September 2024

Putterman Yu Wang LLP partner George Chikovani secured the dismissal with prejudice of an investor lawsuit against the co-founder a medical software company, resulting in a complete defense win at the pre-discovery stage.

The suit, filed in San Mateo Superior Court, alleged claims of breach of fiduciary duty, negligence, and conversion against the co-founder on behalf of an individual who invested in the start-up at an early stage. The complaint alleged that the co-founder misspent investor funds and used them for personal use, causing the failure of the company.

Immediately after being retained, our firm prepared a demurrer to the complaint (the California state court equivalent of a motion to dismiss), on the basis that the claims alleged in the complaint were shareholder derivative claims and could not be maintained by the investor on an individual basis. Plaintiff requested leave to amend the complaint to address this issue, precluding any discovery or motion practice in the meantime. Plaintiff eventually filed an amended complaint asserting essentially unchanged claims. Defendant then demurred to the amended complaint.

The court sustained defendant’s demurrer, agreeing that the complaint failed to plead any legally cognizable claim. The court denied the plaintiff leave to amend, a rare instance in California state court for the first demurrer brought by a defendant, resulting in the dismissal of the case with prejudice.