Party to Agreement Not to Disclose Ongoing Negotiations Can Be Held Liable for Time and Money Spent on Negotiations

On May 18, 2021, the First Department issued a decision in Garda USA, Inc. v. Sun Capital Partners, Inc., 2021 NY Slip Op. 03146, holding that a party to an agreement not to disclose ongoing negotiations can be held liable for revealing those negotiations, explaining:

In its complaint, plaintiff seeks the profits it lost by not being able to acquire SOS at the price in the letter of intent. Because the documents state that defendants were not bound to go forward with the transaction, plaintiff cannot recover lost profits on the theory that it would have acquired SOS. However, plaintiff has plausibly alleged at the pleading stage that it was caused to expend monies for no benefit, in reliance on defendants' contractual promise not to reveal the existence of negotiations to other entities.

(Internal citations omitted).

Part of the reason parties to commercial contracts choose to have those contracts governed by New York law is that New York courts typically enforce contracts as written. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding the interpretation of a contract under New York law.

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