November 9, 2007
SLM Goes for a Quick Ruling
SLM filed their Form 10-Q this morning. In it was this nugget of disclosure:
Under guidance from the Delaware Court of Chancery at a scheduling hearing on November 5, 2007, the Company has elected to pursue an expedited decision on its October 19, 2007 motion for partial judgment on the pleadings. Specifically, the Company is seeking an expedited ruling that its interpretation of the Merger Agreement as it pertains to a Material Adverse Effect is the correct interpretation. The effect of this election will be that trial is expected to commence on an undetermined date after Thanksgiving 2008, rather than in mid-July 2008.
The Flowers group still needs to agree to this. And, although, they have made murmurings before that they might so agree, at the last scheduling conference their lawyer, Marc Wolinsky, was very silent when SLM and VC Strine discussed the issue. So, what will the Flowers group do? My hunch is that they will agree to it -- in order to appear amenable to Strine. And, as I said before, I think they have a very strong case on a plain reading of the contract. Another issue is whether Strine will ask the parties to waive their right to appeal if he does make such an expedited ruling. There is no way Flowers would agree to this.
The bigger question in my mind is why SLM feels the need to push this at this point -- wouldn't the company be better off just moving on and fighting this out at a later date? Or, heaven forbid, settling it out? This is now devolved into a clear litigation suit -- unless SLM is willing to lower its asking price down to an acceptable level for Flowers -- something Lord et al. appear unwilling to do.
Interesting addedum point: Delaware provides for pre-judgement interest on breach of contract claims. The rate of interest to be paid is at the discretion of the judge. So, Flowers insistence that it has not repudiated the merger agreement and equal insistence that they will not terminate is likley due to posturing on this issue. If they lose, they can claim that they never breached the merger agreement and so do not have to pay interest.
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