Kraton Performance Polymers Wins Dismissal of Lawsuit Seeking Merger Termination Fee

On July 23, 2015, the U.S. District Court for the District of Delaware granted Cravath’s motion on behalf of Kraton Performance Polymers, Inc. to dismiss a lawsuit brought by LCY Chemical Corp. and LCY Synthetic Rubber Corp. (together “LCY”) requesting a termination fee based on the decision by Kraton’s board of directors to withdraw its support from a proposed merger with LCY. Kraton claimed a “material adverse effect” justification for nonpayment of the merger termination fee, a hotly contested issue under Delaware law.

Kraton moved to dismiss the suit, arguing that it should have been properly brought in Delaware Chancery Court pursuant to the forum selection provision of the Combination Agreement between Kraton and LCY.

Judge Gregory M. Sleet granted Kraton’s motion to dismiss, rejecting LCY’s argument that Chancery lacked jurisdiction because, according to LCY, the dispute between the parties concerned an asset transfer component of the Combination Agreement and therefore did not concern a “merger” within the meaning of 8 Del. C. § 264. Judge Sleet held: “Accepting that there are multiple transactions contemplated by the Combination Agreement‑‑an asset transfer and a merger‑‑does not preclude, in this court’s view, subject matter jurisdiction in the Chancery Court.”

The Cravath team included partner Antony L. Ryan, as well as associates Justin C. Clarke and Michelle M. Swan. The case is LCY Chemical Corp., et al. v. Kraton Performance Polymers, Inc., No. 14‑cv‑1279 (D. Del.).