Divorce Case Could Affect Sale of Suitable to Blue Ocean

A California divorce case could have implications into the pending sale of Suitable Technologies to Blue Ocean Robotics, according to court documents obtained by Robotics Business Review, as well as published reports. A hearing scheduled for Dec. 6 in Delaware could determine whether the sale will be allowed to close as currently structured.

In August, Denmark-based Blue Ocean Robotics announced it was acquiring the assets of Suitable Technologies, creator of the Beam brand of telepresence robots. The company’s CEO, Scott Hassan, is currently involved in divorce proceedings in California, with his wife, Allison Huynh.

Earlier this month, Huynh filed a motion for an injunction and expedited proceedings regarding the sale of Suitable to Blue Ocean. The lawsuit claims breaches of fiduciary duties by Hassan and Blue Ocean for agreeing to sell the company for an “infinitesimal fraction of their value”.

From a heavily-redacted version of the complaint:

“Instead of seeking to maximize stockholder value, Mr. Hassan, in bad faith and to enrich himself alone by [REDACTED] agreed to sell a substantial amount of the Company’s assets for an infinitesimal fraction of their value – despite (a) the existence of superior offers on identical terms, (b) failing to obtain a professional valuation of all the Company’s assets, and (c) two valuations by experts engaged by Plaintiff showing the assets were worth tens of millions of dollars or more than the indefensible sales price of no more than $400,000. Mr. Hassan further breached his fiduciary duties (d) by including unjustifiable deal protections in the asset purchase agreement that he negotiated with Blue Ocean – protections designed to favor Blue Ocean at the expense of Suitable and Suitable’s stockholders and prevent the emergence of other potential offers that would undoubtedly better maximize value; and (e) by failing to assure compliance with federal laws protecting the Nation’s national security from the sale of critical technology to foreign purchasers.”

In a hearing on Nov. 7 before J. Travis Laster, vice chancellor at the Court of chancery of the State of Delaware, attorneys for Huynh further elaborated on their reason for the lawsuit.

From Travis Hunter, of Richards, Layton & Finger:

“As explained in our papers, based on the information we currently have, there appear to be serious violations of fiduciary duty in connection with the process used to conduct the sale. For example, as alleged in our complaint, the sale price to Suitable appears to be substantially less than the price the company could fetch if sold in the proper manner. In fact, it does not even appear that Mr. Hassan procured any valuation of any kind before agreeing to the sale.”

In addition, Hunter said in the hearing that there would be irreparable harm if the sale was allowed to close, as “it would be impossible to unscramble the eggs by attempting to unwind a sale that has been completed.”

Divorce leverage?

Nicholas J. Rohrer, of Young, Conaway, Stargatt & Taylor LLP, representing Suitable Technologies, said that the injunction motion was “largely an effort to gain leverage in that pending divorce proceeding,” to which the court responded with “By the same token, the instant transaction may be an effort to gain leverage in that divorce proceeding.”

Rohrer said there is a hearing in California on Dec. 19 to assess the transaction within the realm of the divorce proceeding, before the scheduled close of the sale. The California court, therefore, should be the one that determines the fairness of the transaction, the defendants’ attorneys said.

Hunter argued that they were asking the Delaware court to look at the matter because they were unsure whether the California court would have jurisdiction over Blue Ocean, it being a Delaware corporation, as well as being based in Denmark. In addition, the plaintiffs “are seeking to evaluate the transaction on behalf of all stockholders of Suitable and the company itself.” While Hassan is a majority stockholder of Suitable Technologies, both attorneys said there are other stockholders that could be affected by the sale.

In the breach complaint, the plaintiffs argued that recent acquisitions of other robotics companies and its intellectual property should garner significantly more than the price offered by Blue Ocean. “… with its 11 granted patents and 10 pending applications, [Suitable] should obtain a value in the tens, if not hundreds, of millions of dollars based on its outstanding patent portfolio alone and the myriad potential fields of use for licensing,” the complaint states.

John L. Reed, representing Blue Ocean in the hearing, argued that the implications that the company’s assets were valued at tens of millions of dollars was incorrect. “… we’re talking about them complaining about rejection of a million-dollar offer in exchange for a $400,000 offer,” said Reed in the hearing. “And even under their calculation that we’re really paying $70,000 instead of $400,000, it’s a $930,000 damages claim.”

December hearing

After hearing the arguments, Laster granted the motion to expedite proceedings on the lawsuit, scheduling a hearing on Dec. 6, at 9:15 a.m. In the decision, Laster said there were differences between what the California court would be deciding about the fairness of the transaction within the family law, and the laws of Delaware in terms of fiduciary responsibilities of corporate officers to their stockholders.

“I’m not trying to get ahead of the California court on this,” said Laster. “I’m doing this because of the timeline that I’ve been presented with in terms of the potential early closing date” He said if the attorneys could come up with an approach that lets the California court go first, “I will certainly take into account whatever factual findings and determinations are made out there in terms of making the rulings in front of me,” he said.

In a statement sent to Robotics Business Review, a Blue Ocean spokeswoman said, “Blue Ocean Robotics’ acquisition of assets and rights to the Beam business from Suitable Technologies, Inc. is subject to court approval. The proceedings in Delaware is part of the court approval process. Blue Ocean Robotics is under a confidentiality agreement”.

In addition to being the CEO of Suitable Technologies, Hassan was the founder of the Willow Garage robotics research lab and technology incubator, which shut down in early 2014. According to a Bloomberg Law article that published earlier this week, Hassan and Huynh began legal separation proceedings in 2015.