Express Scripts, Inc. v. Bracket Holdings CorpAnnotate this Case
United BioSource LLC (“UBC”), a subsidiary of Express Scripts, Inc. (“ESI”) agreed to sell three of UBC’s pharmaceutical research and development businesses to Bracket Holding Corp. (“Bracket”), a holding company formed by Parthenon Capital Partners, LP (“Parthenon”). In August 2013, Bracket and UBC signed a $187 million securities purchase agreement (“SPA”). Except for claims involving deliberate fraud and certain fundamental representations, Bracket agreed to limit its remedy for breach of the SPA’s representations and warranties to an insurance policy (the “R&W Policy”) purchased to cover these claims. After closing, Bracket claimed that ESI and UBC engaged in fraud by inflating the revenue and working capital of one of the divisions of the acquired companies. In an arbitration proceeding Bracket recovered $13 million under the R&W Policy for breach of the SPA’s representations and warranties. Bracket then sued ESI and UBC for fraud in Delaware superior court. A jury awarded Bracket over $82 million. The parties appealed the jury verdict and judgment. After review, the Delaware Supreme Court found one issue dispositive: the SPA provided unambiguously that, except in the case of deliberate fraud and certain fundamental representations, Bracket could only recover up to the R&W Policy’s limits for breaches of the representations and warranties. Over ESI’s objection, however, the superior court instructed the jury that it could find for Bracket not only for deliberate fraud, but also for recklessness. "A deliberate state of mind is a different kettle of fish than a reckless one." The Supreme Court determined the superior court’s erroneous jury instruction was not harmless: it violated a key provision of the SPA and how the parties allocated risk in the transaction. The Supreme Court therefore reversed the superior court’s judgment and remanded for a new trial.