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MONTH-IN-BRIEF (Jan 2020)

M&A Law

Delaware Supreme Court Holds Plaintiff Failed to Establish Its Recoverable Costs

By John Adgent

On January 6, 2020, the Delaware Supreme Court (the “Court”) reversed the Delaware Chancery Court’s award of $440,149 in costs to Brace Industrial Contracting, Inc., a provider of industrial services (“Brace”). The appeal arose from Brace’s 2014 acquisition of Peterson Industrial Scaffolding Inc., a scaffold subcontracting company (“PIS”), from Peterson Enterprises, Inc. (“PEI”).  

In 2015, Brace filed a complaint against PEI for breaching the parties’ Security Purchase Agreement (“SPA”). Brace sought indemnification due to PEI allegedly misrepresenting the amount of scaffolding equipment owned by PIS in the SPA’s asset disclosure schedules (the “Inventory Claim”). Additionally, Brace alleged that PEI breached a restrictive covenant not to compete with Brace through a subsidiary (the “Restrictive Covenant Claim”). The Delaware Chancery Court awarded Brace $703,975 on the Inventory Claim, but ruled in favor of PEI on the Restrictive Covenant Claim. The Delaware Chancery Court also awarded Brace $440,149, representing all of its costs for both claims, under the SPA’s indemnification provision.

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