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Finom Management GMBH v. Celerion Holdco, LLC

United States District Court, D. Delaware

September 17, 2019


          Christopher J. Day, DAY LAW GROUP, LLC, Wilmington, DE; Joseph M. Donley, Peter Blume, and Christopher M. Brubaker, CLARK HILL PLC, Philadelphia, PA, Attorneys for Plaintiffs.

          Travis S. Hunter, Tyler E. Cragg, and Alexandra M. Ewing, RICHARDS LAYTON & FINGER, P.A., Wilmington, DE, Attorneys for Defendants.




         Pending before the Court is Defendants Clerion Holdco, LLC ("Celerion"), MTS Health Investors, LLC ("MTS"), Christopher J. Bumes, Peter J. Crowley, Curtis S. Lane, and Susan C. Thornton's (collectively "Defendants") motion to dismiss for failure to state a claim. (D.I. 11) On August 9, 2018, Plaintiffs Finom Management GMBH ("Finom") and Dr. Klaus Johann Fischer ("Fischer") (collectively "Plaintiffs") sued Defendants on various claims of breach of contract, breach of fiduciary duties, and fraud. (D.I. 1) ("Compl.") The motion is fully briefed (see D.I. 12, 15, 17) and the Court heard oral argument on April 29, 2019 (see Transcript) ("Tr"). For the reasons stated below, the Court will grant in part and deny in part Defendants' motion.


         On January 4, 2016, pursuant to a Stock Purchase Agreement, Plaintiffs sold Assign Clinical Research GmbH ("Assign") and acquired ownership interests in Celerion. (Compl. ¶ 15) Previously, Plaintiff Fischer had owned 100% of Finom, which had owned Assign. (Id.) As consideration for the sale of Assign, Finom was granted 209, 000 fully-vested Class A Membership Interest Units in Celerion (hereinafter, "Units" or "shares"). (Id.) Plaintiff Fischer was granted 29, 928 Class B Profits Interest Units, 7, 482 Class C Units, and 7, 482 Class D Units (all also referred to hereinafter as "Units" or "shares"). (Id.) Fischer's Units vested throughout his employment with Celerion as set out in a December 21, 2015 Executive Securities Award Agreement ("Award Agreement"). (Id. ¶ 17) In particular, 25% of Fischer's Class B shares vested at closing, followed by equal monthly installments vesting over the next three years if he continued to be employed by Celerion. (Id.) Fischer's Class C and D shares would vest upon the sale of Celerion, unless Fischer's employment terminated for any reason prior to such a sale. (Id. ¶¶ 17-18)

         "The Award Agreement granted Celerion the option to repurchase all or any portion of Fischer's vested Units at 'Fair Market Value' in the event Plaintiff Fischer ceased to be employed by Celerion or any of its subsidiaries for any reason." (Id. ¶ 19) "Fair Market Value" was defined according to Article XIII of Celerion's LLC Agreement ("LLC Agreement"), as follows:

The "Fair Market Value" of any Unit, unit of membership interests, or any other asset or security held by the Company [Celerion] shall mean the fair market value thereof as of the date of valuation as determined by the Board in its good faith judgment taking into account all relevant factors determinative of value.

(Id. ¶ 20)

         On March 9, 2017, Celerion notified Fischer that it would terminate him on June 30, 2017, and further advised him it would exercise its option to repurchase Fischer's 11, 223 vested Class B Units and Finom's 209, 000 vested Class A Units. (Id. ¶ 22) Celerion purchased these shares from Plaintiffs on July 13, 2017, pursuant to a Redemption Agreement ("the Redemption Agreement"). (Id. ¶ 23) Celerion paid Plaintiffs a total of 1, 500, 000 Euros (the "Purchase Price") and warranted that "the Purchase Price is equal to the 'Fair Market Value' as defined in Article 13 of the LLC Agreement." (Id.) On June 16, 2017, in a one-page email, Defendant MTS' CEO justified the calculation of the Purchase Price. (Id. ¶ 24) This email did not include any mention of a potential purchase of Celerion by Court Square or any other party. (Id.)

         The Redemption Agreement also included a release of certain rights:

The Members, on behalf of themselves and their respective affiliates, successors, and assigns (collectively, "Member Releasors") hereby release, waive, and forever discharge the Company and its respective affiliates, employees, officers, directors, shareholders, members, agents, representatives, permitted successors, and permitted assigns (collectively, "Company Releasees") of and from any and all actions, causes of action, suits, losses, liabilities, rights, debts, dues, obligations, costs, liens, bonds, covenants, controversies, agreements, promises, damages, judgments, claims, and demands, whether now known or unknown, foreseen or unforeseen, matured or unmatured, suspected or unsuspected, in law, or in equity (collectively, "Claims"), which any of such Member Releasors ever had, have or hereafter may have against any of such Company Releasees arising out of the Members' ownership of the Units, the LLC Agreement and the Executive Securities Agreement, except for any Claims relating to rights and obligations preserved by, created by or otherwise arising out of this Agreement. For the avoidance of doubt, the Employment Agreement between Fischer, Celerion Inc. and Assign Clinical Research GesmbH shall remain unaffected except as agreed in that certain letter agreement among the Parties dated as of the Effective Date.

(D.I. 1 Ex. 4 at 4.1.1) (emphasis added)

         Plaintiffs allege, on information and belief, that "in or about early 2017, Court Square Partners ('Court Square'), most probably in addition to other potential buyers, expressed interest in acquiring Celerion in an all-cash transaction in which Court Square preliminarily valued Celerion at a price per Unit that was substantially higher than the price at which Celerion's Board subsequently valued Plaintiffs' shares." (Id. ¶ 21) Defendants publicly announced on November 1, 2017 that Court Square had purchased Celerion.[1] (Id. ¶ 25)

         Plaintiffs also allege that as the initial act of fraud, Defendants intentionally terminated Fischer, in order to cause his Class C and D Units never to vest, and to allow the repurchase of his vested Units prior to the sale. (Id. ¶¶ 26-27) Plaintiffs further allege that Defendants delayed closing the Court Square deal until four months after Fischer's termination, in order to avoid a clause in the LLC Agreement providing him rights to a compensatory distribution if a liquidity event (e.g., a company sale) occurred within three months of a Call Closing date (i.e., repurchase of Units). (Id. ¶¶ 28-29) (citing LLC Agreement at Section 11.5.6)

         Plaintiffs filed their Complaint on August 9, 2018 against Cerelion, MTS, and individual members of Celerion's board. (D.I. 1) The numerous claims of the Complaint are summarized below:

Count I: Breach of Contract (Award Agreement) - Fischer Against Celerion
Count II: Breach of Contract (Redemption Agreement) - Plaintiffs Against Celerion
Count III: Breach of Contract (LLC Agreement) - Plaintiffs Against MTS
Count IV: Breach of Fiduciary Duty - Plaintiffs Against Individual Defendants
Count V: Breach of Fiduciary Duty - Plaintiffs Against MTS
Count VI: Aiding and Abetting Breach of Fiduciary Duty - Plaintiffs Against MTS
Count VII: Breach of Covenant of Good Faith and Fair Dealing (Award Agreement) - Fischer ...

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