As readers know, I have been keeping track of COVID 19-related securities class action lawsuits as they have been filed over the course of recent weeks (most recently here). One of the companies to get hit with a COVID 19 related securities suit is the pharmaceutical company Inovio; as discussed here, a plaintiff shareholder filed a securities suit against the company based on alleged statements by the company’s CEO about the company’s readiness to prepare and begin testing a coronavirus vaccine. Now the company’s board has been with a separate shareholder derivative lawsuit based on the same coronavirus-related allegations. A copy of the plaintiff’s complaint, filed on April 20, 2020, can be found here.
In this new derivative lawsuit, an Invoio shareholder has filed a complaint in the Eastern District of Pennsylvania against the company’s CEO, J. Joseph Kim; the company’s board chair, Simon Benito; five other company directors. The complaint also lists the company itself as a nominal defendant.
The allegations in the complaint track very closely with the allegations in the previously filed securities class action lawsuit; that is, the complaint relates to the defendants represented to the investing public, in statements by Kim and in company SEC filings that the company had developed a COVID-19 vaccine that could be ready for human trials as early as April 2020. These statements, cause the company’s share price to rise, only to see the share price drop or after March 9, 2020 based online statements by short-settle Citron Research on its Twitter feed.
The complaint alleges that the defendants breached their fiduciary duties by making or causing the company to make the allegedly misleading statements, and by failing to correct or failing to cause the company to correct the allegedly false and misleading statements. The complaint also alleges that the defendants breached their fiduciary duties by failing to maintain internal controls.
The complaint also alleges that the defendants misconduct allegedly subjected the company to a securities class action lawsuit; subjected the company to the need to conduct internal investigations, the need to implement adequate internal controls, losses from alleged waste of corporate assets, losses from the unjust enrichment of individual defendants who allegedly were over-compensated or benefited from the alleged wrongdoing.
The complaint further alleges that demand on the board to pursue the claims asserted in the derivative complaint is excused by the substantial likelihood of the individual defendants’ liability, their being beholden to each other, their longstanding business and personal relationships, and their not being disinterested or independent.
The complaint asserts claims for breach of fiduciary duty; unjust enrichment; abuse of control; gross mismanagement; waste of corporate assets; and for contribution (against Kim).