Justia Contracts Opinion SummariesArticles Posted in Mergers & Acquisitions
Pure Presbyterian Church v. Grace of God Presbyterian Church
The Supreme Court affirmed the judgment of the trial court entering an order enforcing a merger agreement between two churches, holding that the trial court had subject matter jurisdiction to adjudicate this dispute.The two churches in this case entered into a merger agreement memorializing a merger between the churches. When one of the churches (Defendant) decided it wished to withdraw from the “proposed” merger, the other church (Plaintiff), instituted this action. The jury returned a special verdict in favor of Plaintiff, finding that the parties had reached a merger agreement and that Plaintiff had performed its obligations under the merger agreement. The trial court entered a final order in accord with the merger agreement and the jury’s verdict. Defendant sought to vacate the trial court’s order, arguing that the trial court lacked subject matter jurisdiction to enter it. The Supreme Court disagreed, holding that the trial court had subject matter jurisdiction either to adjudicate a breach of contract claim or to issue a declaratory judgment on the merger contract, and a pending bankruptcy did not foreclose the trial court’s adjudication of the merger contract. View "Pure Presbyterian Church v. Grace of God Presbyterian Church" on Justia Law
Allison v. Eriksson
Mass. Gen. Laws ch. 156C, 60(b) provides the exclusive remedy for dissenting members of a limited liability company that has voted to merge, so long as the merger is undertaken in accordance with Mass. Gen. Laws ch. 156C, 59-63.In this case, a member of a limited liability company (LLC) conducted a merger in breach of his fiduciary and contractual duties. The judge granted equitable relief. At issue was whether distribution of dissenting members’ interest in the LLC is the exclusive remedy of minority shareholders who objected to the merger and whether the judge erred in declining to rescind the merger. The Supreme Court held (1) where, as here, a merger was not conducted in compliance with Mass. Gen. Laws ch. 156C, 63, the remedy provided by Mass. Gen. Laws ch. 156C, 60(b) providing for distribution of dissenting members’ interest is not exclusive; (2) the trial judge did not abuse his discretion in fashioning an equitable remedy in this case, as rescission of the merger would be complicated and inequitable; and (3) the portion of the trial judge’s decision that increased Plaintiff’s interest in the merged LLC to five percent is remanded because there was no basis in the record for that figure. View "Allison v. Eriksson" on Justia Law
Mercury Sys., Inc. v. S’holder Representative Servs., Inc.
Pursuant to a merger agreement, Sellers agreed to indemnity Buyer for the tax liabilities of the company being sold. The tax bills for indemnification purposes, however, were to be calculated as if certain deductions were not going be taken when both parties knew they would be. These deductions reduced the company’s tax liability to zero. After the merger, the company’s tax prepayments and credits were refunded in their entirety, thus benefitting Buyer. Because the calculation of the indemnity obligation was based on a counterfactual measure of tax liability, that calculation resulted in Sellers’ owing Buyer a substantial amount of liability. Buyer filed this complaint asserting claims for declaratory relief and breach of contract. At issue in this case was whether the prepayments and credits affected the tax indemnification obligation of Sellers. The district court entered judgment on the pleadings in favor of Sellers, concluding that the indemnification provision unambiguously required that the indemnity obligation be offset by the amount of the refunded prepayments and credits. The First Circuit vacated the judgment of the district court, holding that the indemnification provision was ambiguous as to how the tax refunds affect the indemnification obligation of Sellers. Remanded. View "Mercury Sys., Inc. v. S’holder Representative Servs., Inc." on Justia Law
Belzberg v. Verus Invs. Holdings Inc.
Petitioner and Ajmal Khan, principal of Verus Investment Holdings, purchased securities in a company to arbitrage a merger between that company and another company (the trade). Petitioner and Khal used Verus' account at Jefferies & Co. and Winton Capital Holding to complete the purchase. After the merger, Jefferies wired to Verus the original investment and profits attributable to the Winton funds. Verus wired the investment money to Winton and the profits to Doris Lindbergh, a friend of Petitioner. Tax authorities later informed Jefferies it owed withholding tax on the trade. Pursuant to an arbitration clause in an agreement between Jefferies and Verus, Jefferies commenced an arbitration against Verus for the unpaid taxes. Verus, in turn, asserted thirty-party arbitration claims against Petitioner, Lindbergh, and others for their share of the taxes. After a hearing, Supreme Court determined that nonsignatories Petitioner and Lindbergh could not be compelled to arbitrate. The Appellate Division reversed, concluding that Petitioner should be estopped from avoiding arbitration because he knowingly exploited and received direct benefits from the agreement between Jefferies and Verus. The Court of Appeals reversed, holding that Petitioner did not receive a direct benefit from the arbitration agreement and could not be compelled to arbitrate. View "Belzberg v. Verus Invs. Holdings Inc." on Justia Law
Horras v. American Capital Strategies, Ltd.
Plaintiff, an Iowa citizen with a home health care business, merged his business with other home health care providers to form Auxi, Inc., a Delaware corporation. After the merger, ACS acquired control of Auxi and then sold Auxi to HHC. Auxi did not inform plaintiff of the sale and plaintiff received no compensation for his shares of Auxi stock. Plaintiff filed suit against ACS claiming breach of fiduciary duty and breach of contract. The court concluded that plaintiff pleaded insufficient facts to support a claim that ACS breached its fiduciary duties as a majority shareholder; although plaintiff's complaint alleged damages, it contained no facts identifying the existence of a contract between ACS and plaintiff or its terms; and plaintiff pleaded no facts suggesting that the alleged contract between ACS and HHC manifested an intent to benefit him. Accordingly, the court affirmed the district court's dismissal of both claims. The court also concluded that the district court did not abuse its "considerable discretion," in concluding that it was not required to allow plaintiff to amend the post-judgment complaint where plaintiff never sought to amend until after dismissal, despite being on notice of the need to amend. View "Horras v. American Capital Strategies, Ltd." on Justia Law
Martin Marietta Materials, Inc. v. Vulcan Materials Co.
This case arose when Martin Marietta sought to purchase all of Vulcan's outstanding shares (Exchange Offer). At issue was the meaning of confidentiality agreements entered into by both parties. The court found in favor of Vulcan on its counterclaims for breach of the non-disclosure agreement (NDA) (Count I), and the joint defense and confidentiality agreement (JDA)(Count II), and against Martin Marietta on its claim that it did not breach the NDA (Count I). Martin Marietta shall be enjoined for a period of four months from prosecuting a proxy contest, making an exchange or tender offer, or otherwise taking steps to acquire control of Vulcan shares or assets. During that period, it is also enjoined from any further violations of the NDA and JDA. Vulcan shall submit a conforming final judgment within five days, upon approval as to form by Martin Marietta.
RAA Management, LLC v. Savage Sports Holdings, Inc.
RAA appealed from a final judgment of the Superior Court that dismissed its complaint pursuant to Rule 12(b)(6). RAA's complaint alleged that Savage told RAA, one of several potential bidders for Savage, at the outset of their discussions that there was "no significant unrecorded liabilities or claims against Savage," but then during RAA's due diligence into Savage, Savage disclosed three such matters, which caused RAA to abandon negotiations for the transactions. The complaint contended that had RAA known of those matters at the outset, it never would have proceeded to consider purchasing Savage. Therefore, according to RAA, Savage should be liable for the entirety of RAA's alleged $1.2 million in due diligence and negotiation costs. The court held that, under Paragraphs 7 and 8 of the non-disclosure agreement (NDA), RAA acknowledged that in the event no final "Sale Agreement" on a transaction was reached, Savage would have no liability, and could not be sued, for any allegedly inaccurate or incomplete information provided by Savage to RAA during the due diligence process. The court also held that RAA could not rely on the peculiar-knowledge exception to support its claims. Finally, the court held that, when Savage and RAA entered into the NDA, both parties knew how the non-reliance clauses had been construed by Delaware courts. Accordingly, the court affirmed the judgment.
JPMorgan Chase & Co. v. American Century Co.
Plaintiffs brought their Verified Complaint asserting claims for breach of contract and breach of the implied covenant of good faith and fair dealing against defendant. J.P.Morgan also asserted a claim for attorneys' fees and costs under an option agreement that J.P. Morgan and defendant entered into, which was the contract central to the dispute. Defendant moved to dismiss pursuant to Court of Chancery Rule 12(b)(6). The court held that J.P. Morgan has failed to state a claim that defendant breached the express terms of the Option Agreement and therefore, defendant's motion to dismiss was granted as to Count I. Defendant's motion to dismiss was denied as to Count II because J.P. Morgan's allegations, taken together, were sufficient to state a claim of the implied covenant. Finally, defendant's motion to dismiss was denied as to Count III where J.P. Morgan could eventually be the prevailing party in this action.
In re K-Sea Transportation Partners L.P. Unitholders Litigation
This was a class action brought on behalf of the common unit holders of a publicly-traded Delaware limited partnership. In March 2011, the partnership agreed to be acquired by an unaffiliated third party at a premium to its common units' trading price. The merger agreement, which governed the transaction, also provided for a separate payment to the general partner to acquire certain partnership interests it held exclusively. The court concluded that defendants' approval of the merger agreement could not constitute a breach of any contractual or fiduciary duty, regardless of whether the conflict committee's approval was effective. The court also found that the disclosures authorized by defendants were not materially misleading. Therefore, plaintiffs could not succeed on their claims under any reasonable conceivable set of circumstances and defendants' motion to dismiss was granted.
Buerger, et al. v. Apfel, et al.
This derivative action challenged a series of related-party transactions. Defendants moved for judgment on the pleadings, contending that laches barred the bulk of the claims. Defendants were partly right, laches barred the challenges to certain stock options granted in 2004 and 2005. Laches also barred a portion of the challenge to compensation received under certain employment agreements and rent-free sublease. With respect to these claims, the doctrine applied to the extent the compensation was paid and rent-free space provided before March 18, 2008. The doctrine did not apply to the extent that compensation was paid and rent-free space provided on or after March 18, 2008. On a final set of claims, the court granted plaintiffs leave to replead because although the complaint alleged facts sufficient to invoke the doctrine of equitable tolling, the pleading failed to identify when plaintiffs subsequently found out about the self-dealing transactions.