How far can you take corporate personhood? This was a question the Delaware Chancery recently addressed in the Dole shareholder litigation, about which we reported in a prior BVWire. The precise issue was whether Dole could designate its financial advisory firm, as opposed to the human being(s) who wrote the expert report, as its valuation expert.
Backstory: In late 2013, the defendant, Dole Food Co. (Dole), effected a take-private merger. Subsequently, the plaintiffs, two investment firms that appeared to pursue an “appraisal arbitrage” strategy, challenged the transaction in the Delaware Chancery, claiming breach of fiduciary duty and petitioning for statutory appraisal.
Dole named Stifel, Nicolaus & Co. (Stifel), an investment banking firm, as its expert witness on the subject of the company’s value at the time of the transaction. The opening and rebuttal reports identified the entity as its author, but two “biological persons” signed them as authorized representatives of the firm. Neither individual signed in his personal capacity.
For purposes of deposition, Stifel produced the managing director as the person who was most knowledgeable about the reports. When he claimed authorship, Dole’s counsel objected that “he is not the expert” but that Stifel was the expert. The plaintiffs contended that an expert witness must be a biological person.
A firm has no mind: Even though the Delaware Code includes provisions that “appropriately personif[y]” corporations, companies, and firms in certain commercial and economic contexts, “the Rules of Evidence make clear that a witness must be a biological person,” the court said. A corporation is an artificial being that only existed “in the contemplation of the law.” It has no mind with which to think and no voice with which to speak. This meant that Stifel could not testify at trial. However, to avoid leaving Dole without an expert, the court allowed the managing director to substitute in and testify to the contents of the expert reports, as long as he confirmed that he had adopted Stifel’s expert reports.
Takeaway: A corporation can do and be many things, but it cannot serve as an expert witness.
Find a digest of In re Dole Food Co., Inc. Stockholder Litigation, 2015 Del. Ch. LEXIS 47 (Feb. 27, 2015) in the May issue of Business Valuation Update; the court’s opinion will be available soon at BVLaw.