An attorney for former investors in urgent care provider CityMD urged Delaware's Supreme Court on Wednesday to reverse a lower court's dismissal of claims they were coerced into giving up purported rights to the same consideration a private equity controller received in a 2021 merger.

"This case comes down to a basic principle: You can only change a contract with genuine, voluntary consent," Michael C. Wagner of Labaton Keller Sucharow LLP, counsel to CityMD co-founder Dr. Faiz Khan and Dr. Ralph Finger, a CityMD investor.

Labaton Keller represented the same parties in a Delaware Court of Chancery suit dismissed in May by Vice Chancellor Lori W. Will, who concluded in a decision on appeal Wednesday that private equity Warburg Pincus and other parties owed no fiduciary duties to Khan, Finger and others in connection with alleged disparate treatment of their stake in CityMD in 2022 after two previous mergers.

Kahn and Finger allege that Warburg Pincus unfairly extracted all cash terms for its own stake in CityMD after its merger with Summit Health and subsequent sale to VillageMD, controlled By Walgreens Boots Alliance.

In the deal, WP received cash while the other parties received a mix of cash and equity, despite what Wagner said were assurances that the others would have "tag-along" rights to the same cash and consideration.

"Diffuse investors aren't expected to band together" and overcome "coercive procedures that a counterparty imposes on them," Wagner told the justices, arguing that the "Class B" members who appealed were required as part of their unit-holder vote on the merger to consent to waive rights to "tag along" with Warburg and to waive potential claims, at the risk of an effective forfeiture of their claim.

Wagner said investors were told "If you want cash, you need to make an election" and "if you don't act soon you could end up with no cash."

"If they felt coerced, why would they wait a year to complain about it?" Justice Karen L. Valihura asked, referencing a point raised by Vice Chancellor Will in dismissing the Court of Chancery complaint earlier this year.

Wagner said those involved were told they had representation, making them far less likely to act on their own.

"Also, everyone was happy until they were not," Chief Justice Collins J. Seitz observed.

"Everyone was happy until they realized that a fast one had been pulled on them," Wagner said.

According to trial briefs, Walgreens disclosed a $12 billion goodwill impairment charge on VillageMD last year, more than a year after the deal closed, due to downward revisions in the company's long-term forecast that affected the value of the plaintiff's equity.

The impairment charge "significantly harmed the company's minority investors," who took a hit on their equity that would have been potentially smaller had they received the share of cash they alleged they were due, the stockholder's complaint asserted

"The WP Investors were permitted to negotiate and propose a merger that provided different forms of consideration to different members, because they owed no fiduciary duties to the plaintiffs and because they were expressly permitted to act in their own self-interest," attorneys for Warburg argued in a brief.

Sameer Advani of Willkie Farr & Gallagher LLP, counsel to Warburg Pincus and its affiliates, told the justices the overwhelming majority with a stake in the deal supported it.

"Delaware law does not operate as an insurance policy," Advani said. "You cannot use the implied covenant of good faith and fair dealing" as a remedy, or to bring in fiduciary duty concepts "when it's a case of buyer's remorse."

"It sounded more like a problem with the information statement and disclosures," Chief Justice Seitz said. "It's starting to sound like a disclosure case to me."

"Advani said disclosures were not a big part of their appeal," adding that "there's an assertion in passing that the information statement contained false information. I don't think it's actually borne out by the document."

Nathan Taylor of Latham & Watkins LLP, counsel to Walgreens affiliate Village Practice Management Co. LLC, or VillageMD, said the merger agreement "expressly recognized the tag-along right by making it a condition to closing the merger," and that the "agreement itself would not be effective unless a partial roll-over holder voted to amend to permit payment of a differential amount."

Warburg Pincus, however, argued that their investors "did not owe any fiduciary duties to" the CityMD camp or the minority members and were expressly permitted to act in their own self-interest.

Warburg Pincus acquired a majority stake in CityMD in 2017 and merged the business with Summit Medical Group in 2019, before its eventual tie-up with VillageMD.

Vice Chancellor Will found in a 31-page opinion in April that CityMD minority investors who alleged unfair payment terms leaned on "quasi-fiduciary" claims that improperly "injected common law fiduciary duties into a contractual relationship that eliminated them." The decision concluded that counsel for Khan and Ralph failed to sufficiently allege Walgreens, Warburg, and its affiliated entities breached an implied covenant, illegally interfered, or unjustly enriched themselves during a 2022 merger.

The four-count suit alleged breach of the implied covenant of good faith and fair dealing, tortious interference with contractual relations against Warburg, and a similar claim against Walgreens and VillageMD, as well as a claim of unjust enrichment against Warburg investors. A key claim focused on a deal amendment that eliminated minority rights to tag along with Warburg.

Khan and Finger are represented by Ned Weinberger, Michael C. Wagner, John Vielandi and Jiahui (Rose) Wang of Labaton Keller Sucharow LLP.

Warburg Pincus LLC and affiliates are represented by William M. Lafferty, Ryan D. Stottmann and Rachel R. Tunney of Morris Nichols Arsht & Tunnell LLP and Tariq Mundiya, Sameer Advany, Vanessa Richardson and Richard Li of Willkie Farr & Gallagher LLP.

Walgreens Boots Alliance Inc. is represented by Kevin R. Shannon, Christopher N. Kelly and Callan R. Jackson of Potter Anderson & Corroon LLP and Kristen R. Seeger and John M. Skakun III of Sidley Austin LLP.

The case is Faiz Khan et al. v. Warburg Pincus LLC et al., case number 236,2025, in the Supreme Court of the State of Delaware. The case under appeal is 2024-0523, in the Court of Chancery of the State of Delaware.