Polaris Venture Partners VI, L.P. v Ad-Venture Capital Partners, L.P.

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Polaris Venture Partners VI, L.P. v Ad-Venture Capital Partners, L.P. 2021 NY Slip Op 31423(U) April 27, 2021 Supreme Court, New York County Docket Number: 650623/2018 Judge: Andrew Borrok Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. [*[FILED: 1] NEW YORK COUNTY CLERK 04/27/2021 09:22 AM] NYSCEF DOC. NO. 174 INDEX NO. 650623/2018 RECEIVED NYSCEF: 04/27/2021 SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PRESENT: PART HON. ANDREW BORROK IAS MOTION 53EFM Justice ---------------------------------------------------------------------------------x POLARIS VENTURE PARTNERS VI, L.P., POLARIS VENTURE PARTNERS FOUNDERS' FUND VI, L.P. INDEX NO. MOTION DATE MOTION SEQ. NO. Plaintiff, 650623/2018 02/12/2021 008 -vAD-VENTURE CAPITAL PARTNERS, L.P., BRIAN ADDY, DECISION + ORDER ON MOTION Defendant. ---------------------------------------------------------------------------------x The following e-filed documents, listed by NYSCEF document number (Motion 008) 136, 137, 138, 139, 140, 142, 143, 144, 145, 146, 147, 148, 149, 150, 151, 152, 153, 154, 155, 156, 157, 158, 159, 160, 161, 162, 163, 164, 165, 166, 167, 168, 173 were read on this motion to/for JUDGMENT-SUMMARY Upon the foregoing documents, Polaris Venture Partners, VI, L.P. and Polaris Partners Founders' Fund VI, L.P.'s (collectively, Polaris) motion for summary judgment must be granted. The Delaware Appraisal (the Delaware Appraisal; NYSCEF Doc. No. 34) is primaface evidence of the damages due Polaris. The underlying premise which dooms Ad-Venture Capital Partners, L.P.' s (Ad-Venture) position is based on Polaris' failure to have its option shares included in the Delaware Appraisal. This theory fails as a matter of law because the sole reason Polaris did not have its option shares included in the Delaware Appraisal is that Ad-Venture frustrated their ability to do so. Thus, having failed to create an issue of fact for trial, Polaris' motion must be granted. For completeness, previously, on August 7, 2019, the court had granted Polaris summary judgment solely with respect to liability for breach of a certain Stock Transfer Agreement and 650623/2018 POLARIS VENTURE PARTNERS VI, vs. AD-VENTURE CAPITAL PARTNERS, Motion No. 008 1 of 4 Page 1of4 [*[FILED: 2] NEW YORK COUNTY CLERK 04/27/2021 09:22 AM] NYSCEF DOC. NO. 174 INDEX NO. 650623/2018 RECEIVED NYSCEF: 04/27/2021 denied summary judgment on damages to Polaris because discovery had not yet occurred (see Mot. Seq. No. 002; NYSCEF Doc. No. 64). At the conclusion of discovery, on December 20, 2020, this court granted leave to Polaris to renew its motion for summary judgment because it had become clear that Ad-Venture' s theory of damages is premised on Polaris's failure to have its option shares included in the Delaware Appraisal. As this court previously explained, Polaris' failure occurred solely because of Ad-Venture and as such the Delaware Appraisal is prima facie evidence of the damages owed to Polaris (NYSCEF Doc. No. 131at1). Polaris now moves for summary judgment on the issue of damages equal to the difference between what Polaris would have received for its 76 option shares of ISN Software Corporation (ISN) if they had been included in the Delaware Appraisal ($98, 783 per share) and the price under the purchase option in the Stock Transfer Agreement ($29,783.30 per share). AdVenture' s argument that the Delaware Chancery Court would have valued the shares differently had they actually been included in the Delaware Appraisal fails. ISN' s CEO and director, Bill Addy, testified that the company's operations, financial condition, and business prospects did not change between the merger date that was used by the Delaware Chancery Court and the date of Ad-Venture's breach approximately two months later (NYSCEF Doc. No. 139 at 30). In addition, as discussed above, Ad-Venture can not claim that damages should be assessed on the basis that Polaris did not have independent appraisal rights and that the option shares might not have been included in the Delaware Appraisal (see NYSCEF Doc. Nos. 64, 131). To the extent that Ad-Venture asserts that a damages award should be reassessed on what knowledgeable investors anticipated the future conditions and performance would be at the time of the breach under New York law (see Kaminsky v Herrick, Feinstein LLP, 59 AD3d 1, 11 [1st Dept 2008] 650623/2018 POLARIS VENTURE PARTNERS VI, vs. AD-VENTURE CAPITAL PARTNERS, Motion No. 008 2 of 4 Page 2 of 4 [*[FILED: 3] NEW YORK COUNTY CLERK 04/27/2021 09:22 AM] NYSCEF DOC. NO. 174 INDEX NO. 650623/2018 RECEIVED NYSCEF: 04/27/2021 [citations omitted]), this is precisely what the Delaware Chancery Court did when it undertook a detailed analysis of ISN' s fair value based on the corporation's operative reality and accounted for facts which were known or which could be ascertained as of the date of the merger (NYSCEF Doc. No. 34 at 6). Finally, Ad-Venture is judicially estopped from arguing that any transactions predating the Delaware Appraisal should be included in a valuation of the option shares. Judicial estoppel prevents a party who assumed a position in a prior proceeding and secured a ruling in his or her favor from advancing a contrary position in another action, simply because his or her interests have changed (Becerril v City of NY Dept. of Health & Mental Hygiene, 110 AD3d 517, 519 [1st Dept 2013]). Ad-Venture previously argued that the prior transactions were unique and distressed transactions that were unrelated to the fair value of ISN shares. This argument the Delaware Chancery Court adopted when it determined that the prior transactions were an unreliable indicator of fair value (compare NYSCEF Doc. No. 30 at 55-62, with NYSCEF Doc. No. 34 at 10-11). Thus, Ad-Venture is not permitted to take a contrary position in these proceedings that the prior transactions should be accounted for in a damages analysis before this court. Accordingly, it is ORDERED that plaintiffs' motion for summary judgment is granted; and it is further ORDERED that the Clerk is directed to enter judgment in favor of Polaris Venture Partners, VI, L.P. and Polaris Partners Founders' Fund VI, L.P. and against Ad-Venture Capital Partners, L.P. in the amount of $5,243,977.20, plus statutory interest of 9% from March 13, 2013 until the 650623/2018 POLARIS VENTURE PARTNERS VI, vs. AD-VENTURE CAPITAL PARTNERS, Motion No. 008 3 of 4 Page 3 of 4 [*!FILED: 4] NEW YORK COUNTY CLERK 04 /2 7 /2 021 0 9: 2 2 AMI NYSCEF DOC. NO. 174 INDEX NO. 650623/2018 RECEIVED NYSCEF: 04/27/2021 date of entry of judgment, plus statutory interest of 9% per annum from the date of entry of judgment, plus costs and disbursements as allocated by the Clerk. The plaintiffs shall have execution thereof. 4/27/2021 DATE CHECK ONE: ANDREW BORROK, J.S.C. CASE DISPOSED GRANTED D DENIED APPLICATION: SETTLE ORDER CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN 650623/2018 POLARIS VENTURE PARTNERS VI, Motion No. 008 vs. AD-VENTURE 4 of 4 ~ NON-FINAL DISPOSITION GRANTED IN PART SUBMIT ORDER FIDUCIARY APPOINTMENT CAPITAL PARTNERS, D D OTHER REFERENCE Page 4 of 4

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