Vardakas v. American DG Energy, Inc. et al

Filing 101

District Judge Leo T. Sorokin: ORDER entered Defendants' 71 Motion for Judgment on the Pleadings is ALLOWED as to the remaining Counts III, IV and V. May's 85 Motion to Certify Class is DENIED AS MOOT. The Clerk shall enter judgment forthwith, with each side to bear its own fees and costs. (Montes, Mariliz)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
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Plaintiff,
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v.
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AMERICAN DG ENERGY INC., JOHN N. )
HATSOPOULOS, GEORGE N.
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HATSOPOULOS, et al.,
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Defendants.
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LEE VARDAKAS, individually and on
behalf of all others similarly situated,

Civil No. 17-10247-LTS

ORDER ON MOTION FOR JUDGMENT
November 16, 2018
SOROKIN, J.
This class action case, brought by and on behalf of William Chase May 1 and other
similarly situated holders (“the May class”) of the common stock of American DG Energy Inc.
(“American DG”), arises out of the 2017 merger of American DG and Tecogen Inc.
(“Tecogen”). Doc. No. 34. The case essentially alleges that the merger of American DG and
Tecogen (“the merger”) was the result of a conflicted sales process that undervalued the common
stock of American DG. See id. On March 2, 2018, the Court dismissed May’s federal securities
law claims. Doc. No. 55. Remaining are Counts III, IV, and V, which allege that the directors,

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The class action was originally brought by Lee Vardakas. Doc. No. 1. Vardakas and May
moved to appoint May as Lead Plaintiff, and thereafter the Court appointed May to be Lead
Plaintiff. Doc. Nos. 18, 25. On June 19, 2017, May filed an amended class action complaint (“the
Complaint”), identifying May as the lead plaintiff. Doc. No. 34. Vardakas remains the named
plaintiff in the action though May is the lead Plaintiff. See Doc. No. 34.

co-CEOs, and certain controlling shareholders of American DG and Tecogen 2 breached their
fiduciary duties in connection with the merger (Counts III and IV); and that George Hatsopoulos,
former American DG chairperson and Tecogen director, and certain entities 3 aided and abetted in
that breach (Count V). Doc. No. 34 ¶¶ 134–45. Now, the defendants have moved for judgment
on the pleadings under Rule 12(c) of the Federal Rules of Civil Procedure as to all remaining
counts. Doc. No. 71. Plaintiffs have opposed. Doc. No. 77.
I.

FACTS 4
American DG and Tecogen are energy companies with complementary businesses.

American DG distributes and operates on-site combined heat and power systems and natural gas
powered cooling systems. Doc. No. 34 ¶ 24. Tecogen designs, manufactures, and sells combined
heat and power systems. Id. ¶¶ 25, 50. Prior to the merger, the companies were “affiliated,” id.

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The individual defendants are Co-CEOs of American DG and Tecogen John N. Hatsopoulos
and Benjamin Locke (“officer defendants”); board of director members Charles T. Maxwell,
Deanna M. Petersen, Christine Klaskin, John Rowe, Joan Giacinti, Elias Samaras (“director
defendants”); and George N. Hatsopoulos. See Doc. No. 34 ¶¶ 24–39.
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The entity defendants initially named in the Complaint are American DG, Tecogen, and
Tecogen.ADGE Acquisition Corp. (“Merger Sub”), and Cassel Salpeter & Co., LLC (“Cassel”).
All claims against American DG and Cassel have been dismissed. See Doc. No. 55. Accordingly,
the only remaining entity defendants are Tecogen and Merger Sub. See Doc. No. 34 ¶¶ 142–145.
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In considering the defendants’ motion, the Court must accept the Complaint’s factual allegations
as true and draw all reasonable inferences in Plaintiffs’ favor. Unless otherwise noted, all facts are
recited as set forth in the Complaint. The defendants’ motion is accompanied by exhibits,
including SEC filings, American DG’s certificate of incorporation, and American DG and
Tecogen’s joint proxy statement. See Doc. Nos. 73; 73-3; 73-4; 73-5; 73-6; 73-7. While
ordinarily “any consideration of documents not attached to the complaint, or not expressly
incorporated therein, is forbidden . . . courts have made narrow exceptions for documents the
authenticity of which are not disputed by the parties; for official public records; for documents
central to plaintiffs’ claim; [and] for documents sufficiently referred to in the complaint.”
Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993). SEC filings and risk disclosures are the sorts of
documents courts routinely consider at this stage. See, e.g., Fire & Police Pension Ass’n of Colo.
v. Abiomed, Inc., 778 F.3d 228, 232 n.2 (1st Cir. 2015). Plaintiff has not objected to the
consideration of these documents. Accordingly, the Court will consider the submitted exhibits
where indicated.
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¶ 47; they shared co-founders, brothers John Hatsopoulos (“J. Hatsopoulos”) and George
Hatsopoulos (“G. Hatsopoulos”); co-CEOs, John Hatsopoulos and Benjamin Locke; certain
members of senior management, directors, and ownership; and office space. Id. ¶¶ 3, 27–28, 50.
In 2014 and 2015, nearly 10 percent of Tecogen’s total revenues came from sales of
cogeneration parts and services to American DG. Id. ¶ 49.
In July 2010, American DG established EuroSite Power (“EuroSite”), a subsidiary of
American DG. Id. ¶ 72. As was the case with American DG and Tecogen, the leadership and
ownership of American DG and EuroSite overlapped. Id. ¶¶ 72–73. Between 2011 and 2012,
American DG issued convertible debentures to J. Hatsopoulos and two other owners of Tecogen
common stock in an amount of $19.4 million, which remained outstanding until early 2016. Id.
¶ 75.
Discussions of a merger between the two companies began in early 2016. Id. ¶ 63. The
initial discussions took place informally and included J. Hatsopoulos, Benjamin Locke, and
outside counsel for both companies, as well as the management teams of both companies. Id.
¶¶ 63–64. These initial meetings were not disclosed to either company’s board of directors at the
time that the meetings were ongoing. Id. In March 2016, J. Hatsopoulos and Locke informed the
board of directors of each company of the merger discussions, leading each board to create a
committee of independent directors to negotiate the merger. Id. ¶ 65. The committees were solely
tasked with evaluating the Tecogen-American DG merger and did not run a competitive auction
or otherwise explore other potential acquirors. Id. ¶ 68. During the first month after its formation,
the American DG committee discussed on several occasions a transaction that would eliminate
the American DG convertible debt. Id. ¶ 77. On April 25, 2016, following these discussions, the
board of American DG approved a transaction in which the convertible debt of American DG

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was exchanged for shares of EuroSite with an exchange price of $0.575 per share of EuroSite
stock used to calculate the number of EuroSite shares exchanged for the convertible debt. Id. ¶
77-78. (At the time, the market price per share of EuroSite was $0.75 per share. Id. ¶ 78.)
The American DG and Tecogen independent committees continued to meet discuss,
evaluate, and negotiate the merger of American DG and Tecogen until October 31, 2016 when a
merger agreement was negotiated. See Doc. No. 73-3 at 102–109. The agreement reflected the
committees ultimately negotiated purchase price of $0.38 per share of Tecogen, which the parties
settle upon after discussing prices ranging from $0.29 to $0.41 per share. Id. Each committee of
independent directors recommended the merger to their respective boards of directors. Id. at
108–09. Following these recommendations, each company’s board of directors unanimously
approved the merger. Id. at 109–10. On November 1, 2016, the agreement of merger was
executed by American DG and Tecogen, and, on November 2, 2016, American DG and Tecogen
announced their plan of merger, upon the consummation of which Merger Sub, a wholly owned
subsidiary of Tecogen formed for the purpose of effecting the merger, merged with and into
American DG, with American DG continuing as the surviving corporation as a wholly owned
subsidiary of Tecogen. See Doc. No. 34 ¶ 2; 73-3 at 2.
At the time the merger was announced, co-founders J. and G. Hatsopoulos each had
leadership roles in the companies. J. Hatsopoulos was the co-CEO of both companies and served
as director of each, while G. Hatsopoulos was a technical advisor to American DG and had
previously served as chairperson of the board of directors for American DG and on the board of
directors for Tecogen. Doc. No. 34 ¶ 4. The two brothers, together with their families, also
beneficially owned or controlled more than 34 percent of American DG stock and more than 23
percent of Tecogen common stock. Id. ¶ 5. As of March 9, 2017, the Hatsopoulos brothers

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collectively held 17.4 million shares of American DG common stock and 4.6 million shares of
Tecogen common stock. Id. ¶ 51. By virtue of their ownership interests in American DG and
Tecogen, the brothers, “with a small group of other major shareholders, ha[d] the ability to
control various corporate decisions, including [the two companies’] direction and policies, the
election of directors, the content of [the] charter and bylaws and the outcome of any other matter
requiring shareholders’ approval, including a merger.” Id. ¶¶ 54–55.
The proxy statement issued to shareholders described the merger agreement negotiation
process and the two companies’ overlapping leadership and ownership. See Doc. No. 73-3 at
101–09, 112. Stockholders overwhelmingly voted in favor of the merger, and, on May 18, 2017,
the merger was executed. Doc. No. 73-4.
II.

LEGAL STANDARD
Rule 12(c) of the Federal Rules of Civil Procedure provides, “After the pleadings are

closed—but early enough not to delay trial—a party may move for judgment on the pleadings.”
Fed. R. Civ. P. 12(c). “The standard of review of a motion for judgment on the pleadings under
Federal Rule of Civil Procedure 12(c) is the same as that for a motion to dismiss under Rule
12(b)(6).” Marrero-Gutierrez v. Molina, 491 F.3d 1, 5 (1st Cir. 2007). To survive a motion to
dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a complaint must contain
sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its face.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007)). The Court “must take the allegations in the complaint as true and must make all
reasonable inferences in favor of the plaintiff[].” Watterson v. Page, 987 F.2d 1, 3 (1st Cir.
1993). “[F]actual allegations” must be separated from “conclusory statements in order to analyze
whether the former, if taken as true, set forth a plausible, not merely a conceivable, case for

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relief.” Juarez v. Select Portfolio Servicing, Inc., 708 F.3d 269, 276 (1st Cir. 2013) (internal
quotations omitted). This highly deferential standard of review “does not mean, however, that a
court must (or should) accept every allegation made by the complainant, no matter how
conclusory or generalized.” United States v. AVX Corp., 962 F.2d 108, 115 (1st Cir. 1992).
Dismissal for failure to state a claim is appropriate when the pleadings fail to set forth “factual
allegations, either direct or inferential, respecting each material element necessary to sustain
recovery under some actionable legal theory.” Centro Medico del Turabo, Inc. v. Feliciano de
Melecio, 406 F.3d 1, 6 (1st Cir. 2005) (quoting Berner v. Delahanty, 129 F.3d 20, 25 (1st Cir.
1997)).
III.

DISCUSSION
A.

Breach of Fiduciary Duty against J. and G. Hatsopoulos in Their Capacity as
Control Group

Count IV alleges that J. and. G. Hatsopolous breached their common-law “fiduciary
duties of loyalty, care, and good faith owed to [American DG’s] unaffiliated shareholders by
placing their personal interests ahead of the interests of” May and similarly situated shareholders
“and foisting an unfair transaction, both in terms of process and price” on them. Doc. No. 34
¶ 139. “Because they acted in concert as a control group and stood on both sides of the
[m]erger,” May claims that they “have the burden . . . of proving that the transaction was entirely
fair” to May and similarly situated shareholders. Id. ¶ 138.
The parties agree Delaware law applies to May’s common-law claims. Under Delaware
law, “a number of shareholders . . . can collectively form a control group” that can be “accorded
controlling shareholder status, and, therefore, its members owe fiduciary duties to their fellow
shareholders.” Dubroff v. Wren Holdings, LLC, 2009 Del. Ch. LEXIS 89, *12. “A controlling or

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dominating shareholder standing on both sides of a transaction, as in a parent-subsidiary context,
bears the burden of proving its entire fairness.” Kahn v. Lynch Commc’n Sys., Inc., 638 A.2d
1110, 1115 (Del. 1994). However, controlling shareholders’ “undermining influence does not
exist in every controlled merger setting, regardless of the circumstances.” Kahn v. M & F
Worldwide Corp., 88 A.3d 635, 644 (Del. 2014). When a controlling shareholder and minority
shareholders receive equal treatment in a merger, “the presumption is that a large blockholder,
who decides to take the same price as everyone else, believes that the sale is attractive, and thus
is a strong indication of fairness and that judicial deference is due.” In re Morton’s Rest. Grp.,
Inc. S’holders Litig., 74 A.3d 656, 666 (Del. Ch. 2013). But even “[t]he equal-treatment
principle is not an absolute rule because there may be times when a controller has a unique
interest that causes it to favor a transaction that is disadvantageous, or relatively less
advantageous, for the minority,” such as an urgent need for liquidity. Ford v. VMware, Inc.,
2017 Del. Ch. LEXIS 70, *43 (Del. Ch. May 2, 2017).
In this case, May alleges that the Hatsopolous brothers acted as a control group of
American DG, Doc. No. 34 ¶¶ 46, 138, and that evaluating their alleged breach of fiduciary duty
in their capacity as a control group consequently requires application of the entire fairness
standard, id. ¶¶ 7, 46, 61, 138. At the November 2, 2018, hearing, counsel for the defendants
conceded that the Hatsopolous brothers acted as a control group in both companies involved in
the merger transaction. The defendants argue that the facts of this case nevertheless do not
require the application of the equal fairness standard.
The parties agree that, if the equal fairness standard applies, the claim against the
Hatsopolous brothers must survive at least to summary judgment, while the application of the
business judgment rule would lead to the claim’s dismissal at this stage. May argues that

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Delaware law is clear that the equal fairness standard applies in any case where a controlling
shareholder is on both sides of the merger, advancing cases that include dicta appearing to so
hold. See, e.g., Emerald Partners v. Berlin, 726 A.2d 1215, 1221 n.8 (Del. 1999) (controlling
shareholder’s “stance on both sides as a corporate fiduciary, alone, is sufficient to require the
demonstration of entire fairness”). But in every such case, the controlling shareholder had an
identifiable interest diverging from those of the shareholder plaintiff, and May’s counsel
conceded at the November 2, 2018, hearing that he could identify no controlling Delaware case
specifically holding that application of the equal fairness standard is required even without such
a conflict of interest. 5 When federal courts are applying state law, they must “interpret[] and
apply[] the rules of substantive law enunciated by the state’s highest judicial authority, or, on
questions to which that tribunal has not responded, mak[e] an informed prophecy of what the
court would do in the same situation.” Blinzler v. Marriott Int’l, Inc., 81 F.3d 1148, 1151 (1st
Cir. 1996). Whether the equal fairness standard is the proper standard of review in a case with
these facts appears to be an open question that requires such a prediction.
May offers no factual allegations to establish that the Hatsopolous brothers had interests
that conflicted with minority shareholders, much less that they engaged in self-dealing with
respect to the merger terms. Relying on the Hatsopolous brothers’ position as controlling
shareholders on both sides of the merger alone to justify the application of the equal fairness
standard suffers from at least three problems. First, the brothers received the same terms as other

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May advances several cases in which such an identifiable interest was present, and it is clear
that there exist many scenarios in which the controlling shareholder would have such an interest.
Most basically, for example, such an interest could be present if, unlike here, the claim were
brought by a shareholder of the company in which the controlling shareholder held a share that
was smaller, rather than larger, than her share of the other company. The Court further notes that
the defendants’ counsel also conceded that there is no controlling case with the opposite holding.
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shareholders, accepting the 0.092 ratio used to exchange each share of American DG common
stock for Tecogen common stock. Doc. No. 34 ¶ 1. Second, although May claims that the greater
value of the Hatsopolous brothers’ holdings in Tecogen, compared to their American DG
holdings, gave them “a huge financial incentive to protect the value of their Tecogen shares in
the Merger, even at the expense of the value of their [American DG] shares,” id. ¶ 52, the
opposite is true. As the defendants argue, because the brothers owned a greater proportion of
American DG’s total outstanding common stock than they did of Tecogen’s, their financial
incentive ran in the opposite direction: They stood to benefit from a higher purchase price, not a
lower one. See Doc. No. 72 at 21–22. Finally, although May claims that the Hatsopolous
brothers interfered with the ability of the independent committee tasked with negotiating the
merger to act in the best interest of shareholders, the independent committee nevertheless
secured a 27 percent increase in Tecogen’s offered purchase price, from $0.30 per American DG
share to $0.38 per share. Doc. No. 73-3 at 106–08. Simply put, the defendants do not advance a
plausible reason other than price—such as an urgent need for liquidity, a particularized benefit to
the brothers, or anything else—for which the brothers’ interests would have diverged from those
of other shareholders. The Hatsopolous brothers’ involvement, as described in the Complaint,
therefore does not create a rational inference that their interests diverged from those of minority
American DG shareholders.
The Court concludes that the Delaware Supreme Court, presented with facts such as
these, would rule that the application of the equal fairness standard is not required in cases where
a controlling shareholder stands on both sides of a merger but lacks any plausible conflict of
interest with the shareholder advancing the lawsuit. The purpose of the equal fairness standard is
to provide a more searching judicial inquiry in cases where the controlling shareholder’s interests

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diverged from those of the aggrieved minority shareholder, who therefore requires additional
protection. See Kahn, 638 A.2d at 1116. The Delaware court has discussed several categories of
mergers in which these interests diverge by definition, including a “self-dealing” buyout of a
subsidiary by its majority-shareholder parent company, Glassman v. Unocal Expl. Corp., 777
A.2d 242, 247 (Del. 2001); a majority-shareholder’s “interested” merger of a company with
other companies he owns entirely, Emerald Partners v. Berlin, 787 A.2d 85, 93 (Del. 2001); a
controlling partnership’s “self interest[ed]” purchase of the company’s sole asset for its own tax
planning needs, William Penn P’ship v. Saliba, 13 A.3d 749, 756 (Del. 2011); and a controlling
shareholder’s “self-interested” purchase of the remaining shares of a public corporation, In re
Cornerstone Therapeutics Inc. Stockholder Litig., 115 A.3d 1173, 1177 (Del. 2015). In any of
these circumstances, the conflict of interest between the controlling and minority shareholders is
clear from the facts pled, making apparent minority shareholders’ need for additional protection
from the power of the controller.
Without such divergent interests, the minority shareholder stands in the same shoes as
shareholders suing corporate directors to complain about merger terms, a circumstance in which
the business judgment rule would generally apply. See, e.g., Cede & Co. v. Technicolor, Inc.,
634 A.2d 345, 361 (Del. 1993). In a case governed by the entire fairness standard, “even though
the ultimate burden of proof is on the majority shareholder to show by a preponderance of the
evidence that the transaction is fair, it is first the burden of the plaintiff attacking the merger to
demonstrate some basis for invoking the fairness obligation.” Weinberger v. UOP, Inc., 457
A.2d 701, 703 (Del. 1983). Although a conflict of interest between a control group on both sides
of a merger and the minority shareholders of one of the companies often, if not usually, creates
such a basis, the facts pled in this case do not establish such a conflict. Applying the entire

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fairness standard in a case without some conflict of interest would place a court in the role of
assessing, likely years after the fact, a merger’s merits without any compelling justification—
precisely the judicial meddling that the business judgment rule is intended to prevent. See Cede
& Co., 634 A.2d at 360. Here, May has not met his burden to demonstrate a conflict of interest
sufficient to merit such an inquiry.
Accordingly, because American DG’s other shareholders need no protection from the
Hatsopolous brothers’ pursuit of interests shared by all shareholders, application of the entire
fairness standard serves no purpose here. Because May offers no factual basis to infer that the
Hatsopolous brothers’ interests diverged from those of American DG’s minority shareholders,
there is no reason to infer that the brothers did not share minority shareholders’ interest in a
higher purchase price, unlike in the cases advanced by May. The Court therefore finds that that
the business judgment rule, rather than the entire fairness standard, applies to the Hatsopolous
brothers’ conduct in this case. May’s counsel conceded at the November 2, 2018, hearing that the
Complaint does not state a claim with respect to the merger negotiations under the business
judgment standard. 6
May’s claims about the transaction in which the convertible debt of American DG was
exchanged for shares of EuroSite also fail. Although May claims that J. Hatsopolous “cause[d

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After the defendants moved for judgment on the pleadings on May 21, 2018, the parties moved
jointly to allow May extra time to file his opposition to that motion, which was submitted on
June 12, 2018. The opposition argues solely that the Complaint states a claim because the equal
fairness standard applies. Nowhere does it argue that, in the alternative, another standard of
review might apply, and May made no request to file a surreply. At the end of the lengthy oral
argument at the November 2, 2018, hearing, May’s counsel suggested for the first time that
intermediate scrutiny might apply even if the entire fairness standard is inapplicable and offered
to provide supplemental briefing on that possibility. The time for May to raise this argument was
in his opposition to the defendants’ motion for judgment. Because May’s opposition brief did not
mention the possible applicability of intermediate scrutiny, the Court declines to consider the
argument, deeming it waived.
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American DG] to sell him[] a valuable asset for much less than its market value . . . potentially
expos[ing] him and the other [American DG] directors to derivative liability,” he also admits that
such liability “would have been eliminated by the Merger.” Doc. No. 34 ¶ 140; see also id. ¶ 81
(acknowledging that “derivative liability was likely extinguished through the Merger”). “Under
Delaware law, it is well established that a merger which eliminates a derivative plaintiff’s
ownership of shares of the corporation for whose benefit she has sued terminates her standing to
pursue those derivative claims.” Lewis v. Ward, 852 A.2d 896, 900–01 (Del. 2004). Because, as
a result of the merger, May is no longer a shareholder in American DG, he may no longer bring a
derivative claim related to the convertible debt transaction. Accordingly, the defendants’ motion
for judgment on the pleading is ALLOWED as to Count IV against J. Hatsopolous and G.
Hatsopolous in their role as a control group.
B.

Breach of Fiduciary Duty Against Director/Officer Defendants

Count III alleges the director and officer defendants breached their common-law
fiduciary duties owed to American DG shareholders by “fail[ing] to take steps to obtain the
highest available value for [American DG] consideration . . . fail[ing] to adequately consider
other strategic alternatives, [and by] favor[ing] their own . . . interests . . . rather than protect the
best interests of [American DG’s] unaffiliated shareholders,” Doc. No. 34 ¶ 135.
1.

Director Defendants

Under Delaware law, directors owe shareholders duties of due care, loyalty, and good
faith. Emerald Partners, 787 A.2d at 90. However, American DG’s certificate of incorporation
contains an exculpatory provision limiting director liability to the fullest extent permitted under
Delaware law. Doc. No. 73-7 at 3. Delaware law permits directors, through such clauses, to
exculpate themselves from liability for breaches of the duty of due care. Del. Code tit. 8

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§ 102(b)(7). Accordingly, as to the director defendants, May’s claim is limited to breaches of
loyalty and good faith.
Because the director defendants are protected by an exculpatory charter provision, May
must plead “facts supporting a rational inference that the director[s] harbored self-interest
adverse to the stockholders’ interests, acted to advance the self-interest of an interested party
from whom they could not be presumed to act independently, or acted in bad faith.” In re
Cornerstone Therapeutics Inc. Stockholder Litig., 115 A.3d at 1178–80. The Complaint makes
only limited specific claims as to each of the director defendants Charles T. Maxwell, Deanna M.
Petersen, Christine Klaskin, John Rowe, Joan Giacinti, and Elias Samaras. The Complaint
explains each director’s relevant roles: Maxwell’s positions on the board of directors of
American DG and Tecogen; Petersen, Klaskin, and Rowe’s positions on the board of directors of
American DG and membership in the independent committee formed to advise American DG;
and Giacinti and Samaras’ positions on the board of directors of American DG and Eurosite.
Doc. No. 34 ¶¶ 29-34, 65, 73. The Complaint also alleges that Klaskin was added to the
independent committee weeks after the other committee members were selected and weeks after
the committee’s formation. Id. ¶ 65.
The limited factual allegations in the Complaint as to the director defendants fail to
support a rational inference that the directors were disloyal or acted in bad faith. May argues that
he need not present specific facts as to each director because he has alleged that the directors
were “beholden to the Hatsopoulos brothers,” Doc. No. 77 at 15, but that conclusory allegation is
unsupported by specific facts. May alleges the Hatsopoulos brothers attended meetings with the
independent committee members, Doc. No. 34 ¶ 66, but their attendance does not, on its own,
create a rational inference that the brothers improperly influenced the directors’ decision-making

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sufficient to overcome the presumption that the they acted independently. Plaintiff’s comparison
of this case to MAZ Partners LP v. Shear, 204 F. Supp. 3d 365 (D. Mass. 2016), is inapt because
this case lacks the “unresolved questions concerning a director’s independence,” Doc. No. 77 at
20, that were present in MAZ. In that case, the directors voted to approve a $5 million payment to
the CEO at other shareholders’ expense without obtaining a fairness opinion from outside
advisors, creating a rational inference that the CEO improperly influenced the directors’ actions.
MAZ, 204 F. Supp. 3d at 376. By contrast, the acquisition at issue here was negotiated by special
committees of each board and recommended to the boards after evaluation, and the acquisition
benefitted shareholders, including the brothers, in like manner. Accordingly, the defendants’
motion for judgment on the pleadings is ALLOWED as to Count III against the director
defendants.
2.

Officer Defendants

Under Delaware law, “the fiduciary duties of officers are the same as those of directors.”
Gantler v. Stephens, 965 A.2d 695, 709 (Del. 2009). The officer defendants are John Locke and
J. Hatsopoulos. With respect to Locke, the Complaint alleges only that he discussed the merger
with J. Hatsopoulos before it was presented to the board, informed the board of that discussion,
and attended the independent committee’s meetings. Doc. No. 34 ¶¶ 8, 63, 65–66. These facts
alone are insufficient to support a rational inference that Locke, who did not vote on the merger
and received no special benefit from it, violated his fiduciary duty or otherwise acted wrongly
with respect to the merger. Similarly, with respect to J. Hatsopolous in his capacity as officer, the
Complaint relies on conclusory claims that J. Hatsopolous placed his own interests ahead of
shareholders without alleging specific facts to support that inference. Id. ¶¶ 44–45, 135. There is
no allegation that J. Hatsopolous received special benefit from the merger as a result of his

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officer capacity. Accordingly, the defendants’ motion for judgment on the pleading is
ALLOWED as to Count III against Locke and against J. Hatsopolous in his capacity as officer.
C.

Aiding and Abetting Breaches of Fiduciary Duty

Count V alleges that G. Hatsopolous, Tecogen, and Merger Sub “knowingly aided and
abetted” the director and officer defendants’ breach of their fiduciary duties. Doc. No. 34 ¶ 144.
“An aiding and abetting claim ‘may be summarily dismissed based upon the failure of the breach
of fiduciary duty claims against the director defendants.’” In re KKR Fin. Holdings LLC
S’holder Litig., 101 A.3d 980, 1003 (Del. Ch. 2014) (quoting Meyer v. Alco Health Servs. Corp.,
1991 WL 5000, at *2 (Del. Ch. Jan. 17, 1991)). Because the primary claims of breach of
fiduciary duty have failed, the aiding and abetting claims also fail. Accordingly, the defendants’
motion for judgment on the pleading is ALLOWED as to Count V.
IV.

CONCLUSION
Based on the foregoing, the defendants’ Motion for Judgment on the Pleadings, Doc. No.

71, is ALLOWED as to the remaining Counts III, IV, and V. May’s Motion for Class
Certification, Doc. No. 85, is DENIED as moot. The Clerk shall enter judgment forthwith, with
each side to bear its own fees and costs.

SO ORDERED.

/s/ Leo T. Sorokin
Leo T. Sorokin
United States District Judge

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