Litigation in the now-cancelled merger between Simon Property Group and Taubman may take longer to resolve than normal because of the choice of venue, partner F.L. Gorman and other lawyers told analysts from Reorg this week. Simon filed its declaratory judgment action in business court in Michigan, which is relatively new and has a smaller base of established law. That fact alone may shape how the parties proceed, F.L. told Reorg.
Timing issues may favor a settlement and re-negotiated transaction, F.L. said. “In this case, it may be best for Simon to have a prolonged litigation, so that they can work out an economic solution,” F.L. said.
Simon is asking a judge in state court in Michigan to declare that Taubman has experienced a “Material Adverse Effect” from the pandemic as defined by the merger agreement. Simon is arguing that Taubman’s high end enclosed shopping centers have been more acutely damaged by the COVID-19 pandemic than other subsets of the retail industry. Simon also argues that Taubman’s failure to quickly curtail expenses as a result of the pandemic breached covenants in the merger agreement entitling Simon to terminate the agreement.
