Fraud Actions Rights of Action and Defenses k. Defenses. Under New York law, “peculiar knowledge” exception to fraudulent inducement, which provides that claims of fraudulent inducement due to statements made by a seller are barred by a non-reliance provision in a contract between the parties if the facts at issue in the claim were peculiarly within the misrepresenting party's knowledge, does not apply where the plaintiff had a low-cost alternative, such as insisting that the written contract terms reflect any oral undertaking on a issue. Corporations and Business Organizations 101 2749 Corporations and Business Organizations Mergers, Acquisitions, and Reorganizations Sale or Transfer of All or Controlling Interest of Stock Agreements to Purchase or Sell k. Requisites and validity in general. Provision of nondisclosure agreement between potentially acquiring company and potentially acquired company in which potentially acquiring company agreed that potentially acquired company would have no liability resulting from any representation potentially acquired company made in course of potentially acquiring company's due diligence was not unenforceable as against public policy; public policy favored enforcing contractually binding written disclaimers of reliance on representations outside of a final agreement of sale or merger. *109 Court Below—Superior Court of the State of Delaware, in and for New Castle County, C.A. No. N11C–04–202. Upon appeal from the Superior Court. AFFIRMED., Esquire and , Esquire, Phillips, Goldman & Spence, P.A., Wilmington, Delaware, and , Esquire (argued), , Esquire and , Esquire, Winston & Strawn LLP, Washington, D.C., for appellant. , Esquire, Abrams & Bayliss LLP, Wilmington, Delaware, , Esquire (argued) and , Esquire, Ropes & Gray LLP, New York, New York, for appellee. Before , and , Justices. , Justice: The plaintiff-appellant, RAA Management, LLC (“RAA”) appeals from a final judgment of the Superior Court that dismissed RAA's Complaint, pursuant to Rule 12(b)(6) of the Rules of Civil Procedure. In the Fall of 2010, RAA was
In order to obtain confidential documents and information from Savage, as part of its due diligence process, RAA entered into a NDA with Savage on September 17, 2010. Pursuant to the NDA, RAA agreed to keep confidential all information furnished by Savage “concerning the Company that is non-public, confidential or proprietary in nature[.]” In negotiating the terms of the NDA, the parties were each represented by experienced legal counsel. In the NDA, RAA agreed that Savage was making no representations or warranties as to the accuracy or completeness of any information (the “Evaluation Material”) being provided to RAA, and that Savage would have no liability to RAA resulting from RAA's reliance on such information, except for breaches of representations and warranties that Savage was to later make in an executed “Sale Agreement.” Paragraph 7 of the NDA states: You [RAA] understand and acknowledge that neither the Company [Savage] nor any Company Representative is making any representation or warranty, express or implied, as to the accuracy or completeness of the Evaluation Material or of any other information concerning the Company provided or prepared by or for the Company, and none of the Company nor the Company Representatives, will have any liability to you or any other person resulting from your use of the Evaluation Material or any such other information. Only those representations or warranties that are made to a purchaser in the Sale Agreement when, as and if it is executed, and subject to such limitations and restrictions as may be specified [in] such a Sale Agreement, shall have any legal effect. Emphasis added. In the NDA, RAA also waived any claims it might have in connection with any potential transaction with Savage unless the parties entered into a definitive sale agreement. Paragraph 8 of the NDA provides: You [RAA] understand and agree that no contract or agreement providing for a transaction between you and the Company [Savage] shall be deemed to exist between you and the Company unless *111 and until a definitive Sale Agreement has been executed and delivered, and you hereby waive, in advance, any claims ... in connection with any such transaction unless and until you shall have entered into a definitive Sale Agreement.” Emphasis added. After undertaking some preliminary due diligence, RAA expressed an interest in purchasing Savage. RAA submitted a Letter
and the acquired corporation (“IBP”), on the grounds that IBP fraudulently induced the merger through misrepresentations and omissions made during the due diligence process. The Court of Chancery rejected Tyson's fraud claim, in part because of a non-reliance clause in the parties' Confidentiality Agreement entered into at the beginning of the parties due diligence/negotiation process: . We [Tyson] understand and agree that none of the Company, its advisors or any of their ... representatives (i) have made or make any representation or warranty, express or implied, as to the accuracy or completeness of the Evaluation Material or (ii) shall have any liability whatsoever to us or our Representatives relating to or resulting from the use of the Evaluation Material or any errors therein or omissions therefrom, except in the case of (i) and (ii), to the extent provided in any definitive agreement relating to a Transaction. (emphasis In analyzing the foregoing provision, the Court of Chancery held: The intent of the Confidentiality Agreement is clear: it was designed to require Tyson to waive any deficiencies in due diligence as a basis for suit, unless that deficiency constituted a breach of representation or warranty in the resulting merger agreement. Then Vice Chancellor (now Chancellor) Strine determined that the quoted language in the Confidentiality Agreement “emphasize[d] to an objective reader that the merger negotiation process not be one during which Tyson could reasonably rely on oral assurances. Instead, if Tyson wished to protect itself, it would have to ensure that any oral promises were converted into contractual representations and warranties.” In applying New York law, the Court of Chancery held that the disclaimer language in the Confidentiality Agreement was unambiguous and stated: (emphasis added). [The Confidentiality Agreement] contributes to the caution with which Tyson should have taken any oral assurances or representations from IBP during the Merger negotiation process. Tyson had agreed that it could not use any oral or written due diligence information (or omissions therefrom) as a basis for a lawsuit unless that issue was covered by *115 a specific provision of a subsequent, written contract. As a result, Tyson could