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Paul, Weiss is widely recognized as having one of the nation’s preeminent securities litigation and regulatory practices. For two decades, our lawyers have guided global corporations and financial institutions through a series of “bet-the-company” securities-related crises, consistently reducing or eliminating their most damaging claims and negotiating favorable resolutions.
Kraft Heinz Wins Delaware Supreme Court Appeal Upholding Dismissal of Stockholder Derivative Action
- Client News
- August 1, 2022
Paul, Weiss achieved a significant victory when the Delaware Supreme Court upheld the dismissal of a consolidated stockholder derivative lawsuit filed against our clients The Kraft Heinz Company and certain current or former Kraft Heinz directors and officers, as well as against 3G Capital, Inc. and certain affiliates.
In their complaint filed in April 2020, the plaintiffs challenged a $1.2 billion stock sale in August 2018 by certain entities affiliated with 3G Capital. The sale was followed by Kraft Heinz’s disclosure of disappointing financial results, including $15.4 billion in non-cash impairment charges with respect to certain reporting units and intangible assets, primarily its Kraft and Oscar Mayer brands, as well as a significant drop in its stock price in February 2019. The plaintiffs alleged that 3G Capital, its affiliated entities and certain affiliated Kraft Heinz directors and officers breached their fiduciary duties under Delaware law by purportedly engaging in or facilitating the stock sale based on adverse material nonpublic information belonging to Kraft Heinz.
In December 2021, Vice Chancellor Lori Will dismissed the complaint with prejudice, finding that the plaintiffs had failed to satisfy Delaware’s demand futility standards by failing to plead that a majority of the Kraft Heinz board of directors could not impartially determine whether to assert the claims directly on behalf of Kraft Heinz. In particular, the Vice Chancellor concluded that the plaintiffs had failed to plead that a majority of the directors—none of whom participated in the stock sale or were named as defendants in the action—lacked independence from 3G Capital.
On appeal, the Delaware Supreme Court, sitting en banc, unanimously agreed. The court’s order, drafted by Delaware Justice Tamika Montgomery-Reeves, affirmed the Vice Chancellor’s decision in all respects.