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Tyson Foods Inc. on Tuesday asked the Delaware Supreme Court to overturn a landmark Court of Chancery decision that makes it harder for companies to back out of mergers. The poultry giant wants the state’s top court to vacate Judge Leo E. Strine’s decision in IBP v. Tyson, in which he held that a short-term drop in corporate profitability does not constitute a material adverse effect. The company also is seeking to overturn six other Chancery Court rulings in the case. Strine’s decision has been hailed as one of the most significant corporate law rulings in the last 10 years, and it already has been cited in other cases filed in the Chancery Court. Before the decision, many corporations had assumed that they could use a merger agreement’s material adverse effect, or MAE, clause to easily abort the deal if they got second thoughts. Since the ruling, lawyers have crafted MAE clauses to more explicitly cover economic changes. The appeal will not affect Tyson’s $4.7 billion acquisition of IBP Inc. That deal was completed last year after Strine ordered the Springdale, Ark., poultry giant to complete the merger. Rather than appeal his ruling in the spring, Tyson settled with IBP. But judge’s verdict now poses a problem for Tyson, which faces a class action by IBP shareholders who lost money selling stock after the company tried to exit the deal. They cite Strine’s findings in the ruling that the real reason Tyson attempted to halt the deal was remorse at agreeing to pay such a high price for the meat processor. Court rules prohibit Tyson from relitigating findings made by another court. That means Strine’s comments on buyer’s remorse would be part of the record unless the initial decision is overturned. John L. Reed, a partner at Duane Morris of Philadelphia who represents the IBP shareholders, gave Tyson little chance of succeeding in the appeal. “They are going to do whatever they feel they need to do, but at some point they need to come around and face the issue,” he said. “[Strine's] opinion was very solid.” A Tyson spokesman had no immediate comment. Tyson’s appeal is unusual because a litigant typically has 30 days to file an appeal. The IBP-Tyson decision was issued more than 10 months ago, May 10. Five of the six other rulings also are more than 30 days old. The one order within the last 30 days is the Feb. 11 decision rejecting Tyson’s motion to vacate the Tyson-IBP decision. In that ruling, Strine said it would be inappropriate to void a court decision so long after the case had ended. In its four-page notice of appeal, Tyson said it had a right to wait to file its appeal until the Chancery Court finished considering the entire case, which occurred with the Feb. 11 order. “Tyson did not file its notice of appeal on these opinions, orders and rulings until now because Tyson understood that when entered these opinions, orders and rulings were interlocutory, and Tyson believes that a final order … was not entered in this case until Feb. 11, 2002,” the company said in its appeal notice. One Delaware corporate lawyer said Tyson is “overreaching” by seeking an appeal this late in the process. “They are just wrong, and Strine said they were wrong in his latest opinion,” the lawyer said. “This is bizarre.” The lawyer said Tyson is likely hoping to ride the wave of recent Delaware Supreme Court decisions overturning the Chancery Court. Yet he gave them little chance of success. “They are crazy,” the lawyer said. Court rules give Tyson 45 days to file a brief explaining their case. During this process, the plaintiffs are expected to file a motion to dismiss the appeal on the grounds it has been more than 30 days since Strine issued his decision. Copyright (c)2002 TDD, LLC. All rights reserved.

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