NEW YORK, December 27, 2007 – International law firm Milbank, Tweed, Hadley & McCloy LLP won a major trial victory on December 21, 2007 for Cerberus Capital Management ("Cerberus") and its affiliates in a lawsuit filed by United Rentals, Inc. ("URI") in Delaware Chancery Court. The case was the first M&A litigation arising out of the troubled credit markets to proceed to trial in Delaware.
On July 22, 2007, RAM Holdings Corp. and RAM Acquisition, Inc. ("RAM"), two shell acquisition entities formed by Cerberus, agreed to acquire URI, a leading equipment rental company, for a purchase price of approximately $4 billion, plus assumption of indebtedness bringing the total value of the transaction to nearly $7 billion. Cerberus agreed to provide up to $1.5 billion in equity financing. On November 14, 2007, following the recent turmoil in the credit markets, RAM notified URI that it was no longer prepared to consummate the transaction on the terms contemplated by the merger agreement. URI filed suit in the Delaware Court of Chancery five days later to force RAM to complete the merger, arguing that the merger agreement gave URI a right of "specific performance" against RAM requiring RAM to draw down its equity and debt financing and close the merger. RAM asserted in its defense that the terms of the merger agreement and related transaction documents barred specific performance and instead gave RAM and its affiliates the ability to walk away from the transaction at any time and incur a maximum liability of $100 million.
The case was assigned to Chancellor William B. Chandler III. At a scheduling conference on November 29, 2007, Chancellor Chandler set an expedited trial for December 17, 2007, but also allowed URI to file a motion for summary judgment, with expedited briefing to be completed on December 11, 2007. Led by the Milbank team, RAM successfully opposed URI's summary judgment motion and, in less than three weeks, completed all steps necessary to prepare the case for trial, including multi-tracked depositions of fact and expert witnesses, substantial document production, and extensive briefing of evidentiary objections to potential trial testimony. The trial commenced on December 18, 2007, and lasted for two days. The Milbank team led the direct examinations of five RAM witnesses and obtained several key admissions during an intense cross examination of URI's principal negotiator and draftsman.
On December 21, 2007, Chancellor Chandler issued a 67-page opinion, holding that although the merger agreement was ambiguously drafted, URI did not have the specific performance remedy it claimed and, in fact, had no right to force RAM to complete the merger. The Chancellor found that Cerberus had openly and consistently communicated to URI during negotiations its understanding that it could walk away from the transaction at any time and that URI's sole remedy in such event was to collect a reverse break-up fee of $100 million. The Chancellor found, in contrast, that URI had failed to act forthrightly in negotiations and had failed to communicate its alleged contrary understanding of the merger agreement to RAM. URI announced on December 24, 2007 that it would not appeal the Chancellor's ruling.
The Milbank litigation team was led by New York-based litigation partners Michael L. Hirschfeld and Scott A. Edelman and LA-based partner Daniel M. Perry. The team also included New York-based associates Robert L. Liubicic, Robert C. Hora, Tamieka Spencer-Bruce, Melanie Westover, Alyssa Rower, Karen Chang, Fay Sardjono, and BriAnne Shaw. Milbank was also assisted by Gregory Williams of Richards, Layton & Finger P.A. and Stuart Shapiro of Shapiro Forman Allen Sava & McPherson LLP.
Milbank, Tweed, Hadley & McCloy LLP is a preeminent global law firm that is recognized for more than 140 years for providing innovative legal solutions in many of the world’s largest, most complex, “first-ever” corporate transactions, including capital markets, corporate finance, project finance, acquisition finance and other major fields of law practice. Milbank clients range from prominent multinational financial, industrial and commercial enterprises to governments, institutions and individuals. The firm is headquartered in New York with offices in Beijing, Frankfurt, Hong Kong, London, Los Angeles, Munich, Singapore, Tokyo and Washington, DC.