United States: Delaware Court Of Chancery Rules Reverse Triangular Mergers Do Not Result In Assignments By Operation Of Law

In an opinion published on March 8, 2013, the Delaware Court of Chancery ruled in Meso Scale Diagnostics v. Roche Diagnostics, C.A. No. 5589-VCP (Mar. 8, 2013) that a reverse triangular merger does not result in an assignment of the assets of the surviving entity, by operation of law or otherwise. Although this decision confirms long-held views of generations of corporate lawyers, it reverses a previous holding from April 2011 in this same case and contradicts two previous Federal District Court opinions interpreting California and New Jersey law.

This case of first impression in Delaware, the most important jurisdiction for U.S. corporate law, will likely be viewed with relief by corporate practitioners because it both resolves the ambiguity created by that earlier ruling in this same case and because it sits in stark conflict with two previous Federal District Court opinions: a much-debated, unpublished 1991 opinion of the United States District Court for the Northern District of California in SQL Solutions, Inc. v. Oracle Corp., 1991 WL 626458 (N.D. Cal. Dec. 18, 1991) and a 2012 opinion of the United States District Court for the District of New Jersey in DBA Distribution Services, Inc. v. All Source Freight Solutions, Inc., 2012 WL 845929 (D.N.J. Mar. 13, 2012). Each of these prior cases, which found the question to be one of first impression under the laws of California and New Jersey, respectively, held that a reverse triangular merger transferred a license by operation of law in violation of the anti-assignment provisions in the licenses in question. In declining to follow SQL Solutions, Vice Chancellor Parsons asserted that such a view would frustrate the parties' intentions and conflict with Delaware jurisprudence on the effects of stock acquisitions.

Facts and Procedural History

The dispute at issue in this case stems from a series of agreements relating to the use of electrochemiluminescent ("ECL") technology, which is a sophisticated diagnostic and assay technology used in drug research and human diagnostics. In 2003, defendant Roche Diagnostics GmbH, C.A. ("Roche") received a new, field-limited, non-exclusive license to this ECL Technology after breaching and subsequently losing a license it had previously held to this technology. This license was granted in conjunction with the transfer of the ECL Technology patent rights to the newly formed BioVeris Corporation ("BioVeris"). Plaintiffs Meso Scale Diagnostics, LLC and Meso Scale Technologies, LLC (together, "Meso Scale"), which are the exclusive licensee under the ECL Technology for all other fields, consented to and "joined" this license agreement. This new license included an anti-assignment provision, which stated: "Neither this Agreement nor any of the rights, interests or obligations under [it] shall be assigned, in whole or in part, by operation of law or otherwise by any of the parties without the prior written consent of the other parties." The license did not include a change of control provision; however, which clause would have resolved the matter at issue in this case unambiguously.

In response to a dispute in 2007 regarding whether Roche's use of the ECL technology had again exceeded the field of its limited license, Roche acquired BioVeris through a reverse triangular merger, with BioVeris surviving as a wholly owned subsidiary. On June 22, 2010, Meso Scale sued Roche on two counts: (1) that the reverse triangular merger was an assignment by operation of law that required its consent and (2) that Roche breached the 2003 license by exceeding the field limitation of its limited license to the ECL technology, which license Meso Scale could enforce as a "joined" party (the licensor having received $600 million in cash as part of the acquisition and becoming a subsidiary of Roche no longer objected to Roche's potential breach).

Roche moved to dismiss Meso Scale's complaint, arguing, among other things, that the completed reverse triangular merger had only changed the ownership of BioVeris and not the entity itself, and therefore no assignment of the license had occurred in violation of this anti-assignment provision. In denying Roche's motion, Vice Chancellor Parsons ruled in Meso Scale Diagnostics v. Roche Diagnostics GMBH, 2011 WL 1348438 (Del. Ch. Apr. 8, 2011) that, for purposes of a motion to dismiss in a case of first impression under Delaware law, Meso Scale's interpretation of the anti-assignment provision was not unreasonable. Vice Chancellor Parsons also observed that Roche's post-acquisition behavior, where it transformed BioVeris into little more than an intellectual property holding company by discontinuing all of Bioveris' products, firing all its employees and closing its facility within months of the merger, hurt Roche's argument that all that had really occurred was a change of ownership.

Holding and Reasoning

Following discovery, Roche moved for summary judgment on both counts of Meso Scale's complaint. The Delaware Court of Chancery granted Roche's motion with respect to the first count, ruling that the reverse triangular merger was not an assignment by operation of law or otherwise and therefore did not trigger the anti-assignment provision in the 2003 license agreement that required Meso Scale's consent. Vice Chancellor Parsons began by noting that there is no Delaware case law that directly addresses whether a reverse triangular merger can be viewed as an assignment by operation of law or otherwise, before reviewing the provisions of Delaware's General Corporation Law and both contractual and legal theory as adopted in Delaware to reach the conclusion that it should not.

Turning first to Delaware law, Vice Chancellor Parsons observed that Delaware General Corporation Law, Title 8, Section 259(a), and its interpreting case law, hold that a merger or consolidation results in the transfer of the non-surviving corporation's rights and obligations to the surviving corporation, which is consistent with the interpretation of commentators that no transfer of the surviving entity's rights or obligations occurs in a reverse triangular merger. This same consensus, when viewed by the Vice Chancellor using the objective theory of contract interpretation that is followed in Delaware, makes it unlikely the parties would have expected a clause covering assignments to apply in the context of a reverse triangular merger. Meso Scale's next argument, that the acquisition of BioVeris resulted, practically, in nothing more than an assignment of the intellectual property rights of BioVeris to Roche, was rejected by the court under the doctrine of independent legal significance, wherein acts taken under different sections of the Delaware General Corporation Law are acts of independent legal significance even though the end result may be the same as the result of actions taken under a different section. Finally, the Vice Chancellor rejected Meso Scale's argument that the court should look to Delaware case law on forward triangular mergers, noting that in mergers of that form the target company does not survive the transaction as it does in the reverse triangular context.

The Delaware Court of Chancery, however, denied Roche's motion for summary judgment with respect to the second count, holding that Meso Scale had raised a triable issue of material fact as to whether it was a party to, and so could enforce, the 2003 license and with it the field restriction. Trial as to this count began on March 1, 2013, and a decision is expected presently.


The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.