344 A.3d 1009
Del. Super. Ct.2025Background
- JanCo, a subsidiary of Argenbright, acquired ISS’s cleaning business for $80 million pursuant to a heavily negotiated Asset Purchase Agreement (APA) in September 2021, with closing on November 30, 2021.
- The APA included post-closing purchase price adjustments, indemnity provisions, and broad representations regarding the business's condition from ISS, with certain damages (like lost profits) expressly excluded unless tied to fraud or willful misconduct.
- JanCo claimed it was fraudulently induced into the transaction and that ISS breached various APA representations, especially concerning business performance and labor issues leading up to closing.
- ISS argued JanCo was aware of the business’s operational challenges through due diligence, denied fraud or willful misconduct, and counterclaimed for unpaid purchase price adjustments and related sums.
- Both parties brought claims in Superior Court (after transfer from Chancery) and the case proceeded through summary judgment, trial, and post-trial briefing.
Issues
| Issue | Plaintiff's Argument (JanCo) | Defendant's Argument (ISS) | Held |
|---|---|---|---|
| Breach of Absence of Changes Representation (APA § 4.10) | ISS’s business materially changed after June 30, 2021; labor costs rose, People@ISS rollout caused issues | No material adverse effect; any changes were disclosed and indemnified per contract terms; broad reading produces overbreadth | ISS breached, but materiality is scraped; only any adverse effect needed, not material. JanCo failed to prove compensable damages |
| False/Misleading Financial Statements (APA § 4.6, 4.25) | ISS financials understated actual labor costs; bonus and salary data misrepresented | Financials accurate per evidence and accounting; bonuses and salaries included properly | No breach; JanCo could not prove statements were false or misleading |
| Work Authorization Representations (APA § 4.20) | ISS had unauthorized workers, failed to use E-Verify properly | APA does not require E-Verify use; no evidence of unauthorized workers; compliance representations accurate | No breach; JanCo failed to prove unauthorized workers or non-compliance |
| Fraud/Willful Misconduct | ISS concealed true state of business, made knowingly false representations | No scienter; JanCo had access to, and actual knowledge of, business issues pre-closing | No fraud or willful misconduct; JanCo lacked justifiable reliance and evidence of knowing breach |
| Unpaid Purchase Price Adjustments | N/A | JanCo withheld required working capital/other adjustments | ISS entitled to $3.39M working capital adjustment, $1.49M Ingram Micro consent, and $5M holdback |
Key Cases Cited
- E.I. DuPont de Nemours & Co. v. Fla. Evergreen Foliage, 744 A.2d 457 (Del. 1999) (elemental requirements for fraud under Delaware law)
- Arwood v. AW Site Servs., LLC, 2022 WL 705841 (Del. Ch. 2022) (justifiable reliance in fraud claims)
- Interim Healthcare, Inc. v. Spherion Corp., 884 A.2d 513 (Del. Super. 2005), aff’d, 886 A.2d 1278 (Del. 2005) (preponderance of evidence standard and breach of contract elements)
- Hudson’s Bay Co. Lux., S.A.R.L. v. JZ LLC, 2013 WL 1457019 (Del. Super. 2013) (applying materiality scrape to financial representations)
- Cobalt Operating, LLC v. James Crystal Enter., LLC, 2007 WL 2142926 (Del. Ch. 2007) (expectation damages in breach of contract)