Daniel J. Riskin, M.D. v. Brenton Burns ( 2020 )

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
DANIEL J. RISKIN, M.D., )
)
Plaintiff, )
)
v. ) C.A. No. 2019-0570-KSJM
)
BRENTON BURNS; MARY BETH JENKINS; )
RAYMOND SCOTT; JOHN STEPHEN )
WHITEHURST; SCOTT HUEBNER; JOHN )
KUZMISHIN; FRED SCHWARZER; CRAIG )
GOMULKA; CHARLES TALBOT )
HEPPENSTALL, JR.; UNIVERSITY OF )
PITTSBURGH MEDICAL CENTER, a )
Pennsylvania corporation; UPMC )
PRESBYTERIAN SHADYSIDE, a )
Pennsylvania corporation; UPMC HEALTH )
PLAN, INC., a Pennsylvania corporation; )
CHARTER LIFE SCIENCES (OHIO) II, L.P., a )
Delaware limited partnership; CHARTER LIFE )
SCIENCES II, L.P., a Delaware limited )
partnership; CLS PARTNERS II (OHIO), LLC, )
a Delaware limited liability company; CLS )
PARTNERS II, L.P., a Delaware limited )
partnership; CLS MANAGEMENT II, LLC, a )
Delaware limited liability company, and )
HEALTH FIDELITY, INC., a Delaware )
corporation. )
)
Defendants. )
ORDER RESOLVING HEPPENSTALL’S AND THE UPMC AFFILIATES’
MOTIONS TO DISMISS FOR LACK OF PERSONAL JURISDICTION
1. This Order resolves the motions to dismiss the Amended Complaint1
for lack of personal jurisdiction under Court of Chancery Rule 12(b)(2) filed by
Defendants Charles Talbot Heppenstall, Jr., UPMC Presbyterian Shadyside (“UPMC
Presbyterian”), and UPMC Health Plan, Inc. (“UPMC Health Plan,” and with UPMC
Presbyterian, the “UPMC Affiliates”). The factual background in the
contemporaneously filed Memorandum Opinion supplies the background to the
present motion. Defined terms used in this Order have the same meaning ascribed
to them in the Memorandum Opinion.
2. “When a defendant moves to dismiss a complaint pursuant to Court of
Chancery Rule 12(b)(2), the plaintiff bears the burden of showing a basis for the
court’s exercise of jurisdiction over the defendant.”2 Delaware courts resolve
questions of jurisdiction using a two-step analysis. 3 First, the court must “determine
that service of process is authorized by statute.” 4 Second, the defendant must have
certain minimum contacts with Delaware such that the exercise of personal
jurisdiction “does not offend traditional notions of fair play and substantial justice.”5
1
C.A. No. 2019-0570-KSJM, Docket (“Dkt.”) 56, Verified Am. Class Action and
Derivative Compl. (“Am. Compl.”).
2
Ryan v. Gifford, 935 A.2d 258, 265 (Del. Ch. 2007) (citing Werner v. Miller Tech.
Mgmt., L.P., 831 A.2d 318 (Del. Ch. 2003)).
3
Id.4
Id.5
Matthew v. Fläkt Woods Gp. SA, 56 A.3d 1023, 1027 (Del. 2012) (quoting Int’l
Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (internal quotation marks omitted)).
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3. To satisfy these tests as to Heppenstall and the UPMC Affiliates,
Plaintiff relies on Delaware’s long-arm statute, codified at 10 Del. C. § 3404, and
the conspiracy theory of jurisdiction.
4. The Delaware Supreme Court established the elements of the
conspiracy theory of jurisdiction in Istituto Bancario Italiano SpA v. Hunter
Engineering Co.:
[A] conspirator who is absent from the forum state is
subject to the jurisdiction of the court . . . if the plaintiff
can make a factual showing that: (1) a conspiracy . . .
existed; (2) the defendant was a member of that
conspiracy; (3) a substantial act or substantial effect in
furtherance of the conspiracy occurred in the forum state;
(4) the defendant knew or had reason to know of the act in
the forum state or that acts outside the forum state would
have an effect in the forum state; and (5) the act in, or
effect on, the forum state was a direct and foreseeable
result of the conduct in furtherance of the conspiracy. 6
“Delaware courts construe this test narrowly and require a plaintiff to assert specific
facts, not conclusory allegations, as to each element.” 7 So long as the plaintiff
asserts specific facts, “the factual record is read in the light most favorable to the
plaintiff.”8
6
Perry v. Neupert, 2019 WL 719000, at *22 (Del. Ch. Feb. 15, 2019) (quoting Istituto
Bancario Italiano SpA v. Hunter Eng’g Co., 449 A.2d 210, 225 (Del. 1982)).
7
Hartsel v. Vanguard Gp., Inc., 2011 WL 2421003, at *10 (Del. Ch. June 15, 2011) (citing
Werner, 831 A.2d at 329–30).
8
Mobile Diagnostic Gp. Hldgs., LLC v. Suer, 972 A.2d 799, 802 (Del. Ch. 2009).
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5. Plaintiff’s arguments as to Heppenstall are slim. Plaintiff claims that
Heppenstall aided and abetted in breaches of fiduciary duties, and this forms the
basis of the alleged conspiracy supporting Plaintiff’s jurisdictional arguments.
Plaintiff alleges that Heppenstall was UPMC’s President and the “ultimate decision-
maker over [UPMC’s] investment in Health Fidelity.” 9 He executed, on behalf of
UPMC, stockholder consents purporting to authorize: the June 2016 Bridge
Financing; the December 2016 Equity Plan Amendment; and the 2017 Series B
Financing. He also executed the Note and Warrant Purchase Agreement on behalf
of UPMC and attended various Health Fidelity Board meetings.
6. Heppenstall, however, was not giving his own consent or binding
himself in any way in connection with these actions, and Plaintiff supplies no
authority for the proposition that the court may attribute those actions to Heppenstall
personally so as to establish jurisdiction. Generally, a corporation “cannot be
deemed to have conspired with its officers and agents for purposes of establishing
jurisdiction under the conspiracy theory” unless the agent “steps out of her role as
an officer or agent and acts pursuant to personal motives.”10 Plaintiff does not argue
9
See Am. Compl. ¶ 41.
10
Amaysing Techs. Corp. v. Cyberair Comm’ns, Inc., 2005 WL 578972, at *7 (Del. Ch.
Mar. 3, 2005).
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that Heppenstall acted pursuant to personal motives, so Heppenstall cannot be
deemed to have conspired with UPMC for the purpose of establishing jurisdiction.
7. Plaintiff’s arguments as to the UPMC Affiliates are even weaker.
Plaintiff claims that the UPMC Affiliates aided and abetted Defendants’ breaches of
fiduciary duties, and this forms the basis of Plaintiff’s personal jurisdiction
arguments as to the UPMC Affiliates. The Amended Complaint is somewhat vague
as to the predicate breach for the aiding and abetting claim. In briefing, Plaintiff
hones in on the 2014 and 2015 UPMC Agreements, which allegedly allowed the
UPMC Affiliates to “extract[] thousands and millions of dollars from Health
Fidelity.” 11 As discussed in the Memorandum Opinion, however, claims challenging
those transactions pre-dating June 2016 are barred by the doctrine of laches, and thus
they cannot supply the predicate conspiracy for jurisdictional purposes.
8. The Amended Complaint contains a few other facts specific to the
UPMC Affiliates, none of which support this court’s exercise of personal
jurisdiction. For example, Plaintiff alleges that Jenkins, who served on the Health
Fidelity Board, was also the Chief Administrative and Operating Officer of UPMC
Health Plan. But Jenkins’s presence on the Health Fidelity Board alone does not
give rise to the inference that UPMC Health Plan conspired in any breach of
11
Pl.’s Answering Br. at 101.
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fiduciary duty undertaken by any Board members during Jenkins’ tenure, and
Plaintiff’s theory is not more developed than that.
9. Plaintiff also alleges that UPMC Presbyterian executed the stockholder
consent for the June 2015 Equity Plan Amendment, but claims challenging that
amendment are also barred by the doctrine of laches. Further, as Plaintiff
acknowledges, UPMC Presbyterian was not a Health Fidelity stockholder. The
printing of “UPMC Presbyterian” was more likely than not a typographical error by
the UPMC representative that drafted the document and not supportive of a supposed
conspiracy involving UPMC Presbyterian.
10. The claims against Heppenstall and the UPMC Affiliates are therefore
dismissed pursuant to Court of Chancery Rule 12(b)(2).
IT IS SO ORDERED.
/s/ Kathaleen St. Jude McCormick
Vice Chancellor of the Court of Chancery
December 31, 2020
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