Diem-II, LLC, Diem-III, LLC, and Diem-VIII, LLC v. Maisonette Inc., New Enterprise Associates 15, L.P., Sylvana Durrett, Luisa Mendoza, Anthony Florence, Marissa Mayer, Pierre Poignant, and Myra Cortado

Summary

The Delaware Court of Chancery resolves motions to dismiss claims arising from plaintiffs’ investments in Maisonette Inc. Plaintiffs allege fraud, breach of contract, fiduciary-duty violations, aiding and abetting, securities-law violations, conversion, and unjust enrichment based on alleged inaccuracies in financial information and representations concerning litigation and key employees. The court largely denies the motions to dismiss, including defendants’ argument that a contractual release waived unknown fraud claims.

Holdings

1. The Series C SPA's release did not unambiguously waive unknown fraud claims arising from the convertible note because it did not expressly release unknown claims or otherwise show a voluntary and intentional relinquishment of a known right to pursue them.
2. The complaint adequately stated fraud claims against Maisonette, the Director Defendants, and Cortado based on allegedly false historical financial information, and against Maisonette and the Director Defendants based on the allegedly false absence-of-litigation representations. The claim based on Mendoza's status as a key employee was not adequately pleaded, and the fraud claim was therefore granted in part and denied in part.
3. The complaint stated breach-of-contract claims against Maisonette based at least on the allegedly false absence-of-litigation representations in the Series C and Series D SPAs.
4. The complaint stated a non-duplicative claim against the Director Defendants for breach of the fiduciary duty of disclosure based on approving the allegedly false absence-of-litigation representation while seeking stockholder action.
5. To the extent the common-law fraud claim survived, the FSIPA claim also survived against the Director Defendants, Cortado, and Maisonette.
6. The complaint stated a civil-conspiracy claim against NEA 15 and the other defendants because it plausibly alleged a confederation or common design to induce Plaintiffs to invest through fraudulent statements.
7. The complaint stated an aiding-and-abetting claim against NEA 15 because it plausibly alleged that NEA 15, through Florence, knowingly and substantially participated in the Director Defendants' disclosure breach.
8. The equitable-fraud claim survived against Maisonette and the Director Defendants only insofar as it was based on the Series D SPA, when the Director Defendants stood in a fiduciary relationship to Plaintiffs. The claim was dismissed as to the Note and Series C SPA and as to NEA 15.
9. The complaint failed to state a conversion claim against Maisonette based on the automatic conversion of rights under the note.
10. The complaint stated an alternative unjust-enrichment claim against all defendants at the pleading stage.

Questions Presented

1. Whether the complaint adequately pleaded fraud and fraudulent inducement based on allegedly misstated financial information, undisclosed litigation involving a director, and a representation concerning a key employee.
2. Whether a release in the Series C SPA waived unknown fraud claims arising from the convertible note.
3. Whether the complaint adequately pleaded breach of the Series C and Series D SPAs.
4. Whether the Director Defendants could be liable for breach of the fiduciary duty of disclosure based on the allegedly false absence-of-litigation representation made in connection with a request for stockholder action.
5. Whether the complaint adequately pleaded civil conspiracy to commit fraud against NEA 15 and the other defendants.
6. Whether the complaint adequately pleaded aiding and abetting breach of fiduciary duty against NEA 15.
7. Whether the complaint stated an equitable-fraud claim and, if so, against which defendants and financing transactions.
8. Whether the complaint stated a conversion claim based on the automatic conversion of rights under the note.
9. Whether Plaintiffs could plead unjust enrichment in the alternative to breach-of-contract and fraud theories.

Disposition

other