Court Opinion

ID: 9390466
Source: CourtListenerOpinion
Date Created: 2023-04-27 17:03:29.629694+00
Date Added: 2024-06-11T17:18:34.719991
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

TEUZA – A FAIRCHILD          )
TECHNOLOGY VENTURE LTD.,     )
Individually and on Behalf of All Others
                             )
Similarly Situated,          )
                             )
              Plaintiff,     )
                             )
      v.                     ) C.A. No. 2022-0130-SG
                             )
MARK LINDON, MICHAEL DREYER, )
ANOOSHEH BOSTANI, DAVID      )
SCOTT, NICHOLAS TERRAFRANCA, )
JOSEPH RUBLE, ALFRED E. MANN )
TRUST, MANN GROUP, LLC,      )
BIOVENTUS LLC, AND BIOVENTUS )
INC.,                        )
                             )
              Defendants.    )

                        MEMORANDUM OPINION

                       Date Submitted: January 19, 2023
                        Date Decided: April 27, 2023

Stephen E. Jenkins & Samuel M. Gross, ASHBY & GEDDES, Wilmington,
Delaware; OF COUNSEL: Donald J. Enright, Elizabeth K. Tripodi, and Jordan A.
Cafritz, LEVI & KORSINSKY, LLP, Washington, D.C., Attorneys for Plaintiff.

Raymond J. DiCamillo, Kevin M. Gallagher, and Kyle H. Lachmund, RICHARDS,
LAYTON & FINGER, P.A., Wilmington, Delaware; OF COUNSEL: Adam H.
Offenhartz & M. Jonathan Seibald, GIBSON, DUNN & CRTUCHER LLP, New
York, New York, Attorneys for Defendants Michael Dreyer, Anoosheh Bostani,
Alfred E. Mann Trust, and Mann Group, LLC.

Kevin M. Coen & Stephanie Rudolph, MORRIS, NICHOLS, ARSHT & TUNNELL
LLP, Wilmington, Delaware, Attorneys for Defendants Bioventus LLC and Bioventus
Inc.
Scott B. Czerwonka & Andrea S. Brooks, WILKS LAW, LLC, Wilmington,
Delaware, Attorneys for Defendant Mark Lindon.

Kurt M. Heyman & Jamie L. Brown, HEYMAN ENERIO GATTUSO & HIRZEL
LLP, Wilmington, Delaware; OF COUNSEL: John F. Baughman & Daniel A.
Schwartz, JFB LEGAL, PLLC, Norfolk, Virginia, Attorneys for Defendants David
Scott, Nicholas Terrafranca, and Joseph Ruble.

GLASSCOCK, Vice Chancellor
       Before me are motions to dismiss a complaint that alleges a straightforward

tale of self-dealing by a controller in the context of a merger. The matter is

complicated by the fact that entities—a trust and an LLC—separate the human

controllers from the controlled entity. Nonetheless, the complaint largely clears the

low hurdle of plausibility1 presented by Rule 12(b)(6). The simple facts involve

related entities under common control, one of which controlled the Delaware

corporation at issue, Bioness Inc., the other constituting its largest creditor. The

allegations are that, in the auction of Bioness, the controllers decisively favored the

bidder that provided a better deal for the creditor, at the expense of the minority

stockholders.

       There are four motions to dismiss pending before me. This memorandum

opinion resolves these motions.

                                    I. BACKGROUND2

       Bioness (the “Company”) was founded in 2004 as a joint venture between

Alfred E. Mann and Neuromuscular Electrical Systems Ltd., an Israeli medical

device manufacturer.3          Neuromuscular Electrical Systems later became the

1
  By which I mean reasonable conceivability.
2
  The facts in this section are drawn from the First Am. Verified Class Action Compl. for Breach
of Fiduciary Duty (the “Compl.”), Dkt. No. 14. I find that the complaint also incorporates certain
documents by reference, including various loan agreements and the merger agreement with
Bioventus. See Winshall v. Viacom Int’l, Inc., 76 A.3d at 808, 818 (Del. 2013) (holding that a
plaintiff cannot prevent the court from considering a document the plaintiff extensively references
in its pleadings).
3
  Compl. ¶ 1.

                                                1
Company’s subsidiary and the former stockholders, including Plaintiff Teuza, were

granted representation on the Company’s board (the “Board”).4                   The former

stockholders’ representative was Avi Kerbs.5 Kerbs served continuously on the

Board from his appointment until the Company’s sale in March 2021, which is the

subject of this litigation.6

       Mann served as the Company’s chairman until 2013 and as an actively

engaged director until his death in February 2016.7 Mann was also the Company’s

controlling stockholder, holding a majority of the Company’s stock through the

California-based Alfred E. Mann Trust (the “Trust”), here a Defendant.8 Following

Mann’s death, the Trust continued as an administrative trust administered by

Defendants Michael Dreyer and Anoosheh Bostani (the “Trustees”), both California

residents.9

       In addition to his significant equity holdings, Mann was also the Company’s

primary creditor. Prior to his death, Mann had loaned $133 million in principal to

the Company through Mann Group, LLC (the “LLC”), a Delaware-based investment

4
  Id. ¶¶ 1-2.
5
  Id. ¶ 2.
6
  Id. ¶¶ 2, 114.
7
  Id. ¶ 3.
8
  Id. ¶¶ 3, 14, 26.
9
  Id. ¶¶ 3-4; Opening Br. of Defs. Michael Dreyer, Anoosheh Bostani, Alfred E. Mann Trust, and
Mann Group LLC in Supp. of Their Mot. to Dismiss (the “Mann Defs. OB”) at 20, Dkt. No. 34
(the residency of the Trustees is not disputed by Plaintiff).

                                              2
vehicle he controlled.10 At the time of the merger, the Company owed the LLC

approximately $273 million, including interest.11 Per Plaintiff, no interest was ever

paid on the LLC’s loans to the Company “and there was no expectation by Mr. Mann

that the loans would ever be repaid.”12 Instead, Mann’s reasons for funding this

medical device company were purportedly purely philanthropic.13

       Following Mann’s death, Trustees Dreyer and Bostani wielded control over

the Company via the Trust, while also controlling the LLC as its managers.14

Plaintiff alleges that the Trustees leveraged this position of power to push the

Company into a series of transactions that favored the LLC’s interests as a creditor

to the common stockholders’ detriment. This began with the appointment of

Defendant Mark Lindon as a director and, later, chairman of the Company.15 With

Lindon’s assistance, in August 2017 the Individual Defendants caused the Company

and the LLC to execute an all-assets security agreement.16 This agreement was

accompanied by a promissory note that purported to incorporate all the LLC’s loans

10
   Compl. ¶¶ 3-4, 17; Ex. 1 through 11 to Transmittal Aff. of Kevin M. Gallagher, Esq. in Supp.
of Defs. Michael Dreyer’s, Anoosheh Bostani’s, Alfred E. Mann Trust’s, and Mann Group LLC’s
Opening Br. in Supp. of their Mot. to Dismiss (“Defs.’ Ex.”) 82 (pages numbered sequentially
based on PDF), Dkt. No. 36.
11
   Defs.’ Ex. at 5.
12
   Compl. ¶¶ 3 n.3, 26, 27.
13
   Id. ¶ 3 n.3.
14
   Id. ¶ 4.
15
   Id. ¶ 34.
16
   Id. ¶ 35.

                                              3
since 2008.17 Two weeks later, the LLC filed a UCC-1 statement under which it

claimed a security interest in all of the Company’s assets, including in its intellectual

property.18     The LLC had never previously claimed a security interest in the

Company’s intellectual property.19 Per Plaintiff, the Board neither knew of nor

approved any of these steps to consolidate and secure the LLC’s debt.20

       Plaintiff alleges that Defendants subsequently used this enhanced leverage to

obtain interest rate increases, block the Board’s efforts to obtain outside financing,

and, ultimately, push through a sale unfavorable to common stockholders.21 In

August 2020, the LLC informed the Company that it would not offer additional

loans.22 The Company responded by seeking alternative sources of funding.23 In

September, Defendants rejected an outside investor group’s proposal involving a

combination of new loans and stock issuance, instead demanding an outright sale of

the Company.24 In November, the Company agreed to a preliminary term sheet with

Kuhn Global Capital LLC (“Kuhn”), which contemplated a $750,000 bridge loan

17
   Id.
18
   Id. ¶ 36.
19
   Id. ¶¶ 30-33, 36.
20
   Id. ¶¶ 35, 36.
21
   Id. ¶¶ 36, 40.
22
   Id. ¶ 40.
23
   Id. ¶ 41.
24
   Id.

                                           4
accompanied by a one-year non-binding option for Kuhn to acquire the Company

for either $75 million or a future royalties-based amount.25

       On December 24, 2020, the Board was presented with a fully negotiated letter

of intent from a new potential acquirer, Bioventus (the “LOI”).26        The LOI

contemplated that Bioventus would lend the Company $1.5 million and acquire all

outstanding Company stock for $35 million in cash at closing, with potential earn-

outs of up to $65 million.27 Of the $35 million due at closing, $20.5 million would

pay off non-LLC loans and other expenses, with the remaining $14.5 million going

to the LLC.28       Any earn-outs would go to the LLC in their entirety.29     The

stockholders would get nothing.30 The LOI also contained a stringent no-shop

provision, which prohibited solicitation of or communications regarding alternative

acquisition proposals.31 This provision also prohibited the Company from taking on

new loans, unless they came from the LLC.32 Though negotiations with Kuhn were

ongoing, the Board approved the LOI the same day it was received and without

substantive discussion.33

25
   Id. ¶ 43; Defs.’ Ex. at 105-07.
26
   Compl. ¶ 45.
27
   Compl. ¶ 45; Defs.’ Ex. at 109-13.
28
   Id. ¶ 48.
29
   Id.
30
   Id. ¶ 46-47.
31
   Id. ¶ 46.
32
   Id.
33
   Id. ¶ 45.

                                          5
       Pursuant to the LOI, the Board formed a committee (the “Committee”) to

recommend whether a sale of the Company should proceed and to negotiate any such

sale.34 Despite the fact that Defendant Lindon continued to represent the Trust in a

variety of legal and consulting matters, which had led him to recuse himself from at

least one previous Trust-related board decision,35 he was nonetheless appointed to

lead the Committee.36 The Committee subsequently revised the proposed Bioventus

merger agreement to reduce the consents required from Company stockholders.37

Per Plaintiff, this ensured that sufficient consents could be obtained from

stockholders under the thumb of the Trust and LLC.38 The Committee also “failed

to even attempt to negotiate any benefit for the minority stockholders[.]”39

       Lindon and the Trustees also took steps to enforce the LOI’s no-shop

provision that limited minority stockholders’ ability to seek out a more favorable

deal. In the immediate aftermath of the Board’s approval of the LOI, Lindon sent a

cease-and-desist email to director Kerbs, who represented a block of minority

stockholders including Plaintiff Teuza.40 In the cease-and-desist email, Lindon

warned that Kerbs could face legal liability for seeking an alternative to the

34
   Id. ¶ 52.
35
   Id. ¶¶ 10, 52.
36
   Id. ¶ 52.
37
   Id. ¶ 54.
38
   Id.
39
   Id. ¶ 56.
40
   Id. ¶¶ 2, 62-64.

                                          6
Bioventus deal.41       Lindon also advised the Trustees to limit alternative deal

discussions with Kerbs in order to discourage “an offer from Avi [Kerbs], Kuhn or

some new group.”42 For its part, the Trust made its position clear, writing to Teuza’s

counsel that the Trust “‘will not engage with your clients about any transaction that

could facilitate potential alternatives to Bioventus acquiring Bioness or that

otherwise interferes with the sale process[.]’”43

       Undeterred, Kerbs continued to work to identify alternatives to the Bioventus

deal.44 These efforts resulted in a competing offer from Accelmed (the “Accelmed

Offer”), which was comprised of an initial payment of $60 million and earnout

payments that “presented the possibility that the total equity value could exceed $200

million.”45 Importantly, the Accelmed Offer also gave the minority stockholders the

opportunity to remain as stockholders post-closing.46               Bioventus countered by

increasing the initial payment component of its offer by $10 million.47 In exchange,

it demanded an expedited closing, later adding a new no-shop provision that would

41
   Id. ¶ 64.
42
   Id. ¶ 62.
43
   Id. ¶ 65.
44
   Id. ¶ 69.
45
   Id. ¶ 70. Because the complaint is inconsistent with its chronology, it is unclear whether this
was an initial offer or a final one. Compare id. ¶ 70 with id. ¶ 92 (indicating that the Accelmed
offer was updated, though the iterative differences are never discussed).
46
   Id. ¶ 70.
47
   Id. ¶ 71.

                                                7
only expire after the planned closing date.48 Accelmed responded by unilaterally

presenting improved proposals throughout March 2021.49                       Despite this new

competition, the Company remained resolutely focused on a Bioventus deal.50

       From February to March 2021, there had been significant turnover in the

Board, with non-party directors Jim McHargue and William Dearstyne, as well as

Defendant Mark Lindon, all resigning within a six-week period.51 These directors

represented a majority of the Committee,52 and their replacements were appointed

by the Trust.53 The newly appointed directors were Defendants David Scott,

Nicholas Terrafranca, and Joseph Ruble (together, the “Replacement Directors”).54

Per Plaintiff, the Company took no steps to screen the Replacement Directors for

conflicts.55 The Replacement Directors uniformly supported the no-shop agreement

with Bioventus and refused to consider alternative transactions.56 The Replacement

Directors justified these positions by claiming that the Company was on the brink of

bankruptcy and that the Accelmed Offer was too risky.57 Plaintiff points out that

48
   Id. The Bioventus counteroffer made no mention of a no-shop provision. Id. ¶ 78. Instead, the
initial draft of the no-shop agreement was presented by the Company’s counsel on the Company’s
letterhead. Id. ¶ 79.
49
   Id. ¶ 72.
50
   Id. ¶ 79.
51
   Id. ¶ 75.
52
   Id. ¶ 81.
53
   Id. ¶¶ 75, 81. It appears that, following these departures, the Company abandoned the transaction
committee structure. Instead, the merger was put to a vote of the full Board. Id. ¶ 93.
54
   Id. ¶¶ 11-13, 75.
55
   Id. ¶ 81.
56
   Id. ¶ 82.
57
   Id.

                                                 8
Teuza had already committed to a $6 million loan to give the Board sufficient time

to consider competing offers, while Accelmed itself had offered millions in loans to

guarantee employee salaries pending closing.58

        On March 27, the Board entered into the revised no-shop agreement with

Bioventus.59 Two days later, Accelmed submitted a revised offer that, in addition to

increased merger consideration, committed to agree to the deal terms the Company

had worked out with Bioventus without due diligence and upon only 24 hours of

review.60 During a March 28 Board meeting to discuss the competing offers, the

Replacement Directors and director Robert Perry, together a majority, took the

position that the no-shop agreement prohibited the Company from engaging with

Accelmed.61 Thus, despite Accelmed’s commitments, the Board took the position

that the Bioventus deal was preferable because it offered greater certainty.62

        On March 30, Accelmed delivered its final proposal, which added a waiver of

closing conditions.63 The Board rejected the proposal outright,64 instead voting 3-1

to approve the Bioventus merger and declare it advisable to the Company’s

58
   Id. ¶ 84.
59
   Id. ¶ 85.
60
   Id. ¶ 87.
61
   Id. ¶ 88.
62
   Id. ¶ 91.
63
   Id. ¶ 92.
64
   Id.

                                          9
stockholders.65 Thus, the Board approved the Bioventus deal without having ever

communicated with Accelmed regarding any of its offers.66                        In addition, the

stockholder consents approving the merger had been signed prior to both the

submission of Bioventus’ revised offer and the Board’s recommendation to

stockholders.67

       Under the deal consummated on March 31,68 the LLC would receive the lion’s

share of consideration, while the Company’s minority stockholders would receive

just $5 million of the $45 million upfront payment and 2.5% of the $65 million in

contingent payments.69 After approving the merger, the Board proceeded to award

each of the directors $75,000 for their “service.”70                    Following the merger,

distributions of merger consideration to minority stockholders’ have allegedly been

conditioned on the waiver of any claims against certain Defendants.71

65
   Id. ¶ 93. Kerbs was the only dissenting vote. This vote also approved and declared advisable a
number of transactions associated with the merger itself. Id. Additionally, at this meeting the
Board members universally expressed doubt that the milestones associated with the contingent
payment component of Bioventus’ deal could be achieved. Id. ¶ 104. However, the fairness
opinion provided by the Company’s financial advisor, upon which the Board presumably relied,
was premised on the achievement of these milestones. Id.
66
   Id. ¶ 92. The Board also failed to wait for or consider other interested parties, at least three of
which were exploring potential transactions. Id. ¶¶ 106, 119.
67
   Id. ¶ 94.
68
   Id. ¶ 114.
69
   Id. ¶¶ 98-99.
70
   Id. ¶ 100.
71
   Id. ¶ 121. Plaintiff’s indiscriminate use of “Controller” throughout the complaint to refer to
some combination of the LLC, Trust, and Trustees obscures the key differences between these
parties and their various responsibilities.

                                                 10
                                      II. ANALYSIS

       All Defendants have moved to dismiss the amended complaint (the

“Complaint”) under Rule 12(b)(6).72 The Trustees, Defendants Dreyer and Bostani,

have also moved to dismiss for lack of personal jurisdiction under Rule 12(b)(2).73

I begin my analysis with the threshold issue of personal jurisdiction, before

evaluating whether the Complaint states a claim upon which relief may be granted.

        A. The Trustees’ Motion under Rule 12(b)(2)

       The Defendants contest this Court’s personal jurisdiction over Dreyer and

Bostani, both of whom reside in California. Plaintiff argues that jurisdiction was

either conferred by the merger agreement or is otherwise proper under a theory of

conspiracy jurisdiction.74 I find that the Plaintiff has made allegations that support

jurisdictional discovery and grant leave accordingly.

       Plaintiff contends that, “[b]y consenting to the exclusive jurisdiction in the

Merger Agreement, the Mann entities and the Trustees have submitted to Delaware

jurisdiction for matters related to the merger.”75 However, Dreyer and Bostani

72
   Defs. David Scott, Nicholas Terrafranca and Joseph Ruble’s Opening Br. in Supp. of Their Mot.
to Dismiss, Dkt. No. 30 (the “Director Defs. OB”); Def. Mark Lindon’s Opening Br. in Supp. of
his Mot. to Dismiss, Dkt. No. 31 (the “Lindon OB”); Opening Br. of Defs. Bioventus LLC and
Bioventus Inc. in Supp. of Their Mot. to Dismiss, Dkt. No. 33 (the “Bioventus OB”); Mann Defs.
OB.
73
   Mann Defs. OB at 19-26.
74
   Pl.’s Answering Br. in Opp. to Defendant Michael Dreyer, Anoosheh Bostani, Alfred E. Mann
Trust, Mann Group LLC, David Scott, Nicholas Terrafranca, and Joseph Ruble’s Mot. to Dismiss
(the “PL Combined AB”) at 15-20, Dkt. No. 49.
75
   Id. at 19.

                                              11
signed the merger agreement on behalf of the Trust and the LLC, respectively, rather

than in their personal capacities.76 This Court has held that individuals signing

agreements on behalf of an entity are generally not themselves subject to forum

selection provisions contained therein.77           Accordingly, I find that the merger

agreement does not confer personal jurisdiction over the Trustees.

       Plaintiff further argues that personal jurisdiction over the Trustees is proper

under a theory of conspiracy jurisdiction. The Delaware Supreme Court codified

that theory in Istituto Bancario, holding that:

       a conspirator who is absent from the forum state is subject to the
       jurisdiction of the court, assuming he is properly served under state law,
       if the plaintiff can make a factual showing that: (1) a conspiracy to
       defraud existed; (2) the defendant was a member of that conspiracy; (3)
       a substantial act or substantial effect in furtherance of the conspiracy
       occurred in the forum state; (4) the defendant knew or had reason to
       know of the act in the forum state or that acts outside the forum state
       would have an effect in the forum state; and (5) the act in, or effect on,
       the forum state was a direct and foreseeable result of the conduct in
       furtherance of the conspiracy.78

76
   Ex. 12 through 13 to Transmittal Aff. of Kevin M. Gallagher, Esq. in Supp. of Defs. Michael
Dreyer’s, Anoosheh Bostani’s, Alfred E. Mann Trust’s, and Mann Group LLC’s Opening Br. in
Supp. of their Mot. to Dismiss (“Defs.’ Ex. 12 & 13”) at 74-75 (pages numbered sequentially based
on PDF), Dkt. No. 36.
77
   See Morrison v. Berry, 2020 WL 2843514, at *15 n.210 (Del. Ch. June 1, 2020) (finding no
personal jurisdiction over individual who signed on behalf of a trust); see also Ruggiero v.
FuturaGene, plc., 948 A.2d 1124, 1132 (Del. Ch. 2008) (finding no jurisdiction where individuals
signed on behalf of an entity).
78
   Istituto Bancario Italiano SpA v. Hunter Eng’g Co., Inc., 449 A.2d 210, 225 (Del. 1982).

                                               12
       “Although Istituto Bancario literally speaks in terms of a ‘conspiracy to

defraud,’ the principle is not limited to that particular tort.”79 In subsequent cases,

this Court has held that a fiduciary duty claim can satisfy this element.80 As a result,

my findings below of a sufficient pleading that the Trust and Trustees breached their

fiduciary duties, aided and abetted by the LLC, provide a sufficient basis to infer a

conspiracy, of which the Trustees were members, to push through a transaction

unfavorable to the stockholders.81

       The third element is a closer issue. The Complaint does not provide a

thorough “factual showing” that the Trustees’ actions create a nexus sufficient to

support personal jurisdiction.         However, the Plaintiff’s allegations do provide

grounds to conduct jurisdictional discovery.82              Accordingly, the Plaintiff may

explore the connections between the Trustees and the sale to Bioventus for the

purpose of demonstrating personal jurisdiction.

        B. Defendants’ Motions to Dismiss under Rule 12(b)(6)

       Delaware courts apply a well-settled standard to motions to dismiss under

Rule 12(b)(6). Specifically, the court will “(1) accept all well pleaded factual

79
   Harris v. Harris, 289 A.3d 310, 339 (Del. Ch. 2023) (citation omitted).
80
   See Carsanaro v. Bloodhound Techs., Inc., 65 A.3d 618, 635-36 (Del. Ch. 2013) (noting that
theory encompasses claims of breach of fiduciary duty and aiding and abetting), abrogated on
other grounds by El Paso Pipeline GP Co., L.L.C. v. Brinckerhoff, 152 A.3d 1248, 1264 (Del.
2016).
81
   The absence of an explicit conspiracy claim is not fatal for jurisdictional purposes. See Harris,
289 A.3d 341.
82
   Accord Harris, 289 A.3d 342.

                                                13
allegations as true, (2) accept even vague allegations as ‘well pleaded’ if they give

the opposing party notice of the claim, [and] (3) draw all reasonable inferences in

favor of the non-moving party.”83 I begin my analysis with the central breach of

fiduciary duty claims against the Mann Defendants, from which most of the second

order causes of action derive.

              1. Count IV: Breach of Fiduciary Duty (Against Dreyer, Bostani, and
              the Trust)

       Count IV asserts a claim for breach of the duty of loyalty against the Trust

and Trustees for pushing through a conflicted transaction as the Company’s

controlling stockholder.84 As the holder of a majority of the Company’s stock, it is

indisputable that the Trust was a controlling stockholder.85 Controlling stockholders

owe fiduciary duties to both the corporation and to its minority stockholders.86 As

the “ultimate human controller[s]” who purportedly set the conflicted transaction

into motion, the Trustees also owed the Company fiduciary duties, despite

“participat[ing] in the transaction through intervening entities.”87                 Thus, the

operative question is whether the Complaint supports a pleadings-stage finding that

83
   Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27 A.3d 531, 535 (Del. 2011).
84
   Compl. ¶¶ 141-46.
85
   Williamson v. Cox Commc’ns, Inc., 2006 WL 1586375, at *4 (Del. Ch. June 5, 2006); Compl. ¶
148.
86
   Delman v. GigAcquisitions3, LLC, 288 A.3d 692, 712 (Del. Ch. 2023).
87
   In re Ezcorp Inc. Consulting Agreement Derivative Litig., 2016 WL 301245, at *9 (Del. Ch. Jan.
25, 2016).

                                               14
the Trust and Trustees breached their fiduciary duties by entering a conflicted

transaction with the Company.

       Where a company engages in a transaction in which a controlling stockholder

receives a non-ratable benefit, the applicable standard of review is entire fairness.88

Here, although the controller and the recipient of the non-ratable benefit are separate

entities—the Trust and the LLC—both are directly controlled by the Trustees. I find

that this relationship, combined with the asymmetrical distribution of merger

consideration,89 is sufficient at the pleadings stage to draw a reasonable inference

that the Trust or Trustees derived a non-ratable benefit from the consideration paid

to the LLC. As a result, the appropriate standard of review is entire fairness and the

motion to dismiss Count IV must be denied.90

               2. Count V: Breach of Fiduciary Duty (Dreyer, Bostani, and the Trust)

       In Count V, Plaintiff brings a so-called Primedia91 claim seeking recovery for

pre-merger derivative claims relating to the Trust and Trustees’ purported efforts to

88
   Id. at *30.
89
   Indeed, absent some other source of benefit, the Trustees’ decision to have the Trust forgo its
rightful share of merger consideration is facially inconsistent with the Trustees’ fiduciary duties to
the Trust.
90
    See Kahn v. Lynch Commc’n Sys., Inc., 638 A.2d 1110, 1117 (Del. 1994). Putting aside
Plaintiff’s allegations of imperfect director independence and uninformed stockholder votes, MFW
cleansing is not available here due to the lack of an independent special committee. See Kahn v.
M & F Worldwide Corp., 88 A.3d 635, 644 (Del. 2014) (outlining the process by which a conflicted
squeeze-out merger can be cleansed back to business judgment review), overruled on other
grounds by Flood v. Synutra Int’l, Inc., 195 A.3d 754 (Del. 2018). Recognizing this, Defendants
make no attempt to argue that MFW should apply. See Mann Defs. OB at 43-48.
91
   See In re Primedia, Inc. Shareholders Litig., 67 A.3d 455 (Del. Ch. 2013).

                                                 15
consolidate, secure, and weaponize the LLC’s debt.92 That is, Plaintiff seeks to

preserve choses-in-action that it contends existed and were not accounted for in the

sale to Bioventus.

      A claim under the rubric of Primedia requires the plaintiff to allege: (1) a

viable derivative claim, (2) that is material to the overall transaction, and (3) that

will not be pursued by the buyer and is not reflected in the merger consideration.93

Plaintiff’s vague and conclusory arguments, which largely relate to acts outside the

statute of limitations, fail to satisfy the “stringent standards” required of a Primedia

claim and must be dismissed.94 However, to the extent that these allegations are not

time barred, Plaintiff is free to rely on them as evidence of unfair price or unfair

process.

             3. Count VI: Aiding & Abetting Breach of Fiduciary Duty (Against
             Dreyer, Bostani, and the LLC)

      A cause of action for aiding and abetting breach of fiduciary duty requires a

plaintiff to plead facts supporting “(i) the existence of a fiduciary relationship, (ii) a

breach of the fiduciary’s duty, (iii) knowing participation in that breach by the

defendants, and (iv) damages proximately caused by the breach.”95 The duty,

breach, and damages elements are fulfilled by my finding that the Trust and Trustees

92
   Compl. ¶¶ 147-152; PL Combined AB at 44-46.
93
   Morris v. Spectra Energy Partners (DE) GP, LP, 246 A.3d 121, 127 (Del. 2021).
94
   PL Combined AB at 44-46; In re Orbit/FR, Inc. Stockholders Litig., 2023 WL 128530, at *3
(Del. Ch. Jan. 9, 2023).
95
   RBC Cap. Markets, LLC v. Jervis, 129 A.3d 816, 861 (Del. 2015).

                                            16
owed and breached fiduciary duties to the Company in the squeeze-out merger.

Defendants argue that Plaintiff fails to carry its burden on the “knowing” element.96

To the extent that I understand this argument, it is tacitly premised on the idea that

Dreyer and Bostani, controlling the LLC as its managers, were unaware of what

Dreyer and Bostani were doing in their capacity as Trustees.                The inference,

obviously, is otherwise.

       The Complaint thus states a claim for aiding and abetting breach of fiduciary

duty against both the Trustees and the LLC. While the claim against the Trustees

may well be rendered redundant by my finding that they owed and breached

fiduciary duties directly to the Company,97 I retain the aiding and abetting claim

against them, at this pleading stage, as an alternative cause of action.

              4. Count VII: Unjust Enrichment (Against the LLC)

       A cause of action for unjust enrichment, pled here against the LLC, requires

“(1) an enrichment, (2) an impoverishment, (3) a relation between the enrichment

and impoverishment, (4) the absence of justification, and (5) the absence of a remedy

provided by law.”98 Plaintiff argues that, by agreeing to the LOI, the LLC bindingly

agreed to cap the consideration it would receive at $14.5 million. 99 The increased

96
   Mann Defs. OB at 52.
97
   See CMS Inv. Hldgs., LLC v. Castle, 2015 WL 3894021, at *20 (Del. Ch. June 23, 2015).
98
   Garfield on behalf of ODP Corp. v. Allen, 277 A.3d 296, 341 (Del. Ch. 2022) (quoting Nemec
v. Shrader, 991 A.2d 1120, 1130 (Del. 2010)).
99
   Compl. ¶ 48; PL Combined AB at 46-48.

                                             17
consideration the LLC received under Bioventus’s subsequent improved offer

violated this purported agreement and was, per Plaintiff, an enrichment.100 Putting

aside the fact that the LOI was explicitly non-binding,101 the Plaintiff’s “unjust

enrichment” claim is effectively a cause of action for breach of contract. Even

assuming such a binding contract existed, a claim for such a breach would inhere in

Bioventus or, perhaps, the Company, but not in Plaintiff. Accordingly, Count VII is

dismissed.

               5. Count I: Promissory Estoppel (Against the LLC)

       Plaintiff argues that the LLC is estopped from seeking repayment of its loans

to the Company because Mr. Mann never expected repayment. A promissory

estoppel claim requires a plaintiff to show that “(i) a promise was made; (ii) it was

the reasonable expectation of the promisor to induce action or forbearance on the

part of the promisee; (iii) the promisee reasonably relied on the promise and took

action to his detriment; and (iv) such promise is binding because injustice can be

avoided only by enforcement of the promise.”102 Putting aside the parties’ various

100
    PL Combined AB at 46-47.
101
    Defs.’ Ex. at 113; see ev3, Inc. v. Lesh, 114 A.3d 527, 530 n.7 (Del. 2014) (holding that letters
of intent are generally nonbinding). Plaintiff’s answering brief conspicuously avoids addressing
Defendants’ arguments on this issue. PL Combined AB 47-48.
102
    SIGA Techs., Inc. v. PharmAthene, Inc., 67 A.3d 330, 347-48 (Del. 2013).

                                                18
arguments around timeliness103 and contract integration,104 Plaintiff fails to show

that Mann’s statements constituted “a real promise, not just mere expressions of

expectation, opinion, or assumption.”105

       Plaintiff’s argument is that Defendants have taken actions inconsistent with a

“reasonably definite and clear”106 promise by Mr. Mann to never seek repayment for

his loans to the Company.107 Plaintiff’s core piece of evidence for this promise is

the following email, sent to Kerbs in 2014:

       Avi, I advanced my loans to Bioness to support operation of the
       company with full understanding of the risk and the possibility that
       might not collect it at all. I had actually tried to write off 25 million in
       late 2012 but there were some significant obstacles under US tax law.
       Of course I want to be able to use any write of [sic] efficiently.

       I want Bioness to succeed and am committed to create value for our
       stockholders. If needed I am prepared to write off some or even all of
       those loans but do not want to do anything formally until we are
       operationally secure. I am very pleased with the progress but I am not
       yet ready to make a final adjustment.

103
    Defendants argue that Plaintiff should have sued in 2017, when the first actions inconsistent
with the alleged promise were taken. Mann Defs. OB at 27-28; Reply Br. of Defs. Michael Dreyer,
Anoosheh Bostani, Alfred E. Mann Trust, and Mann Group LLC in Supp. of their Mot. to Dismiss
(the “Mann Defs. RB”) at 11-13, Dkt. No. 60. Plaintiff counters that it could not have known of
these actions and that the statute of limitations should be tolled. PL Combined AB at 50-52. I
decline to address these arguments because, to the extent they are appropriate at the pleadings
stage, they are mooted by Plaintiff’s failure to plead the elements of promissory estoppel.
104
    Defendants also contend that promissory estoppel does not govern where there is an integrated,
enforceable contract. Mann Defs. OB at 30-31; Mann Defs. RB at 14. Here, however, the
pleadings raise questions about the enforceability of those contracts, given the alleged lack of
board approval. See Compl. ¶¶ 30-36. Because the events in question took place in 2017, this
argument again raises timeliness issues.
105
    See James Cable, LLC v. Millennium Digital Media Sys., L.L.C., 2009 WL 1638634, at *5 (Del.
Ch. June 11, 2009) (quoting Addy v. Piedmonte, 2009 WL 707641, at *22 (Del.Ch. Mar.18, 2009)).
106
    Id.
107
    PL Combined AB at 52-53.

                                               19
      I realize the loans give you some difficulty; I just have to find the best
      method and the right time to resolve all that.108

While the email does raise the possibility of full loan forgiveness, it is hedged in

layer upon layer of conditionality. Qualifiers like “possibility,” “if needed,”

“until,” “not ready yet,” and “right time” undermine Plaintiff’s contention that

Mann would never seek repayment. As a result, even at the pleadings stage, I am

unable to find that the Plaintiff has shown that Mann made a reasonably definite

promise not to seek repayment sufficient to support an estoppel claim. Count I is

therefore dismissed.

             6. Count X: Breach of Contract (Against the Trust, the LLC,
             Bioventus LLC, and Bioventus Inc.)

      Count X alleges that the Trust and the LLC breached the merger agreement

by refusing to pay out merger consideration to certain minority stockholders.109

Defendants contend that no breach has occurred, because release of consideration

was contractually conditioned on a waiver of claims, known and unknown, which

Plaintiff has declined to sign.110     Plaintiff counters that the waiver is likely

unenforceable.111

108
    Compl. ¶ 27.
109
    Compl. ¶¶ 172-76.
110
    Mann Defs. OB at 55-57.
111
    PL Combined AB at 56-57.

                                          20
       Plaintiff has raised sufficient questions about the waiver’s coerciveness and

enforceability to merit examination on a more developed record. I am therefore

denying the Mann entities’ motion to dismiss with regard to Count X, which may be

reviewed on summary judgment as appropriate.

       Count X is also pled against Bioventus.112 Bioventus argues that no breach

has occurred, because under the relevant section of the merger agreement,

Bioventus’s only obligation (which it completed) was to pay $5 million to the

Company or to the designated paying agent, who would then handle distribution.113

Plaintiff’s response fails to address Bioventus’s core argument.114 A review of the

merger agreement, which is part of the record at this stage, substantiates Bioventus’s

position.115 Accordingly, Count X is dismissed with respect to Bioventus.

              7. Count VIII: Aiding and Abetting Breach of Fiduciary Duty
              (Against Bioventus)

       While the existence of a fiduciary relationship and a breach of duty have been

established, at least at this pleadings stage, Plaintiff fails to adequately allege that

112
    Count X names both Bioventus Inc. and Bioventus LLC, a Bioventus subsidiary through which
Bioventus Inc. acquired the Company. Compl. ¶¶ 18-19, 96, 173. I refer to them as a single
defendant for the purposes of both this and subsequent causes action.
113
    Bioventus OB at 13-14; Compl. ¶ 98.
114
    See Pl.’s Answering Br. in Opp. to Def. Bioventus’ Mot. to Dismiss (the “PL Bioventus AB”)
17-19, Dkt. No. 47; see also Emerald Partners v. Berlin, 726 A.2d 1215, 1224 (Del. 1999)
(citations omitted) (“Issues not briefed are deemed waived”).
115
    Defs.’ Ex. 12 & 13 at 11.

                                             21
Bioventus’s participation was knowing.116 This would require Plaintiff to make a

plausible allegation of scienter by pleading “specific facts from which [the] court

could reasonably infer”117 that the aider-and-abettor had “actual or constructive

knowledge” of its participation in the breach.118 One way this can be shown is by

demonstrating that an acquirer created or knowingly exploited the target board’s

fiduciary duty breach.119

       Stripping away those allegations that are entirely conclusory, Plaintiff does

not allege specific facts sufficient to support an inference of that Bioventus engaged

in anything but arms-length negotiations. Plaintiff’s strongest assertion is that

Bioventus actively bargained for an indemnification provision in the merger

agreement, including clauses specifically identifying lawsuits already being brought

by Kerbs and Plaintiff Teuza.120 Per Plaintiff, this inclusion “leaves little doubt that

Bioventus was acutely aware” of the Mann entities’ fiduciary duty breaches.121

However, knowledge of an allegation of a breach is not the same as knowledge of

116
    Plaintiff does not make any specific allegations that Bioventus aided and abetted the Director
Defendants’ breaches of their fiduciary duties. See Compl. ¶¶ 161-67. As a result, I limit my
analysis to Plaintiff’s central claim: that Bioventus was a knowing participant in the Mann entities’
alleged conspiracy.
117
    Jacobs v. Meghji, 2020 WL 5951410, at *8 (Del. Ch. Oct. 8, 2020) (quoting McGowan v. Ferro,
2002 WL 77712, at *2 (Del. Ch. Jan. 11, 2002)).
118
    Id. at *7 (quoting Schorsch, 2018 WL 1640169, at *5).
119
    Gilbert v. El Paso Co., 490 A.2d 1050, 1058 (Del. Ch. 1984); In re Del Monte Foods Co.
S’holders Litig., 25 A.3d 813 (Del. Ch. 2011).
120
    PL Bioventus AB at 14-15.
121
    Id. at 14.

                                                22
the breach itself. Though Bioventus knew that litigation was pending, this fact alone

is insufficient to imply that it knew Kerbs’ claims had merit.                Indeed, the

contemporary state of the litigation implied otherwise. The record at the time

disclosed that the Court had denied Kerbs’ motion for a temporary restraining order

in the referenced action.122 As a result, Plaintiff has not pled specific facts from

which I can reasonably infer that Bioventus knew of the Mann entities’ breaches and

actively supported or participated in them.

              8. Count IX: Unjust Enrichment (Against Bioventus)

       As discussed earlier, a claim for unjust enrichment requires the plaintiff to

show “(1) an enrichment, (2) an impoverishment, (3) a relation between the

enrichment and impoverishment, (4) the absence of justification, and (5) the absence

of a remedy provided by law.”123 Accepting for the purposes of this analysis

Plaintiff’s contentions that the first three elements are satisfied by Bioventus’s

acquisition of the Company at an alleged discount,124 Plaintiff fails to show an

absence of justification. A low acquisition price alone is not proof of unjust

enrichment absent some additional wrongful conduct.125 Here, Plaintiff points to the

same alleged conspiracy underlying its unsuccessful aiding and abetting claim.126

122
    Kerbs v. Lindon, C.A. No. 2021-0100-SG, Tr. of Telephonic Oral Arg. and Rulings on Pls.’
Mot. for a TRO at 40:19-45:20, Dkt. No 107.
123
    Garfield, 277 A.3d 341 (citation omitted).
124
    PL Bioventus AB at 16-17.
125
    In re Columbia Pipeline Grp., Inc., 2021 WL 772562, at *56 n.27 (Del. Ch. Mar. 1, 2021).
126
    PL Bioventus AB at 16-17.

                                            23
Having failed to establish a non-conclusory basis for Bioventus’s participation in

this conspiracy, Plaintiff’s unjust enrichment claim fails as well.127

              9. Count II: Breach of Fiduciary Duty (Against Scott, Terrafranca, and
              Ruble)

       In Count II, Plaintiff alleges that Defendants David Scott, Nicholas

Terrafranca, and Joseph Ruble, all Company directors, breached their duty of loyalty

to the Company in connection with the sale to Bioventus.128 In its answering brief,

Plaintiff admits via footnote that David Scott did not participate in the votes at

issue.129 Accordingly, Scott’s motion to dismiss is GRANTED. The following

analysis is limited to Defendants Terrafranca and Ruble (the “Director Defendants”).

       My finding that entire fairness review applies to the transaction in question

“does not automatically doom the [Director Defendants’] motion to dismiss.”130

However, under In re Cornerstone, where the company’s charter contains an

exculpation provision, a plaintiff can overcome a director defendant’s motion to

dismiss by pleading bad faith, self-interest, or advancement of the self-interest of a

127
    While aiding and abetting’s scienter requirement imposes a higher standard than is applicable
for an unjust enrichment claim, Plaintiff’s allegations fall short even under these more relaxed
requirements.
128
    Compl. ¶¶ 132-35.
129
    PL Combined AB at 33 n.12. The Plaintiff should have withdrawn its breach of duty claim,
instead of acting by footnote. It was coy when it should have been forthright.
130
    Manti Holdings, LLC v. Carlyle Grp. Inc., 2022 WL 1815759, at *10 (Del. Ch. June 3, 2022).

                                               24
party from whom the director defendant could not be presumed to act

independently.131

       Plaintiff argues that the Director Defendants were interested in the challenged

transaction because they awarded themselves a $75,000 bonus for their “service.”132

However, Plaintiff admits that the Board voted on and awarded itself this self-

dealing bonus after the merger was approved.133 The Complaint is devoid of any

non-conclusory allegations that the Director Defendants approved the merger

because they knew there would be a subsequent payout.134 Nor has Plaintiff

established that this sum was material to the directors in question.135 As a result,

Plaintiff has not pled facts from which I can reasonably infer that the future

possibility of bonus payments caused the Director Defendants to be interested in the

merger.136

       Plaintiff’s next argument is that the Director Defendants engaged in self-

dealing by approving the merger, which conditioned payout on a broad release of

claims against both the Mann entities and the Director Defendants themselves.137

131
    In re Cornerstone Therapeutics Inc., S’holder Litig., 115 A.3d 1173, 1180 (Del. 2015).
132
    Compl. ¶ 100.
133
    Id.
134
    See Id. ¶ 101 (arguing that the Court should make an inference).
135
     Plaintiff merely makes the conclusory statement that it “would be material to essentially
anyone.” PL Combined AB at 40-41.
136
    Clearly, the bonuses were a self-dealing transaction. However, any fiduciary duty claim for
this self-dealing bonus would inhere in Bioventus because the alleged breach occurred after the
merger was approved.
137
    PL Combined AB at 34.

                                              25
However, Plaintiff fails to allege specific facts from which I can reasonably infer

that a viable claim against the Director Defendants was released (implying self-

interest) or that the Director Defendants were not independent of the Company’s

controller. Accordingly, the Director Defendants’ motion to dismiss is GRANTED.

              10. Count III: Breach of Fiduciary Duty (Against Lindon)

       Plaintiff next brings a cause of action for breach of fiduciary duty against

Defendant Mark Lindon. Plaintiff alleges that Lindon, due to his longstanding

relationship as an attorney for the Trust, was not independent from that entity in his

capacity as a Company director and worked to advance the Trust’s interests over

those of the minority stockholders.138 Plaintiff further contends that Lindon was so

instrumental in negotiating and structuring the tainted transaction that he should be

held liable despite resigning before it was consummated.139

       I find Plaintiff’s allegations sufficient to support a pleadings stage finding that

Lindon was not independent of the Trust and worked to advance its interests in

negotiating the challenged transaction while a Company fiduciary. Accordingly,

Defendant Mark Lindon’s Motion to Dismiss is DENIED.

138
    Pl.’s Answering Br. in Opp. to Def. Lindon’s Mot. to Dismiss (the “PL Lindon AB”) 15-18,
Dkt. No. 48.
139
    PL Lindon AB at 8-11.

                                            26
                                III. CONCLUSION

      For the foregoing reasons, Defendants’ motions to dismiss under Rules

12(b)(2) and 12(b)(6) are GRANTED in part and DENIED in part. The parties are

instructed to submit a form of order consistent with this decision.

                                         27