Archive: October 2019

Termination Fee is Not Exclusive Remedy for Breach of No-Shop

By Sara Kirkpatrick and Lisa Stark

On September 9, 2019, the Delaware Court of Chancery held that Genuine Parts Company (“GPC”) adequately pled facts that supported a pleading stage inference that Essendant Inc. breached its merger agreement with GPC by terminating the agreement to pursue a transaction with non-party Sycamore Partners (“Sycamore”) pursuant to a superior proposal termination right. The Court further found that GPC adequately pled that its acceptance of a termination fee from Essendant did not preclude GPC from pursuing breach of contract claims against Essendant for its alleged breaches of the parties’ merger agreement.

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COURT OF CHANCERY APPLIES POLITICAL QUESTION DOCTRINE IN DEFERRING TO U.S. PRESIDENT’S RECOGNITION OF VENEZUELAN PRESIDENT AND HOLDS THAT EXTRA-TERRITORIAL EFFECTS DO NOT PRECLUDE APPLICATION OF THE ACT OF STATE DOCTRINE

By: CJ Voss and Teresa Teng

In Jiménez v. Palacios et al., C.A. No. 2019-0490-KSJM (Del. Ch. Aug. 2, 2019), the Delaware Court of Chancery accepted as binding the U.S. President’s recognition of a foreign government and upheld the validity of that government’s appointments to the board of directors of a state-owned oil company. In turn, the state-owned oil company could validly appoint the board of directors of its Delaware subsidiaries. However, the court determined that the consents appointing the boards of directors of the Delaware subsidiaries were not appropriately considered on a motion for judgment on the pleadings and granted the plaintiffs the opportunity to identify facts in dispute foreclosing summary judgment in favor of the defendants. 

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earn-out provision of merger agreement requires extrinsic evidence to aid interpretation

By Scott E. Waxman and Pouya D. Ahmadi

In Western Standard, LLC, v. SourceHOV Holdings, Inc. and Pangea Acquisitions, Inc., C.A. No. 2018-0280-JRS (Del. Ch. July 24, 2019), the Delaware Court of Chancery (the “Court”) refused to the grant SourceHOV Holdings, Inc. (“SourceHOV”) and Pangea Acquisitions, Inc.’s (“Pangea”) motion to dismiss, holding that more extrinsic evidence was needed for the Court to be able to interpret the terms of the merger agreement (the “Merger Agreement”) among Pangea and BancTec, Inc. (“BancTec”) and decide whether there was a valid breach of a contract claim.

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delaware court of chancery allows stockholder to inspect books and records over defendant corporation’s objections

By Scott Waxman and Serena Hamann

In Senetas Corporation, Ltd. v. DeepRadiology Corporation, C.A. No. 2019-0170-PWG (Del. Ch. July 30, 2019), the Delaware Court of Chancery allowed a stockholder’s books and records inspection despite objections raised by the defendant corporation because the stockholder established a proper purpose for the inspection by proving a credible basis from which the Court could infer mismanagement or wrongdoing may have occurred and because the defendant failed to prove the plaintiff’s stated purpose was offered under false pretenses.

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In a $1.365 Billion Merger, the Target Company “Blindsided” the Proposed Buyer by Terminating the Merger Agreement and the Court Upheld the Termination; Court Requests Further Briefing re the $126.5 Million Reverse Termination Fee

By: Kevin Stichter and Tami Mack

In Vintage Rodeo Parent, LLC et al. v. Rent-A-Center, Inc., C.A. No. 2018-0927-SG (Del. Ch. March 14, 2019), the Delaware Court of Chancery (the “Court”) held that the target company Rent-A-Center, Inc. (“Rent-A-Center”) validly exercised its right to terminate the $1.365 billion merger under the merger agreement (the “Merger Agreement”) among Rent-A-Center and the proposed buyer Vintage Capital Management, LLC and certain affiliates (collectively, “Vintage”), despite Vintage’s claims that the term of the Merger Agreement had already been extended or, alternatively, that Rent-A-Center had not validly terminated.

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