New York – August 24, 2022 – Cooley successfully defended Enovix, which designs, develops and manufactures an advanced silicon-anode lithium-ion battery using proprietary 3D cell architecture, against a strike suit, achieving dismissal and a denial of the plaintiff’s motion for attorneys’ fees and expenses. Partners Shannon Eagan and Sarah Lightdale led the Cooley team representing Enovix.
In March 2021, Enovix’s predecessor, Rodgers Silicon Valley Acquisition Corp. (RSVAC), filed a preliminary proxy statement with the US Securities and Exchange Commission (SEC) related to a business combination with Enovix. In April 2021, a complaint was filed in the United States District Court for the Southern District of New York against Enovix by a stockholder seeking to enjoin the business combination and alleging that the defendants violated the Securities Exchange Act of 1934, and that the individual defendants breached their fiduciary duties under Delaware law by entering into the transaction and failing to meet their disclosure obligations.
The business combination was completed in July 2021 after RSVAC filed several amended proxy statements with additional disclosures to address SEC comment letters.
In October 2021, the stockholder voluntarily dismissed the action. But in December 2021, the stockholder’s attorneys filed a motion for their attorneys’ fees, arguing that the complaint resulted in supplemental disclosures that substantially benefitted RSVAC shareholders. Enovix opposed the motion, arguing that the supplemental disclosures were made as part of the ordinary course of the SEC review process, not in response to the complaint.
On August 23, 2022, US District Judge Andrew L. Carter Jr. sided with Enovix and dismissed the fee motion, finding no indication that the additional disclosures were made in response to the stockholder’s complaint, and stating that “simply filing suit is not enough.”
This controversial merger litigation practice of mootness fees occurs when plaintiff firms file objections to mergers and other large-scale transactions on the premise of seeking additional disclosures. To avoid the disastrous economic consequences of stalling a deal, the defendant corporation often agrees to make immaterial supplemental disclosures designed to “moot” plaintiff claims. After a deal closes, the plaintiff’s counsel demands a “mootness fee” to compensate them for the supposed benefit they achieved for shareholders from such disclosures. In this case, Enovix relied on Cooley to successfully represent it in refusing to make the immaterial disclosures or pay the attorneys’ fees the plaintiff stockholder demanded.
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