Sarissa Capital Domestic Fund L.P. v. Innoviva, Inc.

During a board meeting on April 19, 2017, the board of directors of Innoviva, Inc. (defendant) appointed James Tyree, the then-vice chairman of the board, as the lead negotiator and exclusive communications channel regarding a potential settlement agreement with Sarissa Capital Domestic Fund L.P. (Sarissa) (plaintiff). Tyree accepted the appointment, which authorized him to contact Alexander Denner, Sarissa’s chief investment officer, to offer settlement terms that provided for no standstill, and in which Innoviva would expand its board from seven to nine members, including two Sarissa appointees, and in which Sarissa would be required to include a conciliatory quote in a jointly issued press release. Tyree contacted Denner and conveyed these terms. At the time that the board authorized Tyree to offer these terms, the board expected that at least two of Sarissa’s nominees to the then-seven-member board would be imminently approved by shareholder vote, thereby replacing two of Innoviva’s existing directors. The board also expected that once Sarissa’s nominees were appointed to the then-seven-member board, Sarissa would have little incentive to settle the proxy contest. Upon receiving the settlement terms from Tyree, Denner believed that Tyree spoke on behalf of Innoviva and that Tyree was authorized to enter into settlement terms on Innoviva’s behalf. Sarissa, through Denner, agreed to the terms conveyed by Tyree. Subsequently, Innoviva argued that the settlement terms were not binding. Sarissa filed suit in the Delaware Court of Chancery to enforce the terms of the settlement.