Posts in Fraud Claims

Chancery Denies Sellers’ Request for Dismissal, Finding That Fraud Claims Were Timely Filed and Properly Pled

Agspring Holdco, LLC v. NGP X US Holdings, L.P., C.A. No. 2019-0567-AGB (Del. Ch. July 30, 2020)

This opinion concerns a buyer’s attempt to plead fraud in connection the acquisition of a business. The Court denied in the main the defendants’ motion to dismiss the fraud claims brought in connection with private equity firm American Infrastructure Partners’ (the “Buyer”) $300 million acquisition of Agspring LLC (the “Company”), which was then almost entirely owned by NGP X US Holdings, LLP (“NGP”), another private equity firm.  More ›

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CCLD Applies Anti-Reliance Provisions, Dismisses Buyer’s Fraud Claims

Infomedia Group, Inc. v. Orange Health Solutions Inc., C.A. No. N19C-10-212 AML CCLD (Del. Super. Ct. July 31, 2020)

This case is a strong reminder that Delaware will enforce anti-reliance clauses to bar claims for fraud where sophisticated parties voluntarily agree to the anti-reliance clauses. Here, plaintiff Infomedia Group, Inc., d/b/a Carenet Health Services entered into an asset purchase agreement (the “Purchase Agreement”) with defendant Orange Health Solutions, Inc. (“Citra”).  More ›

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Chancery Applies Contract’s Choice of Law to Related Fraud Claims, Declines to Dismiss Fraud Claims Where Contract Lacked Clear Anti-Reliance Language

The Anshutz Corp. v. Brown Robin Cap., LLC, 2019-0710-JRS (Del. Ch. June 11, 2020)

In dealing with what the Court of Chancery called “a version of a [commercial] dispute as old and abiding as commerce itself,” the Court provides insights useful to drafters of both pleadings and contracts. More ›

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CCLD Bars Tort Claims Overlapping with Contract Claims under Economic Loss Doctrine

GEA Sys. N. Am. LLC v. Golden State Foods Corp., C.A. No. N18C-11-242 EMD CCLD (Del. Super. Ct. June 8, 2020)

This case illustrates the extent to which the economic loss doctrine bars tort claims arising out of the same transaction as claims for breach of contract. In this case, plaintiff GEA Systems North America LLC (“GEA”) sold defendant Golden State Food Corp. (“Golden State”) three industrial freezers for use in Golden State’s hamburger patty facility. Golden State argued, among other things, that the freezers did not meet the production figures that GEA promised and GEA failed properly to install or repair the freezers. For this alleged misconduct, Golden State brought claims for negligence, fraudulent inducement, and intentional misrepresentation as well as for breach of contract. On a motion to dismiss, the Delaware Superior Court held that the economic loss doctrine barred the fraudulent inducement and intentional misrepresentations claims, but not the claims for negligence and gross negligence. More ›

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Chancery Dismisses Fraud, Misrepresentation and Mistake Claims Based on Anti-Reliance Provisions

Midcap Funding X Trust v. Graebel Companies, Inc., C.A. No. 2018-0312-MTZ (Del. Ch. Apr. 30, 2020)

The Court of Chancery found on a motion to dismiss that the plaintiffs’ allegations regarding misrepresentations in contractual negotiations were irrelevant due to the contract’s anti-reliance and integration clauses, and that the plaintiffs in the action otherwise were “scouring and stretching” the contract’s plain terms.  More ›

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Chancery Finds Corporation Fraudulently Induced Investor into Contract, Acting “Through Concealment and Silence”

Maverick Therapeutics Inc. v. Harpoon Therapeutics, Inc., C.A. No. 2019-0002-SG (Del. Ch. Apr. 3, 2020).

In this post-trial opinion, the Court of Chancery found that Harpoon Therapeutics, Inc., (“Harpoon”), a Delaware corporation in the business of developing novel cancer therapies, fraudulently induced an investor into acquiring an interest in one of its business divisions by intentionally drafting a non-compete narrowly to exclude certain opportunities Harpoon wished to pursue, in contrast with its representations to the investor about its future plans. More ›

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Superior Court Dismisses Fraud Claim Improperly Boot-Strapped to Breach of Contract Claim

Cont’l Fin. Co., LLC, v. ICS Corp., C.A. No. N19C-07-184 AML (Del. Super. Feb. 20, 2020).

This case represents another example of the application of the “bootstrap doctrine” to define the limits of a contract party’s ability to assert a fraud claim against a counter-party. Ruling on a 12(b)(6) motion to dismiss, the Superior Court permitted plaintiff’s breach of contract claim to proceed but granted dismissal of plaintiff’s fraud claim. The Court reasoned the fraud claim was impermissibly boot-strapped to a breach of a contractual duty, and the plaintiff failed plead damages distinct from those allegedly resulting from the contractual breach.  More ›

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Court of Chancery Finds the Delaware Uniform Fraudulent Transfer Act Grants Standing for Insureds with Contingent, Unmatured Claims to Sue Insurers, but Dismisses Certain Claims as Time-Barred

Burkhart v. Genworth Fin. Inc., C.A. No. 2018-0691-JRS (Del. Ch. Jan. 31, 2020). 

This case illustrates not only that plaintiffs who have only unmatured and contingent claims against a transferor have standing to seek relief under the Delaware Uniform Fraudulent Transfer Act (“DUFTA”), but also that they must comply with that statute’s rules for timely filing to avoid dismissal. Here, the plaintiffs are a class of insureds who hold long-term care insurance policies and insurance agents who receive commission payments from selling the insurance policies. The defendant is Genworth Life Insurance Company (“GLIC”), which underwrote the insurance policies at issue. GLIC allegedly made fraudulent transfers between 2012 and 2014 while GLIC was near insolvency by: (1) declaring $410 million in dividends, and (2) terminating intra-company contracts that provided financial support. The plaintiffs filed an action in 2018 in which they argue that GLIC’s fraudulent transfers violate the DUFTA.  More ›

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Co-Founder Squeezed Out in Conversion from LLC to Corporation Adequately Pled Claims for Fraud, Breach of Fiduciary Duties, Aiding and Abetting, and Civil Conspiracy

Ogus v. SportTechie, Inc., C.A. No. 2018-0869-AGB (Del. Ch. Jan. 31, 2020). 

Simon Ogus was a co-founder of a sports-technology news company. He owned 44.5 percent of the LLC’s units, held veto power over major decisions of the company, and had employment protection based on a requirement that the company could only terminate his employment for cause. After outside investors began making large investments in the company, several officers and directors persuaded Mr. Ogus to: (1) approve a conversion of the LLC to a corporation; (2) sign a written consent of stockholders to expand the size of the board of directors; and (3) execute a shareholders agreement that gave the company the option to purchase Mr. Ogus’ shares if his employment was terminated for any reason, at fair market value, as determined in good faith by the board. One month later, the company terminated Mr. Ogus without cause and proposed to purchase his shares. Mr. Ogus brought suit, claiming that the officers and directors conspired to remove him from the company and eliminate his 44.5% interest to enrich themselves, and transfer control of the company to Oak View Group, a private equity & venture fund. Defendants moved to dismiss his suit. More ›

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