Akin Secures Victory for Armistice Capital Obtaining Dismissal of a Shareholder Derivative Action

(New York) – Akin has secured a significant victory on behalf of Armistice Capital at the Court of Chancery of Delaware in the case, Paul Witmer. v. Armistice Capital Master Fund Ltd. et al.  

On August 14, 2025, Vice Chancellor Morgan T. Zurn granted a motion to dismiss all claims with prejudice that were asserted against Armistice Capital (Armistice), including breach of fiduciary duty, insider trading, aiding and abetting and unjust enrichment. At issue were allegations made by the Plaintiff, Aytu BioPharma (Aytu) stockholder Paul Witmer, who alleged that Armistice controlled Aytu and improperly influenced—and benefited from—two transactions involving acquisitions of Armistice-affiliated entities (the “Challenged Transactions”). The Plaintiff also alleged that Armistice engaged in insider trading by selling Aytu shares shortly after the company announced it had entered into a distribution agreement for a COVID-19 rapid test. 

Vice Chancellor Zurn agreed with Armistice Capital, granting its motion to dismiss all claims with prejudice. The Court reasoned that Plaintiff failed to plead facts showing that Armistice dominated the Board’s decision-making, or that Armistice’s board designee tainted, or even participated in, the process of approving the Challenged Transactions. The Court also held that Delaware law does not impose fiduciary duties on stockholders based solely on access to confidential information. On the aiding and abetting claim, the Court held that Plaintiff failed to plead that Armistice knowingly participated in the alleged breaches, reasoning that mere silence or passive awareness of board-level decisions was insufficient. Finally, the Court agreed with Armistice that the unjust enrichment claim was duplicative of the breach of fiduciary duty claim. 

The Akin team was led by investment funds litigation head Doug Rappaport and investment funds litigation partner Kate Shapiro, and included litigation counsel Aleaa Stanton, and associates Fatima Bishtawi and Madeleine Freeman.  

This win marks Akin’s third victory for Armistice Capital in the past sixteen months, winning summary judgment in Roth v. Armistice Capital in the Southern District of New York in March 2024 and securing a jury trial win in Revive Investing LLC et al. v. Armistice Capital Master Fund Ltd. et al. at the U.S. District Court for the District of Colorado where the jury found Armistice Capital exempt from a law that would require it to return $11 million in profits from the short-swing trades of Aytu BioPharma’s stock.  

Akin is a leading international law firm with more than 900 lawyers in offices throughout the United States, Europe, Asia and the Middle East.  

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