He breached confidentiality and kept most of his equity – here's where the employer overreached
A Delaware court ruled an affordable housing firm went too far when it cancelled a fired executive's full equity stake for cause.
Vice Chancellor J. Travis Laster of the Delaware Court of Chancery granted summary judgment to William Blodgett on May 13, 2026, ending the liability phase of a four-year dispute with Fairstead Capital Management and FCM Affordable. The remedy phase is next.
Blodgett co-founded Fairstead in October 2013 with hedge fund manager Stuart Feldman, the firm's primary backer, and Feldman's personal attorney Jeffrey Goldberg, who took the CEO seat. Blodgett ran day-to-day operations. As the business grew, he and colleague John Tatum decided they deserved a bigger equity slice and worked two parallel plans – restructure Fairstead with themselves in control, or leave and start a competitor.
According to the opinion, Blodgett used a personal email account to share confidential Fairstead information with two billionaire family offices linked to his in-laws, the Sussman Office and the Tisch Office. The material included internal valuations, financial projections, business plans and training materials.
The opinion catalogues a cascade of red flags. Tatum downloaded 2,300 files from company servers. Junior team member Billy Kreinik later downloaded another 2,800. Blodgett pulled 1,100 files including pricing models and due diligence checklists. He pushed Feldman for escalating equity stakes in face-to-face meetings, first asking for 40%, then 80% to 90% of a restructured business. Feldman refused.
Goldberg began monitoring Blodgett's email in August 2021. On September 12, an invoice for "Newco Formation" from an outside law firm landed in Blodgett's company inbox by mistake. Fairstead terminated him for cause two days later and purported to cancel his entire equity stake.
An arbitrator issued findings in April 2025 that Blodgett had breached the confidentiality and policy-compliance sections of his employment agreement. But the same arbitrator held the employment agreement only let Fairstead cancel equity tied to pending deals – not Blodgett's entire stake.
Fairstead then turned to the separate LLC agreements that governed Blodgett's equity, arguing they gave the company an independent right to cancel everything. The Chancery Court rejected that.
Laster ruled Blodgett's misconduct was conduct as an employee, governed by his employment agreement, and did not trigger the member-level obligations sitting in the LLC agreements. The provisions might look similar on the page, but they operate on different conduct.
The opinion carries a broader warning for companies and their lawyers. Laster wrote that businesses have increasingly tried to embed employment-style restrictions inside LLC agreements to take advantage of Delaware's contract-friendly regime, citing cases from the past five years involving employees in California, Florida, New York, Texas, Washington and a dozen other jurisdictions. He cautioned that Delaware courts risk overreach if they let LLC agreements be used to police what is really employment conduct.
For HR functions, the practical takeaways are direct. A for-cause termination does not automatically erase vested equity when that equity sits in a separate document with separate rules. Confidentiality clauses in an employment agreement and near-identical clauses in an LLC or operating agreement can operate differently, and breach of one is not automatically breach of the other. When a senior leader is both an employee and an equity holder, the capacity in which they acted shapes the analysis at every step.
The case also reinforces patterns HR teams already see in disclosure disputes. Personal email accounts surface repeatedly when employees move confidential material outside the firm. Mass server downloads in the weeks before a departure are exactly what monitoring tools are designed to flag. Email monitoring itself is defensible – Goldberg's monitoring is what turned up the Newco invoice - but it works in tandem with documented policies employees have acknowledged.
Fairstead did win ground in the arbitration. The arbitrator found Blodgett breached his fiduciary duties as an employee through improper solicitation of Tatum, Kreinik and team member Adam Sussi, and through the misappropriation of confidential information. But the arbitrator also rejected Fairstead's request for $34 million in damages tied to a missed business opportunity and a separate request for $433,989 in public relations fees. The Chancery ruling adds another loss: Fairstead cannot use the LLC agreements to claw back Blodgett's equity in non-pending deals.
The parties have 30 days to propose a schedule for the remedy phase. The court has signaled the next step is crafting relief for the improperly cancelled equity. The liability ruling is final.
