In re P3 Health Group Holdings, LLC ( 2022 )

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN RE P3 HEALTH GROUP ) Consol. C.A. No. 2021-0518-JTL
HOLDINGS, LLC )
ORDER DENYING MOTION BY FORESIGHT ACQUISITION CORP.,
FORESIGHT ACQUISITION CORP. II, AND GREG WASSON
TO DISMISS COUNT XI
1. Hudson Vegas Investment SPV, LLC (“Hudson”) was a minority investor in
P3 Health Group Holdings, LLC (the “Company”). In this litigation, Hudson has asserted
various claims based on a transaction between the Company and a special purpose
acquisition company, commonly known as a SPAC.
2. The defendants filed a surfeit of motions to dismiss on various grounds,
including Rule 12(b)(6). The court has issued a decision addressing the breach of contract
claims that Hudson asserted. Dkt. 172 (the “Contract Opinion,” cited as “Op.”). This order
incorporates that decision by reference.
3. In Count XI of its complaint, Hudson has asserted a claim against Foresight
Acquisition Corp. (“Foresight”), Foresight Acquisition Corp. II (“Foresight II”), and Greg
Wasson for tortiously interfering with Hudson’s contractual rights.
4. Delaware has adopted the formulation of a claim for tortious interference
with contract that appears in the Restatement (Second) of Torts. WaveDivision Hldgs., LLC
v. Highland Cap. Mgmt., L.P., 49 A.3d 1168, 1174 (Del. 2012); ASDI, Inc. v. Beard Rsch.,
Inc., 11 A.3d 749, 751 (Del. 2010). Generally speaking, “[o]ne who intentionally and
improperly interferes with the performance of a contract . . . between another and a third
person by inducing or otherwise causing the third person not to perform the contract, is
subject to liability to the other.” Restatement (Second) of Torts § 766 (Am. L. Inst. 1979),
Westlaw, (database updated Oct. 2022). Reframed as elements, a plaintiff must plead “(1)
a contract, (2) about which defendant knew, and (3) an intentional act that is a significant
factor in causing the breach of such contract, (4) without justification, (5) which causes
injury.” Bhole, Inc. v. Shore Invs., Inc., 67 A.3d 444, 453 (Del. 2013) (internal quotation
marks omitted).
5. The Contract Opinion has found that Hudson has stated claims for breach of
contract and that Hudson suffered injury. See Op. at 31, 41, 44, 60, 65, 74. It is reasonably
conceivable that Foresight, Foresight II, and Wasson knew about the LLC Agreement and
Hudson’s contract rights. The debate is over elements (3) and (4).
6. Hudson has pled that Foresight, Foresight II, and Wasson engaged in an
intentional act, designed to induce breaches of contract, when Wasson offered Tolan and
Kazarian the opportunity to invest in Foresight II.
a. As described in the Contract Opinion, Chicago Pacific and the
Company pursued a de-SPAC merger with Foresight, but that transaction became far less
attractive to the Company in April 2021. Id. at 11–12.
b. An important aspect of the de-SPAC merger was the Company’s
ability to raise additional financing through the PIPE. Chicago Pacific principals handled
nearly every aspect of the PIPE. The letter of intent contemplated a PIPE of $400 to $500
million. Id. at 11.
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c. In April 2021, the SPAC market began to weaken, and JPMorgan
warned Chicago Pacific that the PIPE would top out at $300 to $350 million, nearly one-
third less than the letter of intent contemplated. Id.
d. As April 2021 unfolded, the SPAC market declined further. By April
29, JPMorgan was telling Tolan that the maximum proceeds had fallen to $250 million. No
one provided the information to the Board. Tolan decided to continue moving forward with
the de-SPAC merger. Id. at 11–12.
e. To shore up Chicago Pacific’s commitment to the transaction, Wasson
gave Tolan and Kazarian the opportunity to invest personally in a follow-on SPAC called
Foresight II. Tolan described the invitation as “an honor.” Id. at 12. Without making any
disclosure to the Board, Tolan and Kazarian accepted, and on May 7, 2021, they invested
$500,000 and $100,000 in Foresight II. Based on historical rates of return to SPAC insiders,
Tolan and Kazarian stood to reap nearly $9 million and $5 million, respectively, if
Foresight II completed an acquisition. Id.
f. It is reasonably conceivable that Wasson offered Tolan and Kazarian
the opportunity to invest in Foresight II to induce them to push through the transaction with
Foresight, notwithstanding the violations of Hudson’s contract rights.
7. The final element is the issue of justification.
a. “The tort of interference with contractual relations is intended to
protect a promisee’s economic interest in the performance of a contract by making
actionable ‘improper’ intentional interference with the promisor’s performance.” Shearin
v. E.F. Hutton Gp., 652 A.2d 578, 589 (Del. Ch. 1994). “The adjective ‘improper’ is
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critical. For participants in a competitive capitalist economy, some types of intentional
interference with contractual relations are a legitimate part of doing business.” NAMA
Hldgs., LLC v. Related WMC LLC, 2014 WL 6436647, at *26 (Del. Ch. Nov. 17, 2014).
“[C]laims for unfair competition and tortious interference must necessarily be balanced
against a party’s legitimate right to compete.” Agilent Techs. v. Kirkland, 2009 WL
119865, at *8 (Del. Ch. Jan. 20, 2009). Determining when intentional interference becomes
improper requires a “complex normative judgment relating to justification” based on the
facts of the case and “an evaluation of many factors.” Shearin, 652 A.2d at 589 (internal
quotation marks omitted).
b. The Delaware Supreme Court has adopted the factors identified in
Section 767 of the Restatement (Second) of Torts as considerations to weigh when
evaluating the existence of justification. WaveDivision, 49 A.3d at 1174. The factors are:
(a) the nature of the actor’s conduct, (b) the actor’s motive, (c) the interests
of the other with which the actor’s conduct interferes, (d) the interests sought
to be advanced by the actor, (e) the social interests in protecting the freedom
of action of the actor and the contractual interests of the other, (f) the
proximity or remoteness of the actor’s conduct to the interference and (g) the
relations between the parties.
Id. Weighing the seven factors identified in the Restatement requires the court to engage
in a fact-specific inquiry to determine whether the interference with contract is improper
under the particular circumstances of the case. See Restatement (Second) of Torts § 767
cmt. b (“[T]his branch of tort law has not developed a crystallized set of definite rules as
to the existence or non-existence of a privilege . . . . Since the determination of whether an
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interference is improper is under the particular circumstances, it is an evaluation of these
factors for the precise facts of the case before the court.”).
c. It is often difficult to assess the element of justification at the pleading
stage. If it is not possible to determine at the pleading stage that the interference was
justified as a matter of law, then the claim for tortious interference can proceed. See
Bandera Master Fund LP v. Boardwalk Pipeline P’rs, LP, 2019 WL 4927053, at *27–29
(Del. Ch. Oct. 7, 2019).
d. In this case, it is reasonable to infer that Wasson’s actions were not
justified. It is reasonable to infer that he offered Tolan and Kazarian the equivalent of a
bribe.
8. In response, Wasson, Foresight, and Foresight II advance a technical
argument based on entity separateness. They say that only the manager of Foresight II had
the ability to offer an investment opportunity, and that entity is not named as a defendant.
That is too cute.
a. At the pleading stage, it is reasonable to infer that Wasson controlled
Foresight and Foresight II through his family office, which sponsored both entities.
b. At the pleading stage, it is reasonable to infer that when Wasson
offered Tolan and Kazarian the opportunity to invest in Foresight II, he was not making an
empty gesture. It is reasonable to infer that he actually had the ability to make good on his
offer.
c. The complaint alleges that Tolan and Kazarian actually invested in
Foresight II. It is reasonable to infer that Wasson had the power to deliver and did.
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d. At a later stage of the case, it may be appropriate to parse the
differences between entities. Hudson may even want to add another defendant based on the
defendants’ representation. At the pleading stage, the entity separateness argument does
not warrant dismissal.
9. Wasson, Foresight, and Foresight II also seem to suggest that Hudson must
tie their actions to a specific breach. Hudson has alleged specific breaches of contract with
the common theme of Chicago Pacific and its representatives pushing a transaction through
for their own benefit. By offering the equivalent of a bribe to the lead representatives of a
counterparty in the middle of the deal process, Wasson, Foresight, and Foresight II engaged
in conduct that supports a reasonable inference that they were trying to induce precisely
that outcome. At the pleading stage, on the facts of this case, Hudson is not required to tie
its allegations more directly to a particular breach.
10. Count XI states a claim on which relief can be granted against Wasson,
Foresight, and Foresight II. Their motion to dismiss Count XI is denied.
/s/ J. Travis Laster
Vice Chancellor Laster
November 4, 2022
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