Chancery Clarifies When Related Agreements Will Be Construed Together
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.
As part of the State of Delaware’s privatization of the Port of Wilmington, GT USA Wilmington, LLC (the incoming private Port operator) agreed to purchase Murphy Marine Services of Delaware, Inc. (a stevedore business operating at the Port), at its going concern value. The parties agreed to engage KPMG to establish a value. After KPMG rendered its valuation, the parties disputed various aspects of the valuation, and Murphy Marine and its stockholders sought specific enforcement.
One issue the Court considered was whether the parties’ sale agreement (the “BLA”) should be interpreted in conjunction with the Engagement Letter entered with KPMG. Both agreements were entered on the same day. Although the BLA discussed certain specifics of the KPMG’s engagement, the BLA did not expressly reference or incorporate the Engagement Letter. Relying heavily on an earlier Delaware Supreme Court decision, GT asserted that the agreements must be construed together, and that if they were, then KPMG’s valuation was a “draft” valuation under the Engagement Letter and not enforceable.
The Court, however, declined to read the BLA and the Engagement Letter as a single agreement. In the Court’s view, the prior case was distinguishable in several respects. There, the two coordinated agreements involved the same parties and formed one contract; neither agreement was independently sufficient to achieve the parties’ intent. Here, however, the BLA was sufficient to accomplish the sale of Murphy Marine’s shares to GT. Additionally, the parties to the BLA and to the Engagement Letter were different. And the BLA parties could have, but did not, incorporate the terms of the Engagement Letter, which was executed first, into the BLA. Although the Engagement Letter and the BLA were related, they were “not two parts of a whole. ”Thus, the Court concluded that BLA stood on its own.Share