News & Events

Litigation Partner Joe McLaughlin and Corporate Associate Yafit Cohn were quoted in a Bloomberg BNA article titled, “Delaware Cases Clarify Scope of M&A Non-Reliance Clauses.” The article discusses the importance of two Delaware Court of Chancery opinions that clarify when buyers may pursue fraud claims based on alleged misrepresentations made outside the four corners of an acquisition agreement. In the first ruling, Prairie Capital III v. Double E Holding Corp., the Chancery Court declined to allow a buyer to pursue certain fraud claims against the seller based on extra-contractual representations. In doing so, the decision clarified that no “magic words” are required to implement a non-reliance provision that clearly conveys that the buyer did not rely on extra-contractual statements, according to Joe and Yafit. In the second decision, FdG Logistics LLC v. A&R Logistics Holdings Inc., the Chancery Court distinguished its Prairie Capital ruling from the case before it, finding that the provision at issue was not effective in preventing a buyer from bringing fraud claims for representations made outside the merger agreement because the provision was drafted from the seller’s point of view. 

McLaughlin and Cohn said that taken together, FdG and Prairie Capital suggest that attorneys seeking to maximize the effectiveness of a non-reliance provision should ensure that the non-reliance provision is the product of arm’s-length negotiation between sophisticated parties; give full and deliberate consideration to the specific representations and warranties to be included in the agreement; and ensure that the non-reliance provision eliminates any potential ambiguity in the parties’ intent. 

To read the full article, please click here.