Paul Witmer v. Armistice Capital, LLC

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

PAUL WITMER, )
)
Plaintiff, )
)
v. ) C.A. No. 2022-0807-MTZ
)
ARMISTICE CAPITAL, LLC, )
ARMISTICE CAPITAL MASTER FUND )
LTD., STEVEN BOYD, JOSHUA )
DISBROW, GARY CANTRELL, JOHN )
DONOFRIO, JR., CARL DOCKERY, and )
KETAN B. MEHTA, )
)
Defendants, )
)
and )
)
AYTU BIOPHARMA, INC., )
)
Nominal Defendant. )

MEMORANDUM OPINION
Date Submitted: April 14, 2025
Date Decided: August 14, 2025

Thomas A. Uebler, MCCOLLOM D’EMILIO SMITH UEBLER LLC, Wilmington, DE;
Andrew W. Robertson, William H. Spruance, MORRIS KANDINOV LLP, New York,
NY, Attorneys for Plaintiff Paul Witmer.

Matthew F. Davis, Adriane M. Kappauf, POTTER ANDERSON & CORROON LLP,
Wilmington, DE; Douglas A. Rappaport, AKIN GUMP STRAUSS HAUER & FELD
LLP, Attorneys for Defendants Armistice Capital, LLC and Armistice Capital Master
Fund Ltd.

ZURN, Vice Chancellor.
A stockholder of the nominal defendant company alleges that company

overpaid on two transactions that benefitted the company’s largest investor. The

stockholder also alleges the investor improperly traded on inside information. The

stockholder brought derivative claims against the investor for breach of fiduciary

duty, insider trading, aiding and abetting, and unjust enrichment. The investor

moved to dismiss, presenting five questions for adjudication.

The first is whether a company’s decision to permit a stockholder to pursue

derivative claims against an investor should be set aside because the company

granted that permission in a settlement agreement. I conclude the company’s

decision remains paramount in that context. It follows that demand is excused.

The second is whether the stockholder pled the investor exerted transaction-

specific control over the asset purchases via the investor’s large stake in the

company, the investor’s board designee, his role in the process and ties to

management, and the company’s disclosure that the investor could exercise

control. I conclude the plaintiff did not plead actual control and so failed to saddle

the investor with fiduciary duties at the pleading stage.

The third is whether the stockholder pled the investor owed fiduciary duties

for purposes of an insider trading claim based solely on its board designee’s access

to confidential company information. I conclude that theory has no foothold in

Delaware law.

2
The fourth is whether the stockholder pled an aiding and abetting claim

against the investor. The investor’s knowing participation is not well-pled.

The fifth is whether the stockholder pled an unjust enrichment claim. I find

he did not.

I. BACKGROUND1

The facts are drawn from the operative complaint, the documents integral to

it, and those incorporated by reference. The stockholder demanded and received

books and records before filing its complaint in this action.2

A. Aytu and Armistice

Plaintiff Paul Witmer is a stockholder of nominal defendant Aytu

Biopharma, Inc. (“Aytu”), a publicly traded pharmaceutical company incorporated

1
Citations in the form “SAC” refer to the plaintiff’s second amended complaint in this
action, available at docket item (“D.I.”) 34. Citations in the form “OB –” refer to the
defendants’ opening brief, available at D.I. 42. Citations in the form “AB –” refer to the
plaintiff’s answering brief, available at D.I. 46. Citations in the form “RB –” refer to the
defendants’ reply brief, available at D.I. 50. Citations in the form “Defs. Supp. –” refer
to the defendants’ supplemental brief, available at D.I. 78. Citations in the form “Pl.
Supp.” refer to the plaintiff’s supplemental brief, available at D.I. 81. Citations in the
form “Kappauf Aff.” refer to the affidavit of Adriane M. Kappauf, available at D.I. 41.
Citations in the form “Pl’s Ex.” refer to the exhibits attached to the plaintiff’s answering
brief, available at D.I. 46.
2
It is unclear to me whether the parties agreed to incorporate the company’s entire
production into the complaint. See, e.g., Amalgamated Bank v. Yahoo! Inc., 132 A.3d
752, 796–99 (Del. Ch. 2016), abrogated on other grounds by Tiger v. Boast Apparel,
Inc., 214 A.3d 933 (Del. 2019). The parties only rely on documents explicitly
incorporated in the complaint. Those include emails, company policies, and board
minutes, but no board materials.

3
in Delaware.3 Armistice Capital, LLC is a Delaware-incorporated hedge fund

primarily focused on the health care and consumer sectors.4 It operates Armistice

Capital Master Fund Ltd., a Cayman Island limited company and investment fund

(together with Armistice Capital, “Armistice”).5 Armistice held Aytu equity from

2017 to 2020.6 Steven Boyd is Armistice Capital’s founder, Chief Investment

Officer, and Managing Partner.7 He sat on Aytu’s board from April 2019 to

August 2021.8

In November 2018, Armistice lent Aytu $5 million at 8% for three years.9

The promissory note was guaranteed by Aytu’s revenues from a contemporaneous

licensing agreement with Tris Pharma, Inc.10 Boyd learned of the Tris deal

through his service as a director at Cerecor Inc., and Boyd brokered the deal

between Tris and Aytu.11 In January 2019, Armistice exchanged the promissory

3
SAC ¶¶ 12–14.
4
Id. ¶ 15.
5
Id. ¶ 16.
6
Id. ¶¶ 4, 7, 24, 128.
7
Id. ¶ 17.
8
Id.
9
Id. ¶ 27.
10
Id.
11
Id. ¶¶ 27–30.

4
note for Aytu common stock at a discounted rate and warrants to purchase

additional common stock.12

When Aytu approved the promissory note and Tris deal, it also expanded its

board by two seats so Boyd and a non-Armistice-affiliated director could join.13

Boyd joined in April 2019.14 During his tenure, Boyd worked closely with Aytu’s

CEO Joshua Disbrow, consulting privately about Aytu’s financial position and

business strategy, and assisting Disbrow with arranging certain financing

arrangements for Aytu.15

As of April 2019, Armistice had a 41.1% stake in Aytu.16 At this time,

Aytu’s board noted Armistice would be an interested stockholder for purposes of

8 Del. C. § 203.17 In Aytu’s 10-K for the fiscal year ending June 2019, Aytu

disclosed that because of Armistice’s ownership and Boyd’s board seat, Armistice

“could be able to exert significant control over” Aytu.18

B. The Challenged Transactions
In late 2019 and early 2020, Aytu entered into two transactions with

12
Id. ¶ 38.
13
Id. ¶ 32.
14
Id. ¶ 33.
15
Id. ¶¶ 26, 133, 138.
16
Id. ¶ 40.
17
Id. ¶ 41.
18
Id. ¶ 42.

5
Armistice portfolio companies. At that time, Aytu’s board consisted of seven

directors.19 First, Aytu acquired Innovus Pharmaceuticals Inc. (“Innovus” and the

“Innovus Transaction”), which included a “portfolio of over thirty consumer

products competing in large therapeutic categories, including diabetes, men’s

health, sexual wellness and respiratory health.”20 Armistice held 10% of Innovus’s

equity.21

Negotiations began in summer 2019. Boyd was a member of a two-person

special committee (the “Review Committee”) that reviewed Aytu’s proposed terms

for purchasing Innovus before the full board did.22

After the Review Committee reviewed the proposed terms, the full board

met to review and discuss Aytu’s letter of intent on July 24, 2019.23 The board

received materials from management about Innovus, including its recent revenue

generation and potential synergies.24 But the board was not informed of Innovus’s

financial issues: that Innovus had never earned a profit, operated at a large deficit,

and was in financial distress.25 The board did not review Innovus’s financial

19
Id. ¶¶ 17–23, 61 n.2.
20
Id. ¶¶ 45, 47.
21
Id. ¶ 46.
22
Id. ¶ 61.
23
Id.; Pl’s Ex. 6 at -0300.
24
SAC ¶¶ 57, 59.
25
Id. ¶¶ 48, 57–58.

6
reports.26 The board was not told of Armistice’s stake in Innovus at this meeting.27

After discussion, the board determined the LOI’s terms were acceptable to Aytu

and its stockholders, and voted to authorize Aytu management to negotiate the

deal.28

On September 10, the board met again to discuss the Innovus Transaction

and to vote.29 Disbrow gave the board a summary of discussions with Innovus and

“discussed the structure of the transaction, key deal terms, and the potential

timeline for completing the acquisition.”30 The terms had not substantially

changed since July.31 Then the Aytu board discussed Boyd and Armistice’s

interest in the transaction, and “the benefits and potential risks” of the

transaction.32 Boyd left the meeting for the vote; then the board approved the

Innovus Transaction.33 Plaintiff alleges Armistice and Boyd knew material

information about Innovus’s financials because of Armistice’s stake in the

26
Id. ¶ 57.
27
Id. ¶ 60.
28
Id. ¶ 61; Pl’s Ex. 6 at -0301–02.
29
SAC ¶¶ 62–64; Pl’s Ex. 7.
30
Pl’s Ex. 7 at -0304.
31
SAC ¶ 56. One substantial addition included a warrant exchange: Aytu agreed to issue
convertible preferred stock to retire warrants held by Innovus investors, including
Armistice. Id.
32
Pl’s Ex. 7 at -0305.
33
Id.

7
company, but Boyd did not share that additional information with the board.34 The

board did not retain a financial advisor or seek a fairness opinion in connection

with the Innovus Transaction.35

As consideration, Aytu agreed to pay Innovus stockholders $8 million, lend

Innovus $1.4 million in bridge financing, and pay $1.1 million in stock to retire

Innovus warrants largely held by Armistice.36 Aytu agreed to pay Innovus

stockholders additional money if Innovus’s business achieved certain revenue

metrics from 2019 through 2023.37 Aytu assumed $3.5 million in debt from

Innovus.38

A few months later, on February 12, 2020, and shortly before the

stockholder vote was scheduled, the Aytu board was advised of new developments

about Innovus.39 The board learned of a significant increase in accounts payable,

an increased debt load, concerns over nonpayment of key vendors, and potential

termination by a service provider.40 Aytu did not disclose this new information to

34
SAC ¶ 61.
35
Id. ¶ 60.
36
Id. ¶¶ 51–52.
37
Id. ¶¶ 52–53.
38
Id. ¶ 54.
39
Id. ¶¶ 67–68.
40
Id. ¶ 68.

8
stockholders.41

The board considered moving the stockholder vote.42 But the board held the

vote because Boyd agreed to provide bridge financing to Innovus until its next

financing.43 Stockholders, including Armistice, approved the transaction on

February 13.44 The Innovus Transaction closed on February 14, 2020.45

At the same time Aytu was considering the Innovus Transaction, Aytu was

negotiating an asset purchase agreement with Cerecor to purchase a portfolio of six

pediatric and primary care products (the “Cerecor Transaction,” and together with

the Innovus Transaction, the “Challenged Transactions”).46 At the time, Armistice

owned 64.3% of Cerecor’s voting stock and Boyd sat on Cerecor’s board.47

On September 30, 2019, Aytu’s board met to discuss the Cerecor

Transaction.48 The board received materials about the Cerecor portfolio’s

historical revenues; those materials did not disclose that Cerecor had written off

and abandoned sales efforts with respect to one product in the portfolio, or that

Cerecor purchased four of the products less than two years earlier for nominal

41
Id. ¶ 71.
42
Id. ¶ 69.
43
Id. ¶¶ 69–70.
44
Id. ¶ 107.
45
Id. ¶ 72.
46
Id. ¶¶ 75–77.
47
Id. ¶ 76.

9
consideration.49 The September 30 materials include no analyses on value or

anticipated profitability.50 The board did not review Cerecor’s public filings.51

Despite Boyd and Armistice’s knowledge of Cerecor, Boyd did not give the board

any additional information.52

The Aytu board met again on October 10 to discuss and vote on the Cerecor

Transaction; the board was informed that Boyd was “interested in the [Cerecor]

Transaction.”53 Meeting materials failed to disclose that the Cerocor portfolio was

unprofitable, and that one of the products was discontinued.54

The Aytu board approved the Cerecor Transaction.55 Boyd did not recuse

himself from the vote.56 The Aytu board did not retain a financial advisor or

receive a fairness opinion.57

Aytu purchased the portfolio for a cash payment of $4.5 million and issued

Aytu convertible preferred stock to Cerecor stockholders, valued at $12.5

48
Id. ¶ 87.
49
Id. ¶¶ 87–88.
50
Id. ¶ 89.
51
Id. ¶ 88.
52
Id.
53
Id. ¶¶ 90–92.
54
Id. ¶ 94.
55
Id. ¶ 90.
56
Id. ¶ 92; Kappauf Aff. Ex. E at -3004, -3008.
57
SAC ¶¶ 81, 95.

10
million.58 Aytu also assumed certain Cerecor financial and royalty obligations.59

The Cerecor Transaction closed on November 1.60

Through the Challenged Transactions, Armistice nearly tripled its Aytu

stake.61

C. Goodwill

In the months after the Challenged Transactions, Aytu wrote off millions of

dollars in goodwill from the Cerecor Transaction.62 Aytu initially recorded $8.4

million in goodwill from the Innovus Transaction; that number increased to $8.6

million by the end of 2020.63 And as of December 2019, Aytu recorded $15.4

million in goodwill from the Cerecor Transaction;64 by June 2020, that number

increased to $19.5 million.65 In June 2021, Aytu disclosed it had “concluded that

[it] had a material weakness in internal control over financial reporting related to

[its] analysis for the accounting of goodwill and other intangibles and accounting

58
Id. ¶ 78.
59
Id. ¶¶ 79–80.
60
Id. ¶ 96.
61
Id. ¶ 111. Contemporaneously with the Cerecor Transaction, Armistice entered into a
private placement offering with Aytu to purchase Series F Convertible Preferred Stock.
Id. ¶¶ 98–101.
62
Id. ¶¶ 113, 122–23.
63
Id. ¶ 117.
64
Id. ¶ 115.
65
Id. ¶ 116.

11
for impairment of longlived assets.”66 In September 2021, Aytu disclosed it found

a goodwill impairment based on its determination that the fair value of one of the

Cerecor portfolios it purchased was less than the portfolios’ carrying value.67

Ultimately, Aytu wrote off the entire amount of goodwill recorded for the Cerecor

Transaction.68

D. Trades

Shortly after the Challenged Transactions, Armistice liquidated its holdings

in Aytu. Armistice was considered an Aytu insider and was subject to Aytu’s

insider trading policy (the “Insider Trading Policy”).

The Insider Trading Policy defined material nonpublic information

(“MNPI”) to include, among other things: “news of pending or proposed

acquisitions”; “news of the disposition or acquisition of significant assets”;

“significant developments involving collaboration relationships”; “known but

unannounced future earnings or losses”; and “new equity or debt offerings.”69 The

Insider Trading Policy imposes a special black-out period for Aytu insiders until

66
Id. ¶ 118.
67
Id. ¶ 120.
68
Id. ¶¶ 121–23. Aytu recorded $8.6 million in goodwill from the Innovus Transaction.
Id. ¶ 117. Plaintiff does not specifically plead Aytu wrote off any Innovus goodwill.
Id. ¶ 113.
69
Id. ¶ 134; Pl’s Ex. 2 at -0251.

12
three days after a disclosure of material company developments. 70 The policy also

prohibits insiders with MNPI from trading on that information until it has been

known by the public for two days.71 Aytu’s Insider Trading Policy has a pre-

clearance requirement that prohibits directors, and entities controlled by directors,

from trading until:

(i) the person trading has notified the Chief Financial Officer in
writing of the amount of the proposed trade(s), and (ii) the person
trading has certified to the Chief Financial Officer in writing no
earlier than one business day prior to the proposed trade(s) that (a) he
or she is not in possession of Material Nonpublic Information
concerning the Company, and (b) the proposed trade(s) do not violate
the trading restrictions of Section 16 of the Exchange Act or Rule 144
of the Securities Act.72

Because directors may possess MNPI about the company’s financials,

Aytu’s policy imposes a financial information blackout period prohibiting director

trading beginning ten days before the end of each fiscal quarter and ending three

days after Aytu publicly discloses its quarterly financial results.73 Lastly, the

Insider Trading Policy prohibits insiders from tipping others about MNPI, or

providing trading advice about Aytu securities while possessing MNPI.74

70
SAC ¶ 144.
71
Id. ¶ 145.
72
Id. ¶ 147.
73
Id. ¶ 154.
74
Id. ¶¶ 165–66.

13
1. March Trades

On March 9, 2020, Disbrow advised Aytu’s board that Aytu was signing an

exclusive distribution agreement to commercialize a rapid COVID-19 test.75 Aytu

announced this agreement to the public the next day, March 10. Aytu’s stock price

jumped 400% by the end of that day.76

Also on March 10, Armistice sold 23.5 million shares, representing $31.2

million.77 These sales were not made pursuant to a Rule 10b5-1 plan.78 Before

making those trades, Armistice’s counsel emailed Disbrow, Aytu’s CFO, and

Aytu’s outside counsel requesting permission to trade.79 Disbrow confirmed

Armistice was not in possession of MNPI and authorized Armistice to trade.80

Over the next two days, on March 11 and March 12, Aytu announced it was

entering into certain financing arrangements with investors to purchase twenty-four

million Aytu shares through registered direct offerings, set to close March 13.81

Boyd knew about these arrangements before Armistice’s March 10 trades.82 By

75
Id. ¶ 131.
76
Id. ¶ 135.
77
Id. ¶¶ 129, 136.
78
Id. ¶ 142.
79
Id. ¶ 148.
80
Id. ¶ 149.
81
Id. ¶ 137.
82
Id. ¶ 138.

14
March 13, Aytu’s stock price fell by 44%.83

2. April Trades

On April 27, Armistice emailed Disbrow, and Aytu’s CFO and outside

counsel, requesting clearance to trade.84 Disbrow gave Armistice the go-ahead.85

Later that day, Armistice liquidated the rest of its stock (together with the March

trades, the “Trades”).86 Under Aytu’s Insider Trading Policy, April 27 fell within a

financial blackout period.87

E. Litigation And Partial Settlement
Plaintiff filed this derivative action on September 12, 2022.88 He amended

his complaint on April 10, 2023,89 and again on April 3, 2024 (the “Amended

Complaint”).90 Plaintiff brought claims against Armistice and Boyd for breach of

fiduciary duty, aiding and abetting, and unjust enrichment, and against certain

current and former Aytu directors and officers (the “Directors”) for breach of

fiduciary duty, aiding and abetting, and unjust enrichment.

On March 13, 2024, Plaintiff and the Directors entered into a Stipulation and

83
Id. ¶ 140.
84
Id. ¶¶ 159–60.
85
Id. ¶ 161.
86
Id. ¶¶ 150–52.
87
Id. ¶¶ 156–57.
88
D.I. 1.
89
D.I. 13.
90
See SAC.

15
Agreement of Settlement, Compromise, and Release to settle all claims against

them (the “Settlement”).91 I approved that settlement on January 13, 2025.92 As

part of the Settlement, Plaintiff voluntarily dismissed Boyd from this action.93 In

the Settlement, Aytu agreed to maintain a position of neutrality with respect to the

derivative claims against Armistice.94

Armistice is the sole remaining defendant. Plaintiff presses claims against

Armistice for breach of fiduciary duty as to the Challenged Transactions, breach of

fiduciary duty as to the Trades, aiding and abetting breach of fiduciary duty, and

unjust enrichment.

II. ANALYSIS

Armistice seeks dismissal of this action under Court of Chancery Rule 23.1

for failure to plead demand futility and under Rule 12(b)(6) for failure to state a

claim. The facts here “are drawn from the operative complaint, the documents

91
D.I. 27; SAC ¶ 194.
92
D.I. 71.
93
D.I. 27 ¶ 22; see also D.I. 77 (dismissing Boyd from action per settlement).
94
D.I. 27 ¶ 21 (“The Aytu Defendants agree that they will maintain a position of
neutrality with respect to the claims asserted in the Action against the Armistice
Defendants. The Aytu Defendants shall not file any motion, pleading, or other
submission seeking dismissal of the claims against the Armistice Defendants pursuant to
Del. Ch. Ct. R. 23.1 or otherwise. In the event the Armistice Defendants seek dismissal of
the Action pursuant to Del. Ch. Ct. R. 23.1, the Aytu Defendants shall file with the Court
a declaration stating that the Company neither objects to nor supports claims being
brought against the Armistice Defendants on its behalf.”).

16
integral to it, and those incorporated by reference.”95 For reasons I will explain,

demand is excused, and the motion to dismiss is granted.

A. Demand Is Excused.
I begin with demand futility. “In a derivative suit, a stockholder seeks to

displace the board’s authority over a litigation asset and assert the corporation’s

claim.”96 “‘In order for a stockholder to divest the directors of their authority to

control the litigation asset and bring a derivative action on behalf of the

corporation, the stockholder must’ (1) make a demand on the company’s board of

directors or (2) show that demand would be futile.”97 Plaintiff did not bring a

demand on the board, so he must show the demand requirement is excused as

futile.98

Because Aytu has taken a position of neutrality on the claims against

Armistice, demand is excused. “‘A cardinal precept’ of Delaware law is ‘that

directors, rather than shareholders, manage the business and affairs of the

95
Bricklayers Pension Fund of W. Pa ex rel. Centene Corp. v. Brinkley, 2024 WL
3384823, at *2 (Del. Ch. July 12, 2024).
96
United Food & Com. Workers Union v. Zuckerberg, 250 A.3d 862, 876 (Del. Ch.
2020), aff’d sub nom. United Food & Com. Workers Union & Participating Food Indus.
Emps. Tri-State Pension Fund v. Zuckerberg, 262 A.3d 1034 (Del. 2021).
97
United Food & Com. Workers Union & Participating Food Indus. Emps. Tri-State
Pension Fund v. Zuckerberg (Zuckerberg II), 262 A.3d 1034, 1047 (Del. 2021) (quoting
Lenois v. Lawal, 2017 WL 5289611, at *9 (Del. Ch. Nov. 7, 2017)).
98
SAC ¶ 182.

17
corporation.’”99 And “[t]he board’s authority to govern corporate affairs extends to

decisions about what remedial actions a corporation should take after being

harmed, including whether the corporation should file a lawsuit against its

directors, its officers, its controller, or an outsider.”100 The corporation’s position

is paramount over any court consideration of demand futility:

When the defense of failure to make a demand is asserted, the court is
required to examine the position or policy espoused by the corporation
which it seeks to protect. Therefore, before a court can apply the
traditional standards for determining when demand is excused it must
first examine whether the corporation on whose behalf the action is
brought has taken a position concerning the propriety of the derivative
litigation. Stated differently, if the demand rule requires deference to
the prerogative of management, its invocation must advance
management’s position, vis-a-vis, the claims in question, otherwise,
the rule serves no function.101

Built on Delaware’s board-centric foundation, Kaplan v. Peat, Marwick, Mitchell

& Co. explains a company’s enunciated position on a derivative claim takes

precedence over the Court’s Rule 23.1 assessment of the position the company

might be able to take.102

In keeping with that precept, the Delaware Supreme Court held that “when a

corporation chooses to state its position in regard to the propriety of the derivative

99
Zuckerberg II, 262 A.3d at 1047 (quoting Aronson v. Lewis, 473 A.2d 805, 811 (Del.
1984), overruled on other grounds 746 A.2d 244 (Del. 2000)).
100
Zuckerberg II, 262 A.3d at 1047.
101
Kaplan v. Peat, Marwick, Mitchell & Co., 540 A.2d 726, 731 (Del. 1988).
102
Id.

18
litigation it must do so affirmatively. A position of neutrality is viewed as

inconsistent with objection to the continued prosecution of the derivative action

and thus serves to excuse demand.”103 In Kaplan, the company stated it “neither

objects to nor supports” the derivative action brought on its behalf by

stockholders.104 The high court explained that “a corporation’s failure to object to

a suit brought on its behalf must be viewed as an approval for the shareholders’

capacity to sue derivatively.”105

Under Kaplan, Aytu’s position of neutrality excuses demand for the claims

against Armistice. Aytu committed to a position of neutrality with regard to

Plaintiff’s claim against Armistice.106 Kaplan tells us Aytu’s stance must be

viewed as approval for Plaintiff to sue Armistice derivatively.107

Armistice does not dispute that interpretation of Aytu’s stance.108 Rather,

Armistice argues a statement of neutrality made in connection with a settlement

103
Id. at 727.
104
Id. at 729.
105
Id. at 731; see also Envirokare Composite Corp. v. D&D Mfg., LLC, C.A. No. 2022-
1202-KSJM, at 27 (Del. Ch. Mar. 6, 2024) (“LRM’s position of neutrality excuses
Plaintiff’s failure to make a demand. So the Rule 23.1 argument does not pass ‘Go.’”)
(TRANSCRIPT).
106
SAC ¶ 200.
107
Kaplan, 540 A.2d at 731.
108
And Armistice made clear that “[i]n making [its] argument, Armistice does not seek to
undermine or overturn the Settlement between Aytu and Plaintiff.” Defs. Supp. at 8 n.3.

19
should not, as a policy matter, permit a plaintiff to bypass Rule 23.1.109 Armistice

stresses that a “position of neutrality thus becomes a bargaining chip” or a

“weapon” to “avoid the otherwise imperative standing obligation.”110 In

Armistice’s view, this “defies the policy underlying Rule 23.1’s demand

requirement.”111

At bottom, Armistice is asking the Court to disregard the board’s decision

that Plaintiff can pursue Aytu’s claim against Armistice, and make the Court’s own

Rule 23.1 determination, because Aytu enunciated that position after negotiating

with Plaintiff. Asking the Court to substitute its judgment for a board’s is a big

ask. Doing so requires some reason to doubt the board’s competence, loyalty, or

independence; Armistice offers none.112 Whether Plaintiff extracted that statement

109
See generally Defs. Supp.
110
Id. at 8.
111
Id. at 3.
112
“[T]he ‘business judgment rule’ is ‘[a]t the foundation’ and ‘[a]t the core of Delaware
corporate law.’” Binks v. DSL.net, Inc., 2010 WL 1713629, at *5 (Del. Ch. Apr. 29,
2010) (first quoting Disney v. Walt Disney Co., 2005 WL 1538336, at *4 (Del. Ch. June
20, 2005); and then quoting In re CompuCom Sys., Inc. S’holders Litig., 2005 WL
2481325, at *5 (Del. Ch. Sept. 29, 2005)). “[T]he business judgment rule serves to
promote the role of the board, and not the court, as the ultimate manager of the business
and affairs of the corporation.” CompuCom, 2005 WL 2481325, at *5; see also Solash v.
Telex Corp., 1988 WL 3587, at *8 (Del. Ch. Jan. 19, 1988) (“Because businessmen and
women are correctly perceived as possessing skills, information and judgment not
possessed by reviewing courts and because there is great social utility in encouraging the
allocation of assets and the evaluation and assumption of economic risk by those with
such skill and information, courts have long been reluctant to second-guess such
decisions when they appear to have been made in good faith.”).

20
of neutrality, rather than the board providing it in its loyal and informed business

judgment, is not plain from the face of the Settlement; inferring that would be an

improper defense-friendly inference. At bottom, Armistice asks the Court to

elevate Rule 23.1 over the board’s decision. But the point of Rule 23.1 is to ensure

the directors “control the legal rights of the corporation unless there is a basis for

excusing their control.”113 When the board has ceded control, there is no reason

for the Court to ask if it should have control.114

Finally, the mere fact that the company’s position appears in a settlement

agreement does not support the Court substituting its judgment for the company’s.

Still, one way to read the Settlement is as an exchange of a statement of neutrality
toward Armistice for a release of claims against the Directors (and dismissal of Boyd):
throwing Armistice to a stockholder plaintiff in exchange for peace at home. I make no
comment on the loyalty of any such exchange, nor do I consider if or how the Court
might probe whether a statement of neutrality—promoting monetization of a derivative
claim—should be disregarded as wrongful because it bought a release for directors. See,
e.g., Zapata Corp. v. Maldonado, 430 A.2d 779, 786–89 (Del. 1981) (concluding a
special litigation committee’s decision to dismiss demand-excused derivative litigation
presents sufficient risk of disloyalty to warrant judicial evaluation, and establishing a
framework); In re Straight Path Commc’ns Inc. Consol. S’holder Litig., 2017 WL
5565264, at *4 (Del. Ch. Nov. 20, 2017). My holding today is limited to Armistice’s
argument that a statement of neutrality offered to a plaintiff in a settlement allows that
plaintiff to bypass Rule 23.1’s demand requirements and should be disregarded because
of it. See OB 52 (briefly noting “procedural implications” of “us[ing] ‘demand
neutrality’ as a settlement bargaining chip to escape [Plaintiff’s] demand obligations”);
RB 29 (arguing the statement should be disregarded because at that time the settlement
had not yet been approved); Defs. Supp. 7–10 (arguing that a statement of neutrality
offered as a central settlement term improperly allows plaintiffs to bypass demand futility
requirements).
113
In re Am. Intern. Gp, Inc., 965 A.2d 763, 810 (Del. Ch. 2009).
114
Id. at 811.

21
In the settlement context, Delaware’s board-centric governance model dovetails

with two more foundational precepts. First, “Delaware is famously

contractarian.”115 “We ‘uphold[] the freedom of contract and enforce[] as a matter

of fundamental public policy the voluntary agreements of sophisticated parties.’”116

And second, “Delaware law, as a general proposition, favors the voluntary

settlement of contested issues.”117 When a board pronounces its neutrality as to a

derivative action in a settlement agreement, these precepts favor respecting that

neutrality, not overriding it. Demand is excused.

B. Court of Chancery Rule 12(b)(6)

Next, I turn to Rule 12(b)(6). In a ruling on a motion to dismiss under Rule

12(b)(6),

the Court accepts as true all well-pled factual allegations contained in
the amended complaint, but conclusory statements–those unsupported
by well-pled factual allegations–are not accepted as true. The Court
will draw all inferences logically flowing from the amended
complaint in favor of the plaintiff but only if such inferences are
reasonable. The Court will not dismiss under Rule 12(b)(6) any claim
unless it appears to a reasonable certainty that the plaintiff cannot
prevail on any set of facts which might be proven to support the

115
Fortiline, Inc. v. McCall, 2025 WL 1783560, at *3 (Del. Ch. June 27, 2025).
116
Cantor Fitzgerald, L.P. v. Ainslie, 312 A.3d 674, 688–89 (Del. 2024) (quoting NAF
Hldg., LLC v. Li & Fung (Trading) Ltd., 118 A.3d 175, 180 n.14 (Del. 2015)).
117
Kahn v. Sullivan, 594 A.2d 48, 58 (Del. 1991); see also Citron v. Burns, 1985 WL
11533, at *2 (Del. Ch. Feb. 4, 1985) (“To begin with, there is a policy favoring such
settlements in the interest of judicial economy.”).

22
allegations in the amended complaint.118

Armistice has moved to dismiss Counts I and II for breach of fiduciary duty,

Count III for unjust enrichment, and Count VII for aiding and abetting.119 I grant

the motion in full.

1. Armistice Is Not A Controlling Stockholder.

First, I turn to Plaintiff’s claim for breach of fiduciary duty in connection

with the Challenged Transactions. Plaintiff asserts Armistice breached its

fiduciary duties “by causing Aytu to enter into transactions that benefitted . . .

[Armistice] and were not in the best interest of [Aytu] or its minority

stockholders.”120 A threshold question is whether Armistice owed fiduciary duties.

I find it did not.

“As a general rule, stockholders do not owe fiduciary duties to the

corporation or its stockholders and are free to act in their self-interest.”121 But

“Delaware law imposes fiduciary duties on those who effectively control a

118
Beam ex rel. Martha Stewart Living Omnimedia, Inc. v. Stewart (Beam I), 833 A.2d
961, 970 (Del. Ch. 2003) (footnote omitted), aff’d, 845 A.2d 1040 (Del. 2004).
119
E.g., OB 19–21.
120
SAC ¶ 205. “Because the [Aytu] board had the opportunity to consider whether to
move to dismiss this litigation or take charge of it but instead . . . opted to take no
position, the appropriate metric by which to measure whether the [c]omplaint survives is
the Rule 12(b)(6) standard, not the Rule 23.1 standard.” In re Am. Int’l Gp., Inc., Consol.
Deriv. Litig., 976 A.2d 872, 881 n.13 (Del. Ch. 2009), aff’d sub nom. Teachers’ Ret. Sys.
of La. v. Gen. Re Corp., 11 A.3d 228 (Del. 2010) (TABLE).
121
In re Oracle Corp. Deriv. Litig. (Oracle II), -- A.3d --, 2025 WL 249066, at *11 (Del.
Jan. 21, 2025).

23
corporation.”122 “[A] stockholder who owns or controls over 50% of a Delaware

corporation’s stock is presumed to exercise ‘hard’ control and assumes fiduciary

duties in certain circumstances. This is because a majority stockholder controls the

levers of power within the corporation.”123 “Conversely, a stockholder who owns

or controls less than 50% of a corporation’s voting power is not presumed to be a

controlling stockholder with fiduciary duties.”124 “Under recent Delaware

Supreme Court precedent, a minority stockholder may exercise actual control (i)

‘over the corporation’s business and affairs’ or (ii) ‘over a specific transaction.’”125

Here, Plaintiff asserts Armistice exercised actual control over the Challenged

Transactions.126

“The test for actual control by a minority stockholder ‘is not an easy one to

satisfy.’”127 “To allege transaction-specific control, a plaintiff must plead facts

supporting the inference that a stockholder ‘exercised actual control over the board

122
Quadrant Structured Prods. Co. v. Vertin, 102 A.3d 155, 183–84 (Del. Ch. 2014).
123
Oracle II, 2025 WL 249066, at *11 (footnote omitted).
124
Id. at *12.
125
Frank v. Mullen, 337 A.3d 824, 837 (Del. Ch. May 5, 2025) (quoting Oracle II, 2025
WL 249066, at *12).
126
As I recently noted in Frank v. Mullen, “[w]hether Delaware law has or should have
recognized transaction-specific control is subject to a lively debate before the judiciary
and in academia.” 337 A.3d at 837 n.141. For purposes of this opinion, I “proceed[]
under recent Delaware Supreme Court precedent recognizing that ‘a minority stockholder
can be a controlling stockholder by exercising actual control . . . over a specific
transaction.’” Id. (quoting Oracle II, 2025 WL 249066, at *12).

24
of directors during the course of a particular transaction.’”128

“[T]he potential ability to exercise control is not sufficient.”129 “At the pleadings

stage, a reasonable inference of actual control rests on the totality of the facts and

circumstances considered in the aggregate.”130 Indeed, “there is no magic formula

to find control; rather, it is a highly fact specific inquiry.”131 Plaintiff has failed to

allege facts supporting an inference that Armistice conceivably “dominated or

controlled [the Board’s] ‘corporate decision-making process[.]’”132

Plaintiff pleads the following indicia of control133:

• Armistice’s 41% stake in Aytu;134

127
Oracle II, 2025 WL 249066, at *12 (quoting In re PNB Hldg. Co. S’holders Litig.,
2006 WL 2403999, at *9 (Del. Ch. Aug. 18, 2006)).
128
Frank, 337 A.3d at 837–38 (quoting Oracle II, 2025 WL 249066, at *12).
129
Williamson v. Cox Commc’ns, Inc., 2006 WL 1586375, at *4 (Del. Ch. June 5, 2006).
130
Sciannella v. AstraZeneca UK Ltd., 2024 WL 3327765, at *17 (Del. Ch. July 8, 2024),
aff’d, 2025 WL 946148 (Del. Mar. 26, 2025).
131
Calesa Assocs., L.P. v. Am. Cap., Ltd., 2016 WL 770251, at *11 (Del. Ch. Feb. 29,
2016).
132
In re Rouse Props., Inc., 2018 WL 1226015, at *15 (Del. Ch. Mar. 9, 2018) (quoting
In re Crimson Expl. Inc. S’holder Litig., 2014 WL 5449419, at *11 n.66 (Del. Ch. Oct.
24, 2014)).
133
Witmer sees another sign of control in Boyd brokering the Tris deal before he was an
Aytu director. SAC ¶¶ 27–28. I fail to see how Boyd brokering that deal provides any
support for an inference of actual control over the board with respect to the Challenged
Transactions a year later. I focus on Witmer’s more salient allegations.
134
Id. ¶ 40. The parties dispute the size of Armistice’s relevant holdings. Plaintiff pleads
that by spring 2019 “Armistice held 41.1% of the Company’s outstanding shares” and as
of January 2020, it held 40.4%. Id. ¶¶ 40, 104. Citing to Aytu’s December 2019
Schedule 14A, Armistice says that it owned only 28% of Aytu’s stock as of December
2019. OB 23; Kappauf Aff. Ex. D at 1. Armistice says Plaintiff improperly contributes

25
• Armistice’s ownership in Innovus and Cerecor135;
• Boyd’s membership on the board and Review Committee136;
• the process surrounding the Challenged Transactions;137
• Boyd’s business relationship with Disbrow;138 and
• Aytu’s disclosure that “Armistice could be able to exert
significant control.”139

I will consider each factor in turn before evaluating them holistically.

i. Ownership Stake

First, Armistice’s stake. Our control jurisprudence “do[es] not reveal any

sort of linear, sliding-scale approach whereby a larger share percentage makes it

substantially more likely that the court will find the stockholder was a controlling

stockholder. Instead, the scatter-plot nature of [prior] holdings highlights the

importance and fact-intensive nature of the actual control factor.”140 Armistice’s

less-than-fifty-percent stake in Aytu does not demonstrate control in itself.141 Nor

does Armistice’s stake in Innovus and Cerocor.142 More is required.

nonvoting stock toward his control analysis. RB 2–3, 12–13. For this motion only, I will
assume the larger number.
135
SAC ¶¶ 46, 75–76; AB 44.
136
SAC ¶ 61; AB 14, 44.
137
SAC ¶¶ 238–39.
138
Id. ¶ 26; AB 9–10.
139
SAC ¶ 42.
140
Crimson Expl., 2014 WL 5449419, at *10 (collecting cases).
141
Oracle II, 2025 WL 249066, at *11.
142
Armistice’s benefit from the Challenged Transactions may mean Armistice had
motive to exert control, but allegations of actual control are still needed. Crimson Expl.,

26
ii. Process-Based Arguments

“Process inquiries are fact-intensive. Evaluating process integrity for the

purpose of determining actual control considers all ‘possible sources of influence’

and ‘[b]roader indicia of effective control.’”143 Boyd’s mere presence while the

seven-member Aytu board discussed the Challenged Transactions, without any

allegation that his presence slanted discussion or cowed directors, offers no support

for an inference of control.144

Plaintiff has not pled that Boyd participated in either Challenged

Transaction’s process in any way that tainted the process or affected the outcome.

In connection with the Innovus Transaction, Boyd’s alleged conduct is limited to

2014 WL 5449419, at *16 (explaining a plaintiff must “allege facts to show that the
[investor] actually controlled the board’s decision about the transaction at issue.”).
143
Frank, 337 A.3d at 846 (footnoted omitted) (quoting Basho Techs. Holdco B, LLC v.
Georgetown Basho Invs., LLC, 2018 WL 3326693, at *26–27 (Del. Ch. July 6, 2018),
aff’d sub nom. Davenport v. Basho Techs. Holdco B, LLC, 221 A.3d 100 (Del. 2019)
(TABLE)).
144
SAC ¶¶ 61, 91–92; see In re Vaxart, Inc. S’holder Litig., 2021 WL 5858696, at *17
(Del. Ch. Nov. 30, 2021) (“The presence of Armistice designees Boyd and Maher on the
Board does not establish control. Boyd and Maher constituted two of the eight directors
on the Board at the time of the challenged transactions and as of the filing of the
operative Complaint. Neither of them is an officer of Vaxart and neither of them is
alleged to have taken action to exert control over Vaxart’s affairs or any of the challenged
transactions.”); see also Turnbull v. Klein, 2025 WL 353877, at *14 (Del. Ch. Jan. 31,
2025); Patel v. Duncan, 2021 WL 4482157, at *14 (Del. Ch. Sept. 30, 2021) (holding a
stockholder’s “representatives’ passive presence at Board meetings discussing the
Challenged Transaction” did not support an inference of control, noting the “stark
contrast” to other cases “where the alleged controllers were deeply involved in
negotiating and structuring the challenged transactions”), aff’d, 277 A.3d 1257 (Del.
2022) (TABLE).

27
his inclusion on the Review Committee. The Review Committee was a “special

committee” that “reviewed the proposed” terms of the Innovus Transaction before

they were presented to the full board.145 Plaintiff does not plead that the Review

Committee was empowered in any manner to negotiate, recommend, or approve

the Innovus Transaction. 146 As pled, the Review Committee was not empowered

to do much at all. Boyd “reviewed” the potential terms before the full board did

the same. As to the Cerecor Transaction, Plaintiff provides even less about Boyd’s

conduct,147 alleging only his presence at board meetings.

From there, Plaintiff simply finds fault in Aytu’s board’s process. Plaintiff

asserts the board rubberstamped both Challenged Transactions,148 and received

inadequate information about both companies’ finances and value.149 And he

points to the lack of fairness opinions, advisors, or “meaningful analysis, or

negotiation[.]”150 While Plaintiff’s complaints may touch on competence, they do

not touch on control.

145
SAC ¶ 61.
146
Cf. Rouse Props., 2018 WL 1226015, at *12 (explaining a plaintiff demonstrates
control if she pleads the stockholder “actually dominated and controlled . . . the deciding
committee with respect to the challenged transaction”).
147
SAC ¶¶ 81–95.
148
Id. ¶¶ 55, 86.
149
Id. ¶¶ 57–60, 67–71, 86–89, 92–95.
150
Id. ¶¶ 55, 67–68, 95.

28
“Critically, the Amended Complaint does not allege that [Armistice] ‘steered

the negotiations or otherwise dominated’ the Board,” and includes almost no

allegations about Boyd’s conduct, “let alone the type of ‘overt or even subtle

bullying’ that this Court has found to support a reasonable inference of control.”151

iii. Control Over Disbrow

Plaintiff also asserts Disbrow was not independent of Armistice because of

his business relationship with Boyd. First, even accepting this argument as true,

Disbrow was one of seven board members – far from a majority of the board

required to plead dominion.152

151
Turnbull, 2025 WL 353877, at *14 (Del. Ch. Jan. 31, 2025) (first quoting Flannery v.
Genomic Health, Inc., 2021 WL 3615540, at *15 (Del. Ch. Aug. 16, 2021); and then
quoting Larkin v. Shah, 2016 WL 4485447, at *15 (Del. Ch. Aug. 25, 2016)); see In Re:
Sea-Land Corp. S’holders Litig., 1987 WL 11283, at *1–2, 5 (Del. Ch. May 22, 1987)
(finding control not well-pled despite 39.5% stockholder’s attendance at board meetings).
152
SAC ¶¶ 17–22, 61 n.2; see Frank, 337 A.3d at 845; Calesa Assocs., 2016 WL 770251,
at *12 (denying motion where the plaintiffs “pled sufficient facts to support a reasonable
inference that a majority of the Board was not disinterested or lacked independence from
[the stockholder], such that [the stockholder] was a controlling stockholder at the time of
the Transaction.”); Thermopylae Cap. P’rs, L.P. v. Simbol, Inc., 2016 WL 368170, at *14
(Del. Ch. Jan. 29, 2016) (explaining a stockholder can exercise control over a decision if
it “achieved control or influence over a majority of directors through non-contractual
means, such as affiliation or aligned self-interest”); In re Morton’s Rest. Gp., Inc.
S’holders Litig., 74 A.3d 656, 665 (Del. Ch. 2013) (“The fact that two employees of [a
27.7% stockholder] sat on the board, without more, does not establish actual domination
of the board, especially given that there were eight directors not affiliated with [the
27.7% stockholder].”).
To the extent Plaintiff challenges the independence of other Aytu directors
because “Boyd and Armistice concentrate their investment activities in the same
industry” those directors work in, that challenge fails. SAC ¶ 189; see, e.g., Beam ex rel.
Martha Stewart Living Omnimedia, Inc. v. Stewart (Beam II), 845 A.2d 1040, 1051–52
(Del. 2004) (“Mere allegations that they move in the same business and social circles . . .

29
And Plaintiff fails to dislodge the presumption that Disbrow was

independent. “Directors are presumed to be independent. To carry their burden, a

plaintiff must sufficiently plead that a director’s ties to the interested party, when

judged subjectively, were material such that those ties could have affected that

director’s impartiality. These ties are viewed holistically.”153 Plaintiff asserts only

that Disbrow and Boyd worked together, and one previous business dealing.

Specifically, he asserts: (1) Boyd was a “confidante and advisor” to Disbrow,

“with the two frequently consulting privately about [Aytu’s] financial position and

business strategy,”154 (2) Boyd assisted Disbrow in arranging financing

arrangements for Aytu,155 and that (3) while sitting on the Cerecor board in 2018,

Boyd directed the Tris Deal to Disbrow and Aytu.156 Those business connections

is not enough to negate independence for demand excusal purposes.”); Newman v. KKR
Phorm Invs., L.P., 2023 WL 5624167, at *5 (Del. Ch. Aug. 31, 2023) (finding “[t]he
Amended Complaint fails to rebut the presumption of independence” where it “alleges no
facts suggesting that [defendant stockholder] ‘controlled’ the [Review Committee] or
‘dominated’ them through a ‘close relationship’ or ‘force of will.’” (quoting Orman v.
Cullman, 794 A.2d 5, 25 n.50 (Del. Ch. March 1, 2002))).
153
Ligos v. Tsuff, 2022 WL 17347542, at *7 (Del. Ch. Nov. 30, 2022); In re HomeFed
Corp. S’holder Litig., 2020 WL 3960335, at *14 (Del. Ch. July 13, 2020) (“Although the
presence of a controller does not alone overcome the presumption of director
independence, it is relevant when considering Plaintiffs’ allegations holistically.”).
154
SAC ¶ 26.
155
Id. ¶¶ 133, 138.
156
Id. ¶¶ 30–31.

30
do not disturb Disbrow’s independence.157

iv. Aytu’s Disclosure

Finally, Aytu’s disclosure that Armistice could generally exert control is not

enough to plead control over the Challenged Transactions. In 2019, Aytu

disclosed that “[t]he significant ownership interest Armistice has” and “Boyd’s

position on [the] board of directors could give Armistice the ability to influence

[Aytu] through their ownership positions” and that “Armistice could be able to

exert significant control over [Aytu].”158

A company’s public acknowledgment of control or outsized influence is an

indicator of control.159 But “Delaware law requires actual control, not merely the

potential to control.”160 It follows that a disclosure of the mere possibility of

control does not amount to actual control, without more.

157
E.g., Kahn v. M & F Worldwide Corp., 88 A.3d 635, 648–49 (Del. 2014) (“Bare
allegations that directors are friendly with, travel in the same social circles as, or have
past business relationships with the proponent of a transaction or the person they are
investigating are not enough to rebut the presumption of independence.”), abrogated on
other grounds by Flood v. Synutra Int’l, Inc., 195 A.3d 754 (Del. 2018); Beam II, 845
A.2d at 1051–52.
158
Aytu Bioscience, Inc., Annual Report (Form 10-K) (Sept. 26, 2019) (emphases
added); SAC ¶ 42.
159
See In re Tesla Motors, Inc. S’holder Litig., 2018 WL 1560293, at *19 (Del. Ch. Mar.
28, 2018); Rouse Props., 2018 WL 1226015, at *19; In re Zhongpin Inc. S’holders Litig.,
2014 WL 6735457, at *6–8 (Del. Ch. Nov. 26, 2014), rev’d on other grounds sub nom.,
In re Cornerstone Therapeutics Inc, S’holder Litig., 115 A.3d 1173 (Del. 2015).
160
Williamson, 2006 WL 1586375, at *5; see also Citron v. Steego Corp., 1988 WL
94738, at *6 (Del. Ch. Sept. 9, 1988) (“[I]t is the actual exercise of such control, not the
simple potential for control, that creates the special duty.”).

31
Plaintiff relies on In re Zhongpin Inc. Stockholders Litigation.161 In

Zhongpin, the company expressly admitted the defendant was its controller, and

confirmed he had “significant influence,” that the company relied on him to

“manage [their] operations,” and that if he left, it would have a “material adverse

effect on [the company’s] business and operations.”162 The Court found that

disclosure, along with other allegations in the complaint, supported a pleading

stage inference that the defendant possessed latent and active control over the

company’s business and affairs generally.163

This Court has acknowledged the importance of Zhongpin’s “outright

admission” of control, absent here.164 And here, Boyd was not deeply involved in

Aytu’s business.165 Boyd was not an executive or consultant with Aytu; he was an

161
2014 WL 6735457, at *7–8; AB 42.
162
Zhongpin, 2014 WL 6735457, at *7–8.
163
Id. at *9.
164
Rouse Props., 2018 WL 1226015, at *19 (explaining that “Rouse’s disclosure in its
2014 Form 10–K that ‘[o]ur substantial stockholder may exert influence over us that may
be adverse to our best interests and those of our other stockholders’ is a far cry from the
outright admission that a minority blockholder was the corporation’s ‘controlling
stockholder’”).
165
Tesla Motors, 2018 WL 1560293, at *19 (distinguishing Zhongpin because the
company did not “expressly concede[]” control, and noting that “if the public disclosures
were all that Plaintiffs could point to as evidence of Musk’s control, the pleading likely
would come up short”).

32
investor’s board designee who made some substantive contributions. Boyd was

one of seven directors when the Challenged Transactions were approved.166

And finally, even in a combination of all factors, I find Plaintiff has not pled

actual control. “Whether a constellation of facts supports an inference of control is

a fact-specific inquiry, and different constellations of facts can lead to different

outcomes.”167 Here, the constellation of facts does not demonstrate control. While

Armistice held a large stake in Aytu, it did not control the board, dictate its

decision making, or compel the challenged outcomes. Armistice, for example, did

not hold board veto power,168 hold “day-to-day managerial supremacy,”169 threaten

the board,170 or hold any other lever of control over Aytu’s board, at all or for

purposes of the Challenged Transactions. Armistice was a significant investor

with a board designee, who had also invested in products Aytu’s majority-

166
SAC ¶¶ 17–22, 61 n.2.
167
Voigt v. Metcalf, 2020 WL 614999, at *22 (Del. Ch. Feb. 10, 2020).
168
Williamson, 2006 WL 1586375, at *4–5 (finding control well-pled where stockholders
were the company’s “only significant customers” and held “significant leverage” over the
company, held board veto power, and placed designees on the board).
169
In re Cysive, Inc. S’holders Litig., 836 A.2d 531, 552 (Del. Ch. 2003) (determining
post-trial that a stockholder was a controller because he was the chairman, CEO, founder,
and “inspirational force” behind the company, exercised “day-to-day managerial
supremacy,” was “involved in all aspects of the company’s business,” and had multiple
family members as company executives).
170
O’Reilly v. Transworld Healthcare, Inc., 745 A.2d 902, 913 (Del. Ch. 1999) (finding
sufficient allegations of control over a merger where the stockholder owned 49% of the
company, held an option to purchase another 2%, owned substantially all the company’s
debt, and where the company reduced the merger price after the stockholder threatened it
would not consummate the merger unless there was a reduction).

33
independent board decided to acquire. That is all.

2. Brophy

Plaintiff next asserts a Brophy claim: he alleges Armistice breached its

fiduciary duties by trading on MNPI.171 I disagree on the grounds that Armistice

did not owe fiduciary duties.

“[A] plaintiff seeking to prevail on a Brophy claim ultimately must show

that: 1) the corporate fiduciary possessed material, nonpublic company

information; and 2) the corporate fiduciary used that information improperly by

making trades because she was motivated, in whole or in part, by the substance of

that information.”172 Once again, the threshold inquiry is whether Armistice owed

fiduciary duties.

Plaintiff’s Brophy theory does not assert Aytu owed fiduciary duties because

it was a controller.173 He argues a different pathway to fiduciary status. He asserts

171
SAC ¶ 208–14.
In re Oracle Corp., 867 A.2d 904, 934 (Del. Ch. 2004), aff’d sub nom. In re Oracle
172

Corp. Deriv. Litig., 872 A.2d 960 (Del. 2005) (TABLE).
173
Plaintiff’s theory that Armistice owed fiduciary duties because it exerted transaction-
specific control over the board for purposes of the Challenged Transactions does not
extend to the Trades. See Oracle II, 2025 WL 249066, at *12 (explaining a stockholder
can show “actual control over a specific transaction” if the investor “exercised actual
control over the board of directors during the course of a particular transaction.” (quoting
In re W. Nat’l Corp. S'holders Litig., 2000 WL 710192, at *20 (Del. Ch. May 22,
2000))). The idea of imposing fiduciary duties based on control over a board for
purposes of a trade is not intuitive to me; I suppose a plaintiff could argue in good faith
that a stockholder controlled a board’s approval of a trade. Plaintiff did not attempt to

34
Armistice owed fiduciary duties because it possessed, through Boyd, Aytu’s

confidential information.174 Plaintiff offers no Delaware law supporting his theory.

“Fiduciary duties arise from the separation of ownership and control. The

essential quality of a fiduciary is that she controls something she does not own.” 175

It follows that “[d]uties of a fiduciary character will only be imposed where the

relationship or trust can be characterized as ‘special;’ fiduciary duties will not be

imposed in the midst of typical arms-length business relationships.”176 “A

fiduciary relationship exists where one party places a special trust in another and

relies on that trust, or where a special duty exists for one party to protect the

interests of another.”177 “A fiduciary relationship implies a dependence, and a

argue actual control over the Trades. See AB 38–47. Indeed, Aytu’s board had no role in
approving them. SAC ¶¶ 148, 159.
174
SAC ¶¶ 211 (“[Aytu’s] MNPI [wa]s an asset belonging to the Company, which
Defendant Boyd and the Armistice Defendants used for their own benefit when Armistice
sold its holdings of the Company’s stock.”); AB 38 (“[W]hether or not Armistice was a
controlling stockholder is beside the point for purposes of Defendants’ fiduciary duties
under Brophy, which arise from access to MNPI, and do not require any showing of
control.”); AB 39–40 (“Here, Defendants indisputably had access to Aytu’s MNPI
through Boyd’s position on the Board and role as Armistice’s Chief Investment Officer
responsible for making investment decisions. Accordingly, Brophy, Defendants occupied
a ‘position of trust and confidence’ that gives rise to fiduciary duties with respect to their
trading of Aytu securities.” (citation omitted)).
In re Pattern Energy Gp. Inc. S’holders Litig., 2021 WL 1812674, at *40 (Del. Ch.
175

May 6, 2021) (footnote omitted).
176
Total Care Physicians, P.A. v. O’Hara, 798 A.2d 1043, 1058 (Del. Super. Ct. 2001)
(quoting McMahon v. New Castle Assocs., 532 A.2d 601, 604 (Del. Ch. 1987)).
177
Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 872 A.2d 611, 624–25 (Del. Ch. April 1,
2005), aff’d in part, rev’d in part on other grounds, 901 A.2d 106 (Del. 2006).

35
condition of superiority, of one party to another.”178 “It generally requires

‘confidence reposed by one side and domination and influence exercised by the

other.’”179 Traditional corporate fiduciaries like officers, directors, and controlling

stockholders control a corporation that stockholders own, and so owe fiduciary

duties.180 From there, where control is separated from ownership, “Delaware law

has acknowledged various relationships as proper fiduciary relationships, for

example: attorney and client, general partners, administrators or executors,

guardians, and principals and their agents.”181

178
Id. at 624.
179
Id. (quoting BAE Sys. N. Am. Inc. v. Lockheed Martin Corp., 2004 WL 1739522, at *8
n.62 (Del. Ch. Aug. 3, 2004)).
180
Oracle II, 2025 WL 249066, at *11 (explaining that majority stockholders owe
fiduciary duties because they “control[] the levers of power within the corporation”);
Schoon v. Smith, 953 A.2d 196, 206 (Del. 2008) (noting that fiduciary “duties stem in
part from the quasi-trustee and agency relationship directors have to the corporation and
stockholders that they serve”); Cahall v. Lofland, 114 A. 224, 228 (Del. Ch. 1921)
(explaining that “directors and officers of a corporation are stewards, or trustees, for the
stockholders, and their acts are to be tested as such according to the searching, drastic and
far–reaching rules of conduct which experience has found to be salutary to protect the
trust beneficiaries”), aff’d, 118 A. 1 (Del. 1922).
181
Bird’s Const. v. Milton Equestrian Ctr., 2001 WL 1528956, at *4 (Del. Ch. Nov. 16,
2001). Black’s Law Dictionary defines “fiduciary relationship” as follows: “A
relationship in which one person is under a duty to act for the benefit of another on
matters within the scope of the relationship – such as trustee-beneficiary, guardian-ward,
principal-agent, and attorney-client – require an unusually high degree of care. Fiduciary
relationships usu[ally] arise in one of four situations: (1) when one person places trust in
the faithful integrity of another, who as a result gains superiority or influence over the
first, (2) when one person assumes control and responsibility over another, (3) when one
person has a duty to act for or give advice to another on matters falling within the scope
of the relationship, or (4) when there is a specific relationship that has traditionally been
recognized as involving fiduciary duties, as with a lawyer and a client or a stockbroker
and a customer.” Fiduciary Relationship, Black’s Law Dictionary (12th ed. 2024).

36
Plaintiff excavates the foundation of fiduciary duties altogether, asserting

Armistice need not exert any control over Aytu to owe them.182 Plaintiff asserts

that because Armistice “indisputably had access to Aytu’s MNPI through Boyd’s

position on the Board,”183 Armistice “occupied a ‘position of trust and confidence’

that gives rise to fiduciary duties with respect to their trading of Aytu securities.”184

Plaintiff relies on three cases as support for his theory: Brophy v. Cities

Service Co.,185 Triton Construction Co. v. East Shore Electric Services, Inc.,186 and

In re Fitbit, Inc. Stockholder Derivative Litigation.187 They do not support

imposing fiduciary duties based on mere access to confidential information.

In Brophy, the defendant was a fiduciary because he was a company

employee in a position of trust and confidence, and obtained confidential

information through that position. After the company’s confidential secretary

learned through his employment that the company intended to repurchase company

shares, the secretary traded on that information.188 A stockholder brought a

182
AB 38 (asserting “whether or not Armistice was a controlling stockholder is beside the
point for purposes of [its] fiduciary duties under Brophy, which arise from access to
MNPI, and do not require any showing of control”).
183
Id. 39.
184
Id. at 40.
185
70 A.2d 5 (Del. Ch. 1949).
186
2009 WL 1387115 (Del. Ch. May 18, 2009), aff’d, 988 A.2d 938 (Del. 2010).
187
2018 WL 6587159 (Del. Ch. Dec. 14, 2018); AB 38–40.
188
Brophy, 70 A.2d at 7.

37
derivative claim, arguing a constructive trust should be placed on the secretary’s

profits.189 The Court determined the secretary was a fiduciary. The secretary did

not owe fiduciary duties that restricted his right to sell merely because he had

access to confidential information.190 Nor did he owe fiduciary duties merely

because of his employment status.191 The duties arose from the combination of his

position within the company, which was a “position of trust and confidence,” and

access to confidential information acquired in the course of that employment.192

Armistice was not an Aytu employee. Armistice was not in a position of

trust and confidence; as explained, Armistice was not a controller. And while

Boyd is an Aytu fiduciary, and learned confidential information during his

189
Id.
190
Id. (explaining that “by reason of [his] employment as an executive and as the
confidential secretary to an officer and director of [the company] he occupied a position
of trust and confidence toward the corporation, with respect to the information so
acquired” (emphasis added)); see also Kahn v. Kolberg Kravis Roberts & Co., L.P., 23
A.3d 831, 837 (Del. 2011) (noting that in Brophy, “[b]ecause the employee defendant
occupied a position of trust and confidence within the plaintiff corporation, the court
found his relationship analogous to that of a fiduciary”).
191
Brophy, 70 A.2d at 7 (“A mere employee, not an agent with respect to the matter
under consideration, does not ordinarily occupy a position of trust and confidence toward
his employer.”); id. at 8 (“[I]n the absence of special circumstances, corporate officers
and directors may purchase and sell its capital stock at will, and without any liability to
the corporation. Ordinarily an employee has the same rights.”)
192
Id. at 8; id. at 7 (“But if an employee in the course of his employment acquires secret
information relating to his employer’s business, he occupies a position of trust and
confidence toward it, analogous in most respects to that of a fiduciary, and must govern
his actions accordingly.”).

38
directorship, neither is true for Armistice.193 Brophy does not support imposing

fiduciary duties on Armistice that would restrict Armistice’s right to sell.

Triton does not help Plaintiff either.194 It considered whether an employee

breached fiduciary duties owed to the company employer by performing work for

its direct competitor and usurping the employer’s business opportunities.195 The

Court recognized that fiduciary duties flow from an agency relationship.196 It also

recognized that the defendant employee “was not a key managerial employee, and,

therefore, owed no fiduciary duties to the Company solely by virtue of his

position.”197 At the preliminary injunction stage, the Court found it was more

likely than not that the employee’s particular job responsibilities made him an

193
Armistice is the defendant, not Boyd: Boyd was dismissed in the Settlement. D.I. 77;
see Fitbit, 2018 WL 6587159, at *13–15. To be sure, Boyd’s knowledge can be imputed
onto Armistice. See BrandRep, LLC v. Ruskey, 2019 WL 117768, at *6 (Del. Ch. Jan. 7,
2019). Boyd’s conduct might be imputed onto Armistice, depending on the facts. See In
re PLX Tech. Inc. S’holders Litig., 2018 WL 5018535, at *50 (Del. Ch. Oct. 16, 2018),
aff’d, 211 A.3d 137 (Del. 2019) (TABLE). And Armistice may, in certain circumstances,
even join Boyd in the company’s circle of attorney-client privilege. Hyde Park Venture
P’rs Fund III, L.P. v. FairXchange, LLC, 292 A.3d 178, 184 (Del. Ch. 2023). But those
cases are limited to the imputation of knowledge and conduct; Boyd’s fiduciary status is
not imputed onto Armistice. An investor does not become a fiduciary simply because it
has a board designee. Emerson Radio Corp. v. Int’l Jensen Inc., 1996 WL 483086, at
*20, n.18 (Del. Ch. Aug. 20, 1996) (“The notion that a stockholder could become a
fiduciary by attribution (analogous to the result under the tort law doctrine of respondeat
superior) would work an unprecedented, revolutionary change in our law, and would give
investors in a corporation reason for second thoughts about seeking representation on the
corporation’s board of directors.”).
194
2009 WL 1387115, at *9.
195
Id. at *5.
196
Id. at *9.

39
agent of the company, specifically his ability to bind the company to contracts.198

Here, Armistice was not Aytu’s agent; Plaintiff fails to satisfy Triton’s

foundational premise.

Finally, Fitbit offers no support either.199 There, the Court declined to

dismiss claims against defendant directors who traded on inside information

through funds they controlled.200 The defendants were the directors, who of course

already owed fiduciary duties—not the funds. The Court explained that “to allow

these directors, through their controlled funds, to profit from inside information

without recourse would be inconsistent with the policy of ‘extinguish[ing] all

possibility of profit flowing from a breach of the confidence imposed by the

fiduciary relation’ that undergirds Delaware’s insider trading law.”201 That makes

perfect sense. But the defendant here is the fund, not the director. Fitbit does not

support imposing fiduciary duties on the fund.

Plaintiff points to no authority holding that possessing confidential

information alone creates fiduciary duties. For good reason: if I accepted

Plaintiff’s theory, every stockholder with a director designee would itself be a

fiduciary for purposes of a Brophy claim. “The Delaware courts have been

197
Id. at *10.
198
Id.
199
2018 WL 6587159, at *17.
200
Id. at *13–15.

40
reluctant to extend too broadly the applicability of fiduciary duties.”202 Plaintiff’s

Brophy claim fails.

3. Aiding And Abetting

Next, I turn to Armistice’s aiding and abetting claim. “To survive a motion

to dismiss, the complaint must allege facts that satisfy the four elements of an

aiding and abetting claim: ‘(1) the existence of a fiduciary relationship, (2) a

breach of the fiduciary’s duty, ... (3) knowing participation in that breach by the

defendants,’ and (4) damages proximately caused by the breach.”203 Armistice

challenges the second and third elements. Plaintiff has not pled knowing

participation.

The Amended Complaint alleges the Directors breached their duty of care in

approving the Challenged Transactions by not seeking or obtaining enough

information about the targets.204 Plaintiff alleges Aytu’s board received limited

201
Id. at *14 (quoting Guth v. Loft, Inc., 5 A.2d 503, 510 (Del. 1939)).
202
Wal-Mart Stores, Inc., 872 A.2d at 625.
203
Malpiede v. Townson, 780 A.2d 1075, 1096 (Del. 2001) (quoting Penn Mart Realty
Co. v. Becker, 298 A.2d 349, 351 (Del. Ch. 1972)).
204
SAC ¶ 223; AB 7 (“[T]he Director Defendants breached their duty of care in
approving the Collusive Transactions, and the Armistice Defendants aided and abetted
those breaches.”); AB 53. I do not read the complaint to allege a duty of loyalty
violation. Other than one allegation that the directors “acted in bad faith in
rubberstamping” the Challenged Transactions, the complaint does not allege disloyalty
by the Directors. SAC ¶ 184. Plaintiff explicitly framed the purported breach as a duty
of care claim. See AB 51–54, 59–60; D.I. 89 at 56 (stating at oral argument that
“Armistice is liable, through Mr. Boyd, for aiding and abetting the Aytu board’s breach
of the duty of care in approving the Innovus and Cerecor transactions.”).

41
financial information on Innovus and Cerecor from management, did not review

the companies’ filings or reports despite that limitation, did not retain advisors or

obtain a fairness opinion, met only twice in approving each transaction, and

rubberstamped both transactions.205

Plaintiff alleges Armistice “knowingly participated in and facilitated the

Director Defendants’ breaches of fiduciary duty by orchestrating the C[hallenged]

Transactions and participating in the Board’s purported consideration of the terms

of the Transactions.”206 Plaintiff asserts that while the Directors were inadequately

informed about the Challenged Transaction, Armistice “[b]y virtue of its

substantial investments in Innovus and Cerecor and Boyd’s position on the Cerecor

board” knew material information about those companies that Boyd withheld from

Aytu’s board.207 I do not reach whether Plaintiff pleads a predicate breach; the

Of course, the fact that Aytu’s charter exculpates the Directors from care claims
does not preclude a finding that an outsider exploited a care violation and so must face
liability for aiding and abetting. RBC Cap. Markets, LLC v. Jervis, 129 A.3d 816, 874
(Del. 2015) (“Importantly, while Section 102(b)(7) insulates directors from monetary
damages stemming from a breach of the duty of care, its protection does not apply to
third parties such as RBC.”); see also Firefighters’ Pension Sys. of City of Kansas City,
Missouri Tr. v. Presidio, Inc., 251 A.3d 212, 286 (Del. Ch. 2021); Kappauf Aff. Ex. I Art.
V. § 2; AB 54 (acknowledging exculpatory provision). Armistice’s argument that
“[w]ithout an underlying, non-exculpated breach of fiduciary duty, there can be no aiding
and abetting claim” is plainly refuted by Delaware law. RB 28.
205
E.g., SAC ¶¶ 53, 55–56, 58–59, 81, 85–86, 89, 95.
206
Id. ¶ 239.
207
AB 54; SAC ¶ 239 (“Defendant Boyd and the Armistice Defendants knew, but did not
disclose, material adverse information about the business and prospects of Innovus and
Cerecor as a result of the Armistice Defendants’ significant investments in Cerecor and

42
claim dies on failure to plead Armistice knowingly participated in the Directors’

shortcomings.

“[A] claim for aiding and abetting often turns on meeting the ‘knowing

participation’ element. Therefore, ‘there must be factual allegations in the

complaint from which knowing participation can be reasonably inferred.’”208

“[C]onclusory statements that are devoid of factual details to support an allegation

of knowing participation will fall short of the pleading requirement needed to

survive a Rule 12(b)(6) motion to dismiss.”209

The “knowing participation” element “involves two concepts: knowledge

and participation.”210 The requirement that “the aider and abettor must act with

scienter” brings in the two distinct concepts of knowledge and participation.211

Innovus, and Defendant Boyd’s role as a member of Cerecor’s board of directors. By
failing to disclose this information to the Aytu Board, Defendant Boyd and the Armistice
Defendants caused the Director Defendants to approve transactions that were materially
unreasonable and unfair to Aytu and its stockholders.”).
208
Buttonwood Tree Value P’rs, L.P. v. R. L. Polk & Co., 2017 WL 3172722, at *9 (Del.
Ch. July 24, 2017) (quoting In re Shoe-Town, Inc. S’holders Litig., 1990 WL 13475, at *8
(Del. Ch. Feb. 12, 1990)); see also In re Gen. Motors (Hughes) S’holder Litig., 2005 WL
1089021, at *24 (Del. Ch. May 4, 2005) (“Conclusory statements of knowing
participation will not suffice.”), aff’d, 897 A.2d 162 (Del. 2006); Shoe-Town, 1990 WL
13475, at *8 (“A claim of knowing participation need not be pled with particularity.
However, there must be factual allegations in the complaint from which knowing
participation can be reasonably inferred.”).
209
Jacobs v. Meghji, 2020 WL 5951410, at *1 (Del. Ch. Oct. 8, 2020) (quoting
McGowan v. Ferro, 2002 WL 77712, at *2 (Del. Ch. Jan. 11, 2002)).
210
Presidio, 251 A.3d at 275.
211
RBC, 129 A.3d at 862.

43
And “the requirement that the aider and abettor act with scienter makes an aiding

and abetting claim among the most difficult to prove.”212

“To prove scienter for an aiding and abetting claim, a plaintiff must prove

two types of knowledge.”213 First, the defendant must “know that the primary

party’s conduct constitutes a breach.”214 And second, the defendant must “kn[o]w

that ‘its own conduct regarding the breach was improper.’”215 The “aider-and-

abettor’s knowledge of the fiduciary breach in question and of the wrongfulness of

its own conduct, must be actual knowledge.”216

As to the participation prong, “participation in an aiding and abetting claim

requires that the aider and abettor provide ‘substantial assistance’ to the primary

violator.”217 And where a director’s affiliate is charged with aiding and abetting,

the complaint must plead participation by that affiliate.218 “The requirement of

212
Id. at 866; Presidio, 251 A.3d at 275 (same); Binks, 2010 WL 1713629, at *10 (“The
standard for an aiding and abetting claim is a stringent one, one that turns on proof
of scienter of the alleged abettor.”).
213
In re Mindbody, Inc., S’holder Litig., 332 A.3d 349, 394 (Del. 2024).
214
Id. at 390.
215
In re Columbia Pipeline Gp., Inc. Merger Litig., 2025 WL 1693491, at *22 (quoting
Mindbody, 332 A.3d at 391).
216
Columbia Pipeline, 2025 WL 1693491, at *33.
217
Mindbody, 332 A.3d at 393.
218
In re Hennessy Cap. Acq. Corp. IV S’holder Litig., 318 A.3d 306, 329 (Del. Ch. 2024)
(“[T]here are no allegations whatsoever that Hennessy Capital took action with regard to
the merger or proxy. This deficiency persists even if Daniel Hennessy’s alleged
knowledge is imputed to Hennessy Capital. There are, of course, allegations that Daniel
Hennessy participated in the purported wrongdoing. The Complaint is silent, though,

44
substantial assistance for a finding of ‘knowing participation’ emanates from

the Restatement (Second) of Torts § 876(b). Many Delaware cases have cited §

876(b) as persuasive authority for what the ‘knowing participation’ element

requires.”219 That section states that “[f]or 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.”220

“[A]n aider and abettor’s participation in a primary actor’s breach of

fiduciary duty must be of an active nature,”221 as compared to mere “passive

awareness.”222 In Mindbody, the purported aider and abettor reviewed the

company’s proxy, knew it was deficient, but remained silent despite a contractual

regarding actual participation by Hennessy Capital. The bare statement that Hennessy
Capital was involved in the alleged breaches of fiduciary duty are insufficient.”), aff’d,
2024 WL 5114140 (Del. Dec. 16, 2024) (TABLE).
219
Mindbody, 332 A.3d at 394.
220
Id. (citing Restatement (Second) of Torts § 876 (1979)); see also Columbia Pipeline.,
2025 WL 1693491, at *21. In Mindbody, the Court adopted a five-factor analytical
framework from In re Dole Food Co., Inc. S’holder Litig., 2015 WL 5052214, (Del. Ch.
Aug. 27, 2015) and derived from Restatement section 876, comment d, to guide whether
the defendant’s assistance or participation warranted liability. See Mindbody, 332 A.3d at
396 (identifying “whether the defendant’s assistance or participation is substantial
enough for liability … [1] the nature of the act encouraged, [2] the amount of assistance
given by the defendant, [3] his presence or absence at the time of the tort, [4] his relation
to the other[,] and [5] his state of mind are all considered”).
221
Columbia Pipeline, 2025 WL 1693491, at *27.
222
Mindbody, 332 A.3d at 389, 393; id. at 393 (“This substantial assistance requirement
can also be understood as requiring active participation rather than ‘passive
awareness.’”).

45
obligation to inform the company of material omissions.223 Because the defendant

“provided no affirmative assistance at all and took no action that actively furthered

[the fiduciary’s] disclosure breach,” the defendant did not participate in the

breach.224

Plaintiff’s aiding and abetting theory appears to be a fallback from his theory

of transaction-specific control: that Armistice orchestrated or directed the

Challenged Transactions. His brief defended his knowing participation allegations

with only four sentences, and no law.225 I have already concluded Plaintiff did not

plead transaction-specific control; for the same reasons, the Amended Complaint

does not plead that Armistice orchestrated or directed either Challenged

Transaction.

That leaves Plaintiff’s allegation that Armistice “participat[ed] in the

Board’s purported consideration,”226 and that Armistice knew information the

223
Id. at 399–400.
224
Id. at 390. The high court distinguished the Mindbody facts from situations where a
defendant “purposefully misled the board and created an informational vacuum” and
committed fraud on the board. Id. at 401 (addressing RBC, 129 A.3d at 862–65).
225
AB 54 (“In addition to alleging the Director Defendants’ breaches of fiduciary duty,
the Complaint also alleges the Armistice Defendants’ knowing participation in those
breaches. Armistice orchestrated the Collusive Transactions and, through Boyd, actively
participated in the Board’s consideration of those transactions. By virtue of its substantial
investments in Innovus and Cerecor and Boyd’s position on the Cerecor board, Armistice
knew that the Innovus business was failing, as were the products in the Pediatric
Portfolio. Yet, Armistice failed to share that information with the Board, and actively
worked to push through both transactions.”).
226
SAC ¶ 239.

46
Directors did not know, but did not share it. “[T]here are no allegations

whatsoever that [Armistice] took action” with regard to the Challenged

Transactions.227 Plaintiff’s allegation of “participation in the Board’s

consideration” is conclusory.

Plaintiff does allege Armistice knew information that the board did not, and

withheld it. But, under these facts, Armistice did not actively participate; it only

had passive awareness.228 Even assuming Armistice, through Boyd, knew the

Directors were working off of inadequate information, Armistice’s silence was not

“affirmative assistance” and did not “actively further[]” the Directors’ failure to

inform themselves.229 Plaintiff does not plead that Armistice created an

informational vacuum or misled Aytu’s board in any way.230 Rather, he asserts the

Directors were negligent in their own information-gathering and reliance on

227
See Hennessy Cap., 318 A.3d at 329.
228
Mindbody, 332 A.3d at 389–401. Nor does Plaintiff plead that Armistice actively
exploited the board’s lack of knowledge, played a role in crafting the board’s materials,
or advised the board on Innvous and Cerecor. Cf. id. at 393 (“[O]ur case law in the
corporate governance context has found liability only where there has been overt
participation such as active ‘attempts to create or exploit conflicts of interest in the board’
or an overt conspiracy or agreement between the buyer and the board as described
above.” (quoting Malpiede, 780 A.2d at 1097)).
229
Mindbody, 332 A.3d at 398.
230
E.g., RBC 129 A.3d at 862–63; FrontFour Cap. Gp. LLC v. Taube, 2019 WL
1313408, at *31 (Del. Ch. Mar. 11, 2019) (“The method of facilitating the breach can
include ‘creating the informational vacuum’ in which the board breaches its duty of
care.” (collecting cases)).

47
management.231 Armistice was not an Aytu fiduciary or advisor, and did not speak

for either Innovus or Cerecor in due diligence.232 Armistice did not mislead Aytu’s

board or cause its lack of information.233 Boyd was present for deliberations, and

knew information he withheld and should have shared as a director; but Plaintiff

does not plead or argue Boyd’s participation can or should be imputed to

Armistice.234

Plaintiff fails to plead Armistice actively participated in the Challenged

Transactions. The aiding and abetting claim fails.

4. Unjust Enrichment

This brings us to Plaintiff’s unjust enrichment claim against Armistice.

Unsurprisingly, this claim is also dismissed. Unjust enrichment is the “unjust

retention of a benefit to the loss of another, or the retention of money or property

of another against the fundamental principles of justice or equity and good

231
Indeed, much of the information complained about was openly available to the board
through public filings. See, e.g., SAC ¶¶ 83, 88, 124.
232
E.g., Mesirov v. Enbridge Energy Co., Inc., 2018 WL 4182204, at *15 (Del. Ch. Aug.
29, 2018) (declining to dismiss a claim against financial advisor who “used a manipulated
valuation to support a fairness opinion” and created an informational vacuum).
233
Mindbody, 332 A.3d at 401 (distinguishing RBC, 129 A.3d at 862–66).
234
Hennessy Cap., 318 A.3d at 329 (requiring distinct allegations of active participation
by a director’s affiliate); but see PLX, 2018 WL 5018535, at *50 (Del. Ch. Oct. 16, 2018)
(imputing, post-trial, director designee’s conduct and knowledge onto entity for purposes
of aiding and abetting claim). PLX explained its “holding does not stand for the
proposition that the actions of the director representative of a stockholder can always be
attributed to a stockholder.” Id.

48
conscience.”235 “The elements of unjust enrichment are: (1) an enrichment, (2) an

impoverishment, (3) a relation between the enrichment and impoverishment, [and]

(4) the absence of justification . . . .”236 Plaintiff asserts unjust enrichment in

connection with the Challenged Transactions and the Trades. Armistice argues the

unjust enrichment claim should be dismissed because it is duplicative of Plaintiff’s

now-dismissed claims.237 I agree.

“The Court frequently treats duplicative fiduciary duty and unjust

enrichment claims in the same manner when resolving a motion to dismiss. For

example, if the Court dismisses a fiduciary duty claim for failure to state a claim,

then it very likely also dismisses a duplicative unjust enrichment claim.”238 The

Court will do so when “it is fair to say that the unjust enrichment claim depends

per force on the breach of fiduciary duty claim” and “[t]here is no evidence in the

record or argument submitted to the Court that th[e] unjust enrichment claim is

materially broader than or different from the analogous breach of fiduciary duty

claim.”239 That is the case here. Plaintiff’s unjust enrichment claim is based on the

wrongdoing underlying its breach of fiduciary duty and aiding and abetting claims,

235
Hennessy Cap., 318 A.3d at 328 (quoting Nemec v. Shrader, 991 A.2d 1120, 1130
(Del. 2010), aff’d, 2024 WL 5114140 (Del. Dec. 16, 2024)).
236
Nemec, 991 A.2d at 1130.
237
OB 42; RB 25–27.
238
Frank v. Elgamal, 2014 WL 957550, at *31 (Del. Ch. Mar. 10, 2014).
239
Id.

49
which are dismissed.

III. CONCLUSION

Armistice’s motion to dismiss is granted with prejudice.

50