EV3, Inc. v. Lesh, M.D., et al.
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This case came before the Supreme Court on appeal of a jury verdict which found that ev3, Inc., the buyer of Appriva Medical, Inc., 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. At many points during the trial, ev3 attempted to convince the Superior Court that a non-binding letter of intent should not be used to interpret or contradict the clear terms of the merger agreement, but the Superior Court adhered to the contrary view advocated by Appriva. 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 non-binding letter of intent. The jury agreed that ev3 had breached its contractual obligations and determined that ev3 owed Appriva the full amount of the milestone payments, $175 million. 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 set forth in the agreement. After review, the Supreme Court concluded that 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. The case was remanded for further proceedings.
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