In A Right to Match Can Provide Multiple Benefits, I discussed some subtle ways to create value through the use of a right to match or a right of first refusal. A recent decision by Justice Robert Ullmann of the Massachusetts Superior Court highlights some additional features of rights to match that are far from intuitive and could either be used to your benefit or be a trap for the unwary.
In Serrano v. Serrano, Dennis Serrano had the right of first refusal to purchase property owned by the Marina Trust. In March of 2014, the trustee of that Trust offered the property for sale, and Bremis Realty, Inc. offered to purchase the property for $2.2 million and agreed to put up a $5,000 deposit. After Serrano was notified of the offer, he timely informed the trustee that he was exercising his right of first refusal, and tendered a check in the amount of $5,000, confirming that he genuinely was matching the Bremis Realty offer. When Bremis Realty learned that Serranno had exercised his right to match, it made an enhanced offer that included, among other things, an expedited closing date and additional pre-payments.
A client recently forwarded me an article about a lawsuit that Oakley brought against Nike and golf wonder-boy Rory McIlroy. In that suit, Oakley claims that as part of its endorsement agreement with McIlroy it had a right to match any new endorsement proposals made to McIlroy. Nevertheless, after Nike made a proposal to McIlroy, the golf star refused to consider Oakley’s tender of a match. While it appears that Oakley’s claims in that case will rise or fall based on whether McIlroy/Nike can prove that Oakley waived its right to match, the dispute reminded me that rights to match (sometimes denoted as “rights of first refusal”) can turn out to be extremely valuable assets in a host of contexts.
Perhaps the most common use of rights to match arises in the context of restrictions on the transfer of equity in a closely held business. Indeed, without such restrictions, a competitor might easily be able to buy out a minority equity holder and instantly gain access to key company data. Even if that is not a genuine concern, those involved in a closely held business generally do not want a stranger to suddenly … Keep reading