Calenture, LLC v. Sofinnova Venture Partners X, L.P.

Background

Calenture, LLC and Nosirrah Management LLC sued Sofinnova Venture Partners X, L.P., Sofinnova Management X, L.P., and Sofinnova Management X-A, L.L.C. under Section 16(b) of the Securities Exchange Act of 1934. Section 16(b) requires certain statutory insiders to return profits from a purchase and sale of an issuer’s securities occurring within six months. Vera Therapeutics, Inc. was named as a nominal defendant.

The amended complaint alleged that Sofinnova Partners purchased 161,290 shares of Vera’s Class A common stock on January 30, 2024, at $31 per share. It then sold Vera shares on March 21, 22, and 25, 2024. The complaint estimated the resulting profit at $1,832,916.39. The parties did not dispute that the purchases and sales occurred within six months. The dispute was whether the defendants were statutory insiders as officers, directors, or shareholders owning more than ten percent of a class of Vera securities.

The plaintiffs relied on a “director by deputization” theory. Under that theory, an entity may be treated as a director when it places an individual on an issuer’s board to represent the entity’s interests. The complaint alleged that Sofinnova negotiated board-representation rights, designated Dr. Maha Katabi as its representative on Vera’s board, and continued to receive rights to use Vera’s confidential information to monitor its investment. It also alleged that Katabi had access to material nonpublic information, shared it with the defendants, and participated in decisions concerning Sofinnova Partners’ Vera investment.

Motion to Dismiss

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint alleges enough facts to state a legally plausible claim. On that motion, the court accepted the complaint’s factual allegations as true and drew reasonable inferences for the plaintiffs. The court emphasized that this procedure does not decide whether the plaintiffs will ultimately prevail or weigh competing evidence.

The court ruled that it could consider Vera’s 2023 proxy statement in full because the amended complaint attached excerpts from it. The court declined to consider Vera’s IPO registration statement and Form 8-K for the truth of their contents because the complaint did not sufficiently incorporate those documents. The court could take judicial notice of the filings as documents but could not use them at this stage to establish that their factual assertions were true.

The defendants argued that the director-by-deputization theory did not apply and relied on five factors described in a Section 16 treatise: whether the entity recommended the director; whether the director was selected to protect the entity’s interests; whether the director obtained material nonpublic information; whether the director shared it with the entity; and whether the entity used it in its investment strategy. The court held that these factors can help assess deputization but are not mandatory requirements. It also stated that deputization is generally a fact question to be decided case by case.

Court’s Analysis

The court found that the complaint plausibly alleged the first two factors. It alleged that Sofinnova negotiated for board representation to protect its investment and designated Katabi as its representative. The complaint also alleged that Katabi remained on Vera’s board after the initial voting agreement ended, and that Vera’s governance structure and voting rules allowed her to be elected without meaningful opposition. The court found that Katabi’s classification as an independent director under Nasdaq rules did not resolve whether she represented Sofinnova for Section 16(b) purposes.

The court also found the remaining allegations sufficient at the pleading stage. The complaint alleged that the Investors’ Rights Agreement allowed Vera to provide material nonpublic information to Sofinnova and allowed Sofinnova to use confidential information to monitor its investment. The complaint further alleged that Katabi was a control person and general partner connected to Sofinnova, that she had authority over or influence on investment decisions, and that transactions in Vera securities occurred under her oversight. From those allegations, the court held that it was reasonable to infer that she could receive Vera’s confidential information, share it with Sofinnova, and use it in connection with Sofinnova’s trading decisions.

Disposition

Judge Edgardo Ramos denied the defendants’ motion to dismiss. The ruling allowed the amended Section 16(b) claim to proceed, but it did not determine whether the defendants actually were statutory insiders, whether they used confidential information, or whether they ultimately must return any profits. The court also scheduled a status conference for July 30, 2025, and directed the clerk to terminate the motion.