By Jeff Montgomery

Law360 (April 2, 2020, 2:34 PM EDT) -- Retailer Bed Bath & Beyond Inc. asked Delaware's Chancery Court late Wednesday to order 1-800-Flowers.com Inc. to close on a $252 million purchase of PersonalizationMall.com, accusing the flower and gift company of using the COVID-19 crisis to breach a firm March 30 deal deadline.

In its 30-page complaint, which also named 800-Flowers Inc., Bed Bath & Beyond said a Feb. 14 equity purchase agreement among the companies required a closing regardless of most economic, social or geopolitical calamities unless the effects fell disproportionately on the buyer.

Despite the contract barriers to claiming a defensible, deal-killing "material adverse event," 1-800-Flowers reported on March 23 that it would not close by the deadline, and requested postponement until April 30, without committing to close on the later date, attorneys for Bed Bath & Beyond said in the complaint.

A day later, 1-800-Flowers invoked uncertainty surrounding the COVID-19 crisis for its intended refusal to close on March 30, without claiming a qualifying MAE and still without providing assurances that it would ever close on or after April 30, Bed Bath & Beyond said. The buyer's balks continued beyond the closing deadline.

"1-800-Flowers transparently seeks to rewrite the agreement and avoid its obligations, forcing Bed Bath to bear any associated losses and refusing to commit to a closing date," Bed Bath & Beyond said in its complaint. On the closing date, Bed Bath & Beyond added, the buyer stated: "at most that it needed additional time to 'assess' whether an MAE had taken place."

In a statement released Thursday, 1-800-Flowers said that the company requested a reasonable delay due to the unprecedented circumstances created by the COVID-19 pandemic.

"While we still desire to proceed with the transaction, we maintain that the conditions to closing the transaction have not been satisfied in light of the consequences of the COVID-19 pandemic, including the shut-down of the PersonalizationMall.com facilities until at least April 30, 2020," the company said. "We intend to vigorously defend ourselves against this lawsuit."

On Feb. 18, 1-800-Flowers CEO Chris McCann said in a deal announcement that his company's acquisition of Bed Bath & Beyond's PersonalizationMall and its "extensive product offering and industry-leading personalization capabilities will be an excellent addition to our growing family of popular gifting brands."

In addition, the announcement said, the deal will give 1-800-Flowers access to a newly renovated, 360,000-square-foot production and distribution center, a large consumer and corporate customer database, a "purpose-built website and mobile product platform and innovative business team."

In a letter included with the complaint, 1-800-Flowers pointed to the national state of emergency and intense focus on employee health and safety in addition to business, leaving few resources available to attend to the deal.

"Accordingly, we are postponing the closing of the transaction until April 30, 2020 to allow the parties the opportunity to focus on addressing the continuing impact of COVID19," the unsigned letter said.

The company's public announcement of the purchase noted that it was "subject to the satisfaction of customary closing conditions, including regulatory approval." Citigroup Global Markets Inc. was identified as exclusive financial adviser and Cahill Gordon & Reindel LLP is serving as legal counsel for the deal.

The complaint argued that 1-800-Flowers was aware that no MAE had taken place justifying the refusal to close, and said that PersonalizationMall "is in the same situation as millions of businesses worldwide facing the impact of COVID-19," barring attempts to use the pandemic as justification for the breach.

Bed Bath & Beyond chose 1-800-Flowers over other potential buyers, the complaint said, because 1-800-Flowers offered payment without contingencies from cash on hand or secured from extensions of agreements with existing lenders.

Although an MAE specific to the business was acknowledged as a potential deal-breaker, Bed Bath & Beyond said, language in the agreement excluded from the definition of an MAE "any change resulting from conditions affecting any of the industries or markets in which the company operates," as well as "any change resulting from changes in general business, financial, political, capital market or economic conditions" more broadly.

"Under the plain terms of the definition, even a calamitous event such as COVID-19 does not permit a party to avoid its obligations unless it causes a disproportionate impact on the company, which is simply not the case," Bed Bath & Beyond argued.

The suit, assigned to Vice Chancellor Sam Glasscock III, sought a finding that 1-800-Flowers was in breach of a contract and obligation for specific performance, and a declaratory judgment that the prospective buyer had refused to close in violation of the agreement.

In addition to an order requiring closing on the deal as of March 30, with interest, the suit asked the vice chancellor to award attorney fees and any other ruling found to be "just and equitable."

Bed Bath & Beyond Inc. is represented by Jeffrey L. Moyer, Travis S. Hunter and Dorronda R. Bordley of Richards Layton & Finger PA and Peter J.W. Sherwin and Seth D. Fiur of Proskauer Rose LLP.

Counsel information for 1-800-Flowers Inc. was not immediately available.

The case is Bed Bath & Beyond Inc. v. 1-800-Flowers.com Inc. and 800-Flowers Inc., case number 2020-0245, in the Court of Chancery of the State of Delaware.

--Editing by Alyssa Miller.

Update: This article has been updated to include additional information.

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