This article is Part VIII of the Musings on Contracts series by Glenn D. West, which explores the unique contract law issues the author has been contemplating, some focused on the specifics of M&A practice, and some just random.

Contractual boilerplate is much maligned. Every contract has it, but it is considered the “standard stuff” at the back that is rarely relevant to the “substantive” provisions at the front. The problem with that view is that a boilerplate provision contained in a contract between sophisticated parties is not, generally, any less enforceable than any other provision.^[1] And the boilerplate provisions given short shrift in the negotiation or drafting of a contract could undermine other provisions of that contract.

Unconsidered or outdated boilerplate may contain landmines that could wreak havoc on your contract’s other “substantive” provisions. But these landmines exist primarily because of thinking about boilerplate as if it were somehow not a substantive part of the contract. The fact “is that ‘boilerplate’ is a misnomer as applied to these provisions and that lying in wait within each of them are significant business and legal issues.”^[2] Just because “these provisions . . . have been in the firm’s precedents for ages, garnering ever more hallowed status,” does not mean that they are exempt from the same “critical analysis” that has been brought to bear on what are perceived to be the more substantive parts of the contract.^[3] Indeed, these provisions may have been “drafted by geniuses, but those geniuses may have been wearing powdered wigs.”^[4]

While contractual boilerplate is routinely relegated to the “Miscellaneous” section at the very back of a contract, the subjects covered include matters that could be outcome-determinative if there is a subsequent dispute regarding other contract terms. Those subjects include, among others: what law will govern any dispute (and whether that chosen law includes the chosen law’s statute of limitations and applicable tort law),^[5] in what forum any dispute must be adjudicated (and whether those claims requiring adjudication will include related tort claims or just the contractual ones),^[6] whether third parties have any enforceable rights under the contract,^[7] whether the contract is assignable,^[8] how certain words and phrases are to be interpreted, whether actions by a party may constitute a waiver of its substantive rights under the contract, and how and where notices are to be delivered. In reviewing contractual boilerplate after a dispute arises, one can be either mining for gold or uncovering landmines depending on the extent of the contractual hygiene^[9] practiced when the contract was first negotiated. In other words, one could find either peril or delight in a subsequent review of these provisions once a dispute arises.

The Peril Side of Contractual Boilerplate

The typical survival provision provides that the right to indemnification terminates with respect to any indemnifiable claim for which the indemnifying party has not received notice before the end of the specified survival period.^[10] While there are frequent disputes over whether the notice of claim was valid when the claim was for losses not yet incurred or the notice failed to provide sufficient detail of the claim,^[11] it is rare that there is a dispute over whether the notice was timely. Just ensure the indemnifying party receives your notice before the end of the survival period. Right?

In a recent Delaware Superior Court decision, Mosaic Capital Partners v. Local Bounti Operating Co.,^[12] Judge Paul R. Wallace had to consider whether a notice received by the indemnifying party after “normal business hours” on the last day of the specified survival period was timely and preserved the indemnification claim. The survival provision was set forth in Article VIII of the Purchase Agreement. Section 8.01(a) provided that:

Except as set forth below in this Section 8.01, the representations and warranties of the Sellers, the Target, Parent and Purchaser contained in this Agreement or in any certificates or documents delivered hereunder shall survive for a period of time ending at 11:59 p.m. Eastern Time, on that date which is twelve (12) months after the Closing Date.^[13]

Section 8.05(a) of the Purchase Agreement further provided that:

No Seller Indemnifying Party shall be liable for any claim for indemnification under this Article VIII unless written notice of a claim for indemnification is delivered by the Purchaser Indemnified Party seeking indemnification to the Seller Indemnifying Party from whom indemnification is sought prior to the expiration of any applicable survival period set forth in Section 8.01 (in which event the claim shall survive until finally and fully resolved).^[14]

The buyer sent a claim notice to the seller by email “at 10:04 p.m. EST” on April 4, 2023 (the twelve-month anniversary of the Closing Date). But the seller claimed that the notice was untimely (having been received by the seller on April 5, not April 4). Why? Well, buried in the boilerplate at the end of the Purchase Agreement was a notice provision, Section 11.03. That Section read as follows:

Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 11.03).^[15]

Because the survival period did not end until 11:59 p.m. EST on April 4, 2023, the buyer argued that applying the “normal business hours” requirement (particularly if that meant 9 a.m. to 5 p.m. as it has been historically understood) would effectively mean that the survival period was shortened by almost seven hours.

Because this was a Motion for Judgment on the Pleadings by the seller, the seller was required to demonstrate that its interpretation of the Purchase Agreement was “the only reasonable one because the agreement is unambiguous.”^[16] Judge Wallace, however, determined that the Purchase Agreement (with the potential conflict between the survival clause and the boilerplate notice provision) was ambiguous. While “[s]pecific language in a contract controls over general language, and where specific and general provisions conflict, the specific provision ordinarily qualifies the meaning of the general one,”^[17] Judge Wallace did not believe that he could determine whether Section 8.01 (a) or Section 11.03 was the specific provision governing the required notice of indemnification before the end of the survival period. After all, while the survival clause was explicit in tying the end of the survival period to 11:59 PM EST on April 4, 2023, unless written notice of an indemnification claim was received by the sellers prior to such time, the survival clause did not specify how any such notice was to be given; only the notice clause provided that specificity.

But there was another reason that Judge Wallace was hesitant to rule on the case without further evidence: he was not certain that giving timely notice in the manner prescribed by Section 11.03 was even a condition to the continued survival of the indemnity provision. Why? Because he viewed Section 11.03 as simply a “procedural” notice requirement and “the Court shouldn’t read any agreement in a way that permits a procedural provision to limit a substantive right, unless such . . . intention to do so is explicitly stated in the agreement.”^[18] In other words, failure to give notice before 11:59 PM EST on April 4, 2023, may well have limited a substantive right because Section 8.05(a) said as much, but failure to give that notice until after the end of “normal business hours” may not have done so because Section 11.03 did “not clearly state it applies to indemnity notices.”^[19]

Judge Wallace found potential support for viewing the requirements of Section 11.03 as simply “procedural” and not limiting the substantive rights in Article VIII by looking at yet another boilerplate provision—Section 11.10.^[20] Section 11.10 of the Purchase Agreement, titled “Amendment and Modification; Waiver,” contained the following language: “No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof.”^[21] So, did it matter whether the notice was timely, at least pursuant to the required notice procedures in Section 11.03? Hmm.

Finally, to the extent compliance with notice during “normal business hours” pursuant to Section 11.03 was operative as a condition to the seller’s indemnification obligations under Article VIII, Judge Wallace also noted that he needed evidence of what exactly were “normal business hours” of the seller/recipient of the notice, Mosaic Capital Partners, a lower-middle-market private equity firm. Are their “normal business hours” really 9 a.m. to 5 p.m.? What are most private equity firms’ “normal business hours?”

Interestingly, although not cited by Judge Wallace in Mosaic, a similar issue arose in Fesnak and Associates, LLP v. U.S. Bank National Ass’n.^[22] There, the U.S. District Court for the District of Delaware reacted the same way Judge Wallace did to a seeming conflict between a survival clause ending at 11:59 PM EST on June 9, 2010, a notice provision requiring notice by fax to be given during “normal business hours,” and a fax indemnity notice that was sent at 10:21 PM EST on June 9, 2010—the court decided it needed more evidence before ruling.

Is a reference to “normal business hours” something that should even be in a notice provision today, particularly given that the most likely notice it would apply to post-closing was the indemnification claim notice? Is a reference to “normal business hours” old-school and no longer workable? Obviously, this simple strike-through in the boilerplate notice provision would have presumably eliminated this dispute: “if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient.” And, by the way, did we ever think the standard no waiver clause (particularly the “no delay” language) would apply to a potential failure to provide timely notice of indemnification? Should we consider modifying or eliminating that language in M&A deals? Read on.

The Delight Side of Contractual Boilerplate

I have told a version of this story before,^[23] but it’s the best illustration I know of the “outcome-determinative” delights that can be found in contractual boilerplate. There was once a public company that, as part of the audit of its financial statements, was informed that its accounting firm might need to issue a “going concern” qualification based upon the accounting firm’s review of the company’s public debt indenture. Apparently, the company had engaged in a transaction during the prior year that appeared to have violated one of the indenture’s negative covenants, and the accounting firm was seeking confirmation from the company’s counsel that the indenture had not been violated. The company’s counsel, however, was unable to provide that assurance.

Given the seriousness of the issue and the fact that a private equity firm controlled the company, we were called for a second opinion. Reviewing the negative covenant, it was clear that the transaction would likely have violated the otherwise broad prohibition without an applicable exception. However, an exception permitted transactions otherwise prohibited by the negative covenant to the extent permitted by the “Credit Agreement.” “Credit Agreement” was defined elsewhere in the indenture to be that certain Credit Agreement, dated as of a specific date, and entered into with a named bank, “as the same may be amended, modified, or replaced from time to time.”

While nothing in the original credit agreement would have permitted the transaction in question, it turned out that the original credit agreement had been amended to allow the transaction during the prior year. Someone at the company had been alerted to the need to amend the original credit agreement but hadn’t necessarily considered the impact on the indenture. It appeared clear, therefore, that the transaction was permitted under the indenture because it allowed any transaction permitted by the “Credit Agreement,” which was defined to include any amendments thereto. Somehow, the current company counsel overlooked this fact. However, we had an advantage because, in the early days of private equity, we insisted on these “as amended” definitions to provide flexibility for our private equity clients and their portfolio companies in agreements that were more difficult to amend (like an indenture). So we were alert to look for them.

While the “amended, modified or replaced from time to time” language may not have technically been boilerplate in this particular indenture (and instead was part of an operative definition), there are, in fact, many contracts, including purchase and sale agreements, that routinely include boilerplate provisions with a similar effect. Indeed, the Purchase Agreement at issue in Mosaic contained the following provision in Section 11.04:

Unless the context otherwise requires, references herein: . . . (y) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof.^[24]

In a different dispute, this might be a delightful find or one contributing to peril. And again, it’s a fairly standard provision.^[25] Is the flexibility it provides going to help or hurt? You have to decide whether you want to include it or not. One thing is for sure: you cannot ignore it simply because it’s considered “boilerplate.”

Could this “boilerplate provision” allow the seller to argue that a disclosed contract, which had been amended before entering into the Purchase and Sale Agreement but which amendment had been overlooked in compiling the disclosure schedules, had been disclosed in its “as amended” state? Presumably, any ability to rely on this clause to allow the seller to enter into amendments post-signing and pre-closing and have them deemed disclosed as of signing would be precluded by the pre-closing covenants. But, from a buyer’s perspective, what potential benefit could be derived from having this as part of the boilerplate? And what legitimate argument does the seller have to include this clause? While the clause may be helpful in other contexts, is it something better left out or at least modified to be clear it would not allow a nondisclosed amendment to have been deemed disclosed?

Concluding Thoughts on the Perils and Delights of Contractual Boilerplate

There are likely more perils than delights to be found in contractual boilerplate. And that would be more proof that transactional lawyering is not for the “faint of heart,”^[26] or, as Ken Adams prefers, “not for the faint-hearted.”^[27] So we have no choice but “to think clearly and act bravely.”^[28]

The truth is we need to regularly review our contractual boilerplate to ensure nothing lurking there could undermine other provisions of the agreement. And in reviewing that boilerplate, we must ensure that we are knowledgeable about some of the nuances associated with boilerplate (particularly the “encrusted” variety). As suggested in a recent law review article:

Lawyers need to [know] what boilerplate clauses were originally intended to accomplish and how they have been interpreted; they need to know what words make a difference in forum selection and governing law provisions to actually accomplish their objectives; they need to understand what a standard no-third-party beneficiary cause does and what exceptions should be built in to avoid causing more harm than good; they need to appreciate the nuances of liquidated damages provisions; they need to understand why and how no reliance clauses work to eliminate potential extra-contractual fraud claims in many states; they need to understand how courts have interpreted the supposed hierarchy of “efforts” clauses; they need to be able to confidently review an anti-assignment or change of control clause and advise on whether the contemplated deal needs consent based upon applicable caselaw; they need to understand the courts’ interpretation of standard material adverse change clauses; and yes, they need to know what each type of damage or loss included in a typical excluded loss provision might actually mean.^[29]

Because you may not have learned this stuff in law school,^[30] you need to ensure your in-house CLE programs are covering it; and, if you are not a member of the Jurisprudence Subcommittee of the ABA Business Law Section’s M&A Committee, where we regularly do that sort of thing based on a review of recent caselaw, you should be.

1. See Rissman v. Rissman, 213 F.3d 381, 385 (7th Cir. 2000) (“[T]he fact that language has been used before does not make it less binding when used again. Phrases become boilerplate when many parties find that the language serves their ends. That’s a reason to enforce the promises, not to disregard them.”); see also Silva v. Encyclopedia Britannica Inc., 239 F.3d 385, 389 (1st Cir. 2001) (“[T]hat the forum-selection clause is a ‘boilerplate’ provision does not ipso facto render it invalid. ‘It is not the law that one must bargain for each and every written term of a contract.’” (citations omitted)). ↑

2. Tina L. Stark, Negotiating and Drafting Contract Boilerplate §1.01, at 5 (ALM Publ’g 2003). ↑

3. Id. §1.02, at 6. ↑

4. Howard Darmstadter, Does the Pony Express Still Stop Here?, Bus. L. Today, Sept./Oct. 1998, at 16–17. ↑

5. See John F. Coyle, The Canons of Construction for Choice-of-Law Clauses, 92 Wash. L. Rev. 631 (2017); see also Glenn D. West, There Is More to a Choice-of-Law Clause Than Filling in the Name of the Selected State, Weil’s Glob. Priv. Equity Watch (June 30, 2021). ↑

6. See John F. Coyle, Interpreting Forum Selection Clauses, 104 Iowa L. Rev. 1791 (2019); see also Glenn D. West, Special Order Your Forum Selection Clause, Weil’s Glob. Priv. Equity Watch (Oct. 28, 2019). ↑

7. See Glenn D. West, No-Third-Party-Beneficiary Clauses and the “Ever-Evolving Contractual Arms Race,” Weil’s Glob. Priv. Equity Watch (Sept. 9, 2020). ↑

8. See Glenn D. West, Stuff You Might Need to Know: What Assignments Do Broad Anti-Assignment Clauses Not Prohibit?, Weil’s Glob. Priv. Equity Watch (Aug. 9, 2021). ↑

9. A word borrowed from Ken Adams. See Ken Adams, In Contracts, It’s Best to Practice Good Semantics Hygiene, Adams on Cont. Drafting (Mar. 19, 2025). ↑

10. See Glenn D. West, Making Sure Your Survival Clause Works as Intended, Bus. L. Today (Mar. 7, 2025). ↑

11. See Glenn D. West, Indemnification 101: Without a Loss There Is No Claim, Weil Priv. Equity Sponsor Sync, Jan. 2024, at 16; Glenn D. West, How a 12 Month Survival Period Can Become A Lot Longer (or Not)—the Required Notice of Claim, Weil’s Glob. Priv. Equity Watch (Mar. 22, 2018); Glenn D. West, Making Sure Your Survival Periods Actually Work as Intended, Weil’s Glob. Priv. Equity Watch (Feb. 22, 2016). ↑

12. No. N23C-08-292 PRW CCLD, 2025 WL 898339 (Del. Super. Ct. Mar. 24, 2025). ↑

13. Id. at *2; Purchase and Sale Agreement, by and among Hollandia Produce Group, Inc. Employee Stock Ownership Trust, Mosaic Capital Investors I, LP, True West Capital Partners Fund II, L.P. F/K/A Seam Fund II, LP, Mosaic Capital Investors LLC, solely in its capacity as Sellers’ Representative, Hollandia Produce Group, Inc., Local Bounti Operating Company LLC, and Local Bounti Corporation, dated as of March 14, 2022, Section 8.01(a). ↑

14. Purchase and Sale Agreement, supra note 13, at Section 8.05(a). ↑

15. 2025 WL 898339, at *2; Purchase and Sale Agreement, supra note 13, at Section 11.03 (emphasis added). ↑

16. 2025 WL 898339, at *3. ↑

17. Id. at *4 (quoting DCV Holdings, Inc. v. ConAgra, Inc., 889 A.2d 954, 961 (Del. 2005)). ↑

18. Id. ↑

19. Id. ↑

20. Id. ↑

21. Purchase and Sale Agreement, supra note 13, at Section 11.10. ↑

22. 722 F. Supp. 2d 496 (D. Del. 2010). ↑

23. See Glenn D. West, Mining for Gold in Contractual Boilerplate, Weil Priv. Equity Sponsor Sync, Autumn 2024, at 24. ↑

24. Purchase and Sale Agreement, supra note 13, at Section 11.04. ↑

25. See, e.g., 13 Fletcher Corp. Forms § 61:91 (5th ed.) (“(h) any reference to a document or set of documents, and the rights and obligations of the parties under any such documents, means such document or documents as amended from time to time, and any and all modifications, extensions, renewals, substitutions, or replacements thereof”). ↑

26. Glenn D. West, Transactional Lawyering as an Art: When Saying Less Is More Than Enough, Bus. L. Today (Feb. 11, 2025). ↑

27. Ken Adams, What’s Semantic Acuity, and How Can I Get Some?, Adams on Cont. Drafting (Mar. 2, 2025). ↑

28. Darmstadter, supra note 4, at 17. ↑

29. Glenn D. West, Another Consequential Damages Redux: A Response to “Consequential Damages Clauses: Alien Vomit or Intelligent Design?,” 102 Wash. U. L. Rev. 633, 648 (2024). ↑

30. I do teach a course that covers this stuff at SMU Dedman School of Law. See Glenn D. West, Teaching Contract Drafting through Caselaw—A Syllabus and a Collection of My Musings About Contract Drafting Based upon Recent Cases (2023). ↑

In recent years, the Delaware Court of Chancery has increased its focus on the importance of preserving data and delineating the consequences for failing to do so. Indeed, last year we wrote an article about the risks of failing to preserve text messages and other messaging data.

Recently, the Court issued a ruling in In re Facebook Inc. Derivative Litigation^[1] that highlights the importance of preserving personal email. That ruling, along with its practical implications, is discussed below.

I. Summary of the Case

Facts

In March 2018, news broke that Cambridge Analytica, a British data analytics firm, harvested private information of more than 50 million Facebook users without their permission.^[2] Cambridge Analytica reportedly paid Meta Platforms, Inc. (“Meta”), which owns Facebook and other platforms, for information that included users’ identities, personal identifying information, friends, and “likes.”^[3]

Shortly after news broke about the Cambridge Analytica data harvest, Meta issued a legal hold that advised its recipients of their obligation to preserve (among other things):

all hard copy and electronic data and documents (such as files, data tables or logs, notes, memos, spreadsheets, docs stored in Dropbox and Box, Quip, and Google or Zoho Docs), and all correspondence (such as email, instant messages, Skype messages, WhatsApp messages, FB Messages, text messages, FB Group posts, and letters).^[4]

Sheryl Sandberg, then a member of Meta’s senior leadership team, received the legal hold.^[5] At the time, she was the chief operating officer, a position she held until August 2022.^[6] Sandberg was also on Meta’s board of directors (the “Board”), a position she held until May 2024.^[7]

On April 25, 2018, litigation stemming from the Cambridge Analytica data harvest was initiated.^[8] As litigation progressed, Meta reminded its document custodians about the legal hold.^[9] When a new director (Jeffrey Zients) joined the Board in 2018, Meta sent him the legal hold.^[10]

Outside counsel spoke with Sandberg and Zients, both of whom were defendants in the litigation, about document preservation and collection.^[11] They also received “FAQs Regarding Legal Holds,” which emphasized the obligation to preserve “‘any information related to the Matter,’” including information on personal devices and accounts.^[12]

In discovery, plaintiffs asked defendants to disclose information about their preservation and collection of electronically stored information. While interrogatory responses disclosed that Sandberg had a practice prior to the litigation of regularly deleting emails from her Gmail account that were over thirty days old,^[13] Sandberg’s counsel—as characterized by the Court—was not forthcoming with certain information about the preservation of her personal Gmail account and could not provide a specific date by when Sandberg ceased this practice.^[14] As to Zients, counsel disclosed that he had an auto-delete function enabled that deleted email approximately every six months.^[15]

Sandberg’s and Zients’s counsel investigated whether deleted emails could be obtained from other sources.^[16] They reviewed emails from Sandberg’s Gmail account and documents obtained from her in connection with other litigation.^[17] None were responsive.^[18] Counsel was able to identify fifty-seven emails in the litigation record that were sent to or from Sandberg’s Gmail account.^[19] For Zients, counsel reviewed documents from Zients’s other accounts and identified 415 that were sent to or from his personal account.^[20]

Plaintiffs moved for sanctions for spoliation.^[21]

Relevant Rulings

On January 21, 2025, the Court ruled on the sanctions motion, holding that Sandberg and Zients had “an affirmative duty to preserve their personal emails as evidence”— which neither contested.^[22] Both, as noted above, received litigation holds and were advised by their counsel to preserve personal email, but did not.

The Court held that while counsel was able to identify some deleted email, the balance was lost and could “support a spoliation sanction.”^[23]

The Court then considered whether the emails were lost due to a failure to take reasonable preservation steps. In doing so, the Court noted that individuals, like organizations,

must disable auto-delete functions that would otherwise destroy emails or texts. They also must back up data from personal devices before disposing of them. Failing to disable the auto-delete setting or back up messages before deletion demonstrates that a defendant acted unreasonably. Individuals may not claim ignorance. After receiving a litigation hold, an individual must take steps to determine what is necessary to comply. This includes learning what is necessary to prevent destruction or automatic deletion.^[24]

“Under these principles,” ^[25] the Court held that Sandberg and Zients failed to take reasonable steps to preserve their personal emails. The Court inferred Sandberg was “picking and choosing which emails to delete,” and the Court found that there was a lack of “transparency” to plaintiffs’ counsel about Sandberg’s email practices.^[26] Zients used an auto-delete function on his email that deleted data approximately every six months.^[27]

Against this backdrop, the Court held that plaintiffs “made a showing sufficient to demonstrate prejudice” and shifted the burden to Sandberg and Zients to show lack of prejudice.^[28]

Sandberg could not meet her burden “to make a convincing case against a finding of prejudice.”^[29] The Court noted that a review of the documents that counsel was able to recover reflected emails discussing matters relevant to the action, such as the “reputational danger” Cambridge Analytica posed to Meta and Meta’s lagging “trust among [Facebook] regular users.”^[30] As a sanction for spoliation, the Court raised Sandberg’s standard of proof by one level on any issue where she bears the burden of proof, and it awarded expenses incurred by plaintiffs in pursuing the spoliation issue against Sandberg including “for the effort required to pin down Sandberg’s positions and confirm that the ESI was not available from other sources.”^[31]

Conversely, the Court held that there is less reason to think that Zients lost relevant emails, and as a result the Court did not impose sanctions against him.^[32] Zients “was an outside director, not a C-suite officer, so he logically would have been less immersed in Company operations and likely received communications comparable to what other directors received.”^[33] Also, he joined the Board after the Cambridge Analytica data harvest—and did not “participate in those events in real time.”^[34]

II. Practical Application

How can I be certain that potentially relevant personal data is preserved? It is not uncommon for individuals to text or, as in the case of Facebook, use personal email accounts to communicate about business matters. In the context of litigation, any such potentially relevant communications must be preserved. As part of the preservation process, it is important to speak with custodians early on (and then throughout the litigation) about their preservation obligations—including discussing turning off any auto-delete functions and not actively deleting potentially relevant information.

Because a company often has less control over personal data, one option is to collect personal data to ensure that it is available, if ever needed. When considering whether to pursue this option, it is important to evaluate whether any applicable privacy laws or regulations restrict the collection of personal data.

What should I do when someone with potentially relevant personal data leaves while litigation is pending? The life cycle of litigation is often long. Indeed, Facebook began in 2018 and is still being litigated.

During the litigation life cycle, employees, officers, and directors with potentially relevant data may leave. In Facebook, Sandberg stopped being an officer and director years into the litigation.

Part of ensuring potentially relevant documents are adequately preserved can involve considering a company’s relationship with someone after they stop being associated with the company, and whether their data should be collected before they leave. For example, although Sandberg stopped being an officer and director, she remained a defendant and had to abide by discovery obligations as a party to the litigation. For individuals who are not parties to a litigation, it may be harder to access their potentially relevant personal data after they are no longer associated with the company absent an ongoing contractual agreement that would require their cooperation or a subpoena.

Do I have to disclose to opposing counsel that potentially relevant data such as personal email has been deleted? While every case is different, the Court—as evidenced by Facebook—expects transparency in discussions with opposing counsel about preservation matters, especially where there is a concern that data has been lost, destroyed, or deleted.

1. C.A. No. 2018-0307-JTL, 2025 WL 262194 (Del. Ch. Jan. 21, 2025). ↑

2. Id. at *3. ↑

3. Id. ↑

4. Id. ↑

5. Id. ↑

6. Id. ↑

7. Id. ↑

8. Id. ↑

9. Id.; see also id. at *7 (“Zients and Sandberg received frequent reminders about their preservation obligations”). ↑

10. Id. at *3. ↑

11. Id. at *4. ↑

12. Id. at *7. ↑

13. Id. at *4. ↑

14. Id. at *4–5, 9. ↑

15. Id. at *10; see also id. at *4. ↑

16. Id. at *5. ↑

17. Id. ↑

18. Id. ↑

19. Id. ↑

20. Id. ↑

21. Id. ↑

22. Id. at *7. ↑

23. Id. ↑

24. Id. at *8 (internal quotations omitted). ↑

25. Id. at *9. ↑

26. Id. at *9. ↑

27. Id. at *10. ↑

28. Id. ↑

29. Id. ↑

30. Id. at *11. ↑

31. Id. at *12–13. ↑

32. Id. at *11. ↑

33. Id. ↑

34. Id. ↑

This article is related to a Showcase CLE program that took place at the American Bar Association Business Law Section’s 2025 Spring Meeting. All Showcase CLE programs were recorded live and will be available for on-demand credit, free for Business Law Section members.

Since returning to office in January 2025, President Donald Trump has moved quickly to put his stamp on the federal regulatory landscape. For business lawyers, the implications are broad and fast-evolving, touching everything from litigation exposure and securities regulation to political risk, capital markets, and tax planning. This article offers a practical overview of five key practice areas for business lawyers: government affairs, corporate litigation, federal securities regulation, private equity and venture capital, and taxation.

1. Government Affairs: Political Realignment and Industry-Specific Disruption

The 2024 elections delivered unified Republican control of Congress, with the GOP holding a narrow majority in the House (220 R to 213 D) and a more solid advantage in the Senate (53 R to 47 D, including two independents who caucus with Democrats). This shift, combined with Republican momentum in several state legislatures and governorships, has created a political environment highly conducive to sweeping federal policy changes and aggressive administrative action.

The Trump administration’s early moves have included a regulatory freeze, a 10-to-1 deregulation order (requiring federal agencies to eliminate ten existing regulations for every new proposed regulation), and a rollback of diversity, equity, and inclusion (“DEI”) programs across agencies and federal contractors. Select industries—particularly financial services, hospitality, and tech—are feeling the immediate impact. Recent tariff hikes on goods from China, Canada, Mexico, and the EU are further disrupting global supply chains and forcing companies to reevaluate sourcing, pricing, and international contracts.

In addition to the waves from the new executive branch, business lawyers must also navigate the ripple effects of key judicial branch decisions, including the Supreme Court cases of Loper Bright Enterprises v. Raimondo, which curbed Chevron deference, and Food and Drug Administration v. Alliance for Hippocratic Medicine, in which the Court unanimously dismissed the case on standing grounds—leaving the FDA’s regulatory authority intact, but highlighting the ongoing legal vulnerability around agency actions in politically charged areas.

2. Business and Corporate Litigation: Executive Orders and Political Exposure

Corporate litigators must navigate emerging risks arising from recent executive orders that affect law firm operations, modify federal enforcement practices, and alter established compliance frameworks. Notably, the administration has issued a wave of multiple executive directives (with no end in sight) that: (1) eliminate DEI mandates; (2) restructure digital asset regulation; and (3) penalize firms perceived to have political conflicts.

Perkins Coie, Jenner & Block, and WilmerHale are each currently litigating actions that revoked the security clearances of their attorneys and barred federal contract access. These cases will likely provide important judicial guidance on the limits of executive power in determining eligibility for federal contracting and legal access.

Broader risks for corporate clients include increased scrutiny of labor practices, trade policy violations, and supply chain transparency. To mitigate exposure, business lawyers should advise clients on proactive compliance, robust documentation, strengthened internal controls, and dispute resolution planning. Cross-functional coordination between legal, HR, and government affair teams is increasingly essential.

3. Federal Regulation of Securities: A Refocused, Leaner SEC

President Trump’s nomination of Paul Atkins to chair the Securities and Exchange Commission (“SEC”) is expected to pivot the agency toward a more streamlined regulatory approach. Even though (as of this writing) Atkins has yet to be confirmed, the SEC has already begun realigning its agenda by, among other things, dissolving the Climate and ESG (environmental, social, and governance) Task Force, scaling back SEC staff’s enforcement discretion, and prioritizing capital formation initiatives. Furthermore, the departure of more than six hundred members of the Staff, representing more than 10 percent of the SEC’s workforce, will accelerate the need to narrow regulatory focus and reallocate resources.

Securities lawyers can expect (1) less aggressive disclosure mandates (especially for ESG and climate issues); (ii) expanded accommodations for emerging growth companies and non-U.S. issuers; and (iii) renewed scrutiny of shareholder proposals, proxy advisors, and beneficial ownership reporting. Meanwhile, a newly formed Crypto Task Force is working to (finally) develop a more coherent and durable framework for digital assets, with increased engagement from the SEC staff expected in the months ahead.

In sum, the SEC is likely to offer increased engagement and guidance on priority issues, while avoiding expansive new rulemakings that extend beyond its core statutory mandate.

4. Private Equity and Venture Capital: Deregulation Meets Strategic Uncertainty

The Trump administration’s deregulatory stance offers potential benefits across the venture and private equity landscape. Legal and regulatory burdens may ease for emerging companies, corporate venture programs, and financial sponsors alike—particularly in areas like investment adviser compliance, marketing restrictions, and disclosure obligations. The administration’s focus on capital formation, reduced enforcement around ESG-related reporting, and openness to digital asset innovation create a more permissive environment for venture-backed businesses, fintech startups, and transactional activity.

While broader market volatility has spiked following recent tariff escalations and stock market declines, private capital markets remain relatively insulated. Many venture-backed and private equity portfolio companies are not directly exposed to short-term public market swings. However, the ongoing closure of the IPO window—highlighted by high-profile delays such as Klarna and other unicorns—has complicated near-term exit planning. Most market participants view the shutdown as temporary, with expectations of a rebound once macroeconomic uncertainty and policy direction stabilize, potentially within the next several months.

Despite current headwinds, many in the PE/VC community remain optimistic that a shift in antitrust policy will lead to a more permissive M&A climate. Under the prior administration, heightened Federal Trade Commission (“FTC”) scrutiny created obstacles to strategic exits, delaying liquidity events and limiting capital recycling within the ecosystem. A more deal-friendly regulatory regime should help restore exit pathways and improve certainty for acquirers, sellers, and investors alike.

At the same time, political volatility—including abrupt regulatory shifts, heightened scrutiny of ESG strategies, growing Committee on Foreign Investment in the United States (“CFIUS”) exposure, and unpredictable executive actions—has introduced new risks across the ecosystem. These are particularly pronounced in cross-border transactions, co-investment structures, and sectors involving artificial intelligence, semiconductors, and defense-adjacent technologies. Trade nationalism, scrutiny of foreign investors, and enhanced national security reviews continue to elevate uncertainty around foreign capital and global dealmaking. While such an approach may seem counterintuitive under a Republican administration, it reflects a bipartisan realignment around economic nationalism and technological sovereignty. Legal counsel should prepare clients—whether funds, startups, or strategic investors—for enhanced diligence, evolving state and federal oversight, and reputational considerations in an increasingly complex regulatory climate.

5. Taxation: Modest Tools, Big Ambitions

While the 2025 congressional budget resolution provides no reconciliation pathway for major tax cuts, the Trump administration continues to press for extending key Tax Cuts and Jobs Act (“TCJA”) provisions and introducing new exemptions, especially for businesses impacted by tariff-related pressures. Absent new legislation, changes may occur through regulatory reinterpretation, IRS enforcement reprioritization, or executive-led guidance (e.g., on Global Intangible Low-Taxed Income (“GILTI”), Base Erosion and Anti-Abuse Tax (“BEAT”), or passthroughs).

At the same time, IRS staffing reductions and lower audit rates—particularly for high-income individuals—pose compliance risks that practitioners should monitor closely. Loper Bright, already shaping administrative law more broadly, may also expose longstanding tax regulations to legal challenge, contributing to a more uncertain regulatory climate.

Business lawyers should help clients navigate timing decisions and planning strategies around asset sales, intercompany transfers, and restructurings, with special attention to evolving litigation risks and guidance gaps.

Conclusion

The Trump administration’s second term has ushered in a uniquely fast-moving and ideologically driven transformation of the legal landscape. For business lawyers, this moment demands agility, vigilance, and strategic foresight. Whether advising a public company, a startup fund, or a multinational enterprise, attorneys must prepare clients for a regulatory environment where norms are shifting, institutions are evolving, and risk is increasingly political as well as legal.

In 1996, the U.S. Congress passed the Cuban Liberty and Democratic Solidarity Act of 1996, known as the Helms-Burton Act. Title III of the Act allows U.S. companies and U.S. citizens whose property was confiscated by the Cuban government in 1959 or later to sue parties profiting from their confiscated property. By its own terms, Title III did not go into effect immediately. Rather, Congress left the discretion to activate Title III to the president. In May 2019, the president activated Title III for the first time since the Act’s enactment, and several lawsuits were filed against parties trafficking in confiscated property.

On July 30, 2024, the U.S. Court of Appeals for the D.C. Circuit decided one such case brought by Exxon Mobil against several Cuban state corporations. Exxon is now seeking review of the decision by the U.S. Supreme Court.

In 1960, Cuba’s revolutionary government confiscated Cuban assets of a subsidiary of Exxon (then known as Standard Oil). When a few years later the U.S. Congress established a mechanism to submit expropriation claims against Cuba, Exxon filed a claim with the U.S. Foreign Claims Settlement Commission, which determined Exxon suffered a loss of $72 million plus interest at 6 percent. Exxon’s lawsuit contended that the defendants currently traffic in confiscated property by participating in the oil industry and operating service stations using the property.

One of the defendants unsuccessfully moved to dismiss the complaint based on foreign sovereign immunity. The Foreign Sovereign Immunities Act (“FSIA”) generally bars U.S. courts from exercising jurisdiction over foreign sovereign entities such as the defendants in this case. As the appellate opinion described it, “The district court held that the [Helms-Burton Act] does not itself overcome a foreign sovereign’s general immunity from suit under the FSIA, and that jurisdiction in [the] case thus depend[ed] on the applicability of an FSIA exception.” The district court determined the FSIA’s commercial-activity exception applied to the action, and thus foreign sovereign immunity did not apply.

After the defendants appealed the denial of the motion to dismiss and Exxon cross-appealed the district court’s holdings, a panel of the D.C. Circuit Court of Appeals determined 2 to 1 that “plaintiffs bringing Title III actions against foreign states must satisfy one of the FSIA’s exceptions,” and that the FSIA’s expropriation exception did not apply in the circumstances but that the district court needed to further analyze whether the FSIA’s commercial-activity exception did. The senior judge dissented on all points from his two younger colleagues.

The Court of Appeals wrote that given the FSIA’s terms, the Supreme Court has “repeatedly explained” the FSIA provides the “sole basis” for obtaining jurisdiction over a foreign state in the courts of the United States. It therefore rejected Exxon’s argument that Title III of Helms-Burton independently confers jurisdiction over its action against Cuba, in agreement with the district court.

Exxon also argued its lawsuit satisfied two FSIA exceptions: the expropriation exception and the commercial-activity exception. The Court agreed with the district court the expropriation exception was inapplicable. With respect to the commercial-activity exception, the Court concluded the district court needed to undertake additional analysis before determining jurisdiction exists under the exception.

The district court had concluded that defendant CIMEX “causes a direct effect in the United States,” as required for the commercial-activity exception, “in two ways: first, by operating a remittances business that enables transfers of money from the United States to recipients in Cuba; and second, by selling goods imported from the United States at its convenience stores.”

The Court of Appeals agreed with Exxon and the district court that “the types of effects Exxon allege[d]—outflows of money from the United States and purchases of U.S. goods—can constitute direct effects in the United States.” Nevertheless, the Court vacated and remanded for the district court to further assess whether the defendant “causes” those effects and whether the effects are sufficiently “direct,” finding there were questions necessary to that determination that had not been examined by the district court. For example, regarding the remittances business, it stated, “[T]he the pertinent inquiry is whether CIMEX’s remittances operations at the four to ten stations located on former [Exxon subsidiary] property cause a direct effect in the United States—not whether CIMEX’s entire remittances business does so.”

The dissent stated, “It is true the Supreme Court and [the D.C. Circuit court] have repeatedly referred to the exclusive nature of the FSIA. But in each case [cited by the majority], Title III [of the Helms-Burton Act] did not apply for at least one of three reasons.” Either Helms-Burton did not exist at the time, it was not in effect because the president had suspended its cause of action, or “the plaintiffs’ claims did not arise out of or relate to Cuba’s confiscations.” Not one of the cases cited by the majority mentioned Title III of Helms-Burton. The dissent argued that those decisions thus could not control the issue in this case and that Title III “considered alone, deprives the Cuban defendants of immunity from suit.”

As to the expropriation exception, the majority concluded it did not apply “because, under international law, the property Cuba confiscated was owned not by Exxon but by its subsidiary.” But in Helms-Burton actions, the dissent argued, “‘the court shall accept’ claims certified by the Foreign Claims Settlement Commission ‘as conclusive proof’ of violated property rights.”

This case is at the intersection of Helms-Burton and sovereign immunity, which always presents many problems. Both of the amicus briefs filed in support of Exxon’s petition for a writ of certiorari so far have highlighted the potential for the D.C. Circuit’s decision to make it more difficult for businesses to access the remedy of Title III of the Helms-Burton Act. In the present case as well as future ones that are sure to come up in this area, such complications should be handled with great simplicity.

The Delaware Chancery Court has issued a notable opinion that confirms Delaware’s position as a pro-sandbagging jurisdiction and clarifies when damages may be computed using a transaction multiple. These are important points for parties to take into account when negotiating and drafting acquisition agreements.

In re Dura Medic Holdings, Inc. Consolidated Litigation^[1] involved a private equity firm’s acquisition of a medical equipment supplier through a reverse triangular merger. As explained in more detail below, the buyer sought indemnification from the sellers for breaches of certain representations and warranties in the merger agreement.

Sandbagging

Background

The sellers represented and warranted that the target company had been in compliance with applicable healthcare laws and, except as otherwise disclosed, had not received written notice of alleged noncompliance from any government authority in the three years prior to closing. The disclosure schedules described one such notice, but soon after closing, the buyer discovered others, one of which resulted in further government review and significant expense to the buyer. The buyer sued the sellers for breach of the representation. In response, the sellers contended that the buyer’s claim failed because the sellers had informed the buyer about the relevant notices in a conference call during pre-closing due diligence.

Sandbagging Jurisprudence in Delaware

In M&A transactions, the term “sandbagging” refers to circumstances in which a buyer asserts a claim after the closing based on a breach of a representation or warranty despite having had reason to suspect it was inaccurate as of the closing. The term has a negative connotation,^[2] suggesting that the buyer is seeking to entrap the seller by concealing what the buyer knows and feigning reliance on the representation.

Delaware courts will enforce provisions in M&A agreements that expressly allow sandbagging (“pro-sandbagging” provisions) or expressly prohibit it (“anti-sandbagging” provisions, which effectively require the buyer to prove that it did not have knowledge of the inaccuracy of a representation or warranty in order to bring a claim). In cases where the acquisition agreement is silent, Delaware’s default position was widely thought to be pro-sandbagging, based in part on Chancery Court holdings by then–Vice Chancellor Leo E. Strine, Jr. However, the Delaware Supreme Court’s 2018 opinion in Eagle Force Holdings, LLC v. Campbell included dicta that muddied the waters. In a footnote, the majority opinion seemed to support a pro-sandbagging position (citing a New York line of cases)^[3] while a concurring opinion by then–Chief Justice Strine cited to a 1913 opinion for the proposition that “[v]enerable Delaware law casts doubt” on a buyer’s ability to engage in sandbagging.^[4]

Since Eagle Force, Delaware courts have consistently adopted a pro-sandbagging default position. Two post-trial Chancery Court opinions held that a buyer could terminate an acquisition agreement when the seller’s representations were incorrect even though the buyer was aware of the inaccuracy at an earlier stage of the transaction.^[5] In another post-trial opinion, the Chancery Court held that sandbagging was not implicated because the buyer lacked actual knowledge that the seller’s representations were false; however, then–Vice Chancellor Joseph R. Slights III wrote: “In my view, Delaware is, or should be, a pro-sandbagging jurisdiction.”^[6] Despite this general pro-sandbagging trend, none of these opinions squarely addressed the question of whether a buyer’s pre-closing knowledge of the inaccuracy of a seller’s representation or warranty would prevent the buyer from bringing a post-closing contractual indemnification claim for breach of that representation or warranty. In re Dura Medic addresses this issue.

The Court’s Holdings

In his opinion, Vice Chancellor J. Travis Laster noted that representations and warranties in an acquisition agreement serve to allocate risk between the parties and, unlike fraud claims, do not require a buyer to prove that it justifiably relied on the representations. He reiterated his pro-sandbagging holding in Akorn, Inc. v. Fresenius Kabi AG, which in turn quoted extensively from a pre–Eagle Force Vice Chancellor Strine opinion:

A breach of contract claim is not dependent on a showing of justifiable reliance. . . . [R]epresentations like the ones made in the agreement serve an important risk allocation function. By obtaining the representations it did, the buyer placed the risk [of inaccuracies] on the seller. Its need then, as a practical business matter, to independently verify those things was lessened because it had the assurance of legal recourse against the seller in the event the representations turned out to be false. . . . Having contractually promised the buyer that it could rely on certain representations, the seller is in no position to contend that the buyer was unreasonable in relying on the seller’s own binding words.^[7]

Vice Chancellor Laster emphasized that, by making a representation and warranty, a seller agrees to assume the risk that the facts and circumstances as represented are or may become incorrect, regardless of the foreknowledge of either the buyer or the seller. This approach not only holds the parties to the plain terms of their acquisition agreement, but it serves to reduce due diligence costs, especially when a buyer is confronted with circumstances that may be subject to change or otherwise difficult to determine at the time of contracting.

Vice Chancellor Laster made the additional point that, for breach of contract claims (as opposed to fraud claims), a standard integration clause prevents information outside of the four corners of the agreement from operating to modify the agreement.^[8] In the case of In re Dura Medic, this meant that, even if the sellers had disclosed other governmental notices to the buyer during the pre-closing due diligence process (the court ultimately found that they had not), such disclosures would only modify the representation if they appeared in the transaction documents.

Key Points for Buyers

As the latest installment in Delaware’s pro-sandbagging jurisprudence, In re Dura Medic should give buyers greater assurance that, unless sellers include an express anti-sandbagging provision in an acquisition agreement, their representations and warranties will be interpreted as they are written to shift risk to the sellers. While buyers can further strengthen their position through an express pro-sandbagging provision (at least perhaps until the Delaware Supreme Court speaks to the issue), In re Dura Medic holds that a standard integration clause will function essentially as a pro-sandbagging provision. As interpreted by Vice Chancellor Laster, such a clause will prevent sellers from claiming that information provided to buyers outside of the transaction documents (whether through due diligence, site visits, employee interviews, emails, or otherwise) operates to modify the sellers’ representations.

Key Points for Sellers

If sellers want anti-sandbagging protection, they should include an express anti-sandbagging provision in the acquisition agreement and, in a transaction that contemplates a bifurcated sign and close, a mechanism to update the disclosure schedules. In the absence of these protections, information provided to a buyer during pre-closing due diligence that does not appear in the transaction documents likely will not modify the sellers’ representations and warranties. Accordingly, sellers should take care to ensure that their representations and warranties are accurate and appropriately qualified and that disclosure schedules are complete.

Use of a Transaction Multiple to Calculate Damages

Background

In the merger at issue in In re Dura Medic, the purchase price for the target company was calculated using its EBITDA for the twelve months ending April 30, 2018, multiplied by 6.7797. The merger agreement provided that the sellers would indemnify the buyer for “Losses” resulting from inaccurate representations, with “Losses” defined as “any and all damages,” including “damages based on a multiple of earnings, revenue or other metric.”^[9] Despite expressly allowing for damages to be calculated using a transaction multiple, the agreement was silent as to when a multiple should or should not be used.

The sellers represented and warranted in the agreement that no significant customer had notified the target company of an intent to terminate or reduce its business. This representation proved to be false with respect to two customers. Vice Chancellor Laster calculated damages based on the loss of earnings that would have been received from those customers during the same twelve-month period used to calculate the purchase price. At issue was whether the Losses over this twelve-month period should be multiplied by 6.7797 to mirror the purchase price calculation. The sellers argued that no multiple should apply because the target company was not permanently impaired by the loss of the two customers and because the buyer had failed to mitigate the losses.

The Court’s Holdings

Vice Chancellor Laster applied the 6.7797 multiple to calculate damages. He held that when an acquisition agreement is silent as to when a multiple should be applied, the court must look to the common law, which allows a party to “recover reasonable expectation damages based on a multiple where the price was established with a market approach using a multiple.”^[10] He cited evidence—namely, the buyer’s pre-closing investment committee memorandum and expert testimony—that proved that the buyer had derived the purchase price using a 6.7797 multiple of EBITDA during the applicable twelve-month period. He also rejected an argument by the sellers that losses must permanently affect a business in order for a transaction multiple to apply to the calculation of damages.^[11] Instead, he found that “[w]hether a misrepresentation diminishes the value of the business sufficiently to warrant applying a multiple turns on the extent to which the misrepresentation affects future earning periods.”^[12] Using that standard, he found that the undisclosed customer losses resulted in recurring declines in the target company’s revenue, which resulted in the buyer paying an inflated purchase price and caused damages that the buyer could not mitigate due to the sellers’ breach of its significant customer representation.

Key Points

Many acquisition agreements are silent as to whether and when a transaction multiple will be applied to calculate damages. In re Dura Medic stands for the proposition that, when the purchase price is calculated using a transaction multiple and the suffered loss would have impacted that price, the court may interpret such silence by looking to the common law, which allows the buyer to seek multiple-based damages. This holding may encourage some buyers to leave the acquisition agreement silent on multiple-based damages, but sellers should be aware of the risk this presents and consider drafting the agreement to expressly exclude multiple-based damages or otherwise limit the circumstances under which such damages may apply.

Buyers that wish to ensure that a transaction multiple is used to calculate damages for breaches of the sellers’ representations and warranties should expressly state in the acquisition agreement that multiple-based damages may be recovered. Buyers should also be prepared to support their position with evidence (e.g., pre-closing deal models, investment committee memoranda, or fact or expert witness testimony) that demonstrates that the purchase price was calculated using a transaction multiple and that a lower purchase price would have been paid (or that the buyer would not have closed on the transaction) if the seller made accurate representations and disclosures in the transaction documents.

The authors would like to thank Andrew J. Spadafora for his contributions to this article.

1. ___ A.3d ___, Cons. C.A. No. 2019-0474-JTL (Del. Ch. Feb. 20, 2025) (Laster, V.C.). ↑

2. The term “sandbagging” has a criminal derivation: “In the 19th century, ruffians roamed the streets armed with cotton socks. These ostensibly harmless socks were filled with sand and used as weapons to rob innocent, unsuspecting victims. Sandbaggers, as they came to be known, were reviled for their deceitful treachery: representing themselves as harmless, until they have you where they want you. Then, revealing their true intentions, they spring their trap on the unwitting.” Arwood v. AW Site Servs., LLC, C.A. No. 2019-0904-JRS, slip op. at 71–72 (Del. Ch. Mar. 9, 2022) (Slights, V.C.) (quotations and citations omitted). ↑

3. Eagle Force Holdings, LLC v. Campbell, 187 A.3d 1209, 1236 n.185 (Del. 2018) (Valihura, J., majority opinion). ↑

4. Id. at 1247 (Strine, C.J., concurring in part and dissenting in part). ↑

5. Restanca, LLC v. House of Lithium, Ltd., C.A. No. 2022-0690-PAF (Del. Ch. June 30, 2023) (Fioravanti, V.C.), aff’d, 328 A.3d 328 (Del. 2024); Akorn, Inc. v. Fresenius Kabi AG, C.A. No. 2018-0300-JTL (Del Ch. Oct. 1, 2018) (Laster, V.C.), aff’d 198 A.3d 724 (Del. 2018). ↑

6. Arwood, slip op. at 6. ↑

7. In re Dura Medic Holdings, Inc. Consol. Litig., Cons. C.A. No. 2019-0474-JTL, slip op. at 32 (Del. Ch. Feb. 20, 2025) (Laster, V.C.) (quoting then–Vice Chancellor Strine’s holding in Cobalt Operating, LLC v. James Crystal Enters., LLC, C.A. 714-VCS (Del. Ch. July 20, 2007); textual revisions in the original not shown). ↑

8. An integration clause is a provision by which the parties agree that the transaction documents constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter. ↑

9. In re Dura Medic, slip op. at 17 (emphasis added). ↑

10. Id. at 47 (quotations and citations omitted). ↑

11. To support this argument, the sellers cited Zayo Group, LLC v. Latisys Holdings, LLC, C.A. No. 12874-VCS (Del. Ch. Nov. 26, 2018). However, Vice Chancellor Laster found Zayo Group to be factually distinguishable and held that it did not create a test for future cases requiring a permanent loss or diminution in business value for a transaction multiple to be applied. See In re Dura Medic, slip op. at 48–49. ↑

12. Id. at 49. ↑

The typical chapter 11 sale process is well-developed: A debtor markets substantially all of its assets and sells its business, ideally as a going concern, in accordance with a court-approved marketing and sale process.

While this structure is well-known, bankruptcy also offers mechanisms for the sale of discrete or unique assets—such as litigation, leftover assets at properties where leases have been or will be rejected, remnant assets, and many others. This flexibility provides unique opportunities to create value or acquire assets.

Chapter 11 Sale Process, Generally

A debtor or a trustee can “use, sell, or lease” property outside of the ordinary course of business, subject to bankruptcy court approval.^[1] While there are nuances in each case, a chapter 11 sale process generally falls into five stages.

1. Prepetition marketing and selection of a stalking horse. Prior to filing for bankruptcy, a chapter 11 debtor markets the assets to potential strategic and financial buyers. The goal is to identify a stalking horse bidder that would provide the baseline bid against which all other interested parties would compete. In exchange, the stalking horse bidder receives certain bid protections, like a break-up fee of 1–3 percent of the purchase price and reasonable expense reimbursement.
2. Commencement of chapter 11 case and approval of bidding procedures. Next, the debtor files its chapter 11 bankruptcy case and, shortly thereafter, seeks approval of bidding procedures that establish the process for selling its business.
3. Additional marketing, auction, and selection of successful bidder. After the bankruptcy court approves the bidding procedures, the debtor continues marketing the assets. The duration of the postpetition marketing period depends upon the extent of the prepetition marketing effort. The postpetition outreach includes those who were contacted prior to the bankruptcy filing. If there is sufficient interest, the debtor holds an auction, and the “highest or otherwise best” offer is selected as the successful bid, with the second-best offer often selected as the binding back-up bid.
4. Approval of the successful bid and the back-up bid by the bankruptcy court. Following the auction, the sale to the successful bidder and the back-up bidder is presented to and approved by the bankruptcy court.
5. Closing. Upon satisfaction of all conditions precedent, the sale closes.

One of the primary benefits of a chapter 11 sale process is the ability of the buyer to “cherry pick” specific assets (and liabilities) it wishes to acquire. The bankruptcy court authorizes the sale “free and clear” of liens, claims, and encumbrances that attach to the proceeds of the sale.^[2] The ability to make a “free and clear” sale can be reason enough to justify a chapter 11 filing.

Sales of Discrete Assets

Bankruptcy also offers additional, flexible sale structures that allow for liquidation and maximizing the value of individual, discrete, or intangible assets.

• Going out of business sales. Debtors, particularly those in retail, often file with the goal of right-sizing their lease portfolio. What to do with the inventory and other assets located at stores that will be closed? Going out of business sales allow the debtor, through a liquidation agent, to sell remaining inventory and fixtures at a discount. A debtor can generally conduct these sales notwithstanding applicable state law or lease provisions to the contrary. This process allows debtors to recover some value, instead of abandoning residual assets and deriving no value from them.
• Sales of wholly owned nondebtor entities. Rather than an “asset” sale, a debtor can sell the equity of a wholly owned subsidiary even if the subsidiary is not itself a debtor in bankruptcy. Since these are structured as equity sales, there are some limitations: The subsidiary is sold wholesale, and a buyer does not acquire the assets of the subsidiary free and clear of liens, claims, and encumbrances. Nevertheless, a sale of nondebtor subsidiary equity interests allows a debtor to effectively sell an entire, sometimes profitable, business unit through bankruptcy without directly involving that subsidiary in the chapter 11 process.
• Sales of litigation. Discrete litigation can be sold through chapter 11, even if it would not generally be assignable under state law. The sale can be structured as a contingency fee structure or a true sale, with complete control and risk passing to the purchaser. In some instances, a sale of litigation can occur through an auction process.
• Remnant asset sales. Remnant assets include intangible assets and payment rights not tied to the debtor’s core business. The sale of remnant assets allows a debtor to generate some value for assets that may be contingent, unknown, or otherwise abandoned.
• Intellectual property sales. A debtor can sell its intellectual property, such as brands, software, trademarks, patent portfolios, and digital assets, among others. There are some limitations on the assignability of intellectual property over a licensor’s objection.

Conclusion

Going concern sales in chapter 11 are common, but they are not the only means of monetizing a debtor’s diverse assets. There are creative solutions available for the sale and maximization of value of even unique asset portfolios and nontraditional assets. This flexibility offers opportunities for distressed companies to generate value as well as for interested parties to acquire discrete assets.

1. 11 U.S.C. § 363(b). ↑

2. 11 U.S.C. § 363(f). ↑

Liability management transactions (“LMTs”), at their core, are maneuvers whereby a favored (or “winning”) group of lenders to a given borrower extract value from an unfavored (or “losing”) group of lenders to the same borrower. LMTs have recently gained significant momentum and—from the perspective of unfavored lenders—notoriety.

Although structures continue to evolve, LMTs generally fall into three primary buckets.

• Drop-Down Transactions: Sometimes referred to as “trap door” transactions, drop-downs involve the borrower moving assets outside of the reach of the borrower’s primary lenders. The borrower then uses those same assets to raise new debt from existing or third-party lenders, typically on more favorable terms than previously provided by the primary lenders.
• Uptier Transactions: Substantially all credit agreements are rooted in the understanding that lenders in a given tranche of debt receive pro rata treatment. Uptier transactions upend this notion, whereby a subset of existing (and similarly situated) lenders to a given borrower move their loans into a new tranche featuring more senior payment and lien priority terms (sometimes alongside a new money component)—leaving the remaining (unfavored) lenders with subordinated payment terms and lien priority.
• Double-Dip Transactions: A more recent market innovation, the double-dip transaction is structured to use available secured debt capacity to provide a single new money loan with two separate claims against the assets of the borrower credit group. The proceeds of the new loan are used to fund an intercompany loan to an affiliate of the same borrower. The lenders’ new loan is then secured by both (i) the borrower’s repayment obligations and assets and (ii) the intercompany loan (and related guarantees and security) issued by the affiliate of the borrower.

The Administrative Agent

In a customary credit agreement, the administrative agent serves as a liaison between the borrower and the syndicate lenders, coordinating communications and facilitating operational efficiencies. In addition to routine matters involving the collection and disbursement of payments and providing access to financial reporting, agents play a pivotal role in assessing the necessary lender approval thresholds for proposed borrower actions. This latter function is of paramount importance in a contested LMT where, for example, a group of unfavored lenders may seek to block an uptier transaction by asserting that unanimous or affected lender consent is required to alter the pro rata treatment of lenders.

In this capacity, the duties of the administrative agent are delineated strictly as mechanical and administrative in nature. Separately, customary credit agreements typically provide that the administrative agent is not a trustee or fiduciary for either the borrower or the syndicate lenders. Unless granted the specific authority to take a unilateral action under the credit agreement or unless a given action requires unanimous or supermajority consent, the administrative agent must act at the direction of the “Required Lenders” (typically, lenders with more than 50 percent of outstanding loans and/or commitments under the credit agreement). In addition, when matters exceed the administrative agent’s explicit authority under the credit agreement (including matters of judgment), it is prudent for the administrative agent to consult with (and, ultimately, take direction from) the Required Lenders.

As LMTs have continued to proliferate and clear the lending market, administrative agents would be well served to take a measured and calibrated approach when evaluating requests from sponsors (and their related portfolio company borrowers) to consider, and sanction, LMTs.

Key Considerations in Drop-Down Transactions

The investment and restricted payments covenants in the credit agreement are central to drop-down transactions. A borrower utilizes negotiated baskets embedded in these covenants to transfer assets from a restricted subsidiary (that is, a subsidiary subject to the constraints of the credit agreement) to an unrestricted subsidiary (that is, one that is not).

While variations of this structure have existed for many years, J.Crew, Envision, and other drop-down transactions that have ensued highlight the types of determinations that administrative agents must undertake when analyzing the borrower’s use of covenant baskets.

As a preliminary matter, the administrative agent should evaluate whether the credit agreement contains protective terms (often referred to as a “J.Crew blocker”) that serve to prevent the borrower’s transfer of material assets in a specified asset category without the consent of the lenders. While intellectual property is commonly designated as the asset class subject to a J.Crew blocker, when negotiating the credit agreement, the administrative agent should confirm which asset classes are genuinely material for that particular borrower. For instance, the crown jewel of a mining company might be its leasehold rights—making those rights the appropriate asset class to designate as “material” for purposes of the J.Crew blocker.

If a J.Crew blocker is not contained in the credit agreement, the administrative agent must then confirm that the subsidiary that will receive the asset has been appropriately designated as an unrestricted subsidiary. Designation of an unrestricted subsidiary is generally construed as an investment (and typically utilizes the investment basket) under a credit agreement. In addition to calculating basket capacity under the investment covenant, when confirming the classification of a subsidiary as unrestricted, the administrative agent must determine if any other requirements that apply—such as pro forma financial covenant compliance, or the absence of any defaults or events of defaults—have been satisfied.

Given that basket capacity is a key feature when assessing the permissibility of a drop-down transaction, in addition to analyzing the investment basket, administrative agents should also consider the permitted indebtedness and asset disposition covenants (and related baskets). Furthermore, they should analyze whether any cumulative credit basket is available (sometimes referred to as “stacking”) and if the unallocated portion of a debt, investment, or restricted payments basket can be reallocated to another basket (sometimes referred to as “reclassifying”). An additional provision to consider is the “transactions with affiliates” covenant and whether it may be breached by the proposed drop-down.

Given that borrowers consistently seek to obtain operational flexibility, while lenders regularly endeavor to impose guardrails to mitigate collateral leakage, basket calculations are routinely subject to intense negotiations. As administrative agents analyze LMTs, there are a number of techniques that can be employed to provide additional lender protections. Administrative agents can, for example, require a borrower to certify its basket calculations (and provide the lenders with related supporting materials). Another useful approach is to require that the borrower provide a generally unqualified factual statement that the proposed transaction is permitted by the terms of the credit agreement. With respect to investments made by the borrower (using the investment basket), the lenders can insist on a borrower officer’s certificate that specifies the valuation mechanics of the proposed investment. For example, the lenders can require that the value of the transferred asset (in excess of a certain threshold) be validated by a third-party appraisal or valuation statement.

In the drop-down context, the operational mechanics of releasing a guarantor or lien on a transferred asset should also be considered. Administrative agents should evaluate whether liens and guarantees are automatically released in a proposed LMT. Careful scrutiny of the administrative agent’s ability to facilitate these releases is warranted. In practice, administrative agents need to consider whether they are required to provide the syndicate lenders with notice of a borrower-requested lien release. As a further step, some administrative agents now require the borrower to certify that the administrative agent is authorized to release its lien on designated collateral under the terms of the credit agreement.

Key Considerations in Uptier Transactions

In an uptier transaction, the administrative agent must first determine the consent threshold for the proposed credit agreement amendment intended to authorize the non–pro rata treatment of lenders. Does taking this step require an affected lender vote or a more permissive Required Lender vote?

In further analyzing whether an uptiering amendment is permissible, regardless of whether some level of syndicate lender approval is required, the administrative agent should evaluate whether the proposed amendment functionally modifies a sacred right (such as the maturity date of the facility—which modification would require an affected lender vote).

With respect to the required intercreditor agreement that will delineate the rights and remedies of the existing “unfavored” lenders vis-a-vis the “favored” lenders, the administrative agent should evaluate whether the credit agreement simply “authorizes” the administrative agent to enter into the intercreditor or “authorizes and instructs” the agent to do so, as this latter formulation is more protective of the administrative agent. An attendant consideration is whether the credit agreement requires unanimous syndicate lender consent to subordinate existing liens. Unlike drop-down transactions, a borrower’s certification with respect to the analytical issues associated with uptier transactions is less prevalent in the market.

In addition to voting rights, the debt repurchase mechanics are another area of focus in uptier transactions. Many credit agreements restrict a borrower (and its related sponsor and affiliates) from repurchasing debt under the credit agreement (subject to carefully negotiated thresholds and exceptions). The market has not reached a consensus standard as to whether a privately negotiated purchase of debt constitutes an open market purchase (which is a common exception to the non–pro rata treatment of lenders under a credit agreement). Agents must also consider if there are other mechanisms to facilitate the non–pro rata treatment of the “favored lenders.”

Key Considerations in Double-Dip Transactions

In the ever-evolving world of LMTs, the double-dip transaction represents a market development that poses a unique set of challenges for administrative agents, made more so by the fact that the structure has not been fully adjudicated in a bankruptcy court. A borrower’s ability to implement a double-dip stems from secured debt capacity under the credit agreement and the interpretation of how pari passu debt capacity can be applied. Since the double-dip primarily relies on pari passu baskets, administrative agents can carve out intercompany loans from those baskets in an attempt to limit their adoption in the market. Another alternative is to restrict a borrower’s ability to incur intercompany loans exclusively to the intercompany debt basket, which requires subordination and other protections. As a practical matter, these nuances are still being refined, and effective LMT blockers for double-dips are not yet pervasive in loan documentation.

Blockers: Not Created Equally

While the efficacy of LMT blockers has been the subject of much commentary, it is critical to note that not all LMT blockers are the same. Debtor-in-possession exceptions can cut a wide swath into intended protections. While what is referred to as a “Chewy blocker” is intended to prevent a subsidiary guarantor from being released from its guarantee obligations, borrowers do attempt to negotiate baskets around these release mechanics. Additionally, in response to borrowers using a drop-down transaction to remove assets from the collateral base and then, instead of raising debt, raising preferred equity and issuing a dividend to the borrower, some lenders have adopted what is referred to as a “Pluralsight blocker,” which restricts or otherwise imposes limitations with respect to any contemplated preferred equity issuance of an obligor. However, this blocker is not prevalent in the current market.

Conclusion

As administrative agents navigate drop-down, uptiering, and double-dip LMTs and their various permutations, considerations with respect to voting rights, basket capacity, and borrower certification will remain key areas of focus. Subtle changes in language, such as an agent “acting on the instruction” of the lenders, can provide incremental protections that further mitigate administrative agent risks. Finally, agents should bear in mind that for any LMT blocker that offers purported protections, there is likely an impending workaround being crafted. As such, facilitating thorough diligence and transparent communications between the borrower and the lenders will be key to balancing the various competing interests in LMTs.

David Ebroon is an Assistant General Counsel at J.P. Morgan Chase, and serves on the Commercial and Investment Banking Legal Team. He is the Head of Legal for each of Mid-Corporate and Capital & Advisory Solutions.

Arleen Nand is a shareholder at Greenberg Traurig, LLP.

The opinions expressed are those of the authors and do not necessarily reflect the views of their employer, its or their clients or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

Antitrust law helps ensure fair competition and innovation. Under the Biden administration, the FTC had expressed an interest in ensuring that health care markets are competitive to improve costs, care, and innovation. The Trump administration has similarly expressed its intent to protect competition in health care markets. While antitrust enforcement has often been applied to monopolistic practices in industries like pharmaceuticals and technology, recently it has increasingly focused on the clinical trial site landscape, where exclusive agreements, site consolidations, and unfair pricing strategies can limit competition and patient access to trials.

This article introduces the fundamentals of antitrust law as applied to clinical trial sites, including key risks for sponsors, contract research organizations (“CROs”), and sites themselves, as well as compliance strategies to mitigate legal exposure.

Understanding Antitrust Law

Antitrust laws are designed to prevent unfair competition that could harm businesses, consumers, or innovation. In the U.S., the three primary federal antitrust statutes include:

1. The Sherman Act (1890), which prohibits monopolization and anticompetitive agreements. In the clinical research sector, this could include the use of exclusive contracting.
2. The Clayton Act (1914), which restricts mergers and acquisitions that may reduce competition or tend to create a monopoly, including excessive consolidation of clinical trial sites by private equity.
3. The Federal Trade Commission (“FTC”) Act (1914), which prohibits unfair business practices that hinder competition—for example, some kinds of clinical trial site access restrictions.

How Antitrust Law Applies to Clinical Trial Sites

Only 3 percent of the nation’s physicians and patients participate in clinical research. However, these sites are often where patients with no further standard of care options turn to for lifesaving therapy. Accordingly, clinical trial sites function as critical access points for research and patient recruitment. Lack of availability of clinical trial sites can hence present a bottleneck to clinical research sponsors and CROs. The lack of availability of such sites can significantly impact trial costs, innovation, and market competition, as well as access for patient care. Antitrust concerns may arise when trial site networks, CROs, or sponsors engage in behavior that limits reasonable access to trials.

1. Exclusive Contracts and Site Lockout

Sponsors and their representatives such as CROs generally avoid signing exclusive contracts with sites. CROs act on the sponsor’s behalf and therefore, like sponsors, have significant negotiation power. They help sponsors recruit clinical trial sites and manage clinical research projects. Accordingly, clinical trial sites are often beholden to CROs and sponsors and therefore have a power differential with them. However, both sponsors and CROs may have preferred arrangements with clinical trial sites and may hence sign them before other sites. While such preferred site arrangements may not be inherently problematic, if such an arrangement escalates to sponsors or CROs signing exclusive contracts with large site networks or hospital systems, it can rachet up the risk profile of the transaction and may be seen as anticompetitive. This could lead to FTC scrutiny.

For example, if a major CRO only allows trials to take place at sites it owns and it prevents or otherwise blocks the use of independent hospitals or research centers, it could trigger a claim of unfair competition. Similarly, steering by CROs to their wholly owned sites could have similar implications.

2. Price-Fixing Among Clinical Trial Sites

Sites routinely complain about the inadequacy of payment terms, and they routinely address the inadequacy of direct payments by requiring an additional indirect payments fee, which can be as high as 70 percent of the direct payments. This is especially true with large academic institutions that participate in publicly and privately funded research.

The Trump administration recently announced a 15 percent cap on indirect costs as applicable to National Institutes of Health (NIH) grants. Though this policy is currently being challenged and is blocked for the time being, it would represent a direct impact on large academic institutions and also worries smaller commercial clinical trial sites, which are concerned that private sponsors may impose similar limits on them. To battle these downward pricing pressures, trial sites and site networks may feel pressure to discuss sharing pricing strategies, or even discuss minimum site fees. Sites must be cautious that this could be interpreted as improper coordination of collusive price-fixing and a violation of the Sherman Act and FTC Act, since it could be seen to artificially maintain, stabilize, or inflate trial costs.

3. Mergers & Acquisitions in Site Networks

There has recently been an uptick in clinical trial site mergers and acquisitions. As clinical trial site consolidation increases, the FTC and Department of Justice may scrutinize mergers to prevent market dominance that reduces competition, especially if it eliminates regional or treatment-area-related competition or raises clinical trial costs. In such cases, regulators could block or reverse the merger.

4. Site Approval Delays as a Competitive Tactic

There has been significant vertical integration in the clinical trial space, with large private equity companies owning CROs, sites, institutional review boards (“IRBs”), and more. Accordingly, it is possible for such a private equity company to favor its own CROs, sites, and IRBs over independent ones. While some CROs may choose to outright favor an individual site, others could simply slow the approval process for independent sites, including site initiation visits, to effectively render them noncompetitive. If a dominant trial network or a CRO with its own clinical trial site slows approvals for independent sites to gain market advantage, it may be considered an anticompetitive tactic.

Best Practices for Compliance

To avoid antitrust violations, clinical trial stakeholders must proactively implement compliance safeguards, such as the following practices.

1. Practice Transparent Site Selection: Develop objective, data-driven site selection criteria and disclose why certain sites are chosen to avoid misunderstandings and exclusionary claims. At a practical level, this must be balanced against the risk of unnecessary liability risk from private malfeasant actors.
2. Avoid Exclusive Agreements: Exclusive arrangements can harm competition unless justified by efficiency, and such contracts must not substantially foreclose access for independent sites.
3. Prohibit Price Coordination: Sites must be able to independently negotiate fees. Standardized pricing agreements can lead to assertions of anticompetitive behavior.
4. Monitor Mergers & Acquisitions: Site acquisitions generally afford greater multiples for larger site networks. Excessive market concentration can significantly impact pricing for a specific disease state or local area. Such an impact may have antitrust risks. To avoid such risks, it is recommended to conduct antitrust impact assessments before acquiring competing sites. It may, in some circumstances, be prudent to offer contractual commitments to maintain market competition.
5. Avoid Self-Preferencing: CROs should ensure reasonable access to trials for independent sites. Sponsors and CROs should audit CRO site selection processes to avoid allegations of unfair competition or market favoritism. While sometimes difficult to achieve, granting equal access to independent sites is often a preferred, but not required, option to consider.

Conclusion

Regulators, including the FTC, Department of Justice, and Food and Drug Administration, are monitoring how trial sites, CROs, and sponsors interact in ways that affect market access, pricing, and competition. As clinical trial operations evolve, the intersection of antitrust law and research site competition is becoming increasingly important. To mitigate legal risks, stakeholders should adopt transparent, fair business practices and proactively assess contracts, mergers, and trial site selection processes for antitrust compliance.

For policyholders, insurance is meant to provide peace of mind—a promise that when disaster strikes, they’ll have financial support to rebuild and recover. But as two recent cases show, the question of what qualifies as covered “direct physical loss or damage” can lead to drastically different outcomes in court.

In two recent California cases, policyholders sought coverage after wildfire smoke and debris affected their properties. One court, in Bottega, LLC v. National Surety Corporation, ruled in favor of coverage.^[1]. The other, in Gharibian v. Wawanesa General Insurance Co., sided with the insurer.^[2] These contrasting decisions highlight issues policyholders may encounter in securing coverage for smoke-related damage and the ongoing debate over what constitutes “direct physical loss or damage,” a key phrase in most property insurance policies.

This article explores these cases, the influence of COVID-19 coverage litigation on the interpretation of “direct physical loss or damage,” and what policyholders can learn to better protect their rights.

The Importance of “Direct Physical Loss or Damage” in Insurance Disputes

At the heart of both cases is a fundamental question: What does it mean for a property to suffer “direct physical loss or damage” under an insurance policy?

Insurance companies often take a narrow view, arguing that physical loss requires structural damage, like a collapsed roof. Policyholders, on the other hand, argue that contamination—such as smoke infiltration or toxic debris—permeates property and cannot simply be dusted off or ventilated, rendering property unusable for its intended use and qualifying as a covered physical loss.

Courts struggled with this question in the wake of the COVID-19 pandemic, which sparked thousands of lawsuits over business closures and contamination claims. Some courts have ruled that lasting, tangible physical alteration of property is required, while others have found that loss of use due to the presence of the virus in air or on surfaces is enough.

This debate played out in Bottega and Gharibian, with strikingly different results.

Bottega, LLC v. National Surety Corporation: A Win for the Policyholder

In Bottega, a Napa Valley restaurant faced significant disruptions after the 2017 North Bay Fires. Although the fires did not burn the restaurant itself, thick smoke, soot, and ash inundated the premises, forcing it to close for one day after the fire and for a week shortly thereafter. When the restaurant did reopen, for the next few months, it was temporarily limited to less than one-third of its seating because of the smell of the smoke, soot, and ash. Throughout this period, employees routinely cleaned the walls and upholstery to remove the smell and ultimately replaced the upholstery. The smell of fire remained for two years. The restaurant sought coverage under its commercial property insurance policy, which covered losses due to “direct physical loss of or damage to property.”

The insurer, National Surety, initially made some payments under the policy’s civil authority provision but later denied broader coverage. The insurer argued that because the restaurant was still physically intact, it had not suffered a “physical loss” as required by the policy.

The U.S. District Court for the Northern District of California rejected National Surety’s narrow interpretation, ruling in favor of Bottega. The key findings were:

• Smoke and soot contamination rendered the property unfit for normal use, meeting the standard for “direct physical loss.”
• The restaurant had to suspend operations, triggering business income coverage under the policy.
• The insurer’s own admissions confirmed that the premises had suffered smoke damage, undermining its argument against coverage.

Unlike many COVID-19 coverage cases that relied on the issuance of stay-at-home orders to conclude that the virus did not cause loss or damage, the Bottega court found that the insured reopened during the state of emergency declared for the fire. It also described, in some depth, the nature and extent of the damage caused by the smoke. This decision aligns with prior rulings recognizing that contamination impairing the usability of a property—whether from smoke, chemicals, or other pollutants—can meet the threshold for physical loss. Courts have previously found that asbestos contamination, toxic fumes, and harmful mold all permeated property and constituted physical damage, even if the structure itself remained intact.

In Bottega, the policyholder’s success was largely due to strong evidence showing that smoke infiltration impacted business operations and required extensive remediation, causing the policyholder’s loss.

Gharibian v. Wawanesa General Insurance Co.: A Win for the Insurer

While Bottega marked a win for policyholders, Gharibian v. Wawanesa shows how courts can take a different approach, often to the detriment of policyholders.

Homeowners in Granada Hills sought coverage after the 2019 Saddle Ridge Fire deposited wildfire debris around their home. Although the flames did not reach their property, their property was covered in soot and ash, and plaintiffs asserted that smoke odors lingered within the home.

Their insurer, Wawanesa, paid $23,000 for professional cleaning services that plaintiffs never used, but later denied additional coverage, arguing that there was no “direct physical loss to property” because the home was structurally intact and that removable debris did not qualify.

The California Second District Court of Appeal sided with the insurer, emphasizing:

• The smoke and soot did not cause structural damage or permanently alter the property.
• The debris did not “alter the property itself in a lasting and persistent manner” and was “easily cleaned or removed from the property.”
• The plaintiffs’ own expert concluded that “soot by itself does not physically damage a structure” and that ash only creates physical damage when left on the structure and exposed to water, which did not appear to have happened. He also acknowledged that “the home could be fully cleaned by wiping the surfaces, HEPA vacuuming, and power washing the outside.” It followed that he could not establish that the property suffered lasting harm from the smoke.

The Long Shadow of COVID-19 Litigation: Raising the Bar for “Physical Loss or Damage”

Given the large volume of COVID-19 coverage cases, the courts’ experience doubtless has shaped how they interpret “physical loss or damage” in insurance policies, particularly concerning business interruption claims. Many businesses sought coverage for losses incurred due to (1) government-mandated shutdowns, arguing that the inability to use their properties constituted a direct physical loss, or (2) the presence of COVID-19 in the air or on surfaces, arguing it made properties unsafe for normal use. In the COVID-19 context, courts have largely rejected both arguments.

These decisions effectively raised the threshold for what constitutes “physical loss or damage,” making it more challenging for policyholders to claim coverage for intangible or nonstructural impairments. This heightened standard has significant implications for claims involving smoke contamination from wildfires. The differing rulings in Bottega and Gharibian show the inconsistencies the standard yields.

In Gharibian, a case in which there was no evidence that the insured undertook any remediation yet the insurer still paid considerable monies, the court cited California Supreme Court precedent that held COVID-19 did not cause physical loss because (1) the virus did not physically alter property and (2) it was a temporary condition that could be remedied by cleaning.^[3] Applying this logic, the Gharibian court determined that in that particular case, the evidence was (1) soot and char debris did not alter the property in a lasting and persistent manner and (2) the debris was easily cleaned or removed from the property. Therefore, fire debris does not constitute “direct physical loss to property.”

Meanwhile, the Bottega court, with the benefit of a robust showing of how smoke permeated the property of a sympathetic plaintiff, cited another COVID-19 business interruption case, Inns-by-the-Sea v. California Mutual Ins. Co.,^[4] to reach the opposite conclusion. The court found that, whereas a virus like COVID-19 can be removed through cleaning and disinfecting, smoke is more like noxious substances and fumes that physically alter property.

To reconcile these results in their favor, policyholders must now provide compelling evidence that such contamination has caused tangible, physical alterations to their property to meet this elevated threshold. This development underscores the importance of thorough documentation and expert testimony in substantiating claims for damage that is not visible.

Policies That Expressly Cover Smoke Damage

Many policies do not specifically address smoke damage, leaving the parties to argue about whether the particular smoke contamination constitutes “direct physical loss or damage.” However, some policies explicitly provide coverage for smoke-related harm. For example, certain property insurance policies specifically list “smoke damage” as a covered peril, which can simplify claims for businesses and homeowners affected by wildfires.

When evaluating coverage, policyholders should:

• Review their policy language to determine if smoke damage is explicitly covered.
• Consider endorsements or additional riders that may enhance coverage.
• Be aware that even with explicit smoke coverage, insurers may still challenge claims by arguing the damage is superficial or remediable. To assess the scope of the insurer remediation proposal, policyholders are encouraged to retain their own remediation consultants to provide their own proposals, which can then serve as the basis for ensuring an apples-to-apples comparison and negotiation.

Having a policy that expressly includes smoke damage can reduce the likelihood of disputes and prolonged litigation.

Key Takeaways

These cases illustrate the fine line courts draw when assessing whether contamination rises to the level of a physical loss.

1. The nature of the damage matters: In Bottega, the insured proved that smoke infiltration rendered the property temporarily unfit for use. In Gharibian, the court saw the debris as a removable nuisance rather than a physical loss.
2. Policy wording can be decisive: Policies that explicitly cover smoke damage may provide a simpler path to coverage without protracted legal battles.
3. Burden of proof is critical: The Bottega plaintiffs provided stronger evidence linking their loss to physical damage, while Gharibian plaintiffs could not show a lasting impact on their property (much less one the insured felt required remediation).
4. Challenge denials with expert testimony: Some insurers may argue that smoke and soot are “removable” and do not qualify as damage. Policyholders should counter this with expert evidence demonstrating how smoke contamination affects long-term usability and air quality.
5. Consider the forum for litigation: As seen in Bottega and Gharibian, which court hears the case can significantly affect the outcome. When possible, policyholders should seek a jurisdiction with favorable precedents or challenge insurers’ attempts to move cases to less policyholder-friendly forums.

Final Thoughts

Wildfires raise critical questions about insurance coverage for smoke and debris damage. The rulings in Bottega and Gharibian show the ongoing battle over what counts as “direct physical loss,” with courts reaching different conclusions.

While Bottega is a win for policyholders, Gharibian suggests that insurers will continue to push for restrictive interpretations and to analogize losses to COVID-19. Policyholders must be proactive—documenting their losses, seeking expert opinions and being prepared to challenge denials.

Ultimately, courts and policymakers must recognize that insurance should protect against real-world risks, not just total destruction. Until then, policyholders must be prepared to fight for the coverage they deserve.

1. No. 21-cv-03614-JSC, 2025 WL 71989 (N.D. Cal. Jan. 10, 2025). ↑

2. No. B325859, 2025 WL 426092 (Cal. Ct. App. Feb. 7, 2025). ↑

3. Another Planet Ent., LLC v. Vigilant Ins. Co., 548 P.3d 303 (Cal. 2024). ↑

4. 286 Cal. Rptr. 3d 576 (Cal. Ct. App. 2021). ↑

Since the new Hart-Scott-Rodino (“HSR”) Rule was finalized in October 2024, there have been dozens of articles summarizing the changes and new requirements. While these articles are helpful and understanding the changes is necessary, for in-house counsel some of the logistical challenges presented by the new HSR regime are as important as the legal ones. This article’s goal is to identify practical solutions for the efficient and compliant collection, review, and production of some of the new categories of documents and information required by the HSR changes.^[1]

The changes discussed below fall into two categories: deal-agnostic changes (i.e., those that apply to every deal) and deal-specific changes (i.e., those that only apply when there is an overlapping product or service between the parties). 

Deal-agnostic changes include the requirements to provide certain

• final documents sent to or from the supervisory deal team lead and
• draft documents that are sent to any board member. 

Deal-specific changes include the requirements to provide

• regularly prepared CEO reports containing relevant information,
• board reports containing relevant information,
• information about overlapping directorates,
• detailed customer information, and
• detailed supply relationships information. 

Deal-Agnostic Changes

Previously, only “Competition Documents”^[2] sent to a director or officer had to be produced with an HSR filing. The new HSR Rule changes that in two significant ways: (1) all final Competition Documents sent to or from the supervisory deal team lead (“SDTL”) are producible, and (2) draft Competition Documents sent to any individual board member are producible.

Final Competition Documents Sent to SDTL

As an initial matter, in-house counsel will want to carefully consider whom to designate as the SDTL for a deal (or for all deals). The new rule defines supervisory deal team lead as “the individual who has primary responsibility for supervising the strategic assessment of the deal, and who would not otherwise qualify as a director or officer.”^[3] The rule appears to envision the SDTL as the person who makes the yes/no call on whether to send the deal to the board (or similar entity) for final approval. In some companies, this may also be the person overseeing the deal on a day-to-day basis. As you move into larger companies with more complex corporate development teams, those roles may be separated. For companies that do not have dedicated corporate development teams, potential SDTLs could include a business stakeholder assessing whether the target would be a strategic fit or someone in the Finance Department. 

After identifying the SDTL, in-house counsel should orient that person to the new requirements immediately, and together they should design a workable process for collecting and reviewing relevant documents. The goal, of course, is not to significantly disrupt the ongoing work evaluating strategic acquisitions. Some useful practices include the following:

Create a deal-specific mailbox, and put all emails relating to the deal in that mailbox. This will reduce the need for email searches, and the SDTL can simply provide antitrust counsel access to the mailbox so that the SDTL will not have to waste time or energy assessing what is producible. 

Inform the SDTL that documents accessed through collaborative platforms/channels will be produced. All final Competition Documents, including communications, housed in collaborative platforms/channels such as Teams, Slack, Google Chat, etc., likely must be produced if accessed by the SDTL. In-house counsel should introduce the SDTL to this requirement proactively so the SDTL can be mindful regarding if and how to use such channels throughout the deal. 

Communicate to deal stakeholders that emails sent to the SDTL will be produced. All final Competition Documents sent from or received by the SDTL must be produced. It is therefore important that in-house counsel inform all deal stakeholders of this requirement and remind them to be thoughtful in their email practices. This may include reminders to always use accurate language in emails, to not speculate, and to avoid unnecessarily cc’ing the SDTL on every correspondence. 

Separate substantive discussions from drafting discussions in emails. All final Competition Documents sent to the SDTL must be produced. As a general matter, the new rule defines a final document to include an email. An important exception is that emails discussing draft documents are not considered final. For example, an email identifying and explaining the redline edits made in a document is considered a draft and not producible. However, an email that explains redline edits and discusses the competitive dynamics of the deal is likely producible. Separating drafting emails from substantive discussions will avoid this confusion. 

These processes and practices work best in conjunction. But even implementing one or two of these practices will make life easier for both the SDTL and in-house counsel.

Draft Competition Documents Sent to Any Single Board Member

Previously, draft Competition Documents were only producible if they went to the entire Board of Directors or subcommittee thereof. Under the new rule, a draft Competition Document is producible if it is sent to any individual member of the board.

In-house counsel will therefore want to investigate the processes the corporate development team uses for document creation to determine if individual board members ever receive documents outside of official channels. For example, does a senior member of the corporate development team bounce ideas off an individual board member before finalizing a document to send to the whole board? To the extent that any such processes exist, in-house counsel will want to inform all stakeholders that these types of draft documents must now be produced to regulators. Similarly, if board members have a day-to-day role on a transaction and are expected to receive documents outside their role, this should also be flagged to help inform production decisions.

Deal-Specific Changes

Many of the changes in the new HSR Rule only apply when there is a competitive overlap between the acquirer and the target. These deal-specific requirements are sufficiently numerous that it is fair to say there are effectively now two different HSR forms: one for deals with overlaps and one for deals without them. Because the HSR submission for deals with overlaps is considerably more onerous, parties should now make the overlap assessment much earlier in the deal process—indeed, it will be difficult to accurately gauge either the timeline or budget for an HSR filing without first making this determination.

After concluding the deal involves an overlap, in-house counsel must begin the process of collecting new categories of information and documents. This section addresses five of the most burdensome and/or tricky of those categories:

1. Regularly prepared CEO reports that contain information on the competitive dynamics of the overlapping product market or service line
2. Board reports that contain information on the competitive dynamics of the overlapping product market or service line
3. Information on individual board members who also serve on the boards of other companies that operate in the same industry
4. Detailed information about each party’s customers of the overlapping product market or service line
5. Detailed information about the parties’ supply relationships with regard to the overlapping product market or service line 

Regularly Prepared CEO Reports Discussing Competition in the Overlapping Market

The new rule requires parties to produce regularly prepared CEO reports if they (1) discuss competition-related issues involving the overlapping market implicated by the deal and (2) were prepared within one year of filing. Regularly prepared reports are specifically defined as quarterly, biannual, or annual reports. The challenge, therefore, is determining when a report contains information making it responsive, which is amplified by the one-year lookback window. It will not usually be apparent when the report is prepared whether it will be responsive later. The following processes may help mitigate these challenges:

Work with the CEO’s staff ahead of time to understand the full universe of regularly prepared reports the CEO receives, and inform the CEO of the need to collect these documents. The CEO undoubtedly receives reports that do not contain producible information, e.g., a report outlining insurer and benefits administrator options for employees. The CEO is also likely to receive reports that contain information on the competitive dynamics of markets. Understanding ahead of time the full corpus of regularly prepared reports that the CEO receives—and the content of those reports—will allow in-house counsel to more efficiently allocate their attention when reviewing materials for responsiveness for a specific deal. 

Determine whether a preemptive review of the regularly prepared CEO reports is necessary. As discussed, it will not be clear in real time whether a CEO report will have to be produced. And parties cannot extract only the responsive information/pages from a report. Thus, in-house counsel should assess whether there are ways to balance the HSR requirements against the burden of producing nonresponsive information. To use the prior example, simply issuing two different reports—one on benefits and one on competitive dynamics—will prevent the company from having to produce totally irrelevant (but highly sensitive) benefits information because it is included in a competitive intelligence overview. 

Determine who will review the CEO reports, and train that person. Regardless of whether there is a preemptive review, in-house counsel will have to work with the CEO’s staff to determine who should review the CEO reports when you must file an HSR form. Ideally, this would be in-house or external antitrust counsel. However, given the highly sensitive nature of the reports, the CEO’s office may prefer someone else. This may be a senior staff member, the general counsel, or other trusted adviser. In any event, it will be in-house counsel’s responsibility to thoroughly train the reviewer so that the reviewer can identify the types of competitive information that make a report responsive. This training should include clear instructions to err on the side of flagging for production, and if a nonlawyer conducts the preliminary review, it will have to be confirmed by counsel before filing.

Keep a checklist of regularly prepared reports, and check it before filing. Failing to include a producible document in an HSR filing may lead to, at a minimum, a costly delay in closing. This type of mistake can be avoided by creating and maintaining an up-to-date list of all quarterly, biannual, and annual reports the CEO receives and then checking off each one during the review process. 

Organize all regularly prepared CEO reports in real time. The easiest way to miss a CEO report (especially without a checklist) is to scramble to collect them every time you file an HSR form. Even with the soundest of efforts and intentions, if in-house counsel are furiously searching inboxes, platforms, and other storage solutions on an ad hoc basis for each deal, eventually something will be missed. Instead, in-house counsel should work with the CEO’s staff to create separate folders for quarterly, biannual, and annual reports and ensure they are updated in real time. In addition to reducing the risk of missing a report, this will save both in-house counsel and the CEO’s office time when a filing is required by eliminating the need for last-minute searches. 

Any Board Report Discussing Competition in the Overlapping Market

The new HSR Rule imposes the same requirements on board reports as CEO reports, with one notable expansion: instead of only requiring regularly prepared reports, the rule requires production of any board report discussing competition in the overlapping market. This requirement also has a one-year lookback window, so companies will not know at the time a board report is created whether it is producible.

The challenges presented by this requirement are akin to CEO reports but may be amplified if processes are not followed because the requirement is not limited to regularly prepared reports. Fortunately, implementing the same process for board reports as for CEO reports may reduce both burden and risk:

• Work early with whoever prepares board materials to understand the full universe, and introduce that person to the new requirements.
• Determine whether a preemptive review will occur and, if so, who will conduct it.
• Determine who will review board reports when an HSR filing is required.
• Train the reviewers if they are not dedicated antitrust counsel.
• Organize board files in an easily accessible and navigable manner in real time. 
• Conduct periodic audits of the board’s documentation to ensure compliance with the new rule and identify any gaps.

There are two additional practices that may help with collecting and reviewing board reports and minimize the risk of missing a responsive document:

Consolidate board reports. If one hundred reports are sent to the board every year, it will be exponentially easier to collect and review those reports if twenty-five are bundled at the end of every quarter than if they are sent individually on an ad hoc basis. And although the requirement still applies that if any part of a report is responsive the whole report must be produced, administratively bundling twenty-five independent reports into a zip drive does not magically transform them into one report for HSR purposes. There is, therefore, little downside and significant upside to sending board reports in a routine, standardized, and consolidated manner. 

Organize the board’s documents in a workstream or platform. Rather than sending board reports, upload them to a specified platform or portal, ideally at a specific, standard time such as before meetings. Do not send any board reports to the board (or individual members) outside of this platform. If the only way the board can access its reports is by logging onto the platform, in-house counsel can be assured of a single, easily accessible source of truth when an HSR filing occurs. 

Providing Information About Overlapping Directorates

Another new category of information required by the new HSR Rule relates to overlapping directorates. Specifically, the acquirer must determine if any of its board members serve on the board of a different company (i.e., not the target) that reports revenue in the same North American Industry Classification System (“NAICS”) codes as the target. For example, if Company A provides cybersecurity services and is acquiring Company B, which provides software, in-house counsel for Company A will have to determine whether any members of its board also sit on the board of any other company that provides software. If so, Company A must disclose the name of the director(s) and the other board(s) on which they sit as part of the HSR filing. Several processes can help with collecting and producing this information:

Implement policies to review board affiliation. There are good legal reasons—beyond just HSR requirements—to enact policies that review not only the number of external board affiliations each director can have but also the types of companies with which they may be affiliated. To explain why, it may be helpful to take a step back. 

Many acquirers target companies that operate in the same industry/ecosystem. These companies are likely to report revenues in a limited number of NAICS codes relevant to that ecosystem. Conversely, it is less common for an acquirer to target a company in an unaffiliated industry. Companies in unaffiliated industries are unlikely to report revenues in NAICS codes common to the ecosystem. Accordingly, the more directors a company has who sit on the board of other ecosystem companies, the more likely any individual target hits on a NAICS code that requires disclosure. One way to minimize the need to identify overlapping directors is to enact a policy that curtails the number of board members who can join other for-profit boards in the same ecosystem.

Even outside of HSR, Section 8 of the Clayton Act prohibits directors from sitting on the boards of competing companies. Therefore, having policies in place that prevent overlapping directorates and having mechanisms in place to monitor and track external board membership to ensure compliance serve two goals. 

Monitor board memberships in real time. Because NAICS codes can be defined so broadly, some degree of disclosure is likely inevitable even with the above policy. Absent proactive processes, this could impose a substantial burden on in-house counsel and delay the HSR filing (and, consequently, the closing). Imagine having a large board of twenty directors. If board affiliation information is not already available, in-house counsel will first have to determine whether any of the twenty directors are on other for-profit boards, and which ones. If, for example, each is on two additional boards, in-house counsel will then have to research the products and services that all forty of those companies offer and compare them to the target.

 To prevent this, the overlapping directorate assessment should be part of the real-time approval process, both for any new member of the company’s board and for any existing member who wants to join an external board. If the company is considering adding someone to the board, in-house counsel should review the candidate’s current board and officer affiliations to determine whether any are with competitors or ecosystem players. Again, this will also help ensure compliance with Section 8. In-house counsel can track this analysis in real time so that when they make an HSR filing, they not only will have a current list of all directors and corresponding affiliations but also will already have done some of the industry analysis.

Customer Information for Overlapping Products/Services

In all deals, both parties now must describe the categories of products and services they offer. Where there is a current or planned overlap, the parties must provide (1) total revenue for each overlapping product/service from the prior fiscal year, (2) the top ten customers by category for each overlapping product/service, and (3) the top ten overall customers for each overlapping product/service. 

Figure 1. Customers by Category. See note 4 for a discussion of this chart’s example.

The time needed to respond to this requirement will largely depend on the number of “customer categories” involved^[4] and the extent to which in-house counsel have proactively developed processes to collect this information.

The term customer categories is not defined in the rule or guidelines. Unfortunately, neither the rule nor any guidelines published thus far define what customer category means in this context. Some possibilities include categories by industry; by distribution level (retailers, wholesalers, distributors, direct to consumer, etc.); and by geography (local customers, regional customers, national customers, international customers, etc.). Therefore, it will likely be up to in-house counsel to make this determination.

There are various approaches companies can take to define customer categories. As a first step, in-house counsel should consult with business stakeholders in the overlapping products/services to determine whether there is an internal ordinary-course definition of customer categories. If the company has a preestablished definition, in-house counsel should likely use that. If not, in-house counsel may have to look to other sources in defining customer categories for HSR purposes, such as the business’s informal understanding (“we tend to view customers this way”) or external industry standards.

Proactively socialize stakeholders in financial roles, including understanding how these requirements do (or do not) comport with how revenue is tracked in the ordinary course. In-house counsel will likely depend on Finance to collect the above information, so, as with other stakeholders, they will want to orient Finance to these changes beforehand. In particular, in-house counsel will want to determine how long it will take Finance to pull these reports, which is largely a function of whether it tracks revenue data in the manner specified by the reporting requirements. For example, Finance may not track customers “by category,” much less track the top customers in each (nonexistent) category. In this example, Finance would not be pulling a report but creating one, which could take significantly longer. Knowing this at the outset will help in-house counsel manage expectations.

Supply Relationships Information for Overlapping Products/Services

The new HSR Rule requires both parties to identify (1) any products or services it sells to or purchases from the other party and (2) any products or services it sells to or purchases from competitors of the other party.^[5] For each such input, the parties must provide detailed sales information and a list of the top ten customers that use each party’s products as an input to compete with the other party. Identifying supply overlaps and producing the requisite information may be particularly laborious. In addition to socializing Finance stakeholders to this requirement (see above), the following actions may help with this task:

Enlist the help of those performing due diligence on the acquisition to help identify overlaps. Unlike with competitive overlaps, it may not be apparent whether the parties have any type of vertical relationship with each other, much less with one of the other party’s competitors. However, the due diligence team should already be reviewing supply relationships/contracts in strategically assessing and valuing the deal. In-house counsel may be able to leverage that work so due diligence can flag any relevant supply relationships in real time. 

Use a reasonable definition of input. The new rule requires the above information when either party (1) purchases from or supplies to the other party an input or (2) purchases from or supplies to the other party’s competitors an input that helps them compete. Although in-house counsel will want to err on the side of caution in determining which inputs qualify for the latter, overhead products and services that every company uses likely would not count. Imagine the acquirer is a children’s toy manufacturer and purchases plastic from the target’s competitor for use in its products—that would qualify. Imagine now that the target’s competitor also manufactures and sells bottled water that the acquirer purchases and stocks in its offices. Although this is a “product” supplied by the target’s competitor to the acquirer, it would likely fall outside the scope of this requirement because it is unrelated to competition in the toy manufacturing market. Again, in-house counsel should not take an overly restrictive approach but instead take a good-faith, commonsense approach using their professional judgment, which recognizes that some inputs (food, water, electricity, basic equipment, structures, etc.) are so weakly connected to competition (unless the acquirer operates in that industry) that they are not meant to be subject to this requirement. 

Conclusion

The new HSR Rule will add time and expense to filings. However, it will impact deals with overlaps significantly more than deals without overlaps. As a result, in-house counsel must endeavor to make the overlap determination much earlier than under the old regime so they can start the collection-and-review process early and accurately set budget and timing expectations.

Regardless, the amount of additional time and burden the new HSR Rule imposes will be proportional to the number of processes, practices, and socializations in place at the time of filing. The way in-house counsel can most effectively support the business’s acquisition strategy, therefore, is by proactively enacting processes that minimize cost, time, and disruption when an HSR filing is required.

Matt Bester and Paul Covaleski talk about their tips on Our Curious Amalgam, the podcast of the ABA Antitrust Law Section. Listen to Episode #320, “What Can In-House Counsel Do To Tame the Premerger Notification Beast? Practical Suggestions For Complying With the New HSR Rules” (April 7, 2025), available at www.ourcuriousamalgam.com.

1. As the Federal Trade Commission (“FTC”) releases additional guidance on the new HSR form, some of the below practices may have to be altered, eliminated, or expanded upon. In-house counsel will therefore want to track any such guidance closely and adjust their practices accordingly. ↑

2. The new HSR Rule also changed the nomenclature: documents previously referred to as 4(c) documents are now referred to as Competition Documents, while documents previously referred to as 4(d) documents are now referred to as Transaction-Related Documents. For the sake of clarity, and because it is not relevant here, this article refers to all items previously referred to as 4(c) or 4(d) documents as Competition Documents. ↑

3. Premerger Notification; Reporting and Waiting Period Requirements, 89 Fed. Reg. 89,216, 89,279 (Nov. 12, 2024) (emphasis added). ↑

4. In the chart above, the company would have to disclose thirty customers to comply with this requirement: twenty for overlap 1 because there are two categories of customers, and ten for overlap 2 because there is one category of customer. This illustrates how the definition of customer category will directly and substantially impact the burden associated with this requirement—if each overlap had ten customer categories, the company would have to disclose two hundred customers. ↑

5. The rule contains an exception for inputs with less than $10 million in sales. ↑