In Re Vaxart, Inc., C.A. No. 2020-0767 - PAF - Supplemental Op. Final (Claims Dismissed in Entirety)

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN RE VAXART, INC. ) CONSOLIDATED

STOCKHOLDER LITIGATION ) C.A. No. 2020-0767-PAF
MEMORANDUM OPINION
Date Submitted: February 4, 2022

Date Decided: June 3, 2022
Stephen E. Jenkins, F. Troupe Mickler, IV, ASHBY & GEDDES, P.A., Wilmington,
Delaware; Gregory V. Varallo, BERNSTEIN LITOWITZ BERGER &
GROSSMANN LLP, Wilmington, Delaware; Jeroen van Kwawegen, Daniel E.
Meyer, Margaret Sanborn-Lowing, BERNSTEIN LITOWITZ BERGER &
GROSSMANN LLP, New York, New York; Gustavo F. Bruckner, Samuel J.
Adams, Daryoush Behbood, POMERANTZ LLP, New York, New York; Sascha N.
Rand, Rollo C. Baker, IV, Silpa Maruri, Jesse Bernstein, Charles H. Sangree,
QUINN EMANUEL URQUHART & SULLIVAN, LLP, New York, New York;
Stanley D. Bernstein, Matthew Guarnero, BERNSTEIN LIEBHARD LLP, New
York, New York; William J. Fields, Christopher J. Kupka, Samir Shukurov, FIELDS
KUPKA & SHUKUROV LLP, New York, New York; Attorneys for Plaintiffs.
Brock E. Czeschin, Andrew L. Milam, RICHARDS LAYTON & FINGER, P.A.,

Wilmington, Delaware; Riccardo DeBari, Renee Zaytsev, THOMPSON HINE, New
York, New York; Attorneys for Defendants Andrei Fioroiu, Wouter W. Latour, Todd
Davis, Michael J. Finney, Robert A. Yedid, Anne M. VanLent, and Nominal
Defendant Vaxart, Inc.
Matthew F. Davis, Abraham C. Schneider, POTTER ANDERSON & CORROON

LLP, Wilmington, Delaware; Douglas A. Rappaport, Kaitlin D. Shapiro, Elizabeth
C. Rosen, Madeleine R. Freeman, AKIN GUMP STRAUSS HAUER & FELD LLP,
New York, New York; Attorneys for Defendants Steven Boyd, Keith Maher, and
Armistice Capital, LLC.
FIORAVANTI, Vice Chancellor

In May 2020, as the COVID-19 pandemic gripped the world, the federal
government formed Operation Warp Speed (“OWS”) a national program to
accelerate the development, manufacturing, and distribution of COVID-19 vaccines,
therapeutics, and diagnostics. With nearly $10 billion in authorized funds, the
objective was to develop and deliver a safe and effective COVID-19 vaccine by
January 2021. As of May 2020, OWS had selected 14 vaccine candidates, which
would then be narrowed to the seven or eight most promising candidates. Those
finalists would then go through further testing and clinical trials, followed by large
scale production and distribution. Shortly after the OWS statement, news reports
revealed the names of some, but not all of the selected vaccine candidates.
On June 26, 2020, Vaxart, Inc. (“Vaxart” or the “Company”), a small
biotechnology company working to develop an oral COVID-19 vaccine, issued a
press release headlined: “Vaxart’s COVID-19 Vaccine Selected for the U.S.
Government’s Operation Warp Speed.” This headline was just that—a headline. It
did not tell the whole story. The press release did not state that Vaxart had been
selected as one of the seven or eight final vaccine candidates to receive federal
funding to develop, manufacture, and potentially distribute its COVID-19 vaccine.
Instead, the body of the press release stated that Vaxart had been invited to
participate in a non-human, primate, research study funded under the umbrella of
resources and initiatives encompassed by OWS.

The plaintiffs are Vaxart stockholders who have alleged that the Company’s
selection to participate in the non-human primate study should have been disclosed
to stockholders in advance of the June 8, 2020 annual meeting of Vaxart
stockholders. Specifically, the plaintiffs allege that Vaxart’s selection to participate
in the research study was material information that stockholders should have been
told prior to their vote at the annual meeting on an amendment to Vaxart’s equity
incentive plan. The plaintiffs also allege that the director defendants were unjustly
enriched by hiding this news because the plan amendment, once approved, enabled
the directors to issue themselves “spring-loaded” stock options.
In an earlier opinion, the court dismissed breach of fiduciary duty and aiding
and abetting claims concerning the board’s amendment of two warrant agreements
with a hedge fund that enabled the fund to dispose of its shares more quickly. In this
opinion, the court considers the remaining breach of fiduciary duty claim concerning
the amendment to the equity incentive plan and the unjust enrichment claim
concerning compensation decisions made before and after stockholders approved
the plan amendment. The operative complaint fails to allege facts creating a
reasonable inference that the Company’s selection to participate in a single, non-
human, primate, research study was material to stockholders voting on the plan
amendment. The plaintiffs’ unjust enrichment theory also proceeds from the
incorrect premise that the selection of Vaxart to participate in a single research study
2
was material non-public information that the directors knew at the time of their
compensation decisions and would cause the Company’s stock price to increase, thus
enhancing the value of their options. Accordingly, the defendants’ motion to dismiss
is granted.
I. FACTUAL BACKGROUND 1
Unless otherwise specified, the facts recited in this Memorandum Opinion are
drawn from the Verified Complaint (the “Complaint”), documents integral thereto,
or otherwise subject to judicial notice.2
1
This Opinion avoids repetition of facts pertaining to the warrant amendment claims,
which were the subject of the court’s Memorandum Opinion dated, November 30, 2021,
as corrected on December 1, 2021.
2
Exhibits attached to the operative complaint (“Compl.”), see Jaquith v. Vaxart, Inc., C.A.
No. 2020-0904-PAF, Dkt. 1, will be cited as “Ex.” Exhibits entered into the record by the
Plaintiffs (defined below) outside of the Complaint, see Dkt. 128, will be cited as “Pls.’
Ex.” Exhibits entered into the record by the Armistice Defendants (defined below), see
Dkt. 81, 97, and 113, will be cited as “Armistice Defs.’ Ex.” Exhibits entered into the
record by the Vaxart Defendants (defined below), see Dkt. 84, 99, and 131, will be cited
as “Vaxart Defs.’ Ex.” Plaintiffs have objected that Defendants have introduced into the
record “extraneous documents” produced to Plaintiffs in response to books and records
demands under 8 Del. C. § 220. Pls.’ Ans. Br. 34. Plaintiffs’ characterization of Vaxart’s
participation in OWS has prompted the Defendants to request that the court “review the
actual documents to ensure that the plaintiff has not misrepresented their contents and that
any inference the plaintiff seeks to have drawn is a reasonable one.” In re CBS Corp.
S’holder Class Action & Deriv. Litig., 2021 WL 268779, at *18 (Del. Ch. Jan. 27, 2021)
(citations omitted). The Plaintiffs’ respective confidentiality agreements with the
Company governing the production of Section 220 documents each provide that all
“documents” produced pursuant to the agreements “will be deemed incorporated by
reference in any complaint relating to the subject matter referenced in the Demand[s].”
Armistice Defs.’ Exs. 1 ¶ 11, 2 ¶ 13. The confidentiality agreement between the Company
and Plaintiffs Cynthia Jaquith and Paul Bergeron makes incorporation conditional upon
written confirmation from the Company that it “believes in good faith that it has completed
3
A. The Parties
Plaintiffs Cynthia Jaquith and Paul Bergeron have been Vaxart stockholders
since April 2020. 3 Plaintiff Kenny Galjour alleges to have been a Vaxart stockholder
“at all relevant times.” 4 They are collectively referred to as “Plaintiffs” herein.
Nominal defendant Vaxart is a Delaware corporation based in San Francisco,
California.5 The Company is a clinical stage biotechnology company focused on
developing oral vaccines.6 Vaxart is the result of a 2018 reverse merger (the
“Merger”) between Vaxart, Inc., then a privately held company (“Private Vaxart”),
and publicly traded Aviragen Therapeutics, Inc. (“Aviragen”). 7 As a result of the
production” of all in-scope documents within five business days of making a “good-faith
determination” as to such. Armistice Defs.’ Ex. 2 ¶ 14. Defendants have entered into the
record an October 1, 2020 letter representing that “on September 1, 2020, the Company
provided the written certification required by Paragraph 14 of the Confidentiality
Agreement, stating that it believes in good faith that it has completed its production of the
documents that the Company stated it will produce, all of which are within the scope of the
Demands.” Vaxart Defs.’ Ex. 28. Plaintiffs have not disputed this representation.
Nevertheless, the incorporation by reference of documents produced under Section 220
“does not change the pleading standard that governs a motion to dismiss.” Amalgamated
Bank v. Yahoo! Inc., 132 A.3d 752, 798 (Del. Ch. 2016) (emphasis omitted), abrogated on
other grounds by Tiger v. Boast Apparel, Inc., 214 A.3d 933 (Del. 2019). “If there are
factual conflicts in the documents or the circumstances support competing interpretations,
and if the plaintiff makes a well-pleaded factual allegation, then the allegation will be
credited.” Id.
3
Compl. ¶ 20.
4
Dkt. 1 (“Galjour Compl.”) ¶ 17.
5
Compl. ¶ 21.
6
Id. ¶ 32.
7
Vaxart Defs.’ Ex. 3 at 95.
4
Merger, Private Vaxart became a subsidiary of Aviragen and Aviragen changed its
name to Vaxart.8 Certain Aviragen and Private Vaxart directors continued on after
the Merger as directors of the post-Merger parent company (“Vaxart”), including
three of the named defendants in this case. 9 Vaxart’s common stock trades on the
Nasdaq stock market. 10
Defendants Steven Boyd and Keith Maher joined the Vaxart board of directors
(the “Board”) in October 2019. 11 Boyd is the Chief Investment Officer and Maher
is a Managing Director of defendant Armistice Capital LLC (“Armistice”), a hedge
fund focused on the health and consumer sectors. 12 Armistice was a Vaxart
stockholder from September 26, 2019 13 until at least June 29, 2020, the date of its
last publicly reported trade before the filing of the Complaint. 14 Boyd and Maher
8
Id.
9
See Vaxart, Inc., Schedule 14A (Apr. 24, 2020) (the “Proxy”) at 10–12.
10
Vaxart Defs.’ Ex. 3 at Cover Page.
11
Proxy at 10–11.
12
Compl. ¶¶ 1, 22–24.
13
Vaxart, Inc., Schedule 13D (Oct. 1, 2019). The court may take judicial notice of this and
other SEC filings cited in this Opinion to the extent they are “matters that are not subject
to reasonable dispute.” In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d 162, 169
(Del. 2006) (citing D.R.E. 201(b)); see Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 860 A.2d
312, 320 n.28 (Del. 2004) (noting that courts may take judicial notice of contents of public
documents such as SEC filings required by law to be filed).
14
Vaxart, Inc., Schedule 13D (June 30, 2020).
5
are together the “Armistice Directors” and, together with Armistice, the “Armistice
Defendants.”
Defendant Wouter Latour is the Chairman of the Vaxart Board. 15 Latour
served as a director and Chief Executive Officer (“CEO”) of Private Vaxart since
October 2011 and September 2011, respectively, through the Merger, and he has
continued to serve as a director of Vaxart since then. 16 He also continued to serve
as the CEO of Vaxart since the Merger until his resignation on June 14, 2020.17
Defendant Andrei Floroiu joined the Board on April 13, 2020. 18 On June 15,
2020, the Board appointed him to replace Latour as CEO.19
Defendants Michael Finney, Robert Yedid, and Todd Davis are outside
directors of Vaxart. Finney joined the board of Private Vaxart in 2007 and stayed
on after the Merger as a Vaxart director. 20 He also served as the CEO of Private
Vaxart from 2009 until 2011.21 Yedid and Davis were appointed to the Vaxart Board
15
Compl. ¶ 25.
16
Proxy at 9.
17
Compl. ¶¶ 25, 101.
18
Id. ¶¶ 4, 38.
19
Vaxart, Inc., Current Report (Form 8-K) (June 15, 2020), Item 5.02. The Complaint
alleges that Floroiu “served as . . . CEO of the Company since June 15, 2020.” Compl. ¶
26.
20
Proxy at 10.
21
Id.
6
in October 2019. 22 Davis served on the Board’s Compensation Committee (the
“Compensation Committee”) “at all times relevant hereto.” 23
Anne M. VanLent was a director of Private Vaxart from 2013 24 until the
Merger and stayed on as a Vaxart director until June 8, 2020.25 VanLent was not
nominated for reelection at the 2020 annual meeting of Vaxart stockholders.26
Latour, Boyd, Floroiu, Davis, Finney, Maher, Yedid, and VanLent are
together referred to in this Opinion as the “Director Defendants.”
B. Vaxart’s Vaccine Development Efforts

As of December 31, 2019, Vaxart only had 14 full-time employees, 27 had
experienced two consecutive years of net losses,28 and had never brought a vaccine
to market.29 On January 31, 2020, in the early stages of the COVID-19 pandemic,
Vaxart announced it was developing a vaccine for COVID-19. 30 Vaxart’s stock
22
Compl. ¶¶ 28-29.
23
Id. ¶ 28.
24
Vaxart, Inc., Form 10-K (Feb. 6, 2019) at 120.
25
Compl. ¶ 30.
26
See Proxy at 9.
27
Vaxart, Inc., Form 10-K (Mar. 19, 2020) at 38.
28
Id. at 80.
29
Compl. ¶ 33; see Vaxart, Inc., Form 10-K (Mar. 19, 2020) at 38 (“[W]e . . . have not yet
successfully completed a large-scale, pivotal clinical trial, obtained marketing approval,
manufactured our tablet vaccine candidates at commercial scale, or conducted sales and
marketing activities that will be necessary to successfully commercialize our product
candidates.”).
30
Compl. ¶ 39.
7
price closed at $1.25 per share that day. 31 In its annual report to stockholders in
March 2020, Vaxart acknowledged that its “business currently depends heavily on
the successful development, regulatory approval and commercialization of our
coronavirus and norovirus tablet vaccine.” 32 In the ensuing months, Vaxart
disclosed its incremental progress in developing its COVID-19 oral vaccine.33
C. The 2019 Equity Incentive Plan

Like many early-stage biotech companies with little to no cash flow, Vaxart
used equity awards to incentivize and compensate employees, directors, and
contractors. In April 2019, Vaxart’s stockholders approved an equity incentive plan
(the “Plan”). 34 The Plan authorized the Board to grant individual equity-based
31
VXRT Historical Data, Vaxart, Inc. Common Stock, https://www.nasdaq.com/market-
activity/stocks/vxrt/historical (last visited May 26, 2022). Here and elsewhere, “I take
judicial notice of these reported stock prices because they are not subject to reasonable
dispute.” Lee v. Pincus, 2014 WL 6066108, at *4 n.11 (Del. Ch. Nov. 14, 2014) (citing
D.R.E. 201(b)(2)).
32
Vaxart, Inc., Form 10-K (Mar. 19, 2020) at 40.
33
See Compl. ¶ 41; see also, e.g., Vaxart, Inc., Current Report (Form 8-K) (April 29, 2020),
Ex. 99.1 (“announced that [Vaxart’s] lead vaccine candidates generated anti-SARS CoV-
2 antibodies in all tested animals after the first dose”); Vaxart, Inc., Current Report (Form
8-K) (May 12, 2020), Ex. 99.1 (reporting that “the Company’s lead vaccine candidates
generated robust anti-SARS CoV-2 antibodies in all tested animals after both the first and
second dose, with a clear boosting effect after the second dose”); Vaxart, Inc., Current
Report (Form 8-K) (June 18, 2020), Ex. 99.1 (corporate presentation describing Vaxart’s
“Covid-19 program” as “Advancing Expeditiously”).
34
Vaxart Defs.’ Ex. 2 (the “Plan”).
8
compensation “Awards”—including stock options, restricted stock awards, and
stock appreciation rights (“SARs”)—to employees, directors and consultants. 35
Subject to exceptions not pertinent here, “the aggregate number of shares of
Common Stock that may be issued pursuant to Stock Awards will not exceed
1,600,000 shares” (the “Share Reserve”). 36 In addition, the maximum number of
shares subject to stock awards granted during any calendar year to any non-employee
director, taken together with any cash fees paid by the Company to such non-
employee director during such calendar year, may not exceed $600,000 in total
value, “calculating the value of any such stock awards based on the grant date fair
value of the stock awards for financial reporting purposes.”37
The Plan provides that it is to be administered by the Board, which may
delegate administrative authority to a Board committee. 38 The Board “delegated
concurrent authority to administer the . . . Plan to [the] Compensation Committee.39
In practice, the Compensation Committee recommended award grants to the Board,
35
Id. § 1(a)–(c).
36
Id. § 3(a)(i).
37
Id. § 3(d). For newly elected or appointed directors, the threshold is $750,000 in total
value for the calendar year in which they first join the Board. Id.
38
Id. § 2(c)(i).
39
Proxy at 25.
9
which acted as the final decision maker. 40 The Compensation Committee at all
relevant times in this case consisted of Maher and Davis.41
On February 21, 2020, the Board approved an amendment to the Plan (the
“Plan Amendment”) that would increase the Share Reserve from 1.6 million to 8
million shares.42 The Plan Amendment was conditioned upon stockholder approval,
which the Board intended to seek at the next annual meeting of stockholders.43 In
the meantime, on March 24, 2020, the Board approved a grant of time-based stock
options covering a total of 2,610,000 shares—including 900,000 shares to CEO
Latour—at a per share exercise price of $1.70 44—the closing price of Vaxart’s shares
on that day (the “March Awards”).45 The March Awards vested over a two-year
period.46
40
The awards at issue here were granted by the Board upon the Compensation Committee’s
recommendation. Vaxart Defs.’ Ex. 26 at VAXART000068.
41
Compl. ¶¶ 24, 28; Proxy at 13–14.
42
Proxy at 21. The Complaint calls the “increase [of] the shares reserved for issuance
under the Company’s equity incentive plan” the “2020 Plan.” Compl. ¶ 14. The Complaint
alleges that “[t]he Vaxart Board approved the 2020 Plan on March 24, 2020. To effect it,
the stockholders would still have to vote to approve it.” Id. ¶ 92. The Proxy made clear
that stockholders were being asked to vote on an amendment to the Plan, not to vote on the
adoption of a new plan. See Proxy at 3 (describing “Proposal No. 3” thus: “To approve
an amendment to our 2019 Equity Incentive Plan to increase the number of shares of
common stock reserved for issuance thereunder by 6,400,000 shares to 8,000,000 shares.”).
43
Proxy at 21.
44
Compl. ¶¶ 93, 94.
45
Proxy at 22, 32.
46
Id. at 32.
10
On April 13, 2020, the Board granted 54,720 time-based stock options to
Floroiu upon his joining the Board (the “April Awards”).47 The exercise price was
$1.71,48 the closing price of Vaxart’s common stock on April 13, 2020. 49 Floroiu’s
option grant was not extraordinary. The number and terms were the same as those
in the awards to new directors upon joining the board since early 2019—54,720
options, vesting over three years.50 At the time of grant, none of the March Awards
or April Awards could be exercised, however, because the number of shares
underlying those awards exceeded the number of shares remaining in the Share
Reserve. Therefore, those option awards were only exercisable if Vaxart
stockholders approved the Plan Amendment at the upcoming annual meeting of
stockholders.
The Board selected June 8, 2020 for the annual meeting of stockholders (the
“Annual Meeting”) and planned to hold a meeting of the Board immediately
thereafter. The Company issued the notice of meeting and proxy statement (the
“Proxy”) on April 24, 2020. The Proxy included a proposal to amend the certificate
47
Id. at 33.
48
Compl. ¶ 89.
49
Proxy at 33.
50
Id. at 44. Boyd and Maher did not receive any awards under the Plan, as dictated by
Armistice’s policy. Compl. ¶ 15 n.1.
11
of incorporation to increase the number of authorized shares to 150 million. 51 The
Proxy also sought stockholder approval of the Plan Amendment to increase the Share
Reserve from 1.6 million to 8 million shares. 52 The Proxy disclosed that the Share
Reserve had been depleted to 110,276 issuable shares. 53 The Proxy also stated:
In determining the number of additional shares to reserve for issuance

under the 2019 Plan, our board of directors considered the number of
shares available for future awards, the potential dilution resulting from
the proposed increase, equity plan guidelines established by certain
proxy advisory firms, and advice provided by the Compensation
Committee’s compensation consultant. 54
The Proxy disclosed the March Awards and the April Awards, including the terms
of the specific grants to Latour, Floroiu, and two other Vaxart executives.55
According to the Proxy, the March Awards and the April Awards would be
exercisable only if stockholders approved the Plan Amendment. 56
D. Operation Warp Speed

On May 15, 2020, the White House announced OWS—a “public-private
partnership to facilitate the development, manufacturing, and distribution of
51
Proxy at 3.
52
Id.
53
Id. at 19.
54
Id. at 22.
55
Id. at 32–33.
56
Id.
12
COVID-19 countermeasures.” 57 OWS was an interagency federal program, led by
the U.S. Department of Health and Human Services and the Department of Defense,
funded with an initial budget of almost $10 billion to “accelerate the development,
manufacturing, and distribution of COVID-19 vaccines, therapeutics, and
diagnostics (medical countermeasures).”58 OWS planned to select a small number
of vaccine candidates to receive coordinated government support in simultaneous
vaccine development.59
On June 3, 2020—five days before the Annual Meeting—Bloomberg reported
that “[t]he White House is working with seven pharmaceutical companies” as part
of OWS.60 The Bloomberg article explained that “Operation Warp Speed seeks to
compress a process that is typically years long into a matter of months, in part by
spending as much as $10 billion on research, manufacturing and agreements to
57
Compl. ¶¶ 46, 46 n.2; see also Trump Administration Announces Framework and
Leadership for ‘Operation Warp Speed’, U.S. Dept. of Defense (May 15, 2020),
https://www.defense.gov/News/Releases/Release/Article/2310750/trump-administration-
announces-framework-and-leadership-for-operation-warp-speed/ (last visited May 26,
2022) (the “White House Press Release”). The court is permitted to consider documents
such as this press release relied upon in the Complaint. See Windsor I, LLC v. CWCapital
Asset Mgmt. LLC, 238 A.3d 863, 873 (Del. 2020) (The court “may consider documents
outside the pleadings when the document is integral to a plaintiff’s claim and incorporated
into the complaint, or when the document is not being relied upon to prove the truth of its
contents” and the court “may also take judicial notice of matters that are not subject to
reasonable dispute.”) (cleaned up).
58
Compl. ¶¶ 46–47; White House Press Release.
59
Compl. ¶ 46 & n.2.
60
Id. ¶¶ 45–46.
13
guarantee purchase of the vaccines.”61 Bloomberg noted that the program’s stated
goal of developing a vaccine before year-end “would be a remarkable feat, given the
process of bringing a conventional vaccine from inception to regulatory approval
takes more than a decade on average.” 62 “The June 3 Bloomberg article revealed the
names of five of the seven vaccine finalists selected for OWS. Vaxart was not one
of [them].” 63
E. The Day Before the Annual Meeting and Subsequent Board

Meeting
On June 7, 2020—the day before the Annual Meeting and subsequent Board
and committee meetings—the Compensation Committee provided the Board with
recommendations for awards to be made under the Plan.64 The recommendations,
contained in a PowerPoint slide presentation and accompanying email, determined
that Floroiu was ineligible for an annual grant of options because he had just joined
the Board and received his initial option grant within the last six months.65 The
committee recommended that outside directors Davis, Finney, and Yedid each
61
Riley Griffin and Jennifer Jacobs, White House Works with Seven Drugmakers in ‘Warp
Speed’ Push, BLOOMBERG (June 3, 2020, 5:14 PM),
https://www.bloomberg.com/news/articles/2020-06-03/white-house-working-with-seven-
drugmakers-in-warp-speed-push.
62
Id.
63
Compl. ¶ 50.
64
Vaxart Defs.’ Ex. 24.
65
Id.
14
receive an annual stock option grant covering 65,700 shares,66 which would fully
vest one year later on June 8, 2021.67 That number was based on a “target” of
0.073% of “Total Outstanding” common stock, reflecting the 50th percentile of
annual equity awards in an analysis of peer data conducted by the Compensation
Committee’s independent compensation consultant, Compensia, Inc.68 The
committee also recommended accelerated vesting and a two-year extension to
exercise options held by VanLent, who was leaving the Board. 69 The committee
noted that this treatment was consistent with prior practice for departing directors.70
The committee did not recommend a grant of any new options to VanLent.71
The Board meeting agenda was circulated on June 7, 2020.72 The agenda
items included updates on “Status Covid program” and “Status COVID funding” but
included no details. 73
66
Vaxart Defs.’ Ex. 25 at VAXART0000016.
67
68
Vaxart Defs.’ Ex. 25 at VAXART000014; Vaxart, Inc., Schedule 14A (Apr. 30, 2021)
at 34.
69
70
Id.
71
72
Compl. ¶ 141.
73
Armistice Defs.’ Ex. 24.
15
F. The June 8 Meetings of the Stockholders, Compensation
Committee, and Board
The June 8, 2020 Annual Meeting was held virtually, starting at 9:30 a.m.
Pacific Time.74 The telephonic Compensation Committee meeting began at 9:45
a.m. Pacific Time.75 According to the Compensation Committee meeting minutes,
the meeting lasted 15 minutes, with the committee formally approving for
submission to the Board the recommendations contained in its presentation that was
circulated the prior day. 76 The full Board then met by phone at 10:00 a.m. Pacific
Time. 77 Latour, Boyd, Davis, Finney, Floroiu, Maher, and Yedid attended. 78 Latour
summarized the results of the Annual Meeting, reporting that stockholders had
approved all of the proposals submitted for their approval.79 Latour then updated
the Board on Vaxart’s COVID-19 vaccine program, noting that “the Company was
invited to participate in a non-human primate study organized by Operation Warp
Speed and was negotiating the relevant documentation” (the “Research Study”).80
The Board minutes reflect no other reference to that invitation.
74
75
Pls.’ Ex. A at VAXART000007.
76
Id. at VAXART000007, VAXART000008.
77
78
Id.
79
Id.
80
Id. at VAXART000067.
16
The record does not reflect precisely when Vaxart was invited to participate
in the Research Study or when the directors first became aware of it. The Plaintiffs
insist that “Vaxart’s management, the Board, and Armistice knew as of June 3, 2020,
and likely on May 28, 2020, that the Company had been chosen as an OWS
participant.”81 Plaintiffs cite no document or human conduct to support that
allegation other than the June 3, 2020 Bloomberg article.
At the June 8, 2020 Board meeting, Latour also updated directors on the
development and manufacturing of the Company’s oral COVID-19 vaccine
candidate.82 On the subject of COVID-19 funding, Latour summarized the status of
various funding initiatives and potential funding sources,83 which included a
presentation on “BARDA/NIH (OWS)” and “[f]unding challenge study in NHP.”84
The Compensation Committee formally presented its recommendations for
annual director compensation and stock option grants. 85 The Board approved those
recommendations, which accelerated vesting and extended the expiration date of
VanLent’s options and awarded 65,700 stock options to each of Davis, Finney, and
81
Compl. ¶ 122 (emphasis omitted).
82
83
Id.
84
Pls.’ Ex. B at VAXART000049.
85
17
Yedid. 86 The exercise price of the options awarded to Davis, Finney, and Yedid was
$2.39, which was the closing price of Vaxart’s common stock on the Nasdaq that
day. 87
Five days after this Board meeting, the Board executed a written consent
deeming it in Vaxart’s best interests that Latour resign from his position as President
and CEO,88 but providing for him to remain on the Board. The Board also approved
a separation agreement with Latour, permitting his stock options to “vest for so long
as he continues to serve on the Board.” 89 The separation agreement included a
general release of claims that Latour may have against the Company, its officers,
directors, agents, and others. 90
On June 15, 2020, the Company announced Latour’s resignation and the
appointment of Floroiu as his successor.91 No explanation was provided for Latour’s
resignation. 92
86
Id. at VAXART000068, VAXART000070.
87
activity/stocks/vxrt/historical (last visited May 26, 2022).
88
Compl. ¶ 102; Vaxart Defs.’ Ex. 27.
89
90
Vaxart Defs.’ Ex. 9 at §§ 2(b), 3, Ex. C. On June 15, 2020, the Company announced
Latour’s resignation and the appointment of Floroiu as his successor. Compl. ¶ 103;
Vaxart, Inc., Current Report (Form 8-K) (June 15, 2020).
91
Compl. ¶ 101; Vaxart, Inc., Current Report (Form 8-K) (June 15, 2020).
92
Compl. ¶ 101; see Vaxart Defs.’ Ex. 27.
18
Upon his appointment as CEO, Floroiu received time-based stock options to
purchase 1,745,280 shares of Vaxart’s common stock at a strike price of $2.46 per
share, the closing price of Vaxart shares on June 15, 2020. 93 A quarter of the stock
option grant would vest on June 15, 2021, and the remaining options would vest in
equal monthly installments over the following three-year period, subject to
acceleration under certain circumstances. 94 Floroiu also received performance-
based stock options to purchase up to 900,000 shares of Vaxart’s common stock at
a strike price of $2.46 per share.95 One-third of the performance-based stock options
would vest if Vaxart’s shares closed at a per share price of $5, $7.50 and $10,
respectively, for ten consecutive trading days between June 15 and November 30,
2020. 96
G. Vaxart’s June 24, 25, and 26, 2020 Announcements and the
Aftermath
Two weeks after the Annual Meeting, Vaxart made three public
announcements on three consecutive days. On June 24, 2020, the Company
announced that it would be included in the Russell 3000 Index, effective June 29,
93
Compl. ¶¶ 103–04.
94
Id. ¶ 104; Vaxart Defs.’ Ex. 27.
95
Compl. ¶ 105.
96
Id.; Vaxart Defs.’ Ex. 27.
19
2020. 97 “On this news, Vaxart’s stock increased nearly 20%, from a closing price
of $2.66 on June 23, 2020 to a closing price of $3.19 on June 24, 2020.” 98 On June
25, 2020, Vaxart announced a memorandum of understanding with Attwill Medical
Solutions Steriflow, LP (“Attwill”) to manufacture Vaxart’s oral COVID-19
vaccine.99 The subheadline of the Company’s news release announcing the deal
stated that the agreement had the effect of “Enabling Production of A Billion or More
COVID-19 Vaccine Doses Per Year.”100 The Company’s stock price closed at $6.26
per share that day, as compared to $2.66 per share on June 23, 2020 and $3.19 per
share on June 24, 2020.101 The third announcement in this string is at the center of
this case—Vaxart’s invitation to participate in the OWS-sponsored, non-human
primate study.
To place the announcement into proper context, as of late June 2020, OWS
had not yet identified all the participants in the vaccine development program. The
97
Compl. ¶ 111; see Vaxart, Inc. Set to Join Russell 3000® Index, Vaxart, Inc. (June 24,
2020, 8:00 AM), https://investors.vaxart.com/news-releases/news-release-details/vaxart-
inc-set-join-russell-3000r-index. The court can take judicial notice of Vaxart’s
announcements as a “publicly available press release.” In re Duke Energy Corp. Deriv.
Litig., 2016 WL 4543788, at *4 n.34 (Del. Ch. Aug. 31, 2016).
98
Compl. ¶ 111.
99
Id. ¶ 112.
100
Vaxart, Inc., Current Report (Form 8-K) (June 30, 2020), Ex. 99.1.
101
20
market was aware of the five participants that had been disclosed in the June 3
Bloomberg article. Here is the substantive portion of the June 26, 2020 press release:
Vaxart’s COVID-19 Vaccine Selected for the U.S. Government’s

Operation Warp Speed
OWS to Test First Oral COVID-19 Vaccine in Non-Human

Primates
SOUTH SAN FRANCISCO, Calif., June 26, 2020 (GLOBE

NEWSWIRE) -- Vaxart, Inc., a clinical-stage biotechnology company
developing oral vaccines that are administered by tablet rather than by
injection, today announced that its oral COVID-19 vaccine has been
selected to participate in a non-human primate (NHP) challenge study,
organized and funded by Operation Warp Speed, a new national
program aiming to provide substantial quantities of safe, effective
vaccine for Americans by January 2021.
The study is designed to demonstrate the efficacy of Vaxart’s oral

COVID-19 vaccine candidate.
“We are very pleased to be one of the few companies selected by

Operation Warp Speed, and that ours is the only oral vaccine being
evaluated. SARS-CoV-2, the coronavirus that causes COVID-19, is
primarily transmitted by viral particles that enter through the mucosa -
nose, mouth or eyes - strongly suggesting that mucosal immunity could
serve as the first line of defense,” said Andrei Floroiu, Chief Executive
Officer of Vaxart Inc. “In addition, our vaccine is a room temperature-
stable tablet, an enormous logistical advantage in large vaccination
campaigns.” 102
102
Vaxart, Inc., Current Report (Form 8-K) (June 30, 2020), Ex. 99.2. Vaxart filed the
July 25, 2020 press release at the same time.
21
“On this news, Vaxart’s stock price jumped to a high of $14.30 and closed at
$8.04 on June 26, 2020,” compared to the prior day’s close of $6.26.103 The stock
closed at $6.44 on July 6, 2020.104 Three weeks after the trio of press releases,
starting July 13, 2021, Vaxart’s stock price closed above $10 a share for 13
consecutive trading days.105 As a result, Floroiu’s 900,000 performance-based
options became fully vested. Vaxart’s public relations campaign and sharp increase
in its stock price during that period caught the eye of regulators and law enforcement.
In July 2020, Vaxart was served with a grand jury subpoena from the U.S.
Attorney’s Office for the Northern District of California.106 Pursuant to this
subpoena, Vaxart produced documents relating to its “participation in, and
disclosure of, an [OWS]-funded non-human primate study, and option grants,
warrant transactions, and other corporate and financing matters disclosed since
March 2020.”107
103
Compl. ¶¶ 112–13.
104
105
Compl. ¶ 108. The Complaint does not contain any allegations concerning Vaxart’s
public statements about its vaccine development after June 26, 2020.
106
Id. ¶ 120; Vaxart, Inc., Current Report (Form 8-K) (Oct. 14, 2020), Item 8.01. The
Form 8-K did not specify the date Vaxart was served with the subpoena.
107
Compl. ¶ 120; Vaxart, Inc., Current Report (Form 8-K) (Oct. 14, 2020), Item 8.01.
22
On Saturday, July 25, 2020, The New York Times reported that “[s]ome
officials at the Department of Health and Human Services have grown concerned
about whether companies including Vaxart are trying to inflate their stock prices by
exaggerating their roles in Warp Speed.”108 The article quoted a Department official,
who confirmed that the Department “has entered into funding agreements with
certain vaccine manufacturers” and was “negotiating with others.”109 The official
also clarified: “[n]either is the case with Vaxart.”110 Vaxart’s stock price opened on
the following Monday, July 27, 2020, at $10.34 per share—down 15.86% from its
closing price the previous Friday. That same day, Vaxart’s stock price closed at
approximately $11.16 per share, down 9.19% from the previous closing price.
Between July 27, 2020 and September 8, 2020, Vaxart’s shares dropped 56.81%.111
In August 2020, the Company voluntarily responded to a document request
from the Enforcement Division of the U.S. Securities and Exchange Commission,
providing documents similar to those given in response to the California grand jury
108
David Gelles & Jesse Drucker, Corporate Insiders Pocket $1 Billion in Rush for
Coronavirus Vaccine, N.Y. TIMES (July 25, 2020),
https://www.nytimes.com/2020/07/25/business/coronavirus-vaccine-profits-
vaxart.html?smid=url-share (the “NYT Article”). The Complaint incorporates the article
by reference. See Compl. ¶ 118 (quoting the article).
109
NYT Article.
110
Id.
111
23
subpoena.112 Two months later, in October 2020, the Office of the U.S. Attorney for
the Northern District of California transferred its investigation to the Office of the
U.S. Attorney for the Eastern District of New York and the Fraud Section of Main
Justice.113 The New York investigators then issued a grand jury subpoena seeking
substantially the same information provided in response to the California grand jury
subpoena.114
II. PROCEDURAL HISTORY
A. This Action
On September 8, 2020, Plaintiff Kenny Galjour filed his complaint. On
October 20, 2020, Plaintiffs Cynthia Jaquith and Paul Bergeron filed their complaint.
The court consolidated the actions on November 12, 2020,115 and the Plaintiffs
designated the Jaquith-Bergeron complaint as the operative complaint.116
Defendants moved to dismiss. 117 On November 30, 2021, the court issued a
Memorandum Opinion, 118 corrected on December 1, 2021,119 dismissing Counts I,
112
Compl. ¶ 121; Vaxart, Inc., Current Report (Form 8-K) (Oct. 14, 2020), Item 8.01.
113
Pls.’ Ans. Br. 17; Vaxart, Inc., Form 10-K (Feb. 24, 2022) at 56.
114
Pls.’ Ans. Br. 17; Vaxart, Inc., Form 10-K (Feb. 24, 2022) at 56.
115
Dkt. 53.
116
Dkt. 72.
117
Dkt. 74, 75.
118
Dkt. 122.
119
Dkt. 123.
24
IV and V.120 Thereafter, the court requested supplemental briefing as to two issues
related to Counts II and III.121 The parties completed briefing on February 4,
2022. 122
B. The California Actions
1. The California State Court Action
On August 4, 2020, other Vaxart stockholders initiated litigation against
Floroiu, Latour, Davis, Finney, Yedid, Boyd, and Maher (the “California
Defendants”) in the California Superior Court in San Mateo County (the “California
Litigation”).123 On November 25, 2020, the plaintiffs in the California Litigation
filed a Second Amended Complaint asserting claims for breach of fiduciary duties,
unjust enrichment, waste, and aiding and abetting breach of fiduciary duties, relating
to alleged “spring-loaded” stock option grants. 124
On March 15, 2021, the California Superior Court granted the California
Defendants’ demurrer, without prejudice and with leave to replead. 125 On June 17,
120
Count I was a breach of fiduciary duty claim asserted against the Director Defendants
for the approval of the warrant amendments (the “Warrant Amendments”). Count IV was
an unjust enrichment claim asserted against Armistice for the retention of the Warrant
Amendments. Count V was a breach of fiduciary duty claim asserted against Armistice.
121
Dkt. 125.
122
Dkt. 139–40.
123
Defs.’ Joint Suppl. Br. in Further Supp. of Their Mots. to Dismiss, Ex. 37.
124
Id.; Ennis v. Latour, 20-civ-03253 (Cal. Super. Ct. Nov. 25, 2020).
125
Dkt. 116, Ex. B at 3; Ennis v. Latour, 20-civ-03253 (Cal. Super. Ct. Mar. 15, 2021).
25
2021, the plaintiffs in the California action filed a Third Amended Complaint. 126 On
April 26, 2022, the California Court sustained the California Defendants’ demurrers
without leave to amend as to all claims asserted against Armistice and the unjust
enrichment and aiding and abetting claims against the Armistice Directors relating
to the Warrant Amendments.127 In its ruling, the California Court agreed with this
court’s holdings that the Warrant Amendments must be treated as a transaction
separate from the June Awards, that the stockholder plaintiffs failed to sufficiently
allege a quid pro quo arrangement between the Armistice Defendants and the other
director defendants, and that demand was not excused as to any claims relating to
the Warrant Amendments.128 The California Court has deferred ruling on the
remaining claims pending this court’s decision. 129
2. The Federal Securities Actions
On August 24, 2020, a securities fraud action was initiated by a Vaxart
stockholder in California federal court against the Company, Floroiu, Latour, and
126
Ennis v. Latour, 20-civ-03253 (Cal. Super. Ct. June 17, 2021).
127
Ennis v. Latour, 20-civ-03253 (Cal. Super. Ct. Apr. 26, 2022). The California Court
also acknowledged that “Plaintiffs have now had three opportunities to amend their
complaint” and concluded that “there is no reasonable possibility that Plaintiffs can amend
their complaint to allege demand futility as to the claims relating to the Warrant
Amendments.” Id. at 13.
128
Id.
129
Ennis v. Latour, 20-civ-03253 (Cal. Super. Ct. Apr. 26, 2022).
26
the Armistice Defendants.130 The case was consolidated with several other similar
cases, and on January 29, 2021, the plaintiffs filed a consolidated amended
complaint adding Yedid, Davis, and Finney, and two Vaxart officers, Sean Tucker
and Margaret Echerd, as defendants. 131 On December 22, 2021, the court dismissed
the claims against Armistice but denied the motion to dismiss the consolidated
amended complaint as to the other defendants (the “Order”).
In the Order, the court reasoned that the June 26, 2020 press release
announcing Vaxart’s participation in the non-human primate study, together with
the previous day’s press release announcing the agreement with Attwill, “created the
materially misleading impression that Vaxart stood at the precipice of pioneering a
successful coronavirus vaccine.”132 Because “Attwill lacked the regulatory capacity,
personnel, and wherewithal to produce even one dose, never mind one billion,” the
Attwill announcement created the misleading impression that the Company had
entered into the agreement because it was on the “cusp of achieving something
momentous.” 133 As to the announcement of the non-human primate study selection,
the court reasoned that, even if the press release was “literally true,” its timing and
130
In re Vaxart, Inc. Sec. Litig., 3:20-cv-05949-VC (N.D. Cal. Aug. 24, 2020).
131
In re Vaxart, Inc. Sec. Litig., 3:20-cv-05949-VC (N.D. Cal. Jan. 29, 2021).
132
In re Vaxart, Inc. Sec. Litig., 2021 WL 6061518, at *4 (N.D. Cal. Dec. 22, 2021).
133
Id.
27
eye-catching title obscured the “crucial reality that Vaxart had been chosen only to
participate in a primate study and not to receive a vast influx of federal funds.”134
On October 23, 2020, another Vaxart stockholder commenced a securities
class action against Armistice, Armistice Capital Master Fund Ltd., Boyd, and
Vaxart (as nominal defendant) in the United States District Court for the Southern
District of New York.135 The plaintiff sought the disgorgement of all profits realized
by the defendants, in violation of Section 16(a) of the Securities Exchange Act of
1934, 136 through the Warrant Amendments.137 The defendants moved to dismiss the
complaint, arguing that the Warrant Amendments were not so substantial and
material as to constitute a purchases of securities within the meaning of the statute.138
On March 29, 2022, the court denied the motion, finding that the plaintiff had
plausibly alleged that the Warrant Amendments were “tantamount to the purchase
of new securities” as they enabled the defendants to more expeditiously exercise the
warrants and to hold significantly more stock while executing them.139
134
Id. at *5.
135
Roth v. Armistice Capital, LLC, 1:20-CV-08872 (S.D.N.Y. Oct. 23, 2020).
136
See 15 U.S.C. § 78p(a).
137
Roth v. Armistice Capital, LLC, 2022 WL 912942, at *2 (S.D.N.Y. Mar. 29, 2022).
138
Id. at *3.
139
Id. at *3–4.
28
III. ANALYSIS
Count II is a direct claim alleging the Director Defendants breached their
fiduciary duties by failing to disclose Vaxart’s selection to participate in the
Research Study prior to the stockholder vote on the Plan Amendment. Count III
asserts that Floroiu, Latour, Davis, Finney, Yedid, and VanLent were unjustly
enriched through their receipt of “stock options whose value they knew would be
inflated by the OWS announcement.” 140
A. Standard of Review
On a motion to dismiss for failure to state a claim under Court of Chancery
Rule 12(b)(6):
(i) all well-pleaded factual allegations are accepted as true; (ii) even
vague allegations are well-pleaded if they give the opposing party
notice of the claim; (iii) the Court must draw all reasonable inferences
in favor of the non-moving party; and ([iv]) dismissal is inappropriate
unless the plaintiff would not be entitled to recover under any
reasonably conceivable set of circumstances susceptible of proof.
Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002) (cleaned up). At the
motion to dismiss stage, “[p]laintiffs are entitled to all reasonable factual inferences
that logically flow from the particularized facts alleged, but conclusory allegations
are not considered as expressly pleaded facts or factual inferences.” White v. Panic,
783 A.2d 543, 549 (Del. 2001) (citation omitted). “[A] claim may be dismissed if
140
Compl. ¶ 179.
29
allegations in the complaint or in the exhibits incorporated into the complaint
effectively negate the claim as a matter of law.” Malpiede v. Townson, 780 A.2d
1075, 1083 (Del. 2001). The court also need not “accept every strained
interpretation of the allegations proposed by the plaintiff.” In re Gen. Motors
(Hughes) S’holder Litig., 897 A.2d 162, 168 (Del. 2006) (quoting Malpiede, 780
A.2d at 1083).
B. Count II Is Dismissed Because the Directors Were Not Required to

Supplement the Proxy with Details of Vaxart’s Selection to
Participate in the Non-Human Primate Study.
Count II alleges that each of the Director Defendants breached their fiduciary
duties by not supplementing the Proxy with news about Vaxart’s selection to
participate in the Research Study. Plaintiffs maintain that this disclosure breach
rendered the stockholder vote on the Plan Amendment uninformed and, therefore,
the Plan Amendment is invalid. 141 Plaintiffs seek an order rescinding all options
awarded under the Plan, as amended, and directing a new “fully informed
stockholder vote.” 142
141
Compl. ¶ 175.
142
Compl. § VI, D & E (Requests for Relief). At the 2021 annual meeting, Vaxart
stockholders approved another amendment to the Plan, this time increasing the number of
shares underlying awards to 16,900,000 shares. Vaxart, Inc., Current Report (Form 8-K)
(June 21, 2021), Item 5.07. The proxy statement disseminated to stockholders in
connection with the vote on that amendment did not seek to ratify any prior awards under
the Plan. Vaxart, Inc., Schedule 14A (Apr. 28, 2021).
30
“It is well-settled law that directors of Delaware corporations [have] a
fiduciary duty to disclose fully and fairly all material information within the board’s
control when it seeks shareholder action.” Gantler v. Stephens, 965 A.2d 695, 710
(Del. 2009) (internal quotations omitted). “That duty attaches to proxy statements
and any other disclosures in contemplation of stockholder action.” Id. (internal
quotations omitted). The adequacy of a disclosure is a mixed question of law and
fact. In re Om Grp., Inc. S’holders Litig., 2016 WL 5929951, at *12 (Del. Ch. Oct.
12, 2016) (citing Zirn v. VLI Corp., 681 A.2d 1050, 1055 (Del. 1996)). This court
should deny a motion to dismiss “when developing the factual record may be
necessary to make a materiality determination.” See Davidow v. LRN Corp., 2020
WL 898097, at *8 (Del. Ch. Feb. 25, 2020) (collecting cases). Plaintiffs alleging a
disclosure claim must, however, “provide some basis for a court to infer that the
alleged violations were material.” Loudon v. Archer-Daniels-Midland Co., 700
A.2d 135, 141 (Del. 1997). “This Court has, on several occasions in the context of
a motion to dismiss, found it appropriate to dismiss disclosure claims on the basis
that the complained of omission was not material.” Orman v. Cullman, 794 A.2d 5,
32 (Del. Ch. 2002) (citing Malpeide v. Townson, 780 A.2d 1075, 1086 n.35 (Del.
2001)).143
143
See, e.g., Feldman v. AS Roma SPV GP, LLC, 2021 WL 3087042 (Del. Ch. July 22,
2021) (granting motion to dismiss disclosure claims alleging material omissions in
31
“To state a claim for breach by omission of any duty to disclose, a plaintiff
must plead facts identifying (1) material, (2) reasonably available (3) information
that (4) was omitted from the proxy materials.” Pfeffer v. Redstone, 965 A.2d 676,
686 (Del. 2009) (citation omitted). “An omitted fact is material if there is a
substantial likelihood that a reasonable shareholder would consider it important in
deciding how to vote.” Rosenblatt v. Getty Oil Co., 493 A.2d 929, 944 (Del. 1985)
(quoting TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976)). The
materiality test “does not require proof of a substantial likelihood that disclosure of
the omitted fact would have caused the reasonable investor to change his vote.” Id.
(quoting TSC, 426 U.S. at 449). “[D]irectors are not required to disclose all available
information, but only that information necessary to make the disclosure of their
recommendation materially accurate and complete.” Matador Cap. Mgmt. Corp. v.
BRC Hldgs., Inc., 729 A.2d 280, 295 (Del. Ch. 1998) (internal quotations omitted).
There is no dispute that Vaxart had not yet been invited to participate in the
Research Study when Vaxart disseminated the Proxy to stockholders on April 24,
2020. Thus, the issue on this motion as to Count II is whether the Director
financial statements and member loan materials); Pascal on behalf of Columbia Fin., Inc.
v. Czerwinski, 2020 WL 7383107, at *6–7 (Del. Ch. Dec. 16, 2020) (granting motion to
dismiss disclosure claims alleging material omissions in proxy materials); Chatham Asset
Mgmt., LLC v. Papanier, 2020 WL 204027 (Del. Ch. Jan. 13, 2020) (granting motion to
dismiss disclosure claims alleging material omissions in tender offer materials); Shaev v.
Adkerson, 2015 WL 5882942, at *11 (Del. Ch. Oct. 5, 2015) (granting motion to dismiss
disclosure claims alleging material omissions in proxy materials).
32
Defendants had a duty to supplement the Proxy prior to the Annual Meeting with
information about the invitation to participate in the Research Study.
The Delaware Supreme Court addressed a fiduciary’s duty to supplement its
disclosure in Kahn v. Household Acquisition Corp., 591 A.2d 166 (Del. 1991). In
Household, stockholder plaintiffs alleged that a proxy statement disseminated in
connection with a proposed merger should have been supplemented with post-proxy
information that would have provided more clarity as to the company’s projected
earnings. Specifically, the proxy disclosed that the company and the federal
government were in negotiations over the amount of an annual government subsidy.
The proxy included both the company’s ask and the government’s bid. Less than
two weeks after the issuance of the proxy, the company and government negotiators
reached a preliminary agreement on the amount of the subsidy, which represented a
compromise between the bid and ask. The deal was not finalized until after
stockholders had voted to approve the merger. In a post-trial opinion, the Court of
Chancery concluded the information was not material. In affirming that conclusion,
the Delaware Supreme Court articulated a fiduciary’s duty to disclose subsequent
events:
[S]ubsequent events may have significance, and thus require disclosure,

only as they relate to information originally disclosed. If subsequent
events impart a new and significant slant on information already
discussed, their disclosure is mandated. If the subsequent event is
tentative, ill defined or adds little to material already disclosed, the duty
of fresh disclosure is limited.
33
Id. at 171.
The Court did not expand on the “limited” nature of the disclosure duty in the
last sentence of the quotation above. The Court concluded that in the case before it,
the tentative agreement on the amount of the subsidy “did not introduce a significant
new fact into the mix of financial data already available to shareholders.” Id. The
Court also emphasized the tentative nature of the agreement. Id. (“[T]hat which
plaintiff characterizes as an ‘agreement in principle’ had been reached at the staff
level and was subject to approval, and possible modification, at the [government
agency] level.”). In addition, the principal author of the fairness opinion presented
to the board testified that the agreement would not have altered his previous views
of the merger. Id. at 172.
The Director Defendants here argue that Plaintiffs have failed to meet their
burden to plead an omission claim for three primary reasons. First, the Director
Defendants contend that news of the Research Study Selection was not “reasonably
available” to the Board because “there is no basis for Plaintiffs’ speculation that the
Board knew about the [Research Study Selection] prior to the June 8, 2020 Board
meeting, which took place after the Annual Meeting.”144 Second, the Director
Defendants argue that even if the Board had knowledge of that information,
144
Vaxart Defs.’ Op. Br. at 56 (emphasis in original).
34
Plaintiffs have failed to adequately allege that the information was material.145
Third, the Director Defendants contend that even if such information were material,
Plaintiffs have failed to adequately plead that the Board acted in bad faith.146
The viability of the disclosure claim turns on the allegations concerning the
significance of the Research Study selection. Plaintiffs allege that Latour, as the
Company’s CEO, must have learned of the Research Study selection before the June
8, 2020 Board meeting 147 and that “it is implausible Latour would not immediately
inform the members of the Board of the news.” 148 That, Plaintiffs maintain, is
because the Research Study Selection was a “watershed moment” for the
Company: 149
Selection to participate in OWS would mean that Vaxart is no longer

one of many clinical stage biopharmaceutical companies enmeshed in
the slow struggle to commercialize a drug, but instead now has access
to the U.S. government’s substantial resources, with its COVID-19
vaccine candidate having a path to be put on a fast-track regulatory
timeline. 150
145
Id. at 56–67.
146
Vaxart Defs.’ Op. Br. at 57–58; Vaxart Defs.’ Op. Suppl. Br. at 2.
147
Compl. ¶ 52.
148
Id.; see also Compl. ¶ 57 (“Latour surely kept his fellow Board members apprised of
the status of this make-or-break negotiation with the government.”); id. ¶ 58 (“Latour
would surely have immediately passed on this monumental news to his successor the
moment he was informed. And, Floroiu would have just as surely passed along the
information to his old Armistice and McKinsey colleague, Boyd.”).
149
Compl. ¶ 52.
150
Id. ¶ 49.
35
“Selection to participate in OWS,” this argument goes, “dramatically increased the
likelihood that Vaxart’s COVID-19 vaccine candidate would be commercialized”151
and would thus “dramatically increase Vaxart’s stock price.”152 Plaintiffs further
allege that “the options . . . the stockholders were voting on were significantly more
valuable than stockholders could have understood based on the information
available.”153 And so, Plaintiffs allege, “[t]his extraordinary increase in the value of
stock option awards was material information any reasonable stockholder would
have wanted to consider before voting on the proposal.”154
Plaintiffs’ theory is based on an inaccurate characterization of what
stockholders were being asked to approve at the Annual Meeting. The Plan
Amendment sought to increase the number of shares in the Share Reserve.
Stockholders were not being asked to vote directly on the March Awards or the April
Awards, although the outcome of the vote on the Plan Amendment would determine
whether those awards could be exercised.
It is reasonable to infer that Latour had knowledge about the invitation to
participate in the Research Study before June 8, 2020. But the Complaint fails to
plead facts supporting a critical link in this logical chain: that participation in the
151
Id. ¶ 135.
152
Id. ¶ 96.
153
Id.
154
Pls.’ Suppl. Ans. Br. at 5.
36
non-human research study was a watershed event that would cause “a massive
increase in the value” of the March and April Awards.155 Absent any facts to support
that inference, the entire argument founders.
1. The Complaint Fails to Support the Inference that the

Research Study Selection Was Material to Stockholders
Voting on the Plan Amendment.
“Where shareholder ratification of a plan of option compensation is involved,
the duty of disclosure is satisfied by the disclosure or fair summary of all of the
relevant terms and conditions of the proposed plan of compensation, together with
any material extrinsic fact within the board’s knowledge bearing on the issue.”
Lewis v. Vogelstein, 699 A.2d 327, 333 (Del. Ch. 1997). The Proxy disclosed the
terms of the Plan, the terms of the Plan Amendment, and the reasons for which the
amendment was sought. The Proxy contained only a generic statement about the
Company’s efforts to develop its COVID-19 vaccine.156 Plaintiffs insist, however,
that the invitation to participate in the non-human primate study was material
information that needed to be disseminated in a supplement to the Proxy.
155
Compl. ¶ 97.
156
Proxy at 2 (“We are developing prophylactic vaccine candidates that target a range of
infectious diseases. These include coronavirus disease 2019, or COVID-19, a coronavirus
currently causing an epidemic throughout the world; norovirus, a widespread cause of acute
gastro-intestinal enteritis . . . ; seasonal influenza . . . ; and respiratory syncytial virus, a
common cause of respiratory tract infections.”).
37
Vogelstein is instructive. In that case, Chancellor Allen granted a motion to
dismiss claims alleging a stockholder vote on a stock option plan was uniformed.
The plaintiff argued the failure to include option values derived from the Black-
Scholes option pricing model was a material omission. The court disagreed,
concluding that such “soft information” was immaterial. Id. at 333. Even closer to
the facts of the present case is In re 3COM Corp. Shareholders Litigation, 1999 WL
1009210 (Del. Ch. Oct. 25, 1999). As here, plaintiffs in 3COM alleged that a
stockholder vote approving an increase in the number of shares available for
issuance under a stock option plan was uninformed. In dismissing the action, former
Chief Justice, then-Vice Chancellor, Steele held that the option values derived from
a Black-Scholes model were not material and did not need to be disclosed. Id. at *6;
see also id. (finding that the “mere[] approval of an amendment to a plan already in
existence,” in comparison to the “wholesale adoption of a stock option plan,” is
“even less cause” for the valuation disclosures alleged material by the plaintiff).
Here, Plaintiffs’ materiality argument is at least one step removed from that
in Vogelstein and 3COM. Plaintiffs argue not, as in Vogelstein and 3COM, that
valuation information was omitted; instead, they assert that an invitation to
participate in a research study would have caused an increase in the value of
38
previously granted options in some unknown, but “massive,” amount. 157 Plaintiffs
argue a reasonable stockholder voting on the Plan Amendment would have wanted
to know that stock options already granted would increase in value upon the
announcement of positive news about the Company. As the theory goes,
stockholders might not vote in favor of increasing the number of shares eligible for
a grant under the Plan if they knew the options would become more valuable upon
the Company’s announcement of positive news and a subsequent increase in the
stock price. 158
Plaintiffs’ theory does not hold together under the facts alleged in the
Complaint. The invitation to participate in the Research Study is even softer
information than the option pricing model information deemed immaterial in
157
Compl. ¶¶ 95–96.
158
“Most companies garner strong equity plan proposal support from shareholders,
regardless of the say-on-pay results.” Brian V. Breheny, Joseph M. Yaffe & Caroline S.
Kim, Skadden, Arps, Slate, Meagher & Flom LLP, Say-on-Pay Votes and Compensation
Disclosures, Harv. L. Sch. Forum on Corporate Governance (Jan. 6, 2021),
https://corpgov.law.harvard.edu/2021/01/06/say-on-pay-votes-and-compensation-
disclosures/. See id. (“As of September 2020, Russell 3000 companies with less than 70%
say-on-pay approval that presented an equity plan proposal still received 82% support for
the equity plan proposal.”). If anything, the connection became even more tenuous in 2021.
Semler Brossy, 2021 Say on Pay & Proxy Results: Russell 3000 (Sept. 30, 2021)
(“Companies receiving less than 70% Say on Pay vote support have had slightly higher
average equity plan proposal vote support in 2021 (86%) than in previous years.”).
“Indeed,” a recent study concludes, “in the absence of poor economic performance,
shareholders do not appear to care about excess executive compensation.” Jill E. Fisch,
Darius Palia & Steven Davidoff Solomon, Is Say on Pay All About Pay? The Impact of
Firm Performance, 8 HARV. BUS. L. REV. 101, 109 (2018).
39
Vogelstein and 3COM. First, the invitation was subject to negotiation and not
definitive. 159 See Household, 591 A.2d at 171 (holding disclosure of an agreement
in principle on government subsidy was not material information requiring
supplemental disclosure). More problematic for the Plaintiffs here is that nothing in
the Complaint supports the inference that an invitation to participate in the Research
Study would have caused the Company’s stock price to increase “dramatically.” 160
The Federal Food, Drug, and Cosmetic Act (“FDCA”) mandates that all drugs
marketed or sold in interstate commerce maintain FDA approval. 21 U.S.C. §
355(a). In its March 2019 Annual Report, Vaxart summarized the U.S. Product
Development Process as follows:
The process required by the FDA before a drug or biological product

may be marketed in the United States generally involves the
following:
• completion of nonclinical laboratory tests and animal studies . .
.;
• submission to the FDA of an IND which must become effective
before human clinical trials may begin;
• performance of adequate and well-controlled human clinical
trials . . .;
• submission to the FDA of a Biologics License Application, or
BLA, for marketing approval . . .;
• satisfactory completion of an FDA inspection of the
manufacturing facility or facilities where the biological product
is produced . . .;
• potential FDA audit of the nonclinical study and clinical trial
sites that generated the data in support of the BLA; and
159
Compl. ¶¶ 53, 56.
160
Id. ¶ 96.
40
• FDA review and approval, or licensure, of the BLA.161
Preclinical testing of laboratory animals is merely the first step on this long
road. “Most drugs that undergo preclinical (animal) testing never even make it to
human testing and review by the FDA.” 162
Plaintiffs allege no well-pleaded facts and present no argument to support
their assertion that Vaxart’s selection to participate in a non-human primate study
was a “watershed” moment for the Company. In fact, Vaxart was already engaged
in preclinical studies for its COVID-19 vaccine at the time of the Research Study
Selection. On May 12, 2020, the Company reported that “[i]n preclinical testing,
the Company’s lead vaccine candidates generated robust anti-SARS CoV-2
antibodies in all tested animals after both the first and second dose, with a clear
boosting effect after the second dose.” 163
161
Vaxart, Inc., Form 10-K (Mar. 19, 2020) at 32. The process to obtain FDA approval is
“both onerous and lengthy.” Mut. Pharm. Co., Inc. v. Bartlett, 570 U.S. 472, 476 (2013);
see also Compl. ¶ 48 (“Drug development is an expensive, risky process. Only a fraction
of drugs that have an Investigational New Drug Application approved by the FDA—which
allows the company to initiate Phase 1 trials—ever make it to market.”). It takes an average
of 12 years to reach market approval and requires millions, or hundreds of millions, in
funding. See Gail A. Van Norman, Drugs, Devices, and the FDA: Part 1: An Overview
of Approval Processes for Drugs, 1 JACC: BASIC TO TRANSLATIONAL SCI. 170, 170
(2016); see also id. (“A recent analysis suggests that the actual cost of taking a new drug
from concept to market as of 2014 is now above $1.3 billion”).
162
The FDA’s Drug Review Process: Ensuring Drugs Are Safe and Effective, U.S. Food &
Drug Administration (last updated Nov. 24, 2017),
https://www.fda.gov/drugs/information-consumers-and-patients-drugs/fdas-drug-review-
process-ensuring-drugs-are-safe-and-effective.
163
Vaxart, Inc., Current Report (Form 8-K) (May 12, 2020), Ex. 99.1.
41
The Company’s selection to participate in the non-human primate study did
not “impart a new and significant slant on information already discussed” in the
Proxy.164 The Complaint’s allegations as to the significance of this event are
conclusory assertions that are based upon a misreading of the June 26 press release,
conflating Vaxart’s invitation to participate in a non-human primate study with being
selected as one of the participants in vaccine development with the government. For
example, the Complaint alleges:
• “Selection to participate in OWS would mean that Vaxart is no

longer one of many clinical stage biopharmaceutical companies
enmeshed in the slow struggle to commercialize a drug, but instead
now has access to the U.S. government’s substantial resources, with
its COVID-19 vaccine candidate having a path to be put on a fast-
track regulatory timeline.” 165
• “Selection to participate in OWS dramatically increased the
likelihood that Vaxart’s COVID-19 vaccine candidate would be
commercialized.”166
• “This selection was a watershed moment for the Company . . . .” 167
• “[T]he Company knew that, following the imminent announcement
of its OWS participation, it would be able to raise equity capital at a
much greater valuation . . . .” 168
164
Household, 591 A.2d at 171.
165
Compl. ¶ 49.
166
Id. ¶ 135.
167
Id. ¶ 52.
168
Id. ¶ 71.
42
• “The Board, of course, knew that public disclosure of the
Company’s selection to participate in OWS would lead to Vaxart’s
stock price skyrocketing . . . .” 169
• “[T]he Vaxart Board and management kn[e]w that the OWS
announcement would cause its stock price to rise drastically . . . .”170
• “[The directors] were set to receive options that they knew would
become worth millions of dollars as soon as the OWS selection was
announced.” 171
• The Board should have delayed the annual meeting “so that the
stockholders could vote on the plan with full knowledge of the
inflationary effect the OWS selection would have on the value of the
Board’s option grants.” 172
• “As the Board knew, the OWS selection would dramatically
increase Vaxart’s stock price. Accordingly, the options to be
awarded under the 2020 Plan the stockholders were voting on were
significantly more valuable than stockholders could have
understood based on the information available.” 173
• “Because of their knowledge of the OWS selection, the Vaxart
Board knew these options were far more valuable than would be
apparent to any outside observer, like a compensation consultant, or
was known to the stockholders who voted to approve the 2020
Plan.” 174
There are no well-pleaded allegations that the Board “knew” on or before June
8, 2020 that disclosure of the invitation to participate in a non-human primate study
would put the Company on a fast-track to obtain regulatory approval for its oral
169
Id. ¶ 84.
170
Id. ¶¶ 86, 124.
171
Id. ¶ 14.
172
Id. ¶ 15.
173
Id. ¶ 96.
174
Id. ¶ 107.
43
COVID-19 vaccine, give the Company access to government funding for its vaccine,
cause the Company’s stock price to increase drastically, or cause the value of the
Director Defendants’ options to increase dramatically in value. Had Vaxart been
selected as one of the OWS finalists to receive government funding for vaccine
development, Plaintiffs might have a better claim, but that is not what happened.
The Complaint conflates the significance of the selection to participate in the
Research Study with being selected as one of the OWS finalists. The source of
Plaintiffs’ confusion is the June 26 press release, issued two-and-a-half weeks after
the Annual Meeting. As the Complaint alleges, Vaxart’s press release raised
concerns in the investment community and among regulators. In an article discussed
in the Complaint, The New York Times cited Vaxart as an example of “companies .
. . attracting government scrutiny for potentially using their associations with
Operation Warp Speed as marketing ploys.” 175 The article focused on the
Company’s June 26 press release, noting: “Vaxart’s vaccine candidate was included
in a trial on primates that a federal agency was organizing in conjunction with
Operation Warp Speed. But Vaxart is not among the companies selected to receive
significant financial support from Warp Speed to produce hundreds of millions of
175
NYT Article.
44
vaccine doses.”176 Indeed, the federal government went out of its way to knock
down any misconceptions about Vaxart’s involvement with OWS:
“The U.S. Department of Health and Human Services has entered into
funding agreements with certain vaccine manufacturers, and we are
negotiating with others. Neither is the case with Vaxart,” said Michael
R. Caputo, the department’s assistant secretary for public affairs.
“Vaxart’s vaccine candidate was selected to participate in preliminary
U.S. government studies to determine potential areas for possible
Operation Warp Speed partnership and support. At this time, those
studies are ongoing, and no determinations have been made.” 177
The Complaint contains nothing beyond conclusory allegations that Vaxart’s
OWS selection to participate in a preliminary non-human primate study, for which
the Company is not alleged to have received any funds, would have been material to
a stockholder voting on the Plan Amendment.
The allegations in the Complaint contrast sharply with the allegations of a
federal securities suit in the United States District Court for the Northern District of
California. In that case, the plaintiffs allege that Vaxart and its officers “deliberately
crafted a press release designed to make it seem as if the company had achieved
something significant—a trough of federal funding through Warp Speed—when in
fact it had accomplished nothing of the sort.” In re Vaxart, Inc. Sec. Litig., 2021 WL
6061518, at *7 (N.D. Cal. Dec. 22, 2021). The claims in that case allege not that the
176
Id.
177
Id.
45
Company’s selection to participate in the Research Study was material, but rather
that the Company’s press release announcing this fairly pedestrian event “created
the materially misleading impression that Vaxart stood at the precipice of pioneering
a successful coronavirus vaccine.” Id. at *4. 178
By contrast, Plaintiffs here have taken the opposite approach, alleging that
Vaxart’s invitation to participate in the Research Study was, in fact, material
information. The Complaint lacks non-conclusory allegations that the invitation to
participate in the Research Study, which was subject to further negotiation, was
information that was material to a stockholder voting to increase the number of
awards available under the Plan. There are no facts alleged to support the conclusory
allegation that on or before June 8, 2020, the Director Defendants had “full
knowledge of the inflationary effect the OWS selection would have on the value of
178
A similar press release was at issue in McDermid v. Inovio Pharmaceuticals, Inc., 520
F. Supp. 3d 652 (E.D. Pa. 2021). In that case, the plaintiffs asserted federal securities
claims concerning a different pharmaceutical company’s statements about its COVID-19
vaccine. Like Vaxart, the company at issue in that case (Inovio) issued a press release in
late June 2020 with a headline stating that the company’s vaccine had been “[s]elected for
the U.S. Government’s Operation Warp Speed.” Id. at 659. But the full press release
explained that the company had been chosen to participate in an OWS sponsored non-
human primate study. Id. at 659–60. The plaintiffs alleged the press release was materially
false and misleading. The court disagreed, observing the plaintiffs did not explain how or
why a reasonable investor, reading the entire press release, “would have thought Inovio
would receive government funding for its vaccine.” Id. at 669. In the California federal
securities action involving Vaxart, the court found McDermid unpersuasive, noting the
different context and circumstances surrounding the claims in that case as compared to
those presented in the complaint before the court. Vaxart, 2021 WL 6061518, at *6.
46
the Board’s option grants.”179 Nor are there facts to support the conclusion that on
June 8, 2020 the Board “knew that public disclosure” of the Company’s selection to
participate in the non-human primate study “would lead to Vaxart’s stock price
skyrocketing.”180
The Complaint acknowledges that stockholders were aware of Vaxart’s
publicly disclosed efforts to develop a COVID-19 vaccine, weeks, even months
before the Annual Meeting. 181 This included the April 2020 announcement that
Vaxart’s “COVID-19 vaccine candidates had produced promising results in
preclinical, nonhuman trials.” 182 In light of these disclosures, the Complaint fails to
allege facts to support a reasonable inference that an invitation to participate in a
non-human primate study would have significantly altered the total mix of
information available to Vaxart stockholders when deciding how to vote on the Plan
Amendment.183 Accordingly, Count II is dismissed.
179
Compl. ¶ 15.
180
Id. ¶ 84.
181
See id. ¶¶ 39, 41.
182
Id. ¶ 41; see Vaxart, Inc., Current Report (Form 8-K) (Apr. 29, 2020), Ex. 99.1
(announcing that Vaxart’s “lead vaccine candidates generated anti-SARS CoV-2
antibodies in all tested animals after the first dose”).
183
Although it is not necessary for this decision, the Complaint lacks well-pleaded
allegations to support a reasonable inference that any member of the Board, other than
Latour, was aware of the invitation to participate in the Research Study before the June 8,
2020 Board meeting. Given that Vaxart was in the process of “negotiating the relevant
documentation,” it is reasonable to infer that Latour, as the Company’s CEO, knew of the
47
C. The Unjust Enrichment Claims
Count III is a derivative claim against Floroiu, Latour, Davis, Finney, Yedid,
and VanLent for unjust enrichment. Plaintiffs maintain that the “Board members
were unjustly enriched when they granted themselves ‘spring-loaded’ options after
Research Study selection before the Annual Meeting. Vaxart Defs.’ Ex. 26 at 2. The
Complaint, however, fails to support the reasonable inference that Latour shared this
information with other Board members ahead of the Annual Meeting. “The only
conceivable inference,” Plaintiffs insist, “is that Latour was gleefully sharing the good
news with the Board immediately after he was informed.” Compl. ¶ 52. Even if the
agreement had not yet been finalized, Plaintiffs allege, Latour would have “surely kept his
fellow Board members apprised of the status of this make-or-break negotiation with the
government.” Id. ¶ 57. These allegations have no basis. For reasons already discussed,
the Complaint fails to support the inference that the invitation to participate in the non-
human primate study was a “make-or-break” development or that Latour would regard the
study as having any such implications. If the Research Study selection had the momentous
import that Plaintiffs allege, one would expect to see correspondence between Latour and
the other directors on the subject. Pursuant to its Section 220 demand, Plaintiffs had the
Company run relevant search terms—including “Operation Warp Speed,” “OWS,” and
“BARDA.” Vaxart Defs.’ Ex. 28. Plaintiffs, however, cite no such correspondence in the
Complaint. The allegation that the remaining directors must have been told about the
Research Study invitation prior to the June 8, 2020 Board meeting amounts to “surmise,
speculation, [and] conjecture.” In re Xura, Inc., S’holder Litig., 2018 WL 6498677, at *14
n.139 (Del. Ch. Dec. 10, 2018) (quoting In re Asbestos Litig., 155 A.3d 1284, 1284 n.2
(Del. 2017) (TABLE); see Pfeffer, 965 A.2d at 687 (“The assertion that the Viacom
Directors knew of the cash flow analysis because [the CEO] would have told [the Chairman
of the Board] could not be more conclusory”); In re Zimmer Biomet Holdings, Inc. Deriv.
Litig., 2021 WL 3779155, at *21 (Del. Ch. Aug. 25, 2021) (rejecting as unreasonable the
inference that two directors shared material non-public information with two shareholder
funds that then allegedly traded on that information). In their supplemental briefing,
Plaintiffs have introduced for the first time a fraud-on-the board theory against Latour.
“This was not alleged in the Complaint, so I do not consider it an appropriate cause of
action to be addressed here.” Galindo v. Stover, 2022 WL 226848, at *4 n.59 (Del. Ch.
Jan. 26, 2022); see also Cal. Pub. Empl. Ret. Sys. v. Coulter, 2002 WL 31888343, at *12
(Del. Ch. Dec. 18, 2002) (“Arguments in briefs do not serve to amend pleadings.”).
48
deceiving stockholders into approving the 2020 Plan at a time when they knew that
those options were worth far more than could be reasonably justified.” 184
Notably, the Complaint does not directly allege a claim for breach of fiduciary
duty against the directors for issuing awards to themselves. Count I alleged a breach
of fiduciary duty against the Director Defendants for approving the Warrant
Amendments, 185 and Count II alleged a breach of fiduciary duty against the Director
Defendants for failing to supplement the Proxy with information about the invitation
to participate in the OWS Research Study. 186 The only claim challenging any
compensation decision is Count III for unjust enrichment. 187
Plaintiffs’ decision to challenge the director compensation decisions solely
under an unjust enrichment theory places this case in an unusual context.
Stockholders challenging executive compensation decisions frequently challenge
both the board or compensation committee’s decision to grant the compensation as
184
Pls.’ Ans. Br. at 40. In their supplemental briefing, Plaintiffs have raised a different
theory. That theory posits that “Latour, Davis, Finney, Yedid, and Floroiu were enriched
because they received options covering shares that exceeded the limit in the unamended
2019 Plan.” Pls.’ Suppl. Ans. Br. at 18. This new theory fails because, as discussed above,
the stockholder vote on the Plan Amendment to increase the number of shares eligible for
issuance under the Plan was not uninformed.
185
Compl. ¶¶ 164–72.
186
Id. ¶¶ 173–77.
187
By contrast, the Galjour complaint, which is not the operative complaint, alleges the
Director Defendants breached their fiduciary duties “by issuing the spring-loaded equity
awards and approving the other self-interested equity arrangements complained of herein.”
Galjour Compl. ¶ 78.
49
a breach of fiduciary duty and separately that the recipient was unjustly enriched.
For example, in Calma v. Templeton, 2015 WL 1951930 (Del. Ch. Apr. 30, 2015),
Chancellor Bouchard denied a motion to dismiss to claims challenging director
compensation. The focus of the decision was the fiduciary duty claim. After having
determined that the plaintiffs had stated a claim for breach of fiduciary duty, the
Chancellor sustained the unjust enrichment claim rather summarily. Id. at *20
(“[B]ecause I concluded above that Count I states a claim for breach of fiduciary
duty, I also conclude that it is reasonably conceivable that Plaintiff could recover
under Count III [alleging unjust enrichment].”). Similarly, in Knight v. Miller, 2022
WL 1233370 (Del. Ch. Apr. 27, 2022), Vice Chancellor Glasscock denied a motion
to dismiss claims alleging members of the compensation committee breached their
fiduciary duties in awarding compensation to themselves and other directors.
Acknowledging that a parallel claim for unjust enrichment as to the recipients of
those awards was not strong, he denied the motion to dismiss it because the
complaint alleged that the committee “set the other awards in the same wrongful
manner” as it did in making awards to themselves. Id. at *13; see also SDF Funding
LLC v. Fry, 2022 WL 1511594, at *18 (Del. Ch. May 13, 2022) (denying a motion
to dismiss fiduciary duty and unjust enrichment claims challenging bonus awards
and stock grants because the adequately pleaded fiduciary duty claim operated as a
predicate for the unjust enrichment claims); Garfield v. Allen, 2022 WL 1641802, at
50
*53–54 (Del. Ch. May 24, 2022) (denying a motion to dismiss breach of contract,
breach of fiduciary duty, and unjust enrichment claims arising from the approval,
receipt, and failure to correct executive compensation payments, noting that “[a]ll of
the claims arise from a common nucleus of operative fact.”); Espinoza v.
Zuckerberg, 124 A.3d 47, 66–67 (Del. Ch. 2015) (holding that a duplicative unjust
enrichment claim logically survived summary judgment when its underlying claim
for breach of fiduciary duty survived); Pfeiffer v. Leedle, 2013 WL 5988416, at *10
(Del. Ch. Nov. 8, 2013) (declining to dismiss unjust enrichment claims where the
complaint adequately alleged breach of fiduciary duty claims challenging stock
options awarded to an executive); Weiss v. Swanson, 948 A.2d 433, 449–50 (Del.
Ch. 2008) (denying motion to dismiss fiduciary duty claims challenging spring-
loaded options and concluding it was also reasonably conceivable that recipients of
the spring-loaded options were unjustly enriched, even as to unexercised options);
Ryan v. Gifford, 918 A.2d 341, 347, 361 (Del. Ch. 2007) (denying motion to dismiss
fiduciary duty and unjust enrichment claims arising from the alleged approval and
acceptance of backdated options in violation of the company’s option plans); In re
Tyson Foods, Inc., 919 A.2d 563, 602–03 (Del. Ch. 2007) (finding that the fiduciary
duty allegations, even if only proven as to some of the defendants, may serve as a
basis for unjust enrichment claims as to others).
51
Unlike in the aforementioned cases, Plaintiffs have not asserted a separate
claim alleging a breach of fiduciary duty for the awarding of director and officer
compensation.
1. The Plaintiffs’ Claims
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 conscience.” Nemec v. Shrader, 991 A.2d 1120, 1130
(Del. 2010). “The elements of unjust enrichment are: (1) an enrichment, (2) an
impoverishment, (3) a relation between the enrichment and impoverishment, (4) the
absence of justification, and (5) the absence of a remedy provided by law.” 188 Id. at
1130. The “impoverishment” element does not “require that the plaintiff seeking a
restitutionary remedy suffer an actual financial loss, as distinguished from being
deprived of the benefit unjustifiably conferred upon the defendant.” Id. at 1130 n.37.
By their nature, compensation awards from a company to its directors
implicate the first three elements. The wrongdoing therefore turns on the fourth
element, an “absence of justification.” See Feuer v. Redstone, 2018 WL 1870074,
at *17 (Del. Ch. Apr. 19, 2018) (finding plaintiff adequately pleaded that ongoing
188
In a recent scholarly analysis of unjust enrichment, Vice Chancellor Laster highlights
how the final element of the claim as cited in Nemec and other cases appears to have been
the product of “jurisprudential missteps.” Garfield, 2022 WL 1641802, at *44. An
application of the fifth element is not necessary to resolve the pending motion.
52
compensation payments to an incapacitated executive “lacked justification”); Fry,
2022 WL 1511594, at *18 (declining to dismiss unjust enrichment claims based on
compensation decisions when “the absence of an arms-length negotiated transaction
and the allegation that Defendants were knowingly complicit in a breach of fiduciary
duties . . . support finding that justification was absent.”); see also Jacobs v. Meghji,
2020 WL 5951410, at *14 (Del. Ch. Oct. 8, 2020) (holding that to support a claim
of unjust enrichment, “there must be an absence of justification for the defendant's
benefit obtained through the challenged transaction” and “‘[t]hat requirement
usually entails some type of wrongdoing or mistake at the time of transfer.’”).
Plaintiffs allege that Floroiu, Latour, Davis, Finney, Yedid, and VanLent were
enriched without justification because they received stock options that were “spring-
loaded.”
Spring-loading refers to the practice of “issuing options just before a release
of positive information” with the knowledge that “the company’s stock is worth
more than its market trading price because the market is ignorant of information that
will affect the price.” Desimone v. Barrows, 924 A.2d 908, 943–44 (Del. Ch. 2007);
see also Securities & Exchange Commission, Staff Accounting Bulletin No. 120, 17
CFR Part 211 (Nov. 24, 2021), https://www.sec.gov/oca/staff-accounting-bulletin-
120 (noting that a “share-based payment award granted when a company is in
possession of material nonpublic information to which the market is likely to react
53
positively when the information is announced is sometimes referred to as being
‘spring-loaded.’”).
Specifically, Plaintiffs allege that Floroiu, Latour, Davis, Finney, Yedid, and
VanLent received options or other favorable compensation decisions as to their
options, “whose value they knew would be greatly inflated by the OWS
announcement.” 189 Thus, the claim turns on whether it is reasonably conceivable
under the well-pleaded allegations of the Complaint that at the time of these
compensation decisions the Board knew that the invitation to participate in the
Research Study was material information. In other words, did the Director
Defendants make the compensation decisions with knowledge of “material non-
public information soon to be released that would impact the company’s share
price.” Tyson Foods, 919 A.2d at 593.
An unjust enrichment claim may be rejected when the disputed enrichment is
insufficiently related to the wrongful conduct at issue in the case. See In re
Nanthealth, Inc. S’holder Litig., 2020 WL 211065, at *8 (Del. Ch. Jan. 14, 2020)
(“Here, the conduct underlying the fiduciary duty claim—allegedly making false and
misleading disclosures—is unrelated to the directors' receipt of compensation from
the Company. Thus, [the plaintiff] has failed to plead the necessary relationship
189
Compl. ¶ 179.
54
between the conduct at issue and the alleged harm to the Company to support a claim
for unjust enrichment.”); Bakotic v. Bako Pathology LP, 2018 WL 6601172, at *5
(Del. Super. Ct. Dec. 10, 2018) (“The compensation that has allegedly unjustly
enriched Plaintiffs was given to them as consideration under the Merger Agreement.
Plaintiffs’ alleged misconduct occurred well after the sale of the businesses, which
was governed by the Merger Agreement, and is unrelated to this sum of money.”).
2. Is Demand Excused?
The Plaintiffs’ unjust enrichment claims are derivative.190 To survive the
motion to dismiss, the Complaint must plead particularized facts to establish that
demand is futile. Patel v. Duncan, 2021 WL 4482157, at *17 (Del. Ch. Sept. 30,
2021); In re CBS Corp. S’holder Class Action & Deriv. Litig., 2021 WL 268779, at
*28 (Del. Ch. Jan. 27, 2021).
Section 141(a) of the Delaware General Corporation Law provides that a
corporation “shall be managed by or under the direction” of its board of directors. 8
Del. C. § 141(a). This managerial authority encompasses the ability to determine
whether to “initiate, or refrain from entering, litigation.” Zapata Corp. v.
190
“A claim for unjust enrichment can be personal, direct, or derivative, depending on the
facts alleged.” Bamford v. Penfold, L.P., 2020 WL 967942, at *32 n.25 (Del. Ch. Feb. 28,
2020) (citation omitted). Where the “allegations focus on self-dealing payments that [the
defendant] caused [the company] to make . . . the claim is exclusively derivative.” Id.
(citing El Paso Pipeline GP Co., L.L.C. v. Brinckerhoff, 152 A.3d 1248, 1260–65 (Del.
2016)).
55
Maldonado, 430 A.2d 779, 782 (Del. 1981). Through derivative litigation, a
stockholder may attempt to assert a claim on behalf of a corporation. To do so
without the board of director’s consent, the stockholder must demonstrate that “the
stockholder demanded that the directors pursue the corporate claim and they
wrongfully refused to do so,” or that “demand is excused because the directors are
incapable of making an impartial decision regarding the litigation.” United Food &
Commercial Workers Union v. Zuckerberg, 250 A.3d 862, 876 (Del. Ch. 2020),
aff’d, 262 A.3d 1034 (Del. 2021).
Plaintiffs have not made any demand on Vaxart’s Board to institute litigation
against the Director Defendants. Therefore, Court of Chancery Rule 23.1 requires
Plaintiff to “plead with particularity facts showing that a demand on the board would
have been futile.” In re Citigroup Inc. S’holder Deriv. Litig., 964 A.2d 106, 120
(Del. Ch. 2009) (citing Ct. Ch. R. 23.1(a)). “To determine whether a board of
directors could properly consider a demand, a court counts heads. If the board lacks
a majority of directors who could exercise independent and disinterested judgment
regarding a demand, then demand is futile.” Zuckerberg, 250 A.3d at 877 (internal
citations omitted). The standard for demand futility is “well balanced, requiring that
the plaintiff plead facts with particularity, but also requiring that this Court draw all
reasonable inferences in the plaintiff’s favor.” Marchand v. Barnhill, 212 A.3d 805,
56
818 (Del. 2019) (citation omitted). Under Zuckerberg, the court considers on a
director-by-director basis:
(i) whether the director received a material personal benefit from the
alleged misconduct that is the subject of the litigation demand,
(ii) whether the director would face a substantial likelihood of

liability on any of the claims that are the subject of the litigation
demand, and
(iii) whether the director lacks independence from someone who
received a material personal benefit from the alleged misconduct that is
the subject of the litigation demand or who would face a substantial
likelihood of liability on any of the claims that are the subject of the
litigation demand.
Zuckerberg, 250 A.3d at 890 (formatting).
At the time of the Complaint, the Board consisted of Finney, Davis, Yedid,
Floroiu, Latour, Boyd, Maher, and non-party Wilson (the “Demand Board”). Thus,
to establish demand futility, the Complaint must plead particularized allegations to
show that at least four of the members of the Demand Board could not consider a
demand. Plaintiffs concede that Wilson was capable of considering a demand. Boyd
and Maher did not receive any options and were not the beneficiaries of any of the
compensation decisions challenged in this action. Plaintiffs have tried to frame the
compensation claims and the previously dismissed Warrant Amendment claims as a
unitary transaction, rendering all of the directors, except Wilson, as interested and
unable to consider a demand. The court has already rejected that theory. In re
Vaxart, Inc. S’holder Litig., 2021 WL 5858696, at *19–20 (Del. Ch. Nov. 30, 2021).
57
Thus, Boyd and Maher were not interested in the compensation decisions and were
capable of considering a demand as to Count III. Therefore, to excuse demand,
Plaintiffs must allege that four of the remaining five directors could not consider a
demand. United Food & Commercial Workers Union & Participating Food Indus.
Emps. Tri-State Pension Fund v. Zuckerberg, 262 A.3d 1034, 1059 (Del. 2021)
(“demand is excused as futile” if “the answer to any of the questions is ‘yes’ for at
least half of the members of the demand board”) (emphasis added).
The unjust enrichment claim is grounded on the assertion that the Board
approved stock options or engaged in other director compensation decisions with
knowledge of the Company’s invitation to participate in the Research Study and that
they knew when making those decisions, that disclosure of the Research Study
invitation would cause the value of their equity-based compensation to dramatically
increase in value.
The demand futility analysis “proceeds director-by-director and transaction-
by-transaction.” See Khanna v. McMinn, 2006 WL 1388744, at *14 (Del. Ch. May
9, 2006). There are essentially four separate compensation decisions encompassed
within the unjust enrichment claim: (1) the March Awards; (2) the April Awards;
(3) the June 8, 2020 compensation decisions; and (4) the June 13, 2020
compensation decisions. Plaintiffs argue that in considering demand futility all of
these decisions should be considered one decision, based on an alleged scheme.
58
a. The March and April Awards
The March Awards and the April Awards—even if considered together—
affected only two directors. Latour received an option to purchase 900,000 shares
and Floroiu received an option to purchase 54,720 shares. None of the other
directors is alleged to have received any of the March Awards or April Awards.
Six of the eight members of the Demand Board received no personal benefit
from the March Awards and April Awards. The are no well-pleaded allegations that
these six directors face a substantial likelihood of liability as to those grants. Nor
are there any particularized allegations creating a reasonable inference that any of
Davis, Finney, Yedid, Boyd, Maher, or Wilson lacks independence from Floroiu or
Latour.
Plaintiffs argue demand is excused because all of the challenged
compensation decisions are one interconnected decision arising from the Board’s
failure to disclose the Company’s selection to participate in the Research Study
before the Annual Meeting. The March Awards and the April Awards, however,
predated the public announcement of OWS’s creation. Plaintiffs seek to avoid this
fact with the argument that the March Awards and the April awards were not granted
until June 8, 2020 following the stockholder vote on the Plan Amendment. That
assertion is incorrect. First, the Plan itself states that a grant of any award “will be
deemed completed as of the date of such corporate action, . . . regardless of when
59
the . . . Award is . . . actually received or accepted by, the Participant.” 191 Second,
as a matter of well-established Delaware law, as “to claims challenging stock options
and other equity-based awards, this court has held that the relevant date is the grant
date, not the time when the participant receives the shares.” Garfield, 2022 WL
1641802, at *13. Demand is not excused as to the March Awards and the April
Awards. In addition, the Complaint fails to state a claim for unjust enrichment as to
those awards because stockholders were not asked to vote on them and because, as
discussed in the analysis of Count II, the stockholder vote on the Plan Amendment
was not uninformed. See Knight, 2022 WL 1233370, at *7 (dismissing duty of
disclosure claim challenging equity awards where the proxy statement did not
request that stockholders vote on or ratify those awards).192
191
Plan § 8(b).
192
Defendants argue that lead plaintiffs, Cynthia Jaquith and Paul Bergeron, lack standing
to challenge these awards because they each purchased their Vaxart stock after they were
granted. See Vaxart Defs.’ Ex. 30 (showing that Bergeron and Jaquith purchased Vaxart
stock on April 29, 2020 and April 27, 2020, respectively); see 8 Del. C. § 327 (“In any
derivative suit instituted by a stockholder of a corporation, it shall be averred in the
complaint that the plaintiff was a stockholder of the corporation at the time of the
transaction of which such stockholder complains or that such stockholder's stock thereafter
devolved upon such stockholder by operation of law.”) (emphasis added). Defendants also
argue that plaintiff Galjour forfeited his ability to allege demand futility because he later
served a derivative demand on October 24, 2021. Vaxart Defs.’ Ex. 37, 38. Because the
court dismisses the unjust enrichment claim as to those awards on the merits and for failure
to plead demand futility, the court does not reach the standing argument.
60
b. The June 8, 2020 Compensation Decisions
Following stockholder approval of the Plan Amendment on June 8, 2020, the
Board awarded 65,000 stock options to each of Yedid, Davis, and Finney. In
addition to these outside-director awards, the Board also approved the accelerated
vesting of VanLent’s remaining options and the extension of their exercise period.193
The Complaint does not allege anything about VanLent’s options—i.e., the exercise
price, total number, or expiration dates. The Complaint also inaccurately
characterizes the Board’s action on June 8, 2020 as to VanLent. The Complaint
alleges the Board “determined to reward VanLent . . . with new options.”194 The
Complaint cites to the June 8, 2020 Compensation Committee and Board minutes
for this proposition. Both of those documents, however, state that the committee
recommended and the Board approved accelerated vesting and extension of the
expiration date to June 8, 2022.195 Furthermore, the Compensation Committee’s
presentation to the Board explained that the departure package proposed and
ultimately approved for VanLent mirrored the acceleration and vesting terms
193
194
Compl. ¶ 91 (emphasis added).
195
The Plan authorizes the Board to amend the terms of any award. Plan § 2(b).
61
provided to the last two directors who had stepped down from the Company’s
Board. 196
Five of the eight members of the Demand Board received no benefit from the
June 8, 2020 compensation decisions of the Board. Only three members of the
Demand Board received option grants on June 8, 2020.
c. The June 13, 2020 Compensation Decisions
On June 14, 2020, Latour resigned from the Board. According to a June 13,
2020 unanimous written consent of the Board (expressly referenced in the
Complaint), the Company reached an agreement to terminate Latour as an officer
but retain him as a member of the Board (the “June 13 Consent”).197 In the
separation agreement approved by the Board, Latour’s existing options would
continue to vest for so long as he remained a director. The Complaint characterizes
this as “gift[ing] Latour spring-loaded options.” 198 The Complaint does not allege
the number, terms, or exercise prices of the options affected by the separation
agreement, but presumably it included all of the 900,000 options granted to Latour
in the March Awards.
Vaxart Defs.’ Ex. 25 at VAXART000012; see also Vaxart Defs.’ Ex. 21 (Latour and
196
Davis looking to past practice to determine the appropriate package to be offered to

VanLent as a departing director).
197
Compl. ¶¶ 101–02; Vaxart Defs.’ Ex. 27.
198
Compl. ¶ 102.
62
The June 13 Consent also approved an award to Floroiu of 845,280 time-based
options and 900,000 performance-based options in connection with his selection as
Latour’s replacement as CEO. The award was effective June 15, 2020. The exercise
price of the options was the closing stock price on the date of grant, which was $2.46.
As noted earlier, one-third of the performance-based options would vest if the
Company’s closing stock price remained above $5 per share for ten consecutive
trading days before November 30, 2020. Each of the remaining two thirds would
similarly vest if the stock price closed above $7.50 and $10 per share, respectively,
during the same time period. As alleged in the Complaint, all of the performance-
based options vested in late July 2020.
Only two of the eight members of the Demand Board received any financial
benefit from the June 13, 2020 compensation decisions. As with the March Awards
and the April Awards, there are no particularized allegations creating a reasonable
inference that any of Davis, Finney, Yedid, Boyd, Maher, or Wilson lacked
independence from Floroiu or Latour.
d. The Collective Action Argument
Plaintiffs do not allege or argue that, if the challenged compensation decisions
are viewed separately, demand is excused. Instead, Plaintiffs argue that the
compensation decisions should be viewed as one transaction for purposes of the
63
demand analysis.199 Plaintiffs contend that the Delaware Supreme Court’s decision
in In re Investors Bancorp, Inc. Stockholder Litig., 177 A.3d 1208 (Del. 2017), as
revised (Dec. 19, 2017) compels that result.
In Investors Bancorp, stockholders asserted claims challenging equity awards
to directors and officers alleged to be excessive and far beyond that of peer
companies. The board issued the awards pursuant to an equity incentive plan giving
the board discretion to issue awards. In an opinion reversing this court’s dismissal
of the complaint, the Delaware Supreme Court held that stockholder approval of the
plan did not justify a ratification defense because the stockholders did not ratify the
specific awards that were being challenged. The Court then addressed the question
of whether demand was excused as to awards made to two executive directors. The
outside directors argued that they were not disabled for considering a demand as to
those awards because the plaintiffs had not demonstrated a quid pro quo between
the executive director awards and the outside director awards. The Court disagreed,
explaining that alleging a quid pro quo was not necessary to excuse demand.
“Although showing a quid pro quo might be one way of proving interestedness or
199
The Plaintiffs actually contend that all of the challenged actions in this case should be
viewed collectively from a demand perspective, not only the June 2020 compensation
decisions, but also the decision to amend the Warrant Agreements and the March Awards
and the April Awards. The court already rejected that argument as to the Warrant
Amendments. See In re Vaxart, Inc. Stockholder Litig., 2021 WL 5858696, at *19 (Del.
Ch. Nov. 30, 2021).
64
lack of independence, it is not a requirement. Rather, the focus is on the acts being
challenged and the relationship between those acts and the directors who approved
them.” Id. at 1225. In that case, the Investors Bancorp directors held a series of
nearly contemporaneous meetings to consider extraordinary awards to directors and
officers immediately after stockholders had approved a new equity incentive plan.
In fact, the awards were all granted on the same day. Id. at 1215 (noting that the
board approved the incentive stock and option grants on June 23, 2015). In addition,
the nature of the compensation decisions at issue all involved extraordinary grants
of options. Based on those circumstances, the Court concluded that it would be
“implausible” for non-employee directors to independently consider a demand that
would call into question the grants they made to themselves. Id. at 1226.
The circumstances of Investors Bancorp do not neatly fit the facts of this case.
The Vaxart Board’s compensation decisions occurred on different days, and not all
of them involved direct awards of stock or options. The June 8, 2020 option awards
to Finney, Davis, and Yedid were annual outside-director awards and their timing
was not unusual. The decision that same day to accelerate and extend by two years
the expiration of VanLent’s options is not unusually suspicious from a timing
standpoint. Indeed, Plaintiffs do not challenge those decisions for any reason other
than the Company’s failure to disclose the invitation to participate in the Research
Study before making the grants. The two compensation decisions that occurred on
65
June 13, 2020 were tied to a change in the CEO, and one of them did not involve an
award of equity compensation. Those distinctions support Defendants’ argument
that the compensation decisions at issue here should not be viewed as a unitary act
for purposes of assessing demand futility.
On the other hand, the sole basis for Plaintiffs’ unjust enrichment claim is that
the Board made these decisions knowing that the beneficiaries would soon
handsomely profit once the invitation to participate in the Research Study was
disclosed. Viewed in that light, four of the eight members of the Demand Board
(Yedid, Davis, Finney, and Floroiu) would be required to consider a demand that
would “call into question the grants they made to themselves” based on their alleged
knowledge of the Research Study invitation and its significance at the time of the
grants. Investors Bancorp, 177 A.3d at 1226. Given the “relationship between [the]
acts [challenged] and the directors who approved them,” the court considers demand
as to the June 2020 compensation decisions as a single transaction, for which a
majority of the Demand Board is not disinterested. Id. at 1225.
“Materiality is a case-specific endeavor.” Kihm v. Mott, 2021 WL 3883875,
at *22 (Del. Ch. Aug. 31, 2021), aff'd, 2022 WL 1054970 (Del. Apr. 8, 2022).
“Materiality is intrinsically a contextual concept that requires consideration of the
nature of the supposedly material information that was not public knowledge and of
the other information that was known to the market.” In re Oracle Corp., 867 A.2d
66
904, 934 (Del. Ch. 2004), aff’d sub nom. In re Oracle Corp. Deriv. Litig., 872 A.2d
960 (Del. 2005); see also Galindo v. Stover, 2022 WL 226848, at *7 (Del. Ch. Jan.
26, 2022) (“Delaware cases have further recognized that materiality is, by its nature,
a contextual and fact-specific concept, requiring careful consideration of the
allegedly material nonpublic information in conjunction with the public knowledge
of the market.”).
The unjust enrichment claim is premised solely on the allegation that the
directors made the June compensation decisions with knowledge that the invitation
to participate in the Research Study was information that, once in the market, would
cause the stock price to increase and, in turn, make their options more valuable.
Therefore, according to Plaintiffs, the Board should have deferred their
compensation decisions until after announcing the invitation to participate in the
Research Study.
The operative inquiry for the court is determining when the Board learned of
the allegedly material information “and understood its significance to [the
company’s] financial performance.” In re TrueCar, Inc. S’holder Deriv. Litig., 2020
WL 5816761, at *14 (Del. Ch. Sept. 30, 2020). The well-pleaded allegations of the
Complaint support a reasonable inference that at the time the June 2020
compensation decisions were made, the Company had been invited to participate in
a non-human, primate study supported by OWS. The terms were still being
67
negotiated, no funds were attached, and the invitation did not offer fast-tracking of
Vaxart’s oral COVID-19 vaccine. The Company had already conducted and
reported on animal studies. None of the Complaint’s well-pleaded allegations
support a reasonable inference that the directors understood at the time they made
the June 2020 compensation decisions that the invitation to participate in the
Research Study would be significant to the Company’s financial performance.
Plaintiffs point to the jump in Vaxart’s stock price after the June 26, 2020
announcement as evidence of materiality, but they fail to substantiate that assertion
with any well-pleaded facts. As in Desimone, Vaxart’s stock price was volatile, a
fact that the Company itself had acknowledged.200 The increase in Vaxart’s stock
price in late June 2020 followed three consecutive days of press releases, including
the inclusion of Vaxart’s stock on the Russell 3000 Index. Plaintiffs acknowledge
that “the Company’s stock price would potentially rise upon being listed on the
Russell 3000.”201 But just days after the June 26 press release, the stock closed near
pre-announcement levels. The Department of Health and Human Services also went
out of its way in July 2020 to knock down any misconception that Vaxart was in line
200
See Vaxart, Inc., Form 10-K (Feb. 6, 2019) at 42 (noting that the Company’s stock price
was “expected to be volatile,” had been “subject to significant fluctuations,” and that
market prices for “securities of early-stage pharmaceutical, biotechnology and other life
sciences companies have historically been particularly volatile.”); Vaxart, Inc., Form 10-
K (Mar. 19, 2020) at 42 (same).
201
Compl. ¶ 151.
68
to receive government funding for its vaccine. As the Court in the federal securities
action acknowledged, the focus of any wrongdoing on the part of Vaxart or its
officers and directors is in how they portrayed the Company’s participation in the
Research Study, not the invitation itself. Vaxart, 2021 WL 6061518, at *5-6.
As with the claim challenging the vote on the Plan Amendment, Plaintiffs’
assertion that the invitation to participate in the Research Study was material
information conflates that event with being selected as one of the finalists to receive
government funding to develop and produce a COVID-19 vaccine. There are no
well-pleaded allegations in the Complaint creating a reasonable inference that an
invitation to participate in the Research Study, which was subject to further
negotiation, was material non-public information on June 8, 2020, when the Board
approved the annual director grants to Yedid, Davis, and Finney and accelerated and
extended the expiration dates of VanLent’s options. See Investors Bancorp, 177
A.3d at 1223 (indicating that equitable review of director self-compensation
decisions focuses on the directors’ conduct “when making the awards”); see also
Weiss, 948 A.2d at 452–53 (sustaining fiduciary duty and unjust enrichment claims
where the board had a policy of issuing spring-loaded and bullet-dodging options
where the directors knew the contents of the yet-to-be-issued quarterly earnings
release). Therefore, the Complaint fails to allege that the Board knowingly granted
spring-loaded options to Yedid, Davis, and Finney on June 8, 2020. The Complaint
69
also fails to allege that the Board accelerated and extended the expiration dates of
VanLent’s options on June 8, 2020 knowing that the invitation to participate in the
Research Study was material non-public information.
The invitation to participate in the Research Study is nothing close to the
allegedly undisclosed material information that resulted in denial of motions to
dismiss in other compensation cases. For example, in Knight, stockholders alleged
directors granted equity awards to the board of a healthcare company at a strike price
set on the same day the company’s stock had hit its lowest price during the pandemic,
and at a time when the chairman and controlling stockholder “‘knew or had reason
to know of the time and extent of federal grants,’ including relief that [the company]
might reasonably expect to receive.” 2022 WL 1233370 at *10. In Howland v.
Kumar, the court denied a motion to dismiss claims challenging the repricing of
options where the board knew that the federal government had approved one of its
patents, and provided the expected issuance date, but did not announce the patent
decision until after the repricing. 2019 WL 2479738, at *1, *6. Notably, the court
dismissed claims as to one director who was not alleged to have known of the patent
issuance at the time of the repricing. Id. at *5. In Weiss, the defendant directors
were given early access to the company’s quarterly earnings releases, containing
information that materially affected the company’s stock price, and the plaintiff
alleged that the directors repeatedly used that information to time their own option
70
awards under the company’s equity incentive plan. 948 A.2d at 439. In Tyson, the
plaintiff alleged that the compensation committee would award options to key
employees days before the company would issue press releases that were very likely
to drive stock prices higher. 919 A.2d at 576. Unlike in Weiss and Tyson, Plaintiffs
here do not allege an extended practice of awarding spring-loaded, bullet-dodging,
or back-dated options.202
* * *
The challenge to the compensation decisions made in connection with the
CEO transition also fails to state a claim. Those decisions are reflected in the June
13, 2020 unanimous written consent of the directors. As to Latour, the Plaintiffs do
not articulate how the decision to permit his options to continue to vest involved
spring-loading, at least not in the classic sense of the term. Latour’s most recent
202
At the time the Board met on June 8, 2020 to consider the awards to Yedid, Davis, and
Finney, the Compensation Committee had already recommended those annual outside-
director grants based on an analysis by its compensation consultant. The number of options
proposed for each outside director was based on a percentage of the total number of
outstanding shares. The Complaint does not challenge the number of options awarded to
these directors. The Plan provides that the maximum amount of compensation to any
outside director in a calendar year cannot exceed $600,000. Plan § 3(d). Plaintiffs do not
allege the compensation paid to Yedid, Davis, or Finney in 2020, including the June 8,
2020 awards exceeded that amount. Defendants have not relied on this provision in support
of their motion to dismiss. The court in 3COM held that discretionary awards within
specific ceilings based upon specific categories of service would be subject to the business
judgment standard of review. 1999 WL 1009210, at *2–3. The Delaware Supreme Court’s
decision in Investors Bancorp, however, suggests that even grants within such limitations
cannot escape judicial review “when a breach of fiduciary duty claim has been properly
alleged.” Investors Bancorp, 177 A.3d at 1222.
71
option award occurred in March 2020. The June 2020 decision did not involve a
grant of new options or change in the exercise price. Instead, the Board allowed his
existing options to continue vesting as long as he remained on the Board as part of
the termination agreement between Latour and the Company, which was permitted
under the terms of the Plan. The second decision awarded time-based and
performance-based options to Floriou as part of his compensation package as the
new CEO. As with the June 8, 2020 compensation decisions, there are no well-
pleaded allegations that the Board knowingly spring-loaded Floriou’s options based
on the invitation to participate in the Research Study. Nor does the Complaint allege
that the Board amended Latour’s options knowing that the invitation to participate
in the Research Study was material information.
Although materiality is generally considered an issue of fact, dismissal here
is appropriate because it is “so obvious[] . . . that reasonable minds cannot differ on
the question” of whether the invitation to participate in the Research Study was
material at the time of the June 2020 compensation decisions. In re Tele-Commc’ns,
Inc. S’holders Litig., 2005 WL 3642727, at *3 (Del. Ch. Dec. 21, 2005). It was not.
The terms were still being negotiated. There are no well-pleaded allegations that
selection for participation in the Research Study was a watershed moment as
Plaintiffs assert. Plaintiffs must accept the “crucial reality that Vaxart had been
72
chosen only to participate in a primate study and not to receive a vast influx of
federal funds.”203
Count III is dismissed for failure to state a claim as to all of the challenged
compensation decisions and for failure to plead demand futility as to the March
Awards and the April Awards.204
IV. CONCLUSION
The motions to dismiss Count II and Count III are granted in their entirety.
This conclusion is based on the allegations of the Complaint and how the Plaintiffs
have framed their claims. The Plaintiffs have not alleged that the Director
Defendants breached their fiduciary duties or were unjustly enriched based on a plan
to exaggerate the significance of the Company’s selection to participate in the
Research Study and then to capitalize on the selling or vesting of options at inflated
market prices. That is not the Plaintiffs’ theory. The Plaintiffs chose to ride with
the claims asserted in the operative complaint instead of filing a consolidated
complaint. The claims, as pleaded in the Complaint, do not state a claim that the
stockholder vote on the Plan Amendment was uninformed or the product of a breach
203
Vaxart, 2021 WL 6061518, at *5.
204
Therefore, the court need not reach the merits of the Director Defendants’ other defenses
to this claim.
73
of the duty of disclosure or that Latour, Floroiu, Davis, Finney, Yedid, or VanLent
was unjustly enriched.
IT IS SO ORDERED.
74

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In Re Vaxart, Inc., C.A. No. 2020-0767 - PAF - Supplemental Op. Final (Claims Dismissed in Entirety)

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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN RE VAXART, INC. ) CONSOLIDATED

Date Submitted: February 4, 2022

Brock E. Czeschin, Andrew L. Milam, RICHARDS LAYTON & FINGER, P.A.,

Matthew F. Davis, Abraham C. Schneider, POTTER ANDERSON & CORROON

FIORAVANTI, Vice Chancellor

government formed Operation Warp Speed (“OWS”) a national program to

accelerate the development, manufacturing, and distribution of COVID-19 vaccines,

On June 26, 2020, Vaxart, Inc. (“Vaxart” or the “Company”), a small

biotechnology company working to develop an oral COVID-19 vaccine, issued a

funding to develop, manufacture, and potentially distribute its COVID-19 vaccine.

participate in a non-human, primate, research study funded under the umbrella of

resources and initiatives encompassed by OWS.

to stockholders in advance of the June 8, 2020 annual meeting of Vaxart

stockholders. Specifically, the plaintiffs allege that Vaxart’s selection to participate

the directors to issue themselves “spring-loaded” stock options.

concerning compensation decisions made before and after stockholders approved

reasonable inference that the Company’s selection to participate in a single, non-

or otherwise subject to judicial notice.2

Nominal defendant Vaxart is a Delaware corporation based in San Francisco,

California.5 The Company is a clinical stage biotechnology company focused on

and publicly traded Aviragen Therapeutics, Inc. (“Aviragen”). 7 As a result of the

the Merger as directors of the post-Merger parent company (“Vaxart”), including

Nasdaq stock market. 10

is a Managing Director of defendant Armistice Capital LLC (“Armistice”), a hedge

Defendant Wouter Latour is the Chairman of the Vaxart Board. 15 Latour

continued to serve as a director of Vaxart since then. 16 He also continued to serve

2020, the Board appointed him to replace Latour as CEO.19

“Compensation Committee”) “at all times relevant hereto.” 23

nominated for reelection at the 2020 annual meeting of Vaxart stockholders.26

together referred to in this Opinion as the “Director Defendants.”

B. Vaxart’s Vaccine Development Efforts

Vaxart announced it was developing a vaccine for COVID-19. 30 Vaxart’s stock

the successful development, regulatory approval and commercialization of our

coronavirus and norovirus tablet vaccine.” 32 In the ensuing months, Vaxart

disclosed its incremental progress in developing its COVID-19 oral vaccine.33

C. The 2019 Equity Incentive Plan

used equity awards to incentivize and compensate employees, directors, and

contractors. In April 2019, Vaxart’s stockholders approved an equity incentive plan

stock appreciation rights (“SARs”)—to employees, directors and consultants. 35

Subject to exceptions not pertinent here, “the aggregate number of shares of

1,600,000 shares” (the “Share Reserve”). 36 In addition, the maximum number of

value of the stock awards for financial reporting purposes.”37

The Plan provides that it is to be administered by the Board, which may

delegate administrative authority to a Board committee. 38 The Board “delegated

concurrent authority to administer the . . . Plan to [the] Compensation Committee.39

In practice, the Compensation Committee recommended award grants to the Board,

relevant times in this case consisted of Maher and Davis.41

options covering a total of 2,610,000 shares—including 900,000 shares to CEO

or April Awards could be exercised, however, because the number of shares

Reserve. Therefore, those option awards were only exercisable if Vaxart

stockholders approved the Plan Amendment at the upcoming annual meeting of

“Annual Meeting”) and planned to hold a meeting of the Board immediately

In determining the number of additional shares to reserve for issuance

exercisable only if stockholders approved the Plan Amendment. 56

D. Operation Warp Speed

partnership to facilitate the development, manufacturing, and distribution of

manufacturing, and distribution of COVID-19 vaccines, therapeutics, and

diagnostics (medical countermeasures).”58 OWS planned to select a small number