Court Opinion

ID: 4924501
Source: CourtListenerOpinion
Date Created: 2021-09-22 21:05:42.495758+00
Date Added: 2024-06-11T08:14:14.556321
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

                                      )
GMF ELCM FUND L.P., GMF ELCM          )
LLC, GMF ELCM REGENCY I LLC,          )
and GMF ELCM REGENCY II LLC,          )
                                      )
               Plaintiffs,            )
                                      )
     v.                               ) C.A. No. 2018-0840-SG
                                      )
ELCM HCRE GP LLC, ELCM                )
SPONSOR I HOLDCO LLC, ELCM            )
PARTNERS, LLC, ELCM ASSET             )
MANAGER HOLDCO LLC, and               )
ANDREW WHITE,                         )
                                      )
               Defendants,            )
                                      )
      and                             )
                                      )
 EAST LAKE CAPITAL                    )
 MANAGEMENT LLC, ELCM                 )
 HEALTHCARE REAL ESTATE FUND          )
 LP, ELCM SPONSOR I LLC, and GMF      )
 RSL BUYER LLC,                       )
                Nominal Defendants.

                     MEMORANDUM OPINION

                     Date Submitted: June 3, 2021
                   Date Decided: September 22, 2021

Daniel E. Ross and Bradley R. Aronstam, of ROSS ARONSTAM & MORITZ,
Wilmington, Delaware; OF COUNSEL: Joshua S. Amsel and Matthew R.
Friedenberg, of WEIL, GOTSHAL & MANGES LLP, New York, New York,
Attorneys for Plaintiffs.
Joseph H. Huston, Jr., of STEVENS & LEE, P.C., Wilmington, Delaware; OF
COUNSEL: Robert K. Keach, BERNSTEIN, SHUR, SAWYER & NELSON,
Portland, Maine, Attorneys for Receiver.

Andrew White, pro se.

Benjamin M. Lord, pro se.

Ryan P. Newell of YOUNG CONAWAY STARGATT & TAYLOR, LLP,
Wilmington, Delaware, Attorneys for Nominal Defendants.

GLASSCOCK, Vice Chancellor
       This is the latest installment in this long-running litigation, which involves a

blizzard of entities created by Andrew White, one of the Defendants, from which to

conduct his business. That business, generally, involved the acquisition of nursing

homes and the operation of those nursing homes. The business failed, in a way that,

in a previous opinion, I described as “curious and insidious.”1 The Plaintiffs are

entity investors in one of Mr. White’s businesses, ELCM Healthcare Real Estate

Fund LP (“HCRE”). Eventually, I found the intentions of the parties in the operation

of that entity were frustrated, and I ordered its dissolution.2

       This Memorandum Opinion resolves several outstanding issues in the matter.

Benjamin M. Lord (the “Claimant”) timely submitted a proof of claim and a brief in

support of that claim (the “Initial Brief”) to counsel for Mark F. Stickney, as the

permanent receiver and liquidating trustee (the “Liquidating Trustee”) of HCRE, on

July 9, 2020.3 On February 17, 2020, the Liquidating Trustee filed an objection (the

“Trustee’s Objection”) to the proof of claim. 4 In response, the Claimant has (1) filed

a cross-motion to allow his claim (“Claimant’s Cross-Motion”); 5 (2) moved to

1
  GMF ELCM Fund L.P. v. ELCM HCRE GP LLC, 2019 WL 3713844, at *1 (Del. Ch., August 7,
2019).
2
  Id.
3
  The Initial Brief is included as Exhibit A to the Claimant’s Cross-Motion Brief, defined below.
See generally Claimant’s Cross-Motion Brief, Ex. A, Dkt. No. 386 [hereinafter “Initial Brief”].
4
  Objection to Claim, Dkt. No. 380 [hereinafter “Trustee’s Objection”].
5
  Cross-Mot. to Allow, Dkt. No. 386 [hereinafter “Claimant’s Cross-Motion”]; Br. in Support of
Cross-Mot. to Allow, Dkt. No. 386 [hereinafter “Claimant’s Cross-Motion Brief”].
intervene as a party in this action; 6 and (3) objected to the Liquidating Trustee’s

allowance of a claim by Plaintiff GMF ELCM Fund L.P. (“Claimant’s Objection”).7

In his various submissions, the Claimant seeks indemnification from HCRE and four

of its affiliates for fees and expenses incurred as part of his defense in a New Jersey

state court lawsuit captioned ELCM HCRE Acquisition V LLC v. The Woodlands at

Hayes Mill, et al., v. Andrew White and Benjamin Lord, NJ Sup. Ct., CAM C

000043-18 (the “New Jersey Litigation”) and his fees and expenses incurred in

bringing the present claim for indemnification. 8

       This Memorandum Opinion concludes that the Claimant is entitled to

indemnification for his fees and expenses incurred in the New Jersey Litigation, as

well as his fees and expenses incurred in bringing the present indemnification claim,

and that he is entitled to intervene in this action. The parties should inform me

whether further briefing or oral argument regarding the Claimant’s Objection to

GMF ELCM Fund L.P.’s claim is appropriate in light of this opinion.

6
  Mot. to Intervene, Dkt. No. 389 [hereinafter “Motion to Intervene”].
7
  Limited Objection to Allowance of Claim, Dkt. No. 395 [hereinafter “Claimant’s Objection”].
8
  See generally Initial Brief, Claimant’s Cross-Motion Brief, Motion to Intervene, Claimant’s
Objection.

                                             2
                                      I. BACKGROUND 9

       A. Relevant Parties and Non-Parties

       Nominal Defendant East Lake Capital Management (“ELCM”) is a Delaware

limited liability company. 10 ELCM sits at the top of the organizational chart of “East

Lake”-associated entities involved in this case.11

       Nominal Defendant HCRE is a Delaware limited partnership 12 in the process

of dissolution.13 ELCM is the indirect majority owner of HCRE’s manager and

HCRE’s general partner, which has “full control over the business, assets, conduct

and affairs of [HCRE].” 14 ELCM also holds indirect ownership interests in HCRE.15

       ELCM HCRE HoldCo LLC (“HoldCo”) is a Delaware limited liability

company that is wholly owned by HCRE. 16

       ELCM HCRE Operating Entity I LLC (“Operating Entity”) is a Delaware

limited liability company that is wholly owned by HoldCo.17

9
  I draw these limited facts from the parties’ papers and exhibits submitted in connection with the
motions at issue. A fuller recitation describing the parties, the facts of the case, and its procedural
history can be found in GMF, 2019 WL 3713844, at *1–11.
10
   I have previously described the entity structure in this case as a “complicated jumble.” See id.
at *2.
11
   See id.
12
   Trustee’s Objection, Ex. A-3, No. 4 [hereinafter “HCRE Partnership Agreement”].
13
   See GMF, 2019 WL 3713844, at *12–13.
14
   HCRE Partnership Agreement § 6.1(a); Claimant’s Cross-Motion Brief ¶¶ 2, 62.
15
   See Dkt. 205, Ex. 1.
16
   Trustee’s Objection, Ex. A-3, No. 5 at 1 [hereinafter “HoldCo LLC Agreement”]; Dkt. 205,
Ex. 1.
17
   Trustee’s Objection, Ex. A-3, No. 6 at 1 [hereinafter “Operating Entity LLC Agreement”]; Dkt.
205, Ex. 1.

                                                  3
       ELCM PropCo I LLC (“PropCo”) is a Delaware limited liability company that

is wholly owned by Operating Entity.18

       ELCM TRS I LLC (“TRS”) is a Delaware limited liability company that is

wholly owned by Operating Entity.19

       HoldCo, Operating Entity, PropCo, and TRS are collectively referred to as the

“LLC Subsidiaries.”

       Plaintiff GMF ELCM Fund L.P. (“GMF”) is a Delaware limited partnership

and a limited partner of HCRE.20

       Defendant Andrew White is the indirect majority owner of ELCM,21 as well

as the manager for each of the LLC Subsidiaries.22

       The Claimant is a former employee of ELCM and/or its wholly owned

subsidiary, East Lake Capital Management Employer I LLC.23 The Claimant was

employed as an analyst from September 26, 2016 until early 2018, and as a vice

president from early 2018 until February 25, 2019, when his employment

terminated.24

18
   Trustee’s Objection, Ex. A-3, No. 7 at 1 [hereinafter “PropCo LLC Agreement”]; Dkt. 205,
Ex. 1.
19
   Trustee’s Objection, Ex. A-3, No. 8 at 1 [hereinafter “TRS LLC Agreement”]; Dkt. 205, Ex. 1.
20
   GMF, 2019 WL 3713844, at *1.
21
   Dkt. 205, Ex. 1.
22
    HoldCo LLC Agreement ¶ 5(b); Operating LLC Agreement ¶ 5(b); PropCo LLC
Agreement ¶ 5(b); TRS LLC Agreement ¶ 5(b) (together, the “LLC Agreements”).
23
   Claimant’s Cross-Motion Brief ¶ 6.
24
   Initial Brief at 3.

                                              4
       B. The New Jersey Litigation

       In November 2018, the defendants in a New Jersey action filed a third-party

complaint against the Claimant and Mr. White (the “New Jersey Complaint”). 25 The

New Jersey Complaint brought claims against the Claimant and Mr. White for

fraudulent misrepresentation and violations of the New Jersey Racketeering Act in

connection with the failed purchase of an assisted living facility by a wholly owned

subsidiary of PropCo, ELCM HCRE Acquisition V LLC (“ELCM V”).26                            In

particular, the New Jersey Complaint alleged that the Claimant and Mr. White

fraudulently induced facility owners to enter into contracts to sell their facilities with

no intent to honor the contracts. 27

       On July 2, 2019, the claims against the Claimant were dismissed without

prejudice.28 Although the Claimant is pro se in this proceeding, he retained counsel

at Allman, Kelly & Willner, LLC in connection with the New Jersey Litigation and

incurred $88,922.90 in attorneys’ fees and expenses, as well as $2,001.43 in personal

travel expenses.29

       The Claimant also incurred $10,620.00 in attorneys’ fees and expenses from

Allman, Kelly & Willner, LLC in connection with his claim for indemnification.30

25
   See Trustee’s Objection, Exhibit A-3, No. 1 [hereinafter the “New Jersey Complaint”].
26
   See id. ¶¶ 1, 65–76, 77–103.
27
   See id. ¶ 1.
28
   See Trustee’s Objection, Exhibit A-3, No. 2.
29
   See Trustee’s Objection, Exhibit A-3, Nos. 12–13, 15.
30
   See Trustee’s Objection, Exhibit A-3, Nos. 12–13.

                                               5
Shortly after the New Jersey Litigation was dismissed, the Claimant engaged another

law firm, Wick Phillips Gould & Martin LLP, to pursue indemnification, for which

he incurred $4,209.50 in attorneys’ fees. 31 After I ordered the dissolution of HCRE,

the Claimant decided to represent himself pro se with respect to his indemnification

claim. 32 The Claimant has incurred $11,737.69 in expenses in connection with his

pro se representation.33

       C. Procedural History

       In 2018, the Plaintiffs brought the above-captioned action against HCRE,

Mr. White and certain of his affiliated business entities, as well as a Motion to

Appoint a Receiver Pendente Lite (the “Receiver Motion”). 34 By order of August 7,

2019, I mandated the dissolution of HCRE and appointed an independent liquidating

trustee for the reasons contained in my Memorandum Opinion of that same date. 35

       Mark F. Stickney was appointed Liquidating Trustee and receiver for HCRE

by my Third Amended Order Appointing Receiver Pendente Lite dated September 6,

2019, replacing the Second Interim Receiver. 36 On June 10, 2020, I granted the

Liquidating Trustee’s Motion for Entry of an Order Establishing a Deadline for

Filing Proofs of Claim and Procedures Relating Thereto and entered the Liquidating

31
   See Trustee’s Objection, Exhibit A-3, Nos. 12, 14.
32
   See Claimant’s Cross-Motion Brief.
33
   See Trustee’s Objection, Exhibit A-3, Nos. 12, 16–17.
34
   GMF, 2019 WL 3713844, at *4.
35
   See generally id.
36
   Third Am. Order Appointing Receiver Pendente Lite, Dkt. No. 246.

                                             6
Trustee’s proposed order (the “Claims Procedure Order”). 37 Pursuant to the Claims

Procedure Order, creditors and members, general partners and/or limited partners of

HCRE or any Downstream Affiliated Entity (defined in the Claims Procedure Order

to include the LLC Subsidiaries) had until July 30, 2020 to file a proof of claim with

the Liquidating Trustee. 38

       The Claimant timely submitted his proof of claim on July 9, 2020. 39 His claim

seeks indemnification from HCRE and the LLC Subsidiaries for fees and expenses

incurred as part of the Claimant’s defense in the New Jersey Litigation and his fees

incurred in bringing the present claim for indemnification. 40

       The Claimant’s purported right to indemnification stems from HCRE’s

limited partnership agreement (“HCRE Partnership Agreement”) and the limited

liability company agreements or, where applicable, the amended and restated limited

liability company agreements (the “LLC Agreements”) for each of the LLC

Subsidiaries. 41

       The HCRE Partnership Agreement includes the following indemnification

provision, in relevant part:

37
   Order re Liquidating Trustee’s Mot. for Entry of an Order Establishing a Deadline for Filing
Proofs of Claim and Procedures Relating Thereto and Approving Form and Manner of Notice
Thereof at 1–2, Dkt. No. 353 [hereinafter “Claims Procedure Order”].
38
   Claims Procedure Order ¶ 3(a).
39
   See generally Initial Brief.
40
   See generally Initial Brief; Claimant’s Cross-Motion Brief.
41
   See generally Initial Brief.

                                              7
                To the maximum extent not prohibited by applicable law,
                the Partnership shall indemnify each of (i) the General
                Partner, (ii) the Management Company, (iii) unless
                otherwise determined by the General Partner in its sole
                discretion, each of their respective owners, members,
                managers, shareholders, partners, directors, officers,
                employees, agents, advisors, assigns, representatives and
                affiliates (and their respective owners, members,
                managers, shareholders, partners, directors, officers,
                employees, agents, advisors, assigns, representatives and
                affiliates) . . . against any claims, losses, liabilities,
                damages, costs or expenses (including attorney fees,
                judgments and expenses in connection therewith and
                amounts paid in defense and settlement thereof) to which
                any of such Persons may directly or indirectly become
                subject in connection with the Partnership, any Parallel
                Fund, any Feeder Vehicle, any REIT Subsidiary or any
                Alternative Investment Vehicle or in connection with any
                involvement with a Portfolio Investment or a portfolio
                investment of any Alternative Investment Vehicle . . . . 42
         The LLC Agreements contain the following indemnification provision, which

is identical in each: 43

                The Covered Persons shall be indemnified by the
                Company, to the fullest extent permitted by law, against
                all expenses and liabilities (including judgments, fines,
                penalties, interest, amounts paid in settlement with the
                approval of the Company and counsel fees and
                disbursements on a solicitor and client basis) arising from
                the performance of any of their duties or obligations in
                connection with their service to the Company or this
                Agreement, or any investment made by or on behalf of, or
                held by or on behalf of, the Company or its affiliates,
                including in connection with any civil, criminal,
                administrative, investigative or other action, suit or
                proceeding to which any such Covered Person may

42
     HCRE Partnership Agreement § 6.9.
43
     LLC Agreements § 13(a).

                                            8
                    hereafter be made party by reason of being or having been
                    a Covered Person except to the extent that the respective
                    acts or omissions of a Covered Person are finally
                    determined by a court of competent jurisdiction to
                    constitute fraud, willful misconduct or gross negligence.44
          The following four definitions are relevant to the indemnification provisions

in the LLC Agreements:

                    “Covered Person” shall mean the Member, any Manager
                    or any officer of the Company, and any Affiliate of any of
                    the foregoing.
                    “Affiliate” shall mean, with respect to any Person, any
                    other Person directly or indirectly Controlling or
                    Controlled by or under direct or indirect common Control
                    with such Person or any Person who has a familial
                    relationship, by blood, marriage or otherwise with such
                    Person or any Affiliate of such Person.
                    “Control” shall mean the possession, directly or indirectly,
                    of the power to direct or cause the direction of the
                    management or policies of a Person, whether through the
                    ownership of voting securities or general partnership or
                    managing member interests, by contract or otherwise.
                    “Controlling” and “Controlled” shall have correlative
                    meanings.     Without limiting the generality of the
                    foregoing, a Person shall be deemed to Control any other
                    Person in which it owns, directly or indirectly, a majority
                    of the ownership interests.
                    “Person” shall mean any natural person, corporation,
                    limited liability company, general partnership, limited
                    partnership, proprietorship, other business organization,
                    trust, union, association or governmental or regulatory
                    authority, or other entity. 45

44
     Id. § 13(a).
45
     Id. § 13(i).

                                                 9
       In response to the Claimant’s claim and Initial Brief, the Liquidating Trustee

filed the Trustee’s Objection on February 17, 2021. 46 The Claimant thereafter filed

a cross-motion seeking to allow his claim and opposing the Trustee’s Objection on

March 4, 2021.47

       A few weeks after the Claimant filed his cross-motion, on March 29, 2021,

counsel for the Liquidating Trustee informed the Claimant by email that, in the event

this Court allowed his claim, HCRE would only be able to pay out three percent of

it because HCRE was purportedly insolvent.48 The following day, on March 30,

2021, counsel for the Liquidating Trustee elaborated to the Claimant via email that

the Liquidating Trustee intended to treat GMF’s $22.2 million claim as a general

unsecured claim, rather than an equity interest, which would therefore diminish the

payout of the Claimant’s claim. 49

       Following this discovery, on April 5, 2021, the Claimant filed the Motion to

Intervene in this action along with a proposed complaint (i) bringing a derivative

breach of fiduciary duty claim against the Liquidating Trustee, and (ii) seeking an

order declaring that GMF’s claim is an equity interest, not a general unsecured

claim. 50 On May 17, 2021, the Claimant filed an objection to the allowance of

46
   See Trustee’s Objection.
47
   See Claimant’s Cross-Motion Brief.
48
   See Motion to Intervene § II; Motion to Intervene, Ex. A, Nos. 7–9.
49
   Motion to Intervene, Ex. A, No. 9.
50
   See generally Motion to Intervene; Motion to Intervene, Ex. A.

                                               10
GMF’s $22.2 million claim.51 The Liquidating Trustee filed a response to the

Motion to Intervene and the Claimant’s Objection on May 27, 2021, 52 and the

Claimant filed a reply brief on May 28, 2021. 53

       I heard oral argument on the Claimant’s indemnification claim on June 1,

2021. The Claimant subsequently filed a short letter pertaining to the oral argument

on June 3, 2021,54 and I considered the matter fully submitted as of that date.

                                        II. ANALYSIS

       A. Legal Standards

               1. Indemnification

       Partnership agreements and limited liability agreements are contracts subject

to the general principles of contract interpretation.55 Delaware employs the objective

theory of contract interpretation.56 “Under the objective theory of contracts, ‘a

contract’s construction should be that which would be understood by an objective,

51
   See generally Claimant’s Objection.
52
   Liquidating Trustee’s Resp. to Benjamin Lord’s Limited Obj. to the Allowance of GMF ELCM
Fund LP’s Am. Claim, Dkt. No. 397.
53
   Benjamin Lord’s Reply in Supp. of His Limited Obj. to the Allowance of GMF ELCM Fund
LP’s Am. Claim, Dkt. No. 400.
54
   Dkt. No. 402.
55
   In re Nantucket Island Assocs. Ltd. P’ship Unitholders Litig., 810 A.2d 351, 361 (Del. Ch. 2002)
(“Like other contracts, limited partnership agreements are to be construed in accordance with their
literal terms.”); Mickman v. Am. Int’l Processing, L.L.C., 2009 WL 2244608, at *2 (Del. Ch. July
28, 2009) (“LLC agreements are creatures of contract, which should be construed like other
contracts.”).
56
   Tektree, LLC v. Borla Performance Indus., Inc., 2013 WL 5230705, at *3 (Del. Com. Pl. Sept.
16, 2013).

                                                11
reasonable third party.’” 57 In practice, the objective theory of contracts requires the

court to effectuate the parties’ intent, 58 which, absent ambiguity, “must be

ascertained from the language of the contract.”59

       Both the Delaware Revised Uniform Limited Partnership Act (“DRULPA”)

and the Delaware Limited Liability Company Act (the “LLC Act”) provide parties

with broad “flexibility to craft an agreement that is tailored to their needs,”60

including by crafting their own indemnification scheme.61 This Court typically

construes contractual indemnification provisions in partnership and LLC agreements

broadly in favor of indemnification.62

57
   Id.
58
   Zimmerman v. Crothall, 62 A.3d 676, 690 (Del. Ch. 2013).
59
   Comet Sys., Inc. S’holders’ Agent v. MIVA, Inc., 980 A.2d 1024, 1030 (Del. Ch. 2008) (quoting
In re IAC/InterActive Corp., 948 A.2d 471, 494 (Del. Ch. 2008)).
60
   Crothall, 62 A.3d at 691; Elf Atochem N. Am., Inc. v. Jaffari, 727 A.2d 286, 290 (Del. 1999)
(“The [LLC] Act can be characterized as a ‘flexible statute’ because it generally permits members
to engage in private ordering with substantial freedom of contract to govern their relationship,
provided they do not contravene any mandatory provisions of the Act.”); Gotham Partners, L.P.
v. Hallwood Realty Partners, L.P., 817 A.2d 160, 170 (Del. 2002) (“DRULPA embodies ‘the
policy of freedom of contract’ and ‘maximum flexibility.’ DRULPA’s ‘basic approach is to permit
partners to have the broadest possible discretion in drafting their partnership agreements and to
furnish answers only in situations where the partners have not expressly made provisions in their
partnership agreement’ or ‘where the agreement is inconsistent with mandatory statutory
provisions.’”) (quoting Elf, 727 A.2d at 291, 291 n.27).
61
   See Stockman v. Heartland Indus. Partners, L.P., 2009 WL 2096213, at *8 (Del. Ch. July 14,
2009) (“DRULPA gives limited partnerships wider freedom of contract to craft their own
indemnification scheme for a partnership’s indemnitees than is available to corporations under
§ 145 of the DGCL . . . .”).
62
   Delphi Easter Partners Ltd. P’ship v. Spectacular Partners, Inc., 1993 WL 328079, at *2 (Del.
Ch. Aug. 6, 1993) (“[C]ourts should interpret language so as to achieve where possible the
beneficial purposes that indemnification can afford.”); Stockman, 2009 WL 2096213, at *18
(“[A]ny ambiguity regarding whether Heartland owes indemnification rights should be resolved
against it, and in favor of the Indemnitees seeking indemnification”); Int’l Rail Partners LLC v.
Am. Rail Partners, LLC, 2020 WL 6882105, at *7 (Del. Ch. Nov. 24, 2020) (“Unlike typical

                                               12
              2. Intervention

       Delaware Court of Chancery Rule 24(a)(2) provides for intervention in an

action as of right, upon a timely application, “when the applicant claims an interest

relating to the property . . . which is the subject of the action and . . . the disposition

of the action may . . . impede the applicant’s ability to protect that interest, unless

the applicant’s interest is adequately represented by existing parties.”63

       B. The Claimant Is Entitled to Indemnification Under the LLC Agreements

       The Liquidating Trustee makes four arguments in support of his position that

the Claimant is not entitled to indemnification under the LLC Agreements.

       First, the Liquidating Trustee argues that the Claimant is not a “Covered

Person” as defined by the LLC Agreements. 64 Second, the Liquidating Trustee

argues that the New Jersey Litigation did not “arise as a result of [the Claimant’s]

service to the [LLC Subsidiaries] or any of their physical assets,” as purportedly

required by the LLC Agreements.65 Third, the Liquidating Trustee contends that the

Claimant is disqualified from indemnification because his conduct underlying the

New Jersey Litigation allegedly involved “fraud, willful misconduct, and gross

commercial contracts, indemnification and advancement provisions in LLC agreements are
derived from clear statutory authority and apply much more broadly.”).
63
   Del. Ct. Ch. R. 24(a)(2).
64
   Trustee’s Objection ¶¶ 38–40.
65
   Id. ¶ 41.

                                            13
negligence.” 66   Finally, the Liquidating Trustee contends that “the Claimant’s

damages are overstated and cannot be substantiated.”67

       As explained below, I am unpersuaded by each of these arguments.

              1. The Claimant Is a “Covered Person”

       The LLC Agreements provide indemnification rights only to “Covered

Person[s].”68 Covered Person is defined to mean “the Member, any Manager or any

officer of the Company, and any Affiliate of any of the foregoing.” 69

       The Trustee argues that the Claimant is not a Covered Person, because

although he was employed as a vice president of ELCM, he was never employed as

an officer of any of the LLC Subsidiaries.70 The Claimant does not dispute that he

served as a vice president of ELCM, not the LLC Subsidiaries, but he contends that

officers of ELCM qualify as “Affiliate[s]” within the definition of Covered Person.71

       The LLC Agreements define Affiliate to include, “with respect to any Person,

any other Person . . . under direct or indirect common Control with such

Person . . . .” 72 Accordingly, the Claimant qualifies as an Affiliate, and therefore a

66
   Id.
67
   Id. ¶ 16(e).
68
   LLC Agreements § 13(a).
69
   Id. § 13(i).
70
   Trustee’s Objection ¶¶ 38–41.
71
   Claimant’s Cross-Motion Brief § VII.A.
72
   LLC Agreements § 13(i).

                                            14
Covered Person, if he is “under direct or indirect common Control with” the

Member, any Manager, or any officer of the LLC Subsidiaries. 73

       The Claimant argues that he is an Affiliate because he is “under direct or

indirect common Control” with HCRE, the Member for each of the LLC

Subsidiaries. 74 Specifically, the Claimant argues that HCRE is controlled by ELCM

because ELCM is the “indirect majority owner of” HCRE’s general partner and

manager.75 The Claimant further argues that he, too, is controlled by ELCM by

virtue of his employment with ELCM, meaning that he and HCRE are both under

the common control of ELCM. 76

       Control is defined by the LLC Agreements as follows:

              “Control” shall mean the possession, directly or indirectly,
              of the power to direct or cause the direction of the
              management or policies of a Person, whether through the
              ownership of voting securities or general partnership or
              managing member interests, by contract or otherwise.
              “Controlling” and “Controlled” shall have correlative
              meanings.     Without limiting the generality of the
              foregoing, a Person shall be deemed to Control any other
              Person in which it owns, directly or indirectly, a majority
              of the ownership interests.77
       The Claimant is correct that, under this definition of control, ELCM controls

both HCRE and the Claimant. As Vice Chancellor Laster explained in PWP Xerion

73
   Id. § 13(i).
74
   Claimant’s Cross-Motion Brief § VII.A.
75
   Id. § VII.A.
76
   Id. § VII.A.
77
   LLC Agreements § 13(i).

                                            15
Holdings III LLC v. Red Leaf Resources, Inc., 2019 WL 5424778, at *9 (Del. Ch.

Oct. 23, 2019), in a discussion concerning the nearly identical definition of control

under the Delaware General Corporation Law (“DGCL”), 78 “an officer or employee

of an entity is affiliated with that entity . . . because he is under the control of and

accountable to the governing body of the entity he serves. An employee is similarly

under the control of and accountable to the entity that employs him.” 79 The

Claimant, who served as both an analyst and a vice president of ELCM,80 was

therefore under the control of ELCM. HCRE is likewise controlled by ELCM

because ELCM owns majority interests in HCRE’s manager and HCRE’s general

partner, which is vested with “full control over the business, assets, conduct and

affairs of [HCRE].” 81

       Accordingly, because the Claimant is “under direct or indirect common

Control” with HCRE, the Member for each of the LLC Subsidiaries, he qualifies as

an Affiliate of the LLC Subsidiaries’ Members and is thus a Covered Person.

78
   Under the DGCL, “‘Control,’ including the terms ‘controlling,’ ‘controlled by’ and ‘under
common control with,’ means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a person, whether through the ownership of voting
stock, by contract or otherwise. . . .” 8 Del. C. § 203(c)(4).
79
   PWP Xerion, 2019 WL 5424778, at *9 (citations omitted).
80
   Claimant’s Cross-Motion Brief ¶ 6.
81
   HCRE Partnership Agreement § 6.1(a).

                                                16
                2. The New Jersey Litigation Is Indemnifiable

        The LLC Agreements provide for the indemnification of a Covered Person

only for expenses and liabilities “arising from the performance of any of their duties

or obligations in connection with their service to the Company or this Agreement,

or any investment made by or on behalf of, or held by or on behalf of, the Company

or its Affiliates . . . .” 82

        The Liquidating Trustee reads this language to mean that the New Jersey

Litigation must have arisen “as a result of [the Claimant’s] service to the [LLC

Subsidiaries] or any of their physical assets.” 83 The Liquidating Trustee argues that

the New Jersey Litigation does not meet this criterion because the subject of the

litigation was ELCM V, not any of the LLC Subsidiaries, and also because ELCM V

failed to acquire the facility at issue.84 To hold otherwise, says the Liquidating

Trustee, would “ignore the corporate forms established to govern the intercompany

operations between and among the various ELCM entities.” 85

        I am unpersuaded by the Liquidating Trustee’s arguments.                  The

indemnification provisions do not apply narrowly to just the LLC Subsidiaries or

their “physical assets,” as the Liquidating Trustee contends. Rather, the Claimant’s

82
   LLC Agreements § 13(a).
83
   Trustee’s Objection ¶ 41.
84
   Id.
85
   Id.

                                          17
indemnification right applies to expenses and liabilities arising from, among other

things, “any investment made by or on behalf of, or held by or on behalf of, the

Company or its Affiliates . . . .” 86 The subject of the New Jersey Litigation was the

unconsummated acquisition of certain facilities by ELCM V. 87 ELCM V was a

wholly owned subsidiary of PropCo, which itself was directly owned by Operating

Entity and indirectly owned by HoldCo.88 Accordingly, ELCM V was an Affiliate

of at least those three LLC Subsidiaries because it was “directly or indirectly . . .

Controlled” by them. 89 To my mind, it is clear, therefore, that the New Jersey

Litigation involved an investment “made by or on behalf of . . . [the LLC

Subsidiaries’] Affiliates . . . .” 90

       Furthermore, the New Jersey Litigation involves at least one act performed by

the Claimant that was directly in service of the LLC Subsidiary PropCo: forming

ELCM V as its direct subsidiary for the purpose of purchasing the facility. 91 Indeed,

the New Jersey Complaint alleges that the Claimant’s misconduct involved

“form[ing] acquisition companies, often with some variation of the name ‘ELCM

HCRE Acquisition,’ . . . to enter into agreements to purchase residential health care

86
   LLC Agreements § 13(a) (emphasis added).
87
   See generally New Jersey Complaint.
88
   Dkt. 205, Ex. 1.
89
   LLC Agreements § 13(i).
90
   Id. § 13(a).
91
   Claimant’s Cross-Motion Brief ¶ 66.

                                              18
facilities . . . .” 92 The New Jersey Litigation therefore “ar[ose] from the performance

of [the Claimant’s] duties [and] obligations in connection with [his] service to

[PropCo].” 93

                3. The Claimant’s Alleged Conduct Does Not Bar Indemnification

       The LLC Agreements exclude indemnification for “acts or omissions of a

Covered Person [that] are finally determined by a court of competent jurisdiction to

constitute fraud, willful misconduct or gross negligence.” 94 The Liquidating Trustee

concludes, therefore, that the Claimant’s indemnification claims “are barred as he

committed fraud, willful misconduct, and gross negligence.”95 The Liquidating

Trustee bases this conclusion on the fact that the New Jersey Complaint brings

claims against the Claimant for “fraud, conspiracy, and racketeering.”96

       As the Claimant points out, however, this exclusion only applies if such fraud,

willful misconduct or gross negligence is “finally determined by a court of

competent jurisdiction.” 97 Because the claims against the Claimant in the New

Jersey Litigation were dismissed without prejudice, no such determination has been

made. This exclusion therefore does not bar the Claimant’s indemnification claim.

92
   See New Jersey Complaint ¶ 40.
93
   LLC Agreements § 13(a).
94
   Id. § 13(a).
95
   Trustee’s Objection ¶ 41.
96
   Id. ¶ 33.
97
   Claimant’s Cross-Motion Brief ¶¶ 72–73.

                                             19
              4. The Claimant Substantiated His Litigation Expenses

       The Liquidating Trustee makes a perfunctory argument that the fees and

expenses incurred by the Claimant cannot be substantiated.98          The Claimant,

however, introduced two sworn affidavits from the attorneys that he engaged in

connection with the New Jersey Litigation and his indemnification claim, receipts

for his travel expenses, and invoices for the litigation expenses that he incurred in

connection with his pro se representation. 99 The Liquidating Trustee does not offer

any reasons why these exhibits are insufficient or make any argument supporting his

bald assertion that “the Claimant’s damages are overstated and cannot be

substantiated.”100 I am satisfied that the sworn affidavits, receipts and invoices are

sufficient to substantiate the Claimant’s attorneys’ fees and expenses.

       C. The Claimant Is Entitled to Fees on Fees Under the LLC Agreements

       The Claimant contends that, under the language of the LLC Agreements,

which provide for indemnification “to the fullest extent permitted by law,” he is

entitled to fees and expenses incurred in connection with his pursuit of

indemnification for the New Jersey Litigation.

       In Stifel Financial Corp. v. Cochran, the Supreme Court of Delaware held that

the plaintiff was entitled to fees on fees in connection with an indemnification suit

98
   Trustee’s Objection ¶ 16.
99
   See Trustee’s Objection, Ex. A-3, Nos. 12–17.
100
    Trustee’s Objection ¶ 16.

                                              20
under a corporate bylaw that provided for indemnification to the “fullest extent

permitted by law.” 101 The Court held that indemnification for fees on fees was

covered under this bylaw because such indemnification was “authorized by law”

under DGCL § 145(a). 102 Although Stifel involved the bylaws of a corporation, the

Court’s reasoning is equally applicable in the context of the LLC Agreements. As I

explained above, the LLC Act “grants LLCs broad authority to provide for

indemnification by contract in their agreements.” 103 This includes indemnification

for fees on fees. Therefore, the “only way out of the Stifel ‘fees on fees’ award was

for the [LLC Subsidiaries] ‘to tailor their indemnification . . . to exclude ‘fees on

fees.’”104 The LLC Subsidiaries chose not to do so. The Claimant is thus entitled to

indemnification for the fees that he incurred in pursuing his indemnification claim.105

101
    809 A.2d 555, 560–63 (Del. 2002).
102
    Id. at 561.
103
    Hyatt v. Al Jazeera Am. Holdings II, LLC, 2016 WL 1301743, at *7 n.38 (Del. Ch. Mar. 31,
2016) (quoting Senior Tour Players 207 Mgmt. Co. LLC v. Golftown 207 Holding Co., LLC, 853
A.2d 124, 127 (Del. Ch. 2004)).
104
    DeLucca v. KKAT Mgmt., L.L.C., 2006 WL 224058, at *15 (Del. Ch. Jan. 23, 2006).
105
    Neither case cited by the Liquidating Trustee holds that “clear and unequivocal articulation of
intent” to indemnify fees on fees is required in the context of an LLC agreement. See TranSched
Sys. Ltd. v. Versyss Transit Sols., LLC, 2012 WL 1415466 (Del. Super. Ct. Mar. 29, 2012); Data
Ctrs., LLC v. 1743 Holdings LLC, 2015 WL 9464503 (Del. Super. Ct. Oct. 27, 2015). Both
TranSched and Data Centers involved indemnification provisions in negotiated, bilateral
agreements, which are distinguishable from the LLC Agreements at issue here. See Int’l Rail
Partners, 2020 WL 6882105, at *7 (“Defendant’s argument, however, ignores the fundamental
distinction that the TranSched line of cases involved arm’s length, bilateral, commercial contracts,
where a counterparty sought to turn an indemnification provision into a fee-shifting provision.
Unlike typical commercial contracts, indemnification and advancement provisions in LLC
agreements are derived from clear statutory authority and apply much more broadly.”).

                                                21
                                         *       *       *

       Accordingly, the Claimant has a valid claim for indemnification under the

LLC Agreements for his fees and expenses incurred in connection with the New

Jersey Litigation, as well as his fees and expenses in seeking his indemnification

claim, in the amount of $117,491.52. Having determined that the Claimant is

entitled to indemnification under the LLC Agreements, I need not decide whether he

has a separate right to indemnification under the HCRE Partnership Agreement.106

       D. The Claimant Is Entitled to Intervene

       Having decided that the Claimant is entitled to indemnification, and thus is a

creditor of HCRE, the balance of the intervention request is easy to resolve. To

prevail on his motion to intervene, the Claimant must have “(a) timely moved to

intervene, (b) in order to protect a property interest at issue in this case, (c) that

would be impaired by the disposition of this action, (d) under circumstances where

their interests are not adequately represented by [the existing parties].” 107 The

Claimant satisfies each of these requirements.

106
    That agreement, I note, contains language providing that the Partnership “shall indemnify”
certain parties “unless otherwise determined by the General Partner in its sole discretion . . . .”
HCRE Partnership Agreement § 6.9. To the extent enforceable, this language indicates that any
indemnification can only come at the pleasure of the General Partner. The Liquidating Trustee
contends that the General Partner, via Mr. White, determined not to indemnify the Claimant.
Trustee’s Objection § B. The Liquidating Trustee further contends that, as Liquidating Trustee,
he is vested with all rights of the General Partner, and that he also determined not to indemnify the
Claimant by filing the Trustee’s Objection. Id.
107
    Carlyle Inv. Mgmt. L.L.C. v. Moonmouth Co. S.A., 2015 WL 778846, at *3 (Del. Ch. Feb. 24,
2015).

                                                22
              1. The Motion to Intervene Was Timely

       “Timeliness is a flexible concept, requiring consideration of all the

circumstances of a particular case.”108 The timeliness determination “is a fact

specific analysis that rests in the sound discretion of the trial court.”109 The Court

considers two factors in connection with a timeliness analysis: “the inexcusableness

of the delay and the prejudice to existing parties.”110

       Here, the Claimant filed his Motion to Intervene on April 5, 2021, just one

week after the Liquidating Trustee informed him on March 29, 2021 that HCRE

would only be able to pay out three percent of his claim, and only six weeks after

the Liquidating Trustee objected to his claim on February 17, 2021. That is not

inexcusable delay. Nor would any delay prejudice the existing parties. Indeed, none

of the Plaintiffs in this action have objected to the Claimant’s Motion to Intervene,

nor does the Liquidating Trustee dispute that the Motion to Intervene is timely. I

find that the Claimant’s Motion to Intervene is timely.

              2. The Claimant Has a Property Interest at Issue in this Case

       The Claimant is not a “busybody intermeddler” in this action.111 Rather, as

explained above, he is a creditor with a valid claim for indemnification against the

108
    Dugan v. Dineen, 1990 WL 82719, at *5 (Del. Ch. June 12, 1990).
109
    Great Am. Leasing Corp. v. Republic Bank, 2003 WL 22389464, at *1 (Del. Ch. Oct. 3, 2003).
110
    Id.
111
    Wells Fargo Bank, N.A. v. Peninsula at Longneck, L.L.C., 2013 WL 285727, at *2 (Del. Ch.
Jan. 25, 2013).

                                             23
LLC Subsidiaries. Each LLC Subsidiary is ultimately wholly owned by HCRE, the

subject of dissolution in this action. Accordingly, the Claimant’s ability to collect

on his indemnification claim will be impacted by the treatment of claims with respect

to HCRE’s various creditors. The Claimant therefore has a valid property interest at

stake in this litigation.

              3. The Claimant’s Indemnification Claim May Be Impaired by the
              Disposition of this Action

       To establish an intervention as of right, the Claimant must show that his

indemnification claim “would be impaired by the disposition of this action.”112 This

calls for the Court to decide whether, “‘as a practical matter’ the intervener

applicant’s ability to protect h[is] rights will be impeded.” 113 The Claimant has made

such a showing here.

       As explained above, the Claimant has established a valid indemnification

claim against the LLC Subsidiaries for $117,491.52.                After objecting to the

Claimant’s indemnification claim, the Liquidating Trustee informed the Claimant

that even if his claim is valid, he would only receive three percent in part because

GMF’s $22.2 million claim would diminish the Claimant’s payout since it is being

treated as a general unsecured claim rather than an equity interest.114 The Claimant

112
    Carlyle Inv. Mgmt., 2015 WL 778846, at *3.
113
    Harris v. RHH Partners, LP, 2009 WL 891810, at *3 (Del. Ch. Apr. 3, 2009).
114
    See Motion to Intervene ¶ 5.

                                             24
disputes this classification of GMF’s claim and has filed a proposed complaint

seeking, among other things, an order declaring that GMF’s claim should be

classified as an equity interest and enjoining the Liquidating Trustee from treating it

as a general unsecured claim.115 Accordingly, I am persuaded that the Claimant’s

ability to protect his indemnification claim may be impaired by the disposition of

this action.

               4. The Claimant’s Indemnification Claim Is Not Adequately
               Represented by Existing Parties

       “[D]oubts of the adequacy of representation should be resolved in favor of

intervention.”116     The Court “must conclude ‘to a reasonable certainty’ that

representation is adequate in order to deny intervention of right on that basis.” 117

       None of the existing parties to this action adequately represent the Claimant’s

interest in his indemnification claim. First, in light of the Liquidating Trustee’s

objections to the Claimant’s indemnification claim, I am not “reasonably certain”

that he will adequately represent the Claimant’s creditor interests. Second, GMF,

which is a purported creditor competing for the same HCRE assets, obviously cannot

adequately represent the Claimant’s interests. Finally, as to the Defendants in this

action, I previously granted a motion for default judgment against Defendants

115
    Motion to Intervene, Ex. A ¶¶ 61–65.
116
    In re RJR Nabisco, Inc. S’holders Litig., 576 A.2d 654, 661 (Del. Ch. 1990).
117
    Id. (citing Schiff v. RKO Pictures Corp., 136 A.2d 193, 195 (1954)).

                                               25
ELCM HCRE GP LLC, ELCM Sponsor I Holdco LLC, ELCM Partners LLC, and

ELCM Asset Manager Holdco LLC. 118 Moreover, it would strain credulity to

suggest that Mr. White, whose problematic conduct in this litigation is described in

my Memorandum Opinion of August 7, 2019, 119 could adequately represent the

Claimant’s interests.

          Accordingly, the Claimant is entitled to intervene in this action.

                                       III. CONCLUSION

          For the foregoing reasons, the Claimant’s Cross-Motion and Motion to

Intervene in this action are GRANTED. The Trustee’s Objection is DENIED. The

parties should confer, provide a form of order consistent with the decision above,

and inform the Court whether further briefing or oral argument is appropriate in light

of this decision, regarding the Claimant’s Objection or otherwise.

118
      See Order Granting Pls.’ Mot. for Default J., Dkt. No. 278.
119
      GMF, 2019 WL 3713844, at *4–13.

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