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Surprise: Target Company May Not Be Entitled to Expectancy Damages Based Upon the Lost Premium for an Acquirer’s Wrongful Failure to Close a Merger

Glenn D. West — Tue, 14 Nov 2023 16:27:53 +0000

In what appears to be the last decision related to the Twitter/Musk saga, Crispo v. Musk, 2023 WL 7154477 (Del. Ch. Oct. 31, 2023), Chancellor McCormick cast significant doubt upon the ability of a target company to recover damages measured by the “lost stockholder premium” that was bargained for as part of the merger agreement. Although this issue had been out there as a theoretical problem ever since the Second Circuit’s decision in Consolidated Edision, Inc. v. Northeast Utilities, 426 F.3d 524 (2d Cir. 2005) (almost universally referred to as “Con Ed”), most practitioners believed Delaware courts would likely view damages measured by the lost stockholder premium as, at least in part, recoverable by a target company when an acquirer wrongly terminated the merger agreement and the expected conversion of the target’s stock into the agreed-upon merger consideration did not occur. But that belief now appears to have been unjustified.

Purchase Price Adjustments: Arbitrations, Expert Determinations, Stuff in Between, and the Spector of a “Malicious” Adjustment Claim

Glenn D. West — Fri, 27 Oct 2023 14:40:23 +0000

Many private company acquisition agreements contain provisions providing a mechanism for resolving disputes over post-closing purchase price adjustments, without resort to litigation. In most cases, this involves contractually referring the dispute to an independent accountant with limited authority to resolve the parties’ disagreements regarding accounting methodology and calculations. It is rare that contracting parties actually […]

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Distinguishing Between Ownership of an Entity and the Entity Itself

Glenn D. West — Wed, 06 Sep 2023 20:22:17 +0000

Failing to distinguish between a parent entity and its operating subsidiary can have devastating consequences in the drafting and interpretation of written agreements. A recent Delaware Court of Chancery decision, Frontline Technologies Parent LLC v. Murphy, 2023 WL 5424802 (Del. Ch. Aug.23, 2023), is a case in point. Frontline involved a dispute over the effect […]

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Using Contract Language to Eliminate or Mitigate Potential Tort Claims

Glenn D. West — Wed, 30 Aug 2023 22:06:26 +0000

Contracts involve the voluntary imposition of specific obligations on the parties, but there are independent obligations that are imposed on all members of society as a matter of tort law irrespective of any contractual arrangement. And, as anyone that has been involved in a post-closing dispute involving an acquisition transaction knows, tort-based, extra-contractual claims frequently […]

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Lost Profits May or May Not be Consequential Damages

Glenn D. West — Tue, 11 Jul 2023 16:38:06 +0000

Some drafting lessons seem to require constant relearning. And that is no more the case than in drafting the ubiquitous “consequential damages” waiver. Although there are many reasons to avoid the use of the term “consequential damages” altogether, if you are going to use the term in a clause purporting to exclude a list of damages types, with the term “consequential damages” as an additional catch-all exclusion (as opposed to a limitation on the other listed exclusions), it is important to use it correctly. A case decided earlier this year by a Federal District Court, Endless River Technologies LLC v. Trans Union LLC, 2023 WL 24101 (N.D. Ohio Jan, 3, 2023), is a helpful example.

The Dreaded Right of First Refusal and the “Packaged” Asset Deal

Glenn D. West — Thu, 25 May 2023 14:09:40 +0000

An important aspect of the diligence involved in acquiring a business is identifying any third party rights that could potentially delay, hinder or block the acquisition. Among those potential third party rights is the dreaded Right of First Refusal (or “ROFR”). And a recent decision from Iowa, Pistol Limited Co. v. Green Family Flooring, Inc., […]

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Retained Liabilities: Expiration of an Indemnification Obligation Respecting a Retained Liability Does Not Impose the Retained Liability Upon the Indemnified Party

Glenn D. West — Tue, 16 May 2023 21:55:51 +0000

Why should deal lawyers read cases? The answer is simple: “Good transactional lawyers … ‘study past disputes in order to draft contractual provisions that will avoid similar disputes in the future.’”[1] A recent Delaware Court of Chancery decision interpreting an asset purchase agreement (the “APA”),[2] provides a good example. In Merck & Co., Inc. v. Bayer, […]

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Representing a Portfolio Company: Delaware Law Declares that the Entire Board, and Any Shareholder Who Appointed a Specific Member of the Board, are all Joint Clients

Patrick Wildes — Mon, 10 Apr 2023 13:07:33 +0000

Members of the Board of a Delaware corporation owe fiduciary duties to the corporation and all of the corporation’s shareholders. This is true even for a board member that was appointed to the Board on behalf of only one particular shareholder pursuant to some contractual right. Sometimes, in the exercise of those fiduciary duties, a […]

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Testing Your Fluency in the “Secret Language” of Choice-of-Law/Forum-Selection Clauses

Glenn D. West — Mon, 27 Feb 2023 18:26:44 +0000

The decision as to which law applies in resolving a dispute arising from or related to a contract can be outcome determinative—i.e., a claim may be sustainable if one state’s law applies, but unsustainable if another state’s law applies. Contractually-related disputes include both traditional breach of contract claims, as well as tort-based claims such as […]

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Non-Competes and Forfeiture-for-Competition Provisions – The Reasonableness Override Under Delaware Law

Glenn D. West — Tue, 17 Jan 2023 17:39:48 +0000

Delaware courts are regarded as reliably contractarian in their interpretation and enforcement of written agreements. That means that Delaware courts do not re-write agreements that parties make, and will enforce both good deals and bad deals in accordance with the written terms. But Delaware’s contractarianism is mediated through long-standing common-law rules that sometimes do refuse […]

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