Vice Chancellor Morgan T. Zurn said she would rule on the not-yet-filed motion to dismiss the case by mid-July and told the two sides to “plan for trial in November or early December.” The order was docketed Tuesday after being issued at a May 8 teleconference.
The Chancery Court suit accuses relocation services company SIRVA and its private equity owners of using the Covid-19 pandemic to renege on their planned acquisition of Cartus Corp. from Realogy, a nationwide real estate brokerage. Like SIRVA, Cartus provides moving services.
Some of those cases involve the $5.8 billion acquisition of a hotel chain; the purchase of Victoria’s Secret; a business unit sale from
‘Story Will Be Told’
In her ruling, Zurn rejected SIRVA’s argument that there was no need to expedite the case because the purchase agreement explicitly bars “specific performance” of the deal in the event of a breach.
The order didn’t explain the judge’s reasoning, and a transcript of the May 8 hearing wasn’t immediately available.
SIRVA and Madison Dearborn have also fired back at Realogy’s claims, saying the real estate giant “hid the devastating impact of Covid-19" on Cartus.
“That story will be told,” they said in a filing unsealed Tuesday.
According to the partly redacted filing, SIRVA and its lenders pressed Realogy for information about the coronavirus’ impact on Cartus after the pandemic’s scope became clear in March. Realogy responded with “inflated” projections based on “high-level assumptions,” SIRVA claims.
“SIRVA asked more questions,” the filing says. “Realogy never answered them. Instead, it filed this lawsuit.”
But the pandemic constitutes a “material adverse event” that justifies canceling the transaction, according to SIRVA.
Echoes of Similar Suits
The arguments previewed in Realogy’s complaint and SIRVA’s response echo those being made in the other similar suits.
The outcome in each case will likely hinge in part on whether the merger’s material adverse event clause excludes “general” business downturns—even those based on unforeseen calamities—and whether the reneging party can show the deal has been disproportionately affected by the pandemic, relative to the broader economy.
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, 5/12/20.