1 IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE LAUREN GLASSMAN, Plaintiff, vs. CROSSFIT, INC.

, a Delaware corporation, and GREG GLASSMAN, Defendants. - - Chancery Court Chambers Court of Chancery Courthouse 34 The Circle Georgetown, Delaware Wednesday, September 5, 2012 10:00 a.m. - - BEFORE: HON. SAM GLASSCOCK, III, Vice Chancellor. - - : : : : : : : : : : :

Civil Action No. 7717-VCG

TELEPHONIC ORAL ARGUMENT AND THE COURT'S RULING

-----------------------------------------------------CHANCERY COURT REPORTERS 34 The Circle Georgetown, Delaware 19947 (302) 856-5645

2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 CHANCERY COURT REPORTERS - - APPEARANCES: (via telephone)

PHILIP TRAINER, JR., ESQ. Ashby & Geddes, P.A. -andGRACE Y. PARK, ESQ. of the California Bar Bergeson, LLP for Plaintiff RAYMOND J. DICAMILLO, ESQ. KEVIN M. GALLAGHER, ESQ. Richards, Layton & Finger, P.A. -andBLAIR G. CONNELLY, ESQ. KYLE L. WALLACE, ESQ. of the New York Bar Latham & Watkins LLP for Defendants

3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Mr. DiCamillo. Honor. Honor. THE COURT: This is Sam Glasscock. please? MR. TRAINER: Good morning, Your Good morning, counsel.

Who do I have on the line,

Lee Trainer from Ashby & Geddes for plaintiff, I also have Grace Park from

Lauren Glassman.

Bergeson, LLP on the line. THE COURT: All right. Welcome.

MR. DiCAMILLO:

Good morning, Your Also with

Ray DiCamillo for the defendants.

me on the line from my office is Kevin Gallagher. Also on the line are Blair Connelly and Kyle Wallace from Latham & Watkins. THE COURT: Counsel. All right. Welcome.

I don't know if you have

discussed how you want to present the motions that are outstanding. If you have, I am happy to hear you in Otherwise, I guess, I

any order you've decided on.

would prefer to start with the temporary restraining order request. MR. DiCAMILLO: Your Honor, this is

We have not discussed how to proceed.

We are happy to go in any fashion that Your Honor wishes. With respect to the motion for temporary CHANCERY COURT REPORTERS

4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 you, Your Honor. May it please the Court, this is Blair Connelly for the defendants, and our motion seeks to preserve the status quo pending a hearing on our motion for preliminary injunction. And the basis for loud and clear. MR. CONNELLY: Okay. Terrific. Thank Your Honor. restraining order, Mr. Connelly is going to argue that on behalf of the defendants, and I will handle the motion to compel and motion to quash. THE COURT: All right. Well, then,

Mr. Connelly, would you like to proceed? MR. CONNELLY: Thank you very much I ask because I

Can the Court hear me?

am talking on a hotel conference room phone. THE COURT: You are coming through

our motion is that Miss Glassman, who is a director of CrossFit, provided confidential company information to a third party for her personal financial benefit, without even telling the company or its board of directors, let alone getting permission. And on the first element we think we have easily shown a colorable claim. I know the other We

side is arguing there is a higher standard. CHANCERY COURT REPORTERS

5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 disagree with them, but candidly, we don't think it really matters because the legal principles that are at issue here are so clear and so broad. In particular, I point the Court to just last year the Supreme Court reaffirmed the principle that it is inequitable to permit a fiduciary to profit from using confidential company information. That's from the Kahn v. KKR case, 23 A.3d at 838. that principle holds even if the corporation can't show that it has actually suffered any harm at all because it's based on the rule that the Court called inveterate and unflinching in its rigidity. It's a And

rule that's based on public policy, and here I am quoting from Guth v. Loft that extinguishes all possibility of profit flowing from a breach of the confidence imposed by the fiduciary relationship. THE COURT: Why wouldn't the remedy be

disgorgement of profits rather than preventing the sale of the assets? MR. CONNELLY: Well because I think

that the principle that equity will not allow the director to profit from this -- I think as in Hollinger militates -- I think the cases that talks about disgorgement are cases where, frankly, it came CHANCERY COURT REPORTERS

6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 to late to do anything about it. But we think that if

equity doesn't allow it, the proper remedy is if it can be prevented at the front end, it ought to be prevented at the front end rather than trying to unscramble the egg afterwards. That's what happened in Hollinger. Hollinger, they were able to prevent it at the front end and Chancellor Strine -- then-Vice Chancellor Strine, I think, did exactly that. And here, I know In

there were other issues going on, and Hollinger was certainly a case rich with misconduct, but two of the breaches that were cited by Vice Chancellor Strine are certainly true here. Confidential company information

was used for the personal financial benefit of a director, and there was also importantly a breach of the duty of candor because the director didn't tell anybody that this was going on. company. He didn't tell the He didn't tell And that's

He didn't tell the board.

the shareholders that he was doing this. exactly what's going on here.

And we think that

rather than allowing the transaction to go forward, which I will talk about later, will impose some significant harms on the company, the proper remedy would be to prevent it from going forward in the first CHANCERY COURT REPORTERS

7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 general. MR. CONNELLY: As a general matter -A correct. THE COURT: I am just talking about in instance. THE COURT: A shareholder in this

situation has the right to financial information to provide for a due diligence review upon the potential sale of her shares, correct? MR. CONNELLY: Has the right to do

that if the court -- you mean if the court in Arizona gives her the right to alienate her interests? THE COURT: Yes. Obviously, that has

to happen, or there is no issue. MR. CONNELLY: That's correct. That's

and they cite the Schoon case for this principle.

shareholder can make a 220 demand and say that I want to get this information because I want to try to sell my shares. That's -- they rely on the Schoon case for But there is a couple of very

that principle.

important distinctions between that case and this case. First, in Schoon, the shareholder actually said in his 220 demand this is what I am CHANCERY COURT REPORTERS

8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 looking -- this is why I want this information. is my proper purpose. THE COURT: second, Mr. Connelly. My question is: Let me stop you for just a This

I understand those differences.

What information was released to a

third party that would not have been released if there had been a proper disclosure and request to the corporation for those documents that the stockholder was entitled to provide to a potential purchaser? MR. CONNELLY: I think our point here,

Your Honor, is -- by the way, it may well be that at least some of that information, if a proper process had been gone through, might have ultimately been disclosed, but it would have been done pursuant to a process where the company would have had an opportunity to protect its interests. And you know,

if you look at the information that went across the transom, we are talking about financial statements, confidential contracts with commercial partners, payroll information, basically the whole kit and caboodle of the company's internal documents. Now, if a proper process had happened, and if she had gone to the company and said, "Hey, I want to do this," then there would have been a back CHANCERY COURT REPORTERS

9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 asking you. and forth. And at a minimum, the company would have

had an opportunity to protect itself in some manner by insisting on appropriate confidentiality restrictions. That didn't happen here. this. THE COURT: So your real contention is The company got ambushed by

not with the information being provided but the lack of the confidentiality order? MR. CONNELLY: I think it's both. If an I

think it's hard to separate the two.

appropriate process had been gone through, you know, and she had gone and actually told the company this is what I am doing here, then there could have been a dialogue about it. And it may well be that some of

that confidential information would not have gone across the transom because there have would been a back and forth and an agreement or perhaps even a litigation about whether that was actually needed. THE COURT: Well, that's what I am

What information could the company have

legally prevented her from providing to a third party potential buyer that was actually disclosed here? MR. CONNELLY: Well, I think

without -- candidly, I haven't thought about that CHANCERY COURT REPORTERS

10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 point because we have been focused on the broader one. But I think payroll information would have arguably been one that I don't think they would have needed, individual names of people and what their individual salaries were, confidential contracts with third parties that by their terms are supposed to be kept confidential from other people. If the buyer in this

case, you know, has relationships with companies who are direct competitors with some of our commercial partners, we would not have wanted that information to be shared with them. examples. There are probably other

Those are the only ones I can come up with

off the top of my head. THE COURT: All right. How do you

respond to the laches argument that the plaintiffs made? MR. CONNELLY: I have to say at the

front end I find it somewhat ironic, given their own delays, they're making this argument. But one point I

think I should make for the Court's benefit is they note in their papers that, you know, well you should have known at this point and you should have known at that point, but what they don't tell you in their papers is we have been asking them about Anthos. CHANCERY COURT REPORTERS We

11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 want to know exactly what the information is that you sent to Anthos. We asked it repeatedly, and it wasn't

until August 10 that counsel for Miss Glassman actually sent us a disc containing the information that was actually sent over. on a Friday by FedEx. It was sent, you know,

So we didn't actually get it

until a few days later and have an opportunity to review it. So I think that's the sort of time frame

we ought to be measuring it by. But more fundamentally, Your Honor, I think the main point is she hasn't shown any prejudice that she's suffered here in terms of how she's been harmed in her ability to defend certainly our motion for preliminary injunction but even this motion. The

only prejudice that is articulated in her papers is that she had to respond to this over a period of four days. You know, we found that hard to swallow just

because we had to respond to her TRO motion in 24 hours. So we don't think that's a sufficient ground

of prejudice for a laches argument in this context, particularly when we are talking about here is a director secretly disclosing confidential company information without giving the company an opportunity to protect itself. We think the duty of loyalty there

CHANCERY COURT REPORTERS

12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Mr. Connelly? MR. CONNELLY: Thank you very much. is a very important consideration and the duty of candor is as well. THE COURT: All right. Anything else,

What I wanted to respond to here, I think as in Hollinger, the appropriate remedy is to restrain the transaction, but I also want to talk about what their response is because they're not denying that the information is confidential and they're not denying that she did this secretly. But

the argument is that because she made a 220 demand in both her director capacity and her shareholder capacity and because the company didn't make her sign a confidentiality agreement because, you know, they for some reason thought that they were actually entitled to rely upon her loyalty and her candor, that she then had carte blanche to do whatever she wanted to do with these documents. And we just don't think

it's the law that a director can play gotcha with the corporation to which she owes fiduciary duties. mean, a director always has a duty of loyalty and always has a duty of candor, and at a minimum, if she wants to do that, she at least has to tell the company CHANCERY COURT REPORTERS I

13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 so that the company can assert its own rights. We

don't see how her fiduciary duties as a director can get past that. THE COURT: What would the ultimate Is it

result be of entering a restraining order here? your position that she can never consummate a transaction with Anthos? that you are seeking? MR. CONNELLY:

What is the ultimate remedy

Well, obviously, at

this point, all we are seeking is that the status quo be preserved pending our preliminary injunction motion and the ultimate remedy, if there is a final award, we would ask for her to be restrained from selling it to Anthos, and of course, if the court -- if the Arizona court gives her the right to sell her interests, she would be free to sell it to anybody else at that point. But in our view, the fact that, you know,

there is an irreparable taint here by virtue of her conduct that's an issue we think for another day. could, of course, sell it to anybody else. sell it to her husband. She

She could

You know, at this point, you

know, the harm to be considered at this point, we think, is merely the harm of being temporarily restrained during the brief interim period until our CHANCERY COURT REPORTERS

14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 preliminary injunction motion can be heard. THE COURT: Well her harm -- and I am

sure I will hear argument to this effect -- is that she may lose the deal. I am struggling a little bit

to see -- I understand the breach of fiduciary duty argument, and I understand that there is some documents that have been provided that may not have been provided if a proper procedure had been followed in your view, but I am struggling a little bit to see what the harm is to the corporation if this deal is consummated. And once again, I guess my question is:

Why isn't the remedy to let the deal go forward and simply -- I am not even clear about what benefit she has received from this disclosure because she had the right to, if she had gone through a proper procedure, to disclose sufficient financials that the deal could have been consummated. So I am just struggling a

little bit to see what the ill gotten gain is here. MR. CONNELLY: Well, I think that the

answer to two points you raise is one, on the harm, again, our point is that the harm to the company -and the cases, the Brophy line of cases and Kahn, all say this, is that that's the harm. The harm is in the

mere fact that the fiduciary has done this and cannot CHANCERY COURT REPORTERS

15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 position. THE COURT: All right. Our position is on the that's right. be allowed to profit from it. We have also

articulated some other harms that will happen if this particular deal goes through, because among other things the company's tax status could be changed, which would impose additional administrative burdens on the company and certainly impose financial consequences on Mr. Glassman. THE COURT: That would happen no

matter to whom these shares were sold unless it was sold to Mr. Glassman, correct? MR. CONNELLY: No, I don't think

I think if it was sold to another

individual investor I don't think that's true. Certainly, there are other investors that would also happen with. THE COURT: All right. You are not

arguing that -- well, maybe you are -- is it your position that as a director she cannot sell her shares to any individual if it would have an adverse tax impact on the corporation? MR. CONNELLY: That's not our

MR. CONNELLY:

CHANCERY COURT REPORTERS

16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 harm point what we are saying is we think that the harm -- that under Kahn the fact of the breach is itself sufficient to satisfy the Kahn prong, but we've also pointed out in this particular deal because of Anthos and because of what they're planning to do with the company, you know, the affidavit of Mr. Saran explains how this is already causing problems with important business initiatives, relationships with commercial partners, and relationships with affiliates because this is really going to fundamentally alter the entire -- how the company is perceived and how it does business and what it's model is. THE COURT: But that's not a harm that

arises from the provision -- the wrongful provision of documents. That's a harm that arises from a

50 percent interest being sold to a third party who may disagree with current management's ideas of how to run the corporation, correct? MR. CONNELLY: separate the two. I think it's hard to

I see your point, and I think that But I think it's

there is a valid point there.

frankly hard to separate the harm of the breach and, you know, from the consequences of this sale. Candidly, we don't think that a director should get CHANCERY COURT REPORTERS

17 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 address that. the benefit of the doubt from her own breach of fiduciary duty of saying, "Gotcha. happened anyway." It would have You know,

We can't know that.

because the company, which was entitled to loyalty and which was entitled to candor, never had the opportunity to go through that. We don't know if

Anthos would have done this deal if they hadn't got all of those documents. We just don't know. And we

don't think that the company -- that is really a speculation. We don't think she's entitled to the

benefit of that doubt. THE COURT: Tell me what's before the

Family Court of Arizona today. MR. CONNELLY: Sure. And I wanted to

That was another point they raised that There is a motion before

we think is not well taken.

the Arizona Family Court, which is Miss Glassman's motion basically to lift the injunction and allow her to proceed with this sale. And we are certainly not

asking the Arizona Family Court to decide the Delaware fiduciary duty issues that we placed before Your Honor. The company has moved to intervene in that proceeding so that it can assert its own CHANCERY COURT REPORTERS

18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 interests and speak for itself on the harm that would befall the company in that proceeding if the judge goes Miss Glassman's way. But, you know, we are

certainly asking this Court, and not the Arizona Family Court, to rule on the Delaware fiduciary duty issues. The company has told the Court there that

there are fiduciary duty issues here, but at this point, the company is just being asked to intervene. I also note that on the same day that Miss Glassman said, you know, in these proceedings that we should be required to go litigate these issues before the Arizona court, we got an e-mail from Miss Glassman's counsel in Arizona saying she intends to object to the company's participating in those proceedings or, in her words, to have any voice whatsoever in those proceedings. So we don't think

that she can have it both ways, but just to be clear, we are certainly not trying to get two bites at the apple here. We want this Court to rule on the

Delaware fiduciary duty issues. THE COURT: Right. But if you are

allowed to intervene, aren't you arguing that fiduciary duty issues should influence the Court in not lifting its stay of sale of assets? CHANCERY COURT REPORTERS

19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 MR. CONNELLY: I think that the

purpose of intervening in the Arizona court -- I am not counsel in that action so I can only speak to what I know, but the purpose of intervening there is so that the company can show the Court how the company as a separate entity would be harmed if this transaction went through. And the papers certainly informed the

Court that there are fiduciary duty claims existing here, but that's -- you know, our position is the Arizona court is going to decide whether, as a matter of Arizona family law, Arizona divorce law, and Arizona community property law, she can be permitted to go forward with this sale. Our position is, even

if she is given that right by the Arizona court, there are separate Delaware fiduciary duty law reasons why the sale should not go through as a matter of Delaware corporate law. THE COURT: that position, Mr. Connelly. All right. I understand

Do you know or have an

expectation as to when the Arizona court will decide the issue of whether Mrs. Glassman can alienate her stock? Is that something that you expect today, or is

that something that will take further litigation, or do you know? CHANCERY COURT REPORTERS

20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 around. I did want to note -- I wanted to respond to this again on the Schoon case, just to CHANCERY COURT REPORTERS Honor. MR. CONNELLY: I don't know, Your I know And

I am giving you my best information.

that the hearing is at 2:00 today Arizona time.

that we don't know if the Court is going to rule right at the hearing, if the Court is going to take it under advisement, and there is also, in complete candor, a chance that the entire hearing may be kicked, because if Miss Glassman is objecting to whether the company can intervene, to allow that issue to be decided. don't know any better than that. THE COURT: All right. The status quo We

in the Arizona suit is that these shares of stock cannot be sold, correct? MR. CONNELLY: That is correct. They

are owned 100 percent jointly by Mr. and Mrs. Glassman. They are community property. Neither

of them can sell without either the other's consent or permission from the Court. THE COURT: All right. Mr. Connelly,

you have been very patient with me. MR. CONNELLY:

Anything else?

I sort of got jumped

21 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 overarching. point out that not only in that case did the shareholder actually tell the company why he wanted the information, that shareholder wasn't a director. We would point the Court to Holdgreiwe v. Nostalgia Networks Incorporated. That's a case where a director

made a 225 demand, and the company wanted to make the director sign a confidentiality agreement as a condition of getting the documents. And Chancellor

Allen ruled that wasn't necessary because, as a director, he was already under an obligation to maintain the confidences of the corporation. THE COURT: All right. And that was

MR. CONNELLY:

That's true here too. THE COURT: Thank you. And I do have one more As I

MR. CONNELLY:

point I wanted to make, which is about the NDA.

said before, we don't think telling us after the fact we have an NDA is sufficient. It doesn't solve the

harm, but in addition, as we said in the papers, the company doesn't have the right to enforce the NDA. If

you look at the NDA, which is Exhibit 2 to our motion, it actually expressly permits Anthos to share the confidential information with affiliates, with CHANCERY COURT REPORTERS

22 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 is: consultants, and with advisors as long as they sign an equally strong confidentiality agreement. doesn't protect the company at all. That

If one of their

affiliates is a competitor and they get our confidential information, it doesn't help us that they then keep it a secret. They have it at that point.

It doesn't give the company any protection. THE COURT: I am struck once again by

the disconnect between the harm that the breach of duty allegedly has caused and the remedy. Because

this information, which should have remained confidential in your view, is now in the hands of Anthos, liable to be circulated as you said to advisors. I am not sure how restricting the sale

remedies that breach. MR. CONNELLY: I think the question There shouldn't be

How else can it be remedied?

a right without a remedy.

And at this point, you

know, we think that under the doctrines that were articulated by the Supreme Court in Kahn and the strength of this policy of preventing directors from doing this, we think that that militates in favor of the remedy of taking away the transaction. It should

not have happened, and they ought to be required to go CHANCERY COURT REPORTERS

23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 from you. MR. TRAINER: Thank you, Your Honor. permission. THE COURT: I would be happy to hear Mr. Connelly? MR. CONNELLY: No, Your Honor. Thank back to square one and start over. THE COURT: All right. Anything else,

you very much for your patience with me. THE COURT: I appreciate it.

Mr. Trainer, who is going to argue the TRO motion from your side? MR. TRAINER: I am, with Your Honor's

First off to address Your Honor's question about Arizona, it's my understanding that the matter is ripe for decision so justice in this court. The Arizona judge could rule from the bench, could take it under advisement. possibilities. There are various

Obviously, no one knows what he will

do, but that is at 2:00 this afternoon. THE COURT: MR. TRAINER: Okay. Also in the Arizona

proceeding, Your Honor, as we mentioned in our papers, they filed the very same affidavits, Mr. Saran and CHANCERY COURT REPORTERS

24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Mr. Smith, in support of their motion to intervene in Arizona. So it is -- the same issues are very much in

front of the Arizona court as are before Your Honor. And there's been no suggestion, nor I think could they, that the Arizona court cannot deal appropriately with the matters between Mr. and Mrs. Glassman. It's also, I think, sort of supremely ironic that they indicate that the company has a separate vested interest in what occurs in Arizona inasmuch as we suggested repeatedly to them that the company might have interests separate and apart from Mr. Glassman, and nonetheless, they are still represented by the same counsel. But we think that

Arizona can certainly handle everything that's been put before it both by Miss Glassman, Mr. Glassman and CrossFit. Your Honor asked about the laches, and I am not sure Mr. Connelly was able to articulate a particularly good response on that because we think it's egregious in this situation. They have known of

the sale by Miss Glassman to Anthos since July 20th. THE COURT: Before we move on,

Mr. Trainer -- I am sorry to not have stopped you sooner -- but before we move on, how do I know that CHANCERY COURT REPORTERS

25 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 the court in Arizona can handle these issues? I am

assuming, without knowing, that like most family courts, Arizona Family Court is a court of limited jurisdiction. Can it take into account the interests

of the corporation when the corporation is a hundred percent owned by the divorcing couple? Are you

representing to me that is within their statutory purview? MR. TRAINER: It's my understanding it

is, Your Honor, and certainly I think CrossFit feels that way, as much as they intervened with the same arguments or attempted to intervene with the same arguments here. THE COURT: Well, they're taking a But I am just trying

belt and suspenders approach.

to -- if you are representing to me that that is within their statutory purview, that's one thing. But

if your evidence for that is simply that CrossFit is trying to make the same arguments there that they are attempting to make here, that's not particularly persuasive. So I guess what I am asking you is: Have

you examined the statutes, and can you tell me that, or are you simply relying on what CrossFit has done? MR. TRAINER: Your Honor, I am relying

CHANCERY COURT REPORTERS

26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Honor. And I mentioned that they've known of the sale to Anthos since July 3rd, June 20th. think any of these dates are in dispute. I don't that's fine. MR. TRAINER: I definitely cannot on what the parties have argued in Arizona and what CrossFit has done, and it probably has exhausted my knowledge of Arizona civil procedures. THE COURT: You're ahead of me so

represent that I've looked at the statutes and this is within their purview. No one has seemed to raise

objection in the pleadings back and forth and the arguments that this is something that is outside of that court's jurisdiction. THE COURT: Fair enough. Now, you can

move to laches, if you would. MR. TRAINER: Okay. Thank you, Your

They have

known that Miss Glassman shared confidential information with Anthos since the 27th. They knew

since late July that Miss Glassman was petitioning the Arizona court to sell her 50 percent interest. They

have known since August 3rd that the Arizona court was hearing this today. And I think, Your Honor, in light

CHANCERY COURT REPORTERS

27 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 your argument. MR. TRAINER: Chancellor Allen warned reasons be? MR. TRAINER: Perhaps, Your Honor, the of that, the defendants have really manufactured their own emergency. I know Chancellor Strine is fond of saying that a party's untoward does not constitute his emergency, and I think that's the very situation here. They say we have suffered no prejudice. We said in

our papers that we have very limited time to respond to this. swallow. Mr. Connelly said he finds that hard to I should submit an affidavit from my wife

that Labor Day weekend was gone responding to this, but I think that does constitute prejudice. Also, the

fact that we are arguing this on the very morning of the hearing in Arizona. I think they had months to

address this and just for strategic reasons chose not to. THE COURT: What would those strategic

fact that, as everyone in Delaware knows, it is an easier road to hoe on success of the merits on a TRO than it is on a preliminary injunction. THE COURT: All right. I understand

CHANCERY COURT REPORTERS

28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 of this very danger that by waiting until the last minute, as I think manufacturing your own emergency, you come in on an easier standard, and that is why we suggest that we are looking at the likelihood of success on the merits that really a preliminary injunction standard should be applied here instead of the standard for temporary restraining order. And, Your Honor, on the merits, I really think the breach of fiduciary duty claim is a red herring. And Mr. Connelly described it as playing

gotcha with the company. I am not sure where that comes from because Miss Glassman's Section 220 demand was abundantly clear that it was being made as a director and a stockholder, and I think there might be some weight to Mr. Connelly's argument if she had just been utterly irresponsible with the documents she obtained through that demand. not. The simple fact is that she was

She disclosed a subset of those documents to

Anthos solely in connection with Anthos' interest in purchasing her stock. So she was acting as a

stockholder when she did that, and she had Anthos execute a non-disclosure agreement. So this is not as though she published CHANCERY COURT REPORTERS

29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 the confidential information of the company. I've

heard nothing indicated that Anthos has done anything untoward or irresponsible with the information she provided. She was simply, as a stockholder, working And as a director, she So I don't think

to monetize her investment.

acted responsibly in doing that.

there's been a breach of fiduciary duty. Delaware law has long drawn a distinction between a director who is also a stockholder that they certainly don't lose their rights as a stockholder when they're a director. that's why I say it's a red herring. certainly not Hollinger. Hollinger, as Mr. Connelly mentioned, was replete with wrongdoing. And the significant This is So

thing in Hollinger was that the opportunity that Mr. Black usurped from the company was a deal that the company was involved in. company was interested in. It was a deal that the Here, it's not a deal that The company is not It's

the company is interested in.

there to buy Miss Glassman's stock.

Mr. Glassman, and that overlies, not just this motion, Your Honor, but all three of them, the fact that Mr. Glassman is a competing bidder. CHANCERY COURT REPORTERS

30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 And so what we have here is not a breach of fiduciary duty. It's frustration being And as recently as

voiced by a disappointed bidder.

last week, Mr. Glassman was continuing to make proposals to purchase Miss Glassman's interests in CrossFit. So that's why I say the whole issue of the

plain breach of fiduciary duty is not that and, frankly, a red herring throughout these proceedings. And, Your Honor, in irreparable harm, the test, as the Court knows, is whether the irreparable injury is imminent. If the injury was the

disclosure of the confidential information, that happened two and a half months ago. So I don't think

there is any imminency with that, and if the injury is to sell to Anthos -- and Your Honor seemed to question the connection between the claimed wrongdoing and the claimed injury -- I have been mystified by that connection or claim connection as well. But if there

is a connection, it's compensable by money damages. So I don't think we have real irreparable injury here. The real claimed injury that Miss Glassman will sell her 50 percent stake interest, with which Mr. Glassman does not see eye to eye, is not irreparable injury. Mr. Connelly alluded to the affidavit CHANCERY COURT REPORTERS

31 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 of Mr. Saran, the company's general counsel, that no one knows what's going to happen as far as affiliates and whether they will stay loyal to CrossFit brand. That's not the basis for a TRO that no one is sure. Mr. Saran, to his credit, he says, "I don't know what is going to happen with the affiliates." So that's

not a basis for granting a temporary restraining order, and it's also certainly not a basis for preventing Miss Glassman from monetizing her investment in CrossFit. And the tax claims, similarly, its -I am not sure that's basis for saying you can sell your interest to an entity that is not an individual. I mean, if that was important to CrossFit, perhaps the stockholder agreement would have been appropriate. But again, it's, one, not a basis for granting the TRO sought, and two, if you actually look at the numbers, it doesn't seem to be that financially significant. So I think that is neither here nor there. Finally, on the balance of the hardships, Your Honor, if the sale is enjoined -- and Your Honor pointed this out -- that there is a chance that Miss Glassman could lose the opportunity presented by the Anthos offer. Conversely, as I just

CHANCERY COURT REPORTERS

32 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Honor. Anything else? MR. TRAINER: Thank you. THE COURT: All right. Thank you. Not from plaintiff, Your mentioned, denying the motion for temporary restraining order will not cause the irreparable harm. At worse, it will result in Anthos owning 50 percent of CrossFit, and while we understand that Mr. Glassman may not agree with that, it's not irreparable harm. THE COURT: Where is it in the record

that there is a reasonable potential that given a short-term temporary restraining order pending a preliminary injunction hearing this deal will be lost, or am I supposed to simply take that on faith because it could happen in any deal? MR. TRAINER: Your Honor, I am not

going to say take it on faith, but I don't think the agreement representing that is in the record. are concerned -- there is a hard-stop date of December 31st on the offer. I can represent that to But we

the Court, but I think what you are faced with is the risk that has been current in any deal of this type. THE COURT: All right. Understood.

Mr. Connelly, anything else? CHANCERY COURT REPORTERS

33 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 MR. CONNELLY: Yes. On that very last

point, Mr. Trainer correctly pointed out, to his credit, that the hard-stop date on the contract is December 31, 2012. The same provision, which is

Section 7 of the agreement, says that, "Each party shall use its good faith reasonable efforts to cause each of the closing conditions set forth in paragraphs 5 and 6 above to be satisfied as promptly as reasonably possible." So until December 31st, 2012, there is an agreement that contains that provision. So I think

that actually negates the idea that Anthos would simply walk if there was a brief adjournment for purposes of a preliminary injunction motion. by the way, that that agreement is governed by Delaware law and is subject to exclusive jurisdiction in the Delaware Chancery Court. So I think the Court I note,

can reach its own judgment about how successful that position would be. THE COURT: How long will it take you,

assuming we go forward to a preliminary injunction hearing, Mr. Connelly, to be ready to put that case on? MR. CONNELLY: Well, fortunately, I

CHANCERY COURT REPORTERS

34 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 think we have sort of been doing double duty in the discovery we are doing in this case because some of the same issues are relevant to our opposition of her preliminary injunction hearing. would take long at all. So I don't think it

I think from our perspective

we will likely get the discovery that we want from the depositions that are going on right now. We may have

collateral issues, but I think it's really a matter for what the plaintiff -- what she would need, if there is anything else she would need for a preliminary injunction hearing, but we could do it in a few weeks easily. THE COURT: All right. Mr. Trainer,

how long would it take you to be prepared to go forward to preliminary injunction hearing? MR. TRAINER: same position, Your Honor. THE COURT: want to do, counsel. All right. This is what I I think we are in the

I think at this point it's

premature to put in a temporary restraining order. The matter is pending before -- or about to be pending before the Family Court in Arizona. I have no idea

what the decision of that court will be, whether it will have res judicata effects on the decision before CHANCERY COURT REPORTERS

35 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 alive. me because of the community property issues which may supersede what the parties can do as directors or stockholders. I don't know whether it will moot the

temporary restraining order by denying the right to alienate the stock. So first of all, until there is a decision changing the status quo in the Arizona court, there is no pending irreparable harm. So instead of

denying the temporary restraining order, what I am going to do is continue this hearing. And I say that

so that if there is a decision, Mr. Connelly, from the Arizona Court that in your mind places this issue squarely before me, you don't need to resubmit another application for TRO. You just simply need to request

that the continued hearing be scheduled immediately for further consideration, and I will certainly do that. I would expect, Mr. Trainer, that there won't be a sale of the property in the interim between the reconstitution of this hearing and the time that the Court rules, if there is that brief gap. So I am keeping this TRO application But whatever the outcome, we should move to a It appears to

preliminary injunctive relief hearing. CHANCERY COURT REPORTERS

36 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 me that the chance of Ms. Glassman losing this deal, if she is entitled to go forward with it, at least if it's done on a reasonably prompt basis, is simply not established. I have some concerns about how this information was conveyed. I have some questions about

whether she was acting as a stockholder or director and whether she's entitled to act as a stockholder given her directorial fiduciary duties with respect to this confidential information. But without having a

real feel for the scope of what was provided as compared to what would have been provided in a situation where she had approached the corporation, I have trouble telling at this point to what extent she may have breached a duty. I also note that this isn't your typical situation. company together. This is a couple who own this They are going through a divorce.

It's not clear to me what procedure would have been followed if she had made a request on the corporation. All those things, I think, need to be fleshed out at a preliminary injunction hearing. So what I am going to

do -- as I said, I am continuing this hearing without making a decision, and I look forward, Mr. Connelly, CHANCERY COURT REPORTERS

37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 was. Thank you. THE COURT: discovery issues then. Let's move to the thank you. Mr. Trainer, was that clear as well? MR. TRAINER: Yes, Your Honor. It appreciate that. Who was just speaking? MR. CONNELLY: THE COURT: That was Mr. Connelly. Mr. Connelly, to you reconstituting it if we need to. Otherwise, we

are going to move to a preliminary injunction hearing, and I would ask the parties to submit a form of order that would schedule such a hearing. MR. CONNELLY: Thank you, Your Honor.

And we will advise the Court of whatever happens in Arizona. THE COURT: I would certainly

All right.

I suppose the one that is

squarely in front of me is the protective order, the plaintiff's protective order motion. MR. TRAINER: Yes. Thank you, Your Honor.

The procedural background is

pretty straightforward that they have -- the defendants have sought to take the deposition of CHANCERY COURT REPORTERS

38 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Bergeson LLP as well as Miss Grace Park, who is on the line, who is an associate at Bergeson. There are really two levels to this. The first, and the one I find most disconcerting, Your Honor, is that there was a motion for commission filed for both Bergeson and Miss Park. And in connection

with that, we were contacted by counsel for the defendant, and specifically Mr. Bergeson and I were on the phone, and we were told when we complained about the subpoenas that it was just protective to make sure that any documents that were in the possession of the law firms would not be -- would be produced, and we wouldn't take the position that Miss Glassman did not have possession of those documents. And a letter to

that very effect from counsel for Mr. Glassman and the company came along, and based on that, we agreed -- or I personally and Mr. Bergeson agreed to accept service of the subpoenas. And it was only after that, that counsel took the position that because Bergeson had been transactional counsel in the deal with Anthos that they should be allowed to depose -- take the depositions, not just get documents, depose Bergeson and depose Miss Park. And I think under the Delaware

CHANCERY COURT REPORTERS

39 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Mr. Trainer. law, the Kahn v. KKR case, they have a pretty high burden to show that they have a need, demonstrable need, to take the deposition of litigation counsel. They were under the misconception that Bergeson was deal counsel or transactional counsel for Miss Glassman. THE COURT: Let me stop you,

Isn't that the issue here if Bergeson

was transactional counsel, they're not only subject to discovery but they're probably not in a position to continue as trial counsel if they were witnesses to this transaction, and if the counterclaims put the facts surrounding that transaction into play, then I don't see how they can continue in place. If they

weren't transactional counsel, then there is, indeed, a very high burden, and it's unlikely that it would be met here. So isn't this a factual question? And

what I have factually is the series of e-mails going back and forth that seem to show that up to a certain point, they were transactional counsel and then perhaps the role was taken by other attorneys, so maybe you can address that. MR. TRAINER: Sure, Your Honor. I

CHANCERY COURT REPORTERS

40 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Honor. find it surprising that simply copying counsel for Miss Glassman, litigation counsel for Miss Glassman, on the back and forth somehow includes them as transactional counsel, and I think that's defendants' position and certainly the purpose of the letter that was forwarded to Your Honor yesterday. When it came

down to the actual negotiation, when it came down to the negotiation and drafting of the agreement between Anthos and Miss Glassman, it was Gunderson Dettmer. It was not Bergeson. Simply including them on the

informational loop as Miss Glassman's counsel, I don't think, one, making transactional counsel or, two, making them subject to discovery here. THE COURT: Who is transactional

counsel before Gunderson was employed? MR. TRAINER: There wasn't, Your

The communications between Miss Glassman and I can get

Anthos started, I believe, it was in April. an exact date for Your Honor. quickly. THE COURT: All right.

So it came about rather

And Gunderson

is subject to discovery, of course, correct? MR. TRAINER: case, Your Honor. I am not sure that's the

I am not going to argue for them,

CHANCERY COURT REPORTERS

41 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 argue. but I was not aware. Transactional counsel was

automatically exposed to discovery. But if that is how the Court thinks in this case given the allegation of a breach of fiduciary duty, so be it, but certainly Bergeson was not transactional counsel and Gunderson Dettmer was. THE COURT: Anything else, Mr. Trainer? MR. TRAINER: THE COURT: No, Your Honor. Thank you. All right. Got it.

Mr. Connelly or whoever is going to I am sorry, Mr. DiCamillo. MR. DiCAMILLO: It's Mr. DiCamillo. Plaintiff makes two primary points in support of their motion to quash. First, in her Thank you, Your Honor.

opening papers, she stated that the defendants could not show that Miss Park or Bergeson have any material information that they could not obtain from plaintiff's document production or plaintiff's own testimony. Second, in the reply papers, and here

again this morning, they take the position that neither Bergeson nor Miss Park was transaction counsel for the plaintiff. CHANCERY COURT REPORTERS

42 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 What we know as of today does not support either of those positions. Plaintiff's

counsel has told us that there are not written communications between Miss Glassman and Anthos during the period that the agreement was being negotiated. Plaintiff's counsel has also told us that most of the communications during that time period were oral. The

documents that have been produced show that Bergeson had oral communications, which did not involve Miss Glassman. The documents also show that Bergeson was

heavily involved in the transaction's underlined litigation and were not merely copied on e-mails that involved Gunderson. In fact, there are many documents

that don't -- that Gunderson is not on at all, but before and after, Gunderson was involved. THE COURT: How are these documents

relevant to the issue of whether there was a breach of fiduciary duty in providing otherwise confidential documents to a potential purchaser of stock? MR. DiCAMILLO: They are relevant

because we don't know exactly what was discussed between the two, between Miss Glassman's side -- Miss Glassman's camp on one side and the Anthos' side -the Anthos and its representatives on the other side. CHANCERY COURT REPORTERS

43 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 We have alleged that Miss Glassman has breached her fiduciary duties in connection with providing the confidential information. We have also alleged that

she's breached her fiduciary duties by creating this whole issue about trying to stop the purchase of the plane and that she's done that merely as a pretext and to create gridlock with respect to the real transaction at issue, which is the sale of her stock. We have also alleged, and Mr. Connelly argued earlier this morning, that the transaction between Miss Glassman and CrossFit -- I'm sorry -- and Anthos potentially harms the company. So we are --

clearly conversations or communications between Miss Glassman's side and Anthos' side satisfy the liberal discovery standard of being reasonably calculated to lead to discovery of admissible evidence. I want to spend just a few minutes on the documents that I sent over to the Court yesterday morning. I sent them, you know, before I had the It

opportunity really to go through them in detail. was clear from the face of them that Bergeson was

clearly involved in the negotiation of the underlying transaction. But I just want to highlight a few of

them for the Court, and I am just going to go in Bates CHANCERY COURT REPORTERS

44 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 number order of a few of them. First, starting with document number 623, there is an e-mail from an attorney at Cooley, who represents Anthos, saying to Mr. Bergeson and Mr. Dettmer at Gunderson, "Bryan would like to try to get everyone on the phone (including Lauren and her divorce attorney) to see if there is a solution that works for everyone. might be helpful. Let me know if you think that I'm not available on Friday, but

would be available on Tuesday." Mr. Bergeson then responds saying, "Tuesday is good for me," but says maybe we shouldn't involve the clients. Let's do a lawyers call only and

not have the clients on the phone. So clearly evidence is that there were communications between Bergeson and counsel for Anthos was to not involve Miss Glassman. So Miss Glassman

could not give us any testimony on those conversations. Then, if you flip to 650, there is an e-mail from Mr. Bergeson to Cooley. Gunderson on it. call me." Nobody from Please

"Mark, I spoke with Lauren.

Again, evidencing conversations between

counsel which did not involve Miss Glassman, also did CHANCERY COURT REPORTERS

45 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 not involve Gunderson. Then, 658. There is a draft of these

stock -- of the purchase and sale agreement that was drafted by counsel for Anthos forwarded to Mr. Bergeson and also to Mr. Dettmer of Gunderson, but if you go to the page before it, 657, Mr. Bergeson then sends an e-mail to Miss Glassman, doesn't copy anyone from Gunderson, says, "Lauren, we will review and thereafter contact you with our comments." Then, there is an e-mail which I am struggling to find right now but -THE COURT: I get the point. It clearly shows that

MR. DiCAMILLO:

Miss Park provided comments on the purchase and sale agreement. So the notion that Bergeson was simply a

bystander in the transaction is certainly not played out by the documents that have been produced. And I found the e-mail, 690. There is

an e-mail from Miss Park to Cooley and Gunderson. "Please find attached a clean redline of the transfer agreement. Please note that these are being sent to

all counsel and may be subject to additional comments and changes." So it's evident that Bergeson has CHANCERY COURT REPORTERS

46 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Mr. Trainer? MR. TRAINER: Yes, Your Honor. They discoverable information that is not available from other sources. There are no facts to support

plaintiff's claims that we are simply doing this for harassment. And the point that Mr. Trainer led with

that somehow relied on this letter and conversation saying we weren't going to seek a deposition, doesn't make any sense. The notice of deposition was attached And

to the letter that they keep referencing.

following receipt of that letter, Mr. Trainer called me and said, "You know, are you still going to go forward with these depositions? should." We don't think you

So there was clearly no reliance on their

side that we promised for all time not to take a deposition. For those reasons, we oppose the motion to quash be denied. THE COURT: All right. Anything else,

still have not shown any kind of compelling need for this information. We have, as they requested in the

letter, indicated in the call, Bergeson has produced all documents that it has -- that are not privileged relating to this matter. So their claim that they

CHANCERY COURT REPORTERS

47 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 were just doing it for protective reasons that's been satisfied. But they've shown no compelling need why

they have to depose Miss Glassman's litigation counsel. And again, I think pointing to various

e-mails on which Bergeson was copied or that they may have commented on the purchase agreement just doesn't carry the day. They are Miss Glassman's attorney.

They are kept in the loop on everything, and they have been. They did not negotiate the deal. They did not

draft the document with Anthos. transactional counsel.

So there is

There is litigation counsel.

And I think the only purpose here is really to harass. I am not sure I've been in litigation where right off the bat they go -- the opposing side goes to depose litigation counsel, and they have a high burden to meet under this Court's law. don't think they are there. THE COURT: All right. Mr. DiCamillo, And I

is there any plan to depose the -- I am struggling for the name now -- I can't remember what firm, Gunderson firm? MR. DiCAMILLO: Your Honor, we have So we

filed a motion for commission for Gunderson. are pursuing discovery against them. CHANCERY COURT REPORTERS

Mr. Connelly can

48 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 jump in if there is anything I am missing. answer to the question is: The short

Yes, we are pursuing

information from Gunderson, but I don't think that relieves -- that necessarily gets Bergeson off the hook because as the e-mails demonstrate there are certainly conversations pre-Gunderson that only Bergeson was involved in. Even after Gunderson was

involved, there are still communications that Bergeson was having without Gunderson people on the phone or in the e-mails. So Gunderson is not going to be the

complete story here. THE COURT: All right. I understand.

Counsel, this is what I want to do. First of all this material, it seems to me, is discoverable under our broad discovery rules. The

question is whether I should allow an invasion of litigation counsel, which may require ultimately the recusal of that counsel on a -- what is really, it seems to me, a peripheral set of issues. It may turn

out not to be peripheral, but this is how I want to proceed. Once the defendants have taken the

deposition of the Gunderson firm, you can renew this motion. We will have a brief telephone conference,

and you can tell me at that time whether you have CHANCERY COURT REPORTERS

49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 more motion. sufficient evidence to go forward with your claims or how the information you have gotten from Gunderson effects your need to take the deposition of current counsel. Until then, I am going to grant conditionally the motion to quash. It seems to me

once the record is more fully developed the defendants will have a better feel for whether this information is truly necessary to their case or not. I am loathe, as you can tell, to allow discovery that may well disqualify counsel. However,

if it turns out that after taking the Gunderson firm's deposition that there were significant things in the creation of this deal that were done by litigation counsel that bear on the issues, then I think those depositions will have to be taken. But I would like

to have the benefit of the Gunderson information being developed first. Was that clear enough, counsel? MR. TRAINER: MR. DiCAMILLO: THE COURT: Thank you Your Honor. Yes, Your Honor. There is one

All right.

I don't know whether you consider it

fully briefed, you want to go forward with it or not, CHANCERY COURT REPORTERS

50 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Mr. DiCamillo. and it's the motion to compel from CrossFit. MR. DiCAMILLO: Your Honor, this is

We did not have the opportunity to

submit a reply, but I am happy to go forward here. And then once you have heard from us, you can decide whether further submissions are necessary. But I

think it's straightforward enough that we can resolve, at least part of it, this morning. THE COURT: happy to hear you. All right. I would be

I will tell you, however, that the

benefit of a reply on California law involving the business strategy immunity and the common interest doctrine may very well be helpful, but with that caveat, go ahead. MR. DiCAMILLO: Sure.

Your Honor, as I said in connection with the motion to quash, the defendants have two basic claims against Miss Glassman. First, that she

breached the fiduciary duty by providing Anthos with confidential information in furtherance of the transaction that we believe is harmful to the company. Also, second, that her objection to the purchase of the plane is pretext designed to create gridlock. In order to attempt to prove our CHANCERY COURT REPORTERS

51 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 law. claims, we are entitled to communications between Miss Glassman and her representatives on the one hand and Anthos and its representatives on the other hand. Miss Glassman has produced some but not all of those communications and is attempting to use various privileges to shield documents that she doesn't like from discovery. The threshold issue here is choice of Plaintiff contends that California law applies.

However, she cites no case in support of that proposition, the choice of law proposition. The facts

that she relies on are that Anthos is a California company, that Anthos hired a California law firm, and that she hired a California law firm. I am certainly

not aware of any authority which says that the location of your lawyer dictates choice of law and such a rule wouldn't really make any sense. The more salient facts are that CrossFit is a Delaware corporation. Both Miss

Glassman's claims against us and our claims against Miss Glassman involve issues of Delaware law. Plaintiff chose to initiate this litigation in Delaware. The stock purchase agreement between Miss

Glassman and Anthos is governed by Delaware law and CHANCERY COURT REPORTERS

52 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 has a Delaware choice of forum provision in it, and that item was the subject of negotiation. If you look in the documents that I sent over to Your Honor yesterday morning at Bates No. 703, the contract originally out of California choice of law and California choice of forum provision in there that was changed to Delaware, Delaware in both instances. Under those circumstances, Delaware law And that's exactly what Vice Chancellor The case I'm referring

should apply.

Noble held in the 3Com case.

to is 3Com Corporation v. Diamond II Holdings, Inc. decided by the Court on May 31st, 2010. cite is 2010 WL 2280734. I will just read a paragraph from that where Vice Chancellor Noble was faced with a decision on what choice of law should apply to privilege issues. Vice Chancellor Noble noted, "The parties The Westlaw

selected Delaware law to govern the Merger Agreement, and chose Delaware as the forum for any disputes arising out of the Merger Agreement. Delaware has

considerable interest in ensuring that corporate entities seek a business combination under its laws may expect consistent and predictable treatment when appearing before its Courts. Most mergers and other

CHANCERY COURT REPORTERS

53 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 important corporate transactions necessarily entail the involvement of business people, attorneys, and advisors located throughout the country, if not the world. Newco's focus on the communications' location,

if followed, could foster inconsistency in a context where predictability is at a premium. Indeed, while

the record shows that many of challenged communications originated or were received in Massachusetts, several others both originated and were received outside of that jurisdiction. Applying

Delaware law in this context would avoid the uncertainty generated by the varying loci of communications involved both in this case and others like it. This, in turn, would foster predictability

for parties to major corporate transactions that have availed themselves of Delaware law." So we think under that holding Delaware law should be the appropriate choice of law in this context. Plaintiff is clearly just using

California law because she likes the holding in the Oxy case under the common interest privilege. It is

curious, however, that when discussing the business strategy privilege, plaintiff makes no mention of California law and argues exclusively under Delaware CHANCERY COURT REPORTERS

54 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 law, presumably because she doesn't like the California law and business strategy privilege. And

in fact, it's my understanding that California does not recognize the business strategy privilege. I am

not prepared to say that authoritatively because I haven't completed the research, but that's at least my preliminary findings. So getting to the meat of the issue, once you are looking at it through a Delaware law lens, I think plaintiff has heavily framed the issues by breaking down the disputes into three categories, looking at communications prior to the signing of the purchase and sale agreement, then in between signing and litigation and then post-litigation. In fact, I So

think probably only two categories are necessary. I am just going to focus on pre-signing of the agreement and post-signing of the agreement. Turning first to pre-signing, plaintiff relies exclusively on the California Oxy case to argue that a common interest exists or may exist.

They don't even go so far as to say, I don't

think, under that case that a common interest definitely exists. However, that case and that holding CHANCERY COURT REPORTERS

55 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 are directly at odds with Delaware law. In Zirn v.

VLI, this Court made very clear that communications between the merging parties prior to the execution of the merger agreement are not privileged. There have

been -- we cited to them over the weekend, a Superior Court case, Titan Investment Fund, which essentially reaches the same conclusions that pre-signing of a contract, the parties to the contract do not have a common interest that is protectable in terms of the legal attorney-client privilege or business strategy. So there is no basis to determine common interest before the signing of an agreement. Drafts of merger agreements, which are exchanged between parties, are typically produced in litigation in this Court. In fact, plaintiff here has There is

produced drafts of the purchase agreement.

no reason why analysis for the documents she is trying to withhold should be any different from the analysis for drafts of the purchase agreement. It is

reasonable to infer that there is something in those documents she doesn't want us to see, but that's not a basis for withholding them. And on the overall business strategy question the types of things they are trying to CHANCERY COURT REPORTERS

56 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 withhold don't really fall within business strategy. Business strategy protection doesn't protect plans that are already in place. already been signed. already been known. Purchase agreement has

The amount of the bid has We have offered to take these

documents on an attorney-eyes-only basis. And I think it's important to focus on what we are not asking for. We are not asking Miss --

if there is an internal communication between Miss Glassman and her attorneys, or anyone for that matter, which says, "I would take Anthos offering me X, I am going to counter at Y, but I would really take Z." That's business strategy, and same for Anthos, to the extent Anthos has those internal communications. are offering Miss Glassman X. We would take Z." "We

She is countering at Y.

That's the kind of thing that the We are

business strategy has historically protected. not asking for that.

What they are trying to withhold are documents that were exchanged or communications that were exchanged between Miss Glassman and Anthos. Those are not protected by the business strategy privilege, and no common interest privilege can attach prior to the signing of the agreement. CHANCERY COURT REPORTERS

57 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 THE COURT: How can I tell what kind

of documents are being withheld without a privilege log? MR. DiCAMILLO: Well, Your Honor, on

the pre-signing agreement document I don't think you need a privilege log because our position is no privilege at all would possibly attach if the communications were exchanged between Anthos and Miss Glassman. Different for the post-signing, and let me turn to that now. Post-signing. We

acknowledge that there is at least an argument that they have some common interest privilege applies post-signing of the agreement. But that doesn't mean Even if

that everything is immune from the discovery.

there is a common interest that attaches after the signing of the agreement, there's got to be some underlying privilege to protect. For example, there's

got to be some rendering of legal advice if there is going to be attorney-client privilege. So in order to evaluate plaintiff's claim of privilege post-signing, I think we do need to know exactly what they are withholding, and I am skeptical that everything they are purporting to CHANCERY COURT REPORTERS

58 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 is related. to me. withhold would be protected by any privilege. For example, I am reading from Paragraph 31 of their opposition to the motion to compel. They say, "Counsel for Miss Glassman and

Anthos and counsel for Anthos also communicated and strategized over the hurdles to overcome with respect to effectuating the Sale and any opposition they might receive from Mr. Glassman. These strategic

communications with respect to the reaction to the Sale by CrossFit, Mr. Glassman and others are protected by the attorney-client privilege, the work product doctrine and the common interest doctrine." That doesn't sound like legal advice I am not saying there couldn't be some legal

advice in there, but I don't think with respect to the post-signing communications we need a log. We asked

them to provide a log on Monday, but they haven't produced them. compel. But let me raise one other issue which The parties, as I indicated to the Court That's our argument on the motion to

in my letter yesterday, worked over the Labor Day weekend. It started working before that to deal with

things like deposition scheduling, scope of document CHANCERY COURT REPORTERS

59 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 production, and late last week the parties sketched out a preliminary plan for the scheduling of depositions. On Friday, Mr. Trainer, Mr. Connelly, and I had a call, and we slated Miss Glassman's deposition in for tomorrow. And we indicated that

because of the issues on the motion to compel that, you know, we very well might need to change that if we were going to be getting additional documents so that we didn't have the need to redepose people, and we also wanted to get all the documents that we were entitled to prior to taking Miss Glassman's deposition. On Sunday, Mr. Trainer sent an e-mail to Mr. Connelly and I outlining his position on various of the issues, which are the subject of his motion to compel. And Mr. Connelly responded back, as You know, we will look at

he had on Friday, "Thanks.

this and evaluate it, but we really think we need to push off Miss Glassman." And you know, we made

efforts to move around some other depositions so that we could fit others into scheduling for tomorrow. On a call yesterday, we again indicated our position that we think Miss Glassman CHANCERY COURT REPORTERS

60 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 should be moved, and for the first time, plaintiffs indicated that they were not willing to move her deposition. So notwithstanding the fact that we had mentioned it on Friday and Sunday, they never said, "Oh, no. silent. We are not moving her." They remained

So we assumed -- obviously incorrectly --

that they were agreeable to moving her, and it now turns out that they are not. Phoenix. Mr. Connelly is in

He is prepared to take her deposition

tomorrow, if necessary, but we really think that the deposition should be pushed off. There is no reason And if there is a

that it has to go forward tomorrow.

possibility that we are going to get more documents, we think that we should get those documents first before we have to depose her. Now, we are on obviously a schedule. Plaintiffs have a brief. We have preliminary

injunction scheduled for the end of September. Plaintiff's opening brief is due fairly shortly after the close of depositions, but we can certainly move around dates with respect to the briefing. And the

reality is -- I am not sure that we really need this hearing before September 30th. Obviously, it's

CHANCERY COURT REPORTERS

61 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 scheduled, and we are prepared to go forward with it, but I am not sure it's really necessary in the overall context of things. Your Honor will recall that the last time we were together on an application for TRO an issue had arisen that Cirrus, the seller of the aircraft, had asked us for further assurances that we were going to complete the sale, complete the purchase on September 30th. Plaintiffs wanted us not to Your Honor denied TRO and

provide any assurances.

told us, you know, there is a possibility that you can enjoin the sale. We sent a letter to Cirrus following that hearing which indicated that as far as the company was concerned we intended to complete the purchase. We alerted Cirrus to the pendency of this

litigation, the fact that Miss Glassman was trying to stop the purchase, and that we had -- that the purchase could potentially be stopped. However, Mr. Glassman indicated, as I am happy to send Your Honor a copy of this letter, "However, in the event that CrossFit cannot complete the purchase of the airplane due to Miss Glassman's litigation or for any other reason, I hereby undertake CHANCERY COURT REPORTERS

62 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 to complete the acquisition, on the same terms as those previously agreed upon by you and CrossFit, in my personal capacity and on my own behalf." So the reality is, as I said at the last hearing, they're never going to be able to show irreparable harm because if the corporation can't do this purchase, Mr. Glassman is committed in writing to do it in his personal capacity. So to the extent they are -- the long-winded way, to the extent there are scheduling issues, we can work them out. We don't think Miss

Glassman's deposition should have to go forward tomorrow. And, you know, on a related topic, Your Honor has indicated that we need to take Gunderson before we take Bergeson's deposition, and we would just ask that plaintiffs assist us in facilitating that deposition. We are having problems

scheduling the deposition of the plaintiff's financial advisor. well. We have asked for assistance on that one as

But certainly if the Court's ruling is that we

have to take Gunderson before Bergeson, we need some help from plaintiff to get that accomplished. THE COURT: All right. Thank you.

CHANCERY COURT REPORTERS

63 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 there? THE COURT: MR. TRAINER: Glassman's deposition first. THE COURT: MR. TRAINER: Sure. This is the first I've Sure. Deal with Miss Mr. Trainer? MR. TRAINER: Thank you, Your Honor.

If I might, can I take it in reverse

heard of flexibility on the September 30th date for the purchase of the aircraft, so not really ready to respond to that. THE COURT: under a misconception. I'm -- maybe I am laboring

I thought that that hearing

would involve only whether Mr. Glassman had acted withing the scope of his authority in binding the corporation or not and, therefore, whether the sale of the airplane -- and there are other issues as well, but that's the predicate one -- whether the sale or the purchase of the airplane should be enjoined. MR. TRAINER: That was my

understanding as well, Your Honor. THE COURT: So I don't know what these

other -- I understand there is a theory on the part of CHANCERY COURT REPORTERS

64 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Mr. DiCamillo. the defendants that this litigation itself is all a ruse and a stalking horse to gain leverage with respect to this sale of Miss Glassman's shares, but I don't know what that has to do with the preliminary injunction hearing itself. So I will let Mr. DiCamillo address that as well, but that is why I am having a little trouble understanding what difference it makes whether we get all these depositions in before that preliminary injunction hearing. MR. DiCAMILLO: Your Honor, this is

Let me address that. Certainly, the primary issue on the

table is plaintiff's motion for preliminary injunction with respect to the sale. The other issues overlap,

and we've had discussions with Mr. Trainer about this. We've discussed whether there were ways we could focus the deposition now on just the plane issue, and both parties agreed that there was really no easy way to do that because a lot of our defense to the preliminary injunction application is going to involve the plaintiff's laches, plaintiff's unclean hands, plaintiff's breach of fiduciary duty in connection with all of this being a pretext and designed to CHANCERY COURT REPORTERS

65 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 things. Your Honor. create gridlock. So the issues are intertwined. So while I agree with Your Honor that the only thing on the table at the end of September is their motion to enjoin the purchase of the plane, all the issues are intertwined. THE COURT: Well, tell me this,

Mr. DiCamillo, why do we even need -- maybe this should be addressed to Mr. Trainer, but if there is an undertaking by Mr. Glassman that if I ultimately decide that the purchase of the aircraft by the corporation is improper, that he is willing to undertake to pay for the airplane himself -- and I assume that would mean the entire purchase price and not just the remainder after the down payment -- but if that's the case, why do we even need a preliminary injunction hearing? MR. DiCAMILLO: That's my exact point,

I don't think we do. THE COURT: All right. Let me hear

from Mr. Trainer then. MR. TRAINER: Your Honor, a couple

I am a little confused by all of that for

several reasons. First of all, we have not, to my CHANCERY COURT REPORTERS

66 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 knowledge, seen a final version of the further assurance letter that was given to Cirrus Aircraft. Second, as you will recall when we were before Your Honor in early August, the issue was that the company was giving further assurances, and that is what we wanted to stop. The draft of the further assurance

letter, at least the one I had seen, had Mr. Glassman giving further assurances which was certainly not what we, as the plaintiffs, were led to believe or I think Your Honor was led to believe when we were heard on TRO. THE COURT: That's correct. But

doesn't it obviate the potential harm that the TRO would prevent? MR. TRAINER: If there is going to be

no question that the company is not going to buy the airplane, Your Honor, I agree. If Mr. Glassman has

the wherewithal to do what is represented in the draft letter, I agree with that too. So in other words, if

there is no exposure to the company, I agree we do not need the preliminary injunction hearing. THE COURT: All right. Why don't you

address the other issues that have been raised in the motion to compel? CHANCERY COURT REPORTERS

67 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 fair enough. MR. TRAINER: working backward. THE COURT: I know you were. That's Yes, Your Honor. I was

I am not suggesting you weren't doing

what you told me you would do. MR. TRAINER: Thank you, Your Honor.

As Your Honor pointed out, the defendants have this concept that the whole airplane litigation was or is a way to gridlock the company. can assure the Court that there is documents and e-mails from CrossFit's chief financial officer that show precisely a different story and show how quickly Miss Glassman moved when she did find out that the plane purchase was going forward. But stepping back from that, Miss Glassman is not the snarky character that the defendants would have the Court believe. monetize her investment in CrossFit. done with CrossFit. She wants to I

She wants to be

She wants her divorce finalized. She does not enjoy

She is a single mother of four.

this litigation, and frankly, she's not wild about having her deposition taken tomorrow. scheduled. Yes, there was some indication that if CHANCERY COURT REPORTERS It's been

68 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 there were documents that maybe we should produce late, maybe we should think about rescheduling. But I

she is ready to have her deposition taken tomorrow. am headed out there tonight. there. Mr. Bergeson is already

As I say, it's not something she relishes.

We

should just do it. this case.

It's one of the big depositions in If there are

It's been scheduled.

documents that Your Honor would order be produced subsequent, we can do a clean-up deposition. But its

one that Miss Glassman has been ready for, and I don't think there is any real practical need to postpone it. THE COURT: the motion to compel. MR. TRAINER: Your Honor, on the All right. Let's turn to

substance of the motion to compel, Your Honor -- and I alluded to this earlier -- the big difference in this case is that Mr. Glassman, who is represented by the same counsel that represents the company, is a competing bidder. And so we do not think that he

should be given documents that would in anyway give him an inside track to the bids that he has made as recently, as I said earlier, last week. And Your

Honor the business strategy privilege is to prevent a party from using litigation in this court to get CHANCERY COURT REPORTERS

69 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 certain advantages in the commercial world. And I

really do have to give defendant's counsel credit since they, in their request for production, they weren't subtle about it. Request Number 14 says, "All documents regarding Anthos' attempt to value CrossFit or your equity interest therein, including any valuation, analysis undertaken, and any documents or other information used as inputs in such evaluation and analysis." Fifteen. "All documents regarding

Anthos' management of and/or goals for CrossFit after the consummation of the purchase transaction." Sixteen. "All documents regarding

Anthos' plans related to current senior management." That's just an example, Your Honor. So they are going right to the heart of Anthos' strategy, right to the heart of the valuation and negotiation that resulted in this deal. So I think that is clearly protected for someone who is, on the other side, trying to match or exceed the offer that has been made by Anthos. that, Your Honor -THE COURT: Is that still an open And in all of

CHANCERY COURT REPORTERS

70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 possibility? I thought this transaction was set

except for the TRO and the prohibition on sale by the Arizona court? Is this something that your client

views as an ongoing negotiation for the stock that she owns? MR. TRAINER: My client doesn't, Your

Honor, but I think it's pretty clear that the defendants do consider it ongoing negotiations. that perhaps if they propose a price that is high enough, Miss Glassman will risk breaching her agreement with Anthos and accepting that offer because they are continuing to bid. THE COURT: All right. But isn't it And

really your perspective that I should be interested in? MR. TRAINER: Well, Your Honor, I

think in this situation, yes, it's our perspective. But they are asking for information should, you know, one of the covenants not be met, should Anthos -should it go past December 31st, should Anthos decide that it has the right not to consummate the transaction. It really puts Mr. Glassman in the

captain's seat because, one, he succeeded in driving away Anthos, and, two, he has all the information CHANCERY COURT REPORTERS

71 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 argument. MR. TRAINER: Okay. And so in all of relating to the evaluation and the bidding between Anthos and Miss Glassman. THE COURT: Okay. I understand your

that, Your Honor, we have really just refused -- and this is on the business strategy privilege -- refused to produce a very narrow set of documents. And they

are specifically valuation documents for either Miss Glassman or Anthos. Miss Glassman or Anthos plans to

bring the sale to a close because, as we've seen, the defendants are working very hard to prevent exactly that. We have also refused to produce documents by

indicating how or what manner Miss Glassman judged Anthos' proposal and her decision as just how to respond, and also any documents that may reflect Anthos' current and future plans for CrossFit. Other

than that on the business strategy, Your Honor, we have produced everything. As to the choice of law, I am not nearly as clever as Mr. DiCamillo gives me credit for. It seems that the issue of what is to be produced in this litigation should be controlled by Delaware's business strategy, white knight, whatever, immunity. CHANCERY COURT REPORTERS

72 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 I think communications that occurred prior to the litigation solely in California should be controlled by the California rules of privilege. And

that's why we cited the Oxy Resources case and also the STI Outdoor case to Your Honor. And I think it's

especially appropriate in this case where the other side demanding the documents is a competing bidder. think it might be different if it were simply the company asking for the documents and the company was represented by separate counsel, but saying we have agreed to attorneys-eyes-only protections for these documents when the company is also represented in competing bidder -- or counsel for the company is also representing the competing bidder is just wholly inadequate. So we think we have taken a very narrow approach to the business strategy here. We I

also think the fact that communications regarding these strategies that were shared between counsel for Anthos and counsel for Miss Glassman both before and after the execution of the purchase agreement fall well within that privilege, and we do not believe they should be produced. THE COURT: All right. Thank you.

CHANCERY COURT REPORTERS

73 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Your Honor. With respect to the business strategy argument, Mr. Trainer just said they're taking a very narrow view of it. I think in actuality they're Anything else, Mr. DiCamillo? MR. DiCAMILLO: Just very briefly,

expanding it beyond a position that its never taken before. They are -- the business strategy privilege They are

is meant to protect internal communications.

trying to protect communications that went back and forth between Miss Glassman and Anthos during a setting when they were adversaries. That is not

something that the business strategy privilege has ever protected. With respect to the letter to Cirrus, it has been produced to plaintiff. number is CRF1123. The document

As I said before, I am going to

provide a copy to Your Honor since we talked about it so much today. And on the note of Miss Glassman's deposition, it's not just a simple matter of well let's do it tomorrow and then if you get more documents, we can just do it again. You know, part of

taking a deposition is knowing what is out there, CHANCERY COURT REPORTERS

74 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 knowing the universe of what is out there and -THE COURT: I don't need anymore

argument on -- I understand the issues with respect to the deposition. Anything else? MR. DiCAMILLO: THE COURT: I have nothing else.

I didn't mean to cut you

off, but I do understand that. Counsel, this is what I think we need to do first, because I think there will be probably more production. I think the deposition of Miss And I say that for

Glassman needs to be rescheduled. two reasons.

One is that I believe there will be

other documents produced, but the other involves whether we are going to go forward on the schedule that we have set up. It seems to me that if

Mr. Glassman's position is that he is -- and obviously, this is going to have to be demonstrated. There need to be affidavits filed or some other demonstration, but if he is both willing and financially able to finance the purchase of this plane himself, if I ultimately determine that he did not have the authority to cause the corporation to purchase the plane, either because it was outside of the scope of his authority as an officer or because it CHANCERY COURT REPORTERS

75 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 together. was a breach of fiduciary duty or some other issue, if that is the case, then there can't be irreparable harm, and we should simply go forward to a determination of the legal issues. preliminary injunction hearing. So I expect both sides to get Mr. DiCamillo, you are obviously going to I don't think And I don't need a

have to demonstrate those two things. the letter itself has done it.

But it seems to me

likely that, if that's the case, we are not going to need a preliminary injunction hearing at the end of September. So that changes the whole structure of

this matter it seems to me. Second, I would appreciate some briefing on the issue of choice of law and the application of these two doctrines under California law, if that proves to be the case. I also think I

need a privilege log in order to resolve these questions in a reasonable manner. So I am going to

direct you to do both of those things on a schedule that I am going to let you set. Let me say two preliminary things. It

seems to me unlikely that the common interest doctrine is going to prevent the production of documents that CHANCERY COURT REPORTERS

76 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 were circulated before there was an agreement when there was still an adversary position between the parties, number one, and number two, I have the authority -- and I intend to exercise it -- to prevent the production of documents where it appears to me the primary purpose of that production is to give one of the parties, Mr. Glassman, a leg up in the litigation. He certainly is entitled to documents to prosecute in his cross claims, but not in his position as a bidder for Miss Glassman's shares. issue. I am concerned about that

And I intend to use my inherent power to I am telling you this

prevent that from happening.

before you do the additional work because it seems to me that there should be an agreement between the parties or among the parties as to what is producible. This case is generating a lot of motion practice, and it seems to me that it's not helpful motion practice for the most part. I

understand that there are legitimate issues between the parties that have to be resolved, some of them have to be resolved by the Court, but issues such as the timing of depositions it seems to me, if those are all referred to the Court, then the process breaks down and it grinds to a halt. CHANCERY COURT REPORTERS

77 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 My broader point is this, this is, at its heart, a divorce matter and distribution of assets between these two individuals. I don't know if there I don't know what

is any possibility of settlement.

is going on in the Arizona Family Court litigation. But this is turning into a litigation where there is more litigation than I think is probably warranted. So I would urge you to get together, try to resolve the underlying issues if you can. If you can't, try

to resolve the discovery issues, and to the extent you can't, I am going to require and ask you to put your heads together and come up with a schedule, supplemental briefing, and a privilege log on the common interests and the business strategy doctrines. But I have given you kind of how I am looking at the issue now in the hopes that it will aid your settlement. So I am going to ask you for a time

table, Mr. DiCamillo, within which you can have affidavits submitted that would tend to obviate the need for the preliminary injunction hearing. MR. DiCAMILLO: Certainly, Your Honor. As you know, So I

I think we could get those promptly.

there is stuff going on in Arizona today.

probably can't get them today, but you know, CHANCERY COURT REPORTERS

78 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 works for me. THE COURT: All right. Let's say In Mr. Connelly can correct me if I am wrong, I don't see any reason why we can't provide them by the end of the week. MR. CONNELLY: THE COURT: going to do is this: I agree. What I am

All right.

If you have your calendars

ready, let me set up another telephone conference in two weeks, and we can discuss the scheduling going forward. Two weeks from today would be the 19th. I

can do it in the afternoon of the 19th if that would suit you. MR. TRAINER: plaintiff, Your Honor. MR. DiCAMILLO: Mr. DiCamillo. It That's fine by

1:00, September 19th, we will get back together.

the meantime, obviously, discuss the discovery issues. If you can't resolve them promptly, give me a letter telling me under what schedule you are going to submit privilege logs and the supplemental briefing, and I will decide -- as soon as I get those, I will decide that promptly, I promise you. Anything else we can do here this CHANCERY COURT REPORTERS

79 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 CHANCERY COURT REPORTERS - - morning? MR. DiCAMILLO: defendants, Your Honor. Not from the

I think all parties

appreciate the time and patience you've had with us on this matter. MR. TRAINER: for plaintiff, appreciate it. THE COURT: All right. Well, I It And, Absolutely, Your Honor,

appreciate your willingness to work together. sounds like some of these issues may fall away.

of course, I am anxious to hear what happens in the Arizona litigation if I don't talk to you before. If

you need me, obviously, you know how to get a hold of me. Otherwise, I will talk to you at 1:00 on Thank you very much, counsel.

September 19th. Good-bye.

(Teleconference concluded at 11:40 a.m.)

80 CERTIFICATE

I, CHRISTINE L. QUINN, Official Court Reporter for the Court of Chancery of the State of Delaware, do hereby certify that the foregoing pages numbered 3 through 79 contain a true and correct transcription of the proceedings as stenographically reported by me at the hearing in the above cause before the Vice Chancellor of the State of Delaware, on the date therein indicated. IN WITNESS WHEREOF I have hereunto set my hand this 14th day of September, 2012.

/s/ Christine L. Quinn ------------------------Official Court Reporter of the Chancery Court State of Delaware

Certificate Number: 123-PS Expiration: Permanent