Commercial Litigation and Arbitration

Judicial Notice of Internet Evidence — On Summary Judgment, Court May Take Notice, for Background Purposes, of Facts about Parties from Their Websites

Powers v. Stanley Black & Decker, Inc., 2015 U.S. Dist. LEXIS 130068 (S.D.N.Y. Sept. 28, 2015):

This case involves claims that false representations and warranties made in connection with a corporate acquisition justified the buying company in refusing to release to the seller certain funds held in escrow.

On April 23, 2012, the buyer, Stanley Black & Decker, Inc. ("SB&D") entered into an agreement (the "Transaction Agreement" or "Agreement") with Jeffrey R. Powers, Christopher W. Powers, and Frederic B. Powers, III (collectively, the "Powers Parties") to buy, for $225 million, the worldwide business of Powers Fasteners, [*2]  Inc., including its subsidiaries and affiliates (the "Powers Business"). The deal closed a few weeks later. The Transaction Agreement established an escrow account of $16.5 million, as well as a series of dates, over several years, on which the escrowed funds were to be released to the selling Powers Parties--provided that both sides agreed to release the escrowed funds. But the Transaction Agreement entitled SB&D to refuse to consent to the release of certain funds if, inter alia, the Powers Parties had breached any of their representations or warranties in the Agreement.

Not long after the transaction closed, SB&D notified the Powers Parties that it believed they had breached multiple warranties by misrepresenting a variety of facts in the Agreement, including relating to the Powers Business's financial condition, liabilities, taxes, ongoing litigation, and intellectual property. On that basis, SB&D declined to consent to the release of more than $4.2 million in escrowed funds. In response, the Powers Parties brought this suit, claiming that SB&D had breached the Agreement by unjustifiably withholding these funds. SB&D counterclaimed, asserting that the Powers Parties had breached [*3]  multiple warranties.1

1   Jeffrey Powers, as the Seller's Representative, initiated this lawsuit on behalf of the Powers Parties; SB&D counterclaimed against him, and filed a third-party Complaint against him, Christopher W. Powers, and Frederic B. Powers, III, in their individual capacities. For simplicity, and following the parties' practice, the Court refers to the various Powers individuals collectively as "the Powers Parties." See, e.g., Dkt. 32, at 1.

Now pending before the Court are the parties' cross-motions for partial summary judgment. The issues, at this stage, solely involve whether the Powers Parties made, as to four distinct subject matters, misleading representations in breach of the Transaction Agreement. The damages arising from any such misrepresentation, if found, would be determined later.

For the reasons that follow, the Court holds that the Powers Parties breached the Agreement by making two misrepresentations. Specifically, the Powers Parties wrongly failed to disclose to SB&D (1) ongoing litigation involving the imposition of Canadian import duties, and (2) an ongoing patent dispute in Australia. However, the Court holds that the Powers Parties properly disclosed a [*4]  trademark dispute in Venezuela. As to the fourth and final claim that SB&D makes--that the Powers Parties made materially false statements regarding the imposition of Canadian import taxes--the Court denies both parties' motions for summary judgment. The Court accordingly grants in part, and denies in part, each party's motion for summary judgment. The Court also holds that, in light of these rulings, and because the Agreement permits SB&D to obtain "diminution in value" damages for a breach of warranty, SB&D has to date lawfully withheld the money in escrow.

I. Background

A. Factual Background


1. The Parties

SB&D, a Connecticut corporation, is a manufacturer of industrial tools and household hardware, as well as a provider of security products and locks.3 The corporation resulted from the 2010 merger of The Stanley Works and Black & Decker. Before the transaction at issue here, the Powers Business manufactured anchoring and fastening products for the concrete, masonry, and steel industries. It was headquartered in New York.

3   The parties have not provided much information about their businesses, but the Court [*6]  may take judicial notice--purely for purposes of background--of the limited facts regarding the nature of the companies as set forth in this paragraph. See Fed. R. Evid. 201 (court may take notice, at "any stage of the proceeding," of any fact "that is not subject to reasonable dispute because" it "can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned"); Doron Precision Sys., Inc. v. FAAC, Inc., 423 F. Supp. 2d 173, 179 n.8 (S.D.N.Y. 2006) ("For purposes of a 12(b)(6) motion to dismiss, a court may take judicial notice of information publicly announced on a party's website, as long as the website's authenticity is not in dispute and 'it is capable of accurate and ready determination.'"); see generally; (both last visited Sept. 28, 2015).

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