Nature of the Case
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Facts
Halvorsen, Olson, and Ott worked together at Tiger Management. Halvorsen was the #2 person at Tiger and Olson, and Ott were hired by Halvorsen. Halvorsen was frustrated with Tiger’s founder and decided to form his own firm. Halvorsen resigned to start his own fund, Viking. Olson resigned over compensation but stayed at the fund for a few months to help find his replacement. Halvorsen contacted Olson to discuss the possibility of joining Viking after he finished with his responsibilities at Tiger. Halvorsen also contacted Ott, who was still at Tiger. After a few initial conversations, they trio met in February to discuss the governance, investment strategy, compensation, and logistics related to the formation of Viking. They agreed to an operating committee made up of the three of them and decisions would require a two of three vote, subject to a Halvorsen veto. Halvorsen got a veto because he had the most experience among them and would contribute about $50 million to the fund, while Olson and Ott would each contribute somewhere between $2 million and $4 million. They decided that all the profits at Viking would be paid out annually. Each year, after all, other employees were paid, Halvorsen would receive 55%, and Olson and Ott would each receive 22.5% of the profits. Equity was eventually split in the same percentages. They all agreed that if any one of them left Viking, he would only be entitled to his earned compensation and his capital account (the “cap and comp” agreement). They decided that Halvorsen would be primarily responsible for raising capital and hiring employees, Olson would deal with the lawyers regarding formation of the necessary entities, and Ott, who was still employed at Tiger and had less time, would locate office space. A document was eventually created which reflected these terms. They created three Delaware entities to carry on the Viking business. Olson directed counsel to draft operating agreements for the Viking entities. These “long form sheets” reflected the oral agreements reached by the three founders at the February meeting and the core principles listed in Olson’s term sheet. The long form sheets were not yet finished, but they needed to do business, so Olson asked Viking’s counsel to draft short-form operating agreements for Investors and Partners. The short-form agreements were skeletal (each only three or four pages in length) and do not contain all of the terms agreed upon by the founders at the February meeting. They were executed, but the long form agreements were still being drafted. These were eventually finished, but only the agreement for the Performance entity was signed. Olson came up with a new compensation concept and proposed that upon departure from Viking a founding member (or his estate) would be paid an earnout, through a new entity to be called Founders. Everyone thought the idea interesting, but the three founders left the issue open for discussion. Olson contracted counsel stating that Viking would “probably” create another entity called Founders. The terms provided that, upon retirement or death, each founder would receive a declining percentage of his interest in Viking for six years following his departure. The drafting of the Founders operating agreement took place over about a year and a half, and at no point during that process did Olson discuss with his partners the changes he was making to what he now claims was their “agreement.” Olson added a requirement to the draft Founders operating agreement that Halvorsen keep over 89% of his capital in the fund or forfeit his veto. Halvorsen was upset to see such a clause in the draft. None of the three founders ever signed a Founders operating agreement. At Olson’s direction, outside counsel filed a certificate of formation for Founders on September 28, 1999. Thereafter, also at Olson’s direction, Founders was made a member of Performance. At trial, Smith stated that he ran money through Founders for bookkeeping purposes because Olson directed him to do so. Success went to Olson’s head, and he threw a hissy fit and demanded more money and then threatened to leave. The parties negotiated a new payment plan but all three admitted that they did not discuss the effect it would have on Founders. Halvorsen and Ott thought that by readjusting these percentages only annual compensation would be affected, not retirement benefits. If it was as Olson claimed, he could have left the next day with a massive increase in compensation without any additional benefit to Viking. Founders again became an issue 3 years later. In the meantime, Olson’s stellar performance began to wane dramatically. He announced a six-month sabbatical in 2005. He said he was not sure if he would return. In his absence, everyone discovered the Viking was a better fund. He was terminated in August 2005. At a termination meeting, Olson raised Founder issues. At trial, Olson did not prove that Founders superseded any prior agreements made. Olson (P) filed suit for (1) breach of contract, (2) breach of fiduciary duty, (3) civil conspiracy, (4) right to fair value and interest in the Viking entities pursuant to 6 Del. C. § 18-604 and 6 Del. C. § 17-604, (5) unjust enrichment, (6) accounting, (7) equitable estoppel, and (8) promissory estoppel. Ds filed counterclaims alleging that P breached his fiduciary duties and violated the implied covenant of good faith and fair dealing due to his alleged misstatements about, concealment of, and attempt to enforce the purported earnout. The parties filed cross-motions for summary judgment and, the court granted summary judgment in favor of the Ds on P’s contract claim. Trial occurred.
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