Erste Asset Management GMBH v. Hees

IN THE SUPREME COURT OF THE STATE OF DELAWARE

ERSTE ASSET MANAGEMENT §
GMBH, §
§
Plaintiff Below, § No. 374, 2024
Appellant, §
§ Court Below: Court of Chancery
v. § of the State of Delaware
§
BERNARDO HEES, ALEXANDRE § C.A. No. 2023-1191
BEHRING, JORGE PAULO §
LEMANN, MARCEL HERRMANN §
TELLES, PAULO BASILIO, DAVID §
KNOPF, EDUARDO PELLEISSONE, §
3G CAPITAL, INC., 3G CAPITAL §
LTD., 3G GLOBAL FOOD §
HOLDINGS, L.P., 3G GLOBAL §
FOOD HOLDINGS GP LP, 3G §
CAPITAL PARTNERS II L.P., 3G §
CAPITAL PARTNERS LTD, HK3 18 §
LP, JOHN CAHILL, GEORGE §
ZOGHBI, RASHIDA LA LANDE, and §
JOAO M. CASTRO-NEVES, §
§
Defendants Below, §
Appellees, §
§
-and- §
§
THE KRAFT HEINZ COMPANY, §
a Delaware Corporation, §
§
Nominal Defendant, §
Appellee. §

Submitted: March 12, 2025
Decided: June 9, 2025
Before SEITZ, Chief Justice; VALIHURA, TRAYNOR, LEGROW, and
GRIFFITHS, Justices.

Upon appeal from the Court of Chancery, REVERSED and REMANDED.

Joel Friedlander, Esquire, Jeffrey M. Gorris, Esquire, Christopher M. Foulds,
Esquire, Matthew D. Venuti, Esquire, FRIEDLANDER & GORRIS P.A.,
Wilmington, Delaware, Lawrence P. Eagel, Esquire, Melissa Fortunato, Esquire,
Brandon Walker, Esquire, BRAGAR EAGEL & SQUIRE, P.C., New York, New
York, Attorneys for Appellant/Plaintiff-Below, Erste Asset Management GmbH.

Matthew D. Stachel, Esquire, PAUL, WEISS, RIFKIND, WHARTON &
GARRISON LLP, Wilmington, Delaware, Daniel J. Kramer, Esquire, Andrew J.
Ehrlich, Esquire, Robert N. Kravitz, Esquire, PAUL, WEISS, RIFKIND,
WHARTON & GARRISON LLP, New York, New York, Attorneys for
Appellees/Defendants-Below, The Kraft Heinz Company, Bernardo Hees, Alexandre
Behring, Jorge Paulo Lemann, Marcel Herrmann Telles, Paulo Basilio, David
Knopf, Eduardo Pelleissone, John Cahill, George Zoghbi, Rashida La Lande, and
Joao M. Castro-Neves.

Michael A. Pittenger, Esquire, Jacqueline A. Rogers, Esquire, Camilia R. Katkocin,
Esquire, POTTER ANDERSON & CORROON LLP, Wilmington, Delaware,
Sandra C. Goldstein, Esquire, Stefan Atkinson, Esquire, Kevin M. Neylan, Jr.,
Esquire, KIRKLAND & ELLIS LLP, New York, New York, Attorneys for
Appellees/Defendants-Below, 3G Capital, Inc., 3G Capital Partners Ltd., 3G
Capital Partners II LP, 3G Global Food Holdings GP LP, 3G Global Food Holdings
LP, and HK3 18 LP.

LEGROW, Justice:
In early 2020, Erste Asset Management GmbH filed an action asserting

derivative claims against Kraft Heinz Company’s fiduciaries. Erste’s claims arose

from an August 2018 sale of Kraft Heinz’s stock by 3G Capital, Inc., a significant

Kraft Heinz minority stockholder. The Court of Chancery dismissed that complaint

under Rule 23.1, concluding that the derivative plaintiffs failed to plead

particularized facts creating a reasonable doubt that six of Kraft Heinz’s eleven

directors were disinterested or lacked independence. One of those six directors was

John Cahill.

Cahill had previously served as a consultant to Kraft Heinz and received

substantial compensation in that role. In his consultancy work, Cahill reported to

Kraft Heinz’s CEO and its board chair, both of whom were 3G partners, and Kraft

Heinz’s 3G-controlled compensation committee established Cahill’s compensation.

In August 2019, Kraft Heinz disclosed that Cahill’s consultancy had ended on July

1, 2019—before the date for assessing demand futility. The representation that

Cahill’s consulting relationship had terminated was repeated several times in Kraft

Heinz’s public disclosures and in the briefs that the derivative defendants filed in the

Court of Chancery. In concluding that the derivative plaintiffs’ allegations did not

impugn Cahill’s ability to impartially consider a demand, the Court of Chancery

expressly referred to the fact that his consulting agreement terminated before the
derivative action was filed and that there were no facts alleged indicating that Cahill

expected the consulting arrangement to resume.

But Kraft Heinz now concedes that those disclosures, on which the derivative

plaintiffs and the Court of Chancery relied, were false. It is undisputed that Cahill

continued to serve as a consultant to Kraft Heinz after July 2019. The only thing

that changed at that time was his compensation structure: in return for Cahill’s

continuing work, he received 500,000 options, with one-third of that award vesting

on each anniversary of the initial grant. The fact of Cahill’s ongoing consultancy—

undisclosed in and contrary to Kraft Heinz’s public disclosures—was not known to

Erste until October 2023, more than a year after the derivative action was dismissed

and closed.

Upon learning this new information, Erste filed a complaint seeking relief

from the judgment in the prior action on the basis of fraud and newly discovered

evidence under Rule 60(b). The Court of Chancery dismissed Erste’s bid to reopen

the prior action, holding that (i) fraud under Rule 60(b)(3) applies only in the rare

circumstance that a party commits a fraud on the court; and (ii) the new information

regarding Cahill’s consultancy was not newly discovered evidence under the rule

because Erste could have learned the information with reasonable diligence.

We reverse. The Court of Chancery erred in its conclusion that a party may

obtain relief from final judgment on the basis of fraud only if there has been a “fraud

2
on the court.” Although Rule 60(b)(3) applies only in rare circumstances, the rule’s

plain language and Delaware precedent establish that it extends beyond a fraud on

the court and applies when fraud between the parties prevents the defrauded party

from fairly and adequately presenting its case. Erste has pleaded such a claim, and

the court therefore erred in dismissing the action.

I. FACTUAL AND PROCEDURAL BACKGROUND
A. The Parties

Erste Asset Management GmbH is a minority stockholder of the Kraft Heinz

Company, a Delaware corporation and one of the largest global food and beverage

companies.1 Kraft Heinz was established as a standalone public company in 2015

after the merger of Kraft Food Groups, Inc. and H.J. Heinz Holding Corporation.

3G Capital, Inc. is a global investment firm and significant minority

stockholder in Kraft Heinz. As of June 2019, three 3G principals—Jorge Paulo

Lemann, Alexandre Behring, and Joao Castro-Neves—served on Kraft Heinz’s

board of directors (the “Board”). Another director, Alexandre Van Damme, was a

longtime business partner of 3G. Board members John Cahill and George Zoghbi

worked as consultants to Kraft Heinz.

1
Unless otherwise noted, the facts are taken from Erste Asset Mgmt. GmbH v. Hees, 2024 WL
3722620 (Del. Ch. Aug. 8, 2024) [hereinafter the “Opinion”].

3
B. Cahill’s Consultancy

Before the Kraft Heinz merger, Cahill was Chairman and Chief Executive

Officer of Kraft Food Groups, Inc. In July 2015, he became a Kraft Heinz director

and vice chairman of the Board. Later that month, Cahill entered into a two-year

consulting agreement with Kraft Heinz. He was paid $4 million per year to consult

with Kraft Heinz CEO Bernardo Hees and Chairman Behring, who were also 3G

partners.2 After the initial consulting agreement expired, Kraft Heinz and Cahill

entered into a new consulting agreement on November 1, 2017. Cahill undertook

fewer responsibilities, and his compensation was lowered to $500,000 per year. This

payment was in addition to approximately $255,000 in compensation that Cahill

received as a director. Cahill’s Kraft Heinz-related compensation constituted more

than half his annual income.

In June 2019, Cahill emailed Chairman Behring and director Gregory Abel.

He raised potential independence issues associated with the current consulting

agreement and suggested a “change to [his] financial arrangement with Kraft

Heinz.”3 Cahill wrote:

. . . I ask you to consider a change to my financial arrangement with
Kraft Heinz.

2
Hees was a 3G partner from July 2010 until June 2019. App. to Appellant’s Opening Br.
[hereinafter A__] at A254.
3
Opinion at *2; A14.

4
The bulk of my financial tie[s] to the Company is in the form of options,
and all my options are underwater. This is completely appropriate given
our results and the losses shareholders have endured. At the same time,
I am mindful that I am deemed to be a non-independent Director
because of recurring annual consulting payments of $500,000. This is
probably not hea[l]thy for the long term.

To address both issues, I recommend the Company suspend consulting
payments to me (benefitting the ongoing P&L). In lieu, the Company
would provide me a one-time grant of 500,000 options vesting ratably
over three years. This would get me on the road to independent status.

If you think this is not sensible, no worries. Know that my commitment
to working with the new team to turn around Kraft Heinz is solid . . . .4

In a June 20, 2019 meeting, the Kraft Heinz Compensation Committee

reviewed Cahill’s consulting arrangement. Minutes of the meeting reflect that the

Compensation Committee “discussed proposed changes to Mr. Cahill’s

compensation arrangement.”5 The Committee reviewed a slide deck that stated:

• “Cahill . . . [c]urrently receives an annual gross compensation of USD $500k
as an advisor.”

• “We are proposing no cash compensation effective July 2019 and [a] one time
grant of #500,000 stock options[].”

• “This creates a path for Cahill becoming an independent board member in
three years.”6

4
Opinion at *2; A14.
5
Opinion at *3; A18.
6
Opinion at *3; A16.

5
The presentation noted that Cahill’s “stock options [were] expected to be issued the

later of the end of the blackout period or August 15 based on the closing price for

[Kraft Heinz] stock on that date.”7 The Compensation Committee approved the

proposed changes to Cahill’s compensation arrangement.8

On August 2, 2019, Kraft Heinz filed a proxy statement (the “2019 Proxy”)

that referred to Cahill as “a former consultant to Kraft Heinz” and stated that “Mr.

Cahill’s advisory and consulting arrangement terminated on July 1, 2019.” 9 In

accordance with Item 402(k) of Regulation S-K, Kraft Heinz disclosed Cahill’s

compensation in the Director Compensation Table. The table listed Cahill’s

standard Board retainer fee of $110,000, deferred stock awards of $125,050, and

payments of $500,000 for his consulting duties under the column “All Other

Compensation.”10 A footnote to the Cahill-related disclosure explained:

Mr. Cahill provided advisory and consulting services to Kraft Heinz
related to then-current and historical finances, relationships with
licensors, customers, and vendors, employee matters, product
development, marketing and distribution, government affairs, and
strategic opportunities. Such services were provided pursuant to a
consulting agreement entered into between Mr. Cahill and the
Company in November 2017. Mr. Cahill’s advisory and consulting
arrangement terminated on July 1, 2019. Previously, these services
were provided pursuant to an arrangement entered into following the

7
Opinion at *3; A16.
8
Opinion at *3; A18.
9
Opinion at *; Kraft Heinz Company, Proxy Statement (Form 14a) (Aug. 2, 2019) [hereinafter the
“2019 Proxy”]; A19–36 (2019 Proxy).
10
2019 Proxy at A35.

6
2015 Merger. Mr. Cahill’s services under the consulting agreement
were distinct and separate from his duties as a director. Payments to Mr.
Cahill under the consulting agreement are disclosed in the “All Other
Compensation” column. For a discussion of the advisory and consulting
services provided by Mr. Cahill to Kraft Heinz, please see “Corporate
Governance and Board Matters — Independence and Related Person
Transactions — Consulting Agreement.”11

The section titled “Consultant Agreement” disclosed:

On November 2, 2017, we entered into a consulting agreement with Mr.
Cahill pursuant to which he provided advisory and consulting services
to us related to then-current and historical finances, relationships with
licensors, customers and vendors, employee matters, product
development, marketing and distribution, government affairs and
strategic opportunities. Mr. Cahill’s advisory and consulting
arrangement terminated on July 1, 2019. Payments to Mr. Cahill
under the consulting agreement are disclosed in the “All Other
Compensation” column of 2018 Non-Employee Director
Compensation Table below. Previously, Mr. Cahill had provided
similar services under a consulting agreement entered into following
the 2015 Merger, which had expired in July 2017.12

On August 16, 2019, Cahill received the stock options approved by the

Compensation Committee in a Non-Qualified Stock Option Award Agreement

under the Kraft Heinz Company Omnibus Incentive Plan.13 Cahill was awarded

500,000 shares at $25.41 per share, vesting over a three-year period.14 The options

11
2019 Proxy at A35 n.4 (emphasis added).
12
Id. at A26 (emphasis added); Opinion at *3.
13
Exhibit D to the Transmittal Affidavit of Joel Friedlander, Esquire, in Support of Plaintiff Erste
Asset Management GmbH’s Answering Brief in Opposition to Defendants’ Motions to Dismiss
the Verified Stockholder Complaint at 5, Erste Asset Management GmbH v. Bernardo Hees, et al.,
No. 2023-1191 (Del. Ch. Aug. 8, 2023) (Ch. Dkt. 17).
14
Id. at 5.

7
“vest and become exercisable . . . subject to [Cahill’s] continued Service (including,

for the avoidance of doubt, service as a board of director member, consultant or

advisor) with the Company or one of its Subsidiaries or Affiliates.”15 Kraft Heinz

disclosed the grant in a Form 4 filing four days later, stating that the stock options

“cliff-vest on August 16, 2022, subject to the terms and conditions of the stock

option award agreement.”16

The Form 4 did not provide any further information about the options’

connection with Cahill’s ongoing consultancy. 17 To the contrary, Kraft Heinz

continued to publicly represent that the consultancy had ended.18 On March 27,

2020, Kraft Heinz filed its 2020 proxy statement with the SEC (the “2020 Proxy).19

The 2020 Proxy disclosed that Cahill received $250,000 in 2019 under a 2017

“advisory and consulting arrangement terminated on July 1, 2019.”20 His consulting

services were described as being “distinct and separate from his duties as a

15
Id. at 6.
16
Opinion at *4; Kraft Heinz Company, Statement of Changes in Beneficial Ownership of
Securities (Form 4) (Aug. 20, 2019) [hereinafter “Form 4”]; A37–38.
17
See Form 4; A37–38.
18
See Kraft Heinz Company, Proxy Statement (Form 14a) (March 27, 2020) [hereinafter the “2020
Proxy”]; A53–87; Kraft Heinz Company, Proxy Statement (Form 14a) (March 24, 2023) at A33.
19
Opinion at *4; 2020 Proxy.
20
Opinion at *4; 2020 Proxy at A58, A65, A73, A84.

8
director.” 21 It also stated that he received a “one-time grant of 500,000 stock

options” “[i]n connection with the termination of his consulting agreement.”22

Kraft Heinz’s proxy statements for 2021–2023 continued to incorrectly

describe Cahill as a “former consultant.”23 The 2023 proxy statement stated that

Cahill “last provided consulting services to Kraft Heinz in June 2019,” “received a

grant of stock options in 2019 in connection with the termination of his consulting

agreement,” and was “determined to be independent effective August 17, 2022.”24

Kraft Heinz now concedes for purposes of this appeal that its public

statements that Cahill was a former consultant were false.25

C. The Prior Action

On December 2, 2019, Erste served a books and record demand under 8 Del.

C. § 220 on Kraft Heinz “[t]o investigate potential wrongdoing, mismanagement,

and breaches of fiduciary duties by the Company’s management and its Board of

21
Opinion at *4; 2020 Proxy at A64, A85.
22
Opinion at *4; 2020 Proxy at A58, A73.
23
Kraft Heinz Company, Proxy Statement (Form 14a) (March 26, 2021); Kraft Heinz Company,
Proxy Statement (Form 14a) (March 25, 2022); Kraft Heinz Company, Proxy Statement (Form
14a) (March 24, 2023) [hereinafter the “2023 Proxy”].
24
Opinion at *4; 2023 Proxy at A333.
25
Oral Argument at 28:26 (Mar. 12, 2025) (accessible at https://courts.delaware.gov/supreme/
oralarguments/) (Supr. Dkt. 29) [hereinafter “Appellate Oral Argument”] (The Court: “The
defendants’ brief seems to avoid addressing whether the company’s disclosures were in fact false
[and] misleading . . . are the defendants conceding for the purpose of this argument that they were
false and misleading?” Kraft Heinz: “We will concede for the purpose of this argument that the
statement was untrue”).

9
Directors.”26 It sought, among other things, “[d]ocuments reflecting any and all

personal, familial, financial, or business relationships, other than their service as

directors of Kraft Heinz, between or among any members of the Board.”27 Kraft

Heinz produced documents in response.28

After receiving the books and records produced by Kraft Heinz, Erste filed a

derivative complaint in the Court of Chancery on January 21, 2020. The complaint

alleged breach of fiduciary duty claims concerning an August 2018 sale of part of

3G’s Kraft Heinz stock, which took place six months before Kraft Heinz’s disclosure

of disappointing financial results and impairment charges that resulted in a

significant drop in its stock price.29

Various derivative actions filed by Kraft Heinz stockholders between July 30,

2019 and early 2020 were consolidated (the “Prior Action”), and Erste was

appointed co-lead plaintiff.30 A consolidated amended complaint was filed in the

Prior Action on April 27, 2020 (the “Amended Complaint”). The derivative

plaintiffs alleged that demand on the board was excused as futile because a majority

26
Opinion at *5; App. to Appellee’s Answering Br. [hereinafter B__] B20 (books and records
demand).
27
Opinion at *5; B20 (books and records demand).
28
Opinion at *5.
29
See B55–62.
30
In re Kraft Heinz Co. Derivative Litig., 2021 WL 6012632 at *3 (Del. Ch. Dec. 15, 2021), aff'd,
282 A.3d 1054 (Del. 2022) (TABLE); A39–52.

10
of the directors were interested or lacked independence. The relevant date for

demand-futility purposes was July 30, 2019. The Amended Complaint alleged that

Cahill served as a consultant of Kraft Heinz “until July 1, 2019.”31 That allegation

was based on Kraft Heinz’s representations in the 2019 and 2020 Proxies.32 Kraft

Heinz conceded at oral argument in this appeal that the proxy statements were

incorporated by reference into the amended complaint.33

In June 2020, Kraft Heinz moved to dismiss the Amended Complaint for

failure to plead demand futility under Court of Chancery Rule 23.1 and for failure

to state a claim under Rule 12(b)(6). During briefing and oral argument on their

motion to dismiss, Kraft Heinz repeated previous statements that Cahill no longer

was a consultant as of the date for assessing demand futility.34

On December 15, 2021, the Court of Chancery dismissed the Prior Action

with prejudice under Rule 23.1.35 The court held that the plaintiffs had failed to

plead particularized facts creating a reasonable doubt that a majority of Kraft Heinz’s

31
A332; A336 (Verified Complaint for Relief from Judgment).
32
Id.
33
Appellate Oral Argument at 30:20.
34
A336–37 at ¶¶ 267, 269–70 (Verified Complaint for Relief from Judgment); see Reply Br. in
Prior Action at 8–9 (“Defendants demonstrated that the Complaint lacks particularized allegations
suggesting that Mr. Cahill’s prior consulting arrangement with Kraft Heinz and receipt of ordinary
director compensation plead a lack of independence.”) (emphasis in original).
35
In re Kraft Heinz Co. Derivative Litig., 2021 WL 6012632 at *13 (Del. Ch. Dec. 15, 2021),
aff‘d, 282 A.3d 1054 (Del. 2022) (TABLE).

11
Board was disinterested or lacked independence from 3G or its defendant partners

as of July 30, 2019.

In its opinion dismissing the Amended Complaint in the Prior Action, the

court reasoned that six of Kraft Heinz’s eleven directors were independent: Jeanne

Jackson, John Pope, Feroz Dewan, Tracy Britt Cool, Abel, and Cahill. The court

held that “plaintiff’s allegations about Cahill . . . do not, in totality, impugn [his]

independence from 3G.”36

In reaching that conclusion, the Court of Chancery relied on the Amended

Complaint’s allegation that Cahill’s consulting agreement had ended before the first

derivative complaint was filed. That allegation was based on Kraft Heinz’s public

disclosures. The court stated:

Cahill’s consulting agreement with Kraft Heinz terminated on July 1,
2019—before this action was filed. There are no facts alleged
indicating that Cahill expected his consulting arrangement to resume.37

Because those six directors constituted a majority of the Board, the court declined to

address whether the other directors, including Zoghbi or Van Damme, were

disinterested and independent of 3G.

The derivative plaintiffs appealed to this Court, still unaware that Cahill’s

consultancy had not ended. On appeal, the derivative plaintiffs referred to the 2019

36
Id.
37
Opinion at *5 (citing and quoting In re Kraft Heinz, 2021 WL 6012632, at *11).

12
stock option award to Cahill, but—believing the consultancy had ended—argued

that the changes to Cahill’s compensation arrangement were made tactically to

defend against possible future derivative litigation. Based on public disclosures

(including the August 2019 Form 4 filings), the plaintiffs asserted that the stock

grants “were disclosed in August 2019 . . . suggesting that the economic

arrangements for [Cahill] were being restructured in anticipation of the filing of

derivative actions.”38 Erste hypothesized that the options disclosed in the Form 4

were a surreptitious way to pay Cahill differently without requiring further work:

[Kraft Heinz’s] 2020 proxy statement describes the grant of stock
options to Cahill ‘[i]n connection with the termination of his consulting
agreement’[ ], but the Form 4 respecting the options was filed on
August 20, 2019, and states that the ‘transaction date’ was August 16,
2019—after the termination of the consulting agreement and after the
filing of the first derivative complaint . . . In other words, KHC sought
to challenge demand futility based on Cahill’s status as former
consultant, when in reality they were conniving to pay him differently
without requiring any further consulting work.

. . . If Cahill cannot act objectively respecting KHC, there is no reason
to believe he can act objectively as to 3G, which wields managerial
authority at KHC.39

On appeal, Kraft Heinz again argued that Cahill was independent because his

consultancy had ended. The Company described his consultancy with the following

terminology: “former consultant”; “prior consulting arrangement”; “former

38
B159 (Reply Br. in Appeal of the Prior Action).
39
B171–72 (Reply Br. in Appeal of the Prior Action).

13
consulting arrangement”; “prior consulting”; “waning prior consulting relationship”;

“former status as a consultant.”40 The defendants distinguished Cahill’s consultancy

from cases that involve “indefinite or lengthy consulting arrangements [that] courts

have found indicative of bias-producing relationships.” 41 At oral argument on

appeal, the defendants argued that Cahill was “free of the consulting relationship”

as of the date for assessing demand futility.42

On August 1, 2022, this Court affirmed the Court of Chancery’s decision on

the basis of its December 15, 2021 opinion. The Amended Complaint was dismissed

with prejudice and the Prior Action was closed.

D. The Demand and the Board’s Response

On November 29, 2022, Erste served a litigation demand on the Kraft Heinz

Board. The demand raised the same claims alleged in the Prior Action. The demand

also raised a new claim: certain defendants were liable to the Company for waste.

This waste claim was based on Erste’s contention that the 3G-affiliated defendants

caused Kraft Heinz to “gift” Cahill “500,000 options after his consulting agreement

was terminated.”43

40
A337 ¶ 271; A130; A152–53; A157–58.
41
A157.
42
A338 ¶ 272 (internal quotation marks omitted) (citation omitted).
43
Opinion at *6.

14
The Board assembled a “Working Group” of two independent directors who

investigated and eventually rejected the demand.44 During the investigation, the

Working Group interviewed Cahill about the purpose of the stock options granted to

him in 2019. The Working Group concluded that the options were to compensate

Cahill for “ongoing work for the Company that exceeded the role and scope of his

service as a director.”45 On May 20, 2023, the Working Group issued its report and

recommended that the Board reject the demands. 46 The Board accepted that

recommendation and decided not to pursue further litigation on the matter. Erste

was made aware of the decision by a letter to his counsel dated May 30, 2023.47

On August 21, 2023, Erste served a new books and records demand to

investigate the Board’s rejection, theorizing that the stock options awarded to Cahill

were a wasteful transaction since his consultancy had purportedly ended before the

options were granted. Kraft Heinz produced documents on October 11, 2023,

including (i) Cahill’s email to Behring and Abel on June 1, 2019; (ii) the minutes

and presentation from the June 20, 2019 Compensation Committee meeting; and (iii)

44
Answering Br. at 17; A339.
45
Opinion at *6; Supplemental Report of the Working Group of the Board of Directors of The
Kraft Heinz Company, dated May 20, 2023, Erste Asset Management GmbH v. Bernardo Hees, et
al., at 34 (Aug. 8, 2024) (Exhibit 1 to the Stachel Affidavit) [hereinafter the “Working Group
Report”].
46
A339.
47
B191–92.

15
the May 20, 2023 Working Group Report.48 For the first time, Erste became aware

that Cahill’s consultancy had not ended on July 1, 2019, as Kraft Heinz had

represented in its proxy statements and in the Prior Action.

E. The New Action

Other plaintiffs filed wrongful refusal actions in the Court of Chancery,49 but

Erste took another tack. On October 30, 2023, Erste attempted to file a motion in

the Prior Action seeking relief from the judgment under Court of Chancery Rule

60(b). Since the Prior Action had been closed for more than a year, however, the

motion was time barred. Erste then filed a new action to set aside the judgment in

the Prior Action under Rule 60(b).

Erste advanced five claims in this new action. Count I sought relief under

Rule 60(b). 50 Count II claimed that certain director defendants breached their

fiduciary duties by allegedly making false disclosures in Kraft Heinz’s proxy

statements. 51 Counts III, IV, and V mirrored Erste’s claims in the Amended

Complaint in the Prior Action, alleging Brophy and aiding-and-abetting claims based

48
See Opinion at *6; A14–18.
49
See In re Kraft Heinz Demand Refused Deriv. S’holder Litig., 2024 WL 3493957 (Del. Ch. July
19, 2024) (dismissing the demand-refused suits).
50
See A342–43 (Count I (Relief from Judgment)).
51
See A343–44 (Count II (False Disclosures)).

16
on 3G’s August 2018 stock sale.52 The parties agreed to brief Counts I and II first,

as a dismissal of those claims would be dispositive of the others.

Count I sought relief under two subsections of Rule 60(b). First, Erste argued

that it was entitled to relief under Rule 60(b)(2) for newly discovered evidence.

According to Erste, Cahill and another Kraft Heinz director, Zoghbi, had received

stock options for undisclosed and ongoing consulting services. Second, Erste

asserted that Kraft Heinz’s public filings improperly disclosed Cahill’s consultancy

status and compensation, which constituted fraud under Rule 60(b)(3).

In Count II Erste claimed that the director defendants breached their fiduciary

duties by failing to correct the false compensation-related disclosures in Kraft

Heinz’s proxy statements. Erste alleged that it was harmed because it incurred

litigation costs in the Prior Action.53

The director defendants, 3G entities, and Kraft Heinz moved to dismiss the

complaint on March 4, 2024. After briefing and oral argument, the Court of

Chancery dismissed Count I. The court held that the information regarding Cahill’s

ongoing consultancy was not “newly discovered evidence” because “reasonable

diligence on Erste’s part—either through its books and records demand or a thorough

review of Kraft Heinz’s public filings—would have uncovered this information

52
See A344–45 (Count III (Brophy)); A345-49 (Count IV (Contribution and Indemnification));
A349–50 (Count V (Aiding and Abetting)); See also Opinion at *7 n.80–82.
53
See A343 (Count II (False Disclosures)).

17
during the prior lawsuit.” 54 The court reasoned that Erste “raised the director’s

options in its appeal of the Prior Action to the Supreme Court.”55 Based on its

conclusion that Erste could have obtained the information about Cahill and Zoghbi

before the Prior Action was dismissed, the court rejected Erste’s claim under Rule

60(b)(2).

The court then considered whether the Prior Action was a product of fraud on

the court under Rule 60(b)(3). It found that the alleged fraud fell outside the judicial

process, “fall[ing] well short of what Rule 60(b)(3) requires.” The court held that

Rule 60(b)(3) is “confined to the more serious, but fortunately rare, cases involving

a corruption of the judicial process itself.”56 The court reasoned that “[t]o justify

relief under Rule 60(b)(3), the ‘fraud must be extrinsic’” and “‘directly affect[]’ the

‘integrity of the court and its ability to function impartially.’”57 The court concluded

that “if this were fraud, it is ‘intrinsic,’” explaining that any misrepresentation in the

disclosures was “outside the judicial process,” and the alleged fraud therefore was

not covered by Rule 60(b)(3).58 Having so concluded, the court dismissed Count I,

54
Opinion at *9.
55
Id. at *1.
56
Id. at *10.
57
Id. (quoting Smith v. Williams, 2007 WL 2193748, at *4-5 (Del. Super. July 27, 2007)).
58
Id. at *10.

18
stating “Erste makes no well-pleaded allegation supporting a reasonable inference

that counsel gave false information to this court.”59

The court also dismissed Count II, holding that it “cannot reasonably infer that

the director defendants ‘knew’ false statements were being used to ‘create a false

[litigation] record.’”60 It also rejected Erste’s damages claim, calling it a “creative

attempt to recover attorneys’ fees [that] falls short of pleading the elements of Erste’s

claim.”61

Because dismissal of the first two claims was dispositive of the others, the

court did not reach Counts III–IV. The Court of Chancery concluded that Erste was

not entitled to the relief it sought, stating that “the sort of rare circumstances that

might merit revisiting” the Prior Action were absent in this case.62

Erste now appeals the Court of Chancery’s ruling on its Rule 60(b) arguments

in Count I and the dismissal of Count II under Rule 12(b)(6).63

59
Id.
60
Id. at *12.
61
Id. at *1.
62
Id.
63
Id. at *1, *8, *12.

19
II. STANDARD OF REVIEW

This court reviews a trial court’s decision to grant or deny a Rule 60(b) motion

on an abuse of discretion standard.64 “An abuse of discretion occurs when ‘a court

has . . . exceeded the bounds of reason in view of the circumstances, [or] . . . so

ignored recognized rules of law or practice so as to produce injustice.’”65 Whether

the court employed the correct legal standard in resolving a Rule 60(b) application

is a matter of law that we review de novo.66 The dismissal of a claim under Rule

12(b)(6) for failure to state a claim also is subject to de novo review.67

III. ANALYSIS
On appeal Erste argues that the court erred by (i) applying the incorrect legal

standard to the application for relief under Rule 60(b)(3); (ii) holding that

“reasonable diligence” for the purposes of Rule 60(b)(2) requires a books and

64
MCA, Inc. v. Matsushita Elec. Indus. Co., 785 A.2d 625, 633 (Del. 2001) (“A motion to reopen
a judgment under Court of Chancery Rule 60(b) is addressed to the sound discretion of the trial
court. This Court’s review of the grant or denial of such a motion is for an abuse of discretion.”)
(citing Battaglia v. Wilmington Sav. Fund Soc., 379 A.2d 1132, 1135 (Del. 1977)); see also Wife
B. v. Husband B., 395 A.2d 358 (Del. 1978)).
65
MCA, 785 A.2d at 634 (quoting Lilly v. State, 649 A.2d 1055, 1059 (Del. 1994)).
66
RBC Cap. Mkts., LLC v. Educ. Loan Tr. IV, 87 A.3d 632, 639 (Del. 2014); MCA, 785 A.2d at
638 (reiterating that whether a trial court employed an incorrect legal standard in denying a Rule
60(b) application is reviewed de novo).
67
In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d 162, 167–68 (Del. 2006) (the dismissal
of a complaint under Rule 12(b)(6) for failure to state a claim for relief is reviewed de novo);
Franklin v. Glenhill Advisors LLC, 2023 WL 569192, at *5 (Del. Ch. Jan. 27, 2023), aff’d, 304
A.3d 950 (Del. 2023) (TABLE) (acknowledging that a Rule 12(b)(6) motion addressed to an
independent action under Rule 60 requires the court’s evaluation of standards and policies of Rule
60 to determine whether the Complaint has stated a claim for relief).

20
records demand to confirm the accuracy of a proxy statement; and (iii) concluding

that Count II failed to plead the necessary elements of a disclosure claim. Erste does

not challenge the Court of Chancery’s dismissal of the claims concerning Zoghbi in

Count I.68 Because we find the 60(b)(3) issue dispositive, we do not reach the Rule

60(b)(2) issue and make no conclusions regarding the correctness of the court’s

dismissal of that aspect of the claim. We also remand Count II for further

consideration and briefing in light of our decision as to Count I.

A. The Court of Chancery applied the incorrect legal standard under Rule
60(b)(3).69

The Court of Chancery’s dismissal of Erste’s claim based on Rule 60(b)(3)

was founded on the court’s legal conclusion that Rule 60(b)(3)’s application is

limited to instances of “fraud on the court.” Erste argues that this conclusion was in

error. In Count I, Erste claimed that Kraft Heinz’s misrepresentations regarding

Cahill’s consultancy amounted to both a fraud on the court and broader “intrinsic”

fraud that misled Erste about Cahill’s independence and prevented Erste from

68
See generally Opening Br. at 18–37; Reply Br. at 5–16; see also Murphy v. State, 632 A.2d
1150, 1152 (Del. 1993) (“The failure to raise a legal issue in the text of the opening brief generally
constitutes a waiver of that claim on appeal.”) (footnote omitted).
69
The parties did not argue, and the Court of Chancery did not decide, whether Rule 60(b)(3)
establishes the correct standard for an independent action seeking relief from a final judgment on
the basis of fraud. We therefore express no view on that issue and instead analyze Erste’s claim
under Rule 60(b)(3), as the parties and the court did. See Charles Alan Wright et al., Federal
Practice and Procedure at § 2868 (1995) [hereinafter Wright & Miller] (Independent Action for
Relief) (noting that there may be different elements for fraud as an independent action seeking
relief from judgment as opposed to a motion filed in a previous action to reopen a judgment under
Rule 60(b)(3)).

21
establishing demand futility in the Prior Action.70 In rejecting Erste’s claim for relief

grounded in Rule 60(b)(3), the Court of Chancery held that the rule is “narrow” and

“confined to the more serious, but fortunately rare, cases involving a corruption of

the judicial process itself.”71 The court held that the fraud “must be extrinsic” to

satisfy Rule 60(b)(3), and that since any misrepresentation in the proxies was at most

“intrinsic,” Erste failed to make “well-pleaded allegation[s] supporting a reasonable

inference that counsel gave false information to this court.”72

On appeal, Erste has abandoned its fraud-on-the-court claim but argues that

the court contradicted the plain language of the rule and applicable case law by

failing to consider Count I under the broader definition of “fraud” within Rule

60(b)(3).73 Erste contends that fraud “between parties” is an appropriate ground for

relief from judgment under Rule 60(b)(3) under certain circumstances, and Kraft

Heinz’s failure to accurately disclose Cahill’s consulting arrangement in the 2019

and 2020 Proxies are circumstances warranting relief under this standard.74

70
A342–43 (Verified Stockholder Complaint).
71
Opinion at *10.
72
Id.
73
Opening Br. at 19 (arguing that “the Court of Chancery erred by applying the case law
interpreting ‘fraud on the court’ without regard for the case law interpreting Rule 60(b)(3). The
Court of Chancery also erred by classifying Erste’s claim as “intrinsic” fraud and denying it on
that basis, in contradiction with the plain language of Rule 60(b)(3).”).
74
See Opening Br. at 24–25 (“[T]he Court of Chancery did not analyze whether Erste satisfied the
Rule 60(b)(3) standard for fraud between the parties (i.e., that Kraft Heinz’s fraud prevented Erste
from fairly and adequately presenting its case respecting Cahill’s lack of independence).”).

22
Kraft Heinz responds that the Court of Chancery correctly dismissed Erste’s

claim.75 Kraft Heinz argues that despite Erste’s argument that the Vice Chancellor

“‘improperly collapsed’ the tests for fraud under Rule 60(3) and for fraud upon the

court,” the standard for “both tests required Plaintiff to allege fraud, amounting to

unfair litigation tactics, during the course of the Prior Action.”76 Kraft Heinz does

not expressly argue that Rule 60(b)(3) is confined to fraud on the court, instead

positing that “the Vice Chancellor’s analysis was not confined to the historical,

narrow distinction of intrinsic and extrinsic fraud.”77 Kraft Heinz contends that Erste

“could not plead relief under Rule 60(b)(3) because [Erste] only challenged extra-

litigation disclosures in proxy statements made before [Erste] filed the amended

complaint in the Prior Action.”78

Notwithstanding Kraft Heinz’s efforts to elide what occurred in the Prior

Action and ignore the basis for the Court of Chancery’s holding in this case, Rule

60(b)(3) plainly offers Erste relief under these circumstances. That is not to say that

Rule 60(b)(3) applies broadly; the rule’s application remains cabined to instances of

fraud that impair a party’s ability to present its case in litigation. The Court of

Chancery was correct in stating that Rule 60(b)(3) applies only in rare

75
Answering Br. at 21–27.
76
Id. at 24.
77
Id. at 27.
78
Id.

23
circumstances. But, as explained below, the court erred in limiting those

circumstances to instances of fraud on the court.

1. The scope of Rule 60(b)(3) relief

Rule 60(b) requires a court to balance two significant, but competing, values:

“[t]he first is ensuring the integrity of the judicial process and the second,

countervailing, consideration is the finality of judgments.”79 Given the substantial

interest in preserving the finality of judgments, Rule 60(b) motions are not taken

lightly or granted easily.80 A court confronting a request for relief under the rule

must strike a balance between the need to bring litigation to a conclusive end and

the “countervailing concern that justice is carried out.”81 “A Rule 60(b) motion is

not an opportunity for a do-over or an appeal.”82

Rule 60(b)(3) permits a court to relieve a party from a final judgment in the

event of intrinsic or extrinsic fraud, misrepresentation or other misconduct of an

adverse party. The Rule provides:

On motion and upon such terms as are just, the Court may relieve a
party or a party’s legal representative from a final judgment, order, or
proceeding for the following reasons . . . (3) fraud (whether heretofore

79
MCA, 785 A.2d at 634–35 (citations omitted) (citing Credit Lyonnais Bank Nederland, N.V. v.
Pathe Communications Corp., 1996 WL 757274, at *1 (Del. Ch. Dec. 20, 1996)); see also Wright
& Miller § 2857 (Discretion of the Court).
80
MCA, 785 A.2d at 634–35.
81
Id. at 635.
82
Carlyle Inv. Mgmt. LLC. v. Nat’l Indus. Grp. (Hldg.), 2012 WL 4847089, at *5 (Del. Ch. Oct.
11, 2012), aff’d, 67 A.3d 373 (Del. 2013).

24
denominated intrinsic or extrinsic), misrepresentation or other
misconduct of an adverse party . . . .83

Delaware courts interpret unambiguous language according to its plain text to

give effect to the drafters’ intent.84 By its plain terms, Rule 60(b)(3) covers both

intrinsic and extrinsic fraud and obviates the muddied distinction between the two

concepts.85 In explaining the federal counterpart to Rule 60, commentators have

clarified that “[t]he old law had permitted relief for ‘extrinsic’ fraud, fraud collateral

to the matter or question that was tried and determined by the judgment in question,

but had denied relief for ‘intrinsic’ fraud, fraud relating to the subject matter of the

action.”86 Like its federal analog, Rule 60(b)(3) now applies more broadly; the rule’s

plain language includes fraud arising from a “misrepresentation . . . of an adverse

party . . .” and expressly captures intrinsic and extrinsic fraud.

Our precedent has recognized Rule 60(b)(3)’s broader scope. In MCA, Inc. v.

Matsushita Elec. Indus. Co.,87 this Court observed that “[a] Rule 60(b)(3) motion is

83
Del. Ch. Ct. R. 60(b)(3).
84
Stream TV Networks, Inc. v. SeeCubic, Inc., 250 A.3d 1016, 1040 (Del. Ch. 2020) (quoting
Rubick v. Sec. Instrument Corp., 766 A.2d 15, 18 (Del. 2000)).
85
See Wright & Miller § 2870.
86
Wright & Miller § 2861 (“Distinction Between Intrinsic and Extrinsic Fraud”); see also Appriva
S’holder Litig. Co., LLC v. EV3, Inc., 937 A.2d 1275, 1286 (Del. 2007) (“Where, as here, the
Superior Court's Rules of Civil Procedure closely track the Federal Rules of Civil Procedure, cases
interpreting the federal rules are persuasive authority for our construction purposes.”); Cede & Co.
v. Technicolor, Inc., 542 A.2d 1182, 1191 (Del. 1988) (“Decisions interpreting the Federal Rules
of Civil Procedure are usually of great persuasive weight in the construction of parallel Delaware
rules.”).
87
785 A.2d 625, 639 (Del. 2001).

25
reserved for situations where a party has engaged in fraud or misrepresentation that

prevents the moving party from fairly and adequately presenting his or her case.”88

Further, MCA recognized that Rule 60(b)(3) is “generally employed in situations

where fraud or misrepresentation between the parties has occurred.”89

Similarly, in Franklin v. Glenhill Advisors LLC, 90 the Court of Chancery

distinguished the narrow “fraud on the court” standard from Rule 60(b)(3) fraud,

stating that: “[a] Rule 60(b)(3) motion is reserved for situations where a party has

engaged in fraud or misrepresentation that prevents the moving party from fairly and

adequately presenting his or her case.” 91 “Fraud on the court, by contrast, is a

different, more serious, species, generally limited to fraudulent conduct that

seriously affects the integrity of the normal process of adjudication.”92

In Smith v. Williams, the Superior Court likewise distinguished fraud on the

court from fraud between the parties, stating:

Even though Defendants have identified a number of inconsistencies,
some of which appear material to the issues in this case, and even
88
MCA, 785 A.2d at 639 (citing Wright & Miller § 2860).
89
Id. at 639 n.15; see also Wright & Miller, § 2870. In MCA, the plaintiffs’ claim was “more
properly characterized as a motion pursuant to Rule 60(b) . . . because there was a fraud upon the
court, rather than a motion under Rule 60(b)(3).” MCA, 785 A.2d at 639. Because the plaintiffs
only advanced a fraud on the court claim in MCA, the stricter fraud on the court standard was
appropriate, and this Court held that the trial court “applied the appropriate standard in ruling on
the [] plaintiffs’ motion.” Id.
90
2023 WL 569192, at *5 (Del. Ch. Jan. 27, 2023), aff’d, 304 A.3d 950 (Del. 2023).
91
Id.
92
Id. (internal quotes omitted) (citing Johnson v. Preferred Pro. Ins. Co., 91 A.3d 994, 1005 (Del.
Super. 2014)).

26
though the possibility of perjury or false testimony potentially overlaps
into other litigation filed by Smith in this Court, I am still not persuaded
that such conduct is so manifestly unconscionable as to constitute fraud
on the Court as distinguished from fraud between the parties.93

2. The rule’s application to Erste’s claim for relief

In denying Erste’s claim, the Court of Chancery erred in limiting its analysis

to whether Erste met the “fraud on the court” standard instead of considering the

broader scope of Rule 60(b)(3) fraud recognized in our precedent and in persuasive

federal authorities. The cases cited by the Court of Chancery discuss the burden of

proving fraud on the court but do not limit the rule to only those cases that meet that

standard.94 Erste’s fraud claim was based on the proxy disclosures that “ma[de] it

appear that [Cahill] [was] independent, so that a derivative action against 3G [was]

dismissed for failure to plead demand futility.”95

93
Smith, 2007 WL 2193748, at *5 (emphasis added).
94
See, e.g., Chang v. Child’s Advoc. Ctr. of Del., Inc., 2016 WL 3636539, at *1 (Del. Ch. June 29,
2016) (citing the discussion of “fraud on the court” in MCA, that “[a] party seeking to vacate an
order on the ground that his or her opponent effectuated a fraud on the court bears a heavy burden,”
and stating that “[s]inister suspicions and dark imaginings of duplicitous conduct are not enough”
to establish fraud on the court) (emphasis added); Postorivo v. AG Paintball Hldgs, Inc., 2008 WL
3876199, at *21 (Del. Ch. Aug. 20, 2008) (discussing the difference between extrinsic and intrinsic
fraud as described in Smith for purposes of its fraud on the court analysis. The case only analyzes
fraud on the court and does not cite Rule 60(b). It considers whether a court may dismiss a case
based on the conduct of counsel or the parties if such misconduct amounts to fraud on the court.);
Paron Cap. Mgmt., LLC v. Crombie, 2012 WL 214777 (Del. Ch. Jan. 24, 2012) (“This Court has
held that ‘only extrinsic fraud will justify dismissal to remedy a fraud on the court, and only where
established by clear and convincing evidence.’”) (emphasis added) (citation omitted).
95
A471 (Plaintiff Erste Answering Brief in Opposition to Defendants’ Motion to Dismiss the
Verified Stockholder Complaint).

27
The Court of Chancery was correct in concluding that not any fraudulent

statement or representation will warrant relief under Rule 60(b)(3). The rule remains

difficult to satisfy and establishes an exacting standard: (1) the burden of proving

fraud is on the moving party; (2) the fraud must be established by clear and

convincing evidence; and (3) the fraud must have prevented the moving party from

fairly and adequately pleading its case.96 The appropriate question now is whether

the false disclosures that Kraft Heinz used to conceal Cahill’s ongoing consultancy

met this standard.

Kraft Heinz concedes for purposes of these proceedings that it made a false

public disclosure regarding Cahill’s ongoing consultancy and that the derivative

plaintiffs incorporated those public disclosures in their Amended Complaint. 97

Those concessions and the undisputed facts satisfy the first two elements of the Rule

60(b)(3) standard. Those false disclosures caused Erste to incorrectly believe and

allege in the Prior Action that Cahill’s consultancy had ended before the date for

assessing demand futility. The mistaken impression that Cahill had no ongoing

consulting position with Kraft Heinz contributed to the Court of Chancery’s

conclusion that Cahill—and thereby a majority of the Kraft Heinz Board—was

96
Wright & Miller § 2860; see, e.g., Floorgraphics Inc. v. News Am. Mktg. In-Store Servs., Inc.,
434 F. App’x 109, 111 (3d Cir. 2011) (discussing the federal Rule 60(b)(3) standard).
97
Appellate Oral Argument at 28:46.

28
disinterested and independent. The Court of Chancery therefore dismissed the

Amended Complaint in the Prior Action under Rule 23.1.

Kraft Heinz challenges the third element of this standard, urging us to affirm

the Court of Chancery’s reasoning that Erste “merely challenge[d] statements made

in SEC filings—outside the judicial process” and thereby outside the scope of Rule

60(b)(3).98 Kraft Heinz argues that the false statements in the proxies were “extra-

litigation disclosures” made outside of the litigation and “before Plaintiff filed the

amended complaint in the Prior Action.” 99 Kraft Heinz relies on the Court of

Chancery’s reasoning that to the extent those false statements were “arguably linked

to the judicial process,” they were limited to “defense counsel’s statements in the

Prior Action” that were “addressing allegations in the Prior Action Complaint about

Cahill’s consultancy.”100

Kraft Heinz’s argument contravenes the record and is circular. First, the false

statements in the proxy statements were incorporated by reference in the amended

complaint and were repeated by defense counsel during argument in the Prior

Action. The incorporation and reliance on those statements in the litigation brought

them squarely within the judicial process. Second, Kraft Heinz cannot avoid the

98
Answering Br. at 23.
99
Id. at 27.
100
Id. at 23; Opinion at *10.

29
misleading nature of the misrepresentations it made in litigation by arguing that it

was parroting the Amended Complaint when the allegations in the complaint were

wrong because Kraft Heinz’s own proxy statements were false. The derivative

plaintiffs were entitled to rely on the proxies; the falsity of the proxy statements was

information solely in Kraft Heinz’s possession.

A party cannot make a false public disclosure outside litigation that the other

side relies on in its allegations in the complaint, repeat those false representations in

court, obtain a final ruling based on those false representations, and then argue that

those false representations were entirely outside the judicial process and that the

defrauded party is to blame for relying on them. But even if we could agree with

Kraft Heinz’s argument that the representations remained outside the litigation, that

argument reverts to the outdated distinction between intrinsic and extrinsic fraud,

when Rule 60(b)(3) encompasses both. Properly understood, our inquiry must focus

on whether Kraft Heinz’s misrepresentations, within litigation or otherwise,

prevented Erste from fairly presenting its case.

Erste contends that the false disclosures created a misimpression that Cahill’s

consulting relationship had concluded, which was integral to the Court of

Chancery’s conclusion that the plaintiffs in the Prior Action failed to plead

particularized facts creating a reasonable doubt that Cahill lacked independence.

According to Erste, on July 30, 2019 (the date for assessing demand futility), Cahill

30
had not been issued the 500,000 stock options. Therefore, Erste argues,

“[a]nticipation of those options would weigh on a hypothetical decision by Cahill to

sue 3G.”101 In addition, even after the options were granted, the 3G-affiliated Board

members who comprised a majority of the Compensation Committee could decide

that Cahill’s consulting services no longer were needed and could terminate the stock

option agreement before all Cahill’s stock options vested. At the motion to dismiss

stage—where “all well-pleaded factual allegations are accepted as true”102—Kraft

Heinz’s misrepresentations prevented Erste from adequately presenting the

argument that Cahill was not independent from 3G on the basis of his ongoing

consulting relationship with Kraft Heinz and its 3G-controlled management and

Compensation Committee.

Accordingly, Count I was well-pleaded as to Rule 60(b)(3), and dismissal was

not appropriate. The parties agreed at oral argument that if this Court reversed the

Court of Chancery’s Opinion as to Count I, the next logical step would be to remand

the matter to the trial court for Rule 23.1 motion practice in the Prior Action in light

of the new evidence.103

101
Opening Br. at 24.
102
Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002).
103
Appellate Oral Argument at 18:00–19:20 (Erste) (“What makes sense under this circumstance
. . . if we present[] facts on a pleading, you know, sufficient to state a claim, that it justifies re-
opening the judgment . . . to warrant 60(b) relief it would be essentially to go back and re-do the
23.1 analysis . . . the Court has the ability actually to make the 23.1 determination as to Cahill right

31
B. Erste’s breach of fiduciary duty claim requires further proceedings
consistent with our ruling regarding Erste’s fraud claim.
The final point on appeal concerns the sufficiency of Erste’s claim in Count

II of the Complaint. Erste alleged in Count II that five Kraft Heinz directors “knew

that the 2019 Proxy falsely and misleadingly described the changes to the

compensation arrangements of Cahill and Zoghbi, and that subsequent proxy

statements falsely described Cahill's ongoing consultant status.”104 Erste alleged

that these directors breached their duty of loyalty by “never correcting the 2019

Proxy or the 2020 Proxy, which they knew [were] being used by the 3G Defendants

to create a false record for the Court of Chancery and the Delaware Supreme Court

to adjudicate the independence of Cahill [ ] in the Prior Action.”105 As to damages,

Erste sought payment of litigation costs it incurred “to escape the effect of the

wrongful dismissal of the Prior Action based on fraudulent public disclosures.”106

The Court of Chancery held that “Count II fail[ed] to state a claim on which relief

now for pleading purposes or it could be remanded back to the Vice Chancellor to just do a 23.1
analysis to leave open the Cahill question.”); id. at 37:32–38:04 (Kraft Heinz) (“On this [appellant]
and me may agree a little bit in the sense that I think we agree a remand would be appropriate I
think we agree that a trial on a Rule 60 would make very little sense our view would be that there
should then be a Rule 23.1 motion practice in the court below with whatever additional facts Erste
would want to bring to bear.”).
104
Opinion at *11; see A344 (Complaint at ¶ 291).
105
A344 (Complaint at ¶ 292).
106
Id. (Complaint at ¶ 293).

32
can be granted.”107 It dismissed the claim “in its entirety with prejudice under Rule

12(b)(6).”108

The standards governing a motion to dismiss for failure to state a claim are

well settled:

(i) all well-pleaded factual allegations are accepted as true; (ii) even
vague allegations are “well-pleaded” if they give the opposing party
notice of the claim; (iii) the Court must draw all reasonable inferences
in favor of the non-moving party; and (iv) dismissal is inappropriate
unless the “plaintiff would not be entitled to recover under any
reasonably conceivable set of circumstances susceptible of proof.”109

The Court of Chancery held that the Complaint failed to allege any facts

creating a reasonable inference that the director defendants “‘knew’ false statements

were being used to ‘create a false [litigation] record.’”110 The court held that (i) Erste

could not rely on a presumption of reliance, causation, and damages because it did

not assert that “stockholders’ economic or voting rights were impaired by

disclosures”; and (ii) Erste failed to plead those elements, waiving any argument that

its complaint satisfied these elements.111

In our view, the Court of Chancery’s conclusions as to Count II may have

been colored by its view that Rule 60(b)(3) relief is limited to extrinsic fraud.

107
Opinion at *12.
108
Id.
109
Savor, Inc., 812 A.2d 894, 896–97 (footnotes and internal quotation marks omitted).
110
Opinion at *12; see A344 (Complaint at ¶ 292).
111
Opinion at *11.

33
Additionally, Rule 23.1 motion practice may inform the analysis of whether Count

II is well-pleaded or may obviate the need for the claim altogether. At a minimum,

the motion practice is likely to clarify issues regarding causation and damages.

Accordingly, we remand Count II for further proceedings consistent with our

decision and based on the further development of the record regarding the underlying

derivative litigation.

IV. CONCLUSION

We REVERSE the judgment below and REMAND for further proceedings

consistent with this decision.

34