Anchorage Police & Fire Retirement System v. Rudy Adolf

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

ANCHORAGE POLICE & FIRE )
RETIREMENT SYSTEM and )
TEAMSTERS UNION NO. 142 PENSION )
)
FUND, on behalf of themselves and all
other former stockholders of Focus )
Financial Partners Inc., )
)
Plaintiffs, )
)
v. ) C.A. No. 2024-0354-KSJM
)
RUDY ADOLF, RAJINI KODIALAM, )
JAMES D. CAREY, FAYEZ S. )
MUHTADIE, STONE POINT CAPITAL )
LLC, TRIDENT FFP L.P., TRIDENT VI, )
L.P., TRIDENT VI PARALLEL FUND, )
L.P., TRIDENT VI DE PARALLEL )
FUND, L.P., GOLDMAN SACHS & CO. )
LLC, CLAYTON, DUBILIER & RICE, )
LLC, FERDINAND FFP ACQUISITIONS, )
LLC, FERDINAND FFP MERGER SUB )
1, INC., and FERDINAND FFP MERGER )
SUB 2, LLC, )
)
Defendants. )

MEMORANDUM OPINION

Date Submitted: October 23, 2024
Date Decided: April 3, 2025

Derrick B. Farrell, Matthew L. Miller, Robert B. Lackey, BLEICHMAR FONTI &
AULD LLP, Wilmington, Delaware; Christine M. Mackintosh, Vivek Upadhya,
Casimir O. Szustak, GRANT & EISENHOFER P.A., Wilmington, Delaware; Javier
Bleichmar, BLEICHMAR FONTI & AULD LLP, New York, New York; Counsel for
Plaintiff Anchorage Police & Fire Retirement System.

Ned C. Weinberger, Michael C. Wagner, LABATON KELLER SUCHAROW LLP,
Wilmington, Delaware; Craig J. Springer, ANDREWS & SPRINGER LLC,
Wilmington, Delaware; Domenico Minerva, John Vielandi, LABATON KELLER
SUCHAROW LLP, New York, New York; Eric L. Zagar, Cameron N. Campbell,
Lauren C. Lummus, KESSLER TOPAZ MELTZER & CHECK, LLP, Radnor,
Pennsylvania; Jeremy S. Friedman, David Tejtel, Christopher M. Windover, David
A. Rosenfeld, FRIEDMAN OSTER & TEJTEL, Bedford Hills, New York; Counsel for
Plaintiff Teamsters Union No. 142 Pension Fund.

Rolin P. Bissell, Alberto E. Chávez, YOUNG CONAWAY STARGATT & TAYLOR,
LLP, Wilmington, Delaware; Craig E. Zieminski, Andrew E. Jackson, VINSON &
ELKINS LLP, Dallas, Texas; Counsel for Defendants Rudy Adolf and Rajini
Kodialam.

Raymond J. DiCamillo, Robert L. Burns, Matthew W. Murphy, Nicholas F. Mastria,
RICHARDS, LAYTON & FINGER, P.A., Wilmington, Delaware; Craig S. Waldman,
Jacob Lundqvist, SIMPSON THACHER & BARTLETT LLP, New York, New York;
Counsel for Defendants James D. Carey, Fayez S. Muhtadie, Stone Point Capital
LLC, Trident FFP LP, Trident VI L.P., Trident VI Parallel Fund, L.P., and Trident
VI DE Parallel Fund, L.P.

A. Thompson Bayliss, E. Wade Houston, Bryan M. Blaylock, ABRAMS & BAYLISS
LLP, Wilmington, Delaware; Matthew Solum, Mary T. Reale, KIRKLAND & ELLIS
LLP, New York, New York; Counsel for Defendants Clayton, Dubilier & Rice, LLC,
Ferdinand, FFP Acquisitions, LLC, Ferdinand FFP Merger Sub 1, Inc., and
Ferdinand FFP Merger Sub 2, LLC.

S. Mark Hurd, Emily Friedman, MORRIS, NICHOLS, ARSHT & TUNNELL LLP,
Wilmington, Delaware; Robert J. Giuffra, Jr., Jonathan S. Carter, Alexander N.
Gross, SULLIVAN & CROMWELL LLP, New York, New York; Counsel for Defendant
Goldman Sachs & Co. LLC.

McCORMICK, C.
The defendants have moved to dismiss this class-action lawsuit asserting

claims for breach of fiduciary duty in connection with a merger. The stockholder-

plaintiffs allege that the merger was a conflicted-controller transaction subject to

entire fairness review. They alternatively argue that their claims implicate enhanced

scrutiny because the merger was an all-cash transaction. They also advance claims

against the acquiror and one of the company’s financial advisors for aiding and

abetting breaches of fiduciary duties.

The plaintiffs have not adequately alleged the existence of a controller or

control group to invoke entire fairness review. A 20% stockholder, who held rights

under a credit agreement with the target company, agreed to rollover its shares and

port the company’s debt to the post-merger entity in exchange for rights in the post-

merger entity. The plaintiffs are correct that this arrangement placed the

stockholder in conflict with the company’s minority stockholders. The plaintiffs do

not sufficiently allege, however, that the 20% stockholder was a controller. To plead

that a 20% stockholder exercised actual control to give rise to fiduciary duties, a

stockholder must point to indicia in addition to share ownership to support an

inference of actual control, which the plaintiffs have failed to do. The plaintiffs also

fail to adequately allege that the 20% stockholder had a legally significant connection

with other stockholders to form a control group. This decision grants the defendants’

motions as to the controller and control group claim.

Absent a conflicted controller, the plaintiffs’ claims are presumptively subject

to enhanced scrutiny unless the transaction is approved by a fully informed,
uncoerced vote of the disinterested stockholders. The defendants obtained approval

by the disinterested stockholders, but the plaintiffs allege that the vote was

uninformed because the proxy statement suffers eight disclosure deficiencies.

Of the plaintiffs’ eight theories, only one gives the court any pause. The

plaintiffs allege that a strategic buyer, which made a competing offer, was behind in

diligence compared to the ultimate acquiror because the defendants excluded the

strategic buyer from the sale process. If true, a reasonable stockholder would

consider the undisclosed facts material for a few reasons. For one, the company’s

financial advisor advised, and the stockholders were told, that strategic buyers would

not have an interest in acquiring the company. For another, the disclosed rationale

for agreeing to exclusivity with the ultimate acquiror was the strategic bidder’s lack

of progress in diligence.

The defendants maintain that the plaintiffs’ factual allegations concerning the

strategic bidder are false, citing to the documents on which plaintiffs base their

allegations. For the purposes of the present motion, however, the court must draw

reasonable inferences in the plaintiffs’ favor. Because the plaintiffs’ inferences are

reasonable, the plaintiffs have adequately alleged a viable disclosure deficiency.

That said, it seems imprudent to allow the plaintiffs full-blown discovery into

the sale process if the plaintiffs cannot prove the facts underlying their one viable

disclosure theory. The court is therefore converting the motions to dismiss into

motions for summary judgment to allow the plaintiffs limited discovery into the

issues surrounding that theory.

2
The acquiror and financial advisor have moved to dismiss the plaintiffs’ claims

for aiding and abetting breaches of fiduciary duties. These claims are predicated on

the plaintiffs’ claims for breach of fiduciary duty, which will be further analyzed on

summary judgment. The motions to dismiss the claims for aiding and abetting,

therefore, are stayed pending resolution of the summary judgment motion.

I. FACTUAL BACKGROUND

The facts are drawn from the Verified Class Action Complaint (the

“Complaint”) and the documents it incorporates by reference.1

A. The Company And Stone Point

Focus Financial Partners Inc. (“Focus” or the “Company”) acquires and

partners with wealth management firms in the registered investment advisor

industry. Focus operates through Focus Financial Partners, LLC (“Focus LLC”).

Focus’s former CEO, Defendant Rudy Adolf, founded Focus LLC in 2004. The LLC

structure allowed Focus LLC to generate and distribute profits to its unitholders in

a tax-advantaged manner.

Defendant Stone Point Capital LLC, an investment management firm (“Stone

Point”), was among Focus’s initial investors. Stone Point owns its interests in Focus

through a series of funds, each of which is named as a defendant and included, for

convenience, in the definition of “Stone Point.”2 During the relevant period, Stone

1 C.A. 2024-0354, Docket Entry (“Dkt.”) 1 (“Compl.”).

2 The funds are: Trident FFP LP, Trident VI, L.P., Trident VI Parallel Fund, L.P.,

and Trident VI DE Parallel Fund, L.P.

3
Point was Focus’s largest stakeholder, owning approximately 20.6% of outstanding

shares of Focus’s Class A and B common stock.

B. The Credit Agreement

In 2017, Focus LLC entered into a credit agreement with multiple banks (the

“Credit Agreement”). During the relevant period, Focus owed approximately $2.5

billion outstanding under the Credit Agreement, which bore a favorable 4% weighted-

average interest rate (below the 4.5% federal fund rate in place during the sale

process described below).

Under Sections 11.11 and 11.12 of the Credit Agreement, a “Change of Control”

transaction constituted an “Event of Default,” which accelerated repayment under

the Credit Agreement.3 The agreement defined “Change of Control” to include any

situation where a party acquired 35% or more of Focus’s voting stock.4 That definition

contained a carveout: Focus’s debt would not accelerate upon a change-of-control

transaction if “Permitted Holders” had “the right or the ability by voting power,

contract, or otherwise to elect or designate for election at least a majority of the board

of directors of [Focus].”5 The definition of Permitted Holders includes Stone Point,

Adolf, and Focus’s Chief Operating Officer, Rajini Kodialam.6

3 Dkt. 42 (“Defs.’ Opening Br.”), Ex. 11 (“Credit Agr.”) §§ 11.11, 11.12.

4 Compl. ¶ 63; Credit Agr. § 1.1 at 17 (Definition of “Change of Control”).

5 Id.

6 Compl. ¶ 63; see also Credit Agr. § 1.1 at 44 (Definition of “Initial Investors”), 56

(Definition of “Permitted Holders”).

4
C. The Reorganization And IPO

In July 2018, Focus LLC’s unitholders approved an Up-C reorganization. An

Up-C structure preserves some of the tax benefits conferred by an LLC structure

while giving a company access to public markets. Because of the reorganization,

Focus LLC became a wholly owned subsidiary of Focus. The reorganization allowed

Focus to conduct an initial public offering (“IPO”), which closed in July 2018.

Stone Point executed a Nomination Agreement in connection with the IPO (the

“Nomination Agreement”), which gave Stone Point the right to nominate two

directors to the Focus Board of Directors (the “Board”). The Nomination Agreement

also gave Stone Point two seats on the Board’s three-person compensation committee

(the “Compensation Committee”).

D. The Tax Receivables Agreement

After the reorganization, Focus would realize certain tax benefits when holders

of Focus LLC units exchanged those units for Focus common stock. To allow those

benefits to flow to Focus’s pre-IPO investors, Focus executed tax receivable

agreements (“TRAs”) with certain Focus LLC unitholders, including Stone Point,

Adolf, and Kodialam. The TRAs specified when the unit exchanges would occur, and

they limited the number of units that could be exchanged in any given quarter. Under

the agreements, 85% of any tax savings Focus realized from such exchanges would

go to the exchanging unitholder (the “TRA Beneficiaries”), and the remaining 15% in

value would stay with Focus.

While Focus operated in the ordinary course, the payments to the TRA

Beneficiaries varied depending on the number of Focus LLC units exchanged and the

5
price of Focus’s common stock on the exchange date. Higher stock prices resulted in

greater tax benefits, and thus, greater payouts to the TRA Beneficiaries. Because no

one could predict with certainty Focus’s future stock price, the number of Focus LLC

units exchanged, or the future status of applicable tax laws, there was no way to

determine how much the TRA Beneficiaries would receive over time. But if Focus

underwent a change-in-control transaction, the TRA Beneficiaries would be entitled

to a lump-sum payment based on the hypothetical present value of all expected future

payments under the TRAs, applying a contractually defined discount rate.

E. The Sale Process

In early 2022, the Board comprised eight members: Adolf and Kodialam (the

“Officer Directors”); two Stone Point designees, Defendants James Carey and Fayez

Muhtadie (the “Stone Point Directors”); and four outside directors, non-parties

Joseph Feliciani,7 Greg Morganroth,8 George LeMieux, and Elizabeth Neuhoff.9

Carey and Muhtadie joined the Board in 2018 under the Nomination Agreement.

Feliciani, Morganroth, LeMieux, and Neuhoff held interests in the TRAs through

Focus LLC Incentive Units or Focus LLC Common Units, which they received as part

of their compensation.

7 Feliciani, former BlackRock, Inc. COO of Finance, joined the Board in 2019. Compl.
¶ 41.
8 Morganroth, founder and CEO of the California Skin Institute, joined the Board in

2020. Id. ¶ 42.
9 LeMieux and Neuhoff joined the Board on March 7, 2022. Id. ¶ 95. LeMieux is the
Chairman of a Florida-based law firm, and Neuhoff is the CEO and President of a
broadcast and digital media company. Id. ¶¶ 38, 40.

6
On March 30 and 31, 2022, the Board met in Big Sky, Montana for its first

meeting since LeMieux and Neuhoff joined the board three weeks earlier. During the

meeting, the Board discussed Focus’s performance as well as its long-term plans and

strategic goals. Two bankers from Goldman Sachs & Co. LLC (“Goldman”) attended

the meeting. The Board met again on May 11 and approved retaining Goldman and

legal counsel to assist the Board in evaluating strategic options. Following the May

11 meeting, Adolf began contacting prospective M&A partners.

1. CD&R Expresses An Interest In Acquiring The Company.

Defendant Clayton, Dubilier & Rice LLC (“CD&R”)10 expressed interest in

acquiring the Company during a June 16 meeting with Adolf. CD&R is a private

equity firm that operates managed investment funds. According to its marketing

materials, CD&R “tailors its investments to meet the needs of founders, family

owners, management teams and significant shareholders.”11 CD&R also markets its

practice of providing management with equity stakes in its portfolio companies: “[A]

critical element of investment success is reward-sharing, which is why we emphasize

incentives that support alignment, including substantial equity ownership for our

portfolio company management teams.”12

10 This opinion defines “CD&R” to include defendants Ferdinand FFP Acquisitions,

LLC, Ferdinand FFP Merger Sub 1, Inc., and Ferdinand FFP Merger Sub 2, LLC, the
limited liability companies through which CD&R effectuated the transaction at issue.
11 Compl. ¶ 100.

12 Id.

7
On June 30, the Board met with Goldman and Focus’s management to discuss

officially commencing a sale process. Goldman focused its presentation on potential

financial partners for a leveraged buyout or a take-private transaction. Goldman

identified CD&R as a potential transaction partner at the June 30 meeting.

2. Goldman Warns That It Is A Challenging Market To
Execute A Deal.

At the same meeting, Goldman warned that it was a “[c]hallenging market to

execute a deal” and that there was “limited upside in engaging at this point[.]”13

Goldman further warned that executing a non-disclosure agreement (“NDA”) with a

potential acquiror “[m]ay create noise in the market” and have little positive effect

because of the “[c]hallenging financing market[.]”14 Goldman advised the Board that

the Company could “engage later” when the financing markets improved. 15 Despite

Goldman’s warnings, the Board executed an NDA with CD&R on July 13.

Adolf also met with other potential private-equity buyers throughout July and

August. They did not engage due to the challenging financing market. One firm was

“[u]ncomfortable putting forth a bid in August due to [the] financing market

backdrop.”16 A second firm asked to “re-engage when financing markets normalize.”17

A third firm would support a deal only as a co-investor and was unwilling to engage

before Labor Day. A fourth firm was interested in Focus, but it was looking “to pursue

13 Id. ¶ 102.

14 Id.

15 Id.

16 Id. ¶ 105.

17 Id.

8
changes to [the] business model if taken private”—forecasting a possible change in

Focus’s management.18 Of the five potential financial sponsors Goldman initially

contacted, CD&R seemed the only firm willing to move forward quickly.

3. CD&R Makes An Oral Offer To Acquire Focus.

On August 11, CD&R made an oral offer to acquire Focus in cash at a per share

price in the mid- to high-$40s. Focus informed CD&R that it was not interested in a

transaction at that price. On September 14, CD&R submitted its first written offer

at $50 per share in cash. The September 14 proposal stated that “CD&R has

established its reputation by helping management teams” and that “CD&R would be

an outstanding partner for the management team[.]”19

4. Goldman Introduces Focus To WEG, A Potential Strategic
Acquiror.

On September 20, as Focus negotiated with CD&R, Goldman introduced Adolf

to Jeff Dekko, the CEO of Wealth Enhancement Group (“WEG”), a potential strategic

acquiror. The Board did not know about this introduction or that there was a

strategic acquiror interested in Focus. Dekko and Adolf met on November 15.

On September 21, the Board met with Focus management, Goldman, and the

Company’s outside counsel, Vinson & Elkins LLP (“V&E”). Two Stone Point

representatives who were not on the Board—Nikhil Dixit and Alexander Sarnoff (a

Stone Point Vice President responsible for Stone Point’s Focus investment)—also

attended. At the meeting, Goldman relayed the concerns that it had heard from

18 Id.

19 Id. ¶ 110.

9
potential acquirers regarding the challenging financing market and reiterated its

advice that poor market conditions made it a bad time to run a sale process.

Despite this advice, the Board continued with the sale process. With Dixit,

Sarnoff, the Stone Point Directors, and the Officer Directors present, the Board

authorized management to allow CD&R to conduct due diligence. Neither Goldman

nor Adolf informed the Board of WEG’s indication of interest or that WEG’s CEO had

been trying to schedule a meeting with Adolf.

5. A Focus Subsidiary Also Hires Goldman.

While the Focus sale process was underway, a Focus subsidiary, NKSFB LLC,

hired Goldman to advise on its own sale. NKSFB offered concierge-style services to

artists in music, film, and television, as well as athletes, executives, entrepreneurs,

and the like. Focus acquired NKSFB in April 2018. After, the former owners of

NKSFB managed the business through a separate entity, KSFB Management LLC

(“KSFB”). Focus pushed for KSFB to hire Goldman, which it eventually did on

September 16, 2022. The same Goldman banker working on the Focus sale acted as

the lead for the NKSFB sale.

6. The Focus Board Forms A Special Committee.

On November 1, months after CD&R signed its NDA and began performing

diligence, the Board executed a written consent forming a special committee to

negotiate, review, and evaluate potential transactions (the “Special Committee”).

The Special Committee retained Potter Anderson & Corroon LLP (“Potter Anderson”)

to serve as its legal advisor and engaged Goldman as its financial advisor.

10
The Special Committee comprised LeMieux, Neuhoff, Morganroth, and

Feliciani, with LeMieux as chair. Neuhoff and Morganroth received $40,000 to serve

on the committee; LeMieux received $80,000 to chair it. None of the committee

members had ever overseen or conducted a sale process of a publicly traded company.

Nor did any committee member have expertise in Focus’s industry. Each member of

the Special Committee stood to receive lump sum TRA payments if Focus was sold.

On November 9, CD&R made a revised oral offer to Focus for $45 per share—

five dollars less than its September 14 offer. In support of its lowered bid, CD&R

cited recent challenges in the financing markets and a revised estimate as to the cost

of the TRA payouts. With its updated offer, CD&R conveyed that it “would require a

partner or partners in connection with a transaction” and expected any deal would

include a “material roll-over of equity.”20

7. Stone Point Considers Joining CD&R On The Buy-Side.

Goldman did not immediately relay the November 9 proposal to the Special

Committee. Instead, Goldman contacted Stone Point to gauge its interest in

participating on the buy side of a sale with CD&R and rolling over some or all of its

equity interest in the potential transaction. After that conversation, Stone Point

informed LeMieux that it was interested in moving forward as a bidder.

On November 10, the Special Committee met to discuss CD&R’s November 9

proposal. LeMieux reported that Stone Point was interested in partnering with

CD&R in a potential transaction. The Special Committee granted Stone Point access

20 Id. ¶ 130.

11
to Focus’s confidential data room. For the remainder of November, Goldman, Stone

Point, and CD&R continued to discuss the November 9 offer.

On November 15, weeks after their September 20 introduction, Adolf met with

WEG’s CEO, Dekko. During the meeting, Dekko indicated that WEG was interested

in engaging in a transformative transaction with Focus. Adolf did not inform the

Special Committee that he intended to take the meeting with Dekko.

On November 23, the Special Committee met with Potter Anderson and

Goldman. At the meeting, Goldman relayed its conversations with Stone Point and

CD&R and discussed its preliminary financial analysis of the Company, including its

belief that the markets were undervaluing Focus’s stock. Goldman also flagged the

continuing poor market conditions, highlighting that the “state of the financial

markets could have a negative impact on bidders’ willingness to move forward with

exploring a potential acquisition[.]”21 Neither Goldman nor Adolf informed the

Special Committee of Adolf’s meeting with WEG’s CEO, nor of WEG’s purported

interest in participating in a transaction.

On November 30, the Special Committee met again with Potter Anderson and

Goldman. At the meeting, Goldman advised “the Committee that there were no likely

strategic buyers for the Company.”22 Goldman did not inform the Special Committee

of WEG’s interest or the November 15 meeting between Adolf and Dekko. Goldman

told the Special Committee it should view the purported lack of interest from other

21 Id. ¶ 146.

22 Id. ¶ 151.

12
potential bidders, including the private equity funds that had been previously

contacted, as “instructive for the Committee’s evaluation of a Potential

Transaction.”23 But Goldman did not relay that it had not reached out to those firms

recently, including to raise the concept of a Stone Point rollover.

On December 1, CD&R submitted a revised proposal to acquire Focus for

$47.50 per share. The proposal assumed “that all the [C]ompany’s debt for borrowed

money would remain outstanding following the closing of the proposed transaction”

and further explained that there would be a “lower per share price” if there “were

additional costs of borrowing.”24 The proposal also conveyed that CD&R was

impressed by Focus’s management team and that CD&R would discuss its

partnership with management, management agreements, and management’s

rollover of its existing equity stake.

The next day, the Special Committee met with Potter Anderson and Goldman

to discuss the December 1 proposal, including the proposed financing terms. At the

meeting, the Special Committee concluded that CD&R’s offer was not worth pursuing

and that the Committee was going “pencils down.”25

Stone Point kept pushing for a deal. Three days after the Special Committee

went pencils down, Stone Point met with CD&R. One day later, on December 6, Stone

Point Director Muhtadie met with LeMieux and conveyed his opinion that Focus

23 Id.

24 Id. ¶ 153.

25 Id. ¶ 158.

13
“could perform better as a private company.”26 He also noted, with respect to the

price of CD&R’s offer, that the Company’s average trading price was “significantly

lower than [the] $68 per share” price Focus had reached at times during 2021.27

The Special Committee next met on December 7. LeMieux reported that he

had additional conversations with Stone Point regarding CD&R’s December 1 offer.

LeMieux also told the Special Committee that Adolf told him that another private

equity firm had expressed interest in acquiring Focus. Adolf did not tell LeMieux (or

any other members of the Special Committee) about the interest of potential strategic

acquiror WEG.

On December 10, CD&R submitted a revised written proposal to acquire Focus

for the same price as the September 14 proposal, $50.00 per share. The December 10

offer requested exclusivity and conveyed CD&R’s interest in structuring any

transaction such that the Company’s debt would not accelerate under the Credit

Agreement.

The Special Committee met on December 12 and 14 to discuss the new

proposal. At the December 12 meeting, Goldman stated that it had not seen a

strategic buyer engage in discussions regarding a potential acquisition of Focus and

that it did not view the Company’s business as one that would fit well with a strategic

buyer. At the December 14 meeting, Goldman focused on the change-of-control

provision of the Credit Agreement. Muhtadie and Goldman told the Special

26 Id. ¶ 160.

27 Id.

14
Committee that “if Stone Point did not participate on the purchaser side in a Potential

Transaction, CD&R had assumed that the existing capital structure could not remain

in place.”28

8. The Special Committee Retains A Second Financial
Advisor, Jefferies.

On December 16 and 17, the Special Committee discussed retaining a second

financial advisor. Jefferies LLC (“Jefferies”), Evercore, and Houlihan Lokey all made

presentations to the committee. Of the three, only Jefferies raised the issue of Focus’s

debt under the Credit Agreement and the importance of ensuring the debt remained

portable in any transaction. The Special Committee retained Jefferies. Jefferies’s

initial engagement letter with the Special Committee provided for compensation of

$4.5 million contingent on a qualifying transaction, with the potential for a bonus of

up to $1 million at the Special Committee’s discretion.

On December 18, Goldman informed the Special Committee that CD&R

requested a response to its December 10 offer. The proposal indicated that CD&R

was open to a post-signing go-shop, but Goldman told the Special Committee that it

was “rare that a go-shop would increase the consideration received by [Focus’s]

stockholders[.]”29 Goldman also informed the Special Committee that it was rare to

see another private equity bidder submit a topping bid in a transaction already

involving a private equity buyer. Goldman again reminded the Special Committee

that the Permitted Holders would need control over the post-close Board to avoid

28 Id. ¶ 167.

29 Id. ¶ 174.

15
accelerating the Company’s debt. The Special Committee determined it wanted to

speak with Jefferies before formally responding to CD&R.

9. The Company Conducts A Market Check.

Also at the December 18 meeting, the Special Committee determined to have

Jefferies conduct a market check. By that point, CD&R already had six months to

complete a “comprehensive diligence process.”30

On December 28, the Special Committee met with Potter Anderson, Goldman,

and Jefferies to discuss conducting a market check. At the meeting, which was to

discuss outreach to other potential buyers, Goldman conveyed that Stone Point was

“not agnostic with respect to potential partners in an acquisition of the Company and

had expressed certain views on potential partners.” 31 Goldman also advised that,

“since Stone Point may be participating on the buyer side, it was disincentivized to

support a higher price per share in a potential acquisition of the Company[.]” 32

Against this backdrop, the Special Committee authorized Goldman and Jefferies to

contact seven financial sponsors—four of which Focus had talked to at the beginning

of the sale process—and one strategic acquiror, WEG.

During the December 28 meeting, the Special Committee learned that Adolf

had met with WEG’s CEO in November and that WEG had expressed an interest in

acquiring Focus.

30 Id. ¶ 176.

31 Id. ¶177.

32 Id. ¶ 178.

16
Jefferies informed the Special Committee that, due to CD&R’s head-start in

the sale process, WEG and other potential bidders would need to engage in a

significant amount of diligence to be on the same footing as CD&R. Jefferies and

Goldman did not contact the potential bidders until the holiday week between

Christmas and New Year’s Day. In their communications, they relayed that “[g]iven

the current challenging financial markets, we think there is a path to roll the current,

recently-updated capital structure with Stone Point’s support.”33

On January 4, 2023, the Special Committee met with its advisors to discuss

the results of the market check and CD&R’s December 10 proposal. Goldman

reported that potential bidders had inquired about the portability of Focus’s existing

debt. After conveying this, Goldman reiterated to the Special Committee that Stone

Point was “not agnostic with respect to potential partners in an acquisition of the

Company and had expressed certain views on potential partners.”34

On January 5, CD&R made a “best and final offer” to acquire Focus for $51.50

per share.35 CD&R threatened to stop pursuing the deal if the Special Committee did

not respond within a week. The Special Committee met the next day. At the meeting,

the Special Committee discussed that other potential bidders felt that the sales

process had been skewed in CD&R’s favor. One potential bidder stated it would “only

[participate] if the process was on a level playing field, and . . . would not participate

33 Id. ¶ 183.

34 Id. ¶ 192.

35 Id. ¶ 195.

17
in a post-signing go shop.”36 Another potential bidder stated that it “did not want to

serve as a ‘stalking horse’ in a bidding process.”37

On January 7, 2023, the Special Committee held a meeting attended by the

committee members, Adolf, and Carey. Carey acknowledged that Stone Point’s

participation would likely be necessary for any financial sponsor to make a successful

bid. Adolf also informed the Special Committee that Focus management was

supportive of a deal at $51.50 per share and informed the Special Committee that if

Stone Point did not participate as a buyer, the Company would likely have to

refinance its debt.

On January 10, the Special Committee met with Potter Anderson, who

conveyed that Stone Point supported CD&R’s January 5 offer and stated it would not

participate as a buyer and rollover at any price above $51.50 per share. On January

11, Goldman told the Special Committee that it was “not worthwhile” to engage with

one potential bidder due to Stone Point’s position “that it would not make an

additional equity investment at a price per share above $51.50.”38

On January 12, the Special Committee conveyed to CD&R that it was

attempting to bridge the valuation gap between CD&R’s offer and Focus’s strong

stock price by asking Stone Point and management to forgo the TRA payouts that

would be due upon completion of a change-of-control sale. The next day, Stone Point

36 Id. ¶ 196.

37 Id.

38 Id. ¶ 275.

18
informed the Special Committee’s advisors that it would not agree to forgo or reduce

the amount of its TRA payments.

10. WEG Submits An Offer To Acquire Focus.

On January 17, 2023, WEG submitted a written proposal to acquire Focus for

$51.75 per share in cash. WEG’s proposal was predicated on “consolidat[ing]

management and operations” to achieve “meaningful cost savings[.]”39 WEG stated

that although it would support an equity rollover from Stone Point, it would not

require participation from Stone Point to complete the transaction. In other words,

WEG’s offer, unlike CD&R’s, provided no suggestion that management would

maintain their roles at Focus after the deal or that Stone Point would obtain

governance rights in the post-close company. WEG also represented that it was

“prepared to move quickly with our confirmatory due diligence . . . [w]ith the

appropriate assistance from and access to management.”40

The Special Committee discussed WEG’s proposal the next day. The Special

Committee’s advisors noted that WEG’s proposal was only worth $50.95 per share,

because it based its calculation of TRA liability on publicly available information.

Focus provided WEG with updated information concerning the TRA payouts but did

not provide any additional diligence that WEG requested.

On January 21, CD&R indicated it might offer $52.00 per share if Stone Point

and management agreed to defer—but not waive—their TRA payments. Stone Point

39 Id. ¶ 208.

40 Id.

19
and management promptly agreed. On the same day, the Special Committee met,

and Goldman advised that a WEG deal faced significant execution risk, particularly

given that CD&R had substantially completed diligence. The Special Committee

instructed its advisors to inform WEG that it would only have access to additional

diligence materials if it submitted an offer at $55.00 per share.

On January 22, WEG disclosed that it was prepared to increase its offer to

$55.00 per share. In connection with the increased offer, WEG requested exclusivity

because it “was starting at an informational disadvantage to other bidders[.]”41 On

January 24, WEG confirmed that it would up its offer to $55.00 per share only if Focus

would agree to exclusivity. Without exclusivity, WEG noted that it would continue

evaluating a potential deal at $51.75 per share—$0.25 higher than CD&R’s most

recent offer. On January 27, WEG provided the Special Committee with a draft

exclusivity agreement.

11. CD&R Submits A Final Offer.

On January 28, the Special Committee met, and Goldman expressed

skepticism regarding WEG’s offer, claiming that WEG had a “long way to go” to

finance a deal.42 Midway through the meeting, CD&R called Goldman to convey that

they would increase their offer to $53 per share if Focus agreed to exclusivity. CD&R

also indicated that it expected Stone Point to make an investment in the post-close

company in addition to rolling over its equity. The Special Committee authorized

41 Id. ¶ 215.

42 Id. ¶ 223.

20
Goldman to respond that the Special Committee was prepared to have Focus move

forward on an exclusive basis with CD&R at an offer price of $53 per share. This

offer assumed that Stone Point and management agreed to defer their TRA payouts.

Stone Point confirmed its support the same day.

On January 29, CD&R orally agreed to proceed with their $53 per share offer.

CD&R stated that it would need three to four weeks to complete diligence, arrange

equity financing, and negotiate the definitive transaction. WEG had indicated that

it only needed “three to four weeks” to complete its own diligence and financing

arrangements for its offer that was $2 higher than CD&R’s.43 The next day, Focus

signed an exclusivity agreement with CD&R that ran through February 20.

WEG contacted Jefferies and Goldman on February 2 to request permission

from the Special Committee to contact potential financing sources. On the same day,

Focus announced CD&R’s $53 per share offer and its exclusivity arrangement with

CD&R. Given the exclusivity agreement, the Special Committee did not respond to

WEG’s February 2 request.

12. The Board Increases Compensation For Special
Committee Members And Jefferies.

During a February 8, 2023 meeting, the Special Committee members raised a

concern that they and Jefferies were being underpaid. On February 25, the Special

Committee met again, and Potter Anderson reported that it had discussed the Special

43 Id. ¶ 225.

21
Committee’s and Jefferies’s fees with Focus’s outside counsel. The Special Committee

agreed to raise the cap on Jefferies’s discretionary bonus from $1 million to $8 million.

On February 26, the Special Committee met to consider accepting CD&R’s

offer. Before voting to approve the transaction, the Special Committee took a break,

during which Defendants Carey, Adolf, and Kodialam executed a written consent that

increased the compensation for the Special Committee members: LeMieux’s Special

Committee compensation went from $80,000 to $280,000, and each of the remaining

committee members’ compensation increased 600%, from $40,000 to $240,000.

Defendant Muhtadie had signed the written consent before the meeting. The Special

Committee members each signed the written consent either during or shortly after

the meeting.

13. Focus And CD&R Execute The Merger Agreement.

After reconvening, the Special Committee listened to Goldman’s and Jefferies’s

fairness opinions and voted to approve the proposed transaction with CD&R (the

“Merger”). The same day, Focus’s full board met to review the Special Committee’s

recommendation and the proposed transactional documents and voted unanimously

to approve the Merger. On February 27, 2023, the parties entered into an Agreement

and Plan of Merger (the “Merger Agreement”).

Also on February 27, 2023, Stone Point entered into two additional

agreements.

First, Stone Point and the Officer Directors signed TRA Waiver and Exchange

Agreements (the “TRA Waiver Agreements”). Under the TRA Waiver Agreements,

Stone Point and the Officer Directors agreed to receive a portion of their TRA payouts
22
in the form of promissory notes at the closing of the Merger. The promissory notes

mature on September 30, 2028, and accrue interest at a favorable 8% annual rate.

Second, Stone Point executed a support agreement with CD&R that was

approved by the Board and the Special Committee (the “Support Agreement”). Under

the Support Agreement, Stone Point agreed to roll over half of its equity—or

approximately 10% of Focus’s pre-Merger equity. In exchange, and under another

agreement concerning the governance of the post-Merger entity (the “Interim

Investors Agreement”), Stone Point gained the right to appoint a majority of the post-

Merger Board.

14. Focus Issues A Proxy Statement, Obtains Stockholder
Approval, And Closes The Merger.

The Merger Agreement provided for a forty-day go-shop period and gave CD&R

four days to match any superior offer. The go-shop occurred between February 27

and April 3 and expired without Focus receiving any additional offers. The Company

issued a definitive proxy statement seeking stockholder approval of the Merger

Agreement on June 12, 2023. On July 6, 2023, Focus filed a “Supplement to the

Definitive Proxy Statement” (together with the June 12 proxy statement, the “Proxy

Statement”).44 On July 14, a majority of Focus stockholders approved the

transaction, which closed on August 31.

44 Id. ¶ 263; Defs.’ Opening Br., Ex. 5 (“Proxy Statement”).

23
F. This Litigation

With the aid of documents obtained through a pre-suit investigation under

Section 220 of the DGCL, Anchorage Police & Fire Retirement System and Teamsters

Union No. 142 Pension Fund (“Plaintiffs”) filed this action on April 3, 2024.45 The

Complaint names as defendants Stone Point, the Stone Point Directors, the Officer

Directors, Goldman, and CD&R (collectively, “Defendants”).

The Complaint contains seven counts:

• In Count I, Plaintiffs claim that Stone Point, the Stone Point Directors,
and the Officer Directors comprised a control group and breached their
duties as controllers by causing Focus to “run an unfair sale process and
by approving the unfair Merger” and “by approving and disseminating
[a] materially misleading Proxy[.]”46

• In Count II, Plaintiffs claim that the Officer Directors breached their
fiduciary duties as officers by “vot[ing] to approve the Merger, despite
the unfair and unreasonable sale process and the unfair and inadequate
Merger price” and “caus[ing] the issuance of [a] materially false and
misleading Proxy.”47

• In Count III, Plaintiffs claim that the Officer Directors breached their
fiduciary duties as directors by “vot[ing] to approve the Merger, despite
the unfair and unreasonable sale process and the unfair and inadequate
Merger price” and “caus[ing] the issuance of [a] materially false and
misleading Proxy.”48

• In Count IV, Plaintiffs claim that the Stone Point Directors breached
their fiduciary duties as directors by “us[ing] their positions on the
Board and the Credit Agreement to undermine the sale process” and
“approv[ing] the materially misleading Proxy.”49

45 See generally Compl.

46 Compl. ¶¶ 302–03.

47 Id. ¶¶ 310–11.

48 Id. ¶¶ 317–18.

49 Id. ¶ 322.

24
• In Count V, Plaintiffs claim that Goldman aided and abetted the
foregoing breaches of fiduciary duty by “misleading the Board and
Special Committee concerning strategic acquiror interest in Focus” and
“limiting outreach to certain potential bidders and/or deterring potential
bidders in favor of Stone Point and CD&R[.]”50

• In Count VI, Plaintiffs claim that CD&R aided and abetted the foregoing
breaches of fiduciary duty by “failing to disclose material information to
public stockholders prior to the Merger vote.”51

• In Count VII, Plaintiffs claim that if the court does not find that Stone
Point acted as a controller or part of a control group, that Stone Point
aided and abetted the foregoing breaches of fiduciary duty by “helping
to orchestrate the Merger to obtain liquidity on [its] investment horizon
and providing Stone Point with post-closing-control of the privately-
owned Focus[.]”52

Defendants moved to dismiss the Complaint,53 the parties completed briefing

on September 10, and the court heard argument on October 23.54

II. LEGAL ANALYSIS

All Defendants have moved to dismiss the Complaint under Court of Chancery

Rule 12(b)(6) for failure to state a claim on which relief can be granted. “[T]he

governing pleading standard in Delaware to survive a motion to dismiss is reasonable

‘conceivability.’”55 When considering such a motion, the court must “accept all well-

pleaded factual allegations in the [c]omplaint as true . . . , draw all reasonable

inferences in favor of the plaintiff, and deny the motion unless the plaintiff could not

50 Id. ¶ 326.

51 Id. ¶ 329.

52 Id. ¶ 336.

53 Dkts. 25–28.

54 See Dkt. 89 (“Oral Arg. Tr.”).

55 Cent. Mortg. Co. v. Morgan Stanley Mortg. Capital Hldgs. LLC, 27 A.3d 531, 537

(Del. 2011).

25
recover under any reasonably conceivable set of circumstances susceptible of proof.”56

The court, however, need not “accept conclusory allegations unsupported by specific

facts or . . . draw unreasonable inferences in favor of the non-moving party.”57

A. Count I Against The Alleged Controllers

Count I is premised on the claim that Stone Point, the Stone Point Directors,

and the Officer Directors, acting together, exercised control over Focus and the

Merger such that they owed fiduciary duties to Plaintiffs and the Company. Plaintiffs

also argue that Stone Point, acting alone, was a controller with concomitant fiduciary

duties.58 This analysis begins with the latter assertion.

Stone Point does not hold a mathematical majority of Focus’s voting power. In

such a case, a plaintiff may plead controller status by alleging facts sufficient to

support an inference that the defendant “exercises control over the business affairs

of the corporation.”59 For this purpose, a plaintiff need not argue that the defendant

exercised general control over the business and affairs of the corporation. Although

a showing of “general control” is sufficient to establish fiduciary status, a plaintiff can

plead fiduciary status by alleging that the defendant controlled the particular

transaction at issue, referred to as “transaction-specific” control.60

56 Id. at 536 (citing Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002)).

57 Price v. E.I. du Pont de Nemours & Co., 26 A.3d 162, 166 (Del. 2011) (citing Clinton

v. Enter. Rent-A-Car Co., 977 A.2d 892, 895 (Del. 2009)).
58 Dkt. 55 (“Pls.’ Answering Br.”) at 46.

59 Ivanhoe P’rs v. Newmont Min. Corp., 535 A.2d 1334, 1344 (Del. 1987).

60 Voigt v. Metcalf, 2020 WL 614999, at *11–12 (Del. Ch. Feb. 10, 2020); Basho Techs.

Holdco B, LLC v. Georgetown Basho Invs., LLC, 2018 WL 3326693, at *25–26 (Del.
26
To successfully plead general control, a plaintiff must allege facts indicating

“that a defendant or group of defendants exercised sufficient influence ‘that they, as

a practical matter, are no differently situated than if they had majority voting

control.’”61 One way to do so is to allege “that the defendant, ‘as a practical matter,

possesses a combination of stock voting power and managerial authority that enables

him to control the corporation, if he so wishes.’”62 Among other things, the analysis

of general control looks to the alleged controller’s ability to exert influence as a

stockholder, in the boardroom, and outside the boardroom through managerial roles.

Breaking these categories down to “indicia of effective control,” the factors include:

• “ownership of a significant equity stake (albeit less than a majority),”

• “the right to designate directors (albeit less than a majority),”

• “decisional rules in governing documents that enhance the power of a
minority stockholder or board-level position,” and

• “the ability to exercise outsized influence in the board room, such as
through high-status roles like CEO, Chairman, or founder.”63

To successfully allege transaction-specific control, a plaintiff must plead facts

indicating that the defendant “exercise[d] actual control over the board of directors

during the course of a particular transaction[.]”64 This analysis often focuses on

Ch. July 6, 2018), aff’d sub nom. Davenport v. Basho Techs. Holdco B, LLC, 221 A.3d
100 (Del. 2019).
61 Basho, 2018 WL 3326693, at *25 (quoting In re PNB Hldg. Co. S’holders Litig.,

2006 WL 2403999, at *9 (Del. Ch. Aug. 18, 2006)).
62 Id. (quoting In re Cysive, Inc. S’holders Litig., 836 A.2d 531, 553 (Del. Ch. 2003)).

63 Id. at *27 (citations omitted).

64 In re W. Nat’l Corp. S’holders Litig., 2000 WL 710192, at *20 (Del. Ch. May 22,

2000) (citation omitted).

27
“relationships with key managers or advisors who play a critical role in presenting

options, providing information, and making recommendations[.]”65 It can also

address “the exercise of contractual rights to channel the corporation into a particular

outcome by blocking or restricting other paths,” and “commercial relationships[.]”66

Both general control and transaction-specific control call for a holistic

evaluation of sources of influence. “Rarely (if ever) will any one source of influence

or indication of control, standing alone, be sufficient to make the necessary

showing.”67 “Different sources of influence that would not support an inference of

control if held in isolation may, in the aggregate, support an inference of control.” 68

“Sources of influence and authority must be evaluated holistically, because they can

be additive.”69 “Invariably, the facts and circumstances surrounding the particular

transaction will loom large.”70

1. Plaintiffs Fail To Plead That Stone Point Exercised
Control.

Plaintiffs advance theories of both general and transaction-specific control.

This analysis addresses whether Stone Point held transaction-specific control with

65 Basho, 2018 WL 3326693, at *26 (concluding on a motion to dismiss that the
defendant’s relationship with management, including tips received by defendant from
company’s officers that provided negotiating leverage, supported an inference of
control (citing OTK Assocs., LLC v. Friedman, 85 A.3d 696, 706–07 (Del. Ch. 2014))).
66 Basho, 2018 WL 3326693, at *26 (citations omitted); see also Skye Mineral Inv’rs,

LLC v. DXS Cap. (U.S.) Ltd., 2020 WL 881544, at *26–27 (Del. Ch. Feb. 24, 2020).
67 Basho, 2018 WL 3326693, at *28 (citations omitted).

68 Voigt, 2020 WL 614999, at *13.

69 Id.

70 Basho, 2018 WL 3326693, at *28.

28
respect to the Merger. There are many reasons why a court often focuses on

transaction-specific control when addressing claims like those asserted by Plaintiffs.

For one, control allegations typically arise in the context of a transaction, making it

logical to evaluate the indicia of control in the context of events surrounding the

transaction. Moreover, where it is not reasonably conceivable that an individual or

group exercised transaction-specific control, it is hard to make a case for general

control. Additionally, because “[b]roader indicia of effective control also play a role

in evaluating whether a defendant exercised actual control over a decision[,]” 71 the

sources of influence identified by a plaintiff in support of a finding of general control

factor into the transaction-specific analysis.

Here, Plaintiffs have not adequately alleged transaction-specific control, and

it is not reasonably conceivable that Stone Point or the alleged control group exercised

general control.

Plaintiffs argue the following factors support an inference that Stone Point

exerted transaction-specific control of Focus in connection with the Merger:

• Stock Ownership: Stone Point held approximately 20.6% of the
Company’s equity at the time of the Merger.72

• Influence Over Charter And Bylaw Amendments: Focus’s charter
requires approval by “the holders of at least 66 2/3 % in voting power of
the outstanding shares of stock of [Focus] entitled to vote generally in
the election of directors” to amend the charter and “the vote of holders
of not less than 66 2/3 % in voting power of the then-outstanding shares
of stock entitled to vote thereon” to amend the bylaws.73 Plaintiffs argue

71 Id. at *27.

72 Compl. ¶ 25.

73 Id. ¶ 56; Defs.’ Opening Br., Ex. 26 at 6–7, 11.

29
Stone Point’s nearly 21% stake gave it “an effective veto over such
amendments.”74

• The Nomination Agreement: Under the Nomination Agreement, Stone
Point was entitled to appoint two directors to the Board75 and two
directors to the three-member Compensation Committee.76

• The Credit Agreement: Stone Point was a Permitted Holder under the
change-of-control carveout. As a Permitted Holder, Stone Point could
help an acquiror avoid triggering an Event of Default by retaining, post-
merger, the right or the ability by voting power, contract, or otherwise
to elect or designate for election at least a majority of the board of
directors of Focus. “Porting” the Credit Agreement in this way allowed
an acquiror to offer $3.00–$4.00 more per share.77 Thus, Stone Point
had unique negotiating leverage because Stone Point had the ability to
make Focus’s debt portable.78

• Special Committee Compensation: The Compensation Committee
elected to compensate Focus’s non-employee directors with Focus LLC
units, making them eligible to become TRA Beneficiaries. The Merger
would trigger lump-sum TRA payments to all Focus LLC unitholders
and accelerate the vesting of the Special Committee members’ Focus
LLC units. Plaintiffs argue this incentivized the Special Committee to
recommend the Merger.79

a. Stock Ownership

“All else equal, a relatively larger block size should make an inference of actual

control more likely[.]”80 This is due to the mathematics of voting because the

existence of a larger block leaves fewer shares held by individuals who could be

74 Pls.’ Answering Br. 49–50.

75 Compl. ¶ 57.

76 Id. ¶¶ 58–59.

77 Id. ¶ 64.

78 Pls.’ Answering Br. at 56–57.

79 Id. at 58.

80 Voigt, 2020 WL 614999, at *17 (emphasis omitted).

30
convinced to oppose the blockholder’s wishes. As the blockholder’s stake increases,

opponents must poll at historically unachievable supermajority rates to overcome the

blockholder’s advantage.81 At the same time, compared to a smaller blockholder, a

larger blockholder needs the support of fewer other investors to carry a vote.82

Although not applicable here, quorum requirements and levels of voter turnout may

render some levels of ownership equivalent to majority control. With 80% turnout,

for example, a 40.0001% blockholder has the same effective voting power as the

holder of a mathematical majority.83

With these dynamics in mind, Stone Point’s just-over-20% block size is

influential. As this court has explained, “if the holder of a 21.9% block favors a

particular outcome, then the holder will win as long as holders of approximately one-

in-three shares vote the same way. By contrast, an opponent must garner

approximately 71% of the unaffiliated shares to win.”84 So, Stone Point’s 20.6%

81 Id. at *18 (citation omitted). For example, “assuming a meeting where holders with

80% of the voting power turn out, and the standard is a majority of the shares present
and entitled to vote . . . if the holder of a 35% block favors a particular outcome at a
meeting, then the blockholder will win as long as holders of 1-in-7 shares vote the
same way. The opponents must garner over 90% of the unaffiliated shares to win.”
Id.
82 See generally id. at *18–19 (discussing the mathematics behind this principle in

detail).
83 Id. at *18 (citing 8 Del. C. § 216(2) (requiring a “majority of shares present in person

or represented by proxy,” once a quorum is present, to take action), (3) (requiring “a
plurality of the votes of the shares present in person or represented by proxy,” once a
quorum is present, to elect directors)). “Meetings typically attract participation from
just under 80% of the outstanding shares. At that level, the holder of a 40% block
can deliver the vote needed to prevail at a meeting.” Id.
84 Tornetta v. Musk, 310 A.3d 430, 502 (Del. Ch. 2024).

31
interest in Focus gave it a weighty say in the outcome of any vote. That said, this

court has found that a 20% (or less) blockholder exercised sufficient control to be a

fiduciary only in rare circumstances, and only then when buttressed by other indicia

of control.85

b. Influence Over Charter And Bylaw Amendments

Stone Point’s alleged “effective veto” over amendments to Focus’s charter and

bylaws is not in play here because the Merger did not implicate Stone Point’s veto

power. Nor is there any indication that Stone Point had ever wielded this power or

threatened to use it to secure a desired outcome in this transaction or otherwise.86

85 See, e.g., In re Pattern Energy Gp. Inc. S’holders Litig., 2021 WL 1812674, at *41–

46 (Del. Ch. May 6, 2021) (finding it reasonably conceivable that a stockholder owning
“slightly more than 10%” was a controller who had consent rights and threatened to
use it to control decisions); FrontFour Cap. Gp. LLC v. Taube, 2019 WL 1313408, at
*21–24 (Del. Ch. Mar. 11, 2019) (finding post-trial that stockholders who collectively
owned “less than 15%” of the company’s stock were controllers where they were the
founders and officers of the company, managed the day-to-day operations, and had
control of deal structures and information flow); In re Zhongpin Inc. S’holders Litig.,
2014 WL 6735457, at *7–8 (Del. Ch. Nov. 26, 2014) (finding it reasonably conceivable
that a stockholder owning 17.3% block was a controller because the stockholder was
the CEO, and the company’s 10-K stated that the stockholder effectively controlled
the company), rev’d on other grounds sub nom. In re Cornerstone Therapeutics Inc.
S’holder Litig., 115 A.3d 1173 (Del. 2015); Williamson v. Cox Commc’ns, 2006 WL
1586375, at *1 n.4, 4–5 (Del. Ch. June 5, 2006) (finding it reasonably conceivable that
two stockholders, owning collectively a 17.1% block, jointly controlled the company
based on their ability to nominate two of the five directors, their ability to influence
the flow of revenue into the corporation, and their potential “veto” power over certain
corporate decisions).
86 Cf. Tornetta, 310 A.3d at 503 n.586 (crediting a 21.9% blockholder’s influence over

charter and bylaw amendments subject to a supermajority voting provision where the
blockholder had blocked amendments multiple times).

32
This factor does not favor an inference of transaction-specific control and only weakly

supports an inference of general control.

c. The Nomination Agreement

The rights conveyed through the Nomination Agreement inch a 20%

blockholder closer to a controlling influence. The Nomination Agreement only gave

Stone Point two out of the Company’s seven to nine Board seats. Although Stone

Point’s representatives were incapable of carrying or blocking any Board action.87

Stone Point’s Board seats increase its influence over the transaction and the

Company generally.

d. Special Committee Compensation

The Nomination Agreement also gave Stone Point disproportionate

representation on the Compensation Committee.88 Plaintiffs argue that this gave

Stone Point influence over the Merger in two ways.

First, the “Stone-Point-controlled Compensation Committee chose to

compensate the Company’s non-employee directors with Focus LLC units,” thus

making the Special Committee members potential TRA beneficiaries.89 Plaintiffs say

87 The Complaint states that Focus’s Board only had seven members “[i]n early 2022.”

Compl. ¶ 95. By March 7, 2022, the Focus Board comprised nine members. By July
2022, there were eight Board members. Id. The Complaint alleges that the Board
did not begin discussing the possibility of engaging in an M&A transaction until
March 30 and 31 (id. ¶ 97), and Adolf didn’t have his first meeting with CD&R until
June 16 (id. ¶ 99). Thus, for most of the relevant period, the Board comprised eight
members.
88 Id. ¶ 58 (“The Nomination Agreement required that the Stone Point Directors be

appointed to serve as two of the three members of the Compensation Committee;
Muhtadie was appointed Chair.”).
89 Pls.’ Answering Br. at 58.

33
that this maneuver incentivized the Special Committee members to pursue a deal

over recommending that Focus continue as a standalone company.90 But this point

is not persuasive. The historical decision to compensate all non-employee directors

with Focus LLC units does not indicate that Stone Point controlled the process

leading to the Merger. The TRA payouts are better understood as a potential source

of conflict rather than evidence of Stone Point’s control.

Second, Plaintiffs argue that Stone Point “bribed the Special Committee

members to further incentivize them to approve the Merger” by approving a “six-fold

increase in the Special Committee members’ fees” during an adjournment of the

meeting at which the Special Committee approved the Merger.91 Plaintiffs infer from

this the Special Committee members wanted a raise, needed the non-committee

directors to approve it, and promised support for the Merger to get it.

The last-minute pay increase is an unusual fact. But what of it? Plaintiffs do

not do a great job of drawing out why this fact is relevant to the control analysis.

Plaintiffs do not argue that this alleged bribe was intended to induce the

Special Committee members to stiff-arm WEG in favor of Stone Point’s supposedly

favored bidder. And for good reason. The Special Committee jettisoned WEG weeks

earlier when they approved an exclusivity arrangement with CD&R and then worked

to “finalize the deal contracts.”92 Plaintiffs do not develop an argument that the

90 Id.

91 Id. at 59–60.

92 Compl. at ¶¶ 225, 228.

34
committee members felt some degree of owingness to Stone Point over the

compensation decision. If that argument were viable, no doubt Plaintiffs would have

advanced it. Based on the timing of the decision alone, Plaintiffs say that Stone Point

controlled the process.

Plaintiffs emphasize that the Special Committee adjourned the meeting to

wait for Carey, Adolf, and Kodialam to sign the written consent that increased their

compensation. There is no basis to infer that Stone Point had power or sway over

Adolf and Kodialam at this moment. The other Stone Point director, Muhtadie

executed the written consent before the meeting.

e. The Credit Agreement

“Contractual rights that do not amount to a significant source of general

control can, depending on the circumstances, give rise to an inference of transaction-

specific control, because the holder of the contract rights can use them to channel a

corporation into a particular outcome by blocking other paths.”93 In this way, the

Credit Agreement presents an interesting wrinkle in this analysis. To maintain the

Credit Agreement through a sale (and thus, keep Focus’s debt from accelerating), the

Permitted Holders (including Stone Point) would need to control a supermajority of

Focus’s post-transaction equity or have the right to appoint at least a majority of the

post-merger board.

Plaintiffs argue that “[b]ecause Stone Point and the Officer [Directors] wanted

to work with CD&R, they were willing to take the steps necessary to make the debt

93 Voigt, 2020 WL 614999, at *19.

35
portable,” which in turn, gave CD&R a “$2.00–$4.00 per share advantage in bidding

for the Company.”94 Defendants dispute this characterization of the Credit

Agreement, noting that Stone Point, Adolf, and Kodialam, though Permitted Holders,

were not parties to the Credit Agreement, and thus did not have to take any “steps”

to make Focus’s debt portable. Instead, “[i]t was up to third-party bidders to decide

if they wanted Focus’s debt to remain outstanding, and if so, to allocate director

appointment rights accordingly.”95

Defendants get it partly right. The decision to keep Focus’s debt in place

belonged foremost to Focus’s bidders. Portable debt was a selling point for some

bidders but not others. To be sure, Stone Point’s unique ability to prevent an Event

of Default accelerating debt under the Credit Agreement might have given Stone

Point independent leverage in negotiations with bidders, as well as a reason to favor

bidders willing to grant concessions to Stone Point. The Credit Agreement, therefore,

was another source of influence for Stone Point.

f. Conclusion Regarding Control Allegations Against
Stone Point

Plaintiffs identify multiple sources of Stone Point’s influence over the

transaction, and they also identify at least one unusual fact—the pay increase. But

no individual source of influence nor interesting fact, standing alone, is enough for

the court to conclude that Stone Point exercised actual control. And Plaintiffs failed

to piece these allegations together to form a coherent theory of control under a holistic

94 Pls.’ Answering Br. at 57.

95 Dkt. 76 (“Defs.’ Reply Br.”) at 20.

36
analysis. There is no basis for the court to infer that Stone Point has the power or

influence sufficient to force a deal that the Special Committee or other directors did

not want. Plaintiffs thus have failed to allege transaction-specific control. And

because there is no reasonable inference that Stone Point determined the outcome of

the sale process, there is no reasonable inference that Stone Point controlled the

Company writ large. Plaintiffs do not adequately allege that Stone Point, standing

alone, was a controller with concomitant fiduciary allegations.

2. Plaintiffs Fail To Plead A Control Group.

Plaintiffs also assert that Stone Point, acting with the Stone Point Directors

and the Officer Directors comprised a control group. In Sheldon v. Pinto, the

Delaware Supreme Court addressed the requirements for pleading a control group,

adopting the “legally significant connection” standard:

To demonstrate that a group of stockholders exercises
control collectively, the [plaintiffs] must establish that they
are connected in some legally significant way—such as by
contract, common ownership, agreement, or other
arrangement—to work together toward a shared goal. . . .
[T]here must be some indication of an actual agreement,
although it need not be formal or written.96

It is safe to infer that the Stone Point Directors acted in a group with Stone

Point. Both are Senior Principals of the firm. Carey has been with Stone Point or its

predecessor entities since 1997, and Muhtadie since 2003. But that does not give

Stone Point any greater power or authority than it exercised without the Stone Point

96 Sheldon, 220 A.3d at 251–52 (internal quotation marks omitted) (quoting In re

Crimson Expl. Inc. S’holder Litig., 2014 WL 5449419, at *15 (Del. Ch. Oct. 24, 2014)).

37
Directors. Thus, including these defendants within the alleged group does not help

Plaintiffs. Plaintiffs appear to include the Stone Point Directors for the limited

purpose of building a tie to the Officer Directors to group them with Stone Point.

In support of their argument for including the Officer Directors in a group,

Plaintiffs contend that the Officer Directors and Stone Point had parallel interests in

connection with the Merger97 and formally memorialized their connection through

the Interim Investors Agreement.98 They also allege that the group members shared

historical ties with each other.99

Plaintiffs’ suite of allegations does not support the existence of a control group.

Plaintiffs have pled that the Officer Directors had parallel interests, but group

allegations look toward horizontal ties among group members. The concurrence of

self-interest might explain why group members work together, but that concurrent

interest alone is not enough to allege the existence of a group.100

97 Pls.’ Answering Br. at 41.

98 Id. at 44–45.

99 Id. at 41–43.

100 See, e.g., Gilbert v. Perlman, 2020 WL 2062285, at *6 (Del. Ch. Apr. 29, 2020) (“To

demonstrate the existence of a control group, it is insufficient to identify a group of
stockholders that merely shares parallel interests.”); Garfield v. BlackRock Mortg.
Ventures, LLC, 2019 WL 7168004, at *9 (Del. Ch. Dec. 20, 2019) (noting that “an array
of plus factors” beyond a “mere concurrence of self-interest” could “allow[ ] the Court
to infer some indication of an actual agreement” (internal quotation marks omitted)
(quoting Sheldon, 220 A.3d at 252)); In re Crimson, 2014 WL 5449419, at *15 (“The
law does not require a formal written agreement, but there must be some indication
of an actual agreement. Plaintiffs must allege more than mere concurrence of self-
interest among certain stockholders to state a claim based on the existence of a
control group.”); Dubroff v. Wren Hldgs., LLC, 2009 WL 1478697, at *3 (Del. Ch. May
22, 2009) (“[I]f all a complaint alleges is that a group of shareholders have ‘parallel
interests,’ such allegations are insufficient as a matter of law to support the inference
38
The Interim Investors Agreement offers no help. The Officer Directors were

not parties to the Interim Investors Agreement; it was executed by affiliates of CD&R

and Stone Point. Plaintiffs rely on Schedule A to the Interim Investors Agreement,

a term sheet for the partnership that would own the Company post-closing. The term

sheet provides that Stone Point would appoint five members of the post-Merger nine-

member board, two of whom would be “the Company’s CEO and another member of

the Company’s senior management who is a ‘Permitted Holder’ under [the Credit

Agreement].”101 Schedule A does not refer expressly to the Officer Directors, but

refers to members of Focus management generally. In a conclusory fashion, Plaintiffs

alleged, however, that “CD&R agreed to give Stone Point and the Officer [Directors]

control of the private post-Merger Focus”102 and “tied the Officer [Directors’] post-

Merger board representation to the size of Stone Point’s equity stake[.]”103 Plaintiffs

provide no factual bases to support these inferences.104 It is not reasonably

conceivable that the Interim Investors Agreement reflects an agreement among the

Officer Directors, Stone Point, and the Stone Point Directors to act as a group.

that the shareholders were part of a control group.” (quoting Cox Commc’ns, 2006 WL
1586375, at *6)).
101 Pls.’ Answering Br., Ex. 29 (Interim Investors Agreement) Schedule A at 1–2.

102 Compl. ¶ 252.

103 Pls.’ Answering Br. at 44.

104 See infra Part II.B.7 (finding that Plaintiffs failed to plead facts supporting an

inference that the Officer Directors were motivated by the promise of post-close
employment).

39
As to historical ties, Plaintiffs alleged that Stone Point was an anchor investor

in Focus since its founding through the close of the Merger and that the Officer

Directors served on the Board with Carey and Muhtadie from July 2018 through the

close of the Merger.105 These are relevant considerations, but they are not enough to

infer a legally significant relationship. No Delaware decision has found that fitting

the description of an “anchor” investor or having one’s board nominee serving on a

board with management suffices to group an investor with management absent some

plus factor.

As a plus factor here, Plaintiffs allege that “Adolf, Carey, and Muhtadie were

members of the exclusive Yellowstone Club.”106 This is a juicy fact. It does not extend

to Kodialam. But one can reasonably infer that the three club members are friends.107

Even so, this sort of friendship is weaker than the kinds of relationships from which

this court has inferred the existence of a control group.108

105 Compl. ¶¶ 21–23, 45.

106 Pls. Answering Br. at 42.

107 Of course, not all persons who spend vacations in homes in the same neighborhood

are friends. In fact, sometimes neighborly relationships succeed due to a lack of
contact. In the words of Robert Frost’s Mending Wall, “good fences make good
neighbors.” Robert Frost, “Mending Wall,” North of Boston (1914). But the court
must draw plaintiff-friendly inferences at this stage.
108 In re Tilray, Inc. Reorg. Litig., 2021 WL 2199123, at *11 (Del. Ch. June 1, 2021)

(finding plaintiffs adequately pled the existence of a control group where the members
were “former classmates and long-time friends[,]” jointly managed different entities
through management agreements, “held each other out as partners,” defined
themselves in their group entity charter as the “Founders,” and “work[ed] on their
various co-ventures just down the hall from each other”) (internal quotation marks
omitted)); Garfield v. BlackRock Mortgage Ventures, LLC, 2019 WL 7168004, at *9
(Del. Ch. Dec. 20, 2019) (finding plaintiffs adequately pled the existence of a control
group where plaintiffs alleged the group members had “ten-year history of co-
40
Plaintiffs’ argument for a control group becomes even less reasonable if one

accepts Plaintiffs’ position (for the sake of argument) that Stone Point is a controller

all on its own. As this court held in Almond v. Glenhill Advisors, LLC, where a single

member of an alleged control group is by itself a controller, a plaintiff must plead

facts supporting an inference that the other members of the group are necessary to

secure the desired outcome.109 In Glenhill, plaintiffs alleged that the minority

stockholder defendants formed a control group with another stockholder that had

mathematical voting control.110 The court rejected the theory, explaining that the

plaintiff sought to “glom on to a preexisting controlling stockholder additional

stockholders to give them the status of a control group.”111

Plaintiff does not adequately allege that Stone Point needed the Officer

Directors to achieve any desired outcome. Indeed, Plaintiffs argue the opposite,

asserting that “even if [the court] was not inclined to find it reasonably conceivable

that Stone Point and the [O]fficer [D]efendants acted as a group, the [c]ourt should

find that Stone Point alone was a controller.”112 Thus, the Officer Directors are

investment” in the company, which they “decided to start . . . together as the
Company’s founding sponsors,” and the company repeatedly used defined terms in
public documents to interchangeably and collectively refer to the group members); In
re Hansen Medical, Inc. S’holders Litig., 2018 WL 3025525, at *7 (Del. Ch. June 18,
2018) (finding plaintiffs adequately pled the existence of a control group where the
members shared a “twenty-one year coordinated investing history”).
109 2018 WL 3954733, at *25 (Del. Ch. Aug. 17, 2018), aff’d, 224 A.3d 200 (Del. 2019);

see also Gilbert, 2020 WL 2062285, at *6–10.
110 2018 WL 3954733, at *25.

111 Id. at *26 (internal quotation marks omitted).

112 Oral Arg. Tr. at 77:16–20; see also Pls.’ Answering Br. at 46 (“Even if Plaintiffs

had not adequately alleged that the Controller Defendants acted as a group (and they
41
merely glommed on to the party that Plaintiffs propose is the real controller—Stone

Point. Pleading no facts suggesting that the Officer Directors’ participation was

necessary to achieve Stone Point’s alleged ends, Plaintiffs have not successfully pled

the existence of a control group including them.

B. Counts II Through IV Against The Stone Point Directors And
Officer Directors

Given the absence of a controller, and because Focus stockholders received

cash for their shares, the Merger is presumptively subject to enhanced scrutiny.113

Under Corwin, however, a defendant can lower the standard of review to the

irrebuttable version of the business judgment rule if the merger “has been approved

by a fully informed, uncoerced majority of the disinterested stockholders.”114 Where,

as here, a merger subject to enhanced scrutiny has been approved by an uncoerced

majority of the disinterested stockholders, a plaintiff bears the burden of pleading

disclosure deficiencies sufficient to refute a Corwin defense.115 A single well-pled

disclosure deficiency will foreclose the application of Corwin.116

At the pleading stage, the operative question in assessing a Corwin vote is

whether the complaint “supports a rational inference that material facts were not

have), that would not change the outcome. The facts alleged support an inference
that Stone Point by itself had the ability to control the Company and, in fact,
controlled the process leading to the Merger.”).
113 Revlon, Inc. v. MacAndrews & Forbes Hldgs., Inc., 506 A.2d 173, 184 (Del. 1986).

114 Corwin v. KKR Fin. Hldgs. LLC, 125 A.3d 304, 306 (Del. 2015).

115 In re Solera Hldgs., Inc. S’holder Litig., 2017 WL 57839, at *7–8 (Del. Ch. Jan. 5,

2017).
116 Van der Fluit v. Yates, 2017 WL 5953514, at *8 n.115 (Del. Ch. Nov. 30, 2017).

42
disclosed or that the disclosed information was otherwise materially misleading.”117

A fact is material “if there is a substantial likelihood that a reasonable shareholder

would consider it important in deciding how to vote.”118 Materiality does not demand

“a substantial likelihood that [the] disclosure . . . would have caused the reasonable

investor to change his vote.”119 Rather, the test is whether there is “a substantial

likelihood that the disclosure of the omitted fact would have been viewed by the

reasonable investor as having significantly altered the ‘total mix’ of information made

available.”120

Plaintiffs argue that the Proxy Statement suffers eight different disclosure

deficiencies.

1. WEG’s Interest

Plaintiffs’ strongest theory concerns disclosures relating to WEG. The Proxy

Statement states that WEG (identified in the Proxy Statement as “Party I”) made

non-binding offers of up to $55 per share, which the Special Committee rejected in

favor of CD&R’s $53 per share offer.121 The Proxy Statement disclosed that part of

117 Morrison v. Berry, 191 A.3d 268, 282 (Del. 2018).

118 Rosenblatt v. Getty Oil Co., 493 A.2d 929, 944 (Del. 1985) (quoting TSC Indus.,

Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976)).
119 Id.

120 Id.

121 Proxy Statement at 41 (“On January 17, 2023, Party I, along with its financial

sponsors, submitted a preliminary and non-binding proposal to acquire the Company
for $51.75 per share in cash.”), 44 (“Also on January 22, 2023, Party I informed
representatives of each of the Special Committee Financial Advisors that it was
prepared to increase its offer price to $55.00 per share in cash but that this increased
offer price would be preliminary and non-binding and would be subject to continued
due diligence and Party I’s receipt of the requisite financing.”), 47 (“The Special
43
the Special Committee’s rationale for agreeing to exclusivity with CD&R in late

January 2023 was because WEG was comparatively behind in conducting due

diligence and obtaining debt and equity financing. Defendants say this is enough,

citing cases for the proposition that “Delaware law does not require disclosure of a

play-by-play of negotiations leading to a transaction or of potential offers that a board

has determined were not worth pursuing.”122

Plaintiffs allege, however, that WEG was behind compared to CD&R because

Defendants iced WEG out of the sale process. They allege that: (i) Goldman

introduced Adolf to WEG’s CEO on September 20, 2022, as a party potentially

interested in buying Focus; (ii) WEG’s CEO tried to schedule a meeting with Adolf

during September and October 2022; and (iii) WEG’s CEO and Adolf met for dinner

on November 15, 2022, and WEG expressed interest in acquiring Focus during the

meeting.123 Plaintiffs also allege that Adolf did not disclose WEG’s expression of

interest until December 28, when the indication of interest first appears in the

Committee reviewed its rationale for having the Company enter into exclusivity,
including that it believed that it had engaged in a rigorous process to achieve the best
price reasonably available for all of the stockholders of the Company and that a
Potential Transaction at a price per share of $53.00 in cash was, in the Special
Committee’s view, more likely to be consummated than a transaction with Party I at
a preliminary price per share of $55.00 in cash[.]”).
122 City of Miami Gen. Emps. v. Comstock, 2016 WL 4464156, at *15 (Del. Ch. Aug.

24, 2016), aff’d, 158 A.3d 885 (Del. 2017).
123 Compl. ¶¶ 112, 147.

44
minutes of any Special Committee or Board meeting.124 The Proxy Statement did not

disclose any of these facts.

If true, a reasonable stockholder would consider these facts important,

particularly given that Goldman repeatedly advised that strategic buyers like WEG

would not have an interest in acquiring the Company. Also, given that a disclosed

rationale for agreeing to exclusivity with CD&R in late January 2023 was WEG’s

lesser progress in diligence, a reasonable stockholder would want to know if

Defendants caused this disadvantage by declining to engage with WEG during the

fall of 2022.

Defendants contend that Plaintiffs’ theory is not true. Defendants instead

point the court to a letter from V&E to Plaintiffs’ counsel regarding the settlement of

Plaintiffs’ action to enforce their demand to inspect documents under 8 Del. C. § 220

(the “V&E Letter”).125 The V&E Letter states that “Mr. Adolf and Mr. Dekko met for

dinner on November 15, 2022 . . . [w]ithin a week thereafter, Mr. Adolf orally

informed both the Special Committee and Goldman Sachs of that dinner during

ordinary-course communications.”126

Essentially, Defendants ask the court to accept a factual statement made by

its attorneys in a document produced through a Section 220 inspection as a basis for

rejecting reasonable plaintiff-friendly inferences at the pleading stage. They note

124 Compl. ¶ 180 (“These facts are not disclosed in the Proxy and are wholly absent

from any prior Board or Special Committee minutes.”).
125 Defs.’ Opening Br. at 50.

126 Id., Ex. 16 at 2.

45
that the parties agreed to incorporate the Section 220 document into the pleadings

by reference, and so it is fair for them to point to this document. But “[t]he

incorporation-by-reference doctrine does not enable a court to weigh evidence on a

motion to dismiss. It permits a court to review the actual documents to ensure that

the plaintiff has not misrepresented their contents and that any inference the

plaintiff seeks to have drawn is a reasonable one.”127

“Where a defendant improperly and extensively uses Section 220 Documents

in support of a Chancery Rule 12(b)(6) motion to support factual inferences that run

counter to those supported in the complaint, the court may either exclude the

extraneous matter from its consideration or convert the Chancery Rule 12(b)(6)

motion into a motion for summary judgment so that the plaintiff may take discovery

before the court determines if pre-trial dispositive relief is appropriate.”128

The court declines to deny the motion outright. As discussed more below,

Defendants’ motion has done the work of significantly narrowing the well-pled

allegations to a single disclosure issue. By introducing countervailing facts at the

pleading stage, however, Defendants invite the court to convert their motions to

dismiss into motions for summary judgment under Court of Chancery Rule 12(d).

Rule 12(d) provides that, where a party “moves under Rule 12(b)(6) or 12(c) and

presents matters outside the pleadings that are not excluded by the Court, then (1)

the motion must be treated as one for summary judgment under Rule 56; and (2) all

127 Voigt, 2020 WL 614999, at *9 (collecting cases).

128 In re CBS Corp. S’holder Class Action & Deriv. Litig., 2021 WL 268779, at *18

(Del. Ch. Jan. 27, 2021), as corrected (Feb. 4, 2021).

46
parties must be given a reasonable opportunity to present pertinent material under

Rule 56.”129

In this circumstance, it is appropriate to convert Defendants’ motions to

dismiss into motions for summary judgment for the limited purpose of addressing

Plaintiffs’ disclosure theory based on the WEG interactions.

2. Stone Point’s Preferences

Plaintiffs next argue that the Proxy Statement should have disclosed that

“Stone Point had conveyed that it was not agnostic with respect to potential partners

in an acquisition of the Company and had expressed certain views on potential

partners.”130 That allegation does not support a disclosure claim.

The Proxy Statement informed stockholders that Stone Point might have

preferences among bidders. An attachment to Focus’s 13e-3 filing disclosed Jefferies’s

advice that bids from other parties may “depend[] on Stone Point’s willingness to

129 Ct. Ch. R. 12(d); see also Acero Capital, L.P. v. Swrve Mobile, Inc., 2021 WL
2207197, at *3 (Del. Ch. June 1, 2021) (converting Rule 12(b)(6) motion into motion
for summary judgment because defendant relied on matters outside the pleadings);
Raj & Sonal Abhyanker Family Tr. ex rel. UpCounsel, Inc. v. Blake, 2021 WL
2477025, at *9 (Del. Ch. June 17, 2021) (same); Bedrock Techs., LLC v. Earthwater
Tech. Int’l, Inc., 2006 WL 2521430, at *1 (Del. Ch. Aug. 24, 2006) (same); Kessler v.
Copeland, 2005 WL 396358, at *4 (Del. Ch. Feb. 10, 2005) (same); Peoples Sec. Life
Ins. Co. v. Fletcher, 1988 WL 26791, at *1 (Del. Ch. Mar. 16, 1988) (same); Kramer v.
W. Pac. Indus., Inc., 1987 WL 17043, at *1 (Del. Ch. Sept. 11, 1987), aff’d, 546 A.2d
348 (Del. 1988) (same); Broadscale OC Invs., L.P. v. Clayton, C.A. No. 2020-0262-
PAF, Dkt. 30 at 78–81 (Del. Ch. Oct. 15, 2020) (TRANSCRIPT) (same); Dawson v.
Pittco Cap. P’rs, L.P., C.A. No. 3148-VCN, Dkt. 38 at 37 (Del. Ch. Dec. 7, 2007)
(TRANSCRIPT) (same).
130 Compl. ¶ 192.

47
partner with other sponsors[.]”131 The Proxy Statement also disclosed that Stone

Point informed the Special Committee that “a transaction with [WEG] would involve

Stone Point conducting due diligence on and an evaluation of [WEG] if Stone Point

were asked to roll over all or a portion of its equity[.]”132 Although the Proxy

Statement did not use the phrase “not agnostic,” the information conveyed accurately

informed stockholders of this disposition.

Plaintiffs rely on Morrison v. Berry,133 but that case does not apply. There, the

company disclosed that its founder was “willing to consider any equity rollover with

a party other than Apollo[.]”134 That was false, as internal emails revealed the

opposite.135 Plaintiffs can point to no false assertions here.

Plaintiffs fail to plead that these omissions would have materially altered the

total mix of information.

3. Bankers’ Advice

Plaintiffs argue that the Proxy Statement should have disclosed the following

advice provided by the Special Committee’s financial advisors:

Goldman’s advice that it was “not worthwhile” for the
Special Committee to engage with [Party E] because Stone
Point had already indicated that “it would not make an
additional equity investment at a price per share above
$51.50” and that Goldman informed the Special Committee
that, because Stone Point wanted to “participat[e] on the

131 Defs.’ Opening Br., Ex. 19 at Ex. 99.(c)(8) at 28.

132 Proxy Statement at 38.

133 191 A.3d 268 (Del. 2018).

134 Id. at 281.

135 Id. at 285–86.

48
buyer side, it was disincentivized to support a higher price
per share.”136

And

Jefferies’ advice that, if Stone Point were not comfortable
participating as a buyer, the Company likely would not
have an actionable bid.137

As to Goldman’s advice, the Proxy Statement disclosed that Party E indicated

its offer would require that Stone Point purchase significant additional Focus equity,

Stone Point expressed its lack of interest in purchasing such additional equity for

more than $51.50 per share, and CD&R and WEG had offered $51.50 per share or

more.138 Goldman’s conclusion that it was “not worthwhile” to further engage with

Party E does not add much to this mix.139

As to Jefferies’s advice, Plaintiffs appear to be characterizing a bullet point on

a Jefferies slide deck, which states “[t]o get actionable bids, other parties will need to

undertake diligence and potentially secure committed financing depending on Stone

136 Pls.’ Answering Br. at 68.

137 Id.

138 Proxy Statement at 38 (“Party E stated that it understood that Stone Point would

need to be a part of the go-forward capital structure for the Company’s debt to be
portable under the Existing Credit Documents and indicated that it would expect
Stone Point to make an additional investment in the pro forma company resulting
from a potential acquisition by Party E.”), 44 (“Stone Point indicated, however, that,
based on the terms proposed as of such date, it was not willing to commit to a rollover
of all of its equity interests in the Company in a Potential Transaction and a
reinvestment in the pro forma company resulting from a Potential Transaction at a
price per share higher than $51.50.”).
139 Cinerama, Inc. v. Technicolor, Inc., 1991 WL 111134, at *24 (Del. Ch. June 24,

1991), aff’d in part, rev’d in part on other grounds sub nom. Cede & Co. v. Technicolor,
Inc., 634 A.2d 345 (Del. 1993) (“[C]onclusions that may be drawn from information
disclosed need not be disclosed.”).

49
Point’s willingness to partner with other sponsors[.]”140 That Jefferies presentation

was disclosed it in its entirety as an attachment to the Company’s 13e-3 filing. The

Proxy Statement also told stockholders where they could find this information,

stating: “Copies of [Jefferies’s] written preliminary presentations and a copy of the

Jefferies’ presentation made to the Special Committee on February 26, 2023, have

been filed as exhibits (c)(8) – (c)(10) to the Schedule 13e-3 filed with the SEC in

connection with the proposed Mergers.”141 Plaintiffs fail to allege a disclosure

violation with respect to Jefferies’s advice.

4. Special Committee Compensation

Plaintiffs argue that the Proxy Statement should have disclosed the following

facts concerning the Special Committee’s compensation: (i) shortly before and during

a break in the Special Committee meeting to recommend the Merger, the Stone Point

Directors and management approved the Special Committee’s increased

compensation; (ii) all the Special Committee members except LeMieux approved the

increased compensation, with LeMieux approving it minutes after the meeting; and

(iii) the compensation of three of the four Special Committee members increased six-

fold.142

The Proxy Statement disclosed that

Prior to the Board meeting to consider the Special
Committee’s recommendation, the Board adopted, by
unanimous written consent, resolutions providing for

140 Defs.’ Opening Br., Ex. 19 at 28.

141 Proxy Statement at 83.

142 Pls. Answering Br. at 69.

50
additional compensation for the Special Committee
members, in light of the work performed by the Special
Committee and to be performed by the Special Committee
during the go-shop period, that had exceeded the
Company’s expectations when it first determined to
structure compensation for each Special Committee
member’s service on the Special Committee.143

Under a section titled “Special Committee Fees,” the Proxy Statement disclosed the

precise amounts of this compensation.144 The Proxy Statement does not disclose that

the increase was approved during a “break” in the Special Committee meeting and

“fifteen minutes” before the Special Committee approved the Merger, but those

details would not alter the total mix of information available.

Plaintiffs rely on In re Tele-Communications, Inc. Shareholder Litigation, but

that case is distinguishable.145 There, an allegedly conflicted director “recommended

that [the special committee members considering a deal] be reasonably compensated

for their efforts in connection with the transaction,” with the amount to be determined

after the committee gave its recommendation.146 The committee then had “four

meetings over a one-week period.”147 After the committee recommended the merger,

the board approved $1 million in compensation to each committee member.148 The

proxy statement in Tele-Communications disclosed nothing about this additional

143 Proxy Statement at 53.

144 Id. at 99.

145 2005 WL 3642727 (Del. Ch. Dec. 21, 2005).

146 Id. at *1, *4–5.

147 Id. at *15 n.52.

148 Id. at *3.

51
compensation.149 The court noted that “the uncertain, contingent, and potentially

large nature of the payments, without any objective benchmarks or other measures,

could have given [the committee] additional and undisclosed financial interests . . .

that might have affected their judgments.”150

The circumstances pled in Tele-Communications bear little resemblance to

those alleged here. The Proxy Statement disclosed the Special Committee’s

compensation, including the full amount that each member received in connection

with their work on the Merger. Additionally, the Special Committee’s compensation

was not “uncertain, contingent,” or lacking “objective benchmarks”; it had specific

base and monthly fees, which the Committee members would receive regardless of

their recommendation. For these reasons, Plaintiffs fail to allege that the information

they believe was wrongfully withheld would materially alter the total mix of

information about the nature of the Special Committee’s compensation increases.

5. Jefferies’s Fee Increase

Plaintiffs argue that the Proxy Statement should have disclosed that the

Special Committee increased Jefferies’s discretionary fee by $7 million on the same

day Jefferies presented its fairness opinion to the Special Committee.151

The Proxy Statement disclosed Jefferies’s modified fee arrangement and that

the Special Committee approved this fee modification on the day it received Jefferies’s

149 Id. at *4.

150 Id. at *5.

151 Pls.’ Answering Br. at 70–72.

52
fairness opinion.152 The Proxy Statement also explains that Jefferies’s compensation

package comprised “up to $4.5 million” in base compensation plus “a discretionary fee

of up to $8.0 million.”153

Given what was disclosed, other information Plaintiffs point to is not likely to

alter the total mix of information.154

6. Special Committee Independence

Plaintiffs assert the Proxy Statement “failed to disclose a number of facts that

undermine the disinterestedness and independence of members of the Special

Committee.”155 These facts relate to Adolf’s personal relationships with committee

members, which Plaintiffs claim Stone Point “exploit[ed]” to its benefit and certain

alleged “associations” LeMieux had with CD&R.156 As to the connections between

Adolf and the committee members, Plaintiffs contend the Proxy Statement failed to

disclose:

• Morganroth and LeMieux both self-reported that they were friends with
Adolf;

• Adolf, LeMieux, and Neuhoff have overlapping social club memberships;
and

152 Proxy Statement at 53.

153 Id. at 83–84.

154 In re Paramount Gold & Silver Corp. S’holders Litig., 2017 WL 1372659, at *13

(Del. Ch. Apr. 13, 2017) (finding registration statement disclosure regarding advisor’s
fee sufficient where it “disclosed the total amount and the contingent nature of [the
advisor’s] compensation in connection with the merger” and “stockholders were made
aware of the full magnitude and nature of [the advisor’s] financial interest in the
transaction”).
155 Compl. ¶ 277.

156 Pls. Answering Br. at 72.

53
• Morganroth and Adolf have neighboring vacation homes at the
Yellowstone Club. 157

The Proxy Statement did not disclose this information. Defendants argue that

the Proxy Statement need not disclose this level of detail, because “[a]llegations of

mere personal friendship or a mere outside business relationship, standing alone, are

insufficient to raise a reasonable doubt about a director’s independence.”158

Plaintiffs rely on In re Orchard Enterprises, Inc., Inc. Stockholder Litigation,

where the relationships and the conflicts were much more pronounced.159 There, the

chair of the special committee had “long-standing ties” to the family that owned the

controller, including being “business associates and personal friends for

approximately twenty years” and “invest[ing] together in fifteen different

companies.”160 Here, there are no long-standing business ties, but social-circle issues

that tend not to alarm Delaware courts.161 Plus, there is no controller nor any well-

pled allegations that those relationships tainted the process.

157 Compl. ¶ 277.

158 Beam ex rel. Martha Stewart Living Omnimedia, Inc. v. Stewart, 845 A.2d 1040,

1050 (Del. 2004) (affirming finding that plaintiff failed to adequately plead director
interestedness where directors moved in the same social circles, attended the same
weddings, developed business relationships before joining the board, and described
each other as “friends”).
159 Pls.’ Answering Br. at 72.

160 In re Orchard Enters., Inc. S’holder Litig., 88 A.3d 1, 9 (Del. Ch. 2014).

161 See, e.g., Zimmerman v. Crothall, 2012 WL 707238, at *13 (Del. Ch. Mar. 5, 2012),

as revised (Mar. 27, 2012) (finding that allegations that two directors “were good
friends, that their families socialized, and that the two had worked closely together
on previous occasions, including in founding a start-up company” to be “allegations of
mere friendship and shared work experiences” and determining the directors to be
“disinterested and independent”).

54
As to LeMieux’s ties to CD&R, the only connection Plaintiffs appear to raise is

that LeMieux self-reported on a director questionnaire that he is the Chairman of a

law firm that “represents CD&R in immigration matters.”162 Plaintiffs plead no other

facts alleging that this relationship affected any part of the sale process. Nor does

the Complaint suggest that the firm’s representation of CD&R resulted in fees that

would be material to LeMieux. Indeed, the Complaint hesitates to assert the firm

received compensation from CD&R at all, noting only that it “likely obtains fees.” 163

Plaintiffs fail to plead this is a fact that would be germane, yet alone material, to

stockholders when considering whether to approve the Merger.

The information to which Plaintiffs point is not material as a matter of law.

7. CD&R’s Indication Of Interest

Plaintiffs argue that the Proxy Statement should have included more

information concerning CD&R’s offer and discussed its unique benefits for Stone

Point, the Stone Point Directors, and the Officer Directors.164 Specifically, Plaintiffs

argue that the Proxy Statement should have disclosed that: (i) CD&R expected a

material rollover from management; (ii) CD&R stated it would be an “outstanding

partner” to management; and (iii) CD&R insisted on Stone Point’s equity rollover.165

162 Compl. ¶¶ 38, 277.

163 Id. ¶ 277.

164 Id. ¶ 280.

165 Pls.’ Answering Br. at 74.

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Plaintiffs pull the statement regarding management’s equity rollover verbatim

from a deck attached to Focus’s Schedule 13e-3 filing.166 That information is,

therefore, publicly disclosed.

Plaintiffs draw the “outstanding partner” statement from CD&R’s September

14, 2022 proposal stating that it would be “an outstanding partner for the

management team as it works to increase the long-term value of the Company.”167

That was puffery and not material.168

Plaintiffs base their last subpoint on the minutes from a November 10, 2022

Board meeting. The minutes state that Goldman discussed that “CD&R would

require a partner or partners in connection with a transaction . . . [and] the potential

166 Defs.’ Opening Br., Ex. 24 at Exhibit 99.(c)(1) at 5.

167 Compl. ¶ 281.

168 See, e.g., Teamsters Local 677 Health Servs. & Ins. Plan v. Martell, 2023 WL

1370852, at *18 (Del. Ch. Jan. 31, 2023) (rejecting claim that proxy statement failed
to include information regarding promises of post-close employment for target
management where plaintiff “base[d] its theory on a closing-date announcement and
the idea that financial buyers retain management” and did not “allege facts
suggesting that employment discussions with [the acquirors] occurred during the sale
process”); English v. Narang, 2019 WL 1300855, at *13 (Del. Ch. Mar. 20, 2019), aff’d,
222 A.3d 581 (Del. 2019), and aff’d, 222 A.3d 581 (Del. 2019) (dismissing claim that
Recommendation Statement omitted material facts concerning post-close
employment for target management where plaintiffs pled that the acquiror “routinely
retains” existing management but did not allege any facts concerning the “timing and
extent of any discussions between [the target and buyer] regarding post-close
employment”); see also City of Warren Gen. Empls.’ Ret. Sys. v. Roche, 2020 WL
7023896, at *13 (Del. Ch. Nov. 30, 2020) (finding plaintiff failed to plead that
management was conflicted due to prospect of post-transaction employment where
the complaint “seize[d] on complimentary statements in . . . indications of interest”
from buyers, including that the buyers were “100% supportive of the management
team,” and “very enthusiastic about the opportunity to partner with [the target]” and
did not allege that “any employment offers were extended or that employment
discussions were had”).

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impact that Stone Point’s participation may have on CD&R’s indication of

interest.”169 To note the obvious, the minutes only state that CD&R would require “a

partner” to close a deal, not that the partner would have to be Stone Point. Setting

that aside, it is hard to view this omission as material given what was disclosed. The

Proxy Statement already disclosed the following:

• “Having Stone Point be a part of the go-forward capital structure could
allow [Focus’s] debt to be portable,” which would “potentially permit[]
CD&R to submit a higher price per share offer”;170

• Goldman approached Stone Point on November 9 about “rolling over
some or all of its equity interests in [Focus] or making an additional
equity investment”;171

• CD&R expressed a willingness to increase its offer “in the event that
Stone Point was willing to roll over its equity interests”;172

• CD&R explored “discussions with other potential sources of equity
financing even if Stone Point was willing to so participate”;173 and

• The parties ultimately agreed that Stone Point would rollover a portion
of its equity interest.174

These disclosures convey the correlation between the amount of equity Stone Point

would commit to rolling over and CD&R’s ability and willingness to engage in a deal.

Plaintiffs fail to plead that more was required to avoid a materially misleading

disclosure.

169 Pls.’ Answering Br. at 73–74 (quoting Pls.’ Answering Br., Ex. 4 at 3).

170 Proxy Statement at 27.

171 Id. at 28.

172 Id. at 45–46.

173 Id. at 46.

174 Id. at 99.

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8. Effect Of Maintaining The Credit Agreement

Plaintiffs argue that the Proxy Statement should have disclosed that “keeping

the existing financing in place, which required Stone Point’s consent, would allow a

potential purchaser to avoid refinancing costs in the range of $3.00–$4.00 per

share.”175 Plaintiffs also allege that the Proxy Statement should have disclosed that

Stone Point was among the “Permitted Holders” under the Credit Agreement, and

that giving Stone Point the right to designate a majority of the post-closing board was

a way to keep the Credit Agreement in place.

The disclosure of the additional $3–$4 per share detail would not alter the total

mix of information in a material way. The Proxy Statement also detailed how Stone

Point’s involvement through the Credit Agreement might allow CD&R to increase its

bid from $45 to $50 to $51.50 to $53 per share.176 Given those disclosures, the $3–$4

range is “additional granularity” that would be “cumulative to the information

already disclosed.”177

No further disclosures about the “Permitted Holders” are warranted. The

Proxy Statement refences the potential portability of the Credit Agreement several

times,178 including that making Focus’s debt portable could allow bidders “to submit

175 Pls.’ Answering Br. at 76.

176 See Proxy Statement at 45–46 (“CD&R conveyed . . . that [it] might be able to meet

the Special Committee’s proposed price of $53.00 . . . [if] Stone Point was willing to
roll over its equity interests[.]”).
177 Dent v. Ramtron Int’l Corp., 2014 WL 2931180, at *12 (Del. Ch. June 30, 2014).

178 Compl. ¶ 285 (citing Proxy Statement at 28, 30, 35–36, 38–39).

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a higher price per share.”179 The Proxy Statement discloses that after the Merger,

the “Permitted Holders (as defined in the Existing Credit Document)” will “indirectly

own a majority of the Voting Stock of the Company and Focus LLC [and] be entitled

to designate a majority of the members of the [post-close] board[.]” 180 Exhibits to the

Company’s Schedule 13e-3 “defined ‘Permitted Holders’ to include ‘Stone Point’ and

‘Focus management.’”181

Plaintiffs fail to adequately plead that the Proxy Statement fails to disclose

that Stone Point and members of Management were Permitted Holders, and that

such information would significantly alter the total mix of information made

available to stockholders.

III. CONCLUSION

The motion to dismiss Count I is granted; Plaintiffs have failed to adequately

allege the existence of a controller or control group. But for one well-pled disclosure

violation, Defendants would be entitled to dismissal of Counts II through IV under

Corwin. Counts V through VII for aiding and abetting would fail for lack of a valid

predicate. Given the dispositive nature of Plaintiffs’ one viable disclosure issue on

the outcome of Defendants’ motions, the court is converting the motions to dismiss

into motions for summary judgment to explore the factual bases for this limited issue.

179 Proxy Statement at 28.

180 Id. at 120.

181 Defs.’ Opening Br., Ex. 25 at Ex. 99.(c)(3) at 47, Ex. 99.(c)(4) at 48.

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The motions to dismiss Counts V through VII are stayed pending resolution of

summary judgment briefing.

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