The Delaware courts regularly address contract claims arising out of merger agreements. Among other recurring issues are whether and how the parties limited claims based on alleged misrepresentations or omissions, whether a party can state a claim for breach of the implied covenant of good faith and fair dealing, and the nature of the remedies available in the event of breach. The recent case of Haney v. Blackhawk Network Holdings, C.A. No. 10851-VCN (Del. Ch. Feb. 26, 2016), addresses each of these issues and provides guidance to transactional and litigation attorneys concerned about minimizing litigation risk.
Haney arose out of a merger agreement between seller CardLab Inc. and acquirer Blackhawk Network Holdings Inc., which each provided gift cards and other prepaid financial products to customers. Prior to the negotiations between CardLab and Blackhawk, CardLab had been in negotiations with a third party, GameStop, to provide prepaid cards to GameStop, which would then provide those cards to its customers in exchange for used games and other electronics. GameStop and CardLab expected to complete a contract with an estimated 2015 gross margin to CardLab of $8.6 million. Thereafter, Blackhawk submitted a proposal to purchase CardLab for $25 million at closing, plus a performance-based cash payment of up to $50 million to be made within 60 days following the end of 2015 (the earnout payment).
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