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British American Tobacco Wins Appeal Dismissing Putative Class Action Suit Arising from the $27.6 Billion Reynolds‑Lorillard Merger

December 11, 2018

On December 7, 2018, the Supreme Court of North Carolina ruled in favor of Cravath client British American Tobacco plc (“BAT”), reversing the state’s Court of Appeals and dismissing the putative class action suit asserting a claim for breach of fiduciary duty related to the $27.6 billion acquisition of Lorillard Inc. by Reynolds American, Inc. (“RAI”).

Plaintiff, on behalf of a purported class of RAI shareholders, claimed that BAT, as RAI’s largest shareholder with 42% ownership, breached fiduciary duties allegedly owed to other shareholders by causing the transaction to be structured in ways that unduly benefitted BAT. In August 2015, the North Carolina Business Court dismissed the claims against BAT in their entirety, holding that BAT did not exercise sufficient control over RAI to owe the remaining shareholders any fiduciary duty. Plaintiffs appealed to the North Carolina Court of Appeals, which reversed the dismissal. BAT filed a Petition for Discretionary Review with the Supreme Court of North Carolina, and Cravath partner Gary A. Bornstein argued the appeal in January 2018.

In its decision, the Supreme Court of North Carolina held that “[b]ecause BAT was not a majority or controlling stockholder, it did not owe fiduciary duties to the other Reynolds stockholders, and the Business Court properly dismissed plaintiff’s breach‑of‑fiduciary‑duty claim against BAT.”

In addition to partner Gary A. Bornstein, the Cravath team included associates M. Brent Byars, Michael P. Addis, Michael J. Zaken and Andrew D. Huynh. The case is Dr. Robert Corwin as Trustee for the Beatrice Corwin Living Irrevocable Trust v. British American Tobacco plc, et al., No. 56PA17 (N.C.).

Related Practices & Industries

  • Litigation
  • Appellate
  • M&A Litigation
  • Class Action Defense
  • Consumer Products and Services

People

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Name
Gary A. Bornstein
Title
Litigation
Title
Partner
Email
gbornstein@cravath.com
Phone
+1-212-474-1084
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    Education

    • J.D., 1997, Harvard Law School
      magna cum laude
    • B.A., 1994, Yale College
      Phi Beta Kappa, magna cum laude

    Admitted In

    • New York
    Photo
    Name
    Michael P. Addis
    Title
    Litigation
    Title
    Partner
    Email
    maddis@cravath.com
    Phone
    +1-212-474-1956
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      Education

      • J.D., 2010, Harvard Law School
      • M.S.T., 2007, Pace University
      • A.B., 2005, Princeton University
        magna cum laude

      Admitted In

      • New York
      Photo
      Name
      M. Brent Byars
      Title
      Litigation
      Title
      Senior Attorney
      Email
      mbyars@cravath.com
      Phone
      +1-212-474-1104
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        Education

        • J.D., 2009, Harvard Law School
          cum laude
        • M.A., 2006, Emory University
        • B.A., 2004, Davidson College
          Phi Beta Kappa, magna cum laude

        Admitted In

        • New York

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