Exhibit List Party

Cal. Super. - 6th Dist.July 28, 2020

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 20CV368776 Santa Clara - Civil DURIE TANGRI LLP RAGESH K. TANGRI (SBN 159477) rtangri@durietangri.com DAVID McGOWAN (SBN 154289) dmcgowan@durietangri.com BETHANY D. BENGFORT (SBN 3 12507) bbengfort@durietangri.com 217 Leidesdorff Street San Francisco, CA 941 11 Telephone: 415-362-6666 Facsimile: 4 1 5-236-6300 Attorneys for Defendants R. Nguy¢ Electronically Filed by Superior Court of CA, County of Santa Clara, on 10/28/2021 1:46 PM Reviewed By: R. Nguyen Case #20CV368776 Envelope: 7558565 MORRISON & FOERSTER LLP and PAUL L. LION, III SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SANTA CLARA ALLISON Hl] Y NH, Plaintiff, V. MORRISON & FOERSTER, LLP, PAUL L. LION, III, and DOES 1-20, Inclusive, Defendants. Case N0. 20CV368776 EXHIBITS A-F [PUBLIC] TO: RAGESH K. TANGRI’S DECLARATION IN SUPPORT OF DEFENDANTS’ DEMURRER TO PLAINTIFF’S FIRST AMENDED COMPLAINT Date: TBD Time: 9:00 am. Dept: 19, 161 North First Street Judge: Honorable Peter Kirwan EXHIBITS A-F TO: RAGESH K. TANGRI’S DECLARATION IN SUPPORT OF DEFENDANTS’ DEMURRER TO PLAINTIFF’S FIRST AMENDED COMPLAINT / CASE NO. 20CV368776 3n EXHIBIT A 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DURIE TANGRI LLP RAGESH K. TANGRI (SBN 159477) rtangri@durietangri.com DAVID McGOWAN (SBN 154289) dmcgowan@durietangri.com BETHANY D. BENGFORT (SBN 3 12507) bbengfort@durietangri.com 217 Leidesdorff Street San Francisco, CA 941 11 Telephone: 415-362-6666 Facsimile: 415-236-6300 Attorneys for Defendants MORRISON & FOERSTER LLP and PAUL L. LION, III SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SANTA CLARA ALLISON HUYNH, Case No. 20CV368776 Plaintiff, DEFENDANTS’ NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFF’S V. COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES MORRISON & FOERSTER, LLP, PAUL L. LION, III, and DOES 1-20, Inclusive, Date: TBD Time: 9:00 a.m. Defendants. Dept: 19, 161 North First Street Judge: Honorable Peter H. Kirwan DEFENDANTS’ NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFF’S COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TO PLAINTIFF ALLISON HUYNH AND HER COUNSEL OF RECORD: PLEASE TAKE NOTICE THAT 0n such date as the Court may hereafter direct, at 9:00 a.m., or as soon thereafter as the matter may be heard in Department 19 0f the above-entitled Court located at 191 North First Street, San Jose, California 951 13, Defendants Morrison & Foerster LLP and Paul L. Lion, III (“Defendants”) Will and hereby do demur to the Complaint (“Complaint”) filed by Plaintiff Allison Huynh (“Plaintiff”) pursuant to California Code of Civil Procedure section 430.10, et seq., 0n the grounds that Plaintiff” s causes 0f action fail t0 state a claim upon which relief can be granted, are barred by the statute 0f limitations, and must be brought, if at all, as derivative claims. The Defendants’ Demurrer is based upon Code 0f Civil Procedure section 430.10(e); the Complaint; this Demurrer; the accompanying Memorandum 0f Points and Authorities, Request for Judicial Notice, and exhibits thereto; and such other and further evidence and arguments as may hereafter be adduced and any further argument 0r evidence that may be received by the Court at the hearing. Dated: April 16, 2021 DURIE TANGRI LLP BVI /s/ Rages}; K. Tangri RAGESH K. TANGRI Attorneys for Defendants MORRISON & FOERSTER LLP and PAUL L. LION. III 1 DEFENDANTS’ NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFF’S COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DEMURRER Pursuant t0 section 430. 10, et seq., 0f the California Code of Civil Procedure, Defendants generally demur to the Complaint filed by Plaintiff 0n the following grounds: DEMURRER TO FIRST CAUSE OF ACTION (Breach of Fiduciary Duty against All Defendants) Defendants demur t0 this cause 0f action 0n the ground that it is barred by the applicable statute 0f limitations, it does not state facts sufficient to constitute a cause 0f action, and it must be brought, if it all, as a derivative claim. DEMURRER TO SECOND CAUSE OF ACTION (Intentional Interference With Prospective Economic Advantage against All Defendants) Defendants demur to this cause of action 0n the ground that it is barred by the applicable statute of limitations, it does not state facts sufficient t0 constitute a cause of action, it is based 0n conduct that is protected by privilege, and it must be brought, if it all, as a derivative claim. DEMURRER TO THIRD CAUSE OF ACTION (Negligent Interference With Prospective Economic Advantage against All Defendants) Defendants demur to this cause of action on the ground that it is barred by the applicable statute 0f limitations, it does not state facts sufficient to constitute a cause 0f action, it is based 0n conduct that is protected by privilege, and it must be brought, if it all, as a derivative claim. WHEREFORE, Defendants pray that: 1. The Demurrer be sustained Without leave t0 amend; 2. The Court enter an order dismissing the action; 3. Defendants be awarded the costs 0f this action; and 4. The Court grant such other and further relief as the Court may deem proper. Dated: April 16, 2021 DURIE TANGRI LLP Bv: /s/Ragesh K. Tangri RAGESH K. TANGRI Attorneys for Defendants MORRISON & FOERSTER LLP and PAULlL. LION. III DEFENDANTS’ NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFF’S COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 II. III. IV. TABLE OF CONTENTS Page INTRODUCTION ........................................................................................................................... 1 FACTUAL BACKGROUND ..........................................................................................................2 A. The Dissolution Action ........................................................................................................2 B. The Derivative Action .......................................................................................................... 3 C. The Bankruptcy Action ........................................................................................................ 3 D. The Instant Action ................................................................................................................4 LEGAL STANDARD ......................................................................................................................4 ARGUMENT ................................................................................................................................... 5 A. A11 0f Plaintiff’ s Claims are Barred by the Statute 0f Limitations for Attorney Misconduct ........................................................................................................................... 5 1. Plaintiff’ s Claims are Subject t0 Section 340.6(a) ................................................... 5 2. Plaintiff was 0n Inquiry Notice of Her Claims 0n March 22, 2019 at the Latest ........................................................................................................................ 6 B. A11 of Plaintiff s Claims Must Be Brought as Derivative Claims ....................................... 8 C. The First Cause 0f Action Fails for the Additional Reason that Defendants Cannot Be Liable for Breach 0f Fiduciary Duties Because They Owe N0 Duty to Plaintiff...........9 D. The Second and Third Causes 0fAction Fail Because Defendants Cannot be Liable for Interfering With Plaintiff s Contractual Relations ............................................. 11 E. The Second and Third Causes 0fAction Fail for the Additional Reason that Defendants Cannot Be Liable for Tortious Interference Because They Are Agents 0f a Party t0 the Economic Relationship ............................................................................ 12 CONCLUSION .............................................................................................................................. 13 i DEFENDANTS’ NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFF’S COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES Page(s) Cases Applied Equipment Corp. v. Litton Saudi Arabia Ltd, 7 Cal. 4th 503 (1994) ............................................................................................................................ 12 Aubry v. Tri-City Hosp. Dist, 2 Cal. 4th 962 (1992) .............................................................................................................................. 9 Blank v. Kirwan, 39 Cal. 3d 311 (1985) ............................................................................................................................. 5 Genisman v. Carley, 29 Cal. App. 5th 45 (2018) ................................................................................................................. 6, 8 Gutierrez v. Girardi, 194 Cal. App. 4th 925 (201 1) ................................................................................................................. 9 Ixchel Pharma, LLC v. Biogen, Ina, 9 Cal. 5th 1130 (2020) ............................................................................................................................ 6 Kahala Royal Corp. v. Goodsill Anderson Quinn & Stifel, 151 P.3d 732 (Haw. 2007) .................................................................................................................... 11 Kasparian v. Cly. ofLos Angeles, 38 Cal. App. 4th 242 (1995) ................................................................................................................. 12 K00 v. Rubia ’s Restaurants, Ina, 109 Cal. App. 4th 719 (2003) ................................................................................................................. 9 Lee v. Hartley, 61 Cal. 4th 1225 (2015) ...................................................................................................................... 5, 6 Maness v. Star-Kist Foods, Ina, 7 F.3d 704 (8th Cir. 1993) .................................................................................................................... 11 McDermott, Will & Emery v. Superior Court (James), 83 Cal. App. 4th 378 (2000) ............................................................................................................... 8, 9 Panoutsopoulos v. Chambliss, 157 Cal. App. 4th 297 (2007) ............................................................................................................... 12 Patrick v. Alacer Corp, 167 Cal. App. 4th 995 (2008) ................................................................................................................. 8 Rakestraw v. California Physicians ’ Serv. , 81 Cal. App. 4th 39 (2000) ..................................................................................................................... 4 ii DEFENDANTS’ NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFF’S COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Redfearn v. Trader Joe ’s C0., 20 Cal. App. 5th 989 (2018) ................................................................................................................. 13 Responsible Citizens v. Superior Court (Askins), 16 Cal. App. 4th 1717 (1993) ................................................................................................................. 9 Reynolds v. Schrock, 142 P.3d 1062 (Or. 2006) ............................................................................................................... 11, 12 Schott v. Glover, 440 N.E.2d 376 (Ill. App. Ct. 1982) ..................................................................................................... 12 Schuster v. Gardner, 127 Cal. App. 4th 305 (2005) ................................................................................................................. 8 Sirott v. Latts, 6 Cal. App. 4th 923 (1992) ..................................................................................................................... 5 Skarbrevik v. Cohen, England & Whitfield, 231 Cal. App. 3d 692 (1991) ............................................................................................................ 9, 10 Troche v. Daley, 217 Cal. App. 3d 403 (1990) .................................................................................................................. 8 U.S. Bank NA. v. Ocean Towers Housing Corp, No. CV 16-3487-DSF(EX), 2017 WL 7240726 (C.D. Cal. Dec. 7, 2017) .............................................. 9 Zenith Ins. C0. v. O’Connor, 148 Cal. App. 4th 998 (2007) ................................................................................................................. 9 Statutes Cal. CiV. Proc. Code § 340.6 ........................................................................................................................ 5 Rules Cal. R. Prof’I Conduct, R. 1.6 ....................................................................................................................... 6 Cal. R. Prof’l Conduct, R. 1.9 ....................................................................................................................... 6 Cal. R. Profl Conduct, R. 1.13 ................................................................................................................... 10 Other Authorities Mark L. Tuft, et 211., California Practice Guide, Professional Responsibility § 32107.2 (Rutter Grp. 2020 Update) .................................................................................................................... 10 iii DEFENDANTS’ NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFF’S COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION Plaintiff has been involved in contentious divorce proceedings With her husband Scott Hassan (“Hassan”) since 2015. This case is the second collateral lawsuit Plaintiff has filed relating to the divorce, in her effort t0 obtain What she alleges is “her rightful share of community property.” Compl. 1] 1. The first collateral lawsuit was a shareholder derivative suit in Delaware relating t0 Suitable Technologies, Inc. (“Suitable”). In 2019, Suitable attempted to sell substantially all of its assets for $400,000. Plaintiff spent over $1 million in attorneys’ fees arguing that the price was too 10W. Suitable was forced into bankruptcy and auctioned off its assets, eventually selling them f0r-$400,000. Plaintiff “was unable to recover” these fees in the divorce case, Compl. 1] 11, so she filed this one. Plaintiff alleges that Defendants owe her a duty personally because they previously represented a different company, MyDream Interactive, Inc. (“MyDream”), Which she owned. She alleges that Defendants breached fiduciary duties to her by: (1) representing Hassan in the divorce proceedings; and (2) arranging transactions for Suitable and another of Hassan’s companies, Willow Garage, Inc. (“Willow Garage”), that were designed t0 deprive Plaintiff of her rightful share of the community assets. Plaintiff also alleges that Defendants’ conduct intentionally or negligently interfered with her prospective economic relationship with Hassan. In brief, in this case Plaintiff seeks to mix a divorce proceeding With a derivative suit t0 produce a malpractice claim. Plaintiff’s claims fail for five reasons. First, Plaintiff’s claims arise from conduct that occurred, that she knew about, and that she in fact challenged as a breach 0f duty, prior t0 July 28, 2019, more than one year before she filed her Complaint. Plaintiff s claims are thus barred by the one- year statute of limitations. Second, Plaintiff s claim for damages is based on conduct by Defendants that allegedly decreased the value of Suitable and Willow Garage. These types of claims must be brought as derivative actions 0n behalf 0f the companies, as Plaintiff brought in the case for Which she seeks fees, not as individual actions on behalf of a shareholder. Third, Plaintiff has failed t0 allege that Defendants owe any duty t0 her personally, as the facts in the Complaint demonstrate that Defendants owed a duty t0 MyDream, not t0 Plaintiff. Fourth, any claim that Defendants are liable for aiding Hassan in breaching 1 DEFENDANTS’ NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFF’S COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES / CASE NO. 20CV368776 10 u 12 B 14 w 16 17 18 19 20 21 22 23 24 25 26 27 28 his fiduciary duties is barred by the tort-law privilege for legal advice. Finally, Defendants cannot be held liable for interfering With Plaintiff’ s prospective economic relationship because they are not “strangers t0” that relationship, but rather the agents 0f a party t0 the relationship. For these reasons, and as explained more fully below, all of Plaintiff s claims fail as a matter of law and cannot be cured by amendment. The Court should thus sustain Defendants’ demurrer Without leave to amend.1 H. FACTUALBACKGROUNDZ Plaintiff married Hassan 0n December 20, 2001. Compl. 1] 20. During their marriage, Defendant Paul L. Lion, III, a partner with Defendant Morrison & Foerster LLP, represented a number of companies owned and founded by Hassan. Id. 1H] 38, 50; see also Request for Judicial Notice in Support of Defendants’ Demurrer t0 Plaintiff’ s Complaint (“RJN”) EX. 1 at 6-7. These companies include Suitable, which Defendants began representing on 0r around January 19, 201 1, and Willow Garage, Which Defendants began representing on 0r around October 31, 2006. RJN EX. 1 at 3, 6-7. Defendants also represented one company owned and founded by Plaintiff, MyDream, from 2011 t0 2016. Compl. 1W 25-27; RJN Ex. 1 at 4. A. The Dissolution Action On January 8, 2015, Plaintiff initiated an action for dissolution of her marriage t0 Hassan (the “Dissolution Action”). Compl. 1] 20. Hassan hired the law firm Blevans & Blevans t0 represent him in the Dissolution Action. RJN EX. 1 at 3. Plaintiff terminated Defendants as counsel to MyDream in March 2016. Compl. fl 27. Three years later, 0n March 22, 2019, two attorneys from Defendant Morrison & Foerster LLP associated in as co-counsel in the Dissolution Action. Compl. fl 32; RJN EX. 1 at EX. 1. On June 28, 2019, Plaintiff filed a request t0 disqualify Defendant Morrison & Foerster LLP from representing Hassan in the Dissolution Action (the “Disqualification Motion”). RJN EX. 1. In the Disqualification 1 Prior to filing this Demurrer, on August 25, 2020, counsel for the parties met and conferred by telephone regarding the bases for the Demurrer and were unable to resolve the issues. Such efforts continued Via email until March 3 1, 2021 Without success. Decl. 0f Ragesh K. Tangri in Supp. 0f Defs.’ Demurrer t0 P1.’s Compl. filed herewith 1H 2-3. 2 Defendants assume the truth 0f the allegations of the Complaint, as they must on a demurrer, solely for purposes of the demurrer. 2 DEFENDANTS’ NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFF’S COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Motion, Plaintiff contended that Defendant Morrison & Foerster LLP represented not only Suitable, Willow Garage, MyDream, and other companies during Plaintiff and Hassan’s marriage, but also Plaintiff personally. See generally id. According t0 Plaintiff, Defendant Morrison & Foerster LLP’s representation 0f the companies as well as its representation 0f her personally created disqualifying conflicts 0f interest in light of the fact that the division 0f these assets was at issue in the Dissolution Action. See generally id. The court granted the Disqualification Motion 0n August 28, 2019. Compl. 1] 35. B. The Derivative Action On August 22, 2019, Suitable agreed t0 sell substantially all 0f its assets t0 Blue Ocean Robotics ApS (“Blue Ocean”) for a price 0f $400,000. Compl. 1] 40. Defendants represented Suitable in this sale. Compl. 1] 39. On November 5, 2019, Plaintiff filed a derivative action (the “Derivative Action”) 0n behalf 0f Suitable in the Delaware Court 0f Chancery (the “Chancery Court”) seeking a preliminary injunction t0 block the sale. See RJN EX. 2 at 3:1 1-15. Plaintiff alleged that Hassan breached his fiduciary duty t0 Suitable by undervaluing Suitable’s assets in the sale t0 Blue Ocean. Id. at 3:22-24. On December 13, 2019, the Chancery Court denied Plaintiff s request for a preliminary injunction. Id. at 4:4-12. C. The Bankruptcy Action On February 6, 2020, Suitable filed a petition under Chapter 11 of the Bankruptcy Code (the “Bankruptcy Action”) in the United States Bankruptcy Court for the District 0f Delaware (the “Bankruptcy Court”). RJN EX. 3 at 1. On April 20, 2020, the Bankruptcy Court established bidding and auction procedures for the sale of Suitable’s assets. RJN EX. 4. On July 2, 2020, Plaintiff filed a claim against Suitable in the Bankruptcy Action for the approximately $1.1 million in professional fees she allegedly incurred in connection with the Derivative Action. RJN EX. 5 at EX. A. Plaintiff’ s claim was based on her assertion that she had conferred a benefit 0n Suitable by filing the Derivative Action, and thus was entitled to the repayment of her fees. Id. at pdf p. 7, ECF No. 263-2. Meanwhile, the auction for Suitable’s assets in the Bankruptcy Action was underway. Suitable received only two bids for its assets during the auction period, including one from Blue Ocean, and another from MagicHeart Investments, LLC (“Magicheart”). RJN EX. 5 1] 9. On August 20, 2020, the 3 DEFENDANTS’ NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFF’S COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Bankruptcy Court approved the sales of Suitable’s assets to both parties. RJN Exs. 6 & 7. Under the approved agreements, Blue Ocean acquired substantially all of Suitable’s assets, including its entire patent portfolio, for a purchase price of $400,000, While Magicheart acquired certain Suitable software in exchange for a $100,000 credit bid 0f Suitable’s debt. Id. On October 13, 2020, Plaintiffwithdrew her claim against Suitable “because, among other things, based 0n the proceeds generated by the sale 0f [Suitable’s] assets, there is n0 realistic prospect that she Will be able t0 recover any meaningful amount 0n her claim.” RJN EX. 8. D. The Instant Action Having first sought her attorney fees against Suitable in the Bankruptcy Action, on July 28, 2020, Plaintiff filed her Complaint in this action. See Compl. p. 18. As with her claim in the Bankruptcy Action, in this case Plaintiff seeks as damages the $1.1 million in attorney fees she spent in the Derivative Action. She also seeks the “lost value” 0f Suitable and other companies she considers to be “community assets.” See id. 1H] 11, 47, 55, 58, 64, 67, 73, 76. The question whether and to what extent such companies are community assets is at issue in the divorce proceeding. Plaintiff alleges that Defendants breached their fiduciary duties t0 Plaintiff by: (1) representing Hassan in the Dissolution Action; and (2) arranging transactions designed to deprive Plaintiff of or deplete her community property assets. Id. 1] 55. Similarly, the Complaint alleges that Defendants intentionally or negligently interfered with Plaintiff s prospective economic advantage by “assisting Hassan in the transfer, giveaway, mismanagement, depletion, dilution, and devaluation of the community assets . . . .” Id. 1W 63, 72. While Plaintiff claims that “Defendants’ conduct relating to Suitable Technologies is not an isolated incident but instead part of a larger pattern and practice,” the only other conduct identified in the Complaint is Defendants’ representation 0f Willow Garage, an entity whose “existence mostly coincided With the time frame of Hassan’s and Plaintiff” s marriage.” Id. W 48, 49. III. LEGAL STANDARD A demurrer tests the legal sufficiency of factual allegations in a complaint. Rakestraw v. California Physicians ’ Sena, 81 Cal. App. 4th 39, 42 (2000). The court “treats the demurrer as admitting all material facts properly pleaded, but not contentions, deductions, 0r conclusions of fact or law.” Id. at 43. The court may also consider “matters that may be judicially noticed.” Id. If there is n0 reasonable 4 DEFENDANTS’ NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFF’S COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 possibility that the defects in the complaint can be cured by amendment, then the court may sustain a demurrer Without leave to amend. Blank v. Kirwan, 39 Cal. 3d 31 1, 318 (1985). IV. ARGUMENT Plaintiff s claims must be dismissed for the following independent reasons: (1) they are barred by the applicable statute of limitations; (2) they must be brought, if at all, as derivative claims 0n behalf of the requisite companies; (3) Plaintiff has not established that Defendants owe her a duty; (4) Defendants’ alleged conduct is protected by the attorney-client relationship privilege; and (5) Defendants cannot interfere, as a matter 0f law, With an economic relationship for Which they represent a party. A. All 0f Plaintiff’s Claims are Barred by the Statute of Limitations for Attorney Misconduct The critical date in this case is July 28, 2019, one year before the Complaint was filed. Plaintiff knew 0f and in fact asserted the breaches she alleges before that date, no later than March 22, 2019, when Defendant Morrison & Foerster LLP appeared in the Dissolution Action, and June 28, 2019, and when Plaintiffmoved t0 disqualify Morrison & Foerster LLP for alleged breach of duties owed t0 her. Plaintiff s claims are thus barred by the one-year statute 0f limitations under California Code 0f Civil Procedure section 340.6. Section 340.6(a) provides that “[a]n action against an attorney for a wrongful act 0r omission, other than for actual fraud, arising in the performance 0f professional services shall be commenced within one year after the plaintiff discovers . . . the facts constituting the wrongful acts or omission, . . . .” Cal. CiV. Proc. Code § 340.6. “A complaint showing on its face the cause of action is barred by the statute of limitations is subject to demurrer.” Sirott v. Latts, 6 Cal. App. 4th 923, 928 (1 992). 1. Plaintiff’s Claims are Subject t0 Section 340.6(a) While Plaintiff does not allege a direct cause 0f action for attorney malpractice, “section 340.6(a)’s time bar applies to claims Whose merits necessarily depend 0n proof that an attorney violated a ‘professional obligation’ in the course of providing professional services.” Lee v. Hanley, 61 Cal. 4th 1225, 1236-37 (2015) (internal quotation marks added). A “professional obligation” is an “obligation that an attorney has by Virtue of being an attorney, such as fiduciary obligations, . . . and the obligations embodied in the Rules of Professional Conduct.” Id. at 1237. The test for determining whether a cause 5 DEFENDANTS’ NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFF’S COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 0f action falls within the statute of limitations contained in section 340.6(a) is “whether the claim, in order to succeed, necessarily depends 0n proof that an attorney violated a professional obligation as opposed t0 some generally applicable nonprofessional obligation.” Id. at 1238. Section 340.6(a) applies to any claim that meets this test, excluding fraud, notwithstanding how it is styled. Id. T0 succeed 0n her claims, Plaintiff must prove that Defendants violated their professional obligations as attorneys. Indeed, for her breach of fiduciary duties claim, Plaintiff alleges that Defendants breached “both (a) a duty 0f loyalty . . . and (b) a duty not to engage on any matters in which Defendants can use confidential information obtained from its representation 0f Plaintiff . . . .” Compl. 1] 52. These are duties Defendants have “by Virtue 0f being an attorney.” Lee, 61 Cal. 4th at 1229 (emphasis omitted); see also Cal. R. Prof’I Conduct, R. 1.6, 1.9, available at http://www.calbar.ca.gov/Portals/O/documents/rules/Rules-of-Professional-Conduct-1.pdf. For the intentional and negligent interference claims, Plaintiff alleges that Defendants’ conduct was “independently wrongful in that it breached Defendants’ fiduciary duties to Plaintiff as a former client and as a current member 0f the community that owned several of the companies . . . that Defendants represented,” and violated “conflict-of-interest rules governing their professional conduct.” Compl. 1H] 66, 75; see also Ixchel Pharma, LLC v. Biogen, Ina, 9 Cal. 5th 1130, 1142 (2020) (“[A] plaintiff seeking t0 recover damages for interference With prospective economic advantage must plead as an element of the claim that the defendant’s conduct was ‘Wrongful by some legal measure other than the 3” fact 0f interference itself. ) (citation omitted). These claims therefore also “necessarily depend[] on proof that an attorney violated a professional obligation,” Lee, 61 Cal. 4th at 1238, and are subject t0 section 340.6(a). 2. Plaintiff was 0n Inquiry Notice 0f Her Claims 0n March 22, 2019 at the Latest Plaintiff was on notice 0f her claims prior to the critical date of July 28, 2019, the effective date for the one-year statute of limitations. Dismissal is appropriate where, as here, the undisputed facts “compel the conclusion that [the plaintiff] was on inquiry notice of [her] claim more than one year before the complaint was filed.” Genisman v. Carley, 29 Cal. App. 5th 45, 50 (2018). Inquiry notice exists where “the plaintiffs have reason t0 at least suspect that a type 0f wrongdoing has injured them.” Id. at 50-5 1 (citation omitted). A plaintiff “need not be aware of the specific ‘facts’ necessary to establish the 6 DEFENDANTS’ NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFF’S COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 claim; that is a process contemplated by pretrial discovery.” Id. at 5 1 (citation omitted). “Once the plaintiff has a suspicion 0fwrongdoing, and therefore an incentive t0 sue, she must decide whether t0 file suit 0r sit 0n her rights. So long as a suspicion exists, it is clear that the plaintiff must g0 find the facts; she cannot wait for the facts to find her.” Id. (citation omitted). Plaintiff admits in the Complaint that she “learned within the last two years of the facts showing Defendants’ systematic and continuing involvement in trying t0 circumvent her interests by effectuating transactions that depleted 0r devalued community assets,” and cites-as an act that gave her reason to know of Defendants” supposed wrongdoing-the notice she received 0f Defendants” involvement in the Dissolution Action in March 2019. Compl. 11 57 (emphasis added). While that paragraph also alleges that additional facts came t0 light later, those later events cannot change the fact that, by her own admission, Plaintiff was on notice that Defendants “breached their fiduciary duties t0 Plaintiffby . . . [r]epresenting Hassan in the dissolution proceedings,” on March 22, 2019. Id. 1] 55(a). Indeed, Plaintiff believed based 0n this notice that Defendants were acting adversely t0 her interests, which led to her filing the Disqualification Motion 0n June 28, 2019. Id. fl 33; RJN EX. 1. The Disqualification Motion was premised 0n Defendants’ representation 0f Suitable and Willow Garage, the only two “community assets” cited in the Complaint. RJN EX. 1. Thus, on the face 0f the Complaint, which was not filed until July 28, 2020, it is evident that Plaintiff’ s claims are barred by the one-year statute 0f limitations. Even before March 2019, Plaintiff was 0n inquiry notice 0f her claims. Plaintiff filed the Dissolution Action on January 8, 2015, which required a “declaration and division of the couple’s community property.” Compl. fl 20. Plaintiff’ s allegations that Defendants “facilitated the spin-off 0f companies from Willow Garage” are all based on a public news article that came out on February 13, 2016, describing conduct that occurred prior to that date. Id. W 50, 49. And, according t0 the Complaint, Plaintiff “discussed” Hassan’s claim against MyDream with Defendants before MyDream terminated Defendants as counsel in March 2016. Id. 1] 27. Thus, by March 2016 Plaintiff: (1) knew that she was engaged in an adverse proceeding involving Suitable and Willow Garage; (2) knew that Defendants represented Suitable and Willow Garage; (3) had access to publicly filed news information relating to Defendants’ representation of Suitable and Willow Garage; and (4) determined that Defendants should n0 longer represent MyDream. This is more than sufficient t0 create the “suspicion 0f 7 DEFENDANTS’ NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFF’S COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 wrongdoing” underlying her claims that would give rise to inquiry notice under section 340.6(a). Gem'sman, 29 Cal. App. 5th at 50-51; see also Troche v. Daley, 217 Cal. App. 3d 403, 409 (1990) (constructive notice 0f the facts underlying malpractice occurs When the plaintiff fires the attorney for issues related t0 that malpractice). Plaintiff” s claims are thus barred by the statute of limitations. B. All 0f Plaintiff’s Claims Must Be Brought as Derivative Claims Under California law, “a shareholder cannot bring a direct action for damages” against a defendant “on the theory their alleged wrongdoing decreased the value 0f his or her stock (e.g., by reducing corporate assets and net worth).” Schuster v. Gardner, 127 Cal. App. 4th 305, 3 12 (2005) (citation omitted). Instead, “[t]he corporation itself must bring such an action, 0r a derivative suit may be brought 0n the corporation’s behalf.” Id. (citation omitted). An action is derivative if “the gravamen 0f the complaint is injury to the corporation, . . . or if it seeks t0 recover assets for the corporation or prevent the dissipation of its assets.” Id. at 3 13 (citation omitted). “An individual cause of action exists only if damages t0 the shareholders were not incidental t0 damages t0 the corporation.” Id. “[A]ny lawsuit by a shareholder against corporate counsel for damage t0 the corporation must be derivative in nature.” McDermott, Will & Emery v. Superior Court (James), 83 Cal. App. 4th 378, 384 (2000) (emphasis added). In the Complaint, Plaintiff alleges two types of damages: (1) the “lost value of community assets,” i.e., the diminished value 0f Suitable and Willow Garage; and (2) the $1.1 million she incurred in attorney fees in the Derivative Action. Comp]. W 58, 67, 76. Plaintiff claims that these damages were caused by Defendants “assisting Hassan in the transfer, giveaway, mismanagement, depletion, dilution, and devaluation of the community assets.” Id. 1W 63, 72. The gravamen of Plaintiff s claims is thus that Defendants caused damage to Suitable and Willow Garage by devaluing or giving away their assets, Which in turn harmed her interest in those companies. Her fees were allegedly incurred in a derivative suit brought 0n behalf 0f and for the alleged benefit 0f Suitable. It does not matter that Plaintiff styles her claims as harm t0 her “community assets” instead of her interests as a shareholder-a plaintiff asserting a community interest in a corporation is considered a “beneficial shareholder” for the purpose 0f bringing a derivative claim. Patrick v. Alacer Corp, 167 Cal. App. 4th 995, 1011 (2008). The $1.1 million in attorney fees was incidental t0 this alleged harm-in 8 DEFENDANTS’ NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFF’S COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 fact, the attorney fees were directly incurred in the Derivative Action that she brought against Hassan for the same alleged harm. Thus, this is exactly the type of lawsuit that “must be derivative in nature.” McDermott, 83 Cal. App. 4th at 384. C. The First Cause 0f Action Fails for the Additional Reason that Defendants Cannot Be Liable for Breach of Fiduciary Duties Because They Owe N0 Duty to Plaintiff Plaintiff s fiduciary duty theory fails because she alleges n0 facts showing that Defendants agreed to be her personal lawyers, or otherwise owed her a duty in her personal capacity. Gutierrez v. Girardi, 194 Cal. App. 4th 925, 932 (201 1) (fiduciary duty claim requires allegations showing both duty and breach). Attomey-client relationships are formed by agreement. K00 v. Rubia ’s Restaurants, Ina, 109 Cal. App. 4th 719, 729 (2003) (An attorney-client relationship “can only be created by contract, express 0r implied”). The Complaint makes a conclusory assertion that Plaintiff “regarded” Defendants as her “personal counsel,” Comp]. 1] 28, but such conclusory allegations must be disregarded 0n demurrer. Aubry v. Tri-City Hosp. Dist, 2 Cal. 4th 962, 967 (1992) (“The court does not . . . assume the truth of contentions, deductions, or conclusions 0f law”). A client’s subjective belief that an attorney-client relationship exists, standing alone, cannot create such a relationship. Zenith Ins. C0. v. 0 ’Connor, 148 Cal. App. 4th 998, 1010 (2007); see also U.S. Bank NA. v. Ocean Towers Housing Corp, N0. CV 16- 3487-DSF(EX), 2017 WL 7240726, *3 (C.D. Cal. Dec. 7, 2017) (applying California law). Rather, t0 support a finding of an attorney-client relationship, the plaintiff must demonstrate an objectively reasonable belief, supported by factual allegations that would make such a belief reasonable. See Responsible Citizens v. Superior Court (Askins), 16 Cal. App. 4th 1717, 1733 (1993) (“[O]ne of the most important facts involved in finding an attorney-client relationship is ‘the expectation of the client based 9”0n how the situation appears to a reasonable person in the client’s position. ) (quoting Friedman, The Creation 0fthe Attorney-Client Relationship: An Emerging View, 22 Cal. Western L. Rev. 209, 231 (1 986)). The Complaint pleads no facts that could render such a belief reasonable. An agreement to represent Plaintiff’ s company, MyDream, does not suffice because representation of a company is different from representation of company stakeholders, and representing a company does not make the lawyer counsel to the company’s individual members. E.g., Skarbrevik v. Cohen, England & Whitfield, 9 DEFENDANTS’ NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFF’S COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 231 Cal. App. 3d 692, 704 (1991) (“[C]orporate counsel’s direct duty is to the client corporation, not to the shareholders individually, even though the legal advice rendered t0 the corporation may affect the shareholders.”); Cal. R. Profl Conduct, R. 1.13. This is true even though Plaintiff alleges that she had communications about MyDream with Defendants before MyDream was incorporated. See Compl. 1] 25. Courts have reasoned that where, as here, an attorney is hired to represent a corporation before it comes into existence, “an attorney-client relationship exists between the attorney and the corporation (not with the individuals) ‘retroactively’ from the time the attorney is retained until the corporation is actually formed (by filing incorporation papers)” Mark L. Tuft, et al., California Practice Guide, Professional Responsibility § 3: 107.2 (Rutter Grp. 2020 Update) (collecting out-of-state cases). The rationale behind this rule is to prevent this exact situation: “If the person who retains the attorney for purpose of organizing the corporation is considered the ‘client,’ any subsequent representation of the corporation by that lawyer would automatically amount t0 dual representation, resulting in the lawyer’s possible disqualification.” Id. § 32107.3. Plaintiff’ s Complaint also does not allege an agreement by Defendants to represent Plaintiff personally. It contains n0 factual allegations that (even if proved) would show that Defendants undertook to represent Plaintiff personally or would show conduct by Defendants that a reasonable person would interpret as consenting t0 such an undertaking. It does not allege, for example, that Defendants gave Plaintiff any personal advice, as distinct from advice given to her in her capacity as the founder, and an officer and director, of MyDream. The Complaint attempts to plead personal representation by reason 0f Defendants’ MyDream work. It alleges that Defendants owed duties “by reason of their representation of Plaintiff and MyDream in connection with the organization, financing, and structuring 0fMyDream, and by reason 0f Defendants’ representation 0f the numerous family companies described above in Which Plaintiff has, or claims, a community property interest.” Compl. 1] 52. Representing companies does not create independent duties to Plaintiff or any other company constituent, however. Skarbrevik, 231 Cal. App. 3d at 704. Nor does ordinary corporate work regarding the “structure, ownership, and financing” ofMyDream. Compl. 1] 25. Plaintiff’ s interests as a constituent 0fMyDream does not give rise t0 duties running from corporate counsel to her in her personal capacity. 10 DEFENDANTS’ NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFF’S COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 D. The Second and Third Causes 0f Action Fail Because Defendants Cannot be Liable for Interfering with Plaintiff’s Contractual Relations Plaintiff s second and third causes 0f action allege that Defendants interfered with her economic relationship with Hassan by assisting Hassan in conduct that allegedly diminished her community property interests. Compl. W 64, 72. The gist of these claims is that Defendants, “representing and advising Hassan and the companies he established,” id. 1] 62, performed legal work that either transferred assets away from companies in which Plaintiff asserts a community property interest or transferred alleged community assets into new companies.3 While California courts have not directly addressed the issue, the general rule is that “a lawyer acting on behalf of a client and within the scope of the lawyer-client relationship is protected by [] privilege and is not liable for assisting the client in conduct that breaches the client’s fiduciary duty t0 a third party.” Reynolds v. Schrock, 142 P.3d 1062, 1069 (Or. 2006); see also Maness v. Star-Kist Foods, Ina, 7 F.3d 704, 709 (8th Cir. 1993) (determining that under Minnesota law, “an attorney who acts Within the scope of the attorney-client relationship Will not be liable t0 third persons for actions arising out of his professional relationship unless the attorney exceeds the scope 0f his employment or acts for personal gain”). This privilege extends directly t0 claims for tortious interference with prospective economic relations, as “[a] lawyer Who advises or assists a client t0 make or break a contract, to enter or dissolve a legal relationship, or t0 enter or not enter a contractual relation, is not liable to a nonclient for interference with contract or with prospective contractual relations . . . if the lawyer acts to advance the client’s objectives Without using wrongfiJI means.” Restatement (Third) 0f the Law Governing Lawyers § 57(3) (Am. Law Inst. 2000); see also 5 Modern Tort Law: Liability and Litigation § 44:23 (2d ed.) (“Tortious interference claims against an attorney . . . require that the attorney ha[s] acted in a manner demonstrating personal malice or a desire to harm not arising from a desire t0 protect the attorney’s client . . . .”); Kahala Royal Corp. v. Goodsill Anderson Quinn & Stifel, 151 P.3d 732, 752 (Haw. 2007) (concluding that t0 state a claim for tortious interference plaintiffs must allege that the attorneys 3 The allegations are materially similar for both the second and third cause of action. Paragraph 70, in the negligent interference count, is worded slightly differently. It refers t0 legal work “representing and advising Hassan and the companies identified above . . . .” 11 DEFENDANTS’ NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFF’S COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 “possess[ed] a desire t0 harm . . . independent of the desire t0 protect [their] c1ient[s].”) (citation omitted) (first, third, and fourth alterations in original); Schott v. Glover, 440 N.E.2d 376, 380 (Ill. App. Ct. 1982) (holding that a plaintiff can state a cause 0f action for tortious interference against a lawyer only “if the plaintiff can set forth factual allegations from which actual malice may reasonably be said to exist,” necessarily including “a desire to harm, which is independent of and unrelated t0 the attorney’s desire to protect his client”). The privilege exists because courts, “in exercising [their] common-law authority to define tortious conduct, implicitly concluded that the effective performance of the duties arising from those relationships required that the person performing those duties have a qualified privilege from tort liability.” Reynolds, 142 P.3d at 1068. This reasoning comports With the requirement in California that a plaintiff can only state a Viable claim for a lawyer’s conspiracy with a client “only if the attorneys’ actions went beyond their role as attorneys acting 0n behalf of’ the client. Panoutsopoulos v. Chambliss, 157 Cal. App. 4th 297, 306 (2007). Because the reasoning behind the privilege equally applies in California, and because Plaintiff has failed to allege that Defendants engaged in any behavior beyond their roles as attorneys, 0r that Defendants have personal malice or a desire t0 harm her, her claims for intentional and negligent interference with prospective economic relations are barred 0n these grounds. E. The Second and Third Causes 0f Action Fail for the Additional Reason that Defendants Cannot Be Liable for Tortious Interference Because They Are Agents 0f a Party to the Economic Relationship Plaintiff s second and third causes 0f action for intentional and negligent interference With prospective economic advantage also fail because Defendants cannot be held liable in their capacity as representatives 0f Suitable and Willow Garage. In Applied Equipment Corp. v. Litton Saudi Arabia Ltd., the Supreme Court held that a party to a contract cannot, as a matter of law, be liable in tort for interfering with the performance 0f the contract. 7 Cal. 4th 503, 518 (1994). This is because liability only extends t0 parties that are “stranger[s] t0 [the] contract . . . .” Id. at 513 (emphasis omitted) (citation omitted). Courts applying Applied Equipment in the context 0f interference With prospective economic advantage have found that the “principles announced in Applied Equipment clearly [also] apply to bar a tort claim against a party t0 a prospective relationship, . . . .” Kasparian v. CZy. ofLos Angeles, 38 Cal. App. 4th 242, 266 (1995). Only a person “who is not a party t0 the contract 0r an agent ofa party to the contract is a ‘stranger’ for purpose 0f the tort 0f intentional interference with contract” and interference 12 DEFENDANTS’ NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFF’S COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 with prospective economic advantage. Redfeam v. Trader Joe’s C0., 20 Cal. App. 5th 989, 1003 & n. 6 (2018) (emphasis added). Plaintiff s claims for intentional and negligent interference With prospective economic advantage are based 0n her assertion that “Plaintiff has had an economic relationship with Hassan . . . in that Plaintiff as a member 0f the marital community directly co-owned interests in the numerous companies Hassan established during the marriage . . . .” Compl. 1] 61. Plaintiff alleges that Defendants interfered with this relationship when they were “representing and advising Hassan and the companies he established, . . . .” Id. 1] 62. Plaintiff’s claims confirm that Defendants are agents of parties t0 the economic relationship, and are therefore not “strangers” t0 that relationship. As a result, Plaintiff s second and third causes of action fail as a matter 0f law. V. CONCLUSION Based 0n the foregoing reasons, the demurrer should be sustained and Plaintiff s claims in the Complaint should be dismissed with prejudice. Dated: April 16, 2021 DURIE TANGRI LLP Bv: /s/ Rages}; K. Tangri RAGESH K. TANGRI Attorneys for Defendants MORRISON & FOERSTER LLP and PAUL L. LION. III 13 DEFENDANTS’ NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFF’S COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES / CASE NO. 20CV368776 .5 ©00fl0‘xU1 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PROOF OF SERVICE I am employed in San Francisco County, State of California, in the office of a member of the bar of this Court, at Whose direction the service was made. I am over the age 0f eighteen years, and not a party t0 the Within action. My business address is 217 Leidesdorff Street, San Francisco, CA 941 1 1. On April 16, 2021, I served the following documents in the manner described below: DEFENDANTS’ NOTICE 0F DEMURRER AND DEMURRER TO PLAINTIFF’S COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES m BY ELECTRONIC SERVICE: By electronically mailing a true and correct copy through Durie Tangri’s electronic mail system from mrubalcaba@durietangri.com to the email addresses set forth below. On the following part(ies) in this action: Walter J. Lack Steven C. Shuman Engstrom, Lipscomb & Lack, P.C. 10100 Santa Monica Boulevard Suite 1200 Los Angeles, CA 90067-41 13 Email: Wlack@elllaw.com sshuman@elllaw.com Attorney for Plaintiff ALLISON HUYNH I declare under penalty 0f perjury under the laws of the State of California that the foregoing is true and correct. Executed on April 16, 2021, at San Francisco, California. rH ary Ann ubalcaba 14 DEFENDANTS’ NOTICE OF DEMURRER AND DEMURRER TO PLAINTIFF’S COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES / CASE NO. 20CV368776 EXHIBIT B 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DURIE TANGRI LLP RAGESH K. TANGRI (SBN 159477) rtangri@durietangri.com DAVID McGOWAN (SBN 154289) dmcgowan@durietangri.com BETHANY D. BENGFORT (SBN 3 12507) bbengfort@durietangri.com 217 Leidesdorff Street San Francisco, CA 941 11 Telephone: 415-362-6666 Facsimile: 4 1 5-236-6300 Attorneys for Defendants MORRISON & FOERSTER LLP and PAUL L. LION, III SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SANTA CLARA ALLISON HUYNH, Case No. 20CV368776 Plaintiff, REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF DEFENDANTS’ DEMURRER V. TO PLAINTIFF’S COMPLAINT MORRISON & FOERSTER, LLP, PAUL L. Date: TBD LION, III, and DOES 1-20, Inclusive, Time: 9:00 a.m. Dept: 19, 161 North First Street Defendants. Judge: Honorable Peter H. Kirwan REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF DEFENDANTS’ DEMURRER TO PLAINTIFF’S COMPLAINT / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TO PLAINTIFF ALLISON HUYNH AND HER COUNSEL OF RECORD: PLEASE TAKE NOTICE THAT in connection With their concurrently filed Demurrer to Plaintiff s Complaint, Defendants Morrison & Foerster LLP and Paul L. Lion, III (collectively “Defendants”) hereby request that this Court take judicial notice of the following documents pursuant t0 California Evidence Code sections 452 and 453: 1. Attached hereto as Exhibit 1 is a true and correct copy of excerpts from Petitioner’s Request t0 Disqualify Counsel from Representing Respondent (Unredacted), filed on June 28, 2019 in In re the Marriage ofAllison Huynh and Scott Hassan, Case No. 2015-6-FL-013853, Santa Clara County Superior Court (the “Dissolution Action”). This document is lodged provisionally under seal pursuant to California Rule of Court 2.551(b)(3). 2. Attached hereto as Exhibit 2 is a true and correct copy of excerpts from the Rulings of the Court 0n Plaintiff s Motion for a Preliminary Injunction dated December 13, 2019 in Huynh v. Hassan, C.A. No. 2019-0893-JTL, Court 0f Chancery for the State of Delaware (the “Chancery Court Action”). 3. Attached hereto as Exhibit 3 is a true and correct copy of excerpts from the Voluntary Petition for Non-Individuals Filing for Bankruptcy, filed 0n February 26, 2020, in In re Suitable Technologies, Ina, Case N0. 20-10432 (MFW), United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Action”). 4. Attached hereto as Exhibit 4 is a true and correct copy 0f excerpts from the Order (I) Scheduling a Hearing 0n the Approval of the Sale 0f A11 0r Substantially A11 of the Debtor’s Assets, and the Assumption and Assignment of Certain Executory Contracts and Unexpired Leases, (II) Approving Certain Bidding Procedures and Assumption and Assignment Procedures, and the Form and Manner of Notice Thereof, (III) Authorizing the Debtor to Agree to (but Not Approving) Certain Bid Protections for Any Stalking Horse Purchaser and (IV) Granting Related Relief, issued in the Bankruptcy Action 0n April 20, 2020. 5. Attached hereto as Exhibit 5 is a true and correct copy of excerpts from the Notice 0f Objection t0 Proof of Claim, filed in the Bankruptcy Action 0n September 30, 2020. 6. Attached hereto as Exhibit 6 is a true and correct copy 0f excerpts from the Order (I) Approving APA, (II) Authorizing the Sale of Certain of the Debtor’s Assets Free and Clear of A11 1 REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF DEFENDANTS’ DEMURRER TO PLAINTIFF’S COMPLAINT / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Encumbrances, (III) Authorizing the Assumption and Assignment of Certain Executory Contracts and Unexpired Leases, and (IV) Granting Related Relief, filed in the Bankruptcy Action 0n August 20, 2020. 7. Attached hereto as Exhibit 7 is a true and correct copy 0f the excerpts from Order (I) Approving Asset Purchase Agreement, (II) Authorizing the Sale of Certain Assets Free and Clear of A11 Encumbrances, and (III) Granted Related Relief, filed in the Bankruptcy Action 0n August 20, 2020. 8. Attached hereto as Exhibit 8 is a true and correct copy 0f the Notice 0f Withdrawal 0f Claim and Reservation of Rights, filed in the Bankruptcy Action on October 13, 2020. I. THIS COURT MAY TAKE JUDICIAL NOTICE OF PAPERS FROM OTHER COURTS Defendants request that this Court take judicial notice 0f decisions issued by the Delaware Court 0f Chancery and the United States Bankruptcy Court for the District 0f Delaware, as well as papers submitted t0 the Santa Clara County Superior Court and the United States Bankruptcy Court for the District 0f Delaware in the Dissolution Action and Bankruptcy Action. This Court may take judicial notice of the “decisional . . . law . . . of any state of the United States,” Cal. Evid. Code § 452(a); “[o]fficial acts of the . . . judicial departments of the United States or of any state of the United States,” id. § 452(0); and “[r]ecords of . . . any court of record of the United States 0r 0f any state of the United States,” id. § 452(d). II. DEFENDANTS ARE ENTITLED TO COMPULSORY JUDICIAL NOTICE. This Court must take notice 0f the matters listed in section 452 if the moving party does the following: (1) asks the Court t0 take judicial notice; (2) gives the adverse party sufficient notice of the request so that the adverse party may dispute it; and (3) provides the Court with sufficient information to enable it t0 take judicial notice 0f the matter. Cal. Evid. Code § 453. By this request, Defendants have fulfilled each of these requirements for mandatory judicial notice. /// /// /// 2 REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF DEFENDANTS’ DEMURRER TO PLAINTIFF’S COMPLAINT / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 III. CONCLUSION Defendants respectfully request this Court take judicial notice 0f these items for the reasons stated above. Dated: April 16, 2021 DURIE TANGRI LLP By: /s/Ragesh K. Tangri RAGESH K. TANGRI Attorneys for Defendants MORRISON & FOERSTER LLP and PAUL L. LION, III 3 REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF DEFENDANTS’ DEMURRER TO PLAINTIFF’S COMPLAINT / CASE NO. 20CV368776 .5 ©00fl0‘xU1 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PROOF OF SERVICE I am employed in San Francisco County, State of California, in the office of a member of the bar of this Court, at Whose direction the service was made. I am over the age 0f eighteen years, and not a party t0 the Within action. My business address is 217 Leidesdorff Street, San Francisco, CA 941 1 1. On April 16, 2021, I served the following documents in the manner described below: REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF DEFENDANTS’ DEMURRER TO PLAINTIFF’S COMPLAINT m BY ELECTRONIC SERVICE: By electronically mailing a true and correct copy through Durie Tangri’s electronic mail system from mrubalcaba@durietangri.com to the email addresses set forth below. Walter J. Lack Steven C. Shuman Engstrom, Lipscomb & Lack, P.C. 10100 Santa Monica Boulevard Suite 1200 Los Angeles, CA 90067-41 13 Email: Wlack@elllaw.com sshuman@elllaw.com Attorney for Plaintiff ALLISON HUYNH I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. Executed 0n April 16, 2021, at San Francisco, California. 4 REQUEST FOR IUDICIAL NOTICE IN SUPPORT OF DEFENDANTS’ DEMURRER TO PLAINTIFF’S COMPLAINT / CASE NO. 20CV368776 EXHIBIT 1 LODGED PROVISIONALLY UNDER SEAL IN ITS ENTIRETY EXHIBIT 2 IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE ALLISON HUYNH, derivatively on . behalf Of SUITABLE TECHNOLOGIES, INC.,: Plaintiff, v : C. A. No. 2019-0893-JTL SCOTT HASSAN, BLUE OCEAN ROBOTICS HOLDINGS APS, BEAM ROBOTS APS, BEAM ROBOTS US INCORPORATED, Defendants, and SUITABLE TECHNOLOGIES, INC., Nominal Defendant. Chancery Courtroom No. 12B Leonard L. Williams Justice Center 500 North King Street Wilmington, Delaware Friday, December 13, 2019 1:30 p.m. BEFORE: HON. J. TRAVIS LASTER, Vice Chancellor RULINGS OF THE COURT ON PLAINTIFF'S MOTION FOR A PRELIMINARY INJUNCTION CHANCERY COURT REPORTERS Leonard L. Williams Justice Center 500 North King Street - Suite 11400 Wilmington, Delaware 19801 (302) 255-0523 lO ll 12 13 l4 15 l6 l7 l8 l9 20 21 22 23 24 APPEARANCES: SRINIVAS M. RAJU, ESQ. TRAVIS S. HUNTER, ESQ. TYLER E. CRAGG, ESQ. DORRONDA BORDLEY, ESQ. Richards, Layton & Finger, P.A. -and- PIERCE O'DONNELL, ESQ. of the California Bar Greenberg Glusker Fields Claman & Machtinger LLP for Plaintiff DAVID J. TEKLITS, ESQ. KEVIN M. COEN, ESQ. SARA TOSCANO, ESQ. Morris, Nichols, Arsht & Tunnell LLP for Defendant Scott Hassan JOHN L. REED, ESQ. KELLY FREUND, ESQ. DLA Piper LLP (US) -and- DAVID A. PRIEBE, ESQ. of the California Bar DLA Piper LLP (US) for Defendants Blue Ocean Robotics Holdings ApS, Beam Robots ApS, Beam Robots US Incorporated NICHOLAS J. ROHRER, ESQ. MAE OBERSTE, ESQ. Young Conaway Stargatt & Taylor LLP for Nominal Defendant Suitable Technologies, Inc. CHANCERY COURT REPORTERS lO ll 12 13 14 15 l6 17 l8 l9 20 21 22 23 24 THE COURT: Welcome back, everyone. Please be seated. I'm going to go ahead and give you an answer now. First let me thank you for the outstanding effort that went into preparing these submissions. You-all got an impressive amount of work done in a very short period of time; not just document discovery, but depositions and expert reports and very thorough briefs, so I'm grateful for all of the sweat that went into preparing the case for decision. We're here today because the plaintiff, Allison Huynh, has applied for a preliminary injunction to block Suitable Technologies from consummating a sale of assets to acquisition subsidiaries controlled by Blue Ocean Robotics ApS. The principal defendant is Scott Hassan. I will warn you-all, and apologize in advance to Mr. Hassan, I have been mentally thinking of his name as "Ha-san," and so it is entirely possible that I may slip during my ruling, and I do that inadvertently. Mr. Hassan is the controlling stockholder and sole director of Suitable. Ms. Huynh contends that Mr. Hassan breached his fiduciary duties in connection with the sale. The other defendants are CHANCERY COURT REPORTERS lO ll 12 13 14 15 l6 17 l8 l9 20 21 22 23 24 Blue Ocean and its acquisition subsidiaries. I find that the plaintiff has established a reasonable likelihood of success on the merits. I also agree that there is a threat of irreparable harm, but I am denying the preliminary injunction based on the balancing of the hardships and the Court's ability to remedy a fiduciary breach after the fact through a remedy that would encompass an award of money damages and, if warranted by the evidence and the arguments, the potential recharacterization or equitable subordination of Mr. Hassan's debt. I'm going to start With some background facts. Suitable is a Delaware company engaged in the robotics business that was founded by Mr. Hassan. Suitable designs, manufactures, and sells mobile telepresence robots. It has two products: the BeamPro for the enterprise market and the Beam for the consumer market. Suitable has approximately 7.7 million shares of common stock outstanding, with 31 stockholders of record. Mr. Hassan holds 600,000 shares that are community property owned jointly with Ms. Huynh, which represents approximately 7.7 percent CHANCERY COURT REPORTERS lO ll 12 13 l4 15 l6 l7 l8 l9 20 21 22 23 24 32 CERTIFICATE I, JULIANNE LABADIA, Official Court Reporter for the Court of Chancery for the State of Delaware, Registered Diplomate Reporter, Certified Realtime Reporter, and Delaware Notary Public, do hereby certify that the foregoing pages numbered 3 through 31 contain a true and correct transcription of the rulings as stenographically reported by me at the hearing in the above cause before the Vice Chancellor of the State of Delaware, on the date therein indicated, except as revised by the Vice Chancellor. IN WITNESS WHEREOF I hereunto set my hand at Wilmington, this 14th day of December, 2019. /s/ Julianne LaBadia Julianne LaBadia Official Court Reporter Registered Diplomate Reporter Certified Realtime Reporter Delaware Notary Public CHANCERY COURT REPORTERS EXHIBIT 3 Case 20-10432-MFW Doc 1 Filed 02/26/20 Page 1 of 14 Fill in this information to identify your case: United States Bankruptcy Court for the: DISTRICT OF DELAWARE Case number (ifknown) Chapter 1 1 D Check if this an amended filing Official Form 201 Voluntary Petition for Non-lndividuals Filing for Bankruptcy ozzzo If more space is needed, attach a separate sheet to this form. On the top of any additional pages, write the debtor's name and the case number (if known). For more information, a separate document, Instructions for Bankruptcy Forms for Non-Individuals, is available. 1. Debtor's name Suitable Technologies, Inc. 2. All other names debtor used in the last 8 years Include any assumed names, trade names and doing business as names 3. Debtor's federal Employer Identification 27-461 781 6 Number (EIN) 4. Debtor's address Principal place of business Mailing address, if different from principal place of business 921 E. Charleston Road Palo Alto, California 94303 Number, Street, City, State & ZIP Code P.O. Box, Number, Street, City, State & ZIP Code Santa Clara Location of principal assets, if different from principal County place of business Number, Street, City, State & ZIP Code 5. Debtor'swebsite(URL) www.suitabletech.com 6- Type 0f debtor X Corporation (including Limited Liability Company (LLC) and Limited Liability Partnership (LLP)) D Partnership (excluding LLP) D Other. Specify: Official Form 201 Voluntary Petition for Non-lndividuals Filing for Bankruptcy page 1 258671491 Case 20-10432-MFW DOC 1 Filed 02/26/20 Page 2 Of 14 Debtor Suitable Technologies, Inc. Case number (ifknown) Name 7. Describe debtor's business A. Check one: Health Care Business (as defined in 11 U.S.C. § 101(27A)) Single Asset Real Estate (as defined in 11 U.S.C. § 101(51B)) Railroad (as defined in 11 U.S.C. § 101(44)) Stockbroker (as defined in 11 U.S.C. § 101(53A)) Commodity Broker (as defined in 11 U.S.C. § 101(6)) Clearing Bank (as defined in 11 U.S.C. § 781(3)) None of the above @DDDDDD B. Check all that apply D Tax-exempt entity (as described in 26 U.S.C. §501) D Investment company, including hedge fund or pooled investment vehicle (as defined in 15 U.S.C. §80a-3) D Investment advisor (as defined in 15 U.S.C. §80b-2(a)(11)) C. NAICS (North American Industry Classification System) 4-digit code that best describes debtor. See http://www.uscourts.qov/four-diqit-national-association-naics-codes. 3342 8. Under which chapter of the Check one: Bankruptcy Code is the debtor filing? D Chapter 7 D Chapter 9 g Chapter 11. Check all that apply: D Debtor's aggregate noncontingent liquidated debts (excluding debts owed to insiders or affiliates) are less than $2,725,625 (amount subject to adjustment on 4/01/22 and every 3 years after that). D The debtor is a small business debtor as defined in 11 U.S.C. § 101(51D). If the debtor is a small business debtor, attach the most recent balance sheet, statement of operations, cash-flow statement, and federal income tax return or if all of these documents do not exist, follow the procedure in 11 U.S.C. § 1116(1)(B). The debtor is a small business debtor as defined in 11 U.S.C. §101(51D), and it chooses to proceed under Subchapter V of Chapter 11. A plan is being filed with this petition. Acceptances of the plan were solicited prepetition from one or more classes of creditors, in accordance with 11 U.S.C. § 1126(b). The debtor is required to file periodic reports (for example, 10K and 1OQ) with the Securities and Exchange Commission according to § 13 or 15(d) of the Securities Exchange Act of 1934. File the attachment to Voluntary Petition for Non-Individuals Filing for Bankruptcy under Chapter 11 (Official Form 201A) with this form. D The debtor is a shell company as defined in the Securities Exchange Act of 1934 Rule 12b-2. DUDE D Chapter 12 9. Were prior bankruptcy cases filed by or against the debtor within the last 8 years? If more than 2 cases, attach a separate list. g No D Yes District When Case number District When Case number 10. Are any bankruptcy cases pending or being filed by a business partner or an affiliate of the debtor? List all cases. If more than 1, attach a separate list g No D Yes Debtor Relationship District When Case number, if known Official Form 201 Voluntary Petition for Non-lndividuals Filing for Bankruptcy page 2 Case 20-10432-MFW Doc 1 Filed 02/26/20 Page 3 of 14 Debtor Suitable Technologies, Inc. Name 11. Why is the case filed in this district? Check all that apply: Case number (ifknown) g Debtor has had its domicile, principal place of business, or principal assets in this district for 180 days immediately preceding the date of this petition or for a longer part of such 180 days than in any other district. D A bankruptcy case concerning debtor's affiliate, general partner, or partnership is pending in this district. 12. Does the debtor own or g No have possession of any real property or personal D Yes property that needs immediate attention? Answer below for each property that needs immediate attention. Attach additional sheets if needed. Why does the property need immediate attention? (Check all that apply.) D It poses or is alleged to pose a threat of imminent and identifiable hazard to public health or safety. What is the hazard? D It needs to be physically secured or protected from the weather. D It includes perishable goods or assets that could quickly deteriorate or lose value without attention (for example, livestock, seasonal goods, meat, dairy, produce, or securities-related assets or other options). D Other Where is the property? Number, Street, City, State & ZIP Code ls the property insured? D No Insurance D Yes agency Contact name Phone - Statistical and administrative information 13. Debtor's estimation of Check one: 'l bl f dava' a e un s g Funds will be available for distribution to unsecured creditors. D After any administrative expenses are paid, no funds will be available to unsecured creditors. 14. Estimated numberof D 1-49 D 1,000-5,000 creditors D 50-99 D 5oo1-1o,ooo (on a consolidated basis) D 100-199 D 10,001-25,000 g 200-999 D 25,001-5o,ooo D 50,001-1oo,ooo D Morethan 100,000 15. Estimated Assets D $0 _ $50,000 (on a consolidated basis) D $50,001 - $100,000 D $100,001 -$500,ooo D $500,001 -$1 million D $1,000,001 - $10 million fi $10,000,001 - $50 million D $50,000,001 - $100 million D $100,000,001 - $500 million D $500,000,001 - $1 billion D $1,ooo,ooo,oo1 - $10 billion D $1o,ooo,ooo,oo1 - $50 billion D More than $50 billion 16. Estimated liabilities D $0 _ $50,000 (on a consolidated basis) D $50,001 - $100,000 D $100,001 -$500,000 D $500,001 -$1 million D $1,000,001 - $10 million D $10,000,001 - $50 million E $50,000,001 - $100 million D $100,000,001 - $500 million D $500,000,001 - $1 billion D $1,ooo,ooo,oo1 - $10 billion D $10,ooo,ooo,oo1 - $50 billion D More than $50 billion Official Form 201 Voluntary Petition for Non-lndividuals Filing for Bankruptcy page 3 Case 20-10432-MFW Doc 1 Filed 02/26/20 Page 4 of 14 Debtor Name Suitable Technologies, Inc. -Request for Relief, Declaration, and Signatures Case number (ifknown) WARNING -- Bankruptcy fraud is a serious crime. Making a false statement in connection with a bankruptcy case can result in fines up to $500,000 or imprisonment for up to 20 years, or both. 18 U.S.C. §§ 152, 1341, 1519, and 3571. 17. Declaration and signature of authorized representative of debtor The debtor requests relief in accordance with the chapter of title 11, United States Code, specified in this petition. l have been authorized to file this petition on behalf of the debtor. | have examined the information in this petition and have a reasonable belief that the information is trued and correct. | declare under penalty of perjury that the foregoing is true and correct. MM/DD/YYYY Executed on X QMCW\ Signature of authorized representative of debtor Title Chief Restructuring Officer Charles C. Reardon Printed name 18. Signature of attorney Official Form 201 M Signature of attorney for debtorURobert F. Poppiti, Jr. Date Z- ,Azé’ 232-3MM / DD/YYYY Printed name Young Conaway Stargatt & Taylor, LLP Firm name Rodney Square 1000 N. King Street Wilmington, Delaware 19801 Number, Street, City, State & ZIP Code Contact phone (302) 571 ~6600 Email address 5052 (Delaware) rpoppiti@ycst.com Bar number and State Voluntary Petition for Non-lndividuals Filing for Bankruptcy page 4 EXHIBIT 4 Case 20-10432-MFW Doc 110 Filed 04/20/20 Page 1 of 18 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: Chapter 11 SUITABLE TECHNOLOGIES, INC} Case No. 20-10432 (MFW) Debtor. Ref. Docket Nos. 91 and 109 ORDER (I) SCHEDULING A HEARING ON THE APPROVAL OF THE SALE OF ALL OR SUBSTANTIALLY ALL OF THE DEBTOR’S ASSETS, AND THE ASSUMPTION AND ASSIGNMENT OF CERTAIN EXECUTORY CONTRACTS AND UNEXPIRED LEASES, (II) APPROVING CERTAIN BIDDING PROCEDURES AND ASSUMPTION AND ASSIGNMENT PROCEDURES, AND THE FORM AND MANNER OF NOTICE THEREOF, (III) AUTHORIZING THE DEBTOR TO AGREE TO (BUT NOT APPROVING) CERTAIN BID PROTECTIONS FOR ANY STALKING HORSE PURCHASER AND (IV) GRANTING RELATED RELIEF Upon consideration 0f the motion [Docket N0. 91] (the “M0ti0n”)2 0f the above- captioned debtor and debtor in possession (the “Debt0r”) for the entry of: (a) an order, (i) scheduling a hearing (the “Sale Hearing”) 0n approval 0f the proposed sale (the “Sale”) of all or substantially all 0f the Debtor’s assets (the “Assets”), free and clear of all liens, claims, encumbrances, and other interests other than those permitted by the APA (as defined below), Stalking Horse APA (as defined below), 0r Modified APA (collectively, the “Encumbrances”) t0 a potential stalking horse purchaser (a “Stalking Horse Purchaser”) 0r, absent a Stalking Horse Purchaser 0r in the event a Stalking Horse Purchaser is not the Successful Bidder, then to the Successfill Bidder, and authorizing the assumption and assignment of certain executory contracts and unexpired leases (each, an “Assumed Contract,” and collectively, the “Assumed Contracts”) in connection therewith; (ii) authorizing and approving certain bidding procedures 1 The last four digits 0f the Debtor’s United States federal tax identification number are 7816. The Debtor’s mailing address is 921 East Charleston Road, Palo Alto, CA 94303. 2 Capitalized terms used but not defined herein shall have the meanings given them in the Bidding Procedures (as defined below), 0r t0 the extent not defined therein, the Motion. 26148689.3 Case 20-10432-MFW Doc 110 Filed 04/20/20 Page 2 of 18 for the Sale attached hereto as Exhibit 1 (collectively, the “Bidding Procedures”), authorizing and approving certain assumption and assignment procedures for the Assumed Contracts provided for herein (collectively, the “Assumption and Assignment Procedures”), and authorizing the Debtor t0 agree to (but not approving) certain bid protections for a Stalking Horse Purchaser, including a Break-Up Fee and an Expense Reimbursement (together, the “Bid Protections”), and authorizing and approving the form and manner of notice 0f each 0f the foregoing; and (iii) granting related relief; and (b) an order (the “Sale Order”), (i) authorizing and approving the Debtor’s entry into an asset purchase agreement for the Assets substantially in the form attached t0 the Bidding Procedures as Schedule 1 (the “APA”), with a Stalking Horse Purchaser or, absent a Stalking Horse Purchaser 0r in the event a Stalking Horse Purchaser is not the Successful Bidder, then the Successful Bidder; (ii) authorizing and approving the Sale, free and clear of all Encumbrances; (iii) authorizing and approving the assumption and assignment 0f the Assumed Contacts in connection therewith; and (iV) granting related relief; and due and proper notice 0f the Motion having been given; and it appearing that n0 other 0r further notice 0f the Motion is required except as set forth herein; and it appearing that the Court has jurisdiction t0 consider the Motion in accordance with 28 U.S.C. §§ 157 and 1334 and the Amended Standing Order; and it appearing that this is a core proceeding pursuant t0 28 U.S.C. § 157(b)(2); and it appearing that venue of this proceeding and the Motion is proper pursuant t0 28 U.S.C. §§ 1408 and 1409; and the Court having reviewed the Motion; and the Bidding Procedures Hearing (as defined below) having been held; and the Court having found and determined that the relief set forth in this Order is in the best interests 0f the Debtor, its estate and creditors and all parties in interest, and that the legal and factual bases set forth in the Motion and at the 26148689.3 Case 20-10432-MFW Doc 110 Filed 04/20/20 Page 3 0f 18 Bidding Procedures Hearing establish just cause for the relief granted herein; and after due deliberation and sufficient cause appearing therefor, it is hereby FOUND AND DETERMINED THAT23 A. This Court has jurisdiction t0 consider the Motion in accordance With 28 U.S.C. §§ 157 and 1334 and the Amended Standing Order. B. Venue 0f this proceeding and the Motion is proper pursuant t0 28 U.S.C. §§ 1408 and 1409. This is a core proceeding pursuant t0 28 U.S.C. § 157(b)(2). C. The statutory and legal predicates for the relief requested in the Motion and provided for herein are sections 105(a), 363, 365, 503 and 507 0f title 11 of the United States Code, 11 U.S.C. §§ 101 et seq. (the “Bankruptcy Code”), Rules 2002, 6004, 6006, 9007, and 9014 0f the Federal Rules 0f Bankruptcy Procedure (the “Bankruptcy Rules”), and Rule 6004-1 0f the Local Rules 0f Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District 0f Delaware (the “Local Rules”). D. In the Motion and at the hearing on the relief set forth in this Order (the “Bidding Procedures Hearing”), the Debtor demonstrated that good and sufficient notice 0f the relief granted by this Order has been given and no further notice is required except as otherwise provided for herein. A reasonable opportunity t0 object 0r be heard regarding the relief granted by this Order has been afforded t0 those parties entitled t0 notice pursuant to Bankruptcy Rule 2002 and all other interested parties. E. The Stalking Horse Notice (as defined below), With the information set forth in Paragraph 3 below, is appropriate and reasonably calculated t0 provide all interested 3 The findings and conclusions set forth herein constitute the Court’s findings 0f fact and conclusions 0f law pursuant t0 Bankruptcy Rule 7052, made applicable t0 this proceeding pursuant t0 Bankruptcy Rule 9014. T0 the extent that any 0f the following findings of fact constitute conclusions 0f law, they are adopted as such. T0 the extent any 0f the following conclusions 0f law constitute findings of fact, they are adopted as such. 26148689.3 3 Case 20-10432-MFW Doc 110 Filed 04/20/20 Page 4 of 18 parties with timely and proper notice 0f: (i) the identification 0f any Stalking Horse Purchaser; (ii) a copy of any Stalking Horse APA; (iii) any Stalking Horse Purchase Price; (iv) the deposit paid by any Stalking Horse Purchaser; (V) the amount 0f any Bid Protections agreed to in the Stalking Horse APA; and (Vi) any other information to be set forth in such notice pursuant t0 Paragraph 3 below. F. The Sale Notice (as defined below), substantially in the form attached hereto as Exhibit 2, is appropriate and reasonably calculated to provide all interested parties with timely and proper notice of this Order, the Bidding Procedures, the auction for the Assets (the “Aucti0n”), the Sale, and the Sale Hearing, and any and all objection deadlines related thereto, and no other 0r further notice is required 0f the foregoing. G. The Bidding Procedures are: (i) fair, reasonable, and appropriate; and (ii) designed to maximize recovery With respect t0 the Sale. H. The Assumption and Assignment Procedures provided for herein and the Assumption Notice (as defined below), substantially in the form attached hereto as Exhibit 3, are reasonable and appropriate and consistent With the provisions 0f section 365 of the Bankruptcy Code and Bankruptcy Rule 6006. The Assumption and Assignment Procedures and the Assumption Notice have been tailored t0 provide an adequate opportunity for all Counterparties (as defined below) t0 assert any Contract Obj ections (as defined below). I. Entry of this Order is in the best interests 0f the Debtor, its estate and creditors and all other interested parties. NOW, THEREFORE, IT IS HEREBY ORDERED THAT: 1. Those portions 0f the Motion seeking approval 0f (a) the Debtor’s entry into a Stalking Horse APA, (b) the Assumption and Assignment Procedures, (c) the Bidding 26148689.3 Case 20-10432-MFW Doc 110 Filed 04/20/20 Page 5 0f 18 Procedures, (d) the date and time of the Sale Hearing, and (e) the noticing and objection procedures related to each of the foregoing, including, without limitation, the Stalking Horse Notice (as defined below), the notice of the Sale and the entry 0f this Order, substantially in the form attached hereto as Exhibit 2 (the “Sale Notice”), and the notice 0f the Debtor’s potential assumption and assignment of the Assumed Contracts, substantially in the form attached hereto as Exhibit 3 (the “Assumption Notice”) (subclauses (a) - (e) above, collectively, the “Bidding and Auction Process”), are hereby GRANTED t0 the extent set forth herein. 2. Any objections t0 the Motion as it pertains to the Bidding and Auction Process 0r the relief granted by this Order that have not been Withdrawn, waived 0r settled, and all reservations of rights included therein, are hereby overruled and denied on the merits with prejudice. For the avoidance of doubt, all rights of interested parties with respect t0 any Stalking Horse APA, including, without limitation, any Break-Up Fee or Expense Reimbursement (each as defined below) agreed t0 therein, are reserved. 3. The Debtor is hereby authorized, but not directed, in consultation with the Consultation Parties, t0 execute one 0r more APA(S) With a Stalking Horse Purchaser(s) (each, a “Stalking Horse APA”) not later than June 29, 2020 (the “Stalking Horse Designation Deadline”). In the event the Debtor enters into any Stalking Horse APA, within two (2) business days 0f the Stalking Horse Designation Deadline, the Debtor shall file With the Court and serve by regular mail 0n the Stalking Horse Notice Parties a notice (a “Stalking Horse Notice”) that shall include the following: (a) the identification 0f the Stalking Horse Purchaser (and to the extent that the Stalking Horse Purchaser is a newly formed acquisition entity or the like, the identity of the Stalking Horse Purchaser’s parent company 0r sponsor); (b) a copy 0f the Stalking Horse APA; (c) the purchase price provided for in the Stalking Horse APA (the “Stalking Horse 26148689.3 Case 20-10432-MFW Doc 110 Filed 04/20/20 Page 6 0f 18 Purchase Price”); (d) the deposit paid by the Stalking Horse Purchaser; (e) the amount 0f any Bid Protections agreed to in the Stalking Horse APA; and (f) Whether the Stalking Horse Purchaser has any connection t0 the Debtor other than those arising from the negotiation and execution 0f the Stalking Horse APA. 4. The Debtor is hereby authorized, but not directed, in consultation with the Consultation Parties, t0 agree in any Stalking Horse APA t0 a break-up fee (a “Break-Up Fee”) and an expense reimbursement for the documented and reasonable expenses incurred by a Stalking Horse Purchaser (an “Expense Reimbursement”) for any such Stalking Horse Purchaser that is not the Successful Bidder; provided that (i) in the aggregate, any Break-Up Fee shall not exceed two percent (2%) of any Stalking Horse Purchase Price, (ii) the aggregate amount of any Expense Reimbursement shall not exceed one percent (1%) 0f any Stalking Horse Purchase Price, and (iii) such Stalking Horse Purchaser is not an insider 0f the Debtor as that term is defined in section 101(3 1) 0f the Bankruptcy Code. T0 the extent the Debtor agrees t0 a Break-Up Fee 0r an Expense Reimbursement With any Stalking Horse Purchaser, the Stalking Horse Notice shall identify the amount and conditions 0f the same. Notwithstanding the foregoing, nothing in this Order is intended 0r shall be deemed t0 approve, or authorize the Debtor t0 pay, any such Break-Up Fee or Expense Reimbursement, and approval 0f, and authorization for the Debtor t0 pay, any such Break-Up Fee and Expense Reimbursement, shall be subj ect t0 further order 0f this Court. 5. The Bidding Procedures are hereby approved. The failure to specifically include 0r reference any particular provision of the Bidding Procedures in the Motion or this Order shall not diminish or otherwise impair the effectiveness 0f such procedures, it being this Court’s intent that the Bidding Procedures are approved in their entirety, as if fully set forth in 26148689.3 7 26148689.3 this Order. The Debtor is hereby authorized to conduct the Auction pursuant to the terms of the Bidding Procedures and this Order. 6. The Debtor shall have the right, in its reasonable discretion, to withhold or limit access to any due diligence information that the Debtor determines is business-sensitive or otherwise not appropriate for disclosure to a Qualifying Bidder. Notwithstanding any prepetition limitations, including, without limitation, any non-disclosure, confidentiality or similar provisions relating to any due diligence information, the Debtor and its estate shall be authorized to provide due diligence information to Qualifying Bidders provided that such Qualifying Bidders have delivered an executed confidentiality agreement in form and substance acceptable to the Debtor. The Debtor and its estate is not responsible for, and shall have no liability with respect to, any information obtained by, or provided to, any Qualifying Bidders in connection with the Bidding Procedures or the Sale, provided that the information was provided in accordance with this Order. 7. For all purposes under the Bidding Procedures: (a) any designated Stalking Horse Purchaser shall be considered a Qualifying Bidder, and any Stalking Horse APA shall be considered a Qualifying Bid; (b) the Lender (as defined in the DIP Order) is, and will be deemed to be, a Qualifying Bidder for all purposes under the Bidding Procedures, without regard to any of the requirements or conditions set forth herein and without any other or further action by the Lender; and (c) in determining whether the Potential Bidders constitute Qualifying Bidders, the Debtor may consider a combination of bids for the Assets. 8. The Bidding Procedures shall apply to the Potential Bidders, the Qualifying Bidders, the submission, receipt, and analysis of all bids relating to the Sale, and the conduct of the Sale and the Auction. Case 20-10432-MFW Doc 110 Filed 04/20/20 Page 7 of 18 approved: (a) (b) (C) (d) 261486893 Case 20-10432-MFW Doc 110 Filed 04/20/20 Page 8 0f 18 9. The following “Assumption and Assignment Procedures” are hereby On or before July 1, 2020 (the “Assumption Notice Deadline”), the Debtor shall file with the Court and serve on each counterparty (each, a “Counterparty,” and collectively, the “C0unterparties”) to an Assumed Contract an Assumption Notice. The Assumption Notice shall include, without limitation, the cure amount (each, a “Cure Amount”), if any, that the Debtor believes is required t0 be paid to the applicable Counterparty under section 365(b)(1)(A) and (B) 0f the Bankruptcy Code for each of the Assumed Contracts. If a Counterparty objects t0 (i) the assumption and assignment 0f the Counterparty’s Assumed Contract, (ii) the Cure Amount for its Assumed Contract or (iii) the provision 0f adequate assurance 0f future performance, the Counterparty must file with the Court and serve 0n the Objection Notice Parties (as defined below) a written objection (a “Contract Objection”). Within two (2) business day of the Stalking Horse Designation Deadline, the Debtor shall provide the Adequate Assurance Information for any Stalking Horse Purchaser to all Counterparties Whose Assumed Contracts are included in the Stalking Horse APA and that are the subject 0f the Assumption Notice. In all other cases, the Debtor shall provide by overnight mail the Adequate Assurance Information of all parties that submit a bid, not later than one (1) business day after the date of the Bid Deadline, t0 all Counterparties Whose Assumed Contracts are included in such bid and that are the subj ect 0f an Assumption Notice. Any Contract Objection shall: (i) be in writing; (ii) comply With the Bankruptcy Rules and the Local Rules; (iii) be filed with the Clerk 0f the Court, 824 N. Market Street, 3rd Floor, Wilmington, Delaware 19801, 0n 0r before 4:00 p.m. (ET) 0n Julv 16, 2020 (the “Contract Objection Deadline”), and proof of service 0f such Contract Objection upon the Objection Notice Parties shall be filed with the Court as and When required by the Local Rules; (iV) be served upon the Objection Notice Parties; and (V) state With specificity the grounds for such objection, including, Without limitation, the fully liquidated cure amount and the legal and factual bases for any unliquidated cure amount that the Counterparty believes is required t0 be paid under section 365(b)(1)(A) and (B) 0f the Bankruptcy Code for the Assumed Contract, along With the specific nature and dates of any alleged defaults, the pecuniary losses, if any, resulting therefrom, and the conditions giving rise thereto. *If any Stalking Horse Purchaser is designated in accordance with the Bid Procedures, any objections t0 adequate assurance 0f performance by such Stalking Horse Purchaser shall befiled by the Contract Objection Deadline. * 26148689.3 (f) (g) (h) Case 20-10432-MFW Doc 110 Filed 04/20/20 Page 9 0f 18 “Any objections t0 adequate assurance offuture performance by a Successful Bidder other than a Stalking Horse Purchaser shall befiled in accordance with subparagraph (g) below. ** The “Objection Notice Parties” are as follows: (i) counsel to the Debtor, Young Conaway Stargatt & Taylor, LLP, Rodney Square, 1000 North King Street, Wilmington, Delaware 19801 (Attn: Robert S. Brady, Esq. (rbrady@ycst.com) and Robert F. Poppiti, J11, Esq. (rpoppiti@ycst.com)); (ii) counsel t0 any official committee of unsecured creditors appointed in the Chapter 11 Case; (iii) counsel t0 the Lender, Morris, Nichols, Arsht & Tunnell LLP, 1201 North Market Street, Wilmington, DE 19801 (Attn: Curtis S. Miller (cmiller@mnat.com)); (iv) the Office of the United States Trustee for the District of Delaware, 855 King Street, Suite 2207, Lockbox 35, Wilmington, Delaware 19801 (Attn: Juliet M. Sarkessian (juliet.m.sarkessian@usd0j.gOV)); and (V) counsel t0 the Stalking Horse Purchaser(s), if any. As soon as reasonably practicable after the completion of the Auction, the Debtor shall file with the Court a notice identifying the Successful Bidder (a “Notice 0f Successful Bidder”), which shall set forth, among other things, (i) the Successful Bidder and Back-Up Bidder (if any) and the amounts of the same, (ii) the Selected Assumed Contracts, and (iii) the proposed assignee(s) of such Selected Assumed Contracts. As soon as reasonably practicable after the completion 0f the Auction, the Debtor Will cause t0 be served by overnight mail and, if available, electronic mail, upon each affected Counterparty and its counsel (if known) the Notice 0f Successful Bidder. **In the event any Stalking Horse Purchaser is not the Successful Bidder, the Counterparties shall file any Contract Objections solely 0n the basis 0f adequate assurance offuture performance not later than Julv 21, 2020 at 4:00 gm. (ET2.** At the Sale Hearing, the Debtor Will seek Court approval of its assumption and assignment t0 any Stalking Horse Purchaser or, absent any Stalking Horse Purchaser 0r in the event a Stalking Horse Purchaser is not the Successful Bidder, then to the Successful Bidder, 0f only those Assumed Contracts that have been selected by any Stalking Horse Purchaser or, absent a Stalking Horse Purchaser 0r in the event a Stalking Horse Purchaser is not the Successful Bidder, then the Successful Bidder, to be assumed and assigned (each, a “Selected Assumed Contract,” and collectively, the “Selected Assumed Contracts”). The Debtor and its estate reserves any and all rights With respect to any Assumed Contracts that are not ultimately designated as Selected Assumed Contracts. If no Contract Objection is timely received With respect t0 a Selected Assumed Contract: (i) the Counterparty to such Selected Assumed Contract shall be deemed to have consented t0 the assumption by the Debtor and assignment t0 any 26148689.3 (i) (k) Case 20-10432-MFW Doc 110 Filed 04/20/20 Page 10 of 18 Stalking Horse Purchaser or, absent any Stalking Horse Purchaser 0r in the event a Stalking Horse Purchaser is not the SuccessfiJI Bidder, then t0 the Successful Bidder, 0f the Selected Assumed Contract, and be forever barred from asserting any objection with regard t0 such assumption and assignment (including, without limitation, With respect t0 adequate assurance 0f future performance by any Stalking Horse Purchaser 0r, absent any Stalking Horse Purchaser or in the event a Stalking Horse Purchaser is not the Successful Bidder, then the Successful Bidder); (ii) any and all defaults under the Selected Assumed Contract and any and all pecuniary losses related thereto shall be deemed cured and compensated pursuant to section 365(b)(1)(A) and (B) 0f the Bankruptcy Code; and (iii) the Cure Amount for such Selected Assumed Contract shall be controlling, notwithstanding anything to the contrary in such Selected Assumed Contract, 0r any other related document, and the Counterparty shall be deemed t0 have consented to the Cure Amount and shall be forever barred from asserting any other claims related t0 such Selected Assumed Contract against the Debtor and its estate 0r any Stalking Horse Purchaser 0r, absent any Stalking Horse Purchaser or in the event a Stalking Horse Purchaser is not the Successful Bidder, then the Successful Bidder, 0r the property of any of them, that existed prior t0 the entry 0f the Sale Order. T0 the extent that the parties are unable to consensually resolve any Contract Objection prior t0 the commencement 0f the Sale Hearing, including, without limitation, any dispute With respect to the cure amount required t0 be paid t0 the applicable Counterparty under section 365(b)(1)(A) and (B) 0f the Bankruptcy Code (any such dispute, a “Cure Dispute”), such Contract Objection Will be adjudicated at the Sale Hearing or at such other date and time as may be determined by the Debtor 0r fixed by the Court; provided, however, that if the Contract Objection relates solely t0 a Cure Dispute, the Selected Assumed Contract may be assumed by the Debtor and assigned to any Stalking Horse Purchaser 0r, absent any Stalking Horse Purchaser or in the event a Stalking Horse Purchaser is not the Successful Bidder, then t0 the Successful Bidder, provided that the cure amount that the Counterparty asserts is required t0 be paid under section 365(b)(1)(A) and (B) 0f the Bankruptcy Code (or such lower amount as agreed t0 by the Counterparty) is deposited in a segregated account by the Debtor 0r any Stalking Horse Purchaser or, absent any Stalking Horse Purchaser 0r in the event a Stalking Horse Purchaser is not the Successful Bidder, then the Successful Bidder, pending the Court’s adjudication 0f the Cure Dispute 0r the parties’ consensual resolution of the Cure Dispute. Notwithstanding anything t0 the contrary herein, if after the Sale Hearing 0r the entry 0f the Sale Order additional executory contracts or unexpired leases 0f the Debtor are determined t0 be Assumed Contracts, as soon as practicable thereafter, the Debtor shall file with the Court and serve, by regular mail, 0n the Counterparties an Assumption Notice, and such Counterparties shall file any Contract Objections not later than fourteen (14) days thereafter. If n0 Contract Objection is timely received, the Debtor shall be authorized t0 assume and assign such Assumed Contracts t0 any Stalking Horse Purchaser or, absent any Stalking 10 11 26148689.3 Horse Purchaser or in the event a Stalking Horse Purchaser is not the Successful Bidder, then to the Successful Bidder, without further notice to creditors or other parties in interest and without the need for further order of the Court, and such assumption and assignment shall be subject to the terms of the Sale Order. 10. The Debtor’s decision to assume and assign the Assumed Contracts to any Stalking Horse Purchaser or, absent any Stalking Horse Purchaser or in the event a Stalking Horse Purchaser is not the Successful Bidder, then to the Successful Bidder, is subject to this Court’s approval and the closing of the Sale. Accordingly, absent this Court’s approval and the closing of the Sale, the Assumed Contracts shall not be deemed assumed or assumed and assigned, and shall in all respects be subject to further administration by the Debtor and its estate under the Bankruptcy Code in connection with the Chapter 11 Case. 11. The Assumption and Assignment Procedures are appropriate and fair to all Counterparties and comply in all respects with the Bankruptcy Code, the Bankruptcy Rules and the Local Rules. The Assumption Notice is: (a) reasonably calculated to (i) provide sufficient, effective notice to all Counterparties and any other affected parties of the Debtor’s intent to assume and assign to any Stalking Horse Purchaser or, absent any Stalking Horse Purchaser or in the event a Stalking Horse Purchaser is not the Successful Bidder, then to the Successful Bidder, some or all of the Assumed Contracts, and (ii) afford the Counterparties the opportunity to exercise any rights affected by the Motion and the relief granted by this Order pursuant to Bankruptcy Rules 2002(a)(2), 6004 and 6006; and (b) hereby approved. 12. The inclusion of a contract, lease or other agreement on an Assumption Notice shall not constitute or be deemed a determination or admission by the Debtor and its estate or any other party in interest that such contract, lease or other agreement is, in fact, an executory contract or unexpired lease within the meaning of the Bankruptcy Code, and any and all rights of the Debtor and its estate with respect thereto shall be reserved. Case 20-10432-MFW Doc 110 Filed 04/20/20 Page 11 of 18 12 26148689.3 13. The Stalking Horse Notice, the Sale Notice, the Assumption Notice, the Bidding Procedures, the Auction, the Sale Hearing, and the Assumption and Assignment Procedures and the objection periods associated with each of the foregoing are reasonably calculated to provide notice to any affected party and afford the affected party the opportunity to exercise any rights affected by the Motion as it relates to the Bidding Procedures, the Auction, the Sale, the Sale Hearing, and the assumption and assignment to the Stalking Horse Purchaser or, absent any Stalking Horse Purchaser or in the event a Stalking Horse Purchaser is not the Successful Bidder, then to the Successful Bidder, of the Assumed Contracts pursuant to Bankruptcy Rules 2002(a)(2), 6004 and 6006, and such notice and objection periods are hereby approved. 14. The Sale Notice is approved. Within five (5) business days of the entry of this Order, the Debtor shall serve the Sale Notice by regular mail on: (a) the Office of the United States Trustee for the District of Delaware; (b) counsel to the Lender; (c) all parties known by the Debtor to assert a lien or encumbrance on any of the Assets; (d) all persons known or reasonably believed to have asserted an interest in or claim to any of the Assets; (e) all persons known or reasonably believed to have expressed an interest in acquiring all or a substantial portion of the Assets within the one (1) year prior to the Petition Date; (f) the Office of the United States Attorney for the District of Delaware; (g) the Office of the Attorney General in each state in which the Debtor has operated; (h) the Office of the Secretary of State in each state in which the Debtor has operated; (i) the Internal Revenue Service and all state and local taxing authorities in the states which the Debtor has or may have any tax liability; (j) all environmental authorities having jurisdiction over any of the Assets, including the Environmental Protection Agency; (k) the Federal Trade Commission; (l) the United States Attorney General/Antitrust Case 20-10432-MFW Doc 110 Filed 04/20/20 Page 12 of 18 Case 20-10432-MFW Doc 110 Filed 04/20/20 Page 13 of 18 Division of Department of Justice; (m) all non-Debtor parties t0 any 0f the Assumed Contracts; (n) all 0f the Debtor’s other known creditors and equity security holders; and (o) all other parties that have filed a notice of appearance and demand for service 0f papers in the Chapter 11 Case as of the service date (collectively, the “Sale Notice Parties”). 15. The Debtor shall post the Sale Notice, any Stalking Horse Notice, and the Bidding Procedures Order 0n the website of the Debtor’s claims and noticing agent. Within seven (7) business days 0f the entry 0f this Order, the Debtor shall cause the Sale Notice t0 be published once in the national edition of USA Today. Publication 0f the Sale Notice as described in this Order conforms t0 the requirements 0f Bankruptcy Rules 2002(1) and 9008, and is reasonably calculated t0 provide notice t0 any affected party, including any Potential Bidders, and afford the affected party the opportunity to exercise any rights affected by the Motion and the relief granted by this Order. 16. Any objections t0 the Sale 0r the relief requested in connection with the Sale (a “Sale Objection”), other than a Contract Objection, Which shall be governed by the Assumption and Assignment Procedures, must: (a) be in writing; (b) comply With the Bankruptcy Rules and the Local Rules; (c) set forth the specific basis for the Sale Objection; (d) be filed With the Clerk of this Court, 824 N. Market Street, 3rd Floor, Wilmington, Delaware 19801, 0n 0r before 4:00 p.m. (ET) 0n JulV 16, 2020 (the “Sale Objection Deadline”), and proof 0f service of such Sale Objection upon the Objection Notice Parties shall be filed with the Court as and when required by the Local Rules; and (e) be served upon the Objection Notice Parties. If a Sale Objection is not filed and served on or before the Sale Objection Deadline in accordance With the foregoing requirements, the obj ecting party may be barred from obj ecting t0 26148689.3 13 14 26148689.3 the Sale and being heard at the Sale Hearing, and this Court may enter the Sale Order without further notice to such party. 17. Failure to file a Sale Objection on or before the Sale Objection Deadline (a) may forever bar the assertion, whether at any Sale Hearing or thereafter, of any objection to the Motion, to entry of the Sale Order, and/or to the consummation and performance of the Sale contemplated by a Stalking Horse APA or any Modified APA with a Successful Bidder, and (b) for purposes of section 363(f)(2) of the Bankruptcy Code, shall be deemed to be “consent” to entry of the Sale Order and consummation of the Sale and all transactions related thereto. 18. The Lender, in its capacity as such, (i) shall have the continuing right to use the amounts then outstanding under the Postpetition Debt (as defined in the DIP Order), or any part thereof, to credit bid with respect to the Assets, and (ii) subject to Paragraph 10 of the DIP Order, shall have the continuing right to use the amounts then outstanding under the Prepetition Secured Debt (as defined in the DIP Order), or any part thereof, to credit bid with respect to the Assets. 19. As part of its bid, each Qualifying Bidder must provide the Debtor, the other Bidding Procedures Notice Parties, the Consultation Parties and the Counterparties to any Assumed Contracts included in its bid, information supporting the Qualifying Bidder’s ability to comply with the requirements of adequate assurance of future performance under section 365(f)(2)(B) and, if applicable, section 365(b)(3) of the Bankruptcy Code (the “Adequate Assurance Information”), including (a) the Qualifying Bidder’s financial wherewithal and willingness to perform under any contracts and leases that are assumed and assigned to such Qualifying Bidder; and (b) a contact person for the proposed assignee that the applicable Counterparty may directly contact in connection with the adequate assurance of future Case 20-10432-MFW Doc 110 Filed 04/20/20 Page 14 of 18 15 26148689.3 performance. To the extent that the Qualifying Bidder is a newly formed acquisition entity or the like, the financial and other information supporting the Qualifying Bidder’s financial wherewithal shall include financial and other information supporting the financial wherewithal of the Qualifying Bidder’s parent company or sponsor. To the extent available, the Adequate Assurance Information may also include: (x) a corporate organization chart or similar disclosure identifying ownership and control of the proposed assignee; and (y) financial statements, tax returns and annual reports. The Debtor, the other Bidding Procedures Notice Parties and the Consultation Parties shall keep confidential all Adequate Assurance Information provided to them under this Paragraph and the Bidding Procedures, and shall be permitted to use and disclose such Adequate Assurance Information only as provided in this Order and the Bidding Procedures unless the Qualifying Bidder that provided such Adequate Assurance Information otherwise consents in writing. 20. Each Counterparty in receipt of Adequate Assurance Information under this Order shall review the Adequate Assurance Information received on a confidential basis and shall not disclose the Adequate Assurance Information except as expressly provided in this Order and the Bidding Procedures. Such Counterparty may not use or disclose, except to representatives, attorneys, advisors and financing sources (collectively, “Representatives”), any confidential Adequate Assurance Information for any purpose other than: (a) evaluating whether adequate assurance of future performance as required under section 365(f)(2)(B) and, if applicable, section 365(b)(3) of the Bankruptcy Code has been provided; and (b) in support of any objection (the “Assignment Objection”) (subject to the limitations on disclosure set forth herein) by such Counterparty relating to adequate assurance of future performance. Any Assignment Objection that includes confidential, non-public Adequate Assurance Information must be filed under seal Case 20-10432-MFW Doc 110 Filed 04/20/20 Page 15 of 18 Case 20-10432-MFW Doc 110 Filed 04/20/20 Page 16 of 18 unless disclosure 0f such confidential, non-public information is authorized by the Debtor and the applicable assignee(s). The party filing an Assignment Obj ection under seal shall follow the procedures for the same set forth in Local Rule 9018-1(d). The unredacted versions 0f such Assignment Objections shall be served upon the Debtor, the other Bidding Procedures Notice Parties, the Consultation Parties and the United States Trustee, with a copy to the Court’s chambers; provided further, that all rights of all parties in interest in the Chapter 11 Case are reserved t0 oppose the filing under seal of any such information and t0 seek any other relief from this Court With respect to such matter. Any Representative receiving Adequate Assurance Information shall be notified and shall agree to be bound by the restrictions set forth in this Order. 21. If no timely Qualifying Bids other than any Stalking Horse Purchaser’s Qualifying Bid are submitted on 0r before the Bid Deadline, the Debtor shall not hold an Auction and shall request at the Sale Hearing that this Court approve the Stalking Horse APA and the transactions contemplated thereunder. If the Debtor timely receives one 0r more Qualifying Bids other than any Stalking Horse Purchaser’s Qualifying Bid, then the Debtor shall conduct the Auction on Julv 16, 2020 at 10:00 a.m. (ET), at the offices 0f Young Conaway Stargatt & Taylor, LLP, 1000 North King Street, Wilmington, DE 19801. Only the Debtor, the Auction Bidders, the Consultation Parties, and creditors 0f the Debtor, together With the professional advisors to each 0f the foregoing parties, may attend the Auction; provided that any such creditors provide counsel for the Debtor written notice of their intent to attend the Auction n0 later than 5:00 p.m. (ET) the day prior to the Auction. 26148689.3 16 Case 20-10432-MFW DOC 110 Filed 04/20/20 Page 17 0f 18 22. The Debtor shall have until Julv 22, 2020 at Noon (ET) t0 file and serve a reply t0 any objection filed in connection with the Sale, including any Sale Obj ection or Contract Objection. 23. The Sale Hearing shall be held in this Court on Julv 23, 2020 at 3:00 p.m. fl, unless otherwise determined by this Court. The Sale Hearing may be adjourned by the Debtor from time to time Without fithher notice t0 creditors 0r other parties in interest other than by announcement 0f the adjournment in open court on the date scheduled for the Sale Hearing, and/or by filing a hearing agenda or notice on the docket 0f the Chapter 11 Case. 24. The Debtor is authorized t0 conduct the Sale Without the necessity 0f complying with any state or local bulk transfer laws 0r requirements. 25. In the event that there is a conflict between this Order 0r the Bidding Procedures, 0n the one hand, and the Motion, the APA, a Stalking Horse APA, 0r a Modified APA, on the other hand, this Order and the Bidding Procedures shall control and govern. If there is a conflict between this Order and the Bidding Procedures, this Order shall control and govern. If there is a conflict between this Order 0r the Bidding Procedures, on the one hand, and any notice served in connection with the Motion or this Order, this Order and the Bidding Procedures shall control and govern. 26. Prior t0 mailing the Assumption Notice and the Sale Notice, as applicable, the Debtor may fill in, 0r cause t0 be filled in, any missing dates and other information, correct any typographical errors, conform the provisions thereof to the provisions of this Order, and make such other, non-material changes as the Debtor deems necessary 0r appropriate. 27. This Order shall be effective immediately upon entry, and any stay 0f orders provided for in Bankruptcy Rules 6004(h) or 6006(d) 0r any other provision of the 261486893 17 Case 20-10432-MFW Doc 110 Filed 04/20/20 Page 18 of 18 Bankruptcy Code, the Bankruptcy Rules or the Local Rules is expressly waived. The Debtor is not subject to any stay in the implementation, enforcement 0r realization of the relief granted in this Order, and may, in its sole discretion and without further delay, take any action and perform any act authorized or approved undar this Order. 28. The requirements set forth in Local Rules 6004-1, 9006-1 and 9013-1 are hereby satisfied or waived. 29. Attached hereto as Schedule A is a summary of the key dates established by this Order. 30. This Court shall retain exclusive jurisdiction With respect t0 all matters arising from or related to the implementation 0r interpretation of the Order. Dated: April 20th, 2020 MARY F. WALRATH 26148689.Wi|mington, Delaware 18 UNITED STATES BANKRUPTCY JUDGE EXHIBIT 5 Case 20-10432-MFW Doc 263 Filed 09/30/20 Page 1 0f 16 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: Chapter 11 SUITABLE TECHNOLOGIES, INC.,1 Case No. 20-10432 (MFW) Debtor. Hearing Date: October 30, 2020 at 10:30 a.m. (ET) Response Deadline: October 14, 2020 at 4:00 p.m. (ET) DEBTOR’S OBJECTION TO PROOF OF CLAIM NUMBER 16 FILED BY ALLISON HUYNH Suitable Technologies, Inc., the above-captioned debtor and debtor in possession (the “Debtor” 0r “Suitable”), hereby submits this objection (this “Objection”), pursuant t0 section 502 0ftitle 11 0f the United States Code, 11 U.S.C. §§ 101 et seq. (the “Bankruptcy Code”), Rule 3007 0f the Federal Rules 0f Bankruptcy Procedure (the “Bankruptcy Rules”), and Rule 3007-1 0f the Local Rules 0f Bankruptcy Practice and Procedure for the United States Bankruptcy Court for the District 0f Delaware (the “Local Rules”), t0 proof 0f claim number 16 filed in this chapter 11 case by Allison Huynh (the “Disputed Claim”), a copy 0fwhich is attached hereto asw A, and requests the entry 0f an order, substantially in the form attached hereto as Exhibit B (the “Proposed Order”), disallowing the Disputed Claim. In support 0f this Objection, the Debtor respectfully states as follows: 1 The last four digits 0f the Debtor’s United States federal tax identification number are 7816. The Debtor’s mailing address is 921 East Charleston Road, Palo Alto, CA 94303. 2694969 1 .9 Case 20-10432-MFW Doc 263 Filed 09/30/20 Page 2 0f 16 PRELIMINARY STATEMENT2 1. Ignoring the facts 0f this Chapter 11 Case, the Court’s findings in the Sale Orders, and the extensive evidentiary record presented and admitted in connection with the Court’s approval 0f the Postpetition Sales, Ms. Huynh asserts an approximately $ 1 .1 million claim against the Debtor’s estate for professional fees she allegedly incurred in connection with the Chancery Court Action. Ms. Huynh’s claim rests entirely 0n her misguided application 0f the corporate benefit doctrine, which clearly does not provide a valid legal basis for her claim under the facts and circumstances 0f this Chapter 11 Case. She cannot, as she must, meet her burden under that doctrine and applicable bankruptcy law 0fdemonstrating that the Chancery Court Action conferred a substantial benefit t0 the Debtor 0r its shareholders, because 0f the simple fact that the Debtor ultimately sold its assets for the same cash purchase price contemplated by the Prepetition Blue Ocean Sale that Ms. Huynh unsuccessfully sought t0 enjoin. If anything, Ms. Huynh’s actions were detrimental t0 Suitable, and in furtherance 0fher own self-interest with respect t0 her ongoing divorce proceedings with Scott Hassan. Therefore, the Disputed Claim must be disallowed. JURISDICTION 2. The Court has jurisdiction t0 consider this Obj ection pursuant t0 28 U.S.C. §§ 157 and 1334(b), and the Amended Standing Order ofReference from the United States District Court for the District 0f Delaware dated as 0f February 29, 2012 (the “Amended Standing Order”). This is a core proceeding pursuant t0 28 U.S.C. § 157(b)(2). Venue is proper in this Court pursuant t0 28 U.S.C. §§ 1408 and 1409. 2 Capitalized terms used in this Preliminary Statement but not yet defined shall have the meaning ascribed t0 such terms below. 2694969 1 .9 Case 20-10432-MFW Doc 263 Filed 09/30/20 Page 3 0f 16 3. Pursuant t0 Local Rule 9013-1(f), the Debtor consents t0 the Court’s entry 0f a final judgment 0r order with respect t0 this Objection if it is determined that the Court, absent consent 0f the parties, cannot enter final orders 0r judgments consistent with Article III 0f the United States Constitution. 4. The statutory and legal predicates for the relief requested herein are section 502(b) 0f the Bankruptcy Code, Bankruptcy Rule 3007, and Local Rule 3007-1. BACKGROUND A. General Background 5. On February 26, 2020 (the “Petition Date”), the Debtor commenced a voluntary case (this “Chapter 11 Case”) under chapter 11 0f the Bankruptcy Code. Pursuant t0 sections 1 107(a) and 1 108 0fthe Bankruptcy Code, the Debtor is continuing t0 manage its financial affairs as a debtor in possession. N0 official committees have been appointed in the Chapter 11 Case, and n0 request has been made for the appointment 0f a trustee 0r examiner. B. Prepetition Blue Ocean Sale 6. Prior t0 the Petition Date, after experiencing financial difficulties, the Debtor determined t0 wind down its operations and find a third-party buyer for its assets. In doing so, between December 2018 and May 2019, the Debtor initiated discussions with over a dozen prospective purchasers that the Debtor believed maintained the capacity and industry wherewithal t0, among other things, sustain its Beam servers. In August 2019, at the conclusion 0fthose efforts, the Debtor entered into an asset purchase agreement (the “Prepetition Blue Ocean APA”) with Blue Ocean Robotics ApS (“Blue Ocean”), one 0f its distributors, for the sale 0f substantially all 0f the Debtor’s assets (the “Prepetition Blue Ocean Sale”). Notably, certain 0f the Debtor’s patents were excluded assets under the Prepetition Blue Ocean APA. 2694969 1 .9 4 26949691.9 7. Although the Prepetition Blue Ocean APA, in the Debtor’s business judgment, presented the only viable offer for its assets under the circumstances, in November 2019, Ms. Huynh, the spouse of the Debtor’s controlling shareholder, Mr. Hassan, in her alleged capacity as a minority shareholder (as a result of certain community property shares), commenced a civil action (the “Chancery Court Action”) in the Court of Chancery of the State of Delaware (the “Court of Chancery”), seeking, among other things, a preliminary injunction to enjoin the Prepetition Blue Ocean Sale. On December 13, 2019, the Court of Chancery denied the preliminary injunction request. Despite constituting an arms-length, third-party transaction, the Prepetition Blue Ocean Sale ultimately did not close. C. Postpetition Sale Process 8. As set forth in the Declaration of Charles C. Reardon in Support of the Debtor’s Chapter 11 Petition and First Day Pleadings [Docket No. 7], the Debtor commenced the Chapter 11 Case to continue the process of winding down its business affairs and to conduct a comprehensive sale process (the “Postpetition Sale Process”) for substantially all of its assets pursuant to section 363 of the Bankruptcy Code. To facilitate the Debtor’s chapter 11 efforts: (a) on March 24, 2020, the Court entered an order [Docket No. 74] approving the Debtor’s postpetition financing facility with Magicheart Investments, LLC (“Magicheart”), pursuant to which the Debtor obtained approximately $6 million in secured post-petition financing (the “DIP Facility”); and (b) on April 20, 2020, the Court entered an order [Docket No. 110] (the “Bidding Procedures Order”), establishing, among other things, certain bidding and auction procedures in connection with the Postpetition Sale Process. 9. In accordance with the Bidding Procedures Order, the Debtor, in consultation with its professional advisors, conducted a thorough marketing process for its assets. Case 20-10432-MFW Doc 263 Filed 09/30/20 Page 4 of 16 5 26949691.9 As attested to in the Declaration of Luis Pillich in Support of Sale [Docket No. 218] (the “Pillich Declaration”), the Debtor contacted nearly 230 potential bidders, executed 25 non-disclosure agreements, and hosted well over 100 conference calls and meetings with representatives of prospective bidders. At the conclusion of this extensive marketing process, the Debtor’s independent director and Chief Restructuring Officer, along with the Debtor’s bankruptcy counsel and investment banker, determined that the Debtor only received two bids for its assets that were qualifying bids under the Bidding Procedures Order: a cash bid from Blue Ocean for substantially all of the Debtor’s assets, including all of the Debtor’s patents (the “Blue Ocean Bid”); and a credit bid from Magicheart, its secured lender, for the Debtors’ intellectual property assets (the “Magicheart Bid”). Despite the Debtor’s exhaustive marking efforts described above, no other parties submitted a qualifying bid for its assets. 10. After carefully evaluating the Blue Ocean Bid and the Magicheart Bid, the Debtor determined, in its business judgment, that to maximize the value of the assets, it was necessary for the Debtor to work separately with Blue Ocean and Magicheart to modify their bids in a way that would allow the Debtor to execute value-maximizing transactions with both parties. Following extensive arm’s length and good faith discussions and negotiations, Blue Ocean and Magicheart modified their bids in a manner that would allow the Debtor to consummate transactions with both parties to maximize estate value. At the conclusion of the auction, the Debtor designated Blue Ocean and Magicheart as the successful bidders for the acquired assets under their respective asset purchase agreements. 11. Pursuant to the Blue Ocean agreement (the “Blue Ocean Postpetition APA”), Blue Ocean acquired substantially all of the Debtor’s assets, including all of its patent portfolio, for a cash purchase price of $400,000. Under the Magicheart agreement (the Case 20-10432-MFW Doc 263 Filed 09/30/20 Page 5 of 16 Case 20-10432-MFW Doc 263 Filed 09/30/20 Page 6 0f 16 “Magicheart APA”), Magicheart purchased certain software from the Debtor in exchange for a $100,000 credit bid of its secured debt. On August 20, 2020, upon consideration 0f, among other things, the Declaration 0f Charles Reardon in Support ofSale [Docket N0. 217] and the Pillich Declaration, the Court entered orders [Docket Nos. 225 and 226] (together, the “Sale Orders”) approving the sales contemplated by the Blue Ocean APA (the “Postpetition Blue Ocean Sale”) and the Magicheart APA (the “Magicheart Sale,” and together, the “Postpetition Sales”). The Postpetition Sales closed (the “Closing”) 0n August 21, 2020 [Docket N0. 228]. D. Debtor’s Post-Closing Efforts 12. Following the Closing, the Debtor has focused its efforts 0n the claims reconciliation process, determining an appropriate exit strategy for this Chapter 11 Case, and continuing the wind down 0f its affairs. 13. On September 14, 2020, the Debtor filed its first and second omnibus claims objections [Docket Nos. 244 and 245] (together, the “Omnibus Objections”), and n0 responses were received t0 the Omnibus Obj ections. Assuming the Court sustains the Omnibus Obj ections, the Debtor believes, 0n a preliminary basis, that there will be approximately $1 million in valid prepetition claims against its estate, excluding the secured and unsecured claims 0f Magicheart and its affiliates against the Debtor. The secured claims 0f Magicheart total n0 less than approximately $ 1 0 million. The unsecured claims 0fMagicheart and its affiliates total n0 less than approximately $90 million. OBJECTION 14. By this Objection, the Debtor seeks the entry 0f the Proposed Order, disallowing the Disputed Claim. 2694969 1 .9 Case 20-10432-MFW Doc 263 Filed 09/30/20 Page 7 0f 16 15 . Pursuant t0 the Disputed Claim, Ms. Huynh asserts a $ 1 ,157,749.72 general unsecured claim against the Debtor’s estate for professional fees she allegedly incurred in connection with the Chancery Court Action. In doing so, Ms. Huynh alleges that she provided a significant benefit t0 Suitable and its shareholders through the Chancery Court Action in allegedly preventing the Prepetition Blue Ocean Sale, which she asserts “massively undervalued” Suitable’s assets. BASIS FOR OBJECTION A. Applicable Bankruptcy Law 16. Section 502(b) 0f the Bankruptcy Code provides, in relevant part that, “[a] claim or interest, proof 0f which is filed under section 501 0f this title, is deemed allowed, unless aparty in interest . . . objects.” 11 U.S.C. § 502(a). 17. Bankruptcy Rule 3007 provides, in relevant part, that: “(a) An objection t0 the allowance 0f a claim shall be in writing and filed. A copy 0f the objection with notice 0f the hearing thereon shall be mailed 0r otherwise delivered t0 the claimant, the debtor 0r debtor in possession and the trustee at least 30 days prior t0 the hearing.” FED. R. BANKR. P. 3007. 18. As set forth in Bankruptcy Rule 300 1 (f), a properly executed and filed proof 0f claim constitutes prima facie evidence 0f the validity and the amount 0f the claim under section 502(a) 0f the Bankruptcy Code. FED. R. BANKR. P. 3001(f); see, e.g., In re Oneida Ltd, 400 B.R. 384, 389 (Bankr. S.D.N.Y. 2009) (“A proof 0f claim is prima facie evidence 0f the validity and amount 0f a claim, and the objector bears the initial burden 0f persuasion”). The proof 0f claim, however, must set forth enough facts necessary t0 support the claim. In re Allegheny Int’l, Ina, 954 F.2d 167, 173 (3d Cir. 1992) (“Initially, the claimant must allege facts sufficient t0 support 2694969 1 .9 Case 20-10432-MFW Doc 263 Filed 09/30/20 Page 8 0f 16 the claim. If the averments in his filed claim meet this standard 0f sufficiency, it is ‘primafacie’ valid”). 19. If the objector sets forth evidence equal in force t0 the prima facie case t0 refute at least one element essential t0 the claim, the burden shifts back t0 the claimant, who must prove by a preponderance 0f the evidence that the claim should be allowed. In re Oneida, 400 B.R. at 389 (“When the burden is shifted back t0 the claimant, it must then prove by a preponderance 0f the evidence that under applicable law the claim should be allowed”); see also Allegheny, 954 F.2d at 173-74 (“If the objector produces sufficient evidence t0 negate one 0r more 0f the sworn facts in the proof 0f claim, the burden reverts t0 the claimant t0 prove the validity 0f the claim by a preponderance 0f the evidence.”). The objecting party may accomplish this by refuting one 0r more facts contained within the proof 0f claim. In re St. Johnsbmy Trucking Ca, 206 B.R. 318, 323 (Bankr. S.D.N.Y. 1997) (“Any party objecting t0 the claim has the burden 0f putting forth evidence sufficient t0 negate the prima facie validity 0f the claim by refuting one 0r more 0f the facts in the filed claim”). Ultimately, the burden 0f persuasion remains with the claimant t0 prove that the claim is valid. Id. (“Once this occurs, however, the ultimate burden 0f persuasion undoubtedly remains upon the claimant. The claimant must prove the claim, not sit back while the objector attempts t0 disprove it”); Allegheny, 954 F.2d at 174 (“The burden 0f persuasion is always 0n the claimant”). 20. For the reasons set forth below, Ms. Huynh has failed t0 meet her burden and cannot set forth the facts necessary t0 support her claim. Accordingly, the Disputed Claim must be disallowed. 2694969 1 .9 9 26949691.9 B. Applicable Delaware Corporate Law 21. Ms. Huynh’s claimed right to payment of her professional fees allegedly incurred in pursuing the Chancery Court Action rests solely on the corporate benefit doctrine, a doctrine of Delaware corporate law that permits repayment of certain fees, in certain narrowly defined circumstances. Under the corporate benefit doctrine, a litigant is “eligible” for fees and expenses only if “(1) the suit was meritorious when filed; (2) the action producing benefit to the corporation was taken by the defendants before a judicial resolution was achieved; and (3) the resulting corporate benefit was causally related to the lawsuit.” United Vanguard Fund, Inc. v. TakeCare, Inc., 693 A.2d 1076, 1079 (Del. 1997). 22. The Debtor’s objection to the Disputed Claim is a simple one: Ms. Huynh, is not entitled to fees under the corporate benefit doctrine because the Chancery Court Action did not secure any benefit for Suitable and its shareholders, let alone the requisite substantial one. See Martin v. Harbor Diversified, Inc., 2020 WL 568971, at *2 (Del. Ch. Feb. 5, 2020) (corporate benefit doctrine requires showing of “substantial benefit”). The Disputed Claim also fails because there can be no “casual connection,” as there must be, where there is no benefit. Id. (corporate benefit doctrine requires showing of “causal connection . . . between the litigation and the benefit”). The Disputed Claim should be disallowed because the result of the Debtor’s comprehensive and thorough Postpetition Sale Process has proven that the proposed purchase price for the Prepetition Blue Ocean Sale was not, as Ms. Huynh incorrectly contends, indicative of a fire sale or a massive undervaluation of Suitable’s assets. 23. Under the Prepetition Blue Ocean APA, Blue Ocean agreed to pay $400,000 for substantially all of Suitable’s assets, other than certain of Suitable’s patents, which patents were excluded assets under the Prepetition Blue Ocean Sale. Ms. Huynh then commenced the Case 20-10432-MFW Doc 263 Filed 09/30/20 Page 9 of 16 10 26949691.9 Chancery Court Action seeking to enjoin the Prepetition Blue Ocean Sale on the ground that the value of Suitable’s assets was purportedly in excess of $100 million. The Postpetition Sale Process has proven that she was clearly wrong. The cash proceeds resulting from the Postpetition Sale Process were $400,000-the same cash purchase price under the Prepetition Blue Ocean APA. Ms. Huynh did not file an objection to the approval of the Postpetition Sales in this Chapter 11 Case, challenge the thorough marketing process undertaken by the Debtors’ professionals in the Postpetition Sale Process, or dispute that the highest and best value for the Debtor’s assets was obtained. 24. Further, the Prepetition Blue Ocean APA did not include certain of Suitable’s patents, which Blue Ocean has now acquired under the Postpetition Blue Ocean APA- for the same cash purchase price as the Prepetition Blue Ocean APA. Accordingly, the post- petition purchase price is actually less. In addition, to achieve this result, the Debtor incurred significant incremental secured debt, including the approximately $6 million DIP Facility, to run the Postpetition Sale Process. While the Debtor did close the Magicheart Sale in connection with the Postpetition Sale Process, the only consideration from that sale was a $100,000 credit bid against the millions of dollars in incremental debt that the Debtor incurred after the Prepetition Blue Ocean Sale did not close. 25. Not only has Ms. Huynh failed to provide any benefit to Suitable, she most certainly has provided no benefit to Suitable’s shareholders, as required by the corporate benefit doctrine on which she bases her claim. Here, given (i) the value of Suitable’s assets based on the Postpetition Sales, which sales the Court found were the highest and otherwise best offers for the Debtor’s assets, and (ii) that valid secured and unsecured claims against the estate total Case 20-10432-MFW Doc 263 Filed 09/30/20 Page 10 of 16 11 26949691.9 approximately $100 million, Suitable’s shareholders will not receive any recovery from the proceeds of the Postpetition Blue Ocean Sale. 26. Had the Prepetition Blue Ocean Sale closed, Suitable’s shareholders likewise would not have received any recovery from the sale proceeds given Suitable’s significant prepetition secured and unsecured debt. Thus, after the extensive and costly Postpetition Sale Process, the result for the shareholders is the same: the sale consideration does not exceed the estate’s debt, and none of the proceeds will flow to the shareholders. In other words, the shareholders have received no benefit from the Chancery Court Action. 27. Although Ms. Huynh claims that “preventing” the purported “fire sale” (via the Chancery Court Action) itself conferred a benefit on Suitable and its shareholders, she does not explain how it does so (as she must), and she ignores the facts of this Chapter 11 Case, the Court’s findings in the Sale Orders, and the extensive and uncontroverted evidentiary record presented and admitted in connection with the Court’s approval of the Postpetition Sales. For example, pursuant to the Sale Order for the Blue Ocean Postpetition Sale, the Court found that: a) The terms contained in the APA constitute the highest and best offer for the Purchased Assets and will provide a greater recovery for the Debtor’s bankruptcy estate for the Purchased Assets than would be provided by any other available alternative. The Debtor’s determination that the APA constitutes the highest and best offer for the Purchased Assets constitutes a valid and sound exercise of the Debtor’s business judgment. [Docket No. 225, ¶ O.] b) The APA and the Sale contemplated thereby represent a fair and reasonable offer to purchase the Purchased Assets. No other person, entity or group of entities has presented a higher or otherwise better offer to the Debtor to purchase the Purchased Assets for greater economic value to the Debtor’s bankruptcy estate than the Buyer. Id. ¶ P. c) Approval of the Motion and the APA and the consummation of the Sale contemplated thereby is in the best interests of the Debtor, its bankruptcy estate, its creditors and other parties in interest in the Chapter 11 Case. Id. ¶ Q. Case 20-10432-MFW Doc 263 Filed 09/30/20 Page 11 of 16 12 26949691.9 d) The Debtor has demonstrated a good, sufficient, and sound business purpose and justification for the Sale of the Purchased Assets and the other transactions contemplated by the APA because, among other reasons, (i) the APA constitutes the highest and best offer for the Purchased Assets, (ii) the APA and the closing thereon will present the best opportunity to realize the value of the Purchased Assets, and (iii) any other transaction for the Purchased Assets would not have yielded as favorable an economic result. Id. ¶ R. Said differently, the market has spoken: the value of Suitable’s assets is nearly identical to the cash purchase price under the Prepetition Blue Ocean APA, and Suitable’s assets were not massively undervalued as Ms. Huynh asserted in the Chancery Court Action. See, e.g., In re SubMicron Sys. Corp., 432 F.3d 448, 461 (3d Cir. 2006) (“Section 363 attempts to avoid the complexities and inefficiencies of valuing collateral altogether by substituting the theoretically preferable mechanism of a free market sale to set the price. The provision is premised on the notion that the market’s reaction to a sale best reflects the economic realities of assets’ worth.”) (emphasis added); see also In re Allonhill, LLC, No. 14-10663 (KG), 2019 WL 1868610, at *40 (Bankr. D. Del. Apr. 25, 2019) (“[A] market test - reflecting the actual price a willing buyer agrees to pay - is the best determination of fair market value[.]”). 28. If anything, the Chancery Court Action was detrimental to Suitable, and pursued out of Ms. Huynh’s own self-interest with respect to her ongoing California divorce proceedings with Mr. Hassan. The alleged “fire sale” (i.e., the Prepetition Blue Ocean Sale) that Ms. Huynh sought to enjoin would have yielded a cash purchase price for Suitable that is identical to the cash purchase price ultimately obtained through the Postpetition Blue Ocean Sale, but only after the six-month Postpetition Sale Process. This process was costly for Suitable, causing it to incur, among other expenses, the approximately $6 million DIP Facility. In short, the simple math Case 20-10432-MFW Doc 263 Filed 09/30/20 Page 12 of 16 Case 20-10432-MFW Doc 263 Filed 09/30/20 Page 13 of 16 here shows that Ms. Huynh did not confer any benefit whatsoever 0n Suitable 0r its shareholders through the Chancery Court Action.3 29. The cases Ms. Huynh cites in support 0f her Disputed Claim, in fact, d0 not support her claim at all. As set forth above, t0 be eligible for an award 0f professionals fees under the corporate benefit doctrine, Ms. Huynh must show that the Chancery Court Action “had a causal connection t0 a specific and substantial benefit conferred upon the corporation.” Chi. Milwaukee Corp. v. Eisenberg, 560 A.2d 489, 1989 WL 27743, at *1 (Del. Feb. 23, 1989) (Table) (emphasis added). In Chicago Milwaukee Corp. v. Eisenberg, 1988 WL 112910 (Del. Ch. Oct. 25, 1988), the court granted the plaintiff’s motion for a preliminary injunction that “achieved everything . . . that [the plaintiff] would have achieved after a final hearing.” Id. at *2. The benefit the plaintiff achieved was the correction 0f invalid disclosures in connection with a transaction between the corporation and its stockholders. Id. at *3. In the Chancery Court Action, the court denied Ms. Huynh’s motion for a preliminary injunction. And unlike the stockholders 0f Chicago Milwaukee C0rp., who at least received corrected disclosures in connection with a tender offer, Suitable’s shareholders realized n0 benefit from the auction process. 30. Ms. Huynh cites In re Orchard Enterprises, Inc. Stockholder Litigation, 2014 WL 41 81912 (Del. Ch. Aug. 22, 2014) in support 0f the proposition that “the result accomplished for the corporation is the strongest factor in determining the amount 0f a fee award.” Id. at *7. While that is an accurate statement 0f the law, this “strongest factor” actually demonstrates the emptiness 0f Ms. Huynh’s claim for professional fees. In Orchard Enterprises, the class minority stockholders received a payment in excess 0f $10 million for settlement 0f 3 T0 be clear, Ms. Huynh’s actions also did not benefit Suitable’s creditors given that the purchase price for the Postpetition Blue Ocean APA is the same as the Prepetition Blue Ocean APA, and the Debtor incurred significant incremental secured debt t0 achieve this result, including the DIP Facility, Which must be repaid 0r otherwise satisfied before Suitable’s general unsecured creditors can obtain any recovery in this Chapter 11 Case. 269496919 13 14 26949691.9 litigation challenging a merger transaction. Id. at *1. This is in stark contrast to the Chancery Court Action, which accomplished nothing for Suitable and its shareholders. 31. In Waterside Partners v. C. Brewer and Co., 739 A.2d 768 (Del. 1999), which Ms. Huynh also cites, the Delaware Supreme Court affirmed the Court of Chancery’s decision to deny the plaintiff’s application for attorneys’ fees. The Supreme Court noted that “[f]ee shifting is the exception rather than the rule in corporate litigation and the establishment of a nexus between the litigation, itself, and the claimed corporate benefit is a sine que non.” Id. at 770. For the reasons set forth above, Ms. Huynh cannot show that the Chancery Court Action conferred any corporate benefit, and fee shifting is therefore unwarranted and inappropriate here. 32. Ms. Huynh also cites Rovner v. Health-Chem Corp., 1998 WL 227908 (Del. Ch. Apr. 27, 1998), but simply ignores the court’s analysis of the benefit conferred on the class of stockholders at issue. There, the defendants, in opposing the plaintiffs’ application for attorneys’ fees, argued that the benefits to the class were minimal. Id. at *4. The court acknowledged that “the benefits that accrued to [the] shareholders were not great,” but nonetheless concluded that the benefits were “real and substantial.” Id. The purported benefit to Suitable’s shareholders here is not only “not great,” it is non-existent. Without a showing of any conferred benefit, Ms. Huynh simply is not entitled to her claim for professional fees. See id. at *3 (stating that a defendant is not responsible for counsel fees where “no benefit was conferred”). 33. The only potential benefit of the Court of Chancery Action was a benefit to Ms. Huynh herself (not Suitable or its shareholders)-whatever leverage she gained in her own divorce proceedings pending in California. Indeed, the Court of Chancery expressly cited this aspect of the litigation in support of denying Ms. Huynh’s motion for preliminary injunction: “It strikes me that because [Ms. Huynh and Mr. Hassan] are sophisticated people, aided by Case 20-10432-MFW Doc 263 Filed 09/30/20 Page 14 of 16 Case 20-10432-MFW Doc 263 Filed 09/30/20 Page 15 of 16 sophisticated counsel, they are probably playing three-dimensional chess. . . . It wouldn’t surprise me if this proceeding had some overtones 0f potentially being helpful t0 Ms. Huynh and creating leverage against Mr. Hassan.” Huynh Claim EX. C at 25 (Transcript). Even if there was a corporate benefit t0 Suitable resulting from the Chancery Court Action (there was not), Ms. Huynh’s idiosyncratic self-interest in pursuing the Chancery Court Action weighs in favor 0f nevertheless denying her claim 0f an entitlement t0 fees and disallowing the Disputed Claim. See Martin, 2020 WL 568971, at *4 (“It would be inequitable t0 grant fees t0 the Plaintiff where it is clear that the corporate benefit was a mere externality t0 the Plaintiff” s ultimate goal 0f [advancing her own interest] .”). 34. Ms. Huynh’s claim for over $1.1 million in professional fees-which is approximately equal t0 the amount 0f all valid prepetition claims in this Chapter 11 Case, excluding the prepetition secured and unsecured claims 0f Magicheart and its affiliates-should be denied, otherwise valid estate creditors will potentially incur significant prejudice. 35. For the reasons set forth herein, Ms. Huynh is not eligible for an award of professional fees allegedly incurred in connection with the Chancery Court Action, and therefore the Disputed Claim must be disallowed. RESERVATION OF RIGHTS 36. The Debtor reserves the right t0 amend, modify, 0r supplement this Obj ection, and t0 seek discovery in connection herewith.w 37. The Debtor will provide notice 0f this Objection t0: (i) the Office 0f the United States Trustee for the District 0f Delaware; (ii) counsel for Magicheart; (iii) those creditors holding the largest unsecured claims against the Debtor’s estate (excluding insiders); (iv) Ms. 269496919 15 Case 20-10432-MFW Doc 263 Filed 09/30/20 Page 16 of 16 Huynh and her counsel, Greenberg Glusker Fields Claman & Machtinger LLP and Richards, Layton & Finger, P.A.; and (V) all parties who, as 0f the filing 0f this Objection, have requested notice in the Chapter 1 1 Case pursuant t0 Bankruptcy Rule 2002. The Debtor submits that, in light 0f the nature 0f the relief requested in this Obj ection, n0 other 0r further notice need be given. CONCLUSION WHEREFORE, for the reasons set forth herein, the Debtor respectfully requests that the Court enter the Proposed Order, disallowing the Disputed Claim, and granting such other and further relief t0 the Debtor as the Court deems just and proper. Dated: September 30, 2020 YOUNG CONAWAY STARGATT & TAYLOR, LLP Wilmington, Delaware /s/R0bert F. Poppiz‘i, Jr. Robert S. Brady (No. 2847) Robert F. Poppiti, Jr. (No. 5052) Jaclyn C. Marasco (No. 6477) Betsy L. Feldman (N0. 6410) 1000 North King Street Wilmington, Delaware 19801 Telephone: (302) 571-6600 Facsimile: (302) 571-1253 Emails: rbrady@ycst.com rpoppiti@ycst.com jmarasco@ycst.com bfeldman@ycst.com Counsel t0 the Debtor and Debtor in Possession 269496919 16 Case 20-10432-MFW DOC 263-2 Filed 09/30/20 Page 1 0f 174 EXHIBIT A Disputed Claim 2694969 1 .9 Case 20-10432-MFW Doc 23-2 Filed 09/30/20 269P3a96e 2 0f 174 Fi|| in this information to identify the case: Demon Suitable Technologies, Inc. RECEIVED 7/2/2020 5:58:53 PM (Eastern Time) Debtorg H US BANKRUPTCY COURT-DRC ‘Sp°“se'“""”9’ Claim No. ECN-12 United States Bankruptcy Court forthe: United States Bankruptcy COUI't - District of Delaware Case number 20-1 0432 Official Form 410 Proof of Claim 04/19 Read the instructions before filling out this form. This form is for making a claim for payment in a bankruptcy case. Do not use this form to make a request for payment of an administrative expense other than a claim arising under section 503(b)(9). Make such a request according to 11 U.S.C. § 503. Filers must leave out or redact information that is entitled to privacy on this form or on any attached documents. Attach redacted copies of any documents that support the claim, such as promissory notes, purchase orders, invoices, itemized statements of running accounts, contracts, judgments, mortgages, and security agreements. Do not send original documents; they may be destroyed after scanning. If the documents are not available, explain in an attachment. A person who files a fraudulent claim could be fined up to $500,000, imprisoned for up to 5 years, or both. 18 U.S.C. §§ 152, 157, and 3571. Fill in all the information about the claim as of February 26, 2020. Identify the Claim 1. Who is the current creditor? All'son Huynh . . . . . Name of the current creditor (the person or entity to be pald for thls claim) Other names the creditor used with the debtor 2. Has this claim been m No acquired from someone else? D Yes. From whom? 3. Where should notices Where should notices to the creditor be sent? Where should payments to the creditor be sent? (if and payments to the different) creditor be sent? Greenberg Glusker Fields Claman & Machtinger Federal Rule of Bankruptcy Procedure LLP _ (FRBP) 2002(9) c/o Jeffrey Kneger 2049 Century Park East, Ste. 2600 Los Angeles CA 90067 3105533610 Jkrieger@GreenbergGIusker.com Uniform claim identifier for electronic payments in chapter 13 (if you use one): 4. Does this claim amend M No . 7 .one already f"ed- D Yes_ CIaim number on court claims registry (if known)_-_ Flled 0“ MM / DD / YYYY 5. Do you know if anyone M No else h_as filed _a pr°_°f D Yes. Who made the earlier filing? of clalm for thls clalm? Official Form 410 Proof of Claim page 1 Case 20-10432-MFW Doc 263-2 Fiel d 09/30/20 269P3a96e 3 0f 174 Claim: 12-lDated: 7/2/2020 m Give Information About the Claim as of the Date the Case Was Filed secured? 6. Do you have any number M No 30:35: t0 'dentlfy the D Yes. Last 4 digits of the debtor’s account or any number you use to identify the debtor: e or. 7. How much is the claim? $ $1 ,157,749-72 . Does this amount include interest or other charges? M No D Yes. Attach statement itemizing interest, fees, expenses, or other charges required by Bankruptcy Rule 3001 (c)(2)(A). 8. What is the basis of the Examples: Goods sold, money loaned, lease, services performed, personal injury or wrongful death, or credit card. claim? Attach redacted copies of any documents supporting the claim required by Bankruptcy Rule 3001 (c). Limit disclosing information that is entitled to privacy, such as health care information. See attached Rider 9. ls all or part of the claim M No D Yes. The claim is secured by a lien on property. Nature of property: D Real estate. If the claim is secured by the debtor’s principal residence, file a Mortgage Proof of Claim Attachment (Official Form 41 O-A) with this Proof of Claim. D Motor vehicle D Other. Describe: Basis for perfection: Attach redacted copies of documents, if any, that show evidence of perfection of a security interest (for example, a mortgage, lien, certificate oftitle, financing statement, or other document that shows the lien has been filed or recorded.) Value of property: Amount of the claim that is secured: $ Amount of the claim that is unsecured: $ (The sum of the secured and unsecured amounts should match the amount in line 7.) Amount necessary to cure any default as of the date of the petition: $ Annual Interest Rate (when case was filed) % D Fixed D Variable 10. ls this claim based on a M No lease? D Yes. Amount necessary to cure any default as of the date of the petition. $ 11. ls this claim subject to a right of setoff? ENO D Yes. Identify the property: Official Form 410 Proof of Claim page 2 Case 20-10432-MFW Doc 263-2 Fiel d 09/30/20 269P3a96e 4 0f 174 Claim: 12-lDated: 7/2/2020 12. ls all or part of the claim M No entitled to: (i) priority under 11 U_S_C_ § 507m), D Yes. Check all that apply: gé'e'Lasgrflrd'setrrfivj S c D Domestic support obligations (including alimony and child support) under § 503(b)(9)? 11 U.S.C. § 507(a)(1)(A) or (a)(1)(B). A claim may be partly D Up to $3,025* of deposits toward purchase, lease, or rental of property or services for priority and paruy personal, family, or household use. 11 U.S.C. § 507(a)(7). nonpriority. For example, In 30_m_e categorleS» the D Wages, salaries, or commissions (up to $13,650*) earned within 180 days before the law. I'm'tS the. amount bankruptcy petition is filed or the debtor’s business ends, whichever is earlier. entitled to pnorlty. 11 U_S_C_ § 507(a)(4)_ D Taxes or penalties owed to governmental units. 11 U.S.C. § 507(a)(8). D Contributions to an employee benefit plan. 11 U.S.C. § 507(a)(5). D Other. Specify subsection of 11 U.S.C. § 507(a)(_) that applies. D Value of goods received by the debtor within 20 days before the date of commencement of the case. 11 U.S.C. § 503(b)(9). Attach supporting documentation (See instructions under "Administrative expense claim under 11 U.S.C. § 503(b)(9)"). Amount entitled to priority $ * Amounts are subject to adjustment on 04/01/22 and every 3 years after that for cases begun on or after the date of adjustment. m Sign Below The person completing Check the appropriate box: this proof of claim must sign and date it. D | am the creditor. FRBP 901 1(b)' M | am the creditor’s attorney or authorized agent. If YOU file this Claim D | am the trustee, or the debtor, or their authorized agent. Bankruptcy Rule 3004. electronically, FRBP 5005(a)(2) authorizes courts D | am a guarantor, surety, endorser, or other codebtor. Bankruptcy Rule 3005. to establish local rules specifying what a signature is. A person who files a imprisoned for up to 5 £152.06: ggtflgz 157 and | declare under penalty of perjury that the foregoing is true and correct. 3571. Executed on date 7/2/2020 MM/DD / YYYY /s/ Pierce O'Donnell Signature Print the name of the person who is completing and signing this claim: Pierce O'Donnell Partner Greenberg Glusker Fields Claman & Machtinger LLP 2049 Century Park East, Ste. 2600 Los Angeles CA 90067 31 05533610 PodonnelI@GreenbergGlusker.com | understand that an authorized signature on this Proof of Claim serves as an acknowledgment that when calculating the amount of the claim, the creditor gave the debtor credit for any payments received toward the debt. fraUdu'ent Claim cou'd be | have examined the information in this Proof of Claim and have a reasonable belief that the information is true Official Form 410 Proof of Claim page 3 9. ls all or part of the claim secured? C399 ?O-10437-MFW Doc 763-7 Filpd 09/30/70 26P3396p 5 0f 174 m No Clailntuflgoi Medy7/2/2020 U Yes. The claim Is secured by a lien on property. D Motor vehicle D Real estate. If the claim'Is secured by the debtor’ s D Other (describe): principal residence, file a Mortgage Proof of Claim Attachment (Official Form 410-A) with this Proof of Claim. Basis for perfection: Attach redacted copies of documents, if any, that show evidence of perfection of a security interest (for example, a mortgage, lien, certificate of title, financing statement, or other document that shows the lien has been filed or recorded.) Value of property: S Amount of the claim that is secured: $ Amount of the claim that is unsecured (the sum of the secured lease? and unsecured amounts should match the amount in line 7): $ Amount necessary to cure any default Annual interest rate D Fixed as of the date of the petition: $ (when case was filed): % U Variable 10. ls this claim based on a No U Yes. Amount necessary to cure any default as of the date of the petition. $ 11. ls this claim subject to a right entitled to: (i) priority under 11 u.s.c. § 507(a), or (ii) administrative expense under 11 u.s.c. § 503(b)(9)? A claim may be partly priority and partly nonpriority. For example, in some categories, the law limits the amount entitled to priority. * Amounts are subject to adjustment on 4/01/22 and every 3 years after that for cases begun on or after the date of adjustment. of setoff? a N0 D Yes. Identify the property: 12. ls all or part of the claim m No D Yes. Check all that apply: Amount entitled to priority U Domestic support obligations (including alimony and child support) under 11 U.S.C. § 507(a)(1)(A) or (a)(1)(B). $ D Up to $3,025* of deposits toward purchase, lease, or rental of property or services for personal, family, or household use. 11 U.S.C. § 507(a)(7). s D Wages, salaries, or commissions (up to $13,650*) earned within 180 days before the bankruptcy petition is filed or the debtor’s business ends, whichever is earlier. 11 U.S.C. § 507(a)(4). D Taxes or penalties owed to governmental units. 11 U.S.C. § 507(a)(8). D Contributions to an employee benefit plan. 11 U.S.C. § 507(a)(5). D Other. Specify subsection of 11 U.S.C. § 507(a)(_) that applies. D Value of goods received by the debtor within 20 days before the date of commencement of the case. 11 U.S.C. § 503(b)(9). Attach supporting documentation (See instructions under ”Administrative expense claim under 11 U.S.C. § 503(b)(9)”). $ mmmm Sign Below The person completing this proof of claim must sign and date it. FRBP 9011(b). If you file this claim electronically, FRBP 5005(a)(2) authorizes courts to establish local rules specifying what a signature is. A person who files a fraudulent claim could be fined up to $500,000, imprisoned for up to 5 years, or both. 18 U.S.C. §§ 152, 157, and 3571. Check the appropriate box: D | am the creditor. a | am the creditor’s attorney or authorized agent. D | am the trustee, or the debtor, or their authorized agent. Bankruptcy Rule 3004. D | am a guarantor, surety, endorser, or other codebtor. Bankruptcy Rule 3005. | understand that an authorized signature on this Proof of Claim serves as an acknowledgment that when calculating the amount of the claim, the creditor gave the debtor credit for any payments received toward the debt. | have examined the information in this Proofof Claim and have a reasonable belief that the information is true and correct. | declare under penalty of perjury that the foregoing is true and correct. Executed on date (MM/DD/YYYY); 07/02/2020 Signature: Print the name of the person who is completing and signing this claim: Firstname: Pierce Middle: Last: O'Donnell Title: Company (identify the corporate servicer as the company if the authorized agent is a servicer): Partner Greenberg Glusker Fields Claman & Machtinger LLP Address: 2049 Century Park East, Ste. 2600 City: LOS Angeles State: CA Zip: 90067 phone; 310 553-3610 Ema“; Podonnel|@greenbergg|usker.com Case 20-10432-MFW . Doc 263-2 Filed 09/30/20 Page 6 0f 174 Clalm: 12-1 Dated: 7/2/2020 2693- 6 In re: Suitable Technologies, Inc. (Case N0. 20-10432 (MFW)) RIDER TO PROOF OF CLAIM OF ALLISON HUYNH I. Basis 0f the Claim Creditor Allison Huynh (“Ms. Huynh”) submits this proof 0f claim (this “Claim”) in connection With the above-referenced matter. Ms. Huynh is a shareholder in Debtor Suitable Technologies, Inc. (“Suitable Technologies”). Ms. Huynh is also the Petitioner in a dissolution proceeding pending in the Superior Court 0f California, County of Santa Clara, Case No. 2015-6-FL-013843 (the “Dissolution Action”), in Which Ms. Huynh claims a community interest in Suitable Technologies. The Respondent in that proceeding, Ms. Huynh’s eX-husband, Scott Hassan (“ML Hassan”), is Suitable Technologies’ founder, former president and CEO, and controlling shareholder. In August 2019, Mr. Hassan entered into an agreement (the “‘APA”) to sell Suitable Technologies’ assets t0 Blue Ocean Robotics ApS and related entities (“Blue Ocean”) for $400,000. See Exhibit A (APA). 1 The terms of the APA and California law required that Suitable Technologies obtain court approval as a condition to closing. See id. at Sections 7.2(f), 7.3 (g); Cal. Fam. Code § 1100(b). Mr. Hassan filed a request in the Dissolution Action for such approval, asserting that Ms. Huynh was precluded from opposing the sale in the Dissolution Action due, in part, to the fact that Suitable Technologies is incorporated in Delaware and the APA contained a Delaware choice-of-forum provision. Mr. Hassan’s position forced Ms. Huynh to file a derivative action 0n behalf of Suitable Technologies’ shareholders and herself in the Delaware Court 0f Chancery (the “Chancery Court”) seeking to, among other things, preserve the value of Suitable Technologies’ assets by enjoining Suitable Technologies from closing the sale (the “Chancery Court Action”). See Exhibit B (Verified Complaint - Redacted Public Version). In the Chancery Court Action, Ms. Huynh also filed a motion for preliminary injunction to enjoin the sale. In deciding Ms. Huynh’s motion for preliminary injunction, Vice Chancellor J. Travis Laster held that Ms. Huynh had established a reasonable likelihood 0f success 0n the merits and irreparable harm, finding that: (1) the sale was motivated by Mr. Hassan’s “personal” desires not the best interest of Suitable Technologies; (2) the sales process Mr. Hassan implemented is “not one that inspires confidence. It’s one that inspires concern”; (3) “in an orderly sale that was not driven by the idiosyncratic interests of Mr. Hassan, much more value could have been recognized”; and (4) “there’s good reason t0 believe that Suitable’s asset value approximates 0r even exceeds $100 million.” See Exhibit C (Dec. 13, 2019 Ruling of the Chancery Court on Plaintiff’s Motion for a Preliminary Injunction) at 4:2-12, 526-20, 5223-622, 6:5-8, 7:23-8:10, 8:13-9:9, 1023-10210, 10:13-11:16, 16:4-16, 17:2-5, 17:16-18:22, 1925-9, 19:18-23, 20:5-21zl, 1 True and correct copies of all referenced exhibits are attached hereto. 38469-00004/3808846.5 Case 20-10432-MFW Doc 263-2 Fiel d 09/30/20 Page 7 of 174 Caim. 12-1Dated. 7/2/2020 2693- 6 2222-12, 22:21-24, 23:10-16. Although the Chancery Court declined t0 enjoin the sale on the grounds that there was a “Viable post-closing remedy here in the form of some combination of damages and equitable relief,” it also declined to approve the sale as required under the APA, stating: “I know there’s been some discussion about Whether this Court's approval could be deemed to satisfy the condition. My ruling is not intended to satisfy that condition.” Id. at 24:10- 13, 27: 19-22. The Court in the Dissolution Action likewise declined to approve the sale contemplated under the APA, finding that it would be “probably stepping outside of its jurisdiction” and “potentially infringing 0n the Delaware action” if it did so, stating: “The Court does not believe it has the authority [to approve the sale]. I know that, that the [APA] says . . . that there has to be Court approval 0f the deal. I am not going t0 approve or disapprove of this deal because I don't believe I have that authority.” See Exhibit D (Dec. 19, 2019 Hearing Tr. at 27:2-17).2 After both courts declined t0 approve the sale, Blue Ocean notified Suitable Technologies that it would not be proceeding with the closing. Mr. Hassan, 0n behalf of Suitable Technologies, then sent Blue Ocean a notice terminating the APA. On February 21, 2020, the Court in the Dissolution Action determined that Mr. Hassan was not personally responsible under the terms 0f the stipulation and order governing the payment of professional fees in that matter for the attorneys’ fees and one-half 0f the expert fees that Ms. Huynh incurred in the Chancery Court Action. As a result, Ms. Huynh intended t0 assert her right under Delaware law to seek recovery of these fees in the Chancery Court insofar as her efforts as a derivative plaintiff had brought a benefit t0 Suitable Technologies and its other shareholders by preventing a sale that massively undervalued the company. However, five days later (i.e. February 26, 2020), Suitable Technologies filed for bankruptcy, precluding Ms. Huynh from filing such a motion in the Chancery Court. By bringing the Chancery Court Action, Ms. Huynh secured a benefit for Suitable Technologies and its shareholders by preventing the fire sale 0f Suitable Technologies’ assets. Delaware case law is clear that, under such circumstances, Ms. Huynh is entitled to recover the professional fees she incurred in securing this benefit. See, e.g., Chicago Milwaukee Corp. v. Eisenberg, 560 A.2d 489, 1989 WL 27743, at *1 (Del. Feb. 23, 1989) (“[I]t is well established under Delaware law that when a transaction is corrected to comply With Delaware law, the corporation and all 0f its shareholders receive a benefit”); In re Orchard Enters., Inc. S ’holder Litig, 2014 WL 4181912, at *7 (Del. Ch. Aug. 22, 2014) (stating that the result accomplished for the corporation is the strongest factor in determining the amount 0f a fee award); Waterside P'rs v. Brewer and C0., Ltd, 739 A.2d 768, 770 (Del. 1999) (“Fee shifting is recognized in corporate litigation Where a plaintiff‘s litigation efforts have . . . conferred a benefit 0n the corporation[.] Fee shifting may also be ordered where litigation is rendered moot through resulting action by the defendants.”); Rovner v. Health-Chem Corp, 1998 WL 227908, at *3 (Del. Ch. Apr. 27, 1998) (denying preliminary injunction yet finding claims were meritorious when filed and awarding attorneys’ fees). 2 For ease 0f reference, Ms. Huynh is attaching excerpts of this transcript but can provide copies of the full transcript, upon request. 38469-00004/3808846.5 Case 20-10432-MFW Doc 263-2 Fiel d 09/30/20 Page 8 0f 174 Caim. 12-1Dated: 7/2/2020 2693- 6 Accordingly, Ms. Huynh has a claim in this proceeding for the amount of the professional fees that she incurred in the Chancery Court Action (other than those that she recovered through the Dissolution Action). These fees total $1,157,749.72 and can be broken down as follows: Ms. Huynh’s Unrecovered Fees Incurred in Chancery Court Action Richards, Layton & Finger. P.A. - Ms. Huynh’s counsel of record in the $454,885.44 Chancery Court Action Greenberg Glusker Fields Claman & Machtinger LLP - Ms. Huynh’s counsel $549,387.55 of record in the Dissolution Action who assisted in the Chancery Court Action ipCapital Group Inc. - John E. Cronin is a Chairman and Managing Director $80,619.90 0f this firm Who submitted an expert report on behalf of Ms. Huynh relating t0 the value 0f Suitable Technologies’ intellectual property in the Chancery Court Action and was deposed as part of the action. Foresight Valuation Group, LLC - Efrat Kasznik is the President 0f this firm $53,315.58 who submitted an expert report on behalf of Ms. Huynh relating t0 the value 0f Suitable Technologies’ intellectual property in the Chancery Court Action and was deposed as part of the action. Richards Oliver Law Group LLP - Erik Oliver is a partner of this firm who $19,541 .25 submitted an expert report on behalf of Ms. Huynh relating to the best practices for Winding down Suitable Technologies in the Chancery Court Action and was deposed as part of the action. Total: $1,157,749.72 II. Reservation of Rights Nothing herein shall be construed as a waiver 0f any rights 0r claims of Ms. Huynh against Mr. Hassan or any other non-debtor persons 0r entities, Whether such claims are asserted in the Chancery Court Action, the Dissolution Action, or otherwise, and all such rights are expressly reserved. Notwithstanding anything herein or in the accompanying proof of claim form t0 the contrary, Ms. Huynh fithher reserves all rights t0 (i) amend this Claim t0 add additional claims and/or amounts; (ii) assert a setoff in connection with any claim the Debtor may assert; and (iii) file a request for allowance 0f any administrative expenses. 38469-00004/3808846.5 EXHIBIT 6 Case 20-10432-MFW DOC 225 Filed 08/20/20 Page 1 0f 24 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: Chapter 11 SUITABLE TECHNOLOGIES, INC.,1 Case No. 20-10432 (MFW) Debtor. Ref. Docket N0. 91 ORDER (I) APPROVING APA, (II) AUTHORIZING THE SALE OF CERTAIN OF THE DEBTOR’S ASSETS FREE AND CLEAR OF ALL ENCUMBRANCES, (III) AUTHORIZING THE ASSUMPTION AND ASSIGNMENT OF CERTAIN EXECUTORY CONTRACTS AND UNEXPIRED LEASES, AND (IV) GRANTING RELATED RELIEF Upon consideration 0fthe motion (the “Motion”? ofthe above-captioned debtor and debtor in possession (the “Debt0r”), pursuant t0 sections 105(a), 363, 365, 503 and 507 0f title 11 0fthe United States Code, 11 U.S.C. §§ 101 et seq. (the “Bankruptcy Code”), Rules 2002, 6004 and 6006 0fthe Federal Rules ofBankruptcy Procedure (the “Bankruptcy Rules”), and Rules 2002- 1 and 6004-1 of the Local Rules of Bankruptcy Practice and Procedure for the United States Bankruptcy Court for the District 0f Delaware (the “Local Rules”), for the entry 0f an order (this “Sale Order”) (a) authorizing and approving that certain Asset Purchase Agreement, dated as of August 12, 2020, attached hereto as Exhibit 1 (the “APA”), between the Debtor and Blue Ocean Robotics ApS (the “Buyer”), (b) approving the sale 0f the Purchased Assets pursuant to the APA (the “Sale”), (c) approving the assumption and assignment of certain executory contracts and unexpired leases pursuant to section 365 of the Bankruptcy Code in connection with the Sale, (d) authorizing the Debtor t0 consummate transactions related to the APA, and (e) granting other 1 The last four digits 0f the Debtor’s United States federal tax identification number are 7816. The Debtor’s mailing address is 921 East Charleston Road, Palo Alto, CA 94303. 2 Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the APA (as defined below), 0r to the extent not defined therein, the Bidding Procedures Order (as defined below). 269123433 Case 20-10432-MFW DOC 225 Filed 08/20/20 Page 2 0f 24 related relief; and the Court having entered 0n April 20, 2020 that certain Order (I) Scheduling a Hearing 0n the Approval 0f the Sale ofAll 0r Substantially All 0f the Debtor’s Assets, and the Assumption andAssignment ofCertain Executory Contracts and Unexpired Leases, (II) Approving Certain Bidding Procedures and Assumption and Assignment Procedures, and the Form and Manner OfNotice Thereof, (III) Authorizing the Debtor t0 Provide (But Not Approving) Certain Bid Protections for any Stalking Horse Purchaser and (IV) Granting Related Relief [Docket N0. 110] (the “Bidding Procedures Order”); and based upon the Declaration 0f Charles Reardon In Support ofSale filed on August 19, 2020 [Docket N0. 217] and the Declaration ofLuis Pillich In Support ofSale filed 0n August 19, 2020 [DocketN0. 2 1 8] (together, the “Supporting Declarations”); and the Debtor having determined that the highest and otherwise best offer for the Purchased Assets was made by the Buyer pursuant t0 the APA; and the Court having conducted a hearing 0n August 20, 2020 (the “Sale Hearing”), at which time all parties in interest were offered an opportunity t0 be heard with respect t0 the Sale, t0 consider the approval 0f the Sale pursuant to the terms and conditions 0f the APA, and the Court having considered (i) the Motion and any obj ections thereto, (ii) the Sale, (iii) the arguments of counsel made, and evidence adduced, related thereto, and (iv) the full record in the Chapter 11 Case, including the record related to the hearing to consider the Bidding Procedures Order and the Sale Hearing held before the Court; and all parties in interest having been heard, or having had the opportunity to be heard, regarding the approval of the APA, the Sale and the transactions contemplated by the APA; and it appearing that the reliefrequested in the Motion is in the best interests 0f the Debtor, its bankruptcy estate, its creditors, and other 269123433 Case 20-10432-MFW Doc 225 Filed 08/20/20 Page 3 0f 24 parties in interest in the Chapter 11 Case; it is hereby FOUND, CONCLUDED, AND DETERMINED THAT:3 A. The findings and conclusions set forth herein constitute this Court’s findings of fact and conclusions of law pursuant to Bankruptcy Rule 7052, made applicable to the Chapter 11 Case pursuant t0 Bankruptcy Rule 9014. B. T0 the extent that any 0f the following findings of fact constitute conclusions 0f law, they are adopted as such. T0 the extent any of the following conclusions 0f law constitute findings of fact, they are adopted as such. C. This Court has jurisdiction over the Motion and over the property 0f the Debtor, including the Purchased Assets t0 be sold, transferred, and conveyed pursuant t0 the APA, pursuant t0 28 U.S.C. §§ 157 and 1334. This is a core proceeding pursuant t0 28 U.S.C. § 157(b)(2). Venue 0f the Chapter 11 Case and the Motion in this District and Court is proper under 28 U.S.C. §§ 1408 and 1409. D. This Sale Order constitutes a final order Within the meaning of 28 U.S.C. § 158(a). Notwithstanding Bankruptcy Rules 6004(h) and 6006(d), and to any extent necessary under Bankruptcy Rule 9014 and Rule 54(b) 0f the Federal Rules of Civil Procedure, as made applicable by Bankruptcy Rule 7054, this Court finds that there is n0 just reason for delay in the implementation of this Sale Order, and directs entry ofjudgment as set forth herein. E. The Purchased Assets constitute property of the Debtor’s bankruptcy estate and title thereto is vested in the Debtor’s bankruptcy estate within the meaning 0f section 541(a) of the Bankruptcy Code. 3 . . . . . . A11 findlngs of fact and conclusmns 0f law announced by the Court at the Sale Hearmg 1n relatlon to the Motlon are hereby incorporated herein to the extent not inconsistent herewith. 269123433 3 Case 20-10432-MFW DOC 225 Filed 08/20/20 Page 4 0f 24 F. The statutory bases for the relief requested in the Motion and provided for herein are sections 105, 363, 365, 503 and 507 0f the Bankruptcy Code, Bankruptcy Rules 2002, 6004 and 6006, and Local Rules 2002-1 and 6004-1. G. On February 26, 2020 (the “Petition Date”), the Debtor filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. Since the Petition Date, the Debtor has continued t0 maintain its business and manage its property as a debtor in possession pursuant to sections 1107 and 1108 0f the Bankruptcy Code. H. This Court previously entered the Bidding Procedures Order, among other things: (i) establishing certain bidding and auction procedures; (ii) scheduling the Auction (if necessary) and the Sale Hearing to consider the sale of the Purchased Assets; (iii) establishing certain procedures for noticing and determining cure amounts related t0 the Debtor’s executory contracts and unexpired leases; (iv) approving the form and manner ofnotice 0f certain procedures, dates and deadlines in connection with the Bidding Procedures and the Sale; and (V) granting certain related relief. I. As evidenced by the affidavits of service and publication previously filed with the Court [Docket Nos. 95, 119, 123, 129, 173, 187, 195, 207 & 208], and based 0n the representations 0f counsel at the Sale Hearing, due, proper, timely, adequate, and sufficient notice of the Motion, the Sale Hearing, the Auction, the Sale, and the assumption and assignment of the executory contracts and unexpired leases t0 be assumed and assigned to the Buyer at Closing pursuant to this Sale Order and the APA (collectively, the “Assumed Contracts”) has been provided in accordance with sections 102(1), 363, and 365 0f the Bankruptcy Code and Bankruptcy Rules 2002, 6004, 9007, and 9014, and in compliance with the Bidding Procedures Order, t0 each party entitled t0 such notice, including, as applicable: (a) the Office 0f the United 269123433 Case 20-10432-MFW Doc 225 Filed 08/20/20 Page 5 0f 24 States Trustee for the District ofDelaware; (b) counsel to the Lender (as defined in the DIP Order); (c) all parties known by the Debtor t0 assert a lien on any of the Purchased Assets; (d) all persons known or reasonably believed to have asserted an interest in any of the Purchased Assets; (e) all persons known or reasonably believed to have expressed an interest in acquiring all or a substantial portion of the Purchased Assets within the one (1) year prior to the Petition Date; (f) the Office of the United States Attorney for the District of Delaware; (g) the Office 0f the Attorney General in each state in which the Debtor has operated; (h) the Office 0f the Secretary of State in each state in Which the Debtor has operated; (i) all taxing authorities having jurisdiction over any of the Purchased Assets, including the Internal Revenue Service; (j) all environmental authorities having jurisdiction over any of the Purchased Assets, including the Environmental Protection Agency; (k) the Federal Trade Commission; (1) the United States Attorney General/Antitrust Division 0f Department 0f Justice; (m) all non-Debtor parties t0 any 0f the Assumed Contracts; (n) all 0f the Debtor’s other known creditors and equity security holders; and (0) all other parties that have filed a notice of appearance and demand for service of papers in the Chapter 11 Case as 0f the service date. With respect to entities Whose identities are not reasonably ascertained by the Debtor, publication 0f the Sale Notice once in the national edition 0f USA Today 0n April 27, 2020, as evidenced by the affidavit 0f service filed by the Debtor at Docket No. 129 in the Chapter 11 Case, was, and is deemed, sufficient, and reasonably calculated under the circumstances to reach such entities. The notices described above were good, sufficient, and appropriate under the circumstances, and no other or further notice 0f the Motion, the Auction, the Sale, and the Sale Hearing is, or shall be, required. J. The Debtor has articulated good and sufficient reasons for this Court t0 grant the relief requested in the Motion as it pertains t0 the Sale and the reliefprovided for herein. 269123433 Case 20-10432-MFW Doc 225 Filed 08/20/20 Page 6 0f 24 K. The Sale Notice provided all interested parties with timely and proper notice of the Sale, the Sale Hearing, and the Auction. L. The disclosures made by the Debtor in the Motion, the Sale Notice, and related documents filed With the Court (including, without limitation, in the Supporting Declarations) concerning the APA, the Auction, the Sale and the Sale Hearing were good, complete and adequate. M. The Bidding Procedures set forth in the Bidding Procedures Order are non- collusive, proposed and executed in good faith as a result 0f arms’-length negotiations, designed t0 maximize the value 0f the Purchased Assets, and substantively and procedurally fair t0 all parties. N. The Debtor conducted the process with respect to the Sale in accordance with, and has otherwise complied in all respects with, the Bidding Procedures Order. The sale process set forth in the Bidding Procedures Order afforded a full, fair, and reasonable opportunity for any entity to make a higher or otherwise better offer to purchase the Purchased Assets. The Debtor’s decision t0 negotiate With the Buyer and with Magicheart Investments LLC prior to the Auction t0 modify their respective Qualifying Bids in a manner that would maximize the value of the Debtor’s Assets was an appropriate exercise 0f the Debtor’s business judgment, appropriate under the Bidding Procedures Order, and done at arms’-length, in good faith and without collusion. O. The terms contained in the APA constitute the highest and best offer for the Purchased Assets, and Will provide a greater recovery for the Debtor’s bankruptcy estate for the Purchased Assets than would be provided by any other available alternative. The Debtor’s determination that the APA constitutes the highest and best offer for the Purchased Assets constitutes a valid and sound exercise 0f the Debtor’s business judgment. 269123433 Case 20-10432-MFW DOC 225 Filed 08/20/20 Page 7 0f 24 P. The APA and the Sale contemplated thereby represent a fair and reasonable offer t0 purchase the Purchased Assets. No other person, entity or group 0f entities has presented a higher or otherwise better offer t0 the Debtor t0 purchase the Purchased Assets for greater economic value to the Debtor’s bankruptcy estate than the Buyer. Q. Approval of the Motion and the APA and the consummation 0f the Sale contemplated thereby is in the best interests 0f the Debtor, its bankruptcy estate, its creditors and other parties in interest in the Chapter 11 Case. R. The Debtor has demonstrated a good, sufficient, and sound business purpose and justification for the Sale 0f the Purchased Assets and the other transactions contemplated by the APA because, among other reasons, (i) the APA constitutes the highest and best offer for the Purchased Assets, (ii) the APA and the closing thereon Will present the best opportunity t0 realize the value 0f the Purchased Assets, and (iii) any other transaction for the Purchased Assets would not have yielded as favorable an economic result. S. The Buyer is purchasing the Purchased Assets in good faith, is a good-faith buyer within the meaning of section 363(m) of the Bankruptcy Code, and is not an “insider” (as defined under section 101(3 1) of the Bankruptcy Code) 0f the Debtor, and therefore is entitled t0 the full benefits and protections of section 363(m) 0f the Bankruptcy Code, and otherwise has proceeded in good faith in all respects in connection with the Sale in that: (i) the Buyer recognized that the Debtor was free to deal with any other party interested in acquiring the Purchased Assets; (ii) the Buyer complied With the Bidding Procedures Order and was represented by sophisticated counsel; (iii) the Buyer agreed t0 subj ect its bid to the competitive bidding procedures set forth in the Bidding Procedures Order; (iv) all payments to be made by the Buyer and other agreements 01‘ arrangements entered into by the Buyer in connection with the Sale have been disclosed; (V) the 269123433 Case 20-10432-MFW Doc 225 Filed 08/20/20 Page 8 0f 24 Buyer has not violated section 363(n) of the Bankruptcy Code by any action or inaction; and (Vi) the negotiation and execution 0f the APA, including the Sale contemplated thereby, were at arms’-length, in good faith and without collusion. T. The APA and the transactions contemplated thereby cannot be avoided under section 363(n) of the Bankruptcy Code. The Debtor, the Buyer and their respective agents, representatives and affiliates have not engaged in any conduct that would cause or permit the APA or the consummation of the transactions contemplated thereby to be avoided, or costs or damages t0 be imposed, under section 363(n) 0f the Bankruptcy Code. U. The consideration provided by the Buyer pursuant t0 the APA: (i) is fair and adequate, and constitutes reasonably equivalent value and fair consideration and value, under the Bankruptcy Code and under the laws 0f the United States, any state, territory, possession, 0r the District 0f Columbia (including the Uniform Fraudulent Transfer Act); and (ii) will provide a greater recovery for the Debtor’s bankruptcy estate and creditors than would be provided by any other reasonably practicable available alternative, including a piece-meal liquidation of the Debtor’s Assets. V. By consummating the Sale, the Buyer is not a mere continuation 0f the Debtor 0r its bankruptcy estate, and there is n0 continuity, n0 common identity, and no continuity of enterprise between the Debtor and the Buyer. The Buyer shall not be deemed t0 be holding itself out as a continuation 0f the Debtor based on the Sale, the APA 0r this Order. The Buyer is not a successor to the Debtor 0r its bankruptcy estate by reason of any theory of law or equity, and the Sale does not amount to a consolidation, merger, 0r de facto merger 0f the Buyer and the Debtor. Neither the Buyer nor any of its agents, representatives 0r affiliates shall assume 0r in any way be responsible for any obligation 0r liability 0f the Debtor and its bankruptcy estate except as 269123433 Case 20-10432-MFW Doc 225 Filed 08/20/20 Page 9 0f 24 expressly provided in this Sale Order or the APA. None of the transactions contemplated by the APA, including, without limitation, the Sale or the assumption and assignment 0f any Assumed Contracts, is being undertaken for the purpose 0f hindering, delaying, or defrauding any creditors under the Bankruptcy Code, under the laws 0f the United States, or under the laws of any state, territory, possession, 0r the District of Columbia. W. The Sale neither impermissibly restructures the rights 0f the Debtor’s creditors, nor impermissibly dictates the terms of a plan 0f reorganization of the Debtor. The Sale does not constitute a sub rosa plan. X. The Debtor, acting by and through its agents, representatives, and officers, has full corporate power and authority to execute and deliver the APA and all other documents contemplated thereby, and the Debtor requires n0 further consents 0r approvals t0 consummate the Sale contemplated by the APA, except as otherwise set forth in the APA. Y. The transfer 0f each 0f the Purchased Assets to the Buyer will be as of the Closing Date a legal, valid, and effective transfer 0f all 0f the Debtor’s right, title, and interest in such assets, and vests 0r Will vest the Buyer With all of the Debtor’s right, title, and interest to the Purchased Assets free and clear 0f all Encumbrances (as defined below), unless otherwise assumed in, or permitted by, the APA. Z. The Debtor may sell the Purchased Assets free and clear of all Encumbrances against the Debtor, its bankruptcy estate, 0r any of the Purchased Assets (unless otherwise assumed in, 0r permitted by, the APA) because, in each case, one 0r more 0f the standards set forth in section 363(f)(1)-(5) 0f the Bankruptcy Code has been satisfied. Those holders 0fEncumbrances against the Debtor, its bankruptcy estate, 01‘ any 0f the Purchased Assets Who did not obj ect, 0r Who withdrew their objections, t0 the Sale or the Motion are deemed t0 have 269123433 Case 20-10432-MFW Doc 225 Filed 08/20/20 Page 10 of 24 consented thereto pursuant t0 section 363(f)(2) of the Bankruptcy Code. Those holders of such Encumbrances who did object fall within one 0r more of the other subsections of section 363(f) and are adequately protected by having their Encumbrances, if any, in each instance against the Debtor, its bankruptcy estate, or any of the Purchased Assets, attach t0 the cash proceeds of the Sale ultimately attributable to the Purchased Assets in which such creditor alleges an Encumbrance, in the same order 0f priority, With the same validity, force, and effect that such creditor had prior to the Sale, subj ect t0 any claims and defenses that the Debtor and its bankruptcy estate may possess With respect thereto. A11 other holders of Encumbrances could be compelled in a legal 0r equitable proceeding t0 accept money satisfaction 0f such claim 0r interest, 0r otherwise falls within section 363(f) 0f the Bankruptcy Code. AA. The Lender (as defined in the Bidding Procedures Order), in its capacity as such, has consented t0 the sale 0f the Purchased Assets to the Buyer pursuant t0 the APA free and clear of any Encumbrances 0f the Lender against the Purchased Assets, provided that cash proceeds generated from the Sale shall be paid to the Lender upon the closing of the Sale for application to the Aggregate Debt (as defined in the DIP Order) in accordance With the terms and conditions 0f the DIP Order, until such time as the Aggregate Debt has been paid in full. BB. If the Sale were not free and clear 0f all Encumbrances (except as otherwise assumed in, or permitted by, the APA), or if the Buyer would, or in the future could, be liable for any Encumbrances (except as otherwise assumed in, or permitted by, the APA), the Buyer would not have entered into the APA and would not consummate the Sale, thus adversely affecting the Debtor, its bankruptcy estate and its creditors. CC. The Debtor has demonstrated that it is an exercise 0f its sound business judgment for the Debtor to assume and assign the Assumed Contracts t0 the Buyer pursuant t0 the 269123433 10 Case 20-10432-MFW DOC 225 Filed 08/20/20 Page 11 Of 24 terms of this Sale Order and the APA, in each case in connection with the consummation of the Sale, and the assumption and assignment of the Assumed Contracts is in the best interests 0f the Debtor and its bankruptcy estate. The Assumed Contracts being assigned t0 the Buyer under the APA are an integral part of the APA and the Sale, and accordingly such assumptions and assignments are reasonable and enhance the value 0f the Debtor’s bankruptcy estate. Any non- Debtor counterparty t0 any Assumed Contract that has not actually filed With the Court an obj ection to such assumption as 0f the date hereof is deemed to have consented t0 such assumption and assignment. DD. The Debtor and the Buyer have, t0 the extent necessary, satisfied the requirements of section 365 0f the Bankruptcy Code, including sections 365(b)(1)(A), 365(b)(1)(B), and 365(f) 0f the Bankruptcy Code, in connection With the sale and assumption and assignment 0f the Assumed Contracts t0 the extent provided under this Sale Order and the APA and have: (i) cured any default existing prior t0 the date hereof under any 0f the Assumed Contracts, Within the meaning 0f section 365(b)(l)(A) 0f the Bankruptcy Code; and (ii) provided compensation or adequate assurance of compensation to any party for any actual pecuniary loss to such party resulting from a default prior to the date hereof under any of the Assumed Contracts, Within the meaning of section 365(b)(1)(B) of the Bankruptcy Code, and the Buyer has provided adequate assurance of future performance With respect to the Assumed Contracts, within the meaning of sections 365(b)(1) and 365(f)(2) ofthe Bankruptcy Code. The Assumed Contracts are assignable notwithstanding any provisions contained therein to the contrary. EE. The APA and Sale must be approved and the Closing must occur promptly to preserve the value 0f the Purchased Assets and the Debtor’s bankruptcy estate. 269123433 1 1 Case 20-10432-MFW DOC 225 Filed 08/20/20 Page 12 0f 24 FF. Given the adequacy and fair value of the consideration provided by the Buyer under the APA, the Sale and the other transactions contemplated by the APA, including the rejection 0f the Distributor Agreement as set forth in Section 3.3 0f the APA (the “Rejecti0n”) and the mutual release of claims as set forth in Section 6. 14 0f the APA (the “Mutual Release”), constitute a reasonable and sound exercise of the Debtor’s business judgment, are in the best interests 0f the Debtor, its bankruptcy estate and its creditors and other parties in interest in the Chapter 11 Case, and should be approved. The Mutual Release is a necessary and integral component of the Blue Ocean APA, supported by good and valuable consideration, and appropriate under the circumstances, particularly in light 0f the complexity, expense and inherent uncertainty necessarily associated with any litigation with Blue Ocean. GG. The consummation 0f the Sale is legal, valid, and properly authorized under all applicable provisions 0f the Bankruptcy Code, including, Without limitation, sections 105(a), 363(b), 363(f), 363(m), 365(b), and 365(t) 0f the Bankruptcy Code, and all 0f the applicable requirements 0f such sections have been complied With in respect of the Sale, including the assumption and assignment of the Assumed Contracts in connection therewith. HH. Time is of the essence in effectuating the APA and proceeding with the transactions contemplated therein Without interruption. Accordingly, cause exists t0 waive the stay to the extent necessary, as contemplated by Bankruptcy Rules 4001(a), 6004(h), and 6006(d) to permit the immediate effectiveness 0f this Order. NOW THEREFORE, IT IS HEREBY ORDERED, ADJUDGED AND DECREED THAT: 1. The relief requested in the Motion is granted as set forth herein. 2. Any and all objections and responses t0 the Motion that have not been Withdrawn, waived, settled, 0r resolved, and all reservations of rights included therein, are hereby overruled and denied on the merits. For the avoidance of doubt, this Order shall have n0 effect 0n 269123433 1 2 Case 20-10432-MFW Doc 225 Filed 08/20/20 Page 13 of 24 the Obj ection of CenturyLink Communications, LLC to Proposed Cure Amount [Docket No. 189] or the Supplement t0 Obj ection of CenturyLink Communications, LLC to Proposed Cure Amount [Docket N0. 190]. 3. Notice 0f the Motion, the Auction, the Sale Hearing, and the Sale was fair and equitable under the circumstances, and complied in all respects with section 102(1) 0f the Bankruptcy Code, Bankruptcy Rules 2002, 6004, and 6006, and the Local Rules. Approval 0f APA, Including Sale 0f Purchased Assets 4. The APA, including all other ancillary documents, and all of the terms and conditions thereof, and the Sale and other transactions contemplated thereby, including, Without limitation, the Rej ection and the Mutual Release, are hereby approved in all respects. 5. Pursuant t0 section 363(b) 0f the Bankruptcy Code, the Debtor, acting by and through its agents, representatives and officers, is authorized and empowered t0 take any and all actions necessary or appropriate t0: (a) consummate and close the Sale pursuant t0 and in accordance With the terms and conditions 0f this Sale Order and the APA; (b) transfer and assign all of the Debtor’s right, title, and interest to all Purchased Assets in accordance with the terms and conditions of this Sale Order and the APA; and (c) execute and deliver, perform under, consummate, and implement this Sale Order and the APA and all additional instruments and documents that may be reasonably necessary or desirable to implement this Sale Order, the APA and the Sale, including any other ancillary documents, 0r as may be reasonably necessary 0r appropriate to the performance 0f the Obligations as contemplated by this Sale Order, the APA and any such other ancillary documents. 6. This Sale Order shall be binding in all respects upon the Debtor, its bankruptcy estate, all creditors, all holders of equity interests in the Debtor, all holders 0f any Encumbrances against the Debtor, any holders of Encumbrances against or 011 all or any portion 269123433 1 3 Case 20-10432-MFW DOC 225 Filed 08/20/20 Page 24 0f 24 38. To the extent that this Sale Order is inconsistent With any prior order or pleading with respect to the Motion in the Chapter 11 Case, the terms of this Sale Order shall govern. 39. To the extent there are any inconsistencies between the terms of this Sale Order and the APA (including all ancillary documents executed in connection therewith), the terms of this Sale Order shall govern. 40. The APA and any related agreements, documents or other instruments may be modified, amended or supplemented by the parties thereto in accordance With the terms thereof without further order 0f this Court, except that any modification, amendment 0r supplement that is materially adverse to the Debtor’s estate shall require Court approval, upon a motion on notice. 4 1. The provisions 0fthis Sale Order are nonseverable and mutually dependent. 42. Notwithstanding the provisions of Bankruptcy Rules 6004(h), 6006(d) 0r 7062 or any applicable provisions of the Local Rules, this Sale Order shall not be stayed after the entry hereof, but shall be effective and enforceable immediately upon entry, and the fourteen (14) day stay provided in Bankruptcy Rules 6004(h) and 6006(d) is hereby expressly waived and shall not apply. 43. This Court shall retain jurisdiction t0, among other things, interpret, implement, and enforce the terms and provisions of this Sale Order and the APA, all amendments thereto and any waivers and consents thereunder and each 0f the agreements executed in connection therewith to which the Debtor is a party 0r which has been assigned by the Debtor t0 the Buyer, and to adjudicate, if necessary, any and all disputes concerning or relating in any way Dafeq: Atuguls; ?Oth’ 202° MARY F. WALRATH 269123433“ "“"9 °"’ e aware 24 UNITED STATES BANKRUPTCY JUDGE to the Sale. Case 20-10432-MFW Doc 225-1 Filed 08/20/20 Page l of 84 EXHIBIT 1 APA 269123433 Case 20-10432-MFW Doc 225-1 Filed 08/20/20 Page 2 of 84 EXECUTION VERSION ASSET PURCHASE AGREEMENT This Asset Purchase Agreement (this “Agreement”), dated as 0f August 12, 2020, (the “Eflective Date”) is entered into by and between Suitable Technologies, Inc., a Delaware corporation (“Seller”), and Blue Ocean Robotics ApS, a private limited company organized under the laws 0f Denmark (“Buyer”). WHEREAS, Seller is engaged in the business 0f developing, manufacturing, and selling a telepresence robot and technology platform (the “Business”); WHEREAS, Seller commenced a voluntary case (the “Bankruptcy Case”) under title 11 0f the United States Code, 11 U.S.C. §§ 101-1532 (the “Bankruptcy Code”), in the United States Bankruptcy Court for the District 0f Delaware (the “Bankruptcy Court”) 0n February 26, 2020 (the “Petition Date”); WHEREAS, Seller Wishes t0 sell and assign t0 Buyer, and Buyer Wishes t0 purchase and assume from Seller, certain specified assets and certain specified liabilities 0f the Business, all in the manner and subject t0 the terms and conditions set forth in this Agreement and in accordance With sections 105, 363, and 365 and other applicable provisions 0f the Bankruptcy Code; WHEREAS, the Purchased Assets (as defined below) and Assumed Liabilities (as defined below) are assets and liabilities 0f Seller that are t0 be purchased by Buyer pursuant t0 the Sale Order (as defined below) all in the manner and subj ect t0 the terms and conditions set forth in this Agreement and the Sale Order and in accordance With the applicable provisions 0f the Bankruptcy Code; and WHEREAS, the execution and delivery 0f this Agreement and Seller’s ability t0 consummate the transactions set forth in this Agreement are subject, among other things, t0 the entry 0f the Sale Order. NOW, THEREFORE, in consideration 0f the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency 0f Which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS The following terms have the meanings specified 0r referred t0 in this Article I: “Access Agreement” has the meaning set forth in Section 3.2(a)(Viii). “Action” means any claim, action, cause 0f action, demand, lawsuit, arbitration, inquiry, audit, notice 0f Violation, proceeding, litigation, citation, summons, subpoena 0r investigation 0f any nature, civil, criminal, administrative, regulatory 0r otherwise, Whether at law 0r in equity; provided, however, that the foregoing shall not include any claim, action, cause 0f action, demand, lawsuit, arbitration, inquiry, audit, notice 0f Violation, proceeding, litigation, citation, summons, subpoena 0r investigation 0f any nature, civil, criminal, administrative, regulatory 0r otherwise, Case 20-10432-MFW Doc 225-1 Filed 08/20/20 Page 9 of 84 “Software Asset Purchase Agreement” means that certain Asset Purchase Agreement between Seller and the Software Owner dated as 0f August 12, 2020. “Software Owner” means the purchaser 0f the Assigned Software. “Supplemental Deposit” has the meaning set forth in Section 2.5gb 1. “Tangible Personal Property” has the meaning set forth in Section 2.1(d1. “Tax” 0r “Taxes” means all federal, state, local, foreign and other income, gross receipts, sales, use, production, ad valorem, transfer, documentary, franchise, registration, profits, license, lease, service, service use, Withholding, payroll, employment, unemployment, estimated, excise, severance, environmental, stamp, occupation, premium, property (real 0r personal), real property gains, Windfall profits, customs, duties 0r other taxes, fees, assessments 0r charges 0f any kind whatsoever, together With any interest, additions 0r penalties With respect thereto and any interest in respect 0f such additions 0r penalties. “Tax Return” means any return, declaration, report, claim for refund, information return 0r statement 0r other document relating t0 Taxes, including any schedule 0r attachment thereto, and including any amendment thereof. ARTICLE II PURCHASE AND SALE 2.1 Purchase and Sale 0f Assets. Pursuant t0 sections 105, 363, and 365 0f the Bankruptcy Code and subject t0 the terms and conditions set forth herein and the Sale Order, at the Closing, Seller shall sell, assign, transfer, convey and deliver t0 Buyer, and Buyer shall purchase from Seller, free and clear 0f any Encumbrances other than Permitted Encumbrances, all of Seller’s right, title and interest in, t0 and under all 0f the assets, properties and rights 0f every kind and nature, Whether real, personal 0r mixed, tangible or intangible (including goodwill), Wherever located and Whether now existing 0r hereafter acquired (other than the Excluded Assets), Which are used 0r held for use in connection With, the Business (collectively, the “Purchased Assets”), including, Without limitation, the following: (a) all inventory, finished goods, raw materials, work in progress, packaging, supplies, parts and other inventories (including, Without limitation the items listed 0n Schedule 2.1(a1), Whether in the physical possession 0f Seller 0r another party, excluding items sold in the ordinary course 0f Business prior t0 Closing and Leased Equipment (“Inventoly”); (b) all Contracts set forth 0n Schedule 2.1(b1 (the “Assigned Contracts”); (c) all Intellectual Property Assets, except for the Assigned Software; (d) all furniture, fixtures (excluding real property fixtures), equipment, machinery, tools, vehicles, office equipment, supplies, computers, telephones, assets leased t0 third parties pursuant t0 any Assigned Contracts, and other tangible personal property (including, Without limitation the items listed 0n Schedule 2.1gd1 but excluding items sold in the ordinary Case 20-10432-MFW Doc 225-1 Filed 08/20/20 Page 10 0f 84 course 0f Business prior t0 Closing, Leased Equipment, and as set forth in Section 2.2(h1) (the “Tangible Personal Properly”); (e) except as set forth in Section 2.2(n1, all rights t0 any Actions 0f any nature available t0 0r being pursued by Seller t0 the extent related t0 the Business, the Purchased Assets 0r the Assumed Liabilities, Whether arising by way 0f counterclaim 0r otherwise; (f) except as set forth in Section 2.2(g), Section 2.2(k), and Section 2.2m), all claims, refunds, rights 0f recovery, rights 0f set-off, rights 0f recoupment, and related sums and fees; (g) all 0f Seller’s rights under warranties, indemnities and all similar rights against third parties t0 the extent related t0 any Purchased Assets; (h) originals, 0r Where not available, copies, 0f all books and records in the possession 0f Seller and maintained in the Ordinary Course, including, but not limited t0, books 0f account and ledgers machinery and equipment maintenance files, customer lists, customer purchasing histories, price lists, distribution lists, supplier lists, production data, quality control records and procedures, customer complaints and inquiry files, research and development files, records and data (including all correspondence With any Governmental Authority), sales material and records (including pricing history, total sales, terms and conditions 0f sale, sales and pricing policies and practices), strategic plans, marketing and promotional surveys, material and research and files relating t0 the Intellectual Property Assets and the Intellectual Property Agreements, except books and records related t0 corporate governance 0r tax matters (e.g., minute books, capitalization records and tax records), and books and records that constitute Privileged Communications (“Books and Records”); and (i) all goodwill and the going concern value 0f the Business. 2.2 Excluded Assets. Notwithstanding the foregoing, the Purchased Assets shall not include the following assets (collectively, the “Excluded Assets”): (a) cash and cash equivalents; (b) Contracts that are not Assigned Contracts (the “Excluded Contracts”); (c) the corporate seals, organizational documents, minute books, stock books, Tax Returns, books 0f account 0r other records having t0 d0 With the corporate organization 0r tax matters 0f Seller; (d) all benefit plans and assets attributable thereto; (e) the assets, properties and rights specifically set forth 0n Schedule 2.2(61; (f) deposits held by Seller in connection With any Excluded Contracts; (g) all accounts 0r notes receivable held by Seller, and any security, claim, remedy 0r other right related t0 any 0f the foregoing; Case 20-10432-MFW Doc 225-1 Filed 08/20/20 Page 11 of 84 (h) the computer numerical control machine owned by Seller ; (i) the rights Which accrue 0r Will accrue t0 Seller under this Agreement and the Ancillary Documents; (j) Licensed Intellectual Property (other than t0 the extent that Buyer assumes an Assigned Contract that constitutes an Intellectual Property Agreement under Which Seller obtained rights t0 Licensed Intellectual Property); (k) all claims, cross claims, causes 0f action and other rights 0f Seller arising under Sections 542 through 553 0f the Bankruptcy Code existing at Closing; (1) all insurance, utility, and tax deposits 0r refunds owing t0 Seller; (m) all insurance policies and insurance agreements, including, Without limitation, any directors and officers insurance policies; (n) all actions, causes 0f actions 0r claims 0f Seller arising under any legal theory against any former officers, directors, employees 0r other Representatives 0f the Company, including without limitation, the Chancery Court Action; (0) books and records (i) that relate t0 corporate governance 0r tax matters 0f the Business, 0r (ii) that constitute Privileged Communications; (p) the Assigned Software and other assets acquired by the Software Owner in the Software Asset Purchase Agreement. Buyer shall have the right, exercisable in Buyer’s sole discretion at any time prior t0 the Bankruptcy Court hearing t0 consider the Sale Order, t0 designate any 0f the Purchased Assets as Excluded Assets; provided, however, that designating Purchased Assets as Excluded Assets shall not affect the Purchase Price. 2.3 Assumed Liabilities. Subject t0 the terms and conditions set forth herein, Buyer shall assume and agree t0 pay, perform and discharge only the following Liabilities of Seller (collectively, the “Assumed Liabilities”), and n0 other Liabilities: (a) all Liabilities in respect 0f the Assigned Contracts but only t0 the extent that such Liabilities thereunder are required t0 be performed after the Closing Date and d0 not arise from any failure to perform, improper performance, warranty 0r other breach, default 0r Violation by Seller 0n 0r prior t0 the Closing; (b) all liabilities arising from the conduct 0f the Business 0r the use 0r operation 0f the Purchased Assets by Buyer from and after the Closing; (c) the Cure Claims; and (d) Taxes that arise out 0f the consummation 0f the transactions contemplated hereby that are the responsibility 0f Buyer pursuant t0 Section 6. 10. 10 Case 20-10432-MFW Doc 225-1 Filed 08/20/20 Page 12 of 84 2.4 Excluded Liabilities. Notwithstanding the provisions 0f Section 2.3 0r any other provision in this Agreement t0 the contrary, Buyer shall not assume and shall not be responsible t0 pay, perform 0r discharge any Liabilities 0f Seller 0f any kind 0r nature whatsoever other than the Assumed Liabilities (the “Excluded Liabilities”). Without limiting the generality 0f the foregoing, the Excluded Liabilities shall include, but not be limited t0, the following: (a) any Liabilities 0f Seller arising out 0f 0r incurred in connection With the negotiation, preparation, investigation and performance 0f this Agreement, the Ancillary Documents and the transactions contemplated hereby and thereby, including, Without limitation, fees and expenses 0f counsel, accountants, consultants, advisers and others; (b) any Liability for (i) Taxes of Seller (or any stockholder 0r Affiliate 0f Seller) 0r relating t0 the Business, the Purchased Assets 0r the Assumed Liabilities for any Pre-Closing Tax Period; 0r (ii) other Taxes 0f Seller (0r any stockholder 0r Affiliate 0f Seller) 0f any kind 0r description (including any Liability for Taxes of Seller (0r any stockholder 0r Affiliate 0f Seller) that becomes a Liability 0fBuyer under any common law doctrine 0f de facto merger 0r transferee 0r successor liability 0r otherwise by operation 0f contract 0r Law); (c) any Liabilities relating t0 0r arising out 0f the Excluded Assets (unless and until such time as an Excluded Asset, With respect t0 the Liabilities relating t0 0r arising out 0f such Excluded Asset, becomes a Purchased Asset pursuant t0 the terms 0f this Agreement); (d) any Liabilities in respect 0f any pending 0r threatened Action arising out 0f, relating t0 0r otherwise in respect 0f the operation 0f the Business 0r the Purchased Assets t0 the extent such Action relates t0 such operation 0n 0r prior t0 the Closing Date; (e) any product Liability 0r similar claim for injury t0 a Person 0r property Which arises out 0f 0r is based upon any express 0r implied representation, warranty, agreement 0r guaranty made by Seller, 0r by reason 0f the improper performance or malfunctioning of a product, improper design 0r manufacture, failure t0 adequately package, label 0r warn 0f hazards 0r other related product defects 0f any products at any time manufactured 0r sold 0r any service performed by Seller prior t0 the Closing; (f) any recall, design defect 0r similar claims 0f any products manufactured 0r sold 0r any service performed by Seller prior t0 the Closing; (g) any Liabilities of Seller arising under or in connection With any benefit plan providing benefits t0 any present 0r former employee 0f Seller; (h) any Liabilities of Seller for any present 0r former employees, officers, directors, retirees, independent contractors 0r consultants 0f Seller, including, Without limitation, any Liabilities associated With any claims for wages 0r other benefits, bonuses, accrued vacation, workers’ compensation, employee deferred compensation including stock option plans, grants and agreements, severance, retention, termination 0r other payments; (i) except as set forth in Section 2.3(61, all trade accounts payable 0f Seller; 11 Case 20-10432-MFW Doc 225-1 Filed 08/20/20 Page 13 0f 84 (j) any Liabilities 0f the Business relating 0r arising from unfulfilled commitments, quotations, purchase orders, customer orders 0r work orders that (i) d0 not constitute part 0f the Purchased Assets issued by the Business’ customers t0 Seller 0n 0r before the Closing; 0r (ii) are not validly and effectively assigned t0 Buyer pursuant t0 this Agreement; (k) any Liabilities to indemnify, reimburse 0r advance amounts t0 any present or former officer, director, employee 0r agent 0f Seller (including With respect t0 any breach 0f fiduciary obligations by same); (1) any Liabilities under the Excluded Contracts; (m) any Liabilities associated With debt, loans 0r credit facilities 0f Seller and/or the Business; and (n) any Liabilities arising out of, in respect 0f 0r in connection With the failure by Seller t0 comply With any Law 0r Governmental Order. 2.5 Purchase Price and Deposit. (a) The aggregate purchase price for the Purchased Assets shall be Four Hundred Thousand Dollars ($400,000.00) (the “Base Amount”), plus the assumption 0f the Assumed Liabilities (collectively, the “Purchase Price”), minus the aggregate amount required t0 be paid by the Buyer in respect 0f the Cure Claims pursuant t0 Section 2.8. At the Closing, Buyer shall (i) pay the Base Amount minus the Deposit (as defined hereinafter) as provided in Section 3.2, and (ii) direct the Escrow Holder t0 disburse the Deposit t0 Seller. (b) Concurrently With Buyer’s delivery 0f this Agreement, Buyer shall deposit into an account (the “Escr0w”) maintained by an escrow holder identified and established by Seller (the “Escrow Holder”), in immediately available funds by Wire transfer in an amount equal t0 ten percent (10%) 0f the Base Amount (the “Initial Deposit”). If Buyer is declared the Successful Bidder at the Auction, Buyer shall, if necessary, Within one (1) Business Day 0f the close 0f the Auction, supplement the Initial Deposit such that Buyer’s deposit shall be equal t0 an amount that is ten (10%) percent 0f the Successful Bid (the “Supplemental Deposit” and together With the Initial Deposit, the “Dep0sit”). Upon receipt 0f the Deposit, the Escrow Holder shall immediately place the Deposit into a non-interest-bearing escrow account. The Deposit shall become nonrefundable upon the earlier 0f (i) the entry 0f the Sale Order and satisfaction by all parties 0f all conditions set forth in Section 7.2, and the absence 0f any restriction, limitation, or prohibition 0n Buyer’s right t0 acquire the Purchased Assets in the manner, and under the terms and conditions, set forth in this Agreement except Where any such restriction, limitation, 0r prohibition is caused by an act 0r omission 0f Buyer, and (ii) Seller’s termination 0f the transaction contemplated by this Agreement by reason 0f a Buyer’s Default 0f this Agreement (a “Buyer Default Termination”). At the Closing, the Deposit shall be delivered t0 Seller and credited toward payment 0f the Purchase Price. In the event the Deposit becomes non-refundable by reason 0f a Buyer Default Termination and Seller is not then in Default 0f this Agreement, Escrow Holder shall immediately disburse the Deposit t0 Seller t0 be retained by Seller for Seller’s own account as part 0f damages resulting t0 Seller from such Buyer Default Termination. If this Agreement is terminated by reason 0f (i) Seller’s Default 0f this Agreement, (ii) the failure 0f a condition t0 12 Case 20-10432-MFW Doc 225-1 Filed 08/20/20 Page 14 of 84 Buyer’s obligations, 0r (iii) the approval by the Bankruptcy Court 0f an Alternative Transaction and Buyer is not then in Default 0f this Agreement and has not been designated as the Back-Up Bidder, the Escrow Holder shall retain the Deposit until five (5) Business Days after the earlier 0f (X) a determination by the Bankruptcy Court as t0 the Default 0f this Agreement 0r failure 0f a condition precedent referenced in subsections (i) 0r (ii) 0f this Section 2.5 b , as applicable, and (y) the closing 0f an Alternative Transaction. 2.6 Allocation 0f Purchase Price. Seller and Buyer agree that the Purchase Price and the Assumed Liabilities as well as any other items constituting the amount realized for Tax purposes (the “Allocable Consideration”) Will be allocated among the Purchased Assets in a manner consistent With Section 1060 0f the Code and any Treasury Regulations promulgated thereunder. Buyer Will, n0 later than forty-five (45) days following the Closing Date, prepare and deliver t0 Seller a schedule setting forth the allocation 0f the Allocable Consideration in accordance With the preceding sentence (the “Allocation Schedule”). Buyer and Seller will endeavor for a period 0f not less than thirty (30) days t0 resolve any disputes related t0 the Allocation Schedule. Neither Buyer nor Seller Will take any position that is contrary t0 0r inconsistent With the Allocation Schedule for any Tax purpose, including With respect t0 any Tax Return (including amended Tax Returns). In the event that the Allocation Schedule is disputed by any Governmental Authority, the party receiving notice 0f such dispute Will promptly notify the other party and the parties Will consult in good faith as t0 how t0 resolve such dispute in a manner consistent With the agreed upon Allocation Schedule. Notwithstanding any provision 0f this Section 2.6 t0 the contrary, if Buyer and Seller are not able t0 agree t0 the Allocation Schedule, each party shall be allowed t0 use that party’s own formulation With respect t0 the allocation 0f the Purchase Price and the Assumed Liabilities. 2.7 Third Partv Consents. Notwithstanding the Sale Order 0r the Bankruptcy Code, t0 the extent that Seller’s rights under any Contract 0r Permit constituting a Purchased Asset, 0r any other Purchased Asset, may not be assigned t0 Buyer Without the consent 0f another Person Which has not been obtained, this Agreement shall not constitute an agreement t0 assign the same if an attempted assignment would constitute a breach thereof 0r be unlawful, provided, however, that, subject t0 the satisfaction 0r waiver 0f the conditions contained in Article VII, the Closing shall occur notwithstanding the foregoing Without any adjustment t0 the Purchase Price 0n account thereof, and Seller and Buyer, each at its own expense, shall use commercially reasonable efforts, and shall cooperate With each other, t0 obtain any such required consent(s) as promptly as possible. 2.8 Cure Claims. With respect t0 each 0f the Assigned Contracts assigned t0 Buyer 0n the Closing Date, Buyer shall pay 0n the Closing Date all amounts necessary t0 cure any monetary defaults (as distinct from curing all defaults 0r failures t0 comply With provisions thereunder that may not be cured by the mere payment 0f money) that are required t0 be paid pursuant t0 section 365 0f the Bankruptcy Code in order t0 assume and assign the Assigned Contracts t0 Buyer, Which amounts shall be reflected 0n Schedule 2.1(b1, subject t0 approval 0f such amounts by the Bankruptcy Court (collectively, the “Cure Claims”). Within five (5) Business Days 0f the Closing Date, Buyer shall provide t0 Seller a written certification that all Cure Claims have been satisfied and paid in full by Buyer. Upon the reasonable request 0f Seller, Buyer shall provide t0 Seller any and all documentation evidencing the full payment and satisfaction 0f any Cure Claim. 13 Case 20-10432-MFW Doc 225-1 Filed 08/20/20 Page 15 0f 84 2.9 Perpetual License t0 Assigned Software; Restrictions. (a) Effective as 0f the Closing, Seller hereby grants t0 Buyer a non-exclusive, royalty-free, transferable, sublicensable, perpetual, fully-paid-up, worldwide, irrevocable right and license t0 use the Assigned Software, including t0 reproduce, alter, distribute, and create derivative works 0f the Assigned Software. Notwithstanding anything set forth herein t0 the contrary, in connection With the license granted t0 Buyer herein, Buyer hereby acknowledges and agrees that neither Buyer, its Affiliates nor any Person t0 Whom Buyer transfers 0r sublicenses the Patents that constitute Acquired Assets, shall have the right t0, and Buyer covenants not t0, bring any claim 0r cause 0f action against any Person, With respect t0 such Patents, for patent infringement, misappropriation, 0r other Violation thereof, 0r otherwise against any Person; in each case, arising out 0f such Person’s use 0f the Assigned Software as contemplated by Section 2.9gb )g ii 1. Further, Buyer acknowledges and agrees that any agreement With any purchaser 0r licensee 0f the Patents that constitute Acquired Assets shall contain the restriction described in the preceding sentence. (b) Prior t0 the Closing, Seller shall have transferred all rights, title and interest in and t0 the Assigned Software t0 the Software Owner pursuant t0 the Software Asset Purchase Agreement. The Software Owner acquired the Assigned Software subject t0 the following use restrictions, Which are binding 0n the Software Owner and any successor 0r any subsequent transferee that acquires rights in the Assigned Software: (i) for the period beginning 0n the Closing Date (as defined in the Software Asset Purchase Agreement) and ending 0n the second (2nd) anniversary thereof, the Assigned Software may be used solely for personal use and such Assigned Software shall not be used in connection With any commercial purpose 0r sublicensed by the Software Owner t0 any third party; and (ii) effective as 0f the second (2nd) anniversary 0f the Closing Date (as defined in the Software Asset Purchase Agreement), the Assigned Software may be used in source and binary forms, With 0r Without modification, in accordance With the terms 0f the BSD License, including making any of the Assigned Software available t0 third parties 0r the public under the terms 0f the BSD License. (c) Pursuant t0 the Software Asset Purchase Agreement, the Software Owner granted a non-exclusive, royalty-free, transferable, sublicenseable, perpetual, fully-paid-up, worldwide, irrevocable right and license t0 use the Assigned Software, including t0 reproduce, alter, distribute, and create derivative works 0f the Assigned Software. The parties t0 the Software Asset Purchase Agreement acknowledged and agreed that Seller shall have all rights and remedies available at law and in equity t0 enforce the use restrictions described in Section 2.9gb 1. Further, the parties t0 the Software Asset Purchase Agreement acknowledged and agreed that (i) Seller may sublicense the Assigned Software and (ii) Seller may transfer its rights set forth in Section 6.14(b) 0f the Software Asset Purchase Agreement, Without the prior written consent 0f the Software Owner and such sublicensee shall be entitled t0 enforce the use restrictions set forth in Section 6. 14 0f the Software Asset Purchase Agreement t0 fullest extent permitted by law. Effective as 0f, and contingent 0n the occurrence 0f, the Closing, Seller hereby assigns and transfers its rights under Section 6. 14(b) 0f the Software Asset Purchase Agreement t0 Buyer. 14 EXHIBIT 7 Case 20-10432-MFW Doc 226 Filed 08/20/20 Page 1 0f 13 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: Chapter 11 SUITABLE TECHNOLOGIES, INC.,1 Case No. 20-10432 (MFW) Debtor. Ref. Docket N0. 91 ORDER (I) APPROVING ASSET PURCHASE AGREEMENT, (II) AUTHORIZING THE SALE OF CERTAIN ASSETS FREE AND CLEAR OF ALL ENCUMBRANCES, AND (III) GRANTING RELATED RELIEF Upon the motion (the “MLmn’UZ 0f the above-captioned debtor and debtor in possession (the“MU for entry 0f an order (this “Or_der”) authorizing and approving: (a) the proposed sale (the “SL163 0f the Debtor’s assets free and clear 0f all liens, claims, encumbrances, and interests (together, the “Encumbrances”) pursuant t0 the terms 0f that certain asset purchase agreement, dated as 0f August 12, 2020 (including all exhibits and schedules related thereto) (the “fl’l other than the Assumed Liabilities and Permitted Encumbrances; (b) entry into the APA With Magicheart Investments, LLC, a Delaware limited liability company (the “Purchaser”), for the sale 0f certain 0f the Debtor’s intellectual property assets (the “Purchased Assets”), a copy 0fwhich is annexed hereto as Exhibit A; and (c) granting related relief; and the Court having entered an order [Docket No. 110] (the “Bidding Procedures Order”) approving the bidding procedures (the “Bidding Procedures”); an Auction having been commenced and thereafter conducted pursuant t0 the terms 0f the Bidding Procedures Order 0n August 12, 2020; the Debtor having identified the bid by the Purchaser as the highest or otherwise best bid for the Purchased Assets, 1 The Debtor in this chapter 1 1 case, along With the last four digits 0fthe Debtor’s federal tax identification number is Suitable Technologies, Inc. (7816). The Debtor’s headquarters are located at 921 East Charleston Road, Palo Alto, CA 94303. 2 Capitalized terms used in this Order but not defined herein have the meanings given to such terms in the Motion or APA, as applicable. 269158253 Case 20-10432-MFW Doc 226 Filed 08/20/20 Page 2 0f 13 and the Court having conducted a hearing 0n the Motion commencing on August 20, 2020 (the “Sale Hearing”), at which time all interested parties were offered an opportunity to be heard with respect t0 the Motion; and the Court having (a) reviewed and considered the Motion, all relief related thereto, any objections thereto and statements of counsel and the evidence presented in support of the relief requested by the Debtor in the Motion at the Sale Hearing, including the Declaration 0f Charles Reardon In Support ofSale filed 0n August 19, 2020 [Docket N0. 217] (the “Reardon Declaration”) and the Declaration 0f Luis Pillich In Support 0f Sale filed 0n August 19, 2020 [Docket No. 218] (the “Pillich Declaration”), and (b) found that, after an appropriate marketing process by the Debtor under the facts and circumstances 0f this Chapter 11 Case, the Purchaser has submitted the highest 0r otherwise best bid for the Purchased Assets; and adequate and sufficient notice 0fthe Bidding Procedures was given pursuant t0 and consistent With the Bidding Procedures Order; and it appearing that the reliefrequested in the Motion is in the best interests 0f the Debtor, its estates, creditors, and other parties in interest; and it further appearing that the legal and factual bases set forth in the Motion and at the Sale Hearing establish just cause for the relief granted herein; and after due deliberation thereon; and good and sufficient cause appearing therefor; IT HEREBY IS FOUND AND DETERMINED THAT23 A. Jurisdiction and Venue. This Court has jurisdiction to consider this Motion under 28 U.S.C. §§ 157 and 1334. This is a core proceeding under 28 U.S.C. § 157(b). Venue 0f this case and this Motion in this District is proper under 28 U.S.C. §§ 1408 and 1409. 3 A11 findings of fact and conclusions 0f law announced by the Court at the Sale Hearing are hereby incorporated herein to the extent not inconsistent herewith. In addition, findings of fact shall be construed as conclusions of law and conclusions 0f law shall be construed as findings of fact When appropriate. See Bankruptcy Rule 7052. 269158253 Case 20-10432-MFW Doc 226 Filed 08/20/20 Page 3 0f 13 B. Statutorv Predicates. The statutory predicate for the relief sought in the Motion is section 363, as supplemented by Bankruptcy Rules 2002, 6004, and 9014. C. Final Order. This Order constitutes a final order Within the meaning 0f28 U.S.C. § 158(a). Notwithstanding Bankruptcy Rules 6004(h), and to any extent necessary under Bankruptcy Rule 9014 and Rule 54(b) 0f the Federal Rules 0f Civil Procedure, as made applicable by Bankruptcy Rule 7054, this Court expressly finds that there is n0 just reason for delay in the implementation of this Order, and expressly directs entry ofjudgment as set forth herein. D. NLice. Notice of the Motion, the time and place 0f the proposed Auction, the time and place 0f the Sale Hearing and the time for filing objections t0 the Motion (the “SLle NLice”) was reasonably calculated t0 provide all interested parties with timely and proper notice of the Sale, the Auction, and the Sale Hearing. E. As evidenced by the certificates 0f service previously filed with the Court, proper, timely, adequate, and sufficient notice of the Motion, Sale Hearing, Sale and transactions contemplated thereby, has been provided in accordance With the Bidding Procedures Order, Bankruptcy Code section 363 and Bankruptcy Rules 2002, 6004, 9007 and 9008. The Debtor has complied With all obligations to provide notice 0fthe Motion as set forth in the Bidding Procedures Order. The notices described above were good, sufficient, and appropriate under the circumstances, and no other or further notice of, opportunity to object to, or other opportunity to be heard regarding, the Motion, Auction 0r Sale Hearing is 0r shall be required. F. Compliance with Bidding Procedures Order. As demonstrated by evidence proffered or adduced and the representations of counsel at the Sale Hearing, the Debtor conducted a comprehensive and robust marketing process that was designed t0 and did obtain the highest and best value for the Debtor’s assets, and a fair and open sale process in compliance with the Bidding 269158253 Case 20-10432-MFW Doc 226 Filed 08/20/20 Page 4 0f 13 Procedures Order. The Bidding Procedures were non-collusive, substantively and procedurally fair t0 all parties, were the result 0f arm’s length negotiations, and afforded a full, fair, and reasonable opportunity for any interested party t0 obtain necessary due diligence information and to submit the materials required under the Bidding Procedures Order by the extended Bid Deadline (as defined in the Amended Bidding Procedures Order [Docket No. 188]). Through marketing efforts and a competitive sale process conducted in accordance With the Bidding Procedures Order, the Debtor: (i) afforded interested potential purchasers a full, fair, and reasonable opportunity t0 qualify as bidders and submit their highest 0r otherwise best offer t0 purchase the Debtor’s assets; (ii) provided potential purchasers sufficient information t0 enable them t0 make an informed judgment on whether to bid on the Purchased Assets; and (iii) considered any bids submitted on 0r before the Bid Deadline. Based upon the circumstances and record 0f this Chapter 11 Case, all creditors, equity holders, parties in interest, and all prospective purchasers have been afforded a reasonable and fair opportunity t0 bid for the Purchased Assets. G. Sale in Best Interests 0f the Debtor’s Estate. Good and sufficient reasons for approval of the APA and the transactions to be consummated in connection therewith have been articulated, and the relief requested in the Motion and provided for herein is in the best interests of the Debtor, its estate, its creditors, and other parties in interest. Given all of the circumstances of this Chapter 11 Case and the adequacy and fair value of the Purchase Price, the proposed Sale constitutes a reasonable and sound exercise 0f the Debtor’s business judgment. H. The consummation 0f the Sale is legal, valid, and properly authorized under all applicable provisions of the Bankruptcy Code, including, without limitation, Bankruptcy Code sections 105(a) and 363, and all applicable requirements 0f such sections have been complied with in respect 0f the transaction. 269158253 Case 20-10432-MFW Doc 226 Filed 08/20/20 Page 5 0f 13 I. Insider Status. Scott Hassan is affiliated With the Purchaser and is a shareholder of and has previously served as a director and officer 0f the Debtor, such that the Purchaser qualifies as an “insider” as such term is defined in Bankruptcy Code section 101(3 1). As set forth in the Declaration 0f Charles C. Ream’on in Support 0f Chapter 11 Petition and First Day Pleadings [Docket N0. 7], the Reardon Declaration, and the Pillich Declaration, the Debtor has taken the following steps t0 ensure that the sale process has been conducted t0 ensure fairness to all potential bidders: (1) prior to commencing this Chapter 11 Case, Mr. Hassan resigned as a director and officer of the Debtor and turned control 0f the Debtor over t0 an independent chief restructuring officer and independent director t0 pursue a sale process to maximize the value of the Debtor’s assets, (2) the Debtor solicited interest from eight investment banking and patent broker firms and interviewed four candidates before selecting Stout Risius Ross Advisors, LLC (“M”), an experienced investment banker, t0 assist in consummating a value-maximizing transaction, (3) following the Petition Date, Stout contacted approximately 230 potential bidders and afforded each potential bidder a full and fair opportunity t0 access the Debtor’s data room and conduct diligence 0n the Debtor’s business, (4) in connection with the Purchaser’s submission 0f a bid 0n the Bid Deadline, the Purchaser waived its consultation rights under the Bidding Procedures and n0 person affiliated with the Purchaser had any role in the Debtor’s assessment 0f the Successful Bid, (5) on August 12, 2020, the Debtor opened the auction under the direction of the Debtor’s independent director and independent chief restructuring officer and determined the Purchaser t0 be the bidder with the highest or otherwise best bid for the Purchased Assets, and (6) the Debtor conducted the postpetition marketing process in accordance With the Bidding Procedures Order. In addition t0 the foregoing, the Debtor and the Purchaser each retained 269158253 Case 20-10432-MFW Doc 226 Filed 08/20/20 Page 6 0f 13 sophisticated counsel prior to the solicitation of bids for the Purchased Assets during the period prior to the Petition Date. J. Good Faith 0f Purchaser and Seller. The APA was negotiated, proposed, and entered into by the Debtor and the Purchaser without collusion, in good faith, and from arm’s- length bargaining positions, and is substantively and procedurally fair t0 all parties. Neither the Debtor nor the Purchaser has engaged in any conduct that would cause 0r permit the APA t0 be avoided under Bankruptcy Code section 363(n). Purchaser is purchasing the Purchased Assets, in accordance With the APA, in good faith and is a good faith buyer Within the meaning 0f section 363(m) 0f the Bankruptcy Code, and is therefore entitled t0 all 0f the protections afforded by such provision. The Debtor’s decision t0 negotiate with the Purchaser and with Blue Ocean Robotics ApS prior to the Auction t0 modify their respective Qualifying Bids in a manner that would maximize the value 0f the Debtor’s Assets was an appropriate exercise 0f the Debtor’s business judgment, appropriate under the Bidding Procedures Order, and done at arms’-length, in good faith and Without collusion. K. Consideration. The consideration provided by Purchaser pursuant to the APA (a) is fair and reasonable, (b) is the highest and best offer for the Purchased Assets, and (c) constitutes reasonably equivalent value and fair consideration (as those terms are defined in each 0f the Uniform Voidable Transactions Act (formally the Uniform Fraudulent Transfer Act), Uniform Fraudulent Conveyance Act, and section 548 of the Bankruptcy Code) under the laws 0f the United States, any state, territory, possession, 0r the District 0f Columbia. No other person 0r entity or group of entities has offered to purchase the Purchased Assets for greater value than Purchaser. Approval of the Motion, the APA and the consummation 0f the transactions 269158253 Case 20-10432-MFW Doc 226 Filed 08/20/20 Page 7 0f 13 contemplated thereby is in the best interests of the Debtor, its estate, its creditors and other parties in interest. L. Legal, Valid, and Binding Transfer. The Purchased Assets are property 0f the Debtor’s estate and title thereto is vested in the Debtor’s estate within the meaning 0f Section 541(a) of the Bankruptcy Code. The transfer 0f the Purchased Assets t0 the Purchaser will be a legal, valid, and effective transfer 0f the Purchased Assets and, except as provided in the APA or this Order, will vest the Purchaser with all right, title, and interest 0f the Debtor t0 the Purchased Assets free and clear of all liens, claims, interests, and encumbrances, except for Permitted Encumbrances, unless specifically assumed by the Purchaser pursuant t0 the APA. The APA is a valid and binding contract between the Debtor and the Purchaser and shall be enforceable according to its terms. M. N0 Successor. The transactions contemplated under the APA do not amount to a consolidation, merger, or de facto merger 0f the Purchaser and the Debtor and/or the Debtor’s estate; there is not substantial continuity between the Purchaser and the Debtor; there is n0 continuity of enterprise between the Debtor and Purchaser; the Purchaser is not a mere continuation 0f the Debtor or its estate; the Purchaser shall not be deemed t0 be holding itself out as a continuation 0f the Debtor based on the Sale, the APA or this Order; and the Purchaser is not, and shall not be considered, a successor-in-interest of the Debtor or its estate for any purpose, including but not limited t0 under any federal, state, 0r local statute 0r common law, or revenue, pension, ERISA, tax, labor, employment, environmental, escheat 0r unclaimed property laws, 0r other law, rule, 0r regulation (including Without limitation filing requirements under any such laws, rules 0r regulations), 0r under any products liability law 0r doctrine with respect t0 the Debtor’s liability under such law, rule, 0r regulation or doctrine 0r common law, 0r under any product 269158253 Case 20-10432-MFW Doc 226 Filed 08/20/20 Page 8 0f 13 warranty liability law or doctrine With respect t0 the Debtor’s liability under such law, rule 0r regulation or doctrine and the Purchaser and its affiliates shall have no liability or obligation under the Workers Adjustment and Retraining Act, 929 U.S.C. §§ 210 et seq., 0r the Comprehensive Environmental Response Compensation and Liability Act, and shall not be deemed to be a “successor employer” for purposes 0f the Internal Revenue Code 0f 1986, Title VII 0f the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act, the Americans With Disability Act, the Family Medical Leave Act, the National Labor Relations Act, the Labor Management Relations Act, the Older Workers Benefit Protection Act, the Equal Pay Act, the Civil Rights Act 0f 1866 (42 U.S.C. 1981), the Employee Retirement Income Security Act, the Multiemployer Pension Protection Act, the Pension Protection Act and/or the Fair Labor Standards Act. Except for the Assumed Liabilities and Permitted Encumbrances, the transfer of the Purchased Assets t0 the Purchaser does not and will not subject the Purchaser to any liability whatsoever with respect t0 the operation 0f the Debtor’s business before the Closing Date 0r by reason of such transfer under the laws of the United States, any state, territory, 0r possession thereof, or the District 0f Columbia, based, in whole or in part, directly or indirectly, on any theory 0f law or equity, including, without limitation, any theory of equitable law, including, without limitation, any theory of antitrust 0r successor 0r transferee liability. N. Free and Clear. The conditions of Bankruptcy Code section 363(f) have been satisfied in full; therefore, the Debtor may sell the Purchased Assets free and clear of any Encumbrances in the property, other than the Assumed Liabilities and Permitted Encumbrances, t0 the fullest extent permitted by applicable law. The Purchaser would not have entered into the APA and would not consummate the transactions contemplated thereby ifthe Sale t0 the Purchaser was not free and clear 0f all Encumbrances other than the Assumed Liabilities and Permitted 269158253 Case 20-10432-MFW Doc 226 Filed 08/20/20 Page 9 0f 13 Encumbrances. The Debtor may sell the Purchased Assets free and clear of any Encumbrances of any kind 0r nature whatsoever (other than Assumed Liabilities and Permitted Encumbrances) because in each case, one or more 0f the standards set forth in section 363(f)(1)-(5) of the Bankruptcy Code has been satisfied. Each entity with Encumbrances ofany kind on the Purchased Assets t0 be transferred on the Closing Date: (i) has, subject t0 the terms and conditions of this Order, consented t0 the Sale or is deemed to have consented t0 the Sale; (ii) could be compelled in a legal 0r equitable proceeding to accept money satisfaction 0f such Encumbrances; or (iii) otherwise falls Within the provisions 0f section 363(f) 0f the Bankruptcy Code. Those holders 0f Encumbrances Who did not object t0 the Motion as it pertains t0 the relief provided for herein are deemed, subj ect t0 the terms of this Order, t0 have consented pursuant to Bankruptcy Code section 363(f)(2). THEREFORE, IT IS ORDERED, ADJUDGED AND DECREED THAT: 1. The Motion and the relief requested therein is GRANTED and APPROVED, as set forth herein. 2. Any objections filed or asserted in response to the Motion and the relief granted herein, to the extent not resolved as set forth herein or 0n the record at the Sale Hearing, are hereby overruled on the merits in their entirety. For the avoidance ofdoubt, this Order shall have n0 effect on the Objection of CenturyLink Communications, LLC to Proposed Cure Amount [Docket No. 189] 0r the Supplement t0 Objection of CenturyLink Communications, LLC t0 Proposed Cure Amount [Docket N0. 190]. 3. Pursuant t0 Bankruptcy Code sections 363(b) and 363(f), the Debtor is hereby authorized t0 sell, transfer, and convey the Purchased Assets t0 the Purchaser pursuant t0 the terms 0f the APA. The APA, and all other ancillary documents, and all of the terms and conditions thereof, are hereby approved in all respects. 269158253 Case 20-10432-MFW Doc 226 Filed 08/20/20 Page 10 of 13 4. Pursuant t0 Bankruptcy Code section 363(b), the Debtor and the Purchaser, as well as their officers, employees, and agents, are authorized t0 take any and all actions and/or execute any and all documents as may be necessary 0r desirable t0 consummate the transactions contemplated by the APA. Any actions taken by the Debtor and the Purchaser necessary or desirable to consummate such transaction prior t0 the entry of this Order are hereby ratified. 5. Binding Nature. This Order shall be binding in all respects upon the Debtor, its estate, all creditors 0f, and holders 0f equity interests in, the Debtor, any holders 0f Encumbrances 0r other interests in, against, 0r 0n all 0r any portion 0f the Purchased Assets (Whether known or unknown), the Purchaser and all successors and assigns of the Purchaser, the Purchased Assets, any trustees subsequently appointed in the Debtor’s chapter 11 case 0r upon a conversion t0 chapter 7 under the Bankruptcy Code 0f the Debtor’s case, and all other parties in interest. 6. Transfer 0f Purchased Assets Free and Clear of Encumbrances. Pursuant t0 Bankruptcy Code sections 105(a), 363(b) and 363(f), the Debtor is authorized t0 transfer the Purchased Assets to the Purchaser in accordance With the APA and such transfer shall constitute a legal, valid, binding, and effective transfer of such Purchased Assets and shall vest the Purchaser with all 0f the Debtor’s title in and to the Purchased Assets and, other than the Assumed Liabilities and Permitted Encumbrances, the Purchaser shall take title to and possession 0f the Purchased Assets free and clear of all Encumbrances and other interests of any kind or nature whatsoever, including but not limited t0 successor 0r successor-in-interest liability and claims in respect of the Excluded Liabilities, With all such Encumbrances and other interests t0 attach t0 any cash proceeds received by the Debtor that are ultimately attributable to the property against or in which such Encumbrances are asserted, subject t0 the terms of such Encumbrances with the same validity, force, and effect, and in the same order 0f priority, Which such Encumbrances now have against 269158253 10 Case 20-10432-MFW Doc 226 Filed 08/20/20 Page 13 of 13 Purchased Assets, and is entitled to all of the benefits and protections afforded by Bankruptcy Code section 363(m). 13. Failure t0 Specifv Provisions. The failure specifically to include any particular provisions of the APA in this Order shall not diminish or impair the effectiveness 0f such provisions, it being the intent 0f the Court that the APA be authorized and approved in its entirety; provided, however, that this Order shall govern if there is any inconsistency between the APA (including all ancillary documents executed in connection therewith) and this Order. 14. Non-Material Modifications. The APA and any related agreements, documents, or other instruments may be modified, amended, 0r supplemented by the parties thereto, in a writing signed by such parties, and in accordance with the terms thereof, Without further order of the Court, provided that any such modification, amendment, or supplement does not have a material adverse effect on the Debtor’s estate. 15. N0 Stay 0f Order. Notwithstanding the provisions of Bankruptcy Rule 6004(h) and pursuant t0 Bankruptcy Rules 7062 and 9014, this Order shall not be stayed for fourteen days after the entry hereof, but shall be effective and enforceable immediately upon issuance hereof. 16. Retention 0f Jurisdiction. This Court retains jurisdiction, pursuant to its statutory powers under 28 U.S.C. § 157(b)(2), t0, among other things, interpret, implement, and enforce the terms and provisions of this Order and the APA, and resolve any dispute arising from or relating to the sale of the Purchased Assets or this Order. Dalte‘i': Atuguls; ?Oth’ 202° MARY F. WALRATH 26915825.?“ "“"9 0", e aware UNITED STATES BANKRUPTCY JUDGE 13 Case 20-10432-MFW Doc 226-1 Filed 08/20/20 Page l of 36 EXHIBIT A APA 269158253 Case 20-10432-MFW Doc 226-1 Filed 08/20/20 Page 2 of 36 EXECUTION VERSION ASSET PURCHASE AGREEMENT This Asset Purchase Agreement (this “Agreement”), dated as 0f August 12, 2020, (the “Effective Date”) is entered into by and between Suitable Technologies, Inc., a Delaware corporation (“Seller”), and Magicheart Investments LLC, a Delaware limited liability company (“Buyer”). WHEREAS, Seller is engaged in the business 0f developing, manufacturing, and selling a telepresence robot and technology platform (the “Business”); WHEREAS, Seller commenced a voluntary case (the “Bankruptcy Case”) under title 11 0f the United States Code, 11 U.S.C. §§ 101-1532 (the “Bankruptcy Code”), in the United States Bankruptcy Court for the District 0f Delaware (the “Bankruptcy Court”) 0n February 26, 2020 (the “Petition Date”); WHEREAS, Seller Wishes t0 sell and assign t0 Buyer, and Buyer Wishes t0 purchase and assume from Seller, certain specified intellectual property assets and certain specified liabilities 0f the Business, all in the manner and subject t0 the terms and conditions set forth in this Agreement and in accordance With sections 105, 363, and 365 and other applicable provisions 0f the Bankruptcy Code; WHEREAS, the Purchased Assets (as defined below) and Assumed Liabilities (as defined below) are assets and liabilities 0f Seller that are t0 be purchased by Buyer pursuant t0 the Sale Order (as defined below) all in the manner and subject t0 the terms and conditions set forth in this Agreement and the Sale Order and in accordance With the applicable provisions 0f the Bankruptcy Code; and WHEREAS, the execution and delivery 0f this Agreement and Seller’s ability t0 consummate the transactions set forth in this Agreement are subject, among other things, t0 the entry 0f the Sale Order. NOW, THEREFORE, in consideration 0f the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency 0f Which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS The following terms have the meanings specified 0r referred t0 in this Article I: “Action” means any claim, action, cause 0f action, demand, lawsuit, arbitration, inquiry, audit, notice 0f Violation, proceeding, litigation, citation, summons, subpoena 0r investigation 0f any nature, civil, criminal, administrative, regulatory 0r otherwise, Whether at law 0r in equity; provided, however, that the foregoing shall not include any claim, action, cause 0f action, demand, lawsuit, arbitration, inquiry, audit, notice 0f Violation, proceeding, litigation, citation, summons, subpoena 0r investigation 0f any nature, civil, criminal, administrative, regulatory 0r otherwise, Whether at law 0r in equity by the Seller against any former 0r present director 0r officer 0f the Seller. “Affiliate” 0f a Person means any other Person that directly 0r indirectly, through one or more intermediaries, controls, is controlled by, 0r is under common control With, such Person. The Case 20-10432-MFW Doc 226-1 Filed 08/20/20 Page 8 of 36 “Representative” means, With respect t0 any Person, any and all directors, managers, officers, employees, consultants, financial advisers, counsel, accountants and other agents 0r representatives 0f such Person. “Sale Documents” means this Agreement and the Ancillary Documents. “Sale Hearing” has the meaning set forth in the Bid Procedures. “Sale Order” has the meaning set forth in Section 6.13gb 1. “Successful Bid” has the meaning set forth in the Bid Procedures. “Successful Bidder” has the meaning set forth in the Bid Procedures. “Seller” has the meaning set forth in the preamble. “Seller Closing Certificate” has the meaning set forth in Section 7.2g d1. “Seller’s Knowledge” 0r any other similar knowledge qualification, means the actual knowledge 0f Seller’s Chief Restructuring Officer. “Supplemental Deposit” has the meaning set forth in Section 2.5g b 1. “Tax” 0r “Taxes” means all federal, state, local, foreign and other income, gross receipts, sales, use, production, ad valorem, transfer, documentary, franchise, registration, profits, license, lease, service, service use, Withholding, payroll, employment, unemployment, estimated, excise, severance, environmental, stamp, occupation, premium, property (real 0r personal), real property gains, Windfall profits, customs, duties 0r other taxes, fees, assessments 0r charges 0f any kind whatsoever, together With any interest, additions 0r penalties With respect thereto and any interest in respect 0f such additions 0r penalties. “Tax Return” means any return, declaration, report, claim for refund, information return or statement 0r other document relating t0 Taxes, including any schedule 0r attachment thereto, and including any amendment thereof. ARTICLE II PURCHASE AND SALE 2.1 Purchase and Sale 0f Assets. Pursuant t0 sections 105, 363, and 365 of the Bankruptcy Code and subject t0 the terms and conditions set forth herein and the Sale Order, at the Closing, Seller shall sell, assign, transfer, convey and deliver t0 Buyer, and Buyer shall purchase from Seller, free and clear 0f any Encumbrances other than Permitted Encumbrances, all 0f Seller’s right, title and interest in, t0 and under the following (collectively, the “Purchased Assets”): (a) [Reserved]; (b) [Reserved]; Case 20-10432-MFW Doc 226-1 Filed 08/20/20 Page 9 of 36 (c) all Assigned Software (Which, for the avoidance 0f doubt includes all Software that constitutes an Intellectual Property Asset); (d) [Reserved] (e) [Reserved]; (f) the computer numerical control machine owned by Seller; and (g) originals, 0r Where not available, copies, 0f all books and records in the possession 0f Seller relating t0 the Purchased Assets. 2.2 Excluded Assets. Notwithstanding the foregoing, the Purchased Assets shall not include, and Buyer is not acquiring, any assets, properties, rights, interest, 0r claims 0f any kind 0r description 0f Seller 0r its Affiliates other than the Purchased Assets (collectively, the “Excluded Assets”). Without limiting the generality 0f the foregoing, the Excluded Assets shall include, but not be limited t0, the following: (a) cash and cash equivalents; (b) Contracts (the “Excluded Contracts”); (c) the corporate seals, organizational documents, minute books, stock books, Tax Returns, books 0f account 0r other records having t0 d0 With the corporate organization 0r tax matters 0f Seller that are not required t0 use, practice 0r operate the Purchased Assets; (d) all benefit plans and assets attributable thereto; (e) the assets, properties and rights specifically set forth 0n Schedule 2.2ge 1; (f) deposits held by Seller in connection With any Excluded Contracts; (g) all accounts 0r notes receivable held by Seller, and any security, claim, remedy 0r other right related t0 any 0f the foregoing; (h) royalties, fees, income, payments, and other proceeds With respect t0 Intellectual Property that accrued prior t0 the Closing Date and any security, claim, remedy 0r other right related t0 any 0f the foregoing; (i) the rights Which accrue 0r Will accrue t0 Seller under this Agreement and the Ancillary Documents; (j) Licensed Intellectual Property (provided, that for the avoidance 0f doubt, none 0f the Assigned Software constitutes Licensed Intellectual Property); (k) all claims, cross claims, causes 0f action and other rights 0f Seller arising under Sections 542 through 553 0f the Bankruptcy Code existing at Closing; (1) all insurance, utility, and tax deposits 0r refunds owing t0 Seller; Case 20-10432-MFW Doc 226-1 Filed 08/20/20 Page 10 0f 36 (m) all insurance policies and insurance agreements, including, without limitation, any directors and officers insurance policies; (n) all actions, causes 0f actions 0r claims 0f Seller arising under any legal theory against any former officers and directors 0f the Seller, including without limitation, the Chancery Court Action; and (0) books and records that d0 not relate t0 Purchased Assets. Buyer shall have the right, exercisable in Buyer’s sole discretion at any time prior t0 the Bankruptcy Court hearing t0 consider the Sale Order, t0 designate any 0f the Purchased Assets as Excluded Assets; provided, however, that designating Purchased Assets as Excluded Assets shall not affect the Purchase Price. 2.3 Assumed Liabilities. Subject t0 the terms and conditions set forth herein, Buyer shall assume and agree t0 pay, perform and discharge only the following Liabilities 0f Seller (collectively, the “Assumed Liabilities”), and n0 other Liabilities: (a) [Reserved]; (b) all liabilities arising from the use 0r operation 0f the Purchased Assets by Buyer from and after the Closing; (c) [Reserved]; and (d) Taxes that arise out 0f the consummation 0f the transactions contemplated hereby that are the responsibility 0f Buyer pursuant t0 Section 6.10. 2.4 Excluded Liabilities. Notwithstanding the provisions 0f Section 2.3 0r any other provision in this Agreement t0 the contrary, Buyer shall not assume and shall not be responsible t0 pay, perform or discharge any Liabilities 0f Seller 0f any kind 0r nature whatsoever other than the Assumed Liabilities (the “Excluded Liabilities”). Without limiting the generality 0f the foregoing, the Excluded Liabilities shall include, but not be limited t0, the following: (a) any Liabilities 0f Seller arising out 0f 0r incurred in connection With the negotiation, preparation, investigation and performance 0f this Agreement, the Ancillary Documents and the transactions contemplated hereby and thereby, including, Without limitation, fees and expenses 0f counsel, accountants, consultants, advisers and others; (b) any Liability for (i) Taxes of Seller (or any stockholder 0r Affiliate 0f Seller) 0r relating t0 the Business, the Purchased Assets 0r the Assumed Liabilities for any Pre-Closing Tax Period; 0r (ii) other Taxes 0f Seller (0r any stockholder or Affiliate of Seller) of any kind or description (including any Liability for Taxes 0f Seller (0r any stockholder 0r Affiliate 0f Seller) that becomes a Liability 0f Buyer under any common law doctrine 0f de facto merger 0r transferee 0r successor liability 0r otherwise by operation 0f contract 0r Law); (c) any Liabilities relating t0 0r arising out 0f the Excluded Assets (unless and until such time as an Excluded Asset, With respect t0 the Liabilities relating t0 0r arising out 0f such Excluded Asset, becomes a Purchased Asset pursuant t0 the terms 0f this Agreement); Case 20-10432-MFW Doc 226-1 Filed 08/20/20 Page 11 0f 36 (d) any Liabilities in respect 0f any pending 0r threatened Action arising out 0f, relating t0 0r otherwise in respect 0f the operation 0f the Business 0r the Purchased Assets t0 the extent such Action relates t0 such operation 0n 0r prior t0 the Closing Date; (e) any product Liability 0r similar claim for injury t0 a Person or property Which arises out 0f 0r is based upon any express 0r implied representation, warranty, agreement 0r guaranty made by Seller, 0r by reason 0f the improper performance 0r malfunctioning 0f a product, improper design 0r manufacture, failure t0 adequately package, label 0r warn 0f hazards 0r other related product defects 0f any products at any time manufactured 0r sold 0r any service performed by Seller prior t0 the Closing; (f) any recall, design defect 0r similar claims 0f any products manufactured 0r sold 0r any service performed by Seller prior t0 the Closing; (g) any Liabilities of Seller arising under or in connection With any benefit plan providing benefits t0 any present 0r former employee 0f Seller; (h) any Liabilities of Seller for any present 0r former employees, officers, directors, retirees, independent contractors 0r consultants 0f Seller, including, Without limitation, any Liabilities associated With any claims for wages 0r other benefits, bonuses, accrued vacation, workers’ compensation, employee deferred compensation including stock option plans, grants and agreements, severance, retention, termination 0r other payments; (i) all trade accounts payable 0f Seller; (j) any Liabilities 0f the Business relating 0r arising from unfulfilled commitments, quotations, purchase orders, customer orders 0r work orders that (i) d0 not constitute part 0f the Purchased Assets issued by the Business’ customers t0 Seller 0n 0r before the Closing; 0r (ii) are not validly and effectively assigned t0 Buyer pursuant t0 this Agreement; (k) any Liabilities to indemnify, reimburse 0r advance amounts t0 any present 0r former officer, director, employee 0r agent 0f Seller (including With respect t0 any breach 0f fiduciary obligations by same); (1) any Liabilities under the Excluded Contracts; (m) any Liabilities associated With debt, loans 0r credit facilities 0f Seller and/or the Business; and (n) any Liabilities arising out of, in respect 0f 0r in connection With the failure by Seller t0 comply With any Law 0r Governmental Order. 2.5 Purchase Price and Deposit. (a) The aggregate purchase price for the Purchased Assets shall be One Hundred Thousand Dollars ($100,000.00) (the “Base Amount”) payable in the form 0f credit bid rights under Section 363(k) 0f the Bankruptcy Code consisting 0f the surrender and release by Buyer 0f a portion of the Liabilities arising under, 0r otherwise relating t0 the Debtor-in-Possession Credit and Security Agreement dated as 0f February 26, 2020 by and between Seller and Buyer (the “DIP Credit Agreement”) in an aggregate amount equal t0 $100,000 (the “Credit Bid and Release”); plus the 10 Case 20-10432-MFW Doc 226-1 Filed 08/20/20 Page 12 0f 36 assumption 0f the Assumed Liabilities (collectively, the “Purchase Price”). At the Closing, Buyer shall (i) pay the Base Amount minus, if applicable, the Deposit (as defined hereinafter) as provided in Section 3.2, and (ii) if applicable, direct the Escrow Holder t0 disburse the Deposit t0 Seller. (b) If Buyer is declared the Successful Bidder at the Auction and solely t0 the extent that a portion 0f Buyer’s successful bid consists 0f cash, Buyer shall Within one (1) Business Day 0f the close 0f the Auction, deposit into an account (the “Escrow”) maintained by an escrow holder identified and established by Seller (the “Escrow Holder”), in immediately available funds by Wire transfer in an amount equal t0 ten percent (10%) 0f the cash portion 0f the Purchase Price (the “Dep0sit”). Upon receipt 0f the Deposit, the Escrow Holder shall immediately place the Deposit into a non-interest-bearing escrow account. The Deposit shall become nonrefundable upon the earlier 0f (i) the entry 0f a final and non-appealable Order 0f the Bankruptcy Court approving Buyer as the Successful Bidder at the Sale Hearing and satisfaction 0f all conditions set forth in Section 7.1 and Section 7.2, and the absence 0f any restriction, limitation, 0r prohibition 0n Buyer’s right to acquire the Purchased Assets in the manner, and under the terms and conditions, set forth in this Agreement except Where any such restriction, limitation, 0r prohibition is caused by an act 0r omission 0f Buyer, and (ii) Seller’s termination 0f this Agreement pursuant t0 Section 8.11011 1 1 by reason 0f a Buyer’s Default 0f this Agreement and Buyer’s failure t0 cure such Default Within five (5) days 0f Buyer’s receipt 0f written notice 0f such breach from by Seller (a “Buyer Default Termination”). At the Closing, the Deposit shall be delivered t0 Seller and credited toward payment 0f the Purchase Price. In the event the Deposit becomes non-refundable by reason 0f a Buyer Default Termination and Seller is not then in Default 0f this Agreement, Escrow Holder shall immediately disburse the Deposit t0 Seller t0 be retained by Seller for Seller’s own account as part 0f damages resulting t0 Seller from such Buyer Default Termination. If this Agreement is terminated by reason 0f (i) Seller’s Default of this Agreement, (ii) the failure 0f a condition t0 Buyer’s obligations, (iii) the occurrence 0f the events described in Section 8.1(a) 0r Section 8.1(d), 0r (iv) the approval by the Bankruptcy Court 0f an Alternative Transaction and Buyer is not then in Default 0f this Agreement and has not been designated as the Back-Up Bidder, the Escrow Holder shall retain the Deposit until five (5) Business Days after the earlier 0f (X) a determination by the Bankruptcy Court as t0 the Seller’s Default 0f this Agreement, (y) the failure 0f a condition precedent referenced in subsection (ii) 0f this sentence, and (z) the closing 0f an Alternative Transaction, at Which time Escrow Holder shall disburse the Deposit t0 Buyer. 2.6 Allocation 0f Purchase Price. Seller and Buyer agree that the Purchase Price and the Assumed Liabilities as well as any other items constituting the amount realized for Tax purposes (the “Allocable Consideration”) Will be allocated among the Purchased Assets in a manner consistent With Section 1060 0f the Code and any Treasury Regulations promulgated thereunder. Buyer Will, n0 later than forty-five (45) days following the Closing Date, prepare and deliver t0 Seller a schedule setting forth the allocation 0f the Allocable Consideration in accordance With the preceding sentence (the “Allocation Schedule”). Buyer and Seller Will endeavor for a period 0f not less than thirty (30) days t0 resolve any disputes related t0 the Allocation Schedule. Neither Buyer nor Seller Will take any position that is contrary t0 0r inconsistent With the Allocation Schedule for any Tax purpose, including With respect t0 any Tax Return (including amended Tax Returns). In the event that the Allocation Schedule is disputed by any Governmental Authority, the party receiving notice 0f such dispute Will promptly notify the other party and the parties Will consult in good faith as t0 how t0 resolve such dispute in a manner consistent with the agreed upon Allocation Schedule. Notwithstanding any provision 0f this Section 2.6 t0 the contrary, if Buyer and Seller are not able t0 agree t0 the Allocation Schedule, each party shall be allowed t0 use that party’s own formulation with respect t0 the allocation 0f the Purchase Price and the Assumed Liabilities. 11 Case 20-10432-MFW Doc 226-1 Filed 08/20/20 Page 13 0f 36 2.7 Third Partv Consents. Notwithstanding the Sale Order 0r the Bankruptcy Code, t0 the extent that Seller’s rights under any Purchased Asset, may not be assigned t0 Buyer without the consent 0f another Person which has not been obtained, this Agreement shall not constitute an agreement t0 assign the same if an attempted assignment would constitute a breach thereof 0r be unlawful, provided, however, that, subject t0 the satisfaction 0r waiver 0f the conditions contained in Article VII, the Closing shall occur notwithstanding the foregoing without any adjustment t0 the Purchase Price 0n account thereof, and Seller and Buyer, each at its own expense, shall use commercially reasonable efforts, and shall cooperate with each other, t0 obtain any such required consent(s) as promptly as possible. ARTICLE III CLOSING; POST-CLOSING MATTERS 3.1 Closing. Subject t0 the terms and conditions 0f this Agreement, the consummation 0f the transactions contemplated by this Agreement (the “Closing”) shall take place remotely Via the exchange 0f documents and signatures 0n the second Business Day after all 0f the conditions t0 Closing set forth in Article VII are either satisfied 0r waived (other than conditions Which, by their nature, are t0 be satisfied 0n the Closing Date), but in n0 event later than August 24, 2020 (the “Outside Date”), 0r in such other manner as Will be mutually acceptable between Buyer and Seller. The date 0n Which the Closing is t0 occur is herein referred t0 as the “Closing Date”. 3.2 Closing Deliverables. (a) At the Closing, Seller shall deliver t0 Buyer the following: (i) A bill of sale in the form of Exhibit A hereto (the “Bill ofSale”) and duly executed by Seller, transferring the Purchased Assets t0 Buyer; (ii) An assignment and assumption agreement in the form of Exhibit B hereto (the “Assignment and Assumption Agreement”) and duly executed by Seller, effecting the assignment t0 and assumption by Buyer 0f the Purchased Assets and the Assumed Liabilities; (iii) [Reserved]; (iv) [Reserved]; (V) [Reserved]; (Vi) the Seller Closing Certificate; (Vii) a copy 0f the Sale Order entered by the Bankruptcy Court; (viii) solely if a Deposit has been made t0 the Escrow Holder, joint instructions t0 the Escrow Holder t0 deliver the Deposit t0 Seller; and (ix) such other customary instruments 0f transfer, assumption, filings or documents, in form and substance reasonably satisfactory t0 Buyer, as may be required t0 give effect t0 this Agreement. 12 EXHIBIT 8 Case 20-10432-MFW DOC 276 Filed 10/13/20 Page l Of 2 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: Chapter 11 SUITABLE TECHNOLOGIES, INC., Case No. 20-10432-MFW Debtor. Ref. Claim N0. 16 NOTICE OF WITHDRAWAL OF CLAIM AND RESERVATION OF RIGHTS PLEASE TAKE NOTICE THAT Creditor Allison Huynh (“M3, Huynh”) hereby gives notice that she is withdrawing the Proof 0f Claim filed with claims agent Donlin Recano [Claim no. 16 on the Donlin Recano claims register and filed stamped as ECN-12] in the above- referenced action 0n July 2, 2020. Ms. Huynh is withdrawing her Proof 0f Claim because, among other things, based 0n the proceeds generated by the sale of Debtor Suitable Technologies, Inc.’s assets, there is no realistic prospect that she will be able to recover any meaningful amount on her claim. Ms. Huynh reserves her rights t0 assert fiduciary duty and other claims against Scott Hassan, Blue Ocean Robotics ApS and others, and t0 seek related discovery in the pending Chancery Court and dissolution actions. 38469-00004/3874443 .4 Case 20-10432-MFW DOC 276 Filed 10/13/20 Page 2 0f 2 Dated: October 13, 2020 Wilmington, Delaware 3 8469-00004/3874443 .4 and /s/ BrettM Haywood Paul N. Heath (DE 3704) Brett Haywood (DE 6166) Travis S. Hunter (DE 5350) RICHARDS, LAYTON & FINGER, P.A. One Rodney Square 920 North King Street Wilmington, Delaware 19801 Telephone: (302) 651-7700 Facsimile: (302) 35 1-7701 Email: heath@r1f.com Email: haywood@rlf.com Email: hunter@rlf.com GREENBERG GLUSKER FIELDS CLAMAN & MACHTINGER LLP Jeffrey A. Krieger, (Bar No. 156535) 2049 Century Park East. Suite 2600 Los Angeles, CA 90067 Telephone: 3 10.553.3610 Facsimile: 310.553.0687 Email: JKrieger@GreenbergGlusker.com Attorneysfor Debtor Allison Huynh EXHIBIT C 1 2 J 4 5 6 7 8 9 10 l1 t2 13 I4 15 t6 I7 18 I9 20 2l 22 23 24 25 26 27 28 WALTER J. LACK, ESQ. (SBN 57550) STEVEN C. SHUMAN, ESQ. (SBN 82828) ENGSTROM, LIPSCOMB & LACK, P.C. 10100 Santa Monica Boulevard, Suite 1200 Los Angeles, CA 90067-4113 Telephone: (3 1 0) 552-3800 Facsimile: (3 l0) 552-943 4 Attorneys for Plaintiff ALLISON HUYNH ALLISON HUYNH, MORzuSON & FOERSTER, LLP; PAUL L. LION, III; and DOES 1-20, Inclusive, Defendants. SUPERIOR COURT OF THE STATE OF CALIFORNIA F'OR THE COUNTY OF SANTA CLARA CASE NO. 20CV368776 Plaintiff, VS [Assigned to the Hon. Peter H. Kirwan, Dept. lel PLAINTIFF''S OPPOSITION TO DEFENDANTS' DEMURRER TO COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES DATE: June29,202l TIME: 9:00 a.m. DEPT: 19 Action Filed: July 28,2020 [Filed Concurrently with Request for Judicial Notice and Notice of Lodging Documents Under Seall TO DEFENDANTS AND TO THEIR ATTORNEYS OF RECORD: Plaintiff Allison Huynh, hereby submits her Opposition to Defendants' Demurrer to Complaint as follows: 446606 OPPOSITION TO DEFENDANTS' DEMURRER TO COMPLAINT 1 2 J 4 5 6 7 8 9 10 11 t2 13 I4 15 I6 t7 t8 T9 20 2l 22 23 24 25 26 27 28 TABLE OF CONTENTS Page I. INTRODUCTION 1 II. ru LEGAL STANDARD THE STATUTE OF LIMITATIONS DOES NOT BAR ALL PLAINTIFF'S CLAIMS 2 The Statute of Limitations Commences on Discovery and is Tolled When Plaintiff Has SufferedNo Injury. .....................2 Plaintiff Discovered the Wrongful Acts and Omissions Causing Injury Within One Year of Filing This Action J Plaintiff Did Not Suffer Actual Injury in Connection With the Motion to Disquali$, so That Motion Did Not Trigger the Statute of Limitations. .... The Statute of Limitations Does Not Run Because Defendants are Committing a Continuing Tort.... IV. HYUNH DOES NOT NEED TO BRING HER CLAIMS AS DERIVATIVE CLAIMS.. 6 V. DEFENDANTS OWE FIDUCIARY DUTIES TO PLAINTIFF.. DEFENDANTS CAN BE LIABLE FOR INTERFERING WITH PLAINTIFF'S PROSPECTIVE ECONOMIC ADVANTAGE...... 11 DEFENDANTS ARE NOT AGENTS OF A PARTY TO THE ECONOMIC RELATIONSHIP AND CANNOT AVOID LIABILITY ON THAT BASIS. ................ 13 CONCLUSION 15 A. B. 4 5 D C 8 u. VII. VM I446606 OPPOSITION TO DEFENDANTS' DEMURRER TO COMPLAINT I 2 3 4 5 6 l 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHO California Cases Aaroe v. First American Title Insurance Co. (1990) 222 Cal. App.3 d 124 ........ Adams v. Paul (1995) 11 Cal.4th 583 .... Adelman v. Associated Int'l Ins. Co. (2001) 90 Cal.App.4th352 Asahei Kasei Pharma Corp. v. Actelion (2013) 222 Cal.App.4Ih 945...... Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962 ........... Blankv. I(irwan (1985) 39 Ca1.3d 311......... CrossTalk Productions, Inc. v. Jacobson(1 998) 65 Cal.App.4th 631 Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1 1 50............ Della Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 11 Ca1.4h376 Denevi v LGCC, LLC (2004) 121 Cal. App.4th 121 1 ............ People ex rel. Dept. of Corporations v. SpeeDee Oil Change Sts. ( 1999) 20 Cal.4th 1135 ......... Donabedian t,. Mercury Ins. Co. (200a) 116 Cal.App.4th968.. Goldstein v. Lees (1975) 46 Cal.App.3d 614... 11 Page(s) 13,74 5 4 ',..,,.14 13 8 446606 OPPOSITION TO DEFENDANTS' DEMURRER TO COMPLAINT ......9, 10 1 2 J 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 2l 22 23 24 25 26 27 28 Gong v. RFG Oil, Inc. (2008) 1 66 Cal.App.4th 209........ Grosset v. Wenaas (2008) 42 Cal4th 1100 ......... Ivano.ffv. Bank of America (2017) 9 Cal.App. 5th I 19...... Jones v. H.F. Ahmanson & Co. (1969) 1 Cal.3d 93 Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134 .... Lee v. Escrow Consultants, Inc. (1989) 21 0 Cal.App.3d 91 5............... Lee v. Hanley (2015) 61 Cal.4th 1225 ........... Livett v. F.C Financial Assoc., Ltd. (1981) 124 Cal.App.3d 413 McCann v. Welden (1984) 153 Cal. App. 3d 814.. McDermott, Will & Emery v. Superior Court (2000) 83 Cal.App .4th 31 8..... PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680... Quelimane Co., Inc. v. Stewart Title Guar. Co. (1998) 19 Cal'.4th26 . Redfearn v. Trader Joe's Co. (2018) 20 Cal. App.sth 989..... Schifando v. City of Los Angeles (2003) 31 Cal.App.4th 1074... Schnabel v. Superior Court (1994) 30 Cal.App,4th 7 58..... Schuster v. Gardner (2005) 127 Cal.App.4th 305.... lll ',.,.,7 10 13 7 6 2 6 2 5 4 2 1, 74 10 6 446606 OPPOSITION TO DEFENDANTS' DEMURRER TO COMPLAINT 1 2 J 4 5 6 7 8 9 10 11 12 13 14 15 16 11 18 19 20 21 22 23 24 25 26 2l 28 Sheehanv. San Francisco 49ers, Ltd. (2009) 45 Cal.4th992 Stella v. Asset Mgmt. Consultants, Inc. (2077) 8 Cal.App.sth 181 Stueve Bros. Farms, LLC v. Berger, Kahn (2013) 222 Cal. App.4th 303............ (Jnion Carbide Corp. v. Superior Court (1984) 36 Cal.3d 15 United Western Medical Centers v. Superior Court (1996) 42 Cal.App.4th 500.......... Woods v. Superior Court (1983) | 49 Cal.App.3d 93 1 ............. Wyatt v. Union Mortgage Company (1979) 24 Cal.3d 7 13................... Other State Cases Granewich v. Harding (1999) 329 Or.47 ... Jesse by Reineclce v. Danforth (1992) 169Wis.2d229 Reynolds v. Schrock (2006) 341 Or. 338.................. California Statutes California Code of Civil Procedure $ 340.6(a) CCP $ 3a0.6(a)(1) ccP $ 4s2............ Other Authorities Mark L. Tuft, et al., California Practice Guide, Professional Responsibility (Rutter Group, 2020 Update) .............. Rules of Professional Conduct, Rule 1.7(b) Rules of Professional Conduct, Rule 1.18... lv 2 6 2 2 2 9,10 5 17, 72 9 17,72 2 15 't " 10 9 8 446606 OPPOSITION TO DEFENDANTS' DEMURRER TO COMPLAINT I 2 J 4 5 6 7 8 9 10 11 12 13 I4 15 16 17 18 l9 20 2t 22 23 24 25 26 27 28 Restaternent (Third) of the Law Governing Lawyers$57(3) (Am. Law. Inst. 2000), l1 446606 OPPOSITION TO DEFENDANTS' DEMURRER TO COMPLAINT \OOOQQLI‘ILUJNH NNNNNNNNNr-Ib-lwv-tr-IHp-th-tu-np-A WQQM$WNHO©OOQONUI#WNHO est em i 0 h overni yer §57( . . t. 00), ................... 11 V OSI ON NTS’ PL N 1 2 a J 4 5 6 7 8 9 10 11 12 13 t4 15 t6 t7 18 I9 20 2I 22 23 24 25 26 27 28 I. INTRODUCTION After having represented Allison Huynh, her ex-husband Scott Hassan, and their many jointly owned companies over several years, and after then getting disqualified when they tried to represent Hassan in the divorce case between Hyunh and Hassan based on conflicts of interest arising from that joint representation, an utterly unrepentant Morrison & Foerster LLP and Paul L. Lion now seek to avoid liability for assisting Hassan in various machinations designed to deprive Huynh, their former client, of her rightful share of the community property she owned with Hassan. The arguments that defendants have advanced suffer from numerous flaws. Defendants' statute of limitations argument ignores the tolling provisions of the very statute on which it relies, as well as the discovery rule and the nature of their conduct as a continuing tort. The derivative claim argument disregards the fact that plaintiff is suing for attorney fees that she as an individual, not any corporation, incurred, and the fact that plaintiff seeks damages for wrongs directed at her by a controlling shareholder. Defendants' argument that they owe plaintiff no duties overlooks their own disqualification from representing Hassan against plaintiff and the law underlying that disqualification, as well as some allegations in the complaint. And the argument against the interference claims relies on allegations of attorney and agent status not pled in the Complaint. II. LEGAL STANDARD A demurrer can be used only to challenge defects that appear on the face of the pleading under attack; or from matters outside the pleading that are judicially noticeable. Blankv. Kirwan (1985) 39 CaI.3d 311, 3181, Donabedianv. Mercury Ins. Co. (200$ 116 Cal.App.4th968,994. Courts must liberally construe the pleading with a view to substantial justice between the parties. Code of Civil Procedure ("CCP") $ 452; Redfearn v. Trader Joe's Co. (2018) 20 CalApp.sth 989, 996; Ivanoff v. Bank of America (2017) 9 Cal.App.sth7I9,726. A complaint must be read in context and given a reasonable interpretation. Schifando v. City of Los Angeles (2003) 31 Cal.App.4th 107 4, 108 1. Where the complaint is defective, "[i]n the furtherance ofjustice great liberality should be exercised in permitting a plaintiff to amend his [or her] complaint. Aubry v. Tri-City Hospital Dist. (1992) 2 Cal. th962,970-g7l; Redfearn, sl;pra,20 Cal.App .5th at996. 1446606 OPPOSITION TO DEFENDANTS' DEMURRER TO COMPLAINT 1 2 J 4 5 6 7 8 9 10 1t t2 13 t4 15 I6 t7 18 19 20 2l 22 23 24 25 26 27 28 A general demurer does not lie to only parl of a cause of action. If there are sufficient allegations to entitle plaintiff to relief, other allegations cannot be challenged by general demumer. Daniels v. Select Portfulio Servicing, hc. (2016) 246 Cal.App.4th 1 150, 1167 . In PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 1682-1683, one of the several distinct acts of legal malpractice alleged was not malpractice as a matter of law. This was not ground for demurrer to the complaint because the malpractice cause of action was supporled by the other acts. Moreover, any valid cause of action overcomes a demurrer. It is not necessary that the cause of action be the one intended by plaintiff. The test is whether the complaint states any valid claim entitling plaintiff to relief. If the essential facts of some valid cause of action are alleged, the complaint is good against a general demurrer. Sheehan v. San Francisco 49ers, Ltd. (2009) 45 Cal.4th 992, 998 (general demuffer rnay be upheld "only if the complaint fails to state a cause of action under any possible legal theory"); Quelimane Co., Inc. v. Stewart Title Guar. Co. (1998) 19 Cal.4th26,38-39; Adelman v. Associated Int'l Ins. Co. (2001) 90 Cal.App.4th352,359; A demurrer based on a statute of limitations will not lie where the action may be, but is not necessarily, barred. In order for the bar to be raised by demurrer, the defect must clearly and affirmatively appear on the face of the cornplaint; it is not enough that the complaint shows that the action may be barred. Lee v. Hanley (2015) 61 Cal.4Ih 7225, 1232, quoting Committee For Green Foothills v. Santa Clara County Bd. of Supervisors (2010) 48 Cal.4th 32, 42; Stueve Bros. Farms, LLC v. Berger, Kahn (2013) 222 Cal. App.4t" 303,327. A statute of limitations demurrer lies only where the dates in question are shown on the face of the complaint. If they are not, there is no ground for general or special demurrer as dates are not essential to the cause of action. Union Carbide Corp. v. Superior Court (1984) 36 Ca1.3d 75,25; United Western Medical Centers v. Superior Court (1996) 42 Cal.App.4th 500, 505. ilI. THE STATUTE OF LIMITATIONS DOES NOT BAR ALL PLAINTIFF'S CLAIMS A. The Statute of Limitations Commences on Discovery and is Tolled When Plaintiff Has Suffered No Injury. CCP $340.6(a) provides that an action against an attomey for a wrongful act or omission in the performance of professional services must be commenced within one year after the plaintiff 2446606 OPPOSITION TO DEFENDANTS' DEMURRER TO COMPLAINT 1 2 J 4 5 6 1 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 discovers, or through the use of reasonable diligence should have discovered, the facts constituting the wrongful act or omission, or four years fiom the date of the wrongful act or omission, whichever occurs first. However, the running of the lirnitations period is tolled whenever plaintiff has not suffered actual injury. CCP $340.6(aX1). B. Plaintiff Discovered the Wrongful Acts and Omissions Causing Injury Within One Year of Filing This Action. Plaintiff has pled that she did not discover the wrongful conduct giving rise to the damages she is claiming until less than one year fi'om the July 28,2020 filing of this action, i.e. after the July 28,2019 "critical date" defendants identifiz for statute of lirnitations purposes. The primary item of damages plaintiff seeks to recover is the $ 1 .1 million plaintiff spent to successfully litigate a halt to the underpriced sale of the assets of Suitable Technologies ("Suitable") in Delaware.l Complaint ("Compl.") n1144-41. Suitable did not even enter the Asset Purchase Agreement that spawned that litigation until August22,2079. Compl. fl40. Plaintiff first leamed about that Agreement in discovery in the divorce case in late 2019. Id. l5l . Plaintiff did not file her Delaware derivative action, and start incurring the fees that cornprise her injury from defendants' wrongful conduct, until November 5,2019, well within ayear of filing this action. Id.n44. Plaintiff did not receive, or have any way to obtain, documentation, showing defendants' continued involvement in other transactions until Hassan produced them in discovery in the divorce case in early 2020. Id. n57. Even now, plaintiff does not know if those other transactions will produce actual injury to plaintiff, because that will depend on whether she establishes in the divorce case that the assets with which defendants were involved were community property and on whether plaintiff fully recovers the value of her comrnunity interest via the divorce action. That action is set for trial commencing August 23,2021. Thus, to the extent plaintiff is seeking in this action recovery of the $1.1 million in attomey fees she incurred in Delaware, the action is not bared because the injury did not occur, and plaintiff I While defendants assert that the Delaware Court in that litigation denied plaintiff s application for a preliminary injunction, that Court, at plaintiff s urging, declined to approve the sale, and court approval was a condition of the sale. Compl. fl46. The subsequent sale for the same price in a fire-sale bankruptcy auction, if anything, vindicates J446606 OPPOSITION TO DEFENDANTS' DEMURRER TO COMPLAINT 1 2 J 4 5 6 7 8 9 10 11 12 13 14 15 16 l7 l8 I9 20 21 22 23 24 25 26 27 28 did not discover it, until after July 28,2019. Even if the Court cornpletely credits defendants' statute of lirnitations argument, which it should not for the reasons below, at best defendants would only have shown a portion of the claim to be barred by the statute of limitations, and they cannot successfully demur to part of a cause of action. Plaintiff has sufficiently pled a claim for that $ I .1 million, and other relief, that arose within the statute of limitations, and to the extent it is based on the statute of limitations, the demurer should be ovemrled. C. Plaintiff Did Not Suffer Actual Injury in Connection With the Motion to Disqualify, so That Motion Did Not Trigger the Statute of Limitations. When plaintiff suffers actual injury is generally a question of fact, unless the facts are undisputed and plaintiff suffered manifest and palpable injury as a matter of law. Adams v. Paul (1995) 1 1 Cal.4tL 583, 593. Plaintiff rnust have suffered "definite and cefiain" injury, something more than nominal or insubstantial damages. Id. at 589-591. Because actionable harm may occur at any one of several points in time subsequent to an attorney's negligence, the determination of when it occurred is generally a question of fact. McCann v. Welden (1984) 153 Cal. App. 3d 874, 824. Plaintiff has not pled, or incurred, any actual injury as a result of the Motion to Disqualifu. By order of the Court in the divorce case, Hassan has been paying plaintiff s attomey fees, including the fees for the battle resulting in defendants' disqualification as counsel in that case. The statute of limitations bar must appear on the face of the complaint, as shown in $II above. On this demurer, defendants have not identified any allegation of damages arising out of the Motion to Disqualifli, and they cannot do so. For example, even though plaintiff has alleged that defendants' representing Hassan in the divorce case breached defendants' fiduciary duty to her, and that she knew about that particular breach as early as March, 2019, the only damages alleged for breach of fiduciary duty are the $1.1 million in attorney fees and the lost value of community assets that defendants facilitated for Hassan. None of those damages are attributable to the Motion to Disqualify, and defendants sirnply miss the mark in arguing that plaintiff adrnitted in Compl. 157 that she knew of defendants' plaintiff s position, and the Delaware Court's conclusion, that the fair market value was higher. R.IN Ex.5, Ex.A 4446606 OPPOSITION TO DEFENDANTS' DEMURRER TO COMPLAINT 1 2 J 4 5 6 7 8 9 10 11 12 13 I4 15 16 17 18 19 20 2t 22 23 24 25 26 27 28 wrongdoing based on her notice of their involvement in the Dissolution Action in March, 2019. Knowledge of wrongdoing--even if it existed that early without the later infonnation fl57 alleges provided that knowledge--does not create actual injury, and without actual injury, the statute is not running. The mere existence of the conflict of interest, while a breach of fiduciary duty and important to the other legal claims, did not create the monetary loss claimed in this case. Accordingly, under CCP $340.6(a)(1), no statute of limitations could be triggered by the Motion to Disqualiflz or the appearance of defendants on behalf of Hassan in the Dissolution Action per se. With no actual injury, i.e. monetary damage, alleged in the cornplaint based on facts, events, or knowledge more than one year before this action, defendants' statute of limitations demurer fails. D. The Statute of Limitations Does Not Run Because Defendants are Committing a Continuing Tort. Plaintiff has pled that defendants' conduct is part of a pattern of structuring, negotiating and documenting transactions designed to deprive her of her community interest, or the value of her community property, that has continued at least into December,2079 with the Suitable transaction that failed to close after the Delaware Courl opined there was reason to believe Hassan's conduct was not motivated by Suitable's best interests and the assets were wofih far more than the proposed sale price, and the couft in the Dissolution Action declined to approve the sale. Compl. t1fl37-a8; RJN, Ex.5, Ex.A, pp.6-7 of 714.2 The statute of limitations does not start running on a continuing tort until it is cornpleted. Wyatt v. Union Mortgage Company (1979) 24 Cal.3dl73,186-188; Aaroe v. First American Title Insurance Co. (1990) 222 Cal.App.3d 124, 128; Livett v. F.C Financial Assoc., Ltd. (1981) 124 Cal.App.3d 413,427. Thus, regardless of when defendants clairn the statute should have started running, their own continuing wrongful conduct prevented the statute from being triggered. Also, any duty to investigate or inquire about suspicious facts is relaxed where defendant owed plaintiff fiduciary duties. If the nature of the relationship was such as to cause plaintiff to rely on the fiduciary, there is no duty to inquire until the relationship is repudiated or plaintiff becornes 2 References to RJN with exhibit numbers (including this reference) are to defendants' RIN; references to RJN with 446606 5 OPPOSITION TO DEFENDANTS' DEMURRER TO COMPLAINT 1 2 J 4 5 6 7 8 9 10 11 12 13 14 15 16 t7 18 t9 20 21 22 23 24 25 26 27 28 aware of facts that would make a reasonably prudent person suspicious of the fiduciary. Stella v. Asset Mgntt. Consultants, Inc. (2017) 8 Cal.App.5th 187,191 fn. 13; Lee v. Escrow Consultants, Inc. (1989) 210 Cal.App.3d 915, 921. As argued below, defendants owe fiduciary duties to Huynh both by vifiue of representing her and by virtue of representing family-owned companies that she co-owns. Hence, even absent the continuing tort doctrine, the pre-2019 facts defendants cite would not trigger a duty to inquire of a fiduciary so as to commence the running of the statute of limitations. In any event, at most those facts might show a conflict of interest, but not damage- causing conduct. IV. HYUNH DOES NOT NEED TO BRING HER CLAIMS AS DERIVATIVE CLAIMS. Hyunh personally incurred the $1.1 rnillion in attomey fees in the Delaware action. They are not damages suffered by Suitable, nor are they merely incidental to the darnage Suitable suffered. While the relief sought in Delaware-preventing a below-value asset sale--would benefit Suitable as distinguished from its shareholders, and thus required a derivative action in Delaware, the fees for that action were neither incurred nor reimbursed by Suitable, and the burden of them did not fall on either the corporation or the shareholders as a body in proportion to their percentage of ownership. That burden fell entirely on Hyunh, so Hyunh can pursue recovery of those fees individually. McDermott, Will & Emery v. Superior Court (2000) 83 Cal.App.4th3l8,384 cited by defendants, is inapposite. Defendants cited it not for any actual holding in the case but for a proposition that the case indicated was just a characterization of a holding from another state. Even at that, the holding involved only the unremarkable proposition that a shareholder who is suing colporate counsel for darnage to the corporation must sue derivatively. Plaintiff in the present case is suing for darnage she suffered personally, not damage to Suitable. Schuster v. Gardner (2005) 127 Cal.App.4th 305, 312-313, the other case defendants cite, really proves plaintiff s point. It holds that a claim for loss of value of stock or loss of investment value that is incidental to the harm suffered by the corporation and that affects all shareholders must be asserted derivatively. exhibit letters are to Hyunh's RJN 446606 6 OPPOSITION TO DEFENDANTS' DEMURRER TO COMPLAINT 1 2 aJ 4 5 6 l 8 9 10 11 12 13 14 15 16 l7 18 19 20 21 22 23 24 25 26 27 28 Plaintiff s attorney fees do not comprise hann to the corporation, nor are they incidental to hann suffered by the corporation such that they affect all shareholders. As stated in Grosset v. lVenaas (2008) 42Cal.4tt' 1100, 1108and Jonesv.H.F.Ahmanson&Co. (1969) I Cal.3d93, 106-l07,an action is derivative if "the gravamen of the cornplaint is injury to the corporation, or to the whole body of its stock." On the other hand, "[i]f the injury is not incidental to ar-r injury to the corporation, an individual cause of action exists." Denevi v. LGCC, LLC (2004) 121 Cal.App.4th 1211, 1222. Neither the corporation nor the whole body of its stock suffered the attorney fees claimed in this case. Only Huynh did. Her claim for those fees is not a derivative claim. As to the damages for other transactions, this case parallels the fact pattem in Jones v. H.F. Ahmanson & Co. (1969) 1 Cal.3d 93. In Ahmanson, a minority shareholder brought an action for breach of fiduciary duty against a holding company and present or fonner holders of stock in a savings and loan association who had transferred a control block of shares in the association to the holding company, for breach of fiduciary responsibility. The Courl ruled that the action did not need to be asserted derivatively because the complaint did not seek recovery on behalf of the corporation for injuries to the corporation or for injury incidental to any injury to the corporation but rather sought recovery for injury to the shareholder herself and other minority stockholders. She complained that the majority shareholders formed a new corporation whose major asset was to be the control block of association shares but from which minority stockholders were excluded, whereby the rnajority became holders of stock more marketable than the association shares. The Courl found that although the plaintiff alleged the value of her stock had been dirninished by defendants' actions, she did not contend the dirninished value reflected an injury to the corporation and resultant depreciation in the value of the stock. Thus the gravamen of her cause of action was injury to herself and the other minority stockholders. Accordingly, the Court ruled that her suit was not derivative, and could be rnaintained without showing injury that was unique to her. Hyunh is alleging that one controlling shareholder, with defendants' assistance, breached his fiduciary duty by siphoning off corporate value for his benefit and to her detriment. Compl. flfll0, 72, 48-50,55(c)-(e), 56. In this regard, she is alleging conduct by one shareholder and corporate counsel against another shareholder, not damage to the corporation and its whole body of 446606 7 OPPOSITION TO DEFENDANTS' DEMURRER TO COMPLAINT I 2 a J 4 5 6 7 8 9 10 11 12 13 t4 15 16 17 18 19 20 21 22 23 24 25 26 27 28 shareholders. Hassan was a shareholder as well, and he benefited fi'orn the conduct alleged. Where the effect or-r a plaintiff/shareholder is not the salne as on the other shareholders, the damage is not incidental to damage suffered by the corporation, but rather is personal to the shareholder suing. To the extent the demurrer is based on plaintiff having to sue derivatively, it should be ovemrled. V. DEFENDANTS OWE FIDUCIARY DUTIES TO PLAINTIFF. Defendants' contention that they never had an attomey-client relationship with Huynh, and therefore owe her no duties, is specious. An attorney-client bond encompasses the earliest moments of the relationship. "The fiduciary relationship existing between lawyer and client extends to prelirninary consultations by a prospective client with a view to retention of the lawyer, although actual employment does not result. People ex rel. Dept. of Corporations v. SpeeDee Oil Change Sys. (l 999) 20 Cal.4tr' 1 135, 1 147-48; Califomia Rules of Professional Conduct ("RPC"), Rule 1.18. Huynh and defendants exchanged many confidential communications before MyDream was ever fonned. During that time, Huynh, not MyDream-which did not even exist yet-was the client. The communications between defendants and Huynh about contemplated financing, fonnation, and operation of a business that Huynh wanted to start were pafi of a confidential attorney-client relationship between them, as was the advice that defendant Paul Lion provided about the structuring, financing, and fonnation of MyDream. Defendants could not be counsel to just the corporation when the corporation did not exist and defendants were advising the principal on the very subject of what legal form the business should take. Defendants did not even transmit a retainer agreement to plaintiff until after they had fonned MyDream. Cornpl. fl26. Plaintiff has alleged she discussed her plans for an educational software and gaming company with Lion, and before the company was ever incorporated, conveyed confidential information and received personal legal counsel and advice frorn Lion with respect to that yet-to-be- formed entity, including with respect to her own relationship and involvernent with the not-yet- fonned entity. Compl. tl25; Declaration of Allison Huynh, RJN, Ex. A.3 This allegation concerning advice relating to her personal circumstances and relationship vis-d-vis the proposed business, 3 Huynh's RJN, Ex. A is the same Request to Disqualify Counsel as Defendants'R.IN, Ex. 1, except Huynh's RJN, 446(to6 8 OPPOSITION TO DEFENDANTS' DEMURRER TO COMPLAINT 1 2 3 4 5 6 7 8 9 l0 l1 l2 13 14 15 16 t7 18 t9 20 21 22 23 24 25 26 27 28 especially in light of Hassan's reference to defendants as "our farnily lawyers", makes Huynh's belief that defendants were representing her objectively reasonable, and provides the facts concerning personal advice and the rationale for Huynh's understanding that she was defendants' client which defendants erroneously argue on demurrer is rnissing from the complaint. Compl. fl28. Defendants rest their argument that they were not counsel for Huynh when they were advising her on her future business on the thin reed of two out-of-state cases, frorn Minnesota and Wisconsin, cited in Mark L. Tuft, et al., Califtrnia Practice Guide, Professional Responsibility (Rutter Group, 2020Update), one of which, Jesse by Reinecke v. Danforth (1992) 169 Wis.2d 229,240-42, involved 23 doctors who retained a firm specifically to organize a corporation, just two of whom were later sued for malpractice by that same lawfirm. Defendants' duties to Huynh derive not only from their representation of her and their advising her concerning her nascent business, but also from representing family companies. An attomey representing a presumptively community entity cannot later choose sides and act on behalf of one spouse against the other, as defendants have done by first attempting to represent Hassan in the Dissolution Action and then assisting and facilitating Hassan's campaign to deprive Huynh of her community property interest in the family businesses for which defendants were and are counsel. This is the lesson of Woods v. Superior Court (1983) 149 Cal.App.3d 93 7,933,931 where the Courl of Appeal disqualified an attorney who had been representing the family business from appearing as counsel for the husband in a divorce proceeding. In holding that the attorney of a farnily-owned business could not represent one owner against the other in a dissolution action, Woods rejected the argument that the attorney was representing only the farnily business and therefore owed no duties to the wife. The Court held that "the proper focus should be on the fact that in representing an ongoing farnily corporation, fcounsel] in a very real sense continues to represent wife." Id. at935. Woods cited Goldstein v. Lees (1915) 46 Cal.App.3d 614,622 for the principles that a "corporation's legal adviser must refrain from taking parl in controversies among shareholders as to Ex. A includes Huynh's Declaration, pp. 16-17 of the document, which Defendants chose to omit. 446606 9 OPPOSITION TO DEFENDANTS' DEMURRER TO COMPLAINT I 2 aJ 4 5 6 7 8 9 10 11 12 13 14 15 16 t7 18 t9 20 2t 22 23 24 25 26 21 28 its control, and when his opinion is sought he must give it without bias or prejudice." Iiloods, supra, 149 Cal.App.3d at 936. Goldsteinheld that even after an attorney ceases to be ernployed by a corporation, the attorney "must refrain frorn taking part in any controversies or factional differences which may exist among shareholders as to its control." Goldstein, supra,46 Cal.App .3d at 622. Thus "[w]hen fthe attomey's] opinion is sought by those entitled to it, or when it becomes his duty to voice it, he must be in a position to give it without bias or prejudice and to have it recognized as being so given...Unless he is in that position, his usefulness to his client is impaired...This duty to act without bias or prejudice does not dissolve merely because the attorney has been discharged." Id. Applying these principles, Woods explained that allowing the attorney for a family company, co-owned by a husband and wife, to represent the husband against the wife on matters relating to the family company would create "serious problems" because (l) the attomey owes "undivided loyalty" to the family company and "cannot take sides in a serious dispute between its owners" and (2) there is a presumption that the attomey obtained confidential and/or otherwise protected information through its prior representation that might be disclosed in the successive representation. Woods, supra, 149 Cal.App.3d at 934-936. Other cases have reiterated the principle that an entity's lawyer cannot choose sides between competing owners. Gong v. RFG Oil, Inc. (2008) 166 Cal.App.4tt'209,2l4held "A cotporation's legal advisor must abstain from taking part in controversies among the corporation's directors and shareholders." In Schnabel v. Superior Court (1994) 30 Cal.App.4't'J58,159-60, the Courl in a dissolution proceeding found joinder of a corporation of which the couple owned 30Yo to be necessary because the corporation and the husband were represented by the same law firm, the corporation had paid the husband's attorney fees, and the cotporation exhibited favoritism toward the husband. Id. at763-64. Citing liloods, the court expressed "concern" that the husband was being represented by the same lawyers as the corporalion. Id. at763, n.5. See RPC, Rule 1.7(b). This is the same authority that already persuaded the Court in the Dissolution Action to disqualify defendants from representing Hassan in that action. RJN Ex. A, pp.9-13; and Ex. B. Thus, in addition to the duties defendants have to Huynh deriving from having represented and 10446606 OPPOSITION TO DEFENDANTS' DEMURRER TO COMPLAINT 1 2 a J 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 2l 28 advised herbefore MyDrearn existed, the duties of loyalty arising fi'orn defendants'representing farnily companies require that defendants not act so as to facilitate the diverting of corporate value, or the devaluing of assets, in farnily companies in a manner that favors one spouse to the detriment of the other, and if they do, to answer for doing so in damages. VI. DEFENDANTS CAN BE LIABLE FOR INTERFERING WITH PLAINTIFF'S PROSPECTIVE ECONOMIC ADVANTAGB. According to the Restatement (Third) of the Law Governing LawyeLs$57(3) (Am. Law. Inst. 2000), as quoted by defendants, a lawyer advising his client is not liable to a non-client for interference with contract or prospective contractual relations if the lawyer acts to advance the client's objectives without using wrongful means. Under that standard, defendants actually can be liable for interfelence with prospective econornic advantage because they did use wongful means. They have acted in breach of fiduciary duties and the duty of loyalty they owe to plaintiff as her fonner counsel and as counsel for farnily-owned businesses, as set forth in $V above. Cornpl. fl65. This wrongful conduct, this breach of defendants' own independent duties to the plaintiff, is absent from Reynolds v. Schrock (2006) 341 Or. 338, and every other case defendants cite for the purported existence of a privilege on the part of the attomeys to aide and assist in their own client's breach of fiduciary duties. In Reynolds, for example, Reynolds and Schrock jointly owned two properties, and to settle differences, agreed that Reynolds would transfer his interest in one of the two jointly owned properties to Schrock and that Schrock and Reynolds would sell the second property. If the second properly sold for less than $500,000 then Schrock would grant Reynolds a security interest in the first property. Schrock's attorney then advised Schrock to sell the first property first and thereafter revoke the consent to sell the jointly owned second properly. Reynolds sued both Schrock and Schrock's attorney for breach of fiduciary duty. The court found that Schrock's attorney could not be held jointly liable with a client for the client's breach of fiduciary duty unless the third parly showed that the lawyer was acting outside the scope of the lawyer-client relationship. The court distinguished the case Reynolds had relied on, Granewich v. Harding (1999) 329 Or. 47 , which allowed an action against an attorney for assisting others in breaching the fiduciary duties they owed as majority shareholders to the plaintiffs as 44(t(t06 1 1 OPPOSITION TO DEFENDANTS' DEMURRER TO COMPLAINT 1 2 a J 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 rninority shareholders. In Granewiclt, according to Reynolds, the lawyer being sued was the attonrey for the corporation, not the individuals that owed the fiduciary duties. 341 Or. at344. Huynh has alleged that defendants represented the various farnily corporations, not Hassan individually. Cornpl. flfl4, 5, 9,10,29,38,39, and 50. Indeed, defendants themselves spent a porlion of their demurrer drawing this very distinction, clairning to have represented MyDrearn but not Huynh. Demurer, pp. 9-10. Huynh has alleged an advantageous economic relationship with Hassan, not with the companies she has alleged defendants represented. Cornpl. fl61. Thus, this case falls within the category of Granewich, where the Oregon court allowed an action against the attorney for aiding a non-clients' breach of fiduciary duty, and is unlike Reynolds, where the court found a privilege for the lawyer advising his own breaching client, but specifically distinguished the situation of the corporation's lawyer aiding in the breach by the corporation's shareholder. No privilege applies here based on defendants' own authority. Reynolds does not apply to the present case for another reason. In Oregon, one is liable for harm resulting to a third person from the tortious conduct of another, if he (a) does a tortious act in concert with the other or pursuant to a cornmon design with hirn, or (b) knows that the other's conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other so to conduct hirnself, or (c) gives substantial assistance to the other in accomplishing a tortious result and his own conduct, separately considered, constitutes a breach of duty to the third person. Reynolds, supra, 341 Or. at 345. Howevet, the parties in Reynolds agreed that Reynolds had not alleged a claim under subsection (c) because Reynolds did not assefi that the attomey's own conduct, separately considered, constituted a breach of duty to Reynolds. Consequently, the holding of Reynolds finding a privilege on the part of the attorney does not apply where the attomey breached a separate duty to the plaintiff. Huynh alleges that defendants' conduct in aiding Hassan did, separately considered, breach a duty to Huynh. Cornpl. fl1152-56,65-66,74-75. For this additional reason, the authority in Oregon and other states, and the Restatement cited above, does not establish that a privilege would apply to defendants' conduct in this case. Defendants admit that no California couft has ever held such a privilege exists, and given the requirements in California for the torl itself, such a privilege would be superfluous. In California, 44660(t 12 OPPOSITION TO DEFENDANTS' DEMURRER TO COMPLAINT I 2 J 4 5 6 l 8 9 10 11 12 13 14 15 16 t7 18 I9 20 21 22 23 24 25 26 27 28 the tort of interference with prospective econornic advantage, interitional or negligent, requires that the conduct of the defendant be indeper-rdently wrongftil. Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Ca7.4t1' 1134, 1158-59; Della Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 1 1 Cal.4tr' 376,392-393. If the attorney's conduct is independently wrongful apart from just the interference itself, such as in this case where it breaches independent fiduciary duties owed to Huynh, there is no justification for cloaking the attorney's conduct in a privilege. Based on the distinctions between this case and defendants' cited authority, the specific requirements of the tort in Califomia, and the conspicuous absence of any California authority supporting defendants' demurrer on this point, the demurrer should be denied to the extent it is based on a purpofied privilege exempting defendants from liability for interference. VII. DEFENDANTS ARB NOT AGENTS OF A PARTY TO THE BCONOMIC RELATIONSHIP AND CANNOT AVOID LIABILITY ON THAT BASIS. In Asahei l{asei Pharma Corp. v. Actelion (2013) 222 Cal.App.4th 945,961-968, Actelion acquired a compally that had a contract with Asahei to run trials on a new medication that would threaten the market dominance of a medication Actelion made. Actelion and its offtcers then directed its new subsidiary to terminate the contract. Actelion acknowledged it was not a party to the contract. The coufi detennined that both Actelion and its officers could be sued for interference with contract and with prospective economic advantage. As to the officers, they had no insulation as agents because they were agents of a non-contracting party, Such is the case here. Hyunh's econornic relationship was with Scott Hassan. Complflfl61, 63,64. Huynh has alleged that defendants represented the various family corporations, not Hassan individually. Cornpl. fln4,5,9,70,29,38,39,50, and 66. All of those allegations are incorporated into the causes of action for interference with prospective econotnic advantage. Defendants ignore all those clear allegations that they repr"esented various entities who were not parties to the economic relationship and seize on sorne adrlittedly irnprecise language in]162 of the Cornplairrt asserting they had the requisite knowledge of the advantageous econornic relationship while they were "representing and advising Hassan and the cotnpanies he established". The language quotecl can be interpretecl a number of ways, but in context the clear intent of l3446606 OPPOSITION TO DEFENDANTS' DEMURRER TO COMPLAINT 1 2 aJ 4 5 6 l 8 9 10 11 12 13 t4 15 t6 17 18 t9 20 21 22 23 24 25 26 2l 28 the language is to refer to aclvising Hassan in the course of representing the companies plaintiff has alleged throughout the Complaint that defendants represent. It certainly was not plaintiff s intent to plead that defendants were representing Hassan individually so as to exonerate thern as agents of the party to the economic relationship, when plaintiffhad scrupulously to that point only alleged defendants represented the cornpanies. Such an interpretation would violate the principles that courts must liberally construe the pleading with a view to substantial justice between the parties and must read a complaint in context and give it a reasonable interpretation. In any event, courts cannot sustain demurrers without leave to amend based on ambiguities. CrossTalk Productions, Inc. v. Jacobson (1998) 65 Cal.App .4th 637, 635 (Complaint ambiguous as to whether "secure" meant "bribe", showing an unclean hands defense, orjust "protect or safeguard"). Both Redfearn and Asahei make clear'that rnerely having an economic interest in a contract or a relationship of others does not insulate a parly frorn liability for interfering with that contract or relationship. Thus, a parent company can be liable for interfering with its subsidiary's contract. Asahei, supro, 222 Cal.App.4th at 961-965. Likewise, a nonpafty to a contract that contemplates the nonparly's perfonnance, by that fact alone, is not immune from liability for contract interference. Red.fearn, supro,20 Cal.App.5th at 1003 (supermarket could be liable for interfering with contract between food processor and broker, even though it had to buy from broker fol that contract to be effective). Defendants do not even have a monetary interest in the economic relationship between Huynh and Hassan. There is no allegation or inference that defendants or any of the companies to which they are counsel would suffer economically if Hassan did not breach his duties in managing and preseruing the community properly. Even if they did, though, it would not defeat the claim against defendants because they would still be agents of strangers to the Huynh/Hassan relationship. Plaintiff has not clearly pled that defendants are agents of Hassan, and in light of the numerous, overshadowing allegations that defendants represent the companies, any ambiguity in pleading their status should be disregarded. To the extent the demurrer is based on defendants' purported agency of a parly to the relationship, it should be denied. 14446606 OPPOSITION TO DEFENDANTS' DEMURRER TO COMPLAINT 1 2 J 4 5 6 l 8 9 10 11 12 13 14 15 16 17 18 19 20 2l 22 23 24 25 26 27 28 VIII. CONCLUSION. Plaintiff has filed this action within one year of discovery of the facts giving rise to her claim, or one year of the occuffence of those facts, and certainly within one year of her suffering injury, so the statute of lirnitations should not bar this claim. Plaintiff is suing on her own behalf for damages she personally suffered, so the claim is not derivative. Defendants owe fiduciary duties to plaintiff based on having represented her and having represented family companies of which she was and is co-owner. Defendants are not immune from liability as either counsel or an agent for Hassan as a parly to the relationship because plaintiff has alleged defendants are counsel for the companies, and her economic relationship was with Hassan individually. The Court shouid ovemrle the demurer in its entirety. If it sustains any part of the demurrer, plaintiff requests leave to amend. Dated: June 16,2021 ENGSTROM, LIPSCOMB & LACK B WALTER J. LACK STEVEN C. SHUMAN Attorneys for Plaintiff 15446606 OPPOSITION TO DEFENDANTS' DEMURRER TO COMPLAINT I 2 aJ 4 5 6 l 8 9 10 11 12 13 14 15 t6 17 18 19 20 21 22 23 24 25 26 27 28 PROOF OF SERVICE STATE OF CALIFORNIA COUNTY OF LOS ANGELES I am ernployed in the County of Los Angeles, State of California. I am over the age of 18 and not apafiy to the within action;rny business address is 10100 Santa Monica Boulevard, l2th Floor, Los Angeles, Californi a 90067 -4113. On June 16,2021, I served the foregoing document described as PLAINTIFF'S OPPOSITION TO DEFENDANTS' DEMURRER TO COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES the interested party(ies) in this action as follows Ragesh K. Tangri, Esq. David McGowan, Esq. Bethany D. Bengfort, Esq. DURIE TANGRI LLP 277 Leidesdorff S. San Francisco, CA 94111 Tel: 415-362-6666 Email : rtaneri@durietangri.com drnc gowan@duri etan qri. corn bb en efort@ duri etan eri. corn (BY MAIL) I deposited such envelope in the mail at Los Angeles, Califomia. The envelope was mailed with postage thereon fully prepaid. I am readily familiar with the firm's practice of collection and processing corespondence for mailing. It is deposited with the U.S. postal service on that same day in the ordinary course of business. I am aware that on motion of the party seled, service is presumed invalid if postal cancellation date or postage meter date is more than 1 day after date of deposit for mailing in affidavit. X (BY E-MAIL/ELECTRONIC TRANSMISSION): Based on a court order or an agreement of the parties to accept service by e-mail or electronic transmission, I caused the documents to be sent to the persons at the e-rnail addresses listed below. I did not receive, within a reasonable time after the transmission, any electronic message or other indication that the transmission was unsuccessful. (TO ALL NOTED ON SERVICE LIST) SS, ) ) ) X the (STATE) I declare under penalty of perjury under the laws of the State of Califomia that above is true and correct. Executed on June 16,2021, at Los Angeles, fornia. Merl Fletcher r6446606 OPPOSITION TO DEFENDANTS' DEMURRER TO COMPLAINT EXHIBIT D 1 2 J 4 5 6 7 8 9 10 11 t2 13 l4 15 T6 t7 18 I9 20 2I 22 23 24 25 26 27 28 WALTER J. LACK, ESQ. (SBN 57550) STEVEN C. SHUMAN, ESQ. (SBN 82828) ENGSTROM, LIPSCOMB & LACK, P.C. 10100 Santa Monica Boulevard, Suite 1200 Los Angeles, CA 90067-4113 Telephone: (3 1 0) 552-3800 Facsimile: (3 10) 552-9434 Attorneys for Plaintiff ALLISON HUYNH ALLISON HUYNH, Plaintiff, vs. MORRISON & FOERSTER, LLP; PAUL L. LION, III; and DOES 1-20, Inclusive, Defendants. SUPERIOR COURT OF'THE STATE OF CALIF'ORNIA F'OR THE COUNTY OF SANTA CLARA CASE NO. COMPLAINT F'OR DAMAGES: 1. BREACH OF'F'IDUCIARY DUTY 2. INTENTIONAL INTERF'ERENCE WITH PROSPECTIVE ECONOMIC ADVANTAGE 3. NEGLIGENT INTERF'ERENCE WITH PROSPECTIVE ECONOMIC ADVANTAGE DEMAND F'OR JURY TRIAL Plaintiff, ALLISON HUYNH, alleges for causes of action against Defendants MORzuSON & FOERSTER, LLP, PAUL L. LION, III, and DOES l'20, and each of them, as follows: Y3:442126 1 38469-00005/3821267 .4 COMPLAINTFORDAMAGES 1 2 J 4 5 6 7 8 9 10 11 I2 13 I4 15 T6 r7 18 t9 20 2l 22 23 24 25 26 27 28 INTRODUCTION 1. History teaches that corporate comrption, financial fraud, and economic skullduggery cannot be perpetrated without the willful conniving of lawyers. The same is true when a scheming spouse with money and power in an adverse proceeding is intent on cheating his spouse out of her rightful share of community property. In the case of Plaintiff, MORRISON & FOERSTER has been the willing architect and facilitator of Silicon Valley mogul Scott Hassan's ('oHassan") nefarious scheme to cheat his wife and children out of hundreds of millions of dollars- all in violation of MORRISON & FOERSTER's solemn ethical duties to Plaintiff, its former client. 2, This case arises from MORRISON & FOERSTER's disloyalty to and betrayal of a former client. 3. MORzuSON & FOERSTER represented Plaintiff personally in connection with the formation and structuring of her tech company in20l1, exchanging confidential communications with her. For years thereafter, MORRISON & FOERSTER represented Plaintifl the tech company she manages and "family companies" owned by Plaintiff and her husband, Hassan. 4. Starting over a decade ago, MORRISON & FOERSTER began representing numerous tech and real estate family companies launched by Hassan, most of which were formed during marriage and are presumptively community property under California family law, thereby giving Plaintiff a direct ownership interest in them. Hassan told Plaintiff that MORRISON & FOERSTER attorneys, and specificatly Defendant Paul "Chip" L. Lion III ("Lion"), were "the family lawyers" and she should use them for her personal and business matters. Lion was the point person and senior attorney for MORRISON & FOERSTER on the engagement and worked closely with both Hassan and Plaintiff on various matters. 5. Then, when Plaintiff separated from Hassan and filed for divorce in January 2015, MORRISON & FOERSTER and Lion improperly chose sides, aligning themselves with Hassan in at least the following ways: . MORRISON & FOERSTER and Lion continued to represent the family companies that Hassan managed in a way that was detrimental to Plaintiff; o MORRISON & FOERSTER represented at least six Hassan-affiliated deponents in Y3.442126 2 3 8469-00005/3 82126',1 .4 COMPLAINT FOR DAMAGES I 2 J 4 5 6 7 8 9 10 11 I2 13 T4 15 t6 T7 18 t9 20 2T 22 23 24 25 26 27 28 the dissolution action; and o MORRISON & FOERSTER associated in as Hassan's counsel in the dissolution action. 6. MORzuSON & FOERSTER's conduct was so egregious that the family court judge in the dissolution action took the rare step of disqualiSing MORRISON & FOERSTER from representing Hassan in that action. The court also prohibited MORRISON & FOERSTER from assisting Hassan in any way in connection with the dissolution action. 7. MORzuSON & FOERSTER and Lion decided to flout rather than follow the court's disqualifi cation order. 8. After being disqualified and in defiance of the disqualification order, MORRISON & FOERSTER continued to assist and advise Hassan in the dissolution action. 9. MORzuSON & FOERSTER and Lion also continued to represent several of the family companies managed by Hassan and co-owned by Plaintiff. 10. One of those family companies is Suitable Technologies, LLC ("Suitable Technologies"), a telepresence robot business that MORRISON & FOERSTER and Lion represented before and after the couple's separation. MORzuSON & FOERSTER and Lion have represented Suitable Technologies in away that assisted Hassan in the dissolution proceeding and prejudiced Plaintiff. Specifically, MORRISON & FOERSTER, through Lion, orchestrated a fire- sale for a paltry $400,000 of Suitable Technologies' assets-in which Plaintiff has a half interest- in order to secure a personal tax benefit of over $90 million for Hassan. 11. MORRISON & FOERSTER and Lion structured the deal in a way that forced Plaintiff to hire counsel and file an action in the Delaware Court of Chancery to stop the sale. Although Plaintiff was successful in thwarting the sale-the Court of Chancery found that the sales process "inspire[d]" concern, was driven by Hassan's desire to obtain a personal tax benefit, and that 'othere's good reason to believe that Suitable Technologies' asset value approximates or even exceeds $100 milliol"-5fis incurred substantial professional fees in doing so. These fees, which she was unable to recover in the dissolution action, total more than $ 1 .1 million. 12. MORzuSON & FOERSTER's and Lion's conduct relating to the attempted Y3:442126 J 3 8469-00005/3 821267 .4 COMPLAINT FOR DAMAGES 1 2 J 4 5 6 7 8 9 10 11 T2 13 T4 15 t6 t7 18 t9 20 2l 22 23 24 25 26 27 28 giveaway of Suitable Technologies' assets is not an isolated incident but rather part of a larger pattern and practice of MORRISON & FOERSTER and Lion breaching the fiduciary and other duties they owe Plaintiff and/or aiding and abetting Hassan in breaching the fiduciary duties that he owes Plaintiff. 13. MORzuSON & FOERSTER is a sophisticated, international law firm and a prominent presence in the Silicon Valley legal community. Lion has been practicing in the field for nearly 40 years. They should know better. The only deterrent for such reprehensible betrayal of a client is a significant award of compensatory and punitive damages. If MORRISON & FOERSTER and Lion will not heed a court order and crystal-clear ethical rules, a massive financial penalty might just get its attention. THE PARTIES 14. The true names and capacities, whether individual, corporate, partnership, or associate, of DOES I-20 arc unknown to Plaintiff, who therefore sues those Defendants by those fictitious names pursuant to California Code of Civil Procedure 5474. Each of those DOE Defendants is in some manner legally responsible or liable for the acts and conduct and for the damages hereinafter described, either by reason of their own conduct or their vicarious liability for the acts of others, by reason of aiding and abetting breaches of fiduciary duty by Hassan, or by some other means. Plaintiff will seek leave of Court to amend this Complaint when the true names and capacities of the DOE defendants become known. 15. At all times mentioned herein, each of the Defendants named herein was the agerrt", employee, employer, partner, manager, controlling entity, or joint venturer of each of the other Defendants, and in doing the things herein alleged was acting within the course and scope of such agency, employment, partnership, management, control, or joint venture with the full knowledge and consent of the other Defendants, all acting in concert together. At all times all employees and agents of any corporate or entity Defendants acted with the advance knowledge or under the direction or with ratification of corporate officers or entity managing agents who had the ability to bind the corporate or entity Defendants. 16. At all times mentioned herein, Defendant MORzuSON & FOERSTER LLP Y3:442126 4 3 8469-00005/3 82r26',1 .4 COMPLAINT FORDAMAGES I 2 J 4 5 6 7 8 9 10 11 T2 13 T4 15 l6 I7 18 t9 20 2t 22 23 24 25 26 27 28 (hereinafter ooDefendant") was and is a limited liability partnership organized and existing under the laws of one or more of the United States. MORzuSON & FOERSTER is an international law firm with 17 offrces worldwide. 17. At all times mentioned herein, Defendant Paul "Chip" L. Lion III was and is an individual residing in the State of California, County of Santa Clara, and was employed by MORRISON & FOERSTER as a licensed California attorney in its Santa Clara County office. JURISDICTION AND VENUE 18. MORzuSON & FOERSTER has its principal place of business and worldwide headquarters in San Francisco, California. It maintains an office in Palo Alto, Santa Clara County, California where MORzuSON & FOERSTER conducts business and where the culpable MORzuSON & FOERSTER attorneys work, including Lion. 19. The events described herein occurred primarily in the County of Santa Claru, State of California. FACTUAL BACKGROUND A. Plaintiffs Marriage to Hassan 20. Ptaintiff married Hassan on December20,2001. Plaintiff and Hassan separated on January 5,2015. On January 8,2015, Plaintiff initiated an action for dissolution of the marriage and for a declaration and division of the couple's community property. 21. Hassan is widely acknowledged as the third founder of Google and was the principal prograrnmer of the original Google search engine. He acquired shares in Google which by 2004, when Google went public, were worth over $200 million. Hassan is a renowned pioneer, inventor, computer software developer, innovator, investor, and incubator in the field of robotics, and founded or spun off several companies in that field as well as other technologies. He is also an active real estate investor and developer in the Silicon Valley area. Hassan engaged in that economic activity throughout his marriage to Plaintiff. 22. In spring 2005, after consulting with his lawyers and other professionals, Hassan proposed that Plaintiff enter into a one-sided post-nuptial agreement. Plaintiff declined the offer. 23. Hassan has created amaze of over 50 limited liability companies to hold his Y3:442126 5 38469-00005/3821267 .4 COMPLAINT FOR DAMAGES 1 2 a J 4 5 6 7 8 9 10 11 t2 13 T4 15 T6 t7 18 19 20 2l 22 23 24 25 26 27 28 investments in high tech and real estate titled solely in his name but acquired during marriage. B. Defendants' Representation of Plaintiff and the Family Company that She Manages, MyDream 24. Plaintiff studied computer science at Stanford. Beginning in May 2003 with the birth of their first child, Plaintiff became adevoted mother to the couple's three children, acting as the primary and sometimes exclusive parent. Plaintiff thereafter put her own educational goals and entrepreneurial desires on hold to work as an e-commerce consultant in order to support the family since Hassan was not wealthy when the couple met and married. 25. In20l1, Plaintiff repeatedly discussed with Lion her plans for an educational software and game company that was originally known as socialvilla, Inc. and later become known as MyDream Interactive ("MyDream"). Before the company was incorporated or retained MORzuSON & FOERSTER as its corporate counsel, Plaintiff conveyed confidential information in these communications to Lion and she received personal legal counsel and advice from Lion with respect to the not-yet formed entity, including with respect to her relationship and involvement with the not-yet-formed entity, such as structure, ownership, and financing. 26. Lion formed MyDream for Plaintiff on June 23,2011, before Plaintiff engaged MORzuSON & FOERSTER as MyDream's counsel. Lion sent Plaintiff an engagement letter for MyDream, dated June24,20lI,which she did not sign and date until July 15,2011. Plaintiff and Lion had numerous attorney-client conversations between June 23 , 20 1 1 and July 1 5, 20Il . 27. Defendants represented MyDream for years, with Lion serving as an officer. MyDream terminated Defendants as its counsel in March 2016, over a year after Plaintiff filed the dissolution proceeding. Hassan is claiming in the dissolution proceeding that Plaintiff breached her fiduciary duties by using his separate property to fund MyDream, causing him $1,000,000 in damages. This very subject matter was discussed by Plaintiff with Lion. 28. Both Plaintiff and Hassan have regarded MORRISON & FOERSTER-and, specifically, Lion-as their personal counsel. Indeed, when Plaintiff told Hassan that she was interested in starting MyDream, he recommended that she contact Lion, telling her that he'ois our family lawyer for all our businesses'" Y3:442126 6 3 8469-00005/3 821267 ,4 COMPLAINT FOR DAMAGES 1 2 J 4 5 6 7 8 9 10 11 I2 13 T4 15 t6 T7 18 t9 20 2l 22 23 24 25 26 27 28 C. Defendantst Representation of the ooFamily Companies" 29. While Plaintiff and Hassan were married and before they separated, Defendants represented many of the family companies formed during that marriage that are community property, most of which Hassan managed for the community. In doing so, Defendants have represented the interests of both Plaintiff and Hassan in those companies. Lion was the point person on these engagements, and he became a close friend of Hassan. D. DefendanttsRepresentationofHassan-AffiliatedDeponents 30. In the dissolution action, MORRISON & FOERSTER has represented at least six deponents affiliated with Hassan and/or community entities that Hassan manages, including a former officer of Suitable Technologies. 31. This representation was adverse to Plaintiff. E. Defendant's Representation of Hassan in the Dissolution Action and Subsequent Disqualification 32. On March 22,z}l9,Defendant MORzuSON & FOERSTER-and specifically litigator Bryan Wilson ("Wilson")-associated in as counsel of record for Hassan in the dissolution proceeding, in which Plaintiff and Hassan are disputing the character and value of numerous companies that Defendants have represented and still represent. 33. Plaintiff requested that Defendant voluntarily withdraw from its representation of Hassan in the dissolution action. Defendant refused to withdraw, forcing Plaintiff to move to disqualiff Defendant as Hassan's counsel. 34. In the dissolution proceeding, the family law court ruled on August 16,20t9 that Defendant had aconflict of interest in representing Hassan and granted Plaintifls request. 35. On August 28,2019, the Court issued an order that Defendant not represent Hassan or assist him in any way in connection with the dissolution proceeding. F. Defendants Continued to Represent Family Companies After Being Disqualified' including Suitable Technologies 36. Even after being disqualified-and being ordered not to assist Hassan in connection with the dissolution action-Defendants have continued to advise Hassan in the dissolution action Y3:442126 7 3 8469-00005/3 821267 .4 COMPLAINT FOR DAMAGES 1 ) J 4 5 6 7 8 9 10 11 I2 13 I4 15 16 I7 18 t9 20 2t 22 23 24 25 26 27 28 and to represent the family companies in a way that has assisted Hassan in the dissolution action to Plaintiff s great detriment. One conspicuous example is Suitable Technologies. 37. During the marriage, Hassan founded Suitable Technologies, a community asset that became a groundbreaking telepresence robotics company. Hassan invested, on behalf of the community, almost $100 million in the company, and he devoted nearly full time to the company. 38. MORzuSON & FOERSTER has long advised Suitable Technologies. For example, Wilson advised Suitable Technologies concerning intellectual property matters in2014 and conferred about transactions for Suitable in 2015. Lion has served as Suitable Technologies' General Counsel. 39. After being disqualified, Defendants continued to advise Suitable Technologies, including in connection with the sale of its assets to a Danish company, Blue Ocean and its related entities ("Blue Ocean"). Lion led Defendant's team in connection with this transaction. 40. On August 22,20l9-after Defendants had been disqualified-Suitable Technologies and Blue Ocean executed the Asset Purchase Agreement ("APA") for this transaction. Under the APA, Suitable Technologies agreed to sell its assets to Blue Ocean at a fire-sale price of $400,000. Defendants structured the deal and handled all the negotiations. 4I. Knowing that Plaintiff opposed the deal on the grounds that, among other things, it was a giveaway of Suitable Technologies' assets, Defendants crafted the APA in a way that made it difficult for Plaintiff to challenge the sale. For example, Defendants inserted a highly unusual "put option" to the APA, which purported to exclude Suitable Technologies' patents from the transaction but gave Hassan the right to unilaterally transfer the patents to Blue Ocean for no additional consideration once the transaction concluded. Defendants also included a Delaware choice of law provision, making it more difficult for Plaintiff to challenge the sale in the California dissolution action. 42. Defendants kept Blue Ocean's counsel apprised of developments in the dissolution action (even though they were prohibited from representing or assisting Hassan in that action). 43. Hassan sought approval of the sale in the dissolution action (as required under the California Family Code) and, based on the way Defendants crafted the APA, argued that Plaintiff Y3:442126 8 38469-00005/3821267 .4 COMPLAINT FOR DAMAGES 1 2 J 4 5 6 7 8 9 10 11 t2 13 t4 l5 t6 t7 18 t9 20 2I 22 23 24 25 26 27 28 could not challenge the fairness and reasonableness of the sale price in that action. 44. Hassan's position forced Plaintiff to file a derivative action in the Delaware Court of Chancery on November 5, 2019 onbehalf of Suitable Technologies' shareholders, alleging that Hassan had breached his fiduciary duties to Suitable Technologies' shareholders by trying to dispose of Suitable Technologies' assets for an unfair price and through an improper sales process. 45. In the Delaware Court of Chancery action, Plaintiff retained Delaware counsel and designated and submitted reports relating to the value of Suitable Technologies' assets from five experts. Plaintiff also engaged in extensive discovery, taking and defending expert and other depositions. 46. The Delaware Court of Chancery, as well as the Court in the dissolution action, declined to approve the sale. The Delaware Court of Chancery found that: (1) the sale was motivated by Mr. Hassan's "personal" desires not the best interest of Suitable Technologies; (2) the sales process Mr. Hassan implemented is oonot one that inspires confidence. It's one that inspires concern."; (3) "in an orderly sale that was not driven by the idiosyncratic interests of Mr. Hassan, much more value could have been recognized"; and (4) "there's good reason to believe that Suitable Technologies' asset value approximates or even exceeds $100 million." 47. In connection with thwarting the sale, Plaintiff incurred more than $1.1 million in professional fees that she was unable to recover in the dissolution action. G. Defendants' Conduct is Part of Larger Pattern and Practice of Acting Against Plaintiff s Interests 48. Defendants' conduct relating to Suitable Technologies is not an isolated incident but instead part of a larger pattern and practice of Defendants structuring, negotiating, and documenting numerous transactions designed to deprive Plaintiff of her interest in community property or designed to dissipate the value in those companies to the detriment of Plaintiff, or having the effect of doing one or the other. Defendants thereby assisted Hassan in preventing Plaintiff from obtaining her share of community property companies, their assets, their intellectual property, or their ownership, or in devaluing or dissipating the assets of those companies, all in direct breach of Defendants' fiduciary duties as described above. \3:442126 9 3 8469-00005/3 821267 .4 COMPLAINT FOR DAMAGES 1 2 J 4 5 6 7 8 9 10 11 t2 I3 I4 15 t6 T7 18 I9 20 2t 22 23 24 25 26 27 28 49. For example, according to a February 13,2016 article in Business Insider, Hassan founded a company called Willow Garage, which became a groundbreaking robotics company, and was quoted as having put $80 million into that company. According to that article, Willow Garage's existence mostly coincided with the time frame of Hassan's and Plaintiff s maniage. By virtue of Hassan's putting millions of dollars into that company and Hassan's devoting his efforts to it during the marriage, Willow Garage, or at least Hassan's ownership in Willow Garage, presumptively is a community asset. Willow Garage became an unrivaled incubator of modern robotics engineering and employed much of the robotics' industry's top talent, according to the article. It created a common Robot Operating System, known as ROS technology, widely used in the robotics industry. Hassan allowed certain Willow Garage roboticists and engineers to spin off companies from Willow Garage, as described in the article, and those companies have generated commercial value from the intellectual property of Willow Garage. Some of those spin-offs have since been acquired by Google, according to the article. Willow Garage did not realize a commercial benefit from the unique intellectual property it created that according to the article now permeates a vast swath of a burgeoning robotics industry. 50. Willow Garage was one of the family companies for which Defendants structured, negotiated and documented transactions. Defendants facilitated the spin-off of companies from Willow Garage that depleted Willow Garage, a community asset, of its valuable intellectual property in robotics and effectively gave that value away to companies in which Plaintiff may be unable to establish ownership. FIRST CAUSE OF ACTION (For Breach of Fiduciary Duty Against All Defendants) 51. Plaintiffrefers to paragraphs 1 through 50 and incorporates each ofthose paragraphs as if set forth in full at this point. 52. Defendants owed and continue to owe fiduciary duties to Plaintiff by reason of their representation of Plaintiff and MyDream in connection with the organization, financing, and structuring of MyDream, and by reason of Defendants' representation of the numerous family companies described above in which Plaintiff has, or claims, a community property interest. Y3:442t26 10 3 8469-00005/3 82126'1 .4 COMPLAINT FOR DAMAGES I 2 J 4 5 6 7 8 9 10 11 t2 13 t4 15 I6 T7 18 I9 20 2l 22 23 24 25 26 27 28 Defendants' fiduciary duties encompass both (a) a duty of loyalty that among other things requires that Defendants not take positions or engage in conduct adverse to the interests of Plaintiff and (b) a duty not to engage on any matters in which Defendants can use confidential information obtained from its representation of Plaintiff on behalf of another client against Plaintiff. 53. The fiduciary duties Defendants owed and continue to owe to Plaintiff as described above include, but are not limited to, the following: a) A duty to avoid representing another client in litigation where the other client is taking a position adverse to Plaintifi b) A duty to avoid representing one spouse against the other spouse in connection with disputes over businesses represented by Defendants that the spouses co-own or that are community property; c) A duty to avoid participating in the structuring of transactions relating to businesses that are community property so as to benefit one co-owning spouse (Hassan) to the detriment of the other co-owning spouse (Plaintiff); d) A duty to avoid providing material assistance to one co-owning spouse in depleting or devaluing community assets to the detriment of the other co-owning spouse; e) A duty to avoid undertaking representation of one spouse on matters relating to which Defendants have confidential information from the other spouse when the spouses are adverse concerning those matters, 54. Defendants breached their fiduciary duties to Plaintiff described above by continually displaying unwavering allegiance to Hassan in many contexts at the expense of or to the detriment of Plaintiff. Defendants have breached those fiduciary duties in many particulars as described below. 55. Defendants have breached their fiduciary duties to Plaintiff by, among other actions, the following conduct: a) Representing Hassan in the dissolution proceedings against Plaintiff when Hassan was asserting claims adverse to Plaintiff regarding ownership and character of MyDream and many of the other family companies Hassan founded, mostly with Y3:442126 11 38469-00005/3821267 .4 COMPLAINT FOR DAMAGES 1 2 J 4 5 6 7 8 9 10 11 T2 13 T4 15 T6 I7 18 t9 20 2l 22 23 24 25 26 27 28 Defendants' assistance, that are community property. b) Structuring a sale of Suitable Technologies' assets for a mere $400,000 in a way that made it difficult for Plaintiff to challenge the sale, thereby forcing Plaintiff to incur more than $ I .1 million in legal and other fees to thwart the sale that she was unable to recover in the dissolution action. c) Facilitating the spin-off of entities from companies founded by Hassan during the marriage that depleted one or more community assets of valuable intellectual property in robotics and effectively gave that value away to entities in which Plaintiff may be unable to establish ownership. d) Assisting Hassan in the usurpation of highly valuable real properties from the community to Hassan's separate property. e) Forming and assisting one or more separate property companies to usurp investment opportunities traditionally afforded to the community, all of which diluted Plaintiff s interest in community assets or deprived her of her community interest in those investments altogether. 56. Defendants played an instrumental role in disposing of community assets for less than their fair value, effecting the spin-off of entities from community companies and community real estate development projects that depleted those community companies and projects of value, and enabling ostensibly separate property companies to usurp community investment opportunities. All that activity was part of a pattern and practice of injuring PlaintifPs property and infringing on her rights by depriving her of her interest in community assets, or doing so indirectly by eliminating the value of those assets, in violation of Defendants' fiduciary duties to Plaintiff. 57. Plaintiff only learned within the last two years of the facts showing Defendants' systematic and continuing involvement in trying to circumvent her interests by effectuating transactions that depleted or devalued community assets. Plaintiff had no way to know of Defendants' instrumental role in the transactions referred to above until Defendant MORRISON & FOERSTER undertook to represent Hassan in the dissolution litigation in March, 2019, Hassan produced documents relating to the APA in late2019, and Hassan produced other documents in Y3:442r26 12 3 8469-00005/3 821267 .4 COMPLAINT FOR DAMAGES I 2 J 4 5 6 7 8 9 10 11 T2 13 t4 15 I6 t7 18 t9 20 2t 22 23 24 25 26 27 28 early 2020 showing Defendants' continued involvement in other transactions involved in the dissolution proceeding. 58. As a direct and proximate result of Defendants' breach of fiduciary duties as set forth above, Plaintiff has suffered damages in excess of $ 1 ,1 00,000 consisting generally of attorney and other fees she has incurred and lost value of community assets, all in an amount to be proven at the time of trial. 59. The conduct of Defendants as described above was committed with the intent to vex, injure, and annoy Plaintiff, and in conscious disregard of PlaintifPs rights, all for the purpose of enabling Defendants to earn massive fees or compensation at the expense of Plaintiff s interest in the community and without consideration of conflicts of interest and the integrity of the profession. The conduct described above was committed by managing agents of Defendant MORRISON & FOERSTER such that it should be deemed conduct of that Defendant, or was authorized or ratified by the highest levels of that Defendant's management. Accordingly, Plaintiff is entitled to recover punitive or exemplary damages from Defendants. SECOND CAUSE OF ACTIONO. (For Intentional Interference With Prospective Economic Advantage Against All Defendants) 60. Plaintiffrefers to paragraphs 1 through 59, and incorporates each ofthose paragraphs as if set forth in full at this point. 6t. At all times mentioned herein, Plaintiff has had an economic relationship with Hassan that was likely to benefit Plaintiff, in that Plaintiff as a member of the marital community directly co-owned interests in the numerous companies Hassan established during the marriage before separation, and thereafter as progeny of those companies. Due to Plaintiff s dissolution proceedings with Hassan, the economic aspect of her relationship with him promised to provide her in the future with the considerable benefit of money and/or assets equivalent to half of the value of the community assets as well as future appreciation of those community assets if managed in accordance with the fiduciary duties of stewardship imposed on Hassan under the Family Code as manager of the community assets. The economic health and profitability of the many entities that have spun off from community assets and the highly successful real estate developments originating Y3:442126 13 3 8469-00005/3821267 .4 COMPLAINT FOR DAMAGES 1 2 J 4 5 6 7 8 9 10 11 I2 13 I4 15 t6 t7 18 t9 20 2I 22 23 24 25 26 27 28 as community assets, for example, demonstrate the likely economic benefit Plaintiff stood to obtain by retention and proper management of community assets. 62. At all times mentioned herein, Defendants, and each MORzuSON & FOERSTER partner representing and advising Hassan and the companies he established, knew Plaintiff was married to Hassan, knew the couple was engaged in dissolution proceedings, knew the community had valuable assets, and knew that retention, preservation and proper management of those assets would yield economic benefit to Plaintiff. Defendants thus had knowledge of the advantageous economic relationship between Plaintiff and Hassan. 63. By their conduct as described above, Defendants intentionally and wrongfully engaged in conduct designed to disrupt, or which Defendants knew was substantially certain to disrupt, the advantageous economic relationship between Plaintiff and Hassan by assisting Hassan in the transfer, giveaway, mismanagement, depletion, dilution, and devaluation of the community assets that would provide the economic benefit Plaintiff stood to obtain from her relationship with Hassan. 64, Defendants' conduct actually did disrupt the economic relationship Plaintiff had with Hassan. Defendants orchestrated, structured, assisted in, and facilitated (a) an APA for Suitable Technologies that would have transferred at least ten millions dollars' worth of patents out of the community for virtually no consideration, resulting in a cost of approximately $1,100,000 to Plaintiff to stop that dissipation; (b) formation of numerous spin-offs of community companies and transfer of valuable patent assets to those spin-offs for no appreciable consideration realized by the community; (c) transfer of valuable real estate development projects from the community into entities created after the marital separation; (d) usurpation of investment opportunities of the community or community companies that deprived Plaintiff of her share of the profits on those investments; and (e) the sale of community assets at less than their fair market value, all of which had the effect of impairing management of community assets for the benefit of the community and thereby disrupting the economic relationship between Plaintiff and Hassan. 65. By reason of Defendants' former representation of MyDream until at least ayear after the dissolution proceeding was underway, and of Plaintiff before the organization of My \3:442126 t4 3 8469-00005/3 82126',1 .4 COMPLAINT FOR DAMAGES 1 2 J 4 5 6 7 8 9 10 11 I2 13 t4 15 T6 t7 18 t9 20 2I 22 23 24 25 26 27 28 Dream; Defendants' obtaining confidential information about MyDream, including about MyDream's formation, financing and capital structure, which could be relevant in connection with Hassan's claim in the dissolution proceeding that Plaintiff used separate property to form MyDream; and Defendants' representation of the various family companies that are part of the community, Defendants owe Plaintiff independent fiduciary duties, duties of loyalty, and a legal duty of their own not to assist one spouse in family companies they represent against the other spouse on matters relating to those companies. 66. Defendants' conduct as described herein was independently wrongful in that it breached Defendants' fiduciary duties to Plaintiff as a former client and as a current member of the community that owned several of the companies, or substantial interests in several of the companies, that Defendants represented. Additionally, in violation of conflict-of-interest rules established by California case law and the order of the Court in the dissolution case, Defendants acted on behalf of one spouse owning all or a portion of the companies Defendants represented and against the interest of the other spouse owning all or a portion of the companies Defendants represented. Violating conflict-of-interest rules governing their professional conduct, and violating a court order, also make Defendants' conduct as described herein independently wrongful. 67. As a direct and proximate result of Defendants' intentional interference with plaintiff s advantageous economic relationship with Hassan as set forth above, Plaintiff has suffered damages in excess of $ 1,100,000 consisting generally of attorney and other fees and costs she has incurred and lost value of community assets, all in an amount to be proven at the time of trial. 68. The conduct of Defendants as described above was committed with the intent to vex, injure, and annoy Plaintiff, and in conscious disregard of Plaintiff s rights, all for the purpose of enabling Defendants to earn massive fees at the expense of PlaintifPs interest in the community and without consideration of conflicts of interest and the integrity of the profession. The conduct described above was committed by managing agents of Defendant MORRISON & FOERSTER such that it should be deemed conduct of that Defendant, or was authorized or ratified by the highest levels of that Defendant's management. Accordingly, Plaintiff is entitled to recover punitive or exemplary damages from Defendants. Y3:442126 15 3 8469-00005/3821267 .4 COMPLAINT FOR DAMAGES 1 2 J 4 5 6 7 8 9 10 11 T2 13 I4 15 t6 T7 18 t9 20 2l 22 23 24 25 26 27 28 THIRD CAUSE OF ACTION (For Negligent Interference With Prospective Economic Advantage Against All Defendants) 69. Plaintiff refers to paragraphs t through 61, and incorporates each of those paragraphs as if set forth in full at this point. 70. At all times mentioned herein, Defendants, and each MORRISON & FOERSTER partner representing and advising Hassan and the companies identified above, knew or should have known Plaintiff was married to Hassan, knew or should have known the couple was engaged in dissolution proceedings, knew or should have known the community had valuable assets, and knew or should have known that retention, preservation and proper management of those assets would yield economic benefit to Plaintiff. Defendants thus knew or should have known of the advantageous economic relationship between Plaintiff and Hassan. 71. At all times mentioned herein, Defendants, and each MORRISON & FOERSTER partner representing and advising Hassan and the companies identified above, know or should have known that Plaintiff s advantageous economic relationship with Hassan would be disrupted if Defendants failed to act with reasonable care in organizing entities and structuring transactions that impacted on the character and value of community property assets. 72. In committing the acts described above, Defendants failed to exercise reasonable care by assisting Hassan in the transfer, giveaway, mismanagement, depletion, dilution, and devaluation of the community assets that would provide the economic benefit Plaintiff stood to obtain from her relationship with Hassan, and thus wrongfully engaged in conduct Defendants knew or should have known would disrupt, or was substantially certain to disrupt, the advantageous economic relationship between Plaintiff and Hassan. 73. Defendants' conduct actually did disrupt the economic relationship Plaintiff had with Hassan. Defendants orchestrated, structured, assisted in, and facilitated (a) an APA for Suitable Technologies that would have transferred at least ten million dollars' worth of patents out of the community for virtually no consideration, resulting in a cost of approximately $1,100,000 to Plaintiff; (b) formation of numerous spin-offs of community companies and transfer of valuable patent assets to those spin-offs for no appreciable consideration to the community or any community Y3:442126 t6 38469-00005/382126',1 .4 COMPLAINT FOR DAMAGBS 1 2 a J 4 5 6 7 8 9 10 11 I2 13 I4 15 I6 l7 18 I9 20 2l 22 23 24 25 26 27 28 companies; (c) the usurpation of highly valuable real properties to be developed from the community to Hassan's separate property; (d) usurpation of investment opportunities of community companies that deprived Plaintiff of her share of the profits on those investments; and (e) the sale of community assets for less than fair market value, all of which had the effect of impairing management of community assets for the benefit of the community and thereby disrupting the economic relationship between Plaintiff and Hassan. 74. By reason of Defendants' former representation of MyDream until at least ayear after the dissolution proceeding was underway, and of Plaintiff before the organization of My Dream; Defendants' obtaining confidential information about MyDream, including about its formation, financing and capital structure, which could be relevant in connection with Hassan's claim in the dissolution proceeding that Plaintiff used separate property to form MyDream; and Defendants' representation of the various family companies that are part of the community as described above, Defendants owe Plaintiff independent fiduciary duties, duties of loyalty, and a legal duty of their own not to assist one spouse in family companies they represent against the other spouse on matters relating to those companies. 75. Defendants' conduct as described herein was independently wrongful in that it breached Defendants' fiduciary duties to Plaintiff as a former client and as a current member of the community that owned several of the companies, or substantial interests in several of the companies, that Defendants represented. Additionally, in violation of conflict-of-interest rules established by California case law and in violation of the Court order rendered in the dissolution proceeding, Defendants acted on behalf of one spouse owning all or a portion of the companies Defendants represented and against the interest of the other spouse owning all or a portion of the companies Defendants represented. Violating conflict-of-interest rules governing its professional conduct and violating a Court order also make Defendants' conduct as described herein independently wrongful. 76. As a direct and proximate result of Defendants' negligent interference with PlaintifPs advantageous economic relationship with Hassan as set forth above, Plaintiff has suffered damages in excess of $1,100,000 consisting generally of attorney and other fees and costs she has incurred and lost value of community assets, all in an amount to be proven at the time of trial. Y3:442126 l7 3 8469-00005/3 821267 .4 COMPLAINT FOR DAMAGES 1 2 J 4 5 6 7 8 9 10 11 r2 13 I4 15 t6 I7 18 T9 20 2t 22 23 24 25 26 27 28 WHEREFORE, Plaintiff prays for judgment against Defendants, and against any DOE defendants, as follows : 1. For compensatory damages in an amount to be proven at the time of trial, but in excess of $1,100,000. 2. For punitive or exemplary damages in an amount to be determined at the time of trial. 3. For costs of suit incurred herein, including attorney fees if appropriate. 4. For such other and further relief as the Court deems just and proper. DEMAND F'OR JURY TRIAL Plaintiff hereby demands trial by jury Dated: JuIy 28,2020 ENGSTROM, LIPSCOMB & LACK n6ltu / b.M" WALTE{J. LACK STEVEN C. SHUMAN Attorneys for Plaintiff Y3:442126 18 38469-00005/3821267,4 COMPLAINT FOR DAMAGES EXHIBIT E \DOO‘QONUI-bbJNa-n NNNNNNNNNr-‘r-Ih-Ip-n-np-np-ap-nu-iu-a OOHmLh-phLoJNP-‘OwOOHJQLh-bb-INHO '1 IE5Lu JUL -_ 7 2021 6 l . ( \Céeue €5i6‘ Supedogéggwgtgfosgfla Clara ofide" _ ed ' BY $3 DEPUTY dew“ Q&W”g .0'0 SUPERIOR COURT OF CALIFORNIA COUNTY OF SANTA CLARA ALLISON HUYNH, Case N0. 20CV368776 Plaintiff» ORDER RE: DEMURRER T0 COMPLAINTVS. MORRISON & FORESTER LLP; PAUL L. LION III; and DOES 1-20, inclusive, Defendants. The Demurrer to the Complaint by Defendants Paul L. Lion III and Morrison & Foerster LLP came on for hearing before the Honorable Joseph H. Huber 0n June 29, 2021, at 9:00 am. in Department 19. The matter having been submitted, the Court finds and orders as follows: This is an action for professional negligence brought by Plaintiff Allison Huynh (“Plaintiff”) against Defendants Paul L. Lion III and Morrison & Foerster LLP (“Defendants”) based on Defendants’ former representation 0f Plaintiff, a company formed by Plaintiff, and companies formed by Plaintiff‘s husband Scott Hassan (“Hassan”). Defendant Lion is an attorney employed by Morrison & Foerster. Plaintiff and Hassan are parties in a currently 1 ORDER RE: DEMURRER TO COMPLAINT \DOONJONLh-b-UJNH NNNNNNNNNu-In-Ab-At-n-nr-nr-AHHr-h OONJONLIl-bwml-‘OWWKJONM-PWNHC ongoing marital dissolution action, In re Marriage ofAIlison Huynh and Scott Hassan, 2015-6- FL-013853. The original and still operative Complaint in this action was filed 0n July 28, 2020. The Complaint states three causes of action, each alleged against both Defendants: 1) Breach of Fiduciary Duty; 2) Intentional Interference with Prospective Economic Advantage, and; 3) Negligent Interference with Prospective Economic Advantage. Defendants now demurrer to. all three causes 0f action in the Complaint on the grounds that they each “fail to state a claim upon which relief can be granted, are barred by the state of limitations, and must be brought, if at all, as derivative claims.” (Notice 0f Demurrer at p. 1 :7-8.) Requests for Judicial Notice “Judicial notice may not be taken of any matter unless authorized or required by law.” (Evidence Code §450.) A precondition t0 judicial notice in either its permissive or mandatory form is that the matter to be noticed be relevant t0 the material issue before the Court. (Silverado Modjeska Recreation and Park Dist. v. County ofOrange (201 1) 197 Ca1.App.4th 282, 307, citing People v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 422, fn. 2.) Both sides here have submitted requests for judicial notice. //// //// M! 2 ORDER RE: DEMURRER T0 COMPLAINT \DMQQM-b-UJNH NMNNNNNNNr-tr-tr-n-Ir-IHHHHH OOHONM-hbJN-‘OGODQQMLDJNHO 1) Defendants’ Request In support 0ftheir demurrer Defendants ask the Court to takejudicial notice of 8 documents, separately submitted as exhibits 1-8. Defendants assert that notice can be taken of these documents pursuant to Evidence Code §§452(a), (c), and (d). Exhibit 1 is a c0py of excerpts from Plaintiff’s request to disqualify Morrison & Foerster as coufisel in the marital dissolution action filed on June 28, 2019. Exhibit 2 is a copy of a brief excerpt from the transcript of a December 13, 2019 court hearing 0n a motion for preliminary injunction brought by Plaintiff in a related Delaware action, Huynh v. Hassan, C.A. No. 2019- 0893-JTL (“Delaware Action”). The request for preliminary injunction was denied. Exhibit 3 is a copy of excerpts from a bankruptcy petition filed in the federal bankruptcy court for the District 0f Delaware on February 26, 2020 in another related action, In re Suitable Technologies, Inc., Case No. 20-10432 (MFW) (“Bankruptcy Action”). Exhibit 4 is a copy of excerpts from an April 20, 2020 order issued in the Bankruptcy Action. Exhibit 5 is a copy of excerpts from a Notice of Objection to Proof of Claim by the debtor in the Bankruptcy Action on September 30, 2020. The debtor objected to a claim made by Allison Huynh. Exhibit 6 is a copy 0f excerpts from an August 20, 2020 Order issued in the Bankruptcy Action. Exhibit 7 consists of copies of further excerpts from the same order. Exhibit 8 is a copy 0f a Notice of Withdrawal 0f Claim and Reservation of Rights filed by Allison Huynh in the Bankruptcy Action 0n October 13, 2020. Notice of exhibit I is GRANTED in part and DENIED in pan. Notice is granted, pursuant t0 Evidence Code §452(d) only, of the existence and filing date 0f the request to 3 ORDER RE: DEMURRER TO COMPLAINT \DOONJQm-h-UJM- NMNMMNNNNHn-nr-ur-Ip-An-nn-nu-nu-ap-a OON-IONUI-IEDJNHOWOO‘QQM-PDJN-‘O disqualify counsel. Notice cannot be and is not taken of the contents of the declarations from Plaintiff‘s Counsel Pierce O’Donnell and Plaintiff attached to the request, or arguments in the points and authorities dependent Upon the contents of the attached declarations. Notice 0f the contents of these documents is DENIED as declarations cannot bejudicially noticed as to the truth 0f their contents. (See 0h v. Teachers Ins. & Annuity Assn. ofAmerica (2020) 53 Cal.App.5th 71 , 79-81 [truth of contents of court records cannot be judicially noticed]; Intengcm v. BAC Home Loans Servicing LP (2013) 214 Cal.App.4th 1047, 1057 [court may take judicial notice 0f existence of declaration but not 0f facts asserted in it]; Bach v. McNeIis (1989) 207 Cal.App.3d 852, 86S [court may not notice the truth of declarations or affidavits filed in court proceedings); Garcia v. Sterling (1985) 176 Ca1.App.3d 17, 22 [“Although the existence 0f statements contained in a deposition transcript filed as part of the court record can be judicially noticed, their truth is not subject to judicial notice.”]) Notice of exhibits 2, 4, 6 and 7 is GRANTED pursuant to Evidence Code §452(c) only. Notice of exhibits 3, 5 and 8 is GRANTED pursuant to Evidence Code §452(d) only. These documents can only be noticed as to their existence and filing date and not the truth of their contents. With the Reply Defendants have submitted a request forjudicial notice of yet another document, a copy of a stipulation and order from the marital dissolution action dated September 11, 2017, attached as (a second) exhibit 1. While it has little relevance to the material issues before the Court notice is GRANTED pursuant to Evidence Code §452(c) only. 4 ORDER RE: DEMURRER TO COMPLAINT \OOONJONU'I-DUJNH NNNNNNNNNHI-‘i-‘I-‘I-Hr-AHHr-n OOHONLh-DMNP-‘OKDOOHJQLh-me-‘O 2) Plaintiff’s Request With her opposition to the demurrer Plaintiff has submitted a request for judicial notice of two documents, submitted as exhibits A and B. Plaintiff asserts that notice can be granted pursuant to Evidence Code §§452(c), (d), (g) and (h). (See Request at p. 2:4.) As an initial matter the Court notes that §452(g) and (h) have no application to the material submitted by Plaintiff. Exhibit A is another excerpt from the same request to disqualify counsel filed by Plaintiff in the marital dissolution action on June 28, 2019 “specifically including at pp. 16-17 Declaration of Allison Huynh in support of Petitioner’s request to disqualify counsel . . .” (Request at p. 2:7-8.) Exhibit B consists 0f a very brief excerpt from the transcript of the August 16, 2019 court hearing in the marital dissolution action on the request to disqualify Morrison & Foerster and the resulting order. Notice of Exhibit A is GRANTED pursuant t0 Evidence Code §452(d) only and only as to the existence and filing date of the request to disqualify counsel. This request is redundant of exhibit 1 to Defendant’s request and the contents of the declarations and the memorandum of points and authorities may not be judicially noticed 0r considered in ruling on a demurrer. While it has little relevance to the material issues before the Court (the fact of the disqualification being undisputed), notice 0f exhibit B is GRANTED solely pursuant to Evidence Code §452(c). Demurrer to the Complaint 5 ORDER RE: DEMURRER TO COMPLAINT \OOOHIONLh-PUJNu-A NNNNNNNNNr-Ir-Ir-nt-ur-Ar-tu-IHv-tr-t OO‘JQM-PUJNHowooMJONm-b-WNb-O The Court in ruling on a demurrer treats it “as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact 0r law.” (Piccinim' v. Cal. Emergency Management Agency (2014) 226 Cal.App.4th 685, 688, citing Blank v. Kirwan (1985) 39 Cal.3d 31 1, 318.) “A demurrer tests only the legal sufficiency 0f the pleading. It admits the truth 0f all material factual allegations in the complaint; the question of plaintiff" s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court.” (Committee 0n ChiIdren ’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213-214.) In ruling 0n a demurrer or motion to strike the Court considers only the pleading under attack, any attached exhibits (part 0f the “face of the pleading”) and any facts or documents for which judicial notice is properly requested and may be granted. The Court cannot consider extrinsic evidence in ruling on a demurrer or motion to strike. 1) Demurrer to all three claims based on CCP 8340.6 CCP §340.6(a) states in pertinent pan that an action against an attorney for a “wrongful act 0r omission, other than for actual fraud, arising in the performance 0f professional services shall be commenced within one year after the plaintiff discovers, or through the use of reasonable diligence should have discovered, the facts constituting the wrongful act or omission, or four years from the date 0r the wrongful act or omission, whichever occurs first.” The running of the statute shall be tolled during any of the following, “(1) The plaintiff has not sustained actual injury; (2) The attorney continues t0 represent the plaintiff regarding the specific subject matter in which the alleged wrongful act or omission occurred; (3) The attorney willfully 6 ORDER RE: DEMURRER TO COMPLAINT \DOONJGNUI-b-LLJNH NMNNNNMNNHr-tr-AHHHHHr-IH OOKJONMJEMNHOWOONJQM-bMN-‘O conceals the wrongful act 0r omission occurred, and; (4) The plaintiff is under a legal 0r physical disability which restricts the plaintiff’s ability to commence legal action.” The Supreme Court in Lee v. Hanley (2015) 61 Cal.4th 1225, 1229 held that “section 340.6(a) applies to a claim when the merits 0f the claim will necessarily depend upon proof that an attorney violated a professional obligation-that is, an obligation the attorney has by virtue 0f being an attomcy-in the course of firoviding professional services. Such claims brought more than one year after the plaintiff discovers or through reasonable diligence should have discovered the facts underlying the claim are time-barred by section 340.6(a) unless the plaintiff alleged actual fraud.” (Emphasis in original.) The Court later stated that “section 340.6(a)’s time bar applies to claims whose merits necessarily depend upon proof that an attorney violated a professional obligation in the course 0f providing professional services. in this context, a ‘professional obligation’ is an obligation that an attorney has by virtue of being an attorney, such asfiducz'aty obligations, the obligation t0 perform competently, the obligation t0 perform the services contemplated in a legal services contract into which an attorney has entered, and the obligations embodied in the Rules of Professional Conduct.” (Id. at pp. 123 6-1237, Court’s emphasis.) CCP §340.6 clearly applies to all three causes 0f action alleged against Defendants here as they all depend upon obligations Defendants had “by virtue of” being attorneys. The one-year limitations period in §340.6 is triggered when the client discovers, or through the use 0f reasonable diligence should have discovered, the facts constituting the wrongful act 0r omission and suffers actual injury. (Peregrine Funding, Inc. v. Sheppard, MuIlin, Richter & Hampton, 7 ORDER RE: DEMURRER TO COMPLAINT KOOOMJQUI-bmtq-n NNNNNNNNNHt-It-Ip-nu-nr-Iu-nn-n-nr-n OONJONM-h-UJNHOOOOHJQU'I-h-DJNHO LLP (2005) 133 Cal.App.4th 658, 685; Levin v. Graham & James (1995) 37 Cal.App.4th 798, 805; Pompilio v. Kosmo (1995) 39 Cal.App.4th 1324, 1328 [“discovery of facts essential t0 malpractice and the suffering of actual harm from the malpractice establish a cause 0f action and start the statute 0f limitations”].) “Actual injury” occurs “when the plaintiff suffers any loss 0r injury IegaIIy cognizable as damages in a legal malpractice action based 0n the asserted errors or omissions.” (Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739, 743. Court’s emphasis.) “An existing injury is not contingent or speculative simply because future events may affect its permanency or the amount 0f monetary damages eventually incurred.” (1d. at p. 754.) Defendants’ demurrer to all three causes 0f action 0n statute of limitations grounds is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND. The Complaint (at 1]55(a)) alleges that (among other things) Defendants’ representation of Hassan in the dissolution action was in and of itself a breach of fiduciary duty. “The elements of a cause of action for breach of fiduciary duty are the existence of a fiduciary relationship, its breach, and damage proximately caused by the breach.” (Knox v. Dean (2012) 205 Cal App 4th 417, 432.) The Complaint thus plainly alleges that Plaintiff was harmed by Defendants’ representation of Hassan in the dissolution action, otherwise there would be no basis for alleging that this action was a breach 0f fiduciary duty. As a party to the litigation, Plaintiff was necessarily aware of Defendant Morrison & Forester associating in as counsel for Hassan in the dissolution action as soon as it occurred on March 22, 2019. (See Complaint at 1132.) Both the Complaint itself (at 11152-57) and the judicially noticed material (Defendants’ exhibit 1 and 8 ORDER RE: DEMURRER TO COMPLAINT KOOONJONU'I-PUJNH MNNNNNNNNr-b-Ib-‘I-IHr-HHHH OOKJONM-fibJNHOKDOOQQM-DDJNHO Plaintiff’s exhibit A) establish that Plaintiff determined that this representation injured her, due t0 Defendant Paul Lion’s knowledge of her personal business and the community business, and "u, based on this belief of injury filed her request for Morrison & Forester to be disqualified as counsel for Hassan on June 28, 2019, just over three months after the representation of Hassan had begun. Accordingly, the one-year statute of limitation in CCP §340.6 began running by no later than June 28, 2019 and expired before the Complaint in this action was filed on July 28, 2020. “The words 0f the statute are quite broad, but they are not ambiguous: any time a plaintiff brings an action against an attorney and alleges that attorney engaged in a wrongful act 0r omission, other than fraud, in the attorney’s performance of his or her legal services, that action must be commenced within a year after the plaintiff discovers, 0r should have discovered, the facts that comprise the wrongful act or omission.” (Yee v. Cheung (2013) 220 Cal.App.4th 184, 194-195.) The argument by Plaintiff in Opposition that the one and only damage she ever suffered from Defendants’ alleged actions or seeks to recover was the $1.1 million in attorney’s fees she incurred “in thwarting the sale” in the Delaware Action (Complaint at 113 7) is not a reasonable interpretation 0f the Complaint and contradicts the Complaint’s allegation that Defendants’ representation 0f Hassan in the dissolution action was a breach 0f fiduciary duty. The Complaint itself (at 1158) alleges that as a proximate result of Defendants’ breach of fiduciary duty Plaintiff has suffered damages “in excess 0f$1,100,000 consisting generally of attorney and otherfees she has incurred and Iost value Ofcommunity assets.” (Court’s emphasis.) 9 ORDER RE: DEMURRER TO COMPLAINT \DOONJQUI-bUJMp-a NNNNMNNNNr-Ir-nr-Ar-np-ar-nur-nmn-t OOHCNLh-QUJND-‘OKOOO‘JQM-PMNHO The further argument in the opposition that the limitations period does not start running until the tort is completed, and that no tort alleged in the Complaint was complete until Plaintiff incm'red $ I .1 million in attomeys’ fees “in thwarting the sale” in the Delaware action is not a basis for overruling the demurrer. The Complaint on its face asserts that a breach 0f fiduciary duties Defendants owed Plaintiff “by Virtue 0f” being attorneys occurred and was complete by March 22, 2019 when Morrison & Forester associated in as counsel for Hassan in the dissolution action. “While inconsistent theories of recovery are permitted, a pleader cannot blow hot and cold as to the facts positively stated.” (Mami v. Gunari (1970) 5 Ca1.App.3d 442, 449, internal citation omitted.) As the demurrer is sustained on statute of limitations grounds it is not necessary for the Court t0 consider Defendants’ other arguments in support 0f the demurrer at this time. Given that this is the first pleading challenge in this action and it is not apparent to the Court that leave t0 amend would be futile, granting leave to amend at least once is appropriate. Plaintiff is reminded that if a demurrer is brought to an amended complaint, the Court “may consider the factual allegations 0f prior complaints, which a plaintiffmay not discard or avoid by making contradictory averments, in a superseding, amended pleading.” (Berg & Berg Enterprises, LLC v. Boyle (2009) 178 Cal.App.4th 1020, 1034, internal quotations omitted.) Plaintiff is also advised that when a demurrer is sustained with leave to amend, the leave must be construed as permission to the pleader to amend the causes of action to which the demurrer has been sustained, not add entirely new causes 0f action. (Patrick v. AIacer Corp. 10 ORDER RE: DEMURRER TO COMPLAINT NOOOKJONUIhbJNr-n [\JNMNNNMNNp-an-Ir-nr-Ip-nr-r-nu-IHH OOMJQLJI$DJNHOKDOOQONM$WNHO (2008) 167 Ca1.App.4th 995, 1015.) To raise claims entirely unrelated to those originally alleged requires either a new lawsuit or a noticed motion for leave t0 amend. Absent prior leave of court an amended complaint raising entirely new and different causes of action may be subject to a motion t0 strike. (See Harris v. Wachovia Mortg, FSB (2010) 185 Cal.App.4th 1018, 1023 [“Following an order sustaining a demurrer or a motion for judgment on the pleadings with leave to amend, the plaintiff may amend his or her complaint only as authorized by the court's order. The plaintiffmay not amend the complaint to add a new cause 0f action without having obtained permission t0 do so, unless the new cause of action is within the scope of the order granting leave t0 amend.”]) The Court’s order 0n this demurrer does not authorize the addition of any new claims or parties. 7/964 @WflgJos p .Hliber Ju g ofthe Superior Court 11 ORDER RE: DEMURRER T0 COMPLAINT SUPERIOR COURT OF CALIFORNIA COUNTY OF SANTA CLARA DOWNTOWN COURTHOUSE 191 NORTH FIRST STREET SAN JOSE, CALIFORNIA 951 l3 CIVIL DIVISION RE: Allison Huynh vs Paul Lion, Ill et al Case Number: 200V368776 PROOF 0F SERVICE ORDER RE: DEMURRER T0 COMPLAINT was delivered to the parties listed below the above entitled case as set forth in the sworn declaration below. If you. a party represented by you. or a witness to be called on behalf of that party need an accommodation under the American with Disabilities Act. please contact the Court Administrator’s office at (403) 882-2700. or use the Court's TDD line (408) 882-2690 or the VoicelTDD California Relay Service (800) 735-2922. DECLARATION OF SERVICE BY MAIL: l declare that | served this notice by enclosing a true copy in a sealed envelope. addressed to each person whose name is shown below. and by depositing the envelope with postage fully prepaid. in the United States Mail at San Jose. CA on July 0?. 2021. CLERK OF THE COURT. by Shantel Hernandez, Deputy. cc: Walter J Lack 10100 Santa Monica Blvd 16th Floor Los Angeles CA 900674107 David Floyd McGowan 217 Leidesdorff St San Francisco CA 94111 CW-9027 REV 12!08f16 PROOF 0F SERVICE EXHIBIT F 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 20CV368776 Santa Clara - Civil DURIE TANGRI LLP RAGESH K. TANGRI (SBN 159477) rtangri@durietangri.com DAVID McGOWAN (SBN 154289) dmcgowan@durietangri.com BETHANY D. BENGFORT (SBN 3 12507) bbengfort@durietangri.com 217 Leidesdorff Street San Francisco, CA 941 11 Telephone: 415-362-6666 Facsimile: 4 1 5-236-6300 Attorneys for Defendants Electronically Filed by Superior Court of CA, County of Santa Clara, on 6/22/2021 2:29 PM Reviewed By: F. Miller Case #20CV368776 Envelope: 6698685 MORRISON & FOERSTER, LLP and PAUL L. LION, III SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SANTA CLARA ALLISON HUYNH, Plaintiff, V. MORRISON & FOERSTER, LLP, PAUL L. LION, III, and DOES 1-20, Inclusive, Defendants. Case N0. 20CV368776 REPLY IN SUPPORT OF DEFENDANTS’ DEMURRER TO COMPLAINT Date: June 29, 2021 Time: 9:00 a.m. Ctrm: 19 Judge: Honorable Peter H. Kirwan REPLY IN SUPPORT OF DEFENDANTS’ DEMURRER TO COMPLAINT / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 II. III. TABLE OF CONTENTS INTRODUCTION .................................................................................................................... ARGUMENT ............................................................................................................................ A. A11 0f Plaintiff’ s Claims are Barred by the Statute 0f Limitations ............................... 1. Every Cause 0f Action is Premised 0n Conduct that Occurred Prior t0 July 28, 2019 ............................................................................................................. 2. Plaintiff Suffered Actual Injury in at Least Two Ways Prior to July 28, 2019 ................................................................................................................... 3. The Continuous Accrual Doctrine does not Apply t0 Section 340.6 ................ B. A11 of Plaintiff s Claims Directly Stem from Injury t0 a Corporation and Must be Brought as Derivative Claims ....................................................................................... C. Defendants’ Representation ofMyDream prior to its Formation (and After) did not Result in a Personal Duty t0 Plaintiff ........................................................................... D. Defendants’ Second and Third Causes of Action Fail because Defendants are Protected by Attorney Immunity .................................................................................. E. Plaintiff s Second and Third Causes of Action Fail because Defendants are not Strangers to the Economic Relationship ....................................................................... CONCLUSION ......................................................................................................................... i Page ....... 1 ....... 1 ....... 1 ....... 1 .......3 ....... 5 ....... 5 .......6 ....... 8 .......9 ..... 10 REPLY IN SUPPORT OF DEFENDANTS’ DEMURRER TO COMPLAINT / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES Page(s) Cases Benasra v. Mitchell Silberberg & Knupp LLP, 123 Cal. App. 4th 1179 (2004) ............................................................................................................... 3 Budd v. Nixen, 6 Cal. 3d 195 (1971) ............................................................................................................................... 2 Capra v. Capra, 58 Cal. App. 5th 1072 (2020), as modified (Jan. 15, 2021) .................................................................... 7 Goldstein v. Lees, 46 Cal. App. 3d 614 (1975) .................................................................................................................... 7 Gordon v. Law Ojfices 0nguirre & Meyer, 70 Cal. App. 4th 972 (1999) ................................................................................................................... 5 Granewich v. Harding, 329 Or. 47 (Or. 1999) ............................................................................................................................. 9 Haynes & Boone, LLP v. NFTD, LLC, N0. 20-0066, 2021 WL 2021453 (TeX. May 21, 2021) ...................................................................... 8, 9 Jocer Enters., Inc. v. Price, 183 Cal. App. 4th 559 (2010) ................................................................................................................. 5 Jones v. H. F. Ahmanson & C0., 1 Cal. 3d 93 (1969) ................................................................................................................................. 6 Jordache Enters. v. Brobeck, Phleger & Harrison, 18 Cal. 4th 739 (1998) .................................................................................................................... 3, 4, 5 M’Guinness v. Johnson, 243 Cal. App. 4th 602 (2015) ................................................................................................................. 7 Manion v. Nagin, 394 F.3d 1062 (8th Cir. 2005) ................................................................................................................ 7 Oaks Mgmt. Corp. v. Superior Court (Ayyad), 145 Cal. App. 4th 453 (2006) ................................................................................................................. 7 Panoutsopoulos v. Chambliss, 157 Cal. App. 4th 297 (2007) ................................................................................................................. 8 Rakestraw v. California Physicians ’ Serv. , 81 Cal. App. 4th 39 (2000) ..................................................................................................................... 4 ii REPLY IN SUPPORT OF DEFENDANTS’ DEMURRER TO COMPLAINT / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Redfearn v. Trader Joe ’s C0., 20 Cal. App. 5th 989 (2018) Jesse ex rel. Reinecke v. Danforth, 169 Wis. 2d 229 (Wis. 1992) Rose v. Hudson, 153 Cal. App. 4th 641 (2007) .. Schuster v. Gardner, 127 Cal. App. 4th 305 (2005) .. Truong v. Glasser, 181 Cal. App. 4th 102 (2009) .. Woods v. Superior Court (Woods), 149 Cal. App. 3d 931 (1983) Statutes Cal. CiV. Proc. Code § 340.6 ......... Cal. CiV. Proc. Code § 340.6(a)(1) Cal. CiV. Proc. Code § 340.6(a)(2) Rules Cal. R. Profl Conduct 1.13 ........... ............................................................................................................. 10 ............................................................................................................... 7 ............................................................................................................... 5 ............................................................................................................... 6 ............................................................................................................... 4 ............................................................................................................... 7 ........................................................................................................... 1,5 ............................................................................................................... 6 iii REPLY IN SUPPORT OF DEFENDANTS’ DEMURRER TO COMPLAINT / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 I. INTRODUCTION Plaintiff’ s Opposition seeks t0 walk back the Complaint by deleting allegations that show the Complaint is both time-barred and a disguised derivative claim, either 0f Which would be case dispositive. Plaintiff mischaracterizes the Complaint as “primarily” directed toward conduct occurring after the critical date, ignoring the many allegations regarding conduct occurring before that date. Plaintiff asserts that she did not suffer injury before the critical date because she did not have t0 pay the legal fees associated with her (pre-critical date) motion to disqualify Defendants in the family court, but that argument rests on a false characterization 0f the family court’s order, which (i) requires her t0 pay $20,000 0f her own legal fees each month and (ii) provides that fees over that amount are advanced (not ultimately paid for) by the other party t0 that action. Plaintiff also selectively ignores all of the allegations in the Complaint regarding the “10st value” of her community assets, arguing instead that her sole claim t0 damages is 0n fees she incurred “personally.” With regard to duty, Plaintiff argues that Defendants represented her personally by Virtue of their representation of MyDream, but then later argues that Defendants are strangers t0 the economic relationship between her and Hassan because they did not represent either party by Virtue of their representation of the various family companies. Plaintiff” s arguments cannot be reconciled with the Complaint, the law, or her other arguments, and the demurrer should be sustained. II. ARGUMENT A. All 0f Plaintiff’s Claims are Barred by the Statute 0f Limitations 1. Every Cause of Action is Premised 0n Conduct that Occurred Prior t0 July 28, 2019 Each cause 0f action in Plaintiff s Complaint is barred by the statute 0f limitations set forth in California Code 0f Civil Procedure section 340.6; she has not set forth a plausible argument t0 the contrary. Plaintiff first argues in her Opposition that she “did not discover the wrongful conduct giving rise to the damages she is claiming until . . . after the July 28, 2019 ‘critical date’ defendants identify for statute of limitations purposes.” Opp’n 3. The Complaint refutes this claim. It alleges that Plaintiff “learned Within the last two years 0f the facts showing Defendants’ systematic and continuous involvement in trying to circumvent her interests by effectuating transactions that depleted 0r devalued 1 REPLY IN SUPPORT OF DEFENDANTS’ DEMURRER TO COMPLAINT / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 community assets.” Compl. fl 57 (emphasis added). And it makes clear that that means “more than a year ago,” by citing t0 Defendant Morrison & Foerster’s representation 0f Hassan in March 2019 as one of the critical dates in supplying this knowledge. Id. Plaintiffknew as 0f March 22, 2019 that Defendants were undertaking representation adverse to her interests. Id. 1H] 55, 57. And while Plaintiff argues that she “did not receive, or have any way t0 obtain, documentationfl showing defendants’ continued involvement in other transactions until Hassan produced them in discovery in the divorce case in early 2020,” Opp’n 3, this argument is belied by the fact that the Complaint cites to a public news article published in February 2016 as the source of her information regarding Defendants” allegedly wrongful conduct concerning Willow Garage. Compl. W 49-50. Plaintiff argues that she had no duty t0 inquire into this conduct until her relationship with Defendants was “repudiated” or she became “aware 0f facts that would make a reasonably prudent person suspicious of the fiduciary.” Opp’n 5-6. But she does not dispute that this standard was met either When Plaintiff fired Defendants as MyDream’s counsel in March 2016, see Compl. fl 27 or, at the latest, when Defendant Morrison & Foerster undertook t0 represent Hassan adverse to Plaintiff in the Dissolution Action in March 2019, see id. 1] 55. Plaintiff thus has n0 excuse for Why she waited until July 28, 2020 to file a complaint based 0n conduct that occurred over three years prior and about which she either knew or should have known over a year prior. Plaintiff next argues that her claims are not time-barred because her “primary item 0f damages” is the $1.1 million Plaintiff spent to thwart the sale 0f Suitable, and she did not incur these damages until after July 28, 2019. Opp’n 3. The Complaint refutes this argument as well. It claims damages in the form 0f the “10st value of community assets” and other “attorney fees and costs” she may have incurred as a result 0f Defendants’ alleged wrongful conduct. Compl. 1N 58, 67, 76. The argument also is irrelevant because Plaintiffmay not extend the limitations period by focusing on some subset of alleged harm. A cause 0f action for attorney misconduct typically “arises . . . before the client sustains all, 0r even the greaterpart, of the damages occasioned by [the] attorney’s negligence.” Budd v. Nixen, 6 Cal. 3d 195, 201 (1971) (emphasis added). Once the client “discover[s] his attorney’s negligence” and “suffer[s] some damage, the client must institute his action Within the time prescribed in the statute of limitations. . . .” Id. (emphasis added). Accordingly, the statute 0f limitations began t0 run When Plaintiff learned that Defendants were acting against her interests and she suffered any injury as a result 2 REPLY IN SUPPORT OF DEFENDANTS’ DEMURRER TO COMPLAINT / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 0f these actions, regardless of whether she later sustained further damage arising from the same wrongful conduct, and the standard for injury is 10w. See Jordache Enters. v. Brobeck, Phleger & Harrison, 18 Cal. 4th 739, 749 (1998) (explaining that the question ofWhether “actual injury” has occurred focuses “on the fact of injury” rather than the amount). Finally, Plaintiff suggests that the sale of Suitable should be Viewed as a separate, independently wrongful act subject t0 its own statute 0f limitations. Opp’n 3-4. That is incorrect as a matter of both fact and law. First, the Complaint alleges that “Defendants’ conduct relating to Suitable Technologies is not an isolated incident but instead part 0f a larger pattern and practice,” making it clear that the sale of Suitable cannot be Viewed as separate from Defendants’ other allegedly wrongful conduct. Compl. fl 48. Second, courts have found that a cause of action for the breach of a duty of loyalty-a finding of which is essential t0 every cause of action in the Complaint-arises as soon as the attorney undertakes an adverse representation, regardless of any subsequent actions related t0 that representation. See Benasm v. Mitchell Silberberg & Knupp LLP, 123 Cal. App. 4th 1179, 1189 (2004) (explaining that a breach 0f the duty of loyalty occurs as soon as an attorney undertakes to represent a party adverse t0 its former client, not When it later files suit or takes action against the former client). Defendants’ conduct in structuring the sale 0f Suitable is thus not an independent breach of the duty 0f loyalty, but rather relates back to Whenever Defendant first “accept[ed] a representation” contrary t0 Plaintiff’ s interests. Id. The Complaint alleges that that was at least as early as March 22, 2019. Compl. fl 55. 2. Plaintiff Suffered Actual Injury in at Least Two Ways Prior t0 July 28, 2019 Plaintiff next argues that the statute of limitations should be tolled under section 340.6(a)(1) because she did not suffer any actual injury until she incurred fees in the Derivative Action. See Opp’n 2-5. On the face 0f the Complaint, however, Plaintiff suffered at least two injuries prior t0 July 28, 2019: (1) the depletion of Willow Garage, a “community asset,” When Defendants gave away “valuable intellectual property” prior to 2016, see Compl. 1W 49-50; and (2) the resources she expended and the fees she necessarily incurred when “forc[ed] . . . to move to disqualify Defendant as Hassan’s counsel” in June of 2019. Id. fl 33; see also P1.’s RJN EX. 1. As explained in Defendants’ Opening Brief, Plaintiff was on inquiry notice of Defendants’ conduct relating to Willow Garage as early as 2016 and at the latest in March of 2019. Opening Br. 7. While Plaintiff argues that she “does not know if those other 3 REPLY IN SUPPORT OF DEFENDANTS’ DEMURRER TO COMPLAINT / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 transactions will produce actual injury” because she has not yet established her right t0 the underlying assets, Opp’n 3, the Complaint is necessarily premised 0n the allegation that she did have a community property interest in those assets, and that Defendants’ conduct did in fact deplete those assets. See Compl. 1] 50. Plaintiff s argument that her claim is timely because it might be wrong is nonsensical. On a demurrer, the court must treat all properly pleaded facts alleged in the Complaint as true. Rakestraw v. California Physicians ’ Serv., 81 Cal. App. 4th 39, 42 (2000). Plaintiff also argues that neither injury counts because: (1) Hassan was ordered by the court in the Dissolution Action to pay her attorney fees, Opp’n 4; and (2) she may be able t0 recover the full value 0f her lost community interest in the Dissolution Action, id. at 3. First, Plaintiff s characterization 0f the court’s order in the Dissolution Action is false. The order, which was the result of a stipulation between the parties, requires only that Hassan advance Plaintiff’ s attorney fees until a final resolution 0n the allocation 0f fees at trial. See Request for Judicial Notice in Support 0f Defendants’ Demurrer Reply (“RJN”) EX. 1 at 1N 1, 8-9.1 Regardless of the ultimate decision 0n fee allocation between the parties, Plaintiff has still incurred an obligation to ensure that her attorneys are paid. See Truong v. Glasser, 181 Cal. App. 4th 102, 115 (2009) (the client sustains actual injury When it “obtain[s] and obligate[s] t0 pay new counsel” to remedy the consequences of attorney misconduct). In addition, the stipulation requires that Plaintiffpay $20,000 0f her own attorney fees each month. RJN EX. 1 1] 3. This necessarily includes the relevant proportion 0f fees directed towards Plaintiff s attorneys’ work on the Disqualification Motion in the months prior to June 28, 2019. Second, Plaintiff’ s argument that she has suffered no actual injury because her financial injury may ultimately be obviated or reduced has been explicitly rejected by the Supreme Court. The Court has made clear that “when malpractice results in the loss 0f a right, remedy, 0r interest, or in the imposition 0f a liability, there has been actual injury regardless ofwhetherfuture events may aflect the permanency offhe injury 0r the amount ofmonetary damages eventually incurred.” Jordache, 18 Cal. 4th at 750 (emphasis added) (citation omitted). Indeed, the Supreme Court specifically “rejected the claims that actual injury should be defined by a monetary amount and that the limitations period should be tolled if 1 In assessing whether to sustain a demurrer, the court may consider “matters that may be judicially noticed,” such as a court order. Rakestraw, 81 Cal. App. 4th at 42. 4 REPLY IN SUPPORT OF DEFENDANTS’ DEMURRER TO COMPLAINT / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 the injury is, in some way, remediable.” Id. Thus, just because Plaintiff was 0r could be later compensated for her injury, this does not change the fact that she “sustained actual injury,” thus triggering the statute of limitations. 3. The Continuous Accrual Doctrine does not Apply t0 Section 340.6 Plaintiff lastly argues that the statute of limitations did not begin t0 run because Defendants” structuring 0f the sale 0f Suitable constituted a continuing Violation, thus tolling the statute 0f limitations under the continuous accrual doctrine. Opp’n 5-6. The continuous accrual doctrine, however, does not apply to causes of action under section 340.6. See Jocer Enters., Inc. v. Price, 183 Cal. App. 4th 559, 569 (2010) (“[O]ur Supreme Court has held that the Legislature intended to disallow tolling under any circumstances not enumerated in section 3406.”); see also Rose v. Hudson, 153 Cal. App. 4th 641, 655 (2007) (“In no event Will the statute 0f limitations for legal malpractice be tolled unless the tolling provisions contained in the statute apply, . . . .”) (citation omitted). Section 340.6(a)(2) specifically enumerates that the statute of limitations is tolled when “[t]he attorney continues to represent the plaintiff regarding the specific subj ect matter in Which the alleged wrongfiJI act or omission occurred,” but does (C not contemplate continuous accrual in any other circumstances. Because the statute’s explicit tolling provisions [are] exclusive,” Gordon v. Law Ufices 0nguirre & Meyer, 70 Cal. App. 4th 972, 977 n.5, 974 (1999), any other version of the continuous accrual doctrine cannot apply here. Accordingly, all 0f Plaintiff s causes of action are barred by the statute 0f limitations, and the Court need not reach the remaining issues. B. All 0f Plaintiff’s Claims Directly Stem from Injury to a Corporation and Must be Brought as Derivative Claims Even if the statute of limitations did not apply, however, all of Plaintiff s causes of action are independently barred because Plaintiff is required t0 bring them as derivative claims. Plaintiff argues that she need not bring her claims as a derivative action because she incurred the attorney fees in the Derivative Action “personally.” Opp’n 6. This argument ignores the Complaint’s allegation that Plaintiff also seeks t0 recover the “lost value 0f community assets.” Compl. 1H] 58, 67, 76. Moreover, Plaintiff s entire claim for these damages rests on the theory that Defendants’ actions decreased the value 0f her community assets, thus forcing her t0 incur fees “to prevent the dissipation of [the] assets.” 5 REPLY IN SUPPORT OF DEFENDANTS’ DEMURRER TO COMPLAINT / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Schuster v. Gardner, 127 Cal. App. 4th 305, 313 (2005) (citation omitted). These damages (fees allegedly incurred t0 prevent or remedy supposed damage t0 the corporation) thus were “incidental to damages to the corporation,” and so bar an individual cause of action. Id. The sole case that Plaintiff cites in support, Jones v. H. F. Ahmanson & C0., 1 Cal. 3d 93 (1969), is inapposite. In that case, the plaintiff contended that the defendants breached their fiduciary duties to the minority shareholders by creating and operating a holding company in a way that benefited maj ority shareholders and harmed minority shareholders. Id. at 101, 107. As the Supreme Court noted, the stipulated facts demonstrated that the decreased value t0 the plaintiff’ s stock was not the result 0f an injury t0 the corporation, but rather, the dilution 0f the minority shareholders’ interest relative t0 the majority shareholders’ interest. Id. at 106-07. Here, Plaintiff admits that the “relief sought in Delaware-preventing a below-value asset sale-would benefit Suitable as distinguished from its Shareholders,” Opp’n 6, and thus that her fees were directly incurred as a result of an injury to the corporation, and not just to herself as a shareholder. Ahmanson therefore does not apply. C. Defendants’ Representation of MyDream prior to its Formation (and After) did not Result in a Personal Duty to Plaintiff Plaintiff” s first cause of action is barred for a third, independent reason because it is premised on Defendants having a fiduciary duty to Plaintiff personally, and not just t0 MyDream, the corporation she founded. Compl. 1W 52, 66, 75. Plaintiff argues that Defendants necessarily represented both MyDream and Plaintiff because “Defendants could not be counsel to just the corporation when the corporation did not exist and defendants were advising the principal on the very subj ect of What legal form the business should take.” Opp’n 8. This argument posits that corporations may never be formed Without counsel personally representing shareholders, but n0 case so holds. Plaintiff offers no substantive analysis for disputing the rule that a corporation accedes t0 all client rights upon formation. It is true that the leading cases are from outside California, id. at 9, but it does not follow that California law is different. Plaintiff offers no reason t0 believe it is. That some duties may form before representation, Opp’n 8, is irrelevant t0 the identity of the client. See, e.g., Cal. R. Prof’l Conduct 1.13 (organization is client in entity representation). Plaintiff further ignores that the formal retention agreement made it clear that Defendants were representing MyDream, and not Plaintiff personally. Compl. fl 26. 6 REPLY IN SUPPORT OF DEFENDANTS’ DEMURRER TO COMPLAINT / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 In any case, the reasoning behind the leading cases 0n this issue-Jesse ex rel. Reinecke v. Danforth, 169 Wis. 2d 229 (Wis. 1992) and Manion v. Nagin, 394 F.3d 1062, 1068 (8th Cir. 2005)- applies equally in California. In both 0f those cases the courts held that, even though an attorney may represent an individual personally before a corporation is formed, if the representation is limited to the creation of that corporation, then the “lawyer’s pre-incorporation involvement With the person is deemed to be representation of the entity, not the person.” Manion, 394 F.3d at 1069 (citing Jesse, 169 Wis. 2d at 241). The rule was created to prevent the very situation presented in this case: “dual representation” 0f a corporation and a corporate constituent With potentially conflicting interests. Jesse, 169 Wis. 2d at 240- 41. The rule was grounded in the relevant state rules about the representation of corporations, Which “mak[e] clear that the attorney’s duty attaches t0 the entity, not its constituents.” Manion, 394 F.3d at 1068. This is also the rule in California. M’Guinness v. Johnson, 243 Cal. App. 4th 602, 622 (2015) (“[A]n attorney for a corporation’s first duty is t0 the corporate entity”). Plaintiff also argues that Defendants owe her a duty 0f loyalty because “[a]n attorney representing a presumptively community entity cannot later choose sides and act 0n behalf of one spouse against the other, . . . .” Opp’n 9. The cases Plaintiff cites, however, make it clear that this obligation stems from the attorney’s duty t0 the corporation, not t0 any particular Spouse. See, e.g., Woods v. Superior Court (Woods), 149 Cal. App. 3d 931, 935 (1983) (agreeing that the attorney owes “undivided loyalty t0 the corporation and cannot take sides in a serious dispute between its owners.”); Goldstein v. Lees, 46 Cal. App. 3d 614, 622 (1975) (denying fee claim by former corporate counsel who represented shareholder in proxy fight 0n ground that representation was inconsistent With duty of confidentiality). Woods is particularly inapposite. The case involved disqualification, not civil liability, and the court employed an “appearance of impropriety” standard that is not consistent with subsequent case law. E.g., Oaks Mgmt. Corp. v. Superior Court (Ayyad), 145 Cal. App. 4th 453, 471 (2006) (“To any extent the court felt there was arguably an appearance of impropriety, in California that is not a sufficient ground for disqualification of an attorney”). As the court 0f appeal noted recently in Capra v. Capra, 58 Cal. App. 5th 1072, 1096-97 (2020), as modified (Jan. 15, 2021): We respectfully disagree With Woods’s statement that the attorney, as counsel for the closely held family corporation, “necessarily” represented both husband’s and wife’s interests if that statement is taken out of its context. Even in a closely held corporation, the company’s attorney owes a duty 0f loyalty to the corporation, not the shareholders. 7 REPLY IN SUPPORT OF DEFENDANTS’ DEMURRER TO COMPLAINT / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Plaintiff has thus failed to establish that Defendants owed any duty t0 herpersonally, as opposed t0 MyDream as their corporate client. D. Defendants’ Second and Third Causes of Action Fail because Defendants are Protected by Attorney Immunity Plaintiff’ s second and third causes of action are barred for the additional and independent reason that Defendants are protected from liability for these claims by attorney immunity. Plaintiff argues that the doctrine of attorney immunity cannot apply to her second and third causes 0f action for three reasons: (1) the immunity is not relevant to California law; (2) Defendants represented the “family companies,” and not Hassan; and (3) Defendants used “wrongful means” t0 advance their client’s obj ectives by way 0f their breach of their fiduciary duties t0 Plaintiff. Opp’n 11-13. Plaintiff is incorrect. First, as the Texas Supreme Court recently explained in Haynes & Boone, LLP v. NFTD, LLC, N0. 20-0066, 2021 WL 2021453, at *7 (TeX. May 21, 2021) (publication pending), the doctrine 0f attorney immunity stems from English common law, and to this day, “no jurisdiction has found a duty of care based 0n negligent services by an attorney to an adverse party.” (citation omitted). Plaintiff cites to n0 California case that suggests that the doctrine 0f attorney immunity does not apply in California, and indeed, the premise of attorney immunity is instantiated in the requirement in California that a plaintiff can only state a Viable claim for a lawyer’s conspiracy With a client “if the attorneys” actions went beyond their role as attorneys acting 0n behalf 0f” the client. Panoutsopoulos v. Chambliss, 157 Cal. App. 4th 297, 306 (2007). While Plaintiff suggests that “there is n0 justification for cloaking the attorney’s conduct in privilege” if “the attorney’s conduct is independently wrongful,” Opp’n 13, the privilege is designed t0 protect “an attorney’s conduct [that] may be wrongful but still fall[s] within the scope of client representation.” Haynes & Boone, 2021 WL 2021453, at *8 (citation omitted). Second, the fact that Defendants represented Suitable and Willow Garage in these transactions, and not Hassan, is irrelevant. For one thing, the Complaint alleges that Defendants represented Hassan by way of their representation of family companies. See, e.g., Compl. 1N 28-29, 62, 70-71. For another, Plaintiff’ s claims stem from her allegations that Defendants” conduct in the “transfer, giveaway, mismanagement, depletion, dilution, and devaluation 0f the community assets” interfered With her prospective economic advantage. Id. 1N 63, 72. The structure, management, and sale 0f the family 8 REPLY IN SUPPORT OF DEFENDANTS’ DEMURRER TO COMPLAINT / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 companies’ assets “is part of the discharge of the lawyer’s duties in representing” its corporate clients. Haynes & Boone, 2021 WL 2021453, at *8 (emphasis omitted) (citation omitted). Because the alleged conduct was “Within the scope 0f its representation” 0f the family companies, Defendants are “protected by attorney immunity.” Id. For this reason, Plaintiff’s reliance on Granewich v. Harding, 329 Or. 47 (Or. 1999), is inapposite. The plaintiff in that case alleged that lawyers were secondarily liable for actions taken by non-clients Whom the lawyers had agreed t0 assist in the context 0f a control dispute among shareholders. The Complaint in this case alleges the attempted dilution of company assets and seeks damages in the form 0f dilution of those assets, Which Plaintiff alleges was the subj ect of corporate representation. Finally, Plaintiff s claim that Defendants breached their fiduciary duties t0 her does not actually establish that Defendants used “wrongful means” in their representation 0f Suitable 0r Willow Garage. Indeed, the means Plaintiff alleges they used-structuring sales, and managing assets-are all rather ordinary in the course of representing a corporation. As explained by the Texas Supreme Court, “Whether attorney immunity applies depends 0n the kind of conduct at issue rather than the alleged wrongfulness 0f said conduct,” and “immunity applies When a non-client’s claim is based on an attorney’s conduct within the scope ofhz's representation ofhis clients” as opposed t0 conduct that is “foreign t0 the duties ofa lawyer.” Haynes & Boone, 2021 WL 2021453, at *9 (internal quotation marks omitted) (citations omitted). Because Plaintiff has not pled factual allegations that would demonstrate that Defendants were acting outside the scope 0f their representation of the family companies, attorney immunity applies. E. Plaintiff’s Second and Third Causes 0f Action Fail because Defendants are not Strangers t0 the Economic Relationship Plaintiff’ s second and third causes of action are also independently barred because, 0n the face of the Complaint, Plaintiff has failed to show that Defendants are “strangers” t0 the economic relationship as required by the claims. The Complaint alleges that: (1) Defendants represented Plaintiff personally during her and Hassan’s marriage, Compl. 1H] 28-29; (2) Defendants represented Hassan personally during and after Plaintiff and Hassan’s marriage, id. 1W 28-29, 62, 70-71; and (3) Defendants represented the “family companies” underlying her economic relationship with Hassan. Id. 1] 29. Nevertheless, 9 REPLY IN SUPPORT OF DEFENDANTS’ DEMURRER TO COMPLAINT / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Plaintiff argues that Defendants are somehow still strangers to that relationship. Opp’n 13-14. Plaintiff’s explanation that she meant t0 only allege that Defendants represented the family companies, id., makes n0 sense. First, all three 0f Plaintiff s causes of action are premised 0n her allegation that Defendants owed her a duty 0f loyalty because they represented her personally in connection with the formation of MyDream. Compl. 1H 52, 66, 75. Second, Plaintiff alleges throughout the Complaint that Defendants also represented Hassan by way of their representation of the family companies, and that they acted in his interests when structuring the allegedly wrongful transactions. See, e.g., id. 1N 28-29, 62, 70-71. Finally, even if Plaintiff did allege only that Defendants represented the family companies, the family companies are still part 0fthe economic relationship between her and Hassan. This is a far cry from Plaintiff s only cited case in support, where the agents in question were agents t0 a party that acknowledged that it was not party t0 the underlying contract. See Opp’n 13 (citing Asahei Kasei Pharma Corp. v. Actelion, 222 Cal. App. 4th 945, 961-968 (2013)). Because on the face 0f the Complaint Defendants are not “stranger[s] for purpose of the tort of intentional interference” with contract 0r prospective economic advantage, Redfearn v. Trader Joe ’s Ca, 20 Cal. App. 5th 989, 1003 & n. 6 (2018), Plaintiff’s second and third causes 0f action fail as a matter of law. III. CONCLUSION Based on the foregoing reasons, the demurrer should be sustained and Plaintiff’ s claims in the Complaint should be dismissed With prejudice. Dated: June 22, 2021 DURIE TANGRI LLP By: /s/Ragesh K. Tangri RAGESH K. TANGRI Attorneys for Defendants MORRISON & FOERSTER, LLP and PAUL L. LION, III 1 0 REPLY IN SUPPORT OF DEFENDANTS’ DEMURRER TO COMPLAINT / CASE NO. 20CV368776 A ©00fl0‘xU1 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PROOF OF SERVICE I am employed in Los Angeles County, State 0f California, in the office of a member of the bar 0f this Court, at Whose direction the service was made. I am over the age 0f eighteen years, and not a party to the within action. My business address is 953 East 3rd Street, Los Angeles, CA 90013. On June 22, 2021, I served the following documents in the manner described below: m REPLY IN SUPPORT OF DEFENDANTS’ DEMURRER TO COMPLAINT BY ELECTRONIC SERVICE: By electronically mailing a true and correct copy through Durie Tangri’s electronic mail system from mrubalcaba@durietangri.com t0 the email addresses set forth below. Walter J. Lack Steven C. Shuman Engstrom, Lipscomb & Lack, P.C. 10100 Santa Monica Boulevard Suite 1200 Los Angeles, CA 90067-41 13 Email: Wlack@elllaw.com sshuman@elllaw.com Attorney for Plaintiff ALLISON HUYNH I declare under penalty 0f perjury under the laws of the State of California that the foregoing is true and correct. Executed on June 22, 2021, at San Francisco, California. r a...vw‘ ary Ann ubalcaba 11 REPLY IN SUPPORT OF DEFENDANTS’ DEMURRER TO COMPLAINT / CASE NO. 20CV368776 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PROOF OF SERVICE I am employed in San Francisco County, State 0f California, in the office of a member of the bar 0f this Court, at whose direction the service was made. I am over the age 0f eighteen years, and not a party t0 the within action. My business address is 217 Leidesdorff Street, San Francisco, CA 941 1 1. On October 28, 2021, I served the following documents in the manner described below: EXHIBITS A-F [PUBLIC] TO: RAGESH K. TANGRI’S DECLARATION IN SUPPORT OF DEFENDANTS’ DEMURRER TO PLAINTIFF’S FIRST AMENDED COMPLAINT BY ELECTRONIC SERVICE: By electronically mailing a true and correct copy through ' Durie Tangri’s electronic mail system from mrubalcaba@durietangri.com t0 the email addresses set forth below. On the following part(ies) in this action: Walter J. Lack Steven C. Shuman Engstrom, Lipscomb & Lack, P.C. 10100 Santa Monica Boulevard, Suite 1200 Los Angeles, CA 90067-41 13 wlack@elllaw.com sshuman@elllaw.com mfletcher@elllaw.com Attorneysfor PlaintiffAllison Huynh I declare under penalty 0f perjury under the laws 0f the State 0f California that the foregoing is true and correct. Executed 0n October 28, 2021, at San Francisco, California. M MMary Ann Rubalcaba EXHIBITS A-F TO: RAGESH K. TANGRI’S DECLARATION IN SUPPORT OF DEFENDANTS’ DEMURRER TO PLAINTIFF’S FIRST AMENDED COMPLAINT / CASE NO. 20CV368776