Fresh Del Monte Produce in $9.5 Million Judgment
March 16, 2005
Cleary Gottlieb won a $9.5 million judgment in favor of longstanding clients Fresh Del Monte Produce Inc. (“FDMP”) and its principal shareholder, IAT Group Inc., against Eastbrook Caribe A.V.V. (“Eastbrook”). Justice Charles E. Ramos directed the entry of the judgment.
The case began nine years ago, when Eastbrook filed a lawsuit in the Supreme Court of New York County to enjoin the sale of FDMP to IAT. That suit was settled in November 1996 by means of a Settlement Agreement and Release drafted by Cleary Gottlieb. Judge Ramos called the Release “unique” in providing that if Eastbrook ever re-asserted a challenge to the 1996 transaction, the Release would indemnify FDMP and IAT for any harm caused by renewed litigation, including “any decline in value” relating to the assertion of released claims up to the amount Eastbrook received in the 1996 settlement or $9.5 million. In November 2002, Eastbrook filed such a renewed action in the same court contending that the 1996 transaction with IAT was induced by the payment of a bribe and that Eastbrook was therefore fraudulently induced to enter into the Settlement Agreement and Release. The announcement of Eastbrook’s suit resulted in a drop in FDMP’s stock price by more than 25%. In January 2004, Justice Ramos dismissed Eastbrook’s renewed action as barred by the Release. The Appellate Division, First Department unanimously affirmed the dismissal in October 2004, establishing the precedent that a party in litigation may not reasonably rely solely on alleged misrepresentations made to it by its adversary as to a matter in controversy in the dispute.
In November 2004 Cleary Gottlieb tried the claims of FDMP and IAT for compensation under the indemnity. At the conclusion of a six-day trial, Justice Ramos ruled that Eastbrook’s re-initiation of litigation in 2002 caused a drop in the value of IAT’s shares in FDMP far in excess of the $9.5 million indemnity cap. In post-trial briefing, Eastbrook argued that because FDMP’s stock price had returned to its pre-suit levels by the time of trial, IAT could not recover for an “unrealized loss.” Justice Ramos held that the Release reflects the intention of the parties to compensate one another for “any decline in value” whether realized or not, and that such an agreement between sophisticated parties is enforceable under New York law.