perform better, what it does is it creates additional value in the SPE.”); id. at 

310:20–311:5 (Schwat explaining that the principals operate UIP because “third-party 

property management clients are not going to get treated as well” if he does not service 

them); id. at 311:6–18 (Schwat explaining that having a “general contractor under our own 

roof in our offices gives us the ability to budget projects very early on” which is “the most 

valuable aspect of having the construction company under the same roof”); id. at 338:8–11 

(Schwat testifying that the value of UIP corresponded to “putting a value on the goodwill 

of the two partners”).

250 Plaintiff also argues that one of the directors that approved the Stock Sale, Cox, did so 

not because it was in the best interests of stockholders, but because it “effectuate[d] the 

spirit of the [T]erm [S]heet.” Trial. Tr. at 202:7–13 (Cox). “A director’s failure to 

understand the nature of his duties can be evidence of unfairness.” Trados, 73 A.3d at 62. 

But this theory is subsumed by Plaintiff’s general argument that the Board was not an 

effective negotiator due to the directors’ disabling conflicts, which the Court has addressed.

251 Cede & Co. v. Technicolor, Inc., 2003 WL 23700218, at *7 (Del. Ch. Dec. 31, 2003) 

(describing concerns with valuations based on projections developed after litigation 

commences because they are tainted by “hindsight bias and other cognitive distortions” 

(quoting Agranoff v. Miller, 791 A.2d 880, 892 (Del. Ch. 2001)), rev’d on other grounds, 

884 A.2d 26 (Del. 2005).
46

analysis conducted below relies heavily on the McLean Valuation, Plaintiff’s 

arguments regarding Smith’s alleged bias warrant discussion.

It is true that Smith ran Plaintiff’s name as an adversary for conflicts purposes, 

but that ministerial best practice hardly impugns his opinion.

It is also true that after Smith issued his original valuation report, he 

participated in calls with Schwat, Bonnell, and Defendants’ counsel,252 and 

subsequently issued a revised report.253 The revisions, however, did not change the 

valuation. The only change brought to light by the parties was Smith’s removal of 

language summarizing his belief that the purpose of the UIP corporate structure was 

“to provide breakeven profits at the UIP Companies level in order for the underlying 

real estate investments to realize more profits.”254 

 

252 JX-265; JX-62.

253 JX-288 (Smith clarifying that “[t]he attached report is our final draft and supersedes the 

prior report in order to incorporate . . . some additional language related to the description 

of the business”).

254 Compare JX-67 at 7 (“UIP Companies and its subsidiary primarily serve the realty 

businesses of its owners, as the majority of the Company’s revenue (over 95%) comes from 

SPEs that have Schwat Realty LLC and Coster Realty LLC as equity members. Based on 

information provided by management, this business structure is designed to provide 

breakeven profits at the UIP Companies level in order for the underlying real estate 

investments to realize more profits.”), with JX-66 at 7 (“UIP Companies and its subsidiaries 

primarily serve the realty businesses of its owners, as nearly all of the Company’s revenue 

comes from SPEs in which the owners are investors. Based on information provided by 

management, the vast majority of profits to the owners have been generated through the 

SPEs and not UIP Companies, which is not unusual in the industry for tax and other 

reasons.”). Unfortunately, neither party elicited trial testimony regarding the reasons for 

this change. At his deposition, Smith could not recall the specific changes made as a result 

of his call with Schwat. Smith Dep. Tr. (Feb. 14, 2019) at 64:12–22.
47

It is further true that only three days after Smith first corresponded with

Schwat, Smith wrote to a third party and expressed his belief that “there is no value”

to the operating companies of UIP.255 One could view this fact cynically, concluding 

that any analysis taken thereafter was results-driven window-dressing on an 

uninformed gut reaction. But such a conclusion is not warranted here. Smith is a 

senior managing director and holds a number of professional licenses: he is a 

certified public accountant, a member of the American Society of Appraisers, a 

certified valuation analyst, and a holder of an accredited business valuation from the 

American Institute of Certified Public Accountants.256 Smith has extensive

professional experience valuing real estate entities.

257 He is exceptionally

knowledgeable about the industry.258 He held informed beliefs concerning UIP’s 

type of corporate structure, which he later confirmed at trial.259 Smith’s extensive 

knowledge on the profitability of corporations structured like UIP is not a process 

defect.

 

255 JX-56; Trial Tr. at 538:16–23 (Smith).

256 Trial Tr. at 504:2–3 (Smith); id. at 505:6–13 (Smith).

257 Id. at 508:9–21 (Smith).

258 Id. at 506:9–508:21 (Smith explaining how McLean Group conducts “about 300 

valuations a year” for clients in the “lower middle-market,” including “a variety of 

companies in the real estate sector”).

259 Id. at 539:6–10 (Smith on cross examination, confirming his perspective that “there’s 

no material value when you have an SPE structure and property management companies 

that serve it, you typically don’t have significant value to the stand-alone operating 

company behind it”); id. at 539:13–22 (Smith).
48

Further, Smith’s perspective on UIP’s profitability is not unique. Wout 

himself opined in 2014 that “the only real value of UIP [Asset Management, Inc.] is 

that it creates promote interests to the owner that are a multiple value of the operating 

companies.”260 Wilkinson testified to similar effect,261 and Schwat echoed these 

sentiments in 2014 well before any litigation arose.262

Thus, Plaintiff’s attempts to impugn the process by portraying Smith as biased 

miss the mark. The Court credits Smith’s valuation and testimony. Although the 

procedural process was by no means optimal, Plaintiff’s fair dealing arguments 

standing alone do not prove that the price reached was unfair. While “process can 

infect price,” Delaware law is clear that “the test for fairness is not a bifurcated one”

and “price may be the preponderant consideration outweighing other features of the 

[transaction].”

263

 With that in mind, the Court moves to evaluating the fair price 

inquiry.

b. Fair Price

The fair price inquiry as to the Stock Sale considers “the economic and 

financial considerations of the proposed [transaction], including all relevant factors: 

 

260 JX-3 at 1.

261 Trial Tr. at 171:2–9 (Wilkinson noting “the ownership SPE was where the money 

was . . . to be made”).

262 JX-6 at 1; see also Trial Tr. at 326:17–22 (Schwat).

263 Weinberger, 457 A.2d at 711.
49

assets, market value, earnings, future prospects, and any other elements that affect 

the intrinsic or inherent value of a company’s stock.”

264

 “The value of a corporation 

is not a point on a line, but a range of reasonable values.”

265

 “[T]he court asks 

whether the transaction was one ‘that a reasonable seller, under all of the 

circumstances, would regard as within a range of fair value; one that such a seller 

could reasonably accept.’”

266

“[T]he ‘fair price’ aspect of the unitary entire fairness standard is widely 

regarded as requiring a valuation analysis equivalent to the ‘fair value’ inquiry in an 

appraisal.”

267

 “‘The underlying assumption in an appraisal valuation is that the 

dissenting shareholders would be willing to maintain their investment position had 

the merger not occurred.’ Accordingly, the corporation must be valued as a going 

concern based upon the ‘operative reality’ of the company as of the time of the 

 

264 Id.; see Applied Energetics, Inc. v. Farley, 2019 WL 334426, at *7 (Del. Ch. Jan. 23, 

2019) (applying Weinberger fair value principles to self-dealing sale of stock); In re Nine 

Sys. Corp. S’holders Litig., 2014 WL 4383127, at *38 (Del. Ch. Sept. 4, 2014) (applying 

Weinberger fair value principles to a recapitalization where controllers caused company to 

issue new classes of stock for inadequate consideration); Union Illinois v. Korte, 2001 

WL 1526303, at *7 (Del. Ch. Nov. 28, 2001) (applying fair value principles from appraisal 

context to calculate value of stock “which the directors caused to be sold to themselves”).

265 Reis, 28 A.3d at 465 (citing Cede & Co. v. Technicolor, Inc., 2003 WL 23700218, at 

*2).

266 Id. at 466 (citing Cinerama, Inc. v. Technicolor, Inc., 663 A.2d 1134, 1143 (Del. Ch. 

1994)). 

267 Id. at 461; see also Basho Techs. Holdco B, LLC v. Georgetown Basho Invs., LLC, 2018 

WL 3326693, at *36 & n.405 (Del. Ch. July 6, 2018) (collecting cases across various 

contexts that equate entire fairness inquiry with fair value standard in appraisal).
50

[transaction].”

268

 “‘Fair value’ should be determined on the basis of future free cash 

flows associated with the going concern, including the agency costs inherent in the 

enterprise prior to the merger.”

269

Defendants argue that the McLean Valuation accurately values the stock. 

Plaintiff does not offer her own valuation and instead presents an expert, Dr. Brett 

Margolin, to discredit the McLean Valuation.270 Margolin did not review any 

materials or evidence in the record other than the McLean Valuation itself.271

i. The McLean Valuation

In undertaking its valuation, the McLean Group interviewed management and 

reviewed historical company financial statements, analyzed the state of the real 

estate industry and broader national economy, and analyzed any available peer 

 

268 M.G. Bancorporation, Inc. v. Le Beau, 737 A.2d 513, 525 (Del. 1999) (quoting Cede & 

Co. v. Technicolor, Inc., 684 A.2d 289, 298 (Del. 1996)).

269 Reis, 28 A.3d at 471 (quoting Lawrence A. Hamermesh & Michael L. Wachter, The

Fair Value of Cornfields in Delaware Appraisal Law, 31 J. Corp. L. 119, 154 (2005));

Gonsalves v. Straight Arrow Publ’rs, Inc., 701 A.2d 357, 363 (Del. 1997) (“[W]here the 

corporation’s going forward business plan is to retain the same management, a dissenting 

shareholder seeking appraisal may not seek to attribute value to an alternative cost pattern 

which may occur post-merger.” (citing Cede & Co. v. Technicolor, Inc., 684 A.2d at 298–

99)).

270 Plaintiff offers Iver Scott, who conducted a valuation of the Company in 2016, as a fact 

witness only. Trial Tr. at 50:14–16 (Ross explaining that Plaintiff is “not relying on [Scott] 

or his report as an expert report in any fashion” and that Scott is “strictly a fact witness”); 

Pl.’s Post-trial Opening Br. at 27, 31–42; Pl.’s Post-trial Answering Br. at 24.

271 Trial Tr. at 548:7–9 (Margolin testifying that his analysis in this case “was much more 

of an academic exercise for [him] when [he] wrote [his] report. The only thing [he] looked 

at was the McLean [Valuation]”); id. at 550:8–22 (Margolin).
51

companies and comparable company transactions.272 The McLean Group 

considered three different valuation approaches: market-based, asset-based, and 

income-based.273 It rejected the first two. Smith eschewed a market-based approach 

because “none of the selected guideline public companies were directly comparable, 

primarily due to their significantly larger size, greater probability, wider geographic 

area of operations, more diversified customer base, and breadth of offerings.”

274

 

Smith dismissed the asset-based approach because it resulted in book value of

negative $910,344.

275

The McLean Valuation ultimately relies on an income-based approach, the 

capitalized cash flow method. A near-cousin of a discounted cash flow analysis,276

the capitalized cash flow method uses “a company’s historical and/or near term 

earnings to estimate the future income that will be produced by operations” instead 

of relying strictly on projected future income.277 The model relies on calculating a 

normalized EBITDA that a company can reasonably achieve indefinitely, 

 

272 JX-66 at 6.

273 Id. at 8.

274 Id.; Trial Tr. at 518:6–14 (Smith). 

275 JX-66 at 8; Trial Tr. at 518:1–5 (Smith testifying that a negative book value was “not 

relevant”).

276 JX-66 at 50 (“Capitalized cash flow is an income-based valuation approach and suggests 

that a company’s value lays primarily in the future income it produces.”).

277 Id.
52

subtracting out taxes and expected capital expenditures to arrive at free cash flows, 

and then applying an appropriate discount rate to those cash flows to determine the 

enterprise value of the company.278 After calculating enterprise value, the model

requires subtracting a working capital deficiency and any balance of interest-bearing 

debt to arrive at equity value.

279

Applying this methodology, the McLean Valuation begins by assuming that 

UIP’s steady-state yearly revenue is approximately $30 million, assuming it can 

“achieve a revenue level similar to the Company’s [last-twelve-month]

performance.”

280

 From there, Smith assumes an “implied profit margin of 1%, 

which is consistent with market expectations based on the nature of the Company’s 

business operations.”

281

 This leads to a normalized yearly EBITDA of $300,000.282 

From this, Smith subtracts depreciation expenses and expected taxes to arrive at an 

annual free cash flow figure of $201,320.283

 

278 Id. at 56.

279 Id.

280 Id. at 51. The Company’s LTM revenue at the time of valuation was approximately $32 

million. Id.

281 Id.

282 Id.

283 Id. at 56. Smith enlarges this value to $225,083 using a mid-period adjustment factor, 

which assumes that the cash flows are not recognized solely at the end of the year. Id.; see 

Laidler v. Hesco Bastion Envtl., Inc., 2014 WL 2873977, at *2 (Del. Ch. June 25, 2014) 

(concluding that the Court undervalued the company at issue “in failing to use the midyear convention”).
53

The McLean Valuation calculates the capitalization rate by calculating UIP’s 

weighted average cost of capital (WACC) and subtracting from that a reasonable 

long-term growth rate.284 The WACC calculation allocates 100% of the weight to 

equity because according to Smith, any Company debt is personally guaranteed by 

Schwat and Bonnell, which causes it to “take on attributes of equity because the risk 

of personal loss to the owner.”

285

 Smith calculates UIP’s cost of equity using three 

inputs derived from the Duff & Phelps Cost of Capital Navigator286: a normalized 

risk-free rate (3.50%),287 an equity and size risk premium (14.14%),288 and a specific 

company and industry risk premium (7.50%).289 The total cost of equity is 25.14%, 

which Smith rounds to an even 25%.290 The long-term annual growth rate of 4.0% 

is extrapolated from a June 2018 Federal Reserve ten-year forecast, which forecasts 

 

284 JX-66 at 52.

285 Id. at 55 (citing Gary Trugman, Understanding Business Valuation: A Practical Guide 

to Valuing Small to Medium Sized Businesses (2002)).

286 This source is not in evidence, but the Court recognizes that Duff & Phelps sources are 

routinely relied upon in this Court and the valuation community. See, e.g., In re Appraisal 

of Jarden Corp., 2019 WL 3244085, at *44–48 (Del. Ch. July 19, 2019). 

287 Smith uses a normalized value because “the current 20-year U.S. Treasury yields are 

considered to be abnormally low.” JX-66 at 52.

288 Id. at 53.

289 Smith explains that this risk premium accounts for UIP’s reliance on related-party 

transactions for 95% of its revenue; UIP’s reliance on “key person relationships with 

[Schwat and Bonnell]”; UIP’s geographic concentration in the Washington, D.C. market; 

and UIP’s stable future growth due to the structure of its business. Id. at 54.

290 Id. at 55.
54

average yearly nominal GDP growth of 4.6%.291 Smith calculates an ultimate 

capitalization rate of 21%.292

Smith discounts the free cash flows using the capitalization rate to arrive at an 

enterprise value of $1,071,822.293 To calculate equity value, he subtracts the 

Company’s working capital deficiency ($452,220) and interest-bearing debt 

($495,733).294 The McLean Valuation reports a final equity value of $123,869.295

ii. Plaintiff’s Attempts to Discredit the McLean 

Valuation

Plaintiff’s chief criticism of the McLean Valuation is that it does not make

normalizing adjustments for what Margolin terms “sub-market pricing” of UIP’s 

contracts with the SPEs.296 This Court has recognized that normalizing adjustments 

to valuation models might be necessary to correct for “expenses that reflect 

controller self-dealing where the plaintiff/petitioner provides an adequate 

evidentiary basis for adjustment.”297 “[I]n terms of ensuring that minority 

 

291 Id. at 51.

292 Id. at 56.

293 Id.

294 Id.

295 Id.

296 Trial Tr. at 246:3–248:17 (Margolin); id. at 249:12–21 (Margolin); see also JX-80 at 6–

7. This “sub-market pricing” critique is best viewed as a challenge to the inputs in the cash 

flow model.

297 Reis, 28 A.3d at 472 & n.21 (collecting cases where this Court adjusted inputs to cash 

flow models to correct for controller self-dealing).
55

stockholders receive their aliquot share of the going concern value of the firm, 

interested transactions of this type present difficulties.”298

Smith addressed the reasons why he declined to make normalizing

adjustments to “the revenue stream of the business in the contracts that the company 

has with the SPEs.”

299

 From his perspective, the SPE contracts were part of the 

operating reality of UIP, which this Court must consider when determining what a 

willing buyer would pay for the Company.

300

 Smith cited to Schwat’s deposition 

testimony that Schwat never sought to minimize revenue flowing to the operating 

companies during contract negotiations.301 Schwat explained that any below-market 

prices resulted from negotiations against “large investors” who “expect you to 

 

298 Id. at 472.

299 Id. at 528:5–7 (Smith). Smith considered additional adjustments for “nonrecurring or 

one-time expense, . . . personal or discretionary expenses, . . . [or] personal expenses going 

through the business or charitable contributions or things that a hypothetical willing buyer 

would not incur.” Id. at 519:11–18 (Smith). The McLean Valuation makes one 

normalizing adjustment for life insurance policies of the principals. Id. at 520:2–10 

(Smith).

300 Id. at 528:19–529:3 (Smith); see also Reis, 28 A.3d at 470–71 (declining to apply 

normalizing adjustments to expenses that “represent[ed] the operative reality of the 

enterprise” and not self-dealing because “a reduction in [those] expense[s] only could be 

made by a new controller” and “adjustments to reflect those changes would generate a 

third-party sale value, not going concern value”). 

301 Schwat Dep. Tr. at 54:20–55:3 (“I think what you’re asking is do I . . . charge lower 

fees to a venture to benefit the venture at the expense of the fee company, the property 

management or the general contracting, and the answer to that is certainly not.”).
56

charge a competitive rate,”

302 and that investors who were repeat clients did entertain 

higher service fees charged by UIP.303

Margolin responds that “sub-market pricing” allows UIP “to record at the SPE 

level the economic benefits generated by UIP’s activities,” which “artificially 

inflat[es] the profit recorded at the SPE level and artificially decreas[es] the profit 

recorded by UIP.”304 Margolin claims that a hypothetical investor would not invest 

in UIP “for its token cash flows, but for the ability to recognize those higher cash 

flows at the SPE level.”305 Thus, he believes that some value of the SPEs should be 

attributed to UIP.306

Although Margolin’s criticisms might have some basis in theory, they fail on 

the facts because Plaintiff did not demonstrate that the SPE contracts were at submarket prices due to the principals’ ownership interests in the SPEs or otherwise.307

 

 

302 Id. at 52:1–8.

303 Id. at 52:9–14.

304 Id. (describing “pricing of UIP’s services at below-market rates, as well as intercompany 

loans and leases, consulting agreements, compensation and perquisites, and other relatedparty transactions”). 

305 Trial Tr. at 242:5–9 (Margolin); see also id. at 255:7–17 (Margolin) (“I mean, first of 

all, fair market value demands those normalizing adjustments. Secondly, we’re asking 

about what somebody would buy into this company if there were a pure financial investor 

– if they were purchasing from a pure financial investor and the company was being run at 

arm’s length. . . . You must normalize that market ideal.”).

306 Id. at 242:9–10 (Margolin testifying: “Therefore, I’m willing to pay based on the 

combined cash flows.”).

307 See Reis, 28 A.3d at 472 (remarking that courts are empowered to “make normalizing 

adjustments to account for expenses that reflect controller self-dealing when the 
57

In fact, Wilkinson testified in part that Schwat lacked input in the negotiations 

concerning a large category of the supposedly sub-market contracts, undermining 

any argument that Schwat improperly offered influenced the negotiations of those 

contract.

308

 Plaintiff did elicit on cross examination a concession from Gerard 

Heiber, president of UIP General Contracting,309 that the market could bear a higher 

fee from an operating company on a single project, the “Boathouse” in Washington, 

D.C.310 Heiber testified that UIP General Contracting’s management fee on that 

 

plaintiff/petitioner provides an adequate evidentiary basis for the adjustment.” (emphasis 

added)); Montgomery Cellular Hldg. Co., Inc. v. Dobler, 880 A.2d 206, 224 (Del. 2005) 

(“To reiterate, where, as here, one side of the litigation presents no competent evidence to 

aid the Court in discharging its duty to make an independent valuation, we will defer to the 

Vice Chancellor’s valuation approach unless it is manifestly unreasonable, i.e., on its face 

is outside a range of reasonable values.”); Zutrau v. Jansing, 2014 WL 3772859, at *39 

(Del. Ch. July 31, 2014) (normalizing for controller’s compensation after plaintiff 

presented evidence that bonus payments were excessive); see also Laidler, 2014 

WL 1877536, at *9 (finding that “the best predictor of future cash flows is past cash flow” 

and declining to make normalizing adjustments when the parties did not attempt to quantify 

their effects); Hodas v. Spectrum Tech, Inc., 1992 WL 364682, at *4 (Del. Ch. Dec. 8, 

1992) (declining to adjust allegedly excessive compensation expense because expert failed 

to present market evidence and failed to show that he was otherwise qualified to opine on 

the subject). Margolin did not review any evidence in the record except for the McLean 

Valuation itself. Trial Tr. at 548:7–9 (Margolin); id. at 550:8–22 (Margolin).

308 Trial Tr. at 168:2–10 (Wilkinson testifying that Schwat “did not have input into the UIPGC side of [the] contract negotiation”). Wilkinson was not called as a trial witness in light 

of his acrimonious departure from UIP; thus the Court does not have the benefit of a live 

credibility assessment. Compare id. at 166:8–12 (Wilkinson testifying he did not believe 

his departure from UIP was caused by his “poor performance”), with id. at 351:4–23 

(Schwat describing Wilkinson’s alleged poor performance).

309 Id. at 285:5–8 (Heiber).

310 Id. at 291:8–19 (Heiber). 
58

project is “2 percent” but that the market could bear a fee of “3 to 4 percent.”311 But 

when Heiber attempted to explain why the fee was discounted, Plaintiff’s counsel 

did not allow him to elaborate.312 Defendants did not address this line of questioning 

on re-direct. In any event, this de minimis correction on a single contract does not 

provide an adequate evidentiary basis to support that every SPE contract was a 

product of self-dealing.

Plaintiff also criticizes Smith’s chosen expense inputs and claims that they 

should be normalized downward. Specifically, Margolin takes issue with the

McLean Valuation for not adjusting salary expenses that are based solely on 

“information provided by management.”

313

 Margolin’s critique amounts to an 

assertion that Schwat and Bonnell, as de facto controllers, are paying themselves 

above-market salaries and that a hypothetical buyer would correct for this. Smith, 

however, did analyze general market compensation trends and interviewed specific 

companies regarding their own compensation practices.314 He found that “a 

hypothetical buyer would not consider the compensation to be outside of a 

 

311 Id. at 291:14–19 (Heiber).

312 Id. at 293:23–294:3 (Heiber testifying “there is another portion to the fee that [Plaintiff’s 

counsel is] not acknowledging” and asking to explain before Plaintiff’s counsel replies “I’d 

rather move on to other things, actually”). 

313 JX-80 at 6.

314 JX-81 at 6.
59

reasonable range.”

315

 Again, Plaintiff does not present any evidence to discredit the 

reliability of Smith’s market survey.316 Thus, the Court adopts the salary expense as 

calculated by the McLean Valuation.

Plaintiff further takes issue with Smith’s application of a specific company

risk premium in his calculation of UIP’s cost of equity. Margolin calls the specific 

company risk premium “arbitrary and subjective, unsupported in its magnitude by 

any analysis, research, or data.”

317

 Smith agrees that adjusting for company-specific 

risk “is one of the most judgmental areas of business valuation” but claims that his 

conclusions are a result of “analytical processes” that evaluated risks related to “key 

person, dependency on related projects, 30-day termination clauses, lack of longterm contracts, lack of infrastructure (and track record) to market and win third party 

opportunities, performance risks, among other factors.”

318

 Margolin opines that the 

McLean Valuation overstates key person risk by first “reduc[ing] cash flows to 

almost zero” and then “appl[ying] a specific-company risk premium to its cost of 

capital.”

319

 Smith disputes this, reasoning that Schwat and Bonnell “play an active 

 

315 Id.

316 Hodas, 1992 WL 364682, at *4.

317 JX-80 at 9.

318 JX-81 at 11. 

319 JX-80 at 9.
60

role in managing the business and without them, the Company’s contracts would 

have significant risk of continuing.”

320

“A so-called ‘specific-company risk premium’ (SCRP) is added to a discount 

rate when valuing an asset ‘to the extent that the company has risk factors that have 

not already been reflected in the general equity risk premium as modified by beta

and the small company size premium.’”

321

 This Court has approached the 

application of a specific-company risk premium with skepticism,322 requiring the 

proponent to produce evidence on which the Court can base the discount.323 That 

said, this Court “recognizes that some level of subjectivity is inherent in the 

calculation of SCRP.”

324

 In this case, Smith studied UIP’s business model and 

concluded that it “represents greater risk to potential investors than a company of 

similar size.”

325

 The risk factors warranting this conclusion include:

 The Company was founded to be an operating 

company for the owners’ realty businesses, Schwat 

Realty LLC and Coster Realty LLC. The vast 

 

320 JX-81 at 12.

321 Gesoff v. IIC Indus., Inc., 902 A.2d 1130, 1157–58 (Del. Ch. 2006) (citing Pratt, The 

Lawyer’s Business Valuation Handbook 125 (2000)).

322 See, e.g., Del. Open MRI Radiology Assocs., P.A. v. Kessler, 898 A.2d 290, 339 (Del. 

Ch. 2006) (“To judges, the company specific risk premium often seems like the device 

experts employ to bring their final results into line with their clients’ objectives, when other 

valuation inputs fail to do the trick.”).

323 Gesoff, 902 A.2d at 1159.

324 Id.

325 JX-66 at 54.
61

majority of the Company’s revenue (over 95%) 

comes from this related party relationship.

 The entities’ client relationships are also based on 

underlying key person relationships with the 

principals.

 Management confirmed that multiple lending banks 

are contracted with Mr. Schwat and Mr. Bonnell in 

joint venture agreements that relate to their real 

estate holdings. . . . . If Mr. Schwat and Mr. Bonnell 

are not active in the business, the equity 

investors . . . can change the firm(s) engaged to 

provide the aforementioned services in relation to 

the underlying investments.

 The Company is geographically concentrated in 

Washington, D.C., and as such, is subject to the 

risks specific to that location and fluctuations in its 

real estate market.326

Given UIP’s unique circumstances as almost wholly dependent on the SPEs 

and Schwat and Bonnell for its revenue, the Court finds that Defendants have met 

their burden of showing that a specific-company risk premium is necessary in this 

case. 

Margolin additionally attacks other aspects of the McLean Valuation in a 

theoretical dart throwing exercise that seemed untethered to any real world 

considerations, including the practical effect of these criticisms on the fairness of the 

price.327 Plaintiff abandoned these additional criticisms in post-trial briefing by 

 

326 Id.

327 JX-80 at 8–9.
62

failing to address them. This decision declines to adopt Margolin’s additional 

criticism for these reasons, but catalogues them below toward the goal of 

completeness.

First, Margolin argues that Smith’s decision to use a normalized risk-free rate 

instead of a spot 20-year Treasury rate overstates the cost of equity.328 Margolin 

asserts that the spot 20-year Treasury rate is “literally the only way to measure the 

risk-free rate.”329 Smith responds by citing Duff & Phelps’ explanation that when 

“risk-free rates appear to be abnormally low . . . , valuation analysts may want to 

consider normalizing the risk-free rate.”330

Second, Margolin argues that Smith used a historical equity risk premium and 

should have used a supply-side equity risk premium in order to have an “apples-toapples comparison.”331

 Smith responds that the Duff & Phelps dataset on which he 

relies does incorporate a supply-side equity risk premium, mooting Margolin’s 

concerns.332

 

328 Id. at 8; Trial Tr. at 258:14–260:22 (Margolin). 

329 Trial Tr. at 260:19–20 (Margolin).

330 JX-81 at 10; Trial Tr. at 532:16–20 (Smith) (“The underlying economic theory is that 

our economy, since the financial crisis, has – interest rates have been supported by the 

Federal Reserve. It’s an unusual financial market that we are in.”).

331 Trial Tr. at 261:7–15 (Margolin). 

332 JX-81 at 9. See In re Appraisal of SWS Gp., Inc., 2017 WL 2334852, at *16 (Del. Ch. 

May 30, 2017) (adopting supply-side equity risk premium and commenting “there is no 

basis in the factual record to deviate from what this Court has recently recognized as 

essentially the default method in these actions”).
63

Third, Margolin complains that Smith used a normalized risk-free rate but did 

not normalize the equity-risk premium.333 Smith responds that Margolin 

misunderstands the methodology and that his calculation is in fact an “apples-toapples calculation” prescribed by Duff & Phelps.334

 Margolin testified that he 

performed cursory research of the Duff & Phelps data to verify his criticisms, but he 

did not testify to any exact corrections he would make to Smith’s model.335

Although each of these three additional criticisms might carry weight in other 

circumstances, the Court declines to adopt them here, and is satisfied that in the 

circumstances of this case, Smith’s approach generated a reliable indicator of UIP’s 

value.

Notwithstanding the weight of the McLean Valuation, Plaintiff argues that 

contemporaneous conflicting valuations cast doubt on the validity of the McLean 

Valuation. In June 2018, in order to obtain financing for one of his real estate 

development projects, Schwat submitted to his lender a signed statement of assets 

that valued his interest in UIP at $2.125 million.336 This, coupled with the figure 

used in the Term Sheet, would imply that Schwat believed the value of the Company 

 

333 Trial Tr. at 261:20–262:11 (Margolin).

334 Id. at 533:3–10 (Smith). 

335 Id. at 261:20–262:11 (Margolin testifying that he “went through a simple Google of 

information just to make sure I am right” and concluding from there that “it is exactly what 

my understanding was, it’s exactly what I thought I read in the Duff & Phelps book”).

336 JX-53; Trial. Tr. at 410:2–411:1 (Schwat). 
64

was $4.25 million at that time. Plaintiff argues that Schwat only updated this value 

with his bank on November 29, 2018, three days after Plaintiff had served a 

subpoena on the bank.337 At trial, Schwat did not recall the timeline on which he 

updated his personal balance sheet, but he did testify that the $4.25 million valuation 

was from April 2014.338 He also testified that he and Wout calculated this value

themselves rather than hire a valuation professional, and that they did so not by 

examining the fundamentals of the business, but by projecting their combined 

salaries out over six years.339 This approach was idiosyncratic to UIP’s principals at 

the time and unmoored from any valuation principles relevant to this proceeding. 

Thus, this decision declines to rely on it as evidence of UIP’s fair value.

c. The Stock Sale Is Entirely Fair.

To summarize, despite Plaintiff’s attacks on the credibility and accuracy of 

the McLean Valuation, the Court finds that it is the most reliable indicator of the fair 

value of UIP as of the date of the Stock Sale. In light of all the evidence, Defendants 

have carried their burden of proving that the price of the Stock Sale based on the

McLean Valuation falls within a range of reasonable values. Thus, Defendants have 

 

337 Dkt. 41, Notice of Subpoena Duces Tecum to BMO Capital Markets Corp.; see Dkt. 42 

at 5 (indicating subpoena was served on Nov. 26, 2018); see also Trial Tr. at 411:8–18 

(Schwat).

338 Trial Tr. at 410:21–411:1 (Schwat). 

339 Id. at 331:15–332:9 (Schwat). 
65

met their burden to show that the Stock Sale satisfies the entire fairness standard. 

Because Defendants have met their burden, “they have demonstrated that they did 

not commit a fiduciary breach.”

340

B. The Court Declines to Appoint a Custodian.

Plaintiff requests the appointment of a custodian under Section 226(a)(1), 

which presumes stockholder deadlock.341 Plaintiff has not made the requisite 

showing to justify the expansive relief she requests.342 Because this decision holds 

that the Stock Sale satisfies entire fairness and must stand, it may not assume that 

the stockholders are currently deadlocked. Thus, the Court declines to appoint a 

custodian pursuant to Section 226(a)(1).

At times, Plaintiff appears to argue that Defendants’ conduct warrants the 

appointment of a custodian even absent a stockholder deadlock. Plaintiff has failed

to prove that Defendants committed any act justifying the imposition of a custodian 

 

340 Trados, 73 A.3d at 78; see id. (“Under the circumstances of this case, the fact that the 

directors did not follow a fair process does not constitute a separate breach of duty.”). 

341 See 8 Del. C. § 226(a)(1).

342 Custodian Compl. at 13–14 (praying for custodian to “exercise full authority and control 

over the Company, its operations, and management; exercise all other rights, powers, and 

privileges of a Director of the Company; retain advisors as the Custodian deems necessary 

in carrying out his or her duties; command and receive full and unrestricted access to any 

and all books and records of the Company; create a current consolidated financial statement 

for the Company; create a retrospective financial statement for the Company; and continue 

or terminate the services to the Company of anyone, including present employees, agents, 

officers, and directors, as he or she deems appropriate”).
66

over UIP. Fairness and justice do not compel the appointment of a custodian, 

particularly one with such broad authority sought by Plaintiff.

III. CONCLUSION

For the foregoing reasons, the Court enters judgment in favor of Defendants. 

Plaintiff’s request for attorneys’ fees is therefore denied.