Goldman Sachs Wins Unanimous Appellate Decision Affirming Dismissal of Claims Related to Financing of $3 Billion Grocery Acquisition

On January 19, 2021, the New York Appellate Division, First Department, affirmed the complete dismissal of claims against Cravath client Goldman Sachs (“Goldman”) by the New York State Supreme Court’s Commercial Division in May 2020. Those claims by Goldman’s former client, United Natural Foods, Inc. (“UNFI”), alleged 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. 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.

Cravath filed a motion to dismiss the case in May 2019, and argued in July 2019 that the case rested on plaintiff's faulty assumption that but for alleged wrongdoing, the loan would have easily sold through to the market — which was unlikely at a time when both UNFI and SuperValu reported weak financial results. Cravath argued the appeal on behalf of Goldman in December 2020.

In affirming the Commercial Division’s decision, about which more information is available here, the Appellate Division concluded that the breach of contract claim was properly dismissed because both contractual conditions to charging marketing period fees were satisfied. The panel also found that the fraud claim was properly dismissed because plaintiff did not sufficiently plead justifiable reliance or damages, and plaintiff’s breach of the implied covenant of good faith and fair dealing claim was properly dismissed because it was conclusory and insufficiently alleged and because it sought to impose obligations on defendants inconsistent with the terms of the relevant contracts.

The Cravath team was led by partners Michael A. Paskin, who argued the appeal, Michael T. Reynolds and Lauren A. Moskowitz and included senior attorney Hector J. Valdes and associate Zachary W. Jarrett. Phillip J. Kaplan also worked on the matter. Associates John I. Karin, Alexander L. Mills, G. Alejandro Carvajal and Carolyn R.C. Young previously worked on the matter at the motion to dismiss stage before the Commercial Division.

The case is United Natural Foods, Inc. v. Goldman Sachs Group, Inc., et al., Case No. 2020‑02490.