District Court Awards Hedge Fund Manager $1.5 Million “Break-Up” Fee Pursuant to Financing Deal’s Letter of Intent

On May 19, 2009, the United States District Court for the Southern District of New York ordered Fair Finance Company, Inc. (FairFin), a financier of retail stores that traded in accounts receivables, to pay FCS Advisors, Inc. d/b/a Brevet Capital Advisors (Brevet), a hedge fund manager, a $1.5 million break-up fee and due diligence expenses based on FairFin’s breach of a letter of intent (LOI).  The LOI stipulated that Brevet would provide FairFin with up to $75 million in financing, and contained an exclusivity provision that required FairFin to pay Brevet $1.5 million if FairFin closed with another party “in lieu of” the financing contemplated in the LOI.  The district court entered summary judgment on behalf of Brevet after finding that no reasonable jury could dispute that Brevet had exercised its option to pursue financing with FairFin, that FairFin violated the exclusivity provision, and that FairFin then closed a similar financing transaction with another financier “in lieu” of a transaction with Brevet.  We explain the facts of the case and the court’s legal analysis.

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