Shareholder Lawsuits Filed Against Mondavi
Cases raise even more questions about the future of the company
Daniel Sogg
Posted: October 22, 2004
The hurly-burly at Robert Mondavi Corp., which was planning to split in two until it received a takeover bid of $970 million in cash from beverage giant Constellation Brands, has grown even more tumultuous. At least two lawsuits, both seeking class-action status, have been brought this week against Robert Mondavi Corp. on behalf of Mondavi shareholders.
One suit, filed on Oct. 19 in Napa County Superior Court on behalf of Bamboo Partners LLC, alleges breach of fiduciary duty by Mondavi and eight of the company's nine directors. Whether by intent or oversight, Tim Mondavi is the only director not named as a defendant and the identity of the people involved in Bamboo Partners is not known. Of the three law firms listed on the complaint, all either declined to comment or did not return phone calls.
The suit charges Mondavi officials with failure to adequately consider Constellation's bid, saying that the offer is superior to the proposed restructuring plan that was announced by Mondavi on Sept. 20. That plan would sell off Mondavi's high-end operations, notably Robert Mondavi Winery and Opus One, both in Napa Valley, in order to focus on the company's $15-and under-brands, such as Woodbridge.
The plaintiff alleges that the "Defendants … appear only willing to proceed with the restructuring and recapitalization plan and are unwilling to entertain alternative strategies, though they may be more advantageous to shareholders."
The complaint further states that "defendants' summary rejection of the overture is rendered even more suspicious given that it has been reported that at the time Constellation approached defendants and defendants rejected the overture, Mondavi projected a post-restructuring total equity value in the range of $749 million to $929 million, which was below the amount offered by Constellation."
Three firms represent the plaintiff, including New York-based Milberg Weiss Bershad & Schulman, which specializes in shareholder lawsuits. It claims on its Web site to have been "responsible for $45 billion in recoveries," including "$1.027 billion for the NASDAQ market makers antitrust litigation" and "$460 million for the Raytheon securities fraud" case.
The grounds for the second lawsuit are at present unclear because of factual mistakes in the initial press release from the plaintiff attorney, Brian Felgoise of Philadelphia. Felgoise alleged "Constellation Brands Inc. has a controlling interest in Mondavi and thus is able to control the board, and to influence the possible acceptance of an inadequate cash and stock bid worth approximately $53 per share for the Class A shareholders and $61.75 for the Class B shareholders. The action also alleges that the bid was not the result of arm's length bargaining, and seeks to benefit the controlling shareholder at the expense of the public shareholders."
Constellation has, in fact, no such controlling interest, and the corrected press release did not cite other grounds for a lawsuit on behalf of Mondavi shareholders. Felgoise did not return calls seeking comment.
At press time, a third lawsuit, filed by shareholder Robert Lewis, had been reported.
"We feel the lawsuits are without merit, and we intend to defend against them vigorously," said Robert Mondavi spokeswoman Hilary Martin.
Although the plaintiffs in the first two suits seek class-action status, that status is not guaranteed, as it requires certification by the presiding judge.
