Background
Vision Biobanc Holdings LLC is a biotech startup that raised capital in 2020 through Private Placement Memoranda (PPMs). Defendant David Lessen served as the company’s co-founder, CFO, COO, and as a member of both its board of directors and its audit committee. Vision Biobanc sued Lessen — along with co-defendant Derek Taller and others — asserting, among other things, breach of fiduciary duty (First Cause of Action), aiding and abetting breach of fiduciary duty (Second Cause of Action), and aiding and abetting fraud (Seventh Cause of Action). Lessen moved to dismiss all three claims against him.
The lawsuit centers on allegedly false statements in the January 2020 PPM, which represented that Vision Biobanc had an active board of directors including Lessen, Silver, Birnholz, and Barron; that it had a functioning audit committee; and that it had retained one of the “Big Four” accounting firms — PricewaterhouseCoopers — as its auditor. According to the amended complaint, three of the named board members (Silver, Birnholz, and Barron) were unaware they had been named to the board, never participated in a board meeting, and there was no functioning board or audit committee at the time. The company also allegedly had not retained an auditor at all when the January 2020 PPM was circulated, as later acknowledged in revised PPMs in August and November 2020. Supreme Court, New York County, denied Lessen’s motion to dismiss all three claims. Lessen appealed.
The Court’s Holding
The Appellate Division, First Department, modified the order, granting dismissal of the Second Cause of Action (aiding and abetting breach of fiduciary duty) but otherwise affirming denial of dismissal on the First and Seventh Causes of Action. On the breach of fiduciary duty claim, the court held that Lessen, as a co-founder and CFO/COO, owed fiduciary duties to Vision Biobanc directly and that the complaint adequately alleged his breach. On the aiding and abetting fraud claim, the court found the pleadings sufficient: the PPM statements about the board, audit committee, and Big Four auditor were styled as present-fact representations — not forward-looking statements covered by PPM disclaimers — and were plausibly false. Lessen’s actual knowledge of the falsity was sufficiently alleged given his roles as co-founder, CFO, COO, board member, and audit committee member, notwithstanding that some allegations were made “upon information and belief.”
The court dismissed the aiding and abetting breach of fiduciary duty claim (Second Cause of Action) because the complaint did not adequately distinguish Lessen’s alleged role as an aider and abettor from his role as a direct fiduciary. A co-founder and officer cannot simultaneously be a primary fiduciary and an “aider and abettor” of the same breach — the direct breach claim subsumed the aiding and abetting theory. This is a pleading distinction with practical significance for startup litigation.
Key Takeaways
- PPM representations styled as present-fact statements about existing governance (a board “in place,” a retained auditor) are not shielded by forward-looking-statement disclaimers and can support fraud claims even when the PPM includes cautionary language.
- Allegations made “upon information and belief” can be sufficient to establish actual knowledge for an aiding and abetting fraud claim when they are corroborated by documentary evidence — here, the revisions to later PPMs that implicitly acknowledged the prior statements were false.
- A co-founder and officer who owes primary fiduciary duties cannot simultaneously be an “aider and abettor” of the same breach — courts will dismiss redundant aiding-and-abetting claims where the same defendant is the direct fiduciary.
- Biotech startups and other early-stage companies raising capital through PPMs must ensure that governance representations — board composition, committee existence, auditor retention — are accurate as of the date of issuance, not aspirational.
Why It Matters
For New York lawyers advising early-stage life sciences and biotech companies on capital raises, this decision is a reminder that PPM governance representations carry real legal weight. It is common in early-stage ventures to include ambitious board and committee language before those structures are fully operational — this case makes clear that doing so exposes founders and officers to fraud exposure if the statements are materially false at issuance. The “corroboration by revision” logic is particularly notable: the court treated later PPM amendments that softened governance language as corroborating evidence that the earlier statements were inaccurate.
The decision also clarifies the boundary between direct fiduciary liability and aiding-and-abetting liability in New York, which matters for how plaintiffs plead multi-defendant startup fraud cases. Stacking both theories against the same defendant in the same capacity will result in the aiding-and-abetting claim being dismissed as duplicative — counsel should reserve aiding-and-abetting theories for defendants who lack primary fiduciary duties to the plaintiff entity.