Legal Battle Unfolds as Company Seeks Damages for Failed Investment

Share

Explore the riveting legal battle in the M&A world as a California-based video platform company takes on a Chinese investor in a high-stakes $18 million breach of stock purchase agreement. Delve into the intricate details of the failed investment, the unexpected twists, and the court’s preliminary ruling in this gripping M&A saga. Uncover the complexities of exculpatory clauses, force majeure events, and the pursuit of justice in Ninespot, Inc. v. Jupai Holdings Limited.

M&A Stories

August 7, 2018

In a recent courtroom drama, a California-based online video platform company took legal action against a Chinese investor, alleging a breach of a stock purchase agreement totaling $18 million. The company, known for its innovative livestream content, had entered into the agreement with a joint venture comprising a Chinese investment firm and a wealth management entity.

The story begins in 2015 when the company’s CEO and chairman engaged in talks with the vice president of the Chinese investment firm, aiming to forge strategic partnerships, expand product offerings, and secure investment capital in the Asian market. Fast forward to April 2017, a stock purchase agreement was inked, outlining the terms for the investor’s acquisition of shares.

Despite assurances from the investment firm up until May 2017, the promised investment had not materialized by June of that year. Promptly, the company issued a demand letter seeking assurance of the investor’s commitment. In a surprising turn, the investor attributed its failure to fund the investment to unforeseen and uncontrollable restrictions imposed by the Chinese government on outbound capital flow, invoking a force majeure event. The investor declared its intention to halt all efforts to fund the investment.

Undeterred, the company initiated legal proceedings, alleging that the investor’s failure to fulfill the stock purchase agreement rendered its business virtually worthless. The investor, in defense, pointed to an “exculpatory clause” in the agreement, claiming immunity from liability for not completing the investment. The company countered, asserting that the clause only shielded the investor if it couldn’t purchase the “full amount” of total shares, not if it failed to purchase any at all.

In a preliminary victory for the company, the court sided with its interpretation of the agreement, allowing the pursuit of the breach of contract claim against the investor. However, the legal battle is far from over, with the company still needing to gather compelling evidence to support its case. The court’s decision did not delve into the specifics of the exculpatory clause, leaving room for the investor’s legal argument to resurface in later stages of the case.

Case Reference:

Ninespot, Inc. v. Jupai Holdings Limited, Civil Action No. 18-144-RGA, United States District Court, D. Delaware, (July 30, 2018).

By John McCauley: I help people start, grow, buy and sell their businesses.

Email: jmccauley@mk-law.com

Profile:            http://www.martindale.com/John-B-McCauley/176725-lawyer.htm

Telephone:      714 273-6291

Check out my book: Buying Assets of a Small Business: Problems Taken From Recent Legal Battles

 

Posted in closing, force majeure, stock purchase agreement Tagged with: , , , , , , , , , , , , , , , , , , ,

Recent Comments

Categories