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In re Avon Products, Inc. Shareholders Litigation

Supreme Court, New York

March 5, 2013

In re AVON PRODUCTS, INC. SHAREHOLDERS LITIGATION Index No. 651087/2012

Unpublished Opinion

Motion Date: 9/5/2012

Hon. Eileen Bransten, J.S.C.

This matter comes before the Court on Defendants Andrea Jung, Fred Hassan, Ann S. Moore, Paula Stern, Lawrence A. Weinbach, Maria Elena Lagomasino, W. Don Cornwell, Gary M. Rodkin, V. Ann Hailey, Paul S. Pressler, Douglas R. Conant and Sherilyn McCoy's (collectively "Defendants") motion to dismiss Plaintiffs' shareholder derivative and putative class action claims. Plaintiffs oppose. For the reasons that follow, Defendants' motion to dismiss is granted.

I. Background[1]

Nominal Defendant Avon Products, Inc. ("Avon" or the "Company") is "a global manufacturer and marketer of beauty products, " incorporated in New York. (Amended Consolidated Complaint ("Compl.") ¶ 36; Defendants' Memorandum in Support of Motion to Dismiss the Amended Consolidated Complaint ("Defs' Moving Br.") at 3.) Defendants are current and former members of the Avon Board of Directors ("Board"). (Compl.¶¶ 20-31.)

Plaintiffs are five purported Avon shareholders, see id. ¶¶ 14-18, who bring this action challenging the Board's decision as to whether to engage in negotiations with Coty, Inc. ("Coty") regarding the potential sale of Avon.

Coty approached Avon in late 2011, interested in exploring a potential transaction. (Compl. ¶¶41-42.) In three letters sent during March 2012, Coty presented "compelling proposals" to the Board and requested that the parties open discussions about a potential transaction. Id . 42. Coty then publicly disclosed its proposals to purchase Avon in an April 2, 2012 press release, which contained an open letter to the Board and then CEO, Defendant Andrea Jung. Id. Coty's proposal offered a $23.25 per share purchase price. Id. ¶ 43.

Shortly thereafter, Avon released its own press release, explaining its rejection of Coty's proposal. Id. ¶¶ 3, 43. In its press release, Avon offered reasons for its rejection of Coty's overtures, including: (1) the Board's confidence in Avon's stand-alone prospects; (2)the Board's belief that "Coty's indication of interest substantially undervalues Avon"; (3)the hiring of a new Avon CEO and the "greater opportunity to improve shareholder value in excess of Coty's offer; and, (4) the non-binding nature of Coty's offer and its reservation of the ability to raise or lower the purchase price. (Affirmation of Jasand Mock in Support of Defendants' Motion to Dismiss ("Mock Affirm."), Ex. 6) (April 2, 2012 Avon press release).

Following the issuance of Avon's press release, Coty continued pursuing the Company during April and May. On May 9, 2012, Coty submitted another proposal to Avon, this time raising its price to $24.75 per share. Id. 44. Plaintiffs represent that this offer constituted a premium of nearly 40% over the trading price of Avon, as of May 17, 2012. Id. ¶¶ 7, 47. In its May 9, 2012 letter, Coty stated that its offer would expire on May 14, 2012. Id. 44. Before the deadline, Avon emailed Coty to request an additional week to consider the offer. Id. ¶ 45. After receiving Avon's email, Coty withdrew its offer on May 14, 2012, its original deadline. Id. ¶ 46.

Plaintiffs then filed this action, alleging that the Avon Board's refusal to enter into discussions with Coty constituted a breach of its fiduciary duties. Plaintiffs' Complaint asserts both derivative and direct breach of fiduciary duty claims against the twelve Defendant-members of the Avon Board. In their Complaint, Plaintiffs plead that demand on the Avon Board was not made because it would have been futile.

II. Analysis

Defendants seek dismissal of both the derivative and direct breach of fiduciary duty claims brought against them in the Complaint. Each claim will be ...


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