In MHR Capital Partners LP v. Presstek, Inc.1 the Court of Appeals ruled that where there has been a failure of an express condition, a party is free to walk away from a transaction and no breach of contract claim can be premised on the theory that the party’s withdrawal was motivated not by the failure of the condition but by the party’s intention to pursue a better deal. The Court addressed a situation where contract documents relating to a corporate acquisition clearly provided that the agreements were to be null and void upon failure to fulfill an express condition, the condition was not satisfied and, immediately after the failure of the condition, the acquiror began pursuit of, and ultimately closed, the acquisition on more favorable terms.
Background
In 2003, Presstek, Inc. (Presstek) and its wholly owned subsidiary, Silver Acquisition Corp., began exploration of the possibility of acquiring A.B. Dick Company (ABD) from its corporate parent, Paragon Corporate Holdings, Inc. (Paragon) The parties negotiated a stock purchase agreement (the SPA) and executed it in June 2004. The SPA incorporated various ancillary agreements, including one whereby MHR Capital Partners LP and its affiliates (collectively, MHR), major creditors of ABD, waived rights that they held under notes ABD had issued. In connection with the acquisition, MHR would receive from Presstek a payment of $10 million and Presstek stock.
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