Chancery Won't Allow Early Appeal In $1.6B Dole Deal Case

By Matt Chiappardi

Law360Law360, Wilmington (February 13, 2015, 7:15 PM ET) -- A Delaware Chancery judge on Friday rejected a bid by Dole Food Co. Inc. to fast-track an early appeal of his decision to deny summary judgment in the litigation challenging CEO David Murdock's $1.6 billion go-private deal in 2013, setting the stage for the issue to go to trial.

Giving his ruling during a teleconference, Vice Chancellor J. Travis Laster, denied bids from both Dole and Deutsche Bank AG, the financial adviser on the deal, for interlocutory appeal of his order last week that refused to throw out the case at the summary judgment stage and determined there were genuine issues of disputed facts that need to be sorted out.

The vice chancellor also denied Dole’s request to halt the trial schedule while the appeal was pending, saying the issues to be challenged wouldn’t get rid of the need for a trial anyway.

“The appeals aren’t going to dispose of the whole case,” Vice Chancellor Laster said. “The public has an interest in prompt resolution of disputes.”

The vice chancellor added that the interlocutory appeals could “derail” the case less than 10 days before it was scheduled for a trial, Feb. 23, that the sides had been preparing to tackle for some time. He also said that interlocutory appeal was reserved for the most “extraordinary” of instances, and the case at this juncture didn’t fit the bill.

“An appeal now could be wholly unnecessary depending on how the case turns out,” Vice Chancellor Laster said. “An interlocutory appeal would be inappropriate.”

The issues stems back to the deal that saw Murdock, who had already owned 40 percent of Dole, take the company private in 2013, with him paying $13.50 per share for the units he didn’t already control. The transaction was valued at $1.6 billion including debt.

Several minority shareholders sued in Delaware Chancery Court over the deal, arguing in part the offer undervalued the company and that the board of directors engineered a series of moves to sink the price to that level.

The litigation, which consists of a series of consolidated lawsuits, also came to include an appraisal demand by a handful of hedge funds that bought stock days before the deal closed and are contending they didn’t get fair value for their shares.

Back when the case was in the pleading stage in August 2013, Vice Chancellor Laster declined to put it on the fast track, ruling that the shareholders, if their claims were ultimately successful, would recover a monetary award whether the case were adjudicated before or after the deal closed.

In the roughly year and a half since then, the case had been simmering as litigators waited for the Delaware Supreme Court’s ruling in the now-famous MFW case dealing with how judges ought to consider suits that challenged take-private deals.

The high court affirmed MFW in March — which set up a more lenient courtroom review of such transactions, so long as they included a committee of independent directors and approval by a majority of noncontrolling shareholders — and the Dole case eventually kicked back into high gear with the sides preparing, and disputing over, a massive amount of discovery evidence to be presented to the vice chancellor over nine trial days.

When Vice Chancellor Laster denied Dole’s motion for summary judgment Feb. 5, which he said looked more like a post-trial brief given its length and number of exhibits, he wrote that the requests actually raised a number of facts that needed to be better developed through a trial.

The vice chancellor also wrote that the case would be evaluated under Delaware’s strict entire fairness standard, with the burden of proof on the defendants, because the shareholders had offered evidence indicating Dole may not have met the requirements set up in the MFW case to afford it consideration under the board-deferential business judgment standard.

“The merger agreement that was executed did not contain a nonwaivable majority-of-the-minority requirement,” Vice Chancellor Laster wrote in his Feb. 5 order. “There is evidence Murdock had previously threatened and taken punitive action against directors who did not accede to his wishes.”

While the vice chancellor’s ruling Friday denies certification of the interlocutory appeals, he said the ultimate authority about what happens next in the case lies with the Supreme Court, who could render a contradictory decision, hear the appeal anyway and stay the trial.

“I’m not the final word,” Vice Chancellor Laster said. “If they want to stay [the case] so they can hear these appeals, I will certainly follow whatever direction they give me.”

After the hearing, attorneys for the shareholders said they were gearing up for the fact trial.

“The vice chancellor's thorough rebuttal of the defendants' motions was absolutely correct and we are fully prepared to present our case during the upcoming trial,” Kevin G. Abrams of Abrams & Bayliss LLP said.

Attorneys for Dole did not immediately respond to requests for comment Friday.

The shareholders are represented by Stuart M. Grant, Geoffrey C. Jarvis and Nathan A. Cook of Grant & Eisenhoffer PA, and Kevin G. Abrams, J. Peter Shindel, Jr., Daniel R. Ciarrocki  and Matthew L. Miller of Abrams & Bayliss LLP, 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 of Young Conaway Stargatt & Taylor and Theodore J. Boutrous, Andrea E. Neuman, Colin B. Davis, Meryl L. Young and William B. Dawson of Gibson Dunn.

The case is In re: Dole Food Co. Inc. Stockholder Litigation, case number 8703, in the Delaware Court of Chancery.

--Additional reporting by Lance Duroni, Eric Hornbeck and Karlee Weinmann. Editing by Chris Yates.

© 2015, Portfolio Media, Inc.