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"Person And Its Affiliates" - Can "And" Be A Disjunctive Conjunction?

Yesterday, I wrote about New York Judge Marcy Friedman's opinion in Special Situations Fund III QP, L.P. v Overland Storage, Inc., 2017 N.Y. Misc. LEXIS 3878, 2017 NY Slip Op 32125 (Oct. 10, 2017).  The case involved a contract provision requiring a multimillion dollar payment in the event of a "specified transaction".  The contract defined "specified transaction" to mean, among other things, "an acquisition by any Person and its Affiliates of more than 50% of the then outstanding voting power of Seller [Overland]".  The defendant argued that the transaction at issue was not a "specified transaction" because  the transaction resulted, at most, in an acquisition of voting power by a single Person—FBC—not by a "Person and its Affiliates."  The defendant emphasized that the use of the word "and" in the phrase "Person and its Affiliates" is "unambiguously conjunctive," and requires acquisition by an Affiliate.

Judge Friedman, applying California rules of construction, found that the contested definition is reasonably susceptible of the interpretation advanced by the plaintiffs—that acquisition of the required threshold of voting power by a single Person is sufficient to satisfy the clause.   She further found that the defendant's interpretation, although arguably supported by a very literal reading of the contractual language, is unreasonable when read in the context of the agreement as a whole and in light of its undisputed purpose.

Does that mean that "and" is a disjunctive conjunction?  Judge Friedman thought not:

The court does not read "and" and "or" synonymously in holding that clause (i) imposes no requirement of acquisition of voting power by an Affiliate.  Nor does the court give the word "and" a disjunctive meaning.  Read in the context of the Agreement as a whole, and in light of its undisputed purpose, the use of the word "and" merely signifies that any acquisition of voting power by an Affiliate is to be added to the acquisition of voting power by its affiliated Person in calculating whether more than 50% of voting power has been acquired under clause (i).  In other words, any acquisition of voting power by an Affiliate is to included in the calculation of  voting power; but there is no requirementthat an Affiliate acquire voting power.

Although the defendant lost this argument, they did succeed in their other contentions, winning summary judgment and dismissal of the complaint with prejudice.

 

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