United States District Court, D. Nebraska
JESSE CAMPBELL, Individually and on Behalf of All Others Similarly Situated, Plaintiffs,
TRANSGENOMIC, INC., et al., Defendants.
MEMORANDUM AND ORDER
M. Gerrard, United States District Judge
dispute involves the merger of two companies: Transgenomic,
Inc. and Precipio, Inc. The plaintiff, Jesse Campbell, is a
former Transgenomic stockholder. Campbell is now suing
Transgenomic, its former Chief Executive Officer Paul Kinnon,
and Transgenomic's post-merger entity Precipio, Inc.,
under the Securities Exchange Act of 1934 ("the Exchange
Act"), 15 U.S.C. §§ 78a et seq., for
allegedly issuing a false and misleading proxy statement in
connection with the merger.
matter is before the Court on Transgenomic and Paul
Kinnon's (collectively, "Transgenomic") motion
to dismiss (filing 34, filing 37). For the reasons set forth
below, the Court will grant the parties' motions and
Campbell's amended complaint will be dismissed.
was a Nebraska-based biotechnical company specializing in
advancing various technologies aimed at detecting and
treating inherited diseases. Filing 22-1 at 24. Specifically,
Transgenomic developed a "Multiplex ICE-COLD PCR
technology" capable of detecting genetic mutations
without resorting to invasive medical procedures. Filing 22-1
at 25. Precipio was a cancer diagnostics company focused on
providing diagnostic services to the oncology market. Filing
22-1 at 25. In essence, oncologists and hospitals around the
country would use Precipio's services to more accurately
and efficiently diagnose various forms of cancer. Filing 22-1
October 12, 2016, Transgenomic entered into a Merger
Agreement with Precipio. Filing 35 at 10; see also
filing 22-1 at 22. Under the terms of the agreement,
Transgenomic would merge with Precipio to form Precipio, Inc.
(i.e., post-merger Precipio). Filing 22-1 at 22. The
agreement also provided that Transgenomic stockholders would
have the opportunity to exchange their shares of Transgenomic
common stock for shares of post-merger Precipio common stock
at a rate of 25.7505. Filing 65 at 10. In other words,
Transgenomic stockholders could trade 25.7505 shares of their
Transgenomic stock for one share of post-merger Precipio
evaluate the fairness of the proposed transaction, including
the exchange ratio, Transgenomic retained Craig-Hallum
Capital Group LLC-- an investment banking firm specializing
in mergers, acquisitions, and corporate valuations. Filing 35
at 10; filing 36-2 at 75. According to Craig-Hallum, the
Merger Agreement and the exchange ratio were both fair and
equitable to Transgenomic's investors. See
filing 22-1 at 24. So, with this understanding in mind,
Transgenomic moved forward with its merger negotiations.
February 2, 2017, Transgenomic and Precipio amended the
Merger Agreement to provide for a common stock exchange rate
of 24.4255. Filing 22 at 5. That is, Transgenomic
stockholders could now trade 24.4255 shares of their
Transgenomic stock for one share of post-merger Precipio
stock--a more favorable exchange rate to Transgenomic
stockholders than that of the original Merger Agreement.
Seefiling 36-2 at 91. Following this amendment,
Transgenomic's board of directors unanimously approved
this version of the Merger Agreement and shortly after,
Transgenomic filed its Preliminary Proxy Statement with the
Securities Exchange Commission (SEC). Seefiling 36-2
at 56. On May 12, Transgenomic filed its Definitive Proxy
Statement ("the Proxy Statement") with the SEC.
Filing 22 at 10.
Proxy Statement provided notice of a June 4, 2017 special
shareholders meeting where Transgenomic stockholders would
vote on a variety of issues associated with the merger. To
assist the shareholders in their voting decision, the Proxy
Statement included, among other things, various financial
valuations and projections relating to Transgenomic,
Precipio, and post-merger Precipio. Seefiling 22-1
at 58-79. In particular, the Proxy Statement included
stand-alone revenue projections, a combined discounted cash
flow projection, and other financial valuations.
Seefiling 22-1 at 58-79.
is that financial information that is at the center of the
parties' dispute. In his amended complaint, Campbell
claims that the Proxy Statement was materially misleading.
Filing 22. In particular, Campbell takes issue with one
specific financial valuation--"Precipio's internal
financial projection." This projection, he claims, was
materially misleading in violation of Section 14(a) and
Section 20(a) of the Exchange Act. Filing 22 at 18-25; filing
22 at 2-3; filing 22 at 20.
has moved to dismiss Campbell's amended complaint. And
for the reasons discussed below, that motion will be granted.
complaint must set forth a short and plain statement of the
claim showing that the pleader is entitled to relief.
Fed.R.Civ.P. 8(a)(2). This standard does not require detailed
factual allegations, but it demands more than an unadorned
accusation. Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009). The complaint need not contain detailed factual
allegations, but must provide more than labels and
conclusions; and a formulaic recitation of the elements of a
cause of action will not suffice. Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007). For the purposes of a
motion to dismiss a court must take all of the factual
allegations in the complaint as true, but is not bound to
accept as true a legal conclusion couched as a factual
survive a motion to dismiss under Fed.R.Civ.P. 12(b)(6), a
complaint must also contain sufficient factual matter,
accepted as true, to state a claim for relief that is
plausible on its face. Iqbal, 556 U.S. at 678. A
claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged. Id. Where the well-pleaded facts do not
permit the court to infer more than the mere possibility of
misconduct, the complaint has alleged-but has not shown-that
the pleader is entitled to relief. Id. at 679.
whether a complaint states a plausible claim for relief will
require the reviewing court to draw on its judicial
experience and common sense. Id. The facts alleged
must raise a reasonable expectation that discovery will
reveal evidence to substantiate the necessary elements of the
plaintiff's claim. See Twombly, 550 U.S. at 545.
The court must assume the truth of the plaintiff's
factual allegations, and a well-pleaded complaint may
proceed, even if it strikes a savvy judge that actual proof
of those facts is improbable, and that recovery is very
remote and unlikely. Id. at 556.
deciding a motion to dismiss under Rule 12(b)(6), the Court
is normally limited to considering the facts alleged in the
complaint. If the Court considers matters outside the
pleadings, the motion to dismiss must be converted to one for
summary judgment. Fed.R.Civ.P. 12(d). However, the Court may
consider exhibits attached to the complaint and materials
that are necessarily embraced by the pleadings without
converting the motion.Mattes v. ABC Plastics,
Inc., 323 F.3d 695, 697 n.4 (8th Cir. 2003). Documents
necessarily embraced by the pleadings include those whose
contents are alleged in a complaint and ...