Grimes v. Alteon, Inc.

804 A.2d 256 (2002)

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Nature of the Case

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Facts

D is a pharmaceutical company specializing in drugs for cardiovascular and renal diseases. P is a lawyer and an investor who, along with his wife, Jane Gillespie Grimes, often purchases large blocks of stock (but below 10% to avoid insider obligations) in small technology-based companies. Ps held approximately 9.9% of D's stock. Moch, the President and Chief Executive Officer of D, told P that D needed additional funds and that D was considering a private placement stock offering. P expressed concern about his holdings being diluted, and that he would buy 10% of any such offering. Moch promised orally that he would offer P 10% of the offering. IP promised orally to buy 10% of the offering. P admits that there is no writing memorializing these promises. He also admits that D's board did not approve this transaction. D publicly announced a private placement offering but did not allow P to participate. D's stock price increased from $3 to as high as $5-5/16 per share. P sued D for damages and specific performance of the oral agreement between P and Moch. D moved to dismiss the complaint under Court of Chancery Rule 12(b)(6) for failure to state a claim on which relief may be granted. D argued that any agreement constituted a 'right' under 8 Del. C. § 157, and is thus invalid because it is not written and was not approved by the board of directors. D also argued that the agreement was a 'preemptive right' under 8 Del. C. § 102(b)(3) and is thus invalid because it was not expressly provided in D's certificate of incorporation. D also argued that the agreement is too indefinite as to time, quantity, and price to constitute an enforceable contract. The Court of Chancery accepted the first ground and granted the motion to dismiss. Ps appealed.