Tag: breach of contract

DAMAGES AND TERMINATION FEE CLAIMS REJECTED IN ANTHEM-CIGNA FAILED MERGER SUIT

By: Remsen Kinne and Adam Heyd

In In re Anthem-Cigna Merger Litigation, C.A. No. 2017-0114-JTL (Del. Ch. August 31, 2020), the Delaware Court of Chancery (“Court”) rejected claims for damages by Anthem, Inc. (“Anthem”) and by Cigna Corporation (“Cigna”) for breach of covenants under their Agreement and Plan of Merger entered into on July 23, 2015 (“Merger Agreement”).  The Court also ruled against Cigna’s claim for a reverse termination fee.

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Music Industry Executive Lawsuit against Record Label Partially Dismissed

By Scott E. Waxman and Marissa Leon

In Todd Moscowitz v. Theory Entertainment LLC (C.A. No. 2019-0780-MTZ), the Court of Chancery of the State of Delaware (the “Court”)  narrowed the claims in a lawsuit challenging the buyout of a music industry executive’s ownership interest in a record label he co-founded.

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Delaware Court of Chancery Finds Oral Agreement to Form a Joint Venture Enforceable

By: Scott Waxman and Serena Hamann

In Leonard F. Iacono Sr. et al. v. Estate of Joseph M. Capano et al, C.A. No. 11841-VCL (Del. Ch. June 29, 2020), the Delaware Court of Chancery denied the defendants’ motion for summary judgment because the evidence, construed in favor of the Plaintiffs, could support a finding that an enforceable oral agreement to form a joint venture existed between the parties.

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Chancery Court Enforces Merger Agreement Milestone Payment Despite Time and Cost to Bring Experimental Drug to Market

By: Scott Waxman and Zane Madden

In Shareholder Representative Services LLC v. Shire US Holdings, Inc. and Shire Pharmaceuticals LLC , C.A. No. 2017-0863-KSJM (Del. Ch. October 12, 2020), the Delaware Court of Chancery (the “Court”) held that Shire US Holdings, Inc.’s (together with Shire Pharmaceuticals LLC, “Shire”) failure to initiate Phase III clinical trials for an experimental drug acquired via merger was improper because said failure was due to a series of development delays routine to the pharmaceutical industry and every-day business decisions, in contravention of the language of the merger agreement.

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FAILED BREACH OF CONTRACT CLAIMS UNDERSCORE CHANCERY COURT’S FOCUS ON CONTRACTUAL PLAIN LANGUAGE OVER OUTSIDE EVIDENCE

By: Scott Waxman and Adam Heyd

In Braga Investment & Advisory, LLC v. Yenni Income Opportunities Fund I, L.P., C.A. No. 2017-0393-AGB (Del. Ch. June 8, 2020), Braga Investment & Advisory, LLC (“Braga”), a minority investor in Steven Feller, P.E., LLC (“Newco”) alleged that Yenni Income Opportunities Fund I, L.P. (the “Fund”), the majority investor in Newco, had breached a purchase agreement for interests in Newco when the Fund amended it without Braga’s consent. Braga also contended that the Fund breached its co-investment agreement with Braga when it revoked Braga’s right to receive board packages under that agreement. The Delaware Court of Chancery (the “Court”) concluded that the Fund’s amendment of the purchase agreement did not require Braga’s consent, and that the Fund did not breach Braga’s right to receive board packages based on the ordinary use of that term.

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Chancery Court Rules on Fraud Claims and Breach of Fiduciary Duty Claim against a Solar Project Fund and its Manager

By: Scott E. Waxman and Marissa Leon

In HOMF II Investment Corp., et al v. Joaquin Altenberg, et al. (C.A. No. 2017-0293-JTL), the Delaware Chancery Court (the “Court”) ruled in favor of the plaintiffs on a breach of fiduciary duty claim, in favor of the defendant on a fraud in the inducement claim due to the plaintiffs’ failure to give defendant procedural notice and in favor of the defendant on plaintiff’s second claim of fraud due to the plaintiffs’ failure to prove fraud while operating a fund.

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CHANCERY COURT FINDS PLAINTIFF’S CLAIMS OF FRAUD, BREACH OF FIDUCIARY DUTY, AND RELATED CLAIMS, PASS MUSTER UNDER 12(b)(6)

By: Scott E. Waxman and Douglas A. Logan

In Simon Ogus v. SportTechie, Inc., memorandum opinion 200131, C.A. No. 2018-0869-AGB, the Delaware Court of Chancery (the “Court”), generally held that Simon Ogus (the “Plaintiff”), pled sufficiently claims for fraud, breach of fiduciary duty, aiding and abetting, civil conspiracy and breach of contract against  Oak View Group, LLC (“Oak View”) and individuals Taylor Bloom, Francesca Bodie, Daniel Kaufman (each a “Defendant” and together the “Defendants”). The claims stemmed from the Plaintiff’s termination and subsequent forced sale of shares in SportTechie, Inc. (“SportTechie or the “Company”), and the Court allowed most of the Plaintiff’s claims to survive the 12(b)(6) motion but dismissed a small number as well.

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Settlement Agreement Violates Preferred Stockholder Consent Rights

By: Jill B. Louis and Pouya D. Ahmadi

In PWP Xerion Holdings III LLC v. Red Leaf Resources Inc., C.A. No. 2017-0235-JTL (Del. Ch. Oct. 23, 2019), the Delaware Court of Chancery (the “Court”) granted Xerion Holdings III LLC’s (“Xerion”) motion for partial summary judgement on a breach of contract claim, holding that the Red Leaf Resources, Inc. (“Red Leaf” or the “Company”) breached Xerion’s contractual right to consent as the holder of a majority of the shares of the Company’s Series A preferred stock.

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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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CONTRACT LANGUAGE MUST BE UNAMBIGUOUS FOR CHANCERY COURT TO GRANT DISMISSAL AS MATTER OF LAW

By: Scott E. Waxman and Douglas A. Logan

In Fortis Advisors LLC v. Stora Enso AB letter opinion 180810, Stora Enso AB (the “Defendant”) filed a motion to dismiss the claims by Fortis Advisors LLC (the “Plaintiff”), alleging the merger agreement (the “Merger Agreement”) entered into by each of the parties unambiguously did not obligate the Defendant to make further payments to the Plaintiff. The Chancery Court disagreed, finding the language of the Merger Agreement ambiguous, therefore denying the Defendant’s motion.

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DISPUTE OVER PUT RIGHT ILLUSTRATES THE POTENTIAL PITFALLS OF AMBIGUOUS CONTRACT LANGUAGE

By: David Forney and Adam Heyd

In QC Holdings, Inc. v. Allconnect, Inc., C.A. No. 2017-0715-JTL (Del. Ch. August 28, 2018), plaintiff QC Holdings, Inc. (“QC Holdings”), a former stockholder of defendant Allconnect, Inc. (the “Company”), brought a claim against the Company to enforce its right (the “Put Right”) under a Put Agreement to sell its Company shares (the “Put Shares”) to the Company in exchange for $5 million (the “Put Price”).  The Company had refused to pay the Put Price on the basis that it was contractually restricted from doing so on the date required under the Put Agreement, and therefore the Put Right was extinguished and never survived a subsequent merger of the Company when those restrictions arguably lifted. The Delaware Court of Chancery  held that the Company’s arguments would have resulted in an improper forfeiture of QC Holdings’ contractual rights to the Put Price and that the exercise of the Put Right constituted a redemption of the Put Shares prior to the merger and a continuing contractual obligation by the Company to pay the Put Price.  The Court ordered the Company to pay the Put Price to QC Holdings out of an escrow set up at the merger closing for this purpose.

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Court of Chancery Dismisses Fraud Claim for Alleged Extra-Contractual Misrepresentations Based on Anti-Reliance Clause

By: Claire S. White and Rachel P. Worth

In ChyronHego Corporation, et al., v. Cliff Wight and CFX Holdings, Inc., C.A. No. 2017-0548-SG (Del. Ch. July 31, 2018), the Delaware Court of Chancery granted the defendants’ motion to dismiss the plaintiffs’ claim for extra-contractual fraud on the basis that the stock purchase agreement contained an effective anti-reliance clause that precluded such claim. The Court found that the anti-reliance clause rebutted the common law fraud element of reliance on any extra-contractual representations, as described further below.  At the same time, the Court dismissed the defendants’ motion to dismiss claims for fraud and breaches of express representations and warranties under the stock purchase agreement, finding that the plaintiffs had sufficiently pleaded the elements of these claims.

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