A Delaware court has awarded $1,164,976.16 in attorneys' fees to Neem International CV after finding that defendant Vadim Shulman acted in bad faith during litigation. This decision stems from a complex case involving corporate misconduct and financial distress at Pathway Genomics Corporation, where Shulman was the largest outside investor.
The court's ruling, issued on July 30, 2026, comes after a lengthy legal battle that began in February 2022. The case highlights issues of fiduciary duty and corporate governance, particularly in how Shulman managed Pathway's assets and the actions he took without board approval.
In the original dispute, Neem International and other plaintiffs accused Shulman of orchestrating a sham foreclosure sale to acquire Pathway’s assets, disregarding the plaintiffs' contractual rights. The court found that Shulman had engaged in egregious conduct, including manufacturing board approvals and forging documents, which ultimately led to the plaintiffs losing their liquidation preferences.
Background
The case, Neem International CV et al. v. Vadim Shulman et al., C.A. No. 2022-0187-LWW, centers around Pathway Genomics Corporation, a startup that faced severe financial difficulties. Shulman, who was initially a passive investor, took control of the company, leading to a series of unauthorized actions that harmed the plaintiffs' interests.
Shulman's actions included directing corporate officers to sign security agreements without board approval and staging a foreclosure sale that effectively wiped out the plaintiffs' claims to the company's assets. The plaintiffs filed a lawsuit against Shulman, asserting multiple claims, including breach of fiduciary duty and seeking equitable restitution.
After a trial, the court ruled in favor of the plaintiffs on one direct claim for breach of the liquidation preference, awarding them $1,849,437.93. However, the court also found that ten of the plaintiffs' derivative claims were invalid due to a lack of standing, as Pathway's corporate charter was void due to unpaid franchise taxes.
The Ruling
The court ruled on the plaintiffs' motion for attorneys' fees, costs, and expenses, which totaled $3,530,230.80. Shulman opposed the motion, arguing that the fees were disproportionate to the plaintiffs' limited success. The court ultimately granted the motion in part, awarding one-third of the requested fees.
The court stated, "The record provides clear evidence that Shulman engaged in an extraordinary pattern of subjective bad faith."
Vice Chancellor Lori W. Will presided over the case and noted that under Delaware law, the American Rule generally requires parties to bear their own attorneys' fees. However, exceptions exist, particularly when a party acts in bad faith. The court found that Shulman’s actions before and during litigation justified the fee award.
The court emphasized that Shulman's conduct was not merely a breach of contract but involved extreme disloyalty and manipulation of corporate governance processes. This included coercing board approvals and obstructing the discovery process, which forced the plaintiffs to incur significant legal costs to uncover the truth.
Impact
This ruling is significant as it reinforces the principle that parties engaging in bad faith conduct can be held accountable for the costs incurred by their opponents. The court's decision to award fees in this case underscores the importance of corporate governance and the responsibilities of fiduciaries to act in the best interests of all stakeholders.
The award of $1,164,976.16 serves as a reminder that courts can impose financial consequences for egregious behavior in corporate settings. This case may influence future litigation involving corporate misconduct and fiduciary duties, particularly in Delaware, which is known for its corporate law framework.
What's Next
Shulman has the option to appeal the court's ruling, although details regarding any potential appeal were not available in the court filing. There may also be related cases pending that stem from the same corporate governance issues at Pathway Genomics Corporation.