Screenshot of Post Holdings' website.

The Delaware Court of Chancery on Monday ordered Post Holdings Inc. and its Delaware subsidiary to turn over nearly $1 million in funds stemming from the food suppliers' $93.5 million deal to buy National Pasteurized Eggs Inc. in 2016.

The ruling, from Chancellor Andre G. Bouchard, came in Post's October 2017 lawsuit, seeking to recover a $7.5 million contractual indemnification payment from escrow based on alleged misrepresentations NPE had made to Post during deal talks.

A representative of the Illinois-based egg producer responded last November with its own claims that Post and its subsidiary, Michael Foods of Delaware Inc., had breached a stock purchase agreement by refusing to promptly remit approximately $974,000 in tax refunds and insurance proceeds from the period before the deal closed. In June, NPE moved for judgment on the pleadings as to its counterclaims, arguing that Post and Michael Foods were trying to retain the benefits of the contract, while at the same time failing to meet their obligations under it.

On Monday, Bouchard agreed, in a 20-page memorandum opinion addressing only the NPE rep's counterclaims. In his ruling, Bouchard said that Delaware law forbids Post and Michael Foods from using a supposed breach to escape their duties under a contract that they had elected to enforce.

“Because buyers' conduct clearly indicates a desire to continue to accept the benefits of the agreement after sellers' alleged material breach, buyers must continue to be bound by and to perform under the contract as well, irrespective of whether sellers materially breached the agreement,” Bouchard said.

Attorneys for Post did not respond to calls Monday afternoon seeking comment on the decision. Kevin R. Shannon, a Potter Anderson & Corroon partner who represented NPE's representative, declined to comment, citing the firm's policy of not commenting on pending litigation.

The ruling did not touch Post's claims for fraud and breach of warranty, which are still pending before the court.

In their complaint, Post and Michael Foods, which is incorporated in Delaware but headquartered in Minnesota, said that NPE made false representations about its workforce, the condition of its production equipment and the capacity of its pasteurizers during the due-diligence period leading up to the sale. It wasn't until after the deal closed, the companies said, that they learned that NPE was violating immigration laws and could not sustain its stated production rates.

Those claims are currently the subject of discovery, and no trial date has yet been set, according to court documents.

Bouchard's opinion entered final judgment on the counterclaims from NPE's representative, clearing the way for it to collect the tax refunds and insurance proceeds that it was owed. It was not clear on Monday whether Post and Michael Foods would appeal the ruling.

The sellers are represented by Shannon, Christopher N. Kelly and Jay G. Stirling of Potter Anderson and William C. O'Neil, Jeffrey J. Huelskamp and Michael A. Meneghini of Winston & Strawn's Chicago office.

Post and Michael Foods are represented by Rodger D. Smith II, Ryan D. Stottmann and Alexandra M. Cumings of Morris, Nichols, Arsht & Tunnell in Wilmington and Richard B. Walsh, Jr. and Evan Z. Reid of Lewis Rice in St. Louis.

The case is captioned Post Holdings v. NPE Seller Rep.