On November 15, 2017, the California Court of Appeal, Sixth Appellate District,ruledin plaintiffs’ favor, reviving a lawsuit against Intel Corp., McAfee, Inc. and its former CEO David DeWalt. Plaintiffs allege that the companies engaged in an unfair merger process contaminated by conflicts when Intel Corporation acquired McAfee for $7.68 billion. In partially vacating the prior ruling that granted summary judgment in defendants’ favor on November 2, 2012, the court agreed with the plaintiffs that DeWalt, McAfee and Intel were not entirely truthful when negotiating the 2010 merger.
The case, led by Central Laborers’ Pension Fund, alleges that DeWalt did not tell McAfee’s board that Intel’s Software and Services Group, led by the group’s general manager and senior vice president Renee James, had mentioned offering $50 per share if it would “get the deal done.” According to James, DeWalt replied, “No, 52 to 54.” DeWalt failed to disclose this conversation with McAfee, Inc., an omission that led the company to accept an acquisition offer at $48 per share. Furthermore,the plaintiffs also allege that defendants omitted material information from the merger proxy statement on which McAfee’s public shareholders relied in voting for the merger. The plaintiffs contend that the board did not do enough to protect shareholders and should have appointed a special committee to handle negotiations with Intel.
“Even if the evidence at the time that Intel made its revised offer at $48 per share showed that it was Intel’s best and final offer, conflicting inferences emerge as to why DeWalt did not mention James’s probing inquiry two weeks earlier,” the court stated. “DeWalt bears the burden under the enhanced scrutiny standard of review to show that he exercised his fiduciary duties . . . .”
The court continued, asserting, “Even if the evidence is insufficient to create a triable issue of material fact as to disloyalty or bad faith, as an officer of the corporation, DeWalt is not exculpated from liability for a breach of the duty of care.”
“We are pleased and happy to be able to move forward,” saidRandall J. Baron, one of the Robbins Geller attorneys representing the investor class. “It’s been a long time coming.”
Central Laborers’ Pension Fund v. McAfee, Inc., No. H039508, slip op. (Cal. Ct. App. Nov. 15, 2017).