As reported in our Spring 2015 newsletter, Kessler Topaz conducted a nine-day trial earlier this year in the Delaware Court of Chancery, as co-lead counsel on behalf of Dole Food Company’s former public stockholders. On August 27, 2015, Vice Chancellor J. Travis Laster issued the Court’s post-trial opinion and delivered a victory to the stockholders.
The Court concluded that David Murdock, Dole’s long-time controlling stockholder, and C. Michael Carter, Dole’s former chief operating officer and long-time general counsel, are liable for engineering Murdock’s unfair 2013 buyout of Dole’s public stockholders. The Court awarded the stockholders $2.74 per share, or approximately $148 million in total, plus pre-and-post judgment interest. Kessler Topaz partner Michael Wagner and associate Justin Reliford led the firm’s trial team in the case.
In a detailed 108-page opinion, Vice Chancellor Laster concluded that Murdock and Carter are jointly responsible for the harm caused to Dole’s former stockholders. Among other things, the Court found that Murdock and Carter “primed the market for the freeze-out by driving down Dole’s stock price” and provided the company’s outside directors with “knowingly false” information and intended to “mislead the board for Mr. Murdock’s benefit.” By doing so, Murdock and Carter deprived Dole’s outside directors “of the ability to negotiate [against Murdock] on a fully informed basis and potentially say no” to the buyout. Additionally, the Court held, “Murdock and Carter likewise deprived the stockholders of their ability to consider the [buyout] on a fully informed basis and potentially vote it down.” Murdock and Carter’s conduct, the Court ruled, “demonstrated that their actions were not innocent or inadvertent, but rather intentional and in bad faith.”
Based on Murdock and Carter’s conduct, as proved at trial, the Court found that both fiduciaries had breached the duty of loyalty that they owed to Dole’s public stockholders. The award of $2.74 per share, the Court reasoned, was appropriate to ameliorate the harm that Murdock and Carter inflicted on the public stockholders and “eliminate the ability of the defendants to profit” from their wrongful conduct.
The Court also found that Murdock’s financial advisors at Deutsche Bank – which had also been the company’s long-time financial advisors – “acted improperly by favoring Murdock and treating him as the bank’s real client in transactions before the [buyout], even when Deutsche Bank was officially representing Dole.” While the Court did not ultimately find that Deutsche Bank owes money to Dole’s former stockholders along with Murdock and Carter, the Court largely accepted the stockholders’ version of events, presented at trial, of how Murdock and Carter, assisted in several respects by Deutsche Bank, short-changed the public stockholders in the 2013 buyout.
This $148 million recovery for stockholders represents the second-largest post-trial verdict ever in merger litigation, behind only Kessler Topaz’s landmark 2011 $2 billion verdict in In re Southern Peru.