Ari Rostowsky v. Laura M. Hirsch and Lisa M. True, and Aither Health, LLC

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

ARI ROSTOWSKY )
)
Plaintiff, )
)
v. ) C.A. No. 2022-0004-SG
)
LAURA M. HIRSCH and )
LISA M. TRUE, )
)
Defendants, )
)
-and- )
)
AITHER HEALTH, LLC, )
)
Nominal Defendant. )

MEMORANDUM OPINION

Date Submitted: May 8, 2024
Date Decided: October 15, 2024

Daniel C. Herr, LAW OFFICE OF DANIEL C. HERR LLC, Wilmington, Delaware;
OF COUNSEL: Barry F. Fagel, LINDHORST & DREIDAME CO., L.P.A.,
Cincinnati, Ohio, Attorneys for Plaintiff Ari Rostowsky.

David B. Anthony, BERGER MCDERMOTT LLP, Wilmington, Delaware; Brian
Gottesman, GABELL BEAVER LLC, Wilmington, Delaware, Attorneys for
Defendants Laura M. Hirsch and Lisa M. True.

Alisa E. Moen, MOEN LAW LLC, Wilmington, Delaware, Attorney for Nominal
Defendant Aither Health LLC.

GLASSCOCK, Vice Chancellor
This post-trial opinion addresses the ownership interest held by Plaintiff, Ari

Rostowsky, in a business he formed with Individual Defendants, Laura Hirsch and

Lisa True. The business is formally structured as a Delaware LLC, Aither Health.

It is a service business related to administration of health insurance claims. Plaintiff

avers that he is a member of the LLC. However, there is a written LLC operating

agreement that states that there are only two members of the LLC, Hirsch and True.

Plaintiff advances another claim, however; that he is entitled to a share of the

business under the rubric of promissory estoppel. The record at trial demonstrates

that Plaintiff is entitled to a 15% share of the business (or damages) under that

theory, based on the following facts. The parties, including Plaintiff, created the

company. The parties also made clear in their business plan that Plaintiff was a

“Founder” of the company. They did not disclose to him that they had executed an

LLC operating agreement that excluded him, and Plaintiff expected and attempted

to facilitate an LLC operating agreement that would acknowledge his interest.

Defendants relied on these assertions and omissions to benefit themselves and the

LLC at Plaintiff’s expense, most notably by 1) causing Plaintiff to work for more

than a year without pay based on his understanding that the waxing value of his

equity would eventually compensate him, and 2) relying on Plaintiff to secure a start-

up loan to the business from a company in which his father was a principal. The

million-dollar loan was made without collateral, was not convertible to equity, and

1
was guaranteed only personally by Defendants. This loan was based on a business

plan that referred to Hirsh, True, and Plaintiff as “the Founders,” and Plaintiff’s

father testified that he would not have approved the loan absent the parties holding

Plaintiff out as a co-owner.

Finally, in an email to Plaintiff by True, copied to Hirsch, True stated that

Plaintiff owned 15% of Aither’s business. Hirsch did not dissent. I find by clear

and convincing evidence that Hirsch and True are estopped from asserting that

Plaintiff is not a 15% owner of Aither’s business, although not a member of the LLC

under the LLC operating agreement.

Plaintiff eventually left his work for Aither. Subsequently, the parties

disagreed about Plaintiff’s stake in Aither, which Plaintiff argued should be 1/3, and

which Defendants insisted was inchoate and unvested. 1

This Memorandum Opinion leaves other matters unresolved, including how

equity should vindicate Plaintiff’s rights. I address here only the issue described

above.

1
Defendants argue, without the support of written evidence, that Plaintiff agreed to five year’s
labor as a condition precedent for receiving a share of Aither, a term of service he failed to
complete. One wonders whether, upon completion of the term, like Jacob (Genesis 29:20–35),
Plaintiff would have received less attractive equity.

2
I. BACKGROUND 2

1. The Parties

Plaintiff Ari Rostowsky (“Ari” or “Plaintiff”) is the former Senior Vice

President of Business Development 3 of Aither Health, LLC (“Aither” or the

“Company”). 4

Defendant Laura Hirsch (“Hirsch”) is co-CEO of Aither and is a managing

member of Aither.5

Defendant Lisa True (“True” and collectively with Hirsch, the “Defendants”)

is co-CEO of Aither and is a managing member of Aither. 6 Together, Hirsch and

True control Aither. 7

Defendant Aither is a Delaware limited liability company involved in the

business of third-party administration of health insurance claims (“TPA”). 8

2
This Memorandum Opinion only contains facts necessary to my analysis. Citations to the parties’
joint trial exhibits are referred to by the numbers provided by the parties and cited as “JX __”. See
Ex. A to Joint Pre-Trial Stipulation and [Proposed] Ord., Dkt. No. 46; Ex. 97, Dkt. No. 65.
Citations to the parties’ stipulated pre-trial order are cited as “PTO ¶ __”. Joint Pre-Trial
Stipulation and [Proposed] Ord., Dkt. No. 46. References to the trial transcripts are cited as “Tr.
__:__”. 09-07-2023 Tr. of Evid. Hr’g, Dkt. No. 49.
3
Tr. (A. Rostowsky) 30:10–12.
4
PTO ¶ 11.
5
JX71; Tr. (True) 249:7–12.
6
JX71; Tr. (True) 249:7–12.
7
JX71.
8
JX24; JX97 at 4.

3
Non-party Richard Rostowsky (“Richard”) is Ari’s father and a former owner

of a TPA named S&S Healthcare. 9

2. The Parties Prior Involvement with TPAs

Prior to joining Aither, Plaintiff worked in sales for his father’s TPA, S&S

Healthcare, from September 2011 to April 2019. 10 Hirsch and True met Plaintiff at

their place of employment, Nova Healthcare, another TPA company. 11 S&S

Healthcare provided services to Nova Healthcare. 12 In August 2018, Richard and

his business partner sold S&S Healthcare to a private equity company.13 At the time

of the sale, Plaintiff signed an employee agreement that contained a non-compete

and non-solicitation clause.14 After the sale, S&S Healthcare terminated Plaintiff’s

employment in April 2019. 15

In April 2019, Plaintiff, Hirsch, and True began discussions about going into

business together by purchasing Significa Benefits, an existing TPA. 16 Hirsch and

True learned of Significa Benefits through Plaintiff. 17 Plaintiff introduced Significa

Benefits personnel to Hirsch and True, and the pair expressed an interested in buying

9
PTO ¶¶ 1–4. I refer to the Rostowskys by first name in the interest of clarity; no familiarity or
disrespect is intended.
10
Id. ¶¶ 1–2.
11
Tr. (True) 190:8–191:13; Tr. (A. Rostowsky) 81:8–82:8.
12
Tr. (True) 190:8–191:13; Tr. (A. Rostowsky) 81:19–82:8; PTO ¶ 5.
13
PTO ¶ 3.
14
Tr. (A. Rostowsky) 8:17–9:9; JX68.
15
PTO ¶ 4.
16
Tr. (A. Rostowsky) 14:11–15:18; Tr. (True) 230:6–231:11.
17
Tr. (A. Rostowsky) 14:11–15:4.

4
the company.18 After two meetings with Significa Benefits, Hirsch and True

prepared a business plan which outlined the following ownership structure: Hirsch

and True would each own 30%, Plaintiff would own 15%, and two other individuals

would own 20% and 5%.19 Plaintiff did not agree to the ownership breakdown.20

Ultimately, and in any event, Plaintiff, Hirsch, and True decided that purchasing

Significa Benefits was not an ideal business decision and settled on forming their

own TPA.21

3. The Formation of Aither Health LLC

In summer 2019, the parties took steps toward forming Aither. On July 2,

2019, Hirsch and True executed a certificate of formation,22 initial resolutions,23 and

an operating agreement for Aither. 24 The operating agreement listed and currently

lists only Hirsch and True as members of the Company.25 For the admittance of new

members, Section 1.8 of Aither’s operating agreement requires unanimous written

consent of all members. 26 Plaintiff asserts he was not aware of the execution of the

operating agreement and believed Aither did not have an executed written operating

18
Id.; Tr. (True) 230:6–24, 232:14–233:11.
19
Tr. (True) 195:21–196:2, 232:14–233:11; JX3.
20
Tr. (A. Rostowsky) 16:20–17:9.
21
Id. at 18:20–20:6; Tr. (True) 235:11–236:20; JX7.
22
JX71.
23
JX83.
24
JX10.
25
Id. at 12.
26
Id. at 2.

5
agreement.27 Defendants assert that Plaintiff is not an owner of the Company, but

instead, Plaintiff agreed to earn a 15% non-voting ownership interest in the

Company after five years of work 28 and agreed not to be compensated for any work

until Aither could afford to do so.29 Defendants contend that, in exchange, Plaintiff

did not have to guarantee the Company’s debt or make capital contributions.30

After Hirsch and True executed the operating agreement, the parties evaluated

options for funding the venture.31 The parties prepared an updated business plan on

July 27, 2019 that listed Plaintiff, Hirsch, and True as “Founders.” 32

The business plan attributed various company functions to the “Founders,”

such as “Expansion Plan,” “Investor Equity,” and “Exit Strategy.” 33 In addition, the

business plan refers to the parties’ ownership of the Company using the possessive

form “their.”34 For instance, the business plan’s “Management Team” section lists

each party (including Plaintiff) as a part of the Company’s management team.35 The

“Management Team” section details each parties’ respective background in the

industry and states that “[the parties’] combined expertise and industry network, will

27
Tr. (A. Rostowsky) 46:2–23. See also First Am. Verified Member Compl. Asserting Deriv. and
Direct Claims ¶ 4, Dkt. No. 11 (“First Am. Compl.”).
28
Tr. (True) 207:12–17, 246:19–23, 264:1–18.
29
Id. at 200:17–201:7.
30
Id. at 200:17–19, 211:21–212:4.
31
Tr. (A. Rostowsky) 22:2–22.
32
JX97 at 4.
33
Id. at 5–6.
34
See JX97.
35
Id. at 5.

6
bring the operations of their business to profitability within its first two years.”36 In

addition, the business plan states “[t]he Founders intend to grow the Company for at

least 10–15 years. Eventually, the Company will hire a qualified business broker to

sell the business [on] their behalf.”37 Further, the “Organizational Budget” section

of the business plan listed three owners of the Company. 38 This section of the

business plan did not specify who those owners were. 39

Hirsch also prepared a five-year forecast for Aither. 40 For an employee

projection for 2019 to 2024, Hirsch put “Co CEO, Co CEO, SVP Business

Development” under the “Owners” section of the table.41 At trial, True testified that

“SVP of business development” referenced Plaintiff.42

Plaintiff proposed that the parties borrow startup money from his father in

order to fund the venture.43 Hirsch and True emailed Richard and his business

partners the updated version of Aither’s business plan 44 as well as a July 27, 2019

version of the five-year financial forecast. 45 Richard testified that his understanding

36
Id. (emphasis added).
37
Id. at 6 (emphasis added).
38
Id. at 21.
39
Id.
40
Tr. (A. Rostowsky) 28:24–32:14; Tr. (True) 248:11–249:15; JX17a.
41
JX17a at 32.
42
Tr. (True) 248:11–249:15.
43
Tr. (A. Rostowsky) 22:2–11; Tr. (True) 238:6–8.
44
JX13; JX97.
45
JX17; JX17a. In my factual findings and analysis, I rely on the employee projection table in the
financial forecast. I note that the parties submitted the September 5, 2019 version of the five-year
forecast as Joint Exhibit 17a rather than the version of the forecast that was attached to the July
27, 2019 updated business plan given to Buffalo Enterprises. JX13; JX17; JX17a. However, at

7
of the business plan was that Plaintiff would be a part owner of Aither.46 Richard

further testified that based on his understanding of the ownership structure of Aither,

he decided with his partners to agree to loan the money to Aither. 47 Specifically,

Richard testified that he would not have provided the loan to Aither if Plaintiff was

not an owner of Aither.48 In addition, Richard stated that he discussed with Hirsch

Plaintiff’s desire to not disclose his involvement with Aither due to the non-compete

and non-solicitation clauses with S&S Healthcare, which restricted, or may have

restricted, Plaintiff’s participation in Aither. 49

Aither entered into a promissory note with Buffalo Enterprises, LLC, an entity

owned in part by Richard, 50 on October 1, 2019, wherein Aither agreed to repay

$1,000,000.51 Hirsch and True personally guaranteed the loan, but provided no

collateral, with the creditor agreeing to rely solely on their personal guarantees.52

According to Richard, Plaintiff did not guarantee the loan because Richard would

trial, True testified that the employee projection table in Joint Exhibit 17a was included in the five-
year forecast attached to the July 27, 2019 updated business plan. Tr. (True) 248:11–249:15. In
other words, for the purposes of my findings and analysis, the difference in the forecast versions
submitted to the Court and to Buffalo Enterprises is not material, as I rely on the employee
projection table that appears in both versions.
46
Tr. (R. Rostowsky) 165:1–24, 166:1–14, 166:23–167:7, 167:8–23.
47
Id. at 168:13–169:3.
48
Id. at 169:21–170:12.
49
Id. at 171:6–23. At this time, Plaintiff was involved in a lawsuit with S&S Healthcare relating
to his employment agreement. Tr. (A. Rostowsky) 32:23–33:8.
50
Tr. (R. Rostowsky) 171:24–172:3.
51
JX20. In addition to the loan that Hirsch and True received, the pair contributed their personal
funds to Aither. Tr. (True) 267:12–22.
52
JX20; Tr. (R. Rostowsky) 170:13–15, 182:16–23; Tr. (True) 211:13–212:4, 251:13–252:19.

8
assume responsibility for any potential liability that his son incurred.53 The terms of

the loan provided that repayment of the loan would commence with interest-based

payments on September 1, 2020 and repayment of the principal on January 1, 2022

for a five year period.54

Prior to the execution of the promissory note, Jeffrey Steinberg, a member of

Buffalo Enterprises, requested via email Aither’s articles of organization and a

“Corp resolution stating intent to borrow money from Buffalo Enterprises” to send

to an attorney. 55 Richard did not request a copy of Aither’s operating agreement.56

On October 2, 2019, True emailed Steinberg a copy of Aither’s Certificate of

Formation along with minutes of a special meeting of Aither.57 An excerpt from the

meeting minutes reads: “The following members and/or managers were present at

this special meeting: Lisa M. True Laura M. Hirsch being all the members of the

Limited Liability Company.”58

4. Plaintiff’s Involvement with Aither

During the Company’s startup period, Plaintiff contributed to its marketing by

recruiting a friend of his to create Aither’s logo and color scheme.59 Plaintiff

53
Tr. (R. Rostowsky) 170:16–171:1.
54
JX20.
55
JX24; Tr. (R. Rostowsky) 163:9–13, 176:3–7; Tr. (True) 206:1–3.
56
Tr. (R. Rostowsky) 173:18–174:12.
57
JX24.
58
Id.
59
Tr. (A. Rostowsky) 35:20–36:9.

9
disseminated marketing materials to prospective customers which identified Hirsch

and True as the only members of Aither.60 In addition, Plaintiff was aware of license

filing applications in different states that identified Hirsch and True as the sole

members of Aither.61 Plaintiff did not object or assert that Aither was making

inaccurate statements in its filings.62

While ramping up Aither’s business, Plaintiff, Hirsch, and True agreed to

forgo compensation until Aither became profitable.63 Plaintiff did not receive

compensation for eighteen months but provided services to the company 80 to 90

hours per week during that time period. 64 Utilizing an email address owned by

True’s other business, Plaintiff worked behind the scenes until Plaintiff was released

from his non-compete agreement with S&S Healthcare in October 2019.65

Afterwards, True created an official Aither email address for Plaintiff. 66 However,

Plaintiff did not revise the marketing materials to reflect his alleged ownership.67

According to Plaintiff, he was content with the materials not reflecting his alleged

60
Id. at 153:24–154:13.
61
Id. at 152:7–153:8, 153:13–17, 156:4–11; JX85; JX87; JX90.
62
See Tr. (A. Rostowsky) 152:7–153:8, 153:13–17, 156:4–11; JX85; JX87; JX90.
63
Tr. (A. Rostowsky) 36:13–38:3; Tr. (True) 200:17–201:7, 215:7–216:4.
64
Tr. (A. Rostowsky) 36:17–38:6, 48:1–2; Tr. (True) 201:2–11, 254:11–255:2, 265:2–6.
65
Tr. (A. Rostowsky) 39:15–41:13; JX95.
66
Joint Post-Trial Stipulation of Facts ¶ 5, Dkt. No. 52.
67
Tr. (A. Rostowsky) 153:24–155:17.

10
ownership since he did not want to confuse the public’s view of Aither and disrupt

the Company’s reputation, potentially stunting its growth.68

In 2020, Plaintiff brought in Aither’s first client. 69 Throughout 2020, Hirsch,

True, and Plaintiff discussed the Company’s strategy, employee hiring, and the

Company’s financial status on a high-level basis.70 In addition, Plaintiff recruited

employees for the Company.71 The Company grew quickly 72 and at the start of the

new year of 2021, in a text message to Plaintiff with True copied, Hirsch wrote

“Thank you for putting up with us and for being our partner!!! Here’s to another

awesome year!!!”73 In April 2021, Aither began to make a profit, and the parties

began to draw base salaries.74 Plaintiff’s pay was based on an annual payment

structure of $125,000. 75

5. Communications Regarding Plaintiff’s Ownership Interest in Aither

After S&S Healthcare released Plaintiff from his employment agreement,

Plaintiff had discussions with Defendants about signing a written operating

agreement.76 In October 2019, Plaintiff visited Hirsch’s house in Buffalo, New York

68
See id. at 154:14–155:17.
69
Id. at 44:5–9.
70
Id. at 49:20–50:5.
71
Id. at 50:1–5.
72
Id. at 47:18–24.
73
JX44.
74
Tr. (A. Rostowsky) 64:6–65:6.
75
Id. at 145:3–5.
76
Id. at 41:14–23.

11
with the expectation of executing a written operating agreement.77 According to

Plaintiff, however, when he arrived there was not an operating agreement available

for him to sign.78 Later in December that same year, Plaintiff travelled to Buffalo

again to execute an operating agreement, but (according to Plaintiff) Defendants said

that they could not sign because True was too distracted, having learned that her

father was diagnosed with a severe illness.79 In February 2020, Plaintiff travelled to

Dallas, Texas for a conference and with the goal to execute an operating

agreement.80 Once again, Hirsch and True told Plaintiff the agreement was not ready

to be signed.81 On August 15, 2020, True replied to an email from Plaintiff, wherein

Plaintiff attached a draft NDA that he signed, stating “technically as a minority you

don’t have authority to bind Aither.”82 Plaintiff did not refute this characterization

of his ownership.83

6. Plaintiff’s Resignation from Aither

Finally, in 2021, Plaintiff’s frustration with Hirsch and True came to head.

On February 9, 2021, Plaintiff and True had a phone call about creating an operating

77
Id. at 41:20–43:1.
78
Id. at 42:19–43:1.
79
See Tr. (A. Rostowsky) 43:2–44:4. During this time, Plaintiff also visited a potential client in
Syracuse, New York. Id. at 44:2–4.
80
Id. at 44:21–45:22.
81
Id. at 45:4–8.
82
JX79.
83
Tr. (A. Rostowsky) 116:16–117:1.

12
agreement to memorialize his ownership interest.84 That night, True sent a follow-

up email after the phone call, to Plaintiff and copied to Hirsch, stating that Plaintiff

had a 15% ownership interest in Aither. 85 True testified that her statement in the

email was incorrect, and intended to avoid further discussion because True was tired

and frustrated.86 Plaintiff did not refute True’s characterization of his ownership

interest as limited to 15%, as he contends he was relieved that Hirsch and True

finally recognized his ownership status, at all.87 In a similar vein, Hirsch did not

object to True’s email confirming Plaintiff’s ownership status. 88

In June 2021, Plaintiff asked Hirsch via text to provide him with K-1 tax

documents for the 2020 year.89 This request implied that he was an owner of Aither,

who would be entitled to a K-1. Hirsch responded: “We haven’t done the taxes. It’s

going to take awhile for me to catch everything up.” 90 Defendants did not refute

Plaintiff’s entitlement to the K-1 tax documents.91

Ultimately, because he had to “pull[] teeth” to get paid by Defendants and

was stressed from working for the Company, Plaintiff resigned from Aither on June

84
Id. at 59:13–61:7.
85
JX49.
86
Tr. (True) 217:9–219:1, 261:1–262:5.
87
Tr. (A. Rostowsky) 63:8–64:5.
88
Tr. (True) 262:6–18.
89
JX53.
90
Id. at 2.
91
Id.; Tr. (A. Rostowsky) 68:4–16.

13
21, 2021. 92 Upon Plaintiff’s resignation, Hirsch and True asserted that Plaintiff was

not an owner of Aither. 93 Specifically, Hirsch and True claimed that Plaintiff’s 15%

ownership interest was inchoate, and would vest only after Plaintiff worked at Aither

for five years. 94 In addition, Defendants claim that Plaintiff agreed to accept (once

his interest vested) a non-voting ownership. 95

B. Procedural History

Plaintiff filed his initial Complaint on January 3, 2022,96 and later filed an

Amended Complaint on April 19, 2022.97 The Amended Complaint asserts the

following causes of actions: Count I (Declaratory Judgment Recognizing Plaintiff’s

Ownership of Aither), Count II (Breach of Contract Against All Defendants), Count

III (Breach of Fiduciary Duty Against Hirsch and True), Count IV–VI (Unjust

Enrichment, Quantum Meruit, and Promissory Estoppel Against All Defendants),

Count VII (Fraud Against Hirsch and True), Count VIII (Violation of the Fair Labor

Standards Act, 29 U.S.C. § 201, et. seq. Against Aither).98

92
Tr. (A. Rostowsky) 69:3–70:4; PTO ¶ 11.
93
Tr. (A. Rostowsky) 71:15–23.
94
Tr. (True) 200:17–201:23, 246:19–23, 262:1–265:6.
95
Id. at 264:12–14.
96
Verified Member Deriv. Compl., Dkt. No. 1.
97
First Am. Compl.
98
Id. ¶¶ 58–96.

14
Defendants filed a Motion to Partially Dismiss the Amended Complaint on

May 23, 202299 and the parties fully briefed the Motion on July 15, 2022.100 I held

oral argument on the Motion to Dismiss on January 24, 2023, and held the Motion

in abeyance. 101 I ordered an evidentiary hearing concerning solely whether Plaintiff

is an owner of Aither. 102 I held trial in this matter on September 7, 2023.103 The

parties filed their respective post-trial briefs, 104 and I heard post-trial oral argument

on April 9, 2024. 105 I requested parties to meet and confer on possible settlement

and give a status update to the Court on April 30, 2024.106 On May 1, 2024, the

parties informed the Court that they were unable to reach a settlement. 107 On May

8, 2024, I wrote a letter to counsel informing the parties that I consider the matter

submitted as of that date.108

99
Defs.' Mot. to Partially Dismiss Pl.’s First Am. Verified Deriv. Member Compl., Dkt. No. 13.
100
Defs.' Opening Br. in Supp. of Their Mot. to Dismiss Pls.' Am. Verified Member Deriv. Compl.,
Dkt. No. 14; Pl.’s Answering Br. In Opp’n To Defs.’ Mot. For Partial Dismissal Of Pl.’s First Am.
Compl., Dkt. No. 16; Defs.' Reply Br. in Further Supp. of Their Mot. to Partially Dismiss Pls.' Am.
Verified Member Deriv. Compl., Dkt No. 17.
101
Mot. to Dismiss before Vice Chancellor Sam Glasscock dated 1.24.23 re: Arg. Deferred;
Counsel to meet and confer and contact Chambers re an Evid. Hr’g date, Dkt. No. 21.
102
Id.
103
Evid. Hr’g before Vice Chancellor Sam Glasscock dated 9.7.23, Dkt. No. 47.
104
Defs.' Joint Post Trial Opening Br., Dkt. No. 53 (“Defs. PT OB”); Pl.'s Post-Trial Br., Dkt. No.
54 (“Pl. PT OB”); Defs.' Joint Post Trial Answering Br., Dkt. No. 58 (“Defs. PT AB”); Pl.’s Post
Trial Answering Br., Dkt. No. 59 (“Pl. PT AB”).
105
Post Trial Oral Arg. before Vice Chancellor Sam Glasscock dated 4.9.24, Dkt. No. 62.
106
Tr. of Post Trial Oral Arg. dated 4.9.24 (“Post-Trial Tr.”) 75:5–76:7.
107
Letter to the Ct. from Pl.’s Counsel: Status Update re Settlement, Dkt. No. 63.
108
Letter to Counsel, Dkt. No. 64.

15
This Memorandum Opinion addresses only Plaintiff’s ownership status in

Aither and his ownership percentage.109

II. ANALYSIS

The question before me is whether Plaintiff is an owner of Aither Health LLC,

and if so, what percentage Plaintiff owns in the Company. I find that pursuant to the

Delaware Limited Liability Act (the “LLC Act”), Plaintiff has not established that

he is a member of Aither since he was not admitted as a member at the time of

Aither’s formation or at a later time pursuant to Aither’s operating agreement.110

The record, however, demonstrates that Plaintiff is entitled to relief pursuant to

promissory estoppel.111 My analysis follows.

109
I note that there is a pending Motion in Limine before me. Defs.’ Joint Mot. In Limine, Dkt.
No. 39. First, Defendants seek to exclude as evidence Richard Rostowsky’s deposition testimony
and trial testimony because Richard did not answer questions relating to S&S Healthcare during
his deposition. Defs.’ Joint Pre-Trial Opening Br. 39–41, Dkt. No. 40. Second, Defendants seek
to exclude as evidence emails pertaining to settlement negotiations and testimony from a witness
who allegedly was not deposed nor identified by Plaintiff as a trial witness. Id. at 42–45. Lastly,
Defendants seek an adverse inference against Plaintiff because, as Defendants argue, Plaintiff self-
collected evidence and spoliated data from a cell phone during the pendency of this litigation. Id.
at 35–39.
Richard Rostowsky’s involvement with S&S Healthcare, the emails pertaining to
settlement negotiations, and testimony from a witness who allegedly was not deposed nor
identified as a trial witness, were not necessary to my analysis, and I decline to rule on that portion
of the Motion. In regard to evidence Plaintiff self-collected, I find that an adverse finding against
Plaintiff is not warranted. I find that Defendants’ spoilation argument fails to satisfy Defendants’
burden to demonstrate Plaintiff acted recklessly or intentionally. See DG BF, LLC v. Ray, 2021
WL 5436868, at *5 (Del. Ch. Nov. 19, 2021) (quoting TR Invs., LLC v. Genger, 2009 WL 4696062,
at *17 (Del. Ch. Dec. 9, 2009)). Accordingly, I deny the request for an adverse inference against
Plaintiff.
110
Robinson v. Darbeau, 2021 WL 776226, at *8 (Del. Ch. Mar. 1, 2021) (“A member may be
admitted at the time of formation or at a later time.”); 6 Del. C. § 18-301(a)–(b).
111
Defendants argue that Plaintiff did not raise the claim of a membership interest in Aither based
on a theory of promissory estoppel, in his Complaint, Amended Complaint, pre-trial briefs, or pre-

16
A. Plaintiff was not Admitted as a Member in Aither at the Time of Aither’s
Formation or Pursuant to the Method Required by its Operating Agreement

I begin my analysis by determining whether Plaintiff was admitted into

membership of Aither, an LLC. Under the LLC Act, a “member” is “a person who

is admitted to a limited liability company as a member as provided in § 18-301.”112

trial stipulation, thus waiving the argument. Defs. PT OB 45–46. Defendants further argue that it
is prejudicial to allow Plaintiffs to seek an award of membership interest through promissory
estoppel post-trial because Defendants could not have known to develop evidence to defeat this
claim. Id.
First, Plaintiff did raise the theory of promissory estoppel in his Amended Complaint
(although Defendants assert it was only an alternative theory for monetary damages to compensate
Plaintiff for his services at Aither rather than for an award of membership interest). First Am.
Compl. ¶¶ 52, 75–84; Defs. PT OB 45–46. Defendants are free to argue that the proper remedy for
the promissory estoppel theory is monetary damages rather than equity, in the next phase of this
litigation. However, because Plaintiff did raise the theory of promissory estoppel in his Amended
Complaint, Defendants were on notice of this argument both during discovery and at trial. As
such, Plaintiff’s argument for a membership interest under promissory estoppel is not prejudicial
to Defendants and the discovery and trial they conducted. Cf. In re PNB Hldg. Co. S’holder Litig.,
2006 WL 2403999, at *22 n.117 (Del. Ch. Aug. 18, 2006) (barring defendants from relying on an
exculpation clause where defendants raised the defense, which is “in the nature of an affirmative
defense,” after discovery was closed and after plaintiffs had shaped their trial plans, making it
prejudicial to the plaintiffs (quoting Emerald P’rs v. Berlin, 726 A.2d 1215, 1223 (Del. 1999)));
Zaman v. Amedeo Hldgs., Inc., 2008 WL 2168397, at *15 (Del. Ch. May 23, 2008) (holding that
defendants waive their affirmative defense because they did not give fair notice by raising it for
the first time on the second day of trial when it was not included in their answer, pre-trial briefs,
or pre-trial order).
Further, both parties were able to address the promissory estoppel argument in their post-
trial briefs and during the post-trial oral argument. Defs. PT OB 46–53; Defs. PT AB 31–34; Pl.
PT OB 28–33; Pl. PT AB 24–31; Post-Trial Tr. 59:7–61:11, 67:3–68:1. Therefore, I find that
Defendants have suffered no prejudice where promissory estoppel was raised in post-trial briefing
prior to the post-trial oral argument. Cf. In re IBP, Inc. S’holder Litig., 789 A.2d 14, 62 (Del. Ch.
2001) (finding that a party waived any arguments that were not raised in their opening post-trial
brief); Emerald P’rs v. Berlin, 2003 WL 21003437, at *43 (Del. Ch. Apr. 28, 2003) (denying
plaintiff’s motion for leave to file a post-argument brief, after a post-trial oral argument, advancing
an argument that has never been advanced in any briefing filed by the plaintiff in the action), aff’d,
840 A.2d 641 (Del. 2003); In re Morrow Park Hldg. LLC, 2020 WL 3415649, at *20 (Del. Ch.
June 22, 2020) (holding that parties’ second basis for promissory estoppel is waived because it
was raised for the first time at oral argument for a motion for summary judgment and not in the
complaint or brief in opposition to summary judgment).
112
6 Del. C. § 18-101(13).

17
6 Del. C. § 18-301 establishes different courses of action to admit a member into an

LLC both in connection with the formation of an LLC and after the formation of an

LLC. 113

At the time of formation of an LLC, 6 Del. C. § 18-301(a) “permits a person

to be admitted as a member ‘when the person’s admission is reflected in the records

of the limited liability company.’”114

After the formation of an LLC, a person is admitted as a member of the LCC:

“In the case of a person who is not an assignee of a limited liability
company interest, including a person acquiring a limited liability
company interest directly from the limited liability company and a
person to be admitted as a member of the limited liability company
without acquiring a limited liability company interest in the limited
liability company at the time provided in and upon compliance with the
limited liability company agreement or, if the limited liability company
agreement does not so provide, upon the consent of all members or as
otherwise provided in the limited liability company agreement;” 115

In summary, among other courses of action, a person can be admitted as a

member of an LLC in connection with its formation if the person is identified as a

member in the LLC’s records at the time of formation, and after its formation

pursuant to the requirements of the LLC’s operating agreement. Accordingly, my

113
Id. § 18-301(a)–(b).
114
Robinson, 2021 WL 776226, at *8 (quoting 6 Del. C. § 18-301(a)(2)). “The records of a limited
liability company at the time of formation include, at a minimum, the certificate of formation, and
the LLC Act provides that members may be identified at the time of formation in the certificate of
formation itself.” Id. at *8 (emphasis added).
115
6 Del. C. § 18-301(b)(1).

18
analysis relies on Aither’s records at the time of formation and Aither’s written

operating agreement.116

I turn first to whether Plaintiff was admitted as a member of Aither in

connection with its formation. Plaintiff is not identified as a member of Aither in

Aither’s records at the time of formation, which include its certificate of formation,

initial resolutions, and written operating agreement.117 Thus, Plaintiff was not

admitted as a member of Aither in connection with its formation.

Next, I turn to whether Plaintiff was admitted as a member of Aither after its

formation pursuant to the requirements of Aither’s written operating agreement. I

116
Plaintiff argues that the written operating agreement has no legal effect, as in his view the
parties came to an implied or oral operating agreement for Aither, which predated Aither’s “secret”
written operating agreement, recognized Plaintiff as a member, and could not be overridden by the
“secret” written operating agreement without Plaintiff. Pl. PT OB 20–22. I disagree. “[T]he fact
that an LLC agreement may be oral or implied does not change the fact that [LLC] had a written
agreement. . . That agreement governs.” See Riverside Risk Advisors LLC v. Chao, 2022 WL
14672745, at *20 (Del. Ch. Oct. 26, 2022, revised Oct. 28, 2022), judgment entered, 2023 WL
35348 (Del. Ch. Jan. 3, 2023), and rearg. denied, 2023 WL 5046760 (Del. Ch. Jan. 3, 2023), aff'd,
303 A.3d 51 (Del. 2023) (citing A&J Cap., Inc. v. L. Off. of Krug, 2018 WL 3471562, at *5 (Del.
Ch. July 18, 2018)). Aither has a written operating agreement; I find that the written operating
agreement governs.
Plaintiff argues that Riverside facts are materially different because the Riverside plaintiff
began as an employee of the LLC after its formation, and she was never a member under the LLC’s
operating agreement that only lists other parties; therefore, the Riverside plaintiff was not able to
block the execution of a later operating agreement. Pl. PT AB 6. I read Riverside differently. The
Riverside plaintiff makes a similar argument to that of Plaintiff in this action—that she was kept
in the dark of the existence of the LLC’s written agreement for three and a half years, during which
she was a member the entire time because LLC agreements can be oral or implied. Defs. Answer
to Frosts Post Trial Br. at 10, Riverside Risk Advisors LLC v. Grace I Ching Chao, 2019-0789-
KSJM, (Del. Ch. May 3, 2022). The Court in Riverside found that the LLC’s written agreement
governs. Riverside, 2022 WL 14672745, at *20. Similarly, I find that Aither’s written operating
agreement governs.
117
See JX10 at 12; JX71; JX83.

19
find that he was not. Pursuant to Section 1.8 of Aither’s written operating agreement,

additional members could be admitted to the Company only by unanimous written

consent of its members. 118 Plaintiff did not receive unanimous written consent from

Hirsch and True. Although True sent an email to Plaintiff on February 9, 2021

stating that his ownership interest was 15%, 119 Hirsch did not respond to that email

or otherwise provide written consent.

Plaintiff was not admitted as a member of Aither pursuant to its operating

agreement.

B. The Record Demonstrates that Plaintiff is Entitled to a Remedy Pursuant
to Promissory Estoppel

I now turn to whether the record demonstrates Plaintiff is entitled to relief

pursuant to promissory estoppel. I find that he is. To prevail on a promissory

estoppel claim, a plaintiff must establish that by clear and convincing evidence:

(i) a promise was made; (ii) it was the reasonable expectation of the
promisor to induce action or forbearance on the part of the promisee;
(iii) the promisee reasonably relied on the promise and took action to
his detriment; and (iv) such promise is binding because injustice can be
avoided only by enforcement of the promise. 120

118
JX10 at 2.
119
JX49.
120
Harmon v. State, Del. Harness Racing Comm'n, 62 A.3d 1198, 1201 (Del. 2013) (quoting Lord
v. Souder, 748 A.2d 393, 399 (Del. 2000)).

20
The predominant question in Delaware promissory estoppel cases is “whether

injustice could be avoided only by enforcement of the promise.” 121

1. The Record Demonstrates that Hirsch and True Made a Promise to
Plaintiff that He Would be an Owner of Aither with a 15% Interest

a. Hirsch and True Promised that Plaintiff Would be an Owner
of Aither

Unless noted otherwise, the findings of fact below are made pursuant to the

clear and convincing evidence standard.

Plaintiff testified that he was promised an ownership interest by

Defendants, 122 and I find that the record, in addition to this testimony, demonstrates

that he was promised an ownership interest by Defendants. The parties’

communications amongst themselves and to third parties demonstrate that Hirsch

and True made a promise that Plaintiff would be an owner of Aither. True referred

to the existence of Plaintiff’s ownership interest in various emails. For example, in

one email to Plaintiff, True stated that Plaintiff owned a 15% interest in Aither.123 In

another email to Plaintiff, True categorized Plaintiff as “a minority” of Aither.124

The record does not demonstrate that either Defendant recanted or objected to the

existence of an ownership interest held by Plaintiff after these emails were

121
Grunstein v. Silva, 2011 WL 378782, at *11 (Del. Ch. Jan. 31, 2011) (quoting Grunstein v.
Silva, 2009 WL 4698541, at *7 (Del. Ch. Dec. 8, 2009)).
122
Ex. A – Ari Rostowsky July 18, 2023 Tr. 91:1–93:22, Dkt. No. 41.
123
JX49.
124
JX79.

21
exchanged.125 In addition, Plaintiff requested K-1 tax documents from Hirsch, and

Hirsch’s reply indicated that the K-1 would be forthcoming.126 Plaintiff’s request

implied that he was an owner of Aither, who would be entitled to a K-1, and

Defendants did not refute Plaintiff’s entitlement to the K-1.

Further, the parties sent an updated business plan and five-year forecast to

Buffalo Enterprises to secure an investment after the execution of Aither’s operating

agreement.127 The business plan listed Plaintiff, Hirsch, and True as “the

Founders.” 128 The business plan refers to the parties’ ownership of the Company

using the possessive form “their.”129 For instance, the “Management Team” section

details each parties’ (including Plaintiffs’) respective background in the industry and

states that “[the parties’] combined expertise and industry network, will bring the

operations of their business to profitability within its first two years.” 130

In addition, the five-year forecast, as included with the updated business plan,

had a table that indicated the projected owners of Aither were two Co-CEOs and the

SVP of Business Development for 2019 to 2024. 131 True testified that “SVP of

business development” referred to Plaintiff. 132 These facts regarding the parties’

125
See Tr. (True) 262:1–5, 262:9–18.
126
JX53.
127
JX10; JX13; JX17; JX17a; JX97.
128
JX97 at 4.
129
See JX97.
130
Id. at 5 (emphasis added).
131
JX17a at 32; Tr. (True) 248:11–249:15.
132
Tr. (True) 248:11–249:15.

22
communications amongst themselves in combination with the updated business plan

and five-year forecast clearly and convincingly support a finding that Hirsch and

True promised Plaintiff an ownership interest in Aither, and acted in such a way as

to acknowledge the promise.

Defendants make several arguments to negate these communications, but

none is persuasive. Defendants argue that True was tired and frustrated when she

sent the email that stated Plaintiff owned an interest in Aither.133 Whatever the truth

of this statement, I do not find this testimony persuasive as to either Defendants’ or

Plaintiff’s understanding of Aither’s ownership; True made no effort to refute the

statement after she became calm and clear-minded.134 Defendants further assert that

True only stated that Plaintiff was a minority and had no authority to bind Aither

because True was using it as a “coaching opportunity” to explain to Plaintiff that at

no point in time would he be able to bind Aither, even if he became an owner years

hence.135 I also do not find this testimony credible, as a reasonable person would not

refer to an individual as a “minority” owner if they in fact had no present interest in

the company, and only an inchoate and conditional expectation of an interest in the

future. These communications, to my mind, clearly acknowledge a present interest.

133
Id. at 217:13–218:1, 260:9–261:24.
134
Id. at 262:1–18.
135
Id. at 219:4–220:11, 255:22–257:19.

23
Defendants also contend that Plaintiff being listed in the updated business plan

as one of three “Founders” simply indicates that the parties developed the business

concept together and does not indicate each of the Founders had an ownership

interest in the Company itself.136 I do not find this argument persuasive. The record

indicates that Plaintiff took extensive efforts to develop Aither (the actual company

and not just the concept), alongside True and Hirsch by assisting in finding its start-

up investment, 137 securing the Company’s first client, 138 and working without pay

for eighteen months,139 which I will discuss further below. These are consistent with

the business plan’s implication of a current interest. Defendants also contend that

the five-year forecast, which indicates that there are three owners of the business,140

was based on a “template” to forecast expenses, and not intended to specify who the

members of Aither were or what percentage membership interest they held.141 I find

this not to be a credible interpretation. The five-year forecast specifically includes

the “SVP [of] Business Development” under the “Owners” section of a table.142

136
Defs. PT OB 24.
137
See Tr. (A. Rostowsky) 22:2–11; Tr. (True) 238:6–239:20; JX7 (demonstrating that Hirsch was
relying on Plaintiff’s connections to secure a start-up loan).
138
Tr. (A. Rostowsky) 44:5–9.
139
Id. at 36:17–38:9; Tr. (True) 201:2–11, 254:11–255:2, 265:2–6.
140
JX17a at 32.
141
Defs. PT OB 24–25.
142
JX17a at 32.

24
Further, True herself testified at trial that “SVP of business development” refers to

Plaintiff. 143

Finally, Defendants argue Plaintiff did not prove a promise was made because

certain communications to third parties did not include him as a member of Aither.

For instance, Defendants state that even after Plaintiff was released from his non-

compete, he allowed Aither to submit license applications that excluded him as a

member 144 and he failed to change marketing materials sent to prospective customers

to include himself as a member.145 I find this insufficient to rebut the clear evidence

of the documentary record, taken as a whole. First, Plaintiff adequately explained

that he was loathe to announce to potential customers a different ownership

structure, lest confusion in the marketplace result.146 Second, even if certain

communications to third parties did not state that Plaintiff is a member, Defendants

represented Plaintiff as a “Founder” in the updated business plan.147 But, more

importantly, Defendants also represented to Plaintiff himself that he had an

ownership interest in Aither in several communications. Accordingly, I find, by clear

and convincing evidence, that Plaintiff was promised an ownership interest in the

Aither business by Defendants.

143
Tr. (True) 249:13–15.
144
Defs. PT OB 49.
145
Id. at 29, 48–49.
146
See Tr. (A. Rostowsky) 53:2–55:16, 154:14–155:17.
147
JX97.

25
b. Hirsch and True Promised a 15% Ownership Interest in
Aither

Turning to the amount of Plaintiff’s ownership interest in the LLC, I find that

the record supports a finding that Plaintiff was promised a 15% ownership interest.

Plaintiff asserts that he is entitled to a one-third interest, 148 as Hirsch and True orally

or impliedly agreed to this ownership structure. 149 The record, to my mind, does not

support such a finding. Upon receiving the email from True that confirmed that he

held a 15% interest, Plaintiff did not object to such statement.150 In addition, after

the email exchange wherein True stated that Plaintiff was a “minority” interest

holder, Plaintiff did not protest that he held a share equal to Hirsch and True. 151 This

finding is consistent with the anticipated ownership structure of Significa Benefits,

the company that the parties almost acquired and created an ownership structure

for.152 This latter fact is not dispositive, but is indicative of the Defendants’ intention

towards Plaintiff. I find that the parties understood that Plaintiff was promised a

15% ownership interest in Aither.

148
Pl. PT OB 33. Plaintiff did not initially assert he held a one-third interest but did later in
litigation. See Verified Member Deriv. Compl., Dkt. No. 1.
149
Pl. PT OB 17–22.
150
Tr. (A. Rostowsky) 63:8–14.
151
See id. at 116:16–117:1; JX79.
152
Tr. (True) 195:10–196:2; JX3.

26
2. The Record Demonstrates that Hirsch and True Reasonably
Expected to Induce Action or Forbearance on Part of Plaintiff

Plaintiff’s services provided to Aither without compensation 153 and the loan

provided to Aither by Buffalo Enterprises 154 demonstrate that Hirsch and True

reasonably expected to induce action or forbearance on part of Plaintiff. “The

standard for testing expectation is an objective one.”155

Plaintiff’s conduct—uncompensated labor156—mirrored the conduct of an

individual who expected to share in profits and losses. Hirsch and True also worked

for this period of time without pay.157 Only an unreasonable person in Hirsch’s and

True’s position would expect a non-equity-holder to work for a long-extended

period, at will and facing the possibility of termination before any interest vested,

without payment. In contrast, a reasonable person would expect inducement of that

conduct where there is an incentive, such as expecting to share in profits and losses

through an ownership interest. In addition, upon reading Aither’s business plan,158

a reasonable person would infer that Plaintiff had an interest in the profitability of

Aither and acted in accordance. Accordingly, I find by clear and convincing

153
Tr. (A. Rostowsky) 36:13–37:2; Tr. (True) 200:17–201:11, 215:7–16, 254:11–255:2, 265:2–6.
154
JX20.
155
Ramone v. Lang, 2006 WL 905347, at *15 (Del. Ch. Apr. 3, 2006).
156
Tr. (A. Rostowsky) 36:13–37:2; Tr. (True) 200:17–201:11, 215:7–16, 254:11–255:2, 265:2–6.
157
Tr. (A. Rostowsky) 36:13–23, 38:1–3; Tr. (True) 201:2–5, 215:7–16.
158
JX97.

27
evidence that Hirsch and True expected to induce action—uncompensated labor—

on part of Plaintiff, from the promise of an ownership interest in Aither.

The loan provided to Aither by Buffalo Enterprises also supports a finding

that Hirsch and True expected that Plaintiff would be induced to act based on their

promise. Buffalo Enterprises is partly owned by Plaintiff’s father, Richard.159

Defendants expected Plaintiff to use his influence with his father,160 an action

incentivized by the promise of Plaintiff’s ownership interest in Aither. In fact, True

even texted Hirsch that Plaintiff’s expected contribution to Aither was to “bring in

the money and prospects – leave the rest to [them].161

The record demonstrates that Plaintiff did use his influence with his father.

First, the loan was not a normal business loan—it was made without collateral.162

Second, Richard testified that he only loaned the money because he expected

Plaintiff to be a co-owner of Aither based on conversations with Defendants.163 I

159
Tr. (R. Rostowsky) 171:24–172:3.
160
See JX7; Tr. (True) 238:6–239:4; Tr. (A. Rostowsky) 22:2–23:2.
161
JX11.
162
JX20; Tr. (R. Rostowsky) 182:16–19; Tr. (True) 251:19–21.
163
Tr. (R. Rostowsky) 165:17–24, 166:12–14, 167:16–23, 168:13–169:3, 169:21–170:12.
Defendants assert that any probative value of Richard’s testimony is negated by Defendants’
disclosure that Hirsch and True are the only members of the Company in the meeting minutes
given to Steinberg on October 2, 2019 and Richard’s failure to request the operating agreement
from Defendants. Defs. PT OB 50. I find this argument to be unpersuasive. Given that the record
does not indicate that Richard was aware of either the operating agreement or meeting minutes,
these facts do not negate that Richard expected Plaintiff to be a co-owner of Aither. Tr. (R.
Rostowsky) 171:2–5, 173:18–175:14. This is further supported by the fact that Richard knew
Hirsch was aware of Plaintiff’s desire to keep his involvement with Aither a secret, as discussed
below. Id. at 171:6–23. Accordingly, I find that regardless of what the documents stated, Richard

28
find his testimony credible, in light of the terms of the loan. Given Plaintiff’s

relationship with the creditor (father–son), the favorable nature of the start-up loan,

and Richard’s testimony of his understanding of Plaintiff’s interest in Aither based

on conversations with Defendants, Defendants had reason to know that Plaintiff did

rely on the promise of his ownership interest in Aither and “acted” by influencing

his father. I find by clear and convincing evidence that Hirsch and True reasonably

expected to induce action on part of Plaintiff (influencing his father to give Aither a

loan from Buffalo Enterprises) in light of their promise to give him an ownership

interest in Aither.

Defendants point out that they, and not Plaintiff, personally guaranteed the

Buffalo Enterprises loan. 164 The argument is that there was no action or forbearance

on part of Plaintiff because he did not make the loan or personally guarantee the

loan—it was Buffalo Enterprises that “acted” by giving the loan. 165 I do not find

this argument persuasive. Plaintiff did not need to have personally guaranteed the

loan because the record, as discussed above, already shows action on part of Plaintiff

that Defendants reasonably expected to induce—uncompensated labor and

expected Plaintiff to be a co-owner of Aither and was thus influenced by Plaintiff to offer this
favorable loan to Aither at the request of Plaintiff.
164
Defs. PT OB 50.
165
Id. (“Plaintiff’s contention that Buffalo Enterprises would not have given Aither the Loan but
for his alleged ownership in the Company does not cure this fundamental deficiency – as it may
have been Buffalo Enterprise’s reliance but not Plaintiff’s. Plaintiff did not make the Loan, and
did not take on any risk for this financing; Defendants bore all of the risk alone. There is no legal
basis for a claim of third-party reliance or reliance by proxy.”).

29
influencing his father for the start-up loan. In addition, the record demonstrates that

Plaintiff’s personal guaranty was not necessary as Plaintiff’s father, Richard,

expected to be responsible for Plaintiff’s portion of any liability. 166

Defendants also assert that they could not reasonably expect that Plaintiff

would be induced to act by a promise of an immediate ownership interest in Aither

because their understanding of the agreement was that Plaintiff’s ownership interest

would vest after five years.167 As I understand Defendants’ argument, it is that if

Plaintiff was induced to act, it must be based on this alleged agreement that

Plaintiff’s ownership interest would vest after five years. They assert that the parties’

agreement was both conditional—on his remaining an at-will employee for the full

term—and oral.168

I find this untenable. The record demonstrates that Hirsch and True asserted

this version of the agreement of ownership interest only after this litigation began.169

Further, it is not plausible that an employee would be induced to act, i.e., work

without compensation for an extended period of time, solely with the expectation of

an incentive—unvested—that could come to fruition five years in the future. Such

an agreement, I note, would be difficult to enforce due to the statute of frauds,

166
Tr. (R. Rostowsky) 170:16–171:1.
167
Defs. PT OB 50–51.
168
Id.; Tr. (True) 262:9–15, 263:10–265:6.
169
See Tr. (A. Rostowsky) 70:5–24, 71:15–23.

30
making it even less plausible that an employee would be induced to act by such an

agreement.170 In short, Defendants’ arguments are not credible, and I find that

Plaintiff has proved, under the clear and convincing standard, that Defendants

reasonably expected to induce action on part of Plaintiff based on their promise of

his ownership interest in Aither.

3. The Record Demonstrates that Plaintiff Reasonably Relied on
Hirsch’s and True’s Promise and That He Took Actions to his
Detriment

Plaintiff reasonably relied on Defendants’ promise for his ownership interest

in Aither and acted to his detriment because of the promise. Plaintiff worked for

Aither for eighteen months without compensation, 171 secured—through his

connection with his father—the Company’s start-up loan,172 secured the Company’s

first client,173 and contributed other services to the Company.174 Plaintiff testified

that he would not have worked without pay unless he was an owner of Aither.175 I

believe this testimony. Plaintiff also demonstrated his belief that he was an owner,

as he testified that he discussed with Defendants the Company’s strategy, employee

hiring, and finances at a high-level.176 I find his testimony credible.

170
6 Del C. § 2714(a).
171
Tr. (A. Rostowsky) 36:13–37:2; Tr. (True) 200:17–201:11, 215:7–16, 254:11–255:2, 265:2–6.
172
Tr. (A. Rostowsky) 22:2–23:2; Tr. (True) 238:6–239:20; JX20.
173
Tr. (A. Rostowsky) 44:5–9.
174
See id. at 36:5–12, 49:23–50:5.
175
Id. at 37:7–9.
176
Id. at 49:23–50:5.

31
The record demonstrates that Hirsch and True were well aware of the

extensive services that Plaintiff provided to Aither at the beginning stages of its

formation, during its startup period, and when it became profitable. In addition,

Plaintiff communicated his understanding of his ownership interest, over an

extended period of time, to Defendants. 177 Defendants at no point in time during

Plaintiff’s eighteen-month tenure with Aither refuted his ownership interest nor

explicitly made clear that he was simply an employee.178 Thus, I find it was

reasonable for Plaintiff to rely on Hirsch’s and True’s promise, and that he did so to

his detriment.

Defendants point to marketing materials, filings, and minutes that stated

Hirsch and True were the only owners of Aither. 179 Defendants argue that Plaintiff

and Buffalo Enterprises were aware of these materials and did not refute them, which

demonstrates that Plaintiff could not have reasonably relied on their promise. 180 I

find this argument unpersuasive since the record demonstrates Plaintiff, Buffalo

Enterprises, and Defendants had an incentive to keep Plaintiff’s involvement in the

Company a secret in light of Plaintiff’s non-compete with S&S Healthcare, a fact

177
See id. at 41:14–42:11, 42:19–43:1, 43:2–44:1, 44:21–45:22, 60:3–61:10; JX49.
178
Ramone, 2006 WL 905347, at *16 (finding reasonable and detrimental reliance where promisor
was aware of promisee’s reliance and took no action to correct promisee’s conduct based on the
purported promise).
179
Defs. PT OB 29–30, 52.
180
Id.

32
that Hirsch and True were well aware of. 181 I find that Plaintiff reasonably relied on

Defendants’ promise and took actions, including uncompensated labor, to his

detriment.

4. The Promise is Binding Because Injustice Can be Avoided Only By
Enforcement of the Promise

I find that an injustice can be avoided only by enforcing Hirsch’s and True’s

promise to Plaintiff. Plaintiff introduced the connection to secure Aither’s start-up

loan.182 In turn, the record demonstrates that Hirsch and True used their association

with Plaintiff to receive the loan.183 Plaintiff also contributed extensive services to

Aither for eighteen months without pay.184 In addition, Plaintiff had continuous back

and forth communications regarding the status of his ownership with Hirsch and

True while being led on.185 The Company relied on and benefitted materially from

the assistance and contributions that Plaintiff provided. Therefore, I find that it

would be manifestly unjust to allow Hirsch and True reap the benefits of Plaintiff’s

contributions without fulfilling their promise to Plaintiff.

181
See Tr. (R. Rostowsky) 171:6–23; Tr. (A. Rostowsky) 12:11–14:8; Tr. (True) 227:20–229:21,
253:7–23; JX2.
182
Tr. (A. Rostowsky) 22:2–23:2; Tr. (True) 238:6–239:2.
183
JX7 (demonstrating that Hirsch was relying on Plaintiff’s connections to secure a start-up loan);
Tr. (R. Rostowsky) 168:13–169:3.
184
Tr. (A. Rostowsky) 36:13–37:2; Tr. (True) 200:17–201:11, 215:7–16, 254:11–255:2, 265:2–6.
185
See Tr. (A. Rostowsky) 41:14–43:1, 43:2–44:1, 44:21–45:22, 60:3–17; JX49.

33
III. CONCLUSION

For the foregoing reasons, I find that Plaintiff pursuant to promissory estoppel

has a 15% ownership interest in Aither. How equity should act to vindicate this

interest remains for further consideration. The parties should submit a form of order

consistent with this Memorandum Opinion.

34