LAURENGLASSMAN, Plaintiff/Counterclaim Defendant, v. CROSSFIT,INC.

,aDelawarecorporation,and GREGGLASSMAN, Defendants/ CounterclaimPlaintiffs ) ) ) ) ) ) ) ) ) ) ) )

EFiled:Sep25201205:37PMEDT TransactionID46622420 CaseNo.7717VCG

INTHECOURTOFCHANCERYOFTHESTATEOFDELAWARE

C.A.No.7717VCG

DEFENDANTSMOTIONTOCOMPELPRODUCTIONOFDOCUMENTS FROMANTHOSCAPITAL,L.P. Defendants/Counterclaim Plaintiffs CrossFit, Inc. (CrossFit or the Company) and Greg Glassman (Mr. Glassman, together, Defendants), through their counsel, move this Court,pursuanttoCourtofChanceryRule37(a)(2),foranOrdercompellingthirdpartyAnthos Capital, L.P. (Anthos) to produce documents responsive to Defendants Subpoena Duces TecumandAdTestificandumdirectedtoAnthos(Subpoena). FACTUALBACKGROUND 1. The abovecaptioned action was commenced by Plaintiff Lauren

Glassman (Plaintiff or Ms. Glassman), asserting fiduciary duty claims against Defendants arisingoutoftheireffortstoacquireacorporateaircraftforDefendantCrossFit. 2. Defendants,inturn,assertedCounterclaimsagainstPlaintiffarisingoutof

her misuse of confidential Company information and other actions taken in furtherance of her ownintereststothedetrimentofCrossFit. 3. Specifically, Defendants contend that Plaintiff provided confidential

internalCompanymaterialstoAnthosinfurtheranceofhereffortstosellherequityinterestin
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CrossFittoAnthos.1PlaintiffprovidedthosematerialstoAnthoswithoutCrossFitsknowledge andwithoutCrossFitbeingdesignatedasabeneficiaryunderthenondisclosureagreementthat purportedly governed the exchange of materials between Plaintiff and Anthos. As a result, CrossFithadnoopportunitytostopthedisclosureofitsdocuments,andnowhasnorightsunder thenondisclosureagreementtoacttopreventmisuseofthosematerialsbyAnthos. 2 4. Defendants have also alleged that Plaintiff Lauren Glassman acted in

concertwithAnthostodisruptCrossFitsbusinessoperationsandaffiliaterelationships.Aspled inDefendantscounterclaims,sucheffortswerepartofthegridlockstrategythatAnthosand Ms.GlassmandevisedtocreatesuchatoxicenvironmentthatDefendantGregGlassmanwould havenochoicebuttoapprovethesaleofPlaintiffsinterestinCrossFittoAnthos.Defendants have claimed irreparable harm from Ms. Glassmans breach of her fiduciary duties in those regards,specificallythatifMs.GlassmanseffortstosellherinterestinCrossFittoAnthosare successful CrossFit and Mr. Glassman will be saddled with a 50% owner (Anthos) whose businessplansareantitheticaltotheCompanys.Suchashotgunmarriagewouldlikelyresultin thelossofCrossFitaffiliatesandbusinesspartners,aswellasadversetaxconsequences. 5. AnthosplansforCrossFitareatthecenterofthepartiesdispute.Tothis

point,CrossFitssuccesshasresultedinlargepartfromthedevelopmentofanextremelyloyal anddevotedcommunityofworkoutenthusiasts,whotrainatCrossFitaffiliategyms.CrossFit hasalwaysgivensignificantfreedomtotheseaffiliatesinoperatingtheirfacilities.Itdoesnot,

1

Defendants allegations are more fully set out in their Counterclaims, filed August 8, 2012,andMotionforaTemporaryRestrainingOrder,filedonAugust31,2012. Moreover, the nondisclosure agreement was entered into by Plaintiff and Anthos Capital, LLC as opposed to Anthos Capital, L.P. or AnthosCF Holdings LLC, the counterpartytothepurchaseagreement. It isunclearifAnthosCapital, LLC isinfact evenanextantcorporateentity. 2

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forexample,imposetopdownrequirementsfor wheretheaffiliatesbuy theirequipment,what they can sell atthegyms,orotherrulestypicalofmanyfitnesscompanies.Thisfreedomhas helpedCrossFitgrowitsnetworkofaffiliatesatanextraordinarypace,from13in2005toover 4,400 today. It is also a central driver of CrossFits overall credibility as a fitness program compared to other companies: because CrossFit does not try to sell any products through its affiliates, it can only succeed with affiliates if its fitness program actually works for their customers.ChangingCrossFitsrelationshipwiththeaffiliateswouldthusunderminetheentire basisforitsextraordinarygrowthtothispoint. 6. AsallegedinDefendantscounterclaim,Anthos previouslytoldCrossFit

executives that it believes the Company should radically change its relationship with the affiliates,turningthemeffectivelyintopointsofsalefortshirts,supplements,andotheritems. Defendants vehemently disagree with Anthos approach, and believe that it would destroy the foundation for the Companys success: its strong relationship with the affiliates and the CrossFitterswhofrequentthem.Indeed,whenwordofAnthospotentialpurchasegotout,many affiliates expressed serious concern. While Anthos subsequently denied that it plans to make such changes, Anthos public statements are directly contrary to what Anthos told CrossFit in private. 7. At the time she entered into the Purchase Agreement with Anthos,

PlaintiffwaswellawareofAnthosexpresseddesiretoupendCrossFitsentirebusinessmodel, and was well aware that CrossFit management vigorously opposed Anthos views. Indeed, Defendants believe that Plaintiff entered into the Purchase Agreement with Anthos precisely becauseitwilldamagethevalueofMr.Glassmansequityinterest(whileshewalksawaywith $20million).TheCompanyhasthusbecomethepawninabitterdivorcebattle. 3
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8.

Given Defendants counterclaims, Anthos plainly possesses discoverable

information.Accordingly,DefendantsservedtheSubpoenaonAnthosonAugust10,2012.See Ex.1(SubpoenaDucesTecumandAdTestificandumdirectedtoAnthosCapital,L.P.). 9. On August 24, 2012, Anthos served its Responses and Objections to

Subpoena Duces Tecum and Ad Testificandum Directed to Anthos Capital, L.P. (Responses and Objections). In addition to various standard objections, Anthos raised objections on the groundsofthebusinessstrategyimmunity,thecommoninterestprivilege,andbecausethe Subpoena sought the production of confidential, trade secret or other commercially sensitive information.(Ex.2,ResponsesandObjections,passim.) 10. For the same reasons that those privileges are inapplicable to Plaintiffs

documents, they are also inapplicable to Anthos. See Defendants Motion to Compel Production of Documents (Motion to Compel), Defendants Reply Memorandum in Further SupportofTheirMotiontoCompeltheProductionofDocuments(ReplyBrief),Defendants Response to Plaintiffs September 19, 2012 SurReply to the Honorable Sam Glasscock III In FurtherSupportoftheirMotiontoCompel(ResponsetoSurReply).Accordingly,onAugust 28, 2012, Defendants sent a letter to Anthos challenging its assertion of those objections and requestingaprivilegelog.SeeEx.3(August28,2012LetterfromB.ConnellytoA.Dunning) 11. On September 11, 2012, counsel for Defendants met and conferred with

counselforAnthosregardingdocumentproductionissues.AlthoughDefendantsexplainedthat this case was proceeding on an expedited schedule at Ms. Glassmans request because of her contractwithAnthos,counselforAnthosassertedthatAnthoswouldnotbeabletoproduce any documentsuntiltheweekofSeptember17.Anthosfurtherrefusedtoprovideanyestimateasto whenitwouldcompleteitsdocumentproduction.WithrespecttoAnthosbasesforwithholding 4
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documents, counsel for Anthos acknowledged that the Defendants had moved to compel the production of documents from Plaintiff Lauren Glassman and that it would not make sense to relitigate the same principles with respect to Anthos. Although noting that the application of thoseprivilegestoAnthosdocumentsmightrequireadocumentbydocumentanalysis,counsel also asserted that Anthos would not produce a privilege log until after final completion of its production. Again, counsel for Anthos refused to say when that might be. Defendants memorializedthecontentsofthatconversationinaSeptember13,2012letter,furtherrequesting thatAnthosproduceallresponsivedocumentsandaprivilegelogbySeptember18,2012. See Ex.4(September13,2012letterfromW.RecklertoA.Dunning). 12. OnSeptember17,2012, Anthossentaletterobjectingtotherequestfor

production and privilege log by September 18, stating that the time frame was unduly burdensomeeventhoughtheexpeditedtimeframeisdueto AnthosowncontractwithMs. Glassman,andeventhoughAnthoshasbeeninpossessionoftheSubpoenaforsixweeks,and awareofthislitigationsince(atleast)itsinceptioninlateJuly. 3SeeEx.5(September17,2012 letter from A. Dunning to W. Reckler). Anthos also stated that it would not be bound by the principles set out in the Courts anticipated ruling on the Defendants Motion to Compel. Finally, Anthos again asserted that it would not produce documents reflecting its business strategiesordocumentsreflectingPlaintiffsactions,plans,knowledgeorintent(withrespect toAnthos,CrossFitorotherwise)totheextenttheyareprivilegedorotherwiseprotectedfrom disclosure.

Indeed, it appears from the documents that Anthos was aware of this litigation even beforePlaintifffiledit.SeeEx.6(July20,2012emailfromG.ParktoM.Tanouryand S.BrillaskingifCooleywasavailableforacallwithDelawarecounsel). 5

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13.

OnSeptember21,Anthosproduced161documentstotalling1187pages,

inwhatitdescribedasthefirstinstallmentofarollingproduction.Ofthose161documents,118 documents were those provided as due diligence materials by Plaintiff to Anthos, which Defendants had already received from Plaintiff. In the six weeks between the service of the Subpoena and Anthos September 21 production, therefore, Anthos has produced only forty threenewdocumentsresponsivetoDefendantsdocumentrequestsmanyofwhicharecopies ofpleadingsfromthislitigation.Althoughpromisingtomakefutureproductions,Anthosdidnot saywhenitwoulddosoorwhenitwouldproduceaprivilegelog. 14. Accordingly, given the rapidity with which trial in this matter is

approaching, Defendants respectfully request that the Court order Anthos to complete its production of documents, to not withhold documents as confidential trade secret, or other commercialsensitiveinformation,tonot withholddocumentsonthebasisofeither business strategyorcommoninterest,andtoprovideaprivilegelogofanydocumentswithheldonother grounds,byOctober5,2012. ANALYSIS 15. Asaninitialmatter,AnthosobjectiononthegroundthatDefendantsseek

confidential,tradesecret,orothercommerciallysensitiveinformationhasbeenrenderedmoot by the Courts entry of the Stipulated and [Proposed] Order Governing the Production and Exchange of Confidential and Highly Confidential Information (Protective Order). The ProtectiveOrderprovidesfullprotectionforsensitivebusinessinformation.Accordingly,there isnobasisforwithholdingmaterialsfromproductiononthatbasis. 16. Anthos bears the burden of establishing that it is entitled to withhold

documentsonthebasisofthebusinessstrategyandcommoninterestprivileges.SeeMoyer 6
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v. Moyer, 602A.2d68, 72(Del.1992) (Theburden ofprovingthattheprivilegeappliestoa particular communication is on the party asserting the privilege). It has not and cannot. As explained in Defendants Motion to Compel, Reply Brief, and Response to SurReply, those objections fail when made by Plaintiff visvis her communications with Anthos both before and afterthey enteredintothepurchaseandsaleagreement(Purchase Agreement). Anthos objections regarding those same communications and documents necessarily fail for the same reasons.Intheinterestofefficiency,Defendantswillnotrepeattheirargumentswithrespectto thebusinessstrategyandcommoninterestdoctrinesinfull.Rather,theyherebyincorporateby reference the arguments made with respect to those issues in their Motion to Compel, Reply Brief,andResponsetoSurReply,andwillonlyaddresstheminbriefbelow. I. THEBUSINESSSTRATEGYEXCEPTIONDOESNOTPROTECTANTHOS OTHERWISERESPONSIVEDOCUMENTSANDCOMMUNICATIONSFROM PRODUCTION 17. Thebusinessstrategyprivilegeisalimitedprivilegethatentitlesatarget

corporationtoshielditselffromtimesensitiveinformationinthetakeovercontext.PfizerInc.v. WarnerLambertCo.,1999WL33236240,at*2(Del.Ch.Dec.8,1999). 18. AnthosisthecounterpartytoasignedcontractfortheacquisitionofMs.

Glassmans equity interest in CrossFit. As such, there is no active takeover at issue and no reason to shield Anthos strategy with respect to the negotiation of the Purchase Agreement. Morebroadly,thereisnobasisinlawatallforAnthosassertionofbusinessstrategyprotection astoitsplansforforcingCrossFitandMr.GlassmantoapprovethePurchaseAgreement,orfor managementofCrossFitpostacquisition. SeeMotiontoCompel,2127ReplyBrief42 46,51ResponsetoSurReply2527.

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19.

Likewise, Anthos cannot assert, at it appears to do in its September 17

letter, that documents relating to its business strategies areirrelevant to the matters in dispute. SeeEx.5,September17,2012LetterfromA.DunningtoW.Reckler(Anthosisnotaparty, anditsactionsandplansaresimplynotatissue.).Onthecontrary,Anthosactionsandplans aredirectlyrelevanttoDefendantscounterclaims.AsDefendantshavelongsuspected,andas thedocumentsprovidedthusfarbyPlaintifftoDefendantshavemadeclear,Anthosisadirect partnerin,ifnotthedrivingforcebehind,thegridlockstrategythatservedastheimpetusfor PlaintiffsfilingherclaimsinthisCourt.SeeReplyBrief,4748.Moreover,Defendantshave asserted in their Counterclaims that Anthos future plans for CrossFit are fundamentally inconsistentwithCrossFitsbusinessmodel,andifthesaleisallowedtogoforwardandthose plans implemented, CrossFit will be irreparably harmed. Accordingly, Anthos documents regardingtheinformationitreceivedfromMs.Glassman,itsplansforinducingMr.Glassmanto approve the sale, and its plans for CrossFit postacquisition are directly relevant and plainly discoverable.ThefactthatAnthosisnotapartytothislitigationisofnomoment. II. THECOMMONINTERESTDOCTRINEDOESNOTPROTECTANTHOS OTHERWISERESPONSIVEDOCUMENTSANDCOMMUNICATIONSFROM PRODUCTION 20. Anthos cannot claim a common interest with Plaintiff prior to the

execution of the Purchase Agreement. See Titan Inv. Fund II, LP v. Freedom Mortg. Corp., 2011WL532011,at*45(Del.Super.Feb2,2011)(collectingcases).Atalltimespriortothe execution of the Purchase Agreement with Plaintiff, Anthos and Plaintiff were armslength counterparties to one another. Although the parties may have been negotiating toward a common goal,thatisnotenoughtoinvokethecommoninterest privilege. Seeid.at*5([A] commoncommercialobjectiveisnotsufficienttoextendtheprotectionofthecommoninterest 8
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doctrine.) seealsoMotiontoCompel40Reply Brief 3741ResponsetoSurReply 2024. 21. Likewise, to the extent Anthos asserts that it shares a common legal

interest with Plaintiff after the execution of the Purchase Agreement, that argument also fails because its interests are at most commercial and not legal. See Reply Brief, 5253 ResponsetoSurReply2024.ItsonlyinterestintheArizonadivorcelitigationiswhetherthe Arizona court will approve its purchase of Plaintiffs shares. That is a purely commercial interest.AnthosalsohasnocognizablelegalinterestintheactionbeforethisCourt.Anthoswas notashareholderatthetimeCrossFitenteredintotheagreementtopurchasetheairplaneatissue in this case and will not be ashareholder when that transaction is completed. Accordingly, it cannot purport to have a legal interest in the propriety of that purchase. Anthos interest in Defendants counterclaims is simply whether the Court will enjoin the proposed sale of PlaintiffssharesasaremedyforPlaintiffsbreachofherfiduciaryduties.Aswithitsinterestin theArizonadivorceproceedings,thatispurelycommercial. CONCLUSION 22. DefendantsrespectfullyrequestthatthisCourtenteranorderintheform

attached hereto compelling Anthos to produce communications between Anthos, its agents, Plaintiff, and Plaintiffs agents, and all other documents in Anthos possession, custody and controlresponsivetoDefendantsSubpoenathatitmightotherwisewithholdonthebasisofthe business strategy immunity, the common interest doctrine, or other improper bases, and a logdetailinganydocumentsthatitdoesinfactintendtowithholdonanyothergrounds,sothat

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Defendantsmayseekfurtherreliefwithouthavingtospeculateastothenatureandquantityof documentsbeingwithheld. /s/RaymondJ.DiCamillo RaymondJ.DiCamillo(#3188) KevinM.Gallagher(#5337) Richards,Layton&Finger,P.A. 920NorthKingStreet Wilmington,Delaware19801 (302)6517700 AttorneysforDefendantsCrossFit,Inc.andGreg Glassman

Dated:September25,2012

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