The Delaware Chancery Court recently denied a shareholder’s motion to expedite proceedings to enjoin a company buyout, finding that the shareholder failed to show that any threatened harm from the buyout was imminent, irreparable and non-speculative.
Plaintiff, a shareholder of VitalSpring Technologies, Inc., filed a shareholder derivative suit against defendant Sreedhar Potarazu, VitalSpring’s chief executive officer and only director, in connection with the alleged impending sale of VitalSpring. In September 2014, defendant emailed VitalSpring’s shareholders informing them that VitalSpring had reached an agreement to be sold, and that the buyout would be completed in mid-October 2014 pending approval by the Federal Trade Commission. On October 20, 2014, defendant informed shareholders that the buyout would be further delayed. Plaintiff, who expressed doubt as to whether a buyer actually existed and alleged that defendant had a history of misleading shareholders, filed suit to enjoin the buyout until VitalSpring released audited financial statements and held an annual shareholder meeting.
Plaintiff filed a motion to expedite proceedings, arguing that the buyout could potentially close at any time. The court denied the motion, finding that “Plaintiff’s suspicion – a not unreasonable apprehension – that Defendant is engaging in nefarious activities does not establish an imminent, irreparable, and non-speculative harm.”
Smollar v. Potarazu, No. 10287-VCN (Del. Ch. Nov. 19, 2014).