United States District Court, D. Delaware
Vincent Wise is a purported stockholder of Biowish
Technologies, Inc., Biowish Technologies International, Inc.,
Juventa Technologies, Inc., and Juventa Technologies
Holdings, Inc. Plaintiff has sued those corporate entities,
their directors, their outside counsel, and at least one of
their investors (collectively, the "Defendants")
after a transaction in which the Juventa entities sold all or
substantially all of their assets to the Biowish entities.
Individual defendants Ian Edwards, Nabil Sakkab, and Jeffrey
McCormick serve on the board of directors for the Biowish
entities. (D.I. 1 at ¶¶ 10, 12, 15). Individual
defendants Irwin Heller, Rod Vautier, and Mark McGrath serve
on the board of directors for the Juventa entities.
(Id. at ¶¶ 11, 13, 14). Heller is also a
partner at the law firm of Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C., which provided legal services to the
Biowish and Juventa entities. (Id. at ¶ 11).
Individual defendant Geoff Rosenhain serves on the board for
both the Biowish and Juventa entities. (Id. at
¶ 16). Finally, Big I Investments is a stockholder in
the Biowish and Juventa entities and is owned 50/50 by
Edwards and Heller. (Id. at ¶ 8).
asserts seven counts against different groups of Defendants
for breaches of fiduciary duty, legal malpractice, and
securities fraud. Defendants have moved to dismiss the
complaint pursuant to Fed.R.Civ.P. 12(b)(6). (D.I. 28). The
court has jurisdiction over this matter pursuant to 28 U.S.C.
§§ 1331 and 1367. For the reasons stated below,
Defendants' motion to dismiss is granted.
2007, Plaintiff co-founded Biowish Technologies Pty Ltd., an
Australian company and the predecessor to the Delaware
corporations Biowish Technologies, Inc. (formed in 2009) and
Biowish Technologies International, Inc. (formed in"
2012). (D.I. 1 at ¶ 21). Plaintiff does not know the
precise relationship between these two Delaware corporations
and, therefore, refers to them collectively and without
distinction as "Biowish." (Id. at ¶
4). Plaintiff held stock in Biowish and served as its
Executive Chairman. (Id. at ¶¶ 4, 23).
Over time, Plaintiffs percentage interest in Biowish was
reduced following capital investments by Big I Investments,
Sakkab, McGrath, and Rosenhain. (Id. at ¶¶
24-25). In 2012, Plaintiff resigned from the Biowish board of
directors, but he remained a stockholder of the company.
(Id. at ¶ 50.)
February 2012, Biowish's board of directors created two
Delaware corporations, Juventa Technologies, Inc. and Juventa
Technologies Holdings, Inc., to develop and commercialize
Biowish's technology and intellectual property.
(Id. at ¶ 51). Plaintiff does not know the
precise relationship between the two Juventa entities and,
therefore, refers to them collectively as
"Juventa." (Id. at ¶ 7). Plaintiff is
a stockholder of Juventa and served on its board of directors
until his resignation sometime in 2013. (Id. at
¶¶ 7, 52, 80). Some time after Juventa's
formation, Biowish and Juventa entered into a license
agreement, which was prepared by the law firm Mintz Levin.
(Id. at ¶¶ 58- 59; D.I. 1-1). Under the
terms of the license agreement, Juventa received an exclusive
license to commercialize certain Biowish technology and
intellectual property. (D.I. 1 at ¶ 58). In exchange,
Juventa agreed to pay a royalty based on the annual net sales
of each product. (Id. at ¶ 64).
complaint alleges that Juventa "suffered from cash-flow
problems typical of a start-up company." (Id.
at ¶ 88). In March 2015, Biowish informed Juventa that
it was in default of the licensing agreement, because it had
failed to pay certain royalties and failed to repay a $60,
000 loan. (Id. at ¶¶ 90-96). Biowish
further informed Juventa that unless the default was cured by
April 17, 2015, it would terminate the license agreement.
(D.I. 29-1 at p.4 of 51). Plaintiff alleges that at an April
17, 2015 meeting of the Juventa board of directors, the CEO
of Juventa, Stan Weiss, presented the terms of a potential $1
million investment in Juventa by a "group of
investors." (Id. at ¶ 101). The complaint
does not identify the group of investors or describe any
proposed terms beyond the amount. (Id.). According
to the complaint, Heller cut off the conversation regarding
the potential investment to instead propose that the company
resolve its dispute with Biowish by entering into a
"contribution agreement." (D.I. 1 at ¶¶
103-106). Like the license agreement, the contribution
agreement was prepared by Mintz Levin. (Id. at
¶ 107). Under the terms of the contribution agreement,
Juventa would transfer to Biowish all rights and causes of
action under the license agreement as well as all rights,
title, and interest in all trademarks. (Id. ¶
106; D.I. 29-1 at p. 9 of 51). In return, Biowish would
assume certain liabilities of Juventa and, further, issue
shares of Biowish stock to certain Juventa shareholders.
(D.I. 1 at ¶ 126; D.I. 29-1 at p. 4 of 51). The Juventa
board approved the contribution agreement that same day.
(D.I. 1 at ¶ 109).
next month, the Juventa board sought stockholder approval of
the contribution agreement. Accordingly, on May 6, 2015, the
company sent stockholders, including Plaintiff, a letter
explaining the transaction and requesting that stockholders
provide written consent. (D.I. 29-1). The letter stated that
Juventa was seeking the consent of: (i) a majority of all
outstanding Juventa common stock, (ii) a majority of Juventa
common stock not receiving Biowish shares in this
transaction, and (iii) a majority of the Juventa common stock
subject to restricted stock agreements. (Id.).
Attached to the letter was a copy of the contribution
agreement and a stockholder written consent form.
that same month, defendants Edwards and Heller contacted
Plaintiff and "explained that Juventa was struggling
financially and that Juventa and Biowish faced potential
legal liability from [a Juventa investor] stemming from his
recent investment." (D.I. 1 at ¶ 120). According to
the complaint, Heller also told Plaintiff that "if [he]
did not sign the [contribution agreement], he stood to lose
the entirety of his interest in both Juventa and Biowish and
could face additional legal liability." (Id. at
¶ 122). During that conversation, "[n]either Heller
nor Edwards ever informed [Plaintiff] about the potential for
other outside investment in Juventa." (Id. at
¶ 123). In reliance on Heller's advice, Plaintiff
provided his written consent. (Id. at ¶ 131).
STANDARD OF REVIEW
Rule 12(b)(6), a party may move to dismiss a complaint for
failure to state a claim upon which relief can be granted.
Fed.R.Civ.P. 12(b)(6). To survive the motion to dismiss, the
complaint must contain sufficient factual matter "to
state a claim to relief that is plausible on its face."
Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009)
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007)). The factual allegations do not have to be
detailed, but they must provide more than labels,
conclusions, or a "formulaic recitation" of the
claim elements. Twombly, 550 U.S. at 555. In
assessing the plausibility of a claim, the court must accept
all well-pleaded factual allegations in the complaint as true
and draw all reasonable inferences in favor of the plaintiff.
In re Rockefeller Ctr. Prop., Inc. Sec. Litig., 311
F.3d 198, 215 (3d Cir. 2002). The court's review is
limited to the allegations in the complaint, exhibits
attached to the complaint, documents incorporated by
reference, items subject to judicial notice, and matters of
the public record. Mayer v. Belichick, 605 F.3d 223,
230 (3d Cir. 2010).
have raised multiple arguments as to why each of the seven
counts in the complaint should be dismissed. Nevertheless, I
will primarily focus only on those arguments necessary to
show why the complaint fails to state a claim. Specifically,
Counts I and II, for breach of fiduciary duties, are
dismissed pursuant to Fed.R.Civ.P. 23.1(b)(3) for failure to
plead demand futility. Counts III, IV, and V, based on a
purported attorney-client relationship between Plaintiff and
Heller, are dismissed pursuant to Fed.R.Civ.P. 12(b)(6) for
failure to plead facts from which the court can plausibly
infer the existence of such attorney-client relationship.
Counts VI and VII are dismissed pursuant to Fed.R.Civ.P. 9(b)
for failure to plead fraud with particularity. Finally, I
will address Defendants' argument that Counts I and VI
should be dismissed pursuant to the applicable statute of
limitations, so that the parties have the opportunity to
address any perceived deficiencies should Plaintiff choose to
file an amended complaint.
Counts I & II: The Derivative Claims
I and II of the complaint assert that the directors of
Juventa and Biowish, respectively, breached their fiduciary
duties. (D.I. 1 at ¶¶ 140-47). Defendants argue
that Counts I and II should be dismissed, because Plaintiff
has failed to properly plead these counts as derivative
claims. (D.I. 29 at 6-9). If a stockholder-plaintiff s claim
is derivative in nature, then the plaintiff must plead
"with particularity: (A) any effort by the plaintiff to
obtain the desired action from the directors ...; and (B) the
reasons for not obtaining the action or not making the
effort." Fed.R.Civ.P. 23.1(b)(3). "If a party
brings derivative claims without first making demand, and
demand is not excused, those claims must be dismissed."
Albert v. Alex. Brown Mgmt. Serv., Inc., 2005 WL
2130607, at *13 (Del. Ch. Aug. 26, 2005). Here, Plaintiff has
not alleged that he made any ...