Delaware Judge Rules Against Trump Media in Breach of Contract Lawsuit
In a recent ruling, a Delaware judge has determined that Trump Media & Technology Group (TMTG), the company behind Truth Social, breached its agreement with ARC Global and will be required to provide ARC with over half a million additional shares. The judge, Lori Will of the Delaware Chancery Court, issued her opinion on September 16th, following a lawsuit in which ARC Global accused TMTG of shortchanging them on stock ownership.
ARC Global, led by Patrick Orlando, was an early investor in Digital World Acquisition Corp. (DWAC), a special-purpose acquisition company that later merged with TMTG, making the company public. Former President Donald Trump owns approximately 57 percent of TMTG. In her ruling, Judge Will found that ARC Global is entitled to receive 8.19 million shares of TMTG, which is more than the 7.04 million shares initially allocated to them. This decision was based on the fact that ARC had “prevailed on aspects of its breach of contract claim.”
The case centered around a contract dispute involving DWAC’s certificate of incorporation, which established the rules for how Class B shares would convert into Class A shares during a business combination. Orlando, who served as DWAC’s CEO, was involved in negotiating the merger with TMTG but was removed from his position before the transaction was finalized. ARC Global claimed that TMTG’s board intentionally set a share conversion ratio that disadvantaged them, reducing their expected stake. On the other hand, Trump Media accused Orlando of mismanagement and expressed concerns about his handling of the deal.
Judge Will rejected ARC’s allegations of breach of fiduciary duty against TMTG’s board, stating that their actions were not driven by bad faith. However, she did award ARC Global fewer shares than the 10 million they initially sought. The judge criticized both parties for making the process more complicated than necessary and stated that the case should have been a straightforward exercise in contract interpretation and math.
She noted that the injection of unrelated issues by both parties obscured the main focus of the case. ARC claimed that the board calculated the conversion ratio and made related disclosures in bad faith due to personal animosity towards Orlando. In response, Trump Media raised affirmative defenses concerning unrelated misconduct by Orlando. Judge Will dismissed these diversions as meritless, irrelevant, or untimely.
Ultimately, the judge determined that the proper conversion ratio should be a value approximately in the middle of what DWAC calculated after Orlando’s removal and what ARC demanded. She set the conversion ratio at 1.4911:1. The contract stipulates that ARC and Trump Media cannot sell their stock until the lock-up period expires on September 19th.
An implementing order filed simultaneously with Judge Will’s opinion mandates that the parties must work immediately to release the additional shares to ARC. This will allow ARC to freely sell or transfer them after the lock-up period ends. Neither ARC Global nor Trump Media have provided a comment on the ruling at this time.
It is worth noting that Trump has stated he does not intend to sell his shares in TMTG, which are currently valued at approximately $1.84 billion. Trump Media has experienced significant growth since its debut on Wall Street, with a market capitalization of around $3.23 billion and a valuation that peaked at nearly $10 billion.
Overall, this ruling highlights a breach of contract dispute between Trump Media and ARC Global. While the judge found that Trump Media breached its agreement, she determined that their actions were not driven by bad faith. The decision serves as a reminder of the importance of clear contract interpretation and the potential complications that can arise when personal animosity influences business decisions.
