In Cytotheryx, Inc. v. Castle Creek Biosciences, Inc., C.A. No. 2023-1142-PAW (Del. Ch. Nov. 10, 2025), the Delaware Court of Chancery (Superior Court Judge Patricia Winston, sitting by designation) sustained defamation and defamation per se counterclaims arising from a press release issued by the plaintiff during a pending merger dispute. The decision underscores a growing reality in M&A litigation: when deal participants take their disputes to the public arena, defamation claims can follow.
Increasingly, defamation is becoming part of the M&A litigation playbook—particularly when disputes spill beyond the pleadings and into press releases, investor communications, or other public statements. In that setting, defamation claims can serve as both a sword and a shield—reshaping leverage, broadening discovery, complicating forum strategy, and transforming what might otherwise be a straightforward contract case into a more complex and expensive proceeding.
When a deal dispute moves from the courtroom to the press, the consequences can extend well beyond public relations. Because defamation claims typically carry a right to a jury trial, an incautious public statement may shift the trajectory of a case—potentially moving it from a bench trial on contract claims in the Court of Chancery to a jury trial on tort claims in the Delaware Superior Court.[1] In that sense, a communications strategy is not merely reputational; it can materially affect litigation posture.
The Cytotheryx dispute arose from a 2021 transaction in which Cytotheryx sold its majority interest in a biotech startup to Castle Creek. Three years later, Cytotheryx filed suit alleging fraud and promissory estoppel based on purported misrepresentations during negotiations. After surviving a motion to dismiss, Cytotheryx issued a press release stating, in part:
Castle Creek and its parent responded with defamation counterclaims.
Judge Winston denied Cytotheryx’s motion to dismiss, holding that the press release was reasonably susceptible to a defamatory meaning on two independent grounds. First, the reference to “misrepresentations” could reasonably be understood as an assertion that Castle Creek lied during negotiations—an allegation that, if false, is sufficient to support a libel claim. Second, the statements regarding financial stability and contractual adherence could be interpreted to imply either that Castle Creek had the ability to pay but intentionally chose not to, or that it was financially unstable. If untrue, such assertions could unjustifiably deter potential business partners, suppliers, or investors, causing reputational harm sufficient to support a defamation claim.
The court rejected several familiar defenses at the pleading stage. Although the truth of the otherwise defamatory statement is often a defense to defamation claims, the court declined to dismiss the claims on that basis, reiterating that only in the “rare case” can a defamation claim be dismissed on truth grounds at the outset. It also held that whether a party lied or is financially stable are “objectively verifiable” facts, not protected opinions. And although the press release concerned ongoing litigation, the court concluded that the absolute litigation privilege did not apply because the statements went beyond summarizing allegations in court filings. The court explained that the privilege generally “does not extend to statements made outside of the course of the judicial proceedings, such as in a press release.”
Cytotheryx is a cautionary reminder that litigation and public-relations strategies must be aligned from the outset of a dispute. Statements made outside the four corners of a complaint and not otherwise made during a judicial proceeding may carry independent legal risk—particularly when they include unqualified assertions about objectively verifiable facts, such as an adversary’s financial condition.[3] As M&A disputes increasingly unfold in parallel both in court and in the press, defamation claims are no longer outliers. They provide a vehicle to expand a contract case into collateral issues, introduce jury-trial dynamics, and expose parties to additional discovery burdens and damages theories.
For litigators and in-house counsel alike, the lesson is clear: build communications review into dispute-response protocols and treat public statements during active litigation with the same rigor as court filings. In high-stakes deal litigation, what is said outside the courtroom may ultimately shape what happens inside it.
[1] Judge Winston addressed these issues by noting that all parties had expressly waived their right to a jury trial.
[2] Cytotheryx, Inc. v. Castle Creek Biosciences, Inc.,C.A. No. 2023-1142-PAW, Docket 28 Ex. C.
[3] Delaware courts have, in some circumstances, extended the litigation privilege to certain out-of-court communications—such as demand letters—made to address the parties’ disputes. See, e.g., Feenix Payment Sys., LLC v. Blum, 2022 WL 215026 (Del. Super. Jan. 25, 2022); BRP Hold Ox, LLC v. Chilian, 2018 WL 5734648 (Del. Super. Oct. 31, 2018). Those circumstances were not present in Cytotheryx, which involved a public press release.
