IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

PILOT AIR FREIGHT, LLC

 Plaintiff,

 v.

MANNA FREIGHT SYSTEMS, INC., 

ALAN J. MEEHAN REVOCABLE TRUST, 

and ALAN J. MEEHAN,

 Defendants.

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C.A. No. 2019-0992-JRS

MEMORANDUM OPINION

Date Submitted: June 2, 2020

Date Decided: September 18, 2020

Jody C. Barillare, Esquire of Morgan, Lewis & Bockius LLP, Wilmington, Delaware 

and Troy S. Brown, Esquire, Margot G. Bloom, Esquire and Brian F. Morris, Esquire

of Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania, Attorneys for 

Plaintiff Pilot Air Freight, LLC.

Kurt M. Heyman, Esquire and Melissa N. Donimirski, Esquire of Heyman Enerio 

Gattuso & Hirzel LLP, Wilmington, Delaware and Michael F. Cockson, Esquire and 

Nathaniel J. Zylstra, Esquire of Faegre Drinker Biddle & Reath LLP, Minneapolis, 

Minnesota, Attorneys for Defendants Manna Freight Systems, Inc., Alan J. Meehan 

Revocable Trust and Alan J. Meehan.

SLIGHTS, Vice Chancellor
1

This Action involves disputes relating to an Asset Purchase Agreement 

(the “APA”) whereby Plaintiff, Pilot Air Freight, LLC (“Pilot”), purchased 

substantially all the assets of Defendant, Manna Freight Systems, Inc. (“Manna,” or 

the “Company”) (the “Acquisition”).

1

 As to be expected, Manna and its direct and 

indirect owners, Defendants, Alan J. Meehan Revocable Trust u/a/d/ 8/20/2007 

(the “Trust”) and Alan J. Meehan (“Meehan”), as sellers, made contractual 

representations and warranties in the APA to Pilot, as buyer, regarding the fitness of 

Manna’s trucking business.2

 The parties agreed that Sellers would indemnify Pilot 

for any breaches of the representations and warranties,

3 and that any claim for 

indemnification must be filed within 15 months of the APA’s closing.4

 Apart from 

Sellers’ contractual representations and warranties, however, Pilot promised it was 

not relying on any extra-contractual promises, representations or warranties.5

 1 Verified Compl. Under Seal (“Compl.”) (D.I. 1) ¶¶ 1–4; Compl. Ex. A (the “APA”). 

2 See, e.g., Compl. ¶ 35; APA Art. 5 (“Each of Seller, the Trust and Meehan jointly and 

severally represent . . . .”). Meehan and the Trust together are referred to in the APA as 

“Owner.” The APA designates Manna as “Seller.” Throughout this Opinion, when 

quoting from the APA, I will follow this convention. For ease of reference, however, 

I designate Manna and the Owner, collectively, as “Sellers” when addressing Sellers’ 

representations and warranties in order to avoid repeated references to “Seller, the Trust 

and Meehan jointly and severally” as the actual parties who made the “Representations and 

Warranties By Seller” as per the APA. APA Art. 5. 

3 APA § 9.1 (“Indemnification by Seller”).

4 APA § 9.1, § 9.3 (“Survival”). 

5 APA § 9.8 (“Limitation of Representations and Warranties”). 
2

A significant aspect of Pilot’s thesis in support of the Acquisition was that it 

could “market its [own] logistics services to Manna’s customers and therefore 

expand its customer base.”6

 Given the “critical importance” of Manna’s existing 

customer relationships, a significant component of Pilot’s valuation of Manna was 

Manna’s “projected future customer revenues.”7

 To buttress its valuation, Pilot 

bargained for a specific representation regarding the stability of the Company’s 

relationship with its “30 largest customers for calendar year 2017.”8

 It also 

bargained for post-signing protection in the form of a representation that, between 

signing and closing, Sellers had not received notice from any of Manna’s top 

customers of an intent materially to decrease the volume of business with the 

Company.9

The Acquisition closed on July 16, 2018. More than fifteen months later, on 

December 11, 2019, Pilot filed this Action alleging fraud, breach of representations 

and warranties and breach of the implied covenant of good faith and fair dealing.10 

According to Pilot, at some point after closing, it discovered that three of the 

 6 Compl. ¶ 2. 

7 Id.

8 APA § 5.27 (“Customers”). 

9 Compl. ¶ 25; APA § 5.27. 

10 Compl. ¶ 96(a) (alleging Sellers breached various representations and warranties). 
3

Company’s top customers from 2017 were “no longer [] customer[s] at all.”11 This 

discovery has prompted Pilot to allege that Sellers “initiated a scheme to 

misrepresent to Pilot the declining or essentially ended nature of certain of its 

material customer relationships” as soon as Sellers realized “the value Pilot placed” 

on Manna’s customer relationships.

12

Manna has moved to dismiss under Court of Chancery Rule 12(b)(6) for 

failure to state viable claims. According to Manna, the indemnification claims are

untimely and the implied covenant and fraud claims are not well-pled. 

Despite the “critical importance” of customer relationships to Pilot’s plans for 

Manna’s assets, it offers no viable excuse for waiting until after the 15-month 

contractual limitations period expired to seek indemnification.13 To avoid dismissal 

of its indemnification claims, Pilot conjures an argument that Sellers “put Pilot off 

the ‘trail of inquiry’” by employing an “‘actual artifice’ to [] prevent Pilot from 

learning about the true status of [the] customer relationships.”14 But after giving 

Pilot the benefit of all reasonable inferences flowing from the Complaint, it is not 

 11 Compl. ¶ 43 (Modus was a “lost customer”), ¶ 55 (Personal Comfort was “no longer a 

customer at all”), ¶ 72 (Big Fig “no longer intended to be a customer”). 

12 Compl. ¶ 34. 

13 Compl. ¶ 2. 

14 Pl.’s Answering Br. in Opp’n to Defs.’ Mot. to Dismiss Pl.’s Verified Compl. (“PAB”) 

(D.I. 23) at 22. 
4

reasonably conceivable that the Sellers did anything to prevent Pilot from 

discovering within the contractual limitations period that the three “critical” 

customers it has identified were, in Pilot’s words, “no longer [] customer[s] at all.”15

The APA was a “heavily negotiated” contract that “cover[ed] a large number 

of specific risks explicitly.”16 One of those risks was that Manna’s top customers 

would go elsewhere. The APA’s bargained-for “representations and warranties 

serve an important risk allocation function” by allowing Pilot to fine-tune its risk 

preferences regarding these top customers.17 Given that Pilot knowingly bargained 

away the right to seek indemnification for breaches of the relevant representations 

and warranties after 15 months from closing, Pilot may not avail itself of a remedy 

that, by its own hand, no longer exists. Accordingly, Pilot’s indemnification claims 

must be dismissed. 

The implied covenant claim parrots the allegations supporting the claim for 

indemnification. This is not surprising given that the gravamen of the claim is that 

Sellers acted in bad faith by falsely representing in the APA the state of Manna’s 

 15 Compl. ¶ 55. 

16 In re Tibco Software Inc. S’holders Litig., 2014 WL 6674444, at *18 (Del. Ch. Nov. 25, 

2014). 

17 Id.; Julius v. Accurus Aerospace Corp., 2019 WL 5681610, at *15 (Del. Ch. Oct. 31, 

2019). 
5

relationship with key customers. This topic is covered expressly in the APA; there 

is no room for the implied covenant. That claim must also be dismissed. 

Apart from a minor dispute involving Manna’s accounts receivable,18 this 

leaves Pilot with fraud claims. In this regard, Pilot alleges Sellers “fraudulently 

induce[d] Pilot to proceed to Closing” (later defined) by making certain false 

statements regarding a number of customers within the Agreement.

19 After carefully 

reviewing the Complaint and the APA, I am satisfied the bulk of the alleged fraud is 

pled with particularity, not barred by the APA’s non-reliance clause and not 

otherwise barred as bootstrapped breach of contract claims. The motion to dismiss 

the contractual fraud claims, therefore, must be denied. 

I. BACKGROUND

I have drawn the facts from well-pled allegations in the Verified Complaint 

and documents incorporated by reference or integral to that pleading.

20 For purposes 

 18 As explained below, the Complaint does well-plead a breach of contract claim with 

respect to certain Excluded Liabilities. 

19 Compl. ¶ 4.

20 Compl.; Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 860 A.2d 312, 320 (Del. 2004) 

(noting that on a Motion to Dismiss, the Court may consider documents that are 

“incorporated by reference” or “integral” to the complaint). 
6

of Defendants’ Rule 12(b)(6) motion, as I must, I accept those well-pled facts as 

true.

21

A. The Parties and Relevant Non-Parties

Pilot is a “worldwide provider of transportation and logistics services.”22 

Until Pilot acquired substantially all its assets, Manna was also engaged in the 

trucking and logistics industry.23 The Trust is Manna’s sole shareholder.

24

Meehan is an individual who resides in Minnesota.25 He is alleged to be 

Manna’s founder and the sole settlor and grantor of the Trust.26 Meehan was 

Manna’s CEO at all relevant times before the closing.27

Non-Parties, Modus Furniture International (“Modus”), Personal Comfort 

Beds (“Personal Comfort”), Big Fig Mattress (“Big Fig”) and General Electric 

 21 In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d 162, 169 (Del. 2006). 

22 Compl. ¶¶ 1, 7. 

23 Compl. ¶¶ 1, 8. 

24 Compl. ¶ 9. 

25 Compl. ¶ 10. 

26 Id.

27 Id.
7

(“GE”) were Manna customers.28 Non-party, Forward Air Corp. (“Forward Air”), 

was a Manna supplier.29 

B. Pilot and Manna’s Strategic Overlap

Prior to the Acquisition, Manna’s business focused on providing “final mile” 

delivery services, specializing in more difficult deliveries “(i.e., mattress 

delivery).”30 This business relied heavily on revenue generated from repeat 

customers.31 Pilot saw the Acquisition as a means to expand its global transportation 

and logistics business by adding “final mile” delivery service to its existing logistics 

offerings.

32 By adding this piece of the delivery puzzle, Pilot would be positioned 

to “provide customers with a complete package of delivery solutions” and could then 

offer its “full mile” services to Manna’s “last mile customers.”33

 28 Compl. ¶¶ 36, 55, 68, 77, 84.

29 Compl. ¶ 78. 

30 Compl. ¶ 1. “Final (or last) mile” deliveries take product from intermediate depos to the 

final destination. 

31 Id. 

32 Compl. ¶¶ 1, 2, 27. 

33 Compl. ¶ 31. “Full mile” deliveries take product from origination to final destination.
8

C. The APA

Pilot, Manna, the Trust and Meehan signed the APA on June 26, 2018 

(the “Signing”).

34 The Acquisition of substantially all of Manna’s assets closed 

three weeks later, on July 16, 2018 (the “Closing” or “Closing Date”).35

Not surprisingly, the APA contains a series of interrelated provisions whereby 

Sellers (i) disclaimed all extra-contractual representations and warranties,

(ii) explicitly provided Pilot with a discrete list of contractual representations and 

warranties about the Company, (iii) represented that the contractual representations 

and warranties were true as of the Signing and the Closing, (iv) set aside a portion 

of the purchase price in escrow to serve as Pilot’s exclusive source of recovery 

should Pilot prove that the representations and warranties were untrue as of the date 

they were made, (v) agreed to indemnify Pilot out of the escrow fund for any losses 

arising out of a breach of the contractual representations and warranties and 

(vi) contractually specified the date by which any claims for breaches of Sellers’ 

representations and warranties must be brought.36 

 34 APA (recitals); Compl. ¶ 1. The APA includes a Delaware choice-of-law provision and 

provides that the exclusive jurisdiction and venue for APA disputes shall be the state and 

federal courts of the State of Delaware. APA § 14.7; Compl. ¶ 13. 

35 APA § 1.1 (“Purchased Assets”); Compl. ¶¶ 17–18. The purchase price was $18,000,000 

subject to certain net working capital and tax adjustments. APA § 2.1 (“Purchase Price”).

36 APA § 9.8 (“Limitation of Representations and Warranties”), § 5 (“Representations and 

Warranties By Seller”), § 5 (Sellers’ Representations and Warranties made as of the 

Signing), § 8.2 (Sellers’ representations and warranties true as of the Closing), § 9.1 
9

The Non-Reliance Provision

The APA contains a non-reliance provision whereby Pilot agreed that it was 

not relying on any extra-contractual representations or warranties when it entered 

into the APA.

37 Specifically, in Section 9.8 of the APA, captioned “Limitation of 

Representations and Warranties,” Pilot agreed: 

Except for the representations and warranties expressly set forth in 

Article 5, the Seller and the Owners are not making and shall not be 

deemed to have made, any other representations or warranties, written 

or oral, statutory, express or implied, concerning the Seller, the Owners, 

the Purchased Assets, the Assumed Liabilities, the Business or any 

other matter related to this Agreement, all of which are otherwise being 

accepted by Purchaser “AS IS AND WHERE IS.” . . . EXCEPT AS 

EXPRESSLY PROVIDED IN ARTICLE 5, NEITHER THE SELLER 

NOR THE OWNERS HAS MADE, AND THE SELLER AND THE 

OWNERS HEREBY EXPRESSLY DISCLAIM AND NEGATE, 

AND PURCHASER HEREBY EXPRESSLY WAIVES AND 

AGREES THAT IT IS NOT RELYING ON, ANY 

REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT 

COMMON LAW, BY STATUTE OR OTHERWISE RELATING TO, 

AND PURCHASER HEREBY EXPRESSLY WAIVES AND 

RELINQUISHES ANY AND ALL RIGHTS, CLAIMS AND 

CAUSES OF ACTION AGAINST THE SELLER, THE OWNERS 

AND THEIR REPRESENTATIVES IN CONNECTION WITH, THE 

ACCURACY, COMPLETENESS OR MATERIALITY OF ANY 

STATEMENTS, INFORMATION, DATA OR OTHER MATERIALS 

(WRITTEN OR ORAL) OR DOCUMENTS HERETOFORE 

FURNISHED OR MADE AVAILABLE TO PURCHASER AND ITS 

 

(“Indemnification by Seller”), § 9.4(b) (Sellers’ liability “shall not exceed” the “Escrow 

Amount” subject to narrow exceptions), § 9.6 (discussing the “Escrow”), § 9.5 (discussing 

“Survival”). 

37 APA § 1.1; Compl. ¶ 17. 
10

REPRESENTATIVES BY OR ON BEHALF OF THE SELLER OR 

THE OWNERS.38

Relatedly, in Section 14.4, the parties agreed the APA, “together with all 

disclosure schedules, . . . constitutes the entire agreement between the parties.”39

To remove all doubt, the APA reiterates that it was to “supersede any prior 

understandings, agreements, or representations and warranties by or among the 

parties.”40 When read together, Article 9 and Section 14.4 make clear that Pilot had 

no right to rely on Sellers’ extra-contractual statements concerning Manna and its 

business.41 

The APA distinguishes between Sellers’ extra-contractual representations and 

warranties (on which Pilot agreed it would not rely) and the contractual 

representations and warranties for which Pilot bargained in the APA. In Section 9.1, 

the APA states: 

Nothing in this Agreement shall limit or restrict any of Purchaser’s 

rights to maintain or recover any amounts at any time in connection 

with any action or claim based upon intentional fraud by Seller or 

Owner in this Agreement.

42

 38 APA § 9.8 (capitalization in original). 

39 APA § 14.4 (“Entire Agreement”). 

40 Id.

41 APA §§ 9.1, 9.8, 14.4. 

42 APA § 9.1 (emphasis supplied). 
11

Accordingly, the APA preserves Pilot’s right to bring a claim for “intentional fraud” 

at “any time,” provided the basis for the alleged fraud arises out of Sellers’

representations and warranties in the APA.

Sellers’ Representations and Warranties

As the relevant provisions make clear, the risk allocation scheme manifested 

in the APA placed singular focus on the promises the parties made to each other in 

the contract itself. Relevant here, Sellers represented and warranted to Pilot that, as 

of the Signing, and then as of Closing:

43

• Section 5.6 (Financial Statements): except as set forth in the 

disclosure schedules, the Company’s financial statements for the year 

ended 2016 and 2017, as well as the interim period ended April 30, 

2018 (the “Interim Financial Statements”) “present fairly, in all 

material respects, the financial position of Seller at such dates and the 

results of operations of Seller for such respective periods in conformity 

with . . . [GAAP].”44

 43 APA Art. V (“Each of Seller, the Trust and Meehan jointly and severally represent and 

warrant to Purchaser, as of the [Signing], as follows:”); § 8.2(a) (“The representations and 

warranties of Seller and Owner contained in Article 5 shall be true and correct in all 

respects (without giving effect to any update of the Disclosure Schedules pursuant to 

Section 10.7) on and as of the Closing Date with the same effect as though made at and as 

of such date (except those representations and warranties that address matters only as of a 

specified date, the accuracy of which shall be determined as of that specified date in all 

respects), except for any inaccuracy in any representation and warranty that, individually 

or in the aggregate with any other such inaccuracy, has not had a Material Adverse 

Effect.”); § 8.2(i) (discussing officer certificates). Critically, while Sellers made these 

representations at Signing and then again at Closing, to the extent a specific statement 

“addresses matters only as of a specified date, the accuracy” of such statement “shall be 

determined as of that specified date in all respects.” § 8.2(a) (emphasis supplied).

44 APA § 5.6.
12

• Section 5.8 (Absence of Changes): Except as set forth on the 

Company’s disclosure schedules, since April 30, 2018 to Closing, there 

has not been: (a) any Material Adverse Effect, (b) any “damage, 

destruction or loss” adversely affecting the “properties or assets of the 

Business in any material respect” or (c) any “transactions with respect 

to the Business not in the ordinary course.”45

• Section 5.24 (Accounts Receivable): except as set forth in disclosure 

schedules, all of the accounts receivable reflected on the Company’s 

financial statements “will be actual and bona fide receivables” that are 

stated “in accordance with GAAP.” And, to the Knowledge46 of the 

Seller, there are not any amounts in excess of $10,000 due in respect of 

any such individual account receivable that is in dispute.47

• Section 5.27 (the “Customer Rep”): “Set forth on Schedule 5.27 

hereof is a true and complete list of Seller’s 30 largest customers for 

calendar year 2017 (by revenue attributable to such customers) 

(“Material Customers”) . . . Except as indicated on Schedule 5.27, . . . 

neither Seller nor Owner has received written notice or, to the 

Knowledge of Seller, any oral notice from any Material Customer that 

any Material Customer intends or expects, after the Closing Date, to 

stop or materially decrease the volume of, or change, adjust or modify 

in any materially adverse manner any of the material terms . . . with 

respect to its purchasing of services from Seller.”48

• Section 5.28 (Vendors): the Company’s disclosure schedules contain 

“a true and complete list” of the Company’s “30 largest vendors for 

calendar year 2017. . . . Since January 1, 2016, neither Seller nor Owner 

has received written notice, or to the Knowledge of Seller, any oral 

notice” that any such vendor “intends or expects to stop or materially 

 45 APA § 5.8; see also APA § 5.6 (discussing the “Interim Balance Sheet”), § 8 (discussing 

closing conditions). 

46 The APA defines “Knowledge” to mean the actual knowledge of Meehan or the 

Company’s COO or CFO. APA § 9.1(p). 

47 APA § 5.24. 

48 APA § 5.27. 
13

change . . . any of the material terms . . . with respect to its provision of 

goods or services” to the Company.49

Two aspects of the Customer Rep are particularly important to Pilot’s breach 

and fraud claims. First, Sellers disclosed a list of the Company’s 30 largest 

customers “for calendar year 2017.”50 On its face, the Customer Rep says nothing 

about Manna’s largest customer during any other time period. This leaves a sixmonth gap between the period addressed in the Customer Rep (i.e., the end of 2017) 

and the Signing (June 26, 2018).51 Second, Sellers represented that no Material 

Customer from the list had notified the Company of an intent to “stop or materially 

decrease” their purchases “after the Closing Date” (a “Business Reduction 

Notification”).52

Another key aspect of Sellers’ disclosure is the “disclosure statements” carveout. As noted, Sellers’ representations and warranties are qualified by the phrase 

“except as set forth” on the Company’s disclosure statements.

53 Accordingly, if 

 49 APA § 5.28. 

50 APA § 5.27. 

51 Compare APA § 5.27 (disclosing the Company’s largest customers “for calendar year 

2017), with Compl. ¶ 16 (signing occurred on June 26, 2018). 

52 APA § 5.27 (emphasis supplied). 

53 See, e.g., APA § 5.8 (“Except as set forth on Schedule 5.8”), § 5.6 (“Except as set forth 

on Schedule 5.6”). 
14

Sellers disclosed a fact in a disclosure statement, that disclosure, in essence, was

carved out of Sellers’ representations and warranties. 

Sellers provided the first disclosure statement to Pilot at Signing 

(the “Original Disclosure Schedules”). Under Section 10.7, Sellers then had the 

option to update (or not) the disclosure schedules before Closing (the “Updated 

Disclosure Schedules”):

54

Seller and the Owners may from time to time before Closing update the 

Disclosure Schedules regarding any matter about which they obtain 

Knowledge after the date hereof that would constitute a breach of any 

of the representations and warranties in this Agreement in the form of 

a written supplement or amendment delivered to Purchaser; provided, 

any such update by Seller and the Owners shall be made within 

seven (7) days of Seller first obtaining such Knowledge. No such 

supplement or amendment shall have any effect on the satisfaction of 

the conditions to closing set forth in Section 8.2; provided, however, if 

Purchaser proceeds with the Closing, then Purchaser and the other 

Purchaser Indemnified Persons shall be deemed to have waived any 

right or claim pursuant to the terms of this Agreement or otherwise, 

including for indemnification pursuant to Article 9, with respect to any 

and all matters disclosed pursuant to any such supplement or 

amendment at or before the Closing, and the representations and 

warranties shall be qualified by any matters set forth in such supplement 

or amendment.55

As the APA makes clear, the information contained on the Updated Disclosure 

Schedules would not affect (one way or the other) Pilot’s obligation to close, but if 

 54 APA § 10.7 (“Updating Disclosure Schedules”); Compl. ¶ 22. 

55 APA § 10.7.
15

Pilot “proceeds with the Closing,” then Pilot would waive any claim with respect to 

the matters disclosed.56

Indemnification and Survival

Section 9.1 of the APA defines Pilot’s indemnification rights:

From and after the Closing and subject to the limits set forth in this 

Article 9, Seller and each Owner, jointly and severally, shall indemnify, 

defend and hold Purchaser . . . harmless from and against any and all 

loss, liability, damage, or expense . . . (collectively “Losses”) that 

[Purchaser may] suffer, sustain, incur or become subject to, arising out 

of, resulting from or due to: (a) any breach or inaccuracy when made of 

any representation and warranty of Seller or Owner in this Agreement; 

(b) the non-fulfillment of any covenant, agreement or other obligation 

of Seller or Owner under this Agreement; (c) any Excluded Liabilities; 

. . . (g) IC Liabilities incurred by Seller to the extent arising out of 

Seller’s operations prior to the Closing Date, up to the remaining 

Escrow Amount then held in escrow under the Escrow Agreement. 57

While broad, the right to indemnification under the APA, in most instances, is not 

indefinite. In a section of the APA entitled “Survival,” Pilot agreed that most of the 

Sellers’ representations and warranties, including the key ones at issue here, would 

survive for only 15 months after Closing: 

All representations and warranties set forth in this Agreement shall 

survive for a period of 15 months after the Closing; provided, however, 

that the Fundamental Representations and the representations and 

warranties made by Purchaser in Sections 6.1 (Corporate Organization 

and Standing), 6.2 (Authority), and 6.3 (Brokers) shall survive until the 

 56 APA § 8.2(i), § 8.2(a) (stating that Pilot was not obligated to close unless 

“[t]he representations and warranties of Seller and Owner contained in Article 5 shall be 

true . . . as of the Closing Date”). 

57 APA § 9.1. 
16

expiration of the statute of limitations plus sixty (60) days. All 

covenants, indemnities and agreements of [Manna] and the Owners 

shall survive for three (3) years after the Closing Date (after which such 

obligations shall terminate), except (i) each of Section 10.2 and 

Section 10.3 shall survive in accordance with its terms, and (ii) the 

indemnification obligations of Seller and Owners with respect to 

Fundamental Representations shall continue in accordance with the 

terms of this Section 9.3. . . . No claim for indemnification as to 

representations and warranties under this Agreement may be made after 

the expiration of the applicable period set forth in this Section 9.3 and 

[Manna] and the Owners shall have no Liability for any claims made 

after the expiration of such applicable period for breach of or an 

inaccuracy when made of a representation or warranty. All demands or 

claims for indemnification under this Agreement shall be in writing and 

shall set forth with reasonable specificity the basis for such demand or 

claim and the amount of such claim (if known).58

The practical impact of the Survival clause is that claims for breach of 

representations and warranties subject to the clause must be brought within 

15 months of Closing. Thereafter, the claims are time barred.

On the same day as the Closing, the parties entered into an escrow agreement, 

which required that $1,500,000 be placed into escrow to cover timely claims brought 

by the buyer (Pilot) for indemnification (the “Escrow Property”).59 If no claims for 

indemnification were presented within 15 months after Closing, any amount 

remaining in the escrow was to be distributed to Sellers.

60

 58 APA § 9.3 (emphasis supplied).

59 Compl. ¶ 19. 

60 Compl. ¶ 20. 
17

D. Business Reduction Notifications

“In 2017 and 2018, Manna’s business relationships with certain key customers 

fell into jeopardy.”61 Indeed, several customers “advised Manna that they intended 

to terminate their relationship with Manna.”62 According to Pilot, when Manna

learned that several of the Company’s key clients would be leaving the fold, its 

management (including Meehan) “initiated a scheme to misrepresent to Pilot the 

declining or essentially ended nature of [these] material customer relationships.”63 

Pilot flags three troubled customer relationships that it believes Manna had a duty to 

disclose under the APA. 

Modus

In the Original Disclosure Schedules, Sellers identified Modus as Manna’s 

fourth largest customer by revenue “for calendar year 2017.”64 Specifically, the 

Sellers represented Modus’ billed revenue for 2017 was $2,317,000.65 Pursuant to 

Sellers’ contractual obligation to disclose Business Reduction Notifications, the 

Original Disclosure Statement revealed that “[i]n 2018 and in the ordinary course of 

 61 Compl. ¶ 3. 

62 Id.

63 Compl. ¶ 34. 

64 Compl. ¶ 36; APA § 5.27. 

65 Compl. ¶ 36. 
18

business, Modus . . . decreased the volume of services purchased from [Manna].”66 

The Original Disclosure Statement did not reveal, however, that six months before 

Signing, Modus notified Manna that it intended to terminate its business with the 

Company.

67 Upon receiving this notice, Manna’s management began to identify 

Modus as a “lost customer.”68 

Personal Comfort 

The Sellers’ Original Disclosure Schedule listed Personal Comfort as the 

Company’s twenty-fifth largest customer during 2017 with aggregated billed 

revenue of $446,000.69 Despite this significant business during 2017, by Signing, 

Personal Comfort was no longer a Manna customer.70 Indeed, Sellers knew at least

a month before Signing that Personal Comfort was no longer transacting business 

with the Company due to customer service issues.

71 

By the time Sellers received Personal Comfort’s Business Reduction 

Notification before Signing, the Original Disclosure Schedules had been issued and 

 66 Compl. ¶ 49. 

67 Compl. ¶¶ 37, 38. 

68 Compl. ¶ 39. 

69 Comp. ¶ 55. 

70 Id.

71 Compl. ¶ 63. 
19

made no mention of Personal Comfort’s cessation of business.

72 It was not until 

well after receiving Personal Comfort’s Business Reduction Notification that Sellers 

finally disclosed the bad news regarding the loss of Personal Comfort’s business on 

the Updated Disclosure Schedule.73

Big Fig 

On the Original Disclosure Schedule, Sellers listed Big Fig as the Company’s

twenty-fourth largest customer in 2017 with revenue of $452,000.74 Pilot alleges 

Sellers were aware, as of April 20, 2018, that Big Fig was “dissatisf[ied]” with 

Manna’s services.75 And, on information and belief, Pilot alleges “Big Fig advised 

Sellers prior to Closing that it no longer intended to be a customer of Manna’s.”76 

Neither the Original nor the Updated Disclosure Schedule contained any mention of 

Big Fig’s Business Reduction Notification.

77 

 72 Compl. ¶¶ 63–64.

73 Compl. ¶¶ 63, 64, 67. 

74 Compl. ¶ 68. 

75 Compl. ¶¶ 70–72. 

76 Compl. ¶ 72. 

77 Id.
20

Separately, Pilot maintains Sellers never disclosed that a $127,144 receivable 

from Big Fig was “uncollectible and in dispute.”78 Even though Sellers disclosed a 

$50,000 reserve against this receivable, Pilot claims Sellers “had actual knowledge 

that the full amount of the receivable was uncollectible.”79

*****

The chart below summarizes the Business Reduction Notifications Pilot 

alleges Sellers received and yet failed to disclose in order to induce Pilot to sign the 

APA and close the Acquisition:

80

 78 Compl. ¶ 75. 

79 Id.

80 Compl. ¶¶ 16, 18. As noted, the APA was signed on June 26, 2018, and the Acquisition

closed on July 16, 2018.

Remainder of Page Intentionally Left Blank
21

Alleged date Sellers received 

Business Reduction 

Notification from a customer

Method and date of 

Sellers’ disclosure of 

Business Reduction 

Notification

Content of disclosure

Modus December 29, 2017 [1]

Footnote to Original 

Disclosure Schedule, dated 

June 26, 2018 [2]

“In 2018 and in the ordinary course of 

business, Modus . . . [has] decreased 

the volume of services purchased from 

Seller.” [3]

Personal 

Comfort

May 24, 2018 or June 27, 2018 

at the latest [4]

Updated Disclosure 

Schedules, dated July 16, 

2018 (more than 7 days 

after Sellers received 

Business Reduction 

Notification) [5]

“In 2018 and in the ordinary course of 

business, Personal Comfort [] no 

longer purchases services from Seller.”

[6]

Big Fig

On April 20, 2018, the Sellers 

knew Big Fig had made 

complaints. [7] “Upon 

information and belief, Big Fig 

advised Sellers prior to Closing 

that it no longer intended to be 

a customer.” [8]

No disclosure [9] No disclosure 

[1] Compl. ¶ 37; [2] Compl. ¶ 49; [3] Compl. ¶ 49; [4] Compl. ¶¶ 59, 63; [5] Compl. ¶ 64; [6] Compl. ¶ 64; [7] 

Compl. ¶ 70; [8] Compl. ¶ 72; [9] Compl. ¶ 72. 

E. Vendor Rates and Customer Service Setoff Disputes

In addition to negative customer relationship developments pre-Signing and 

pre-Closing, Manna experienced negative pre-Closing developments related to its 

vendors and shipping liabilities. According to Pilot, neither of these issues were 

adequately disclosed in either the Original or the Updated Disclosure Schedules.81

First, in the Original Disclosure Schedule, Sellers disclosed that Forward Air 

was Manna’s third largest vendor.82 Sellers also disclosed that “in 2018 and in the 

 81 Compl. ¶¶ 77–82, 83–86. 

82 Compl. ¶ 79. 
22

ordinary course of business, Forward Air [] has increased its prices.”83 Sellers 

included this disclosure because “Forward Air gave [notice of] a rate increase of 

5.9%” that would “go effective” on “9-1.18” (two months after Closing).84 Pilot 

alleges Sellers’ actual disclosure (i.e., “in 2018” and in the “ordinary course,” 

Forward Air increased its prices) led it to believe that Forward Air’s price increase 

“had already occurred and was already reflected in” the Company’s financial 

disclosures.85

Second, GE was a pre-Closing customer of Manna’s.86 After the Closing, GE 

informed Pilot that it was claiming a set-off of payments owed in the aggregate 

amount of $69,440 due to certain “shipment issues.”87 Originally, GE claimed these 

losses occurred post-Closing.88 After an investigation, however, GE determined it 

 83 Compl. ¶ 79. 

84 Compl. ¶ 81. It is unclear when Pilot alleges the price increase took place. Compare 

Compl. ¶ 81 (“beginning of June”), with Compl. ¶ 81 (stating an increase will “go effective 

[] 9-1.18”). 

85 Compl. ¶ 80. 

86 Compl. ¶ 84. 

87 Compl. ¶¶ 84–85.

88 Compl. ¶¶ 84–86. 
23

“had made an administrative error, and realized that all of the complained of losses 

occurred prior to Closing.”89

F. Procedural History

Pilot sent Sellers an indemnification demand (the “Demand”) on October 14, 

2019.90 The Demand claimed Pilot suffered damages in excess of $6.9 million 

because of Sellers’ alleged wrongdoing in connection with the APA.91 Sellers

disagreed and rejected the Demand. With this dispute unresolved, the Escrow 

Property cannot be released unless and until the parties issue written joint 

instructions for release of the funds to the escrow agent or a court of competent 

jurisdiction enters a final, non-appealable judgment resolving the claims.

92

After negotiations proved unsuccessful, Pilot filed the Complaint in this Court 

on December 11, 2019 (more than 15 months post-Closing).93 The Complaint 

comprises six counts. In Counts I and II, Pilot claims Sellers breached the APA, 

 89 Compl. ¶ 86. 

90 Compl. ¶ 88. 

91 Id.

92 Compl. ¶ 89. 

93 Compl. ¶ 1. 
24

giving Pilot a right to indemnification and release of the Escrow Property.94 Pilot’s 

breach of contract claims fall into four buckets. 

First, Pilot allegesit received inadequate disclosure of the Business Reduction

Notifications from Modus, Personal Comfort and Big Fig before the Closing.95 With 

respect to Modus, Pilot concedes the Original Disclosure Schedules revealed that,

“[i]n 2018 and in the ordinary course of business,” Modus “decreased the volume of

services purchased from Seller.”96 But Pilot alleges this disclosure was false and 

intentionally misleading because Modus’ 90% purchasing reduction was not 

“ordinary course.”97 As for Personal Comfort, Pilot concedes Sellers disclosed that

“in 2018 and in the ordinary course of business, Personal Comfort Beds no longer 

purchases services from Seller.”98 Despite this disclosure, Pilot argues it came too 

late because it (a) should have been included on the Original Disclosure Statement 

and (b) was added to the Updated Disclosure Schedules more than 7 days after 

Sellers received notice from Personal Comfort.99 Finally, as for Big Fig, Pilot 

 94 Compl. ¶¶ 91–110. 

95 Compl. ¶¶ 37, 55, 71–72. 

96 Compl. ¶ 49. 

97 Id.

98 Compl. ¶¶ 64, 67.

99 Compl. ¶ 67; see APA § 10.7 (stating that, to be effective, any updated disclosure must 

be made “within seven (7) days of [Manna] first obtaining such Knowledge”). 
25

contends Sellers did not make any disclosure of Big Fig’s Business Reduction 

Notification even though it was received pre-Closing.100

Taken together, Pilot argues these factual allegations state viable claims for

breach of the Customer Rep (requiring disclosure of Business Reduction 

Notifications)—as well as the representations in Section 5.6 (accuracy of financial 

statements) and Section 5.8 (absence of material adverse effect).101 On the latter 

claim, it appears Pilot would have the Court conclude that these three customers’ 

departure had such a severe impact on the Company as a whole that it caused a 

“Material Adverse Effect.”102 Pilot levels this claim even though the total loss of 

Modus, Personal Comfort and Big Fig would have accounted for no more than 6% 

of the Company’s total revenue even if the Company added no new customers during 

2018.

103

Pilot’s theory as to Section 5.6 is even less clear. Pilot does not allege the 

Company’s financial statements were inaccurate (i.e., that the Company made more 

 100 Compl. ¶¶ 71–72. 

101 Compl. ¶¶ 51–52, 66–67, 73.

102 Compl. ¶¶ 50, 65.

103 See Compl. ¶ 36 ($2,317,000 revenue attributed to Modus during 2017), ¶ 47 (Modus’ 

2017 revenue was 4% of total revenue), ¶ 55 ($446,000 revenue attributed to Personal 

Comfort during 2017), ¶ 68 ($452,000 revenue attributed to Big Fig during 2017). The 

product of $2,317,000 and 100 divided by 4 renders the Company’s total revenue during 

2017 (i.e., $57,925,000). 
26

or less money than Sellers reported). Rather, Pilot appears to argue that because 

Manna failed to disclose the Business Reduction Notifications, the Company’s 

financial statements no longer “present fairly . . . the financial position of [Manna]” 

on a prospective basis.104 And yet, to be clear, Pilot does not allege Sellers provided 

it with any financial forecasts—only backwards-looking financial statements. 

Second, and unrelated to the Business Reduction Notification claims, Pilot 

alleges Sellers breached the representation in Section 5.24 of the APA because the 

Big Fig receivable of $127,114 on the Company’s disclosure statements was not a 

“bona fide” receivable.

105 The Complaint alleges Sellers had “actual knowledge that 

the full amount of the receivable was uncollectible.”106 

Third, Pilot brings a claim predicated on the verb tense of Sellers’ disclosure 

related to Forward Air’s price increase. Specifically, Pilot argues that when it was 

told Forward Air “has increased its prices,” it was misled to believe that “the price 

increase . . . was already reflected” in the Company’s financial statements 

 104 Compl. ¶ 51; PAB at 29–31.

105 Compl. ¶¶ 74–76; see APA § 5.24 (Sellers’ representation that “[a]ll of the accounts 

receivable reflected on the Interim Balance Sheet are . . . actual and bona fide 

receivables . . . . Such accounts receivable . . . are stated [] in accordance with GAAP . . . . 

Except as set forth on [the Original Disclosure Schedule], to the Knowledge of [Manna], 

there are not (i) any amounts in excess of $10,000 due . . . that is in dispute”). 

106 Compl. ¶¶ 74–76. 
27

(it was not).107 This, by Pilot’s lights, constitutes a breach of Sellers’ representation 

in Section 5.28 (captioned “Vendors”).108

Fourth, Pilot makes breach claims unrelated to Sellers’ representations and 

warranties. Specifically, it alleges Sellers breached Sections 10.7 and 3.2 of the 

APA by failing to update the Original Disclosure Schedules within 7 days of 

becoming aware of any matter that would constitute a breach of their representations 

and warranties (Section 10.7) and failing to accept responsibility for GE’s offset 

claim of $69,440 as an “Excluded Liability” (Section 3.2).109 

In Counts III–VI, Pilot repurposes the factual predicates of its breach of 

contract claims to plead breach of the implied covenant of good faith and fair 

dealing, fraud, fraudulent inducement and negligent misrepresentation, 

respectively.110 

 107 Compl. ¶¶ 79–80 (emphasis in original). 

108 Compl. ¶¶ 77–82; see APA § 5.28 (“Set forth on [the Original Disclosure Schedules] is 

a true and complete list of [Manna’s] 30 largest vendors . . . . Since January 1, 2016, neither 

[Manna] nor Owner has received written notice . . . that any Material Vendor intends or 

expects to . . . materially change . . . any of the material terms . . . with respect to its 

provision of goods.”). 

109 Compl. ¶¶ 23, 83–86; PAB at 9, 20. 

110 Compl. ¶¶ 111–165.
28

In response, Sellers have moved to dismiss the Complaint under Court of 

Chancery Rule 12(b)(6) for failure to plead viable claims and Rule 9(b) for failure 

to plead fraud with particularity.

111

II. ANALYSIS

The standards for deciding a motion to dismiss under Court of Chancery 

Rule 12(b)(6) is well-settled:

(i) all well-pleaded factual allegations are accepted as true; (ii) even 

vague allegations are “well-pleaded” if they give the opposing party 

notice of the claim; (iii) the Court must draw all reasonable inferences 

in favor of the non-moving party; and (iv) dismissal is inappropriate 

unless the plaintiff would not be entitled to recover under any 

reasonably conceivable set of circumstances susceptible of proof.112

A. Breach of Contract Claims (Counts I–II)

To prevail on a breach of contract claim, Pilot must plead and prove “(1) the 

existence of a contract; (2) the breach of an obligation imposed by the contract; and 

(3) damages that the plaintiff suffered as a result of the breach.”113 Of these 

elements, only the second is in dispute.114

 111 D.I. 12; Ct. Ch. R. 12(b)(6); Ct. Ch. R. 9(b). 

112 Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002) (citation omitted). 

113 Osram Sylvania Inc. v. Townsend Ventures, LLC, 2013 WL 6199554, at *6 (Del. Ch. 

Nov. 19, 2013). 

114 See Defs.’ Opening Br. in Supp. of Mot. to Dismiss Pl.’s Verified Compl. (“DOB”) 

(D.I. 14) at 29.
29

Breach of contract claims are susceptible to disposition on a motion to dismiss 

“[w]hen the language of [the] contract is plain and unambiguous.”115 Contract 

language is ambiguous “only when the provisions in controversy are reasonably or 

fairly susceptible of different interpretations or may have two or more different 

meanings.”116 If the plaintiff has proffered a reasonable construction upon which its 

claim of breach rests, the motion to dismiss must be denied.117

Pilot’s Indemnification Claims 

The main thrust of Pilot’s breach of contract claim is that certain Seller 

representations and warranties were untrue (both at Signing and again at Closing) 

and that Pilot is thus entitled to indemnification under Section 9.1 of the APA.

118

In particular, many of Pilot’s claims turn on the Customer Rep in Section 5.27 and 

the allegations that while Modus, Personal Comfort and Big Fig were top customers 

during 2017, by the summer of 2018, Sellers knew those customers would no longer 

do business with Manna.

119 Pilot maintains these customer departures triggered 

 115 Id.

116 AT&T Corp. v. Lillis, 953 A.2d 241, 252 (Del. 2008) (quotations omitted). 

117 Caspian Alpha Long Credit Fund, L.P. v. GS Mezzanine P’rs 2006, L.P., 93 A.3d 1203, 

1205 (Del. 2014); Kahn v. Portnoy, 2008 WL 5197164, at *1 (Del. Ch. Dec. 11, 2008). 

118 Compl. ¶ 96 (alleging breaches of Sections 5.6, 5.8, 5.24, 5.27 and 5.28). 

119 Compl. ¶¶ 37–39, 55, 68–69. 
30

Sellers’ obligation to disclose their receipt of a Business Reduction Notification 

under Section 5.27.120 Even though Sellers did disclose that Modus and Personal 

Comfort had reduced their purchases during 2018, Pilot alleges the disclosure 

schedules were misleading because they stated Modus and Personal Comfort had 

decreased purchases “in the ordinary course” of business, and there was no 

disclosure as to Big Fig.121

The default statute of limitations for breach of contract is three years.122 

Delaware law, however, permits parties to shorten the three-year statute of 

limitations by contract if “(1) the claims are based on a written contract; (2) the 

contract involved at least $100,000; and (3) the contract specifies a period for claims 

to accrue.”123 There is no dispute that Pilot’s indemnification claims are based on a 

written contract that involves at least $100,000.124 The parties dispute the third

element—whether the APA sets a contractual limitations period. 

 120 Compl. ¶¶ 49, 64, 72.

121 Id.

122 10 Del. C. § 8106(a). 

123 10 Del. C. § 8106(c); AssuredPartners of Va. v. William Patrick Sheehan, 2020 

WL 2789706, at *15 (Del. Super. Ct. May 29, 2020).

124 See APA § 2.2(c) (discussing the “Estimated Cash Purchase Price”). 
31

In Delaware, the default rule is that representations and warranties do not 

survive closing, but parties may agree to create a contractual survival period if they 

so choose:

Absent contract language providing to the contrary, pre-closing 

representations about the acquired property interest become ineffective 

post-closing under the same rationale that causes representations about 

real property to merge with a warranty deed. . . . [But] [p]arties can 

contract for representations to survive closing by incorporating a 

survival clause in the transaction agreement.125

To the extent representations and warranties survive closing, claims that a party’s 

representations were false must be brought within the applicable limitations period, 

whether contractual or statutory as the case may be.

126 

“There is no special rule requiring that in order to contractually shorten the 

statute of limitations, parties [must] utilize clear and explicit language.”127 Rather, 

“Delaware courts have interpreted contractual provisions that limit the survival of 

representations and warranties as evidencing an intent to shorten the period of time 

 125 Bear Stearns Mortg. Funding Tr. 2006-SL1 v. EMC Mortg. LLC, 2015 WL 139731, 

at *14 (Del. Ch. Jan. 12, 2015) (internal quotation and citation omitted). 

126 See Shaw v. Aetna Life Ins. Co., 395 A.2d 384, 386 (Del. Super. Ct. 1978) (“The 

Delaware decisions follow the general principle that contractual limitation of actions 

periods are valid if they are reasonable.”). 

127 GRT, Inc. v. Marathon GTF Tech., Ltd., 2011 WL 2682898, at *12 (Del. Ch. July 11, 

2011) (internal quotation omitted). 
32

in which a claim for breach of those representations and warranties may be brought, 

i.e., the statute of limitations.”128

In the APA, the parties agreed Sellers’ representations and warranties (other 

than fundamental representations and warranties that are not at issue) “shall survive 

for a period of 15 months after the Closing.”129 Pilot filed the Complaint more than 

15 months after the Closing. 130 Given this express limitations period, and the settled 

law that claims for breaches of representations and warranties accrue at closing, 

Pilot’s claims for breaches of Sellers’ representations and warranties are untimely.

131

Pilot attempts to escape this conclusion by making four arguments, each of 

which it foreswore in the APA itself. First, Pilot reasons that because Manna’s 

indemnity obligations survive for “3 years after the Closing date,” that must mean 

that Pilot can sue Manna for breached representations and warranties any time within 

 128 Id. 

129 APA § 9.3. 

130 Compare APA § 9.3 (stating “all” representations and warranties “shall survive for a 

period of 15 months after the Closing”), and Compl. ¶ 18 (The APA closed on July 16, 

2018.), with D.I. 1 (showing that the Complaint was filed on December 11, 2019). 

131 GRT, 2011 WL 2682898, at *6 (“Because representations and warranties about facts 

pre-existing, or contemporaneous with, a contract's closing are to be true and accurate when 

made, a breach occurs on the date of the contract's closing and hence the cause of action 

accrues on that date.”). 
33

three years post-Closing.132 This is wrong. In Section 9.3, Pilot expressly 

acknowledged that: 

No claim for indemnification as to representations and warranties 

under this Agreement may be made after [15 Months] . . . and Seller 

and the Owners shall have no Liability for any claims made after the 

expiration of such applicable period for breach of or an inaccuracy 

when made of a representation or warranty.

133

Because I must “interpret contractual provisions in a way that gives effect to 

every term of the instrument,” I must give effect to Section 9.3, which specifically 

and explicitly subjects breach of representation and warranty claims to a truncated 

15-month survival period.134 This reading dovetails with the more general 3-year 

indemnification period because other indemnification obligations (such as the 

obligation to defend against certain third party claims) are not swept into the 15-

month survival clause for inaccurate representations and warranties.

135 Stated 

differently, Sellers’ obligations to indemnify Pilot for damages caused by inaccurate 

representations and warranties subject to the 15-month limitations period are a 

 132 PAB at 16. 

133 APA § 9.3 (emphasis supplied). 

134 Aircraft Serv. Int’l, Inc. v. TBI Overseas Hldgs., Inc., 2014 WL 4101660, at *3 

(Del. Super. Ct. Aug. 5, 2014); see also DCV Hldgs., Inc. v. Con Agra, Inc., 889 A.2d 954, 

961 (Del. 2005) (“Specific language in a contract controls over general language, and 

where specific and general provisions conflict, the specific provision ordinarily qualifies 

the meaning of the general one.”). 

135 See APA § 9.5 (captioned “Notice and Opportunity to Defend”). 
34

subset of the losses for which Pilot is entitled indemnity.136 But, as to this subset, 

Pilot committed that any claims would be brought within 15 months of Closing.

Second, Pilot argues “written notice is plainly sufficient to” toll the 15-month 

survival period.137 As Pilot sees it, because it gave Sellers a written demand notice 

on October 14, 2019 (within 15 months of Closing), it had until the expiration of the 

3-year indemnification period to file its claims.

138 Pilot points to the following 

language from Section 9.3 as support for its tolling argument: 

All demands or claims for indemnification under this Agreement shall 

be in writing and shall set forth with reasonable specificity the basis for 

such demand or claim and the amount of such claim (if known).139 

No matter how emphatically Pilot argues “written notice is plainly sufficient,” 

nothing in the APA says that an indemnification demand (rather than filing suit) will 

toll the survival period.

140 Pilot expressly agreed that “[n]o claim for 

indemnification” would be filed after 15 months post-Closing; its post hoc spin is 

unreasonable. 

 136 See APA § 9.1 (obligating Sellers to indemnify Pilot for, among other things, “(a) any 

breach . . . of any representation and warranty of [Manna],” “(b) the non-fulfillment of any 

covenant,” “(c) any Excluded Liabilities,” “(d) any Excluded Taxes”). 

137 PAB at 18. 

138 Compl. ¶ 88; PAB at 17–18. 

139 PAB at 18 (citing APA § 9.3). 

140 PAB at 18. 
35

This is not a novel proposition. While it is true that “[p]arties may 

contractually agree that an indemnification notice tolls the limitation period until the 

underlying claim is resolved,” the APA contains no such tolling provision.141 

In Delaware, by default: 

when parties have shortened the statute of limitations by providing that 

representations and warranties survive only through a specified date, 

the party claiming breach must file suit within the specified time period. 

Providing notice within the specified time period is not enough.142

To be sure, the APA requires that indemnification “demands” be made in writing, 

but Pilot’s argument conflates contractual conditions precedent to asserting an 

indemnification claim (i.e., written notice) with the contractual 15-month limitations 

period. There is nothing inconsistent with “a contractual limitations period that 

requires the parties to preserve rights by filing a lawsuit, but that still provides for 

extrajudicial dispute resolution procedures.”143 

 141 See, e.g., Aircraft, 2014 WL 4101660, at *4 (involving the following contractual 

language: “if written notice of a violation or breach of any specified representation . . . is 

given to the party charged with such violation or breach during the period provided . . . 

such representation [or] warranty . . . shall continue to survive”). 

142 Friedman Fleischer & Lowe, LLC v. Accentcare, Inc., 2016 WL 6967898, at *3 

(Del. Ch. Nov. 29, 2016) (citing ENI Hldgs., LLC v. KBR Gp. Hldgs., LLC, 2013 

WL 6186326, at *9–10 (Del. Ch. Nov. 27, 2013); GRT, 2011 WL 2682898, at *9–10) 

(emphasis supplied). 

143 ENI, 2013 WL 6186326, at *10 (stating “[i]t is not a reasonable interpretation of the 

SPA that KBR can preserve a lawsuit based on an expired representation or warranty 

merely by providing notice before the applicable Termination Date”); see also Kilcullen v. 

Spectro Sci., Inc., 2019 WL 3074569, at *6 (Del. Ch. July 15, 2019) (“Because Spectro’s 

claim notice did not toll the statute of limitation, Spectro’s Indemnification Counterclaims 
36

Third, Pilot argues the APA did not require it to file suit within 15 months 

because the APA did not expressly state that representations and warranties 

“terminated on the survival expiration date.”144 As noted, Delaware does not require 

explicit language to set a contractual limitations period.145 Where, as here, a contract 

provides “the representations and warranties of the Seller . . . shall survive until” a 

specified date, such language unambiguously sets a contractual limitations period.

146 

And even if this language were not enough to set a limitations period (it is), to 

reiterate, Section 9.3 states “no claim” for inaccurate representations and warranties 

“may be made after” 15 months of Closing.147 

Finally, Pilot claims the contractual limitations period should be tolled

because Sellers “acted to affirmatively conceal the wrong.”148 In this regard, I gather 

 

based on the representations provision are dismissed as time-barred.”); GRT, 2011 

WL 2682898, at *15 (“The most persuasive authorities conclude that [a] survival clause 

with a discrete survival period has the effect of granting the non-representing and 

warranting party a limited period of time in which to file a post-closing lawsuit.”) 

(emphasis supplied). 

144 PAB at 16 (emphasis in original). 

145 GRT, 2011 WL 2682898, at *12.

146 See Aircraft, 2014 WL 4101660, at *3 (holding the following language set a contractual 

limitations period: “the representations and warranties of the Seller contained in 

Section 2.15 hereof shall survive until the second anniversary of the Closing Date”). 

147 APA § 9.3. 

148 PAB at 21 (citing Lincoln v. Snyder, 722 F. Supp. 546, 563 (D. Del. 2010)). 
37

Pilot seeks to invoke the doctrine of fraudulent concealment.149 “Under this 

doctrine, a plaintiff must allege an affirmative act of ‘actual artifice’ by the defendant 

that either prevented the plaintiff from gaining knowledge of material facts or led 

the plaintiff away from the truth.”150 While not stated clearly in its briefs, Pilot’s 

theory seems to be that the top Customer Rep “put Pilot off the ‘trail of inquiry,’” 

meaning that Pilot relied on the top Customer Rep and did not notice the departure 

of key customers until it was too late.151

The fraudulent concealment doctrine cannot resuscitate Pilot’s 

indemnification claims because “relief” from the limitations period “extends only 

until the plaintiff is put on inquiry notice.”152 “No theory will toll the statute beyond 

the point where the plaintiff was objectively aware, or should have been aware, of 

facts giving rise to the wrong.”153 Importantly, “inquiry notice does not require 

actual discovery of the reason for injury,” but instead “exists when plaintiff becomes 

 149 PAB at 21 (citing CertainTeed Corp. v. Celotex Corp., 2005 WL 217032, at *8 (Del. Ch. 

Jan. 24, 2005)). 

150 In re Tyson Foods, Inc., 919 A.2d 563, 585 (Del. Ch. 2007). 

151 PAB at 22. 

152 Tyson Foods, 919 A.2d at 585.

153 Id.
38

aware of facts sufficient to put a person of ordinary intelligence and prudence on 

inquiry which, if pursued, would lead to the discovery of injury.”154

Pilot has pled that when it took over Manna’s business, the Company’s 

“fourth” largest customer (accounting for $2,317,000 in revenue) had reduced its 

purchases by “90%,” and the Company’s “twenty-fifth” largest customer “was no 

longer a customer at all.”155 Pilot alleges these departures were so significant that 

they caused a Material Adverse Effect (as defined in the APA) on the Company 

before Closing.156 This means that Pilot believes the Company had experienced such 

a “significant deterioration” in its business that the “fundamentals of the deal” were 

threatened.157 In other words, by the time Pilot took the helm at the Company, ship’s 

alarms had been ringing for months. Against this backdrop, even after affording it

all reasonable inferences, Pilot cannot make a reasonably conceivable case for 

fraudulent concealment given that it was indisputably on inquiry notice of the 

alleged breach well within the limitations period.

158 

 154 Certainteed, 2005 WL 217032, at *7 (internal quotation omitted). 

155 Compl. ¶¶ 48, 54–55. 

156 Compl. ¶ 101; PAB at 32. 

157 Akorn, Inc. v. Fresenius Kabi AG, 2018 WL 4719347, at *47 (Del. Ch. Oct 1, 2018) 

(construing a contractual “MAE Condition”). 

158 See, e.g., Compl. ¶ 55 (“Personal Comfort was no longer a customer at all” by “June 26, 

2018”). Pilot’s citation to Vice Chancellor Glasscock’s decision in MKE Holdings v. 

Schwartz is misplaced. PAB at 22 (citing MKE Hldgs. LTD., v. Schwartz, 2020 
39

The Survival clause represents bargained-for “risk allocation.”159 If Pilot 

wanted a longer period within which to ascertain whether Sellers’ representations 

and warranties were accurate, it could have shifted that risk to the Sellers by 

negotiating a longer survival period. Now that Pilot memorialized the terms of its 

agreement with Sellers in the form of a clear and unambiguous contract, the Court 

cannot allow Pilot to re-trade rights it knowingly bargained away.160 For this reason, 

Pilot’s claims for breaches of Sections 5.6, 5.8, 5.24, 5.27 and 5.28 must be 

dismissed.161

 

WL 467937, at *11 (Del. Ch. Jan. 29, 2020)). There, defendants solicited a $7 million 

investment by touting a company’s financial performance while taking affirmative steps to 

shield specific, negative accounting reports from plaintiffs’ due diligence review. The 

plaintiffs received the relevant accounting memoranda only after they made a books and 

records demand. Id. at *11–12. Here, on the other hand, Pilot has not pled that Sellers 

stashed away unflattering documents in a forgotten filing cabinet. Rather, key customers 

that had been a focus of Pilot’s due diligence review stopped sending any business to 

Manna before the APA closed. Under any reasonably conceivable set of circumstances 

susceptible of proof, if Pilot had exercised “reasonable diligence,” it would have 

discovered its injury from these lost customers immediately after the Closing. Certainteed, 

2005 WL 217032, at *7.

159 In re Tibco, 2014 WL 6674444, at *18. 

160 GMG Capital Inv., LLC v. Athenian Venture P’rs I, L.P., 36 A.3d 776, 779 (Del. 2012) 

(“The Court will give priority to the parties’ intentions as reflected in the four corners of 

the agreement.”). 

161 See Compl. ¶¶ 96(a), 101. 
40

Pilot’s Remaining Breach of Contract Claims

Having determined that Pilot’s claims for breach of Sellers’ representations 

and warranties are untimely, I turn to Pilot’s remaining breach of contract claims. 

Pilot maintains that even if its claims under Article 5 (Sellers’ representations and 

warranties) are untimely, it has stated a viable claim under two provisions of the 

APA that are not subject to the 15-month survival period. I agree, at least as to one 

of the remaining breach claims. 

Even though not separately pled in the Complaint, Pilot has argued in its 

Answering Brief that it stated a separate claim for breach of Section 10.7.162 Pilot’s 

newfound claim appears to rest on its interpretation of the APA that Sellers “were 

required to update” the Original Disclosure Schedules if they received a Business 

Reduction Notification.163 That is not what Section 10.7 says. To the contrary, it 

states, in relevant part: 

[Manna] and the Owners may from time to time before Closing update 

the Disclosure Schedules regarding any matter about which they obtain 

Knowledge . . . that would constitute a breach of any of the 

representations and warranties in this Agreement . . . provided, any such 

update . . . shall be made within seven [] days of [Manna] first obtaining 

such Knowledge. No such supplement or amendment shall have any 

effect on the satisfaction of the conditions to closing . . . provided, 

however, if [Pilot] proceeds with the Closing, then [Pilot] . . . shall be 

 162 Compare PAB at 20 (arguing Pilot breached Section 10.7), with Compl. ¶¶ 96, 101 

(alleging breaches of Sections 3.2, 5.6, 5.8, 5.24, 5.27, 5.28 and 9.1 of the APA). 

163 See Compl. ¶ 23 (citing APA § 10.7). 
41

deemed to have waived any right or claim pursuant to the terms of this 

Agreement . . . with respect to any and all matters disclosed.164 

On its face, Section 10.7 is permissive not mandatory.

165 It does not create 

new obligations. Indeed, to the extent Sellers provide updated disclosures, the 

supplemental disclosure has no impact on whether (or not) their representations and 

warranties were accurate when made.166 It is true that if updated disclosures were 

given more than seven days after Manna obtained the relevant Knowledge, then 

Sellers could not rely on the Updated Disclosure Schedules to argue that Pilot had 

waived its right to seek indemnification by proceeding to Closing. But that is a 

separate question from whether Section 10.7 creates an obligation. On its face, it 

does not. 

Pilot next alleges it is entitled to indemnification for certain “Excluded 

Liabilities” under Sections 3.2 and 9.1(c) of the APA related to Manna’s customer, 

 164 APA § 10.7 (emphasis supplied). 

165 See Miller v. Spicer, 602 A.2d 65, 67 (Del. 1991) (“The use of the verb ‘shall’ . . . 

generally connotes a mandatory requirement while the verb ‘may’ is deemed permissive.”) 

(citation omitted). 

166 APA § 10.7. 
42

GE.

167 Since this allegation does not involve an inaccurate representation or 

warranty subject to the 15-month survival period, it is not time barred.

168

According to Pilot, after Closing, “GE [] determined that it had made an 

administrative error,” and asserted that it had suffered a loss of $69,440 due to a 

“shipment issue[]” that Manna caused “prior to Closing.”169 After it discovered the 

“shipment issue,” GE “set-off and reduced its payments to Pilot.”170 Tracing this 

factual allegation through the APA, Pilot argues this pre-Closing “shipment issue” 

was an “Excluded Liability” for which it is entitled to indemnification under 

Section 9.1(c).171

The APA defines “Excluded Liabilities” as, among other things, “[a]ny 

liabilities or obligations with respect to [Manna’s shipping business] arising prior to 

the Closing Date”; but, “for the avoidance of doubt,” Excluded Liabilities do not 

include any “Assumed Liabilities”—even if they arose prior to Closing.172 In turn, 

 167 Compl. ¶ 83. 

168 See APA § 3.2 (stating Pilot “shall not assume or in any way become liable for . . . 

Excluded Liabilities”); § 9.1 (requiring Sellers to indemnify Pilot for “Excluded 

Liabilities”). 

169 Compl. ¶ 86. 

170 Compl. ¶ 85. 

171 See APA § 9.1(c). 

172 APA § 3.2(a). 
43

“Assumed Liabilities” include “all Services Liabilities to the extent of the reserves, 

accruals, and allowances in the Final Net Working Capital.”173 Finally, the APA 

defines “Services Liabilities” as “all liabilities and obligations incurred in 

connection with Seller’s delivery of products in the ordinary course of business, 

including related to customer claims for cargo damages or loss, or related to property 

damage incurred in the ordinary course of business in connection with the delivery 

of products.”174

The upshot is that the APA allocates Manna’s pre-Closing liabilities to 

Sellers—except for all “Services Liabilities” which Pilot assumes up to the net 

working capital target.175 Pilot has not alleged the GE liability would cause Services 

Liabilities to exceed the net working capital target. This means the parties’ dispute 

turns on whether (or not) it is reasonably conceivable the GE liability is something 

other than a “Services Liability.”176 To put an even finer point on the disagreement, 

I must decide whether it is reasonably conceivable that GE’s set-off of $69,440—

caused by “shipment issue[s]”—is a liability “incurred in connection with [Manna’s] 

 173 APA § 3.1(c). 

174 APA § 12(aa) (definition of “Services Liabilities”) (emphasis supplied). 

175 See APA §§ 3.1–3.2. 

176 APA § 3.1(c) (stating Pilot assumed all “Services Liabilities to the extent of . . . the 

Final Net Working Capital”).
44

delivery of products in the ordinary course of business” (i.e., a “Services 

Liability”).177 

If the GE liability is a “Services Liability,” then the GE liability is Pilot’s to 

bear as an “Assumed Liability.”178 While Pilot has pled nothing more about the GE 

liability than a vague reference to its origin (“shipment issues”) and its amount, I am 

satisfied there exists a “reasonably conceivable set of circumstances susceptible of 

proof” in which a reasonable factfinder could conclude the GE liability was incurred 

outside the ordinary course of business.179 As such, it is reasonably conceivable that 

Pilot is entitled to indemnification for the GE liability as an Excluded Liability under 

Section 3.2, and Pilot has stated a viable (albeit narrow) claim for breach of contract

on that basis.

B. Pilot’s Implied Covenant Claim (Count III)

In Count III, Pilot alleges Sellers breached the implied covenant of good faith 

and fair dealing by: 

(i) intentionally misrepresenting and omitting material information in 

order to fraudulently induce Pilot into signing the Asset Purchase 

Agreement and to subsequently close the acquisition; (ii) falsely 

engineering its disclosures to misrepresent and overstate customer 

revenue; (iii) intentionally delaying making disclosures and making 

disclosures that are intentionally ambiguous and misleading; 

 177 APA § 12(aa) (definition of “Services Liabilities”). 

178 Id.

179 CML V, LLC v. Bax, 28 A.3d 1037, 1040 (Del. 2011). 
45

(iv) manipulating [Manna’s] gross revenue calculations to reflect a time 

period that did not fairly and accurately portray the financial condition 

of Manna prior to closing; and (v) refusing to execute the joint written 

instructions in order to release the Escrow Property.180

While the laundry list of generalized grievances is lengthy, Count III rests on the 

same factual allegations that support Pilot’s breach of contract claims.181 And for 

that reason, none of the grievances can sustain a viable claim for breach of the 

implied covenant.

The implied covenant of good faith and fair dealing “involves a ‘cautious 

enterprise,’ inferring contractual terms to handle developments or contractual gaps 

that the asserting party pleads neither party anticipated.”182 Courts will not “rewrite 

the contract to appease a party who later wishes to rewrite a contract he now believes 

to have been a bad deal. Parties have a right to enter into good and bad contracts, 

the law enforces both.”183

Each of Pilot’s implied covenant allegations fails for two reasons. First, Pilot

cannot state a viable implied covenant claim by recycling its allegations that Sellers

 180 APA § 120. 

181 Compl. ¶¶ 111–124 (“Sellers covenanted that [they] would act in good faith to provide 

accurate and truthful representations.”). 

182 Nemec v. Schrader, 991 A.2d 1120, 1125 (Del. 2010). 

183 Id. at 1126. 
46

breached express provisions in the APA.

184 It is black letter law that where the APA 

“expressly addresses a particular matter” (such as Manna’s top Customers and the 

absence of Business Reduction Notifications), Manna cannot salvage its untimely 

breach of contract claims by recasting them under the implied covenant.

185 

Second, and relatedly, Pilot has not identified a “gap that the implied 

covenant might fill.”186 Pilot would have the Court infer a “free-floating duty,” 

unattached to the APA, requiring Sellers to “provide accurate and honest 

representations of Manna’s financial condition.”187 Specifically, Pilot takes issue 

with Sellers’ strategic negotiation of the Customer Rep (by only agreeing to disclose 

Manna’s top customers in 2017 rather than 2018), and argues this negotiation tactic 

amounted to bad faith “manipulat[ion]” of the “substance and timing” of Sellers’ 

 184 Narrowstep, Inc. v. Onstream Media Corp., 2010 WL 5422405, at *10 (Del. Ch. 

Dec. 22, 2010) (finding implied covenant claim not available when “the subject at issue is 

expressly covered by the contract”) (internal quotations & citation omitted); see also Fortis 

Advisors LLC v. Dialog Semiconductor PLC, 2015 WL 401371, at *3 (Del. Ch. Jan. 30, 

2015) (“Where the contract speaks directly regarding the issue in dispute, existing contract 

terms control . . . such that implied good faith cannot be used to circumvent the parties’ 

bargain.”) (internal quotations and citation omitted). 

185 Brightstar Corp. v. PCS Wireless, LLC, 2019 WL 3714917, at *12 (Del. Super. Ct. 

Aug. 7, 2019) (“Where a contract expressly addresses a particular matter, ‘an implied 

covenant claim respecting that matter is duplicative and not viable.’”) (quoting Edinburgh 

Hldgs. v. Educ. Affiliates, Inc., 2018 WL 2727542, at *9 (Del. Ch. June 6, 2018)). 

186 Allen v. El Paso Pipeline GP Co., L.L.C., 113 A.3d 167, 183 (Del. Ch. June 20, 2014). 

187 PAB at 39; Longerman v. EPE Hldgs., LLC, 5 A.3d 1008, 1017 (Del. Ch. 2010) 

(“Implied good faith cannot be used to circumvent the parties’ bargain, or to create a freefloating duty unattached to the underlying legal documents.”). 
47

disclosures.188 If the implied covenant worked to circumvent carefully negotiated 

representations and warranties in this manner, then it could be weaponized by any 

dissatisfied deal party to re-trade the deal regardless of what was bargained-for. That 

is not how contractarian expectations or the implied covenant work. 

Contrary to Pilot’s argument, it is precisely because the parties carefully 

negotiated the “substance and timing” of Sellers’ representations and warranties that 

Pilot cannot identify a gap within which the implied covenant might fit.189 Indeed, 

the representations and warranties Sellers are alleged to have breached served an 

“important risk allocation function” regarding the possibility that Manna’s financial 

position would deteriorate before Closing.190 Because the parties explicitly 

addressed the issues about which Pilot now complains, the implied covenant cannot 

 188 PAB at 39; see, e.g., APA § 5.27 (requiring disclosure of the Company’s to customers 

for “calendar year 2017”). 

189 See PAB at 39. 

190 In re Tibco, 2014 WL 6674444, at *18 (discussing the role of representations and 

warranties in “heavily negotiated” agreements and their “important risk allocation 

function”) (internal quotations omitted); see also Emp.’s Ret. Sys. of City of St. Louis v. 

TC Pipelines GP, Inc., 2016 WL 2859790, at *6 (Del. Ch. May 11, 2016) (“The Courts 

apply the implied covenant . . . cautiously to infer contractual terms or gaps to address 

situations that the contracting parties did not anticipate.”).
48

“create rights that contradict an express contractual provision” of the APA.

191 

Count III fails as a matter of law. 

C. Fraud Claims (Counts IV-VI)

Even though Pilot packages its fraud claims in three, separate counts, it is hard 

to tell them apart—not only from each other, but also from the breach of contract 

claims I have addressed above. In Counts IV–VI, Pilot alleges that the same course 

of conduct underlying its breach of contract claims also gives rise to actionable 

fraud, fraudulent inducement and negligent misrepresentation.

192 In response, 

Sellers maintain all of Pilot’s fraud claims should be dismissed because they (i) are 

untimely, (ii) impermissibly bypass the APA’s non-reliance provision, (iii) fail to 

plead fraud with particularity as required by Court of Chancery Rule 9(b) and (iv) are 

duplicative of Pilot’s breach of contract claims.193 I address each argument seriatim.

 191 Great-West Inv’rs LP v. Thomas H. Lee P’rs, L.P., 2011 WL 284992, at *5 (Del. Ch. 

Jan. 14, 2011); see APA § 5.8 (captioned “Absence of Changes”); § 5.27 (requiring notice 

of Business Reduction Notifications).

192 See Compl. ¶ 127(a) (alleging representations regarding Modus were false), ¶ 129 

(alleging representations in Section 5.6, 5.8, 5.24 and 5.28 were false), ¶¶ 139–54, 156–65 

(similar); see also Fortis Advisors, 2015 WL 401371, at *9 (noting that “a claim for 

negligent misrepresentation is often referred to interchangeably as equitable fraud”).

193 DOB at 44–52, 54–55. 
49

The APA Does Not Unambiguously Require Pilot’s Fraud Claims to 

be Brought Within 15 Months

Before turning to the other aspects of Pilot’s fraud claims, I address Sellers’ 

threshold argument that Pilot’s fraud claims are untimely. “Delaware’s statute of 

limitations for claims sounding in fraud . . . is three years.”194 Even though Pilot has 

brought this action within the statutory limitations period, Sellers argue that 

Section 9.3 not only bars Pilot’s breach of representation and warranty claims

(as discussed above), but also requires dismissal of Pilot’s fraud claims.195

Sellers concede that no Delaware court has adopted this line of reasoning, but 

urges the Court to embark on a three-step analytical expedition to reach their

heretofore-uncharted destination.196 First, the default rule in Delaware is that 

representations and warranties do not survive closing.197 A survival clause, in 

essence, gives breath to any claim predicated on a party’s representations and 

warranties only for as long as the clause allows. Second, Pilot promised not to rely 

on any statements about the Company other than those embodied in Sellers’ 

 194 Winklevoss Capital Fund, LLC v. Shaw, 2019 WL 994534, at *5 (Del. Ch. Mar. 1, 2019) 

(citing 10 Del. C. § 8106). 

195 Telephonic Oral Arg. on Defs.’ Mot. to Dismiss (D.I. 34) at 18–20.

196 Id.

197 Bear Stearns, 2015 WL 139731, at *14 (“Absent contract language providing to the 

contrary, pre-closing representations about the acquired property interest become 

ineffective post-closing.”). 
50

contractual representations and warranties.198 Third, in the APA, Pilot agreed that 

Sellers would have “no Liability for any claims made after the expiration” of the 15-

month survival period “for breach of or an inaccuracy when made of a representation 

or warranty.”199 Together, Sellers argue these three steps lead to the inescapable 

conclusion that Pilot’s fraud claims, which must be based on Sellers’ representations 

and warranties in the APA, come too late.

200 In other words, while Delaware law 

does not permit a party to “‘lie’ intentionally” in a contract, and a non-reliance 

provision cannot bar claims for “intentional fraud” predicated upon knowing 

falsehoods in a party’s “written representations,” nothing in our law prohibits a party 

from agreeing not to bring such a claim after a prescribed limitations period 

expires.

201

 198 APA § 9.3. 

199 Id. (emphasis supplied). 

200 H-M Wexford LLC v. Encorp, Inc., 832 A.2d 129, 144 (Del. Ch. 2003) (stating a plaintiff 

must plead he “acted or did not act in justifiable reliance on” defendant’s representation) 

(emphasis supplied). 

201 See Abry P’rs V, L.P. v. F&W Acq. LLC, 891 A.2d 1032, 1062 (Del. Ch. 2006) (cited 

approvingly in RAA Mgmt., LLC v. Savage Sports Hldgs., Inc., 45 A.3d 107, 116 (Del. 

2012)) (stating “there is little support for the notion that it is efficient to exculpate parties 

when they lie about the material facts on which a contract is premised” (i.e., contractual 

representations and warranties); CLP Toxicology, Inc. v. Casla Bio Hldgs. LLC, 2020 

WL 3564622, at *17 (Del. Ch. June 29, 2020) (discussing “intentional fraud” claims 

generally and stating that, even though plaintiffs “expressly represented . . . that they were 

not relying on any extra-contractual representations,” their “fraud claims may proceed 

based on the written representations in the SPA”). 
51

I do not dwell on the soundness of Sellers’ argument because the APA does 

not purport to limit “intentional fraud” claims to a 15-month contractual limitations 

period. While Section 9.3 does provide that Sellers will have “no Liability for any 

claims” based upon “breach” or “inaccuracy” of their representations and warranties

beyond 15 months,

202 Section 9.1 makes clear that “[n]othing in this Agreement shall 

limit” Pilot’s right to recover “any amounts at any time in connection with any action 

or claim based upon intentional fraud by [Sellers] in this Agreement.”203

Section 9.1 can be reconciled with Section 9.3 because the former expressly 

trumps the latter’s broad language when it states “nothing in this agreement” shall 

limit Pilot’s right to bring a claim for “intentional fraud.”204 At some point, in 

another case, this court may be called upon to assess the enforceability of a party’s 

unambiguous promise to bring intentional fraud claims only within a contractual 

limitations period, but the APA does not call this question. Indeed, Section 9.1 

unambiguously preserves Pilot’s right to bring intentional fraud claims “at any 

time.”205 Given this clear language, Sellers cannot credibly argue that Pilot’s 

intentional fraud claims are untimely. 

 202 APA § 9.3 (emphasis supplied). 

203 APA § 9.1 (emphasis supplied). 

204 Id. 

205 Id.
52

The APA Precludes Extra-Contractual Fraud Claims

Sellers read the APA as precluding fraud claims based on extra-contractual

promises, representations or warranties.206 I agree. 

In his seminal Abry Partners decision, then-Vice Chancellor Strine reinforced 

this court’s dedication to upholding the “free will” of sophisticated parties by 

enforcing non-reliance provisions like those in the APA.

207 Abry offers the 

following guidance: do not disavow reliance on extra-contractual statements unless 

you mean it.208 If a sophisticated party agrees he is relying only on those 

representations and warranties in a written contract, and says as much in the contract, 

he “may not reasonably rely on information that [he] contractually agreed did not

form a part of the basis for [his] decision to contract.”209 With this in mind, this 

court does not hesitate to dismiss fraud claims premised on extra-contractual 

representations when the parties’ contract contains an unambiguous mutual covenant 

 206 See DOB at 46. 

207 Abry, 891 A.2d at 1058.

208 Id. (“The enforcement of non-reliance clauses recognizes that parties with free will 

should say no rather than lie in a contract.”). 

209 H-M Wexford, 832 A.2d at 142 n.18; see also ev3, Inc. v. Lesh, 114 A.3d 527, 529 n.3 

(Del. 2014) (“Delaware courts seek to ensure freedom of contract and promote clarity in 

the law in order to facilitate commerce.”); RAA Mgmt., 45 A.3d at 118–19 (“Abry Partners

accurately states Delaware law and explains Delaware’s public policy in favor of enforcing 

contractually binding written disclaimers of reliance on representations outside of a final 

agreement of sale or merger.”). 
53

that neither relied upon extra-contractual promises in connection with their decision 

to enter the contract or to make (or receive) promises within the contract.

210 

In Section 9.8, Pilot agreed Sellers did not make and “shall not be deemed to 

have made, any [] representations or warranties, written or oral, statutory, express or 

implied.”211 And Pilot “EXPRESSLY WAIVE[D] AND AGREE[D] THAT IT IS 

NOT RELYING ON, ANY REPRESENTATION OR WARRANTY” (other than 

those embodied in the APA) whether “EXPRESS” or “IMPLIED.”212 In other 

words, if Sellers did not say it in the APA, as a matter of law, it was not said. In a 

futile effort to escape the legal consequence of its promise, Pilot attempts to expand 

the universe of statements (or omissions) on which it is entitled to rely in two ways; 

neither are persuasive. 

First, Pilot argues the non-reliance provision does not extend to “Pilot’s 

fraudulent omission and concealment claims” because Pilot did not disclaim reliance 

 210 Abry, 891 A.2d at 1057.

211 APA § 9.8. 

212 Id. (emphasis in original); see also id. (Pilot “expressly waives and relinquishes any and 

all rights, claims and causes of action against the [Sellers] . . . in connection with, the 

accuracy, completeness or materiality of any statements, information data or other 

materials (written or oral) or documents heretofore furnished or made available to 

[Pilot] . . . by or on behalf of the [Sellers.]”); APA § 14.4 (“This Agreement . . . constitutes 

the entire agreement between the parties with respect to the subject matter hereof . . . and 

supersede any prior understandings, agreements, or representations and warranties by or 

among the parties, written or oral, to the extent they related in any way to the subject matter 

hereof or thereof.”). 
54

on the “omission” of information or the “completeness” of the information in 

Sellers’ representations and warranties.213 Wrong. Pilot promised not to rely on the 

“completeness or materiality of any statements, information, data or other materials 

(written or oral) or documents heretofore furnished . . . to [it].”214 This non-reliance 

provision is unambiguous, explicit and comprehensive; Pilot “forthrightly affirm[ed] 

that [it was] not relying upon any representation or statement of fact not contained 

[in the contract],” including whether any statement was “complete.”215 

 213 PAB at 49. 

214 APA § 9.8 (emphasis supplied, original in all caps). 

215 Kronenberg v. Katz, 872 A.2d 568, 591 (Del. Ch. 2004); see also Infomedia Gp., Inc. v. 

Orange Health Sols., Inc., 2020 WL 4384087, at *8 (Del. Super. Ct. July 31, 2020) (“[T]he 

TransDigm court distinguished its holding from other Delaware precedent on the basis that 

the anti-reliance clause at issue did not refer to ‘omissions’ and did not disclaim the 

‘accuracy or completeness’ of information provided in due diligence.”) (citing TransDigm 

Inc. v. Alcoa Glob. Fasteners, Inc., 2013 WL 2326881, at *8 (Del. Ch. May 29, 2013) 

(“There is no argument, however, that Alcoa agreed in the Purchase Agreement that 

TransDigm was making no representation as to the ‘accuracy and completeness’ of the 

information TransDigm provided to Alcoa.”)); RAA Mgmt., 45 A.3d at 115 (addressing a 

non-reliance provision including “completeness” language, “RAA acknowledged that . . . 

Savage would have no liability, and could not be sued, for any allegedly inaccurate or 

incomplete information provided by Savage to RAA during the due diligence process.”); 

Infomedia, 2020 WL 4384087, at *8 (“That express repudiation of the validity and 

completeness of information provided during due diligence distinguishes the Purchase 

Agreement from the stock purchase agreement at issue in TransDigm.”); Wind Point P’rs 

VII-A, L.P. v. Insight Equity A.P. X Co., LLC, 2020 WL 5054791, at *17 (Del. Super. Ct. 

Aug. 17, 2020) (noting that in the absence of an “accuracy and completeness” clause, 

“Wind Point has adequately pleaded fraudulent concealment in the Complaint” 

notwithstanding the non-reliance provision). I note that some aspects of TransDigm have 

been questioned (or, at least, distinguished) by some Delaware authority—see, e.g., Prairie 

Capital III, L.P. v. Double E Hldg. Corp., 132 A.3d 35, 54 (Del. Ch. 2015) (noting that 

“[t]o the extent TransDigm suggests that an agreement must use a magic word like 

“omissions,” then I respectfully disagree with that interpretation”—but TransDigm’s 
55

Pilot concedes that when there is “an express waiver with respect to the 

accuracy or completeness of the information provided,” all extra-contractual 

fraudulent omission claims are waived.216 As illustrated in TransDigm, where the 

parties elect not to include a “completeness” provision in their non-reliance clause, 

they are expressing an intent not to include fraudulent omission claims within the 

prohibitive scope of the clause.217 Their decision to include the “completeness” 

language, on the other hand, exemplifies an unambiguous intent to preclude extracontractual fraudulent concealment and omission claims.218

Second, Pilot argues that Sellers deceptively negotiated limitations on the 

scope of the Customer Rep, thereby rendering those pre-contract negotiations 

fraudulent and yet not barred by the non-reliance clause because they resulted in a 

knowingly false contractual promise.

219 I gather the theory is that while the APA 

was being negotiated, Pilot requested a representation of the Company’s 30 largest 

 

observation regarding the effect of “completeness” language has not been questioned and, 

in my view, the court got the construction of a non-reliance clause with that language just 

right. 

216 PAB at 49 (“Delaware Courts have long held that even when a buyer promises not to 

rely on representations outside a contract, this does not waive otherwise-viable claims for 

fraudulent omissions in the absence of . . . ‘an express waiver with respect to the accuracy 

or completeness of the information provided by the Defendants.’”).

217 TransDigm Inc., 2013 WL 2326881, at *8.

218 Id.; RAA Mgmt., 45 A.3d at 115; Wind Point, 2020 WL 5054791, at *17.

219 Compl. ¶¶ 45–50. 
56

customers during 2018—which would have revealed falling revenue attributed to 

Modus, Personal Comfort and Big Fig.220 Sellers allegedly recognized that a top 

customer list for 2018 would torpedo the deal, so they pushed Pilot to agree that the 

top customer list would be limited to 2017. This dynamic, according to Pilot, takes 

the non-reliance clause out of the picture.

Pilot misapprehends the scope of the clause it agreed to as interpreted under 

our law. If a dissatisfied buyer could bring a fraud claim against a seller for truthful 

representations and warranties that allegedly are the product of a failure to “fairly 

and accurately portray the financial condition” of a company, non-reliance 

provisions would be meaningless, and sellers would have a free-floating (legally 

enforceable) duty to disclose any and all information relevant to a company’s value, 

whether asked for or not.

221 If critical information lurks within the interstices of a 

 220 Id.; ¶ 127(f) (alleging Sellers fraudulently “manipulate[ed] [Manna’s] gross revenue 

calculations to reflect a time period that did not fairly and accurately portray the financial 

condition of Manna prior to closing.”) (emphasis supplied); PAB at 47 (“Pilot seeks fraud 

damages because it has discovered damning emails that reveal that Sellers intentionally 

manipulated and engineered the disclosures in the APA to misrepresent the true status of 

Manna’s pre-Closing customer relationships.”) (emphasis supplied). 

221 Compl. ¶ 127(f). Indeed, if a seller negotiated an agreement with no representations 

and warranties, a dissatisfied buyer could bring a claim for fraud arguing (as Pilot does 

here) that the seller had “engineered” its disclosures to “misrepresent the true status” of the 

Company. PAB at 47. 
57

counterparty’s truthful representations and warranties, a sophisticated party has a 

means to flush that out: negotiate for more fulsome disclosures, full stop.222 

The net effect of an enforceable non-reliance provision and carefully 

negotiated representations and warranties is to “define what information the Buyer 

relied upon in deciding to execute the Agreement.”223 In connection with Pilot’s 

investigation of the Company’s value, each representation and warranty is like a 

piece of a puzzle that Sellers placed on the puzzle table for Pilot’s benefit. Once 

Pilot was satisfied it had seen enough of the picture, it stopped negotiating for 

additional puzzle pieces and agreed to purchase the Company.

224 Of course, each of 

the individual puzzle pieces must be free from defect so that the image depicted is 

true. But now that Pilot has assumed control of the Company after assembling the 

puzzle to its satisfaction, it cannot construct a fraud claim upon the notion that it 

 222 For example, if a seller represents that a car has not been crashed any time during 2012–

2017 or 2019–2020, and a buyer purchases a car promising to rely only on that 

representation, the buyer cannot bring a fraud claim if the car was, in fact, crashed during 

2018. In the face of a non-reliance provision, the parties’ representations and warranties 

“form[] the reality upon which the parties premise[] their decision to bargain.” Abry, 891 

A.2d at 1058. With that said, nothing here should be read as prohibiting a buyer from 

presenting evidence of extra-contractual omissions as part of its broader presentation in 

support of a contractual fraud claim. The point is that the omissions, themselves, cannot 

be the bases of fraud claims when the contract contains a non-reliance clause as broad as 

the one in the APA. 

223 Id. at 1041. 

224 Id. at 1058 (Representations and warranties “form[] the reality upon which the parties 

premised their decision to bargain.”).
58

needed more, or different, pieces in the APA to see the full picture.

225 Aggressive 

bargaining is not fraud. 

Pilot Has Pled Contractual Fraud With Particularity 

Having determined that Pilot may only rely upon the representations and 

warranties within the APA to state a claim for fraud, I address the Sellers’ third 

ground for dismissal—that Pilot has failed to plead fraud with the particularity 

required by our law. The prima facie elements of fraud are well settled:

(1) the defendant falsely represented or omitted facts that the defendant 

had a duty to disclose; (2) the defendant knew or believed that the 

representation was false or made the representation with a reckless 

indifference to the truth; (3) the defendant intended to induce the 

plaintiff to act or refrain from acting; (4) the plaintiff acted in justifiable 

reliance on the representation; and (5) the plaintiff was injured by its 

reliance.226

To meet the particularity requirement, Rule 9(b) often will require a plaintiff 

making a fraud claim to allege: “the time, place, and contents of the false 

representation, the identity of the person(s) making the representation, and what he 

intended to obtain thereby.”227 “When a party sues based on a written contract, as 

 225 Cf. Compl. ¶ 127(f); PAB at 42 (“Sellers fraudulently manipulated the disclosures they 

made regarding the status of Manna’s customer relationships to make it appear that the 

business was worth more than it actually was in order to induce Pilot to purchase Manna 

at an inflated price.” (citing Compl. ¶¶ 37–49, 67, 72, 129–133, 142–48, 150)).

226 Abry, 891 A.2d at 1050.

227 Wexford, 832 A.2d at 145; see also Trenwick Am. Litig. Tr. v. Ernst & Young LLP, 906 

A.2d 168, 207–08 (Del. Ch. 2006) (Strine, V.C.), aff’d sub nom. Trenwick Am. Litig. Tr. v. 

Billett, 931 A.2d 438 (Del. 2007) (noting that the relevant factors include “the time, place, 
59

[Pilot] has done here, it is relatively easy to plead a particularized claim of fraud.”228

“The plaintiff can readily identify who made what representations where and when, 

because the specific representations appear in the contract. The plaintiff likewise 

can readily identify what the defendant gained, which was to induce the plaintiff to 

enter into the contract.”229 Given that state of mind and knowledge may be averred

generally when pleading fraud, an allegation that a contractual representation is 

knowingly false typically will be deemed well pled (even if ultimately difficult to 

prove).

230

The Complaint well-pleads that Sellers made three knowingly false statements 

in the APA that conceivably amount to fraud.

231 First, Pilot alleges Sellers stated in 

 

and contents of the false representations; the facts misrepresented; the identity of the 

person(s) making the misrepresentation; and what that person(s) gained from making the 

misrepresentation”).

228 Prairie Capital, 132 A.3d at 62; see also Swipe Acq. Corp. v. Peter M. Krauss, et al., 

2020 WL 5015863, at *9 (Del. Ch. Aug. 25, 2020) (same).

229 Prairie Capital, 132 A.3d at 62; see also Swipe, 2020 WL 5015863, at *9 (same).

230 Abry, 891 A.2d at 1050.

231 Pilot’s allegations with respect to Forward Air fall short of a viable fraud claim. Pilot 

alleges that Sellers disclosed that Forward Air, a vendor of Manna, had increased its prices 

and made it seem as if “the price increase had already occurred and was already reflected

in the Interim Balance Sheet.” Compl. ¶ 80. Pilot stops short of alleging that the balance 

sheet or income statements themselves were fraudulent, instead insisting that Sellers 

intentionally misled Pilot into thinking “the price increase was already booked as an 

expense in Manna’s Financial Statement.” Compl. ¶ 82. Yet, nothing in either 

Schedule 5.28 or the related representation says or even implies the price increase was or 

was not reflected in the Interim Balance Sheet. And Pilot does not even generally plead 

that Sellers intended or had knowledge that the representation they made to Pilot regarding 
60

the APA that Modus “decreased the volume of services purchased” from the 

Company “in the ordinary course of business.”232 In reality, Modus had decreased 

its purchases by “90%,” a reduction that “can hardly be considered ‘ordinary 

course.’”233

Second, Sellers disclosed in the APA that Personal Comfort “no longer 

purchases services from” the Company “in the ordinary course of business.”234 This 

statement is alleged to be false because Sellers knew Personal Comfort’s decision to 

terminate its business with Manna was anything but “ordinary course.” Instead, the 

 

the price increase was false when made. Even if Sellers had knowledge of a price increase, 

this does not support an inference they knew that their disclosures gave the impression that 

the price increase had already occurred. It is not surprising, therefore, that the Complaint 

makes no such allegation. The fraud claim based on allegedly manipulated “gross revenue 

calculations to reflect a time period that did not fairly and accurately portray the financial 

condition of Manna prior to Closing” also fails. Compl. ¶ 127f. Pilot fails to cite a single 

case where the court found a plaintiff had pled a viable fraud claim based on revenue 

calculations that were the subject of highly fluid negotiations between the parties. Pilot 

could have negotiated for access to gross revenue calculations for the time periods in 

question, but it surely cannot blame Sellers for failing to give it something that it did not 

bargain for in the agreement. Finally, the fraud claim based upon Big Fig’s accounts 

receivable likewise fails to state a claim. The Updated Disclosure Schedule plainly refutes 

that the Sellers “had actual knowledge that the full amount of the receivable was 

uncollectible.” Compl. ¶ 74; DOB, Ex. 2 at 28. The schedule indicates that Big Fig had in 

fact paid down some of its accounts receivable and Pilot alleges nothing to suggest that Big 

Fig had given any indication the payments would stop. DOB, Ex. 2 at 28. 

232 Compl. ¶ 49. 

233 Id. (emphasis in original). 

234 Compl. ¶ 64 (emphasis omitted). 
61

abrupt departure “resulted from, among other things, ‘several failures that went 

horribly wrong.’”235 

Third, Pilot alleges Sellers represented they had not received a Business 

Reduction Notification from Big Fig even though Big Fig “advised Sellers prior to 

Closing that it no longer intended to be a customer of Manna’s.”236 According to 

Pilot, Sellers affirmatively made “the false statement that Big Fig was Sellers’ 

twenty-fourth largest customer . . . despite having Knowledge that Big Fig was no 

longer a customer at all.”237 While the APA makes no specific reference to “the size 

of various customers at any time after December 31, 2017,”238 Section 5.27 of the 

APA does provide that “neither Seller nor Owner has received written notice or, to 

the Knowledge of the Seller, any oral notice from any Material Customer that any 

Material Customer intends or expects, after the Closing Date, to stop or materially 

decrease” its business.239 Pilot alleges Big Fig did precisely that, and that Sellers 

knew it when they made the Customer Rep.

240 

 235 Compl. ¶ 65. 

236 Compl. ¶ 72. 

237 Compl. ¶ 127c. 

238 DOB at 17–18.

239 APA § 5.27.

240 Compl. ¶ 127a–b. Sellers argue that “after the Closing Date” implies that if Big Fig 

notifies Sellers of their intent to end their relationship pre-Closing, that information need 

not be disclosed. APA § 5.27; DOB 30–32. Pilot responds that this is an “absurd” reading 
62

*****

Pilot has pled reasonably conceivable fraud claims regarding the status of 

Modus, Personal Comfort and Big Fig as Manna customers. Otherwise, its claims 

of contractual fraud are not well-pled and must be dismissed. 

Pilot’s Fraud Claims Are Not Bootstrapped Breach of Contract 

Claims

As has become customary in cases involving fraud claims asserted alongside 

breach of contract claims, Sellers argue Pilot’s fraud claims must be dismissed 

because they are nothing more than “bootstrapped” breach of contract claims.

241

Delaware courts will find that improper bootstrapping has occurred when the 

plaintiff simply “add[s] the words ‘fraudulently induced’ or alleg[es] that the 

contracting parties never intended to perform” as a means to plead fraud in cases 

 

of Section 5.27. PAB at 24. While I do not favor the characterization, I agree that Sellers’ 

construction is unreasonable. Under Sellers’ reading, even if Sellers knew pre-Closing that 

a major customer they had disclosed as in the fold had, in fact, left the fold, they would

have no obligation to alert Pilot to that fact since Pilot bargained only for an assurance that 

a major customer would not leave after Closing. That is not what the contract says. Sellers 

also contend that Pilot categorically cannot rest its allegations of fraud with respect to Big 

Fig on mere “information and belief.” Compl. ¶ 72; DOB at 51. I reject that argument as 

well. See H-M Wexford, 832 A.2d at 145–46 (allowing a fraud claim based upon 

“information and belief” to survive dismissal when plaintiff well pled “the representations 

[in a contract] were false when made” and “the defendants knew they were false”). Given 

the facts pled regarding the circumstances of Big Fig’s departure, the Complaint places 

Sellers on heightened notice of the bases for Pilot’s allegation that Sellers knew prior to 

Closing that Big Fig would cease doing business with Manna. Compl. ¶¶ 69–71, 75, 143.

241 A key word search on the WestlawTM Legal Research site, Delaware database, for 

“bootstrap! /s fraud!” revealed 64 hits as of this writing. 
63

where the parties are bound by contract.242 The bootstrapping is deemed improper 

because the plaintiff has simply tacked on conclusory allegations that the defendant 

made the contract knowing it would not or could not deliver on its promises.

243

As our law in this area has evolved, it is now clear that improper bootstrapping 

does not occur: (1) “where a plaintiff has made particularized allegations that a seller 

knew contractual representations were false or lied regarding the contractual 

representation,”244 (2) “where damages for plaintiff's fraud claim may be different 

from plaintiff's breach of contract claim,”245 (3) when the conduct occurs prior to the 

execution of the contract “and thus with the goal of inducing the plaintiff’s signature 

and willingness to close on the transaction”246 or (4) when the breach of contract 

 242 Iotex Commc’ns, Inc. v. Defries, 1998 WL 914265, at *5 (Del. Ch. Dec. 21, 1998).

243 Swipe, 2020 WL 5015863, at *11; Smash Franchise P’rs, LLC v. Kanda Hldgs., Inc., 

2020 WL 4692287, at *16 (Del. Ch. Aug. 13, 2020) (“A bootstrapped fraud claim thus 

takes the simple fact of nonperformance, adds a dollop of the counterparty’s subjective 

intent not to perform, and claims fraud.”).

244 Swipe, 2020 WL 5015863, at *11; Anschutz Corp. v. Brown Robin Capital, LLC, 2020 

WL 3096744, at *15 (Del. Ch. June 11, 2020) (recognizing that the bootstrapping rule does 

not apply where the plaintiff/buyer . . . can plead “either: (1) that the Seller knew that the 

Company’s contractual representations and warranties were false; (2) that the Seller itself 

lied to Buyer about a contractual representation and warranty” or (3) because damages for 

fraud would be distinct from damages for breach of contract (quoting Abry, 891 A.2d at

1064)).

245 Swipe, 2020 WL 5015863, at *11.

246 In re Bracket Hldg. Corp. Litig., 2017 WL 3283169, at *8–9 (Del. Super. Ct. July 31, 

2017).
64

claim is not well-pled such that there is no breach claim on which to “bootstrap” the 

fraud claim. Pilot’s fraud claims fall squarely within several, if not all, of these nonbootstrapping spaces. 

At the outset, this clearly is not a case where Sellers are alleged to have entered 

into the APA with no intent to perform. According to Pilot, Sellers had every intent 

to sell Manna’s assets. They just hoped Pilot would not discover that the business 

was not as valuable as Sellers represented it was. In this regard, Pilot has alleged 

with particularity three instances in which Sellers knew that its contractual 

representations with respect to its customers were false. Pilot alleges these 

statements were made in the APA to induce Pilot into Closing; a separate and distinct 

claim from any of its breach of contract claims.247 And Pilot’s fraud damages are 

arguably distinct from its breach damages. As the APA makes clear, Pilot’s breach 

of contract damages are capped at the Escrow amount.248 Finally, no breach of 

contract claim implicated by the fraud claims has survived dismissal. There is, 

therefore, no claim to which the fraud claims can be bootstrapped. 

 247 Compl. ¶ 4.

248 APA § 9.1; Swipe, 2020 WL 5015863, at *12 (“The anti-bootstrapping rule also does 

not apply here because Plaintiff might be entitled to greater damages through its fraud 

claim than its breach of contract claim.”).
65

III. CONCLUSION

For the foregoing reasons, the Motion to Dismiss is GRANTED as to 

Counts I, II, III, and VI, except as to the breach of contract claim regarding GE and 

the “Excluded Liability.” The Motion to Dismiss Count IV and V is DENIED, 

except to the extent the claims rest on alleged Forward Air price increases, 

manipulation of gross revenue calculations, the Big Figs accounts receivable or 

extra-contractual statements or omissions. 

IT IS SO ORDERED.