Lawsuit Claims Biote CEO, Chairman Conspired to Direct BioTE Holdings, LLC into SPAC Transaction to Enrich Themselves

June 6, 2024 – A lawsuit filed on behalf of Brewer, Attorneys & Counselors client Marci Donovitz alleges that the chief executive officer and chairman of Irving-based Biote Corp. breached their duties to plaintiff and others by channeling the hormone therapy company into a value-destructive special purpose acquisition company (“SPAC”) transaction.

The lawsuit was filed by Ms. Donovitz, the trustee of the Donovitz Family Irrevocable Trust and a BioTE Holdings, LLC shareholder, on June 5 in the Court of Chancery of the State of Delaware.

The suit was filed against Biote CEO Teresa “Terry” Weber, Executive Chairman Marc Beer, Mary Elizabeth Conlon, Haymaker Sponsor III LLC, Steven J. Heyer, and Cooley LLP. Haymaker was the SPAC company that acted as the sponsor of the transaction.

“The lawsuit reveals the inner workings of a scheme to enrich a few – at the expense of the owner who built the company,” says William A. Brewer III, partner at Brewer, Attorneys & Counselors, and counsel to Ms. Donovitz. “Our client believes a handful of insiders conspired to secure lucrative benefits to which they were not entitled.”

As explained in the filing, a SPAC – also known as a “blank check company”—is a shell company set up by a sponsor that goes public without an operating business to raise funds, but with a plan to find a target private company with an operating business with which it would merge within a fixed period, usually two years.

Ms. Donovitz is the ex-wife of Biote founder Dr. Gary Donovitz, who the lawsuit contends was tricked into waiving a minimum cash closing condition just days before the SPAC deal was completed on May 26, 2022.

As has been publicly reported, Biote was a recent defendant in a separate lawsuit filed by Dr. Donovitz by Brewer regarding the SPAC deal. As reported, in February 2024, Biote disclosed it agreed to buy back nearly $77 million of Dr. Donovitz’s stock to settle the matter.

The lawsuit alleges that “Defendants knew for months that astronomical redemptions would eviscerate almost all the cash raised by the SPAC and would cause the transaction to be destructive of value. Nonetheless, Defendants proceeded with their scheme to enrich themselves.”

The lawsuit alleges that BioTE Holdings, LLC was channeled into the SPAC transaction that improperly diverted $70 million from the deal to Biote executives for their own enrichment and $135 million in cash and stock to the defendants. Plaintiff alleges that their actions resulted in her suffering hundreds of millions of dollars in damages and the dilution of her equity and voting power.

In addition to breaches of fiduciary duties, the lawsuit also alleges that defendant Biote executives negligently “misled Plaintiff’s trustee regarding the likely impact of this Merger on the value of her shares, failed to disclose material information regarding the risks of this SPAC transaction (including the possibility that it would provide virtually no cash), and failed to disclose that these risks had materialized.” The lawsuit also alleges that the Defendants were unjustly enriched.

Ms. Donovitz requests that the court order relief including the disgorgement of profits and forfeiture of ill-gotten gains, including the forfeiture of cash or equity obtained in the merger. The lawsuit also requests monetary damages.

Bloomberg Law Reports on Brewer Advocacy, Retention of NYU Law Professor

June 4, 2024 – Bloomberg Law reported today on the Brewer firm’s representation of the NRA against the New York Attorney General. The article notes that the NRA has added New York University law professor Samuel Estreicher to its legal team.

As reported, The NRA has asked a judge to throw out a recent jury verdict, ordering former chief executive Wayne LaPierre and another official to repay more than $6 million to the organization. The court will consider whether to also require independent monitoring in a second phase of the trial that’s set to start July 15.

Estreicher is working closely on this motion to set aside the verdict, according to William A. Brewer III, the NRA’s lead outside attorney. Estreicher joins a legal team led by Brewer and other lawyers from his New York litigation boutique, Brewer Attorneys & Counselors. Partners Svetlana M. Eisenberg, Sarah B. Rogers, and Noah Peters have also worked on the case.

“He appreciates that the NYAG is pursuing many novel legal theories in support of the jury’s verdict, and that the NYAG’s pursuit of the NRA raises grave constitutional questions under the First Amendment,” Brewer said in a statement. “In particular, we have worked closely with Professor Estreicher on the pending motion to set aside the verdict.”

Read more here.

Washington Post Editorial Board Recognizes Historic Win

June 1, 2024 – The Washington Post editorial board recognized the historic Supreme Court win for Brewer client, the National Rifle Association of America (NRA). The editorial, “The NRA Deserved its First Amendment Win at the Supreme Court,” observes, “…the court’s 9-0 ruling in National Rifle Association v. Vullo was a positive development in two ways: It showed that the fractious justices can still unite around certain basic constitutional principles; and the constitutional principle they rallied behind in this case was the sacred one of free speech.” The unanimous ruling in favor of the NRA was on May 30, 2024.

In speaking of a 2018 “blacklisting campaign” against the NRA undertaken by former New York state regulator Maria T. Vullo, the Post writes, “To be sure, state officials such as Ms. Vullo have every right to punish actual legal infractions by any companies that do business with NRA members, as Justice Sonia Sotomayor, writing for the court, explained. And they have every right to speak out against gun violence and the NRA. What they cannot do, however, ‘is use the power of the State to punish or suppress disfavored expression,’ Justice Sotomayor wrote. ‘At the heart of the First Amendment’s Free Speech Clause is the recognition that viewpoint discrimination is uniquely harmful to a free and democratic society.’”

The NRA was represented by the Brewer firm, the ACLU, and First Amendment Scholar Eugene Volokh.

Read the editorial here.

Law360 Names Brewer Firm "Legal Lions of the Week"

June 1, 2024 — Law360 has named Brewer, Attorneys & Counselors one of its "Legal Lions of the Week" after the U.S. Supreme Court unanimously ruled for Brewer client the National Rifle Association of America (NRA) in its First Amendment case against a former New York state regulator.

The recognition noted that the NRA is represented by The NRA is represented by William Brewer III, Sarah Rogers and Noah Peters of Brewer Attorneys & Counselors.

Law360 writes that, “In a unanimous decision, the high court said Thursday that the NRA sufficiently showed that former New York Financial Services Superintendent Maria T. Vullo likely breached the group's First Amendment protections through the collective actions the NRA accused her of taking against banks and insurance agencies affiliated with it.”

Read more here.

The Wall Street Journal: A Unanimous Supreme Court Backs the NRA on Free Speech

May 31, 2024 – The Wall Street Journal Editorial Board writes on the unanimous opinion rendered by the Supreme Court in support of Brewer client the National Rifle Association of America (NRA) in its First Amendment case against a former New York regulator. 

In the editorial, "A Unanimous Supreme Court Backs the NRA on Free Speech," the Board details the case, in which the NRA alleges that former New York State Department of Financial Services Superintendent Maria Vullo coerced financial institutions that she regulated to stop doing business with the NRA and other gun-rights groups.

Writing for the Court, Justice Sonia Sotomayor wrote that Vullo's conduct “could be reasonably understood to convey a threat of adverse government action in order to punish or suppress speech.” 

The editorial states, "Justice Sotomayor emphasizes that covert threats against private intermediaries are especially subversive of speech rights since 'intermediaries will often be less invested in the speaker’s message and thus less likely to risk the regulator’s ire.' When government officials abuse power behind closed doors, voters aren’t able to punish them at the ballot box."

The editorial continues, "The Court’s resounding ruling protects liberal and conservative advocacy alike. It puts government officials on notice that they can’t use their power to retaliate against and silence their opponents. In these hyper-partisan times, that’s an important message for the censors in the Biden Administration and those in a potential second Trump Presidency."

Read the full editorial here. 

National Media Report on Brewer Client NRA Scoring Landmark Supreme Court Victory

May 30, 2024 – Major media outlets are reporting on the unanimous Supreme Court decision finding in favor of the National Rifle Association (NRA) in a First Amendment case in which Brewer, Attorneys & Counselors represented the NRA.

The New York Times reports that Justice Sonia Sotomayor wrote the decision finding that the NRA plausibly claimed a violation of the First Amendment, which now sends the case to the U.S. Court of Appeals for the Second Circuit in New York.

The Hill also reports that the NRA can move forward in its “free speech fight” against Maria Vullo, the former superintendent of the New York Department of Financial Services (DFS), over her encouragement of insurers and banks she regulated to cut ties with the NRA. The Hill reports that the NRA maintains those actions were unconstitutional government coercion.

USA Today reports that the NRA will get another chance to “punish” New York regulators who discouraged insurers and bankers from doing business with the NRA. The article noted that Justice Sotomayor wrote in her decision that, "Ultimately, the critical takeaway is that the First Amendment prohibits government officials from wielding their power selectively to punish or suppress speech, directly or, as alleged here, through private intermediaries.”

CNN reports that the decision will provide clarity to both liberal and conservative regulators about how far they may go in pressuring companies that do business with certain advocacy groups.

“This is a landmark victory for the NRA and all who care about our First Amendment freedom,” William A. Brewer III, counsel to the NRA, said in a statement quoted by CNN. “The opinion confirms what the NRA has known all along: New York government officials abused the power of their office to silence a political enemy.”

Law 360 Reports on NRA Reaction to NYAG Filing

May 8, 2024 – Law360 reports that Brewer client the National Rifle Association of America (NRA) responded to a filing by the New York Attorney General (NYAG) in which she asked a New York judge not to "reverse" a Manhattan jury's verdict. The jury verdict was entered in the NYAG vs. NRA lawsuit on February 23, 2024.

NRA lawyer William A. Brewer III told the publication, "In her response to the NRA's motion for judgement post-trial, the NYAG advances a number of novel legal theories to save the claims she presented at trial ... The NYAG's theories have no grounding in existing law. We look forward to responding." 

The report states, "In February, jurors found that [former NRA Executive Vice President Wayne] LaPierre, who resigned on the eve of trial, as well as general counsel John Frazer and retired Chief Financial Officer Wilson 'Woody' Phillips, breached their fiduciary duties. Frazer was additionally held responsible for the false filings and Phillips for the related-party transactions. The verdict requires LaPierre to repay $4.4 million in ill-gotten funds to the NRA for his breaches, while Phillips must pay back $2 million."

A second phase of the proceedings is scheduled to begin in July – a bench trial before Justice Joel M. Cohen, in which the judge is expected to rule on any final remedies against defendants. In the final analysis, individual defendants could face financial awards payable to the NRA. No money damages will be awarded against the Association.  

Read the report here. 

The Reload: NRA Foundation Settles DC Lawsuit

 April 18, 2024 – Reload editor and CNN contributor Stephen Gutowski today reported on the consent agreement between Brewer client the National Rifle Association of America (NRA), the NRA Foundation, and the District of Columbia Attorney General (DCAG). 

According to the report, per terms of the consent order, the NRA Foundation will "adopt a conflict-of-interest policy, a board and officer compliance training program, and new standards for lending money or doing business with other NRA entities. It also agreed to limit loans to the NRA’s other operations to only charitable purposes in line with the group’s educational mission. However, it admitted no wrongdoing and avoided the more severe sanctions the AG initially sought to impose."

Gutowski wrote that the NRA disputes claims made by DCAG Brian Schwalb after the order was signed and "demanded he retract them in a letter to his office that was obtained by The Reload. It noted the lawsuit initially asked the court to appoint an overseer for the Foundation, a condition not included in the deal, and the Foundation didn’t admit to any wrongdoing in the settlement. It also asserted the NRA had agreed to pay back the Foundation for an outstanding loan before DC filed its lawsuit."

“The DCAG’ spins’ today’s settlement in avoidance of the facts: the DCAG long ago abandoned any claims of wrongdoing against the NRA,” William Brewer, the NRA’s outside counsel, said in a statement. “Even by DC standards, this is rank political gamesmanship – an after-the-fact justification for a failed lawsuit by these officials.”

Read the article here.