A ruling yesterday by a Delaware judge clears the way for IBP (NYSE:IBP) to proceed with its lawsuit against Tyson Foods (NYSE:TSN).
Vice Chancellor Leo E. Strine, a judge in the Delaware Court of Chancery, today denied Tyson’s motion to dismiss or stay the case. This means the lawsuit will go to trial, as previously scheduled, on May 14.
“We are pleased the court has affirmed our position and look forward to presenting the specifics of our case next month,” Sheila Hagen, IBP executive vice president & general counsel, said.
IBP filed the lawsuit in Delaware March 30 to force Tyson to honor its agreement to complete a $4.7 billion merger acquisition of IBP. Company officials stated that Tyson’s reasons for backing out of the deal “are completely unjustified,” and that “we will do what is necessary to protect our shareholders and our company.”
IBP filed the suit in Delaware for several reasons. There are already shareholder claims pending in Delaware Chancery court pertaining to the IBP/Tyson merger. Both companies are also incorporated in the state. Finally, and most importantly, the issues raised in the matter are governed by a “confidentiality agreement” both companies signed in December 2000. IBP and Tyson agreed that any state or federal court in Delaware would have “exclusive jurisdiction” over any suit, action or proceeding “arising out of or relating to this Agreement.”
Tyson contended the IBP claim should be “stayed or dismissed” because of a lawsuit they had filed against IBP in Washington County, Arkansas, where the Tyson’s corporate headquarters is based. The Delaware court ruled, however, that because of the “exclusive jurisdiction” provision of the parties’ confidentiality agreement, the Arkansas court “cannot do complete justice in this case.”