Delaware Court of Chancery

Real estate and relocation services company Realogy Holdings Corp. does not have grounds to pursue breach-of-contract claims against SIRVA Worldwide Inc., Vice Chancellor Morgan Zurn determined July 17 following a Delaware Court of Chancery hearing.

Zurn's dismissal with prejudice of two claims brought this spring by Realogy against SIRVA, which is also a relocation company, and its affiliates took the maximum amount of relief Realogy can pursue in the case down from potential enforcement of what was originally a $400 million purchase agreement to the possibility of being awarded a $30 million termination fee.

The decision was made the same day oral arguments were made via Zoom, with Zurn stating she found, based on what was presented by Andrew Kassof, of Kirkland & Ellis, who argued the case on behalf of SIRVA, that Realogy, not SIRVA, caused the conditions of the deal to fail.

"I will save everyone the wait and duplicative effort and adopt (Kassof's) presentation today as my grounds for granting defendants' motion to dismiss on Counts I and II, with two exceptions," Zurn said July 17.

Those two exceptions to Kassof's argument were Zurn's decisions that because Realogy, not SIRVA, caused the deal to fall through, she would not reach boundaries of prevention doctrine and that the contract as written would have required that Realogy maintain its financing throughout the various stages of the proposed transaction, rather than only at a particular point in time.

In a brief filed prior to last week's argument, SIRVA made the assertion that Realogy's specific performance claims were barred by the contract itself because Realogy had filed its suit against a number of other parties, including Madison Dearborn Partners, SIRVA's private equity owner, rather than only against SIRVA as the prospective buyer.

Additionally, SIRVA argued Realogy's filing of the case made the equity financing in the deal fall through, making the conditions of the deal unable to be satisfied and rendering Realogy at fault and unable contractually to force the deal to close.

A trial is currently scheduled to take place in late November and early December. Based on remaining claims and counterclaims, it could address whether SIRVA owes a termination fee for backing out of its purchase of Cartus Corp. from Realogy or if the COVID-19 pandemic qualifies as a material adverse effect, which SIRVA would have been authorized to use as a reason to back out of the deal, based on the specific terms of the agreement.

The issue of a material adverse effect was not discussed as reasoning behind support for the motion to dismiss but could later factor into whether or not SIRVA owes a termination fee for the sale not being completed as planned.

Ed Micheletti of Skadden, Arps, Slate, Meagher & Flom, who argued July 17 for Realogy, was not immediately available for comment on the case.