Standard General Master Fund L.P.
Majeske, et al.
Submitted: November 14, 2018
and non-party, Strategic Value Partners, LLC
("SVP"), have moved for partial reargument under
Court of Chancery Rule 59(f) (the "Motion")
following the Court's October 31, 2018 bench ruling (the
"Ruling") in which I granted Plaintiffs' motion
to compel. For the reasons that follow, the Motion is
brought this case challenging, among other things, the White
Energy Holdco, LLC ("Holdco") and White Energy,
Inc. (collectively "White Energy") boards of
directors' use of board committees as a means of
excluding one of their members, Vladimira Mircheva, from
meaningful participation in board-level decision
making. In their counterclaims, Defendants allege
that plaintiffs, Mircheva and Standard General Master Fund
L.P., breached the Holdco operating agreement, the implied
covenant of good faith and fair dealing and fiduciary duties
by releasing confidential information to a competitor and by
interfering with Holdco's selection of a new CEO. In last
month's Ruling, I addressed competing motions for
dispositive relief and Plaintiffs' Motion to Compel. In
this latter motion, Plaintiffs sought certain documents that
Defendants withheld from production on the basis of
privilege. As noted, that motion was granted.
motion for reargument under Court of Chancery Rule 59(f) will
be denied unless the court has overlooked a controlling
decision or principle of law that would have controlling
effect, or the court has misapprehended the law or the facts
so that the outcome of the decision would be
different." Reargument "is only available to
re-examine the existing record, " not to consider
new evidence, entertain arguments not raised previously or
rehash arguments already made. In other words, reargument
motions may not be used to relitigate matters already fully
litigated or to present arguments or evidence that could have
been presented before the court entered the order from which
reargument is sought.
Ruling, I held Defendants had not adequately demonstrated
that Mircheva, as a member of the White Energy boards of
directors, was adverse to White Energy such that the boards
could withhold communications involving the companies from
her on the basis of attorney-client privilege. In the absence
of adversity, I determined that Mircheva's service as
board member and manager entitled her to have access to the
reargument motion is premised on three notations in
Plaintiffs' privilege log that they maintain reveal
Plaintiffs' adversity to White Energy. First, Defendants
point to Plaintiffs' "opposition" to White
Energy's effort to enforce the LLC Agreement at issue in
the Post Union Litigation. Defendants argue, "[s]pecifically,
at the 6/14 Board Meeting, Standard General . . . (i) refused
to permit Mircheva to attend as Standard General's
designated manager, and (ii) claimed that Post Union's
position . . . was 'reasonable.'" These positions,
Defendants maintain, can only be characterized as adverse to
argument is not persuasive. First, this same argument was
raised in opposition to the motion to compel and rejected.
Defendants offer nothing new here to justify reargument.
Moreover, as I stated in the Ruling, "Mircheva's
comments expressing her contrary views about certain board
matters at a board meeting and the fact that certain board
members determined that she could not be a member of the
litigation committee are not enough to infer that she was
adverse to White Energy." Indeed, Defendants concede that
Standard General ultimately took "'no position'
regarding the dispute between the LLC and Post
second argument is that because Plaintiffs sought legal
advice regarding whether to adhere to a term of the existing
LLC Agreement (i.e., appointment of a designated manager), I
should infer that Plaintiffs ceased to support the LLC
Agreement and were thus adverse to White Energy. Again, this
is not cause for reargument. Indeed, it appears Defendants
did not think much of this argument when the motion to compel
was argued given that it merited only passing treatment in a
footnote in their opposition papers and was not mentioned at
all during oral argument. In any event, seeking outside
counsel on how (or even whether) to conform to the LLC
Agreement did not render Plaintiffs adverse to White Energy.
To the contrary, Standard General sought guidance on how to
govern its behavior in accordance with the LLC Agreement.
This behavior is laudable, not adversarial.
these reasons, I remain satisfied that Defendants have failed
to meet their burden of showing that Plaintiffs'
consultation with outside counsel somehow rendered Plaintiffs
adverse to White Energy such that Standard General's
board designee should be denied access to White Energy
documents. Holding otherwise would set a dangerous
precedent. By Defendants' lights, anytime a director
sought outside legal advice regarding matters before the
board, the other directors could assert adversity and block
access to information critical to effective board-level
participation. That is not, or should not be, our law.
last point is that Plaintiffs' privilege log reflects
that Plaintiffs had begun discussions with outside counsel
"in anticipation of litigation" against White
Energy by the time certain documents subject to the motion to
compel were created. Defendants did not advance this argument
in opposition to the motion to compel, despite having had
access to the evidence upon which the argument rests (the
privilege log) all along. Thus, on this basis alone,
reargument is not proper.Moreover, Defendants
acknowledge that the log entries at issue reflect work
product communications between Plaintiffs and outside counsel
regarding the "Post Union and White Energy"
litigation. Without more, this is inadequate to
evidence adversity between Plaintiffs and White Energy that
would justify denying documents to a White Energy board
member, particularly given that Standard General was itself
involved in litigation against Post Union at the same time.
Joinder depends solely on Defendants' arguments. It is,
therefore, denied for the reasons stated above.
foregoing reasons, the Motion is DENIED.