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An Extraordinary Course: Important Lessons from the Delaware Court of Chancery Decision in AB Stable VIII v. MAPS Hotels

Firm Memoranda

Does a contractual promise to operate only in the ordinary course of business mean ordinary course on a clear day or ordinary course in a viral-based rainstorm?  This was the question as framed by Vice Chancellor Laster of the Delaware Court of Chancery near the height of the pandemic, on May 8, 2020.  On November 30, 2020, the court reached its decision:  a seller that promises to operate only in the ordinary course of business consistent with past practice (with no qualifications) must do just that, and failure to do so—even in response to the pandemic—results in a breach of a contractual covenant.  In the case of AB Stable VIII v. MAPS Hotels and Resorts One, C.A. No. 2020-0310-JTL, the Delaware Court of Chancery handed a complete victory to Quinn Emanuel’s client, agreeing that the buyer of 15 luxury hotels was entitled to terminate the sale when those hotels went into a “quasi-catatonic state” in response to the Covid-19 pandemic.  The case has  important lessons for M&A practitioners.

Click here to read the full article, featured in CCRcorp's DealLawyers.com.