In Fairstead Capital Management LLC and FCM Affordable LLC v. William Blodget, Vice Chancellor Laster ruled on May 14, 2026 that Fairfield, one of the nation’s largest multi-family housing funds, was not entitled to a retroactive disgorgement of Blodget’s carried interest for his misuse and improper disclosure of confidential information, and violation of non-competition. The dispute arose after Blodget left Fairfield and started a competing fund.
In Fairstead Capital Management LLC and FCM Affordable LLC v. William Blodget, Vice Chancellor Laster ruled on May 14, 2026 that Fairfield, one of the nation’s largest multi-family housing funds, was not entitled to a retroactive disgorgement of Blodget’s carried interest for his misuse and improper disclosure of confidential information, and violation of non-competition. The dispute arose after Blodget left Fairfield and started a competing fund.
As Laster said in an earlier decision in the same case on January 6, 2023 that allowed issues under the employment agreement to go to arbitration and those under the LLC operating agreement to go to the court:
“Complexity breeds inconsistency, and inconsistency breeds disputes. Fund complexes are particularly fecund. The proliferation of entities strews rights and obligations across multiple agreements, which only the divine could align. Further complicating matters, the different legal cultures that take the lead on the different agreements embrace different norms. For forum selection, entity lawyers favor the courts of the chartering state. Employment lawyers favor mandatory arbitration. A typical fund principal serves in multiple roles with entities in the fund complex and holds a range of interests in those entities, then has some form of employment agreement on the side. That combination sets the stage for a dispute-resolution collision.”
The court made clear that it was not the proper forum for deciding employment disputes, only those relating to Delaware corporate law. However, the fund could have chosen a dispute resolution provision governing all of the issues, which even required a former member of the Chancery court to be the arbitrator. Here, the fund did no such thing.
In addition, while Fairfield sought total disgorgement of Blodget’s carried interest (15% of Fairfield’s total carried interest allocation), the language in the LLC agreement was not clear (including a missing definition of confidential information), nor the remedies, and therefore the court only limited disgorgement to pending deals based on the plain reading of the employment agreement and LLC operating agreement.
Therefore, where funds will have employees who will also earn compensation in the form of a % of the fund’s carried interest, they should:
● Clearly map out the intended responsibilities of its principals who would receive a form of carried interest as compensation.
● Map out the fund’s rights and remedies across both the employment agreement and operating agreement.
● Clearly define terms such as confidential information with consistency.
● Choose clear and unified dispute resolution mechanisms prioritizing the preferred forum for dispute (e.g. the fund’s preference for court vs. arbitration). We typically recommend cascading dispute resolution – friendly consultation, non-binding mediation, then arbitration.
Jerome Fogel is co-founder of Fogel & Potamianos LLP, a firm recognized by Chambers & Partners’ California Spotlight Guide for excellence in corporate law. A partner in the Corporate Practice Group and Chair of the Sports & Entertainment Group, he is known as an innovator and dealmaker in the legal community. He serves as a general counsel to privately held companies, including representation in mergers and acquisitions.
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