'Pure Speculation': Judge Dismisses Breach of Contract Claims in Failed $558 Million Merger

A Kirkland team led by litigation partners John Hartmann, Martin Roth, Jeffrey Bramson and Kent Hayden is highlighted for its representation of Sun Capital Partners after a New York judge dismissed a breach of contract lawsuit alleging that Sun Capital leaked confidential information that allowed Garda USA's competitor to outbid the company.

A Manhattan judge has dismissed breach of contract claims against private equity firm Sun Capital Partners, ruling that allegations of improper disclosures leveled by Garda USA after a failed $558 million merger transaction were purely speculative.

Garda sued Sun Capital and SOS Ultimate Holding, a mid-sized security company, alleging leaks of confidential information that allowed company Allied Security to outbid Garda for 100% of the equity interest of SOS. Garda’s 2019 lawsuit alleged that Sun Capital repeatedly made false statements, wrongfully pursued deals with other buyers, shared Garda’s purchase price with those buyers in violation of confidentiality agreements, and other claims.

Manhattan Supreme Court Judge Melissa Crane on July 7 granted motions for summary judgment filed by Sun Capital and SOS, finding Garda had failed to produce evidence of the alleged breaches as to their claimed damages.

Evidence showed that Allied did not know Garda’s bid, the judge found, and the exclusivity period between Garda and Sun Capital had expired.

“It is beyond dispute that Garda’s exclusivity period expired without a deal,” Crane ruled. “Nor did Garda have a deal in place at any time before Allied’s higher offer. Therefore, to support its theory of liability Garda is left with the argument that, but for defendants’ indiscretion with confidential information, it would have been Garda who had the winning bid. Under the circumstances, this is pure speculation.”

“There is no evidence to support that Allied was able to outbid Garda because Allied received confidential information,” the ruling reads. “If Allied outbid Garda fair and square, then Garda cannot have sustained damages because of amounts expended on due diligence and the like. There is simply no causation.”

Crane also found that Garda could not sue to enforce the terms of their non-disclosure and confidentiality agreements because Garda itself had breached those provisions when it shared confidential business information belonging to SOS to banks and other entities which were not authorized to see it.

Garda was represented by Williams Russell, Michael Garvey and Robert Arnay of Simpson Thacher & Bartlett, as well as Kyle Longeran and James H. Smith of McKool Smith. Sun Capital and its associated defendants were represented by Lamina Bowen and Matthew Solum of Kirkland & Ellis. SOS was represented by Carmine Boccuzzi, Arminda Bepko, Howard Zelbo and Rahul Mukhi of Cleary Gottlieb Steen & Hamilton. John Hartmann and Martin Roth of Kirkland & Ellis represented both Sun Capital and SOS.

“We are pleased with the Court’s decision,” Mukhi said.

Crane’s ruling follows a May 2021 ruling from the Appellate Division, 1st Department in which the appeals court determined Garda could not recover lost profits.

Garda filed its own motion for summary judgment, which Crane denied in the same order.

Neither attorneys nor representatives of the Simpson Thatcher, McKool Smith, or Kirkland & Ellis immediately returned a message seeking comment.