Court Opinion

ID: 4678904
Source: CourtListenerOpinion
Date Created: 2021-04-20 17:03:16.109368+00
Date Added: 2024-06-11T09:12:18.591127
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

SIXTH STREET PARTNERS                             )
MANAGEMENT COMPANY, L.P.,                         )
SIXTH STREET PARTNERS, L.P., and                  )
SPECIAL SITUATIONS GP, LLC,                       )
                                                  )
                     Plaintiffs,                  )
                                                  )
     v.                                           )
                                                  )    C.A. No. 2021-0127-MTZ
DYAL CAPITAL PARTNERS III (A) LP,                 )
DYAL CAPITAL PARTNERS III (B) LP,                 )
NB DYAL ASSOCIATES III LP, NB                     )
DYAL GP HOLDINGS LLC, DYAL III                    )
SLP LP, NB ALTERNATIVES GP                        )
HOLDINGS LLC, NB ALTERNATIVES                     )
ADVISERS LLC, NEUBERGER                           )
BERMAN AA LLC, and NEUBERGER                      )
BERMAN GROUP LLC,                                 )
                                                  )
                     Defendants.                  )

               ORDER DENYING PLAINTIFFS’ MOTION FOR
                     PRELIMINARY INJUNCTION

       WHEREAS, having considered the Motion for Preliminary Injunction (the

“Motion”) filed by Plaintiffs Sixth Street Partners Management Company, L.P.,

Sixth Street Partners, L.P., and Special Situations GP, LLC (collectively, “Sixth

Street” or “Plaintiffs”), and related briefing, it appears that:1

1
 Citations in the form of “Pls.’ Ex. —” refer to the exhibits attached to the Transmittal
Declaration of Eliezer Y. Feinstein, Esq. in Support of Plaintiffs’ Opening Brief in Support
of Motion for Preliminary Injunction, available at Docket Item (“D.I.”) 160 through D.I.
171, and D.I. 173 through D.I. 175. Citations in the form of “Defs.’ Ex. —” refer to the

                                             1
         A.     Dyal Capital Partners (“Dyal”) is a division of defendant Neuberger

Berman Group LLC (“Neuberger”), an investment management company with over

$400 billion of assets under management.2 Dyal manages funds that acquire passive

minority equity stakes in other private investment firms, referred to as “partner

managers.”3 The funds raise money primarily from outside investors, including

pension funds, insurance companies, and foundations.4 Dyal has established five

such funds (Dyal I through V, collectively, the “Dyal Funds”), which have made

passive minority equity investments in fifty partner managers.5

exhibits attached to the Transmittal Declaration of Daniel M. Rusk in Support of Dyal
Defendants’ Answering Brief in Opposition to Plaintiffs’ Motion for a Preliminary
Injunction, available at D.I. 198 through D.I. 207. Citations in the form of
“[Name] Dep. —” refer to deposition testimony in the record.
2
  Defs.’ Ex. 23 at NB_0002295. Neuberger is a Delaware LLC headquartered in New
York, which holds the various subsidiaries that have also been named as defendants in this
action. Neuberger holds all of the interests of Neuberger Berman AA LLC. See Defs.’
Ex. 48 at NB_0008678. Neuberger owns 99.999% of the interests of non-party NB
Alternatives Holdings LLC, which in turn holds all of the interests in defendants NB
Alternatives GP Holdings LLC and NB Alternatives Advisers LLC. See id. NB
Alternatives GP Holdings LLC owns the general partners of various other entities involved
in alternative investing. See Komaroff Dep. 52–53. NB Alternatives Advisers LLC is the
registered investment advisor for the Dyal Funds, as well as other funds under the
Neuberger corporate structure. See Defs.’ Ex. 48 at NB_0008678.
3
  See Defs.’ Ex. 4 at 258–59 [hereinafter “Proxy”]; Pls.’ Ex. 18 at DYAL_00011439;
Pls.’ Ex. 51 at NB_0007802.
4
    Proxy at 258.
5
    Id. at 260–61.

                                            2
          B.     The Dyal Funds are limited partnerships. The investors (the “Dyal

LPs”) hold economic ownership of the Dyal Funds.6 General partner entities (the

“Dyal GPs”) manage the Dyal Funds, but hold no economic rights or interests. 7

Through the Dyal Funds’ limited partnership agreements, the Dyal LPs appoint the

Dyal GPs.8 The Dyal GPs are owned and controlled by various Neuberger entities,

with ultimate control lying with Neuberger itself.9 Through the upward chain of

ownership and control from the Dyal GPs, Neuberger possesses “complete control

of the management and conduct of the business of” the Dyal Funds,10 including the

power to “exercise all rights of the Partnership with respect to [its] interest in any

Person, firm, corporation or other entity.”11 Partner managers are not parties to the

limited partnership agreements.

          C.     Dyal Capital Partners III (A) LP and Dyal Capital Partners III (B) LP

operate collectively as one Dyal Fund known as “Dyal III.” Dyal III is managed by

one of the Dyal GPs, Dyal Fund III GP (“Dyal III GP”).12 Dyal III GP is directly

6
    See id. at 258–59, 261; Ward Dep. 61; Defs.’ Ex. 5 § 5.02(a) [hereinafter “Dyal III LPA”].
7
    Ward Dep. 61–62; Dyal III LPA §§ 3.01, 3.02, 5.02(a).
8
    See Dyal III LPA § 3.01.
9
    See Defs.’ Ex. 44; Defs.’ Ex. 48 at NB_0008678.
10
     Dyal III LPA § 3.01.
11
     Id. § 2.09(f); see id. § 3.01.
12
  See id. § 3.01 (“The General Partner shall be vested with the complete control of the
management and conduct of the business of the partnership and the other entities
comprising the Fund.”); id. § 3.02 (vesting General Partner with various powers).

                                               3
owned and controlled by NB Dyal GP Holdings LLC (“Dyal Holdings”), which is

in turn directly owned and controlled by NB Alternative GP Holdings LLC

(“Transferor”), and ultimately owned and controlled by Neuberger.13

         D.     Sixth Street is one of Dyal III’s ten partner managers. Sixth Street is a

private investment firm with over $50 billion in assets under management. It focuses

on special situations investments, raising capital from outside investors to provide

complex credit solutions to companies around the world.14 Sixth Street also has a

smaller direct lending business that makes direct loans to middle market

companies.15 Of Sixth Street’s 15 to 20 investment funds, only two focus principally

on direct lending.16

         E.     Sixth Street and Dyal began exploring Dyal III’s potential investment

in Sixth Street in 2016. According to Sixth Street, the purpose of the deal was to

obtain “growth capital” to allow Sixth Street to “continu[e] to grow [its] business.”17

The parties negotiated Dyal III’s investment over six months.18 On June 16, 2017,

the parties executed an Amended and Restated Equity Subscription and Investment

13
     See Defs.’ Ex. 44.
14
     See Defs.’ Ex. 24 at SS_0017086; Stiepleman Dep. 85–86; Rees Dep. 141–42.
15
     See Stiepleman Dep. 85–86, 91–92; Rees Dep. 141.
16
     See Stiepleman Dep. 91–92; see also Pls.’ Ex. 18 at DYAL_00011481.
17
     Easterly Dep. 54; see also Muscolino Dep. 53.
18
     See Stiepleman Dep. 120–121.

                                             4
Agreement (the “Investment Agreement”) under which Dyal III invested

approximately $417 million in Sixth Street.19

                 a.    Through the Investment Agreement, Dyal III became “a passive

minority investor that’s not involved in the day-to-day actions of [the Sixth Street]

managers.”20

                 b.    In exchange for its investment, Dyal III acquired certain

economic “Interests,” defined as an equity interest in Sixth Street and attendant cash

flows.21 Dyal III also acquired limited noneconomic rights to ensure its investors

are treated equitably and paid in accordance with the Investment Agreement’s

terms.22 These include, inter alia, the right to consent to (1) changes in Sixth Street’s

capital structure that would “disproportionately and adversely” affect Dyal III; (2)

business transactions in which Dyal III would not participate pro rata; and (3)

“material” related-party transactions.23

19
     See Defs.’ Ex. 1 [hereinafter “IA”].
20
  Ward Dep. 227; see also Defs.’ Ex. 28 at SS_0008972 (explaining to Sixth Street’s senior
team that it was “important to know” that under the Investment Agreement, “we continue
to run the business as we currently run it; Dyal has very few rights as a minority holder”);
Defs.’ Ex. 29 at SS_0023712 (emphasizing that Sixth Street “retains full control of the
business and the investment does not affect the way [it] raises and deploys capital”).
21
     See IA § 2.1 & Recitals.
22
     See id. § 6.5.
23
  See id. § 6.5(i)–(vii); see also id. § 2.8 (identifying rights to receive certain information
about Sixth Street’s business on a periodic basis); id. § 61.3 (issuing tag-along and drag-
along rights in connection with equity transactions initiated by Sixth Street); id. § 6.10(b)
(granting rights to enforce restrictive covenants, including noncompete restrictions, against

                                              5
                 c.    Dyal III also acquired a limited information right, entitling it to

Sixth Street information to monitor and value its investment.24 Sixth Street must

provide Dyal III with certain financial information:              balance sheets, income

statements, statements of cash flows, annual and quarterly investor reports, and Sixth

Street’s principals’ compensation.25 Sixth Street executives have acknowledged that

none of the information it supplies to Dyal is “competitively sensitive . . . in any real

sense,”26 as it is historical and therefore would not allow a competitor to “move[]

against [Sixth Street] or decide[] to get in on a deal that [Sixth Street] w[as] working

on.”27

                 d.    Dyal III GP ultimately controls and wields Dyal III’s

noneconomic rights under the Investment Agreement.28 Dyal III GP’s decisions

with respect to those rights are made by Dyal Holdings, and ultimately Transferor.

certain Sixth Street personnel); id. § 7.3(a) (granting rights to force a repurchase of the
investment in the event of a key person departure from Sixth Street); Defs.’ Ex. 28
(explaining that “basically they [Dyal III] need to be treated pro rata ‘shoulder to shoulder’
with us”); Stiepleman Dep. 160 (agreeing that “any minority controls are of the flavor of
treating the holder pro rata”).
24
     IA § 2.8; see also Ward Dep. 106–07.
25
     IA § 2.8.
26
     Defs.’ Ex. 30 at SS_0018583.
27
     Stiepleman Dep. 68; see also Ward Dep. 208–09.
28
     See Dyal III (A) LPA §§ 2.09, 3.01, 3.02.

                                                 6
                e.     The Investment Agreement also granted Sixth Street important

rights. Relevant here, Section 7.1(b) provides that prior to the tenth anniversary of

the investment or a qualified initial public offering, unless otherwise specifically

permitted in the Agreement, “no Subscriber may Transfer its Interests in any [Sixth

Street] Issuer without the prior written consent of the Manager, which consent may

be given or withheld for any reason or no reason” (the “Transfer Restriction”).29

                f.     The Investment Agreement defines “Subscriber” as Dyal III, and

defines “Interests” as the Subscriber’s equity stake and related cash flows.30

“Transfer” is defined expansively, encompassing any transfer that would “directly

or indirectly transfer (whether by merger or sale or any other similar transaction

involving an Affiliate) transfer, sell, assign, exchange, hypothecate, pledge, or

29
  IA § 7.1(b). Section 7.1(c) adds that, after the ten-year period expires, no “Transfer may
be made without the prior written consent of the Manager if such Transferee or any of its
Affiliates . . . is, in the reasonable opinion of [Sixth Street], a Competitor,” id. § 7.1(c)(A),
which includes any entity “that materially competes, or that has a division or business line
that materially competes, with one or more of the material underlying businesses in which
[Sixth Street] [is] engaged,” id. § 9.1.
        And Section 7.2(a) of the Investment Agreement identifies five specific types of
“Transfers” that are permitted without Sixth Street’s consent. Id. § 7.2(a)(i)–(v).
Defendants contend that under Sixth Street’s theory of this case, the transaction at issue
would constitute a “Subscriber Portfolio Sale” under Section 7.2(a)(iv), defined as the
Transfer of at least 75% of Dyal III’s portfolio of investments and/or the sale of Dyal III
itself. Id. §§ 7.2(a)(iv), 9.1. Because Sixth Street’s theory fails, I do not reach this issue.
30
     See id. § 2.1, Preamble, & Recitals; see also Defs.’ Ex. 19.

                                                7
otherwise encumber or dispose of any interest (pecuniary or otherwise) therein or

rights thereto.”31 “Affiliate” includes any affiliates of Dyal.32

                 g.     Sections 7.1(b) does not, on its face, extend to entities other than

Dyal III, which is the only Dyal Fund named as a party to the Investment Agreement.

Dyal III did not believe itself capable of binding upstream entities, and Sixth Street

never asked that any entity other than Dyal III be made a party to the Investment

Agreement.33          The Investment Agreement does not contain any provision (1)

addressing or restricting a change of control of Dyal; (2) preventing Neuberger or

Dyal from competing against Sixth Street, acquiring or being sold to a competitor,

or otherwise restricting their business activities in any way;34 or (3) supplying Sixth

Street the right to buy back Dyal III’s stake at fair value in the event of a Dyal III

change in control, which several other Dyal partner managers did seek and obtain.35

                 h.     Section 6.1.1 of the Investment Agreement similarly restricts

Sixth Street from transferring equity. But unlike the Transfer Restriction limited to

31
     IA § 2.1.
32
     See id. § 9.1.
33
     See Ward Dep. 130; Stiepleman Dep. 116–17; Rees Dep. 201–03.
34
   In fact, Neuberger maintained a direct lending business at the time of Dyal III’s
investment in Sixth Street, so such a noncompete was impracticable. See Rees Dep. 202–
05.
35
     See Ward Dep. 245–46.

                                               8
Dyal III, Section 6.1.1 explicitly imposes additional duties on Sixth Street’s “general

partner of each of the [Sixth Street] Issuers” as “Manager.”36

          F.     On December 23, 2020, Neuberger announced that it had entered into

a business combination agreement (“BCA”) to merge its Dyal division with Owl

Rock Capital Group (“Owl Rock”) and a special purpose acquisition company called

Altimar Acquisition Corporation (“Altimar”) (the “Transaction”).37 The resulting

entity would be a new publicly traded company called Blue Owl Capital Inc. (“Blue

Owl”),38 which intends to pursue “enhanced origination opportunities for [Owl

Rock’s] direct lending businesses through ownership relationships in [Neuberger’s]

GP Cap Solutions business.”39 The Dyal Funds have advised their limited partners

that “Blue Owl and its affiliates are expected to compete (through the historic Owl

Rock business) with certain current . . . partner managers.”40

                 a.       The mechanics of the roughly $12.5 billion Transaction are

undisputed. The entire Dyal business is transferring to Blue Owl via the entities that

control and manage the Dyal Funds.41 Blue Owl Capital GP, a wholly owned

36
  IA § 6.1.1 & Recitals. Section 6.1.1 also binds Sixth Street’s “Founders” personally.
See id. § 6.1.1 & Signature Pages.
37
     See Proxy at 13.
38
     See id.
39
     Pls.’ Ex. 26 at 3.
40
     Pls.’ Ex. 68 at DYAL_00020667.
41
     See generally Pls.’ Ex. 5; Proxy.

                                             9
subsidiary of Blue Owl, will serve as the general partner to two limited partnerships:

Blue Owl Holdings and Blue Owl Capital Carry.42 Transferor will transfer Dyal

Holdings—and its accompanying control over Dyal III GP and therefore Dyal III’s

Interests and noneconomic rights under the Investment Agreement—to Blue Owl

Capital Carry.43 Blue Owl Capital Carry will also acquire the investment adviser

entities that manage the Dyal Funds’ investments.44 Blue Owl will be co-owned and

co-controlled by Owl Rock and Dyal principals.45

                 b.      Dyal III is not a party to the BCA and is transferring nothing in

the Transaction. Rather, the Transaction only involves Dyal III’s “upstairs” entities,

and only the ownership of Dyal GP will change.                 The legal and economic

relationships between Sixth Street and Dyal III, and between Dyal III and its

investors, will not change.46

          G.     Owl Rock is a credit manager that specializes in direct lending solutions

to middle-market companies backed by private equity sponsors.47 Thus, Owl Rock’s

42
     See Proxy at 127.
43
   See Pls.’ Ex. 21 at DYAL_00012015 (“CHANGE IN OWNERSHIP: The Blue Owl
transaction results in . . . an indirect change of control of the Fund’s non-economic general
partner.”); see also Defs.’ Ex. 25; Defs.’ Ex. 32; Pls.’ Ex. 5; Pls.’ Ex. 9.
44
     See Proxy at 127.
45
     See, e.g., Pls.’ Ex. 5.
46
     Compare Defs.’ Ex. 44, with Defs.’ Ex. 25 at 97.
47
     Proxy at 248.

                                              10
business overlaps with the business of two Sixth Street funds. Thus, the Transaction

will transfer control of the Dyal Funds—and therefore control of Dyal III’s rights

and obligations vis-à-vis Sixth Street—to an entity partially owned and controlled

by Owl Rock, which competes with a small segment of Sixth Street’s business.48

           H.   After learning of the Transaction, in December 2020, Sixth Street’s

senior executives assured their investors that the Transaction would have “zero

impact on our business” because Dyal III was a “completely passive investor” run

by “good folks.”49 And importantly, they emphasized that Dyal “[does not] get

competitively sensitive information from us in any real sense,”50 and that “whatever

information they [Dyal] get will be manag[ed]” with “informational firewalls.”51

Accordingly, David Stiepleman, Sixth Street’s Co-President and Chief Operating

Officer, stated that he was “not particularly concerned about the theoretical

possibility of [Owl Rock as] a smaller firm in the credit space seeing [Sixth Street’s]

info.”52 Sixth Street reiterated its lack of concern on multiple occasions,53 assuring

48
     See Pls.’ Ex. 5 at NB_0000305; Defs.’ Ex. 32 at DYAL_00020646.
49
     Defs.’ Ex. 30 at SS_0018583.
50
     Id.
51
  Defs.’ Ex. 33 at SS_0008984; see also Stiepleman Dep. 35, 37, 39; Easterly Dep. 120–
21; Waxman Dep. 89–90.
52
     Defs.’ Ex. 30 at SS_0018583.
53
     See Defs.’ Ex. 18 at 14–15; Stiepleman Dep. 36–38.

                                            11
investors that Dyal III was a “[p]assive 10% owner of Sixth Street” and there was

“nothing [to be] concerned about at all” with respect to the Transaction.54

         I.     In January and February 2021, Sixth Street set out to leverage the

Transaction to force a buyback of Dyal III’s investment.55

                a.        After telling its investors that the Transaction was no cause for

concern, on January 11, 2021, Sixth Street sent a letter to Dyal asserting for the first

time that the Transaction required its consent under Section 7.1(b), and voicing

concerns about the post-close entity misusing Sixth Street’s confidential

information.56 In response, Dyal provided drafts of an information control policy

that would govern information sharing at Blue Owl, which gave Sixth Street the right

to consent to any future changes.57 Dyal did the same with other partner managers,

including a number with credit and lending businesses.58 Sixth Street did not

respond.59

                b.        On February 9, Sixth Street demanded a buyback for $417

million—the same price Dyal III paid more than three years earlier—in installment

54
     Defs.’ Ex. 34 at SS_0025461.
55
     See Stiepleman Dep. 48, 78–79; Defs.’ Ex. 20 at ML-037; Defs.’ Ex. 21 at CL-094.
56
     See Defs.’ Ex. 35.
57
     See Defs.’ Ex. 36.
58
     See id.; Defs.’ Ex. 37; Defs.’ Ex. 38; Easterly Dep. 170; Ward Dep. 231–33.
59
     See Ward Dep. 233–34, 250–53, 207–09; see also Defs.’ Ex. 37.

                                               12
payments over five years, without interest.60 Sixth Street’s banker, Mark Bradley,

told Dyal that Sixth Street would “muck up” the Transaction if Dyal did not accept

the take-it-or-leave-it buyback offer within five days.61

                c.        Dyal believed that Sixth Street’s demand undervalued its

interest, as Sixth Street’s assets under management have nearly tripled since the

parties executed the Investment Agreement.62 As far back as 2018, Sixth Street

estimated its value at $6 billion, implying a $700 million valuation for Dyal III’s

stake.63 Therefore, Dyal rejected the take-it-or-leave-it demand, but explained that

it would be willing to engage in good faith buyback negotiations and valuation

discussions.64 Sixth Street declined to negotiate.65

                d.        At the same time, Sixth Street was attempting to derail the

Transaction via regulatory channels.           Specifically, Sixth Street lobbied the

Department of Justice to block the deal based on antitrust concerns, and contacted

the SEC regarding the “adequacy of disclosures” relating to the Transaction.66 Sixth

60
     See Defs.’ Ex. 39.
61
     Ward Dep. 247–49, 277–78; see Rees Dep. 226–28.
62
     See Defs.’ Ex. 38.
63
     See Defs.’ Ex. 24 at SS_0017184.
64
     See Defs.’ Ex. 38.
65
     See Ward Dep. 207–09, 250–53.
66
     See Defs.’ Ex. 17 at 18–19.

                                             13
Street also lobbied other Dyal partner managers to oppose the deal.67 Those efforts

yielded only one additional dissenting partner manager, Golub Capital (“Golub”).

         J.        Sixth Street filed this action on February 12,68 and filed an Amended

Complaint on February 24.69 Sixth Street asserts breach of the Transfer Restriction

under Section 7.1(b) of the Investment Agreement and tortious interference with

contract, and seeks a preliminary injunction enjoining the Transaction.70 The parties

engaged in substantial expedited discovery and briefing.71 In briefing, Sixth Street

narrowed its requested injunctive relief, seeking to “preliminarily enjoin the transfer

of the Dyal Funds’ interests in Sixth Street.”72 I heard argument on the preliminary

injunction on March 24.73 After argument, Sixth Street again narrowed its request,

asking for an order “enjoining the Dyal fund entities and their general partner from

transferring the funds’ interests in Sixth Street or, in the alternative and at a

minimum, enjoining the Dyal fund entities and their general partner from exercising

the funds’ non-economic rights under the Investment Agreement pending resolution

67
     Defs.’ Ex. 18 at 12–13.
68
     See D.I. 1.
69
     See D.I. 40.
70
     See id. ¶¶ 93–117.
71
     See D.I. 159; D.I. 196; D.I. 197; D.I. 214.
72
     D.I. 159 at 62.
73
     See D.I. 253; D.I. 255.

                                               14
of Plaintiffs’ claims.”74 By Dyal’s most recent estimation, the Transaction will not

close before May 4.75

         K.      On February 23, nearly two weeks after this litigation began, Golub

filed a similar lawsuit in New York seeking similar injunctive relief; Sixth Street’s

counsel represents Golub in that action.76 After considering Golub’s substantially

identical transfer restriction, the New York Court denied Golub’s requested

preliminary injunction on April 5.77

         L.      To obtain a preliminary injunction, the movant must demonstrate (i) a

reasonable probability of success on the merits; (ii) a threat of irreparable injury if

an injunction is not granted; and (iii) that the balance of the equities favors the

issuance of an injunction.78 “This Court has broad discretion to grant or deny a

preliminary injunction.”79 But a preliminary injunction “is not granted lightly,” and

“the moving party bears a considerable burden in establishing each of these

74
     D.I. 245 at 1–2.
75
     D.I. 256.
76
  GCDM Hldgs. LP, et al. v. Dyal Cap. P’rs Mirror Aggregator (A) LP, et al., No.
651226/2021 (N.Y. Sup. Ct., N.Y. Cty. 2021).
77
     See D.I. 250.
78
  Pell v. Kill, 135 A.3d 764, 783 (Del. Ch. 2016) (citing Revlon, Inc. v. MacAndrews &
Forbes Hldgs., Inc., 506 A.2d 173, 179 (Del. 1986)); see also Ivanhoe P’rs v. Newmont
Mining Corp., 535 A.2d 1334, 1341 (Del. 1987).
79
  Fletcher Int’l, Ltd. v. ION Geophysical Corp., 2010 WL 1223782, at *3 (Del. Ch.
Mar. 24, 2010) (citing Data Gen. Corp. v. Digit. Comput. Controls, Inc., 297 A.2d 437,
439 (Del. 1972)).

                                            15
necessary elements. Nevertheless, while some showing is required as to each

element, there is no steadfast formula for the relative weight each of these three

factors deserves.”80

      IT IS HEREBY ORDERED, this 20th day of April, 2021:

      1.     The Motion is DENIED, as Sixth Street has failed to demonstrate

entitlement to extraordinary relief.

      2.     The first element of the familiar injunction test requires that the plaintiff

establish a reasonable probability of success on the merits. This standard “falls well

short of that which would be required to secure final relief following trial, since it

explicitly requires only that the record establish a reasonable probability that this

greater showing will ultimately be made.”81 Yet, Sixth Street has failed to make that

showing on its breach of contract and tortious interference claims.

             a.     The critical question at this stage is whether the Transaction has

triggered the Transfer Restriction. Thus, the Court is tasked with interpreting its text

to determine what the parties intended.82 “Delaware adheres to the objective theory

80
  Id. (alterations and internal quotation marks omitted) (quoting La. Mun. Police Empls.’
Ret. Sys. v. Crawford, 918 A.2d 1172, 1185 (Del. Ch. 2007), and then quoting Alpha
Builders, Inc. v. Sullivan, 2004 WL 2694917, at *3 (Del. Ch. Nov. 5, 2004)).
81
  Pell, 135 A.3d at 783 (quoting Cantor Fitzgerald, L.P. v. Cantor, 724 A.2d 571, 579
(Del. Ch. 1998)).
82
  See Sunline Com. Carriers, Inc. v. CITGO Petroleum Corp., 206 A.3d 836, 846
(Del. 2019).

                                           16
of contracts, [meaning that] a contract’s construction should be that which would be

understood by an objective, reasonable third party.”83 The Court will “give effect to

the plain-meaning of the contract’s terms and provisions,”84 “will read a contract as

a whole[,] and . . . will give each provision and term effect, so as not to render any

part of the contract mere surplusage.”85 “Unless there is ambiguity, Delaware courts

interpret contract terms according to their plain, ordinary meaning,” without

resorting to extrinsic evidence.86

                b.     The Transfer Restriction’s unambiguous language compels an

outcome in Defendants’ favor. To trigger the Transfer Restriction, a transaction

must satisfy three specific and defined components: the subject of the sentence (the

Subscriber) must perform a specific action (a Transfer) with the verb’s direct object

83
  Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010) (internal quotation
marks omitted) (quoting NBC Universal v. Paxson Commc’ns, 2005 WL 1038997, at *5
(Del. Ch. Apr. 29, 2005)).
84
     Id. at 1159–60.
85
  Id. at 1159 (quoting Kuhn Constr., Inc. v. Diamond State Port Corp., 990 A.2d 393, 396–
97 (Del. 2010)).
86
     Alta Berkeley VI C.V. v. Omneon, Inc., 41 A.3d 381, 385 (Del. 2012).

                                             17
(the Interests).87 Here, the Subscriber, Dyal III, is transferring nothing in the

Transaction, so the Transfer Restriction is not triggered.

                 c.     This reading is supported by the Delaware Supreme Court’s

recent decision in Borealis Power Holdings Inc. v. Hunt Strategic Utility Investment

L.L.C.88 There, the Supreme Court considered whether a right of first refusal over a

“Minority Member’s” transfer of its LLC Units was implicated by the sale of an

interest in the Minority Member itself.89 The Court concluded it was not, as the

trigger was a Minority Member transferring its units, which did not occur when a

Minority Member’s owner sold its interest in the Minority Member.90 The analysis

was governed by the “subject” of the right of first refusal, i.e. the “Minority

Member.”91 Actions by a different subject, i.e. the owner, could not trigger the

refusal right.92

                 d.     This Court recently applied this rationale in Sheehan v.

AssuredPartners, Inc.93 Judge LeGrow, sitting as Vice Chancellor, considered

whether a tag-along right tethered to “sell[ing] or otherwise Transfer[ing] all or any

87
     IA § 7.1(b).
88
     233 A.3d 1 (Del. 2020).
89
     See id. at 9–10.
90
     See id.
91
     See id.
92
     See id.
93
     2020 WL 2838575 (Del. Ch. May 29, 2020).

                                          18
number of its Class A-1 Units” was triggered by a downstream transaction involving

an indirect transfer of those units.94 Relying on Borealis, the Court concluded that

the tag-along was not triggered, as the provision’s subject was dispositive and the

subject was not transferring or selling its units in the challenged transaction.95

                e.     Here, the Transfer Restriction is triggered only by the

Subscriber’s Transfer of its Interests in Sixth Street, which will not occur in the

Transaction. Dyal III is not transferring any Interests. The Transfer Restriction

applies only when Dyal III is doing the transferring, so an upstairs sale of control

over Dyal III GP cannot trigger it.96 Dyal III, the Subscriber, is not a party to the

Transaction and its investment in Sixth Street is unchanged. The Transaction does

not trigger the Transfer Restriction.97

                f.     Despite the Transfer Restriction’s plain language, Sixth Street

argues the parties intended the Transfer Restriction to bind Dyal III’s upstairs entities

and restrict their actions. Sixth Street relies on the definition of “Transfer,” pointing

out that it expansively reaches any “direct or indirect transfer” involving Dyal III’s

Affiliates. But Borealis instructs this approach is improper, as it “elide[s] the subject

of the operative sentence” in Section 7.1(b), of which the verb “Transfer” serves as

94
     Id. at *12–13.
95
     See id.
96
     See Borealis, 233 A.3d at 9–10.
97
     See id.; Sheehan, 2020 WL 2838575, at *12–13.

                                           19
the predicate.98 “That subject is not accidental or unimportant.”99 If a transfer is not

performed by the Subscriber, it does not matter whether the transfer is a “Transfer”

under the Investment Agreement. “Put another way, the fact that the [Transfer

Restriction] is only triggered by transfers by the [Subscriber] is dispositive in

[Defendants’] favor regardless of whether the [Transaction] could be said to effect

an indirect transfer of [the Interests].”100 “Subscriber,” as the subject of the operative

sentence, sets the initial scope of the Transfer Restriction, making it “unnecessary”

and “inappropriate” to parse the definition of “Transfer.”101

                   g.   Sixth Street’s interpretation would have the Court enjoin a

transaction at any level of Dyal’s corporate pyramid, regardless of whether that

entity was explicitly bound by the Transfer Restriction.            This runs afoul of

Delaware’s well-settled respect for and adherence to principles of corporate

separateness and freedom of contract, especially in the hands of sophisticated parties

that could have expressly bound Dyal III’s upstairs entities if doing so reflected their

98
     Borealis, 233 A.3d at 10 (emphasis in original).
99
     Id.
100
      Id. at 9.
101
      Id. at 10.

                                              20
intended agreement.102      They did not do so, and the subject of the Transfer

Restriction—Subscriber—is dispositive.

             h.     Consequently, Sixth Street has also failed to demonstrate a

reasonable likelihood of success on its tortious interference claim. A defendant

tortiously interferes with a contract under Delaware law when (1) there is a contract,

(2) about which defendant knew, and (3) the defendant’s intentional act is a

significant factor in causing a contract breach (4) without justification (5) injuring

plaintiffs.103 Because Sixth Street has failed to demonstrate a likelihood of success

on its breach of contract claim, it cannot demonstrate a likelihood of success on its

claim that any breach was the result of tortious interference.

      3.     Sixth Street has also failed to make a clear showing of irreparable harm

that justifies the extraordinary relief of a preliminary injunction. “Irreparable injury

is an indispensable and essential factor in determining whether to grant injunctive

relief,”104 and an injunction “should not be issued in the absence of a clear showing

  Cf. IA § 6.1.1 (imposing responsibility and restrictions on Sixth Street’s Manager and
102

Founders with respect to equity transfers).
103
  NAMA Hldgs., LLC v. Related WMC LLC, 2014 WL 6436647, at *25 (Del. Ch.
Nov. 17, 2014).
104
   N.K.S. Distribs., Inc. v. Tigani, 2010 WL 2367669, at *4 (Del. Ch. June 7, 2010) (citing
Kingsbridge Cap. Gp. v. Dunkin’ Donuts Inc., 1989 WL 89449, at *4 (Del. Ch.
Aug. 7, 1989) (denying a motion for a preliminary injunction where plaintiffs did not
demonstrate “the sine qua non of preliminary injunctive relief: the threat that irreparable
harm will befell them . . . unless an injunction issues”)).

                                            21
of imminent irreparable harm to the plaintiff.”105 Even assuming the movant has

made a sufficient showing on the merits,

         the extraordinary remedy of preliminary injunction will issue only
         where the court is persuaded that the plaintiff is threatened with
         irreparable harm that will occur before the matter can be determined at
         trial, and that the harm that plaintiff seeks to avoid outweighs the risk
         of injury that may befall the defendant in the event the injunction is
         entered.106

“To demonstrate irreparable harm, a plaintiff must present an injury of such a nature

that no fair and reasonable redress may be had in a court of law and must show that

to refuse the injunction would be a denial of justice. The alleged injury must be

imminent and genuine, as opposed to speculative.”107

                a.     Sixth Street has asserted the Transaction will irreparably harm it

because it will give Owl Rock, a minimal competitor, two valuable types of assets:

(1) Sixth Street’s “competitively sensitive information,” and (2) Dyal III’s “material

noneconomic rights” in the Investment Agreement, to be wielded by Dyal’s GP as

105
      In re Cogent, Inc. S’holder Litig., 7 A.3d 487, 513 (Del. Ch. 2010).
106
   Tigani, 2010 WL 2367669, at *4 (quoting Kingsbridge Cap. Gp., 1989 WL 89449, at
*4).
107
   CBS Corp. v. Nat’l Amusements, Inc., 2018 WL 2263385, at *4 (Del. Ch. May 17, 2018)
(quoting Aquila, Inc. v. Quanta Servs., Inc., 805 A.2d 196, 208 (Del. Ch. 2002)).

                                               22
controlled by Dyal Holdings, as controlled by Blue Owl Capital Carry.108 The record

undermines both positions.

                 b.        First, upon learning about the Transaction, Sixth Street assuaged

its investors that the information it provides Dyal III is not competitively sensitive,

and the Transaction was of no moment.109 Just one day before filing this lawsuit,

Josh Easterly, the CEO of Sixth Street’s direct lending business, stated that Sixth

Street “d[id]n’t care about the information [and] d[id]n’t think Owl Rock is a

competitor.”110 And when Sixth Street began contending its information was at risk,

Dyal and Owl Rock offered to implement information controls to mitigate any risk

that the post-closing entity would misuse or abuse Sixth Street’s competitively

sensitive information, but Sixth Street refused to engage.

                 c.        Since filing, nothing in the record indicates Sixth Street ever

actually became concerned about its confidential information. Rather, the record

further undermines Sixth Street’s purported irreparable harm. In his deposition,

Alan Waxman, Sixth Street’s CEO, testified that “[Blue Owl is] not getting our

pipeline. They’re not going to be involved in our investment process.” 111 Sixth

Street acknowledged that “[Dyal] would be crazy” to disfavor any one partner

108
      D.I. 159 at 54, 56.
109
      See, e.g., Ex. 30.
110
      Ward Dep. 209.
111
      Waxman Dep. 87.

                                                23
manager, as the success of Dyal’s business depends on the success of all 50 of its

partner managers,112 and that misuse of partner managers’ confidential information

“would kill [Dyal’s] business.”113 Sixth Street’s concerns about misuse of its

confidential information in the hands of a competitor are speculative at best and

cannot support a preliminary injunction.

                d.      Nor can Sixth Street’s concerns about Dyal III’s noneconomic

rights, which are designed to protect Dyal III’s investment.114 When Sixth Street

announced Dyal III’s investment, it was firm in its position that Dyal III would retain

a “~10% passive interest in [Sixth Street]” and that “[Sixth Street] retains full control

of the business and the investment does not affect the way [it] raises and deploys

capital.”115        Sixth Street reaffirmed this position after the Transaction was

announced, telling its limited partners that Dyal III is the “[p]assive 10% owner of

Sixth Street, nothing [to be] concerned about at all; will remain passive.”116 While

Dyal III has some noneconomic rights, the record undermines Sixth Street’s

112
      Stiepleman Dep. 184–86.
113
      Id. 110–11.
114
      See D.I. 159 at 54–55.
115
      Defs.’ Ex. 29 at SS_0023712.
116
      Defs.’ Ex. 34 at SS_0025461.

                                            24
litigation position that those rights are so significant that passing effective control

over them to an Owl Rock co-owned entity will irreparably harm Sixth Street.

              e.     Sixth Street has failed to make a clear showing of imminent

irreparable harm to support a preliminary injunction.117

       4.     Finally, the balance of the equities favors Defendants. The Court must

“balance the plaintiff’s need for protection against any harm that can reasonably be

expected to befall the defendants if the injunction is granted.”118 The Court

       must be cautious that its injunctive order does not threaten more harm
       than good. That is, a court in exercising its discretion to issue or deny
       such a remedy must consider all of the foreseeable consequences of its
       order and balance them. It cannot, in equity, risk greater harm to
       defendants, the public or other identified interests, in granting the
       injunction, than it seeks to prevent.119

117
    To the extent Sixth Street relies on the irreparable harm stipulation in Section 10.11 of
the Investment Agreement, see D.I. 159 at 53, the parties to the Transaction are not bound
by that term. See Weygant v. Weco, LLC, 2009 WL 1351808, at *4 (Del. Ch.
May 14, 2009) (stating that the law will “not extend[] the rights and obligations of contracts
to parties that did not execute them, absent special circumstances”). And even if they were,
an irreparable harm stipulation “does not deprive the Court of its discretion with respect to
one of the critical forms of equitable relief,” AM Gen. Hldgs. LLC v. Renco Gp., Inc., 2016
WL 787929, at *2 (Del. Ch. Feb. 19, 2016), or “force the Court’s hand,” Del. Elevator,
Inc. v. Williams, 2011 WL 1005181, at *15 (Del. Ch. Mar. 16, 2011). Where the facts “do
not warrant a finding of irreparable harm, this Court is not required to ignore those facts.”
AM Gen. Hldgs. LLC v. Renco Gp., Inc., 2012 WL 6681994, at *4 n.49 (quoting Kansas
City S. v. Grupo TMM, S.A., 2003 WL 22659332, at *5 (Del. Ch. Nov. 4, 2003)).
118
   CBS Corp., 2018 WL 2263385, at *5 (quoting Mills Acq. Co. v. Macmillan, Inc., 559
A.2d 1261, 1279 (Del. 1989)).
119
  Id. (alterations and internal quotation marks omitted) (quoting In re Del Monte Foods
Co. S’holders Litig., 25 A.3d 813, 839 (Del. Ch. 2011)).

                                             25
                 a.    Sixth Street’s contention that the Transaction “would force Sixth

Street into an unwanted marriage with a direct competitor in clear breach of Sixth

Street’s contractual rights” is hollow.120 The record indicates that this litigation and

the parallel action in New York were part and parcel of a calculated effort to “muck

up” the Transaction to force a buyback. After admitting the Transaction was not

concerning, Sixth Street saw opportunity in it. Sixth Street sought to impede the

bargain between Dyal III’s upstairs entities and Owl Rock and secure a lowball

buyback of Dyal III’s investment. When those efforts failed, Sixth Street filed this

litigation, months after the Transaction was announced. Sixth Street also threatened

the Transaction through other administrative avenues.

                 b.    Sixth Street’s pursuit of a below-market buyback of Dyal III’s

original $417 million investment threatens the interests of a panoply of parties

interested in the $12.5 billion Transaction, including Neuberger and Owl Rock

investors who are in no way implicated in Sixth Street’s relationship with Dyal III.121

120
      D.I. 159 at 1.
121
   See, e.g., Ward Dep. 254 (“[T]here are all sorts of different things that could happen
that could derail this transaction and cause . . . quite literally billions of dollars of lost value
to Dyal’s investors . . . .”).

                                                26
The balance of the equities counsels against an injunction in Sixth Street’s favor.

The Motion is denied.

                                                      /s/ Morgan T. Zurn
                                                Vice Chancellor Morgan T. Zurn

                                        27