Rulings on AssuredPartners M&A litigation mixed
By Judy Greenwald
A Delaware judge, ruling for two different state courts, is permitting some charges filed by the previous owners of a Virginia brokerage acquired by AssuredPartners Inc. to continue, while dismissing others, in mixed rulings.
Separate rulings were issued Friday by Delaware Superior Court Judge Abigail M. LeGrow on behalf of the Delaware Chancery Court and Delaware Superior Court, an intermediate appeals court, in litigation over the December 2014 acquisition of Haymarket, Virginia-based Sheehan Insurance Services Inc. to Lake Mary, Florida-based AssuredPartners, according to the two rulings.
The Chancery Court ruling is William Patrick Sheehan and Mark Joseph Sheehan v. AssuredPartners Inc., et al. while the Superior Court ruling is AssuredPartners Of Virginia LLC v. William Patrick Sheehan et al.
The Chancery Court opinion states the Chancery Court litigation was filed on Oct. 4, 2019, and the Superior Court litigation on Oct. 15, 2019. Judge LeGrow was designated to decide the Chancery Court action “so that one judicial officer could resolve the parties’ overlapping and related disputes,” according to her Chancery Court opinion.
The Chancery Court complaint includes several claims for breach of contract, with defendants contending the complaint fails to state any claim against them.
AssuredPartners charges breach of contract in the Superior Court complaint, and the charges are denied by the Sheehans.
The Chancery Court ruling states that in connection with the sale of their insurance agency to AssuredPartners of Virginia LLC and AssuredPartners Inc., the Sheehans signed employment agreements with AP Virginia, under which Pat Sheehan accepted the position of president of AssuredPartners’ Haymarket operations while Mark Sheehan signed substantially the same agreement and accepted an insurance producer position.
The transaction also involved an earn-out agreement, a limited partnership agreement and an equity incentive plan. Management employees were also offered the opportunity to invest in AssuredPartners by becoming limited partners of its ultimate parent company. This offer included the right to purchase Class A-2 interests and eligibility to be awarded Class B Profits Interests in the parent company, according to the ruling.
On Feb. 12, 2019, the buyers terminated the Sheehan’s employment classifying it as “for cause.” It also informed the Sheehans it was repurchasing their class A-2 interests for cost and canceling their Class B Profits Interests.
On Feb. 20, 2019, GTCR (AP) Holding, a Chicago-based private equity firm, acquired Assured Partners’ parent company and the surviving entity became a GTCR entity.
The Sheehans’ subsequent lawsuit alleged noncompliance with the earn-out agreement, employment agreement, limited partnership agreement and equity incentive plan.
The Chancery Court ruling states the Sheehan’s claims for breach of contract, breach of the implied covenant of good faith and fair dealing and declaratory judgment “survive under minimal pleading standard applicable to a motion to dismiss.”
AssuredPartners charges the Sheehans in the Superior Court litigation with a breach of the asset purchase agent’s representations and warranties, and that the sellers “fraudulently concealed material facts with the goal of making Sheehan Insurance Inc. look more attractive than it was, resulting in an inflated purchase price” for its assets. The Sheehans moved to dismiss the case.
“I conclude the action cannot be dismissed as untimely at this stage of the litigation, but I dismiss the sellers’ fraudulent inducement and civil conspiracy claims for failure to state a claim,” says the ruling. Remaining counts in the case include those for breach of contract and, breach of the implied covenant.
Assured Partners’ attorney had no comment while the Sheehan’s attorney did not respond to a request for comment.