Court Opinion

ID: 9379394
Source: CourtListenerOpinion
Date Created: 2023-03-15 16:02:36.751091+00
Date Added: 2024-06-11T17:15:54.454809
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

 IN RE MINDBODY, INC.,                    )    CONSOLIDATED
 STOCKHOLDER LITIGATION                   )    C.A. No. 2019-0442-KSJM

                    POST-TRIAL MEMORANDUM OPINION

                              Submitted: July 28, 2022
                               Dated: March 15, 2023

Joel Friedlander, Jeffrey M. Gorris, Christopher M. Foulds, FRIEDLANDER & GORRIS,
P.A., Wilmington, Delaware; Gregory V. Varallo, Andrew E. Blumberg, BERNSTEIN
LITOWITZ BERGER & GROSSMANN LLP, Wilmington, Delaware; Jeroen van
Kwawegen, Christopher J. Orrico, BERNSTEIN LITOWITZ BERGER & GROSSMANN
LLP, New York, New York; Co-Lead Counsel for Lead Plaintiffs and Petitioners Luxor
Capital Partners, L.P., Luxor Partners Offshore Master Fund, LP, Luxor Wavefront, LP,
and Lugard Road Capital Master Fund, LP.

Lisa A. Schmidt, Robert L. Burns, Matthew D. Perri, John M. O’Toole, RICHARDS,
LAYTON & FINGER, P.A, Wilmington, Delaware; Matthew Solum, P.C., John Del
Monaco, Jeffrey R. Goldfine, KIRKLAND & ELLIS LLP, New York, New York; Counsel
for Defendants Richard Stollmeyer, Vista Equity Partners Management, LLC, Torreys
Parent, LLC, and Torreys Merger Sub, Inc., and Respondent Mindbody, Inc.

McCORMICK, C.
       This case arises from the 2019 acquisition of Mindbody, Inc. (“Mindbody” or the

“Company”) by Vista Equity Partners Management, LLC (“Vista”) for $36.50 per share

(the “Merger”). The story begins in 2018, when Mindbody’s visionary founder, Richard

Stollmeyer, had grown frustrated with his inability to monetize his holdings of Mindbody

stock, fearful of the volatility and fickleness of the public markets, and uncertain about his

ability to lead Mindbody through its next stage of its growth. A sale of the Company would

solve his problems, and Stollmeyer decided it was a good time to sell.

       Regrettably, Stollmeyer set the sale process in motion largely without the

involvement or knowledge of the Company’s board of directors (the “Board”). In August

2018, Stollmeyer met with a banker that had close relationships with multiple private

equity firms. The banker immediately introduced Stollmeyer to one of those firms, Vista.

Stollmeyer met with Vista shortly after and told Vista that he was looking for a “good

home” for his company and its management team. He later accepted Vista’s invitation to

attend the “CXO Summit” for CEOs of ex-public companies (hence “CXO”) that Vista had

acquired. At the summit, Vista made presentations advertising the immense wealth that

CXOs had achieved by selling to and working for Vista. During the summit, Stollmeyer

texted another Mindbody executive about his “mind blowing” experience and that he

“loved” Vista. Stollmeyer quickly came to believe that selling to Vista gave him the unique

opportunity to both gain liquidity and remain as CEO in pursuit of post-acquisition equity-

based upside.
       After the Vista conference, Stollmeyer’s focus seemed to shift. He no longer was

interested in just any sale of the Company. He wanted to sell to Vista. And Stollmeyer let

Vista know what he wanted. Vista responded by expressing interest in buying Mindbody.

       Vista’s modus operandi is speed. Vista leverages its ability to move quickly from

an expression of interest, through confirmatory diligence, to a firm offer, thereby truncating

the process and reducing interloper risk. Vista calls it “sprinting,” and for Vista, that’s

good business. For a target company seeking to maximize stockholder value, however, a

truncated timeline can present challenges. It takes time to develop alternatives to promote

competition and extract the best price. By sprinting to the finish line, Vista seeks to prevent

a target company from doing that.

       Shortly after the CXO Summit and before Vista sent its expression of interest, the

banker who introduced Stollmeyer to Vista warned him about the firm’s need for speed

and the risks of rushing a sale process. In response to this advice, Stollmeyer did not

adequately involve the Board or erect, much less adhere, to speed bumps to ensure a value-

maximizing process. Rather, Vista-smitten Stollmeyer effectively greased the wheels for

Vista by stalling the Board process.

       Vista’s expression of interest came in on a Monday. Stollmeyer sent an email to his

management team on a Wednesday telling them not to fear for their jobs and to let

Stollmeyer “socialize” the topic with the Board. On Thursday, Stollmeyer spoke for an

hour with Eric Liaw, the director representative of Institutional Venture Partners XIII, L.P.

(“IVP”). IVP was Mindbody’s largest stockholder, and for reasons of its own, IVP wanted

a near-term exit. Stollmeyer checked Vista’s references on Friday. Meanwhile, Vista

                                              2
accelerated to deal velocity, contracted for a detailed market study, and put itself in a

position to make a firm offer long before other bidders could react.

       It was not until the following week that Stollmeyer started dribbling out messages

about Vista’s expression of interest to the other Board members. Unaware of the full extent

of Stollmeyer and Vista’s courtship, the Board did not form a transaction committee to

consider running a sale process until two weeks later. Stollmeyer asked Liaw to chair the

committee, and when Liaw began playing a leadership role, the other directors accepted

his leadership without discussing or voting on who would serve as chair. Liaw lobbied for

the committee to hire the same banker who had already introduced Stollmeyer to Vista,

which it did.

       To its credit, the transaction committee established guidelines to cabin

management’s communications with potential bidders, but Stollmeyer ignored them and

tipped Vista that a formal sale process was beginning. And the banker tipped Vista as to

Stollmeyer’s target price. By the time the committee had authorized its banker to contact

financial bidders, Vista was poised to pounce.

       In response to the banker’s outreach, Vista made a firm offer. The Board asked

other bidders to respond promptly with best-and-final offers of their own, but they were

still in the early stages of their work and could not respond within that timeframe. The

committee countered, and Vista raised its final bid to $1 per share below where its deal

team thought the deal price would land. Rather than making another counter, the Board

approved it.

                                             3
         The plaintiffs are entities affiliated with Luxor Capital Partners, L.P. (collectively

“Luxor’ or “Plaintiffs”).1 Those entities own the second largest block of Mindbody stock.

They filed this action on behalf of a class of Mindbody’s stockholders.2 They claim that

Stollmeyer and the other Board members breached their fiduciary obligations in connection

with the Merger and that Vista aided and abetted those breaches. By the time of trial, all

of the defendants except Stollmeyer and Vista had either settled or been dismissed.

Plaintiffs tried their claims against Stollmeyer and Vista (together, “Defendants”).

         Plaintiffs advance two main theories of breach. The first is that Stollmeyer breached

his fiduciary duties by tilting the process in favor of Vista. The second is that Stollmeyer

committed disclosure violations by failing to disclose facts about the sale process and

omitting information concerning Mindbody’s actual revenue results.

         The facts of this case offer multiple analytical frameworks to choose from. The

parties agree that one possible framework is enhanced scrutiny under Revlon, Inc. v.

MacAndrews & Forbes Holdings, Inc.3 Under that standard of review, Stollmeyer loses.

He did not strive in good faith to pursue the best transaction reasonably available. He

instead pursued a fast sale to Vista to further his personal interests. Because he tilted the

1
 Plaintiffs are Luxor Capital Partners, L.P., Luxor Partners Offshore Master Fund, LP,
Luxor Wavefront, LP, and Lugard Road Capital Master Fund, LP.
2
 Luxor also petitioned for appraisal and litigated the appraisal claim in parallel with the
breach of fiduciary duty claims. This decision does not resolve Luxor’s claim for appraisal.
3
    506 A.2d 173 (Del. 1986).

                                               4
sale process in Vista’s favor for personal reasons, the process did not achieve a result that

falls within the range of reasonableness.

       As a remedy, Plaintiffs seek the lost transaction price that Vista would have paid if

the process had not been tilted in its favor. Plaintiffs peg that figure at $40 per share. This

decision accepts Plaintiffs’ theory of liability but rejects the evidentiary basis for a $40 per

share figure. The record demonstrates that Vista would have paid $37.50 per share.

Stollmeyer is therefore liable for $1 per share.

       In contrast to Stollmeyer, Vista prevails on the sale-process claim, but only because

of a procedural foot fault. Plaintiffs failed to assert a claim against Vista for aiding and

abetting in the sale-process breaches until trial. Plaintiffs tried to fix their error through a

motion to amend the pleadings to conform to the evidence presented at the close of trial,

but to grant that motion would be prejudicial to Vista.

       On the disclosure claim, however, Plaintiffs prevail against both Stollmeyer and

Vista. Plaintiffs proved that Stollmeyer breached his duty of disclosure. He failed to

disclose the full extent of his involvement with Vista, which was a material omission.

Plaintiffs proved that Vista aided and abetted Stollmeyer’s breach by failing to correct the

proxy materials to include a full and fair description of its own interactions with

Stollmeyer. Vista was contractually obligated to review the proxy materials and inform

the Company if there were material omissions from the proxy materials. The record shows

that Vista personnel who interacted with Stollmeyer reviewed the proxy materials. Vista

knew about its own interactions, and it was evident that Stollmeyer was not disclosing

them. Vista knowingly participated in the breach by not speaking up.

                                               5
          As a remedy for the disclosure claims, Plaintiffs seek compensatory damages

calculated using a quasi-appraisal methodology. That remedy, however, requires proof of

reliance and causation, which Plaintiffs made no effort to demonstrate.            Plaintiffs,

therefore, are only entitled to nominal damages as a remedy.

          To set nominal damages, this decision turns to a venerated authority—Weinberger

v. UOP, Inc.4 There, Chancellor Brown encountered similar difficulty in compensating the

minority stockholders for an obvious wrong when there was no mathematical basis for

deriving a damages figure. He reasoned that “equity will not suffer a wrong without a

remedy.”5 The facts of that case demonstrated that the acquirer would have paid at least

$1 more for the target, and at that price, the transaction still would be profitable for the

acquirer. Engaging in a classic exercise of equitable discretion, he awarded nominal

damages in the amount of $1 per share.

          Similar case-specific factors warrant the same relief here. The record demonstrates

that Vista had authority to bid up to $40 per share, but that figure was a stretch. Internal

Vista communications show that Vista was prepared to increase its bid to $37.50 per share,

and the most senior person on the deal team predicted that the bidding would end at that

price. Vista’s modeling demonstrates that a deal at that price remained profitable for Vista.

As in Weinberger, the court exercises its equitable discretion to award damages of $1 per

4
 1985 WL 11546 (Del. Ch. Jan. 30, 1985), aff’d sub nom. Weinberger v. UOP, Inc., 497
A.2d 792 (Del. 1985).
5
    Id. at *9.

                                               6
share for the disclosure violations. Stollmeyer and Vista are jointly and severally liable for

the resulting amount.

         Plaintiffs are only entitled to one recovery. It makes no difference whether

Stollmeyer pays $1 per share in damages for the sale-process claims, or whether Stollmeyer

and Vista pay $1 per share in damages for the disclosure claims.

         Plaintiffs are awarded pre- and post-judgment interest at the legal rate, compounded

monthly, with the rate varying with changes in the reference rate. Plaintiffs are awarded

costs as the prevailing party.

I.       FACTUAL BACKGROUND

         The record comprises 1,865 joint trial exhibits, trial testimony from eighteen fact

and six expert witnesses, deposition testimony from twenty-four fact witnesses, and 123

stipulations of fact in the pre-trial order.6 These are the facts as the court finds them after

trial.

6
  C.A. No. 2019-0442-KSJM, Docket (“Dkt.”) 492, Joint Schedule of Evid.; Dkt. 445, Pre-
Trial Stipulation and Order (“PTO”). This decision cites to trial exhibits (by “JX” number);
the trial transcript, Dkts. 461–68 (by “Trial Tr. at” page, line, and witness); the post-trial
oral argument, Dkt. 493 (by “Post-Trial Oral Arg. Tr. at” page and line); and the deposition
transcripts of Dominic Calvani, Christopher Cernich (expert), Jeffrey Chang, Court
Cunningham, Jamie d’Almeida (expert), Daniel Fischel (expert), Doug Friedman, Gail
Goodman, David Handler, Craig Heinle, Cipora Herman, Michael Kass, Derek Klomhaus,
Christian Leone, Eric Liaw, Kimberly Lytikainen, Michael Mansbach, Kevin Murphy
(expert), Drew Pascarella (expert), Monti Saroya, Brian Sheth, Graham Smith, Nicolas
Stahl, Richard Stollmeyer, Vista Equity Partners LLC (30(b)(6)), and Brett White (by the
deponent’s last name and “Dep. Tr. at” page and line).

                                              7
         A.      Setting The Stage

         Mindbody founder Stollmeyer is the key protagonist in this drama. Stollmeyer is

an impressive person. He started his business career as a child helping in his parents’ retail

lighting fixture store.7 He attended the United States Naval Academy and served as a

nuclear submarine officer for six years after graduation.8 He next landed a position as a

program manager at Vandenberg Air Force Base, which took him to California’s Central

Coast.9

         In the mid-1990s, a friend showed Stollmeyer software he had written to support

owners of yoga, Pilates, and spinning studios.10 This software inspired Stollmeyer to

launch Mindbody with his friend.11 By fall 2000, Stollmeyer “leapt off a cliff,” in his

words, by quitting his engineering job and taking out a second mortgage to start Mindbody

in his garage in San Luis Obispo.12

         From these humble beginnings, Stollmeyer grew Mindbody into a software-as-a-

service (“SaaS”) platform that serves the fitness, wellness, and beauty industry. Stollmeyer

took Mindbody public in 2015.13

7
    Trial Tr. at 336:22–337:9 (Stollmeyer).
8
    Id. at 337:22–338:16 (Stollmeyer).
9
    Id. at 338:17–339:3 (Stollmeyer).
10
     Id. at 339:13–17 (Stollmeyer).
11
     Id. at 339:7–340:15 (Stollmeyer).
12
     Id. at 340:2–18 (Stollmeyer).
13
     PTO ¶ 89.

                                              8
                  1.     Stollmeyer Is Ready To Sell.

          By 2018, Stollmeyer had grown Mindbody to over $1 billion market capitalization,

yet Stollmeyer had never experienced a big liquidity event.14 And he had made substantial

financial commitments in the meantime. Stollmeyer had (i) invested nearly $1 million into

his wife’s wellness company, (ii) invested at least $300,000 into “Stollmeyer Technologies,

LLC,” (iii) loaned his brothers and his former business partner money for their own real

estate purchases, and (iv) pledged $3 million to a local college, of which $2.4 million was

unpaid.15

          Stollmeyer described his unhappiness with his pre-Merger financial situation in a

post-Merger interview for Alejandro Cremades’s “dealmakers” podcast.16 During the

interview, Stollmeyer described how “98% of [his] net worth” was “locked inside”

Mindbody’s “extremely volatile” stock, while Stollmeyer could only sell “tiny bits” of his

stake in the public market under his 10b5-1 plan.17 Stollmeyer described those sales as

“kind of like sucking through a very small straw”:

                  [F]or the entrepreneur or particularly for the CEO, [an IPO] is
                  not a liquidity event. Your capital is locked inside the business,
                  and you can sell tiny bits of it, called the 10b5-1 plan where
                  you decide essentially a year in advance, a couple of quarters
                  in advance, you come up with a plan that says sell off a little
                  bit on these predefined dates. It doesn’t matter if the stock got
                  hammered, it doesn’t matter if the stock’s high. So, it’s kind

14
   See JX-1441 at 10 (“[F]or the entrepreneur or particularly for the CEO, [an IPO] is not
a liquidity event.”).
15
     JX-1142 at 2; Dkt. 474 (“Defs.’ Demonstrative 12”) at 1–2.
16
     JX-1441.
17
     Id. at 10.

                                                  9
                   of like sucking through a very small straw. For me, I had been
                   at it for a long time. . . .

                   We were public in 2015, so I’d been at it for 15 years. We
                   would have public investors. I would have them challenge me
                   that I was selling my own stock, and he was like, “Don’t you
                   believe in your own company, Rick?” 98% of my net worth is
                   in the stock of my company, which is extremely volatile. I’m
                   in my 50s now, and I’ve got kids in college. What kind of
                   question is that?18

           In February 2018, Stollmeyer asked his financial advisor to “estimate [his] cash

position” in light of his impending expenses.19 Stollmeyer stated that the timing and

amount of his 10b5-1 sales were “top of mind” because of “greater than expected H1 cash

outlays[.]”20 To meet his commitments, Stollmeyer had to “dig[] into [his] LOC [line of

credit].”21

           Stollmeyer made similar statements in his book on building a wellness business,

which was published in 2021 while this litigation was pending.22 In a chapter about early

financing, he described his efforts to obtain money for Mindbody from family and friends,

and then referenced his own experience “contributing a significant portion of the cash

needed to help my nephew, wife, and son start their own businesses.”23 Stollmeyer also

18
     Id.
19
     JX-145 at 1.
20
     Id.
21
     Id.
22
     JX-1647 (titled Building a Wellness Business That Lasts).
23
     Id. at 183.

                                                10
explained that completing the $1.9 billion Merger “doesn’t make me a billionaire.”24 He,

nevertheless, took “great pleasure” in knowing that “after many years of living at or near

the precipice of financial ruin, my family and I don’t have to worry about money

anymore.”25

           At trial, Stollmeyer denied that he needed liquidity in early 2018.26 To bolster his

testimony, Stollmeyer introduced testimony from his financial advisor and from an expert

on executive compensation.27 The financial advisor claimed that Stollmeyer had never

expressed concerns about liquidity pressures that would require him to sell off his entire

Mindbody stake.28 The executive compensation expert reviewed Stollmeyer’s financial

decisions during the five years preceding the Merger and opined that Stollmeyer did not

seem to be in need of liquidity.29 He conceded that Stollmeyer faced significant cash

demands in the period leading up to the Merger.30 Both the expert and Stollmeyer’s

financial advisor acknowledged that Stollmeyer frequently relied on a line of credit to pay

expenses.31

24
     Id. at 181.
25
     Id.
26
     Trial Tr. at 486:7–20 (Stollmeyer).
27
     Id. at 240:10–241:5 (Calvani); id. at 1813:16–1814:1 (Murphy).
28
     Id. at 238:5–24 (Calvani).
29
     Id. at 1821:18–1823:17 (Murphy).
30
     Id. at 1843:12–1849:19 (Murphy).
31
     Id. at 226:16–227:4 (Calvani); id. at 1813:3–5 (Murphy).

                                                11
           Ultimately, Stollmeyer’s own pre-litigation and intra-litigation statements reflecting

his personal and financial circumstances are far more persuasive than the trial testimony of

Stollmeyer or the other witnesses. Stollmeyer said it himself: He was tired. He was tired

of “sucking through a very small straw.” He was ready to sell.

           And 2018 seemed the time to do it. One reason was that Stollmeyer held shares of

super-voting Class B stock that would automatically convert to shares of common stock in

October 2021.32        As of 2018, those shares enabled Stollmeyer to control 19.8% of

Mindbody’s fully diluted voting power, giving him the second largest block of votes.33

After October 2021, those same shares would carry less than 4% of the Company’s fully

diluted voting power.34 Tactically, it was best to for Stollmeyer to move before the sunset

loomed, so that another party seeking to neutralize his influence did not try to wait him out.

           Another reason, discussed more below, was that Mindbody’s largest stockholder—

IVP—faced the same sunset provision and was looking to exit.35 If that happened, then the

Board seat held by Liaw would likely transition to a representative from Luxor. Stollmeyer

had spoken with both firms. He knew that IVP wanted a near-term sale, while Luxor did

not.36 It behooved Stollmeyer to strike while his major ally also held a position of power.

32
     PTO ¶ 70.
33
     Id.
34
     Id. ¶¶ 70, 77; JX-1138 at 90.
35
     PTO ¶¶ 70, 77.
36
     Trial Tr. at 33:1–34:7 (Friedman).

                                                 12
         Additionally, Stollmeyer was exhausted by the struggles that Mindbody faced

during 2018. The Company made two strategic acquisitions at the beginning of the year:

FitMetrix, a company that integrated workout equipment and wearable fitness trackers with

performance feedback technology, and Booker, a cloud-based business management

company for salons and spas.37 Mindbody also shifted its sales strategy to focus on high-

value customers.38     In addition to integrating the acquisitions and reorienting the sales

strategy, Stollmeyer was simultaneously serving as the CEO and CTO of Mindbody after

the Board terminated the CTO in April.39 During trial, Stollmeyer testified at length about

the difficulties he faced.40 He stated that by late 2018, he was “physically and emotionally

exhausted[.]”41 Understandably, he wanted out.

                 2.    Mindbody’s Largest Stockholder Is Ready To Sell.

         In 2018, the Company’s largest stockholder was IVP, a venture capital investor that

had held Mindbody super-voting Class B stock shares since the Company’s IPO in 2015.42

Through a combination of super-voting Class B stock and regular Class A stock, IVP held

shares carrying approximately 24.6% of the Company’s voting power.43 Together, IVP

37
     PTO ¶ 90.
38
     JX-293 at 105; Trial Tr. at 51:1–17 (Friedman); id. at 1991:10–20 (White).
39
     Trial Tr. at 359:21–360:14 (Stollmeyer).
40
     Id. at 669:18–22 (Stollmeyer); see also id. at 1991:10–1992:17 (White).
41
     Id. at 364:12–22 (Stollmeyer).
42
  JX-1138 at 90 (showing IVP’s holdings in Mindbody Class A and Class B shares); PTO
¶ 77; Trial Tr. at 1401:2–13 (Liaw).
43
     PTO ¶ 77.

                                                13
and Stollmeyer controlled over 44% of the Company’s voting power.44 After October

2021, however, the Class B stock would automatically convert into Class A, and IVP’s

share of the Company’s fully diluted voting power would fall to 6%.45

         Liaw served as IVP’s representative on the Board. No other institutional investors

enjoyed representation on the Board.46

         Liaw was one of IVP’s eight general partners and thus owed fiduciary duties to IVP.

That meant that if IVP wanted a near-term sale, then Liaw had a fiduciary duty to IVP and

its investors to pursue a near-term sale. But if a near-term sale was not in the best interests

of the Company, then Liaw also had a fiduciary duty as a director of the Company not to

pursue a near-term sale. Liaw’s position was rife with the potential for conflict.

         In March 2018, Liaw emailed Stollmeyer that IVP “may be contemplating a

disposition” of its Mindbody stock.47 IVP had internal reasons to exit. By August 2018,

IVP’s position in Mindbody reflected an unrealized gain of $68 million.48 During a

meeting on August 13, IVP’s partners “agreed to target at least $200M in additional

liquidity by year end.”49 Mindbody was listed as one of five positions that would contribute

44
     Id. ¶¶ 70, 77.
45
     JX-1138.
46
     Trial Tr. at 1394:9–13 (Liaw).
47
     JX-153.
48
     JX-224 at 1; Trial Tr. at 1499:4–22 (Liaw).
49
     JX-236 at 2.

                                              14
to meeting this goal, and Liaw was directed to “evaluate/recommend evaluate [sic]

distributing 50% of position by 12/15[.]”50

                 3.     The Other Mindbody Directors

           In addition to Stollmeyer and Liaw, there were six other members of the Board:

Katherine Blair Christie, Court Cunningham, Gail Goodman, Cipora Herman, Adam

Miller, and Graham Smith.51

           Christie had served in multiple C-suite positions, including as Chief Development

Officer at Landit Inc. and Chief Marketing Officer at Cisco Systems, Inc.52 She had also

been a director of museums, institutes, and societies.53 She had not served on the board of

any other for-profit company and had no experience with a sale process.54

           Cunningham had been an executive officer of several private companies, including

as CEO of Yodle Inc.55 Cunningham participated in the sales process for Yodle in 2016 to

Web.com.56         Cunningham had also served two other private company boards.57

50
     Id.
51
     PTO ¶ 79.
52
     JX-1483 at 1–2.
53
     Id. at 3.
54
     Id. at 1.
55
     JX-1482 at 1; Trial Tr. at 875:16–876:9 (Cunningham).
56
     Trial Tr. at 875:16–876:9 (Cunningham).
57
     JX-1482 at 1.

                                               15
Cunningham had not served on any public company board aside from Mindbody and had

no experience selling a public company.58

           Herman had been the Vice President of Finance during Facebook’s early years and

stayed with that company through its IPO.59 Herman then served as the CFO for the San

Francisco 49ers and the CFO for the Los Angeles 2028 Olympic Games Committee.60

Herman had not served on the board of any public company before Mindbody and had no

experience selling a public company.61

           Miller founded and served as CEO, President, and director of Cornerstone

OnDemand, Inc., which he took public.62 He had no experience selling a public company.63

           Smith had been CFO of large software companies, including Salesforce, Advent

Software, and Vitria.64 He had also served on the boards of several public companies that

specialized in software.65 He had no experience selling a public company.

           Goodman was the lead independent director of Mindbody at the time of the sale

process and the only director with experience selling a public company.66 She had served

58
     Id.
59
     Trial Tr. at 1870:14–1872:19 (Herman).
60
     Id. at 1870:14–1872:19 (Herman).
61
     Id. at 1874:12–14 (Herman).
62
     JX-168 at 15.
63
     Id.
64
     Trial Tr. at 2155:5–9 (Smith).
65
     Id. at 2154:7–2155:3 (Smith).
66
     Id. at 1285:4–18 (Goodman).

                                              16
as the president and CEO of a publicly traded online marketing and SaaS company for over

15 years, and she participated in the sale of that company to Endurance International for

$1 billion.67

                4.    Mindbody’s Prospects

         The directors testified that when Mindbody embarked on its sale process, they

viewed its prospects as highly uncertain for many reasons.

         For starters, the integration of FitMetrix and Booker had been rocky. Herman

recalled participating in a Q2 2018 guide-down based on a reduction in sales productivity

“during this integration period.”68 The Company’s CFO Brett White testified that the

investments were underperforming.69 In contemporaneous statements to the Board and the

Company’s investors, however, Stollmeyer expressed optimism about these investments.

At Mindbody’s annual analyst conference in September 2018, he declared in his

presentation slides that “The Integration is Working.”70 Goodman also believed the

investments would pay off.71

         The directors also cited the shift toward high-value customers.    Cunningham

testified that the optimism about high-value subscribers “ended up not panning out over

67
     Id. at 1250:23–1252:12 (Goodman).
68
     Id. at 1880:19–1881:13 (Herman).
69
     Id. at 2041:23–2042:12 (White).
70
     JX-293 at 7.
71
     Trial Tr. at 1366:20–22 (Goodman).

                                           17
the subsequent year [2018].”72 Liaw and White testified that Mindbody’s high-value

subscribers had declined in 2018 for two quarters in a row.73 Again, the contemporaneous

documents paint a different picture, with White’s slides at the same conference proclaiming

“Our Customer Base is Healthier than Ever”74 and “Subscriber Base Shifting To Higher

Priced Tiers.”75

          Mindbody’s results for Q3 2018 were mixed. The highlights were an increase of

19% in year-over-year average revenue per subscriber and the first organic increase in net

new subscribers in two years.76 The lowlights included a revenue miss of $2.4 million

against Mindbody’s internal plan and $0.2 million against the analyst consensus.77

          The consensus view was that if Mindbody could weather a year or so of challenges,

then the future was bright. Stollmeyer estimated in October 2018 that “[f]ull realization of

the synergies” from the Booker and FitMetrix acquisitions “will take 1–2 years.”78 At trial,

he confirmed that expectation.79 By October 2018, Goodman “absolutely believed the

investments would pay off” and saw no need for cash infusions.80

72
     Id. at 882:3–883:3 (Cunningham).
73
     Id. at 1461:20–1462:7 (Liaw); id. at 2090:1–8 (White).
74
     JX-293 at 104.
75
     Id. at 105.
76
     JX-414 at 3.
77
     Id. at 3.
78
     JX-476 at 2.
79
     Trial Tr. at 610:17–611:10 (Stollmeyer).
80
     Id. at 1366:20–1367:1 (Goodman).

                                                18
         At trial, Stollmeyer and Vista sought to show that because of the risks that the

Company faced, the Board viewed a sale as the best option for stockholders, and there is

support for that conclusion in the record.81 Yet, crediting that the Board reached that

conclusion does not require crediting that the Merger was the best transaction reasonably

available, and that was because of how the sale process played out. The Board comprised

many talented individuals, but only Goodman had any experience selling a public

company. The Company’s outside counsel described the Board as “super green” and

recommended thorough training regarding what a process would entail.82

         At the time the Board embarked on a sale process, the Board was not aware of the

conflicts afoot. Although Defendants proved that the Board knew that Stollmeyer wanted

to resign as CEO within two to three years,83 the Board did not know that he wanted to sell

the Company sooner or that IVP was in lockstep with Stollmeyer toward this goal.

Stollmeyer did not disclose his need for liquidity to any Mindbody director at any time

81
   See id. at 1347:19–1348:5 (Goodman) (testifying that she “thought this was an excellent
price that would derisk the future for our shareholders”); id. at 2188:21–2189:17 (Smith)
(testifying that “the premium that the company was getting in a cash transaction was
definitely worth accepting versus the uncertainty of potentially several years of uncertain
execution”).
82
     JX-577.
83
   Goodman testified that Stollmeyer approached her in August 2018 to suggest that the
Board start looking for a successor because the next year would be his last year, that “he
openly admitted that he was getting tired,” and that she informed the other directors of
Stollmeyer’s intentions. Trial Tr. at 1265:5–1266:8 (Goodman). Herman and Cunningham
testified that the Board discussed potential CEO replacements at their September 2018
dinner. Id. at 1890:15–1891:16 (Herman); id. at 884:21–885:8 (Cunningham).

                                            19
during the sale process. Neither Stollmeyer nor Liaw disclosed IVP’s desire to exit. And

Stollmeyer concealed many of his interactions with Vista from the Board.

         B.     Events Before The Board Process

         On August 7, 2018, Stollmeyer met with Jeff Chang, an investment banker with

Qatalyst Partners.84 Stollmeyer and Chang had been meeting from time to time over the

course of five years.85 Chang testified that before August 2018, Stollmeyer “had never

been open-minded to having dialogue” with private equity.86 During the August 7 meeting,

however, something was different, and Stollmeyer was “more open to having a dialogue.”87

         Stollmeyer had kept in contact with a couple of private equity shops.88 Before

Mindbody’s IPO, Vista and Thoma Bravo had each approached Mindbody about an

acquisition.89 Stollmeyer thought they would be good places to start. Chang had a good

relationship with Vista. He had sold about four or five companies to them and advised

84
     JX-231 at 1.
85
     Trial Tr. at 255:14–257:1 (Chang).
86
     Id. at 255:20–259:1 (Chang).
87
     Id. at 260:18–24 (Chang).
88
   Id. at 362:23–363:13 (Stollmeyer) (regarding communications throughout 2014–2017);
id. at 365:11–367:16 (Stollmeyer) (regarding communications with Thoma Bravo and
H&F in 2016 and 2018); JX-618 (reflecting communications with Thoma Bravo); JX-243
(reflecting communications with H&F); JX-1804 at 2 (reflecting Vista’s reconnection with
Stollmeyer in 2017); JX-176 (reflecting May 2018 meeting with CCO of GoDaddy); JX-
1543 (reflecting February 2018 meeting with Qatalyst); JX-1509 (reflecting August 2018
meeting with Centerview); JX-196 (reflecting June 2018 meeting with TCV).
89
     JX-231 at 1.

                                           20
Vista or its affiliates.90 Monti Saroya, a Vista principal, had been involved in transactions

where Chang represented the seller.

                 1.     Qatalyst Reconnects Stollmeyer And Vista.

          During the August 7 lunch meeting, Chang offered to reconnect Stollmeyer to Vista.

Immediately after lunch, Chang did so by email.91 Chang wrote to Saroya:

                 I was with Rick [Stollmeyer] today, . . . . I know you all have
                 met before but thought a direct thread might be helpful to get
                 you, Brian [Sheth] and Rick together some time in the future.
                 Nothing pressing, but thought it’d be helpful for you all to
                 meet.92

Saroya responded about seven minutes later to set up a meeting.93

          Shortly after, Chang forwarded the email chain to George Boutros, a senior partner

at Qatalyst.94 In the forwarding email, Chang provided the following report:

                 Known them [Mindbody] since pre-IPO and founder/CEO
                 [Stollmeyer] has never wanted to sell. Vista and Thoma
                 [Bravo] tried to acquire them pre-IPO.

                 Met with him [Stollmeyer] today and he immediately talked
                 about how he is tired of being public and wanted me to re-
                 connect him w[ith] Vista and Thoma. Probably a 2019 deal is
                 my guess.95

90
     Trial Tr. at 251:3–254:24 (Chang); see also JX-591 at 2.
91
     JX-230.
92
     Id. at 2.
93
     Id. at 1.
94
     JX-231.
95
     Id. at 1.

                                               21
By 7 p.m. that same day, Saroya and Stollmeyer had scheduled a meeting for “late Aug/

early Sep.”96

         Chang waited a week to connect Stollmeyer with two other private equity firms,

Thoma Bravo and Hellman & Friedman (“H&F”).97 Stollmeyer did not meet with those

firms until mid-October and early November.98

                2.     Stollmeyer Takes Luxor’s Temperature.

         On August 9, 2019, two days after reconnecting with Vista, Stollmeyer met with

Luxor, which had owned shares of Mindbody since 2016. By August 2018, Luxor had

accumulated a 14% stake in the Company,99 but Luxor does not fit the mold of an “activist”

investor. Luxor does not seek to take control of companies. It is not in the habit of

demanding to inspect books and records of its investments. And it had not petitioned for

appraisal or sought to be lead plaintiff in a representative action before this lawsuit.100

         Stollmeyer wanted to know where Luxor stood on a sale. If IVP followed through

on its stated intention to exit, Luxor would be Mindbody’s largest public investor. Even if

IVP did not exit, Luxor would become Mindbody’s largest investor as soon as the super-

voting Class B shares converted to Class A in October 2021.

96
     JX-230 at 1.
97
     JX-238; JX-239; JX-250 at 2.
98
     JX-566; see also JX-317; Stollmeyer Dep. Tr. at 292:18–293:2.
99
     JX-266 at 3.
100
      Trial Tr. at 17:1–18 (Friedman).

                                              22
         Historically, Luxor had worked constructively with Mindbody management and the

Board.      And Luxor was extremely knowledgeable of Mindbody’s business.             Luxor

conducted substantial research on its investment in Mindbody, including collecting and

analyzing data on the number of users downloading the Mindbody app monthly, the

transaction behavior of Mindbody customers, and the progress of Mindbody’s dynamic

pricing model.101 Stollmeyer described Luxor as having “unparalleled knowledge of MB,”

“unfettered access to [CFO] Brett White and me for years,” and as being “more

[knowledgeable] about this company than any other public investor.”102

         Stollmeyer had met with Luxor as recently as June 2018. At that point, the

discussion focused on having Luxor’s Doug Friedman join the Board.103 Stollmeyer was

initially receptive to the idea, as he expected Liaw to be leaving his position on the Board,

making room for an alternative institutional stockholder representative.104 By the August 9

meeting, however, Stollmeyer’s tune had changed, and he wanted to know whether Luxor

would support a sale.105 Friedman responded that Luxor would not support a near-term

sale because Luxor expected much higher return over the long term.106

101
      Trial Tr. at 26:7–29:5 (Friedman).
102
      JX-1118 at 2; Stollmeyer Dep Tr. at 816:16–819:15.
103
      Trial Tr. at 429:10–431:24 (Stollmeyer).
104
      Id. at 429:10–431:24 (Stollmeyer).
105
    Id. at 32:20–34:7 (Friedman); id. at 33:1–34:7 (Friedman); id. at 429:10–431:24
(Stollmeyer).
106
      Id. at 33:1–34:7 (Friedman).

                                                 23
         Concerned about resistance to a sale, after the August 9 meeting, Stollmeyer

instructed one of Mindbody’s long-time advisers, David Handler of Centerview Partners

LLC (“Centerview”), to create a comprehensive dossier on Luxor, including any activist

campaigns.107

                3.      Stollmeyer Meets With Vista.

         On September 4, 2018, Stolleyer met with Saroya and another Vista representative,

senior vice president Nicolas Stahl.108 Saroya and Stahl were the lead Vista representatives

for the Mindbody deal.

         Saroya and Stahl testified at trial that they did not recall the specifics of the

September 4 meeting. Stahl, however, prepared a contemporaneous summary of the

meeting consistent with Vista’s practices.109 It stated:

                We met with Rick [Stollmeyer]. Rick mentioned he would like
                to find a good home for his company. He is getting tired and
                expects to stay in his seat 2-3 more years. He has 2 folks (one
                from Booker acq[uisition]) that he thinks could succeed him.110

During the meeting, Saroya invited Stollmeyer to join them for the CEO dinner at Vista’s

CXO Summit.111 Saroya did not remember any of those details. He recalled that they

107
      JX-265; JX-266; Trial Tr. at 528:5–12 (Stollmeyer).
108
      JX-264; JX-277.
109
      Trial Tr. at 781:9–782:8 (Stahl).
110
      JX-277.
111
      JX-264.

                                              24
“talked about how excited he is for the market, how well Mindbody has done historically,

and how he thinks Mindbody has a bright future.”112

            Stollmeyer did not have Board authorization to disclose that he was planning to step

down in two or three years or that he had two people in mind to succeed him.113 After the

September 4 meeting, Stollmeyer did not tell the Board that he had disclosed this

information to Vista.114 Stollmeyer admitted that he did not provide this information to

any other potential acquirers in August, September, or October 2018.115

            The fact that Stollmeyer told Vista that he was looking for a “good home” for

Mindbody was a bad fact for Defendants. It indicated that Stollmeyer had tipped off Vista

that Mindbody was considering a near-term sale and that Stollmeyer would be leading the

process. So, at trial, Stollmeyer denied it. He asserted that he never would have used the

words “good home,” claiming “the idea that I was looking for something like that and I

would say that to them, it just doesn’t feel like something I would say. I don’t recall saying

it.”116 He also said that he would never refer to Mindbody as “my” company.117 That

testimony was not credible. As to finding a “good home” for Mindbody, Stahl used this

“home” terminology describing Stollmeyer’s position in not one, but two contemporaneous

112
      Trial Tr. at 1033:21–1034:4 (Saroya).
113
      Id. at 524:15–525:7 (Stollmeyer).
114
   Stollmeyer Dep Tr. at 298:23–300:8; Lytikainen Dep Tr. at 85:6–89:17; Liaw Dep Tr. at
134:10–135:11.
115
      Trial Tr. at 524:15–525:7 (Stollmeyer).
116
      Id. at 374:18–375:13 (Stollmeyer).
117
      Id.

                                                 25
documents.118        As to calling Mindbody “my company,” Stollmeyer used this exact

terminology during his post-Merger podcast interview with Cremades.119 More likely than

not, Stahl’s notes of the meeting provide an accurate account of what occurred.

                4.      Stollmeyer Gives The Board A Partial Account Of His Meeting
                        With Vista.

         At an informal Board dinner in Santa Monica on September 5, 2018, Stollmeyer

advised the Board that he had met with Vista, but he did not give a full report on the

meeting.120 He did not report on his discussion with Qatalyst about a potential sale.121 The

Board instructed Stollmeyer to keep them in the loop, not get “too far advanced” in his

conversations, and to “get smart on the topic” of selling the Company.122 That was also

the day that Centerview provided Stollmeyer with the dossier on Luxor.123

         The Board meeting that followed on September 6 was seemingly uneventful. The

minutes reflect that members of management presented on Mindbody’s growth, retention,

and integration performance.124     White covered Q2 highlights, areas of growth, and

118
      See JX-277; JX-344.
119
      JX-1441 at 10.
120
      Trial Tr. at 978:6–981:2 (Cunningham); id. at 1363:4–24 (Goodman).
121
      Id. at 972:10–18 (Cunningham); id. at 1360:8–10, 1362:1–4, 1362:1–23 (Goodman).
122
      Id. at 1268:8–1269:17, 1364:1–5 (Goodman).
123
      JX-265.
124
      JX-270.

                                            26
management’s second-half outlook.125 The minutes do not mention Stollmeyer’s meeting

with Saroya and Stahl, nor the invitation to attend the CXO Summit.

            A few days later, on September 9, Handler copied Stollmeyer on an email to

Mindbody’s Chief Legal Officer, Kimberly Lytikainen, asking for a meeting to “discuss

the various elements of dealing with the Luxor situation.”126 On September 10, Stollmeyer

asked Centerview to “add an analysis of my voting power if I exercised all of my vested

options as of the end of the year.”127 Centerview provided this information on September

17.128

                  5.    Stollmeyer Attends Vista’s CXO Summit And Is Blown Away.

            Vista’s CXO Summit is an annual gathering of senior executives from Vista

portfolio companies and select industry guests. Vista uses the conference to prospect for

acquisition targets.129 Saroya testified that the CXO Summit gives CEOs from potential

targets “a flavor of what it feels like to work for Vista” and helps “take away the myth that

[Vista] might be a slash-and-burn shop.”130

125
      Id. at 2.
126
      JX-1617 at 2.
127
      Id. at 1.
128
      Id.
129
      JX-264; Stahl Dep. Tr. at 34:9–35:19; see also Stollmeyer Dep Tr. at 286:6–287:18.
130
      Trial Tr. at 1123:12–20 (Saroya).

                                              27
            Stollmeyer accepted Saroya’s invitation to attend the CXO Summit on October 9.131

At the summit, he met with executives from Vista portfolio companies.132 After the first

day, Stollmeyer texted Saroya to ask for a one-on-one meeting with Vista’s founder Robert

Smith, Vista’s President Brian Sheth, or Vista portfolio company CEO Reggie

Aggarwal.133 Stollmeyer asked Vista to put him in touch with Aggarwal because he wanted

“to know what it’s like to sell to Vista as a founder.”134 Stollmeyer pitched Mindbody to

Robert Smith in a brief meeting on October 9.135

            Stollmeyer watched presentations from both Robert Smith and Sheth at the

summit.136 Smith’s presentation included estimated wealth creation for CXOs who took

their companies private with Vista and noted that Vista portfolio company executives had

earned $488.6 million since 2017.137

            Stollmeyer texted Saroya that the “[p]resentations are very impressive.”138 He

texted Mindbody’s President Michael Mansbach that the presentations are “mind

blowing/inspiring.”139 Stollmeyer told Mansbach later that day that Vista “really love[s]

131
   Id. at 980:13–19 (Cunningham); id. at 1274:6–1274:11, 1364:9–12 (Goodman); id. at
2170:17–2171:1 (Smith).
132
      Id. at 389:20–23 (Stollmeyer).
133
      JX-327.
134
      JX-344; see also Stollmeyer Dep. Tr. at 384:9–385:21.
135
      Trial Tr. at 389:20–390:23 (Stollmeyer).
136
      Id.
137
      JX-343 at 124–25.
138
      JX-327.
139
      JX-328.

                                                 28
me, I love them.”140 Stollmeyer also told Mansbach that the CXO Summit helped him

“center on what is nagging from my subconscious.”141 Stollmeyer sent Mansbach a series

of screenshots, which Stollmeyer described as “money shots,” from a presentation that

Sheth gave.142 Two of the screenshots focused on Vista’s 2016 acquisition of Marketo for

$1.8 billion and subsequent sale of Marketo in 2018 for $4.75 billion.143          At trial,

Stollmeyer admitted that Marketo made an interesting parallel to Mindbody and that

Marketo was “purchased by Vista and then Vista sold them in a fairly short order . . . with

a really strong return.”144 Friedman testified that Stollmeyer later touted to Luxor “that

Vista had bought [Marketo] and then sold it 18 months later for 3x the price.”145 Stollmeyer

would later tell his financial advisor that, after a sale to Vista, “he could make as much

money over the next three years as he did the first go around.”146

         Stahl set up a meeting between Stollmeyer and Aggarwhal. In a text to Aggarwal

on October 9, Stahl explained that Stollmeyer wanted “to know what it’s like to sell to

Vista as a founder.”147 Stahl’s text also used the concept of a “home” for Vista, adding

140
      Stollmeyer Dep. Tr. at 326:8–328:12.
141
      JX-332 at 1, 3.
142
      JX-333.
143
      JX-334; JX-335; see also Stollmeyer Dep. Tr. at 364:5–366:14.
144
      Trial Tr. at 532:13–533:3 (Stollmeyer).
145
      Id. at 72:18–74:6 (Friedman).
146
      JX-1262.
147
      JX-344.

                                                29
that Stollmeyer “is hyper focused on maintaining culture and ensuring his business finds

the right home that will accelerate growth, not cause it to falter.”148

         The Board was aware that Stollmeyer was attending the CXO Summit, but

Stollmeyer did not have Board authorization to tell Vista that he was focused on finding a

home for Mindbody.149 Stollmeyer never told the Board that he had done so.150

         The CXO Summit changed the way Stollmeyer viewed a sale to a private equity

firm, or at least a sale to Vista. He explained: “what I saw there really shifted my paradigm

a bit on how private equity operates. Classically, you think of private equity firms as

purchasing companies and kind of stripping out the investments to yield maximum cash

flow.”151 Centerview’s Handler agreed that the CXO Summit changed Stollmeyer’s

perception of private equity and that Stollmeyer saw Vista as “his solution.”152 Consistent

with his text to Mansbach, Stollmeyer admitted at trial that he left the CXO Summit with

the impression that Vista really loved him and he loved them.153 Vista felt the same, touting

internally that Stollmeyer “loved” them and that they “built a strong relationship with

[Stollmeyer].”154

148
      JX-344.
149
      Stollmeyer Dep Tr. at 313:12–18.
150
      Lytikainen Dep Tr. at 86:14–20; Liaw Dep. Tr. at 134:10–135:11.
151
      Trial Tr. at 393:21–394:16 (Stollmeyer).
152
   Id. at 183:5–11 (Handler) (“I would describe it as he had a sea change in terms of his
impression of the PE world, and he had gone from really one end of the spectrum to
another. You know, hated and despised to beloved. You know, this was his solution.”).
153
      Id. at 535:22–536:1 (Stollmeyer).
154
      JX-350; JX-372 at 1.

                                                 30
          After the CXO Summit, Vista began drafting a memorandum about Mindbody for

its Investment Committee, the group tasked with deciding whether to approve or reject an

acquisition.155 The draft recounted Stollmeyer’s attendance at the CXO Summit and noted

that Stollmeyer “mentioned to Nicolas how impressed he had been with Robert [Smith]

and Vista’s vision, reiterating his intention to explore a take-private for Mindbody.”156

Stollmeyer conceded at trial that he did not have authorization to tell Vista in mid-October

2018 that he intended to explore a take-private for Mindbody.157

                  6.   Stollmeyer Works With Qatalyst To Kick Off A Sale Process.

          After the CXO Summit, Stollmeyer became laser focused on a sale to Vista. On

October 11, 2018, Chang and Stollmeyer discussed beginning “preparatory work prior to

kicking off a process for Mindbody[.]”158 Stollmeyer asked Chang to provide references

for Vista.159 Chang provided two, one of whom had sold his company to Vista in a deal

where he was represented by Qatalyst.160

          In that same email, Chang cautioned Stollmeyer that whenever Vista asked

Mindbody for non-public information, Stollmeyer should confer with Chang “because it is

at that juncture they will use their ability to move quickly to their advantage[]” and “it is

155
      JX-1461.
156
      Id. at 1.
157
      Trial Tr. at 538:18–22 (Stollmeyer).
158
      JX-129 at 1; JX-410 at 1.
159
      JX-356.
160
      JX-410.

                                             31
very important to get the right ‘process’ and messaging from the start to optimize for

value.”161 Stollmeyer later commented that “[t]his advice proved to be prescient and

important.”162

                  7.   Vista Expresses An Interest In Acquiring Mindbody.

          On October 15, 2018, Saroya called Stollmeyer, and the two spoke for twenty-five

minutes.163 During the call, Saroya delivered an oral expression of interest to acquire

Mindbody.164 Saroya told Stollmeyer that Vista would pay a substantial premium to

Mindbody’s recent trading price, which closed at $33.27 on October 15.165 Stollmeyer

understood that Vista saw Mindbody’s recent stock correction as a buying opportunity.166

At trial, Stollmeyer testified that he told Saroya that Mindbody was “not for sale” but that

he would relay Vista’s interest to the Board.167 Those statements do not take twenty-five

minutes to say.

                  8.   Vista Initiates Its Internal Process.

          Vista is a pro at acquiring companies. As Chang had warned Stollmeyer, Vista’s

advantage is speed. Vista likes to engage “in significant background work” and is “[p]ro-

active in making friendly unsolicited approaches and prefer[s] to kick-off processes vs.

161
      JX-410 at 2.
162
      Trial Tr. at 545:17–18 (Stollmeyer).
163
      PTO ¶ 97.
164
      Id. ¶ 98.
165
      Trial Tr. at 549:13–550:11 (Stollmeyer).
166
      Id. at 549:13–550:11 (Stollmeyer).
167
      Id. at 400:5–12 (Stollmeyer).

                                                 32
reacting to outreach.”168 Vista then capitalizes on its ability to “move very quickly through

both business and confirmatory diligence” and leverages its early analysis “to truncate

processes and reduce the ability for other potential acquirers to be able to complete

diligence and provide certainty at the finish line[.]”169 The record at trial involved

precedent transactions in which Vista used this strategy, and Vista representatives testified

about the strategy and its competitive advantages.170 In internal communications, Vista

representatives call it “Sprinting,”171 capitalizing the word as if it were defined term.

            Vista deployed its go-early-and-fast strategy after the CXO Summit. Stahl texted

Saroya on October 11, “MB down another 6% today. Thoughts on going to IC next week

to get a hunting license?”172 Saroya then texted Stahl on October 14, suggesting, “[l]et’s

get the list of stuff we need from MB ready. I’m going to try and catch [Stollmeyer]

tomorrow and tell him I want to send him the list ASAP and get going.”173 Stahl texted a

fellow Vista deal team member on October 14:

                  I’ve been back and forth with Monti today and we are likely
                  going to Sprint hard on Mindbody (they have now engaged a
                  banker) and may be trying to sign a deal in the next 2-3 weeks.
                  Would it be possible to upgrade / add to our team to enable us
                  to Sprint?174

168
      JX-593 at 46.
169
      Id.
170
      Trial Tr. at 1151:4–7 (Saroya).
171
      See, e.g., JX-378.
172
      JX-1457 at 1.
173
      Id.
174
      JX-378.

                                                33
When presented with these texts at trial, Saroya agreed that Vista was “gearing up and

trying to push hard to get to a signing very fast.”175

          Initially, Vista set a goal of signing an agreement before the Company’s next

earning’s call, which was fewer than three weeks away. On October 14, 2018, Stahl texted

Vista deal team member Derek Klomhaus that “Monti wants to announce before their

earnings. What day is that in November? Have Mike add to all of our calendars

(incl[uding] Monti).”176 On October 15, Stahl texted Saroya suggesting that “even if the

earnings call is 10/25, we could still Sprint to sign beforehand.”177 Vista’s goal was to “try

to get ahead of” any competitors in the Company’s sale process.178

          Vista also gamed out ways to block other bidders. As early as October 15, Stahl

noted that Vista’s outside counsel was already “thinking through how to reduce interloper

risk / goshop risk.”179 Chang wanted to reach out to other companies before Vista could

act.180

          Vista started requesting a market study—a third-party analysis of a particular market

for an acquisition. On October 19, Stahl texted Saroya to ask permission to conduct a

175
      Trial Tr. at 1048:18–23 (Saroya).
176
      JX-1781.
177
      JX-1490 at 29.
178
      JX-409.
179
   JX-1490 at 29. At trial, Saroya claimed unpersuasively not to know what his text meant.
Trial Tr. at 1164:2–10 (Saroya).
180
      Trial Tr. at 303:20–304:7 (Chang).

                                               34
market study on Mindbody.181 Saroya texted back “yes” in less than thirty seconds,182 and

Vista retained Bain & Co. to conduct the study.183 A typical market study takes between

two to five weeks to complete, so it was an advantage for Vista to request it before the

Company launched its sale process. The study was expensive—the final price tag for the

four-week analysis was $960,000184—so Vista would not have contracted for it without

some confidence that Mindbody would be running a sale process.185

                   9.     Stollmeyer Tells His Team About Vista’s Interest.

            While Vista was revving up its internal process, Stollmeyer began dribbling out

news about the expression of interest. Stollmeyer told his management team first. On

October 17, 2018, Stollmeyer sent an email to Mansbach, White, and Lytikainen with the

heading “Highly Confidential – For Your Eyes and Ears Only. Do not forward or discuss

outside this group without my permission[.]”186 Stollmeyer relayed Vista’s expression of

interest and that Vista “would pay a substantial premium to recent trading range and see

the stock correction an opportunity.”187

            Stollmeyer tried to give his team some comfort, stating that he believed that a private

equity sale might be Mindbody’s best option to achieve its long-term vision, but that a sale

181
      JX-423.
182
      JX-424.
183
      JX-681.
184
      JX-1644.
185
      Trial Tr. at 705:11–15 (Klomhaus).
186
      JX-410 at 1.
187
      Id.

                                                  35
would not be an “automatic ‘exit’” for management.188 Overall, Stollmeyer seemed excited

about a deal with Vista and described the possibility as “lean[ing] into an acquirer who

sees our current capabilities, gets our huge potential, and has the resources to accelerate

our results over the 3 year planning window, and expedite the full realization of what [sic]

our Vision and Purpose.”189

            Stollmeyer told the email recipients that he “plan[ned] to socialize this possibility

to the Board [of] Directors individually over the next week” and further said “[p]lease do

not hint or otherwise discuss with them or anyone else until I have a chance to do so and

give you the green light.”190 Stollmeyer acknowledged that the “conversation” with Vista

was “progressing rapidly.”191

            Next, Stollmeyer told Liaw of Vista’s expression of interest during an hour-long

conversation on October 18.192 Liaw texted Stollmeyer later that same day, asking him to

“[p]lease keep me posted on the other conversations.”193 Stollmeyer replied that he

appreciated hearing Liaw’s perspective and “our alignment on the key elements.”194

            On October 19, before he had spoken with any Board member other than Liaw,

Stollmeyer spoke for thirty-one minutes with Andre Durand, the founder and CEO of a

188
      Id.
189
      Id.
190
      Id.
191
      Id.
192
      Trial Tr. at 574:21–575:12 (Stollmeyer).
193
      JX-1618 at 1.
194
      Id. at 2.

                                                 36
company that sold to Vista. Durand was one of the two references that Chang had provided

for Qatalyst.

         Stollmeyer testified that Durand was incredibly positive about his experience with

Vista on this call.195 Durand reported to Saroya that the conversation turned out to be a

reference call for Vista.”196 Saroya replied, “Yup I was aware[.]”197 Stollmeyer did not

tell the Board about his conversation with Durand.198

                10.    Stollmeyer Informs The Other Directors Of Vista’s Interest.

         Stollmeyer waited until October 23—eight days after Vista’s expression of

interest—to begin contacting the remaining Board members.199 When he spoke with the

directors, Stollmeyer omitted key elements of his discussions with Vista200 and key pieces

of information that he had shared with his management team.

         Four of Mindbody’s six outside directors—Cunningham, Goodman, Herman and

Smith—testified at trial. All four admitted that they were unaware of key facts as of

October 23. They agreed that none of them knew about IVP’s desire for a near-term exit.201

To varying degrees, they agreed that they did not know that Vista viewed the downturn in

195
      Trial Tr. at 559:1–560:2 (Stollmeyer).
196
      JX-421 at 1.
197
      JX-422 at 1.
198
      Trial Tr. at 560:3–9 (Stollmeyer).
199
      JX-1442; Trial Tr. at 574:9–575:5 (Stollmeyer).
200
      Herman Dep Tr. at 88:5–89:8; Lytikainen Dep Tr. at 101:3–102:18.
201
    Trial Tr. at 920:3–5, 968:13–16 (Cunningham); id. at 1383:24–1384:6 (Goodman); id.
at 1492:15–1493:1 (Liaw).

                                               37
Mindbody’s stock price as a buying opportunity or that Vista planned to make an offer

based on a premium over the Company’s trading price, which meant that a further

downturn in the Company’s stock price would result in a lower bid.202 The directors’

testimony also indicates that they did not know that Stollmeyer had already interacted with

Vista on multiple occasions, had spoken with a portfolio company CEO about his

experience selling to Vista, and had told Vista that he planned to step down in two to three

years.

         C.     The Formal Sale Process Begins.

         During a regularly scheduled Board meeting on October 26, 2018, the Board

discussed Vista’s expression of interest and whether to form a transaction committee to

explore a potential acquisition (the “Transaction Committee”).203 This portion of the

meeting occurred in executive session. Stollmeyer remained present, but other members

of management were excused.204

         At some point on or before October 26, Stollmeyer asked Liaw to serve as chair of

the Transaction Committee, and Liaw agreed.205 During the meeting, Liaw started acting

202
    Id. at 890:21–891:3 (Cunningham) (testifying that he did not know about Vista’s plan
to price its offer based on Mindbody’s trading price); Goodman Dep. Tr. at 114:14–19
(testifying that she was not aware that Vista viewed the downturn in Mindbody’s stock as
a buying opportunity); Smith Dep. Tr. at 69:8–72:18 (testifying that he did not know that
Vista intended to price its offer based on Mindbody’s trading price). Herman claimed not
to recall anything about her conversation with Stollmeyer. Herman Dep. Tr. at 88:5–14.
203
      PTO ¶ 111; JX-1426 at 180; Trial Tr. at 895:10–896:7 (Cunningham).
204
      JX-1426 at 181.
205
      Trial Tr. at 576:6–10 (Stollmeyer): id. at 1429:24–1430:4 (Liaw).

                                              38
like the chair, and everyone else went along. The other Board members did not know when

or how Liaw became the presumptive chair of the committee. Goodman testified that

Liaw’s role as chair was just “assumed” at the October 26 board meeting.206 The Board

did not know at that time that IVP was looking to exit and therefore did not discuss whether

IVP’s interest in selling would affect Liaw’s ability to consider strategic alternatives

independently.207

         During the meeting, Liaw asked for volunteers to join the Transaction Committee,

warning directors that a sales process can be time-consuming and that they should not

“volunteer lightly.”208 Goodman texted Liaw to volunteer.209 Later that day, Liaw asked

Stollmeyer to “take the lead on conversations to fill out the rest of the committee,” but

Liaw seemed to continue to play a vetting role.210 Cunningham joined the committee after

talking through the commitment with Liaw.211

206
    Id. at 1382:19–1383:2 (Goodman); see also id. at 2196:6–12 (Smith) (testifying that he
did not know who proposed the membership of the committee or how Liaw was chosen as
its chair).
207
      Id. at 1383:24–1384:2 (Goodman); id. at 1895:15–1896:2 (Herman).
208
      Id. at 895:10–896:7 (Cunningham).
209
      PTO ¶ 112.
210
      JX-454.
211
      Trial Tr. at 895:16–896:7 (Cunningham).

                                            39
            The Board created the Transaction Committee by unanimous written consent on

October 30, 2018.212 It comprised Liaw, Goodman, and Cunningham, with Liaw as

chair.213

            The Transaction Committee’s initial mandate was to interview financial advisors

and make a recommendation to the Board on whether to engage one or more financial

advisors to assist in reviewing strategic alternatives.214 That was it.

            On October 31, the Transaction Committee met with Mindbody’s Chief Legal

Officer and outside counsel who advised the Board on a regular basis.215 Among other

things, the committee members reviewed the initial expectations, their mandate, and set the

date of November 14 to interview potential financial advisors.216 During a closed session

of the meeting that excluded Stollmeyer and other management members, the Committee

discussed

                  the importance of establishing a process . . . that was
                  independent and free of any influence from members of
                  management or other directors who, depending on the
                  circumstances, could have (or could be viewed to have) a
                  potential conflict with respect to any specific financial advisor
                  or potential strategic partner.217

212
      JX-1426 at 182–84.
213
      Id.
214
      PTO ¶ 114.
215
      JX-475.
216
      JX-487 at 1; JX-475 at 1.
217
      JX-475.

                                                 40
Toward that end, the committee requested sample “‘neutrality’ guidelines to serve as a

framework for ensuring that management understood its role in any potential process.”218

          With the assistance of outside counsel, the Transaction Committee prepared

“guidelines for communications, potential conflicts and disclosure matters” (the

“Guidelines”).219      The Guidelines required management to obtain “authorization for

outbound communications to potential strategic parties or financial advisors, timely

reporting of indications of interest or strategic inquiries to the board or Strategic

Transaction Committee and flagging any potential conflicts.”220

          The Transaction Committee adopted the Guidelines during the October 31 meeting,

and Lytikainen emailed the Guidelines to the Board on November 2.221 Stollmeyer

received and reviewed the Guidelines.222

          D.      The Company Lowers Guidance.

          During late October and early November, the Company was preparing to release Q4

guidance. Investors watched the Company’s guidance closely, and the stock price had a

history of reacting to it.

218
      Id. at 2.
219
      JX-487 at 1; JX-475 at 1.
220
      JX-487 at 3–4.
221
    Id.; Trial Tr. at 898:20–899:9 (Cunningham) (“The point of the guidelines was to make
sure that they weren’t disclosing price, talking about structure, talking about their
employment, very strategic, needy things[.]”); id. at 1587:3–10 (Lytikainen) (similar); id.
at 2201:22–2202:8 (Smith) (similar).
222
      Stollmeyer Dep. Tr. at 651:10–18.

                                             41
         Mindbody had been struggling to hit its publicly disclosed targets throughout 2018.

In the first half of 2018, Mindbody revised its 2018 full-year guidance to well below Street

expectations.223 And at the end of Q2 2018, Mindbody reduced the midpoint of its full-

year revenue guidance by approximately $1 million.224 During the second half of 2018,

Mindbody continued to miss targets.225 Its Q3 revenue ($63.8 million) missed the midpoint

of Mindbody’s already-reduced Q3 revenue guidance ($64 million).226 By September

2018, Mindbody’s internal Q4 revenue forecast stood at $69.40 million, down from May’s

$72 million forecast.227

         By October 2018, Mindbody’s Q4 revenue forecast had slipped to approximately

$68 million.228 On October 26, White provided the Audit Committee a “first pass,

preliminary view of Q4’18 guidance” of $65–$67 million against a forecast of $67.8

million.229     On November 2, Mindbody’s head of financial planning and analysis

(“FP&A”), Craig Heinle, advised that his best estimate had risen to $67.8–$68.2 million.230

         Stollmeyer felt that because of the Company’s prior difficulties meeting estimates,

the Board and the FP&A team “had now swung the pendulum to being overly

223
      JX-179 at 7; Trial Tr. at 1432:6–1433:16 (Liaw); id. at 2037:2–22 (White).
224
      JX-210 at 8; see also Trial Tr. at 1433:20–1434:15 (Liaw).
225
      Trial Tr. at 411:5–15 (Stollmeyer).
226
      JX-414 at 29.
227
      JX-1860 at 9; JX-1861 at 12.
228
      JX-1433; JX-503 at 2.
229
      JX-456.
230
      JX-496; Heinle Dep. Tr. at 123:12–124:12.

                                              42
conservative.”231 Stollmeyer wanted to “guide to the closest thing we could to our

reality.”232 On November 5, Stollmeyer emailed Gold and members of the Mindbody

management team that he had “never played a game of lowered expectations” and that “[i]f

I change my tune now, that would be inauthentic and disheartening. It would also sound

weird to those who know me.”233 On the morning of November 5, after digging into the

forecast, Stollmeyer suggested guiding to $67–69 million.234 That evening, however,

Stollmeyer and White presented a revised forecast of $68.1 million and a revised proposed

guidance range of $66–68 million, for which “the mid point would give us $1.1M in

cushion.”235

         The revised guidance range of $66–68 million was conservative. The $1.1 million

cushion between the forecast and the midpoint of the guidance was more than the previous

quarter,236 even though management was unusually confident because the October flash

report was “basically spot-on.”237 There was only $305,000 of risk in the forecast, meaning

that management did not foresee a scenario in which revenue would fall below $67.5

231
      Trial Tr. at 414:23–415:12 (Stollmeyer).
232
      Stollmeyer Dep. Tr. at 542:7–543:10.
233
      JX-510.
234
      JX-507; Trial Tr. at 415:13–24, 584:5–10 (Stollmeyer); id. at 2044:22–2045:1 (White).
235
      JX-531; JX-508 at 2.
236
      JX-206 at 28.
237
      Heinle Dep. Tr. at 95:9–14, 120:24–121:7.

                                                 43
million.238 Adjusted for high, medium, and low probability risks and opportunities, the

forecast was greater than $68 million across the board.239

            The Audit Committee convened by phone the evening of November 5. Audit

Committee members Liaw and Herman were present, along with Stollmeyer and White.240

Committee chair Smith had signed off on guiding $66–68 million before the meeting.241

Liaw favored lower guidance because “the only way to rebuild [credibility] or start to

rebuild that is to show that [Mindbody] can hit, and ideally beat, future guidance.”242

Herman agreed that guidance should position Mindbody to “beat and raise.” 243 They

recommended guidance of $65–67 million.244

            Stollmeyer and Liaw spoke immediately after the Audit Committee meeting for

sixteen minutes.245

            Three minutes after hanging up with Liaw, Stollmeyer texted White that he was

“adding a new second paragraph in [his] script noting our challenges.”246 Later that night,

238
      JX-508 at 1.
239
      Id.
240
      JX-531.
241
      JX-506; JX-531; Smith Dep. Tr. at 193:11–194:17.
242
      Trial Tr. at 1440:21–1441:13 (Liaw).
243
    Id. at 1980:23–1981:16 (Herman); see also id. at 1314:20–1315:8 (Goodman)
(describing “beat and raise” as a “perfect kind of managing-the-street scenario”); id. at
2172:21–2173:15 (Smith).
244
      Id. at 1439:13–23 (Liaw); id. at 1900:23–1901:14 (Herman); id. at 2048:6–8 (White).
245
      JX-1442; Trial Tr. at 1528:3–1530:11 (Liaw).
246
   JX-504; see also Trial Tr. at 598:16–599:4 (Stollmeyer) (acknowledging that he made
the script more negative after speaking with Liaw).

                                              44
Stollmeyer circulated the revised script to his management team.247 He deleted the portion

of his script that noted Mindbody’s substantial progress integrating Booker.248 He pulled

other “good stuff” from his script, deciding to “save [it] for future use.”249

          Stollmeyer led the November 6 earnings call during which Mindbody announced its

Q3 revenue miss and issued Q4 guidance of $65–67 million.250 He threw “Booker under

the bus”251 and referred to management’s failed execution, noting that “we’ve been

humbled by the last couple of quarters in dealing with the magnitude of integrating these

businesses and ramping up growth at the same time.”252 Centerview employees observed

in real time that Stollmeyer “sounded too apologetic [and] strange.”253 Friedman recalled

Stollmeyer sounding “depressed” and listened to the call “in shock.”254

          After the earnings call, Mindbody stock fell 20%—from a November 6 close of

$32.63 per share to a November 7 close of $26.18 per share.255 The stock fell so far that

Stollmeyer suggested to Liaw that Mindbody buy back shares.256

247
      JX-523.
248
      Compare JX-1434 with JX-523 at 3.
249
      JX-523 at 1.
250
      Id. at 3, 9.
251
      JX-397
252
      JX-527 at 10.
253
      JX-516.
254
      Trial Tr. at 41:24–42:6 (Friedman).
255
      JX-130 at 3.
256
      JX-1626.

                                              45
          Plaintiffs argue that Stollmeyer lowered guidance to depress Mindbody’s stock

price and make a deal seem more attractive. Certainly, Stollmeyer knew the guidance

could affect the stock price. He told White and Mansbach a few days earlier that “a few

hundred thousand of Q4 revenue makes a huge difference [on] Tuesday,”257 and he testified

that guiding $1 million higher would have affected Mindbody’s stock price.258 When asked

at trial whether he was considering how guidance could impact the sales process,

Stollmeyer acknowledged that, “a low guide, I certainly knew, was going to be a really

unfortunate message to send to potential acquirers as we were talking to them and trying

to rev up their excitement about our company.”259

          Liaw also knew that lowered guidance would make a sale more attractive. He and

a colleague discussed that “the PE guys will drag it out if they think we will miss

numbers.”260 Liaw later suggested to Goodman that lowering Q4 guidance would facilitate

a sale, explaining that “if we are missing [guidance] they will slow roll us. Hence good to

guide down as far as we did.”261          During his deposition, Liaw claimed that his

recommendation to lower Q4 guidance was not in any way based on the prospective sale

process.262 He withdrew this statement at trial and admitted that the sale process was not

257
      JX-495 at 1.
258
      Trial Tr. at 579:2–13, 597:23–598:13 (Stollmeyer).
259
      Id. at 589:6–21 (Stollmeyer).
260
      JX-101 at 6.
261
      Id. at 14.
262
      Liaw Dep. Tr. at 398:18–399:13.

                                             46
“completely absent from my mind.”263 He testified, however, that his “primary focus”

when the Company lowered guidance “was figuring out how the company could start to

rebuild credibility.”264

         In the end, the facts surrounding the Q4 guidance are murky. They reflect both a

desire to establish a figure that the Company could hit and a recognition of the effect that

low guidance would have for the attractiveness of a sale.265

         E.     Qatalyst Tips Vista About Stollmeyer’s Target Price.

         The drop in Mindbody’s stock price after the November 6 earnings call caught

Vista’s attention.266 Vista equated a lower stock price with a lower deal price,267 leading to

a greater profit in a future exit. Vista had recognized huge gains on software companies by

263
      Trial Tr. at 1483:5–1484:13, 1442:16–24 (Liaw).
264
      Id. at 1442:16–24 (Liaw).
265
    In a side debate, Defendants argued that the Audit Committee gave Stollmeyer
“direction” and a “directive” on where to guide. See Dkt. 447 (“Defs.’ Pre-Trial Br.”) at
11, 13). But the Audit Committee members uniformly testified that the decision was up to
management. Trial Tr. at 1952:16–1953:13 (Herman); id. at 2217:14–20 (Smith); id. at
1528:13–17 (Liaw). Herman went so far as to describe Defendants’ word choice
(“directive”) as “unfortunate.” Id. at 1954:8–21 (Herman). Defendants’ counterfactual
narrative on this point was unnecessary. In the end, Stollmeyer understood that it was his
decision where to guide. See JX-499 at 3–4. He took Liaw’s advice, but Plaintiffs failed
to prove that Liaw’s advice or Stollmeyer’s decision on this issue emanated from a
malicious intent to cater to an acquirer.
266
   JX-533 (“MB down 16% after earnings. Should we sprint?”); JX-557 (“You see mb
earnings? Tanked”); JX-558 (“Absolutely demolished”).
267
      Trial Tr. at 698:21–24, 701:24–702:5 (Klomhaus); id. at 1564:11–1566:7 (Sheth).

                                             47
purchasing them when they experienced stock price “dislocation,” then selling on the

“rebound.”268

            On the evening of November 6, Stahl texted Saroya about Mindbody’s stock drop:

“MB down 16% after earnings.”269 Stahl asked, “Should we sprint?”270 He also asked if

Saroya had heard anything from Chang.271 Saroya called Chang and spoke for five

minutes.272

            After the call, Saroya texted Stahl that “Jeff [Chang is] all over it” and that “[h]e

wants 40 min.”273 Saroya then inquired about the implications of a $40 per share price for

Vista’s financial model, which Stahl had just reported was “in good shape,” and Stahl

responded that Vista “can lean in to get there,” and that it would be easier to do so if Vista

assumed a “7x+ exit multiple” rather than the “6x forward” they were currently running.274

In other words, Stahl explained to Saroya how to make it work under the model to pay $40

per share for Mindbody.

            The statement that “he wants 40 min” received a great deal of attention at trial. The

clear implication of this text is that the pronoun (“he”) referred to Stollmeyer, and that

268
      JX-1465 at 30.
269
      JX-533.
270
      Id.
271
      Id.
272
      JX-1452.
273
      JX-533 (emphasis added).
  Id. On October 11, Saroya had texted Stahl that he “would pay 6-7x forward” for
274

Mindbody. JX-365 at 12.

                                                 48
Chang tipped Vista that Stollmeyer wanted a deal price of at least $40 per share. Other

contemporaneous evidence shows that Stollmeyer wanted a deal price of at least $40 per

share. Stollmeyer had implied it in mid-October when he described the expression of

interest to his management team and wrote that Vista was willing to pay a “substantial

premium” over Mindbody’s stock price after it closed at $33.27 per share.275 Chang said

it in mid-November, writing internally that “Rick’s bogey is $2bn,” 276 which equates to

$40 per share.277 Liaw said it in mid-December, telling Goodman and Cunningham that he

was “modestly concerned that Rick still seems focused on a 4-handle by year end.”278 That

is deal talk for at least $40 per share.279

         Chang’s pricing tip to Vista was a bad fact for Defendants. Unable to deny that the

text was sent, Defendants attempted to explain it away, suggesting that the “40 min” text

was sent accidentally and that Chang had meant to communicate to someone else at Vista

(not Stahl) about a different transaction (Apptio). There is no support for that in the record.

Both Saroya and Chang had zero recollection of what they discussed on the phone that

day.280 Unfortunately, there is little other contemporaneous evidence on this issue, because

before this litigation arose, Saroya lost his phone and was unable to recover any text

275
      JX-410 at 1; JX-130 at 3.
276
      JX-589.
277
   Mindbody had 48,016,533 shares outstanding at that time, JX-1138 at 16, which means
that a $2 billion deal price would translate into $41.65/share.
278
      JX-750 (emphasis added).
279
      Trial Tr. at 915:21–916:3 (Cunningham).
280
      Id. at 1195:20–1196:7 (Saroya); id. at 288:4–9 (Chang).

                                              49
messages from the entire year of 2018,281 and Chang had deleted potentially responsive

texts from 2018 through 2019.282

         The record on this issue is limited to Stahl’s text with Saroya. The text is clear. The

text references a “40 min,” which was Stollmeyer’s minimum. The text prior to the “40

min” was about Mindbody. The text after the “40 min” was about Mindbody. And Vista

called Chang in between to discuss Mindbody. All indicators are that the communication

was not about Apptio at all. It was about Mindbody.

         F.      Stollmeyer Tips Vista About The Formal Sale Process.

         The Guidelines required management to obtain authorization “for outbound

communications to potential strategic parties,”283 but Stollmeyer ignored them.             On

November 10, he texted Saroya asking to speak.284 They talked by phone later that day.285

         During his deposition, Stollmeyer testified that he informed Saroya during this call

that Mindbody would be running a sales process: “Q. So it’s your testimony today that on

November 10th you notified Mr. Saroya of the process? A. Yes, I believe so.”286

Stollmeyer repeated that admission later in his deposition. When asked, “So it’s fair to say

281
      Id. at 1105:11–1106:17 (Saroya).
282
      Id. at 246:14–247:7 (Chang).
283
      JX-489 at 2.
284
      JX-573.
285
      JX-1442.
286
      Stollmeyer Dep. Tr. at 626:12–23.

                                               50
that as of November the 10th, your testimony is that you told Mr. Saroya, hey, we’re going

to be doing a process. Right?” Stollmeyer replied: “I believe I did.”287

          Stollmeyer’s tip was yet another bad fact for Defendants. At trial, Stollmeyer tried

to recant. When confronted with his deposition testimony, he stated that he had “done a

lot of thinking about it,” that he had been deposed for “12 to 14 hours” by the time he was

asked this line of questioning and, “[a]t that point” he was “confused about dates.” 288 He

continued: “I’m not sure that I ever told Monti we’re having a process.”289 The deposition

testimony at issue, however, occurred during the morning of the second day of his

deposition, not at the end of a long day. Stollmeyer could have corrected his testimony by

errata sheet, but he did not do so. Circumstantial evidence makes it likely that Stollmeyer

did exactly what he described in his deposition. Plaintiffs proved that Stollmeyer tipped

Vista to the sales process on November 10.

          There was at least one other instance in which Stollmeyer violated the Guidelines

by contacting Vista. On November 17, Saroya texted Stollmeyer about an invitation to a

charity event in Miami.290 Stollmeyer replied, despite the prohibition in the Guidelines on

outbound communications to potential acquirers, saying that it would be “worth the trip”

and asking if he could bring his wife.291 Stollmeyer then asked Chang if he should attend,

287
      Id. at 627:13–18.
288
      Trial Tr. at 622:9–623:3 (Stollmeyer).
289
      Id. at 622:9–623:3 (Stollmeyer).
290
      JX-1490 at 43.
291
      Id. at 44.

                                               51
and Chang said no.292 That was the right answer, but Chang did not give that advice

because the Guidelines plainly barred the contact. Rather, Chang texted Stollmeyer, “The

more they think or feel you’re in their camp, the less $ they’ll pay.”293 Stollmeyer was

undaunted: “On the other hand, I [c]an show a little leg and get them frothing at the mouth

to get me and MB in the portfolio [.]”294 Although Stollmeyer eventually declined the

invitation, the communications speak volumes as to Stollmeyer’s mindset at the time.295

            G.     Mindbody Retains Qatalyst As Its Financial Advisor.

            On November 14, 2018, the Transaction Committee convened to decide on hiring

an investment banker.296 Vista conveyed its expression of interest on October 15. It was

now one month later, and Mindbody still had not retained a financial advisor. Both

Centerview and Qatalyst had provided advisory services to Mindbody in the past, and both

were invited to pitch for the business.297

            Centerview’s presentation emphasized its experience on deals in the technology

sphere, where Mindbody operated.298 Picking up on Stollmeyer’s request for a dossier on

Luxor, Centerview also cited its experience in mergers that faced activist challenges.299

292
      JX-617.
293
      Id.
294
      JX-552.
295
      Trial Tr. at 564:5–17 (Stollmeyer).
296
      JX-607.
297
      PTO ¶ 118.
298
      JX-595 at 12.
299
      Id. at 14.

                                              52
Centerview depicted Mindbody as a company facing near-term challenges but with

excellent long-term prospects. The near-term challenges included “Recent Execution

Issues”300 and the recent downturn in SaaS company valuations.301 The presentation also

showed the extent to which the downward changes in Mindbody’s guidance negatively

impacted the Company’s stock price.302 According to Centerview, this “Recent Noise”

masked Mindbody’s “Strong Healthy Underlying Business.”303 Centerview’s calculations

of Mindbody’s earning potential “Impl[ied] a Significant Value Dislocation in the

Market.”304 Handler agreed that these materials showed how Mindbody’s depressed

valuation correlated with its Q4 guidance.305

          Turning to the sale process, Centerview explained how its approach would achieve

the goal of “Keeping MINDBODY’s Special Committee in Control of the Process.”306

Centerview’s proposed timeline contemplated an initial phase during which Centerview

and management would develop a baseline valuation. After that, Centerview would

contact potential acquirers. Interested bidders would respond. If the Committee decided

to pursue an offer, then the process would move toward closing.307          According to

300
      Id. at 22.
301
      Id. at 24.
302
      Id. at 25 (“Small Revenue Re-sets – Large Stock Impact”).
303
      Id. at 27.
304
      Id. at 28; Handler Dep. Tr. at 287:15–25.
305
      Handler Dep. Tr. at 291:21–292:8.
306
      JX-595 at 40.
307
      Id. at 56.

                                              53
Centerview’s presentation, the process could take somewhere between 60–190 days.308

Lytikainen’s notes suggest that Centerview saw no need for a near-term transaction and

that for purposes of a sale, the “time frame is two years.”309 That comment reflected the

reality that Mindbody’s prospects would improve as the Company worked through its near-

term challenges.

            Qatalyst’s pitch emphasized its experience on deals with Vista.310 One of the slides

showed potential transaction prices and highlighted $38.50 per share as corresponding to

the revenue multiple Vista had paid in its Apptio acquisition.311 Qatalyst also described

Vista’s ability to “move very quickly through both business and confirmatory diligence”

and “to truncate processes and reduce the ability for other potential acquirers to be able to

complete diligence and provide certainty at the finish line[.]”312 Qatalyst envisioned a

much quicker sale process and contemplated a closing as early as December 31 “if a party

provides a pre-emptive bid that the Board finds compelling and other parties indicate lower

ranges of value.”313 That comment described Vista’s preferred strategy.

            After the presentations from Centerview and Qatalyst, the Transaction Committee

authorized the Company to engage Qatalyst.314

308
      Id.
309
      JX-607 at 2.
310
      JX-593.
311
      Id. at 30.
312
      Id. at 46.
313
      Id. at 42.
314
      JX-600 at 2.

                                                 54
         At trial, the directors lauded Qatalyst’s experience with technology companies as

the basis for their choice.315 That testimony was credible, but there is also evidence that

Liaw—who knew of Stollmeyer’s interactions with Vista—pushed to retain Qatalyst. The

strongest proof of this fact is found in an email that Liaw sent to himself. When preparing

to negotiate Qatalyst’s fee, Liaw emailed himself a set of talking points that included “I

lobbed this up for you guys to dunk it”; “You know I went to bat for you”; and “Everyone

knows this a high probability outcome just based on the inbound interest and overall set

up[.]”316 At trial, Liaw tried to minimize the significance of these comments as containing

“a degree of embellishment for the purpose of negotiating a lower fee for Mindbody,” and

that testimony was credible. Even discounting the statements for embellishment, it is

undeniable that Liaw had advocated to retain the adviser who emphasized its relationship

with Vista and recommended a quick sale process.

         H.     Qatalyst Contacts Potential Buyers.

         With Qatalyst’s help, Mindbody identified fourteen potential buyers, including both

financial sponsors and strategic acquirors.317 Stollmeyer rejected one candidate because

he didn’t “want to work for a payments company.”318

315
  Trial Tr. at 1903:2–19 (Herman); id. at 1316:19–1317:1 (Goodman); id. at 2029:6–13
(White).
316
      JX-614; see also Trial Tr. at 1486:23–1491:10 (Liaw).
317
      JX-623 at 1.
318
    JX-670; JX-671 (“Qatalyst had them on the list, and we pulled them from early
outreach.”).

                                             55
            Qatalyst planned to approach the strategic bidders beginning on November 19 and

the financial sponsors beginning on November 30.319 Qatalyst wanted to contact the

strategic bidders first because they often moved slower than the financial sponsors.320

            Under that schedule, Vista was not supposed to know that Mindbody had started a

sale process until November 30 at the earliest. But Vista already knew and was ready to

sprint. Vista had provided its expression of interest on October 15. Stollmeyer had tipped

Vista about the process on November 10. There is even evidence that Vista gained

additional insight into the schedule, because on November 27, Stahl texted a colleague that

“Monti and I are going to be sprinting at Mindbody starting next week.”321

            Chang formally contacted Vista on November 30.322 Chang did not contact the other

financial sponsors until December 3 and 4.323

            Interested buyers attended management presentations from Stollmeyer and his

executive team. They met with H&F on the morning of December 11.324 He texted his

wife that the meeting “went really well. Like those guys.”325 Later that day, the team met

319
      JX-1138 at 36.
  See JX-625 at 1 (“As you know, sponsors will be phased in later.”); see also Trial Tr. at
320

910:6–20 (Cunningham) (“[I]n my experience, this is a common thing to do.”).
321
      JX-652.
322
      JX-960.
323
      Id.
324
      JX-730.
325
      Id.

                                               56
with Vista.326 Stollmeyer joined Sheth and Saroya for drinks afterward and texted Chang:

“Am with Brian and Monti at Battery. Going great!”327 Stollmeyer treated the two firms

differently.

         I.     Vista’s Investment Committee Approves A Range.

         On December 12, Saroya texted his team that Sheth wanted to convene Vista’s

Investment Committee on “Friday [December 14] and move fast on [Mindbody].”328 Vista

received Bain’s final market study on December 13, 2018,329 two days before other

financial sponsors gained access to Mindbody’s data room. Klomhaus testified that the

Bain study gave Vista “more conviction that we knew more about the market than we

otherwise would have.”330 Another Vista deal team member later wrote, “[w]e were able

to conduct all of our outside-in work before the process launched allowing us to gain

conviction early that this is a must own business.”331

         At trial, Defendants stressed that when the Investment Committee met, Vista still

believed that it faced competition for Mindbody. That was true. Saroya messaged his team

on December 13 instructing them to “[s]olve for approval up to 39. We are going to have

a lot of competition on this one[.]”332 After learning that Vista’s estimated internal rate of

326
      Id.; JX-960.
327
      JX-727.
328
      JX-744.
329
      JX-755; JX-756.
330
      Trial Tr. at 711:21–712:2 (Klomhaus).
331
      JX-968.
332
      JX-763 at 1.

                                              57
return at $39 per share would be the same as the Apptio transaction, Saroya instructed his

team: “I think we show 35 but ask for approval up to 40.” 333 Vista wanted the ability to

compete if it ended up facing competition, but Vista also hoped that by sprinting, it could

eliminate the competition.

          The drafting of the Investment Committee materials corroborate that Vista knew in

advance about the sale process. An early draft of the slide deck stated that Qatalyst had

informed Vista of Mindbody’s sale process in “Late October 2018.”334 That was true, and

it revealed the informational advantage that Vista received. In the final presentation, the

date was adjusted to November 30, which was the official date when Qatalyst was

authorized to contact financial sponsors.335 In between drafts, Stahl sent a text to the drafter

of the deck saying “dont tell them about process.”336

          The deal team made similar changes to the summary memorandum distributed to

the Investment Committee along with the presentation. An early draft contained a lengthy

description of Vista’s interactions with Stollmeyer:

                  In August of 2018, Monti met with Rick and introduced him to
                  Nicolas Stahl. The three of them had lunch in San Luis Obispo,
                  where the Company is currently headquartered.             Rick
                  mentioned that he would like to find a good home for his
                  Company and expects to stay as the CEO for 2-3 more years,
                  citing two qualified internal candidates who would make good
                  successors. In October at the CXO conference in San Diego,
                  Rick mentioned to Nicolas how impressed he has been with

333
      Id. at 8.
334
      JX-739 at 6.
335
      JX-781 at 7.
336
      JX-758.

                                               58
                   Robert and Vista’s vision, reiterating his intention to explore a
                   take-private for Mindbody. Shortly after the conclusion of
                   CXO, Rick reached out to Jeff Chang at Qatalyst Partners in
                   order to begin preparatory work prior to kicking off a process
                   for Mindbody after the Company’s Q3 2018 Earnings Call on
                   November 6th.337

The final version omitted that paragraph and stated only that Saroya and Stahl met with

Stollmeyer on August 23 and that Stollmeyer attended the CXO Summit.338 The final draft

omitted Stollmeyer’s other interactions with Vista and stated incorrectly that Vista first

learned of a potential sale process on November 30.339

            On December 14, Vista’s Investment Committee authorized a formal bid for

Mindbody.340 No minutes or other record evidence reflects the discussion or the decision.

Stahl testified that he did not recall what was said at the meeting.341 When asked at trial

whether the Investment Committee approved a range, Saroya testified that the Investment

Committee approved a “cap of $35.”342

            Saroya’s testimony about a cap conflicted with his instructions to his team to prepare

documents to obtain approval for a range of over $35 and “ask for approval up to 40.”343

337
      JX-1461 at 1 (emphasis added).
338
      JX-1462 at 1.
339
      Id.
340
      Trial Tr. at 824:13–19 (Stahl).
341
      Id. at 824:24–825:2 (Stahl).
342
      Id. at 1078:1–9 (Saroya).
343
      JX-763 at 1, 8 (emphasis added).

                                                  59
It is also inconsistent with a slide showing purchase prices at increasing revenue multiples

up to $40/share.344

          Saroya’s testimony conflicted with the testimony of Sheth, Vista’s President. Sheth

explained that the Investment Committee’s practice was to provide a range, not a cap, and

that they followed that practice for Mindbody.345 When presented with Sheth’s testimony

at trial, Saroya deferred to Sheth’s recollection.346

          Saroya’s testimony conflicted with how Vista acted. Vista started the bidding at

$35 per share, which would be strange if that was a cap. Saroya testified that increasing a

price beyond what the Investment Committee had authorized required an additional round

of approval from the Investment Committee.347 Vista increased its bid, and Saroya had no

recollection of getting an additional approval to go beyond the cap.348

          Saroya’s testimony is inconsistent with his deal team’s internal communications.

Vista employees took bets on what price Vista would pay to acquire Mindbody. This came

out in trial through a text from Stahl to Saroya, which attached a photo that Stahl called

“[t]he line.”349 The image had a line set at $37.50—halfway between $35 and $40.350 Vista

344
      JX-781 at 11.
345
      Trial Tr. at 1570:23–1571:23 (Sheth).
346
      Id. at 1225: 2–5 (Saroya).
347
      Id. at 1078:10–13, 1222:8–1123:4 (Saroya).
348
      Id. at 1226:1–6 (Saroya).
349
      JX-883 at 1–2.
350
      Id. at 2.

                                              60
employees submitted their over-under guesses of the eventual deal price.351 The lowest

prediction was $36.50, and the highest prediction was $40.352 Over half of the participating

employees guessed that the price would be greater than $37.50.353 The highest prediction

by a deal team member was $38.50/share.354 In response to this image, Saroya said, “37.5

is a good guess[.]”355 Stahl replied, “I thought so too.”356

            In light of this evidence, Saroya’s testimony about a cap at $35 per share was not

credible. The Investment Committee approved a bidding range that went up to $40 per

share.

            J.    Mindbody Grants Data Room Access To Potential Acquirers.

            Ultimately, seven parties signed non-disclosure agreements and gained access to

Mindbody’s data room.357 The data room opened on December 15.358 All parties received

the same documents, which were designed to provide what a generic private equity fund

would want to have for its “first-level diligence.”359 Parties began dropping out after

receiving data room access.360

351
      Id.
352
      Id.
353
      Id.
354
      Trial Tr. at 835:11–24 (Stahl).
355
      JX-883 at 3.
356
      Id. at 5.
357
      JX-787 at 1.
358
      Id.
359
      JX-1221; Trial Tr. at 307:15–308:2 (Chang); id. at 2050:13–21 (White).
360
      JX-886 at 3.

                                                61
          Vista moved forward. Stahl testified at trial that Vista’s outlook on Mindbody’s

value initially soured after gaining access to the data room,361 because “there was less near-

term growth than what we have previously anticipated.”362 Stahl testified that Vista also

had concerns about Mindbody’s customer retention, its ability to upsell products to

customers, declining organic revenue, and competitive threats.363 The contemporaneous

evidence shows that like Mindbody management, Vista viewed those issues as near-term

hurdles that the Company could overcome. After processing the information from the data

room, Saroya texted Sheth that “our key finding is that if we fix the go to market engine

we can accelerate growth meaningfully” and that “we will be lined up to preempt after you

and I discuss.”364 Saroya minimized the near-term challenges that the Company faced,

stating, “[w]e see the same issues in most of these businesses.”365

          Vista became more excited after meeting with Mindbody’s sales team.366 Stahl

texted Saroya that “the sale strategy was terrible and they have started fixing a lot of

things.”367 Stahl believed that Vista could achieve significant long-term gains after buying

Mindbody.368

361
      Trial Tr. at 748:11–754:21 (Stahl).
362
      Id. at 748:17–749:5 (Stahl).
363
      Id. at 748:2–749:8 (Stahl).
364
      JX-820 at 1.
365
      Id. at 3.
366
      JX-852.
367
      JX-855.
368
      Trial Tr. at 748:17–749:5 (Stahl).

                                             62
          K.      Vista Makes A Formal Offer.

          On December 18, 2018, three days after the data room opened, Vista submitted an

offer to acquire the Company for $35 per share.369 Vista imposed a 24-hour deadline for

acceptance. After that, the offer would expire. Vista conditioned its offer on Stollmeyer

and IVP entering into a voting and support agreement.370

          That same day, Stahl sent Saroya the photo of the bidding line at $37.50, and Vista

employees began betting on the final price.371 In his deposition, Stahl testified that the

guesses were just a “game” that “wasn’t based on anything.”372 At trial, Saroya claimed to

not recall what the “line” was even about.373 Saroya’s other texts give him away. Referring

to a bet of $40 per share by an employee named Luke, he wrote, “Luke has no faith in me

huh.”374

          The Transaction Committee convened on December 19, 2018, to discuss Vista’s

offer of $35 per share.375 Later that day, the Transaction Committee directed Qatalyst to

communicate to all potential bidders that there was pressing need for them to submit

prompt indications of interest.376 The remaining potential bidders were much further

369
      JX-825.
370
      Id. at 1.
371
      JX-883 at 2.
372
      Stahl Dep. Tr. at 112:23–113:22.
373
      Trial Tr. at 1227:9–16 (Saroya).
374
      JX-883 at 4.
375
      JX-1729.
376
      JX-1138 at 39.

                                              63
behind in their diligence than Vista. One Qatalyst employee emailed Chang on December

19 to note that one bidder, Thoma Bravo, was not as far in their process: “They are just

much further behind in their thinking. . . . Level of questions is much more basic so far.”377

         Thoma Bravo dropped out of the process on December 20.378 Evidencing that Vista

continued to have privileged access to what was happening in the deal process, Vista had

expected to learn after 3:00 p.m. Pacific Time that day whether Thoma Bravo had

submitted a bid.379

         Another bidder, Recruit, was also still early in diligence.380 Recruit’s impression

from the management presentation was that Stollmeyer seemed “checked out.”381

Stollmeyer told Centerview that he was uncomfortable with Recruit because he did not

want to work with a Japanese company, as they required a translator.382

         By December 20, only Vista and one other bidder, H&F, remained.383 Qatalyst had

initiated follow-up calls with H&F on Mindbody’s go-to-market and financial

performance, but H&F had not submitted an offer.384

377
      JX-876 at 1.
378
      JX-895.
379
      JX-902; JX-903.
380
      JX-877.
381
      JX-1605.
382
      Trial Tr. at 72:18–74:6 (Friedman).
383
      JX-886 at 3.
384
      JX-885 at 5.

                                             64
          L.      Mindbody Counters And Vista Makes A “Best And Final Offer.”

          Mindbody’s Board convened on December 20 to discuss Vista’s initial offer with

Qatalyst.385 During the meeting, the Board authorized Qatalyst to make a counteroffer of

$40 per share.386 Qatalyst had recommended that figure,387 which matched both the top of

Vista’s range and the number that Stollmeyer had said he wanted.

          After receiving the counter, Saroya circulated a slide within Vista that identified

potential synergies with other Vista portfolio companies.388 He wrote that “[o]ur team

believes these synergies allow us to move up on our initial bid.”389 At trial, Saroya claimed

that the model presented to the Investment Committee only supported a maximum price

between $36 and $37 per share and that he did not recall any discussion about a higher

range.390 The evidence shows that the Investment Committee had already given Saroya

authority to go above $35 per share.

          On December 20, Vista bumped to $36.50 per share. Vista described its bid as its

“best and final” offer, but the evidence shows that Vista could and would gone higher if it

had been pressured to do so. Qatalyst first contacted Stollmeyer to communicate the

385
      JX-885.
386
      Id. at 2.
387
      JX-884 at 2.
388
      JX-914.
389
      Id. at 1.
390
      Trial Tr. at 1090:5–16 (Saroya).

                                              65
offer.391 Stollmeyer then texted Liaw that Vista had given their “best and final” offer of

$36.50.392 Liaw responded, “I’m kind of disappointed actually . . . .”393

            Qatalyst reached out to H&F on December 21.394 H&F responded that they were

“processing” and would need “2 more weeks to sign” up a transaction.395 On price, H&F

told Qatalyst that they had “no path to $40.”396

            At this point, the Transaction Committee seemed to discontinue meeting, and the

full Board convened to discuss Vista’s $36.50 per share bid on December 21. 397 Without

other bidders, the Board had to decide whether or not to take Vista’s bid of $36.50. On

December 21, Liaw told his partners that he “personally thought Vista would get up to

$38,” but that the market volatility and lack of other interested buyers made [$36.50] the

most attractive offer.398 Goodman thought $36.50 per share was “an excellent price that

would derisk the future for our shareholders.”399 Smith thought that the premium “was

definitely worth accepting versus the uncertainty of potentially several years of uncertain

execution.”400

391
      Id. at 455:14–23 (Stollmeyer).
392
      JX-890; JX-891.
393
      JX-892.
394
      JX-906 at 1–2.
395
      JX-951.
396
      Id.
397
      JX-906.
398
      JX-904.
399
      Trial Tr. at 1347:19–1348:3 (Goodman).
400
      Id. at 2188:21–2189:17 (Smith).

                                               66
            The deal price of $36.50 per share represented a premium of approximately 68%

over the closing price of Mindbody’s Class A common stock on December 21.401 Qatalyst

said it could render a fairness opinion for the $36.50 per share offer.402 On December 21,

the Board directed management to accept the bid and negotiate a merger agreement.403

            M.     The Parties Sign The Merger Agreement.

            On December 23, 2018, the Board approved the Agreement and Plan of Merger (the

“Merger Agreement”), and the parties signed it.404 If the Merger closed, then each share

of Mindbody common stock would be converted into the right to receive $36.50 per share

in cash, subject to the stockholder’s right to eschew the merger consideration and seek

appraisal.405 Stollmeyer and IVP agreed vote shares carrying 32.1% of Mindbody’s

outstanding voting power in favor of the Merger.406

            The Merger was publicly announced on December 24, 2018.407 Immediately after

announcement, Stollmeyer texted his financial advisor: “Vista’s in love with me (and me

with them). No retirement in my headlights.”408

401
      JX-1138 at 42.
402
      JX-921 at 1.
403
      JX-906 at 1–2.
404
      PTO ¶ 3.
405
      Id.
406
      Id. ¶ 120.
407
      Id. ¶ 121.
408
   JX-956; see also JX-954 (“Vista loves me and wants us to step on the gas. No retirement
in my headlights.”); JX-958 (“Best part – they want me to still run the company. Merry
Christmas[.]”).

                                              67
            In an internal email, Vista’s Mike McMullan described how Vista had secured the

deal. He bragged that Vista was “able to conduct all of our outside-in work before the

process launched,” which enabled Vista “to move swiftly in the process to provide the

MINDBODY Board with a highly certain offer within 3 days of receiving data room

access.”409

            N.    The Go-Shop

            The Merger Agreement authorized a 30-day go-shop.410 Beginning on Christmas

Eve, Qatalyst reached out to 52 potential bidders, 38 of which were entities that were not

part of the sale process.411 Only eight received the management presentation and signed a

non-disclosure agreement.          Only two expressed interest in continuing diligence

thereafter.412

            On January 5, 2019, Stollmeyer informed Vista that Luxor and another large

stockholder were trying to put together a bid.413 Stollmeyer told Vista that it was a “low

likelihood” outcome because those parties “likely could only write $100-200mm

checks.”414 Stollmeyer conceded at trial that he should not have revealed this information

to Vista.415 In any event, Luxor refused to sign an NDA, and Friedman admitted at trial

409
      JX-968.
410
      PTO ¶ 122.
411
      JX-1138 at 41.
412
      JX-1015 at 3.
413
      JX-1038.
414
      Id.
415
      Trial Tr. at 663:19–665:1 (Stollmeyer).

                                                68
that Luxor wanted to preserve the ability to vote against the merger and bring an appraisal

claim in the future.416 No bid emerged.

            On January 6, halfway through the go-shop process, Stollmeyer went on vacation

to Costa Rica.417 He instructed management in an email to decline go-shop presentations

in his absence, “[u]nless it’s urgent.”418 Stollmeyer was signaling his lack of interest in a

competing offer.

            O.    The Proxy Materials

            The Merger Agreement granted Vista rights and obligations related to the

preliminary proxy, the definitive proxy, and any subsequent supplemental disclosures (all

together, the “Proxy Materials”). The parties agreed that the Proxy Materials must not

“contain any untrue statement of a material fact or omit to state any material fact required

to be stated therein or necessary in order to make the statements therein, in light of the

circumstances under which they are made, not false or misleading.” 419 Section 6.3(b) gave

Vista the right to “a reasonable opportunity to review and comment” on the Proxy Materials

before they were filed.420 The Merger Agreement mandated that Mindbody “may not file

the Proxy Statement or any Other Required Company Filing with the SEC without first

providing [Vista] and its counsel a reasonable opportunity to review and comment

416
      Id. at 128:13–129:6 (Friedman).
417
      JX-1489 at 42.
418
      Id.
419
      Id.
420
      JX-1138 at 157.

                                              69
thereon[.]”421 Section 6.3(d) obligated Vista to notify Mindbody if it became aware of any

facts that, if not disclosed, would render the Proxy Materials materially misleading or

incomplete.422

            Saroya and Stahl both received a summary of Mindbody’s proposed “Background

of the Merger” section.423 Both the summary and the version filed with the SEC stated

only that “[i]n October 2018, representatives of Vista and Mr. Stollmeyer discussed Vista’s

investment strategy and the firm’s interest in learning more about MINDBODY’s approach

to the fitness, beauty and wellness services industries.”424 The preliminary proxy omitted

any references to Stollmeyer’s meeting with in August, Stollmeyer’s attendance at the

CXO Summit in October, or Vista’s expression of interest on October 15.425 Nevertheless,

Stahl replied that the description “makes sense to me,” and Saroya replied, “This works.”426

            Mindbody filed the preliminary proxy on January 9, 2019.427 Stahl texted Saroya

on January 10 to remind him to stick to their story, which required saying that “Jeff [Chang]

called you on 11/30 inviting us into the process[.]”428

421
      Id. at 157.
422
      Id. at 158.
423
      JX-1044.
424
      JX-1058 at 26.
425
      Id.
426
      JX-1044 at 1.
427
      JX-1058.
428
      JX-1066.

                                               70
            On January 11, Luxor filed a Schedule 13D stating that the proposed Merger

Agreement “significantly undervalues” Mindbody.429 On January 14, Friedman spoke to

Stollmeyer and asked him why Mindbody had guided down for Q4.430               Stollmeyer

responded that he had “kitchen-sinked” the guidance.431 On January 18, 2019, Mindbody

stockholder Luxor issued a demand for books and records under 8 Del. C. § 220 seeking,

among other things, “the Company’s actual or anticipated Q4 performance, including

subscriber accounts by tier.”432

            Stahl and Klomhaus also received a copy of Mindbody’s proposed definitive

proxy.433 Klomhaus did not have any comments or edits.434 Stahl noted that he had “had

some discussions” with counsel about the documents and wanted to review the changes.435

At trial, Stahl testified that he did not believe there were any undisclosed aspects of the

Merger that should have been disclosed.436 Like the preliminary proxy, the definitive proxy

omitted any reference to Stollmeyer’s meeting with Vista in August, Stollmeyer’s

429
      JX-1077.
430
      Trial Tr. at 79:24–80:23 (Friedman).
431
      Id.; id. at 82:8–19 (Friedman).
432
      JX-1111 at 9.
433
      JX-1139.
434
      Id.
435
      Id.
436
      Trial Tr. at 774:2–10 (Stahl).

                                             71
attendance at the CXO Summit in October, or Vista’s expression of interest on

October 16.437

         Stollmeyer reviewed and signed the definitive proxy as CEO.438 On January 23,

2019, Mindbody filed the definitive proxy with the SEC.439

         P.      The “Massive Beat”

         On January 4, 2019, Mindbody determined preliminarily that its Q4 revenue had

come in around $68.3 million.440         Stollmeyer texted White that day, “$68.3M Q4.

Awesome!”441 He advised his management team that this figure reflected 37% growth year

over year and a “massive beat against the Street’s $66 million consensus midpoint.”442

         On January 6, Stollmeyer texted White again about the Q4 results: “One question:

should we plan one last Earnings Call? My script: ‘here’s our big beat. Adios mutha

f******s.’”443

         On January 24, after Mindbody filed the definitive proxy, White emailed the Audit

Committee to convey his belief that Mindbody should disclose the preliminary Q4

results.444 White noted that Q4 revenue “exceeded consensus pretty meaningfully” and

437
      JX-1138 at 26.
438
      Id. at 183; Trial Tr. at 466:11–20 (Stollmeyer).
439
      PTO ¶ 9; JX-1138.
440
      JX-1037 at 2.
441
      JX-1032.
442
      JX-1037 at 1.
443
      JX-1042 (text altered).
444
      JX-1141 at 1.

                                               72
that the information should be publicly released by February 7 “so the shareholders have

the information before they vote” on February 14.445 Liaw agreed but expressed concern

that Luxor “may use this information to bolster their position[.]”446 Smith also expressed

concern about the effect of the disclosure on the Merger vote: “What happens

(hypothetically) if the vote fails on Feb. 14th? Just want to understand that first.”447 By

asking about the effect on the vote, they demonstrated that they thought the information

could be important for the vote.

            By January 31, Mindbody’s outside counsel had drafted a press release announcing

the preliminary Q4 results.448 As required by the Merger Agreement, Mindbody sent the

draft to Vista.449 After speaking with outside counsel, Klomhaus asked Stahl for “a minute

to chat about my concerns.”450

            The Audit Committee met on February 6.451 Mindbody’s outside counsel reported

on Vista’s position.452 The Audit Committee voted against disclosing the Q4 results,

Neither the discussions nor the purported determination appear in the minutes.453

445
      Id.
446
      Id.
447
      Id.
448
      JX-1165; JX-1463.
449
      JX-1165.
450
      Id.
451
      JX-1188.
452
      Trial Tr. at 2140:15–19 (White).
453
      Id. at 2185:21–2186:12 (Smith).

                                               73
         During this litigation, the Audit Committee members provided several reasons for

their recommendation. Both Liaw and Smith testified that they were concerned with

setting a precedent of pre-announcing quarterly results if the Merger failed.454 The fact

that a merger vote was pending provided an obvious distinction from ordinary course

situations. There was also already information in the market on the subject, because

Mindbody had issued the Proxy Materials that included Mindbody’s 2019 projections.455

If the Merger failed, Mindbody would not be in the same position for future quarters.

         Herman, Smith, and Cunningham all testified at trial that the amount of the revenue

beat was not material.456 That testimony is hard to square with Stollmeyer and White’s

contemporaneous reactions, and it is inconsistent with Company counsel’s preparation of

a press release that would announce the results. This is another issue on which Stollmeyer

changed his testimony at trial. He had acknowledged in his deposition that this information

would be material to an investor, but he maintained at trial that the information would not

be material to a stockholder voting on the Merger.457

454
      Id. at 1463:2–20 (Liaw); id. at 2184:4–2185:20 (Smith).
455
      JX-1138 at 51.
456
  Trial Tr. at 1971:18–1972:1 (Herman); id. at 2178:11–2179:23 (Smith); id. at 949:1–18
(Cunningham).
457
      Stollmeyer Dep. Tr. at 527:14–21, 830:9–831:13.

                                             74
          Liaw, White, and Smith also testified that releasing the Q4 results, without context,

would be misleading to investors.458 It is not clear why that would be true. Investors know

what preliminary results are. Regardless, the draft press release provided context.459

          Q.      Litigation Ensues.

          Before the Merger closed, Mindbody stockholders filed federal securities class

actions in California and Delaware.460 In the Court of Chancery, Mindbody stockholders

Philip Ryan, Jr. and Donald Friedman filed suit under 8 Del. C. § 225 challenging the

validity of the stockholder vote (the “Section 225 Action”).461 The next day, Luxor filed

an enforcement action in this court under 8 Del. C. § 220 to obtain books and records

concerning the Merger (the “Section 220 Action”).462

          To moot the federal suits and aspects of the Section 225 Action, Mindbody issued

supplemental disclosures (the “Supplemental Disclosures”).463 As with the previous SEC

filings related to the Merger, Vista had the opportunity to review the Supplemental

Disclosures before filing. Multiple Vista personnel, including Saroya and Stahl, received

a copy before filing.464 Vista’s outside counsel said they were “scrubbing one more

458
   Trial Tr. at 1463:21–1465:9 (Liaw); id. at 2090:17–2091:22 (White); id. at 2184:4–
2185:20 (Smith).
459
      JX-1165; JX-1463.
460
      JX-1194 at 3.
461
      PTO ¶ 19.
462
      Id. ¶ 20.
463
      JX-1194 at 3–7, 50–83.
464
      JX-1192 at 1.

                                               75
time.”465 On February 7, Mindbody issued the Supplemental Disclosures, which added

details about the sale process and other issues.466

            ISS and Glass Lewis recommended that stockholders vote for the transaction.467

Analysts also supported the Merger.468 The stockholders approved the Merger during a

special meeting on February 14, 2019.469 The Merger closed the next day.470

            R.    Vista Hires Stollmeyer.

            On February 17, two days after the Merger closed, Stollmeyer retained employment

counsel and began negotiating with Vista over the terms of his post-acquisition

employment. Unlike the formal sale process, those negotiations took months.471

            The terms of Stollmeyer’s post-deal employment resembled his pre-deal

employment. Stollmeyer took the same salary and bonus in 2019.472 He received a stock

grant equal to 1.7% of the post-transaction equity, assuming full vesting and no

forfeiture.473

465
      Id.
466
      JX-1194.
467
      JX-1172.
468
      See, e.g., JX-551; JX-945; JX-969; JX-1181.
469
      PTO ¶¶ 16–17.
470
      Id. ¶ 1.
471
      JX-1218; JX-1302; JX-1303; JX-1304; JX-1305.
472
      JX-1305; Trial Tr. at 474:19–22 (Stollmeyer).
473
      JX-1304; JX-1330; JX-1410 at 17.

                                               76
          S.      This Litigation Takes The Main Stage.

          After the Merger closed, the litigation landscape shifted. Mindbody produced

documents in response to the Section 220 action, which Luxor voluntarily dismissed in

August 2019.474

          The Section 225 Action moved forward, with discovery concluding in April 2019.475

That same month, Luxor filed an appraisal petition (the “Appraisal Action”).476 In June

2019, Luxor filed a class action lawsuit alleging breach of fiduciary duty claims against

Stollmeyer, White, and Liaw (the “Luxor Action”).477

          In October 2019, the court consolidated the Section 225 Action, the Appraisal

Action, and the Luxor Action into this proceeding. The court named Luxor as the lead

plaintiff for purposes of the claims raised in the Luxor Action but permitted the plaintiffs

who had filed the Section 225 Action to continue pursuing the Section 225 claim.

          The Section 225 claim moved forward rapidly, and the court held a trial on a paper

record on December 9, 2019.478 After trial, the parties then agreed to a settlement of the

Section 225 claim, which the court approved on December 15, 2020.479

474
      PTO ¶ 20.
475
      Id. ¶ 23.
476
   Id. ¶ 24. The court will address Luxor’s appraisal petition in a later decision to the
extent necessary.
477
      Id. ¶ 27.
478
      Id. ¶¶ 23, 32
479
      Id. ¶ 35.

                                              77
            Luxor amended its complaint to strengthen its claims for breach of fiduciary duty,

and the defendants moved to dismiss.480 The court issued a decision that dismissed the

claims against Liaw and otherwise denied the motion.481 The decision noted that Liaw’s

dismissal was without prejudice and that “[i]f discovery shows that [Liaw] had a more

significant and compromising role, then subject to the law of the case doctrine, [the

plaintiff] can seek to revisit [Liaw’s] dismissal, should future developments provide a

compelling reason for doing so.”482 Stollmeyer and White filed answers and discovery

ensued.483

            After fact discovery closed, Luxor sought leave to amend its complaint. After

receiving leave, Luxor filed the operative complaint on July 27, 2021.484 It dropped White

as a defendant, reasserted claims against Liaw, and added aiding and abetting claims

480
      Id.
  In re Mindbody, Inc., 2020 WL 5870084 (Del. Ch. Oct. 2, 2020) [hereinafter, “Dismissal
481

Decision”].
482
   Id. at *34 n.309 (quoting In re Dell Techs. Inc. Class V S’holders Litig., 2020 WL
3096748, at *43 (Del. Ch. June 11, 2020)).
483
      PTO ¶ 39.
484
      Id.

                                                78
against IVP and Vista.485 Liaw, IVP, and Vista moved for dismissal.486 Stollmeyer moved

for summary judgment.487 The court denied all three motions.488

          Liaw and IVP agreed to a settlement, which the court approved.489 That left only

Stollmeyer and Vista as defendants.

          The court held trial February 28, 2022, through March 9, 2022.490 Post-trial briefing

concluded on July 14, 2022, and post-trial argument was heard on July 28, 2022.491 The

parties submitted their joint schedule of evidence on August 11, 2022.492

II.       LEGAL ANALYSIS

          Stollmeyer was an officer and director of a Delaware corporation. In each capacity,

he owed duties of loyalty and care to the corporation and its stockholders as residual

claimants.493 As a function of those duties, Stollmeyer owed a duty to disclose all material

485
      Id. ¶ 40.
486
      Id. ¶ 42.
487
      Id. ¶ 43.
488
  Id. ¶¶ 45–46. See Dkts. 398, 399, 401 (In re Mindbody, Inc., S’holder Litig., 2021 WL
5565172 (Del. Ch. Nov. 29, 2021); In re Mindbody, Inc., S’holder Litig., 2021 WL
5564687 (Del. Ch. Nov. 29, 2021); In re Mindbody, Inc., S’holder Litig., 2021 WL
5834263 (Del. Ch. Dec. 9, 2021)).
489
      Dkt. 481.
490
      Dkts. 461–68.
  Dkt. 477 (“Pls.’ Opening Post-Trial Br.”); Dkt. 478 (“Defs.’ Opening Post-Trial Br.”);
491

Dkt. 484 (“Pls.’ Answering Post-Trial Br.”); Dkt. 485 (“Defs.’ Answering Post-Trial Br.”);
Dkt. 493 (“Post-Trial Oral Arg. Tr.”).
492
      Dkt. 492.
493
    In re Rural Metro Corp., 88 A.3d 54, 80 (Del. Ch. 2014); In re McDonald’s Corp.
S’holder Deriv. Litig, 2023 WL 387292, at *13–15 (Del. Ch. Jan. 26, 2023). In his capacity
as a director, Stollmeyer was protected by an exculpatory charter provision, which means

                                               79
information in connection with the Merger.494 Plaintiffs claim that Stollmeyer breached

his fiduciary duties by tilting the sale process in Vista’s favor and by failing to disclose

material information. Plaintiffs contend that Vista aided and abetted those breaches.

       A.     The Claims Against Stollmeyer

       When determining whether corporate fiduciaries have breached their duties, a court

applying Delaware law evaluates their conduct through the lens of a standard of review.495

The standard of review informs the evidentiary burden and provides a framework for legal

analysis. Here, the parties identified an abundance of potential and, at times, competing

legal standards for the claims against Stollmeyer. To chart an analytical course as to those

claims, this decision begins by outlining the complex system of potential legal standards

implicated by the parties’ arguments.

that Plaintiffs would have to prove that Stollmeyer acted disloyally or in bad faith to prevail
on a claim against him as a director. Mindbody’s exculpatory charter provision did not
protect Stollmeyer from liability when he was acting as an officer. Generally, when a
defendant acted in both exculpated and unexculpated capacities, the court must distinguish
in which capacity the defendants acted to resolve the claim for liability. See, e.g., In re
Oracle Corp. Deriv. Litig., 2021 WL 2530961, at *2 (Del. Ch. June 21, 2021). Because
Plaintiffs have proven that Stollmeyer acted disloyally, however, this decision need not
make that distinction and the exculpatory charter provision plays no role in the legal
analysis.
494
   Stroud v. Grace, 606 A.2d 75, 84 (Del. 1992) (“[The duty of candor] represents nothing
more than the well-recognized proposition that directors of Delaware corporations are
under a fiduciary duty to disclose fully and fairly all material information within the
board’s control when it seeks shareholder action.”).
495
   See Chen v. Howard-Anderson, 87 A.3d 648, 666 (Del. Ch. 2014); In re Trados Inc.
S’holder Litig., 73 A.3d 17, 35–36 (Del. Ch. 2013).

                                              80
            Delaware law has three transactional standards of review: the business judgment

rule, enhanced scrutiny, and entire fairness.496

            Where a stockholder challenges a change-of-control transaction like an all-cash

merger, enhanced scrutiny supplies the presumptive standard of review. In an M&A

setting, the key features of the enhanced scrutiny test require “(a) a judicial determination

regarding the adequacy of the decision[-]making process employed by the directors,

including the information on which the directors based their decision; and (b) a judicial

examination of the reasonableness of the directors' action in light of the circumstances then

existing.”497 The defendant fiduciaries bear the burden of proof on both elements.498

            Where enhanced scrutiny under Revlon presumptively applies, defendant fiduciaries

can invoke Corwin to lower the standard to an irrebuttable version of the business judgment

rule. To lower the standard, the transaction must have been “approved by a fully informed,

uncoerced majority of the disinterested stockholders.”499 A single disclosure deficiency

will defeat Corwin cleansing.500 The plaintiff bears the initial burden of identifying alleged

496
  Chen, 87 A.3d at 666 (quoting Reis v. Hazelett Strip-Casting Corp., 28 A.3d 442, 457
(Del. Ch. 2011)).
497
      Paramount Commc’ns Inc. v. QVC Network Inc., 637 A.2d 34, 45 (Del. 1994).
498
      Id.
499
      Corwin v. KKR Fin. Hldgs. LLC, 125 A.3d 304, 305–06 (Del. 2015).
500
   In re Xura, Inc. S’holder Litig., 2018 WL 6498677, at *12 (Del. Ch. Dec. 10, 2018);
van der Fluit v. Yates, 2017 WL 5953514, at *8 n.115 (Del. Ch. Nov. 30, 2017).

                                               81
disclosure problems, but the defendants bear the burden of proving at trial that the

stockholder vote was fully informed.501

       Where a conflicted fiduciary uses their position to mislead a board in a sale process,

committing “fraud on the board,” there are other potential legal frameworks for evaluating

the claim. One framework incorporates the conduct that constituted fraud on the board as

part of an analysis using the entire fairness standards of review.502 Another framework

examines whether the plaintiff proved the traditional elements of a claim for common law

or equitable fraud, but with the focus on the board rather than the plaintiff as the victim.503

The different frameworks have different approaches to burden allocation.

501
   In re Solera Hldgs., Inc. S’holder Litig., 2017 WL 57839, at *7–8 (Del. Ch. Jan. 5,
2017).
502
    See Dismissal Decision at *25 n.229 (discussing cases); see also Cinerama, Inc. v.
Technicolor, Inc. (Technicolor Plenary III), 663 A.2d 1156, 1170 n.25 (Del. 1995)
(suggesting that, when the default standard of review is the business judgment rule, fraud
on the board causes the standard of review to escalate to entire fairness); Mills Acq. Co. v.
Macmillan, Inc., 559 A.2d 1261, 1283–84 & n.33 (Del. 1989) (suggesting that, where
enhanced scrutiny applies, fraud on the board causes the standard of review to escalate to
entire fairness). Applying a traditional fiduciary standard makes the most sense when
evaluating how a proven fraud on the board affects the potential liability of defendant
fiduciaries who were misled or manipulated by the fraudster. In that scenario, if the
fiduciaries can satisfy the transactional standard, then they did not breach their duties,
regardless of having been misled or manipulated. If the misled or manipulated directors
cannot prove that the transaction satisfied the fiduciary standard of review, then they have
committed a fiduciary breach, albeit likely a breach of the duty of care for which they
would be exculpated.
503
   See Firefighters’ Pension Sys. of City of Kansas City, Missouri Trust v. Presidio, Inc.,
251 A.3d 212, 274–55 (Del. Ch. 2021) (citing Joel Edan Friedlander, Confronting the
Problem of Fraud on the Board, 75 Bus. Law. 1441 (2020)). There is merit to treating
fraud on the board as a separate theory of liability that can be committed by anyone,
including a non-fiduciary. RBC Cap. Mkts., LLC v. Jervis, 129 A.3d 816, 865 (Del. 2015)
(explaining that trial court’s award of money damages against a contractual counterparty,

                                              82
         In certain circumstances, a plaintiff can pursue a claim for breach of the duty of

disclosure as an independent path to liability.504 When a corporation seeks stockholder

action, the duties of loyalty and care manifest themselves contextually in a “duty to disclose

fully and fairly all material information within the board’s control when it seeks

shareholder action[.]”505 Unlike under Corwin, where the defendants have the burden of

proof, the plaintiff bears the burden of proving the elements of a disclosure claim.506

         In briefing, the parties grappled with the complicated surfeit of standards described

above. Plaintiffs briefed enhanced scrutiny, entire fairness, and disclosure as independent

paths to liability.507 Stollmeyer argued that enhanced scrutiny is the presumptive standard,

but that Corwin cleansing applies, resulting in an irrebuttable version of the business

judgment rule governing the case.508 The parties’ respective positions read like a legal

a financial advisor, “was premised on [the financial advisor]’s ‘fraud on the Board’”).
Ultimately, fraud-on-the-board theory is a developing area of Delaware law, which this
decision does not address given the selected legal standard.
504
   When entire fairness applies, disclosure becomes one element of the fair process
dimension, rather than an independent claim for fiduciary breach. See, e.g., Weinberger,
457 A.2d at 711 (“Part of fair dealing is the obvious duty of candor . . . . [O]ne possessing
superior knowledge may not mislead any stockholder by use of corporate information to
which the latter is not privy.”).
505
      Stroud, 606 A.2d at 84.
506
   Solomon v. Armstrong, 747 A.2d 1098, 1128 (Del. Ch 1999) (“As far as claims of
material misstatements, omissions, and coercion go, the law is clear that plaintiff bears the
burden of proof that disclosure was inadequate, misleading, or coercive.”).
507
      See Pls.’ Opening Post-Trial Br. at 68–83; Pls.’ Answering Post-Trial Br. at 15–40.
508
      See Defs.’ Opening Post-Trial Br. at 52–58; Defs.’ Answering Post-Trial Br. at 12–13.

                                              83
version of a choose-your-own-adventure story, where all of Plaintiffs’ adventures lead to

liability and all of Stollmeyer’s adventures lead to exoneration.

       For a court, a one-adventure approach is desirable. This decision applies the

approach urged by Stollmeyer—addressing Plaintiffs’ claims against Stollmeyer under

Revlon, evaluating the viability of Corwin, and assessing disclosure as an independent path

to liability.509 Adopting Stollmeyer’s approach, this decision finds that the conduct leading

to the Merger fell outside of the range of reasonableness.

       Notably, there is a conflict between the allocation of the burden of proof on Corwin

cleansing and the claim for breach of the duty of disclosure. Rather than conducting the

analysis twice, once with the burden of proof on Stollmeyer under Corwin and once with

the burden of proof on Plaintiffs for the breach of fiduciary duty claim, this decision

conducts the analysis once with the burden on Plaintiffs. Using that framework, this

decision finds that Corwin cleansing is not available because Stollmeyer failed to disclose

material information. That finding also provides the predicate for Plaintiffs’ claim for

breach of the duty of disclosure. Because Plaintiffs prevail, allocating the burden of proof

to them proves inconsequential to the outcome and avoids the need to analyze the

disclosure issues twice.

509
   This approach has the added benefit of aligning the court’s legal analysis with the
parties’ focus in briefing. Compare Pls.’ Opening Post-Trial Br. at 68–74 (devoting six
pages to addressing Revlon arguments) and Defs.’ Opening Post-Trial Br. at 62–94
(devoting over thirty pages to addressing same), with Pls.’ Opening Post-Trial Br. at 80–
83 (devoting fewer than three pages to addressing entire fairness arguments) and Defs.’
Opening Post-Trial Br. at 59–63 (devoting fewer than four pages to addressing same).

                                             84
                1.     The Sale-Process Claim

         Under Revlon, “‘directors are generally free to select the path to value

maximization, so long as they choose a reasonable route to get there.’”510 The question

posed is whether the fiduciaries have exercised their powers “in the service of a specific

objective: maximizing the sale price of the enterprise.”511 Generally speaking, to satisfy

enhanced scrutiny under Revlon, defendants bear the burden of demonstrating both (i) the

reasonableness of the decision making process employed by the directors, including the

information on which the directors based their decision, and (ii) the reasonableness of the

directors’ action in light of the circumstances then existing.512

         Under Delaware law, “[w]hen directors bias the process against one bidder and

toward another not in a reasoned effort to maximize advantage for the stockholders, but to

tilt the process toward the bidder more likely to continue current management, they commit

a breach of fiduciary duty.”513 This is also true when a single board member causes the

board to favor a bidder “not in a reasoned effort to maximize advantage for the

510
   In re Answers Corp. S’holders Litig., 2011 WL 1366780, at *3 (Del. Ch. Apr. 11, 2011)
(quoting In re Dollar Thrifty S’holder Litig., 2010 WL 5648895, at *17 (Del. Ch. Sept. 8,
2010)).
511
    Malpiede v. Townson, 780 A.2d 1075, 1083 (Del. 2001) (citing Revlon, 506 A.2d at
183); see also Revlon, 506 A.2d at 182–83 (explaining that, in the change-of-control
context, the duty of loyalty requires “the maximization of the company’s value at a sale for
the stockholders’ benefit”); Paramount, 637 A.2d at 44 (“In the sale of control context, the
directors must focus on one primary objective—to secure the transaction offering the best
value reasonably available for the stockholders—and they must exercise their fiduciary
duties to further that end.”).
512
      Paramount, 637 A.2d at 45.
513
      In re Topps Co. S’holders Litig., 926 A.2d 58, 64 (Del. Ch. 2007).

                                              85
stockholders,” but because of “personal reasons.”514 “The sins of just one fiduciary can

support a viable Revlon claim.”515 Thus, “the paradigmatic context for a good Revlon claim

. . . is when a supine board under the sway of an overweening CEO bent on a certain

direction[] tilts the sales process for reasons inimical to the stockholders’ desire for the best

price.”516 Reframed more generally, “the paradigmatic Revlon claim involves a conflicted

fiduciary who is insufficiently checked by the board and who tilts the sale process toward

his own personal interests in ways inconsistent with maximizing stockholder value.”517

         When a plaintiff proves a paradigmatic Revlon claim, that showing calls into

question the reasonableness of the decision-making process employed and the

reasonableness of the directors’ action in light of the circumstances then existing.

         Plaintiffs proved that this case fits the paradigm. Stollmeyer suffered a disabling

conflict because he had an interest in near-term liquidity, a desire to sell fast, and an

expectation that he would receive post-Merger employment accompanied by significant

equity-based incentives as a Vista CXO. Stollmeyer tilted the sale process by strategically

driving down Mindbody’s stock price and providing Vista with informational and timing

514
  In re Columbia Pipeline Gp., Inc. Merger Litig., 2021 WL 772562, at *41 (Del. Ch.
Mar. 1, 2021).
515
   Dismissal Decision at *14 (citing Kahn v. Stern, 183 A.3d 715, 2018 WL 1341719, at
*1 n.4 (Del. 2018) (ORDER)); MacMillan, 559 A.2d at 1283; Xura, 2018 WL 6498677, at
*13; Toys “R” Us, 877 A.2d 975, 1002–03 (Del. Ch. 2005).
516
      877 A.2d at 1002 (quoted favorably in Kahn, 2018 WL 1341719, at *1 n.4)).
517
      Dismissal Decision at *13.

                                               86
advantages during the due-diligence and go-shop periods. And the Board failed to

adequately oversee Stollmeyer.

         Because facts concerning the sale-process breaches were not disclosed to

stockholders, the stockholder vote was not fully informed. Defendants, therefore, are not

entitled to Corwin cleansing and Plaintiffs have provide their disclosure claim against

Stollmeyer.

                        a.     Stollmeyer Suffered Disabling Conflicts.

         “Delaware law recognizes that liquidity is one benefit that may lead directors to

breach their fiduciary duties if a desire to gain liquidity caused them to manipulate the sales

process and subordinate the best interests of the corporation and the stockholders as a

whole.”518      “Delaware law also recognizes that management’s prospect of future

employment can give rise to a disabling conflict in the sale context.”519 “Regardless of the

underlying theory, the key in evaluating whether financial interests gave rise to a disabling

conflict is to look to the subjective intent of the fiduciary.”520

         Plaintiffs proved at trial that, in 2018, Stollmeyer was subjectively motivated in

large part by his need for liquidity. To recap, by 2018:

         •       Stollmeyer had never experienced a big liquidity event.521

518
      Dismissal Decision at *15 (cleaned up) (collecting cases).
519
      Id. (cleaned up) (collecting cases).
520
      Id. at *16 (cleaned up) (collecting cases).
521
    JX-1337 at 10 (“[F]or the entrepreneur or particularly for the CEO, [an IPO] is not a
liquidity event.”).

                                                87
            •     He had made substantial financial commitments by investing, loaning, or
                  pledging: (i) nearly $1 million into his wife’s wellness company,
                  (ii) $300,000 into “Stollmeyer Technologies, LLC,” (iii) money to his
                  brother and his former business partner for their own real estate purchases,
                  and (iv) $3 million to a local college, of which $2.4 million was unpaid.522

            •     He openly and unapologetically described his unhappiness with his pre-
                  Merger financial situation in a post-merger interview for Cremades’s
                  “dealmakers” podcast, stating how “98% of his net worth” had been “locked
                  inside” “extremely volatile” Mindbody stock, and when he faced the expense
                  of “kids in college,” he regularly sold “tiny bits” of his stake in the public
                  market under his 10b5-1 plan.523

            •     He described sales made pursuant to his 10b5-1 plan as “kind of like sucking
                  through a very small straw.”524

            •     He emailed his financial advisor to ask that he “estimate my cash position”
                  in light of his impending expenses, stating that the timing and amount of his
                  10b5-1 sales were “top of mind” because of “greater than expected H1 cash
                  outlays[.]”525

            •     His spending required him to “dig[] into his LOC [line of credit]” to fund
                  additional financial commitments.526

            •     He described his pre-Merger financial position in his book as the “living at
                  or near the precipice of financial ruin,” and he further wrote that, post-
                  Merger, “my family and I don’t have to worry about money anymore.”527

            Plaintiffs further proved that Stollmeyer became uniquely smitten with Vista before

the formal sale process began. To recap:

            •     Stollmeyer met with Qatalyst’s Chang on August 7, and although Stollmeyer
                  “had never been open-minded to having dialogue” with private equity before

522
      JX-1142; Defs.’ Demonstrative 12 at 1–2.
523
      JX-1337 at 10.
524
      Id.
525
      JX-145 at 1.
526
      Id.
527
      JX-1647 at 181.

                                                88
                that time, his posture had changed by that point, and he was “more open to
                having a dialogue” with private equity firms.528

         •      Chang connected Stollmeyer to Saroya immediately after the meeting,529 and
                Stollmeyer met with Vista on September 4.530 Chang waited a week to
                connect Stollmeyer with other private equity firms,531 and Stollmeyer did not
                meet with those firms until mid-October and early November.532

         •      Chang reported internally that Stollmeyer had “talked about how he is tired
                of being public and wanted me to re-connect him w[ith] Vista and Thoma.
                Probably a 2019 deal is my guess.”533

         •      During the September 4 meeting, Stollmeyer told Vista that he was looking
                to “find a good home for his company” and that he was “getting tired” but
                did still expect to “stay in his seat 2-3 more years.”534

         •      Stollmeyer attended the CXO Summit, where he saw presentations from
                Vista leadership about the wealth of portfolio company CEOs. Stollmeyer
                described the presentations as “very impressive”535 and “mind
                blowing/inspiring.”536

         •      Stollmeyer sent a colleague “money shots,” from the Vista presentation,537
                two of which focused on Vista’s 2016 acquisition of Marketo for $1.8 billion
                and subsequent sale of Marketo in 2018 for $4.75 billion.538

528
      Trial Tr. at 255:22–257:1 (Chang).
529
      JX-230.
530
      JX-264; JX-277.
531
      JX-238; JX-239.
532
      JX-566; see also JX-317; Stollmeyer Dep. Tr. at 292:18–293:2.
533
    JX-231 at 1; Trial Tr. at 374:18–376:13 (Stollmeyer) (stating that “maybe I was
conveying that with my body language. It was a really tough and challenging time for me
personally, wearing both hats of CEO and CTO and trying to find our new CTO”).
534
      JX-277.
535
      JX-327.
536
      JX-328.
537
      JX-333.
538
      JX-334; JX-335; see also Stollmeyer Dep. Tr. at 364:5–366:14.

                                              89
         •       Stollmeyer pitched Mindbody to Vista during the CXO Summit,539 asked
                 Vista to put him in touch with a founder who had sold to Vista,540 and gave
                 Vista the impression that he was “hyper focused on maintaining culture and
                 ensuring his business finds the right home that will accelerate growth, not
                 cause it to falter.”541

         •       Stollmeyer told Mansbach after the CXO Summit that Vista “really love[s]
                 me, I love them.”542

         •       Vista understood that they had largely sold Stollmeyer on a transaction,
                 touting internally that Stollmeyer “loved” them and that they “have built a
                 strong relationship with [Stollmeyer].”543

         •       After meeting his interactions with Vista, Stollmeyer saw Vista as “his
                 solution.”544 He could keep his position as CEO, reload with equity, and
                 participate in a follow-on sale.545 Stollmeyer told his financial advisor that
                 “he could make as much money over the next three years as he did the first
                 go around.”546

         Moreover, Plaintiffs proved that timing was an issue for Stollmeyer. In 2018, he

needed liquidity, was tired of running a public company, and had a relatively limited

window for effectuating a transaction. He knew that it was advantageous to before the

sunset of the super-voting shares loomed. It would also be easier to sell while Liaw

remained on the Board, and before Luxor, who had told Stollmeyer it would oppose a sale

of Mindbody, joined. Topping things off, Qatalyst cautioned Stollmeyer on October 11,

539
      Trial Tr. at 389:20–390:23 (Stollmeyer).
540
      JX-344; see also Stollmeyer Dep. Tr. at 384:9–385:21.
541
      JX-344.
542
      Stollmeyer Dep. Tr. at 326:8–328:12.
543
      JX-350; JX-372.
544
      Trial Tr. at 183:5-11 (Handler).
545
      Id. at 72:18–74:6 (Friedman).
546
      JX-1262.

                                                 90
2018, to be careful providing non-public information to Vista because they liked to move

fast. For Stollmeyer, that was a plus. Rather than taking steps to slow Vista down, he

helped them get ahead.

         In response to this compelling factual record, Defendants beat on the same dead

horse that they championed at the dismissal stage. They argue that because of his large

stock holdings, Stollmeyer’s interests had to be aligned with the stockholders as a whole.

It is true “that material amounts of stock ownership can serve to align the interests of

fiduciaries with the interests of other stockholders.”547 But that does not mean that owning

material amounts always align the interests of a fiduciary with the interest of the other

stockholders.

         In this case, Stollmeyer’s stock ownership did not result in fully aligned interests.

Defendants’ mathematical argument assumes, counterfactually, that Stollmeyer valued the

immediate incremental dollar value per share in a sale over everything else. It ignores

Stollmeyer’s craving for a liquidity event, his fear of near-term market risk, and the upside

Stollmeyer expected to capture under Vista ownership. Defendants’ counterfactual theory

requires the court to ignore everything Stollmeyer said and did.

         The record overwhelmingly supports Plaintiffs’ theory. To sum it up, Stollmeyer

wanted to sell for idiosyncratic reasons. He wanted to sell fast to a “good home” sheltered

from the pressures of being a public company. He wanted both near-term liquidity and a

547
      Dismissal Decision at *14 (collecting cases).

                                              91
potential for post-closing upside. And Vista offered all of this. He said it best himself: He

loved Vista, and they loved him.

                       b.     Stollmeyer Tilted The Sale Process In Vista’s Favor.

         Plaintiffs proved that Stollmeyer created advantages for Vista in the sale process.

The record is riddled with instances when Stollmeyer tilted the playing field in Vista’s

favor.

         Stollmeyer did not have Board authorization to explore a sale of Mindbody until

mid-October 2018.548 Before then, he met twice with Vista and signaled that Mindbody

could be an acquisition target. During his first meeting with Vista on September 4,

Stollmeyer said that he “would like to find a good home for his company.”549 Stollmeyer

then pitched Mindbody to Vista during the CXO Summit on October 9.550 After the

summit, Vista had the impression that Stollmeyer “is hyper focused on maintaining culture

and ensuring his business finds the right home that will accelerate growth, not cause it to

falter.”551 Vista immediately began drafting a memorandum for its Investment Committee

and preparing its expression of interest.552

548
      Trial Tr. at 538:18–22 (Stollmeyer).
549
      JX-277.
550
      Trial Tr. at 389:20–390:23 (Stollmeyer).
551
      JX-344.
552
      JX-1461 at 1.

                                                 92
         At least by October 11, Stollmeyer knew that Vista might attempt to move fast to

gain a competitive advantage.553 Rather than slowing Vista down, Stollmeyer helped Vista

get ahead. After receiving Vista’s expression of interest on October 15, Stollmeyer took

his time telling his fellow directors. He informed management on October 17, but he swore

them to secrecy.554 He informed Liaw on October 18. He called Vista’s references on

October 19. It was not until October 23 that Stollmeyer informed the other directors

through a series of individual conversations that let him control the message.555 During the

same period, his conversations with Vista were “progressing rapidly.”556 By delaying

before informing the Board, Stollmeyer postponed the formal commencement of a sale

process and gave Vista a head start.

         Vista used that head start to rev up its process. Vista knew that Stollmeyer was

looking for a good home for his company, was a willing seller, and had contacted Vista’s

references.557 Based on that information, Saroya authorized retaining Bain to prepare an

“outside-in” market analysis of Mindbody that would take four to six weeks to complete.558

By starting the process in mid-October, Vista was positioned to make a firm offer in early

553
      Trial Tr. at 545:14–18 (Chang).
554
      JX-410 at 1.
555
      See Weinberger, 457 A.2d at 711–12.
556
      JX-410 at 1.
557
      JX-421 (Saroya: “Yup, I was aware.”).
558
      JX-681.

                                              93
December.559 None of the strategic bidders so much as heard about the process until

November 19. No other financial bidders were contacted until December 3 and 4.

         The skewed sale process had an obvious effect. When Vista was ready to make a

firm offer in early December, the other bidders were still in the early stages.560 By

December 20, only Vista and H&F remained in the process.561 Vista made its “best and

final” offer on December 20.562 When Qatalyst tried to prompt H&F to bid, H&F lamented

internally that they needed more time.563

         Stollmeyer was unabashed in his preference for Vista. After the Transaction

Committee adopted the Guidelines requiring management to obtain “authorization for

outbound communications to potential strategic parties or financial advisors,” Stollmeyer

made an unauthorized call to Vista to tip them that Mindbody would be commencing a

formal sale process.564 He later entertained an invitation to attend a Vista-sponsored charity

event, thinking he would “show a little leg.”565 Meanwhile, he rejected bidders that he

disliked for personal reasons.566

559
      JX-825.
560
    JX-876 at 1 (Qatalyst employee emailing Chang on December 19 that Thoma Bravo
was “just much further behind in their thinking . . . . Level of questions is much more basic
so far”); JX-877 (Recruit still early in diligence by the time Vista had made an offer).
561
      JX-886 at 3.
562
      JX-917.
563
      JX-951 (“[W]e are processing, need 2 more weeks to sign.”).
564
      Stollmeyer Dep. Tr. at 626:12–23; JX-487.
565
      JX-552.
566
      JX-670; JX-671; Trial Tr. at 72:18–74:6 (Friedman).

                                             94
            Stollmeyer did not tell other bidders in September that he was looking for a good

home for his company. Stollmeyer did not check other bidders’ references in October.

Stollmeyer did not tip other bidders in November that Mindbody was commencing a formal

sale process. Stollmeyer did not breach the Guidelines to communicate with other bidders.

Stollmeyer did not suggest showing other bidders “a little leg.”567 No other bidder knew

that Stollmeyer had a deal price bogey of $40 per share. No other bidder knew to get

approval to bid up to $40 per share. No other bidder could say “[w]e were able to conduct

all of our outside-in work before the process launched.”568 No other bidder was able “to

move swiftly in the process to provide the MINDBODY Board with a highly certain offer

within 3 days of receiving data room access.”569

            Chang warned Stollmeyer that “[t]he more [that Vista personnel] think or feel

you’re in their camp, the less $ they’ll pay.”570 And that is what happened. Vista had the

authority from the Investment Committee to pay up to $40 per share, but it had no reason

to get there. Without competitive pressure, the Company had no leverage to extract a

higher price. Vista ended up paying $36.50 per share, less than the midpoint of their range

and below the predictions of the most knowledgeable deal-team members. Without

Stollmeyer’s help, Vista would not have gotten the Company for $36.50 per share.

567
      JX-552.
568
      JX-968.
569
      Id.
570
      JX-617.

                                               95
                      c.     The Board Process

         Directors can manage conflicts if they are aware of them. The Mindbody Board did

not know about the conflicts that infected the sale process. Not surprisingly, the Board did

not manage them effectively.

         To recap:

         •      The Board did not know about Stollmeyer’s need for liquidity or IVP’s desire
                for a near-term exit their Mindbody investment.

         •      The Board did not know the details of Stollmeyer’s September 5 meeting
                with Vista.

         •      The Board did not know that Stollmeyer found the presentations at the CXO
                Summit to be “mind blowing/inspiring.”571

         •      The Board did not know that during the CXO Summit, Stollmeyer told Vista
                that he wanted to find a home for his Company.

         •      The Board did not know that after the CXO Summit, Stollmeyer felt that the
                Vista team “really love[s] me, I love them.”572

         •      The Board did not know that Stollmeyer checked Vista’s references before
                informing the majority of the Board of Vista’s expression of interest.

         •      The Board did not know that Qatalyst leaked Stollmeyer’s “40 min” price.

         •      The Board did not know that Stollmeyer had tipped Vista about the start of
                the formal sale process.

         •      The Board did not know that Stollmeyer wanted to “show a little leg” to
                encourage Vista.573

         •      The Board did not know of Vista’s huge head start.

571
      JX-328.
572
      Stollmeyer Dep. Tr. at 326:8–328:12.
573
      JX-552.

                                             96
         In short, the Board was in the dark. Stollmeyer’s actions deprived the Board of the

information needed to employ a reasonable decision-making process. Given the Board’s

lack of knowledge, Stollmeyer cannot rely on the Board’s actions to support the

reasonableness of the sale process or the ultimate outcome.

               2.     Corwin Cleansing And The Disclosure Claim

         When enhanced scrutiny under Revlon is the presumptive standard of review, a

defendant can restore the business judgment rule through Corwin cleansing by

demonstrating that the transaction was “approved by a fully informed, uncoerced majority

of the disinterested stockholders.”574 Ordinarily, the directors bear the burden of proof at

trial to establish Corwin cleansing. For the reasons already discussed, the court has

allocated the burden to Plaintiffs to establish a disclosure violation.

         In this case, the stockholders were as in the dark as the Board. Generally, when a

plaintiff proves the paradigmatic Revlon claim, a defendant will not be able to show that

the stockholder vote was fully informed, precisely because the Board did not know about

and could not disclose information about the officer’s machinations.575 This generalization

plays out here. The stockholders were not made aware of Stollmeyer’s conflicts or the way

in which the process favored Vista. This is more than sufficient to defeat a Corwin defense.

The Corwin analysis could end here. Because, however, Plaintiffs’ disclosure theories are

also relevant to the aiding and abetting analysis, a more thorough review is warranted.

574
      Corwin, 125 A.3d at 305–06.
575
  See, e.g., Dismissal Decision at *26; Xura, 2018 WL 6498677, at *12–13; In re Lear
Corp. S’holder Litig., 926 A.2d 94, 114–15 (Del. Ch. 2007).

                                              97
       Plaintiffs contend that Stollmeyer breached his duty of disclosure by keeping secret

his pre-acquisition interactions with Vista (the “process-based disclosures”) and by joining

Stollmeyer’s decision not to disclose the Q4 results before the shareholder vote (the “Q4-

results disclosures”).

       An omitted fact is material where “there is a substantial likelihood that a reasonable

shareholder would consider it important in deciding how to vote.”576 To be material, an

omitted fact must have “significantly altered the ‘total mix’ of information made

available.”577 When assessing materiality, courts must balance “the benefits of additional

disclosures against the risk that insignificant information may dilute potentially valuable

information.”578 Although a fiduciary need not give a play-by-play account, “when

fiduciaries choose to provide the history of a transaction, they have an obligation to provide

shareholders with ‘an accurate, full, and fair characterization of those historic events.’”579

576
  Rosenblatt v. Getty Oil Co., 493 A.2d 929, 944 (Del. 1985) (quoting TSC Indus., Inc. v.
Northway, Inc., 426 U.S. 438, 449 (1976)).
577
   Arnold v. Soc’y for Sav. Bancorp, Inc., 650 A.2d 1270, 1277 (Del. 1994) (quoting TSC
Indus., 426 U.S. at 449).
578
   In re Volcano Corp. S’holder Litig., 143 A.3d 727, 749 (Del. Ch. 2016); see also
Solomon, 747 A.2d at 1128 (“The theory goes that there is a risk of information overload
such that shareholders' interests are best served by an economy of words rather than an
overflow of adjectives and adverbs in solicitation statements.”).
579
   David P. Simonetti Rollover IRA v. Margolis, 2008 WL 5048692, at *12 (Del. Ch. June
27, 2008) (quoting Globis P’rs, L.P. v. Plumtree Software, Inc., 2007 WL 4292024, at *14
(Del. Ch. Nov. 30, 2007)); see also Clements v. Rogers, 790 A.2d 1222, 1242–43 (Del. Ch.
2001) (“In a transaction where the outcome is foreordained by the majority stockholder's
voting power and where that voting power precludes the Special Committee from finding
other purchasers, the effective functioning of the Special Committee as an informed and
aggressive negotiating force is of obvious importance to the public stockholders. When a

                                             98
“[O]nce defendants travel[] down the road of partial disclosure of the history leading up to

the [transaction] …, they ha[ve] an obligation to provide the stockholders with an accurate,

full, and fair characterization of those historic events.”580

         A violation of the duty of disclosure can implicate the duties of either loyalty or

care. A “violation of the duty of loyalty is implicated where the required disclosure was

made in ‘bad faith, knowingly or intentionally.’”581 For a non-exculpated officer like

Stollmeyer, liability can be premised on gross negligence.582

         Stollmeyer read the definitive proxy and the Supplemental Disclosures before they

were filed, and he signed the Proxy Materials as CEO.583 He was also in a unique position

of informational asymmetry at the time of the stockholder vote, as only he and Vista

employees knew of the nature and even existence of some of their interactions leading up

Proxy Statement details the functioning of that process, it must do so in a fair and balanced
manner that does not create a materially misleading impression of how the Committee
actually operated in fact.”) (citations omitted).
580
      Arnold, 650 A.2d at 1280.
581
   Crescent/Mch I P’rs, L.P. v. Turner, 846 A.2d 963, 987 (Del. Ch. 2000) (quoting
O'Reilly v. Transworld Healthcare, Inc., 745 A.2d 902, 915 (1999)).
582
   See Harcum v. Lovoi, 2022 WL 29695, at *27 (Del. Ch. Jan. 3, 2022) (“As discussed
above, the Complaint does not state a claim that the Proxy contained material omissions or
inaccurate disclosures. Even if any of the alleged omissions or inaccurate disclosures were
material, I am not persuaded that they were the product of gross negligence on the part of
[individual defendants] in their capacities as officers of the Company.”); In re Pattern
Energy Gp. Inc. S’holders Litig., 2021 WL 1812674, at *66 (Del. Ch. May 6, 2021) (“An
officer's compliance with the duty of care is evaluated for gross negligence.”); In re Baker
Hughes Inc. Merger Litig., 2020 WL 6281427, at *15 (Del. Ch. Oct. 27, 2020) (“Under
Delaware law, the standard of care applicable to the fiduciary duty of care of an officer is
gross negligence.”).
583
      JX-1138 at 183; Trial Tr. at 466:11–20 (Stollmeyer).

                                              99
to the Merger. Stollmeyer knowingly withheld information from the stockholders by

painting his interactions with Vista in a sterile light. The sterilized narrative begins with

Stollmeyer’s September 4 meeting with Stahl and Saroya. The Supplemental Disclosures

state that

                a representative of Vista emailed Stollmeyer, offering to meet
                for lunch, which took place on September 4, 2018, and at which
                Mr. Stollmeyer provided the representative of Vista with a
                general overview of MINDBODY and its approach to the
                fitness beauty and wellness services industries as was typical
                for Mr. Stollmeyer to present to potential investors.584

It is true that Stollmeyer met with Vista on September 4. The Supplemental Disclosures

fail to state that Stollmeyer invited discussions about an acquisition by saying he wanted

to find a “good home” for his company, that he was “getting tired,” and that he expected

to “stay in his seat 2–3 more years.”585 Contrary to the disclosure, the meeting was not

“typical” for Stollmeyer—he did not provide this information to any other potential

acquirers in August, September, or October 2018.586

         The Supplemental Disclosures next describe Stollmeyer’s attendance at the CXO

Summit as if it were a run-of-the-mill industry gathering.

                In October 2018, at that “meet and greet” annual conference
                hosted by Vista, at which Mr. Stollmeyer was present as an
                attendee on October 8th and 9th, representatives of Vista and
                Mr. Stollmeyer discussed Vista’s investment strategy and the

584
      JX-1195 at 4.
585
      JX-277.
586
      Trial Tr. at 525:8–526:11 (Stollmeyer).

                                                100
                firm’s interest in learning more about MINDBODY’s approach
                to the fitness, beauty and wellness services industries.587

The disclosure omits that during the CXO Summit, Stollmeyer reiterated his intention to

explore a sale of Mindbody,588 without any Board authorization to do so.589

         The Supplemental Disclosures also provide an anodyne description of Vista’s

October 15 expression of interest, stating only that “Vista indicated to Mr. Stollmeyer that

it was interested in pursuing strategic transaction discussions with MINDBODY.” 590 In

reality, Saroya and Stollmeyer spoke for 25 minutes over the phone, and Saroya shared that

Vista saw Mindbody’s stock price correction as a buying opportunity, was willing to pay a

“substantial premium” to Mindbody’s then-trading stock price of $33.27 per share, and did

not see any need for an “automatic exit” for management.591

         In addition to the partial disclosures sterilizing the description of Stollmeyer’s

interactions with Vista, the Proxy Materials are completely silent as to the following

events:

         •      Stollmeyer’s reference call with a Vista portfolio CEO on October 19.592

         •      Chang’s tip to Vista on November 6 that Stollmeyer wanted $40 per share.593

587
      JX-1195 at 4.
588
      JX-1461 at 1.
589
      Trial Tr. at 538:18–22 (Stollmeyer).
590
      JX-1195 at 4.
591
      JX-410 at 1.
592
      JX-1442; Trial Tr. at 543:10–19, 559:3–6 (Stollmeyer).
593
      JX-533.

                                             101
         •      Stollmeyer’s call to Saroya on November 10, in violation of the Guidelines,
                tipping him that Mindbody would be running a sale process.594

         •      Saroya’s invitation for Stollmeyer to attend a charity event in Miami, and
                Stollmeyer’s initial acceptance as long as he could bring his wife.595

         The Proxy Materials create a false narrative in which Stollmeyer met casually with

Vista on September 4 and October 9, Vista expressed general interest in a transaction on

October 15, and then Vista learned of the formal sale process with other potential acquirers

on November 30. This is not an “accurate, full and fair characterization” of those events.596

         Perhaps one of these disclosure issues, standing alone, would not meet the

materiality standard. Taken together, however, the partial and complete omissions altered

the total mix of information available to Mindbody’s stockholders. Plaintiffs proved that

Stollmeyer breached his fiduciary duties in the process-based disclosures.

         Because the Plaintiffs proved one disclosure violation, this decision does not rule

on the Q4-results disclosure.

         B.     The Claims Against Vista

         Plaintiffs advance two theories of liability for aiding and abetting against Vista.

They first argue that Vista aided and abetted Stollmeyer’s sale-process breaches, but that

claim is procedurally improper. The viability of Plaintiffs’ claim against Vista turns on

whether Vista aided and abetted the disclosure violations, which it did.

594
      Stollmeyer Dep. Tr. at 626:12–23.
595
      JX-1490 at 44.
596
      Arnold, 650 A.2d at 1280.

                                             102
                   1.   The Sale-Process Breaches

          In almost three years of litigation and through four iterations of its complaint,

including the last version when Vista was added as a party following the conclusion of fact

discovery, Plaintiffs never asserted that Vista aided and abetted the sale-process breaches.

Vista moved to dismiss Plaintiffs’ claims, and the parties fully briefed that motion.597

Nowhere in the parties’ briefing did Plaintiffs raise (or did Vista expressly anticipate

Plaintiffs raising) an argument that Vista aided and abetted in the sale-process breaches.

Plaintiffs asserted this theory for the first time in post-trial briefing, relying primarily on

an oral motion made at the conclusion of trial pursuant to Court of Chancery Rule 15(b).598

          Whether to permit post-trial amendment is a matter for this court’s discretion.599

The primary consideration “is prejudice to the opposing party.”600 Although not required

by law, the court routinely denies parties’ attempts to raise new claims in post-trial

briefing.601 In at least two cases, this court has refused to allow a party to assert aiding and

597
   Dkt. 342 (Vista’s Mot. to Dismiss); Dkt. 343 (Vista’s Opening Br. in Support of Mot.
to Dismiss); Dkt. 363 (Pls.’ Answering Br. in Opposition to Mot. to Dismiss); Dkt. 385
(Vista’s Reply Br. in Support of Mot. to Dismiss).
598
      Pls.’ Opening Post-Trial Br. at 84 n.480.
599
   Those Certain Underwriters at Lloyd’s, London v. Nat’l Installment Ins. Servs., Inc.,
2008 WL 2133417, at *7 (Del. Ch. May 21, 2008) [hereinafter “Lloyd’s”].
600
      Id. at *8.
601
   See Zhou v. Deng, 2022 WL 1024809, at *7 (Del. Ch. Apr. 6, 2022) (dismissing newly
asserted aiding and abetting claim introduced in post-trial briefing because it was “too late”
and the argument was waived); CanCan Dev., LLC v. Manno, 2015 WL 3400789, at *22
(Del. Ch. May 27, 2015) (same), aff’d, 132 A.3d 750 (Del. 2016); see also In re Est. of
DeGroat, 2020 WL 2078992, at *26 (Del. Ch. Apr. 30, 2020) (finding that defendant had
waived counterclaim by failing to present evidence on the claim at trial and only
“referenc[ing] the claim briefly in post-trial briefing”).

                                              103
abetting claims in post-trial briefing.602 This general approach derives from the principle

that “[p]leadings are intended to provide fair notice to the opposing party of the legal and

factual theories and claims to be litigated.”603

          Rule 15(b) authorizes post-trial amendments to the pleadings to conform to issues

“tried by express or implied consent of the parties.”604 It is “designed to cure the situation

where the course of the trial departs so materially from the image of the controversy

pictured in the pleadings or by the discovery process that it becomes necessary to adjust

the pleadings to reflect the case as it actually was litigated in the courtroom.”605 Implied

consent can arise when an opposing party acquiesces to the introduction of evidence that

only relates to the unpled issue.606 To support a finding of implied consent in this context,

“‘it must appear that parties understood evidence introduced without objection was aimed

at the unpleaded issue.’”607

          Plaintiffs contend that Vista impliedly consented to amend the pleadings to include

a claim that Vista aided and abetted the sale-process breaches by failing to object to

Plaintiffs’ Rule 15(b) motion at the close of trial, but Plaintiffs did not state the purpose of

its motion when raising it. Rather, Plaintiffs raised its Rule 15(b) motion as “a technical

602
      Zhou, 2022 WL 1024809, at *7; CanCan Dev., 2015 WL 3400789, at *22.
603
      Zutrau v. Jansing, 2014 WL 6901461, at *7 (Del. Ch. Dec. 8, 2014).
604
      Ct. Ch. R. 15(b).
605
      Lloyd’s, 2008 WL 2133417, at *9 (cleaned up).
606
      Id. at *8.
607
   Id. at *9 (quoting Laird v. Buckley, 539 A.2d 1076, 1080 (Del. 1988)). It is this jurist’s
preference to consider motions made under Rule 15(b) in the context of post-trial briefing.

                                              104
matter.”608 Nor did the court grant the or invite argument when it was raised.609 The court

deferred the issue for post-trial briefing. Vista’s silence was not consent.

            Vista also did not implicitly consent through its actions at trial. The evidence

Plaintiffs introduced did not speak only to a claim for aiding and abetting. All of the

evidence also related to the sale-process claim against Stollmeyer.610 The evidence did not

suggest a new claim, so Vista had no reason to object.

            Allowing an amendment at this stage would impose substantial prejudice on Vista.

Neither party raised the claim in their pre-trial briefs.611 Vista had no reason to mount a

defense to the claim at trial.

            Plaintiffs argue that they alerted Vista to the potential claim by identifying the

following as an open issue of law and fact that remains to be litigated in the pre-trial order:

“Whether Vista aided and abetted the breaches of fiduciary duty by Stollmeyer and/or the

other Mindbody directors in approving the Merger, recommending the Merger to

Mindbody’s stockholders, and seeking stockholder approval of the Merger based on false

and misleading disclosures[.]”612 On different facts, that could be enough to preserve an

issue, but not here. Plaintiffs needed to do more to put Vista on notice that it faced a claim

for aiding and abetting sale-process breaches. Plaintiffs may not advance that claim.

608
      Trial Tr. at 2547:24–2548:6.
609
      Id.
610
      Post-Trial Arg. Tr. at 53:3–5.
611
      Dkt. 443 (Pls.’ Pre-Trial Br.); Defs.’ Pre-Trial Br.
612
      PTO ¶ 133.

                                               105
         Based on Plaintiffs’ failure to timely assert its claim, Plaintiffs may not advance a

claim for aiding and abetting based on Stollmeyer’s sale-process breaches.

                2.     The Disclosure Breaches

         In contrast to their failed claim for aiding and abetting sale-process breaches,

Plaintiffs proved that Vista aided and abetted disclosure breaches.

         To prevail on an aiding and abetting claim after trial, a plaintiff must demonstrate:

“(1) the existence of a fiduciary relationship, (2) a breach of the fiduciary’s duty, . . .

(3) knowing participation in that breach by the defendants, and (4) damages proximately

caused by the breach.”613 Generally, a plaintiff bears the burden of proving a claim for

aiding and abetting.614

         Of the four elements, the first is not disputed (Stollmeyer was a fiduciary), the

second is established (Stollmeyer breached his duty of disclosure), and the fourth

(damages) is addressed in the next section. This section focuses on the third element,

knowing participation.

         “The element of knowing participation involves two concepts: knowledge and

participation. To establish knowledge, ‘the plaintiff must demonstrate that the aider and

613
      Malpiede, 780 A.2d at 1096.
614
   In re Rural Metro Corp., 88 A.3d at 85 & n.11 (collecting cases). The second element
of a claim for aiding and abetting—a fiduciary breach—presents a recurring exception to
the general rule of burden allocation. Often, the burden of proof for the predicate claim of
breach shifts to the defendant fiduciaries. For example, under enhanced scrutiny, the
defendant fiduciaries bear the burden of proving the absence of a fiduciary breach. If the
claims against the fiduciaries are tried and the fiduciaries fail to satisfy their burden, then
the finding of breach applies to the aiding and abetting claim. The court need not re-
analyze the claim for fiduciary breach with the plaintiff bearing the burden of proof.

                                              106
abettor had actual or constructive knowledge that their conduct was legally improper.’”615

The standard for knowing participation is “stringent” and “turn[s] on proof of scienter.”616

“‘[T]he requirement that the aider and abettor act with scienter makes an aiding and

abetting claim among the most difficult to prove.’”617 “[T]he question of whether a

defendant acted with scienter is a factual determination.”618

            Vista knew that the Proxy Materials omitted the pre-process disclosures. Vista

knew that Stollmeyer had said on September 4 that he was tired and looking for a “good

home” for his company. Vista knew that Stollmeyer reiterated his intention to explore a

take-private at the CXO Summit. Vista knew that its expression of interest to Stollmeyer

contemplated a price based on a premium over market and envisioned retaining some

members of management. Vista knew that Stollmeyer called one of its portfolio company

CEOs as a reference. Vista knew that Chang had tipped them on November 6 about

Stollmeyer’s minimum price of $40 per share. Vista knew that Stollmeyer had tipped them

on November 10 about the timing of the sale process. Vista knew that on November 17,

Saroya had invited Stollmeyer to a charity event in Miami. Other than Stollmeyer (and on

some issues, Chang), Vista was the only party who knew this information.

            Vista knew the significance of the information that was omitted from the Proxy

Materials. Vista scrubbed the same incriminating information from the Investment

615
      Presidio, 251 A.3d at 275 (quoting RBC, 129 A.3d at 862).
616
      Id.
617
      Id. (quoting RBC, 129 A.3d at 865–66).
618
      RBC, 129 A.3d at 862.

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Committee materials. Stahl texted Klomhaus before the Investment Committee meeting

to remind him, “dont tell them about process.”619 Vista changed the slide deck to omit the

statement that “Qatalyst Partners call[ed] Vista to indicate that Mindbody will come to

market” in late October 2018620 and falsely assert that Vista was not contacted about a

potential sale until November 30.621 Vista changed the deal-team memorandum to omit an

entire paragraph about Stollmeyer’s interactions with Vista from August through

November, including Stollmeyer “reiterating” at the CXO “his intention to explore a take-

private for Mindbody.”622 Stahl later texted Saroya after Mindbody filed its preliminary

proxy statement to remind him to stick to this story that “Jeff called you on 11/30 inviting

us into the process.”623 Vista hid these details precisely because they did not reflect well

on them. This all sheds light on Vista’s knowledge.

         Plaintiffs also proved that Vista participated in the breach. “For purposes of a board

decision, the requirement of participation can be established if the third party ‘participated

in the board’s decisions, conspired with [the] board, or otherwise caused the board to make

the decisions at issue.’”624 “Because the involvement of secondary actors in tortious

conduct can take a variety of forms that can differ vastly in their magnitude, effect, and

619
      JX-758.
620
      JX-739 at 6.
621
      JX-781 at 7.
622
      Compare JX-1461 at 1, with JX-1462 at 1.
623
      JX-1066.
624
   In re PLX Tech. Inc. S’holders Litig., 2018 WL 5018535, at *48 (Del. Ch. Oct. 16,
2018), aff’d, 211 A.3d 137 (Del. 2019) (quoting Malpiede, 780 A.2d at 1098).

                                              108
consequential culpability, the element of ‘knowing participation’ requires that the

secondary actor have provided ‘substantial assistance’ to the primary violator.”625

          The Merger Agreement introduced a contractual obligation for Vista to correct any

material omissions in the Proxy Materials.         The Merger Agreement mandates that

Mindbody “may not file the Proxy Statement or any Other Required Company Filing with

the SEC without first providing [Vista] and its counsel a reasonable opportunity to review

and comment thereon[.]”626 If Vista discovered that any information omitted from the

Proxy Materials would result in a materially misleading disclosure, the Merger Agreement

obligated Vista to “promptly notify [Mindbody], and an appropriate amendment or

supplement to such filing describing such information will be promptly prepared and filed

with the SEC.”627

          In accordance with this contractual language, Vista had multiple opportunities to

review the Proxy Materials. Saroya, Stahl, and Klomhaus routinely received copies of

Mindbody’s proposed disclosures before filing. Saroya and Stahl both reviewed the

preliminary proxy statement on January 5, and both approved the proposed language.628

Stahl and Klomhaus both received and reviewed the definitive proxy statement on January

  In re Dole Food Co., Inc. S’holder Litig., 2015 WL 5052214, at *41 (Del. Ch. Aug. 15,
625

2015) (quoting Kuhns v. Bruce A. Hiler Delaware QPRT, 2014 WL 1292860, at *21 (Del.
Ch. Mar. 13, 2014)).
626
      JX-1138 at 157.
627
      Id. at 158.
628
      JX-1044.

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21, and neither suggested any changes to the disclosures.629 Vista participated in the

drafting of the Proxy Materials.

         This court has described “an aiding and abetting claim based on a third-party’s

alleged failure somehow to prevent a board from providing misleading disclosures” as

“resting on thin ice.”630 Here, the ice is plenty thick. Vista had an obligation to correct the

material omissions discussed above and failed to do so. Vista thus withheld information

from the stockholders. Vista is liable for aiding and abetting in Stollmeyer’s process-based

disclosure breaches.

         C.      Damages

         “Once a breach has been established, this court’s powers are complete to fashion

any form of equitable and monetary relief as may be appropriate.”631 “Delaware law

dictates that the scope of recovery for a breach of the duty of loyalty is not to be determined

narrowly.”632 “Damages must be ‘logically and reasonably related to the harm or injury

for which compensation is being awarded,’”633 but “[a]s long as there is a basis for an

estimate of damages, and the plaintiff has suffered harm, mathematical certainty is not

629
      JX-1141.
630
      Xura, 2018 WL 6498677, at *15.
631
      Dole, 2015 WL 5052214, at *44 (cleaned up).
632
      Thorpe v. CERBCO, Inc., 676 A.2d 436, 445 (Del. 1996).
633
    Dole, 2015 WL 5052214, at *44 (quoting In re J.P. Morgan Chase & Co. S’holder
Litig., 906 A.2d 766, 773 (Del. 2006)).

                                             110
required.”634 Any uncertainties in calculating damages must be “resolved against the

wrongdoer.”635

      Plaintiffs have proven that Stollmeyer breached the duty of loyalty and committed

disclosure violations and that Vista aided and abetted in the disclosure violations. They

seek transaction damages for their sale-process claim in the amount of $3.50 per share and

quasi-appraisal damages for their disclosure claim in the amount of $5.75 per share. In

response, Defendants defend the deal price as more than fair and further argue that

Plaintiffs’ disclosure claims can only generate nominal damages.

             1.     Damages For The Sale-Process Breaches

      As a remedy for their sale-process claim, Plaintiffs seek damages from Stollmeyer

in the amount that Vista would have paid, which Plaintiffs peg at $40 per share. The lost-

transaction theory of damages finds firm footing in Delaware law. As Vice Chancellor

Laster has explained:

             When seeking post-closing damages for a breach of fiduciary
             duty in a sale process, the measure of damages logically
             depends on what the plaintiffs contend would have happened
             absent the breach. If the plaintiffs prove that the defendants
             could have sold the corporation to the same or to a different

634
    In re S. Peru Copper Corp. S’holder Deriv. Litig., 52 A.3d 761, 814 (Del. Ch. 2011)
(quoting Bomarko, Inc. v. Int’l Telecharge, Inc., 794 A.2d 1161, 1184 (Del. Ch. 1999),
aff'd, 766 A.2d 437 (Del.2000)); see also Red Sail Easter Ltd. P’rs, L.P. v. Radio City
Music Hall Prod., Inc., 1992 WL 251380, at *7 (Del. Ch. Sept. 29, 1992).
635
  Thorpe v. CERBCO, Inc., 1993 WL 443406, at *12 (Del. Ch. Oct. 29, 2013); see also
Dole, 2015 WL 5052214, at *46 (applying wrongdoer rule).

                                           111
                acquirer for a higher price, then the measure of damages should
                be based on the lost transaction price.636

That is true even if the merger price falls within the range of reasonableness. “Factors such

as . . . secret conflicts or fraud could lead a court to hold that a transaction that fell within

the range of fairness was nevertheless unfair compared to what faithful fiduciaries could

have achieved. Under those circumstances, the appropriate remedy can be a ‘fairer’

price[.]”637

         In response, Defendants argue the lost transaction price should supply the measure

of damages only when a controller sets out to extract value rapaciously from the minority

or freezes out “the minority to capture the value of opportunities that the corporation was

on the verge of achieving and in which the minority would otherwise have shared.”638 They

argue that where, as here, the liable party did not reap the rewards of the lowered deal price

directly, the lost transaction price serves as an inequitable measure of damages.

         Defendants cite Reis v. Hazelett Strip-Casting Corp., but it does not stand for the

limiting principle that they advance.639 In Reis, the court applied entire fairness review to

a controller-led reverse stock split under 8 Del. C. § 155. In granting relief, the Reis court

recognized the “remedial breadth afforded by a plenary breach of fiduciary action” and its

636
  PLX, 2018 WL 5018535, at *51 (emphasis added); see also Columbia Pipeline, 2021
WL 772562, at *56 & n.26 (citation and quotation marks omitted) (collecting authorities).
637
   ACP Master, Ltd. v. Sprint Corp., 2017 WL 3421142, at *19 (Del. Ch. July 21, 2017)
(collecting authorities), aff’d, 184 A.3d 1291 (Del. 2018).
638
      Reis, 28 A.3d at 467–68; see also Defs.’ Opening Post-Trial Br. at 100–02.
639
      Defs.’ Opening Post-Trial Br. at 100–02.

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statement that, “[d]epending on the facts and the nature of the loyalty breach, the answer

can be a ‘fairer’ price.”640

         Defendants do not point to any other authority that would limit the availability of

lost-transaction damages to controller transactions. Such a rule ignores the harm to the

injured class and would run contrary to the bedrock principle that “[o]nce a breach of duty

has been established, this court’s ‘powers are complete to fashion any form of equitable

and monetary relief as may be appropriate.’”641

         Alternatively, Defendants dispute that Vista would have paid $40 per share. To be

clear, the record reflects that Vista had authority to bid up to $40 per share, but that does

not mean that Vista would have bid that amount. In the Investment Committee materials,

$40 was at the highest end of Vista’s modeling. Using the same private equity model, H&F

saw “no path to $40.”642 If Mindbody had been able to introduce competition, then Vista

might have stretched to reach $40 per share, but Vista also could have declined to go that

high.

         The internal Vista bets provide the most compelling evidence as to what Vista would

have paid. Recall that Vista employees, including the deal team members, bet on what the

deal price would be in a range of $36.50 (the then-current offer) and $40 (the high-end of

640
      Reis, 28 A.3d at 467–68.
641
   Dole, 2015 WL 5052214, at *44; see also Thorpe, 676 A.2d at 445 (“Delaware law
dictates that the scope of recovery for a breach of the duty of loyalty is not to be determined
narrowly.”).
642
      JX-951.

                                             113
the approved range). The line was at $37.50. Over half guessed that the price would be

greater than $37.50, and the highest prediction by a deal team member was $38.50/share.

Two of Vista’s most informed deal team members believed that the deal price was likely

to be $37.50.643 Only one employee, who was not on the deal team, thought that Vista

would pay $40.

         The evidence demonstrates that Vista would have paid $37.50 had Stollmeyer not

corrupted the process. If Mindbody had countered a second time off Vista’s $36.50 figure,

such as by matching Vista’s $1.50 increment and going from $40 to $38.50, then Vista

would have made a further move. This would not have been outlandish—Qatalyst’s pitch

deck showed $38.50 per share as corresponding to the revenue multiple Vista had paid in

its Apptio acquisition.644 Whether Vista split the difference by going straight to $37.50 or

engaging in more fractional bidding, the likely result was a deal at $37.50. Plaintiffs are

therefore entitled to lost-transaction damages in the amount of $1 per share.

                2.    Damages For The Disclosure Breaches

         Plaintiffs seek quasi-appraisal damages on their disclosure claims, which is a

measure of compensatory damages. The Delaware Supreme Court has held that when a

plaintiff seeks more than nominal damages, the plaintiff must prove “reliance [and]

causation.”645 Plaintiffs made no effort to prove either. Plaintiffs therefore are only entitled

to nominal damages.

643
      JX-883.
644
      JX-593 at 30.
645
      Dohmen v. Goodman, 234 A.3d 1161, 1175 (Del. 2020).

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            In this context, nominal need not be minimal. In Weinberger,646 Chancellor Brown

was instructed on remand to award damages for a breach of fiduciary duty where the breach

turned on the failure to disclose the substance of the now famous Arledge-Chitea report.

Chancellor Brown did not believe the plaintiff class had suffered any compensatory

damages, leaving nominal damages as the only possible remedy. He chose to award

damages of $1 per share on a deal price of $21 per share, reflecting damages equal to 4.8%

of the deal price. He reasoned as follows:

                  The approval of the minority secured in the face of the
                  inadequate proxy information enabled [the acquirer] to get
                  what it wanted at the price it wanted to pay, and it seems
                  without question that achieving sole ownership of [the target]
                  has proven quite profitable to [the acquirer]. Under these
                  circumstances, I feel that the minority should be compensated
                  for the wrong done to them even though a damage figure
                  cannot be ascertained from a comparison of selected stock
                  values and hypotheticals with any degree of precision. Quite
                  simply, equity will not suffer a wrong without a remedy.647

This court has cited that ruling favorably.648

            Chancellor Brown derived the $1-per-share remedy by relying upon evidence that,

at the time of the merger, a per-share price of $22 rather than the $21 per share actual price

would have represented a beneficial deal for the acquirer.649 The acquirer’s expert also

646
      1985 WL 11546, at *9–10.
647
      Id.
648
   See, e.g., Oliver v. Boston Univ., 2006 WL 1064169, at *35 (Del. Ch. Apr. 14, 2006)
(“Nominal damages of $1.00 per share have been awarded in certain circumstances in
which a rational basis can be found in the record for the award.”) (citing Weinberger, 1985
WL 11546, at *10).
649
      Weinberger, 1985 WL 11546, at *10.

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conceded that $22 per share would “not have been out of line for the acquisition” and

opined that the information available at the time of the merger would have supported a fair

price range of $20–22.650 The award in Weinberger thereby approximated a fair division

of the merger surplus comparable to what could have been reached if the information had

been shared.

            Here, as in Weinberger, the Company’s stockholders were harmed by the inadequate

disclosures, which deprived them of a fair opportunity to vote down the Merger. As in

Weinberger, the precise extent of the harm cannot be established.651 It is clear, however,

that a $1 increase in the per share price would not have rendered the deal undesirable for

Vista, nor would it represent a windfall to the class. Based on a deal price of $36.50 per

share, an award of $1 per share reflects damages of 2.7%. In these circumstances, a $1-

per-share award of nominal damages is appropriate.652

                  3.     Stollmeyer And Vista Are Jointly And Severally Liable For The
                         Damages Award.

            “A defendant who aids and abets a breach of fiduciary duty is jointly and severally

liable for the damages resulting from the breach. Under this liability standard, ‘the injured

650
      Id.
651
      Id.
652
   This case is distinguishable from another circumstance where the Delaware Supreme
Court questioned the rationale behind a $1-per-share award. In Gaffin v. Teledyne, Inc.,
611 A.2d 467 (Del. 1992), this court had awarded $1 per share in damages based on
Weinberger without providing any accompanying evidentiary support. The Supreme Court
noted that nothing in the evidentiary record supported the trial court’s award. Because the
defendant failed to cross-appeal on that issue, however, the award remained intact. Id. at
476. By contrast, here there is ample evidence to support the $1-per-share award.

                                                116
person is entitled to recover his damages from [any] of the tortfeasors, without distinction,

subject to the limitation that his total recovery may not exceed the full amount of his

damage.’”653 This decision has already found that Stollmeyer breached his duty of loyalty

and duty of disclosure, and that Vista aided and abetted in Stollmeyer’s duty of disclosure

breach. As a result, Stollmeyer and Vista jointly and severally liable for the damages award

of $1 per share.

         Only Stollmeyer is liable for the damages award of $1 per share on the sale-process

claims. Plaintiffs, however, are not entitled to a double recovery. All that the class can

recover is $1 per share.

         D.     Interest And Costs

         “A successful plaintiff is entitled to interest on money damages as a matter of right

from the date liability accrues.”654 Under Delaware law, where neither party submits

evidence showing the appropriate rate of interest, the court typically awards 5% over the

Federal Reserve discount rate compounded quarterly. Such an award is appropriate here.

         Court of Chancery Rule 54(d) provides that costs “shall be allowed as of course to

the prevailing party unless the court otherwise directs.”655          Under Rule 54(d), the

653
   In re Rural Metro Corp. S’holders Litig., 102 A.3d 205, 221 (Del. Ch. 2014) (citations
omitted) (quoting Brown v. Comegys, 500 A.2d 611, 613 (Del. Super. 1985)); see also
Laventhol, Krekstein, Horwath & Horwath v. Tuckman, 372 A.2d 168, 170 (Del. 1976)
(“Persons who knowingly join a fiduciary in an enterprise which constitutes a breach of his
fiduciary duty of trust are jointly and severally liable for any injury which results.”) (citing
Jackson v. Smith, 254 U.S. 586 (1921)).
654
      Summa Corp. v. TransWorld Airlines, Inc., 540 A.2d 403, 409 (Del. 1988).
655
      Ct. Ch. R. 54(d).

                                              117
“prevailing” party is a party who successfully prevails on the merits of the main issue or

the party who prevailed on most of their claims.656 Since Plaintiffs have prevailed on their

claims against Stollmeyer and Vista in this action, they are entitled to their related costs.

III.     CONCLUSION

         Judgment will be entered in Plaintiffs’ favor and against Stollmeyer on Count I for

breach of fiduciary duty. Judgment will be entered in Plaintiffs’ favor and against Vista as

to Count II for aiding and abetting breaches of fiduciary duty. Defendants are jointly and

severally liable for $1 per share in damages, plus interest and costs consistent with this

opinion. The parties shall confer on a form of order implementing this decision.

         Plaintiffs’ petition for appraisal was litigated in parallel with their breach of

fiduciary duty claims. The Delaware Supreme Court has instructed that when a merger

gives rise to both a plenary action for breach of fiduciary duty and a statutory appraisal

proceeding, the court should rule on the plenary claims first, because a finding of liability

and the resultant remedy could moot the appraisal proceeding.657 “[R]egardless of the

Court’s substantive findings, the plaintiffs are limited to, and statutorily assured of, a single

recovery.”658 This decision therefore does not reach the appraisal claims. The parties shall

656
      Brandin v. Gottlieb, 2000 WL 1005954, at *27 (Del. Ch. July 13, 2000).
657
      Cede & Co. v. Technicolor, Inc., 542 A.2d 1182, 1189 (Del.1988).
658
      Bomarko, 794 A.2d at 1177.

                                              118
confer and inform the court whether further proceedings to address the appraisal claims are

necessary.659

659
    See Dole, 2015 WL 5052214, at *47 (“It may be that the parties can resolve these issues
in the first instance. Rather than burdening an overly long opinion with further analysis of
appraisal and its contingent relevance, the parties shall meet and confer about whether
further rulings are necessary.”).

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