FdG Logistics LLC v. A&R Logistics Holdings, Inc.
131 A.3d 842
| Del. Ch. | 2016Background
- Private equity buyer (A&R) acquired Old A&R via merger with FdG Logistics as Securityholders’ Representative; Merger Agreement signed Dec. 18, 2012 and closed that day.
- Pre-closing tax refunds for periods prior to closing were identified as Securityholders’ property under the Merger Agreement and were to be paid promptly to the Securityholders’ Representative.
- Disclosures, schedules, and Knowledge Certificates were prepared during due diligence, with management certifying accuracy of representations and warranties.
- After closing, FdG Logistics asserted indemnification and a 2012 Tax Refund totaling $2,080,650; A&R refused to remit the refund, triggering this litigation.
- Securityholders moved to dismiss Counts II (Delaware Securities Act) and IV (unilateral mistake) and the court denied in part; FdG moved for summary judgment on the tax refund claim under Section 9.6(E).
- The court held that the Delaware choice-of-law provision alone does not automatically invoke the Delaware Securities Act and that the indemnification provisions provide the exclusive remedies apart from fraud claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the Delaware Securities Act apply to the merger transaction? | A&R asserts nexus via Delaware choice-of-law provision. | FdG contends no Delaware nexus; Act not triggered. | No sufficient Delaware nexus; Count II dismissed. |
| Can Buyer’s pre-merger fraud claim survive against extra-contractual statements? | Buyer argues reliance on pre-merger materials outside the Merger Agreement. | Securityholders rely on merger disclosures and integration clause. | Count III survives; anti-reliance not unambiguously stated. |
| Is there a basis to rescind the Merger for unilateral mistake? | A&R seeks rescission due to unilateral mistake. | Enforcement not unconscionable; rescission impracticable after years. | Count IV dismissed; rescission not feasible. |
| Does FdG have entitlement to the 2012 Tax Refund under the Merger Agreement? | N/A | Merger language requires prompt payment to Securityholders’ Representative. | Summary judgment granted for payment of the 2012 Tax Refund to Securityholders’ Representative. |
Key Cases Cited
- Abry P’rs V, L.P. v. F & W Acquisition LLC, 891 A.2d 1032 (Del. Ch. 2006) (anti-reliance language required to bar extra-contractual fraud claims; framing matters)
- Kronenberg v. Katz, 872 A.2d 568 (Del. Ch. 2004) (anti-reliance considerations for merger-integration clauses)
- H-M Wexford LLC v. Encorp, Inc., 832 A.2d 129 (Del. Ch. 2003) (fraud claims and integration clauses; balancing policy against fraud)
- Singer v. Magnavox Co., 380 A.2d 969 (Del. 1977) (blue-sky law requires nexus to Delaware for applicability)
- Abry Partners V, L.P. v. F & W Acquisition LLC, 891 A.2d 1032 (Del. Ch. 2006) (Delaware common law on contract/nexus; Abry as guiding)
- Great Lakes Chem. Corp. v. Pharmacia Corp., 788 A.2d 544 (Del. Ch. 2001) (fraud claims and integration clauses; anti-reliance principles)
- City Investing Co. Liquidating Trust v. Cont’l Cas. Co., 624 A.2d 1191 (Del. 1993) (courts’ use of integration clauses and contract interpretation)