In Matthews v. Grove Networks, Inc., download file, the court interprets the terms of a Certificate of Incorporation regarding a claim that the “Liquidation Preference” does not apply to merger proceeds in the event of a merger. The definition of Liquidation Event which would trigger the liquidation preference, included a merger. The payment was to be due from “Distributable Assets,” which was defined as the company’s assets whether from capital, surplus or earnings. However, the definition for Distributable Assets is not specifically defined with specific reference to the proceeds in a merger. The plaintiff extrapolated on that silence to take the position that merger consideration was not intended to be part of the assets of the corporation and, therefore, they argued that the Liquidation Preference definition did not govern the distribution of merger consideration. The court disagreed and rejected as “making little sense,” the argument of plaintiff that the Liquidation Preference did not apply in the event of a merger based on the observation that in the event of a merger, the assets are transferred to the acquiring corporation in return for cash consideration paid to shareholders. If the court adopted the interpretation of the plaintiff, the Liquidation Preference would “have no effect.”