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In a high-stakes legal showdown that could reshape the trajectory of SPAC-backed ventures, the Delaware Court of Chancery has ruled that most claims in a suit against key figures behind the Archer Aviation $1.7B SPAC deal will proceed to trial. The case alleges a web of overhype, misleading disclosures, and self-enrichment in the electric aircraft maker’s path to going public.

Vice Chancellor Lori W. Will, speaking by teleconference, allowed four out of five counts to move forward after heated April arguments, retaining breach of fiduciary duty and unjust enrichment allegations against a roster that includes billionaire Ken Moelis and his namesake firm, Moelis & Co.

Allegations Take Flight: “Sham” Aircraft Claims and Market Freefall

At the heart of the suit are claims that Moelis and others painted a wildly inflated picture of Archer Aviation’s prospects. Plaintiffs accuse the SPAC sponsors of hyping a futuristic air taxi — the "Midnight" tilt-rotor aircraft — through selectively edited footage and sky-high promises of 150 mph speeds and 60-mile ranges.

But according to the complaint, what investors got instead was a glorified hovercraft. In footage released before the 2021 merger, the prototype only managed to lift a few feet off the ground — a maneuver the plaintiffs say took two years to achieve and barely qualified as a milestone.

Investors who clung to their shares rather than redeeming them for $10 saw them plummet to under $3 by early 2022. The suit claims this nose-dive confirms that the SPAC merger "was nowhere close to being entirely fair."

Moelis and Others Still in the Hot Seat — But Some Walk Free

Vice Chancellor Will dismissed aiding and abetting claims against Archer Aviation, Atlas Crest Investment LLC, and others, citing a lack of “well-pleaded” evidence. “Without any allegations about how Moelis controlled diligence or the negotiation process,” she said, “there's nothing to support” such claims.

However, Moelis & Co., Atlas Crest, and Moelis himself remain exposed to breach of fiduciary duty and unjust enrichment claims. The court accepted the plaintiffs’ argument that critical disclosures were missing, depriving investors of the information needed to make informed redemption decisions.

The case invokes the Chancery Court’s "entire fairness" doctrine, its most rigorous legal standard — requiring both a fair price and process when controllers are involved in contested deals.

A Proxy Statement or a “Treasure Hunt”?

The vice chancellor was particularly skeptical of the defense’s implication that investors could have deduced the aircraft’s limitations. "A proxy statement is not meant to be a treasure hunt," she noted, underscoring the expectation for clarity and transparency.

Dismissed from the case was Todd Lemkin, a former Archer board member. While the plaintiffs tried to tie him to the sponsor, the court ruled that any such connection was “too tenuous.”