IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
`
`SARAH KENVILLE, DYLAN
`NEWMAN, and MICHAEL FARZAD,
`
`Plaintiffs,
`
`v.
`
`NORTHERN STAR SPONSOR LLC,
`JOANNA COLES, JONATHAN J.
`LEDECKY, JAMES H.R. BRADY,
`JONATHAN MILDENHALL,
`DEBORA SPAR, JUSTINE CHENG,
`BARKBOX, INC., BARK, INC.,
`MATTHEW MEEKER, and HENRIK
`WERDELIN,
`
`C.A. No. 2024-0276-PAF
`
`Defendants.
`DEFENDANTS’ ANSWERING BRIEF IN OPPOSITION TO
`PLAINTIFFS’ MOTION FOR CLASS CERTIFICATION
`John P. DiTomo (#4850)
`Srinivas M. Raju (#3313)
`Cassandra Baddorf (#7365)
`Matthew D. Perri (#6066)
`MORRIS, NICHOLS, ARSHT
`Sandy Xu (#6966)
`Brendan W. Clark (#7383)
`& TUNNELL LLP
`1201 North Market Street
`RICHARDS, LAYTON & FINGER, P.A.
`920 North King Street
`P.O. Box 1347
`Wilmington, DE 19801
`Wilmington, DE 19899-1347
`jditomo@morrisnichols.com
`(302) 651-7700
`cbaddorf@morrisnichols.com
`raju@rlf.com
`perri@rlf.com
`xu@rlf.com
`clark@rlf.com
`
`Attorneys for Defendants Barkbox,
`Inc., BARK, Inc., Matthew Meeker
`and Henrik Werdelin
`
`Attorneys for Defendants Northern Star
`Sponsor LLC, Joanna Coles, Jonathan J.
`Ledecky, James H.R. Brady, Jonathan
`Mildenhall, Debora Spar, and Justine
`Cheng
`
`RLF1 32704553v.1
`
`EFiled: Apr 04 2025 04:56PM EDT
`Transaction ID 75972552
`Case No. 2024-0276-PAF
`
`

`

`OF COUNSEL:
`
`Lisa Bugni
`KING & SPALDING LLP
`50 California Street, Suite 3300
`San Francisco, CA 94111
`
`Benjamin Lee
`Lauren Smith
`KING & SPALDING LLP
`1180 Peachtree Street, NE
`Suite 1600
`Atlanta, GA 30309
`
`Attorneys for Defendants Barkbox,
`Inc., BARK, Inc., Matthew Meeker
`and Henrik Werdelin
`
`Dated: April 4, 2025
`
`RLF1 32704553v.1
`
`

`

`TABLE OF CONTENTS
`
`Page
`
`III.
`
`PRELIMINARY STATEMENT...............................................................................1
`BACKGROUND.......................................................................................................3
`I.
`Merger Between Northern Star and Legacy Bark...........................................3
`II.
`The Merger Closes. .........................................................................................4
`III. New BARK Stock Traded above $10 For Weeks...........................................5
`IV.
`Plaintiffs’ Second Amended Complaint..........................................................6
`ARGUMENT ............................................................................................................7
`I.
`A CLASS SEEKING DAMAGES CANNOT BE CERTIFIED. ...................8
`II.
`A CLASS SEEKING COMPENSATORY DAMAGES FOR A
`DUTY OF DISCLOSURE CLAIM CANNOT BE CERTIFIED
`UNDER ANY RULE....................................................................................12
`A.
`Plaintiffs Must Prove Reliance, Causation and Damages to
`Recover Compensatory Damages.......................................................12
`Reliance and Causation Cannot Be Proven on a Class-Wide Basis. ..13
`1.
`2. Damages (or Benefits) of the Merger Are Individualized Thereby
`Rendering Certification Impossible and Inefficient............................16
`B. MultiPlan, Gig3, Buttonwood, and Other SPAC Cases Do Not
`Require Class Certification.................................................................18
`THE COURT SHOULD NOT CERITFY A CLASS FOR
`EXCLUSIVELY NOMINAL DAMAGES...................................................23
`A.
`A Disclosure Claim Arising out of a Transaction Seeking
`Exclusively Nominal Damages Would Be Duplicative of a
`Derivative Claim.................................................................................24
`Pursuing a Claim for Nominal Damages is Detrimental to the
`Class....................................................................................................26
`Nominal Damages are Not Compensatory Damages..........................27
`i
`
`B.
`
`C.
`
`RLF1 32704553v.1
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`

`

`IV. ANY CLASS SHOULD ONLY BE PRELIMINARILY CERTIFIED
`PENDING DISCOVERY. ............................................................................33
`CONCLUSION .......................................................................................................34
`
`RLF1 32704553v.1
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`ii
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`

`

`TABLE OF AUTHORITIES
`
`Page(s)
`
`CASES
`Buttonwood Tree Value P’rs, L.P. v. R. L. Polk & Co.,
`2022 WL 2255258 (Del. Ch. June 23, 2022) .....................................................21
`Carroll v. Philip Morris USA, Inc.,
`163 A.3d 91 (Del. Super. Ct. 2017)....................................................................15
`In re Celera Corp. S’holder Litig.,
`59 A.3d 418 (Del. 2012).................................................................................8, 11
`In re Columbia Pipeline Grp., Inc. Merger Litig.,
`299 A.3d 393 (Del. Ch. June 30, 2023)..............................................................32
`Delman v. GigAcquisitions3, LLC,
`288 A.3d 692 (Del. Ch. 2023) ..........................................................16, 18, 24, 25
`In re Dennis Greenman Sec. Litig.,
`829 F.2d 1539 (11th Cir. 1987)..........................................................................10
`Dieter v. Prime Comput., Inc.,
`681 A.2d 1068 (Del. Ch. 1996) ............................................................7, 9, 10, 11
`Dohmen v. Goodman,
`234 A.3d 1161 (Del. 2020)...............................................................13, 19, 20, 27
`Dubroff v. Wren Holdings, LLC,
`2010 WL 3294219 (Del. Ch. Aug. 20, 2010)...................................14, 15, 16, 17
`Fogie v. Rent-A-Center, Inc.,
`867 F. Supp. 1398 (D. Minn. 1993) ...................................................................11
`Gaffin v. Teledyne, Inc.,
`611 A.2d 467 (Del. 1992).................................................................15, 16, 28, 30
`Ivize of Milwaukee, LLC v. Compex Litig. Support, LLC,
`2009 WL 1111179 (Del. Ch. Apr. 27, 2009)......................................................27
`In re J.P. Morgan Chase & Co. Stockholder Litigation,
`906 A.2d 766 (Del. 2006)...................................................................................25
`
`RLF1 32704553v.1
`
`iii
`
`

`

`Joseph v. Shell Oil Co.,
`1985 WL 21125 (Del. Ch. Feb. 8, 1985)............................................................10
`Laidlaw v. GigAcquisitions2, LLC,
`2023 WL 2292488 (Del. Ch. Mar. 1, 2023) .......................................................12
`In re Lawson Software, Inc. Stockholder Litigation,
`2011 WL 2185613 (Del. Ch. May 27, 20211) ...................................................14
`Leon N. Weiner & Assocs., Inc. v. Krapf,
`584 A.2d 1220 (Del. 1991).............................................................................7, 26
`In re Lordstown Motors Corp. S’holder Litig.,
`C.A. No. 2021-1066-LWW (Del. Ch. June 24, 2024) (TRANSCRIPT) ...........20
`In re Lordstown Motors Corp. S’holders Litig.,
`2022 WL 678597 (Del. Ch. Mar. 7, 2022) ...................................................12, 20
`Macrophage Therapeutics, Inc. v. Goldberg,
`2021 WL 2582967 (Del. Ch. June 23, 2021) .....................................................28
`In re Mindbody, Inc., S’holder Litig.,
`2023 WL 2518149 (Del. Ch. Mar. 15, 2023), aff’d in part, rev’d in part,
`2024 WL 4926910 (Del. Dec. 2, 2024)..............................................................31
`In re Mindbody, Inc., S’holder Litig.,
`2023 WL 7704774 (Del. Ch. Nov. 15, 2023), aff’d, 2024 WL 4926910
`(Del. Dec. 2, 2024) .......................................................................................30, 31
`In re Mindbody, Inc. S’holder Litig.,
`2024 WL 4926910 (Del. Dec. 2, 2024)..............................................................31
`In re MultiPlan Corp. Stockholders Litigation,
`268 A.3d 784 (Del. Ch. 2022).....................................................................passim
`Nguyen v. Barrett,
`2016 WL 5404095 (Del. Ch. Sept. 28, 2016).......................................................1
`Noerr v. Greenwood,
`2002 WL 31720734 (Del. Ch. Nov. 22, 2002)...............................................9, 10
`Nottingham P’rs v. Dana,
`564 A.2d 1089 (Del. 1989).................................................................................11
`
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`
`iv
`
`

`

`Oliver v. Boston Univ.,
`2006 WL 1064169 (Del. Ch. Apr. 14, 2006)......................................................28
`In re Orchard Enters., Inc. S’holder Litig.,
`88 A.3d 1 (Del. Ch. 2014) ..................................................................................30
`In re Phila. Stock Exch., Inc.,
`945 A.2d 1123 (Del. 2008)...................................................................................8
`Ravenswood Inv. Co., L.P. v. Est. of Winmill,
`2018 WL 1410860 (Del. Ch. Mar. 21, 2018), aff’d, 210 A.3d 705 (Del.
`2019) (TABLE) ..................................................................................................28
`In re Rural/Metro Corp. S’holders Litig.,
`102 A.3d 205 (Del. Ch. 2014) ............................................................................30
`In re Siliconix Inc. S'holders Litig.,
`2001 WL 618210 (Del. Ch. May 25, 2001) .......................................................34
`Smith v. Shell Petroleum, Inc.,
`1990 WL 186446 (Del. Ch. Nov. 26, 1990), aff’d, 606 A.2d 112 (Del.
`1992)...................................................................................................................30
`
`In re Straight Path Communications Inc. Consolidated Stockholder
`Litigation,
`2022 WL 2236192 (Del. Ch. June 14, 2022) .....................................................14
`Strassburger v. Earley,
`752 A.2d 557 (Del. Ch. 2000) ......................................................................28, 29
`Thornton v. Bernard Technologies, Inc.,
`2009 WL 426179 (Del. Ch. Feb. 20, 2009)........................................................25
`In re Transkaryotic Therapies, Inc.,
`954 A.2d 346 (Del. Ch. 2008) ..............................................................................1
`Weinberger v. UOP, Inc.,
`1985 WL 11546 (Del. Ch. Jan. 30, 1985), aff’d, 497 A.2d 792 (Del.
`1985)...................................................................................................................29
`Zimmerman v. Bell,
`800 F.2d 386 (4th Cir. 1986)..............................................................................11
`
`RLF1 32704553v.1
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`

`

`STATUTES & RULES
`Ct. Ch. R. 23(a)..........................................................................................................8
`Ct. Ch. R. 23(b) .............................................................................................9, 10, 17
`OTHER AUTHORITIES
`2 DONALD J. WOLFE, JR. & MICHAEL A. PITTENGER, CORPORATE &
`COMMERCIAL PRACTICE IN THE DELAWARE COURT OF CHANCERY § 12.02
`(2d ed. 2025).......................................................................................................10
`5 JAMES WM. MOORE, MOORE’S FEDERAL PRACTICE - CIVIL § 23.42 (3d ed.
`2025)...................................................................................................................10
`
`RLF1 32704553v.1
`
`vi
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`

`

`Defendants Northern Star Sponsor LLC, Joanna Coles, Jonathan J. Ledecky,
`
`James H.R. Brady, Jonathan Mildenhall, Debora Spar, and Justine Cheng, Barkbox,
`
`Inc., BARK, Inc., Matthew Meeker and Henrik Werdelin (collectively,
`
`“Defendants”), by their undersigned attorneys, submit this brief in opposition to
`
`Plaintiffs’ Motion for Class Certification (the “Motion”).
`
`PRELIMINARY STATEMENT
`Plaintiffs seek to certify a class of stockholders for purposes of pursuing
`
`damages in a post-closing merger case based exclusively on purported disclosure
`
`violations. That is improper.
`
`It has long been the law of Delaware that duty of disclosure cases are most
`
`appropriately pursued by seeking pre-closing injunctive relief.1 In that context, the
`
`Court can certify a class under Court of Chancery Rule 23(b)(2), and expeditiously
`
`resolve alleged disclosure violations without the difficulties arising from fashioning
`
`an after-the-fact damages remedy.
`
`Here, by contrast, Plaintiffs seek damages in a case exclusively about a
`
`purported breach of the duty of disclosure. In 2020, the Delaware Supreme Court
`
`clarified that a presumption of reliance, causation, and damages with respect to a
`
`1 See, e.g., Nguyen v. Barrett, 2016 WL 5404095, at *7 (Del. Ch. Sept. 28, 2016)
`(noting that the preferred method for vindicating truly material disclosure claims is to bring
`them pre-close, at a time when the Court can insure an informed vote); In re Transkaryotic
`Therapies, Inc., 954 A.2d 346, 360–61 (Del. Ch. 2008).
`
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`disclosure claim only exists when a stockholder is seeking nominal damages. When
`
`seeking a compensatory remedy, however, there is no such presumption. Rather,
`
`stockholders seeking a compensatory remedy for a disclosure violation bear the
`
`burden of establishing reliance, causation, and damages. These elements are
`
`necessarily individualized and, therefore, impossible to prove on a class-wide basis.
`
`Even setting aside the general inability to certify a class given the
`
`requirements for causation and reliance, there are unique issues of damages here that
`
`prevent any class from being certified. Plaintiffs claim the disclosures relating to
`
`approval of a merger between a public company, which was a special purpose
`
`acquisition vehicle (“SPAC”), and a private company were incorrect or insufficient
`
`such that stockholders with certain redemption rights were unable to determine on
`
`an informed basis whether to exercise redemption rights. Plaintiffs purport to be
`
`former stockholders of the SPAC who then continued to hold their shares post-
`
`merger. To determine the appropriate damages in this case, the Court would be
`
`required to determine what each stockholder in the class received for his, her, or its
`
`shares and whether that caused any damages to that stockholder. Plaintiffs have
`
`made no effort to tailor the class to only stockholders who share an actual alleged
`
`harm.
`
`The continuing nature of the SPAC further prevents certification of any class
`
`seeking nominal damages for at least three reasons. First, given a derivative claim
`
`RLF1 32704553v.1
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`

`

`relating to the same transaction could be filed derivatively, a class seeking
`
`exclusively nominal damages would be seeking duplicative relief. Second, the
`
`purpose of class action litigation is the ability of class members to pursue
`
`collectively an efficient resolution of claims. The cost of litigation to the parties and
`
`the Court has already exceeded the value of claims for nominal damages. Third, if
`
`Plaintiffs believe a compensatory remedy could be appropriate for any class
`
`members, then Plaintiffs and their counsel would be breaching their fiduciary duties
`
`to the class members by pursuing class-wide relief and thereby precluding such class
`
`members the ability to seek an individualized compensatory remedy.
`
`The Court should deny the class action certification motion in accordance with
`
`the Supreme Court’s opinion in Dohmen and the long-standing practical principle
`
`that disclosure claims are best remedied pre-closing.
`
`BACKGROUND
`I. Merger Between Northern Star and Legacy Bark.
`
`Northern Star Acquisition Corp. (“Northern Star” or the “Company”) was
`
`founded on July 8, 2020, as a SPAC. Second Amended Complaint (Dkt. 85; “SAC
`
`¶ ___”) ¶ 56.
`
`Northern Star conducted its initial public offering (“IPO”) on November 13,
`
`2020, raising approximately $250 million in proceeds. SAC ¶ 58. Thereafter,
`
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`Northern Star sold additional ownership units pursuant to the IPO underwriters’
`
`over-allotment option. Id.
`
`Matthew Meeker and Werdelin founded private company Barkbox, Inc.
`
`(“Legacy Bark”) in October 2011. SAC ¶ 42. Legacy BARK was a private company
`
`offering products to benefit the health and wellbeing of dogs across categories
`
`including play, food, health, and home. Id.
`
`On December 16, 2020, Northern Star and Legacy Bark executed the
`
`Agreement and Plan of Reorganization (the “Merger Agreement”), under which the
`
`Company was to acquire Legacy BARK and became BARK, Inc. (“New BARK”;
`
`the de-SPAC merger, the “Merger”). SAC ¶¶ 1, 102.
`
`II. The Merger Closes.
`
`On May 12, 2021, Northern Star filed Form S-4 with the Securities Exchange
`
`Commission (the “Proxy”), providing notice for the May 28, 2021 stockholder
`
`meeting and disclosures about the Merger.
`
`The detailed Background of the Merger section of the Proxy disclosed, among
`
`other things, Northern Star’s process for evaluating potential transactions and the
`
`reasons to support the Merger. Proxy at 89-96.
`
`Northern Star’s common stockholders had the opportunity to vote for or
`
`against the Merger at a special meeting set for May 28, 2021. SAC ¶ 107. Certain
`
`of those stockholders also held redemption rights, which allowed them to elect to
`
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`

`

`receive $10 per share from assets held in a trust rather than to remain as stockholders
`
`after the Merger. SAC ¶ 58; Proxy at F-7 (“[E]ach public stockholder may elect to
`
`redeem their Public Shares irrespective of whether they vote for or against the
`
`proposed transaction.”).
`
`Prior to Northern Star’s redemption of any shares, there were 25,435,000
`
`public shares of Class A Northern Star common stock outstanding.2 Proxy at 21.
`
`Northern Star stockholders submitted 2,728,989 public shares for redemption. SAC
`
`¶ 108. 18,812,152 shares were voted in favor of the Merger. Northern Star May 28,
`
`2021, Form 8-K at 2.
`
`On June 1, 2021, the Merger closed. SAC ¶ 108.
`
`III. New BARK Stock Traded above $10 For Weeks.
`
`The Company’s stock price immediately after closing was $11.15 per share.
`
`SAC ¶ 109. 1.7 million shares were traded on that day alone. Ex. A at 2.3
`
`On June 9, 2021, New BARK’s stock rose to $12, and 11 million shares were
`
`traded that day. Id.
`
`2 At the time, there were 6,358,750 shares of Northern Star’s Class B common stock
`outstanding. Proxy at 21. These were “founder shares” subject to a one-year lockup. SAC
`¶ 20.
`
`3 Citations in the form of “Ex. [letter]” refer to the exhibits to the Transmittal
`Affidavit of Brendan W. Clark, Esq., in support of this Answering Brief.
`5
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`New BARK’s stock price stayed above $10 through July 2, 2021. Id. In total,
`
`approximately 66 million shares of New BARK’s stock were traded above $10
`
`between the Merger and July 2, 2021. See id.
`
`IV.
`
`Plaintiffs’ Second Amended Complaint.
`
`On March 20, 2024, Plaintiffs filed a complaint. Dkt. 1. They filed an
`
`amended complaint on September 30, 2024. Dkt. 49. On February 21, 2025,
`
`Plaintiffs filed the Second Amended Complaint. Dkt. 85. Certain defendants
`
`answered and others have moved to dismiss. Dkts. 92, 93.
`
`Plaintiffs are pursuing a class action disclosure claim for breach of fiduciary
`
`duty under the theory espoused in In re MultiPlan Corp. Stockholders Litigation,
`
`268 A.3d 784, 805 (Del. Ch. 2022). The claim is premised on the allegation that
`
`Defendants “breached their fiduciary duties of loyalty and candor to Plaintiffs and
`
`the Class … by failing to adequately inform public stockholders of material
`
`information necessary to allow them to make an informed redemption decision.”
`
`SAC ¶¶ 197, 204. Plaintiffs allege, “[a]s a result, Plaintiffs and Class members were
`
`harmed due to the impairment of their redemption rights prior to the Merger.” SAC
`
`¶¶ 198, 205.
`
`Plaintiffs seek to maintain this action as a class action and seek compensatory
`
`damages on behalf of themselves and the purported class. Mot. at 1; Mot. Proposed
`
`Order at 4; SAC Prayer for Relief at ¶¶ A, G.
`
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`

`Plaintiffs have proposed a class (the “Proposed Class Definition”) of:
`
`All Persons who held shares of Northern Star Class A common stock
`as of the redemption deadline on May 26, 2021, either of record or
`beneficially, and who were entitled to, but did not, redeem all of their
`shares,
`including
`their heirs, successors-in-interest, successors,
`transferees, and assigns. Excluded from the Class are: (i) Defendants,
`as well as the members of their immediate families, and any entity in
`which any of them has a controlling interest, and the legal
`representatives, heirs, successors, or assignees of any such excluded
`party; and (ii) any trusts, estates, entities, or accounts that held shares
`of Northern Star Class A or Class B common stock for the benefit of
`any of the foregoing.
`
`Mot. at 1. Plaintiffs sought to be appointed as class representative of the proposed
`
`class and to have Grant & Eisenhofer P.A., Robbins Geller Rudman & Dowd LLP,
`
`and Robbins LLP, appointed as Co-Lead Counsel for the Proposed Class. Mot.
`
`Proposed Order at 4.
`
`Defendants oppose class certification.
`
`ARGUMENT
`A plaintiff seeking to bring a class action must satisfy the requirements of
`
`Court of Chancery Rule 23. Leon N. Weiner & Assocs., Inc. v. Krapf, 584 A.2d
`
`1220, 1224 (Del. 1991); Dieter v. Prime Comput., Inc., 681 A.2d 1068, 1071 (Del.
`
`Ch. 1996). The burden of establishing an appropriate class falls on the party seeking
`
`certification, not the defendant or the Court. See Dieter, 681 A.2d at 1071.
`
`RLF1 32704553v.1
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`

`I. A CLASS SEEKING DAMAGES CANNOT BE CERTIFIED.
`
`Class certification requires a “rigorous analysis,” and “an explicit
`
`determination on the record of the propriety of the class action according to the
`
`requisites of Rule 23(a) and (b).” In re Celera Corp. S’holder Litig., 59 A.3d 418,
`
`432 (Del. 2012) (emphasis added). Plaintiffs contend that the Proposed Class
`
`Definition satisfies all the requirements under Rule 23(a) and seek certification of a
`
`proposed class under Rules 23(b)(1) and 23(b)(2). Opening Brief (“Op. Br.”) at 14.
`
`For the reasons stated below, individual issues of reliance, causation, and damages
`
`preclude a finding that Plaintiffs satisfy the requirements under Rule 23(a), 23(b)(1)
`
`or 23(b)(2).4
`
`Under Rule 23(a), Plaintiffs must show that: (1) the putative class is so
`
`numerous that joinder of all of the members is impracticable; (2) there are questions
`
`of fact or law common to the members of the class; (3) the claims or defenses of the
`
`representatives are typical of the claims or defenses of class members; and (4) the
`
`representative parties will fairly and adequately protect the interests of the class. Ct.
`
`Ch. R. 23(a). The Delaware Supreme Court has held that class certification should
`
`be denied if “significant factual diversity” exists among class members that would
`
`need to be resolved in order to decide liability or damages. In re Phila. Stock Exch.,
`
`Inc., 945 A.2d 1123, 1141 (Del. 2008).
`
`4 Plaintiffs do not seek to certify a class under Rule 23(b)(3).
`8
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`In addition to satisfying Rule 23(a), the proposed class must fall under one of
`
`the three listed categories in Rule 23(b). A class action may be maintained if Rule
`
`23(a) is satisfied and if:
`
`(1) prosecuting separate actions by or against individual class
`members would create a risk of:
`(A) inconsistent or varying adjudications with respect to
`individual class members that would establish incompatible
`standards of conduct for the party opposing the class; or
`(B) adjudications with respect to individual class members
`that, as a practical matter, would be dispositive of the interests of
`the other members not parties to the individual adjudications or
`would substantially impair or impede their ability to protect their
`interests; [or]
`(2) the party opposing the class has acted or refused to act on
`grounds that apply generally to the class, so that final injunctive relief
`or corresponding declaratory relief is appropriate with respect to the
`class as a whole.
`Ct. Ch. R. 23(b).
`
`Class certification under subsection (b)(1) deals with the risks inherent in
`
`separate adjudications. A class certification under Rule 23(b)(1) is further divided
`
`into two different types, but Plaintiffs failed to address them separately. See Op. Br.
`
`at 15-16. Subsection (b)(1)(A) focuses on the risks multiple adjudications may pose
`
`to the party opposing the class. Noerr v. Greenwood, 2002 WL 31720734, at *6
`
`(Del. Ch. Nov. 22, 2002). To satisfy Rule 23(b)(1)(A), there must be a concern that
`
`“inconsistent standards for future conduct are [] created” if a class is not certified
`
`under this subsection. Dieter, 681 A.2d at 1075. Further, “there must be a total
`9
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`

`absence of individual issues.” Joseph v. Shell Oil Co., 1985 WL 21125, at *4 (Del.
`
`Ch. Feb. 8, 1985). In an action seeking compensatory damages for a purported class,
`
`“inconsistent standards for future conduct are not created [when] a defendant might
`
`be found liable to some plaintiffs and not to others.” Dieter, 681 A.2d at 1075.
`
`Therefore, “class certification [is] inappropriate under Rule 23(b)(1) where a
`
`plaintiff s[eeks] solely compensatory damages.” Id.; see also In re Dennis
`
`Greenman Sec. Litig., 829 F.2d 1539, 1545 (11th Cir. 1987) (“Many courts
`
`confronting the issue have held that Rule 23(b)(1)(A) does not apply to actions
`
`seeking compensatory damages.”).
`
`Subsection (b)(1)(B) focuses on the members of the putative class and seeks
`
`to protect them against situations in which the proposed class members might be
`
`prejudiced by separate litigations. See Ct. Ch. R. 23(b)(1)(B); Noerr, 2002 WL
`
`31720734, at *6. “One instance, then, in which subsection (b)(1)(B) certification
`
`would likely apply is where the claims of individual class members seek monetary
`
`relief from a limited fund.” 2 DONALD J. WOLFE, JR. & MICHAEL A. PITTENGER,
`
`CORPORATE & COMMERCIAL PRACTICE IN THE DELAWARE COURT OF CHANCERY §
`
`12.02 (2d ed. 2025). A “limited fund” case is an action in which damages awarded
`
`to the earlier plaintiffs might exhaust the limited fund and, as a practical matter,
`
`prejudice the later plaintiffs. See 5 JAMES WM. MOORE, MOORE’S FEDERAL
`
`PRACTICE - CIVIL § 23.42 (3d ed. 2025). Inability to show the fund is limited is
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`grounds to deny class certification under this subsection. See Zimmerman v. Bell,
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`800 F.2d 386, 389 (4th Cir. 1986); Fogie v. Rent-A-Center, Inc., 867 F. Supp. 1398,
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`1403 (D. Minn. 1993) (plaintiffs failed to produce evidence that limited fund could
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`not satisfy multiple judgments).
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`A class action may be maintained as a Rule 23(b)(2) class action where the
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`relief sought is primarily class-wide injunctive or declaratory relief. Nottingham
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`P’rs v. Dana, 564 A.2d 1089, 1095 (Del. 1989). Seeking a class certification under
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`Rule 23(b)(2) when damages were the primary relief sought is grounds to deny a
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`motion for class certification. Dieter, 681 A.2d at 1073-76 (because the plaintiffs
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`primarily sought damages, the Court declined to certify a class under Rule 23(b)(1)
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`or 23(b)(2)); see also In re Celera, 59 A.3d at 433 (class may be evaluated as
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`23(b)(2) class only “so long as the claim for equitable relief predominates” (cleaned
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`up)).
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`When the primary remedy sought is damages, as is the case here, the relevant
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`standard is set forth in Rule 23(b)(3). Nottingham, 564 A.2d at 1095; Dieter, 681
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`A.2d at 1076 (“Subparagraph (b)(3) is the ‘damage class action’ because courts have
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`traditionally applied subdivision (b)(3) to class actions seeking relief in the form of
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`damages.”). Despite Rule 23(b)(3) being the most applicable standard to this case,
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`Plaintiffs do not attempt to seek certification under this rule.5
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`In sum, a class seeking compensatory damages generally cannot be certified
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`under Rule 23(b)(1)(A), and Plaintiffs cannot show otherwise. Plaintiffs do not
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`argue this is a limited fund case or any prejudice to purported class members that
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`implicates Rule 23(b)(1)(B). Plaintiffs do not seek equitable relief rendering Rule
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`23(b)(2) unavailable. And, Plaintiff has not moved for certification of a class under
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`Rule 23(b)(3). Thus, Plaintiffs’ Motion should be denied.
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`II. A CLASS SEEKING COMPENSATORY DAMAGES FOR A DUTY OF
`DISCLOSURE CLAIM CANNOT BE CERTIFIED UNDER ANY RULE.
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`Individual issues of reliance, causation, and damages prevent certification of
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`a class under any rule.
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`A.
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`Plaintiffs Must Prove Reliance, Causation and Damages to Recover
`Compensatory Damages.
`Plaintiffs assert that a disclosure violation prevented them from making an
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`informed decision on their redemption rights. SAC ¶¶ 197, 204, 210; see MultiPlan,
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`268 A.3d at 803; Laidlaw v. GigAcquisitions2, LLC, 2023 WL 2292488, at *6 (Del.
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`Ch. Mar. 1, 2023) (“The plaintiff brings duty of loyalty claims ‘inextricably
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`intertwined’ with allegations of misleading disclosures.”); In re Lordstown Motors
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`5 As explained infra in Section II, a motion under Rule 23(b)(3) would have failed
`regardless.
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`Corp. S’holders Litig., 2022 WL 678597, at *5 (Del. Ch. Mar. 7, 2022) (“The claims
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`advanced ‘invoke[ ] both the duty of loyalty and disclosure duties implicating
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`director loyalty.’”).
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`In Dohmen v. Goodman, 234 A.3d 1161 (Del. 2020), after extensive analysis
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`of its prior precedent, the Delaware Supreme Court clarified that different standards
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`of proof apply to such disclosure claims depending on the relief sought. Id. at 1174.
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`As the Supreme Court held, “if there was any doubt after Loudon, our J.P. Morgan
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`Chase decision limited the per se damages rule to nominal damages, and only when
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`the breach of the duty of disclosure ‘caused impairment to the economic or voting
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`rights of stockholders.’” Id. Stated differently, “to recover compensatory damages,
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`an investor who proves a breach of the fiduciary duty of disclosure must prove
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`reliance, causation, and damages.” Id. at 1175.
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`Plaintiffs seek compensatory relief. SAC ¶¶ 200, 206, 213, 224, Prayer for
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`Relief at G. Under Dohmen, such claims require Plaintiffs to prove reliance,
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`causation, and damages.
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`Reliance and Causation Cannot Be Proven on a Class-Wide Basis.
`1.
`Whether any stockholder relied on any disclosure and whether that caused any
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`injury related to the redemption is an individualized inquiry that cannot be
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`undertaken on a class-wide basis.
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`In Dubroff v. Wren Holdings, LLC, the Court of Chancery held that “[b]ecause
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`the elements of reliance, causation, and damages will need to be individually
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`established, it cannot be said that the relevant questions of law or fact are commonly
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`shared by the proposed Class … the commonality requirement has not been met”
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`under Rule 23(a). 2010 WL 3294219, at *6 (Del. Ch. Aug. 20, 2010).6 Although
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`failure to satisfy Rule 23(a) is an independent basis to deny a motion for class
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`certification, the Court in Dubroff proceeded with the Rule 23(b) analysis and found
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`Rule 23(b) was not satisfied. Id.
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`Plaintiffs in Dubroff sought class certification under Rule 23(b)(1)(A) or Rule
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`23(b)(3). Id. at *4. As the Court held, “[t]o qualify under Rule 23(b)(1)(A), ‘there
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`must be a total absence of individual issues.’” Id. at *8. “Because [the individual
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`issues of reliance, causation, and actual damages] will need to be established for
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`Plaintiffs to succeed on their disclosure claim, class certification is unavailable under
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`6 Plaintiffs cite In re Straight Path Communications Inc. Consolidated Stockholder
`Litigation, 2022 WL 2236192, at *4 (Del. Ch. June 14, 2022) and In re Lawson Software,
`Inc. Stockholder Litigation, 2011 WL 2185613, at *2 (Del. Ch. May 27, 20211) to support
`their commonality argument. Op. Br. at 10. Lawson is distinguishable because the
`stockholders in that case sought primarily equitable relief pre-closing. See C.A. No. 6443-
`VCN, Dkt. 28, Consolidated Plaintiffs’ Brief in Support of Their Motion for Class
`Certification at 6 (“The relief that is sought is primarily equitable in nature.”). In Straight
`Path, the primary challenge to the commonality related to what stock in another entity each
`putative class member held, which the Court found was not relevant. 2022 WL 2236192,
`at *5. Here, by contrast, whether each stockholder was damaged at all by any purported
`disclosure violation and to what extent are individual questions not common to the
`purported class.
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`Rule 23(b)(1)(A).” Id. The Court likewise rejected class certification under Rule
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`23(b)(3) because it was unclear that common questions of law and fact predominated
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`over the individual questions of reliance, causation, and damages. Id. The Court
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`further held that complications in establishing these three elements on an individual
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`basis defeated the predominance requirement. Id.
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`In Gaffin v. Teledyne, Inc., the Delaware Supreme Court held that once the
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`action became an action solely abou