Tamika Montgomery-Reeves Vice Chancellor

ORDER LIFTING STAY AND DENYING MOTION FOR CIVIL CONTEMPT

WHEREAS, on December 9, 2010, Defendant Silverback Media, PLC ("Silverback") filed a members voluntary liquidation in the United Kingdom and hired Mr. Freddy Khalastchi and Mr. Barry David Lewis of Harris Lipman LLP to act as liquidators (the "MVL Liquidators");

WHEREAS, on December 9, 2010, Silverback transferred the majority of its assets, totaling $80 million, to Defendant Adenyo, Inc. ("Adenyo") in exchange for an indemnification letter;

WHEREAS, in April 2011, Adenyo sold its assets to non-party Motricity, Inc. in exchange for $100 million, which was immediately transferred to Defendant 7539088 Canada, Inc., who then distributed the $100 million to Adenyo's shareholders;

WHEREAS, on May 8, 2013, this Court entered a final order and judgment (the "Final Judgment") in In re Mobilactive Media LLC Consolidated C.A. No. 5725-VCP in favor of Plaintiff against Defendants Silverback, Adenyo, Adenyo Acquisition Sub, Inc., and Adenyo USA, Inc. (together with 7539088 Canada, Inc., "Defendants") for the amount of $3,084,527.00, plus $388,590.21 in prejudgment interest;

WHEREAS, on May 29, 2013, Plaintiff filed a proof of debt with the MVL Liquidators, and discovered that Silverback did not have the assets to pay the judgment, and the liquidation was converted to a creditors voluntary liquidation;

WHEREAS, on September 23, 2013, this Court amended the Final Judgment "to add as a defendant and judgment debtor . . . the corporation named '7539088 Canada, Inc.,' also known as 'Amalco,' and previously known as 'Adenyo, Inc.;'"

WHEREAS, on December 26, 2013, this Court entered a default judgment (the "Default Judgment," together with the Final Judgment, "the Judgments") in the amount of $1,300,891.71, plus $68,038.42 in prejudgment interest, against Defendants and ordered that Defendants "pay Plaintiff the reasonable cost and attorneys' [fees] incurred in Plaintiff's collection activities in this instant litigation, as well as amounts incurred in Delaware, Canada, the United Kingdom, and elsewhere . . . until [the Judgments] are paid in full, with interest;"

WHEREAS, on August 7, 2014, non-parties Grant Thornton UK LLP and David Anthony Ingram were appointed as the new liquidators of Silverback (the "CVL Liquidators");

WHEREAS, on September 4, 2014, Silverback, by and through the CVL Liquidators, filed an action in the United Kingdom against the MVL Liquidators for breaching "their duty to act with reasonable skill and care" by allowing Silverback to transfer substantially all of its assets to Adenyo "without adequately providing for Mr. Bienstock's contingent claims" (the "MVL Liquidator Action");

WHEREAS, in August 2015, the CVL Liquidators, against Mr. Bienstock's wishes and without Mr. Bienstock's consent, settled the MVL Liquidator Action for £3 million (the "Settlement");

WHEREAS, after the CVL Liquidators paid their fees and VAT on their fees out of the Settlement, Mr. Bienstock received only £891,294.61 of the £3 million;

WHEREAS, on October 25, 2016, Plaintiff filed a motion to show cause why an order of civil contempt pursuant to Court of Chancery Rule 70(b) and Rule 71 should not be entered against Defendant Silverback and non-parties the CVL Liquidators (the "Contempt Motion");

WHEREAS, on February 24, 2017, the CVL Liquidators filed legal proceedings in the Companies Court in London seeking a declaration that the CVL Liquidators "distributed the MVL [L]iquidators' settlement payment in accordance with English insolvency law, specifically Insolvency Act § 115, which expressly provides that liquidation fees and expenses such as legal fees are to be paid in priority to all other unsecured claims;"

WHEREAS, on April 11, 2017, this Court stayed the determination of the Contempt Motion until the resolution of the proceeding in Companies Court;

WHEREAS, on October 20, 2017, Plaintiff moved to lift the stay and for an order of civil contempt pursuant to Court of Chancery Rule 70(b) and Rule 71 (the "Renewed Motion");

WHEREAS, the Court heard oral argument on the Renewed Motion on March 27, 2018;

NOW, THEREFORE, THE COURT HEREBY FINDS AND ORDERS AS FOLLOWS:

1. The Court has reviewed the parties' briefs, supporting submissions, and the applicable law.

2. The Motion to Lift the Stay is GRANTED. This Order resolves the latest chapter in the seemingly Sisyphean saga of Mr. Bienstock, who is trying to collect millions of dollars he is owed by virtue of judgments against Defendants issued by this Court. As much as the Court wishes to see a favorable outcome for Mr. Bienstock, the Motion for Contempt must be DENIED.

3. Court of Chancery Rule 70(b) authorizes the Court to find a party in contempt who "fail[s] to obey a restraining or injunctive order, or to obey or to perform any order." Ct. Ch. R. 70(b). "The remedy of civil contempt serves two purposes: to coerce compliance with the order being violated, and to remedy injury suffered by other parties as a result of the contumacious behavior." Aveta Inc. v. Bengoa, 986 A.2d 1166, 1181 (Del. Ch. 2009) (citing Del. State Bar Ass'n v. Alexander, 386 A.2d 652, 665 (Del. 1978)). A party may be held in contempt where he (1) is bound by an order, (2) has notice of the order, and (3) nevertheless violates the order. Id. at 1181. "A party petitioning for a finding of contempt bears the burden to show contempt by clear and convincing evidence; the burden then shifts to the contemnor to show why they were unable to comply with the order." TR Inv'rs, LLC v. Genger, 2009 WL 4696062, at *15 (Del. Ch. Dec. 9, 2009), aff'd in relevant part, 26 A.3d 180, 190-94 (Del. 2011).

4. "An order generally binds not only the named parties, but also 'those identified with them in interest, in "privity" with them, represented by them or subject to their control.'" Deutsch v. ZST Dig. Networks, Inc., 2018 WL 3005822, at *10 (Del. Ch. June 14, 2018) (quoting Regal Knitwear Co. v. NLRB, 324 U.S. 9, 14 (1945)). "The Court of Chancery Rules recognize that in appropriate circumstances, an order can be enforced against non-parties." Id. Court of Chancery Rule 71 provides that "when obedience to an order may be lawfully enforced against a person who is not a party, that person is liable to the same process for enforcing obedience to the order as if that person were a party." Ct. Ch. R. 71.

5. Plaintiff's briefs focus on the allegations that the CVL Liquidators "clearly decided that they had struck a bad deal with Bienstock and the Silverback estate when they decided to take the MVL Liquidator Action on a pure contingency." Reply Br. 13. Plaintiff contends that "rather than honoring [their] commitments . . ., and their fiduciary duties to maximize the estate's recovery on its sole asset, [the CVL Liquidators] decided that they would rather . . . take the money and run by settling the MVL Liquidator Action at a fire sale price, thereby locking in their contingency fees." Id. at 14. Plaintiff further alleges that Silverback then "diverted" "almost $2.4 million [from the Settlement] to [the CVL Liquidators], rather than turning those funds over to Bienstock (its sole creditor) in partial satisfaction of the [Judgments]." Opening Br. 17.

6. Plaintiff argues that the CVL Liquidators' actions violated the Judgments and constituted a breach of the constructive trust established in the Final Judgment. Opening Br. 18; Reply Br. 14-16. The CVL Liquidators argue in response that (1) "contempt is not available to enforce money judgments;" (2) they cannot be held in contempt because they are not subject to personal jurisdiction in Delaware; and (3) the Judgments do not supersede the order of priority established by English insolvency law, which allows payment of the CVL Liquidators' fees first. Answering Br. 13, 19, 33. The Court finds that the CVL Liquidators are not in contempt for two reasons: (1) the constructive trust established in the Final Judgment does not apply to the Settlement proceeds; and (2) contempt is not the appropriate enforcement mechanism for the money judgments in this case.

7. First, the money at issue here was never part of the constructive trust. The Final Judgment created a constructive trust in favor of Mr. Bienstock over "the proceeds from the sale of the Defendants' assets to Motricity, Inc., including, without limitation, the proceeds that remain in the possession of any and all of the Defendants." Final Order and Judgment ¶ 5 (May 8, 2013). The constructive trust exists only "over proceeds from the sale of the Defendant's assets to Motricity" but not over all the assets of Defendants generally. The Settlement funds were not part of the proceeds of the sale of Defendants' assets; instead they were a result of a claim brought against the MVL Liquidators related to the propriety of their acceptance of certain indemnification letters from certain Defendants. Thus, the fact that the entirety of the Settlement amount was not paid to Mr. Bienstock does not violate the constructive trust.

8. Second, Silverback and the CVL Liquidators did not violate the Judgments by not turning over the entire Settlement amount to Plaintiff because, as the CVL Liquidators point out in their Answering Brief, the Judgments "simply memorialized the judgments - i.e., that Silverback Media plc owed Bienstock certain sums." Answering Br. 17. Court of Chancery Rules 70 and 71 contemplate the enforcement of coercive orders of the Court. At issue here is the proper way to enforce a money judgement.

For the most part, judgments for money or for the possession of property are enforced by writs of execution, today as at common law. Such a writ is not a command to the defendant but an authorization to the proper officer (usually a sheriff . . .) to do something. In the case of a money judgment this will be to seize defendant's

nonexempt property, sell it on execution sale, and apply the proceeds toward the satisfaction of the judgment.

If the regular judgment of the court, after the decision of the suit, be not suspended, superseded or reversed . . ., the next and last step is the execution of the judgment or putting the sentence of the law in force. Execution, in civil actions, is the mode of obtaining the debt or damages recovered by the judgment. It is enforced by the party who has obtained the judgment suing out of the court having the record thereof, a certain writ founded upon and suitable to the action in which the judgment has been given. This writ is termed execution process, as distinguished from original process, and is a judicial writ granted primarily upon the request of the party entitled to it, and now issued of course.

While I find it deplorable that defendant RDIS, Inc. has apparently failed to meet its obligations as established by the October order (no appeal was filed), I do not think that contempt of court is the appropriate remedy for failure to satisfy a judgement for money. The law supplies execution process for this purpose. For practical as well as theoretical reasons that is the appropriate way, in my opinion, for this matter to be resolved.

9. Finally, Mr. Bienstock argues in the Contempt Motion that the CVL Liquidators "owed Silverback (including its creditors and its members) a duty to act with the degree of reasonable skill and care to be expected of those holding themselves out to be licensed insolvency practitioners," Opening Br. 22, and that the CVL Liquidators "owed a fiduciary duty to Bienstock as Silverback's liquidator pursuant to the Mobilactive joint venture agreement," Id. at 22 n.8. Mr. Bienstock contends that the CVL Liquidators breached these duties in connection with the Settlement. Reply Br. 19-20. While Mr. Bienstock certainly may have a claim against the CVL Liquidators for breach of their fiduciary duties, this action for contempt is not the appropriate vehicle for Mr. Bienstock to bring that claim. Furthermore, as the CVL Liquidators' arguments regarding personal jurisdiction foreshadow, the Delaware Court of Chancery may not even be the proper venue for that claim.

10. For all the foregoing reasons, the Motion for Contempt is DENIED.

/s/ Tamika Montgomery-Reeves

Vice Chancellor

Dated: June 28, 2018