Can Simpson Thacher & Bartlett succeed for Grupo Mexico where Milbank, Tweed, Hadley & McCloy failed last year?
It’ll be months before the Delaware Supreme Court answers that question, when it rules on whether Delaware Chancellor Leo Strine Jr. was right to award shareholders a whopping $1.9 billion over claims that Grupo Mexico forced Southern Peru Copper Company to overpay for a Grupo mining subsidiary. But now that the company has filed a 35-page opening appellate brief, we at least know how Grupo’s lawyers are framing Chancellor Strine’s October ruling: as a slap in the face to Delaware law that contradicts Strine’s own previous findings in the case.
Grupo brought in Simpson Thacher’s Bruce Angiolillo to handle the appeal late last year, after Milbank’s Alan Stone failed to convince Chancellor Strine that the Southern Peru deal was above board and that Grupo, as Southern Peru’s majority shareholder, hadn’t breached its duty of loyalty to shareholders.
Angiolillo argues in Grupo’s March 5 filing that Strine made a crucial error in refusing to allow the defense to present a Goldman Sachs witness to testify about Goldman’s valuation advice to the Southern Peru committee that assessed the merger. “The trial court excluded this testimony despite specifically identifying ‘what the bankers were thinking’ as a key question for trial and despite the fact that the trial court based its opinion almost entirely on criticisms of Goldman’s valuation and resulting fairness opinion,” Grupo argues.
Chancellor Strine made matters worse, Grupo argues, when he “arbitrarily and capriciously” made his own valuation determinations by “cherry-picking” and misunderstanding elements of Goldman’s presentations. Strine failed to decide which side in the case had the burden of proof at trial, and then arrived at a record-breaking damages calculation that “is not supported by evidence in the record, but rather by impermissible speculation and conjecture,” the brief asserts.
Grupo’s lawyers also slammed Chancellor’s Strine’s decision to award $305 million in attorneys’ fees to lawyers for the shareholder plaintiffs at Kessler, Topaz, Meltzer & Check and Prickett, Jones & Elliott. They argue that the fee award, which works out to about $35,000 an hour for the plaintiffs lawyers who worked on the case, was an abuse of discretion, ignored limits on attorney fee awards under Delaware law, and ignored Strine’s and other judge’s own findings that the lawyers had caused huge delays in the case.
In other words, there’s plenty of meat for the state appellate judges to sink their teeth into even before they schedule arguments in the case, which the Delaware bar and shareholder M&A lawyers around the country are going to be watching very closely indeed. Will the court back Strine or jump at the chance to poke holes in the newly-minted Chancellor’s ruling?
We reached out to Lee Rudy of Kessler Topaz for his reaction to Monday’s filing but didn’t hear back. (The plaintiffs have 30 days to file their response.) Milbank’s Stone and Simpson Thacher’s Angiolillo declined to comment on the brief or on whether Milbank has retained a role in the litigation. The appellate brief names only Simpson Thacher and Delaware counsel at Morris, Nichols, Arsht & Tunnell.