Background
In 2022, Fast Pace Health (FPMCM, LLC) acquired urgent care operator First Care, LLC for approximately $61.5 million under a merger agreement that included a five-year books-and-records provision (Section 8.20(b)). That clause required Fast Pace to preserve and retain “any books and records, including electronic files, of the Acquired Companies existing prior to the Closing and reasonably required in connection with any audit, accounting, Tax, litigation or similar reports or filings with any Governmental Authority,” and to give the sellers’ representative access upon reasonable notice.
In January 2024, the U.S. Attorney’s Office for the Eastern District of Kentucky opened a civil investigation into Brock Medical — First Care’s subsidiary — concerning allegedly false claims submitted to federal health insurance programs in connection with COVID testing. Fast Pace gave the sellers’ representative, Roberto Pantoja, written notice of an indemnification claim arising from the investigation and reserved the full $6.15 million indemnity escrow. In May 2025, while corresponding about the investigation, Fast Pace disclosed that its Chief Technology Officer had deliberately destroyed all pre-merger email accounts and electronic records from the acquired subsidiaries after closing.
Pantoja demanded that Fast Pace produce those emails and electronic records under Section 8.20(b), and when Fast Pace refused, he filed suit in the Court of Chancery. The complaint sought specific performance compelling production of the records, a declaration that their destruction breached the Merger Agreement and required release of the indemnity escrow, and a declaration that Pantoja was entitled to indemnification for Fast Pace’s breach. Fast Pace moved to dismiss for lack of subject matter jurisdiction and for failure to state a claim.
The Court’s Holding
Vice Chancellor David denied the motion to dismiss on jurisdictional grounds. Because Pantoja sought specific performance of a contractual information right — an equitable remedy — the Court of Chancery had subject matter jurisdiction. The court rejected Fast Pace’s argument that the availability of discovery in a law-court breach-of-contract action rendered equitable relief unnecessary, noting that a contractual entitlement to information is legally distinct from discovery rights, which can be stayed or limited through motion practice. The court also declined to find that specific performance would be categorically futile, since Fast Pace’s own correspondence suggested that at least some emails might have been preserved for employees who stayed on after the merger.
The court nonetheless granted dismissal under Rule 12(b)(6) because Section 8.20(b), properly construed, does not cover the records Pantoja sought. The provision is expressly limited to records “reasonably required in connection with any audit, accounting, Tax, litigation or similar reports or filings with any Governmental Authority.” Applying the canons of noscitur a sociis and ejusdem generis, the court held that this language reaches only discrete, report-like filings — audits, tax returns, accounting submissions — not broad document production needed to evaluate or defend a wide-ranging government investigation. Pantoja’s reading, the court found, would impose an unbounded preservation obligation with no limiting principle, since virtually any document could conceivably be relevant to future litigation.
The court further noted that the parties could have drafted broader language — for instance, requiring retention of “any and all information pertaining to the business and affairs” of the acquired company, or embedding an information right within the indemnification procedures — but chose not to. Because all three counts of the complaint depended on Section 8.20(b) covering the requested documents, the entire complaint was dismissed. The court expressly reserved that Fast Pace’s alleged destruction of emails “will have no legal consequence in future proceedings,” signaling that spoliation or other theories may remain available in a different forum.
Key Takeaways
- A post-closing books-and-records clause in an M&A agreement that limits preservation to records “reasonably required” for audits, accounting, tax, or similar government filings does not, by its plain terms, reach emails and electronic documents needed to respond to a broad federal investigation — even one that triggers the deal’s indemnification mechanism.
- Courts will apply ejusdem generis and noscitur a sociis to cabin catch-all language in records-access provisions; a reference to “litigation or similar reports” in a list alongside audits and tax filings does not expand the clause to encompass comprehensive litigation discovery.
- Sellers who want access to post-closing records in the context of an indemnification dispute should negotiate an explicit information right within the indemnification procedures, rather than relying on a general books-and-records preservation covenant.
- The Court of Chancery has subject matter jurisdiction to specifically enforce contractual information rights in M&A agreements, even when similar documents might eventually be obtainable through discovery in a law-court action, because contractual access rights are legally distinct from discovery entitlements.
Why It Matters
This decision provides important guidance on the scope of post-closing information rights in merger agreements. Practitioners on both sides of M&A transactions should treat generic books-and-records preservation covenants as narrow instruments tied to discrete regulatory or accounting compliance purposes — not as all-purpose discovery tools available whenever an indemnification dispute arises. Sellers seeking meaningful access to acquired-company records in the event of post-closing government investigations should demand a stand-alone information right in the indemnification article, linked expressly to the buyer’s obligation to cooperate in the defense of third-party claims.
The court’s parting observation — that the alleged destruction of emails “will have no legal consequence in future proceedings” was deliberately disclaimed — leaves open the possibility of spoliation arguments or other remedies if the government investigation results in litigation. Buyers who destroy pre-merger records after a government subpoena has issued face significant risk beyond the contractual framework, regardless of how this particular clause was drafted.