DealLawyers.com Blog

July 1, 2024

New York Court Awards Seller Specific Performance

In James River Group Holdings v. Fleming Group Holdings, (NY Sup. 4/24), the New York Supreme Court’s Commercial Division recently addressed a seller’s claim for specific performance of the buyer’s obligation to close under the terms of a stock purchase agreement.  The Court rejected the buyer’s allegations that the seller had breached various provisions of a stock purchase agreement and granted the seller’s request for specific performance.

In reaching this conclusion, the Court pointed to provisions of the agreement entitling the seller to specific performance (Section 8.4) and providing a post-closing “true up” process to address the monetary issues raised by the buyer (Section 1.4):

In §8.4, the SPA provides for specific performance because the parties agree that there is irreparable harm if the contract is breached, and damages would be difficult to calculate. Courts enforce such provisions when negotiated by sophisticated counsel, as is true here. [Citations omitted]. The court is inclined to accept the parties’ agreement in the SPA where the parties crafted the SPA to prevent this precise situation with SPA §8.4 and §1.4.

The Court also agreed that the seller was suffering irreparable harm as a result of the buyer’s refusal to close the transaction. In particular, it pointed to the reputational harm that the seller, a public company which had announced the sale of this subsidiary as part of a long-term strategic plan to focus on core business, had suffered when the buyer’s refusal to close became public.

Specifically, the Court noted that the seller’s share price immediately dropped to an all-time low after the buyer balked, and that an analyst opined that the refusal to close potentially impacted the seller’s core value, interfered with its employees and operations, and distracted it from its strategic plan because of the need to maintain the subsidiary’s operations.

John Jenkins