WOOD ROBBINS SUCCESSFULLY REPRESENTS TECH FOUNDERS

Lawsuit Against Angel Investor Settles to Clients’ Satisfaction

In a recent case, Wood Robbins, LLP joined forces with the Law Offices of David H. Schwartz in representing founders of a digital marketing company. The founders were forced to sell their shares in a cash-out merger before the marketing company experienced exponential growth. As a result of being forced-out, the founders missed out on the company’s sale years later, which was for much more.

The complaint, filed in San Luis Obispo Superior Court, sought damages of $150 million based on the allegation that is what plaintiff-founders would have received had they not been forced to sell early. The defendants alleged to have orchestrated the freeze-out merger were represented by Latham & Watkins. The global law firm filed multiple demurrers and motions for summary judgment based on the statute of limitations, the case being filed six years after the merger in question. All were defeated.

The case involved subpoenaing documents from large companies, including Apple and Publicis, and also required we depose investment banking firms in New York. A few months before trial, Latham & Watkins filed a motion claiming Cal. Corp. § 2115 limited plaintiffs to dissenter’s rights and precluded the founders from recovering as if they held stock through the company’s resale. We opposed, in-part pointing out that if Cal. Corp. § 2115 applied so did California’s requirement that all shareholders in a merger transaction be treated equally, which in the subject merger transaction the shareholders were not. (The investor’s shares were being exchanged for an interest in the new post-merger entity while plaintiffs’ shares could only be converted to cash.) The judge tentatively ruled in our favor, after which the case settled to our clients’ satisfaction. For Wood Robbins, LLP, Greg WoodDawn Johnson and Leyla Pasic are credited with the win.

This lawsuit is not the first jointly handled by Wood Robbins, LLP and the Law Offices of David H. Schwartz. Prior to this case, for example, Mr. Wood and Mr. Schwartz represented early investors of a telecom company suing late-round investors who let the company fall into bankruptcy then bought the company’s assets from the bankruptcy, effectively cutting out the early investors from the company’s later growth.


Do you have a claim? Fiduciary duties are imposed on controlling shareholders by law and they significantly limit what controlling shareholders can do, how much a controlling shareholder can act in their self-interest. Don’t assume, just because the investor/controlling shareholder orchestrating the freeze-out has a team of lawyers, that you don’t have a claim. And, don’t wait to call. The statute of limitations on breach of fiduciary duty claims can be as short as three years from when the lawsuit could first have been brought. Undue delay may result in multi-million dollar claims being barred. Initial consultations are free of charge.

2017 Jury