Delaware Business Litigation Report

Chancery Dismisses Claims Relating to Proposed Financing of Italian Soccer Club

Feldman v. AS Roma SPV GP, LLC, C.A. No. 2020-0314-PAF (Del. Ch. July 22, 2021)
In Feldman, plaintiffs were minority members of a Delaware limited liability company that held a controlling interest in a premier Italian soccer club. The LLC’s managing member and its controllers and associated entities sought to exit their control investment in the club. A sales process stalled during the coronavirus pandemic. The controllers called for additional capital from existing members on a pro rata basis, either through new financing or conversion of debt, in exchange for units with priority status and liquidation preferences. The controllers approved a related amendment to the LLC agreement. Due to insufficient interest from members, the controllers instead proposed a financing transaction that included member loans with certain preferences, such as premium payments in the event of the company’s sale. Eighty percent of membership interests participated in the loans. Soon after, a sale of the club was announced.

After originally challenging the abandoned financing, plaintiffs amended their complaint and brought a series of claims focused on the amendment to the LLC agreement and the member loan transaction. The defendants moved to dismiss and the Court of Chancery dismissed the complaint in its entirety. The Court found that the plaintiffs’ fiduciary duty disclosure claim regarding the member loan transaction was rooted in a desire for blow-by-blow description of fluid sale negotiations and for predictions regarding a future sale, neither of which are disclosures required by Delaware law. The Court next dismissed plaintiffs’ claim regarding the creation of new, preferred membership interests through the amendment in connection with the abandoned financing. The complaint itself acknowledged that no such units had been issued, and the transactional documents provided for units only on the timetable of the originally contemplated transaction, not beyond lapsed deadlines. There also was no justiciable controversy, as any harm that might have been posed by the abandoned transaction was moot, and any harm that might come from a hypothetical future transaction involving preferred units was unripe. Given the dismissal of all claims for breaches of fiduciary duty, the Court likewise dismissed the claim for aiding and abetting.

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