Manbro Energy Corporation v. Chatterjee Advisors, LLC

Background

This order resolves five motions in limine filed by Chatterjee Advisors, LLC, Chatterjee Fund Management, LP, Chatterjee Management Company, and Dr. Purnendu Chatterjee, and eight motions in limine filed by Manbro Energy Corporation. A motion in limine asks the court to decide before trial whether particular evidence or arguments may be presented.

The court stated that Manbro’s claims are not governed by Delaware’s business-judgment rule or entire-fairness test. Instead, the implied covenant of good faith and fair dealing—an obligation to exercise contractual discretion reasonably and consistently with the contract’s purpose, terms, and the parties’ expectations—controls the relevant analysis. The court said the jury may consider whether the defendants acted consistently with the fund’s stated purpose of disposing of investments in an orderly way intended to maximize long-term value for former and continuing members. The court also stated that Manbro was not entitled under the agreement to the full or fair value of the Haldia shares; upon withdrawal, Chatterjee Advisors was required to pay the lesser of cost or fair value.

Defendants’ Motions

1. Defendants’ First Motion in Limine (Dkt. No. 233) was granted in part and denied in part. Manbro may not argue that the transaction failed the entire-fairness test. However, evidence about the defendants’ decision-making process and the profits they allegedly obtained at investors’ expense may be admitted because it is relevant to whether they acted reasonably and in good faith.

2. Defendants’ Second Motion in Limine (Dkt. No. 235) was granted in part and denied as moot in part. Manbro may not argue that it never assented to the WPPE LLC Agreement or that the lack of negotiation made the agreement’s terms less binding. The motion was denied as moot to the extent it addressed arguments Manbro said it would not make. The order does not bar background evidence about the timing of Manbro’s investment and the parties’ various agreements.

3. Defendants’ Third Motion in Limine (Dkt. No. 237) was denied as moot because Manbro agreed that neither side may introduce outside evidence about interpreting contractual provisions the court found unambiguous.

4. Defendants’ Fourth Motion in Limine (Dkt. No. 240) was granted in part and denied in part as moot. Evidence or argument about Dr. Chatterjee’s 1993 neither-admit-nor-deny settlement with the Securities and Exchange Commission was excluded under Rules 403, 404, and 608(b) of the Federal Rules of Evidence. The motion was denied as moot regarding Dr. Chatterjee’s retention of Rajat Gupta as a consultant in 2016 because Manro represented that it would not offer that evidence.

5. Defendants’ Fifth Motion in Limine (Dkt. No. 242) was granted in part and denied in part. Evidence of what the defendants believed the unrealized value of the Haldia shares to be may be used because it is relevant to liability. But Manbro may not use that evidence during the liability phase to argue that the defendants were required to pay the full value of the shares, including unrealized appreciation. Evidence of the shares’ true value was not admissible to establish liability, although valuation evidence could be relevant to damages as described in the order.

Manbro’s Motions

6. Manbro’s First Motion in Limine (Dkt. No. 243) was granted in part and denied in part. The court stated that the trial would be divided into liability and damages phases. Evidence about minority and marketability discounts was not categorically excluded. At the liability phase, valuation evidence may be used only insofar as it helps show what the defendants knew or believed when they compelled Manbro’s withdrawal. At the damages phase, marketability and possibly minority-shareholder discounts may be relevant to expectation damages. The court also denied Manbro’s request to exclude the testimony of the defendants’ expert Marc Brown; the criticisms of his valuation model could be addressed through cross-examination and went to the weight of the testimony rather than its admissibility.

7. Manbro’s Second Motion in Limine (Dkt. No. 246) was granted in part and denied in part. Evidence of actual sales of Haldia shares may be admitted when relevant to what the defendants knew or believed at the liability phase and, at the damages phase, without that limitation. Evidence of rejected bids was excluded because of its limited value and the risk of prejudice, delay, or jury confusion.

8. Manbro’s Third Motion in Limine (Dkt. No. 248) was granted. Evidence about Manbro’s returns on other investments with the defendants or on unrelated investments was excluded as irrelevant and potentially prejudicial. The order states that the defendants may respond if Manbro opens the door by introducing such evidence, and both sides may present background evidence about the investment timeline and agreements.

9. Manbro’s Fourth Motion in Limine (Dkt. No. 250) was granted. Evidence about the defendants’ waiver of management fees was excluded because its slight relevance to the defendants’ conduct years later was substantially outweighed by the risk of prejudice. The defendants may introduce the evidence if Manbro opens the door by putting the waiver or the defendants’ motives for it in issue.

10. Manbro’s Fifth Motion in Limine (Dkt. No. 252) was granted. Evidence about other investors’ responses to the final distribution was excluded under Rule 403 because its limited probative value was outweighed by the risk that the jury would speculate about why those investors accepted the distribution and signed releases.

11. Manbro’s Sixth Motion in Limine (Dkt. No. 254) was granted. Evidence about Manbro’s class allegations, its press outreach, its motives for filing the lawsuit, how it funded the case, and its effort to pressure the defendants to settle was excluded as irrelevant and potentially prejudicial. The order allows an exception if Manbro opens the door by presenting evidence about other investors as potential beneficiaries of the lawsuit.

12. Manbro’s Seventh Motion in Limine (Dkt. No. 256) was granted in part and denied in part. The defendants may not offer evidence of the contents of an unproduced “non-disposal undertaking” because they did not sufficiently show that an executed original existed and was later lost or destroyed. Expert testimony based on the assumption that the undertaking was executed was also excluded. The defendants may offer evidence of the Rupee Loan Facility Agreement if they do not use it to argue that the non-disposal undertaking was executed.

13. Manbro’s Eighth Motion in Limine (Dkt. No. 258) was granted in part. People who were not present at the meeting with Mr. Basu may not give second-hand testimony to establish what happened at that meeting, subject to any applicable exception to the hearsay rule. Before offering testimony about the Bose Report, the defendants must make an offer of proof to Manbro at least 24 hours beforehand. Unresolved admissibility disputes must be presented to the court by letter no later than 6:00 p.m. the day before the testimony.

Disposition

The court directed the Clerk of Court to close the listed motions. This order resolved evidentiary issues for trial; it did not enter a final judgment on the underlying claims.