Submitted: March 3, 2017
L. Reed, Ethan H. Townsend, Harrison S. Carpenter, DLA PIPER
LLP, Wilmington, Delaware; Grant P. Alexander, DLA PIPER LLP,
Los Angeles, CA, Counsel for Organovo Holdings, Inc.
L. Finger, FINGER & SLALINA, LLC, Counsel for Georgi
LASTER, Vice Chancellor.
Georgi Dimitrov moved to vacate the entry of default judgment
against him. His motion is granted.
facts are drawn from the Verified Complaint (the
"Complaint") and the materials submitted by the
parties during post-default proceedings. A default judgment
"deem[s] admitted all the well-pleaded facts in the
complaint." This decision also takes judicial
notice of previous proceedings in a related action.
Organovo Holdings, Inc. ("Organovo" or the
"Company") is a Delaware corporation with its
headquarters in San Diego, California. The Company designs
and creates functional human tissues through its use of
proprietary three-dimensional bio-printing technology. In
July 2013, the Company listed its common stock on the New
York Stock Exchange. In the months following its initial
listing, the Company's stock price fluctuated widely.
Between October 2013 and March 2014, the Company's stock
price ranged between $5.55 per share and $12.75 per share,
with an average trading price of $8.78.
is a man of mystery. In February 2014, he formed non-party
Simeon Research, LLC ("Simeon"), a Delaware limited
liability company. Shortly afterwards, he created a website
for Simeon at the URL www.simeonresearch.com. He also secured
for Simeon the Twitter handle @SimeonResearch. Simeon's
Twitter bio described its feed as "long/short analytical
engaged in a single activity: publishing negative information
about the Company. In March and April 2014, Dimitrov
published two reports in Simeon's name. Dimitrov called
attention to these reports by posting sixty-five comments on
Simeon's Twitter account.
The March Report
March 2014, Dimitrov posted a fifty-seven page report on
Simeon's website titled "Organovo: Dissecting the
Fairy Tale - Full Report" (the "March
Report").Dimitrov styled the March Report to
look like work product from a professional equity research
firm. He created official-looking letterhead and included a
standard anti-reliance disclaimer. The report claimed to be
the product of "hundreds of hours of intensive research
from hundreds of journal publications, never-before seen
primary sources, and extensive industry
interviews." It contained 189 footnotes citing
public filings, news articles, and academic papers. It
included numerous pictures and charts. Less professionally,
it made extensive use of bold and underlined typeface, which
this decision omits.
beginning of the March Report summarized its key points.
• "Organovo's bioprinting technology is not
pivotal to tissue engineering or organ fabrication. Simeon
Research publishes for the first time to the public the views
expressed by Organovo's scientific founder: bioprinting -
'it's nothing, it's a stupid exercise.'"
• "Organovo has misled investors in multiple
instances about its technology, its competitive position, and
what it can deliver."
• "A number of companies and academics have
developed bioprinters that have better capabilities than
those of Organovo's NovoGen bioprinter."
"Organovo has failed to deliver on its promises a number
of times in the past, and has experienced a wash-out of
• "Organovo's liver tissue data is years behind
competitors in the 3D liver toxicology market."
"Organovo's intellectual capital has deteriorated
significantly, as the founder exited and key scientistis
• "The scientific consensus on organ printing is
that the media has hyperbolized it far and above reality
while the public has bought in . . . ."
• "Organovo has experienced a rabid run-up in price
that is incongruent with its real valuation, which we believe
to be $1.35/share."
bulk of the March Report focused on the bioprinting
industry's lack of commercial promise and the
Company's technical inferiority to competitors in that
field. It mixed in accusations that the Company's
management had misled investors and engaged in self-dealing.
the last three pages of the March Report analyzed the value
of the Company's stock. Much of this final section
consisted of quotes from outside analysts. The only original
valuation work appeared in the final two pages. Simeon
ultimately valued Organovo based on an asset-based approach
described in a single paragraph:
We have demonstrated that Organovo lacks a competitive moat -
its bioprinting technology is just a "stupid
exercise" in the words of its scientific founder and it
has been eclipsed by other bioprinting manufacturers while
its liver tissue is inferior to the product offerings of
other companies. Given this, we think it would be fairly easy
to replicate every tangible asset on which Organovo's
valuation is based - it thus makes a good basis for valuing
the company. Bioprinters from a competing company. A
warehouse. 35 scientists. $50M in cash. We will grant the
exceedingly generous 5x multiple to Organovo's $13.5M in
R&D spent since inception. All of this brings us to ~
$120M. At the current diluted share count, Organovo would be
valued at $1.35/share. We think this is a fair value and even
generous given the cascade of red flags about the company and
Company responded to the March Report on its website. Among
other things, the Company asserted that the report "was
issued by or at the request of a short seller or
The April Report
March Report portended further publications. "This
report encompasses roughly a third of the information Simeon
Research has uncovered. Additional reports will follow in the
coming weeks." In April 2014, Simeon published a
second report on its website titled "Bargaining with the
Devil: How Organovo Used Fraudulent Brokers and Promoters to
Sell its Shares and Story" (the "April
Report"). Dimitrov prepared the April Report in
the same style as the March Report.
April Report asserted that the Company was defrauding its
investors. The first sentence of the April Report stated,
"Organovo has carried out one of the most successful
penny stock promotions currently listed on a major
exchange." The April Report summarized its
support for this assertion as follows:
• "Organovo paid millions to brokers with
fraudulent histories to promote shares to individual
• "Organovo paid for stock promotion services
without disclosing the payments - it enlisted ProActive
Capital, which has been accused of paying a cadre of authors
to write promotional articles covering client stocks without
• "During the course of this stock promotion, we
believe that pro-Organovo articles may have been published in
exchange for compensation without any disclosure."
• "Organovo has spent nearly 3x as much on selling
shares and promoting its stock as it has on Research &
Development since the company was
April Report claimed that Simeon had "submitted [its]
findings to the SEC and look forward to their
response." It touted that Organovo's stock
price had fallen 9.3% since the publication of the March
April Report responded to the Company's claim that Simeon
was working on behalf of short-sellers. It stated: "We
want to make unequivocally clear that our research and
publications are in no way whatsoever the result of a
'request' or compensation by any third party. Our
reports represent Simeon Research's original
investigations and analysis. . . . [W]e stand by our work and
believe in its accuracy." The April Report also
claimed that "Organovo has, in the past, attempted to
smear critical research of its valuation by calling negative
views 'short and distort'
called attention to Simeon's two reports through the
Company's Twitter account. After releasing the reports,
Simeon sent out at least sixty-five tweets, all of which
concerned the Company. For example, two tweets on April 8,
2014 stated, "Simeon Research reiterates $1.35 price
target for Organovo shares . . . ." and "[Organovo]
is down 4% today and 12% since our first report in March. We
believe downside exists to $1.35/share."
The Simeon Action
April 21, 2014, the Company filed a lawsuit against Simeon in
this court (the "Simeon
Action"). Because the Company did not yet know
who controlled Simeon, the Company included "unnamed
Does 1-25" as defendants.
complaint alleged that the March and April Reports (together,
the "Simeon Reports") contained numerous false or
misleading statements. The Company specifically cited
• "[Organovo] has failed to achieve renewal from
its 2 key pharmaceutical partners and secured fluff PR pieces
• "No researcher will shell out $200, 000 to buy
Organovo's bioprinter when they can make a comparable or
better bioprinter on their own for a fraction of the price.
Organovo has placed 6 of these bioprinters with academic
centers since 2009, or, 1 bioprinter per year. And they
didn't receive a cent - they loaned the printers at no
• "Leapfrogging Organovo, researchers at
Scotland's Herriot-Watt University have made a
revolutionary breakthrough in tandem with privately-held
Roslin Cellab by bioprinting human embryonic stem cells with
high levels of viability (>95% with identical physiology
post-printing) using a modified MakerBot printer. The work,
unlike the claims of Organovo, has been published in the
journal Biofabrication - it has been called "the
greatest breakthrough in 3D bioprinting to date."
• "Keith Murphy [the Company's CEO] tells
investors that Organovo can leverage its platform to achieve
partnership deals that bring in $10, 000, 000-$30, 000, 000
per deal plus a 3%-7% royalty. That is 7 times to 22 times
greater than Organovo's largest deal-to-date, a deal that
has not been renewed."
• "The company publicizes any thread of good news
while sweeping detrimental events under the rug without
• "Of course, Organovo knows [that it did not
develop the first bioprinter], because it worked with nScrpyt
to develop its own bioprinter."
• "[E]ither Organovo's management made dubious
claims to raise money from investors, or its employees and
technology failed to achieve their targets."
• "Organovo has a history of serial dilution and
insider sales in the last half-year exceed the amount of
money the company invested in Research &
• "Back in 2012, every private investor in Organovo
sold their shares into the market, liquidating 32.1M shares
(99.7% of their holdings) at a blended price of
• "[The fact that] Organovo has spent triple its
entire R&D budget since inception on raising money from
small-time investors and stock promotion demonstrates that
Organovo is more penny-stock promotion than legitimate
• "Organovo has spent nearly three times as much
money ($36.5 million) compensating its brokers and
discounting shares in a follow-on as it has on Research and
Development ($13.5 million) since the Company's
• "ProActive provided Organovo a number of stock
promotion services in exchange for Organovo's business -
many had none of the legally-required disclosures."
• "ProActive Capital and DreamTeamGroup have
absolutely no disclosures on any of their operated websites
that they were compensated by Organovo for their
• "Organovo paid these brokers more than $1 in
cash, stock, and warrants for every $1 raised from
Company brought claims for libel, libel per se, and tortious
interference with prospective economic advantage. The Company
sought an order "(i) enjoining Defendant from making or
publishing any further false and defamatory statements
regarding Plaintiff, and (ii) compelling Defendant to remove
any and all defamatory and violative statements from its
website and Twitter account."
suing Simeon, the Company identified Dimitrov by subpoenaing
Simeon's registered agent. On May 15, 2014, the Company
served Dimitrov with a subpoena at his apartment in
caused Simeon to retain counsel, and Simeon moved to dismiss
the Simeon Complaint for lack of subject matter
jurisdiction, lack of personal jurisdiction, and failure to
state a claim upon which relief could be
granted. Then, on June 10, 2014, Simeon's
counsel moved to withdraw, stating that his client "has
ceased communicating with counsel." On June 16, I
issued an order to show cause directing Simeon to file any
opposition to the motion to withdraw by a specified date. The
order warned Simeon that "[i]f no action is taken by
this date, the Motion to Withdraw will be
granted." Simeon did not respond. On July 17,
I granted the motion to withdraw.
that point on, Simeon did not participate in the litigation.
The Company asked the court to deny Simeon's motion to
dismiss and enter a default judgment. I agreed in part and
denied the motion to dismiss. I declined to enter a default
judgment and instead provided Simeon twenty-one days to
answer the complaint. Simeon again did not respond.
August 26, 2014, the Company renewed its motion for default
judgment. By order dated September 3, 2014, I entered a
default judgment against Simeon in the form requested by the
Company. The final order permanently enjoined Simeon from
"making any further defamatory statements about [the
Company]" or "publishing or posting any libelous
statements about Plaintiff anywhere on the Internet."
Simeon was also ordered to "immediately remove or cause
to be removed any and all libelous statements from its
website, Twitter account, or any other public websites,
" including the Simeon Reports and all posts on
Simeon's Twitter account.
January 13, 2015, the Company filed this action against
Dimitrov. The Company contended that Dimitrov acted through
Simeon and used the entity "solely for the purpose of
allowing him to shield his identity and assets, and to create
the appearance that a legitimate research company was
challenging the business of [the
Company]." The factual allegations of the
Complaint were substantially identical to those alleged in
the Simeon Complaint.
Company asserted for claims libel, libel per se, tortious
interference with prospective economic advantage, and
negligence. The Complaint sought an injunction substantially
identical to the one asked for and obtained by default in the
[T]he court should enter a permanent injunction (i)
compelling Dimitrov to remove any and all defamatory and
violative statements from any website he maintains and the
@SimeonResearch Twitter account (ii) enjoining Dimitrov from
forming or creating new entities with the purpose of
preparing and/or publishing any false and defamatory
statements regarding [the Company.], and (iii) enjoining
Defendant from forming or creating new entities with the
purpose of preparing and/or publishing any false and
defamatory statements regarding [the Company.]
seeking this relief, the Company acknowledged in its
Complaint that Simeon's website had been taken down and
that all of Simeon's tweets about the Company had been
Company attempted to serve Dimitrov at his last known address
in Alexandria, Virginia. Someone accepted delivery, then
returned the documents to UPS, suggesting that Dimitrov
either no longer resided there or was evading service. The
Company next attempted to contact Dimitrov via his last-known
phone number, but he did not answer and his voicemail was
full. The Company also e-mailed Dimitrov at his last known
e-mail address, but Dimitrov did not respond. The Company
then searched public records and sent a process server to an
address in New York City, but a building representative told
the process server that Dimitrov did not reside
Company next sought and received permission to effectuate
service by publication. The order authorizing service by
publication directed Dimitrov to appear on May 18, 2015. It
warned that "failure to appear shall be cause for entry
of judgment by default." The Company published
the required notice on March 20, March 27, and April 3, 2015.
13, 2015, over a month after the last notice by publication,
Dimitrov emailed the Company's counsel from a new e-mail
address. His email stated:
My name is Georgi Dimitrov. I recently discovered through a
posting on Delaware Online that Organovo has filed a civil
suit against me due to my publications through my LLC, Simeon
Research. I am writing first to ask the purpose of the suit,
given my impression that by conceding the suit against Simeon
Research and removing all research material and statements
regarding Organovo the matter would be concluded.
Second, I am writing to inform you that I am currently in
Europe, and due to personal matters am wholly unable to be
present in court on May 18th. Therefore, I hope that a
mutually favorable resolution can be reached, and in the
meanwhile, I hope that you would see fit to at least delay
the court date.
did not contact the court.
letter dated May 15, 2015, Organovo submitted Dimitrov's
letter to the court and asked to proceed with the hearing as
scheduled. The Company explained the lengths to which it had
gone to serve Dimitrov and provide notice of the hearing. The
Company also discussed the timing of Dimitrov's email:
In his May 13 e-mail, Mr. Dimitrov claims to have
"recently discovered through a posting on Delaware
Online that Organovo has filed a civil suit against me due to
my publications through my LLC, Simeon Research." On
this point, we note that Organovo arranged for the Order to
be published in The News Journal on March 20, March 27, and
April 3, 2015. Thus, Mr.Dimitrov's e-mail came more than
40 days after the most recent date the Order was published in
The News Journal.
Company inferred that Dimitrov "has gone through great
effort to avoid learning the 'purpose' of this
lawsuit." The Company cited precedents in
which Delaware courts had scheduled hearings and entered
default judgments when parties failed to
Company provided a copy of its letter to Dimitrov using the
email address that he had used to contact the Company. From
that point forward, copies of all filings in this case were
sent to Dimitrov at that email address. Dimitrov did not
respond to the Company's letter.
hearing went forward as scheduled on May 18, 2015. Dimitrov
did not appear. I held that he had defaulted.
ruling that Dimitrov was in default, I did not enter the form
of default judgment that the Company had proposed. I instead
instructed the Company's counsel to brief two matters:
(i) the amount of damages, and (ii) whether the requested
injunctive relief constituted an unconstitutional prior
restraint on future speech.
letter dated September 16, 2015, the Company submitted a
Proposed Order and Final Judgment of Default (the
"Proposed Final Order"). The Proposed Final Order
included a request that Dimitrov disgorge his trading
profits. This was the first time that the Company had
requested this relief. Lacking any public records reflecting
Dimitrov's trades, the Company sought an order compelling
Dimitrov to provide them. Dimitrov did not oppose the
request, and I granted it.
Company commendably provided thorough and evenhanded briefing
on the constitutional issues raised by its request for
injunctive relief. The Company proposed a narrowly tailored
injunction that permanently enjoined Dimitrov from
republishing the content of the Simeon Reports and tweets.
The Company agreed that in any future proceeding to enforce
the injunction, the Company would bear the burden of
establishing Dimitrov's ...