Chancery Holds Tension Between “Bespoke” Provision Governing Post-Closing Conduct and a Boilerplate Survival Clause Requires Consideration of Parol Evidence
The founders of Cablevision Systems Corp., the Dolan family, in connection with a $17.7 billion acquisition of that entity by Altice Europe N.V. and Altice USA Inc., obtained a commitment in the Merger Agreement affirming that Altice would operate a particular group of regional cable news channels (News12 Networks LLC) “substantially in accordance with the existing News12 business plan … through at least the end of plan year 2020[.]” When Altice proceeded to lay off News12 employees after the merger, the Dolan family filed an action in the Court of Chancery for specific performance.
In this decision on the defendants’ motion to dismiss, the Court found certain clauses in the merger agreement to be ambiguous, and so allowed the Dolans’ breach of contract and declaratory relief claims to proceed. Defendants had argued that the obligation to operate News12 consistent with the existing business plan did not survive the closing, because it was not one of the covenants designated to survive the closing in a provision explicitly identifying such covenants. Instead, they claimed the commitment really was only a “goodwill gesture and was in no way meant to bind Altice before or after the Merger closed.” Yet the provision was stated as an affirmative obligation, and indicated that this affirmative obligation would continue through 2020. The Court concluded the conflict between this affirmative language in a “bespoke” provision and a “boilerplate” survival clause rendered the merger agreement subject to two reasonable interpretations. It accordingly held that consideration of parol evidence was required to evaluate the parties’ intent.Share