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Boston College Law School

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Friday, January 4, 2008

Genesco -- the ambiguity of specific performance

Apparently in response to a Genesco motion to clarify, the Tenn. judge today issued this order.   A few points:

  1. The judge rules that her recent opinion is not a final order and she will issue a final order only once a ruling is issued in the N.Y. action. In other words, since it is an interim ruling, any appeal of the Tenn. opinion will likely only occur after the New York litigation is resolved.  It is unclear whether she means that the ruling has to be final in New York (i.e., all appeals exhausted up to the Second Circuit and Supreme Court) or she will reconvene proceedings based on a lower court ruling.
  2. The reason for the ambiguity in her opinion on specific performance which I previously highlighted is now apparent (i.e., at the end of the opinion she left open the issue of whether she would order specific performance of the merger or damages if Finish Line loses in New York against UBS).  In the order she specifically states that she will consider the issue of whether Finish Line is required to complete the merger in such a scenario only after a ruling in the New York litigation.  Particularly, in such a scenario she is going to permit Finish Line to argue frustration of commercial purpose.  This is a very high standard to meet.  And the case she cites for this proposition is one where the party failed to meet it. 
  3. Ultimately, this means more delay in any final resolution of this dispute.  The parties now definitely must go to New York and the possibly Tenn. for Finish Line to be held liable for damages.  And there must still be a Tenn. appeal.  The timing issue is likely more important than the possibility of Finish Line winning in Tenn. on frustration of commercial purpose since this, again, is a hard test to meet.
  4. At this point the outcome the parties would have received in Delaware versus Tenn. is beginning to diverge. 

More on Monday . . . .

http://lawprofessors.typepad.com/mergers/2008/01/genesco----the.html

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