Courthouse News: NRA Expert Accuses State of Political Prosecution at NY Bench Trial
July 25, 2024 – Courthouse News reports that a non-profit governance expert for Brewer's client, the National Rifle Association of America (NRA), "lambasted the New York attorney general on Thursday [July 25, 2024] for requesting a court-appointed monitor to supervise the group’s ongoing compliance efforts."
“A monitor in this situation is crazy, unprecedented,” expert Daniel Kurtz testified Thursday during phase two trial proceedings in NYAG v. NRA. “I’ve never seen anything like this happen.”
Currently a partner at Fox Rothschild LLP, Kurtz previously served as Assistant Attorney General-in-Charge of the Charities Bureau in the New York State Attorney General's office.
According to the Courthouse News reporting, during his testimony, Kurtz "accused the state of targeting the NRA for political reasons and asking for unreasonable relief."
“I see New York State both persecuting and prosecuting the NRA,” Kurtz said of this case, acknowledging the NRA is “politically unpopular” in New York.
Per documents filed in the case, the NYAG's office is requesting that the judge overseeing the bench trial appoint a monitor to oversee the NRA for a period of three years. Kurtz argued that such an appointment would result in both employees and members leaving the NRA in droves.
Kurtz testified, “There’s never been a situation, to my knowledge, in which a monitor has been appointed to reform the ‘nonprofit governance’ of an organization” – equating New York’s pursuit of the NRA to McCarthyism and the Second Red Scare of the 1940s and 1950s.
As the report states, the NRA argued in court his week that the organization is on the right track, noting that it has recently hired a chief compliance officer and established new internal protocols.
Read the report here.
Third Lawsuit Claims Biote CEO, Chairman, Aided by Law Firm, Conspired to Direct BioTE Holdings, LLC into SPAC Transaction to Enrich Themselves
July 16, 2024 – A third lawsuit filed by Brewer, Attorneys & Counselors alleges that company executives from Irving-based Biote Corp. – aided by the Cooley LLP law firm – breached their duties to plaintiffs by channeling the hormone therapy company into a value-destructive special purpose acquisition company (“SPAC”) transaction.
The lawsuit was filed by co-trustees of The Yosaki Trust and The Mioko Trust, Russell J. Miller and Mary Miller, on July 12, 2024, in the Court of Chancery of the State of Delaware.
The suit was brought against Biote CEO Teresa “Terry” Weber, Executive Chairman Marc Beer, Mary Elizabeth Conlon, Haymaker Sponsor III LLC, Steven J. Heyer, and Cooley LLP. Haymaker was the SPAC company that acted as the sponsor of the transaction and Cooley acted as outside counsel. The complaint states that the Cooley firm acted in aiding and abetting defendants’ breaches of their fiduciary duties.
The lawsuit alleges that “The Insider Defendants conspired to close this disastrous transaction to divert approximately $70 million of merger consideration to themselves and gain control of an enterprise they did not build. Plaintiffs respectfully request that the Court order Defendants to disgorge their ill-gotten gains.”
The filing follows a recent settlement with shareholder Marci Donovitz over similar issues.
As explained in the filing, a SPAC – also known as a “blank check company”—is a shell company set up by a sponsor that goes public without an operating business to raise funds, but with a plan to find a target private company with an operating business with which it would merge within a fixed period, usually two years.
“Our clients believe this case reveals a startling fact – company insiders worked with a blank check company and a law firm to enrich themselves and dilute the ownership interest of others,” says William A. Brewer III, partner at Brewer, Attorneys & Counselors, and counsel to plaintiffs.
The lawsuit alleges that plaintiffs’ ownership was diluted and devalued by the transaction, which enriched defendants at the expense of the legacy owners – plaintiffs bring the action to recover damages caused by the “disloyal fiduciaries, and those who aided them.”
As publicly reported, Biote was a recent defendant in a separate lawsuit filed by Biote founder and Brewer client Dr. Gary Donovitz regarding the SPAC deal. As reported, in February 2024, Biote disclosed it agreed to buy back nearly $77 million of Dr. Donovitz’s stock to settle the matter. In July 2024, it was reported that Biote reached a $60 million settlement with another shareholder Marci Donovitz, also a Brewer client.
The New York Times: The NRA Is Facing a Court Fight for Control of Its Future
July 14, 2024 – The New York Times reports that Brewer client the National Rifle Association of America (NRA) is preparing to return to a Manhattan courtroom in connection with a lawsuit filed by the New York Attorney General's office – and that the "stakes this time will be far higher."
The Times reports that "the NRA's leadership, not the group itself, was most at risk heading into the earlier phase of the trial. In the second phase, scheduled to begin on Monday in State Supreme Court, a judge will decide whether the group needs outside monitoring, a step that would curb its independence, at least temporarily, and that it stridently opposes."
“Every witness with personal knowledge of the internal workings of the association today concurs that further state intrusion poses a grave, needless threat to the NRA’s recovery,” the association said in a recent legal filing, adding that the first part of the trial had aired events from its “distant past.”
The reporting included comment from the NRA's lead counsel, William A. Brewer III, who acknowledged that "there was misconduct by former vendors and insiders" but said there was "no evidence it continues today. Not a shred."
To read the full report, click here.
Bloomberg Law and The Dallas Morning News Report on $60 Million Shareholder Settlement with Biote
July 8, 2024 – Bloomberg Law and The Dallas Morning News report that Biote reached a $60 million settlement with Brewer, Attorneys & Counselors client and Biote shareholder Marci Donovitz in a lawsuit over its merger with a special purpose acquisition company, also known as a “SPAC” or “blank check company.”
Bloomberg Law reported that Donovitz alleged her shares in the hormone therapy company were diluted by the deal. The article reported that the company will buy back her shares over a three-year period, with $30 million paid upfront. Bloomberg reports that the lawsuit filed in Delaware Chancery Court alleged that Biote company insiders benefited from the transaction with Haymaker Acquisition Corp. III that delivered almost no cash to the company.
“This settlement validates our client’s claim that the transaction was a scheme to enrich a few company ‘insiders’ – and reward them with financial and managerial benefits to which they were not entitled,” William A. Brewer III, a partner at the Brewer firm, said in a statement quoted in the media reports.
The Morning News report noted that as part of the settlement, Biote will be forced to repurchase all 8.3 million of Donovitz’s shares at $7.23 each.
The Morning News article observes that SPACs were once a very popular way for companies to go public but have faced scrutiny from the Securities and Exchange Commission in recent years.
Read the Bloomberg Law report here and The Dallas Morning News report here.
Biote Shareholder Achieves $60 Million Settlement of Breach of Fiduciary Duty Claims
July 3, 2024 – Brewer, Attorneys & Counselors announced today that its client, Marci Donovitz, reached a $60 million settlement with the company. The settlement resolves a lawsuit alleging that Biote executives breached their fiduciary duties by channeling the hormone therapy company into a speculative transaction with a special purpose acquisition company (“SPAC”) which provided almost no cash for the merger.
The lawsuit was filed by Ms. Donovitz on June 5, 2024, against defendants Biote CEO Teresa “Terry” Weber, Biote Executive Chairman Marc Beer, Biote General Counsel Mary Elizabeth Conlon, Haymaker Sponsor III LLC, Steven J. Heyer, and Cooley LLP. Haymaker was the SPAC sponsor for the transaction and Cooley advised those involved with the deal. Ms. Donovitz is the trustee of the Donovitz Family Irrevocable Trust and a BioTE Holdings, LLC shareholder.
The lawsuit alleged that “Defendants knew for months that astronomical redemptions would eviscerate almost all the cash raised by the SPAC and would cause the transaction to be destructive of value. Nonetheless, Defendants proceeded with their scheme to enrich themselves.” The lawsuit further alleged that as part of the transaction, defendants improperly diverted $70 million from the deal to Biote executives and $135 million in cash and stock in total to all defendants.
“This settlement validates our client’s claim that the transaction was a scheme to enrich a few company ‘insiders’ – and reward them with financial and managerial benefits to which they were not entitled,” says William A. Brewer III, partner at Brewer and counsel to Ms. Donovitz. “Our client hopes this outcome lights a path for those victimized by similar deals. This case underscores the rights of those too often viewed as pawns in these speculative pursuits.”
As explained in the underlying lawsuit, filed in The Court of Chancery of The State of Delaware, a SPAC – also known as a “blank check company” – is a shell company set up by a sponsor that goes public without an operating business to raise funds, but with a plan to find a target private company with an operating business with which it would merge within a fixed period, usually two years.
Ms. Donovitz is the ex-wife of Biote founder Dr. Gary Donovitz, who the lawsuit contends was tricked into waiving a minimum cash closing condition just days before the SPAC deal was completed on May 26, 2022.
As has been publicly reported, Biote was a defendant in a separate lawsuit filed by Dr. Donovitz regarding the SPAC deal. As reported, in February 2024, Biote disclosed it agreed to buy back nearly $77 million of Dr. Donovitz’s stock to settle the matter.
In addition to breaches of fiduciary duties, the lawsuit by Ms. Donovitz also alleged that defendant Biote executives negligently “misled Plaintiff’s trustee regarding the likely impact of this Merger on the value of her shares, failed to disclose material information regarding the risks of this SPAC transaction (including the possibility that it would provide virtually no cash), and failed to disclose that these risks had materialized.”
Under the terms of the settlement with Ms. Donovitz, Biote will repurchase all of the approximately 8.3 million shares she owns. At an average of $7.23 per share, the payout will occur over a three-year schedule: approximately 4.1 million shares valued at $30 million immediately, followed by 1.4 million shares valued at $10 million for each of the next three years.
Bloomberg Law, Law 360 Report on Lawsuit Against Cooley LLP and Biote Insiders
June 6, 2024 – Bloomberg Law and Law360 report on a lawsuit brought by Brewer, Attorneys & Counselors on behalf of Marci Donovitz against Cooley LLP and Biote company insiders concerning a special purpose acquisition company (SPAC) merger with the hormone therapy company Biote .
The lawsuit filed in Delaware Chancery Court concerned the 2022 merger of Biote with Haymaker Acquisition Corp. III, a SPAC company. The reporting noted that the defendants — including Cooley lawyers, SPAC founders and company insiders – failed to disclose material aspects of the deal as it deteriorated.
Bloomberg Law notes that the family trust , the Donovitz Family Irrevocable Trust, says its holdings were diluted in favor of the corporate insiders. Law360 writes that the lawsuit contends that the insider defendants conspired to close the merger for their own benefit.
In a statement, William A. Brewer III of Brewer, Attorneys & Counselors, counsel for the trust and its trustee Marci Donovitz, said: "The lawsuit reveals the inner workings of a scheme to enrich a few — at the expense of the owner who built the company. Our client believes a handful of insiders conspired to secure lucrative benefits to which they were not entitled."
Bloomberg Law noted that the SPAC market has “all but evaporated” as a growing number of deals resulted in litigation that alleged they benefitted insiders rather than helping companies grow.
Read the Bloomberg Law article here.
Read the Law360 article here.
Lawsuit Claims Biote CEO, Chairman Conspired to Direct BioTE Holdings, LLC into SPAC Transaction to Enrich Themselves
June 6, 2024 – A lawsuit filed on behalf of Brewer, Attorneys & Counselors client Marci Donovitz alleges that the chief executive officer and chairman of Irving-based Biote Corp. breached their duties to plaintiff and others by channeling the hormone therapy company into a value-destructive special purpose acquisition company (“SPAC”) transaction.
The lawsuit was filed by Ms. Donovitz, the trustee of the Donovitz Family Irrevocable Trust and a BioTE Holdings, LLC shareholder, on June 5 in the Court of Chancery of the State of Delaware.
The suit was filed against Biote CEO Teresa “Terry” Weber, Executive Chairman Marc Beer, Mary Elizabeth Conlon, Haymaker Sponsor III LLC, Steven J. Heyer, and Cooley LLP. Haymaker was the SPAC company that acted as the sponsor of the transaction.
“The lawsuit reveals the inner workings of a scheme to enrich a few – at the expense of the owner who built the company,” says William A. Brewer III, partner at Brewer, Attorneys & Counselors, and counsel to Ms. Donovitz. “Our client believes a handful of insiders conspired to secure lucrative benefits to which they were not entitled.”
As explained in the filing, a SPAC – also known as a “blank check company”—is a shell company set up by a sponsor that goes public without an operating business to raise funds, but with a plan to find a target private company with an operating business with which it would merge within a fixed period, usually two years.
Ms. Donovitz is the ex-wife of Biote founder Dr. Gary Donovitz, who the lawsuit contends was tricked into waiving a minimum cash closing condition just days before the SPAC deal was completed on May 26, 2022.
As has been publicly reported, Biote was a recent defendant in a separate lawsuit filed by Dr. Donovitz by Brewer regarding the SPAC deal. As reported, in February 2024, Biote disclosed it agreed to buy back nearly $77 million of Dr. Donovitz’s stock to settle the matter.
The lawsuit alleges that “Defendants knew for months that astronomical redemptions would eviscerate almost all the cash raised by the SPAC and would cause the transaction to be destructive of value. Nonetheless, Defendants proceeded with their scheme to enrich themselves.”
The lawsuit alleges that BioTE Holdings, LLC was channeled into the SPAC transaction that improperly diverted $70 million from the deal to Biote executives for their own enrichment and $135 million in cash and stock to the defendants. Plaintiff alleges that their actions resulted in her suffering hundreds of millions of dollars in damages and the dilution of her equity and voting power.
In addition to breaches of fiduciary duties, the lawsuit also alleges that defendant Biote executives negligently “misled Plaintiff’s trustee regarding the likely impact of this Merger on the value of her shares, failed to disclose material information regarding the risks of this SPAC transaction (including the possibility that it would provide virtually no cash), and failed to disclose that these risks had materialized.” The lawsuit also alleges that the Defendants were unjustly enriched.
Ms. Donovitz requests that the court order relief including the disgorgement of profits and forfeiture of ill-gotten gains, including the forfeiture of cash or equity obtained in the merger. The lawsuit also requests monetary damages.
Bloomberg Law Reports on Brewer Advocacy, Retention of NYU Law Professor
June 4, 2024 – Bloomberg Law reported today on the Brewer firm’s representation of the NRA against the New York Attorney General. The article notes that the NRA has added New York University law professor Samuel Estreicher to its legal team.
As reported, The NRA has asked a judge to throw out a recent jury verdict, ordering former chief executive Wayne LaPierre and another official to repay more than $6 million to the organization. The court will consider whether to also require independent monitoring in a second phase of the trial that’s set to start July 15.
Estreicher is working closely on this motion to set aside the verdict, according to William A. Brewer III, the NRA’s lead outside attorney. Estreicher joins a legal team led by Brewer and other lawyers from his New York litigation boutique, Brewer Attorneys & Counselors. Partners Svetlana M. Eisenberg, Sarah B. Rogers, and Noah Peters have also worked on the case.
“He appreciates that the NYAG is pursuing many novel legal theories in support of the jury’s verdict, and that the NYAG’s pursuit of the NRA raises grave constitutional questions under the First Amendment,” Brewer said in a statement. “In particular, we have worked closely with Professor Estreicher on the pending motion to set aside the verdict.”
Read more here.