throbber

`
`Case 1:21-cv-07681 Document 1 Filed 09/14/21 Page 1 of 10
`
`
`
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`
`SAVERIO RUSSO,
`
`
`
`
`v.
`
`
`MEDALLIA, INC., BORGE HALD, AMY
`PRESSMAN, LESLIE STRETCH, LESLIE
`KILGORE, MITCH DAUERMAN, DOUG
`LEONE, JAMES D. WHITE, ROB
`BERNSHTEYN, STAN MERESMAN, and
`STEVE WALSKE,
`
`
`
`Defendants.
`
`Plaintiff,
`
`
`
`
`Case No. ___________
`
`JURY TRIAL DEMANDED
`
`
`
`
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`
`COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
`
`Plaintiff, by his undersigned attorneys, for this complaint against defendants, alleges upon
`
`personal knowledge with respect to himself, and upon information and belief based upon, inter
`
`alia, the investigation of counsel as to all other allegations herein, as follows:
`
`NATURE OF THE ACTION
`
`1.
`
`This action stems from a proposed transaction announced on July 26, 2021 (the
`
`“Proposed Transaction”), pursuant to which Medallia, Inc. (“Medallia” or the “Company”) will be
`
`acquired by affiliates of Thoma Bravo, L.P.
`
`2.
`
`On July 25, 2021, Medallia’s Board of Directors (the “Board” or “Individual
`
`Defendants”) caused the Company to enter into an agreement and plan of merger (the “Merger
`
`Agreement”) with Project Metal Parent, LLC (“Parent”) and Project Metal Merger Sub, Inc.
`
`(“Merger Sub”). Pursuant to the terms of the Merger Agreement, Medallia’s stockholders will
`
`receive $34.00 in cash for each share of Medallia common stock they own.
`
`
`
`

`

`Case 1:21-cv-07681 Document 1 Filed 09/14/21 Page 2 of 10
`
`
`
`3.
`
`On September 3, 2021, defendants filed a proxy statement (the “Proxy Statement”)
`
`with the United States Securities and Exchange Commission (the “SEC”) in connection with the
`
`Proposed Transaction.
`
`4.
`
`The Proxy Statement omits material information with respect to the Proposed
`
`Transaction, which renders the Proxy Statement false and misleading. Accordingly, plaintiff
`
`alleges herein that defendants violated Sections 14(a) and 20(a) of the Securities Exchange Act of
`
`1934 (the “1934 Act”) in connection with the Proxy Statement.
`
`JURISDICTION AND VENUE
`
`5.
`
`This Court has jurisdiction over the claims asserted herein pursuant to Section 27
`
`of the 1934 Act because the claims asserted herein arise under Sections 14(a) and 20(a) of the 1934
`
`Act and Rule 14a-9.
`
`6.
`
`This Court has jurisdiction over defendants because each defendant is either a
`
`corporation that conducts business in and maintains operations within this District, or is an
`
`individual with sufficient minimum contacts with this District so as to make the exercise of
`
`jurisdiction by this Court permissible under traditional notions of fair play and substantial justice.
`
`7.
`
`Venue is proper under 28 U.S.C. § 1391(b) because a portion of the transactions
`
`and wrongs complained of herein occurred in this District.
`
`PARTIES
`
`8.
`
`Plaintiff is, and has been continuously throughout all times relevant hereto, the
`
`owner of Medallia common stock.
`
`9.
`
`Defendant Medallia is a Delaware corporation and a party to the Merger
`
`Agreement. Medallia’s common stock is traded on the New York Stock Exchange, which is
`
`headquartered in New York, New York, under the ticker symbol “MDLA.”
`
`
`
`2
`
`

`

`Case 1:21-cv-07681 Document 1 Filed 09/14/21 Page 3 of 10
`
`
`
`Defendant Borge Hald is Chairman of the Board of Directors of the Company.
`
`Defendant Amy Pressman is a director of the Company.
`
`Defendant Leslie Stretch is President, Chief Executive Officer, and a director of the
`
`Defendant Leslie Kilgore is a director of the Company.
`
`Defendant Mitch Dauerman is a director of the Company.
`
`Defendant Doug Leone is a director of the Company.
`
`Defendant James D. White is a director of the Company.
`
`Defendant Rob Bernshteyn is a director of the Company.
`
`Defendant Stan Meresman is a director of the Company.
`
`Defendant Steve Walske is a director of the Company.
`
`The defendants identified in paragraphs 10 through 19 are collectively referred to
`
`10.
`
`11.
`
`12.
`
`Company.
`
`13.
`
`14.
`
`15.
`
`16.
`
`17.
`
`18.
`
`19.
`
`20.
`
`herein as the “Individual Defendants.”
`
`
`Background of the Company and the Proposed Transaction
`
`SUBSTANTIVE ALLEGATIONS
`
`21. Medallia is a pioneer and market leader in customer, employee, citizen, and patient
`
`experience.
`
`22.
`
` Medallia uses proprietary artificial intelligence and machine learning technology
`
`to automatically reveal predictive insights that drive powerful business actions and outcomes.
`
`23.
`
`On July 25, 2021, Medallia’s Board caused the Company to enter into the Merger
`
`Agreement.
`
`24.
`
`Pursuant to the terms of the Merger Agreement, Medallia’s stockholders will
`
`receive $34.00 in cash per share.
`
`
`
`3
`
`

`

`Case 1:21-cv-07681 Document 1 Filed 09/14/21 Page 4 of 10
`
`
`
`25.
`
`According to the press release announcing the Proposed Transaction:
`
`Medallia, Inc. (NYSE: MDLA) (“Medallia”), the global leader in customer and
`employee experience, today announced that it has entered into a definitive
`agreement to be acquired by Thoma Bravo, a leading software investment firm, in
`an all-cash transaction that values Medallia at $6.4 billion. Through this transaction,
`Medallia will become a private company with additional resources and greater
`flexibility to build on its innovation leadership and expand its customer impact.
`Additionally, the transaction will allow Medallia to benefit from the operating
`capabilities, capital support and deep sector expertise of Thoma Bravo – one of the
`most experienced and successful software investors in the world.
`
`Under the terms of the agreement, Medallia shareholders will receive $34.00 per
`share in cash, which represents a premium of approximately 20% to Medallia’s
`unaffected closing stock price on June 10, 2021, the last full trading day prior to
`media reports regarding a possible transaction, and a premium of approximately
`29% to Medallia’s unaffected 30-day average price. . . .
`
`Transaction Details
`
`Following an unsolicited approach regarding an acquisition, the Medallia Board of
`Directors engaged in a robust strategic review process with the assistance of
`independent legal and financial advisors. This included an evaluation of Medallia’s
`strategic plan as an independent company and other strategic alternatives.
`Following this process, the Medallia Board unanimously approved the transaction
`with Thoma Bravo, as it provides Medallia’s shareholders with immediate and
`certain value.
`
`Thoma Bravo has also entered into voting agreements with Medallia’s directors and
`executive officers, and investment funds affiliated with these individuals. Under
`these agreements, which represent approximately 34% of Medallia’s outstanding
`shares, the applicable shareholders have agreed to vote in favor of the transaction,
`subject to certain terms and conditions contained therein.
`
`Timing and Approval
`
`The agreement includes a 40-day “go-shop” period expiring on September 4, 2021.
`During this period, Medallia, assisted by its legal and financial advisors will
`actively initiate, solicit and consider alternative acquisition proposals from third
`parties. The Medallia Board will have the right to terminate the merger agreement
`to enter into a superior proposal, subject to the terms and conditions of the merger
`agreement. There can be no assurance that this “go-shop” process will result in a
`superior proposal, and Medallia does not intend to disclose developments with
`respect to the solicitation process unless and until it determines that such disclosure
`is appropriate or otherwise required.
`
`4
`
`
`
`
`
`

`

`Case 1:21-cv-07681 Document 1 Filed 09/14/21 Page 5 of 10
`
`
`
`The transaction is expected to close in 2021, subject to customary closing
`conditions, including approval by Medallia shareholders and receipt of regulatory
`approvals. Upon completion of the transaction, Medallia’s common stock will no
`longer be listed on any public market. Medallia will remain headquartered in San
`Francisco.
`
`Advisors
`
`Morgan Stanley & Co. LLC is serving as lead financial advisor to Medallia, and
`BofA Securities and Wells Fargo Securities are also serving as financial advisors.
`Wilson Sonsini Goodrich & Rosati, Professional Corporation is serving as
`Medallia’s legal advisor. Kirkland & Ellis LLP is serving as legal advisor to Thoma
`Bravo. Debt financing for the transaction is being provided by Blackstone Credit,
`certain funds managed by affiliates of Apollo Capital Management, L.P., KKR
`Credit, Thoma Bravo Credit and Antares Capital.
`
`The Proxy Statement Omits Material Information, Rendering It False and Misleading
`
`26.
`
`Defendants filed the Proxy Statement with the SEC in connection with the Proposed
`
`Transaction.
`
`27.
`
`28.
`
`As set forth below, the Proxy Statement omits material information.
`
`First, the Proxy Statement omits material information regarding the Company’s
`
`financial projections.
`
`29. With respect to the Company’s financial projections, the Proxy Statement fails to
`
`disclose: (i) all line items used to calculate the projections; and (ii) a reconciliation of all non-
`
`GAAP to GAAP metrics.
`
`30.
`
`The disclosure of projected financial information is material because it provides
`
`stockholders with a basis to project the future financial performance of a company, and allows
`
`stockholders to better understand the financial analyses performed by the company’s financial
`
`advisor in support of its fairness opinion.
`
`31.
`
`Second, the Proxy Statement omits material information regarding the analyses
`
`performed by the Company’s financial advisor, Morgan Stanley & Co. LLC (“Morgan Stanley”).
`
`
`
`5
`
`

`

`Case 1:21-cv-07681 Document 1 Filed 09/14/21 Page 6 of 10
`
`
`
`32. With respect to Morgan Stanley’s Public Trading Comparables Analysis, the Proxy
`
`Statement fails to disclose the individual multiples and metrics for the companies observed by
`
`Morgan Stanley in the analysis.
`
`33. With respect to Morgan Stanley’s Discounted Equity Value Analysis, the Proxy
`
`Statement fails to disclose: (i) the net cash used in the analysis; (ii) the estimated fully-diluted
`
`shares outstanding used in the analysis; and (iii) the individual inputs and assumptions underlying
`
`the discount rate.
`
`34. With respect to Morgan Stanley’s Discounted Cash Flow Analysis, the Proxy
`
`Statement fails to disclose: (i) the terminal values for the Company; (ii) the individual inputs and
`
`assumptions underlying the discount rates and perpetuity growth rates; (iii) the net debt and net
`
`operating losses used in the analysis; and (iv) the estimated fully-diluted shares outstanding used
`
`in the analysis.
`
`35. With respect to Morgan Stanley’s Precedent Transactions Multiples Analysis, the
`
`Proxy Statement fails to disclose: (i) the announcement and closing dates for the transactions; and
`
`(ii) the total values of the transactions.
`
`36. With respect to Morgan Stanley’s Illustrative Precedent Transaction Premiums
`
`analysis, the Proxy Statement fails to disclose: (i) the transactions observed by Morgan Stanley in
`
`the analysis; and (ii) the premiums paid in the transactions.
`
`37. With respect to Morgan Stanley’s Equity Research Analysts’ Future Price Targets
`
`analysis, the Proxy Statement fails to disclose: (i) the price targets used in the analysis; (ii) the
`
`sources thereof; and (iii) the individual inputs and assumptions underlying the discount rate.
`
`
`
`6
`
`

`

`Case 1:21-cv-07681 Document 1 Filed 09/14/21 Page 7 of 10
`
`
`
`38. When a banker’s endorsement of the fairness of a transaction is touted to
`
`shareholders, the valuation methods used to arrive at that opinion as well as the key inputs and
`
`range of ultimate values generated by those analyses must also be fairly disclosed.
`
`39.
`
`The omission of the above-referenced material information renders the Proxy
`
`Statement false and misleading.
`
`40.
`
`The above-referenced omitted information, if disclosed, would significantly alter
`
`the total mix of information available to the Company’s stockholders.
`
`COUNT I
`
`Claim for Violation of Section 14(a) of the 1934 Act and Rule 14a-9 Promulgated
`Thereunder Against the Individual Defendants and Medallia
`
`41.
`
`42.
`
`Plaintiff repeats and realleges the preceding allegations as if fully set forth herein.
`
`The Individual Defendants disseminated the false and misleading Proxy Statement,
`
`which contained statements that, in violation of Section 14(a) of the 1934 Act and Rule 14a-9, in
`
`light of the circumstances under which they were made, omitted to state material facts necessary
`
`to make the statements therein not materially false or misleading. Medallia is liable as the issuer
`
`of these statements.
`
`43.
`
`The Proxy Statement was prepared, reviewed, and/or disseminated by the
`
`Individual Defendants. By virtue of their positions within the Company, the Individual Defendants
`
`were aware of this information and their duty to disclose this information in the Proxy Statement.
`
`44.
`
`The Individual Defendants were at least negligent in filing the Proxy Statement
`
`with these materially false and misleading statements.
`
`45.
`
`The omissions and false and misleading statements in the Proxy Statement are
`
`material in that a reasonable stockholder will consider them important in deciding how to vote on
`
`the Proposed Transaction. In addition, a reasonable investor will view a full and accurate
`
`
`
`7
`
`

`

`Case 1:21-cv-07681 Document 1 Filed 09/14/21 Page 8 of 10
`
`
`
`disclosure as significantly altering the total mix of information made available in the Proxy
`
`Statement and in other information reasonably available to stockholders.
`
`46.
`
`The Proxy Statement is an essential link in causing plaintiff to approve the Proposed
`
`Transaction.
`
`47.
`
`By reason of the foregoing, defendants violated Section 14(a) of the 1934 Act and
`
`Rule 14a-9 promulgated thereunder.
`
`48.
`
`Because of the false and misleading statements in the Proxy Statement, plaintiff is
`
`threatened with irreparable harm.
`
`COUNT II
`
`Claim for Violation of Section 20(a) of the 1934 Act
`Against the Individual Defendants
`
`49.
`
`50.
`
`Plaintiff repeats and realleges the preceding allegations as if fully set forth herein.
`
`The Individual Defendants acted as controlling persons of Medallia within the
`
`meaning of Section 20(a) of the 1934 Act as alleged herein. By virtue of their positions as officers
`
`and/or directors of Medallia and participation in and/or awareness of the Company’s operations
`
`and/or intimate knowledge of the false statements contained in the Proxy Statement, they had the
`
`power to influence and control and did influence and control, directly or indirectly, the decision
`
`making of the Company, including the content and dissemination of the various statements that
`
`plaintiff contends are false and misleading.
`
`51.
`
`Each of the Individual Defendants was provided with or had unlimited access to
`
`copies of the Proxy Statement alleged by plaintiff to be misleading prior to and/or shortly after
`
`these statements were issued and had the ability to prevent the issuance of the statements or cause
`
`them to be corrected.
`
`
`
`8
`
`

`

`Case 1:21-cv-07681 Document 1 Filed 09/14/21 Page 9 of 10
`
`
`
`52.
`
`In particular, each of the Individual Defendants had direct and supervisory
`
`involvement in the day-to-day operations of the Company, and, therefore, is presumed to have had
`
`the power to control and influence the particular transactions giving rise to the violations as alleged
`
`herein, and exercised the same. The Proxy Statement contains the unanimous recommendation of
`
`the Individual Defendants to approve the Proposed Transaction. They were thus directly involved
`
`in the making of the Proxy Statement.
`
`53.
`
`By virtue of the foregoing, the Individual Defendants violated Section 20(a) of the
`
`1934 Act.
`
`54.
`
`As set forth above, the Individual Defendants had the ability to exercise control
`
`over and did control a person or persons who have each violated Section 14(a) of the 1934 Act and
`
`Rule 14a-9, by their acts and omissions as alleged herein. By virtue of their positions as controlling
`
`persons, these defendants are liable pursuant to Section 20(a) of the 1934 Act. As a direct and
`
`proximate result of defendants’ conduct, plaintiff is threatened with irreparable harm.
`
`PRAYER FOR RELIEF
`
`
`
`WHEREFORE, plaintiff prays for judgment and relief as follows:
`
`A.
`
`Preliminarily and permanently enjoining defendants and all persons acting in
`
`concert with them from proceeding with, consummating, or closing the Proposed Transaction;
`
`B.
`
`In the event defendants consummate the Proposed Transaction, rescinding it and
`
`setting it aside or awarding rescissory damages;
`
`C.
`
`Directing the Individual Defendants to disseminate a Proxy Statement that does not
`
`contain any untrue statements of material fact and that states all material facts required in it or
`
`necessary to make the statements contained therein not misleading;
`
`
`
`9
`
`

`

`Case 1:21-cv-07681 Document 1 Filed 09/14/21 Page 10 of 10
`
`
`
`D.
`
`Declaring that defendants violated Sections 14(a) and/or 20(a) of the 1934 Act, as
`
`well as Rule 14a-9 promulgated thereunder;
`
`E.
`
`Awarding plaintiff the costs of this action, including reasonable allowance for
`
`plaintiff’s attorneys’ and experts’ fees; and
`
`F.
`
`Granting such other and further relief as this Court may deem just and proper.
`
`
`
`Plaintiff hereby requests a trial by jury on all issues so triable.
`
`JURY DEMAND
`
`Dated: September 14, 2021
`
`
`
`
`
`
`
`By:
`
`
`
`RIGRODSKY LAW, P.A.
`
`/s/ Gina M. Serra
`Seth D. Rigrodsky
`Timothy J. MacFall
`Gina M. Serra
`Vincent A. Licata
`825 East Gate Boulevard, Suite 300
`Garden City, NY 11530
`Telephone: (516) 683-3516
`Email: sdr@rl-legal.com
`Email: tjm@rl-legal.com
`Email: gms@rl-legal.com
`Email: vl@rl-legal.com
`
`Attorneys for Plaintiff
`
`10
`
`

This document is available on Docket Alarm but you must sign up to view it.


Or .

Accessing this document will incur an additional charge of $.

After purchase, you can access this document again without charge.

Accept $ Charge
throbber

Still Working On It

This document is taking longer than usual to download. This can happen if we need to contact the court directly to obtain the document and their servers are running slowly.

Give it another minute or two to complete, and then try the refresh button.

throbber

A few More Minutes ... Still Working

It can take up to 5 minutes for us to download a document if the court servers are running slowly.

Thank you for your continued patience.

This document could not be displayed.

We could not find this document within its docket. Please go back to the docket page and check the link. If that does not work, go back to the docket and refresh it to pull the newest information.

Your account does not support viewing this document.

You need a Paid Account to view this document. Click here to change your account type.

Your account does not support viewing this document.

Set your membership status to view this document.

With a Docket Alarm membership, you'll get a whole lot more, including:

  • Up-to-date information for this case.
  • Email alerts whenever there is an update.
  • Full text search for other cases.
  • Get email alerts whenever a new case matches your search.

Become a Member

One Moment Please

The filing “” is large (MB) and is being downloaded.

Please refresh this page in a few minutes to see if the filing has been downloaded. The filing will also be emailed to you when the download completes.

Your document is on its way!

If you do not receive the document in five minutes, contact support at support@docketalarm.com.

Sealed Document

We are unable to display this document, it may be under a court ordered seal.

If you have proper credentials to access the file, you may proceed directly to the court's system using your government issued username and password.


Access Government Site

We are redirecting you
to a mobile optimized page.





Document Unreadable or Corrupt

Refresh this Document
Go to the Docket

We are unable to display this document.

Refresh this Document
Go to the Docket