Tag: Representations and Warranties

Court of Chancery Dismisses Fraud Claim for Alleged Extra-Contractual Misrepresentations Based on Anti-Reliance Clause

By: Claire S. White and Rachel P. Worth

In ChyronHego Corporation, et al., v. Cliff Wight and CFX Holdings, Inc., C.A. No. 2017-0548-SG (Del. Ch. July 31, 2018), the Delaware Court of Chancery granted the defendants’ motion to dismiss the plaintiffs’ claim for extra-contractual fraud on the basis that the stock purchase agreement contained an effective anti-reliance clause that precluded such claim. The Court found that the anti-reliance clause rebutted the common law fraud element of reliance on any extra-contractual representations, as described further below.  At the same time, the Court dismissed the defendants’ motion to dismiss claims for fraud and breaches of express representations and warranties under the stock purchase agreement, finding that the plaintiffs had sufficiently pleaded the elements of these claims.

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Chancery Court Cites Inelegant Drafting When Allowing an Indemnification Claim to Proceed

By Whitney Smith and Dean Brazier

In EMSI Acquisition, Inc. v. Contrarian Funds, LLC, et al., C.A. No. 12648-VCS (Del. Ch. May 3, 2017) the Delaware Chancery Court denied a motion to dismiss brought by defendants who were sellers (“Sellers”) in the acquisition of EMSI Holding Company (“EMSI”) by an affiliate of private equity firm Beecken Petty O’Keefe & Company where “inelegant drafting” created an ambiguity that may make the Sellers liable for EMSI’s fraudulent representations and warranties.  To reach this conclusion, the Court considered whether the provisions of the Stock Purchase Agreement (“SPA”) permitted the plaintiff (“Buyer”) to seek indemnification beyond the cap on liability and, if so, whether the Sellers could be liable for the allegedly fraudulent representations and warranties from EMSI.  The Court concluded that the SPA contained conflicting provisions with interpretations that could reasonably support either party’s claims and the conflicts could not be resolved on a motion to dismiss.

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Chancery Court Finds Clear Disclaimer of Reliance on Extra-contractual Statements in Dismissing Buyer’s Fraud Claim; Allows Certain Breach of Contract Claims to Proceed

By: C.J. Voss and H. Corinne Smith

In IAC Search, LLC, v. Conversant LLC (f/k/a ValueClick, Inc.), C.A. No. 11774-CB (Del. Ch. Ct. November 30, 2016) the Chancery Court granted the defendant’s motion to dismiss plaintiff’s fraud claim based on the inclusion of provisions in the purchase agreement that disclaimed reliance on extra-contractual statements that bar plaintiff’s fraud claim.  The Court also granted defendant’s motion to dismiss one breach of contract claim, but denied the motion with respect to several other breach of contract claims.

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