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Chancery Lets Stockholders Amend $116M Dole
Settlement
By
Rick Archer
Law360, New York (February 15,
2017, 7:08 PM EST) -- The Delaware Chancery Court on Wednesday granted a
motion by class counsel to amend the distribution mechanism of
Dole Food Co.’s $115.7 million stockholder settlement, saying a flurry
of short sales days before the company went private in 2013 hopelessly
confused the ownership of millions of shares.
Vice Chancellor J. Travis Laster said the distribution terms for the
settlement — which resolved claims company officials depressed stock
prices leading up to the going-private transaction — needed to be changed
because the settlement administrator received “facially eligible” claims
for approximately 49.2 million shares when the class members were known to
have held only 36.8 million shares at the time the settlement was reached
in 2015.
“Without obtaining detailed records about the millions of trades that took
place during the three days leading up to the closing, it is impossible to
determine who owned the shares as of closing. And obtaining those records
is not realistically achievable,” he said.
The suit accused top Dole officers of fraudulently pushing down the
company’s price before selling it into private ownership for $1.6 billion
in late 2013. The parties settled in
early December 2015.
The problem with the settlement claims arose because of extensive short
selling in the days leading up to the close of the deal, Vice Chancellor
Laster said.
“The shorting resulted in additional beneficial owners who received the
merger consideration, who fell within the technical language of the class
definition, and who could claim the settlement consideration. Meanwhile,
the lenders of the shares, not knowing that the shares were lent, also
could claim the settlement consideration,” he said.
Resolving the situation would require auditing records from the more than
4,600 claimants and more than 800 banks and brokerages, followed by
resolving the additional ownership disputes that would likely arise from
such a review, he said.
“The journey down the rabbit hole would require mapping the whole warren,”
he said.
Instead, the judge said he agreed with the class counsel that the better
method would be to have the settlement distributed by the Depository Trust
Company that handled distribution of the consideration Dole paid to the
shareholders for going-private transaction, which had been structured as a
merger.
“Under this method, it will be up to the DTC participants and their client
institution to resolve in the first instance any issues over who should
receive the settlement consideration. Shifting the burden to them is
efficient because they already had to address these issues for purposes of
allocating the merger consideration,” he said.
Class counsel did not immediately respond to requests for comment
Wednesday.
The shareholders are represented by Stuart M. Grant, Nathan A. Cook,
Kimberly A. Evans, Michael T. Manuel 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 and Justin O. Reliford of
Kessler Topaz Meltzer & Check LLP.
Dole and the individual defendants are represented by Bruce L.
Silverstein, Elena C. Norman and James M. Yoch Jr. of
Young Conaway Stargatt & Taylor and J. Clayton Athey of
Prickett, Jones & Elliott PA.
The cases is In re: Dole Food Co. Inc. Stockholder Litigation, case number
8703 in the
Delaware Court of Chancery.
--Additional reporting by Matt Chiappardi, Kat Greene and Jeff Montgomery.
Editing by Orlando Lorenzo.
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