Hudson's Bay Co. v. JZ LLC

CONCLUDED

Oral Argument
10/23/13 – 10/23/13

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Summary

Hudson’s Bay Company Luxembourg, S.A.R.L. (“HBCL”) seeks an indemnity under a Stock Purchase Agreement t (“SPA”) by which it bought the 80% of Hudson’s Bay Company (“Hbc”) it did not already own. The Complaint was filed on December 10, 2010, against the indemnitors, JZ LLC and AGZ LLC. HBCL alleged Hbc failed to pay or to reserve for a $1.18 million tax, violating a tax representation -- a claim to which JZ later stipulated -- and three breaches of a financial statement representation arising from Hbc’s accounting for inventory, a customer loyalty plan and a subtenant’s lease default. A bench trial was held on June 18-26, 2012. Despite an SPA provision striking considerations of materiality, the Court held the errors did not violate the Financial Representation because they were immaterial. In this oral argument before the Delaware Supreme Court, HBCL contended that the lower court erred by construing the SPA indemnity to cover only material GAAP departures, nullifying a “Materiality Scrape” which provided that, for purposes of indemnification, materiality is eliminated from the Financial Representation.

Outcome

The Delaware Supreme Court affirmed in part, the Superior Court’s  judgment in favor of appellees JZ LLC and AGZ LLC, on the basis of its March 11, 2013, Memorandum Opinion.

Sessions

Recording Disclaimer: This proceeding was recorded in full.

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