Heather Benzmiller Sultanian is a Partner at Sidley Austin LLP. This post is based on her Sidley memorandum, and is part of the Delaware law series; links to other posts in the series are available here.
In a recent dismissal of all claims in Borsody v. Gibson, the Delaware Court of Chancery grappled with an unusual set of circumstances involving a former director who believed he had been wrongfully removed from a board and prevented from exercising his stock options. Having missed the window for asserting claims against the two officers who allegedly engaged in the wrongful scheme, he instead targeted two new directors who did not join the Board until after the scheme had already been completed.
Plaintiff Mark Borsody co-founded and chaired the Board of a medical device company, Nervive, Inc. The complaint alleged that, in late 2019, Borsody was denied contractually-owed stock options (which had been granted through a Stock Option Agreement) and ousted from the Board after he began to question the interim CEO’s dealings with potential investors. Shortly thereafter, in October 2019, two new directors were appointed to the Board, one of whom had previously served as CEO of Nervive and allegedly felt “personal animus” toward Borsody. The following month, Borsody attempted to exercise his stock options, but Nervive refused to recognize the exercise — despite advice from Nervive’s counsel that Borsody’s claims to the stock options were legitimate.
