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The landmark Tyson Foods Inc.-IBP Inc. decision may be headed to the Delaware Supreme Court, casting doubt on whether this important legal interpretation of merger and acquisition law will remain in force. The poultry giant has until March 14 to decide whether to appeal. This would be the company’s final option for overturning Vice Chancellor Leo E. Strine’s June 15 decision. The judge rejected last week Tyson’s request that he void the ruling. John L. Reed, a partner at Duane Morris in Wilmington, Del., said he expects Tyson to seek supreme court review. “I think they will try to do this,” said Reed, who represents former stockholders of IBP who are suing Tyson over allegations it misled them by asserting it had a right to terminate the merger. Investors are seeking about $700 million in damages. For its part, Tyson wants Strine’s ruling vacated because it would give the poultry giant greater freedom to defend itself against the class action. The Tyson-IBP verdict is precedent-setting because it addressed how much a company’s financial condition must deteriorate to trigger a material adverse change clause in a merger agreement. The clause is intended to let a company abort a deal if the economics behind it change greatly. Before Tyson-IBP, many assumed an acquirer needed little proof to invoke the MAC clause. But Strine held that the financial change must be more than a temporary dip. Since the ruling, companies have made MAC clauses more specific. Reversing Strine’s decision would nullify his opinion, which could not be cited in future litigation, lawyers said, though it would not affect the $4.7 billion acquisition of IBP, which closed Sept. 28. Reed said he expects a Tyson appeal because it has pursued every other available avenue to overturn the decision. There is no reason to believe the company would stop when the supreme court option is on the table, he said. Tyson spokesman Ed Nicholson did not return calls for comment. The food company has argued that Strine’s decision should be vacated because the settlement with IBP deprived it of the right to appeal the findings of facts and other conclusions reached by the judge. That is important to Tyson because the plaintiffs in the securities suit may cite Strine’s findings as proof the company deceived investors. Tyson would have little opportunity to rebut the findings of fact because legal rules generally prohibit a party from litigating issues already decided by a different court. Peter J. Walsh Jr., a partner at Potter, Anderson & Corroon in Wilmington, Del., said Tyson has two options for reversing the opinion. First, it may ask the Delaware Supreme Court to overturn Strine’s Feb. 11 refusal to vacate the opinion. Walsh said this is the company’s strongest argument because the law is unclear on whether a judge should vacate a decision if a party has been deprived of the right to challenge the findings on appeal. But he expects the justices to reject this argument because Tyson made a conscious decision to settle with IBP despite knowing that shareholders had filed a federal securities suit. “There are lots of situations where litigants want to get rid of an opinion,” Walsh said. “But that is not how it works.” Charles Elson, the director of Center for Corporate Governance at the University of Delaware, said the Delaware Supreme Court must consider whether it is appropriate from a public policy perspective to vacate decisions if the dispute is settled after the verdict. “The name of a case should not be ‘Sorry I Asked,’” Elson said. “Once the judge speaks, the judge has spoken. You should accept it.” Reed said a Delaware Supreme Court decision voiding the opinion would be bad law. That is because most of the key corporate law decisions out of Delaware come at preliminary stages in the case, such as on a motion to dismiss. Many of these disputes are later settled. Under Tyson’s theory, all of these rulings could be vacated. That would sharply reduce the amount of guidance coming from Delaware on corporate law, he said. “Under this theory, all those cases could be vacated,” Reed said. “That would disrupt Delaware’s place in the corporate world.” Tyson’s second option is to appeal Strine’s June 15 decision directly, rather than attempting to have the opinion voided. To do this, it must argue that Strine has not entered a final judgment in the dispute. Legal experts said that will be tough to demonstrate. In his Feb. 11 ruling on the motion to vacate, Strine notes he signed Aug. 3 an “Order and Final Judgment,” which he said was intended to end the dispute. “Put bluntly, the court believed that it had resolved all issues in this case,” he said. Strine said in a footnote that Tyson has not explained what issues were left unaddressed by the Aug. 3 order. “Tyson’s claims had been dismissed,” he said. “The relief to be granted for IBP’s claims had been ordered. … So long as the parties thereafter implemented the terms of these orders — which reflected their various agreements — what was the further role for the court?” The judge did acknowledge that Tyson had presented an Aug. 13 letter sent to the court asserting that the Aug. 3 order was not a final judgment. But he said the lawyers should have filed that as a motion if they wanted the court to act on it. “The letter in itself does not alter the fact that the prior order of Aug. 3, 2001, completed the adjudication of all claims,” he wrote. Walsh said the justices will look at whether Strine intended for the Aug. 3 order to end the case. “There is not a lot of wiggle room to argue this is not a final decision,” he said. “This is a long shot.” Copyright (c)2002 TDD, LLC. All rights reserved.

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