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Madison Dearborn Says Realogy Virus Suit Aimed for Bad Headlines

June 17, 2020, 11:00 PM

Madison Dearborn Partners fired back in Delaware court at Realogy Holdings Corp.'s lawsuit over its scrapped $400 million deal with a Madison Dearborn affiliate, saying the real estate brokerage breached their contract by going to court—and by targeting the private equity firm itself solely to embarrass it.

Despite explicit contractual restrictions, “Realogy sued MDP under the purchase agreement—and immediately boasted about it in a press release,” Madison Dearborn says in court papers unsealed Tuesday.

Although Realogy later “changed its tune,” the filing adds, “the damage had been done.”

The suit, filed last month in the Chancery Court, targets relocation services company SIRVA Worldwide Inc. and its owners, various Madison Dearborn funds. It accuses them of using the Covid-19 pandemic to renege on their planned acquisition SIRVA subsidiary Cartus Corp., also a moving services company.

The case is part of a wave of suits asking courts to keep mergers on track as acquirers balking at coronavirus risks scramble deals worldwide. Most of those disputes are being heard in the Chancery Court.

Some of the similar cases involve a $5.8 billion hotel deal; the purchase of Victoria’s Secret; a business unit sale from Bed Bath & Beyond to 1-800-Flowers; a CMX Cinemas merger; a franchise buyout by CorePower Yoga; and private equity transactions over a cybersecurity company and the world’s top cake decorations wholesaler.

Pandemic’s ‘Devastating Impact’

In response to Realogy’s suit, SIRVA and Madison Dearborn have accused it of hiding “the devastating impact” of Covid-19 on Cartus—first by dragging its feet when they pressed for more information, then by making misleading disclosures on the eve of closing.

Given the pandemic’s effect on Cartus, it constitutes a “material adverse event” justifying cancellation, they said.

Those arguments echo the issues being raised in the other similar suits, which will likely hinge in part on the specifics of each deal’s MAE clause, including whether it excludes the pandemic and whether the reneging party can show the transaction has been disproportionately affected by it.

The joint motion to dismiss the case elaborates on those claims. Instead of answering follow-up questions, it says, Realogy rushed to the courthouse to seek relief that’s explicitly not available from parties it’s expressly not allowed to sue.

The purchase agreement bars claims against Madison Dearborn itself, rather than against SIRVA, and makes clear that specific performance of the deal isn’t available once its financing has expired, which it has, they argue. No Delaware court has forced a transaction to close under those circumstances, according to the filing.

“This is not the case to be the first,” it says.

Targeting Madison Dearborn

Moreover, the plaintiffs in other similar cases have gone out of their way to stress that they aren’t targeting a deal’s private equity sponsors, according to the joint motion.

But Realogy deliberately conflated all the defendants in court filings and a press release publicizing the suit, knowing it would lead to headlines emphasizing Madison Dearborn’s role, the motion says.

The SIRVA parties also hit Realogy with a breach of contract counterclaim in a separate filing unsealed the same day.

SIRVA and Madison Dearborn are represented by Morris, Nichols, Arsht & Tunnell LLP and Kirkland & Ellis LLP. Realogy is represented by Skadden, Arps, Slate, Meagher & Flom LLP.

The case is Realogy Holdings Corp. v. SIRVA Worldwide Inc., Del. Ch., No. 2020-0311, motion to dismiss unsealed 6/16/20.

To contact the reporter on this story: Mike Leonard in Washington at

To contact the editors responsible for this story: Rob Tricchinelli at; Carmen Castro-Pagan at