IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE STACEY KOTLER, ) ) Plaintiff, ) ) v. ) C.A. No. 2017-0457-JRS ) SHIPMAN ASSOCIATES, LLC, ) a Delaware limited liability company, ) ) Defendant. ) MEMORANDUM OPINION Date Submitted: May 15, 2019 Date Decided: August 21, 2019 A. Thompson Bayliss, Esquire, Adam K. Schulman, Esquire and Daniel J. McBride, Esquire of Abrams & Bayliss LLP, Wilmington, Delaware and Steve Wolosky, Esquire and Renée M. Zaytsev, Esquire of Olshan Frome Wolosky LLP, New York, New York, Attorneys for Plaintiff Stacey Kotley. Blake Rohrbacher, Esquire, Kevin M. Gallagher, Esquire, John M. O’Toole, Esquire and Ryan D. Konstanzer, Esquire of Richards, Layton & Finger, P.A., Wilmington, Delaware, Attorneys for Defendant Shipman Associates, LLC. SLIGHTS, Vice Chancellor Marissa Shipman (“Marissa”) began making cosmetics in her kitchen in 1999.1 She formed The Balm.com, Inc. later that year and changed the company’s name to Shipman Associates, Inc. four years later.2 In 2003, Marissa hired her friend, Stacey Wexler (now Stacey Kotler), to sell The Balm cosmetics as an independent contractor. By all accounts, Kotler was a highly effective salesperson and the Company flourished. The Company paid Kotler only on sales commissions. Accordingly, after she had demonstrated her worth to the Company, as reflected in the Company’s steady growth, Kotler asked the Company to reward her with equity. Marissa’s father, Robert Shipman (“Robert”), had joined the Company soon after its formation to assist his daughter with the business side of the Company’s operations. Robert responded to Kotler’s inquiry about equity, in essence, by telling her that she deserved equity and assuring her the Company would work with her to make that happen. Over time, as the Company seemed to string her along, Kotler would renew her request for equity and Mr. Shipman would renew his response. Still, nothing happened. All the while, the Company continued to grow. 1 I refer to the Shipmans by first name to avoid confusion. 2 As explained below, in 2014, Shipman Associates, Inc. (the “Company”) became Defendant, Shipman Associates, LLC. 1 Eventually, the discussions turned from providing Kotler with straight equity to granting her a warrant to purchase shares. Over several months in 2006 and early 2007 the parties exchanged drafts of a warrant agreement. Both sides engaged counsel to assist in the negotiations. The Company engaged White & Case LLP; Kotler cannot recall the name of the attorney or law firm she hired. The evidence regarding the negotiations leading to the execution of the warrant agreement is thin. Neither side retained emails nor other correspondence and neither side can recall specific discussions. The only contemporaneous evidence of any real value are the various drafts of the warrant agreement. These drafts reflect that the Company wanted to condition the grant of the warrant on Kotler’s agreement to a perpetual post-separation non-competition/non-solicitation covenant. Kotler would agree only to a pre-separation non-compete or, at most, a non-compete with an 18-month tail. Neither side recalls ever having altered their respective position on this material ...
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