We secured a ruling that LG invalidly removed our clients from the board of directors of Alphonso 

Davis Polk served as lead trial counsel for certain founders, minority stockholders and former employees of Alphonso, Inc., a technology company that specializes in advertising technology for smart TVs, in an expedited litigation contesting the removal of certain of our clients from Alphonso’s board of directors at the direction of Alphonso’s controlling shareholder, an affiliate of LG Electronics, Inc. After a two-day trial in September 2023 and oral argument in early December 2023, Vice Chancellor Nathan Cook of the Delaware Court of Chancery issued a post-trial decision on January 3, 2024, holding that our clients’ removal from the Alphonso board was invalid and that certain of our clients retain a continuing right to appoint directors to the Alphonso board.

Our clients had rights under a stockholders’ agreement to appoint directors to Alphonso’s board. In late December 2022, the LG-affiliated directors on Alphonso’s board, at LG’s direction, effected a scheme in which they terminated our clients from their employment at Alphonso for the purpose of enabling LG to eliminate our clients’ rights to appoint directors to Alphonso’s board and eventually terminate the stockholders’ agreement entirely. By terminating the stockholders’ agreement, LG could avoid its obligations to provide liquidity to minority stockholders of Alphonso at fair market value via contractual tender offer and IPO rights and steal for itself a greater share of Alphonso’s significant value.

In April 2023, our clients sued LG and the LG-appointed directors on Alphonso’s board, asserting a claim under section 225 of the Delaware General Corporation Law, challenging the removal of our director clients, as well as additional breach of fiduciary duty claims. In litigating the section 225 claim, which was expedited and tried in September 2023, Davis Polk argued that the defendants’ actions were taken for the bad faith purpose of eliminating the minority stockholders’ board-appointment and liquidity rights under the stockholders’ agreement. We argued, among other things, that the defendants’ scheme constituted a breach of an express provision in the stockholders’ agreement that required Alphonso to use reasonable efforts to preserve our clients’ contractual rights and also violated the implied covenant of good faith and fair dealing. In a 104-page opinion, Vice Chancellor Cook agreed with our core factual arguments and held, on the basis of our express breach claim, that the removal of our directors clients was invalid and that certain other of our clients remain entitled going forward to appoint directors to the Alphonso board on behalf of minority stockholders.

The Davis Polk team included partners Brian M. Burnovski and Andrew Ditchfield, counsel Pascale Bibi and Nikolaus Williams and associates Marie Killmond, Deborah S. Mazer, Danielle Mullery, Laixin Li, Cristina Lauren Lang, Melissa English, Zach Zaremba and Emily Park. All members of the Davis Polk team are based in the New York office.