IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

JOHN C. TATUM III and JCT CAPITAL 

LLC,

Plaintiffs and Counterclaim 

Defendants,

v.

FAIRSTEAD AFFORDABLE LLC, FCM 

AFFORDABLE LLC, JD2 AFFORDABLE 

LLC, STUART FELDMAN, JEFFREY 

GOLDBERG, FSC EF&F LLC, FAIRSTEAD 

CAPITAL LLC, FAIRSTEAD CAPITAL 

MANAGEMENT LLC, JD2 REALTY 

MANAGEMENT LLC, FA DC LLC, FSC 

REALTY MANAGEMENT LLC, and SDF 

FUNDING LLC,

Defendants and Counterclaim 

Plaintiffs.

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C.A. No. 2022-0970-JTL

MEMORANDUM OPINION DISMISSING COUNT IV OF THE 

COUNTERCLAIMS

Date Submitted: November 6, 2023

Date Decided: December 22, 2023

Thomas A. Uebler, Adam J. Waskie, Sarah P. Kaboly, MCCOLLOM D’EMILIO 

SMITH UEBLER LLC, Wilmington, Delaware; Counsel for John C. Tatum III and 

JCT Capital LLC.

Ryan D. Stottman, Thomas P. Will, Alec Hoeschel, MORRIS, NICHOLS, ARSHT & 

TUNNELL LLP, Wilmington, Delaware; Michael B. Carlinsky, Rollo C. Baker, 

Jonathan E. Feder, Alison Y. Lo, Cohl K. Love, Stephanie Keleman, QUINN 

EMANUEL URQUHART & SULLIVAN, LLP, New York, New York; Counsel for 

Fairstead Affordable LLC, FCM Affordable LLC, JD2 Affordable LLC, Stuart 

Feldman, Jeffrey Goldberg, FSC EF&F LLC, Fairstead Capital LLC, Fairstead 

Capital Management LLC, JD2 Realty Management LLC, FA DC LLC, FSC Realty 

Management LLC, and SDF Funding LLC. 

LASTER, V.C.
The defendants comprise an investment fund complex specializing in 

affordable housing. One of the entities in the fund complex employed plaintiff John 

C. Tatum, III. The defendants agreed to his departure, deeming it a resignation 

without good reason. 

After Tatum filed this action, the defendants asserted a counterclaim in which 

they sought to recharacterize his departure as a termination for cause. Doing so 

would allow them to cancel all of his economic interest in the fund complex for no 

consideration. Tatum holds those interests through plaintiff JCT Capital LLC, an 

entity he controls.

1

Tatum moved to dismiss the counterclaim, contending that the defendants 

cannot recharacterize his departure. This decision grants that motion. The 

allegations in the counterclaims demonstrate that the defendants knew about the 

alleged misconduct on which they now rely before they accepted Tatum’s departure 

as a resignation without good reason. The defendants benefited from that 

determination, which delayed Tatum’s ability to work for another firm. The 

defendants then waited another eight months before changing course. They cannot 

now retroactively treat Tatum’s departure as a termination for cause. 

I. FACTUAL BACKGROUND

The facts are drawn from the currently operative pleadings and the documents 

1 The distinction between Tatum and his entity is not significant to this 

decision, which for simplicity refers only to Tatum. 
2

they incorporate by reference. For purposes of the motion to dismiss, the 

counterclaims’ allegations are assumed to be true, and the defendants receive the 

benefit of all reasonable inferences.2

A. Fairstead

The entity defendants are part of an investment fund complex that operates 

under the trade name “Fairstead.” Defendants Stuart Feldman and Jeffrey Goldberg 

control Fairstead.

In 2016, Tatum and William Blodgett co-founded Fairstead Affordable LLC

with Feldman and Goldberg. They negotiated an operating agreement to govern the 

internal affairs of Fairstead Affordable. Ex. 1 (the “Operating Agreement”). Tatum

became a member of Fairstead with a 5.25% member interest. Tatum also signed an 

employment agreement with one of the entities in the fund complex. Ex. 4 (the 

“Employment Agreement”).

B. Fairstead 2.0

By 2020, Blodgett, Tatum, and other Fairstead employees had become 

unhappy with their compensation and equity ownership. In late 2020, Tatum and 

Blodgett worked with advisors on strategies for increasing their equity ownership, 

gaining control of the fund complex, or alternatively starting a competing business. 

While Tatum and Blodgett were making plans, they continued working for Fairstead. 

2 Citations in the form “Ex. ___” refer to documents attached to the amended 

complaint. Citations in the form “CC ¶ ___” refer to allegations in amended 

counterclaims. 
3

Tatum’s 5.25% member interest in Fairstead vested on May 6, 2021. Three 

days later, Tatum and Blodgett began downloading thousands of Fairstead 

documents to their devices. They inferably downloaded those documents in case they 

decided to start a competing firm. 

That same month, Blodgett told Feldman that Fairstead’s employees were 

unhappy with their compensation and intended to leave. During a meeting on May 

18, 2021, Blodgett provided Feldman with a term sheet for restructuring Fairstead. 

Called “Fairstead 2.0,” it contemplated that Blodgett, Tatum, and other employees 

would own 80–90% of the equity. Feldman and Goldberg would own the balance. 

Feldman rejected the term sheet and asked Blodgett to identify the employees’ 

concerns. Blodgett never did. 

The defendants allege that Blodgett and Tatum timed their proposal to take 

advantage of Feldman and Goldberg when they were most vulnerable. In May 2021, 

Fairstead had at least twenty-eight construction projects underway. Feldman and 

Goldberg had personally guaranteed the financing for those projects. If Tatum and 

Blodgett left and took Fairstead’s employees with them, then Fairstead could default 

on its loans, making Feldman and Goldberg liable on their guarantees. 

Meanwhile, Blodgett and Tatum downloaded more Fairstead documents to 

their devices. Tatum connected four personal flash drives to a Fairstead computer 

and copied thousands of documents.

During June 2021, matters became more tense. Tatum met again with 

Feldman about Fairstead 2.0. Feldman again rejected the proposal and made clear 
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that he and Goldberg would not give up control of Fairstead. Shortly after the 

meeting, Tatum downloaded additional Fairstead documents, including organization 

charts, valuation documents, and information about business contacts. 

Feldman decided to investigate Tatum and Blodgett’s activities. After 

discovering their suspicious downloading, Fairstead hired a forensic analyst to 

investigate further. Fairstead also hired outside counsel to oversee an investigation 

and identify any potential claims against Tatum and Blodgett.

C. Blodgett And Tatum Leave. 

Based on the investigation, Feldman and Goldberg concluded that Tatum and

Blodgett had breached their contractual and fiduciary obligations to Fairstead. They 

caused Fairstead to terminate Blodgett for cause on September 14, 2021. They did 

not terminate Tatum. According to the counterclaims, they were “concerned that the 

announced termination of two of [Fairstead’s] senior executives could have a negative

impact on the business.” CC ¶ 78. 

Shortly thereafter, Tatum announced his intention to leave Fairstead. He 

prepared and began implementing a transition plan. 

On October 21, 2021, Fairstead’s general counsel notified Tatum that by 

engaging in actions such as transferring his 401(k) account to a new provider, he had 

constructively resigned. Fairstead’s general counsel informed Tatum that Fairstead 

had accepted his resignation and deemed it a resignation without good reason. Under 

the Operating Agreement, that meant Tatum had to give 120-days written notice 

before leaving. Tatum could not work for a competitor during that period without 
5

breaching the Operating Agreement. His departure from Fairstead did not become 

official until February 10, 2022. 

D. Fairstead And Tatum Negotiate The Terms Of His Departure. 

Beginning in October 2021, Tatum and Fairstead negotiated the terms of his 

departure. Fairstead demanded that Tatum return any confidential or proprietary 

information in his possession. Fairstead’s counsel also stated in various 

communications that Fairstead was reserving “any and all rights, claims, and 

recourse it may have against Mr. Tatum, whether arising by or in contract, law, 

equity, or otherwise.” CC ¶ 84. 

As early as December 2021, Fairstead made clear to Tatum that he had 

breached the Employment Agreement and the Operating Agreement. CC ¶ 86. In 

April 2022, Fairstead’s counsel told Tatum in writing that Fairstead had determined

that he “engaged in numerous offenses that would easily serve as grounds to have 

fired [him] for cause.” CC ¶ 87. Counsel then reiterated that Fairstead had accepted 

Tatum’s resignation without good reason, while reserving all rights to dispute 

Tatum’s entitlement to compensation. Counsel then proposed to proceed with a 

buyout process for Tatum’s interests in Fairstead Affordable. Fairstead exercised its 

buyout right, and Fairstead and Tatum subsequently engaged in an appraisal 

process. 

E. Fairstead Changes Course. 

On June 28, 2022, Fairstead’s counsel informed Tatum that although 

Fairstead previously accepted his resignation without good reason, it had now 

determined that Tatum had engaged in a scheme to usurp control of Fairstead and 
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steal Fairstead’s employees. Fairstead therefore was recharacterizing Tatum’s 

departure as a termination for cause. 

Fairstead counsel asserted that Tatum’s misconduct began before May 6, 2021, 

when his member interest in Fairstead Affordable vested. Fairstead contended that 

it would have fired Tatum for cause before the vesting date if it had known about his 

misconduct. Fairstead therefore deemed all of Tatum’s interests to be forfeited and 

cancelled them without providing any compensation to Tatum. 

F. This Litigation

Tatum sued on October 26, 2022. Among other things, he sought an order 

directing Fairstead to comply with the buyout mechanism in the Operating 

Agreement. Alternatively, he seeks money damages for breach of those provisions. 

The defendants responded with eleven counterclaims. In Count IV, the 

defendants seek a declaration that they retroactively terminated Tatum for cause. 

Tatum has moved to dismiss Count IV. 

II. LEGAL ANALYSIS

Tatum contents that Count IV fails to state a claim on which relief can be 

granted. 

When considering a defendant’s motion to dismiss, a trial court should 

accept all well-pleaded factual allegations in the Complaint as true, 

accept even vague allegations in the Complaint as ”well-pleaded” if they 

provide the defendant notice of the claim, draw all reasonable inferences 

in favor of the plaintiff, and deny the motion unless the plaintiff could 

not recover under any reasonably conceivable set of circumstances 

susceptible of proof.

Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27 A.3d 531, 536 (Del. 

2011). 
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Section 8.8(a)(v) of the Operating Agreement provides that if Tatum were 

terminated for cause before May 6, 2021, he would forfeit 100% of his membership 

interests. The defendants allege that Tatum engaged in conduct that would have 

allowed them to terminate him for cause before the vesting date if they had known 

about it. They further allege that Tatum concealed his misconduct until June 2022. 

To support their argument for a retroactive, for-cause termination, the 

defendants rely on Metro Storage International LLC v. Harron, 275 A.3d 810 (Del. 

Ch. 2022). That case involved an executive who engaged in misconduct throughout 

his employment. The company only discovered the misconduct after the executive had 

resigned. The company sought to exercise an option to repurchase the executive’s 

equity interests for no consideration, which it could only do after a termination for 

cause. 

The Metro Storage decision permitted the company to recharacterize the 

executive’s departure as a termination for cause, reasoning as follows: “Under the 

‘after-acquired evidence’ doctrine, an employer can ‘introduce evidence the employer 

collected after the discharged employee brings suit for wrongful discharge.’” Id. at 

879 (citing Davenport Gp. MG, L.P. v. Strategic Inv. P’rs, Inc., 685 A.2d 715, 723 (Del. 

Ch. 1996)). “The doctrine typically applies when an employer uses evidence acquired 

after an employee’s termination to defend against a claim that it wrongfully 

terminated that employee.” Id. The doctrine “applies all the more persuasively . . . 

where a faithless fiduciary [] concealed the wrongdoing that could have supported a 

for-cause termination.” Id. As a policy matter, the court noted that unless an 
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employer could invoke the doctrine, a faithless fiduciary could benefit from its acts of 

deception. Id.

The defendants attempt to rely on Metro Storage, but the allegations of the 

counterclaims defeat their claim. Assuming for purposes of analysis that Tatum 

breached his obligations, the defendants concede that they knew about Tatum’s 

conduct before they accepted Tatum’s resignation without good reason. The 

counterclaims allege that it was “clear” to the defendants “in July 2021” that 

“Blodgett and Tatum were not acting in good faith to better Fairstead but were, 

instead, focused on their hostile takeover.” CC ¶ 10. The defendants necessarily knew 

about those activities in May 2021, when Blodgett told Feldman about Fairstead 2.0.

The counterclaims also acknowledge that after conducting an investigation,

Fairstead terminated Blodgett for cause in September 2021, citing “material 

breaches” of his agreements. The same investigation “revealed that Tatum had 

engaged in misconduct that caused numerous breaches of his legal obligations.” Id. ¶ 

78. According to their own allegations, the defendants had sufficient knowledge to 

terminate Tatum for cause in September 2021.

The counterclaims further allege that the defendants consciously chose not to 

terminate Tatum, out of concern for the “negative impact on the business” that could 

occur if Fairstead announced that two of its senior executives had been terminated. 

Id. Instead, the defendants accepted Tatum’s resignation on October 21, 2021, 

deeming it a resignation without good reason. That allowed Fairstead to insist on 
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120-days written notice, which prevented Tatum from working elsewhere until 

February 2022. 

For the next eight months, the defendants continued to act as if Tatum had 

resigned without good reason. Fairstead exercised its buyout right, and the parties 

engaged in an appraisal process. On multiple occasions, the defendants described 

Tatum as having resigned without good reason and noted that his resignation had 

been accepted. In April 2022, the defendants told Tatum again that they were aware 

of breaches of his contractual and fiduciary duties that would have provided grounds 

for termination for cause. Yet the defendants did not purport to retroactively change 

the nature of Tatum’s termination until June 2022. 

Having taken these positions, Fairstead cannot now claim that it did not 

terminate Tatum for cause because he had concealed his misconduct. The Metro 

Storage case relied on the after-acquired evidence doctrine. It did not countenance a 

previously acquired evidence doctrine. The employer in Metro Storage did not know 

about the executive’s breaches until after he had left, then promptly acted on the 

information. Fairstead knew about Tatum’s alleged misconduct by May 2021, decided 

not to terminate him for cause, accepted his resignation in September 2021, then 

continued along that path for eight months before eventually reversing position in 

June 2022. 

To try to squeeze back into the Metro Storage framework, the defendants argue 

that they only delayed contending that Tatum had been terminated for cause so that 

they could conduct a thorough investigation. But the defendants have not identified 
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anything that they learned that might justify a change of position. The allegations of 

the counterclaims indicate that the defendants knew everything they needed to know 

in September 2021, when they accepted Tatum’s departure and deemed it a 

resignation without good reason. 

III. CONCLUSION

The after-acquired evidence doctrine prevents a faithless fiduciary from 

retaining the benefits flowing from his concealment and deception. It does not 

authorize an employer to learn about misconduct, make a business decision not to act 

on it, treat an employee as having resigned, accept the benefits of that mode of 

departure, then reverse course months later. The motion to dismiss Count IV of the 

counterclaims is granted.