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No Fraud for Positive Projections Proved Inaccurate in Hindsight

May 31, 2020 Introduction It is all too common for an acquired business to not perform as well as expected after the closing. But the fact that the target’s projections were inaccurate do not amount to a fraud claim. The

Posted in constructive fraud, federal securities fraud, fraud in business sale Tagged with: , ,

Owner Loses $14.5 Million Fraud Claim Against Majority Shareholder in Stock Deal

May 22, 2020 Introduction This deal is a reminder that a seller of a business needs to read the transactional documents (with the help of a competent lawyer) before signing. In this case it cost the seller $14.5 million. The

Posted in fraud in business sale, fraudulent inducement, shareholder release Tagged with: , ,

Court Says Asset Business Buyer Can Sue the seller’s owner for Fraud

January 20, 2020 Introduction “Things gained through unjust fraud are never secure.” Sophocles The deal The seller’s owner operated a business that helped clients obtain wholesale automobile dealership licenses for auto dealerships in Missouri through seller a limited liability company.

Posted in fraud in business sale Tagged with: , ,

Court Greenlights Business Seller’s Fraud Lawsuit Over Earnout Dispute

Introduction Disappointing earnout deals are common. The deal This deal involved the stock acquisition of the target, a legal analytics company by a competitor. The price was $9 million cash plus a $3 million earnout potential.  The earnout was based

Posted in anti-reliance clause, earn outs, integration clause Tagged with: ,

Trust but Verify-Business Seller Failed to Verify Accuracy of Earnout Statement

Introduction A buyer and seller of a business often use an earnout when they can’t agree upon a purchase price. In that case, the purchase agreement provides for a buyer calculation of the earnout amount, along with an earnout dispute

Posted in earn out, earn out dispute procedure, economic loss doctrine, fraud in business sale, fraud in the inducement exception Tagged with: , , , , , ,

Bootstrapping Doctrine No Bar to Business Buyer’s Fraud Claim

Introduction A buyer of a closely held business often has limited recourse against a seller if the deal turns out bad.  Even if fraud is involved, the buyer must run the gauntlet of indemnification cap, survival period, exclusive remedy, non-reliance,

Posted in bootstrapping doctrine, exclusive remedy, fraud carveout, fraud in business sale, non-reliance clause Tagged with:

Franchise Buyer’s Fraud Claim Bars Seller’s Summary Collection of Note

Introduction It can be easy for a creditor to obtain a judgment against a debtor that has defaulted on payment of a promissory note. Essentially all the creditor must do is produce the signed note and prove nonpayment. But not

Posted in asset purchase agreement, fraud in business sale, promissory note, rescission Tagged with: ,

Fraud carve out saves buyer in “as-is where-is” in divestiture

Seller manufactures over-the-counter pharmaceutical products. On June 17, 2016, it sold one of its product lines to Buyer. The terms of that sale were memorialized in an asset purchase agreement. At the time of the sale, there was a class action suit

Posted in "as is where is", fraud in business sale Tagged with: , ,

Seller of company can sue Buyer for making oral fraudulent and negligent misrepresentations

Seller’s Owner founded Seller in 2002. Seller was based out of the greater Sacramento, California area. In 2007, Seller began doing business as BenefitsCONNECT. BenefitsCONNECT is an online benefits enrollment and administration system that connects employer groups, insurance carriers, third

Posted in asset purchase agreement, boilerplate provisions, fraud in business sale, integration clause, no oral modifications of contract, private equity

Israeli pharma buyer’s fraud claim against seller of Mexican pharma company tossed out by court

In 2015, Buyer, an Israeli pharma company purchased Target, a Mexican pharmaceutical company, from Sellers, and the intellectual property used by Target from a Sellers affiliate. The total sale price came to $2.3 Billion. After the closing, Buyer claimed that

Posted in compliance with all applicable laws, extra-contractual fraud, fraud in business sale, indemnification cap, representations and warranties

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