Anthos CrossFit Teleconference on September 5th

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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

LAUREN GLASSMAN, :

:

Plaintiff, :

:

vs. : Civil Action

: No. 7717-VCG

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.

- - -

TELEPHONIC ORAL ARGUMENT AND THE COURT'S RULING

------------------------------------------------------

CHANCERY COURT REPORTERS

34 The Circle

Georgetown, Delaware 19947

(302) 856-5645

2

1 APPEARANCES: (via telephone)

2 PHILIP TRAINER, JR., ESQ.

Ashby & Geddes, P.A.

3 -and-

GRACE Y. PARK, ESQ.

4 of the California Bar

Bergeson, LLP

5 for Plaintiff

6 RAYMOND J. DICAMILLO, ESQ.

KEVIN M. GALLAGHER, ESQ.

7 Richards, Layton & Finger, P.A.

-and-

8 BLAIR G. CONNELLY, ESQ.

KYLE L. WALLACE, ESQ.

9 of the New York Bar

Latham & Watkins LLP

10 for Defendants

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12 - - -

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1 THE COURT: Good morning, counsel.

2 This is Sam Glasscock. Who do I have on the line,

3 please?

4 MR. TRAINER: Good morning, Your

5 Honor. Lee Trainer from Ashby & Geddes for plaintiff,

6 Lauren Glassman. I also have Grace Park from

7 Bergeson, LLP on the line.

8 THE COURT: All right. Welcome.

9 MR. DiCAMILLO: Good morning, Your

10 Honor. Ray DiCamillo for the defendants. Also with

11 me on the line from my office is Kevin Gallagher.

12 Also on the line are Blair Connelly and Kyle Wallace

13 from Latham & Watkins.

14 THE COURT: All right. Welcome.

15 Counsel. I don't know if you have

16 discussed how you want to present the motions that are

17 outstanding. If you have, I am happy to hear you in

18 any order you've decided on. Otherwise, I guess, I

19 would prefer to start with the temporary restraining

20 order request.

21 MR. DiCAMILLO: Your Honor, this is

22 Mr. DiCamillo. We have not discussed how to proceed.

23 We are happy to go in any fashion that Your Honor

24 wishes. With respect to the motion for temporary


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1 restraining order, Mr. Connelly is going to argue that

2 on behalf of the defendants, and I will handle the

3 motion to compel and motion to quash.

4 THE COURT: All right. Well, then,

5 Mr. Connelly, would you like to proceed?

6 MR. CONNELLY: Thank you very much

7 Your Honor. Can the Court hear me? I ask because I

8 am talking on a hotel conference room phone.

9 THE COURT: You are coming through

10 loud and clear.

11 MR. CONNELLY: Okay. Terrific. Thank

12 you, Your Honor.

13 May it please the Court, this is Blair

14 Connelly for the defendants, and our motion seeks to

15 preserve the status quo pending a hearing on our

16 motion for preliminary injunction. And the basis for

17 our motion is that Miss Glassman, who is a director of

18 CrossFit, provided confidential company information to

19 a third party for her personal financial benefit,

20 without even telling the company or its board of

21 directors, let alone getting permission.

22 And on the first element we think we

23 have easily shown a colorable claim. I know the other

24 side is arguing there is a higher standard. We


5

1 disagree with them, but candidly, we don't think it

2 really matters because the legal principles that are

3 at issue here are so clear and so broad.

4 In particular, I point the Court to

5 just last year the Supreme Court reaffirmed the

6 principle that it is inequitable to permit a fiduciary

7 to profit from using confidential company information.

8 That's from the Kahn v. KKR case, 23 A.3d at 838. And

9 that principle holds even if the corporation can't

10 show that it has actually suffered any harm at all

11 because it's based on the rule that the Court called

12 inveterate and unflinching in its rigidity. It's a

13 rule that's based on public policy, and here I am

14 quoting from Guth v. Loft that extinguishes all

15 possibility of profit flowing from a breach of the

16 confidence imposed by the fiduciary relationship.

17 THE COURT: Why wouldn't the remedy be

18 disgorgement of profits rather than preventing the

19 sale of the assets?

20 MR. CONNELLY: Well because I think

21 that the principle that equity will not allow the

22 director to profit from this -- I think as in

23 Hollinger militates -- I think the cases that talks

24 about disgorgement are cases where, frankly, it came


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1 to late to do anything about it. But we think that if

2 equity doesn't allow it, the proper remedy is if it

3 can be prevented at the front end, it ought to be

4 prevented at the front end rather than trying to

5 unscramble the egg afterwards.

6 That's what happened in Hollinger. In

7 Hollinger, they were able to prevent it at the front

8 end and Chancellor Strine -- then-Vice Chancellor

9 Strine, I think, did exactly that. And here, I know

10 there were other issues going on, and Hollinger was

11 certainly a case rich with misconduct, but two of the

12 breaches that were cited by Vice Chancellor Strine are

13 certainly true here. Confidential company information

14 was used for the personal financial benefit of a

15 director, and there was also importantly a breach of

16 the duty of candor because the director didn't tell

17 anybody that this was going on. He didn't tell the

18 company. He didn't tell the board. He didn't tell

19 the shareholders that he was doing this. And that's

20 exactly what's going on here. And we think that

21 rather than allowing the transaction to go forward,

22 which I will talk about later, will impose some

23 significant harms on the company, the proper remedy

24 would be to prevent it from going forward in the first


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1 instance.

2 THE COURT: A shareholder in this

3 situation has the right to financial information to

4 provide for a due diligence review upon the potential

5 sale of her shares, correct?

6 MR. CONNELLY: Has the right to do

7 that if the court -- you mean if the court in Arizona

8 gives her the right to alienate her interests?

9 THE COURT: Yes. Obviously, that has

10 to happen, or there is no issue.

11 MR. CONNELLY: That's correct. That's

12 correct.

13 THE COURT: I am just talking about in

14 general.

15 MR. CONNELLY: As a general matter --

16 and they cite the Schoon case for this principle. A

17 shareholder can make a 220 demand and say that I want

18 to get this information because I want to try to sell

19 my shares. That's -- they rely on the Schoon case for

20 that principle. But there is a couple of very

21 important distinctions between that case and this

22 case.

23 First, in Schoon, the shareholder

24 actually said in his 220 demand this is what I am


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1 looking -- this is why I want this information. This

2 is my proper purpose.

3 THE COURT: Let me stop you for just a

4 second, Mr. Connelly. I understand those differences.

5 My question is: What information was released to a

6 third party that would not have been released if there

7 had been a proper disclosure and request to the

8 corporation for those documents that the stockholder

9 was entitled to provide to a potential purchaser?

10 MR. CONNELLY: I think our point here,

11 Your Honor, is -- by the way, it may well be that at

12 least some of that information, if a proper process

13 had been gone through, might have ultimately been

14 disclosed, but it would have been done pursuant to a

15 process where the company would have had an

16 opportunity to protect its interests. And you know,

17 if you look at the information that went across the

18 transom, we are talking about financial statements,

19 confidential contracts with commercial partners,

20 payroll information, basically the whole kit and

21 caboodle of the company's internal documents.

22 Now, if a proper process had happened,

23 and if she had gone to the company and said, "Hey, I

24 want to do this," then there would have been a back


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1 and forth. And at a minimum, the company would have

2 had an opportunity to protect itself in some manner by

3 insisting on appropriate confidentiality restrictions.

4 That didn't happen here. The company got ambushed by

5 this.

6 THE COURT: So your real contention is

7 not with the information being provided but the lack

8 of the confidentiality order?

9 MR. CONNELLY: I think it's both. I

10 think it's hard to separate the two. If an

11 appropriate process had been gone through, you know,

12 and she had gone and actually told the company this is

13 what I am doing here, then there could have been a

14 dialogue about it. And it may well be that some of

15 that confidential information would not have gone

16 across the transom because there have would been a

17 back and forth and an agreement or perhaps even a

18 litigation about whether that was actually needed.

19 THE COURT: Well, that's what I am

20 asking you. What information could the company have

21 legally prevented her from providing to a third party

22 potential buyer that was actually disclosed here?

23 MR. CONNELLY: Well, I think

24 without -- candidly, I haven't thought about that


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1 point because we have been focused on the broader one.

2 But I think payroll information would have arguably

3 been one that I don't think they would have needed,

4 individual names of people and what their individual

5 salaries were, confidential contracts with third

6 parties that by their terms are supposed to be kept

7 confidential from other people. If the buyer in this

8 case, you know, has relationships with companies who

9 are direct competitors with some of our commercial

10 partners, we would not have wanted that information to

11 be shared with them. There are probably other

12 examples. Those are the only ones I can come up with

13 off the top of my head.

14 THE COURT: All right. How do you

15 respond to the laches argument that the plaintiffs

16 made?

17 MR. CONNELLY: I have to say at the

18 front end I find it somewhat ironic, given their own

19 delays, they're making this argument. But one point I

20 think I should make for the Court's benefit is they

21 note in their papers that, you know, well you should

22 have known at this point and you should have known at

23 that point, but what they don't tell you in their

24 papers is we have been asking them about Anthos. We


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1 want to know exactly what the information is that you

2 sent to Anthos. We asked it repeatedly, and it wasn't

3 until August 10 that counsel for Miss Glassman

4 actually sent us a disc containing the information

5 that was actually sent over. It was sent, you know,

6 on a Friday by FedEx. So we didn't actually get it

7 until a few days later and have an opportunity to

8 review it. So I think that's the sort of time frame

9 we ought to be measuring it by.

10 But more fundamentally, Your Honor, I

11 think the main point is she hasn't shown any prejudice

12 that she's suffered here in terms of how she's been

13 harmed in her ability to defend certainly our motion

14 for preliminary injunction but even this motion. The

15 only prejudice that is articulated in her papers is

16 that she had to respond to this over a period of four

17 days. You know, we found that hard to swallow just

18 because we had to respond to her TRO motion in 24

19 hours. So we don't think that's a sufficient ground

20 of prejudice for a laches argument in this context,

21 particularly when we are talking about here is a

22 director secretly disclosing confidential company

23 information without giving the company an opportunity

24 to protect itself. We think the duty of loyalty there


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1 is a very important consideration and the duty of

2 candor is as well.

3 THE COURT: All right. Anything else,

4 Mr. Connelly?

5 MR. CONNELLY: Thank you very much.

6 What I wanted to respond to here, I

7 think as in Hollinger, the appropriate remedy is to

8 restrain the transaction, but I also want to talk

9 about what their response is because they're not

10 denying that the information is confidential and

11 they're not denying that she did this secretly. But

12 the argument is that because she made a 220 demand in

13 both her director capacity and her shareholder

14 capacity and because the company didn't make her sign

15 a confidentiality agreement because, you know, they

16 for some reason thought that they were actually

17 entitled to rely upon her loyalty and her candor, that

18 she then had carte blanche to do whatever she wanted

19 to do with these documents. And we just don't think

20 it's the law that a director can play gotcha with the

21 corporation to which she owes fiduciary duties. I

22 mean, a director always has a duty of loyalty and

23 always has a duty of candor, and at a minimum, if she

24 wants to do that, she at least has to tell the company


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1 so that the company can assert its own rights. We

2 don't see how her fiduciary duties as a director can

3 get past that.

4 THE COURT: What would the ultimate

5 result be of entering a restraining order here? Is it

6 your position that she can never consummate a

7 transaction with Anthos? What is the ultimate remedy

8 that you are seeking?

9 MR. CONNELLY: Well, obviously, at

10 this point, all we are seeking is that the status quo

11 be preserved pending our preliminary injunction motion

12 and the ultimate remedy, if there is a final award, we

13 would ask for her to be restrained from selling it to

14 Anthos, and of course, if the court -- if the Arizona

15 court gives her the right to sell her interests, she

16 would be free to sell it to anybody else at that

17 point. But in our view, the fact that, you know,

18 there is an irreparable taint here by virtue of her

19 conduct that's an issue we think for another day. She

20 could, of course, sell it to anybody else. She could

21 sell it to her husband. You know, at this point, you

22 know, the harm to be considered at this point, we

23 think, is merely the harm of being temporarily

24 restrained during the brief interim period until our


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1 preliminary injunction motion can be heard.

2 THE COURT: Well her harm -- and I am

3 sure I will hear argument to this effect -- is that

4 she may lose the deal. I am struggling a little bit

5 to see -- I understand the breach of fiduciary duty

6 argument, and I understand that there is some

7 documents that have been provided that may not have

8 been provided if a proper procedure had been followed

9 in your view, but I am struggling a little bit to see

10 what the harm is to the corporation if this deal is

11 consummated. And once again, I guess my question is:

12 Why isn't the remedy to let the deal go forward and

13 simply -- I am not even clear about what benefit she

14 has received from this disclosure because she had the

15 right to, if she had gone through a proper procedure,

16 to disclose sufficient financials that the deal could

17 have been consummated. So I am just struggling a

18 little bit to see what the ill gotten gain is here.

19 MR. CONNELLY: Well, I think that the

20 answer to two points you raise is one, on the harm,

21 again, our point is that the harm to the company --

22 and the cases, the Brophy line of cases and Kahn, all

23 say this, is that that's the harm. The harm is in the

24 mere fact that the fiduciary has done this and cannot


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1 be allowed to profit from it. We have also

2 articulated some other harms that will happen if this

3 particular deal goes through, because among other

4 things the company's tax status could be changed,

5 which would impose additional administrative burdens

6 on the company and certainly impose financial

7 consequences on Mr. Glassman.

8 THE COURT: That would happen no

9 matter to whom these shares were sold unless it was

10 sold to Mr. Glassman, correct?

11 MR. CONNELLY: No, I don't think

12 that's right. I think if it was sold to another

13 individual investor I don't think that's true.

14 Certainly, there are other investors that would also

15 happen with.

16 THE COURT: All right. You are not

17 arguing that -- well, maybe you are -- is it your

18 position that as a director she cannot sell her shares

19 to any individual if it would have an adverse tax

20 impact on the corporation?

21 MR. CONNELLY: That's not our

22 position.

23 THE COURT: All right.

24 MR. CONNELLY: Our position is on the


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1 harm point what we are saying is we think that the

2 harm -- that under Kahn the fact of the breach is

3 itself sufficient to satisfy the Kahn prong, but we've

4 also pointed out in this particular deal because of

5 Anthos and because of what they're planning to do with

6 the company, you know, the affidavit of Mr. Saran

7 explains how this is already causing problems with

8 important business initiatives, relationships with

9 commercial partners, and relationships with affiliates

10 because this is really going to fundamentally alter

11 the entire -- how the company is perceived and how it

12 does business and what it's model is.

13 THE COURT: But that's not a harm that

14 arises from the provision -- the wrongful provision of

15 documents. That's a harm that arises from a

16 50 percent interest being sold to a third party who

17 may disagree with current management's ideas of how to

18 run the corporation, correct?

19 MR. CONNELLY: I think it's hard to

20 separate the two. I see your point, and I think that

21 there is a valid point there. But I think it's

22 frankly hard to separate the harm of the breach and,

23 you know, from the consequences of this sale.

24 Candidly, we don't think that a director should get


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1 the benefit of the doubt from her own breach of

2 fiduciary duty of saying, "Gotcha. It would have

3 happened anyway." We can't know that. You know,

4 because the company, which was entitled to loyalty and

5 which was entitled to candor, never had the

6 opportunity to go through that. We don't know if

7 Anthos would have done this deal if they hadn't got

8 all of those documents. We just don't know. And we

9 don't think that the company -- that is really a

10 speculation. We don't think she's entitled to the

11 benefit of that doubt.

12 THE COURT: Tell me what's before the

13 Family Court of Arizona today.

14 MR. CONNELLY: Sure. And I wanted to

15 address that. That was another point they raised that

16 we think is not well taken. There is a motion before

17 the Arizona Family Court, which is Miss Glassman's

18 motion basically to lift the injunction and allow her

19 to proceed with this sale. And we are certainly not

20 asking the Arizona Family Court to decide the Delaware

21 fiduciary duty issues that we placed before Your

22 Honor.

23 The company has moved to intervene in

24 that proceeding so that it can assert its own


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1 interests and speak for itself on the harm that would

2 befall the company in that proceeding if the judge

3 goes Miss Glassman's way. But, you know, we are

4 certainly asking this Court, and not the Arizona

5 Family Court, to rule on the Delaware fiduciary duty

6 issues. The company has told the Court there that

7 there are fiduciary duty issues here, but at this

8 point, the company is just being asked to intervene.

9 I also note that on the same day that

10 Miss Glassman said, you know, in these proceedings

11 that we should be required to go litigate these issues

12 before the Arizona court, we got an e-mail from Miss

13 Glassman's counsel in Arizona saying she intends to

14 object to the company's participating in those

15 proceedings or, in her words, to have any voice

16 whatsoever in those proceedings. So we don't think

17 that she can have it both ways, but just to be clear,

18 we are certainly not trying to get two bites at the

19 apple here. We want this Court to rule on the

20 Delaware fiduciary duty issues.

21 THE COURT: Right. But if you are

22 allowed to intervene, aren't you arguing that

23 fiduciary duty issues should influence the Court in

24 not lifting its stay of sale of assets?


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1 MR. CONNELLY: I think that the

2 purpose of intervening in the Arizona court -- I am

3 not counsel in that action so I can only speak to what

4 I know, but the purpose of intervening there is so

5 that the company can show the Court how the company as

6 a separate entity would be harmed if this transaction

7 went through. And the papers certainly informed the

8 Court that there are fiduciary duty claims existing

9 here, but that's -- you know, our position is the

10 Arizona court is going to decide whether, as a matter

11 of Arizona family law, Arizona divorce law, and

12 Arizona community property law, she can be permitted

13 to go forward with this sale. Our position is, even

14 if she is given that right by the Arizona court, there

15 are separate Delaware fiduciary duty law reasons why

16 the sale should not go through as a matter of Delaware

17 corporate law.

18 THE COURT: All right. I understand

19 that position, Mr. Connelly. Do you know or have an

20 expectation as to when the Arizona court will decide

21 the issue of whether Mrs. Glassman can alienate her

22 stock? Is that something that you expect today, or is

23 that something that will take further litigation, or

24 do you know?


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1 MR. CONNELLY: I don't know, Your

2 Honor. I am giving you my best information. I know

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

4 that we don't know if the Court is going to rule right

5 at the hearing, if the Court is going to take it under

6 advisement, and there is also, in complete candor, a

7 chance that the entire hearing may be kicked, because

8 if Miss Glassman is objecting to whether the company

9 can intervene, to allow that issue to be decided. We

10 don't know any better than that.

11 THE COURT: All right. The status quo

12 in the Arizona suit is that these shares of stock

13 cannot be sold, correct?

14 MR. CONNELLY: That is correct. They

15 are owned 100 percent jointly by Mr. and

16 Mrs. Glassman. They are community property. Neither

17 of them can sell without either the other's consent or

18 permission from the Court.

19 THE COURT: All right. Mr. Connelly,

20 you have been very patient with me. Anything else?

21 MR. CONNELLY: I sort of got jumped

22 around.

23 I did want to note -- I wanted to

24 respond to this again on the Schoon case, just to


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1 point out that not only in that case did the

2 shareholder actually tell the company why he wanted

3 the information, that shareholder wasn't a director.

4 We would point the Court to Holdgreiwe v. Nostalgia

5 Networks Incorporated. That's a case where a director

6 made a 225 demand, and the company wanted to make the

7 director sign a confidentiality agreement as a

8 condition of getting the documents. And Chancellor

9 Allen ruled that wasn't necessary because, as a

10 director, he was already under an obligation to

11 maintain the confidences of the corporation.

12 THE COURT: All right.

13 MR. CONNELLY: And that was

14 overarching. That's true here too.

15 THE COURT: Thank you.

16 MR. CONNELLY: And I do have one more

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

18 said before, we don't think telling us after the fact

19 we have an NDA is sufficient. It doesn't solve the

20 harm, but in addition, as we said in the papers, the

21 company doesn't have the right to enforce the NDA. If

22 you look at the NDA, which is Exhibit 2 to our motion,

23 it actually expressly permits Anthos to share the

24 confidential information with affiliates, with


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1 consultants, and with advisors as long as they sign an

2 equally strong confidentiality agreement. That

3 doesn't protect the company at all. If one of their

4 affiliates is a competitor and they get our

5 confidential information, it doesn't help us that they

6 then keep it a secret. They have it at that point.

7 It doesn't give the company any protection.

8 THE COURT: I am struck once again by

9 the disconnect between the harm that the breach of

10 duty allegedly has caused and the remedy. Because

11 this information, which should have remained

12 confidential in your view, is now in the hands of

13 Anthos, liable to be circulated as you said to

14 advisors. I am not sure how restricting the sale

15 remedies that breach.

16 MR. CONNELLY: I think the question

17 is: How else can it be remedied? There shouldn't be

18 a right without a remedy. And at this point, you

19 know, we think that under the doctrines that were

20 articulated by the Supreme Court in Kahn and the

21 strength of this policy of preventing directors from

22 doing this, we think that that militates in favor of

23 the remedy of taking away the transaction. It should

24 not have happened, and they ought to be required to go


23

1 back to square one and start over.


3 Mr. Connelly?

4 MR. CONNELLY: No, Your Honor. Thank

5 you very much for your patience with me.

6 THE COURT: I appreciate it.

7 Mr. Trainer, who is going to argue the

8 TRO motion from your side?

9 MR. TRAINER: I am, with Your Honor's

10 permission.

11 THE COURT: I would be happy to hear

12 from you.

13 MR. TRAINER: Thank you, Your Honor.

14 First off to address Your Honor's

15 question about Arizona, it's my understanding that the

16 matter is ripe for decision so justice in this court.

17 The Arizona judge could rule from the bench, could

18 take it under advisement. There are various

19 possibilities. Obviously, no one knows what he will

20 do, but that is at 2:00 this afternoon.

21 THE COURT: Okay.

22 MR. TRAINER: Also in the Arizona

23 proceeding, Your Honor, as we mentioned in our papers,

24 they filed the very same affidavits, Mr. Saran and


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1 Mr. Smith, in support of their motion to intervene in

2 Arizona. So it is -- the same issues are very much in

3 front of the Arizona court as are before Your Honor.

4 And there's been no suggestion, nor I think could

5 they, that the Arizona court cannot deal appropriately

6 with the matters between Mr. and Mrs. Glassman.

7 It's also, I think, sort of supremely

8 ironic that they indicate that the company has a

9 separate vested interest in what occurs in Arizona

10 inasmuch as we suggested repeatedly to them that the

11 company might have interests separate and apart from

12 Mr. Glassman, and nonetheless, they are still

13 represented by the same counsel. But we think that

14 Arizona can certainly handle everything that's been

15 put before it both by Miss Glassman, Mr. Glassman and

16 CrossFit.

17 Your Honor asked about the laches, and

18 I am not sure Mr. Connelly was able to articulate a

19 particularly good response on that because we think

20 it's egregious in this situation. They have known of

21 the sale by Miss Glassman to Anthos since July 20th.

22 THE COURT: Before we move on,

23 Mr. Trainer -- I am sorry to not have stopped you

24 sooner -- but before we move on, how do I know that


25

1 the court in Arizona can handle these issues? I am

2 assuming, without knowing, that like most family

3 courts, Arizona Family Court is a court of limited

4 jurisdiction. Can it take into account the interests

5 of the corporation when the corporation is a hundred

6 percent owned by the divorcing couple? Are you

7 representing to me that is within their statutory

8 purview?

9 MR. TRAINER: It's my understanding it

10 is, Your Honor, and certainly I think CrossFit feels

11 that way, as much as they intervened with the same

12 arguments or attempted to intervene with the same

13 arguments here.

14 THE COURT: Well, they're taking a

15 belt and suspenders approach. But I am just trying

16 to -- if you are representing to me that that is

17 within their statutory purview, that's one thing. But

18 if your evidence for that is simply that CrossFit is

19 trying to make the same arguments there that they are

20 attempting to make here, that's not particularly

21 persuasive. So I guess what I am asking you is: Have

22 you examined the statutes, and can you tell me that,

23 or are you simply relying on what CrossFit has done?

24 MR. TRAINER: Your Honor, I am relying


26

1 on what the parties have argued in Arizona and what

2 CrossFit has done, and it probably has exhausted my

3 knowledge of Arizona civil procedures.

4 THE COURT: You're ahead of me so

5 that's fine.

6 MR. TRAINER: I definitely cannot

7 represent that I've looked at the statutes and this is

8 within their purview. No one has seemed to raise

9 objection in the pleadings back and forth and the

10 arguments that this is something that is outside of

11 that court's jurisdiction.

12 THE COURT: Fair enough. Now, you can

13 move to laches, if you would.

14 MR. TRAINER: Okay. Thank you, Your

15 Honor.

16 And I mentioned that they've known of

17 the sale to Anthos since July 3rd, June 20th. I don't

18 think any of these dates are in dispute. They have

19 known that Miss Glassman shared confidential

20 information with Anthos since the 27th. They knew

21 since late July that Miss Glassman was petitioning the

22 Arizona court to sell her 50 percent interest. They

23 have known since August 3rd that the Arizona court was

24 hearing this today. And I think, Your Honor, in light


27

1 of that, the defendants have really manufactured their

2 own emergency.

3 I know Chancellor Strine is fond of

4 saying that a party's untoward does not constitute his

5 emergency, and I think that's the very situation here.

6 They say we have suffered no prejudice. We said in

7 our papers that we have very limited time to respond

8 to this. Mr. Connelly said he finds that hard to

9 swallow. I should submit an affidavit from my wife

10 that Labor Day weekend was gone responding to this,

11 but I think that does constitute prejudice. Also, the

12 fact that we are arguing this on the very morning of

13 the hearing in Arizona. I think they had months to

14 address this and just for strategic reasons chose not

15 to.

16 THE COURT: What would those strategic

17 reasons be?

18 MR. TRAINER: Perhaps, Your Honor, the

19 fact that, as everyone in Delaware knows, it is an

20 easier road to hoe on success of the merits on a TRO

21 than it is on a preliminary injunction.

22 THE COURT: All right. I understand

23 your argument.

24 MR. TRAINER: Chancellor Allen warned


28

1 of this very danger that by waiting until the last

2 minute, as I think manufacturing your own emergency,

3 you come in on an easier standard, and that is why we

4 suggest that we are looking at the likelihood of

5 success on the merits that really a preliminary

6 injunction standard should be applied here instead of

7 the standard for temporary restraining order.

8 And, Your Honor, on the merits, I

9 really think the breach of fiduciary duty claim is a

10 red herring. And Mr. Connelly described it as playing

11 gotcha with the company.

12 I am not sure where that comes from

13 because Miss Glassman's Section 220 demand was

14 abundantly clear that it was being made as a director

15 and a stockholder, and I think there might be some

16 weight to Mr. Connelly's argument if she had just been

17 utterly irresponsible with the documents she obtained

18 through that demand. The simple fact is that she was

19 not. She disclosed a subset of those documents to

20 Anthos solely in connection with Anthos' interest in

21 purchasing her stock. So she was acting as a

22 stockholder when she did that, and she had Anthos

23 execute a non-disclosure agreement.

24 So this is not as though she published


29

1 the confidential information of the company. I've

2 heard nothing indicated that Anthos has done anything

3 untoward or irresponsible with the information she

4 provided. She was simply, as a stockholder, working

5 to monetize her investment. And as a director, she

6 acted responsibly in doing that. So I don't think

7 there's been a breach of fiduciary duty.

8 Delaware law has long drawn a

9 distinction between a director who is also a

10 stockholder that they certainly don't lose their

11 rights as a stockholder when they're a director. So

12 that's why I say it's a red herring. This is

13 certainly not Hollinger.

14 Hollinger, as Mr. Connelly mentioned,

15 was replete with wrongdoing. And the significant

16 thing in Hollinger was that the opportunity that

17 Mr. Black usurped from the company was a deal that the

18 company was involved in. It was a deal that the

19 company was interested in. Here, it's not a deal that

20 the company is interested in. The company is not

21 there to buy Miss Glassman's stock. It's

22 Mr. Glassman, and that overlies, not just this motion,

23 Your Honor, but all three of them, the fact that

24 Mr. Glassman is a competing bidder.


30

1 And so what we have here is not a

2 breach of fiduciary duty. It's frustration being

3 voiced by a disappointed bidder. And as recently as

4 last week, Mr. Glassman was continuing to make

5 proposals to purchase Miss Glassman's interests in

6 CrossFit. So that's why I say the whole issue of the

7 plain breach of fiduciary duty is not that and,

8 frankly, a red herring throughout these proceedings.

9 And, Your Honor, in irreparable harm,

10 the test, as the Court knows, is whether the

11 irreparable injury is imminent. If the injury was the

12 disclosure of the confidential information, that

13 happened two and a half months ago. So I don't think

14 there is any imminency with that, and if the injury is

15 to sell to Anthos -- and Your Honor seemed to question

16 the connection between the claimed wrongdoing and the

17 claimed injury -- I have been mystified by that

18 connection or claim connection as well. But if there

19 is a connection, it's compensable by money damages.

20 So I don't think we have real irreparable injury here.

21 The real claimed injury that Miss Glassman will sell

22 her 50 percent stake interest, with which Mr. Glassman

23 does not see eye to eye, is not irreparable injury.

24 Mr. Connelly alluded to the affidavit


31

1 of Mr. Saran, the company's general counsel, that no

2 one knows what's going to happen as far as affiliates

3 and whether they will stay loyal to CrossFit brand.

4 That's not the basis for a TRO that no one is sure.

5 Mr. Saran, to his credit, he says, "I don't know what

6 is going to happen with the affiliates." So that's

7 not a basis for granting a temporary restraining

8 order, and it's also certainly not a basis for

9 preventing Miss Glassman from monetizing her

10 investment in CrossFit.

11 And the tax claims, similarly, its --

12 I am not sure that's basis for saying you can sell

13 your interest to an entity that is not an individual.

14 I mean, if that was important to CrossFit, perhaps the

15 stockholder agreement would have been appropriate.

16 But again, it's, one, not a basis for granting the TRO

17 sought, and two, if you actually look at the numbers,

18 it doesn't seem to be that financially significant.

19 So I think that is neither here nor there.

20 Finally, on the balance of the

21 hardships, Your Honor, if the sale is enjoined -- and

22 Your Honor pointed this out -- that there is a chance

23 that Miss Glassman could lose the opportunity

24 presented by the Anthos offer. Conversely, as I just


32

1 mentioned, denying the motion for temporary

2 restraining order will not cause the irreparable harm.

3 At worse, it will result in Anthos owning 50 percent

4 of CrossFit, and while we understand that Mr. Glassman

5 may not agree with that, it's not irreparable harm.

6 THE COURT: Where is it in the record

7 that there is a reasonable potential that given a

8 short-term temporary restraining order pending a

9 preliminary injunction hearing this deal will be lost,

10 or am I supposed to simply take that on faith because

11 it could happen in any deal?

12 MR. TRAINER: Your Honor, I am not

13 going to say take it on faith, but I don't think the

14 agreement representing that is in the record. But we

15 are concerned -- there is a hard-stop date of

16 December 31st on the offer. I can represent that to

17 the Court, but I think what you are faced with is the

18 risk that has been current in any deal of this type.

19 THE COURT: All right. Understood.

20 Anything else?

21 MR. TRAINER: Not from plaintiff, Your

22 Honor. Thank you.

23 THE COURT: All right. Thank you.

24 Mr. Connelly, anything else?


33

1 MR. CONNELLY: Yes. On that very last

2 point, Mr. Trainer correctly pointed out, to his

3 credit, that the hard-stop date on the contract is

4 December 31, 2012. The same provision, which is

5 Section 7 of the agreement, says that, "Each party

6 shall use its good faith reasonable efforts to cause

7 each of the closing conditions set forth in paragraphs

8 5 and 6 above to be satisfied as promptly as

9 reasonably possible."

10 So until December 31st, 2012, there is

11 an agreement that contains that provision. So I think

12 that actually negates the idea that Anthos would

13 simply walk if there was a brief adjournment for

14 purposes of a preliminary injunction motion. I note,

15 by the way, that that agreement is governed by

16 Delaware law and is subject to exclusive jurisdiction

17 in the Delaware Chancery Court. So I think the Court

18 can reach its own judgment about how successful that

19 position would be.

20 THE COURT: How long will it take you,

21 assuming we go forward to a preliminary injunction

22 hearing, Mr. Connelly, to be ready to put that case

23 on?

24 MR. CONNELLY: Well, fortunately, I


34

1 think we have sort of been doing double duty in the

2 discovery we are doing in this case because some of

3 the same issues are relevant to our opposition of her

4 preliminary injunction hearing. So I don't think it

5 would take long at all. I think from our perspective

6 we will likely get the discovery that we want from the

7 depositions that are going on right now. We may have

8 collateral issues, but I think it's really a matter

9 for what the plaintiff -- what she would need, if

10 there is anything else she would need for a

11 preliminary injunction hearing, but we could do it in

12 a few weeks easily.

13 THE COURT: All right. Mr. Trainer,

14 how long would it take you to be prepared to go

15 forward to preliminary injunction hearing?

16 MR. TRAINER: I think we are in the

17 same position, Your Honor.

18 THE COURT: All right. This is what I

19 want to do, counsel. I think at this point it's

20 premature to put in a temporary restraining order.

21 The matter is pending before -- or about to be pending

22 before the Family Court in Arizona. I have no idea

23 what the decision of that court will be, whether it

24 will have res judicata effects on the decision before


35

1 me because of the community property issues which may

2 supersede what the parties can do as directors or

3 stockholders. I don't know whether it will moot the

4 temporary restraining order by denying the right to

5 alienate the stock.

6 So first of all, until there is a

7 decision changing the status quo in the Arizona court,

8 there is no pending irreparable harm. So instead of

9 denying the temporary restraining order, what I am

10 going to do is continue this hearing. And I say that

11 so that if there is a decision, Mr. Connelly, from the

12 Arizona Court that in your mind places this issue

13 squarely before me, you don't need to resubmit another

14 application for TRO. You just simply need to request

15 that the continued hearing be scheduled immediately

16 for further consideration, and I will certainly do

17 that.

18 I would expect, Mr. Trainer, that

19 there won't be a sale of the property in the interim

20 between the reconstitution of this hearing and the

21 time that the Court rules, if there is that brief gap.

22 So I am keeping this TRO application

23 alive. But whatever the outcome, we should move to a

24 preliminary injunctive relief hearing. It appears to


36

1 me that the chance of Ms. Glassman losing this deal,

2 if she is entitled to go forward with it, at least if

3 it's done on a reasonably prompt basis, is simply not

4 established.

5 I have some concerns about how this

6 information was conveyed. I have some questions about

7 whether she was acting as a stockholder or director

8 and whether she's entitled to act as a stockholder

9 given her directorial fiduciary duties with respect to

10 this confidential information. But without having a

11 real feel for the scope of what was provided as

12 compared to what would have been provided in a

13 situation where she had approached the corporation, I

14 have trouble telling at this point to what extent she

15 may have breached a duty.

16 I also note that this isn't your

17 typical situation. This is a couple who own this

18 company together. They are going through a divorce.

19 It's not clear to me what procedure would have been

20 followed if she had made a request on the corporation.

21 All those things, I think, need to be fleshed out at a

22 preliminary injunction hearing. So what I am going to

23 do -- as I said, I am continuing this hearing without

24 making a decision, and I look forward, Mr. Connelly,


37

1 to you reconstituting it if we need to. Otherwise, we

2 are going to move to a preliminary injunction hearing,

3 and I would ask the parties to submit a form of order

4 that would schedule such a hearing.

5 MR. CONNELLY: Thank you, Your Honor.

6 And we will advise the Court of whatever happens in

7 Arizona.

8 THE COURT: I would certainly

9 appreciate that.

10 Who was just speaking?

11 MR. CONNELLY: That was Mr. Connelly.

12 THE COURT: All right. Mr. Connelly,

13 thank you.

14 Mr. Trainer, was that clear as well?

15 MR. TRAINER: Yes, Your Honor. It

16 was. Thank you.

17 THE COURT: Let's move to the

18 discovery issues then. I suppose the one that is

19 squarely in front of me is the protective order, the

20 plaintiff's protective order motion.


22 Yes. The procedural background is

23 pretty straightforward that they have -- the

24 defendants have sought to take the deposition of


38

1 Bergeson LLP as well as Miss Grace Park, who is on the

2 line, who is an associate at Bergeson.

3 There are really two levels to this.

4 The first, and the one I find most disconcerting, Your

5 Honor, is that there was a motion for commission filed

6 for both Bergeson and Miss Park. And in connection

7 with that, we were contacted by counsel for the

8 defendant, and specifically Mr. Bergeson and I were on

9 the phone, and we were told when we complained about

10 the subpoenas that it was just protective to make sure

11 that any documents that were in the possession of the

12 law firms would not be -- would be produced, and we

13 wouldn't take the position that Miss Glassman did not

14 have possession of those documents. And a letter to

15 that very effect from counsel for Mr. Glassman and the

16 company came along, and based on that, we agreed -- or

17 I personally and Mr. Bergeson agreed to accept service

18 of the subpoenas.

19 And it was only after that, that

20 counsel took the position that because Bergeson had

21 been transactional counsel in the deal with Anthos

22 that they should be allowed to depose -- take the

23 depositions, not just get documents, depose Bergeson

24 and depose Miss Park. And I think under the Delaware


39

1 law, the Kahn v. KKR case, they have a pretty high

2 burden to show that they have a need, demonstrable

3 need, to take the deposition of litigation counsel.

4 They were under the misconception that Bergeson was

5 deal counsel or transactional counsel for Miss

6 Glassman.

7 THE COURT: Let me stop you,

8 Mr. Trainer. Isn't that the issue here if Bergeson

9 was transactional counsel, they're not only subject to

10 discovery but they're probably not in a position to

11 continue as trial counsel if they were witnesses to

12 this transaction, and if the counterclaims put the

13 facts surrounding that transaction into play, then I

14 don't see how they can continue in place. If they

15 weren't transactional counsel, then there is, indeed,

16 a very high burden, and it's unlikely that it would be

17 met here.

18 So isn't this a factual question? And

19 what I have factually is the series of e-mails going

20 back and forth that seem to show that up to a certain

21 point, they were transactional counsel and then

22 perhaps the role was taken by other attorneys, so

23 maybe you can address that.

24 MR. TRAINER: Sure, Your Honor. I


40

1 find it surprising that simply copying counsel for

2 Miss Glassman, litigation counsel for Miss Glassman,

3 on the back and forth somehow includes them as

4 transactional counsel, and I think that's defendants'

5 position and certainly the purpose of the letter that

6 was forwarded to Your Honor yesterday. When it came

7 down to the actual negotiation, when it came down to

8 the negotiation and drafting of the agreement between

9 Anthos and Miss Glassman, it was Gunderson Dettmer.

10 It was not Bergeson. Simply including them on the

11 informational loop as Miss Glassman's counsel, I don't

12 think, one, making transactional counsel or, two,

13 making them subject to discovery here.

14 THE COURT: Who is transactional

15 counsel before Gunderson was employed?

16 MR. TRAINER: There wasn't, Your

17 Honor. The communications between Miss Glassman and

18 Anthos started, I believe, it was in April. I can get

19 an exact date for Your Honor. So it came about rather

20 quickly.

21 THE COURT: All right. And Gunderson

22 is subject to discovery, of course, correct?

23 MR. TRAINER: I am not sure that's the

24 case, Your Honor. I am not going to argue for them,


41

1 but I was not aware. Transactional counsel was

2 automatically exposed to discovery.

3 But if that is how the Court thinks in

4 this case given the allegation of a breach of

5 fiduciary duty, so be it, but certainly Bergeson was

6 not transactional counsel and Gunderson Dettmer was.

7 THE COURT: All right. Got it.

8 Anything else, Mr. Trainer?

9 MR. TRAINER: No, Your Honor.

10 THE COURT: Thank you.

11 Mr. Connelly or whoever is going to

12 argue. I am sorry, Mr. DiCamillo.

13 MR. DiCAMILLO: Thank you, Your Honor.

14 It's Mr. DiCamillo.

15 Plaintiff makes two primary points in

16 support of their motion to quash. First, in her

17 opening papers, she stated that the defendants could

18 not show that Miss Park or Bergeson have any material

19 information that they could not obtain from

20 plaintiff's document production or plaintiff's own

21 testimony. Second, in the reply papers, and here

22 again this morning, they take the position that

23 neither Bergeson nor Miss Park was transaction counsel

24 for the plaintiff.


42

1 What we know as of today does not

2 support either of those positions. Plaintiff's

3 counsel has told us that there are not written

4 communications between Miss Glassman and Anthos during

5 the period that the agreement was being negotiated.

6 Plaintiff's counsel has also told us that most of the

7 communications during that time period were oral. The

8 documents that have been produced show that Bergeson

9 had oral communications, which did not involve Miss

10 Glassman. The documents also show that Bergeson was

11 heavily involved in the transaction's underlined

12 litigation and were not merely copied on e-mails that

13 involved Gunderson. In fact, there are many documents

14 that don't -- that Gunderson is not on at all, but

15 before and after, Gunderson was involved.

16 THE COURT: How are these documents

17 relevant to the issue of whether there was a breach of

18 fiduciary duty in providing otherwise confidential

19 documents to a potential purchaser of stock?

20 MR. DiCAMILLO: They are relevant

21 because we don't know exactly what was discussed

22 between the two, between Miss Glassman's side -- Miss

23 Glassman's camp on one side and the Anthos' side --

24 the Anthos and its representatives on the other side.


43

1 We have alleged that Miss Glassman has breached her

2 fiduciary duties in connection with providing the

3 confidential information. We have also alleged that

4 she's breached her fiduciary duties by creating this

5 whole issue about trying to stop the purchase of the

6 plane and that she's done that merely as a pretext and

7 to create gridlock with respect to the real

8 transaction at issue, which is the sale of her stock.

9 We have also alleged, and Mr. Connelly

10 argued earlier this morning, that the transaction

11 between Miss Glassman and CrossFit -- I'm sorry -- and

12 Anthos potentially harms the company. So we are --

13 clearly conversations or communications between Miss

14 Glassman's side and Anthos' side satisfy the liberal

15 discovery standard of being reasonably calculated to

16 lead to discovery of admissible evidence.

17 I want to spend just a few minutes on

18 the documents that I sent over to the Court yesterday

19 morning. I sent them, you know, before I had the

20 opportunity really to go through them in detail. It

21 was clear from the face of them that Bergeson was

22 clearly involved in the negotiation of the underlying

23 transaction. But I just want to highlight a few of

24 them for the Court, and I am just going to go in Bates


44

1 number order of a few of them.

2 First, starting with document number

3 623, there is an e-mail from an attorney at Cooley,

4 who represents Anthos, saying to Mr. Bergeson and

5 Mr. Dettmer at Gunderson, "Bryan would like to try to

6 get everyone on the phone (including Lauren and her

7 divorce attorney) to see if there is a solution that

8 works for everyone. Let me know if you think that

9 might be helpful. I'm not available on Friday, but

10 would be available on Tuesday."

11 Mr. Bergeson then responds saying,

12 "Tuesday is good for me," but says maybe we shouldn't

13 involve the clients. Let's do a lawyers call only and

14 not have the clients on the phone.

15 So clearly evidence is that there were

16 communications between Bergeson and counsel for Anthos

17 was to not involve Miss Glassman. So Miss Glassman

18 could not give us any testimony on those

19 conversations.

20 Then, if you flip to 650, there is an

21 e-mail from Mr. Bergeson to Cooley. Nobody from

22 Gunderson on it. "Mark, I spoke with Lauren. Please

23 call me." Again, evidencing conversations between

24 counsel which did not involve Miss Glassman, also did


45

1 not involve Gunderson.

2 Then, 658. There is a draft of these

3 stock -- of the purchase and sale agreement that was

4 drafted by counsel for Anthos forwarded to

5 Mr. Bergeson and also to Mr. Dettmer of Gunderson, but

6 if you go to the page before it, 657, Mr. Bergeson

7 then sends an e-mail to Miss Glassman, doesn't copy

8 anyone from Gunderson, says, "Lauren, we will review

9 and thereafter contact you with our comments."

10 Then, there is an e-mail which I am

11 struggling to find right now but --

12 THE COURT: I get the point.

13 MR. DiCAMILLO: It clearly shows that

14 Miss Park provided comments on the purchase and sale

15 agreement. So the notion that Bergeson was simply a

16 bystander in the transaction is certainly not played

17 out by the documents that have been produced.

18 And I found the e-mail, 690. There is

19 an e-mail from Miss Park to Cooley and Gunderson.

20 "Please find attached a clean redline of the transfer

21 agreement. Please note that these are being sent to

22 all counsel and may be subject to additional comments

23 and changes."

24 So it's evident that Bergeson has


46

1 discoverable information that is not available from

2 other sources. There are no facts to support

3 plaintiff's claims that we are simply doing this for

4 harassment. And the point that Mr. Trainer led with

5 that somehow relied on this letter and conversation

6 saying we weren't going to seek a deposition, doesn't

7 make any sense. The notice of deposition was attached

8 to the letter that they keep referencing. And

9 following receipt of that letter, Mr. Trainer called

10 me and said, "You know, are you still going to go

11 forward with these depositions? We don't think you

12 should." So there was clearly no reliance on their

13 side that we promised for all time not to take a

14 deposition.

15 For those reasons, we oppose the

16 motion to quash be denied.


18 Mr. Trainer?

19 MR. TRAINER: Yes, Your Honor. They

20 still have not shown any kind of compelling need for

21 this information. We have, as they requested in the

22 letter, indicated in the call, Bergeson has produced

23 all documents that it has -- that are not privileged

24 relating to this matter. So their claim that they


47

1 were just doing it for protective reasons that's been

2 satisfied. But they've shown no compelling need why

3 they have to depose Miss Glassman's litigation

4 counsel. And again, I think pointing to various

5 e-mails on which Bergeson was copied or that they may

6 have commented on the purchase agreement just doesn't

7 carry the day. They are Miss Glassman's attorney.

8 They are kept in the loop on everything, and they have

9 been. They did not negotiate the deal. They did not

10 draft the document with Anthos. So there is

11 transactional counsel. There is litigation counsel.

12 And I think the only purpose here is really to harass.

13 I am not sure I've been in litigation

14 where right off the bat they go -- the opposing side

15 goes to depose litigation counsel, and they have a

16 high burden to meet under this Court's law. And I

17 don't think they are there.

18 THE COURT: All right. Mr. DiCamillo,

19 is there any plan to depose the -- I am struggling for

20 the name now -- I can't remember what firm, Gunderson

21 firm?

22 MR. DiCAMILLO: Your Honor, we have

23 filed a motion for commission for Gunderson. So we

24 are pursuing discovery against them. Mr. Connelly can


48

1 jump in if there is anything I am missing. The short

2 answer to the question is: Yes, we are pursuing

3 information from Gunderson, but I don't think that

4 relieves -- that necessarily gets Bergeson off the

5 hook because as the e-mails demonstrate there are

6 certainly conversations pre-Gunderson that only

7 Bergeson was involved in. Even after Gunderson was

8 involved, there are still communications that Bergeson

9 was having without Gunderson people on the phone or in

10 the e-mails. So Gunderson is not going to be the

11 complete story here.

12 THE COURT: All right. I understand.

13 Counsel, this is what I want to do.

14 First of all this material, it seems to me, is

15 discoverable under our broad discovery rules. The

16 question is whether I should allow an invasion of

17 litigation counsel, which may require ultimately the

18 recusal of that counsel on a -- what is really, it

19 seems to me, a peripheral set of issues. It may turn

20 out not to be peripheral, but this is how I want to

21 proceed. Once the defendants have taken the

22 deposition of the Gunderson firm, you can renew this

23 motion. We will have a brief telephone conference,

24 and you can tell me at that time whether you have


49

1 sufficient evidence to go forward with your claims or

2 how the information you have gotten from Gunderson

3 effects your need to take the deposition of current

4 counsel.

5 Until then, I am going to grant

6 conditionally the motion to quash. It seems to me

7 once the record is more fully developed the defendants

8 will have a better feel for whether this information

9 is truly necessary to their case or not.

10 I am loathe, as you can tell, to allow

11 discovery that may well disqualify counsel. However,

12 if it turns out that after taking the Gunderson firm's

13 deposition that there were significant things in the

14 creation of this deal that were done by litigation

15 counsel that bear on the issues, then I think those

16 depositions will have to be taken. But I would like

17 to have the benefit of the Gunderson information being

18 developed first.

19 Was that clear enough, counsel?

20 MR. TRAINER: Thank you Your Honor.

21 MR. DiCAMILLO: Yes, Your Honor.

22 THE COURT: All right. There is one

23 more motion. I don't know whether you consider it

24 fully briefed, you want to go forward with it or not,


50

1 and it's the motion to compel from CrossFit.


3 Mr. DiCamillo. We did not have the opportunity to

4 submit a reply, but I am happy to go forward here.

5 And then once you have heard from us, you can decide

6 whether further submissions are necessary. But I

7 think it's straightforward enough that we can resolve,

8 at least part of it, this morning.

9 THE COURT: All right. I would be

10 happy to hear you. I will tell you, however, that the

11 benefit of a reply on California law involving the

12 business strategy immunity and the common interest

13 doctrine may very well be helpful, but with that

14 caveat, go ahead.

15 MR. DiCAMILLO: Sure.

16 Your Honor, as I said in connection

17 with the motion to quash, the defendants have two

18 basic claims against Miss Glassman. First, that she

19 breached the fiduciary duty by providing Anthos with

20 confidential information in furtherance of the

21 transaction that we believe is harmful to the company.

22 Also, second, that her objection to the purchase of

23 the plane is pretext designed to create gridlock.

24 In order to attempt to prove our


51

1 claims, we are entitled to communications between Miss

2 Glassman and her representatives on the one hand and

3 Anthos and its representatives on the other hand.

4 Miss Glassman has produced some but not all of those

5 communications and is attempting to use various

6 privileges to shield documents that she doesn't like

7 from discovery.

8 The threshold issue here is choice of

9 law. Plaintiff contends that California law applies.

10 However, she cites no case in support of that

11 proposition, the choice of law proposition. The facts

12 that she relies on are that Anthos is a California

13 company, that Anthos hired a California law firm, and

14 that she hired a California law firm. I am certainly

15 not aware of any authority which says that the

16 location of your lawyer dictates choice of law and

17 such a rule wouldn't really make any sense.

18 The more salient facts are that

19 CrossFit is a Delaware corporation. Both Miss

20 Glassman's claims against us and our claims against

21 Miss Glassman involve issues of Delaware law.

22 Plaintiff chose to initiate this litigation in

23 Delaware. The stock purchase agreement between Miss

24 Glassman and Anthos is governed by Delaware law and


52

1 has a Delaware choice of forum provision in it, and

2 that item was the subject of negotiation.

3 If you look in the documents that I

4 sent over to Your Honor yesterday morning at Bates No.

5 703, the contract originally out of California choice

6 of law and California choice of forum provision in

7 there that was changed to Delaware, Delaware in both

8 instances. Under those circumstances, Delaware law

9 should apply. And that's exactly what Vice Chancellor

10 Noble held in the 3Com case. The case I'm referring

11 to is 3Com Corporation v. Diamond II Holdings, Inc.

12 decided by the Court on May 31st, 2010. The Westlaw

13 cite is 2010 WL 2280734.

14 I will just read a paragraph from that

15 where Vice Chancellor Noble was faced with a decision

16 on what choice of law should apply to privilege

17 issues. Vice Chancellor Noble noted, "The parties

18 selected Delaware law to govern the Merger Agreement,

19 and chose Delaware as the forum for any disputes

20 arising out of the Merger Agreement. Delaware has

21 considerable interest in ensuring that corporate

22 entities seek a business combination under its laws

23 may expect consistent and predictable treatment when

24 appearing before its Courts. Most mergers and other


53

1 important corporate transactions necessarily entail

2 the involvement of business people, attorneys, and

3 advisors located throughout the country, if not the

4 world. Newco's focus on the communications' location,

5 if followed, could foster inconsistency in a context

6 where predictability is at a premium. Indeed, while

7 the record shows that many of challenged

8 communications originated or were received in

9 Massachusetts, several others both originated and were

10 received outside of that jurisdiction. Applying

11 Delaware law in this context would avoid the

12 uncertainty generated by the varying loci of

13 communications involved both in this case and others

14 like it. This, in turn, would foster predictability

15 for parties to major corporate transactions that have

16 availed themselves of Delaware law."

17 So we think under that holding

18 Delaware law should be the appropriate choice of law

19 in this context. Plaintiff is clearly just using

20 California law because she likes the holding in the

21 Oxy case under the common interest privilege. It is

22 curious, however, that when discussing the business

23 strategy privilege, plaintiff makes no mention of

24 California law and argues exclusively under Delaware


54

1 law, presumably because she doesn't like the

2 California law and business strategy privilege. And

3 in fact, it's my understanding that California does

4 not recognize the business strategy privilege. I am

5 not prepared to say that authoritatively because I

6 haven't completed the research, but that's at least my

7 preliminary findings.

8 So getting to the meat of the issue,

9 once you are looking at it through a Delaware law

10 lens, I think plaintiff has heavily framed the issues

11 by breaking down the disputes into three categories,

12 looking at communications prior to the signing of the

13 purchase and sale agreement, then in between signing

14 and litigation and then post-litigation. In fact, I

15 think probably only two categories are necessary. So

16 I am just going to focus on pre-signing of the

17 agreement and post-signing of the agreement.

18 Turning first to pre-signing,

19 plaintiff relies exclusively on the California Oxy

20 case to argue that a common interest exists or may

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

22 think, under that case that a common interest

23 definitely exists.

24 However, that case and that holding


55

1 are directly at odds with Delaware law. In Zirn v.

2 VLI, this Court made very clear that communications

3 between the merging parties prior to the execution of

4 the merger agreement are not privileged. There have

5 been -- we cited to them over the weekend, a Superior

6 Court case, Titan Investment Fund, which essentially

7 reaches the same conclusions that pre-signing of a

8 contract, the parties to the contract do not have a

9 common interest that is protectable in terms of the

10 legal attorney-client privilege or business strategy.

11 So there is no basis to determine common interest

12 before the signing of an agreement.

13 Drafts of merger agreements, which are

14 exchanged between parties, are typically produced in

15 litigation in this Court. In fact, plaintiff here has

16 produced drafts of the purchase agreement. There is

17 no reason why analysis for the documents she is trying

18 to withhold should be any different from the analysis

19 for drafts of the purchase agreement. It is

20 reasonable to infer that there is something in those

21 documents she doesn't want us to see, but that's not a

22 basis for withholding them.

23 And on the overall business strategy

24 question the types of things they are trying to


56

1 withhold don't really fall within business strategy.

2 Business strategy protection doesn't protect plans

3 that are already in place. Purchase agreement has

4 already been signed. The amount of the bid has

5 already been known. We have offered to take these

6 documents on an attorney-eyes-only basis.

7 And I think it's important to focus on

8 what we are not asking for. We are not asking Miss --

9 if there is an internal communication between Miss

10 Glassman and her attorneys, or anyone for that matter,

11 which says, "I would take Anthos offering me X, I am

12 going to counter at Y, but I would really take Z."

13 That's business strategy, and same for Anthos, to the

14 extent Anthos has those internal communications. "We

15 are offering Miss Glassman X. She is countering at Y.

16 We would take Z." That's the kind of thing that the

17 business strategy has historically protected. We are

18 not asking for that.

19 What they are trying to withhold are

20 documents that were exchanged or communications that

21 were exchanged between Miss Glassman and Anthos.

22 Those are not protected by the business strategy

23 privilege, and no common interest privilege can attach

24 prior to the signing of the agreement.


57

1 THE COURT: How can I tell what kind

2 of documents are being withheld without a privilege

3 log?

4 MR. DiCAMILLO: Well, Your Honor, on

5 the pre-signing agreement document I don't think you

6 need a privilege log because our position is no

7 privilege at all would possibly attach if the

8 communications were exchanged between Anthos and Miss

9 Glassman.

10 Different for the post-signing, and

11 let me turn to that now. Post-signing. We

12 acknowledge that there is at least an argument that

13 they have some common interest privilege applies

14 post-signing of the agreement. But that doesn't mean

15 that everything is immune from the discovery. Even if

16 there is a common interest that attaches after the

17 signing of the agreement, there's got to be some

18 underlying privilege to protect. For example, there's

19 got to be some rendering of legal advice if there is

20 going to be attorney-client privilege.

21 So in order to evaluate plaintiff's

22 claim of privilege post-signing, I think we do need to

23 know exactly what they are withholding, and I am

24 skeptical that everything they are purporting to


58

1 withhold would be protected by any privilege.

2 For example, I am reading from

3 Paragraph 31 of their opposition to the motion to

4 compel. They say, "Counsel for Miss Glassman and

5 Anthos and counsel for Anthos also communicated and

6 strategized over the hurdles to overcome with respect

7 to effectuating the Sale and any opposition they might

8 receive from Mr. Glassman. These strategic

9 communications with respect to the reaction to the

10 Sale by CrossFit, Mr. Glassman and others are

11 protected by the attorney-client privilege, the work

12 product doctrine and the common interest doctrine."

13 That doesn't sound like legal advice

14 to me. I am not saying there couldn't be some legal

15 advice in there, but I don't think with respect to the

16 post-signing communications we need a log. We asked

17 them to provide a log on Monday, but they haven't

18 produced them. That's our argument on the motion to

19 compel.

20 But let me raise one other issue which

21 is related. The parties, as I indicated to the Court

22 in my letter yesterday, worked over the Labor Day

23 weekend. It started working before that to deal with

24 things like deposition scheduling, scope of document


59

1 production, and late last week the parties sketched

2 out a preliminary plan for the scheduling of

3 depositions.

4 On Friday, Mr. Trainer, Mr. Connelly,

5 and I had a call, and we slated Miss Glassman's

6 deposition in for tomorrow. And we indicated that

7 because of the issues on the motion to compel that,

8 you know, we very well might need to change that if we

9 were going to be getting additional documents so that

10 we didn't have the need to redepose people, and we

11 also wanted to get all the documents that we were

12 entitled to prior to taking Miss Glassman's

13 deposition.

14 On Sunday, Mr. Trainer sent an e-mail

15 to Mr. Connelly and I outlining his position on

16 various of the issues, which are the subject of his

17 motion to compel. And Mr. Connelly responded back, as

18 he had on Friday, "Thanks. You know, we will look at

19 this and evaluate it, but we really think we need to

20 push off Miss Glassman." And you know, we made

21 efforts to move around some other depositions so that

22 we could fit others into scheduling for tomorrow.

23 On a call yesterday, we again

24 indicated our position that we think Miss Glassman


60

1 should be moved, and for the first time, plaintiffs

2 indicated that they were not willing to move her

3 deposition.

4 So notwithstanding the fact that we

5 had mentioned it on Friday and Sunday, they never

6 said, "Oh, no. We are not moving her." They remained

7 silent. So we assumed -- obviously incorrectly --

8 that they were agreeable to moving her, and it now

9 turns out that they are not. Mr. Connelly is in

10 Phoenix. He is prepared to take her deposition

11 tomorrow, if necessary, but we really think that the

12 deposition should be pushed off. There is no reason

13 that it has to go forward tomorrow. And if there is a

14 possibility that we are going to get more documents,

15 we think that we should get those documents first

16 before we have to depose her.

17 Now, we are on obviously a schedule.

18 Plaintiffs have a brief. We have preliminary

19 injunction scheduled for the end of September.

20 Plaintiff's opening brief is due fairly shortly after

21 the close of depositions, but we can certainly move

22 around dates with respect to the briefing. And the

23 reality is -- I am not sure that we really need this

24 hearing before September 30th. Obviously, it's


61

1 scheduled, and we are prepared to go forward with it,

2 but I am not sure it's really necessary in the overall

3 context of things.

4 Your Honor will recall that the last

5 time we were together on an application for TRO an

6 issue had arisen that Cirrus, the seller of the

7 aircraft, had asked us for further assurances that we

8 were going to complete the sale, complete the purchase

9 on September 30th. Plaintiffs wanted us not to

10 provide any assurances. Your Honor denied TRO and

11 told us, you know, there is a possibility that you can

12 enjoin the sale.

13 We sent a letter to Cirrus following

14 that hearing which indicated that as far as the

15 company was concerned we intended to complete the

16 purchase. We alerted Cirrus to the pendency of this

17 litigation, the fact that Miss Glassman was trying to

18 stop the purchase, and that we had -- that the

19 purchase could potentially be stopped.

20 However, Mr. Glassman indicated, as I

21 am happy to send Your Honor a copy of this letter,

22 "However, in the event that CrossFit cannot complete

23 the purchase of the airplane due to Miss Glassman's

24 litigation or for any other reason, I hereby undertake


62

1 to complete the acquisition, on the same terms as

2 those previously agreed upon by you and CrossFit, in

3 my personal capacity and on my own behalf."

4 So the reality is, as I said at the

5 last hearing, they're never going to be able to show

6 irreparable harm because if the corporation can't do

7 this purchase, Mr. Glassman is committed in writing to

8 do it in his personal capacity.

9 So to the extent they are -- the

10 long-winded way, to the extent there are scheduling

11 issues, we can work them out. We don't think Miss

12 Glassman's deposition should have to go forward

13 tomorrow.

14 And, you know, on a related topic,

15 Your Honor has indicated that we need to take

16 Gunderson before we take Bergeson's deposition, and we

17 would just ask that plaintiffs assist us in

18 facilitating that deposition. We are having problems

19 scheduling the deposition of the plaintiff's financial

20 advisor. We have asked for assistance on that one as

21 well. But certainly if the Court's ruling is that we

22 have to take Gunderson before Bergeson, we need some

23 help from plaintiff to get that accomplished.



63

1 Mr. Trainer?


3 If I might, can I take it in reverse

4 there?

5 THE COURT: Sure.

6 MR. TRAINER: Deal with Miss

7 Glassman's deposition first.

8 THE COURT: Sure.

9 MR. TRAINER: This is the first I've

10 heard of flexibility on the September 30th date for

11 the purchase of the aircraft, so not really ready to

12 respond to that.

13 THE COURT: I'm -- maybe I am laboring

14 under a misconception. I thought that that hearing

15 would involve only whether Mr. Glassman had acted

16 withing the scope of his authority in binding the

17 corporation or not and, therefore, whether the sale of

18 the airplane -- and there are other issues as well,

19 but that's the predicate one -- whether the sale or

20 the purchase of the airplane should be enjoined.

21 MR. TRAINER: That was my

22 understanding as well, Your Honor.

23 THE COURT: So I don't know what these

24 other -- I understand there is a theory on the part of


64

1 the defendants that this litigation itself is all a

2 ruse and a stalking horse to gain leverage with

3 respect to this sale of Miss Glassman's shares, but I

4 don't know what that has to do with the preliminary

5 injunction hearing itself.

6 So I will let Mr. DiCamillo address

7 that as well, but that is why I am having a little

8 trouble understanding what difference it makes whether

9 we get all these depositions in before that

10 preliminary injunction hearing.


12 Mr. DiCamillo. Let me address that.

13 Certainly, the primary issue on the

14 table is plaintiff's motion for preliminary injunction

15 with respect to the sale. The other issues overlap,

16 and we've had discussions with Mr. Trainer about this.

17 We've discussed whether there were ways we could focus

18 the deposition now on just the plane issue, and both

19 parties agreed that there was really no easy way to do

20 that because a lot of our defense to the preliminary

21 injunction application is going to involve the

22 plaintiff's laches, plaintiff's unclean hands,

23 plaintiff's breach of fiduciary duty in connection

24 with all of this being a pretext and designed to


65

1 create gridlock. So the issues are intertwined.

2 So while I agree with Your Honor that

3 the only thing on the table at the end of September is

4 their motion to enjoin the purchase of the plane, all

5 the issues are intertwined.

6 THE COURT: Well, tell me this,

7 Mr. DiCamillo, why do we even need -- maybe this

8 should be addressed to Mr. Trainer, but if there is an

9 undertaking by Mr. Glassman that if I ultimately

10 decide that the purchase of the aircraft by the

11 corporation is improper, that he is willing to

12 undertake to pay for the airplane himself -- and I

13 assume that would mean the entire purchase price and

14 not just the remainder after the down payment -- but

15 if that's the case, why do we even need a preliminary

16 injunction hearing?

17 MR. DiCAMILLO: That's my exact point,

18 Your Honor. I don't think we do.

19 THE COURT: All right. Let me hear

20 from Mr. Trainer then.

21 MR. TRAINER: Your Honor, a couple

22 things. I am a little confused by all of that for

23 several reasons.

24 First of all, we have not, to my


66

1 knowledge, seen a final version of the further

2 assurance letter that was given to Cirrus Aircraft.

3 Second, as you will recall when we were before Your

4 Honor in early August, the issue was that the company

5 was giving further assurances, and that is what we

6 wanted to stop. The draft of the further assurance

7 letter, at least the one I had seen, had Mr. Glassman

8 giving further assurances which was certainly not what

9 we, as the plaintiffs, were led to believe or I think

10 Your Honor was led to believe when we were heard on

11 TRO.

12 THE COURT: That's correct. But

13 doesn't it obviate the potential harm that the TRO

14 would prevent?

15 MR. TRAINER: If there is going to be

16 no question that the company is not going to buy the

17 airplane, Your Honor, I agree. If Mr. Glassman has

18 the wherewithal to do what is represented in the draft

19 letter, I agree with that too. So in other words, if

20 there is no exposure to the company, I agree we do not

21 need the preliminary injunction hearing.

22 THE COURT: All right. Why don't you

23 address the other issues that have been raised in the

24 motion to compel?


67

1 MR. TRAINER: Yes, Your Honor. I was

2 working backward.

3 THE COURT: I know you were. That's

4 fair enough. I am not suggesting you weren't doing

5 what you told me you would do.


7 As Your Honor pointed out, the

8 defendants have this concept that the whole airplane

9 litigation was or is a way to gridlock the company. I

10 can assure the Court that there is documents and

11 e-mails from CrossFit's chief financial officer that

12 show precisely a different story and show how quickly

13 Miss Glassman moved when she did find out that the

14 plane purchase was going forward.

15 But stepping back from that, Miss

16 Glassman is not the snarky character that the

17 defendants would have the Court believe. She wants to

18 monetize her investment in CrossFit. She wants to be

19 done with CrossFit. She wants her divorce finalized.

20 She is a single mother of four. She does not enjoy

21 this litigation, and frankly, she's not wild about

22 having her deposition taken tomorrow. It's been

23 scheduled.

24 Yes, there was some indication that if


68

1 there were documents that maybe we should produce

2 late, maybe we should think about rescheduling. But

3 she is ready to have her deposition taken tomorrow. I

4 am headed out there tonight. Mr. Bergeson is already

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

6 should just do it. It's one of the big depositions in

7 this case. It's been scheduled. If there are

8 documents that Your Honor would order be produced

9 subsequent, we can do a clean-up deposition. But its

10 one that Miss Glassman has been ready for, and I don't

11 think there is any real practical need to postpone it.

12 THE COURT: All right. Let's turn to

13 the motion to compel.

14 MR. TRAINER: Your Honor, on the

15 substance of the motion to compel, Your Honor -- and I

16 alluded to this earlier -- the big difference in this

17 case is that Mr. Glassman, who is represented by the

18 same counsel that represents the company, is a

19 competing bidder. And so we do not think that he

20 should be given documents that would in anyway give

21 him an inside track to the bids that he has made as

22 recently, as I said earlier, last week. And Your

23 Honor the business strategy privilege is to prevent a

24 party from using litigation in this court to get


69

1 certain advantages in the commercial world. And I

2 really do have to give defendant's counsel credit

3 since they, in their request for production, they

4 weren't subtle about it.

5 Request Number 14 says, "All documents

6 regarding Anthos' attempt to value CrossFit or your

7 equity interest therein, including any valuation,

8 analysis undertaken, and any documents or other

9 information used as inputs in such evaluation and

10 analysis."

11 Fifteen. "All documents regarding

12 Anthos' management of and/or goals for CrossFit after

13 the consummation of the purchase transaction."

14 Sixteen. "All documents regarding

15 Anthos' plans related to current senior management."

16 That's just an example, Your Honor.

17 So they are going right to the heart

18 of Anthos' strategy, right to the heart of the

19 valuation and negotiation that resulted in this deal.

20 So I think that is clearly protected for someone who

21 is, on the other side, trying to match or exceed the

22 offer that has been made by Anthos. And in all of

23 that, Your Honor --

24 THE COURT: Is that still an open


70

1 possibility? I thought this transaction was set

2 except for the TRO and the prohibition on sale by the

3 Arizona court? Is this something that your client

4 views as an ongoing negotiation for the stock that she

5 owns?

6 MR. TRAINER: My client doesn't, Your

7 Honor, but I think it's pretty clear that the

8 defendants do consider it ongoing negotiations. And

9 that perhaps if they propose a price that is high

10 enough, Miss Glassman will risk breaching her

11 agreement with Anthos and accepting that offer because

12 they are continuing to bid.

13 THE COURT: All right. But isn't it

14 really your perspective that I should be interested

15 in?

16 MR. TRAINER: Well, Your Honor, I

17 think in this situation, yes, it's our perspective.

18 But they are asking for information should, you know,

19 one of the covenants not be met, should Anthos --

20 should it go past December 31st, should Anthos decide

21 that it has the right not to consummate the

22 transaction. It really puts Mr. Glassman in the

23 captain's seat because, one, he succeeded in driving

24 away Anthos, and, two, he has all the information


71

1 relating to the evaluation and the bidding between

2 Anthos and Miss Glassman.

3 THE COURT: Okay. I understand your

4 argument.

5 MR. TRAINER: Okay. And so in all of

6 that, Your Honor, we have really just refused -- and

7 this is on the business strategy privilege -- refused

8 to produce a very narrow set of documents. And they

9 are specifically valuation documents for either Miss

10 Glassman or Anthos. Miss Glassman or Anthos plans to

11 bring the sale to a close because, as we've seen, the

12 defendants are working very hard to prevent exactly

13 that. We have also refused to produce documents by

14 indicating how or what manner Miss Glassman judged

15 Anthos' proposal and her decision as just how to

16 respond, and also any documents that may reflect

17 Anthos' current and future plans for CrossFit. Other

18 than that on the business strategy, Your Honor, we

19 have produced everything.

20 As to the choice of law, I am not

21 nearly as clever as Mr. DiCamillo gives me credit for.

22 It seems that the issue of what is to be produced in

23 this litigation should be controlled by Delaware's

24 business strategy, white knight, whatever, immunity.


72

1 I think communications that occurred

2 prior to the litigation solely in California should be

3 controlled by the California rules of privilege. And

4 that's why we cited the Oxy Resources case and also

5 the STI Outdoor case to Your Honor. And I think it's

6 especially appropriate in this case where the other

7 side demanding the documents is a competing bidder. I

8 think it might be different if it were simply the

9 company asking for the documents and the company was

10 represented by separate counsel, but saying we have

11 agreed to attorneys-eyes-only protections for these

12 documents when the company is also represented in

13 competing bidder -- or counsel for the company is also

14 representing the competing bidder is just wholly

15 inadequate.

16 So we think we have taken a very

17 narrow approach to the business strategy here. We

18 also think the fact that communications regarding

19 these strategies that were shared between counsel for

20 Anthos and counsel for Miss Glassman both before and

21 after the execution of the purchase agreement fall

22 well within that privilege, and we do not believe they

23 should be produced.



73

1 Anything else, Mr. DiCamillo?

2 MR. DiCAMILLO: Just very briefly,

3 Your Honor.

4 With respect to the business strategy

5 argument, Mr. Trainer just said they're taking a very

6 narrow view of it. I think in actuality they're

7 expanding it beyond a position that its never taken

8 before. They are -- the business strategy privilege

9 is meant to protect internal communications. They are

10 trying to protect communications that went back and

11 forth between Miss Glassman and Anthos during a

12 setting when they were adversaries. That is not

13 something that the business strategy privilege has

14 ever protected.

15 With respect to the letter to Cirrus,

16 it has been produced to plaintiff. The document

17 number is CRF1123. As I said before, I am going to

18 provide a copy to Your Honor since we talked about it

19 so much today.

20 And on the note of Miss Glassman's

21 deposition, it's not just a simple matter of well

22 let's do it tomorrow and then if you get more

23 documents, we can just do it again. You know, part of

24 taking a deposition is knowing what is out there,


74

1 knowing the universe of what is out there and --

2 THE COURT: I don't need anymore

3 argument on -- I understand the issues with respect to

4 the deposition. Anything else?

5 MR. DiCAMILLO: I have nothing else.

6 THE COURT: I didn't mean to cut you

7 off, but I do understand that.

8 Counsel, this is what I think we need

9 to do first, because I think there will be probably

10 more production. I think the deposition of Miss

11 Glassman needs to be rescheduled. And I say that for

12 two reasons. One is that I believe there will be

13 other documents produced, but the other involves

14 whether we are going to go forward on the schedule

15 that we have set up. It seems to me that if

16 Mr. Glassman's position is that he is -- and

17 obviously, this is going to have to be demonstrated.

18 There need to be affidavits filed or some other

19 demonstration, but if he is both willing and

20 financially able to finance the purchase of this plane

21 himself, if I ultimately determine that he did not

22 have the authority to cause the corporation to

23 purchase the plane, either because it was outside of

24 the scope of his authority as an officer or because it


75

1 was a breach of fiduciary duty or some other issue, if

2 that is the case, then there can't be irreparable

3 harm, and we should simply go forward to a

4 determination of the legal issues. And I don't need a

5 preliminary injunction hearing.

6 So I expect both sides to get

7 together. Mr. DiCamillo, you are obviously going to

8 have to demonstrate those two things. I don't think

9 the letter itself has done it. But it seems to me

10 likely that, if that's the case, we are not going to

11 need a preliminary injunction hearing at the end of

12 September. So that changes the whole structure of

13 this matter it seems to me.

14 Second, I would appreciate some

15 briefing on the issue of choice of law and the

16 application of these two doctrines under California

17 law, if that proves to be the case. I also think I

18 need a privilege log in order to resolve these

19 questions in a reasonable manner. So I am going to

20 direct you to do both of those things on a schedule

21 that I am going to let you set.

22 Let me say two preliminary things. It

23 seems to me unlikely that the common interest doctrine

24 is going to prevent the production of documents that


76

1 were circulated before there was an agreement when

2 there was still an adversary position between the

3 parties, number one, and number two, I have the

4 authority -- and I intend to exercise it -- to prevent

5 the production of documents where it appears to me the

6 primary purpose of that production is to give one of

7 the parties, Mr. Glassman, a leg up in the litigation.

8 He certainly is entitled to documents to prosecute in

9 his cross claims, but not in his position as a bidder

10 for Miss Glassman's shares. I am concerned about that

11 issue. And I intend to use my inherent power to

12 prevent that from happening. I am telling you this

13 before you do the additional work because it seems to

14 me that there should be an agreement between the

15 parties or among the parties as to what is producible.

16 This case is generating a lot of

17 motion practice, and it seems to me that it's not

18 helpful motion practice for the most part. I

19 understand that there are legitimate issues between

20 the parties that have to be resolved, some of them

21 have to be resolved by the Court, but issues such as

22 the timing of depositions it seems to me, if those are

23 all referred to the Court, then the process breaks

24 down and it grinds to a halt.


77

1 My broader point is this, this is, at

2 its heart, a divorce matter and distribution of assets

3 between these two individuals. I don't know if there

4 is any possibility of settlement. I don't know what

5 is going on in the Arizona Family Court litigation.

6 But this is turning into a litigation where there is

7 more litigation than I think is probably warranted.

8 So I would urge you to get together, try to resolve

9 the underlying issues if you can. If you can't, try

10 to resolve the discovery issues, and to the extent you

11 can't, I am going to require and ask you to put your

12 heads together and come up with a schedule,

13 supplemental briefing, and a privilege log on the

14 common interests and the business strategy doctrines.

15 But I have given you kind of how I am

16 looking at the issue now in the hopes that it will aid

17 your settlement. So I am going to ask you for a time

18 table, Mr. DiCamillo, within which you can have

19 affidavits submitted that would tend to obviate the

20 need for the preliminary injunction hearing.

21 MR. DiCAMILLO: Certainly, Your Honor.

22 I think we could get those promptly. As you know,

23 there is stuff going on in Arizona today. So I

24 probably can't get them today, but you know,


78

1 Mr. Connelly can correct me if I am wrong, I don't see

2 any reason why we can't provide them by the end of the

3 week.

4 MR. CONNELLY: I agree.

5 THE COURT: All right. What I am

6 going to do is this: If you have your calendars

7 ready, let me set up another telephone conference in

8 two weeks, and we can discuss the scheduling going

9 forward. Two weeks from today would be the 19th. I

10 can do it in the afternoon of the 19th if that would

11 suit you.

12 MR. TRAINER: That's fine by

13 plaintiff, Your Honor.

14 MR. DiCAMILLO: Mr. DiCamillo. It

15 works for me.

16 THE COURT: All right. Let's say

17 1:00, September 19th, we will get back together. In

18 the meantime, obviously, discuss the discovery issues.

19 If you can't resolve them promptly, give me a letter

20 telling me under what schedule you are going to submit

21 privilege logs and the supplemental briefing, and I

22 will decide -- as soon as I get those, I will decide

23 that promptly, I promise you.

24 Anything else we can do here this


79

1 morning?

2 MR. DiCAMILLO: Not from the

3 defendants, Your Honor. I think all parties

4 appreciate the time and patience you've had with us on

5 this matter.

6 MR. TRAINER: Absolutely, Your Honor,

7 for plaintiff, appreciate it.

8 THE COURT: All right. Well, I

9 appreciate your willingness to work together. It

10 sounds like some of these issues may fall away. And,

11 of course, I am anxious to hear what happens in the

12 Arizona litigation if I don't talk to you before. If

13 you need me, obviously, you know how to get a hold of

14 me. Otherwise, I will talk to you at 1:00 on

15 September 19th. Thank you very much, counsel.

16 Good-bye.

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

18

19 - - -

20

21

22

23

24


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

Anthos CrossFit Teleconference on September 5th

Documents

Transcript of Anthos CrossFit Teleconference on September 5th