Valuation Materials Prepared Pre-litigation by Appraisal Petitioners Are Discoverable

By Eric Freedman and Sophia Lee Shin


On June 11, 2013, Dole Food Company, Inc. (“Dole”) announced that its board had received an unsolicited proposal from David Murdock, Dole’s CEO, Chairman, and controlling stockholder, to purchase all of the outstanding shares of Dole’s common stock for $12 per share. Approximately two months later, Dole and Murdock announced an agreement to take Dole private in a merger at $13.50 per share (the “Merger”). On October 31, 2013, Dole held a special meeting of the stockholders at which the stockholders approved the Merger, and the transaction closed on November 1, 2013.

Hudson Bay Master Fund Ltd. and Hudson Bay Merger Arbitrage Opportunities Master Fund Ltd. (together, “Hudson Bay”) and Ripe Holdings LLC (“Ripe”), as holders of Dole common stock, subsequently sought an appraisal for their shares. Ripe is a special-purpose investment vehicle managed by the affiliates of Fortress Investment Group (“Fortress”).

During discovery, Dole requested pre-litigation materials regarding valuations of Dole’s common stock that Hudson Bay and Ripe (together, the “petitioners”) prepared, reviewed, or considered in making their decision to purchase or sell Dole’s common stock or seek an appraisal. The petitioners objected to this request, and Dole subsequently noticed Delaware Court of Chancery Rule 30(b)(6) depositions of the petitioners. Hudson Bay appointed as its witness Henry Choi, a portfolio manager, and Ripe appointed as its witness John Neumark, a managing director at the subsidiary that served as the investment manager for Fortress’ funds. Both petitioners’ counsel, however, instructed the witnesses not to respond to any questions about the valuations. Dole then brought a motion to compel production of the requested materials and for supplemental depositions of the witnesses.


Under Delaware Court of Chancery Rule 26(b)(1), any material that is (1) relevant and (2) reasonably calculated to lead to the discovery of admissible evidence—even if the material itself may not be admissible—is discoverable.


The petitioners opposed the motion to compel on the grounds of potential inadmissibility—they claimed that the requested materials and deposition would not lead to the discovery of admissible evidence. They argued that the issue of valuation in an appraisal was a matter appropriately reserved for experts, and that the petitioners’ witnesses (Choi and Neumark) were not experts but rather lay witnesses whose opinions on valuation were inadmissible.

The Court held that the valuation information Dole requested did indeed satisfy the potential admissibility requirement, and thus was discoverable.

The Court noted that both parties bore a burden of proof regarding their respective valuations in a statutory appraisal proceeding, and if neither side succeeded in meeting this burden, the court would be required to determine the fair value of the shares using a wide range of factual evidence, for which the information Dole sought would indeed be useful, and thus discoverable and admissible.

The Court also held that, even if it were to assume that the petitioners were correct, the information sought by Dole could still be used by Dole’s expert in his or her report, and any information used in that report, even if not independently admissible, would be admissible as a part of the expert’s report and thus was discoverable.

The Court also held that the valuation process did not necessarily require expert knowledge. It noted that the Court, although not a valuation expert, was required by statute to determine the fair value of the shares if neither party met its burden of proof regarding its proposed valuation. In addition, the Court indicated that although the petitioners’ witnesses (Choi and Neumark) might technically have been lay witnesses, both were qualified in light of their experience and training to express views on value.


Ripe claimed that its valuation information was privileged, and thus not discoverable, because its valuation witness, Neumark, was a lawyer. The Court held that, while Neumark did indeed have a law degree and had originally joined his employer in its legal department, he did not currently practice law or work as in-house counsel to his employer. Neumark could not, while performing in a business capacity, avail himself of the attorney-client privilege or work product doctrine simply because he had previously served as a practicing attorney for the company.

The only exception to the Court’s holding regarding application of the attorney-client privilege and work product doctrine was in the context of a memorandum that Neumark presented to Fortress’ investment management committee, which included his recommendation regarding the investment strategy for Dole’s common stock (the “Fortress Memorandum”). The Court held that the Fortress Memorandum must be submitted to the Court for in camera review because Neumark testified that the Fortress Memorandum contained analysis of the appraisal statute and had been prepared after consulting with outside counsel.


The Court awarded Dole all reasonable costs incurred in taking the depositions and bringing the motion to compel, because the petitioners had improperly instructed their witnesses not to answer certain questions during the deposition.


In conclusion, the Court ordered the petitioners to produce all documents relating to the valuations or similar analyses that the petitioners had prepared, reviewed, or considered regarding Dole (with the exception of the Fortress Memorandum, which was to be reviewed in camera by the Court), provide supplemental responses to interrogatories regarding such valuations or similar analyses, and designate Rule 30(b)(6) witnesses to testify about these matters.


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