Item 3. Legal Proceedings
ITEM 3.
Legal Proceedings
From time to time, we become involved in litigation and arbitrations in the ordinary course of business. Legal fees and other costs associated with such actions are expensed
as incurred. In addition, we assess the need to record a liability for litigation and contingencies. We reserve for costs relating to these matters when a loss is probable, and the amount can be reasonably estimated.
Dhesh Govender v. Eterna Therapeutics LLC, et al., Index No. 650847/2021 (N.Y. Sup. Ct. N.Y. Cty. 2021)
On or about February 5, 2021, Dhesh Govender, a former short-term consultant of Eterna LLC, filed a complaint against Eterna LLC and certain individuals that plaintiff
alleged were directors of Eterna LLC. Plaintiff alleged that Eterna LLC and certain of its officers and directors (“Govender defendants”) engaged in unlawful and discriminatory conduct based on race, national origin and hostile work environment.
Plaintiff also asserted various breach of contract, fraud and quantum meruit claims based on an alleged oral agreement pursuant to which he alleged Eterna LLC agreed to hire him as an executive once the Merger was completed. On December 15, 2022,
the parties executed a Confidential Settlement Agreement and Release of All Claims. On January 11, 2023, the parties filed a Stipulation to Discontinue in the Court action. Also on January 11, 2023, Govender voluntarily dismissed the arbitration.
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John Westman v. Novellus, Inc., Christopher Rohde, and Matthew Angel, Civil Action No. 2181CV01949 (Middlesex County (Massachusetts) Superior Court)
On or about September 7, 2021, John Westman, a former employee of Novellus, Inc. filed a Complaint in Middlesex County (Massachusetts) Superior Court against Novellus, Inc. and
Novellus, Inc.’s founders and former executives, Dr. Christopher Rohde and Dr. Matthew Angel. The case includes allegations that Novellus, Inc. violated the Massachusetts Wage Act (“Wage Act”). Eterna acquired Novellus, Inc. on July 16, 2021.
Mr. Westman’s claims relate to alleged conduct that took place before Eterna acquired Novellus, Inc. Westman agreed to dismiss the lawsuit and proceed with his claims in arbitration. Following mediation, the parties settled this dispute in
December 2022.
The aggregate settlement amount payable by the Company for the two matters discussed above is approximately $0.5 million.
Novellus, Inc. v. Sowyrda et al., C.A. No. 2184CV02436-BLS2
On October 25, 2021 Novellus, Inc. filed a complaint in the Superior Court of Massachusetts, Suffolk County, against former Novellus, Inc. employees Paul Sowyrda and John Westman
and certain other former investors in Novellus LLC (Novellus, Inc.’s former parent company prior to our acquisition of Novellus, Inc.), alleging breach of fiduciary duty, breach of contract and civil conspiracy. Eterna acquired Novellus, Inc. on
July 16, 2021. On May 27, 2022 Novellus, Inc. amended the complaint to withdraw all claims against all defendants except Paul Sowyrda and John Westman. On July 1, 2022, Westman filed a motion to compel arbitration or in the alternative, to stay
the litigation pending the disposition of certain litigation in the Court of Chancery for the State of Delaware filed by Mr. Sowyrda against Novellus LLC, Dr. Christopher Rohde, Dr. Matthew Angel, Leonard Mazur and Factor Bioscience, Inc.
captioned Zelickson et al., v. Angel et al., C.A. 2021-1014-JRS and by Westman against Novellus LLC captioned Westman v. Novellus LLC , C.A. No. 2021-0882-NAC (the
“Delaware Actions”). On July 1, 2022, Sowyrda answered the complaint and asserted counterclaims against Novellus, Inc, and third-party defendants Dr. Matthew Angel and Dr. Christopher Rohde alleging violations of the Massachusetts Wage Act,
Massachusetts Minimum Fair Wage Law, the Fair Labor Standards Act, breach of contract, unjust enrichment and quantum meruit. Sowyrda also joined in Westman’s motion to stay the case pending the Delaware Actions. Novellus, Inc.’s claims and Mr.
Sowyrda’s counterclaims relate to alleged conduct that took place before Eterna acquired Novellus, Inc.
On November 15, 2022, prior to a decision on Westman’s and Sowyrda’s motion to compel or stay, the Parties agreed to voluntarily dismiss and
consolidate the Delaware Actions with this action. On December 15, 2022, Sowyrda filed an Amended Answer to the Amended Complaint, asserted affirmative defenses and filed Amended Counterclaims against Dr. Angel, Dr. Rohde, Novellus LLC,
Novellus Inc., Factor Bioscience Inc., and Eterna Therapeutics Inc. (“Counterclaim Defendants”) alleging against various Counterclaim Defendants breach of contract, breaches of the implied duty of good faith and fair dealing, breaches of
fiduciary duty, breaches of the operating agreement, aiding and abetting breaches of fiduciary duty, tortious interference with contract, equitable accounting, violations of the Massachusetts Wage Act, Massachusetts Minimum Fair Wage Law, the
Fair Labor Standards Act, unjust enrichment, and quantum meruit. Also on December 15, 2022, Westman filed an answer to the Amended Complaint and asserted similar counterclaims against the same Counterclaim Defendants. Westman and Sowyrda each
asserted claims for indemnification and/or advancement against Novellus, Inc. On January 11, 2023, Westman and Sowyrda served a joint motion to enforce their advancement and/or indemnification rights against Novellus Inc. Novellus Inc.
vigorously opposes this motion and served its opposition on January 27, 2023. On February 8, 2023, Westman and Sowyrda served a reply in support of their motion to enforce indemnification/advancement rights, and submitted the motion to the
Court. Novellus Inc. answered Westman and Sowyrda’s counterclaims on January 27, 2023, denying liability. The remaining Counterclaim Defendants served a motion to dismiss most of the remaining counterclaims on January 27, 2023. Sowyrda’s and
Westman’s oppositions to the motion to dismiss were served on March 3, 2023, and Counterclaim Defendants’ reply is due March 24, 2023, at which point the motion to dismiss will be fully briefed. The Court announced that it would hold oral
argument on April 5, 2023 on (a) the Counterclaim Defendants’ motion to dismiss, and (b) Sowyrda’s and Westman’s motion to enforce. The parties attended an initial status and scheduling conference with the Court on February 7, 2023. The
Court deferred entering a case scheduling until after the April 5 hearing.
ITEM 4.
Mine Safety Disclosures
Not Applicable.
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PART II