Francis Pileggi Pens Delaware Business Court Insider Commentary on Delaware Supreme Court’s Interpretation of Business Sale Agreement

Wilmington, Del. (May 17, 2022) - Wilmington Managing Partner Francis G.X. Pileggi recently authored a commentary for the Delaware Business Court Insider (part of Law.com) titled, “Supreme Court Decides Deadline for Notice of Indemnification Claim.” The article analyzes a Delaware Supreme Court decision that interpreted an agreement for the sale of a business, including the provisions regarding deadlines for providing notice of indemnification claims.

Mr. Pileggi begins by observing that the matter of North American Leasing v. NASDI Holdings, Del. Supr., No. 192, 2020 (April 11, 2022) “provides a lesson for drafters of agreements for the sale of a business by providing an example of the problems caused by a lack of clarity in describing a deadline to send notices of claims for indemnification post-closing.” He goes on to describe the underlying facts in the case as well as the three issues that the Delaware Supreme Court decided: (1) whether the Delaware Court of Chancery erred in applying the Delaware laws of contract interpretation in determining the agreement’s deadline for giving notice of indemnification claims; (2) whether an affirmative defense of set-off and recoupment was waived; and (3) whether it was appropriate for the Court of Chancery to decline to consider evidence that the total amount of the claims should have been reduced.

Next, Mr. Pileggi reviews the legal analysis of Delaware’s high court, noting that three members affirmed the Court of Chancery’s decision and two dissented from the majority opinion. Mr. Pileggi explains that the Delaware Supreme Court observed that Delaware law adheres to an objective theory of contracts, or “that which would be understood by an objective, reasonable third party.” This theory, he notes, prioritizes the intentions of the parties reflected in the four corners of the agreement. Mr. Pileggi describes the manner in which the majority of the court applied this theory to the facts before it, as well as how the dissenting members reached their conclusion.

Mr. Pileggi is a member of Lewis Brisbois’ Complex Business & Commercial Litigation Practice. He focuses primarily on high-stakes disputes of corporations, stockholders, members of boards of directors, members and managers of LLCs, and those with managerial or ownership interests in other forms of entities. In addition, since 2004, Mr. Pileggi has also maintained the Delaware Corporate & Commercial Litigation Blog, at www.delawarelitigation.com, in which he analyzes key corporate and commercial decisions from Delaware's Supreme Court and Court of Chancery.

You can read the full Delaware Business Court Insider article here (subscription may be required).