Do Change of Control Transactions Constitute an Assignment by Operation of Law?

Commercial landlords often rely on anti-assignment provisions to restrict the ability of tenants to assign their interest in a lease to a third party. Such provisions often restrict assignments by “operation of law,” which are generally considered involuntary assignments mandated via a court order. Commercial landlords may assume that a change of control transaction violates a basic anti–assignment clause. Landlords wishing to restrict change of control of a tenant entity, however, should have clear anti-assignment provisions in their leases that expressly restrict such transactions and characterize such “changes of control” as assignments.  

A change of control is a significant change in the equity, ownership, or management of a business entity. This can occur through a merger, consolidation or acquisition.  

The general rule is that change of control of a corporate entity is not an assignment by operation of law, and therefore does not violate a basic anti-assignment provision. Courts have reasoned that a landlord entering into a lease with a corporate tenant should be aware that a corporation, or limited liability company, is an entity which exists separate and apart from its ownership, and that a change in ownership of the corporate entity does not change the tenant entity under the lease.  

Courts in many states including Florida, New York and Delaware have held that a change of control is not an assignment by operation of law. In  Sears Termite & Pest Control, Inc. v. Arnold , a Florida court held, “[t]he fact that there is a change in the ownership of corporate stock does not affect the corporation’s existence or its contract rights, or liabilities.” Further, in  Meso Scale Diagnostics LLC v. Roche Diagnostics GMBH , a Delaware court ruled, “[g]enerally mergers do not result in an assignment by operation of law of assets that began as property of the surviving entity and continued to be such after the merger.” 

Importantly, the rule is different if the tenant entity does not survive the transaction. In  MTA Canada Royalty Corp. v.  Compania  Minera Pangea , a Delaware Superior Court held that a merger in which the contracting entity does not survive may be held to be an assignment by operation of law.  

If a landlord intends for a change of control of a tenant to violate the anti-assignment clause in its lease, the landlord should ensure that its lease expressly states that a change of control constitutes an assignment.

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new york merger assignment by operation of law

Do Change of Control Transactions Constitute an Assignment by Operation of Law?

Commercial l andlords  often  rely on  anti-assignment provisions  to  restrict the ability of tenants to assign their interest in  a  lease to a third party .  Such provisions will often explicitly restrict assignments by  “ operation of law, ”  which are generally considered involuntary assignments  mandated via a  court order. Commercial landlords may assume that a change of control transaction violates a basic anti – assignment cla use, but clear drafting is necessary for Landlords to protect their interests .  Landlords  wishing to restrict change of control of a tenant entity ,  should  have clear  anti-assignment provision s in their leases that   expressly restrict such transaction s  and characterize such “changes of control” as assignments .   

A change of control is a significant change in the equity, ownership, or management of a business entity. This can occur through a merger, consolidation or acquisition.   

The general rule is that change of control of a corporate entity  is  not  an assignment by operation of law ,  and therefore  does not violate a basic  anti- assignment provision. Courts have reasoned that a landlord entering into a lease with a corporate tenant should be aware that a corporation, or limited liability company, is an entity which exists separate and apart from its ownership, and that a change in ownership of the corporate entity does not change the tenant entity under the lease.   

Courts in many states including Florida, New York and Delaware have held that a change of control is not an assignment by operation of law. I n  Sears Termite & Pest Control, Inc. v. Arnold ,  a Florida court held ,  “ [t] he fact that there is a change in the ownership of corporate stock does not affect the corporation’s existence or its contract rights, or liabilities. ”  Further,   i n  Meso Scale Diagnostics LLC v. Roche Diagnostics GMBH , a Delaware court ruled, “ [ g ] enerally  mergers do not result in an assignment by operation of law of assets that began as property of the surviving entity and continued to be such after the merger.”  

Importantly,  the rule is different if the tenant entity does not survive the transaction.   In  MTA Canada Royalty Corp. v.  Compania  Minera Pangea , a  Delaware Superior Court held that a  merger in which the contracting entity does not survive may be held to be an assignment by operation of law.   

If  a  l andlord inten d s for a change of control of a tenant to violate the anti-assignment clause  in its lease, the landlord should ensure that its  lease expressly state s   that a change of control constitutes an assignment .

This article is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read here. Please review the full disclaimer for more information. Relying on the information provided in this article or communicating with Lowndes through our website does not create an attorney/client relationship.

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Courts Consider Anti-Assignment Clauses And Reverse Triangular Mergers

In a reverse triangular merger, the acquiring company forms a subsidiary that merges with and into the target with the outstanding shares of the target being converted into securities of the acquiring corporation or some other consideration.  Does a reverse triangular merger constitute an assignment of a target corporation's contracts?  Because the reverse triangular merger is an exceedingly common acquisition technique, one would expect that this question was answered long ago.  Surprisingly, however, this isn't the case.

Earlier this year, Vice Chancellor Donald F. Parsons  analyzed whether a reverse triangular merger violated an anti-assignment clause that read as follows: "Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the parties without the prior written consent of the other parties . . .".  He concluded:

In sum, Meso could have negotiated for a "change of control provision."  They did  not.  Instead, they negotiated for a term that prohibits "assignments by  operation of law or otherwise." Roche has provided a reasonable interpretation of Section 5.08 that is consistent with the general understanding that a reverse triangular merger is not an assignment by operation of law. On the other hand, I  find Meso's arguments as to why language that prohibits "assignments by  operation of law or otherwise" should be construed to encompass reverse  triangular mergers unpersuasive and its related construction of Section 5.08 to  be unreasonable.

Meso Scale Diagnostics, LLC v. Roche Diagnostics GmbH , 62 A.3d 62, 88 (Del. Ch. 2013).  See I’ve Been Thinking About Conversion, But I Haven’t Decided To Convert .

Here in California, U.S. District Court Judge Samuel Conti recently addressed the issue even more recently as follows:

No California state court has resolved this matter, and the Court is not inclined to guess at possible conclusions.  The Court therefore begins from the presumption that a reverse triangular merger, which leaves intact the acquired corporation, does not effect a transfer of rights from the wholly owned subsidiary to its acquirer as a matter of law. What little applicable law there is could be analogized from California cases on stock sales, like Farmland Irrigation Co. v. Dopplmaier , 48 Cal. 2d 208, 223, 308 P.2d 732 (Cal. 1957), which suggested that if a plaintiff had sold all of his stock in a corporation, there could be no contention that the corporation's licenses would be extinguished as a matter of law, since the two contracting parties were still extant and in privity.

Florey Inst. of Neuroscience & Mental Health v. Kleiner Perkins Caufield & Byers, 2013 U.S. Dist. LEXIS 138904 (N.D. Cal. Sept. 26, 2013).

Both jurists confronted, and declined to follow, Judge Marilyn Hall Patel's earlier decision in SQL Solutions v. Oracle Corp. , 1991 U.S. Dist. LEXIS 21097 (N.D. Cal. Dec. 18, 1991) with Vice Chancellor Parsons saying: "I decline to adopt the approach outlined in SQL Solutions , however, because doing so would conflict with Delaware's jurisprudence surrounding stock acquisitions, among other things.  Under Delaware law, stock purchase transactions, by themselves, do not result in an assignment by operation of law."  Judge Conti said "Plaintiff relies solely on SQL Solutions to argue that assignment occurred as a matter of law when an acquired corporation became another corporation's wholly owned subsidiary.  That case did not analyze nonassignment clauses and also found that federal copyright law forbid transfer."

Hollywood, Somali Pirates and Homer

Over the weekend, I saw the recently released film,  Captain Phillips .  The movie tells the story of the takeover of the MV Maersk by Somali pirates.  When the Navy uses a Somali speaker to communicate with the pirates, one of the pirates asks "Who's this?".  The translator answers "nemo", the Latin word for "no one".  The interchange, of course, is an echo of the famous encounter of Odysseus and the Cyclops, Polyphemus in Homer's Odyssey :

Κύκλωψ, εἰρωτᾷς μ᾽ ὄνομα κλυτόν, αὐτὰρ ἐγώ τοι ἐξερέω: σὺ δέ μοι δὸς ξείνιον, ὥς περ ὑπέστης. Οὖτις ἐμοί γ᾽ ὄνομα: Οὖτιν δέ με κικλήσκουσι μήτηρ ἠδὲ πατὴρ ἠδ᾽ ἄλλοι πάντες ἑταῖροι. Cyclops, you are asking my renowned name, nevertheless I will declare: "Give to me the hospitality, you were promising.  My name is no one: no one is what my mother, father and all my comrades call me."

Homer,  Odyssey Book 9, lines 364 -367 (my translation). Matters went downhill from there for both Polyphemus and the pirates.

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new york merger assignment by operation of law

In a reverse triangular merger, the acquiring company forms a subsidiary that merges with and into the target with the outstanding shares of the target being converted into securities of the acquiring corporation or some other consideration.  Does a reverse triangular merger constitute an assignment of a target corporation’s contracts?  Because the reverse triangular merger is an exceedingly common acquisition technique, one would expect that this question was answered long ago.  Surprisingly, however, this isn’t the case.

Earlier this year, Vice Chancellor  Donald F. Parsons  analyzed whether a reverse triangular merger violated an anti-assignment clause that read as follows: “Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part,  by operation of law or otherwise by any of the parties without the prior written consent of the other parties  . . .”.  He concluded:

In sum, Meso could have negotiated for a “change of control provision.”  They did  not.  Instead, they negotiated for a term that prohibits “assignments by  operation of law or otherwise.” Roche has provided a reasonable interpretation of Section 5.08 that is consistent with the general understanding that a reverse triangular merger is not an assignment by operation of law. On the other hand, I  find Meso’s arguments as to why language that prohibits “assignments by  operation of law or otherwise” should be construed to encompass reverse  triangular mergers unpersuasive and its related construction of Section 5.08 to  be unreasonable.

Meso Scale Diagnostics, LLC v. Roche Diagnostics GmbH , 62 A.3d 62, 88 (Del. Ch. 2013).  See  I’ve Been Thinking About Conversion, But I Haven’t Decided To Convert .

Here in California, U.S. District Court Judge  Samuel Conti  recently addressed the issue even more recently as follows:

No California state court has resolved this matter, and the Court is not inclined to guess at possible conclusions.  The Court therefore begins from the presumption that a reverse triangular merger, which leaves intact the acquired corporation, does not effect a transfer of rights from the wholly owned subsidiary to its acquirer as a matter of law. What little applicable law there is could be analogized from California cases on stock sales, like  Farmland Irrigation Co. v. Dopplmaier , 48 Cal. 2d 208, 223, 308 P.2d 732 (Cal. 1957), which suggested that if a plaintiff had sold all of his stock in a corporation, there could be no contention that the corporation’s licenses would be extinguished as a matter of law, since the two contracting parties were still extant and in privity.

Florey Inst. of Neuroscience & Mental Health v. Kleiner Perkins Caufield & Byers,  2013 U.S. Dist. LEXIS 138904 (N.D. Cal. Sept. 26, 2013).

Both jurists confronted, and declined to follow, Judge Marilyn Hall Patel’s earlier decision in SQL Solutions v. Oracle Corp. , 1991 U.S. Dist. LEXIS 21097 (N.D. Cal. Dec. 18, 1991) with Vice Chancellor Parsons saying: “I decline to adopt the approach outlined in  SQL Solutions , however, because doing so would conflict with Delaware’s jurisprudence surrounding stock acquisitions, among other things.  Under Delaware law, stock purchase transactions, by themselves, do not result in an assignment by operation of law.”  Judge Conti said “Plaintiff relies solely on  SQL Solutions  to argue that assignment occurred as a matter of law when an acquired corporation became another corporation’s wholly owned subsidiary.  That case did not analyze nonassignment clauses and also found that federal copyright law forbid transfer.”

Hollywood, Somali Pirates and Homer

Over the weekend, I saw the recently released film,  Captain Phillips .  The movie tells the story of the takeover of the MV Maersk by Somali pirates.  When the Navy uses a Somali speaker to communicate with the pirates, one of the pirates asks “Who’s this?”.  The translator answers “nemo”, the Latin word for “no one”.  The interchange, of course, is an echo of the famous encounter of Odysseus and the Cyclops, Polyphemus in Homer’s Odyssey :

Κύκλωψ, εἰρωτᾷς μ᾽ ὄνομα κλυτόν, αὐτὰρ ἐγώ τοι ἐξερέω: σὺ δέ μοι δὸς ξείνιον, ὥς περ ὑπέστης. Οὖτις ἐμοί γ᾽ ὄνομα: Οὖτιν δέ με κικλήσκουσι μήτηρ ἠδὲ πατὴρ ἠδ᾽ ἄλλοι πάντες ἑταῖροι. Cyclops, you are asking my renowned name, nevertheless I will declare: “Give to me the hospitality, you were promising.  My name is no one: no one is what my mother, father and all my comrades call me.”

Home,  Odyssey  Book 9, lines 364 -367 (my translation). Matters went downhill from there for both Polyphemus and the pirates.

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new york merger assignment by operation of law

Spotting issues with assignment clauses in M&A Due Diligence

Written by: Kira Systems

January 19, 2016

6 minute read

Although not nearly as complex as change of control provisions , assignment provisions may still present a challenge in due diligence projects. We hope this blog post will help you navigate the ambiguities of assignment clauses with greater ease by explaining some of the common variations. (And, if you like it, please check out our full guide on Reviewing Change of Control and Assignment Provisions in Due Diligence. )

What is an Assignment Clause?

First, the basics:

Anti-assignment clauses are common because without them, generally, contracts are freely assignable. (The exceptions are (i) contracts that are subject to statutes or public policies prohibiting their assignment, such as intellectual property contracts, or (ii) contracts where an assignment without consent would cause material and adverse consequences to non-assigning counterparties, such as employment agreements and consulting agreements.) For all other contracts, parties may want an anti-assignment clause that allows them the opportunity to review and understand the impact of an assignment (or change of control) before deciding whether to continue or terminate the relationship.

In the mergers and acquisitions context, an assignment of a contract from a target company entity to the relevant acquirer entity is needed whenever a contract has to be placed in the name of an entity other than the existing target company entity after consummation of a transaction. This is why reviewing contracts for assignment clauses is so critical.

A simple anti-assignment provision provides that a party may not assign the agreement without the consent of the other party. Assignment provisions may also provide specific exclusions or inclusions to a counterparty’s right to consent to the assignment of a contract. Below are five common occurrences in which assignment provisions may provide exclusions or inclusions.

Common Exclusions and Inclusions

Exclusion for change of control transactions.

In negotiating an anti-assignment clause, a company would typically seek the exclusion of assignments undertaken in connection with change of control transactions, including mergers and sales of all or substantially all of the assets of the company. This allows a company to undertake a strategic transaction without worry. If an anti-assignment clause doesn’t exclude change of control transactions, a counterparty might materially affect a strategic transaction through delay and/or refusal of consent. Because there are many types of change of control transactions, there is no standard language for these. An example might be:

In the event of the sale or transfer by [Party B] of all or substantially all of its assets related to this Agreement to an Affiliate or to a third party, whether by sale, merger, or change of control, [Party B] would have the right to assign any or all rights and obligations contained herein and the Agreement to such Affiliate or third party without the consent of [Party A] and the Agreement shall be binding upon such acquirer and would remain in full force and effect, at least until the expiration of the then current Term.

Exclusion for Affiliate Transactions

A typical exclusion is one that allows a target company to assign a contract to an affiliate without needing the consent of the contract counterparty. This is much like an exclusion with respect to change of control, since in affiliate transfers or assignments, the ultimate actors and responsible parties under the contract remain essentially the same even though the nominal parties may change. For example:

Either party may assign its rights under this Agreement, including its right to receive payments hereunder, to a subsidiary, affiliate or any financial institution, but in such case the assigning party shall remain liable to the other party for the assigning party’s obligations hereunder. All or any portion of the rights and obligations of [Party A] under this Agreement may be transferred by [Party A] to any of its Affiliates without the consent of [Party B].

Assignment by Operation of Law

Assignments by operation of law typically occur in the context of transfers of rights and obligations in accordance with merger statutes and can be specifically included in or excluded from assignment provisions. An inclusion could be negotiated by the parties to broaden the anti-assignment clause and to ensure that an assignment occurring by operation of law requires counterparty approval:

[Party A] agrees that it will not assign, sublet or otherwise transfer its rights hereunder, either voluntarily or by operations of law, without the prior written consent of [Party B].

while an exclusion could be negotiated by a target company to make it clear that it has the right to assign the contract even though it might otherwise have that right as a matter of law:

This Guaranty shall be binding upon the successors and assigns of [Party A]; provided, that no transfer, assignment or delegation by [Party A], other than a transfer, assignment or delegation by operation of law, without the consent of [Party B], shall release [Party A] from its liabilities hereunder.

This helps settle any ambiguity regarding assignments and their effects under mergers statutes (particularly in forward triangular mergers and forward mergers since the target company ceases to exist upon consummation of the merger).

Direct or Indirect Assignment

More ambiguity can arise regarding which actions or transactions require a counterparty’s consent when assignment clauses prohibit both direct and indirect assignments without the consent of a counterparty. Transaction parties will typically choose to err on the side of over-inclusiveness in determining which contracts will require consent when dealing with material contracts. An example clause prohibiting direct or indirect assignment might be:

Except as provided hereunder or under the Merger Agreement, such Shareholder shall not, directly or indirectly, (i) transfer (which term shall include any sale, assignment, gift, pledge, hypothecation or other disposition), or consent to or permit any such transfer of, any or all of its Subject Shares, or any interest therein.

“Transfer” of Agreement vs. “Assignment” of Agreement

In some instances, assignment provisions prohibit “transfers” of agreements in addition to, or instead of, explicitly prohibiting “assignments”. Often, the word “transfer” is not defined in the agreement, in which case the governing law of the contract will determine the meaning of the term and whether prohibition on transfers are meant to prohibit a broader or narrower range of transactions than prohibitions on assignments. Note that the current jurisprudence on the meaning of an assignment is broader and deeper than it is on the meaning of a transfer. In the rarer case where “transfer” is defined, it might look like this:

As used in this Agreement, the term “transfer” includes the Franchisee’s voluntary, involuntary, direct or indirect assignment, sale, gift or other disposition of any interest in…

The examples listed above are only of five common occurrences in which an assignment provision may provide exclusions or inclusions. As you continue with due diligence review, you may find that assignment provisions offer greater variety beyond the factors discussed in this blog post. However, you now have a basic understand of the possible variations of assignment clauses. For a more in-depth discussion of reviewing change of control and assignment provisions in due diligence, please download our full guide on Reviewing Change of Control and Assignment Provisions in Due Diligence.

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new york merger assignment by operation of law

General Contract Clauses: Assignment and Delegation (NY) | Practical Law

new york merger assignment by operation of law

General Contract Clauses: Assignment and Delegation (NY)

Practical law standard clauses w-000-0886  (approx. 17 pages).

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Articles | By Joseph C. Marrow | 03/18/13

Does a Reverse Triangular Merger Constitute An Assignment by Operation of Law?

new york merger assignment by operation of law

In a Delaware Court of Chancery decision dated February 22, 2013, Vice Chancellor Parsons held that a reverse triangular merger does not constitute an assignment by operation of law under Delaware law. The decision, Meso Scale Diagnostics, LLC v. Roche Diagnostics GMBH , C.A. No. 5589-VCP (Del. Ch. 2013) helped to clarify some uncertainty created by the same court in an earlier decision involving the same parties.  As a result of the decision, M&A practitioners should feel more comfortable that Delaware courts will find that a reverse triangular merger will not be considered an assignment by operation of law when interpreting a contract.

A reverse triangular merger is a transaction whereby the acquiring party forms a subsidiary and then merges the subsidiary into the target company with the target company being the surviving entity and a wholly-owned subsidiary of the acquiring party. At issue in theMeso Scale case was whether the reverse triangular merger structure triggered the anti-assignment language in a license agreement being acquired by the acquiring party. The anti-assignment provision in the license agreement provided as follows:

“Neither this Agreement, nor any of the rights, interests or obligations under [it] shall be assigned, in whole or in part, by operation of law or otherwise by any of the parties without the prior written consent of the other parties…”

In an earlier decision involving this matter, Vice Chancellor Parsons had declined to hold that the reverse triangular merger did not result in an assignment of the license agreement at issue. In the summary judgment proceeding, Roche argued that because the target in a reverse triangular merger survives and continues to own its assets, no assignment took place (the rights and obligations of the target are not transferred, assumed or impacted as a result of the structure of the transaction). The plaintiffs argued that mergers, including a reverse triangular merger, as a general proposition, result in an assignment by operation of law.

The Chancery Court concluded that a reverse triangular merger does not trigger the anti-assignment provision based on Delaware corporate law (and in particular Section 259 of the Delaware General Corporation Law) and since it does not result in the transfer of the rights and obligations of the non-surviving corporation to the surviving corporation.

The decision of Vice Chancellor Parsons confirms what most M&A lawyers have believed — that by using the reverse triangular merger structure, parties can avoid triggering anti-assignment clauses in licenses, contracts or other assets. The decision clarifies the state of the law in Delaware. As long as the parties structure the acquisition as a reverse triangular merger, they should not be required to obtain consents from third parties to a contract which contains a standard anti-assignment provision such as the one referenced above. It should be noted that if the anti-assignment provision at issue contains change of control or change of ownership language, this ruling will likely not be applicable. In addition, the ruling of the Chancery Court only addresses Delaware law. Other jurisdictions including California and New Jersey have held that in certain cases a reverse triangular merger does constitute an assignment by operation of law (requiring parties to obtain consents to assignments from third parties).

To discuss the potential benefits of a reverse triangular merger structure, please contact the author Joseph C. Marrow .

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COMMENTS

  1. Mergers and Restrictions on Assignments by "Operation of Law"

    Nonetheless, " [w]hen an anti-assignment clause includes language referencing an assignment 'by operation of law,' Delaware courts generally agree that the clause applies to mergers in which the contracting company is not the surviving entity.". [3] Here the anti-assignment clause in the original acquisition agreement did purport to ...

  2. Do Change of Control Transactions Constitute an Assignment by Operation

    The general rule is that change of control of a corporate entity is not an assignment by operation of law, and therefore does not violate a basic anti-assignment provision. Courts have reasoned ...

  3. Assigning Contracts in the Context of M&A Transactions

    One of the key considerations in structuring merger and acquisition (M&A) transactions is determining which contracts of the target company, if any, will remain in effect for the acquiror following closing. This post will briefly outline: (1) the general rules of contract assignment; (2) the effect of anti-assignment clauses and other ...

  4. Do Change of Control Transactions Constitute an Assignment by Operation

    This can occur through a merger, consolidation or acquisition. The general rule is that change of control of a corporate entity is not an assignment by operation of law, and therefore does not violate a basic anti-assignment provision. Courts have reasoned that a landlord entering into a lease with a corporate tenant should be aware that a ...

  5. Mergers and Restrictions on Assignments by "Operation of Law"

    [4] And, although Delaware has recognized that a merger in which the contracting party is the survivor (a reverse triangular merger) is not an assignment by operation of law "because the ...

  6. PDF TRANSACTIONAL REAL ESTATE Reverse Triangular Mergers and Non-Assignment

    explicitly restricts assignments by operation of law (in this case, the operation of the merger statute) and where—as is the case in a forward merger—the identity of the tenant, not merely its ownership, changes.5 In an RTM, the acquiring entity creates a new subsidiary that merges with and into the target company, which survives.

  7. FALL 2006

    stituting transfers by operation of law, not voluntary assignments.35 As a result, such transfers do not violate Basic Assignment Restrictions. 36 One New York court reasoned: [T]he merger of the subsidiary corpora-tion into its parent corporation did not constitute an assignment for purposes of violating the nonassignment covenant in the lease.

  8. Reverse Triangular Mergers: Mere Change of Ownership? Maybe Not

    New York case law generally supports this proposition, even though courts in Delaware or New York have not considered . specifically whether an RTM would violate an anti-assignment provision. There is an established body of law in New York . that stands for the general principle that mergers do not constitute assignments.

  9. PDF DELVACCA presents: Avoiding Boilerplate Blunders in Mergers and

    Assignment - Mergers. Many courts narrowly construe anti-assignment provisions as prohibiting only voluntary assignments. To prohibit other types of assignments, add "by operation of law, merger or otherwise". May need to be even more explicit for some states (including TX and CA) that have statutes providing that mergers do not constitute ...

  10. Anti-Assignment Clause Prohibiting Assignment by Operation of Law

    CMP moved to dismiss MTA's action, arguing that the merger of Alberta and Global resulted in an assignment of Alberta's contract rights by operation of law, and under the anti-assignment ...

  11. PDF Anti-AssignmentProvisions in Leases

    District of New York (applying New York law) have consistently taken a strict approach to construing anti-assignment provisions. In Brentsun Realty Corp. v. D'Urso Supermarkets, Inc., 182 A.D.2d 604, 582 N.Y.S.2d 216 (N.Y. App. Div. 1992), the Second Department interpreted an anti-assignment covenant in a lease that pro -

  12. Courts Consider Anti-Assignment Clauses And Reverse Triangular Mergers

    On the other hand, I find Meso's arguments as to why language that prohibits "assignments by operation of law or otherwise" should be construed to encompass reverse triangular mergers unpersuasive and its related construction of Section 5.08 to be unreasonable. Meso Scale Diagnostics, LLC v. Roche Diagnostics GmbH, 62 A.3d 62, 88 (Del. Ch. 2013

  13. Courts Consider Anti-Assignment Clauses And Reverse Triangular Mergers

    Roche has provided a reasonable interpretation of Section 5.08 that is consistent with the general understanding that a reverse triangular merger is not an assignment by operation of law.

  14. A Guide to Understanding Anti-Assignment Clauses

    The court noted that generally, mergers do not result in an assignment by operation of law of assets that began as property of the surviving entity and continued to be such after the merger.

  15. PDF Summary of Legal Aspects of Mergers, Consolidations, and Transfers of

    Jefferson C. Glassie, a partner in Pillsbury Winthrop Shaw Pittman's nonprofit organizations group, represents associations and nonprofit organizations on a wide range of legal matters, including antitrust, tax, certification, accreditation, contracts, employment, merger, intellectual property and corporate issues. Mr.

  16. PDF Assignment and Subletting Restrictions 140

    signment by "operation of law"11 would constitute an Advanced Assignment Restriction. "Assignment Restriction" refers to Basic Assignment Restric-tions and Advanced Assignment Restrictions together. 8 See Riggs v. Pursell, 66 N.Y. 193, 201 (1876) ("Such covenants are restraints which courts do not favor.

  17. A Critical Determination: Who Is the Restricted Person in a Change of

    Endnotes (↵ returns to text). And remember not all mergers even constitute transfers. See Glenn West, Mergers and Restrictions on Assignments by "Operation of Law," Weil Insights, Weil's Global Private Equity Watch, September 22, 2020, available here. ↵; See Glenn West, Pondering One of Diligence's Seemingly Imponderable Questions: The Effect of Restrictions on "Indirect ...

  18. Assignability of Commercial Contracts (NY)

    A Practice Note examining New York law relating to the transferability of commercial contracts, including a party's legal ability to assign its rights and delegate its performance obligations under a contract that is silent on transferability, the construction and enforceability of contractual anti-assignment and anti-delegation clauses, and drafting an effective assignment.

  19. Spotting issues with assignment clauses in M&A Due Diligence

    An inclusion could be negotiated by the parties to broaden the anti-assignment clause and to ensure that an assignment occurring by operation of law requires counterparty approval: [Party A] agrees that it will not assign, sublet or otherwise transfer its rights hereunder, either voluntarily or by operations of law, without the prior written ...

  20. General Contract Clauses: Assignment and Delegation (NY)

    A Standard Clause, also known as an anti-assignment clause and anti-delegation clause, that provides for a contractual limitation on the assignability of contractual rights and the delegation of contractual duties under New York law. This Standard Clause has integrated notes with important explanations and drafting tips.

  21. Does a Reverse Triangular Merger Constitute An Assignment by Operation

    In a Delaware Court of Chancery decision dated February 22, 2013, Vice Chancellor Parsons held that a reverse triangular merger does not constitute an assignment by operation of law under Delaware law. The decision, Meso Scale Diagnostics, LLC v. Roche Diagnostics GMBH, C.A. No. 5589-VCP (Del. Ch. 2013) helped to clarify some uncertainty ...

  22. Reverse Triangular Mergers and Non-Assignment Clauses in Leases

    This view is particularly common where the lease explicitly restricts assignments by operation of law (in this case, the operation of the merger statute) and where—as is the case in a forward ...

  23. Anti-Assignment Provisions in Leases

    Anti-Assignment Provisions in Leases. In their Transactional Real Estate column, Allen Wieder and Salvatore Gogliormella review cases suggesting that courts in New York, California, Texas, and ...

  24. Northeastern Expands With Marymount Manhattan Merger

    The Boston-based institution will absorb the small, liberal-arts college, adding a 14th campus to its global system and establishing its first site in New York City. Northeastern University is once again expanding, this time through a merger with Marymount Manhattan College, extending Northeastern's already sizable footprint into New York City.

  25. New York's Largest Firm Offices Report YOY Growth in ...

    By ALM Staff | June 03, 2024 at 09:37 AM. The vast majority of top 25 law firms, ranked on their New York attorney headcounts, report significant increases in the sizes of their most recent ...