Tyson Shareholders Plan for Trial
This article was published on Tuesday, February 6, 2007 9:57 PM CST in Business
By Kim Souza
The Morning News
A Delaware court ruled Tuesday that Tyson Foods Inc. shareholders can proceed with a case against 18 Tyson directors and the Tyson Limited Partnership controlled by former chairman Don Tyson.
Because Springdale-based Tyson Foods is a Delaware corporation, any resulting trial in the case against will be heard in a Wilmington, Del., Chancery Court.
Chancery Judge William B. Chandler III found reasonable cause for the plaintiffs -- shareholders Amalgamated Bank and Eric Meyer -- to go forward with three of the nine counts fully intact and three more partially intact, despite the defendants argument for dismissal. The court did fully dismiss three counts on the statute of limitations violation.
Amalgamated Bank, an institutional shareholder of Tyson Foods, introduced the case against Tyson Foods in February 2005. Meyer brought suit against the company alleging corporate waste and unjust enrichment in September 2005. The plaintiffs challenged the legality of $163 million in payments by Tyson Foods to members of the Don Tyson family and Tyson Foods' board members.
Judge Chandler heard oral arguments in September and on Tuesday released his 78-page ruling. In the ruling, Chandler noted that the counts represent "a lengthy and complex complaint that includes almost a decade's worth of challenged transactions."
The heart of the complaint charges Tyson directors with breach of fiduciary responsibilities, favoring their own personal interests and those of controlling shareholders -- the Tyson family -- ahead of the company's minority shareholders.
Still alive are three counts which allege wrongdoing in the way the company paid its executives prior to a 2004 investigation by the federal Securities and Exchange.
In August 2004 the SEC revealed a settlement for the company's noncompliance with federal regulations for the years 1997 through 2003. Tyson Foods paid a noncompliance penalty covering the $1.5 million of perquisites given to Don Tyson relating to inadequate internal controls over payments and personal use of Tyson assets.
The company said in a recent SEC filing Don Tyson voluntarily repaid the company $1.5 million in 2004. Neither the company or Don Tyson admitted any wrongdoing.
In commenting on potential problems with stock options grants identified in Count III, Chandler suggests the plaintiffs have cause for action.
"Certainly at this state of the litigation, plaintiffs are entitled to the reasonable inference of conduct inconsistent with a fiduciary duty," Chandler noted in the ruling.
Both sides on Tuesday said they were pleased with Chandler's ruling.
"The bulk of our claims and the heart of our case remain intact. We look forward to taking discovery, gathering evidence and going to trial," Megan McIntyre, partner with Grant & Eisenhofer, lead council for the plaintiffs, said Tuesday.
Tyson Foods on Tuesday released the following statement: "We're extremely pleased with today's Delaware court decision, which completely dismissed three counts, severely cut back three others, and only allowed three of the original nine counts to remain in their entirety. We're confident that much, if not all, of what remains in the case, can be handled with additional motions, including those requesting summary judgment. Such motions may negate the need for any trial."
Judge Chandler allowed the plaintiffs to move forward with their complaints involving corporate waste and unjust enrichment stating that individual directors or company executives who profited from timed option grants or improper payments could be liable.
Shareholders were made aware of the alleged improprieties in the 2004 SEC investigation and the judge disallowed Tyson Foods' move for dismissal based on statute of limitations.
That particular ruling was "big" for the plaintiffs because it allows some of the more serious charges to proceed, McIntyre said.
The next phase is discovery as both sides will prepare for trial in Judge Chandler's court, McIntyre said.
AT A GLANCE
Delaware Chancery Court ruling on nine counts in a shareholder action against Tyson Foods Inc.
* Counts Granted
Count 2: Breach of fiduciary duty for award of "Other Compensation"
Count 6: Breaches of contract
Count 9: Unjust enrichment
* Counts Partially Granted
Count 3: Grant of options between 1999 and 2001
Count 4: Related party transactions
Count 5: Breach of fiduciary duty for inadequate disclosure of perquisites leading to SEC sanctions and fines.
* Counts Dismissed
Count 1: Consulting contracts for Robert Peterson and Don Tyson
Count 7: Contempt prior to 2002
Count 8: Material misrepresentations in the 2004 proxy statement
SOURCE: Delaware Chancery Court, New Castle County.
This article was published on Tuesday, February 6, 2007 9:57 PM CST in Business
By Kim Souza
The Morning News
A Delaware court ruled Tuesday that Tyson Foods Inc. shareholders can proceed with a case against 18 Tyson directors and the Tyson Limited Partnership controlled by former chairman Don Tyson.
Because Springdale-based Tyson Foods is a Delaware corporation, any resulting trial in the case against will be heard in a Wilmington, Del., Chancery Court.
Chancery Judge William B. Chandler III found reasonable cause for the plaintiffs -- shareholders Amalgamated Bank and Eric Meyer -- to go forward with three of the nine counts fully intact and three more partially intact, despite the defendants argument for dismissal. The court did fully dismiss three counts on the statute of limitations violation.
Amalgamated Bank, an institutional shareholder of Tyson Foods, introduced the case against Tyson Foods in February 2005. Meyer brought suit against the company alleging corporate waste and unjust enrichment in September 2005. The plaintiffs challenged the legality of $163 million in payments by Tyson Foods to members of the Don Tyson family and Tyson Foods' board members.
Judge Chandler heard oral arguments in September and on Tuesday released his 78-page ruling. In the ruling, Chandler noted that the counts represent "a lengthy and complex complaint that includes almost a decade's worth of challenged transactions."
The heart of the complaint charges Tyson directors with breach of fiduciary responsibilities, favoring their own personal interests and those of controlling shareholders -- the Tyson family -- ahead of the company's minority shareholders.
Still alive are three counts which allege wrongdoing in the way the company paid its executives prior to a 2004 investigation by the federal Securities and Exchange.
In August 2004 the SEC revealed a settlement for the company's noncompliance with federal regulations for the years 1997 through 2003. Tyson Foods paid a noncompliance penalty covering the $1.5 million of perquisites given to Don Tyson relating to inadequate internal controls over payments and personal use of Tyson assets.
The company said in a recent SEC filing Don Tyson voluntarily repaid the company $1.5 million in 2004. Neither the company or Don Tyson admitted any wrongdoing.
In commenting on potential problems with stock options grants identified in Count III, Chandler suggests the plaintiffs have cause for action.
"Certainly at this state of the litigation, plaintiffs are entitled to the reasonable inference of conduct inconsistent with a fiduciary duty," Chandler noted in the ruling.
Both sides on Tuesday said they were pleased with Chandler's ruling.
"The bulk of our claims and the heart of our case remain intact. We look forward to taking discovery, gathering evidence and going to trial," Megan McIntyre, partner with Grant & Eisenhofer, lead council for the plaintiffs, said Tuesday.
Tyson Foods on Tuesday released the following statement: "We're extremely pleased with today's Delaware court decision, which completely dismissed three counts, severely cut back three others, and only allowed three of the original nine counts to remain in their entirety. We're confident that much, if not all, of what remains in the case, can be handled with additional motions, including those requesting summary judgment. Such motions may negate the need for any trial."
Judge Chandler allowed the plaintiffs to move forward with their complaints involving corporate waste and unjust enrichment stating that individual directors or company executives who profited from timed option grants or improper payments could be liable.
Shareholders were made aware of the alleged improprieties in the 2004 SEC investigation and the judge disallowed Tyson Foods' move for dismissal based on statute of limitations.
That particular ruling was "big" for the plaintiffs because it allows some of the more serious charges to proceed, McIntyre said.
The next phase is discovery as both sides will prepare for trial in Judge Chandler's court, McIntyre said.
AT A GLANCE
Delaware Chancery Court ruling on nine counts in a shareholder action against Tyson Foods Inc.
* Counts Granted
Count 2: Breach of fiduciary duty for award of "Other Compensation"
Count 6: Breaches of contract
Count 9: Unjust enrichment
* Counts Partially Granted
Count 3: Grant of options between 1999 and 2001
Count 4: Related party transactions
Count 5: Breach of fiduciary duty for inadequate disclosure of perquisites leading to SEC sanctions and fines.
* Counts Dismissed
Count 1: Consulting contracts for Robert Peterson and Don Tyson
Count 7: Contempt prior to 2002
Count 8: Material misrepresentations in the 2004 proxy statement
SOURCE: Delaware Chancery Court, New Castle County.