Ambiguous Tail Provisions in Investment Banking Engagement Letters

A recent state appeals court decision highlights the importance of drafting unambiguous tail provisions to avoid litigating over fees. In William Blair and Co. v. FI Liquidation Corp., an Illinois appellate court held that a tail provision in an engagement letter left in doubt whether a company owed a success fee to an investment banking firm for work it had done to introduce the company to its eventual buyer. Because the provision’s ambiguity left issues of material fact in contention, the appeals court held that the investment bank could pursue the disputed fees in a trial court — a costly and time-consuming proposition that could have been avoided.