YVONNE GONZALEZ ROGERS, District Judge.
This case staged a tension between the inveterate, established law of fiduciary duties held by corporate directors and breach of fiduciary duty claims that arise when directors of emerging companies are innovators in the technology themselves. In such an instance, plaintiff AngioScore would have innovation subverted to duty; defendants would have duty subverted to innovation. Neither party's position admits of any balance, and neither can be wholly right. As set forth in this Order, the Court finds that where transparency, loyalty, and good faith predominate, a director's fiduciary duties and his drive to innovate can co-exist, albeit with the duties to the corporation taking precedence.
AngioScore brings state law claims for breach of fiduciary duty against one of its founders and former directors, Eitan Konstantino, alleging that while he was a member of AngioScore's board, Konstantino developed a medical device directly competitive with AngioScore's flagship product. Rather than offer the opportunity to acquire the new device to AngioScore, AngioScore maintains that Konstantino instead took it for himself. AngioScore also claims that corporate defendants Quattro Vascular PTE Ltd. and TriReme Medical, Inc. aided and abetted Konstantino's breach, and that liability for these entities' wrongdoing runs to QT Vascular Ltd. Defendants disagree, arguing in part that the duty was not breached either because no opportunity existed, or because AngioScore was not entitled to Konstantino's intellectual property as a matter of law.
Following a six-day bench trial on AngioScore's claims, the parties submitted proposed findings of fact and conclusions of law. (Dkt. Nos. 643 (AngioScore's Opening Post-Trial Brief ("AOB"), 645 (Defendants' Opening Post-Trial Brief ("DOB"), 649 (AngioScore's Post-Trial Reply Brief ("ARB"), 650 (Defendants' Post-Trial Reply Brief ("DRB")).) Specifically, those claims pertain to Konstantino's breach of fiduciary duty; that Quattro and TriReme aided and abetted the same; QT Vascular is a successor in interest to Quattro and TriReme and therefore liable for their aiding and abetting; and finally, that defendants have violated California's Unfair Competition Law. Having reviewed the evidence of record, the arguments of the parties, and relevant case law, for the reasons set forth in these findings of facts and conclusions of law, the Court hereby
Since its founding in 2003, AngioScore has designed, manufactured, and marketed specialty angioplasty balloon catheters that are used for the treatment of cardiovascular disease. Its signature product line, sold under the brand name AngioSculpt, consists of an nylon balloon surrounded by a nitinol structure. The AngioSculpt is sold in an array of dimensions and lengths to meet varying patient needs, although the structure of the balloon and cage remain unchanged in all material respects at each available sizing option. The purpose of the AngioSculpt is to treat cardiovascular disease, whereby plaque deposits along a blood vessel's wall, forming what are called lesions. The plaque deposits harden and block, or occlude, blood flow, with potentially severe health risks. The AngioSculpt is used to open occluded or narrowed blood vessels at lesion sites by inflating the balloon to compress the plaque deposits against a vessel wall. As the balloon inflates, the AngioSculpt's nitinol wire cage expands. The expanded cage sits atop the balloon and impresses upon plaque, "scoring it," in an effort designed to "crack" the plaque and open the blood vessel, without injuring or puncturing the vessel wall. It is to this scoring feature that AngioScore owes its name. After use, the device can then deflate, returning to its original form, for removal from the patient's body.
Defendant Eitan Konstantino invented the AngioSculpt. An engineer by training with a doctorate in laser surface treatment, optical design, and materials science, Konstantino was a co-founder, President, and Chief Scientist of AngioScore, Inc. In this role, Konstantino sought to develop and bring the AngioSculpt to market, which involved gaining approval both in Europe and through the United States Food and Drug Administration ("FDA"). To accomplish these goals, Konstantino sought funding from investors, who in turn acquired seats on AngioScore's board of directors. Among those directors were Tom Raffin, a partner with the venture capital firm Telegraph Hill Partners, and Lisa Suennen, a partner at Psilos, another such firm.
In 2005, the board decided that Konstantino would be better suited to a role directed to research and development. Tom Trotter then became AngioScore's chief executive officer. When Trotter assumed the position, he and Konstantino discussed what role was most appropriate for Konstantino moving forward. In light of that conversation, Trotter offered Konstantino the role of Executive Vice President of Research and Development and Chief Scientific Officer.
AngioScore wanted Konstantino to remain on the AngioScore team because of his central role at the company as a co-founder, and his skill as an engineer. Konstantino, however, expressed a desire to leave and work full time as President and CEO of TriReme Medical, Inc., a company he had founded for the purpose of developing bifurcation stents. Accordingly, in the fall of 2005, Trotter started to look for a replacement for Konstantino. Both he and Konstantino interviewed the candidates. At the same time, Konstantino requested that he be given permission to work on a developing technology with TriReme: endovascular bifurcation stents and delivery systems for the same. Although bifurcation stents are not competitive with specialty balloon angioplasty catheters, AngioScore's board took this request seriously, ultimately adopting a resolution that granted Konstantino permission to pursue this limited goal, and waived AngioScore's interest in the bifurcation stent technology.
In late 2006, the role of AngioScore's Vice President of Research and Development transitioned from Konstantino to Feridun Ozdil. While the details remain unclear, the relationship between Konstantino and Ozdil soon became strained and culminated in a physical altercation. Both Konstantino and Ozdil are intelligent scientists, but both are egotistical and authoritarian. The "he said"/"he said" personality conflict was never resolved definitively.
In April 2007, Konstantino's employment with AngioScore terminated, although he remained on its Board of Directors. In his capacity as a board member, he continued to attend AngioScore's board meetings and received updates about AngioScore's financial well-being and the status of its new product development up until he was asked to resign in February 2010.
In the fall of 2009, Konstantino and his brother-like friend and colleague, Tanhum Feld, conceived of what was to become "Chocolate" during a telephone "brainstorming" session. Feld was discussing frame ideas for a balloon; Konstantino offered the notion of a balloon surface defined by pillows and grooves. The concept was that a nitinol cage would surround a nylon balloon. As the balloon inflated, it would protrude through the cage. The inflated balloon would then display a pattern of pillows and grooves, exerting force against plaque lining a vessel wall.
With the concept for Chocolate established, Feld undertook to engineer the device, directing and coordinating efforts of TriReme employees with Konstantino's approval. By October 2009, Konstantino applied for a provisional patent application, naming himself and Feld as co-inventors. Within just a few months, Chocolate had progressed from an intellectual concept to physical prototypes. In January 2010, Konstantino and other TriReme employees attended animal testing at Stanford for a Chocolate prototype.
Along with supervising and directing the employees at TriReme in their efforts to develop Chocolate, Konstantino assumed the role of the businessman, conceptualizing the marketing of Chocolate and pitching it to investors under the guise of a corporate entity called "Proteus." During the second half of 2009, Konstantino met with twenty to thirty investors, offering them the opportunity to invest in Chocolate. In these pitches, Konstantino represented that the Chocolate was being developed by "Proteus," and that Chocolate's intellectual property, design, prototypes, business model, team, and partnerships were all completed. With representations of this sort, he secured a grant from the Singapore Economic Development Board and continued to solicit additional investors.
The similarities between AngioSculpt and Chocolate are obvious. Both are specialty angioplasty balloon catheters. Both are comprised of a nylon balloon surrounded by a nitinol structure. Both are used to treat peripheral and coronary artery disease by inflating to open occluded blood vessels. Neither leaves any metal behind in a blood vessel after use, unlike a stent. Both are sold to the same customers and make overlapping marketing claims. Both are sold at premium pricing with roughly identical list prices. Given the similarities between the devices, Konstantino himself identified AngioScore as a partner for the Chocolate opportunity in investor presentations in 2009 and 2010.
Konstantino knew that the devices would compete with one another and contemporaneous documents show that not only did he so intend, but this information was used as part of his investment pitch. In pricing Chocolate, Konstantino and employees at TriReme purposefully priced Chocolate exactly $25 below the list prices for AngioSculpt and targeted the same customers. Communications between Konstantino, Feld, and TriReme employees and officers from late 2009 into 2010 confirm that all those involved with the development of Chocolate-Konstantino, TriReme, and Quattro — were purposefully seeking to compete with the AngioSculpt in the specialty balloon catheter market. This included touting Chocolate for all its competitive advantages, including its potential as a drug-eluting balloon.
While he directed the development of Chocolate as both a medical device and business opportunity, Konstantino nonetheless remained on AngioScore's board of directors. Pursuant thereto, he was privy to all manner of confidential financial information, market information, and competitive information regarding the performance of the AngioSculpt device and AngioScore's highly sensitive risk assessments. (PX 220 (July 2009 Board Meeting presentation, including strategic focus, discussions of business challenges).) He knew that AngioScore was having difficulty developing a 100mm version of its AngioSculpt as of July 2009. (Id.) And, he knew that the company was interested in pursuing a drug coated specialty balloon. (See PX 217 (February 21, 2009 email between board members discussing efforts to attain drug coated balloon technology); PX 220 (July 2009 board presentation outlining future business strategy including "extra long" devices of 100mm and a drug coated device).) In addition, Konstantino knew that the financial status of AngioScore in late 2009 to early 2010 was relatively strong. AngioScore was in a prime position to raise further capital, had considerable cash reserves, and was in the process of dedicating resources to improving its presence in the specialty balloon catheter market, even though it had just emerged from the expense of an unwarranted investigation. Indeed, AngioScore's December 2009 Monthly Report, distributed for the board meeting, reflected that cash on hand totaled $15.3 million. The report described this figure as an "[o]utstanding result." (DX 1199.) That AngioScore could have exploited the Chocolate opportunity, had it been offered, is not subject to reasonable dispute.
Notably, in December 2009, Konstantino had a conversation with AngioScore's CEO, Trotter, regarding TriReme's development of a plain old balloon angioplasty ("POBA") device called "Glider." At trial, both Trotter and Konstantino confirmed that this conversation took place. Konstantino told Trotter that TriReme was too small to commercialize the Glider product, and that he was in search of a funder. He offered the Glider to AngioScore for distribution purposes. In his deposition, Konstantino explained that conversation as follows:
(See Trial Transcript ("Trial Tr."
Trotter confirmed that when Konstantino revealed that TriReme had been working on the Glider, he expressed concern that TriReme was venturing into angioplasty balloons at all. Because Konstantino had presented TriReme's Glider as an ordinary POBA, however, the Glider would not be acutely competitive with AngioSculpt. Notably absent from this conversation was any mention of Chocolate, which had been in development for months, offered to others as a corporate opportunity, and was about to undergo porcine testing.
After sitting through the February 3, 2010 AngioScore board meeting, Konstantino approached Trotter and asked to meet privately. Referencing the December 2009 conversation in which he had offered AngioScore the Glider POBA balloon, Konstantino told Trotter that TriReme was "considering developing a specialty balloon catheter for peripheral indications," and that TriReme had been actively working on "something for the future" in specialty balloon catheters. To say that Konstantino "downplayed" the facts surrounding Chocolate would be an understatement. Konstantino did not inform Trotter that the development of TriReme's specialty balloon, which by that point had been called Chocolate for several months, was well underway. He did not disclose his personal role in the development and conceptualization of the device, nor did he disclose that a prototype had been created, a patent application and been submitted, animal testing had occurred, or that he had already engaged potential investors and funding sources. Trotter was nonetheless shocked by this news. Specialty balloons were AngioScore's focus. He was of the belief that prior to that point, TriReme had been focusing on bifurcation stents and had only recently started to consider POBA devices, and even then, only the Glider POBA. Trotter informed Konstantino that he did not think further discussion was appropriate and asked him to leave.
Immediately following that meeting, Trotter relayed the conversation with Konstantino to members of AngioScore's board. The board expressed a universal belief that Konstantino should resign as soon as possible. If TriReme developed a specialty balloon, Konstantino would have direct a conflict of interest. The board was concerned that TriReme was considering potentially competing with AngioScore. At that point, no one at AngioScore knew that a competitive specialty balloon device had been developed under Konstantino's direction and control.
The next day, Trotter sent Konstantino an email entitled "Board of Directors Position," copying AngioScore's attorney, John Sellers. In it, Trotter restated his concerns about TriReme moving into the specialty balloon market, and stated that the board members with whom he had spoken saw this as a "clear conflict of interest." The "consensus opinion" was that Konstantino "need[ed] to resign from the Board immediately [and] probably should not have participated in yesterday's Board Meeting." Trotter told Konstantino that Sellers would be in touch to make arrangements for his resignation.
Konstantino's response was brief. Again, he did not disclose the existence, or development status of the Chocolate device, nor did he disclose his intimate involvement with the project. Rather, and importantly, he began his campaign of active misdirection. Thus, he responded: "TriReme has not made any decision to make such [a] change and I was giving you very early heads up to
On February 4, 2010, John Sellers responded to Konstantino in an email. Sellers informed Konstantino that "e[]ven if you are just contemplating . . . you have important fiduciary duties [and] ongoing confidentiality obligations." Later that day, the two men spoke on the telephone for five to ten minutes. Sellers again emphasized Konstantino's fiduciary obligations to AngioScore as a director, including that a conflict of interest would exist if TriReme developed a potentially competing technology. They also discussed the logistics of Konstantino's resignation from the Board.
The next day, February 5, 2010, Konstantino replied to Sellers, copying Trotter, Suennen, and Raffin:
(PX 107 (emphasis supplied).) To investigate the issue further, Suennen reached out to former AngioScore CEO, co-founder, and one of AngioScore's largest common stockholders, Ephraim Heller, to discuss filling Konstantino's board seat and to find out whether Heller knew if Konstantino was working on a new specialty balloon catheter at that time. (See DX 1292.) Although Konstantino had done work previously that Heller suspected may have conflicted with his obligations to AngioScore, Konstantino had reassured him that all such activities had been precleared with AngioScore. Heller also stated that at that time, he believed that Konstantino was working to bring a "competitive product" to market, although it was not clear whether such device was the Glider, of which AngioScore was already aware, or whether it was a specialty balloon. Suennen also spoke with Mike Lynn, a TriReme board member. Lynn stated that he had no knowledge or recollection that TriReme was working on a specialty balloon catheter.
Based on the above, the board decided to investigate whether Konstantino or TriReme had in fact developed a competitive device. To that end, they questioned Konstantino pointedly. On February 10, 2010, John Sellers sent a letter to Konstantino entitled "Obligations to AngioScore, Inc." (PX 419.) Knowing only of the Glider, AngioScore's board sought information relative to whether Konstantino had been working on a device that built off of the Glider model, such as for example adding a metal cage around the balloon structure. The top paragraph on the second page reads:
AngioScore acknowledged that as of the date of Konstantino's resignation, he and TriReme had "every right going forward to develop products that may compete with AngioScore as long as you do not use or disclose AngioScore['s] confidential information or intellectual property." (Id.) Nonetheless, Sellers requested that Konstantino confirm that no such activities took place while Konstantino was on AngioScore's board: "we respectfully request that you promptly provide the AngioScore Board of Directors further information regarding these activities in order to allow the Board to assess whether they are competitive to AngioScore." (Id.)
In response, Konstantino's counsel sent a letter on February 23, 2010 in which Konstantino disavowed any development of a specialty balloon by TriReme and affirmed that he had no role in the development of any such device. Specifically, Konstantino's counsel reiterated that prior to Konstantino's resignation on February 5, 2010, he was not "involved in
Although the board had no factual basis at the time for believing that such representations were false, Konstantino's letter was technically non-responsive to Sellers's original question and accordingly, AngioScore continued to pursue the matter.
In an email to the board, Trotter asked for opinions and feedback on Konstantino's response, and speculated that Konstantino may have been involved in developing a scoring version of Glider to compete with AngioScore in the future.
AngioScore continued to investigate its concerns regarding Konstantino's involvement developing a competitive product with Konstantino directly. Sellers followed up with another letter on March 5, 2010 directed to counsel for Konstantino, and the boards of both TriReme and AngioScore. In it, Sellers remarked that previous representations by Konstantino had avoided squarely addressing AngioScore's concern, namely, that during Konstantino's service as a board member, he:
(PX 421 (emphasis supplied).) Sellers further stated that AngioScore's board "specifically would like to know whether prior to February 5, 2010, Mr. Konstantino and/or TriReme evaluated, negotiated, or otherwise pursued the acquisition or licensing of any technology that competes with AngioScore's products, and if so, why that opportunity was not provided to AngioScore in accordance with Mr. Konstantino's duties as a Board member of AngioScore." (Id.)
Again, counsel for Konstantino responded, unequivocally and unambiguously denying that any such activity had taken place. Characterizing AngioScore's questioning as predicated on "unsubstantiated accusations" against Konstantino, counsel informed AngioScore that should such accusations continue, Konstantino will "have no choice but to consider his legal options." (PX 423.)
With that, AngioScore considered its inquiry complete. Konstantino's representations had sufficiently assuaged any and all concerns about whether he or TriReme had developed a specialty balloon. AngioScore was satisfied that nothing of the sort had occurred. Based on the nature and strength of Konstantino's representations, a reasonable person would have come to the same conclusion.
AngioScore only learned that Chocolate existed a year and a half later, in the second half of 2011, when a sales representative called the Washington Hospital Center and heard that a presentation had been made on a new device called "Chocolate." However, it was only after Feld's deposition in the spring of 2014, in connection with AngioScore's patent case, that AngioScore discovered all of the facts referenced above evidencing that Chocolate had been developed while Konstantino sat on AngioScore's board. That discovery yielded the claims herein addressed.
The corporate opportunity doctrine "represents but one species of the broad fiduciary duties assumed by a corporate director or officer." Broz v. Cellular Info. Sys., Inc., 673 A.2d 148, 154 (Del. 1996). As a fiduciary of a corporation, directors agree to "place the interests of the corporation before his or her own in appropriate circumstances." Id. "At the core of the fiduciary duty is the notion of loyalty—the equitable requirement that, with respect to the property subject to the duty, a fiduciary always must act in a good faith effort to advance the interests of his beneficiary." In re Mobilactive Media, LLC, No. CIV.A. 5725-VCP, 2013 WL 297950, at *21 (Del. Ch. Jan. 25, 2013) reargument denied, No. CIV.A. 5725-VCP, 2013 WL 1900997 (Del. Ch. May 8, 2013) (citing Dweck v. Nasser, 2012 WL 161590, at *12 (Del. Ch. Jan. 18, 2012)).
Noting that corporate directors stand in fiduciary relationship to the corporations they serve, the Delaware Supreme Court recognized in Guth v. Loft, Inc., 5 A.2d 503 (Del. 1939) that:
Id. at 510. The corporate opportunity doctrine seeks to define the bounds of this duty where a director may be inclined to take a business opportunity for him or herself. See id. The rule enunciated in Guth is this:
Id. at 510-11. Thus, under Delaware law, "[t]he elements of misappropriation of corporate opportunity are: (1) the opportunity is within the corporation's line of business; (2) the corporation has an interest or expectancy in the opportunity; (3) the corporation is financially able to exploit the opportunity; and (4) by taking the opportunity for his own, the corporate fiduciary is placed in a position inimical to his duties to the corporation." In re Mobilactive Media, 2013 WL 297950, at *21. Once the plaintiff has shown the breach of the director's duty of loyalty, the burden switches to the fiduciary to show that he or she did not seize a corporate opportunity "because either the corporation was presented the opportunity and rejected it, or because the corporation was not in a position to take the opportunity." Grove v. Brown, No. 6793-VCG, 2013 WL 4041495, at *8 (Del. Ch. Aug. 8, 2013). Delaware courts further recognize that "a director or officer may take a corporate opportunity if: (1) the opportunity is presented to the director or officer in his individual and not his corporate capacity; (2) the opportunity is not essential to the corporation; (3) the corporation holds no interest or expectancy in the opportunity; and (4) the director or officer has not wrongfully employed the resources of the corporation in pursuing or exploiting the opportunity." Broz, 673 A.2d at 155 (emphasis omitted).
The rule set forth in the Delaware cases accords with economic and public policy, and civic accountability. Put simply, men are not angels. We require structures to govern conduct. See FEDERALIST NO. 51. The corporate structure necessarily requires a separation of ownership and control, which produces a conflict: the shareholders are the principle bearers of risk, but the board of directors are vested with the power to make managerial decisions. (See Trial Tr. at 646:7-21 (Testimony of Prof. Eric Talley).) Centralizing decisionmaking authority in a board of directors presents efficiencies insofar as shareholders can diversify their interests, which, in turn, has contributed to substantial economic growth and development. (Id. at 646:22-647:21.) However, the concentration of decisionmaking power in individuals who do not necessarily bear the risk creates a misalignment of interests. (Id. at 647:23-649-9.) The general purpose of corporate governance principles, specifically, the duties of care and loyalty, is to control for the moral hazards that arise when directors either shirk their responsibilities or self-serve. (Id. at 649:10-650:25.) Without strong corporate governance principles, the trust that underpins a shareholder's decision to invest will dissolve, with broader economic consequences to follow. (Id. at 651:17-652:10.)
Whether a corporate opportunity has been usurped is "a factual question to be decided by reasonable inferences from objective facts." Guth, 5 A.2d at 513.
Throughout this case, defendants have argued that the corporate opportunity doctrine cannot apply where, as here, a director invents a technology, even where such technology is directly competitive with that of the corporation he serves. Defendants maintain that because Chocolate was intellectual property belonging to Konstantino and the product of his own innovation, this necessarily obviates any fiduciary obligation to offer Chocolate to AngioScore. (DOB at 2-3.) The Court disagrees.
The fact of inventorship does not absolve a director of his fiduciary obligations with respect to inventions he may develop that compete with the corporation he serves. To hold otherwise would work an absurdity. Directors of corporations would be free to invent and develop competing technologies for their own benefit, concealing the same from the companies they serve, even where elements of those inventions would likely benefit the companies. This scenario stands in stark opposition to the foundational principles of corporate governance, which demand that directors exalt the interests of the companies they serve above their own. Guth, 5 A.2d at 510 ("the rule . . . demands of a corporate officer or director, peremptorily and inexorably, the most scrupulous observance of his duty, not only affirmatively to protect the interests of the corporation committed to his charge, but also to refrain from doing anything that would work injury to the corporation, or to deprive it of profit or advantage which his skill and ability might properly bring to it, or to enable it to make in the reasonable and lawful exercise of its powers."). Most seriously, the extension of defendants' preferred rule would have directors entertain divided loyalty. The position is untenable. See id. ("[t]he rule . . . demands that there shall be no conflict between duty and self-interest"). The rule makes logical sense. A director can leave the corporation thereby dissolving the duties he owes. A corporation cannot and therefore relies on untarnished fidelity.
Defendants cite no case holding conclusively in their favor, but rather argue by analogy to Equity Corp v. Milton, 221 A.2d 494 (Del. 1966). That case is distinguishable. First, the facts of Milton counseled against a finding that the opportunity to that interest rightfully and in fairness belonged to the corporation. Milton, 221 A.2d 497; see also Thorpe v. CERBCO, Inc., No. CIV.A. 11713, 1993 WL 443406 (Del. Ch. Oct. 29, 1993) ("While courts have considered a number of criteria in evaluating whether a director has usurped a corporate opportunity, the essence of this doctrine is `that a director may not appropriate something for himself that in all fairness should belong to his corporation.'") (citing Milton, 221 A.2d at 497). Applying this standard, the Milton court determined that the claimed opportunity was not, in fairness, one belonging to the corporation — it was not of practical advantage to the corporation (see id. at 497), in keeping with the business of the corporation, nor did it fit into an established corporate policy (see id.). Having laid this foundation, the court stated, "if any doubt remains," the shares that had previously been controlled by Milton were later reacquired by him; simply put, the entire transaction from start to finish concerned Milton's property. Essentially, because there was nothing wrong with a corporate officer owning and controlling stock of his corporation, the court found that the duty of loyalty is not violated when a director shifts that ownership as he sees fit. (Id. at 498-99.) Thus, there was conclusively no corporate opportunity at issue in Milton.
The logic enunciated in Milton does not compel a finding in defendants' favor here. The essential question is whether a director has appropriated something for himself that, in all fairness, should belong to his corporation. The determination of this question is always one of fact to be determined from the objective facts and surrounding circumstances. Johnston v. Greene, 121 A.2d 919, 923 (Del. 1956). Here, the Court is confronted with facts establishing that Konstantino, aware of AngioScore's competition-sensitive information, its then-existing financial condition, design challenges, and business objectives, developed a competing device while on AngioScore's board and took affirmative steps to exploit it himself while concealing it from AngioScore. At the same time, Konstantino was aware that he owed AngioScore fiduciary duties. On these facts, that Konstantino invented the competitive technology does not serve his argument that he should be absolved of his fiduciary obligations to AngioScore. Rather, it works the opposite effect: Konstantino's failure to abide by his duty is plainly all the more offensive. For these reasons, the Court finds that it cannot indulge defendants' position and find that the corporate opportunity doctrine does not apply.
At the same time, AngioScore's position is equally untenable. AngioScore posits that by virtue of Konstantino's position as a director, AngioScore had a right to the Chocolate outright, and that therefore Konstantino was obligated to give the opportunity to AngioScore. The logical extension of this position demonstrates its implausibility. Were this the case, Konstantino's invention assignment agreement would have been superfluous in the first instance, and so, too, would all invention assignment agreements between directors and the corporations they serve. The Court cannot overlook the effect such a rule would work in the context of intellectual property and emerging technologies. Critically, holding that directors who are also innovators must relinquish to the corporations they serve technologies falling within that corporation's line of business, in which the corporation has an interest or expectancy, or which aligns with its business purpose and objectives, would serve to undermine innovation. Indeed, holding as AngioScore requests would subvert fundamental principles of intellectual property respecting inventors' rights, which are designed to encourage, not discourage, ingenuity and innovation. The fact that this case concerns a medical device, which is currently being used in medical procedures in this country, only serves to underscore the public interest in innovation.
With these positions, the parties posit a tension: do fiduciary duties extend so far as to compromise, potentially fatally, innovation; or, by contrast, does a director's ingenuity and innovation provide an escape route from his fiduciary duties? Neither extreme prevails. A court must apply the principles of the law in such a way that balances the wise public policy behind the Guth rule, with the public policy counseling in favor of innovation. For this reason, the Court finds that although AngioScore was owed fiduciary duties by Konstantino, those duties did not entitle AngioScore to outright ownership of the Chocolate opportunity at any point in time. Rather, what Konstantino's fiduciary duty demanded was that he offer AngioScore the opportunity to acquire the rights to the Chocolate. The Court need not venture as to specifics of such a transaction, but having chosen to remain on AngioScore's board, the offering must occur to satisfy both the law of fiduciary duties and the public interest in innovation. Offering an opportunity to AngioScore meets Delaware's demand that directors not undertake any activity that would work harm to the corporation they serve and prioritize the interests of those corporations above their own. See In re Mobilactive Media, LLC, 2013 WL 297950, at *21 ("At the core of the fiduciary duty is the notion of loyalty . . . with respect to the property subject to the duty, a fiduciary always must act in a good faith effort to advance the interests of his beneficiary."). It also accords with directors' duty not to "do anything" that would "deprive" the corporations they serve "of profit or advantage which [their] skill and ability might properly bring to it." Guth, 5 A.2d at 510. And, it remains faithful to the general principle that a director can establish conclusively no breach of his fiduciary duty where, in keeping the interests of the corporation he serves first in mind, the corporation is presented the opportunity and rejects it. See Grove, 2013 WL 4041495, at *8. By ensuring that transparency and good faith predominate, the application of the rule in this manner assures that any conflict will be resolvable.
Longstanding law requires that certain "opportunities" be offered to the corporation. The definition of an "opportunity" is "a favorable juncture of circumstances" or "a good chance for advancement or progress." MERRIAM-WEBSTER, New Collegiate Dictionary (9th ed. 1988). The evidence adduced in this case establishes conclusively that as of the date Konstantino resigned from AngioScore's board of directors, Chocolate was a concrete business opportunity. By that point, Chocolate had developed from a mere idea into a concrete opportunity. It had been in development for approximately five months. The initial "brainstorming" discussions in the second half of 2009 had resulted in the creation of many engineering design models, followed by physical models and prototypes. By January of 2010, the Chocolate design was so complete that prototypes were suitable for testing, and in fact, was the subject of a porcine study at Stanford, which TriReme employees and Konstantino attended.
Not only was Chocolate sufficiently developed to enable testing, development of Chocolate had advanced to the point that Konstantino felt it appropriate to market it as an opportunity for investors. The fact that much development remained is no relevant to whether the opportunity had already manifested. Defendants cannot escape that during the second half of 2009, Konstantino offered between twenty and thirty investors the opportunity to invest in Chocolate. In preparation for investor meetings, Konstantino prepared slide presentations in which he described the Chocolate technology, extolled its competitive, medical virtues, and delineated the phases for potential investment. In a November 2009 presentation seeking funding from the Singapore Economic Development Board, Konstantino stated that the Chocolate "IP, Concept design, Prototypes, business model, Team, [and] partnerships" were all "completed." In furtherance of his financial objectives, Konstantino corresponded with potential investors. In such communications, he represented that Chocolate's "initial design already works well and attracts a lot of attention" and that Chocolate's product design was completed.
Such claims were not mere puffery designed to solicit investment. In early 2010, design of the Chocolate was essentially complete. Indeed, Chocolate's 510K application in 2011 referenced testing completed on Chocolate's nitinol cage designs created in January 2010. Based on these facts, that Chocolate had been developed to the point sufficient to render it a concrete business opportunity prior to Konstantino's resignation from AngioScore's board of directors cannot be reasonably disputed. If the Chocolate opportunity was sufficiently concrete for twenty to thirty investors, it was sufficiently developed to be offered to AngioScore. The Court so finds.
An opportunity is within a corporation's line of business if it is "an activity as to which [the corporation] has fundamental knowledge, practical experience and ability to pursue, which, logically and naturally, is adaptable to its business having regard for its financial position, and is one that is consonant with its reasonable needs and aspirations for expansion." In re Mobilactive Media, 2013 WL 297950, at *21 (citing Guth, 5 A.2d at 514). This factor is to be broadly construed. Id. (citing Dweck, 2012 WL 161590, at *13).
The Court finds that Chocolate falls within AngioScore's line of business. Since its founding in 2003, AngioScore has designed, manufactured, and marketed angioplasty balloon catheters surrounded by a nitinol structure that are used for the treatment of cardiovascular disease and sold under the brand name AngioSculpt. The evidence demonstrates conclusively that AngioSculpt and Chocolate are similar in both purpose and function. AngioSculpt and Chocolate are both angioplasty balloon catheters consisting of a nitinol cage surrounding a semi-compliant balloon. Both are used to open occluded or narrowed blood vessels at lesion sites by inflating to compress plaque deposits against the vessel wall and then deflating for removal from the patient's body. Both devices were cleared by the FDA with overlapping indications for use. Indeed, there are no indications for which the peripheral Chocolate device is cleared that the peripheral AngioScore device is not and the devices make similar marketing claims. Both specialty balloons and as such, enjoy premium pricing over that of plain old balloon angioplasty (POBA) products. In fact, Chocolate is priced at $25 per unit less than the AngioSculpt. Moreover, as set forth in more detail below, Chocolate is a competitor to the AngioSculpt with a common customer base.
Under Delaware law, the "line of business" element is to be broadly construed. The Court finds it met here. The similarities in terms of purpose and function establish that AngioScore had "fundamental knowledge and practical experience" to pursue Chocolate. That AngioScore has historically focused on products that "scored" plaque is of no moment, for the devices are materially similar and their differences amount to variations on a common theme. For example, both devices are comprised of nylon balloons encased in nitinol cages. No other specialty balloons on the market use nitinol cage on a semi-compliant balloon — the Boston Scientific Cutting Balloon uses surgical steel, and the Vascutrak uses stainless steel guide wires.
Based on the above findings, the conclusion is inescapable that Chocolate is "logically and naturally . . . adapt[ed] to [AngioScore's] business." See In re Mobilactive Media, 2013 WL 297950, at *21 (citation omitted).
"[F]or a corporation to have an expectant interest in any specific property, there must be some tie between the property and the nature of the corporate business." Grove, 2013 WL 4041495, at *8 (internal quotes omitted). By requiring "a tie to the `nature of the corporate business,'" this factor "implicates many of the issues" discussed above concerning AngioScore's line of business. See Beam ex rel. Martha Stewart Living Omnimedia, Inc. v. Stewart, 833 A.2d 961, 973 (Del. Ch. 2003) (citing Broz, 673 A.2d at 156). Even if there is a "tie" between the line of a corporation's business and the potential opportunity, however, the Court may decline to find an interest or expectancy where facts establish that a corporation is shifting away from its historical line of business, where it disavows such interest, and where it lacks the capacity to capitalize on the interest. In Broz, for example, the Delaware Supreme Court found that there was no interest or expectancy where a corporation was divesting in the area of venture from which the potential opportunity arose, and where its business plan did not contemplate any new acquisitions. Broz, 673 A.2d at 156. The inquiry requires a court to use its judgment to discern whether, given the factual context of each particular case, the corporation had an interest, "actual or in expectancy," or whether the acquisition of property for a director's own use "may hinder or defeat the plans and purposes of the corporation in the carrying on or development of the legitimate business for which it was created." Johnston, 121 A.2d at 924 (citations omitted) (emphasis in original).
As detailed in the preceding discussion, the Court finds that "some tie" exists between Chocolate and the nature of AngioScore's business. The devices are both angioplasty balloon catheters that serve similar purposes and are constructed from the same materials. Well beyond the loose connection that the "some tie" standard evokes, however, the Court finds that in 2009 and early 2010, AngioScore had an actual and expectancy interest in Chocolate by virtue of its then-existing needs and business purposes, as well as Chocolate's unique features and potential benefits to AngioScore. The Court so finds for three main reasons: (1) Chocolate's design configuration could have proven helpful, and at a minimum, would have been seriously considered in solving AngioScore's then-existing problem with creating AngioSculpt devices at 100mm lengths; (2) Chocolate's potential as a drug-eluting specialty balloon technology was in keeping with AngioScore's business goal to bring such a device to market; and (3) AngioScore had an interest in keeping a direct competitor out of the relatively small specialty balloon market. Collectively, these conclusions compel a finding that AngioScore had an interest and expectancy in Chocolate as of, at the latest, the date Konstantino resigned from its board. The Court elaborates:
First, in late 2009, AngioScore needed a balloon design amenable to longer length catheters. AngioScore was facing design challenges with its 100mm AngioSculpt. At the same time, drawings and prototypes of 100mm Chocolate balloons existed. Jeffrey Bleam, AngioScore's Vice President of Research and Development, explained the company's difficulty executing its 100mm AngioSculpt balloon. Part of the engineering challenge had to do with ensuring that the balloon would inflate uniformly while inside the nitinol cage. In the longer lengths, the balloon was less likely to inflate uniformly every time. The concern was that uneven inflation would result in an uneven distribution of force, jeopardizing the safety and effectiveness of the device. The company devoted significant resources to resolving this problem. Although research began in 2009, AngioScore did not release a 100mm balloon until 2011. Even as AngioScore finalized its first generation 100mm AngioSculpt, there remained issues with deployment. The company then devoted further engineering resources to design a second generation balloon. Ultimately, the engineering team discovered that by adding cross-lengths to the metal struts, they were able to ensure more even deployment of the balloon. The second generation 100mm balloon was released in 2013, presenting the critical cross-struts.
Had AngioScore known about the importance of the cross-struts back in 2009 and 2010, it likely never would have released the first generation 100mm AngioSculpt. To that end, the Chocolate's design would have been of considerable help. The cross-lengths added to the AngioSculpt 100mm resemble, at least conceptually, those which present as radial struts on the Chocolate device, and which had been a part of the Chocolate design since its early development in 2009. Bleam testified that had he gained access to the Chocolate, its unique elements could have benefitted the design of the 100mm AngioSculpt. He stated that the radial strut configuration was "pretty interesting, specifically," and its cross-application was relatively obvious. Accordingly, the Court finds it plausible that Chocolate's design would have aided AngioScore's pursuit of a 100mm balloon.
Second, the Court finds that Chocolate's avowed potential as a drug-eluting specialty balloon as of late 2009 accorded with AngioScore's business goal of bringing a drug-eluting balloon to market, and AngioScore would have therefore been interested in such technology. As a member of AngioScore's board, Konstantino knew that AngioScore's strategy included bringing drug-eluting balloon to market. In fact, the issue was discussed at AngioScore's 2010 board meeting, which Konstantino attended. (See PX 246 (AngioScore February 2010 Board Meeting presentation, giving overview of then-existing cash balance, notably above budget, research and development items, including drug-coated devices).) The fact that Konstantino was soliciting investments upon representations that Chocolate was an "ideal platform for drug delivery" (see PX 85) establishes conclusively that Chocolate would have aligned with AngioScore's stated business objectives, long-term research and development plan, and business purpose. Moreover, Konstantino's attendance at AngioScore's board meetings confirms that he both knew and understood AngioScore's desire to enter this portion of the market.
Third, the Court finds that based on the evidence adduced at trial, AngioScore would have been interested in Chocolate because rejecting the Chocolate opportunity carried financial implications for the company: namely, the potential entry of a competitive device into the specialty balloon catheter marketplace and a likely reduction in AngioScore's market share. In so finding, the Court notes that AngioScore competes in a relatively small, specialty balloon catheter market. In late 2009 and early 2010, there were only two general types of balloon catheters in the specialty balloon market — those that scored or cut, as in the case of the Boston Scientific Cutting Balloon and the AngioSculpt, and the Vascutrak, which possesses stainless steel guide wires. The market was thus defined by the nature of the devices then available. Chocolate presented a paradigm-shifting design: a cage designed to create pillows and grooves in such a way as to create focal force on the balloon surface as it pushes through the openings in the cage. The entry of such a device into a small, competitive marketplace previously limited to devices whose purpose was to have metal come into contact with a vessel wall would have significant implications for revenues. As a young company, revenue growth was a primary concern for AngioScore. (See Trial Tr. at 488:17-22; 489:15-490:4 (Raffin).) The business judgment revealed during the course of testimony, in combination with common sense, leads the Court to conclude that AngioScore would not have simply done nothing had Chocolate been offered in a timely fashion.
Defendants advance primarily three arguments in opposition to the interest and expectancy element. (See DRB at 7-8.) The Court finds none persuasive based on the evidence in this case. First, defendants argue that AngioScore would have rejected Chocolate because it was focused singularly on developing the AngioSculpt line of scoring balloons. Second, defendants argue that AngioScore disclaimed any interest in Chocolate when Konstantino's invention assignment agreement terminated at the conclusion of his employment with AngioScore, and relatedly, that the only entities with legally cognizable interests in Chocolate were Konstantino and Feld, Chocolate's inventors. Third, defendants maintain that AngioScore would have passed on the Chocolate opportunity due to personality conflicts with Konstantino. The Court addresses, and rejects, each in turn.
As to the first argument, for the reasons set forth above, the Court is not convinced that AngioScore would not have been interested in Chocolate. Put differently, the Court is not persuaded that AngioScore would have refused the opportunity. The fact that Chocolate does not engage in an identical mechanism of action to that of the AngioSculpt is not enough to overcome the weight of evidence supporting the Court's finding that AngioScore would have been interested in Chocolate.
Defendants argue that AngioScore's 2009 rejection of an unnamed scoring device establishes that AngioScore would not have been interested in Chocolate. AngioScore's mid-2009 rejection of a new scoring balloon was based in part on Trotter's belief that there was no strong need to add another scoring device to the market. (See DX 1099.) The Court is not convinced that this decision bears on whether AngioScore had an interest or expectancy in Chocolate. The opportunity presented in early 2009 related to another concrete product. AngioScore was permitted to evaluate the design features. In light of this concrete opportunity, Trotter explained that AngioScore declined to pursue the proposed technology because "there was nothing particularly impressive about it." (Trial Tr. at 627:25-628:1 (Trotter direct).) He further added that he "didn't see that there was any innovation there that would be valuable to AngioScore." (Id. at 628:1-2.) The fact that Chocolate represented a new concept — focal force through the creation of balloon pillows, rather than scoring — sets it apart from the opportunity AngioScore contemplated and rejected. Moreover, as set forth above, AngioScore would have been interested in Chocolate for its presentation of longer lengths and for its potential as a drug-eluting device.
Defendants further rely on answers board members provided in response to a survey conducted by a consultant, Sarah Lugaric. Board members were directed to answer the following question: "Do you support acquiring another company, technology, or product line? (yes/no, timing, description)." The board's responses fell onto a spectrum — some directors were open to it, others less so. Three of the seven directors were opposed to acquiring another company, technology, or product line; four indicated that they would be open to it with certain reservations. Defendants seize on these answers to argue that the board never would have been interested in Chocolate. The Court disagrees. First, the Lugaric question was hypothetical and abstract. Second, the question related to members' inclination to acquire more than simply a new product-it also concerned whether the members would be interested in the acquisition of another company. The directors were not considering a concrete, potentially paradigm-changing technology. They did not know that Chocolate existed. The answers to this survey thus cannot undermine the Court's finding that AngioScore had an interest or expectancy in the Chocolate.
Defendants' second argument reduces to this: AngioScore did not renew Konstantino's invention assignment agreement. Therefore, AngioScore had no interest in Konstantino's inventions. Chocolate was one such invention. Therefore, AngioScore had no interest in Chocolate. (DRB at 7.) Under the terms of an invention assignment agreement and as a matter of contract law, this would appear to make sense. However, the rights and obligations to which parties agree in the context of an employee/employer invention assignment agreement are fundamentally different from the nature of the issue presented here: whether, in developing Chocolate, and secreting it from the corporation he served for his own personal benefit, Konstantino violated his duty of loyalty to AngioScore. Simply because AngioScore would no longer automatically have property rights in anything Konstantino invented does not obviate Konstantino's obligation to adhere scrupulously to his duty to place the interests of AngioScore above his own financial gain. The lack of an invention assignment agreement does not absolve a director of his fiduciary obligations with respect to inventions he may develop that compete with the corporation he serves. To hold otherwise would undermine the basic fabric upon which the duty is based.
Last, defendants maintain that AngioScore would have passed on the Chocolate opportunity due to personality conflicts between Konstantino and members of the AngioScore board. Throughout the trial in this case, the defense returned to its theory that at some point between 2006 and 2010, members of AngioScore's board had essentially blacklisted Konstantino. While the Court agrees that personality conflicts may have existed, defendants' resort to overstatement undermines their credibility and any relevance the true facts might have had. With the exception of Ozdil, with whom Konstantino had previously had an altercation, and possibly Tom Trotter, who was less than pleased to hear that in December 2009 Konstantino and TriReme were embarking on building a POBA (the Glider), the Court finds that Konstantino was generally well-regarded and respected by his other fellow board members in the time period leading up to his resignation. No board members who testified stated that prior to the events giving rise to this litigation, they had anything but amicable and professional interactions with Konstantino. None witnessed any effort by any other board member to push Konstantino off the board, nor did any board member witness any hostility between AngioScore and Konstantino. No evidence, besides Konstantino's ruminations, supports any inference that board members possessed anti-Semitic feelings toward Konstantino. Board members Raffin and Suennen testified credibly that no one harbored such feelings and that they themselves are Jewish. Konstantino's claim that he was ostracized at AngioScore is further undermined by evidence that AngioScore's CEO, Trotter, was helping Konstantino further his non-AngioScore business pursuits, including fundraising for TriReme, around the same time Konstantino and Feld were developing Chocolate. Specifically, in August of 2009, Trotter emailed Ivan Pirzada in an attempt to get Konstantino funding. (PX 234.) In December 2009, Trotter sent Konstantino a tip on potential funders for TriReme. (PX 241.) The Court thus finds that there is no merit to Konstantino's claim that AngioScore would not have worked with him on Chocolate. Furthermore, and to state the obvious, personality conflicts between board members do not obviate their fiduciary duties to the companies they serve. The law expects and demands that board members rise above such concerns.
Accordingly, the Court finds that AngioScore had an interest and expectancy in the Chocolate opportunity.
The Court finds that AngioScore had the financial ability to exploit Chocolate. In so finding, the Court is mindful that under Delaware law, this prong implicates broader policy concerns more favorable to the corporation. Such concerns stem from the inherent conflict between, on the one hand, a director who has control and responsibility for the financial security of the corporation he serves, and on the other hand, the director's potential personal interest in ensuring that the company not have secured financial footing so as to permit usurpation of what otherwise might be a corporate opportunity. Thus, once the plaintiff has made such a prima facie showing of financial ability, a fiduciary "faces a significant burden in establishing that a corporation was financially unable to take advantage of a corporate opportunity." Norman v. Elkin, 617 F.Supp.2d 303, 312 (D. Del. 2009) (citing Gen. Video Corp. v. Kertesz, No. 1922-VCL, 2008 WL 5247120, at *19 (Del. Ch. Dec. 17, 2008) (finding financial inability must amount to insolvency such that the company is practically defunct); but see Yiannatsis v. Stephanis by Sterianou, 653 A.2d 275, 279 (Del. 1995) (declining to adopt "the `insolvency-in-fact test'"; stating instead that courts should consider "a number of options and standards for determining financial inability, including but not limited to, a balancing standard, temporary insolvency standard, or practical insolvency standard")). Defendants have not established AngioScore's inability to capitalize on the Chocolate opportunity. To the contrary, AngioScore has established that it could have capitalized on Chocolate had Konstantino offered the opportunity.
Evidence regarding what it would have cost to develop Chocolate varies, but in all events, reflects an initial amount that fell below the amount of cash AngioScore had on hand at the end of 2009 and beginning of 2010. According to an email from November 17, 2009, Konstantino estimated capital requirement of approximately $3 million. (PX 70.) By May 2010, Konstantino had secured sufficient capital to pursue the Chocolate "all the way to first commercial sale"; the total raised to that point was $4.5 to 5 million. (PX 547; Belson dep., discussing Feb 2010 Chocolate presentation that placed the cost of developing Chocolate at roughly $2 million USD beyond the Singaporean EDB grant, PX 78).) Finally, with respect to the amount of money required to acquire an assignment of the intellectual property rights to Chocolate, the record places that value in the amount of $370,000 cash and a royalty of 5%. (Trial Tr. at 237:8-18.) In the event such right was acquired, however, there is nothing to suggest that AngioScore would have been obligated to develop Chocolate.
Based on the above figures, even assuming that Chocolate would have cost $5 million to develop, the Court finds that AngioScore was able to exploit this opportunity through several avenues. First, AngioScore had approximately $17 million cash on hand in October 2009, and in excess of $15 million cash on hand at the end of 2009. Second, as a going concern with existing relationships, AngioScore could have obtained funds from external investors, such as Oxford Finance, or other venture capital funds. In December 2009, for example, Oxford Capital expressed a willingness to lend between $10 and $20 million to AngioScore. Third, AngioScore could have redirected research and development money it was currently using to fix the design problems for its 100mm AngioSculpt product. This financial position existed notwithstanding the downsizing and resources expended in response to a Department of Justice investigation.
The practicalities of new technology companies further support the Court's conclusion. Konstantino himself admitted that startup companies in Silicon Valley, such as AngioScore and TriReme, are frequently short on cash and face the prospect of running out of money. He further stated that the fact that such a company is not "profitable" doesn't mean that the company is "not successful." For example, TriReme was not able to sell its Antares product, a stent, in the United States, and Antares made only negligible sales abroad. Despite TriReme's limited financial position, TriReme was able to develop Chocolate.
Based on the foregoing, the Court finds that AngioScore was able to exploit the Chocolate opportunity. Despite having been privy to AngioScore's confidential financial documents as a member of AngioScore's board of directors (see e.g., PX 246, February 2010 board meeting presentation including proposed budget, discussion of cash on hand), Konstantino never broached the subject of Chocolate with AngioScore.
The result of the above findings compels the conclusion that by taking the Chocolate opportunity for himself and companies he preferred, to the exclusion of AngioScore, Konstantino placed himself in a "position inimicable to his duties to the corporation." Broz, 673 A.2d at 155. In essence, he became a competitor to AngioScore. It is axiomatic that as such, absent some knowing waiver by AngioScore, Konstantino could never fulfill his duty of loyalty to AngioScore. Any financial gain Konstantino enjoyed stemmed from Chocolate's success in the limited specialty balloon market, in which AngioScore is a key player. Indeed, while sitting on AngioScore's board, Konstantino participated in a strategy where, by design, Chocolate would compete with AngioScore. Chocolate's price was explicitly tied to AngioSculpt pricing, i.e. exactly $25 less than AngioScore's products. That Chocolate was priced just below the AngioSculpt was intended to "drive rapid adoption" and "get faster uptick" in the specialty balloon catheter market. Moreover, Konstantino himself extolled the advantages of Chocolate compared to scoring balloons, including AngioScore's devices, as he sought to secure funding for Chocolate.
This factor is therefore met, as is each element of AngioScore's breach of fiduciary duty claim.
"A claim for breach of fiduciary duty accrues at the time of the wrongful act." Sutherland v. Sutherland, No. CIV.A. 2399-VCN, 2010 WL 1838968, at *8 (Del. Ch. May 3, 2010); see Pomeranz v. Museum Partners, L.P., No. CIV.A. 20211, 2005 WL 217039, at *8 (Del. Ch. Jan. 24, 2005). The parties agree as follows: (i) the relevant statute of limitations for breach of fiduciary duty claims is three years
Three bases for tolling exist under Delaware law: (1) the inherently unknowable doctrine (the "Discovery Rule"), (2) equitable tolling, and (3) fraudulent concealment. As set forth in Smith v. McGee, No. CIV.A. 2101-S, 2006 WL 3000363, at *3-*4 (Del. Ch. Oct. 16, 2006), the contours of each of these bases is as follows:
Id. (citing In re Dean Witter P'ship Litig., 1998 WL 442456 (Del. Ch. July 17, 1998)). Under Delaware law, tolling is proper only until a plaintiff is properly put on inquiry notice. "When plaintiffs are on inquiry notice, the statute of limitations begins to run. Inquiry notice does not require full knowledge of the material facts; rather, plaintiffs are on inquiry notice when they have sufficient knowledge to raise their suspicions to the point where persons of ordinary intelligence and prudence would commence an investigation that, if pursued, would lead to the discovery of the injury." Pomeranz, 2005 WL 217039, at *3 (citation omitted).
The Court finds tolling appropriate here based on the third of these theories: namely, Konstantino's purposeful, fraudulent concealment, although much of the analysis would also overlap with the first two approaches. Tolling is warranted because Konstantino "engaged in fraudulent concealment of the facts necessary to put [AngioScore] on notice of the truth." Albert v. Alex. Brown. Mgmt. Servs., Inc., No. CIV.A. 762-N, 2005 WL 1594085, *19 (Del. Ch. June 29, 2005). Specifically, Konstantino's "affirmative act[s] of concealment" in early 2010, during the time in which AngioScore sought information relating to whether he had developed a specialty balloon, constitutes "an `actual artifice'" that prevented AngioScore from gaining knowledge of the facts. In re Dean Witter, 1998 WL 442456, at *5 (citation omitted). Having reviewed the evidence of record and observed the testimony at trial, the conclusion is inescapable that letters authored by Konstantino's counsel contained intentional misrepresentations that were intended to put AngioScore "off the trail of inquiry." Id.
In Konstantino's February 3, 2010 meeting with Trotter, Konstantino told Trotter that TriReme was "considering developing a specialty balloon catheter for peripheral indications," and that TriReme had been actively working on "something for the future" in specialty balloon catheters. (Trial Tr. at 574:8-12; 602:22-25 (Trotter); see PX 107.) This conversation itself was deceptive in nature, for Konstantino did not in any way indicate that the development of TriReme's specialty balloon, which by that point had been called Chocolate for several months, was well underway. Nor did he disclose his personal role in the development and conceptualization of the device, that a prototype had been created, that animal testing had occurred, or that he had already engaged potential investors and funding sources.
Even lacking these details, the news of a possible specialty balloon at TriReme resulted in an investigation led by AngioScore's lawyer. Trotter sent Konstantino an email entitled "Board of Directors Position," copying AngioScore's counsel, John Sellers. (PX 107.) In it, Trotter restated his concerns about TriReme moving into the specialty balloon market, and stated that the board members with whom he had spoken saw this as a "clear conflict of interest."
Konstantino then engaged in a series of communications intentionally designed to assuage AngioScore's concerns, disavowing that any such device existed or had been developed, much less that he had any personal role in the development of a specialty balloon. For example, in response to Trotter's email, Konstantino stated that "TriReme has not made any decision to make such a change and I was giving you very early heads up to
Thereafter, Konstantino continued in his misdirection. The next day, February 5, 2010, Konstantino wrote an email to Sellers, cc'ing Trotter, Suennen, and Raffin. (Id.) In it, he stated:
(Id. (emphasis supplied).)
The board nonetheless continued investigating whether Konstantino or TriReme had in fact developed a competitive device. At that point, Konstantino himself was the most authoritative source of information regarding what activities, if any, he had actually undertaken with respect to bringing a competitive product to market. Thus, the board undertook to ask Konstantino whether he had done so.
What followed were several letters from Konstantino, through counsel, in which Konstantino unequivocally refuted any notion that he had worked on a specialty balloon catheter, or that any such device had been developed, while he was on AngioScore's board.
In the first such letter, dated February 23, 2010. Konstantino's counsel specifically reiterated that prior to Konstantino's resignation on February 5, 2010, he was not "involved in
In response, AngioScore expressed concern that during Konstantino's service as a board member, he:
(PX 421 (emphasis supplied).) Again, Konstantino unequivocally and unambiguously denied that any such activity had taken place. (PX 423.) Characterizing AngioScore's questioning as predicated on "unsubstantiated accusations" against Konstantino, counsel informed AngioScore that should such accusations continue, Konstantino will "have no choice but to consider his legal options." (Id.)
At that point, Konstantino's representations had sufficiently assuaged any and all concerns about whether he or TriReme had developed a specialty balloon. AngioScore was satisfied that nothing of the sort had occurred. Given the nature and strength of Konstantino's representations, a reasonable person would have come to the same conclusion.
"Equitable exceptions to statutes of limitations are narrow and designed to prevent injustice." Pomeranz, 2005 WL 217039, at *13 (citations omitted). The equitable exception to the normal rule is warranted here. AngioScore acted diligently in its 2010 investigation. That Konstantino now disavows the intent of his obvious affirmative, misleading representations, particularly those cloaked in formality as letters from his attorneys, is self-serving and bears on his credibility for truthfulness.
Because Konstantino's artifice worked to his desired ends, the three-year statute of limitations cannot now shield him from AngioScore's claim. AngioScore was not on inquiry notice until it learned, in connection with the discovery in its patent case, that Chocolate had been developed before Konstantino left AngioScore's board. It filed this claim mere months after that. The claim is timely.
Under California law, "`[l]iability may . . . be imposed on one who aids and abets the commission of an intentional tort if the person (a) knows the other's conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other to so act or (b) gives substantial assistance to the other in accomplishing a tortious result and the person's own conduct, separately considered, constitutes a breach of duty to the third person.'" Casey v. U.S. Bank Nat'l Ass'n, 127 Cal.App.4th 1138, 1144 (2005) (citations omitted); Neilson v. Union Bank of California, N.A., 290 F.Supp.2d 1101, 1133 (C.D. Cal. 2003) (noting that California courts cite Restatement (Second) of Torts section 876 to hold that "liability may properly be imposed on one who knows that another's conduct constitutes a breach of duty and substantially assists or encourages the breach.") (citations omitted). AngioScore must establish that defendant corporations TriReme and Quattro actually knew of Konstantino's fiduciary duty breach. Casey, 127 Cal. App. 4th at 1145 ("[E]ven `ordinary business transactions' . . . can satisfy the substantial assistance element of an aiding and abetting claim if the [defendant] actually knew those transactions were assisting the [fiduciary] in committing a specific tort [breach of fiduciary duty]. Knowledge is the crucial element."). Additionally, "causation is an essential element of an aiding and abetting claim," and AngioScore must show that the aiders and abettors provided assistance that was a substantial factor in causing AngioScore's harm. Neilson, 290 F. Supp. 2d at 1135.
For corporations, "[i]t is the general rule that knowledge of an officer or director of a corporation will be imputed to the corporation." See Brown v. Brewer, No. CV 06-3731-GHK (JTLx), 2008 WL 6170885, at *7 (C.D. Cal. July 14, 2008) (quoting Teachers' Ret. Sys. of La. v. Aidinoff, 900 A.2d 654, 671 n.23 (Del. Ch. 2006)). California follows the well-established principle that the acts and knowledge of an officer or agent can be attributed to a corporation or principal. In re Cal. TD Inv. LLC, 489 B.R. 124, 129 (Bankr. C.D. Cal. 2013).
The Court finds that TriReme knew Konstantino's conduct constituted a breach of duty and gave substantial assistance or encouragement for Konstantino to persist in his breach. Accordingly, TriReme is liable for aiding and abetting Konstantino's breach of fiduciary duty.
First, the record is replete with evidence that TriReme employees provided substantial assistance to Konstantino at every step of the design and modeling process for Chocolate. While Konstantino remained on AngioScore's board of directors, TriReme engineers helped him develop and build the Chocolate device. Such individuals included Feld
Second, the Court finds that based on the evidence of record, TriReme employees and management knew that Konstantino was on AngioScore's board while such work was undertaken. The conclusion is all but inescapable that they knew Konstantino's work on Chocolate constituted a violation of his fiduciary duties as a board member. Throughout the later part of 2009 and early into 2010, TriReme employees, as well as Konstantino, knew well — indeed, intended — that Chocolate would compete with AngioScore, and that Konstantino remained on AngioScore's board of directors. As TriReme's CEO, Konstantino knew he owed AngioScore fiduciary duties solely by virtue of his board seat. (PX 101 (February 2009 letter Konstantino signed confirming that he remained bound by fiduciary duties as a director).) Pizarro, a former AngioScore engineer, knew AngioScore's line of business and knew that Konstantino was serving on AngioScore's board of directors while Chocolate work was done at TriReme. (Trial Tr. at 1028:17-23; 1093:25-1094:3.) Feld knew not only that Konstantino remained on AngioScore's board of directors and remained subject to fiduciary duties, and that Chocolate competed with AngioSculpt, but also that Konstantino had previously obtained a waiver from AngioScore for purposes of working on bifurcated stents with TriReme. Ong, TriReme's HR Manager, also knew that Konstantino remained on AngioScore's board while she helped him obtain financing for a product directly competitive with AngioScore's products.
The Court finds that during the development of Chocolate, Quattro existed as "Proteus," an unincorporated association. In March of 2010, "Proteus" incorporated under the name Quattro. For the reasons set forth below, the Court finds that Quattro/Proteus is liable for aiding and abetting Konstantino's breach.
First, Proteus was an "unincorporated association" that predated Quattro and was capable of being sued. Under California law, an "unincorporated association" is defined in California Corporations Code section 18035. Subsection (a) of that provision provides that an "Unincorporated association" is an unincorporated group of two or more persons joined by mutual consent for a common lawful purpose, whether organized for profit or not. Cal. Corp. Code § 18035 (West).
Although case law on this provision generally concerns entities like churches, political parties, professional or trade associations, social clubs, and homeowners associations, the doctrine and the breadth of what qualifies as an "unincorporated association" was explained in Barr v. United States Methodist Church, 90 Cal.App.3d 259 (1979). There, the court of appeals explained that the trend in the state and nation was to "assure legal status where in fairness it is appropriate" and included in such consideration the dictates of fairness where "persons dealing with the association contend their legal rights have been violated." Barr, 90 Cal. App. 3d at 266-67. An unincorporated association need not have the formalities of quasi-corporate organization. "Courts have even assessed liability against a church association with no officers where there were only nine persons whose sole business transaction (aside from small purchases of printed religious material) was the purchase, by down payment, of a station wagon." Id. at 267 (citation omitted). Likewise, criminal street gangs have been found to qualify as "unincorporated associations" capable of being sued. People ex rel. Totten v. Colonia Chiques, 156 Cal.App.4th 31, 41 (2007).
Proteus easily satisfies the criteria under Section 18035. During the development of Chocolate, Proteus was held out as if a corporation. It consisted of at least three members, James Dreher, Konstantino, and Feld, and was formed for the lawful purpose of raising money and investor interest in the Chocolate technology. Investors were informed that "Proteus" was the entity developing Chocolate and seeking funds therefor, and Konstantino represented himself as Chairman of the entity. As Proteus's chairman, Konstantino signed a contract to raise funds for Chocolate's development. Fairness would dictate that investors who gave money to Proteus would have been able to seek recourse against Proteus. Barr, 90 Cal. App. 3d at 266-67. Konstantino held himself out as a Chairman of Proteus, signed contracts as such, sought money from individuals under the guise of this entity, and later, to investors, characterized Proteus's transition to "Quattro" as merely a name change. Not only did Konstantino himself understand that Quattro was "previously Proteus," but by characterizing the transition from Proteus to Quattro as a simple change in name, he was able to retain for Quattro the benefits Proteus had obtained. Indeed, the lack of distinction between Quattro and Proteus is so complete that on the basis that the difference between these entities was merely one of nomenclature, contracts signed between "Proteus" and third parties were amended to substitute the name "Quattro Vascular Pte Ltd" for "Proteus Vascular Systems Pte Ltd." (PX 7.) The unfairness of immunizing Quattro is amplified here, where defendants now offer a hypertechnical argument that because Quattro did not formally exist as an incorporated entity at the time of Konstantino's breach, it cannot be liable for acts it undertook when it was known as Proteus.
Proteus/Quattro was inextricably involved in, and had actual knowledge of, Konstantino's breach. Indeed, it was formed with the specific purpose of furthering that breach. Konstantino, as Proteus's Chairman and Quattro's Director, formed the organization for purposes of raising funds for Chocolate, which included seeking funding from the Singaporean government, and later, used Quattro as the corporate entity to hold intellectual property rights in Chocolate. Dreher implemented a business strategy for seeking early investors and funds. On this basis, the Court finds that Proteus, as an unincorporated association, knowingly aided and abetted Konstantino's breach of fiduciary duty. In March of 2010, when Proteus incorporated as Quattro, it maintained its debts and liabilities. See Sec.-First Nat. Bank of L.A. v. Cooper, 145 P.2d 722, 731 (Cal. Ct. App. 1944).
The decision whether to impose successor liability involves broad equitable considerations. See Ray v. Alad Corp., 19 Cal.3d 22, 34 (Cal. 1977); see also Rosales v. Thermex-Thermatron, Inc., 67 Cal.App.4th 187, 196 (Cal. Ct. App. 1998). Each case of successor liability must be assessed on its own unique set of facts. See CenterPoint Energy, Inc. v. Super. Ct., 157 Cal.App.4th 1101, 1122 (Cal. Ct. App. 2007). Under California law, a corporation that purchases the assets of another does not assume the liabilities of the selling corporation unless: "(1) there is an express or implied agreement of assumption, (2) the transaction amounts to a consolidation or merger of the two corporations, (3) the purchasing corporation is a mere continuation of the seller, or (4) the transfer of assets to the purchaser is for the fraudulent purpose of escaping liability for the seller's debts." Ray, 19 Cal.3d at 28.
As a preliminary matter, successor liability under California law requires an asset transfer, not merely the purchase of stock. Sunnyside Dev. Co., LLC v. Opsys Ltd., No. C 05 0553 MHP, 2007 WL 2462142, at *6 (N.D. Cal. Aug. 29, 2007); Potlatch Corp. v. Superior Court, 154 Cal.App.3d 1144, 1150-51 (Cal. Ct. App. 1984). The evidence on this point is admittedly limited. However, in view of the evidentiary record, including its observation of the critical witness on this issue, the Court finds that an asset transfer occurred. This conclusion is based on testimony from defendants' 30(b)6 corporate designee, Momi Brosh, QT Vascular's Vice President of Business Operations. Brosh was designated by defendants to testify on the relationship between QT Vascular, Quattro, and TriReme. He testified that QT Vascular assumed both the assets and liabilities. (See Brosh Dep. at 277:19-281:15
Persons designated as corporate representatives "[shall] testify as to matters known or reasonably available to the organization." Fed. R. Civ. P. 30(b)(6). A Rule 30(b)(6) deposition notice serves a unique function: it is the sworn corporate admission that is binding on the corporation. Hardin v. Wal-Mart Stores, Inc., No. 08-CV-0617 AWI BAM, 2011 WL 11563217, at *2 (E.D. Cal. Dec. 2, 2011) (citing Gales v. Winco Foods, 2011 WL 3794887 (N.D. Cal. 2011) ("As a 30(b)(6) witness, her testimony is a sworn corporate admission binding on the corporation."). If the notice of deposition or subpoena served on the entity sufficiently describes the matters on which questions will be asked, the entity is under a duty to designate and produce "one or more officers, directors, or managing agents, or designate other persons who consent to testify on its behalf. . . ." Rule 30(b)(6); Mitchell Eng'g v. City & Cnty. of S.F., 2010 WL 455290, at *1 (N.D. Cal. Feb. 2, 2010) ("A 30(b)(6) witness testifies as a representative of the entity, his answers bind the entity and he is responsible for providing all the relevant information known or reasonably available to the entity.") (quotation marks and citation omitted); Great Am. Ins. Co. of N.Y. v. Vegas Constr. Co., Inc., 251 F.R.D. 534, 541 (D. Nev. 2008). Still, other courts hold that "testimony given at a Rule 30(b)(6) deposition is evidence which, like any other deposition testimony, can be contradicted and used for impeachment purposes[,]" and that such testimony does not "bind" the designating entity "in the sense of [a] judicial admission." A.I. Credit Corp. v. Legion Ins. Co., 265 F.3d 630, 637 (7th Cir. 2001). The Ninth Circuit has not yet decided the issue. Coalition for a Sustainable Delta v. McCamman, 725 F.Supp.2d 1162, 1172 (E.D. Cal. 2010).
In the absence of specific direction from the Ninth Circuit, the Court joins those courts who have adopted a middle ground and holds that defendants cannot rebut the testimony of their Rule 30(b)(6) witness when, as here, the opposing party has relied on the Rule 30(b)(6) testimony, and defendants have provided no adequate explanation for the rebuttal offered at trial. See MKB Constructors v. Am. Zurich Ins. Co., 49 F.Supp.3d 814, 829 n.11 (W.D. Wash. 2014); Hyde v. Stanley Tools, 107 F.Supp.2d 992, 993 (E.D. La. 2000), aff'd 31 Fed. App'x. 151 (5th Cir. 2001) (per curiam) (unpublished); State Farm Mut. Auto. Ins. Co. v. New Horizont, 250 F.R.D. 203 (E.D. Pa. 2008) ("The better rule is that the testimony of a Rule 30(b)(6) representative, although admissible against the party that designates the representative, is not a judicial admission absolutely binding on that party," but the party still may not "retract prior testimony with impunity" and courts can disregard inconsistent testimony when the movant has relied on it); Tex. Technical Inst. v. Silicon Valley, Inc., No. H-04-3349, 2006 WL 237027, at *5 (S.D. Tex. Jan. 31, 2006) (affidavit did not create an issue of material fact because it conflicted without explanation with Rule 30(b)(6) testimony).
With this in mind, the Court expounds on the basis for its finding. Brosh testified that he prepared for the deposition. He went over materials, spoke with the defendants' financial team, and with the research and development engineers. (Brosh Dep. at 33:11-19.) He provided specific names of individuals with whom he spoke. (Brosh Dep. at 34:06-35:24; 36:09-14.) He estimated that he spent approximately twenty hours preparing for the deposition, and that he met with counsel in preparation. (Brosh Dep. at 34:06-35:24; 62:08-19; 62:23-63:05.) He also spent time preparing on his own, including reading the QT Vascular IPO documents. (Brosh Dep. at 72:18-73:06.) Because Mr. Brosh is not a native English speaker, a translator was present for his deposition, as was his English-speaking counsel, and he was free to ask for translation assistance during the deposition. (See Brosh Dep. at 59:09-12.)
In addition, the pattern of questioning by AngioScore's counsel during the critical moments of Brosh's deposition permitted both sufficient review of the relevant documents, and was sufficiently clear to provide Brosh an opportunity to understand what was being asked and answer accordingly. Each question was constructed in the following format: counsel identified a document and presented it to Brosh. She then read a brief sentence or phrase from the document supporting a conclusion that certain factual events occurred. She would then ask if the relevant sentence or phrase accurately set forth what actually happened. (See Brosh Dep. at 272:07-10; 273:19-21: 273:24-274:04; 277:19-277:22; 280:03-11; 281:02-15.) She did this no fewer than four times. Brosh agreed every time. (See id.)
To the extent Brosh's answers were inaccurate or erroneous, he was free to submit errata following the transmittal of his deposition transcript. He elected to do so. Indeed, Brosh submitted fairly extensive errata, in two parts, wherein he amended his answers for purposes of accuracy fifty-five times. (Dkt. Nos. 593-7, 593-8.) Tellingly, Brosh did not seek to amend or correct the answers given with respect to QT Vascular's acquisition of assets from TriReme and Quattro. To the extent defendants believed that his testimony remained in some way deficient, they were free to offer another person for deposition as to these issues. They did not do so.
Moreover, Brosh's testimony that an asset transfer and liability assumption took place was corroborated by contemporaneous documents reflecting that QT Vascular would be the product of a merger between TriReme and Quattro. (PX 32; PX 43.) It is therefore not wholly controverted by the evidence of record. At trial, defendants offered public statements of the corporate group (comprising QT Vascular, TriReme US, TriReme Singapore, and Quattro), such as their initial public offering documents and their 2013 annual report, to controvert Brosh's statements. Those documents purport to demonstrate that by virtue of an arms'-length corporate reorganization, QT Vascular acquired all stock in Quattro and TriReme, with only certain liabilities. In exchange therefor, the shareholders in each of TriReme and Quattro received shares of QT Vascular's stock. The Court is not convinced that these representations, standing alone, overcome the weight of evidence to the contrary — Brosh's testimony, the manner in which the defendants' key players, including Konstantino, Brosh, Haig, Pizarro, and Feld, conducted business affairs, and the fact that the bulk of the management of these three defendant companies is entrusted to the same people. Although some of these individuals simultaneously occupy different roles in the various defendant corporations, these roles do not appear to be distinct. It also cannot be overlooked that Brosh, an insider himself, reviewed the IPO document in preparation for his testimony and nonetheless testified that QT Vascular acquired all assets and liabilities of TriReme and Quattro.
Based on the foregoing, the Court finds Brosh's answers to the questions most relevant to whether QT Vascular assumed all of TriReme's and Quattro's assets and liabilities and that given the sufficiency of their reliability, AngioScore appropriately relied upon his answers. To the extent that defendants seek to rely on contradictory testimony provided by Randall Farwell, QT Vascular's CFO, who was never deposed, and was first disclosed as a witness on the eve of trial, long after discovery had closed, they cannot do so. Rule 30(b)(6) is a powerful and necessary discovery tool, and AngioScore was entitled to rely upon Brosh's representations in developing its case. To the extent Brosh's testimony on this subject was inaccurate, there were multiple ways for defendants to correct or clarify the evidentiary record and they have failed to provide any adequate reason for why they did not do so, or why Brosh's testimony should be rebutted. Their failure to do so cannot be the basis for permitting an eleventh-hour witness to offer defendants' preferred version of events. To hold otherwise would be to permit a trial by ambush, which the federal discovery rules are designed to avoid.
Having found that underlying the formation of QT Vascular was a transfer of assets and liabilities from TriReme and Quattro, the Court now turns to whether QT Vascular is a successor in interest to the liabilities of Quattro and TriReme. Again, a corporation acquiring the assets of another corporation will be found to have succeeded in interest to the acquired corporation's liabilities if any one of the following applies: "(1) there is an express or implied agreement of assumption, (2) the transaction amounts to a consolidation or merger of the two corporations, (3) the purchasing corporation is a mere continuation of the seller, or (4) the transfer of assets to the purchaser is for the fraudulent purpose of escaping liability for the seller's debts." Ray, 19 Cal.3d at 28.
AngioScore argues that the first and second of the above theories apply here. As to the first — express or implied agreement to assume liabilities — as explained above, the Court finds that QT Vascular assumed the liabilities of Quattro and TriReme. Accordingly, imposing successor liability is proper.
As to the second — whether the transaction amounted to a de facto merger — the Court also finds that evidence supports a finding that this occurred. The de facto merger doctrine applies under California law when "one corporation takes all of another's assets without providing any consideration that could be made available to meet claims of the other's creditors" or when "the consideration consists wholly of shares of the purchaser's stock which are promptly distributed to the seller's shareholders in conjunction with the seller's liquidation." Ray, 136 Cal. Rptr. at 578. To determine whether a transaction "cast in the form of an asset sale actually achieves the same practical result" as a merger, the Court considers the following factors: "(1) was the consideration paid for the assets solely stock of the purchaser or its parent; (2) did the purchaser continue the same enterprise after the sale; (3) did the shareholders of the seller become shareholders of the purchaser; (4) did the seller liquidate; and (5) did the buyer assume the liabilities necessary to carry on the business of the seller?" Schwartz v. Pillsbury Inc., 969 F.2d 840, 846 (9th Cir. 1992) (citing Marks v. Minn. Mining and Mfg. Co., 187 Cal.App.3d 1429, 1436 (Ct. Ct. App. 1986)).
Here, QT Vascular assumed the assets and liabilities of Quattro and TriReme, and in consideration, gave QT Vascular stock to the former shareholders of Quattro and TriReme. The purchasing company, QT Vascular, continued in the enterprise of Quattro and TriReme after its formation: manufacturing and selling the Chocolate device. The shareholders of Quattro and TriReme became shareholders of QT Vascular, and QT Vascular assumed the liabilities of each. It cannot be said that under these facts, the transaction resulting in QT Vascular did not achieve the same practical result as a merger. See Marks, 187 Cal. App. 3d at 1437-38 (finding a "reorganization" between a parent and a subsidiary constituted a de facto merger).
For these reasons, the Court finds that QT Vascular is the successor in interest to the liabilities of Quattro and TriReme.
Under California Business and Professional Code section 17200, et seq., "any unlawful, unfair or fraudulent business act or practice" is prohibited. Cal. Bus. & Prof. Code § 17200 (West). "Because . . . section 17200 is written in the disjunctive, it establishes three varieties of unfair competition—acts or practices which are unlawful, or unfair, or fraudulent. . . ." Aleksick v. 7-Eleven, Inc., 205 Cal.App.4th 1176, 1184 (Cal. Ct. App. 2012). AngioScore argues that one of these three bases apply here: that defendants' acts constitute "unlawful" predicate acts to establish liability under California's Unfair Competition Law ("UCL").
A "violation of another law is a predicate for stating a cause of action under the UCL's unlawful prong." Graham v. Bank of Am., N.A., 226 Cal.App.4th 594, 610 (Cal. Ct. App. 2014) (citing Berryman v. Merit Prop. Mgmt., Inc., 152 Cal.App.4th 1544, 1554 (Cal. Ct. App. 2007)). "By proscribing any unlawful' business practice, [S]ection 17200 borrows violations of other laws and treats them as unlawful practices that the unfair competition law makes independently actionable. Virtually any law—federal, state or local—can serve as a predicate for a [UCL] action." Law Offices of Mathew Higbee v. Expungement Assistance Servs., 214 Cal.App.4th 544, 553 (2013) (quotations omitted); Cel-Tech Commc'ns, Inc., 20 Cal. 4th at 195 (Kennard, J., concurring and dissenting) (explaining that in 1963, the state legislature added "unlawful" business practices to the list of proscribed conduct and thereby "expanded the definition of unfair competition with respect to conduct violating statutory prohibitions, for now any business practice that violated an independent statutory duty was an instance of unfair competition that could be enjoined even if the underlying statute did not specifically authorize injunctive relief") (citation omitted). Common law violations may suffice as predicate acts under the UCL. Yanting Zhang v. Superior Court, 57 Cal.4th 364, 380 (Cal. 2013). Under the statute, "[p]revailing plaintiffs are generally limited to injunctive relief and restitution." Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134, 1144 (Cal. 2003) (quoting Cel-Tech Commc'ns, Inc., 20 Cal.4th at 179). Accordingly, the Court addresses the issue below.
AngioScore seeks the extraordinary remedy of injunctive relief and asks that the Court permanently enjoin defendants from continuing to sell Chocolate. In evaluating this request, the Court has considered whether AngioScore has met its burden to establish that: (1) it has suffered an irreparable injury; (2) remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) the public interest would not be disserved by a permanent injunction. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 390 (2006). Having considered these factors, the Court declines to award AngioScore's requested injunction.
The Court possesses broad discretion in imposing equitable remedies upon finding a violation of the UCL. Yanting Zhang, 57 Cal. 4th at 371 (citations omitted). Even when an unfair business practice has been shown, the UCL does not require the imposition of equitable relief. See Cortez v. Purolator Air Filtration Prods. Co., 23 Cal.4th 163, 180 (Cal. 2000) ("The court's discretion is very broad. Section 17203 does not mandate restitutionary or injunctive relief when an unfair business practice has been shown."). Here, the Court is satisfied that the remedies set forth below fully and fairly compensate AngioScore for its past and future harms, and adequately addresses defendants' wrongdoing. AngioScore has conceded that the existence of such relief obviates the need for an injunction. (Dkt. No. 658 at 5.) See E.B.C. Trust Corp. v. JB Oxford Holdings, Inc., 2005 WL 6214851, at *5 (C.D. Cal. Aug. 26, 2005) (injunctive relief "requires a showing that other adequate relief is not available" and where "the plaintiff pursues other remedies in addition to seeking relief under [UCL] the court may conclude that those other remedies obviate the need for injunctive relief.") (citations omitted). Furthermore, as discussed more below, an injunction is directly contrary to the public interest. Accordingly, the Court declines to award AngioScore its requested injunction.
The law abhors one who betrays his or her fiduciary duty. Thus, "[i]f an officer or director of a corporation, in violation of his duty as such, acquires gain or advantage for himself, the law charges the interest so acquired with a trust for the benefit of the corporation, at its election, while it denies to the betrayer all benefit and profit." Guth, 5 A.2d at 510. The bounds of this rule are considerable, for it rests upon the "broader foundation of a wise public policy that, for the purpose of
While it is true that damages flowing from a breach of fiduciary duty are to be liberally calculated, Thorpe by Castleman v. CERBCO, Inc., 676 A.2d 436, 444 (Del. 1996) (citing Milbank, Tweed, Hadley & McCloy v. Boon, 13 F.3d 537, 543 (2d Cir. 1994)), the Delaware Supreme Court has held that where certain claimed damages were not proximately caused by the breach, those damages were not recoverable. Id. Thus, causation remains a consideration for damages even in the context of fiduciary duty breaches. Thorpe, 676 A.2d at 444; Boyer v. Wilmington Materials, Inc., 754 A.2d 881, 907 (Del. Ch. 1999) (noting lack of causal relationship; finding authority to award damages where the breach of duty caused economic harm to a corporation) (citing Thorpe, 676 A.2d at 445). So, too, does causation remain at issue in the case of aiding and abetting the commission of a tort. See Bancroft-Whitney Co. v. Glen, 64 Cal.2d 327, 352 (1966) ("It is clear from the evidence . . . that Bender was aware of or ratified Glen's breach of his fiduciary duties in all but a few respects, that he cooperated with Glen in the breach, and that he received the benefits of Glen's infidelity. . . . Under all the circumstances, Bender and Bender Co. must be held liable for their part in Glen's breach of his fiduciary duties. They encouraged the sowing and reaped the benefit. They cannot now disclaim the burden.").
Defendants have argued throughout this case that AngioScore has failed to prove that defendants' behavior caused harm to AngioScore either because (i) the devices do not compete, or (ii) Feld had an independent right to develop Chocolate. The Court is unpersuaded.
First, Chocolate and AngioSculpt compete. More than sufficient evidence exists in the record to support a finding that Chocolate's presence in the market has harmed AngioScore. The Court explains:
In the angioplasty balloon market, there are two basic categories of products. First are the plain old balloon catheters, or POBAs, which come in three basic forms: compliant, semi-compliant, and non-compliant. Within that field, POBAs come in different types (small, large, standard, and high-pressure). (PX 294 at 251.) POBAs are priced between approximately $150 to $200 per unit. (Trial Tr. at 412:7-9 (Viano direct).) Specialty balloons comprise a sub-market within the broader angioplasty balloon market, and are priced as high as $1000, depending on length. (See id.) Within that sub-market, there are relatively few players. (Id. at 249.) As of 2013, the specialty balloon catheter market was primarily occupied by four companies: Boston Scientific, C.R. Bard, Abbott Laboratories, and AngioScore. The market share at that time reflects that AngioScore was in close competition with Boston Scientific's flagship product, the Cutting Balloon: AngioScore occupied 48.1% of the specialty balloon market and Boston Scientific occupied 47.1%. C.R. Bard held only 3.3% of the market with its specialty balloon, the Vascutrak. Abbott Laboratories held only 1.3%. (PX 294 at 249.)
The similarities between Chocolate and AngioSculpt from a competitive viewpoint are overwhelming. Both are specialty balloons. Both contain balloons made with nylon elements. Both have a nitinol cage surrounding the balloon. Neither device leaves anything behind in a vessel after it has inflated; no stent remains, for example. The purposes for the devices are the same: to open occluded blood vessels and enable more blood flow. The devices share the same target customers, both of which are specialized: interventional cardiologists and vascular surgeons. (Trial Tr. at 407:20-408:3 (Viano).) The fact that the two products do not use identical mechanisms of action does not mean that they do not compete.
The obviousness of the competitive relationship between the devices becomes undeniable upon a review of defendants' own pre-litigation communications regarding their goals for Chocolate, then being developed and marketed. Konstantino himself made multiple written references that touted the competitive benefits of the Chocolate compared to the AngioSculpt. (See PX 66 (November 2009 Chocolate presentation referencing that Chocolate would "reduce dissections"; dissections would occur with a scoring balloon, i.e., AngioSculpt); PX 124 (January 2010 email from Konstantino forwarding information memorandum outlining benefits of Chocolate as Proteus's proprietary device; identifying AngioScore as one of "only a couple companies" marketing specialty balloon products); PX 132 (October 2011 email from Vardit Benjamin to Konstantino and Haig attaching "TriReme's Competitor Analysis" spreadsheet; identifying the AngioSculpt as competitor); PX 127 (February 2011 email Konstantino forwarded his wife for purposes of his patent application background discussion, identifying AngioSculpt as an "alternative tool" to Chocolate).) Chris Haig further confirmed the market similarities between Chocolate and AngioSculpt. As Chocolate was being developed, TriReme faced the question of where to price its new specialty balloon catheter device. In October 2011, an email from Steve Dreaden entitled "AngioScore Competitive Information" relayed "competitive field intel on AngioScore" in terms of their pricing. (PX 130.) The email itself and responses make clear that TriReme priced Chocolate just $25 under AngioScore's prices. (See also PX 135.)
Thus, for every size Chocolate was available, it was priced at exactly $25 below its AngioScore counterpart. Notably, Haig admitted that pricing for the Chocolate was keyed off AngioSculpt, as opposed to Vascutrak, because AngioSculpt was "on the higher side" of the pricing spectrum and had higher clinical value. However, at that time they were first pricing Chocolate, TriReme lacked clinical data on the value of Chocolate, further evidencing that defendants believed AngioSculpt was the "closest competitor" to Chocolate. (PX 143.) Konstantino himself approved the pricing.
Ample other evidence of record reveals that TriReme considered Chocolate competitive with AngioSculpt. On December 30, 2011, following Chocolate's 510K approval, for example, Haig forwarded a powerpoint deck to Konstantino extolling the virtues of Chocolate. (PX 137.) Included was a slide entitled "Chocolate — pricing strategy" that stated that Chocolate was "price competitive to other "specialty" catheters to drive rapid adoption" and noted specifically that AngioSculpt was priced at $852. (Id.) Sales discussions at TriReme focused substantially on distinguishing Chocolate from AngioSculpt in order to gain market share over the other competitive specialty balloons. To that end, in December 2012, high level discussions occurred at TriReme concerning such things as how to describe Chocolate's relative advantages compared to the AngioScore and Vascutrak when communicating with potential customers. (PX 142.) Although the devices are different in some ways, "all of these balloons fall under the "specialty balloon" category." (Id.) The differences are finely tuned. In defendants' parlance, AngioScore was described as a "focal force" balloon; Chocolate was described as a "distributed force" balloon. Defendants maintain that Chocolate is "the opposite of a scoring balloon" because when inflated, the balloon itself protrudes through the nitinol cage, forming crowns or pillows that impress upon the plaque. This, they claim, contrasts with the AngioSculpt, which is designed such that the nitinol element itself presses into the plaque. Again, the Court finds that these differences do not do not demonstrate lack of competition. TriReme acknowledged as much when it was marketing Chocolate. The differences, to the extent the parties' documents acknowledge them, were focused on helping each side market its own product as against the other side's product — indeed, the Court finds that such documents, on the whole, reaffirm that the devices were competing with one another, not that they were so different that they did not compete.
Defendants' succeeded in their attempt to compete with the AngioSculpt. Frank Viano, Eastern Area of VP of Sales for Spectranetics (which acquired AngioScore), testified on the competitive relationship between Chocolate and AngioSculpt. With over 20 years of experience in the area of selling cardiovascular angioplasty devices, including experience working with AngioScore's other competitors such as Boston Scientific, Viano attested that he has personally seen sales of AngioScore products affected by the advent of Chocolate. According to Viano, Chocolate is the closest competitor to AngioSculpt in the field of specialty balloons. Viano also confirmed that POBAs and stents are not competitors with AngioSculpt.
Loss of AngioSculpt sales have been directly attributed to Chocolate. (Trial Tr. at 444:20-445:21 (Viano, discussing losing five to ten units a month to Chocolate, including its sales to Dr. Garcia, defendants' industry expert).) Viano testified that he has been asked to reduce prices for AngioSculpt approximately twenty-five to thirty times. Corroborating that testimony, in March 2013, for example, Viano was asked via email by a sales and service representative in Maryland and Rhode Island to reduce the AngioSculpt price because Chocolate had been offered at a lower price. (PX 152.) He estimated that requests to reduce prices for AngioSculpt sales have occurred at approximately ten to fifteen percent of the 200 or 250 hospitals falling under his jurisdiction. In response to the competition from Chocolate, Viano explained that he has directed his sales representatives to provide more sales focus time on the AngioSculpt, to "sell our features, clinical success, and track record to the hospitals in a much more robust fashion." (Trial Tr. at 418:18-419:5 (attesting to diversion of resources at AngioScore due to counter market threats by Chocolate and including lowering prices for AngioSculpt).)
Defendants place much reliance on the fact that AngioScore initially disclaimed any similarity between the devices when Chocolate was first released. The Court finds such arguments unpersuasive. Initial reactions to Chocolate on behalf of AngioScore's marketing team expressing skepticism that Chocolate could compete with AngioSculpt,
Defendants' criticism that AngioScore's submission of sales documents do not demonstrate a direct corroboration or one-to-one link between decrease in sales, and, in particular, Chocolate as the source of the loss, is not dispositive. The proffered evidence more than meets the legal standard. Leaving aside the weight of evidence confirming that AngioScore was forced to lower its prices on its products due to pressure from Chocolate, and that defendants themselves claimed that clinicians were replacing AngioScore devices with Chocolate (PX 164), defendants argue that Chocolate did not impede AngioScore's market share because the two devices are "complementary." The only practitioner evidence directly supporting this notion is testimony from Dr. Garcia, defendants' industry expert. Defendants place more weight on this testimony than it can bear. Dr. Garcia, whose testimony is of marginal weight given his pre-existing relationship with the defendants, testified that Chocolate and AngioSculpt are complementary, and stated that Chocolate and AngioSculpt can be used "in concert, in the same patient." (Trial Tr. at 911:16-25.) But Dr. Garcia himself could not recall ever having used a Chocolate and AngioSculpt in this manner. Nor could he recall any medical studies recommending such complementary usage. Furthermore, he admitted that defendants' promotional materials did not tout Chocolate as "complementary" to another product. (Trial Tr. at 932:4-933:3.) Indeed, defendants' goal was to have physicians replace their use of AngioSculpt with Chocolate, and gain market share. (PX 164 (noting that clinicians are replacing the use of Scoring/Cutting (AngioScore) devices with Chocolate).)
Defendants' second argument is that due to Feld's independent right to assign his interest in Chocolate, defendants enjoyed an independent right to develop Chocolate. Thus, they reason that AngioScore cannot demonstrate that their actions caused AngioScore's harm, and that AngioScore cannot establish that had the opportunity been offered by Konstantino, it would have been able to acquire an exclusive right to Chocolate. The Court rejects this conclusion as contrary to the facts of record and reasonable inferences therefrom.
Defendants' position hinges on the notion that Feld would never have assigned his rights to AngioScore under any circumstances. The Court finds this argument implausible. Feld testified that while he was the engineering leader on the device, Konstantino was the one with the business acumen. Indeed, in deposition, Feld stated that he had no involvement with "the business side." (Trial Tr. at 862:21-863:1.) He had incomplete knowledge of who Chocolate's first investors were and was not involved in determining who could be a potential partner for Chocolate. (Trial Tr. at 863:10-14.) Konstantino was responsible for handling such things. Based on this and other of Feld's testimony, the Court finds that Feld would have assigned his interest wherever and to whomever Konstantino recommended. That Feld was subject to Konstantino's business decisions and did not exert any independent control over these decisions is further evidenced by the fact that despite Feld's critical role in designing the device, he was paid only $70,000 for his interest in Chocolate while Konstantino was paid $250,000. Feld's undeniable deference to Konstantino's independent business decisions is further underscored by the fact that Konstantino received a 2.85% royalty in Chocolate where Feld received only 2.15%. Had Konstantino offered the opportunity to AngioScore, the Court is steadfastly confident that based on Feld's lack of business acumen, allegiance to Konstantino, and fundamental character, he would have followed Konstantino's lead. For this reason, defendants' insistence that Feld's independent right somehow undermines AngioScore's harm does not persuade. Feld's claim he disliked AngioScore and would not have wanted Chocolate to belong to AngioScore, is belied by the objective facts and only raised conveniently in the context of ongoing litigation.
In sum, the Court finds that plaintiffs have offered sufficient evidence to establish that defendants' conduct — Konstantino's breach and defendants' aiding and abetting that breach-intentionally, and directly caused AngioScore harm.
Under Guth, the remedies available in a breach of duty case are designed to "den[y] to the betrayer all benefit and profit." Guth, 5 A.2d at 510. AngioScore has proved that its interests have been subverted by a disloyal fiduciary, and may now "elect to claim all of the benefits of the transaction for itself." Id. at 273; see also Thorpe, 676 A.2d at 445 ("Once disloyalty has been established, the standards . . . require that a fiduciary not profit personally from his conduct, and that the beneficiary not be harmed by such conduct.").
Accordingly, Konstantino may retain no benefit of his breach. The result, while potentially viewed as harsh, is designed to deter such conduct from occurring in the first place. It differs from contractual remedies and does more than return AngioScore to the position that it would have been in had the breach never occurred. It serves to deter future transgressions. To wit, Konstantino's personal disgorgement shall include the $250,000 he received in agreeing to assign his intellectual property rights to Chocolate, as well as the 2.85% royalty on Chocolate sales. It also includes his shares in QT Vascular stock, which total roughly 15 million, and his existing stock options. Furthermore, Konstantino must disgorge any and all monies he collected in any sale of such stock, the monies he has received relative to his royalty share, and any monies he has made in connection with his monthly consulting retainer relative to Chocolate.
In light of the fact that the underlying claim is equitable in nature, the Court has broad discretion to address inequity. See Gotham Partners, L.P. v. Hallwood Realty Partners, L.P., 817 A.2d 160, 175 (Del. 2002) (citing Weinberger v. UOP, Inc., 457 A.2d 701, 715 (Del. 1983) (noting "the broad discretion of the Chancellor to fashion such relief as the facts of a given case may dictate"); Int'l Telecharge, Inc. v. Bomarko, Inc., 766 A.2d 437, 439 (Del. 2000) (noting that this Court "defer[s] substantially to the discretion of the trial court in determining the proper remedy")). Beyond the disgorgement of benefits Konstantino personally received as a result of his breach, the Court finds it appropriate, given the totality of the circumstances, to fashion a remedy in order that defendants may be deterred from future breaches and to compensate AngioScore, as "the beneficiary must not be harmed by such conduct." Boyer, 754 A.2d at 906.
As set forth above, AngioScore has proved that Chocolate's market presence has cost it market share and resulted in lower profits; the causation element is satisfied. But it must be noted that the harms resulting from defendants' wrongdoing are difficult to quantify, especially given the industry and the infancy of Chocolate. The Court, "fortunately, has broad discretion to tailor remedies to suit the situation as it exists." Cantor Fitzgerald, L.P. v. Cantor, No. CIV.A. 16297, 2001 WL 536911, at *3 (Del. Ch. May 11, 2001). Cognizant of this framework, AngioScore has presented myriad alternative remedies that it believes would work to the same equitable ends. For example, AngioScore has presented measurements of the following alternative remedies: (i) disgorgement of defendants' past profits from Chocolate; (ii) an injunction on the sale of Chocolate; (iii) awarding AngioScore its lost profits sustained to date, and a reasonable estimate into the future; and (iv) awarding AngioScore the present value of Chocolate, which represents its value into the future. The Court first explains why a lost profits award is, in its estimation, the most appropriate for this case, and next explains why the other proposed remedies are wanting.
The Court finds that AngioScore's calculated lost profits, reflective of both its harm to this point and into the future, is sufficiently well-established to remedy AngioScore's harm, and represents an appropriate degree of opprobrium for defendants' wrongful behavior. Thus, the Court awards AngioScore (i) its current lost profits of $2.97 million, representing the profits it would have generated had business not been diverted to defendants, and (ii) its future lost profits where, as here, the Court declines to issue an injunction and permits Chocolate to stay on the market. That value is $17.064 million, representing AngioScore's lost profits on future sales from 2014 through the second quarter of 2019. (PX 383; Trial Tr. at 759:22-760:2.)
Defendants' dispute as to AngioScore's lost profits calculation centers on the definition of the "market" in which AngioSculpt and Chocolate compete, and the corresponding market share used to calculate AngioScore's lost sales.
Next, AngioScore is awarded $17.064 million, which represents one measure to address future harms, namely, AngioScore's calculation of its future lost profits through mid-'.
With these principles in mind, AngioScore's alternative remedies are less satisfying. For example, AngioScore's first proposed remedy — an injunction barring the sale of Chocolate — is not appropriate here, where the parties concede that a monetary award will serve as an adequate remedy. Moreover, the Court cannot overlook the harm such an injunction would work on the public interest. That AngioScore asks the Court to remove from the quiver of practicing physicians one arrow with which they might treat a patient is brazen, particularly where they also seek monetary damages, albeit as an alternative. The Court sees limited benefits in removing from the avowedly limited field of specialty balloon catheters a device that has been approved for medical use in treating complex disease. An injunction is plainly inappropriate.
Next, given the infancy of Chocolate, calculating an award based on defendants' past profits is less satisfying.
AngioScore's calculation centers on the delta between the sales price of the device less the actual cost to manufacture, less a deduction for some marginal costs. Defendants, by contrast, argue that all their research and development ("R&D") costs should be considered in determining past and future lost profits. Both positions suffer from want of certainty, and were proffered to the Court without any industry context or a fulsome record,
Next, the Court finds both of AngioScore's present value calculations lack adequate foundation. First, AngioScore relies upon terminal value for purposes of determining Chocolate's present value. Such calculations formed the basis for Gary Olsen's present value calculation. (See PX 381; PX 383.) The use of a terminal value is most commonly used to evaluate the value of a firm, rather than the future value of a discrete device or invention. (Trial Tr. at 1220:1-17.)
As an alternative to its terminal value calculation for Chocolate's present value, AngioScore contends in its post-trial briefing that the application of a multiple to current revenue in order to calculate Chocolate's present value is appropriate. Applying that multiple to AngioScore's 2014 revenue results in a total of $35 million, which AngioScore argues represents another measure of Chocolate's present value. The Court finds that this, too, lacks foundation. Olsen's testimony does not support a finding that this is a satisfactory method of calculating the value of a technology, as opposed to a going concern. As with the use of a terminal value, AngioScore's proof at trial concerning the appropriateness of using a revenue multiple effectively relied on the fact that this valuation technique was used in valuing QT Vascular as a going concern with a stabilized revenue stream, not the Chocolate as a new technology. (Trial Tr. at 777:5-13 (Olsen, testifying that use of a revenue multiple is a common way to value a company and noting that AngioScore and QT Vascular have been valued using a multiple applied to revenue); Trial Tr. at 780:2-7; see also Trial Tr. at 1246:18-1251:25 (Prowse, testifying that such measures are used to value companies).)
In sum, the Court finds that equitable considerations counsel in favor of awarding AngioScore a remedy in the form of its past and future lost profits. Such a remedy repairs and deters without being punitive.
As aiders and abettors of Konstantino's breach of fiduciary duty, defendants are jointly and severally liable. See Casey, 127 Cal. App. 4th at 1144; Neilson, 290 F. Supp. 2d at 1133 (noting that California courts cite Restatement (Second) of Torts section 876 to hold that "liability may properly be imposed on one who knows that another's conduct constitutes a breach of duty and substantially assists or encourages the breach.") (citations omitted); see also Gotham Partners, 817 A.2d at 160. Based upon the detailed discussion above, this liability should extend to the corporate defendants. See Bancroft-Whitney, 64 Cal.2d at 352 (finding that where defendant aiders and abettors were "aware of or ratified a director's breach of his fiduciary duties in all but a few respects, . . . cooperated with [the director] in the breach, and . . . received the benefits of [the director's] infidelity. . . . [they] must be held liable for their part in the director's breach of his fiduciary duties. They encouraged the sowing and reaped the benefit. They cannot now disclaim the burden.").
In summary, the Court finds that Konstantino not only breached his fiduciary duties, he actively hid his transgressions to avoid detection. As a result, he exploited the Chocolate opportunity for his own gain rather than providing the opportunity to AngioScore, as he was duty bound to do. While such a duty would not have existed had he resigned before Chocolate became an opportunity, Konstantino's breach resulted in measurable harm to AngioScore.
A director's duty to the corporation he serves cannot be ignored under the mantra of innovation. Should a director walk that path, the innovation must be offered, the conduct transparent, and the fidelity to one's duty paramount. While conflicts between the desire to innovate and the obligations of board membership may arise, a director always has the option to resign. Here, Konstantino did neither, and thus, a remedy must be awarded to address the breach. The Court further finds that Quattro and TriReme aided and abetted the breach of fiduciary duty, and that QT Vascular is liable for the acts of Quattro and TriReme.
Accordingly, the Court
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