LG Electronics (LGE) took a control position in Alphonso, an advertising tech startup. Later and unsatisfied with the contractual relationship between the two companies, LGE allegedly attempted to take de facto control, remove the minority board members, and shift control and profits back to LGE.
In Ashok Mayya v. Edward Lee… LG Electronics, Inc. et al., decided on July 27, 2026, Vice Chancellor Cook rejected LGE’s attempt to dismiss fiduciary duty claims against it and its board member designees.
LGE, through its subsidiary Zenith, entered into a stock purchase agreement to obtain 59.5% of Alphonso’s common stock on a fully diluted basis. The resulting governance structure had three key gives for the minority holders: 1) liquidity rights, 2) director designation rights, and 3) veto rights. The board designation rights included 3 board seats for Alphonso key holders and 4 board seats for LGE. The liquidity rights included a deal for the minority rights holders to require Alphonso to go public by 2024 at its option, or else the LGE controlled company would issue a series of tender offers to purchase their remaining shares. The veto rights were centered mostly around these liquidity and director designation rights.
However, there was inevitable and predictable conflict.
As the court noted in a prior 2024 opinion related to the facts of this case:
“In addition to the companies’ cultural differences, some of this friction derived from differences in [minority shareholders’] and LGE’s objectives. LGE had long-term goals that required cautious integration of Alphonso’s ACR technology into its smart TVs. By contrast..many of the Key Holders were focused on getting to an IPO. Although LGE was on board with the idea at the beginning, it soon became less accommodating and sought strategic flexibility in that area.”
Despite the conflict, Alphonso’s business was successful. As the court noted:
“Notwithstanding the division and disputes, Alphonso thrived. Alphonso exceeded the high revenue targets that LGE set and grew to a 300-person work-force. In the two years that followed closing, Alphonso produced $78 million and $270 million in revenue. This greatly exceeded LGE’s initial targets for Alphonso. By December 2022, Alphonso was valued at over a $1 billion—nearly ten times its valuation at closing. And around that time, LGE’s own internal correspondence confirms that Alphonso’s value had risen to upwards of $1.4 billion.”
As Alphonso became more successful, LGE sought ways to keep profits within LGE and not within Alphonso. This included a scheme to terminate the rights of the minority holders by terminating their employment in late 2022.
Ultimately LGE saw its greatest opportunity to profits to acquiring the technology outright and folding it into LGE rather than allowing Alphonso to go to IPO. LGE could have acquired a larger percentage of the company to ensure it could take the strategic direction it wanted (and based on the facts Alphonso was seeking an outright sale from the beginning). That said, Alphonso could have insisted the board also had an independent board member along with LGE’s appointments to temper LGE’s inevitable fiduciary conflict.
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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