Yatra Online, Inc.v. Ebix, Inc. ( 2021 )

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
YATRA ONLINE, INC., )
)
Plaintiff, )
)
v. ) C.A. No. 2020-0444-JRS
)
EBIX, INC., EBIXCASH TRAVELS, INC., )
REGIONS BANK, BMO HARRIS BANK N.A., )
BBVA USA, FIFTH THIRD BANK, )
NATIONAL ASSOCIATION, KEYBANK )
NATIONAL ASSOCIATION, SILICON )
VALLEY BANK, CADENCE BANK, N.A., )
and TRUSTMARK NATIONAL BANK, )
)
Defendants. )
MEMORANDUM OPINION
Date Submitted: May 17, 2021
Date Decided: August 30, 2021
Gregory V. Varallo, Esquire of Bernstein Litowitz Berger & Grossmann LLP,
Wilmington, Delaware and Mark Lebovitch, Esquire and Daniel E. Meyer, Esquire
of Bernstein Litowitz Berger & Grossmann LLP, New York, New York, Attorneys
for Plaintiff Yatra Online, Inc., as to all Defendants Except Fifth Third Bank, N.A.
Alisa E. Moen, Esquire of Moen Law LLC, Wilmington, Delaware, Of Counsel and
Conflicts Counsel for Plaintiff Yatra Online, Inc. as to Fifth Third Bank, N.A.
Paul J. Lockwood, Esquire, Cliff C. Gardner, Esquire and Elisa M.C. Klein, Esquire
of Skadden, Arps, Slate, Meagher & Flom LLP, Wilmington, Delaware, Attorneys
for Defendants Ebix, Inc. and EbixCash Travels, Inc.
Tammy L. Mercer, Esquire and Lakshmi A. Muthu, Esquire of Young Conaway
Stargatt & Taylor, LLP, Wilmington, Delaware; Robert A. Muckenfuss, Esquire and
Kelly A. Warlich, Esquire of McGuireWoods LLP, Charlotte, North Carolina; and
Kayla J. Marshall, Esquire of McGuireWoods LLP, Washington, DC, Attorneys for
Defendants Regions Bank, BMO Harris Bank, N.A., BBVA USA, KeyBank
National Association, Silicon Valley Bank, Cadence Bank, N.A., and Trustmark
National Bank.
Michael D. DeBaecke, Esquire and F. Troupe Mickler IV, Esquire of Ashby &
Geddes, P.A., Wilmington, Delaware and Victor A. Walton, Jr., Esquire, Eric W.
Richardson, Esquire and David F. Hine, Esquire of Vorys, Sater, Seymour and
Pease LLP, Cincinnati, Ohio, Attorneys for Defendant Fifth Third Bank, National
Association.
SLIGHTS, Vice Chancellor
This case concerns an abandoned merger (the “Merger”) that Plaintiff,
Yatra Online Inc. (“Yatra”), asserts was sabotaged post-signing by Defendants,
Ebix, Inc. (“Parent”) and EbixCash Travels, Inc. (“Merger Sub” and, together with
Parent, “Ebix”), after Parent determined the deal was no longer attractive. In early
2019, Parent and Yatra engaged in extensive negotiations regarding Parent’s
potential acquisition of Yatra. The parties ultimately agreed to structure the
transaction as a stock-for-stock reverse triangular merger with Parent forming an
acquisition subsidiary, Merger Sub, to merge with and into Yatra, leaving Yatra as
both the surviving entity and a direct, wholly owned subsidiary of Parent. The
merger agreement (the “Merger Agreement”) was duly executed by Ebix and Yatra
on July 16, 2019 (the “Signing Date”), but the closing never occurred.
According to the Merger Agreement, at closing (the “Closing”), each share of
Yatra stock would be converted into the right to receive shares of Parent’s
convertible preferred stock (the “Convertible Preferred Stock”) per a fixed exchange
ratio. The rights associated with the Convertible Preferred Stock included a put right
(the “Put Right”), which could be exercised during the 25th month after the Closing.
The Put Right gave former Yatra stockholders the option to force Parent to redeem
any unconverted shares of Convertible Preferred Stock for $5.31 per share. This was
a key feature of the deal, in part, because it gave Yatra stockholders a floor under
which the price for their shares could not fall.
1
The Convertible Preferred Stock was to be issued for the first time in
connection with the Merger and, thus, had not been registered with the Securities
Exchange Commission (“SEC”) as of the Signing Date. To register the security,
Parent needed to file, and the SEC needed to accept and approve, a Form S-4
registration statement. As a right attached to the Convertible Preferred Stock, the
Put Right could not be exercised until the Convertible Preferred Stock was registered.
Parent’s S-4 filing was delayed for months after the Signing Date
notwithstanding Parent’s contractual promise to move forward on that front as
promptly as practicable. Making matters worse, the COVID-19 pandemic depressed
Parent’s stock price, ballooning the value of the Put Right relative to Parent’s market
capitalization. According to Yatra’s amended complaint (the “Complaint”), it was
then that Parent’s view of the deal soured, and it wanted out.1
To buy time as it planned its exit, Parent sought to renegotiate several
deal points post-signing and repeatedly extended the outside date contemplated in
the Merger Agreement. Relevant here, one of those extensions came in the form of
a letter agreement (the “Extension Agreement”), where Ebix explicitly promised,
among other things, that it would negotiate with Yatra in good faith. Having
anchored Yatra at bay in the dark, Parent and its lenders (the “Lender Defendants”—
1
Pl.’s Verified Am. Compl. (D.I. 27) (“Compl.”).
2
further defined below) secretly negotiated an amendment (the “Tenth Amendment”)
to Yatra’s credit agreement (together with the amendments, the “Credit Agreement”)
that effectively eliminated Parent’s ability to issue the Put Right without causing
Parent to default under the Credit Agreement.
Fed up with Parent’s behavior during the extended renegotiations, and after
the final outside closing date lapsed, Yatra terminated the Merger Agreement and
filed a lawsuit against Ebix in this court on June 5, 2020. Yatra’s original complaint
(the “Original Complaint”) asserted two counts against Ebix: Count I claimed a
breach of the Merger Agreement, while Count II claimed a breach of the Extension
Agreement.2 In its initial motion to dismiss, Ebix argued that Yatra’s termination
triggered the Merger Agreement’s Effect of Termination provision (the “Effect of
Termination Provision”), which eliminated Ebix’s liability for all claims post-
termination except fraud. In response, Yatra amended its Original Complaint to
assert fraud and breach of the implied covenant of good faith and fair dealing against
Ebix—in addition to the two breaches of contract claims alleged in the Original
Complaint. Yatra also added a claim against the Lender Defendants for tortious
2
See generally Pl.’s Verified Compl. for Breach of Contract (D.I. 1).
3
interference with Yatra’s Put Right. 3 All Defendants have moved to dismiss the
Complaint under Chancery Rule 12(b)(6).
For reasons explained below, Defendants’ motions must be granted in full.
Under the Merger Agreement’s plain terms, Yatra extinguished its breach of contract
claims when it elected to terminate the Merger Agreement. The implied covenant
claim fails because there is no gap in the Merger Agreement for the implied covenant
to fill. And the fraud and tortious interference claims fail because each relies on the
false premise that the Tenth Amendment frustrated Yatra’s remedy for specific
performance. As Yatra affirmatively pleads, it could not have sued for specific
performance until the S-4 filing was approved, and it elected to terminate the Merger
Agreement before that condition to closing occurred. Consequently, Yatra has failed
to plead reasonably conceivable loss causation for either fraud or tortious
interference. My reasoning follows.
3
(D.I. 27).
4
I. BACKGROUND
The facts are drawn from the pleadings, documents incorporated into the
pleadings by reference and matters of which the Court may take judicial notice. 4
A. The Parties
Plaintiff, Yatra, is a Cayman Islands exempted company with operations
primarily in India.5 It operates in the online travel space servicing both leisure and
business travelers. 6 Yatra’s common stock (or “ordinary shares”) are listed on the
NASDAQ exchange under the symbol “YTRA,” and certain warrants to purchase
its ordinary shares are listed on the OTCQX Best Market under the symbol
“YTROF.” 7
Defendant, Parent, is a Delaware corporation with headquarters in
Johns Creek, Georgia. 8 It operates as an international supplier of on-demand
4
Vanderbilt Income & Growth Assocs., L.L.C. v. Arvida/JMB Managers, Inc., 691 A.2d
609, 612–13 (Del. 1996).
5
Compl. ¶ 22.
6
Id.7
Id.8
Compl. ¶ 23.
5
infrastructure exchanges to the insurance, financial and healthcare industries. 9
Parent’s common stock is listed on NASDAQ under the symbol “EBIX.”10
Defendant, Merger Sub, is a Cayman Islands exempted company and a direct,
wholly owned subsidiary of Parent. 11 Merger Sub was formed solely to engage in
the transactions contemplated by the Merger Agreement. 12
Defendant, Regions Bank (“RB”), is an Alabama state-chartered commercial
bank. 13 RB serves as administrative agent and collateral agent under the Credit
Agreement and has served in such capacities since August 5, 2014.14 RB is also a
lender under the Credit Agreement and executed the Tenth Amendment.15
9
Id.10
Id.11
Compl. ¶ 24.
12
Ebix Defs.’ Opening Br. in Supp. of their Mot. to Dismiss the Verified Am. Compl.
(D.I. 53) (“DOB”), Ex. A (Merger Agreement, dated July 16, 2019, by and among Ebix
and Yatra) (“MA”); MA § 4.9.
13
Compl. ¶¶ 25, 119.
14
Compl. at 2.
15
Compl. ¶ 25.
6
Defendant, BMO Harris Bank N.A. (“BMO”), is a bank based in Chicago,
Illinois.16 BMO is a lender under the Credit Agreement and executed the Tenth
Amendment.17
Defendant, BBVA USA, is an Alabama banking corporation headquartered in
Birmingham, Alabama. 18 BBVA USA is a lender under the Credit Agreement and
executed the Tenth Amendment.19
Defendant, Fifth Third Bank, National Association (“FTBNA”), is a national
bank based in Cincinnati, Ohio.20 FTBNA is a lender under the Credit Agreement
and executed the Tenth Amendment.21
Defendant, KeyBank National Association (“KNA”), is a regional bank
headquartered in Cleveland, Ohio. 22 KNA is a lender under the Credit Agreement
and executed the Tenth Amendment.23
16
Compl. ¶ 26.
17
Id.
18
Compl. ¶ 27.
19
Id.
20
Compl. ¶ 28.
21
Id.
22
Compl. ¶ 29.
23
Id.
7
Defendant, Silicon Valley Bank (“SVB”), is a California state-charted bank.24
SVB is a lender under the Credit Agreement and executed the Tenth Amendment.25
Defendant, Cadence Bank, N.A. (“CB”), is a national banking association.
It is a lender under the Credit Agreement and executed the Tenth Amendment. 26
Defendant, Trustmark National Bank (“TNB” and, together with CB, SVB,
KNA, FTBNA, BBVA USA, BMO and RB, the “Lender Defendants”), is a
Mississippi state-chartered bank headquartered in Jackson, Mississippi.27 TNB is a
lender under the Credit Agreement and executed the Tenth Amendment.28
B. Yatra and Ebix Negotiate and Execute the Merger Agreement
On February 13, 2019, the CEO of Parent, Robin Raina, advised the CEO of
Yatra, Dhruv Shringi, that Parent was interested in exploring a strategic transaction
with Yatra. 29 Over the next two weeks, Shringi and Raina discussed potential
24
Compl. ¶ 30.
25
Id.
26
Compl. ¶ 31.
27
Compl. ¶ 32.
28
Id.
29
Compl. ¶ 33.
8
transaction structures, the details of which Shringi brought back to Yatra’s senior
management and Yatra’s board of directors. 30
On February 24, 2019, Parent sent a written proposal to Yatra’s board of
directors to acquire 100% of Yatra via a merger (the “Initial Proposal”).31 The Initial
Proposal contemplated that the merger consideration would be payable either in cash
or freely-tradeable Parent stock (with a price floor). All outstanding Yatra warrants
would be surrendered (or repurchased) and retired by Yatra before closing. 32 If the
merger consideration was stock, the Initial Proposal also provided for a put right that
would be exercisable 25 months after closing and would allow former Yatra
stockholders to sell the Parent stock they received as merger consideration back to
Parent at 90% of the price at which it was issued. 33 Yatra’s board of directors
engaged sophisticated legal and financial advisors to assist in its evaluation of the
proposed transaction.34
30
Compl. ¶¶ 33–34.
31
Compl. ¶ 34.
32
Id.
33
Id.
34
Compl. ¶ 35.
9
On March 11, 2019, without consent from Yatra, Parent publicly disclosed
the terms of the Initial Proposal in a press release and Form 8-K filed with the SEC.35
Later that day, Yatra publicly confirmed that it was exploring a transaction with
Parent, and the parties subsequently entered into a confidentiality agreement to
protect against future unauthorized disclosures.36
Over the next several months, Yatra and Parent negotiated the Merger
Agreement’s terms and conducted mutual due diligence aided by legal and financial
advisors. 37 Though Yatra engaged in preliminary discussions with two other
potential strategic acquirors, Yatra and Ebix ultimately finalized and executed the
Merger Agreement on July 16, 2019, announcing the Merger the next day. 38
C. The Merger Agreement
The Merger Agreement contemplated a stock-for-stock transaction where,
upon Closing, each share of Yatra Stock would be cancelled and converted into a
right to receive shares of Convertible Preferred Stock, in accordance with a fixed
exchange ratio (with a different exchange ratio assigned to each class of
35
Compl. ¶ 36.
36
Id.
37
Compl. ¶ 38.
38
Compl. ¶ 39.
10
Yatra stock). 39 The rights associated with the Convertible Preferred Stock included
the Put Right, which could be exercised during the 25th month after the Closing.
The Put Right gave former Yatra stockholders the option to force Parent to redeem
any unconverted shares of Convertible Preferred Stock for $5.31 per share. 40 On the
Signing Date, the Put Right implied a Yatra equity value of $257 million, equaling
41
approximately 17.5% of the Parent’s market capitalization. The Merger
Agreement also contemplated that Parent would also assume certain outstanding
Yatra warrants, which would be convertible into the same Convertible Preferred
Stock per a specified exchange ratio and tempered by the same Put Right. 42
Beyond the economic terms, the Merger Agreement included a number of
representations and warranties offered by both Yatra and Ebix, as well as post-
39
Compl. ¶ 40.
40
Id.
41
Compl. ¶ 41. The relative value of the Put Right to Parent’s market capitalization would
fluctuate, however, according to Parent’s stock price. For example, on November 14, 2019,
as Parent’s stock price fell in the wake of a disappointing earnings announcement, the value
of the Put Right equaled approximately 25.67% of Parent’s market capitalization. Id.
As of May 1, 2020, the last trading day before Parent proposed the “Heads of Terms”
(described infra), the Put Right equaled approximately 44.17% of Parent’s market
capitalization. Id.
42
Compl. ¶ 42.
11
signing, pre-Closing covenants, which were tied to closing conditions for the
Merger. 43 Several of these provisions are relevant here.
First, Parent represented and warranted in Section 4.8 that all prior and future
public disclosures complied or would comply with all SEC rules and regulations and
federal securities laws (collectively, the “Accuracy Rep”).44
Second, and relatedly, Parent represented and warranted in Section 4.10 that:
(a) all prior and future financial statements complied or would comply with
applicable accounting requirements, and (b) it had not received regulatory inquiries
into its accounting practices or policies between December 31, 2018, and the date of
the Merger Agreement (collectively, the “Accounting Reps”).45
Third, Parent agreed to file the S-4 with the SEC as “promptly as practicable”
and in no event later than 45 days after the Signing Date (i.e., August 30, 2019).46
Parent also agreed to use “reasonable best efforts” to have the SEC declare the S-4
effective “as promptly as practicable after such filing with the SEC” (the “S-4
43
Compl. ¶ 43.
44
Compl. ¶ 44; MA §§ 4.8(b)–(c).
45
Compl. ¶ 46; MA §§ 4.10(a)–(b).
46
Compl. ¶ 56; MA § 6.1(a).
12
Covenants”). 47 An effective S-4 was a closing condition to the Merger and a
prerequisite for Yatra to hold its stockholder meeting for approval of the Merger.48
Fourth, Parent and Yatra agreed to use “reasonable best efforts” to ensure that
all closing conditions would be satisfied (the “Best Efforts Covenant”). 49
Fifth, the Merger Agreement did not require that the Closing occur on a
specific calendar date. Rather, it provided that the Closing would take place on the
third business day following the date on which each of the closing conditions set
forth in Article VII is satisfied or waived by the party entitled to waive such
condition, provided that the Closing must occur before the outside closing date of
April 12, 2020 (the “Outside Date”).50
Finally, if the Closing did not occur before the Outside Date, then either party
could terminate the Merger Agreement.51 This termination right did not apply if the
terminating party had breached or violated any of its obligations under the Merger
Agreement and “such breach [was] the principal cause of or directly resulted in
47
Compl. ¶ 48; MA § 6.1(a).
48
Compl. ¶ 49; MA §§ 6.1(a), 6.5.
49
Compl. ¶ 50. The Best Efforts Covenant, includes, but is not limited to, Parent’s
covenant to use reasonable best efforts to have the SEC declare the S-4 effective as
promptly as practicable. See MA §§ 6.1(a), 6.5.
50
Compl. ¶ 54; MA § 8.1(b)(i).
51
Id.
13
(A) the failure to satisfy the conditions to the obligations of the terminating party to
consummate the Merger set forth in Article VII prior to the Outside Date or (B) the
failure of the Closing to occur by the Outside Date.”52 In the Effect of Termination
Provision, the parties agreed that, “[i]n the event of any termination of this
Agreement . . . , the obligations of the parties shall terminate and there shall be no
liability on the part of any party with respect thereto,” with limited exceptions not
relevant here.53 The parties agreed, however, that termination shall not “relieve any
party from liability for damages arising out of any fraud occurring prior to such
termination.”54
D. Parent Delays in Preparing and Filing the S-4
As noted, the S-4 filing was essential to the Closing, mainly because the
Merger consideration would consist of newly issued Convertible Preferred Stock
that needed to be registered.55 Key to the timing of Parent’s preparation of the S-4
was whether Parent would have to include pro forma financials for the post-Merger
52
Id.
53
MA § 8.2; Compl. ¶ 56.
54
Id.
55
Id.
14
56
company. And that determination would depend upon the results of a
“significance test.”57
While Parent historically prepared its financials in accordance with U.S.
Generally Accepted Accounting Principles (“GAAP”), as a company operating
primarily out of India, Yatra historically prepared its financials under the
International Financial Reporting Standards (“IFRS”). 58 Aware that converting
Yatra’s financials from IFRS to GAAP would be time-intensive, immediately after
signing the Merger Agreement, Yatra began pushing Parent to determine whether
pro forma financials would be necessary. 59 Despite Yatra’s requests, Parent delayed
conducting its significance test analysis; when it finally was completed, that analysis
revealed that pro forma financials would be required.60 That, in turn, further delayed
preparation of the S-4 and ultimately the Closing.61
56
Compl. ¶ 57. The details of the of the “significance test[ing]” are not provided in the
Complaint.
57
Id.
58
Compl. ¶ 58.
59
Compl. ¶¶ 59–60.
60
Id.
61
Id.
15
E. Parent Conducts a Pretextual Renegotiation
Shortly before the initial Outside Date, in late March 2020, Parent was
severely impacted by the COVID-19 pandemic and approached Yatra about
renegotiating specific terms of the Merger Agreement. 62 While reserving all of its
rights under the Merger Agreement, Yatra reluctantly agreed to renegotiate in hopes
of closing the Merger and avoiding the cost of litigation. 63 With Yatra committed
to renegotiating, Parent sought repeated extensions of the Outside Date and proposed
revisions to a number of material deal terms, including an attempt to eliminate the
Put Right. 64
Meanwhile—unbeknownst to Yatra—Parent and the Lender Defendants were
negotiating the Tenth Amendment, which essentially would prohibit Parent from
issuing the Put Right. 65 Parent and the Lender Defendants executed the Tenth
Amendment on May 7, 2020, despite Parent’s knowledge that the Put Right was a
crucial component of the Merger consideration payable to Yatra and that entering
into the Tenth Amendment would make payment of the Put Right impossible.66
62
Compl. ¶ 127.
63
Compl. ¶ 130.
64
Compl. ¶¶ 131, 133.
65
Compl. ¶¶ 134–35.
66
Compl. ¶¶ 153–57; 172.
16
F. Parent Continues to Delay Closing
After Parent finalized the Tenth Amendment, it continued to string Yatra
along via renegotiations and Outside Date extensions.67 On May 14, 2020, Yatra
and Ebix agreed to a fourth extension of the Outside Date (the “Extension
Agreement”).68 The Extension Agreement requires that Ebix: make its officers and
legal counsel available for diligence sessions as “necessary to satisfactorily assess
the diligence issues” (the “Diligence Covenant”); provide Yatra a proposed draft of
the revised certificate of designation of the Convertible Preferred Stock, which must
clearly set forth Ebix’s proposed modified terms (the “COD Covenant”); provide
Yatra with a proposed draft Merger Agreement amendment, which “shall clearly
articulate and set forth Ebix’s proposed modified terms and shall include provisions
for an interim financing”; and “promptly provide revised drafts of transaction
documents . . . and negotiate in good faith with Yatra.” (the “Good Faith Covenant.”)
67
Compl. ¶ 175.
68
Compl. ¶ 180; Pl.’s Omnibus Answering Br. in Opp’n to Defs.’ Mots. to Dismiss
(D.I. 62) (“PAB”) Ex. 6 (“EA”) at 1.
17
Ebix is alleged to have breached the Extension Agreement by: refusing to
provide diligence details and the proposed draft of the certificate of designation of
the Convertible Preferred Stock; modifying the agreed terms to the amendment; and
failing to respond to Yatra’s term sheet proposing revisions to the deal. 69 The final
Outside Date of June 4, 2020, came and went without any hint that Parent was
prepared to close.70
G. Procedural History
On June 5, 020, the day after the final Outside Date, Yatra terminated the
Merger Agreement and filed this action for breach of contract against Ebix. 71
On June 19, 2020, Parent secured clearance of all of its SEC comment letters. 72
On August 9, 2020, Parent filed a form 10-Q that included a disclosure related to the
69
Compl. ¶¶ 180, 182, 184, 185–86, 191–92. I note that the draft amendment to the Merger
Agreement that Ebix delivered to Yatra included several new terms that are not specifically
addressed in this opinion, which are referred to by the parties as “Heads of Terms.”
Included among these new terms was a loan from Parent to Yatra for $10 million. Yatra
alleges the structure of this loan was “predatory.” I need not address the terms added to
the draft amendment to the Merger Agreement because the parties never entered into the
proposed amendment, and therefore are not bound by its terms. Compl. ¶¶ 144, 234.
70
Compl. ¶ 193.
71
D.I. 1; Compl. ¶ 193.
72
Compl. ¶ 194.
18
Tenth Amendment.73 Yatra filed the now-operative Complaint on September 25,
2020. 74
Yatra’s Complaint comprises five counts. Count I alleges that Ebix breached
several of the Merger Agreement’s provisions, including the Accuracy Rep, the
Accounting Reps, the S-4 Covenants and the Best Efforts Covenant. 75 Count II
alleges that Ebix breached several of the Extension Agreement’s provisions,
including the Diligence Covenant, the COD Covenant, and the Good Faith
Covenant. 76 In Count III, Yatra alleges that Ebix breached the covenant of good
faith and fair dealing implied within the Merger Agreement and the Extension
Agreement. 77 In Count IV, Yatra alleges that Ebix committed fraud when Ebix
intentionally delayed the consummation of the Merger Agreement, to Yatra’s
detriment, through misrepresentations and acts of deceit.78 And, in Count V, Yatra
alleges the Lender Defendants tortiously interfered with the Merger Agreement by
entering into the Tenth Amendment and thereby destroying the economic value of
73
Compl. ¶ 174.
74
D.I. 27.
75
Compl. ¶¶ 195–99.
76
Compl. ¶¶ 200–04.
77
Compl. ¶¶ 205–15.
78
Compl. ¶¶ 216–39.
19
the Put Right.79 After the parties briefed Defendants’ motions to dismiss, the Court
heard oral argument on June 17, 2021, and the matter was deemed submitted for
decision that day.80
II. ANALYSIS
Chancery Rule 12(b)(6) requires dismissal of a complaint if the plaintiff could
not recover under “any reasonably conceivable set of circumstances susceptible of
proof” based on the complaint’s well-pled facts. 81 While the court need not accept
conclusory allegations or “every strained interpretation of the allegations proposed
by plaintiff,”82 it “must accept as true all well-pled allegations in the complaint and
draw all reasonable inferences from those facts in plaintiff’s favor.”83
79
Compl. ¶¶ 240–45.
80
D.I. 51 (Lender Defs.’ Opening Br. in Supp. of Mot. to Dismiss Count V of Pl.’s Verified
Am. Compl.) (“LDOB”); D.I. 53 (DOB); D.I. 62 (PAB); D.I. 76 (Lender Defs.’ Reply Br.
in Supp. of Mot. to Dismiss Count V of Pl.’s Verified Am. Compl.) (“LDRB”); D.I. 79
(Ebix Defs.’ Reply Br. in Further Supp. of Their Mot. to Dismiss the Verified Am. Compl.)
(“DRB”); D.I. 87 (Tr. of 5.17.21 Oral Arg. on Defs.’ Mots. to Dismiss) (“Oral Arg. Tr.”).
81
See Gen. Motors, 897 A.2d at 168; Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97
(Del. 2002).
82
Id.83
In re Rouse Props., Inc., 2018 WL 1226015, at *10 (Del. Ch. Mar. 9, 2018) (citations
omitted).
20
A. Count I – Breach of the Merger Agreement
In Count I, Yatra claims Ebix breached the Merger Agreement. “Under
Delaware law, the elements of a breach of contract claim are: (1) a contractual
obligation; (2) a breach of that obligation by the defendant; and (3) a resulting
damage to the plaintiff.” 84 “[Because] [t]he construction of a contract is a question
of law,”85 it is well understood that “a motion to dismiss is a proper framework for
determining the meaning of contract language.”86
Ebix’s showcase argument is that Yatra’s decision to terminate the Merger
Agreement bars its claims for breach of contract under the unambiguous terms of
the Effect of Termination provision. That provision reads in full:
Section 8.2 Effect of Termination. In the event of any termination of
this Agreement as provided in Section 8.1, the obligations of the
parties shall terminate and there shall be no liability on the part of
any party with respect thereto, except for the confidentiality
provisions of Section 6.4 (Access to Information) and the provisions of
Section 3.26 (No Other Representations and Warranties; Disclaimers),
Section 4.17 (No Expenses), this Section 8.2, Section 8.3 (Termination
Fees) and Article IX (General Provisions), each of which shall survive
the termination of this Agreement and remain in full force and effect;
provided, however, that, subject to Section 8.3(a)(iii), nothing
contained herein shall relieve any party from liability for damages
arising out of any fraud occurring prior to such termination, in
which case the aggrieved party shall be entitled to all rights and
84
77 Charters, Inc. v. Gould, 2020 WL 2520272, at *19 (Del. Ch. May 18, 2020) (internal
quotations omitted).
85
Id.86
Majkowski v. Am. Imaging Mgmt. Servs., LLC, 913 A.2d 572, 581 (Del. Ch. 2006).
21
remedies available at law or equity. The parties acknowledge and agree
that nothing in this Section 8.2 shall be deemed to affect their right to
specific performance under Section 9.9 prior to the valid termination of
this Agreement. In addition, the parties agree that the terms of the
Confidentiality Agreement shall survive any termination of this
Agreement pursuant to Section 8.1 in accordance with its terms. 87
Ebix asserts that, under this provision, Yatra’s decision to terminate the
Merger Agreement eliminated any potential “liability . . . with respect” to the
“obligations” arising from the Merger Agreement, including in particular Yatra’s
claim that Ebix breached the Merger Agreement. Yatra responds that the phrase
“with respect thereto” can reasonably be read to modify “any termination of this
Agreement” (as opposed to “obligations”). Under this construction, the Effect of
Termination provision cannot be understood to eliminate damages owed for prior
breaches of “obligations,” but only damages caused by the act of terminating the
Merger Agreement. Thus, according to Yatra, the Effect of Termination provision
does not by its terms extinguish all claims for breach of the Merger Agreement;
instead, it serves only to make clear which contractual obligations carry forward
post-termination and which do not. At best, Yatra says, the Merger Agreement is
ambiguous as to the effect of termination on a party’s post-termination remedies.
87
MA § 8.2 (emphasis added).
22
Of course, “[a]n agreement is not ambiguous [simply] because the parties
disagree about its interpretation.” 88 Rather, “a contract is ambiguous only when the
provisions in controversy are reasonably or fairly susceptible of different
interpretations or may have two or more different meanings.” 89 “By contrast, a
contract is unambiguous when the agreement’s ordinary meaning leaves no room for
uncertainty, and the plain, common, and ordinary meaning of the words . . . lends
itself to only one reasonable interpretation.” 90
Yatra’s reading of the Effect of Termination provision stretches the words
beyond their tolerance. The comma following “Section 8.1” breaks the sentence,
reading naturally to indicate the Merger Agreement’s drafters intended the phrase
“with respect thereto” to modify “the obligations of the parties” as opposed to
“any termination of this agreement.”91 Further, Yatra’s position—that the provision
only extinguishes liability arising from “any termination of this Agreement”—is
88
Sage Software, Inc. v. CA, Inc., 2010 WL 5121961, at *6 (Del. Ch. Dec. 14, 2010), aff’d,
27 A.3d 552 (Del. 2011) (TABLE).
89
Rhone-Poulenc Basic Chems. Co. v. Am. Motorist Ins. Co., 616 A.2d 1192, 1196
(Del. 1992).
90
Pearl City Elevator, Inc. v. Gieseke, 2021 WL 1099230, at *9 (Del. Ch. Mar. 23, 2021).
91
To the extent Yatra is seeking to invoke the so-called “last antecedent rule,” that rule
actually supports Ebix’s construction. See Rag Am. Coal Co. v. AEI Res., Inc., 1999
WL 1261376, at *4 (Del. Ch. Dec. 7, 1999) (“[O]ridinarily, qualifying words or phrases,
where no contrary intention appears, usually relate to the last antecedent.”) (citation
omitted). The only “antecedents” at work in the clause at issue are “obligations” and
“liability,” both of which “terminate” upon termination of the Merger Agreement.
23
inconsistent with the language immediately following “with respect thereto,” which
“except[s]” certain obligations under the Merger Agreement, as specifically
enumerated, from the effects of the contractual limitation of liability. That clause
would be superfluous if the effect of the provision was to limit liability only arising
from the act of terminating the Merger Agreement.92 Moreover, contrary to Yatra’s
contention that termination leaves claims for breach of contract based on prior acts
unaffected, Section 8.2 expressly carves out only liability for “fraud occurring prior
to such termination,” implying that liability for all other claims (including contract-
based claims) for acts “occurring prior” to termination do no survive post-
termination.93
92
See Kuhn Const., Inc. v. Diamond State Port Corp., 990 A.2d 393, 396–97 (Del. 2010)
(“We will read a contract as a whole and we will give each provision and term effect, so as
not to render any part of the contract mere surplusage.”), see also Restatement (Second) of
Contracts § 203 (“In the interpretation of a promise or agreement or a term thereof, the
following standards of preference are generally applicable: (a) an interpretation which
gives a reasonable, lawful, and effective meaning to all the terms is preferred to an
interpretation which leaves a part unreasonable, unlawful, or of no effect.”); id. cmt. b
(“Since an agreement is interpreted as a whole, it is assumed in the first instance that no
part of it is superfluous.”).
93
Though Yatra places great weight on its (disputed) contention that it filed the Original
Complaint before effectively terminating the Merger Agreement, Section 8.2 expressly
states that following “any termination,” “the obligations of the parties shall terminate and
there shall be no liability on the part of any party with respect thereto,” except “for damages
arising out of any fraud occurring prior to such termination.” MA § 8.2. By expressly
terminating all liability of the parties (except “fraud occurring prior to such termination”)
following termination, the Effect of Termination provision makes clear that the act of
termination extinguishes liability then and there, regardless of whether a claim is pending
before termination. See 17A Am. Jur. 2d Contracts § 709 (2004) (“Where a contract
24
Indeed, Section 8.2’s language is not terra incognita; Vice Chancellor Laster
considered a substantively similar effect of termination provision containing a broad
waiver of contractual liability, modified by two exceptions, in AB Stable VIII LLC
v. Maps Hotels & Resorts One LLC.94 There, the court observed that the provision
and its exceptions were “pretty standard” and cited extensive secondary sources,
including leading treatises, explaining that the consequences of termination are
“usually [ ] that all of the provisions, with a few possible exceptions, will terminate
and no longer be of any force and effect.” 95 In other words, the court endorsed
Ebix’s construction of the Effect of Termination Provision here.
At oral argument, Yatra attempted to distinguish AB Stable by pointing out
that the effect of termination provision at issue there included the phrase “this
prescribes a remedy for a breach, that remedy is generally exclusive if the contract so
declares or clearly shows the parties’ intention to make it so.” (internal citations omitted)).
94
2020 WL 7024929, at *104 (Del. Ch. Nov. 30, 2020). It is telling that Yatra did not
address AB Stable on brief even after Ebix prominently featured that case in its opening
submission. See DOB at 25–26.
95
AB Stable, 2020 WL 7024929, at *104 n.311 (citing Lou R. Kling & Eileen T. Nugent,
Negotiated Acquisitions of Companies, Subsidiaries and Divisions, § 15A.02 at 15A-4.3
(2020 ed.) (noting the effect of a provision broad that eliminates liability upon termination
suggesting that “[it] is important . . . to continue and carve out a proviso to the effect that
the foregoing will not relieve any party for liability for its breach of any provision prior to
termination. Failure to do this could leave the aggrieved party without a remedy,
particularly if the breaching party was the one to terminate.”); ABA Mergers & Acqs.
Comm., Model Tender Offer Agreement 240 (2020) (discussing exceptions to a provision
contemplating no liability upon termination and stating that, “[w]ithout this proviso, the
language in Section 8.02 would provide that neither party would be liable for breach to the
other after termination regardless of pre-closing breaches”)).
25
Agreement shall forthwith become void” upon termination, whereas that phrase is
not included in the Effect of Termination provision at issue here. 96 But, as Yatra
admitted at oral argument, 97 the court in AB Stable expressly observed that “[u]nder
the common law, termination results in an agreement becoming void, but that fact
alone does not eliminate liability for a prior breach.”98 The court went on to explain
that when parties include a provision stating that “there shall be no liability on the
part of either party” upon termination, they “alter[] the common law rule” and
“broadly waive[] contractual liability and all contractual remedies.”99 The Merger
Agreement’s Effect of Termination Provision contains language nearly identical to
AB Stable’s hypothetical, providing that there “shall be no liability on the part of any
party” in the event of termination, rendering the basis for Yatra’s proffered
distinction illusory. 100
96
Oral Arg. Tr. 101:8–11.
97
Id. at 101:16–21.
98
AB Stable, 2020 WL 7024929, at *103.
99
Id.100
MA § 8.2 (emphasis added). Yatra also observed at oral argument that the effect of
termination provision at issue in AB Stable did not have the “with respect thereto” language
which, according to Yatra, is what inserts ambiguity into the Merger Agreement’s Effect
of Termination Provision. Oral Arg. Tr. 101:24–102:3. But the point to draw from
AB Stable is how an effect of termination provision with the “no liability” language
operates. As the court there observed, that language makes clear the parties’ intent that
termination of the agreement will eliminate liability of both parties except to the extent
26
Yatra next contends that a reading of the broader Merger Agreement conflicts
with Ebix’s construction of the Effect of Termination provision. Specifically,
according to Yatra, Ebix’s reading of Section 8.2 conflicts with Section 9.9(c) and
Section 9.1.
Section 9.9(c) reads:
(ii) nothing set forth in this Section 9.9 shall require any party to
institute any Proceeding (or limit any party’s right to institute any
Proceeding) for specific performance . . . prior or as a condition to
exercising any termination right under Section 8.1, nor shall the
commencement of any Proceeding . . . restrict or limit any party’s right
to terminate the Agreement in accordance with the terms of
Section 8.1 or pursue any other remedies (including monetary
damages) in respect of this Agreement or the transactions contemplated
thereby . . . 101
There is no discernible conflict between Ebix’s construction of Section 8.2 and
Section 9.9(c). Section 9.9(c) plainly provides only that a party need not sue for
specific performance before terminating the Merger Agreement. 102 The disjunctive
expressly carved-out in the provision. That is precisely what the parties agreed to in the
Merger Agreement.
101
MA § 9.9(c) (emphasis added).
102
Yatra proposes that Section 9.9(c) allows for a party to terminate the contract and then
sue for specific performance. PAB at 32. But Section 9.9(c) does not say that. It states
simply that a party is not prevented from suing for specific performance before exercising
its termination right. It would make no sense for a party to terminate the agreement, only
to turn around and sue for specific performance, and Section 9.9(c) does not provide for
that scenario. See Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, (Del. 2010) (holding
that a party seeking specific performance must demonstrate, inter alia, that she “is ready,
willing and able to perform”).
27
between a reference to termination and the pursuit of other remedies “(including
monetary damages)” reveals an intent that a party may either terminate the Merger
Agreement (one contractual remedy for breach) or “pursue any other remedies.”
Thus, the parties contemplated termination as a remedy distinct from others, which
makes perfect sense in view of Section 8.2’s unambiguous provision that when a
party elects to terminate the Merger Agreement, that termination eliminates any
party’s liability for damages arising from a breach occurring prior to termination.
Yatra’s argument under Section 9.1 fares no better. That provision provides
in relevant part:
[R]epresentations, warranties, covenants and agreements in this
Agreement and in any certificate or other writing delivered pursuant
hereto shall not survive the consummation of the Merger or the
termination of this Agreement, subject to Sections 8.2 and 8.3.103
Yatra argues that the survival clause functions to cut off the parties’ continuing
obligations to comply with the Merger Agreement’s provisions after the
consummation of the Merger or the termination of the Merger Agreement, but does
not affect the parties’ rights to sue for prior breaches.
Contrary to Yatra’s argument that the survival clause makes clear that only
the obligations set forth in the Merger Agreement (and not the remedy for prior
breaches of those obligations) are extinguished post-termination, this court has
103
MA § 9.1.
28
explained that “where the contract expressly provides that the representations and
warranties terminate upon closing, so do any remedies for breach of those
representations and warranties.”104 According to Yatra, the holding in GRT is inapt
because Yatra has brought its claims for breach post-termination, not post-closing.105
But this argument ignores that Section 9.2 treats termination as equivalent to closing,
stating that “representations, warranties, covenants and agreements . . . shall not
survive the consummation of the Merger or the termination of this Agreement,
subject to Sections 8.2 and 8.3.” 106 As noted, Yatra’s reading simply cannot be
squared with Section 8.2’s broad elimination of liability following termination. The
only way to square Section 8.2 with Section 9.1 is to understand the survival clause
to provide that termination operates as if the parties consummated the Merger
Agreement—eliminating both sides’ liability for any claim arising out of the
contract.
In a last gasp, Yatra protests that Ebix’s construction results in absurdity, as it
would require Yatra to have sued for breach of contract without terminating the
104
GRT, 2011 WL 2682898, at *13, see also id. (“[A]ll major commentaries agree that by
expressly terminating representations and warranties at closing, the parties have made clear
their intent that they can provide no basis for a post-closing suit seeking a remedy for an
alleged misrepresentation”); id. at *12 (explaining that Delaware law does not require
survival clauses to contain express language limiting remedies).
105
PAB at 36.
106
MA § 9.2 (emphasis added).
29
Merger Agreement.107 But there is nothing absurd about a contract that, in essence,
requires parties to sue for breach without terminating the agreement. 108 Indeed, by
Yatra’s own admission, its obligations under the Merger Agreement “ceased,
because Ebix materially breached the Merger Agreement.” 109 Thus, the Merger
Agreement provided a choice to a party faced with a breach by the counterparty:
either (a) sue for damages (or specific performance) or (b) terminate the Merger
Agreement and extinguish liability for all claims arising from the contract (except
those specifically carved-out, including claims for fraud). The latter option would
be preferable where, for example, the terminating party believed it had some liability
exposure of its own and would prefer to terminate the Merger Agreement to
eliminate that risk. This is a perfectly logical way for parties contractually to manage
risk, and it is not for this Court to redline the parties’ bargained-for limitations of
liability because one party now regrets the deal it struck.110
107
PAB at 32.
108
See 17A Am. Jur. 2d Contracts, § 711 (Aug. 2021 Update) (observing that a party to a
contract may elect “to keep the contract alive” by “remaining at all times ready, willing,
and able to perform their part of the contract” while still maintaining a claim for breach of
contract against the counterparty).
109
Id. at 32 n.21.
110
See GRT, 2011 WL 2682898, at *6; Nemec v. Shrader, 991 A.2d 1120, 1126 (Del. 2010)
(explaining the Court will “not rewrite the contract to appease a party who later wishes to
rewrite a contract”).
30
Yatra agreed that termination of the Merger Agreement would terminate
liability for breach of that contract. Accordingly, its post-termination claim for
breach of the Merger Agreement, as stated in Count I, must be dismissed.
B. Count II – Breach of the Extension Agreement
In Count II, Yatra asserts that Ebix breached the Extension Agreement.
According to Yatra, even if the Court finds that Count I fails under the Merger
Agreement’s Effect of Termination Provision, the Extension Agreement is a
standalone agreement unaffected by any limitations the parties may have agreed to
in other contracts.111
Yatra’s argument cannot be squared with the plain text of either the Merger
Agreement or the Extension Agreement. The Extension Agreement is intended, as
its name suggests, to modify the Merger Agreement by extending the agreed upon
Outside Date. 112 Not surprisingly, the Extension Agreement refers to the Merger
Agreement in its very first sentence, incorporates the capitalized terms in the Merger
113
Agreement and is replete with references to the Merger Agreement.
111
Oral Arg. Tr. 116:3–5.
112
PAB, Ex. 6 (“EA”) at 1.
113
Id. at 1 (“Reference is hereby made to the Merger Agreement . . . . All capitalized terms
used herein but not otherwise defined shall have the meanings ascribed to such terms in
the Merger Agreement. By signing . . . below, and subject to the following agreements,
the Parties hereby agree that the Outside Date in the Merger Agreement shall be further
extended to . . . June 4, 2020 . . .”); id. at 2 (“In the event that Ebix fails to comply with the
provisions in clauses (i)–(iv) above, Yatra shall have the right to immediately terminate
31
Conspicuously absent from the Extension Agreement, however, is an integration
clause.114 Indeed, there is nothing in the Extension Agreement that provides or even
suggests it stands apart from the terms and structure of the Merger Agreement,
including the Effect of Termination provision. On the contrary, the parties agreed
in the Extension Agreement:
With the sole exception of the amendment to the Outside Date set forth
in this letter agreement, the Merger Agreement remains unchanged and
continues in full force and effect. By entering into this letter agreement,
neither Party shall be deemed to waive or otherwise impair any of its
rights under the Merger Agreement or preclude any other or further
exercise of such rights or any other rights under the Merger Agreement.
Both Parties expressly reserve their rights under the Merger Agreement
and in law and equity. 115
That language clearly indicates the Extension Agreement was intended narrowly to
modify the Merger Agreement’s provisions, with all rights and obligations therein
otherwise expressly reserved.
The Merger Agreement, for its part, explicitly contemplates “other writings
delivered pursuant” thereto, like the Extension Agreement, stating that any
representations in “other writings” “shall not survive the consummation of the
this letter agreement by written notice in accordance with the provisions of Section 9.2 of
the Merger Agreement . . . .”).
114
See generally id.
115
EA at 2.
32
Merger or the termination of this Agreement.” 116 For reasons already explained, the
termination of the Merger Agreement eliminates claims for prior breaches of
contract. Thus, like Count I, Yatra’s decision to terminate the Merger Agreement
insulated Ebix from liability for alleged breaches of the Extension Agreement.
Defendants’ motion to dismiss Count II is granted.
C. Count III – Breach of the Implied Covenant of Good Faith and Fair
Dealing
In Count III, Yatra asserts that Ebix breached the implied covenant of good
faith and fair dealing under the Merger Agreement and the Extension Agreement in
two ways. First, Yatra claims Ebix breached the implied covenant by purporting to
renegotiate the terms of the Merger Agreement, without any intention of closing
those renegotiated terms, to induce Yatra to forbear from exercising remedies before
Parent could amend its Credit Agreement, finalize its audit and announce its
financial results.117 Second, Yatra claims that Parent breached the implied covenant
by entering into the Tenth Amendment, effectively foreclosing the issuance of the
Put Right or the payment of any consideration other than stock. 118
116
MA § 9.1.
117
PAB at 38.
118
Id. at 42.
33
Under Delaware law, the implied covenant of good faith and fair dealing is
“a limited and extraordinary legal remedy.” 119 “As such, the implied covenant does
not apply when the contract addresses the conduct at issue, but only when the
contract is truly silent concerning the matter at hand.”120 Even if the contract is
silent, “[a]n interpreting court cannot use an implied covenant to re-write the
agreement between the parties, and ‘should be most chary about implying a
contractual protection when the contract could easily have been drafted to expressly
provide for it.’” 121
With respect to Yatra’s first implied covenant theory, the contract is not silent
as to Ebix’s obligations. Section 6.5 of the Merger Agreement requires the parties
to “use their reasonable best efforts to take, or cause to be taken, as promptly as
practicable, all actions necessary, proper or advisable to consummate the Merger as
promptly as practicable . . . .” 122 Romanette iv of the Extension Agreement obligates
Ebix to “negotiate in good faith with Yatra and its advisors . . . .” 123 These provisions
119
Nemec, 991 A.2d at 1128.
120
Oxbow Carbon & Mins. Hldgs., Inc. v. Crestview-Oxbow Acq., LLC, 202 A.3d 482, 507
(Del. 2019) (internal quotations and citations omitted).
121
Nationwide Emerging Managers, LLC v. Northpointe Hldgs., LLC, 112 A.3d 878, 897
(Del. 2015) (quoting Allied Cap. Corp. v. GC–Sun Hldgs., L.P., 910 A.2d 1020, 1035
(Del. Ch. 2006) (Strine, V.C.)).
122
MA § 6.5.
123
EA at 1.
34
would provide Yatra a contractual hook to hold Ebix to account for its alleged bad
faith foot-dragging and Parent’s subsequent entry into the Tenth Amendment;
indeed, Yatra has attempted to do precisely that in Counts I and II of its Complaint.124
Instead, Yatra elected to terminate the Merger Agreement and, in doing so,
terminated its right to pursue a claim for breach of contract as well. 125 As our
Supreme Court has explained, “[t]he implied covenant of good faith and fair dealing
involves inferring contractual terms to handle developments or contractual gaps that
neither party anticipated. It does not apply when the contract addresses the conduct
at issue.”126
Yatra’s second theory fails for the same reasons as its first—the contract
occupies the space Yatra seeks to fill with the implied covenant. According to Yatra,
124
See Compl. ¶¶ 195–204; Williams Cos., Inc. v. Energy Transfer Equity, L.P., 159 A.3d
264, 272–73 (Del. 2017) (holding a provision requiring “commercially reasonable efforts”
imposed “an affirmative obligation on the parties” and reversing the lower court for
focusing only “on the absence of any evidence” when finding that the provision was not
breached).
125
To support its contention that a breach of the implied covenant is not foreclosed by a
reasonable best efforts provision, Yatra cites cases applying foreign law. PAB at 40 (citing
Liberty Prop. Ltd. P’ship v. 25 Mass. Ave. Prop. LLC, 2008 WL 1746974, at *13 n.60
(Del. Ch. Apr. 7, 2008) (applying D.C. law) and Rus, Inc. v. Bay Indus., Inc., 322 F. Supp.
2d 302 (S.D.N.Y. 2003) (applying New York law)). There is no point in addressing these
authorities as Delaware law on the subject is clear. There is no basis to imply a covenant
of good faith and fair dealing where the express terms of the contract address the matter in
question, including a parties’ obligation to use best efforts to complete a designated task.
Oxbow Carbon, 202 A.3d at 507.
126
Nationwide Emerging Managers, 112 A.3d at 896 (cleaned up).
35
Parent breached the implied covenant when it entered into the Tenth Amendment
without ever disclosing the amendment to Yatra, thereby effectively prohibiting
Ebix from closing the Merger with its Put Right intact or suing for specific
performance. 127 But the Merger Agreement specifically addresses Ebix’s obligation
to consummate the transaction without trigging an event of default under an
agreement to which Parent or Merger Sub is bound. In Section 4.4 of the Merger
Agreement, Ebix represents to Yatra that Ebix’s execution, delivery, and
performance of the Merger Agreement and its consummation of the Merger do not
and will not “violate, conflict with, result in the loss of any benefit under, constitute
a default (or an event which, with or without notice or lapse of time, or both, would
constitute a default) under . . . any Contract to which Parent or Merger Sub is a party,
or by which they or any of their respective properties or assets are bound or
affected . . .” 128 One of Yatra’s closing conditions was that Ebix’s representations
and warranties, as set forth in Section 4.4, are “true and correct” as of the Signing
Date and as of the Closing.129
Yatra alleges the Tenth Amendment prohibits Ebix from closing the Merger
with Yatra’s Put Right intact because doing so would cause Parent to default on the
127
Compl. ¶¶ 213–15.
128
MA § 4.4.
129
MA § 7.3(a).
36
Credit Agreement. 130 Section 7.3 of the Merger Agreement explicitly provides that
Ebix must be able to consummate the Merger without defaulting on the Credit
Agreement, and so the “[e]xisting contract terms control . . . such that implied good
faith cannot be used to circumvent the parties’ bargain.” 131
Because the Merger Agreement leaves no gap to fill with the implied
covenant, the motion to dismiss Count III must be granted. 132
D. Count IV – Fraud
In Count IV, Yatra asserts it was defrauded by Ebix. To be clear, Yatra’s
claim is not premised on a fraudulent inducement theory, nor is it premised upon a
contractual fraud theory, i.e., that Ebix made knowingly false representations in the
Merger Agreement itself. Instead, Yatra’s fraud claim—asserted only in its
Amended Complaint after Ebix briefed in its original motion to dismiss the
130
Compl. ¶¶ 213–15.
131
Dunlap v. State Farm Fire & Cas. Co., 878 A.2d 434, 441 (Del. 2005); see also
Shenandoah Life Ins. Co. v. Valero Energy Corp., 1988 WL 63491, at *8 (Del. Ch. June 21,
1988) (“Where . . . a specific, negotiated provision directly treats the subject of the alleged
wrong and has been found to have not been violated, it is quite unlikely that a court will
find by implication a contractual obligation of a different kind that has been breached.”).
132
I note separately that, in my view, where an implied covenant relates to contractual
commitments that cease to operate upon termination, the covenant itself would likely also
be extinguished. I need not rest dismissal on that ground, however, because Yatra’s
implied covenant claim fails for other reasons. Moreover, Yatra’s implied covenant claims,
both of which implicate the same conduct that animates its fraud claim, appear to be
attempts to dress down a fraud claim in order to avoid the more stringent pleading burdens
imposed by Chancery Rule 9(b). That, too, is likely improper. But again, I need not decide
the motion to dismiss Count III on that ground.
37
consequences of the Merger Agreement’s Effect of Termination provision—is
premised on a theory of promissory fraud, i.e., that Parent made knowingly false
“promises or predictive statements of future intent rather than past or present
facts.”133 Specifically, Yatra alleges that Ebix made extra-contractual promises that
it was willing to renegotiate the Merger Agreement’s terms when, in fact, it had no
intent to close on the renegotiated terms (or any commercially reasonable terms for
that matter). According to Yatra, Ebix strung Yatra along to induce it to forbear
from exercising remedies until Parent could get its house in order by amending its
Credit Agreement, finalizing its audit and announcing its financial results. 134
To state a claim for fraud under Delaware law, a plaintiff must allege:
(1) the defendant falsely represented or omitted facts that the defendant
had a duty to disclose; (2) the defendant knew or believed that the
representation was false or made the representation with a reckless
indifference to the truth; (3) the defendant intended to induce the
plaintiff to act or refrain from acting; (4) the plaintiff acted in justifiable
reliance on the representation; and (5) the plaintiff was injured by its
reliance. 135
133
MicroStategy, Inc. v. Acacia Rsch. Corp., 2010 WL 5550455, at *15 (Del. Ch. Dec. 30,
2010).
134
Compl. ¶¶ 217, 225, 236.
135
DCV Hldgs., Inc. v. ConAgra, Inc., 889 A.2d 954, 958 (Del. 2005). The fifth element—
that ‘the plaintiff was injured by its reliance’—injects a causation inquiry into the fraud
cause of action. See In re Wayport, Inc. Litig., 76 A.3d 296, 325 (Del. Ch. 2013) (holding
that, to be actionable, “the fraudulent misrepresentation must actually cause harm”)
(citations omitted).
38
Fraud claims are subject to Chancery Rule 9(b), which requires the plaintiff to allege
the “circumstances constituting fraud . . . with particularity.” 136 The relevant
circumstances are “the time, place, and contents of the false representations; the facts
misrepresented; the identity of the person(s) making the misrepresentation; and what
that person(s) gained from making the misrepresentation.” 137 “The core test is
whether the claim has been pled with detail sufficient to apprise the defendant of the
basis for the claim.”138
Even assuming arguendo that Yatra’s premise for its fraud claim is sound—
i.e., that Yatra was somehow frustrated in its ability to hold Ebix to the bargain it
struck by Ebix’s inexcusable delay 139—the claim nonetheless fails for lack of loss
136
Ct. Ch. R. 9(b).
137
Trenwick Am. Litig. Tr. v. Ernst & Young, L.L.P., 906 A.2d 168, 207–08 (Del. Ch.
2006), aff’d sub nom. Trenwick Am. Litig. Tr. v. Billett, 931 A.2d 438 (Del. 2007)
(TABLE).
138
Airborne Health, Inc. v. Squid Soap, LP, 984 A.2d 126, 142 (Del. Ch. 2009) (internal
quotations and citations omitted).
139
There is serious reason to doubt this premise. See Shah v. Shah, 1988 WL 67403, at *3
(Del. Ch. June 28, 1988) (“Mere inconvenience or substantial increase in the cost of
compliance with a contract though they might make compliance a hardship, cannot excuse
a party from the performance of an absolute and unqualified undertaking to do a thing that
is possible and lawful. Courts cannot alter contracts merely because they work a hardship.
A contract is not invalid, nor is the obligor therein in any manner discharged from its
binding effect, because it turns out to be difficult or burdensome to perform.” (quoting
Safe Harbor Fishing Club v. Safe Harbor Realty Co., 107 A.2d 635, 638 (Del. Ch. Aug. 3,
1988)); Estate of Necastro, 1993 WL 315464, at *3 (Del. Ch. Aug. 3, 1993) (finding that
“[m]ere inconvenience or substantial increase in the cost of compliance” did not excuse
obligations under terms of settlement agreement).
39
causation. Yatra alleges that, but for Ebix’s false promises that it would engage in
meaningful negotiations while Parent secretly bargained for and then consummated
the Tenth Amendment, Yatra would have sued for specific performance of the
Merger Agreement. 140 According to Yatra, once Parent entered into the Tenth
Amendment, any lawsuit for specific performance was pointless because the claim
would have triggered an event of default under the Tenth Amendment, rendering
Yatra’s Put Right worthless.
140
Compl. ¶¶ 188, (“Ebix . . . effectively gutted Yatra’s valuable Put Right consideration,
making specific performance of the contract impossible.”), 223 (“For its part, Yatra
preferred the original Merger Agreement with its ever more valuable Put Right, but also
was willing to consider a renegotiation on valuable economic terms . . .”), 237 (“Yatra
reasonably relied on Ebix’s promises and did not act to enforce the terms of its existing
Merger Agreement at a time when it had leverage to insist on its favorable Put Right and
other rights.”). On brief, Yatra argues exclusively that the damage suffered as a result of
the fraud was the loss of its ability to sue for specific performance. PAB at 52 (“By its
fraud, Parent lulled Yatra into granting multiple extensions of the Outside Date and not
filing the Original Complaint until June 4, 2020. By this point in time, the specific
performance remedy was both unlikely legally (‘a party seeking specific performance must
act with alacrity or lose its rights’) and infeasible practically (there was too much bad blood
between the parties for a harmonious business combination). Thus, and as described in
more detail below, because of Ebix’s fraud, specific performance was off the table by the
time of filing of the Original Complaint.”); id. at 53 (“By this point in time, specific
performance was effectively foreclosed as a remedy, since it would have caused an
immediate event of default under the Credit Agreement. Yatra clearly had a contractual
right to seek specific performance under the Merger Agreement, and like all contractual
rights the right to seek specific performance has value. Parent, with the help of its lenders
gutted that right by surreptitiously contracting away its ability to issue the Put Right under
the Tenth Amendment.” (emphasis in original)). To the extent Yatra could have contended
it suffered other harm as a result of the alleged fraud (unlikely), it has waived that argument
now. Emerald P’rs v. Berlin, 726 A.2d 1215, 1224 (Del. 1999) (“Issues not briefed are
deemed waived.”).
40
The problem with Yatra’s theory is that specific performance of the Merger
Agreement was never an option in any event because, as Yatra affirmatively pleads,
the SEC never declared the S-4 effective.141 And, as the Complaint acknowledges,
“[i]n order for [Parent] to be able to issue [the Put Right] . . . to Yatra as Merger
consideration, the SEC had to declare effective the S-4.”142 Yatra was aware of
Parent’s troubles with the SEC well before Parent engaged Yatra in the allegedly
fraudulent renegotiations that purportedly frustrated Yatra’s right to specific
performance. 143 Indeed, this frustration animates Yatra’s claim for breach of
contract in Count I, where Yatra alleges Parent failed to use its “reasonable best
efforts” to have the SEC declare the S-4 effective “as promptly as practicable.”144
Thus, Yatra’s own pleading belies its effort to pin its inability to sue for specific
performance on Parent’s separate renegotiation of the Tenth Amendment and, for
141
Compl. ¶¶ 49, 84, 91.
142
Compl. ¶ 49. See also Compl. ¶¶ 43, 48–49 (acknowledging that “an effective S–4 was
a condition to closing”).
143
Compl. ¶¶ 98–122, 133.
144
MA § 6.1; Compl. ¶ 198. I note that the Complaint alleges that Ebix failed to use its
“reasonable best efforts” to have the SEC declare the S-4 effective, but the Merger
Agreement provides that this obligation applies only to Parent and not Parent and
Merger Sub.
41
that reason, its fraud claim fails. 145 Accordingly, Defendants’ motion to dismiss
Count IV must be granted.
E. Count V – Tortious Interference with Contract
In Count V, Yatra asserts the Lender Defendants tortiously interfered with the
Merger Agreement by entering into the Tenth Amendment. Specifically, Yatra
alleges the Tenth Amendment made the issuance of the Put Right impractical and
thereby “sabotaged the Merger all together by contractually prohibiting Ebix from
issuing crucial Merger consideration.”146
At the threshold, the parties dispute choice of law. The Lender Defendants
argue the law of India should apply to Yatra’s tortious interference claim, while
Yatra argues Delaware law applies. For reasons explained below, there is no need
for a choice of law analysis here because Yatra’s tortious interference claim fails
even if the Court assumes the law of Yatra’s preference (Delaware) applies.
145
See Anglo Am. Sec. Fund, L.P. v. S.R. Glob. Int’l Fund, L.P., 829 A.2d 143, 159
(Del. Ch. 2003) (finding that the fourth and fifth elements of fraud are “. . . inadequately
pled to meet the requirements of Court of Chancery Rule 9(b)”), see also Brevet Cap.
Special Opportunities Fund, LP v. Fourth Third, LLC, 2011 WL 3452821, at *8
(Del. Super. Ct. Aug. 5, 2011) (dismissing claim for fraud because plaintiff merely alleged
that it “suffered damages” without identifying “in any meaningful way” what those
damages were); Manzo v. Rite Aid Corp., 2002 WL 31926606, at *5 (Del. Ch. Dec. 19,
2002) (dismissing fraud claim for failure to well plead harm flowing from the alleged
fraud), aff’d, 825 A.2d 239 (Del. 2003) (TABLE).
146
PAB at 66.
42
To state a claim for tortious interference under Delaware law, a party must
plead “(1) a contract, (2) about which [the] defendant knew and (3) an intentional
act that is a significant factor in causing the breach of such contract (4) without
justification (5) which causes injury.”147 Again, Yatra’s contention that the Lender
Defendants caused its injury (the loss of the Put Right) runs headlong into its
allegations that Parent could not have issued the Put Right in any event due to the
SEC having never declared the S-4 effective. 148 The Lender Defendants are not
alleged to have had any role in Parent’s troubles with the SEC, which were ongoing
long before the Tenth Amendment was even contemplated. 149 Thus, the Lender
Defendants’ entry into the Tenth Amendment did not stand alone as an impediment
to Yatra’s ability to pursue specific performance of the Merger Agreement (or its
bargained-for Put Right); even if the Tenth Amendment was never executed, specific
147
Aspen Advisors LLC v. UA Theater Co., 861 A.2d 1251, 1265–66 (Del. 2004) (quoting
Irwin & Leighton, Inc. v. W.M. Anderson Co., 532 A.2d 983, 992 (Del. Ch. 1987)).
148
Compl. ¶¶ 49, 84, 91, see also Stone & Paper Invs., LLC v. Blanch, 2020 WL 3496694,
at *6 (Del. Ch. June 29, 2020) (“[A] claim may be dismissed if allegations in the complaint
or in the exhibits incorporated into the complaint effectively negate the claim as a matter
of law”).
149
See Compl. ¶¶ 56 (alleging the SEC declaration was due “no later than 45 days after
execution of the Merger Agreement (i.e., August 30, 2019)” and that “Ebix breached these
obligations, along with the Best Efforts Provision, by dragging its feet with the preparation
and filing of the S-4”), 87 (“[R]ather than expeditiously working to clear the SEC’s
comments, Ebix sought extensions to respond to each and every one of the Comment
Letters, and its replies were entirely inadequate.”).
43
performance would not have been a remedy available to Yatra. For that reason,
Yatra has failed to allege that the Lender Defendants’ entry into the Tenth
Amendment was a “significant factor” in causing the breach of the Merger
Agreement. 150 The motion to dismiss Count V, therefore, must be granted.
III. CONCLUSION
For the foregoing reasons, Defendants’ Motions to Dismiss are GRANTED
in full.
IT IS SO ORDERED.
150
See Himawan v. Cephalon, Inc., 2018 WL 6822708, at *11 (Del. Ch. Dec. 28, 2018)
(dismissing plaintiffs’ tortious interference with contract claim because “the allegations
that [p]laintiffs cite, even with all reasonable inferences drawn in their favor, do not support
the allegation” that [the defendants actually] interfered with the Merger Agreement . . .”);
NAMA Hldgs., LLC v. Related WMC LLC, 2014 WL 6436647, at *25 (Del. Ch. Nov. 17,
2014) (stating a tortious interference claim requires an act “that is a significant factor in
causing the breach of such contract”).
44