IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
`
`MIR ANWAR, JEREMY KRELL, and
`ROBERT HOROWITZ,
`
` Plaintiffs,
`
`v.
`
`QUIP NYC INC., SIMON ENEVER,
`WILLIAM MAY,
`and GEORGE
`WELLS,
`
` Defendants.
`
`Civil Action No. 2025-0258-MTZ
`
`PLAINTIFFS’ ANSWERING BRIEF IN OPPOSITION TO
`DEFENDANTS’ MOTION TO DISMISS PLAINTIFFS’ COMPLAINT
`
`Plaintiffs Mir Anwar (“Anwar”), Jeremy Krell (“Krell”), and Robert Horowitz
`
`(“Horowitz”) (collectively “Plaintiffs”), submit this Answering Brief in opposition to
`
`the Motion to Dismiss Plaintiffs’ Complaint filed by Defendants Quip NYC Inc.
`
`(“Quip”), Simon Enever (“Enever”), William May (“May”), and George Wells
`
`(“Wells”) (Enever, May, and Wells referred to collectively as “Individual
`
`Defendants,” and with Quip, as “Defendants”).
`
`Dated: May 2, 2025
`
`FREEMAN MATHIS & GARY, LLP
`
`OF COUNSEL:
`Jill R. Dunn*
`Cameron N. Regnery*
`100 Galleria Parkway, Suite 1600
`Atlanta, Georgia 30339
`(T): 770-818-0000
`JDunn@fmglaw.com
`Cameron.Regnery@fmglaw.com
`
`/s/ Daniel M. Young
`Daniel M. Young
`Delaware Bar No. 4945
`1521 West Concord Pike, Suite 301
`Wilmington, Delaware 19803
`(T): 856-866-8921
`Daniel.Young@fmglaw.com
`
`Attorney for Plaintiffs
`
`EFiled: May 05 2025 09:54AM EDT
`Transaction ID 76203985
`Case No. 2025-0258-MTZ
`
`

`

`(*pro hac vice applications
`forthcoming)
`
`

`

`TABLE OF CONTENTS
`
`Table of Contents...........................................................................................................i
`Table of Authorities......................................................................................................ii
`Introduction...............................................................................................................1
`Factual Background.................................................................................................2
`A. The relationship between the parties...............................................................2
`B. Quip promises to include Anwar in secondary stock purchases .....................2
`C. Quip prevents Anwar’s exercise of his stock options .......................................2
`D. Quip executes written agreements to accommodate Anwar............................3
`E. Defendants authorize an exclusive secondary stock purchase and waive all
`notice requirements ..................................................................................................5
`F. Defendants carry out the Subject Transactions without notice to Plaintiffs .6
`G. Plaintiffs independently discover the Subject Transactions ...........................8
`H. The value of Quip stock falls below the trigger level.......................................9
`Argument and Citation to Authority....................................................................9
`A. Plaintiffs need only satisfy the minimal, “reasonable conceivability”
`pleading standard .....................................................................................................9
`B.
`It is reasonably conceivable that Plaintiffs may recover on their claim for
`breach of fiduciary duty (Count I)..........................................................................10
`C.
`It is reasonably conceivable that Plaintiffs may recover on their claim for
`fraudulent concealment (Count II).........................................................................14
`D.
`It is reasonably conceivable that Plaintiffs may recover on their claim for
`negligent misrepresentation (Count III)................................................................16
`E.
`It is reasonably conceivable that Anwar may recover on his claim for breach
`of implied contract (Count IV)................................................................................18
`F.
`It is reasonably conceivable that Anwar may recover on his claim for breach
`of express contract (Count V) .................................................................................21
`G.
`It is reasonably conceivable that Anwar may recover on his claim for
`promissory estoppel (Count VI)..............................................................................23
`H.
`It is reasonably conceivable that Plaintiffs may recover on their claim for
`attorneys’ fees and costs of litigation (Count VII).................................................26
`Conclusion................................................................................................................26
`
`i
`
`

`

`TABLE OF AUTHORITIES
`
`Cases
`
`Black Horse Cap., LP v. Xstelos Holdings, Inc.,
`C.A. No. 8642-VCP, 2014 WL 5025926 (Del. Ch. Sept. 30, 2014) ............................24
`
`Blaustein v. Lord Balt. Cap. Corp.,
`84 A.3d 954 (Del. 2014) ........................................................................................11, 12
`
`Corp. Prop. Assocs. 14 Inc. v. CHR Holding Corp.,
`C.A. No. 3231-VCS, 2008 WL 963048 (Del. Ch. Apr. 10, 2008)................................14
`
`Delman v. GigAcquisitions3, LLC,
`288 A.3d 692 (Del. Ch. 2023) .........................................................................10, 11, 21
`
`DG BF, LLC v. Ray,
`No. 2020-0459-MTZ, 2021 WL 776742 (Del. Ch. Mar. 1, 2021) (Zurn, V.C.) ..........15
`
`Gantler v. Stephens,
`965 A.2d 695 (Del. 2009) ............................................................................................11
`
`Geico Gen. Ins. Co. v. Green,
`308 A.3d 132 (Del. 2022) ......................................................................................18, 21
`
`Haveg Corp. v. Guyer,
`211 A.2d 910 (Del. 1965) ............................................................................................19
`
`In re MultiPlan Corp. Stockholders Litig.,
`268 A.3d 784 (Del. Ch. 2022) .....................................................................9, 10, 11, 13
`
`Kane v. NVR, Inc.,
`No. 2019-0569-PWG, 2020 WL 3027239 (Del. Ch. June 5, 2020) ............................14
`
`Metro Storage Int’l LLC v. Harron,
`275 A.3d 810 (Del. Ch. 2022)..............................................................................passim
`
`Nicolet, Inc. v. Nutt,
`525 A.2d 146 (Del. 1987) ............................................................................................14
`
`PR Acquisitions, LLC v. Midland Funding LLC,
`No. 2017-0465-TMR, 2018 WL 2041521 (Del. Ch. Apr. 30, 2018)......................16, 17
`
`ii
`
`

`

`Savor, Inc. v. FMR Corp.,
`812 A.2d 894 (Del. 2002) ........................................................................................9, 10
`
`SIGA Techs., Inc. v. PharmAthene, Inc.,
`67 A.3d 330 (Del. 2013) ..............................................................................................24
`
`Windsor I, LLC v. CWCapital Asset Mgmt. LLC,
`238 A.3d 863 (Del. 2020) ............................................................................................10
`
`Winshall v. Viacom Int’l, Inc.,
`55 A.3d 629 (Del. Ch. 2011) .................................................................................22, 23
`
`Statutes
`
`6 Del. C. § 2714(a) ......................................................................................................19
`
`8 Del C. § 220................................................................................................................8
`
`Rules
`
`Court of Chancery Rule 12(b)(6)..................................................................................9
`
`Court of Chancery Rule 9(b) ..........................................................................14, 15, 16
`
`iii
`
`

`

`INTRODUCTION
`
`The detailed facts presented in the Complaint demonstrate a pattern of
`
`misconduct and misrepresentation by Defendants. It is therefore reasonably
`
`conceivable that Plaintiffs can recover on each of their claims. At this stage, that is
`
`all that is required.
`
`This case concerns certain transactions that Defendants concealed from
`
`Plaintiffs. In these transactions, a limited group of Quip shareholders, including
`
`Individual Defendants, sold their shares to outside purchasers for a price (at least)
`
`fifteen times greater than the current value of Quip common stock. Plaintiffs were
`
`not informed of these dealings. By failing to disclose the transactions, Defendants
`
`breached their fiduciary duties, engaged in fraud and misrepresentation, and
`
`violated agreements with Anwar. Defendants did so for their own pecuniary benefit
`
`(and to Plaintiffs’ detriment), ensuring Defendants would be able to sell more of
`
`their personal shares in the transactions.
`
`Despite this misconduct, Defendants now seek dismissal of Plaintiffs’ claims.
`
`All of Defendants’ arguments, however, require this Court to do something it
`
`cannot: weigh the facts and draw inferences in Defendants’ favor. At this
`
`preliminary stage, the facts plead in the Complaint are accepted as true, and all
`
`inferences therefrom are drawn in Plaintiffs’ favor. Guided by this analysis, as
`
`opposed to the self-serving one Defendants prefer, Plaintiffs have demonstrated the
`
`possibility of recovery on all Counts. Dismissal of the Complaint is therefore
`
`unwarranted.
`
`1
`
`

`

`FACTUAL BACKGROUND
`
`A.
`
`The relationship between the parties
`
`Quip is a privately-held corporation that designs and sells oral healthcare
`
`products. (Compl. ¶ 16). Plaintiffs are shareholders and former employees of Quip.
`
`(Id. ¶¶ 7-9, 19-21; Opening Br. at 4). At all times relevant to this lawsuit, Individual
`
`Defendants were officers and directors of Quip. (Id. ¶¶ 11-13).
`
`B.
`
`Quip promises to include Anwar in secondary stock purchases
`
`In March 2019, Anwar amicably resigned from his position as Vice President
`
`of Operations at Quip. (Id. ¶¶ 19, 23). While employed in that role, and in exchange
`
`for a reduced salary, Anwar was given a 1.25% share of Quip’s equity by way of
`
`incentive stock options (ISOs). (Id. ¶ 22). On March 8, 2019, Enever and May
`
`approached Anwar regarding their intent to include Anwar in future secondary
`
`stock purchases, including by working with outside firms. (Id. ¶ 24). During these
`
`pivotal discussions—which are only afforded passing reference in Defendants’
`
`Opening Brief—Enever and May informed Anwar that he would be apprised of and
`
`included in future secondary stock purchases. (Id. ¶ 25; Opening Br. at 7).
`
`C.
`
`Quip prevents Anwar’s exercise of his stock options
`
`Anwar’s discussion with Enever and May occurred around the beginning of a
`
`ninety (90)-day period in which Anwar was required to exercise his ISOs. (Id. ¶ 26).
`
`Anwar estimated that the exercise of his ISOs would result in the issuance of
`
`roughly $42,000 worth of Quip stock. (Id. ¶ 27). In an effort to confirm his estimation
`
`prior to exercising his ISOs, Anwar repeatedly sent emails to Enever, May, and
`
`2
`
`

`

`others at Quip. (Id. ¶ 28). No one ever confirmed the value of Anwar’s ISOs. (Id. ¶
`
`29). Without providing this crucial context, Defendants recite only that Anwar
`
`“failed” to exercise his shares within the required time period. (Opening Br. at 4).
`
`But this is inaccurate; Anwar was in fact prevented from exercising his ISOs due to
`
`Defendants’ failure to confirm (upon repeated request) the value of his shares.
`
`(Compl. ¶¶ 28-30).
`
`In light of this full context, it is unsurprising that Quip’s Board of Directors
`
`(the “Board”) then undertook—in Defendants’ words—“an effort to accommodate
`
`Anwar.” (Opening Br. at 4). Defendants describe this effort as an extension of the
`
`period of time for Anwar to exercise his shares, while Plaintiffs allege that this
`
`effort was actually a reissuance of shares. (Compare id. at 4 n.3 with Compl. ¶ 31).
`
`The technicalities of the Board’s effort notwithstanding, the intent was to assist
`
`Anwar with the payment of additional tax obligations incurred as a result of
`
`Defendants preventing Anwar’s exercise of the ISOs. (Id. at 4; Compl. ¶ 34). Indeed,
`
`following the Board’s effort, Anwar’s stock options were no longer ISOs, but were
`
`instead non-qualified stock options (NSOs). (Compl. ¶ 32). When Anwar ultimately
`
`exercised those NSOs, thereby receiving 15,913 shares of Quip common stock, he
`
`incurred greater tax penalties. (Id. ¶¶ 33-34).
`
`D.
`
`Quip executes written agreements to accommodate Anwar
`
`To accommodate Anwar in shouldering this increased tax burden, Quip and
`
`Anwar executed a Stock Pledge Agreement (the “Pledge Agreement”). (Id. ¶ 35,
`
`Opening Br. Ex. B). Pursuant to the Pledge Agreement, Quip agreed to loan Anwar
`
`an amount sufficient to cover the heightened tax penalties. (Id. ¶ 36). Anwar, in
`
`3
`
`

`

`turn, agreed to grant Quip a security interest in his 15,913 share of Quip common
`
`stock. (Id. ¶ 37). The Pledge Agreement required Anwar to further execute a
`
`Secured Promissory Note (the “Promissory Note”), which Anwar delivered to Quip
`
`in August 2019. (Id. ¶ 39; Opening Br. Ex. B).
`
`Under the terms of the Promissory Note, Anwar agreed to pay Quip a
`
`principal sum of $94,741.21, plus interest, secured by Quip’s interest in Anwar’s
`
`shares. (Id. ¶¶ 40-41). The Promissory Note includes a “trigger” provision,1 under
`
`which if the fair market value of Quip common stock falls below $8.48 per share
`
`before August 2028, Anwar is permitted to pay any unpaid principal and accrued
`
`interest directly with his shares. (Id. ¶ 42; Opening Br. Ex. B). Valued at $8.48 per
`
`share, Anwar’s 15,913 shares possess a total value of $134,942.24, over $40,000
`
`more than the principal amount of Quip’s loan. (Id. ¶ 43). The trigger provision was
`
`thus designed as a “buffer,” ensuring that Anwar would still receive the full value
`
`of his previously-held ISOs, despite the additional tax obligations incurred. (Id. ¶
`
`44).
`
`Anwar executed the Pledge Agreement and Promissory Note in reliance upon
`
`Defendants’ promise that he would be included in future secondary stock purchases.
`
`(Id. ¶ 47). Thereafter, and indeed for the next three years, Anwar consistently
`
`communicated with Enever, May, and others at Quip regarding the availability of
`
`The Promissory Note also includes a provision—omitted from Defendants’ Opening
`1
`Brief—under which if Anwar did not dispose of any of his 15,913 shares by August 2020,
`Quip agreed to forgive $36,371.60 of the unpaid principal amount. (Compl. ¶ 45; Opening
`Br. Ex. B). Anwar did not dispose of any of his shares by August 2020, and thus the total
`original principal amount owed was decreased from $94,741.21 to $58,369.61. (Id. ¶ 46).
`
`4
`
`

`

`secondary stock purchase opportunities. (Id. ¶ 48). In response, Quip’s
`
`representatives always informed Anwar that there were no such opportunities at
`
`present, but that they would keep him abreast if any arose. (Id. ¶ 49). As discussed
`
`below, they did not.
`
`E.
`
`Defendants authorize an exclusive secondary stock purchase and
`waive all notice requirements
`
`Unbeknownst to Anwar, or any Plaintiffs, an outside purchaser, CSI Crown
`
`Co-Investment LP (“CSI Crown”), approached Quip with an offer to purchase
`
`secondary stock. On November 23, 2021, Quip’s Board adopted a resolution (the
`
`“Written Consent”) authorizing only certain shareholders—including Individual
`
`Defendants, but excluding Plaintiffs—to sell their shares to CSI Crown at a price of
`
`$127.96 per share. (Id. ¶¶ 51-52). That purchase price was nearly four times greater
`
`than the fair market value of Quip common stock at the time. (Cf. id. ¶ 50). In
`
`approving the sale, Quip’s Board waived all notice requirements and other rights
`
`associated therewith (Id. ¶ 55).
`
`Also on November 23, 2021, Defendants executed a Right of First Refusal and
`
`Co-Sale Waiver (the “First ROFR Waiver”). (Id. ¶¶ 58, 65; Opening Br. Ex. F). The
`
`First ROFR Waiver discloses the number of shares Enever and May were intending
`
`to sell, as well as the substantial amounts they would receive from those sales. (Id.
`
`¶¶ 59-60). The First ROFR Waiver further provides that Enever and May are
`
`subject to the August 17, 2021 Third Amended and Restated Right of First Refusal
`
`and Co-Sale Agreement (the “ROFR Agreement”), which requires Enever and May
`
`to provide notice to Quip and certain “Investors” of their proposed transfer of
`
`5
`
`

`

`shares.2 (Id. ¶ 61).
`
`Pursuant to the ROFR Agreement, upon Enever and May’s notice of proposed
`
`transfer of shares, the Investors possess a co-sale right to participate in such
`
`transfer. (Id. ¶ 62). But by executing the First ROFR Waiver, Quip waived any and
`
`all rights it and the Investors had under the ROFR Agreement, as well as Enever
`
`and May’s compliance with any notice requirements. (Id. ¶¶ 63-64). Defendants did
`
`not inform Plaintiffs of secondary stock purchase opportunity with CSI Crown, the
`
`Written Consent, or the First ROFR Waiver. (Id. ¶¶ 57, 67).
`
`F.
`
`Defendants carry out the Subject Transactions without notice to
`Plaintiffs
`
`CSI Crown’s secondary stock purchases were effectuated through three
`
`separate agreements, as well as a tender offer, executed between November 2021
`
`and April 2022 (referred to collectively as the “Subject Transactions”).
`
`The First Agreement. On November 29, 2021, Quip and CSI Crown executed
`
`the first Secondary Stock Purchase Agreement (the “First Agreement”). (Id. ¶ 68;
`
`Opening Br. Ex. C). Under the First Agreement, certain Quip stockholders sold a
`
`combined 239,555 shares, for a total aggregate purchase price of roughly $30
`
`million. (Id. ¶ 69). Enever sold 81,625 shares for a total price of $10.4 million; May
`
`Defendants suggest that Plaintiffs “misleadingly imply” that they are “Investors”
`2
`under the ROFR Agreement. (Opening Br. at 18). Plaintiffs make no such implication.
`Defendants’ suggestion relies on the substantiated premise that Plaintiffs are not listed on
`Schedule A to the ROFR Agreement. (Id.). The ROFR Agreement is not incorporated into
`the pleadings, and the purported copy provided in Exhibit “F” to Defendants’ Opening Brief
`is not the ROFR Agreement. Instead, Exhibit F is a prior version of the ROFR Agreement.
`It is therefore unclear whether Plaintiffs are entitled to notice under the provision of the
`ROFR Agreement, whether as “Investors” or otherwise.
`
`6
`
`

`

`sold 51,583 shares for a total price of $6.60 million; and Wells sold 2,222 shares for
`
`a total price (after deductions) of $284,327.12. (Id. ¶¶ 70-73). Defendants did not
`
`inform Plaintiffs of the First Agreement. (Id. ¶¶ 77).
`
`
`
`The Second Agreement. On December 29, 2021, Quip and CSI Crown executed
`
`the second Secondary Stock Purchase Agreement (the “Second Agreement”). (Id. ¶
`
`83; Opening Br. Ex. D). Under the terms of the Second Agreement, certain Quip
`
`stockholders sold a combined 83,210 shares, for a total aggregate purchase price of
`
`$10.6 million. (Id. ¶ 85). Defendants did not inform Plaintiffs of the Second
`
`Agreement. (Id. ¶ 88).
`
`The Tender Offer. Section 6.0 of the First and Second Agreements
`
`contemplates that CSI Crown will execute a Tender Offer to purchase up to $50
`
`million worth of additional shares of Quip stock, minus the aggregate purchase
`
`prices paid under the First and Second Agreements. (Compl. ¶¶ 74, 86; Opening Br.
`
`Exs. C, D). On March 2, 2022, CSI and another outside purchaser, Profesionales en
`
`Tesorería SA de CV (“PeT”), submitted the Tender Offer. (Id. ¶ 96). CSI Crown and
`
`PeT offered to purchase up to 6,711 shares of Quip common stock held by certain
`
`“Eligible Holders” at a price of $127.96 per share, for a maximum total aggregate
`
`purchase price of $858,739.56. (Id. ¶¶ 97-98; Opening Br. Ex. G).
`
`The Tender Offer included a proviso allowing a certain Quip executive to
`
`participate therein under a prior agreement with CSI to sell his shares pursuant to
`
`the Tender Offer, rather than the First or Second Agreements. (Opening Br. Ex. G).
`
`The Tender Offer was authorized under a second Right of First Refusal Waiver (the
`
`“Second ROFR Waiver”), under which Quip waived its rights with regard to the
`
`7
`
`

`

`proposed transfer of shares. (Id. ¶¶ 89-94). Defendants did not inform Plaintiffs of
`
`the Tender Offer or Second ROFR Waiver. (Id. ¶¶ 95, 102).
`
`The Third Agreement. On April 27, 2022, Quip and PeT executed the third
`
`Secondary Stock Purchase Agreement (the “Third Agreement”). (Id. ¶ 103; Opening
`
`Br. Ex. E). Under the terms of the Third Agreement, certain Quip stockholders sold
`
`a combined 6,978 shares, for a total aggregate purchase price of $892,904.88. (Id. ¶
`
`105). Defendants did not inform Plaintiffs of the Third Agreement. (Id. ¶ 108).
`
`G.
`
`Plaintiffs independently discover the Subject Transactions
`
`While the Subject Transactions were occurring, Anwar repeatedly asked
`
`Enever, May, and others at Quip whether there were any secondary stock purchase
`
`opportunities available. (Id. ¶ 48). Enever, May, and others at Quip repeatedly
`
`informed Anwar that there were no such opportunities, despite the existence of the
`
`Subject Transactions. (Id. ¶¶ 49, 110). Moreover, when Anwar took it upon himself
`
`to search for prospective buyers, Quip failed to provide him the necessary financial
`
`information to execute any transactions. (Id. ¶ 111). Anwar was therefore left with
`
`no ability to sell his shares.
`
`Defendants similarly failed to inform Krell and Horowitz of the Subject
`
`Transactions, despite their status as Quip shareholders. (Id. ¶ 112). Plaintiffs were
`
`not even made aware of the Subject Transactions until Horowitz was notified
`
`thereof by a Quip employee in November 2023. (Id. ¶ 113). On April 1, 2024,
`
`Plaintiffs sent Quip a written demand to inspect books and records pursuant to 8
`
`Del C. § 220. (Id. ¶ 114). In response, Quip produced several of the documents
`
`8
`
`

`

`identified above on July 9, 2024. (Id. ¶ 115).
`
`H.
`
`The value of Quip stock falls sharply below the trigger level
`
`Thereafter, in September 2024, Quip’s counsel informed Anwar that the fair
`
`market value of Quip’s common stock had fallen sharply below $8.48, the amount
`
`listed in the trigger provision. (Id. ¶ 117). The purchase price per share offered in
`
`the Subject Transactions ($127.96) is therefore at least fifteen times higher than the
`
`current value of Quip stock (less than $8.48). Despite Anwar’s repeated inquiries
`
`regarding the value of his shares, including requests for 409A valuations, no one at
`
`Quip informed Anwar that the trigger provision had become operative. (Id. ¶¶ 118-
`
`19). The whole point of the trigger provision was to provide Anwar a safeguard
`
`ensuring that he would receive, at a minimum, the value of his previously-held
`
`ISOs. (Id. ¶ 44). By preventing Anwar from exercising his contractual rights to sell
`
`his shares to Quip, Anwar was not afforded the protections of the trigger provision.
`
`ARGUMENT AND CITATION TO AUTHORITY
`
`A.
`
`Plaintiffs need only satisfy the minimal, “reasonable conceivability”
`pleading standard
`
`Defendants move to dismiss Plaintiffs’ Complaint in its entirety for failure to
`
`state a claim upon which relief can be granted, pursuant to Court of Chancery Rule
`
`12(b)(6). The pleading standards for the purposes of a Rule 12(b)(6) motion are
`
`“minimal” and “plaintiff-friendly.” In re MultiPlan Corp. Stockholders Litig., 268
`
`A.3d 784, 799 (Del. Ch. 2022); see also Savor, Inc. v. FMR Corp., 812 A.2d 894, 897
`
`(Del. 2002) (“liberal notice pleading standards” govern such motions). Plaintiffs are
`
`9
`
`

`

`required to satisfy the modest “reasonable conceivability standard,” which “asks
`
`only whether there is a possibility of recovery.” Delman v. GigAcquisitions3, LLC,
`
`288 A.3d 692, 708 (Del. Ch. 2023) (markings omitted). Dismissal is only appropriate
`
`where Plaintiffs “would not be entitled to recover under any reasonably conceivable
`
`set of circumstances susceptible of proof.” Id. (quoting Savor, Inc., 812 at 896-97).
`
`Consequently, when evaluating a motion to dismiss under Rule 12(b)(6), “all
`
`well-pleaded factual allegations are accepted as true.” Id. Even “vague allegations”
`
`are considered well-plead—and therefore accepted as true—so long as “they give the
`
`opposing party notice of the claim.” Id. Moreover, the Court is required to “draw all
`
`reasonable inferences in favor of [Plaintiffs].” Id. While the Court may consider
`
`documents outside of the Complaint that are integral to the Plaintiffs’ claims and
`
`incorporated therein by reference, see Windsor I, LLC v. CWCapital Asset Mgmt.
`
`LLC, 238 A.3d 863, 873 (Del. 2020), the Court may not weigh evidence or draw any
`
`inferences in Defendants’ favor. In re Multiplan, 268 A.3d at 799 (citing Savor, Inc.,
`
`812 A.3d at 896).
`
`B.
`
`It is reasonably conceivable that Plaintiffs may recover on their
`claim for breach of fiduciary duty (Count I)
`
`In Delaware, a claim for breach of fiduciary duty requires only two formal
`
`elements: (1) the existence of a fiduciary duty, and (2) the breach of that duty. Metro
`
`Storage Int’l LLC v. Harron, 275 A.3d 810, 840-41 (Del. Ch. 2022); (Opening Br. at
`
`11). Defendants contend that Plaintiffs are required to prove both of these elements
`
`by a preponderance of the evidence standard, but that is a mischaracterization of
`
`10
`
`

`

`Delaware law.3 (Opening Br. at 11). This Court employes the reasonable
`
`conceivability standard at this stage, accepting all well-plead facts as true and
`
`drawing all reasonable inferences in favor of Plaintiffs. Delman, 288 A.3d at 708.
`
`Under this minimal standard, Plaintiffs have demonstrated both elements
`
`necessary to state an actionable breach of fiduciary duty claim. As to the first
`
`element (duty), Plaintiffs allege that Individual Defendants’ possess at least the
`
`fiduciary duty of loyalty to Plaintiffs. (Compl. ¶¶ 122-24, 133). The Delaware
`
`Supreme Court has long-held that officers and directors owe their corporation and
`
`its shareholders the fiduciary duties of loyalty and care. Harron, 275 A.3d at 842
`
`(citing, among others, Gantler v. Stephens, 965 A.2d 695, 708-09 (Del. 2009)). At all
`
`times relevant to this lawsuit, Individual Defendants were officers and directors of
`
`Quip. (Compl. ¶¶ 11-13, 122-24). Individual Defendants therefore necessarily owe
`
`duties of loyalty and care to Plaintiffs, as shareholders of Quip. Harron, 275 A.3d
`
`at 842-43.
`
`Individual Defendants counter that Plaintiffs are not actually invoking the
`
`duty of loyalty (contra Compl. ¶ 133), but are instead inventing a “duty to inform
`
`shareholders of private transactions.” (Opening Br. at 12). Individual Defendants
`
`then construct a straw-man argument against the existence of this unalleged duty,
`
`relying on the Supreme Court’s decision in Blaustein v. Lord Balt. Cap. Corp., 84
`
`A.3d 954 (Del. 2014). There, the Court held that “the directors of a closely held
`
`The cases Defendants cite in support of this assertion concern motions for summary
`3
`judgment and for preliminary injunctions. (Opening Br. at 11 n. 20-21). Those motions are
`not limited to the face of the pleadings and permit the Court to weigh evidence, which it
`cannot do here. In re Multiplan, 268 A.3d at 799.
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`corporation have no general fiduciary duty to repurchase the stock of a minority
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`stockholder.” Blaustein, 84 A.3d at 958. But that case is inapposite. Putting aside
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`the uncertainty of whether Quip is a “closely held corporation,” Plaintiffs are not
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`alleging that Individual Defendants are required to repurchase Plaintiffs’ shares.
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`Contra id. at 956. Plaintiffs are instead asserting that Individual Defendants acted
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`in their personal pecuniary interest, and not in the interest of Quip or its
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`shareholders (Compl. ¶¶ 130-32), which directly implicates the duty of loyalty.
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`Turning then to the second element (breach), “[t]he duty of loyalty mandates
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`that the best interest of the corporation and its shareholders takes precedence over
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`any interest possessed by a director, officer or controlling shareholder and not
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`shared by the stockholders generally.” Harron, 275 A.3d at 842 (emphasis supplied).
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`This imposes a requirement to act in good faith. Id. Individual Defendants “are not
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`permitted to use their position of trust and confidence to further their private
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`interests,” and bad faith may be shown “where the fiduciary intentionally acts with
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`a purpose other than that of advancing the best interests of the corporation.” Id.
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`That is exactly what occurred here. In the Subject Transactions, Individual
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`Defendants received over 40% of the total purchase price paid—roughly $17 million.
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`(Compl. ¶¶ 127, 129). CSI Crown and PeT only offered to purchase a maximum of
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`$50 million worth of shares in the Subject Transactions. (See id. ¶¶ 74, 86, 99;
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`Opening Br. Exs. C, D). By failing to inform Quip’s shareholders, including
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`Plaintiffs, of the Subject Transactions, Individual Defendants were able to sell a
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`greater amount of their personal shares. Individual Defendants thus acted in their
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`own pecuniary interest by personally participating in the Subject Transactions, an
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`opportunity withheld from Quip’s shareholders generally. (Id. ¶ 130).
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`Defendants suggest that Plaintiffs have not demonstrated a breach because
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`“Plaintiffs have no inherent right to sell their shares,” and because there was no
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`“improper board process or failure of consideration of the secondary transaction.”
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`(Opening Br. at 13). But those are not the relevant inquiries. The duty of loyalty
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`mandates that Individual Defendants act in the best interests of Quip’s
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`shareholders, and not use their positions to further their own interests. Harron, 275
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`A.3d at 842. The facts presented demonstrate that Individual Defendants furthered
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`their own interests by failing to inform Quip’s shareholders, including Plaintiffs, of
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`the Subject Transactions, to their benefit.
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`Individual Defendants ask the Court to overlook these well-plead allegations,
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`arguing that Plaintiffs merely “assume” a lost opportunity. (Opening Br. at 14). But
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`that contention requires the Court to impermissibly reach an inference in favor of
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`Individual Defendants, which it cannot. In re Multiplan, 268 A.3d at 799. Under the
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`facts plead, it is reasonable to infer Plaintiffs would have been included in the
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`Subject Transactions if informed thereof. (See Compl. ¶¶ 153, 166, 176). For
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`example, Individual Defendants point to the Tender Offer, claiming it was only
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`available to a certain group of which Plaintiffs are not members. (Opening Br. at
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`15). But the Tender Offer details that a special carve-out was made for a Quip
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`executive (id. Ex. G), thereby creating a reasonable inference that Plaintiffs could
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`have received a similar accommodation. At this early stage of proceedings, the Court
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`must construe that inference in Plaintiffs’ favor, not Individual Defendants’.
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`Plaintiffs have therefore plead sufficient factual material to state a claim for
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`breach of fiduciary duty upon which relief can be granted.
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`C.
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`It is reasonably conceivable that Plaintiffs may recover on their
`claim for fraudulent concealment (Count II)
`
`To establish a claim for intentional misrepresentation (or fraudulent
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`concealment), Plaintiffs must allege: (1) deliberate concealment by Defendants of a
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`material past or present fact, or silence in the face of a duty to speak; (2) that
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`Defendants acted with scienter; (3) an intent to induce Plaintiffs’ reliance upon the
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`concealment; (4) causation; and (5) damages resulting from the concealment. Kane
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`v. NVR, Inc., No. 2019-0569-PWG, 2020 WL 3027239, at *4 (Del. Ch. June 5, 2020)
`
`(citing Nicolet, Inc. v. Nutt, 525 A.2d 146, 149 (Del. 1987)); (Opening Br. at 17). A
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`claim for fraudulent concealment is subject to Court of Chancery Rule 9(b), and thus
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`must be plead with particularity. Id. The allegations are plead with particularity if
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`they inform Defendants “of the precise transactions at issue and the fraud alleged
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`to have occurred in those transactions.” Id.
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`The thrust of Defendant’s argument for dismissal of Count II is that Plaintiffs
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`have not sufficiently pled the first element—deliberate concealment of a material
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`fact, or silence in the face of a duty to speak. (Opening Br. at 18-20). Defendants
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`first contend, without any citation to legal authority, that they “had no duty to
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`inform Plaintiffs under Delaware law.” (Opening Br. at 18). But a duty to speak may
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`arise “where there is a fiduciary relationship” between the parties. Corp. Prop.
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`Assocs. 14 Inc. v. CHR Holding Corp., C.A. No. 3231-VCS, 2008 WL 963048, at *6
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`(Del. Ch. Apr. 10, 2008). And here there is a fiduciary relationship between
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`Individual Defendants, Quip, and Plaintiffs. Harron, 275 A.3d at 842. Because a
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`duty to speak may arise from that relationship, Defendants’ failure to inform
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`Plaintiffs of the Subject Transactions—in the face of that duty—is itself sufficient
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`to establish the first element. (Compl. ¶ 140).
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`Furthermore, Defendants did deliberately co