In re CytRx Corporation Stockholder Derivative Litigation II,
D. Rigrodsky, Esquire Brian D. Long, Esquire Gina M. Serra,
Esquire Jeremy J. Riley, Esquire Rigrodsky & Long, P.A.
B. Andrews, Esquire Craig J. Springer, Esquire David M.
Sborz, Esquire Andrews & Springer LLC.
letter resolves plaintiffs' motions for appointment of a
lead plaintiff and lead counsel. For the reasons described
herein, plaintiffs Gordon Niedermayer and Brent Reed
(collectively, the "Niedermayer Plaintiffs") are
appointed as lead plaintiffs and Andrews & Springer LLC
and Gainey McKenna & Egleston are appointed as lead
co-counsel. The motion filed by plaintiff Jack Taylor is
facts underlying this case are well known. On March 13, 2014,
Richard Pearson, a contributor on the website Seeking
Alpha, published an article titled, "Behind the
Scenes with Dream Team, CytRx and Galena, " in which he
detailed how he went undercover after The Dream Team
("Dream Team") solicited him to write favorable
articles on behalf of CytRx Corporation ("CytRx" or
the "Company") without disclosing payment, how
Dream Team's articles coincided with the company's
disclosures and stock offerings, and how CytRx's stock
price responded. Pearson stated that his goal was "to
determine how involved management from these two companies
were [sic] in this undisclosed paid promotion
scheme." With respect to CytRx, Pearson concluded
that members of management at CytRx, including President and
Chief Executive Officer Steven A. Kriegsman and Vice
President for Business Development David J. Haen, were
"intimately involved in reviewing and editing the paid
articles" on CytRx stock.
any litigation stemming from the Pearson report began, CytRx
adopted a forum selection bylaw. The bylaw states as follows:
Unless the corporation consents in writing to the selection
of an alternative forum, the Court of Chancery of the State
of Delaware shall be the sole and exclusive forum for (i) any
derivative action or proceeding brought on behalf of the
corporation, (ii) any action asserting a claim for breach of
fiduciary duty owed by any director, officer, employee, or
agent of the corporation to the corporation or the
corporation's stockholders . . . .
publication of Pearson's article, multiple lawsuits were
filed in Delaware and California alleging
Caremark claims, federal securities law claims, and
challenges to certain spring-loaded options. Vice Chancellor
Laster approved a final settlement of the spring-loaded
options claims in this Court on November 10, 2015 (the
"First Delaware Action"). That settlement excluded
claims related to the Dream Team allegations. The United
States District Court for the Central District of California
approved a final settlement of the federal securities law
claims on May 18, 2016 (the "Federal Securities
Action"). The Caremark claims related to the
Dream Team allegations remain unresolved and are the focus of
24, 2014, Niedermayer submitted a Section 220 demand to
CytRx. On July 1, 2014, the Company responded, requesting
proof of Niedermayer's stock holdings in CytRx during the
time period in question. On July 29, 2014, Niedermayer sent
CytRx unsworn internet printouts purporting to show his stock
holdings. The Company replied that such printouts were
deficient on August 5, 2014.
August 14, 2014, the first Caremark claim arising
from the Dream Team allegations was filed in the Central
District of California. Taylor filed his complaint in the
Central District of California the next day on August 15,
2014. Those actions were consolidated on October 8, 2014 (the
"California Derivative Action").
December 16, 2014, Niedermayer, in another attempt to prove
his stock holdings, sent CytRx an unsworn printout of a
brokerage statement. Three days later, on December 19, 2014,
CytRx acknowledged receipt of the brokerage statement, sent
Niedermayer a proposed confidentiality agreement, and
requested that Niedermayer make the required Section 220
representations under oath.
December 20, 2014, the defendants moved to dismiss the
California Derivative Action. In February 2015, the parties
to the Federal Securities Action, the First Delaware Action,
and the California Derivative Action began settlement
discussions and agreed to a mediator. On April 6, 2015,
Taylor sent the California Derivative Action defendants a
settlement statement, and on April 15, 2015, the California
Derivative Action parties submitted mediation statements to
the mediator. Mediation occurred in the First Delaware
Action, the Federal Securities Action, and the California
Derivative Action on April 23 and 24, 2015.
24, 2015, the judge in the California Derivative Action,
among other things, denied defendants' rule 12(b)(3)
motion to dismiss for improper venue, but granted leave to
file a motion to dismiss for forum non conveniens
based on the CytRx forum selection bylaw. Defendants filed
such a motion on July 24, 2015.
September 14, 2015, Reed sent a Section 220 demand to CytRx.
Four days later, on September 18, 2015, Niedermayer returned
the signed confidentiality agreement and sworn representation
that CytRx had requested nine months earlier. On September
23, 2015, the Company acknowledged receipt of Niedermayer and
Reed's letters and indicated that it was preparing the
Section 220 documents. CytRx delivered the documents to the
Niedermayer Plaintiffs between October 16 and 23, 2015.
October 30, 2015, the judge in the California Derivative
Action granted the defendants' motion to dismiss for
forum non conveniens based on the CytRx forum
selection bylaw. Taylor filed a notice of appeal of that
decision in the United States Circuit Court of Appeals for
the Ninth Circuit on November 17, 2015.
December 14, 2015, the Niedermayer Plaintiffs commenced this
case by filing a verified stockholder derivative complaint in
December 23, 2015, the parties to the California Derivative
Action entered a memorandum of understanding
("MOU") documenting an agreement in principal that
had been reached in late November. CytRx consented in writing
in the MOU to the Central District of California as an
alternative forum to the Court of Chancery for purposes of
settlement. The parties stipulated to dismissal of the Ninth
Circuit appeal without prejudice to reinstate the appeal,
which the Ninth Circuit granted on February 19, 2016.
February 25, 2016, the individual defendants in this case
filed a motion to dismiss the Niedermayer Plaintiffs'
complaint in this Court. In the alternative, they moved to
stay pending approval of the settlement of the California
March 22, 2016, the Niedermayer Plaintiffs filed an amended
complaint in this Court, but on May 2, 2016, this Court
granted defendants' motion to stay this case in favor of
the California Derivative Action. The Niedermayer Plaintiffs
then moved to intervene in the California Derivative Action
on May 6, 2016. On May 31, 2016, the judge in the California
Derivative Action declined to preliminarily approve the
proposed settlement and denied the Niedermayer
Plaintiffs' motion to intervene, reminding the parties
that the California Derivative Action had been dismissed for
forum non conveniens. The parties to the California
Derivative Action, including Taylor, filed motions to set
aside the judgment dismissing that case, which the California
court denied on August 17, 2016. Thereafter, Taylor filed a
verified stockholder derivative complaint in this Court.
September 2, 2016, this Court granted the Niedermayer
Plaintiffs' fully briefed motion to lift the stay in this
case, and the Niedermayer Plaintiffs filed a second amended
complaint on October 12, 2016. The second amended complaint
adds new allegations based on the Section 220 documents and
an additional claim for waste arising from the ...