Delaware Court Awards $148M In Damages, Finds Dole Food Company Directors Liable

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Delaware Court Awards $148M In Damages, Finds Dole Food Company Directors Liable

The Delaware Court of Chancery found David Murdock and C. Michael Carter liable under the entire fairness standard. Murdock is Dole Food Company Inc.’s Chairman and CEO, and Carter is a director of the company and its President, Chief Operating Officer, and General Counsel. The two were found to have driven down Dole’s stock price before a merger in which Murdock took Dole private and to have undermined the work of a special committee organized to evaluate Murdock’s proposal. The court awarded $148 million in damages. The court also found, however, that Deutsche Bank, Murdock’s financial advisor and lender, was not liable on an aiding and abetting claim.

In order to ready Dole for Murdock’s freeze-out plans, Carter attempted to depress Dole’s stock price by knowingly furnishing the market with a “subterranean” estimate of Dole’s estimated cost savings regarding another transaction and by abolishing a stock repurchase program. Murdock then gave his first proposal of $12.00 a share to Dole’s board of directors, which was a premium over the company’s depressed trading price of $10.20.

Murdock expressly conditioned his offer on the approval of a committee of disinterested and independent Dole directors and the affirmative vote of holders of a majority of the unaffiliated shares. The Board created the committee to consider Murdock’s offer, but Murdock and Carter undermined the committee from the beginning.

Perhaps Carter’s most egregious misconduct was intentionally supplying the committee with “lowball” projections and withholding from the committee financial information and business plans that he was sharing with Murdock’s advisors.  Murdock and Carter’s interference, the Court found, rendered the committee incapable of making a fully informed decision on Murdock’s proposal.  The merger ultimately was approved by 50.9% of the unaffiliated stockholders at a price of $13.50 per share.

The Court applied the entire fairness standard of review and found that the “fairer” price was an additional $2.74 per share or approximately $148 million.

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