Robert P. Davis

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Updating our recent posting concerning the enforcement of disclaimers of extra-contractual liabilities under Delaware law, in FdG Logistics LLC v. A&R Logistics Holdings, Inc. (Del. Ch. Feb. 23, 2016) the Delaware Court of Chancery held, in the context of a motion to dismiss, that any such disclaimer must be unambiguously expressed as a statement by the aggrieved party in order to be effective.

FdG Logistics arose out of the purchase of a trucking company by a private equity firm through a merger transaction.  The purchaser alleged that the target company “engaged in an extensive series of illegal and improper activities that were concealed from it during pre-merger due diligence” and asserted, among other things, that the selling securityholders had committed common law fraud based on alleged misrepresentations in extra-contractual materials, including a confidential information memorandum and a management presentation.
Continue Reading Another Update on Disclaimers of Extra-Contractual Liability in Delaware

Acquisition agreements in private M&A transactions frequently contain language that purports to limit the purchaser’s recourse against the seller for extra-contractual misrepresentations, even if fraudulent, in order to allocate among the parties the risk of potential post-closing losses.  Such limitations on liability are generally enforceable under Delaware law when they have been specifically negotiated between sophisticated parties,[1] and are commonly implemented through a combination of a so-called “entire agreement” integration clause and an “exclusive representation” provision.  Delaware case law had previously suggested that such provisions might need to contain specific language to serve as an effective disclaimer, but the Delaware Court of Chancery recently ruled, in the context of a motion to dismiss, in Prairie Capital III, LP v. Double E Holding Corp. (Del. Ch. Nov. 25, 2015), that no “magic words” are required so long as the parties’ intention is unambiguous.
Continue Reading Disclaimers of Extra-Contractual Liability in Delaware Following Prairie Capital III, LP v. Double E Holding Corp.