Delaware Court Awards $120M in Acquiror-Side M&A Fraud Verdict
The Court of Chancery awarded a $120 million post-trial fraud verdict against a buyer, holding that misrepresentations of present fact made outside the contract are actionable absent a specific, mutual anti-reliance clause.
In a consequential application of the Delaware Supreme Court's recent holding in 'Fortis,' the Court of Chancery awarded a $120 million post-trial verdict against private equity buyers for fraudulently inducing a deal. The court found in 'In re SwervePay Acquisition' that the buyers misrepresented existing payment volumes—a key metric for the sellers' earnout—using an investment-bank estimate they knew internally was a "red herring" and substantially higher than the actual figures.
The decision reinforces that an acquiror can be held liable for fraud based on extracontractual statements of present fact unless the purchase agreement contains a specific and, crucially, mutual anti-reliance clause. A standard integration clause is not enough to bar such a claim. The ruling highlights a contracting implied covenant of good faith and fair dealing, coupled with a robust avenue for well-pled extracontractual fraud claims. For transactional counsel, the key takeaway is the need to draft explicit, bilateral anti-reliance clauses to manage litigation risk. The court also showed its willingness to construct its own damages model from the defendant's internal documents, signaling a granular approach to valuations in post-closing disputes.