(Westlaw) The Delaware Chancery Court has dismissed a stockholder lawsuit challenging the 2021 merger of a special purpose acquisition company with fitness and health company The Beachbody Co. Group LLC, ruling the claims were filed too late.
Reilly v. Horn et al., No. 2024-0654, 2025 WL 2781735 (Del. Ch. Sept. 30, 2025).
Vice Chancellor Lori W. Will said in a Sept. 30 opinion that the lawsuit was barred by the doctrine of laches because the three-year clock for the plaintiff’s claims began ticking May 28, 2021, when the allegedly deficient proxy statement for the merger was disseminated.
Because the suit was filed June 14, 2024, it was untimely, the opinion said.
A ‘now-familiar story’
The case presented a “now-familiar story” of SPAC litigation, in which a shareholder accuses conflicted fiduciaries of impairing redemption rights through a misleading proxy, Vice Chancellor Will wrote.
Bryan Reilly’s complaint alleged that directors and officers of Forest Road Acquisition Corp. breached their fiduciary duties to him and other investors in the SPAC. The complaint said the defendants pushed through a “value-destroying merger” with Beachbody by issuing a proxy that contained material misstatements and omissions.
According to the suit, the proxy failed to disclose a more conservative set of “base case” financial projections prepared by Forest Road and its financial advisers.
It also allegedly omitted key details about the “December Sale,” in which certain Beachbody insiders sold equity to the company’s largest shareholder and other investors at a $1.5 billion valuation. The valuation was about half the $2.9 billion valuation used in the final merger agreement, the complaint said.
The plaintiff claimed these omissions prevented shareholders from making an informed decision about whether to redeem their shares for approximately $10 each or invest in the post-merger company.
Claims barred by laches
The defendants moved to dismiss the suit on several grounds, but the vice chancellor said their timeliness argument was dispositive.
A breach-of-fiduciary-duty claim “accrues at the moment of the wrongful act,” which in this case was the issuance of the proxy statement, Vice Chancellor Will explained. The plaintiff’s “informational injury” occurred when the allegedly misleading proxy tainted the shareholder decision-making process, not at a later date when financial losses may have materialized, the opinion said.
The vice chancellor rejected Reilly’s argument that the claims could not have accrued until the redemption deadline passed. This logic, she wrote, “would create an untenable result where stockholders could not sue to correct a flawed proxy before a vote.”
The opinion also noted that the complaint itself pleads facts demonstrating Reilly was on “inquiry notice” of potential wrongdoing from the proxy’s public disclosures. By highlighting omissions related to the December Sale and the net cash per share value, the complaint showed that a “reasonably diligent stockholder would have been spurred to inquire into whether the defendants had been forthright” when the proxy was issued, the vice chancellor concluded.
Because the claims were time-barred, the court granted the defendants’ motion and dismissed the complaint with prejudice.
Attorneys from Grant & Eisenhofer PA and Bronstein, Gewirtz & Grossman LLC represented Reilly. The defendants were represented by attorneys from DLA Piper LLP.