Richards Layton & Finger

Deal Protection Devices Enforced in the Delaware Court of Chancery

March 2010

Vice Chancellor J. Travis Laster's recent decisions in Global Asset Capital, LLC v. Rubicon US REIT, Inc. and NACCO, Inc. v. Applica Incorporated provide good examples of Delaware's approach to analyzing bargained-for deal protection devices.  These cases provide the following lessons:  (1) in Delaware, deal protection devices including no-shop and prompt notice provisions will be enforced so long as they are part of a reasonable process that adequately protects the interests of the target company; (2) half-hearted attempts to satisfy such provisions generally will not be sufficient; (3) the Delaware Court of Chancery will provide appropriate remedies to protect the non-breaching parties' reasonable expectations; and (4) absent a manifested contrary intent, sufficently definite letters of intent containing such devices will be enforced as binding contracts.

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