EFiled: May 27 2022 04:46PM EDT

Transaction ID 67668415
Case No. 2022-0450-PAF
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
PARITY TECHNOLOGIES, INC. and )
ELIZABETH O’SULLIVAN, )
)
Plaintiffs, )
)
v. ) C.A. No. 2022-0450-PAF
)
JIAHAO CHEN, RUMMAN ) REDACTED PUBLIC VERSION
CHOWDHURY, ANDERS LIER, ) FILED: MAY 27, 2022
MICHAEL MCKENNA, RUMMAN )
CHOWDHURY, LLC, PARITY, INC., and )
THE PROPELL GROUP, )
)
Defendants. )

PLAINTIFFS’ BRIEF IN SUPPORT OF MOTION FOR EXPEDITED

PROCEEDINGS AND FOR STATUS QUO ORDER

Matthew W. Murphy (#5938)

Melissa A. Lagoumis (#6845)
Edmond S. Kim (#6835)
RICHARDS, LAYTON & FINGER, P.A.
One Rodney Square
920 North King Street
Wilmington, Delaware 19801
(302) 651-7700

Counsel for Plaintiffs Parity Technologies,

Dated: May 24, 2022 Inc. and Elizabeth O’Sullivan

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 TABLE OF CONTENTS

Page
TABLE OF AUTHORITIES .................................................................................... ii

PRELIMINARY STATEMENT ...............................................................................1

STATEMENT OF FACTS ........................................................................................3

ARGUMENT .............................................................................................................8

A. Legal Standards ............................................................................................8

B. This Action Should Be Expedited..............................................................10
C. This Court Should Enter a Status Quo Order.............................................11
1. Plaintiffs are likely to succeed on the merits. .....................................13
2. A status quo order will prevent irreparable harm. ..............................15

3. The balance of the equities favors entering a status quo

order.....................................................................................................17
CONCLUSION........................................................................................................19

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 TABLE OF AUTHORITIES

Page(s)
CASES
AM Gen. Hldgs. LLC v. Renco Grp., Inc.,
2012 WL 6681994 (Del. Ch. Dec. 21, 2012)......................................................11

Arbitrium (Caymen Is.) Handels AG v. Johnson,

1994 WL 586828 (Del. Ch. Sept. 23, 1994).................................................12, 13
Atkins v. Hiram,
1993 WL 545416 (Del. Ch. Dec. 23, 1993) .......................................................10

Bossier v. Connell,
1986 WL11534 (Del. Ch. Oct. 7, 1986) .......................................................11, 15

Box v. Box,
697 A.2d 395 (Del. 1997) .....................................................................................9
Carvel v. Andreas Hldgs. Corp.,
698 A.2d 375 (Del. Ch. 1995) ..............................................................................2

CBS Corp. v. Nat’l Amusements, Inc.,

2018 WL 2263385 (Del. Ch. May 17, 2018)........................................................9

Choice Hotels Int’l, Inc. v. Columbus-Hunt Park DR. BNK Inv’rs,

L.L.C.,
2009 WL 3335332 (Del. Ch. Oct. 15, 2009) ......................................................10
Credit Lyonnais Bank Nederland, N.V. v. Pathe Commc’ns Corp.,
C.A. No. 12150 (Del. Ch. July 9, 1991) (TRANSCRIPT).................................15
DG BF, LLC v. Ray,
2020 WL 3867123 (Del. Ch. July 9, 2020), appeal refused, 237
A.3d 70 (Del. 2020) (TABLE) .............................................................................9
Giammargo v. Snapple Beverage Corp.,
1994 WL 672698 (Del. Ch. Nov. 15, 1994) .........................................................9

ii

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Gizzio v. Riddel,
2004 WL 117585 (Del. Ch. Jan. 21, 2004).........................................................12

Newell Rubbermaid Inc. v. Storm,

2014 WL 1266827 (Del. Ch. Mar. 27, 2014) .......................................................9

Pharmalytica Servs., LLC v. Agno Pharms., LLC,

2008 WL 2721742 (Del. Ch. July 9, 2008) ..............................................2, 12, 17

Police & Fire Ret. Sys. of Detroit v. Bernal,

2009 WL 1873144 (Del. Ch. June 26, 2009)......................................................16

Prior v. Prosser,
1995 WL 1791086 (Del. Ch. Aug. 3, 1995) .......................................................12

Raptor Sys., Inc. v. Shepard,

1994 WL 512526 (Del. Ch. Sept. 12, 1994).......................................................11
Salamone v. Gorman,
2014 WL 3905598 (Del. Ch. July 31, 2014) ................................................12, 13
Schroeder v. Buhannic,
2018 WL 11264517 (Del. Ch. Jan. 10, 2018).....................................................14

T.R. Inv’rs, LLC v. Genger,

2012 WL 5471062 (Del. Ch. Nov. 9, 2012) .......................................................10

STATUTES & RULES

8 Del. C. § 225 ..................................................................................................passim

OTHER AUTHORITIES
Donald J. Wolfe, Jr. & Michael A. Pittenger, Corporate and
Commercial Practice in the Delaware Court of Chancery § 4.10[a]
(2d ed. 2018) .........................................................................................................1

Donald J. Wolfe, Jr. & Michael A. Pittenger, Corporate and

Commercial Practice in the Delaware Court of Chancery § 9.09[f]
(2d ed. 2018) .......................................................................................................17
iii

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 PRELIMINARY STATEMENT
This action involves a scheme by a group of minority stockholders of a

Delaware corporation—Parity Technologies, Inc. (“Parity” or the “Company”)—to

seize control of the Company and its assets through a contrived and invalid written

consent. Not content to amend the corporate governance structure through a proper

stockholder process, the Defendants in this matter have forcefully asserted control

by ousting the Company’s CEO and sole director, plaintiff Elizabeth O’Sullivan,

barring her from access to all the company communications and operating systems,

and defaming her reputation to the Company’s key investors and associates. Yet, no

amount of strong-arm and intimidation tactics by Defendants can turn a minority

stock interest (here, ) into the majority of shares required to act by written

consent under the Company’s bylaws and the DGCL.

This Court should promptly expedite proceedings and enter a status quo order,

as is typical in Section 225 actions. Given the summary nature of this proceeding,

the Court should expedite this action “without the usual showings required to obtain

expedition in other matters.” Donald J. Wolfe, Jr. & Michael A. Pittenger,

Corporate and Commercial Practice in the Delaware Court of Chancery § 4.10[a],

at 4-52 (2d ed. 2018). Section 225 actions are routinely accelerated, as Section 225

is intended to “afford a procedure for determining expeditiously who are a Delaware

1

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corporation’s de jure managers, in order to resolve uncertainty over who is

authorized to manage the corporation and act on its behalf.” Carvel v. Andreas

Hldgs. Corp., 698 A.2d 375, 378 (Del. Ch. 1995).

In Section 225 actions, it has been the consistent and longstanding practice of

this Court to enter limited orders maintaining the status quo to prevent harm to a

company before the time the Court is able to declare finally the rights of the parties.

See, e.g., Pharmalytica Servs., LLC v. Agno Pharms., LLC, 2008 WL 2721742, at

*3 (Del. Ch. July 9, 2008) (stating that “the rational, ongoing governance of [an

entity] requires certainty as to who is running the entity” and that “preserving the

status quo . . . is the proper course”).

Defendants’ brute force tactics to subvert O’Sullivan’s authority and wrest

control over the Company and its assets makes a status quo order even more

appropriate in this case. Defendants not only have taken control over the Company’s

systems and databases—cutting off Ms. O’Sullivan’s access to all lines of

communication including her email account—but they also have attempted to

transfer the Company’s operating funds to a bank account under the control of

Defendant (and former Company Chief Technology Officer) Jiahao Chen. Because

of Defendants’ interference, refusal to cooperate in any fashion with O’Sullivan, and

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the current uncertainty among third-party investors and vendors about who controls

the Company, Parity Technologies, Inc., at the present time, is simply at a standstill.

Absent prompt relief, therefore, the Company’s business will be irreparably harmed,

and its assets potentially dissipated.

Accordingly, the Court should enter Plaintiffs’ proposed status quo order

allowing O’Sullivan to continue in her role as CEO and sole director pending the

Court’s assessment of the legality of the recent attempted takeover, and proposed

order granting expedition, both of which are filed contemporaneously herewith.

STATEMENT OF FACTS1
In May 2022, Parity was formed to buy Defendant Parity, Inc.’s intellectual

property assets. Compl. ¶ 13. At the founding of Parity, of

common stock were authorized. O’Sullivan was issued , while

Parity, Inc. was issued Compl. ¶ 14. Since the founding, additional

shares have been issued to Rumman Chowdhury, LLC and The Propell Group

(together with Parity, Inc., the “Parity I Group”), and allocated to various employees,

1
The facts herein are drawn from the Verified Complaint (the “Complaint” or
“Compl. ¶ __”), filed contemporaneously herewith. Capitalized terms not defined
herein shall have the meanings given to them in the Complaint.
3

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among them being Defendant Jiahao Chen, Defendant Michael McKenna, and

Aleksander Eskilson. Compl. ¶ 17.

Under Chen’s employment contract, he was granted

While employed, Chen was empowered to vote the full amount of shares in the grant,

but the shares would vest over a six-year period. The first , that

is , would vest on the first anniversary of his employment start date—

October 4, 2022. Accordingly, as of May 1, 2022, there were

outstanding. Of these shares, O’Sullivan controlled , while the Parity

I Group controlled only . Chen controlled . Compl. ¶¶ 18-19.

In March 2022, O’Sullivan, Chowdhury, Lier, and Chen discussed a potential

reorganization of Parity in view of a potential acquisition offer by a large private

corporation (the “Proposed Reorganization”). Under this anticipated arrangement,

the total outstanding shares of the Company would be increased from

and re-allocated. In the anticipated re-allocation, O’Sullivan was to

receive a reduction in her voting shares, yielding a voting interest, while the

Parity I Group would collectively hold . Chen’s voting share was to increase

to . Compl. ¶ 20. The paperwork was never signed and the Reorganization

never went into effect meaning that as of May 16, 2022, O’Sullivan remained the

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CEO and sole Board member of Parity and continued to hold a interest in the

Company. Compl. ¶¶ 21-22.

On or about May 16, 2022, at 2:32 p.m. EST, the Parity I Group purported to

put O’Sullivan on paid, administrative leave and informed O’Sullivan that they

would be removing her electronic access to all Parity communications, systems and

processes. Compl. ¶ 23, Compl. Ex. A. Following the Termination Email,

Chowdhury and Chen sent emails to investors, prospective investors and other

business associates of Parity, stating, in relevant part:

we’re writing to inform you that effective immediately, Liz O’Sullivan

has been placed on administrative leave and will not represent Parity in
any capacity. We have engaged legal counsel to ensure a smooth
transition. This administrative change will not greatly impact the day
to day of the company, as our leadership remains strong. We still
anticipate meeting all agreed-upon client deliverables without any
additional delay. In addition, we are in the process of expanding the
team to meet current and future anticipated needs.
Compl. ¶ 25. Chen also proceeded to block O’Sullivan’s access to, among other

things, her corporate Gmail account, the employee and payroll system administered

by JustWorks, and the corporate bank account at Mercury. Compl. ¶ 26. That same

day, O’Sullivan sent an email to Chen directing him to restore her access to the

Company systems and Chen failed to do so. Compl. ¶¶ 27-28. Then, on May 17,

2022 O’Sullivan terminated Chen’s employment, effective immediately and

RLF1 27406134v.1
requested that Chen “surrender all credentials to [corporate counsel] so that

[counsel] may restore my access to the company systems.” As of Chen’s

termination, none of his shares had vested and he was thus, no longer a stockholder

in Parity. Compl. ¶¶ 29-30.

In defiance of his termination, on May 19, 2022, Chen used his continuing

access to the Company’s bank account at Mercury Bank to transfer all available

funds out of that account into another account at Chase Bank controlled by Chen.

The transfer was blocked by Mercury when it learned of the unauthorized transfer.

Compl. ¶ 31. Chen and Chowdhury have also defamed O’Sullivan’s professional

reputation by telling investors and potential investors that they were compelled to

initiate an investigation into O’Sullivan, that they had hired a third-party legal team

to conduct the investigation, and that they could not comment on the investigation

while it was pending. Compl. ¶ 32. Now, because of Chen’s interference with the

Company’s operations and the Defendants’ refusal to cooperate with O’Sullivan in

any fashion, the Company is struggling to conduct its normal business operations.

Compl. ¶ 33.

Under Section 5.2 of the By-Laws, the Board has the authority to select the

CEO, and “the business of the corporation shall be managed by or under the direction

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of its Board of Directors.” Compl. Ex. D. Thus, the CEO reports to the Board of

Parity, and can only be removed by the Board. In order for any group of stockholders

to effectuate the removal of O’Sullivan as CEO, it would have to first change the

composition of the Board, and in order to change the composition of the Board, it

would need a majority of stockholders to sign a Written Consent, as provided for in

Section 2.11 of the By-Laws, which Written Consent must be “delivered” in paper

form. Id. The purported termination of O’Sullivan was without legal force and

effect and O’Sullivan remains the sole board member and CEO of Parity with full

power to exercise all authority of the corporation. Further, as a result of his

termination, Chen is no longer an employee of the Company and has no voting

rights.

On Monday, May 23, 2022, the Parity I Group conceded their series of

procedural errors by issuing a formally signed Action by Written Consent purporting

to remove O’Sullivan as a member of the Board and instate four new directors—

Defendants Chen, Chowdhury, Lier, and McKenna. Compl. Ex. E. The May 23

Written Consent is signed by Rumman Chowdhury on behalf of Parity, Inc. and

Rumman Chowdhury, LLC, by Anders Lier on behalf of The Propell Group, Jiahao

Chen and Michael McKenna.

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 The May 23 Written Consent was followed by an Action by Unanimous

Written Consent in Lieu of Special Meeting by the Board of Directors of Parity

Technologies, Inc. signed by the four improperly selected Board members (the

“Purported Board Resolution”). The Purported Board Resolution terminated

O’Sullivan as CEO, and appointed Chen as the President, CEO, Chief Financial

Officer, Treasurer and Secretary of the Company. The Purported Board Resolution

further terminated the Company’s engagement of corporate counsel, Gunderson

Dettmer Stough Villeneuve Franklin & Hachigan, LLP, and substituted Burns &

Levinson LLP in their place. Tellingly, the Purported Board Resolution says nothing

about any third-party law firm tasked with the alleged “investigation.”

The May 23 Written Consent is equally null and void for the simple reason

that Chen no longer holds any shares in the Company and is therefore not able to

vote, and the remaining stockholders who have signed the Consent do not control a

majority of the shares (Parity I Group and McKenna = ). For the same reason,

the Purported Board Resolution is equally null and void.

ARGUMENT
A. Legal Standards
The standards governing motions to expedite and for status quo orders are

similar. Expedition is appropriate when the plaintiff has “articulated a sufficiently

8

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colorable claim and shown a sufficient possibility of a threatened irreparable injury.”

Giammargo v. Snapple Beverage Corp., 1994 WL 672698, at *2 (Del. Ch. Nov. 15,

1994). In applying this well-settled standard, this Court “traditionally has acted with

a certain solicitude for plaintiffs” and “has followed the practice of erring on the side

of more [expedited proceedings] rather than fewer.” Id.; see also Box v. Box, 697

A.2d 395, 398-99 (Del. 1997) (noting that “Delaware courts are always receptive to

expediting any type of litigation in the interests of affording justice to the parties,”

and the Court of Chancery in particular is “renowned” for its “expedited decision-

making”). A “colorable claim” is “essentially a non-frivolous cause of action.” See

CBS Corp. v. Nat’l Amusements, Inc., 2018 WL 2263385, at *3 (Del. Ch. May 17,

2018).

The standard for a status quo order adds a third element requiring balancing

of the hardships. A motion to preserve the status quo is essentially a motion for a

temporary restraining order. See DG BF, LLC v. Ray, 2020 WL 3867123, at *1 (Del.

Ch. July 9, 2020) (TRO standard applies to motion for status quo order), appeal

refused, 237 A.3d 70 (Del. 2020) (TABLE); Newell Rubbermaid Inc. v. Storm, 2014

WL 1266827, at *4 (Del. Ch. Mar. 27, 2014) (“A TRO has two purposes: to protect

the status quo and to prevent imminent and irreparable harm from occurring before

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a preliminary injunction hearing or the final resolution of a matter.”). A status quo

order is therefore appropriate upon a showing by a plaintiff that “(1) it has a colorable

claim against the defendant; (2) it would be irreparably injured without interim

injunctive relief; and (3) the balance of hardships tips in its favor.” Id.

B. This Action Should Be Expedited

This action seeks relief under 8 Del. C. § 225 and is thus a summary

proceeding by its very nature. E.g., Choice Hotels Int’l, Inc. v. Columbus-Hunt Park

DR. BNK Inv’rs, L.L.C., 2009 WL 3335332, at *4-5 (Del. Ch. Oct. 15, 2009)

(explaining that actions under 8 Del. C. § 225 are summary proceedings); see T.R.

Inv’rs, LLC v. Genger, 2012 WL 5471062, at *1 (Del. Ch. Nov. 9, 2012) (“8 Del. C.

§ 225 is designed to protect the wealth-creating potential of a Delaware corporation

by allowing this court to resolve quickly and efficiently disputes over the

composition of its board of directors.”).

As a summary proceeding, this case should be expedited. Indeed, the purpose

of a Section 225 action “is to expeditiously resolve uncertainty within the business

entity.” Choice, 2009 WL 3335332, at *4-5 (internal quotation marks omitted); see

also Atkins v. Hiram, 1993 WL 545416, at *5 (Del. Ch. Dec. 23, 1993) (noting that

Section 225 is intended to “afford a prompt and summary remedy where there is

10

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doubt as to who are the officers or directors of a corporation” and “preclude a

leaderless, and therefore foundering, corporation”).

Actions to determine the correct composition of a Delaware corporation’s

board of directors are routinely expedited due to the irreparable harm as a result of

the uncertainty of the composition of the board. Bossier v. Connell, 1986 WL11534,

at *2 (Del. Ch. Oct. 7, 1986) (noting that “the purpose of 8 Del. C. § 225 is to grant

a quick method of review of the corporate election process in order to prevent a

corporation from being immobilized by controversies as to who are its proper

officers or directors”).

C. This Court Should Enter a Status Quo Order

A status quo order is appropriate where (i) the order will prevent imminent

irreparable harm, (ii) the plaintiff has a reasonable likelihood of success on the

merits, and (iii) the harm to the plaintiff outweighs the harm to the defendant. Raptor

Sys., Inc. v. Shepard, 1994 WL 512526, at *2 (Del. Ch. Sept. 12, 1994). “[T]he

standard is a flexible one, and a strong showing on one element may overcome a

weak showing on another element.” AM Gen. Hldgs. LLC v. Renco Grp., Inc., 2012

WL 6681994, at *3 (Del. Ch. Dec. 21, 2012) (internal quotation marks omitted).

In Section 225 actions, it has been the consistent and longstanding practice of

this Court to enter limited orders maintaining the status quo to prevent harm to the
11

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entity until the Court is able to declare finally the rights of the parties. E.g.,

NHAOCG, LLC, C.A. No. 7304-VCL, at 5; Gizzio v. Riddel, 2004 WL 117585, at

*1 (Del. Ch. Jan. 21, 2004) (stating that forms of order that “preserve the status quo

of the company until a final determination of [a] controversy” are “fairly typical”);

Pharmalytica Servs., 2008 WL 2721742, at *3 (stating that “the rational, ongoing

governance of [an entity] requires certainty as to who is running the entity” and that

“preserving the status quo . . . is the proper course”).

Indeed, the Court routinely enters status quo orders in control disputes to

prevent harm to a company and create a workable approach to its management until

the Court is able to determine the rights of the parties to the control dispute, in a

manner that protects the interests of the company and the parties. See, e.g., Salamone

v. Gorman, 2014 WL 3905598, at *2 (Del. Ch. July 31, 2014) (entering status quo

order because “[the company] and its shareholders would be irreparably harmed by

the uncertainty concerning the composition of its legitimate board of directors”);

Prior v. Prosser, 1995 WL 1791086, at *1 (Del. Ch. Aug. 3, 1995) (status quo order

necessary “to avoid reasonable apprehension over the credibility of actions due to

misuse of apparent authority that might harm [the company] before the Court is able

to declare the final rights of the parties”); Arbitrium (Caymen Is.) Handels AG v.

12

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Johnson, 1994 WL 586828, at *3 (Del. Ch. Sept. 23, 1994) (“[I]t has become

customary in § 225 actions to put into place, either by agreement of the parties or

court order, a status quo arrangement . . .”).

Such orders prevent the parties from unilaterally engaging in transactions

outside of the ordinary course of business until the dispute concerning the

management and future direction of the entity is resolved. See, e.g., Arbitrium

(Cayman Is.) Handels AG, 1994 WL 586828, at *3. Moreover, it is a customary to

enter status quo orders at the outset of a litigation, before a determination of the

merits has been made, which stays in place until the control issue is resolved. See

Salamone, 2014 WL 3905598, at *3 (entering status quo order at outset of litigation,

noting that at this stage even “plausible” arguments will “suffice[] for purposes of

the present status quo order, although the need to resolve the question may depend

upon further proceedings”).

Having satisfied each required element, Plaintiffs are entitled to a status quo

order.

1. Plaintiffs are likely to succeed on the merits.

Here, there is every reason to conclude that Plaintiffs will prevail in this

action. The initial May 16 email that purported to place O’Sullivan on indefinite

leave was improper and without legal force for several reasons. First, the purported
13

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consent was not signed by any of the stockholders and properly delivered to the

Corporation in paper form. Second, the stockholders who purported to vote for the

consent—The Propell Group, Parity, Inc., and Rumman Chowdhury, LLC—did not

on May 16, 2022, and still do not, represent a majority of the voting shares of the

Company. Third, the purported consent did not seek to change the composition of

the Board, but sought only to place O’Sullivan on administrative leave which was

not an act that even a majority of stockholders is empowered to do. (Appointing the

CEO is a core board function that only can be limited in the certificate of

incorporation (pursuant to Section 141(a) of the DGCL) or bylaws (pursuant to

Section 142(b) of the DGCL). Schroeder v. Buhannic, 2018 WL 11264517, at *4

(Del. Ch. Jan. 10, 2018).) As the CEO and sole member of the Board in office prior

to the challenged actions, O’Sullivan should be permitted to maintain control over

the Company’s records, bank accounts, and all other aspects of management.

The more formally drafted purported Written Consent issued a week later, on

May 23, 2022, is equally infirm, as it also does not reflect the will of a voting

majority. Chen, who signed the later Written Consent along with Rumman

Chowdhury, LLC and The Propell Group, is no longer an employee with voting

rights.

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 2. A status quo order will prevent irreparable harm.
In actions to determine the correct composition of a Delaware corporation’s

board of directors, Courts recognize unique considerations and have concluded that

litigants need not satisfy the prerequisites for a temporary restraining order to prevail

on such a motion. E.g., Credit Lyonnais Bank Nederland, N.V. v. Pathe Commc’ns

Corp., C.A. No. 12150, at 27-28 (Del. Ch. July 9, 1991) (TRANSCRIPT) (“[I]n

[Section] 225 actions we have not, in my experience, required a showing of

irreparable damage. Rather, the tendency has been . . . to recognize a dispute about

office and to imply from that that the exercise of corporate power by one group or

the other always risks being the exercise of power by an unauthorized party, since

you haven’t adjudicated who has the rights. And it is that risk, the risk that an

unauthorized party will ultimately have power over corporate assets and processes,

that is the risk that justifies some reasonable restrictions.”). At the present time,

because of Defendants’ interference with the Company operations and the

Defendants’ refusal to cooperate with O’Sullivan in any fashion, the Company is

struggling to conduct its normal business operations. As with any status quo order,

the uncertainty as to the Company’s management merits protection for the Company

pending the resolution of this dispute. Bossier, 1986 WL11534, at *2 (noting that

“the purpose of 8 Del. C. § 225 is to grant a quick method of review of the corporate
15

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election process in order to prevent a corporation from being immobilized by

controversies as to who are its proper officers or directors”).

Moreover, without a status quo order, significant—and potentially

irreversible—changes to the Company could occur. In other words, the Court might

be unable to “unscramble the eggs.” Police & Fire Ret. Sys. of Detroit v. Bernal,

2009 WL 1873144, at *2 (Del. Ch. June 26, 2009). On May 19, 2022, Chen used

his continuing access to the Company’s bank account at Mercury Bank to transfer

all available funds out of that account into another account at Chase Bank controlled

by Chen. While the transfer was blocked by Mercury when it learned of the

unauthorized transfer, these funds are still at risk. Further, as a result of Chen’s

blocking of O’Sullivan’s access to email, O’Sullivan has been unable to maintain

critical and timely contact with a variety of prospective customers and investors

which have shown avid interest in the Company and O’Sullivan as its leader. These

and other key relationships of the Company are in jeopardy.

The status quo order sought here would enable the Company to continue

functioning normally. Only this Court can offer that protection.

Of course, while preserving O’Sullivan’s status as CEO of the Company, the

proposed status quo order here would prohibit her from taking unusual actions

16

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outside of the Company’s ordinary business. Pharmalytica Servs., 2008 WL

2721742, at *3 n.6 (“As the label suggests, status quo orders, in the usual case,

provide for incumbents to continue in office.”); see also Wolfe & Pittenger, §

9.09[f], at 9-228 (“It is conventional for such orders to designate those in office

immediately before the challenged actions that are the subject matter of the suit as

the interim directors during the course of the litigation. The wisdom of this practice

in the typical circumstance seems clear. In addition to the fact that the incumbents

hold the greater legal claim to office until such time as the Court finds otherwise,

this approach has the practical advantage of minimizing the potential for repeated

and disruptive changes in corporate administration over the relatively short time that

will be required to resolve the dispute summarily.” (emphasis added) (footnotes

omitted)).

3. The balance of the equities favors entering a status quo order.

The threatened irreparable harm outweighs any harm to Defendants from a

status quo order. A status quo order here would merely freeze the Company to

permit orderly resolution of the parties’ underlying dispute. Defendants, by contrast,

have attempted to conscript the Company to their own ends by diverting Company

assets and attempting to wrest control over the Company’s systems and

communications from O’Sullivan. Plaintiffs do not seek permanent injunctive relief

17

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through the status quo motion, but rather seek only to permit the Company to

continue to operate, free of Defendants’ purported control, until the Court can

determine the proper composition of the Board and Company management.

Denying a status quo would effectively ratify Defendants’ seizure of control

over both the Board and management of the Company and aggressive strong-arm

tactics to date and would be massively disruptive to the Company. This was not an

ordinary and orderly transition of power that is subject to leisurely dispute; rather,

this was a calculated and precipitous takeover of the Company, orchestrated under

the pretext of a written consent that was endorsed only by a group of minority

stockholders. No reason exists to depart from the standard practice of leaving the

incumbent management in place.

Thus, the balance of equities easily favors a status quo order.

* * *

In Section 225 actions, it has been the consistent and longstanding practice of

this Court to enter limited orders maintaining the status quo to prevent harm to a

company before the time the Court is able to declare finally the rights of the parties.

See, e.g., Feeley, C.A. No. 7304-VCL, at 5 (“[W]here there appears to be a legitimate

bona fide dispute over who should be controlling the business entity, what Delaware

18

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courts routinely do is put into place what we call a status quo order.”). Accordingly,

the Court should enter Plaintiffs’ proposed status quo order filed contemporaneously

herewith.

CONCLUSION
For the foregoing reasons, this Court should expedite proceedings and enter

the proposed status quo order accompanying this brief.

/s/ Matthew W. Murphy

Matthew W. Murphy (#5938)
Melissa A. Lagoumis (#6845)
Edmond S. Kim (#6835)
RICHARDS, LAYTON & FINGER, P.A.
One Rodney Square
920 North King Street
Wilmington, Delaware 19801
(302) 651-7700

Counsel for Plaintiffs Parity Technologies,

Inc. and Elizabeth O’Sullivan

Words: 4,119
Dated: May 24, 2022

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