August 17, 2021

Non-Assignment Clauses: What Assignments Don’t They Prohibit?

This recent Weil blog is titled “Stuff You Might Need to Know: What Assignments Do Broad Anti-Assignment Clauses Not Prohibit?”  I would say a better title might be “Stuff You Definitely Need to Know. . .”  Here’s the intro:

A recent federal court decision applying Delaware law, Partner Reinsurance Co. Ltd. v. RPM Mortgage, Inc., 2021 WL 2716307 (S.D.N.Y. July 1, 2021), explores some rare contractual territory—i.e., the question whether, in the absence of consent, a valid assignment may be made by a party of its rights to pursue a claim for damages for breach of a merger agreement, notwithstanding an anti-assignment clause that declared “void” any assignment of “any or all of” such party’s “rights under” that merger agreement.

Surely, some might say, the right to claim damages for a breach of a contact is a “right[] under” that contract and would accordingly be prohibited by such a broad anti-assignment clause. Not so says the United States District Court for the Southern District of New York; and, in case you were wondering, this holding is consistent with long standing law concerning the scope of even the broadest anti-assignment provisions.

The blog goes on to discuss the applicable provisions of the Restatement of Contracts that Delaware courts and the SDNY applied in reaching this conclusion, and points out that that bottom line is that if parties want to restrict assignment of damage claims, the anti-assignment clause needs to include language specifically addressing those claims, and just restricting the assignment of “any or all rights under the contract” won’t cut it.

John Jenkins