IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

OPTIMISCORP, a Delaware 

corporation, ALAN MORELLI, and 

ANALOG VENTURES, LLC,

Plaintiffs,

v.

JOHN WAITE, WILLIAM ATKINS, 

GREGORY SMITH, and WILLIAM 

HORNE,

Defendants.

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C.A. No. 8773-VCP

MEMORANDUM OPINION

Submitted: April 30, 2015

Decided: August 26, 2015

Anthony W. Clark, Esq., Douglas D. Herrmann, Esq., Amy C. Huffman, Esq., Danielle 

K. Berster, Esq., Ana Lucia Hurtado, Esq., SKADDEN, ARPS, SLATE, MEAGHER & 

FLOM LLP, Wilmington, Delaware; Darius Ogloza, Esq., OGLOZA FORTNEY LLP, 

San Francisco, California; Attorneys for Plaintiffs OptimisCorp, Alan Morelli, and 

Analog Ventures, LLC.

Stephen P. Brauerman, Esq., Vanessa R. Tiradentes, Esq., Sara E. Bussiere, Esq.,

BAYARD, P.A., Wilmington, Delaware; Attorneys for Defendants John Waite, William 

Atkins, and Gregory Smith.

Bruce E. Jameson, Esq., Eric J. Juray, Esq., John G. Day, Esq., PRICKETT, JONES & 

ELLIOTT, P.A., Wilmington, Delaware; Attorneys for Defendant William Horne.

PARSONS, Vice Chancellor.
1

On October 20, 2012, the board of the plaintiff corporation, a company involved in 

providing physical therapy services and developing physical therapy-related software,

met and voted to terminate the plaintiff CEO upon the advice of several attorneys. 

Previously, another attorney, an independent third party, had conducted an investigation 

and concluded that the CEO had engaged in conduct—receiving oral sex from a 

subordinate employee in his office, which also was the bedroom of his house—that could 

amount to sexual harassment. The board, at the same meeting, also voted to amend a 

stockholders agreement to remove a provision that granted the initial stockholders, who 

were controlled by the CEO, the right to appoint a majority of the board. The CEO, a 

former corporate attorney, quickly moved to reacquire control, which included replacing

every director he had appointed who had voted to remove him. Three of the four 

defendants also were directors of the plaintiff corporation and, as of the CEO‘s ouster, 

collectively held roughly as many shares as the CEO. The October 20 meeting was a 

bungled act of corporate governance marred by several flaws. Based on those missteps, 

the CEO eventually prevailed in having his removal and the amendment to the 

stockholders agreement vacated in a subsequent action in this Court pursuant to 8 Del. C. 

§ 225.

Back at the helm, the CEO soon terminated the fourth defendant in this action, the 

company‘s CFO, who was involved romantically with the CEO‘s former wife. A few 

months later, the three director defendants resigned from the company‘s board and the 

next day sued the company in California, where it is headquartered, to rescind the stockfor-stock transaction by which their former physical therapy company had become a 
2

subsidiary of the plaintiff corporation. The director defendants were terminated from that

company shortly thereafter. 

In this action, the CEO and the company return to this Court alleging that the four 

defendants engaged in a long-running and wide-ranging conspiracy that involved, 

essentially, everyone who disagreed with the CEO‘s management of the company. The 

plaintiffs seek approximately $50 million in damages, as well as equitable relief in the 

form of an extension of the stockholders agreement in order to cement the CEO‘s control

for another two years. The alleged wrongs range from nebulous breaches of fiduciary 

duty based on undermining the company‘s strategic vision to breach of contract claims. 

After extensive pre-trial proceedings, I tried this matter for six days in February 2015. 

This Memorandum Opinion (―Opinion‖) reflects my post-trial findings of fact and 

conclusions of law, as well as my rulings on certain ancillary motions. Because of the

far-ranging claims advanced by the plaintiffs and the number of non-party actors who 

figure in their narrative, the recitation of the facts is unusually lengthy.

Overall, the plaintiffs seek damages and equitable relief for breach of the duty of 

loyalty, breach of contract, and tortious interference, and they advance secondary liability 

theories of aiding and abetting and conspiracy. The defendants deny liability on all 

counts, argue that there was and is no conspiracy, and contend that the CEO is a paranoid 

narcissist. The defendants also accuse the plaintiffs of having undermined the integrity of 

the litigation process by engaging in conduct akin to bribing and tampering with 

witnesses.
3

For the reasons that follow, I conclude that the plaintiffs‘ actions have threatened

the integrity of this proceeding. The record includes evidence that supports a finding that 

the plaintiffs paid witnesses for the content of their testimony, threatened witnesses with 

criminal charges, attempted to open criminal investigations, and generally engaged in 

threats of civil litigation based on questionable or baseless claims, all in an effort to 

secure ―evidence‖ that would aid the plaintiffs in this case. As sanctions for this conduct, 

I dismiss the plaintiffs‘ conspiracy claims against all of the defendants (although I also 

hold, in the alternative, that the plaintiffs failed to prove their conspiracy claim) and I 

draw certain adverse inferences against the plaintiffs in connection with certain of their 

other claims. Additionally, I find that the plaintiffs have not met their burden of proving: 

(1) their breach of the duty of loyalty claims, with the exception of one claim relating to 

candor; (2) their claims for breach of either the terms of the stockholders agreement or 

the implied covenant of good faith and fair dealing inherent in that agreement; or (3) their 

tortious interference claims. Finally, I find that the plaintiffs have not proven damages.

I. INTEGRITY OF THE PROCEEDINGS

Unfortunately, because it bears on witness credibility and, ultimately, the facts 

found in this Opinion, I consider it necessary to start in the middle of this story and

address the defendants‘ charge that the plaintiffs have undermined the integrity of these

proceedings, and only then tell the facts from the beginning.1 After a truncated recitation 

 

1 Citations to testimony presented at trial are in the form ―Tr. # (X)‖ with ―X‖ 

representing the surname of the speaker, if not clear from the text. Exhibits will 

be cited as ―JX #‖ and facts drawn from the parties‘ pre-trial Joint Stipulation are 
4

of the necessary background, all of which is explored in greater detail in Section II infra, 

I turn to the acts that the defendants argue were wrongful. 

A. Relevant Actors

There are three Plaintiffs in this action. Plaintiff OptimisCorp (―Optimis‖ or the 

―Company‖) is a Delaware corporation with its principal place of business in Pacific 

Palisades, California. Plaintiff Alan Morelli has been the Company‘s CEO since its 

inception, with the exception of the period from October 20, 2012 through March 21, 

2013, during which time his status was uncertain. Plaintiff Analog Ventures, LLC

(―Analog‖), is a California LLC managed by Morelli that holds many of his Optimis 

shares.2 When this action was filed, Morelli owned or controlled at least 7,400,000 

shares of Optimis stock.3

Morelli, who is described in detail in Section II.D infra, is the locomotive 

propelling this litigation. Described as a charismatic visionary, Morelli succeeded in 

convincing numerous successful business owners, including the three director defendants,

 

cited as ―JS § #.‖ Because of the sheer quantity of the evidence, I note that the 

record citations provided often are indicative, rather than exhaustive, and are 

provided only for facts that may be disputed.

2 Analog Ventures‘ interests are aligned with Morelli. Accordingly, when referring 

to actions taken by Morelli and Analog, I simply refer to them as ―Morelli.‖

3

The Joint Stipulation lists Morelli as personally owning or controlling 4,139,290 

shares and Analog as owning 3,250,000 shares. At trial, however, it was revealed

for the first time that Morelli received roughly 1.6 million additional shares of 

stock in lieu of cash to satisfy the Company‘s advancement obligations to him. Tr. 

588-89 (Morelli). That transaction was approved by the current board of Optimis, 

the majority of whom were appointed by Morelli. Id. at 589-90. 
5

to sell their companies to Optimis in all-stock transactions, thus tying their success or 

failure directly to Optimis and its physical therapy software and indirectly to Morelli. As 

a manager, however, Morelli is ineffective. He has been characterized as controlling, 

intolerant of dissent, paranoid, and vindictive. He contends that his relations with

Optimis employee and non-party Tina Geller were consensual and that the related sexual 

harassment allegations were manufactured by the defendants, and other members of a 

large conspiracy, as a baseless pretext to remove him from power.

There are four defendants. Defendant William Horne started as a consultant to the 

Company in 2006 and became the Chief Financial Officer in January 2008. He was 

stripped of all power and authority on March 25, 2013, placed on administrative leave on

April 16, and formally terminated on May 10, 2013. He owns 167,668 shares (less than 

1%) of the Company‘s stock. Defendants John Waite, William Atkins, and Gregory 

Smith (collectively, the ―Director Defendants‖ and together with Horne, ―Defendants‖) 

jointly owned Rancho Physical Therapy, Inc. (―Rancho‖), a California professional 

corporation that provides physical therapy services in various clinics in San Diego, 

Riverside, and San Bernardino, with its principal place of business in Murrieta,

California. The Director Defendants entered into a Stock Purchase Agreement and Plan 

of Reorganization dated June 14, 2007, pursuant to which Rancho became a wholly 

owned subsidiary of Optimis and the Director Defendants became directors and 

stockholders of Optimis. Rancho was the first, and largest, of a number of physical 

therapy businesses acquired by the Company. Following the Rancho acquisition, the 

Director Defendants no longer owned any Rancho stock, having exchanged it for stock in 
6

Optimis. The Director Defendants continued to be employed by Rancho after the sale, 

but each accepted a significant reduction in salary from what they had received before the 

acquisition. Waite also served as the Chief Operating Officer of Optimis from 2009 until 

his resignation in the summer of 2013. Collectively, the Director Defendants own 

8,755,000 Optimis shares. 

Tina Geller4is a physical therapist formerly employed by Optimis. She joined the 

Company in May 2010 and later began managing the Company‘s Pacific Palisades clinic. 

As described in detail infra, it was her communication to Waite that triggered the sexual 

harassment investigation that formed the basis of Morelli‘s termination by the board on 

October 20, 2012. The parties heavily dispute the genesis and propriety of that 

investigation. It is undisputed, however, that Morelli received oral sex from Geller on 

multiple occasions while she was an employee of the Company and providing physical 

therapy to him, and that Morelli also fondled Geller on occasion during those sessions.5 

Geller filed suit against Optimis in April 2013.6 Defendants, and in particular Horne, 

 

4 After the events giving rise to this case, Geller changed her surname to Robinson. 

For consistency, and because she was known as such during the relevant time 

periods, I refer to her throughout this Opinion as Geller and her deposition is cited 

as ―Geller Dep.‖ 

5

Tr. 404-05, 474-76, 618-19 (Morelli). Morelli placed the number of oral sex 

incidents at five or six. Id. at 404. Geller testified that it occurred eight to ten 

times. Geller Dep. 28. 

6 Geller first filed a complaint with the California Department of Fair Employment 

and Housing on March 26, 2013. JX 703. On April 10, 2013, she filed a civil 

complaint in the California Superior Court for the County of Los Angeles alleging, 
7

contend that the manner in which Plaintiffs settled that lawsuit with Geller amounts to 

witness tampering and bribery.

Helene Fearon and Stephen Levine co-founded Fearon & Levine, a consulting 

firm that they sold to Optimis in December 2008. As with Rancho, that transaction was 

stock-for-stock with no cash consideration and Fearon and Levine accepted significantly 

lower salaries.

7

 Fearon and Levine currently are employed by Optimis Services, Inc., a 

wholly owned subsidiary of the Company. Their positions at the Company primarily

involve assuring compliance with government and industry regulations, as well as 

helping develop and market the Company‘s OptimisPT software package. For many 

months before Morelli‘s temporary ouster, both Fearon and Levine had been seeking pay 

raises from the Company. Although they briefly received their desired raises around 

November 2012 when the Director Defendants were in control, those raises were undone 

as part of the Section 225 Action (the ―225 Action‖). Fearon and Levine had significant 

reputational capital and they staked it on the success of OptimisPT.

8

 

 

among other things, quid pro quo sexual harassment, a hostile work environment, 

and retaliation. JX 726.

7

Tr. 745-46 (Fearon). Upon joining Optimis, Fearon took a pay cut from making 

$150,000 to $180,000 per year to $65,000. Id. at 748 (Fearon). Levine took a

similar pay cut to $65,000. Id. at 1618 (Levine).

8

Id. at 743 (Fearon: explaining that she still worked for the Company ―because of 

the 5,000 users of the software that has my name on it, my face behind it, and my 

credibility‖); id. at 1576 (Levine: ―[I]f we were to leave the company, that would 

be very bad for the company and, frankly, we felt it would . . . damage our 

credibility in the industry and our reputation.‖).
8

In the spring of 2014, with discovery in this action underway and Levine on the 

brink of personal bankruptcy,9Plaintiffs ―settled‖ with Fearon and Levine, who then

received raises to $150,000, the amount they demanded, as well as back pay. Notably, 

neither Fearon nor Levine was a party to this or any other litigation with Plaintiffs at that 

time. Fearon and Levine also exchanged mutual releases with the Company, although 

there is no evidence that either Fearon or Levine understood what, if any, claims the 

Company legitimately might have against them.10 In turn, Fearon and Levine provided 

favorable affidavits that Plaintiffs attempted to submit in opposition to Defendants‘ thenpending summary judgment motions. Around the same time and on the eve of the 

scheduled trial, Plaintiffs also sought to amend their Complaint to allege that Fearon and 

Levine were co-conspirators with Defendants.11 Defendants contend that, by these and 

related actions, Plaintiffs tampered with and effectively bribed Fearon and Levine.

Chris Olsen formerly served as the Controller of Rancho. He served in that 

position from April 2001 until December 2013. I found Olsen‘s trial testimony highly 

credible and probative. He also provided a unique perspective, because he was not 

involved in the core events giving rise to this lawsuit, but was associated with Optimis

 

9

Id. at 1618 (Levine).

10 Id. at 775-77 (Fearon); id. at 1618-23 (Levine).

11 In a previous Memorandum Opinion, I denied Plaintiffs‘ motion to amend, held 

that the Fearon and Levine affidavits were untimely, and refused to consider them

in resolving Defendants‘ summary judgment motions. OptimisCorp v. Waite, 

2015 WL 357675 (Del. Ch. Jan. 28, 2015).
9

while the Director Defendants were employees of Rancho and after they were fired. 

Olsen credibly testified that the atmosphere at Optimis following the Director 

Defendants‘ termination was ―You‘re with us or you‘re with them [Defendants]. And if 

you‘re with them, we‘ll put you in the lawsuit.‖12 At one meeting, Morelli ―suggested 

that the Company would reward [Olsen] if [he] were able to come up with the corporate 

minutes that [Morelli] was looking for,‖ but which he could not find or did not exist.13 

On another occasion, Olsen was asked to sign a declaration that had been prepared in 

advance by Optimis‘ agents, but he crossed out the majority of the declaration as false.

14

In moving for summary judgment, Defendant Horne requested that the Court 

dismiss the claims against him as a sanction for litigation misconduct. The Director 

Defendants joined in that request. I deferred consideration of the request until after trial. 

Defendants briefed the issue again in their pre- and post-trial briefs, in which they aver 

that the settlements Optimis and Morelli made with Geller, Fearon, and Levine constitute 

witness tampering and bribery. Defendants further suggest that Plaintiffs essentially 

attempted to bribe Olsen. After digressing briefly below to provide an overview of the 

major factual disputes in this case, I address Defendants‘ witness tampering arguments in 

turn.

 

12 Tr. at 1217.

13 Id. at 1219.

14 Id. at 1220.
10

B. Factual Preview15

To put in perspective why Plaintiffs‘ actions with respect to these witnesses is so 

important, I provide here a summary of the facts found in Section II infra. Optimis 

simultaneously developed two software packages: OptimisPT and OptimisSport. Many 

individuals at the Company, including Defendants, Fearon, and Levine, believed that 

continuing to develop and stabilize OptimisPT was the Company‘s top priority and best 

hope for succeeding as a business and that the Company was misallocating resources by 

putting too much emphasis on OptimisSport. Morelli made the allocation decisions in the 

Company, and he disagreed. Because of a stockholders agreement, Morelli had the right 

to appoint five of Optimis‘ nine board members. As time went on, Defendants and 

others, including Fearon and Levine, became increasingly frustrated with the stalled 

development of OptimisPT and the spending on OptimisSport and its related promotional 

events. They blamed Morelli for these problems.

Geller‘s initial role at Optimis is unclear, but she worked on OptimisSport and 

functioned essentially as Morelli‘s personal physical therapist. Geller‘s husband also 

worked at Optimis. During 2011 and 2012, it is undisputed that, on some occasions,

Morelli engaged in sexual conduct with Geller during these physical therapy sessions. 

These interactions ceased as Geller spent more time running the Pacific Palisades clinic. 

It is undisputed that, at a conference in February 2012, Geller told Horne about some of 

Morelli‘s conduct, and that Horne shortly thereafter told George Rohlinger what Geller 

 

15 Record citations pertinent to this overview are provided in Section II infra.
11

told him, but Horne did not report the matter to Human Resources. Rohlinger worked 

closely with Waite, but it is contested whether Rohlinger later told Waite what Horne had 

told him. After the February conference, Horne allowed Geller to use his apartment for 

free, because it was closer to Pacific Palisades than her home. Horne was not using it 

because he was staying with Terry Doherty, Morelli‘s former wife.

Plaintiffs contend that Defendants despised Morelli‘s leadership, wanted to 

remove him and take control themselves, and were conspiring with others, including 

Fearon and Levine, to develop a plan as to how to do so. Plaintiffs allege that Defendants 

encouraged, lobbied, and bribed Geller to turn her purportedly consensual interactions 

with Morelli into a sexual harassment complaint. Defendants deny these allegations. On 

September 21, 2012, Geller spoke with Waite by telephone. She apparently was 

concerned that she was going to be reassigned from the Pacific Palisades clinic, where 

she had been working, back to Morelli‘s home, which was his Optimis office. What was 

said on the September 21 call is disputed, but Geller told Waite something about 

Morelli‘s behavior. Geller asked Waite not to report the matter. Waite reported it to 

Human Resources and an investigation began promptly thereafter.

The investigation involved a third-party attorney, chosen indirectly by Optimis‘ 

insurance carrier, who interviewed several Optimis employees. The investigator, Nancy 

Solomon, found Geller credible and corroborated by other witnesses. Solomon did not 

find Morelli credible. Morelli contends that the investigation was rushed and that 

Defendants manipulated it. Defendants deny those allegations. Waite scheduled a 

special meeting of the board of directors for October 20 to deal with Geller‘s allegations 
12

and Morelli‘s possible removal. He did not include any sort of meeting agenda in the 

notice. Solomon‘s report was completed a few days before the October 20 meeting. At 

the meeting, the board formed an ad hoc committee comprised of everyone except 

Morelli. The committee was advised by Leonid Zilberman, an attorney hired by the 

Company‘s insurer, that the Company needed to fire Morelli as CEO to have the best 

defense in a subsequent sexual harassment lawsuit. Other attorneys concurred in that 

advice. The board fired Morelli and amended the stockholders agreement to prevent him 

from returning himself to power and undoing their action. Waite was appointed interim 

CEO. 

Plaintiffs‘ primary duty of loyalty claim alleges that Defendants conspired to 

remove Morelli from power, bribed Geller to make false sexual harassment allegations, 

and used the sexual harassment investigation as a pretext to remove Morelli and take 

control of the Company. Geller is key to this claim. Plaintiffs‘ other main duty of 

loyalty claim alleges that Defendants undermined Morelli‘s authority and the Company‘s 

―strategic vision‖ by countermanding Morelli‘s authority and attempting to divert

resources from OptimisSport to OptimisPT. According to Plaintiffs, Fearon and Levine 

were key members of this purported anti-Morelli conspiracy. 

C. Analytical Framework: Litigation Ethics and the Administration of Justice

I take extremely seriously the claims of witness tampering and bribery. In the 

nearly 300 pages of post-trial briefing, however, the parties failed to articulate a clear 

standard under which to evaluate the conduct being challenged. Horne offered the 

criminal standards for witness tampering and bribery, cited the Rules of Professional 
13

Conduct, repeatedly emphasized that Morelli is a Delaware lawyer, albeit an inactive one, 

and asked this Court to dismiss all claims against Defendants as a sanction for litigation 

misconduct by Morelli and Plaintiffs‘ Delaware and California attorneys.

16

 Plaintiffs 

deny that there was any wrongdoing, assert that aggressive, good faith pursuit of 

settlements is both acceptable and encouraged by public policy, and contend that 

Defendants have been treated fairly and have not been impeded from accessing crucial 

information. I begin with a review of what I conclude are the guiding principles.

Some of the alleged wrongs can be examined from the perspective of the 

Delaware Lawyers‘ Rules of Professional Conduct (the ―Rules‖ or ―DLRPC‖). Rule 3.4, 

entitled ―Fairness to Opposing Party and Counsel,‖ forbids a lawyer to ―unlawfully 

obstruct another party‘s access to evidence‖17 and further instructs that lawyers shall not 

―falsify evidence, counsel or assist a witness to testify falsely, or offer an inducement to a 

witness that is prohibited by law.‖18 Rule 8.4(d), which is a catchall provision, provides 

that it is professional misconduct to ―engage in conduct that is prejudicial to the 

administration of justice.‖19

 

16 See State Line Ventures, LLC v. RBS Citizens, N.A., 2009 WL 4723372, at *1 (Del. 

Ch. Dec. 2, 2009) (―A Delaware lawyer always appears as an officer of the Court 

and is responsible for the positions taken, the presentation of the case, and the 

conduct of the litigation.‖).

17 DLRPC R. 3.4(a).

18 Id. R. 3.4(b). 

19 Id. R. 8.4(d).
14

―In Delaware there is the fundamental constitutional principle that [the Supreme] 

Court, alone, has sole and exclusive responsibility over all matters affecting governance 

of the Bar.‖20 Accordingly, the Court of Chancery generally does not have jurisdiction to 

enforce the Rules. ―The Rules are to be enforced by a disciplinary agency, and are not to 

be subverted as procedural weapons.‖21 The Supreme Court has set forth the standard by

which this Court should consider allegations of misconduct:

Absent misconduct which taints the proceeding, thereby 

obstructing the orderly administration of justice, there is no 

independent right of counsel to challenge another lawyer‘s 

alleged breach of the Rules outside of a disciplinary 

proceeding. Likewise, the trial courts have no jurisdiction to 

entertain such application except as noted above. 

Nonetheless, trial courts retain their traditional powers, 

which are indeed potent, to address, rectify and punish 

conduct of a party or counsel which threatens the legitimacy 

of judicial proceedings.22

Thus, for this Court to address directly an alleged violation of the Rules, that violation 

must involve ―prejudice to the fairness of the proceeding‖ itself.23 Furthermore, such a 

finding must be supported by clear and convincing evidence.24 This is a high bar. 

 

20 In re Appeal of Infotechnology, Inc., 582 A.2d 215, 220 (Del. 1990).

21 Id.

22 Id. at 221-22 (emphasis added). See also Crumplar v. Super. Ct. ex rel. New 

Castle Cty., 56 A.3d 1000, 1009 (Del. 2012) (―If a trial judge believes an attorney 

has committed misconduct, referral to the Office of Disciplinary Counsel, not Rule 

11 sanctions, is the proper recourse in the absence of prejudicial disruption of the 

proceeding.‖).

23 In re Rehab. of Indem. Ins. Corp., RRG, 2014 WL 637872, at *3 (Del. Ch. Feb. 19, 

2014).
15

Outside of the cases involving disqualification of counsel, very little Delaware law 

exists on what sort of conduct ―threatens the legitimacy of judicial proceedings‖ such that 

a trial court would be justified in employing its ―traditional powers.‖ Most frequently, 

the Court of Chancery invokes its ―inherent power to regulate the conduct of the 

attorneys that appear before it‖25 and maintains fairness by shifting fees when a party acts 

in bad faith.26 Only rarely has this Court dismissed cases on the basis of bad faith

conduct.

 

24 In re Appeal of Infotechnology, 582 A.2d at 221. ―The clear and convincing 

standard requires evidence that  ̳produces in the mind of the trier of fact an abiding 

conviction that the truth of [the] factual contentions [is] highly probable.‘‖ Hudak 

v. Procek, 806 A.2d 140, 147 (Del. 2002) (internal quotations omitted) (quoting 

Cerberus Int’l, Ltd. v. Apollo Mgmt., L.P., 794 A.2d 1141, 1151 (Del. 2002)).

25 Audio Jam, Inc. v. Fazelli, 1995 WL 1791087, at *2 (Del. Ch. Aug. 17, 1995).

26 See, e.g., Choupak v. Rivkin, 2015 WL 1589610, at *21-23 (Del. Ch. Apr. 6, 2015) 

(reviewing the law on bad faith fee shifting and concluding that fee shifting was 

appropriate after finding, using the preponderance-of-the-evidence standard, that 

the defendant committed perjury); ASB Allegiance Real Estate Fund v. Scion 

Breckenridge Managing Member, LLC, 2013 WL 5152295, at *10 (Del. Ch. Sept. 

16, 2013) (―When a party or its counsel engages in litigation misconduct to a 

degree sufficient to support fee shifting, the consequences go beyond monetary 

harm to the opposing party. The misconduct affects the court, which must devote 

resources to address the resulting problems, thereby depriving other litigants of the 

court‘s attention. More broadly, misuse of the litigation process undermines the 

public‘s confidence in the legal system.‖); Fairthorne Maint. Corp. v. Ramunno, 

2007 WL 2214318, at *9 (Del. Ch. July 20, 2007) (finding bad faith because of the 

―plethora of frivolous defenses and counterclaims,‖ the ―shifting nature of 

[defendants‘] arguments through their pleadings, briefs and oral argument,‖ and 

the ―incivility injected into these proceedings‖).
16

In Bessenyei v. Vermillion, Inc.,

27 the Court dismissed a case that was based on

falsely verified pleadings. The Court in Bessenyei concluded that the false verifications 

undermined the integrity of the judicial process because the verification requirement is 

designed to encourage truthfulness.28 From Bessenyei, one can draw the principle that 

actions that undercut the truthfulness of the proceeding are ones that threaten the 

legitimacy of the judicial process because they impede, and potentially undermine, the 

Court‘s ability to find facts accurately, which in turn prevents the Court from equitably 

dispensing justice.

Equally relevant are the principles articulated in Parfi Holding AB v. Mirror 

Image Internet, Inc.29 In that case, Chief Justice Strine, then writing as a Vice 

Chancellor, addressed a motion to dismiss presented under Rule 41(b) and ―the inherent 

authority of this court to hold litigants responsible for misconduct in the litigation 

process.‖30 In Parfi, the Court found, by clear and convincing evidence, that the 

plaintiffs repeatedly had misled the Court in an effort to gain a tactical advantage, which 

―implicate[d] this court‘s inherent authority to police the litigation process, to ensure that 

 

27 2012 WL 5830214 (Del. Ch. Nov. 16, 2012).

28 Id. at *8 (―This Court‘s rules, in an effort to assure truthfulness, require 

verifications of complaints, answers, and comparable pleadings. Failing to 

comply with this requirement is not some mere technicality; it undercuts the 

integrity of the judicial process.‖).

29 954 A.2d 911 (Del. Ch. 2008).

30 Id. at 927.
17

acts that undermine the integrity of that process are sanctioned.‖31 The Court dismissed 

the plaintiffs‘ claims as a result of their inequitable conduct and, in so doing, held that: 

―When a party knowingly misleads a court of equity in order to secure an unfair tactical 

advantage, it should forfeit its right to equity‘s aid. Otherwise, sharp practice will be 

rewarded, and the tradition of civility and candor that has characterized litigation in this 

court will be threatened.‖32

In the present case, the argument is not that Plaintiffs have lied to the Court, but 

instead that Plaintiffs fundamentally have impaired the Court‘s ability to find facts by 

offering improper material inducements and employing overbearing threats of criminal 

and civil litigation, a combination of carrots and sticks that has corrupted the witnesses. 

In that vein, Defendants point the Court to this State‘s criminal statutes prohibiting the 

bribing or tampering with witnesses.33 

If the published case law is any indication, witness bribing is a rare phenomenon 

in Delaware. I find relevant, however, the comments of the Delaware Supreme Court in 

 

31 Id. at 932.

32 Id. at 915.

33 11 Del. C. § 1261 (―A person is guilty of bribing a witness when the person offers, 

confers or agrees to confer any benefit upon a witness or a person about to be 

called as a witness in any official proceeding upon an agreement or understanding 

that: (1) The testimony of the witness will be thereby influenced . . . .‖); 11 Del. C. 

§ 1263 (―A person is guilty of tampering with a witness when: (1) The person 

knowingly induces, influences or impedes any witness or victim by false 

statement, fraud or deceit, with intent to affect the testimony or availability of such 

a witness . . . .‖).
18

Weber v. State.

34

 In that case, the Supreme Court reversed a murder conviction on 

several grounds. One of those grounds related to the bias of several witnesses to the 

stabbing. It was revealed during the trial that the family of the victim paid approximately 

$85 to each of three of the State‘s witnesses for haircuts and new suits. Importantly,

there was no evidence that the witnesses were being paid to alter their testimony in any 

way. But, the victim‘s family members knew the testimony that the witnesses were going 

to provide and approved of those statements. The legal question in Weber related to cross 

examination of the witnesses for bias. In the course of addressing that issue, the Supreme 

Court remarked that: 

[The victim‘s family‘s] actions, if not falling within the ambit 

of the criminal proscriptions against bribing a witness (11 

Del. C. § 1261), certainly violate the spirit of the law and cast 

into doubt the integrity of the proceedings in this case. . . . 

Similar conduct by an attorney would violate the Code of 

Professional Responsibility. . . . These tactics, as well as less 

blatant attempts to improperly influence a witness‘ testimony, 

are fundamentally unfair and pervert the truth-seeking 

function of trial.

35

Plaintiffs downplay the significance of these comments as dicta and emphasize that the 

holding in Weber is limited to the right of cross examination, which Defendants have had 

as to the witnesses in question here: Geller, Fearon, Levine, and Olsen. I do not agree

that the Court‘s comments were so limited. The Supreme Court, which has the 

 

34 457 A.2d 674 (Del. 1983).

35 Id. at 679 n.6 (emphasis added).
19

constitutional obligation to police the Bar, went out of its way to note that similar conduct 

by an attorney would be professional misconduct. 

From the foregoing review, I conclude that the inquiry into whether the integrity 

of these proceedings has been undermined should focus on the extent to which the 

Court‘s truth-finding function has been impaired, thus throwing into question any ruling

that ultimately might issue. With that standard in mind, I turn to Plaintiffs‘ litigation 

conduct in this case.

D. The Geller Settlement

Despite the fact that she did not testify at trial, Geller‘s credibility is a key issue in 

this case.36 Morelli‘s alleged sexual harassment of Geller formed the basis of Morelli‘s 

ouster on October 20, 2012, and that firing ranks highly among the items that led to this 

lawsuit. Thus, Geller is an important witness in this litigation. For example, in their 

Verified Complaint (the ―Complaint‖), Plaintiffs alleged that Defendants attempted to 

―coax Geller into bringing a false sexual harassment complaint against Morelli and to use 

it as an excuse to remove him and solicit the other directors and stockholders to support 

their change in control.‖37 Plaintiffs further alleged that Defendants ―bribed Geller into 

cooperating in an investigation against Morelli.‖38 In their post-trial briefing, Plaintiffs 

continue to maintain that Defendants used Geller‘s claims as a pretext to effect a change 

 

36 See infra Section V.A.

37 Compl. ¶ 18.

38 Id. ¶ 20.
20

in control at Optimis,

39 and breached their duty of loyalty by manipulating Geller and the 

subsequent investigation.40 Plaintiffs‘ failure to prove these allegations seriously would 

undercut their case. Aside from documentary evidence, the best sources of information 

as to whether Defendants ―bribed Geller‖ and otherwise used her as a pretext would be 

the testimony of Defendants and Geller on those issues. If the other evidence is not 

determinative, then Geller‘s credibility would be pivotal to resolving these contentions. 

1. Evidentiary objections

Plaintiffs did not raise their evidentiary objections to the materials and 

communications relating to their settlement with Geller until their reply brief. With 

respect to other issues, such as certain hearsay objections, Plaintiffs fairly did not need to 

press those objections earlier because they did not know what documents would be relied 

upon by Defendants in their briefs. But, the Geller settlement materials are different. 

Horne has pursued this witness tampering line of attack since briefing on his summary 

judgment motion, including extensive questioning at trial. In addition, Plaintiffs 

preemptively responded to the concerns about litigation misconduct the Court expressed 

at trial in a lengthy section of their opening brief. Yet, Plaintiffs failed to mention their

evidentiary objections anywhere in that context. Instead, they waited until their reply. I 

 

39 Pls.‘ Post-Trial Opening Br. [hereinafter ―POB‖] 19-22.

40 Id. at 49-50.
21

therefore hold that Plaintiffs have waived their evidentiary objections as to the settlement 

with Geller.41

Even if Plaintiffs‘ evidentiary objections were not waived, they are without merit. 

As to communications resulting from the California mediation, Plaintiffs object under 

California Evidence Code § 1119. That provision makes inadmissible and, indeed, 

prevents the discovery of writings prepared for mediations or evidence of things said in 

mediations.42 Plaintiffs have not offered any explanation, however, as to how the 

California Evidence Code applies in this action. That Code, by its terms, applies only to 

the courts and judicial proceedings of California.43 Additionally, any protection Section 

1119 may offer has been waived. That section also prevents even the discovery of the 

items Plaintiffs now challenge. Even if California law somehow could bind the 

evidentiary determinations of the courts of this State, by voluntarily producing the 

mediation materials and communications in this action, Plaintiffs have waived any 

protection offered by Section 1119.

 

41 Zutrau v. Jansing, 2013 WL 1092817, at *6 (Del. Ch. Mar. 18, 2013); Emerald 

P’rs v. Berlin, 2003 WL 21003437, at *43 & n.144 (Del. Ch. Apr. 28, 2003). I 

recognize that Horne pointed out Plaintiffs‘ evidentiary objections in his 

answering brief, but that is not surprising because, throughout this case, Plaintiffs‘ 

positions and the arguments they ultimately have asserted have been a moving 

target. See infra Section IV.

42 Cal. Evid. Code § 1119(a)-(b).

43 Id. § 300.
22

Plaintiffs next contend that Delaware Rule of Evidence 408 precludes the 

admissibility of any of the Geller settlement discussions. Rule 408 states, in relevant 

part: 

Evidence of (1) furnishing or offering or promising to furnish, 

or (2) accepting or offering or promising to accept, a valuable 

consideration in compromising or attempting to compromise 

a claim which was disputed as to either validity or amount is 

not admissible to prove liability for or invalidity of the claim 

or its amount. . . . This rule also does not require exclusion 

when the evidence is offered for another purpose, such as 

proving bias or prejudice of a witness, negativing a 

contention of undue delay or proving an effort to obstruct a 

criminal investigation or prosecution.44

Plaintiffs also suggest that, based on the strong public policy favoring settlements, any 

doubts should be resolved in favor of excluding such evidence.45 Here, I conclude that

Rule 408 does not apply.

By its terms, Rule 408 precludes admissions of offers of compromise for the 

purpose of proving the liability or amount of the claim actually being settled. I do not 

read the rule as requiring the exclusion of offers of compromise of Claim A in Litigation 

1 from being used to prove or disprove the validity and amount of a different Claim B in 

Litigation 2. Plaintiffs purportedly were settling Geller‘s sexual harassment claims in the 

 

44 D.R.E. 408.

45 E.g., Candlewood Timber Gp. LLC v. Pan Am. Energy LLC, 2006 WL 1382246, at 

*13 (Del. Super. May 16, 2006) (―Moreover,  ̳if application of Rule 408 exclusion 

is doubtful, the better practice is to exclude evidence of compromise 

negotiations.‘‖ (quoting Chase Manhattan Bank v. Iridium Africa Corp., 2003 WL 

22928042, at *2 (D. Del. Nov. 25, 2003)).
23

settlement. Neither the validity nor the value of those claims is at issue here. The 

question in this case is whether Defendants breached their fiduciary duties to the 

Company. Accordingly, Rule 408 is not applicable in these circumstances.

Additionally, even if Rule 408 did apply, the Geller settlement materials still 

would be admissible under the Rule‘s proviso regarding ―another purpose,‖ which 

constitutes an illustrative, not exclusive, list. The Geller settlement documents are being 

admitted primarily to assist in determining whether Plaintiffs undermined the integrity of 

these proceedings—a purpose quite close to Rule 408‘s enumerated ―proving bias or 

prejudice of a witness‖ exception—which is separate from whether Plaintiffs‘ claims are 

meritorious. Moreover, issues of Geller‘s potential bias and credibility are particularly 

important here because she did not appear at trial.

Accordingly, Plaintiffs waived their evidentiary objections and, in any event, I 

would overrule those objections.46

2. The mediation settlement

I start my examination of Plaintiffs‘ settlement with Geller with the mediation 

settlement. I begin here because the evidence supports the conclusion that the settlement 

 

46 Plaintiffs also contend that the Geller settlement materials are not even relevant to 

this case and, as such, should be excluded under Rule 402. Relevant evidence is 

―evidence having any tendency to make the existence of any fact that is of 

consequence to the determination of the action more probable or less probable 

than it would be without the evidence.‖ D.R.E. 401. The Geller settlement 

materials are relevant because, among other things, they pertain to Geller‘s 

credibility and Defendants‘ charge that Plaintiffs have undermined the integrity of 

these proceedings. 
24

entered into between Plaintiffs and Geller following their mediation may have been a

legitimate, good faith effort to settle her sexual harassment claims, even if Plaintiffs 

simultaneously were contemplating using that settlement for other purposes. More 

importantly, the mediation settlement provides a baseline against which to examine the 

subsequent Morelli-funded settlement, which is the focus of Defendants‘ complaints.

By mid-April 2013, Geller, through her California counsel, Jack Schaedel, had 

filed sexual harassment complaints against the Company. On May 30, 2013, the parties 

engaged in a lengthy mediation that lasted about 20 hours.47 One aspect of the resulting 

draft settlement agreement that is central to Defendants‘ contentions that Plaintiffs bribed 

Geller is the Geller Declaration: a sworn statement by Geller as to the chain of events that 

led to her claims. Early on Saturday, June 1, the parties apparently reached a settlement 

agreement (the ―Mediation Settlement‖). At 2:16 a.m., Mike Margolis, counsel to 

Optimis, emailed Schaedel stating: ―Jack, this confirms that we have reached a deal.‖48 

Attached to that email were the then-final Geller Declaration (―Geller‘s Mediation

Declaration‖) and an interim settlement agreement.

Plaintiffs had required a declaration from Geller as a prerequisite for settlement. 

Earlier in the negotiations, Margolis informed Schaedel that the ―declaration is a 

threshold problem‖49 and that Morelli and the Company were ―re-evaluating our interest 

 

47 Schaedel Dep. 80.

48 JX 771.0001.

49 JX 770.0003.
25

in the settlement in light of Geller‘s apparent insistence on hedging her bets in the 

declaration.‖50 Recognizing that Plaintiffs wanted a declaration consistent with their

view of the events in this case,51 Schaedel touted his view that ―the Declaration supports 

the  ̳insurgents-conspiracy‘ argument.‖

52

The end result of these discussions was Geller‘s Mediation Declaration, a one-anda-half-page, eight-paragraph statement. That Declaration includes language geared 

toward this case. For example, paragraph 5 states that Geller was encouraged by 

Jeannine Gunn to provide more information to Nancy Solomon, the investigator, and that 

Geller ―was aware that many leaders of the company, including Jeannine, believed that it 

was important to remove Alan [Morelli] in order for the company to get things done.‖53 

Paragraph 7 then reads: ―In October 2012, I learned that my statements to Ms. Solomon 

had been used to oust Alan from his position as Optimis‘ CEO.‖54 Overall, however, 

Geller‘s Mediation Declaration focuses on Geller‘s sexual harassment claims, provides a 

timeline for how those claims came to be investigated, and tries to suggest weaknesses in 

her story. 

 

50 Id.

51 Id. at 0002 (―She isn‘t hedging her bets, she‘s giving you every word she can. She 

has financial incentive just to say what you want to hear but she‘s not doing that. 

At some point you have to give her credit for that, and accept the best language 

you can get.‖).

52 Id. at 0001.

53 JX 771.0004.

54 Id.
26

For reasons that are not entirely clear, but which appear to relate to the fact that 

the Company‘s insurer would not fund the Mediation Settlement, that agreement never 

was consummated. 

3. The Morelli-funded settlement

On December 2, 2013, six months after the Mediation Settlement, the parties 

executed a final settlement. That agreement consisted of: (1) a mutual release; (2) a 

―Questions and Answers Appendix‖ (the ―Q&A Appendix‖); (3) a revised sixteenparagraph, nearly five-page sworn declaration (the ―Final Geller Declaration‖);55 (4) an 

unsworn but signed summary statement (the ―Summary Statement‖); and (5) a sworn 

declaration from Geller‘s attorney (the ―Schaedel Declaration‖). Together these five 

items constitute the ―Geller Settlement.‖ My review of the evidence leaves me with an

abiding conviction that the money Plaintiffs paid to Geller was for the differences 

between the Mediation Agreement—to which Plaintiffs previously agreed—and the 

various components of the Geller Settlement. Those differences all relate to this 

proceeding and in many instances are keyed to specific allegations in Plaintiffs‘ 

Complaint. Stated more cynically, it appears that, under the guise of settling a California 

sexual harassment complaint by an employee making $58,000 a year,56 Plaintiffs agreed 

 

55 JX 920.0016-20 [hereinafter ―Geller Decl.‖].

56 Geller Dep. 235.
27

to pay Geller $550,00057 to provide a declaration with numerous statements intended for 

use in this Delaware proceeding.58

Preliminarily, I consider it important to describe what the Geller Settlement 

contains before I turn to how Plaintiffs reached that agreement with Geller. Above I 

quoted the two sentences from Geller‘s Mediation Declaration that appeared most

directed toward this litigation. By contrast, I quote below some of the many examples of 

statements from the Final Geller Declaration that are not in Geller‘s Mediation 

Declaration, and that clearly are intended for use in this litigation: 

 ―Mr. Horne made it clear on multiple occasions that he 

did not like Mr. Morelli and said that the Company 

would be better off without him.‖ (¶ 3).

 ―I came to understand that the Rancho executives did 

not like Mr. Morelli and claimed that the Company 

would be better off without him.‖ (¶ 4).

 ―I was also aware that Mr. Waite and others had a 

strong dislike for Mr. Morelli and were unhappy with 

the way Mr. Morelli was running the Company. In 

retrospect, it is likely that they were setting in motion a 

plan to use me as a means to try and accomplish their 

objective of removing Mr. Morelli and taking control 

of the Company. Messrs. Waite, Horne, Godges, and

 

57 JX 920.0006.

58 Plaintiffs now have disowned Geller, denied that Geller is their witness, and 

explicitly called her a ―perjurer.‖ POB 74. But, on August 23, 2014, in opposition 

to the Director Defendants‘ summary judgment motion, Plaintiffs cited the Final 

Geller Declaration (Exhibit 25 to that brief) repeatedly as the basis for factual 

assertions they made. As of that date, Plaintiffs‘ attorneys claimed that they were

unable to make Geller available for a deposition. Later, when Geller was deposed, 

she essentially recanted substantial portions of the Final Geller Declaration.
28

others had apparently wanted to get control of the 

Company.‖ (¶ 7).

 ―Ms. Gunn, like Mr. Waite and others, did not like Mr. 

Morelli and did not want him to be in control of the 

Company. I did not realize at the time that she and 

others saw me as their tool to provide a detailed and 

damning report against Mr. Morelli as a pretext to 

remove Mr. Morelli from his control position at 

OptimisCorp.‖ (¶ 9).

 ―The stress of what I was being asked to do by Mr. 

Waite, Ms. Solomon, and others was causing me to be 

barely able to function or perform tasks such as 

processing accounts receivable . . . . Mr. Waite 

encouraged me to make a complaint against Mr. 

Morelli.‖ (¶ 13).

 ―[A]fter my September 21, 2012 call to Mr. Waite, it 

was clear to me that I was being treated much better 

than I was treated before I made the call. . . . Based on 

what I now know to have been taking place within the 

Company, the raise and the support were rewards for 

my disclosure about my activity with Mr. Morelli.‖ (¶ 

14).

 ―I now see that I likely was a pawn being manipulated 

by Mr. Waite and others who were seeking to get 

control of the Company.‖ (¶ 15).

These statements map almost perfectly to Plaintiffs‘ position in this litigation. Indeed, 

the Final Geller Declaration leaves no doubt about its purpose:

 ―I am providing this statement in part because of the 

continuing effort by Mr. Waite and others to take over 

the Company. . . . I believe I was manipulated and 

misled and it was wrong for Mr. Waite and others to 

use me to attempt to remove Mr. Morelli.‖ (¶ 16).

Geller provided all of these statements under oath, although it is clear from their 

face that she lacked personal knowledge of much to which she swore. Importantly, she 
29

also provided the Summary Statement, which, as explained infra, Plaintiffs deliberately 

did not ask Geller to provide under oath, but still asked her to sign and include in the 

Geller Settlement, making it appear to be her statements. It reads like the synopsis of an 

overwrought legal thriller: 

The events here involve corporate intrigue and treachery. I 

am an aspiring physical therapist, who got into a relationship 

with my company‘s CEO, Alan Morelli. I don‘t recall 

exactly how it all began, but it would be reasonable to believe 

it was initiated by me. . . . [A]s I have now learned, it is clear 

that I was being lobbied and manipulated by the CEO‘s 

enemies, including John Waite, to become a chess piece in 

taking control of the Company. I have also learned Mr. Waite 

took my comments and turned them into not only a tale of 

egregious sexual harassment, but also a pretext for a 

corporate coup. . . . Evidence that I have now seen indicates 

that Mr. Waite, Will Horne, and others found a willing lawyer 

and a willing investigator to conduct an investigation that 

apparently gave them what they wanted most, a pretext to 

sack the CEO. This began a lengthy and bitter corporate battle 

for control of the Company.59

Many similar remarks are included in the Q&A Appendix.60 Finally, Schaedel, 

Geller‘s lawyer, who had had only one conversation with Horne and had never spoken to 

Waite, provided the Schaedel Declaration, in which he swore that ―[Horne] desired to see 

the company [Optimis] go bankrupt,‖ and that Waite‘s actions ―seem consistent with a 

 

59 JX 920.0011.

60 For example, Geller answered―True‖ to the statement: ―It was common knowledge 

among a group of employees that John Waite, George Rohlinger, and/or other 

employees had plans to remove Alan Morelli as CEO and Chairman of 

OptimisCorp (the ―Company‖) in order to take control of the Company.‖ Id. at 

.0009. These true/false statements were neither under oath nor signed. 
30

desire to see the company lose lawsuits and to be forced into bankruptcy.‖61 From that 

limited source of firsthand information, Schaedel declared under oath that the conclusion 

was ―inescapable that Horne, Waite and others saw my client‘s lawsuit against Mr. 

Morelli and OptimisCorp as very helpful to their pre-existing desires and intentions to 

usurp control of the company.‖62

The record contains extensive evidence showing how the Mediation Agreement 

morphed into the sprawling Geller Settlement about which Defendants complain. It is 

reasonable to infer from that evidence that the amount of the settlement payments was 

directly tied to the content of Geller‘s testimony and its utility in this litigation. Plaintiffs 

have emphasized that the settlement discussions all required that Geller tell only ―the 

truth‖ and that she swore under penalty of perjury. But, the record also shows that

Plaintiffs unilaterally supplied documents to Geller that supported their position in this 

litigation when she resisted providing Plaintiffs with the sworn statements they sought.

In these circumstances, even if I presume Plaintiffs believe the statements they worked to 

obtain from Geller to be true, they created an environment, including the potential for a 

large six-figure payday for Geller, in which her testimony easily could have been 

influenced.

The record is unclear as to what happened in the weeks immediately following the 

preparation of the Mediation Settlement, which was never signed. On July 29, 2013, 

 

61 Id. at .0014.

62 Id. at .0015. 
31

however, Gary Mathiason, one of Morelli‘s lawyers,63 wrote to Schaedel that he and

Morelli believed the settlement still could happen ―with a combination of resources 

including the insurance company and the cooperation of your client.‖64 That same day, 

July 29, Morelli and Brian Wing verified the Complaint in this action.

On August 5, 2013, the day that the Complaint was filed, Mathiason again 

contacted Schaedel. It is clear from that point on the newly requested changes to Geller‘s 

Mediation Declaration were being sought for use in this litigation. After stating that 

―[t]he original declaration and the suggested enhanced declaration must be truthful,‖ 

Mathiason wrote: ―The reason for the declaration is the ongoing conflict between Waite 

et al. and Morelli. . . . Anything that can be added to the declaration to show contact and 

encouragement from Waite, Horn [sic], and others is valued and appreciated.‖65 Morelli, 

it seems, offered personally to pay a portion of the settlement, contingent on an 

acceptable declaration for use in this proceeding. Mathiason‘s email continues: ―If we 

can agree on a truthful expanded declaration such as we have proposed, Morelli is 

prepared to personally participate in its funding consistent with the [divorce] court 

imposed restrictions on the use of his personal assets. Morelli views Waite, Horn [sic] et 

al. as setting in motion events that resulted in Geller‘s ultimate departure from the 

 

63 It appears that Mathiason also represented the Company. Tr. 531 (Morelli). 

64 JX 822.0001.

65 JX 831.0001.
32

Company.‖66 According to Morelli, his willingness to fund the settlement depended on 

the acceptability, to him, of the declaration and its ―truthfulness,‖

67 of which he

apparently was the arbiter.

68

As the negotiations continued, Plaintiffs supplied documents to Geller to support 

the language they had drafted for and were seeking from her.

69

 Meanwhile, Geller‘s 

counsel undertook to avoid discussing any of the matters with any of Defendants, thus 

 

66 Id.

67 Tr. 531-33.

68 E.g., JX 838.0001 (8/9/14 email from Mathiason to Schaedel and others: ―Since 

Alan views your client as having been manipulated into making a claim by Waite 

et al, receiving a truthful declaration that more specifically shows his direct and 

indirect involvement would be helpful for the overall litigation.‖). Morelli stated 

that the truthfulness was ―determined by the facts that we were continuing to 

gather as we were able to recover more and more forensic data.‖ Id. at 533. By 

the time this lawsuit was filed, two separate committees of the Morelli-controlled 

board were investigating the facts of this case. There is no evidence, however, 

that either of those committees ever issued a written report or formal findings of 

its ―investigation.‖ 

69 E.g., JX 846.0001 (8/23/13 email from Plaintiffs‘ counsel to Schaedel: ―I sincerely 

hope that the documents and information we shared will help develop an expanded 

declaration that your client can fully embrace as an accurate statement of what 

occurred.‖); JX 848.0001 (8/26/14 email from Schaedel to Plaintiffs‘ counsel: 

―Thank you again for taking the time to come to Pasadena last week and to share 

relevant information and documentation with us . . . .‖); JX 887.0001 (11/7/13 

email from Mathiason to Schaedel: ―Scott McKee firmly recalls the phone 

conversations and the corresponding text message. It is entirely reasonable that 

Tina would have had this conversation with Scott given that she recalls a similar 

call with David [Hwang]. What we want to avoid are unnecessary credibility 

conflicts between Tina, David, and Scott.‖).
33

ensuring a one-sided presentation of ―facts‖ from Plaintiffs to Geller.70 Furthermore, the 

final Geller Settlement precluded Geller from communicating with any of Defendants, at 

least absent a court order.

71

 

The discussions reveal that the payments were tied directly to the content of 

Geller‘s declaration, which was to be sworn and used in this proceeding.72 When the 

declaration did not implicate Defendants sufficiently, Plaintiffs pushed for more.73 When 

Geller either could not recall or, presumably, lacked personal knowledge of the language 

Plaintiffs wanted, they offered to ―refresh‖ her recollection.74 In Plaintiffs‘ own words

 

70 JX 848.0001 (―I instructed Tina not to speak with Will [Horne] or anyone else 

about any of this. . . . While we are working on resolving this agreement, I am 

certainly not going to communicate with Will, Waite et al, or their counsel.‖).

71 JX 920.0003 (―Geller will not communicate with, cooperate with, aid or assist any 

person or entity who is named as an adverse party to Optimis or Morelli in any 

Corporate Action, or whose interests are adverse or potentially adverse to Optimis 

or Morelli in any actual or potential Corporate Action . . . .‖).

72 Indeed, Morelli also contemplated using Geller‘s Mediation Declaration in this 

litigation. In a July 11, 2013 email to James L. Patton, Jr., Esq., the Courtappointed monitor from the previous 225 Action, Morelli wrote: ―We reached a 

confidential settlement with Geller, which includes a statement that will be signed

when it is completed, which is crystal clear in exonerating me and acknowledging 

that she was recruited by Waite in an effort to change control of the company.‖ 

JX 809.0001.

73 JX 849.0002-3 (8/29/13 email from Mathiason to Schaedel: ―The primary concern

is to provide more detail on exchanges with Godges and Horne, as well as others 

including Brys, Eastman, Gunn and Kreile. . . . Our goal is to finalize the Geller 

declaration and agree upon a consideration package with Alan‘s personal financial 

support that will not be contingent on insurance funding . . . .‖). 

74 JX 885.0001 (11/1/13 email from Mathiason to Schaedel: ―If we have included 

any attributions that Tina does not remember or disputes, the supporting 

documentation will be provided.‖).
34

and formatting, there was a ―Correlation Between Payments and Declarations: The 

usefulness and truthful transparency of the Geller declaration correlates to the amount of 

the initial payment.‖75 On certain subjects, Plaintiffs repeatedly attempted to include 

language that Geller had rejected as false, notwithstanding the promise of hundreds of 

thousands of dollars.76 Indeed, Schaedel testified at his deposition that Plaintiffs asked 

Geller ―to swear to statements that were not true.‖77

When the money was not enough to get Geller to agree to the language, Plaintiffs 

resorted to threats. Plaintiffs reminded Geller that the ―most valuable consideration in the 

Agreement‖ is that ―Geller is released from being a named defendant in a $25 million or 

greater claim against those who have illegally harmed Optimis and Morelli,‖78 which

refers to this lawsuit.

This process continued for six months. Very early on, Geller‘s lawyer, Schaedel, 

recognized that there was a serious risk that repeatedly asking Geller to agree to the same 

 

75 JX 886.0002 (11/15/13 email from Mathiason to Schaedel).

76 JX 880 (10/8/13 email from Schaedel to Plaintiffs‘ counsel: ―Today, I was told 

that in order for Alan to  ̳support‘ the settlement (implicitly, at some level less 

than 100%), there needs to be information in the Declaration that you‘ve already 

requested and we‘ve already rejected: (1) that someone told Tina to make the 

recording, and (2) an admission that she initiated sexual contact with Alan. . . On 

(2), it‘s the height of audacity for you to bring this demand up again, 4+ months 

into the settlement discussions, when this was demanded and rejected in May, and 

we‘ve made clear all along that Tina‘s position is that Alan forced Tina into sexual 

conduct.‖).

77 Schaedel Dep. 77. See also id. at 76-77 & errata sheet.

78 JX 886.0001.
35

language over and over again, all the while presenting her with only Plaintiffs‘ supporting 

documents, and increasing the payments if Geller agreed to the language would lead to 

Geller surrendering and saying whatever Plaintiffs wanted.

79

 The statements to which 

Geller nevertheless refused to swear apparently were placed in the Summary Statement. 

In Plaintiffs‘ own words and formatting, they told Geller‘s attorney that: ―Since the 

Summary Statement is not part of the Geller Declaration nor given under oath, she 

should simply sign the Summary Statement since it is written as coming from her.‖80 

Geller did sign the Summary Statement, and the parties incorporated it into the Geller 

Settlement. And, Geller‘s attorney signed the Schaedel Declaration, a questionable and

highly speculative document in its own right, but something Plaintiffs considered to be 

―an important part of the total settlement‖ without which ―the case will not settle.‖81 On 

December 2, 2013, the Geller Settlement was signed. The next day, Plaintiffs served 

their First Request for Production of Documents82 in this case, which essentially had been

dormant since I denied Plaintiffs‘ motion to expedite on August 16, 2013.83

 

79 JX 852.0001 (9/2/13 email from Schaedel to Plaintiffs‘ counsel: ―At some point, I 

think we might start to get only what we‘re asking for; I am not a skilled enough 

interrogator to know how to re-ask the same questions again and again and get 

 ̳new‘ information that is more than a desire to satisfy me. (And that would 

withstand anticipated cross-examination.)‖). 

80 JX 918.0001 (11/29/13 email from Mathiason to Schaedel).

81 JX 886.0001.

82 D.I. 26.

83 D.I. 15, D.I. 16.
36

At her depositions on September 16 and October 6, 2014, Geller essentially 

abandoned significant portions of the Final Geller Declaration. She described the 

statements directly alleging a conspiracy, for example, as ―speculation.‖ I will not detail 

all of those statements, but they include many of the bulleted points I listed supra.

84

 At 

other points, Geller disagreed with the most natural reading of the Declaration and 

instead included extensive undisclosed caveats and background understandings that 

completely change the meaning of the statements.

85

 Many of the ―clarifications‖ related 

to terms that Geller said were manipulated during the negotiations.86 

Asked why she signed the Final Geller Declaration, Geller testified that she signed 

it ―Because I wanted to settle and get this over with. And I was afraid that [Morelli] 

would drag me through the mud and prolong our trial forever and ever and run out of 

money.‖87 She also stated that her relationship with Morelli eventually became ―very 

fear-based‖88 and that ―Alan uses the law to come after people even when he‘s in the 

 

84 E.g., Geller Dep. 179, 201-03 (¶ 7); 354-58 (¶ 13); 363 (¶ 15); 366-67 (¶ 10).

85 E.g., id. at 185-86, 359-60, 364-65.

86 E.g., id. at 359 (clarifying paragraph 14 as Horne providing ―more of an 

encouragement to do what was best for me‖ and stating that the Final Geller 

Declaration language ―was twisted in the negotiations into that [resulting] 

statement‖ by Plaintiffs‘ lawyers).

87 Id. at 77.

88 Id. at 20.
37

wrong.‖89 Geller apparently concluded that she could sign the Final Geller Declaration

notwithstanding that she was under penalty of perjury based on her own self-serving and

idiosyncratic, to say the least, understanding of the meaning of perjury. Specifically, she 

understands ―speculation,‖ which she seems to equate with ―opinion,‖ to be okay in 

sworn documents, so long as she does not know the statement is a lie.90 How Geller, who 

was represented by counsel throughout the negotiations, arrived at this ―not perjury 

unless you know it‘s false‖ understanding is a mystery, but I consider the prospect of a 

$550,000 payment to be a prime suspect. 

4. The “settlement” with Geller undermined the integrity of these proceedings

As previously discussed, the Delaware Supreme Court observed in Weber that the 

$85 payments to three witnesses were ―disgraceful‖91 and that, even if the payments did 

not constitute outright bribery, they ―certainly violate the spirit of the law and cast into 

doubt the integrity of the proceedings.‖92 This was the case even though ―there was no 

 

89 Id. at 55; id. at 59 (―I have a fear that Alan can get away with anything he wants to 

by using the law to do so. He‘s bragged about that and shown that to many people 

throughout the time that I‘ve known him.‖).

90 E.g., id. at 202 (―I had no facts to back up that statement. So it was opinion, and it 

is not a lie, because I have no facts to dispute it and I have no facts to back it up.‖); 

id. at 203 (―I swore that it was neither true or untrue. It‘s an opinion and it‘s 

speculation.‖); id. at 368 (―It was a negotiated statement, as I said. I didn‘t agree 

nor did I disagree with the statement, so I allowed it to be in there because it was 

not untruthful.‖).

91 Weber, 457 A.2d at 682

92 Id. at 679 n.6.
38

evidence that the cash payments influenced [the] testimony.‖93 Cases in other 

jurisdictions have held similarly.94

Additionally, DLRPC Rule 3.4(b) prohibits lawyers from offering an ―inducement 

to a witness that is prohibited by law.‖ In August 2003, the Delaware State Bar

Association Committee on Professional Ethics issued an advisory opinion reviewing the 

issue of compensating fact witnesses for testifying. According to the advisory opinion, 

the minority view in the United States is that fact witnesses cannot be compensated at all. 

The Committee instead adopted the more liberal majority view, which is that of the 

American Bar Association, that holds that fact witnesses can be compensated for their 

time, but that such payments cannot be compensation for the content of their testimony.95 

 

93 Id. at 678-79. Plaintiffs argue that the primary concern in Weber was the family‘s 

lack of candor with respect to the payments. While that lack of candor certainly 

played a role in the Supreme Court‘s condemnation of what happened, the 

comments quoted above were directed at the payments themselves. 

94 See, e.g., HomeDirect, Inc. v. H.E.P. Direct, Inc., 2013 WL 1815979, at *4 (N.D. 

Ill. Apr. 29, 2013) (―In the federal courts it makes no difference whether the 

purchased testimony is truthful. . . . [California Rule of Professional Conduct 5-

310] bars payment contingent on the content of the testimony, truthful or not.‖);

Holmes v. U.S. Bank, 2009 WL 1542786, at *5 (S.D. Ohio May 28, 2009) (―It is 

immaterial that Plaintiff may have only intended to pay [the witness] to provide 

truthful testimony. It is a criminal violation of federal law to offer to a person 

anything of a value—except a witness fee—for or because of that person‘s 

testimony under oath. . . . This is true even if the offeror only seeks to elicit 

truthful testimony.‖) (citing 18 U.S.C. § 201(c)(2) and United States v. Blaszak, 

349 F.3d 881, 886-87 (6th Cir. 2003)).

95 Del. State Bar Assoc. Comm. on Prof‘l Ethics Op. 2003-3 (Aug. 14, 2003), 

available at http://media.dsba.org/ethics/pdfs/2003-3.pdf. 
39

It is beyond the scope of this Opinion and I do not address whether Plaintiffs 

committed criminal acts of bribery or witness tampering. I do find that the evidence 

clearly and convincingly shows that Plaintiffs, and in particular Morelli, paid Geller for 

the content of her testimony, in the form of the Final Geller Declaration and the Summary 

Statement, which, although not under oath, is signed and misleadingly made to appear as 

though it is a truthful statement by Geller. Although they now call her a perjurer, 

Plaintiffs cited the Final Geller Declaration in their opposition to the Director 

Defendants‘ motion for summary judgment and, as discussed infra, Plaintiffs submitted 

that Declaration to the Los Angeles Police Department (―LAPD‖) in an attempt to open a 

criminal investigation against Defendants. Although lawyers have an obligation as 

advocates to ―zealously assert[] the client‘s position,‖ they must do so ―under the rules of 

the adversary system.‖96 Geller‘s credibility is of paramount importance in this case and 

Plaintiffs‘ conduct has cast into doubt any finding based on her testimony.

97

 Thus, I find 

 

96 DLRPC, Preamble ¶2.

97 See HomeDirect, Inc., 2013 WL 1815979, at *4 (―There are sanctions precedents 

that concern the settlement of an unrelated case in exchange for a witness‘s 

agreement not to testify in another case. . . . Bribing a witness, of course, is a 

sanctionable event. . . . This is especially true when the witness is very close to 

being absolutely essential to the opponent‘s case.‖) (citing Synergistics, Inc. v. 

Hurst, 2007 WL 2422871 (E.D. Mo. Aug. 21, 2007) and Ty Inc. v. Softbelly’s, 

Inc., 353 F.3d 528 (7th Cir. 2003) (Posner, J.)).
40

that Plaintiffs‘ actions regarding the Geller Settlement have compromised the integrity of 

these proceedings.98

The troubling actions taken as to Geller‘s testimony are exacerbated by the fact 

that, as the following Subsections show, this theme of threaten, pay, and settle for the use 

of evidence favorable to Plaintiffs reoccurred, to varying degrees, with other witnesses.

E. The Fearon and Levine Settlements

Helene Fearon and Stephen Levine have worked for Optimis since their consulting 

firm became a wholly owned subsidiary of the Company in December 2008. Although 

not physical therapists themselves, Fearon and Levine were well-known, and wellrespected, consultants in the regulatory sphere. They lent their professional images to 

Optimis‘ software products. As a result of the 2008 stock-for-stock transaction, Fearon 

and Levine took pay cuts on the scale of $100,000 each, which in Fearon‘s case was on 

the order of a sixty-percent reduction in pay.

99

 By 2012, with their employment 

agreements expiring in December, they actively were seeking pay raises. In fact, they 

directly addressed the issue on October 6, 2012, in a letter to Morelli, Waite, and 

Horne—Optimis‘ CEO, COO, and CFO, respectively—outlining their compensation 

 

98 Horne makes numerous other complaints about the Geller Settlement. For 

example, he contends that the non-cooperation provisions denied him the ability to 

conduct informal discovery of Geller and prejudiced him in violation of DLRPC 

Rule 3.4(f). These non-cooperation provisions are troubling, but I do not consider 

it necessary to reach them based on my conclusions on the issue of witness 

tampering. Even if I were to find in favor of Horne on that issue, it would not 

cause me to alter my disposition of Defendants‘ request for sanctions.

99 Tr. 748 (Fearon); id. at 1618 (Levine).
41

demands and complaints about how the business was being run.100 The letter suggests

that, if their demands were not met, they ―would then propose to negotiate a separation 

agreement from OptimisCorp.‖101

Presumably because of his purported ouster two weeks after this letter was sent, 

Morelli never met with Fearon and Levine. After October 20, however, Waite, then 

acting-CEO, and Horne agreed to the pay raises and other demands in the letter.102 As a 

result of the subsequently filed 225 Action, however, the raises were undone and Fearon 

and Levine‘s salaries reverted to $65,000.103 Once the 225 Action settled in late March, 

2013, Morelli was restored to power as CEO. But, Fearon and Levine did not get their 

raises in 2013. Nevertheless, despite their earlier threat to leave, Fearon and Levine 

remained at Optimis, because they had staked their personal reputations on OptimisPT.

104

 

Departing from the Company would have left them without input to a product tied to 

their reputational capital in the marketplace.

In fact, it was not until May 2014 that Fearon and Levine ―settled‖ with the 

Company. By that time, Plaintiffs had the Geller Settlement and Levine was on the brink 

 

100 JX 317. 

101 Id. at 0002.

102 Tr. 773 (Fearon).

103 Id. at 774 (Fearon). 

104 Id. at 743 (Fearon); id. at 1576 (Levine).
42

of personal bankruptcy.105 Plaintiffs aggressively pursued a ―settlement‖ with Fearon and 

Levine. In an April 6, 2014 email, Laurent O‘Shea, the Chairman of Optimis‘ Board‘s 

purported ―Independent Committee,‖ emailed Fearon and Levine that the Company has 

―many documents and witnesses that prove that Waite, Horne and their faction tried to 

illegally seize control of the Company.‖106 Plaintiffs contended that Fearon and Levine 

were members of this faction,

107 and effectively threatened litigation against them.108

 

Levine testified that, at an April 17, 2014 meeting, he and Fearon were shown a ―large 

stack of e-mails that were being attributed to us, yet we were only given one to 

review.‖109 Evidently, neither Levine nor Fearon was represented by counsel during this 

process.

110

To sum up, Fearon and Levine‘s reputations were tied to Optimis‘ physical 

therapy software, Levine faced personal bankruptcy, from as early as September 2013 

 

105 Id. at 1618 (Levine).

106 JX 964.0001.

107 Later, after settling with Fearon and Levine, Plaintiffs attempted to amend their 

Complaint to assert that Fearon and Levine were members of the conspiracy with 

Defendants. Plaintiffs did not seek to name Fearon and Levine as defendants;

instead, they sought to expand the scope of Defendants‘ vicarious liability. See 

OptimisCorp, 2015 WL 357675, at *5.

108 Tr. 1628 (Levine: ―I believe that I said to [Plaintiffs‘ counsel] that he was 

threatening litigation; and he, in turn, said that that‘s not what he was threatening 

and gave me a sort of legal maneuvering around that.‖).

109 Id. at 1628-29, 1654 (Levine); JX 976.0003 (4/21/14 email from Levine to Fearon 

with proposed email to Optimis Board). 

110 Tr. at 1627 (Levine).
43

Fearon had expressed a fear of any lawsuits relating to separating from the Company,

111

and Plaintiffs were threatening to sue them while alleging that the Company had 

extensive evidence implicating Fearon and Levine in wrongdoing, but apparently not 

letting them review it. In May 2014, Fearon and Levine settled.112 They executed mutual 

releases with the Company. There is no evidence, however, that, as of that time, either 

Fearon or Levine understood what, if any, legitimate claims the Company might have

against them.

Contemporaneous documents from before the settlement make clear that both 

Fearon and Levine disliked Morelli.113 Indeed, Fearon said she ―never disliked a person 

 

111 JX 877.0001 (9/26/13 email from Fearon to Levine: ―Biggest thing is I do not 

want any lawsuits..losing ground financially has already happened..costing us 

money going forward is not acceptable . . . .‖).

112 Levine testified that Optimis‘ actions to meet his financial demands and provide 

his back pay were separate from and unrelated to the mutual releases. Tr. 1622-

23. This testimony was not credible. Fearon and Levine made their financial

demand as early as fall 2012, but Morelli did not meet those demands until he 

sought their assistance in this litigation. I infer from the close temporal 

relationship between the mutual releases and salary increases that the two were a 

package deal, even if they occurred with some minor gap in time.

113 E.g., JX 186.0001 (4/21/12 email from Fearon to Gunn) (―[unquotable 

profanity]‖); JX 267.0001 (8/21/12 email from Fearon to Gunn) (―Alan is the 

master manipulator.‖); JX 295.0001 (8/27/12 email from Fearon to Levine: ―He is 

such a f---ing manipulative a--hole . . . how can I trust a single thing he says in this 

e-mail‖); id. at .0001 (8/27/12 email from Levine to Fearon: ―Yep . . . my thoughts 

as well . . . He has destroyed any relationships that he has had in this company . . . 

and those that rally around him do so only for their own benefit, and not for the 

company . . . since those that built the company will all be gone at some point.‖).
44

as much as‖ Morelli ―ever in [her] life.‖114 As a result of the settlement, however, Fearon 

and Levine‘s salaries were raised to $150,000 each, and they each received substantial 

back pay.115 Fearon and Levine then provided highly favorable affidavits to the 

Company,

116 all of which Plaintiffs concealed for months.117

 Those affidavits, which are 

nearly identical, aver that Fearon and Levine were members of a group attempting to take 

control of Optimis, and, like the Final Geller Declaration, are closely keyed to the 

allegations in this action.118 

For example, both deceptively state: ―Prior to February 2012, several individuals 

at Optimis, including John Waite, George Rohlinger, Jeanine Gunn and Will Horne, as 

 

114 JX 547.0001 (11/6/12 email from Fearon to Gunn, which goes on: ―Total

disregard for anyone or thing other than his own self interest. . . . I really cannot 

believe I was such a poor judge of character‖); Tr. 750-51.

115 Tr. 775-77 (Fearon); id. at 1618-23 (Levine).

116 JX 1001 [hereinafter ―Levine Aff.‖]; JX 1002 [hereinafter ―Fearon Aff.‖].

117 This issue was dealt with in my previous Memorandum Opinion, OptimisCorp v. 

Waite, 2015 WL 357675 (Del. Ch. Jan. 28, 2015) (concluding that Plaintiffs‘ 

actions amounted to a knowing concealment).

118 E.g., Levine Aff. ¶ 6 (―This plan [to  ̳give Alan a nudge‘] was discussed regularly 

among executives and employees of the company, including Waite, Rohlinger, 

Horne, Gunn, Tom DiAngeles (Gunn‘s husband), Fearon and me. At some point, 

Waite also told me that, if Morelli insisted on remaining as CEO, he (Morelli) 

might have to be removed against his will.‖); Fearon Aff. ¶ 6 (nearly identical); 

Levine Aff. ¶ 10 (―Despite Morelli‘s status as CEO, and his authority under the 

Stockholders Agreement to control the company, Waite, Rohlinger, Horne and 

Gunn encouraged Fearon and me to do whatever was necessary to oppose the 

directions given by Morelli, in spite of his leadership position at Optimis.‖);

Fearon Aff. ¶ 10 (nearly identical). As shown infra, at least this latter statement is 

false.
45

well as Fearon and I, had an interest in taking control of Optimis away from Morelli 

. . . .‖119 Fearon and Levine‘s testimony at trial, however, indicated that their concerns 

focused on having sufficient resources allocated to the OptimisPT software and the

difficulty they and others were having convincing Morelli of that. In that context, they 

discussed removing Morelli‘s oversight of the product, not taking control of the 

Company.120 As described in Section II infra, there is an important difference between 

the two.

F. Other Questionable Conduct by Plaintiffs

Geller, Fearon, and Levine were not the only instances of Plaintiffs threatening or 

attempting to threaten or pay witnesses in connection with testimony. Chris Olsen, 

Rancho‘s controller, credibly testified that there was a ―litigation atmosphere at the 

company‖ following the Director Defendants‘ termination,121 and that siding with the 

Director Defendants essentially meant that you would be added to this lawsuit.122

Olsen attended a meeting at a Starbucks in Anaheim, California with Morelli, 

O‘Shea, and an individual identified as Mr. Lin. According to Olsen, ―the gist of the 

discussion was they knew I was complicit. They knew that I was involved in these selfdealing situations. And if I come clean and if I provide them all the information, that 

 

119 Levine Aff. ¶ 3; Fearon Aff. ¶ 3 (identical, but ―Fearon‖ reads ―Levine‖).

120 E.g., Tr. 697-98, 714, 718, 727-28, 782-83 (Fearon); id. at 1571-72, 1577, 1578-

79, 1604, 1609 (Levine).

121 Id. at 1221.

122 Id. at 1217.
46

they‘ll give me a cooperation agreement and resolve me of any liability.‖123 No evidence 

in the voluminous record in this case implicates Olsen in any purported wrongdoing. 

Nevertheless, and consistent with their actions with respect to Fearon, Levine, and Geller, 

Plaintiffs asked Olsen to sign a pre-prepared declaration. Olsen said he ―crossed out the 

majority of the declaration to where . . . I could, in good faith, sign as being true.‖124 

There is no evidence of further communications between Optimis and Olsen on this 

subject. Olsen eventually left Rancho because ―it was just an unbearable situation‖ that 

included unknown individuals having ―gone through everything in [his] office‖ and 

―blam[ing] him for doing something wrong.‖125

Olsen, apparently after consulting with his attorney, had decided to record the 

Starbucks meeting.126 The existence of that recording was not revealed until the middle 

of trial.

127 It was not played at trial or offered in evidence. In cross-examining Olsen, 

 

123 Id. at 1219. Plaintiffs took a similar stance against Atkins, one of the Director 

Defendants. Sometime after he was fired from Rancho, Atkins was offered the 

chance to return if he surrendered one million of his Optimis shares, which appear 

to have been about one-third of his holdings, and admitted wrongdoing. Id. at 

1494-95 (Atkins). Atkins declined.

124 Id. at 1220.

125 Id. at 1221.

126 Id. at 1230-31.

127 Olsen was a third-party witness and did not tell Defendants about the recording

until the day before he testified. Tr. 1194 (counsel for Director Defendants). 

Defendants promptly turned the tape over to Plaintiffs. Id. at 1194-95. Plaintiffs 

attempted to use the existence of the audiotape as a basis for excluding Olsen‘s 

testimony at trial, despite the fact that no one sought to admit the tape into 

evidence. Id. at 1192 (counsel for Plaintiffs). I denied that request. Id. at 1198.
47

Darius Ogloza, one of Plaintiffs‘ California attorneys who was admitted pro hac vice,

128

quickly embarked on a line of questioning that a reasonable lay person—and certainly 

one who, like Olsen, had experienced Plaintiffs‘ out-of-court threats of civil lawsuits—

would perceive as threatening criminal charges.129 I perceived it as such, notwithstanding 

counsel‘s protestations that the questioning went to ―bias.‖130

This is not the only instance of Plaintiffs arguably threatening criminal 

proceedings against a witness. Another occurred in California against Geller. In October 

or November of 2012, after Geller‘s sexual harassment claims had been reported, 

Morelli, through his California lawyers, had a private investigator contact Geller.131 She 

understood the import of the investigator‘s voicemail to be that ―if I did not sit down and 

talk with him and basically try to work this out, that I would be sued by Alan.‖132 An 

 

128 D.I. 32.

129 Tr. 1231 (―And do you understand that your making that recording may have 

violated California law?‖).

130 Id. at 1231-32. The California Rules of Professional Conduct expressly prohibit 

lawyers from threatening ―to present criminal, administrative, or disciplinary 

charges to obtain an advantage in a civil dispute.‖ Cal. Rules of Prof‘l Conduct R. 

5-100(a). In Delaware, such threats may be permissible in certain instances. See 

Del. State Bar Assoc. Comm. On Prof‘l Ethics Op. 1995-2 (Dec. 2, 1995), 

available at http://media.dsba.org/ethics/pdfs/1995-2.pdf.

131 Geller Dep. 107-08.

132 Id. at 108.
48

audio recording of that voicemail was played at trial during cross-examination of 

Morelli.133 The investigator stated, in part:

Evening, Tina. . . . I‘m a retired FBI agent and a consultant 

. . . . I‘ve been retained by the law firm of Pepper Hamilton 

which is representing Alan Morelli to look into the dispute 

that concerns his purported ouster as CEO of your company 

. . . . And, you know, what I‘m afraid is going to happen is 

that when it comes out, this videotape134—which I‘m afraid it 

appears is made in violation of California law and could 

possibly subject you to some criminal prosecution for it. . . . 

[W]e should expect that Mr. Waite and the others are going to 

try to blame that whole thing on you to try to avoid any 

responsibility themselves for it. . . . I think you‘re too good of 

a person for that, and I‘m worried about you. I don‘t want to 

see that happen to you. You don‘t deserve that. And if you‘ll 

help me understand exactly what role these people played in 

putting you up to this . . . I think I can offer you some help, 

just to help you save yourself. Because what I want to do 

basically is offer you a lifeline.135

Morelli, under cross-examination by Horne‘s counsel, expressed some discomfort with 

the voicemail at trial, stating that the ―criminal prosecution‖ element ―doesn‘t seem 

appropriate or could be misconstrued or misperceived as some sort of threat, 

potentially.‖136 Later that same day, under cross-examination by the Director 

Defendants‘ counsel, Morelli declared: ―I don‘t read this as threatening at all.‖137

 

133 A transcript of the voicemail also is in the record. JX 613. 

134 Geller secretly recorded one physical therapy session with Morelli. That tape is 

not in the record. 

135 Tr. 624-26 (Mike McCall voicemail).

136 Id. at 526.

137 Id. at 628.
49

Finally, I note that Morelli ultimately did file a criminal complaint against Geller 

with the LAPD relating to the video recording she made.138 On November 21, 2012, 

about a month after Morelli‘s temporary ouster, Geller emailed Nancy Kreile, the 

Company‘s Human Resources manager, that ―Alan appears to be retaliating against me 

for filing the sexual harassment claim against him. A Detective Windsor from the LAPD 

left me a message to call him back‖ regarding a case filed by Morelli.139

Later, on March 4, 2014, by which time Plaintiffs had settled with Geller, they 

provided to the LAPD a lengthy letter (the ―Criminal Complaint‖) that included, among 

other items, copies of the Final Geller Declaration, the misleading Summary Statement, 

and the Schaedel Declaration.140 The Criminal Complaint includes a fourteen-page 

chronology of events about the actions that led to this lawsuit, but does not mention that 

Plaintiffs settled with Geller. Only in the annex listing the various actors does the 

Criminal Complaint state that ―Tina has settled her lawsuit against Morelli and 

Optimis.‖141 There is no indication, however, that the Final Geller Declaration, the 

Summary Statement, or the Schaedel Declaration resulted from that settlement. The 

Criminal Complaint requests that the LAPD investigate and prosecute the 

 

138 JX 569 (11/14/12 Morelli email to Holger Beckman, an Optimis employee,

regarding the complaint); JX 582 (11/21/12 Morelli email to the LAPD).

139 JX 583.0001.

140 JX 944.0039-.0048.

141 Id. at .0018.
50

―Insurgents,‖142 a defined term meaning ―several high-ranking former executives and 

board members‖ that includes ―John Waite, George Rohlinger, Laura Brys, Bill Atkins, 

Greg Smith and others.‖143

G. The Integrity of These Proceedings Has Been Undermined

The foregoing review reveals a persistent and troubling course of conduct by 

Plaintiffs to gain an advantage in this proceeding. Plaintiffs threatened and paid Geller, 

eventually breaking her down over the course of six months, to acquire the language they 

wanted to use in this proceeding and then disowned her after she recanted the language in 

the Final Geller Declaration during her deposition. While she was still Plaintiffs‘ 

witness, however, they submitted that Declaration to the LAPD as ―evidence‖ of

Defendants‘ purported wrongdoing. In addition, after stringing them along for over a 

year, Plaintiffs met all of Fearon and Levine‘s financial demands in return for favorable 

testimony in this case. Plaintiffs also attempted to get Olsen to sign a declaration full of 

statements he believed were false, but he refused. After discovering that Olsen recorded 

the meeting in which Morelli threatened Olsen with a civil lawsuit, Plaintiffs arguably 

threatened him in open court with criminal proceedings. 

 

142 Id. at .0002 (―We believe that the Insurgents violated the following federal laws 

and California Penal Code sections and, in some cases, are still violating them, in 

an attempt to regain control of Optimis and conceal evidence of their 

wrongdoing.‖); id. (―We have obtained evidence that the Insurgents and their coconspirators not only engaged in an illegal recording of Mr. Morelli, but also 

violated federal and California law by engaging in commercial bribery, 

embezzlement, extortion, forgery, fraud, theft, perjury and related crimes.‖).

143 Id. at .0001.
51

I recognize that parties have a right to vigorously pursue their claims. I also 

assume that, misguided as I consider it to be, Morelli and his counsel believe their

rhetoric regarding a vast conspiracy to take control of Optimis away from Morelli for the 

alleged insurgents‘ own self-serving motives. But, even so, the conduct I have described 

here is beyond the pale. Specifically, I find that Plaintiffs‘ conduct was ―prejudicial to 

the administration of justice‖144 and has undermined the integrity of these proceedings by 

materially impacting the Court‘s ability reliably and accurately to find the facts. The 

crucial allegation underlying Plaintiffs‘ breach of loyalty claims is that Defendants used 

Geller as a pretext to take over the Company. When deposed, she demolished the 

reliability of the key statements in the Final Geller Declaration that might support a 

finding that Defendants engaged in a takeover conspiracy and used Geller‘s sexual 

harassment claims as a pretext. I, therefore, find it appropriate to disregard, in their 

entirety, all of the documents in the Geller Settlement and to reject any attempt by 

Plaintiffs to use those documents affirmatively to impeach Geller or any other witness. 

Relying on those documents is impossible based on the cynical context and manner in 

which they were created. As a result of Plaintiffs‘ improper conduct, I instead find 

credible and reliable what Geller said at her deposition and resolve any doubts about her 

credibility in favor of Defendants.145

 

144 DLRPC R. 8.4(d).

145 I have reviewed the relevant portions of the videotape of the Geller deposition and, 

in fact, I generally found her statements there cogent, credible, and consistent with 

the other evidence and testimony I found reliable. In addition, I note that Geller 
52

With respect to Fearon and Levine, their affidavits attempted to prove the 

conspiracy Plaintiffs allege. Overall, however, I conclude that Plaintiffs essentially 

struck a hard bargain with them at a time when Levine, at least, was vulnerable 

financially. While there is less evidence of wrongdoing with respect to those settlements, 

I find that the manner and circumstances in which Plaintiffs obtained the two nearly 

identical affidavits from Fearon and Levine improperly influenced their testimony. I also 

find that portions of the affidavits Fearon and Levine submitted in this case were 

materially misleading, as was revealed by their testimony at trial. Upon close 

examination, I found their trial testimony, which differed in important ways from the 

affidavits, largely credible. Based on the course of events that led to them testifying for 

Plaintiffs at trial—and the stark contrast between their affidavits and trial testimony and

their pre-trial views of Morelli and his management of Optimis—I have determined as a 

sanction for Plaintiffs‘ conduct to resolve any doubts in favor of Defendants in those 

instances where the reliability of the testimony of Fearon or Levine is questionable.146 

 

had every financial incentive to stick to the Final Geller Declaration, particularly if 

it was true. I have seen no evidence of a countervailing interest that would cause 

her not to tell the truth at her deposition.

146 I have no question about the credibility of Olsen‘s testimony. Plaintiffs‘ conduct 

relating to him, ranging from the seeming threat of criminal action in court to 

Morelli‘s bogus lawsuit threats and request for a favorable affidavit, is disturbing. 

It also is consistent with Morelli‘s repeated attempts to involve the LAPD in this 

matter. These actions bolster my conclusion to impose the sanctions I have in this 

action.
53

Defendants have requested that I dismiss this action in its entirety as a result of 

Plaintiffs‘ conduct. There is precedent for such a harsh sanction.

147

 I am not convinced, 

however, that such a broad-brush remedy is appropriate here. Virtually all of the 

misconduct related to Plaintiffs‘ claim of a far-ranging and broad-based conspiracy to 

remove Morelli from his position as CEO of Optimis and strip him (and the Initial 

Stockholders he controls) of their ability to appoint five of the nine Optimis directors 

until 2015. Based on the serious and highly prejudicial nature of the witness tampering 

and other misconduct by Plaintiffs that I have found, I hold that the appropriate sanction 

for that misconduct also includes dismissal with prejudice of their conspiracy claim 

against all Defendants. I decline, however, to order dismissal on that basis of Plaintiffs‘ 

other claims. Instead, I conclude that the best course of action is to draw inferences 

related to the credibility of the affected witnesses against Plaintiffs to the extent described 

in this Section and Section V.F infra, and I have done so in the remainder of this Opinion. 

This relief is consistent with my findings that Plaintiffs‘ conduct has affected the 

reliability of certain witnesses and the fact that Plaintiffs bear the burden of proof.

Finally, and in the alternative, because I am making this decision after trial—and 

in the interest of completeness and judicial efficiency—I have considered fully Plaintiffs‘ 

conspiracy claims in the analysis that follows, notwithstanding my dismissal of that claim 

as a sanction. For the reasons stated in the analysis, I conclude that the Plaintiffs failed to 

 

147 See Bessenyei v. Vermillion, Inc., 2012 WL 5830214 (Del. Ch. Nov. 16, 2012); 

Parfi Hldg. AB v. Mirror Image Internet, Inc., 954 A.2d 911 (Del. Ch. 2008).
54

prove that claim as to any of the Defendants, which provides a separate and independent 

basis for its dismissal.

II. FACTUAL BACKGROUND

In the preceding Section, several of the relevant actors were introduced. This 

Section recites my remaining factual findings as to what happened in this case. The 

record is voluminous. Trial took place over six days, with thirteen witnesses testifying in 

person, including two experts. There were over 1,100 exhibits plus the depositions of 

thirty-two individuals, many of which lasted more than a single day.148 Unfortunately, 

almost all of the key facts are disputed. In addition, each side has advanced numerous

evidentiary objections and challenged the credibility of several of the witnesses who 

provided important testimony. The latter complication has been compounded by the fact 

that certain key witnesses, such as Geller and George Rohlinger, did not appear at trial,

and the Court, therefore, has had to make credibility determinations on the basis of their

video depositions.149

A. Threshold Evidentiary Issues

Before proceeding to the merits, I must address two additional threshold issues. 

First, Plaintiffs have moved for an adverse inference against Horne because he deleted an 

entire email account, comprising thousands of emails, from his computer. Plaintiffs did 

not brief their spoliation request after trial until their reply brief, preventing Horne from 

 

148 The parties waived first-level hearsay objections to the deposition testimony of 

those witnesses. JS § VI.G.7.

149 The parties submitted video depositions of some twenty-three witnesses.
55

having an opportunity to respond to it. Thus, I find that Plaintiffs have waived this 

argument.150

Additionally, and as an independent holding, I find that the requested adverse 

inference is not warranted. ―A party in litigation or who has reason to anticipate 

litigation has an affirmative duty to preserve evidence that might be relevant to issues in 

the lawsuit.‖151 Here, Horne admittedly deleted his personal email account, comprising 

thousands of emails, from his work computer in May 2013 after he essentially was told 

he was about to be fired.

152

 Plaintiffs request that I draw an adverse inference that the 

deleted emails would support Plaintiffs‘ claims.

―An adverse inference . . . is appropriate where a litigant intentionally or 

recklessly destroys evidence, when it knows that the item in question is relevant to a legal 

dispute or it was otherwise under a legal duty to preserve the item.‖153 Here, an adverse 

inference is not appropriate for two reasons. First, there is no evidence that the allegedly 

 

150 Plaintiffs originally moved for a spoliation adverse inference in a motion in limine, 

and I advised the parties in the Pre-Trial Conference that I intended to deny that 

motion unless Plaintiffs made a stronger showing at trial. Pre-Trial Conf. Tr. 7-8. 

Plaintiffs did not address that request in their opening post-trial brief and devoted 

only one page to it in their reply brief. In these circumstances, I conclude that 

Plaintiffs‘ request is waived and, in any event, has not been supported by the 

record. Zutrau v. Jansing, 2013 WL 1092817, at *6 (Del. Ch. Mar. 18, 2013);

Emerald P’rs v. Berlin, 2003 WL 21003437, at *43 & n.144 (Del. Ch. Apr. 28, 

2003).

151 Beard Research, Inc. v. Kates, 981 A.2d 1175, 1185 (Del. Ch. 2009).

152 I do not find credible Horne‘s testimony that he reviewed the emails before 

deleting them, at least not in any serious depth. Tr. 1374-75.

153 Sears, Roebuck & Co. v. Midcap, 893 A.2d 542, 552 (Del. 2006).
56

destroyed emails are not available to Plaintiffs. In originally moving for an adverse 

inference based on spoliation, Plaintiffs pointed to 23 emails from Horne‘s personal 

email account that allegedly were deleted; all preceded December 2012.154 Horne deleted 

his personal email account from his Optimis computer shortly before being fired in May 

2013 and having to turn in his computer. But, the Company‘s computers, including 

Horne‘s devices, were imaged for Plaintiffs in either December 2012 or January 2013.155 

Thus, Plaintiffs had a copy of the emails that allegedly were destroyed and there was no 

spoliation. Second, Plaintiffs have not shown that Horne, who was not represented by 

counsel in May 2013, had any reason to believe he would be sued in this action, which 

was not filed until August, three months later, or any other litigation. Horne was not an 

Optimis board member and the 225 Action, in which he was not a named defendant,

settled in March 2013.

156

 For all of these reasons, I deny Plaintiffs‘ request for an 

adverse inference against Horne based on spoliation. 

Plaintiffs also have pled a conspiracy. In motion practice before trial, I limited the 

persons Plaintiffs could claim participated in that conspiracy to the Director Defendants, 

 

154 D.I. 194, Ex. 10.

155 JX 645, 648; D.I. 200, Exs. A-B.

156 Tr. 1375-76 (Horne). I reject Plaintiffs‘ argument that Horne should have been 

aware of the possibility of litigation because he was a member of a far-reaching

conspiracy, because, as discussed infra, Plaintiffs have not proven the existence of 

such a conspiracy.
57

Defendant Horne, Joe Godges, and George Rohlinger.157 Whether a conspiracy exists 

affects the admissibility of certain statements by Rohlinger and Godges objected to by 

Defendants on grounds of hearsay.158 I conclude in Section V.A infra that no conspiracy 

exists. Accordingly, I sustain Defendants‘ objections to several out-of-court statements 

attributed to either Rohlinger or Godges on the grounds that they are hearsay and 

inadmissible.

Because I conclude that there is no conspiracy, I use the term Director Defendants

only when it is unambiguous and a helpful shorthand. Throughout their pleadings and 

briefing, Plaintiffs repeatedly and vaguely referred to allegedly wrongful actions by the 

Director Defendants or Defendants generally. At trial, it was shown that neither 

Defendants nor the Director Defendants were monolithic groups of actors as Plaintiffs 

alleged them to be. 

B. Rancho Physical Therapy and the Director Defendants

William Atkins founded Rancho Physical Therapy in 1984 in Temecula, 

California. The business experienced rapid growth as the surrounding communities 

grew. Atkins knew John Waite and asked him to join Rancho, which Waite did in June 

1990 after he finished graduate school. Greg Smith, Waite‘s roommate in college, also 

joined the business in September 1990. At that time ―Rancho was one single office,‖

159

 

157 OptimisCorp, 2015 WL 357675, at *12.

158 D.R.E. 801(d)(2)(E).

159 Id. at 1253 (Smith).
58

but under these three partners ―it was exploding‖ in terms of growth.160 By 2006, Rancho 

had nineteen offices. The business overall was quite successful. Atkins attributed 

Rancho‘s success to the Company‘s ―corporate values‖ and ―culture.‖161 

Sometime in 2006, the Director Defendants met with Morelli and discussed a 

potential transaction with Optimis, which then was called Physical Therapy Holdings, 

Inc. This meeting occurred after Joe Godges—a man variously described as a ―true 

expert in the field of orthopedics‖

162 and an ―icon‖ in the physical therapy profession163—

suggested to Waite that they should meet with Morelli. According to Smith and Waite, 

Morelli‘s ―concept was to try and have consistent care in all the different physical therapy 

practices,‖164 as opposed to the then-fragmented outpatient physical therapy environment; 

it was a plan to ―change the physical therapy world.‖165

The parties negotiated an acquisition over a lengthy period of time. As a 

prospective seller, Atkins was ―very, very hesitant‖166 because it was a stock-for-stock 

transaction with no cash consideration. According to Smith, around 2005, the Director 

 

160 Id. at 1459 (Atkins); id. at 1013 (Waite).

161 Id. at 1461.

162 Id. at 1014 (Waite).

163 Id. at 1255 (Smith); id. at 1465 (Atkins).

164 Id. at 1254 (Smith).

165 Id. at 1014 (Waite).

166 Id. at 1461.
59

Defendants had been offered about $12 million for Rancho.167 An all-stock deal 

eventually was struck, however, and Rancho became a wholly owned subsidiary of 

Optimis as of June 14, 2007. The Director Defendants each received Optimis shares, and 

they created a stock option pool so that Rancho‘s employees could share in the ultimate 

upside of the transaction. The Director Defendants—as well as several of the other 

individuals who sold businesses to Morelli and Optimis—expected some sort of liquidity 

event in the relatively near future.168

The Rancho transaction included, in addition to the Stock Purchase Agreement,169

two other elements. The first was the Director Defendants‘ employment contracts, all 

three of which are substantively identical (the ―Employment Agreements‖).

170

 Through 

these agreements, the Director Defendants tied their fortunes to Optimis‘ success or 

failure in another respect as well: they each took substantial pay cuts. While operating 

Rancho, they were making between $500,000 and $700,000 a year.171 The Employment 

 

167 Id. at 1254.

168 E.g., id. at 1471 (Atkins: ―The finish line was always our liquidity event. . . . We 

did this so that we could get Optimis to a point where it could be publicly traded 

or whatever or someone would buy us or something like that, so that we could get 

our money out of investing our entire company. . . . [I]t was supposed to be 

maybe three, four years at the most.‖); Garlock Dep. 49 (―That liquidation [sic] 

event was to occur within three to five years, at the long range.‖); Jennings Dep. 

14.

169 JX 61.

170 JX 64 (Smith); JX 65 (Atkins); JX 66 (Waite). For convenience, when referring to 

a term in these identical agreements, I use the citation ―Empl. Agmt.‖

171 Tr. 1020 (Waite).
60

Agreements set their base salaries initially at $100,000 and then at $150,000 two years 

later.172 The Employment Agreements were between the Director Defendants and 

Rancho.

173

 

Consistent with the vision of a near-term liquidity event, the Employment 

Agreements had four-year terms. Thereafter, the Employment Agreements could be 

extended for successive one-year terms by agreement of Rancho and the Director 

Defendants. The Employment Agreements also included protections for the Director 

Defendants. For example, they provided that: 

In the event that there has not been a liquidity event that 

would allow Employee to liquidate at least 30% of the total 

number of shares to which Employee is entitled to receive . . . 

and the Common Stock Value is less than or equal to $5.00 

per share and the Employee has been in material compliance 

with the terms and conditions of this Agreement, then the 

[Rancho] board of directors shall have the discretion to 

extend the Initial Term [of four years] of this Agreement by 

one successive year and reevaluate these conditions in future 

years.

174

The Rancho board consisted of five members, two appointed by Optimis and three

appointed by the Director Defendants.175

 

172 Empl. Agmt. § 3.1. Bonuses were available if certain EBITDA targets were 

achieved. Id. § 3.2.

173 Id. Recital 1.

174 Id. § 2.2.

175 JX 63 (Rancho Operating Plan) § (b).
61

The final element of the Rancho-Optimis transaction was the stockholders 

agreement (the ―Stockholders Agreement‖).176 That agreement gave the ―Initial 

Stockholders‖ of Physical Therapy Holdings, i.e., Optimis, the right to appoint five 

members to the nine-member Optimis Board of Directors (the ―Board‖)177 for a period of 

seven years.

178

 Morelli, individually and by virtue of controlling Plaintiff Analog, 

controls the overwhelming majority of the shares held by the Initial Stockholders. 

Accordingly, the Board appointment rights effectively belonged to Morelli. The 

Stockholders Agreement granted the Director Defendants the right to appoint two 

members to the Optimis Board.179 At all relevant times, however, all three Director 

Defendants served on the Optimis Board.

C. Optimis: The Company’s Business and Structure

Optimis, then called Physical Therapy Holdings, was founded in 2006 by Morelli, 

Scott McKee, and Holger Beckman. Godges was one of the initial employees of the 

Company. Morelli‘s goal was ―to develop software that would increase the quality of 

care, starting with traditional rehabilitation, and then to build on that nucleus of software‖ 

to move ―towards the health and wellness industry.‖180 Beginning with the acquisition of 

 

176 JX 62 [hereinafter ―SHA‖].

177 Id. § 3.3(a).

178 Id. § 9(a). The SHA later was amended and its term extended to February 25, 

2015. 

179 Id. § 3.3(b).

180 Tr. 274 (Morelli).
62

Rancho, the Company essentially had two divisions, which I will refer to as the ―Clinical 

Services Division‖ and the ―Software Division.‖ They overlapped to a degree.

Morelli testified at trial that the Clinical Services Division consists of clinics that 

render traditional physical therapy rehabilitation care, which are primarily sports and 

orthopedic clinics. Optimis owns 51 such clinics, nineteen of which were operated by

Rancho.181 In addition to providing physical therapy, the clinics also helped beta test and 

develop the software. The Software Division develops the Company‘s software, which 

consists of two separate packages: OptimisPT and OptimisSport. 

OptimisPT primarily is a documentation program that deals with electronic 

medical records. The Company began developing this software immediately after its 

founding in 2006. The eventual goal for OptimisPT was to have its own billing program, 

which would allow ―a physical therapy clinic [to] just have one piece of software,‖ as 

opposed to being forced to license both an electronic medical records program and a 

billing program.182 As of trial, Optimis still had not completed the billing component of 

OptimisPT. The PT software also helped physical therapy clinics comply with Medicare 

and other third-party regulations by providing the therapist ―prompts and information 

about whether or not they‘re documented to be compliant with their services.‖183

 

181 Id. at 274-75 (Morelli).

182 Id. at 276 (Morelli). 

183 Id. at 680 (Fearon). 
63

Part of what made the PT software unique was that it ―incorporated a way for the 

clinician to really communicate their clinical decision-making‖ and ―took the clinician‘s 

information and gave them a decision tree to follow . . . and then document 

accordingly.‖184 Fearon‘s belief that the potential for the PT software was ―[h]uge‖ is 

what caused her to join the Company in the first place.185 Levine also thought that

OptimisPT was ―the best thing on the market‖ and the only software product ―that ha[d]

embedded clinical decision support systems‖ and ―embedded compliance elements.‖186

The Company began developing OptimisSport around 2009. As such, it was not 

even under development when the Director Defendants joined the Company in 2007 or 

when Fearon and Levine joined in 2008. Morelli views the Sport software as the key 

product for the Company‘s long-term success and ―doesn‘t see any comparison‖ between 

it and the PT software.

187

 As will be shown, the Director Defendants—and basically 

everyone else alleged to have conspired with them—considered PT to be the crucial 

software that the Company needed to develop in the near term. The Sport software was 

designed to go beyond traditional rehabilitation into more of a health and wellness field. 

It is not clear from the evidence exactly what the Sport software does beyond 

generally being a wellness program. It was not sufficiently developed during most of the 

 

184 Id. at 679-80 (Fearon).

185 Id. at 681. 

186 Id. at 1598.

187 Id. at 279 (Morelli).
64

time period relevant to this case even to be marketable.188 Part of Sport involved weight 

management,189 but the other wellness aspects of the software are not evident from the 

record, except that it was intended to be a continuation of the care begun under the PT 

program. ―OptimisSport was to pick up where OptimisPT leaves off.‖190 PT, however, 

was designed to document care largely or entirely paid for under third-party 

reimbursement regimes and Medicare in particular. Generally, it seems, once 

reimbursement from Medicare or private insurance has ended, ―traditional rehabilitation 

. . . just stops.‖191 OptimisSport and clinical services rendered under that software, by 

contrast, would be paid for by the clients out-of-pocket or, perhaps, by some similar 

method such as a health savings account.192

Optimis‘ business structure contemplated a symbiotic relationship between the 

Clinical Services Division and the Software Division. The revenues from the Clinical 

Services Division financed the Software Division, which developed PT and Sport, and 

 

188 Id. at 1474 (Atkins: describing an instance where he was attempting to promote

OptimisSport at a trade show and stating: ―I had a lot of discomfort because we 

could not define OptimisSport. It was a lot of ideas but there was nothing 

concrete. . . . We had four boxes. There is a marketing component, a business 

component. There was nothing behind the boxes. Nothing was done on it.‖).

189 Id.

190 Id. at 370 (Morelli).

191 Id. at 369.

192 Id. at 372-73 (Morelli).
65

then the Clinical Services Division would beta test the software.193 As Waite testified, 

―the business model was that the clinics spun off the revenue to pay for the development 

of the software, but we also used the software every day.‖194 For example, Rancho, the 

Company‘s largest clinical unit, ―ran more than a million patient records through 

Version 1‖ of OptimisPT.195 The Company‘s Pacific Palisades clinic, which was run by 

Geller, was a testing ground for the Sport product,196 but the Clinical Services Division 

did not utilize the Sport software on a wide-scale basis. One implication of the 

interrelationship between the Software Division and the Clinical Services Division is that 

a failure of OptimisPT could negatively affect the operation of the clinics that produce 

the revenue needed to improve the software, potentially causing a downward spiral.

197

The physical structure and geography of the Company bears emphasizing. 

Optimis‘ headquarters is located in two houses on the same street in Pacific Palisades that 

are owned by Morelli. The houses, based on their location on the street, are known as the 

―Upper Bubble‖ and the ―Lower Bubble.‖ The ―lower bubble is where all the 

programmers worked, and then the upper bubble is where the admin work was done.‖198 

 

193 Id. at 1039-40 (Waite); id. at 1264 (Atkins).

194 Id. at 1039.

195 Id. at 1036 (Waite).

196 E.g., id. at 1476-77 (Atkins).

197 Id. at 1038-40 (Waite); id. at 1265-67 (Smith). 

198 Id. at 44 (Owens).
66

The Upper Bubble also was Morelli‘s personal residence. His bedroom doubled as his 

office, and it was not uncommon to have meetings in Morelli‘s bedroom-office.199

Much of the Company‘s work was done remotely. The Director Defendants 

operated the Rancho clinics out of Murrieta, California, which is roughly two hours away 

from Pacific Palisades. The Company‘s other clinics were even farther away, with the 

exception of the Palisades clinic. The Achieve physical therapy clinics, for example, are 

in Chicago. The MVP clinics are located in Washington State.

Many of the key employees in the Company also were geographically remote from 

Optimis‘ Pacific Palisades headquarters. Fearon, who became an employee in 2008, after

she and Levine sold their consulting firm to Optimis, is the Executive Vice President of 

Business Strategy. She oversees OptimisPT and assists with development, upkeep, and 

market placement, as well as compliance with regulations such as HIPAA. Fearon is 

based in Phoenix, Arizona. Levine, Fearon‘s business partner, is based in South Florida. 

He is Optimis‘ Executive Vice President of Compliance and Consulting Services. 

George Rohlinger, the Company‘s former Chief Business Development Officer, was 

based out of Idaho. Jeannine Gunn, who worked for Optimis from January 2010 until 

June 21, 2013, was the Director of Implementation for OptimisPT. She was based in 

both Tacoma, Washington and Cincinnati, Ohio. Accordingly, a substantial amount of 

the Company‘s work was done remotely, whether telephonically or electronically, 

through email, for example.

 

199 Brys Dep. 32.
67

Some relevant employees, however, spent a substantial amount of time at the 

Upper Bubble. Geller is one; Horne is another. Horne started with Optimis as a 

consultant in the summer of 2006 and eventually became the Company‘s CFO. Although 

originally based in Seattle, Washington, he later acquired an apartment in Pacific 

Palisades. Horne apparently did not use his apartment much, because he was staying 

with Terry Doherty, Morelli‘s former wife, whom he started dating in the fall of 2010.200 

Laura Brys was Optimis‘ General Counsel from around April 30, 2012 through January 

15, 2013; she also appears to have spent a fair amount of time in the Upper Bubble.

D. Alan Morelli: The Man and His Management of Optimis

Morelli unquestionably is the driving force behind this litigation. He claims to be

the victim of a vast conspiracy that undermined his authority and attempted to seize 

control of Optimis from him. As a result of the Stockholders Agreement, Morelli had the 

power to appoint five of the nine Optimis Board members. He also has served as

Optimis‘ CEO and Chairman of the Board since its inception. Defendants characterize 

him as a narcissist, in that he has, among other things, an inflated sense of selfimportance and a lack of empathy for others.

201 Defendants further argue that Morelli‘s 

character affects his credibility, explains the series of events that led to this lawsuit, and 

 

200 Tr. 1311-12, 1319, 1339-41 (Horne).

201 Post-Trial Arg. 105-06. 
68

even provides a rationale for how the litigation has been conducted.202 Because, to some 

degree, that may be true, I briefly review here Morelli‘s background and his management 

of Optimis.

Morelli has a J.D. from Georgetown University and worked as a corporate 

attorney for the Wilmington office of Skadden, Arps, Slate, Meagher & Flom LLP 

(―Skadden‖). Skadden serves as Plaintiffs‘ lead counsel in this action. Morelli later 

moved to Los Angeles and became a partner at the law firm of Manatt, Phelps & Phillips.

Although not a physical therapist, Morelli is an athlete, as were many Optimis 

employees. In fact, Morelli is a tri-athlete and at one time won the ―Member of the Year‖ 

award from the LA Tri Club for having led that club of tri-athletes to its first national 

championship.203 Several witnesses described Morelli as a visionary and an ideas-man, 

 

202 According to Horne, this litigation is economically irrational and its purpose is 

―annihilation of those who disagreed with‖ Morelli. Horne‘s Post-Trial 

Answering Br. [hereinafter ―HAB‖] 70. Plaintiffs‘ damages expert testified that 

Optimis has spent $10 million pursuing this case. Tr. 916 (Bratic). Horne further 

argues that this lawsuit is all about control of the Company. There may be some 

truth to the latter position. Before this litigation, the Director Defendants and 

Morelli each controlled about one-third of the outstanding shares of Optimis‘ 

stock. As a result of the 225 Action, Morelli, apparently at the suggestion of the 

Board he controls, caused the Company to provide him advancement in the form 

of 1.6 to 2 million shares of stock. Id. at 588-98, 668-69 (Morelli). In a similar 

vein of trying to increase Morelli‘s ownership share, one condition the Company 

sought for ―forgiving‖ Atkins was that he would need to surrender a million of his 

shares. Id. at 1494-95 (Atkins).

203 Tr. 338 (Morelli).
69

with big goals for the future of the physical therapy industry.204 Morelli also was 

extremely successful in selling his vision to others and getting them to join him. Fearon

and Levine sold their successful consulting company to Optimis in an all-stock 

transaction, and the Director Defendants did likewise with respect to Rancho. All of the 

Company‘s other acquisitions of physical therapy businesses appear to have been stockfor-stock transactions as well.

On the other hand, numerous witnesses convincingly testified that Morelli was 

controlling, belittling to others, dismissive, intolerant of dissent or criticism, and had poor 

communication skills. Indeed, some of the most striking testimony came from Plaintiffs‘ 

own witnesses. Kevin Owens, Plaintiffs‘ first witness, is illustrative. Owens competed 

in international athletic events and had a marketing background. He began consulting for 

the Company in 2007 or 2008 and remained until May 2011. He was married at the time 

to Joan Lynch, an employee of ESPN who also consulted for Optimis. Owens admired 

Morelli and viewed him as a mentor. While at Optimis, Owens worked with the 

OptimisSport team and assisted with some of the Company‘s events, such as the Distance 

 

204 E.g., id. at 1503 (Atkins: stating that he wanted Morelli to remain a consultant 

even after being fired as CEO because ―I wanted to have access to his mind, his 

vision, those kind of things‖); id. at 1568 (Levine: ―Alan is a CEO, he‘s a 

visionary . . . his talent is not in operations. . . . But he is a great visionary.‖). 

Rohlinger characterized Morelli as ―a very smart man‖ who ―had great vision for‖

Optimis. Rohlinger Dep. 285.
70

Swim Challenge (the ―DSC‖).

205

 He was to be paid for his work entirely in stock 

options, but he apparently never received any.

206

After moving to L.A. in early 2011, Owens worked out of the Upper Bubble. 

Although he tried to become more involved with selling the Sport and PT products, 

Morelli forced Owens to focus only on the DSC. According to Owens, Morelli ―put me 

in . . . literally a back room with a phone and said,  ̳You are to call swim sponsorships 

and get them.‘‖207 On at least one occasion, Morelli actually screamed at Owens to go 

and find sponsorships.208 Owens understandably ―was not very happy with this, being 

belittled or treated in that way.‖209 Although he had learned that others in the Company

opposed the DSC as a waste of money, Owens did not bother telling Morelli because 

Morelli ―wasn‘t listening to a single word I said, and it wouldn‘t have mattered, so I 

didn‘t bring it up.‖210 When Owens attempted to follow up on customer contacts, Morelli 

either prevented him from doing so or else insisted that any emails to customers be 

 

205 Tr. 6-22, 39 (Owens). I describe the DSC infra. In brief, it was a marketing event 

that Optimis held three consecutive years that was designed to draw attention to 

the Company and the Sport product. The event involved mainly a long-distance 

swim, but participants also could do shorter swims.

206 Id. at 24. The Company also refused to pay for Owens‘s expenses to relocate from 

the East Coast to L.A. Id. at 78.

207 Id. at 58.

208 Id. at 122.

209 Id. at 58. 

210 Id. at 70.
71

cleared by him first. Owens found, however, that Morelli was slow or nonresponsive in 

replying to his draft emails.211

Owens described the situation as ―demoralizing at best‖ and the working 

environment at Optimis as ―utterly dysfunctional.‖212 After yet another instance where 

Morelli told Owens not to deal with potential customers, but instead just to sell swim 

sponsorships, Owens attempted suicide.213 Yet, even after that, Owens determined to 

make one last effort with Optimis.

In late April or early May 2011, Owens sent Morelli a proposal (the ―Owens 

Proposal‖) that would shift Owens from selling swim sponsorships to running sales for 

Optimis, which is how Owens believed he would be most beneficial to the Company. In 

exchange, Owens proposed that he receive up to 10% of revenue.214 The relative merit of 

the Owens Proposal is immaterial. What is relevant is Morelli‘s reaction to it. 

In an email to Horne, Waite, and Rohlinger, Morelli referred to the Proposal as

―Kevin‘s bizarre ultimatum‖ and viewed it as a ―very blunt power play‖ by Owens and 

his wife that they ―intended to use . . . to exert undue influence to coerce me/us into 

 

211 Id. at 131-32. 

212 Id. at 78, 79. 

213 Id. at 81. 

214 Id. at 85-87; JX 101. 
72

giving Kevin an inappropriate amount of power and compensation and her a direct stock 

option deal.‖215 Morelli, who was the best man at Owens‘s wedding in 2010, continued:

Don‘t be misled by the fact that it resembles a Unabombertype manifesto, written by a slow 5th

grader; it is an 

ultimatum, designed to use (read: mis-use) the authority given 

to Joan . . . as a way to pressure us to give Kevin 10% of all 

our sales, whether or not he is involved, and be able to exert 

contractual rights that manipulate our ability to hire, etc., 

restricting the company‘s ability to make sound business 

decisions due to his undue influence. This might not be so 

bad except for the fact that Kevin is child-like, never does 

what he says and he craves power like Will craves Starbucks 

coffee. . . . That itch you are feeling to push the green button 

is all part of a coercive, Pavlovian divide-and-conquer 

strategy by Joan and Kevin, which is a little bit juvenile and a 

lot of bit corrupt.216

At trial, Morelli reiterated that he viewed the Owens Proposal as a corrupt blackmail 

attempt.217 After Morelli rejected his proposal, Owens left the Company.

Other witnesses for Plaintiffs echoed some of Owens‘s concerns. Fearon 

complained about Morelli‘s non-direct management style and ―very poor‖ 

communication, testifying that ―communication would often be diverted, or you‘d send 

communication and then not hear anything and then not know how to direct your 

actions.‖

218

 Others at the Company counseled Fearon against directly voicing complaints 

to Morelli, warning her ―that this is not something that is going to go well if you try to 

 

215 JX 102.0001 (5/4, 5/5 emails from Morelli to Waite, Horne, and Rohlinger).

216 Id. at .0002.

217 Tr. 510, 513-14. 

218 Id. at 690, 749. 
73

address it head on.‖219 Levine confirmed that it was difficult or impossible to approach 

Morelli directly with problems, particularly alone.220 Morelli on at least one occasion 

discouraged him from attending a board meeting and, on multiple occasions, chewed 

Levine out for raising concerns.

221

Levine also observed what he ―believed to be paranoid behavior‖ and discussed 

the concept of ―Alan‘s shiny penny.‖ The ―shiny pennies‖ were new people ―with new 

ideas, and they would have Alan‘s ear for a while. And then, typically, most of those 

individuals either fell into bad graces or would challenge Alan to a direction, different 

than he wanted to go,‖ and then Morelli would move on to a new ―shiny penny.‖222

Olsen, a non-party witness called by Defendants, also testified about Morelli‘s 

behavior. As previously noted, he believed a ―very threatening type of atmosphere‖ 

existed at Optimis following the Director Defendants‘ termination.223 In addition, Olsen 

 

219 Id. at 703-04 (Fearon). Her contemporaneous emails comport with this testimony.

JX 196.0001 (5/2/11 email from Fearon to Gunn: ―I have nothing to lose . . . if 

Alan goes off . . it is just one more incidence where he discounts a key individual 

in the company . . . further weakening the structure.‖); see also supra notes 113-

14.

220 Tr. 1613 (―I think my deposition lays out several very what I would call volatile 

conversations between Alan and myself. . . . And so I knew for me, specifically, 

that . . . I was not going to put myself in that situation again. Certainly not 

alone.‖).

221 Id. at 1614 (Levine).

222 Id. at 1614-15. See also Gunn Dep. 63 (―The running term around the office are 

[sic]  ̳new shiny pennies,‘ whether those are new individuals or new projects.‖).

223 Tr. 1214.
74

described a meeting where one of the Rancho therapists asked Morelli when the Director 

Defendants were going to come back and ―Morelli pretty much exploded on [the person]. 

And it was at that point that kind of everybody was taken aback. At that point, 

communication, all communication stopped.‖224 This testimony is consistent with 

Atkins‘s recollection of a Board meeting where Godges, a revered figure in the physical 

therapy community, asked some questions about OptimisSport and Morelli ―really went 

off on him in a way that was almost shocking. I‘ve never seen someone treated that way 

in a professional setting.‖225 Smith similarly described the incident, testifying that 

Morelli ―completely unloaded on him. I was—frankly, I was taken back by how rude 

and how condescending and how mean he was to Mr. Godges. . . . I mean, the meeting 

got deathly quiet. He just—he humiliated him in front of us.‖226 As a result, Smith 

stated: ―I don‘t think anybody really wanted to step up and confront [Morelli], you know, 

with anything at any of the board meetings for fear that he was going to lambaste you and 

basically put you in your place.‖227 Although Defendants obviously have a fair amount 

 

224 Id. at 1215.

225 Id. at 1465.

226 Id. at 1260. 

227 Id. at 1260-61. Horne testified that ―Alan had a way of alienating people that he 

was upset with.‖ Id. at 1319. Waite also stated that Morelli ―doesn‘t take 

disagreement very well. He doesn‘t like it very much when people disagree with 

what he‘s doing or question sort of how things are being run.‖ Id. at 1041. 

Consistent with these descriptions, Geller testified that ―I could have an opinion 

that went against him, but I think that became less tolerable as it went along. . . . I 
75

of animosity towards Morelli, I credit their testimony on his management style, because it

comports with that of Plaintiffs‘ own witnesses.

E. Optimis Grows, Software Development Lags, Frustration Begins

The record contains little information on the early years of Optimis following the 

Rancho acquisition in June 2007. Olsen described Rancho‘s performance as an Optimis 

subsidiary as ―[s]tellar.‖228 The Director Defendants received all of the incentive bonuses 

under their Employment Agreements.

229 After Rancho, the Company completed several 

other acquisitions and eventually grew to fifty-one clinics.230

In early 2009, Morelli asked Waite to serve as the COO of Optimis, and Waite 

agreed. In November of that same year, the Company launched OptimisPT at the largest 

annual conference of private practice physical therapists.231 According to Waite, ―it 

 

just had to say what he thought I should say, or he would react poorly. . . . He 

would almost try to punish somebody in a juvenile way.‖ Geller Dep. 21.

228 Tr. 1206.

229 Morelli now believes that ―those [bonus] calculations are highly suspect in 

hindsight‖ and contends that ―those calculations are very much in dispute.‖ Id. at 

576. But, there are not any claims in this litigation challenging those payments.

230 Between 2007 and 2009, the Company acquired nine physical therapy companies: 

Rancho Physical Therapy, MVP Physical Therapy, Achieve Physical Therapy, 

Fortney‘s Physical Therapy, Fearon Physical Therapy—which was owned by 

Helene Fearon‘s husband—Beachside Physical Therapy, Cascade Physical 

Therapy, Sovereign Physical Therapy, and Schrier Physical Therapy. Id. at 282

(Morelli). Fearon, Schrier, and Sovereign exercised their rescission rights under 

their acquisition agreements and left the Company. I excluded claims relating to 

those rescissions from this action in my previous Memorandum Opinion. 

OptimisCorp, 2015 WL 357675, at *12.

231 Tr. 687 (Fearon).
76

exceeded all of our expectations in terms of the reception that we got in the 

marketplace.‖232 Later in 2009, Optimis started raising capital, using a private placement 

memorandum (―PPM‖).

233 Waite participated and also sold his family and friends on 

Optimis. Smith similarly raised funds for the Company from his family, with his mother 

investing $80,000, his younger brother investing $200,000, and some of his friends 

investing a total of $50,000.234 

The early years of the Company appear to have been successful. Fearon described 

the atmosphere then as good and the relationships among the executives as 

―collaborative, friendly, a lot of joking around.‖235 Trouble began in the latter half of

2010. By that time, both the PT and Sport products were in development and were 

competing for limited resources. The Director Defendants had been with the Company 

for three years, and the promised liquidity event was nowhere in sight. Additionally, the 

Company began spending its limited money on marketing events, geared more for the

then-conceptual Sport product.

One of those events was the OptimisSport DSC. The DSC, which was conceived

of by Morelli and promoted as the world‘s longest open-water swim, took place in Santa 

Monica Bay. The purpose of this product-branding event was to ―show the general 

 

232 Id. at 1025 (Waite). 

233 JX 75.

234 Id. at 1257-58.

235 Id. at 686.
77

population what the human body can do‖ and encourage people to ―just get up and 

move.‖236 The capstone of the event was the 12.6 mile swim, although it also included 

shorter swims of 4.8 and 1.2 miles. Tapping Joan Lynch‘s contacts at ESPN, the 2010 

event received significant coverage, both in advance and of the actual event itself, 

including from sources other than ESPN. Between 150 and 200 swimmers participated in 

the inaugural event, which was held in October 2010.

237

 Overall, Owens thought the

2010 event went ―very well,‖ and Morelli considered it a success.

238

Plaintiffs claim that Defendants tortiously interfered with the DSC. The event was 

held for three consecutive years: 2010, 2011, and 2012. Plaintiffs‘ allegations with 

respect to this claim are vague and it remains unclear whether they allege tortious 

interference as to all three years or one year in particular. The only evidence relating to 

potential interference with the 2010 event relates to Waite. He swam the 1.2 mile 

distance in the 2010 DSC.

239

 According to Owens, he met Waite at the event and said to 

him, ―This is great‖ to which Waite replied ―Yeah, but this is a big waste of money and 

we‘re not going to do it again.‖ Waite denied Owens‘s account, but even assuming 

Owens‘s recollection is correct, I find it immaterial. It is undisputed that Waite did 

 

236 Id. at 33 (Owens). 

237 Generally id. at 30-39.

238 Id. at 33 (Owens); id. at 338 (Morelli).

239 Id. at 1030-31 (Waite). 
78

participate in 2010 and there is no evidence that he did anything to interfere with the 

event that Morelli agreed was successful.

The bigger problems at Optimis in 2010 related to the software. Although the 

launch of the PT product in 2009 was successful, Optimis struggled to improve upon it. 

In November 2010, the Company‘s employees again displayed the PT product at the 

private practices conference where they had received a good reception the previous year. 

The Company had added certain new aspects to the PT product, but they apparently were 

not entirely ready for release. As Fearon testified: ―[A]t that meeting, I experienced 

being very disappointed in how we presented our product, because part of our product 

was really good, and the public was asking for more. And the other part of our product 

. . . it was kind of not well-formed or it was half-baked . . . .‖240 Fearon and Levine were 

highly respected consultants to the physical therapy market, and their recommendation of 

the PT product was likely to cause more therapists to acquire it. By the same token, 

Fearon and Levine had a vested interest in seeing that the product succeeded, because 

they were putting their reputations on the line in standing behind PT. In that context, I 

consider it important that Fearon believed Morelli was devoting insufficient resources to 

PT to enable Optimis to meet market expectations.241 Substantial resources were being 

devoted instead to OptimisSport and the DSC.

 

240 Id. at 687. 

241 Id. at 688-90. 
79

Plaintiffs have accused Defendants and others of hiding their frustration with 

Optimis‘ resource allocation from Morelli and secretly opposing Sport. The evidence 

does not support these allegations. Morelli knew about the frustration. Plaintiffs‘ 

witness David Hwang was Optimis‘ Director of Branding and worked on marketing and 

graphic design for the Sport product. He told Morelli in 2010 that other employees had a 

negative view of OptimisSport.

242

 Morelli dismissed his concerns, however, and told 

Hwang he was being negative and needed to learn to work better with others.243

Plaintiffs also relied heavily on an email chain among the Director Defendants 

from November 30 through December 1, 2010 (the ―2010 Emails‖).244 According to 

Plaintiffs, this email chain evidences a conspiracy and reveals that the Director 

Defendants were plotting to seize the Company as early as November 30, 2010. The

conspiracy allegedly came to fruition almost two years later with Morelli‘s ouster on 

October 20, 2012. In the email chain, Defendant Smith expressed concerns about the 

status of OptimisPT and suggested raising them directly at an upcoming Board meeting. 

Plaintiffs focus on the following two lines from Waite‘s response: ―If we were to create 

that confrontation at the board level, then we must be in a position to do what would 

amount to a hostile take over. I am not sure that is what we want to do right now.‖245 

 

242 Id. at 159-61 (Hwang).

243 Id. at 232.

244 JX 84.

245 Id. at .0001 (11/30/10 email from Waite to Smith and Atkins). 
80

At trial, the Director Defendants testified—credibly, consistent with the text of the 

emails, and in accordance with Fearon‘s testimony—as to the context of the 2010 Emails. 

Kim Frost, a Rancho employee, had discussed with Smith and Atkins that the PT 

software was experiencing problems whereby Rancho was ―actually losing charges.‖

246

 

Smith explained that the PT software was dropping charges and that ―[d]ropped charges 

basically means you lose revenue. So if you drop charges and they go away, if they 

disappear, it‘s difficult to recapture that.‖247 Accordingly, I find that in late 2010

instability of the PT software and slower than expected improvement of that product were

serious problems for the Company.

The 2010 Emails, when read in full, actually demonstrate the opposite of what 

Plaintiffs contend. Because Plaintiffs relied on these emails as evidence of a conspiracy, 

I quote them at some length. The first email is a message Waite forwarded from Frost 

that discussed PT software errors relating to charges.248 Smith then replied to Atkins and 

 

246 Tr. 1038 (Waite). 

247 Id. at 1265; id. at 1469 (Atkins: ―And not that I‘m a software genius in any shape 

or form, but I know that the entire company ran off of this software. And so it 

looked like this was going to explode. And this, in my mind, looking forward, 

was going to . . . have a tremendous negative effect on not only just Rancho. 

Since Rancho was about 70 percent of the income of the entire company, if this 

were to happen, this would be catastrophic.‖).

248 JX 84.0002 (11/30/10 email from Frost to Director Defendants and others: 

―Yesterday I found about 8 errors on the Charge approval screen . . . . Today I 

moved on to testing the batching process and have found some other errors that 

have been written up . . . .‖).
81

Waite. Smith first mentioned the ―fragility of our current situation as it relates to our data 

bases in V1 and CS [OptimisPT] software‖ and then wrote:

We also need to discuss our game plan for the board meeting. 

We are at a critical juncture and we need to address the 

concerns at the meeting. We also need to discuss the poor 

financial budgeting and lack of fiduciary responsibility as it 

relates to expenses Optimis is incurring. I know everyone is 

concerned and we should discuss how we plan on broaching 

this at the meeting. As the three largest shareholders, there is 

a lot at stake for all of us.249

Atkins testified that Smith is the most confrontational of the three Director Defendants.250 

This is consistent with Smith‘s demeanor at trial and his testimony.251 Smith described 

Waite as someone who was less confrontational and would calm him down.252 

Waite responded to Smith‘s email by advising against confronting Morelli 

directly. Waite‘s email stated, in part:

I have come to believe that we need to think carefully about 

our approach and keep in mind our goal, which is to create a 

liquidity event for all of us. Upon reflection, I am not sure 

that confronting this situation at a board meeting with other[s] 

present is the best approach to getting us to our goal of 

liquidity. I am afraid that confronting Alan at a board 

meeting, in front of colleagues, embarrassing him in his home 

will make us feel better in the short term, but in the long run 

will likely result in some rapidly deteriorating issues of 

 

249 Id. at .0001-.0002 (11/30/10 email from Smith to Atkins and Waite).

250 Tr. 1469. 

251 Id. at 1267 (Smith: ―But I was really fired up. Frankly, I wanted to confront Mr. 

Morelli and confront the development team and say, you know,  ̳You guys got to 

figure this out.‘‖).

252 Id.
82

management which may create significant negative effects on 

operations which may include litigation, etc. If we were to 

create that confrontation at the board level, then we must be 

in a position to do what would amount to a hostile take over. 

I am not sure that is what we want to do right now.

Alan is hell bent on creating a listing of a class of equity in 

2011. That is our goal as well. He has deep connections 

which are likely to make that process go more smoothly and 

get us a better outcome.253

Atkins wrote back: ―I have to agree that now is the time to keep the wheels on so we can 

get to the finish line,‖ which was always the liquidity event.254

Atkins further testified that ―John [Waite] was our conduit to Optimis. If we 

wanted to have a connection to the Optimis folks, John was that.‖

255

 As COO of

Optimis, Waite had the most interactions with Morelli and was most aware of Morelli‘s 

character and behavior, which I described at length supra. I find nothing nefarious, 

therefore, in Waite‘s counseling against confronting Morelli directly about development

of the PT software, for which Morelli, as CEO, was responsible, and fearing that a 

confrontation would be counterproductive. Conversely, I reject Plaintiffs‘ assertion that 

the 2010 Emails reveal a conspiracy. Instead, particularly against the backdrop of the 

other evidence, those emails show three large stockholders frustrated with the CEO and 

concerned that the PT software‘s instability could threaten the Company‘s future. I also 

 

253 JX 84.0001 (11/30/10 email from Waite to Smith and Atkins).

254 Id. (12/1/10 email from Atkins to Smith and Waite). See also Tr. 1471 (Atkins); 

id. at 1267-68 (Smith).

255 Tr. at 1470.
83

do not view the 2010 Emails as suggesting that the Director Defendants were hoping to 

take control of Optimis for their own self-interest or otherwise seeking to gain a benefit 

not available to all stockholders. Rather, the most reasonable inference from those emails

is that the Director Defendants‘ primary interest was in continuing to work to achieve a 

liquidity event that would benefit everyone, which included working with Morelli on 

raising capital.

In sum, based on the foregoing evidence, I find that none of the evidence 

regarding events that occurred in 2010 provides any material support for Plaintiffs‘

various theories of liability.

F. 2011: Software Development Stalls, Employees Battle Over Resource 

Allocation, Frustration with Morelli Increases

The state of affairs at Optimis continued going downhill in 2011. Much of the 

evidence in this case focuses on 2012, but Plaintiffs contend that Defendants, and 

particularly the Director Defendants, were engaged in a conspiracy during the entirety of 

2011. Despite this allegedly ongoing conspiracy, there is little evidence of any

purportedly wrongful action in 2011.

Virtually no significant improvements were made on OptimisPT during 2011.256 

Hwang testified that he was told in 2011 not to work with the developers on Sport, which 

he understood to mean that the developers were being shifted to PT, and he reported that

 

256 Id. at 756 (Fearon).
84

to Morelli.257 According to Hwang, ―[e]verybody reported directly to Mr. Morelli.‖

258 In 

these circumstances, I find that, more likely than not, Morelli did know in 2011 about the 

unhappiness among some of the Company‘s employees over allocating resources to

OptimisSport instead of OptimisPT.

Owens also testified about 2011. While he was working on the DSC, Owens met 

with Horne, the CFO, at Starbucks in March 2011. Horne allegedly told Owens: ―The 

swim is not going to happen this year. The board‘s not behind the swim. It‘s a waste of 

money.‖259 Horne further allegedly said ―Alan will be out in six months if we don‘t go 

public. . . . So just keep your head down and keep your mouth shut.‖260 Horne denied 

saying these things.261 Regardless, Owens testified that, notwithstanding what Horne

allegedly told him, he continued to work on the 2011 DSC to the best of his ability.262 

 

257 Id. at 255-56.

258 Id. at 255.

259 Id. at 54 (Owens).

260 Id. at 56.

261 Id. at 1321-22. In many respects, Owens‘s testimony on behalf of Plaintiffs, and 

especially Morelli, did more harm than good. I found Owens to be a wellmeaning, but easily manipulated person. Despite the extremely poor work

environment at Optimis, including Morelli‘s demeaning treatment of him 

personally, Owens later emailed Morelli in April 2013 offering unsolicited aid and 

stating ―you are and always have been a friend.‖ JX 743 (4/18/13 email from 

Owens to Morelli). To the extent Owens offered testimony favorable to Morelli, I 

found that evidence unreliable and biased. 

262 Tr. 127-28. 
85

As further evidence that Defendants allegedly interfered with the 2011 DSC, 

Plaintiffs point to the fact that the LA Tri Club withdrew their sponsorship of the event. 

Owens testified that he met with Paul Hekimian, an Optimis consultant and the head of 

the LA Tri Club, regarding the 2011 DSC. Rohlinger participated in that meeting by 

phone and Owens allegedly heard Rohlinger say ―We‘re not even going to have that 

event this year.‖263 Plaintiffs aver that Rohlinger‘s comment caused the LA Tri Club to 

withdraw their sponsorship, but they failed to prove that such a causal connection exists. 

The LA Tri Club not only withdrew their sponsorship of the DSC for 2011, but also 

revoked Morelli‘s membership.264 Indeed, several members from the LA Tri Club sued 

Morelli because they never received the stock options they were promised for assisting 

with the 2010 DSC.265

As previously mentioned, Owens had left Optimis by May 2011. The DSC 

happened later that year. Waite again swam in the event, participating in the 2.4 mile 

swim.266 Morelli again described the event as successful, with about 400 participants, 

including some celebrities, and some television coverage as well.

267

 

263 Id. at 63-66.

264 Id. at 344-45 (Morelli). 

265 Id. at 345 (Morelli).

266 Id. at 1031.

267 Id. at 346-47.
86

The other event of note in 2011 was the opening of a physical therapy clinic in 

Pacific Palisades. Morelli knew Tina Geller through the LA Tri Club and he recruited 

her to join the Company in February 2010. In October or November 2011, Optimis 

opened the Pacific Palisades clinic that was to be run by Geller. That clinic ―was Alan‘s 

idea to promote the OptimisSport software . . . . He called it a Petri dish for the 

OptimisSport software.‖268

At the end of 2011, the Company again was in need of capital. In December 2011, 

Optimis had another PPM prepared. The Director Defendants—who, according to 

Plaintiffs, were over a year into their conspiracy to ―sabotage[e] the Company‘s strategic 

plan‖269—again answered the call. Optimis raised about $860,000, almost all of which 

came from two people: a friend of Waite‘s and Atkins‘s brother-in-law.270

G. The February 2012 Chicago Conference

In 2012, the alleged conspiracy gained speed. The first activity occurred in 

February 2012. Although the Company largely operated remotely, employees and 

executives would meet at various times throughout the year at conferences and 

conventions. One of those conferences was the combined sections meeting, a physical 

therapy conference, in February 2012 in Chicago (the ―February 2012 Conference‖). 

Attendees included Horne, Rohlinger, Geller, Morelli, Gunn, Fearon, and Levine. 

 

268 Geller Dep. 13.

269 POB 45.

270 Tr. 1322, 1335-36 (Horne); id. at 1467 (Atkins).
87

Before Geller became the director of the Pacific Palisades clinic, her position at 

the Company was not entirely clear.271 She apparently was involved in OptimisSport, but 

also seems to have functioned as Morelli‘s personal physical therapist. The oral sex

incidents began in mid- to late-2011 and gradually ended as she started working more at 

the Palisades clinic in spring of 2012. Geller began working at the clinic part time when 

it opened in late 2011 and worked there full time by April 2012.272 

Geller described the February 2012 Conference at her deposition. I find her

account credible and largely consistent with Horne‘s recollection. One evening at the 

conference, Morelli asked Geller to perform physical therapy on him and then he ―tried 

making sexual advances,‖ but Geller avoided them, saying she had to meet the rest of the 

Optimis employees downstairs.273 She ended up at the hotel bar. A group of employees 

was returning from dinner and Horne apparently was among them. He saw Geller at the 

bar and, according to Horne, she motioned for him to join her. He did.274 The two spoke 

for a period of time, which Horne described as 20-30 minutes275 and Geller recalled being

about an hour.276 

 

271 Geller Dep. 11 (describing unclear job duties and stating that Optimis was her 

―first corporate job‖ so she did not know that this was unusual).

272 Id. at 19, 29. 

273 Id. at 51-52.

274 Tr. 1338, 1409-13 (Horne).

275 Id. at 1412.

276 Geller Dep. 52.
88

According to Geller, Morelli was mentioned while she and Horne were talking and

she commented to the effect that ―if he ever lays his hands on me again, I might just kill 

him.‖277 Horne‘s recollection is that Geller said that ―while she was at his [Morelli‘s]

house in Palisades, the upper bubble, Alan had inappropriately touched her during a PT 

session. She said he was incredibly upset at her and threw her out of the room when she 

questioned him on his behavior.‖278 Horne also testified that he explicitly asked Geller

whether it was sexual harassment, which he had an obligation to report.279 Geller did not 

mention that, but they both testified that Geller asked Horne not to tell anyone, to which 

Horne agreed.280 Horne attributed Geller‘s remarks about Morelli to ―a one-time event, a 

misunderstanding. I didn‘t believe it was sexual harassment. I didn‘t believe Alan would 

have done anything.‖281 He then offered Geller the use of his apartment in Pacific 

Palisades. He confided in her that he was not using it because he was staying with 

Morelli‘s former wife. According to Horne, he ―just figured if [Geller] was using it, that 

would eliminate any possibility of this happening in the future and just eliminate the 

situation.‖282 Geller similarly testified that she believed Horne offered her the apartment 

 

277 Id. at 51.

278 Tr. 1339.

279 Id. at 1339, 1413.

280 Id. at 1339; Geller Dep. 55.

281 Tr. 1340.

282 Id.
89

―to get me to not to have to stay at Alan‘s place anymore.‖283 Horne evidently allowed

Geller to use his apartment rent-free.

Notwithstanding Horne‘s promise not to tell anyone what Geller told him, he soon 

told Rohlinger. Horne testified that this conversation—which he allegedly forgot to 

disclose in his interrogatory answers in this case—occurred within days, or at most two 

weeks, of the February 2012 Conference.284 Horne said that he called Rohlinger to 

determine whether he should report the incident to Kreile in HR. According to Horne, 

Rohlinger told him to report it, but he convinced himself not to.285 Rohlinger vaguely 

recalled the conversation with Horne when asked about it at his deposition. He testified 

that it occurred in Chicago at the conference, possibly in person, and that Horne 

mentioned inappropriate touching. Rohlinger did not remember any further details, and 

said that he concluded that he personally had no obligation to report the matter.286

Levine also attended the February 2012 Conference and testified about a matter 

unrelated to Geller. According to Levine, he spoke with Waite, who told him that,

shortly after Rancho became a subsidiary of Optimis, Morelli had told Waite that ―at 

some point he would need to step away as managing the company, but that that was 

 

283 Geller Dep. 84. Geller‘s husband also worked for Optimis. His exact job is 

unclear, but he appears to have been involved in OptimisSport. The record does 

not indicate where the Gellers lived, but it seems that, at least on some occasions, 

Geller stayed at the Upper Bubble when working late. 

284 Tr. 1414-15.

285 Id. at 1342-44.

286 Rohlinger Dep. 50-55.
90

going to be hard. Alan recognized his control issues, and that he may need to be sort of 

assisted out of that role, or sort of, you know, pushed out of that role if he continued to 

take control.‖287 According to Levine, Waite then said: ―You know, we may just need to 

give Alan a nudge.‖288

H. Suspicious Events Immediately After the February 2012 Conference

According to Plaintiffs, after Horne told Rohlinger about the sexual harassment 

allegations, Rohlinger told Waite, but that is heavily disputed. Based on the latter 

allegation, Plaintiffs suggest that Waite and his alleged co-conspirators waited seven 

months until September 2012 to use those allegations as a pretext to remove Morelli from 

power. 

As the reader may have noticed, there is little, if any, evidence tying either Atkins 

or Smith to the actions taken by Waite or evidence tying Horne to any of the Director 

Defendants. Rohlinger, according to Plaintiffs, is the link. Rohlinger was the 

Company‘s Idaho-based Chief Business Development Officer. He is not a defendant, but 

allegedly is a member of the conspiracy. He did not testify at trial, but he was deposed. 

Plaintiffs‘ position is that Rohlinger was Waite‘s close friend and that Rohlinger, 

therefore, would have told Waite about what Horne told him.

Rohlinger is a former investment banker with an MBA from Harvard Business 

School. He, too, met Morelli through the LA Tri Club and worked for the Company from 

 

287 Tr. 1568.

288 Id.
91

April 2009 through June 2013.289 Initially, Rohlinger worked with the Software Division 

and was tasked with overseeing the development of OptimisPT. In late 2010 or early 

2011, however, he was reassigned to the Clinical Services Division. According to 

Morelli, Rohlinger thereafter had no technical duties ―based on the reporting structure‖ of 

the Company, but he ―crept back into it almost like an alternative management team.‖290 

Rohlinger, by contrast, did not view the transition as ―that black and white.‖291 Like 

other witnesses, he testified that the Company lacked a formal organization chart.

292

 

Once Rohlinger joined the Clinical Services Division, he and Waite developed a ―very 

good professional relationship‖ and they spoke almost daily.293

Rohlinger did not recall discussing with Waite, or anyone else, the incident that 

Geller told Horne about and Horne subsequently relayed to Rohlinger.

294

 Likewise, 

Waite denied that Rohlinger ever told him about his conversation with Horne.

295

 

Plaintiffs contend that the most reasonable inference from the evidence is that Rohlinger 

did tell Waite. I return to this issue later, but I note that, even if Waite was told, the 

 

289 Rohlinger Dep. 14-16.

290 Tr. 359.

291 Rohlinger Dep. 17.

292 Id. at 19; e.g., Gunn Dep. 22-23.

293 Rohlinger Dep. 287-88.

294 Id. at 56, 95-96, 337.

295 Tr. 1120-21.
92

evidence at most would support a finding that he was aware of one incident of 

inappropriate touching between Morelli and Geller. The actions that Geller later revealed 

to Solomon were more explicit and there is no evidence that Waite, Horne, or Rohlinger

knew of those allegations before the investigation into Geller‘s claims.

Two other events occurred shortly after the February 2012 Conference that 

Plaintiffs contend support both the Horne-Rohlinger-Waite inference and a conspiracy 

generally. Defendants offer neutral explanations for these events. Plaintiffs have the 

burden of proof.

1. Circulation of the Optimis Sexual Harassment Policy

The first event relates to Waite allegedly finding out from Rohlinger about 

Geller‘s complaint regarding Morelli‘s behavior. Shortly after the February 2012 

Conference, sexual harassment compliance materials were circulated around the 

Company. Plaintiffs contend that Defendants caused these materials to be circulated. 

Their theory appears to be that Defendants were attempting to alert Geller to the 

possibility that she could bring a claim against Morelli. The problem with this theory, 

despite the suspicious timing, is that the sexual harassment policy apparently was 

circulated largely by Kreile, in her Human Resources role, and Jessica Eastman, 

Morelli‘s assistant.296 Additionally, Morelli was copied on one of the emails circulating 

 

296 JX 123 (2/15/12 Kreile Memo re: Sexual Harassment Procedures); JX 124 

(2/15/12 email from Kreile to Waite and Rohlinger); JX 133.0001 (2/21/12 email 

from Kreile to Horne: ―Hi Will, attached is our sexual harassment policy. The 

first attachment describes our policy and you can use your judgment whether you 

wish to distribute it to Optimis managers. Required is the distribution of the actual 
93

the sexual harassment policy, so this distribution was not secretive.297 Waite described 

Kreile‘s email as routine, annual sexual harassment training.298 Rohlinger recalled 

nothing about this subject.

299

 Kreile testified at her deposition that ―ideally every year the 

sexual harassment pamphlet and policy would go out,‖ and she attributed her email to 

Rohlinger and Waite as being related to that goal.300 There are emails from both 2010 

and 2011 relating to sexual harassment training, but not a circulation of the sexual 

harassment policy.301

 

policy to all employees. Please let me know if you prefer that I send to Jessica 

[Eastman, Morelli‘s assistant,] for distribution or if you wish to handle. This is 

required by California law and we need to proceed asap. . . . I ask that Jessica 

collect the signature sheets from all Optimis employees and return to me . . . .‖); 

JX 137.0001 (3/2/12 email from Eastman to Horne, Kreile, and Waite: ―Hi Nancy 

– I‘ll get this started on our end. If you could handle the team in Murrieta, that 

would be great.‖).

297 JX 138 (3/2/12 email from Eastman to Morelli and many others). Notably, Kreile 

specifically acknowledged receipt of Geller‘s signature. JX 139.0001 (3/2/12 

email from Kreile to Eastman, Waite, and Horne: ―I already have this back from 

Tina, as she was included in the Rancho directors distribution.‖). Given the events 

that unfolded, this specific mention seems suspicious. But, by virtue of running 

the Pacific Palisades clinic, Geller also was the only Optimis employee working at 

a clinic; all of the other clinics were run by the subsidiaries. Waite, as COO, had 

primary responsibility for the clinics. 

298 Tr. 1051-52.

299 Rohlinger Dep. 89-99.

300 Kreile Dep. 119.

301 JX 1113 (8/11/10 email from Morelli to Kreile and others regarding sexual 

harassment training); JX 1115 (1/21/11 email from Kreile to Eastman regarding 

Morelli‘s sexual harassment training).
94

2. Circulation of the Stockholders Agreement

The other event relates to the Stockholders Agreement. On February 20, 2012, 

Horne sent the Stockholders Agreement to Rohlinger as an attachment to an email sent 

from Horne‘s personal email account to Rohlinger‘s personal email account. The email 

contains no text.302 Later that day, Rohlinger forwarded the email to Waite‘s personal 

email account, also without text.303 Plaintiffs contend that these emails show members of 

the conspiracy planning their next moves on how to remove Morelli from power.

Waite did not recall why the Stockholders Agreement was being circulated.304 

Horne testified that he sent the document to Rohlinger, because Rohlinger had just 

discovered its existence, considered it material, and was unhappy that it had not been 

disclosed in the Company‘s previous PPMs.305 Horne believes he used his personal email 

because it was the one that was open when Rohlinger called him and asked about the 

Stockholders Agreement. To the extent Rohlinger had any recall about the February 

2012 circulation of the Stockholders Agreement, he testified that he was surprised when 

he found out about the existence of the Stockholders Agreement.306 Additionally,

 

302 JX 130.

303 JX 129. Waite responded to this email the next day, writing: ―I don‘t see the 

changes as significant. Compare the MVP doc to this one which is Rancho and 

see what you think.‖ JX 132.0001. The record contains no explanation of the 

subject to which Waite was referring.

304 Tr. 1144-46.

305 Id. at 1335-38.

306 Rohlinger Dep. 100-05. See also id. at 78-79 (discussing PPMs).
95

differences in the PPMs themselves comport with Horne‘s testimony. Neither the 2009 

PPM nor the 2011 PPM disclosed the Stockholders Agreements, but the June 2012 PPM 

did.307

I. During 2012 Tensions Over the Company’s Direction Approach the Breaking 

Point 

1. No confidence in Morelli

By spring 2012, many key employees had lost faith in Morelli‘s ability to manage 

the Company successfully. A group of at least five people—Gunn, Rohlinger, Waite, 

Fearon, and Levine—appear to have been engaging in a regular practice of using personal 

emails to gripe about their unhappiness about Morelli.308 Resource allocation issues were 

high on the list of concerns, and morale was low.

309

 The goal of these back-channel 

 

307 Compare JX 75 (2009 PPM), and JX 37 (2011 PPM), with JX 229.0012 (June 

2012 PPM disclosing the Stockholders Agreement). The disclosure, listed under 

the ―Risk Factors‖ section of the PPM, includes the subheading: ―The majority of 

our shareholders have entered into a Stockholders Agreement which provides our 

Chief Executive Officer with the right to designate the majority of our Board of 

Directors.‖ JX 229.0012.

308 E.g., JX 192.0001 (4/29/12 email from Gunn to Waite, Rohlinger, Levine, and 

Fearon: ―I have used our non Optimis emails for this type of communication and 

would request we continue to use those as we have this discussion.‖). Waite could 

offer no explanation for the use of personal emails. I find Gunn the most credible 

witness on this point. She testified at her deposition that by spring 2012 she felt 

Morelli ―was more than likely monitoring emails.‖ Gunn Dep. 75. See also Jim 

Lynch Dep. 27 (―I felt uncomfortable having those conversations on work e-mail. 

At some point, I was told that it would not be unusual to have someone go through 

those e-mails and look at them.‖).

309 JX 192 (―Alan is focussing [sic] on all products that do not involve OptimisPT and 

is treating this team poorly.‖); Tr. 695-97 (Fearon). One line of questioning of 

Fearon misleadingly suggested that it was the back-channel criticisms of Morelli 

that were bringing down morale. Tr. 701. Further questioning, however, clarified 
96

discussions, according to Fearon, was trying to ―effect change‖ and ―[t]rying to get 

something done that would help us accomplish the goal of the OptimisPT product.‖310

Fearon provided the clearest testimony on the problems in this timeframe. She

began holding off on pursuing various opportunities that could have been good for the 

Company because she ―didn‘t feel confident in my CEO because of . . . the way he 

communicated.‖311 For example, Fearon had business contacts with a company named 

WorkWell, but the business relationship with WorkWell failed because ―Alan had 

difficulty communicating in some of our meetings with their executives.‖312 Fearon also 

described an opportunity for Optimis at a university-based hospital system that did not 

materialize ―because we couldn‘t get our act together to be able to have the software be at 

 

that she perceived morale to be low because of decisions about product 

―development or resources‖ that were the responsibility of Morelli. Id. at 702.

310 Tr. 697-98. In May 2012, Fearon emailed Gunn that Rohlinger had told her that 

he was ―undertaking an effort to see what actually would be involved in taking 

control of parts of the company and leaving others to those that are engaged 

there.‖ JX 196 (5/2/12 email from Fearon to Gunn). Though they have 

highlighted this email‘s existence, Plaintiffs have failed to offer a cogent 

explanation of its import. Additionally, because I find that there is no conspiracy, 

use of this email to prove a takeover plot by Defendants would make it hearsay 

and, therefore, inadmissible.

311 Tr. 707.

312 Id.
97

a level where we could actually do that type of integration.‖313 She provided other 

examples as well.314 

It also seems that several opportunities failed because OptimisPT had not reached 

the desired level of development, which Fearon blamed on the resource allocation 

decisions made by Morelli. In her words, she held off on pursuing opportunities because 

―what I was watching was the chief executives of the company basically having zero to 

no confidence in the CEO and actually trying to do something about that.‖315

2. The Director Defendants extend their Employment Agreements

The Director Defendants renewed their Employment Agreements in spring 

2012.316 The Director Defendants had renewed the Employment Agreements in 2011 on 

the same terms that had existed in 2010.

317

 Morelli had disagreements with the Director

Defendants over extending the Employment Agreements in 2012.

318

 Because the 

Director Defendants viewed the Employment Agreements as their safety net, they were

 

313 Id. at 709.

314 Id. at 709-10.

315 Id. at 744. 

316 This factual section is abbreviated, because Plaintiffs have abandoned all claims 

directly related to the Employment Agreements. Alternatively, I consider them 

waived. Emerald P’rs v. Berlin, 2003 WL 21003437, at *43 & n.144 (Del. Ch. 

Apr. 28, 2003).

317 JX 64.0012-.0013; JX 65.0012-.0013; JX 66.0012-.0013.

318 JX 176 (4/9/12 email from Morelli to Director Defendants regarding extensions). 
98

quite unhappy about Morelli‘s resistance.

319

 A Rancho board meeting was necessary to

extend the Employment Agreements; such a meeting had not been held in years. On or 

about April 26, 2012, the Director Defendants, without telling Morelli, purportedly 

removed him from the Rancho board on the basis that, under Rancho‘s bylaws, he could 

not be a board member because he was not a physical therapist.320 As Plaintiffs since

have pointed out, Rancho‘s bylaws also required that the Rancho directors be 

stockholders of Rancho. Because Optimis owned all of the shares of Rancho, none of the 

Director Defendants technically could have been on the Rancho board either.

321

At the April 26, 2012 Rancho board meeting, the Director Defendants and the 

remaining Rancho director, Joe Godges, approved the extension of the Employment 

Agreements.322 Under that extension, the base salaries of the Director Defendants 

remained the same as they were in 2009 and 2010, and the EBITDA targets they needed

to meet to earn bonuses were increased. The change to the bonus provision appears 

consistent with the alterations Morelli was demanding in exchange for renewing the 

agreements.323

 

319 E.g., JX 185 (4/20/12 email from Smith to Waite and Atkins: ―I do not want the 

comp committee making the decisions on my employment contract do you?‖). 

320 JX 58.0002; JX 190.0003.

321 JX 58.0002.

322 JX 190.0003-.0004. Plaintiffs dispute whether such a meeting actually was held.

323 Id. at .0004, JX 191 (4/26/12 email from Waite to Morelli: ―I have had a chance to 

review these terms with Greg and Bill and we look good to go. I appreciate your 

and Will‘s work on getting this completed . . . .‖).
99

3. The June 2012 Meeting: A “conspiracy” of inaction

By the middle of 2012, the problems already described continued to fester. A June 

email chain shows not only the frustrations of the employees, but also demonstrates 

Morelli‘s awareness of the problem. Gunn apparently suggested to Morelli that the 

software developers go to Rancho and work on site so that they could understand how the 

software functioned in the real ebb and flow of a physical therapy office.324 Morelli 

responded: ―Under no circumstances are we going to have these developers go out to 

Rancho. Aside from the big loss in productivity, I have also observed—the [sic] for the 

last couple of years—that our staff never comes back the same from those trips . . . likely 

due to confusing messages that they get.‖325

Gunn forwarded these messages to Waite, who then wrote to Rohlinger, 

describing the situation as ―f---ing ridiculous and clearly about control. He [Morelli] is 

losing his grip on this company and can feel who he is losing it too.‖326 The import of the

second sentence is unclear because of one of two typos.

327

 Plaintiffs focus on the end of 

Waite‘s email, which reads: ―I don‘t expect there is much time left. We must 

 

324 JX 233.0002. 

325 JX 233.0003 (6/17/12 email from Morelli to Gunn) (emphasis added).

326 JX 233.0001 (6/18/12 email from Waite to Rohlinger).

327 It is unclear if the typo is the ―too‖ or the inclusion of the word ―who.‖ The 

sentence either reads ―He is losing grip on this company and can feel . . . he is 

losing it too‖ or ―He is losing grip on this company and can feel who he is losing it 

to[].‖ The meaning of the sentence is quite different depending on which reading 

is correct. Waite remembered nothing about this email. Tr. 1165-73 (Waite). 
100

individually and collectively stay focused on doing the right thing. Set a clear path and 

execute. I realize my role in this approach and am committed.‖328 Plaintiffs contend that 

this indicates a conspiracy, the same conspiracy that allegedly began in late 2010, with 

the end goal approaching.

At some point during 2012, there was another conference in Tampa, Florida. 

Levine recalled a conversation with Waite in which Waite listened to Levine‘s concerns 

and basically placated him and told him that he would attempt to deal with it. Much like 

Smith‘s testimony regarding Waite, Levine observed that ―John was very good at sort of 

making—certainly me feel that he understood and he empathized with what I was 

feeling.‖329 According to Levine, however, by June of 2012 he had ―been hearing the 

same thing for over a year‖ from Waite and no progress was occurring.330 

Plaintiffs repeatedly asked questions of Levine consistent with the misleading 

affidavits he and Fearon filed about a conspiracy bent on ―taking control‖ from Morelli to 

achieve some self-interested goal of the conspirators. When the Court asked Levine 

directly what the goal of this group of individuals was, he answered:

 

328 JX 233.0001. Waite testified unconvincingly that the final sentences of this email 

likely refer to him staying focused and running the Clinical Services Division, but 

he remembered nothing specific about the email.

329 Tr. 1570; id. at 1575 (―I always felt a little better when I talked to John. I mean, 

he has a way of soothing you.‖). See also Jim Lynch Dep. 41 (―Mr. Waite 

provided an environment where I felt comfortable objecting with anything. . . . He 

encouraged me to express my opinions, and if I had concerns, he reaffirmed them 

and made me feel that it was okay to feel a certain way.‖).

330 Tr. 1572.
101

My sense was there was a constant understanding that there 

were resources being diverted away from what we thought 

was our primary mission, was moving OptimisPT forward in 

the market. We had very strong projections for the future. 

And Alan‘s—almost Alan‘s entire focus seemed to be on 

OptimisSport. And while OptimisSport was certainly part of 

the vision, it was not something that we—that I felt, that I 

believed, that we were ready to move into without making 

sure that we were credible in the industry for OptimisPT. 

And every time we would bring this up [to Morelli] . . . Alan 

would start to pontificate on the vision, which was wellness 

and OptimisSport services.331

Levine further explained that he ―and the group that [he] was working with, wanted 

[Morelli] out of the way of any day-to-day working at OptimisPT, because it just seemed 

like . . . everything was getting diverted.‖332 Having carefully considered this evidence, I 

find that Levine‘s testimony supports the view that the goal he, Fearon, Waite, and others 

had was to salvage the PT product in the marketplace and prevent Morelli from 

interfering with its development. The goal was not to engage in a hostile takeover for the 

sake of harming Morelli or some other unexplained reason unique to Defendants and not 

shared by the Optimis stockholders generally (other than Morelli, perhaps). As Fearon 

testified, all of the actions she took during the relevant time period were because she 

believed they were in the best interests of the Company.333

 

331 Id. at 1571.

332 Id. at 1572. 

333 Id. at 782-83.
102

The evidence does not support a finding that Fearon, Levine, Waite, or Rohlinger 

were involved in a takeover conspiracy. In this regard, Levine‘s testimony about the proPT group again is illuminating: ―And it just seemed like every time we got together it was 

nothing but a gripe session. We didn‘t have a plan. We didn‘t have a strategy. We 

didn‘t have anything. And it just became more and more frustrating.‖334 This evidence, 

from Plaintiffs‘ own witnesses, is inconsistent with the self-serving, disloyal conspiracy 

Plaintiffs contend existed.

On June 15, 2012, Levine wrote to Waite, Rohlinger, Gunn, and Fearon, stating 

that he and Fearon were questioning their long-term affiliation with Optimis and 

requesting a face-to-face meeting.335 Plaintiffs highlight this email, because Levine 

referred to it in a text message to Rohlinger as his ―coup d‘état‖336 email and because it 

includes the following lines:

If we have any hopes of a positive outcome for all of us

[presumably the long-awaited liquidity event], we will need 

to take some drastic measures, and things will have to be 

different moving forward. We have all spent too much 

political and reputational capital thus far, and we either need 

to stop the bleeding or amputate the effected [sic] limb in 

which ever way could save this company from itself. Or, as I 

said to John, we either need to take the bull by horns or 

recognize it is going to the slaughterhouse and figure out how 

to save ourselves!337

 

334 Id. at 1573.

335 JX 230. 

336 JX 28.0010.

337 JX 230.0001.
103

The language is colorful and direct, but I do not read Levine‘s email as stating much 

more than what I just described. Virtually all of the actors he addressed had a vested 

interest in the success of Optimis. In several cases, the actors had staked their reputations 

and financial well-being on OptimisPT. In addition, they all shared the view that the 

Company was in difficulty, largely due to Morelli‘s poor leadership and his refusal to 

allocate sufficient resources to Optimis PT to ensure its success. 

By the time of trial, Fearon and Levine had settled with Optimis and Morelli, and 

received the higher salaries Morelli previously had denied them. Fearon and Levine both 

appeared as witnesses for Plaintiffs. Nevertheless, Fearon acknowledged that she 

understood Levine‘s email to mean ―changing the things that were wrong by stopping 

them and trying to improve the things that needed to be done—or the methodologies that 

needed to be taken to get OptimisPT in a different place.‖338 Levine testified that ―I 

thought we needed to get Alan out of the way. I didn‘t know how to do it. . . . But 

clearly, for me, it was a revolution. For me, in my mind, it was about getting rid of the 

current administration and putting somebody else in power.‖339 As a stockholder of 

Optimis and a professional heavily invested in its success, Levine was entitled to hold 

 

338 Id. at 714.

339 Tr. 1583.
104

those views. I do not find his statement to be cogent and reliable evidence of the state of 

mind of Waite and the other Defendants, however.

340

The meeting did occur on June 26, 2012, with Fearon and Levine participating 

from separate remote locations.341 The testimony about the meeting does not support

Plaintiffs‘ claim that there was a plot to seize control of the Company illegally. 

According to Levine, he advocated sitting down ―together with Alan to tell him what our 

concerns were and to tell him that we expected something different.‖342 Rohlinger was 

―emphatically shaking his head no‖ and Waite disagreed with that course of action,

saying ―don‘t poke the tiger.‖343 I also note, however, that the June 26 meeting also 

appears to be the first time Levine learned of the Stockholders Agreement.344

The only concrete action that emerged from the June 26, 2012 meeting was taken 

independently by Fearon and Levine, neither of whom is a defendant in this action. As 

described in Section I.E supra, their Employment Agreements expired in December 2012 

and they took it upon themselves to send a letter to Morelli, dated October 6, 2012, 

outlining their demands, including for raises and improvements to OptimisPT.345 Levine 

 

340 Levine is not a defendant in this action.

341 Id. at 1584-85 (Levine).

342 Id. at 1586. 

343 Id. at 1587 (Levine).

344 Id. at 1588 (Levine).

345 JX 317.
105

sent a draft of that letter to Waite in June, who, apparently anticipating Morelli‘s reaction, 

forwarded the draft to Rohlinger in an email that states: ―FYI eeek.‖346 Although Levine

and Fearon sought input on the letter from Waite and others, they did not receive any.347 

There were changes between the draft and the letter sent in October. According to 

Fearon, ―those were things that we added, thinking to ourselves, well, we need to do this. 

No one‘s giving us direction. We asked, they‘re ignoring us.‖348

In sum, the end result of the June 26 meeting was an October letter by two 

individuals not on trial. At the meeting, Waite, the only Defendant in attendance, advised 

against ―poking the tiger.‖ Fearon and Levine then proceeded on their own.

4. The Company struggles to raise capital and again hosts the DSC

By the end of the summer of 2012, the Company again sought to raise capital in 

the equities market. Although originally looking for an investment of $4 million, the 

Company was unsuccessful despite attending ―a lot of meetings in August and 

September.‖349 The Company also was in discussions with Wells Fargo for a loan in the 

amount of $1 million unsecured and $2.5 million secured by Rancho‘s accounts 

receivable and a personal guarantee by Morelli. That loan was at roughly 3%, as opposed 

to a competing loan from the Bank of the Internet (―B of I‖) at 6.75%. Morelli, however,

 

346 JX 239.0001.

347 Tr. 724 (Fearon).

348 Id. at 723-24.

349 Id. at 1323 (Horne); JX 289 (Sept. 2012 PPM). The September 2012 PPM, like 

the June 2012 PPM, disclosed the Stockholders Agreement. Id. at .0017-.0018.
106

was unable or unwilling to execute a personal guarantee, so the Wells Fargo deal was not 

pursued.350

Notwithstanding the Company‘s financial challenges, Optimis again held the DSC

sometime in mid-August.351 Waite again participated in the event.352 Morelli appears to 

accuse Defendants of sabotaging the American Lung Association‘s (―ALA‖) sponsorship

of the 2012 event. The testimony on this issue is unclear, but it seems that the ALA, in 

late 2011, agreed to sponsor the 2012 DSC, or that Morelli believed they were sponsoring 

it.

353

 The ALA dropped their sponsorship, however, and Morelli blames that on 

misinformation allegedly provided to the ALA by Defendants.354 But, the relevant

testimony was all speculative. In fact, the documentary record contradicts Morelli‘s 

testimony. A May 4 email to Morelli from a representative of the ALA stated that the 

ALA never had reached a sponsorship agreement with Optimis and spelled out several 

irreconcilable differences, such as ALA limits on cross-promotions with a for-profit 

company and budgeting problems for the event.355 Morelli contemplated suing the 

 

350 Tr. 1207-09 (Olsen).

351 Id. at 730 (Fearon). 

352 Id. at 1031 (Waite). Horne and Atkins also swam in the event at least once, but it 

is not clear which years they participated. Id. at 1384 (Horne); id. at 1475-76 

(Atkins).

353 Id. at 348-49 (Morelli).

354 Id. at 350-52.

355 JX 1086; Tr. 500-02 (Morelli).
107

ALA.

356 Nevertheless, he testified that the 2012 DSC was a success, but claimed it lost 

money because of the lack of the ALA sponsorship.357 In any event, Plaintiffs failed to 

prove by a preponderance of the evidence that Defendants collectively or any of them 

individually caused the loss of that sponsorship.

J. The Geller Sexual Harassment Allegations and Subsequent Investigation

In a September 21, 2012 phone call with Waite, Geller told him about some 

inappropriate conduct by Morelli. Defendants‘ version of events is that, upon hearing 

that she might be reassigned to work in close proximity to Morelli, Geller became 

concerned, contacted Waite and told him about the inappropriate contact by Morelli, and 

that Waite then turned the matter over to Kreile in Human Resources with minimal 

involvement thereafter. Plaintiffs contend that Defendants bribed Geller and coaxed her 

to bring the sexual harassment complaint against Morelli and then Defendants 

manipulated the investigation. In the following Subsections, I find Defendants‘ version 

of the facts to be more accurate. 

1. Knowledge of Geller’s allegations and the call to Waite

Plaintiffs contend that several individuals knew of Geller‘s allegations before she 

made them to Waite in September. The implication is that the claims were stale—indeed, 

Plaintiffs contend they are false—and instead were used by Defendants as a pretext to 

oust Morelli. 

 

356 Brys Dep. 33-34.

357 Id. at 658-59. The DSC was never designed to be a money-making event, and 

there is no evidence that it ever broke even. 
108

At trial, Fearon testified that by mid-August 2012 she had heard from Gunn about 

an inappropriate sexual relationship between Geller and Morelli—though Fearon did not 

provide details of what she had heard.

358

 Geller testified that she had made remarks to 

Gunn ―in general passing‖ about Morelli‘s behavior.359 Gunn admitted that she learned 

of the allegations from Geller herself, but testified that did not occur until late September 

at a conference.360 Thus, Gunn denied telling Fearon about those allegations in or before

the middle of August.

361

 Levine also claims to have been aware of the allegations in midAugust, presumably because Fearon told him.362

 In Section I.F supra, I concluded that it 

would be appropriate to resolve doubts against Fearon and Levine. At the same time,

however, I consider Gunn‘s credibility rather questionable and note that she, like 

Rohlinger, did not testify at trial, had limited recall at key moments of her deposition, or 

was evasive in responding to Plaintiffs‘ questioning. I return to this matter infra, but, 

even if Fearon and Levine did know something about Geller‘s situation, there is no 

evidence that Waite knew or that Fearon or Levine told Waite themselves.

 

358 Id. at 729-30. 

359 Geller Dep. 56.

360 Gunn Dep. 50.

361 Id. at 91.

362 Tr. 1589-91. 
109

Two people were aware of Geller‘s allegations early on: Horne and Rohlinger. At

his deposition, Rohlinger claimed to have heard Horne‘s story and put it out of his mind. 

He could not recall discussing the matter with anyone else or telling anyone else.

Plaintiffs assert that Horne suddenly became much more friendly and helpful to 

Geller after learning of her allegations. After their conversation in February 2012, Horne 

did let Geller use his apartment rent-free while he was staying with Doherty. The record 

is unclear on how frequently Geller made use of the apartment. Plaintiffs also allege that 

Horne promised Geller a share of the profits of the Pacific Palisades clinic to induce her 

to make false accusations against Morelli. The basis for this proposition appears to be the 

interview notes of Nancy Solomon, the attorney who investigated the sexual harassment 

claims. According to those notes, Geller told Solomon that Horne discussed a proposed 

salary change with Geller in March or April 2012. Specifically, Horne mentioned a 

reduction in salary in exchange for a percentage of the profits from the Pacific Palisades

clinic. I note, however, that that clinic had never had profits. Apparently this change was 

never implemented.363 

Based on this evidence, I find unpersuasive Plaintiffs‘ suggestion that Horne 

bribed Geller to bring false sexual harassment claims against Morelli in September 2012. 

As to the apartment, Plaintiffs have not proven any link between Horne allowing Geller 

to use his apartment beginning in February and Geller telling Waite about Morelli‘s 

allegedly inappropriate conduct in September. Plaintiffs have not shown that Horne 

 

363 JX 54.0005.
110

encouraged Geller to make the complaints or that Horne asked anything of Geller for 

using his apartment.364

2. Geller’s version of events

I carefully reviewed Geller‘s video deposition with respect to the chain of events 

that led to the October 20, 2012 board meeting. I find that account persuasive, consistent 

with the other evidence, and credible.

Geller began providing physical therapy services to Morelli in late 2010. Geller 

described the incidents involving oral sex as occurring at nighttime in Morelli‘s officebedroom. According to her, ―[Morelli] would generally be at night naked already 

because he had just [sic] a massage, and then he would ask me to work on him after the 

massage, so he would still be naked.‖365 Though he would be wearing a sheet, Morelli 

often had a noticeable erection. Morelli would motion or otherwise suggest to her that he 

wanted oral sex. On some instances, Geller would initiate because she ―could tell that he 

was in that kind of mood‖ and it ―was easier to initiate and get it over with than to try and 

reject it and go through a whole world of trouble.‖366 According to Geller, these 

incidents ended once she left the Upper Bubble and began working in the Pacific 

Palisades clinic. The clinic opened in October or November of 2011 and she was there 

 

364 Horne also had given another employee, Jessica Eastman, a key to his apartment 

so that she could ―shower in the morning‖ after working out and ―[wouldn‘t] have 

to shower at Alan‘s houses.‖ Eastman Dep. 48.

365 Geller Dep. 26.

366 Id.
111

increasingly from that time onwards. By early 2012, Geller was spending almost all of 

her time at the clinic. The incidents of oral sex apparently began in October 2011, with 

only physical touching before that.367 According to Geller, she acquiesced to Morelli‘s 

fondling of her and his requests for oral sex because if she did not, he would ostracize her 

socially or threaten her and her husband‘s jobs.368

Morelli allegedly also made advances on Geller at the February 2012 Conference, 

as she described in her conversation with Horne, recounted supra. The incidents with 

Morelli had stopped entirely by summer 2012, if not somewhat sooner. In the September 

21 phone conversation with Waite, Geller said that she had heard Morelli was going to 

hire a new physical therapist for the Pacific Palisades clinic and that this might result in 

Geller returning to the Upper Bubble. Geller testified: ―I was afraid that . . . I‘d be forced 

to be back at the house and be forced to be subjected to the inappropriate touching and 

sexual manner that I did not want. And I couldn‘t stand to be put back in that situation 

again.‖369 This explanation for Geller‘s telling Waite about her concerns regarding the 

interaction between her and Morelli is consistent with Solomon‘s notes of her interviews

 

367 Id. at 126.

368 Id. at 104-05.

369 Id. at 63. 
112

with Geller.

370

 It also is consistent with Waite‘s testimony regarding his initial phone 

conversation with Geller.

371

Consistent with how others have described Waite‘s management style, he told 

Geller that the she would be okay and that everything would be alright.372 That first 

substantive call happened on the morning of September 21, a Friday. Waite promptly

reported the matter to Kreile.

373

 Kreile contacted the Company‘s insurer, Professional 

Liability Insurance Services, Inc. (―PLIS‖), the same day.

374

 

3. The investigation

Plaintiffs allege that Defendants manipulated the investigation. But, the evidence

does not support that allegation. Plaintiffs also criticize Waite for not reporting Geller‘s

claims to the Board. The record strongly suggests, however, that it would have been 

futile for Waite to do that. After Morelli was terminated, he fired every director he could 

that voted to remove him, installed a new board, re-appointed himself CEO, and began 

investigating Defendants and litigating against them. 

After receiving the claim, PLIS apparently contacted Leonid Zilberman, a 

California employment lawyer with sixteen years of experience working for the firm 

 

370 JX 54.0001, .0005.

371 Tr. 1066-67.

372 Geller Dep. 63.

373 Tr. 1069-70 (Waite); JX 285.0001 (9/21/12 email from Waite to Kreile 

referencing the ―potentially volatile HR issue‖ just discussed by telephone).

374 Kreile Dep. 56-61; JX 282 (―Notification of Claim or Potential Claim‖).
113

Wilson Turner Kosmo LLP.

375

 He previously had handled an entirely unrelated dispute 

involving two Rancho employees; Kreile was Zilberman‘s contact for that matter as well. 

Zilberman first contacted Kreile on September 24, 2012, a Monday and the first business 

day after Kreile filed a notice of potential claim with PLIS.376 Zilberman testified at his 

deposition that, in the case of allegations of harassment against senior management, and 

the CEO in particular, the ―three things that are the most important are that the 

investigation be done promptly, that the investigation be thorough and that the 

investigation be impartial.‖377 After concluding that no one internally at Optimis could 

run the investigation without being accused of bias, Zilberman hired an outside 

investigator: Nancy Solomon.378 This was the beginning of the ―Geller Investigation.‖

There is no evidence that Defendants, or anyone at the Company, had any 

involvement in Solomon‘s retention. In fact, her retention agreement is with the Wilson 

Kosmo Turner law firm, not with Optimis.379 Solomon interviewed nine employees, 

some more than once. The result of that investigation was sixty-seven pages of singlespaced typed notes and a thirty-four page report listing her factual findings, including 

credibility determinations. Morelli admitted that Geller provided oral sex to him, but 

 

375 Zilberman Dep. 9-10.

376 JX 305. 

377 Zilberman Dep. 24-25.

378 Id. at 25. Zilberman‘s concern about bias related to the fact that the other 

employees all reported to Morelli as CEO and thus might fear losing their jobs.

379 Id. at 30-33; JX 291 (―Engagement Agreement‖). 
114

contended that she initiated it.380 Solomon did not find Morelli to be a credible 

witness.381 Similarly, I did not find credible many of Morelli‘s statements regarding 

Geller. 

It is not necessary to detail every aspect of the investigation. Rather, I note several

salient points. Optimis has a specific sexual harassment training program for supervisors. 

Morelli received a ―certificate of completion,‖ but he never completed the training. He 

had his assistant, Eastman, complete it for him.382 Unburdened by such training, Morelli 

testified that it ―did not occur to me at that time‖ that receiving oral sex from a 

subordinate in his bedroom-office, while she was performing work duties, created a risk 

of sexual harassment.383 

Morelli‘s behavior during the investigation also casts doubt on his credibility. On 

or about October 3, 2012, Morelli met for about an hour and a half in his bedroom-office 

with the Company‘s General Counsel, Brys, and CFO, Horne. According to Brys, 

 

380 Tr. 404 (Morelli: denying he ever initiated the sex and testifying that, ―It wasn‘t 

ever different. It was Tina Geller who initiated it.‖); Solomon Dep. 40.

381 Solomon Dep. 46-48; id. at 47 (―It seems more he was trying to build an 

explanation for the things as the interview went on . . . .‖); JX 401.0032 

[hereinafter ―Solomon Report‖]. There is a dispute among the parties as to the 

usage of the Solomon Report. I do not rely on it for the truth of the matter 

asserted, but I conclude that the report is not hearsay when used for another 

purpose, such as showing the apparent thoroughness of the investigation or the 

statements upon which the Board relied when it met on October 20, 2012. See 

801(c). Therefore, I overrule Plaintiffs‘ objection to the use of the Solomon 

Report.

382 Tr. 485-87 (Morelli); Eastman Dep. 50-53.

383 Tr. 476. 
115

Morelli ―told me to call Ms. Geller and tell her to withdraw the claim‖ because it would 

be expensive and bad for the Company.384 Horne also recalls Morelli asking them to 

convince Geller to drop her claims.385 Brys and Horne told Zilberman about this meeting 

and Zilberman advised them that it would not serve the Company well if they pressured 

Geller to drop the claim.386

In addition, Morelli met with Solomon on October 10 in person and then spoke 

with her by phone on October 17. According to Morelli, Solomon was being rushed to 

complete her report, and although he had lots of evidence to support his claims that he 

wanted to provide her, she did not provide him sufficient time to do so. This is contrary 

to the overwhelming weight of the evidence. The only witness who asserts that Solomon 

was rushed is Morelli.387 I find Morelli‘s testimony on this point unreliable, in part 

because, in my view, it reflects his mistaken perception that Solomon was part of, or 

actively being manipulated by, a conspiracy out to get him, which included at least 

seventeen people.388 Nor did Morelli ever provide to Solomon any of the additional

 

384 Brys Dep. 20. 

385 Tr. 1348-51 (Horne).

386 Zilberman Dep. 60-62.

387 Tr. 406-10.

388 Id. at 605-06. This conspiratorial mindset surfaced repeatedly throughout 

Morelli‘s testimony. E.g., id. at 515-16 (―I mean, it was a bittersweet situation emailing Nancy Kreile, who was working closely with John Waite, who I suspected 

might be involved. I mean, even e-mailing the general counsel was, in hindsight, a 

mistake, because she just took my e-mails and immediately forwarded them to 

John Waite, as Nancy Kreile did.‖); id. at 613 (―So was he hired—was Zilberman 
116

exonerating information he allegedly had. Moreover, Solomon repeatedly denied being 

rushed, and Zilberman did not perceive her to be rushed.389

As part of his defensive strategy, Morelli also filed his own sexual harassment 

complaint against Geller on October 17.

390 Indeed, he anticipated making that claim as 

early as October 11, one day after his first meeting with Solomon.391 I conclude that this 

counter-complaint was part of Morelli‘s overall defensive strategy with the objective of 

maintaining his position as Optimis‘ CEO, because he thought ―it was the best hope for 

the company for [him] to remain CEO.‖392 

Plaintiffs also contend that Horne‘s interviews with Solomon evidence a 

conspiracy. At his deposition in May and July 2014, Horne testified that he and Morelli 

 

hired before PLIS was notified? I don‘t know that we know that conclusively. It 

was a very, very unusual set of circumstances that led to Mr. Zilberman and Ms. 

Solomon either appointing themselves or being appointed by the insurance 

company.‖). 

389 Solomon Dep. 23-24; JX 402 (sworn declaration of Solomon stating that she was 

not rushed and that Morelli‘s claim to the contrary was a fabrication); Zilberman 

Dep. 64-66, 80-81, 92-96. Plaintiffs‘ counsel also attempted to ―prove‖ Solomon 

was rushed or manipulated in a lengthy and contentious portion of her deposition 

that reviewed virtually every one of a large number of typos and purported

grammatical errors in her report. This questioning does show Solomon could use 

a proofreader and would benefit from reading over her work more carefully. It 

does not negate the thoroughness of the Solomon Report, however. The findings 

of that report are consistent with the testimony of everyone except Morelli.

390 JX 376.

391 JX 337 (10/12/12 email from Morelli to Kreile referencing a conversation with 

Brys the previous day).

392 Tr. 479.
117

had a ―great working relationship‖ and that he considered Morelli ―a good friend.‖393 

But, Horne never revealed to Morelli that since 2010 Horne had been involved with 

Morelli‘s former wife. In addition, Plaintiffs point out that Horne, referring to Morelli,

told Solomon that ―[P]ersonally I hate the mother f-cker‖394 and that he asked Solomon

not to include the fact that he was involved with Doherty, and she complied.395 Plaintiffs 

argue that this and other evidence shows that Horne is a liar and has a motive to 

undermine Morelli.

I agree that Horne‘s contradictory testimony is troubling, but I do not see the 

situation to be as clear cut as Plaintiffs. Solomon‘s interview notes also reveal that Horne 

stated that he ―would never [have] assumed Alan would have been capable of anything 

[Geller had] accused him of.‖396 At trial, Horne attributed his stated hatred of Morelli to 

his belief that the sexual harassment allegations were hurting the Company: ―We spent 

six years building a company, and I saw it all crumbling, and I was incredibly upset at 

Mr. Morelli at that time.‖397 Solomon ―did not feel in any way that [Horne] was trying to 

bury Mr. Morelli.‖398 And, by telling Solomon about his relationship with Doherty, 

 

393 Id. at 1445 (Horne testifying about his deposition statements).

394 JX 54.0024; Tr. 1446 (Horne).

395 Tr. 1455-56 (Horne).

396 JX 54.0020; Tr. 1448 (Horne).

397 Tr. 1447 (Horne). 

398 Solomon Dep. 50.
118

Horne at least revealed to her a bias he may have had. Taking account of all the evidence 

regarding Horne, I do not consider it appropriate to disregard all of his testimony as not 

credible, but I agree that it is important to examine anything he said with a degree of 

skepticism.

Plaintiffs also contend the investigation was tainted because Geller communicated 

with Defendants several times during the investigation, despite being told by Solomon

not to talk to anyone about it. Although this allegedly shows that Geller was in cahoots 

with Defendants, I do not find these contacts to be material. 

Geller called Waite—the ranking officer at the Company aside from Morelli and 

the person to whom Geller first reported the allegations in September 2012—numerous 

times during the course of the investigation. Geller‘s phone records indicate that she and

Waite had thirty-seven phone calls totaling more than three hours during the relevant 

period.

399

 In one of his shakiest moments on the stand, Waite testified that he only 

recalled two phone calls.400 Geller testified that she repeatedly called Waite and others 

because she was looking for reassurance. She was ―in a highly emotional state and really 

scared for [her] life‖ because she was afraid of what Morelli was going to do to her.

401

 

 

399 JX 278.

400 Tr. 1097-108. Waite also did not disclose any calls beyond those two in his 

interrogatory responses.

401 Geller Dep. 307. This testimony, which I find credible, is consistent with 

Solomon‘s notes, which are replete with statements that Geller was afraid of 

Morelli. JX 54.0004 (― ̳john [Waite] promised this would be quiet that we 

wouldn‘t be approaching Alan. Otherwise I would have never met with you. So if 
119

The phone records show that many of the calls were only one or two minutes long, 

suggesting missed calls or voicemails, which I exclude, and the overwhelming majority 

were from Geller to Waite. There were nine calls of five minutes or longer between 

September 19 and October 2.402 On September 24, the next business day after Geller told 

Waite about Morelli‘s inappropriate touching, Geller had two calls with Waite each in 

excess of thirty minutes. On September 25, Geller had a five-minute call and a sixminute call with Waite. Geller had her first interview with Solomon on September 27 

and talked with Waite for thirteen minutes that day.

This pattern of phone calls comports with Geller being concerned about what was 

going to happen to her. During the same time period, she also called Horne, who 

testified: ―She was scared of Alan. She was scared of retaliation. She was scared about 

her job. She was scared about Mo‘s [her husband‘s] job.‖403 

Plaintiffs emphasize that Geller talked to Solomon, but did not tell her everything, 

and then scheduled another interview to tell her the entire story. After her first interview, 

 

this comes out and he finds out and I get screwed in all this...‘ she starts to cry 

again.‖); id. at .0005 (― ̳I don‘t know what he‘ll do but I know he‘ll go ape sh-t‘‖); 

id. at .0006 (―she is quiet and then whispers  ̳He can‘t find out.‘‖). Numerous 

additional examples follow in the next nine pages of notes. D.R.E. 801(d)(1)(B); 

D.R.E. 803(2)-(3); D.R.E. 807.

402 JX 278. One of the calls, on October 1, is seven minutes long and appears to be 

call-waiting. I excluded that call from my tabulations.

403 Tr. 1346. This is consistent with Geller‘s testimony. Geller Dep. 100-01.
120

Geller, as noted, talked to several people,404 including Gunn, who encouraged her to tell 

the whole story, whatever it may be.405 Geller soon decided to schedule a second 

interview with Solomon to tell her everything. Plaintiffs contend that this shows that 

Waite and Horne, among others, either convinced Geller to change her story or were 

telling Geller what to say.

Plaintiffs‘ argument is unpersuasive. Solomon‘s notes indicate that during the first 

interview, Geller stated that Morelli touched her inappropriately and requested that Geller 

provide physical therapy while he was naked under a sheet with a visible erection. 

During the second interview, Geller added more detail and disclosed the oral sex.406 

Accordingly, it is not true that Geller did an about face between the first and second 

 

404 There were only three calls of any significance with Waite between the first and 

second interviews: the thirteen-minute call on September 27 and calls of sixteen 

and five minutes on October 1. JX 278.

405 Gunn Dep. 50-52, 95-96; Geller Dep. 316-17.

406 JX 54. Solomon‘s interview notes are not hearsay when used for this purpose. 

Hearsay is ―a statement, other than one made by the declarant while testifying at 

the trial or hearing, offered in evidence to prove the truth of the matter asserted.‖ 

D.R.E. 801(c). Here, I rely on the notes only because they indicate what Geller 

said to Solomon. Delaware Rule of Evidence 801(c) tracks Federal Rule of 

Evidence 801(c). In the comments to Federal Rule of Evidence 801, the advisory 

committee noted: ―If the significance of an offered statement lies solely in the fact 

that it was made, no issue is raised as to the truth of anything asserted, and the 

statement is not hearsay.‖ F.R.E. 801 cmt. c (1972). To the extent there is a 

double hearsay objection based on the fact that the interview notes represent an 

out of court statement by Solomon that Geller made the statements Solomon 

recorded, I hold that the notes qualify under the exception to the hearsay rules for 

records of regularly conducted activity. See D.R.E. 803(c); Solomon Dep. 14-27, 

67-68.
121

interviews on September 27 and October 2 and told two different stories or that the two 

interviews are inconsistent on key points.

407

 

At her deposition, Geller repeatedly denied that anyone encouraged her to bring 

the allegations or told her what to say to Solomon.408 Overall, Geller‘s story is consistent 

and cohesive: she became concerned after hearing that a new therapist would be going to 

the Pacific Palisades clinic, meaning she could be working back in the Upper Bubble 

with Morelli; in the course of discussing that concern with Waite, she told him something 

about Morelli‘s prior behavior; Waite notified Kreile in HR, who began the investigative 

process; Geller was interviewed once, was nervous, and presumably did not tell Solomon 

the facts about which she was most embarrassed; because Geller remained afraid that 

Morelli would find out and punish her, she called others at the Company to seek solace, 

and then, after talking to Gunn, she resolved to tell Solomon the rest of the story, which 

she did.

 

407 Solomon testified that it is not unusual in sexual harassment investigations for the 

witnesses to be reluctant during interviews. Solomon Dep. 42. 

408 Geller Dep. 298 (―Mr. Waite or Mr. Horne or Mr. Smith or Mr. Atkins never, ever 

had me—hinted to me that I should bring allegations against Alan, ever.‖); id. at 

310 (―It is my testimony that Mr. Waite never gave me any incentive at all to ever 

file a harassment case or to tell Nancy [Solomon] anything that he wanted me to 

tell her.‖); id. at 314 (―I didn‘t know what was going on. Nobody asked me to file 

a harassment case. Nobody asked me to tell Nancy Solomon anything. Nobody 

asked me to do anything. I just want to know what is going to happen to me. I 

didn‘t give a sh-t about what was happening to the company at that point. It 

wasn‘t my concern.‖).
122

Plaintiffs, at trial, essentially attempted to prove the sexual harassment allegations 

were false or, at least, that the sexual contact between Geller and Morelli was consensual

by portraying Geller as promiscuous and putting on the stand David Hwang, with whom 

she had an affair while working at Optimis.

409

 Hwang offered numerous hearsay 

statements purportedly made by Geller that Plaintiffs have attempted to introduce into 

evidence by arguing that they were statements against interest. I need not reach

Defendants‘ hearsay objections to these statements, however, because I do not find 

credible Hwang‘s testimony with respect to Geller and Morelli. Hwang said that, when 

he heard about the sexual harassment claim, he ―thought it was probably made up‖ and 

that ―it was something that [Geller] was doing either to get money or to get what she 

wants.‖410 Hwang reached these conclusions without knowing that Geller and Morelli

admittedly had engaged in sexual activity.411 Hwang testified that he knew Geller‘s 

complaint was false, even before he began investigating it as a member of one of the

special investigative committees the Company formed after the abortive attempt to oust 

Morelli.

412

 Thus, I find Hwang too biased against Geller to be credible on this issue.

413

 

409 This affair occurred from March 2011 to October 2011. Tr. 162 (Hwang).

410 Id. at 189. 

411 Id. at 251-52. 

412 Id. at 262. Hwang‘s comments also support Defendants‘ contention that the 

Company‘s investigative committees were looking for facts to support their own 

pre-formed conclusions.

413 Hwang also filed with HR a vaguely worded complaint against Geller shortly after 

Morelli‘s ouster. JX 544 (11/5/12 email from Hwang to Kreile). Hwang testified 
123

K. Contingency Planning by the Optimis Executives

Plaintiffs make much of the fact that certain Optimis executives were engaging in 

contingency planning in case Morelli was terminated as a result of the sexual harassment

investigation. Considering the seriousness of the allegations and Zilberman‘s emphasis 

on the need to move quickly, I consider Defendants‘ actions to be reasonable.

Zilberman and Solomon were not the only attorneys involved with the sexual 

harassment claims at this time. Following a conversation in which Zilberman indicated 

that there could be a situation where PLIS‘s interests and the Company‘s interests 

deviate, Brys, the Company‘s General Counsel, retained Tom Kaufman of the law firm 

Sheppard Mullin to serve as outside counsel for Optimis. ―He was there to provide a 

resource to the board of directors, to provide his recommendations and opinions to the 

extent it was requested, whether or not Mr. Zilberman was capable of doing so, based on 

any perceived conflict of interest on the part of Mr. Zilberman.‖414 According to Brys, 

Kaufman‘s retention was not a reflection of dissatisfaction with Zilberman and ―to the 

extent [she] ever sought advice from both counsel, they agreed.‖415

 

that he did not mention Geller by name because he did not like to think about her, 

then or now. Tr. 241.

414 Brys Dep. 103. Because Brys is in separate litigation against the Company, she 

has a potential bias, but having reviewed her deposition, I found her credible.

415 Id. at 104.
124

Throughout the process, Waite and Brys received periodic updates from 

Zilberman.

416

 Horne received only one update. That occurred during the conversation in 

which Horne and Brys discussed with Zilberman the meeting in which Morelli asked 

Horne and Brys to convince Geller to withdraw the complaint.

Entering the week of October 14-20, the chronology becomes less clear. 

Zilberman had advised Waite that a board meeting should be held promptly to discuss the 

investigation and Solomon‘s report, which would be ready later in the week.417 Waite 

began setting up a board meeting, which eventually was scheduled for Saturday, October 

20 (the ―October 20 Meeting‖). Zilberman did not think that was too soon.418 

Two things needed to be done in preparation for the special meeting of the Board 

on October 20. The first involved the Stockholders Agreement. The second was 

dissemination of a notice for a special meeting.

Horne attended a meeting at some point before October 20 in which Waite or Brys 

said that, based on the outcome of the investigation, Morelli may need to be fired. Horne 

then pointed out that the Stockholders Agreement probably would need to be amended. 

He reasoned that: ―If the board decided that Mr. Morelli needed to be removed as CEO, 

 

416 Tr. 1072 (Waite). 

417 Id. at 1073-75 (Waite).

418 Zilberman Dep. 90-91. Brys testified similarly: ―To my knowledge, at the advice 

of Mr. Zilberman and Mr. Kaufman, who were acting as employment counsel for 

the company, they recommended having the board of directors meeting based on a 

very sensitive report as soon as possible.‖ Brys Dep. 166.
125

then if he had the ability to just turn around, appoint new board members and reappoint 

himself as CEO, I think that would go against the spirit of what needed to be done.‖419 

This led to the development of Amendment No. 2 to the Stockholders Agreement, but 

Horne had no further involvement with that amendment.

Amendment No. 2 appears to have been drafted by Waite‘s personal counsel.420 

Waite understood Amendment No. 2 to require a two-step process, in that he needed to

have it approved by the vote of the holders of a majority of Optimis‘ stock and have the 

Board approve the amendment. According to Waite, in the days before the October 20 

Meeting, he contacted other stockholders in the following manner: 

I was very careful not to describe to them that this was 

anything related to Mr. Morelli‘s sexual harassment 

investigation. I simply told them that, as a stockholder, I was 

interested in changing the provisions of the stockholders‘ 

agreement to put the control of . . . who‘s elected to the board 

in the hands of the . . . broader shareholder base.421

This approach does not appear to satisfy Delaware law, but it is largely moot, because 

Amendment No. 2 was vacated on or about March 21, 2013, in connection with the 225 

Action.

A notice of the special meeting also had to be prepared. At this point, another 

attorney, Allen Sussman, becomes important. Sussman is a partner at the law firm of 

 

419 Tr. 1357-58; Brys Dep. 157.

420 Brys Dep. 150-52.

421 Tr. 1084; JX 411.
126

Loeb & Loeb in Los Angeles and practices corporate and securities law from a 

transactional standpoint. He is a friend of Morelli and, at the time of the October 20 

Meeting, he had represented Optimis for some time, was serving as Optimis‘ corporate 

secretary, and previously had represented Morelli personally. Horne called Sussman on 

October 7 and told him about the ongoing investigation.422 Sussman testified that he told 

Horne that the Company was his client, but that he ―was not comfortable acting as the 

company‘s counsel with respect to this matter because of [his] personal relationship with 

Alan.‖423 Sussman allegedly made this clear to Waite and Brys as well.424 Nevertheless, 

Sussman agreed to continue acting as corporate secretary. I find as a fact that at least 

Waite and Brys were confused about Sussman‘s role and attempted to rely on him to a 

limited extent for legal advice, which resulted in a faulty notice for the special meeting. 

The insufficiency of the notice was one of the reasons Morelli succeeded in settling the 

225 Action on favorable terms.425

Brys and Waite, the two employees involved in preparing for the October 20 

Meeting, believed Sussman could provide them some legal advice. According to Brys,

 

422 Tr. 810-12 (Sussman).

423 Id. at 813.

424 Id. at 815-16.

425 JX 454 (special meeting notice); JX 684 (Settlement of 225 Action). This problem 

might have been avoided if Sussman had advised the Company in writing about 

the scope of his representation. See Cal. R. of Prof‘l Conduct R. 3-310. Sussman 

admitted that he did not inform Waite, Brys, Horne, or anyone else in writing of 

the conflict or the scope of his representation. Sussman denied that he was 

providing legal advice. Tr. 857-59.
127

Sussman advised her that ―he could review documents and advise as to whether or not the 

documents that were presented complied with the Delaware law and the company 

documents already to date,‖ but that ―any actions taken subsequently that would be 

involved in the termination of Mr. Morelli, he did not feel like he could render advice 

on.‖426 Waite initially understood that Sussman was providing legal advice to the 

Company, but during the week before the meeting he told Waite to get another 

attorney.427 As discussed below, Waite did hire another attorney and explained in a 

November 4, 2012 email that the attorney was hired ―specifically because Allen Sussman 

informed Laura [Brys] and I that he would not be able to provide any advice to the 

company because of his conflict with his friendship with Morelli.‖428

It is unclear from the contemporaneous documents when Waite concluded that 

Sussman was conflicted, but the emails comport with Brys‘s understanding that Sussman 

could provide limited legal advice. On October 15, Brys sent emails to Sussman 

attaching for his review the Bylaws, the existing Stockholders Agreement, Amendment 

No. 1, and the draft notice of the special meeting. The communications are labeled 

―confidential attorney-client communication and attorney work product‖ and specifically 

ask Sussman if he has any revisions or questions.429 This evidence undermines Plaintiffs‘ 

 

426 Brys Dep. 181; see also id. at 115-16. 

427 Tr. 1076 (Waite). 

428 JX 539.0001.

429 JX 362.
128

position and Sussman‘s testimony that Waite and Brys understood Sussman was 

completely conflicted and unable to help them prepare for the meeting.430 Plaintiffs have 

pointed to no evidence that Sussman attempted to dispel Brys‘s belief that he would 

review the corporate documents she was sending him. In the end, Waite sent out a Notice 

of a Special Meeting of the Board of Directors on October 18 scheduling the October 20

Meeting.

431

 That Notice lacked an agenda of the topics to be covered at the meeting and, 

therefore, was defective.

432

Brys, who was pregnant, was admitted to the hospital by the evening of October 

18. That same day, Waite ―literally pulled David Robbins‘ name out of the newspaper,‖ 

called him at his firm at the time, Bingham McCutchen, and begged him to represent the 

Company. Robbins apparently agreed to get the Company through the October 20 

 

430 See also JX 358 (10/16/12 email from Brys to Sussman attaching Certificate of 

Incorporation); JX 365 (10/17/12 email from Waite to Sussman attaching 

Amendment No. 2 to the Stockholders Agreement and asking Sussman to ―review 

and provide me with any feedback about whether you see any issues‖).

431 JX 392 (10/18/12 email from Waite to Board).

432 After listening to Sussman‘s testimony at trial, Waite implausibly testified that he 

specifically asked Sussman whether he needed an agenda for the meeting notice 

and that Sussman said ―I checked Delaware law. It‘s not required to have an 

agenda.‖ Tr. 1076. Based on all the evidence, I have disregarded this aspect of 

Waite‘s testimony as unreliable. See id. at 1077. 
129

Meeting.433 It appears from the record that Robbins‘s role was to attend the October 20 

Meeting and represent a Special Committee of the Board (which did not yet exist).434

L. The October 20, 2012 Meeting

The October 20 Meeting bears few of the hallmarks of good governance. Brys, 

the General Counsel, was still in the hospital and did not attend the meeting. Sussman, 

the conflicted outside attorney, attended and acted as Corporate Secretary. Zilberman 

participated and presented Solomon‘s report, among other things. Kaufman was present, 

representing the Company. Robbins also attended the meeting in the role described 

above.

The Board then consisted of nine directors: Waite, Atkins, Smith, Ashraf 

Abdelhamid, Morelli, Brian Wing, Maureen Fahey, Terrence O‘Keefe, and Godges. The 

latter five individuals were Morelli appointees. The Director Defendants served, in part,

by virtue of their own appointment rights under the Stockholders Agreement. 

Abdelhamid also had a contractual right to serve on the Board as a result of Optimis‘

acquisition of his physical therapy practice. 

The October 20 Meeting was held at the offices of Sussman‘s firm. He arrived 

around 11:30 am. Eight directors attended in person; O‘Keefe participated by telephone. 

 

433 Id. at 1077-78 (Waite).

434 JX 398. Robbins‘s October 18 engagement letter is addressed to Godges as the 

leader of the Special Committee. The letter was signed, however, by John Waite 

on October 31. It states that Robbins would represent ―the Special Committee 

only‖ for the purpose of assisting in the ―evaluation, review and possible 

termination of Alan Morelli.‖ Id. at .0001.
130

Robbins and Kaufman were present from the beginning, as was Tim Miller, Waite‘s 

personal attorney.435 The full board had assembled, with Waite leading the meeting, and 

it was convened once Morelli arrived.436 Although he did not come with his own 

counsel, Morelli immediately denied knowing what the meeting was about because there 

was no agenda with the notice. He then moved to adjourn the meeting so that he could 

get his personal counsel. That motion failed by a divided vote.

437

 I find that Morelli, a 

former corporate litigation partner, knew the purpose of the meeting in advance,

438 and

took advantage of the defective notice to create a defense for himself in future litigation. 

A series of initial objections were made. Fahey, who apparently had served on 

―Fortune 25‖ corporate boards before, complained that the Board should have been 

contacted earlier and that an independent committee should have investigated the 

 

435 Tr. 817-20 (Sussman). 

436 Id. at 417 (Morelli); id. at 1079-80 (Waite).

437 Id. at 416-18 (Morelli); id. at 821-23 (Sussman); id. at 1080 (Waite).

438 Morelli‘s actions in the days immediately preceding the October 20 Meeting, 

including the fact that he had been interviewed for several hours by Solomon,

show that he knew about the meeting and its purpose. In an email to Brys the day 

before the meeting notice was sent, Morelli wrote: ―To hold a Board of Directors 

meeting this Saturday would preclude me from seeking to defend the false claims 

that Tina Geller has alleged against me.‖ JX 372.0001. Similarly, on October 17, 

Morelli emailed Brian Wing asking to speak with him and bring him ―up to speed 

on some developments.‖ JX 403.0002. The next day, Morelli emailed Wing:

―Thank you again for catching up with me, Brian. I would greatly appreciate any 

assistance you are willing to provide.‖ Morelli then provided Wing with the 

phone numbers or contact information for all the other directors, except Atkins. 

Morelli concluded his email: ―Also, don‘t think for one minute that this power 

struggle is going to prevent us from doing our swim to Africa next summer. . . .‖ 

JX 403.0001.
131

complaint.439 Wing mistakenly objected that the investigator was not independent 

because she was hired by Waite.

440 The Board then created an ad hoc committee, 

comprised of everyone except Morelli, to discuss the Solomon Report and the sexual 

harassment allegations in a different room (the ―Ad Hoc Committee‖).

441

According to Morelli, before the Board entered the Ad Hoc Committee, he tried to 

circulate a written consent ―to replace members of the board pursuant to the stockholders

agreement.‖442 This testimony is incorrect. First, it is inconsistent with Morelli‘s 

repeated claim that he had no idea why the meeting was occurring.443 Giving Morelli the 

benefit of the doubt, he may have brought the written consents as a fall-back position, if 

his lack of notice ploy failed. In that case, he waited too long to raise the consents, 

because the record indicates that no one understood him to be talking about written 

consents before the Ad Hoc Committee convened.

444

 

 

439 Tr. 823-24 (Sussman); JX 431.0001.

440 Tr. 824 (Sussman); JX 431.0001.

441 Tr. 420-21 (Morelli); id. at 825-29 (Sussman); id. at 1080 (Waite) (―And this 

whole process was led on the advice of Lonny Zilberman of how this should be 

run. He stated he told me that Mr. Morelli was not allowed to be in the 

subcommittee.‖). This Ad Hoc Committee appears to correspond to the special 

committee that Robbins undertook to represent.

442 Id. at 420.

443 That Morelli made that claim is borne out by the testimony of the Director 

Defendants. Id. at 1080 (Waite); id. at 1480 (Atkins).

444 Sussman testified that Morelli was saying something about the Stockholders

Agreement as the Board broke to convene the Ad Hoc Committee meeting, but 

Sussman ―didn‘t have the details of exactly what he was saying.‖ Id. at 827. 
132

 With Morelli excluded, the Ad Hoc Committee began discussing the results of 

the sexual harassment investigation. Zilberman led the discussion and reviewed the 

Solomon Report with the Committee. He described his job as being to ―report and 

summarize the investigation, the process, and the results or findings and then give my 

advice.‖445 He summarized the investigation and the findings, provided the Committee 

members with a copy of the Solomon Report and the Solomon Declaration, and provided 

three recommendations to the Board: (1) move Optimis‘ business out of Morelli‘s house; 

(2) terminate Morelli as CEO; and (3) aggressively and quickly negotiate a settlement 

with Geller.446 Zilberman recommended that Morelli be fired because, in his professional 

opinion, based on Morelli‘s admissions and the findings of the investigator, ―nothing 

short of termination was the appropriate remedial measure.‖447 Zilberman stated that not

terminating Morelli seriously could compromise the Company‘s ability to defend a 

 

Also, Sussman‘s contemporaneous notes, which are fairly detailed, lack any 

indication that Morelli attempted to circulate a written consent during the first part 

of the Board meeting or that Morelli even said anything about the Stockholders 

Agreement. JX 431.0001-.0002. Consistent with the fact that Morelli later

attempted to circulate a written consent, Sussman‘s notes reflect that effort, id. at 

.0006, and are consistent with the rest of the testimony, as discussed infra.

445 Zilberman Dep. 106. 

446 Id. at 109-13.

447 Id. at 113. 
133

subsequent sexual harassment suit by Geller.

448

 After providing this advice, Zilberman 

gave his number to the Ad Hoc Committee and left the meeting.

Zilberman‘s account is consistent with Sussman‘s recollection and notes and the 

testimony of Waite, Smith, and Atkins.

449

 Both Smith and Waite recalled that either 

Zilberman or Robbins made a comment to the effect that this was either ―the most clearcut case for termination of a CEO that I‘ve seen in my entire career‖450 or ―the worst case 

of sexual harassment I‘ve seen.‖

451

 

Under Robbins‘s guidance, the Ad Hoc Committee then debated the presentation 

by Zilberman.452 Kaufman‘s role in this process is unclear, but he apparently seconded 

Zilberman‘s advice.453 Wing attempted to defend Morelli and wanted to put him on a 

leave of absence, but Robbins advised that the Board basically had no choice but to fire 

Morelli.454 At one point, the Ad Hoc Committee also discussed Optimis‘ excessive 

expenses, which included massages, treadmills, landscaping, and a housekeeper at the 

 

448 Id. at 113-16. Zilberman also gave other real world examples of CEOs being 

terminated for sexual misconduct. Id. at 117-18. 

449 Tr. 829-35 (Sussman); JX 431.0002-.0004; Tr. 1081-82 (Waite); id. at 1282-83 

(Smith); id. at 1481-83 (Atkins).

450 Tr. 1082 (Waite). Sussman‘s notes reference the same comment. Id. at 836 

(Sussman); JX 431.0005.

451 Tr. 1283 (Smith).

452 Id. at 836, 839 (Sussman). 

453 Id. at 1483 (Atkins). 

454 Id. at 836 (Sussman). 
134

Upper Bubble.455 Ultimately, the Committee passed a series of motions to: (1) appoint

Godges the chairman of the Committee (7-0-1, Wing abstained); (2) approve the 

engagement of Bingham McCutchen and hire Robbins (8-0); (3) recommend the full 

Board terminate Morelli (7-1, Wing abstained or opposed); and (4) appoint Waite as 

interim CEO with no additional compensation (8-0).456

The full Board then reconvened. Wing went downstairs to get Morelli and came 

back without him, because Morelli apparently was consulting with his lawyer. After 

waiting a few minutes, the Board reconvened. Waite then moved to approve Amendment 

No. 2. Although Wing objected to proceeding without Morelli, the Board proceeded and

approved the amendment 7-1-0, with Wing opposed and Morelli not present.457 Sussman 

understood Amendment No. 2 to strip Morelli of his ability to appoint a majority of the 

Board.458 The amendment also stripped the Director Defendants and Abdelhamid of their 

Board-appointment rights.459 Smith and Atkins understood that Amendment No. 2 was 

necessary so that Morelli could not undo the Board‘s actions and re-appoint himself, 

which would endanger the Company in a subsequent sexual harassment lawsuit.460

 

455 Id. at 837-38 (Sussman).

456 Id. at 840-42 (Sussman); JX 431.0005. 

457 Tr. 843-47 (Sussman). 

458 Id. at 846. 

459 Id. at 1085 (Waite).

460 Id. at 1283-85 (Smith); id. at 1483-84 (Atkins).
135

When he returned to the Board meeting, Morelli raised numerous objections and

attempted to circulate written consents to remove all of the Board members he had

appointed; Sussman, however, told him it was too late.461 Robbins then read portions of 

the Solomon Report aloud and the full Board voted to terminate Morelli, with Wing again 

not voting or voting against and Morelli not voting. A series of other pre-prepared 

motions were considered as well.

462

 

M. Morelli’s Shadow Board and the Section 225 Action

Soon after the meeting, Sussman met with Wing, Morelli‘s supporter on the 

Board, to fill in his (Sussman‘s) notes.463 Sussman also had frequent contacts with 

Morelli in the aftermath of the meeting. One of the more perplexing documents in the 

record, JX 432, is a draft of Sussman‘s contemporaneous notes being converted into a 

more formal document. On the second and third pages, the draft switches to Morelli 

writing in the first person. Either Sussman gave Morelli the October 20 Meeting notes 

and let him embellish them, or Sussman incorporated Morelli‘s first-person notes

wholesale.

Morelli rapidly moved to reassert control over the Company. Sometime shortly 

after the October 20 Meeting, Doherty told Morelli that she had been in a relationship 

 

461 Id. at 424-27 (Morelli); id. at 847-48 (Sussman); id. at 1086 (Waite); id. at 1287 

(Smith); id. at 1484 (Atkins); JX 431.0006 (―Alan handed out written consent and 

request for electing 5 directors.‖). 

462 Tr. 849-50 (Sussman).

463 Id. at 877. Interestingly, Sussman did not compare notes with anyone else.
136

with Horne.464 Morelli noticed a special meeting of the Board on October 23.465 Before 

that, Morelli removed Fahey, O‘Keefe, and Godges—all of whom voted against him—

and replaced them with Bert Camp, Larry O‘Shea, and Scott Schroeder. In a trial full of 

questionable testimony, Morelli astonishingly denied that he removed Fahey, O‘Keefe, 

and Godges because they voted to terminate him, but he offered no other explanation for

that action.

466

 Morelli‘s reconstituted Board met on October 25. At this meeting, Morelli 

―suggested that [the board] investigate this purported claim of sexual harassment, which 

made no sense, and then . . . investigate the circumstances surrounding this coup attempt 

five days earlier.‖467 Thereafter, a special committee was created that included Hwang

and others, who spent the next two years reviewing internal Company documents and 

emails.468

Litigation followed, first in California, which was voluntarily dismissed, and then 

in Delaware. Morelli filed the 225 Action on November 1, 2012, against Waite, Godges, 

O‘Keefe, and Fahey. This Court entered a status quo order in that action on December 

 

464 Tr. 1320 (Horne). 

465 JX 454.

466 Tr. 599-601. Morelli also denied that he controlled the Board, despite the fact that 

he is the largest Initial Stockholder and the Initial Stockholders had the right to 

appoint five of the nine Board members. Id. at 592, 599. These sorts of 

statements undermined Morelli‘s credibility. 

467 Id. at 436.

468 Id. at 216-17, 223 (Hwang). If Hwang‘s timeline is accurate, the special 

committee continued to investigate Morelli‘s termination until shortly after the

filing of the Complaint in this action on August 5, 2013.
137

27, 2012. As a part of the 225 Action, the Company‘s computers were imaged to 

preserve documents.

N. Suspicious Post-October 20 Activities

In support of their conspiracy theory, Plaintiffs emphasize the Director 

Defendants‘ treatment of Geller after Morelli was ousted on October 20. The evidence

indicates that the Pacific Palisades clinic was the worst-performing clinic in the Company 

and that Geller was not a great employee.469 The Pacific Palisades clinic, however, was a 

testing ground for OptimisSport, so that clinic is not exactly comparable to the others. 

Regardless, financially, the Pacific Palisades clinic performed poorly. In November 

2012, Geller received a pay raise that was approved by Waite to equalize her salary with 

that of other clinical directors.470 Plaintiffs contend that raise was payment for Geller‘s 

role in the conspiracy.

Plaintiffs also note that Geller missed an in-house residency exam on September 

20, 2012, but later received permission to join the remediation program and complete the 

residency.471 Waite testified that Geller‘s clinic, being an unusual setup, had low patient 

volume, which made it difficult for her to complete the number of clinical hours required

for the residency, and that Godges, Geller‘s mentor, recommended she be allowed to 

 

469 Id. at 1116 (Waite).

470 Id. at 1131-32, 1180-81 (Waite). Kreile Dep. 172-76; JX 594 (11/28/12 email 

from Kreile to Waite: pointing out that Geller makes $5 to $7 an hour less than 

others).

471 Tr. 1130 (Waite). At least one other Optimis physical therapist had been offered 

remediation. Id. at 1182 (Waite).
138

remediate.472 Additionally, a September 21, 2012 email from Kreile to Waite suggested 

that dropping Geller from the residency program would be a bad idea based on her

allegations.473

O. Terminations, Resignations, and Lawsuits

Following the October 20 Meeting, Waite controlled Optimis in terms of day-today operations, but only for a short while. On December 27, 2012, this Court entered a 

status quo order in the 225 Action restoring Optimis, in part, to the conditions that existed 

before the October 20 Meeting: Morelli continued as CEO; Waite remained COO; and 

the Board consisted of the same nine members as on October 20. But, the status quo 

order also required the appointment of an Interim Chief Administrative Officer, a role 

filled by James Patton, who was granted ―full authority to act for the Company and who 

shall be responsible for running the Company on a day-to-day basis.‖474 The order placed 

restrictions on transactions and activities out of the ordinary course of business. Thus, for 

all practical purposes, control of the Company during this time was split between Waite 

and Morelli as any deviations from the status quo order required consent of both parties.

The 225 Action settled on March 21, 2013, and Amendment No. 2 was 

invalidated. Morelli returned to power as CEO. The parties to the 225 Action agreed to 

 

472 Id. at 1130, 1182 (Waite); see also id. at 1277-78 (Atkins: describing remediation 

program and Geller‘s clinic).

473 JX 284.

474 Status Quo Order, Morelli v. Waite, C.A. No. 8001-VCP, D.I. 31 ¶ 3 (Dec. 27, 

2012). The Status Quo Order was amended slightly on January 17, 2013. Id. at 

D.I. 36. Another amendment followed on March 8, 2013. Id. at D.I. 60.
139

form a special committee comprised of Wing and Abdelhamid to investigate the 

circumstances leading to the October 20 Action (the ―225 Committee‖). The relation of 

the 225 Committee to Morelli‘s separate investigative committee (the ―Special 

Committee‖) is unclear, but every member of the Special Committee was appointed to 

the Board by Morelli, making its independence and neutrality highly questionable. 

Neither the 225 Committee nor the Special Committee has issued a report of its findings.

On March 22, 2013, PLIS denied coverage on Geller‘s sexual harassment claims. 

On March 25, the Board—including Horne‘s alleged co-conspirators, the Director 

Defendants—voted to remove all authority from Horne.475 Geller commenced the first of 

her lawsuits on March 26, 2013, by filing a complaint with the Department of Fair 

Employment & Housing.476 On April 10, Geller filed a suit for sexual harassment in the 

Superior Court of Los Angeles.477 The Board formally suspended Horne on April 16, 

2013, and officially terminated him on May 10, 2013. Shortly before he was terminated, 

Horne deleted his personal email account from his computer, as discussed in Section II.A 

supra.

The financial condition of the Company in early 2013 bears noting. At various 

points in this litigation, Plaintiffs have accused Defendants of attempting to drive the 

Company into bankruptcy. The evidence indicates that, as of year-end 2012 and first-

 

475 JX 699.0009.

476 JX 703.

477 JX 726.
140

quarter 2013, the Company‘s cash position had declined to roughly $600,000 and it faced 

a risk of running out of funds.

478

 Accordingly, the Company was looking for financing 

and was negotiating with B of I toward that end.

On June 25, 2013, the same day the B of I loan was supposed to close, the Director 

Defendants resigned from the Board, and Waite resigned as COO. In a letter to the 

Board, they stated that the corporate structure of Rancho violated California law—

because it was a professional corporation—and they listed pages of alleged misdeeds and 

incidents of mismanagement by Morelli.479 The next day the Director Defendants filed 

an action in California seeking to rescind the 2007 Rancho transaction (the ―Rescission 

Action‖).480 On July 1, 2013, the Director Defendants were removed from the Rancho 

Board. Plaintiffs deride the Rescission Action as bad faith litigation, but, in its wake and 

on the same day, July 1, they restructured Optimis by assigning Rancho to Edwin 

Tinoco.

481

 This restructuring seemingly cured the defect complained of in the Rescission 

Action. As a result of the assignment, however, Optimis no longer wholly owns Rancho. 

Instead, it now receives 55 percent of Rancho‘s revenues.482

 

478 Id. at 1224-25 (Olsen); id. at 1382-83 (Horne); JX 682 (3/5/13 email from Horne 

to the Board and others: laying out financial concerns and basically attributing the 

Company‘s problems to Morelli).

479 JX 784. 

480 JX 790.

481 JX 800.

482 Id. at .0014.
141

Tinoco appears to be a friendly third party to Plaintiffs. Olsen described him as 

inexperienced and not respected by the Rancho staff.483 Yet, four days into his job, on 

July 5, 2013, Tinoco terminated the Director Defendants‘ employment with Rancho, 

ending their successful careers as physical therapists there.

484

 Predictably, Morelli denied 

having anything to do with the decision to terminate the Director Defendants.

485

 Smith 

and Atkins, in particular, described the firing as extremely painful.486 On August 23, 

2013, the Rescission Action was voluntarily dismissed without prejudice.487

P. History of This Lawsuit

This brings the story full circle to the events detailed in Section I. Plaintiffs filed 

the Complaint in this action on August 5, 2013. The Board, now entirely under Morelli‘s 

control, previously had authorized the Company to sue the Director Defendants.488 On 

August 16, I denied a motion to expedite. On October 17, 2013, the Company sued 

Zilberman, his law firm, and Brys, as well as 100 unnamed Does, in a California action, 

 

483 Tr. 1216-17.

484 JX 805.

485 Tr. 644. There is no evidence that Tinoco ever met any of the Director 

Defendants. Id. at 1089 (Waite).

486 Id. at 1289 (Smith); id. at 1492-93 (Atkins).

487 JX 845.

488 JX 808. There is no evidence that the Company ever authorized suit against 

Horne.
142

alleging malpractice and breaches of fiduciary duty.489 This case before me essentially

remained inactive until Plaintiffs finalized the Geller Settlement in December 2013, after 

which discovery began in earnest. In May 2014, Plaintiffs settled with Fearon and 

Levine. Continuing on the warpath, Optimis sued PLIS in California for bad faith breach 

of insurance contract, negligent retention of counsel, and aiding and abetting breaches of 

fiduciary duty.490

The Director Defendants and Horne separately moved for summary judgment in 

August and September 2014. Plaintiffs responded to those motions by submitting the 

affidavits of Fearon and Levine, who had not been identified as likely witnesses before 

that point. The related briefing was extensive. Plaintiffs then moved to amend their 

complaint and the parties briefed numerous motions in limine. When it became clear that 

this case was not ready for trial, I rescheduled the trial, for the third time, to early 

February 2015. On January 28, 2015, I denied the summary judgment motions. That 

same day, I issued a Memorandum Opinion denying Plaintiffs‘ motion to amend and 

granting in part Defendants‘ motion in limine to exclude certain undisclosed causes of 

action.491 Although I concluded that the Complaint adequately pled a conspiracy, I held 

that Plaintiffs‘ discovery conduct effectively amounted to a knowing concealment of the 

 

489 JX 884. Brys previously had filed suit against the Company in February 2013 for 

retaliation and wrongful termination. JX 43.

490 JX 948. 

491 OptimisCorp v. Waite, 2015 WL 357675 (Del. Ch. Jan. 28, 2015).
143

scope of their claims. Based on that, and as a sanction for Plaintiffs‘ failure to 

supplement their interrogatory responses under Rule 26(e)(1)(A), I ordered that: Fearon, 

Levine, and Gunn would be excluded from any alleged conspiracy; claims relating to the 

Fearon Rescission would be excluded from this case; and Plaintiffs would be barred from 

attempting to impose liability on Defendants for any acts not then disclosed in the record.

I presided over a six-day trial from February 6-13, 2015. The parties extensively 

briefed the issues and I heard post-trial argument on April 30, 2015.

III. STANDARD OF REVIEW

Plaintiffs have the burden of proving each element, including damages, of each of 

their causes of action against each Defendant by a preponderance of the evidence. 

― ̳Proof by a preponderance of the evidence means proof that something is more likely 

than not. It means that certain evidence, when compared to the evidence opposed to it, 

has the more convincing force and makes you believe that something is more likely true 

than not.‘‖492 By implication, the preponderance of the evidence standard also means that 

if the evidence is in equipoise, Plaintiffs lose.

IV. PARTIES’ CONTENTIONS & STATE OF THE LITIGATION

Defendants‘ main contention is that they have done nothing wrong. The Director 

Defendants contend that there is no conspiracy and that Plaintiffs‘ litigation strategy has 

forced them to try to prove a negative. Once the conspiracy is eliminated, it is clear that 

 

492 Agilent Techs., Inc. v. Kirkland, 2010 WL 610725, at *13 (Del. Ch. Feb. 18, 2010) 

(quoting Del. Express Shuttle, Inc. v. Older, 2002 WL 31458243, at *17 (Del. Ch. 

Oct. 23, 2002)).
144

Atkins and Smith had virtually no involvement in the most of the alleged fiduciary duty 

breaches. The Director Defendants further argue that the duty of loyalty claims fail, that 

the breach of contract claims are legally insufficient, and that the Rescission Action was a 

good faith, privileged action that cannot give rise to liability. Defendant Horne denies 

that he was involved in any wrongdoing. Horne repeatedly has emphasized that there is 

no evidence the Board ever authorized suit against him. Horne argues, therefore, that this 

lawsuit is a vendetta by Morelli against him because of his relationship with Morelli‘s 

former wife, and that Morelli‘s pursuit of this lawsuit against him on behalf of Optimis, 

but without Board authority, is an improper use of corporate funds for personal 

purposes.

493

 Plaintiffs‘ primary claims against Horne at this point are for aiding and 

abetting.

All Defendants strenuously have complained that the claims against them have 

been a shifting target and impossible to defend against without enormous expense. They 

contend that it was not until Plaintiffs filed their final post-trial brief that it was possible 

to ascertain exactly what claims were being pursued in this litigation. 

In addition to the sprawling conspiracy and the rescission claims I previously 

excluded, Plaintiffs have abandoned their claims for at least the following alleged 

wrongs: (1) Horne wrongfully disclosed confidential Company information to Doherty 

for use in her divorce proceedings against Morelli; (2) Horne improperly set a $2 million 

 

493 Based on my dismissal of the claims against Horne on the merits, I do not reach 

the lack of authority to sue defense.
145

reserve for Geller‘s claims; (3) Horne, and possibly the Director Defendants, deliberately 

attempted to drive the Company into bankruptcy so that he (or they) could buy its assets 

at fire-sale prices; (4) the Director Defendants wrongfully extended their Employment 

Agreements with Rancho; (5) the Director Defendants have unfairly competed with 

Rancho by working at All-Star Physical Therapy; (6) the Director Defendants stole reams 

of confidential information from Rancho shortly before they left; (7) the Director 

Defendants wrongfully poached employees from Rancho; (8) Defendants tortiously 

interfered with at least eight contracts or business opportunities in addition to the three 

still at issue and discussed in this Opinion; and (9) duty of care violations by some or all 

of Defendants. To the extent Plaintiffs contend that they have not abandoned these 

claims, I hereby deem them waived.494

With only the slightest risk of oversimplification, a fair summary of Plaintiffs‘ 

position is that everything that has gone wrong at Optimis since at least 2012 is 

Defendants‘ fault. Plaintiffs seek over $50 million in damages and an extension of the 

Stockholders Agreement (and thus Morelli‘s control) for two additional years. According 

to Plaintiffs, at least Horne, the Director Defendants, Rohlinger, and Godges conspired 

for years to breach their fiduciary duties. Those breaches include conspiring to: oust 

Morelli and seize control of the Company; sabotage the Company‘s strategic plan; 

attempt to gain control of Optimis by ambush; try to steal Rancho; and interfere with the 

 

494 Emerald P’rs v. Berlin, 2003 WL 21003437, at *43 & n.144 (Del. Ch. Apr. 28, 

2003).
146

B of I financing. Plaintiffs also contend that Defendants breached the Stockholders 

Agreement or the related implied covenant of good faith and fair dealing. Finally, 

Plaintiffs assert that Defendants tortiously interfered with the DSC, the B of I financing, 

and a potential relationship with the Preferred Therapy Provider Network. Horne is 

alleged to have at least aided and abetted these wrongs. 

V. LEGAL ANALYSIS

A. There Is No Conspiracy

Since the summary judgment briefing, Defendants have contended that the 

conspiracy claims must be dismissed because they fail as a matter of law. Delaware law 

requires an independent tort underlying a civil conspiracy. As such, the breach of 

contract claims cannot serve as a predicate for the alleged civil conspiracy.495 This leaves 

the breach of fiduciary duty claims and the tortious interference claims. While these 

claims can form the basis of a civil conspiracy, Defendants contend that the law 

precludes a conspiracy among fiduciaries to breach fiduciary duties.496 In support of their 

position, Defendants cite cases such as Albert v. Alex. Brown Management Services, Inc., 

 

495 NACCO Indus., Inc. v. Applica Inc., 997 A.2d 1, 35 (Del. Ch. 2009) (―A breach of 

contract is not an underlying wrong that can give rise to a civil conspiracy 

claim.‖); Kuroda v. SPJS Hldgs., L.L.C., 971 A.2d 872, 892 (Del. Ch. 2009) 

(―[U]nless the breach also constitutes an independent tort, a breach of contract

cannot constitute an underlying wrong on which a claim for civil conspiracy could 

be based; similarly, a claim for civil conspiracy cannot be predicated on a breach 

of the implied contractual covenant of good faith and fair dealing unless the

breach also constitutes an independent tort.‖) (emphasis original).

496 In relation to Optimis, the alleged conspirators here, namely, the Director 

Defendants, Horne, Godges, and Rohlinger, all were directors or officers or, in the 

case of Waite, both.
147

which states: ―[C]ivil conspiracy is vicarious liability. It holds a third party, not a 

fiduciary, responsible for a violation of fiduciary duty.‖497

Defendants have the stronger argument on this issue. The case law on vicarious 

liability and fiduciaries admittedly is less than crystalline. In the fiduciary duty context, 

conspiracy is treated essentially as coterminous with aiding and abetting.498 It would 

make little sense, therefore, particularly given the vicarious liability that attaches to 

conspiracy,499 for a lower standard to apply to conspiracy than aiding and abetting.500 In 

 

497 2005 WL 2130607, at *11 (Del. Ch. Aug. 26, 2005). Plaintiffs, by contrast, cited 

other cases that did not include the non-fiduciary requirement in their articulation 

of the conspiracy standard. E.g., Nicolet, Inc. v. Nutt, 525 A.2d 146, 149-50 (Del. 

1987) (―Plaintiffs must prove: (1) A confederation of two or more persons; (2) An 

unlawful act done in furtherance of the conspiracy; and (3) Actual damage.‖). 

Nicolet did not address the issue of a conspiracy among fiduciaries predicated on a 

breach of fiduciary duties.

498 Allied Capital Corp. v. GC-Sun Hldgs., L.P., 910 A.2d 1020, 1038 (Del. Ch. 2006) 

(―Indeed, our state courts have noted that in cases involving the internal affairs of 

corporations, aiding and abetting claims represent a context-specific application of 

civil conspiracy law.‖) (collecting cases); See also Gilbert v. El Paso Co., 490 

A.2d 1050, 1057 (Del. Ch. 1984) (stating the elements of civil conspiracy as ―(1) 

the existence of a fiduciary relationship, (2) a breach of the fiduciary‘s duty and 

(3) knowing participation in that breach by the party not in direct fiduciary 

relationship . . . [and (4)] damages resulting from the action of the conspiracy 

parties‖), aff’d, 575 A.2d 1131 (Del. 1990).

499 Nicolet, 525 A.2d at 150 (―Under Delaware law, a conspirator is jointly and 

severally liable for the acts of co-conspirators committed in furtherance of the 

conspiracy.‖).

500 See Parfi Hldg. AB v. Mirror Image Internet, Inc., 794 A.2d 1211, 1238 (Del. Ch. 

2001) (―Civil conspiracy thus provides a mechanism to impute liability to those 

not a direct party to the underlying tort. As such, it can be viewed as parallel to 

aiding and abetting.‖), rev’d on other grounds, 817 A.2d 149 (Del. 2002); see also

Allied Capital Corp., 910 A.2d at 1038-39 (―Like the test for civil conspiracy, the 
148

those instances where a fiduciary takes actions that would amount to aiding and abetting 

by a non-fiduciary, that conduct amounts to a direct breach of fiduciary duties.501 

Presumably, the same would be true of a conspiracy: an actor‘s entry into a conspiracy to 

facilitate another actor‘s breach of fiduciary duty to an entity to which the first actor 

owed a fiduciary duty would itself be a breach of the first actor‘s fiduciary duties. This 

conceptual complexity, coupled with the minimal additional benefit likely to result from 

holding a fiduciary vicariously, rather than directly, liable for participating in another 

fiduciary‘s breach of duty suggests one reason why it is highly doubtful that a conspiracy 

of fiduciaries is a legally cognizable cause of action.502

Equally importantly, even if I were to recognize such a cause of action, Plaintiffs 

have not satisfied their burden of proving that a conspiracy existed. All of the recitations 

 

test for stating an aiding and abetting claim is a stringent one, turning on proof of 

scienter—a plaintiff must prove: (1) the existence of a fiduciary relationship, (2) a 

breach of the fiduciary‘s duty and (3) knowing participation in that breach by the 

non-fiduciary.‖).

501 Gantler v. Stephens, 965 A.2d 695, 708-09 (Del. 2009); Higher Educ. Mgmt. Gp., 

Inc. v. Mathews, 2014 WL 5573325, at *13 & n.78 (Del. Ch. Nov. 3, 2014) (citing 

Gantler for the proposition that any conduct of the CFO‘s ―rising to the level of 

aiding and abetting would be a breach of his own fiduciary duties‖).

502 Cf. In re Nine Sys. Corp., 2014 WL 4383127, at *48 (Del. Ch. Sept. 4, 2014) 

(allowing aiding and abetting claim to be pled in the alternative and holding: ―In 

other words, the Plaintiffs are limited to one recovery—breach of fiduciary duty or 

aiding and abetting‖). I do not read Microsoft Corp. v. Amphus, Inc., 2013 WL 

5899003 (Del. Ch. Oct. 31, 2013), cited by Plaintiffs, as to the contrary. That 

case, at the pleadings stage, allowed a conspiracy claim to proceed as against a 

director, a separate entity operated by the director, and a third company. Id. at *2, 

*15-16. As such, it did not involve the situation here, where all alleged coconspirators are fiduciaries.
149

of the elements of a conspiracy require a ―confederation.‖ Given the overlap with aiding 

and abetting law in the context of alleged breaches of fiduciary duties, the confederation 

requirement includes ―knowing participation‖ in the conspiracy. Although it is true that 

there need not be an explicit agreement, plaintiffs still must prove knowing participation 

in a conspiracy.503 They have failed to do so.

The main problem is that the evidence on which Plaintiffs chiefly rely simply does 

not say what Plaintiffs argue it does. For example, Plaintiffs rely on the 2010 Emails as 

evidence of the start of the conspiracy. The ―hostile takeover‖ line to which Plaintiffs 

point is taken entirely out of context.504 Although the 2010 Emails indicate a group of 

stockholders and directors coordinating their actions, the actions under discussion related 

to concerns about one of the Company‘s primary products and the difficulty of airing 

 

503 See Gilbert v. El Paso Co., 490 A.2d at 1057. Plaintiffs suggest that proof of a 

conspiracy ―can be inferred from the behavior of the alleged conspirators.‖ POB 

42. That may be true, but Plaintiffs must prove the conspiracy or facts such that 

only a conspiracy could be inferred from them. Malpiede v. Townson, 780 A.2d 

1075, 1097 (Del. 2001) (holding, in the analogous aiding and abetting context that: 

―Knowing participation in a board‘s fiduciary breach requires that the third party 

act with the knowledge that the conduct advocated or assisted constitutes such a 

breach‖); id. at 1097 n.79 (― ̳It may be that some circumstances will arise in which 

the terms of the negotiated transaction themselves are so suspect as to permit, if 

proven, an inference of knowledge of an intended breach of trust.‘‖) (quoting 

Greenfield v. Tele-Commc’ns, Inc., 1989 WL 48738, 15 Del. J. Corp. L. 182, 188 

(Del. Ch. May 10, 1989)). Accordingly, because Plaintiffs must prove every 

element of their claims, they similarly must prove that an inference is appropriate 

under the preponderance of the evidence standard. 

504 JX 84.
150

such concerns in a public setting with a CEO like Morelli. Such discussions are a far cry 

from the disloyal takeover plot Plaintiffs allege.

Absent the 2010 Emails, there is no evidence suggesting a concerted group effort 

to take over the Company. Based on the facts that I have found, the most reasonable 

interpretation of the evidence is that there were several independent groups of individuals 

in the Company, each focused on OptimisPT, but not operating in a confederation to 

commit a wrongful act. Neither Atkins nor Smith had much involvement with the dayto-day operations of Optimis; they focused on running their Rancho clinics. To the 

extent they had a unified goal with Waite, that goal was to improve the PT software and 

achieve a liquidity event, an outcome that would be shared with all stockholders. Fearon 

and Levine similarly sought to improve OptimisPT, to which their reputations were 

linked, and also wanted their employment agreements extended and improved. Contrary 

to pursuing some form of confederated action with one or more of Defendants, Fearon 

and Levine struck out on their own because Waite could not address their concerns. 

Horne only enters the alleged conspiracy because of an email that includes no text in 

February 2012. That email was to Rohlinger. Similarly, Horne‘s telling Rohlinger about 

Geller‘s allegations does not implicate him in a takeover plot. Even if Rohlinger did later 

tell Waite, the only item tying Horne to the purported machinations by Waite is the 

February 2012 emailing of the Stockholders Agreement. Defendants have proffered an 

innocent, non-conspiracy explanation for that email that is supported by the 

contemporaneous documents: disclosure of the Stockholders Agreement in the PPMs. 

But, even if the purpose of the email was to enable Horne and Rohlinger to review 
151

Morelli‘s rights under the Stockholders Agreement to appoint five of the nine Optimis 

directors, as Plaintiffs imply, there is nothing improper about that. 

Additionally, the June 2012 email from Waite to Rohlinger505 on which Plaintiffs 

focus does nothing to implicate either Horne, Atkins, or Smith. The best reading of that 

email is Waite venting. Indeed, the most direct communication that plausibly could 

support a reading of an active plot to remove Morelli was written by Levine.506 But, 

Plaintiffs settled with Levine and I have precluded Plaintiffs from contending he is part of 

the alleged conspiracy among Defendants. Moreover, even if he was part of the alleged 

conspiracy, Waite and Rohlinger both advised Levine at the June 2012 Meeting not to 

confront Morelli as Levine planned. Eventually, Fearon and Levine proceeded to contact 

Morelli on their own, without any assistance from any of Defendants.

Levine‘s testimony about the June 2012 Meeting—which is temporally close to 

the alleged fruition of the conspiracy—undermines the idea that there was a 

confederation, particularly one dating back to late 2010. At trial, Levine explained his 

frustration with the lack of progress on OptimisPT and on resolving his and Fearon‘s 

complaints.507 The evidence does not support a finding that Defendants, or even Waite, 

Rohlinger, and Levine, considered as a group, participated in a confederation to 

undermine Morelli. Levine, Plaintiffs‘ witness, again is on point. He stated: ―And it just 

 

505 JX 233.

506 JX 230.

507 Tr. 1572.
152

seemed like every time we got together it was nothing but a gripe session. We didn‘t 

have a plan. We didn‘t have a strategy. We didn‘t have anything. And it just became 

more and more frustrating.‖508 This lack of a plan, the absence of a strategy, and Waite‘s 

inability to resolve Fearon and Levine‘s concerns is what led Fearon and Levine to send 

their formal letter to Morelli threatening to leave the Company if their demands were not 

met. Such evidence cuts sharply against a finding that Defendants were in a conspiracy 

to breach their fiduciary duties by undermining Morelli and attempting to take control of 

Optimis. 

Waite is the most active of any of Defendants in the alleged conspiracy. His 

activity, however, primarily involved assuaging others or advising others against doing 

things. The evidence does not show a plot between him and the other Director 

Defendants or any of the Director Defendants, Horne, and Rohlinger to commit the 

wrongs Plaintiffs allege. Rather, the facts indicate several individuals both independently 

and collectively discussing their complaints about Morelli. All of those individuals owed 

fiduciary duties to Optimis and cared deeply about the success of Optimis; they may have 

disliked Morelli and sincerely wanted him gone, not out of animus toward him (with the 

possible exception of Defendant Horne), but instead based on a belief that he was doing a 

poor job as CEO. As Defendants‘ briefing—and the preceding paragraphs—show, it is

difficult to ―disprove‖ a conspiracy. But, Plaintiffs have the burden of proof. They have 

not shown that Defendants participated in a confederation that involved breaches of 

 

508 Id. at 1573.
153

fiduciary duty. The main evidence upon which they rely—the 2010 Emails and the June 

2012 Meeting—does not support their position. Moreover, the key piece of the puzzle, 

Defendants allegedly having bribed and cajoled Geller to disclose her sexual harassment 

complaints, was not proven. 

In sum, I seriously question whether a cause of action exists under Delaware law 

for a conspiracy among fiduciaries to breach a fiduciary duty. Even if such a cause of 

action exists, however, Plaintiffs have not met their burden of proving the existence of 

such a conspiracy in this case. As a result, I dismiss Plaintiffs‘ claim of conspiracy and 

proceed to examine the alleged wrongs committed by the various Defendants separately.

B. The Duty of Loyalty

Plaintiffs‘ arguments raise basic questions as to what the duty of loyalty requires. 

The classic formulation of that duty comes from Guth v. Loft, Inc., in which the Delaware 

Supreme Court stated:

Corporate officers and directors are not permitted to use their 

position of trust and confidence to further their private 

interests. . . . A public policy, existing through the years, and 

derived from a profound knowledge of human characteristics 

and motives, has established a rule that demands of a 

corporate officer or director, peremptorily and inexorably, the 

most scrupulous observance of his duty, not only 

affirmatively to protect the interests of the corporation 

committed to his charge, but also to refrain from doing 

anything that would work injury to the corporation, or to 

deprive it of profit or advantage which his skill and ability 

might properly bring to it, or to enable it to make in the 

reasonable and lawful exercise of its powers. . . . The 

occasions for the determination of honesty, good faith and 

loyal conduct are many and varied, and no hard and fast rule 
154

can be formulated. The standard of loyalty is measured by no 

fixed scale.509

―Essentially, the duty of loyalty mandates that the best interest of the corporation and its 

shareholders takes precedence over any interest possessed by a director, officer or 

controlling shareholder and not shared by the stockholders generally.‖510 ―In short, 

directors must eschew any conflict between duty and self-interest.‖511

Plaintiffs allege four duty of loyalty breaches: (1) undermining the Company‘s 

strategic plan; (2) attempting to gain control of Optimis by ambush; (3) attempting to 

steal Rancho from Optimis; and (4) interfering with the B of I financing. I address these 

purported wrongs in turn. 

Plaintiffs‘ arguments suffer from two fatal flaws. The first is that Plaintiffs allege 

a takeover scheme bereft of a motive or interest not shared with the other stockholders 

generally. Defendants allegedly engaged in a years-long takeover effort. For what selfinterested reason? Plaintiffs have offered no convincing explanation. The second 

problem, which may be the cause of the first, is that Plaintiffs seem to presume that 

Morelli has a right to be CEO. He does not. The facts instead show that, at least until the 

225 Action, Defendants acted in the best interests of Optimis, the entity, which they 

believed coincided with their own interests as stockholders.

 

509 5 A.2d 503, 510 (Del. 1939) (emphasis added). 

510 Cede & Co. v. Technicolor, Inc., 634 A.2d 345, 361 (Del. 1993), modified in 

irrelevant part, 636 A.2d 956 (Del. 1994) (emphasis added). 

511 Ivanhoe P’rs v. Newmont Mining Corp., 535 A.2d 1334, 1345 (Del. 1987).
155

1. Sabotaging the Company’s strategic plan

This is the most nebulous wrong Plaintiffs allege. The claim seems to be that 

OptimisSport was the long-run vision of the Company and Defendants undermined it. 

The evidence clearly shows that Morelli believed OptimisSport was the path forward. 

The evidence also shows, however, that the Director Defendants, then the Company‘s 

largest stockholders and the managers of Rancho, the Company‘s largest asset and the 

generator of most of its cash, believed that the first priority should be to stabilize and 

perfect OptimisPT. At least Fearon, Levine, and Gunn all believed similarly. Plaintiffs‘ 

arguments on this point are convoluted, but appear to be that Defendants secretly opposed 

OptimisSport and the DSC, reallocated resources to OptimisPT, undermined Morelli‘s 

authority, and hid all of this by communicating through private emails. It is unclear 

whether Plaintiffs are asserting a violation of the duty of candor or the duty of loyalty, or 

some sort of hybrid claim. They cite two cases in support of their sabotage argument: 

HMG/Courtland Properties, Inc. v. Gray512 and Hollinger International Inc. v. Black.

513

 

Neither supports the sweeping liability theory for which Plaintiffs advocate.

Both HMG/Courtland and Hollinger involved self-dealing transactions. There is 

no self-dealing transaction in this case. HMG/Courtland Properties involved a suit by a 

corporation against, principally, the corporation‘s former president and a former director. 

The individual defendants stood on both sides of the challenged transactions, did not 

 

512 749 A.2d 94 (Del. Ch. 1999).

513 844 A.2d 1022 (Del. Ch. 2004), aff’d, 872 A.2d 559 (Del. 2005). 
156

disclose that interest, and later misled the company‘s board about their involvement.514 

In discussing a fraud claim, the Court noted that the ―directors . . . had an  ̳unremitting 

obligation‘ to deal candidly with their fellow directors.‖515 Thus, the directors had an 

affirmative obligation to disclose their conflicting interests in the transactions. The 

situation in Hollinger is even more factually inapposite to this case. There, the Court 

recounted at length the antics of Lord Conrad Black, who: deliberately undermined the 

board‘s ability to consider a transaction and instead diverted the opportunity to himself; 

misled the board as to his ongoing, secret efforts to sell pieces of the company; 

improperly used confidential information to advance his own interests; and effectively 

encouraged his secret buyers to try and bribe the financial advisor to approve the sale.516

Both HMG/Courtland and Hollinger, therefore, involved classic examples of 

conflicted transactions where an interest adverse to the company was not disclosed. In 

this case, there was no transaction at all and Plaintiffs have not shown some sort of self-

 

514 HMG/Courtland Props., 749 A.2d at 114 (―Gray‘s undisclosed, buy-side interest 

in the Transactions is a classic case of self-dealing.‖).

515 Id. at 119 (quoting Mills Acq. Co. v. Macmillan, Inc., 559 A.2d 1261, 1283 (Del. 

1989)).

516 Hollinger Int’l, 844 A.2d at 1062 (―In sum, Black intentionally subverted the 

International Strategic Process he had pledged to support through a course of 

conduct involving misleading and deceptive conduct toward his fellow directors, 

all designed with the goal of presenting them with a  ̳fait accompli.‘ . . . It is 

difficult to conceive of a meaningful definition of the duty of loyalty that tolerates 

conduct of this kind.‖).
157

interest that led Defendants to engage in purportedly disloyal acts. The cases Plaintiffs 

rely on have no application to the facts of this case.

Plaintiffs also argue that the Company‘s strategic vision involved devoting 

resources to both OptimisPT and OptimisSport, that Defendants sabotaged that plan, and 

that, accordingly, Defendants breached their duty of loyalty. This argument fails at 

several levels, but principally because Plaintiffs have not proven that Defendants acted in 

a manner that elevated any personal interest above the Company‘s interests, even 

considering idiosyncratic motivators like pride or greed. Plaintiffs have shown no special 

interest or benefit that accrued to Defendants that would not have accrued to all of 

Optimis‘ stockholders. In short, Plaintiffs have not shown the key element of disloyalty.

The factual record, as recounted above, indicates that the Company, in fact, did 

decide to pursue two products simultaneously. Plaintiffs rely heavily on the minutes of 

several meetings of the Optimis Board to suggest some sort of Board-approved strategy. 

But, this evidence is weak. It includes statements like ―OptimisPT: George Rohlinger led 

a discussion about the developments in our beta program since the last Board of Directors 

meeting . . . .‖517 and ―Mr. Morelli led a discussion about OptimisSport and OptimisSport

Events.‖518 Conspicuously absent from the Board minutes is any discussion of the 

resource allocation between the two products or any action on a resolution regarding that 

issue. Plaintiffs have pointed to no such Board-determined, specific allocation of 

 

517 JX 30.0001.

518 Id. at .0012.
158

resources. In a company with finite resources attempting to develop and market two 

separate products, it is not unusual that a decision to expend more effort on one product 

results in less effort being spent on the other. Plaintiffs have not proven that the 

Company explicitly had decided on a particular resource allocation scheme or that 

Defendants subsequently undermined it for self-interested reasons. Absent such a clear 

allocation program, it is difficult to see how Defendants acted disloyally in supporting 

providing a greater share of the available resources for OptimisPT, which they believed 

would better serve the interests of Optimis and its stockholders. Instead, the Company‘s 

day-to-day operations involved the customary battle for limited resources. 

Plaintiffs attempt to turn this competition, which manifested itself in a difference 

of opinion between Morelli and the Director Defendants, into a breach of the duty of 

loyalty. The actions complained of do not amount to such a breach. For example, 

several executives thought the DSC was a waste of money. Even if Horne told Owens 

not to work on the event, Owens did not listen. That disputed fact, regarding Horne‘s 

alleged statement, is about the strongest evidence Plaintiffs marshal of ―sabotage.‖ 

Plaintiffs further contend that ―Defendants repeatedly challenged Morelli‘s authority and 

allocation of assets within the Company, all outside of Morelli‘s presence.‖519 The duty 

of loyalty is owed to the corporation and the stockholders at large, not to Morelli.520 The 

 

519 Pls.‘ Post-Trial Reply Br. [hereinafter ―PRB‖] 13. 

520 See, e.g., Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946, 955 (Del. 1985) 

(―[C]orporate directors have a fiduciary duty to act in the best interests of the 

corporation‘s stockholders.‖); eBay Domestic Hldgs., Inc. v. Newmark, 16 A.3d 1, 
159

duty of loyalty does not require Defendants to act like lemmings with respect to Morelli. 

The evidence may show that Defendants did not like Morelli, but Plaintiffs have not 

proven that Defendants ―undermined‖ his authority such that they acted disloyally to 

Optimis.

Plaintiffs also argue that Defendants orchestrated a clandestine scheme of secretly 

diverting resources and hiding it all from Morelli. But, Morelli knew about the 

disagreements over Sport and PT. Hwang, for example, told Morelli about them 

directly.521 Moreover, Morelli‘s own emails indicate that he was aware of the allegedly 

secret resource diversion problem.522 Additionally, the weight of the evidence shows that 

Morelli, who worked in close proximity to the developers, decided the Company‘s 

direction with respect to the software as he saw fit.523 Thus, I find that Morelli knew 

about the resource allocation dispute.

 

34 (Del. Ch. 2010) (explaining that directors‘ fiduciary duties include ―acting to 

promote the value of the corporation for the benefit of the stockholders.‖); Gilbert 

v. El Paso Co., 1988 WL 124325, 14 DEL. J. CORP. L. 727, 743 (Del. Ch. Nov. 21, 

1988) (―[T]he directors‘ fiduciary duty runs to the corporation and to the entire 

body of shareholders generally, as opposed to specific shareholders or shareholder 

subgroups.‖), aff’d, 575 A.2d 1131 (Del. 1990).

521 Tr. 255-56.

522 JX 233.0003.

523 See, e.g., Brys Dep. 193 (―Q. Do you agree with Mr. Morelli‘s assessment that 

there was a power struggle going on in around [sic] this time? A. No. I don‘t 

agree with his assessment. . . . Because everyone reported to Mr. Morelli. He . . . 

decided how the company was going to be managed and that‘s how the company 

was managed and directed. So a struggle implies a competing power. I didn‘t see 

one.‖).
160

The evidence shows that Defendants, particularly the Director Defendants and 

Fearon and Levine, believed that the best thing for Optimis would be the completion of 

OptimisPT. That position was not unreasonable: it was the OptimisPT product that led 

many successful business people to sell their businesses to Morelli in stock-for-stock 

transactions; PT is the product with market share; and it is the product that has a proven 

revenue-generating structure—third-party reimbursement, as opposed to Sport‘s apparent 

reliance on out-of-pocket payments. Also, PT was the only Optimis product that was 

described with any specificity at trial. It remains unclear exactly what Sport consists of, 

what it will do, how it will work, and how it will generate positive cash flow.524 Thus, I 

find that the battle for resources within the Company was driven by a good faith, 

reasonable belief that the Company‘s best interests lay in focusing more on completing 

the PT product.525

Plaintiffs allege that Defendants‘ ―self-interested motivation‖ was eliminating 

Morelli so they ―could force a liquidity event for themselves.‖526 This argument lacks 

merit. There is no evidence Defendants took any action to force a liquidity event. 

 

524 Atkins credibly testified that he previously had experimented with a weight-loss 

program at Rancho that was not run through a reimbursement platform. That 

program was difficult to monetize effectively and, in fact, most of those efforts 

lost money. Tr. 1465-66. When Atkins explained this to Morelli, he replied: ―I 

don‘t know if you know that much about this . . . . What we‘re doing is much 

bigger than what you‘ve done.‖ Id. at 1466.

525 See Rohlinger Dep. 69-72, 116 (testifying that the dilution of resources across 

OptimisPT and OptimisSport was detrimental to all of the Company‘s products).

526 POB 13-14.
161

Indeed, the evidence in the record is to the contrary: the ―hostile takeover‖ email, for 

example, expressly discusses following Morelli‘s plan because he was best situated to 

bring about a liquidity event.527 Viewing the evidence as a whole, I find that Defendants 

shared the hope, as Morelli had promised, of achieving an advantageous liquidity event in 

the relatively near future. Morelli apparently believed the most effective means to that 

end was focusing primarily on the Sport product. Defendants, for different reasons in 

some cases, disagreed; they believed giving priority to development of the PT product in 

the near term would maximize the Company‘s chances for a liquidity event. 

Plaintiffs suggest that I could find Defendants liable even if they acted selflessly 

and in the best interest of the Company.528 It is difficult to envision a situation that would 

provide a useful analogy to this case where that would be true. In any event, Plaintiffs 

have not explained how a non-self-interested fiduciary could act disloyally when 

pursuing an objectively reasonable goal.

 

527 JX 84.

528 See Guttman v. Huang, 823 A.2d 492, 506 n.34 (Del. Ch. 2003) (―There might be 

situations when a director acts in subjective good faith and is yet not loyal (e.g., if 

the director is interested in a transaction subject to the entire fairness standard and 

cannot prove financial fairness), but there is no case in which a director can act in 

subjective bad faith towards the corporation and act loyally.‖); see also Johnston 

v. Pedersen, 28 A.3d 1079, 1092 (Del. Ch. Sept. 23, 2011) (―The defendant 

directors therefore breached their duty of loyalty by issuing the Series B Preferred. 

Despite this fiduciary failing, they have convinced me that they acted in good 

faith. To reiterate, they honestly believed that a period of ―stability‖ (i.e.

entrenched incumbency) would be in the best interests of [the company].‖). These 

cases involve either a failure of proof (Guttman) or subjective beliefs that 

objectively are unreasonable under Delaware law (Johnston). Plaintiffs also cite 

VGS, Inc. v. Castiel for this proposition. I discuss that case infra. 
162

Finally, Plaintiffs suggest, without elaborating, that there was a breach of the duty 

of candor here. The gist of this argument appears to be that Defendants had a duty to tell 

the Board that they opposed the OptimisSport product. There is no evidence that the 

Board, before October 20, 2012, operated as any substantial check on Morelli in any area 

or served any useful purpose other than rubber-stamping his proposals. When a Board 

member did something Morelli disliked, such as disagree with him, he reacted negatively. 

For example, when Godges, a highly respected figure in the physical therapy field, 

crossed Morelli at a Board meeting, Morelli browbeat him into submission. Morelli‘s 

demeaning treatment of Godges surprised and concerned the Director Defendants.529 Not 

surprisingly, therefore, Defendants were reluctant to cross Morelli, especially in the 

―public‖ setting of a Board meeting. Plaintiffs have not cited, and I am not aware of, any 

case holding that a director‘s disagreement with the amount of resources devoted to a 

specific product line without telling the Board amounts to disloyalty, particularly when 

no Board action on that issue has been sought. 

As stated, Plaintiffs have not proven that the Board set an allocation of resources 

as between PT and Sport. Plaintiffs have not shown that any Defendant acted 

disloyally—i.e., that a Defendant put the Company‘s and the stockholders‘ interests 

second to some personal interest—by competing for those resources on a day-to-day 

level. In any event, as discussed above, the evidence shows that Morelli knew there were 

internal disagreements over the allocation between Sport and PT. Because Plaintiffs 

 

529 See supra notes 225-27 and accompanying text.
163

failed to prove by a preponderance of the evidence that Defendants acted in some way 

other than loyally to the Company, I reject their duty of candor claim as fatally flawed. 

Plaintiffs bear the burden of proving that each Defendant ―sabotaged‖ the 

Company‘s strategic direction. They have not shown, however, that any Defendant had a 

motive contrary to that of the stockholders at large. Similarly, Plaintiffs have shown no 

evidence that Atkins or Smith did anything to sabotage the DSC or OptimisSport. 

Plaintiffs have not proven that Horne took actions sufficient to constitute disloyalty—at 

worst, he told an employee, who ignored him, not to work on a project Horne believed 

was a waste of money, but in which he nevertheless participated. Plaintiffs also have not 

shown that Waite did anything more than compete for limited resources within the 

Company and vent about Morelli‘s performance as CEO. Based on the evidence 

presented at trial, therefore, I conclude that Defendants and others in the Company 

favoring OptimisPT proceeded in good faith and in the reasonable belief that they were 

acting in the best interests of Optimis and its stockholders.530 Thus, I conclude that 

Plaintiffs have not proven that Defendants undermined the Company‘s strategic vision.

2. Attempting to gain control of Optimis by ambush

Plaintiffs‘ second theory of liability is the closest to a traditional duty of loyalty 

violation. Although not directly an interested transaction, Plaintiffs argue that Morelli‘s 

ouster was self-interested—driven by a hatred of Morelli or a decision to divest him of 

his contractual right to control the composition of the Board until early 2015 by whatever 

 

530 E.g., Tr. 782-83 (Fearon). 
164

means necessary—and fell below minimum standards of fairness. A primary premise of 

this theory is that the sexual harassment investigation was a sham and a pretext to 

eliminate Morelli. Plaintiffs contend that the entire process was ―tainted by defendants‘ 

undisclosed material conflicts.‖531 I reject this argument, but note that, in making it, 

Plaintiffs relied heavily on certain Delaware case law that appears supportive. Having 

carefully considered those cases, I conclude that the main ones were incorrectly decided 

and I decline to follow them. In rejecting those cases and applying the law to the facts as 

I have found them, I find that the process to oust Morelli, though procedurally bungled, 

was a good faith effort to act in the best interests of the Company and that no liability 

attaches to that attempt.

a. The super-director theory

The first element of Plaintiffs‘ argument is that Morelli, as a director and 

controller,532 was entitled to advance notice of the October 20 Meeting and a chance to 

exercise his contractual rights and reconstitute the Board. By depriving him of that right, 

Defendants allegedly breached their duty of loyalty. To evaluate Plaintiffs‘ legal 

position, it is necessary to examine a line of four cases dating to 1992.

 

531 PRB 18.

532 Under the Stockholders Agreement, the Initial Stockholders had the right to 

appoint a majority of the Board. Morelli, individually and through Analog, 

controlled the vast majority of the shares held by the Initial Stockholders. 

Accordingly, he unilaterally could determine a majority of the Board. See supra 

notes 177-79 and accompanying text.
165

The first of those cases was Koch v. Stearn.

533

 In that case, the company, 

Showcase Communications Network, Inc. (―Showcase‖), had a four-member board. 

Stearn, the President, CEO, and majority stockholder, controlled two board seats; Koch, 

an outside director who owned preferred stock, had the right to appoint two board 

members and the right to elect a fifth director if certain covenants were breached. The 

board initially consisted of Stearn, his appointee Ginsberg, Koch, and his designee Bunn. 

When Showcase ended up in poor financial condition, Koch offered to invest more 

money if Stearn resigned. On April 6, 1992, Bunn faxed Showcase‘s attorney a letter 

asking him and Stearn to attend a special board meeting the next morning. That same 

day, Bunn circulated to Koch and Ginsberg draft resolutions that provided, among other 

things, for Stearn‘s removal, but no one sent those resolutions to Stearn.534

At the meeting, after Stearn refused to reconsider the financing offer, Bunn 

proposed the resolution removing him as President and CEO and replacing him with 

Ginsberg. Stearn at some point attempted to remove Ginsberg. Koch later purported to 

exercise his power to appoint a fifth director. A Section 225 action followed. According 

to the Court, the ―validity of the board action taken on April 7th . . . depends upon 

whether Stearn was tricked or deceived into attending the meeting.‖535 The Court found 

 

533 1992 WL 181717, 18 DEL. J. CORP. L. 730 (Del. Ch. July 28, 1992), vacated, 628 

A.2d 44 (Del. 1993), overruled in part (despite being vacated), Klaassen v. 

Allegro Dev. Corp., 106 A.3d 1035 (Del. 2014). 

534 Id. at 732-35.

535 Id. at 737.
166

that Stearn was tricked into attending, even though Stearn suspected his removal would 

be discussed. More importantly for present purposes, the Court concluded that Stearn 

was ―disadvantaged‖ by the failure of the other directors to clue him in on their plans:

If Stearn had seen the draft resolutions before the meeting, he 

could have exercised his right to remove Ginsberg as a 

director and he could have replaced Ginsberg with another 

nominee who would vote with Stearn to block Stearn‘s 

removal. Without doubt, Stearn‘s inability to thus protect 

himself constituted a disadvantage. Thus, I conclude that the 

actions taken at the April 7th board meeting were void and of 

no effect.536

The Court cited no authority in support of its decision and I am aware of no case 

previously so holding. To the contrary, it long has been the law of Delaware that a 

Delaware corporation is managed by the directors.537 The Koch opinion, however, 

suggests that a CEO with board-appointment rights must receive notice of board action 

against him so that he can preempt the Board.

 

536 Id. at 738.

537 8 Del. C. § 141(a) (―The business and affairs of every corporation organized under 

this chapter shall be managed by or under the direction of a board of directors 

. . . .‖); McMullin v. Beran, 765 A.2d 910, 916 (Del. 2000) (―One of the 

fundamental principles of the Delaware General Corporation Law statute is that 

the business affairs of a corporation are managed by or under the direction of its 

board of directors.‖); Aronson v. Lewis, 473 A.2d 805, 811 (Del. 1984) (―A 

cardinal precept of the General Corporation Law of the State of Delaware is that 

directors, rather than shareholders, manage the business and affairs of the 

corporation.‖), overruled in irrelevant part, Brehm v. Eisner, 746 A.2d 244 (Del. 

2000).
167

The Delaware Supreme Court vacated Koch, but its holding still was relied on in 

the case of VGS, Inc. v. Castiel,

538

a case upon which Plaintiffs rely heavily. VGS

involved an LLC. Castiel, directly or indirectly, owned 75% of the member interests and 

75% of the voting rights. Sahagen, a venture capitalist, owned the other 25% of the 

member interests and the voting rights. Castiel had the right to appoint two directors, and 

Sahagen had the right to appoint one. The board consisted of Castiel, his appointee 

Quinn, and Sahagen. Sahagen eventually convinced Quinn that Castiel was a bad 

manager and needed to be terminated. The pair then used a provision in the LLC‘s 

operating agreement allowing the use of non-unanimous written consents and effected a 

merger whereby Castiel‘s ownership interest was diluted to 37.5%.539 

The Court held that Sahagen and Quinn breached the duty of loyalty they owed to 

Castiel, as another LLC member.540 In so holding, the Court stated:

When Sahagen and Quinn, fully recognizing that this [ability 

to appoint two directors] was Castiel‘s protection against 

actions adverse to his majority interest, acted in secret, 

without notice, they failed to discharge their duty of loyalty to 

him in good faith. They owed Castiel a duty to give him prior 

notice even if he would have interfered with a plan that they 

 

538 2000 WL 1277372 (Del. Ch. Aug. 31, 2000), aff’d, 781 A.2d 696 (Del. 2001) 

(TABLE).

539 Id. at *1-2.

540 This holding is inapplicable in the corporate context. Fiduciary duties are owed to 

the entity and the stockholders at large, not a single stockholder, even if that 

person is a majority stockholder. See supra note 520.
168

conscientiously believed to be in the best interest of the 

LLC.

541

Next, in 2002, this Court issued a memorandum opinion in the case of Adlerstein 

v. Wertheimer,

542 a Section 225 case upon which Plaintiffs principally rely. Adlerstein 

based its holding on VGS, an LLC case,543 and Koch, which was vacated. Adlerstein

concerned SpectruMedix Corporation (―SpectruMedix‖) and its former chairman and 

CEO, Adlerstein. As of 2000, Adlerstein owned about 21% of the equity of 

SpectruMedix, but controlled 73% of the vote. The company‘s board then consisted of 

Adlerstein, Wertheimer, an investment banker, and Mencher, a money manager with 

expertise in distressed investments. In March 2001, a sexual harassment allegation was 

lodged against Adlerstein, and an independent consultant later concluded that Adlerstein 

was guilty of sexual harassment and had not been cooperative during the investigation. 

Adlerstein also was less than forthcoming with the board about the company‘s cash 

situation, which was dire. When the board hired a restructuring consultant, Adlerstein 

 

541 VGS, 2000 WL 1277372, at *4.

542 2002 WL 205684 (Del. Ch. Jan. 25, 2002).

543 I question the applicability of VGS to corporate disputes. The facts of that case 

were dependent upon particular provisions of the LLC Operating Agreement in 

question. See CML V, LLC v. Bax, 28 A.3d 1037, 1043 (Del. 2011) (―Ultimately, 

LLCs and corporations are different; investors can choose to invest in an LLC, 

which offers one bundle of rights, or in a corporation, which offers an entirely 

separate bundle of rights.‖).
169

interfered with his work. The consultant eventually advised the board that SpectruMedix 

could not succeed unless Adlerstein was removed.544

Wertheimer contacted Reich, an investor and manager with the wealth and ability 

to fix SpectruMedix. Reich offered to invest in the company, but only if Adlerstein were 

removed and Reich were put in charge. Soon thereafter, Wertheimer, Mencher, and 

Reich discussed firing Adlerstein for cause because of the sexual harassment. By early 

July 2001, the company was basically insolvent. On July 5, Wertheimer asked Adlerstein 

to attend a July 9 meeting. On July 6, Reich circulated draft transactional documents to 

Wertheimer and Mencher, but not Adlerstein. Adlerstein called the July 9 meeting to 

order and began discussing an ongoing arbitration. Wertheimer interrupted him, changed 

the topic to finances, and showed Adlerstein the term sheet for the Reich deal. Adlerstein 

rejected the proposal because it would dilute his shares and eliminate his voting control. 

Wertheimer then moved to vote on the transaction; he and Mencher voted in favor, 

thereby approving the deal. Next, Wertheimer and Mencher discussed removing 

Adlerstein for cause, which they did.545

In response to Adlerstein‘s challenge to the transaction under Section 225, the 

Court concluded that he had a right to know of the Reich investment deal in advance, 

because it would have eliminated his majority control. In a line relied upon by Plaintiffs, 

the Court stated: ―This right to advance notice derives from a basic requirement of our 

 

544 Adlerstein, 2002 WL 205684, at *1-4.

545 Id. at *4-7.
170

corporation law that boards of directors conduct their affairs in a manner that satisfies 

minimum standards of fairness.‖546 The Court continued:

Adlerstein possessed the contractual power to prevent the 

issuance of the Series C Preferred Stock by executing a 

written consent removing one or both of Wertheimer and 

Mencher from the board. He may or may not have exercised 

this power had he been told about the plan in advance. But he 

was fully entitled to the opportunity to do so and the 

machinations of those individuals who deprived him of this 

opportunity were unfair and cannot be countenanced by this 

court.547

The Court stated that the result ―flows from the fact that Adlerstein was both a director 

and a controlling stockholder, not from either status individually.‖548 The Court further 

held that the ―authority of both Koch and VGS strongly support the conclusion that 

Adlerstein had a right to such advance notice in order that he might have taken steps to 

protect his interest.‖549

 

546 Id. at *9.

547 Id.

548 Id. at *9 n.28. In explaining its rationale, the Court recognized that Adlerstein 

would not have been entitled to notice as a stockholder, or as a director. But, the 

Court held that, ―when a director either is the controlling stockholder or represents 

the controlling stockholder, our law takes a different view of the matter where the 

decision to withhold advance notice is done for the purpose of preventing the 

controlling stockholder/director from exercising his or her contractual right to put 

a halt to the other directors‘ schemes.‖ Id.

549 Id. at *11. 
171

The final case in this line is Fogel v. U.S. Energy Systems, Inc.550 There, Fogel 

was the CEO and chairman of the board, which included three other board members. The 

company in question was in financial distress and the board determined, on June 14, 

2007, to hire a restructuring officer and to meet again on June 29. Over that fifteen-day 

period, the three independent directors discussed Fogel‘s performance and eventually 

decided that he should be fired. By the morning of the 29th, the other directors had 

resolved to terminate Fogel, and they asked him to resign voluntarily by the end of the 

day. One of the directors called him that evening; Fogel declined to resign and the 

director told him he was fired. On July 1, Fogel attempted to call a special meeting of the 

stockholders to remove the directors, as authorized by the company‘s bylaws. That same 

day, the board ignored Fogel‘s call for a special meeting and passed a resolution 

terminating him.551

Fogel subsequently filed a Section 225 action. The Court determined that the 

meeting where Fogel was terminated was not a board meeting under Delaware law and 

thus the action taken there was void. More importantly for present purposes, the Court 

held, in the alternative, that the action taken was void because Fogel was tricked into 

coming. Relying on Koch and Adlerstein, the Court held that, even though Fogel 

probably lacked the votes, ―had he known [the purpose of the meeting] beforehand, he 

 

550 2007 WL 4438978 (Del. Ch. Dec. 13, 2007), overruled on other grounds, 

Klaassen v. Allegro Dev. Corp., 106 A.3d 1035 (Del. 2014).

551 Id. at *1-2. 
172

could have exercised his right under the bylaws to call for a special meeting before the 

board met. The deception renders the meeting and any action taken there void.‖552

Plaintiffs rely on this line of cases, including primarily Adlerstein and VGS, for the 

proposition that it was a breach of the duty of loyalty for the Director Defendants not to 

provide Morelli fair notice of their intent to remove him and allow him to exercise his 

rights under the Stockholders Agreement. To the extent that one or more of the cases on 

which Plaintiffs rely can be read to stand for that proposition, I decline to follow those 

cases.

553

At least three of the four cases just discussed threaten the fundamental premise of 

Delaware law that a corporation is managed by the board of directors.554 Vice Chancellor 

Laster examined these and other earlier cases at length in his opinion granting a stay in 

Klaassen v. Allegro Development Corp.

555

 I agree with his criticisms of those precedents 

and summarize some of them here.

 

552 Id. at *4. 

553 I also note that money damages were not a component of any of these four cases, 

whereas the relief Plaintiffs seek here includes damages. Furthermore, VGS is 

factually distinguishable from this case. First, the machinations undertaken in that 

case depended upon specific provisions of the LLC Agreement in question. See 

supra note 543. Second, the primary holding of VGS was that Sahagen and Quinn 

breached their duty of loyalty to Castiel. Here, the analogous holding would be 

that Defendants breached their duty of loyalty to Morelli. But, no such duty exists 

in the corporate context. See supra notes 520 & 540. 

554 See supra note 537.

555 2013 WL 5967029 (Del. Ch. Nov. 7, 2013). On appeal in Klaassen, the Supreme 

Court recognized that Vice Chancellor Laster questioned the continuing viability 
173

In my view, the holdings of these cases depart from key tenets of Delaware law. 

In a Delaware corporation, the directors of the corporation manage the corporation and 

that principle is statutorily enshrined in Section 141(a). A written contract allowing 

board appointment rights cannot be used to thwart that precept of Delaware law.

Plaintiffs‘ theory, fairly understood, is that Morelli had absolute blocking rights 

against the Board because it would be unjust to take any action against him before he 

could exercise his rights to remove and reappoint a majority of the board. This would 

make him, for all intent and purposes, a ―super-director whose powers trump the board‘s 

statutory authority under Section 141(a).‖556 Rather than recognize such power in one 

individual, however, our law consistently has been to the contrary.557 The board has a 

duty to act in the best interests of the entity and the stockholders as a whole. Thus, in 

appropriate instances, the fiduciary duties of directors may enable a board to take action 

 

of these precedents, but did not address that concern because it was unnecessary to 

answer the question presented. 106 A.3d 1035, 1045 n.65 (Del. 2014). Whether 

or not Koch, Adlerstein, and Fogel are good law squarely has been raised in this 

case.

556 Klaassen, 2013 WL 5967028, at *3.

557 Phillips v. Insituform of N. Am., Inc., 1987 WL 16285, 13 DEL. J. CORP. L. 774, 

790 (Del. Ch. Aug. 27, 1987) (―Much of plaintiffs‘ argument that the by-law 

amendments are invalid seems premised on an assumption that a right to designate 

a majority of the board involves legally the right to control the board‘s action and 

thus the corporation. However, so long as the law demands of directors, as I 

believe it does, fidelity to the corporation and all of its shareholders and does not 

recognize a special duty on the part of directors elected by a special class to the 

class electing them, such a premise must be regarded as legally incorrect.‖).
174

against a controlling stockholder.558 By contrast, the cases upon which Plaintiffs rely 

suggest that, even if the directors in the exercise of their fiduciary duties conclude that the 

CEO must be fired, the directors first must give the CEO the chance to fire a majority of 

the directors and replace them with his own hand-picked group of more acquiescent 

directors—a Catch-22 for Optimis in this case. Such a holding creates serious 

entrenchment problems and undermines one of the board‘s chief functions, which is the 

appointment of officers, and particularly the CEO, to manage the corporation‘s day-today affairs.559

 Thus, I consider the Koch line of cases difficult to square with the bedrock 

principle of Delaware law that the directors of a corporation manage the corporation‘s 

affairs.

Accordingly, I reject the first premise of Plaintiffs‘ ambush theory, i.e., that 

Morelli was entitled to advance notice of the meeting so that he could replace the 

directors and thwart the Board. In the circumstances of this case, at least, I find the case 

 

558 See, e.g., Mendel v. Carroll, 651 A.2d 297, 304 (Del. Ch. 1994) (―Where, 

however, a board of directors acts in good faith and on the reasonable belief that a 

controlling shareholder is abusing its power and exploiting or threatening to 

exploit the vulnerability of minority shareholders, I suppose . . . that the board 

might permissibly take such an action [and dilute the controller‘s holdings].‖)

(Allen, C.) (citing Blasius Indus., Inc. v. Atlas Corp., 565 A.2d 651 (Del. Ch. 

1988), Freedman v. Restaurant Assoc., 1987 WL 14323 (Del. Ch. Oct. 16, 1987), 

and Phillips, 1987 WL 16285); see also Hollinger Int’l, Inc. v. Black, 844 A.2d 

1022, 1088 (Del. Ch. 2004) (―By parity of reasoning, if actual action to dilute the 

majority might be justified, the less extreme act of interposing a rights plan should 

not be ruled out entirely as a permissible response to a controlling stockholder‘s 

serious acts of wrongdoing towards the corporation.‖) (Strine, V.C.), aff’d, 872 

A.2d 559 (Del. 2005).

559 See Klaassen, 2013 WL 5967028, at *15 & nn.6-8 (collecting sources).
175

law supporting Plaintiffs‘ argument to be unsound and I decline to follow it. Rather, each 

case must be examined on its own facts, especially in a Court of equity. Here, the first 

thing Morelli did after October 20, 2012, was fire all three of the Board members he had 

appointed who voted to terminate him as CEO. I have no doubt he would have 

terminated those directors in advance of the meeting if he had been given the opportunity. 

Thus, I hold that none of the Director Defendants breached their duty of loyalty by not 

advising Morelli in advance of his potential termination.

b. The Geller Investigation

Plaintiffs further contend that Defendants breached their fiduciary duties by: (1) 

manipulating the Geller Investigation to provide a pretext to oust Morelli; (2) 

manipulating the information provided to the Board at the October 20 Meeting; and (3) 

botching the October 20 Meeting so badly that it amounted to bad faith. These claims 

rely on a number of factual premises that I have rejected. Accordingly, most of these 

contentions can be dismissed in short order. For instance, there is no evidence that Smith 

or Atkins played any role in the Geller Investigation.

As to Plaintiffs‘ contention that Defendants Waite or Horne manipulated the 

Geller investigation, Plaintiffs have the burden of proof. Because I have concluded that 

Geller‘s deposition testimony is credible, their manipulation argument is without merit. 

Plaintiffs failed to prove that anyone manipulated Geller. Even though she stated to 

Waite on September 21 that she did not want to make a sexual harassment claim, Waite 

acted reasonably and, perhaps, in accordance with the requirements of California law or, 

at least, Optimis‘ sexual harassment policy, when he reported Geller‘s accusations to 
176

Kreile. Plaintiffs did not prove by a preponderance of the evidence that Waite knew in 

advance of September 21 about Geller‘s allegations. Even if he did, however, Plaintiffs 

have not proven: (a) that anyone encouraged Geller to make the claim; or (b) that anyone 

encouraged Geller to change her story to Solomon between the first and second 

interviews. Plaintiffs allege that Defendants bribed Geller, but the evidence they rely on 

is too weak to overcome her testimony to the contrary. Plaintiffs showed that Geller had 

free use of Horne‘s apartment, and after October 20, 2012, her pay was equalized with 

other physical therapists and she was allowed to remediate her residency program. As 

discussed supra, there are innocuous explanations for each of these actions. Thus, based 

on the evidence presented, and my discussion of Plaintiffs‘ witness tampering, I conclude 

that Plaintiffs have failed to prove by a preponderance of the evidence that Defendants, 

individually or collectively, encouraged or bribed Geller to make her claims or 

encouraged or bribed her to change her story. 

Plaintiffs‘ argument that Horne manipulated the investigation by telling Solomon 

about his affair with Doherty and asking her not to include that in her report is illogical. 

By telling Solomon about his relationship, Horne put his cards on the table and she fairly 

could evaluate his credibility. Similarly, even if Horne lied about previously being 

friends with Morelli, I do not understand how telling Solomon that he hated Morelli 

undermined the investigation in any way. Horne also told Solomon that he did not 

believe Morelli was capable of sexual harassment. In addition, Plaintiffs repeatedly 

argued that Waite manipulated the investigation by not telling Solomon about his 

takeover plot. But, Plaintiffs have not proven that Waite, individually or in concert with 
177

others, was involved in a takeover plot; accordingly, they have not proven that Waite had 

any potential bias that he improperly failed to disclose to Solomon.

In any event, even assuming, hypothetically, that Waite personally wanted to oust 

Morelli and would lie to accomplish that goal, it remains unclear how that affects the 

propriety of Solomon‘s investigation. Under the facts as I have found them, Waite 

promptly turned the matter over to Kreile in HR. Kreile contacted the insurer. The 

insurer hired Zilberman. Zilberman hired Solomon. Solomon conducted the 

investigation and concluded that Geller was credible and that her allegations were 

corroborated by the testimony of others besides Waite. Solomon—who credibly denied 

she was rushed—provided her report to Zilberman, who made recommendations to the 

Board. Meanwhile, Brys engaged Kaufman as independent outside counsel to advise the 

Company. Thus, Plaintiffs have not proven that the Geller Investigation either was a 

pretext for a secret takeover plot or that it was compromised, lacked independence, or 

was not thorough. By contrast, the evidence supports the finding that this was a good 

faith, independent investigation by outside counsel that concluded Optimis‘ CEO 

apparently had engaged in sexual harassment. At a minimum, the evidence shows that 

the Director Defendants had no reason to question the expertise of Solomon or Zilberman 

or the reliability of the Solomon Report or Zilberman‘s advice regarding the Geller 

Investigation.

Plaintiffs‘ contrary argument, aside from being based on allegations of a wideranging conspiracy, which I have rejected, rests on allegations that one or more 

Defendants manipulated Geller, and then manipulated or fooled four different 
178

independent third-party attorneys—Solomon, Zilberman, Kaufman, and Robbins. On 

one side of the evidentiary ledger, I have found (or the parties do not dispute) numerous 

facts that support Defendants‘ explanation of the challenged events, the bona fides of the 

investigation, and the actions Defendants took. Morelli admittedly had sexual contact 

with a subordinate in his bedroom-office while she was working. At least one other 

female employee previously had seen Morelli naked in his bedroom-office.

560

 

Defendants had no role in the selection of the investigator that did the fact-finding. 

Morelli, on the other hand, took actions to interfere with the investigation, such as 

attempting to convince Horne and Brys to get Geller to rescind her allegations and filing 

his own sexual harassment complaint against Geller. Thus, Plaintiffs have failed to prove 

that the Geller Investigation was a pretext or that Defendants manipulated that 

investigation.

c. The October 20 Meeting

The October 20 Meeting was not a model of corporate governance, but it does not 

provide a basis for any breach of the duty of loyalty. Viewing the October 20 Meeting in 

light of my findings that Plaintiffs have not proven: (1) a takeover motive by any of the 

Defendants; (2) the existence of a conspiracy; (3) that the Geller Investigation was a 

pretext; or (4) that Geller was manipulated, the meeting looks like nothing more than a 

board attempting in good faith to follow the advice provided by several separate legal 

 

560 Morelli‘s secretary, Eastman, had seen him come out of the shower in his 

bedroom-office completely naked. Eastman Dep. 29. 
179

advisors.561 For incidental failings in this regard, Delaware law provides a safe harbor for 

directors under 8 Del. C. § 141(e).562

Directors are protected under Section 141(e) ― ̳when the directors reasonably 

believe the information upon which they rely has been presented by an expert selected 

with reasonable care and is within that person‘s professional or expert competence.‘‖563 

 

561 Plaintiffs assert that the Director Defendants manipulated the meeting in bad faith. 

Bad faith is a high standard. In Stone v. Ritter, 911 A.2d 362, 369-70 (Del. 2006), 

the Supreme Court gave the following examples of bad faith conduct: ―where the 

fiduciary intentionally acts with a purpose other than that of advancing the best 

interests of the corporation, where the fiduciary acts with the intent to violate 

applicable positive law, or where the fiduciary intentionally fails to act in the face 

of a known duty to act, demonstrating a conscious disregard for his duties.‖ 

Plaintiffs base their allegations of bad faith on their assertion that Defendants had 

a purpose other than advancing the Company‘s best interests. Because Plaintiffs 

failed to prove such a purpose, they have not shown that Defendants acted in bad 

faith at the October 20 Meeting.

562 ―A member of the board of directors, or a member of any committee designated by 

the board of directors, shall, in the performance of such member‘s duties, be fully 

protected in relying in good faith upon the records of the corporation and upon 

such information, opinions, reports or statements presented to the corporation by 

any of the corporation‘s officers or employees, or committees of the board of 

directors, or by any other person as to matters the member reasonably believes are 

within such other person‘s professional or expert competence and who has been 

selected with reasonable care by or on behalf of the corporation.‖ 8 Del. C. 

§ 141(e).

563 Crescent/Mach I P’rs, L.P. v. Turner, 846 A.2d 963, 985 (Del. Ch. 2000) (Steele, 

V.C. by designation) (internal quotations omitted) (quoting In re Cheyenne 

Software, Inc. S’holders Litig., 1996 WL 652765, at *2 (Del. Ch. Nov. 7, 1996)).
180

To rebut the Director Defendants‘ claimed reliance on the advisors in question here, 

Plaintiffs would have to show that they were grossly negligent in so relying.564

It is not material that the full Board did not make the decision to hire these 

advisors. Section 141(e) expressly allows reliance on those selected ―by or on behalf of

the corporation.‖ Zilberman was hired by PLIS, the Company‘s insurer; therefore, he 

comes within the scope of the Section 141(e) safe harbor. In addition, Kaufman was 

hired by the Company‘s General Counsel, Brys, to represent Optimis in the event of any 

conflict between Zilberman and the Company. Those two attorneys were in agreement in 

every instance when Brys sought a legal opinion of both.565 Although Robbins‘s 

retention is more questionable,566 there is no indication that he was unqualified as a 

 

564 The Supreme Court has provided the following list of examples that, if proven, 

would rebut the protection offered by Section 141(e): ―(a) the directors did not in 

fact rely on the expert; (b) their reliance was not in good faith; (c) they did not 

reasonably believe that the expert‘s advice was within the expert‘s professional 

competence; (d) the expert was not selected with reasonable care by or on behalf 

of the corporation, and the faulty selection process was attributable to the 

directors; (e) the subject matter . . . that was material and reasonably available was 

so obvious that the board‘s failure to consider it was grossly negligent regardless 

of the expert‘s advice or lack of advice; or (f) that the decision of the Board was so 

unconscionable as to constitute waste or fraud.‖ Brehm v. Eisner, 746 A.2d 244, 

262 (Del. 2000).

565 Brys Dep. 104.

566 Waite testified that he contacted Robbins because he ―had apparently taken on 

Michael Eisner in some board battle or something like that.‖ Tr. 1077 (Waite). 

This appears to be a reference Robbins‘s representation of Roy Disney and Stanley 

Gold in their Vote No campaign against Eisner. See Bruce Orwall et al., Eisner 

Steps Down as Disney Chairman, WALL ST. J. (Mar. 4, 2004), available at

http://www.wsj.com/articles/SB107832734296045356. 
181

corporate attorney. Indeed, the Ad Hoc Committee considered his credentials, which 

Sussman described as ―impressive,‖ and expressly approved his engagement.567 

Plaintiffs complain that none of the advisors was a Delaware attorney. Section 141(e), 

however, contains no such requirement. Furthermore, many of the issues involved at the 

October 20 Meeting related to sexual harassment under California law.568

Finally, Plaintiffs argue that the Director Defendants manipulated the information 

provided to the Board. There is no evidence of any such manipulation by either Smith or 

Atkins. This leaves Waite. Plaintiffs contend Waite had an obligation to tell the Board 

that he had known of Geller‘s allegations since February. This argument is unpersuasive 

because Plaintiffs failed to prove that Waite knew anything about those allegations before 

September 21, 2012, let alone the details he learned on that date. In any event, I find that 

any knowledge by Waite more than likely would not have affected Zilberman‘s advice or 

the Board‘s reliance upon it. Even if Waite knew of the allegations in advance, that does 

not change the fact that Solomon found Morelli engaged in unwelcome sexual 

interactions with Geller or that Zilberman, Kaufman, and Robbins all advised that Morelli 

 

567 Tr. 841 (Sussman).

568 Plaintiffs speculate that the advisors did not review the relevant Delaware law or 

were unfamiliar with Optimis‘ corporate governance documents. Because this is a 

post-trial opinion, Plaintiffs must prove what they allege and they supplied no 

evidence to support such speculation. I also do not find persuasive the fact that the 

meeting may have been contrary to Adlerstein. The key inquiry is whether the 

Director Defendants had some reason to doubt that they reasonably could rely on 

their legal advisors. No evidence suggests that the existence of a potential 

problem under Adlerstein would have been known to or understood by 

Defendants.
182

should be fired for that apparent sexual harassment. Plaintiffs again complain that the 

Director Defendants hid their takeover motives and that Waite had numerous contacts 

with Geller during the investigation. But, Plaintiffs have not proven either a takeover 

motive or that Geller ever was encouraged to make the allegations in the first place or 

change her story. 

Accordingly, Waite and the other Director Defendants were entitled under Section 

141(e) of the DGCL to rely in good faith upon the three advisors that were present at the 

October 20 Meeting, and they did. The Director Defendants‘ actions leading up to and at 

that meeting, therefore, are fully protected. Waite relied in good faith upon advisors at 

every step of the way. He relied upon Brys, and probably Sussman, in drafting the 

meeting notice. He relied on Robbins and Zilberman in excluding Morelli from the 

meeting.569 The Board relied on Zilberman and Solomon (via her report) in determining 

to fire Morelli. 

Plaintiffs also contend that Waite misrepresented the effect of Amendment No. 2 

to the Board. That amendment, among other things, eliminated the right of the Initial 

Stockholders (effectively, Morelli) to appoint a majority of the Board until 2015. 

According to Abdelhamid‘s deposition, Waite stated that the Amendment was no big 

 

569 See also J. Travis Laster and John Mark Zeberkiewicz, The Rights and Duties of 

Blockholder Directors, 70 BUS. LAW. 33, 57-60 (Winter 2014/2015) (discussing 

Delaware case law supporting the concept that, in certain situations, a conflicted 

director can be excluded from decision making relevant to that conflict). 
183

deal.570 Assuming Waite made that statement, I agree with Plaintiffs that it was 

inaccurate and potentially misleading. Abdelhamid‘s deposition testimony is murky, 

however, in its descriptions and contrary to contemporaneous documents in which 

Abdelhamid and Waite discussed the fact that, by virtue of Amendment No. 2, 

Abdelhamid would lose his own Board appointment right, as would the Director 

Defendants.571 Additionally, even if Waite did say that Amendment No. 2 was a small 

thing or that it would not affect Morelli, the other testimony supports a reasonable 

inference that, nonetheless, the Board understood that the purpose of the amendment was 

to prevent Morelli from undoing his own termination.572 Plaintiffs also argue that the 

Director Defendants are liable for ―failing to permit the board to consider Morelli‘s 

written consent to elect a new majority of directors.‖573 I have found, however, that

 

570 Abdelhamid Dep. 68-69.

571 JX 411.0004.

572 Tr. 645-47 (Sussman). Sussman‘s testimony is perhaps the most sympathetic to 

Plaintiffs‘ position. To the extent that Sussman implies that the Board did not 

understand the amendment and the need for Amendment No. 2, however, I do not 

consider his testimony reliable. The reason is that he seems to have misled Brys 

and Waite with respect to the meeting notice and then assisted Morelli in creating 

an agenda, and also because after the meeting Sussman met only with Wing, 

Morelli‘s ally on the Board, to work on documentation of the meeting. I also note 

that Sussman, a corporate attorney, recognized Morelli was being terminated and 

told Morelli something to the effect that it was ―too late‖ when Morelli attempted 

to raise the issue of the written consents. Id. at 1484 (Atkins); id. at 1287 (Smith). 

All of the Director Defendants understood the purpose of the Amendment. Id. at 

1083-86 (Waite); id. at 1284 (Smith); id. at 1483 (Atkins).

573 POB 53.
184

Morelli did not present his written consents until after Amendment No. 2 had been 

approved, by which time Sussman informed Morelli that it was too late.574

Although the Board meeting had many flaws, the Director Defendants reasonably 

relied on several attorneys to guide them through the process. Plaintiffs have not proven 

a takeover motive or that the Director Defendants acted in bad faith as to the meeting. In 

particular, Plaintiffs have not proven that Defendants attempted to take over the company 

by ―ambush‖ or in a way that falls below minimum standards of fairness. To the extent 

the Koch line of cases otherwise would lead to a different conclusion, I first note that I 

am not aware of the Delaware Supreme Court ever having endorsed that line of 

reasoning. Furthermore, if Koch or any of its progeny would lead to a different result 

here, I consider the reasoning of those cases flawed and decline to follow it in the 

circumstances of this case.

3. Trying to steal Rancho

Plaintiffs‘ third theory is that the Director Defendants breached their duty of 

loyalty by filing the Rescission Action without telling the Board about the underlying 

problem: a flawed corporate structure. Specifically, California Business & Professions 

Code § 2694 prohibits any non-licensed person (i.e., Optimis) from being a shareholder 

 

574 Plaintiffs rely on the unclear deposition testimony of Abdelhamid to suggest that 

Morelli circulated the written consents before Amendment No. 2 was signed. 

Abdelhamid Dep. 68-69. I do not consider this chronology to be accurate or 

reliable, as it is contrary to the facts as I have found them, including Sussman‘s 

contemporaneous notes. See supra Section II.L; see also infra Section V.C.1.
185

of a physical therapy corporation,575 and California Corporations Code §§ 13406(a) and 

13407 render void any transfer of shares in a professional corporation, including physical 

therapy corporations, to such a non-licensed person.576 Briefing on this issue by both 

Plaintiffs and the Director Defendants was sparse and largely unhelpful. 

Preliminarily, I note that the Director Defendants did not breach their duty of 

loyalty by filing the Rescission Action because it was filed after they had resigned from 

Optimis. Because of the bright-line rule as to the temporal scope of directors‘ fiduciary 

duties,577 filing the lawsuit itself could not have breached a duty they no longer owed. 

Furthermore, it cannot be said that the lawsuit was meritless. Shortly after the Director 

Defendants filed the Rescission Action, Optimis remedied the faulty corporate structure 

that the lawsuit pointed out by assigning Rancho to Tinoco, who is a physical therapist.

As Plaintiffs allege, however, the Director Defendants were aware of the illegal 

corporate structure while they were Optimis directors and failed to alert the rest of the 

Board. The Director Defendants instead secretly planned their lawsuit. This leaves 

Plaintiffs asserting that the Director Defendants breached their duty of candor by not 

 

575 Cal. Bus. & Prof. Code § 2694.

576 Cal. Corp. Code §§ 13406(a), 13407.

577 In re Walt Disney Co. Deriv. Litig., 907 A.2d 693, 758 (Del. Ch. 2005) (―Just as 

Delaware law does not require directors-to-be to comply with their fiduciary 

duties, former directors owe no fiduciary duties . . . .‖) (footnote omitted), aff’d, 

906 A.2d 27 (Del. 2006).
186

revealing the defect that formed a primary basis for the Rescission Action.578 The 

Director Defendants have offered no serious defense to the fact that they failed to inform 

the Board.579 Their best argument in that respect stems from an analogy to unfair 

competition law, which recognizes that an agent or fiduciary can act consistently with his 

or her duty of loyalty while preparing to compete with the entity to which they owe 

fiduciary duties.580 I consider this analogy inapt. There is a material distinction between 

a fiduciary‘s preparing to compete, such as by forming a new entity, and failing to 

disclose a material problem in a corporation‘s structure and then attempting, after 

resigning, to exploit that very flaw. The Director Defendants had a duty to deal candidly 

 

578 See Mills Acq. Co. v. Macmillan, Inc., 559 A.2d 1261, 1283 (Del. 1989) (―[T]he 

duty of candor is one of the elementary principles of fair dealing . . . . At a 

minimum, this rule dictates that fiduciaries, corporate or otherwise, may not use 

superior information or knowledge to mislead others in the performance of their 

own fiduciary obligations.‖). The duty of candor, also called the duty of 

disclosure, can implicate either the duty of care or the duty of loyalty depending 

on the factual situation. See generally In re Transkaryotic Therapies, Inc., 954 

A.2d 346, 357-363 (Del. Ch. 2008) (discussing the evolution of the law on this 

issue). Here, I infer from the facts that the duty of loyalty is implicated.

579 The Director Defendants weakly contended that Morelli, as a corporate attorney, 

should have been aware of the problem with Optimis‘ corporate structure. 

Because it appears that no one focused on this issue in the more than five years 

since Optimis acquired Rancho, I see no merit in this finger-pointing defense.

580 Triton Constr. Co. v. E. Shore Elec. Servs., Inc., 2009 WL 1387115, at *9 (Del. 

Ch. May 18, 2009) (―[A]n agent can make arrangements or preparations to 

compete with his principal before terminating his agency, provided he does not act 

unfairly or injure his principal.‖), aff’d, 988 A.2d 938 (Del. 2010) (TABLE); see 

also Seibold v. Camulos P’rs LP, 2012 WL 4076182, at *21-22 (Del. Ch. Sept. 17, 

2012).
187

with their fellow directors.581 Having become aware of the problem with the RanchoOptimis structure, I conclude that the Director Defendants breached their duty of candor 

by not alerting the Board to the issue. Because they acted intentionally for their own 

benefit, I further find the Director Defendants breached their duty of loyalty in this 

regard.

Having found that breach, however, I am not convinced that it warrants a 

monetary or equitable remedy. The negative effects about which Plaintiffs in fact 

complain relate to the Rescission Action. Optimis promptly cured the technical defect 

regarding the ownership of Rancho by assigning it to Tinoco. As discussed, however, the 

filing of the Rescission Action itself was not a breach of fiduciary duty because the 

Director Defendants owed no fiduciary duties at the time of its filing. Furthermore, 

Plaintiffs have offered no basis upon which I could award any non-speculative damages 

for this breach of the duty of loyalty, as discussed in Section V.F infra.

4. Interfering with the B of I financing

Plaintiffs contend that the Director Defendants breached their fiduciary duties by 

unreasonably delaying the B of I financing, withdrawing their support, and then filing the 

Rescission Action. This is virtually identical to the tortious interference claim that I 

 

581 Int’l Equity Capital Growth Fund, L.P. v. Clegg, 1997 WL 208955, at *7 (Del. Ch. 

Apr. 22, 1997) (noting that directors owe a ―duty to disclose to other directors‖); 

see also Hoover Indus. v. Chase, 1988 WL 73758, at *2 (Del. Ch. July 13, 1988).
188

discuss in Section V.D.3 infra. Overall, Plaintiffs contend that the Director Defendants 

breached their fiduciary duties by interfering with the Company‘s financing.582

The evidence of disloyally delaying the financing is weak. Morelli testified that it 

took longer than necessary to get the documentation together, and Plaintiffs seem to 

blame that on Defendants.583 The evidence presented is insufficient to prove a breach of 

the duty of loyalty. Plaintiffs have not shown that this purported delay in providing 

documentation actually delayed the process of finalizing the loan or that any Defendant 

intentionally delayed providing the documentation. Additionally, it is difficult to 

understand how the Director Defendants breached their duty of loyalty by resigning from 

the Company. Leaving one‘s job could be a breach of contract, but the act of resigning 

and therefore choosing to no longer work for a company or owe it fiduciary duties, 

without more, generally would not give rise to a breach of the duty of loyalty, absent 

unusual circumstances such as those existing in In re Puda Coal, Inc. Stockholders 

Litigation.

584

 

582 Plaintiffs rely on Shocking Technologies, Inc. v. Michael, 2012 WL 4482838, at 

*10 (Del. Ch. Sept. 28, 2012) (―In short, a loyal director does not put the company 

in dire financial circumstances in order to obtain what he perceives as a benefit for 

himself and his associated investors.‖). That opinion was vacated after Plaintiffs 

filed their brief. 2015 WL 3455210 (Del. Ch. May 29, 2015). The principle for 

which Plaintiffs cite it, however, remains viable.

583 Tr. 450-52.

584 C.A. No. 6476-CS, at 22-23 (Del. Ch. Feb. 6, 2013) (TRANSCRIPT).
189

Plaintiffs‘ real complaint is with the Rescission Action, which they contend 

scuttled the B of I financing. Again, the Director Defendants were not fiduciaries when 

that action was filed. Plaintiffs‘ claim appears to be that by filing a lawsuit at a time 

when the Director Defendants were not fiduciaries, those Defendants breached their 

fiduciary duties. This claim fails under its own logic. The disruption of the B of I 

financing is best understood as a tortious interference claim. I address that argument 

infra. 

C. Plaintiffs Have Not Proven a Breach of Contract

Plaintiffs contend that Defendants breached the Stockholders Agreement by 

adopting Amendment No. 2. These claims, which are asserted against all Defendants, are 

legally deficient for the reasons that follow.

1. No Direct Breach

―[T]o state a breach of contract claim, the plaintiff must demonstrate: first, the 

existence of the contract, whether express or implied; second, the breach of an obligation 

imposed by that contract; and third, the resultant damage to the plaintiff.‖

585

 There is no 

evidence that Defendant Horne ever signed Amendment No. 2, nor was Horne present at 

the October 20 Meeting. How he breached the Stockholders Agreement is unexplained 

by Plaintiffs.

In their breach of contract claims against the Director Defendants, Plaintiffs assert 

that they breached the Stockholders Agreement by refusing to honor the written consents 

 

585 VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003).
190

presented by Morelli on October 20, 2012, thereby breaching Section 3.3(a) of that 

agreement. That section entitled the Initial Stockholders to appoint five members of the 

nine-member Board. Plaintiffs also assert a breach of Section 11, which is a ―further 

assurances‖ clause.

Section 3.1 of the Stockholders Agreement requires the signatories ―to vote or 

cause to be voted such Shares at any regular or special meeting of stockholders of the 

Company and/or give a written consent as a stockholder with respect to such Shares, in 

accordance with the provisions of this Agreement.‖586 Those provisions included a 

requirement that ―whenever members of the Board are to be elected by written consent,‖ 

the Initial Stockholders and the Director Defendants ―agree to vote or act with respect to 

their shares so as to: (a) cause and maintain the election to the Board of five (5) 

individuals designated by the holders of a majority of the Shares held by the Initial 

Stockholders.‖587 The Stockholders Agreement is silent as to how the Initial 

Stockholders are to ―designate‖ their candidates to the Director Defendants.

This breach of contract claim is meritless. Plaintiffs claim that the Director 

Defendants breached the Stockholders Agreement by not executing written consents to 

elect the new directors designated by the Initial Stockholders, i.e., Morelli. Amendment 

No. 2 purported to eliminate Morelli‘s right to appoint a majority of the directors of the 

 

586 SHA § 3.1.

587 Id. § 3.3(a).
191

Board.588 Plaintiffs have not shown that Morelli demanded that the Director Defendants 

provide such written consents before Amendment No. 2 was adopted. Nor have Plaintiffs 

shown how Morelli still had the contractual right to require the Director Defendants to 

sign written consents when he did make his demand.589 I have found that Morelli did not 

attempt to act by written consents from the stockholders, including consents to be 

obtained from the Director Defendants, until after the full Board was called to order for a 

 

588 JX 67.

589 Plaintiffs must prove the existence of the provision that allegedly was breached. 

Defendants have asserted that Section 3.3(a) could not have been breached 

because it had been amended out of existence. Plaintiffs seem to argue that 

Amendment No. 2 never took effect. The burden is on Plaintiffs, however, to 

prove that Section 3.3(a) remained in force at the time of the alleged breach, i.e., 

to prove that Amendment No. 2 did not take effect. Two elements were necessary 

to effectuate Amendment No. 2: (1) the votes of a majority of the stockholderparties to the underlying agreement; and (2) approval by the Board. In their posttrial briefing, Plaintiffs seemingly contested only the latter of those requirements. 

But, the Board did approve Amendment No. 2. The only way that approval would 

not have completed the amendment process was if the Board‘s actions were void. 

The Delaware Supreme Court, however, has held that board action ―taken in 

violation of an equitable rule‖ is voidable, not void. Klaassen v. Allegro Dev. 

Corp., 106 A.3d 1035, 1046-47 (Del. 2014). Accordingly, even though the parties 

settled the 225 Action in March 2013 and determined that ―any actions of the 

board purportedly taken at [the October 20 Meeting] were void,‖ JX 684.0004, I 

am not persuaded that that means Amendment No. 2 was not effective when 

Morelli attempted to act by the written consents. Rather, I assume that the actions 

taken at the October 20 Meeting were only voidable, as the holding in Klaassen

suggests, and therefore remained in force until voided by the settlement 

agreement. See generally C. Stephen Bigler & Seth Barrett Tillman, Void or 

Voidable?—Curing Defects in Stock Issuances Under Delaware Law, 63 BUS.

LAW. 1109, 1115-16 (August 2008) (discussing the distinction between void and 

voidable and noting that the latter is capable of ratification); see also Klaassen, 

106 A.3d at 1046 (noting that voidable acts are susceptible to equitable defenses).
192

second time and Amendment No. 2 was adopted. By that time, he no longer had the right 

to appoint a majority of the Board.590

2. The Implied Covenant Claims Are Fatally Flawed

Plaintiffs‘ implied covenant claims are more colorable, but still not meritorious. 

Plaintiffs make several arguments in this regard, some of which were not introduced until 

the post-trial briefing. The first is that Amendment No. 2 violated the implied covenant 

 

590 As discussed in Section V.B.2.c supra, I have rejected, as a factual matter, 

Plaintiffs‘ contention that Morelli attempted to act by written consent during the 

morning session of the October 20 Meeting. If Morelli properly had invoked 

Sections 3.1 and 3.3 of the Stockholders Agreement in the morning, the question 

of whether the Director Defendants would have violated the Stockholders 

Agreement would be more difficult, but the answer is not as clear as Plaintiffs 

argue. 

One instance where a party is excused from complying with a contract is when the 

counterparty is in material breach of that contract. BioLife Solutions, Inc. v. 

Endocare, Inc., 838 A.2d 268, 278 (Del. Ch. 2003) (―A party is excused from 

performance under a contract if the other party is in material breach thereof.‖). 

Consistent with my rejection of the Koch line of cases, I consider it conceivable 

that Delaware law would excuse what otherwise would be a breach of a 

stockholders agreement in certain instances, such as when enforcement of the 

agreement would undermine the principle established by 8 Del. C. § 141(a) and 

consideration of fiduciary duties implicated in a specific situation.

Although I need not reach this issue, I question whether Morelli would have had 

the right to demand that the Director Defendants execute written consents so that 

he could thwart the Board from determining, in the exercise of its fiduciary duties, 

whether Morelli needed to be terminated as CEO. See Rohe v. Reliance Training 

Network, Inc., 2000 WL 1038190, at *16 n.50 (Del. Ch. July 21, 2000) (Strine, 

V.C.) (―[I]t may well be that the director‘s right to demand a vote was conditioned 

on his compliance with an implied covenant not to intentionally breach his duty of 

loyalty to the corporation. If the director breached that implied covenant, his prior 

material breach could, as a doctrinal matter, be said to excuse subsequent nonperformance by the other party.‖); see also Hollinger Int’l, 844 A.2d at 1076 n.122 

(citing Rohe for the proposition that ―an agreement to vote for a director could be 

excused if the director later engaged in material misconduct justifying removal‖).
193

of good faith and fair dealing by generally depriving Morelli of the benefit of the bargain 

under the Stockholders Agreement. The second argument is that the process of enacting 

Amendment No. 2 fell below minimal standards of fairness. The third position is that 

Waite solicited the stockholder consents needed to implement Amendment No. 2 by false 

pretenses. Under Delaware law, none of these allegations satisfy the standard for stating 

an implied covenant claim. 

―The  ̳implied covenant of good faith and fair dealing involves . . . inferring 

contractual terms to handle developments or contractual gaps that . . . neither party 

anticipated.‘ It does not apply when the contract addresses the conduct at issue.‖591 The 

implied covenant ―is recognized only where a contract is silent as to the issue in 

dispute.‖592 It is not a tool to re-write contracts and it ―cannot be invoked to override the 

express terms of the contract.‖593 Indeed, ―courts should be most chary about implying a 

contractual protection when the contract could easily have been drafted to expressly 

provide for it.‖

594

 

591 Nationwide Emerging Managers, LLC v. Northpointe Hldgs., LLC, 112 A.2d 878, 

896 (Del. 2015) (quoting Nemec v. Shrader, 991 A.2d 1120, 1125 (Del. 2010)) 

(footnotes omitted). See also Lazard Tech. P’rs, LLC v. Qinetiq N. Am. 

Operations LLC, 114 A.3d 193, 196 n.12 (Del. 2015) (collecting cases).

592 AQSR India Private, Ltd. v. Bureau Veritas Hldgs., Inc., 2009 WL 1707910, at 

*11 (Del. Ch. June 16, 2009).

593 Kuroda v. SPJS Hldgs., L.L.C., 971 A.2d 872, 888 (Del. Ch. 2009).

594 Allied Capital Corp. v. GC-Sun Hldgs., L.P., 910 A.2d 1020, 1035 (Del. Ch. 

2006).
194

Plaintiffs‘ first argument is that they were denied the fruits of their bargain, i.e., 

the right to appoint five members of the Board. Even though the Stockholders 

Agreement has a provision expressly allowing for amendment, and even though that 

provision literally was followed, Plaintiffs contend that Amendment No. 2 violated the 

implied covenant. This argument fails because the express terms of the contract cover 

this situation. The Stockholders Agreement previously had been amended to allow 

Achieve Physical Therapy, Abdelhamid‘s business, the right to appoint one board 

member.595 Thus, the parties themselves previously amended the very provision of the 

Stockholders Agreement, Section 3.3, that Plaintiffs now suggest could not be further 

amended without violating the implied covenant.596 Moreover, the Stockholders 

Agreement contains several other important provisions and rights, so it is not accurate to 

say, as Plaintiffs do, that the Stockholders Agreement was amended in a way that 

hollowed out the agreement.597 Finally, if Morelli and the Initial Stockholders had 

 

595 JX 69.

596 Plaintiffs‘ argument also ignores the fact that Amendment No. 2 stripped everyone

of their board appointment rights: Morelli, the Director Defendants, and 

Abdelhamid. This is not a situation where a majority of the stockholders 

conspired to deprive only Morelli of a contractual right while benefiting 

themselves. Indeed, Morelli could have triumphed under Amendment No. 2 and 

had nine board members installed if he convinced a majority of the stockholders to 

favor his nominees.

597 For example, Section 3.6 required consensus of the Rancho Stockholders and the 

Initial Stockholders on any Substantial Transactions, such as a merger, JX 

68.0006, and Section 4 instituted a ―Market Stand-Off‖ agreement to effectuate a 

future underwriting, id. at .0007-.0008. These provisions were not changed by 

Amendment No. 2. 
195

wished to prevent amendment of their Board-appointment rights under the Stockholders 

Agreement, they could have bargained for that right at the outset. They did not and 

Morelli cannot seek here via an implied covenant claim what he failed to secure at the 

bargaining table.

Plaintiffs‘ second implied covenant claim is that the process by which the 

amendment was adopted fell below minimum standards of fairness. The argument is that 

Defendants left Morelli and Analog in the dark by not telling them about the amendment. 

This argument is based on Adlerstein and VGS. In addition to my having held that the 

reasoning in those cases does not control under the facts of this case, this argument is not 

a cognizable implied covenant claim, because the complained-of conduct—amendment—

was covered by an express term of the contract and because Plaintiffs have not identified 

an implied contractual provision that was violated. Basically, Plaintiffs assert that 

Defendants acted unfairly. But, unfairness alone is not an implied covenant claim; either 

the contract‘s terms, express or implied, were breached, or they were not. The implied 

covenant is not a license for the Court ― ̳to create a free-floating duty . . . unattached to 

the underlying legal document.‘‖598

The final argument is that Defendants used false justifications to pass the 

Amendment. As previously discussed, Plaintiffs have not proven that Waite 

misrepresented the import of Amendment No. 2 to the Board. The second aspect of this 

 

598 Nationwide Emerging Managers, 112 A.2d at 896 n.72 (quoting Dunlap v. State 

Farm Fire & Cas. Co., 878 A.2d 434, 441 (Del. 2005)).
196

argument is that Waite misrepresented the purpose of Amendment No. 2 to the other 

stockholders. This is not an implied covenant claim.599 Instead, it appears to involve 

Plaintiffs asserting that other people, not parties to this litigation, fraudulently were 

induced into adopting Amendment No. 2. Plaintiffs have not explained how they have 

standing to bring fraudulent inducement claims on behalf of unnamed stockholders and 

then transform those claims into implied covenant claims. They do not have such 

standing because only parties to an agreement can assert a claim for breach of the implied 

covenant.600

For these reasons, Plaintiffs have failed to prove a breach of the Stockholders 

Agreement or the related implied covenant of good faith and fair dealing. 

D. Plaintiffs’ Tortious Interference Claims

Plaintiffs also assert three claims for tortious interference with prospective 

business relations. They have abandoned all of their tortious interference with contract 

claims. With the exception of the B of I financing situation, these claims border on 

frivolous. The only tortious interference claim asserted against Horne relates to the DSC. 

―To prove a claim for tortious interference with prospective business relations, a 

plaintiff must show: (1) a reasonable probability of a business opportunity; (2) intentional 

 

599 Disingenuous invocation of a contractual provision, i.e., utilizing a contractual 

provision with ulterior motives, is not an implied covenant claim. Id. at 897. 

600 Gerber v. Enter. Prods. Hldgs., LLC, 67 A.3d 400, 421 n.53 (Del. 2013) (―We 

reject [the] argument that the implied covenant applies to nonparties to the 

contract.‖), overruled in irrelevant part, Winshall v. Viacom Int’l Inc., 76 A.3d 

808 (Del. 2013).
197

interference by a defendant with that opportunity; (3) proximate causation; and (4) 

damages.‖

601

 In the context of tortious interference with contract, Delaware law 

recognizes a privilege known as the stranger doctrine. 602 Defendants contend that the 

privilege also applies to tortious interference with prospective business relations. I 

question that, but consider it unnecessary to decide that here.

1. DSC

Horne contends that Plaintiffs‘ interrogatory responses only allege interference 

with the 2012 DSC. It is true that those responses only allege that Defendants interfered 

with ―the opportunity to obtain media coverage for the benefit of OptimisCorp in 

connection with the 2012 DSC in Los Angeles, CA.‖603 Nevertheless, Plaintiffs now 

appear to argue that Defendants tortiously interfered with that event in 2010, 2011, 2012, 

 

601 Beard Research, Inc. v. Kates, 8 A.3d 573, 607-08 (Del. Ch.), aff’d sub nom. 

ASDI, Inc. v. Beard Research, Inc., 11 A.3d 749 (Del. 2010).

602 The stranger doctrine is a slight extension of the principle that ―a party to a 

contract cannot be liable both for breach of that contract and inducing that 

breach.‖ Shearin v. E.F. Hutton Gp., Inc., 652 A.2d 578, 590 (Del. Ch. 1994). 

Under the stranger doctrine, ―employees . . . of a contracting corporation cannot be 

held personally liable for inducing a breach of contract by their corporations when 

they act within their role.‖ Id. Stated differently, ―an officer or director may be 

held personally liable for tortious interference with a contract of the corporation if, 

and only if, said officer or director exceeds the scope of his agency in so doing.‖ 

Int’l Ass’n of Heat & Frost Insulators & Asbestos Workers Local Union 42 v. 

Absolute Envtl. Servs., Inc., 814 F. Supp. 392, 400 (D. Del. 1993). See also

Tenneco Auto. Inc. v. El Paso Corp., 2007 WL 92621, at *5-6 (Del. Ch. Jan. 8, 

2007) (describing the stranger doctrine and the policy underlying the privilege).

603 JX 939.0024.
198

and then ―killed the event‖ thereafter.604 This is consistent with Plaintiffs‘ generally 

shifting litigation strategy and, in itself, provides a sufficient basis to deny their claim as 

to the DSC in all respects except the 2012 event. Regardless, I find no evidence of 

tortious interference with the DSC in any year.605

The strongest evidence of ―interference‖ is that Horne allegedly told Owens not to 

work on the DSC and that Waite called it a waste of time or money or both.606 Plaintiffs 

also contend that Waite countermanded Morelli‘s instructions. This evidence falls 

woefully short of proving tortious interference. By his own testimony, Morelli 

acknowledged that the event was successful each year, particularly in 2010. And, Owens 

admitted that he ignored the alleged instruction from Horne not to work on the event. 

Waite participated in the event all three years, and each of the other Defendants, Atkins, 

Smith, and Horne, also participated at least once. Accordingly, Plaintiffs have not proven 

there ever was any ―interference‖ with the DSC. 

 

604 POB 66.

605 I summarily dismiss Plaintiffs‘ ipse dixit claim that Defendants ―killed‖ the event 

after 2012. This claim was not made previously, and Defendants were not given 

fair notice of it. In addition, Plaintiffs failed to identify any evidence supporting 

such a claim.

606 Apparently, many people considered the DSC extravagant. E.g., Brys Dep. 192-

93 (―There also was a disagreement because I think various members of the 

company thought that the Optimis DSC was—I wouldn‘t say a waste of money, 

but it consumed a lot of money and resources and did not give a lot back to the 

company.‖).
199

Plaintiffs also completely failed to prove proximate causation, because the event 

took place each year and was successful. Plaintiffs seem to contend that, but for the 

alleged interference (that Plaintiffs have not proven), the event would have been more

successful and the Company would have received greater media coverage and better

advertising. In that regard, Plaintiffs rely primarily on two specific incidents: the 

withdrawal of the LA Tri Club‘s sponsorship and the ALA‘s decision not to sponsor the

event. Neither of those incidents, however, was caused by Defendants. Plaintiffs allege, 

for example, that the LA Tri Club backed out because of Rohlinger‘s alleged phone 

comment to Owens. But, Rohlinger is not a defendant and Plaintiffs have not proven a 

conspiracy, so there is no basis to attribute his action to any of Defendants. Additionally, 

based on the evidence, I find that it is more probable than not that the LA Tri Club 

backed out because of their ongoing litigation with Morelli. Similarly, there is no 

evidence linking Defendants to the ALA‘s decision not to sponsor the DSC event. 

Instead, that decision appears to have resulted from the ALA‘s own policies and 

limitations as a non-profit entity. 

Finally, Plaintiffs have advanced no persuasive evidence of damages. They cite 

no record evidence for their bald assertion that ―the Company was damaged because it 

was not able to benefit from the visibility it otherwise would have gained through media 

coverage and greater penetration of its software into the marketplace.‖607 Optimis 

 

607 POB 66.
200

successfully ran the DSC for at least three years, but Plaintiffs have not provided concrete 

evidence of a measurable benefit from that event in any of those years.

2. Preferred Therapy Provider Network

Plaintiffs also contend that Defendants tortiously interfered with a potential 

business relationship with the Preferred Therapy Provider Network (―PTPN‖). I did not 

include the story of PTPN in the fact Section supra because this claim is so flimsy that it 

borders on frivolous. The argument, basically, is that Waite‘s poor negotiating skills 

undermined a potential business relationship with PTPN. Plaintiffs contend that Waite 

deliberately sabotaged those negotiations.608

According to Morelli, the Company engaged in negotiations with PTPN to partner 

on some form of licensing agreement or similar venture in the fall and winter of 2010. 

This discussion ―fizzled out at the end of 2010.‖609 Morelli‘s version of events is that 

Michael Weinper, the president and cofounder of PTPN, had a wellness initiative called 

Physequality and that Optimis had a negotiating strategy under which Optimis would 

―present a firm stance to Michael Weinper that to succeed, he had to stop really trying to 

cram Physequality down the throats of his members and rebrand and present a new fresh 

strategy to them.‖610 Presumably, Physequality would be replaced by OptimisSport, 

OptimisPT, or both. Morelli claims that, in the middle of a conference call with Weinper 

 

608 Horne, Atkins, and Smith had no involvement with the PTPN negotiations.

609 Tr. 328 (Morelli).

610 Id. at 330.
201

in early December 2010, Waite interrupted and offered Weinper the opportunity to keep 

Physequality. Waite then flew to meet with Weinper and, as a result of that meeting, 

Weinper made a proposal to work with Optimis that Morelli described as a nonstarter. 

Even according to Morelli, Waite was ―shocked‖ at how off the mark Weinper‘s proposal 

was.

611

 Waite testified that he ―worked hard to try to get that deal to close,‖ which would 

have served his own interests as an Optimis stockholder.612 Waite said he volunteered to 

fly out to meet with Weinper because, from his perspective, the process was failing and 

on the conference call it ―looked like . . . it was going to die.‖613

Even assuming Morelli‘s version of events is accurate, Plaintiffs have not proven 

tortious interference. Waite unquestionably acted within the scope of his authority. If 

Morelli was displeased with Waite‘s efforts, he should have overruled him as CEO or 

otherwise criticized his actions in the nature of a performance review. Instead, Morelli 

let Waite meet with PTPN and continue the discussions, notwithstanding Morelli‘s 

testimony that Waite already had torpedoed the negotiations. This incident represents 

nothing more than a disagreement between two senior executives as to how best to deal 

with a prospective client. It is far from an actionable tort.

Furthermore, tortious interference with business relations requires a showing that 

there was reasonable probability of a business relationship. The most reasonable 

 

611 Id. at 335.

612 Id. at 1028.

613 Id. at 1029.
202

inference from the testimony of Waite and Morelli is that Weinper was not interested in 

letting go of Physequality, as evidenced by PTPN‘s inadequate proposal to Optimis. 

Thus, Plaintiffs have not proven a reasonable probability of a business relationship. 

Similarly, they also failed to prove the necessary elements of proximate cause and 

damages. Thus, Plaintiffs failed to meet their burden of proof on all aspects of the PTPN 

claim.

3. Bank of the Internet financing

The B of I financing is a closer call. Ordinarily, the filing of a lawsuit is 

privileged action and cannot form the basis of liability for tortious interference.614 Such a 

filing, however, must be in good faith. On the one hand, it is difficult to conclude that the 

Rescission Action was filed in bad faith. Within days after the Director Defendants filed 

it, Optimis tacitly acknowledged the merits of the lawsuit‘s primary claim by reworking 

its corporate structure and assigning Rancho away to Tinoco.615 On the other hand, the 

timing of the Rescission Action is difficult to ignore. The Director Defendants resigned 

on the day the B of I loan documents were supposed to be executed, and they filed the 

Rescission Action the next day. This raises the question of whether an otherwise 

colorable lawsuit can be filed in bad faith by virtue of its timing.

 

614 See Corning Inc. v. SRU Biosystems, LLC, 292 F. Supp. 2d 583, 586 (D. Del. 

2003) (―Section 773 of the Second Restatement [of Torts] provides a defense to a 

party who, in good faith, files an action to protect a legal interest.‖).

615 JX 800. 
203

Regardless of whether the Rescission Action was privileged, Plaintiffs have not 

met their burden of proving all the elements for a claim of tortious interference. In 

particular, it is questionable whether they have shown proximate cause and they 

definitely have not shown damages. With respect to proximate cause, the documentary 

record indicates that the B of I officials were quite concerned about the Rescission 

Action.616 The lawsuit, however, was not B of I‘s only concern. Their representatives 

noted the ―huge operational risk with [the Director Defendants‘] departure‖ and wrote 

that the lender needed to ―perform an operational assessment of Rancho with your newly 

appointed managers and determine its going concern.‖617 Thus, the Director Defendants‘ 

resignation itself was a concern. 

Additionally, the record shows that B of I continued negotiations with Optimis 

after the Rescission Action was filed.618 On July 18, a B of I representative emailed 

Morelli and stated that the lender‘s ―chief legal counsel believes that unless all of the 

complaints have been dismissed we are not in a position to go forward.‖619 That email 

specifically references the TRO in the Rescission Action, but Geller‘s litigation against 

 

616 JX 794.0001 (6/28/13 email from B of I representative to Morelli and others: 

―This litigation and the issues raised by the litigation have drastically changed 

(i.e., increased) the risk profile of the proposed loan transaction.‖).

617 JX 793.0001 (6/28/13 email from B of I representative to Morelli and others).

618 E.g., JX 794.0001 (―This email is not a loan commitment, but rather an expression 

of the Bank‘s willingness to continue to investigate the viability of making a loan 

to OptimisCorp.‖).

619 JX 813.0001.
204

the Company also remained pending at this time, making it unclear if B of I required that 

litigation to be resolved as well. Overall, it seems that B of I was concerned primarily, 

but not exclusively, about the Rescission Action. In any event, even assuming arguendo

that Plaintiffs have met their burden of proof as to proximate cause, Plaintiffs have made 

no showing sufficient to satisfy their burden with respect to damages.

The Company, according to Morelli, eventually did receive financing from a 

Boston-based lender called SCM sometime in the summer of 2013.620 The terms of that 

financing are not in the record and it is unclear not only when that loan was made, but 

also whether the SCM loan was on better or worse terms than the B of I loan. There also 

has been no effort to quantify the purported harm to Optimis, if any, caused by the delay 

in not receiving financing. Thus, even if Plaintiffs had made a showing sufficient to 

overcome the defense that filing a lawsuit is a privileged action, and even if they 

sufficiently had proven proximate cause, Plaintiffs failed to meet their burden of showing 

damages. Therefore, Plaintiffs‘ claim for tortious interference with the B of I financing 

will be dismissed.

E. There Was No Aiding and Abetting

It is unclear whether Plaintiffs assert that Smith and Atkins aided and abetted 

Waite,621 but Plaintiffs have asserted that Horne aided and abetted the alleged wrongs 

committed by the Director Defendants, and Waite in particular, even if Horne was not a 

 

620 Tr. 669-72. That is less than three months after the filing of the Rescission Action.

621 Plaintiffs essentially put all of their eggs in the ―vast conspiracy‖ basket.
205

member of a conspiracy. Aiding and abetting requires proof of: ―(1) the existence of a 

fiduciary relationship; (2) a breach of that fiduciary‘s duty; (3) Defendants‘ knowing 

participation in that breach; and (4) damages.‖622 Conduct by a fiduciary (such as 

Horne), however, that would amount to aiding and abetting is instead an independent 

breach of that fiduciary‘s duties.623 

Here, the aiding and abetting claim against Horne fails because there was no 

underlying breach of fiduciary duty with which he was involved. The only breach of 

fiduciary duty claim Plaintiffs have proved involved the failure of the Director 

Defendants to inform the Board about the flaw in Optimis‘ corporate structure. There is 

no evidence Horne knew of that defect or that Horne had any involvement with the 

subsequent Rescission Action. Additionally, with respect to most of the facts underlying 

Plaintiffs‘ fiduciary duty claims—such as manipulating the Geller Investigation and 

attempting to take over the Company—Waite acted alone. There is no evidence that 

Smith or Atkins played any role in the Geller Investigation. Horne‘s role was limited to: 

(1) dealing with Morelli‘s attempt to have Horne and Brys convince Geller to drop her 

claims; (2) being interviewed by Solomon, at which time he revealed his biases; and (3) 

advising Brys about the possible need to amend the Stockholders Agreement. I already 

have discussed the first two items. As to the third, it is not surprising that Horne, as 

 

622 In re Crimson Exploration S’holder Litig., 2014 WL 544919, at *27 (Del. Ch. Oct. 

24, 2014).

623 Higher Educ. Mgmt. Gp., Inc. v. Mathews, 2014 WL 5573325 at *13 & n.78 (Del. 

Ch. Nov. 3, 2014).
206

Optimis‘ CFO, knew about the provision in the Stockholders Agreement effectively 

giving Morelli the ability to appoint a majority of Optimis‘ Board until early 2015. 

Similarly, once Brys told Horne that it might be necessary to remove Morelli as CEO, it 

would have been consistent with Horne‘s duties as an officer of Optimis to advise her of 

the provision in the Stockholders Agreement that would enable Morelli to reverse any 

such action. Thus, Plaintiffs have not proven any aiding and abetting.

F. Plaintiffs’ Damages Calculations Are Speculative and Unreliable

Plaintiffs request approximately $50 million in damages and equitable relief in the 

form of a two-year extension of the Stockholders Agreement. I conclude first that 

Plaintiffs have not proven any damages.

With respect to money damages, Plaintiffs‘ showing in this regard was inadequate 

to support any form of monetary relief. Plaintiffs‘ damages expert, Walter Bratic, 

calculated damages by comparing the Company‘s actual performance against a 

combination of prior management projections developed in 2012 and new management 

projections developed after Horne and the Director Defendants left Optimis.624 As 

Defendants pointed out in their pre- and post-trial briefing, the problems with Plaintiffs‘ 

damages calculations are legion. Yet, Plaintiffs have failed to address the majority of 

those concerns. The most fundamental flaw is that Bratic relied upon management 

projections (the ―Projections‖) that are unreliable and highly speculative. 

 

624 JX 1085.0001. Horne also contends that the latter projections were developed for 

this litigation and not in the ordinary course of business, rendering them especially 

unreliable. I need not reach this argument, however.
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The Projections come from Optimis‘ September 2012 PPM.625 Notably, although 

the Projections paint a rosy picture of Optimis‘ future, no one invested in the Company 

on the basis of that PPM. I question the overall growth predicted by the Projections in 

general. More importantly, I find no reliable basis in the record whatsoever for the 

predicted explosion in revenue from the Software Division. The following table shows 

the revenue and income-before-tax figures from the Projections, with year-over-year 

growth percentages indicated in brackets:626

2010 (A) 2011 (A) 2012 (E) 2013(E) 2014(E)

Clinical 

Revenue $28,383,990 $32,143,500[13.25%]

$39,778,839

[23.75%]

$48,862,040

[22.83%]

$58,940,076

[20.63%]

Software 

Revenue $528,565 $1,001,157[89.41%]

$1,663,539

[66.16%]

$6,372,160

[283.05%]

$15,593,826

[144.72%]

Total Income 

Before Tax $ (707,841) $19,983 $ (1,641,631) $1,226,414 $11,287,759

The Projections estimate that software revenue would be fifteen times larger by the end 

of 2014 than it was in 2011. Similarly, the Company‘s income before taxes was expected 

to be roughly nine times larger in 2014 than in 2013.

Part of the clinical growth was expected to come from acquisitions of additional 

clinics, which the Company has not made. Additionally, the assumed growth in acquired 

clinics, fifteen per year from 2012-2014 and then ten per year for 2015 and 2016, is 

entirely out of line with the fact that the Company acquired, on average, only 4.25 clinics 

 

625 JX 289. 

626 JX 289.0119. ―(A)‖ represents actual results and ―(E)‖ represents expected 

results.
208

per year from 2009-2012.627 Most of the Company‘s clinical acquisitions occurred in 

2007 and 2008, when 19 and 21 clinics were acquired, respectively. There is no basis in 

the record to assume that the Company suddenly would start acquiring dramatically more 

clinics.

With respect to the Software Revenue, the evidence shows that OptimisPT was, at 

best, only marginally more developed as of 2012 than it was when it was released in late 

2009. Thus, PT provides no support for the predicted growth explosion.628 Indeed, 

Levine testified that, even as of trial in February 2015, OptimisPT still was not being 

developed quickly enough and the Company was ―in the same boat of not having 

resources.‖629 The likely contribution of OptimisSport to revenue and income is even 

more speculative. 630 Accordingly, I find that the factual record does not support the 

massive predicted growth in revenue for the Software Division.

 

627 JX 1014.0005-.0006.

628 Tr. 754-56 (Fearon).

629 Id. at 1597.

630 The revenue figures for OptimisSport border on fantasy. Most of the testimony at 

trial suggested that Sport was not even at a level to be salable during most of the 

time period relevant to this litigation. It generated or was predicted to generate 

revenue for the first time at the end of 2012, amounting to $11,880. The 

Projections then indicate that Sport was predicted to generate $558,000 in 2013, 

$3.4 million in 2014, $8.4 million in 2015, $13.4 million in 2016, $16 million in 

2017, and $16.1 million in 2018. JX 1085.0031-.0038. Other than the fact that 

senior management of Optimis, including Horne, were willing to give these 

Projections to investors, there has been no evidentiary showing that these revenue 

figures for the Sport product are anything more than mere speculation. Regarding 

the creation of the Projections, Horne testified that Morelli provided the inputs for 
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Perhaps these flaws could be rationalized, to some extent, if the Company 

previously had been remotely in the ballpark with respect to its forecasts. But, the 

evidence showed that the Company‘s previous projections egregiously overstated future 

performance. In the 2009 PPM, the Company forecasted that, in 2012, the Clinical 

Services Division would have 90 clinics and $63 million in revenue and the Software 

Division would generate $23 million in revenue from OptimisPT alone.631 The 

September 2012 PPM had reduced 2012 revenues for the Clinical Services Division, 

which only had 57 clinics, to about $40 million and revenue for the Software Division, 

which now included both OptimisPT and OptimisSport, to $1.66 million.632 In quite an 

understatement, Horne explained: ―It‘s just—this company did not meet its forecasts.‖633 

As of 2012, Optimis‘ 2009 PPM had overstated the number of clinics the Company 

would have by 33 and achieved only about 63% of its predicted revenue for the Clinical 

Services Division.

 

Sport: ―If I was looking at OptimisSport, the only person we could really go to 

would be Alan, because we never actually developed a product or determined how 

we were going to price it.‖ Tr. 1324 (emphasis added). Basically, the Sport 

projections were based solely on Morelli‘s vision of the product, which had not 

been developed yet. Horne continued: ―But, again, we didn‘t know how we were 

going to market it to the [physical therapists]. All we knew is we hoped we were 

going to get 70 to $80 a visit. It was going to be cash from the individual patient, 

not the insurance companies. And we were going to try and charge a percentage 

of that per-visit fee as a licensing fee.‖ Id. at 1325.

631 JX 75.0113; Tr. 1328-29 (Horne).

632 JX 289.0119; Tr. 1329-31 (Horne).

633 Tr. 1331.
210

I therefore find that the Projections that form the basis of Plaintiffs‘ damages 

calculation are speculative, especially as to OptimisSport, and generally unreliable. 

There is ample support in Delaware precedent for rejecting damages claims based 

primarily on speculative evidence.

634

 Although I need not address all of the other 

problems with Bratic‘s damages calculations, I note the following additional concerns. 

Neither Plaintiffs nor Bratic made any effort to apportion the harm allegedly suffered 

among the three separate plaintiffs, namely, Morelli, Optimis, and Analog.635 Plaintiffs 

give short shrift to this concern, but it remains the fact that each Plaintiff has to prove that 

he or it is entitled to damages. There also is no indication that Bratic apportioned the 

harm from each alleged wrong. Even though I have found liability on one fiduciary duty 

claim, the evidence of record makes it impossible to determine what amount of damages, 

if any, was caused by that wrong. 

Plaintiffs contend that, because they have shown that Defendants engaged in 

wrongdoing, the Court should overlook the speculative nature of their damages 

calculation.636 In the same vein, they note that ―Delaware law dictates that the scope of 

 

634 See In re Mobilactive Media, LLC, 2013 WL 297950, at *24 (Del. Ch. Jan. 25, 

2013); cf. Doft & Co. v. Travelocity.com Inc., 2004 WL 1152338, at *5-6 (Del. 

Ch. May 21, 2004) (finding management projections unreliable in the context of 

an appraisal action because, among other reasons, management themselves did not 

regard them as reliable).

635 Tr. 943 (Bratic).

636 See In re Mobilactive Media, 2013 WL 297950, at *24 (―Public policy has led 

Delaware courts to show a general willingness to make a wrongdoer  ̳bear the risk 

of uncertainty of a damages calculation where the calculation cannot be 
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recovery for a breach of the duty of loyalty is not to be determined narrowly.‖637 It is true 

that this Court shows solicitude for plaintiffs with respect to the difficulty of precise 

damages in certain circumstances and that damages in duty of loyalty cases serve the dual 

purposes of compensating for injury and deterring future breaches of the duty of loyalty. 

It remains the law, however, that ―when acting as the fact finder, this Court may not set 

damages based on mere  ̳speculation or conjecture‘ where a plaintiff fails adequately to 

prove damages.‖638 Here, Plaintiffs‘ damages calculation is not merely uncertain, it is 

speculative and unreliable. Even giving Plaintiffs the benefit of the doubt, the 

Projections do not provide an appropriate basis from which to determine damages and 

any damages award based on them would be mere conjecture. Additionally, even though 

I have found one breach of the duty of loyalty—albeit a minor one in comparison to the 

claims Plaintiffs alleged—I reach the same conclusion.

Even though Plaintiffs have made out one of their claims relating to the Director 

Defendants‘ failure to inform the Board of Optimis‘ faulty corporate structure, I conclude 

that no equitable relief is warranted on that claim because of Plaintiffs‘ unclean hands in 

this action, particularly with respect to their witness tampering in general and treatment 

 

mathematically proven.‘‖) (quoting Great Am. Opportunities, Inc. v. Cherrydale 

Fundraising, LLC, 2010 WL 338219, at *23 (Del. Ch. Jan. 29, 2010)).

637 Thorpe v. CERBCO, Inc., 676 A.2d 436, 445 (Del. 1996).

638 In re Mobilactive Media, 2013 WL 297950, at *24 (quoting Medek v. Medek, 2009 

WL 2005365, at *12 n.78 (Del. Ch. July 1, 2009)).
212

of Geller in particular.639 Those actions were inequitable and I consider it appropriate to 

apply the doctrine of unclean hands here to deny Plaintiffs any nominal equitable relief to 

which they otherwise might have been entitled for the one breach they did prove, out of 

the scores of violations they asserted over the course of this litigation.640 Finally, based 

on my rulings on the merits, which generally favor Defendants, I deny Plaintiffs‘ request 

for their attorneys‘ fees and expenses. 

Defendants also have requested their attorneys‘ fees and expenses. That request 

also is denied. Although Defendants prevailed on most issues, many of those issues were 

close and the Court needed to resolve numerous disputed issues of material fact regarding 

them. Some of those disputes were resolved against Defendants. In addition, Plaintiffs‘ 

legal position regarding the Adlerstein case, for example, was reasonable, even if not 

successful. Although after considering all the evidence, I generally adopted Defendants‘ 

version of the facts and, in particular, I rejected Plaintiffs‘ conspiracy theory, it is my 

opinion that there was sufficient evidence to make many of the positions taken by 

Plaintiffs, and expertly presented by their counsel, plausible. As a result, apart from the 

witness tampering discussed at length supra, I do not find that Plaintiffs engaged in bad 

 

639 See supra Section I.

640 See Nakahara v. NS Am. Trust, 718 A.2d 518, 522 (Del. Ch. 1998) (―The unclean 

hands doctrine is aimed at providing courts of equity with a shield from the 

potentially entangling misdeeds of the litigants in any given case. The Court 

invokes the doctrine when faced with a litigant whose acts threaten to tarnish the 

Court‘s good name. In effect, the Court refuses to consider requests for equitable 

relief in circumstances where the litigant‘s own acts offend the very sense of 

equity to which he appeals.‖).
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faith or vexatious litigation conduct that would warrant departing from the American 

Rule and awarding Defendants, or any of them, their attorneys‘ fees. I consider my 

finding that there was improper witness tampering here to be important, and, on that 

basis, I imposed serious merits-based sanctions. Because the witness tampering issue is 

relatively novel in Delaware and Plaintiffs ultimately produced a significant number of 

the underlying documents relating to the settlements in question, I do not believe an 

additional sanction in the form of attorneys‘ fees is appropriate here.

VI. CONCLUSION

For the foregoing reasons, Plaintiffs are not entitled to any relief. The conspiracy 

alleged was not proven. Plaintiffs did prove a breach of the duty of loyalty with respect 

to Defendants‘ failure to alert the Board of the flaw in Optimis‘ corporate structure

regarding Rancho, but Plaintiffs did not prove damages for that wrong. Otherwise, 

Plaintiffs claims failed. Plaintiffs‘ claims, therefore, shall be dismissed with prejudice. 

An implementing order accompanies this Opinion.