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1. Ocean Spray' s Proxy Statement Disclosures Were Materially False And Misleading.

Ocean Spray presented the Resolutions to the shareholders for vote at the 2001 Ocean Spray Annual Meeting. At bottom, the Resolutions required that the shareholders express their views on the desirability of an extraordinary transaction, that the Board determine what would be gained for shareholders were such a transaction undertaken, and that it report on how Ocean Spray would go forward thereafter. To express this vote, a shareholder would need to be informed upon the risks and rewards inherent in the various strategic options. To properly evaluate those risks and rewards, a shareholder would need to have information concerning, inter alia, (1) the prospects of the turnaround plan succeeding, (2) the damages to growers (i.e., how many were expected to perish) in the interim, (3) whether the turnaround plan was based in any part on programmed attrition, (4) the benefits of an extraordinary transaction, and (5) the downside of delaying such a transaction and the lost opportunities for an extraordinary transaction if the turnaround plan continues to be pursued.

Once Ocean Spray put the Resolutions before the shareholders -- notwithstanding its prior "scorched earth" resistance to doing so -- and disclosed any information, it had the duty to ensure a proper voting process based on full and fair disclosure. But the shareholders could not evaluate the alternatives in the dark. Given the momentous matters at stake -- the future of Ocean Spray, the ability of shareholders to survive as farmers, and the disposition of the buried value in Ocean Spray which, for many growers, represented their life savings -- the shareholders were provided barely any information to inform their votes. In fact, the little information actually provided was materially inaccurate.

The Proxy Statement addresses the Resolution at pages 5-10. 2001 Proxy Statement, Exhibit "F." Ocean Spray printed a four paragraph statement offered by the 15% shareholders who were the proponents of the Resolutions. Ocean Spray had denied the proponents of the Resolutions access to such key documents as the consultant reports; thus, much of the four paragraph statement pled for adequate information. 2001 Proxy Statement at 6, Exhibit "F."

The next four pages of the proxy were devoted to management's opposition. 2001 Proxy Statement at 6-9, Exhibit "F." Management deflected the "scorched earth" resistance it previously offered to presenting the Resolutions. Id. at 6-7. After admitting that the Board was "well aware of the current economic difficulties that challenge its grower owners," the proxy stated that the Board had evaluated a range of possible economic outcomes, having engaged some of the country's most respected experts, including experts on the value of the Ocean Spray brand, the post-merger viability of the cooperative, and the feasibility of various liquidity options. Id. at 7. Based on the information - the details of which are no way set out - the Board recommended that the turnaround plan be pursued. Id. at 7. Ocean Spray then stated that a 75% vote was necessary to effect any strategic option other than the turnaround, and that enough ownership "strongly opposes any transaction at this time" so as to block any proposal. Id. at 7-8. Finally, Ocean Spray stated that the Board had constituted an Unlocking Shareholder Value Committee to identify ways for shareholders to access the liquidity of their equity interests, and condemned the Resolutions as redundant and entailing duplication of the Committee's work. Id. at 7, 9.

Defendants cannot seriously pretend that the proxy constituted fair disclosure. Rather, the attitude toward disclosure in the proxy -- an attitude repeated by Defendants before this Court -- is that since the Resolutions were advisory, anything goes. The issues presented for shareholder action had the same dimension as a vote on a proposal for merger - in the case of Ocean Spray, whether to undertake the most consequential of corporate transactions, at a crucial juncture in the economic fortunes of the grower owners. Ocean Spray's disclosure was nakedly inadequate.

The naked inadequacy of Ocean Spray's disclosure is readily evident from the numerous authorities which have considered proxy disclosure in the merger resolution context. See Gilmartin v. Adobe Res. Corp., Del. Ch., Civ. A. No. 12467, 1992 WL 71510, at * 10 (Apr. 6, 1992) (in considering merger, the fairness of the consideration is paramount); In re Trans World Airlines S'holders Litig., Del. Ch., Civ. A. No. 9844, 1988 WL 111271, at * 10, 12 (Oct. 21, 1988) (material facts in financial expert's analysis must be revealed under duty of candor); Barkan v. Amsted Indus., Inc., Del. Supr., 567 A.2d 1279, 1289 (1989) (shareholders must receive up-to-date financial estimates which provide a reasonable basis for an informed investment decision); Glassman v. Wometco Cable TV, Inc., Del. Ch., Civ. A. No. 7307, 1989 WL 1160, at *3-4 (Jan. 6, 1989) (corporate fiduciaries must disclose all information in their possession that a reasonable shareholder would consider material in deciding what to do, including information which indicates the worth of the corporation); Rand v. Western Airlines, Del. Ch., Civ. A. No. 8632, 1989 WL 104933, at 4 (Sept. 11, 1989); Smith v. Van Gorkom, Del. Supr., 488 A.2d 858, 890 (1985); Kahn v. United States Sugar Corp., Del. Ch., Civ. A. No. 7313, 1985 WL 4449, at *7 (Dec. 10, 1985) (holding deficiencies in disclosure relating to the value of the company material).

2. Ocean Spray' s Attempt To Justify Its Materially False And Misleading Proxy Statement Disclosures Is Whop Unavailing.

Under these circumstances, there can be no meaningful question that Ocean Spray's disclosures were false and misleading. Its shareholders were voting on the strategic options of the Company, but had essentially no information to assess those options despite the fact that management stated that it had studied them and reached conclusions. Perhaps mindful that the Board has the burden to justify withholding information, see Stroud v. Grace, Del. Ch., Civ. A. No. 10719, 1990 WL 176803, at *10 (Nov. 1, 1990), aff d in part; rev'd in part on other ,grounds, Del. Supr., 606 A.2d 75 (1992), Defendants in their brief try to slice and dice the disclosure issues. Deft. Br. 23-31. In doing so, they lose the forest for the trees.

The consultant reports are bedrock to an informed decision on the Resolutions, material as they are to the Resolutions which sought stockholder action on the exact issue addressed by the reports -- whether to pursue a sale or merger. 12 Indeed, management made specific reference in the proxy to its reliance upon them, parading them as justification but not offering _any information as to their content. See Arnold v. Society for Savings Bancorp., Inc., Del. Supr., 650 A.2d 1270, 1280-1281 (1994) (partial disclosure was material and misleading even if information was speculative and unreliable); Lynch v. Vickers Energy Corp., Del. Ch., 383 A.2d 278, 280 (1978); Freeman v. Restaurant Assocs. Indus., Inc., Del. Ch., Civ. A. No. 9212, 1990 WL 135923, at *8, Allen, C. (Sept. 21, 1990).

Regardless, the question is not, at this point, whether Defendants were required to reveal the reports, but whether, once they refer to them, they must do so truthfully. Having said they relied on the reports to support the turnaround, Defendants never provided them, and what little was provided was false and misleading because the disclosure was totally incomplete and highly selective. See Arnold, 650 A.2d at 1280-1281; Lynch, 383A.2d at 280 ("Completeness, not adequacy, is both the norm and the mandate.")

Denial of access to these documents mocks the voting process since shareholders cannot properly evaluate the risks and the rewards in pursuing the alternative courses of action. Likewise, information on why the Board elected not to consider or pursue third party inquiries was essential to an informed vote on the strategic direction of Ocean Spray. Since the turnaround plan was the excuse for management not to pursue an extraordinary transaction, it was essential that shareholders know what they were getting in exchange for what they were giving up. 13 Both In re Trans World Airlines S'holders Litig., 1988 WL 111271, at *10-12, and Rand, 1989 WL 104923, reject the notion that expert reports -- even those containing estimates -are not material. 14

Nor can Defendants now hide behind the rubric of self-flagellation. Directors are under a duty to disclose all relevant facts, including facts relating to their own actions and motives if relevant to the decision to be made. See e.g., In re Trans World Airlines S'holders

Litig., ., 1998 WL 111271, at *12 (disclosure as to whether directors negotiated on stockholder's behalf and accepted proposal held material). For example, in light of the changes to the

nomination process for the 2001 election, which eliminated the long-standing practice of regional nomination and representation, information about the basis for selection of Company sponsored nominees for the Board was material to the stockholder's vote.

Since the frame of reference for the exercise of the Board's fiduciary duty is the economic welfare of the owner grower at the farm level, the policies which best serve that interest must be under constant re-examination, certainly no less frequently than after each growing season. Were it true that the strategic option data had not been updated, but represented the basis for Board's ongoing refusal to address an issue which needs to be constantly reexamined, the data would still need to be disclosed. Ocean Spray's "staleness" argument proves nothing, other than the Board's dereliction in not updating its data for the presentation at the 2001 Annual Meeting.

Finally, Ocean Spray argues it accurately informed shareholders about the legal issues involved in a merger or sale. But Defendants now concede that a simple majority is all that is necessary for sale of assets, Deft. Br. at 29, effectively admitting the falsity of previous statements that a 75% shareholder vote was required for any strategic option.15

Ocean Spray exists to promote the economic welfare of its growers at the farm level. The Board must make every effort to give to those growers the right to express their views on the strategic direction of Ocean Spray. Instead, the Board has fought such attempts tooth and nail.  ¶¶ 103-104, 106-108, 110. Having denied its shareholders a meaningful vote in 2001, Ocean Spray should be ordered to afford one at the earliest opportunity.

For these reasons, the motion to dismiss Count I should be denied.

III. THE DEMAND REQUIREMENT WAS PROPERLY EXCUSED, AND THE MOTION TO DISMISS COUNT II SHOULD BE DENIED.

Defendants seek to dismiss Count II for failure to comply with the demand requirement of Rule 23.1 of the Delaware Rules of Civil Procedure. Count 11 asserts derivative claims, alleging that the Defendants' preconceived plan and scheme to thwart fair consideration of sale or merger proposals while divesting less affluent shareholders of their stock is a breach of their fiduciary duty. The well-pleaded allegations demonstrate that demand is properly excused. The Delaware Supreme Court, in Aronson v. Lewis, Del. Supr., 473 A.2d 805 (1984), set forth two alternate bases for determining whether demand is excused. Under the first prong of Aronson, demand will be excused where the factual allegations create a reasonable doubt as to the disinterestedness and independence of the directors at the time the Complaint was filed. Id. at 812. Under the second prong of Aronson, demand will be excused where the allegations in the complaint demonstrate that the transaction appears to be "so egregious" or "unsound" that the protective presumptions of the business judgment rule do not apply. Id. Either prong suffices to relieve plaintiff of the necessity of demand; both prongs are satisfied here.

A. A Majority Of The Board Is Interested Or Lacks Independence.

With respect to the first prong - interest - the court reviews the factual allegations to determine whether they create a reasonable doubt as to the disinterest and independence of the directors at the time the complaint was filed. Where the complaint contains allegations demonstrating that a majority of the directors have a direct and substantial financial or other interest in the transaction, "the business judgment rule has no application" and courts will excuse demand. Aronson v. Lewis, 473 A.2d at 812. See also Sealy Mattress Co. of N.J., Inc. v. Sealy, Inc., Del. Ch., Civ. A. No. 8853, 1987 WL 15254, at *5 (July 20, 1987) (parent controlled board of subsidiary); Steiner v. Meyerson, Del. Ch., Civ. A. No. 13139, 1995 WL 441999, at *6

(July 19, 1995); Heineman v. Datapoint Corp., Del. Supr., 611 A.2d 950, 954 (1992) (an affiliate entity owned by certain directors profited from assets of the corporation, with the corporation bearing all the risk); Pogostin v. Rice, Del. Supr., 480 A.2d 619, 627 (1984) (manipulation of corporate machinery by directors for the sole or primary purpose of perpetuation themselves in office); see also In re Chrysler Corp. S'holder Litig;, Del. Ch., Civ. A. No. 11873, 1992 WL 181024, at * 4 (July 27, 1992).

1. Ocean Spray' s Board Possesses A Financial Benefit Not Conferred On All Shareholders Equally.

In Pogostin v. Rice, Del. Supr., 480 A.2d 619 (1984), the Supreme Court of  Delaware has stated:

Directorial interest exists whenever divided loyalties are present, or a director either has received, or is entitled to receive a personal financial benefit from the challenged transaction which is not shared equally by the stockholders.

Id. at 624. Exactly that situation is alleged here.

The particularized, well-pleaded allegations suffice to excuse demand under the first prong of Aronson. The Board refuses to fairly consider strategic options of sale or merger under Ocean Spray's current economic situation, instead supporting a problematic turnaround plan which will admittedly force many shareholders into bankruptcy. It refuses to forego application of the forced redemption provisions of the Cranberry Marketing Agreement which will forfeit shares from shareholders who lack economic endurance. Meanwhile, Defendants fail to disclose key information on Ocean Spray to the shareholders when they are asked to vote on the Company's strategic direction. All of this occurs against a background of clear self-interest: the grower directors will profit from the programmed shareholder attrition they have wrought, through (1) decreasing supply (and rising fruit prices) and (2) share concentration (which will

enable them to derive more of the buried value of Ocean Spray upon their ultimate entry into an extraordinary transaction). T~ 69, 73, 83, 88, 90, 98, 100-101, 103-104, 106, 109, 113-133, 142.

The Ocean Spray Board has 15 members, 12 of whom are defendants. 142. Eight of the defendants are also cranberry growers -- May, Johnson, Smith, Gilmore, Lee, Habelman, Podvin, and Potter -- and can be deemed self-interested. ¶¶ 142, 147. 16 In voting to

pursue this tainted course of action, 17 their affluence can be presumed: each was aware of their financial circumstances, has resisted consideration of exploring an extraordinary transaction, and can be presumed not to pursue policies which would result in their economic extinction. 18 At the same time, the attrition of other growers will directly benefit them; the failure to adopt measures which would allocate the distress equally so as to avoid attrition compels the conclusion that

Defendants seek to create it.

As this Court recognized in Litle v. Waters, Del. Ch., Civ. A. No. 12155, 1992 WL 25758 (Feb. 11, 1992) (quoting Cinerama, Inc. v. Technicolor, Inc., Del. Ch., Civ. A. No. 8358 (June 24, 1991)), whether a director is disinterested depends on whether:

the director ... involved had [a] material financial or other interest in the transaction different from the shareholders generally. "Material" in this setting refers to a financial interest that in the circumstances created a reasonable probability that the independence of the judgment of a reasonable person in such circumstances could be affected to the detriment of the shareholders generally.

Id. at *5. Under this standard, a majority of the Board is clearly interested, excusing demand. 19 While Defendants argue (Deft. Br. at35) the claimed distress is speculative under Brehm v. Eisner, Del. Supr., 746 A.2d 244, 254 (2000), and that plaintiffs theory of economic ruin of the less affluent growers is not credible (Deft. Br. at 36), both arguments are refuted by nothing less than Ocean Spray's own 2001 Annual Report. There, Ocean Spray admits that (1) returns are below the cost of production, (2) many growers may find themselves at financial risk as the putative turnaround evolves, and (3) not all growers will be able to survive until the putative turnaround occurs. 2001 Annual Report at 1, 7, Exhibit "C.".

Ocean Spray's argument to dismiss based on the first prong of Aronson is therefore unavailing.

2. Any Argument By Defendants That The Challenged Actions Have The Same Effect On All Shareholders Is Erroneous And Fails To Take Into Account The Differences Between Ocean Spray And Conventional Corporations.

Defendants argue that the challenged actions have the same effect on all shareholders, and therefore cannot support an inference of interest. This is not the case. The argument of Defendants on this issue, and all others, ignores the two critical differences between Ocean Spray and conventional corporations. When those differences are properly analyzed, it is clear that an impermissible distinction exists between affluent growers who can survive the programmed attrition and the financially weaker growers who cannot.

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Cover page, Contents 1Contents 2, pages 1-11, 12-20, 21-30, 31-40,and 41-50 .


12 In the cases relied on by Defendants, stockholders sought information on transactions that were not the subject of the resolution at issue. See In re Santa Fe Pacific Corp. S'holder Litig., Del. Supr., 669 A.2d 59, 66-67 (1995), and In re Lukens Inc. S'holders Litig., Del. Ch., 757 A.2d 720, 736 (1999), Cf. Glassman v. Wometco Cable TV, Inc., Del. Ch., Civ. A. No. 7307, 1989 WL 1160, at *5 (Jan. 6, 1989). Here, the information was necessary to inform the shareholders on the vote. Cf. Abaiian v. Kennedy, Del. Ch., Civ. A. No. 11425, slip op. at 9, n. 2 (Jan. 17, 1992); Alliance Gaming Corp. v. Bally Gaming Int'l., Inc., Del. Ch., Civ. A. No. 14440, slip op. at 4 (Aug. 5, 1995).

13 Defendants assert that the shareholders, as growers, were well informed of the state of the cranberry market and its prospects for recovery. Deft. Br. at 28. One need look no further than the 2001 Annual Report to see that this contention is unfounded. There, Ocean Spray asks shareholders to "accept in good faith" management's "assurances" that the turnaround plan is "taking hold." In other words, a year after the vote, shareholders still do not have the data to measure the success of management's efforts either from the Company or from their own knowledge as growers. A fortiori, this data was lacking a year earlier and material to the Resolutions.

14 Defendants try to protect disclosure of the consultant reports by labeling them "confidential," without designating why. Defendants cite two cases, Abajian v. Kennedy, Del. Ch., Civ. A. No. 11425, slip op. at 9, n.2 (Jan. 17, 1992) and Alliance Gaming Corp. v. Balls Gaining Int'l, Inc., Del. Ch., Civ. A. No. 14440, slip op. at 4 (Aug. 5, 1995). Neither apply, since the disclosure sought related directly to a vote on the Resolutions where the consultants' reports were directly germane and material to the issues presented. See Weinberger v. UOP, Inc., Del. Supr. 457 A.2d 701 (1983) (internal appraisal in internal feasibility study properly disclosed); Lynch v. Vickers Energy Corp., Del. Supr. 383 A.2d 278 (1978) (Vice President's net asset valuation estimates must be disclosed).

15 Contrary to what the Defendants suggest, Deft. Br. at 29, Ocean Spray has previously been in discussions for the sale of a significant portion of its assets, namely those which represent its juice business. Indeed, both Bain and Merrill Lynch analyzed the prospects for a "spin off' of the branded business. ¶¶ 77, 78, 80.

16 In addition, a ninth director, Hawthorne -- Ocean Spray's CEO -- lacks independence. Management, which includes Hawthorne, is entrenched.  126. The Complaint alleges that Hawthorne said he was opposed to pursuing a sale of the company, as both he, and the nine people he hired, expected to be employed for the "turnaround" and did not transfer to Ocean Spray, in effect, just to sell the company. Id. Hawthorne stated that he "didn't want to disappoint (the transferred personnel) by selling the company." Id.

17 More than half of the defendants repeatedly participated in decisions under attack, amplifying the allegations of interest.¶¶  10-21, 101, 103-08, 124-25. See Heineman v. Datapoint Corp., Del. Supr., 611 A.2d 950, 952 (1992).

18 For this reason, allegations as to the particulars of their farming operations are unnecessary.

19The situation is parallel to the facts of Nixon v. Blackwell, Del. Supr., 626 A.2d 1366 (1993), where financial benefits were disparately given to employee stockholders and not nonemployee stockholders. Id. at 1373, 1376-77. Under such circumstances, the Delaware Supreme Court rejected application of the business judgment rule, holding directors to the entire fairness standard -- akin to excusing demand since the business judgment does not presumptively apply.

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