The Delaware Supreme Court ruled on September 24, 2026, in the case of Claude Gendreau v. Movora LLC, affirming in part and reversing in part a lower court's decision regarding indemnification obligations in a corporate acquisition. This ruling clarifies the scope of indemnification provisions in corporate contracts, particularly in the context of ongoing litigation.
The case arose from a dispute between Claude Gendreau, the founder of Veterinary Orthopedic Implants, LLC (VOI), and Movora LLC, a Swedish private equity firm that acquired VOI. The court's decision impacts how indemnification clauses are interpreted in future corporate transactions, especially those involving pending lawsuits.
Background
Claude Gendreau and the Claude Gendreau Investment Trust, along with other former owners, sold VOI to Movora LLC in 2020 for approximately $100 million. The sale included an indemnification provision that required the former owners to cover any losses related to ongoing patent litigation concerning VOI's products. This litigation stemmed from allegations of patent infringement made by DePuy Synthes Products, Inc., which claimed that VOI's products violated its patents.
After the sale, the patent litigation escalated, leading to a settlement where VOI agreed to pay $70 million to DePuy. The new owners subsequently sought indemnification from Gendreau for the settlement costs, arguing that the indemnification provision covered these expenses. However, Gendreau contested this, claiming that the indemnification did not extend to damages incurred after the sale.
The Ruling
The Delaware Supreme Court upheld the lower court's conclusion that the indemnification provision applied to losses incurred due to the patent litigation, including those arising from post-transaction product sales. The court stated, "The plain text of [the Indemnification Provision] ties [the Buyers’] recoverable indemnity to the Patent Litigation without referencing any point in time." This broad interpretation of the indemnification clause means that former owners can be held responsible for ongoing litigation costs even after the sale has been completed.
However, the court also ruled that the indemnification did not cover certain attorney fees related to enforcing the indemnification provision itself. The court noted that the indemnity obligation was not intended to cover costs associated with the enforcement of the indemnity rights. As a result, the court reversed the lower court's decision on this point.
Impact
This ruling has significant implications for future corporate acquisitions. It clarifies that indemnification provisions can cover damages related to ongoing litigation even if those damages arise from actions taken after the sale. This means that sellers may face greater financial exposure in transactions involving pending lawsuits.
Furthermore, the court's decision highlights the importance of clear language in indemnification clauses. Buyers in corporate acquisitions will likely seek to negotiate broader indemnification terms to protect against future liabilities, especially in industries where litigation risks are prevalent.
What's Next
The case may be appealed further, but as it stands, the Delaware Supreme Court's ruling is final. There are no related cases pending that directly address this specific indemnification issue, but the decision will likely influence future corporate transactions and litigation strategies.