“On the One Hand … On the Other Hand”

Once more, I doff my cap to a reader of this blog.

Steve Pappas—a Penn Law classmate—suggested to me that the construction on the one hand … on the other hand is often misused. It had never crossed my mind to investigate this usage. I’ve now done so, and I agree with Steve.

The construction on the one hand … on the other hand serves to bifurcate a list of three or more items. And it does so in two different ways.

First, consider a list of three or more items that includes at least one and and one or among its conjunctions. Sample 1 below is an example of such a list.

1. except for any transaction involving A and B or C
2. except for any transaction involving (1) A and B or (2) C
3. except for any transaction involving (1) A and (2) B or C
4. except for any transaction involving A and either B or C
5. except for any transaction involving A, on the one hand, and B or C, on the other hand

When in any string of three nouns the first and second are separated by and and the second and third are separated by or, or vice versa, the meaning varies depending on which conjunction “has scope over” the other. (See MSCD 8.57.) In sample 1 above, either or has scope over and, as in sample 2 (with the transaction involving, in addition to C, one out of A or B), or and has scope over or, as in sample 3 (with the transaction involving either A or one out of Band C).

Using enumeration, as in samples 2 and 3, is a simple way to eliminate this ambiguity. Also, as in sample 4 you can use either to indicate that and has scope over or, but only if a single item precedes and. A more versatile way to indicate that and has scope over or is to use on the one hand … on the other hand, as in sample 5—there’s no limit to how many items you can include in each of the two parts of the list.

Here’s a real-life example of this use of on the one hand … on the other hand:

any other transaction involving Parent or any Restricted Subsidiary, on the one hand, and Bear, Stearns & Co. Inc. or any of its Affiliates, on the other hand

Second, on the one hand … on the other hand is used to divide between two categories any list of three or more items using and as the only conjunction. In sample 1 below, it’s not clear to which category B belongs—debtor or creditor? That’s made clear in samples 2 and 3. You could instead use enumeration to remedy the confusion, as in sample 4, but on the one hand … on the other hand seems the clearer option. Perhaps that’s because when you see on the one hand, you know that there is only one more grouping to come. That’s not the case with enumeration.

1. the relationship between A and B and C is that of debtor and creditor
2. the relationship between A, on the one hand, and B and C, on the other hand, is that of debtor and creditor
3. the relationship between A and B, on the one hand, and C, on the other hand, is that of debtor and creditor
4. the relationship between (1) A and B and (2) C is that of debtor and creditor

But that’s not the end of the story. After reviewing a few dozen agreements filed with the SEC that use on the one hand … on the other hand, I’ve concluded that more often than not this construction is used when it’s not needed—in other words, it’s used even when a list doesn’t need to be bifurcated.

For example, on the one hand … on the other hand is sometimes used with a list containing only two items, as in the following examples. As there’s no risk of confusion, it should be omitted.

The relative fault of the indemnifying party on the one hand and the indemnified party on the other is to be determined by reference to …

Each of Parent, on the one hand, and the Stockholders’ Representative, on the other hand, shall cooperate with each other in preparing the 2008 Income Statement.

But what if one of the two items is plural? Here are two examples:

The Sellers, on the one hand, and the Purchaser, on the other hand, are each responsible for paying half of the Transfer Taxes arising out of or in connection with the transactions contemplated by this agreement.

in such proportion as is appropriate to reflect the relative benefits and the relative fault of the Company, on the one hand, and the Placement Agents, on the other hand, in connection with the statements or omissions that resulted in such losses, damages or liabilities

In this context, on the one hand … on the other hand is presumably used to indicate that the plural item is to be considered collectively. I suggest that it would be clearer and more economical to say exactly that (making sure to place the plural item first, to avoid any syntactic ambiguity):

The Sellers (considered collectively) and the Purchaser are each responsible for paying half of the Transfer Taxes arising out of or in connection with the transactions contemplated by this agreement.

in such proportion as is appropriate to reflect the relative benefits and the relative fault of the Placement Agents (considered collectively) and the Company in connection with the statements or omissions that resulted in such losses, damages or liabilities

And on the one hand … on the other hand is sometimes with a list of three or more items even though there’s no need to bifurcate those items. For example:

The Corporate Taxpayer and the Partnerships, on the one hand, and the applicable Limited Partner, on the other hand, [read The Corporate Taxpayer, the Partnerships, and the applicable Limited Partner] acknowledge that, as a result of an Exchange, the Corporate Taxpayer’s basis in the applicable Original Assets shall be increased by the excess, if any, of …

In the same vein, you’ll sometimes see on the one hand … on the other hand used to group three or more parties to a transaction, just as drafters used to use party of the first party … party of the second part. See the example below. But this practice is unnecessary. It’s simplest not to indicate in the introductory clause who is wearing what hat—that’s what the recitals are for.

This asset purchase agreement is dated August 6, 2007, and is between ABLE CORPORATION, a Delaware corporation (the “Buyer”), on the one hand, and BAKER MERCHANDISING LLC, an Ohio limited liability company (the “Seller”), CHARLIE ENTERTAINMENT, INC., a Florida corporation (“Charlie”), and DAVID DELTA, as trustee of the David Delta Trust (the “Trustee” and, together with Charlie, the “Members”), on the other hand.

I continue to be amazed at the nuances that lurk in even the most benign-seeming usages.