Realogy, SIRVA Settle Suit Over Virus-Related Deal Breakdown

Realogy Holdings Corp. and Madison Dearborn Partners LLC affiliate SIRVA Worldwide Inc. have settled their dispute over a $400 million business deal disrupted by the Covid-19 pandemic, according to filings Tuesday with two Delaware courts and the SEC.

The agreement was reached Aug. 8, the day after the judge hearing the lawsuit urged the state’s top court not to review her decision dismissing Realogy’s bid for “specific performance” of the transaction—an order forcing SIRVA to close on it—until the rest of the case concludes.

The filings with the Securities and Exchange Commission, the Chancery Court, and the Delaware Supreme Court didn’t disclose the settlement’s details. Realogy’s attorneys didn’t immediately respond to a request for comment Tuesday. A lawyer for SIRVA referred to Realogy’s SEC filing.

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.

‘Buyer’s Remorse’

The Realogy-SIRVA case concerned Cartus Corp., a moving services company that SIRVA was supposed to acquire from Realogy, a real estate brokerage. SIRVA is also in the relocation business.

The suit accused SIRVA of trying to renege over “buyer’s remorse” related to the coronavirus. The deal’s “material adverse effect” clause “squarely allocated the risk” of an “act of god” to SIRVA unless it disproportionately affects Cartus, but all moving companies have felt the pain, the suit said.

SIRVA and its private equity backers at Madison Dearborn countered by claiming Realogy hid “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.

The pandemic’s effect on Cartus makes it an MAE justifying cancellation, they said.

Those arguments echoed the issues being raised in the other similar suits, which will likely hinge in part on the details of each deal’s MAE clause.

Case-Specific Reasoning

But Vice Chancellor Morgan T. Zurn relied on case-specific reasoning July 17 in denying Realogy’s bid to close the deal, saying the claim didn’t turn on those broader questions.

Instead, she said, Realogy breached the purchase agreement by targeting Madison Dearborn directly solely to embarrass it, instead of confining its legal claims to SIRVA. That triggered a clause allowing the firm to pull its equity financing, which in turn terminated the debt financing as well, the judge found.

The ruling didn’t affect another part of the suit seeking a deal termination fee.

In her Aug. 7 letter opinion, Zurn advised against an immediate appeal, saying the suit didn’t involve issues of first impression, unresolved questions of legal interpretation, or other exceptions to the general rule limiting appellate review to final orders.

SIRVA and Madison Dearborn were 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, stipulation of dismissal filed 8/11/20.