Delaware Vice Chancellor Leo E. Strine Jr. was in no hurry to interject himself into the fight between SLM Corp. and Christopher Flowers Monday afternoon. The Delaware judge declined to accelerate SLM's suit against Flowers, since both parties are free to walk from the deal and the only remedy available to SLM is the $900 million breakup fee Flowers, Bank of America Corp. and J.P. Morgan Chase & Co. would owe if they withdraw from the deal without cause.
The cause they're claiming, of course, is a material adverse effect at SLM. Strine hinted late in Monday's scheduling conference that SLM has the better of the argument there. The judge said: "The weakness from [the defendants'] position is this idea that one penny on top of what is outlined in the agreement makes you count the whole thing as an MAE. This is not intuitively the most obvious reading of [the MAE definition in the agreement]. On the other hand, the plaintiffs' position could have been much more clearly drafted if they wished to say that, essentially, all the legislation was a baseline, and you measure the incremental effect. I'm not sure that this is the greatest example of clear scrivening from either side."
That language may give Flowers and friends a slight nudge to settle in order to avoid paying the $900 million reverse breakup fee in the deal. But by refusing to hear SLM's case on the MAE issue in the next month, Strine essentially left the parties to their own devices.
Full coverage will come later in The Daily Deal and on TheDeal.com. — David Marcus
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