Fairstead Capital Management LLC v. Blodgett

── Fairstead Capital Management LLC v. Blodgett ── Court: Court of Chancery of Delaware Date: May 13, 2026 Category: General IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE FAIRSTEAD CAPITAL MANAGEMENT LLC and FCM AFFORDABLE LLC, Plaintiffs, v. C.A. No. 2022-0673-JTL WILLIAM BLODGETT, Defendant. OPINION ADDRESSING MOTIONS FOR SUMMARY JUDGMENT Date Submitted: January 20, 2026 Date Decided: May 13, 2026 Ryan D. Stottmann, Thomas P. Will, Alec F. Hoeschel, Phillip Reytan, MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, Delaware; Rollo C. Baker, Jared Ruocco, Edgar Aliferov, ELSBERG BAKER & MARURI PLLC, New York, New York; Michael B. Carlinsky, Evan Forbes, QUINN EMANUEL URQUHART & SULLIVAN LLP, New York, New York; Attorneys for Plaintiffs/Counterclaim-Defendants. David E. Ross, Roger S. Stronach, Holly E. Newell, A. Gage Whirley, ROSS ARONSTAM & MORITZ LLP; Wilmington, Delaware; Jacob W. Buchdahl, Elisha B. Barron, Zach Fields SUSMAN GODFREY LLP, New York, New York; Attorneys for Defendant/Counterclaim-Plaintiff. LASTER, V.C.  Two long-time business associates—a hedge fund manager and his personal attorney—teamed up with William Blodgett, an expert in affordable housing. They formed a fund complex to invest in affordable housing projects. The business grew, and Blodgett expanded his team to include John Tatum. Together, they created a new arm of the business that invested in deals funded in part by affordable-housing tax credits. The attorney nominally oversaw their work. The hedge fund manager remained in the background. As the business became more successful, Blodgett and Tatum decided that they deserved a bigger piece of the pie. The attorney encouraged them to develop an equity restructuring plan, but warned them that the hedge fund manager needed to recover his capital before he gave them a larger stake in the firm. Blodgett and Tatum grew impatient. They developed two plans: one involved restructuring the business to give them control; the other involved them leaving and starting a competing company. When developing the plans, Blodgett shared confidential information with members of his family and their advisors. The hedge fund manager rejected the restructuring plan, so Blodgett and Tatum decided to leave. They began negotiating the terms of their departures. Meanwhile, the attorney had started monitoring Blodgett’s emails. The attorney spotted an invoice from an outside law firm for “Newco Formation.” The attorney concluded that Blodgett did not intend to leave on good terms, and the hedge fund manager promptly terminated Blodgett for cause. The termination letter purported to cancel all of Blodgett’s equity.  Blodgett filed an arbitration for breach of his employment agreement. The hedge fund manager and the attorney caused two affiliates to sue Blodgett in this court for breach of the affiliates’ LLC agreements. Blodgett counterclaimed against the affiliates, contending they breached their LLC agreements by improperly cancelling his equity. After the arbitrator issued an award, the parties cross-moved for summary judgment. Based on the arbitrator’s findings, Blodgett is entitled to summary judgment. Blodgett is entitled to summary judgment on the affiliates’ claims for breach of their LLC agreements because Blodgett acted as an employee, not as a member. His employment agreement governed his conduct as an employee. He did nothing as a member that could implicate the restrictions on member activity in the LLC agreements. The court previously granted summary judgment for Blodgett on whether the affiliates breached their LLC agreements by purporting to cancel Blodgett’s equity. He remains entitled to summary judgment on that issue. The arbitrator found that Blodgett’s employment agreement authorized the cancellation of his equity interests in pending deals, but not Blodgett’s equity interests in non-pending deals. The LLC agreements do no