Litigation Victory for Cambridge Information Group

Fried Frank has obtained a significant victory on behalf of clients Cambridge Information Group (CIG), its CEO Andrew Snyder, and another former executive.

On October 25, 2018, the Delaware Court of Chancery granted our motion to dismiss a derivative complaint against our clients and others brought by a stockholder of Blucora, Inc., a company in which CIG held a substantial historical investment and for which Mr. Snyder served on the board of directors. The plaintiff challenged a number of corporate transactions as a breach of fiduciary duty, and also alleged that CIG and Mr. Snyder engaged in insider trading in Blucora’s stock in late 2013 and early 2014 based on nonpublic information supposedly indicating that Blucora’s August 2013 acquisition of another company would be unsuccessful and lead to considerable losses and an eventual write-down. Furthermore, the complaint alleged that Mr. Snyder and the other members of the Blucora board failed to exercise their duties of oversight in connection with several transactions, including supposedly ignoring “red flag” warnings about one of the transactions.

In granting the motion to dismiss, the court adopted in full many of our arguments attacking the plaintiff’s claims. In particular, it agreed that the claims are derivative in nature and that demand on the current directors of the company is not excused because the board has turned over since the events in dispute, and the current board is disinterested. But the court did not stop there, and went on to agree with us that the plaintiff had not identified any actual non-public information our clients possessed regarding the post-acquisition performance of Blucora (the trades occurred in a permitted window following public disclosure of financial results). The court also agreed that the plaintiff had merely assumed, but pled no facts to support the allegations, that our clients were actually motivated by any inside information when engaging in the challenged stock sales. Finally, the court also dismissed the plaintiff’s claim that Mr. Snyder breached his fiduciary duties to the company in approving the challenged corporate transactions, ruling that the plaintiff had not plead sufficient facts to suggest that the Blucora board acted in bad faith.

This was the third time these claims were tossed: on the prior two occasions, the claims were brought in improper locations (the state courts of Washington and California), in violation of Blucora’s forum selection bylaw. This time, the dismissal was on the merits and with prejudice.

The Fried Frank team was led by litigation partner Peter L. Simmons (Picture) and included litigation associate Michael P. Sternheim.

Involved fees earner: Peter Simmons – Fried Frank Harris Shriver & Jacobson; Michael Sternheim – Fried Frank Harris Shriver & Jacobson;

Law Firms: Fried Frank Harris Shriver & Jacobson;

Clients: Cambridge Information Group, Inc.;

Author: Ambrogio Visconti