Main Menu

Showing 283 posts in Breach of Contract.

Court Rejects Franchisor’s Attempt Based on Business Effects of COVID-19 to Escape Contractual Obligation to Purchase Franchisee’s Assets

Posted In Breach of Contract, Chancery, M&A, MAEs


Level 4 Yoga, LLC v. CorePower Yoga, LLC, C.A. No. 2020-0249-JRS (Del. Ch. March 1, 2022)
In this post-trial decision, the Court of Chancery awarded specific performance to Plaintiff/franchisee who sought to enforce Defendant/franchisor’s exercise of its contractual right to purchase Plaintiff’s assets, which included yoga studios in several states.  Defendant exercised its right as of May 2019 but then delayed, and ultimately purported to back out, after the COVID-19 pandemic took hold in early 2020.  The Court granted specific performance based upon the specific language of the parties’ agreement, finding Defendant failed to prove either a Material Adverse Effect or a violation of the ordinary course covenant when Plaintiff temporarily closed its yoga studios in response to COVID-19.  Among other reasons, the seller was the franchisee, the buyer was the franchisor, and the seller had followed the buyer’s instructions concerning the operation of franchises.  The Court also noted that the parties’ agreement contained no closing conditions or an express right to terminate.

Share

CCLD Finds Claims for Pre-Litigation Breaches of Covenants Restricting Speech Exempt From the “Litigation Privilege”

Posted In Breach of Contract, CCLD, Litigation Privilege, Superior Court


Feenix Payment Sys. LLC v. Blum, C.A. No. 21-05-099 EMD CCLD (Del. Super. Jan. 25, 2021)
Under Delaware law, the litigation privilege prevents potential tort liability for statements that may be actionable (e.g., as defamation) where such statements were made in connection with a legal case. This case finds that the litigation privilege is not necessarily apt, however, to claims for breach of contract based on pre-litigation breaches of non-disparagement clauses or similar covenants. More ›

Share

Chancery Applies Plain Language of a Merger Covenant To Dismiss Acquirer’s Untimely Indemnification Claim and Deny Sellers’ Request for Detailed Annual Reports

Posted In Breach of Contract, Chancery, M&A, Merger Agreements


Supernus Pharms., Inc. v. Reich Consulting Grp., Inc., C.A. No. 2020-0217-MTZ (Del. Ch. Oct. 29, 2021)
Supernus Pharmaceuticals, Inc. acquired biotech startup Biscayne Neurotherapeutics, Inc. pursuant to a 2018 merger agreement. In 2019, Supernus submitted indemnification claim notices to Reich Consulting Group, Inc., the security holder representative for Biscayne. Subsequently, Supernus filed an indemnification action against Reich in the Court of Chancery. Following trial, plaintiff Supernus’s only remaining indemnification claim was based on a provision in the merger agreement that required Biscayne to operate in the ordinary course of business during a specific period of time (“Ordinary Course Covenant”). More ›

Share

Chancery Enforces Parties’ Merger Agreement That Barred Claims Upon Termination of the Agreement

Posted In Breach of Contract, Chancery, M&A, Merger Agreements


Yatra Online, Inc. v. Ebix, Inc., C.A. No. 2020-0444-JRS (Del. Ch. Aug. 30, 2021)

Agreements frequently specify how the termination of the agreement affects the parties’ rights and obligations. This case illustrates that Delaware courts generally enforce “effect of termination” provisions in merger agreements as readily as any other contract provision. More ›

Share

Superior Court Enforces $48 Million Liquidated Damages Provision

Posted In Breach of Contract, CCLD, Superior Court


Smart Sand Inc. v. US Well Servs. LLC, C.A. No. N19C-01-144 PRW CCLD (Del. Super. June 11, 2021)

A liquidated damages provision is enforceable under Delaware law if: (1) damages are uncertain at the time of contracting; and (2) the liquidated damages are reasonable. Courts will examine the parties’ intent at the time of contracting in determining whether a liquidated damages provision is enforceable. More ›

Share

Chancery Holds That Claim Based on Purposeful Tanking of Merger Agreement Earnout Is Breach of Contract Claim

Posted In Breach of Contract, Chancery, Earn-Out, Merger Agreements


Shareholder Representative Services LLC v. Albertson’s Companies, C.A. No. 2020-0710-JRS (Del. Ch. June 7, 2021)

Many merger agreements include earnout provisions under which the stockholders in the acquired company are entitled to additional consideration upon the occurrence of certain financial milestones. In this case, the Court of Chancery analyzed and considered the appropriate way to plead claims that the acquirer purposefully operated the company to miss earnout milestones. More ›

Share

Chancery Clarifies When Related Agreements Will Be Construed Together

Posted In Breach of Contract, Chancery


Murphy Marine Services of Delaware, Inc. v. GT USA Wilmington, LLC (Del. Ch. May 28, 2021)
When interpreting a contract, Delaware courts generally stick to the four corners of the agreement at issue. One exception is when a contract is part of a set of inseparable agreements. In that situation, courts may construe all the agreements together as a whole. But, as seen here, the exception may not apply if the contract at issue independently effectuates the parties’ intent and does not expressly incorporate the other. More ›

Share

Chancery Orders Specific Performance of Deal, Despite Lack of Debt Financing, Finding that COVID-Related Business Decline Was Not an MAE and Seller’s Cost-Cutting Efforts Were Not Breaches of the “Ordinary Course” Covenant

Posted In Breach of Contract, Chancery, M&A, Merger Agreements


Snow Phipps Grp., LLC v. KCake Acquisition, Inc., 2020-0282-KSJM (Del. Ch. Apr. 30, 2021)
In Snow Phipps, the Court of Chancery refused to allow a private equity buyer with pandemic-related cold feet to back out of its bargained for agreement to purchase DecoPac, a cake decorating company. In ordering specific performance, the Court found: (1) the durationally insignificant COVID-related business decline did not constitute a material adverse effect (“MAE”); (2) the seller had not violated any of its covenants to operate in the ordinary course by attempting to mitigate business losses; and (3) the condition to closing that the buyer secure debt financing was excused under the prevention doctrine, because the buyer’s actions caused the condition not to be satisfied. More ›

Share

Chancery Refuses to Enforce Alleged Contractual Rights Not Obtained at the “Negotiating Table”

Posted In Breach of Contract, Chancery, Earn-Out, M&A


Obsidian Fin. Grp., LLC v. Identity Theft Guard Solutions, Inc., C.A. No: 2020-0485-JRS (Del. Ch. Apr. 22, 2021)
Delaware is “more contractarian” than many other jurisdictions. Accordingly, as this case illustrates, a court applying Delaware law will respect parties’ contractual choices and will not enforce alleged contractual rights not reflected in the plain language of the agreement. More ›

Share

Chancery Holds that Plaintiff Cannot Recover Cash It Mistakenly Failed to Sweep from its Former Subsidiary’s Account Prior to Closing

Posted In Breach of Contract, Chancery, M&A


Deluxe Entm’t Servs. Inc. v. DLX Acquisition Corp., C.A. No. 2020-0618-MTZ (Del. Ch. Mar. 29, 2021)

Delaware adheres to the objective theory of contracts and enforces the parties’ intentions as reflected in the four corners of an agreement. This is particularly true for sophisticated parties, whom Delaware law presumes are bound by the terms they negotiated. In this case, the plaintiff and defendant entered into an agreement where the plaintiff sold all of the outstanding shares of one of its subsidiaries to the defendant. Plaintiff alleged that, prior to the sale, it failed to sweep funds from the subsidiary’s bank accounts to which it was entitled under the purchase agreement. The Court rejected that claim in granting the defendant’s motion for judgment on the pleadings, in part because the agreement required the transfer of all assets except those explicitly excluded. The disputed cash neither was explicitly excluded, nor was it identified as among the wrongfully transferred assets the agreement required to be returned under a “wrong pocket” provision. Similarly, the Court rejected a claim for breach of the implied covenant of good faith and fair dealing because the parties’ agreement included a provision regarding an unintended asset transfer that did not address the disputed cash. Plaintiff’s alternative argument seeking reformation failed as well because plaintiff failed to plead with particularity mutual or unilateral mistake.

Share

Chancery Dismisses Unripe Contribution Claim but Finds That Corporate Director and Officer Adequately Pled Right to Indemnification Following Merger

Posted In Advancement & Indemnification, Breach of Contract, Chancery, M&A


Wunderlich v. B. Riley Fin., Inc. et al., C.A. No: 2020-0453-PAF (Del. Ch. Mar. 24, 2021)

Delaware corporations may provide indemnification rights to their directors and officers either through the corporation’s organizational documents or by separate agreements. This case concerned the survival and scope of these rights following a merger. More ›

Share

Chancery Finds SEC’s Filing of an Enforcement Action Did Not Trigger Redemption Right

Posted In Breach of Contract, Chancery

Tetragon Fin. Grp. Ltd. v. Ripple Labs Inc., C.A. No. 2021-0007-MTZ (Del. Ch. Mar. 19, 2021)

Plaintiff Tetragon Financial Group Limited is a shareholder of Ripple Labs, Inc., a blockchain company that uses a cryptocurrency called XRP. Tetragon had a right under a Stockholders’ Agreement to require Ripple to redeem its shares if the SEC or another government agency “determine[s] on an official basis” that XRP is a security “on a current and going forward basis.” Here, Tetragon sought a declaration that the SEC’s decisions to file an enforcement action in federal District Court, and issue a Wells Notice, each triggered the redemption right. More ›

Share

Chancery Dismisses Derivative Breach of Contract Claim Against Directors for Alleged Violations of Certificate of Incorporation

Posted In Breach of Contract, Chancery, Fiduciary Duty

Lacey v. Mota-Velasco, C.A. No. 2019-0312-SG (Del. Ch. Feb. 11, 2021)

A corporate charter represents a contractual agreement between the corporation and its stockholders. In Lacey, the Court of Chancery addressed whether a breach of contract claim for damages based on an alleged violation of a provision in the certificate of incorporation could be brought derivatively against director defendants. More ›

Share

Chancery Finds After Trial That $10 Billion Unit-for-Unit Merger Was “Fair and Reasonable” Under Partnership Agreement

Posted In Breach of Contract, Chancery, Limited Partnerships, M&A

Dieckman v. Regency GP LP, C.A. No. 11130-CB (Del. Ch. Feb. 15, 2021)

This matter concerned limited partners’ challenge under the governing limited partnership agreement to an acquisition of the partnership by another entity controlled by the partnership’s ultimate owner. A member of a conflicts committee, which had approved the $10 billion unit-for-unit controlling unitholder merger, also served the board of another company ultimately controlled by the same owner, contrary to the terms of the partnership agreement. After considering this issue, the Court of Chancery nevertheless held after a five-day trial that the merger was “fair and reasonable to the Partnership” under a contractual safe harbor, and that the plaintiffs failed to prove damages. More ›

Share

Superior Court Applies Affiliate Privilege Doctrine To Dismiss Tortious Interference Claim Against Controller, While Sustaining Fraud Claims Against LLC Managers

Posted In Breach of Contract, CCLD, Fraud, Superior Court

Surf’s Up Legacy Partners, LLC v. Virgin Fest, LLC, C.A. No. N19C-11-092 PRW CCLD (Del. Super. Jan. 13, 2021)

In adjudicating a dispute over a scuttled deal in the music festival industry, the Delaware Superior Court applied the so-called affiliate privilege doctrine, which can immunize a controller from tort liability for its affiliates’ contractual breaches, and addressed the viability of fraud claims against individual managers of certain LLCs. More ›

Share

awards

  • US News Best Law Firms
  • JD Supra Readers Choice Award
  • Delaware Today Top Lawyers
  • Super Lawyers
Back to Page