We Co., the parent of WeWork, asked a judge to dismiss a lawsuit brought by two of its board members against SoftBank Group Corp. for reneging on a $3 billion offer to buy the co-working company’s closely held shares.
We Co.’s independent board members Alex Dimitrief and Frederick Arnold said the company’s special committee — comprising Lew Frankfort and Benchmark’s Bruce Dunlevie — “does not and should not have the authority” to pursue the litigation in the name of We Co., according to a Delaware Chancery Court filing. We Co. declined to comment outside of the filing.
“An entirely independent committee of directors who have no affiliation with SoftBank conducted a thorough review and concluded that the members of the special committee never had the authority and should not have authority to act for WeWork,” a SoftBank spokesperson said on Thursday. “WeWork investors have benefited immensely from SoftBank’s investment.”
In May, WeWork co-founder Adam Neumann separately sued SoftBank for scuttling the $3 billion tender offer — part of a bailout package from Masayoshi Son’s conglomerate after WeWork’s failed initial public offering last year. Neumann was ready to sell shares under the agreement.
SoftBank scrapped the $3 billion share purchase in April, saying conditions for the deal hadn’t been met. Frankfort and Dunlevie sued. We Co. created a second special committee and added two new independent directors to evaluate whether to proceed with the suit.
The new committee concluded Frankfort and Dunlevie didn’t have legal grounds for bringing the suit since they weren’t slated to sell shares as part of the SoftBank deal. Lawyers for the two original independent directors dispute those findings, saying they mirror SoftBank’s arguments to have the case thrown out.
SoftBank’s decision to bring replacement directors, who were “paid $250,000 each for two months of service,” had a single aim, and that was to “conclude the (original) Special Committee lacked authority to pursue this lawsuit on the company’s behalf,” William Chandler III, the lawyer representing Frankfort and Dunlevie, said in a letter filed Thursday.
The new committee’s report “is a polished document based on facts and arguments ‘spoon-fed’ by SoftBank’s lawyers and its hand-picked management team to reach the conclusions SoftBank desired,” said Chandler, the chancery court’s former chief judge. “Not surprisingly, then, much of the report adopts the facts and even the verbiage from SoftBank’s pleadings in this case.”
Judge Andre Bouchard, who replaced Chandler as chief judge, held a July 22 hearing on SoftBank’s request to have the original Special Committee’s suit thrown out on procedural grounds. The judge hasn’t ruled yet on that request.
The case is The We Co. v. SoftBank, 2020-0258, Delaware Chancery Court (Wilmington).