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The M&A Advisor Winner 2017The M&A Advisor announced the winners of the 16th Annual M&A Advisor Awards on Monday, November 13 at the 2017 M&A Advisor Awards. Bass, Berry & Sims was named a winner in the two categories related to the following deals:

M&A Deal of the Year (from $1B-$5B) – Acquisition of CLARCOR Inc. by Parker Hannifin Corporation

Corporate/Strategic Deal of the Year (over $1B) – Acquisition of BNC Bancorp by Pinnacle Financial Partners

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Regulation A+

It seems that lately there has been a noticeable uptick in Regulation A+ activity, including several recent Reg A+ securities offerings where the stock now successfully trades on national exchanges. In light of this activity, we have published a set of FAQs about Regulation A+ securities offerings to help companies better understand this "mini-IPO" offering process, as well as pros and cons compared to a traditional underwritten IPO.

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Chris Lazarini Examines Limits on the Scope of the Duty of Good Faith and Fair Dealing in Breach of Contract Dispute

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December 22, 2015

Bass, Berry & Sims attorney Chris Lazarini examined the case of Great Water Capital Partners, LLC vs. Down-lite Int'l, Inc. in which Great Water claimed Down-lite breached the duty of good faith and fair dealing by failing to close on a deal after retaining Great Water to locate potential buyers or investors. The Court rejected Great Water's claims because under the contract, Down-lite retained absolute authority to reject any proposed transaction. Chris provided the analysis for Securities Litigation Commentator (SLC). The full text of the analysis is below and used with permission from the publication. If you would like to receive additional content from the SLC, please visit the SLC website to sign up for the newsletter.

Great Water Capital Partners, LLC vs. Down-lite Int'l, Inc., Nos. C-160015 & C-150023, 2015 Ohio 4877 (Ohio App., 1Dist., 11/18/15) 

*The duty of good faith and fair dealing does not apply where a party to the contract has unconditional authority to make the decision at issue.
**A party to a contract may not prove fraud by claiming the inducement to enter into the contract was a promise within the scope of the agreement but which was ultimately not included in the agreement. 

Great Water is an investment bank that assists middle-market companies with mergers, acquisitions, and capital-raising. In 2008, Down-lite, a family-owned bedding material manufacturer, approached Great Water for assistance in finding a buyer or investor. The parties entered into a contract under which Great Water was to identify and analyze potential transactions for Down-lite. Great Water received a retainer fee and, under the contract, would receive additional fees if a transaction closed. Down-lite retained discretion to approve any proposed deal. After three prospective acquirers submitted letters of intent, Down-lite demanded that the company headquarters remain in Cincinnati, family members be given employment opportunities, and the business continue as a non-union business. No sale or investment transaction was consummated, and Down-lite terminated the agreement with Great Water. The trial court dismissed some of Great Water's claims for failure to state a claim, refused to allow certain proposed amended claims, and granted summary judgment for Down-lite on the claims that survived. 

On appeal, the Court affirms, agreeing with the trial court that Great Water's claims suffered from the same defect – Down-lite had sole discretion to approve any proposed transaction. Implicit in this notion, the Court concludes, is that there was no breach of contract, because Down-lite did not have to close a deal. Nor was there a breach of the duty of good faith. The Court rejects Great Water's claim that Down-lite had a duty to act reasonably, finding that the duty of good faith cannot supplant an express contract term. Here, the Court explains, the duty of good faith did not apply, because Down-lite retained the absolute and exclusive right to reject any proposed transaction and could impose whatever conditions on a potential deal it felt appropriate.

Applying the same rationale, the Court finds that the trial court correctly rejected Great Water's efforts to amend and add claims of unjust enrichment, excuse of condition and prevention of performance. It would have been futile to add those claims, the Court states, when the contract gave Down-lite unconditional decision-making authority.

The Court also agrees with the trial court's grant of summary judgment on Great Water's breach of warranty and fraudulent inducement claims. Those claims were grounded in the concept that Down-lite failed to disclose and/or misrepresented its transaction conditions when negotiating its contract with Great Water. Rejecting the theory, the Court finds that Great Water cannot show it was damaged and cannot complain that it was fraudulently induced to enter into a contract giving Down-light sole discretion when it could have placed limitations on transaction conditions or a requirement that consent to a sale not be unreasonably withheld in the Down-lite contract. 

The Court declines to address the trial court's finding that the contract was unenforceable because Great Water was acting in violation of the Ohio Securities Act by not registering as a dealer with the Ohio Securities Division.


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