Viacom Had No Obligation to Maximize Payout to Rock Band Developer

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Delaware Justice Jack B. Jacobs
Delaware Justice Jack B. Jacobs

"The original EA agreement was essential to Winshall's claim because had the defendants not entered into that agreement, Winshall would not be able to contend that, in the agreement to amend the original EA agreement, the defendants breached an implied covenant under the merger agreement," Jacobs said.

Viacom had filed a cross-appeal challenging Strine's rejection of its indemnification claims. The media giant alleged that it was entitled to indemnification for breaches of representations and warranties made by Harmonix's selling shareholders in the merger agreement. However, Strine said the merger agreement included indemnification language, but did not obligate Harmonix to defend Viacom in court proceedings. The Supreme Court upheld his decision.

"The Court of Chancery was unable to locate any such provision in the merger agreement and neither can we," Jacobs said. "Where parties to a merger agreement intend to create separate duties to indemnify and defend, they employ an 'indemnify and defend against claims' clause or similar language to that effect. But where, as here, the contract expressly imposes only a duty to 'indemnify' as opposed to 'indemnify and defend,' the courts generally hold that there is no duty to defend."

In addition to Rabin, the Harmonix shareholders were represented by Gregory V. Varallo of Richards, Layton & Finger, former Chancery Court Chancellor William B. Chandler III of Wilson Sonsini Goodrich & Rosati and David M. Schiffman of Sidley Austin.
Viacom was represented by Stephen P. Lamb and Leslie G. Fagen of Paul, Weiss, Rifkind, Wharton & Garrison.

This article first appeared in Delaware Business Court Insider, a Legal sibling publication.

 

Jeff Mordock can be contacted at 215-557-2485 or jmordock@alm.com. Follow him on Twitter @JeffMordockTLI.

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