Winklevoss Capital Fund, LLC v. Shaw

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

WINKLEVOSS CAPITAL FUND, )
LLC, TYLER WINKLEVOSS, and )
CAMERON WINKLEVOSS, )
)
Plaintiffs, )
)
v. ) C.A. No. 2018-0398-NAC
)
STEPHEN SHAW, THE )
WESTERMAN TRUST U/T/D )
FEBRUARY 25, 2011, and TREATS!, )
LLC, )
)
Defendants. )

MEMORANDUM OPINION

Date Submitted: March 24, 2024
Date Decided: August 21, 2024

P. Clarkson Collins, Albert J. Carroll, Kirsten A. Zeberkiewicz, MORRIS JAMES
LLP, Wilmington, Delaware; Charles J. Harder, Ryan J. Stonerock, Steven H.
Frackman, Jordan A. Gonzales, HARDER STONEROCK LLP, Los Angeles,
California; Counsel for Plaintiffs Winklevoss Capital Fund, LLC, Tyler Winklevoss,
and Cameron Winklevoss.

Stephen Shaw, Beverly Hills, California; Pro Se Defendant.

COOK, V.C.
This case serves as a reminder that although “[y]ou miss 100% of the shots you

don’t take[,]”sometimes you miss even when shooting at an open net.

The defendants defaulted after ceasing to participate in this litigation and

failing to obey orders of this Court. The operative complaint asked only for

“compensatory damages in appropriate amounts to be determined at trial[.]” So, after

the default, I held a Rule 55(b) hearing to determine the amount of damages. The

plaintiffs submitted a sixty-four-page pre-hearing brief, a set of demonstratives, and

nearly 200 evidentiary exhibits. They even hired an expert who submitted a report

and testified at the hearing.

What could go wrong? A lot.

The plaintiffs make two critical errors. First, they seek $1.3 million in

“rescissory damages” as their primary damages award. In other words, the plaintiffs

changed the remedy they sought in the operative complaint from only seeking

“compensatory damages” to seeking both compensatory and rescissory damages.

Although a court can award relief after trial that is just, equitable, and potentially

different from the remedies specified in the complaint, the same is not true after a

default. In that context, Court of Chancery Rule 54(c) prohibits an award that is

“different in kind” from what the operative pleading requested. Why? Because a

defendant might rationally choose to default and accept the remedy sought. That

option reduces the burdens of litigation and the need to adjudicate cases. But if the

remedy could change, then a defendant who chose to default could be ambushed. I

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therefore cannot award rescissory damages because the plaintiffs did not seek that

relief in the complaint.

Second, the plaintiffs seek as damages the pro rata value of eight corporate

opportunities. But the plaintiffs only value the corporate opportunities based on their

gross revenue, not their profits.

This would be a novel and unprecedented method of calculating the damages

associated with a corporate opportunity, and I reject it. I would have been prepared

to award lost profits, but, with one exception, the plaintiffs did not submit any

evidence to support that calculation, thereby failing to meet their burden of proof.

The one opportunity for which the plaintiffs provided that evidence shows it

generated a net loss.

Notwithstanding these blunders, the plaintiffs prove damages arising from the

misappropriation of funds and a breach of contract. They also show they are entitled

to reasonable attorneys’ fees under a contractual fee-shifting provision.

I. FACTUAL BACKGROUND

Once a party defaults, the well-pled facts in the operative complaint are

deemed admitted.1 The facts therefore come from the Verified Amended and

1 Organovo Hldgs., Inc. v. Dimitrov, 162 A.3d 102, 104–05 (Del. Ch. 2017) (“A default

judgment ‘deem[s] admitted all the well-pleaded facts in the complaint.’” (quoting Hauspie v.
Stonington P’rs, Inc., 945 A.2d 584, 586 (Del. 2008))).

2
Supplemental Complaint (the “Complaint”) and the evidentiary record developed at

the Rule 55(b) hearing.2

A. The Investment

Defendant Treats!, LLC (“Treats”) is a Delaware limited liability company that

owns and operates Treats! (“Treats! Magazine”).3 Plaintiffs describe it as a “fine art

print and digital magazine”4; it seems to specialize in nude or semi-nude

photography. Defendant Stephen Shaw was Treats’ sole member and the publisher

and editor-in-chief of Treats! Magazine.5 In March 2012, Shaw transferred his entire

member interest to defendant The Westerman Trust U/T/D February 25, 2011 (the

“Trust,” together with Treats and Shaw, “Defendants”).6 Shaw was the Trust’s

settlor, trustee, and sole beneficiary.7

In August 2012, plaintiffs Tyler and Cameron Winklevoss (together, the

“Winklevoss Brothers”) invested in Treats through their investment fund, plaintiff

Winklevoss Capital Fund, LLC (“Winklevoss Capital,” together with the Winklevoss

2 Winklevoss Cap. Fund, LLC v. Shaw, C.A. No. 2018-0398-NAC, Docket (“Dkt.”) 246,

Verified Am. and Supp. Compl. (“Am. Compl.”); Dkt. 301, Tr. 3-15-2024 Rule 55(b) Evid. Hr’g
(“Tr.”). Citations in the form “PX-__” refer to the exhibits the plaintiffs submitted in advance
of the Rule 55(b) hearing.

3 Am. Compl. ¶¶ 1, 10.

4 Id.

5 Id. ¶¶ 17–18.

6 Id. ¶ 19.

7 Id. ¶¶ 9, 19; PX-11.

3
Brothers, “Plaintiffs”).8 Winklevoss Capital purchased 1,310,000 Series A

Convertible Preferred Units (approximately 38.24% of Treats’ equity) for $1,310,000

(the “Investment”).9 The transaction was governed by the Treats!, LLC Series A

Preferred Unit Purchase Agreement (the “Purchase Agreement”) between

Winklevoss Capital, the Trust, and Treats. Shaw signed for both entities, and he

retained the remaining majority member interest through the Trust.10

The Purchase Agreement attached as Schedule A the Amended Limited

Liability Company Agreement (the “LLC Agreement”) that governed Treats’ internal

affairs.11 The LLC Agreement designated Shaw as Treats’ sole manager.12 After

making the Investment, Treats borrowed $20,000 from Winklevoss Capital under a

promissory note that called for 2% annual interest (the “2012 Promissory Note”).13

B. The Agreements

The LLC Agreement and Purchase Agreement placed certain restrictions on

Shaw and Treats.

• Intellectual Property: Section 2.17 and Schedule 2.17 of the Purchase
Agreement provide that Treats was the “sole and exclusive owner of, or has

8 Am. Compl. ¶¶ 22, 26.

9 Id.; PX-11.

10 PX-11.

11 Id.

12 Id. at 76, 110; Am. Compl. ¶¶ 26, 31.

13 Am. Compl. ¶ 27; PX-23 at 1. No payments have been made on the 2012 Promissory
Note. See Tr. at 40.

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exclusive license to[,]”14 among others, the trademarks “treats!” and “t!”15 But
at the time, the Trust “owned” those trademarks,16 so Schedule 2.17 required
Shaw to “cause the aforementioned trademarks to be assigned to [Treats.]”17

• Entity Separateness: Section 8.02(c) of the LLC Agreement requires Shaw
as manager to “cause [Treats] to conduct its business and operations separate
and apart from that of any Member or Manager . . . .”18 This provision also
expressly prohibits Shaw from causing the comingling of Treats’ funds and
other assets.19 And it requires that Shaw cause Treats to maintain separate
books and financial records and conduct business with third parties in its own
name.20

• Equity, Asset Sales, and Debt: Section 4.06(b) of the LLC Agreement
provides that “except with the prior approval” from Winklevoss Capital, Shaw
“shall not permit or cause [Treats]” to “increase or decrease” the “number of
authorized Units of any class or series of Units[,]” enter into the “sale, lease
or conveyance of all or substantially all of” Treats’ assets, or “incur any
indebtedness in excess of the aggregate amount of $250,000.00.”21

• No Impairment: Section 3.03(j) of the LLC Agreement (1) prohibits Treats
from taking certain acts to avoid its obligations as set out in the terms of the
LLC Agreement and (2) creates an affirmative obligation for Treats to “at all
times in good faith assist in . . . the taking of all such action as may be
necessary or appropriate in order to protect [Winklevoss Capital] against
impairment.”22

14 PX-11.

15 Id. at 12, 51.

16 Id.

17 Id.

18 Id. at 110–11.

19 Id.

20 Id. Section 12.05 of the LLC Agreement also provides that “[t]he funds of [Treats]
shall not be commingled with the funds of any other Person.” Id. at 133.

21 Id. at 98–99.

22 Id. at 93.

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• Attorneys’ Fees: Section 15.15 of the LLC Agreement includes a fee-shifting
provision that entitles the “prevailing party” in any action “arising out of or
relating to this Agreement” to the payment of its reasonable attorneys’ fees.23

C. Fallout

Shortly after the Investment, Shaw and the Winklevoss Brothers begin to

clash.24 On one side, Tyler Winklevoss felt that, despite sharing “alignment on the

vision[,]” he and Shaw disagreed on Shaw’s “day-to-day decision-making[.]”25 Shaw,

for his part, blamed the Winklevoss Brothers.26 In particular, Shaw believed the

Winklevoss Brothers had an obligation to publicize Treats and generate excitement

and brand awareness, which they did not do.27

1. From Buyout To Shakedown

By mid-2013, Shaw felt stifled. In an email to Tyler Winklevoss, Shaw asserted

that he had upheld his end of the bargain. He thought that meant giving the

Winklevoss Brothers “the access [they] wanted, introduc[ing them] to the people, the

girls[, and] the lifestyle [they] wanted.”28

23 Id. at 143.

24 Tr. at 45.

25 Id. at 46.

26 Id. at 48.

27 See id.; Am. Compl. ¶¶ 3, 46–48, 82–83; PX-32 (“To be absolutely clear that is why

I sold you the stake[].”). Notably, the Purchase Agreement included an integration clause.
See PX-11 at 24 (“This Agreement and the documents referred to herein constitute the entire
agreement among the parties and no party shall be liable or bound to any other party in any
manner by any warranties, representations or covenants except as specifically set forth
herein or therein.”).

28 PX-32.

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But Shaw believed the Winklevoss Brothers had not upheld their end of the

deal. Shaw explained that he chose the Winklevoss Brothers as Treats’ investors

because they “are the founders of Facebook, . . . celebrities in the business and media

world[,] and [they] represented tangible value to [Shaw] (someone who is trying to

create a brand from a standing start).”29 Continuing, Shaw wrote that he allowed

Winklevoss Capital to invest so that he could “promote, advertise, speak of, network,

[and] basically tell the world who [his] new investors / partners were.”30 But that

went awry when the Winklevoss Brothers “ma[de] it clear [he] could never say

anything of [Winklevoss Capital’s] investment.”31

In May of 2013, Shaw asked about buying out Winklevoss Capital.32 He

suggested the Winklevoss Brothers put “forward an offer” to get the buyout

discussions rolling.33 Tyler Winklevoss proposed a minimum price of $1.3 million.34

Shaw called the offer “a joke” and declined.35 He responded that he would “have no

choice [but] to hand this over to [his] lawyers if [they] d[id]n’t get sensible and fair[].”36

29 Id.

30 Id.

31 Id.

32 See id.; Tr. at 51.

33 PX-32; Tr. at 51.

34 See PX-32; Tr. at 52–53.

35 PX-32.

36 Id. This was not the last time Shaw tried to buy out Winklevoss Capital. In
November 2013, he wrote that Treats “currently has less than $25,000 cash on hand” and
that, coincident with a capital raise, he “would be prepared to buy[]out” their “shares for a

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Although the Winklevoss Brothers did not know it at the time, a forensic

accountant later determined that Shaw had depleted the Investment funds by June

2013, if not earlier.37 The forensic accountant concluded that “at least $339,000 of

the . . . Investment[] was spent by Stephen Shaw on matters other than the

operations of [Treats].”38

Having run through the Investment, Shaw began looking for new ways to raise

capital. First, he contacted Peter Cohen and painted quite a rosy picture of Treats,

claiming it was valued at “around $9 million.”39 No deal materialized.

Shaw’s next option was “a shakedown.”40

In August 2013, Shaw forwarded an email to Paul Kemsley.41 Tyler

Winklevoss had originally sent the email to Shaw in October 2012. In the forwarded

email, Tyler Winklevoss asked Shaw to “throw a casting . . . for girls to model at”42 a

promotional 2012 Halloween party for Treats.43 Tyler Winklevoss wanted Shaw to

combination of $250,000 cash and warrants representing 5% equity in the recapitalized
company.” PX-37. The Winklevoss Brothers rejected this proposal. See Tr. at 62. And in
May 2015, Shaw described Treats as “hanging on by a thread & about to go into
bankruptcy[,]” then made an offer to buy out Winklevoss Capital for $100,000. PX-55.
Winklevoss Capital rejected that offer too. See Tr. at 65.

37 See Tr. at 175–76.

38 PX-125.

39 See PX-33.

40 Tr. at 70 (Tyler Winklevoss).

41 See PX-20.

42 PX-21.

43 See Tr. at 40–41.

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“let all the girls come[,] call the hot ones up, invite them, and then I can shag them

;)[.]”44 Tyler Winklevoss later testified that the email was “a joke that Mr. Shaw had

talked about with [him] before, and [he] always took it as a joke, and [he was] actually

parroting back [Shaw’s] joke to him. If [one] look[s] at the vernacular, it’s British

idiom, idiomatic.”45

Kemsley thought the email was “gold” and would be “game over” for the

Winklevoss Brothers.46 Shaw responded that “[t]here are SO many like

that . . . [a]sking [Shaw] to introduce them to under[]age models[, p]hotograph their

girlfriends[, and i]ntroduce them to . . . celebs.”47

Those emails suggest that Shaw planned to use the emails in conjunction with

a buyout offer from a third party to get Winklevoss Capital to sell its equity at a low

price. Shaw felt the Winklevoss Brothers would sell because “[t]hey don’t want it [to

be] public knowledge that they are involved in the company or that they are scumbags

looking to get laid.”48

By September 2013, Shaw believed he found someone “who w[ould] buy out the

[the Winklevoss Brothers] . . . .”49 But the following month, Shaw backed down—

44 PX-21.

45 Tr. at 161.

46 See PX-21.

47 Id.

48 PX-35.

49 Id.

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pivoting to a new strategy. He would “keep [the Winklevoss Brothers] in & go around

them to grow the business.”50

2. Betrayal

Going around the Winklevoss Brothers meant breaching his fiduciary and

contractual duties. There was a long list of violations.

a. The Treats Warrants

First, Shaw borrowed $225,000 from Matthew Gorelick under a loan

agreement on January 7, 2014. The agreement also granted Gorelick warrants to

purchase 34,257 common units in Treats.51

b. Circus Magazine

Second, Shaw formed another magazine publisher named Circus Media &

Publishing Group LLC (“Circus”) to publish Circus magazine.52 Although Circus

magazine was technically distinct from Treats! Magazine, Shaw promoted Circus

using Treats! Magazine in ways that harnessed Treats! Magazine’s reputation and

image to benefit Circus and Circus magazine.53 Circus also tried to hire Aubrey Day

as its editor, but with Treats paying Day as a consultant.54

50 PX-36.

51 PX-58. The note roughly corresponds to a “Long Term Liabilit[y]” that appears on
Treats’ 2014 Balance Sheet titled “Loan from Partner - SS.” PX-12 at Treats 2014 Balance
Sheet. The balance of the liability at the end of 2014 was $233,000. Id.

52 See PX-42; PX-43.

53 See PX-156.

54 See PX-44.

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c. The Circus/Treats Deal

Third, through Circus, Shaw borrowed between $625,000 and $1,000,000 from

Great Fortune Capital Ltd. (“Great Fortune”).55 The governing agreements identified

Circus—not Treats—as the “sole legal and beneficial owner free from any

encumbrances of all intellectual property rights anywhere in the world required to

operate the ‘Treats’ and ‘Circus’ physical and digital magazines and their respective

websites.”56

The agreements turned out to be part of a larger $2.25 million investment

arrangement between Circus and Great Fortune that contemplated an exclusive

partnership and Great Fortune becoming a 25% member of Circus (the “Treats/Circus

Deal”).57 Shaw’s ultimate plan was for Great Fortune to “own part of [T]reats[,]” but

that would not happen “until the [Winklevoss Brothers we]re taken out.”58

d. The 2015 Oscars Party

Fourth, Shaw received “over $240k for the Oscar event in sponsorship &

advertising” (the “2015 Oscars Party”).59 Shaw branded the 2015 Oscars Party as a

joint event for both Treats and Circus. For example, on February 23, 2015, Treats

55 See PX-45; PX-53.

56 PX-45.

57 PX-53.

58 Id. Winklevoss Capital did not approve the side deal. See Tr. at 98.

59 PX-53. This sum is partially substantiated by three $50,0000 credits to Circus’s
bank account in February 2015. PX-75. These payments correspond to entries in a ledger of
“Circus income” from “Event Sponsors.” PX-60.

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posted a photo on Instagram of a sign that read “CIRCUS”60 and bore the caption:

“Spotted at the Treats! . . . Sunday Oscars Party at #TreatsVilla . . . Stay tuned!

#CircusMagazine . . . #treatsmagazine . . . .”61

e. The Treats Calendar Documentary

Fifth, Shaw developed a plan to set up a new company called “[Steve] Shaw &

Co. [(“ShawCo”)], which w[ould] be a production, events, media & publishing

company[.]”62 Shaw planned to “bring[] circus & treats into” ShawCo,63 and ShawCo’s

promotional material and pitch decks relied heavily on the Treats brand.64 In June

2016, Shaw “signed a big deal with Starz tv [sic] network to make an hour

documentary on the making of a 2017 calendar” (the “Treats Calendar

Documentary”).65 Shaw described the calendar as the “TREATS! 2017 Summer

Calendar,”66 then told one of his accountants that the deal “needs to run through

60 See PX-49.

61 Id. (second omission in original).

62 PX-65.

63 PX-67; PX-72.

64 See, e.g., PX-68. For example, in one ShawCo pitch deck, at least thirty of the forty-
two slides explicitly reference the Treats brand, magazine, or some business venture. See id.
On one such slide, titled “Defining Shaw[Co,]” Shaw even describes ShawCo as “building on
our own strong foundations and connections to a clearly defined audience of influencers and
tastemakers, Treats! is now perfectly positioned to establish itself as the world’s leading
luxury lifestyle media group[.]” Id.

65 PX-64.

66 PX-68.

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Shaw[Co.]”67 ShawCo ultimately received $556,000 attributable to the Treats

Calendar Documentary.68 None went to Treats.69

f. The Treats Summer House

Seventh, ShawCo took $170,000 in payments for two events hosted at the

“Treats Summer House” in Malibu.70 Shaw used his Treats email address to ask an

events production company to wire $170,000 to an account for Steve Shaw

Photography, Inc. (another of Shaw’s entities).71 After the payment went through,

Shaw recorded it in ShawCo’s general ledger.72 There is no evidence Treats received

any of these funds.73

67 PX-67.

68 Steve Shaw Photography Inc. received a $360,000 check from Starz Entertainment

LLC, which Shaw credited to ShawCo. Compare PX-74, and PX-75, with PX-17 at ShawCo
General Ledger. ShawCo received three payments, each for $57,000, and one for $25,000
that Shaw credited to ShawCo. Compare PX-76, PX-78, PX-79, and PX-8, with PX-17 at
ShawCo General Ledger. Separately, it seems Taschian recognized the risk of directing the
money from the Treats Calendar Documentary to an entity other than Treats. Taschian
cautioned Shaw to “be sure things are resolved with the Treats partners so there wouldn’t be
an opportunity for them to come after Shaw[Co] (for instance if [Shaw] used the Treats name
or any material etc.).” PX-67.

69 See PX-12 at Treats 2016 General Ledger.

70 See Tr. at 102.

71 See PX-73.

72 Compare id., with PX-17 at ShawCo General Ledger.

73 See PX-12 at Treats 2016 General Ledger. As with the Treats Calendar
Documentary, another of Shaw’s accountants, Christine Barton, expressed concern about
Shaw’s diversion of these funds to one of his own entities instead of Treats. Barton cautioned
that Shaw “should avoid activity under the [ShawCo] name until [he] got something in
writing” with the Winklevoss Brothers because she “worr[ied the Winklevoss Brothers]
w[ould] claim % ownership for any similarity or reference to Shaw and Treats.” PX-71.

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g. Treats Takes on Debt

Seventh, Shaw caused Treats to take on debt, then used the debt to justify a

an offer to buy out Winklevoss Capital for $50,000.74 Shaw indicated that Treats was

insolvent and that he thought it was better to “forgive [his] own back-pay and try to

continue th[e] endeavor on [his] own” rather than to “formally bankrupt” Treats.75

Winklevoss Capital rejected the offer.76

Treats had a lot of debt, but, according to its financial documents, most of it

was owed directly or indirectly to Shaw.

• $313,000 was for “Unpaid Guarantee Due to SS,”

• $228,000 was for “Loan From Partner - SS,”

• $303,133.55 was for “[Circus] Business Loan,”

• $122,985.94 was for a loan from “Steve Shaw Photography,” and

• $19,754.86 is for a loan from “Member Steve Shaw.”77

That left only $14,862.35 in credit card debt and a small business loan as the third-

party obligations.78 The only other identifiable debt was the 2012 Promissory Note.79

74 See PX-93.

75 Id.

76 See Tr. at 68.

77 See PX-12 at Treats 2017 Balance Sheet.

78 See id.

79 See generally PX-23.

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h. The 2017 Oscars Party

Eighth, Shaw organized another Oscars party in 2017 (the “2017 Oscars

Party”) and made arrangements using his Treats email address.80 It is unclear

whether Treats, Circus, or both were responsible for the event.81 Regardless, Treats

never received any payments for it.82 Instead, ShawCo received $75,000 for the

event.83

i. The Screen Vision Sponsorship

Ninth, in June 2017, Shaw hosted a “lunch & Rosé” event he described as “a

soft launch at Cannes Lions of our film brand magazine that will cover movies & high

end tv, called Circus [magazine.]”84 Shaw sent the email from his Treats email

80 See PX-83.

81 Although Shaw later posted footage of the event titled “Circus Magazine Oscar
Party 2017,” he posted the video from his “TREATS! Media” Vimeo account. PX-97. And in
2016, prior to the event, Shaw described his Oscars parties as “TREATS! EVENTS,” although
he also called the 2017 Oscars Party the “CIRCUS[ ]OSCARS VIEWING PARTY AND
OSCARS AFTER HOURS.” PX-68.

82 PX-12 at Treats 2017 General Ledger.

83 See PX-17 at ShawCo General Ledger; PX-81; PX-84. Once again, Shaw’s
accountants expressed concern. PX-85 (Barton wrote that “[she] had a long chat with Nina
yesterday. She fe[lt] it[ was] imperative that [Shaw] settle and conclude [his] agreement with
the [Winklevoss Brothers] before signing anything, either personally or with the other
entities. She felt there is a strong argument that the Treats brand helped with the success
of the others, and that [Shaw was] attempting to take income from Treats/them.”).

84 PX-88.

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address.85 Screen Vision Media sponsored the event and paid $100,000 to Circus (the

“Screen Vision Sponsorship”).86 Treats again received none of the revenue.87

D. Shaw’s Threats of Litigation Cause the Winklevoss Brothers To Sue

In 2018, Shaw threatened to sue the Winklevoss Brothers in an effort to

pressure them to abandon their stake in Treats. Acting at Shaw’s direction, lawyers

told the Winklevoss Brothers “to walk away from [their] equity” and “pay Mr. Shaw

$10 million,” or else Shaw would file a lawsuit.88 Shaw’s leverage came from having

“incriminating video, pics, and emails of the guys asking to get laid.”89 Shaw thought

that because Winklevoss Capital was purportedly “in the middle of a [$]100 mill[ion]

media deal,” the Winklevoss Brothers “w[ould] cut a check for [$]10 mill[ion] to make

[the lawsuit] go away.”90

But the Winklevoss Brothers did not succumb to Shaw’s threats.91 Instead,

they filed this lawsuit in June 2018.92

85 See id.

86 See PX-86; PX-89.

87 PX-12 at Treats 2017 General Ledger.

88 Tr. at 69–70.

89 PX-98.

90 Id.

91 See Tr. at 70.

92 Dkt. 1, Verified Compl. (“Original Compl.”).

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E. Shaw Engages In More Self-Dealing

After the Winklevoss Brothers sued, Shaw canceled the trademarks “t!” and

“treats!” He had never caused the Trust to assign those marks to Treats as called for

by the Purchase Agreement.93

In 2020, a new, UK-based entity, Treats Media UK Ltd. (“Treats UK”)

registered a trademark in the United Kingdom, identical to the old “treats!”

trademark.94 Treats UK was incorporated two days before it registered the

trademark.95 Shaw was its only officer.96 In 2022, Shaw registered a new trademark,

“TREATS!” and assigned it to ShawCo.97 Then, in 2023, Treats UK sought three more

UK trademarks: “treats,” “treats+,” and “Treats.”98 Those efforts coincided with

Treats UK launching a new, online venture called treats+.99

Around the same time Treats UK registered the “treats!” trademark, Shaw

wired a total of $40,000 from Treats to ShawCo (the “2020 Wires”),100 referencing an

outstanding loan.101 Shaw also routed other payments to ShawCo. In 2021, ShawCo

93 See PX-127; PX-128.

94 See PX-131.

95 See PX-122.

96 See id.

97 See PX-129.

98 PX-139.

99 See PX-141; PX-134; PX-133.

100 Compare PX-131, with PX-102, PX-103, and PX-104.

101 See PX-102; PX-103; PX-104.

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received a total of $195,000 from Synapse Financial Technologies (the “2021

Wires”),102 apparently for marketing and content creation.103 And in early February

2022, ShawCo received $60,000 from Rpz La LLC,104 a business in the

“restaurant/nightclub” industry (the “2022 Wires”).105 But rather than payments for

work for ShawCo, the payments seem to relate to a Super Bowl Party at MainRo

associated with Treats.106

F. Procedural History

After filing the original complaint,107 Plaintiffs conducted extensive discovery.

They deposed Kemsley and Gorelick, Shaw’s accountants (Taschian and Barton), and

his business associates (Severs and Day).108 Plaintiffs also obtained a lot of

102 See PX-105; PX-107; PX-109; PX-120.

103 PX-105 at 1; PX-107; PX-120.

104 PX-113.

105 PX-152.

106 The party is documented by three separate posts tagging Treats’ Instagram account

and including corresponding brand-related hashtags. Compare PX-114, PX-115, and PX-116,
with PX-113. Moreover, the name, “MainRo,” appears to be a play on words of the first name
of the sole person linked to Rpz LA LLC, Romain Zago. PX-152. Further connecting Treats
to Zago, “@treatsmag” commented on one of the three Instagram posts, tagging
“@romainzago[.]” PX-116. Separately, ShawCo received an unidentified amount of revenue
through a venture called NuMuses. See, e.g., PX-102; PX-104. In March 2018, Barton wrote
Taschian that ShawCo “[wa]s receiving . . . orders for NuMuses.” PX-98.

107 Original Compl.

108 See Dkt. 291, Pls.’ Pre-Evid. Hr’g Br. (“Pls.’ Br.”) (citing to deposition transcripts

for these individuals).

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documents. Despite Shaw’s resistance,109 Plaintiffs secured electronically stored

information from Shaw’s email addresses and devices.110

Then, in February 2023, Shaw stopped participating in this action. The week

of his scheduled deposition, roughly six weeks before the planned start of trial, Shaw

fired Defendants’ counsel and asked for thirty days to retain new counsel. I granted

that request, but explained in my order that Treats and the Trust “will not be

permitted to proceed in this action except through counsel” and that their “failure to

have counsel enter” an appearance “within 30 days may subject [them] to a motion

for default judgment.”111 Shaw failed to retain new counsel for himself or the

entities,112 and he never sat for a deposition—even after I ordered it.113

109 See Dkt. 44, Pl. Winklevoss Cap. Fund, LLC’s Mot. Compel Further Produc. Docs.

(explaining production deficiencies).

110 See Dkt. 65, Stip. and Order Governing “Quick Peek” Treatment of Select Docs.

111 Dkt. 225, Order Granting Mot. Withdraw at 2; see Dkt. 221, Mot. Withdraw as

Counsel for Defs. ¶¶ 2–3, 6; Dkt. 228, Tr. of 2.28.23 Telephonic Status Conf. and Ruling on
Mot. Withdraw as Counsel at 6, 9–10.

112 See Dkt. 290, Tr. 11-14-2023 Oral Arg. Pls.’ Mot. Default J. (“Default J. Tr.”) at 7.

113 See id. at 32. Shaw failed to sit for his ordered deposition despite substantial efforts

by Plaintiffs (and this Court) to accommodate his purported travel hurdles. See id. (“[E]ven
despite having given him ample opportunity to sit for his deposition, Mr. Shaw did not do so.
The record reflects that he had clear notice of his obligations” but “[h]e failed to comply.”);
Dkt. 251, Order Granting Pls.’ Mot. Compel Def. Stephen Shaw to Appear for Dep. at 3
(permitting deposition by Zoom or at a mutually agreed upon location); Dkt. 257, Tr. 6-7-2023
Telephonic Hr’g Re Mot. Compel and Rulings of Ct. at 28–30 (same); Dkt. 271, Pls.’ Mot. for
Default J. (“Mot. Default J.”) Ex. 12 (Plaintiffs offering to meet Shaw anywhere in the world
to depose him). Compare Mot. Default J. Ex. 6–7 (Shaw representing he was unable to travel
internationally from the United Kingdom to sit for deposition due to “passport issues”), with
id. Ex. 19 (suggesting Shaw was traveling internationally).

19
A few months later, Plaintiffs filed the operative Complaint. It asserts four

claims: Count I for breach of contract arising from the Purchase Agreement and the

LLC Agreement; Count II for breach of contract arising from the 2012 Promissory

Note; Count III for breach of fiduciary duty against Shaw; and Count IV for

declaratory relief.114 Plaintiffs also added a variety of factual details gleaned from

discovery.115

Defendants never answered the Complaint.116 Plaintiffs accordingly moved for

default judgment.117 On November 14, 2023, after due notice, I held a hearing, and

Shaw did not attend.118 At the hearing, I found Shaw in default, citing his failures to

answer the Complaint, to appear for his deposition, and to obey the orders and

deadlines of this Court.119 I also found Treats and the Trust in default for their

prolonged failure to obtain counsel.120

114 See Am. Compl. ¶¶ 56–80.

115 See, e.g., id. ¶¶ 1, 36, 39, 41, 42, 63.

116 See Default J. Tr. at 32–33 (“Plaintiffs filed an amended complaint.
And I entered
an order setting a deadline for the defendants in this matter to answer the amended
complaint. There was clear notice of the obligation, and no answer has been filed. Indeed,
no counsel has entered an appearance on behalf of the entity defendants in this matter as
replacement counsel, let alone answered the amended complaint on behalf of the entity
defendants.”).

117 Mot. Default J.

118 See Default J. Tr. at 28 (“No representative of the defendants is present today.

Neither Mr. Shaw nor counsel for the entity defendants is present, and no meaningful
objection papers have been submitted.”).

119 See id. at 28–36.

120 See Dkt. 285, Order and Entry of Default J. Against Defs.; Default J. Tr. at 28–35.

20
On March 15, 2024, I held a Rule 55(b) hearing to determine the amount of

damages.121 Shaw appeared pro se. Despite having failed to meet any of the

requirements to participate at the hearing, I permitted Shaw to cross-examine

Plaintiffs’ witnesses.122

II. LEGAL ANALYSIS

Court of Chancery Rule 55(b) provides as follows: “[I]f, in order to enable the

Court to enter [default] judgment or to carry it into effect, it is necessary to take into

account or to determine the amount of damages . . . , the Court may conduct such

hearings or order such references as it deems necessary and proper.”123

“Typically, the sole focus . . . is the amount of damages owed to the plaintiff,

which is determined by the trial court judge.”124 “The Court’s findings on damages

are based on a preponderance of the evidence.”125 Under that standard, “evidence

121 I entered a scheduling order governing the Rule 55(b) hearing on December 1, 2023.

See Dkt. 289, Sched. Order Governing Evid. Hr’g. Shaw was aware of the deadlines set out
therein since Plaintiffs served copies of the order on Defendants and emailed a copy of the
order to Shaw. See Dkt. 296, Aff. Albert J. Carrol Re Service of Sched. Order Governing Evid.
Hr’g. Shaw responded to the email: “Frackman[,] GO F**K YOURSELF.” Id. Ex. C.

122 See Tr. at 15–17.

123 Tack v. Lipetz, Tr. of Mary Meade Lipetz Revocable Tr. Dated Dec. 6, 2007, as

Amended & Completely Restated on June 3, 2010, 2021 WL 4595660, at *3 (Del. Ch. Oct. 6,
2021) (alterations in original) (quoting Ct. Ch. R. 55(b)).

124 Id.

125 Id.

21
that is unrebutted when presented by one side should be considered conclusive.”126

But a plaintiff cannot recover on claims that are legally insufficient.127

Plaintiffs bear the burden of proving damages.128 “[T]he quantum of proof

required to establish the amount of damage is not as great as that required to

establish the fact of damage[,]” but “the court may not award damages based on mere

speculation or conjecture where a plaintiff fails adequately to prove damages.” 129

That does not mean a party must prove damages with scientific precision. Where the

amount of damages is unclear, “[r]esponsible estimates of damages that lack

mathematical certainty are permissible so long as the court has a basis to make such

a responsible estimate.”130 But a failure to “connect[] the dots between the harms”

suffered and “the causes of action” proves fatal to a plaintiff seeking a damages

judgment.131

126 Paton v. Yancy, 2014 WL 4674600, at *2 (Del. Super. Sept. 22, 2014) (cleaned up)

(quoting Amalfitano v. Baker, 749 A.2d 575, 578 (Del. 2001)).

127 See Hauspie, 945 A.2d at 586 (“[T]he effect of a default in answering . . . is to deem

admitted all the well-pleaded facts in the complaint. A plaintiff is only entitled to a default
judgment if those facts, taken together, state a claim upon which relief can be granted.”); 10A
Charles Allen Wright & Arthur R. Miller, Federal Practice and Procedure § 2688.1 (4th ed.
2014) [hereinafter Wright & Miller] (“[I]t remains for the court to consider whether the
unchallenged facts constitute a legitimate cause of action, since a party in default does not
admit conclusions of law.”).

128 See Dill v. Dill, 2016 WL 4127455, at *2 (Del. Super. Aug. 2, 2016).

129 Sullivan v. Watson, 2023 WL 3487773, at *2 (Del. Super. May 16, 2023) (ORDER)

(footnotes and internal quotation marks omitted).

130 Great Hill Equity P’rs IV, LP v. SIG Growth Equity Fund I, LLLP, 2020 WL 948513,

at *20 (Del. Ch. Feb. 27, 2020).

131 See Sullivan, 2023 WL 3487773, at *3–4 (finding “no basis to award damages”).

22
Those standards apply even to a proven breach of the duty of loyalty, for which

“recovery is ‘not to be determined narrowly’”132 and “[a]ny uncertainty in awarding

damages is resolved against the wrongdoer.”133 Notwithstanding the burden-shifting

implications of the entire fairness test, to “obtain a meaningful remedy for a breach

of duty,” the burden of showing damages arising from the breaches remains with the

plaintiff.134 Thus, “[i]t remains the law . . . that ‘when acting as the fact finder, this

132 Ravenswood Inv. Co., L.P. v. Est. of Winmill, 2018 WL 1410860, at *19 (Del. Ch.

Mar. 21, 2018) (quoting Thorpe v. CERBCO, Inc., 676 A.2d 436, 445 (Del. 1996)) (rejecting
request for compensatory damages for failure to present evidence to support such award after
determination of breach of loyalty), aff’d, 210 A.3d 705 (Del. 2019).

133 Hampshire Gp., Ltd. v. Kuttner, 2010 WL 2739995, at *50 (Del. Ch. July 12, 2010).

134 Metro Storage Int’l LLC v. Harron, 275 A.3d 810, 859 (Del. Ch. 2022) (“To obtain a

meaningful remedy for a breach of duty, a plaintiff must establish by a preponderance of the
evidence either that the plaintiff suffered harm or that the fiduciary wrongfully received a
benefit. A plaintiff also must prove by a preponderance of the evidence that a sufficient
causal linkage exists between the breach of duty and the remedy sought to make the remedy
an apt means of addressing the breach.”); see also Macrophage Therapeutics, Inc. v. Goldberg,
2021 WL 2582967, at *19 (Del. Ch. June 23, 2021) (explaining that “[i]n a fiduciary duty
action, ‘plaintiffs need not plead (or prove at trial) that they have been injured as an element
of their claim[,]’” but, “[i]n the absence of sufficient proof of a specific injury, the court will
issue a declaration that the defendant breached his fiduciary duties and award nominal
damages” and concluding that “[g]iven that [the plaintiff] failed to prove a causal link
between its claimed damages and the proven breaches of fiduciary duty, the Court will issue
the declaratory judgment [the plaintiff] has requested and award nominal damages in the
amount of $1.00” (footnotes omitted)); Ravenswood, 2018 WL 1410860, at *19–20 (“At trial,
[p]laintiff failed to present any evidence in support of its prayers for relief. . . . As a general
matter, I agree with [p]laintiff that compensatory damages are an appropriate means by
which to remedy a breach of the duty of loyalty. Plaintiff, however, presented absolutely no
evidence upon which the Court could justify an award of compensatory damages to the
Company.” (footnote omitted)); Carlson v. Hallinan, 925 A.2d 506, 540 (Del. Ch. 2006)
(“Plaintiffs’ claim for breach of fiduciary duties . . . fails, in part, for failure to prove money
damages.”).

23
Court may not set damages based on mere ‘speculation or conjecture’ where a plaintiff

fails adequately to prove damages.’”135

A. Count III—$145,037.43

In their briefing, Plaintiffs asked for “rescissory damages in the amount of

[Winklevoss Capital’s] $1.3 million investment and $897,000 in pro rata damages for

the established stolen corporate opportunities.”136 Plaintiffs attribute those totals to

Count III for breach of fiduciary duty.137 Plaintiffs’ request fails on multiple grounds.

As I explain below, Plaintiffs ignore Rule 54(c) by requesting damages not set out in

the Complaint and fail to identify any legally proper evidentiary basis on which I can

award damages for the usurped corporate opportunities.

135 OptimisCorp v. Waite, 2015 WL 5147038, at *82 (Del. Ch. Aug. 26, 2015) (rejecting

“speculative and unreliable” damages calculation as basis for award following finding of
breach of loyalty), aff’d, 137 A.3d 970 (Del. 2016); see also Ravenswood, 2018 WL 1410860, at
*2, *20 n.175 (collecting cases) (“While this court endeavors always to remedy breaches of
fiduciary duty, especially breaches of the duty of loyalty, and has broad discretion in
fashioning such remedies, it cannot create what does not exist in the evidentiary record, and
cannot reach beyond that record when it finds the evidence lacking. Equity is not a license
to make stuff up.”); Daniel J. Wolfe & Michael A. Pittenger, Corporate and Commercial
Practice in the Delaware Court of Chancery, §16.09[c], at 16-128 & n.89 (2022) [hereinafter
Wolfe & Pittenger] (explaining that in the breach of the duty of loyalty context where “the
Court of Chancery has broad discretion to fashion remedies, damage awards must always be
supported by some level of proof” and collecting cases (emphasis added)).

136 Pls.’ Br. at 52.

137 See id. at 49–52 (claiming the value of usurpations of corporate opportunities and

misappropriations exceed $3.6 million but settling for “rescissory damages in the amount of
[Winklevoss Capital’s] $1.3 million investment and $897,000 in pro rata damages for the
established stolen corporate opportunities.”).

24
1. Rescissory Damages—$0

Plaintiffs request $1.3 million in “rescissory damages” in their briefing.138 But

neither the operative Complaint nor the original complaint includes a request for

rescissory damages.139 They only request “compensatory damages in appropriate

amounts to be determined at trial” and “such other and further relief as the Court

deems just and appropriate.”140

But, having failed to request rescissory damages in their pleadings, I am

unable to enter a judgment for rescissory damages. Court of Chancery Rule 54(c)

provides that:

A judgment by default shall not be different in kind from or exceed in
amount that prayed for in the demand for judgment. Except as to a
party against whom a judgment is entered by default, every final
judgment shall grant the relief to which the party in whose favor it is
rendered is entitled, even if the party has not demanded such relief in
the party’s pleadings.141

Put another way, “Rule 54(c) states that a judgment by default is limited to the

relief demanded in the complaint.”142 And indeed, “[i]t would be fundamentally

138 See id. at 34–38, 52.

139Indeed, even the Plaintiffs’ motion for default judgment and the briefing filed
therewith includes no such mention of rescissory damages.

140 Am. Compl. at 29; Original Compl. at 14–15.

141 Ct. Ch. R. 54(c); see also Steinberg v. Shields, 152 A.2d 113, 115 (Del. Ch. 1959) (“A

judgment by default shall not be different in kind from or exceed in amount that prayed for
in the demand for judgment.” (quoting Ct. Ch. R. 54(c))); Wright & Miller § 2663 (“A judgment
in a default case that awards relief that either is more than or different in kind from that
requested originally is null and void and defendant may attack it collaterally in another
proceeding.”).

142 Wright & Miller § 2663 (discussing the substantially similar language of Rule 54(c)

under the Federal Rules of Civil Procedure and explaining further that “the first sentence of

25
unfair to have the complaint lead defendant to believe that only a certain type and

dimension of relief was being sought[,]” but then, “should defendant attempt to limit

the scope and size of the potential judgment by not appearing or otherwise defaulting,

allow the court to give a different type of relief or a larger damage award.”143

Thus, Rule 54(c) serves an important policy role. It finds its roots in a simple

truth—default judgments are not inherently bad. In some instances, defaulting can

Rule 54(c) may be thought of as expressing a simple, but important, principle—at any point
in a case a defendant is entitled to determine his maximum liability, as fixed by the ad
damnum as it stands at that point in the case, and decide whether to proceed further. If
defendant chooses not to proceed, liability cannot be increased.”). “This principle seems
applicable whether or not defendant appears at the damage hearing and therefore should not
turn on when the default occurs.” Id. Indeed, if the first sentence of Rule 54(c) were not to
apply to a defendant that appears at the damages hearing, one might justifiably ask whether
such treatment would only function to penalize an appearing defendant and whether that
result is equitable. See id. (“Allowing the ad damnum to be increased might be thought
inequitable when defendant merely appears. It is true that defendant will receive notice of
the amended pleading and may be treated as acquiescing in the changed prayer for relief if
there is no further effort to defend. Arguably, a rule of this type would impose an undue
burden on a defendant who really had not intended to defend actively and thus might be
viewed as a penalty for making an appearance.”); see also Silge v. Merz, 510 F.3d 157, 161
(2d Cir. 2007) (“While notice is one of the policy objectives underlying Rule 54(c), notice alone
is insufficient to satisfy the rule. The timing and method of such notice (i.e., that it come
before the decision to default and be evident from the face of the complaint) are both critical
to the analysis.”).

Moreover, as some have noted, Rule 54(c) “does not differentiate between a default
based on a total failure of defendant to appear and a default following an appearance.”
Wright & Miller § 2663. But, in other places throughout the rules, the drafters draw
distinctions between appearing versus non-appearing defendants against whom default is
sought. See Ct. Ch. R. 55(b). So “[t]he absence of any words of qualification or differentiation
in the first sentence of Rule 54(c) indicates that the provision is intended to apply to all cases
of default, whether they involve a party who ‘has appeared’ or one ‘in default for failure to
appear.’” Wright & Miller § 2663.

143 Wright & Miller § 2663; see also Steven Baicker-McKee, William M. Janssen &

John B. Corr, Federal Civil Rules Handbook 1084 (2014) [hereinafter Federal Civil Rules
Handbook] (“Because a defaulting defendant may be doing so consciously, (i.e., relying on the
demand pleaded in the ad damnum clause), a plaintiff may not receive a default judgment
for more than the amount sought in the complaint.”).

26
even be the economically rational course of action. If a defendant calculates that his

maximum liability for a default judgment is less than what he would owe by litigating

through a post-trial judgment, taking into account his own attorneys’ fees to get to

such a judgment, it may be economically rational for a defendant simply to default

(assuming settlement is not a viable option).144

As a practical matter, efficient defaults would seem to be in everyone’s best

interest. The Court does not have to expend its finite and already limited resources

on preparing for potentially unnecessary hearings and rulings; the defaulting party

limits its exposure to the relief sought in the operative pleading, per Rule 54(c); and

the non-defaulting party gets a judgment for the relief it requested in its pleadings.

But these efficiency-enhancing capabilities cannot work if the would-be

defaulting defendant could face uncapped liability or if it cannot count on the Court

as a check against its opposition’s attempts to seek unprecedented judgments for the

moon and the stars only after the Court has found it to be in default. Without that

check, a party loses the ability to calculate or estimate expected values in any

meaningful way.

Rule 54(c) functions by requiring plaintiffs to provide defendants with pre-

default notice sufficient to assess the extent of their exposure.145 But to achieve this,

144As is the case here, the presence of a prevailing party fee-shifting provision between

the litigants would of course affect the parties’ respective expected value calculations by
raising the relative stakes of winning or losing and of continuing to litigate.

145 As both sentences of Rule 54(c) make plain, this limit on unpled relief only applies

in the default judgment context. The Court is not bound by a complaint’s remedial request
in a litigated proceeding in which a party has not defaulted. See Ct. Ch. R. 54(c).

27
some degree of specificity is required. Thus, if a complaint’s inclusion of a request for

“such other and further relief as the Court deems just and appropriate” were

sufficient, the first sentence of Rule 54(c) would, in a practical sense, be rendered

meaningless.

Accordingly, in the context of a default judgment, federal courts applying the

substantially similar language found in Rule 54(c) of the Federal Rules of Civil

Procedure have declined to find those general requests sufficient to support a remedy

not otherwise specified in the complaint.146 In one pertinent decision, the United

States Court of Appeals for the Second Circuit explained that “[w]hatever its import

in other contexts, this formulaic language cannot substitute for the meaningful notice

called for by Rule 54(c), which anticipates that defendants will look to the demand

clause to understand their exposure in the event of default.”147

Here, the Complaint only requests compensatory damages, followed by a

request for “such other and further relief as the Court deems just and appropriate.”148

Neither provides an adequate basis on which to award rescissory damages—the latter

because it fails to provide notice needed to avoid inequitably blindsiding the defaulted

146 Silge, 510 F.3d at 160 (rejecting unpled request for prejudgment interest); see also

Federal Civil Rules Handbook at 1084 (“Courts are also unlikely to construe closing,
boilerplate language in a pleading to expand the available remedies in a default situation.”).

147 Silge, 510 F.3d at 160; cf. Hauspie, 945 A.2d at 587 (discussing “strict conformity

with all procedural requirements” governing entry of default judgment).

148 Original Compl. at 14–15; Am. Compl. at 28.

28
Defendants and the former because rescissory damages in this context would be

“different in kind” from the compensatory damages requested in the pleadings.149

2. Compensatory Damages—$145,037.43

“The traditional measure of damages is that which is utilized in connection

with an award of compensatory damages, whose purpose is to compensate a plaintiff

for its proven, actual loss caused by the defendant’s wrongful conduct.”150 Thus,

“compensatory damages are measured by the plaintiff’s ‘out-of-pocket’ actual loss.”151

As noted, the plaintiff bears the burden of proving damages by a

preponderance of the evidence. Here, Plaintiffs seek “pro rata damages for stolen

corporate opportunities[,]”152 to which they do not show an entitlement. Plaintiffs do,

149 See Firmenich Inc. v. Nat. Flavors, Inc., 2020 WL 1816191, at *8 (Del. Super. Apr.

7, 2020) (“Rescissory damages are an exception to the normal out-of-pocket measure of
compensatory damages . . . .” (quoting Strassburger v. Earley, 752 A.2d 557, 579 (Del. Ch.
2000))); Basho Techs. Holdco B, LLC v. Georgetown Basho Invs., LLC, 2018 WL 3326693, at
*49 (Del. Ch. July 6, 2018) (describing how “[r]escissory damages differ from compensatory
damages”), aff’d, 221 A.3d 100 (Del. 2019); Creative Rsch. Mfg. v. Advanced Bio-Delivery LLC,
2007 WL 286735, at *10 (Del. Ch. Jan. 30, 2007) (distinguishing between “a breach of contract
measure of damages[,]” compensating plaintiffs for unpaid balances, and “rescissory
damages” for plaintiffs’ operating costs and expenses); Universal Enter. Gp., L.P. v. Duncan
Petroleum Corp., 2013 WL 3353743, at *16 (Del. Ch. July 1, 2013) (“[R]escissory damages
may be significantly higher than the conventional out-of-pocket damages, because rescissory
damages could include post-transaction incremental value elements that would not be
captured in an ‘out-of-pocket’ recovery.” (quoting Strassburger, 752 A.2d at 579)).

150 Strassburger, 752 A.2d at 579; see also Jardel Co. v. Hughes, 523 A.2d 518, 528

(Del. 1987) (“The object and purpose of an award of compensatory damages in a civil case is
to impose satisfaction for an injury done. In tort actions that satisfaction normally takes the
form of an award of monetary damages to an injured plaintiff, with the size of the award
directly related to the harm caused by the defendant. Once liability is established, the goal
in fixing damages is just and full compensation, with the focus upon the plaintiff’s injury or
loss.”).

151 Strassburger, 752 A.2d at 579.

152 Pls.’ Br. at 41. I treat this as a request for compensatory damages.

29
however, show they are entitled to their pro rata share of funds Shaw

misappropriated. I address these issues in turn.153

a. Corporate Opportunities—$0

“The corporate opportunity doctrine is a consequence of a fiduciary’s duty of

loyalty, and it exists to prevent officers or directors of a corporation—or, as in this

case, a managing member of an LLC—from personally benefiting from opportunities

belonging to the corporation.”154 It provides that:

a corporate officer or director may not take a business opportunity for
his own if: (1) the corporation is financially able to exploit the
opportunity; (2) the opportunity is within the corporation’s line of
business; (3) the corporation has an interest or expectancy in the
opportunity; and (4) by taking the opportunity for his own, the corporate

153 As an aside, I recognize that the claims here are likely derivative, but that
determination would not affect the remedy in this case. Our law recognizes that an investor-
level pro rata recovery can be awarded when “defendants are insiders who misappropriated
corporate property such that an entity-level recovery would return the property to the
wrongdoers’ control” or when “an entity-level recovery would benefit ‘guilty’ stockholders, but
an investor-level recovery could be more narrowly tailored to benefit only ‘innocent’
stockholders.” Goldstein v. Denner, 2022 WL 1797224, at *17 (Del. Ch. June 2, 2022); see also
id. at *17 nn. 16–18; Deane v. Maginn, 2022 WL 16557974, at *30–31 (Del. Ch. Nov. 1, 2022),
appeal dismissed, 291 A.3d 651 (Del. 2023) (granting a pro rata recovery to prohibit the
defendant-manager of the betrayed investment vehicle from profiting off his disloyalty and
to avoid the risk of additional disloyalty). This case fits the mold. Furthermore, factors that
counsel against a pro rata recovery are absent from this case. Although one factor that
weighs against a direct recovery is the risk of limiting the assets available an entity’s
creditors, here that concern is absent as Shaw appears to be Treats’ only significant creditor.
And while another factor that weighs against a pro rata recovery is the risk of bypassing
innocent stockholders in a going concern, Shaw (through the Trust) is the only other
unitholder. Finally, the entity is hardly a going concern. The company was basically a one
man show and Shaw has left the stage. There are no records of Treats operating after 2017.
Accordingly, to the extent Plaintiffs show Treats is entitled to damages flowing from Shaw’s
breaches of fiduciary duty, they are entitled, in these unusual circumstances, to a pro rata
portion of those damages.

154 Grove v. Brown, 2013 WL 4041495, at *8 (Del. Ch. Aug. 8, 2013).

30
fiduciary will thereby be placed in a position inimicable to his duties to
the corporation.155

Here, the facts deemed admitted make clear that Shaw owed fiduciary duties

and usurped a series of opportunities that should have gone to Treats. Plaintiffs tell

me that, combined, the value of the corporate opportunities arising from the 2015

Oscars Party, Treats Calendar Documentary, Screen Vision Sponsorship, 2017

Oscars Party, 2020–2022 Wires, Treats Summer House, and Circus/Treats Deal total

$2,346,000.156 Plaintiffs calculate this sum using only the gross revenues Shaw or

one of his other entities received.157 But, critically, “[t]he usual remedy for usurpation

of corporate opportunity is calculated based on the lost profits that were diverted to

the other business or by the profits generated by the other business that otherwise

would have flowed to the company.”158 Here, any cost to Treats comes in the form of

155 Broz v. Cellular Info. Sys., Inc., 673 A.2d 148, 155 (Del. 1996).

156 Pls.’ Br. at 39. Plaintiffs’ pro rata portion (38.24%) of $2,346,000 is $897,110.40.

157 See, e.g., id. at 50 (“Shaw received over $2.3 million in revenue” (second emphasis

added)).

158 Utilisave, LLC v. Khenin, 2015 WL 4931862, at *7 (Del. Ch. Aug. 18, 2015)
(emphases added); see also In re Mobilactive Media, LLC, 2013 WL 297950, at *1 (Del. Ch.
Jan. 25, 2013) (“I grant monetary relief in the form of damages based on the profits the
defendants unjustifiably received from their participation in opportunities that should have
been, but were not, presented to the joint venture.”); Dweck v. Nasser, 2012 WL 161590, at
*17 (Del. Ch. Jan. 18, 2012) (“As damages for usurping Kids’ corporate opportunities, Dweck,
Taxin, Success, and Premium are jointly and severally liable to Kids for the lost profits Kids
would have generated from business diverted to Success and Premium.”); TCW Tech. Ltd.
P’ship v. Intermedia Commc’ns, Inc., 2000 WL 1478537, at *2 (Del. Ch. Oct. 2, 2000)
(explaining on motion to expedite that “[c]ompensatory damages are sometimes a sufficient
and complete remedy in cases where a fiduciary has manipulated corporate machinery to
benefit itself by expropriating a corporate opportunity. When a minority shareholder can
prove, for example, that a fiduciary has profited by accepting certain payments in connection
with a transaction, those payments may form the basis for a damage award incidental to the
breach of duty.” (emphasis added)).

31
lost profits. Had Shaw offered these opportunities to Treats, Treats could have only

benefited from them to the extent the cost of undertaking would be less than the gross

revenue it would have received.

In the corporate opportunity context, Delaware courts have determined lost

profits using a variety of methods. Among other ways, a plaintiff can establish lost

profits through expert testimony.159 Or the court can use a layman’s estimate.160

“[T]he Court may exercise its ‘own independent judgment in determining the

calculation of damages[,]’” but some evidence quantifying lost profits remains

essential to exercising that judgment.161

Here, Plaintiffs only identify gross revenue from the usurped opportunities.

With limited exceptions, this leaves me without a basis for determining lost profits.

“Equity is not a license to make stuff up.”162 I do, however, consider each opportunity

individually to demonstrate why a lost profits calculation is not possible.

159 See Beard Rsch., Inc., 8 A.3d at 618 (touching on how plaintiff’s damages expert

calculated lost profits); Triton Const. Co. v. E. Shore Elec. Servs., Inc., 2009 WL 1387115, at
*28 (Del. Ch. May 18, 2009) (granting an award of defendant’s profits as an estimate of
plaintiff’s profits), aff’d, 988 A.2d 938 (Del. 2010).

160 See Medicalgorithmics S.A. v. AMI Monitoring, Inc., 2016 WL 4401038, at *26–27

(Del. Ch. Aug. 18, 2016) (analyzing corporate officer’s estimate of lost profits).

161 See id. at *28 (quoting In re Mobilactive Media, LLC, 2013 WL 297950, at *24);

OptimisCorp, 2015 WL 5147038, at *82 (rejecting “speculative and unreliable” damages
calculation as basis for award following finding of breach of loyalty); see also Ravenswood,
2018 WL 1410860, at *20 & n.17 (same, collecting cases); Wolfe & Pittenger §1609[c], at 16-
128 (explaining that in the breach of the duty of loyalty context where “the Court of Chancery
has broad discretion to fashion remedies,” a compensatory “damage awards must always be
supported by some level of proof” (emphasis added)).

162 Ravenswood, 2018 WL 1410860 at *2.

32
• The 2015 Oscars Party—$0: Plaintiffs identify three “[d]eposits” to Circus
totaling $150,000, which they assert were “sponsorship income” related to the
2015 Oscars Party.163 Plaintiffs seek the entire $150,000 in gross revenue.164

• The Treats Calendar Documentary—$0: Plaintiffs identify five
“[d]eposits” made to ShawCo that total $556,000, which, they assert, were
made in conjunction with the Treats Calendar Documentary.165 That is a
gross revenue figure.

• Screen Vision Sponsorship—$0: Plaintiffs identify a single $100,000
payment to Circus in conjunction with the “lunch & Rosé” event.166 Again,
that is a gross revenue figure.

• The 2017 Oscars Party—$0: Plaintiffs identify a singular payment of
$75,000 from “Screevision” to ShawCo.167 As with the others, Plaintiffs do not
provide any assessment of costs associated with hosting the 2017 Oscars
Party. That is a gross revenue figure.

• The 2021 Wires—$0: Plaintiffs identify “deposits” from Synapse Financial
Technologies to ShawCo, totaling $195,000.168 They even describe the
$195,000 as “revenue[,]” not profits.169

163See Dkt. 291, Demonstrative Exs. A–I to Pls.’ Pre-Evidentiary Hr’g Br.
(“Demonstrative”) Ex. B; Pls.’ Br. at 10; PX-60.

164 Plaintiffs did not raise the 2015 Oscars Party or the 2021–2022 Wires in the
Complaint. Since one purpose of a Rule 55(b) hearing is to quantify the damages arising from
the facts set forth in the complaint, I am hesitant to consider these opportunities. The policy
reasons barring remedies different than those requested in the pleadings would seem to apply
in equal measure to a new, unpled bases for damages. See Wright & Miller § 2663 (explaining
that under Rule 54(c), “a default judgment may not extend to matters outside the issues
raised by the pleadings or beyond the scope of the relief demanded”).

165 See Demonstrative Ex. C.

166 See Pls.’ Br. at 19.

167 See PX-81; Pls.’ Br. at 18.

168 See Pls.’ Br. at 23; Demonstrative Ex. E.

169 See Pls.’ Br. at 23.As an initial matter, even accepting the facts alleged in the
Complaint as admitted, I question whether Plaintiffs show the 2021 Wires payments were
made in conjunction with a valid corporate opportunity in which Treats had an interest or
expectancy. Plaintiffs’ logic is as follows: (1) the payments were made to ShawCo, (2)
“ShawCo is a competing enterprise to Treats,” so (3) “this $195,000 revenue from the 2021

33
• The 2022 Wires—$0: Plaintiffs identify two payments totaling $60,000 from
Rpz La LLC to ShawCo for a Super Bowl party.170 Those are revenues, not
lost profits.

Plaintiffs failed to carry their burden of proving damages for these opportunities.171

The Treats Summer House and Circus/Treats Deal are different and require

further explanation.172

i. The Treats Summer House—$0

Shaw (through ShawCo) organized and hosted events at a rental house in

Malibu known as the Treats Summer House. A ShawCo pitch deck linked these

events to Treats and refers to them as Treats’ events.173

In connection with these events, Plaintiffs identify two payments to Steve

Shaw Photography, Inc. totaling $170,000.174 One of Plaintiffs’ exhibits, however,

Wires to ShawCo was another diverted opportunity from Treats.” Id. But the mere fact that
ShawCo received “revenue” from a third party does not automatically mean it was a corporate
opportunity in which Treats had an interest or expectancy. This question, however, is of little
ultimate consequence because, even if a corporate opportunity, Plaintiffs fail to carry their
burden of proving damages.

170 See id.; Demonstrative Ex. I.

171 Cf. Delaware Exp. Shuttle, Inc. v. Older, 2002 WL 31458243, at *15 & n.84 (Del.

Ch. Oct. 23, 2002) (rejecting plaintiff’s request for revenues as remedy for unjust enrichment
arising from breach of non-compete agreement and explaining that the “[d]efendants were
not enriched” by the amount of revenues and instead “[t]he [d]efendants’ profits, not their
revenues, are the correct measure of their unjust enrichment and of [the plaintiff’s]
damages[,]” but noting that the plaintiff “made no effort to prove the profits which it would
have realized from the business which Defendants obtained in violation of the [a]greement”).

172 I address the 2020 Wires below under misappropriation, instead of as a corporate

opportunity.

173 See PX-68.

174 See Demonstrative Ex. D; PX-73.

34
does include an itemized list of expenses that Shaw compiled in connection with these

events.175 Despite citing the exhibit in which the list is found, Plaintiffs make no

further mention of it.176 Yet, Shaw’s list shows the expenses exceed the amount of

the deposits.

It includes the following:177

It seems the only evidence in the record shows the expenses exceeded the

revenues by a significant amount. One might question the accuracy of these

expenses, but even if I factored in a discount or quibbled with various line items, it

would still be difficult to find damages for Plaintiffs. And any attempt to do so would

be only “the product of rank speculation and, as a matter of law, improper.” 178

175 PX-71.

176 See Pls.’ Br. at 17 nn.81–82.

177 See PX-71.

178 Ravenswood, 2018 WL 1410860, at *20.

35
ii. The Circus/Treats Deal—$0

Plaintiffs identify three “[d]eposits” to Circus totaling $625,000, which they

claim related to the Circus/Treats Deal.179 Plaintiffs also identify two other

“[d]eposits” totaling $375,000, which Plaintiffs suggest are “likely” related to the

same Circus/Treats Deal.180

The first two deposits were each for $250,000181 and correspond to the two loan

tranches of “convertible loan notes” in a signed term sheet between Circus and Great

Fortune.182 The term sheet also contemplates that the payments were part of a larger

transaction with Great Fortune.183 The other deposits, totaling $500,000, also appear

to be funds Great Fortune loaned Circus.184 Plaintiffs treat the top-line figures as the

value of the opportunity. But the foregone benefit is the value of the opportunity to

borrow. In this case, the value of the opportunity was not necessarily the $1,000,000

(as Plaintiffs suggest), nor was it the $625,000. It was the value of the opportunity

to borrow those amounts. But Plaintiffs provide me no evidentiary basis on which to

estimate that value.

179 See Demonstrative Ex. A.

180 See id.

181 See id.; PX-60.

182 See PX-45.

183 Id.

184 A third deposit for $125,000 reflects
more funds from Great Fortune loaned Circus.
See PX-53. It is not clear what agreement it relates to. See id.; PX-45.

36
By way of example, one might expect a term sheet like the one here to identify

an interest rate from which some general value of the arrangement might be

extrapolated. But here, the term sheet does not identify any specific interest rate

that would govern repayment.185 It seems that instead of making a direct, economic

return on its investment through interest payments, Great Fortune expected to

receive specific promotional services in return. In addition to a “Brand Collaboration”

section, the term sheet also explains that Circus “will run a minimum of one editorial

page promoting [a Great Fortune subsidiary brand] as [its] interactive mobile

partner” and Circus “will provide a minimum of two advertising pages per edition

which can be used by [lender] at its discretion.”186

Since Plaintiffs leave me with no basis on which to value the services

exchanged under this sort of arrangement, I cannot determine the value of what

Circus gave up in exchange for the benefit of the liquidity provided under the

agreements.

***

As the foregoing makes plain, Plaintiffs are not entitled to any compensatory

damages arising from the corporate opportunities. It is not for lack of trying that I

185 See PX-45. Under the section titled “Interest” it instead provides that “[n]o interest
will accrue on the Loan, save as set out below.” Id. Following the “Interest” section, the only
place any interest rate is identified is pursuant to an acceleration provision that can be
triggered if there is an event of default. Id.

186 Id.
The other lending documents that make up the other parts of the Circus/Treats
Deal provide similarly. Under on such loan agreement, the section titled “INTEREST” only
provides that “interest on the unpaid amount shall accrue” if Circus “fails to make any
payment due[.]” PX-53.

37
arrive at this conclusion. I have attempted to piece together any reasonable basis on

which to calculate the costs associated with the corporate opportunities and award

lost profits. Indeed, my law clerks and I spent a great deal of our already scarce

time187 combing the record for anything that might provide a reasonable basis for

compensatory damages for these opportunities. But the truth is that many (if not all)

of the opportunities Shaw took could have produced net losses.

As it relates to Plaintiffs’ failure to meet their burden, I pause here to clarify

an important point. This decision should not be read to expand meaningfully the type

of showing needed to support a claim for damages. And it certainly should not be

read to do so in the default judgment context. It should only be read to hold plaintiffs

accountable when they try to take advantage of seemingly absent, unrepresented

defendants by asking for unprecedented and unsupported damages awards or by

seeking relief they failed to request in their pleadings.

The burden to show damages is not onerous—especially, as here, where a party

seeks damages arising from proven breaches of the duty of loyalty. But although not

onerous, that burden exists. And if it exists, it must require more than the complete

absence of any showing or attempted showing of damages or failure to provide the

Court with any basis (reasonable or unreasonable) on which it can estimate damages.

Moreover, the facts and circumstances here are somewhat unusual. Here,

unlike in many default judgment actions, the litigation progressed considerably by

187 For those who are curious, my law clerks estimate that by the time they complete

their respective clerkships this month, they will have each worked at least 3,900 productive
hours (if not more) since August 2023.

38
the time of default; Plaintiffs amended their complaint shortly before seeking default

judgment; there was meaningful discovery (which Plaintiffs reference repeatedly in

the Complaint188); and Plaintiffs had copies of invoices, general ledgers, profit and

loss statements, balance sheets, and other financial documents compiled by Shaw’s

accountants for most (if not all) of the relevant entities. Plaintiffs also deposed

Shaw’s accountants and various other individuals involved in Shaw’s schemes and

even hired an expert witness who, as I discuss below, was able to trace payments

across the various accounts at issue.

Put another way, this is not a case where it seems Plaintiffs lacked sufficient

evidence. If Plaintiffs lacked sufficient evidence and had made some effort to explain

why they are unable to provide a reasonable evidentiary basis on which to calculate

the profits flowing from the opportunities—something to which their expert could

have undoubtedly attested if it were the case—I would have been sympathetic to such

a showing. And indeed, this might often be the case in default judgment actions

where a party defaults by failing to appear.

But this is not such a case. Here, Plaintiffs did not even try to show the

insufficiency of available evidence as to these corporate opportunities.189 Instead,

188 See Am. Compl. ¶¶ 1, 36, 39, 41, 42, 63.

189 Cf. Barbey v. Cerego, Inc., 2023 WL 6366055, at *8 (Del. Ch. Sept. 29, 2023) (“[T]he

production of weak evidence when strong is, or should have been, available can lead only to
the conclusion that the strong would have been adverse.” (quoting Smith v. Van Gorkom, 488
A.2d 858, 878 (Del. 1985))), aff’d, 2024 WL 2954223 (Del. June 11, 2024); In re Trados Inc.
S’holder Litig., 73 A.3d 17, 46 (Del. Ch. 2013) (quoting Kahn v. Lynch Commc’n Sys., Inc.,
638 A.2d 1110, 1119 n.7 (Del.1994)).

39
they put forward arguments and calculations that are inconsistent with our law.

Compounding these problems, Plaintiffs seem to ignore Rule 54(c) and, in doing so,

would seem poised to blindside unrepresented defendants with damages that are

different from those requested in the Complaint’s prayer for relief. Plaintiffs

undermined the efficiency-enhancing capabilities of the default-judgment mechanism

in a manner that required the Court to expend a great deal of resources checking

counsel’s work, and, in some instances, doing counsel’s work for them.

A plaintiff’s belief that it lacks a meaningful obligation to color within the lines

in its submissions to a court can give rise to a host of moral hazard problems. A

plaintiff might feel a sense of assurance at the default judgment stage. Without

opposition to its request for damages, the plaintiff may be tempted to ask the court

to enter judgments for extreme or unprecedented damage awards to which it is not

entitled, believing there will be no repercussions for doing so.

To the extent such tactics are intentional and are not simply a product of

counsel’s insufficient diligence, it would seem that in such a plaintiff’s best-case

scenario the novel or errant nature of its request will go unnoticed by the court, which

will likely enter judgment for the damages requested even though it may be for an

amount exceeding the damages to which the plaintiff is actually entitled. And in the

worst-case scenario, the court catches the plaintiff’s attempt to take a larger slice of

pie than it is owed and only awards it the damages to which it is entitled.

On a rudimentary level, this suggests the expected value of seeking an

unjustified judgment may, at times, exceed the expected value of asking for that to

40
which one actually is entitled. But such an approach is not without costly

externalities.

b. Misappropriated Funds—$145,037.43

“If corporate fiduciaries divert corporate assets to themselves for non-corporate

purposes, they are liable for the amounts wrongfully diverted.”190 But there must be

some evidence to support the amounts sought.191 Here, Plaintiffs’ expert witness,

forensic accountant David Hanson, testified that by June 2013—10 months after

Winklevoss Capital’s Investment in Treats—Shaw had used all the Investment.192 Of

the $1.3 million, Hanson testified that Shaw expended approximately $339,000 “in

areas that were unrelated to the Treats[] operation.”193 His report puts the figure at

$339,282.194

Hanson’s calculations, report, and testimony were credible. Based on his

testimony, Plaintiffs proved by a preponderance of the evidence that Shaw

misappropriated these funds. Among other things, the record shows Shaw used the

190 Dweck, 2012 WL 161590, at *19 (quoting Technicorp Int’l II, Inc. v. Johnston, 2000

WL 713750, at *45 (Del. Ch. May 31, 2000)).

191 Bamford v. Penfold, L.P., 2022 WL 2278867, at *53 (Del. Ch. June 24, 2022)
(declining to award damages for expenses that plaintiffs’ expert “didn’t feel like he had
sufficient information to opine definitively about” after plaintiffs obtained records from
defendants’ auditors and accountants), aff’d, 2024 WL 1716494 (Del. Apr. 22, 2024).

192 See Tr. at 174, 176.

193 See id. at 185.

194 See PX-125.

41
Investment to pay a mortgage on one personal residence, rent on another personal

residence, a lease on a Range Rover, and photoshoots for third parties.195

As for the 2020 Wires, Plaintiffs suggest the three payments totaling $40,000

relate to Shaw setting up Treats UK and the UK trademarks.196 The wires were sent

less than a month after Shaw incorporated Treats UK and registered the UK

trademarks.197 Although the memo lines for the wires reference the repayment of a

loan,198 I find that purpose unlikely. There does not appear to be anything to

corroborate a loan from ShawCo to Treats. This is another example of Shaw

misappropriating Treats’ funds.199

Thus, under Count III, Shaw is liable to Plaintiffs for their pro rata share of

these misappropriated amounts, or $145,037.43.

B. Counts I & II—$25,052.83

Counts I and II are for breach of contract. In Count I, Plaintiffs claim Shaw,

Treats, and the Trust breached the LLC Agreement and Purchase Agreement in a

host of ways. “The fundamental principle that underlies the availability of contract

damages is that of compensation.”200

195 See id. Ex. D.

196 Pls.’ Br. at 21–22.

197 Compare PX-131, and PX-122, with PX-102, PX-103, and PX-104.

198 See PX-102; PX-103; PX-104.

199 Shaw’s use of trademarks is addressed further below.

200 24 Williston on Contracts § 64:1 (4th ed.), Westlaw (database updated May 2024);

see also Ramjet Aviation, Inc. v. My Parts Locator, Inc., 2023 WL 166009, at *8 (N.D. Ohio

42
[T]he standard remedy for breach of contract is based upon the
reasonable expectations of the parties ex ante. This principle of
expectation damages is measured by the amount of money that would
put the promisee in the same position as if the promisor had performed
the contract. Expectation damages thus require the breaching promisor
to compensate the promisee for the promisee’s reasonable expectation of
the value of the breached contract, and, hence, what the promisee
lost. . . . [E]xpectation damages must be proven with reasonable
certainty, and “no recovery can be had for loss of profits which are
determined to be uncertain, contingent, conjectural, or speculative.”201

Jan. 12, 2023) (“Compensatory damages, often called expectation damages, seek to place the
injured party in the same position it would have been in but for the breach.”); Marco J.
Jimenez, Retribution in Contract Law, 52 U.C. Davis L. Rev. 637, 659 (2018) (referring to
expectation damages as a “form of” compensatory damages); Daniel B. Kelly, On
Disgorgement and Punitive Damages in Trust Law, 107 Iowa L. Rev. 2079, 2124 (2022)
(same). The Complaint does not include an express request for expectation damages. So it
seems relevant to note that I need not rely on the remedies for Counts I and II being for
expectation damages. I do not find it appropriate to award damages under Count I since,
among other things, Plaintiffs do not ask for (or show) recoverable damages in conjunction
therewith. As for Count II, although the Complaint does not state the specific type of
damages Plaintiffs seeks as to the 2012 Promissory Note, it expressly states the extent of the
damages Plaintiffs seek to recover. Am. Compl. ¶ 74 (“[Winklevoss Capital] has been
damaged in the amount of $20,000.00 plus interest of 2% per annum since inception of the
note: October 26, 2012, for Defendants’ failure to repay the principal with interest.”). This
provided Defendants with a clear basis on which to calculate damages sought pursuant to
Count II and thus it provides sufficient information to assess easily the extent of Defendants’
exposure when deciding whether to default. Put another way, Plaintiffs provided the
meaningful notice required by Rule 54(c) as to Count II and they do not request recoverable
damages as to Count I, so this part of my analysis does not turn on whether it is necessary
to award expectation damages.

201 Siga Techs., Inc. v. PharmAthene, Inc., 132 A.3d 1108, 1130–31 (Del. 2015) (footnote

omitted); see also Dill, 2016 WL 4127455, at *1 (“[T]he standard remedy, or damages, for a
breach of contract is based upon the reasonable expectations of the parties, in an amount
that is equal to the loss in value of defendant’s nonperformance, or breach. Damages for a
breach of contract must be proven with reasonable certainty.”).

43
Unfortunately for Plaintiffs, they fail to tie any of these breaches to the fact of

damage,202 the amount of damage,203 or the damages arise from Shaw’s

misappropriation of funds, which is addressed above.204 Plaintiffs do not even ask for

202 For example, Plaintiffs assert that Shaw loaded Treats with over $250,000 of debt

without Winklevoss Capital’s approval, in violation of the LLC Agreement’s prohibition on
such conduct. Pls.’ Br. at 44–45. But, based on Plaintiffs’ briefing and presentation, I cannot
evaluate damages for the debt incurred. Indeed, here it is not even clear that Plaintiffs have
shown a tangible harm associated with that debt. Plaintiffs also assert Shaw “warranted an
increase in common units to secure at least one related loan” in violation of the prohibition
on “increas[ing] or decreas[ing] the number of authorized units of any class or series of units.”
Id. Plaintiffs contend that Shaw “granted the lender a warrant to purchase 34,257 common
units of Treats[.]” Id. Plaintiffs do not (1) indicate whether the warrant was ever exercised,
(2) provide any formula for calculating the damages from the warrant, or (3) assign any dollar
amount in (or provide the Court with a methodology for calculating) damages.

203 For example, Plaintiffs note that, with respect to the “t!” and “treats!” trademarks,

Shaw failed to cause the Trust to assign them to Treats (PX-63), in violation of the terms in
the Purchase Agreement, and instead “cancel[]ed them altogether in 2018 after this litigation
commenced, and then re-registered Treats! Trademarks under his new competing
enterprises.” See Pls.’ Br. at 43–44. Plaintiffs connect this breach to Shaw’s “us[e of] the
Treats! [Magazine] website to divert business to his competing enterprise, Treats UK.” Id.
at 44. But Plaintiffs do not assign any dollar amount to this conduct. Nor do Plaintiffs offer
a method for determining or even estimating the damages. Plaintiffs claim that “Shaw
misappropriated the Treats[] Trademarks, diverted them to other entities under his control,
and used the stolen intellectual property in manners against [Winklevoss Capital’s]
interests” in violation of the prohibition on “tak[ing] any action in contravention of the
Purchase Agreement.” Id. at 48. Again, Plaintiffs assign no dollar amount to the conduct
and provide me no methodology for reaching a damages figure. The same goes for any
breaches of Section 3.03(j) of the LLC Agreement. Plaintiffs also assert that Shaw’s violation
of the LLC Agreement’s requirement to separately conduct Treats’ business and operations
resulted in the “Circus/Treats Deal, the Calendar Documentary Project, NuMuses, Treats!
Summer House, Treats! 2017 Oscars Party, Screen Vision Sponsorship, and 2020-2022
Wires.” Id. at 42. By and large, these are the same revenues referenced in support of Shaw’s
breaches of fiduciary duty under Count III. See id. at 39 (“Defendants stole at least
$2,346,000 in corporate opportunities from Treats related to the Calendar Documentary
Project, Circus/Treats Deal, Treats! 2015 Oscars Party, 2016 Treats! Summer House, Treats!
2017 Oscars Party, Screen Vision Scholarship and 2020-2022 wires.”). The only late comer
is the reference to NuMuses, which Plaintiffs go on to explain are among those “incapable of
exact quantification” and thus provide the Court no basis on which to estimate damages. See
id. at 50–51.

204 For example, Plaintiffs indicate that Shaw violated the LLC Agreement’s
prohibitions on commingling funds which was designed to prevent “Shaw [from]

44
compensatory damages arising from the breaches.205 They only request the rescissory

damages and pro rata damages from the corporate opportunities. Plaintiffs therefore

did not meet their burden of showing the amount of damages.

Count II is a different story. Under the 2012 Promissory Note, Treats owed

$20,000 in principal plus interest accruing at 2% per annum. When Treats took on

this obligation, the parties expected Treats to perform. But it did not. Plaintiffs now

seek damages for Treats’ breach of the 2012 Promissory Note and prejudgment

interest at the contract rate. As of the Rule 55(b) hearing, Plaintiffs assert this

amount totals $25,052.83. They proved their entitlement to that amount so judgment

will be entered against Treats for that sum.

misappropriating funds for himself or other businesses.” See id. at 41–42. Plaintiffs suggest
that following the Investment, Shaw’s expenditures for “Meals and Entertainment” sky-
rocketed to over “five times” his prior spending—$62,169.38. See Pls.’ Br. at 43 & n.154
(noting that this figure includes expenditures incurred on “the Treats! AmEx” and the
“American Express cards”). But, to the extent any damages can be awarded for this sum, it
would be duplicative of Hanson’s estimates of misappropriated funds that I addressed under
Count III. Compare id., with id. at 31–32 (citing the “‘Meals and Entertainment’ credit card
charges” on the “Treats! AmEx”), and PX-125.

205 With the exception of a single sentence, Plaintiffs do not even suggest that they

seek any recovery for the breaches of contract. That sentence is the first sentence of
Plaintiffs’ legal analysis, in which they state that “Defendants, through numerous self-
interested breaches of fiduciary duty and contractual breaches of the Purchase Agreement,
have rendered Treats valueless.” Pls.’ Br. at 29. And as to that lone sentence, Plaintiffs hint
that the breaches of contract, which contribute to “render[ing] Treats valueless,” functions as
the basis for awarding rescissory damages. But for the reasons discussed above, I am unable
to award rescissory damages. See also Ct. Ch. R. 54(c). Moreover, they repeat the substance
of this sentence later in the brief, leaving out any reference to the breaches of contract. See
Pls.’ Br. at 38 (“Shaw and the Trust, through self-interested breaches of fiduciary duty, have
rendered Treats valueless and cost [Winklevoss Capital] its entire $1.3 million
[I]nvestment.”).

45
C. Count IV

The last claim seeks a declaratory judgment that Plaintiffs bear no contractual

obligation to market or promote Treats or any of its publications and Defendants have

no valid claims against them in this regard. Plaintiffs are entitled to this declaration

based on the well-pled, admitted facts in the Complaint.

D. Attorneys’ Fees—$1,250,000

“Under the American Rule, litigants are expected to bear their own costs of

litigation absent some special circumstances that warrant a shifting of attorneys’

fees.”206 But this rule is not without exception. “For one, ‘[a] fee-shifting provision in

an enforceable contract provides a clear exception to the default American Rule.’ An

applicable provision allows ‘a trial judge [to] award the prevailing party all the costs

it incurred during litigation.’”207

Plaintiffs invoke this exception by requesting attorneys’ fees under the fee-

shifting provision in the LLC Agreement.208 The operative question under that

provision is whether Plaintiffs can properly be considered the “prevailing party.”

206 Avgiris Bros., LLC v. Bouikidis, 2023 WL 7137104, at *2 (Del. Ch. Oct. 31, 2023)

(quoting Beck v. Atlantic Coast PLC, 868 A.2d 840, 850 (Del. Ch. 2005)).

207 Id. (quoting Manti Hldgs, LLC v. Authentix Acq. Co., Inc., 2020 WL 4596838, at *4

(Del. Ch. Aug. 11, 2020) and Sternberg v. Nanticoke Mem’l Hosp., Inc., 62 A.3d 1212, 1218
(Del. 2013)).

208 PX-11 (Section 15.15 of the LLC Agreement provides that: “In the event that any

party hereto institutes any legal suit, action or proceeding, including arbitration, against
another party in respect of a matter arising out of or relating to this Agreement, the
prevailing party in the suit, action or proceeding shall be entitled to receive, in addition to all
other damages to which it may be entitled, the costs incurred by such party in conducting the
suit, action or proceeding, including reasonable attorneys’ fees and expenses and court
costs.”). See generally Leistner v. Red Mud Enter. LLC, 2023 WL 11196881 (Del. Ch. Apr. 26,

46
“Delaware law is clear that in the usual case, and absent contractual language

to the contrary, whether a party has prevailed is determined by looking at the

outcome of the substantive issues, not damages.”209 Thus, even in instances where

this Court has awarded nominal damages, it has still found occasion to shift fees

where a plaintiff predominated in the substance of the litigation.210

Plaintiffs are the prevailing parties. They sought and obtained a default

judgment and showed Defendants breached fiduciary and contractual obligations.

There is no question that Plaintiffs predominated in the substance of this litigation.

“Unless otherwise stated in the contract, ‘a contractual provision entitling the

prevailing party to fees will usually be applied in an all-or-nothing manner.”211

2024) (awarding fees under LLC agreement’s fee-shifting provision where the language in
the provision was identical to that in the LLC Agreement at issue here); Senior Hous. Cap.,
LLC v. SHP Senior Hous. Fund, LLC, 2013 WL 1955012 (Del. Ch. May 13, 2013) (then-
Chancellor Strine, shifting fees under provision in LLC agreement); Avgiris, 2023 WL
7137104, at *3 n.30 (collecting cases and explaining that “the Court of Chancery has
previously awarded fees in Section 18-110 actions under prevailing party provisions in LLC
agreements”). Plaintiffs also seek fee-shifting under similar provisions in the Purchase
Agreement and the 2012 Promissory Note. Since I find fee-shifting appropriate under the
LLC Agreement, I need not reach a conclusion on whether it would be proper under these
other agreements.

209 Ivize of Milwaukee, LLC v. Compex Litig. Support, LLC, 2009 WL 1111179, at *14

(Del. Ch. Apr. 27, 2009); Comrie v. Enterasys Networks, Inc., 2004 WL 936505, at *2 (Del. Ch.
Apr. 27, 2004) (explaining that prevailing party is the party that “predomina[tes] in the
litigation”).

210 See Ivize, 2009 WL 1111179, at *14 (finding that although the plaintiff “did not
prove its damages with the required certainty, it did” prove breach of contract and so it
prevailed in the substance of the litigation).

211 Id. (footnote omitted) (awarding attorneys’ fees under prevailing party provision in

action in which it awarded plaintiff nominal damages).

47
Accordingly, Plaintiffs are entitled to the full amount requested: $1,250,000.212

Defendants are jointly and severally liable.213

E. Interest

Turning to interest, Plaintiffs’ Complaint also does not include an express

request for post-judgment interest. An award of such interest is, however, permitted

in the default context notwithstanding the first sentence of Rule 54(c). In particular,

federal courts have interpreted the substantially similar language of Rule 54(c) of the

Federal Rules of Civil Procedure as not barring post-judgment interest when an

award of post-judgment interest is not left to the trial judge’s discretion.214

Here, Plaintiffs’ failure to request post-judgment interest in the Complaint is

not fatal since an award of post-judgment interest in Delaware “is a right belonging

to the prevailing plaintiff and is not dependent upon the trial court’s discretion.” 215

Accordingly, Plaintiffs are “entitled to post-judgment interest at the legal rate from

212 See Pls.’ Br. at 59 (“Plaintiffs are entitled to the $1,250,000 in attorneys’ fees and

costs as requested in the accompanying Affidavits.”); see also Dkt. 291, Rule 88 Aff. Charles
J. Harder (“Harder Aff.”) ¶ 12 (“[P]laintiffs respectfully request an award of $1,250,000 for
work performed by both Harder Stonerock and Morris James in connection with the Action.
Across both firms, that is taking into account a voluntary discount of more than 53%.”). This
$1,250,000 is inclusive of the fees and expenses I awarded to Stonerock Harder LLP in
conjunction with Plaintiffs’ successful motion to compel. See Harder Aff. ¶ 7. To the extent
this figure does not include the $5,457.15 in fees and costs Morris James LLP is entitled to
pursuant to my order to that effect, that amount is so added to the award of $1,250,000.

213 See 6 Del. C. § 18-101(9); see also 2009 Caiola Fam. Tr. v. PWA, LLC, 2015 WL

6007596, at *33 (Del. Ch. Oct. 14, 2015) (holding the defendants “jointly and severally liable”
for the plaintiffs’ attorneys’ fees under fee-shifting provision in LLC agreement).

214 See ExxonMobil Oil Corp. v. Black Stone Petroleum Inc., 221 F. Supp. 3d 755, 769

(E.D. Va. 2016) (sustaining objection to magistrate judge’s refusal to award post-judgment
interest where it was not a matter of judicial discretion).

215 Wilmington Country Club v. Cowee, 747 A.2d 1087, 1097 (Del. 2000).

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the date of judgment, compounded quarterly” for damages arising from Count III for

breach of fiduciary duty and for attorneys’ fees.216 As to Count II for breach of the

2012 Promissory Note, Plaintiffs are entitled to post-judgment interest at the lesser

of the legal rate and contract rate.217

But Plaintiffs are not entitled to prejudgment interest, except as to the

damages arising from Count II for which they identified the amount of their damage

as including prejudgment interest.218 Only in a footnote to their brief do Plaintiffs

claim they should receive prejudgment interest on other damages if the Court does

“not grant Plaintiffs’ request for rescissory damages to [Winklevoss Capital] in the

amount of its $1.3 million investment.”219

216 Polychain Cap. LP v. Pantera Venture Fund II LP, 2022 WL 2467778, at *12 (Del.

Ch. July 6, 2022).

217 See 6 Del. C. § 2301(a) (“Except as otherwise provided in this Code, any judgment

entered on agreements governed by this subsection, whether the contract rate is expressed
or not, shall, from the date of the judgment, bear post-judgment interest of 5% over the
Federal Reserve discount rate including any surcharge thereon or the contract rate,
whichever is less.”); see also Noranda Aluminum Hldg. Corp. v. XL Ins. Am., Inc., 269 A.3d
974, 976, 980–82 (Del. 2021) (quoting final sentence of 6 Del. C. § 2301(a) and explaining that
post-judgment interest accrues at the legal rate “[i]n contract cases where the parties have
not agreed to an interest rate” and quoting legislative history to 2012 amendment to 6 Del.
C. § 2301(a) for proposition that “the applicable post-judgment interest rate on any judgments
entered in cases of personal loans is the lesser of the legal interest rate or the contract rate”);
Sequoia Presidential Yacht Gp. LLC v. FE P’rs, LLC, 2014 WL 2610577, at *2 (Del. Ch. June
12, 2014) (“[W]here the parties have agreed to a (non-usurious) interest rate in a loan
agreement, under subsection [6 Del. C. § 2301(a)], post judgment interest continues to accrue
at this agreed-upon rate.”).

218 See Am. Compl. ¶ 74.

219 Pls.’ Br. at 59 n.195.

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I consider the issue waived since the “[f]ailure to raise a legal issue in the

above-the-line text of a brief generally constitutes waiver of that issue.” 220 But even

if not waived, Plaintiffs would still not be entitled to prejudgment interest since the

right to prejudgment interest “is not self-executing[.]”221 Our high court has

explained that “[a]lthough pre-judgment interest is awarded as a matter of right, and

not by judicial discretion, a party must affirmatively request this award.

Prejudgment interest is appropriate ‘if a plaintiff requests such an award in its

pleadings or raises the issue at trial.’”222 In another decision, our high court found

that “it was error” for the trial court to award prejudgment interest where “[t]he

complaint was never amended to include a demand for interest, and the matter was

not raised or discussed at trial.”223

Here, Plaintiffs did not request prejudgment interest in the Complaint.

Plaintiffs also did not mention it in their motion for default judgement. Instead,

220 In re Tesla Motors, Inc. S’holder Litig., 2018 WL 1560293, at *20 (Del. Ch. Mar. 28,

2018).

221 Whittington v. Dragon Gp. L.L.C., 2011 WL 1457455, at *15 (Del. Ch. Apr. 15, 2011)

(“Delaware law generally holds that a successful plaintiff may be awarded prejudgment
interest as a matter of right. This right is not self-executing, however.” (footnote omitted)).

222 Chrysler Corp. v. Chaplake Hldgs., Ltd., 822 A.2d 1024, 1037 (Del. 2003) (citation

omitted); Brandywine 100 Corp. v. New Castle Cty., 541 A.2d 598 (Del. 1988) (ORDER)
(“Although pre-judgment interest is awarded as a matter of right, that right is not self-
executing, and a court may properly award pre-judgment interest only if a plaintiff requests
such an award in its pleadings or raises the issue at trial.”); see also Paron Cap. Mgmt., LLC
v. Crombie, 2012 WL 2045857, at *15 (Del. Ch. May 22, 2012) (awarding plaintiffs post-
judgment interest but declining to award prejudgment interest), aff’d, 62 A.3d 1223 (Del.
2013); Wolfe & Pittenger § 16.09[f][1], at 16-139 (“[T]he right to pre-judgment interest is not
self-executing”).

223 Collins v. Throckmorton, 425 A.2d 146, 152 (Del. 1980).

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Plaintiffs raised it for the first time in passing in a footnote to their pre-hearing brief

and did not discuss it at the Rule 55(b) hearing. Even if it were not waived, this

would not be enough,224 particularly in the default judgment context for the reasons

I have described at length in this decision.225

III. CONCLUSION

For the foregoing reasons, judgment will be entered in Plaintiffs’ favor.

Plaintiffs shall submit a form of order implementing this decision.

224 All Pro Maids, Inc. v. Layton, 2005 WL 82689, at *2 (Del. Ch. Jan. 11, 2005)
(rejecting post-merits decision attempt to seek prejudgment interest and reasoning that
plaintiff failed to “either provide fair notice to [d]efendants that it intended to seek
prejudgment interest or enable the Court to conclude whether and to what extent, if any,
interest . . . would be appropriate”).

225 See, e.g., Silge, 510 F.3d at 160 (declining to award prejudgment interest in a
default judgment action pursuant to Rule 54(c)); ExxonMobil, 221 F. Supp. 3d at 766–67
(“Rule 54(c), Fed. R. Civ. P., provides the applicable pleading standard that must be satisfied
to recover pre-judgment interest in the context of a default judgment. . . . In this respect, it
is dispositive that Exxon’s Complaint does not specifically seek pre-judgment interest.”
(footnote and internal citation omitted)). But any limit the first sentence of Rule 54(c) might
have on prejudgment interest in the default context would, of course, not apply to the Court’s
equitable authority to award prejudgment interest outside the default judgment context.
Manti Hldgs., LLC v. Authentix Acq. Co., Inc., 261 A.3d 1199, 1228–29 (Del. 2021) (“The Court
of Chancery has broad equitable authority to award pre-judgment interest, including to a
party that did not prevail in the litigation. The ‘court may grant such relief as the facts of a
particular case may require even if the prevailing party has not demanded such relief in its
pleadings.’” (footnote omitted) (citing Boush v. Hodges, 705 A.2d 243 (Del. 1998) (citing Ct.
Ch. R. 54(c)))).

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