EV3, Inc. v. Lesh

ev3, Inc., the buyer of Appriva Medical, Inc., appealed a jury verdict that held it breached its contractual obligations to Appriva's former shareholders, who gave up their shares in the merger. The merger agreement between ev3 and Appriva provided for the bulk of the payments to the Appriva shareholders to be contingent upon the timely accomplishment of certain milestones toward the approval and marketability of a medical device that Appriva was developing. After it became clear that the milestones were not going to be achieved, the former Appriva shareholders sued, arguing that the full amount of contingency payments was due because ev3 had breached its obligation under the merger agreement to fund and pursue the regulatory milestones in its "sole discretion, to be exercised in good faith." But instead of confining itself to that argument, Appriva also contended that ev3 had breached a provision of a non-binding letter of intent that had been signed by the parties early in their negotiations. That non-binding provision stated that ev3 "will commit to funding based on the projections prepared by its management to ensure that there is sufficient capital to achieve the performance milestones." At many points during the trial, ev3 attempted to convince the Superior Court that the non-binding letter of intent should not have been used to interpret or contradict the clear terms of a clause in the merger agreement. Nevertheless, Appriva was permitted to argue to the jury that ev3 not only failed to act in good faith under the agreement, but that it breached a "promise" to honor the Funding Provision contained in the letter of intent. On appeal, ev3 argued that the Superior Court erred by permitting Appriva to argue that the Funding Provision in the non-binding letter of intent continued to bind ev3, and also that the non-binding letter of intent modified the "sole discretion" standard in the merger agreement. After review, the Supreme Court concluded the Superior Court erred by accepting Appriva‘s position that the non-binding Funding Provision within the letter of intent was admissible to affect the meaning of the merger agreement. Furthermore, by its plain terms, the merger agreement overrode any other provision in the Agreement to the contrary. "Thus, whether or not the letter of intent survived for some purposes, any provisions that conflicted with [section] 9.6 were without force and effect." View "EV3, Inc. v. Lesh" on Justia Law