IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

ARC GLOBAL INVESTMENTS II, 

LLC,

Plaintiff,

v.

DIGITAL WORLD ACQUISITION

CORP., ERIC S. SWIDER, FRANK J.

ANDREWS, EDWARD J. PREBLE, 

AND JEFFREY A. SMITH

Defendants.

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) C.A. No. 2024-0186-LWW

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MEMORANDUM OPINION

Date Submitted: July 29, 2024

Date Decided: September 16, 2024

Matthew D. Perri, Daniel E. Kaprow, Elizabeth J. Freud, Alfred P. Dillione & Rae 

Ra, RICHARDS, LAYTON & FINGER, P.A., Wilmington, Delaware; Counsel for 

Plaintiff ARC Global Investments II, LLC

Kevin M. Coen & Jacob M. Perrone, MORRIS, NICHOLS, ARSHT & TUNNELL 

LLP, Wilmington, Delaware; Bradley J. Bondi, D. Scott Carlton, Traci Zeller & 

Nicholas J. Griepsma, PAUL HASTINGS LLP, Washington, D.C.; Counsel for 

Defendants Digital World Acquisition Corp., Eric S. Swider, Frank J. Andrews, 

Edward J. Preble, and Jeffrey A. Smith

WILL, Vice Chancellor
1

ARC Global Investments II, LLC was the sponsor of Digital World 

Acquisition Company (DWAC), a special purpose acquisition company. Early on, 

ARC purchased founder shares of DWAC Class B common stock that would 

represent 20% of DWAC’s outstanding shares after its initial public offering. Units 

purchased in DWAC’s initial public offering and through private placement included 

one share of Class A common stock per unit and one half of a warrant.

DWAC’s certificate of incorporation provided that at the closing of a business 

combination, shares of Class B common stock would automatically convert into 

shares of Class A common stock at a minimum ratio of 1:1. This would allow the 

Class B stockholders to retain their approximate 20% stake, excluding shares issued 

to any seller in the business combination. The certificate of incorporation also 

provided that if shares of Class A stock were issued or deemed issued in excess of 

the amount sold in the IPO, a different conversion ratio formula would apply. This

formula acted as an anti-dilution provision in favor of Class B stockholders. With 

certain exclusions, Class B stockholders were essentially provided with one Class A 

share for every four Class A shares otherwise issued or issuable.

There is no dispute that the conversion ratio formula was triggered since 

DWAC issued additional Class A shares post-IPO. The parties agree that the 

denominator of the ratio reflects the number of Class B common shares outstanding 

at the time of DWAC’s business combination with Trump Media & Technology 
2

Group Corp. They disagree on whether DWAC properly calculated the numerator 

to the conversion ratio, which is more complicated. DWAC maintains that the 

proper ratio is 1.3481:1. ARC insists that it should be 1.8178:1.

In the decision that follows, I interpret DWAC’s certificate of incorporation 

to determine the correct conversion ratio. I consider the parties’ disagreements on 

Class A common shares that were issued or issuable in connection with several 

categories of securities. I agree with ARC on some inputs, with the defendants on 

others, and set the conversion ratio at 1.4911:1. 

What should have been a straightforward exercise in contract interpretation 

and math was obscured by the parties’ injection of other issues. ARC claims that 

the members of DWAC’s board of directors calculated the conversion ratio and 

made related disclosures in bad faith out of personal animus for ARC’s founder 

Patrick Orlando. In response, the defendants raise a series of affirmative defenses 

concerning unrelated and purported misconduct by Orlando. I reject these diversions 

as meritless, irrelevant, or untimely.

ARC has prevailed on aspects of its breach of contract claim. It is entitled to 

an order of specific performance and related declaratory relief. It did not, however, 

prove its breach of fiduciary duty claims. Judgment is entered for ARC in part and 

for the defendants in part. 
3

I. BACKGROUND

The facts described below were proven by a preponderance of the evidence at 

trial or stipulated to by the parties.

1

 

A. Digital World Acquisition Company and its Sponsor

Defendant Digital World Acquisition Corp. was formed as a Delaware 

corporation on December 11, 2020.

2

 As a SPAC, DWAC’s ultimate purpose was to 

effect a business combination.3

Plaintiff ARC Global Investments II, LLC, a Delaware limited liability 

company, was DWAC’s sponsor.4 In early 2021, ARC purchased founder shares of 

DWAC Class B Common Stock.

5

 These founder shares were to represent 20% of 

the total shares outstanding after DWAC completed its initial public offering.6 

1 See Stipulation and Second Am. Pre-trial Order (Dkt. 182) (“PTO”). Exhibits jointly 

submitted by the parties at trial are cited according to the numbers provided on the parties’ 

joint exhibit list as “JX __,” unless otherwise defined. Unless otherwise noted, pin cites 

are to the pagination stamped in labeling joint exhibits. Deposition transcripts are cited as 

“[Last Name] Dep. __.” 

2 PTO ¶ 13.

3 PTO ¶ 6; see JX 2 at 3; Swider Dep. 9.

4 PTO ¶ 5.

5

Id. After a stock split and return of shares to DWAC, these amounted to 5,490,000 shares 

at the time of the business combination discussed below. Id.

6

JX 2 at 21.
4

Patrick Orlando purports to be ARC’s managing member.7 He also claims to 

be its controlling member.

8

 He previously served as a director and the Chairman 

and Chief Executive Officer of DWAC.9

B. The Initial Public Offering

In preparation for its initial public offering, DWAC filed an amended and 

restated certificate of incorporation (the “Charter”) with the Delaware Secretary of 

State.10 The Charter authorized 210,000,000 shares of Common Stock, consisting 

of 200,000,000 shares of Class A Common Stock and 10,000,000 shares of Class B 

Common Stock.11

DWAC’s initial public offering occurred in September 2021. DWAC sold 

25,000,000 units at $10 per unit. Another 3,750,000 units were sold for $10 per unit 

in a secondary public offering.12 Each IPO unit consisted of one share of DWAC 

Class A Common Stock and one half of a redeemable warrant.13 Each whole warrant 

7 PTO ¶ 47; see Leon v. Orlando, C.A. No. 2024-0311-LWW (Del. Ch.).

8 PTO ¶ 12.

9

Id.

10 JX 40 (“Charter”).

11 PTO ¶ 16; Charter § 4.3.

12 PTO ¶ 18; JX 201.

13 PTO ¶ 15.
5

provided holder with the right to purchase an additional share of Class A Common 

Stock.14

DWAC also issued 1,133,484 private placement units to ARC.

15

 Each private 

placement unit consisted of one share of Class A Common Stock and one half of one 

warrant.16

C. The Conversion Ratio

The Charter explains that upon the closing of a business combination, shares 

of Class B Common Stock would automatically convert into shares of Class A 

Common Stock.17 Section 4.3(b) of the Charter sets the ratio at which Class B 

Common Stock would be converted into Class A Common Stock at a minimum of 

“a one-for-one basis.”

18

 If “additional shares of Class A Common Stock, or Equitylinked Securities . . . [we]re issued or deemed issued in excess of the amounts sold 

in [DWAC]’s initial public offering of securities,” a different conversion ratio in 

Section 4.3(b)(ii) of the Charter (the “Conversion Ratio”) was triggered.19 

14 Id.

15 JX 200 (“Proxy Statement”) at 4. All citations to the Proxy Statement follow its internal 

pagination rather than the joint exhibit pagination.

16 Id.

17 PTO ¶ 16; Charter § 4.3.

18 Charter § 4.3(b)(i).

19 Id. § 4.3(b)(ii); see infra note 93 and accompanying text (discussing the definition of 

“Equity-linked Securities”).
6

The denominator for the Conversion Ratio is static. It is the “number of shares 

of Class B Common Stock issued and outstanding prior to the closing of the initial 

Business Combination.”20 The relevant figure is 7,158,025.21

The numerator is more complicated. Section 4.3(b)(ii) of the Charter outlines 

a mathematical formula to calculate it. The formula proceeds in several steps.

First, the formula considers the “shares of Class A Common Stock issued or 

issuable” by DWAC “upon the conversion or exercise of any Equity-linked 

Securities or otherwise . . . related to or in connection with the consummation of” a 

business combination.22 Second, “securities issued or issuable to any seller” in the 

business combination are excluded from the numerator, as are “any private 

placement units (or underlying securities) issued to ARC.”23 Third, 25% of these 

“issued or issuable” shares Class A Common Stock (less exclusions) are added to 

“number of shares of Class B Common Stock issued and outstanding” before the 

business combination.24

Specifically, Section 4.3(b)(ii) of the Charter states:

20 Charter § 4.3(b)(ii).

21 This number is not in dispute. See Pl.’s Corrected Opening Pre-trial Br. (Dkt. 72) (“Pl.’s 

Opening Br.”) 33; Defs.’ Pre-trial Answering Br. (Dkt. 143) (“Defs.’ Answering Br.”) 

Br. 26 n.29. 

22 Charter § 4.3(b)(ii).

23 Id.

24 Id.
7

(A) 25% of all shares of Class A Common Stock issued or issuable

(upon the conversion or exercise of any Equity-linked Securities or 

otherwise) in each case by the Corporation related to or in connection 

with the consummation of the initial Business Combination (excluding 

any securities issued or issuable to any seller in the initial Business 

Combination and any private placement units (or underlying securities) 

issued to ARC Global Investments II LLC (the “Sponsor”) or its 

affiliates upon conversion of loans made to the Corporation) plus (B)

the number of shares of Class B Common Stock issued and outstanding 

prior to the closing of the initial Business Combination[.]25

D. The Business Combination

On October 20, 2021, DWAC entered into a Merger Agreement with Trump 

Media & Technology Group Corp. (“TMTG”).

26

 Under the Merger Agreement, 

TMTG stockholders would receive shares in DWAC equal to $875,000,000, subject 

to adjustments and the right to receive earnout shares after the closing.27 A May 

2022 amendment to the Merger Agreement provided that holders of promissory 

notes issued by TMTG (the “TMTG Convertible Notes”) would receive DWAC 

stock directly from DWAC.

28

25 Id.

26 PTO ¶ 19; JX 9. DWAC changed its name to Trump Media & Technology Group Corp. 

after the business combination closed. To avoid confusion, this opinion refers to the preclosing and post-closing publicly traded entity as “DWAC” and its pre-closing privately

held counterparty, which is now a wholly owned subsidiary of DWAC, as “TMTG.”

27 JX 9 § 1.9(f); see id. § 7.3(d)(ix).

28 JX 12 § 1.9(g). The Merger Agreement defined the TMTG Convertible Notes as “(i) 

TMTG Executive Promissory Notes entered into in the ordinary course of TMTG’s 

business as compensation for certain of its directors and officers and (ii) series of 

convertible promissory notes in the aggregate principal amount of up to $60,000,000 issued 

by TMTG pursuant to those certain note purchase agreements[.]” Proxy Statement at 6.
8

The business combination encountered roadblocks to closing. Among them 

was an investigation by the United States Securities and Exchange Commission 

(SEC) into whether DWAC falsely represented that it lacked a potential merger 

target when it had already identified TMTG.29 After the investigations began, 

TMTG asserted its right to withdraw from the Merger Agreement pending 

renegotiation.30 On July 20, 2023, the SEC approved a settlement in principle.31 In 

connection with the investigation, DWAC terminated Orlando as DWAC’s 

Chairman and CEO in March 2023.32

TMTG and DWAC resumed negotiations. On August 9, DWAC and TMTG 

amended the Merger Agreement a second time.

33

 Orlando signed the amendment

on behalf of ARC.34 The second amended Merger Agreement explained that the 

issued and outstanding TMTG Convertible Notes would “automatically convert 

29 JX 317. The SEC found that this conduct violated Sections 10(b) and 17(a)(2) of the 

Securities Act of 1933. Id. ¶¶ 46-47.

30 Proxy Statement at 192; see JX 36.

31 Proxy Statement at 63.

32 Id. at 73. At the time of his termination, Orlando had not been charged with or found 

guilty of wrongdoing. On July 17, 2024, the SEC brought a separate complaint against 

Orlando. JX 348.

33 JX 86.

34 Id. at 8.
9

immediately prior to” the effective time of the merger “into a number of shares of 

[TMTG] Common Stock.”35

E. The Post-IPO Issuances

DWAC issued additional securities after its IPO. Several are relevant to this 

dispute. Certain convertible notes were issued in exchange for services. Warrants 

were also issued to resolve threatened litigation.

1. The Compensation Notes

In November 2023, the Compensation Committee of DWAC’s Board of 

Directors proposed a plan to compensate the company’s officers and directors with 

convertible notes (the “Compensation Notes”).36 Those paid for their services by 

the Compensation Notes included defendants Eric Swider, Frank Andrews, Jeffrey 

Smith, and Edward Preble (together, the “Director Defendants”). 

Other than Swider, none of Director Defendants held interests in DWAC 

Class B Common Shares.37 Through the Compensation Notes, Swider received 

192,000 shares. Alexander Cano, DWAC’s Secretary and President, received 

165,500 shares. Andrew, Smith, and Preble each received 97,500 shares.38 Renatus 

Advisors, LLC, of which Swider is the sole member, also received a promissory note 

35 Id. at 2.

36 JX 46; JX 77 at 3.

37 Proxy Statement at 308.

38 JX 46 at 2.
10

of 225,000 shares.39 The Compensation Notes were payable by DWAC on the date 

it consummated the business combination.40

2. The Legal Services Note

DWAC also issued a note for $500,000 to pay an outside attorney who 

provided legal services to the company (the “Legal Services Note”).41 The 

attorney’s engagement letter said that he would provide “legal consultation to 

DWAC on various legal matters,” including the pending federal investigations.42 

The Legal Services Note was the sole compensation for this legal advice.43

3. The Alternative Warrants

In December 2023 and January 2024, investors who had agreed to participate 

in DWAC’s failed private investment in public equity (PIPE) offering sought other 

ways to provide financing to DWAC. DWAC entered into a new $50,000,000 PIPE 

under the registration exemption in Section 4(a)(2) of the Securities Act of 1933.44

39 Swider Dep. 22, 159-60.

40 Proxy Statement at 22-23.

41 JX 50. 

42 JX 45 § 1.

43 Id. § 3 (describing the payment terms).

44 Proxy Statement at 90 (“[O]n February 8, 2024, Digital World entered into a subscription 

agreement with certain institutional investors for the issuance of the Digital World 

Alternative Financing Notes, issuing $10,000,000 in Digital World Alternative Financing 

Notes to such institutional investors. Digital World expects to issue the remaining up to 

$40,000,000 of such Digital World Alternative Financing Notes concurrently with the 

Closing.”).
11

For some of the original investors who did not participate in the new PIPE, 

DWAC entered into warrant subscription agreements for the issuance of 3,050,000

warrants (the “Alternative Warrants”).45 The Alternative Warrants were issued in 

settlement of threatened litigation over the terminated PIPE.46 The recipients of the 

Alternative Warrants did not make any monetary investment in or cash payment to 

DWAC in exchange.47

F. The Conversion Ratio Calculation

As the business combination with TMTG neared, DWAC began preparing its 

proxy statement. One component of the filing was DWAC’s forecast of the 

Conversion Ratio calculation. Orlando began to engage with ARC on the subject.

On February 4, 2024, Orlando told DWAC’s counsel that the Charter required 

a Conversion Ratio of 1.58:1.48 His calculation included shares associated with the 

Compensation Notes and the Alternative Warrants in the numerator but excluded 

shares associated with the TMTG Convertible Notes and certain units issued to ARC 

upon the conversion of loans from ARC to DWAC (the “ARC Notes”).49

45 Id. (“[O]n February 7, 2024, Digital World entered into warrant subscription agreements 

with certain institutional investors for the issuance of the Digital World Alternative 

Warrants in settlement of the terminated PIPE Investment . . . .”); JX 319.

46 Proxy Statement at 90; see also Swider Dep. 232-36.

47 See, e.g., JX 72; JX 73; JX 74; JX 75 (Alternative Warrant Agreements).

48 JX 321.

49 Id.; see JX 31.
12

On February 11, DWAC’s counsel sent Orlando a spreadsheet applying the 

company’s calculation of the conversion ratio with corresponding explanations.

50

 

The spreadsheet excluded Class A shares issued or issuable in relation to the 

Compensation Notes, Legal Services Note, Alternative Warrants, TMTG 

Convertible Notes, and the ARC Notes from the numerator of the Conversion 

Ratio.51 It reflected a ratio of 1.34:1. Orlando responded that ARC’s “current 

calculation of the [C]onversion [R]atio is 1:1.69.”52

G. The Proxy Statement and Closing

On February 16, 2024, DWAC filed a proxy statement/prospectus with the 

SEC on Form 424(b)(4) (the “Proxy Statement”).53 The Proxy Statement alerted 

DWAC stockholders that a special meeting would be held on March 22, 2024 to 

approve the business combination with TMTG. The Proxy Statement also stated 

that DWAC had incurred “significant unanticipated expenses well in excess of the

working capital loans provided by [ARC],” requiring the company to undertake postIPO financings to raise money.54

50 JX 57.

51 JX 325.

52 JX 323 at 1.

53 Proxy Statement at 160.

54 Id. at 96.
13

Proposal 9 of the Proxy describes Class A shares that would be issued or 

issuable upon stockholder approval of the proposal and the business combination:

55

• (i) up to 7,969,145 shares of New Digital World common stock 

in connection with the conversion of any Digital World 

Convertible Notes and Digital World Alternative Financing 

Notes entered into prior to the consummation of the Business 

Combination;

• (ii) up to 6,552,509 shares of New Digital World common stock 

in connection with the exercise of Post-IPO Warrants; and 

• (iii) up to 8,369,509 shares of New Digital World common 

stock issuable upon conversion of outstanding TMTG 

Convertible Notes immediately prior to the Effective Time in 

connection with the Closing.56

The Proxy Statement explained that these issuances would “trigger the anti-dilution 

provision contained in [the] Charter adjusting the [C]onversion [R]atio of [] Class B

common stock to Class A common stock.”57 

The Proxy Statement also made disclosures about the Conversion Ratio. It

explained that DWAC “expect[ed] the [C]onversion [R]atio rate to be 1.34, . . . 

exclud[ing] the expected issuance of the Digital World Alternative Warrants . . . and

the [Compensation Notes].”58 The Proxy Statement further stated that “when 

55 Id. at 224.

56 Id.

57 Id. at 96.

58 Id.
14

calculating the definitive conversion ratio, the Board may also decide to exclude any 

Post-IPO Financings . . . As a result, the Board may find a different, lower 

conversion ratio to be acceptable at the time of the Closing.”

59 It cautioned investors 

against “relying on” the disclosed ratio “[s]ince the Board is obligated to calculate 

the final conversion ratio upon the Closing” and there could be “no assurance that 

the current conversion ratio will not materially differ at the time of the Closing.”60 

It described the dispute with ARC over the Conversion Ratio:

[F]ollowing recent interactions with Mr. Orlando, it is understood that 

Mr. Orlando’s position is that the conversion ratio should be 1.69. 

However, Digital World has not been able to confirm the basis for 

such a different conversion ratio. Should Mr. Orlando pursue these 

claims related to the adjustment and prevail, applying a 1.69 

conversion ratio would result in the issuance of 4,939,038 shares of 

New Digital common stock compared to 2,433,729 shares of Class A 

common stock. If the conversion ratio were 1.34, Public Stockholders 

not redeeming their shares prior to the Closing are expected to bear 

the burden of this additional dilution.61

After this litigation was filed and ARC challenged the disclosures in the Proxy 

Statement, DWAC issued a March 1, 2024 Form 8-K disclosing a potential range 

for the Conversion Ratio.62 It stated that the Board “may find a different, lower 

conversion ratio to be acceptable at the Closing.”63 DWAC reiterated that “certain 

59 Id. at 97.

60 Id.

61 Id.

62 JX 99.

63 Id. at 9.
15

holders of Class B common stock may disagree with the conversion ratio, 

particularly if the Board determined that other Post-IPO Financings should also be 

excluded resulting in a lower conversion ratio.”64 

On March 25, 2024, DWAC Merger Sub Inc. merged with and into TMTG, 

with TMTG surviving as a wholly owned subsidiary of DWAC.65 DWAC changed 

its name to “Trump Media & Technology Group Corp.”66 TMTG’s Registration 

Statement after the business combination stated that “[a]s a result of, and in 

connection with the Closing,” the TMTG Convertible Notes converted into private 

shares of TMTG.67 Specifically, the Registration Statement explained:

(i) immediately prior to the [Business Combination] the TMTG 

Convertible Notes were converted into TMTG Common Stock and all 

of the outstanding TMTG Common Stock that was issued upon such 

conversion was automatically cancelled and ceased to exist . . . [and] 

(iii) Public TMTG issued an aggregate of 95,354,534 shares of Public 

TMTG Common Stock to TMTG securityholders as of immediately 

prior to the Effective Time (which amount includes (x) 7,854,534 

shares of Public TMTG Common Stock to the former holders of the 

TMTG Convertible Notes).

68

Under the second amended Merger Agreement, the private stockholders of TMTG, 

including those who received their shares because of the conversion of the TMTG 

64 Id.

65 JX 129 at 2.

66 Id.

67 JX 137 at F-28.

68 Id.
16

Convertible Notes, received shares in the post-de-SPAC entity in exchange for their 

private TMTG shares.69

H. This Litigation

On February 29, 2024, ARC filed this action against DWAC and the Director 

Defendants.

70 It advanced claims for breach of the Charter, declaratory judgment, 

and breach of fiduciary duty. ARC initially alleged that the proper Conversion Ratio 

was 1.78:1.71 

On March 5, I expedited the litigation so that ARC’s claims could be resolved 

before the expiration of a contractual lock-up period on transferring the relevant 

shares.72 I ordered DWAC to place into escrow “the number of shares of Class A 

common stock shares reflecting the difference between the conversion ratio of 

DWAC Class B common stock shares employed by DWAC at closing and a 

conversion of DWAC Class B common stock shares at a ratio of 2:1.”73 The escrow 

agent is to release the disputed shares sufficient to satisfy ARC’s conversion rights 

69 JX 86; JX 137 at 2.

70 Dkt. 1.

71 Id. ¶ 35.

72 Dkt. 23.

73 Dkt. 28 ¶ 1. This order had the effect of allowing ARC to maintain standing in this action 

after closing.
17

under the Charter within two business days of a direction from this court or a joint, 

written direction from ARC and DWAC.74

On May 23, after fact discovery was complete, ARC sought leave to amend 

its complaint.

75

 The defendants opposed this request. I denied ARC’s motion in 

part but allowed ARC to make amendments reflecting theories on the conversion 

ratio and personal animus against Orlando that were developed during discovery.

76

 

I also permitted the defendants to take limited discovery into the newly pleaded

theories.

ARC filed its amended complaint on June 7.

77

 On June 12, the defendants 

answered the amended complaint and raised seven affirmative defenses.

78

 

The litigation proceeded to a one-day trial on a paper record on July 29. In 

addition to the parties’ claims and defenses, several other motions were submitted 

for resolution by the court. ARC moved to exclude an estoppel theory advanced by 

the defendants, to strike the defendants’ new affirmative defenses, and to exclude 

from evidence testimony regarding reliance on counsel and a late-produced 

74 JX 124 at 16-17.

75 Dkt. 67.

76 Dkt. 126 at 44.

77 Dkt. 91.

78 Dkt. 108.
18

document.79 The defendants moved to exclude certain extrinsic evidence and for 

partial judgment on the pleadings related to ARC’s breach of fiduciary duty claim.80 

These matters were taken under advisement upon the conclusion of trial. I 

committed to resolve then within 150 days of the closing of the business 

combination, at which point the contractual lock-up period expires.

81

 That date is 

September 19, 2024.

II. LEGAL ANALYSIS

ARC’s primary claim is that DWAC breached the Charter by miscalculating 

the numerator to the Conversion Ratio. It also asserts that the Director Defendants 

breached their fiduciary duties by making false and misleading disclosures in the 

Proxy about the Conversion Ratio.

ARC has the burden to prove these claims by a preponderance of the 

evidence.82 “Proof by a preponderance of the evidence means proof that something 

is more likely than not.”83 ARC has met this burden for certain of its contentions 

79 Dkts. 77, 136-37, 184.

80 Dkts. 151, 152.

81 Dkt 28.

82 Agilent Techs., Inc. v. Kirkland, 2010 WL 610725, at *13 (Del. Ch. Feb. 18, 2010).

83 inTEAM Assocs., LLC v. Heartland Payment Sys., Inc., 2016 WL 5660282, at *13 (Del. 

Ch. Sept. 30, 2016), aff’d in part, rev’d in part on other grounds sub nom. Heartland 

Payment Sys., LLC v. inTEAM Assocs., LLC, 171 A.3d 544 (Del. 2017).
19

that the defendants breached the Charter in setting the Conversion Ratio. It has 

otherwise fallen short. 

A. Breach of Contract

“Under Delaware law, the elements of a breach of contract claim are: 1) a 

contractual obligation; 2) a breach of that obligation by the defendant; and 3) a 

resulting damage to the plaintiff.”84 The Charter imposed a contractual duty on 

DWAC regarding the Conversion Ratio.

85

 Resolving ARC’s claim turns on whether 

DWAC improperly excluded certain securities from the Conversion Ratio 

calculation in contravention of the Charter, causing damage to ARC.

The principles of contract interpretation that govern my review of the Charter 

are well established. “Delaware law adheres to the objective theory of contracts,” 

meaning that “a contract’s construction should be that which would be understood 

by an objective, reasonable third party.”86 Absent ambiguity, the court “will give 

priority to the parties’ intentions as reflected in the four corners of the agreement.”87 

84 H-M Wexford LLC v. Encorp, Inc., 832 A.2d 129, 140 (Del. Ch. 2003).

85 Charter § 4.3.

86 Salamone v. Gorman, 106 A.3d 354, 367-68 (Del. 2014) (quoting Osborn ex rel. Osborn 

v. Kemp, 991 A.2d 1153, 1159 (Del. 2010)).

87 Id. at 368 (quoting GMG Cap. Invs., LLC, 36 A.3d 776, 779 (Del. 2012)); see also Eagle 

Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997) (“Contract 

terms themselves will be controlling when they establish the parties’ common meaning so 

that a reasonable person in the position of either party would have no expectations 

inconsistent with the contract language.”).
20

A contract must “be construed in its entirety, and an attempt should be made to 

reconcile all of [its] provisions in order to determine the meaning intended to be 

given to any portion of it.”88 Additionally, the court “will give each provision and 

term effect, so as not to render any part of the contract mere surplusage.”89

ARC reads Section 4.3(b)(ii) of the Charter as requiring a simple exercise in 

division. The denominator is 7,158,025, which is the undisputed total amount of 

outstanding Class B shares.90 The numerator is the Class B shares plus “25% of all 

shares of Class A common Stock issued or issuable (upon the conversion or exercise 

of any Equity-linked Securities or otherwise)” with two exceptions: (1) “any 

securities issued or issuable to any seller in the initial Business Combination” and 

(2) shares derived from “any private placement units (or underlying securities)” 

issued to ARC “upon conversion of loans made to the [DWAC].”91

ARC contends that the defendants made several exclusions from the 

numerator that are inconsistent with this formula. These exclusions concern three 

categories of post-IPO securities: (1) the Compensation Notes, Alternative Warrants, 

and Legal Services Note; (2) the TMTG Convertible Notes; and (3) the ARC Notes. 

88 Warner Commc’ns Inc. v. Chris-Craft Indus., Inc., 583 A.2d 962, 967 (Del. Ch. 1989), 

aff’d, 567 A.2d 419 (Del. 1989) (internal citation omitted).

89 Osborn, 991 at 1159 (quoting Kuhn Constr., Inc. v. Diamond State Port Corp., 2010 WL 

779992, at *2 (Del. Mar. 8, 2010)).

90 Charter § 4.3(b)(ii); JX 130 at 20; see supra note 21.

91 Charter § 4.3(b)(ii).
21

In addition, ARC argues that certain shares listed in the post-closing registration 

statement were wrongfully omitted from the numerator.

1. Equity-linked Securities 

Section 4.3(b)(ii) of the Charter states that the numerator of the Conversion 

Ratio must include shares of “Class A Common Stock issued or issuable (upon the 

conversion or exercise of any Equity-linked Securities or otherwise) . . . .”92 DWAC 

excluded the shares issued in connection with the Compensation Notes, Legal 

Services Note, and Alternative Warrants on the ground that they were not “Equitylinked Securities.” The Charter defines “Equity-linked Securities” as “debt or equity 

securities that are convertible, exercisable or exchangeable for shares of Class A 

common stock issued in a financing transaction in connection with the initial 

Business Combination.”93 

Under ARC’s reading of the Charter, however, it does not matter whether 

these are Equity-linked Securities because the only relevant question is whether 

Class A shares are issued or issuable.94 To determine whether the Conversion Ratio 

is triggered, the Charter requires a determination that “additional shares of Class A 

Common Stock, or Equity-linked Securities . . . are issued or deemed issued in 

92 Charter § 4.3(b)(ii) (emphasis added).

93 Id.

94 See Pl.’s Opening Br. 35-36.
22

excess of the amounts sold in [DWAC’s] initial public offering of securities.”95 

Either (1) an issuance or deemed issuance of Class A Common Stock or (2) an 

issuance or deemed issuance of an Equity-linked Security is sufficient. Once the 

Conversion Ratio is triggered, the Charter requires that “25% of all shares of Class 

A Common Stock issued or issuable” be included in the numerator.96 

The Charter explains that this figure generally includes “all shares of Class A 

Common stock” that are issued or issuable “upon the conversion or exercise of any 

Equity-linked Securities or otherwise,” with two specific exclusions.97 ARC reads 

the word “otherwise” in this provision broadly and consistent with its ordinary 

meaning of “in a different way.”98 ARC argues that the text clarifies that other than 

the two identified exclusions, all other issued or issuable Class A shares are included 

in the figure regardless of whether they result from the conversion or exercise of 

Equity-linked Securities. 

DWAC reads the provision differently. It maintains that only shares issued 

or issuable due to an Equity-linked Security should be included in the numerator, 

95 Charter § 4.3(b)(ii). There is no dispute that the Conversion Ratio was triggered.

96 Id.

97 Id.; see infra Sections II.A.2-3 (discussing the exceptions).

98 Pl.’s Pre-trial Reply Br. (Dkt. 162) 11 (quoting Otherwise, Black’s Law Dictionary (12th 

ed. 2024)).
23

based on a narrow reading of “otherwise.”99 In contrast to ARC’s reading, DWAC 

avers that the phrase “accounts for the various manners in which Equity-linked 

Securities could become Class A stock.”100

DWAC’s interpretation invokes the ejusdem generis canon of construction, 

which instructs that a general word after a list of particulars is “controlled and 

defined by reference” to the terms preceding it.101 It relies on Sullivan Money 

Management, Inc. v. FLS Holdings Inc., where the Court of Chancery applied the 

ejusdem generis canon in interpreting a charter provision requiring a class vote to 

change the terms and provisions of preferred stock “by amendment to the Certificate 

of Incorporation or otherwise.”102 The court construed the “otherwise” clause 

narrowly because a broad reading would change the terms of the preferred stock by 

giving preferred stockholders a class vote on a merger.103

99 Defs.’ Answering Br. 41.

100 Id. at 40-41.

101 Sw. Airlines Co. v. Saxon, 596 U.S. 450 (2022) (citation omitted).

102 1992 WL 345453, at *2 (Del. Ch. Nov. 20, 1992). DWAC cites to the United States

Supreme Court’s recent Fischer decision, which applied ejusdem generis in holding that a 

residual “otherwise” clause in a criminal statute should be narrowly construed since it 

followed a list of specific criminal violations. Defs.’ Answering Br. 43 (citing Fischer v. 

United States, 603 U.S. --, 144 S. Ct. 2176 (2024)). This reading was supported by the fact 

that the statute outlined “specific criminal acts and settings,” such that a broad reading of 

“otherwise” would obviate the overall context of the statute in the criminal code. Fischer, 

144 S. Ct. at 2178. No such considerations apply to the Charter.

103 Sullivan, 1992 WL 345453, at *2.
24

But Delaware courts neither reflexively apply canons of construction nor 

“mechanically assign[] specific words their ordinary meaning.”104 The court must

instead construe the contract as a whole to interpret a term in context. “The object 

of construction is to ascertain the true intent from the words used, not how 

meaningless the words can be made by the application of any given rule.”

105

 

Here, the point of Section 4.3 is to prevent dilution. For the Class B 

stockholders to maintain 20% of the company’s common stock on an as-converted 

basis, the Class B stockholders would be issued one share for every four shares 

issuable—i.e., 25% of all issuable shares. Consistent with this purpose, Section 

4.3(b)(ii) contemplates the inclusion of “25% of all shares of Class A Common 

Stock [that are] issued or issuable.”106 ARC’s interpretation of “or otherwise” as 

meaning that shares are included regardless of the form in which the right to that 

share is created gives effect to this language and intent.

107

DWAC’s interpretation, by contrast, would significantly curtail the antidilution provision by limiting the numerator to 25% of shares issued or issuable 

104 Id. at *4.

105 State ex rel. Waldman v. Miller-Wohl Co., 28 A.2d 148, 152 (Del. Super. 1942).

106 Charter § 4.3(b)(ii) (emphasis added). 

107 See In re Staples, Inc. S’holders Litig., 792 A.2d 934, 961 n.52 (Del. Ch. 2001) (stating 

that the “words ‘or otherwise’ in the certificate may be expansive enough to cover a reverse 

split” effected by hundreds of individual contracts since the certificate included the 

parenthetical “by reverse stock split, reclassification, or otherwise”).
25

through Equity-linked Securities. DWAC believes that the word “otherwise” should 

be limited to the narrow definition of Equity-linked Securities.108 Yet the only 

examples DWAC can conjure of what “otherwise” would mean are “a precursor to 

an equity-linked security” and “something that [was] questionable [as to] whether it 

constituted . . . a security.”109 That is, DWAC cannot give a concrete example of 

what “otherwise” would capture if it only accounted for the ways in which Equitylinked Securities became Class A stock. Its reading would make the phrase “or 

otherwise” superfluous.110

Accordingly, the Conversion Ratio considers all issued or issuable shares of 

Class A Common Stock, with two defined exceptions. I need not determine if the 

Legal Services Notes, Alternative Warrants, and Compensation Notes fall within the 

definition of Equity-linked Securities. The Class A shares issued or issuable from 

the conversion or exercise of these securities must be included in the numerator of 

the Conversion Ratio regardless.

2. TMTG Convertible Noteholders

One of the two categories of shares that Section 4.3(b)(ii) of the Charter 

excludes from the Conversion Ratio is “securities issued or issuable to any seller in 

108 Defs.’ Answering Br. 41.

109 Tr. of July 29, 2024 Trial (Dkt. 204) (“Trial Tr.”) 196-97.

110 See Osborn, 991 A.2d at 1159.
26

the Business Combination.”

111

 ARC does not challenge DWAC’s exclusion of 

shares of Class A Common Stock paid to the pre-closing equity holders of TMTG.

112

 

They dispute whether DWAC should have excluded approximately 8,369,509 shares 

issued to former TMGC Convertible Noteholders at closing.

113

The Charter does not define “seller.” The word is commonly understood to 

mean “[o]ne who sells anything; the party who transfers property in the contract of 

sale.”114 It is the “correlative [of] ‘buyer’ or ‘purchaser.’”115 Applying this 

definition, TMTG equity holders who received consideration for their shares in the 

business combination are “sellers.”116

111 Charter § 4.3(b)(ii).

112 See Pl.’s Opening Br. 43. 

113 The total number of shares corresponding to this input is also in dispute. The Proxy 

Statement stated that “up to 8,369,509 shares” were issuable upon conversion of the TMTG 

Convertible Notes, and ARC uses this number. Proxy Statement at 236; Pl.’s Opening Br.

29. DWAC avers that the correct number is the “final tally” of shares issued (7,854,534)

rather than the maximum issuable according to the Proxy Statement. Defs.’ Answering Br. 

65. Since I decline to include these shares in the numerator, I need not resolve which value 

is correct.

114 Seller, Black’s Law Dictionary (10th ed. 2014).

115 Id.

116 ARC concedes that “sellers” is unambiguous; I agree. Nevertheless, ARC relies on 

extrinsic evidence to argue that the defendants never considered TMTG creditors to be 

sellers. See Pl.’s Opening Br. 46-47. This evidence has no bearing on the plain text of the 

Charter. For example, the fact that the “Seller Representative” discussed in the Merger 

Agreement does not represent former holders of TMTG Convertible Notes does not mean 

that those former noteholders were not sellers at closing under the Charter. See Pl.’s 

Opening Br. 45-46 (citing JX 86 at 5).
27

ARC asserts that that the holders of TMTG Convertible Notes were creditors 

of TMTG—not sellers.117 By their terms, however, the TMTG Convertible Notes

“automatically converted” into TMTG shares “immediately prior to the closing” of 

the business combination.118 The Merger Agreement confirms that the TMTG 

Convertible Notes would “automatically convert immediately prior to the Effective 

Time into a number of shares of [TMTG] Common Stock.”119

ARC insists that this conversion was an “accounting mechanic.”120 Perhaps. 

But the TMTG Convertible Noteholders were nevertheless TMTG equity holders 

immediately before closing.121 The contemporaneous transaction documents 

confirm this transactional reality. The transfer agent was directed to “[i]ssue an 

aggregate of 94,739,894 shares of New Digital World common stock” for all private 

117 Pl.’s Opening Br. 43.

118 JX 318.

119 JX 86 at ‘796; see also JX 137 (“[P]rior to the Effective Time, the issued and outstanding 

TMTG Convertible Notes will be converted into shares of TMTG common stock.”). The 

Merger Agreement defines “Effective Time” as the time at which “[t]he [p]arties . . . shall 

cause the Merger to be consummated by filing the Certificate of Merger for the merger of 

[the DWAC merger subsidiary] with and into [TMTG] . . . with the Secretary of State of 

the State of Delaware in accordance with the relevant provisions of the DGCL.” JX 9

§ 1.2.

120 Pl.’s Opening Br. 45.

121 Cf. Salladay v. Lev, 2020 WL 954032, at *15 & n.172 (Del. Ch. Feb. 27, 2020) 

(discussing that the “ownership stake at the effective time” of the merger included “[n]otes 

[that] would automatically convert into shares of [the company’s] common stock 

immediately prior to the consummation of the [t]ransaction”).
28

TMTG stockholders—including the former TMTG Convertible Noteholders.

122

 

Because the TMTG Convertible Notes were converted into TMTG stock before the 

business combination closed, the creditors became equity holders after the initiation 

of the closing process but before the business combination occurred. They were 

therefore “sellers” in the business combination under Section 4.3(b)(ii) of the 

Charter and properly excluded from the numerator of the Conversion Ratio.

3. ARC Notes

The second category of securities that could be excluded from the Conversion 

Ratio under Section 4.3(b)(ii) of the Charter is “any private placement units (or 

underlying securities) issued to [ARC] or its affiliates upon conversion of loans 

122 JX 329 at 2. The instructions to the transfer agent noted that a list of persons to whom 

the shares would be issued and the amounts issued per person were included in “Annex 

D.” Id. But Annex D was not included with the version of the letter produced by the 

transfer agent. Id. at 13 (“See attached Excel.”). The defendants produced a spreadsheet 

of Annex D after ARC had filed its pretrial reply brief. ARC moved to exclude that 

document because the spreadsheet was produced after the close of fact discovery and

sought an adverse inference. Dkt. 184; see also Dkt. 190. I decline to exclude the 

document. ARC first raised its theory that the TMTG Convertible Noteholders were not 

“sellers” after discovery closed. It was on notice of the existence of Annex D for months, 

after receiving the letter referencing it in a production from the transfer agent. And it 

carries the burden of proof. See e.g., Oberly v. Howard Hughes Medical Inst., 472 A.2d 

366, 387 (Del. Ch. 1984) (stating that where the “nonexistence of a fact” was required to 

prevail, the “burden of proof as to a negative proposition also rests upon the party asserting 

it”); 29 Am. Jur. 2d Evidence § 173, Westlaw (database updated Aug. 2024) (“[W]hoever 

asserts a claim . . . that . . . depends upon a negative proposition has the burden of 

establishing the truth of the assertion[.]”). Even without Annex D, I would conclude that 

the TMTG Convertible Noteholders were “sellers” under Section 4.3(b)(ii).
29

made to [DWAC].”123 Although the Charter does not define “private placement,” 

the generally accepted meaning of this term is a sale of securities to select investors 

through an unregistered private offering.

124

 

DWAC invoked this exception in connection with the ARC Notes, which 

were promissory notes memorializing loans from ARC to DWAC. DWAC excluded 

from the Conversion Ratio 446,355 shares of Class A Common Stock that were 

issued to ARC upon the conversion of the ARC Notes.125 ARC obtained the ARC 

Notes through a private offering.126 The unpaid principal amount of the ARC Notes 

was convertible into “Conversion Units” equal to one share of Class A Common 

Stock and one-half of one warrant to purchase one share of Class A Common 

Stock.127 

123 Charter § 4.3(b)(ii).

124 See, e.g., Office of the Comptroller of the Currency, Comptroller’s Handbook (Section 

411) Narrative and Procedures: Private Placements 1 (1990); see generally In re 

MultiPlan Corp. S’holders Litig., 268 A.3d 784, 794 (Del. Ch. 2022) (discussing a private 

placement to a SPAC sponsor).

125 ARC disputes whether DWAC shorted it 45,000 shares when converting the ARC 

Notes. See Pl.’s Opening Br. 42 & n.15. ARC has agreed, however, to seek a finding that 

446,355 shares of Class A Common Stock should have been included in the numerator. It 

reserves the right to resolve the potential discrepancy at a later time.

126 See Trial Tr. at 102-03 (“It is a type of private placement and a unit is derived from it.”).

127 JX 22 at 12; JX 21 § 15(a); JX 30 § 16(a); JX 31 § 16(a).
30

A plain reading of the Charter supports DWAC’s exclusion of the shares 

derived from the ARC Notes. So does the purpose of the Conversion Ratio. ARC’s 

interest was not diluted by shares issued to ARC.

Yet ARC insists that the ARC Notes cannot be classified as a “private 

placement.” It draws a distinction between private placement units ARC purchased

in conjunction with the IPO (which it believes should be excluded from the 

Conversion Ratio) and subsequent private placement convertible note issuances

(such as the ARC Notes).

128

 ARC relies on the fact that the securities associated 

with the ARC Notes were defined as “Conversion Units” and not “private placement 

units.”129 But the nomenclature assigned to the units does not change the fact that 

they were obtained by ARC through a private placement. The loan documents 

confirm that the “Conversion Units” were “identical to units issued . . . in the private 

placement that closed contemporaneously with” DWAC’s IPO.130

The text of Section 4.3(b)(ii) of the Charter further belies ARC’s distinction. 

The initial private placement at the IPO involved a purchase of units by ARC. The

Charter, however, addresses “private placement units issued to [ARC] upon 

128 Pl.’s Opening Br. 40-41; see also Trial Tr. 101-02. 

129 JX 21 § 15(a); JX 30 § 16(a); JX 31 § 16(a).

130 JX 30 § 16(a); JX 31 § 16(a); see also JX 21 § 15(a) (“The Conversion Units shall be 

identical to the units issued . . . in a private placement upon consummation of the IPO.”).
31

conversion of loans to [DWAC].”131 ARC’s attempt to restrict the Conversion Ratio 

exception to initial private placement units purchased by ARC would leave the 

phrase “upon conversion of loans” meaningless.

4. Inclusion of “Missing” Shares

Finally, ARC asserts that DWAC improperly excluded 524,594 shares of 

Class A Common Stock from the Conversion Ratio. ARC is suspicious of 35

“Selling Securityholders” listed on DWAC’s April 15, 2024 Registration Statement 

who collectively obtained these shares.

132

 Though ARC questions how these 

individuals received unregistered Class A shares, it avers that if the shares were 

issued, they must be reflected in the numerator.

133

The Conversion Ratio calculated by DWAC already accounts for these shares. 

The Registration Statement lists all individuals who received TMTG shares through 

resale transactions.

134

 These “Other Securityholders” together held 1,627,700 shares 

as of the filing of the Registration Statement.135 A total of 4,600 shares belonging 

to two stockholders were mistakenly excluded from this list in the Registration 

131 Charter § 4.3(b)(ii) (emphasis added).

132 Pl.’s Opening Br. 29-31; see JX 137 at 129, 130-32.

133 Pl.’s Opening Br. 31.

134 JX 137 at 130-34. DWAC explained that noteholders who received shares upon the 

business combination passed them on to other parties. See Trial Tr. 258-59.

135 See JX 137 at 130-32 (under “Other Securityholders” heading).
32

Statement.

136

 With these shares, the “Other Securityholders” received 1,632,300 

shares.137 

Although these 4,600 shares were not reflected in the original Registration 

Statement, the shares were included in the numerator of the Conversion Ratio. The 

records of DWAC’s transfer agent address 1,632,300 shares.

138

 DWAC’s 

calculation of the Conversion Ratio accounts for 1,632,299 shares.139 

There is a discrepancy of a single share, which DWAC attributes to a rounding 

error.140 Apart from that share, ARC failed to prove that DWAC omitted these shares 

when calculating the Conversion Ratio. To require DWAC to include them again, 

as ARC requests, would lead to double counting.

* * *

ARC prevails, in part, on its breach of contract claim. The correct Conversion 

Ratio is 1.4911:1. This Conversion Ratio reflects the inclusion of shares issued or 

issuable in respect of the Alternative Warrants, Legal Services Note, and 

136 Compare JX 137 at 130 (listing 10,866 shares for David Jimmerson and 3,334 shares 

for Luis Enrique Cruz), with Trump Media & Technology Group Corp., Am. No. 3 to Form 

S-1 (filed with the SEC June 17, 2024) at 125 (listing 14,633 shares for David Jimmerson 

and 4,167 shares for Luis Enrique Cruz).

137 1,627,700 + 3,767 + 833 = 1,632,300 shares.

138 JX 330.

139 See JX 130 at 18-20.

140 See Defs.’ Answering Br. 66.

34

B. Breach of Fiduciary Duty

“A claim for breach of fiduciary duty requires proof of two elements: (1) that 

a fiduciary duty existed and (2) that the defendant breached that duty.”145 The 

Director Defendants owed fiduciary duties to all DWAC stockholders, including 

ARC. ARC claims that the Director Defendants breached those fiduciary duties in 

two ways: by calculating the Conversion Ratio in bad faith and by issuing false and 

misleading disclosures about the Conversion Ratio.146 Neither theory succeeds.

1. Calculation of the Conversion Ratio

ARC claims that the Director Defendants breached their fiduciary duties by 

deliberately advancing an erroneous Conversion Ratio.147 According to ARC, the 

Director Defendants were motivated to miscalculate the Conversion Ratio out of 

“personal animus” toward Orlando.148 ARC cites to evidence of Orlando being 

excluded from DWAC Board meetings about the Conversion Ratio and claims of 

privilege by the defendants in this litigation as reflecting bad faith.149

145 Beard Research, Inc. v. Kates, 8 A.3d 573, 601 (Del. Ch. 2010) (citation omitted), aff’d

sub nom. ASDI, Inc. v. Beard Rsch., Inc., 11 A.3d 749 (Del. 2010).

146 See PTO ¶¶ 37, 40; see also Compl. ¶¶ 63-64.

147 See PTO ¶ 40.

148 Compl. ¶ 51.

149 See Pl.’s Opening Br. 18 n.5.
35

ARC’s fiduciary duty claim concerns a contractual right affecting DWAC’s 

Class B stockholders—not a fiduciary duty owed to all DWAC stockholders. ARC 

complains that the Director Defendants harmed Class B stockholders by 

miscalculating the Conversion Ratio. This is the same harm complained of in ARC’s

breach of contract claim, in which ARC alleges that the defendants contravened the 

Charter.

150

 ARC “may not ‘bootstrap’ a breach of fiduciary duty claim into a breach 

of contract claim merely by restating the breach of contract claim as a breach of 

fiduciary duty.”151

Above, I concluded that ARC prevailed in part on its breach of contract claim. 

DWAC misapplied certain figures in calculating the numerator of the Conversion 

Ratio. ARC is entitled to a remedy to compensate it for that breach. But it cannot 

also recover for its superfluous breach of fiduciary duty claim.

152

150 Cf. MultiPlan, 268 A.3d at 806 (concluding that a fiduciary duty claim was separate 

from a contract claim, where the right at issue was provided in accordance with the 

certificate of incorporation but the defendants disloyally frustrated it).

151 Grunstein v. Silva, 2009 WL 4698541, at *6 (Del. Ch. Dec. 8, 2009); see also Nemec v. 

Shrader, 991 A.2d 1120, 1129 (Del. 2010) (“It is a well-settled principle that where a 

dispute arises from obligations that are expressly addressed by contract . . . any fiduciary 

claims arising out of the same facts that underlie the contract obligations [will] be 

foreclosed as superfluous.”).

152 See Grayson v. Imagination Station, Inc., 2010 WL 3221951, at *8 (Del. Ch. Aug. 16, 

2010) (explaining that in assessing whether there is an independent basis for a fiduciary 

duty claim involving contractual rights, the court will consider whether the fiduciary duty 

claims “depend[] on additional facts, [are] broader in scope, and involve[] different 

potential remedies”).
36

2. Disclosures About the Conversion Ratio

ARC also claims that the Director Defendants breached their fiduciary duties 

by seeking stockholder approval of the business combination and a Charter 

amendment on the basis of a materially false and misleading Proxy Statement.

153

 It 

raises three alleged issues with the Proxy Statement disclosures:

154 (1) misstating 

that DWAC’s Board had discretion in setting the Conversion Ratio and that a lower 

Conversion Ratio could be applicable;

155 (2) misstating that working capital loans 

provided by ARC did not trigger the anti-dilution provision in the Charter;

156 and 

(3) omitting that the second amendment to the Merger Agreement was meant to 

ensure that TMTG Convertible Notes were dilutive to Class B stockholders.

157

153 PTO ¶ 37.

154 See Pl.s’ Opening Br. 49-50.

155 Proxy Statement at 109 (disclosing that “when calculating the definitive conversion 

ratio, the Board may also decide to exclude any Post-IPO Financings” and “[a]s a result, 

the Board may find a different, lower conversion ratio to be acceptable at the time of the 

Closing”); see also id. (“Class B common stock may disagree with the conversion ratio, 

particularly if the Board decides that other Post-IPO Financings should also be excluded 

resulting in a lower conversion ratio and therefore a lower number of shares of New Digital 

World common stock upon conversion of the Class B common stock.”).

156 Id. at 108 (“Our Charter provides for an adjustment mechanism to the conversion ratio 

applicable to Class B common stock to the extent that additional shares of Class A common 

stock or equity-linked securities are issued in connection with the closing of an initial 

business combination. As such, unlike working capital loans provided by our Sponsor, 

Post-IPO Financings with third parties other than the Sponsor, trigger the anti-dilution 

provision contained in our Charter, adjusting the conversion ratio of our Class B common 

stock to Class A common stock for the benefit of holders of our Class B common stock.”). 

157 Id. at 204-05.
37

“Delaware law imposes upon a board of directors the fiduciary duty to 

disclose fully and fairly all material facts within its control that would have a 

significant effect upon a stockholder vote.”158 Information is material if “there is a 

substantial likelihood that a reasonable shareholder would consider it important in 

deciding how to vote.”

159

 None of the challenged disclosures meet this test.

First, I cannot conclude that the descriptions of the Conversion Ratio in the 

Proxy Statement were materially false or misleading. This litigation demonstrates 

that the Conversion Ratio is complicated in application. ARC itself has changed its 

preferred calculation approach multiple times. The Director Defendants accurately 

communicated in the Proxy Statement that they were tasked with calculating the 

Conversion Ratio and that a decision on the calculation would be forthcoming.160 

The Proxy Statement cautioned stockholders that DWAC “c[ould ]not provide 

assurances regarding its ability to defend its position on the anti-dilution 

provision.”161

158 Stroud v. Grace, 606 A.2d 75, 85 (Del. 1992). 

159 Morrison v. Berry, 191 A.3d 268, 282 (Del. 2018) (quoting Rosenblatt v. Getty Oil Co.,

493 A.2d 929, 944 (Del. 1985)).

160 Proxy Statement at 96-97 (stating that DWAC “expect[ed] the conversion ratio rate to 

be 1.34,” that the “Board may [] decide to exclude” certain financings from the Conversion 

Ratio and “may find a different, lower conversion ratio to be acceptable at the time of the 

Closing,” and that “there is no assurance that the current conversion ratio will not 

materially differ at the time of the Closing”).

161 Id.
38

The disclosures about the ARC Notes were also accurate. DWAC properly 

disclosed that “unlike working capital loans provide by our Sponsor, Post-IPO 

Financings with third parties other than the Sponsor[] trigger the anti-dilution 

provision contained in our Charter.”162

Nor can I conclude that the disclosures about the second amendment to the 

Merger Agreement were materially false or misleading. The Proxy Statement 

discloses that, under the amendment, TMTG Convertible Noteholders would 

become TMTG stockholders immediately before the business combination.163 This 

is not misleading. The Proxy Statement described the conversion consistent with 

the terms of the notes.

164

 There is no evidence that the Director Defendants entered 

into the second amendment to the Merger Agreement (which Orlando signed) with 

the intent to dilute Class B stockholders.

Further, there is no basis to conclude that these alleged misstatements would 

have been important to DWAC stockholders in deciding how to vote. Voting 

stockholders would have wanted to understand the Conversion Ratio calculation 

insofar as it affected their transaction consideration.165 But it is hard to imagine that 

162 Id. at 96; see also Section II.A.3.

163 Proxy Statement at 224.

164 See supra Section II.A.2.

165 Cf. Gilmartin v. Adobe Res. Corp., 1992 WL 71510, at *10 (Del. Ch. Apr. 6, 1992) (“[I]t 

is axiomatic that [information concerning] the fairness of the consideration offered . . . is 

material.”). 
39

they would have been focused on the extent of the Board’s discretion performing the 

calculation. Stockholders were also entitled to—and could—understand the terms 

of the second amendment to the Merger Agreement, rather than ARC’s disproven 

suspicions about the impetus of the amendment. Nothing in the record indicates that 

the Director Defendants intentionally misrepresented the Conversion Ratio or the 

second amendment to the Merger Agreement.166

C. Affirmative Defenses

The defendants put forth seven affirmative defenses. Two defenses—for 

failure to state a claim and the application of an exculpatory Charter provision—

were presented in the answer to ARC’s original pleading.167 Neither defense affects 

the determinations made above. 

After ARC was permitted to amend its complaint to add revised allegations 

slightly changing its calculation of the Conversion Ratio and about its personal 

animus theory, the defendants raised five new affirmative defenses.168 These 

defenses are: (1) estoppel; (2) unclean hands; (3) laches; (4) in pari delicto; and (5) 

166 E.g., Swider Dep. 46-48. 

167 Dkt. 32 at 20-21.

168 See Dkts. 91, 108.
40

the parol evidence rule.169 ARC filed motions to exclude these affirmative defenses 

as untimely and baseless.

170

Court of Chancery Rule 8(c) provides that “[i]n responding to a pleading, a 

party must affirmatively state any avoidance or affirmative defense, 

including . . . estoppel.”

171

 Affirmative defenses not timely pleaded are waived.

172

But the new defenses are not unique to ARC’s amended allegations and theories. 

They could have been raised in response to ARC’s initial complaint. 

The amended complaint afforded the defendants an opportunity to assert new 

affirmative defenses as to the newly pleaded matters.173 It did not create an 

opportunity for a do-over to raise defenses that could have been brought months 

earlier. Since the affirmative defenses were not linked to the two matters first raised 

in the amended complaint, they were waived.174

169 Dkt. 108 at 27-28.

170 Dkts. 147, 155, 168; see also Dkts. 77, 156, 169.

171 Ct. Ch. R. 8(c)(1).

172 E.g., In re Tr. FBO duPont Under Tr. Agreement Dated August 4, 1936, 2018 WL 

4610766, at *11 (Del. Ch. Sept. 25, 2018) (“[A]ffirmative defenses that are not plead are 

waived.”).

173 Ct. Ch. R. 12(h)(6) (“If a pleading raises new matter that is subject to a defense listed

in Rule 12(b)(2)-(6), then an opposing party may assert that defense—even if not asserted 

or preserved initially—as to the new matter.”).

174 See Deene v. Peterman, 2007 WL 2162570, at *7 (Del. Ch. July 12, 2007) (explaining 

that any defense not raised initially is deemed waived).
41

The estoppel affirmative defense is perhaps the most obvious case of 

waiver.

175

 The defendants allege that ARC communicated positions to them about 

the Conversion Ratio on which they purportedly relied to their detriment in making 

public disclosures.176 Although ARC’s original complaint alleged that the 

Conversion Ratio was higher than disclosed in the Proxy Statement, the defendants’ 

answer to that pleading lacked an estoppel affirmative defense.177 Instead, the 

defendants attempted to present an estoppel defense in a draft pre-trial order on 

March 27—before ARC moved to amend its complaint.178 

The defendants’ affirmative defenses are not only late but also weak. To 

prevail on an estoppel theory, a party must show that it: “(i) lacked knowledge or the 

means of obtaining knowledge of the truth of the facts in question; (ii) reasonably 

relied on the conduct of the party against whom estoppel is claimed; and (iii) suffered 

a prejudicial change of position as a result of [its] reliance.”179 How DWAC and the 

Director Defendants lacked knowledge of the facts needed to calculate the 

175 Cf. Abdi v. NVR, Inc., 945 A.2d 1167 (Del. 2008) (TABLE) (holding that the failure to 

plead an affirmative defense in the answer to a complaint constitutes a waiver of the right 

to assert that defense).

176 Dkt. 108 at 27.

177 Dkt. 1 ¶ 41; Dkt. 32 at 20-21.

178 Dkt. 147 Ex. E ¶ 45.

179 HC Cos. v. Myers Indus., Inc., 2017 WL 6016573, at *7 (Del. Ch. Dec. 5, 2017) (citation

omitted). 
42

Conversion Ratio or reasonably relied on the views of Orlando and ARC alone is 

unapparent. 

The other affirmative defenses fare no better. The defendants’ unclean hands 

theory fails because it concerns purported breaches of fiduciary duty by Orlando as 

ARC’s managing member, which are unrelated to ARC’s claims here about the 

Conversion Ratio.180 The in pari delicto theory fails for similar reasons since 

allegations of breaches of fiduciary duty and illegal conduct by Orlando have no 

bearing on the calculation of the Conversion Ratio.181 The defendants’ laches 

defense concerns the timing of ARC’s amended complaint, which I previously 

resolved in ruling on ARC’s motion to amend.182 And the “parol evidence” 

affirmative defense is instead an evidentiary argument.183

180 Dkt. 108 at 27; Portnoy v. Cryo-Cell Int’l, Inc., 940 A.2d 43, 80-81 (Del. Ch. 2008) 

(explaining that the equitable doctrine of unclean hands “provides that ‘a litigant who 

engages in reprehensible conduct in relation to the matter in controversy . . . forfeits his 

right to have the court hear his claim’” (quoting Nakahara v. NS 1991 Am. Tr., 739 A.2d 

770, 791-92 (Del. Ch. 1998))).

181 See In re LJM2 Co-Inv., L.P., 866 A.2d 762, 775-76 (Del. Ch. 2004). The doctrine of 

in pari delicto bars a party’s recovery where it is equally at fault. It is based on the 

“principle of public policy” that “[n]o Court will lend its aid to a man who founds his cause 

of action upon an immoral or an illegal act.” See Am. Healthcare Admin. Servs., Inc. v. 

Aizen, 285 A.3d 461, 487-88 (Del. Ch. 2022) (citing 1 Cowp. 341, 98 Eng. Rep. 1120 

(KB)).

182 Dkt. 108 at 27; Dkt. 86.

183 Dkt. 108 at 28 (alleging that the court should not consider parol evidence since the 

Charter is unambiguous). The defendants also filed a motion in limine to exclude extrinsic 

evidence. Dkt. 152. This motion was resolved above in connection with the analysis of 

ARC’s breach of contract claim. See supra Section II.A; see also supra note 116.
43

III. CONCLUSION

For the reasons stated above, ARC has prevailed in part on its claim that 

DWAC breached Section 4.3 of the Charter by excluding certain securities from its 

calculation of the Conversion Ratio. ARC is entitled to an order specifically 

enforcing Section 4.3 of the Charter based on the correct Conversion Ratio of 

1.4911:1 and to related declaratory relief. 

ARC has failed to prove its breach of fiduciary duty claims. 

The defendants’ affirmative defenses are excluded as untimely and are 

otherwise deficient.

Given the looming expiration of the lockup, an implementing order has been 

filed contemporaneously with this memorandum opinion. The parties are to inform 

the court of any remaining matters to be addressed, as detailed in that order.