David A. Hoffmann v. First Wave Biopharma, Inc. ( 2023 )

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
DAVID A. HOFFMAN, )
)
Plaintiff, )
)
v. ) C.A. No. 2023-0097-MTZ
)
FIRST WAVE BIOPHARMA, INC., )
a Delaware corporation, )
)
Defendant. )
MEMORANDUM OPINION
Date Submitted: June 23, 2023
Date Decided: September 27, 2023
David A. Jenkins, Jason Z. Miller, SMITH, KATZENSTEIN & JENKINS LLP,
Wilmington, Delaware; Robert P. Haney, Jr., Garrick D. Josephs, FOLEY HOAG
LLP, New York, New York; Peter G. Ellis, Sahar M. Basaria, FOLEY HOAG LLP,
Boston, Massachusetts, Attorneys for Plaintiff David A. Hoffman.
Kevin M. Gallagher, Nicole M. Henry, Spencer V. Crawford, RICHARDS,
LAYTON & FINGER, P.A., Wilmington, Delaware, Attorneys for Defendant First
Wave BioPharma, Inc.
ZURN, Vice Chancellor.
Plaintiff David Hoffman is a director of defendant First Wave Biopharma, Inc.
(“First Wave” or the “Company”). Hoffman seeks advancement in connection with
a purported investigation or inquiry into his conduct as a director based on the
Company’s contractual promise to advance fees incurred in connection with
investigations and inquiries.
Hoffman is relatively new to First Wave’s board of directors, and was
appointed in connection with First Wave’s acquisition of a target. That acquisition
resulted in litigation with the target’s stockholder representative followed by
settlement negotiations. First Wave’s plans to raise capital were leaked to the
target’s founder, who used that information to demand a higher settlement payment.
First Wave’s chairman and CEO suspected Hoffman was the mole, and took steps
to create a board committee excluding Hoffman to discuss matters he and the other
directors wanted to keep confidential from the target’s stockholder representative.
Hoffman responded by engaging counsel, and his counsel and First Wave exchanged
letters. At times, First Wave suggested that the other directors believed Hoffman
had breached his fiduciary duties. Hoffman’s counsel asserted that the committee’s
creation amounted to his wrongful exclusion from board discussions.
Notwithstanding the letters, the board approved the committee’s formation.
Hoffman now seeks advancement for his representation in his conflict with
the Company. Hoffman argues that because the other directors concluded that he
1
breached his fiduciary duties, First Wave must have investigated his conduct. First
Wave contends the board acted on a belief that did not result from any investigation.
With the benefit of discovery, the parties proceeded to trial.
The evidence at trial did not prove that the Company undertook any
investigation or inquiry. Rather, it proved that First Wave’s chairman and CEO
presumed that Hoffman disclosed the capital raise, based in part on Hoffman’s
relationship with the target’s founder, and proposed forming the committee based
on that presumption. This opinion concludes Hoffman’s advancement rights are not
triggered because he did not incur expenses in connection with a covered
proceeding.
In pretrial briefing, Hoffman developed a secondary position that, in claiming
he breached his fiduciary duties and violated other laws, the Company had
threatened a lawsuit or regulatory proceeding. Because the advancement provision
entitles him to recover in connection with threatened proceedings, he argued the
Company is obliged to advance his expenses. But Hoffman failed to adequately
plead a claim based on this theory, failed to give the Company adequate notice of
his intent to litigate it, and failed to seek leave to amend his pleading to include it.
These failures defeat his claim for advancement under that theory.
2
I. BACKGROUND
In this post-trial opinion, I have found the following facts by a preponderance
of the evidence based on the witnesses’ videotaped depositions, contemporaneous
documents, and other filings in the record.1
A. The Company’s Acquisition Of Old First Wave Devolves
Into Litigation.
Nonparty Dr. Gary Glick founded nonparty First Wave Bio, Inc. (“Old First
Wave”),2 “a clinical-stage biotechnology company specializing in the development
of novel, gut-targeted, small molecule therapies for auto-immune inflammatory
bowel diseases (IBD) and other serious conditions.”3 Glick approached his
long-time friend Hoffman with an opportunity to invest in Old First Wave, which
Hoffman accepted.4
In 2021, AzurRx BioPharma, Inc. (“AzurRx”) acquired Old First Wave for
approximately $18 million in cash, $4 million in stock, and up to $207 million in
1
Level 4 Yoga, LLC v. CorePower Yoga, LLC, 2022 WL 601862, at *2 (Del. Ch.
Mar. 1, 2022). That record is sparse: it comprises forty-seven exhibits and the deposition
transcripts of Hoffman and First Wave’s chairman and CEO, James Sapirstein. Citations
in the form “[Last Name] —” refer to the deposition testimony of the referenced deponent,
available at docket item (“D.I.”) 28. Citations in the form “JX —” refer to the parties’ joint
trial exhibits.
2
Hoffman 20.
3
JX 1.0083.
4
Hoffman 19–20.
3
milestone payments.5 Additionally, the holders of a majority of Old First Wave’s
outstanding stock at the time of closing had the right to elect a director to the
post-closing entity’s board.6 Practically, Glick had the power to appoint that
director, and in April 2022, he caused Hoffman to be appointed.7 After closing,
AzurRx changed its name to First Wave Biopharma Inc.8
The transaction did not age well. Within two months of closing, Old First
Wave’s stockholder representative Fortis Advisors LLC (“Fortis”) sued First Wave,
alleging it failed to pay part of the up-front consideration and failed to provide notice
that a milestone was met.9 The parties settled that lawsuit on November 15.10 On
May 19, 2022, Fortis sued again, alleging First Wave missed a required payment
under the settlement agreement.11 The parties entered into settlement discussions
and were close to signing a term sheet that contemplated the Company paying Fortis
$1.5 million.12
5
JX 1.0002.
6
JX 1, Ex. 2.1 § 6.9.
7
Hoffman 25–26, 28; D.I. 30 § III ¶¶ 2, 7.
8
D.I. 30 § III.a ¶ 4; First Wave BioPharma, Inc., Form 8-K (Current Report)
(Sept. 21, 2021), Ex. 3.1.
9
Fortis Advisors LLC v. First Wave BioPharma, Inc., C.A. No. 2021-0936-JRS, at D.I. 1
(Oct. 29, 2021).
10
First Wave BioPharma, Inc., Form 8-K (Current Report) (Nov. 16, 2021).
11
JX 6.
12
See Sapirstein 37–38.
4
Meanwhile, the Company sought to raise additional capital.13 At a June
meeting of First Wave’s board of directors (the “Board”), First Wave’s directors
discussed potential financing options, including raising between $1 million and $3
million through an equity offering.14 A final decision was not reached at that time.
On July 28 or 29, the Company’s chairman and CEO James Sapirstein informed the
other directors on a Board call that the Company would be raising $4 million through
an at-the-market, or “ATM,” offering.15 The Board did not intend to publicly
disclose the offering until September or October.16
But Glick found out about First Wave’s planned influx of cash almost
immediately. On a July 29 call, Glick informed First Wave representatives that he
was aware the Company was poised to raise $4 million through an ATM offering,
and demanded that the settlement payment to Fortis be increased by $1 million, to a
total of $2.5 million.17 First Wave gave in, and the parties revised and signed the
13
See JX 7.0003.
14
Id.
15
Sapirstein 180.
16
Id. at 38–39.
17
Id. at 37–38, 180.
5
settlement term sheet to reflect these terms that same day.18 Fortis dismissed the
lawsuit in September, and the parties worked towards a final settlement agreement.19
Glick’s knowledge of the ATM offering “shocked” the Company
representatives on the call, which included Sapirstein, the Company’s CFO Sarah
Romano, and the Company’s head of business development Martin Krusin.20 The
three discussed the matter after getting off the call, though they did not reach a
conclusion as to who could have leaked the information.21
B. Sapirstein Concludes Hoffman Leaked First Wave’s Plan
For Cash, And The Board Creates A Committee Excluding
Hoffman.
Sapirstein believed Hoffman had told Glick about the ATM offering.22 He
had no concrete evidence, but he had two reasons. First, the plan for the ATM
offering was not public: only the Board and certain members of management knew
about it.23 Hoffman was the only person in the know whom Sapirstein did not trust.24
18
JX 8.
19
Fortis Advisors LLC v. First Wave BioPharma, Inc., C.A. No. 2022-0436-MTZ, at D.I.
27 (Del. Ch. Sept. 13, 2022).
20
Sapirstein 37, 39–40.
21
Id. at 41–43.
22
Id. at 42–45.
23
See id.
24
See id. at 44–45.
6
Second, Hoffman was the only director who had a positive relationship with Glick—
the others strongly disliked him.25
After his conversation with Romano and Krusin, Sapirstein discussed the
disclosure with the Company’s outside counsel, who told Sapirstein to “just let it
rest.”26 The Company’s counsel “was not asked at that time to do any work to help
[Sapirstein] determine who . . . disclosed information to Dr. Glick.”27 On an informal
Board call, Sapirstein brought the issue up with Hoffman, who denied informing
Glick of the ATM offering.28 Otherwise, Sapirstein did not take any steps to confirm
his belief that Hoffman had leaked the planned offering to Glick or take other action
at the time.29 His reasons for not doing so were that he wanted to avoid legal costs,
and that he believed that definitively identifying who disclosed the information
would not remedy the situation.30
Others shared Sapirstein’s concerns. Board members individually called
Sapirstein expressing concerns about discussing Fortis matters in front of Hoffman
and “ask[ed] [Sapirstein] to come up with an official process.”31 Sapirstein
25
Id.; see also id. at 56.
26
Id. at 43.
27
Id. at 43–45.
28
Id. at 47–48, 92–93.
29
Id. at 43–45, 52.
30
Id. at 45–46, 53, 152–53, 194.
31
Id. at 64–65.
7
discussed these requests on “one or two” occasions with Edward Borkowski, another
Company director.32 Sapirstein believed Borkowski would be a good resource
because he had “done something like [that] before.”33 Together, he and Borkowski
came up with the idea to form a committee consisting of all directors other than
Hoffman to discuss certain financial matters that may be of significance to Fortis.34
He discussed the plan with only one other director, Chuck Casamento.35 In October,
Sapirstein, in his capacity as chairman, decided he would propose the creation of a
committee comprising all directors other than Hoffman.36
On October 13, Sapirstein circulated Board meeting materials via email to all
directors other than Hoffman.37 In the email, Sapirstein explained that Hoffman
would receive an abridged version of the Board slide deck, and that during the
meeting, the Board would call for a “special session . . . where [Hoffman] will need
to sign off.”38 Sapirstein sent the Board materials to Hoffman later that day.39
32
Id. at 33, 87, 104.
33
Id. at 33.
34
Id. at 107–08.
35
Id. at 87, 89.
36
Id. at 105, 115–16.
37
JX 13.
38
JX 13.0001.
39
JX 14.
8
C. Hoffman Responds Through Counsel.
Hoffman did not take the news well. He replied four days later and quoted an
email from his counsel, which opined that the Board had no legal basis to exclude
him from “board discussions.”40 Hoffman also requested an explanation from
Company counsel as to why he was being excluded.41 He began playing offense,
requesting that the Board discuss “unusual price action and high volume of [the
Company’s] stock price” because “[t]here [were] several issues that pertain to the
board in regards to the trading of [the Company’s] stock that [he] believe[d] need[ed]
to be reviewed.”42 Sapirstein and some other directors understood this to be an
accusation that certain directors or members of management were manipulating the
Company’s stock price.43
Sapirstein responded that day by email:
40
Id.
41
Id.
42
Id.
43
See Sapirstein 24–26, 93, 135–37.
9
The other directors of the Company believe that you have previously
disclosed sensitive information regarding the Company to one or more
stockholders of the Company in violation of applicable federal
securities laws, the Company’s insider trading policy and your
fiduciary duties as a director under Delaware law. Your unauthorized
and unlawful disclosures have resulted in significant damage to the
Company. The Board believes that it needs to take appropriate action
to protect sensitive information regarding the Company and to prevent
the potential for future breaches by you of your legal responsibilities.
Accordingly, at the next meeting, the Board intends to establish a
committee to consider and act on sensitive matters, the unauthorized
disclosure of which could potentially damage the Company.44
On October 18, Sapirstein circulated a draft Board resolution authorizing the
creation of a Strategy and Transactions Committee (the “Committee”).45 The
resolution provided that the Committee would consist of every director other than
Hoffman.46 Sapirstein wrote that “[t]he matters delegated to the committee should
be limited to those necessary to protect Company [sic] against the effects of any
director sharing the information with Fortis.”47 Hoffman perceived the Committee
as a means to exclude him from the Board.48
The next day, Hoffman’s counsel sent a letter to the Company calling the
suggestion that he breached his fiduciary duties and shared confidential information
44
JX 15.0001. Counsel did not explain, and the record did not clearly demonstrate, the
Company’s basis for suggesting Hoffman violated federal securities laws or the Company’s
insider trading policy.
45
JX 16.
46
JX 16.0002.
47
JX 16.0001.
48
See JX 14; JX 17.0001; JX 30.
10
with Fortis “wholly unsubstantiated.”49 The letter contended that “even the board
notice of the meeting where he was being excluded did not allege improper conduct”
and that Hoffman “was never even made aware of the allegation, never asked for
any information and never given an opportunity to respond.”50
The Company’s counsel responded by letter on October 20 (the “October 20
Letter”).51 That letter conveyed that “[t]he Board believes that Mr. Hoffman, in
breach of applicable federal securities laws, the Company’s Insider Trading Policy,
and his duty of loyalty as a director of the Company under Delaware law, unlawfully
disclosed the [ATM offering] to Gary Glick and Fortis.”52 The letter explained that
“this belief is based on” Glick’s “substantially simultaneous demand for” additional
settlement consideration at the time the Board was informed that the Company
would be raising funds through an ATM offering.53 The letter concluded:
49
JX 17.0001.
50
Id.
51
JX 18.0001.
52
Id.
53
Id.
11
As I am sure you are aware, a director is not entitled to exculpation for
a breach of the duty of loyalty under Delaware law and the Company’s
Amended and Restated Certificate of Incorporation. Accordingly, Mr.
Hoffman should consider his situation carefully and, frankly, should
immediate [sic] resign as a director of the Company given his actions.54
The Board met that same day.55 When the Board turned to the Committee’s
creation, Hoffman left the meeting.56
The Board meeting minutes reflect that after Hoffman left, “Sapirstein
expressed his view that Mr. Hoffman had previously disclosed sensitive confidential
information to Fortis and expressed his concern that future disclosures would be
made that could be detrimental to the Company.”57 Borkowski “stated that he
believes that Mr. Hoffman disclosed sensitive information to Fortis to the detriment
of the Company and that his view is that Mr. Hoffman has breached his fiduciary
duties and should not be involved in certain Board discussions.”58 “The other
members of the Board expressed their general agreement with these views . . . .”59
54
JX 18.0002.
55
JX 20.
56
JX 20.0003. Hoffman testified that he was asked to be interviewed at the October 20
Board meeting. Hoffman 85. He then clarified that Sapirstein and Company counsel
merely asked him to give his “side of the issue” at the meeting. Id. at 85–86.
57
JX 20.0004.
58
Id.
59
JX 20.0005.
12
The Board then approved the Committee’s creation, and the Committee met.60 That
was the only official Committee meeting.61
In an October 25 letter, Hoffman’s counsel attacked the Board’s deliberative
process as not amounting to a proper investigation. Hoffman’s counsel criticized
the Board for “fail[ing] to follow lawful procedures in investigating Mr. Hoffman
and making a decision to exclude him from Board deliberations” and failing to
“launch any such inquiry in accordance with the First Wave by-laws and Delaware
law.”62 Hoffman’s counsel noted the Board did not inform Hoffman that it was
conducting an inquiry, and contended launching an investigation without a full
Board meeting requires unanimous Board consent, and that Hoffman did not
consent.63 Hoffman’s counsel also pointed out that Hoffman had never been
interviewed or questioned in connection with his alleged information sharing, which
his counsel described as “the most basic step in any investigation.”64
The Company and Fortis entered into a final settlement agreement on
November 30.65
60
JX 20.0004–0006; JX 19; Sapirstein 94, 212.
61
Sapirstein 93–94, 167–68.
62
JX 22.0001.
63
JX 22.0001–0002.
64
JX 22.0002.
65
JX 27.
13
D. Hoffman Pursues Advancement, Books And Records, And
This Action.
Hoffman’s counsel sent a second letter on October 25 demanding
indemnification and advancement for fees and expenses “incurred in relation to First
Wave’s inquiry into Mr. Hoffman’s alleged ‘violation of applicable federal
securities laws, [First Wave’s] insider trading policy and [his] fiduciary duties as a
director under Delaware law’ and the its [sic] decision to exclude Mr. Hoffman from
certain” Board meetings.66
In December, Hoffman’s counsel served a demand to inspect the Company’s
books and records pursuant to 8 Del. C. § 220.67 Among other things, the demand
sought inspection of books and records relating to the Committee’s formation,
Committee meetings, and “the determination made by the Board at [the October 20]
meeting, purportedly after an inquiry done by the Board, that Mr. Hoffman had
improperly disclosed confidential Board information.”68 The demand’s stated
purposes were “to evaluate the propriety of the creation of the [Committee]
referenced in the October 20, 2022 Board Minutes and the determination made by
said Committee as to the actions of Mr. Hoffman” and to enable Hoffman to stay
informed about the Company such that he could “provide input into important Board
66
JX 23.0001 (first and second alterations in original) (quoting JX 15.0001).
67
JX 29.
68
Id.
14
level issues that have been delegated to the Committee improperly.”69 Hoffman’s
counsel sent another letter the same day, attacking the Committee’s formation and
continued existence and repeating Hoffman’s request for indemnification and
advancement.70
Company counsel responded by letter defending the Committee’s creation.71
It also declined to provide Hoffman with indemnification or advancement, asserting
that the Company had neither threatened nor pursued any legal action and had not
conducted “any formal investigation, inquiry, hearing, or the like” into Hoffman’s
actions.72
The Company produced books and records in response to Hoffman’s demand
on January 11, 2023.73 Hoffman did not pursue his demand any further.
On January 27, 2023, Hoffman filed his complaint in this action seeking
advancement and fees on fees from the Company (the “Complaint”).74 The
69
JX 29.0002.
70
JX 30.
71
JX 33.0001.
72
JX 33.0002.
73
D.I. 30 § III ¶ 23.
74
D.I. 1 [hereinafter “Compl.”].
15
Company answered the Complaint,75 and engaged in discovery before proceeding to
a half-day trial on a paper record.76
II. ANALYSIS
Hoffman seeks advancement under an indemnification agreement with the
Company that grants Hoffman a mandatory advancement right (the “Indemnification
Agreement”).77 That right is triggered where Hoffman incurs expenses “by reason
of his Corporate Status in connection with any Proceeding.”78 There is no dispute
that Hoffman incurred the expenses at issue by reason of his Corporate Status.
Rather, the parties dispute whether the expenses were incurred in connection with a
covered proceeding. The Indemnification Agreement defines “Proceeding” as
follows:
75
D.I. 7 at Ans.
76
D.I. 31.
77
JX 5 § 9.
78
Id. The Indemnification Agreement defines “Corporate Status” in relevant part as “the
status of a person who is or was a director, officer, employee, agent or fiduciary of the
Company.” Id. § 2(b).
16
any threatened, pending or completed action, suit, arbitration, alternate
dispute resolution mechanism, investigation, inquiry, administrative
hearing or any other actual, threatened or completed proceeding,
whether brought in the right of the Company or otherwise and whether
of a civil, criminal, administrative, legislative, or investigative nature,
including any appeal therefrom, in which [Hoffman] was, is or will be
involved as a party, potential party, non-party witness or otherwise by
reason of the fact that [Hoffman] is or was a director or officer of the
Company, by reason of any action taken by him or of any action on his
part while acting as director or officer of the Company, or by reason of
the fact that he is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, limited
liability company, partnership, joint venture, trust or other enterprise,
in each case whether or not serving in such capacity at the time any
liability or expense is incurred for which indemnification,
reimbursement, or advancement of expenses can be provided under this
Agreement; except one initiated by [Hoffman] to enforce his rights
under this Agreement.79
79
Id. § 2(f). At trial, the parties agreed Section 8(c) of the Indemnification Agreement
exempts from advancement “any Proceeding (or any part of any Proceeding) initiated by
[Hoffman], including any Proceeding (or any part of any Proceeding) initiated by
[Hoffman] against the Company or its directors, officers, employees or other indemnitees,
unless” authorized by the Board. D.I. 23 at Pretrial Br. 25–26; D.I. 38 at 53–55 (Hoffman
arguing that Section 8(c) does not apply because the proceeding at issue was initiated by
the Company and not by Hoffman); id. at 55 (“THE COURT: But I don’t see, in Section
8(c), any qualifier for whether something was reasonably necessary in defense or
compulsory or anything like that. It says that any part of a proceeding initiated by
indemnitee. [HOFFMAN’S COUNSEL]: Yeah. I understand the Court’s question. Our
view is that once the proceeding is initiated by the company, Mr. Hoffman has the power
to take whatever steps are necessary, has the ability to be indemnified for whatever steps
are necessary to respond to that -- to that proceeding.”); id. at 61 (“[FIRST WAVE’S
COUNSEL]: “8(c) excludes proceedings initiated by the indemnitee or any part of a
proceeding that is initiated by the indemnitee against the company. That, I believe, is
applicable here as well.”); id. at 102 (“THE COURT: So is your position that -- I read
Section 8(c) to effectively carve out shots by Mr. Hoffman, not to also carve out successive
or even responsive shots by the company. [FIRST WAVE’S COUNSEL]: Right.”).
17
Hoffman bears the burden of demonstrating that the purported proceeding at issue is
covered by the Indemnification Agreement.80 Once Hoffman establishes the
existence of a covered proceeding, the burden is on the Company to show that
advancement is not required.81
Hoffman’s Complaint seeks advancement in connection with a proceeding in
the form of an actual investigation or inquiry.82 The Complaint presses the theory
that “[t]o determine that Mr. Hoffman disclosed confidential company information
The Indemnification Agreement’s language is less than clear on whether the
exception would apply to Hoffman’s claims in an action he initiated. JX 5 § 9 (“This
Section 9 shall not apply to any claim made by [Hoffman] for which indemnity is excluded
pursuant to Section 8 . . . .” (emphasis added)); id. §§ 8, 8(c) (“[T]he Company shall not
be obligated under this Agreement to make any indemnity in connection with any claim
made against [Hoffman]: . . . in connection with any Proceeding (or any part of any
Proceeding) initiated by [Hoffman], including any Proceeding (or any part of any
Proceeding) initiated by [Hoffman] against the Company or its directors, officers,
employees or other indemnitees . . . .” (emphasis added)). I proceed based on the parties’
undisputed interpretation, under which any claim for advancement must be tethered to a
proceeding initiated by the Company. To the extent Hoffman argued to the contrary, he
abandoned that position at trial. D.I. 38 at 55; see D.I. 22 at 19–20 [hereinafter “Pl. PTB”].
80
See Aleynikov, Sergey v. Goldman Sachs Group, Inc., C.A. No. 10636-VCL, at D.I. 97
¶¶ 1, 10 (Del. Ch. July 13, 2016) (ORDER) (“The evidence, such as it was, stands in
equipoise. Because [the plaintiff] had the burden of proof, he failed to prove that someone
who held the bare title of ‘Vice President,’ . . . qualified as an officer for purposes of
advancement under the Bylaws.”), aff’d, C.A. No. 366, 2016 (Del. Jan. 20, 2017); Sassano
v. CIBC World Mkts. Corp., 948 A.2d 453, 463–64 (Del. Ch. 2008) (“The interpretation of
the term ‘nominal officer’ is a question of law, while the question of whether [the plaintiff]
meets that definition is one of fact. [The plaintiff], who seeks to enforce rights under the
Bylaws, bears the burden of persuasion in demonstrating that the Bylaws entitle him to
mandatory advancement.” (footnote omitted)).
81
Kerbs v. Bioness Inc., 2022 WL 3347993, at *3 (Del. Ch. Aug. 15, 2022).
82
See, e.g., Compl. ¶¶ 28–35.
18
and breached his fiduciary duty, the Board necessarily must have conducted an
‘investigation’ and/or ‘inquiry’ into Mr. Hoffman’s actions, thus falling within the
definition of ‘Proceeding’ in the parties’ Indemnification Agreement.”83 Hoffman
argues that the record proves the existence of an actual investigation, based almost
entirely on the inference that an investigation or inquiry must have occurred because
the Board concluded he engaged in misconduct and breached his fiduciary duties.
The Company argues that it never undertook an investigation or inquiry into
Hoffman’s conduct.
In pretrial briefing, Hoffman’s position evolved to include an alternative
argument that the Company threatened a lawsuit or regulatory action, which also
triggers his advancement rights. He maintains that he may recover under a claim for
a threatened proceeding because that theory was adequately pled in the Complaint.
The Company argues Hoffman’s Complaint pleads a claim based only on an actual
investigation or inquiry, not a threatened proceeding.
I find that the Company did not investigate or otherwise conduct an inquiry
into Hoffman. I then conclude that the Complaint did not put the Company on fair
notice of a claim based on a threatened proceeding. And a review of the record
shows that Hoffman did not otherwise put First Wave on notice that he was litigating
83
Id. ¶ 33.
19
a claim based on a threatened proceeding until he filed his pretrial brief. Even then,
the basis for this claim was not clear, and the argument was not fully developed until
Hoffman argued at trial. This lack of notice, coupled with Hoffman’s failure to
amend his Complaint to include such a claim, precludes him from recovering on that
basis. Hoffman is therefore not entitled to advancement or fees on fees in connection
with this litigation.84
A. The Company Did Not Undertake An Investigation Or
Inquiry Into Hoffman’s Conduct.
Hoffman argues that because the Board concluded he “breached his fiduciary
duty, violated federal law and company policy, and materially harmed the
company,” it “must have conducted some form of investigation, inquiry, or at
minimum some other proceeding of an ‘investigative nature.’”85 Because he has
failed to proffer any evidence that such an investigation or inquiry occurred, he has
not demonstrated that any proceeding triggered his advancement rights.
The record offers no evidence of an investigation or inquiry between the
July 29 call and the October 13 email giving Hoffman notice of the proposal to form
the Committee. Hoffman’s testimony reveals that he is aware of no facts supporting
his position that the Board investigated him or otherwise subjected him to an inquiry.
84
See Levy v. HLI Operating Co., 924 A.2d 210, 225–27 (Del. Ch. 2007).
85
Pl. PTB 14.
20
He testified that the Company did not interview him, that he did not produce
documents in connection with an investigation or inquiry, and that he is aware of no
actions that the Board or Company took to carry out an investigation or inquiry. 86
He has no firsthand knowledge of any actions taken in response to the concern that
he may have engaged in misconduct.87
There are likewise no documents evincing an investigation or inquiry. On the
contrary, many of Hoffman’s counsel’s letters support the view that neither
proceeding took place. In an October 19 letter, Hoffman’s counsel asserted that the
issue of disclosing confidential information “was never previously raised with Mr.
Hoffman,” and that Hoffman “was never even made aware of the allegation, never
asked for any information and never given an opportunity to respond.”88 In an
October 25 letter, Hoffman’s counsel criticized the Board for not following any
proper procedures for investigating Hoffman, including informing Hoffman of the
pending investigation and obtaining director consent to initiate the investigation
outside of a Board meeting.89 His counsel also reiterated that Hoffman was never
interviewed, and instead, “the other Board members accepted an uncorroborated
statement from Mr. Sapirstein that Dr. Glick was aware of amounts raised under the
86
Hoffman 84–88, 93, 98–105, 107.
87
See, e.g., id. at 88.
88
JX 17.0001.
89
JX 22.0001–0002.
21
ATM.”90 His counsel also asserted that the Board “assumed, without any evidence,
that Mr. Hoffman was the source of that information.”91 Hoffman’s testimony and
his counsel’s letters, coupled with the lack of any documents reflecting any
investigation, tends to show that no investigation or inquiry occurred.
The only other evidence is Sapirstein’s testimony. Sapirstein’s testimony
demonstrates that when Glick made his July 29 demand, Sapirstein presumed that
Hoffman disclosed the existence of the ATM offering.92 Immediately after learning
the information was leaked to Glick, he discussed the matter with two members of
the Company’s management team.93 He then spoke with the Company’s counsel,
who advised him to “just let it rest.”94 Sapirstein heeded this advice, and took no
action to determine who informed Glick of the offering beyond asking Hoffman on
an informal Board call.95
In responding to the leak, the Company directors started from the conclusion
that Hoffman leaked the offering to Glick; their actions were corrective actions from
that conclusion, not investigative actions undertaken in reaching that conclusion. At
90
JX 22.0002.
91
Id.
92
See Sapirstein 42–45, 153, 180.
93
Id. at 39–43.
94
Id. at 43.
95
Id. at 43–49, 92–93.
22
some point, Sapirstein raised the possibility that Hoffman disclosed that information
on an informal Board call.96 Two to three different Board members called Sapirstein
at different times expressing concern about discussing Fortis matters with Hoffman
present and asking Sapirstein find a way to shield those conversations from
Hoffman.97 Sapirstein reached out to Borkowski, believing he could help develop a
solution.98 Together, they came up with the idea to form the Committee so that
certain financial matters could be discussed without fear that Hoffman would
disclose confidential information to Glick.99 Sapirstein discussed this plan with one
other director before formally proposing the Committee’s formation to the Board.100
These actions were remedial, not investigatory.
The Company’s response falls short of an “investigation” or “inquiry”
sufficient to trigger Hoffman’s advancement rights.101 Hoffman has failed to meet
96
Id. at 44–49, 92–93.
97
Id. at 64–65.
98
Id. at 33.
99
Id. at 33–34, 107–08.
100
Id. at 89.
101
In his pretrial brief, Hoffman appears to argue that the consideration of one or more
facts and then reaching a conclusion based on those facts constitutes an investigation or
inquiry. Pl. PTB 15 (“Mr. Sapirstein’s insistence that determining and evaluating the
relevant facts with advice from counsel in order to determine a company director violated
federal law and company policy was not an investigation or inquiry strains credulity.”). At
trial, he explained this in a slightly different way: “The investigation is simply in the
syllogism that we line up fact A and fact B, and we believe that we’ve established those
23
his burden to prove that the Company conducted an investigation or inquiry that
qualifies as a proceeding warranting advancement under the Indemnification
Agreement.
B. Hoffman May Not Recover In Connection With A
Threatened Proceeding.
The Indemnification Agreement’s advancement provision covers not only
actual proceedings, but also threatened ones. Hoffman’s pretrial brief argues the
existence of threatened “future litigation or regulatory action,” and he appears to rely
on the same communications with Company counsel that supported his position that
there was an actual investigation or inquiry.102 At trial, First Wave countered that
the Complaint did not plead a claim for advancement based on future litigation or
regulatory action such that Hoffman may not recover on that basis.103 With the
facts and we draw factual and legal conclusions.” D.I. 38 at 36. Hoffman’s counsel did
not cite or compare this theory to any definition of “investigation” or “inquiry.”
Hoffman’s syllogism is inconsistent with the plain language definitions of
“investigation” and “inquiry.” Merriam-Webster Dictionary defines “investigate” as “to
make a systematic examination” and especially “to conduct an official inquiry.”
Investigate, Merriam-Webster Dictionary, https://www.merriam-webster.com/dictionary/
investigation (last visited Sept. 26, 2023); see also Investigation, Black’s Law Dictionary
(11th ed. 2019) (“The activity of trying to find out the truth about something, such as a
crime, accident, or historical issue.”). “Inquiry,” in turn, is defined as “a request for
information”; “a systematic investigation often of a matter of public interest”; and
“examination into facts or principles.” Inquiry, Merriam-Webster Dictionary,
https://www.merriam-webster.com/ dictionary/inquiry (last visited Sept. 26, 2023). These
definitions call for more positive action, pomp, and procedure than one individual’s
immediate deductive conclusion based on known facts.
102
Pl. PTB 16–17.
103
D.I. 38 at 120.
24
Court’s leave, Hoffman submitted a supplemental letter asserting that his Complaint
pled a claim based on a threatened proceeding.104 First Wave submitted a letter in
response, maintaining its position that the Complaint did not adequately plead a
claim based on a threatened proceeding.105 I agree with First Wave.
1. Hoffman’s Complaint Did Not Plead A Theory Based On A
Threatened Proceeding.
Generally, a plaintiff may recover following trial for claims adequately pled
in her complaint.106 That complaint must contain a short, plain statement of facts
sufficient to give notice of the claims the plaintiff intends to litigate.107 A complaint
104
D.I. 36.
105
D.I. 37.
106
See HOMF II Inv. Corp. v. Altenberg, 2020 WL 2529806, at *35–41 (Del. Ch.
May 19, 2020) (analyzing whether a claim was pled in the complaint before determining
whether the defendant was on notice and if an amendment under Rule 15(b) was proper),
aff’d, 263 A.3d 1013 (Del. 2021); In re Mindbody, Inc., S’holder Litig., 2023 WL 2518149,
at *43 (Del. Ch. Mar. 15, 2023) (reasoning the plaintiffs could not advance an aiding and
abetting claim after trial where the complaint did not adequately plead the claim and where
amendment under Rule 15(b) was not warranted).
107
Ct. Ch. R. 8(a); Emerald P’rs v. Berlin, 726 A.2d 1215, 1220 (Del. 1999) (“All that is
required is that the complaint give ‘fair notice’ of [the claims at issue].” (quoting Michelson
v. Duncan, 407 A.2d 211, 217 (Del. 1979)); In re McDonald’s Corp. S’holder Deriv. Litig.,
289 A.3d 343, 376 (Del. Ch. 2023) (“The real question, therefore, is whether the complaint
contained a short, plain statement of facts sufficient to support a claim against Fairhurst for
breach of the duty of oversight.”); Altenberg, 2020 WL 2529806, at *37 (“[T]he question
is whether the amended complaint contained a short, plain statement of facts sufficient to
put [the defendant] on notice that the plaintiffs were litigating a claim for fraudulent
inducement, along with allegations sufficient to make it reasonably conceivable that the
plaintiffs could be entitled to recover.”); Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap.
Hldgs. LLC, 27 A.3d 531, 535 (Del. 2011) (“When considering a defendant’s motion to
dismiss, a trial court should accept all well-pleaded factual allegations in the Complaint as
25
that gives fair notice “shifts to the defendant the burden to determine the details of
the cause of action by way of discovery for the purpose of raising legal defenses.”108
Court of Chancery Rule 8(f) provides that “[a]ll pleadings shall be so construed as
to do substantial justice.”109
Hoffman’s Complaint seeks advancement specifically, and exclusively, for a
covered proceeding in the form of an actual investigation or inquiry. It focuses on
the inference that the Board could not have reached the conclusion that Hoffman
breached his duties without an investigation. For example, the penultimate
paragraph of his “Nature of the Action” section reads:
Mr. Hoffman seeks reimbursement for his legal expenses, including
attorneys’ fees, which have been incurred in connection with First
Wave’s inquiry or investigation and to oppose actions taken by First
Wave as a result of that inquiry or investigation, including but not
limited to his efforts to rectify his unlawful exclusion from the Board.110
And in discussing the Company’s October 20 Letter, the Complaint explains: “The
letter thus purports to convey conclusions of an investigation or an inquiry conducted
true, accept even vague allegations in the Complaint as ‘well-pleaded’ if they provide the
defendant notice of the claim, draw all reasonable inferences in favor of the plaintiff, and
deny the motion unless the plaintiff could not recover under any reasonably conceivable
set of circumstances susceptible of proof.”).
108
VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 611 (Del. 2003) (internal
quotation marks omitted) (quoting Klein v. Sunbeam Corp., 94 A.2d 385, 391 (Del. 1952)).
109
Ct. Ch. R. 8(f).
110
Compl. ¶ 5.
26
by First Wave and its counsel involving the alleged actions of Mr. Hoffman.”111 The
Complaint similarly describes Hoffman’s advancement demand as seeking “legal
fees in connection with the inquiry and investigation.”112 The Complaint attaches
the advancement demand, which asserts a right to advancement based only on an
actual investigation or inquiry.113 The final paragraph preceding the heading “Count
I” concludes, “Given that the exclusion of Mr. Hoffman from the Board was based
on specific factual allegations, the company must have conducted an investigation
or inquiry on this issue, albeit a seriously flawed one.”114
And though not dispositive, the Complaint includes only two titled counts,
neither of which concerns a threatened proceeding: Count I, titled “Advancement
In Connection With The Inquiry or Investigation,” and Count II, titled “Claim for an
Award of Expenses, Including Attorneys’ Fees, Incurred in Connection with
Prosecuting this Verified Complaint.”115
Attempting to broaden his allegations to encompass threatened proceedings,
Hoffman points out that the Complaint cites documents that he now argues include
111
Id. ¶ 21.
112
Id. ¶ 23.
113
Id. (citing JX23).
114
Id. ¶ 27.
115
Id. at 10, 12; Altenberg, 2020 WL 2529806, at *36 (in assessing whether a complaint
pled a claim for fraudulent inducement, explaining that the complaint did not include a
claim titled “fraudulent inducement,” but noting that the “omission . . . is not dispositive”).
27
threats of future litigation or regulatory action. But the Complaint’s singular focus
on the existence of an actual investigation or inquiry discourages the conclusion that
the same documents could support a different, and unidentified, type of proceeding.
He also points out that the Complaint quotes the full definition of “Proceeding,” and
therefore the portion of the definition that references threatened proceedings. But
these references are incidental, presented in the context of a claim based on actual
investigation or inquiry, and do not put the Company on notice of Hoffman’s intent
to litigate a claim based on a threatened proceeding. And one such replication of the
full definition of “Proceeding” emphasizes the words “investigation” and “inquiry”
in bold, relegating “threatened” to ordinary typeface, which further reflects the
Complaint’s limited focus.116
At bottom, Hoffman’s argument amounts to a suggestion that a sufficiently
superficial reading of the Complaint would encompass the possibility that he might
intend to seek advancement based on additional types of proceedings. Even with the
benefit of hindsight, it is difficult to read the Complaint as pleading a claim based
on a threatened proceeding—its clear and singular focus is Hoffman’s request for
advancement based on an actual investigation or inquiry into his conduct. This focus
leads a reasonable reader to believe that he is pursuing this summary proceeding on
116
Compl. ¶ 14.
28
that limited basis, to the exclusion of any alternative ground. One would have to
ignore much of the Complaint to read it as putting First Wave on fair notice that
Hoffman believed he was entitled to recover based on the existence of a threatened
proceeding. I decline to do so.117
2. Hoffman Did Not Otherwise Give Fair Notice Of His Theory
Based On A Threatened Proceeding.
“The failure to plead a particular legal theory is not inherently fatal.”118 Our
law favors resolving claims on the merits as opposed to holding a plaintiff to the
theories set forth in her complaint.119 This Court has reasoned that a plaintiff may
recover based on claims not pled in the operative complaint where the plaintiff gives
117
See Ct. Ch. R. 8(f) (“All pleadings shall be so construed as to do substantial justice.”).
118
In re Cellular Tel. P’ship Litig., 2021 WL 4438046, at *61 (Del. Ch. Sept. 28, 2021).
119
In re Mindbody, Inc., S’holder Litig., 2021 WL 5834263, at *1 n.8 (Del. Ch.
Dec. 9, 2021) (“There is a strong public policy that dictates that courts resolve cases on
their merits.”); Shah v. Coupe, 2014 WL 5712823, at *2 (Del. Super. Nov. 3, 2014) (“[T]he
preference of Delaware courts is to decide cases on their merits.”); see also Daniel L.
Herrmann, The New Rules of Procedure in Delaware, 18 F.R.D. 327, 338 (1955)
(explaining the adoption of certain court rules, including Rule 15(b), was in furtherance of
a “de-emphasis upon pleadings and the re-emphasis upon ascertainment of truth”); 5
Charles A. Wright & Arthur R. Miller, Federal Practice & Procedure § 1219 (4th ed.)
[hereinafter “Wright & Miller”] (“[I]t is clear that the federal rules—and the decisions
construing them—evince a belief that when a party has a valid claim, he should recover on
it regardless of his counsel’s failure to perceive the true basis of the claim at the pleading
stage . . . .”).
29
fair notice of the intent to litigate those claims prior to trial through discovery,
motion practice, or otherwise.120
As stated, the Complaint did not put First Wave on notice of a claim based on
a threatened proceeding. During discovery, Hoffman was asked in an interrogatory
to “[i]dentify all facts and circumstances evidencing that Hoffman was a party to a
Proceeding conducted by the Company.”121 After stating various objections,
Hoffman responded:
[T]he . . . Committee was created to exclude him from the Board based
on the Board’s investigation and ultimate finding that he had breached
his fiduciary duty and disclosed confidential information to the
detriment of the Company. Mr. Hoffman also states that the following
documents will evidence that Mr. Hoffman was a party to a proceeding
conducted by the Company: minutes of the First Wave Board of
Directors meeting and Special Committee meeting on or around
October 20, 2022; and [Company counsel’s] letters to [Hoffman’s
counsel].122
The first sentence identifies only an investigation and does not mention a threatened
proceeding. The second identifies the October 20 Letter, though there is no
120
See Altenberg, 2020 WL 2529806, at *37 (“Even still, the failure of the amended
complaint to address Altenberg’s solicitation of the plaintiffs’ investment would not have
foreclosed the plaintiffs from conducting discovery into these issues or seeking to prove a
fraudulent inducement clam at trial, if the plaintiffs had given Altenberg fair notice that
they intended to do so.”); Cellular Tel. P’ship, 2021 WL 4438046, at *61 (evaluating
whether “the plaintiffs gave the defendant adequate notice that they were litigating a
particular theory such that the defendant had ‘a fair opportunity to respond.’” (quoting
Bäcker v. Palisades Growth Cap. II, L.P., 246 A.3d 81, 103 (Del. 2021)).
121
JX 37.0009.
122
JX 37.0010.
30
suggestion that Hoffman was relying on it as evidence of a threatened proceeding,
as the document is central to his theory that the Company investigated him. I
interpret this response as stating Hoffman’s claim is based solely on the existence of
an investigation or inquiry, to the exclusion of other theories.
As is customary in advancement actions, the parties submitted simultaneous
pretrial briefs, and did not engage in post-trial briefing. First Wave’s brief addressed
whether the Board threatened an investigation or inquiry, but did not meaningfully
engage with the question of whether the Company threatened litigation or regulatory
action. Hoffman’s brief raises the possibility of a threatened proceeding in a
one-paragraph argument, which, depending on the light, either was intended to
further support the presence of an actual investigation, or was raised in the
alternative.123 As record support, it cites only five lines of Hoffman’s deposition
transcript, in which he testifies that he deemed a sentence in the October 17 email to
be “a threatening statement.”124 A review of his deposition transcript reveals he gave
two other similar answers, both in response to questions from his own counsel.125
123
Pl. PTB 16–17; see Altenberg, 2020 WL 2529806, at *38 (noting the plaintiffs’ pretrial
brief addressed fraud generally in two paragraphs, which supported the conclusion that it
not provide fair notice of a claim for fraudulent inducement).
124
Pl. PTB 17 (citing Hoffman 140–41).
125
Hoffman 145, 148–49. Hoffman’s pretrial brief does not clearly explain the basis for a
claim based on a threatened proceeding, and Hoffman’s subjective feeling that emails were
“threatening” is not dispositive of whether the Company threatened a lawsuit or
investigation.
31
In the pretrial stipulation, Hoffman likewise did not identify his threatened
proceeding theory as part of the “issues of fact and law to be litigated.”126 Rather,
he stated “the issue of law to be litigated is whether the Company is required to
advance Mr. Hoffman’s fees and expenses for this litigation and any other litigation
arising out of the inquiry and/or investigation conducted by the Company into Mr.
Hoffman’s behavior while a director of the Company,” and referred generally to his
brief.127 The parties also stipulated that no pretrial conference was necessary,
forgoing another opportunity to address this issue.128
Hoffman developed his threatened proceeding theory at trial, explaining that
the October 20 Letter included a litigation threat.129 At trial, his counsel explained
that the statements contained therein would be understood as a threat “especially
[by] someone like Mr. Hoffman, who holds seven different securities licenses and
has made a 35-year distinguished career in the securities industry.”130 That was the
first time Hoffman meaningfully explained any theory that the Company had
threatened a proceeding and thereby triggered his advancement rights. When I asked
First Wave whether the October 20 Letter could be read as a litigation threat, it
126
D.I. 30 § II.A; see Altenberg, 2020 WL 2529806, at *38–39.
127
D.I. 30 § II.A.
128
Id. § VIII.
129
D.I. 38 at 45–48.
130
Id. at 46–47.
32
objected to Hoffman’s argument being considered on the grounds that his Complaint
focuses exclusively on an alleged actual investigation or inquiry.131
Because the Complaint did not put First Wave on notice of the threatened
proceeding theory, and because this theory was not disclosed until the parties filed
their simultaneous pretrial briefs and was not elucidated or supported until trial, I
conclude Hoffman did not put First Wave on fair notice of his intent to litigate a
claim based on a threatened proceeding.
3. Hoffman Did Not Move To Amend.
Court of Chancery Rule 15(b) allows for pleadings to be amended during or
after trial, even where a plaintiff has neither adequately pled her theory nor otherwise
put the defendant on notice.132 Rule 15(b) is intended “to encourage the disposition
131
Id. at 120.
132
Ct. Ch. R. 15(b). Rule 15(b) can be used to add new claims or theories to a complaint.
Mindbody, 2023 WL 2518149, at *41 (considering under Rule 15(b) whether a complaint
could be amended to include a new claim for aiding and abetting); Altenberg, 2020 WL
2529806, at *36, *40–41 (considering whether a complaint should be amended to include
a claim for fraudulent inducement under Rule 15(b)); Those Certain Underwriters at
Lloyd’s, London v. Nat’l Installment Ins. Servs., Inc. (Lloyd’s), 2008 WL 2133417, at *9–
11 (Del. Ch. May 21, 2008) (considering under Rule 15(b) whether a complaint should be
amended to include a statutory claim), aff’d sub nom. Certain Underwriters at Lloyd’s,
London v. Nat’l Installment Ins. Servs., Inc., 962 A.2d 916 (Del. 2008); Miller v. Hob Tea
Room, 75 A.2d 577 (Del. Ch. 1950) (considering under Rule 15(b) whether a plaintiff
“should be permitted to amend to reinstate a theory consciously abandoned”); see also 6A
Wright & Miller § 1493 (“Rule 15(b)(2) has been used in a wide range of circumstances,
and its scope of application is as wide as that of Rule 15(a). . . . Amendments have been
allowed to . . . add unpleaded claims.” (footnote omitted)).
33
of litigation on its merits.”133 In determining whether to allow an amendment under
Rule 15, the Court considers the amendment’s prejudice to the opposing party.134
Whether to allow a Rule 15(b) amendment is within the Court’s discretion.135 A
motion to amend is required where an issue is tried without the opposing party’s
express or implied consent.136
The Court addressed a similar situation in HOMF II Investment Corp. v.
Altenberg.137 There, trial testimony supported a claim for fraudulent inducement,
but the defendant argued the plaintiffs could not recover on that claim because it was
not pled in the complaint.138 The plaintiffs responded only by arguing that the
complaint did plead the claim.139 The Court concluded that the complaint did not
plead a claim for fraudulent inducement and that the defendant was not otherwise on
133
Vichi v. Koninklijke Philips Elecs., N.V., 85 A.3d 725, 759 (Del. Ch. 2014) (internal
quotation marks omitted) (quoting Grand Ventures, Inc. v. Whaley, 632 A.2d 63, 72 (Del.
1993)); see generally Altenberg, 2020 WL 2529806, at *40–41.
134
Altenberg, 2020 WL 2529806, at *41 (“Delaware decisions likewise state that the
primary consideration is whether the opposing party was prejudiced.” (citing Lloyd’s, 2008
WL 2133417, at *10)).
135
Grand Ventures, Inc. v. Whaley, 632 A.2d 63, 72 (Del. 1993) (“A decision to permit or
deny an amendment is left to the discretion of the trial judge.”).
136
See Altenberg, 2020 WL 2529806, at *41; 3 James Moore et al., Moore’s Federal
Practice § 15.18 (3d ed.) (“Even though a court should permit these types of amendments
‘freely,’ the court may not do so sua sponte.”).
137
Altenberg, 2020 WL 2529806, at *40–41.
138
Id. at *27, *35.
139
Id. at *35.
34
notice of the plaintiffs’ intent to litigate the claim prior to trial.140 It then explained
that under those circumstances, “the plaintiffs should have moved under Rule 15(b)
to amend the pleadings to conform to the evidence presented at trial.”141 The Court
reasoned that had they done so, whether the amendment would have been allowed
“would have presented a close question,” in part because the defendants would likely
not be prejudiced.142 Nevertheless, because the plaintiffs “did not make a motion
under Rule 15(b),” the Court reasoned “[i]t remains the case that a claim for
fraudulent inducement has never properly been introduced into the case.”143 The
plaintiffs appealed, arguing among other things that the Court erred in “barring the
fraudulent inducement claim on technical grounds.”144 Our Supreme Court
affirmed.145
Hoffman has not moved under Rule 15(b) to amend the Complaint. Rather,
just as the plaintiffs in Altenberg, he steadfastly maintained that the Complaint pled
a claim based on a threatened proceeding. Because he has failed to seek amendment
140
Id. at *35–40.
141
Id. at *40.
142
Id. at *41.
143
Id.
144
HOMF II Inv. Corp. v. Altenberg, C.A. No. 14, 2021, at D.I. 11 at Op. Br. 27–28 (Del.
Mar. 2, 2021).
145
HOMF II Inv. Corp. v. Altenberg, 263 A.3d 1013 (Del. 2021) (TABLE).
35
under Rule 15(b) or otherwise, he cannot prevail on the threatened proceeding
theory.
III. CONCLUSION
For the forgoing reasons, judgment is entered in First Wave’s favor on Counts
I and II of the Complaint. Counsel shall submit a proposed final order.
36