Be Wary of "Backdoor Standstills" in Non-Disclosure Agreements
By CARL R. SANCHEZ & LAURA MCGURTY
In keeping with the spirit of Delawares pro-contractarian public policy, the Delaware Chancery Court in Martin Marietta Materials, Inc. v. Vulcan Materials Company thoroughly examined both the text and extrinsic evidence of the parties intent at the time of execution of a set of confidentiality agreements in support of its decision to enforce the terms of the agreements to their fullest extent and enjoin one party from launching a hostile tender offer and proxy contest against the other. While the Court narrowly frames the question before it in the context of the parties historical dealings and relies heavily on the facts before it in arriving at its holding, the message sent by the Court in Martin Marietta is one of widespread applicability and gives rise to practical lessons that can easily be applied to prevent future contractual remorse. In particular, transactional lawyers should make note of the Courts discussion of how precise drafting may be used to create a backdoor standstill in confidentiality agreements, which Martin Marietta illustrates can be a useful tool for a seller seeking to prevent an unsolicited offer and a trap for the unwary buyer who believes that making a hostile bid remains a viable option for getting a deal done.