Delaware Supreme Court Holds That Seller's Changes to Operations Because of COVID-19 Breached the Ordinary Course Covenant and Relieved Buyer of Its Obligation to Close

Summary

On Dec. 8, 2021, the Delaware Supreme Court in AB Stable VIII LLC v. MAPS Hotels and Resorts One LLC, No. 71, 2021 (Del. Dec. 8, 2021) affirmed the holding of the Court of Chancery that seller breached the ordinary course covenant in the parties' sale agreement by making operational changes in response to COVID-19 inconsistent with its past practice, relieving buyer of its obligation to close. We previously wrote about the post-trial decision in that case in What's Past Practice Is Prologue: A Recap of Recent Developments in COVID-19-Related Delaware M&A Litigation. The Delaware Supreme Court's opinion affirming Vice Chancellor Laster's decision provides important guidance for practitioners regarding how Delaware courts will interpret and apply ordinary course covenants.