A Delaware vice chancellor on Tuesday pruned to $4.1 million a $7.5 million attorney fee request for litigation that ended with cancellation of more than $37 million in Bolt Financial Group shares used by a company controller to secure a later-defaulted-upon, company-guaranteed loan.

Vice Chancellor Nathan A. Cook's ruling from the bench by telephone observed that the benefits arising from litigation by Bolt stockholder Activant Ventures Advisors II LLC and three affiliates "were 10%, or even, frankly, below" the nearly $38 million estimated benefit obtained, in contrast to a 15% request.

The vice chancellor said the decision balanced other factors and his own discretion in setting an 11% mootness fee, resulting in a "reasonable" $4,114,000 award. The vice chancellor also noted that "the record suggests that Activant continued to litigate" after the case was practically moot.

That history "smacks of representative plaintiffs using litigation to secure individual benefit," the vice chancellor said, an activity he described as "antithetical to the corporate benefit doctrine." The doctrine supports fees for shareholders who pursue litigation, even if mooted, in support of corrective action.

The suit was filed in 2023 after Bolt controlling stockholder Ryan Breslow was accused of securing a company-guaranteed loan from J.P. Morgan Private Bank in October 2021, followed by a default in 2023, allowing JPM to sweep $30 million from Bolt's funds.

The Activant funds sued Bolt, a wealth coaching and investment group, and its directors in July 2023, alleging breaches of a settlement stipulation and saying the company later entered into a conflicted, hold-the-status-quo order with another group of investors.

Earlier talks on a $5 million mootness fee settlement were sidelined by Bolt's revocation of a special committee's negotiating authority and removal of Activant Capital founder and board member Steve Sarracino. The removal of Sarracino and other board members occurred amid ongoing debate over cancellation of Breslow's shares tangled in the deal.

Activant argued during the case that it sought as a secondary goal revocation of Breslow's control of Bolt after the company's former CEO Maju Kuruvilla resigned and the second-largest institutional shareholder sold its shares.

In a brief filed before the ruling, Activant said it was not "seeking fees for the time spent negotiating with [Bolt] or briefing and arguing the fee award," but said that Bolt's actions in the litigation "caused the court and counsel to expend" additional resources.

Bolt itself argued that the share cancellation "would have occurred with or without" Activant's litigation, adding, "The decision to cancel shares stemmed from a contractual right that Bolt and its board of directors was navigating prior to the filing of this litigation," with the "lack of causation alone" reason to deny the fee.

The investors are represented by Richard I.G. Jones Jr. and Harry W. Shenton IV of Berger McDermott LLP, and Christopher J. Clark, Jeffrey D. Rotenberg and Benjamin A. Butzin-Dozier of Clark Smith Villazor LLP.

Breslow is represented by Margaret F. England of Gellert Seitz Busenkell & Brown LLC and Patricia Acosta of PAG Law PLLC.

Bolt is represented by David J. Margules, Elizabeth A. Sloan and Emily C. Friedman of Ballard Spahr LLP.

The case is Activant Ventures Advisors II LLC et al. v. Ryan Breslow et al., case number 2023-0721, in the Court of Chancery of the State of Delaware.