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I’m told that the Delaware Chancery Court’s decision in Akorn v. Fresenius, (Del. Ch.; 10/18), was the longest opinion in the Court’s storied history. Well, it isn’t anymore.  That’s because Vice Chancellor Laster’s 246-page Fresenius opinion pales in comparison to the 306-page behemoth that he just penned in In re Anthem-Cigna Merger Litigation, (Del. Ch.; 8/20). I’m not even going to pretend that I’ve read the whole thing. I’m sure we’ll get a number of law firm memos on the decision that will more than make up for what I don’t cover here, and when we do, I’ll post them in our “Busted Deals” Practice Area.

The length of Vice Chancellor Laster’s opinion is due in no small part to the intricate factual and legal setting of the aborted transaction and the dispute between the parties.  In fact, the case’s background is so byzantine that the Vice Chancellor didn’t even begin to analyze the legal issues involved until page 189!

Vice Chancellor Laster’s substantive analysis of the parties’ claims gets rolling on page 204 with an exhaustive (& exhausting) discussion of various ways in which Cigna breached several covenants contained in the merger agreement. That section of the opinion concludes a mere 69 pages later with a finding that because Cigna proved that the merger would have been enjoined on antitrust grounds even if it had complied with its obligations, the closing condition based on the absence of an injunction would’ve not been satisfied, and Cigna would never have become obligated to close. So, Anthem, you’re out of luck.

If you’re looking for something a little more digestible, I’d suggest you start with discussion of Cigna’s claims against Anthem that begins on page 273 of the opinion. After laying out Cigna’s allegations against Anthem, Vice Chancellor Laster notes that even if Anthem breached its obligations under the agreement, it would have had to have done so willfully in order to be liable for damages. Here’s an excerpt from his conclusion that the way in which the merger agreement defined a “Willful Breach” precluded Cigna’s claim for damages:

The Merger Agreement defines “Willful Breach” as “a material breach of this Agreement that is the consequence of an act or omission by a party with the actual knowledge that the taking of such act or failure to take such action would be a material breach of this Agreement.” Under the Effect-Of-Termination Provision, it is not enough for Cigna to prove the  elements of a claim for breach of contract that satisfies the common law framework.

The parties agreed that once the Merger Agreement had been terminated, “there shall be no liability on the part of any party hereto” except in three defined situations. Only one is  pertinent here: “the Willful Breach of any covenant or agreement set forth in this Agreement.” MA § 7.2(iii). Cigna thus had to demonstrate that Anthem’s breach of the Efforts Covenants was (i) a material breach and (ii) committed “with the actual knowledge that the taking of such act or failure to take such action would be a material breach.”

The Vice Chancellor pointed out that the merger agreement’s “Willful Breach” definition represented a departure from the common law standard, which only requires a party to knowingly takes an action that results in a breach, and does not require actual knowledge that the action in question would be a breach of the agreement. But since the parties bargained for that elevated standard, Cigna was going to be held to it when it came to seeking damages for an alleged breach – and it couldn’t meet that burden.

VC Laster closed the opinion by analyzing Cigna’s claim that Anthem had triggered an obligation to pay a reverse termination fee under the merger agreement.  This blog is already long enough to tax your patience, so I’ll leave it to you to read that part of the opinion.  All I’ll say is that it’s an interesting & worthwhile exercise to see how an experienced judge parses the intricate language of contractual termination fee triggers, and – spoiler alert – ultimately determines that no fee is payable. Tough luck, Cigna.

There’s an awful lot going on in this case, and even though I’ve already admitted that I haven’t read the whole thing, I’ve read enough to know that what I’ve laid out here only begins to scratch the surface. But  I’ll tell you one more thing – reading this opinion has only enhanced my respect for the succinctness of that great jurist Elihu Smails, who only needed one sentence to sum up Vice Chancellor Laster’s holding for both parties in this case – “You’ll get nothing and like it!”

– John Jenkins