Derivative Actions Against Chiquita

We will be following the multidistrict litigation In re: Chiquita Brands International, Inc., pending in the Southern District of Florida.  The multidistrict litigation consists of four shareholder derivative lawsuits (“Derivative Actions”), five tort lawsuits brought under the federal Alien Tort Statute and various state laws, and one tort lawsuit brought under the federal Antiterrorism Act and state tort laws.  Our focus will be on the Derivative Actions.  This post highlights the pleadings to date.

The Derivative Actions consist of three institutional shareholders lawsuits - two originally filed in the District of D.C. and one in the Southern District of Ohio - and one individual shareholder lawsuit originally brought in the District of New Jersey. 

On February 20, 2008 the Judicial Panel on Multidistrict Litigation (“Panel”) ordered one of the D.C. District cases and the Ohio case transferred to the Southern District of Florida for pretrial proceedings.  The Panel found that both of the actions concerned allegations that Chiquita provided financial and other support to a Colombian right-wing paramilitary group called Autodefenses Unidas de Colombia (“AUC”).  Chiquita once had banana-producing operations in Colombia.  According to a Washington Post article, the company stated that it made payments to the AUC for protection of its workers and operations against the Revolutionary Armed Forces of Colombia (“FARC”), a leftist paramilitary group.  The FARC were blowing up railroads used by U.S. companies and kidnapping foreigners for ransom.  A Chiquita spokesman told the Wall Street Journal, “Our actions were always motivated to protect the lives of our employees and their families.”  The Panel moved the cases to Florida because a similar case already pending there appeared to be more advanced than the other lawsuits, and because Florida is closer to Colombia than the other districts with ongoing litigation. 

The Transfer Order provided that actions not included in the order could be treated as potential tag-along actions, referencing the later two shareholder derivative actions. “Tag-along” cases refer to cases with similar subject matter that may be filed simultaneously or shortly after the cases currently under consideration.  On March 24, 2008 the Office of the Clerk in the Southern District of Florida took jurisdiction over the remaining two Derivative Actions as tag-along cases.  All of the transferred actions were assigned to the Honorable Kenneth A. Marra.

On March 3, 2008 the Derivative Actions Plaintiffs filed a Motion to Consolidate Related Shareholder Derivative Actions and Establish a Leadership Structure (“Motion”).  The Motion requested making the law firms Coughlin Stoia Geller Rudman & Robbins LLP (“Coughlin Stoia”), and Cohen, Placitella & Roth P.C. (“Cohen Placitella”) the co-lead derivative counsel for the Derivative Actions.  The Plaintiffs concurrently requested that the Court execute a pretrial order  transferring the Derivative Actions to the Southern District of Ohio based on the argument that coordination with the other MDL actions in Florida would be inefficient and unnecessary.

Judge Marra held a case management conference with all parties on May 16, 2008, and issued subsequent case management orders that kept the Derivative Actions in the Southern District of Florida for the time being.  Judge Marra issued an Order on August 12, 2008 naming Stewart L. Cohen, Esq., Arthur C. Leahy, Esq., and the law firms Cohen Placitella and Coughlin Stoia as co-lead counsel for Plaintiffs in the four Derivative Actions.  Mr. Cohen is a partner for Cohen Placitella, and Mr. Leahy is a partner for Coughlin Stoia.  The management orders give co-lead counsel the authority to speak for the plaintiffs in pretrial procedural matters as well as in settlement negotiations, and make co-lead counsel responsible for coordinating appearances and motions by all of the plaintiffs.

Because technological problems with the Clerk’s electronic filing system prevented formal consolidation of the shareholder derivative actions, the management orders created a pragmatic solution.  The Court and the parties will treat the Derivative Actions as if they were consolidated for all pretrial purposes and pleadings. 

The management orders also required the Plaintiffs to file a Verified Consolidated Shareholder Derivative Complaint (“Complaint”) to serve as the operative initial pleading for all plaintiffs. Co-lead derivative counsel filed the Complaint on September 11, 2008.  The following post will cover the Complaint in detail.

The primary materials for this post are available on the DU Corporate Governance website.