In the decision OrbiMed Advisors LLC v. Symbiomix Therapeutics, LLC, et al., C.A. No. 2023-0769-MTZ, 2024 WL 747567 (Del. Ch. Feb. 23, 2024), the Delaware Court of Chancery considered an advancement dispute. The Court determined that the defendant was obligated to provide advancement under indemnification agreements between the plaintiffs and a company that defendant first acquired, then cancelled.
Background
Symbiomix Therapeutics, LLC was founded by John Gregg, seeking financing with legal assistance from Cooley LLP. OrbiMed Advisors, LLC invested in Symbiomix, obtaining rights to designate board members and terminate Gregg without cause. Rishi Gupta and Klaus Veitinger were appointed to the board, with Veitinger serving as CEO.
Gupta and Veitinger entered into indemnification agreements (IAs) with Symbiomix, offering broad advancement rights to cover expenses incurred in connection with their roles. OrbiMed was also included as a third-party beneficiary.
Lupin, Inc. then purchased all of Symbiomix's equity through an Omnibus Acquisition Agreement (OAA), acquiring its assets and assuming indemnification obligations for managers and officers.
Gregg filed a claim against Cooley, alleging misconduct in the financing and sale of Symbiomix. He also served subpoenas, including demands for documents related to OrbiMed.
Lupin dissolved Symbiomix and acquired its assets, including its obligations under the IAs.
Gupta and Veitinger demanded advancement from Lupin and Symbiomix for expenses related to the New Jersey Action. Lupin initially disputed the request but eventually agreed to advance expenses.
Vice Chancellor Zurn ruled in favor of the plaintiffs on their claims for breach of the IAs and fees on fees. The Court determined that the IAs' advancement rights continued despite changes in board membership and that Lupin assumed Symbiomix's obligations under the IAs. The Court also clarified that Lupin's obligations under the OAA were additional to, not a replacement for, the IAs' rights.
The Court directed the parties to stipulate to procedures for resolving disputes regarding payments already made, interest calculations, and fees on fees for alternative counts. It ordered judgment in favor of the plaintiffs on their claims and Lupin's counterclaim.
Key Takeaway
This decision is important as it demonstrates that advancement obligations of a cancelled company can still be enforceable if such obligations are assumed by a successor entity. Separately, this decision illustrates the Court's proclivity to grant "fees on fees" in connection with advancement demands, because without such an award, as explained by the Court, "indemnification would be incomplete." Slip op., p. 33.
Originally published March 30, 2024
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