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Jay-Z, on Hunch Bacardi’s Tanking His Cognac, Sues for Proof (1)

Oct. 21, 2022, 3:14 PMUpdated: Oct. 21, 2022, 3:46 PM

A company backed by music mogul Jay-Z filed suit in Delaware over concerns that an affiliate of Bacardi Ltd. is intentionally mismanaging their Cognac-making joint venture, D’Usse LLC, so the global liquor giant can buy out the company at a discount.

The lawsuit, made public late Thursday, seeks internal files from D’Usse, which is managed by Empire Investments Inc., a wholly owned subsidiary of Bacardi International Ltd. It was filed by SCLiquor LLC, an entity owned and controlled by Jay-Z, whose given name is Shawn Carter.

The suit seeks to investigate allegations that Empire has for years “artificially held D’Usse back from achieving its full potential,” only to step up its efforts to run the company into the ground in October 2021, after SCLiquor exercised its right to demand a buyout.

The structure of the buyout rights “gave Bacardi a perverse incentive to mismanage D’Usse in the interim to artificially decrease its valuation for purposes of cashing out SC at an unfairly low price,” according to the complaint in Delaware’s Chancery Court.

A representative for Bacardi didn’t immediately respond to a request for comment Friday.

The suit—originally filed under seal Oct. 17—seeks documents under a state law giving limited liability company investors broad inspection rights if they credibly suspect wrongdoing. Records cases often reflect an attempt to drum up fiduciary breach claims.

Rather than respond in good faith to SCLiquor’s demands for files under the statute, Bacardi and Empire executives “have engaged in a shell-game” meant to “stymie SC’s efforts” to obtain buyout-related information, according to the complaint.

Cause of Action: Section 18-305 of the Delaware Code.

Relief: Disclosure of relevant company records; costs and fees.

Attorneys: SCLiquors is represented by Young, Conaway, Stargatt & Taylor LLP and Gibson, Dunn & Crutcher LLP.

The case is SCLiquor LLC v. D’Usse LLC, Del. Ch., No. 2022-0931, complaint released 10/20/22.

(Updates with case information and additional reporting starting at paragraph seven.)

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Brian Flood at bflood@bloomberglaw.com; Andrew Harris at aharris@bloomberglaw.com