Dole CEO, Execs To Pay $114M In Merger Fraud Settlement

By Kat Greene

Law360, Los Angeles (December 7, 2015, 6:33 PM ET) -- Dole Food Co. Inc. CEO David Murdock and several other executives reached a deal Monday to pay investors $114 million over a purported fraud aimed at driving down the company’s price before a 2013 take-private deal, eschewing an appeal of the damages awarded by a Delaware Chancery judge in August.

Murdock will issue a payment to shareholders who held stock in the company during an alleged scheme tied to a go-private deal in which the CEO, who already owned 40 percent of Dole, sought to regain exclusive control of the company at a lower price by selling off businesses and land, according to a stipulation filed in Delaware Chancery Court.

In his August finding that Murcock and General Counsel C. Michael Carter were liable for $148 million to investors, Vice Chancellor J. Travis Laster wrote that although the Dole board's merger committee made a Herculean effort to overcome Murdock and Carter's efforts to keep investors in the dark, it was deprived of information about the company's ability to cut costs and improve income and was unable to negotiate on a fully informed basis to reject the merger offer.

The settlement will pay investors $101 million in damages and $12.5 million in interest, according to the stipulation. The deal would block Murdock and Carter from appealing the August award, according to the filing.

"Subject to the approval of the Court of Chancery and other conditions set forth below … for the good and valuable consideration set forth herein, the litigation shall be finally and fully settled, compromised and dismissed, with prejudice,” the parties wrote in the stipulation.

The defendants also agreed not to oppose the plaintiffs' attorneys' fee application, so long as it’s under 30 percent of the class payment, according to the filing.

Murdock, who had previously taken Dole private in 2003, sold 41 percent of the company in a 2009 initial public offering to pay down the company's debt and loans on some of his real estate ventures. The 2013 buyout followed.

The shareholders claimed Murdock made a series of moves to depress Dole's value before the merger, including the nearly $1.7 billion sale of its Asian business in 2012 to Japan's Itochu Corp. and the CEO’s $300 million sale of the Hawaiian island of Lanai to software mogul Larry Ellison.

The plaintiffs have also claimed Dole’s stock should have been worth more than the $13.50-per-share buyout price, but its value was depressed by pessimistic press releases, a suspended $200 million share repurchase program and an earlier go-private bid at an even lower price.

The settlement follows a nine-day trial earlier this year on Murdock and Carter's conduct during the $1.6 billion go-private deal in which Murdock sought to regain exclusive control of the company known for its fresh bananas and pineapples.

Vice Chancellor Laster then found in August that Murdock and Carter were liable for $148 million, a figure plaintiffs’ attorneys said at the time could climb even higher as interest added up.

The judge found the other defendants in the shareholder suit were not liable. Former CEO David A. DeLorenzo erred by siding with Murdock but did not commit the breaches of fiduciary duty that led to liability, he wrote in the August decision.

Vice Chancellor Laster also rejected the shareholders' effort to impose liability on Murdock's financial adviser and bank, Deutsche Bank Securities Inc. and Deutsche Bank AG, finding that although they acted improperly by favoring Murdock and treating him as the real client, they did not knowingly take part in the breaches leading to liability and their conduct was not causally linked to damages.

Representatives for the parties didn’t immediately respond to requests for comment on Monday.

The shareholders are represented by Stuart M. Grant, Geoffrey C. Jarvis and Nathan A. Cook of Grant & Eisenhofer PA, Randall J. Baron, A. Rick Atwood Jr., David T. Wissbroecker, Edward M. Gergosian and Maxwell Huffman of Robbins Geller Rudman & Dowd LLP, and Marc A. Topaz, Lee D. Rudy, Michael C. Wagner, J. Daniel Albert and Justin O. Reliford of Kessler Topaz Meltzer & Check LLP.

Dole and the individual defendants are represented by Bruce L. Silverstein and Elena C. Norman of Young Conaway Stargatt & Taylor and Theodore M. Mirvis and William Savitt of Wachtell Lipton Rosen & Katz. Deutsche Bank is represented by David Hennes of Ropes & Gray LLP and Steve Norman of Potter Anderson & Corroon LLP.

The cases are In re: Dole Food Co. Inc. Stockholder Litigation, case number 8703, and In re: Dole Food Co Inc. Appraisal Litigation, case number 9079, in the Delaware Court of Chancery.

--Additional reporting by Peter Hall. Editing by Emily Kokoll.

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