Cambridge Retirement System v. Slavko James Joseph Bosnjak (Unilife Derivative Litigation)
Status: Ongoing Case
After investigating the director compensation practices of Unilife Corporation (Unilife), on December 20, 2013, Labaton Sucharow filed a derivative complaint in the Delaware Court of Chancery on behalf of Cambridge Retirement System. The Complaint alleges that the directors of Unilife breached their fiduciary duties by paying themselves excessively high compensation, particularly in light of Unilife's ongoing inability to generate profits or even significant revenues.
Unilife is a healthcare company that specializes in the development, manufacture and sale of various "drug delivery systems," including, most notably, a line of pre-filled, retractable syringes, which automatically retract from a patient's skin after an injection. Unilife, however, has failed to generate any profits from the sale of its retractable syringes, or any of its other products. As Unilife recently acknowledged, "[t]o date, [the company has] generated no substantial product revenue." Over the past two fiscal years, the company has brought in less than $10 million in revenue, and has reported operating losses of more than $100 million. Over this same period, the directors of Unilife have paid themselves more than $2 million, or more than 20% of the company's total revenues, for attending only a few board meetings a year.
The compensation granted to Unilife's Board is also particularly egregious when compared with the significantly lower average board compensation at Unilife's peer companies.
The case poses the unique issue: can a company that has failed for years to generate significant revenues offer exceptionally rich compensation packages to members of its board of directors?
The defendants' brief in support of their motion to dismiss was due February 28, 2014 and the plaintiffs' opposition and the defendants' reply follow thereafter. The court held oral argument on the defendants' motion on June 9, 2014. On June 26, 2014 the court, in large part, denied the defendants' motion.