Case 3:19-cv-08059-RS Document 1 Filed 12/10/19 Page 1 of 24
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`BRODSKY & SMITH, LLC
`Evan J. Smith, Esquire (SBN 242352)
`esmith@brodskysmith.com
`Ryan P. Cardona, Esquire (SBN 302113)
`rcardona@brodskysmith.com
`9595 Wilshire Boulevard, Suite 900
`Beverly Hills, CA 90212
`Phone: (877) 534-2590
`Facsimile: (310) 247-0160
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`Attorneys for Plaintiff
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`IN THE UNITED STATES DISTRICT COURT
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`FOR THE NORTHERN DISTRICT OF CALIFORNIA
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`Civil Action No. ______________
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`CLASS ACTION COMPLAINT FOR BREACH
`OF FIDUCIARY DUTIES AND VIOLATIONS
`OF SECTIONS 14(a) AND 20(a) OF THE
`SECURITIES EXCHANGE ACT OF 1934
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`JURY TRIAL DEMANDED
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`DANIEL ESTES, on behalf of himself
`and all others similarly situated,
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` Plaintiff,
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` vs.
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`FITBIT, INC., JAMES PARK, ERIC N.
`FRIEDMAN, LAURA ALBER,
`MATTHEW BROMBER, GLENDA
`FLANAGAN, BRADLEY M. FLUEGEL,
`STEVEN MURRAY and CHRISTOPHER
`PAISLEY,
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`Defendants.
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`Plaintiff, Daniel Estes (“Plaintiff”), by his attorneys, on behalf of himself and those
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`similarly situated, files this action against the defendants, and alleges upon information and belief,
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`except for those allegations that pertain to him, which are alleged upon personal knowledge, as
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`follows:
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`SUMMARY OF THE ACTION
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`Plaintiff brings this stockholder class action on behalf of himself and all other
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`public stockholders of Fitbit, Inc. (“Fitbit” or the “Company”), against Fitbit and the Company’s
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`Board of Directors (the “Board” or the “Individual Defendants,” collectively with the Company,
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`the “Defendants”), for violations of Sections 14(a) and 20(a) of the Securities and Exchange Act
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`Case 3:19-cv-08059-RS Document 1 Filed 12/10/19 Page 2 of 24
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`of 1934 (the “Exchange Act”) and breaches of fiduciary duty as a result of Defendants’ efforts to
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`sell the Company to Google, LLC (“Parent”), and Magnoliophyta, Inc. (“Merger Sub,” collectively
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`with Parent, “Google”) as a result of an unfair process for an unfair price, and to enjoin an
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`upcoming stockholder vote on a proposed all cash transaction valued at approximately $2.1 billion
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`(the “Proposed Transaction”).
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`2.
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`The terms of the Proposed Transaction were memorialized in a November 1, 2019,
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`filing with the Securities and Exchange Commission (“SEC”) on Form 8-K attaching the definitive
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`Agreement and Plan of Merger (the “Merger Agreement”). Under the terms of the Merger
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`Agreement, Fitbit will become an indirect wholly-owned subsidiary of Google, and Fitbit
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`stockholders will receive only $7.35 in cash for each share of Fitbit common stock they own. As
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`a result of the Proposed Transaction, Plaintiff and other Fitbit stockholders will be frozen out of
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`any future ownership interest in the Company.
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`3.
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`In approving the Proposed Transaction, the Individual Defendants have breached
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`their fiduciary duties of loyalty, good faith, due care and disclosure by, inter alia, (i) agreeing to
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`sell Fitbit without first taking steps to ensure that Plaintiff and Class members (defined below)
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`would obtain adequate, fair and maximum consideration under the circumstances; and (ii)
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`engineering the Proposed Transaction to benefit themselves and/or Google without regard for
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`Fitbit public stockholders. Accordingly, this action seeks to enjoin the Proposed Transaction and
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`compel the Individual Defendants to properly exercise their fiduciary duties to Fitbit stockholders.
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`4.
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`Next, it appears as though the Board has entered into the Proposed Transaction to
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`procure for themselves and senior management of the Company significant and immediate benefits
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`with no thought to the Company’s public stockholders. For instance, pursuant to the terms of the
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`Merger Agreement, upon the consummation of the Proposed Transaction, Company Board
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`Members and executive officers will be able to exchange all Company equity awards for the
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`merger consideration.
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`Case 3:19-cv-08059-RS Document 1 Filed 12/10/19 Page 3 of 24
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`5.
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`On November 25, 2019, Fitbit filed a Preliminary Proxy Statement on Schedule
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`14A (the “Preliminary Proxy”) with the United States Securities and Exchange Commission
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`(“SEC”) in support of the Proposed Transaction.
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`6.
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`Defendants breached their fiduciary duties to the Company’s shareholders by
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`agreeing to the Proposed Transaction which undervalues Fitbit and is the result of a flawed sales
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`process. Post-closure, Fitbit shareholders will be frozen out of seeing the return on their
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`investment of any and all future profitability of Fitbit.
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`7.
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`Finally, in violation of sections 14(a) and 20(a) of the Securities and Exchange Act
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`of 1934 (the “Exchange Act”) and their fiduciary duties, Defendants caused to be filed the
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`materially deficient Preliminary Proxy on November 26, 2019 with the SEC in an effort to solicit
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`stockholders to vote their Fitbit shares in favor of the Proposed Transaction. The Preliminary
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`Proxy is materially deficient and deprives Fitibit stockholders of the information they need to make
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`an intelligent, informed and rational decision of whether to tender their shares in favor of the
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`Proposed Transaction. As detailed below, the Preliminary Proxy omits and/or misrepresents
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`material information concerning, among other things: (a) the Company’s financial projections; (b)
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`the sales process of the Company; and (b) the data and inputs underlying the financial valuation
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`analyses that purport to support the fairness opinions provided by the Company’s financial advisor,
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`Qatalyst Partners LLP (“Qatalyst”).
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`8.
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`Absent judicial intervention, the Proposed Transaction will be consummated,
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`resulting in irreparable injury to Plaintiff and the Class. This action seeks to enjoin the Proposed
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`Transaction or, in the event the Proposed Transaction is consummated, to recover damages
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`resulting from violation of the federal securities laws by Defendants.
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`9.
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`Plaintiff is a citizen of New Hampshire and, at all times relevant hereto, has been a
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`PARTIES
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`Fitbit stockholder.
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`10.
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`Defendant Fitbit provides health solutions in the United States and internationally.
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`The company offers a line of devices, including Fitbit Charge 3, Fitbit Surge, Fitbit Blaze, Fitbit
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`Case 3:19-cv-08059-RS Document 1 Filed 12/10/19 Page 4 of 24
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`Charge 2, Alta HR, Alta, Fitbit Ace, Fitbit Flex 2, Fitbit One, and Fitbit Zip activity trackers; Fitbit
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`Ionic and Fitbit Versa smartwatches; Fitbit Aria 2 Wi-Fi smart scales; and a range of accessories,
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`such as bands and frames for its devices, as well as Fitbit Flyer, a wireless headphone designed for
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`fitness. Fitbit is incorporated under the laws of the State of Delaware and has its principal place
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`of business at 405. Howard Street, San Francisco, CA 94015. Shares of Fitbit common stock are
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`traded on the NasdaqGS under the symbol “FIT.”
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`11.
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`Defendant James Park (“Park") has been a Director of the Company at all relevant
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`times. In addition, Park serves as the President, Chairman of the Company Board, and the
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`Company’s Chief Executive Officer (“CEO”).
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`12.
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`Defendant Eric N. Friedman ("Friedman") has been a director of the Company at
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`all relevant times. In addition, Friedman serves as the Company’s Chief Technology Officer
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`(“CTO”).
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`13.
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`Defendant Glenda Flanagan ("Flanagan") has been a director of the Company
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`since 2016.
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`14.
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`Defendant Matthew Bromberg ("Bromberg") has been a director of the Company
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`since 2018.
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`Defendant Laura Alber ("Alber") has been a director of the Company at all relevant
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`times.
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`Defendant Bradley M. Fluegel (“Fluegel”) has been a director of the Company
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`since 2018.
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`17.
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`Defendant Steven Murray (“Murray”) has been a director of the Company at all
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`relevant times.
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`18.
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`Defendant Christopher Paisley (“Paisley”) has been a director of the Company at
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`all relevant times.
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`19.
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`Defendants identified in ¶¶ 11 - 18 are collectively referred to as the “Individual
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`Defendants.”
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`Case 3:19-cv-08059-RS Document 1 Filed 12/10/19 Page 5 of 24
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`20.
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`Non-Defendant Google, a subsidiary of Alphabet, Inc., primarily provides online
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`advertising services internationally. Google includes principal Internet products, such as Ads,
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`Android, Chrome, Commerce, Google Cloud, Google Maps, Google Play, Hardware, Search, and
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`YouTube, as well as technical infrastructure and newer efforts, including Virtual Reality. This
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`segment also offers digital content, enterprise cloud services, and hardware products, as well as
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`other miscellaneous products and services. Parent is a corporation organized under the laws of the
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`State of Delaware and has its principal place of business at 1600 Amphitheatre Parkway, Mountain
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`View, California 94043. Parent common stock is traded on the NasdaqGS under the ticker symbol
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`“GOOGL”.
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`21.
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`Non-Defendant Merger Sub is a wholly owned subsidiary of Parent created to
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`effectuate the Proposed Transaction.
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`JURISDICTION AND VENUE
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`22.
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`This Court has subject matter jurisdiction pursuant to Section 27 of the Exchange
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`Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1331 (federal question jurisdiction) as Plaintiff alleges
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`violations of Sections 14(a) and Section 20(a) of the Exchange Act. This action is not a collusive
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`one to confer jurisdiction on a court of the United States, which it would not otherwise have.
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`23.
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`Personal jurisdiction exists over each defendant either because the defendant
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`conducts business in or maintains operations in this District, or is an individual who is either
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`present in this District for jurisdictional purposes or has sufficient minimum contacts with this
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`District as to render the exercise of jurisdiction over defendant by this Court permissible under
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`traditional notions of fair play and substantial justice.
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`24.
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`Venue is proper in this District pursuant to 28 U.S.C. § 1391, because Fitbit has its
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`principal place of business is located in this District, and each of the Individual Defendants, as
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`Case 3:19-cv-08059-RS Document 1 Filed 12/10/19 Page 6 of 24
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`Company officers or directors, has extensive contacts within this District.
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`CLASS ACTION ALLEGATIONS
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`25.
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`Plaintiff brings this action pursuant to Federal Rule of Civil Procedure 23,
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`individually and on behalf of the stockholders of Fitbit common stock who are being and will be
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`harmed by Defendants’ actions described herein (the “Class”). The Class specifically excludes
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`Defendants herein, and any person, firm, trust, corporation or other entity related to, or affiliated
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`with, any of the Defendants.
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`26.
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`This action is properly maintainable as a class action because:
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`a. The Class is so numerous that joinder of all members is impracticable.
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`According to the Preliminary Proxy, as of November 15, 2018, there were over
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`260 million shares of Fitbit common stock outstanding. The actual number of
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`public stockholders of Fitbit will be ascertained through discovery;
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`b. There are questions of law and fact which are common to the Class, including
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`inter alia, the following:
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`i. Whether Defendants have violated the federal securities laws;
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`ii. Whether Defendants made material misrepresentations and/or omitted
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`material facts in the Preliminary Proxy; and
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`iii. Whether Plaintiff and the other members of the Class have and will
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`continue to suffer irreparable injury if the Proposed Transaction is
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`consummated.
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`c. Plaintiff is an adequate representative of the Class, has retained competent
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`counsel experienced in litigation of this nature and will fairly and adequately
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`protect the interests of the Class;
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`d. Plaintiff’s claims are typical of the claims of the other members of the Class
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`and Plaintiff does not have any interests adverse to the Class;
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`Case 3:19-cv-08059-RS Document 1 Filed 12/10/19 Page 7 of 24
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`e. The prosecution of separate actions by individual members of the Class would
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`create a risk of inconsistent or varying adjudications with respect to individual
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`members of the Class which would establish incompatible standards of conduct
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`for the party opposing the Class;
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`f. Plaintiff anticipates that there will be no difficulty in the management of this
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`litigation and, thus, a class action is superior to other available methods for the
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`fair and efficient adjudication of this controversy; and
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`g. Defendants have acted on grounds generally applicable to the Class with respect
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`to the matters complained of herein, thereby making appropriate the relief
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`sought herein with respect to the Class as a whole.
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`THE INDIVIDUAL DEFENDANTS’ FIDUCAIRY DUTIES
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`By reason of the Individual Defendants’ positions with the Company as officers
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`and/or directors, said individuals are in a fiduciary relationship with Fitbit and owe the Company
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`the duties of due care, loyalty, and good faith.
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`28.
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`By virtue of their positions as directors and/or officers of Fitbit, the Individual
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`Defendants, at all relevant times, had the power to control and influence, and did control and
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`influence and cause Fitbit to engage in the practices complained of herein.
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`29.
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`Each of the Individual Defendants are required to act with due care, loyalty, good
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`faith and in the best interests of the Company. To diligently comply with these duties, directors
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`of a corporation must:
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`a. act with the requisite diligence and due care that is reasonable under the
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`circumstances;
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`b. act in the best interest of the company;
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`c. use reasonable means to obtain material information relating to a given
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`action or decision;
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`d. refrain from acts involving conflicts of interest between the fulfillment
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`of their roles in the company and the fulfillment of any other roles or
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`their personal affairs;
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`e. avoid competing against the company or exploiting any business
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`opportunities of the company for their own benefit, or the benefit of
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`others; and
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`f. disclose to the Company all information and documents relating to the
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`company’s affairs that they received by virtue of their positions in the
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`company.
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`30.
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`In accordance with their duties of loyalty and good faith, the Individual
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`Defendants, as directors and/or officers of Fitbit, are obligated to refrain from:
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`a.
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`participating in any transaction where the directors’ or officers’
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`loyalties are divided;
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`participating in any transaction where the directors or officers are
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`entitled to receive personal financial benefit not equally shared by the
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`Company or its public stockholders; and/or
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`unjustly enriching themselves at the expense or to the detriment of
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`the Company or its stockholders.
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`Plaintiff alleges herein that the Individual Defendants, separately and together, in
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`connection with the Proposed Transaction, violated, and are violating, the fiduciary duties they
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`owe to Fitbit, Plaintiff and the other public stockholders of Fitbit, including their duties of loyalty,
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`good faith, and due care.
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`32.
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`As a result of the Individual Defendants’ divided loyalties, Plaintiff and Class
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`members will not receive adequate, fair or maximum value for their Fitbit common stock in the
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`Proposed Transaction.
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`SUBSTANTIVE ALLEGATIONS
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`Company Background
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`Case 3:19-cv-08059-RS Document 1 Filed 12/10/19 Page 9 of 24
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`33.
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`Fitbit provides health solutions and wearable fitness and health tracking technology
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`in the United States and internationally.
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`The Company’s portfolio comprises of a line of devices, including Fitbit Charge 3,
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`Fitbit Surge, Fitbit Blaze, Fitbit Charge 2, Alta HR, Alta, Fitbit Ace, Fitbit Flex 2, Fitbit One, and
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`Fitbit Zip activity trackers; Fitbit Ionic and Fitbit Versa smartwatches; Fitbit Aria 2 Wi-Fi smart
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`scales; and a range of accessories, such as bands and frames for its devices, as well as Fitbit Flyer,
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`a wireless headphone designed for fitness.
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`Fitbit offers online dashboard and mobile apps that sync automatically with and
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`display real-time data from its wearable devices; Fitbit Coach that offers exercise programs
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`through personal trainer and yoga apps; and Fitbit Care, a connected health platform for health
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`plans, employers, and health systems.
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`The Company sells its products through consumer electronics and specialty, e-
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`commerce, mass merchant, department store, club, and sporting goods and outdoors retailers;
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`wireless carriers; distributor; and Fitbit.com, an online store, as well as directly to consumers.
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`37.
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`The Company’s recent financial performance indicated new memberships and a
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`shift in direction. For example, in a May 1, 2019 press release announcing its Q1 financial results,
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`the Company highlighted revenue up 10% and devices sold over 36% year-over-year. Smartwatch
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`sales increased 117%. Introduction of new trackers helped spark the first quarter of year-over-year
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`growth in tracker device sales in three years. This preceded the Q2 reported revenue increase of
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`5% year-over-year driven by 31% growth in devices sold in the quarter before. Fitbit also launched
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`Fitbit Premium, a paid membership in the Fitbit app that uses consumer’s unique data to deliver
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`personalized, actionable guidance which expects to generate more growth.
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`Case 3:19-cv-08059-RS Document 1 Filed 12/10/19 Page 10 of 24
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`38.
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`In addition, Fitbit announced two major disease detection partnerships, Fibricheck
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`and Bristol-Meyers Squibb Pfizer Alliance, to target chronic condition areas and raise awareness
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`and support from screening to diagnosis for heart rhythm irregularities and atrial fibrillation. They
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`will be expanding to 59 Medicare Advantage plans in 2020 as a fully covered benefit from 42
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`plans.
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`39.
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`Speaking on these positive results, CEO Defendant Park stated, “In Q3 we
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`continued to make good progress shifting our business towards the faster growing smartwatch
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`category with the introduction of Versa 2, expanding Fitbit Health Solutions, and deepening our
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`relationship with consumers with the launch of Premium. The continued success of the Fitbit brand
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`is built on the trust of our users, and our commitment to strong user privacy and security will not
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`change.”
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`40.
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`These positive results are not an anomaly, but rather, are indicative of a trend of
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`continued financial progression by Fitbit. Clearly, based upon the positive outlook and increases
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`in revenue, the Company is likely to have tremendous future success and should command a much
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`higher consideration than the amount contained within the Proposed Transaction.
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`41.
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`Despite this upward trajectory and increasing financial results, the Individual
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`Defendants have caused Fitbit to enter into the Proposed Transaction for insufficient consideration.
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`The Proposed Transaction
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`42.
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`On November 1, 2019, Google and Fitbit issued a press release announcing the
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`Proposed Transaction. The press release stated, in relevant part:
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`SAN FRANCISCO--(BUSINESS WIRE) -- Fitbit, Inc. (NYSE: FIT) today
`announced that it has entered into a definitive agreement to be acquired by Google
`LLC for $7.35 per share in cash, valuing the company at a fully diluted equity value
`of approximately $2.1 billion.
`
`“More than 12 years ago, we set an audacious company vision – to make everyone in
`the world healthier. Today, I’m incredibly proud of what we’ve achieved towards
`reaching that goal. We have built a trusted brand that supports more than 28 million
`active users around the globe who rely on our products to live a healthier, more active
`life,” said James Park, co-founder and CEO of Fitbit. “Google is an ideal partner to
`advance our mission. With Google’s resources and global platform, Fitbit will be able
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`CLASS ACTION COMPLAINT
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`

`

`Case 3:19-cv-08059-RS Document 1 Filed 12/10/19 Page 11 of 24
`
`
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`to accelerate innovation in the wearables category, scale faster, and make health even
`more accessible to everyone. I could not be more excited for what lies ahead.”
`
`"Fitbit has been a true pioneer in the industry and has created terrific products,
`experiences and a vibrant community of users," said Rick Osterloh, Senior Vice
`President, Devices & Services at Google. "We're looking forward to working with
`the incredible talent at Fitbit, and bringing together the best hardware, software and
`AI, to build wearables to help even more people around the world."
`
`Fitbit pioneered the wearables category by delivering innovative, affordable and
`engaging devices and services. Being “on Fitbit” is not just about the device – it is an
`immersive experience from the wrist to the app, designed to help users understand
`and change their behavior to improve their health. Because of this unique approach,
`Fitbit has sold more than 100 million devices and supports an engaged global
`community of millions of active users, utilizing data to deliver unique personalized
`guidance and coaching to its users. Fitbit will continue to remain platform-agnostic
`across both Android and iOS.
`
`Consumer trust is paramount to Fitbit. Strong privacy and security guidelines have
`been part of Fitbit’s DNA since day one, and this will not change. Fitbit will continue
`to put users in control of their data and will remain transparent about the data it
`collects and why. The company never sells personal information, and Fitbit health
`and wellness data will not be used for Google ads.
`
`The transaction is expected to close in 2020, subject to customary closing conditions,
`including approval by Fitbit’s stockholders and regulatory approvals.
`
`Qatalyst Partners LLP acted as financial advisor to Fitbit, and Fenwick & West LLP
`acted as legal advisor.
`
`The Inadequate Merger Consideration
`
`43.
`
`Significantly, the Company’s financial prospects, opportunities for future growth,
`
`and synergies with Google establish the inadequacy of the merger consideration.
`
`44.
`
`First, the compensation afforded under the Proposed Transaction to Company
`
`stockholders significantly undervalues the Company. The proposed valuation does not adequately
`
`reflect the intrinsic value of the Company. Moreover, the valuation does not adequately take into
`
`consideration how the Company is performing, considering key financial improvements of the
`
`Company in recent years.
`
`45.
`
`The transaction may undervalue the Company and would result in a substantial loss
`
`for many Fitbit shareholders. For example, the consideration is 63 percent below the 2015 IPO
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`CLASS ACTION COMPLAINT
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`Case 3:19-cv-08059-RS Document 1 Filed 12/10/19 Page 12 of 24
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`price of $20, well-below the all-time high near $50 per share and provides virtually no premium
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`2
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`over the share price as recently as February 2019. Since August 1 and months before the Merger
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`3
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`announcement, Fitbit stock has turned around, growing exponentially from around $3 per share to
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`its highest point since June 2018 to over $7 per share.
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`46. Moreover, the Proposed Transaction represents a significant synergistic benefit to
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`Google, particularly in the healthcare arena. In a Forbes article discussing the synergies, the author
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`7
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`noted that Google will “use its ability to aggregate and analyze millions of points of data daily
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`from Fitbit’s 28 million users” to swiftly move into the growing tech healthcare field. The article
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`further noted, that Google’s 2.6 million users on its comparable product to Fitbit’s offering was
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`“not enough to become a game changer in driving health recommendations and interventions…
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`which they could not get there as quickly without Fitbit.” Lastly, Google’s Rick Osterloh, senior
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`vice president of Devices and Services said “over the years, Google has made progress with
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`partners in this space with Wear OS and Google Fit, but we see an opportunity to invest even more
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`in Wear OS as well as introduce Made by Google wearable devices into the market.”
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`47.
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`As a result, Google’s ability to analyze data of Fitbit’s active users supplying data
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`every day, in addition to Fitbit’s recent investments into disease and irregularity detection as
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`17
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`mentioned above, exemplify the significant synergistic benefits to Google and further raise the
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`stakes as to why Google did not pay more for the Company. Clearly, while the deal will be
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`beneficial to Google it comes at great expense to Plaintiff and other public stockholders of the
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`Company.
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`48. Moreover, post-closure, Fitbit stockholders will be frozen out of any ownership
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`interest in the Company, forever foreclosing the ability to see the true return on their investments.
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`49.
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`It is clear from these statements and the facts set forth herein that this deal is
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`designed to maximize benefits for Google at the expense of Fitbit stockholders, which clearly
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`indicates that Fitbit stockholders were not an overriding concern in the formation of the Proposed
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`Transaction.
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`CLASS ACTION COMPLAINT
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`

`

`Case 3:19-cv-08059-RS Document 1 Filed 12/10/19 Page 13 of 24
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`Preclusive Deal Mechanisms
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`50.
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`The Merger Agreement contains certain provisions that unduly benefit Google by
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`3
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`making an alternative transaction either prohibitively expensive or otherwise impossible.
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`4
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`Significantly, the Merger Agreement contains a termination fee provision that is especially onerous
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`5
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`and impermissible. Notably, in the event of termination, the merger agreement requires Fitbit to
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`pay up to $80,000,000 to Google, if the Merger Agreement is terminated under certain
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`circumstances. Moreover, under one circumstance, Fitbit must pay this termination fee even if it
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`consummates any competing Acquisition Proposal (as defined in the Merger Agreement) within
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`12 months following the termination of the Merger Agreement. The termination fee will make the
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`Company that much more expensive to acquire for potential purchasers. The termination fee in
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`combination with other preclusive deal protection devices will all but ensure that no competing
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`offer will be forthcoming.
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`51.
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`The Merger Agreement also contains a “No Solicitation” provision that restricts
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`Fitbit from considering alternative acquisition proposals by, inter alia, constraining Fitbit’s ability
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`to solicit or communicate with potential acquirers or consider their proposals. Specifically, the
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`provision prohibits the Company from directly or indirectly soliciting, initiating, proposing or
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`17
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`inducing any alternative proposal, but permits the Board to consider an unsolicited bona fide
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`“Acquisition Proposal” if it constitutes or is reasonably calculated to lead to a “Superior
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`Proposal” as defined in the Merger Agreement.
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`52. Moreover, the Merger Agreement further reduces the possibility of a topping offer
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`from an unsolicited purchaser. Here, the Individual Defendants agreed to provide Google
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`information in order to match any other offer, thus providing Google access to the unsolicited
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`bidder’s financial information and giving Google the ability to top the superior offer. Thus, a rival
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`bidder is not likely to emerge with the cards stacked so much in favor of Google.
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`53.
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`These provisions, individually and collectively, materially and improperly impede
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`the Board’s ability to fulfill its fiduciary duties with respect to fully and fairly investigating and
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`CLASS ACTION COMPLAINT
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`

`

`Case 3:19-cv-08059-RS Document 1 Filed 12/10/19 Page 14 of 24
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`
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`pursuing other reasonable and more valuable proposals and alternatives in the best interests of the
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`2
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`Company and its public stockholders.
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`3
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`54.
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`Accordingly, the Company’s true value is compromised by the consideration
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`4
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`offered in the Proposed Transaction.
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`Potential Conflicts of Interest
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`55.
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`The breakdown of the benefits of the deal indicate that Fitbit insiders are the
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`primary beneficiaries of the Proposed Transaction, not the Company’s public stockholders. The
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`Board and the Company’s executive officers are conflicted because they will have secured unique
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`benefits for themselves from the Proposed Transaction not available to Plaintiff and the public
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`stockholders of Fitbit.
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`56.
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`Certain insiders stand to receive massive financial benefits as a result of the
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`12
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`Proposed Transaction. Notably, Company insiders, including the Individual Defendants, currently
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`13
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`own large, illiquid portions of Company stock that will be exchanged for large cash pay days upon
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`14
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`the consummation of the Proposed Transaction.
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`57.
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`Furthermore, upon the consummation of the Proposed Transaction, each
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`outstanding Company option or equity award, will be canceled and converted into the right to
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`17
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`receive certain consideration according to the merger agreement.
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`58. Moreover, certain employment agreements with certain Fitbit executives, entitle
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`such executives to severance packages should their employment be terminated under certain
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`circumstances. These ‘golden parachute’ packages are significant, and will grant each director or
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`officer entitled to them millions of dollars, compensation not shared by Fitbit’s common
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`stockholders.
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`59.
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`These payouts will be paid to Fitbit insiders, as a consequence of the Proposed
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`Transaction’s consummation, as follows:
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`
`- 14 -
`CLASS ACTION COMPLAINT
`
`

`

`Case 3:19-cv-08059-RS Document 1 Filed 12/10/19 Page 15 of 24
`
`
`
`Named Executive Officer
`
`James Park(4)
`
`Eric Friedman(4)
`
`Ronald Kisling
`
`Andy Missan
`
`Jeff Devine
`
`
` Cash($)(1)
`
`
`
`Equity
`Awards($)(2)
`
`Heath
`Insurance
`Premiums($)(3) Total($)
`
`
`
` 3,000,000
`
`8,348,513
`
`14,937 11,363,450
`
`
`
`
`
`
`
`
`
`796,250
`
`3,875,537
`
`29,430 4,701,217
`
`739,846
`
`2,219,825
`
`9,958 2,969,629
`
`780,362
`
`1,567,762
`
`30,016 2,378,140
`
`704,615
`
`1,333,724
`
`29,903 2,068,242
`
`60.
`
`Thus, while the Proposed Transaction is not in the best interests of Fitbit
`
`stockholders, it will produce lucrative benefits for the Company’s officers and directors.
`
`The Materially Misleading and/or Incomplete Preliminary Proxy
`
`61.
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`On November 26, 2019, the Board and Fitbit caused to be filed with the SEC a
`
`materially misleading and incomplete Preliminary Proxy that, in violation their fiduciary duties,
`
`failed to provide the Company’s stockholders with material information and/or provides them with
`
`materially misleading information critical to the total mix of inform