Speaker 1: This is Bloomberg Law with June Grassoe from Bloomberg Radio.
Speaker 1: For the first time, the Supreme Court heard arguments this
Speaker 1: week challenging a broad interpretation of the nation's only major
Speaker 1: anti hacking law, and many of the justice is question
Speaker 1: the innocuous acts the law could criminalize. Here are justice Is,
Speaker 1: Samuel Alito, Elena Kagan, and Stephen Bryer. Take the example
Speaker 1: of the person who puts who lies about weight on
Speaker 1: a dating website. How would that be a violation of
Speaker 1: this statute? An employee checking Instagram and work? How is
Speaker 1: that obtaining or altering information? Your employer told you, Mr Jones,
Speaker 1: you work for me. Here is a PC. You will
Speaker 1: get all kinds of emails in this PC. You are
Speaker 1: never to use this email for a personal purpose. Joining
Speaker 1: me is David Thaw, a professor at the University of
Speaker 1: Pittsburgh Law School. David the case before the word involved
Speaker 1: a police officer who was convicted under the Computer Fraud
Speaker 1: and Abuse Act for taking a bribe to look up
Speaker 1: a license plate in the police database. What was the
Speaker 1: basic issue confronting the justices here? This is an issue
Speaker 1: that has been circulating around for a couple of decades.
Speaker 1: In various forms, and on its surface, it sounds very simple,
Speaker 1: which is, when someone who's using a computer that they
Speaker 1: have access to does something on that computer that they're
Speaker 1: not supposed to do but they're technologically able to do,
Speaker 1: is that a violation of the Federal Anti Hacking Statute,
Speaker 1: which prohibits not just unauthorized access but exceeding your authorized access.
Speaker 1: So on its face, it sounds like, if you do
Speaker 1: something that you're not supposed to do, you are exceeding
Speaker 1: your authorized access. The problem is that, in practice, with
Speaker 1: modern computing and information systems, what your quote not supposed
Speaker 1: to do unquote is a much more complex question than
Speaker 1: simply are you allowed to access a given file on
Speaker 1: a computer, which was quite literally what the United States
Speaker 1: Congress was talking about in six when it adopted the
Speaker 1: current version of the statute. That's in questions. What we're
Speaker 1: dealing with today are questions about complex sets of agreements
Speaker 1: and policies and contracts and many other things, even sometimes
Speaker 1: verbal instructions, for example, from an employer to an employee
Speaker 1: regarding what a person can and can't do with a
Speaker 1: computational device that they may carry around with them at
Speaker 1: all times in use for multiple purposes. Some of the
Speaker 1: justices gave scenarios everyday life scenarios like lying about your
Speaker 1: weight on a dating app or browsing Instagram on a
Speaker 1: work computer. What were their concerns so they're getting at
Speaker 1: this complexity. A number of those questions were to acted
Speaker 1: at the government. And what I think the justices were
Speaker 1: trying to push it is the question of saying, well,
Speaker 1: wait a minute, isn't the way you want us the
Speaker 1: court to interpret exceeds authorized access? Isn't that a whole
Speaker 1: lot more than just you're doing something that clearly, obviously
Speaker 1: you're not supposed to. Clearly, obviously you're not supposed to
Speaker 1: go into the file on the machine that is not
Speaker 1: for you. Aren't you now getting into things where a
Speaker 1: private entity can criminalize activities by writing a contract, where
Speaker 1: a dating app could make it criminal. Think about that.
Speaker 1: Make it a federal time to lie about your weight
Speaker 1: for the purpose of getting access to another user's profile,
Speaker 1: or lie about your age. Making that the subject of
Speaker 1: federal criminal law is an incredible expansion beyond what Congress
Speaker 1: originally contemplated. And that's what the Justice's line of questioning
Speaker 1: was getting. It seems like Justice scourse, it's narrowed in
Speaker 1: on that. He said that this risks making a federal
Speaker 1: criminal of all of us, and he called the case
Speaker 1: the latest in a long line of cases where the
Speaker 1: government has sought to expand federal criminal jurisdiction. Do you
Speaker 1: see that as the government trying to expand federal criminal jurisdiction.
Speaker 1: I can't speak to the government's motives, And it's actually
Speaker 1: very difficult really for anyone to speak to the government's motives,
Speaker 1: because governments don't have motives in that kind of sort
Speaker 1: of a linear, continuous sense that we think of. Our
Speaker 1: Congress changes every two years, our executive changes no less
Speaker 1: than every eight years, and the arc of cases that
Speaker 1: Justice course it was describing was over the course of
Speaker 1: a couple of decades. But the point still remains that
Speaker 1: even if there isn't necessarily motive there, there has been
Speaker 1: a trend in a direction. What I think he was
Speaker 1: probably getting at with less about motive and more about
Speaker 1: the building of an inertia, of an expansion of various
Speaker 1: federal criminal statutes that are used in prosecuting what more, traditionally,
Speaker 1: under our federalist constitution would be thought of as the
Speaker 1: province of the states to criminalize, and he and several
Speaker 1: of the other justices asked questions about that about doesn't
Speaker 1: state law also criminalize this. My colleague, Professor Orn Kerr
Speaker 1: from the University of California at Berkeley, in his Amicust brief,
Speaker 1: he talked about the fact that there are other state
Speaker 1: laws that criminalize some of these activities and the federal
Speaker 1: criminal power. Many courts over the decades and centuries of
Speaker 1: the United States have looked at as something that should
Speaker 1: be used for its very specific purpose as outlined in
Speaker 1: the Constitution, not as something that is sort of a
Speaker 1: catch all for when the states overlook something. My colleague,
Speaker 1: Professor Oren Kerr, from the University of California at Berkeley,
Speaker 1: in his Amaricust brief, he talked about the fact that
Speaker 1: there are other state laws that criminalize some of these
Speaker 1: activities and the federal criminal power. Many courts over the
Speaker 1: decades and centuries of the United States have looked at
Speaker 1: as something that should be used for its very specific
Speaker 1: purpose as outlined in the Constitution, not as something that
Speaker 1: is sort of a catch all for when the states
Speaker 1: overlook something. Now, it's important to note here that this
Speaker 1: observation is not one necessarily of malintent, in fact, almost
Speaker 1: certainly not anything other than good faith. One of the
Speaker 1: reasons that federal criminal prosecutions are often brought is because
Speaker 1: federal investigative agencies and really have far more resources and
Speaker 1: far more ability to coordinate, and in the case of
Speaker 1: investigating computer crimes, for example, those resources and interstate coordination
Speaker 1: can be key in successfully being able to not just investigate,
Speaker 1: but collect adequate evidence, apprehend and convict someone who has
Speaker 1: perpetrated a crime. So what I would suggest leads to
Speaker 1: this observation again, which I think justice course is correct
Speaker 1: that there has been a trend in that direction. But
Speaker 1: what leads to it, I think is just a good
Speaker 1: faith effort on the part of law enforcement to try
Speaker 1: and marshal whatever resources they can to deal with an
Speaker 1: incredibly growing problem. And I think what you saw from
Speaker 1: justice across almost the entire bench was a concern that
Speaker 1: the federal government doesn't have plenary police power, and the
Speaker 1: Court was expressing con turn that if there aren't some
Speaker 1: limits in that regard, then those federalist protections, the separation
Speaker 1: of the power between the federal government and the state
Speaker 1: governments will start to erupt. And there have been cases
Speaker 1: where the federal government has prosecuted people under this statute
Speaker 1: where it seemed a little bit stretched, For example, the
Speaker 1: infamous case of Aaron Swartz. There have been a number
Speaker 1: the Aaron Sports case. I think one of the things
Speaker 1: that we're missing in the air in Sports case, and
Speaker 1: this is one of the reasons why it's not the
Speaker 1: example I most commonly uses. We didn't have a full prosecution, trial, verdict,
Speaker 1: and full set of appeals, and that takes some of
Speaker 1: the story away. If you look at a case like
Speaker 1: the at least within computer crime circles, equally infamous case
Speaker 1: of Lori Drew or the case of Mr Ahernheimer, also
Speaker 1: known by his hacker handle of Weaves, those two cases
Speaker 1: illustrate the same type and set of concerns and have
Speaker 1: a fully developed record we can look at. In Lori
Speaker 1: Drew's case, not the judge entered a finding is not
Speaker 1: guilty after the trial was concluded. That's really uncommon, and
Speaker 1: it was done in part because of this issue that
Speaker 1: we're talking about, that the platform in the mid two
Speaker 1: thousands of my Space could not arbitrarily right into its
Speaker 1: contract terms about what content users would put on the
Speaker 1: website and thereby criminalized the activities. There's a concept in
Speaker 1: the law that you have noticed at the time of
Speaker 1: what is and is not criminal, and the Justice has
Speaker 1: talked a lot about this and the fact that allow
Speaker 1: in these private contracts to criminalize some activities and not
Speaker 1: others as a function of the contract rather than something
Speaker 1: that can be figured out clearly from the law itself,
Speaker 1: doesn't put people on notice. And there's a similar problem
Speaker 1: in the case of Mr Ahernheimer Um And in that
Speaker 1: particular case, there's uh. I think a number of scholars,
Speaker 1: myself included, who viewed that the aggrieved parties went, shall
Speaker 1: we say, searching for a favorable prosecutor until they found one,
Speaker 1: and that was in large part why the Third Circuit
Speaker 1: Court of Appeals ultimately ended up rejecting the conviction on
Speaker 1: the unusual grounds that venue was improper. Do you think
Speaker 1: the potential fallout from a broad reading of this law
Speaker 1: is being exaggerated or are there implications for example, for
Speaker 1: cybersecurity research and other areas that we don't think about normally. Yeah,
Speaker 1: there's an excellent question. I think it's one of the
Speaker 1: core questions that we have to deal with given the
Speaker 1: current wording of the statute and the degree to which
Speaker 1: the circuit Courts of Appeal has somewhat split on this question.
Speaker 1: It certainly is not an exaggeration in the context of
Speaker 1: can either criminal prosecutions or the civil analog they remember
Speaker 1: there is in the in the Justice has talked about
Speaker 1: this in there, or there is a civil cause of
Speaker 1: action that a private party can bring. And that actually
Speaker 1: happened in an employer employee case in the Middle District
Speaker 1: of Florida, I think in the late two thousands of
Speaker 1: It might have been early, and it involves somebody using
Speaker 1: Facebook too much at work, and the action was nothing
Speaker 1: more than a retaliatory action against someone who had filed
Speaker 1: an equal opportunity grievance against their employer. The court struck
Speaker 1: it down. It sought for what it was, but it illustrated,
Speaker 1: and I've written in an article about this stat it
Speaker 1: illustrated much like the Lori Drew case, which Professor Kerr
Speaker 1: was involved in, and the Arnheimer case. It illustrates the
Speaker 1: ways in which an expansive reading of the statute can
Speaker 1: be used to criminalize things which might or might not
Speaker 1: otherwise be criminal, but aren't criminal as a function of
Speaker 1: potentially violating in terms of a contract. What ms RU
Speaker 1: did terrorizing a child, that certainly I think should be
Speaker 1: and is criminal under the statutes that I believe that
Speaker 1: jurisdiction was was Missouri, where the child lived at the time,
Speaker 1: But she wasn't prosecuted under Missouri state law. She's prosecuted
Speaker 1: under a federal statute not designed for that purpose. And
Speaker 1: Justice has talked about that a lot in the Van
Speaker 1: Buren case yesterday. So I think that in the context
Speaker 1: of overbroad prosecutions, yes in the context of security research,
Speaker 1: I think the answer is we just don't know enough yet.
Speaker 1: And I think part of the reason we don't know
Speaker 1: enough is we just don't have enough cases to see
Speaker 1: how courts would confront that and whether courts would say
Speaker 1: this clearly is not what Congress was talking about, and
Speaker 1: they're questioning. Most of the justices seemed critical of what
Speaker 1: a broad reading of this statute might lead to. How
Speaker 1: do you think they'll come out? And it's always hard
Speaker 1: to read the tea leaves with the United States Supreme Court,
Speaker 1: but I did not hear a bench that was very
Speaker 1: favorable to the government's position, and I think that that's correct.
Speaker 1: From the particular disposition of this case. It's not often
Speaker 1: that when I hear oral argument for a case, I
Speaker 1: find myself more persuaded by the justices questioning than I
Speaker 1: was by the briefs and oral argument by counsel for
Speaker 1: the parties. But the justice is questioning on the point
Speaker 1: of whether the activity in question was properly criminalized by
Speaker 1: a broad reading of a federal statute or by the states,
Speaker 1: which clearly have the power to make the act otherwise criminal.
Speaker 1: In this case, I think it was otherwise criminal in Georgia.
Speaker 1: That was a very compelling argument, and it also fits
Speaker 1: nicely with what we call the rule of lenity, which
Speaker 1: is an assumption in criminal law that when there is
Speaker 1: ambiguity in a statute is construed in favor of the
Speaker 1: criminal defendant. Because we want to do everything possible to
Speaker 1: give people notice of what the government is telling them
Speaker 1: not to do by the commands and the criminal law.
Speaker 1: So something is ambiguous, we say, well, the Congress should
Speaker 1: be more clear. And I think that's the direction that
Speaker 1: the Justices seemed to be leaning. Was Congress has ample
Speaker 1: opportunity to make this more clear. If they really wanted
Speaker 1: to be this broad, that would be my guess that
Speaker 1: this is not a court that's going to be favorable
Speaker 1: to the government's expensive reading where they're going to come
Speaker 1: out on the reasoning. I think we got a sense
Speaker 1: of how some of the individual justices are approaching it,
Speaker 1: but I did not see an census building on the
Speaker 1: reasoning for why an expansive interpretation of that particular clause
Speaker 1: of the statute is appropriate. So I think it'll be
Speaker 1: real interesting to see how the opinions themselves come down.
Speaker 1: But I don't see five votes for the government's position.
Speaker 1: I'm not even entirely sure I see three votes for
Speaker 1: the government's position. Thanks David. That's David Thaw of the
Speaker 1: University of Pittsburgh Law School. Near A Global Asset investment
Speaker 1: company has successfully next to five point eight billion dollar
Speaker 1: purchase of fifteen luxury US hotels from die Insurance Company
Speaker 1: after arguing the coronavirus outbreak drained value out of the transaction.
Speaker 1: A Delaware judge concluded that mere A properly canceled the
Speaker 1: deal after the insurance company's response to the COVID nineteen
Speaker 1: pandemic meant it couldn't meet conditions for closing the sale
Speaker 1: of the hotels, which included iconic properties such as the
Speaker 1: West ND Saint Francis in San Francisco and the Lows
Speaker 1: Santa Monica Beach Hotel near Los Angeles. This is decision
Speaker 1: is the first in Delaware addressing the legal consequences of
Speaker 1: corporate counters to the pandemic, and they provide a basis
Speaker 1: for other firms to walk away from deals they say
Speaker 1: we're crippled by COVID nineteen. My guest is a lawyer
Speaker 1: who represented Murray Mike Karlinsky, Global head of Complex Litigation
Speaker 1: at Quinn Emmanuel. The judge wrote a two D forty
Speaker 1: two page opinion tell us briefly why he decided to
Speaker 1: cancel the deal. The starting point on this is that
Speaker 1: there are a number of cases that are right now
Speaker 1: pending in the various courts, mostly in Delaware, where you
Speaker 1: have deals that have terminated in the post pandemic or
Speaker 1: during the COVID world. And those cases have common themes
Speaker 1: to them, which are that under the governing documents, the
Speaker 1: merger agreement or the acquisition agreement, there clauses in there
Speaker 1: that allow a buyer to terminate under certain circumstances, either
Speaker 1: the failure of certain conditions having been satisfied or representations
Speaker 1: that were aid that turned out to be false. This
Speaker 1: case is consistent with those cases and that the buyer
Speaker 1: here is seeking to terminate based upon failures by the
Speaker 1: seller to comply with the terms of the agreement. We
Speaker 1: went through a full trial. We litigated this case in
Speaker 1: a very very expedited fashion over the course of three
Speaker 1: and a half months from start to finish, in what
Speaker 1: would otherwise be a three year litigation, but it was
Speaker 1: all compressed with the seller seeking to force the buyer
Speaker 1: to close and the buyer seeking to terminate the deal
Speaker 1: based upon failures under the contract. The Court here by
Speaker 1: Chancellor Laster, after a trial and hearing all of the
Speaker 1: evidence and reviewing all of the materials that were submitted,
Speaker 1: ultimately concluded that the buyer our client Mira A Asset,
Speaker 1: had proven that the seller had failed to comply with
Speaker 1: various provisions of the agreements, which were conditions that had
Speaker 1: to be satisfied before the buyer would be required to
Speaker 1: close is the deal? The judge wrote that the other
Speaker 1: side committed fraud about fraud what was he referring to? There?
Speaker 1: So one of the underlying questions in the case. This
Speaker 1: was a bizarre case because while we had the contract
Speaker 1: issues prior to entering into the contract. Uh and by
Speaker 1: the way, just so we're all clear, the contract here
Speaker 1: was to acquire luxury hotels in the United States and
Speaker 1: some of the top name hotels. Prior to entering into
Speaker 1: the agreement, it became known to us the buyer that
Speaker 1: for six of the hotels, someone purported to transfer title
Speaker 1: to those hotels to their own names, and so, in
Speaker 1: other words, it raised the question as to whether the seller,
Speaker 1: who was going to be transferring these hotels to us
Speaker 1: in exchange for roughly six billion dollars in purchase price,
Speaker 1: owned the hotels. So at the time the seller disclosed
Speaker 1: the existence of these six what we're called fraudulent deeds
Speaker 1: deeds on the properties to the buyer, there was an
Speaker 1: explanation that was given to the buyer. We were told, essentially,
Speaker 1: there's nothing really to worry about. This seems to be
Speaker 1: or this is the work of a twenty something year
Speaker 1: old uber driver with a criminal record, and it's really
Speaker 1: nothing more than a nuisance. So to assuage the buyer's
Speaker 1: concerns about is there a problem here does the seller
Speaker 1: really own these hotels? We were given an explanation that
Speaker 1: was quite the ninth and the essential message was this
Speaker 1: is nothing really to worry about. What it turned out
Speaker 1: in fact, and what was ultimately demonstrated through the course
Speaker 1: of this case and a trial, is that there was
Speaker 1: something much more sinister behind these deeds. There was an
Speaker 1: individ jewel and an organization who was responsible for those
Speaker 1: fraudulent deeds, and that the seller here had a long history,
Speaker 1: over a decade long, of litigation with this very sinister party,
Speaker 1: and that prior to signing the agreement, the seller actually
Speaker 1: knew that it was not the work of a twentysomething
Speaker 1: year old uber driver. It was not a mere nuisance
Speaker 1: as it was portrayed to us, but rather there was
Speaker 1: something much much more sinister, uh and much more of
Speaker 1: a concern, And all of that was withheld from the
Speaker 1: from the buyer, and so the buyer signed an agreement
Speaker 1: it was unaware of any of these underlying facts and
Speaker 1: details and the fact that the seller knew were concealed
Speaker 1: from it. So the underlying the sinister person I'm referring
Speaker 1: to was a fraudster in the court's eyes. But what
Speaker 1: the court is referring to when it said a fraud
Speaker 1: upon fraud is the the seller here defrauded the fire
Speaker 1: by withholding all of this information as to who was
Speaker 1: really behind these deeds and how big of a potential
Speaker 1: problem this really was. And we only learned about this
Speaker 1: as we the buyer, learned about these problems months and
Speaker 1: months later, when um some more of the facts started
Speaker 1: to come out. And that is what the court is
Speaker 1: referring to when it referred to the seller having engaged
Speaker 1: in fraud about fraud. Was the judge's decision based more
Speaker 1: on that you perhaps couldn't get the proper title or
Speaker 1: was it problems because of the coronavirus outbreak? That's a
Speaker 1: great question, June. The court's decision is premised on two pillars.
Speaker 1: One pillar was an argument that the coronavirus and the
Speaker 1: impact that COVID had on the hotel's at these particular
Speaker 1: fifteen luxury hotels was so significant that the seller started
Speaker 1: to make changes to the operations of these hotels in
Speaker 1: violation of obligations that it had under the contract. There's
Speaker 1: a provision which is standard in these contracts called an
Speaker 1: ordinary course covenant, and it basically says from the time I,
Speaker 1: as a buyer, signed the contract to the closing of
Speaker 1: the contract, which could take many months. Here signing to
Speaker 1: closing was expected to be nine months or so. The seller,
Speaker 1: you're obligated to operate the business these hotels in the
Speaker 1: ordinary course, consistent with past practice. Here the seller made
Speaker 1: dramatic changes. It furloughed five thousand plus employees, and it
Speaker 1: did a number of other things. And so one of
Speaker 1: the argument, and this is the one that was specific
Speaker 1: to COVID, was we said, this was a violation of
Speaker 1: that covenant and it gave the buyer an opportunity to
Speaker 1: turn eminate the deal. And the court agreed with us.
Speaker 1: So the court concluded, notwithstanding that these changes were made
Speaker 1: in the light of COVID, and they may have even
Speaker 1: been reasonable given COVID, they nevertheless violated the terms of
Speaker 1: the merger agreement. That was the specific COVID issue. The
Speaker 1: other issue, which was the second pillar of the court's decision,
Speaker 1: related to this whole underlying title issue and the failures
Speaker 1: as we talked about a moment ago of the seller
Speaker 1: to make proper disclosures, and the way it all culminated
Speaker 1: was that one of the key things that is a
Speaker 1: buyer of real estate let alone, billions of dollars worth
Speaker 1: of real estate always has to have both for its
Speaker 1: own protection and because third party lenders who are going
Speaker 1: to be lending the buyer proceeds to buy the deal
Speaker 1: is they have to have complete title insurance. When we
Speaker 1: buy a house, we buy title insurance to make sure
Speaker 1: that the title we're getting is is correct, it doesn't
Speaker 1: have clouds on it will so too in a deal
Speaker 1: like this. But because of all of these issues that
Speaker 1: were raised both by the UH, the sinister character, plus
Speaker 1: the fact that there were all of these concealments by
Speaker 1: the seller itself that went on for months, and surprises
Speaker 1: that were ultimately sprung upon um the buyer here and
Speaker 1: the title insurance companies. When the deal was getting set
Speaker 1: for closing, the title insurers basically threw their hands up
Speaker 1: and said, we can't provide complete title insurance here. We
Speaker 1: have real concerns because of these issues that have not
Speaker 1: been properly addressed by the seller. We're just not comfortable.
Speaker 1: And so they did something which known in the industry
Speaker 1: as raising exceptions. So they're saying we will provide title
Speaker 1: insurance for some, but not all, and then at all.
Speaker 1: Part was really really significant and so in the end,
Speaker 1: that was another provision in the agreement that failed. The
Speaker 1: court found that the seller was obligated to make sure
Speaker 1: that the actions it took allowed title insurance that fully
Speaker 1: protected the buyer here as to any of this underlying
Speaker 1: fraudulent indeed scheme. And because the title insurers could not
Speaker 1: get comfortable uh and therefore wouldn't give that complete insurance,
Speaker 1: the condition in the contract failed. And of course also
Speaker 1: the lenders who would have been asked to lend four
Speaker 1: billion dollars of third party financing for this transaction, they
Speaker 1: too said we're not comfortable, and they too said, if
Speaker 1: there's not complete title insurance, we can't go forward. So
Speaker 1: that second pillar was fact specific to this case, and
Speaker 1: I think what compelled the court to the outcome as
Speaker 1: it related to this particular issue was the court understood
Speaker 1: contextually just how serious of an issue this was and
Speaker 1: why it ultimately led to the title insurers raising these exceptions,
Speaker 1: and that the blame for it lies at the feet
Speaker 1: of the seller because of all of its concealment throughout
Speaker 1: the course of the deal process. Do you think that
Speaker 1: this case might in any way provide a precedent to
Speaker 1: torpedo other deals. Well, I don't like to use the
Speaker 1: word torpedo, I think though understanding the question, sure, I
Speaker 1: think the answer is that clearly this is a precedential
Speaker 1: decision on both the issues we went on and also
Speaker 1: one of the other issues that we didn't win on.
Speaker 1: But with the court, the court issued here are two
Speaker 1: d and forty page opinions in one of the most
Speaker 1: detailed and thorough analyzes of these critical murder and acquisition
Speaker 1: related issues. So to your question, um, the it is
Speaker 1: it is clear that many of the other cases that
Speaker 1: are pending, both in Delaware and throughout the country, and
Speaker 1: I dare say even outside of the United States, are
Speaker 1: looking to Vice Chancellor Laster's decision. I think there were
Speaker 1: courts that have been waiting on this decision, knowing that
Speaker 1: it was coming and it was imminent, and now that
Speaker 1: it has been issued, I do think this will become
Speaker 1: one of the seminal decisions in the field of mergers
Speaker 1: and acquisitions litigation as it relates to the M and
Speaker 1: A clause, that is, the material adverse effect clause, which
Speaker 1: again is a standard provision in these types of agreement,
Speaker 1: and as they said earlier, the ordinary course covenant that
Speaker 1: the Court ultimately found in this case was violated. The
Speaker 1: Court goes through in more detail and analysis than any
Speaker 1: other decision that precedes it uh in going through and
Speaker 1: analyzing that ordinary course covenant. And so both the cases
Speaker 1: that are pending that involved termated deals will be looking
Speaker 1: to this case for its precedential value and its guidance.
Speaker 1: But there's a second point here, which is the Court's
Speaker 1: opinion in this case will become must reading for any
Speaker 1: practitioner going forward that drafts murder and acquisition agreements, whether
Speaker 1: they be merger agreements acquisition agreements. The Court has provided
Speaker 1: clear guidance for I'll call it the rules of the
Speaker 1: road and the concepts around these various provisions that every
Speaker 1: practitioner who prepares one of these agreements or negotiates one
Speaker 1: of these agreements must be aware of. And you took
Speaker 1: over this case from another firm just three and a
Speaker 1: half months before trial. You're dealing with witnesses in China,
Speaker 1: So just give me a little bit about you know,
Speaker 1: what went on behind the scenes, the kind of workforce
Speaker 1: you had, and how you dealt with all this. As
Speaker 1: we're all aware we were dealing with all of this
Speaker 1: in the most of unusual times. We're dealing with all
Speaker 1: of this in the midst of a global pandemic, and so,
Speaker 1: as I said earlier, this was really three years of
Speaker 1: litigation compressed into roughly three and a half months. Delaware
Speaker 1: Chancery Court of Chancery in Delaware is one of the
Speaker 1: best equipped courts, and it's the court in which all
Speaker 1: of these cases tend to be filed because of choice
Speaker 1: of law and governing provisions. But the Court of Chancery
Speaker 1: is well equipped to deal with cases that move with
Speaker 1: extreme expedition. And in cases like this, remember what is
Speaker 1: the seller here seeking. The seller is seeking to force
Speaker 1: my client mire A, the buyer, to close the transaction.
Speaker 1: They literally want the court to issue an order that
Speaker 1: says mi A, you must buy these hotels, and you
Speaker 1: must buy them at the contractual price of six billion dollars,
Speaker 1: even though in a pandemic world, we know those hotels
Speaker 1: are going to be worked significantly last and so in
Speaker 1: order to get to that potential outcome, things have to
Speaker 1: happen very quickly. You can't afford a three year litigation,
Speaker 1: you can't afford a one year litigation. If ultimately there's
Speaker 1: the potential for the court saying you must buy that
Speaker 1: it has to happen quickly. So we understood that coming in,
Speaker 1: and it was just an extraordinary effort. I mean, we
Speaker 1: had a core team of twenty lawyers at my firm,
Speaker 1: and then we probably had another forty or forty or
Speaker 1: fifty lawyers who were assisting in the document reviews and
Speaker 1: the document productions. This was nothing short of a herculean effort.
Speaker 1: In fact, by Chancellor Laster in his opinion very early on,
Speaker 1: points out just how extraordinary this was for both firms.
Speaker 1: I don't mean just my firm, but for the other
Speaker 1: side as well. And recognize that it was all being
Speaker 1: done remotely. So we had depositions of fifty witnesses. They
Speaker 1: were being done by Zoom. Many of those witnesses were
Speaker 1: located in either China or Korea, so it was standard
Speaker 1: fair for depositions to start because we were taking a
Speaker 1: deposition of a witness on their daylight time. So we
Speaker 1: were starting depositions here in New York at six pm,
Speaker 1: seven pm, eight pm in the evening, and those depositions
Speaker 1: were running literally straight through the night. I had one
Speaker 1: deposition of a witness that ended at six fifty two am.
Speaker 1: It was sunshine. Birds were chirping, my family was waking,
Speaker 1: and I was finishing up a deposition that had started
Speaker 1: six pm the night before. But we did it, and
Speaker 1: my team did it, and I can't uh tell you
Speaker 1: how proud I am of my team and this was
Speaker 1: an extraordinary effort. Thanks for being on The Bloomberg Laws Show. Mike.
Speaker 1: That's Mike Carlinsky, Global head of Complex Litigation at Quinn Emmanuel.
Speaker 1: And that's it for the edition of the Bloomberg Law Show.
Speaker 1: Remember you can always at the latest legal news on
Speaker 1: our Bloomberg Law Podcast. You can find them on iTunes, SoundCloud,
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Speaker 1: I'm June gross O. Thanks so much for listening. Tune
Speaker 1: into The Bloomberg Law Show every weeknight a Champion Eastern
Speaker 1: right here on Bloomberg Radio