United States District Court, D. Delaware
pending before the court is Defendants' motion to dismiss
Plaintiffs amended complaint pursuant to Fed.R.Civ.P.
12(b)(6). (D.I. 41). Plaintiff Vincent Wise is a stockholder
of Biowish Technologies, Inc. and Biowish Technologies
International, Inc. (collectively, "Biowish") as
well as Juventa Technologies, Inc., and Juventa Technologies
Holdings, Inc. (collectively, "Juventa").
Defendants are comprised of Biowish, Juventa, their
directors, their outside counsel, and at least one of their
investors (collectively, the "Defendants"). Wise
asserts that different groups of Defendants committed
breaches of fiduciary duty, legal malpractice, and securities
fraud in connection with a transaction whereby Juventa sold
all or substantially all of its assets to Biowish. 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 in part and
denied in part.
February 2012, Biowish's board of directors created
Juventa, a Delaware corporation. (D.I. 40 at ¶ 51).
Thereafter, Biowish and Juventa entered into a license
agreement which gave Juventa the rights to commercialize
certain technology and intellectual property belonging to
Biowish. (Id. at ¶¶ 58, 64). In exchange,
Juventa was obligated to pay royalties based on the annual
net sales of each product. (Id.). The license
agreement was prepared by the law firm Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., where defendant Irwin Heller
is a partner. (Id. at ¶¶ 11, 59). Heller
and Mintz Levin served as outside counsel to both Juventa and
Biowish. (Id. at ¶ 11). Heller also served as
an officer and director of Juventa and an officer of Biowish.
March 2015, Biowish informed Juventa that Juventa was in
default of the license agreement. (Id. at
¶¶ 91-97). If Juventa did not cure the default by
April 17, 2015 by paying a certain sum of money, Biowish
would terminate the license. (Id.; D.I. 29-1 at 4).
Wise alleges that, at an April 17, 2015 meeting of the
Juventa board of directors, the CEO, Stan Weiss, presented
the terms of a potential investment by a group of outside
investors that would have been sufficient to cure the
default. (D.I. 40 at ¶¶ 102, 106). Heller, however,
proposed that Juventa enter into a "contribution
agreement" whereby Juventa would transfer all of its
rights under the license agreement as well as any trademarks
to Biowish. (Id. at ¶¶ 104-107, 127; D.I.
29-1 at 4, 9). In return, Biowish would issue stock to
certain Juventa shareholders and assume certain liabilities.
(Id.). The board immediately took a vote and
approved the idea. (D.I. 40 at ¶ 110). Like the license
agreement, the contribution agreement was prepared by Mintz
Levin. (Id. at ¶ 108).
contribution agreement required the approval of Juventa's
stockholders. See 8 Del. C. § 122(4);
8 Del. C. § 271(a). Accordingly, on May 6,
2015, the company sent its stockholders, including Wise, a
letter explaining the transaction and requesting 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 the 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. (Id.).
that same month, defendants Irwin Heller and Ian Edwards
contacted Wise regarding the written consent form. (D.I. 40
at ¶ 121). In addition to being an officer and director
of Juventa, an officer of Biowish, and outside counsel to
both entities, Heller is a 50% owner of Big I Investments,
which is a stockholder in both the Biowish and Juventa
entities. (Id. at ¶¶ 8, 10-11). The other
50% owner of Big I Investments is Edwards, who also serves as
an officer and director of Biowish. (Id.). Heller
and Edwards told Wise that Juventa was struggling financially
and faced potential legal liability from an investor. (D.I.
40 at ¶ 121). They also told Wise that he would lose his
entire interest in both Juventa and Biowish and could face
legal liability if he did not give written consent.
(Id. at ¶ 123). Heller and Edwards did not
mention any alternatives to the contribution agreement, such
as the outside investment proposed by Weis. (Id. at
¶ 124). Accordingly, in reliance on Heller's advice,
Wise provided his written consent. (Id. at ¶
STANDARD OF REVIEW
survive the motion to dismiss pursuant to Rule 12(b)(6), 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. Twombfy, 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. Twombfy, 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).
I and II of the amended complaint are based on the fiduciary
duties that the directors of Bio wish and Juventa,
respectively, owe to their corporation and its stockholders.
Counts III, IV, and V are based on an attorney-client
relationship between Wise and Heller. Counts VI and VII
allege fraud. Each set of claims is addressed in turn.
Counts I & II: The Derivative Claims
I and II of the complaint assert derivative claims on behalf
of Juventa and Bio wish, respectively, for breaches of
fiduciary duty. (D.I. 40 at ¶¶ 149-66; D.I. 44
at 5). Derivative claims that do not comply with Fed.R.Civ.P.
23.1 must be dismissed. Under Rule 23.1, a stockholder must
allege that the company wrongfully refused a demand to
address an alleged wrong, or that a demand on the board would
have been futile. Allison v. Gen. Motors Corp., 604
F.Supp. 1106, 1112 (D. Del), aff'd, 782 F.2d
1026 (3d Cir. 1985). Wise did not make a pre-suit demand on
the boards of either Juventa or Biowish, so he must show that
demand is excused. "The substantive requirements of
demand are a matter of state law." Blasband v.
Rales, 971 F.2d 1034, 1047 (3d Cir. 1992). Under
Delaware law, demand is excused if the complaint alleges with
particularity that "a majority of the board lacks
independence or is otherwise incapable of validly exercising
its business judgment." Blaustein v. Lord Bait.
Capital Corp., 84 A.3d 954, 958 (Del. 2014).
trying to determine if a majority of the board is
independent, the court's job is to "count
heads." dimming v. Edens, 2018 WL 992877, at
*12 (Del. Ch. Feb. 20, 2018). Wise's amended complaint
has made this job more difficult by failing to provide a
complete list of the current members of each board. Instead,
the amended complaint states that certain defendants
"were" directors "at all relevant times."
(See, e.g., D.I. 40 at ¶ 11). This leaves open
the possibility that those defendants are no longer directors
or that there are other unidentified individuals currently
serving as directors.
Count I, the amended complaint alleges that Heller, Vautier,
McGrath, and Rosenhain were directors of Juventa, so I will
assume that they currently comprise the entire board.
(Id. at ¶¶ 11, 13-14, 16). Wise alleges
that demand is futile as to Count 1, "because the
Biowish Insiders ... are not disinterested or
independent." (Id. at ¶ 157). The
"Biowish Insiders" is comprised of Vautier,
Edwards, and Sakkab. (Id. at ¶ 81). Thus, the
only overlap between the board of Juventa and the Biowish
Insiders is one director-Vautier. One director is not a