Does the Term “Affiliates” in Private Equity Agreements Include “Future Affiliates”?

In 2020, the Fourth Circuit, through its decision in Diana Mey v. DIRECTV, LLC, and the Ninth Circuit, through its decision in Jeremy Revitch v. DIRECTV, LLC, split as to whether an affiliate provision in a contract applies to a contract party’s future affiliates. The DIRECTV decisions represent the culmination of significant jurisprudence in contract interpretation aiming to determine the enforceability of contract provisions against non‑contract parties by being affiliates of bound contract parties. Like most legal questions, courts reviewing this issue have reliably arrived at the same conclusion: It depends. Although at first blush that conclusion appears to create more uncertainty, this guest article by Gabriel L. Valdés and Karla E. Utset at Sidley Austin takes a closer look at the case law and suggests clear guidance: If you understand the governing law and say precisely what you mean, your provisions should be enforceable, but there are some common-sense exceptions. The article details the latest in Delaware court jurisprudence on the scope of “affiliates” in agreements, particularly as it applies in the context of restrictive covenants, forum selection clauses and arbitration provisions. See “What Fund Managers Should Know About the FTC’s Proposed Ban on Non‑Compete Provisions” (Jun. 1, 2023).

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