September 27, 2017
A recent Law 360 story by Matt Chiappardi, “Investors Seek Fees While Altor-NantCell Deal Suit Goes On,” reports that Altor Bioscience Corp. shareholders challenging the merger with billionaire physician Patrick Soon-Shiong's NantCell Inc., purportedly valued at nearly $300 million, pushed the Delaware Chancery Court for a mootness fee award as the case remains running, arguing they've so far garnered valuable supplemental disclosures from the company.
The suing shareholders, who include former EU ambassador and White House counsel C. Boyden Gray and Washington attorney and consultant Adam R. Waldman, argue that even though they did not succeed in halting the merger, they nudged Altor to make two additional packets of disclosures about the deal, bringing a benefit to all of the company's stockholders. For doing so, they should be awarded a nearly $200,000 mootness fee, the shareholders said.
"Plaintiffs caused Altor to issue two supplemental rounds of disclosures, which, although still incomplete, contained material information that Altor did not disclose in its original information statement," their Wednesday motion states. "The value of these supplemental disclosures — the restated information statement and the supplement — can and should be determined now."
The issue stems from a Chancery lawsuit Gray and Waldman lodges in June, a few weeks after the deal was announced. The shareholders argued the deal was an insider-led, lowball transaction to sell Altor to NantCell for a fraction of its value, and that company brass was withholding vital information about it.
A bid to halt the transaction, which closed at the end of July, failed when Vice Chancellor Joseph R. Slights III found there was no proof shareholders would be irreparably harmed if the deal closed.
Vice Chancellor Slights acknowledged the investors' concerns that the deal may have been rubber-stamped by a conflicted board at an unfair price, but said post-closing remedies were available if that were case.
The investors filed an amended complaint earlier this month that now also seeks appraisal and quasi-appraisal remedies.
But during the injunction bid process, the investors say they got Altor to eek out additional disclosures for shareholders that include descriptions of certain directors' potential conflicts of interests, previously unreleased clinical trial information about Altor and NantCell's compounds, Altor's strategic relationships, and information purporting that a financial adviser was not hired, a fairness opinion was not, both due to cost concerns, and a market check was not conducted.
"Because of plaintiffs, Altor's stockholders benefited from the disclosures when they were most valuable — prior to their determination as to whether to seek appraisal or tender their shares," the motion states. "By securing the supplemental disclosures during the injunction phase of this litigation, plaintiffs became entitled to a fee award; the court's finding that 'post-closing relief' is available to plaintiffs does not change plaintiffs' entitlement to a fee award."
Counsel for the Soon-Shiong parties declined to comment Thursday. Counsel for the other parties did not immediately respond to requests for comment.
Applications for mootness fees have become more popular in Delaware since Chancellor Andre G. Bouchard's decision in the In re: Trulia Inc. Stockholder Litigation case, widely seen as wiping out the practice of big-money settlement awards in cases where the resolution only involves disclosures.
In that 2016 opinion, Chancellor Bouchard suggested the proper outcome for gaining additional disclosures was a mootness fee, and litigants have been following suit. Many of the awards have been lower than is typical for the earlier settlement awards, which could sometimes stretch into the millions of dollars.
In the Altor case, the plaintiffs are seeking an interim mootness fee of $196,000 based on benefits to shareholders that "cannot seriously be disputed," with figures based on "actual time spent by plaintiffs' counsel, at normal hourly rates."
Litigation in the case is expected to continue whether or not the court approves the interim mootness fee, with the amended version of the complaint in play.
According to the lawsuit, terms of the deal equated to a $290 million company valuation — lower than Altor's most recent $309 million value peg and "multiple times" lower than industry comparables for a business with a dozen ongoing, in some cases advanced, clinical trials for cancer and HIV drugs.
The suing shareholders contend all directors involved in the Altor sale decision are deeply conflicted and that the company failed to appoint a special committee or independent parties to evaluate the deal, and failed to provide even basic information about it to minority stockholders.
Soon-Shiong already owned or controlled 52 percent of Altor's outstanding stock and securities, and under the merger, some 24 million shares will be reserved for officers and directors to "buy their fealty," suing shareholders allege.
The case is Gray et al. v. Soon-Shiong et al., case number 2017-0466, in the Delaware Court of Chancery.