WeWork Founder Advances Suit Over $3 Billion SoftBank Deal

SoftBank Group Corp. and SoftBank Vision Fund must face part of WeWork founder Adam Neumann’s lawsuit claiming they reneged on a $3 billion investment offer after restructuring their $9 billion bailout package, a Delaware Chancery Court judge ruled Friday.

The investment agreement “can reasonably be interpreted to mean that changing Neumann’s rights” without his consent “is impermissible,” Chancellor Andre G. Bouchard wrote, giving Neumann’s breach of contract claims a green light.

Vision Fund’s arguments to the contrary rely on its interpretation of disputed facts, and dismissing the case on that basis would invert “foundational” legal principles by “asking the court to draw inferences in favor of the defendant” before any discovery is taken, the judge said.

Unlike Vision Fund, SoftBank “tacitly conceded” as much by sitting out the motion to dismiss the breach of contract claim, Bouchard noted. But he dismissed the suit’s fiduciary breach allegations, saying they essentially duplicated the contract count.

Neumann’s complaint is “long on rhetoric but short on factual allegations to support an independent basis for a fiduciary duty claim,” the judge wrote.

That part of the ruling slightly narrowed the suit, one of two targeting the financial conglomerate since the deal fell apart April 2. It’s consolidated with the other, which was brought by two independent WeWork directors—members of a special committee—who sparked an internal battle when they filed it.

The suits stem from SoftBank’s decision to scuttle part of its plan to rescue WeWork, in exchange for an 80% ownership stake, following the disastrous collapse of the co-working company’s initial public offering.

Neumann is represented by Morris Nichols Arsht & Tunnell LLP, Friedman Kaplan Seiler & Adelman LLP, and Susman Godfrey LLP. The special committee is represented by Wilson Sonsini Goodrich & Rosati PC. WeWork is represented by Skadden, Arps, Slate, Meagher & Flom LLP.

SoftBank is represented by Young Conaway Stargatt & Taylor LLP and Morrison & Foerster LLP. Vision Fund is represented by Abrams & Bayliss LLP and Quinn Emanuel Urquhart & Sullivan LLP.

The case is In re WeWork Litig., Del. Ch., No. 2020-0258, 10/30/20.