Novack v. GSI Commerce Inc. et al.

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Defense counsel retained Professor Paul Gompers of the Harvard Business School and Cornerstone Research in a case that involved two mergers.

Retained by Sullivan & Cromwell

Defense counsel retained Professor Paul Gompers of the Harvard Business School and Cornerstone Research in a case that involved two mergers. Professor Gompers prepared an independent valuation and response to the reports of the plaintiff’s expert. The case went to a jury trial in the Superior Court of Suffolk County in Boston.

At the conclusion of the trial, the jury returned a verdict for the defendants.

GSI Commerce Inc. acquired flash sales retailer Rue La La in 2009 for a combination of an upfront payment and an earn-out. This case stemmed from a subsequent 2011 transaction in which eBay Inc. acquired GSI. Certain GSI subsidiaries, including Rue La La, were simultaneously sold to GSI’s founder and CEO Michael Rubin. The plaintiff, representing the former shareholders of Rue La La, alleged that GSI, Mr. Rubin, and eBay intentionally undervalued Rue La La to avoid paying a portion of the earn-out that the former shareholders could be due under a change-in-control provision.

The plaintiff’s expert filed a report suggesting that the value of Rue La La as of the date of the 2011 transaction was substantially higher than what Mr. Rubin paid. Professor Gompers submitted a valuation of the company showing that the purchase price was reasonable. He also testified on the flaws and weaknesses of the plaintiff’s expert’s valuation methodology.

At the conclusion of the trial, the jury returned a verdict for the defendants.

Case Expert

Paul A. Gompers

Eugene Holman Professor of Business Administration,
Harvard Business School,
Harvard University;
Senior Advisor, Cornerstone Research