April 29, 2021
M&A: A Comprehensive Outline of Delaware Issues
Morris Nichols recently published “Mergers & Acquisitions: A Delaware Checklist.” This 168-page document provides a comprehensive outline of issues relating to fiduciary duties, poison pills, deal protections, merger agreement terms, structural issues & appraisal rights under Delaware law. It’s a terrific resource that discusses most of the significant issues you’re likely to encounter & summarizes the major Delaware judicial decisions in each area. Here’s an excerpt from the section dealing with sandbagging:
The majority of cases in Delaware hold that Delaware is a pro-sandbagging state – i.e., as a default rule in Delaware, a party may successfully plead breach of contract even if it knew a representation was not true at the time it entered into a contract. NASDI Hldgs, LLC v. N. Am. Leasing,Inc., (Del. Ch. Oct. 23, 2015); Universal Enter. Grp., L.P. v. Duncan Petroleum Corp., 2013 WL 3363743 (Del. Ch. July 1, 2013); Cobalt Operating, LLC v. James Crystal Enters., LLC., 2007 WL 2142946 (Del. Ch. July 20, 2007); Gloucester Hldgs. Corp. v. U.S. Tape & Sticky Prods. LLC, 32 A.2d 116, 127 (Del. Ch. 2003). But Cf. MicroStrategy Inc. v. Acacia Research Corp., 2010 WL 5550455 (Del. Ch. Dec. 30, 2010); Kelly v. McKesson HBOC, Inc., 2002 WL 88939, at *8 (Del. Super. Ct. Jan. 17, 2002).
However, the Delaware Supreme Court recently cast doubt on Delaware’s status as a pro-sandbagging state. Eagle Force Hldgs., LLC v. Campbell, 187 A.3d 1209, 1237 n. 185 (Del. 2018) (“We acknowledge the debate over whether a party can recover on a breach of warranty claim where the parties know that, at signing, certain of them were not true. [Defendant] argues that reliance is required, but we have not yet resolved this interesting question.”).
– John Jenkins