In a recent decision in SL Globetrotter L.P., Global Blue Group Holding AG v. Suvretta Capital Management, LLC, Toms Capital Investment Management LP, Justice Peter Sherwood declined to dismiss plaintiffs’ breach of contract claims, which arose out of a dispute over investment, through a special purpose acquisition vehicle (“SPAC”), in a new public company.[1]  The opinion sheds light on the interpretation of conditions precedent in a contract, particularly when they deal with the consistency of relevant financial information.

In July 2018, SL Globetrotter, L.P. and Global Blue Group Holding AG (the “Company”) and Global Blue Group AG (“Global Blue”), a provider of tax-free shopping and currency processing services, engaged Far Point Acquisition Corporation (“FPAC”), a SPAC, in order to consummate a transaction.  The transaction would allow the Company to become a public company that would be owned by existing FPAC and Global Blue shareholders as well as investors such as defendants Suvretta Capital Management, LLC and Toms Capital Investment Management LP who made investments through a mechanism known as “private investments in public equity” or “PIPE.”

In December 2019 and January 2020, defendants received an Investor Presentation, which included information about the transaction and the investment opportunity.  The Investor Presentation explicitly disclaimed any guarantees of future performance and “warned that any forward-looking statements involved numerous risks, uncertainties, or other assumptions that could create a difference in results from those expressed or implied by the Investor Presentation.”[2]

On January 16, 2020, defendants entered into agreements pursuant to which they committed to purchase five million shares of the Company for $10 per share, for an aggregate purchase price of $50 million.  The parties planned that the Company would use the money it obtained from defendants and other investors to purchase a portion of Global Blue’s shares. In the agreements they executed, defendants acknowledged the possibility of an immediate loss in their investment’s value.

On June 19, 2020, FPAC filed a preliminary proxy statement with the Securities and Exchange Commission that explained that the COVID-19 pandemic had a negative impact on Global Blue’s financial performance.  Three days later, defendants sent plaintiffs a repudiation letter, which stated that defendants would not perform their obligations under the agreements, including providing the funds necessary to purchase the New Global Blue shares.  Thereafter, plaintiffs sued defendants for breach of contract, and defendants moved to dismiss.[3]

In support of their motion to dismiss, defendants asserted that the conditions precedent to their obligation to purchase shares were not satisfied.  “A condition precedent is an act or event, other than a lapse of time, which, unless the condition is excused, must occur before a duty to perform a promise in the agreement arises[.]"[4]  A plaintiff cannot maintain a claim for breach of contract unless all conditions precedent to the defendant’s performance have been satisfied.[5]

In this case, defendants primarily argued that conditions precedent to their obligations were not satisfied because in the relevant agreements, Global Blue represented that the information in its proxy statement would not be materially inconsistent with the information included in the Investor Presentation.  Defendants pointed to numerous differences between the proxy statement and the Investor Presentation which they argued were material, including (1) that Global Blue’s definitive proxy statement included no financial projections and stated that previous projections could no longer be relied upon, even though the Investor Presentation stated that Global Blue expected an annual revenue growth rate of 3-6% and (2) that Global Blue’s definitive proxy statement revised financial information that was included in the Investor Presentation.[6] 

Justice Sherwood concluded that defendants’ argument failed based on the documentary evidence presented by the parties. 

Specifically, the Court explained that the Investor Presentation included a disclaimer that the information in the presentation was based on the historical financial information included in Global Blue’s audited financial statements.  The Court also emphasized that the Investor Presentation stated that it contained “forward-looking statements” about future developments that Global Blue could not guarantee would occur, and which Global Blue had no obligation to update or revise.

Furthermore, Justice Sherwood noted that defendants specifically acknowledged the risks incident to the transaction, including the possibility of total loss, when they agreed to purchase the shares. 

Thus, the Court declined to dismiss plaintiffs’ breach of contract claims, concluding that “it would be improper to now allow defendants to disclaim their contractual obligations by arguing that the exclusion of forward-looking statements or the inclusion of corrected financial information in the [definitive proxy statement] are material inconsistencies in violation of” the relevant conditions precedent.[7]