Case 1:21-cv-04932 Document 1 Filed 06/03/21 Page 1 of 12
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE SOUTHERN DISTRICT OF NEW YORK
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`SUSAN FINGER,
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`Plaintiff,
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`Case No.
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`COMPLAINT
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`DEMAND FOR JURY TRIAL
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`v.
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`NUANCE COMMUNICATIONS, INC.,
`LLOYD CARNEY, MARK BENJAMIN,
`DANIEL BRENNAN, THOMAS EBLING,
`ROBERT FINOCCHIO, LAURA KAISER,
`MICHAL KATZ, MARK LARET, and
`SANJAY VASWANI,
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`Defendants.
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`Plaintiff Susan Finger (“Plaintiff”), upon information and belief, including an examination
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`and inquiry conducted by and through her counsel, except as to those allegations pertaining to
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`Plaintiff, which are alleged upon personal belief, alleges the following for her Complaint:
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`NATURE AND SUMMARY OF THE ACTION
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`1.
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`Plaintiff brings this action against Nuance Communications, Inc. (“Nuance” or the
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`“Company”) and the members of Nuance’s Board of Directors (the “Board” or the “Individual
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`Defendants,” and together with the Company, “Defendants”) for their violations of Sections 14(a)
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`and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. §§ 78n(a),
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`78t(a), and U.S. Securities and Exchange Commission (“SEC”) Rule 14a-9, 17 C.F.R. § 240.14a-
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`9, arising out of their agreement to be acquired by Microsoft Corporation (“Microsoft”) (the
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`“Proposed Transaction”).
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`2.
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`On April 11, 2021, Nuance and Microsoft into an Agreement and Plan of Merger
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`(the “Merger Agreement”) pursuant to which, Nuance stockholders will receive $56.00 in cash for
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`each share of Nuance common stock that they own.
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`3.
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`On May 17, 2021, Nuance filed a Schedule 14A Definitive Proxy Statement (the
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`“Proxy Statement”) with the SEC, which omits or misrepresents material information concerning
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`the Proposed Transaction. The failure to adequately disclose such material information renders
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`the Proxy Statement false and misleading.
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`4.
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`The stockholder vote to approve the Proposed Transaction is forthcoming. Under
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`the Merger Agreement, following a successful stockholder vote, the Proposed Transaction will be
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`consummated. For these reasons and as set forth in detail herein, Plaintiff seeks to enjoin
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`Defendants from conducting the stockholder vote on the Proposed Transaction unless and until the
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`material information discussed below is disclosed to the holders of the Company’s common stock,
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`or, in the event the Proposed Transaction is consummated, to recover damages resulting from the
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`Defendants’ violations of the Exchange Act.
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`JURISDICTION AND VENUE
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`5.
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`This Court has jurisdiction over all claims asserted herein pursuant to Section 27 of
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`the Exchange Act and 28 U.S.C. § 1331 because the claims asserted herein arise under Sections
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`14(a) and 20(a) of the Exchange Act and Rule 14a-9.
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`6.
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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 each Defendant by this Court permissible
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`under the traditional notions of fair play and substantial justice. “Where a federal statute such as
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`Section 27 of the [Exchange] Act confers nationwide service of process, the question becomes
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`Case 1:21-cv-04932 Document 1 Filed 06/03/21 Page 3 of 12
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`whether the party has sufficient contacts with the United States, not any particular state.” Sec. Inv’r
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`Prot. Corp. v. Vigman, 764 F.2d 1309, 1315 (9th Cir. 1985). “[S]o long as a defendant has
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`minimum contacts with the United States, Section 27 of the Act confers personal jurisdiction over
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`the defendant in any federal district court.” Id. at 1316.
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`7.
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`Venue is proper in this District under Section 27 of the Exchange Act, 15 U.S.C. §
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`78aa, as well as 28 U.S.C. § 1391, because Defendants are found or are inhabitants or transact
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`business in this District. Indeed, the Company’s stock trades on the Nasdaq Global Select Market,
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`which is also headquartered in this District. See, e.g., United States v. Svoboda, 347 F.3d 471, 484
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`n.13 (2d Cir. 2003) (collecting cases).
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`THE PARTIES
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`8.
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`Plaintiff is, and has been at all times relevant hereto, a continuous stockholder of
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`Nuance.
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`9.
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`Defendant Nuance is a Delaware corporation, with its principal executive offices
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`located at 1 Wayside Road, Burlington, Massachusetts 01803. Nuance’s common stock trades on
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`the Nasdaq Global Select Market under the ticker symbol “NUAN.”
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`10.
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`Defendant Lloyd Carney is, and has been at all relevant times, Independent
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`Chairperson of the Board and a director of the Company.
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`11.
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`Defendant Mark Benjamin is, and has been at all relevant times, Chief Executive
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`Officer and a director of the Company.
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`12.
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`Defendant Daniel Brennan is, and has been at all relevant times, a director of the
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`Company.
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`13.
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`Defendant Thomas Ebling is, and has been at all relevant times, a director of the
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`Company.
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`14.
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`Defendant Robert Finocchio is, and has been at all relevant times, a director of the
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`Company.
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`15.
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`Defendant Laura Kaiser is, and has been at all relevant times, a director of the
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`Company.
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`16.
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`Defendant Michal Katz is, and has been at all relevant times, a director of the
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`Company.
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`17.
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`Defendant Mark Laret is, and has been at all relevant times, a director of the
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`Company.
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`18.
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`Defendant Sanjay Vaswani is, and has been at all relevant times, a director of the
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`Company.
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`19.
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`Defendants identified in paragraphs 10-18 are referred to herein as the “Board” or
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`the “Individual Defendants,” and together with Nuance, “Defendants.”
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`SUBSTANTIVE ALLEGATIONS
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`A. Background of the Company
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`20.
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`Nuance is a technology pioneer and market leader in conversational artificial
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`intelligence (“AI”) and ambient clinical intelligence. It delivers intuitive solutions that understand,
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`analyze, and respond to people - amplifying their ability to help others with increased productivity
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`and security. Nuance works with thousands of organizations globally across healthcare, financial
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`services, telecommunications, government and retail - to create stronger relationships and better
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`experiences for their customers and workforce. Nuance offers its customers a wide range of
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`products and services, including clinical documentation, solutions for clinicians, radiologists and
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`care teams, as well as intelligent customer engagement and security biometric solutions for leading
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`brands. In addition, Nuance’s solutions increasingly utilize its innovations in AI, including
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`cognitive sciences and machine learning to create smarter, more natural experiences with
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`technology. Using advanced analytics and algorithms, Nuance’s technologies create personalized
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`experiences and transform the way people interact with information and the technology around
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`them. Nuance markets and sells its solutions and technologies around the world directly through
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`a dedicated sales force and a global network of resellers, including system integrators, independent
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`software vendors, value-added resellers, distributors, hardware vendors, telecommunications
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`carriers and e-commerce websites.
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`B. The Proposed Transaction
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`21.
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`On April 12, 2021, Nuance and Microsoft issued a joint press release announcing
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`the Proposed Transaction stating, in pertinent part:
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`REDMOND, Wash., and BURLINGTON, Mass. – April 12, 2021 – Microsoft
`Corp (Nasdaq: MSFT) and Nuance Communications, Inc. (Nasdaq: NUAN) today
`announced they have entered into a definitive agreement under which Microsoft
`will acquire Nuance for $56.00 per share, implying a 23% premium to the closing
`price of Nuance on Friday, April 9, in an all-cash transaction valued at $19.7 billion,
`inclusive of Nuance’s net debt. Nuance is a trusted cloud and AI software leader
`representing decades of accumulated healthcare and enterprise AI experience.
`Mark Benjamin will remain CEO of Nuance, reporting to Scott Guthrie, executive
`vice president of Cloud & AI at Microsoft. The transaction is intended to close this
`calendar year.
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`Microsoft has accelerated its efforts to provide industry-specific cloud offerings to
`support customers and partners as they respond to disruption and new opportunities.
`These efforts include the Microsoft Cloud for Healthcare, introduced in 2020,
`which aims to address the comprehensive needs of the rapidly transforming and
`growing healthcare industry. Today’s acquisition announcement represents the
`latest step in Microsoft’s industry-specific cloud strategy.
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`Nuance is a pioneer and a leading provider of conversational AI and cloud-based
`ambient clinical intelligence for healthcare providers. Nuance’s products include
`the Dragon Ambient eXperience, Dragon Medical One and PowerScribe One for
`radiology reporting, all leading clinical speech recognition SaaS offerings built on
`Microsoft Azure. Nuance’s solutions work seamlessly with core healthcare
`systems, including longstanding relationships with Electronic Health Records
`(EHRs), to alleviate the burden of clinical documentation and empower providers
`to deliver better patient experiences. Nuance solutions are currently used by more
`than 55% of physicians and 75% of radiologists in the U.S., and used in 77% of
`U.S. hospitals. Nuance’s Healthcare Cloud revenue experienced 37% year-over-
`year growth in Nuance’s fiscal year 2020 (ended September 2020).
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`Microsoft’s acquisition of Nuance builds upon the successful existing partnership
`between the companies that was announced in 2019. By augmenting the Microsoft
`Cloud for Healthcare with Nuance’s solutions, as well as the benefit of Nuance’s
`expertise and relationships with EHR systems providers, Microsoft will be better
`able to empower healthcare providers through the power of ambient clinical
`intelligence and other Microsoft cloud services. The acquisition will double
`Microsoft’s total addressable market (TAM) in the healthcare provider space,
`bringing the company’s TAM in healthcare to nearly $500 billion. Nuance and
`Microsoft will deepen their existing commitments to the extended partner
`ecosystem, as well as the highest standards of data privacy, security and
`compliance.
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`“Nuance provides the AI layer at the healthcare point of delivery and is a pioneer
`in the real-world application of enterprise AI,” said Satya Nadella, CEO, Microsoft.
`“AI is technology’s most important priority, and healthcare is its most urgent
`application. Together, with our partner ecosystem, we will put advanced AI
`solutions into the hands of professionals everywhere to drive better decision-
`making and create more meaningful connections, as we accelerate growth of
`Microsoft Cloud for Healthcare and Nuance.”
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`Beyond healthcare, Nuance provides AI expertise and customer engagement
`solutions across Interactive Voice Response (IVR), virtual assistants, and digital
`and biometric solutions to companies around the world across all industries. This
`expertise will come together with the breadth and depth of Microsoft’s cloud,
`including Azure, Teams, and Dynamics 365, to deliver next-generation customer
`engagement and security solutions.
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`“Over the past three years, Nuance has streamlined its portfolio to focus on the
`healthcare and enterprise AI segments, where there has been accelerated demand
`for advanced conversational AI and ambient solutions,” said Mark Benjamin, CEO,
`Nuance. “To seize this opportunity, we need the right platform to bring focus and
`global scale to our customers and partners to enable more personal, affordable and
`effective connections to people and care. The path forward is clearly with
`Microsoft — who brings intelligent cloud-based services at scale and who shares
`our passion for the ways technology can make a difference. At the same time, this
`combination offers a critical opportunity to deliver meaningful and certain value to
`our shareholders who have driven and supported us on this journey.”
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`The transaction has been unanimously approved by the Boards of Directors of both
`Nuance and Microsoft. The deal is intended to close by the end of this calendar
`year and is subject to approval by Nuance’s shareholders, the satisfaction of certain
`regulatory approvals, and other customary closing conditions.
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`Upon closing, Microsoft expects Nuance’s financials to be reported as part of
`Microsoft’s Intelligent Cloud segment. Microsoft expects the acquisition to be
`minimally dilutive (less than 1 percent) in fiscal year 2022 and to be accretive in
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`fiscal year 2023 to non-GAAP earnings per share, based on the expected close
`timeframe. Non-GAAP excludes expected impact of purchase accounting
`adjustments, as well as integration and transaction-related expenses. The
`acquisition will not impact the completion of its existing share repurchase
`authorization.
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`C. False and Misleading Statements and/or Material Omissions in the Proxy Statement
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`22.
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`On May 17, 2021, Defendants filed the materially incomplete and misleading Proxy
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`Statement with the SEC and disseminated it to Nuance’s stockholders. Designed to convince the
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`Company’s stockholders to vote in favor of the Proposed Transaction, the Proxy Statement is
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`rendered misleading by the omission of critical information.
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`23.
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`Defendants were obligated to carefully review the Proxy Statement prior to its filing
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`with the SEC and dissemination to the Company’s shareholders to ensure that it did not contain
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`any material misrepresentations or omissions. However, the Proxy Statement misrepresents and/or
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`omits material information that is necessary for the Company’s shareholders to make informed
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`decisions regarding whether to vote in favor of the Proposed Transaction, in violation of Sections
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`14(a) and 20(a) of the Exchange Act.
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`24.
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`First, the Proxy Statement omits material information regarding the Company’s
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`financial projections, including the unlevered free cash flows the Company’s financial advisor
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`Evercore Group L.L.C. (“Evercore”) utilized in its Sum-of-the-Parts Discounted Cash Flow
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`Analysis for Nuance, and the underlying line items, as well as the line items underlying Nuance’s
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`whole-company unlevered free cash flows.
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`25.
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`Second, the Proxy Statement omits material information regarding the financial
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`analyses performed by Evercore.
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`26. With respect to Evercore’s Selected Public Company Trading Analysis, the Proxy
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`Statement fails to disclose: (i) the individual multiples and financial metrics for each of the selected
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`companies analyzed by Evercore; (ii) Nuance’s projections utilized in the analysis; (iii) Nuance’s
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`net debt; and (iv) Nuance’s fully diluted outstanding shares.
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`27. With respect to Evercore’s Discounted Cash Flow Analysis, the Proxy Statement
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`fails to disclose: (i) the inputs and assumptions underlying the discount rates ranging from 8.0%
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`to 9.0%; (ii) terminal year unlevered free cash flow; (iii) Nuance’s terminal value; (iv) Nuance’s
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`estimated net debt; and (v) the number of fully diluted shares of Nuance common stock.
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`28. With respect to Evercore’s Sum-of-the-Parts Discounted Cash Flow Analysis, the
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`Proxy Statement fails to disclose: (i) the unlevered cash flows utilized in the analysis; (ii) the inputs
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`and assumptions underlying the discount rates ranging from 8.0% to 9.0% and 17.5% to 22.5%;
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`(iii) terminal year unlevered free cash flows; (iv) the terminal values; (v) Nuance’s estimated net
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`debt; and (vi) the number of fully diluted shares of Nuance common stock.
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`29. With respect to Evercore’s Equity Research Analyst Price Targets analysis, the
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`Proxy Statement fails to disclose: (i) the individual price targets observed; and (ii) the sources
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`thereof.
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`30. With respect to Evercore’s Selected HC & ENT Transactions Analysis and Selected
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`Vertical Software Transactions Analysis, the Proxy Statement fails to disclose: (i) identification
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`of the selected transactions observed; (ii) the individual multiples and financial metrics for each of
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`the selected transactions observed by Evercore; (iii) Nuance’s LTM Revenue; (iv) Nuance’s net
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`debt; and (v) Nuance’s fully diluted outstanding shares.
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`31.
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`Third, The Proxy Statement fails to disclose material information relating to
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`Evercore’s potential conflicts of interest.
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`32.
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`For example, the Proxy Statement fails to disclose the nature of the services
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`Evercore performed for the Company and its affiliates during the two-year period prior to the date
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`of its opinion.
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`33.
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`The omission of the above-referenced material information renders the following
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`sections of the Proxy Statement false and misleading: “Financial Forecasts” and “Opinion of
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`Nuance’s Financial Advisor.”
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`COUNT I
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`For Violations of Section 14(a) and Rule 14a-9 Promulgated Thereunder
`Against All Defendants
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`Plaintiff repeats and realleges each and every allegation contained above as if fully
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`34.
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`set forth herein.
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`35.
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`During the relevant period, Defendants, individually and in concert, directly or
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`indirectly, disseminated or approved the false and misleading Proxy Statement specified above,
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`which failed to disclose material facts necessary in order to make the statements made, in light of
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`the circumstances under which they were made, not misleading, in violation of Section 14(a) of
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`the Exchange Act and Rule 14a-9 promulgated thereunder by the SEC.
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`36.
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`Each of the Individual Defendants, by virtue of his/her positions within the
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`Company as officers and/or directors, were aware of the omitted information but failed to disclose
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`such information, in violation of Section 14(a) of the Exchange Act. Defendants, by use of the
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`mails and means and instrumentalities of interstate commerce, solicited and/or permitted the use
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`of their names to file and disseminate the Proxy Statement with respect to the Proposed
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`Transaction. The Defendants were at least negligent in filing the Proxy Statement with these
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`materially false and misleading statements.
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`37.
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`The omissions and false and misleading statements in the Proxy Statement are
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`material in that a reasonable stockholder would consider them important in deciding how to vote
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`on the Proposed Transaction.
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`38.
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`By reason of the foregoing, the Defendants have violated Section 14(a) of the
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`Exchange Act and SEC Rule 14a-9(a) promulgated thereunder.
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`39.
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`Because of the false and misleading statements in the Proxy Statement, Plaintiff is
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`threatened with irreparable harm.
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`COUNT II
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`For Violations of Section 20(a) of the Exchange Act
`Against the Individual Defendants
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`Plaintiff repeats and realleges each and every allegation contained in the foregoing
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`40.
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`paragraphs as if set forth in full.
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`41.
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`The Individual Defendants acted as controlling persons of Nuance within the
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`meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their positions as
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`officers and/or directors of Nuance, and participation in and/or awareness of the Company’s
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`operations and/or intimate knowledge of the false statements contained in the Proxy Statement
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`filed with the SEC, they had the power to influence and control and did influence and control,
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`directly or indirectly, the decision-making of the Company, including the content and
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`dissemination of the various statements which Plaintiff contends are false and misleading.
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`42.
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`Each of the Individual Defendants was provided with or had unlimited access to
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`copies of the Proxy Statement and other statements alleged by Plaintiff to be misleading prior to
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`and/or shortly after these statements were issued and had the ability to prevent the issuance of the
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`statements or cause the statements to be corrected.
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`43.
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`In particular, each of the Individual Defendants had direct and supervisory
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`involvement in the day-to-day operations of the Company, and, therefore, is presumed to have had
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`the power to control or influence the particular transactions giving rise to the securities violations
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`as alleged herein, and exercised the same. The Proxy Statement at issue contains the unanimous
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`recommendation of each of the Individual Defendants to approve the Proposed Transaction. They
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`were, thus, directly involved in the making of the Proxy Statement.
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`44.
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`In addition, as the Proxy Statement sets forth at length, and as described herein, the
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`Individual Defendants were each involved in negotiating, reviewing, and approving the Proposed
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`Transaction. The Proxy Statement purports to describe the various issues and information that
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`they reviewed and considered—descriptions the Company directors had input into.
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`45.
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`By virtue of the foregoing, the Individual Defendants have violated Section 20(a)
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`of the Exchange Act.
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`46.
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`As set forth above, the Individual Defendants had the ability to exercise control
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`over and did control a person or persons who have each violated Section 14(a) and SEC Rule 14a-
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`9, promulgated thereunder, by their acts and omissions as alleged herein. By virtue of their
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`positions as controlling persons, these Defendants are liable pursuant to Section 20(a) of the
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`Exchange Act. As a direct and proximate result of Defendants’ conduct, Nuance’s stockholders
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`will be irreparably harmed.
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`PRAYER FOR RELIEF
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`WHEREFORE, Plaintiff prays for judgment and relief as follows:
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`A.
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`Preliminarily and permanently enjoining Defendants and all persons acting in
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`concert with them from proceeding with, consummating, or closing the Proposed
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`Transaction and any vote on the Proposed Transaction, unless and until Defendants
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`disclose and disseminate the material information identified above to Nuance
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`stockholders;
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`B.
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`In the event Defendants consummate the Proposed Transaction, rescinding it and
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`setting it aside or awarding rescissory damages to Plaintiff;
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`C.
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`Declaring that Defendants violated Sections 14(a) and/or 20(a) of the Exchange
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`Act, as well as SEC Rule 14a-9 promulgated thereunder;
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`D.
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`Awarding Plaintiff the costs of this action, including reasonable allowance for
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`Plaintiff’s attorneys’ and experts’ fees; and
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`E.
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`Granting such other and further relief as this Court may deem just and proper.
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`JURY DEMAND
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`Plaintiff hereby demands a trial by jury.
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`
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`Dated: June 3, 2021
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`
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`Respectfully submitted,
`
`/s/ Shallom Engel
`Shallom Engel
`Engel Law PLLC
`2329 Nostrand Avenue, Suite 100
`Brooklyn, NY 11210
`Telephone: (917) 573-6555
`Email: shallom@engellawpllc.com
`
`Attorneys for Plaintiff
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`By
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