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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

No fraud in alleged buyer’s financial misrepresentations concerning buyer’s equity received by seller of company

Seller was two related companies, one, a provider of litigation support and e-discovery services and the other, a provider of temporary legal staffing to law firms and corporations. Seller along with Seller Affiliate, a related company providing various litigation support

Posted in due diligence, fraud in business sale, material, receipt of buyer equity or security, receipt of buyer equity or security, reliance

Buyer of business loses misrepresentation claim against seller because claim was not based upon seller’s breach of contract

Madison, Wisconsin based Target, is a contract manufacturer of custom vitamin and trace mineral premixes and value-added branded feed ingredients for the animal feed market. Seller was Target’s president and Buyer its vice-president. Both shared in Targets’ day-to-day operations, and

Posted in economic loss doctrine, fraud in business sale, negligent misrepresentation, tort misrepresentation in M&A

Court said it may be reasonable for business buyer to rely on seller oral representation about competition

Target, based out of the Kansas City area, provides movie theater digital marketing/advertising and movie theater concessions. Sellers were the owners of Target. Buyer is a Texas capital investment limited liability company. In early 2015, Sellers circulated a solicitation seeking

Posted in anti-reliance clause, due diligence, extra-contractual fraud, negligent misrepresentation, reliance

Court says asset buyer of business can sue seller for failure to disclose its union contract obligation

In this post-closing lawsuit, Unions comprised four jointly-managed multiemployer employee benefit plans. Seller was a Nebraska corporation which performed waterproofing, concrete and masonry restoration, and roofing services in Nebraska and the Midwest. Buyer was also a Nebraska corporation, performing commercial

Posted in due diligence, fraud in business sale, post asset purchase issues, representations and warranties, successor liability, union fringe benefits, union liabilities

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