Charlesbank Equity v. Blinds To Go, Inc. (In Re: BLinds to Go Share Purchase Litigation, Nos. 05-2029, 05-2030) is the resolution of one of those great “transactional” sagas. It is catalogued by Judge Selya, who lets all the transactional lawyers know that he is quite smart and read some books. However, it all boils down to an interpretation of the shareholders agreement under Massachusetts law, and whether, under Massachusetts law, it was ambiguous. The court provides a few canons of statutory construction and/or interpretation (such as where to get definitions of words such as “affiliates” and “control” from) and resolves that they should be determined by their use in the contract, not their general or economic usage. Institutional Investor comments here.
The court also holds, that, as a matter of the court’s equitable powers, a District Court (applying Massachusetts law) did not need to order specific performance of a right of first refusal, but could, instead rescind a transfer. And, if you are interested, the court’s summary appears below the fold.
We summarize succinctly. Holdings and the Fund are not affiliates within the purview of the Shareholders' Agreement. Thus, Holdings breached that agreement when it did not offer the BTG shareholders an opportunity to exercise their right of first refusal prior to effecting the challenged transfer. Considering all the circumstances of this case, however, the lower court was not obliged to order specific performance of the first refusal right. Rather, the court acted within its equitable discretion when, after mulling both specific performance and rescission, it chose the latter.
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