Case 1:19-Cv-00377-CFC Document 24 Filed 03/25/19 Page 1 of 1 Pageid #: 230
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Case 1:19-cv-00377-CFC Document 24 Filed 03/25/19 Page 1 of 1 PageID #: 230 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE VERITION PARTNERS MASTER FUND, ) LTD. and VERITION MULTI-STRATEGY ) MASTER FUND, LTD., ) ) Plaintiffs, ) ) v. ) C.A. No. 1:19-cv-00377-CFC ) COHERENT ECONOMICS, LLC, ) Jury Demanded W. BRADFORD CORNELL, and ) SAN MARINO BUSINESS PARTNERS ) ) Defendants. ) DEFENDANTS W. BRADFORD CORNELL AND SAN MARINO BUSINESS PARTNERS’ RULE 12(b)(6) MOTION TO DISMISS Pursuant to Federal Rule of Civil Procedure 12(b)(6), Defendants W. Bradford Cornell and San Marino Business Partners, LLC move to dismiss all, or in the alternative, certain of the claims brought by Plaintiffs Verition Partners Master Fund, Ltd. and Verition Multi-Strategy Master Fund, Ltd. in the Complaint filed in this action for the reasons set forth in Defendants Cornell and San Marino Business Partners’ memorandum of law accompanying this Motion. OF COUNSEL: CONNOLLY GALLAGHER LLP Peter M. Spingola /s/ Ryan P. Newell Robert J. Shapiro Ryan P. Newell (Bar No. 4744) John M. Owen Shaun Michael Kelly (Bar No. 5915) Chapman Spingola, LLP 1201 North Market Street, 20th Floor 190 South LaSalle Street, Suite 3850 Wilmington, DE 19801 Chicago, Illinois 60603 (302) 757-7300 (312) 630-9202 [email protected] [email protected] [email protected] [email protected] [email protected] Counsel for Bradford Cornell and San Marino Business Partners, LLC Dated: March 25, 2019 Case 1:19-cv-00377-CFC Document 24-1 Filed 03/25/19 Page 1 of 25 PageID #: 231 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE VERITION PARTNERS MASTER FUND, ) LTD. and VERITION MULTI-STRATEGY ) MASTER FUND, LTD., ) ) Plaintiffs, ) ) v. ) C.A. No. 1:19-cv-00377-CFC ) COHERENT ECONOMICS, LLC, ) Jury Demanded W. BRADFORD CORNELL, and ) SAN MARINO BUSINESS PARTNERS, ) ) Defendants. ) ) DEFENDANTS W. BRADFORD CORNELL AND SAN MARINO BUSINESS PARTNERS’ OPENING BRIEF IN SUPPORT OF THEIR RULE 12(b)(6) MOTION TO DISMISS OF COUNSEL: CONNOLLY GALLAGHER LLP Ryan P. Newell (Bar No. 4744) Peter M. Spingola Shaun Michael Kelly (Bar No. 5915) Robert J. Shapiro 1201 North Market Street, 20th Floor John M. Owen Wilmington, DE 19801 Chapman Spingola, LLP (302) 757-7300 190 South LaSalle Street, Suite 3850 [email protected] Chicago, Illinois 60603 [email protected] (312) 630-9202 [email protected] Counsel for Bradford Cornell and [email protected] San Marino Business Partners, LLC [email protected] Dated: March 25, 2019 Case 1:19-cv-00377-CFC Document 24-1 Filed 03/25/19 Page 2 of 25 PageID #: 232 TABLE OF CONTENTS NATURE AND STAGE OF THE PROCEEDINGS ..................................................................... 1 SUMMARY OF ARGUMENT ...................................................................................................... 2 STATEMENT OF FACTS ............................................................................................................. 3 A. Verition Engages Defendants as an Expert Witness in the AOL Action ............................ 3 B. Verizon Argues that Cornell Should Be Discredited Because of His Alleged Bias ........... 4 C. The Court of Chancery Determines a Share Price Based on a DCF Analysis in Between the Two Prices Advocated by the Opposing Parties’ Experts ............................................ 4 D. The Court of Chancery Explains Why It Utilized a DCF Model ....................................... 4 E. The Court of Chancery Uses Fischel’s DCF Model as a “Starting Point,” But Carefully Weighs Each Party’s Arguments and Each Expert’s Opinions on the Appropriate Inputs and Assumptions to Utilize in the Model ........................................................................... 5 1. The Court of Chancery Adopts the Cash Flow Projections Favored by Verizon/Fischel ............................................................................................................. 6 2. The Court of Chancery Adopts Verition/Cornell’s Arguments for Including a Pending Deal in AOL's Valuation ............................................................................................... 7 3. In Agreement with Verition’s Position, the Court of Chancery Applies a Higher Growth Rate than the Rate Proposed by Verizon/Fischel ............................................ 7 4. The Court of Chancery Agrees with Fischel’s Position that $150 Million in AOL’s Cash Reserves Should Not Be Included in the Valuation Since It Constituted Working Capital ........................................................................................................................... 8 F. Verition Threatens Suit against Defendants, and in Response, Defendants File a Declaratory Action Asserting that Verition’s Claims Are Barred by a Settlement Agreement Between the Parties .......................................................................................... 8 G. Verition Files the Present Action in Delaware ................................................................... 8 ARGUMENT .................................................................................................................................. 9 I. Verition Fails to Allege Facts that Demonstrate that a Plausible Causal Link Exists Between the Alleged Wrongdoing and Verition’s Purported Injury .................................. 9 A. A Plaintiff Must Plead All Necessary Elements Including Proximate Cause in a Manner that Meets the Iqbal and Twombly Standard ................................................. 9 ii Case 1:19-cv-00377-CFC Document 24-1 Filed 03/25/19 Page 3 of 25 PageID #: 233 B. Verition Fails to State a Plausible Theory of Causation Connecting Its Allegations about Defendants’ Credibility Issues with Its Purported Injuries ............................. 10 1. The Court of Chancery’s Opinions Make Clear that Its Reasons for Its Ruling Had Nothing to Do with and Were Not Affected by Any Credibility Concerns Raised By Verizon at Trial ............................................................................................... 11 2. Verition’s Counsel’s Trial Decision to Accept the Fischel DCF Model as a Starting Point Likely Improved the Outcome in Verition’s Favor and In Any Event that Strategy Did Not Harm Verition ......................................................... 13 II. Verition’s Fraudulent Inducement (Count I), Fraudulent Concealment (Count II), and Professional Negligence (Count IV) Fail Because the Alleged Misconduct Underlying Those Claims Is Not Separate and Distinct from the Alleged Misconduct and Damages Sought in Its Breach of Contract Claim (Count III) ......................................................... 15 A. Verition’s Fraudulent Concealment and Professional Negligence Claims are Barred by the Economic Loss Doctrine and Should Be Dismissed ...................................... 15 B. Verition Fails to Allege the Existence of a Misrepresentation Independent of the Contract, So Its Fraud Claims Fail ............................................................................ 16 C. The Complaint’s Alleged Fraud Damages Rehash Verition’s Breach of Contract Damages and Must Therefore Be Dismissed ............................................................ 17 III. Verition’s Professional Negligence Claim (Count IV) Should Be Dismissed Because Delaware Has Not Recognized an Expert Witness Malpractice Cause of Action and Defendants’ Actions Are Protected by the Absolute Litigation Privilege ........................ 18 IV. If the Court Does Not Grant Defendants’ Pending Motions to Stay and to Transfer, Verition’s Claims Should Be Dismissed under the Prior Pending Action Doctrine......... 20 CONCLUSION ............................................................................................................................. 20 iii Case 1:19-cv-00377-CFC Document 24-1 Filed 03/25/19 Page 4 of 25 PageID #: 234 TABLE OF AUTHORITIES Cases AFH Holding Advisory, LLC v. Emmaus Life Sciences, Inc., 2013 WL 2149993 (Del. Super. Ct. May 15, 2013) ........................................................................................................................... 18 Ashcroft v. Iqbal, 556 U.S. 662 (2009) ........................................................................................... 9 Barker v. Huang, 610 A.2d 1341 (Del. 1992) .............................................................................. 19 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ........................................................................... 9 Brasby v. Morris, 2007 WL 949485 (Del. Super. Ct. Mar. 29, 2007) .................................... 15, 16 Connelly v. Lane Const. Corp., 809 F.3d 780 (3d Cir. 2016) ......................................................... 9 Cornell Glasgow, LLC v. La Grange Properties, LLC, 2012 WL 2106945 (Del. Super. Ct. June 6, 2012) ............................................................................................................................... 16, 17 Del. Open MRI Radiology Assocs., P.A. v. Kessler, 898 A.2d 290 (Del. Ch. 2006) ...................... 6 Delaware Art Museum v. Ann Beha Architects, Inc., 2007 WL 2601472 (D. Del. Sept. 11, 2007) ................................................................................................................................................... 15 Dell, Inc. v. Magnetar Glob. Event Driven Master Fund Ltd, 177 A.3d 1 (Del. 2017) ........... 5, 14 DFC Glob. Corp. v. Muirfield