Novipax Holdings LLC v. Sealed Air Corporation
N17C-03-1682 EMD CCLD
| Del. Super. Ct. | Nov 28, 2017Background
- Novipax purchased Sealed Air’s North American foam tray and absorbent pad business for $80M (APA executed Feb 11, 2015; Closing Apr 1, 2015) and entered a concurrent Transition Services Agreement (TSA).
- Novipax alleges, based on post-closing Sealed Air emails, that Sealed Air concealed and misrepresented material facts about customer migrations to rigid trays, price pressures (Tyson, Perdue, Cargill), and conversion costs, which diminished the Business value.
- The APA contains detailed representations, warranties, covenants (notably §§4.5, 4.6(b), 4.18, 6.1, 6.3), non-reliance/integration clauses (§§4.20, 5.7, 10.3), an indemnification scheme (Art. IX, including §9.3(h) preserving fraud claims), and procedures for working capital disputes (§3.3–3.4).
- Novipax sued for fraud/fraudulent inducement, breach of the APA, breach of the TSA, declaratory relief/setoff, and unjust enrichment; Sealed Air moved to dismiss all counts.
- Sealed Air argued dismissal based on contractual pre-litigation prerequisites, notice/time limits for indemnification claims, and that non-reliance/integration provisions bar extra-contractual fraud; Novipax countered that fraud and equitable claims survive and that some alleged misrepresentations are intra-contractual.
- The Court denied the motion to dismiss, holding Novipax stated viable claims for fraudulent inducement, breach of contract (APA and TSA), unjust enrichment (as an alternative), and declaratory relief; contractual defenses (notice, pre-suit negotiation, and non-reliance) were not dispositive at the pleading stage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether contractual notice/indemnity/time prerequisites (Art. IX) bar suit | Novipax: Art. IX applies only to indemnification claims; fraud and other claims are exempt under §9.3(h) so no pre-suit notice/condition applies | Sealed Air: Novipax failed to provide Claim Notices and missed 18-month windows in Art. IX; thus suit should be dismissed | Court: Ambiguities exist; at pleading stage cannot adopt Sealed Air’s sole interpretation—denied dismissal on this basis |
| Whether TSA §5.15 negotiation requirement is a condition precedent to litigating TSA/APA claims | Novipax: §5.15 applies only to the TSA and does not bar judicial relief; not incorporated as a pre-suit bar in APA | Sealed Air: §5.15 requires good-faith escalation before litigation; bars Count III (TSA) and supports dismissal | Court: §5.15 is not shown to be a clear, unambiguous precondition barring all claims; may affect TSA claim procedure but not a jurisdictional dismissal now |
| Whether non-reliance/integration clauses (§§4.20, 5.7, 10.3) preclude a fraud claim based on extra-contractual statements | Novipax: §9.3(h) preserves fraud claims; many relied-upon representations are contractual (intra-contractual) so fraud claim is allowed | Sealed Air: Non-reliance/integration bar any fraud grounded on pre-contract materials (CIM, management presentations) | Court: Parties preserved fraud claims (§9.3(h)) but non-reliance limits fraud to written/intra-contractual representations; extra-contractual fraud allegations are largely barred at this stage |
| Whether Novipax pleaded fraud and damages with requisite particularity and separate from breach damages | Novipax: Pleads particular facts (emails, personnel statements), justifiable reliance, intent, and seeks rescission/rescissory damages distinct from contract remedies | Sealed Air: Pleading fails Rule 9(b) particularity and improperly duplicates breach damages (bootstrapping) | Court: Fraud pleaded with sufficient particularity; fraudulent inducement is plausibly distinct from breach because Novipax seeks rescission — claim survives now, with possibility to revisit if damages overlap after discovery |
Key Cases Cited
- Central Mortg. Co. v. Morgan Stanley Mortg. Capital Holdings LLC, 27 A.3d 531 (Del. 2011) (pleading-stage standard: accept well-pleaded facts, draw inferences for non-movant)
- Ramunno v. Crawley, 705 A.2d 1029 (Del. 1998) (court may disregard conclusory allegations lacking factual support)
- Airborne Health, Inc. v. Squid Soap LP, 984 A.2d 126 (Del. Ch. 2009) (integration clauses do not automatically bar fraud claims; exclusive-remedy language can preserve fraud causes when the parties so intend)
- Abry Partners V, L.P. v. F & W Acquisition, LLC, 981 A.2d 1032 (Del. Ch. 2009) (fraudulent inducement claim survives where contract contained representations intended to induce the transaction)
- Prairie Capital III, L.P. v. Double E Holding Corp., 132 A.3d 35 (Del. Ch. 2015) (representation-limiting language can define the universe of information on which the buyer relied)