COURT OF CHANCERY

OF THE

STATE OF DELAWARE

J OHN W. N OBLE 417 S OUTH S TATE S TREET
V ICE C HANCELLOR D OVER

, D ELAWARE 19901

T ELEPHONE : (302) 739

- 4397

F ACSIMILE : (302) 739

- 6179

December 29, 2015

Stephen P. Lamb, Esquire Kevin G. Abrams, Esquire Paul, Weiss, Rifkind, Wharton J. Peter Shindel, Jr., Esquire

& Garrison LLP Abrams & Bayliss LLP 500 Delaware Avenue, Suite 200 20 Montchanin Road, Suite 200 Wilmington, DE 19801 Wilmington, DE 19807

Re: AM General Holdings LLC v. The Renco Group, Inc.

C.A. No. 7639

- VCN The Renco Group, Inc. v. MacAndrews AMG Holdings LLC

C.A. No. 7668

- VCN Date Submitted: July 23, 2015

Dear Counsel:

These two actions are proceeding in tandem

. 1 I n essence, the Renco Group,

Inc. and affiliates (“Renco”) are in a dispute with MacAndrews & Forbes Holdings

Inc. and affiliates (“ M&F ”) about their inter

- related investments in Nominal

Defendants AM General Holdings LLC (“Hold co ”) and Ilshar Capital L LC

1 Background can be gleaned from any of several earlier opinions. See AM Gen. Hldgs. LLC ex rel. Ilshar Capital LLC v. Renco Gp., Inc. , 2013 WL 5863010, at *1 n.1 (Del. Ch. Oct. 31, 2013) (collecting some past opinions). Perhaps an understanding of the complex relationships among the various parties can be obtained from one of those opinions.AM General Holdings LLC v. The Renco Group, Inc.

C.A. No. 7639

- VCN The Renco Group, Inc. v. MacAndrews AMG Holdings LLC

C.A. No. 7668

- VCN

December 29, 2015 Page 2

(“Ilshar”) . Currently pending are two motions: M&F has moved to compel

discovery; Renco seeks a preliminary injunction to require M&F to provide it with

certain operating information regarding Holdco

.

A. Discovery

The parties have worked to reduce th e scope of their discovery disputes.

Two issues, under the umbrella of M&F ’ s Motion to Compel, remain.

First, M&F seeks Ilshar’s statement of assets and liabilities. 2 Renco

plausibly argues that M&F’s informational rights are set forth in the careful ly and

c omprehensive ly negotiated Amended and Restated Limited Liability Company

Agreement of Ilshar Capital LLC (the “ I lshar Agreement”) . This, however, is not

only a matter of co ntractual informational rights. In addition, M&F has sought

discovery in th e context of litigation in which Ilshar’s financial condition

— and the

various investments made and liabilities assumed on its behalf by Renco

— is fairly

at issue. For example, M&F has presented colorable claims that improper

2 Ilshar is under the direct operational con trol of Renco ’s affiliate

, ILR Capital

LLC

.AM General Holdings LLC v. The Renco Group, Inc.

C.A. No. 7639

- VCN The Renco Group, Inc. v. MacAndrews AMG Holdings LLC

C.A. No. 7668

- VCN

December 29, 2015 Page 3

investments (as prohibited by t he Ilshar Agreement) have been made. In order to

develop this claim, an understanding of what the investments (assets) are and what

the obligations (liabilities) are has become a proper objective of discovery. Assets

and liabilities are relevant; that in formation is not privileged. The contractual

informational rights of the parties do not override or otherwise limit basic

discovery expectations. Renco shall provide M&F with Ilshar’s statements of

assets and liabilities as prepared over the preceding tw elve months.

Second, M&F seeks to learn how Renco was able to post a supersede a s bond

to facilitate an appeal from a significant monetary judgment awarded against it in

New York. In other words, M&F wants to make sure that Renco has not pledged

(or other wise used) the assets (broadly defined) of Ilshar to obtain the bond. Renco

has denied using Ilshar’s assets in the bonding effort. Given the lack of trust

between the two sides, M&F’s skepticism may be understandable, but skepticism

does not automatical ly open the door to the financial details of a contractual

counter party. Where Renco found the funding

— as long as it was not tied to

Ilshar

— is neithe r relevant to these proceedings nor likely to lead to the discoveryAM General Holdings LLC v. The Renco Group, Inc.

C.A. No. 7639

- VCN The Renco Group, Inc. v. MacAndrews AMG Holdings LLC

C.A. No. 7668

- VCN

December 29, 2015 Page 4

of admissible evidence. Moreover, pre sumably, if Ilshar’s assets were pledged in

some fashion to help with the bonding process, Ilshar’s statement of assets and

liabilities should reflect the obligation. For these reasons, M&F’s motion to

compel is den ied as to any external sources ( i.e. , so urces other than Ilshar) for

support of the supersede a s bond. A more developed factual b asis for this

discovery request may justify its renewal.

B. Preliminary Injunction

Renco seeks “a preliminary injunction enjoining [Defendants] from

depriving Renco of its informational rights under the [Holdco Agreement]. ” 3 More

specifically, it asks the Court to “grant Renco’s requested injunct ion and require

the [Defendants ] to honor Renco’s unambiguous contractual rights by . . . requiring

the [Defendants] to (1 ) permit Renco and an authorized representative to inspect

3 Pl. The Renco Gp., Inc.’s Mot. for a Prelim. Inj. to Enforce its Rights Under the Holdco Agreement. The Limited Liability Company Agreement of AM General Holdings LLC (the “Holdco Agreement”) appears as Exhibit A to the Affidavit of William J. Natbony in Supp. of its Appl. for a Prelim. Inj. to Enforce its Rights Under the Holdco Agreement.AM General Holdings LLC v. The Renco Group, Inc.

C.A. No. 7639

- VCN The Renco Group, Inc. v. MacAndrews AMG Holdings LLC

C.A. No. 7668

- VCN

December 29, 2015 Page 5

and examine Holdco’s and AM General’s books of account and (2) provide Renco

with all monthly reporting relating to the AM General Business since May 2013.” 4

Renco invokes Section 10.1(a) of the H oldco Agreement

, which provides in

pertinent part:

At all times during the continuance of the Company, the Company shall maintain . . . separate books of account for the Company and

AM General that shall show a true and accurate record of all costs and

exp enses incurred . . . all charges made, all credits made and received and all income derived in connection with the operation of the Company business . . . . In accordance with Section 18

- 305 of the Delaware [Limited Liability Company] Act, such books of

a ccount

. . . shall at all times be open to inspection and examination at reasonable times by each Member and its duly authorized representative for any purpose reasonably related to such Member’s interest as a member of the Company.

Renco also relies upon Section 15.14 of the Holdco Agreement

, which provides in

pertinent part:

The parties hereto agree that any party by whom this Agreement is enforceable shall be entitled to specific performance in addition to any other appropriate relief or rem edy. Such party may . . . apply to a

4 Renco’s Appl. for a Prelim. Inj. to Enforce its Rights Under the Holdco Agreement at 3

– 4. “AM General” refers to AM General LLC, which is the operating entity held by Holdco.AM General Holdings LLC v. The Renco Group, Inc.

C.A. No. 7639

- VCN The Renco Group, Inc. v. MacAndrews AMG Holdings LLC

C.A. No. 7668

- VCN

December 29, 2015 Page 6

court of competent jurisdiction for . . . injunctive or such other relief as such court may deem just and proper in order to enforce this Agreement or prevent any violation hereof and, to the extent permitted by applic able law, each party waives any objection to the imposition of such relief.

In Renco Group , Inc. v. MacAndrews AMG Holdings LLC

, 5 the Court looked

to that language in concluding that the irreparable injury prong of the preliminary

injunction standard was satisfied. 6 Thus, Renco understandably argues, under the

law of the case doctrine, 7 that Renco’s burden of showing irreparable harm has

been waived or otherwise satisfied for purposes of this proceeding.

The preliminary problem is procedural. Renco has not invoked statutory

rights to obtain books and records in the traditional sense. 8 Similarly, it has not

used the Court’s discovery rules. To an extent, the question for the Court is

whether Renco’s label for the relief it seeks

— that of a preliminary i njunction

—

5 2013 WL 3369318, at *11 (Del. Ch. June 19, 2013) (the “June 2013 Opinion”)

. 6 See also AM Gen. Hldgs. LLC v. Renco Gp., Inc. , 2012 WL 6681994, at *5

– 6 (Del. Ch. Dec. 21, 2012) (the “December 2012 Opinion”) (considering the effect of

a nearly i dentical provision in the Ilshar Agreement).

7 See May v. Bigmar, Inc. , 838 A.2d 285, 288 (Del. Ch. 2003), aff’d , 854 A.2d 1158 (Del. 2004).

8 See 6 Del. C. § 18

- 305.AM General Holdings LLC v. The Renco Group, Inc.

C.A. No. 7639

- VCN The Renco Group, Inc. v. MacAndrews AMG Holdings LLC

C.A. No. 7668

- VCN

December 29, 2015 Page 7

should guide its analysis or whether the Court should look more broadly at the

substance of Renco’s request which would, at least as a general matter, fit more

conveniently under a books and records or discovery request. Although the latter

appr oaches would seem more efficient, the Court, somewhat reluctantly, concludes

that it should address the question as framed by Renco.

Th e June 2013 Opinion that Renco cites did not establish that Section 15.14

by itself satisfied the element of irreparable harm. 9 An accompanying footnote

clarified the provision’s role in analysis as ancillary, not independently sufficient. 10

Further, after finding that two of the preliminary injunction inquiry’s three

prongs

— probability of success on the merits and the prop er balancing of

equities

— were absent for the relief Renco sought , that opinion de clined to grant

the relief contemplated in Renco’s motion

. 11 Instead, the Court fashion ed

equitable relief to address then

- existing concerns in a manner not envisioned by the

9 See Renco Gp. , 2013 WL 3369318

. 10 Id. at *11 n.94.

11 Id. at *10

– 13.AM General Holdings LLC v. The Renco Group, Inc.

C.A. No. 7639

- VCN The Renco Group, Inc. v. MacAndrews AMG Holdings LLC

C.A. No. 7668

- VCN

December 29, 2015 Page 8

mo van t but nonetheless supported by the record

. 12 There, Renco had sought orders

requiring AMG to reallocate certain distributions and cease any future distributions

to AMG pending appraisal, but the relief the Court ordered accomplished neither;

rather, t he Court crafted a “limited injunction” allowing AMG to make

distributions so long as it provided Renco “a summary of its determination of the

Revalued Capital Accounts fifteen calendar days” before doing so. 13 For all of

these reasons, it is far from clea r that the June 2013 O pinion “decided” the issue of

irreparable harm for purposes of this proceeding under the law of the case

doctrine. 14

Nor did the December 2012 O pinion issued in one of the se parallel

proceeding s

. 15 There, Holdco sought and received a m andatory preliminary

injunction requiring Renco to comply with certain contractual provisions that

12 Id. at *13.

13 Id. at *1, 13.

14 See May , 838 A.2d at 288 n.8 (“The ‘law of the case’ doctrine requires that

issues already decided by the same court should be ado pted without relitigation

. . . .” (emphasis added)).

15 See AM Gen. Hldgs. , 2012 WL 6681994, at *4

– 7

.AM General Holdings LLC v. The Renco Group, Inc.

C.A. No. 7639

- VCN The Renco Group, Inc. v. MacAndrews AMG Holdings LLC

C.A. No. 7668

- VCN

December 29, 2015 Page 9

would resolve a dispute over the rightful ownership of $48,658,515 that Ilshar had

retained. 16 This Court reasoned that particularly strong showings with res pect to

the elements of probability of success on the merits and balancing of the equities

overcame Holdco’s comparatively weak showing of irreparable harm. 17 Two

aspects of Holdco’s irreparable harm theory influenced the December 2012

Opinion’s ultimate h olding: (1) contractual waiver as reflected in a similar

provision in the Ilshar Agreement and (2) the fact that Renco had deprived Holdco

of the corporate governance process by bypassing an applicable contractual

framework. 18 Just like the June 2013 Opini on, the December 2012 Opinion

recognized that a contractual waiver provision does not necessarily satisfy the

element of irreparable harm because each decision weighs it as one relevant , and

sometimes significant, contributor informing whether the flexible preliminary

injunction standard was met. Accordingly, neither opinion establishes that the

16 Id. at *1

– 2, 7.

17 Id. at *7.

18 Id. at *5.AM General Holdings LLC v. The Renco Group, Inc.

C.A. No. 7639

- VCN The Renco Group, Inc. v. MacAndrews AMG Holdings LLC

C.A. No. 7668

- VCN

December 29, 2015 Page 10

waiver provision conclusively satisfies the element of irreparable harm under May

v. Bigmar

. In short, the context of its application cannot be ignored.

Further, Renco has not shown that it is suffering irreparable harm due to its

informational shortage. No doubt, it is inconvenient, but irreparable harm in the

absence of interim injunctive relief is a necessary showing. Parties sometimes, as

Renco and M &F did here, agree that contractual failures are to be deemed to

impose the risk of irreparable harm. Such an understanding can be helpful when

the question of irreparable harm is a close one. 19 Parties, however, cannot in

advance agree to assure themselv es (and thereby impair the Court’s exercise of its

well

- established discretionary role in the context of assessing the reasonableness of

interim injunctive relief) the benefit of expedited judicial review through the use of

a simple contractual stipulation that a breach of that contract would constitute

irreparable harm. 20

19 See Renco Gp. , 2013 WL 3369318, at *11 n.94.

20 In part, this is simply a matter that allocation of scarce judicial resources is a judicial function, not a demand option for litigants. In the preliminary injunction dispute resolved in the December 2012 O pinion, there was a fundamentalAM General Holdings LLC v. The Renco Group, Inc.

C.A. No. 7639

- VCN The Renco Group, Inc. v. MacAndrews AMG Holdings LLC

C.A. No. 7668

- VCN

December 29, 2015 Page 11

Because the irreparable harm standard has not been met, the motion for a

preliminary injunction is denied.

IT IS SO ORDERED.

Very truly yours,

/s/ John W. Noble

JWN/cap

cc: Thad J. Bracegirdle, Esquire Joel Friedlander, Esquire Register in Chancery

- K

breakdown

— or so it was alleged

— in both corporate governance and cash flow aspects of a party’s investment. AM Gen. Hldgs. , 2012 WL 6681994, at *1

– 2. The Court is not suggesting that Renco’s concerns are not significant; it is just noting that they do not carry the criticality of M&F’s claims that were addressed earlier in these proceedings.