Court Opinion

ID: 6318310
Source: CourtListenerOpinion
Date Created: 2022-03-01 14:02:01.311743+00
Date Added: 2024-06-11T09:00:48.645524
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

DAVID LOCKTON AND KATHY                 )
LOCKTON AS TRUSTEES OF THE              )
LOCKTON FAMILY TRUST 2019, C.           )
GORDON     WADE,  DAVID    P.           )
HANLON, BARTLEY FRITZSCHE,              )
RICHARD A. LOCKTON, JENNIFER            )
BARKER,     DR.   FREDERICK             )
HENDRICKS,   and MARY     W.            )
MARSHALL,                               )
                                        )
                  Plaintiffs,           )
      v.                                ) C.A. No. 2021-0058-SG
                                        )
                                        )
THOMAS S. ROGERS, HANK J.               )
RATNER, R. BRYAN JACOBOSKI,             )
JAKE MAAS, STEVE GOODROE, and           )
GRAHAM HOLDINGS COMPANY,                )
                                        )
                  Defendants.           )

                        MEMORANDUM OPINION

                     Date Submitted: November 8, 2021
                       Date Decided: March 1, 2022

Daniel A. Griffith, of WHITEFORD, TAYLOR & PRESTON LLC, Wilmington,
Delaware; OF COUNSEL: Allan B. Diamond, Jason Fulton, and John B. Sample, of
DIAMOND MCCARTHY LLP, Houston, Texas, Attorneys for the Plaintiffs.

Stephen C. Norman, Nicholas D. Mozal, and Callan R. Jackson, of POTTER
ANDERSON & CORROON LLP, Wilmington, Delaware, Attorneys for Defendants
Thomas S. Rogers, Hank J. Ratner, R. Bryan Jacoboski, and Steve Goodroe.
Albert H. Manwaring IV, Matthew F. Lintner, and Kirsten Zeberkiewicz, of
MORRIS JAMES LLP, Wilmington, Delaware; OF COUSEL: Robert A. Van Kirk
and Sarah F. Kirkpatrick, of WILLIAMS & CONNOLLY LLP, Washington, DC,
Attorneys for Defendants Jake Maas and Graham Holdings Company.

GLASSCOCK, Vice Chancellor
      Actions of corporate decision-makers, when within the bounds of fiduciary

duties, are generally free from review by this Court.          When, however, these

fiduciaries venture outside those bounds—as when causing the company to

undertake a transaction in which they are themselves interested—their actions draw

stringent judicial review.     The burden is upon such conflicted fiduciaries to

demonstrate that the actions taken were entirely fair to the entity and its stockholders.

      The Plaintiffs contend that the matter here is the quintessence of such a

conflicted transaction. Holders of corporate debt and preferred equity of WinView,

Inc. (“WinView” or the “Company”) made up the majority of the WinView board

of directors. These defendant directors allegedly caused the company to merge into

other entities, transferring thereby benefits to themselves not shared with the

common stockholders, who were squeezed out; with the defendants ignoring other

opportunities less lucrative for themselves or their principals but better for the

stockholders. The Plaintiffs here are former stockholders of WinView, who seek

damages based on these allegations.

      Before me are motions to dismiss the Amended Complaint. I first consider

whether Corwin applies and requires that the case be dismissed; I find that, based at

least on the factual record as it now exists, Corwin does not cleanse the transaction.

With regard to the Defendants’ Motion to Dismiss under Rule 12(b)(6), I find

generally that the Amended Complaint states adequate breach of fiduciary duty
claims against the Director Defendants, as well as a claim against the Director

Defendants and the largest blockholder of WinView for unjust enrichment.

       I note that the Defendants maintain stoutly that their actions should be viewed

based on what they allege was the insolvency of the Company and the exigencies of

the situation, in light of all of which their actions complied with fiduciary duties to

the creditors and equity-holders of WinView; in fact, per the Defendants, the results

were quite favorable to the common stockholders. These allegations may prove

dispositive upon a fuller record, but are not sufficient at this plaintiff-friendly stage

of the proceedings to support a dismissal.

       My analysis follows, below.

                                  I. BACKGROUND1

       A. The Parties and Relevant Non-Parties

       Non-Party WinView was a privately held Delaware corporation founded in

2009.2 In May 2020, WinView consummated a business combination with two

Canadian companies, Frankly and Torque, pursuant to which Torque would acquire

all of the outstanding shares of Frankly, and WinView would merge with a wholly

1
  Unless otherwise noted, the facts referenced in this Memorandum Opinion are drawn from the
First Amended Verified Complaint for Breach of Fiduciary Duties (referred to herein as the
“Amended Complaint”) and the documents incorporated therein. See generally First Am. Verified
Compl. Breach Fiduciary Duties, Dkt. No. 49 [hereinafter the “Am. Compl.”].
2
  Id. ¶ 18.

                                             2
owned subsidiary of Torque (the “Merger”), with the final entity being renamed

Engine Media Holdings, Inc. (“Engine Media”).3

        Plaintiff David Lockton is a co-founder of WinView and served as WinView’s

Chief Executive Officer (“CEO”), President, and Secretary from 2009 through

2017.4

        Plaintiff Lockton Family Trust 2019 was a WinView common stockholder.5

Plaintiffs David Lockton and Kathy Lockton, a co-founder of WinView, served as

trustees of the Lockton Family Trust 2019.6

        Plaintiff C. Gordon Wade is a co-founder and former member of the Winview

board of directors (the “Board”).7 Wade held WinView common stock at the time

of the Merger.8

        Plaintiff David P. Hanlon is a former member of the WinView Advisory

Board.9 Hanlon held WinView common stock at the time of the Merger.10

        Plaintiff Bartley Fritzsche is a former WinView director.11 Fritzsche held

WinView common stock at the time of the Merger.12

3
  Id. ¶¶ 77, 165.
4
  Id. ¶ 1.
5
  Id. ¶ 2.
6
  Id. ¶¶ 2, 18.
7
  Id. ¶ 3.
8
  Id. ¶¶ 3, 18.
9
  Id. ¶ 4.
10
   Id.
11
   Id. ¶ 7.
12
   Id.

                                         3
       Plaintiffs Richard A. Lockton, Jennifer Barker, Mary W. Marshall, and

Dr. Frederick Hendricks are former WinView common stockholders.13 Each held

WinView common stock at the time of the Merger.14

       Defendant Thomas S. Rogers was the Executive Chairman of WinView and

the Chairman of the Frankly board of directors prior to the Merger.15 At the time of

the Merger, Rogers held secured debt and preferred stock in WinView, and warrants

on WinView’s common and preferred stock.16 Rogers also held common shares and

“restricted share units” in Frankly.17 As a result of the Merger, Rogers became the

Executive Chairman of Engine Media.18

       Defendant Hank J. Ratner was a WinView director prior to the Merger.19 At

the time of the Merger, Ratner held secured debt and preferred stock in WinView,

and warrants on WinView’s common and preferred stock.20 Following the Merger,

Ratner became a member of the Engine Media board of directors.21 Ratner was a

member of the special committee of WinView’s Board formed to facilitate the

Merger process (the “Special Committee”).22

13
   Id. ¶¶ 5–6, 8–9.
14
   Id.
15
   Id. ¶ 10.
16
   Id. ¶ 85.
17
   Id. ¶ 10.
18
   Id.
19
   Id. ¶ 11.
20
   Id. ¶ 85.
21
   Id. ¶ 11.
22
   Id. ¶ 120.

                                         4
       Defendant R. Bryan Jacoboski was a WinView director prior to the Merger.23

At the time of the Merger, Jacoboski held secured debt and warrants on WinView’s

common and preferred stock.24 Jacoboski served on the WinView Board as a

representative for Abingdon Capital Management, Ltd.25 Jacoboski was a member

of the Special Committee.26

       Defendant Jake Maas was a WinView director prior to the Merger.27 Maas

served on the WinView Board as a representative of WinView’s Series B Preferred

Stockholders.28 Maas served as the Chairman of the Special Committee.29 Maas

was also an “agent” of Graham Holdings Company, discussed below.30

       Defendant Graham Holdings Company (“Graham”) is a Delaware

corporation.31 Graham held 83% of WinView Series B Preferred Stock and was

WinView’s largest stockholder.32 At the time of the Merger, Graham held secured

debt and preferred stock in WinView, and warrants on WinView’s common and

preferred stock.33

23
   Id. ¶ 12.
24
   Id. ¶ 85.
25
   Id. ¶ 12.
26
   Id. ¶ 120.
27
   Id. ¶ 13.
28
   Id.
29
   Id. ¶¶ 13, 121.
30
   Id. ¶ 13.
31
   Id. ¶ 14.
32
   Id. ¶¶ 13–14, 98.
33
   Id. ¶¶ 14, 85.

                                        5
        Defendant Steve Goodroe was a WinView director from May 2016 until the

Merger, serving as the representative of WinView’s Series A Preferred

Stockholders.34 Goodroe held secured debt and preferred stock in WinView, and

warrants on WinView’s common and preferred stock.35 Goodroe was a member of

the Special Committee.36

        I refer to Defendants Rogers, Ratner, Jacoboski, Maas, and Goodroe as the

“Director Defendants.”     At the time of the Merger, the WinView Board was

comprised of the Director Defendants and one additional director, Eric Vaughn, who

is not named as a defendant in this action.37

        B. Factual Background

        WinView was founded in 2009 by David Lockton, Kathy Lockton, and C.

Gordon Wade. WinView’s business was focused primarily on sports betting.38

WinView’s asset portfolio was comprised largely of patents related to sports

betting.39 The Company’s patent portfolio grew from nine patents upon its founding

in 2009 to twenty-four patents at the close of its Series A round of financing.40 By

2019, the Company held seventy-five patents “on the synchronized second screen

34
   Id. ¶ 15.
35
   Id. ¶ 85.
36
   Id. ¶ 120.
37
   See id. ¶ 156.
38
   Id. ¶ 18.
39
   Id. ¶¶ 19–20.
40
   Id.

                                          6
experience, mobile sports betting, online gaming, and foundational aspects of [d]aily

[f]antasy [s]ports.”41

       In January 2016, WinView undertook a Series A round of preferred equity

financing.42 Defendants Rogers, Ratner, and Jacoboski each joined WinView’s

Board in connection with this financing round.43 Specifically, David Lockton

approached Defendant Rogers and asked him to join WinView’s Board as its

Chairman in exchange for a $1 million investment.44         Rogers agreed, on the

condition that Defendant Ratner, the former CEO of Madison Square Garden, join

the WinView Board as well and serve as its co-Chairman.45 After negotiations,

Rogers and Ratner ultimately joined the Board in exchange for $400,000

commitments each.46 They also negotiated consulting agreements with WinView,

pursuant to which they would earn stock options that vested at various milestones,

including obtaining sponsorships, acquiring advertising contracts, and meeting

certain financing targets.47

       Meanwhile, WinView negotiated with Defendant Jacoboski to convert a

convertible loan he had previously made to WinView into Series A preferred stock.48

41
   Id. ¶ 20.
42
   Id. ¶ 24.
43
   Id. ¶¶ 24–27.
44
   Id. ¶ 25.
45
   Id.
46
   Id. ¶ 26.
47
   Id.
48
   Id. ¶ 27.

                                         7
Jacoboski agreed to this conversion on the condition that WinView amend its bylaws

and certificate of incorporation (the “Charter”) to provide him with a permanent seat

on the Board.49 In September 2016, Ratner resigned as co-Chairman of WinView’s

Board, though he remained a director.50 Rogers thereafter became the Executive

Chairman of the Board.51

               1. WinView Undertakes a Series of Debt and Equity Financings

       After completing the Series A financing round, WinView undertook five

bridge loans, a Series B equity offering, and four additional debt financings.52 The

Plaintiffs contend that the Director Defendants, some of whom participated in the

financings, granted themselves generous incentive awards and securities in

connection with these offerings.53

                      a. The First Bridge Loan and the Series B Equity Offering

       In late 2016, after the Series A financing round was completed, WinView

raised funds through a short-term bridge loan while it worked towards a Series B

equity financing round.54 The Amended Complaint alleges that, in November 2016,

49
   Id.
50
   Id. ¶ 28.
51
   Id.
52
   See id. ¶¶ 40–70, 86–91. I discuss the bridge loans and other financings undertaken by WinView
prior to the Merger to provide background on how the Defendants came to hold their warrants,
secured debt and preferred stock. To the extent that the allegations regarding these financings
imply potential breaches of fiduciary duties, they would presumably be derivative claims that were
lost with the Merger; at any rate, the Plaintiffs are not pursuing them here.
53
   See id. ¶¶ 40–70, 86–91.
54
   See id. ¶¶ 40–51.

                                                8
Rogers informed the Board that he and Ratner would not invest in the bridge loan,

and that he would inform potential investors that he did not plan to invest and had

concerns about WinView’s management.55           Nevertheless, Rogers and Ratner

ultimately invested $200,000 each in the first bridge loan, which closed in December

2016.56

        In exchange for their investments, Rogers and Ratner negotiated several

incentives.57 For instance, Rogers negotiated to (i) lower the threshold for financing

incentives from $50 million to $30 million, (ii) modify language that awarded him

1% of the Company’s equity for signing the first license with a sports league to

instead award 1% of the Company for each license signed, and (iii) adjust the vesting

requirements for certain stock awards so that they were deemed to have been met.58

        While the first bridge loan was closing, WinView began undertaking a

Series B preferred equity financing, which closed in April 2017.59 WinView raised

$12 million in connection with the Series B financing round, $10 million of which

came from Defendant Graham.60 In exchange for Graham’s investment, WinView

agreed to amend its Charter to provide Graham a permanent representative on

55
   Id. ¶ 41.
56
   Id. ¶ 44.
57
   Id. ¶ 42.
58
   Id.
59
   See, e.g., id. ¶¶ 45, 47.
60
   Id. ¶ 45.

                                          9
WinView’s Board.61 Graham assigned Defendant Maas to serve as its designated

representative on the Board.62

                   b. The Second Bridge Loan

       The Amended Complaint alleges that, after WinView closed the Series B

financing round, Rogers threatened to cancel meetings with potential investors

unless the Board granted him and Ratner additional stock options.63 According to

the Amended Complaint, during a Board call that occurred around October 2, 2017,

Rogers stated that if he were not awarded additional stock, he would cancel investor

meetings, allow WinView to run out of money, and then undertake a cram-down

financing.64 Rogers also sent an email to the Board on October 3, 2017, two days

before a meeting with the CEO of Comcast, stating that he had no incentive to raise

funds for WinView without additional stock awards, and threatened to postpone the

Comcast meeting and other investor meetings if he did not receive the awards.65

Rogers reiterated in a series of emails on October 4, 2017 that he wanted to know

whether the “incentive [was] in place” and that “[i]f need be, [he would] postpone

the [meeting with Comcast’s CEO].”66 The Board then decided to grant Rogers

61
   Id.
62
   Id.
63
   Id. ¶¶ 46–52.
64
   Id. ¶ 48.
65
   Id. ¶ 49.
66
   Id. ¶ 50.

                                        10
additional stock options, though the investor meetings that Rogers had threatened to

scuttle did not ultimately lead to any additional investments in WinView.67

        According to the Amended Complaint, WinView ran out of cash by January

2018, and therefore suspended payments to its suppliers.68 As a result, WinView

raised funds through a second bridge loan.69 Around the same time, on January 1,

2018, the Board exercised a contractual option under Lockton’s employment

agreement to reduce his role at WinView from CEO to Chief Innovation Officer

(“CIO”).70 In Lockton’s place, the Board appointed a vice president of engineering,

Alan Pavlish, as the “acting CEO.”71 Pavlish remained as the “acting CEO” up until

the Merger, when he became an executive of Engine Media.72

        In early 2018, the five Director Defendants met to discuss the terms of the

second bridge loan without Lockton, who had proposed that the second bridge loan

feature the same terms as the first.73 Rogers later relayed to Lockton during a

February 1, 2018 call that the Director Defendants required “100% warrant

coverage” in order to participate,74 meaning that the issued warrants would equal

100% of the dollar amount of their investment.

67
   Id. ¶ 51.
68
   Id. ¶ 52.
69
   Id. ¶¶ 53–57.
70
   Id. ¶ 32.
71
   Id. ¶¶ 32, 138.
72
   Id. ¶ 32.
73
   Id. ¶¶ 53–54.
74
   Id. ¶ 54.

                                         11
       The second bridge loan closed on March 12, 2018, with Defendants Rogers,

Ratner, Jacoboski, Goodroe, and Graham participating.75 The terms of the second

bridge loan featured the 100% warrant coverage for participants, a 2x liquidation

preference upon a change of control, and a conversion into Series B preferred

stock.76 The terms of the second bridge loan also featured various changes to

WinView’s corporate governance.              For instance, Lockton was required to

immediately resign from the Board, and he was replaced by Eric Vaughn as the

common stockholder’s Board representative.77 WinView also amended its Charter

to remove the requirement that financings and major transactions, including the sale

or merger of WinView, be approved by a majority vote of each class of WinView

stock.78 As amended, the Charter required only a majority vote of all shares voting

together.79 Finally, the second bridge loan was secured by WinView’s patents, and

granted Jake Maas the sole power of attorney to foreclose on the patent portfolio in

the event of a default.80

75
   Id. ¶ 57.
76
   Id. ¶ 55.
77
   Id. The Amended Complaint’s allegations are inconsistent on this point. The Plaintiffs also
allege that the Board designated WinView’s “acting CEO,” Pavlish, as the common stockholder
representative. See id. ¶ 33.
78
   Id. ¶ 55; see also id. ¶ 33.
79
   Id. ¶ 55; see also id. ¶ 33.
80
   Id. ¶¶ 38, 55.

                                             12
                    c. The Third Bridge Loan

        According to the Amended Complaint, funds from the second bridge loan ran

out by August 2018.81 Growing concerned about WinView’s future, Lockton

contacted MGM’s CEO in late 2018 to seek capital and a “working partnership.” 82

Lockton met with MGM several times, including an all-day onsite due diligence

session at WinView’s headquarters with MGM’s Vice President of Development,

who informed Lockton that he would recommend that MGM proceed further.83

        Lockton later met with MGM executives and learned that Rogers and Ratner

had approached MGM on behalf of a different mobile technology company called

Tunity.84 According to the Amended Complaint, Rogers and Ratner obtained a

$12 million investment in Tunity from MGM, and they were compensated by Tunity

for obtaining the investment.85 Shortly thereafter, MGM informed Lockton that it

was no longer interested in investing in WinView.86

        With WinView’s funds dwindling, WinView commenced a third bridge loan,

financed by members of the WinView Board.87 The third bridge loan closed on

August 22, 2018, with Rogers and Ratner each investing $200,000.88 In parallel with

81
   Id. ¶ 62.
82
   Id. ¶ 58.
83
   Id.
84
   Id. ¶ 59.
85
   Id.
86
   Id.
87
   Id. ¶ 63.
88
   Id.

                                        13
the third bridge loan, Rogers directed Lockton to pursue financing by enforcing

WinView’s patents through patent infringement actions, with those actions being

financed by patent litigation financing firms.89

                   d. The Fourth Bridge Loan

       In February 2019, Rogers determined that WinView needed to raise funds

through a fourth bridge loan.90 In a call with shareholders in March 2019, Rogers

stated that if WinView was unable to raise the funds, the secured creditors, including

Rogers, Ratner, Jacoboski, and Graham, intended to foreclose on WinView’s patents

and attempt to monetize the patents for themselves.91 The Board then negotiated the

fourth bridge loan with 6% interest, a liquidation preference, and the right to

purchase warrants on WinView common stock for $0.01 per share.92

       Following the fourth bridge loan, the Board made four additional debt

offerings between March 2018 and December 2019, which the Company referred to

as “non-brokered private placements.”93 Each of these debt offerings were secured

by WinView’s patents.94

89
   Id. ¶ 61.
90
   Id. ¶ 65.
91
   Id. ¶¶ 66–67.
92
   Id. ¶ 68.
93
   Id. ¶ 70.
94
   Id.

                                         14
               2. Lockton Pursues Patent Litigation Financing for WinView

       As I noted above, in parallel with the bridge financings, Rogers directed

Lockton, as WinView’s CIO, to attempt to monetize WinView’s patents through

patent litigation.95 In connection with this pursuit, Lockton met with law firms to

discuss potential representation of WinView on a contingency fee basis. 96 Lockton

also met with several patent litigation funding firms.97 By mid-2019, WinView had

reached an agreement with a law firm to represent WinView on a contingency-fee

basis to pursue patent infringement litigation, though it was still seeking financing

for litigation and licensing costs.98

               3. The Board Informs Lockton of the Merger

       On November 16, 2019, Lockton informed Rogers on a call that he had

obtained the necessary litigation funding.99 During the call, however, Rogers

informed Lockton that the WinView Board had executed a binding term sheet to sell

WinView’s assets, including WinView’s platform and patents.100 Rogers explained

to Lockton that the Board planned to merge WinView with Frankly and Torque,

which both traded on the Toronto Venture Exchange.101           Accordingly to the

95
   Id. ¶¶ 61, 69, 71–74.
96
   Id. ¶ 72.
97
   Id.
98
   Id. ¶ 74.
99
   Id. ¶ 75.
100
    Id.
101
    Id.

                                         15
Amended Complaint, Rogers explained to Lockton on the call that the Merger was

fully supported by the other Director Defendants (Ratner, Jacoboski, Goodroe, and

Maas) because the Board wanted liquidity, and, “as secured creditors,” they wanted

“a public market valuation for their secured loans.”102 As I discussed above, the

Merger was structured such that Torque would purchase Frankly, and WinView

would then merge into Torque.103 The final entity was to be renamed Engine

Media.104

       Because Rogers was a Frankly stockholder and the Chairman of its Board,105

the Board formed a Special Committee to negotiate the Merger, consisting of all the

directors except Rogers.106 Rogers represented to Lockton on the call, however, that

he had personally negotiated the Merger.107

       The Merger treated WinView’s common stockholders differently from its

secured creditors and preferred stockholders. The Merger eliminated WinView’s

common stock, with common stockholders receiving no cash and no shares in the

new entity, Engine Media.108 Instead, they received a contractual right to 50% of

any recoveries on successful patent litigation regarding WinView’s patents.109

102
    Id. ¶ 76.
103
    Id. ¶ 77.
104
    Id.
105
    See supra notes 15–17 and accompanying text.
106
    Id. ¶ 120
107
    Id. ¶ 121.
108
    Id. ¶ 82.
109
    Id. ¶¶ 82, 100, 114.

                                             16
Future Engine Media stockholders would receive the other 50%.110 Under the

Merger agreement, Engine Media was required to designate a “representative” of

these former WinView common stockholders, who was tasked with ensuring that

Engine Media would take “reasonable efforts” to monetize the patent portfolio.111

The Director Defendants, who were charged with selecting this representative,

appointed Jacoboski.112

        Meanwhile, secured creditors and preferred stockholders received stock in

Torque, reflecting a $35 million valuation of WinView.113 As secured creditors and

preferred stockholders, the Defendants received $13.8 million of the $35 million.114

Neither the Board nor the Special Committee commissioned a fairness opinion or

retained outside advisors to evaluate different options and their effect on WinView’s

various classes of stock.115

        Rogers formally announced the Merger to WinView’s stockholders on

November 22, 2019, during a stockholder call.116 On that day, Rogers, Ratner,

Jacoboski, and Graham each held WinView secured debt, preferred stock, and

warrants to purchase additional preferred stock and common stock in WinView:

110
    Id. ¶ 114.
111
    Id. ¶ 107.
112
    Id. ¶ 108.
113
    Id. ¶¶ 81, 99.
114
    Id. ¶ 104.
115
    Id. ¶¶ 95, 122.
116
    Id. ¶ 84.

                                         17
            • Rogers held (i) WinView notes with an aggregate principal amount of

                $700,328.77, (ii) 188,074 shares of WinView Series B Preferred Stock,

                and (iii) warrants to purchase 879,656 shares of WinView Common

                Stock and 183,873 shares of WinView Series B Preferred Stock.117

            • Ratner held (i) WinView notes with an aggregate principal amount of

                $700,350.68, (ii) 188,074 shares of WinView Series B Preferred Stock,

                and (iii) warrants to purchase 183,873 shares of WinView Series B

                Preferred Stock, 398,927 shares of WinView Series A Preferred Stock,

                and 879,656 shares of WinView Common Stock.118

            • Jacoboski held (i) WinView notes with an aggregate principal amount

                of $475,000.00 and (ii) warrants to purchase 183,873 shares of

                WinView Series B Preferred Stock, 602,323 shares of WinView Series

                A Preferred Stock, and 792,821 shares of WinView Common Stock.119

            • Graham held (i) WinView notes with an aggregate principal amount of

                $2,000,000, (ii) 5,883,953 shares of WinView Series B Preferred Stock,

                and (iii) warrants to purchase 1,470,988 shares of WinView Series B

                Preferred Stock and 1,103,241 shares of WinView Common Stock.120

117
    Id. ¶ 85.
118
    Id.
119
    Id.
120
    Id.

                                           18
          • Goodroe held (i) WinView notes with an aggregate principal amount of

              $700,438.36, (ii) 763,585 shares of WinView Series A Preferred Stock,

              (iii) 188,074 shares of WinView Series B Preferred Stock, and

              (iv) warrants to purchase 87,067 shares of WinView Series A Preferred

              Stock and 879,656 shares of WinView Common Stock.121

              4. WinView Completes a Fifth Bridge Loan

       On the November 22, 2019 stockholder call, Rogers stated that in order to

cover expenses until the consummation of the Merger, WinView needed to raise

$1.2 million through a secured bridge loan.122 The proposed loan amount was later

increased to $1.4 million.123 Under the terms of the fifth bridge loan, lenders would

to be paid back with interest, plus $3 in Torque stock for every $1 loaned, with the

loans being fully secured by WinView’s patents.124 Lenders also received warrants

for WinView common stock, giving them the right to purchase 3.3 shares of

WinView Common Stock for $0.01 per share for each $1.37 loaned.125 The warrants

could be exercised at any time,126 but even if they were not exercised before the

Merger closed, they entitled holders to a portion of the patent litigation revenues that

121
    Id. The Amended Complaint also alleges that WinView equity was also held by a trust that
Goodroe controlled, and by a Goodroe family member. Id. ¶ 85 n.1.
122
    Id. ¶ 86.
123
    Id.
124
    Id. ¶ 87.
125
    Id.
126
    Id. ¶ 91.

                                            19
were reserved for former WinView common stockholders.127 Thus, the fifth bridge

loan had the effect of diluting the former WinView common stockholder’s

contractual right to a payout on successful patent litigation.128 According to the

Amended Complaint, the Defendants participated in this fifth bridge loan, which

provided them with enough warrants to control, if exercised, 51% of WinView’s

voting stock.129 Even without exercising the warrants, the Defendants controlled

45% of WinView’s total voting stock as of December 2019.130

       On December 1, 2019, Lockton sent a letter to WinView’s Board expressing

that he believed the opportunity to pursue patent litigation on behalf of WinView as

a standalone company was a superior alternative to the Merger.131 Lockton provided

an update on his discussions with potential financers, including that two firms had

executed letters of intent and that he anticipated four more to execute similar letters

in the coming days.132 Lockton also objected to perceived conflicts of interest of the

Director Defendants, given that they had threatened, as secured creditors, to

foreclose on WinView’s patents.133

127
    Id. ¶ 92.
128
    Id.
129
    Id. ¶¶ 88–92.
130
    Id. ¶ 91.
131
    Id. ¶ 93.
132
    Id.
133
    Id. ¶ 94.

                                          20
       Three days later, on December 4, 2019, WinView’s counsel, Damien Weiss,

called Lockton to relay a conversation he had with Rogers about the letter.134 Weiss

told Lockton that the Board was “furious,” and threatened that “the Board would

immediately foreclose on the patents, and pursue patent litigation on their own

behalf,” unless Lockton agreed to several concessions.135               Those concessions

included (i) executing a consulting agreement to represent Engine Media in patent

litigation at a 30% salary reduction, (ii) agreeing to release the Board from all

fiduciary obligations owed to him and his family as WinView stockholders,

(iii) agreeing not to communicate with other stockholders or assist them in any way

in matters relating to the Board’s actions, and (iv) signing a proxy that would give

the Board the right to vote his and his family’s WinView stock.136 Weiss then

emailed Lockton’s attorney executed copies of agreements memorializing those

concessions, and reiterated that the Board would foreclose on the WinView patents

if Lockton did not sign the agreements within 48 hours.137 The Amended Complaint

does not indicate whether Lockton agreed to these concessions.

       The following week, on December 10 and 11, 2019, certain of the

Defendants138 emailed WinView stockholders, stating that the only alternative to the

134
    Id. ¶ 124.
135
    Id.
136
    Id.
137
    Id.
138
    The Amended Complaint does not specify the identity of these Defendants. See id. ¶¶ 138–39.

                                              21
Merger would be for the secured noteholders, which included the Defendants, to

foreclose on WinView’s patents.139 This statement was reiterated to stockholders by

Pavish, Jacoboski, Maas, and WinView’s counsel.140

        According to the Amended Complaint, Rogers interfered with the patent

litigation financing that Lockton had posed as an alternative to the Merger. For

instance, Rogers emailed one litigation funder on January 15, 2020 and stated that

WinView’s “patent counsel” had “heavily advised that this would not be a good time

to engage in a discussion on patent litigation financing.”141

                 5. WinView’s Board and Stockholders Approve the Merger

        WinView’s Board approved the Merger on March 11, 2020.142 On March 30,

2020, the WinView Board sent an information statement to WinView stockholders

regarding the Merger (the “Information Statement”).143 The Amended Complaint

asserts that the Information Statement contained numerous misstatements, including

about the ability of Torque and Frankly to finance patent litigation following the

Merger, the efforts by the WinView Board to obtain financing as a standalone

company and the availability of financing alternatives, Rogers’ role in negotiating

the Merger, and the nature of WinView’s discussions with potential litigation

139
    Id. ¶ 138.
140
    Id.
141
    Id. ¶ 132.
142
    Id. ¶ 147.
143
    Id. ¶ 126.

                                          22
financers.144 The Information Statement did, however, attach in full each of the

letters from Lockton criticizing the Merger.145

       The Merger was approved by a majority of the WinView stockholders voting

together as one class.146 WinView never disclosed the breakdown of the vote,

including what percentage of preferred stockholders and common stockholders

approved the Merger, and whether the Defendants exercised the warrants that would

increase their stock ownership to 51%.147

       The Merger closed on May 11, 2020.148 For fourteen months after the Merger

closed, Engine Media failed to file any patent lawsuits, and therefore has made no

payments to the former WinView common stockholders.149

       C. Procedural History

       The Plaintiffs initiated this action on January 1, 2021.150 After the Defendants

filed motions to dismiss the initial complaint,151 the Plaintiffs filed an amended

144
    See, e.g., id. ¶¶ 125–46.
145
    Transmittal Decl. Callan R. Jackson Pursuant 10 Del. C. § 3927 Defendants Thomas S. Rogers,
Hank J. Ratner, R. Bryan Jacoboski, and Steve Goodroe’s Opening Br. Supp. Mot. Dismiss, Ex. 1
[hereinafter the “Information Statement”], Annexes C, K.
146
    See id. ¶¶ 89, 92.
147
    Id. ¶ 92.
148
    Id. ¶ 165.
149
    Id. ¶ 161. In their motion to dismiss briefing, the Defendants asserted that WinView filed
certain patent lawsuits in July 2021, after the Plaintiffs commenced this action. Defs. Thomas S.
Rogers, Hank J. Ratner, R. Bryan Jacoboski, and Steve Goodroe’s Opening Br. Supp. Their Mot.
Dismiss, Dkt. No. 71 at 21 [hereinafter “Directors’ OB”].
150
    See Verified Compl. Breach Fiduciary Duties, Dkt. No. 1.
151
    See Mot. Dismiss, Dkt. No. 37; Def. Graham Holdings Company’s Mot. Dismiss, Dkt. No. 38l
Def. Jake Maas’ Mot. Dismiss, Dkt. No. 42.

                                               23
complaint on July 8, 2021, which is currently the operative complaint (the

“Amended Complaint”).152 The Amended Complaint brings claims for breaches of

fiduciary duty (Counts I and II), civil conspiracy (Count III), and unjust enrichment

(Count IV) against all of the Defendants.153 The Defendants moved to dismiss the

Amended Complaint and filed opening briefs on August 27, 2021,154 and the parties

completed their briefing on October 27, 2021.155 I held oral argument on November

8, 2021, and I consider the matter fully submitted as of that date.

                                      II. ANALYSIS

       A. Legal Standards

       The Defendants have moved to dismiss the Amended Complaint under Rule

12(b)(6). At the pleading stage, I must take as true all well-pled allegations and draw

inferences therefrom in the light most favorable to the Plaintiffs.156 I may only grant

152
    See generally Am. Compl.
153
    See id. ¶¶ 172–05.
154
    See Directors’ OB; Def. Jake Maas’ Joinder Defs.’ Thomas S. Rogers, Hank J. Ratner, R. Bryan
Jacoboski, and Steve Goodroe’s Opening Br. Supp. Their Mot. Dismiss, Dkt. No. 73; Def. Graham
Holdings Company’s Opening Br. Supp. Its Mot. Dismiss, Dkt. No. 74 [hereinafter “Graham’s
OB”].
155
    See Pls.’ Ans. Br. Opp’n Defs. Thomas S. Rogers, Hank J. Ratner, Steve Goodroe, R. Bryan
Jacoboski’s, and Jake Maas’ Mot. Dismiss, Dkt. No. 76 [hereinafter “Pls.’ First AB”]; Pls.’ Ans.
Br. Opp’n Def. Graham Holdings Company’s Opening Br. Supp. Mot. Dismiss, Dkt. No. 77; Def.
Graham Holdings Company’s Reply Supp. Mot. Dismiss, Dkt. No. 80 [hereinafter “Graham’s
RB”]; Defs. Thomas S. Rogers, Hank J. Ratner, R. Bryan Jacoboski, and Steve Goodroe’s
Corrected Reply Br. Supp. Their Mot. Dismiss, Dkt. No. 82 [hereinafter “Directors’ RB”].
156
    Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Holdings LLC, 27 A.3d 531, 536–37 (Del.
2011).

                                              24
the motions to dismiss if I find it not “reasonably conceivable” that the Plaintiffs

may prevail.157

       B. The Merger Is Not Entitled to Corwin Cleansing

       The Defendants contend that I must dismiss the Amended Complaint because

the Merger was cleansed under the framework outlined in Corwin v. KKR Financial

Holdings LLC.158        Under Corwin, when a transaction absent a controlling

stockholder “is approved by a fully informed, uncoerced vote of the disinterested

stockholders, the business judgment rule applies.”159 As explained below, I find that

the Merger is not entitled to Corwin cleansing.

       The relevant vote for purposes of Corwin cleansing is that of the

“disinterested” stockholders.160      “A stockholder is interested if it may derive

pecuniary interest from one particular result or is otherwise unable to be fair-minded,

unbiased, and impartial.”161

       Under the facts alleged, as secured creditors and preferred stockholders of

WinView, the Defendants were interested stockholders for the purposes of Corwin.

As discussed above, the Merger treated WinView’s secured creditors and preferred

157
    Id. at 537.
158
    See Corwin v. KKR Fin. Holdings LLC, 125 A.3d 304, 308–14 (Del. 2015).
159
    Id. at 309.
160
    Chester Cnty. Emps.’ Ret. Fund v. KCG Holdings, Inc., 2019 WL 2564093, at *10 (Del. Ch.
June 21, 2019).
161
    In re Pattern Energy Grp. Inc. S’holders Litig., 2021 WL 1812674, at *63 (Del. Ch. May 6,
2021).

                                             25
stockholders differently from its common stockholders.162                   WinView secured

creditors and preferred stockholders received stock in Torque valued at $35 million,

while WinView common stockholders were eliminated and received only the

contractual right to 50% of the proceeds from successful patent litigation brought by

Engine Media—if such proceeds ever came to exist.163 The Merger thus conferred

on WinView’s preferred stockholders “benefits . . . not shared with the

Company’s . . . common stockholders.”164              Accordingly, under these particular

facts, the votes of preferred stock cannot count toward a Corwin majority. And

surely, the votes of shares held by the Defendants themselves cannot count as votes

of “disinterested stockholders” for Corwin purposes.

       Although the Amended Complaint does not allege the breakdown of the

stockholder vote because WinView itself never disclosed that information,165 it is

reasonably conceivable that the Merger was not approved by a majority of

WinView’s disinterested shares.166              The WinView preferred and common

stockholders voted together as one class of stock to approve the Merger.167 Besides

Maas, who held no WinView stock, each of the other Defendants were interested for

162
    See supra notes 108–14 and accompanying text.
163
    See supra notes 108–14 and accompanying text.
164
    Pattern Energy, 2021 WL 1812674, at *63.
165
    Am. Compl. ¶ 92.
166
    Until the record is sufficient to a reckoning of what percentage of the vote for the Merger was
composed of stock of the Director Defendants, and what part of that vote was composed of
preferred stock, I need not decide precisely what shares are sterilized for Corwin purposes.
167
    See id. ¶¶ 89, 92.

                                                26
purposes of the stockholder vote because they held secured debt and preferred stock

in WinView. Those Defendants together controlled 45% of WinView’s voting

stock, even without exercising the warrants that would have increased their

ownership percentage to 51%.168

       Moreover, given that the fifth bridge loan that conferred those warrants to the

Defendants was timed contemporaneously with the Merger discussions, it is

reasonably conceivable that the Defendants exercised them to gain majority

stockholder approval.169 Accordingly, it is reasonably conceivable that at least 51%

of the WinView voting stock was held by interested stockholders. Without any

information regarding the remaining 49% percent of WinView’s voting stock,

including the amount that represented interested preferred stock and the amount that

voted in favor of the Merger, I cannot hold as a matter of law that the Merger was

approved by a majority of WinView’s disinterested shares.

       The underlying rationale for applying business judgment under Corwin is that

the Court should acquiesce to a judgement expressed by a majority of unconflicted

stockholders. Denying Corwin cleansing does not mean that the vote of the majority

of WinView stock is not effective to approve the Merger under the WinView

168
   Id. ¶ 91.
169
   At oral argument, the Defendants asserted that they did not exercise the warrants. Tr. Oral
Argument re Defs.’ Mot. Dismiss at 6:18–7:2; see also Graham’s RB at 6. At the pleading stage,
without the benefit of a record, it would be inappropriate for me to credit that assertion, which is
untethered to the Amended Complaint.

                                                27
Charter, which calls for a confirmatory vote of all shares in the aggregate, regardless

of class. Instead, it simply means that a review of the merger under traditional

principals of fiduciary duty shall proceed; viewed correctly, Corwin is

quasi-jurisdictional—it       precludes     (under      rigorous     conditions)      certain

stockholder-approved transactions from further judicial review. Under the facts

pled, such preclusion is unwarranted here.

       Accordingly, at the pleading stage, the Merger is not entitled to Corwin

cleansing. Based on this finding, I need not examine the Plaintiffs’ allegations of

coercion and informational deficits as precluding application of Corwin.

              1. The Amended Complaint Pleads a Non-Exculpated Breach of
              Fiduciary Duty Claim Against the Director Defendants

       WinView’s Charter contained an exculpatory provision, as authorized by 8

Del. C. § 102(b)(7), which provided as follows:

              To the fullest extent permitted by the Delaware General
              Corporation Law as the same exists or as may hereafter be
              amended, a director of the Corporation shall not be
              personally liable to the Corporation or its stockholders for
              monetary damages for a breach of fiduciary duty as a
              director.170

       “[W]hen a director is protected by an exculpatory charter provision, a plaintiff

‘must plead a non-exculpated claim for breach of fiduciary duty . . . or that director

170
   Transmittal Decl. Callan R. Jackson Pursuant 10 Del. C. § 3927 Defendants Thomas S. Rogers,
Hank J. Ratner, R. Bryan Jacoboski, and Steve Goodroe’s Opening Br. Supp. Mot. Dismiss, Ex. 2,
Art. X § 1.

                                             28
will be entitled to dismissal from the suit.’”171 “A ‘non-exclupated claim for breach

of fiduciary duty,’ for purposes of Section 102(b)(7), means a well-pled claim for

breach of the duty of loyalty (in any of its forms).”172

       “To plead a claim for breach of the duty of loyalty that will overcome a motion

to dismiss, a plaintiff must plead sufficient facts to support a rational inference that

the corporate fiduciary acted out of material self-interest that diverged from the

interests of the shareholders.”173 “To plead interestedness, a plaintiff can plead the

fiduciary received ‘a personal financial benefit from a transaction that is not equally

shared by the stockholders,’ or ‘was a dual fiduciary and owed a competing duty of

loyalty to an entity that itself stood on the other side of the transaction or received a

unique benefit not shared with the stockholders.’”174

                      a. The Amended Complaint Pleads Breach of Loyalty Claims
                      Against Defendants Ratner, Goodroe, and Jacoboski

       Despite their status as preferred stockholders and secured creditors,

Defendants Ratner, Goodroe, Jacoboski, and Maas contend that they were not

interested in the Merger. As I held above, as secured creditors and preferred

stockholders who received stock in Torque, Ratner, Goodroe and Jacoboski

171
    In re Tangoe, Inc. S’holders Litig., 2018 WL 6074435, at *12 (Del. Ch. Nov. 20, 2018) (quoting
In re Cornerstone Therapeutics Inc, S’holder Litig., 115 A.3d 1173, 1179 (Del. 2015)).
172
    Id.
173
    In re Saba Software, Inc. S’holder Litig., 2017 WL 1201108, at *21 (Del. Ch. Mar. 31, 2017),
as revised (Apr. 11, 2017).
174
    Pattern Energy, 2021 WL 1812674, at *66 (quoting Frederick Hsu Living Tr. v. ODN Holding
Corp., 2017 WL 1437308, at *26 (Del. Ch. Apr. 14, 2017), as corrected (Apr. 24, 2017)).

                                               29
“receive[d] a financial benefit not available to stockholders equally.”175 Likewise,

Maas was a dual fiduciary of WinView and Graham, which similarly “received a

unique benefit not shared with the stockholders”176 by virtue of its status as a secured

creditor and preferred stockholder. Nonetheless, Ratner, Goodroe, Jacoboski and

Maas make several arguments as to why they were disinterested in the Merger. As

explained below, on this preliminary record I find none of them persuasive.

       First, they argue that WinView was insolvent, which meant that they were

required to consider the interests of WinView’s noteholders and preferred

stockholders, in addition to WinView’s common stockholders.177 Per the Director

Defendants, they achieved an excellent result for all these stakeholders, including

fending off debt foreclosure and preserving certain IP-related rights to the common

stockholders, in spite of the insolvency. But the Amended Complaint does not allege

that WinView was insolvent. The Defendants rely only on material outside of the

Amended Complaint to support their assertion of insolvency. Although the Plaintiffs

do not dispute that WinView was in a perilous and illiquid financial position, they

assert instead that it was merely in the “zone of insolvency,” which has no

175
    In re PNB Holding Co. S’holders Litig., 2006 WL 2403999, at *12 (Del. Ch. Aug. 18, 2006);
see supra notes 162–64 and accompanying text.
176
    Pattern Energy, 2021 WL 1812674, at *66 (quoting Frederick Hsu, 2017 WL 1437308, at
*26)).
177
    Directors’ OB at 46–48; Directors’ RB at 21–22.

                                             30
“implications for fiduciary duty claims.”178 The Plaintiffs also allege that the IP held

by WinView had a value of $175 million, while its debt was only $25 million.179

       To hold as a matter of law that WinView was insolvent would require

defendant-friendly inferences based on material outside of the Amended Complaint,

and resolution of factual disputes in favor of the moving party. Accordingly, I

conclude that the question of WinView’s solvency is a factual issue that awaits a

developed record.

       Second, Ratner, Goodroe, Jacoboski and Maas argue that the Plaintiffs have

failed to plead facts implying that the consideration they received for their secured

debt and preferred stock holdings was material to them.180 For a benefit to be

material, it must be “so substantial as to have rendered it improbable that [the board]

could discharge their fiduciary obligations in an even-handed manner.”181

       I conclude that the Merger consideration “provided reasonably conceivable

material benefits to the Director Defendants.”182 As I discussed above, Ratner,

Goodroe and Jacoboski each held notes with six-figure principal balances, as well

as hundreds of thousands of shares of WinView preferred stock and warrants on

178
    Quadrant Structured Prod. Co., Ltd. v. Vertin, 115 A.3d 535, 546 (Del. Ch. 2015).
179
    Am. Compl. ¶¶ 80, 87, 94, 116, 139.
180
    Directors’ OB at 48–52.
181
    In re Staples, Inc. S’holders Litig., 792 A.2d 934, 951 (Del. Ch. 2001) (quoting In re Gen.
Motors Class H S’holders Litig., 734 A.2d 611, 618 (Del. Ch. 1999)).
182
    Tangoe, 2018 WL 6074435, at *13.

                                              31
       Finally, Ratner, Goodroe, Jacoboski and Maas contend that the duty of loyalty

did not require them to waive their rights as preferred stockholders and secured

creditors in approving the Merger. “[T]he duty of loyalty requires that any power

over the corporation held in a fiduciary capacity may be exercised only for the

purpose of advancing collective/corporate welfare.”188              That said, “fiduciary

obligation does not require self-sacrifice.”189 As a result, “one who may be both a

creditor and a fiduciary (e.g., a director or controlling shareholder) does not by

reason of that status alone have special limitations imposed upon the exercise of his

or her creditor rights.”190 In other words, “a creditor does not lose his rights as a

creditor solely because he is also a . . . director,”191 and “there is nothing under

Delaware law that requires [a fiduciary] to waive enforceable rights that it has as a

holder of preferred stock or as a lender.”192

       But “the obverse of this proposition is true as well”: a creditor or preferred

stockholder cannot “misuse[] a fiduciary position . . . to try to advantage himself in

his creditor [or preferred stockholder] capacity.”193 The allegations here go far

beyond non-waiver of creditor’s rights by the Defendant Directors. A plaintiff can

188
    Odyssey Partners, L.P., Odyssey-ABC Ltd. P’ship, 1996 WL 422377, at *3 (Del. Ch. July 24,
1996).
189
    Id.
190
    Id.
191
    Cox v. Crawford-Emery, 2007 WL 4327775, at *4 n.26 (Del. Ch. Nov. 30, 2007).
192
    Next Level Commc’ns, Inc. v. Motorola, Inc., 834 A.2d 828, 854 (Del. Ch. 2003).
193
    Odyssey, 1996 WL 422377, at *4.

                                             33
plead a breach of loyalty claim against a fiduciary creditor or preferred stockholder

by alleging “facts other than” the mere “exercise of the legal rights acquired by a

fiduciary”—for example, by pleading that a fiduciary “fail[ed] to explore fully

available sources of additional capital” in order to prioritize the fiduciaries’ creditor

interests over their fiduciary duties.194 The Amended Complaint alleges precisely

that: Ratner, Goodroe, Jacoboski and Maas approved a Merger that treated them, as

WinView secured creditors and preferred stockholders, favorably in comparison to

WinView’s common stockholders, without considering alternative sources of

financing, because they wanted “a public market valuation for their secured

loans.”195

      Here, the Merger did not constitute a mere “exercise of [the Director

Defendants’] creditor rights,”196 such as the right to foreclose on WinView’s patents.

Indeed, the Merger represented an alternative to the exercise of those rights. The

Merger “created subclasses of” WinView stockholders and secured creditors: “One

class would remain; the other would go. The class that would remain would profit,

at the other’s expense, if [the Merger] underpaid those departing.”197

194
    Id.
195
    Am. Compl. ¶ 76.
196
    Odyssey, 1996 WL 422377, at *3–4.
197
    PNB, 2006 WL 2403999, at *12.

                                           34
          In that circumstance, the status of Ratner, Goodroe, and Jacoboski as

“stockholders who were eligible to remain rendered them conflicted.”198 Likewise,

Maas was similarly conflicted as a fiduciary for Graham, another stockholder

“eligible to remain.” As fiduciaries for the WinView common stockholders, Ratner,

Goodroe, Jacoboski, and Maas “were obliged to treat all stockholders fairly.”199

They were not thereby barred from “propos[ing] a transaction whereby [the]

common stockholders would be [eliminated]”; the relevant question is “how [they]

could discharge [their] obligation to the departing stockholders in a situation when

[their] own self-interest conflicted with the interests of stockholders generally.”200

In such a circumstance, “the core insight of the entire fairness standard comes into

play.”201 Accordingly, it is reasonably conceivable that Ratner, Goodroe, Jacoboski

and Maas were interested in the Merger and breached their duty of loyalty.

                      b. The Amended Complaint Pleads a Breach of Loyalty Claim
                      Against Defendant Rogers

          Defendant Rogers concedes that he was a dual fiduciary because he served as

the Chairman of Frankly and as the Executive Chairman of WinView at the time of

198
    Id.
199
    Id.
200
    Id.
201
    Id.

                                           35
the Merger.202 He contends, however, that I must dismiss the Amended Complaint

against him because he “abstained from voting on the [Merger].”203

       There is “no per se rule that unqualifiedly and categorically relieves a director

from liability solely because that director refrains from voting on the challenged

transaction.”204 Notably, Rogers does not contend that he abstained from negotiating

the Merger. The Amended Complaint alleges that Rogers told Lockton in November

2019 that he had personally negotiated a binding term sheet for the Merger.205

Delaware law does not allow directors who negotiated a transaction to “specifically

to shield themselves from any exposure to liability” by “deliberately absent[ing]

themselves from the directors’ meeting at which the proposal is to be voted upon.”206

I therefore decline to “accord[] exculpatory significance” to Rogers’ “nonvote.”207

It is reasonably conceivable at this pleading stage that Rogers breached his duty of

loyalty by participating in the Merger negotiations.

       Accordingly, I decline to dismiss Counts I and II against the Director

Defendants.

202
    Directors’ OB at 54–55; Directors’ RB at 29–30.
203
    Directors’ OB at 54–55; Directors’ RB at 29–30.
204
    In re Tri-Star Pictures, Inc., Litig., 1995 WL 106520, at *3 (Del. Ch. Mar. 9, 1995).
205
    Am. Compl. ¶ 121. The Defendants characterize this allegation as “conclusory” and chastise
the Plaintiffs for failing to seek books and records before bringing their claims. Defendants’ RB
at 29–30. Although WinView’s books and records may have elucidated Rogers’ alleged role in
negotiating the Merger, the allegation that Rogers told Plaintiff Lockton that he negotiated the
term sheet is sufficient to establish reasonable conceivability.
206
    Tri-Star, 1995 WL 106520, at *3.
207
    Id.

                                               36
       C. The Amended Complaint Fails to Plead that Graham Was a Controlling
       Stockholder

       The Plaintiffs next contend that Graham owed fiduciary duties to WinView

common stockholders as a controlling stockholder. The Plaintiffs contend that

Graham formed a control group with the Director Defendants, which held at least

45% of WinView’s voting shares, and potentially 51% of WinView’s voting shares

if the Defendants exercised their warrants.208

       “Delaware law imposes fiduciary duties on those who effectively control a

corporation.”209 “The premise for contending that a controller owes fiduciary duties

‘is that the controller exerts its will over the enterprise in the manner of the board

itself.’”210 In other words, a controller so acting is exercising dominion over the

property of the other stockholders, and is therefore a classic fiduciary. At the

pleading stage, the control group inquiry involves two questions: “(1) whether the

alleged control group was indeed a group, and (2) whether the alleged control group

exercised sufficient control.”211 The first question is dispositive here.

       “To demonstrate that a group of stockholders exercises ‘control’ collectively,”

the Plaintiffs must plead that the Defendants “are ‘connected in some legally

significant way’—such as ‘by contract, common ownership, agreement, or other

208
    See supra notes 129–30 and accompanying text.
209
    Patel v. Duncan, 2021 WL 4482157, at *10 (Del. Ch. Sept. 30, 2021), as corrected (Oct. 4,
2021) (quoting Voigt v. Metcalf, 2020 WL 614999, at *11 (Del. Ch. Feb. 10, 2020)).
210
    Id. (quoting Abraham v. Emerson Radio Corp., 901 A.2d 751, 759 (Del. Ch. 2006)).
211
    Id. at *11.

                                             37
arrangement—to work together toward a shared goal.’”212 Simply alleging that the

Defendants shared a “concurrence of self-interest” does not suffice.213 Rather, the

Plaintiffs must plead “some indication of an actual agreement,” though “it need not

be formal or written.”214

      Here, the Plaintiffs contend that Graham and the Director Defendants were

“similarly situated” because they each held secured debt and preferred stock, which

“tied them together to serve their interests in a legally significant way.”215 That is

not enough to establish a control group. “[I]f all a complaint alleges is that a group

of shareholders have ‘parallel interests,’ such allegations are insufficient as a matter

of law to support the inference that the shareholders were part of a control group.”216

Accordingly, without more, the allegation that Graham and the Director Defendants

were similarly situated because they each held secured debt and preferred stock fails

as a matter of law.

      Absent a control group, the allegations against Graham are insufficient to

support an inference that Graham owed fiduciary duties as a controlling stockholder.

Although the Plaintiffs do not allege precisely what percentage of WinView’s voting

stock was owned by Graham, the Amended Complaint concedes that Graham owned

212
     Sheldon v. Pinto Tech. Ventures, L.P., 220 A.3d 245, 251–52 (Del. 2019) (quoting In re
Crimson Expl. Inc. S’holder Litig., 2014 WL 5449419, at *15 (Del. Ch. Oct. 24, 2014)).
213
    Id. at 252.
214
    Id.
215
    Pls.’ First AB at 11.
216
    Dubroff v. Wren Holdings, LLc, 2009 WL 1478697, at *3 (Del. Ch. May 22, 2009).

                                            38
less than 50%.217 When a stockholder owns less than 50% of the corporation’s

outstanding stock, “a plaintiff must allege domination by a minority shareholder

through actual control of corporate conduct.”218 “The bare conclusory allegation

that a minority stockholder possessed control is insufficient.” 219              Instead, the

Amended Complaint must plead facts “showing that the minority stockholder

‘exercised actual domination and control over . . . [the] directors.”220 In other words,

“a minority blockholder is not considered to be a controlling stockholder unless it

exercises ‘such formidable voting and managerial power that [it], as a practical

matter, [is] no differently situated than if [it] had majority voting control.’”221 The

minority blockholders power must be “so potent that independent directors . . .

cannot freely exercise their judgment, fearing retribution” from the controlling

minority blockholder.222

       The Amended Complaint alleges that Graham was WinView’s “largest

stockholder”;223 that Graham held debt in WinView that was secured by WinView’s

217
    See Am. Compl. ¶ 186 (alleging that Defendants together controlled, at most, 51% in the
aggregate).
218
    In re Morton’s Rest. Grp., Inc. S’holders Litig., 74 A.3d 656, 664 (Del. Ch. 2013) (quoting
Citron v. Fairchild Camera & Instrument Corp., 569 A.2d 53, 70 (Del. 1989)).
219
    Id.
220
    Id. at 664–65 (quoting In re Sea-Land Corp. S’holders Litig., 1988 WL 49126, at *3 (Del. Ch.
May 13, 1988)).
221
    Id. at 665.
222
    Id. (quoting In re PNB Holding Co. S’holders Litig., 2006 WL 2403999, at *9 (Del. Ch. Aug.
18, 2006)).
223
    Am. Compl. ¶ 13.

                                              39
only significant assets, its patents;224 that Graham designated a “representative” on

the WinView Board, Maas;225 that Maas held the sole power of attorney on behalf

of all secured creditors, allowing him to foreclose on WinView’s patents in the event

of a default;226 and that Maas served as the Chairman of the Special Committee

charged with negotiating the Merger.227 Nonetheless, the Amended Complaint

alleges that Maas “uniformly acquiesced to and supported any request by Rogers,

whether in the company’s best interest or otherwise.”228       In other words, the

Amended Complaint concedes that Maas’ position on the Board did not confer

control to Graham. Accordingly, I cannot find on the facts alleged that it is

reasonably conceivable that Graham owed fiduciary duties as a controlling

stockholder. Count II is therefore dismissed against Graham.

       D. The Plaintiffs’ Civil Conspiracy Claims

       In addition to the breach of fiduciary duty claims, the Amended Complaint

asserts civil conspiracy claims in Count III against all of the Defendants for

conspiring to “breach their fiduciary duty of loyalty to [the] Plaintiffs by forcing

through the unfair and inequitable Merger.”229 “The elements for civil conspiracy

224
    Id. ¶¶ 13, 85.
225
    Id. ¶ 45.
226
    Id. ¶¶ 38, 45, 55.
227
    Id. ¶ 121.
228
    Id.
229
    Id. ¶ 195; see also id. ¶¶ 194–98.

                                         40
under Delaware law are: (1) a confederation or combination of two or more persons;

(2) an unlawful act done in furtherance of the conspiracy; and (3) actual damage.”230

               1. The Amended Complaint Fails to State Civil Conspiracy Claims
               Against the Director Defendants

       “Delaware law requires an independent tort underlying a civil conspiracy.”231

That is, civil conspiracy “is vicarious liability. It holds a third party, not a fiduciary,

responsible for a violation of fiduciary duty.”232 Accordingly, civil conspiracy for

breach of fiduciary duty does not apply to the Director Defendants, “[who] owe[d]

the [WinView stockholders] a direct fiduciary duty.”233 I therefore dismiss Count III

against the Director Defendants.

               2. The Amended Complaint Fails to Plead a Civil Conspiracy Claim
               Against Graham

       In cases involving the internal affairs of corporations, this Court often

evaluates civil conspiracy claims using the elements traditionally associated with

aiding and abetting claims.234 This is because “in cases involving the internal affairs

230
    Chester Cnty., 2019 WL 2564093, at *20 (quoting AeroGlobal Cap. Mgmt., LLC v. Cirrus
Indus., Inc., 871 A.2d 428, 437 (Del. 2005)).
231
    OptimisCorp v. Waite, 2015 WL 5147038, at *56 (Del. Ch. Aug. 26, 2015), aff’d, 137 A.3d
970 (Del. 2016).
232
    Albert v. Alex. Brown Mgmt. Servs., Inc., 2005 WL 2130607, at *11 (Del. Ch. Aug. 26, 2005).
233
    Id.; see also OptimisCorp, 2015 WL 5147038, at *59 (“I seriously question whether a cause of
action exists under Delaware law for a conspiracy among fiduciaries to breach a fiduciary duty.”).
234
    Gilbert v. El Paso Co., 490 A.2d 1050, 1056–58 (Del. Ch. 1984) (defining conspiracy using
the traditional elements associated with aiding and abetting breach of fiduciary duty), aff’d, 575
A.2d 1131 (Del. 1990); Weinberger v. Rio Grande Indus., Inc., 519 A.2d 116, 131 (Del. Ch. 1986)
(same); Malpiede v. Townson, 780 A.2d 1075, 1098 n.82 (Del. 2001) (noting in merger action that
“[a]lthough there is a distinction between civil conspiracy and aiding and abetting, we do not find
that distinction meaningful here”); Carlton Invs. v. TLC Beatrice Int’l Holdings, Inc., 1995 WL

                                                41
of corporations, aiding and abetting claims represent a context-specific application

of civil conspiracy law.”235 “[T]he basis of such a claim, regardless of how it is

captioned, is the idea that a third party who knowingly participates in the breach of

a fiduciary’s duty becomes liable to the beneficiaries of the trust relationship.”236

Accordingly, and given the plaintiff-friendly stage of the proceedings, I apply the

rubric for aiding and abetting here.

       “Like the test for civil conspiracy, the test for stating an aiding and abetting

claim is a stringent one, turning on proof of scienter—a plaintiff must prove: (1) the

existence of a fiduciary relationship, (2) a breach of the fiduciary’s duty and

(3) knowing participation in that breach by the non-fiduciary.”237 Because I have

held that it is reasonably conceivable that the Director Defendants breached their

fiduciary duties to WinView’s common stockholders in connection with the Merger,

the first two elements of this test are satisfied at the pleading stage. Accordingly,

694397, at *15 n.11 (Del. Ch. Nov. 21, 1995) (“For the purposes of the instant case, however,
analysis under the civil conspiracy test mirrors the analysis under the civil conspiracy/aiding and
abetting standard. Both primarily focus on the understanding of the parties with respect to their
complicity in any scheme to defraud or in any breach of fiduciary duties.”); Alex. Brown, 2005
WL 2130607, at *10 (“Claims for civil conspiracy are sometimes called aiding and abetting.”);
Quadrant Structured Prod. Co. v. Vertin, 102 A.3d 155, 203 (Del. Ch. 2014) (“A claim for
conspiracy to commit a breach of fiduciary duty is usually pled as a claim for aiding and abetting,
and although there are differences in how the elements of the two doctrines are framed, it remains
unclear . . . how the two diverge meaningfully in substance or purpose.”); Benihana of Tokyo, Inc.
v. Benihana, Inc., 2005 WL 583828, at *7 (Del. Ch. Feb. 4, 2005) (distinction between aiding and
abetting and civil conspiracy was “mere hair-splitting [that] contravenes the equitable principle of
looking to the substance rather than to the form”).
235
    Allied Cap. Corp. v. GC-Sun Holdings, L.P., 910 A.2d 1020, 1038 (Del. Ch. 2006).
236
    Alex. Brown, 2005 WL 2130607, at *10 (emphasis omitted).
237
    GC-Sun, 910 A.2d at 1038–39.

                                                42
the pertinent question is whether the Amended Complaint pleads Graham’s

“knowing participation” in those breaches of fiduciary duty.

       The “knowing participation” element “is a “stringent standard that turn[s] on

proof of scienter.”238 The Plaintiffs must plead that Graham “kn[ew] the fiduciary

[wa]s breaching his fiduciary duty and then . . . participate[d], in some way, in that

breach.”239 That participation must take the form of “‘substantial assistance’ to the

primary violator.”240

       Although “knowing participation” is a stringent standard, “[u]nder the liberal

pleading standards of this court, . . . knowledge may be averred generally.”241 Under

Delaware law, “the knowledge and actions of the corporation’s officers and

directors, acting within the scope of their authority, are imputed to the corporation

itself.”242 What is missing in the allegations, however, is anything implying the

participation of Graham in the breach. There are no allegations of Graham providing

substantial assistance to Maas or the other Director Defendants concerning the

238
    In re MeadWestvaco S’holders Litig., 168 A.3d 675, 688 (Del. Ch. 2017) (quoting Lee v. Pincus,
2014 WL 6066108, at *13 (Del. Ch. Nov. 14, 2014)).
239
    In re Xura, Inc. S’holder Litig., 2019 WL 3063599, at *3 (Del. Ch. July 12, 2019).
240
     In re Oracle Corp. Derivative Litig., 2020 WL 3410745, at *11 (Del. Ch. June 22, 2020)
(quoting In re Dole Food Co., Inc. S’holder Litig., 2015 WL 5052214, at *41 (Del. Ch. Aug. 27,
2015)).
241
    Weiss v. Swanson, 948 A.2d 433, 449 (Del. Ch. 2008); accord LVI Grp. Invs., LLC v. NCM
Grp. Holdings, LLC, 2018 WL 1559936, at *14 (Del. Ch. Mar. 28, 2018) (“knowledge may be
averred generally” in conspiracy claim).
242
    Stewart v. Wilmington Tr. SP Servs., Inc., 112 A.3d 271, 302–03 (Del. Ch.), aff’d, 126 A.3d
1115 (Del. 2015).

                                               43
breach. There is not even an allegation that Graham and Maas communicated in any

way regarding the Merger. Although I can impute Maas’ knowledge to Graham, the

facts pled do not support a reasonable implication that Graham substantially assisted

any breach of duty.243 Accordingly, Count III is dismissed against Graham, as

well.244 This holding does not, however, leave the Plaintiffs without a potential

remedy against Graham; as discussed below, I conclude that the Amended

Complaint adequately states an unjust enrichment claim against Graham.

       E. The Plaintiffs’ Unjust Enrichment Claims Survive

       The Amended Complaint also asserts claims for unjust enrichment against all

of the Defendants, because the Merger was allegedly “the product of breaches of

fiduciary duty.”245 “The elements of unjust enrichment are: (1) an enrichment,

(2) an impoverishment, (3) a relation between the enrichment and impoverishment,

(4) the absence of justification, and (5) the absence of a remedy provided by law.”246

       The Plaintiffs’ attempt to satisfy the “absence of justification” element is

premised solely on their argument that the Defendants breached fiduciary duties in

243
    Brown v. Perrette, 1999 WL 342340, at *13 (Del. Ch. May 14, 1999) (“[A]bsent a showing
that the shareholder nominator knowingly participated in the alleged wrong, the wrongful activities
of a nominated director cannot be imputed to the shareholder to sustain an aiding and abetting
claim.”).
244
    I note that records available under Section 220, resort to which the Plaintiffs eschewed, would
presumably have disclosed any participation of Graham in the Merger sufficient to bolster the
implication of knowing participation in breaches of duty.
245
    Am. Compl. ¶¶ 199–05.
246
    Nemec v. Shrader, 991 A.2d 1120, 1130 (Del. 2010).

                                                44
connection with the Merger. This is sufficient to deny the Motion to Dismiss against

Graham; as set out above, the Plaintiffs have failed to plead a civil conspiracy claim

against Graham, but Graham’s knowingly accepting the fruits of its agent’s breach

of duty in the context of the Merger is sufficient to this cause of action.

       The cause of action against the Director Defendants is more problematic. The

Plaintiffs’ unjust enrichment claim is entirely coterminous with claims that these

Defendants breached of fiduciary duties. Because the Plaintiffs are only “entitled to

one recovery,”247 it therefore appears that the remedy for the Plaintiffs’ breach of

fiduciary duty would supersede any remedy for unjust enrichment against the

Director Defendants. Although I am skeptical that the unjust enrichment claim

would provide any relief separate and distinct from the breach of fiduciary and aiding

and abetting claims, bowing under the weight of precedent I decline to dismiss the

unjust enrichment claims against the Director Defendants at this pleading stage.248

247
   matter of Est. of DeGroat, 2020 WL 2078992, at *23 (Del. Ch. Apr. 30, 2020).
248
    See Tornetta v. Musk, 250 A.3d 793, 813 (Del. Ch. 2019) (denying motion to dismiss unjust
enrichment claim that “essentially duplicates [] breach of fiduciary duty claims”); Espinoza v.
Zuckerberg, 124 A.3d 47, 66–67 (Del. Ch. 2015) (“If defendants’ sole basis for summary judgment
on a duplicative unjust enrichment claim is the failure of the underlying claim for breach of
fiduciary duty, then the survival of the fiduciary duty claim logically allows the claim for unjust
enrichment to survive as well.”); Frank v. Elgamal, 2014 WL 957550, at *31 (Del. Ch. Mar. 10,
2014) (“[W]here the Court does not dismiss a breach of fiduciary duty claim, it likely does not
dismiss a duplicative unjust enrichment claim.”); Dubroff v. Wren Holdings, LLC, 2011 WL
5137175, at *11 (Del. Ch. Oct. 28, 2011) (“Delaware law does not appear to bar bringing
[duplicative breach of fiduciary duty and unjust enrichment] claims.”); Calma v. Templeton, 2015
WL 1951930, at *20 (Del. Ch. Apr. 30, 2015) (denying motion to dismiss unjust enrichment claim
despite “no alleged unjust enrichment separate or distinct from the alleged breach of fiduciary duty
claim”); Reith v. Lichtenstein, 2019 WL 2714065, at *21 (Del. Ch. June 28, 2019) (“[T]hough
defendants argue an unjust enrichment claim usually fails along with a fiduciary duty claim, the

                                                45
       F. The Remedy of Recission

       Finally, the Defendants ask that I dismiss the request for rescission. Because

I have found that the Plaintiffs have stated claims for which relief might be granted,

“the nature of that relief is not relevant and need not be addressed” at this pleadings

stage.249 The “determination of relief is beyond the scope of this motion and

premature without an established evidentiary record.”250 I therefore decline to

address the Defendants’ request to dismiss the request for rescission here.

                                   III. CONCLUSION

       For the foregoing reasons, the Motions to Dismiss are GRANTED in part and

DENIED in part. The parties should confer and submit a form of order consistent

with this opinion.

two claims can also survive together.”); DeGroat, 2020 WL 2078992, at *21 (“When an unjust
enrichment claim relies upon a breach of fiduciary duty, a successfully pled breach of fiduciary
duty claim likely supports a well-pled claim for unjust enrichment.”).
249
    Crescent/Mach I Partners, L.P. v. Turner, 846 A.2d 963, 991 (Del. Ch. 2000) (quoting Chaffin
v. GNI Grp., Inc., 1999 WL 721569, at *7 (Del. Ch. Sept. 3, 1999)).
250
    Id.

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