`
`D1 JASPER HOLDINGS LP, D1 SPV JL
`MASTER LP, JAY BLOCKER LTD., JAY
`DOMESTIC LLC, GCCU II LLC, TOCU XX
`LLC, OC II FIE VIII LP, JL SPV HOLDINGS,
`LLC, EMS J-INV LLC, DISRUPTIVE
`TECHNOLOGY SOLUTIONS XIV, LLC,
`DISRUPTIVE TECHNOLOGY SOLUTIONS
`XVI, LLC–SERIES A, DISRUPTIVE
`TECHNOLOGY SOLUTIONS XVI, LLC–
`SERIES B, and DISRUPTIVE TECHNOLOGY
`SOLUTIONS XVI, LLC–SERIES C,
`Plaintiffs,
`
`v.
`JUUL LABS, INC. and JL TAO LLC,
`Defendants.
`
`C.A. No. 2023-1060-NAC
`PUBLIC VERSION FILED:
`May 7, 2024
`
`PLAINTIFFS’ MOTION TO SUPPLEMENT THE RECORD
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`1.
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`Plaintiffs, by and
`
`through
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`their undersigned counsel, hereby
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`respectfully move for an order to supplement the record with the following discrete
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`set of documents, comprising two documents provided to Plaintiffs following trial
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`and related correspondence:
`
`•
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`a document produced on March 20, 2024 by Jefferies Group LLC, an
`advisor to JUUL Labs, Inc. in connection with its fundraising efforts
`(Exhibit A, JX-1231);
`
`• JUUL’s audited Consolidated Financial Statements for the years ending
`December 31, 2022 and December 31, 2023 (Exhibit B, JX-1228, the
`“Financial Statements”), in which JUUL makes representations that are
`
`EFiled: May 07 2024 04:32PM EDT
`Transaction ID 72927000
`Case No. 2023-1060-NAC
`
`
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`either false and misleading, or demonstrate a violation of this Court’s
`orders enjoining JUUL from effecting a conversion of Plaintiffs’ Notes;
`and
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`• the parties’ correspondence in connection with the Financial Statements
`(Exhibits C (JX-1229) and D (JX-1230)).1
`Plaintiffs subpoenaed several third parties in connection with their
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`2.
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`discovery efforts, including Jefferies. Jefferies produced over 3,000 documents in
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`advance of trial. On March 20, six days following trial, and without any advance
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`notice to Plaintiffs that its document productions in response to Plaintiffs’ subpoena
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`were not completed before trial, Jefferies produced over 400 documents.
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`3.
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`Plaintiffs respectfully request to supplement the record with one
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`document from Jefferies’s post-trial production, which further underscores the
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`disingenuous positions that Defendants have taken in this litigation. Exhibit A is a
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`set of Jefferies notes from a September 25, 2023 call with JUUL’s CFO Vittal
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`Kadapakkam and the private equity investor ArmaVir Partners LLC. The notes
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`record several questions posed during the call, as well as Kadapakkam’s responses.
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`Of particular relevance, in response to questions about JUUL’s term loan, the notes
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`reflect that Kadapakkam responded that the term loan is “owned by Nick and Riaz
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`and they have good ability to negotiate.” Ex. A at 1. Further, in response to the
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`1 Unless otherwise defined herein, capitalized terms have the meanings set forth in
`Plaintiffs’ Opening Post-Trial Brief.
`
`2
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`
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`
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`
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`question “Is $1.227bn” [referring to the Insider Financing] “all Nick and Riaz?”
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`Kadapakkam responded: “Mostly along with a few others with minimal
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`contribution.” Id.
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`4.
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`Exhibit A makes clear, yet again, that JUUL’s attempts to distance
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`Pritzker from the Insider Financing are a fiction created specifically for the purposes
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`of this litigation, and divorced from the reality of his extensive substantive
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`involvement, as recognized by all parties involved, including the other Insiders;
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`Pritzker and Valani’s lawyers; JUUL’s advisors; and JUUL itself.
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`5.
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`Additionally, on April 2, 2024, JUUL uploaded the Financial
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`Statements to its virtual data room for review by actual and potential investors. As
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`discussed in Plaintiffs’ Opening Post-Trial Brief, the Financial Statements falsely
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`state—in contravention of this Court’s injunction orders—that (i) the Notes have
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`already been converted into millions of shares of JUUL Class A common stock and
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`(ii) an “adverse court decision could potentially require the Company to reinstate
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`the Notes”:
`
`Pursuant to the 2019 Note Agreement and 2020 Note Agreement, the
`Notes were automatically converted into equity on October 27, 2023,
`upon the closing of a Qualified Private Financing. The Notes were
`converted into 107.8 million shares of Class A common stock. On
`October 19, 2023, certain noteholders commenced legal proceedings in
`Delaware Chancery Court disputing that the transaction that closed on
`October 27, 2023 is a Qualified Financing capable of resulting in
`automatic conversion of the Notes. At the time of the issuance of the
`financial statements, the dispute is still pending. An adverse court
`3
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`decision could potentially require the Company to reinstate the Notes
`at an estimated carrying amount of approximately $610.0 million
`inclusive of accreted interest as of December 31, 2023. Based on the
`status of the dispute at the time of the issuance of the financial
`statements, the Company’s legal counsel believes a decision in the
`Company’s favor is more likely than not.
`
`Ex. B at 30 (emphases added). JUUL likewise assigned a carrying value of $0 to the
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`Notes in its Financial Statements. See id. at 28, 30.
`
`6.
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`On April 8, Plaintiffs sent a letter to JUUL outlining their concerns that
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`JUUL had violated the Court’s orders, or else was misleading potential investors
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`(which JUUL continues to solicit) by implying, falsely, that Plaintiffs’ Notes have
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`been converted. (Exhibit C.)
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`7.
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`On April 11, JUUL responded that it had not converted any Notes, but
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`failed to explain why it would need to “reinstate” Notes that had never been
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`converted in the first place. (Exhibit D.)
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`8.
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`The Financial Statements lead to the deeply concerning conclusion that
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`JUUL has either willfully violated the Court’s orders prohibiting any such purported
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`conversion, on the one hand, or has—once again—intentionally disseminated false
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`and misleading statements to actual or potential investors, on the other hand.
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`Assuming the latter, JUUL has falsely described the Court’s unambiguous orders by
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`marketing itself as a Company with $2 billion less debt on its books. JUUL is thus
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`actively fundraising based on the terms set as part of the improper Insider Financing
`
`4
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`
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`and by promulgating false and misleading statements about this Court’s rulings,
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`JUUL’s capital structure, and the status of the Notes.
`
`9.
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`Under Delaware law, whether to allow supplementation of the trial
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`record “is a matter for the Court’s discretion.” Lola Cars Int’l Ltd. v. Krohn Racing,
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`LLC, 2010 WL 1818907, at *1 (Del. Ch. Apr. 23, 2010). “The Court will allow the
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`introduction of additional evidence when doing so will serve the interests of fairness
`
`and substantial justice.” Id. The factors to be considered include “the materiality of
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`the evidence to be admitted; the moving party’s ability to have introduced the
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`evidence at trial; the length of time that has passed between the conclusion of trial
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`and the request to reopen the record; the need for judicial efficiency; and prejudice
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`to the opposing party.” Id.
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`10. Supplementing the record here to permit the addition of the Jefferies
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`call notes and the Financial Statements (and related correspondence) would be both
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`fair and just. The Jefferies call notes are further material evidence that—contrary to
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`the position that JUUL continues to advance—it was, in fact, Pritzker who brought
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`about the Insider Financing, regardless of the financial vehicle through which his
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`estate did so. The Financial Statements are material evidence that directly relates to
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`this Court’s injunction orders and JUUL’s purported conversion of the Notes. They
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`likewise are consistent with, as established at trial, JUUL’s history of making false
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`statements to actual and potential investors. The Financial Statements, and the
`5
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`parties’ correspondence providing their context, therefore should fairly be available
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`for this Court’s consideration as part of the record.
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`11. The remaining factors to be considered uniformly weigh in favor of
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`supplementing the record. Plaintiffs could not have submitted this evidence at trial
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`because Jefferies did not produce the call notes to Plaintiffs until six days after trial,
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`and JUUL did not make the Financial Statements available to Plaintiffs until April
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`2—weeks after trial. Plaintiffs have promptly submitted the Jefferies call notes and
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`the Financial Statements alongside their Opening Post-Trial Brief (and formally
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`sought the supplementation of the record through this Motion). Permitting the
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`Jefferies call notes and Financial Statements to be entered into evidence would in no
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`way impair judicial efficiency. Finally, there has been and could be no prejudice
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`whatsoever to Defendants, as the additional documents all constitute admissions by
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`JUUL itself or its own advisors. To the extent JUUL believes it has any response or
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`legitimate evidentiary objection to these documents, it is free to address these
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`materials in its answering brief.
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`CONCLUSION
`Plaintiffs respectfully request that the Court grant the Motion and
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`supplement the record to include the documents attached as Exhibits A–D.
`
`
`
`6
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`
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`
`
`OF COUNSEL:
`
`Martin Flumenbaum
`Jeffrey J. Recher
`Nina Kovalenko
`PAUL, WEISS, RIFKIND,
` WHARTON & GARRISON LLP
`1285 Avenue of the Americas
`New York, NY 10019-6064
`(212) 373-3000
`
`
`Dated: April 30, 2024
`
`
`
`PAUL, WEISS, RIFKIND,
` WHARTON & GARRISON LLP
`
`By: /s/ Daniel A. Mason
`Daniel A. Mason (#5206)
`Sabrina M. Hendershot (#6286)
`Elizabeth Wang (#6620)
`1313 North Market Street, Suite 806
`Post Office Box 32
`Wilmington, DE 19899-0032
`(302) 655-4410
`
`
`WORDS: 1,264 of 3,000
`
`Attorneys for Plaintiffs D1 Jasper Holdings
`LP, D1 SPV JL Master LP, Jay Blocker
`Ltd., Jay Domestic LLC, GCCU II LLC,
`TOCU XX LLC, OC II FIE VIII LP, JL SPV
`Holdings, LLC, EMS J-INV LLC, Disruptive
`Technology Solutions XIV, LLC, Disruptive
`Technology Solutions XVI, LLC–Series A,
`Disruptive Technology Solutions XVI, LLC–
`Series B, and Disruptive Technology
`Solutions XVI, LLC–Series C
`
`
`7
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`
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`
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`
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`CERTIFICATE OF SERVICE
`
`I hereby certify that on May 7, 2024, the foregoing [PUBLIC]
`
`Plaintiffs’ Motion to Supplement the Record was caused to be served upon the
`
`following counsel of record via File & ServeXpress:
`
`William M. Lafferty, Esq.
`David J. Teklits, Esq.
`Alexandra M. Cumings, Esq.
`Grant E. Michl, Esq.
`Kirk Andersen, Esq.
`MORRIS, NICHOLS, ARSHT
` & TUNNELL LLP
`1201 N. Market Street
`Wilmington, DE 19801
`
`Richard P. Rollo, Esq.
`Travis S. Hunter, Esq.
`John M. O’Toole, Esq.
`Alexander M. Krischik, Esq.
`RICHARDS, LAYTON
` & FINGER, P.A.
`920 North King Street
`Wilmington, Delaware 19801
`
`/s/ Sabrina M. Hendershot
`Sabrina M. Hendershot (#6286)
`
`