IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN RE HOMEFED CORPORATION 

STOCKHOLDER LITIGATION

)

)

)

CONSOLIDATED

C.A. No. 2019-0592-AGB

MEMORANDUM OPINION

Date Submitted: April 3, 2020

Date Decided: July 13, 2020

Peter B. Andrews, Craig J. Springer, and David M. Sborz, ANDREWS & 

SPRINGER LLC, Wilmington, Delaware; Ned Weinberger, LABATON 

SUCHAROW LLP, Wilmington, Delaware; Jeremy S. Friedman and David F.E. 

Tejtel, FRIEDMAN OSTER & TEJTEL PLLC, Bedford Hills, New York; John 

Vielandi and David MacIsaac, LABATON SUCHAROW LLP, New York, New 

York; D. Seamus Kaskela, KASKELA LAW LLC, Newtown Square, Pennsylvania;

Attorneys for Plaintiffs Richard Rose and Dennis E. Murray Sr.

S. Mark Hurd and Alexandra M. Cumings, MORRIS, NICHOLS, ARSHT &

TUNNELL LLP, Wilmington, Delaware; John P. Stigi III, SHEPPARD, MULLIN,

RICHTER & HAMPTON LLP, Los Angeles, California; Kristin P. Housh,

SHEPPARD, MULLIN, RICHTER & HAMPTON LLP, San Diego, California;

Attorneys for Defendants Patrick Bienvenue and Paul Borden.

Bradley R. Aronstam and S. Michael Sirkin, ROSS ARONSTAM & MORITZ LLP,

Wilmington, Delaware; Joseph S. Allerhand, Evert J. Christensen Jr. and Elizabeth

M. Sytsma, WEIL, GOTSHAL & MANGES LLP, New York, New York; Attorneys

for Defendants Brian Friedman, Jimmy Hallac, Joseph Steinberg, and Jefferies

Financial Group Inc.

BOUCHARD, C
1

This case concerns a transaction in which Jefferies Financial Group Inc., the 

70% stockholder of HomeFed Corporation, acquired the rest of the shares of the 

company in July 2019 by exchanging two of its shares for each share of HomeFed 

held by its minority stockholders. The transaction traces its roots back to 2017, when 

a HomeFed director proposed that Jefferies take HomeFed private in a 2:1 share 

exchange. In December 2017, a special committee of HomeFed’s board of directors 

was put in place to negotiate with Jefferies. The special committee paused its 

process in March 2018, when Jefferies told the special committee it was no longer 

interested in pursuing the transaction. 

Over the next eleven months, despite indicating a lack of interest in a 

transaction, Jefferies engaged in direct discussions concerning a potential transaction 

with HomeFed’s largest minority stockholder (BMO), whose support was essential 

to get a deal done with the approval of the minority stockholders. In early February 

2019, BMO indicated to Jefferies that it would support a 2:1 share exchange. Shortly 

thereafter, Jefferies formally proposed acquiring the rest of HomeFed’s shares in a 

2:1 share exchange conditioned on obtaining the approval of a special committee 

and a majority of the minority stockholders. After some back and forth, the

reactivated special committee ultimately approved the 2:1 share exchange that 

Jefferies originally proposed. 
2

Plaintiffs are former stockholders of HomeFed. Their complaint asserts 

claims for breach of fiduciary duty against HomeFed’s directors and Jefferies as its

controlling stockholder. All of the defendants moved to dismiss the complaint under 

Court of Chancery Rule 12(b)(6) for failure to state a claim for relief.

The primary issue before the court is whether the transaction complied with 

the framework set forth in Kahn v. M & F Worldwide Corp. (“MFW”)1for subjecting 

a squeeze-out merger by a controlling stockholder to business judgment review 

rather than the entire fairness standard. Plaintiffs argue there are several reasons it 

did not. For the reasons explained below, the court concludes that the complaint 

pleads a reasonably conceivable set of facts that the transaction did not satisfy the

requirements of MFW. This is because, according to the complaint, Jefferies did not 

commit itself to the dual protections of MFW before engaging in substantive 

economic discussions concerning the transaction that anchored later negotiations 

and undermined the ability of the special committee to bargain effectively on behalf 

of the minority stockholders. The court also concludes that the complaint states nonexculpated claims against two of the directors who were not affiliated with Jefferies

at the time of the transaction. Accordingly, defendants’ motions to dismiss will be 

denied. 

 

1 88 A.3d 635 (Del. 2014). 
3

I. BACKGROUND

Unless otherwise noted, the facts recited in this opinion come from the 

allegations of the Verified Class Action Complaint (“Complaint”) and documents 

incorporated therein.2 Any additional facts are subject to judicial notice.

A. The Parties 

Plaintiffs Richard Rose and Dennis E. Murray, Sr. (together, “Plaintiffs”) each 

held shares of stock of HomeFed Corporation (“HomeFed” or the “Company”) at all 

times relevant to the buyout transaction at issue in this action (the “Transaction”).

3

 

HomeFed is a Delaware corporation engaged in the development and 

ownership of residential and mixed-use real estate projects in California, Virginia, 

South Carolina, Florida, Maine, and New York.4 

The Complaint names as defendants Jefferies Financial Group Inc. 

(“Jefferies”) and the seven members of HomeFed’s board of directors (the “Board”) 

when the Transaction was approved: Joseph Steinberg, Brian Friedman, Jimmy 

Hallac, Patrick Bienvenue, Paul Borden, Timothy Considine, and Michael Lobatz. 

Three of these individuals (Steinberg, Friedman, and Hallac) held senior positions 

 

2 Verified Compl. (“Compl.”) (Dkt. 1). See Winshall v. Viacom Int’l, Inc., 76 A.3d 808, 

818 (Del. 2013) (“[P]laintiff may not reference certain documents outside the complaint 

and at the same time prevent the court from considering those documents’ actual terms” in 

connection with a motion to dismiss). 

3 Compl. ¶ 16.

4

Id. ¶ 26.
4

at Jefferies and were not “independent” under Nasdaq listing rules.5 Together with

Jefferies, these three individuals are referred to collectively as the “Jefferies 

Defendants.”

Jefferies, formerly known as Leucadia National Corporation, is a diversified 

holding company with an array of businesses and investments.6 As of the closing of 

the Transaction, Jefferies owned an aggregate of 10,853,123 shares of HomeFed 

stock, or approximately 70% of the Company’s common stock.7

Steinberg served on the Board since 1998 and as Chairman of the Board since 

1999.8 Steinberg is also Chairman of Jefferies’ board of directors, served as 

Jefferies’ President from January 1979 until March 2013, and serves as a director of 

Jefferies Group LLC, a wholly-owned subsidiary of Jefferies.9 

Friedman served on the Board since April 2014.10 Friedman has served on 

Jefferies’ board of directors since March 2013 and succeeded Steinberg as President 

in March 2013.11 Friedman also has been a director and executive officer of Jefferies

 

5

Id. ¶¶ 17-19 (citing HomeFed’s definitive proxy statement filed with the Securities and 

Exchange Commission on June 28, 2018).

6

Id. ¶ 24.

7

Id. ¶¶ 24, 31.

8

Id. ¶ 17.

9

Id.

10 Id. ¶ 18.

11 Id.
5

Group LLC and served as Chairman of its Executive Committee since 2002, along 

with serving on several boards of subsidiaries and investee companies of Jefferies

Group.

12

Hallac served on the Board since March 2017.

13

 Hallac has been employed at 

Jefferies since 2002 and currently serves as managing director.14 He also serves on 

the boards of various Jefferies’ portfolio entities.15

Considine and Lobatz, who joined the Board in 1992 and 1995, respectively, 

served on a special committee tasked to negotiate the terms of the Transaction (the 

“Special Committee”).

16

 The remaining two directors, Bienvenue and Borden, both 

joined the Board in May 1998.17

B. The Stockholders Agreement

In 1998, Leucadia spun-off HomeFed to its stockholders.18 In 2014, after 

Leucadia merged with Jefferies the year before, Jefferies increased its ownership of 

HomeFed from approximately 31% to approximately 65% of HomeFed’s 

 

12 Id.

13 Id. ¶ 19.

14 Id.

15 Id.

16 Id. ¶¶ 22-23, 37.

17 Id. ¶¶ 20-21.

18 Id. ¶ 28.
6

outstanding shares.19 In connection with that transaction, Jefferies and HomeFed 

entered into a Stockholders Agreement.20

In the Stockholders Agreement, Jefferies agreed it “shall not directly or 

indirectly” acquire “additional securities of the Company” (i) without the prior 

approval of a special committee of “Independent Directors” and (ii) “if the proposed 

transaction is subject to Rule 13e-3 under the Exchange Act,” without obtaining “the 

affirmative vote of a majority of the Outstanding Voting Securities held by the 

Disinterested Stockholders.”21

C. The Considine Letter

On September 26, 2017, Considine wrote a letter to Steinberg proposing a 

potential merger of HomeFed and Jefferies with a 2:1 exchange ratio (i.e., two 

Jefferies shares for each HomeFed share), which implied a price of $50 per each 

share of HomeFed (the “Considine Letter”).

22 Shortly after receiving the Considine 

Letter, Steinberg, acting on behalf of Jefferies, reached out to a portfolio manager at 

Beck, Mack and Oliver, LLC (“BMO”) to discuss a potential HomeFed-Jefferies 

 

19 Id. ¶¶ 29-30.

20 Id. ¶ 30. The Stockholders Agreement was entered into under Jefferies’ former name, 

Leucadia National Corporation. Transmittal Affidavit of Bradley R. Aronstam (“Aronstam 

Aff.”) Ex. E (“Stockholders Agreement”) Preamble (Dkt. 24).

21 Stockholders Agreement § 3.

22 Compl. ¶ 34. 
7

merger.23 At the time, BMO was HomeFed’s largest stockholder behind Jefferies, 

owning approximately 9% of HomeFed’s common stock, or approximately 36% of 

the shares unaffiliated with Jefferies.24 Discussions with BMO did not progress 

because its thoughts on an appropriate exchange ratio were very different from those 

of Jefferies.25 

In December 2017, Considine and Lobatz wrote a letter alerting the Board that

“[a] discussion has taken place concerning the feasibility of having a stock 

transaction merging HomeFed into [Jefferies]” and requesting, “as the only 

independent directors” on the Board, to be appointed “to investigate a potential stock 

transaction acting as an independent Special Committee.”26 On December 11, 2017, 

the Board adopted resolutions (the “December 2017 Resolutions”) expanding the 

authority of a previously created committee consisting of Considine and Lobatz (as 

defined above, the “Special Committee”) to include:

the exclusive power and authority (1) to review, evaluate and propose 

the terms and conditions, and determine the advisability of a Potential 

Transaction and any other alternative transactions, (2) to communicate 

and negotiate (or to direct communications and negotiations) with any 

other party that the Special Committee of Independent Directors deems 

appropriate with respect to the terms and conditions, or the 

 

23 Id. ¶ 35. 

24 Id.; Aronstam Aff. Ex. F (May 20, 2019 Definitive Proxy Statement of HomeFed filed 

on Schedule 14A) (“Proxy”), at 106-07; Aronstam Aff. Ex. G (Apr. 12, 2019 Presentation), 

at -0238.

25 Compl. ¶ 35.

26 Id. ¶ 37.
8

implementation, of a Potential Transaction and any other alternative 

transactions, . . . [and] (7) to communicate with the full Board, the 

stockholders and other parties to a Potential Transaction and any further 

alternatives.27

The December 2017 Resolutions further provided that “the officers of [HomeFed]

are hereby directed not to have or direct any negotiations or related material 

communications with any other party to a Potential Transaction . . . unless a 

Chairman of the Special Committee of Independent Directors has approved of or is 

present at such communications or negotiations.”28

In January 2018, the Special Committee engaged Sheppard, Mullin, Richter 

& Hampton LLP (“Sheppard Mullin”) as “Special Counsel” to the Company for a 

potential strategic transaction with Jefferies and engaged Seltzer Caplan McMahon 

Vitek and Morris, Nichols, Arsht & Tunnell LLP as its counsel.29 The Special 

Committee also selected Houlihan Lokey as its financial advisor but did not formally 

engage the firm at that time.

30

 

27 Id. ¶ 38 (quoting Aronstam Aff. Ex. I (“December 2017 Resolutions”)).

28 Id. ¶ 39 (same).

29 Id. ¶ 42.

30 Id.
9

D. Jefferies Pauses Negotiations with the Special Committee While 

Continuing to Communicate with HomeFed Stockholders

On March 15, 2018, Hallac emailed Sheppard Mullin on behalf of Jefferies to 

communicate that Jefferies no longer wanted to pursue a strategic transaction.31 

Around this time, HomeFed’s stock was trading around $55 per share while 

Jefferies’ stock was trading at around $24 per share.

32

 With the proposed 2:1 

exchange ratio, this translated to an approximately 13% negative premium for 

HomeFed stockholders. 

On March 26, 2018, the Special Committee determined to “pause” its process 

of exploring a potential transaction.33 Although paused on the Special Committee’s 

end, Jefferies “repeatedly” held discussions with BMO from March 2018 through 

February 2019 about a potential transaction in which Jefferies would acquire the 

remaining shares of HomeFed that it did not already own.34 These discussions did 

not progress because “BMO and Jefferies were too far apart with respect to an 

appropriate exchange ratio.”35 This changed in early February 2019. As explained 

in the Proxy: 

 

31 Id. ¶ 45.

32 Id. ¶ 44.

33 Id. ¶ 46; Aronstam Aff. Ex. O, at 2 (Mar. 26, 2018 Special Committee minutes).

34 Compl. ¶ 47; see also Proxy 19 (referencing discussions between Jefferies and BMO 

occurring from “time to time throughout 2018” and in “early February 2019”). 

35 Compl. ¶ 47.
10

In early February 2019, Mr. Steinberg and Richard Handler, chief 

executive officer of Jefferies, met with a representative of BMO. The 

representative of BMO encouraged Jefferies to make a proposal, 

subject to the terms of the stockholders’ agreement, whereby Jefferies 

would acquire all of the shares of HomeFed common stock that it did 

not already own for an exchange ratio of two shares of Jefferies 

common stock for each share of HomeFed common stock and indicated 

that BMO would support such a transaction. The representative of 

BMO also asked Mr. Steinberg if he, in his personal capacity as a 

beneficial owner of HomeFed common stock, would also support such 

a transaction, and Mr. Steinberg said he would. The representative of 

BMO also indicated that he had been in contact with a representative of 

an investment adviser firm that advised accounts holding a substantial 

number of shares of HomeFed common stock, which we refer to as 

Advisor A, and the representative of Advisor A indicated that Advisor 

A, too, would support such a transaction.36

On February 13, 2019, the Special Committee first learned about these 

discussions between Jefferies and BMO.37 At a meeting of the Special Committee, 

Lobatz and Considine “indicated that, to their knowledge, the Board had taken no 

action to dissolve the Special Committee or to modify the December 11, 2017 

Authorizing Resolutions.”38 The Special Committee then directed Sheppard Mullin 

to request more information about Jefferies’ discussions with BMO and to ask 

Jefferies’ counsel to “remind all of the members of the Board who are also officers 

 

36 Proxy 19; see also Compl. ¶ 50; Aronstam Aff. Ex. A, at 1. 

37 Compl. ¶ 48.

38 Aronstam Aff. Ex. P (Feb. 13, 2019 Special Committee minutes), at 2.
11

or directors of Jefferies that the Special Committee expects they will abide by the 

December 11, 2017 Resolutions for so long as they are in effect.”39

On February 15, 2019, Sheppard Mullin informed the Special Committee that 

Jefferies had indeed been in discussions with BMO and not only would BMO 

support a 2:1 transaction, but also “someone that advises a significant number of 

holders of HomeFed shares . . . would be supportive and recommend in favor of such 

a transaction.”40 The “someone” was RBC Capital Markets (“RBC”), which is 

referred to as “Adviser A” in the Proxy. BMO and RBC together represented 

approximately 70% of the shares of HomeFed unaffiliated with Jefferies.41

E. The February 2019 Offer

On February 19, 2019, Jefferies issued a press release announcing its proposal 

to acquire all remaining HomeFed common stock in exchange for two shares of 

Jefferies stock (the “February 2019 Offer”).42 The next day, on February 20, 

Jefferies filed an amendment to its Schedule 13D announcing the February 2019 

Offer. The amendment stated that the February 2019 Offer “will include a condition 

that the proposed transaction will require the approval of a majority of the 

outstanding shares of [HomeFed]’s Common Stock not already owned by Jefferies 

 

39 Compl. ¶ 49 (quoting Feb. 13, 2019 Special Committee minutes).

40 Id. ¶ 50.

41 See id. ¶¶ 96-97; Proxy 25.

42 Compl. ¶ 52.
12

(or its affiliates)” and that “[i]t is anticipated that the proposed transaction will be 

considered by a Special Committee of the Company’s Board of Directors, comprised 

of Independent Directors of the Company’s Board, whose affirmative

recommendation to the Company’s Board of Directors will be required under 

the . . . Stockholders Agreement.”43

On February 20, 2019, the Special Committee held a meeting to discuss the 

February 2019 Offer.

44

 Shepherd Mullin reported that Jefferies “was in favor of 

reauthorization [of the Special Committee] but would recommend that the 

reauthorization resolutions make clear the ability of Joseph Steinberg (and 

potentially other representatives of Jefferies) to speak with HomeFed minority 

stockholders.”45 The Special Committee rejected this recommendation and 

reiterated that “the Committee desires to control communications with the 

Corporation’s minority stockholders.”

46

On February 25, 2019, during a Special Committee meeting, Shepherd Mullin 

informed the Special Committee members that the Board would “reauthorize” the 

Special Committee with the same power and authority as previously adopted in the 

 

43 Aronstam Aff. Ex. B (Feb. 20, 2019 Jefferies Schedule 13D/A), at 3.

44 Aronstam Aff. Ex. R (Feb. 20, 2019 Special Committee minutes), at 2.

45 Compl. ¶ 54 (quoting Feb. 20, 2019 Special Committee minutes).

46 Compl. ¶ 55; Aronstam Aff. Ex. R, at 2.
13

December 2017 Resolutions.47 Shortly after the Special Committee meeting, the

Board met and unanimously approved a resolution that “confirms that the Special 

Committee . . . is authorized to take any and all actions, and to exercise all of the 

authority, granted to [it] in the resolutions of the Board of Directors dated as of 

December 11, 2017.”

48

 

During the February 25 Board meeting, Steinberg provided the Board with an 

overview of events occurring since receipt of the Considine Letter, including his 

discussions with Lyman Delano of BMO over the past year.

49

 With respect to his 

most recent discussions, the Special Committee minutes state that:

Within the last two weeks, Mr. Delano met with Mr. Steinberg and 

Richard Handler, Jefferies’ CEO. Mr. Delano said he would support a 

2-for-1 deal and asked Mr. Steinberg if he as a major holder would also. 

Mr. Steinberg said yes. Mr. Delano also confirmed that another major 

shareholder similarly would be supportive. Given this encouragement, 

Jefferies’ officers sought and received approval of its board and made 

public its proposal.50

The minutes also reflect that, after Steinberg summarized his discussion with BMO, 

both Considine and Lobatz essentially equated Jefferies’ proposal to the one 

Considine proposed to Steinberg in September 2017:

Messrs. Considine and Lobatz thanked Mr. Steinberg for persevering 

along the lines expressed by Mr. Considine and for leading the effort to 

 

47 Compl. ¶ 56; Aronstam Aff. Ex. II, at 1.

48 Compl. ¶ 58; Aronstam Aff. Ex. A (Feb. 25, 2019 Board minutes), at 2.

49 Compl. ¶ 58.

50 Aronstam Aff. Ex. A, at 1.
14

make a proposal that the Special Committee can consider along with its 

counsel and financial advisors. Mr. Lobatz also commended Mr. 

Considine for writing the September 26, 2017 letter and initiating the 

potential transaction.51

Steinberg then agreed he would “not have substantive communications with 

shareholders without clearing such communications with the Special Committee

until definitive agreements are reached or until the potential transaction is 

abandoned.”

52

F. Negotiations in Response to the February 2019 Offer

In March 2019, the Special Committee formally engaged Houlihan as its 

financial advisor and began evaluating the February 2019 Offer.53 In evaluating the 

value of Jefferies, the Special Committee exclusively relied on Jefferies’ trading 

price.54 Houlihan did not conduct any other analysis of Jefferies’ value or consider

projections of Jefferies’ future performance.55 

During a March 15 meeting of the Special Committee, Lobatz reported that a 

HomeFed stockholder contacted him to convey that the stockholder did not think the 

2:1 ratio was fair.56 On March 18, the Special Committee asked Houlihan to reach 

 

51 Id. at 2.

52 Compl. ¶ 56; Aronstam Aff. Ex. A, at 2.

53 Compl. ¶ 64.

54 Id. ¶ 68.

55 Id.

56 Id. ¶ 67.
15

out to BMO without informing Jefferies.57 BMO later confirmed to Houlihan 

Steinberg’s account of their conversations since the Considine Letter and expressed 

that although BMO “believed the proposal . . . was ‘inadequate,’” BMO “understood 

Jefferies’ position and believed that such proposal was superior to the status quo.”58

Houlihan also reached out to other significant minority stockholders, which

expressed similar concerns. Specifically, Houlihan reported that RBC, which 

advised holders of approximately 750,000 HomeFed shares, was “begrudgingly 

supportive” and was concerned about Jefferies stock price decreasing.59 

On March 25, 2019, the Special Committee decided to propose a $42 fixed 

value counteroffer to the February 2019 Offer.

60

 The next day, Hallac emailed 

Considine and Lobatz to see if one of them could speak over the phone regarding a 

question about the Special Committee’s counteroffer.

61 When Considine called 

Hallac, he sought approval for Jefferies’ CEO to contact BMO to discuss the 

counteroffer.

62

 After Considine told Hallac he did not object, Jefferies’ CEO 

(Richard Handler) immediately reached out to BMO without any input from 

 

57 Id. ¶ 73; Aronstam Aff. Ex. W, at 3.

58 Compl. ¶ 75.

59 Id. ¶ 76.

60 Id. ¶ 77; Aronstam Aff. Ex. Y, at 2-3.

61 Compl. ¶ 79.

62 Id. ¶ 80.
16

Lobatz.

63 In his discussions with BMO, Handler did not tell BMO about the Special 

Committee’s proposal of a fixed value structure at $42 per share and instead implied 

that the 2:1 fixed exchange ratio was a “take it or leave it” proposition.64 BMO 

preferred this proposal to the status quo and thus expressed support.65

When Lobatz learned that Jefferies had spoken with BMO, he immediately 

contacted Hallac to make clear that he did not consent to Jefferies speaking directly 

to BMO.

66 At the next Special Committee meeting on March 26, 2019, which 

occurred later in the day after Handler spoke to BMO, the Special Committee 

discussed its concerns about its “continued effectiveness” in light of Jefferies’

behavior.67 Specifically, the Special Committee directed Sheppard Mullin to 

communicate to Jefferies that “there should be no further contact from anyone 

affiliated with Jefferies with any stockholder of the corporation not affiliated with 

Jefferies without Committee approval, which would occur only after the Committee 

had consulted with its legal and financial advisors.”68

 

63 Id. ¶¶ 80-81.

64 Id. ¶ 81.

65 Id.

66 Id. ¶ 84.

67 Id. ¶ 85.

68 Id.
17

On March 27, 2019, Jefferies rejected the Special Committee’s $42 fixed 

value counteroffer and reiterated its offer at 2:1 fixed exchange ratio.69 Hallac 

communicated that Jefferies rejected the counteroffer based on the 2:1 exchange 

ratio proposed in the Considine Letter and BMO’s support for the 2:1 exchange 

ratio.70

Later on March 27, at a meeting of the Special Committee, Lobatz reiterated 

his displeasure with Jefferies’ conversations with BMO, which he considered “so 

damaging to the Committee’s negotiating position” that he and Considine “discussed 

excluding BMO from the majority of the minority stockholder vote.”

71 The Special 

Committee ultimately decided against taking this action.72

On April 2, 2019, the Special Committee agreed to Jefferies’ 2:1 exchange 

ratio but proposed a collar with a low threshold of $38 and a high threshold of $42 

to protect against a decrease in Jefferies’ stock price.

73

 Jefferies agreed to this 

structure, which was documented in a merger agreement HomeFed and Jefferies 

entered into on April 12.

74

 

69 Id. ¶ 88; Aronstam Aff. Ex. AA, at 1.

70 Compl. ¶ 88.

71 Id. ¶ 89.

72 Id. ¶ 92.

73 Id. ¶ 91.

74 Id. ¶¶ 92-93. Specifically, the April 12 merger agreement provided that minority 

stockholders would receive their choice of either $38 per share in cash or no more than two 

shares of Jefferies stock and, if Jefferies stock was worth more than $21 per share when 
18

G. Stockholders Renegotiate the Transaction Directly with Jefferies

On April 15, 2019, HomeFed and Jefferies publicly announced the terms of 

April 12 merger agreement, to which BMO and RBC promptly expressed their 

opposition to the $42 upper collar.

75

 On April 16, the Special Committee decided to

permit Jefferies to communicate directly with BMO and RBC about their concerns

but only after Houlihan spoke to them first.

76

The following week, the Special Committee spoke with RBC, which 

expressed concerns about the upper collar and that “any cash option was not 

attractive.”77 RBC claimed to speak for BMO as well, which meant it was relaying 

the views of more than 70% of the HomeFed shares not affiliated with Jefferies.78

On April 27, 2019, the Special Committee proposed removing the upper 

collar.

79 Jefferies rejected the proposal unless the $38 cash alternative also was 

removed, to which the Special Committee agreed on April 29, 2019.

80

 

the Transaction closed, the exchange ratio would reduce from 2:1 to ensure that the 

Jefferies stock the HomeFed minority stockholders received would not be worth more than 

$42 in total. Id. ¶ 93. 

75 Id. ¶ 94.

76 Id. ¶ 94; Aronstam Aff. Ex. EE, at 2.

77 Compl. ¶ 97.

78 Id. 

79 Id. ¶ 98.

80 Id. ¶¶ 98-99; Aronstam Aff. Ex. FF, at 1.
19

On May 2, 2019, the Special Committee and the Board approved an

amendment to the merger agreement to remove the upper collar and cash option.

81

 

The minority stockholders voted to approve the Transaction on June 28, 2019.82

II. PROCEDURAL HISTORY

On August 1, 2019, Plaintiffs filed this action, which was consolidated with a 

related action on September 3, 2019.83 On September 16, 2019, Plaintiffs designated 

the Verified Class Action Complaint (as defined above, the “Complaint”) as the 

operative complaint.

84

The Complaint asserts two claims. Count I asserts a breach of fiduciary duty

claim against the seven individual defendants for agreeing to the Transaction that

provided the minority stockholders “unfairly low consideration for their shares of 

HomeFed common stock.”

85

 Count II asserts a breach of fiduciary duty claim 

against Jefferies as HomeFed’s controlling stockholder for devising and

orchestrating “the unfair and self-dealing Transaction.”86

 

81 Compl. ¶ 100; Aronstam Aff. Ex. GG.

82 Aronstam Aff. Ex. HH (June 28, 2019 HomeFed Form 8-K), at 3. Of the 3,772,780 

shares of HomeFed stock held by the Company’s minority stockholders, 2,987,231 shares 

voted for the Transaction, 73,974 shares voted against the Transaction, and 1,476 shares 

abstained. Id. 

83 Dkt. 11.

84 Dkt. 19.

85 Compl. ¶ 135. 

86 Id. ¶ 139.
20

In November 2019, each of the Defendants moved to dismiss the Complaint 

under Court of Chancery Rule 12(b)(6) for failure to state a claim for relief.87 On 

December 17, 2019, the parties stipulated to the dismissal of Considine and Lobatz 

without prejudice.88 After briefing, the court held oral argument on April 3, 2020. 

III. ANALYSIS

The standards governing a motion to dismiss under Rule 12(b)(6) for failure 

to state a claim for relief are well settled:

(i) all well-pleaded factual allegations are accepted as true; (ii) even 

vague allegations are well-pleaded if they give the opposing party 

notice of the claim; (iii) the Court must draw all reasonable inferences 

in favor of the non-moving party; and [(iv)] dismissal is inappropriate 

unless the plaintiff would not be entitled to recover under any 

reasonably conceivable set of circumstances susceptible of proof.89

The Jefferies Defendants’ sole argument for dismissal of the claims against 

them is that the Transaction is subject to business judgment review because the 

Transaction complied with the framework set forth in Kahn v. M & F Worldwide 

Corp. (“MFW”).

90

 The remaining two defendants (Borden and Bienvenue) join in 

the MFW argument and advance one additional argument, i.e., that the Complaint 

fails to plead a non-exculpated claim against them under In re Cornerstone 

 

87 Dkt. 24; Dkt. 25.

88 Dkt. 32.

89 Savor, Inc. v. FMR Corp., 812 A.2d 894, 896-97 (Del. 2002) (internal quotations and 

citations omitted).

90 88 A.3d 635 (Del. 2014). 
21

Therapeutics Inc., Shareholder Litigation.

91 The court addresses each issue in turn 

below. 

A. The MFW Defense

In MFW, our Supreme Court held that the business judgment rule is the 

appropriate standard of review for a challenge to a squeeze-out merger by a 

controlling stockholder if the transaction satisfies certain procedural protections:

We hold that business judgment is the standard of review that should 

govern mergers between a controlling stockholder and its corporate 

subsidiary, where the merger is conditioned ab initio upon both the 

approval of an independent, adequately-empowered Special Committee 

that fulfills its duty of care; and the uncoerced, informed vote of a 

majority of the minority stockholders.92

The high court reasoned that the “simultaneous deployment of [these] procedural 

protections . . . create a countervailing, offsetting influence of equal—if not 

greater—force” than the undermining influence of a controller.

93

 In this way, the

“controller irrevocably and publicly disables itself from using its control to dictate 

the outcome of the negotiations.”94

 

91 115 A.3d 1173 (Del. 2015).

92 88 A.3d at 644.

93 Id.

94 Id.
22

In summarizing its holding, the Supreme Court in MFW identified six 

conditions that must be satisfied to invoke business judgment review of a squeezeout merger by a controlling stockholder:

[I]n controller buyouts, the business judgment standard of review will 

be applied if and only if: (i) the controller conditions the procession of 

the transaction on the approval of both a Special Committee and a 

majority of the minority stockholders; (ii) the Special Committee is 

independent; (iii) the Special Committee is empowered to freely select 

its own advisors and to say no definitively; (iv) the Special Committee 

meets its duty of care in negotiating a fair price; (v) the vote of the 

minority is informed; and (vi) there is no coercion of the minority.95

“If a plaintiff can plead a reasonably conceivable set of facts showing that any or all 

of those enumerated conditions did not exist,” the plaintiff would state a claim for 

relief and be entitled to conduct discovery.96 “If, after discovery, triable issues of 

fact remain about whether either or both of the dual procedural protections were 

established, or if established were effective, the case will proceed to a trial in which 

the court will conduct an entire fairness review.”97

Plaintiffs contend that entire fairness review presumptively applies to the 

Transaction because the Complaint’s factual allegations support more than a 

reasonable inference that three of the six conditions required under MFW were not 

 

95 Id. at 645 (formatting altered), overruled on other grounds by Flood v. Synutra Int’l, 

Inc., 195 A.3d 754, 763 (Del. 2018).

96 Id. 

97 Id. at 645-46.
23

satisfied. For the reasons discussed next, the court concludes that Plaintiffs have 

plead a reasonably conceivable set of facts that Jefferies did not impose the MFW 

conditions ab initio based on the Complaint’s allegations concerning Jefferies’ 

discussions with BMO before Jefferies made the February 2019 Offer.

98

Plaintiffs contend that adherence to the MFW framework required imposition 

of its dual protective devices in 2017, after Considine sent Steinberg a letter 

proposing a potential merger of HomeFed and Jefferies based on a 2:1 exchange 

ratio. According to Plaintiffs, the Considine Letter led to a continuous series of 

substantive negotiations concerning a potential transaction that Jefferies had before

it committed to the MFW framework, first with the Special Committee from 

December 2017 to March 2018 and then directly with BMO from March 2018 to 

February 2019. 

Relying on this court’s decision in In re Books-A-Million, Inc. Stockholders 

Litigation,

99 Defendants counter that the process with the Special Committee that 

began in December 2017 ended in March 2018, when Jefferies abandoned pursuit of 

a transaction, and that the February 2019 Offer began a separate process. As to the 

 

98 Given the court’s conclusion on this issue, it not necessary to address the two other MFW

conditions that Plaintiffs contend were not satisfied, namely that “the Special Committee 

was neither well-functioning nor an effective negotiating agent” and that the “Proxy was 

materially incomplete and misleading.” Pls.’ Answering Br. 25 (Dkt. 33).

99 2016 WL 5874974, at *8 (Del. Ch. 2016), aff’d, 164 A.3d 56 (Del. 2017) (quoting MFW, 

88 A.3d at 644).
24

second process, Defendants contend that Jefferies satisfied the MFW pre-condition 

requirement on the theory that the Stockholders Agreement provided the “rules of 

the road . . . for any potential going-private transaction with Jefferies.”

100

 They 

further contend this requirement was met because, “within days of Jefferies 

informing Lobatz and Considine about BMO’s support for a potential two-for-one 

transaction in February 2019, and before Jefferies made the [February 2019 Offer], 

Jefferies made clear that it expected any transaction to comply with MFW’s strictures 

and the Stockholders Agreement.”

101

 

As an initial matter, Defendants’ reliance on Books-A-Million is misplaced. 

There, this court found it was not reasonably conceivable that a proposal from a 

controller made “nearly three years after” a special committee rejected an initial 

proposal from the controller containing “a different price and different terms” was a 

continuation of the first proposal.102 Here, by contrast, the Complaint alleges that: 

 The Board never repealed the December 2017 Resolutions or dissolved 

the Special Committee;

 As reflected in its minutes and the Proxy, the Special Committee only 

“determined to pause its process” in March 2018 when Jefferies 

indicated it no longer wanted to pursue a transaction;

 Despite asserting a lack of interest in a transaction in March 2018, 

Jefferies “repeatedly” held substantive economic discussions 

 

100 Jefferies Opening Br. 33 (Dkt. 24).

101 Id.

102 Books-A-Million, 2016 WL 5874974, at *9.
25

concerning a potential transaction over the next eleven months with the 

Company’s largest minority stockholder (BMO) notwithstanding the 

fact that the December 2017 Resolutions gave the Special Committee 

the “exclusive power and authority . . . to communicate with . . . the 

stockholders;” and

 Those discussions culminated in BMO expressing support for a

transaction with the same structure (i.e., a 2:1 exchange ratio) proposed 

in the Considine Letter that triggered the need for the Special 

Committee in the first place.

103

Given these well-plead allegations, it is reasonably conceivable that the February 

2019 Offer was part of the same process that led to the adoption of the December 

2017 Resolutions that empowered the Special Committee and caused it to retain 

multiple legal advisors shortly thereafter.

104 That process failed to comply with the 

MFW framework because Jefferies did not condition a transaction ab initio upon the 

dual MFW protections before that process began. 

 

103 Compl. ¶¶ 38, 46-48 (emphasis in original); Aronstam Aff. Ex. O (Mar. 26, 2018 Special 

Committee minutes); Aronstam Aff. Ex. P (Feb. 13, 2019 Special Committee minutes); 

Proxy 19; December 2017 Resolutions at -1381.

104 Defendants ask the court to draw inferences in their favor to find that the Special 

Committee process that began in December 2017 ended in March 2018 because Considine 

and Lobatz sought “reauthorization” from the Board after receiving the February 2019 

Offer and because they declined to engage Houlihan formally until the Board approved the 

reauthorization. Jefferies Opening Br. 37, 43. This would be inappropriate. The court 

may not weigh evidence on a motion to dismiss to resolve a factual dispute. Rather, the 

court’s task is to determine whether plaintiff would be entitled to recover “under any 

reasonably conceivable set of circumstances” while drawing “all reasonable inferences in 

favor of the non-moving party.” Cent. Mortg. Co. v. Morgan Stanley Mortg. Capital Hldgs. 

LLC, 27 A.3d 531, 535 (Del. 2011). 
26

Although it is reasonably conceivable that the February 2019 Offer was part 

of the process that began in December 2017, it ultimately makes no difference in my 

opinion whether it was or whether the February 2019 Offer triggered a new process. 

This is because, in either case, Jefferies did not commit to the MFW protections 

before engaging in substantive economic discussions concerning the Transaction. 

Rather, Jefferies engaged in a series of discussions with BMO until Jefferies 

received an indication of support for a 2:1 share exchange from BMO—whose 

support was essential to get a deal done with minority stockholder approval105—as 

well as from RBC before Jefferies agreed to the dual MFW protections. To be more 

specific, Jefferies received these indications of support in early February 2019 but 

did not agree to the MFW protections until, at the earliest, February 20, 2019, when 

it amended its Schedule 13D.106 Defendants advance essentially two arguments why 

this should not matter. Neither has merit.

 

105 Mot. to Dismiss Hr’g Tr. 27 (Apr. 3, 2020) (Dkt. 47) (Jefferies Defendants’ counsel: 

“the reality is that BMO, owning 9 percent of the stock – which, in fact, translated into 36 

percent of the minority – no deal was ever going to get done without BMO’s interest and 

support.”). 

106 See supra Part I.E. Jefferies appears to argue it agreed to the MFW protections a few 

days earlier, on February 18. That is when its counsel confirmed to Shepherd Mullin the 

details of Steinberg’s discussions with BMO and “indicated that any transaction would be 

subject to the approval of the Special Committee and a majority of the outstanding shares 

of the Corporation’s Common Stock not already owned by Jefferies or its affiliates.” See

Jefferies Opening Br. 13-14 (quoting Feb. 18, 2019 Special Committee minutes), 33. But 

this was not a public commitment to the MFW protections and, in any event, the key 

discussion with BMO occurred before February 18. See MFW, 88 A.2d at 644 (“[W]here 

the controller irrevocably and publicly disables itself from using its control to dictate the 

outcome of the negotiations and the shareholder vote, the controlled merger then acquires 
27

First, Defendants contend the Stockholders Agreement “all but eliminated the 

risk of Jefferies pursuing a going-private transaction without the support of 

HomeFed’s independent directors and minority stockholders.”107 This is incorrect.

The requirement in the Stockholders Agreement for approval of a majority of the 

minority stockholders only applies to transactions subject to Rule 13e-3 of the 

Exchange Act.108 The Stockholders Agreement thus did not preordain that any 

buyout of HomeFed’s minority stockholders would be subject to a majority of the 

minority approval requirement. Indeed, it appears that the Transaction fell within 

an exception to Rule 13e-3 because HomeFed stockholders received “only an equity 

security” (i.e., Jefferies stock) that carried substantially the same rights as HomeFed 

stock.

109 Jefferies does not contend otherwise.

Second, Defendants argue that Jefferies’ discussions with BMO before the 

February 2019 Offer did not pass the point of no return for invoking MFW’s 

protections because those discussions were “preliminary” and only involved “an 

 

the shareholder protective characteristics of third-party, arm’s-length mergers, which are 

reviewed under the business judgment standard.”) (emphasis added). 

107 Jefferies Reply Br. 20 (Dkt. 36).

108 See supra Part I.B.

109 See Pls.’ Answering Br. 27 n.31 (citing 17 CFR § 240.13e-3(g)(2)).
28

unaffiliated minority stockholder with no ability or authority to bind the corporation 

or any other stockholder.”110 The court disagrees.

“The first requirement of [MFW] is that the controller condition the 

transaction ‘ab initio upon both the approval of an independent, adequatelyempowered Special Committee that fulfills its duty of care; and the uncoerced, 

informed vote of a majority of the minority stockholders.’”111 “[T]he purpose of the 

words ‘ab initio,’ and other formulations like it in the MFW decisions, require the 

controller to self-disable before the start of substantive economic negotiations, and 

to have both the controller and Special Committee bargain under the pressures 

exerted on both of them by these protections.”112

As this court recently explained in In re Dell Technologies Inc. Class V 

Stockholders Litigation, “MFW’s dual protections contemplate that the Special 

Committee will act as the bargaining agent for the minority stockholders, with the 

minority stockholders rendering an up-or-down verdict on the committee’s work.”113

A special committee is uniquely qualified to perform this task because directors have 

“superior access to internal sources of information,” can deploy “the Board’s 

statutory authority under Section 141(a) as delegated to the committee under Section 

 

110 Jefferies Opening Br. 39-40.

111 In re Books-A-Million, 2016 WL 5874974, at *8 (quoting MFW, 88 A.3d at 644).

112 Synutra, 195 A.3d at 763.

113 2020 WL 3096748, at *17 (Del. Ch. June 11, 2020).
29

141(c), and can ‘act as an expert bargaining agent.’”

114

 Directors also owe fiduciary 

duties and do not suffer from the collective action problem of disaggregated 

stockholders whereas minority stockholders are unencumbered by fiduciary duties 

(absent special circumstances) and “may have divergent interests in a transaction, 

whether economic or otherwise.”115 

Here, the Complaint sufficiently alleges that, by engaging in substantive 

economic discussions with BMO before committing itself to the twin MFW

protections, Jefferies failed to disable and subject itself to the pressures of 

negotiating with the Special Committee with those protections in place. Instead, 

according to the Complaint, Jefferies anchored the negotiations and undermined the

Special Committee’s ability to bargain effectively as the minority stockholders’ 

agent. To that end, the Complaint specifically alleges that Jefferies cited BMO’s 

support for a 2:1 exchange ratio when it rebuffed the Special Committee’s $42 fixed 

value counteroffer.116 

 

114 Id. (quoting In re Cox Commc’ns, Inc. S’holders Litig., 879 A.2d 604, 618 (Del. Ch. 

2005); see 8 Del. C. § 141. 

115 2020 WL 3096748, at *18 (citations omitted). 

116 Compl. ¶ 88 (alleging that “Jefferies only received” the “purported support of BMO for 

a 2:1 exchange ratio” that Hallac stated was one of “the bases for Jefferies’ decision to 

reject” the Special Committee’s counteroffer by “repeatedly violating the [December 2017] 

Resolutions to pressure and deceive BMO into agreeing to an unfair Transaction”). See 

also id. ¶ 89 (Lobatz complaining that Jefferies’ March 2019 conversations with BMO 

damaged the Special Committee’s “negotiating position” to the point that “the Special 

Committee discussed excluding BMO from the majority-of-the-minority stockholder 

vote”).
30

Defendants’ contention that Jefferies’ discussions with BMO were simply 

“preliminary” is inconsistent with well-plead allegations that those discussions 

concerned the key economic term of the Transaction—the price. Although the value 

realized from a pure share exchange is inherently subject to the relative prices of the 

underlying shares of stock in the exchange, one would be hard-pressed not to view 

the exchange ratio as an important substantive economic term. In fact, the 2:1 ratio 

to which BMO indicated support just days before Jefferies purported to commit itself

to the MFW protections ultimately dictated the final price HomeFed’s minority 

stockholders received for their shares in the Transaction a few months later.

Finally, Defendants’ position implies that substantive economic discussions 

preceding invocation of MFW’s twin protections should not preclude a pleadingstage dismissal under MFW if they occur between the controller and a minority 

stockholder with no authority to bind the company as opposed to an authorized 

representative of the controlled company. Neither party identified any legal 

authority addressing this precise scenario. In Dell, the court held that defendants 

were not entitled to receive a pleading-stage dismissal under MFW where the 

controller bypassed the special committee in favor of direct negotiations with 

stockholders after invoking MFW’s protections.

117

 

117 Dell, 2020 WL 3096748, at *19-20. 
31

As previously mentioned, the animating principle of MFW is to require a 

controller to disable and negotiate with an independent and adequately empowered 

committee of directors under the pressures of the dual protections. If the controller 

does so in accordance with the six conditions enumerated in MFW, the controller 

effectively will secure a pleading-stage dismissal of a case that otherwise would be 

subject to entire fairness review.118 To my mind, it would be imprudent to endorse 

a rule that would allow a controller to undermine the effectiveness of a special 

committee preemptively through direct negotiations with a stockholder under the 

circumstances plead here as much as it would be to do so after the committee has 

been authorized formally. 

For the reasons explained above, the court denies Defendants’ motion to 

dismiss both claims in the Complaint based on their MFW defense. Accordingly, 

Plaintiffs are entitled to proceed to take discovery.119

 

118 See id. at *14 (explaining that the business judgment rule resulting from application of 

MFW is essentially “irrebuttable” because “[i]t is ‘logically difficult to conceptualize how 

a plaintiff can ultimately prove a waste or gift claim in the face of a decision by fullyinformed, uncoerced, independent stockholders to ratify the transaction’”) (quoting Harbor 

Fin. P’rs v. Huizenga, 751 A.2d 879, 889 (Del. Ch. 1999)). 

119 MFW, 88 A.3d at 645 (“If a plaintiff that can plead a reasonably conceivable set of facts 

showing that any or all of those enumerated conditions did not exist, that complaint would 

state a claim for relief that would entitle the plaintiff to proceed and conduct discovery.”). 
32

B. The Cornerstone Defense

Defendants Bienvenue and Borden are protected by a Section 102(b)(7) 

provision in HomeFed’s certificate of incorporation.120 “When a director is 

protected by an exculpatory charter provision, a plaintiff can survive a motion to 

dismiss by that director defendant by pleading facts supporting a rational inference 

that the director harbored self-interest adverse to the stockholders’ interests, acted to 

advance the self-interest of an interested party from whom they could not be 

presumed to act independently, or acted in bad faith.”121 For the reasons discussed 

next, Plaintiffs have plead facts supporting a rational inference that, by voting to 

approve the Transaction, Bienvenue and Borden acted to advance the self-interest of 

an interested party (Jefferies) that stood on both sides of the Transaction from which 

they could not be presumed to act independently.

 

120 Transmittal Affidavit of Alexandra Cumings Ex. 1, § 8 (Dkt. 26). “The court may take 

judicial notice of an exculpatory charter provision in resolving a motion addressed to the 

pleadings.” McMillan v. Intercargo Corp., 768 A.2d 492, 501 n.40 (Del. Ch. 2000). 

Plaintiffs assert in a footnote that Borden cannot secure dismissal under Section 102(b)(7) 

because he was an officer of the Company in addition to being a director, but Plaintiffs 

fails to allege any facts demonstrating that Borden took any action in this capacity relevant 

to Count I. See Arnold v. Soc’y for Sav. Bancorp., Inc., 650 A.2d 1270, 1288 (Del. 1994) 

(finding that a breach of fiduciary duty claim against a dual director-officer asserted “in his 

role as an officer” “lacks merit” where plaintiff “failed to highlight any specific actions 

[the officer-director] undertook as an officer (as distinct from actions as a director)” so as 

to fall outside of Section 102(b)(7)’s protection). 

121 In re Cornerstone, 115 A.3d at 1179-80.
33

With respect to Bienvenue, the Complaint alleges he served in a variety of 

executive roles for Jefferies from January 1996 until April 2011, and has served on 

the HomeFed Board since 1998.

122

 In addition to his continued service on the Board, 

Bienvenue provided paid consulting services to HomeFed for several years and as 

recently as the first quarter of 2019. More specifically, Plaintiffs allege that, aside 

from his HomeFed director role, Bienvenue’s consulting role was his “sole 

employment” and he received approximately $10,000, $39,000, $155,000, and 

$50,000 in consulting fees from HomeFed for 2016, 2017, 2018, and the first quarter 

of 2019, respectively.123 Even under the more onerous particularity pleading 

standard of Rule 23.1, this court has found that a “consulting agreement suggests a 

lack of independence.”

124

 

Turning to Borden, the Complaint alleges he was a Jefferies Vice President 

from August 1988 to October 2000, served as HomeFed’s President for twenty years 

from May 1998 to February 2018, and was serving as Vice Chairman of the 

 

122 Compl. ¶ 20.

123 Id.; HomeFed 10-Q, filed with the SEC on May 9, 2019, at 16, 28. The court may take 

judicial notice of this fact because it is not subject to reasonable dispute between the parties. 

In re General Motors (Hughes) S’holder Litig., 897 A.2d 162, 170 (Del. 2006) (“[I]n acting 

on a Rule 12(b)(6) motion to dismiss, trial courts may consider hearsay in SEC filings to 

ascertain facts appropriate for judicial notice under Delaware Rule of 

Evidence 201. . . [however] it [can] only take judicial notice of facts not subject to 

reasonable dispute.”) (internal quotation marks, alterations, and citations omitted).

124 Orman v. Cullman, 794 A.2d 5, 30 (Del. Ch. 2002) (finding it “reasonable to infer that 

$75,000 would be material” to the director in question and that he would be “beholden to 

the controlling shareholders for future renewals of his consulting contract.”). 
34

Company—an executive officer position—under an employment agreement when 

the Transaction was approved.125 “Under the great weight of Delaware precedent, 

senior corporate officers generally lack independence for purposes of evaluating 

matters that implicate the interests of a controller.”126 Borden also was not listed as 

“independent” under Nasdaq listing rules in HomeFed’s 2018 Proxy.

127

 

The Complaint also alleges that the members of the Special Committee 

recognized Bienvenue and Borden’s lack of independence from Jefferies in 2017

when a Jefferies buyout of the minority stockholders was first proposed. 

Specifically, Considine and Lobatz wrote a letter to the Board in December 2017 

stating that, “as the only independent directors, we would like to request that 

you . . . appoint [us] to investigate a potential stock transaction acting as an

independent special committee.”128 When they sent this letter, Considine and Lobatz 

had served on the Board together with Bienvenue and Borden for nearly twenty years 

 

125 Compl. ¶ 21; Proxy 42 (“No executive officer is a party to any employment agreement 

other than Paul J. Borden.”); HomeFed Schedule 14A, filed with the SEC on June 28, 2018, 

at 13 (“As Vice Chairman, Mr. Borden remains an executive officer of the Company and 

it is expected that he will continue his service through December 31, 2019.”).

126 In re Ezcorp Inc. Consulting Agreement Deriv. Litig., 2016 WL 301245, at *35 (Del. 

Ch. Jan. 25, 2016) (collecting authorities).

127 Compl. ¶ 21.

128 Id. ¶ 37 (emphasis added).
35

and were well-positioned to understand the work Bienvenue and Borden did for 

HomeFed and the relationship they had with Jefferies.129

Bienvenue and Borden argue that the December 2017 letter is “immaterial” 

because it does not speak to their independence when they approved the Transaction 

in May 2019.

130 As discussed above, however, Plaintiffs allege that Bienvenue and 

Borden continued to serve as a consultant and officer of HomeFed, respectively, 

throughout 2018 and into 2019, similar to when their fellow directors (Considine 

and Lobatz) did not view them to be independent in December 2017. 

Bienvenue and Borden also contend that Plaintiffs’ allegations primarily 

concern their ties to HomeFed and have no bearing on their ties to Jefferies. This 

argument ignores the indisputable reality that Jefferies controlled HomeFed for 

several years leading up to the Transaction. As this court discussed in In re BGC 

Partners, Inc., “our law is not blind to the practical realities of serving as a director 

of a corporation with a controlling stockholder.”131 Indeed, “Delaware Supreme 

Court decisions have recognized the risk that directors laboring in the shadow of a 

controlling stockholder face a threat of implicit coercion because of the controller’s 

ability to not support the director’s re-nomination or re-election, or take the more 

 

129 Id. ¶¶ 20-23.

130 Bienvenue and Borden Reply Br. 9-10 (Dkt. 37).

131 2019 WL 4745121, at *7 (Del. Ch. Sept. 30, 2019).
36

aggressive step of removing the directors.”

132

 Although the presence of a controller 

does not alone overcome the presumption of director independence, it is relevant 

when considering Plaintiffs’ allegations holistically. 

Here, when viewed collectively, the Complaint’s allegations show that when 

Borden and Bienvenue cast their votes—which were essential to secure approval of 

a transaction benefitting the controller (Jefferies)133—(i) Borden was simultaneously 

serving as an executive officer of the controlled company (HomeFed); (ii) 

Bienvenue had been receiving consulting fees from HomeFed as his sole 

employment apart from serving as a HomeFed director for years and as recently as 

about one month earlier; and (iii) two of their fellow directors had questioned their 

independence. Accepting the well-plead allegations of the Complaint as true and 

drawing all reasonable inferences in favor of Plaintiffs as the court must under Rule 

12(b)(6), the Complaint supports a rational inference that Bienvenue and Borden

could not be presumed to act independently from Jefferies and acted to support its 

self-interest by approving the Transaction.

134

 

132 In re Ezcorp, 2016 WL 301245, at *20 (citing Kahn v. Lynch Commc’n Sys. Inc., 638 

A.2d 1110, 1116-17 (Del. 1994); and Kahn v. Tremont Corp., 694 A.2d 422, 428 (Del. 

1997)). 

133 It is reasonable to infer that the affirmative votes of Bienvenue and/or Borden were 

essential to approve the Transaction given that three of the seven members of the Board 

(Steinberg, Friedman, and Hallac) “abstained from voting due to their affiliation with 

Jefferies.” Proxy 26. 

134 Bienvenue and Borden argue that the Complaint fails to state a non-exculpated claim 

against them based on the court’s analysis in Klein v. H.I.G. Capital, L.L.C., 2018 WL 
37

IV. CONCLUSION

For the reasons explained above, the Defendants’ motions to dismiss are 

denied. 

IT IS SO ORDERED.

 

6719717 (Del. Ch. Dec. 19, 2018). Klein involved three inter-related 

transactions: (i) HIG’s sale of its 54% interest in Surgery Partners, Inc. to an affiliate of 

Bain, (ii) Surgery Partners’ acquisition of another company from a third party, and 

(iii) Surgery Partners’ issuance of preferred stock to Bain. Id. at *1. The court found that 

the complaint raised a reasonable doubt concerning the independence of one director 

(Doyle) for purposes of determining demand futility but that “no facts [were] alleged in the 

Complaint specific to Doyle that indicate that he advanced HIG’s self-interest as plaintiff 

theorizes” so as to state a non-exculpated claim against him. Id. at * 11-12, 18. Here, the 

Complaint not only pleads facts that call into question Bienvenue’s and Borden’s 

independence from Jefferies, but alleges that they approved the Transaction in breach of 

their fiduciary duties in order to facilitate Jefferies’ purchase of the minority stockholders’ 

shares for “unfairly low consideration.” See Compl. ¶¶ 133-35.