Document: JPMorgan Chase & Co. v. American Century Companies, Inc., C.A. No. 6875-VCN (Del. Ch. Apr. 26, 2012)
The Delaware Court of Chancery found that JPMorgan Chase & Co. (“JPMorgan”) stated a claim for breach of the implied covenant of good faith and fair dealing by American Century Companies, Inc. (“American Century”) in connection with the repurchase by American Century of American Century stock owned by JPMorgan. In 1998, JPMorgan made a $900 million equity investment in American Century, a privately-held company. The relationship quickly soured. As part of a settlement agreement, JPMorgan gave American Century the right to repurchase its shares at their fair market value as determined by third-party appraiser Duff & Phelps (“D&P”). In July 2011, American Century purported to exercise its repurchase option.
Thereafter, JPMorgan initiated this action challenging American Century’s exercise of its repurchase right as set forth in the repurchase agreement. According to JPMorgan, American Century violated the terms of the repurchase agreement, inter alia, by failing to provide D&P with the requisite information to value certain claims held by American Century against JPMorgan pursuant to an arbitration proceeding (the “Arbitration Claims”). The Court rejected JPMorgan’s argument and found that the repurchase agreement did not expressly address what information D&P was required to consider in valuing American Century. However, the Court did find that JPMorgan stated a claim for violation of the implied covenant of good faith and fair dealing. According to the Court, it was reasonable for JPMorgan to presume that American Century would be providing D&P with the information necessary to value its shares, which included information regarding the value of the Arbitration Claims.