EFiled:Oct22201205:05PMEDT TransactionID47226417 CaseNo.

7717VCG IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

LAUREN GLASSMAN, Plaintiff/ Counterclaim Defendant, v. CROSSFIT, INC., a Delaware Corporation, and GREG GLASSMAN, Defendants/ Counterclaim Plaintiffs.

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C.A. No. 7717-VCG

THIRD PARTY ANTHOS CAPITAL, L.P.S OPPOSITION TO DEFENDANTS MOTION TO COMPEL PRODUCTION OF DOCUMENTS Third-party Anthos Capital, L.P. (Anthos) respectfully submits this opposition to Defendants/Counterclaim Plaintiffs CrossFit, Inc. (CrossFit) and Greg Glassmans (Mr. Glassman; together, Defendants) motion to compel the production of documents. INTRODUCTION The Courts October 12, 2012 Opinion (the October 12 Opinion or Op.) substantially narrows the number of documents in dispute. Anthos respectfully submits that a limited number of documents should be protected from discovery consistent with the Courts reasoning in that decision. First, the common-interest doctrine protects communications between counsel for Ms. Glassman and Anthos regarding common legal strategy for defending against claims Defendants have filed against Ms. Glassman and Anthos and for pursuing potential claims Ms. Glassman and Anthos may have against Defendants. That is the very essence of the common-interest doctrine, and Defendants have conceded that such materials are protected under Delaware law. Second, Defendants have likewise explicitly conceded that the business-strategy immunity protects certain internal Anthos valuations, plans and strategies never communicated to Ms. Glassman. Anthos faces substantial non-litigation injury if these internal documents are disclosed to Mr.

Glassman, who continues to pursue a competing bid for Ms. Glassmans stake in CrossFit. Anthos therefore respectfully requests that the Court deny Defendants motion to compel as to this limited universe of documents. BACKGROUND As the Court is well aware, Plaintiff Lauren Glassman brought this action against Mr. Glassman for breach of fiduciary duty stemming from Mr. Glassmans allegedly unauthorized purchase of a private aircraft with corporate funds. Defendants, in turn, have filed counterclaims against Ms. Glassman, alleging that she somehow breached her fiduciary duties to CrossFit by providing certain documents to Anthos pursuant to a non-disclosure agreement and that she is now using the instant litigation to somehow coerce Mr. Glassman into agreeing to allow her to sell her fifty percent interest in CrossFit to Anthos. Anthos is not a party to this action. Mr. Glassmans demonstrated business objective is to purchase Ms. Glassmans interest in CrossFit. Ms. Glassman has already agreed to sell that interest to Anthos, making Mr. Glassman and Anthos competing bidders for the same asset. In this action, CrossFit seeks a temporary restraining order or preliminary injunction blocking the transaction from closing in the event the Arizona divorce court approves the sale to Anthos. In Arizona, Mr. Glassman argues that the divorce court should approve his bid and reject the agreement between Ms. Glassman and Anthos. CrossFit seeks to intervene in the Arizona proceeding in support of Mr. Glassmans bid. See Lauren J. Glassman v. Gregory A. Glassman, No. P 1300 DO 2010 00275, at 16-18 (Ariz. Super. Ct. Oct. 3, 2012) (TRANSCRIPT) (attached hereto as exhibit A). As far back as July 30, 2012, counsel for Defendants also threatened to sue Anthos for allegedly aiding and abetting Ms. Glassmans alleged breach of fiduciary duty. On October 1, 2012, Defendants made good on those threats and spread this dispute to a third forum, filing suit against Anthos in California state court alleging, among other things, aiding and abetting of Ms. 2

Glassmans alleged breach of fiduciary duty, misappropriation of trade secrets, unfair competition, and false advertising. See Verified Complaint dated October 1, 2012, Crossfit, Inc. v. Anthos Capital, L.P. et al., Case No. 112CV233289 (Cal. Super. Ct.) (attached hereto as exhibit B). Defendants exhaustive litigation strategywhich now includes litigation in three forums spanning the countryreflects Mr. Glassmans ultimate business objective of purchasing the same asset that Ms. Glassman has already agreed to sell to Anthos. The Anthos Subpoena Defendants served Anthos with a third-party subpoena for documents in this action on August 10, 2012. The subpoena sought, among other things, all documents regarding Anthoss attempts to value CrossFit or Plaintiffs equity interest therein, including any valuation analysis undertaken, as well as all documents regarding Anthoss internal strategies regarding CrossFit. See Subpoena Duces Tecum and Ad Testificandum Directed to Anthos Capital, L.P. (attached hereto as exhibit C). On August 24, 2012, Anthos served timely responses and objections to the subpoena, objecting on the grounds, among others, that it was overbroad and unduly burdensome, sought documents neither relevant to the claims or defenses asserted by the parties nor reasonably calculated to lead to the discovery of admissible evidence, and sought documents protected by the attorney-client privilege, the attorney-work-product doctrine, the commoninterest doctrine and the business-strategy immunity. Anthos also immediately set about collecting documents potentially responsive to the very broad categories of documents sought by Defendants. These efforts have yielded thousands of documents that must be reviewed by attorneys for privilege and relevance, and Anthos has already expended scores of attorney hours and tens of thousands of dollars toward this end. Anthos produced several thousand pages of documents on September 21 and October 19 and anticipates completing its production of documents by the end of October, at which point it will 3

also be able to compile and serve its privilege log on Defendants. Anthos has undertaken every reasonable effort to comply with its third party discovery obligations in a timely manner. The Motions to Compel On August 31, 2012, Defendants filed a motion to compel production from Ms. Glassman. Defendants filed their motion to compel directed to Anthos on September 25, but failed to notify Anthos about the motion until October 8 and did not serve the motion on Anthos until October 10. As Defendants later revealed to the Court, they filed the motion against Anthos as a protective measureeffectively conceding that the motion was prematureand sought documents largely duplicative of what they were seeking from Ms. Glassman. See September 28, 2012 Letter to the Court from Raymond J. DiCamillo (attached hereto as exhibit D). Indeed, a majority of the responsive documents Anthos has produced in this action are duplicative of the documents Defendants already received from Ms. Glassman. See Defendants Motion to

Compel Production of Documents From Anthos Capital, L.P. at 13. When the Court requested that Defendants motion to compel directed to Ms. Glassman be heard together with the pending motion to compel directed to Anthos, Defendants requested that the Court delay consideration of the Anthos motion until after it had ruled on the motion directed to Ms. Glassman. See ex. D (September 28, 2012 Letter to the Court from Raymond J. DiCamillo). In the October 12 Opinion ruling on the motion to compel directed to Ms. Glassman, the Court held that [a]s to documents in Ms. Glassmans possession . . . the requested communications are not protected by the common-interest doctrine or by the business-strategy immunity. Op. at 15. The Court emphasized, however, that it had not ruled on the application of these, or other, discovery doctrines as they pertain to the Defendants outstanding Motions to Compel brought against third parties which are not yet submitted for decision. Id.

ARGUMENT Anthos appreciates the Courts guidance and believes that the October 12 Opinion substantially narrows the universe of documents in dispute. Anthos respectfully requests that the Court deny Defendants access to two limited categories of documents that should be protected under the reasoning of the October 12 Opinion: (1) communications between counsel for Ms. Glassman and Anthos regarding common legal strategy for defending against claims Defendants have filed against Ms. Glassman and Anthos and for pursuing potential claims Ms. Glassman and Anthos may have against Defendants and (2) internal Anthos valuations and strategies that were never communicated to Ms. Glassman and that would cause substantial non-litigation injury if disclosed to Defendants. I. THE COMMON-INTEREST DOCTRINE PROTECTS COMMUNICATIONS REGARDING COMMON LEGAL STRATEGY FOR DEFENDING CLAIMS BY OR PURSUING CLAIMS AGAINST DEFENDANTS [T]he common-interest doctrine allows separately represented clients sharing a common legal interest to communicate directly with one another regarding that shared interest. Op. at 6 (quoting Titan Inv. Fund II, LP v. Freedom Mortg. Corp., 2011 WL 532011, at *4 (Del. Super. Ct.)). The two parties interests must be sufficiently legal, rather than commercial and substantially similar, not adverse. Id. at 7 (quoting Titan, 2011 WL 532011, at *4) In short, when parties with a common legal interest share privileged communications in furtherance of that legal interest, they do not waive the attorney-client privilege. Id. As the Court recognized, the common-interest doctrine protects those communications that directly relate to the parties legal interests, such as their potential common defense strategies. Id. at 10. For instance, Defendants concede that Ms. Glassman and Anthos would have shared a common interest if they had discussed the threat of both being sued by Greg Glassman or CrossFit. Id. at 8 (internal quotation marks omitted). 5

In the October 12 opinion, the Court held that Ms. Glassman could not withhold documents simply because her deal with Anthos might be affected by the Arizona litigation or because the deal might be subject to litigation by the Defendants. Id. at 9-10. In contrast, the Court recognized that communications would be protected if Ms. Glassman could demonstrate that the documents were subject to a privilege and that the communications therein furthered a common legal interest of Ms. Glassman and Anthos. Id. at 10. The Court found, however, that Ms. Glassman had failed to show that the contents of these documents were created in furtherance of developing a joint legal defense or strategy. Id. at 9.1 Although the Court found that Ms. Glassman failed to make a sufficient showing, Anthos respectfully submits that a limited number of the documents that Defendants seek from Anthos fall within the class of documents the Court recognized should be protected under the commoninterest doctrine. As Anthoss privilege log will demonstrate, these documents are privileged because they reflect communications with and among counsel for the purpose of obtaining or providing legal advice. To the extent these privileged communications were shared between counsel for Ms. Glassman and counsel for Anthos, they are protected by the common-interest doctrine.2 For example, Anthoss counsel and counsel for Ms. Glassman have exchanged a
1

On October 16, Anthos requested that the Court hold in abeyance the portion of the October 12 decision directed to the common-interest doctrine so that Anthos could have the opportunity to review the documents and specify in its own privilege log which of those documents it believes are subject to attorney-client privilege and the common-interest doctrine under the principles announced in the October 12 Opinion. After reviewing those documents, Anthos believes that only thirteen should be withheld on common-interest grounds. Ms. Glassman has withheld these thirteen documents pending the Courts ruling on Anthoss request and has informed Defendants counsel of the privilege log numbers of the thirteen documents. On October 17, before the Court was able to even schedule a hearing on Anthoss request, Defendants filed a motion for contempt seeking monetary sanctions against Ms. Glassman.
2

All the privileged documents that Anthos asserts are protected by the common-interest doctrine are communications between counsel for Anthos and counsel for Ms. Glassman. Anthos is not aware of documents reflecting communications of privileged material directly between Anthos 6

number of communications directed specifically toward developing a common legal strategy for responding to fiduciary duty/aiding and abetting allegations against both Ms. Glassman and Anthosallegations that Defendants threatened as far back as July 30, 2012 and are now pursuing in three jurisdictions. Similarly, Anthoss counsel and counsel for Ms. Glassman have exchanged a number of communications regarding (1) their joint position on Mr. Glassmans and CrossFits use of the same counsel in this litigation notwithstanding that Mr. Glassman is accused of breaching fiduciary duties he owes to CrossFit and (2) the contents of responses and objections to discovery requests in this action seeking documents over which Ms. Glassman and Anthos share a joint privilege. Defendants strategy of pursuing their breach of fiduciary duty and aiding and abetting allegations against Ms. Glassman and Anthos in multiple forums has forced Ms. Glassman and Anthos to coordinate their common legal strategy in three jurisdictions, not only to defend against Defendants claims but also to preserve any claims they may have against Defendants. The legal interests of Anthos and Ms. Glassman in these matters are not merely not adverse and substantially similar, they are identical. Anthos faces substantial prejudice if Defendants are allowed access to these privileged communications. The reasoning of the October 12 Opinion compels protection of this limited universe of documents and, as the Court has noted, Defendants concede that the materials over which Anthos now seeks protection fall within the ambit of the common-interest doctrine. Anthos therefore respectfully requests that Defendants motion to compel these documents be denied.

and Ms. Glassman, but reserves all rights to assert attorney-client privilege and the commoninterest doctrine as to any such communications, to the extent they are located in Anthoss ongoing document search. 7

II.

THE BUSINESS-STRATEGY IMMUNITY PROTECTS INTERNAL ANTHOS DOCUMENTS NOT SHARED WITH MS. GLASSMAN THAT REFLECT VALUATION AND STRATEGIES REGARDING CROSSFIT As explained in the October 12 Opinion, the Court may exercise its inherent power to

enter a protective order under Rule 26(c) where a court fears that information disclosed may not be used for proper legal purposes, but rather for practical business advantages. Op. at 11 (quoting Hexion Specialty Chemicals, Inc. v. Huntsman Corp., 959 A.2d 47, 53 (Del. Ch. 2008)). In other words, the Court may invoke the business-strategy privilege when, after balancing the risk of extralegal prejudice from disclosure against the evidentiary value of the contested information, the court concludes that disclosure would impede the interests of justice. Id. at 12. The Court found that Ms. Glassman was not protected by the business-strategy immunity because the information in this case concerns a transaction that has already been publicly announced. Id. at 13 (noting that many important details of the deal between Ms. Glassman and Anthos Capital are widely known.). Indeed, as between Ms. Glassman and Anthos, the deal has already been agreed to and publicly disclosed, rendering the application of the businessstrategy immunity to communications between Ms. Glassman and Anthos less compelling than when a party seeks to uncover an adversarys confidential future plans. Id. In contrast, Anthoss confidential valuations and strategic plans not communicated to Ms. Glassman are precisely the kinds of sensitive information that threaten substantial non-litigation injury if disclosed to Defendants. Mr. Glassman has submitted a competing bid for Ms. Glassmans stake in CrossFit, and CrossFit seeks to intervene in the Arizona proceeding to support that bid. Lauren J. Glassman v. Gregory A. Glassman, No. P 1300 DO 2010 00275, at 26-29 (Ariz. Super. Ct. Oct. 3, 2012) (TRANSCRIPT) (attached hereto as exhibit A) (CrossFits counsel arguing that Mr. Glassman should have the chance to give [Ms. Glassman] $16 million and that Mr. Glassman seeks to 8

close the purchase of Ms. Glassmans stake in CrossFit by November 15). Mr. Glassman and CrossFit have argued that the Arizona court should block the sale to Anthos and have tried to convince Ms. Glassman that she should accept Mr. Glassmans offer and abandon the Anthos deal. See id. at 50-51 (Mr. Glassmans counsel arguing that Ms. Glassman doesnt have a binding contract with Anthos and that the Court should permit Mr. Glassman to purchase Ms. Glassmans stake in CrossFit). No one knows whether the Arizona Court will approve the sale to Anthos, order a sale to Mr. Glassman, or order some other result, such as a sale of Ms. Glassmans stake to the party willing to pay the most for it. In addition, Defendants have asked this Court to enjoin the sale to Anthos, a separate path through which Mr. Glassman seeks to upset Ms. Glassmans agreement with Anthos in favor of his own competing bid. Allowing Mr. Glassman access to Anthoss internal valuations of CrossFit and future strategic plans that were never shared with Ms. Glassman would undoubtedly give him an unfairand wholly one-sidedadvantage in his attempts to bid for Ms. Glassmans stake in CrossFit. These documents include internal Anthos memoranda and investment analyses

reflecting valuations of and investment strategies for acquiring Ms. Glassmans interest in CrossFit. With this information, Mr. Glassman could, for example, tailor any future offers to Anthoss valuations. See NiSource Cap. Mkts., Inc. v. Columbia Energy Grp., 1999 WL 959183, at *1 (Del. Ch.) (explaining the advantage to knowing another partys internal valuations in a negotiation, including the ability to tailor offers based on that information) (attached hereto as exhibit G). Alternatively, given Mr. Glassmans public statements that he will not allow Ms. Glassman to sell her interest to Anthos under any circumstances, it is highly likely that Mr. Glassman would also use Anthoss internal analyses to thwart its investment objectives (for example, by making changes to those aspects of CrossFits business that attracted Anthos to the

investment in the first place). These are not merely theoretical harms; Mr. Glassman has been rallying affiliates for months to leave CrossFitand thereby devalue the CrossFit business and brandif the sale to Anthos is approved. See, e.g., Aug. 6, 2012 Letter from Angela L. Dunning to Blair Connelly, at 2-3 (attached hereto as exhibit E). Non-litigation injury of this kind compels application of the business-strategy immunity. Indeed, recognizing the clear application of the doctrine in this circumstance, counsel for Defendants explained at the September 5, 2012 conference that they are not seeking internal Anthos valuations. As Defendants counsel stated: [I]f there is an internal communication between Miss Glassman and her attorneys, or anyone for that matter, which says, I would take Anthos offering me X, I am going to counter at Y, but I would really take Z. Thats business strategy, and same for Anthos, to the extent Anthos has those internal communications. We are offering Miss Glassman X. She is countering at Y. We would take Z. Thats the kind of thing that the business strategy has historically protected. We are not asking for that. What they are trying to withhold are documents that were exchanged or communications that were exchanged between Miss Glassman and Anthos. Glassman v. CrossFit, Inc., Del. Ch., C.A. No. 7717-VCG, Glasscock, V.C., at 56 (Sept. 5, 2012) (TRANSCRIPT) (attached hereto as exhibit F). To be clear, the only documents Anthos seeks to withhold under the business-strategy immunity are internal documents never shared with Ms. Glassman.3 The substantial prejudice threatened by disclosure stands in sharp contrast to the limited (if any) relevance this information has to the claims in this proceeding. In this action, Ms. Glassman asserts claims against Mr. Glassman for breach of fiduciary duty stemming from his unauthorized purchase of a private aircraft. In their counterclaims, Defendants assert that Ms.
3

To the extent Defendants seek documents reflecting valuation analyses and plans pertaining to CrossFit that were shared with Ms. Glassman (either in writing or otherwise), Ms. Glassman has produced those materials and Anthos is in the process of doing the same. 10

Glassman is improperly using this litigation to somehow force Mr. Glassman to agree to allow her to sell her interest in CrossFit to Anthos and that she breached fiduciary duties to CrossFit by providing certain due diligence documents to Anthos without the consent of the CrossFit Board of Directors. Op. at 3. Obviously, internal Anthos valuations and strategic plans that were not shared with Ms. Glassman say nothing about Ms. Glassmans plans, knowledge, or intent in bringing this action or whether she was acting, or believed she was acting, in a manner consistent with her fiduciary duties. Such documents are, therefore, wholly irrelevant to

Defendants claims. In contrast, Anthoss internal valuations and strategies that were never shared with Ms. Glassman are highly relevant to Mr. Glassmans efforts to bid against Anthos and coerce it into abandoning its efforts to acquire Ms. Glassmans stake in CrossFit, raising an inference that improper non-litigation motivations drive Defendants quest for this discovery. The substantial risk of non-litigation injury to Anthos far outweighs any marginal relevance this information may have to this action. Application of the business-strategy immunity requires a balancing of extralegal prejudice with the evidentiary value of the contested information. Internal Anthos valuations and strategies not communicated with Ms. Glassman have no conceivable relevance to the claims and defenses asserted in this action and threaten substantial non-litigation injury to Anthos if disclosed to Mr. Glassman and CrossFit. Moreover, Defendants have already conceded that such materials are protected by the business-strategy immunity. Anthos therefore respectfully submits that the business-strategy immunity protects these documents from production.

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CONCLUSION Anthos respectfully requests that the Court deny Defendants motion to compel documents from Anthos that are protected by the common-interest doctrine or the businessstrategy immunity. POTTER ANDERSON & CORROON LLP

OF COUNSEL: COOLEY LLP Angela L. Dunning Five Palo Alto Square 3000 El Camino Real Palo Alto, CA 94306-2155 (650) 843-5855 Dated: October 22, 2012
1079473

By: /s/ Brian C. Ralston Brian C. Ralston (I.D. No. 3770) J. Matthew Belger (I.D. No. 5707) Hercules Plaza 6th Floor 1313 N. Market Street P.O. Box 951 Wilmington, DE 19899 (302) 984-6000 Attorneys for Third Party Anthos Capital, L.P.

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CERTIFICATE OF SERVICE I hereby certify that on this 22nd day of October, 2012, a copy of the foregoing was served via LexisNexis File & Serve upon the following attorneys of record: Philip Trainer, Jr., Esquire Toni-Ann Platia, Esquire Ashby & Geddes, P.A. 500 Delaware Avenue, 8th Floor P.O. Box 1150 Wilmington, DE 19899 Raymond J. DiCamillo, Esquire Kevin M. Gallagher, Esquire Richards Layton & Finger, P.A. 920 North King Street Wilmington, DE 19801

/s/ J. Matthew Belger J. Matthew Belger (I.D. No. 5707)