Founder Vishal Garg has sued Better Home & Finance Holding Co., interim CEO Daniel Lewis and six fellow board members, alleging they illegally entrenched themselves after ousting him as CEO.
The complaint, filed in the Delaware Court of Chancery on Tuesday, brings three counts — breach of fiduciary duty and two claims for declaratory judgment — and asks the court to invalidate the board’s so-called poison pill and special committee formation. Garg argues these moves were adopted as a pretext to thwart shareholders’ voting rights.
A spokesperson for Better did not immediately reply to HousingWire‘s request for comment.
Garg alleges that “through lies and manipulation,” activist hedge fund manager Lewis, founder of Orange Capital, “maneuvered his way” onto Better’s board on July 27, then convinced the board to terminate Garg as CEO without notice or cause on Aug. 3.
According to the complaint, Better’s stock is down nearly 60% since Garg’s ouster, with large stockholders rebelling against the board’s actions and demanding his return. Lewis, meanwhile, “was vacationing in Provence, France,” the complaint states.
The suit claims the company offered Garg a position as vice chairman and advisor to the CEO, which included a cash component of $750,000 per year and an equity award of 875,000 shares, worth more than $15 million over a 16-month period. But he said he declined the offer because the role was limited in scope and responsibility.
The next day, on Aug. 7, two directors allegedly offered a different deal: They and two other directors would resign, giving Garg two board seats to oust Lewis, if Garg could demonstrate 50.1% stockholder support.
Garg said he gathered the consents but, due to an administrative error based on data the company itself had provided, he overstated his support — claiming 51.65% when he actually held roughly 45%.
On Aug. 18, Better sued Garg in the U.S. District Court for the Southern District of New York, alleging he engaged in “unlawful solicitation” and committed related disclosure violations. On Tuesday, Garg filed an opposition to Better’s motion for a preliminary injunction and temporary restraining order, arguing the action “is without merit.”
Garg also challenges the formation of a special committee that excluded him, which then adopted a poison pill on Aug. 20 with a 15% ownership trigger, payable Aug. 31.
Garg attacked the pill as overly broad — particularly a vague provision that aggregates the shares of anyone with an undefined “agreement, arrangement or understanding (whether or not in writing).” He argues this chills stockholders from even communicating with one another, along with the board’s “sole discretion” to waive violations.
