The sure-to-be-explosive fight between Tiffany & Co. and LVMH Moët Hennessy Louis Vuitton is already proving to be especially contentious. On the heels of Tiffany & Co. filing suit against LVMH in Delaware Chancery Court on September 9, in which it is accusing LVMH of trying to withdraw from their $16.2 billion merger, and LVMH promising to “vigorously” defend itself against Tiffany’s “totally unfounded” claims, Tiffany says that the French luxury goods conglomerate is pushing back against its efforts to handle the matter swiftly and in fact, has asked the court in a filing this week to put the case on hold for as long as seven months.
In an 8-K filing with the U.S. Securities and Exchange Commission and corresponding press release both dated September 16, New York-based Tiffany & Co. responded to LVMH’s request to delay the Delaware trial for “six or seven months” and aimed to “correct inaccurate statements by LVMH regarding [the parties’] merger agreement.”
According to Tiffany’s release, LVMH’s September 16 motion to oppose its request for expedited proceedings is the latest example of the luxury goods titan “grasping at any opportunity to delay and avoid its obligations.” After “failing to make standard antitrust filings” in a timely manner and thereafter, “producing a non-binding advisory letter from a French government official that requests further delay in closing,” Tiffany & Co.’s chairman Roger Farah says that LVMH’s opposition motion is yet another example of LVMH looking to escape the “ironclad contract” that the parties entered into in November 2019, which would see LVMH acquire the stalwart jewelry company in what would be its largest deal to date.
“LVMH’s opposition to our motion to expedite is the latest attempt [by LVMH] to run out the clock to avoid fulfilling its obligations under the merger agreement,” Farah argues, asserting that “if LVMH were confident in its legal position, it would have no reason to oppose an expedited trial schedule,” noting that Tiffany is “urging the court to hold the trial on a timetable that will enable a decision before the November 24 termination date in the merger agreement.”
While the state of the market has undoubtedly changed since the parties signed-off on the deal in pre-COVID November 2019, that does not allow LVMH to undo the legally-binding agreement, per Farah. “The terms of the Merger Agreement are crystal clear,” he stated on Wednesday. “LVMH simply does not have the unilateral right to walk away from the transaction or to reduce its price just because it is now suffering from a case of buyer’s remorse.”
Speaking specifically to LVMH’s allegation that the management of the COVID crisis by Tiffany’s management and its Board of Directors fell short, enacting the Material Adverse Effect (“MAE”) clause in the deal, and thereby, putting the validity of the deal at risk, Tiffany & Co. called foul. In response to LVMH’s argument that Tiffany “did not follow an ordinary course of business, notably in distributing substantial dividends when the company was loss making and that the operation and organization of this company are not substantially intact,” the jewelry company says that “it is equally clear that no MAE has occurred.”
“Any impact from the COVID-19 pandemic and U.S. social justice protests cannot even be considered in determining whether an MAE has occurred,” per Tiffany, which states that “the term MAE is very clearly defined” in the merger agreement. As such, “LVMH’s MAE claim is entirely without merit and without support in the text of the Merger Agreement or under Delaware law.”
Tiffany & Co. Chief Executive Officer Alessandro Bogliolo bolstered this argument, stating, “LVMH’s allegations regarding mismanagement are both untrue and legally irrelevant. We have already returned to profitability and expect to remain profitable for the balance of the year, with fourth quarter profits actually exceeding those of the fourth quarter of 2019.” Bogliolo further stated that “the only standard under the Merger Agreement is whether Tiffany has breached its covenants — and we have not.”
In a statement on Thursday, LVMH attempted to set the record straight in terms of the motivation behind its opposition motion, stating, “There is no objective reason why the upcoming trial should not take place within a normal time frame,” and that “it is up to the Delaware court to determine who is in his right, and not the chairman of Tiffany through the press.”
“Given the legal and financial issues at stake, in the context of a pandemic that obviously weighs on the ability of a European group to organize its defense in the United States,” the Bernard Arnault-led giant said, “It seems to LVMH that sound justice requires a reasonable time be granted to rule on the matter.”
Expediting in COVID
In terms of Tiffany & Co.’s motion for expedited proceedings, it is hardly an out of the ordinary request. Francis G.X. Pileggi, the managing partner of the Wilmington office of Lewis Brisbois and a member of the Complex Business & Commercial Litigation Practice, says that the filing and “the grant of a motion for expedited proceedings in the Delaware Court of Chancery is common for corporate and commercial litigation,” especially when transaction deadlines are in play.
While a relatively common procedural element, attempts to expedite proceedings are, nonetheless, becoming increasingly important in the age of COVID, according to Kramer Levin’s Arthur Aufses, Alan Friedman, and Daniel Ketani, particularly in cases where there is “a last-minute case of buyer’s remorse,” which is precisely what Tiffany & Co. says is underway in the case at hand. In light a COVID-related “surge in buyers seeking to avoid their commitments,” they assert that “even if the seller has a solid claim of breach, it is critically important to [the selling party] that they be able to expedite litigation and the resolution of their claims before it becomes difficult to close on the transaction or otherwise obtain an adequate remedy.”
As for whether the court will side with Tiffany’s push for expediency, Aufses, Friedman, and Ketani say that even if a plaintiff like Tiffany “can establish a colorable claim and irreparable harm,” the court will still likely “balance that harm [to Tiffany] against the risks and challenges of an expedited schedule in light of the pandemic, particularly when the assertion of an MAE” – as LVMH is arguing here – “may involve complex fact questions.” In the past, “the Court of Chancery has focused primarily on the strength of the plaintiff’s claim and the possible irreparable harm, but in light of COVID-19 the court has expressed greater concern about both the economic cost and the feasibility and risk of expedited proceedings.”
Despite COVID-19, they say, “The Delaware Court of Chancery continues to be receptive to expedited proceedings, although, it may not be willing to order the sort of aggressive schedules that it has in the past.”
*The case is Tiffany & Co. v. LVMH Moët Hennessy-Louis Vuitton SE; Breakfast Holdings Acquisition Corp.; and Breakfast Acquisition Corp., 2020-0768 (Del. Ch.).