The Blue Bell matter is a shareholder derivative action against Blue Bell Creameries USA’s directors and officers alleging Breach of Fiduciary Duties and Damages.
In 2015, Blue Bell, a privately held ice cream manufacturer, experienced Listeria contamination that caused a total product recall, a temporary production shutdown, and sizable losses. Plaintiff alleged that Blue Bell Creameries USA’s directors and officers breached their fiduciary duties by failing to implement and monitor a food-safety oversight system.
The plaintiff’s expert calculated lost-enterprise-value damages using an ex-ante methodology (expectation damages): the decline in enterprise value before and after the Listeria event. The expert also calculated shareholder-dilution damages using an ex-post methodology based on post-Listeria debt financing including warrants issued while production was suspended.
On behalf of the defendants, Professor Zmijewski, supported by Erik Himan, Pavel Nikolov, Caitlin McCarthy, and Isabel Serrano Alas, evaluated the plaintiff’s expert’s lost-enterprise-value damages and but-for world, which assumed the allegedly omitted food-safety monitoring system would impose no costs and that Blue Bell would never recover from the Listeria event, effectively assuming damages in perpetuity. Using a comparative analysis of publicly traded peers, Professor Zmijewski evaluated the company’s equity value against its pre-Listeria value. Finally, Professor Zmijewski analyzed the shareholder-dilution damages, and whether dilution would arise when the warrants were granted or exercised.