Miracle Ventures I, LP v. Spear

Background

Miracle Ventures I, LP brought claims against FIGS Inc., Catherine Spear, and Heather Hasson for fraud and breach of fiduciary duty. The court had previously dismissed the fraud claim with prejudice but allowed Miracle Ventures to revise its breach-of-fiduciary-duty claim against Spear and Hasson. The Second Amended Complaint contained only that revised claim.

The revised complaint added an allegation that, when Miracle Ventures sold its FIGS shares to Tull, FIGS had agreed with Tulco LLC to pursue a multi-part investment involving the purchase of shares from outside investors, investment in FIGS, assistance in growing the company, and an initial public offering. The complaint also alleged that the Tull investment significantly changed FIGS’s business and the value of its shares.

Choice of Law

The court held that Delaware law governed the claim. Spear and Hasson were alleged to have been FIGS officers and directors, FIGS was a Delaware corporation, and New York’s internal-affairs doctrine generally applies the law of the company’s state of incorporation to relationships involving the company, its directors, and its shareholders. Neither side argued that another state’s law should apply.

Contractual Release and Anti-Reliance Provision

The court granted the motion to dismiss because the stock-purchase agreement contained a broad general release, together with an anti-reliance provision. The release covered all claims of any kind, whether known or unknown, that had accrued or could have been brought by the closing date and that arose from or related to agreements, events, acts, or conduct involving the shares. It expressly covered FIGS’s officers and directors.

The court concluded that this language covered Miracle Ventures’ claim against Spear and Hasson. It rejected Miracle Ventures’ argument that a claim alleging fraud in inducing the release could avoid the release. Under the Delaware authorities discussed by the court, a release can be set aside in some circumstances involving fraud, duress, coercion, or mutual mistake. But the court found that the alleged misconduct here was not separate from the sale of Miracle Ventures’ shares. The release specifically referred to the shares and broadly covered claims connected with the sale, including claims that the seller might not have been considering when it signed the agreement.

The court also relied on Miracle Ventures’ contractual representations that it was a sophisticated investor, had enough information to make an informed decision, and had made its decision independently and without relying on information outside specified contractual representations. Miracle Ventures also acknowledged that Tull might possess material information that it did not have and agreed to sell its shares despite not knowing that information. The court found that these provisions showed Miracle Ventures assumed the risk of undisclosed information and released claims based on it.

Finally, the court rejected the argument that the release had to specifically mention fiduciary-duty claims. The release applied to claims “of any kind or character whatsoever,” and the court distinguished cases involving prospective waivers of fiduciary duties rather than releases of claims based on alleged past breaches.

Disposition

The court held that, even assuming the Second Amended Complaint adequately alleged a disclosure violation or fraud in inducing the release, the claim was released by the stock-purchase agreement. Judge Lorna G. Schofield granted defendants’ motion to dismiss. The Second Amended Complaint was dismissed with prejudice, and the clerk was directed to close the motion and the case.