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Vector Capital Corporation v. Ness Technologies

March 19, 2012

VECTOR CAPITAL CORPORATION, PLAINTIFF,
v.
NESS TECHNOLOGIES, INC., DEFENDANT.



The opinion of the court was delivered by: P. Kevin Castel, District Judge:

MEMORANDUM AND ORDER

Plaintiff Vector Capital Corporation ("Vector") asserts that defendant Ness Technologies, Inc., ("Ness") breached an Exclusivity Agreement (the "Agreement") between Vector and Ness relating to Vector's possible purchase of Ness. Ness now moves to dismiss the Complaint for failure to state a claim on which relief can be granted. Because Vector fails plausibly to allege a breach of the Agreement or damages, Ness's motion is granted.

BACKGROUND

Vector is a privately-held company that "acts as a value investor in established technology businesses." (Compl. ¶ 6.) Ness is a "global provider of IT and business services." (Id. ¶ 7.) In January 2011, Vector and Ness began discussing Vector's possible acquisition of Ness. (Id. ¶¶ 10-11.) Vector was aware that Ness was having similar discussions with other potential acquirers at that time. (Id. ¶ 11.)

On March 16, 2011, Vector and Ness entered into an Exclusivity Agreement. The Agreement placed three obligations on Ness that are currently relevant. First, Ness agreed to refrain from pursuing transactions with other potential acquirers, as follows:

[Ness] Will not, and will cause its affiliates and its and their respective directors, officers, employees, members and managers (collectively, "Affiliates"), and will direct, and use reasonable best efforts to cause, its investment bankers, agents, consultants, advisors and representatives (collectively, "Representatives") not to, directly or indirectly

(a) initiate, solicit or encourage any inquiries, discussions or proposals regarding,

(b) continue, participate in any way in, propose or enter into any negotiations or discussions with respect to,

(c) provide any non-public information relating to or in connection with, or

(d) authorize, propose or enter into any confidentiality agreement, term sheet, letter of intent, purchase agreement or other agreement, arrangement or understanding Regarding, in all cases (i) a merger, reorganization, business combination or similar transaction involving [Ness], (ii) the acquisition of all or a material portion of the assets . . . of [Ness] or (iii) the acquisition of all or a material portion of the outstanding capital stock of [Ness], in each case other than involving . . . [Vector] or any of its Affiliates . . . (any such transaction, an "Alternative Transaction").

(Id. ¶ 12). Second, Ness agreed that it would inform Vector "promptly (and in any event within one business day) of any inquiry, discussion, or proposal from any person or entity made to [Ness] . . . regarding an Alternative Transaction, including a summary of the material terms thereof." (Id. ¶ 13.) Third, Ness agreed that it would "[u]se reasonable best efforts to respond to all reasonable and customary data and information requests from [Vector]." (Id. ¶ 14.)

On March 31, 2011, during the exclusivity period, Citi Venture Capital International ("CVCI") informed Ness of its interest in purchasing Ness. Vector does not allege that Ness failed to inform Vector of this proposal or its material terms. However, according to the Complaint, Ness "actively discussed" the CVCI proposal on March 31, April 1,

On April 7, 2011, Ness received and reviewed a further communication from CVCI concerning its proposal, which included "prospective due diligence items." (Id. ¶ 18.) Ness did not disclose this communication to Vector. (Id.)

According to the Complaint, "from mid-April to mid-May 2011, Ness representatives continually created major and minor roadblocks to the completion of negotiations for the acquisition of Ness by Vector . . . . During the same period, Ness representatives also demanded immediate completion of negotiations despite Ness's failure to provide relevant information to Vector." (Id. ¶ 20.) The exclusivity period ended on May 20, 2011. (Id. ¶ 21.) On June 10, 2011, Ness ...


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