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 Dismissal of Federal Consolidated Stockholder Derivative Action
- Client News
- March 31, 2023
Paul, Weiss won a significant victory in obtaining the dismissal of a consolidated stockholder derivative lawsuit in the U.S. District Court for the Northern District of Illinois brought against our clients, The Kraft Heinz Company and certain current or former Kraft Heinz officers and directors, as well as against 3G Capital, Inc., and certain of its affiliates.
In their operative complaint, the plaintiffs alleged that Kraft Heinz officers and directors made and caused Kraft Heinz to make misleading statements about the company’s performance amid allegedly imprudent and aggressive cost-cutting efforts. According to the plaintiffs, these purportedly misleading statements were followed by the disclosure of disappointing financial results, including $15.4 billion in non-cash impairment charges with respect to certain reporting units and intangible assets, as well as a significant drop in Kraft Heinz’s stock price in February 2019. The plaintiffs further alleged that the purportedly misleading statements allowed certain defendants to profit improperly from sales of the company’s stock ahead of the February 2019 stock drop, including a $1.2 billion stock sale in August 2018 by certain entities affiliated with 3G Capital, Inc.
In his memorandum opinion and order, U.S. District Judge Jorge Alonso dismissed the complaint without prejudice, finding that the plaintiffs had not satisfied 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 court concluded that the plaintiffs had failed to plead that a majority of the directors faced a substantial likelihood of personal liability for any of the claims asserted by the plaintiffs against them.
The Paul, Weiss team included litigation partners Daniel Kramer, Andrew Ehrlich and William Clareman, and counsel Matthew Stachel.