Immunomedics, Inc. v. venBio Select Advisor LLC et al
MEMORANDUM ORDER re 4 MOTION for For Temporary Restraining Order And Preliminary Injunction filed by Immunomedics, Inc. is DENIED. Signed by Judge Leonard P. Stark on 3/2/17. (ntl)
IN THE UNITED STATES DISTJUCT COURT
FOR THE DISTRICT OF DELAWARE
Civil Action No. 17-176-LPS
VENBIO SELECT ADVISOR LLC,
BEHZAD AGHAZADEH, s:coTT
CANUTE, PETER BARTON HUTT,
AND KHALID ISLAM,
· B.efore the Court is Plaintiff Immunomedics, Inc.' s ("Plaintiff' or "Immun_omedics" or
the "Company") Motion for~ Temporary Restraining Order and Preliminary Injunction. (D.I. 4)
Having reviewed the parties': briefing (D.I. 5, 6, 8, 9, 18), heard argument by teleconference, and
having moved expeditiously ,to consider Plaintiffs request for extraordinary relief in light of the
circumstances, 1 IT IS HEREBY ORDERED 'fHAT Plaintiffs Motion (D.I. 4) is DENIED.
· A preliminat)f injunction or temporary restraining order is an "extraordinary
remedy" that .should be granted only in "limited circumstances." Kos Pharm., Inc. v. Andrx
· Corp., 369 F.3d 700, 708 (3d Cir. 2004). This type of remedy is available only when the
petitioner establishes: (1) a likelihood of success on the merits; (2) irreparable haim if the
Plaintiffinitiated this case op February 17, 2017 and filed the present motion on February 21,
2017, just 10 days before its :scheduled and already twice-delayed 2016 annual' meeting ("Annt]al
Meeting"). On February 23,i20l 7, the Court ordered expedited briefing on the motion, which
was completed on the morning of February 28, 2017. Later that same day, the Court held a
lengthy teleconference.to hear argument from the parties.
injunction is denied; (3) the balance of the equities tips in the movant' s favor; and (4) the public
interest favors the requested relief. See id.; see also P. C. Yonkers, Inc. v. Celebrations, 'the Party
and Seasonal Superstore, LLC, 428 F.3d 504, 508 (3d Cir. 2005) (holding that burden lies with
moving party to establish every element in its favor).
Before addressing application of the traditi_onal four factors, the Court considers
two preliminary barriers venBio Select Advisor LLC ("Defendant" or "venBio") posits should
preclude Plaintiff from obtaining its requested relief. First, Defendant contends that Plaintiff has
moved too slowly in seeking relief :from this Court, making laches an independent basis for
denying the Motion: _Second, Defendant asserts that Plaintiff is "playing fast and loose" with this
Court and the Delaware Court of Chancery, so Plaintiff should be estopped from seeking the
requested relie£ Under the totality of circumstances here, the Court does not view either.laches
or estoppel as sufficient bases on which to deny the !'1otion. However, the concerns underlying
these doctrines, including delay and treating courts appropriately, are pertinent to the Court's
analysis of the traditional four factors. As further discussed below, the Court finds.that the
timing with which Plaintiff filed its Motion cuts against its showing of irreparable harm, and the
Court's concern with what Plaintiff told- and did not tell-the Vice Chancellor weighs against
. its showing that the relief sought is in the public interest.
Turning to the four-factor test, the Court first finds that Plaintiffhas failed to
demonstrate a likelihood of success on the merits .. Plaintiff raises three claims of alleged
violations of the Securities Exchange Act ("Exchange Act")_: (1) under Securities and Exchange
Commission ("SEC") Rule 14a-9, Plaintiff claims venBio published misleading and unlawful.
proxy solicitation materials by (a) misreporting early results of the proxy contest and
(b) attacking the integrity oflmmunomedics' crirrent Board of Directors; (2) under SEC Rule
14a-6, Plaintiff alleges venBio failed to file ~ith the SEC certain soliciting materials, namely
written communication with an Immunomedics stockholder and solicitations of members. of an
online message board; and (3) under SEC Rule 13(d), Plaintiff claims venBio failed to file a.
timely Schedule 13D and failed to disclose the existence of members of its proxy solicitation
For all but one of these claims, which is discussed further below, Plaintiff has failed to
provide any evidence, or any persuasive argument, to overcome venBio' s evidence and
representations, specifically that: any statement about Immunomedics' integrity was sufficiently
well-grounded in fact; Defendant.had no obligation to file solicitation materials with the SEC, as
any discussions it had with other shareholders were not substantial enough to trigger the
requirements of the Exchange Act; and Defendant complied with Section 13 (d), as .no
undisclosed groups existed, and as it filed its Schedule 13D within 10 days after acquiring both
the requisite amount of stock and the intent to change or influence control of the corporation.
Plaintiffs sole remaining claim rests on venBio's issuance of a February 14, 2017 press
release, which included the following:
We believe the [Seattle Genetics] deal Immunomedics' current
Board and management announced only four business days before
the Annual Meeting vote was motivated by a desire to entrench
themselves and rush to announce an agreement before theylost the
vote and their Board seats - not 8= true, carefully considered desire
to do what was in the best interests of all stockholders. This is
supported by the fact that as of the day before the deal
announcement, venBio's lead in the shareholder vote was
becoming increasingly cle~ - with 80% of outstanding shares
submitted and 55% cast in' favor ofvenBio's nominees.
(D.I. 6 at 88, February 14, 2017 Press Release) Plaintiff alleges that this statement violates SEC
. Rule 14a-9, 17 C.F.R. § 240.14a-9(a), which prohibits false or misleading statements in any
proxy statement. Plaintiff argues the Rule was violated because Defendant published early
results and because Defendant misrepresented those results. Plaintiff emphasizes that
Defendant's purported offense falls within the scope of an example contained in the Note
following the Rule, which states that possible misleading statements include "claims made prior
to a meeting regarding the resiilts of a solicitation." Id. at Noted. Plaintiff has not shown a
likelihood .of success on the merits of this claim.
While Plaintiff blames venBio for misreporting the results, the evidence is that venBio
merely reported the data reported to it by Immunomedics' agent. At the .time the results were·
. reported, neither venBio nor Plaintiff knew that the data relied on was incorrect. 2 Further, the
Note on which Plaintiff bases its argument states that the listed examples may be misleading
within the meaning of Rule 14a-9 ''depending upon particular facts and circumstances." Here,
the "particular facts and circumstances" in which venBio made its statement include:
(1) Plaintiffs recent announcement of a partnership deal.with Seattle Genetics, Inc. ("Seattle
Genetics") and (2) venBio's filing of a motion for injunction in the Delaware Court of Chancery.
In this full context; venBio' s press release was not a solicitation for a vote and was not intended
to convey - nor likely to be understood by shareholders as conveying - that the result of the
pending vote was a foregone conclu.sion. In context, the press release is a criticism of the Seattle
These statistics were reported to both parties by Broadridge Financial Solutions, Inc.,
Immunomedics' tabulating agent. The. parties agree that these results were misreported and that,
after removing double votes, Broadridge revised its report to be that approximately 66% of the ·
Company's outstanding shares had been voted, with approximately 55% in favor ofvenBio's
· Genetics deal and a defense of venBio' s litigation. Thus, Plaintiff has failed to show a likelihood
that it will prove that venBio' s press release, when appropriately viewed in full context, was
.materially false and misleading. 3
With respect to the· second factor, Plaintiff asserts that irreparable injury is
presumed if there. is a violation of federal proxy rules. As authority for this proposition, Plaintiff
cites Lone Star Steakhouse & Saloon, Inc. v. Adams, 148 F. Supp. 2d 1141, 1150 (D. Kan. 2001).
But Lone Star states that a party "cannot prove irreparable harm merely by showing a material
false solicitation." Id. Moreover, the Supreme Court has stated that "the questions of liability
and relief are separate in private actions under the securities laws [and] the latter is to be
determined according to traditional principles.'' Rondeau v. Mosinee Paper Corp., 422 U.S. 49,
64 (1975). Therefore, even if Plaintiff had demonstrated ·a likelihood of success on the merits which it has not - Plaintiffwould need additionally to show irreparable harm to warrant relief.
Plaintiff has· failed to make this. showing ...
Plaintiff argues that extraordinary relief is warranted here because if the Annual Meeting
goes forward and a change of control results, "an irreparable scrambling of the eggs_will
transpire,'; making it difficult for the Court to "unscramble the eggs" and put the proper Board
back in place. (D.I. 5 at 18} Plaintiff suggests that neither monetary damages nor post-vote relief
See generally Management Assistance Inc. v. Edelman, 584 F. Supp. 1016, 1020 (S.D.N.Y.
1984) (finding statements that certain shareholder "would be able to obtain proxies from only 28
percent" of shareholders, and that opposing management group "would win the proxy contest,"
was not actionable because it did not create impression that shareholder election was foregone
conclusion); Jewelcor Incorporated v. Pearlman, 397 F. Supp. 221, 242, 249 (S.D.N.Y. 1975)
(finding proxy soljcitation statement .,..- that 61. percent of shareholders had voted for proposal,
when no vote had actually been taken- was insufficient to establish violation of section 14(a) .
and was not materially misleading in light of surrounding context).
can be considered as fully remedial relief wlJ.ere, as here, the Court has the ability to prevent the
harm pre-vote. See Lone Star, 148 F. Supp. 2d at 1150.
The Court finds that Plaintiff has not met its burden on irreparable harm. Should the·
Annual Meeting go forward and the venBio nominees replace the current Board, and. should
Plaintiff subsequently prove the election results were tainted, the Court can exercise its equitable
power to void the results of the Annual Meeting (should such action be warrantedbased on a full
record). See Bertoglio v. Texas Intern. Co., 472 F. Supp. 1017, 1021 (D. Del. 1979) ("[I]t is well
within the equitable power of the Court to void the results of a shareholders' vote and require
both a new solicitation of proxies and a second shareholder vote."). Granting an injunction here,
simply because the Court can prevent the vote from taking place, would risk transforming the
extraordinary relief of a preliminary injunction and temporary restraining order into something
easily and regularly obtained. See Silberstein v. Aetn·a, Inc., 2014 WL 1388790, at *5 (S.D.N.Y.
Apr. 9, 2014); see also Stein v. 1-800-Flowers.com, Inc., 2016 WL 8230128, at *3 (E.D.N.Y.
Dec. 2, 2016).
Additionally, the timing with which Plaintiff has sought-relief undermines its showing of
irr'eparable harm. Plaintiff knew ofvenBfo's alleged violations of federal securities laws as far
back as August of2016. In December 2016, Plaintiff articulated many of the same claims
· asserted in this action as part of its defense to an action brought by an individual shareholder in
the Delaware Court of Chancery. Further, Plaintiff appeared to be content to let these disputes
play out in a separate litigation with venBio in the Delaware Court of Chancery until February
17, 2017, just two weeks before its already twice-delayed Annual Meeting. ·under these
circumstances, the pace with which Plaintiff has movedraises reason to doubtthat the harm it
·claims to fear will be irreparable in the absence of immedi~te judicial relief. ·
The balance of harms also.weighs against Plaintiff. The harm to venBio and the
other shareholders from delaying the Amiual Meeting yet again outweighs the harm to Plaintiff
from allowing the vote to go forward based on the information presently before the shareholders. ·
Plaintiff repeatedly stated during the hearing that its Motion is about the shareholders and
protecting their right to vote. The Court agrees ~ but further agrees with Defendant that these
concerns disfavor the relief sought by Plaintiff. A further delay of the
to vote - in the face of allegations of entrenchment by the current Board, in light of evidence that
a large majority of the shareholders appears to wish to replace the Board, and under the totality of
circumstances evident from the record - risks weakening or even effectively nullifying the value
of the shareholder franchise in this case. On the other side of the balance, Plaintiff has not
. proven that it will be harmed in the absence of relief. Allowing the Annual Meeting to go
forward, on the date for which it has been scheduled sine~ February 10, 2017, and allowing the
. Company's shareholders to cast their votes,
leave Plaintiff with directors of the
shareholders' ·choosing, directors who (whatever their identity) will be bound to exercise their
fiduciary duties on behalf of the Company. 4 See generally Elgin Nat. Industries, Inc. v.
Chemetron Corp., 299 F. Supp. 367 (D. Del.1969) (denying preliminary injunction to postpone
annual shareholders meeting based on, among other things, finding that "if the meeting is held
and the proposals of the management carried and the Court finds on final hearing that the
The Court has been provided no basis· on which to doubt that venBio' s slate of directors, if
elected at the Annual Meeting, would violate their fiduciary duties, including in their review of
the Seattle Genetics deal and in evaluating whether to continue to pursue the instant litigation
(the subject of a letter to the Court filed by Plaintiff last night (D.L 19)).
management proxies were improperly solicited and voted the situation would be within the
power of the Court to cure in some manner").
· Finally, the Court finds that the last factor, the public interest, also disfavors
granting Plaintiffs Motion. The public's interest in preserving the integrity of shareholder
voting rights, in the context of this case, favors holding the already twice-delayed Annual
Meeting tomorrow, as scheduled, rather than further delaying the vote. This finding is supported
by the undisputed fact that Immunomedics is in violation of 8 Del. C. Ann. § 211 (c), a state law
governing the timing of annual shareholder meetings, and will remain in violation until the
Allnual Meeting occurs.
A further factor here is the Court's lingering concerns as to the representations Plaintiff
. made to the Court of Chancery. There, in opposing a motion for preliminary injunction filed by
venBio, Plaintiff represented to the Vice Chancellor that Plaintiff agreed "not to postpone,
adjourn, or otherwise delay [the Annual Meeting] without Court approval," a representation that
could have well been understood by the Vice Chancellor, venBio, Immunomedics' shareholders,
and/or the public as meaning that Plaintiff would not seek to (yet again) delay the Annual
Meeting without first seeking approval of the Court of Chancery, the only court that- at the
time of the representation- had possession of disputes relating to the.timing of the meeting. Yet,
mere hours later, without any prior notice to either the Vice Chancellor or venBio, Plaintiff filed
its actiori in this Court, seeking as possible relief an order of this Court to delay the Annual
Meeting.. While the Court is not holding that Plaintiff is estopped from seeking relief in this
Court, the Court's :concerns with how Plaintiff has treated the state and federal courts in
connection with the timing of its Annual Meeting is yet another reason the public interest does
not favor granting Plaintiff its requested relief. 5
Accordingly, for the reasons stated above, Plaintiffs Motion is DENIED.
IT IS FURTHER ORDERED that the parties shall submit a joint status report no later
than March 15, 2017.
March 2, 201 7
UNITED STATES DISTRICT JUDGE
This Court is not in a position to evaluate whether the Vice Chancellor was actually misled by
Immunomedics. Nor is this Court making a finding that Immunomedics had any intent to
mislead the Court of Chancery. The litigations in both the Court of Chancery and here are
moving quickly and Immunomedics may have had valid, strategic reasons not to disclose its
plans. Nonetheless,. it is Plaintiff who is asking this Court to move quickly, and in doing so the
Court views it as appropriate to weigh the concerns articulated above against Plaintiff.
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