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Immunomedics, Inc. v. Venbio Select Advisor LLC

United States District Court, D. Delaware

March 2, 2017




         Before the Court is Plaintiff Immunomedics, Inc.'s ("Plaintiff" or "Immunomedics" or the "Company") Motion for a Temporary Restraining Order and Preliminary Injunction, (D.I. 4) Having reviewed the parties'; briefing (D.I. 5, 6, 8, 9, 18), heard argument by teleconference, and having moved expeditiously to consider Plaintiffs request for extraordinary relief in light of the circumstances, [1] IT IS HEREBY ORDERED THAT Plaintiffs Motion (D.I. 4) is DENIED.

         1. A preliminary injunction or temporary restraining order is an "extraordinary remedy" that should be granted only in "limited circumstances." Kos Pharm., Inc. v. Andrx Corp., 369 F.3d 700, 708 (3d Cir. 2004). This type of remedy is available only when the petitioner establishes: (1) a likelihood of success on the merits; (2) irreparable harm if the injunction is denied; (3) the balance of the equities tips in the movant's favor; and (4) the public interest favors the requested relief. See id.; see also P.C. Yonkers, Inc. v. Celebrations, the Party and Seasonal Superstore, LLC, 428 F.3d 504, 508 (3d Cir. 2005) (holding that burden lies with moving party to establish every element in its favor).

         2. Before addressing application of the traditional four factors, the Court considers two preliminary barriers venBio Select Advisor LLC ("Defendant" or "venBio") posits should preclude Plaintiff from obtaining its requested relief. First, Defendant contends that Plaintiff has moved too slowly in seeking relief from this Court, making laches an independent basis for denying the Motion. Second, Defendant asserts that Plaintiff is "playing fast and loose" with this Court and the Delaware Court of Chancery, so Plaintiff should be estopped from seeking the requested relief. Under the totality of circumstances here, the Court does not view either laches or estoppel as sufficient bases on which to deny the Motion. However, the concerns underlying these doctrines, including delay and treating courts appropriately, are pertinent to the Court's analysis of the traditional four factors. As further discussed below, the Court finds that the timing with which Plaintiff filed its Motion cuts against its showing of irreparable harm, and the Court's concern with what Plaintiff told - and did not tell - the Vice Chancellor weighs against its showing that the relief sought is in the public interest.

         3. Turning to the four-factor test, the Court first finds that Plaintiff has failed to demonstrate a likelihood of success on the merits. Plaintiff raises three claims of alleged violations of the Securities Exchange Act ("Exchange Act"): (1) under Securities and Exchange Commission ("SEC") Rule 14a-9, Plaintiff claims venBio published misleading and unlawful proxy solicitation materials by (a) misreporting early results of the proxy contest and (b) attacking the integrity of Immunomedics' current Board of Directors; (2) under SEC Rule 14a-6, Plaintiff alleges venBio failed to file with the SEC certain soliciting materials, namely written communication with an Immunomedics stockholder and solicitations of members of an online message board; and (3) under SEC Rule 13(d), Plaintiff claims venBio failed to file a timely Schedule 13D and failed to disclose the existence of members of its proxy solicitation group.

         For all but one of these claims, which is discussed further below, Plaintiff has failed to provide any evidence, or any persuasive argument, to overcome venBio's evidence and representations, specifically that: any statement about Immunomedics' integrity was sufficiently well-grounded in fact; Defendant had no obligation to file solicitation materials with the SEC, as any discussions it had with other shareholders were not substantial enough to trigger the requirements of the Exchange Act; and Defendant complied with Section 13(d), as no undisclosed groups existed, and as it filed its Schedule 13D within 10 days after acquiring both the requisite amount of stock and the intent to change or influence control of the corporation.

         Plaintiffs sole remaining claim rests on venBio's issuance of a February 14, 2017 press release, which included the following:

We believe the [Seattle Genetics] deal Immunomedics' current Board and management announced only four business days before the Annual Meeting vote was motivated by a desire to entrench themselves and rush to announce an agreement before they lost the vote and their Board seats - not a true, carefully considered desire to do what was in the best interests of all stockholders. This is supported by the fact that as of the day before the deal announcement, venBio's lead in the shareholder vote was becoming increasingly clear - with 80% of outstanding shares submitted and 55% cast in favor of venBio's nominees.

(D.I. 6 at 88, February 14, 2017 Press Release) Plaintiff alleges that this statement violates SEC Rule 14a-9, 17 C.F.R. § 240.14a-9(a), which prohibits false or misleading statements in any proxy statement. Plaintiff argues the Rule was violated because Defendant published early results and because Defendant misrepresented those results. Plaintiff emphasizes that Defendant's purported offense falls within the scope of an example contained in the Note following the Rule, which states that possible misleading statements include "claims made prior to a meeting regarding the results of a solicitation." Id. at Note d. Plaintiff has not shown a likelihood of success on the merits of this claim.

         While Plaintiff blames venBio for misreporting the results, the evidence is that venBio merely reported the data reported to it by Immunomedics' agent. At the time the results were reported, neither venBio nor Plaintiff knew that the data relied on was incorrect.[2] Further, the Note on which Plaintiff bases its argument states that the listed examples may be misleading within the meaning of Rule 14a-9 "depending upon particular facts and circumstances." Here, the "particular facts and circumstances" in which venBio made its statement include: (1) Plaintiffs recent announcement of a partnership deal with Seattle Genetics, Inc. ("Seattle Genetics") and (2) venBio's filing of a motion for injunction in the Delaware Court of Chancery. In this full context, venBio's press release was not a solicitation for a vote and was not intended to convey - nor likely to be understood by shareholders as conveying - that the result of the pending vote was a foregone conclusion. In context, the press release is a criticism of the Seattle Genetics deal aiid a defense of venBio's litigation. Thus, Plaintiff has failed to show a likelihood that it will prove that venBio's press release, when appropriately viewed in full context, was materially false and misleading.[3]

         4. With respect to the second factor, Plaintiff asserts that irreparable injury is presumed if there is a violation of federal proxy rules. As authority for this proposition, Plaintiff cites Lone Star Steakhouse & Saloon, Inc. v. Adams, 148 F.Supp.2d 1141, 1150 (D. Kan. 2001). But Lone Star states that a party "cannot prove irreparable harm merely by showing a material false solicitation." Id. Moreover, the Supreme Court has stated that "the questions of liability and relief are separate in private actions under the securities laws [and] the latter is to be determined according to traditional principles." Rondeau v. Mosinee Paper Corp., 422 U.S. 49, 64 (1975). Therefore, even if Plaintiff had demonstrated a likelihood of success on the merits -which it has not - Plaintiff would need additionally to show irreparable harm to warrant relief. Plaintiff has failed to make this showing.

         Plaintiff argues that extraordinary relief is warranted here because if the Annual Meeting goes forward and a change of control results, "an irreparable scrambling of the eggs will transpire, " making it difficult for the Court to "unscramble the eggs" and put the proper Board back in place. (D.I. 5 at 18) Plaintiff suggests that neither monetary damages nor post-vote relief can be considered as fully remedial relief where, as here, the Court has the ability to prevent the harm pre-vote. See Lone Star, 148 F.Supp.2d at 1150.

         The Court finds that Plaintiff has not met its burden on irreparable harm. Should the Annual Meeting go forward and the venBio nominees replace the current Board, and should Plaintiff subsequently prove the election results were tainted, the Court can exercise its equitable power to void the results of the Annual Meeting (should such action be warranted based on a full record). See Bertoglio v. Texas Intern. Co., 472 F.Supp. 1017, 1021 (D. Del. 1979) ("[I]t is well within the equitable power of the Court to void the results of a shareholders' vote and require both a new solicitation of proxies and a second shareholder vote."). Granting an injunction here, simply because the Court can prevent the vote from taking place, would risk transforming the extraordinary relief of a preliminary injunction and temporary restraining order into something easily and regularly obtained. See Silberstein v. Aetna, Inc., 2014 WL 1388790, at *5 (S.D.N.Y. Apr. 9, 2014); see also Stein v., Inc., 2016 WL 8230128, at *3 (E.D.N.Y. Dec. 2, 2016).

         Additionally, the timing with which Plaintiff has sought relief undermines its showing of irreparable harm. Plaintiff knew of venBio's alleged violations of federal securities laws as far back as August of 2016. In December 2016, Plaintiff articulated many of the same claims ' asserted in this action as part of its defense to an action brought by an individual shareholder in the Delaware Court of Chancery. Further, Plaintiff appeared to be content to let these disputes play out in a separate litigation with venBio in the Delaware Court of Chancery until February 17, 2017, just two weeks before its already twice-delayed Annual Meeting. Under ...

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