COURT OF CHANCERY OF THE STATE OF DELAWARE M ORGAN T. Z URN V ICE C HANCELLOR L EONARD L. W ILLIAMS J USTICE C ENTER 500 N. K ING S TREET , S UITE 11400 W ILMINGTON , D ELAWARE 19801

- 3734 May 14 , 2020 Bradley R. Aronstam, Esquire Roger S. Stronach , Esquire Ross Aronstam & Moritz LLP 100 South West Street , Suite 400 Wilmington, DE 19801 Michael A. Barlow, Esquire Daniel J. McBride, Esquire Abrams & Bayliss LLP 20 Montchanin Road, Suite 200 Wilmington, DE 19807

RE: Fortis Advisors LLC , v . Allergan W.C

. Holding Inc. , C.A. No. 2019

- 0 159

- MTZ
Dear Counsel:
I write regarding Defendant’s Motion to Treat Real

- Party

- in

- Interest Sellers as Parties for Purposes of Discovery and Trial, and to Compel Discovery (the “Motion”)

. 1 The Motion, filed on January 17, 2020, addresses Defendant Allergan W.C. Holding Inc.’s (“ Allergan”) request for an order requiring the former stockholders of Oculeve, Inc. ( the “ Stockholders ”) to participate in discovery as real
part ies in interest and to be subject to trial subpoenas as parties; or in the alternative, compelling the Stockholders’ agent , Plaintiff Fortis Advisors LLC (“Fortis” or “Shareholder Representative” ), to procure and produce documents and testimony
from the Stockholders

. The parties completed briefing on the Motion on February

1 Docket Item (“D.I.”) 48.Fortis Advisors LLC, v. Allergan W.C. Holding Inc,

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- MTZ May 14 , 2020 Page 2 of 13 27. On March 2, I held a hearing on the Motion and took the matter under
advisement. For the reasons that follow, the Motion is denied.
I. Background
This case arose out of Allergan’s merger with Ocul eve under the Agreement and Plan of Merger (the “Merger Agreement”) executed on July 5, 2015

. Under
Section 2.10(a) of the Merger Agreement, the Stockholders appointed Fortis to be the Shareholder Representative, acting as the Stockholders’ “sole, exclusive, true and lawful agent, representative and attorney

- in

- fact” with respect to “any and all matters relating to, arising out of, or in connection with” the Merger Agreement, including contingent payments. 2 The Agreement provides that “[a]ll action s, notices, communications and determinations by or on behalf of the [Stockholders] shall be given or made by the Shareholders’ Representative.” 3 Specifically, Fortis was appointed to “receive service of process in connection with any claims under this Ag reement.” 4 “[T]he [Stockholders] do not have any requirements, prerequisites or veto rights in connection with the Shareholders’ Representative’s

2 D.I. 10 [hereinafter “Am. Compl.”], Ex. A § 2.10(a)(i) [hereinafter “Merger Agreement”].
3 Id. § 2.10(a).
4 Id. § 2.10(a) (vii).Fortis Advisors LLC, v. Allergan W.C. Holding Inc,

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- MTZ May 14 , 2020 Page 3 of 13 fulfillment of its obligations.” 5 The Merger Agreement does not grant Fortis access
to the S tockholders’ boo ks and records. Fortis’ s obligations are limited to those enumerated in the Merger Agreement. 6 Allergan bargained for certain access to Oculeve information. Under Section 6.2, Oculeve agreed to “make available for inspection by [Allergan] and its Representative . . . all of [ Oculeve’s and its Affiliates’] respective properties, assets, books of accounts, records . . . and any other materials requested by any of them relating to [Oculeve] and its existing and prospective businesses and asse ts and
Liabilities.” 7 Oculeve also agreed to make its officers and senior management
available to Allergan “to verify and discuss the information the information
furnished to [Allergan] and its Representatives and otherwise discuss [Oculeve]’s existing an d prospective businesses and assets and Liabilities.” 8 Under Section 6.3(b), the parties also agreed to make available “any and all information or books

5 Id.
6 Id. § 2.10(a) (“Notwithstanding the foregoing, the Shareholders’ Representative shall have no obligation to act on behalf of the [Stockholders] , except as expressly provided herein and in the Escrow Agreement, and for purposes of clarity, there are no obligation s of the Shareholders’ Representative in any other ancillary agreement, schedule or exhibit to be delivered in connection with this Agreement or the Escrow Agreement or in the Disclosure Schedule.”).
7 Id. § 6.2.
8 Id.Fortis Advisors LLC, v. Allergan W.C. Holding Inc,

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- MTZ May 14 , 2020 Page 4 of 13 and records necessary to prepare or file” a tax return, including a pre

- closing tax period or to respo nd to an audit for any pre

- closing tax period. 9 Allergan and Fortis dispute the Stockholders’ entitlement to post

- closing milestone consideration under the Merger Agreement. For the Stockholders to earn the milestone payment, Allergan’s medical device h ad to achieve a specifically defined enhanced treatment authorization (the “Enhanced Product Labeling Milestone”) from the Federal Drug Administration (“FDA”). 10 After the FDA gave its authorization, Allergan declined to pay the Stockholders the milestone payment, contending the FDA’s authorization fell short of what was contractually required. 11 Fortis, as Shareholder Representative , asserts Allergan materially breached the Merger Agreement by failing to make the Enhanced Product Labeling Milestone

paymen t, 12 and by failing to use commercially reasonable and good faith efforts to achieve the Enhanced Product Labeling Milestone before March 31, 2018. 13 I
sustained these claims over Defendants’ motion to dismiss in a memorandum

9 Id. § 6.3(b).
10 Id. §§ 1.1, 2 .11 ( b)(i i ).
11 Am. Compl. ¶¶ 31

– 32, 36

– 37.
12 Merger Agreement § 2 .11 (b)(i i ).
13 See i d. §§ 1.1, 2.11 (b) ( i i).Fortis Advisors LLC, v. Allergan W.C. Holding Inc,

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- MTZ May 14 , 2020 Page 5 of 13 opinion issued October 30, 2019 (the “Opinion”)

. 14 The parties lifted a s tipulated stay on d iscovery following the Opinion. 15 On December 3, 2019, Allergan served its initial document requests (the “Requests”) , which define “ Sellers ” as
each of the Sellers named in Schedule I to the Merger Agreement, and each of their corporate affiliates, agents, officers, directors, representatives, attorneys, advisors, consultants, or contractors (including their counsel in connection with the Merger Agreement, Wilson Sonsini Goodrich & Rosati, and their attorney

- in

- fact in this litigation, Fortis Advisors LLC). 16
This definition includes over fifty individual non

- party selling stockholders. 17 Fortis objected to the Requests “on the basis that they are directed to the ‘ Sellers ’ who are not parties to this action,” stating , “Fortis’s responses to the Requests and any production of documents in response to the Requests will be on behalf of Fortis only.” 18

14 D.I. 39.
15 D.I. 24.
16 D.I. 49 [hereinafter “Haller Decl.”], Ex. 12, Defendant’s First Request for Inspection and Production of D ocuments Directed to Plaintiffs, at 4.
17 Merger Agreement at Schedule I.
18 Haller Decl. Ex. 13, Plaintiff Fortis Advisors LLC’s Objections and Responses to Defendant Allergan W.C. Holding Inc.’s Request for Inspectio n and Production of Documents, at 2.Fortis Advisors LLC, v. Allergan W.C. Holding Inc,

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- MTZ May 14 , 2020 Page 6 of 13 The parties met and conferred

. Both sides offere d meaningful compromises,
b ut the parties did not reach an agreement was reached. 19 The Motion followed.
II. Analysis In evaluating the relationship between and duties of Fortis and the Stockholders, I begin with the language of the Merger Agreement. Delaware law presumes parties are bound by the language of the agreement they negotiated, especially when the parties are sophisticated entities that have engaged in arms

length negotiations. 20 The Merger Agreement appoints Fortis as the Stockholders’ “sole, exclusive, true and lawful agent, representative and attorney

- in

- fact of all Sellers . . . with
respect to any and all matters relating to, arising out of, or in connection with, this Agreement.” 21 In particular, Allergan agreed that Fortis would “act for the Sellers with regard to all matters pertaining to the . . . Contingent Payments,” including the

19 Fortis has offered to accept electronic service of deposition and document subpoenas for certain members of the Stockholder Advisory Group identified in Section 2.10(d) of the Merger Agreement, and trial subpoena s for Oculeve’s co

- founder and CEO, Michae l Ackermann , as well as perhaps for other Advisory Group witnesses depending on how the case unfolds . Haller Decl. ¶¶ 5, 6, 12, 24, Ex. 15; D.I. 55 ¶¶ 23, 26. Fortis has also offered to allow Allergan to use Delaware subpoenas, so long as any depositions take place where the witnesses are located. D.I. 55 ¶ 26.
20 See HC Cos., Inc. v. Myers Indus., Inc. , 2017 WL 6016573, at *5 (Del. Ch. Dec. 5, 2017).
21 Merger Agreement § § 2.10 (a) , 2.11(b)(ii)

.Fortis Advisors LLC, v. Allergan W.C. Holding Inc,

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- MTZ May 14 , 2020 Page 7 of 13 Enhanced Product Labeling Milestone. 22 The Merger Agreement does not empower Fortis to compel Stockholder participation in litigation: rather, it appoints Fortis to litigate in the Stockholders’ stead. The contractual appointment of a shareholder representative to bring certain actions makes that representative the real party in interest in those actions. 23 This

structure is helpful to both buyers and sellers, as it “enables each side to resolve post

closing disputes efficiently.” 24 Buyers also benefit from the fact that the structure makes a judgment against the representative binding on all the stockholders, eliminating the risk of inconsistent judgments. 25 This Court has been “reluctant to disregard the clear contractual authority of the Stockholders’ Representatives at the

22 Id. § 2.10(a)(i).
23 Coughlan v. NXP B.V. , 2010 WL 1531596, at * 2

– 3 (Del. Ch. Apr. 15, 2010) (“Coughlan, as Stockholders’ Representative, is a party in whose name a contract has been made for the benefit of the GloNav Stockholders, who are admittedly the real parties in interest. Accordingly, she may brin g this action without joining the GloNav Stockholders.”).
24 Ballenger v. Applied Dig

. Sols

. , Inc. , 2002 WL 749162, at *10 (Del. Ch. Apr. 24, 2002); see also Mercury Sys., Inc. v. S ’ holder Representative Servs. LLC , 2014 WL 591218, at *1 (D. Mass. Feb. 14, 2014) (citing Ballenger for the principle that “ a shareholder representative [is] a helpful mechanism for resolving post

- closing disputes efficiently and quickly ” and determining that the inclusion of individual s hareholders as defendants would “eviscerat[e] the salutary purpose of having appointed a shareholder representative in the first place”).
25 Ballenger , 2002 WL 749162, at *11

.Fortis Advisors LLC, v. Allergan W.C. Holding Inc,

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- MTZ May 14 , 2020 Page 8 of 13 behest of a party, [Defendant], whose aims are clearly adverse to those of the former [Stockholder s].” 26 Allergan’s Motion seeks to displace Fortis and the agreed

- upon sharehol der representative structure. To hold that the Stockholders must participate in discovery as real parties in interest would be contrary to the language and purpose of the Merger Agreement’s shareholder representative structure

. Allergan bargained for structural efficiency in closing the merger and in adjudicating post

- closing disputes,
and cannot now avoid that structure because third

- party discovery introduces some tangential inefficiency in litigation against the sellers. 27 Further, the Merger Agreement does not grant F ortis control over the
Stockholders or their documents

. “In the Rule 34 context, [c]ontrol has been defined to include ‘the legal right to obtain the documents requested upon demand.” 28 A party has possession and control of documents if it “has the power, unaided by the

26 Id

. 27 D.I. 63 at 9 [hereinafter “Hrg. Tr.”].
28 Deephaven Risk Arb Trading Ltd. v. UnitedGlobalCom, Inc. , 2005 WL 1713067, at *11 (Del. Ch. July 13, 2005) (quoting 7 James Wm. Moore et al., Moore’ s Federal Practice § 34.14[2][b] (3d ed. 2005)).Fortis Advisors LLC, v. Allergan W.C. Holding Inc,

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- MTZ May 14 , 2020 Page 9 of 13 court, to force production of the documents.” 29 The Merger Agreement does not give Fortis any right to compel Stockholders to produce documents ; accordingly,
Fortis has no control over those documents and no obligation to produce them in discovery. 30 Both Fortis and Allergan note that no Delaware authority addresses the scope
of a shareholder representative’s control over the stockholder s’ docu ments

. 31 Allergan has submitted cases from outside Delaware, but I find them distinguishable. 32

29 Deephaven , 2005 WL 1713067, at *11; see Dawson v. Pittco Capital P ’r s, L.P. , 2010 WL 692385, at *1 (Del. Ch. Feb. 15, 2010) (“Court of Chancery Rule 34 requires defendants to produce all documents within their possession, custody, or control.”).
30 See Theravectys SA v. Immune Design Corp. , 2014 WL 5500506, at *2 (Del. Ch. Oct. 3 1, 2014) ( declining “to apply a broader definition of ‘control’ that would also include an inquiry into the practical ability of the subpoenaed party to obtain documents” (quoting Cradle IP LLC v. Tex. Instruments, Inc., 2013 WL 1794992, at *1 (D. Del. Apr. 29, 2013))).
31 Plaintiff’s counsel from Delaware and California contend that Allergan’s position is unusual in this Court. Hrg. Tr. at 13, 26; id. at 26 (“I checked with

. . . my client at Fortis. He said this is the first case he’s aware of in whic h a defendant in a merger agreement case has taken the position that the selling stockholders should be treated as parties

. . . a real departure from the practice that’s followed in Chancery

. . . ”) (Martin S. Schenker, Esquire); id. (“That’s been similar to my experience as well, not only with Fortis but also with respect to Shareholder Representative Services.”) (Bradley R. Aronstam, Esquire).
32 Royal Park Invs. SA/NV v. Deutsche Bank Nat’l Tr. Co. , 314 F.R.D. 341 (S.D.N.Y. 2016) ; JPMorgan Chase Bank, N.A. v. KB Home , 2010 WL 1994787 (D. Nev. May 18, 2010); JPMorgan Chase Bank v. Winnick , 228 F.R.D. 505 (S.D.N.Y. 2005); In re Infant Formula Antitrust Litig. , 1992 WL 503465 (N.D. Fla. Jan. 13, 1992)

. Delaware courtsFortis Advisors LLC, v. Allergan W.C. Holding Inc,

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- MTZ May 14 , 2020 Page 10 of 13 Allergan points to two cases: JPMorgan Chase Bank v. Winnick 33 and JPMorgan Chase Bank, N.A. v. KB Home 34

. In both Winnick and KB Home , the court granted motions to compel discovery requiring administrative agent s , established under credit agreement s , to produce discovery in the principal lenders’ possession, custody, and control

. Neither of the underlying credit agreements
included lit igation arrangements such as those present in the Merger Agreement.
This distinction is dispositive

. In Winnick , JP Morgan Chase Bank (“the Bank”) served as administrative agent to lenders who sued a borrower company’s directors and employees for
fraud. 35 The Bank’s authority as agent was governed by a credit agreement to which
the borrower company was a party

. Although the Bank was the assignee of certain litigation claims, t he credit agreement did not expressly establish any litigation
arrangement. 36 C onsidering the underlying agreement , the court placed the burden of discovery on the administrative agent , stating, “If plaintiff and the assignees failed

have not cited any of these authorities in the context of a shareholder representative framework or otherwise.
33 228 F.R.D. 505.
34 2010 WL 1994787.
35 228 F.R.D. at 506.
36 Id. at 507; D.I. 59, Ex. 2 at 9

– 10.Fortis Advisors LLC, v. Allergan W.C. Holding Inc,

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- MTZ May 14 , 2020 Page 11 of 13 to obtain rights to insist on cooperation from their assignors in providing such discovery, and canno t persuade the lending Banks to cooperate now, that is their problem, not defendants ’

. ” 37

In KB Home , the Bank again served as administrative agent for a group of lenders who loaned money to the defendants. 38 The Bank and the lenders were parties to a written credit agreement , which again assigned certain rights to the Bank
but did not delineate an y litigation arrangement . The borrower defendant , which
was not a par ty to the credit agreement , moved to compel lender discovery from the
Bank as the admini strative agent. 39 The court analyzed Winnick and reasoned that “[a]ny failure to obtain rights to insist on cooperation in discovery [in the credit agreement] was the Bank’s fault and is therefore the [Bank’s] problem, not the
defendants ’ .” 40

37 Winnick , 228 F.R.D. at 507 (“ It would be unfair to the defendants to permit plaintiff and the assignees to divorce the benefits of the claims from the obligations that come with the right to assert them, to the detriment of defendants

. . . having purchased the right to bring the la wsuit, there is nothing unfair about imposing on them the cost of purchasing cooperation or otherwise complyin g with discovery obligations”).
38 2010 WL 1994787, at *1.
39 Id. at * 1

– 2.
40 Id. at *5.Fortis Advisors LLC, v. Allergan W.C. Holding Inc,

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- MTZ May 14 , 2020 Page 12 of 13 Here, the lack of authority to compel the stockholders’ participation is not
Fortis’ s burden to bear as agent

. Unlike the credit agreements in KB Home and
Winnick , which were silent as to litigation responsibilities, the Merger Agreement specifies Fortis is to act for the Sellers with regard to all matters pertaining to the Contingent Payments

. Allergan consented to the shareholder representative structure as formulated in the Merger Agreement, which does not include the discovery rights it seeks to enfo rce , and which limits itself to the enumerated rights. 41 The fact that the Merger Agreement does not give Fortis control over the Stockholders and their discovery is not Fortis’ s “fault” or “problem”

— it is a result that Allergan bargained for. Further, Fortis has submitted that (i) it has no “substantive relationship with any of the Stockholders outside of the Advisory Committee and has had no communication with them about the litigation,” and (ii) Fortis’ s litigation counsel was engaged for For tis alone, not on the Stockholders ’ behalf. 42 These facts bolster
the conclusion that Fortis does not have control over the Stockholders ’ documents , and raise the threat of legal conflicts if Fortis were ordered to procure discovery on
the Stockholders’ be half.

41 See Merger Agreement § 2.10(a ).
42 D.I. 55 , Pl.’s Opp ’n Br. ¶ 6 ; id. , Adam Lezack Decl. , ¶¶ 5, 8.Fortis Advisors LLC, v. Allergan W.C. Holding Inc,

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- MTZ May 14 , 2020 Page 13 of 13 As a practical matter, upholding the terms of the Merger Agreement will not significantly prejudice Allergan in this litigation. Allergan retained most of the Oculeve documents post

- closing. 43 Allergan explained that it s Motion seeks discovery into what Oculeve’s investors thought about the merger. 44 This issue does not appear to me to be at the core of the parties’ dispute, and in any event, it can be explored through third

- party discovery.
III. Conclusion The Merger Agreement’s shareholder representative structure identifies Fortis
as the real party in interest in this action , and does not give Fortis control over the Stockholders’ discoverable material. Allergan’s Motion is denied. To the extent an order is required to implement this dec ision, IT IS SO
ORDERED

. Sincerely , /s/ Morgan T. Zurn
MTZ/ms Vice Chancellor
cc: All Counsel of Record via File & ServeXpress

43 Hrg. Tr. at 10 (“Q: Can you elaborate for me a little bit more on basically what is already is in Allergan’s control and what remains with Oculeve?

. . . A: Well, Allergan should have most of the documentation.”).
44 D.I. 48 ¶ 8(d); Hrg. Tr. at 10

– 11.