Law360 (December 22, 2021, 5:48 PM EST) — A Seychelles company has asked Delaware Chancery Court for an emergency order compelling Dentons LLP’s release of seized shares in electric car maker Lucid Group — potentially worth more than $450 million — that the law firm tied up last year to secure payment for an undisclosed engagement.
The motion filed Tuesday by Pisces Co. Ltd. and Lucid accused Dentons of convincing Chancery Court to order some 11.9 million shares of common stock in Lucid sequestered on Sept. 28. The Lucid shares were issued with the conversion of preferred shares in its predecessor, Atieva Inc., when Lucid was taken public in July in a $4.5 billion special purpose acquisition company or SPAC deal with Churchill Capital IV Corp.
Dentons sued in August for Lucid stock certificates reflecting the Atieva conversion, citing obligations linked to an earlier, unspecified engagement. Pisces said in its emergency motion that Dentons indicated it might agree to release about 85% of the shares, depending on the timing. All the securities are under a no-trading “lockup” agreement, however, until Jan. 18.
“If Pisces is delayed in monetizing the seized shares past this date, it risks the potential loss of tens of millions of dollars which would be irreparable — either Dentons would not have the resources to reimburse Pisces for these losses, or, even worse, there is no one to whom Pisces could look to compensate it for these losses,” the emergency order said.
“On information and belief,” the emergency motion noted,”even a 10% loss of value is larger than Dentons could pay to make Pisces whole.”
Pisces argued that Lucid’s stock has been “extremely volatile,” trading in a range of $9.67 to $64.86 per share in the past year. The price ranged around $39 on Wednesday, about two weeks after Lucid reported that the Securities and Exchange Commission had requested documents on the SPAC deal.
Included in the motion was a call for an order requiring Dentons to post a bond for any shares retained pending court resolution of disputes over Pisces’ obligations, with the rest of the shares to be released.
Dentons and counsel for Pisces did not immediately respond to a request for comment, and much of the genesis of the case remains murky.
Although the heavily redacted case documents blocked out all details of the services that led to Dentons’ assertion of a right to the shares, they did show some connections.
Exhibits included with Dentons’ complaint in August linked the claim to the Atieva shares to UCC financing statements and lien acknowledgements that listed as collateral “security interest in Series C preferred shares (the “Atieva Shares”) of Atieva Inc., dba Lucid Motors, an exempted company incorporated with limited liability under the laws of the Cayman Islands.”
The interest secured related to a July 20, 2018, engagement letter, the UCC document said, involving Pisces, Dentons and Shanghai Qichengyueming Investment Partnership Enterprise. Both Pisces and Shanghai Qichengyueming were listed at the same address in Shanghai.
Although not mentioned in the litigation, Dentons represented Shanghai Qichengyueming in litigation in the U.S. District Court for the Central District of California in 2018 against former billionaire Jia Yueting, then the top executive at Los Angeles-based startup Faraday Future.
Jia later sought Chapter 11 protection in Delaware, in a case that also saw Dentons make an appearance. In the California district court case, Shanghai Qichengyueming sought enforcement of a $100 million award, including interest, issued by the China International Economic and Trade Arbitration Commission.
Dentons’ complaint said that the firm had “successfully recovered” the Atieva shares, had both a financial and a security interest in them and had physical possession of “the share certificate,” but redacted details.
All outstanding shares of Atieva were converted to class A shares of Churchill through the SPAC deal. The Lucid name was ultimately adopted after the SPAC transaction. Dentons sued for issuance of new shares of Lucid issued in Pisces’ name, with Dentons’ interest recorded in the process.
Pisces, in a brief supporting the petition for release, argued that Dentons failed to seek or secure any authorizing judgment from the court for the securities, which carry transfer restrictions prohibiting the law firm’s sequestration.
Dentons, Pisces said, relied upon an acknowledgement that amounted to no more than an “agreement to agree,” adding: “With regard to the disposition of the Atieva shares, the acknowledgement is devoid of any ‘material and essential terms’ and leaves almost everything ‘to be agreed upon as the result of future negotiations,” undermining claimed rights to the securities.
Dentons US LLP is represented by Rolin P. Bissell, Paul J. Loughman and M. Paige Valeski of Young Conaway Stargatt & Taylor LLP.
Pisces Co. Ltd. is represented by Peter B. Ladig of Bayard PA.
The case is Dentons US LLP v. Lucid Group Inc., et al., case number 2021-0665, in the Court of Chancery of the State of Delaware.
–Editing by Robert Rudinger.
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