The Potentially Painful Consequences of Ambiguity (Intended or Not)
Here’s the interesting intro to this recent opinion in the matter of United Rentals v. Ram Holdings*:
In classical mythology, it took a demigod to subdue Cerberus, the beastly three-headed dog that guarded the gates of the underworld. In his twelfth and final labor, Heracles journeyed to Hades to battle, tame, and capture the monstrous creature. In this case, plaintiff United Rentals, Inc. journeyed to Delaware to conquer a more modern obstacle that, rather than guards the gates to the afterlife, stands in the way of the consummation of a merger. Nevertheless, like the three heads of the mythological Cerberus, the private equity firm of the same name presents three substantial challenges to plaintiff’s case: (1) the language of the Merger Agreement, (2) evidence of the negotiations between the parties, and (3) a doctrine of contract interpretation known as the forthright negotiator principle. In this tale the three heads prove too much to overcome.
First, the language of the Merger Agreement presents a direct conflict
between two provisions on remedies, rendering the Agreement ambiguous and
defeating plaintiff’s motion for summary judgment.
If you’re particularly interested in the potentially painful consequences of stuffing contracts with ambiguity, you’ll find it very interesting.
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*To fully appreciate the intro, you must know that Ram Holdings is an affiliate of Cerberus Capital Management, L.P.
