                             COURT OF CHANCERY
                                   OF THE
                             STATE OF DELAWARE

                                                                    417 S. State Street
JOSEPH R. SLIGHTS III                                             Dover, Delaware 19901
 VICE CHANCELLOR                                                Telephone: (302) 739-4397
                                                                Facsimile: (302) 739-6179

                           Date Submitted: May 28, 2019
                            Date Decided: July 12, 2019



A. Thompson Bayliss, Esquire                  Marcus E. Montejo, Esquire
Abrams & Bayliss LLP                          Prickett, Jones & Elliott, P.A.
20 Montchanin Road, Suite 200                 1310 King Street
Wilmington, DE 19807                          Wilmington, DE 19801

John L. Reed, Esquire                         Rudolf Koch, Esquire
DLA Piper LLP (US)                            Richards, Layton & Finger, P.A.
1201 N. Market Street, Suite 2100             920 North King Street
Wilmington, DE 19801                          Wilmington, DE 19801

Robert S. Saunders, Esquire
Skadden, Arps, Slate,
 Meagher & Flom LLP
One Rodney Square
Wilmington, DE 19801

       Re:    In re Xura, Inc. Stockholder Litigation
              Consolidated C.A. No. 12698-VCS

Dear Counsel:

       As you know, this case arises from the merger of Xura, Inc. and an affiliate of

Siris Capital Group, LLC (the “Merger”). The Merger has prompted certain Xura

stockholders to seek statutory appraisal of their Xura stock in this Court. One of
In re Xura, Inc. Stockholder Litigation
Consolidated C.A. No. 12698-VCS
July 12, 2019
Page 2


those stockholders, Obsidian Management LLC, filed a separate complaint in this

Court (the “Obsidian Complaint”) in which it raised breach of fiduciary duty claims

related to the Merger against Xura’s CEO, Philippe Tartavull, and aiding and

abetting breach of fiduciary duty claims against Siris, Frank Baker, a Siris Managing

Partner, and Michael Hulslander, also a principal of Siris (collectively the “Siris

Defendants”). On December 10, 2018, the Court granted the Siris Defendants’

motion to dismiss Obsidian’s aiding and abetting claims but denied the motion to

dismiss brought by Tartavull (the “Obsidian Opinion”).1 The facts relating to the

Merger and Obsidian’s claims against those involved in consummating the

transaction are spelled out in detail in the Obsidian Opinion.

         Ten days after the Court issued the Obsidian Opinion, another appraisal

petitioner, Istvan Szoke, filed a complaint in this Court (the “Szoke Complaint”) that

is nearly identical to the Obsidian Complaint raising the same claims against the

same defendants named by Obsidian, including the Siris Defendants.                Unlike

Obsidian, however, Szoke purports to bring his claims on behalf of a class of Xura




1
    In re Xura, Inc. S’holder Litig., 2018 WL 6498677 (Del. Ch. Dec. 10, 2018).
In re Xura, Inc. Stockholder Litigation
Consolidated C.A. No. 12698-VCS
July 12, 2019
Page 3


stockholders. In doing so, he acknowledges that he read the Obsidian Opinion, took

note of the pleading deficiencies identified by the Court with respect to the aiding

and abetting claim and then attempted to cure those deficiencies with additional pled

facts in his complaint.

      The Siris Defendants are not pleased. They believed they had achieved a

dismissal with prejudice and yet they now face another round of litigation relating

to the same Merger-related conduct at issue in the Obsidian Opinion. They have

moved to dismiss. Not surprisingly, their lead-off argument is that Szoke’s aiding

and abetting claim is barred by res judicata. In this regard, they point out that Szoke

and Obsidian’s principal are close friends and both Szoke and Obsidian have joined

together with a select few other Xura stockholders to seek appraisal. Szoke and

Obsidian are represented by the same counsel and there appears to have been some

degree of coordination between the litigants. According to the Siris Defendants,

these connections justify a finding that Szoke is bound by the Court’s disposition of

the claims against the Siris Defendants in the Obsidian Opinion. Alternatively, the

Siris Defendants urge the Court to adhere to stare decisis by finding that all of the

claims and issues raised by Szoke have been decided in the Obsidian Opinion.
In re Xura, Inc. Stockholder Litigation
Consolidated C.A. No. 12698-VCS
July 12, 2019
Page 4


       It is tempting to take on the Siris Defendants’ res judicata argument. The

filing of the Szoke Complaint on the heels of the Court’s dismissal of Obsidian’s

aiding and abetting claim raises legitimate concerns that may justify claim

preclusion. But I need not go there for the simple reason that I am satisfied Szoke,

like Obsidian, has failed to state a viable aiding and abetting claim against the Siris

Defendants.2 For that reason, the Siris Defendants’ motion to dismiss must be

granted.3

       Szoke’s complaint presents the same theories of aiding and abetting that were

advanced in Obsidian’s complaint. Specifically, Szoke alleges the Siris Defendants

aided and abetted Tartavull (and perhaps other Xura fiduciaries) (collectively, the




2
  The Siris Defendants have also moved for fees on the ground that Szoke has engaged in
bad faith litigation conduct in bringing claims against the Siris Defendants that are nearly
identical to those dismissed in the Obsidian Opinion. I do not see it that way. First, Szoke
is purporting to represent a class of Xura stockholders. He arguably had a duty to his fellow
stockholders to take a shot at the aiding and abetting claim again. Second, Szoke has added
allegations in his complaint that were not pled in the Obsidian Complaint. That I have
ultimately determined those allegations are inadequate to state an aiding and abetting claim
does not mean that Szoke acted in bad faith in asserting the claims to begin with.
3
  I note that Tartuvall has filed a motion to dismiss the Szoke Complaint as well. Because
Szoke’s claims against him mirror those found to have been adequately pled by Obsidian,
I denied that motion summarily. (D.I. 388).
In re Xura, Inc. Stockholder Litigation
Consolidated C.A. No. 12698-VCS
July 12, 2019
Page 5


“Xura Fiduciaries”) in breaching their fiduciary duties because Siris consummated

the Merger after: (i) knowing that Tartuvall had steered Xura into an underpriced

transaction with Xura, (ii) knowing that Xura stockholders were “dissatisfied with

Tartavull and that his hold on his CEO role was slipping,” and then “knowingly

exploit[ing]” this conflict by “deliberately induc[ing] Tartavull to believe that he

would be CEO of the Company after the Merger,” (iii) knowing that Francisco

Partners had approached Xura about a transaction and was diverted by the Xura

Fiduciaries to join Siris on the buy-side of the Merger, and (iv) facilitating the Xura

Fiduciaries’ allegedly inadequate public disclosures to Xura stockholders about the

Merger.4 As noted, I determined in the Obsidian Opinion that the plaintiff there had

not well-pled facts that would support any of these aiding and abetting theories.

         The following chart, borrowed from the Siris Defendants’ Opening Brief, lays

out the allegations borrowed from the Obsidian Complaint, highlights the new aiding

and abetting allegations in the Szoke Complaint (as underlined), and then compares




4
    See Szoke Compl. ¶¶ 83–84, 90, 101–104, 107, 139–140.
In re Xura, Inc. Stockholder Litigation
Consolidated C.A. No. 12698-VCS
July 12, 2019
Page 6


these allegations to the findings of inadequate pleading identified in the Obsidian

Opinion:



 Pleading Deficiency Identified in the Redline Excerpt Showing New
 Obsidian Plenary Complaint            Allegation in the Szoke Complaint

 “Plaintiff conspicuously stops short of     “On information and belief, Siris knew
 alleging any precedent facts, even on       that major Xura stockholders had
 information and belief, from which a        expressed displeasure with Tartavull’s
 pleading stage adverse inference could      performance and that Tartavull’s hold
 be drawn that Tartavull told or             on his job was slipping.” (Szoke
 otherwise indicated to Siris that he was    Compl. ¶ 83; Ex. 1, new ¶ 83)
 in danger of losing his job if the
 Transaction fell through or that he was     “On information and belief, Siris
 motivated to steer Xura into the            deliberately induced Tartavull to
 Transaction for self-interested reasons.”   believe that he would be CEO of the
 (Mem. Op. at 40)                            Company after the Merger and would
                                             receive lucrative employment benefits.
                                             By doing so, Siris knowingly exploited
                                             Tartavull’s conflict to secure an ally on
                                             the inside and to obtain information
                                             from Tartavull that it could use against
                                             the Company and drive down the
                                             transaction price.” (Szoke Compl. ¶ 84;
                                             Ex. 1, new ¶ 84)
                                             “On information and belief, Baker,
                                             Hulslander and Siris knew that Xura’s
                                             stockholders and its board were
                                             dissatisfied with Tartavull and that his
In re Xura, Inc. Stockholder Litigation
Consolidated C.A. No. 12698-VCS
July 12, 2019
Page 7


                                            hold on his CEO role was slipping.”
                                            (Szoke Compl. ¶ 139; Ex. 1, new ¶ 139)
                                            “Baker, Hulslander, and Siris each
                                            knowingly participated in Tartavull’s
                                            breachbreaches of fiduciary dutiesduty
                                            by …, (ii) using Tartavull’s gloomy
                                            employment prospects to Siris’s
                                            advantage and to the detriment of
                                            Xura’s stockholders by inducing
                                            Tartavull to believe that he would
                                            receive a lucrative employment package
                                            as the Company’s CEO post-merger....”
                                            (Szoke Compl. ¶ 140; Ex. 1, new ¶ 140)

 “Plaintiff has not alleged anything to     “But Francisco Partners did not bid.
 support its conclusory allegation that     Instead, it somehow learned that Siris
 ‘[t]he Siris Defendants knew that          was     Xura’s      counterparty.     On
 Francisco Partners had expressed           information and belief, Tartavull told
 interest and [were] diverted to the buy-   Franscico [sic] Partners that Siris was
 side of the transaction.’” (Mem. Op.       the Company’s counterparty. Instead of
 at 43)                                     submitting a competing proposal and
                                            bidding against a rival private equity
                                            firm, Francisco Partners reached out to
                                            Siris about a potential co-investment on
                                            the buy-side of the transaction. On
                                            information and belief, Siris signaled to
                                            Francisco Partners that it was open to
                                            buy-side participation to avoid a
                                            bidding war, but it told Francisco
                                            Partners that it would need to obtain
                                            approval from Xura before officially
                                            beginning discussions about a buy-side
In re Xura, Inc. Stockholder Litigation
Consolidated C.A. No. 12698-VCS
July 12, 2019
Page 8


                                                partnership.” (Szoke Compl. ¶ 90; Ex.
                                                1, new ¶ 90)

 “Plaintiff’s allegations that Siris            “Shortly after the execution of the
 somehow aided and abetted in the               Merger Agreement, Xura and Siris
 Board’s deficient disclosures also fall        personnel began working on a draft of
 short. At the outset, I note that an aiding    the Proxy. On information and belief,
 and abetting claim based on a third-           Xura and Siris exchanged multiple
 party’s alleged failure somehow to             drafts of the Proxy, and advisers for
 prevent a board from providing                 both sides were intimately involved in
 misleading disclosures to stockholders         the drafting process. On information
 rests on thin ice. Yet that is what            and belief, Xura and Siris personnel
 Plaintiff alleges here. It has pled no facts   carefully reviewed and approved each
 to support an inference that Siris             portion of the Proxy, including the
 knowingly facilitated alleged disclosure       “Background of the Merger” section of
 deficiencies or otherwise ‘knowingly           the document. On information and
 participated” in that aspect of the            belief, both Baker and Huslander [sic]
 alleged breach of fiduciary. Instead, at       were given the opportunity to comment
 best, Plaintiff alleges (albeit summarily)     on the Proxy, and both approved it
 that Siris knew certain facts and knew         before it was issued.” (Szoke Compl.
 that the Board was not disclosing those        ¶ 101; Ex. 1, new ¶ 101)
 facts to stockholders.” (Mem. Op. at
 42-43)                                         “On July 12, 2016, Xura issued the
                                                Proxy. But the ProxyIt did not give the
 “I note Plaintiff alleges Siris Defendants     stockholders all the information they
 aided and abetted the purported                needed to properly evaluate the Merger,
 disclosure deficiencies for the first time     and it misled them in key
 in its Answering Brief. … The                  regardsrespects. The Proxy made no
 Complaint simply claims               Siris    mention     of    Francisco      Partners
 Defendants aided and abetted a breach          whatsoever – despite the fact that
 of fiduciary duty ‘by engaging in direct       Tartavull      had      detailed      his
 and improper communications with               communications       with      Francisco
 Tartavull throughout the negotiations          Partners in comments on a draft of the
 that led to the Merger.’ … This alone is       Proxy. Instead, the Proxy trumpeted the
In re Xura, Inc. Stockholder Litigation
Consolidated C.A. No. 12698-VCS
July 12, 2019
Page 9


 enough to disregard the claim.” (Mem. fact that Xura contacted ‘26 prospective
 Op. at 42 n.147 (citation omitted))        buyers’ and that ‘[n]one of the parties
                                            contacted during the go-shop process...
 “In any event, with regard to the specific submitted an Acquisition Proposal to
 disclosure violations Siris allegedly the Company.’ On information and
 aided and abetted Xura in committing, belief, Siris and Xura jointly determined
 Plaintiff has not alleged anything to that the Proxy should not include any
 support its conclusory allegation that reference to Francisco Partners.”
 ‘[t]he Siris Defendants knew that (Szoke Compl. ¶ 102 (alteration in
 Francisco Partners had expressed original); Ex. 1, new ¶ 102)
 interest and [were] diverted to the buy-
 side of the transaction.’” (Mem. Op. “The Proxy also failed to mention a
 at 43 (alterations in original; citation number of meetings and direct
 omitted))                                  communications between Tartavull and
                                            Siris, including the February 24, 2016
                                            meeting at which they discussed price
                                            and other sensitive topics. As a result,
                                            the Proxy painted an inaccurate picture
                                            of the nature and frequency of
                                            communications between Tartavull and
                                            Siris. On information and belief, Siris
                                            personnel commented on the Proxy’s
                                            portrayal of the negotiating process and
                                            were intimately involved in determining
                                            what should and should not be
                                            disclosed.” (Szoke Compl. ¶ 103; Ex. 1,
                                            new ¶ 103)
                                           “The Proxy described the Strategic
                                           Committee as a committee the board
                                           created to ‘review, evaluate and
                                           negotiate the terms of a potential
                                           transaction with Siris and to make
                                           certain decisions between meetings of
                                           the board of directors.’ On information
In re Xura, Inc. Stockholder Litigation
Consolidated C.A. No. 12698-VCS
July 12, 2019
Page 10


                                          and belief, Xura and Siris jointly
                                          determined to describe the Strategy
                                          [sic] Committee in this way. But in fact,
                                          as both the Company and Siris knew
                                          perfectly well, the Strategic Committee
                                          never met with Siris, never took formal
                                          action, and was just a forum in which
                                          Tartavull raised questions or concerns
                                          about the business generally.” (Szoke
                                          Compl. ¶ 104; Ex. 1, new ¶ 104)
                                          “On information and belief, personnel
                                          from Xura and Siris jointly developed
                                          the Supplemental Proxy. Baker and
                                          Hulsander [sic] were afforded the
                                          opportunity to comment on the
                                          Supplemental      Proxy,    and,   on
                                          information and belief, they approved
                                          the Supplemental Proxy before it was
                                          issued.”            (Szoke     Compl.
                                          ¶ 107; Ex. 1, new ¶ 107)
                                          “Baker, Hulslander, and Siris each
                                          knowingly participated in Tartavull’s
                                          breachbreaches of fiduciary dutiesduty
                                          by … (iii) knowingly participating in
                                          the drafting and dissemination of
                                          inaccurate and misleading disclosures
                                          contained in the Proxy and the Proxy
                                          Supplement.” (Szoke Compl. ¶ 140;
                                          Ex. 1, new ¶ 140)
In re Xura, Inc. Stockholder Litigation
Consolidated C.A. No. 12698-VCS
July 12, 2019
Page 11


         What is clear from this comparison is that Szoke has attempted to plug in the

pleading gaps the Court identified in the Obsidian Opinion principally with

allegations based “on information and belief.” This is so even though Szoke, and

his counsel, have had access to a fully developed discovery record in the Obsidian

appraisal and fiduciary duty actions for months.5             Pleading serial facts “on

information and belief” is no substitute for well-pled facts that will support a

reasonable inference of wrongdoing.6

         What is lacking in the Szoke Complaint is what was lacking in the Obsidian

Complaint—well-pled allegations that Siris “knowingly participated” in the Xura

Fiduciaries’ alleged breaches of fiduciary duty. 7 “Knowing participation” means


5
  Fact discovery in this consolidated action is complete or nearly complete. Trial will
commence on October 7, 2019.
6
  See In re Coca-Cola Enters., Inc., 2007 WL 3122370, at *4 n.28 (Del. Ch. Oct. 17, 2007)
(“[i]f a complaint were held sufficient simply because it restates the legal elements of a
particular cause of action, Rule 8(a) would be rendered meaningless. Plaintiffs need not
offer prolix tales of abuse belabored by needless details, but plaintiffs must allege facts
sufficient to show that the legal elements of a claim have been satisfied.”), aff’d sub nom.
Int’l Bhd. Teamsters v. Coca-Cola Co., 954 A.2d 910 (Del. 2008); Aveta Inc. v. Cavallieri,
23 A.3d 157, 181 (Del. Ch. 2010) (dismissing complaint on stare decisis grounds upon
concluding that the new complaint did not plead new facts “beyond what [was] previously
considered.”).
7
    Malpiede v. Townson, 780 A.2d 1075, 1097 (Del. 2001).
In re Xura, Inc. Stockholder Litigation
Consolidated C.A. No. 12698-VCS
July 12, 2019
Page 12


just that—the alleged aider and abettor must know the fiduciary is breaching his

fiduciary duty and then must participate, in some way, in that breach.8 The Szoke

Complaint, like the Obsidian Complaint, falls short on both fronts. First, there are

no well-pled allegations that, as it negotiated and eventually consummated the

Merger, Siris (and its negotiators) knew: (1) Tartuvull would be terminated as CEO

but for the Merger such that they could exploit that fact (by offering post-Merger

employment) to provoke Tartuvull to facilitate their low ball offer; (2) the Xura

Fiduciaries had directed Francisco Partners to withdraw its expression of interest to

acquire Xura on its own so that it could join Siris in its bid; or (3) Xura had failed to

provide adequate disclosures regarding the Merger to its stockholders. 9 Second,




8
  Binks v. DSL.net, Inc., 2010 WL 1713629, at *10 (Del. Ch. Apr. 29, 2010). See also
Restatement (Second) of Torts §876 (“For harm resulting to a third person from the tortious
conduct of another, one is subject to liability if he (b) knows that the other's conduct
constitutes a breach of duty and gives substantial assistance or encouragement to the other
so to conduct himself”).
9
  See In re Volcano Corp. S’holder Litig., 143 A.3d 727, 750 (Del. Ch. 2016) (noting that
the standard for pleading the “requisite scienter” in connection with the “knowing
participation” element of aiding and abetting imposes a “high burden”), aff’d, 2017
WL 563187 (Del. Feb. 9, 2017) (TABLE); Weinberger v. Rio Grande Indus., Inc., 519
A.2d 116, 131 (Del. Ch. 1986) (dismissing aiding and abetting claim against acquirer based
on the acquirer’s alleged knowing participation in false disclosures upon finding that
In re Xura, Inc. Stockholder Litigation
Consolidated C.A. No. 12698-VCS
July 12, 2019
Page 13


there are no well-pled allegations that the Siris Defendants “participated” in any

breach of fiduciary duty by giving “substantial assistance or encouragement” to any

of the Xura Fiduciaries.10 In this regard, it is not enough to allege that Siris drove a

hard bargain.11 Instead, Szoke was obliged to allege facts that would allow a

reasonable inference that the Siris Defendants took steps to assist the Xura

Fiduciaries in breaching their fiduciary duties knowing that the breaches were

occurring and knowing that they were assisting in those breaches. The Szoke

Complaint falls short of this mark.12


plaintiff had not pled that the acquirer knew the disclosures were misleading or that it
participated in the fiduciaries’ decision to make the disclosures).
10
   See Restatement (Second) of Torts §876(b); see also Malpiede, 780 A.2d at 1097 n.78
(citing Restatement (Second) of Torts §876(b) with approval); Prairie Capital III, LP v.
Double E Hldg. Corp., 132 A.3d 35, 63 (Del. Ch. 2015) (same).
11
  See Tomczak v. Morton Thiokol, Inc., 1990 WL 42607, at *16 (Del. Ch., Apr. 5, 1990)
(“Although Dow’s purchases certainly had the effect of putting economic pressure on
Morton Thiokol, what Dow essentially did was to simply pursue arm’s-length negotiations
with Morton Thiokol through their respective investment bankers in an effort to obtain
Texize at the best price that it could.”); Weinberger v. United Fin. Corp. of Cal., 1983
WL 20290, at *13 (Del. Ch., Oct. 13, 1983) (refusing to impose liability on sponsor of a
tender offer who negotiated aggressively with target at arm's-length to obtain the best price
possible).
12
  For the reasons stated in the Obsidian Opinion, I reject again the argument that the Court
should draw adverse inferences at the pleadings stage against the Siris Defendants based
on the Szoke Complaint’s allegations of spoliation of evidence. The Obsidian Opinion
In re Xura, Inc. Stockholder Litigation
Consolidated C.A. No. 12698-VCS
July 12, 2019
Page 14


       Based on the foregoing, Siris’ motion to dismiss the aiding and abetting claim,

Count II of the Szoke Complaint, must be granted.13

       IT IS SO ORDERED.14

                                           Very truly yours,

                                           /s/ Joseph R. Slights III




held that Obsidian had “conspicuously stop[ped] short of alleging any precedent facts, even
on information and belief, from which a pleading stage adverse inference could be drawn
that Tartavull told or otherwise indicated to Siris that he was in danger of losing his job if
the Transaction fell through or that he was motivated to steer Xura into the Transaction for
self-interested reasons.” In re Xura, Inc. S’holders Litig., 2018 WL 6498677, at *9 n.92
(emphasis added)). As noted in the Obsidian Opinion, the inferences a plaintiff asks the
court to draw at the pleading stage must be reasonable and they must be grounded in pled
facts. Id. at *9 n.92, *14 n.139. No such reasonable inferences, adverse or otherwise, are
supported by any of the new “facts” pled in the Szoke Complaint.
13
   I acknowledge Szoke’s letter dated June 24, 2019 (D.I. 417), submitted well after oral
argument on this motion, in which Szoke’s counsel describes at some length certain
documents produced by Francisco Partners, and then states that Szoke intends to file a
motion for leave to file a second amended complaint. I also acknowledge, and agree with,
the Siris Defendants’ June 25, 2019 letter (D.I. 419) in which they point out that Szoke’s
June 24 letter is an improper substitute for a proper motion for leave to amend. More than
two weeks have passed since Szoke’s June 24 letter, and he has not filed his motion for
leave to amend. Because I have concluded that the June 24 letter is not a proper means by
which to amend or supplement a pleading, I have not considered the contents of that letter
in deciding this motion.
14
  In light of the close proximity of trial, the Siris Defendants shall respond to all ordered,
pending (or agreed to) party discovery as if they remained in this case as parties.
