American billionaire Bharat Desai must face claims that he downplayed litigation risks to inflate the price of Syntel Inc. before its $3.4 billion sale to French tech giant Atos SE, in which he personally made $1.3 billion, a Delaware judge ruled Wednesday.
Vice Chancellor Nathan A. Cook let the lawsuit move forward in Delaware’s Chancery Court, issuing a short order to that effect a few hours after a telephone hearing on Desai’s motion to dismiss the case. He also granted the billionaire’s bid to have some of his legal fees advanced under provisions of the Atos-Syntel merger agreement.
The rulings by Cook, who joined the court in June, don’t contain any legal reasoning other than references to the proceedings earlier Wednesday. Transcripts of the hearing weren’t immediately available.
The suit, filed by Atos in July 2021, accuses Desai of using vague, innocuous-seeming pre-deal disclosures to minimize the risk posed by a “long-running and far-reaching” trade secrets litigation that later led to a $570 million verdict against Syntel.
Desai also directed his subordinates at Syntel to deflect inquiries about the case and to withhold information about adverse developments, such as a ruling rejecting the company’s main defense and another that opened up Syntel’s books weeks before the transaction closed, Atos says.
The trade secrets case allegedly began when Syntel sued TriZetto Group Inc. in 2015 over its decision to terminate their relationship in connection with its acquisition by Cognizant Technology Solutions Corp.
The suit sought a modest $3.4 million before it was transformed by Cognizant’s counterclaims of wide-ranging trade secret theft by Syntel, according to Atos. Desai “made a deliberate choice” to keep Atos in the dark about the TriZetto case, the fraud suit says.
Atos is represented by Paul, Weiss, Rifkind, Wharton & Garrison LLP; Berger Harris LLP; and Latham & Watkins LLP.
Desai is represented by Ross Aronstam & Moritz LLP and Kellogg, Hansen, Todd, Figel & Frederick PLLC.
The case is Atos SE v. Desai, Del. Ch., No. 2021-0630, 10/19/22.
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