Shook, Hardy & Bacon’s team of experienced attorneys assists buyers and sellers with disputes following merger, asset purchase, and financing deals. We have litigated matters involving a variety of legal theories, including breach of contract, fraud, securities violations, and other common law and statutory claims. These cases often turn on important contract provisions, including representations and warranties, working capital adjustments, earn-out provisions, and indemnification clauses. We have represented clients in these lawsuits as both plaintiff and defendant, helping to resolve cases early when circumstances permit, and proceeding to trial or arbitration when necessary.
From finance to manufacturing and automotive industries, our experience has crossed a wide range of industry sectors, including representing both buyers and sellers as policyholders in matters relating to representations and warranties (R&W) insurance policies. For example, we have represented several private equity companies in pursuing claims against R&W insurers involving complex insurance coverage, accounting, generally accepted accounting principles (GAAP), and damages issues. We also have assisted our clients in evaluating and negotiating R&W policies and in complying with reporting and other requirements necessary to secure coverage under these insurance policies.
Shook’s post-closing dispute attorneys have been retained as lead counsel in numerous cases over the last decade. These cases have covered a variety of legal theories and industries. Examples of our work include the following matters.
- Represented the buyer of an axle manufacturing company in federal court in Michigan. On behalf of the buyer, we filed suit, alleging securities and common law fraud and breaches of contractual representations and warranties.
- Represented a private equity firm in fraud, misrepresentation, and breach of representation and warranty claims related to the sales of manufacturing businesses. These disputes involved complex accounting, GAAP and working capital issues; novel securities law issues; and significant forensic investigations.
- Represented a private equity firm that had been sued for breach of representations and warranties after the sale of a manufacturing business. The claims involved a number of complex accounting issues in warranted financial statements.
- Our client, a private equity firm, acquired a large industrial company. Initial earnings before interest, tax, depreciation and amortization (EBITDA) results were well below pre-acquisition forecasts. We pursued litigation against the seller, developing creative theories to avoid strict contractual release provisions and indemnity caps.
- Represented a third-party defendant in three actions related to legal work done as part of the approval and closing of $39 million in bonds to finance the construction of a sucralose factory. Our client was brought into the suits in an effort to seek indemnification or contribution for their efforts in the due diligence and closing efforts. We successfully obtained the dismissal of our client in all three cases.
- Our client purchased a vehicle salvage yard. After operating on the property, it discovered environmental contamination. We pursued claims, including breaches of environmental-related representations and warranties, against the sellers and property owner in an arbitration and federal court, and also represented our client in proceedings before a state regulatory agency. After a two-week arbitration in Delaware, we negotiated a settlement of all matters.
- Represented the buyer of a wheel repair business, asserting in federal court claims for breaches of representations and warranties relating to cash reconciliation, inventory, and employee work authorization. The case involved complex employment issues.
- Represented a Chicago trading company in a dispute with two former executives who claimed damages of over $100 million. The dispute arose out of a complex transaction in which the company sold portions of its businesses to a third party and, as part of the transaction, various employees of the company sold their interests in a related company to the same third party.
- After our client sold a financial services firm, the seller asserted fraud and contract claims in an effort to avoid paying the amount due under an earn-out provision. The claims at issue involved complex accounting issues concerning revenue recognition and accounting reserves.
- Represented a trading company in a dispute over allocation of the purchase price from the sale of a business valued at hundreds of millions of dollars. After our client sold most of its operations, former employees claimed they owned rights in certain intellectual property conveyed in the transaction and so were entitled to a share of the purchase price. After a two-week trial on key threshold issues, the case settled favorably.
- Represented a technology firm in the financial industry in a dispute concerning the acquisition of a competitor. Our client acquired a substantial stake in the competitor and options, which would have permitted it to acquire the remaining interests. Our client later discovered the competitor had made material misrepresentations concerning the true state of the company’s financial condition and the sophistication of its software applications in order to induce our client to enter into the purchase agreement.
- Represented a Denver-based company that acts as a shareholder representative on M & A deals. FTen was a financial services technology company that was purchased by Nasdaq for $110 million. After closing, there was a dispute over audits by various states for unpaid sales taxes. We were retained to assist our client with claims against Nasdaq and other third-parties.
- Represented the seller and its largest shareholders in post-closing claims brought by the buyer of a bank holding company and subsidiary banks alleging fraud and breach of contract in connection with the acquisition.
- Our clients sold a multimillion-dollar environmental sustainability education company to a large for-profit education corporation. The buyer sued our clients in federal court, alleging fraud, breach of contract, breach of fiduciary duty, conversion, and violations of the Computer Fraud and Abuse Act.
- Represented a company that purchased a large pharmaceutical manufacturing business. After the closing, we filed suit on behalf of our client, alleging that the seller had breached certain representations and warranties in the purchase contract and seeking indemnification.
- Represented an individual in a post-closing earn-out lawsuit against the shoe company Crocs, Inc. Our client was the majority shareholder of a sandal/shoe/flip flop company purchased by Crocs. Among other things, our client alleged that Crocs and certain of its officers had misrepresented Crocs’ ability to meet certain sales/distribution thresholds that would have resulted in greater earn-out payments.
- Our client transferred control of a consumer goods business to a large private equity firm but retained a minority ownership interest. We were retained after the underlying company’s financial performance plummeted, due in part to significant and questionable conduct on the part of new management. We were able to negotiate a transaction for the sale of the minority interest at a price that far exceeded valuations.
- Represented the purchaser of an oil and gas exploration company against post-closing claims by the seller for stock and other compensation allegedly due under the purchase and sale agreement.
- Handled an earn-out dispute following the sale of a business in Mexico. Our client, the purchaser, sued the seller in a declaratory judgment action seeking a declaration that the defendant had fraudulently inflated the value of the business and, consequently, that our client did not owe the defendant any additional purchase price under the earn out. The defendant counter-sued for payment of millions in additional earn-out.
- Represented certain purchasers asserting post-closing claims for fraud and related claims in connection with the acquisition of a national chain of sandwich restaurants.
- Represent a public company in a dispute involving the purported assignment of certain contract rights previously held by a company that was acquired by our client. After our client acquired the assets of the target company, our client took the position that certain contract rights previously held by the target could be assigned to our client. The other party to the contact disagreed. The case is currently in arbitration.
- Represented a private equity firm in a lawsuit arising from its sale of a holding company and a number of subsidiaries. When the private equity firm purchased the holding company and subsidiaries, it notified certain key managers that it anticipated including them in a Management Incentive Compensation Plan. The eventual plaintiff received such a letter, but he was not included in the plan that was actually put into place. When the sale occurred several years later, the plaintiff demanded a payout under the plan. He eventually sued the holding company and the subsidiary for which he worked, which in turn brought a third-party claim against the private equity firm (our client). Among other things, the holding company and subsidiary claimed that if the plaintiff were owed money, then our client had breached the sale agreement by not disclosing the liability.
- Represented the buyer of a multimillion-dollar company against the seller in an arbitration before the American Arbitration Association. We asserted that the seller breached the terms of the asset purchase agreement by, among other things, overstating the EBITDA calculations, misrepresenting the nature of the assets being purchased, and having liabilities that exceeded the limits imposed by the agreement. We obtained a favorable settlement for the buyer prior to the arbitration hearing.