COVID-19: Impact on M&A Litigation

On May 5, 2020, Justice Andrea Masley of the New York State Supreme Court’s Commercial Division dismissed claims against Cravath client Goldman Sachs, which was sued in January 2019 by its former client, United Natural Foods, Inc. (“UNFI”), the largest publicly traded distributor of natural, organic, specialty conventional grocery and non‑food products in the U.S. and Canada and a major supplier to Whole Foods. In its complaint, UNFI brought claims alleging breach of contract and fraud relating to Goldman’s handling of the syndication of a term loan that UNFI used to finance its $3 billion acquisition of SuperValu Inc., which was announced in July 2018 and closed in October 2018. UNFI sought to recover damages in excess of $230 million, representing recoupment of fees paid and other costs of syndication, as well as incremental interest costs it expects to pay over the life of the loan.

On April 27, 2020, the North Carolina Business Court entered judgment in favor of Cravath client Reynolds American Inc. (“RAI”) in a judicial appraisal proceeding stemming out of RAI’s 2017 merger with British American Tobacco p.l.c. RAI sought determination of the fair value of shares of RAI common stock exchanged by former RAI shareholders in connection with the merger. The cash value of the merger consideration at closing was $65.87 per share. RAI paid the dissenting stockholders $59.64 per share, which it argued was the fair value of the company at closing. The dissenting stockholders argued for a valuation of $92.17, which would have resulted in a judgment of nearly $400 million including interest. The case was tried in June 2019.

On March 18, 2020, the U.S. District Court for the Southern District of New York granted motions for summary judgment in their entirety in favor of Cravath clients AngloGold Ashanti Limited (“AGA”) and related corporate entities, dismissing a breach of contract and fraud action brought by Newmont Mining Corporation, to whom AGA sold a Colorado gold mine and mineral processing facility in 2015.

On December 7, 2018, the Supreme Court of North Carolina ruled in favor of Cravath client British American Tobacco plc (“BAT”), reversing the state’s Court of Appeals and dismissing the putative class action suit asserting a claim for breach of fiduciary duty related to the $27.6 billion acquisition of Lorillard Inc. by Reynolds American, Inc. (“RAI”).