In ev3 v. Lesh, No. 515, 2013 (Del. Sep. 30, 2014), the Delaware Supreme Court considered the interaction between two critical documents in the negotiation of many mergers and acquisitions: the letter of intent that outlines the deal and the merger agreement that finalizes it. Reversing a $250 million jury verdict entered in the Superior Court, the Supreme Court held the purported obligation in the parties’ letter of intent was inadmissible to contradict their subsequent merger agreement, both because the purported obligation was (on the facts of the case) not binding, and because even if it was binding, its admission violated the parol evidence rule. In dictum, the court also reflected upon the express contractual duty of good faith.
The case arose out of the 2002 acquisition by ev3 Inc. of Appriva Medical Inc., which had developed but not yet obtained regulatory approval for a medical device. In the course of the negotiations, the parties signed a letter of intent that set forth certain binding obligations, including confidentiality, and that also outlined the framework of the nascent deal. Specifically, the parties anticipated that a portion of the purchase consideration would be contingent upon Appriva’s device meeting certain regulatory milestones. The letter of intent also stated “ev3 will commit to funding based on the projections prepared by its management to ensure there is sufficient capital to achieve the performance milestones detailed above.” Following the court’s lead, we refer to this as the funding provision.
