Angioscore, Inc. v. Trireme Medical, Inc.
2015 WL 1538153, 87 F. Supp. 3d 986, 2015 U.S. Dist. LEXIS 45531 (2015)
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Rule of Law:
Under Delaware law, a corporate director's fiduciary duty of loyalty prevents them from usurping a corporate opportunity for their own benefit. An opportunity is considered the corporation's if it falls within its line of business, it has an interest or expectancy in it, and it is financially able to undertake it.
Facts:
- Dr. Eitan Konstantino was a founder of AngioScore, Inc. and served on its board of directors.
- AngioScore's primary product was the 'AngioSculpt,' a specialty angioplasty balloon catheter used for treating cardiovascular disease.
- In the fall of 2009, while still an AngioScore director, Konstantino began developing a competing specialty balloon catheter called 'Chocolate' through his other company, TriReme Medical.
- This development included designing the device, submitting a provisional patent application, conducting animal testing, and preparing materials to secure investors.
- In February 2010, Konstantino informed AngioScore's CEO that TriReme was 'contemplating' entering the specialty balloon market.
- When AngioScore raised concerns about a conflict of interest, Konstantino represented that no new project had actually been started.
- At AngioScore's request, Konstantino resigned from the board on February 5, 2010.
- Following his resignation, Konstantino, through his counsel, sent a letter to AngioScore expressly stating that prior to his departure, he had not been involved in developing any products that competed with AngioScore.
Procedural Posture:
- AngioScore, Inc. originally sued Dr. Eitan Konstantino and his companies in federal district court for patent infringement.
- During discovery, AngioScore uncovered evidence that Konstantino developed the competing product while serving on its board.
- The court granted AngioScore's motion for leave to amend its complaint to add state law claims, including breach of fiduciary duty.
- Defendants filed a motion to dismiss the state law claims for lack of subject matter jurisdiction.
- Both AngioScore and the defendants filed cross-motions for summary judgment on the state law claims.
- The court bifurcated the trial, scheduling a bench trial on the state law claims to occur before the jury trial on the patent claims.
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Issue:
Under Delaware's corporate opportunity doctrine, does a director who invents and develops a competing product while serving on a corporation's board create a genuine issue of material fact as to whether they usurped a corporate opportunity, thus precluding summary judgment in their favor?
Opinions:
Majority - Gonzalez Rogers, J.
Yes, a director who develops a competing product while on the board creates a genuine issue of material fact regarding the usurpation of a corporate opportunity. The court applied the four-factor test from Guth v. Loft, Inc. to determine if Konstantino misappropriated a corporate opportunity. The court granted summary judgment to AngioScore on the first factor, finding that the 'Chocolate' device was undisputedly within AngioScore's 'line of business' because both are specialty balloon catheters with similar functions and target markets. However, the court found that genuine disputes of material fact existed for the other factors, including whether AngioScore had an 'interest or expectancy' in the opportunity (as the board may have been focused solely on its existing product) and whether it had the 'financial ability' to exploit it (as the development costs were disputed). The court also denied defendants' motion for summary judgment based on the statute of limitations, finding that Konstantino's affirmative misrepresentations about his development activities created a triable issue of fact as to whether the statute was tolled due to fraudulent concealment.
Analysis:
This decision reinforces the fact-intensive nature of the corporate opportunity doctrine and the strength of a director's duty of loyalty. It clarifies that a director cannot easily escape this duty by claiming an opportunity was their own invention, especially when it falls squarely within the corporation's line of business. The ruling emphasizes that courts will broadly construe the 'line of business' test. Furthermore, the decision serves as a strong precedent for applying the fraudulent concealment doctrine to toll the statute of limitations when a fiduciary makes affirmative misrepresentations to hide a potential breach of duty.
