In Arwood v. AW Site Servs., LLC (Del. Ch. March 9, 2022), the Seller was approached by Buyer about selling the business. Seller “lacked the know-how or inclination to prepare financial records or to formulate useful valuations,” so Buyer requested, and obtained, “full and unfettered access to the businesses’ raw financial and other records” to use in valuing and deciding whether to acquire the business. When the business did not perform as Buyer had expected after closing, Buyer brought claims for fraud against Seller.
Fraud
The Court found no evidence of intent to defraud by the Seller, whom the court found was “unsophisticated”, and who had granted the buyer “unfettered access” to the business to permit the buyer to conduct its diligence review. The court found that a buyer claiming fraud could show reasonable reliance on false information by showing that it did not have or recklessly disregard knowledge of the falsity of the information, but held that the Buyer had not met that showing.
