Overwell Harvest, Limited v. Widerhorn et al

Filing 126

OPINION AND ORDER. The Court denies Trading Technologies' motion to dismiss 102 , and the Court denies Giedraitis' motion to dismiss 106 . Signed by the Honorable Sara L. Ellis on 9/9/2019: Mailed notice(rj, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
OVERWELL HARVEST LIMITED, a British )
Virgin Islands company, individually and
)
derivatively on behalf of Neurensic, Inc.
)
)
Plaintiff,
)
)
v.
)
)
DAVID WIDERHORN, PAUL GIEDRAITIS )
and TRADING TECHNOLOGIES
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INTERNATIONAL, INC.
)
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Defendants.
)

No. 17 C 6086
Judge Sara L. Ellis

OPINION AND ORDER
After Trading Technologies International, Inc. (“Trading Technologies”) bought
Neurensic, Inc. (“Neurensic”), Overwell Harvest Limited (“Overwell”) brought this suit
individually and derivatively in its capacity as a Neurensic shareholder against Neurensic’s Chief
Executive Officer David Widerhorn, its Chief Operating Officer Paul Giedraitis, and Trading
Technologies. After several rounds of litigation before this Court, Overwell filed a second
amended complaint 1 alleging breach of fiduciary duty against Giedraitis and Widerhorn (Count
I), and aiding and abetting breach of fiduciary duty against Trading Technologies (Count II).
Giedraitis and Trading Technologies move to dismiss the respective claims against them. 2
Giedraitis argues that this Court does not have subject matter jurisdiction to hear Overwell’s suit
against him because there is not complete diversity between the parties, and because Overwell
has failed to prove the requisite amount in controversy. Trading Technologies argues that

1

This is in fact Overwell’s third amended complaint but consistent with the complaint’s caption and
label, the Court refers to this as Overwell’s second amended complaint.
2
Widerhorn filed for bankruptcy on December 15, 2017, automatically staying the proceedings against
him.

Overwell has failed to state a plausible claim for damages, and therefore the suit against Trading
Technologies must fail. The Court finds that these arguments are without merit and denies the
Defendants’ motions to dismiss.
BACKGROUND 3
Neurensic is a Delaware corporate startup in the financial technology sector that is now
defunct. Widerhorn was the company’s CEO and president. Giedraitis was the Chief Operating
Officer.
Overwell, a British Virgin Islands company, was one of the principal investors in
Neurensic. It invested $3.5 million from 2015 to 2017 and received a seat on the Board of
Directors. Overwell made these investments based on Neurensic’s false representations that it
had a value of $60 million, that it had raised several millions more from other committed
investors, and that the investments would “substantially improve the Company’s exit valuation.”
Doc. 99 ¶ 20.
By mid-August 2017, Neurensic was insolvent. According to Widerhorn, the company
owed approximately $3.5 million in debt, including back wages to employees, back taxes and
loans to the government, as well as debts to general creditors. In an email to shareholders on
August 16, Widerhorn represented that the company was working with an accounting firm and a
law firm to complete an audit. This was false. Instead Widerhorn himself, who is not an
accountant, performed the audit. Even now, a third-party professional has yet to audit the
3

The facts here are largely taken from Overwell’s second amended complaint and are presumed true for
the purpose of resolving Trading Technologies’ motion to dismiss. See Virnich v. Vorwald, 664 F.3d 206,
212 (7th Cir. 2011). Additional facts are taken from materials submitted by Giedraitis in order to
determine the motion to dismiss for lack of subject matter jurisdiction. Apex Digital, Inc. v. Sears,
Roebuck & Co., 572 F.3d 440, 444 (7th Cir. 2009). Additionally, the Court presumes familiarity with its
January 31, 2019, Opinion and Order, Doc. 93. The facts here are largely similar, and this Opinion only
sets forth those facts necessary to resolution of the pending motions to dismiss and refers readers to the
background section in its January 31, 2019, Opinion and Order, for a more detailed description of the
underlying facts.

2

company’s financials. Widerhorn also told shareholders that the company’s “assets must be sold
immediately.” Id. ¶ 24. Although several entities were interested in buying the company, he
claimed they had “withdrawn their interest and [we]re unwilling to move forward given the state
of the company’s financial affairs.” Id. The only interested buyer remaining was Trading
Technologies, who would likely offer between $200,000 and $400,000.
On August 18, 2017, Widerhorn told shareholders that unless another investor came
forward by August 21 and agreed to buy the company for at least $1.5 million—the amount of
the company’s emergency liens—Neurensic planned to sell its assets to Trading Technologies.
On August 25, Widerhorn stated that he and Giedraitis had met with Trading Technologies and
argued that “even with the amortization cost, the book value of [Neurensic’s] technology assets
[wa]s approximately $2.5 [million] and that [the company’s] investors would like to see a fair
return in line with the value of the assets[.]” Doc. 106-1 at 28.
Overwell filed a complaint for injunctive relief on August 22, 2017, asking this Court to
stay the impending sale to Trading Technologies because Neurensic failed to comply with notice
and disclosure requirements. On September 7, the Court granted Overwell’s motion in part and
later issued an Order directing Neurensic to halt the sale until “the Board satisfies all applicable
requirements of Delaware law and the Bylaws of Neurensic, Inc.” Doc. 19.
Around that time, Trading Technologies began hiring former Neurensic employees to
help ensure a smooth transition of Neurensic’s business. On September 1, 2017, Trading
Technologies hired Jay Biondo, who continued servicing Neurensic clients while working for his
new employer. On September 19, Trading Technologies hired Morgan Trinkhaus “to ensure
[Trading Technologies’ acquisition of Neurensic] ha[d] the greatest chance of reaching its longterm potential.” Doc. 99 ¶ 56. Trading Technologies also hired former Neurensic employees

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Eric Eckstrand and Evan Story as software engineers to help “recreate the business” for Trading
Technologies. Id. ¶ 57. All of these employees had signed employment contracts with
Neurensic that prohibited them from competing with Neurensic or from disclosing the
company’s proprietary information. Widerhorn knew that Biondo was working for Trading
Technologies no later than September 12. Overwell’s representative on the Board, Kenneth Chu,
raised concerns about Trading Technologies hiring former employees at a board meeting on
September 14. Giedraitis raised the issue in a subsequent conference call with Trading
Technologies; beyond that, neither Giedraitis nor Widerhorn took any action to enforce the noncompete and non-disclosure agreements.
On September 11, 2017, Trading Technologies submitted a revised term sheet to
purchase the company for $300,000. Among other terms, the offer included earnout provisions
that would allow the company to receive a return on future earnings from its assets. On
September 14, a majority of Neurensic’s Board of Directors voted in favor of accepting the offer.
The next day Widerhorn provided shareholders with notice of the agreement and scheduled a
final vote on October 5.
On October 4, Overwell submitted its own term sheet to purchase Neurensic for
$400,000. It did not include other terms that Trading Technologies had offered, such as an
earnout provision. Widerhorn and Giedraitis provided Overwell’s term sheet to Trading
Technologies, which increased its upfront cash offer to match Overwell’s offer. Widerhorn and
Giedraitis did not allow Overwell to increase its offer. Widerhorn informed shareholders on
October 5 that Trading Technologies’ term sheet was better than Overwell’s term sheet. Neither
he nor Giedraitis mentioned that they did not allow Overwell to submit a second offer. On
October 6, 2017, Neurensic sold its assets to Trading Technologies.

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LEGAL STANDARDS
A motion to dismiss under Rule 12(b)(1) challenges the Court’s subject matter
jurisdiction. Fed. R. Civ. P. 12(b)(1). The party asserting jurisdiction has the burden of proof.
United Phosphorus, Ltd. v. Angus Chem. Co., 322 F.3d 942, 946 (7th Cir. 2003), overruled on
other grounds by Minn-Chem, Inc. v. Agrium, Inc., 683 F.3d 845 (7th Cir. 2012). The standard
of review for a Rule 12(b)(1) motion to dismiss depends on the purpose of the motion. Apex
Digital, Inc. v. Sears, Roebuck & Co., 572 F.3d 440, 443–44 (7th Cir. 2009). If a defendant
challenges the sufficiency of the allegations regarding subject matter jurisdiction (a facial
challenge), the Court must accept all well-pleaded factual allegations as true and draw all
reasonable inferences in the plaintiff’s favor. See id.; United Phosphorus, 322 F.3d at 946. If,
however, the defendant denies or controverts the truth of the jurisdictional allegations (a factual
challenge), the Court may look beyond the pleadings and view any competent proof submitted
by the parties to determine if the plaintiff has established jurisdiction by a preponderance of the
evidence. See Apex Digital, 572 F.3d at 443–44; Meridian Sec. Ins. Co. v. Sadowski, 441 F.3d
536, 543 (7th Cir. 2006).
A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the complaint, not
its merits. Fed. R. Civ. P. 12(b)(6); Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir.
1990). In considering a Rule 12(b)(6) motion to dismiss, the Court accepts as true all wellpleaded facts in the plaintiff’s complaint and draws all reasonable inferences from those facts in
the plaintiff’s favor. AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th Cir. 2011). To survive
a Rule 12(b)(6) motion, the complaint must not only provide the defendant with fair notice of a
claim’s basis but must also be facially plausible. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct.
1937, 173 L. Ed. 2d 868 (2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.

5

Ct. 1955, 167 L. Ed. 2d 929 (2007). “A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Iqbal, 556 U.S. at 678.
ANALYSIS
This is the second time that Giedraitis and Trading Technologies move to dismiss the
respective claims against them. The Court previously denied Giedraitis’ motion to dismiss on
the basis that Overwell had sufficiently alleged the existence of a fiduciary duty, and that
Giedraitis breached that duty. The Court found that Overwell need not allege anything else to
sufficiently state a claim at this stage of the proceeding. The Court simultaneously granted
Trading Technologies’ motion to dismiss on the basis that Overwell had not sufficiently alleged
damages. The Court reasoned that “Overwell would have had to increase its offer by more than
eight times in order to” exceed the company’s liabilities and “derive any value for the
shareholders.” Doc. 93 at 15.
If it seems odd that a plaintiff need not allege damages to plead breach of fiduciary duty,
but must do so to sustain a claim for aiding and abetting breach of fiduciary duty, it is because
this would be a rare situation. If a plaintiff seeks compensatory damages, as Overwell does in
this case, they must allege damages to sustain a breach of fiduciary duty claim. O’Reilly v.
Transworld Healthcare, Inc., 745 A.2d 902, 920 (Del. Ch. 1999) (“If the plaintiff requests more
than nominal damages, the complaint must allege facts sufficient to support the damages
requested.”). 4 And if a plaintiff seeks nominal damages in a direct shareholder suit, it must

4

Per the Court’s reasoning in its previous Opinion, Doc. 93 at 6–7, the Court applies Delaware law to
assess Overwell’s claims against Giedraitis under the “internal affairs doctrine.” CDX Liquidating Tr. v.
Venrock Assocs., 640 F.3d 209, 212 (7th Cir. 2011). The Court previously stated that it need not decide
which state’s law governs Overwell’s claims against Trading Technologies since the elements of aiding
and abetting breach of a fiduciary duty are the same under Illinois and Delaware law. But because “the
aiding and abetting claim cannot exist without the underlying allegation of breach of fiduciary duty,” the

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allege that the wrongful conduct deprived it of its economic or voting rights. In re Tyson Foods,
Inc., 919 A.2d 563, 602 (Del. Ch. 2007) (“[N]ominal damages are appropriate only where the
shareholder’s economic or voting rights have been injured.”); In re J.P. Morgan Chase & Co.
S’holder Litig. (J.P. Morgan Chase II), 906 A.2d 766, 774 (Del. 2006) (“[T]he plaintiffs’
entitlement to seek nominal damages depends upon whether their complaint alleges the type of
deprivation of the [company] stockholders’ economic interests or impairment of their voting
rights, that would be cognizable under [In re Tri-Star Pictures, Inc., Litig., 634 A.2d 319, 331
(Del. 1993), as corrected (Dec. 8, 1993), and disapproved of on other grounds by Tooley, 845
A.2d at 1035], as limited by Loudon [v. Archer-Daniels-Midland Co., 700 A.2d 135, 141 (Del.
1997)].”). And Overwell has not alleged any actions that deprived it of its economic or voting
rights, apart from the complete loss of its investments.
But Giedraitis does not press this specific issue. Nor does the Court need to in order to
address the present motions. For Giedraitis argues that even claiming nominal damages,
Overwell cannot possibly establish the requisite amount in controversy for this Court’s subject
matter jurisdiction. Giedraitis has taken the Court’s previous finding—that Overwell had not
sufficiently pleaded damages to sustain its aiding and abetting claim—and refashioned it into a
jurisdictional issue. Trading Technologies again contends that the second amended complaint
does not sufficiently allege damages.
Upon further consideration, the Court believes it erred in its previous analysis regarding
damages. The Court required Overwell to show that it would have recouped some value from a
Court will apply Delaware law to analyze the aiding and abetting breach of fiduciary duty claim. Schartz
v. Parish, No. 16 C 10736, 2016 WL 7231613, at *3 (N.D. Ill. Dec. 14, 2016) (“[T]he aiding and abetting
claim cannot exist without the underlying allegation of breach of fiduciary duty, which is governed by
Wisconsin law. Thus, the aiding and abetting breach of fiduciary duty claim falls within the internal
affairs doctrine and is governed solely by Wisconsin law[.]”); see also CDX Liquidating Tr., 640 F.3d at
219–20 (applying Delaware law under internal affairs doctrine to aiding and abetting breach of fiduciary
claims).

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higher sale price as an individual shareholder. But the Court should have analyzed damages by
looking at what Neurensic hoped to recover as a company. This flows directly from a separate
question that the Court and the parties previously glossed over: does Overwell brings these
claims directly as an individual, derivatively as a shareholder, or both? See Tooley v. Donaldson,
Lufkin & Jenrette, Inc., 845 A.2d 1031, 1036 (Del. 2004) (“Determining whether an action is
derivative or direct is sometimes difficult and has many legal consequences, some of which may
have an expensive impact on the parties to the action.”). For having determined that Overwell
does not allege any individual claims—or if it does that those claims must be dismissed—
Overwell is left with Neurensic’s claim and the Court must consider damages from Neurensic’s
perspective. Int’l Union of Operating Eng’rs, Local 150, AFL-CIO v. Ward, 563 F.3d 276, 288
(7th Cir. 2009) (“The American legal system . . . view[s] a shareholder derivative action ‘as a
suit to enforce a corporate cause of action against officers, directors, and third parties.’” (citation
omitted)).
Accordingly, the Court first addresses whether Overwell has sufficiently alleged
individual or derivative claims. Second, the Court addresses Trading Technologies’ arguments
as to whether Overwell has sufficiently pleaded damages. Because Giedraitis’ jurisdictional
argument relies on the Court’s previous damages decision, the Court then addresses Giedraitis’
argument that Overwell has not sufficiently established the $75,000 amount in controversy
requirement.
I.

Direct or Derivative Claims
Overwell states that it brings this action both individually and derivatively on behalf of

Neurensic. This has almost no bearing on the Court’s analysis since the Court looks at the
substance of the claims, rather than the parties’ characterization of them. Tooley, 845 A.2d at

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1035 (“Plaintiffs’ classification of the suit is not binding.” (citation omitted)). Determining
whether a stockholder’s claim is derivative or direct turns on: “(1) who suffered the alleged harm
(the corporation or the suing stockholders, individually); and (2) who would receive the benefit
of any recovery or other remedy (the corporation or the stockholders, individually)?” Id. at
1033.
Here, the majority of the allegations against Widerhorn and Giedraitis involve
mismanagement of Neurensic. Overwell alleges that they failed to pay taxes and wages, failed to
conduct proper bookkeeping, and that they failed to enforce restrictive covenants against former
employees who began working for Trading Technologies before Neurensic’s sale was complete.
As Overwell puts it, “Widerhorn and Giedraitis could not unwind those actions,” Doc. 99 ¶ 6,
and this, together with the company’s dire financial situation, essentially forced an unfavorable
sale for only $400,000 in cash. These are derivative claims because Widerhorn and Giedraitis’
actions directly harmed the company. See Thornton v. Bernard Techs., Inc., C.A. No. 962-VCN,
2009 WL 426179, at *3 (Del. Ch. Feb. 20, 2009) (“Plaintiffs complain of quintessential director
mismanagement and any recovery would be for the benefit of the corporate entity[.]”); Albert v.
Alex. Brown Mgmt. Servs., Inc., No. Civ. A. 762-N, 763-N, 2005 WL 2130607, at *13 (Del. Ch.
Aug. 26, 2005) (“Essentially, this [is] a claim for mismanagement, a paradigmatic derivative
claim.”). Any harm that Overwell suffered because of the mismanagement is a derivative of the
injury to Neurensic. See Tooley, 845 A.2d at 1036 (noting approvingly that “the inquiry should
be whether the stockholder has demonstrated that he or she has suffered an injury that is not
dependent on an injury to the corporation”).
Overwell also makes allegations that could conceivably give rise to a direct claim.
Specifically, Overwell alleges that Widerhorn and Giedraitis made false representations to

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stockholders regarding the company’s finances, that they failed to tell stockholders that Trading
Technologies had hired Neurensic employees before the sale, and that they “fail[ed] to
adequately apprise the stockholders of the competitive, if not superior, offer submitted by
Overwell.” Doc. 23 ¶ 79. Allegations involving a failure to disclose information can sustain
individual shareholder claims if they implicate the right to a fully informed vote. See Thornton,
2009 WL 426179, at *3 (finding “failure to disclose accurate balance sheets” prevented
shareholders from making an informed vote in board of directors election and was a direct, rather
than derivative, claim); Tyson Foods, 919 A.2d at 601 (“Where a shareholder has been denied
one of the most critical rights he or she possesses—the right to a fully informed vote-the harm
suffered is almost always an individual, not corporate, harm.”). Here, however, Overwell does
not allege that Widerhorn and Giedraitis’ actions prevented Overwell from exercising an
informed vote, either as a board member, or as a shareholder. Indeed, Overwell concedes that it
did not even attend the October 5 board meeting to vote on the sale to Trading Technologies.
And Overwell has not otherwise alleged that Widerhorn and Giedraitis’ actions injured a right it
held as a shareholder. Tyson Foods, 919 A.2d at 601 (“For a shareholder (or, as here, a class of
shareholders) to maintain a direct claim, he or she must identify an injury that is not dependent
upon injury to the corporation.”). Even if it could show that Widerhorn and Giedraitis infringed
its rights as a shareholder, it could not maintain a claim without also pleading damages flowing
directly from those specific actions. See In re J.P. Morgan Chase & Co. S’holder Litig. (J.P.
Morgan Chase I), 906 A.2d 808, 825–27 n.61 (Del. Ch. 2005)) (“In order for the plaintiffs’
request for compensatory damages arising from a violation of the duty of disclosure to survive a
motion to dismiss, the court must find that the plaintiffs have set forth in a well-pleaded
complaint allegations to support those damages.”), aff’d, 906 A.2d 766 (Del. 2006). As already

10

discussed, Overwell has not alleged that the Widerhorn and Giedraitis injured its economic or
voting rights so as to sustain a request for nominal damages. Tyson Foods, 919 A.2d at 602
(“[N]ominal damages are appropriate only where the shareholder’s economic or voting rights
have been injured.”).
The situation is similar to that of J.P. Morgan Chase I, 906 A.2d 808. In that case,
shareholders of J.P. Morgan Chase bank brought derivative claims against the bank’s directors
for breach of fiduciary duty after a merger with another bank. Id. at 812. The central claim was
that the directors had refused a more favorable deal, one that did not involve issuing stock to the
other bank’s shareholders at a premium. Id. They also alleged that the directors failed to
disclose this alternative no-premium offer to the bank’s shareholders. Id. at 814.
The court held that claims against the board for refusing a better deal were derivative
because a less favorable deal harmed the company first. Id. at 818. The court found that failing
to disclose the more favorable deal to shareholders was also a derivative claim:
The issue the court sees is whether this purported class-based
disclosure claim can exist as a claim for money damages apart
from the underlying derivative claim. This issue is particularly
framed by the fact that the damages allegedly flowing from the
disclosure violation are exactly the same as those allegedly
suffered by JPMC in the underlying claim.
The disclosure claim alleged by the plaintiffs . . . if proven, could
have supported a claim for equitable relief. . . . Now, of course,
the “eggs” have been irretrievably “scrambled” and there is no
possibility of effective equitable relief.
Because equitable relief is no longer practicable, the plaintiffs
present their disclosure claim as one seeking money damages.
There are several problems with this approach. In order for the
plaintiffs’ request for compensatory damages arising from a
violation of the duty of disclosure to survive a motion to dismiss,
the court must find that the plaintiffs have set forth in a wellpleaded complaint allegations to support those damages. But, for
the reasons already discussed, the court concludes that the injury
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alleged in the complaint is properly regarded as injury to the
corporation, not to the class, and the damages, if any, flowing from
that alleged breach of fiduciary duty belong to the corporation, not
to the class. How then could the same directors ever be liable to
pay actual compensatory damages to both the corporation and the
class for the same injury? The answer . . . is that they could not.
Id. at 825–26. Similar to J.P. Morgan Chase I, Overwell had a claim for equitable relief before
the Neurensic sale was complete, and the Court granted its request for a stay until Neurensic
provided shareholders with sufficient notice. But now, “equitable relief is no longer practicable”
and Overwell seeks money damages for injuries that flow derivatively from harm to the
company. Id. Because Overwell has not shown that its rights were infringed, or that it suffered
damages apart from the company, there is no direct claim.
Having established that Overwell only alleges derivative claims against Widerhorn and
Giedraitis, its claims against Trading Technologies for aiding and abetting Widerhorn and
Giedraitis’ breach of fiduciary duties must also be derivative. See Feldman v. Cutaia, 956 A.2d
644, 662 (Del. Ch. 2007), aff’d, 951 A.2d 727 (Del. 2008) (“[A]n aiding and abetting claim
premised on a derivative cause of action is necessarily derivative itself.”). Having determined
the nature of Overwell's claims, the Court now turns to the Defendants’ respective motions.
II.

Trading Technologies’ Motion to Dismiss
The Court previously found that Overwell had pleaded itself out of court because it could

not show it suffered any damages. The Court reasoned that given Neurensic’s outstanding debt
of $3.5 million, it was not plausible that Overwell would have “increase[d] its offer by more than
eight times in order to derive any value for the shareholders.” Doc. 93 at 15. Overwell
subsequently filed its second amended complaint, wherein it alleges that Neurensic’s debts may
have been as low as $1.5 million or less given that a full audit has still not been completed.
Overwell also alleges that it intended to bid up to $1.5 million “based on the value of the
12

technology and in order to protect its $3.5 million investment.” Doc. 99 ¶ 68. Trading
Technologies moves to dismiss again, arguing that Overwell has still failed to allege that
Neurensic’s sale price could have plausibly exceeded the company’s debts. Thus, according to
Trading Technologies, Overwell has no hope of recovering its losses and it cannot show any
damages.
Having reconsidered this issue, the Court finds its prior analysis is mistaken and that
Overwell need not allege that it suffered damages as an individual shareholder. As already
established, Overwell brings a derivative, not an individual claim. Because this is Neurensic’s
cause of action, damages would be awarded to the company. Int’l Union of Operating Eng’rs,
563 F.3d at 288 (“The American legal system . . . view[s] a shareholder derivative action ‘as a
suit to enforce a corporate cause of action against officers, directors, and third parties.’” (citation
omitted)); J.P. Morgan Chase II, 906 A.2d at 773 (“[D]amages must be logically and reasonably
related to the harm or injury for which compensation is being awarded.”). As such, the proper
measure of damages is the harm to the company, not to the individual shareholders. Id.
(explaining that “$7 billion damage figure would be a logical and reasonable consequence (and
measure) of the harm caused to [J.P. Morgan Chase]” in derivative suit alleging the company
overpaid for merger with another bank, but it had “no logical or reasonable relationship to the
harm caused to the shareholders individually for being deprived of their right to cast an informed
vote”).
Here, Overwell alleges that Neurensic had a value between $6 to $12 million, and that
because of Widerhorn and Giedraitis’ mismanagement, the company sold for $400,000 cash. As
previously discussed in this Court’s January 31, 2019, Opinion, Overwell alleges that Trading
Technologies aided the leadership’s actions by hiring key employees from Neurensic and

13

facilitating the transfer of Neurensic’s proprietary assets before the completion of the sale.
“[A]ware of the financial distress of the Company,” Trading Technologies aided and abetted the
wrongful behavior and, in essence, helped ensure that the sale was a fait accompli. Doc. 99 ¶ 8–
9. Even if the diminished bidding price was the limit of damages attributable to Trading
Technologies, Overwell has pleaded that it intended to bid $1.5 million. Because this is a
derivative suit, it does not matter if Overwell would have bid more than the company’s liabilities
in order to recoup its own investment. It only matters that Neurensic could have extracted a
more favorable sale price than it did.
Trading Technologies argues that it is speculative to allege that Overwell would have bid
$1.5 million for Neurensic, and that these are the type of “‘naked assertions’ devoid of further
‘factual enhancement’” that Iqbal prohibits. Doc. 103 at 6. The Court does not agree. Overwell
had already invested $3.5 million in Neurensic and has alleged that the company was worth up to
$12 million accounting for the value of the technology, the cost of assembling a comparable
team of engineers, as well as the customer base and subscriptions that were either imminent or
already in place. Even if the Court were to only look at the value of the technology, which
Widerhorn and Giedraitis themselves placed at $2.5 million, a bid of $1.5 million for the entire
company does not seem implausible.
More importantly, Overwell need not show it would have bid $1.5 million, but only that
it may have plausibly bid north of $400,000. Considering the value of Neurensic’s assets, this is
not speculative in the same way as the cases to which Trading Technologies points. Cf. Aliano v.
WhistlePig, LLC, No. 14 C 10148, 2015 WL 2399354, at *5 (N.D. Ill. May 18, 2015) (once
plaintiff-restaurant was aware that defendant’s whiskey was mis-branded, its claim that
customers would stop patronizing restaurant because they wanted to purchase whiskey and could

14

not, or customers were appalled that restaurant continued to sell the product, were “rank
speculation regarding future customer behavior”); Messina v. Vill. of Villa Park, Ill., No. 13 C
00405, 2014 WL 4923610, at *4 (N.D. Ill. Sept. 29, 2014) (police officer’s claim that he “los[t]
valuable job opportunities” because of public comments about his job performance were
“entirely conclusory” and failed to plausibly allege that he had been blacklisted, or that it was
“virtually impossible for him to find new work in his field”); Strautins v. Trustwave Holdings,
Inc., 27 F. Supp. 3d 871, 881 (N.D. Ill. 2014) (plaintiff’s claims that she was injured by cyberattack were too speculative because she could not establish that her information was
compromised or stolen); United Labs., Inc. v. Savaiano, No. 06 C 1442, 2007 WL 4557095, at
*7 (N.D. Ill. Dec. 21, 2007) (plaintiff’s claim that it might not be able to obtain insurance
coverage because insurance policies were not delivered on time was speculative, since plaintiff
“ha[d] only alleged the existence of potential damages at some future point in time”). Even if the
wrongful conduct only dampened the bidding process by $100,000, that is enough to survive a
motion to dismiss. Overwell has plausibly alleged at least this much.
Trading Technologies also argues that Overwell has not sufficiently pleaded proximate
cause. It argues, for instance, that Overwell has not alleged that the employee and technology
transfers to Trading Technologies dampened what Overwell was willing to bid on the company.
Overwell need not connect all of the dots with certainty to survive a motion to dismiss. All it
must allege is “a plausible claim for relief,” Iqbal, 556 U.S. at 679, after which it “receives the
benefit of imagination, so long as the hypotheses are consistent with the complaint,” Twombly,
550 U.S. at 563 (citation omitted). It is not much of a stretch to believe that once Neurensic
employees had defected to Trading Technologies—something that Kenneth Chu brought up at a
board meeting several weeks before Overwell placed a bid—prospective bidders may have been

15

less enthusiastic about acquiring the company if they thought its proprietary software was
compromised. Trading Technologies may raise these arguments again at summary judgment. At
this stage of the proceeding, Overwell has sufficiently pleaded its claim.
For these reasons, Overwell may proceed with its claim of aiding and abetting breach of a
fiduciary duty.
III.

Giedraitis’ Motion to Dismiss
A. Diversity
Giedraitis first argues that since Neurensic and Trading Technologies are both Delaware

corporations, there is a lack of complete diversity necessary for this Court’s subject matter
jurisdiction. Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 553, 125 S. Ct. 2611,
162 L. Ed. 2d 502 (2005) (“In a case with multiple plaintiffs and multiple defendants, the
presence in the action of a single plaintiff from the same State as a single defendant deprives the
district court of original diversity jurisdiction over the entire action.”). But where shareholders
sue on behalf of a corporation that is controlled by managers hostile to the derivative suit, courts
treat the corporation as a defendant. Beck v. Dobrowski, 559 F.3d 680, 687 (7th Cir. 2009) (“A
corporation is controlled by its management, and when the management opposes the derivative
suit the corporation is treated as a defendant rather than as a plaintiff for purposes of determining
whether there is diversity jurisdiction.”). Although Overwell brings Neurensic’s cause of action,
it does so “as a ‘next friend’ might do for an individual, because it is disabled from protecting
itself.” Koster v. (Am.) Lumbermens Mut. Cas. Co., 330 U.S. 518, 523, 67 S. Ct. 828, 91 L. Ed.
1067 (1947). “In effect, this suit is a revolt by [a] shareholder[] against the members of the
board that engineered [Neurensic]’s sale to [Trading Technologies].” Beck, 559 F.3d at 687. As
such, the Court considers Neurensic a defendant for determining diversity, and Neurensic’s

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shared state of incorporation with Trading Technologies does not extinguish this Court’s
jurisdiction. Id.
B. Amount in Controversy
Giedraitis also argues that this Court lacks subject matter jurisdiction to hear Overwell’s
claim. Giedraitis relies on this Court’s January 31, 2019, Order, finding that Overwell did not
plausibly suffer any damages from the Neurensic sale. Therefore, Giedraitis argues, Overwell’s
potential recovery is limited to nominal damages, and because nominal damages cannot possibly
exceed $75,000, Overwell has not met the amount in controversy requirement.
As already explained, Overwell is not limited to nominal damages because it can claim
compensatory damages on behalf of Neurensic. Koster, 330 U.S. at 523 (“[P]laintiffs’ possible
recovery is not the measure of the amount involved for jurisdictional purposes but [instead] the
test is the damage asserted to have been sustained by the defendant corporation.”). Overwell
alleges that Neurensic was valued at as much as $12 million and that Giedraitis’ mismanagement
led to its ruin. This is far beyond the $75,000 amount in controversy requirement. At the very
least, Overwell has pleaded that Giedraitis’ actions deflated Neurensic’s sale price, and that more
competitive bidding could have reaped hundreds of thousands more for the company.
Giedraitis also makes much of Overwell’s failure to attach any affidavits or proof to
counter his factual challenge to the Court’s subject matter jurisdiction. McMillian v. Sheraton
Chicago Hotel & Towers, 567 F.3d 839, 845 (7th Cir. 2009) (“[W]hen the amount in controversy
is contested, the parties asserting federal jurisdiction must come forward with competent proof
that they have satisfied the jurisdictional threshold and not simply point to the theoretical
possibility of recovery for certain categories of damages.”). But Giedraitis does not argue that
the company itself was damaged less than $75,000. Even the supporting documents he submits

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establish that the total damage could have easily exceeded $75,000. See Doc. 106-1 at 28
(“[E]ven with the amortization cost, the book value of the technology assets is approximately
$2.5 [million].”). Therefore, Overwell was not obligated to submit additional proof to refute
Giedraitis’ factual attack. McMillian, 567 F.3d at 845. Overwell’s claims sufficiently allege the
amount in controversy requirement, and this Court has jurisdiction to hear the case.
CONCLUSION
For the foregoing reasons, the Court denies Trading Technologies’ motion to dismiss
[103], and the Court denies Giedraitis’ motion to dismiss [106].

Dated: September 9, 2019

______________________
SARA L. ELLIS
United States District Judge

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