Delaware Chancery Court Finds Breach of Confidentiality Agreement and Enjoins Martin Marietta’s Hostile Bid for Vulcan Materials

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A recent decision of the Delaware Chancery Court shines a spotlight on the terms of confidentiality agreements and the critical importance of explicit drafting to avoid unintended consequences.

Ambiguous terms in a confidentiality agreement (and a related joint defense agreement) between Martin Marietta Materials, Inc. and Vulcan Materials Company resulted in Chancellor Leo E. Strine Jr. interpreting the agreements based on extrinsic evidence. Chancellor Strine determined that Martin Marietta had breached the agreements and enjoined Martin Marietta’s hostile exchange offer and proxy contest for four months. Martin Marietta and Vulcan could have avoided months of expensive litigation and, for Martin Marietta, a devastating injunction, by carefully crafting a confidentiality agreement that clearly delineated the expectations of both parties.

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