Editorial

A strange strained convoluted conspiracy theory that trots out a mangled hodgepodge of allegations?

2/2/02 The DeMarco complaint alleges a scheme by certain Directors and management of Ocean Spray to commit fraud and conspiracy, legal terms that also can be construed as inflammatory when used in everyday context. But they are legal terms. The Ocean Spray response to this Complaint is an attempt to convince the court to dismiss and strike the complaint before its merits can be argued in court. The title of this editorial includes words used in that brief to describe the DeMarco complaint.

We encourage Ocean Spray grower/owners to read both documents carefully with particular attention to whether the Ocean Spray brief presents common sense justification for not taking this case to trial. No matter what the Court decides based on the legal arguments presented, use you own judgment to determine whether DeMarco's allegations bear consideration.

The DeMarco complaint does not cite case law, and in fact is not even written in legalese. Necessarily, the Ocean Spray brief cites chapter and verse of Delaware corporate case law supporting their contention that DeMarco has no merit.

Despite its legalistic language, the Ocean Spray brief is peppered with negative and in some cases mocking adjectives (see below). Furthermore, the sense we got reading it is that only token appreciation is given to the fact that Ocean Spray is a cooperative whose growers are facing losing their farms.

The brief begins with redundantly stating that DeMarco "filed a long and prolix (unduly prolonged or drawn out; too long marked by or using an excess of words; ed. ) complaint" and reduces the DeMarco suit to what they considers its "essence," i.e:

"that times are hard, that DeMarco and certain other stockholders need cash, and that the Board therefore should sell Ocean Spray or otherwise manage the Company to generate cash to meet these stockholders' short term liquidity needs, rather than pursuing a turnaround plan that the Board has adopted and which the Board believes in the long run will serve the best interests of the Company and all of its stockholders (the "Turnaround Plan")."

Throughout their brief, Ocean Spray compares the plight of its grower/owners to shareholders in other corporations. For example:

A board of directors simply does not have a duty to manage a corporation based on the belief of some stockholders that their need for cash will not allow them to continue to hold their shares. p.2

While it is possible to  sympathize with someone who claims to be in financial distress, a board of directors need not manage a corporation on that basis. pp. 2-3

When the shareholders are referred to as growers and their feelings credited, it is sometimes dismissed as legally irrelevant:

Given these facts, the best the Complaint can do to allege that the Company's refusal to waive the Equity Quota Provision has created "stress" for some growers. (Compl.¶128). Even crediting this implicit and unsupported allegation, mental anguish is not the type of interest that excuses demand under Rule 23.1. p.41

We imagine private conversations among the Ocean Spray attorneys at Richard, Layton & Finger as they puzzled over why a man with the wealth of Garfield DeMarco, the third largest Ocean Spray grower, would cast his lot with the "less affluent" who actually labor on their own farms:

"The Complaint also does not explain how or why plaintiff DeMarco, one of the 50 largest growers and 50 largest stockholders, is not in the same superior (and allegedly self‑interested) position purportedly enjoyed by other large grower-stockholders." p.15

The Ocean Spray brief repeatedly addresses the issue of an outright sale of the entire company, and conveniently ignores the fact that at no time was anything more than an exploration of sale of only the juice business being either discussed by sale advocates, or being addressed in the two lawsuits DeMarco was party to. For example:

The relief the Complaint seeks would require that the Court elevate itself to the status of a super‑director, determine that a sale, merger or other strategic transaction was appropriate in the Court's business judgment, and direct Ocean Spray to carry out this Court's decision.  p.19

The Complaint's allegations stem from a misinterpretation of the use of the term "sale" in the Stockholder Merger Resolutions and the Company's response to them. Although a sale of assets only would require a majority vote, a sale of assets was never mentioned, was not being contemplated, and would not have made sense as a way to sell the Company. Any sale of Ocean Spray would most likely be effectuated through a merger, which would require a 75% supermajority vote. As the Court well knows, in mergers and acquisitions parlance it is common to refer to a sale of a company and not imply a sale of assets. p.29-30

We think that Mr. Finkelstein and his Ocean Spray legal team's extravagant use of colorful non-legal words implys that DeMarco's attorney, Mr. Fiebach (a former president of the Pennsylvania Bar) may not be functioning with a full deck ....for example:

Strangely the complaint does not name p.4

The complaint mangles the public record on this issue. p.9

".....its strained theory of director interest...." p.12

"The Plaintiff's convoluted conspiracy theory..." p.36

"As an alternative to its strained arguments about the course of action the Company is pursuing, the Complaint trots out a series of unsupported, generalized allegations..." p.41

"The Complaint next advances a hodgepodge of allegations..." p.58 (emphases added)

....and we doubt that his choosing the following particular quote from Chancellor Allen who described litigants in what allegedly was a similar case was accidental:

"One can readily understand why this imaginative complaint has been filed, but the relief it seeks is odd and the litigation that would result would be grotesque." p.20 (emphasis added)

While they may have legal relevance, some portions of the brief show a questionable understanding of cranberry farming:

"DeMarco alleges that it is a processed cranberry grower, although the Complaint does not allege why DeMarco does not or cannot  grow fresh or organically grown cranberries." ( pg. 10) Later in a footnote they state: "Fresh fruit cranberries are, generally, certain varieties of cranberry which must be harvested and handled in a special way in order to be marketed as fresh fruit. Cranberry bogs that are currently not producing fresh fruit cranberries cannot be easily converted to produce fresh fruit cranberries." (Compl.  ¶ 59). This carefully drafted allegation concedes that cranberry bogs producing processed cranberries in fact can be converted to produce fresh fruit cranberries." (p.11)

Finally, the gist of DeMarco's lawsuit is given short shrift:

Likewise, the Plaintiffs theory is flawed because the ultimate benefit that the larger growers supposedly will achieve exists only in the imagination of Plaintiff. According to the Plaintiff, the Board's purpose is "to increase their share of the inevitable control premium to be realized in a sale or merger of the Company." (Id.¶142). But as the Complaint repeatedly alleges, there is no plan to pursue a sale or merger of the Company. Ocean Spray instead is pursuing the Turnaround Plan as a stand‑alone strategy. Thus the payoff from a sale for the larger growers is entirely speculative and, according to the allegations of the Complaint, never to be achieved.

The Complaint's allegations simply do not support a self‑interested conspiracy by larger, allegedly more affluent growers against smaller, allegedly less affluent growers. As the Complaint admits, "hard times have beset the cranberry industry." (Id. ¶ 34). Hard times affect all growers. All growers have an interest in better prices. All growers have an interest in better market conditions. All growers have an interest in creating new markets. The Board has decided to address these issues through the Turnaround Plan. The Plaintiffs claim based on the turnaround plan "is basically a quarrel with the . . . Board's judgment . . . ." Brehm, 746 A.2d at 263. "Speculation on motives for undertaking corporation action [is] wholly insufficient to establish a case of demand excusal." Grobow, 539 A.2d at 188. p.37

The DeMarco case needs to be decided in a court of law. The sine qua non of a conspiracy is secrecy and deception. Fraud is not committed openly. Merely because the Board hasn't declared an intent to sell the company once enough growers go out of business, in some cases selling their farms at cut rate prices to the conspirators, doesn't mean that a conspiracy isn't being concocted. All, some, or none of DeMarco's allegations may be true. All, some, or none may meet the legal test for a finding in his favor. However, they are serious enough to deserve a fair hearing before a Court of Law.

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