Cumming v. Edens, et al. (New Senior Investment Group, Inc.)

Court: Delaware Court of Chancery
Case Number: C.A. No. 13007-VCS
Judge: Vice Chancellor Joseph R. Slights
Case Contacts: Mark Lebovitch, David Wales

On December 27, 2016, BLB&G filed a complaint in the Delaware Chancery Court on behalf of John Cumming and derivatively on behalf of Nominal Defendant New Senior Investment Group, Inc. (“New Senior” or the “Company”) against certain members of its Board of Directors, Fortress Investment Group LLC (“Fortress”), and certain affiliates of Fortress.  An Amended Complaint was filed on June 8, 2017.  The Amended Complaint was filed following an extensive investigation, including obtaining books and records of New Senior pursuant to Section 220 of the Delaware General Corporations Law.

This action arises out of an unlawful scheme by members of New Senior’s Board to enrich Fortress and its affiliates, at the expense of New Senior and its stockholders, through a self-dealing transaction (the “Holiday Acquisition”).  The Complaint alleges that the transaction was designed to benefit Fortress at the expense of New Senior by, inter alia, causing New Senior to (i) overpay for the properties, (ii) issue a larger secondary offering then necessary to fund the acquisition, and (iii) pay higher management fees than necessary. 

The Complaint further alleges that a majority of the New Senior board was either interested in the transaction or disabled by conflicts arising from various relationships with a principal of Fortress, Wesley Edens. It further alleges that the transaction, comprised of three related and equally unfair elements, is subject to the entire fairness standard of review.

On July 21, 2017 Defendants moved to dismiss the Complaint. On September 1, 2017 Plaintiffs filed their opposition to the motion to dismiss. On October 2, 2017 Defendants filed their reply in further support of their motion to dismiss.

On November 21, 2017 Vice Chancellor Joseph R. Slights heard argument regarding Defendants motion to dismiss. On February 21, 2018 the Court entered an order denying Defendants’ motion to dismiss in all respects. Click here for the Amended Complaint, or visit the Case Documents page for more information.

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