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Vice Chancellor Morgan Zurn of Delaware’s Court of Chancery has announced her intention to grant a January trial requested by Warren Buffett’s Berkshire Hathaway, provided certain conditions are met. This development relates to claims made by Berkshire Hathaway against billionaire Jimmy Haslam, accusing him of improperly attempting to inflate his stake in a prominent truck stop chain.
Trial Conditions Set by Delaware Judge
In her ruling on Friday, Vice Chancellor Zurn expressed a preference for efficiency, proposing that Berkshire’s allegations be heard alongside a scheduled January 8-9 trial. This trial pertains to claims by the Haslam family, including Cleveland Browns owner Jimmy Haslam, asserting that Berkshire was deflating the value of Pilot Travel Centers.
Critical Points in the Dispute
The heart of the matter revolves around determining the amount Berkshire would owe if the Haslams exercised their option to sell their 20% stake in the country’s largest truck stop chain to Berkshire in the first two months of 2024.
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Berkshire has until 9 a.m. ET on Monday to decide whether it will accept a January trial. However, acceptance is contingent upon limiting discovery to what is essential for defending against the lawsuit filed by the Haslam family.
Stakes and Allegations
Berkshire holds an 80% stake in Pilot, acquiring a 38.6% stake for $2.76 billion in 2017 and an additional 41.4% for $8.2 billion in January. Both sides accuse each other of attempting to manipulate Pilot’s earnings, which forms the basis for valuing the stake.
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Irreparable Harm Concerns
Berkshire argues that it would suffer irreparable harm if the case is unresolved before the Haslams exercise their option to sell the stake. The urgency is palpable, given the impending timeline and financial implications.
Dueling Lawsuits
The legal battle began when the Haslams sued Berkshire in October, alleging the use of “pushdown” accounting for Pilot to seek a “windfall.” Berkshire countered on November 28, asserting that Jimmy Haslam attempted to bribe Pilot executives to inflate earnings in 2023 at the expense of future years.
Valuation Dispute
According to court documents, the Haslams believe the 20% Pilot stake was worth $3.2 billion before Berkshire’s accounting change—an amount disputed by Berkshire. Pilot, headquartered in Knoxville, Tennessee, boasts approximately 800 locations.
Berkshire’s Diverse Holdings
Beyond the trucking industry, Berkshire Hathaway owns numerous businesses, including the BNSF railroad and Geico car insurer. The outcome of this trial could have far-reaching implications for the conglomerate’s financial standing and future dealings.
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