Transeo S.A.R.L. v. Bessemer Venture Partners VI L.P.

936 F.Supp.2d 376

TRANSEO S.A.R.L. and Philippe Gelblat, Individually and Derivatively on Behalf of Nominal Defendant, Neutral Holdings, Inc., Plaintiffs,

v. BESSEMER VENTURE PARTNERS VI L.P., Bessemer Venture Partners VI Institutional L.P., Bessemer Venture Partners Co–Investment L.P., Deer VI & Co. LLC, Jeremy Levine, Jeffrey Erwin, and Peter Price, Defendants,andNeutral Holdings, Inc., Nominal Defendant.

No. 11–CV–5331.

United States District Court, S.D. New York.

March 29, 2013.

David Jacoby, Schiff Hardin LLP, New York, NY, for Plaintiffs.

Michael B. Carlinsky, Hilary R. Ormond, Quinn Emanuel Urquhart & Sullivan, LLP, New York, NY, for Defendants.

OPINION AND ORDER

SEIBEL, District Judge.

Before the Court is Defendants' Motion to Dismiss Plaintiff's Second Amended Verified Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). (Doc. 26.) For the following reasons, Defendants' Motion is GRANTED IN PART and DENIED IN PART.

I. Background

For the purposes of the present Motion, the Court accepts as true the facts (but not the conclusions) stated in Plaintiffs' Second Amended Verified Complaint (“SAC”), (Doc. 17).

A. Factual Background

1. The Parties

Plaintiff Transeo S.A.R.L. (“Transeo”) is a French limited liability company with its principal place of business in Paris, France. (SAC ¶ 8.) Laurent Marteau owns Transeo, which acts as a holding company for shares of stock in Nominal Defendant Neutral Holdings, Inc. (“NHI”). ( Id. ¶¶ 2, 18.) NHI is a Delaware corporation formed in 2007 when Bessemer Venture Partners (“BVP”), a venture capital firm, through Defendants Bessemer Venture Partners VI L.P., Bessemer Venture Partners VI Institutional L.P., and Bessemer Venture Partners Co–Investment L.P., all Delaware limited partnerships (collectively, “Bessemer”), acquired a controlling interest in Intego S.A., a French corporation, and its wholly-owned subsidiary, Intego, Inc., a Florida corporation (collectively, “Intego”). ( Id. ¶¶ 2, 5, 15–17.) NHI is the holding company for Intego shares. ( Id. ¶ 18.) Marteau was the President and Chief Executive Officer (“CEO”) of NHI and CEO of Intego. ( Id. ¶ 22.)

Intego is a software company founded by Marteau in 1997 that specializes in security software solutions for Apple, Inc. computers and devices. ( Id. ¶ 16.) In June 2007, through a stock purchase agreement (“SPA”), Bessemer acquired a controlling interest in Intego. ( Id. ¶ 17.) Today, Bessemer owns slightly less than 85% of NHI's outstanding shares; Transeo owns slightly less than 15%; and Plaintiff Philippe Gelblat and John Goldsmith, who is not a party to this action, each own less than 1%. ( Id. ¶¶ 18, 29, 32.) At all times, Bessemer was the majority shareholder of NHI. ( Id. ¶ 27.)

Gelblat is a French citizen residing in Switzerland and was a director of NHI until February 2011. ( Id. ¶¶ 9, 80.) Defendant Deer VI & Co. LLC (“Deer”) is a Delaware limited liability company that is the general partner of each of the Bessemer limited partnerships. ( Id. ¶¶ 5, 11, 231–32.) Defendant Jeremy Levine is a partner at BVP and a director of NHI and Intego. ( Id. ¶ 12.) Defendant Jeffrey Erwin is the President, CEO, and a director of NHI and Intego. ( Id. ¶ 13.) Defendant Peter Price is the Secretary and Chief Financial Officer (“CFO”) of NHI. ( Id. ¶ 14.)

2. The NHI Stockholders' Agreement

At the same time that the SPA was executed in June 2007, Bessemer, Transeo, Gelblat, and NHI entered into the Stockholders' Agreement (“SA”). ( Id. ¶ 19; id. Ex. 1.) Pursuant to the SA, NHI's Board of Directors (“BOD”) could consist of five individuals—one nominated by Transeo at its sole discretion; two nominated by Bessemer at its sole discretion; and two nominated by Bessemer subject to the approval of the other members of the BOD. ( Id. ¶ 30; id. Ex. 1 § 7.1.) Although the SA allowed five directors, NHI had only four directors at all relevant times. ( Id. ¶ 78.) From its initiation until February 2011, the BOD consisted of Marteau (appointed solely by Transeo); Gelblat and Levine (appointed solely by Bessemer); and Goldsmith (appointed by Bessemer and approved by the other members of the BOD). ( Id. ¶¶ 74, 80.) In February 2011, Erwin took Gelblat's position following his removal. ( Id. ¶¶ 80–81.)

The SA also contains provisions on share redemptions and the sale of NHI. Section 5.1(a) states:

At any time, and from time to time (but subject to Section 5.1(b) below), after June 7, 2012, each Major Stockholder ¹ (the “Redeeming Holders”) shall be entitled by written request ... to require that any or all of the Shares held by such Redeeming Holder be redeemed.

( Id. Ex. 1 § 5.1(a) (emphasis omitted).) The following section states:

Subject to Laurent Marteau being the Chief Executive Officer of the Company, on or after June 7, 2012 Transeo shall be entitled to request that the Company appoint an investment bank to conduct a sale of the Company.

( Id. Ex. 1 § 5.1(b).)

3. The Proposed Loan

Bessemer approached Silicon Valley Bank without informing the NHI BOD to secure a term sheet for an $8,000,000 loan—formalized in November 2010—to finance a cash dividend payment to NHI shareholders, which allegedly was structured to give a disproportionate tax benefit to Bessemer. ( Id. ¶¶ 34–35, 40.) Both Marteau and Gelblat opposed the proposed loan, which Bessemer eventually agreed not to pursue, apparently after lengthy discussions with Marteau. ( Id. ¶¶ 42–43, 46.)

4. The Promissory Note Dividend

On December 28, 2010, NHI paid a dividend in the form of a promissory note to its stockholders, which allegedly was structured so that Bessemer did not have to report the proceeds as taxable income in the United States. ( Id. ¶¶ 46–48.)

5. Relocation of Intego Assets

Plaintiffs allege that following the dividend dispute, Bessemer relocated most of Intego's assets—its computer web services and associated intellectual property, including source code—from Intego's headquarters in Paris to the United States, apparently in an effort to exercise “tighter control” of Intego's assets and to use “NHI's assets and cash” for Bessemer's benefit. ( Id. ¶¶ 50, 57, 63.) Plaintiffs allege that the relocation disrupted Intego's services; compromised the security of Intego's clients; damaged Intego's reputation; facilitated the hacking of Intego's website; and potentially violated European data privacy laws. ( Id. ¶¶ 60–61, 65.)

6. The AVG Offer & Gelblat's Removal from the NHI BOD

Beginning in June 2009, AVG Technologies N.V. and its affiliates (collectively, “AVG”), a Dutch internet software security company, approached NHI about a possible sale, and AVG expressed renewed interest in early 2011. ( Id. ¶¶ 67, 69.) On February 24, 2011, Levine wrote an email in which he stated that the NHI BOD expected to “receive an M & A offer from AVG [that] week,” and it would be important to respond to AVG quickly “to keep the deal alive and warm.” ( Id. ¶ 96.) Goldsmith also wrote an email dated February 26, 2011 acknowledging that the NHI BOD “must meet and deliberate” to satisfy its duty “to do what is in the best interest of the company.” ( Id. ¶ 97.)

AVG memorialized its offer in a February 28, 2011 letter, which annexed a non-binding letter of intent valid until March 2, 2011. ( Id. ¶ 69; Ormond Decl. Ex. B.) ² AVG offered to acquire NHI for $25 million on a “cash free” basis, which meant that NHI's cash on hand would be distributed pro rata to shareholders. (SAC ¶ 70.) Levine had indicated earlier in February 2011, before receiving the AVG offer letter, that Bessemer would regard as “compelling” an offer to acquire NHI for $20 million, or possibly as low as $17 million. ( Id. ¶ 66.) Approximately $10 million of the $25 million AVG offer was tied to various contingencies, including “the retention of key employees,” which Plaintiffs allege refers to Marteau remaining active with NHI and Intego. ( Id. ¶¶ 71–72; Ormond Decl. Ex. B, at 2.)

Half of the NHI BOD—Marteau and Gelblat—favored pursuing the AVG offer, and Plaintiffs allege that Bessemer removed Gelblat from the NHI BOD on February 24, 2011 because of his stance vis-à-vis the offer. (SAC ¶¶ 79–80.) Erwin—who was not a BVP employee but allegedly had an “extensive and long-standing” relationship with the venture capital firm—filled Gelblat's position on the NHI BOD. ( Id. ¶ 81.)

7. Marteau's Termination from NHI and Intego

At a BOD meeting on March 1, 2011, which was purportedly scheduled to examine the AVG offer, the NHI BOD ratified the terminations of Marteau as President and CEO of NHI and of Transeo's consulting and management services contract with NHI. ( Id. ¶¶ 86, 98.) There were no deliberations at the meeting related to these terminations—which were allegedly not based on dissatisfaction with Marteau's or Transeo's performance or any other valid business reason, and instead occurred on Bessemer's orders—and Erwin replaced Marteau as NHI's President and CEO. ( Id. ¶¶ 87–88, 99.) A few days after the March 1 meeting, Marteau was terminated as an officer and director of Intego, which is the subject of a pending lawsuit in France. ( Id. ¶¶ 113–14.)

8. Refusal to Consider the AVG Offer

Following Marteau's termination as NHI's President and CEO at the March 1 meeting, Marteau volunteered to be a member of a committee to continue discussions with AVG and advised the BOD that it should conduct the appropriate analysis to determine the strength of the offer, but Erwin moved to take sole control of talks with AVG—a motion supported by the other NHI BOD members. ( Id. ¶¶ 94, 102–04, 120.) Subsequently, neither Erwin nor the other Bessemer-affiliated NHI directors took steps to analyze the AVG offer, such as procuring an outside analysis by an investment bank, conducting a valuation of NHI, considering a counter-offer, or anything beyond the cursory discussions at the March 1 meeting. ( Id. ¶¶ 109, 118–19.) The AVG offer expired on its own terms on March 2, 2011, and it has not been pursued by either NHI or AVG...