Joseph v. Mobileye, N.V.

225 F. Supp. 3d 210, 2016 U.S. Dist. LEXIS 177690, 2016 WL 7488857
CourtDistrict Court, S.D. New York
DecidedDecember 13, 2016
Docket16 Civ. 3554 (VM)
StatusPublished

This text of 225 F. Supp. 3d 210 (Joseph v. Mobileye, N.V.) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Joseph v. Mobileye, N.V., 225 F. Supp. 3d 210, 2016 U.S. Dist. LEXIS 177690, 2016 WL 7488857 (S.D.N.Y. 2016).

Opinion

DECISION AND ORDER

VICTOR MARRERO, United States District Judge.

Plaintiff Larry Joseph and Peter Savitz Partners (“LP Partners”) brought this action against defendant Mobileye, N.V. (“Mobileye”) alleging fraud, negligent misrepresentation and unjust enrichment. LP Partners argues that Mobileye’s misstatements about its value and plans for an initial public offering (“IPO”) induced LP Partners to sell its shares prior to the IPO for a fraction of their value. (See “Amended Complaint.” Dkt. No. 14)

Following the parties’ exchange of pre-motion correspondence, Mobileye now seeks leave to move to dismiss the Amended Complaint. The Court construes Mobi-leye’s pre-motion letters as a motion to dismiss the Amended Complaint. (“Motion,” Dkt. No. 15.) For the reasons discussed below, Mobileye’s Motion is DENIED.

I. BACKGROUND

A. FACTUAL BACKGROUND1

In November 2003, LP Partners purchased 15,385 shares of Mobileye, then a private company incorporated in the Netherlands. In May 2013, Mobileye announced [214]*214a tender offer (the “Offer”) in which Mobi-leye shareholders could sell their shares to Driving Momentum B.V. (“DM”),2 which in turn would sell all the Mobileye shares to a group of outside investors. In the Offer, DM, which was formed for the purpose of making the Offer, sought to acquire up to 10,315,187 Mobileye shares, corresponding to approximately 24 percent of the company’s outstanding stock, for $33,036 per share.

The Offer documents required shareholders selling their shares to acknowledge that they were giving up any future appreciation in the value of their shares. In agreeing to tender its shares pursuant to the Offer, LP Partners agreed that it understood that it would “forgo any future appreciation ... in the value of the shares tendered, including if the Company were to complete an [IPO] ” and that it was “not relying on any representations about the future business or financial projections of the Company in making its decision to sell.” (Amended Complaint, Ex. 1 at 12.) The Offer documents stated that “as of the date of this [Offer], Mobileye has not decided whether to proceed with any IPO or Securities Listing.” (Id. at ii, 12.)

Upon learning of the Offer, Larry Joseph (“Joseph”), a general partner of LP Partners, contacted Mobileye, which set up a telephone conference with Mobileye’s CFO, Ofer Maharshak (“Maharshak”), for May 23, 2013. Joseph asked Maharshak about Mobileye’s valuation and its plans for an IPO or other “liquidity event.” Ma-harshak told Joseph that Mobileye was then valued at $1.6 billion, but that in six years it “should be valued at $3 billion,” at which time Mobileye would evaluate another round of financing or an IPO. (Amended Complaint ¶ 33.) Maharshak “made it clear” that an IPO was not then being considered or contemplated by Mobileye, and that the upside potential for existing shareholders, like LP Partners, was extremely limited for the next six years or more. (Id.) After the telephone conference, Joseph sent an email to Peter Savitz, his partner in LP Partners, summarizing the call with Maharshak and stating Joseph’s view that “we should sell. We have a great return and I don’t want to wait another six years.” (Id., Ex. 2 at 1.)

In reliance on Maharshak’s representations, LP Partners decided to sell its Mobi-leye shares pursuant to the Offer, which expired on July 29, 2013. On July 19, 2013, LP Partners completed the sale of all its Mobileye shares for a total of $508,258.86. Two of Mobileye’s founders, CEO Ziv Avi-ram (“Aviram”) and Amnon Shashua (“Shashua”), agreed to tender up to 16 percent and 20 percent of their holdings, respectively, pursuant to the offer.

After the Offer was announced, newspaper articles characterized the Offer as a step by Mobileye toward an eventual IPO. On July 7, 2013, Bloomberg News quoted Aviram as stating that the Offer “allowed early investors to exit and brought in more prominent stakeholders who can help the company move toward an IPO.” (Amended Complaint ¶ 45.) That article reported that Mobileye, through the Offer, “added five investors, including U.S. global asset managers and a Chinese firm, in a $400 million sale of equity that is a step toward an initial public offering.” (Id.) A New York Times article published the same day stated that the Offer “comes ahead of what [Aviram] said was an expected initial public offering in perhaps a year and a half.” Id.

[215]*215In March 2014, ten months after the Offer, Mobileye announced an IPO whereby Mobileye would become listed on the New York Stock Exchange. The IPO, in which Mobileye issued 8,325,000 new ordinary shares for net proceeds of $197.4 million, closed on August 6, 2014. The IPO valued Mobileye at $5.31 billion at the beginning of the first day of trading and at $7.97 billion at the close of the ffrst day of trading.

On March 15, 2015, Mobileye closed a secondary offering of 19,696,050 ordinary shares at a price of $41.75 per share. The secondary offering was by shareholders who had acquired their shares prior to Mobileye’s IPO, and Mobileye did not receive any proceeds from the secondary offering.

On December 4, 2014, LP Partners sent a demand letter to Mobileye. After Mobi-leye rejected LP Partners’ demand, in May 2016, LP Partners brought an action in New York Supreme Court, and Mobi-leye removed the case to this court. (See “Notice of Removal,” Dkt. No. 1.) After the parties exchanged pre-motion letters regarding Mobileye’s proposed motion to dismiss (see Dkt. No. 15, Exs. A-D), LP Partners on August 2, 2016 filed the Amended Complaint. The parties then exchanged additional pre-motion letters regarding Mobileye’s proposed motion to dismiss the Amended Complaint (See Dkt. No. 15, Exs. E, F.)

B. MOBILEYE’S PROPOSED MOTION TO DISMISS

By letter dated September 20, 2016, Mo-bileye renewed its request for leave to file a motion to dismiss LP Partners’ claims, attaching the parties’ earlier pre-motion correspondence. (See Dkt. No. 15.)

1. Fraud and Negligent Misrepresentation

Mobileye argues that the Amended Complaint fails to - state a claim for fraud or negligent misrepresentation. First, Mo-bileye argues that the Amended Complaint fails to allege a misstatement. Mobileye contends that the alleged misstatements about a possible future IPO cannot be a basis for a fraud claim because the Amended Complaint fails to allege concrete facts showing that Mobileye did not believe its statements. Mobileye argues that the news reports cited in the Amended Complaint fail to show anything regarding Mobileye’s own knowledge or intentions at the time of the Offer. Even if the cited newspaper articles could be relied upon, Mobileye argues that there are other articles that precede the Offer that state that Mobileye “had plans to go public in another year or two.” (Dkt. No. 15 at 3 n.5.)

Second, Mobileye argues that the Amended Complaint fails to allege facts raising a strong inference of fraudulent intent, as required by Rule 9(b) of the Federal Rules of Civil Procedure (“Rule 9(b)”). Specifically, Mobileye argues that the Amended Complaint fails to allege that Mobileye knew the misstatements were false or that Mobileye or its senior executives benefited from the alleged misstatements.

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Bluebook (online)
225 F. Supp. 3d 210, 2016 U.S. Dist. LEXIS 177690, 2016 WL 7488857, Counsel Stack Legal Research, https://law.counselstack.com/opinion/joseph-v-mobileye-nv-nysd-2016.