Get a load of the long, complex contract clauses “reproduced” in this week’s Merck v. Bayer decision concerning whether talc-litigation liabilities were transferred in Merck’s 2014 asset sale of its Claritin, Coppertone, and Dr. Scholl’s product lines for some $14 billion. The Delaware chancery court concluded that the relevant contract provisions were “clear and unambiguous” and that Bayer’s interpretation was “the only reasonable one” (slip op. at 2). But that’s sure as hell not obvious at a glance from the court’s reproduction of the language in question, copied from the court’s opinion:
2.6. Assumption of Liabilities. Effective as of the Closing, neither Seller nor any of its Affiliates shall have any liability or obligation with respect to, and Buyer shall assume and thereafter pay, perform and discharge when due, all liabilities and obligations of Seller and its Affiliates, whether relating to periods prior to, on, or after the Closing, to the extent related to or arising from, the Transferred Consumer Care Assets, the Consumer Care Business, the Transferred Rx Product Assets, the Rx Product Business and/or the Conveyed Sites, other than the Retained Liabilities (collectively, the “Assumed Liabilities”) (provided that, notwithstanding anything to the contrary in this Section 2.6, (i) any liabilities or obligations of the Companies or any of their Subsidiaries shall not constitute Assumed Liabilities, it being acknowledged and agreed that such liabilities or obligations (other than Retained Liabilities) shall remain the liabilities or obligations, as applicable, of the Companies or their applicable Subsidiaries immediately after the Closing, and (ii) nothing in this Section 2.6 shall affect Buyer’s rights pursuant to Article X), including, without limitation: . . . (e) any obligations or liabilities to the extent relating to the Consumer Care Business in connection with any Litigation, other than Retained Liabilities; . . . and (h) the obligations and liabilities set forth in Section 2.6(h) of the Seller Disclosure Schedule.
2.7. Retained Liabilities. Seller shall, without any further responsibility or liability of, or recourse to, Buyer, or any of Buyer’s directors, shareholders, officers, employees, agents, consultants, representatives, Affiliates, successors or assigns (including the Companies and their Subsidiaries), absolutely and irrevocably assume and be solely liable and responsible for the following obligations and liabilities (the “Retained Liabilities”); it being understood that nothing in this Section 2.7 shall affect Buyer’s rights pursuant to Article X: (a) all obligations and liabilities to the extent relating to or arising out of the Retained Assets; (b) any Taxes for which Seller is responsible under Section 6.1 of this Agreement; (c) all obligations and liabilities for which Seller or its Affiliates are made responsible pursuant to the terms of this Agreement or the Ancillary Documents; (d) the obligations and liabilities set forth in Section 2.7(d) of the Seller Disclosure Schedule (the “Section 2.7(d) Liabilities”); and (e) the China Obligations.
And for the retained liabilities, in Section 2.7(d) of the Seller Disclosure Schedule:
1. Any product liability or similar claim for injury to a Person or property that allegedly arises out of or is based upon any express or implied representation, warranty, agreement or guaranty made by the Transferred Business, Seller or its Affiliates, or any of the Companies or their Subsidiaries, or by reason of the alleged improper performance or malfunctioning of a product, improper design or manufacture, failure to adequately package, label or warn of hazards or other related product defects of any products at any time manufactured, marketed or sold by the Companies or their Subsidiaries or otherwise in connection with the Transferred Business, in each case to the extent arising out of or relating to periods prior to the Closing.
2. Any liability or obligation of the Transferred Business, Seller or any of its Affiliates, or any of the Companies or their Subsidiaries, which is related to or associated with the failure, alleged failure or purported failure of a product to comply with applicable labeling, false or misleading advertising or consumer protection Laws, including California’s Proposition 65 (California Health & Safety Code Section 25249.6 et. seq.), in each case to the extent arising out of or relating to periods prior to the Closing.
What a godawful mess.
In contrast, the drafters of the contract had used (relatively) short, single-subject paragraphs.