If you’re weary of the shitshow, I suggest you check out the work of an exemplary public servant—the Delaware Chancery Court opinion by Vice Chancellor Laster in AB Stable VIII LLC v. MAPS Hotels and Resorts One LLC (here), issued on 30 November 2020.
It’s another epic Laster opinion, weighing in at 242 pages. The dispute involves the proposed purchase of hotel assets by a Korean company from a Chinese company for $5.8 billion. To quote the opinion, the factual record was “immense” and the briefs “contain a deluge of legal arguments.” The issue couldn’t be more timely—whether the buyer could back out of a transaction because of the unforeseen consequences of the COVID-19 pandemic. And adding to the tumult was a fraud perpetrated by “a shadowy and elusive figure.”
I’m not going to get into the detail, and I don’t need to—you can expect this case to unleash a flood of commentary. Instead, I’ll just note what caught my eye:
- the discussion of “double materiality”
- the court not finding anything amiss in including the phrase material adverse effect in the definition of the defined term Material Adverse Effect
- that the COVID-19 pandemic fits within the plain meaning of the word calamity
- that a Material Adverse Effect provisions doesn’t have to use the word pandemic to cover pandemics
- that it was “difficult to reach strong conclusions” based on data about use of the word pandemic in acquisition contracts
- that in all material respects reflects a different standard than does a material adverse effect provision
- that changes in the seller’s operations due to the COVID-19 pandemic constituted a departure from the ordinary course of business consistent with past practice
- that in the phrase commercially reasonable efforts, the word commercially is redundant
Some extra points:
Regarding “double materiality,” the court referred to it as a “problem.” I gently suggest that it’s actually a figment of the legalistic imagination; see this 2013 post.
Regarding alternative meanings of material, the court made the same point in its 2018 Akorn opinion (see this post). It’s high time that I offer on my blog my own take on this.
Regarding the discussion of commercially reasonable efforts, the court quoted my 2019 law review article (go here for a copy), calling it “The most thorough analytical treatment of efforts clauses” and calling me “The leading commentator on efforts clauses.” In my world, there’s no higher form of endorsement. But what that really tells me is that I’ve achieved the goal I had in mind when I wrote the article, which was to make available to Delaware courts, should it be of interest, a resource to help them stick with their consistently rational approach to interpreting efforts provisions.
The court also cited A Manual of Style for Contract Drafting and my 2004 article on material adverse change provisions (go here for a copy), but that’s just gravy :-)