Cases
SeaStar Medical Holding Corp
Corporate Governance / Derivative
Overview
Overview
- Date:
- 12/16/2024
- Company Name:
- SeaStar Medical Holding Corp
- Stock Symbol:
- ICU
- Class Period:
- FROM 10/31/2022 TO 3/26/2024
- Status:
- Filed
- Filing Date:
- 7/5/2024
- Court:
- U.S. District Court: Southern District of New York
Bragar Eagel & Squire, P.C., a nationally recognized shareholder rights law firm, is investigating potential claims against SeaStar Medical Holding Corp (NASDAQ: ICU) on behalf of long-term stockholders following a class action complaint that was filed against SeaStar on July 5, 2024 with a Class Period from October 31, 2022 to March 26, 2024. Our investigation concerns whether the board of directors of SeaStar have breached their fiduciary duties to the company.
SeaStar initially operated as a special purpose acquisition company ("SPAC") under the name LMF Acquisition Opportunities, Inc.
On April 22, 2022, the Company, then still operating as a SPAC, and SeaStar Medical, Inc. ("Legacy SeaStar"), a medical technology company developing extracorporeal therapies to reduce the consequences of excessive inflammation on vital organs, jointly announced that they had entered into a merger agreement (the "Merger Agreement"). As contemplated under the Merger Agreement, the combined company would be known as "SeaStar Medical Holding Corporation" and would operate under the same management team as Legacy SeaStar, with all Legacy SeaStar shares owned by Legacy SeaStar's existing equity holders to be converted into Class A Common Stock of the combined company (the "Merger").
The Company and Legacy SeaStar touted the overall prospects of the combined company following the Merger, asserting that Legacy SeaStar had an enterprise value of approximately $85 million, while highlighting Legacy SeaStar's Selective Cytopheretic Device ("SCD") for the treatment of hyperinflammation and the SCD's regulatory and commercial prospects. For example, the companies announced that Legacy SeaStar intended to submit an application for its SCD for approval with the U.S. Food and Drug Administration ("FDA") under the Humanitarian Device Exemption ("HDE") to commence commercialization for the treatment of pediatric acute kidney injury ("AKI"). Moreover, the companies announced that the Merger had already been unanimously approved by both Legacy SeaStar and the Company's Boards of Directors and that the holders of a majority of Legacy SeaStar's voting power had likewise already approved the Merger, with the Merger subject to final approval by stockholders of the Company and other customary closing conditions.
On July 20, 2022, the Company and Legacy SeaStar jointly announced that Legacy SeaStar had submitted an application under the HDE (the "HDE Application") to the FDA for use of Legacy SeaStar's SCD for critically ill children with AKI, which purportedly "follow[ed a] successful pilot study demonstrating the SCD was safe with probable clinical benefits for pediatric patients[.]"
On October 17, 2022, the Company, Legacy SeaStar, and Vellar Opportunity Fund SPV LLC - Series 4 ("Vellar") entered into an agreement (the "Prepaid Forward Agreement") for an equity prepaid forward transaction. The terms of the Prepaid Forward Agreement permitted Vellar to purchase through a broker in the open market shares of Class A common stock, par value $0.0001 per share, of the Company (together with the shares of common stock of the post-Merger Company) from holders of those shares, other than the Company or affiliates of the Company.
On October 18, 2022, following purported positive regulatory developments for the SCD, as announced by the Company and Legacy SeaStar following the unveiling of the Merger, the Company's stockholders voted to approve the Merger.
On October 28, 2022, the Company and Legacy SeaStar consummated the Merger pursuant to the Merger Agreement, whereby a wholly owned subsidiary of the Company, LMF Merger Sub, Inc. ("Merger Sub"), merged with and into Legacy SeaStar, with Legacy SeaStar surviving that merger as a wholly owned subsidiary of the Company. As a result of the Merger, Legacy SeaStar's business, operations, and management became the Company's business, operations, and management, and the Company renamed itself "SeaStar Medical Holding Corporation."
The following trading day, October 31, 2022, the Company's common stock and warrants began publicly trading on the Nasdaq Stock Market under the ticker symbols "ICU" and "ICUCW," respectively.
The Complaint alleges that, throughout the Class Period, Defendants made materially false and misleading statements regarding the Company's business, operations, and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) SeaStar and/or Legacy SeaStar had deficient compliance controls and procedures related to the HDE Application; (ii) accordingly, there were deficiencies with the HDE Application, the FDA was unlikely to approve the HDE Application in its present form, and the SCD's regulatory prospects were overstated; (iii) the Company had downplayed the true scope and severity of deficiencies in its financial controls and procedures, while overstating Defendants' efforts to remediate the same; (iv) accordingly, SeaStar had failed to properly account for the classification of certain outstanding warrants and the Prepaid Forward Agreement; (v) as a result, SeaStar was likely to restate one or more of its previously issued financial statements; (vi) accordingly, SeaStar's post-Merger business and financial prospects were overstated; and (vii) as a result, the Company's public statements were materially false and misleading at all relevant times.
On May 9, 2023, SeaStar announced that it had received a letter from the Center for Biologics Evaluation and Research of the FDA, rejecting the Company's HDE application for its pediatric SCD because "the application [wa]s not approvable in its current form[.]" SeaStar's Chief Executive Officer, Defendant Eric Schlorff ("Schlorff"), also disclosed that the Company had engaged in "a series of [purported] collaborative meetings and correspondence over the past 10 months" with the FDA, had made repeated responses "to the Agency's recommendations," and that there were "current deficiencies cited by the Agency in their letter[.]"
On this news, SeaStar's stock price fell $0.77 per share, or 39.69%, to close at $1.17 per share on May 10, 2023.
Then, on March 27, 2024, SeaStar announced that it would restate its financial statements for the fiscal year ended December 31, 2022, as well as for the interim periods ended March 31, 2023, June 30, 2023, and September 30, 2023 (the "Affected Periods"). The Company disclosed that the restatement would impact the accounting treatment and classification of certain outstanding warrants and the Prepaid Forward Agreement. Defendant Schlorff further disclosed that "[t]he restatement . . . is related to the reporting of non-cash accounting items," noting that "[w]e pursued a [SPAC] as our route to become a public company in late 2022 due to the challenging market conditions at that time," but that, "[m]any SPACs, including ours, relied on a host of complex financial instruments" and, "[u]nfortunately, we determined that certain complex financial instruments required accounting treatment that differed from our previous judgment, which led to the need for a restatement."
On this news, SeaStar's stock price fell approximately $0.04 per share, or 4.84%, to close at approximately $0.71 per share on March 27, 2024.
If you are a long-term stockholder of SeaStar, have information, would like to learn more about these claims, or have any questions concerning this announcement or your rights or interests with respect to these matters, please contact Brandon Walker or Marion Passmore by email at investigations@bespc.com, by telephone at (212) 355-4648, or by filling out the form below. There is no cost or obligation to you.
SeaStar initially operated as a special purpose acquisition company ("SPAC") under the name LMF Acquisition Opportunities, Inc.
On April 22, 2022, the Company, then still operating as a SPAC, and SeaStar Medical, Inc. ("Legacy SeaStar"), a medical technology company developing extracorporeal therapies to reduce the consequences of excessive inflammation on vital organs, jointly announced that they had entered into a merger agreement (the "Merger Agreement"). As contemplated under the Merger Agreement, the combined company would be known as "SeaStar Medical Holding Corporation" and would operate under the same management team as Legacy SeaStar, with all Legacy SeaStar shares owned by Legacy SeaStar's existing equity holders to be converted into Class A Common Stock of the combined company (the "Merger").
The Company and Legacy SeaStar touted the overall prospects of the combined company following the Merger, asserting that Legacy SeaStar had an enterprise value of approximately $85 million, while highlighting Legacy SeaStar's Selective Cytopheretic Device ("SCD") for the treatment of hyperinflammation and the SCD's regulatory and commercial prospects. For example, the companies announced that Legacy SeaStar intended to submit an application for its SCD for approval with the U.S. Food and Drug Administration ("FDA") under the Humanitarian Device Exemption ("HDE") to commence commercialization for the treatment of pediatric acute kidney injury ("AKI"). Moreover, the companies announced that the Merger had already been unanimously approved by both Legacy SeaStar and the Company's Boards of Directors and that the holders of a majority of Legacy SeaStar's voting power had likewise already approved the Merger, with the Merger subject to final approval by stockholders of the Company and other customary closing conditions.
On July 20, 2022, the Company and Legacy SeaStar jointly announced that Legacy SeaStar had submitted an application under the HDE (the "HDE Application") to the FDA for use of Legacy SeaStar's SCD for critically ill children with AKI, which purportedly "follow[ed a] successful pilot study demonstrating the SCD was safe with probable clinical benefits for pediatric patients[.]"
On October 17, 2022, the Company, Legacy SeaStar, and Vellar Opportunity Fund SPV LLC - Series 4 ("Vellar") entered into an agreement (the "Prepaid Forward Agreement") for an equity prepaid forward transaction. The terms of the Prepaid Forward Agreement permitted Vellar to purchase through a broker in the open market shares of Class A common stock, par value $0.0001 per share, of the Company (together with the shares of common stock of the post-Merger Company) from holders of those shares, other than the Company or affiliates of the Company.
On October 18, 2022, following purported positive regulatory developments for the SCD, as announced by the Company and Legacy SeaStar following the unveiling of the Merger, the Company's stockholders voted to approve the Merger.
On October 28, 2022, the Company and Legacy SeaStar consummated the Merger pursuant to the Merger Agreement, whereby a wholly owned subsidiary of the Company, LMF Merger Sub, Inc. ("Merger Sub"), merged with and into Legacy SeaStar, with Legacy SeaStar surviving that merger as a wholly owned subsidiary of the Company. As a result of the Merger, Legacy SeaStar's business, operations, and management became the Company's business, operations, and management, and the Company renamed itself "SeaStar Medical Holding Corporation."
The following trading day, October 31, 2022, the Company's common stock and warrants began publicly trading on the Nasdaq Stock Market under the ticker symbols "ICU" and "ICUCW," respectively.
The Complaint alleges that, throughout the Class Period, Defendants made materially false and misleading statements regarding the Company's business, operations, and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) SeaStar and/or Legacy SeaStar had deficient compliance controls and procedures related to the HDE Application; (ii) accordingly, there were deficiencies with the HDE Application, the FDA was unlikely to approve the HDE Application in its present form, and the SCD's regulatory prospects were overstated; (iii) the Company had downplayed the true scope and severity of deficiencies in its financial controls and procedures, while overstating Defendants' efforts to remediate the same; (iv) accordingly, SeaStar had failed to properly account for the classification of certain outstanding warrants and the Prepaid Forward Agreement; (v) as a result, SeaStar was likely to restate one or more of its previously issued financial statements; (vi) accordingly, SeaStar's post-Merger business and financial prospects were overstated; and (vii) as a result, the Company's public statements were materially false and misleading at all relevant times.
On May 9, 2023, SeaStar announced that it had received a letter from the Center for Biologics Evaluation and Research of the FDA, rejecting the Company's HDE application for its pediatric SCD because "the application [wa]s not approvable in its current form[.]" SeaStar's Chief Executive Officer, Defendant Eric Schlorff ("Schlorff"), also disclosed that the Company had engaged in "a series of [purported] collaborative meetings and correspondence over the past 10 months" with the FDA, had made repeated responses "to the Agency's recommendations," and that there were "current deficiencies cited by the Agency in their letter[.]"
On this news, SeaStar's stock price fell $0.77 per share, or 39.69%, to close at $1.17 per share on May 10, 2023.
Then, on March 27, 2024, SeaStar announced that it would restate its financial statements for the fiscal year ended December 31, 2022, as well as for the interim periods ended March 31, 2023, June 30, 2023, and September 30, 2023 (the "Affected Periods"). The Company disclosed that the restatement would impact the accounting treatment and classification of certain outstanding warrants and the Prepaid Forward Agreement. Defendant Schlorff further disclosed that "[t]he restatement . . . is related to the reporting of non-cash accounting items," noting that "[w]e pursued a [SPAC] as our route to become a public company in late 2022 due to the challenging market conditions at that time," but that, "[m]any SPACs, including ours, relied on a host of complex financial instruments" and, "[u]nfortunately, we determined that certain complex financial instruments required accounting treatment that differed from our previous judgment, which led to the need for a restatement."
On this news, SeaStar's stock price fell approximately $0.04 per share, or 4.84%, to close at approximately $0.71 per share on March 27, 2024.
If you are a long-term stockholder of SeaStar, have information, would like to learn more about these claims, or have any questions concerning this announcement or your rights or interests with respect to these matters, please contact Brandon Walker or Marion Passmore by email at investigations@bespc.com, by telephone at (212) 355-4648, or by filling out the form below. There is no cost or obligation to you.
Contact Instructions
Please contact Brandon Walker by email at investigations@bespc.com with any questions about this case.
The individual or institution below (“Plaintiff”) has reviewed and agrees to the Bragar Eagel & Squire, P.C. (“BESPC”) retainer agreement and authorizes BESPC to prosecute an action on Plaintiff’s behalf under the federal securities laws or applicable state laws to recover damages on behalf of investors in SeaStar Medical Holding Corp. BESPC will prosecute the action on a full contingency basis and will forward all costs and expenses.
Case Updates
Retainer Agreement
This will confirm that you have retained Bragar Eagel & Squire, P.C. (“BESPC”) to represent you in connection with potential litigation against SeaStar Medical Holding Corp (the “Company”) and its directors and officers. BESPC has conducted an investigation and believes that there is a valid basis to assert claims against the Company and its directors and/or officers for breach of fiduciary duties and other applicable laws.
In making this agreement, BESPC is relying upon your representation that you held the Company’s shares during the period from 10/31/2022 to 3/26/2024 (the “Relevant Period”) and that you continue to hold Company shares. Please provide us with documentation of your trading history in the Company’s stock by emailing a relevant copies of your brokerage statements to investigations@bespc.com. If you have any questions or need assistance, please call us at (212) 308-5858.
The terms under which we will represent you and your responsibilities as a potential representative plaintiff are set forth below.
You will have an obligation to remain knowledgeable about the litigation and participate in decisions concerning the progress of the litigation. If BESPC is appointed as lead counsel or in a similar capacity in the action, we will provide you with copies of all pleadings in the litigation for your review and approval, circumstances permitting, before they are filed with the court. BESPC will also promptly advise you of any significant developments in the litigation.
As a representative plaintiff, you cannot have any interest antagonistic to or in conflict with other shareholders or the Company concerning the claims we are pursuing or any relationships with any of the named defendants that would in any way impair your ability or incentive to obtain the best possible result. You agree that neither you nor any of your affiliates or agents will trade stocks while in the possession of any material non-public information you may receive in connection with the litigation. In addition, as a representative plaintiff, you may be required to continue holding Company shares. Please contact us before buying or selling Company shares.
BESPC will prosecute this litigation on a contingency basis. You will not be responsible for paying any legal fees, costs, or out-of-pocket expenses arising out of or related to the prosecution of this litigation, regardless of the outcome of the matter. If there is a monetary recovery in this action, BESPC will, at the conclusion of the litigation or any segment thereof, apply to the court for approval of an award of attorneys’ fees and reimbursement of expenses. BESPC may also seek a fee if we obtain substantial non-monetary relief for the Class or the Company. The court will then award fees and disbursements (if any) from the proceeds of any judgment or settlement obtained in this litigation, based on factors considered relevant by the court. Such fees, costs, and disbursements will be paid from the entire settlement amount and not only from your share of the settlement amount.
BESPC may associate with other counsel to assist in the prosecution of this litigation. Any recovery of fees and costs will be shared with such counsel, determined on a percentage basis or based upon the time spent on the matter, as approved by the court if applicable. The division of work and or fees among co-counsel will not affect the amount of fees received upon a successful completion of the litigation. From time to time, BESPC may utilize contract attorneys to supplement the work of its own employed attorneys. BESPC will supervise the work of all contract attorneys and adopt their work product as its own. You authorize BESPC, as we deem appropriate, to associate with other counsel and to hire experts and consultants to assist in the handling of your claims.
It is possible that you will not be appointed as a lead plaintiff in the action. However, we may wish to represent you in other litigation related to the wrongful acts giving rise to this case. In such event, we will contact you to discuss the scope of such representation and obtain your approval before moving forward. You also agree that we may contact you with respect to other potential matters on your behalf.
BESPC will consult with you regarding any settlement negotiations and seek to obtain your approval for any proposed resolution of this litigation before entering into a final settlement agreement with defendants.
You expressly acknowledge that we have not made any representation to you, express or implied, concerning the outcome of any litigation or other matter in which we represent you.
If you are not chosen as a representative plaintiff and we do not choose to pursue other related litigation on your behalf, we will provide you with notification and this Agreement shall terminate. Otherwise, this Agreement shall remain in effect until the conclusion of the relevant litigation. However, you may terminate this Agreement at any time.
Upon termination, BESPC’s files and papers compiled in connection with its investigation and prosecution of this matter constitute the work product and property of BESPC over which it has complete control with respect to its use and/or disclosure.
This agreement sets forth the entire agreement between the parties and supersedes all other oral or written communications.
Please feel free to contact us at any time should you have any questions or comments in this regard.
In making this agreement, BESPC is relying upon your representation that you held the Company’s shares during the period from 10/31/2022 to 3/26/2024 (the “Relevant Period”) and that you continue to hold Company shares. Please provide us with documentation of your trading history in the Company’s stock by emailing a relevant copies of your brokerage statements to investigations@bespc.com. If you have any questions or need assistance, please call us at (212) 308-5858.
The terms under which we will represent you and your responsibilities as a potential representative plaintiff are set forth below.
Your Responsibilities as a Representative Plaintiff
As a representative plaintiff, you will have a duty to represent the interests of similarly situated shareholders and to participate in the prosecution of this litigation. You may also be asked to provide documents concerning your trading in Company stock and may be asked to sit for a deposition. Accordingly, you should preserve all documents that relate to this case until it has concluded or we inform you otherwise. Relevant documents include any information you have about the Company or your trading in Company stock, no matter how it is recorded or who is keeping it for you. If you have any questions about whether information should be retained, please contact us.You will have an obligation to remain knowledgeable about the litigation and participate in decisions concerning the progress of the litigation. If BESPC is appointed as lead counsel or in a similar capacity in the action, we will provide you with copies of all pleadings in the litigation for your review and approval, circumstances permitting, before they are filed with the court. BESPC will also promptly advise you of any significant developments in the litigation.
As a representative plaintiff, you cannot have any interest antagonistic to or in conflict with other shareholders or the Company concerning the claims we are pursuing or any relationships with any of the named defendants that would in any way impair your ability or incentive to obtain the best possible result. You agree that neither you nor any of your affiliates or agents will trade stocks while in the possession of any material non-public information you may receive in connection with the litigation. In addition, as a representative plaintiff, you may be required to continue holding Company shares. Please contact us before buying or selling Company shares.
Contingency Fee and Advancement of Expenses
BESPC will prosecute this litigation on a contingency basis. You will not be responsible for paying any legal fees, costs, or out-of-pocket expenses arising out of or related to the prosecution of this litigation, regardless of the outcome of the matter. If there is a monetary recovery in this action, BESPC will, at the conclusion of the litigation or any segment thereof, apply to the court for approval of an award of attorneys’ fees and reimbursement of expenses. BESPC may also seek a fee if we obtain substantial non-monetary relief for the Class or the Company. The court will then award fees and disbursements (if any) from the proceeds of any judgment or settlement obtained in this litigation, based on factors considered relevant by the court. Such fees, costs, and disbursements will be paid from the entire settlement amount and not only from your share of the settlement amount.
Association with Counsel
BESPC may associate with other counsel to assist in the prosecution of this litigation. Any recovery of fees and costs will be shared with such counsel, determined on a percentage basis or based upon the time spent on the matter, as approved by the court if applicable. The division of work and or fees among co-counsel will not affect the amount of fees received upon a successful completion of the litigation. From time to time, BESPC may utilize contract attorneys to supplement the work of its own employed attorneys. BESPC will supervise the work of all contract attorneys and adopt their work product as its own. You authorize BESPC, as we deem appropriate, to associate with other counsel and to hire experts and consultants to assist in the handling of your claims.
Other Actions
It is possible that you will not be appointed as a lead plaintiff in the action. However, we may wish to represent you in other litigation related to the wrongful acts giving rise to this case. In such event, we will contact you to discuss the scope of such representation and obtain your approval before moving forward. You also agree that we may contact you with respect to other potential matters on your behalf.No Special Treatment
You understand that in the event we secure a recovery, you will not receive any special treatment or receive a greater share of any recovery based on your service as a named plaintiff. However, we may ask the Court to approve an additional award to you to compensate you for the time and effort you expend on this matter. Any such award is solely within the discretion of the Court.
Settlement
BESPC will consult with you regarding any settlement negotiations and seek to obtain your approval for any proposed resolution of this litigation before entering into a final settlement agreement with defendants.
No Guarantee of Success
You expressly acknowledge that we have not made any representation to you, express or implied, concerning the outcome of any litigation or other matter in which we represent you.
Termination of This Agreement
If you are not chosen as a representative plaintiff and we do not choose to pursue other related litigation on your behalf, we will provide you with notification and this Agreement shall terminate. Otherwise, this Agreement shall remain in effect until the conclusion of the relevant litigation. However, you may terminate this Agreement at any time. Upon termination, BESPC’s files and papers compiled in connection with its investigation and prosecution of this matter constitute the work product and property of BESPC over which it has complete control with respect to its use and/or disclosure.
This agreement sets forth the entire agreement between the parties and supersedes all other oral or written communications.
Please feel free to contact us at any time should you have any questions or comments in this regard.