Partner Reinsurance Company Ltd. v.RPM Mortgage, Inc.et al

Background

The dispute arose from a February 2017 merger agreement involving RPM Mortgage, Inc. and Entitle Direct Group, Inc. PartnerRe was identified as Entitle’s “Stockholder Representative” and as a party to the agreement. Entitle terminated the agreement in June 2017. PartnerRe alleged that RPM had breached the agreement by failing to attend a scheduled closing and refusing to complete the merger. Defendants denied breaching the agreement and contended that Entitle had breached it instead.

In March 2018, after Entitle merged with Radian Title Services, Inc., Entitle, PartnerRe, and Radian signed an Assignment and Cooperation Agreement. That agreement gave PartnerRe the exclusive right to pursue claims arising from or relating to the failed merger agreement.

The Motion

Defendants moved for summary judgment limited to whether PartnerRe had contractual standing—that is, the contractual right to sue for an alleged breach. They argued that PartnerRe lacked that right as the Stockholder Representative, as a third-party beneficiary, or as Entitle’s assignee. They also argued that the assignment was void under the merger agreement’s anti-assignment clause, which said that a party could not assign rights or delegate duties without prior written consent and that an attempted assignment violating the clause would be void.

PartnerRe argued, among other things, that Entitle had assigned only its claim for damages and not its rights or duties under the merger agreement. The court addressed that argument and did not need to resolve PartnerRe’s other asserted bases for contractual standing.

Court’s Analysis

Applying Delaware law, the court explained that anti-assignment clauses are generally construed narrowly. Under the default rule reflected in the Restatement (Second) of Contracts, a prohibition on assigning contract rights does not ordinarily prohibit assigning a right to damages for breach of the entire contract, unless the agreement clearly shows a different intent.

The court held that the merger agreement’s anti-assignment clause restricted assignments of rights and duties under the agreement but did not refer to claims for damages or clearly prohibit assigning such claims. The clause’s statement that a prohibited assignment would be “void” addressed the effect of an assignment that was within the clause’s scope; it did not expand that scope to include a post-breach damages claim that the clause did not otherwise cover.

The court also found that the assignment did not materially change defendants’ contractual duties, interfere with any party’s personal performance, or create a risk of conflicting claims or double liability. The assignment gave PartnerRe the exclusive ability to pursue the damages claim.

Disposition

The court held that Entitle’s assignment of its breach-of-contract claim to PartnerRe was valid and that PartnerRe acquired contractual standing through that assignment. It therefore denied defendants’ motion for summary judgment for lack of contractual standing. The underlying breach claims were not resolved in this opinion. The case was directed to proceed to a bench trial, and the parties were ordered to submit pretrial materials and scheduling information.