Amirsaleh v. Board of Trade of the City of New York: Merger Agreements and the Implied Covenant of Good Faith and Fair Dealing

In Amirsaleh v. Board of Trade of the City of New York, Inc., No. 2822-CC, 2010 WL 177681 (Del. Ch. Jan. 19, 2010), plaintiff Mahyar Amirsaleh (“Amirsaleh”) sued defendants New York Board of Trade (“NYBOT”) and IntercontinentalExchange, Inc. (“ICE”) alleging breach of contract and breach of the implied covenant of good faith and fair dealing.  The court dismissed the plaintiff’s breach of contract claim on defendants’ motion for summary judgment in September 2008, which we previously discussed here. 

After additional discovery in 2009, Amirsaleh sought summary judgment on his implied covenant claim.  The court denied the plaintiff’s motion.  The matter went to trial, lasting three days from November 16 through November 18, 2009.  The court ultimately ruled that the defendants did not breach the implied covenant of good faith and fair dealing in declining to accept plaintiff's late election for consideration to be paid as a result of the merger. 

In December 2006, NYBOT, a private, member-owned not-for-profit New York Corporation (still under the name of NYBOT), merged with ICE’s wholly owned subsidiary, CFC Acquisition Company, to form NYBOT in its current form:  a Delaware for-profit corporation that is a wholly owned subsidiary of ICE. 

Members of NYBOT were entitled, as a result of the merger, to shares of ICE common stock or a combination of shares and cash.  The latter was the more valuable option.  NYBOT members had to express their preference by submitting an election form by January 5, 2007.  Those who did not were given cash for their interest.  

Although the initial deadline for submitting an election was January 5, defendants accepted late submissions through January 18.  Plaintiff, Amirsaleh, submitted his election form on January 19, but the corporation rejected it and cashed out his interests.  Amirsaleh alleged that the defendants’ decision to open a short, indeterminate window of time during which late elections were accepted breached the implied covenant of good faith and fair dealing. 

The court noted that the implied covenant of good faith and dealing was part of every contract and required that the “discretion-exercising party” make contract-related decisions in good faith.  The plaintiff alleged that the one and only reason ICE and NYBOT decided to open the short window of acceptance after the deadline was to ensure that certain “connected” members were able to get their forms in on time, thereby breaching the implied covenant. 

The court agreed that Amirsaleh could demonstrate bad faith by showing that the defendants, in their decision to extend the deadline, did so to provide "special treatment" to certain members.  The court, however, was not convinced that the three members alleged by plaintiffs to have received special treatment had in fact received special treatment. 

First, ICE CEO Jeffrey Sprecher (“Sprecher”) opened the late window to help over thirty NYBOT members, not just Eric Bolling (“Bolling”), the member alleged by plaintiff to have received special treatment.  The court found that Bolling did not have a personal, financial, or other relationship with Sprecher.  The two had spoken only briefly on two occasions and at no time did Sprecher promise Bolling any special assistance. 

Plaintiff also alleged that ICE opened the late window to assist Kevin Davis (“Davis”), but the court could not find any special connection with Sprecher that inappropriately influenced the decision to allow late election submissions.  There was no evidence that Sprecher had any desire to offer Davis any aid and Sprecher never followed up with Davis to learn if Davis submitted his election. 

Finally, the plaintiff claimed that ICE allowed late submissions to ensure that John MacIntosh (“MacIntosh”) was able to turn in his election.  The court found that although MacIntosh contacted NYBOT Chairman Frederick Schoenhut expressing his concern that he missed the election deadline, no one advised ICE about MacIntosh’s concern.  Therefore, the ICE legal team that decided to open the late election window did not consider his request. 

The court held that the evidence did not establish that any of these three individuals had received special treatment.  Sprecher told individuals to submit their forms late only because they contacted Sprecher, something the court noted the plaintiff could have done himself.  Most importantly, as soon as ICE decided to accept late submissions, NYBOT Member Services contacted all members – including the plaintiff – to notify them of the change.  The court held that this demonstrated that the defendants did all that was required under the implied covenant of good faith and fair dealing. 

The court stated that although the late election process could have been better organized and executed, it was nevertheless a good faith attempt to accommodate all NYBOT members who missed the initial deadline.  As such, Chancellor Chandler held that the defendants did not breach the implied covenant of good faith and fair dealing.           

The primary materials for this case may be found on the DU Corporate Governance website.