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Vintage Rodeo Parent, LLC v. Rent-A-Center, Inc.

Court of Chancery of Delaware

March 11, 2019, Submitted; March 14, 2019, Decided

C.A. No. 2018-0927-SG

Opinion

MEMORANDUM OPINION

GLASSCOCK, Vice Chancellor

Plaintiff Vintage Capital Management, LLC ("Vintage Capital) indirectly owns stores offering consumer goods to the public under the trade name "Buddy's." Buddy's is a "rent-to-own" retailer. This business model offers consumers an alternative to paying for goods with cash or credit, and taking immediate title. Under the rent-to-own model, as I understand it, the consumer "rents" the item, the seller retains title, the consumer makes payments denominated "rental payments," which contain an amount of principal payment, and if the consumer is able to complete the contractual payments, title is then transferred to the consumer. Vintage Capital, through two affiliates (collectively with Vintage Capital, "Vintage" or the "Vintage Entitities"), entered a merger agreement to acquire Defendant Rent-A-Center, Inc. ("Rent-A-Center"), a bigger player in the rent-to-own [*3]  market. Because of the overlap of these competing retail operations, the parties knew that Federal Trade Commission ("FTC") permission would be required for the merger, and that the review process could be lengthy. Therefore, in a vigorously negotiated provision, the merger agreement provided an "End Date," six months from signing, after which either party could terminate the merger agreement. If, however, the FTC review process was still ongoing, each party negotiated for itself the unilateral right to extend the End Date for three months (and a second time for an additional three months), by giving the other side notice of the election to extend before the original End Date. By doing so, the extending party was binding both its counterparty and itself to compliance with the merger terms during the extension period. If neither party chose to extend the End Date, the merger was not terminated once that date had passed—both parties were still bound by the merger agreement, but either could terminate at will, simply by giving notice.

Thus, as the End Date approached, each party had a set of decisions to contemplate. It could give notice of election to extend, in which case both it and [*4]  its counterparty would be bound to use commercially reasonable efforts to close during the extension period before the new End Date. If it chose not to extend, the party would nonetheless continue to be so bound if the counterparty gave notice of election to extend.

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2019 Del. Ch. LEXIS 87 *; 2019 WL 1223026

VINTAGE RODEO PARENT, LLC, a Delaware limited liability company, VINTAGE RODEO ACQUISITION, INC., a Delaware corporation, and VINTAGE CAPITAL MANAGEMENT, LLC, a Delaware limited liability company, Plaintiffs, and B. RILEY FINANCIAL, INC., a Delaware corporation, Intervenor-Plaintiff, v. RENT-A-CENTER, INC., a Delaware corporation, Defendant.RENT-A-CENTER, INC., a Delaware corporation, Counterclaim-Plaintiff, v. VINTAGE RODEO PARENT, LLC, a Delaware limited liability company, and B. RILEY FINANCIAL, INC., a Delaware corporation, Counterclaim-Defendants.

Notice: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL.

CORE TERMS

merger agreement, end date, Merger, terminate, parties, notice, election, commercially reasonable, written notice, right to terminate, termination fee, counterparty, consummate, contractual, antitrust, financing, notice of election, contractual right, bind, Entities, waiting period, circumstances, requirement of notice, stockholder, conditions, terms, waive, integration, obligations, compliance

Contracts Law, Contract Interpretation, Defenses, Failure to Read Contract, Evidence, Burdens of Proof, Allocation, Business & Corporate Compliance, Contract Conditions & Provisions, Waivers, Notice, Contracts Law, Standards of Performance, Substantial Performance, Waivers, Standards of Performance, Affirmative Defenses, Fraud & Misrepresentation, Illusory Promises, Contract Interpretation, Good Faith & Fair Dealing, Contract Formation, Consideration, Promissory Estoppel, Estoppel, Equitable Estoppel, Clear & Convincing Proof, Remedies, Equitable Relief, Estoppel, Reformation, Intent