This Week in Chancery Court: Carlyle Group, Prince Estate Fight

The Carlyle Group Inc. will hear this week whether Delaware’s Court of Chancery will allow a challenge to a $344 million payment to the private equity firm’s senior leaders. Separately, the firm also goes to trial in a lawsuit it says “defies the laws of economics” in challenging its sale of Authentix Inc. to Blue Water Energy LP in 2017.

A fight over the management of pop icon Prince’s estate also could be fast-tracked this week, amid ongoing trials:

Monday: Manti Holdings LLC v. The Carlyle Group Inc., Del. Ch., No. 2020-0657, trial 1/22/24.

At issue: Carlyle affiliates will go to trial to resolve investor litigation over their $77.5 million sale of the anti-counterfeiting company Authentix to Blue Water Energy. A Carlyle-managed private equity fund acquired a controlling interest in Authentix in 2008, and Carlyle pushed through the 2017 sale in order to liquidate that fund, the investors said in a pre-trial brief. Carlyle argues the litigation “defies the laws of economics,” according to its own pre-trial brief. “The sale was anything but hasty,” attorneys for Carlyle and its affiliates said. “Plaintiffs are no doubt disappointed that the sale price was not higher. Defendants were disappointed too. But dissatisfaction states no claim under Delaware law.”

Court action: A seven-day trial begins Monday in Georgetown, Del., before Vice Chancellor Sam Glasscock III.

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Monday: Samuels v. CCUR Holdings Inc., Del. Ch., No. 2021-0358, oral argument 1/22/24.

At issue: A former CCUR Holdings Inc. shareholder sued its board in 2021, claiming it wrongly wrote off insured funds seized in a drug bust when cashing out investors. The shareholder, Craig Samuels, has renewed his effort to certify a non-opt-out class consisting of common stockholders who held fewer than 3,000 shares at the time of the reverse stock split on April 22, 2021. Vice Chancellor Paul Fioravanti Jr. in September denied Samuel’s previous motion for class certification. The board says Samuels’s renewed motion to certify could “open a Pandora’s box of class action abuse,” according to their answering brief. Fioravanti also previously dismissed a breach of fiduciary duty claim against the board while allowing a claim alleging a statutory violation to survive.

Court action: Oral arguments on a motion for class certification will be heard in Wilmington, Del.

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Monday: In re FAST Acquisition Corp. S’holders Litig., Del. Ch., No. 2022-0702, oral argument 1/22/24.

At issue: FAST Acquisition Corp., a special-purpose acquisition company led by Ruby Tuesday Inc. founder Sandy Beall, has agreed to pay $12.5 million to settle investor litigation alleging Beall and others tried to keep for themselves a $33 million breakup fee to end a planned merger with the parent company of Golden Nugget casinos, though they had claimed it would benefit shareholders. Fioravanti will consider whether to approve the proposed settlement, along with a $10,000 fee award for the lead plaintiff and a $2 million attorneys fee award, plus almost $43,000 in expenses, sought by the investors’ counsel.

Court action: Oral arguments on the proposed settlement will be heard in Wilmington, Del.

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Monday: City of Pittsburgh Comp. Mun. Pension Tr. v. Conway, Del. Ch., No. 2022-0664, bench ruling 1/22/24.

At issue: Vice Chancellor Morgan Zurn will deliver a bench ruling on Carlyle’s motion to dismiss a lawsuit brought by a pension fund alleging the private equity group forced through a $344 million payment to its senior leaders even though they weren’t entitled to compensation. The payment was approved by Carlyle’s board when the firm changed its corporate structure, and it was lower than the value of long-held tax benefits regularly disclosed in financial statements to shareholders, which ranged up to $1.3 billion, an attorney for Carlyle said in a Sept. 13 hearing. An attorney for the City of Pittsburgh Comprehensive Municipal Pension Trust Fund said the tax agreement actually was valued at less than $150 million in 2018 as Carlyle considered changing its structure.

Court action: Bench ruling by phone on the motion to dismiss.

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Thursday: McMillan v. Nelson, Del. Ch., No. 2024-0016, teleconference 1/25/24.

At issue: The nephew and two longtime friends of music legend Prince want to speed things up in their lawsuit alleging four of his other relatives are wrongfully trying to seize control of a company set up to run the pop icon’s estate. The lawsuit filed earlier this month follows a 2022 Minnesota probate settlement that divided Prince’s $156 million estate between his family and friends, on the one hand, and entertainment company Primary Wave Music LLC. Prince died in 2016 without a will.

Court action: Oral arguments on the motion to expedite will be heard by phone.

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