309 A.3d 434
Del. Ch.2023Background
- 26 Capital (a U.S. SPAC controlled by Jason Ader) entered a de‑SPAC merger agreement to acquire Tiger Resorts Leisure & Entertainment, Inc. ("CasinoCo"), the Philippines vehicle that owns Okada Manila; Universal Entertainment Corporation ("Universal") is CasinoCo’s parent.
- Zama Capital (run by Alex Eiseman) was retained as Universal/CasinoCo’s exclusive SPAC advisor, but secretly acquired ~60% of the economic interest in 26 Capital’s sponsor and worked with Ader to draft SPAC‑favorable documents while advising CasinoCo to accept them.
- In 2022 the Philippine Supreme Court issued a Status Quo Ante Order in separate litigation involving former controller Kazuo Okada; a forcible takeover of the casino followed, and parties then struck a politically charged “dodgy bargain” to regain control — facts that later drew scrutiny and required disclosure.
- The Court assumed for purposes of analysis that CasinoCo breached its covenant to use reasonable best efforts to close, that 26 Capital was ready, willing, and able to perform, and that damages would be an inadequate remedy, and considered whether to order specific performance to compel closing.
- Chancellor Laster denied specific performance because (i) enforcing a reasonable‑best‑efforts covenant would not be self‑executing and would require complex, transnational supervision; (ii) Delaware coercive remedies would be ineffective against Philippines‑located entities/assets; (iii) closing risked violation of the Philippine Supreme Court’s Status Quo Ante Order (raising comity and contempt concerns); and (iv) 26 Capital/Zama engaged in inequitable, deceptive conduct making specific performance inappropriate.
Issues
| Issue | 26 Capital's Argument | CasinoCo/Universal's Argument | Held |
|---|---|---|---|
| Availability of specific performance for breach of covenant to use reasonable best efforts to close | Contract contains specific‑performance clause; damages inadequate; 26 can perform; therefore decree should issue | Specific performance is discretionary; court should consider enforcement and equities | Denied — specific performance is equitable and discretionary; 26 failed to meet the clear‑and‑convincing equitable showing given other factors |
| Enforceability where target, assets, and principal activities are in the Philippines | Delaware decree would be meaningful; 26 can seek domestic enforcement and other remedies | Delaware coercive sanctions (fines, receivership, contempt) would be largely ineffective abroad; decree likely unenforceable in Philippines | Denied — practical enforcement is limited; equitable relief futile if not enforceable |
| Conflict with Philippine Status Quo Ante Order / comity | Status Quo Ante Order does not forbid the transaction; closing could proceed with disclosure; Philippine court would not hold parties in contempt | Philippine Supreme Court’s Clarifying Order indicates the SQAO covers the de‑SPAC; closing risks contempt and criminal penalties in Philippines; comity counsels restraint | Denied — risk of violating a foreign high court order and causing criminal contempt weighs against specific performance |
| Plaintiff's procedural/ethical conduct (clean hands) | 26’s stockholders would be harmed by denial; sponsor clause favors enforcement | 26 and Zama concealed conflicts; Zama acted as double agent drafting SPAC‑friendly docs, steering negotiations, and pressuring Universal; inequitable conduct bars equitable relief | Denied — court attributes Zama’s and Ader’s misconduct to 26 and finds that inequitable behavior forecloses specific performance |
Key Cases Cited
- Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153 (Del. 2010) (party seeking equitable relief must be ready, willing, and able to perform)
- In re IBP, Inc. S’holders Litig., 789 A.2d 14 (Del. Ch. 2001) (specific performance is extraordinary and requires clear and convincing equities)
- Williams Cos., Inc. v. Energy Transfer Equity, L.P., 159 A.3d 264 (Del. 2017) (contractual specific‑performance provisions are important but not mandatory)
- Hexion Specialty Chems., Inc. v. Huntsman Corp., 965 A.2d 715 (Del. Ch. 2008) (courts may order specific performance of transaction agreements where appropriate)
- In re Orchard Enters., Inc. S’holder Litig., 88 A.3d 1 (Del. Ch. 2014) (damages may remain available where specific performance is impracticable)
- In re Stream TV Networks, Inc. Omnibus Agreement Litig., 283 A.3d 1183 (Del. Ch. 2022) (court powers to preserve and enforce judgments; remedies against domestic parties)
- Ruiz v. Estelle, 679 F.2d 1115 (5th Cir. 1982) (courts’ equitable power to appoint agents/receivers to administer complex decrees)
- Weinberger v. Romero‑Barcelo, 456 U.S. 305 (1982) (equity courts must consider public consequences when issuing extraordinary remedies)