## Facts

- NACCO Industries, through its subsidiary Hamilton Beach, pursued the acquisition of Applica, a small-appliance marketer and distributor.
- NACCO and Applica entered a nondisclosure agreement that included a standstill restricting NACCO’s market purchases of Applica shares.
- NACCO and Applica later executed a merger agreement containing deal protections, including a no-shop clause, a superior-proposal exception, notice and information obligations regarding competing proposals, and a termination fee plus expense reimbursement payable if Applica terminated for a superior proposal.
- During the deal period, Harbinger entities accumulated a large minority stake in Applica and made SEC beneficial-ownership filings initially portraying the investment as passive and not intended to influence control.
- Harbinger later amended its disclosure to reflect a control-seeking intent and presented a higher-priced proposal for Applica.
- Applica determined Harbinger’s bid was a superior proposal, terminated its agreement with NACCO, paid the contractual termination fee and expense reimbursement, and entered a transaction with Harbinger affiliates.
- A public bidding contest followed; NACCO alleged Harbinger’s existing stake gave it a cost advantage in bidding for the remaining shares.
- Harbinger ultimately acquired Applica after prevailing in the bidding contest.
- NACCO sued Applica for breach of the merger agreement and sued Harbinger for, among other theories, tortious interference and fraud based on allegedly misleading SEC filings used to gain an advantage in the sale process.

## Issues

1. Whether the complaint plausibly alleged that Applica breached express merger-agreement covenants governing non-solicitation and the duty to provide timely and complete information about superior proposals and related negotiations.
2. Whether the complaint plausibly alleged tortious interference by Harbinger with the NACCO–Applica merger agreement.
3. Whether alleged misstatements in Harbinger’s Schedule 13G/13D filings could support Delaware common law fraud claims, and whether such claims were barred by federal securities-law exclusive jurisdiction.
4. Whether the complaint stated distinct claims for breach of the implied covenant of good faith and fair dealing and for equitable fraud.
5. Whether the complaint plausibly alleged aiding and abetting Applica directors’ fiduciary breaches and a civil conspiracy among defendants.

## Decision

- The court granted in part and denied in part defendants’ Rule 12(b)(6) motions.
- The court denied dismissal of:
  - breach of contract against Applica,
  - tortious interference with contract against Harbinger,
  - common law fraud against Harbinger, and
  - civil conspiracy.
- The court dismissed:
  - breach of the implied covenant of good faith and fair dealing,
  - equitable fraud, and
  - aiding and abetting breach of fiduciary duty.
- The case proceeded on the surviving contract and tort theories, including fraud premised on alleged misrepresentations made in federal securities filings.

## Legal Principles

- On a motion to dismiss, well-pleaded facts are accepted as true and reasonable inferences are drawn in the plaintiff’s favor.
- Express contractual deal-protection provisions (e.g., no-shop and notice/information covenants) can support a plausible breach claim when a seller is alleged to have withheld required information or engaged in prohibited solicitation.
- The implied covenant of good faith and fair dealing is gap-filling and will not be used to duplicate or rewrite obligations that are addressed by express contractual terms.
- A tortious interference claim is adequately pled by alleging a valid contract, the defendant’s knowledge, intentional acts that materially caused a breach, and resulting damages.
- Delaware common law fraud may be pled based on alleged misrepresentations made in SEC filings when the plaintiff seeks state-law fraud remedies rather than enforcement of federal securities statutes; such claims are not automatically barred by federal exclusive-jurisdiction provisions.
- Equitable fraud generally requires equitable features (such as a special relationship or a need for equitable relief) beyond those supporting legal fraud; a duplicative equitable-fraud theory may be dismissed.
- A civil conspiracy claim can proceed when the complaint plausibly alleges coordinated action and at least one underlying tort survives dismissal.

## Conclusion

The Court of Chancery held that NACCO plausibly alleged Applica’s breach of the merger agreement and that Harbinger’s alleged conduct—including purportedly misleading beneficial-ownership disclosures—could support tortious interference, common law fraud, and conspiracy claims, while dismissing duplicative implied-covenant and equitable-fraud theories and an inadequately pled aiding-and-abetting fiduciary-duty claim.


NACCO Indus., Inc. v. Applica Inc., 997 A.2d 1 (Del. Ch. 2009)