Will Blodgett Wins Summary Judgement in Fairstead Case

A disagreement that blew up inside affordable housing operator Fairstead is finally seeing a conclusion in court.

William Blodgett, former founding partner of the group, won summary judgment in a case Fairstead brought against him, according to an opinion filed in Delaware Court of Chancery Wednesday. Despite findings that Blodgett violated his employment agreement and shared confidential information, Vice Chancellor J. Travis Laster, the judge, wrote that Fairstead didn’t have the right to cancel his equity interests.

The decision is a victory for Blodgett. In his opinion, Laster granted Blodgett summary judgment, finding that Blodgett did not breach his LLC agreements — but that the Fairstead LLCs did breach those agreements. Because Blodgett countersued, the court’s decision could mean a multimillion-dollar payout from Fairstead for equity that it improperly canceled, although the size of award is yet to be determined.

“The court found in Blodgett’s favor on all claims, confirmed for a second time that Fairstead had no right to cancel Blodgett’s equity and recognized that Blodgett’s efforts and expertise were essential to Fairstead’s success,” Elisha Barron, a partner at Susman Godfrey and an attorney for Blodgett, said.

The case follows a recent win for another former Fairstead employee, John Tatum III, whose trial concerned many of the same facts.

Blodgett, who now runs affordable housing firm Tredway, was one of the founders of Fairstead, along with hedge fund manager Stuart Feldman and attorney Jeffrey Goldberg. In the court’s telling, Blodgett was influential in growing Fairstead’s affordable arm. He ran the day-to-day, assembled a team, and “provided the vision and the energy,” according to the opinion by Vice Chancellor J. Travis Laster, the judge.

But as the affordable business became more successful, Blodgett and Tatum wanted “a bigger piece of the pie,” according to the decision. By 2020, they developed a restructuring plan as well as plans to form a new company.

Blodgett considered himself the firm’s “golden goose,” according to notes to himself brought up in the Tatum case. He wrote he was “leveraging my name, my family’s name, my relationships,” while “getting NOTHING in return. NOTHING.” (The judge seemed to agree, writing: “Fairstead enjoyed considerable success, and Blodgett and Tatum believed they were chiefly responsible for it. That was true.”)

Along the way, Blodgett shared confidential information with his billionaire in-laws: the Sussman and Tisch family offices, the court found.

Blodgett tried to get Goldberg on board with the restructuring plan, according to the court’s decision in the Tatum case, with Blodgett telling him, “Everyone is here because of me. But they realize that I have no power. No control.”

“Everyone says it’s my company,” he added.

After Feldman rejected the restructuring plan, Blodgett and Tatum planned to leave and started negotiating their exits. But Goldberg was monitoring Blodgett’s emails and saw an invoice for an outside law firm associated with forming the new company. Fairstead terminated Blodgett and said it was canceling all of his equity.

The dispute ended up in court, with some issues sent to arbitration. The summary judgment could signal the beginning of the end of the legal back-and forth.

“This litigation has been ongoing for years, and unfortunately may take several more years before it is resolved,” Michael Carlinsky, head of complex litigation at Quinn Emanuel Urquhart & Sullivan and an attorney for Fairstead in the case, said in a statement, adding their could be “remedies, [or] appeals.”

Attorneys for Blodgett suggested he’s owed tens of millions of dollars back in equity.

Part of the court’s decision rested on the difference between Blodgett’s conduct as an employee and his conduct as a member of the LLCs in which he had ownership interest. He breached his employment agreement by sharing confidential information, the arbitrator found. But the Delaware court found that he shared that information in his capacity as an employee involved in day-to-day operations, and not as a member and investor.

Fairstead’s national footprint includes 25,000 housing units across 28 states, according to company materials. Tredway has built, bought or preserved 9,000 units and operates in 11 states, according to the firm, and has 1,500 units in development in New York City.