Erste Asset Management GmbH v. Bernardo Hees, et al. C.A. No. 2023-1191 (Del. June 9, 2025)
The Delaware Supreme Court reversed the Court of Chancery’s dismissal of a Rule 60(b) motion brought by Erste Asset Management, a Kraft Heinz stockholder, seeking to reopen a dismissed derivative suit. The Supreme Court held that Kraft Heinz’s misrepresentations about a director’s ongoing consulting relationship constituted fraud that warranted relief from judgment under Rule 60(b)(3).
The plaintiff filed a derivative complaint alleging fiduciary breaches related to a stock sale of Kraft Heinz shares, and pled demand futility based on director conflicts. The Court of Chancery dismissed the case on the grounds that a majority of the board was disinterested, which included a director who had been a compensation consultant reporting to the CEO. The dismissal relied on the company’s public and litigation representations that the director’s consulting agreement terminated before the relevant date for assessing demand futility. Later, the plaintiff discovered through a separate books-and-records request that the director had in fact continued consulting for Kraft Heinz after the relevant date and was compensated with 500,000 stock options, which was contrary to the company’s SEC filings and litigation statements. Thus, the plaintiff filed a Rule 60(b) motion seeking relief from judgment based on fraud and newly-discovered evidence. The Court of Chancery found, however, that this new information did not qualify as newly-discovered evidence because the plaintiff could have learned about the compensation through reasonable diligence, and in any event, found that Rule 60(b)(3) only applied in limited circumstances involving fraud on the court.
The Supreme Court disagreed with the Court of Chancery’s finding that Rule 60(b)(3) only permits relief in cases of “fraud on the court.” The Supreme Court explained that fraud between the parties that prevents a fair presentation of the case also suffices under Rule 60(b)(3), including misrepresentations embedded in public disclosures and court filings. Accordingly, the Supreme Court remanded Count I related to the Rule 60(b) fraud to the trial court to reconsider demand futility under Rule 23.1, and also revived and remanded the breach of fiduciary duty claim in Count II for further consideration.
