Miracle Ventures I, LP v. Spear

Background

Miracle Ventures I, LP sued FIGS Inc., Catherine Spear, and Heather Hasson for fraud and breach of fiduciary duty. Spear and Hasson were officers and directors of FIGS, and Miracle Ventures was a former FIGS shareholder.

On April 27, 2017, Spear solicited Miracle Ventures’ sale of its FIGS shares and described the offered price as a “significant premium.” After Miracle Ventures requested an update, Spear said that “[t]he business is doing OK” and provided information showing disappointing revenues, a substantial loss, and a sales-team layoff. Miracle Ventures alleged that the defendants did not disclose that FIGS was discussing a new financing round with the Tull Family Trust or that Tull had entered into an arrangement, as of June 17, 2017, to invest approximately $65 million in FIGS.

On June 6, 2017, Miracle Ventures sold 137,852 FIGS shares to Tull for $1.81 per share, or $249,491.45 total. The stock purchase agreement contained a Delaware choice-of-law clause, a merger clause, a general release, and an anti-reliance provision. In that provision, Miracle Ventures represented that it had adequate information, had independently decided to sell without relying on FIGS or Tull except for specified contractual representations, and understood that Tull might possess material information that Miracle Ventures did not know.

Fraud Claim Against FIGS

The court applied Delaware law because the stock purchase agreement selected Delaware law. The fraud claim was based primarily on alleged omissions concerning the Tull investment and related financing discussions.

The court held that the anti-reliance provision barred the claim. Under Delaware law, fraud requires justifiable reliance, and a clear anti-reliance clause can prevent a plaintiff from relying on statements or omissions outside the contract. The court found that Miracle Ventures expressly limited the information on which it relied and expressly accepted that Tull might possess material information that Miracle Ventures did not have. The clause therefore covered the alleged omissions.

Miracle Ventures also alleged that the agreement falsely stated that FIGS had delivered certain 2016 financial statements to Miracle Ventures. The court rejected that allegation because the agreement said the statements had been delivered to the purchaser, Tull—not to Miracle Ventures. The court concluded that the fraud claim rested on extra-contractual statements and omissions covered by the anti-reliance provision and dismissed the claim. It did not decide whether the fraud allegations independently satisfied all particularity requirements or whether the general release or statute of limitations also barred the claim.

Breach-of-Fiduciary-Duty Claim

The court applied Delaware law to the fiduciary-duty claim under the internal-affairs doctrine, which generally applies the law of a corporation’s state of incorporation to relationships involving the corporation, its directors, and its shareholders. The claim alleged that Spear and Hasson failed to disclose facts material to Miracle Ventures’ decision to sell its shares.

The court considered three potentially relevant disclosure settings under Delaware law. First, in a private stock sale by an outside shareholder, the special-facts doctrine requires disclosure of sufficiently significant facts when an officer or director deliberately misleads a shareholder who is unaware of them. The court held that the complaint did not show that the price and structure of the proposed Tull transaction had been agreed upon by June 6, 2017, when Miracle Ventures signed the agreement. It also did not provide facts supporting an inference that any investment then under consideration would have affected FIGS’s stock price enough to qualify as a special fact.

Second, the court held that the more demanding disclosure standard for requests for shareholder action did not apply. Miracle Ventures’ individual sale of shares was not alleged to be a transaction requiring shareholder approval or a collective shareholder investment decision.

Third, when corporate fiduciaries speak to shareholders, they must not knowingly make false statements. The court found that the complaint did not adequately allege that Spear or Hasson knowingly disseminated false information. The allegation that Spear called the offered price a “significant premium” lacked sufficient detail under the rule requiring fraud allegations to be stated with particularity. The complaint also did not allege that Spear’s statement that the business was “doing OK,” or the information sheet she provided, was untruthful. The court further found no affirmative duty to disclose an inchoate, potential future transaction.

The claim against Hasson was independently deficient because the complaint contained no specific allegations about her statements or conduct. It referred generally to Spear and Hasson together and did not allege that Hasson spoke dishonestly.

Disposition

The court granted the defendants’ motion to dismiss and dismissed the plaintiffs’ claims. Miracle Ventures may, but need not, seek leave to replead the breach-of-fiduciary-duty claim by submitting a proposed second amended complaint and an explanatory letter within fourteen days of the order. The court stated that Miracle Ventures may not seek leave to replead the fraud claim because the anti-reliance provision foreclosed it and amendment could not cure the defect.

The court also noted that evidence outside the pleadings indicated that Tull’s $65 million investment did not occur until 2018, while the defendants asserted that further Tull stock purchases were not contemplated until October 2017. If Miracle Ventures sought to allege an earlier investment arrangement in an amended complaint, the court required it to describe that arrangement specifically and provide a good-faith basis for the allegation.