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United Rentals, Inc. v. RAM Holdings, Inc.

Court of Chancery of Delaware
937 A.2d 810 (2007)


United Rentals, Inc. (URI) (plaintiff) is an equipment rental company that sought to merge with Cerberus, a private equity firm. URI’s counsel, Eric Swedenburg, negotiated the terms of the merger with Peter Ehrenberg, counsel for RAM Holdings, Inc. and RAM Acquisition Corp. (RAM) (defendants). Swedenburg clearly communicated to Ehrenberg that it was a priority for URI to have a mechanism to seek specific performance of the merger, and drafted the merger agreement accordingly. Upon reviewing the draft agreement, RAM returned a draft specifically striking provisions that gave URI the right to specific performance. Ehrenberg also consistently communicated to Swedenburg RAM’s understanding that Cerberus had a right to refuse to close the deal for $100 million and that URI did not have a right to specific performance under the agreement. Moreover, Ehrenberg made clear to Swedenburg that Cerberus’ principals would not move forward unless they were assured that Cerberus had the option of walking away from the deal by paying a penalty. In the finalized contract, Section 9.10 provided URI with the right to seek specific performance, subject to Section 8.2(e) of the contract. Section 8.2(e) in turn provided that the exclusive remedy upon breach would be a penalty of $100 million payable to URI, and expressly precluded the right to seek equitable relief or to seek money damages in excess of the $100 million penalty. In November 2007, URI brought suit against RAM. URI moved for summary judgment and sought an order specifically enforcing the merger agreement.

Rule of Law


Holding and Reasoning (Chandler, J.)

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