Litigation

Court of Chancery Sets New Ground Rules for Merger Litigation

By Edward M. McNally

NACCO Industries Inc. v Applica Incorporated, C.A. 2541-VCL (December 22, 2009)

In this major opinion, the Court of Chancery has established new remedies for the breach of a merger agreement. The Court held that a jilted merger partner may recover for the "expectancy damages" it incurred when the other party to a merger agreement breached that agreement to take a better deal from a competing suitor. While the opinion notes there will be difficulty in actually recovering those damages given that the plaintiff has already been paid millions of dollars in a termination fee and expense reimbursement, the court denied a motion to dismiss.

The case involved the breach of a no-shop and "prompt notice" clause typical of merger agreements and that facilitated a competing bidder prevailing in an auction. Further, the Court upheld a fraud claim based on statements in a Schedule 13 filling that some had thought were only actionable in a federal securities lawsuit.

Full post as published by Delaware Business Litigation Report on December 22, 2009 (boomark / email).