Yonaton Aronoff Quoted on Broad Implications of BuzzFeed Case for Post-SPAC Employee Contracts
May 5, 2022
Law.com quoted Yonaton Aronoff in a recent article covering attempts by BuzzFeed (NASDAQ: BZFD) to block arbitration claims from 90 current and former employees who say they were shortchanged in the media company's IPO last year. BuzzFeed, however, claims it isn't bound to arbitration since it went public by merging with a special purpose acquisition company (SPAC). Aronoff, Jonathan Harris and Joseph Gallagher represent 42 of the employees in the case, which could have lasting implications for employers and employees of post-SPAC Delaware companies.
BuzzFeed's lawyers argue that the company became a new business entity following the merger and is excused from the agreements it entered into as a private company. Therefore, BuzzFeed contends, the arbitration language used in its pre-SPAC employment agreements is no longer valid, and that the Delaware Court of Chancery should hear any employee arbitration claims.
Aronoff told Law.com that BuzzFeed’s efforts to move the employee claims out of arbitration could set a complicated precedent if the Court of Chancery sides with BuzzFeed.
“The company is basically saying it got baptized by the SPAC, and everything pre-SPAC is not its problem,” Aronoff said. “It effectively makes the SPAC almost like a bankruptcy. Under BuzzFeed’s view of the world, which we think is wrong, it would bathe the company and rid it of its contractual obligations that preexisted the SPAC.”
Aronoff further noted that BuzzFeed’s strategy deviates from the playbook most arbitration-minded companies follow, and could impact how professionals respond to other conditions in their employment agreements.
“That (arbitration provision) wasn’t the only provision in these employment agreements,” Aronoff said. “There could be non-disparagement provisions. Is the company saying that the employees are now free to disparage it? You can see employees taking the position post-SPAC that they’re no longer bound by things like restrictive covenants.”