Buying Assets? Want Claims Too? Make It Explicit

I noted with interest this post on ContractsProf Blog by @StaceyLantagne. It’s about one of the lawsuits prompted by the ruling that Apple had engaged in anticompetitive price-fixing in ebooks.

The opinion is DNAML Pty, Ltd. v. Apple Inc., No. 13CV6516 (DLC), 2015 WL 9077075 (S.D.N.Y. Dec. 16, 2015) (PDF here). In it, the court held that the plaintiff lacked the standing to bring its claim. Why? Because the plaintiff (“New DNAML”) wasn’t the one injured and it hadn’t received from the injured party (“Old DNAML”) an assignment of the right to pursue the injured party’s claim.

Look at the opinion, or Stacey’s post, if you want more detail, but here are two key paragraphs from the opinion:

To effect a transfer of the right to bring an antitrust claim, the transferee must expressly assign the right to bring that cause of action, either by making specific reference to the antitrust claim or by making an unambiguous assignment of causes of action in a manner that would clearly encompass the antitrust claim.

The Agreement does not assign antitrust claims from Old DNAML to New DNAML. The Agreement contains no express assignment of Old DNAML’s antitrust claims, and no general assignment of all claims. While the Agreement transfers all of Old DNAML’s “Business and Assets” to New DNAML, neither the term “Assets” nor “Business” is defined in the Agreement to include claims of any kind. As explained above, a transfer of assets does not effect an assignment of antitrust claims.

So if you’re buying assets and you want those assets to include the seller’s claims, make that explicit in the contract. It’s annoying that claims don’t simply come with the assets, but this is one context where there’s no workaround: just do what courts require.

This reminds me of the spat between Carl Icahn and Bill Ackman that I wrote about in this 2013 post:

The contract provided that Icahn was required to pay Ackman on the “sale or other transfer” of the securities in question. The issuing company was subsequently acquired by merger. When Ackman asked for his money, Icahn claimed that the provision didn’t apply, as he hadn’t sold his shares.

Icahn ultimately lost, as the New York court hearing the dispute ruled that “sale or other transfer” was broad enough to encompass a merger, and that ruling was affirmed on appeal.

Whoever drafted that contract would have been advised to mention merger in the contract, in addition to “sale or other transfer,” so as to preclude exactly the sort of fight that materialized.

So in both that dispute and the DNAML dispute, effective drafting required providing more than the bare minimum of detail.

Categories M&A

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.

6 thoughts on “Buying Assets? Want Claims Too? Make It Explicit”

  1. It used to be hornbook law that choses in action, as well as IP rights, were considered intangible assets, and therefore an assignment of all tangible and intangible assets should encompass both. However, as always, nothing is judge-proof.

  2. Ken:

    Under the Texas Business Organizations Code, the merger provisions explicitly say that a merger does not cause a sale or transfer, but the surviving entity succeeds to the non-surviving entity. I wonder how much weight a court would give that, if (for example) the lawyers involved didn’t know about that provision. Would the court say that it was trying to determine the intent of the parties, so it would treat the merger as effecting a transfer? Or would it say that it was trying to abide by the intent of the legislature, so it would treat the merger as not effecting a transfer? I suspect the latter. But the fact that it’s an open question leads to your conclusion: draft to it specifically.


  3. Sounds like a good case for the disciplined use of ‘including’ — ‘assets, including all claims’. Those four words might suffice — the court pointed out that ‘The Agreement contains … no general assignment of all claims’, as if that would have done the trick.

    If I read the case correctly, the drafter used the term ‘assets’ and also described non-antitrust ‘claims’ that were included in the sale, leaving unclear whether the undescribed antitrust ‘claims’ were in or out. Inclusio unius, exclusio alterius.

    The origin of the basic rule seems sound — if I sell you just my dented BMW (asset A), that doesn’t carry with it my property damage claim against the lad who dented it (asset B) — but the court seems to fuzz that up, leaving a drafter uncertain whether saying ‘the entire alphabet’ does or does not ‘expressly’ include zed.

    • In the context of IP assignments, the issue is whether claims, and the right to bring claims, for infringement prior to the date of the assignment, are transferred. Just saying that the assignment includes claims might not convey the sense that rights arising prior to the date of the transfer are included in the transfer.


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