Court Opinion

ID: 6328645
Source: CourtListenerOpinion
Date Created: 2022-03-31 16:01:59.048271+00
Date Added: 2024-06-11T09:22:43.173658
License: Public Domain

COURT OF CHANCERY
                                   OF THE
                             STATE OF DELAWARE

                                                                  417 S. State Street
JOSEPH R. SLIGHTS III                                           Dover, Delaware 19901
 VICE CHANCELLOR                                              Telephone: (302) 739-4397
                                                              Facsimile: (302) 739-6179

                           Date Submitted: March 28, 2022
                            Date Decided: March 31, 2022

    Lisa A. Schmidt, Esquire                      Daniel B. Rath, Esquire
    Matthew D. Perri, Esquire                     Rebecca L. Butcher, Esquire
    Richards, Layton & Finger, P.A.               Jennifer L. Cree, Esquire
    920 North King Street                         Landis Rath & Cobb LLP
    Wilmington, DE 19801                          919 Market Street, Suite 1800
                                                  Wilmington, DE 19801

         Re:    Level 4 Yoga, LLC v. CorePower Yoga, LLC, et al.
                C.A. No. 2020-0249-JRS

Dear Counsel:

         On March 1, 2022, the Court issued a post-trial Memorandum Opinion

(the “Opinion”) in which it determined that Defendants, CorePower Yoga, LLC and

CorePower Yoga Franchising, LLC (“CorePower”), breached an Asset Purchase

Agreement (“APA”) with Plaintiff, Level 4 Yoga, LLC, by failing to close on the

acquisition of Level 4’s assets as required by the APA.1 The Court awarded specific

performance and damages. CorePower has appealed the Opinion and now moves

1
    D.I. 202.
Level 4 Yoga, LLC v. CorePower Yoga, LLC, et al.
C.A. No. 2020-0249-JRS
March 31, 2022
Page 2

for a stay of the Court’s Final Order and Judgment pending appeal (the “Motion”).2

Level 4 opposes the Motion.3

         To decide whether a stay pending appeal is appropriate under Court of

Chancery Rule 62 and Supreme Court Rule 32, the Court must: (1) make a

preliminary assessment of the likelihood of success on the merits of the appeal;

(2) assess whether the petitioner will suffer irreparable injury if the stay is not

granted; (3) assess whether any other interested party will suffer substantial harm if

the stay is granted; and (4) determine whether the public interest will be harmed if

the stay is granted.4 When assessing the likelihood of success on appeal, the court

considers whether the appeal raises “a substantial question that is a fair ground for

litigation and . . . more deliberative investigation.”5 With that said, the first Kirpat

factor “cannot be interpreted literally or in a vacuum when analyzing a motion for

2
 See D.I. 203 (Motion for Stay Pending Appeal); D.I. 208 (Final Order and Judgment);
D.I. 212 (Notice of Appeal).
3
    D.I. 209.
4
    Kirpat, Inc. v. Del. Alcoholic Beverage Control Comm’n, 741 A.2d 356, 357 (Del. 1998).
5
    Id. at 358.
Level 4 Yoga, LLC v. CorePower Yoga, LLC, et al.
C.A. No. 2020-0249-JRS
March 31, 2022
Page 3

stay pending appeal.”6 This is because a “literal reading of the ‘likelihood of success

on appeal’ standard ‘would lead most probably to consistent denials of stay motions,

despite the immediate threat of substantial irreparable injury to the movant,’ because

the trial court would be required first to confess error in its ruling before it could

issue a stay.”7 “[A] more reasonable approach to this issue is to balance all of the

equities involved in the case together.”8 If “the other three factors strongly favor

interim relief, then a court may exercise its discretion to reach an equitable resolution

by granting a stay. . . .”9

          As for the preliminary assessment of the merits of the appeal, I note that the

lion’s share of the Court’s post-trial findings were factual, not legal, and thus are

entitled to more deferential review on appeal.10 Nevertheless, the Court did engage

in the construction of certain provisions of the APA, the results of which are subject

6
    Id.
7
    Id.
8
    Id.
9
    Id.
10
     Hudak v. Procek, 806 A.2d 140, 153 (Del. 2002).
Level 4 Yoga, LLC v. CorePower Yoga, LLC, et al.
C.A. No. 2020-0249-JRS
March 31, 2022
Page 4

to de novo appellate review.11 For this reason, I am satisfied that the appeal presents

a “fair ground” for further review.12

         More importantly, I am satisfied that CorePower is at risk of suffering

irreparable harm if the Motion is not granted. The Court’s decree of specific

performance requires that CorePower forthwith pay for and then receive thirty-four

(34) yoga studios from Level 4. This includes assuming the property leases where

the studios operate, contracts with vendors supporting the studios and contracts or

other arrangements with employees working at the studios. In the event the appeal

is successful, CorePower would have assumed these obligations when it was not

legally obliged to do so. Yet it will be difficult, if not impossible, to unwind those

obligations or to determine an amount of damages that would adequately

compensate CorePower for having to accept (and integrate) assets and liabilities it

was not legally obligated to take on in the first place.

11
     Grand Ventures, Inc. v. Whaley, 632 A.2d 63, 66 (Del. 1993).
12
     Kirpat, 741 A.2d at 358.
Level 4 Yoga, LLC v. CorePower Yoga, LLC, et al.
C.A. No. 2020-0249-JRS
March 31, 2022
Page 5

         On the other hand, no other party will suffer substantial harm if the stay is

granted, assuming the Court adheres to the constitutional directive that the Court

require the appellant to “give sufficient security.”13 The Court already has awarded

Level 4 damages caused by CorePower’s refusal to close, as well as pre- and post-

judgment interest. Because “sufficient security” “shall ordinarily equal such sum of

money [as awarded in the judgment to be stayed] and all costs and damages,

including damages for delay,”14 the Court may address the harm to Level 4 caused

by the continuation of its role as steward of CorePower’s assets during the pendency

of the appeal by directing that the supersedeas bond include amounts that will

compensate Level 4 for these additional delay damages.15 I address the amount of

the bond below.

13
   Del. Const. art. IV, § 24. See also Supr. Ct. R 32(c) (restating the constitutional
requirement that “sufficient security” be posted when the court grants a stay of execution
of a judgment pending appeal); Wiland v. Wiland, 549 A.2d 306, 308 (Del. 1998) (holding
that the appellant most post sufficient security to justify a stay of execution of a judgment
entered against it).
14
     Supr. Ct. R 32(c)(ii) (emphasis added).
15
   CorePower has asked that any security take the form of a cash escrow. Because the
parties are unlikely to agree on the parameters of any such escrow, as evidenced by their
failure to agree on such parameters thus far, I am satisfied that the more prudent approach
Level 4 Yoga, LLC v. CorePower Yoga, LLC, et al.
C.A. No. 2020-0249-JRS
March 31, 2022
Page 6

         The final Kirpat factor–– whether the public interest will be harmed if the stay

is granted––is not implicated here. This case involves a “dispute between private

parties” that does not “invoke significant public policy interests.” 16

         As for the amount of the supersedeas bond, Level 4 has presented credible,

and essentially unrebutted, evidence that its projected post-judgment delay damages

during the pendency of the appeal will amount to $4,852,585. These damages were

calculated by Level 4’s damages expert, Jeffrey Mordaunt, whom the Court found

to be credible, utilizing a damages methodology that the Court has also found to be

credible.17 Those damages, coupled with the amount of the judgment, interest and

costs, total $40,459,398. CorePower shall post a conforming supersedeas bond in

that amount payable to Level 4. Upon posting of the bond, and approval of the

to assure sufficient security is to require CorePower to post a supersedeas bond in the form
prescribed in Official Form J of the Supreme Court Rules. See Supr. Ct. R 32(c)(iii).
16
  Stream TV Networks, Inc. v. SeeCubic, Inc., 2021 WL 5816820, at *5 (Del. Ch. Dec. 8,
2021).
17
     D.I. 209 (Exs. A & B).
Level 4 Yoga, LLC v. CorePower Yoga, LLC, et al.
C.A. No. 2020-0249-JRS
March 31, 2022
Page 7

Court, execution upon the Court’s Final Order and Judgment shall be stayed pending

appeal.18

         Finally, I note that Level 4 has requested that the Court revisit whether to

address the length of the non-compete obligation imposed by the APA as a condition

to granting the Motion. Supreme Court Rule 32(a) authorizes the trial court to

“impose such terms and conditions [with respect to the stay] as may appear

appropriate in the circumstances.”19 The APA requires designated Level 4 principals

to refrain from defined competitive activity for two years from the date of certain

transaction Closings, as defined in the contract.20 Because all Closings prescribed

in the APA will be further delayed by the appeal, Level 4 requests that the stay be

conditioned upon the non-compete running from the date of the Closings, as

contemplated by the APA. The Court declined to address this issue in its Final Order

18
   “Affirmance of [the] judgment on appeal fixes the liability of the surety on the
supersedeas bond.” Levien v. Sinclair Oil Corp., 1975 WL 1952, at *5 (Del. Ch. 1975).
19
     Supr. Ct. R 32(a).
20
     JX 149 (APA § 5.6.1).
Level 4 Yoga, LLC v. CorePower Yoga, LLC, et al.
C.A. No. 2020-0249-JRS
March 31, 2022
Page 8

and Judgment because the issue had not been properly joined for decision. 21 To

avoid “substantial harm” to Level 4, however, it is appropriate to address the

“Restrictive Period,” as defined by the APA, at least to some extent, by conditioning

the stay upon a declaration that the Restrictive Period began to run no later than the

date of the Court’s verdict—March 1, 2022.22

         In summary, the Motion is GRANTED. As a condition of the stay pending

appeal, CorePower shall post a conforming supersedeas bond payable to Level 4 in

the amount of $40,459,398. As a further condition of the stay pending appeal, the

Court declares that the Restrictive Period in the APA began to run no later than the

date of the Court’s verdict.

         IT IS SO ORDERED.

                                           Very truly yours,

                                           /s/ Joseph R. Slights III

21
     D.I. 208 (Final Order and Judgment ¶ 1 b.).
22
  This does not preclude an argument by Level 4 that the Restrictive Period began to run
as of the Closings CorePower refused to attend. That argument may be advanced, if
needed, should CorePower attempt to enforce the APA’s non-compete following an
unsuccessful appeal.