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`Case 1:21-cv-07681 Document 1 Filed 09/14/21 Page 1 of 10
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`SAVERIO RUSSO,
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`v.
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`MEDALLIA, INC., BORGE HALD, AMY
`PRESSMAN, LESLIE STRETCH, LESLIE
`KILGORE, MITCH DAUERMAN, DOUG
`LEONE, JAMES D. WHITE, ROB
`BERNSHTEYN, STAN MERESMAN, and
`STEVE WALSKE,
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`Defendants.
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`Plaintiff,
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`Case No. ___________
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`JURY TRIAL DEMANDED
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`COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
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`Plaintiff, by his undersigned attorneys, for this complaint against defendants, alleges upon
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`personal knowledge with respect to himself, and upon information and belief based upon, inter
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`alia, the investigation of counsel as to all other allegations herein, as follows:
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`NATURE OF THE ACTION
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`1.
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`This action stems from a proposed transaction announced on July 26, 2021 (the
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`“Proposed Transaction”), pursuant to which Medallia, Inc. (“Medallia” or the “Company”) will be
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`acquired by affiliates of Thoma Bravo, L.P.
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`2.
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`On July 25, 2021, Medallia’s Board of Directors (the “Board” or “Individual
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`Defendants”) caused the Company to enter into an agreement and plan of merger (the “Merger
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`Agreement”) with Project Metal Parent, LLC (“Parent”) and Project Metal Merger Sub, Inc.
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`(“Merger Sub”). Pursuant to the terms of the Merger Agreement, Medallia’s stockholders will
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`receive $34.00 in cash for each share of Medallia common stock they own.
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`Case 1:21-cv-07681 Document 1 Filed 09/14/21 Page 2 of 10
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`3.
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`On September 3, 2021, defendants filed a proxy statement (the “Proxy Statement”)
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`with the United States Securities and Exchange Commission (the “SEC”) in connection with the
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`Proposed Transaction.
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`4.
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`The Proxy Statement omits material information with respect to the Proposed
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`Transaction, which renders the Proxy Statement false and misleading. Accordingly, plaintiff
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`alleges herein that defendants violated Sections 14(a) and 20(a) of the Securities Exchange Act of
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`1934 (the “1934 Act”) in connection with the Proxy Statement.
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`JURISDICTION AND VENUE
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`5.
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`This Court has jurisdiction over the claims asserted herein pursuant to Section 27
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`of the 1934 Act because the claims asserted herein arise under Sections 14(a) and 20(a) of the 1934
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`Act and Rule 14a-9.
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`6.
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`This Court has jurisdiction over defendants because each defendant is either a
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`corporation that conducts business in and maintains operations within this District, or is an
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`individual with sufficient minimum contacts with this District so as to make the exercise of
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`jurisdiction by this Court permissible under traditional notions of fair play and substantial justice.
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`7.
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`Venue is proper under 28 U.S.C. § 1391(b) because a portion of the transactions
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`and wrongs complained of herein occurred in this District.
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`PARTIES
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`8.
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`Plaintiff is, and has been continuously throughout all times relevant hereto, the
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`owner of Medallia common stock.
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`9.
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`Defendant Medallia is a Delaware corporation and a party to the Merger
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`Agreement. Medallia’s common stock is traded on the New York Stock Exchange, which is
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`headquartered in New York, New York, under the ticker symbol “MDLA.”
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`Case 1:21-cv-07681 Document 1 Filed 09/14/21 Page 3 of 10
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`Defendant Borge Hald is Chairman of the Board of Directors of the Company.
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`Defendant Amy Pressman is a director of the Company.
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`Defendant Leslie Stretch is President, Chief Executive Officer, and a director of the
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`Defendant Leslie Kilgore is a director of the Company.
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`Defendant Mitch Dauerman is a director of the Company.
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`Defendant Doug Leone is a director of the Company.
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`Defendant James D. White is a director of the Company.
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`Defendant Rob Bernshteyn is a director of the Company.
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`Defendant Stan Meresman is a director of the Company.
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`Defendant Steve Walske is a director of the Company.
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`The defendants identified in paragraphs 10 through 19 are collectively referred to
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`10.
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`11.
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`12.
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`Company.
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`13.
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`14.
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`15.
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`16.
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`17.
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`18.
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`19.
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`20.
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`herein as the “Individual Defendants.”
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`Background of the Company and the Proposed Transaction
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`SUBSTANTIVE ALLEGATIONS
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`21. Medallia is a pioneer and market leader in customer, employee, citizen, and patient
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`experience.
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`22.
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` Medallia uses proprietary artificial intelligence and machine learning technology
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`to automatically reveal predictive insights that drive powerful business actions and outcomes.
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`23.
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`On July 25, 2021, Medallia’s Board caused the Company to enter into the Merger
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`Agreement.
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`24.
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`Pursuant to the terms of the Merger Agreement, Medallia’s stockholders will
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`receive $34.00 in cash per share.
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`Case 1:21-cv-07681 Document 1 Filed 09/14/21 Page 4 of 10
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`25.
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`According to the press release announcing the Proposed Transaction:
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`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.
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`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. . . .
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`Transaction Details
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`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.
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`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.
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`Timing and Approval
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`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.
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`Case 1:21-cv-07681 Document 1 Filed 09/14/21 Page 5 of 10
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`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.
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`Advisors
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`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.
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`The Proxy Statement Omits Material Information, Rendering It False and Misleading
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`26.
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`Defendants filed the Proxy Statement with the SEC in connection with the Proposed
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`Transaction.
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`27.
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`28.
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`As set forth below, the Proxy Statement omits material information.
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`First, the Proxy Statement omits material information regarding the Company’s
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`financial projections.
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`29. With respect to the Company’s financial projections, the Proxy Statement fails to
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`disclose: (i) all line items used to calculate the projections; and (ii) a reconciliation of all non-
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`GAAP to GAAP metrics.
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`30.
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`The disclosure of projected financial information is material because it provides
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`stockholders with a basis to project the future financial performance of a company, and allows
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`stockholders to better understand the financial analyses performed by the company’s financial
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`advisor in support of its fairness opinion.
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`31.
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`Second, the Proxy Statement omits material information regarding the analyses
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`performed by the Company’s financial advisor, Morgan Stanley & Co. LLC (“Morgan Stanley”).
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`Case 1:21-cv-07681 Document 1 Filed 09/14/21 Page 6 of 10
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`32. With respect to Morgan Stanley’s Public Trading Comparables Analysis, the Proxy
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`Statement fails to disclose the individual multiples and metrics for the companies observed by
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`Morgan Stanley in the analysis.
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`33. With respect to Morgan Stanley’s Discounted Equity Value Analysis, the Proxy
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`Statement fails to disclose: (i) the net cash used in the analysis; (ii) the estimated fully-diluted
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`shares outstanding used in the analysis; and (iii) the individual inputs and assumptions underlying
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`the discount rate.
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`34. With respect to Morgan Stanley’s Discounted Cash Flow Analysis, the Proxy
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`Statement fails to disclose: (i) the terminal values for the Company; (ii) the individual inputs and
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`assumptions underlying the discount rates and perpetuity growth rates; (iii) the net debt and net
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`operating losses used in the analysis; and (iv) the estimated fully-diluted shares outstanding used
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`in the analysis.
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`35. With respect to Morgan Stanley’s Precedent Transactions Multiples Analysis, the
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`Proxy Statement fails to disclose: (i) the announcement and closing dates for the transactions; and
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`(ii) the total values of the transactions.
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`36. With respect to Morgan Stanley’s Illustrative Precedent Transaction Premiums
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`analysis, the Proxy Statement fails to disclose: (i) the transactions observed by Morgan Stanley in
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`the analysis; and (ii) the premiums paid in the transactions.
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`37. With respect to Morgan Stanley’s Equity Research Analysts’ Future Price Targets
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`analysis, the Proxy Statement fails to disclose: (i) the price targets used in the analysis; (ii) the
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`sources thereof; and (iii) the individual inputs and assumptions underlying the discount rate.
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`Case 1:21-cv-07681 Document 1 Filed 09/14/21 Page 7 of 10
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`38. When a banker’s endorsement of the fairness of a transaction is touted to
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`shareholders, the valuation methods used to arrive at that opinion as well as the key inputs and
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`range of ultimate values generated by those analyses must also be fairly disclosed.
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`39.
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`The omission of the above-referenced material information renders the Proxy
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`Statement false and misleading.
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`40.
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`The above-referenced omitted information, if disclosed, would significantly alter
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`the total mix of information available to the Company’s stockholders.
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`COUNT I
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`Claim for Violation of Section 14(a) of the 1934 Act and Rule 14a-9 Promulgated
`Thereunder Against the Individual Defendants and Medallia
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`41.
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`42.
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`Plaintiff repeats and realleges the preceding allegations as if fully set forth herein.
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`The Individual Defendants disseminated the false and misleading Proxy Statement,
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`which contained statements that, in violation of Section 14(a) of the 1934 Act and Rule 14a-9, in
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`light of the circumstances under which they were made, omitted to state material facts necessary
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`to make the statements therein not materially false or misleading. Medallia is liable as the issuer
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`of these statements.
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`43.
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`The Proxy Statement was prepared, reviewed, and/or disseminated by the
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`Individual Defendants. By virtue of their positions within the Company, the Individual Defendants
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`were aware of this information and their duty to disclose this information in the Proxy Statement.
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`44.
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`The Individual Defendants were at least negligent in filing the Proxy Statement
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`with these materially false and misleading statements.
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`45.
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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 will consider them important in deciding how to vote on
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`the Proposed Transaction. In addition, a reasonable investor will view a full and accurate
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`Case 1:21-cv-07681 Document 1 Filed 09/14/21 Page 8 of 10
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`disclosure as significantly altering the total mix of information made available in the Proxy
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`Statement and in other information reasonably available to stockholders.
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`46.
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`The Proxy Statement is an essential link in causing plaintiff to approve the Proposed
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`Transaction.
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`47.
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`By reason of the foregoing, defendants violated Section 14(a) of the 1934 Act and
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`Rule 14a-9 promulgated thereunder.
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`48.
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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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`Claim for Violation of Section 20(a) of the 1934 Act
`Against the Individual Defendants
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`49.
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`50.
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`Plaintiff repeats and realleges the preceding allegations as if fully set forth herein.
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`The Individual Defendants acted as controlling persons of Medallia within the
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`meaning of Section 20(a) of the 1934 Act as alleged herein. By virtue of their positions as officers
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`and/or directors of Medallia and participation in and/or awareness of the Company’s operations
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`and/or intimate knowledge of the false statements contained in the Proxy Statement, they had the
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`power to influence and control and did influence and control, directly or indirectly, the decision
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`making of the Company, including the content and dissemination of the various statements that
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`plaintiff contends are false and misleading.
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`51.
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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 alleged by plaintiff to be misleading prior to and/or shortly after
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`these statements were issued and had the ability to prevent the issuance of the statements or cause
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`them to be corrected.
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`Case 1:21-cv-07681 Document 1 Filed 09/14/21 Page 9 of 10
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`52.
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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 and influence the particular transactions giving rise to the violations as alleged
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`herein, and exercised the same. The Proxy Statement contains the unanimous recommendation of
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`the Individual Defendants to approve the Proposed Transaction. They were thus directly involved
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`in the making of the Proxy Statement.
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`53.
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`By virtue of the foregoing, the Individual Defendants violated Section 20(a) of the
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`1934 Act.
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`54.
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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) of the 1934 Act and
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`Rule 14a-9, by their acts and omissions as alleged herein. By virtue of their positions as controlling
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`persons, these defendants are liable pursuant to Section 20(a) of the 1934 Act. As a direct and
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`proximate result of defendants’ conduct, plaintiff is threatened with irreparable harm.
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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 Transaction;
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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;
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`C.
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`Directing the Individual Defendants to disseminate a Proxy Statement that does not
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`contain any untrue statements of material fact and that states all material facts required in it or
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`necessary to make the statements contained therein not misleading;
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`Case 1:21-cv-07681 Document 1 Filed 09/14/21 Page 10 of 10
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`D.
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`Declaring that defendants violated Sections 14(a) and/or 20(a) of the 1934 Act, as
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`well as Rule 14a-9 promulgated thereunder;
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`E.
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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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`F.
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`Granting such other and further relief as this Court may deem just and proper.
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`Plaintiff hereby requests a trial by jury on all issues so triable.
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`JURY DEMAND
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`Dated: September 14, 2021
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`By:
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`RIGRODSKY LAW, P.A.
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`/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
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`Attorneys for Plaintiff
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