Plaintiffs, ECB USA, Inc. and Atlantic Ventures Corp. accused Savencia and Zausner, together with other persons and entities, of commiting a series of tortious acts, including, but not limited to, looting the assets of Schratter Foods Incorporated (“Schratter”), then fraudulently inducing Plaintiffs into executing an agreement to purchase all of Schratter’s shares (the “Stock Purchase Agreement”).
Knowing that the ECB representatives had no experience with cheese and dairy products and were not eligible to work in the United States, Savencia and Zausner, along with other co-conspirators, induced the ECB Representatives to enter a fiduciary relationship with Alain Voss, and then induced Plaintiffs to partner with Voss in the purchase of Schratter. The ECB Representatives, and ultimately Plaintiffs, put their trust and confidence in Voss, who, in turn, colluded with Zausner, Savencia and other co-conspirators in the commission of frauds and other tortious acts.
A key issue in the case is whether, prior to Schratter’s sale, Defendants secretly “stripped” Schratter’s Chief Executive Officer Voss of certain of his powers and duties as CEO and then “lied” to Plaintiffs’ by holding “Voss out as Schratter’s trusted, knowledgeable, and effective chief, for the purpose of persuading [Plaintiffs’] representatives to accept Voss as a fiduciary and to partner with him to purchase Schratter.
Plaintiffs hired Jonathan Macey to provide “opinions on corporate governance and ordinary and customary corporate behavior.” Defendants filed a Daubert motion to exclude Macey’s opinions and testimony because his opinions were unreliable and did not “fit” the facts of the case.
On March 22, 2024, Magistrate Judge Christopher Burke issued a memorandum order granting Defendants’ Daubert motion (“the Order”).
Objections to the Order
The order determined that Macey’s opinions did not fit the facts of the case because they were neither relevant nor would assist the trier of fact. Plaintiffs filed objections to the order on April 5, 2024. On April 19, 2024, Defendants filed a response to Plaintiffs’ objections. Pursuant to Federal Rule of Civil Procedure 72(a), the Court now considers the objections and responses and may “modify or set aside any part of the order that is clearly erroneous or is contrary to law.”
Corporate Law Expert Witness
Jonathan R. Macey is Sam Harris Professor of Corporate Law, Corporate Finance, and Securities Law at Yale University and Professor in the Yale School of Management. Professor Macey earned his B.A. cum laude from Harvard in 1977, and his J.D. from Yale Law School in 1982, where he was Article and Book Review editor of The Yale Law Journal. In 1996, Professor Macey received a Ph.D. honoris causa from the Stockholm School of Economics.
Professor Macey has taught at major universities throughout the world, including Bocconi University (Milan), the University of Tokyo; the University of Toronto; the University of Turin, the University of Amsterdam Department of Finance, and the Stockholm School of Economics, Department of Law. He also has been Professor of Law at the University of Chicago (1990) and Visiting Professor of Law at Harvard Law School (1999). In 1998, he received the D.P. Jacobs prize for the most significant paper in volume 6 of the Journal of Financial Intermediation for his paper (co-authored with Maureen O’Hara), “The Law & Economics of Best Execution.”
Discussion by the Court
Macey provided two principal opinions in his report:
- Based on commonly understood conceptions on the role of the CEO in business organizations such as [Schratter], Alain Voss was not actually the CEO of Schratter during the period beginning June 30, 2014 and continuing through December 31, 2014, as the term ‘CEO’ is universally understood in business. During the foregoing period Voss was the CEO of Schratter in name only, without the usual responsibilities, authority, and duties associated with that position.”
- Analysis of the quality of management of the company being acquired (the target company) is a critical consideration in making a corporate acquisition where the acquisition is being done with management in place. An inevitable implication of this analysis is that the identity of a company’s CEO should be fully and accurately disclosed, including, but not limited to, in the governing documents of the target company. To the extent that a selling entity makes disclosures about the quality of management, such disclosures should be accurate.”
Analysis
Although Plaintiffs argued that Macey’s opinion is “necessary for the jury to fully understand the role of a CEO as that term is used ‘in business,’ Macey’s opinion about the role of some CEOs did not relate to a “pertinent inquiry in the case.”
Plaintiffs asserted that the order misinterpreted Plaintiffs’ allegations about Voss, “erroneously found that Macey’s opinions regarding the importance of senior management, including a CEO, in an acquisition with management in place, are irrelevant,” and “made an unfounded assumption that a lay person would know what a CEO’s role and duties truly are in business.”
The pertinent inquiry in this case is whether Defendants are liable for fraudulent misrepresentations or omissions made about Voss’s pre-closing role. To answer that inquiry, the jury will need to know what Voss’s role at Schratter was throughout 2014, if that role changed, and “the extent to which facts about Voss’s role were disclosed to Plaintiffs.”
The Court held that information about what CEOs do, generally, is entirely irrelevant as to whether Defendants made material misrepresentation about Voss’s role.
Additionally, to succeed on their fraud claims, Plaintiffs must prove that Defendants’ misrepresentations about Voss’s role were material to Plaintiffs’ decision to retain Voss.
The order concluded that Macey’s opinion could not aid jurors in assessing the materiality element because Macey cannot opine on whether the alleged omissions and misstatements about Voss’s role were important to the specific Plaintiffs in this case. The Court held that Macey was not involved in the decision to retain Voss and thus cannot testify as to the state of mind of those who made the decision. Instead, it is only Plaintiffs, and Plaintiffs’ fact witnesses, who can prove that the alleged misrepresentations and omissions were material to their decision to retain Voss.
Held
The Court overruled the Plaintiffs’ objections to Magistrate Judge Christopher Burke’s memorandum order with regard to the testimony of Jonathan Macey.
Key Takeaway:
The Court agreed with Christopher Burke’s thorough analysis on the issue. To begin with, Macey’s opinion about the role of some CEOs did not relate to a “pertinent inquiry in the case.” Information about what CEOs do, generally, is entirely irrelevant as to whether Defendants made material misrepresentation about Voss’s role.
Moreover, Macey was not involved in the decision to retain Voss and thus cannot testify as to the state of mind of those who made the decision.
Please refer to the blogs previously published about this case:
Case Details:
| Case Caption: | Ecb Usa, Inc. Et Al V. Savencia, S.A. Et Al |
| Docket Number: | 1:19cv731 |
| Court: | United States District Court, Delaware |
| Order Date: | February 10, 2025 |
