JANCO FS 2, LLC AND JANCO FS 3, LLC, Plaintiffs, v. ISS FACILITY SERVICES, INC.; ISS C&S BUILDING MAINTENANCE CORPORATION; ISS TMC SERVICES, INC.; and ISS FACILITY SERVICES CALIFORNIA, INC, Defendants. ISS FACILITY SERVICES, INC.; ISS C&S BUILDING MAINTENANCE CORPORATION; ISS TMC SERVICES, INC.; and ISS FACILITY SERVICES CALIFORNIA, INC., Plaintiffs, v. JANCO FS 2, LLC; and JANCO FS 3, LLC Defendants.
C.A. No. N23C-03-005 MAA CCLD; C.A. No. N23C-07-036-MAA CCLD
IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
Decided: August 21, 2025
Submitted: July 7, 2025;
POST-TRIAL OPINION
Robert L. Burns, Esquire, and Sandy Xu, Esquire of RICHARDS, LAYTON & FINGER, P.A., Wilmington, Delaware, and Jason J. Carter, Esquire (Argued), and Austin L. Hollimon, Esquire of BONDURANT MIXSON & ELMORE, LLP, Atlanta, Georgia, and Fredric J. Bold, Jr., Esquire of GREENBERG TRAURIG, LLP, Atlanta Georgia, Attorneys for JanCo FS 2, LLC and JanCo FS 3, LLC.
David J. Teklits, Esquire, Thomas P. Will, Esquire, Rachel R. Tunney, Esquire, and Louis F. Masi, Esquire, of MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, Delaware, and Mark T. Oakes, Esquire (Argued), Ryan E. Meltzer, Esquire, and Emily D. Wolf, Esquire of NORTON ROSE FULBRIGHT US, LLP, Austin, Texas, Attorneys for Defendants ISS Facility Services, Inc., ISS C&S Building Maintenance Corporation, ISS TMC Services, Inc., and ISS Facility Services California, Inc.
Adams, J.
INTRODUCTION
This post-trial opinion resolves disputes regarding the sale of a cleaning business between the seller, ISS, and the buyer, JanCo.1 JanCo alleges ISS fraudulently induced JanCo into agreeing to the Asset Purchase Agreement (the “APA“), and that JanCo received a business worth far less than it anticipated. JanCo further alleges ISS breached the terms of the APA and committed willful misconduct in doing
For the reasons discussed herein, the Court finds ISS breached a single provision in the APA. JanCo, however, failed to prove damages for that breach by a preponderance of the evidence. ISS proved JanCo breached the Parties’ contracts by failing to pay certain post-closing purchase price adjustments. The Parties’ remaining claims fail. Judgment is entered accordingly.
BACKGROUND2
A. The Parties
JanCo is a group of Delaware Limited Liability Companies which are subsidiaries of the Argenbright Group of companies (“Argenbright“).3 Argenbright provides “workforce solutions in human-capital intensive industries.”4 Argenbright formed JanCo in connection with the transaction at issue.5
“The ISS group of companies provides workplace and facility management services on a global scale, with locations in over forty countries and approximately 400,000 employees worldwide.”6 ISS is headquartered in Denmark.7
B. Key Witnesses
John Maynord is JanCo‘s Chief Financial Officer.8 Seth Higdon is JanCo‘s Vice President of Finance.9 Billie-Ann Reader is JanCo‘s Vice President of Operation Services.10 Reader joined JanCo after the transaction, formerly working as ISS‘s Associate Vice President for the West.11
Jason Pitcock is the former Vice President of ISS‘s cleaning division.12 After ISS sold the cleaning division (the “Business“) to JanCo, Pitcock joined JanCo as Vice President of Operations.13 JanCo later terminated Pitcock, and Pitcock returned to ISS.14 Pitcock received a bonus, pursuant to his employment agreement with ISS, for facilitating the deal between JanCo and ISS.15
Morten Heding is one of ISS‘s Vice Presidents of Finance.16 Katie Holloway is ISS‘s Senior Vice President of Finance.17 Kimberly Wray is ISS‘s Vice President of People and Culture.18
C. ISS Sought to Sell the Business.
In early 2020, ISS began exploring the
In late 2020, Harris Williams contacted potential buyers, including Argenbright, to solicit interest in an acquisition of the Business.22 Argenbright submitted an Indication of Interest.23
On March 12, 2021, Argenbright attended an ISS management presentation regarding the Business.24 At that meeting, ISS explained that the Business suffered from employee headcount decline and experienced high employee turnover.25
After a bidding process, Argenbright submitted a Letter of Intent (“LOI“) on May 27, 2021 in which Argenbright proposed to purchase the Business for $80 Million (the “Purchase Price“).26 The proposed Purchase Price reflected a 6.15x multiplier of the Business’ Normalized EBITDA.27 The LOI called for $75 Million of the Purchase Price to be paid up front, with $5 Million deferred.28 ISS accepted the LOI, and Argenbright formed JanCo to complete the deal.29
On July 12, 2021, ISS rolled out its new human resources system, People@ISS, in the United States.30 ISS faced challenges implementing People@ISS, including delays in onboarding.31
ISS uses E-Verify, a process for verifying the work authorization status of a prospective employee.32 During the summer of 2021, ISS worked with the Department of Homeland Security (“DHS“) to open a new E-Verify account and to terminate ISS‘s old account.33
D. The Parties Engaged in Due Diligence.
JanCo hired Virtas Partners (“Virtas“) to serve as its financial advisor and to conduct financial due diligence.34 JanCo hired BDO, a consulting firm, to conduct human resources, information technology, and tax due diligence.35
In July and August 2021, JanCo and ISS employees met in Atlanta, Georgia to discuss the state of the Business.36 At these meetings, ISS operational leaders told JanCo that the Business had 400 to 500 open positions and was using temporary labor and overtime to cover.37 ISS further informed JanCo about the operational issues it faced due to the People@ISS rollout.38
JanCo‘s advisors’ diligence reports noted the Business’ staffing issues. In a July 4, 2021 draft report, Virtas emphasized problems with the Business’ staffing and recruiting and noted there was “not a non-trivial number” of open positions.40
BDO warned JanCo of “overall labor shortages (consistent with the market) which has led to an increase in overtime hours” at the Business.41
Before closing, ISS provided JanCo with an updated profit and loss statement, trial balances, and other financial reports covering July, August, September, and October 2021.42 The trial balances included all of ISS‘s general ledger accounts, including line items for temporary labor.43 JanCo was able to easily run its own monthly profit and loss statements from the trial balances,44 which enabled JanCo to identify the Business’ increased use of temporary labor in an email sent on November 21, 2021.45 The information in those financial reports for July-October 2021 aligned with the Business’ historical performance.46
E. The Parties Signed the APA.
On September 20, 2021, the Parties signed the APA (the “Signing“).47 The APA adopted the LOI‘s Purchase Price of $80 Million.48
Section 2.4(b) of the APA provides that JanCo retained $5 million of the $80 million as a holdback amount to be reduced by any indemnifiable losses (the “Holdback Amount“).49
Section 2.5 of the APA provides a mechanism for adjusting the Purchase Price based on the discrepancy between the Business’ targeted working capital and actual working capital identified after closing.50 If the actual working capital exceeded the target working capital by more than $100,000, ISS would be entitled to the difference between the target working capital plus $100,000 and the actual working capital.51 If the actual working capital was over $100,000 less than the target, JanCo would be entitled to the difference between the target working capital minus $100,000 and the actual working capital.52
Article 4 of the APA contains various representations by ISS. Section 4.6 provides:
Attached hereto as Schedule 4.6 are Sellers’ (i) unaudited divisional balance sheets and (ii) unaudited divisional statements of income for the Target Accounts for the years ended December 31, 2019, December 31, 2020, and as of the period ending July 31, 2021 (the “Financial Statements“). The Financial Statements are true, complete and correct in all material respects, and present fairly in all material respects the financial condition and the results of operation of the Target Accounts as of the dates of such statements and for the periods then ended and have been prepared in accordance with International Financial Reporting Standards.53
Section 4.7 of the APA provides:
The books and records of Sellers relating to the Purchased Assets and Assumed Liabilities, are true and correct in all material respects, have been maintained in accordance with good business practice and in accordance with all laws and other requirements applicable to their business and operations.54
Section 4.10 of the APA (the “Absence of Changes Representation“) provides:
Since June 30, 2021, and solely with respect to the Purchased Assets and Assumed Liabilities, Sellers have operated only in the Ordinary Course of Business and have not:
...
(e) suffered any damage, destruction, or Loss to any asset or suffered any other change, development, or event (individually or in the aggregate) that has had, or could be reasonably expected to have, a Material Adverse Effect on the Target Accounts;
(f) increased the rate of compensation payable or to become payable by it to any of its officers, directors, key employees, or agents, except for general hourly rate increases and normal merit increases in each case done in the Ordinary Course of Business;
(g) made or agreed to make any accrual or arrangement for or payment of any bonus, special compensation, or severance pay of any kind to any shareholder, officer, director, employee or agent;
...
(l) suffered or experienced any other event or circumstance which has resulted in a Material Adverse Effect on it or which is reasonably expected to result in such a Material Adverse Effect;
(o) entered into any agreement or other obligation to do any of the foregoing.55
Section 4.20 provides:
(a) Schedule 4.20(a) sets forth a complete and correct list of all salaried employees who provide services to the Target Accounts, showing for each: (i) name; (ii) hire date; (iii) current job title; (iv) actual base salary, bonus, commission or other remuneration paid during 2020; (v) 2021 base salary level and 2021 target bonus; (vi) whether such employee is on an active or inactive status; (vii) the location at which such employee principally works; (viii) whether such employee is treated as exempt or non-exempt, (ix) any agreements, arrangements or benefits provided to such employee other than standard agreements, (x) other perquisites, including, without limitation, vehicle allowance or the provision of a company vehicle, and (xi) ISS employee identification number.
...
(d) Each Seller is in compliance, in all respects, with all applicable laws relating to the employment of labor with respect to any employees providing services to the Target Accounts employed by any Seller or any employees employed by a third party and leased to any Seller, including the Civil Rights Act of 1964 (Title VII), the National Labor Relations Act, the Occupational Safety and Health Act of 1970, the Family and Medical Leave Act of 1993, the Age Discrimination in Employment Act, the Fair Labor Standards Act, the Affordable Care Act, and any similar state laws. There are no charges that have been filed by the U.S. Equal Employment Opportunity Commission or any state Department of Labor or similar state Governmental Authority against any Seller. No Seller has received any notice or other communication from any Governmental Authority or other Person regarding any violation or alleged violation of any applicable law relating to hiring, recruiting, employing (or continuing to employ) anyone not authorized to work in the United States, solely relating to any Seller‘s provision of services to the Target Accounts.
...
(i) With respect to each employee of Sellers, to Sellers’ Knowledge each such employee is either a United States citizen or has a current and valid work visa or otherwise has the lawful right to work in the United States. Each Seller is in compliance with and not in violation of the terms and provisions of applicable laws relating to immigration, including the Immigration Reform and Control Act of 1986, and all related regulations promulgated thereunder in all material respects.56
Seller‘s Knowledge is defined as “the actual knowledge of any of Jason Pitcock, Morten Heding, Katie Holloway, John Sumner, Billie Ann Reader or Mickay Hall, after reasonable inquiry.”57
Section 4.25 (the “Catchall Representation“) provides: “No representation or warranty made by Sellers in this Article 4, nor any schedule attached hereto contains any untrue statement of material fact or omits to state a material fact necessary to make the statements contained therein not misleading.”58
The APA has an indemnification provision whereby ISS agrees to indemnify JanCo for “Losses” arising out of any breach of ISS‘s representations and warranties.59
The APA contains no representation that ISS used E-Verify to audit every employee of the Business. The APA also contains no representation regarding the Business’ total number of employees.
Section 6.1 of the APA provides that ISS was to acquire consent agreements from the Business’ top customers authorizing the assignment of the customer contracts to JanCo.60 If ISS had not obtained consent agreements from customers by closing, ISS would still be entitled to a Purchase Price adjustment for obtaining these consents after closing, provided they obtained consent within 120 days of closing.61 For obtaining the consent of Ingram Micro, a customer of the Business, within 120 days of closing, ISS would be entitled to a
Section 7.4 of the APA outlines the limits of indemnification: Section 7.4(a) states JanCo is not entitled to any indemnification unless it can demonstrate its losses exceed $500,000;63 Section 7.4(b) states JanCo may not collect more than 12.5% of the Purchase Price from indemnification.64
Section 7.5(a) of the APA contains a materiality scrape (the “Materiality Scrape“):
For purposes of the indemnities . . . all qualifications and limitations set forth in the Parties’ representations and warranties as to “materiality,” “Material Adverse Effect“, “Material Adverse Change” and words of similar import shall be disregarded in determining whether there shall have been any inaccuracy in or breach of any representations and warranties in this [APA].65
“Material Adverse Effect” is defined in Section 9.1 of the APA:
“Material Adverse Effect“...means any effect, condition, circumstance or change that individually or when taken together with other conditions, effects or circumstances in the aggregate has had a material adverse effect on the Target Accounts, Purchased Assets (including intangible assets), liabilities, condition (financial or otherwise), properties or results of operations of the Sellers relating to the Target Accounts in the aggregate, or to the ability of any Party to consummate timely the transactions contemplated hereby; provided that none of the following shall be deemed to constitute, and none of the following shall be taken into account in determining whether there has been, a Material Adverse Effect or Material Adverse Change: (a) any adverse change, event, development, or effect arising from or relating to: (1) financial, banking, or securities markets (including any disruption thereof and any decline in the price of any security or any market index), (2) the industry in which Sellers operate and the United States economy as a whole, to the extent such change, event, development or effect described in this clause does not directly impair or render Sellers substantially inoperative or have a disproportionate effect on Sellers (relative to other participants in the industry), (3) the taking of any action contemplated by this Agreement and the other agreements contemplated hereby or (4) any business disruption or material Losses as a result of COVID-19, or expenses and costs incurred in complying with COVID-19 Control Measures; provided, further, that, the expiration or termination of any contract with any customer listed on Schedule 4.22 shall be deemed to be a Material Adverse Effect and Material Adverse Change.66
The definition of Material Adverse Effect is circular, containing “material adverse effect” within the definition.67
7.4(e) limits indemnification, barring damages based on “lost profits” and “diminution
F. The Parties Closed the Deal.
The Parties closed the transaction on November 30, 2021 (the “Closing“).70 JanCo paid $63,800,693.65 to ISS; placed $11,250,057 into escrow for the unobtained consents from the Business’ customers, including that of Ingram Micro, and retained the $5,000,000 Holdback Amount.71
At Closing, the Parties also executed the Transition Services Agreement, pursuant to which ISS continued to provide back-office functions for the Business for several months as JanCo took over operations.72 Also at Closing, the Parties executed an amendment to the APA (the “Amendment“).73
G. Events After Closing
After Closing, JanCo became concerned about the decline in revenue generated by the Business.74 Evidence at trial indicated JanCo‘s EBITDA for the year after Closing was about $10 million, which would be a decline from the $12.5 million pre-transaction Normalized EBITDA alleged by JanCo.75
After closing, ISS worked to obtain outstanding consent agreements from their former customers. ISS obtained a consent agreement from Ingram Micro on January 30, 2022.76 The following day, ISS received a reciprocal consent request from Ingram Micro in connection with their partial divestiture to CEVA Logistics.77 Jason Pitcock forwarded it to JanCo.78 After consenting to ISS‘s assignment to JanCo, Ingram Micro divested part of their business to CEVA, who ultimately discontinued purchasing services from JanCo.79
ISS calculated the difference between the Business’ actual working capital and target working capital, as of Closing, at $3,490,000, and sent the same figure and calculations to JanCo in October 2022.80 A JanCo employee sent the working capital figure and calculation to its auditors, stating “The attached is the ISS calculation of Net Working Capital Adjustment. We agreed to the highlighted amount for the adjustment (payment to ISS of $3,490K). Per the attached email you can see that there were some additional items outside of working capital that were still in dispute.”81 In 2022, JanCo took a $3,554,694 non-cash write-off.82
H. Procedural History
ISS filed a Complaint against JanCo in the Court of Chancery on December 27, 2022, asserting JanCo failed to pay Purchase Price adjustments owed to ISS and seeking a declaration that JanCo is not entitled to indemnification.84 JanCo moved to dismiss for lack of equitable jurisdiction pursuant to Court of Chancery Rule 12(b)(1).85 Concurrent to briefing the motion, on March 3, 2023, JanCo filed a Complaint in the Superior Court of Delaware.86 On June 20, 2023, the Court of Chancery granted JanCo‘s motion to dismiss the Complaint in Chancery, with leave to transfer to Superior Court subject to
On November 7, 2023, ISS filed an Amended Complaint asserting five counts:91 (I) Breach of Contract (Failure to Provide Escrow Instructions);92 (II) Unjust Enrichment (in the Alternative to Count I);93 (III) Breach of the Implied Covenant (in the Alternative to Count I);94 (IV) Breach of Contract (Failure to Pay Working Capital Adjustment and Purchase Price Adjustments);95 and (V) Declaratory Judgment.96 On November 21, 2023, JanCo filed an Answer and Affirmative Defenses to ISS‘s Amended Complaint.97
On November 22, 2023, JanCo filed an Amended Complaint alleging eight counts:98 (I) Fraud/Intentional Misrepresentation;99 (II) Indemnification for Breaches of Representations and Warranties;100 (III) Breach of Transition Services Agreement;101 (IV) Declaratory Judgment (Declaring Escrow Funds Relating to FAA and Pima County to be Released to Purchasers);102 (V) Breach of Duty of Good Faith and Fair Dealing (Escrow Funds
On March 29, 2024, both ISS and JanCo filed motions for summary judgment.108 The Court resolved the Parties’ motions for summary judgment on August 30, 2024.109 The Memorandum Opinion on the Motions for Summary Judgment resolved JanCo‘s Counts IV-V and ISS‘s Counts I-III.110
The Court held a four-day bench trial from November 18-21, 2024.111 The Parties filed opening post-trial briefs on January 24, 2025.112 The Parties filed answering briefs on February 14, 2025.113 The Court heard post-trial oral argument on February 25, 2025.114 At the Court‘s direction, the Parties filed cross-supplemental briefs regarding the function of the Materiality Scrape on March 14, 2025, and JanCo filed corrected post-trial briefs that same day.115 On July 7, 2025, JanCo filed a letter enclosing supplemental authority.116
STANDARD OF REVIEW
In a bench trial, the judge, as fact-finder,117 “must assess the credibility of each witness and determine the weight given to the testimony.”118 To reach a verdict on the issues, the court considers admitted exhibits, the testimony of witnesses, the Parties’ arguments, and Delaware law.119 The court can consider “each witness‘s means of knowledge; strength of memory; opportunity to observe; how reasonable or unreasonable the testimony is; whether it is consistent or inconsistent; whether it has been contradicted; the witnesses’ biases, prejudices, or interests; the witnesses’ manner or demeanor on the witness stand; and all circumstances that according to the evidence, could affect the credibility of the testimony.”120 After reviewing the evidence presented, the court
A party bears the burden of proving its claims by a preponderance of the evidence.122 Proof by a preponderance of the evidence means “proof that something is more likely than not.”123 If the evidence presented by the Parties “is inconsistent, and the opposing weight of the evidence is evenly balanced, then ‘the party seeking to present a preponderance of the evidence has failed to meet its burden.‘”124 “All elements of a claim must be proven by a preponderance of the evidence, including the plaintiff‘s damages.”125
DISCUSSION
A. ISS Breached Sections 4.10(e) and 4.10(l) of the APA.
JanCo contends ISS breached Sections 4.10(e) and 4.10(l) of the APA.126
Section 4.10(e) provides:
Since June 30, 2021, Sellers have operated only in the Ordinary Course of Business and have not suffered any damage, destruction, or Loss to any asset or suffered any other change, development, or event (individually or in the aggregate) that has had, or could be reasonably expected to have, a Material Adverse Effect on the Target Accounts;127
Section 4.10(l) provides:
Since June 30, 2021, Sellers have operated only in the Ordinary Course of Business and have not suffered or experienced any other event or circumstance which has resulted in a Material Adverse Effect on it or which is reasonably expected to result in such a Material Adverse Effect;128
JanCo contends “massive” changes occurred between June 30, 2021, and Closing, as ISS saw increases in labor costs and struggled with the implementation of People@ISS.129
1. The Materiality Scrape expands the breadth of the Absence of Changes Representation.
“Material Adverse Effect,” as used in Section 4.10, is capitalized, indicating a defined term. The APA defines Material Adverse Effect:
“Material Adverse Effect“... means any effect, condition, circumstance or change that individually or when taken together with other conditions, effects or circumstances in the aggregate has had a material adverse effect on the Target Accounts, Purchased Assets (including intangible assets), liabilities, condition (financial or otherwise), properties or results of operations of the Sellers relating to the Target Accounts in the aggregate, or to the ability of any Party to consummate timely the transactions contemplated hereby; ... provided, further,
that, the expiration or termination of any contract with any customer listed on Schedule 4.22 shall be deemed to be a Material Adverse Effect and Material Adverse Change.130
The definition of Material Adverse Effect is circular, containing “material adverse effect” within the definition, but the latter is in lowercase, indicating an intent for the Court to apply the term as it is defined under Delaware law.131
To understand how these provisions work together, the Court will first insert the definition of Material Adverse Effect wherever the term “Material Adverse Effect” is found in the APA.132 When the definition of Material Adverse Effect is inserted into Section 4.10(e), the result is as follows:
Since June 30, 2021, Sellers have operated only in the Ordinary Course of Business and have not suffered any damage, destruction, or Loss to any asset or suffered any other change, development, or event (individually or in the aggregate) that has had, or could be reasonably expected to have, any effect, condition, circumstance or change that individually or when taken together with other conditions, effects or circumstances in the aggregate has had a material adverse effect on the Target Accounts;133
When the definition is inserted into Section 4.10(l), the result is as follows:
Since June 30, 2021, Sellers have operated only in the Ordinary Course of Business and have not suffered or experienced any other event or circumstance which has resulted in any effect, condition, circumstance or change that individually or when taken together with other conditions, effects or circumstances in the aggregate has had a material adverse effect on the Target Accounts, Purchased Assets (including intangible assets), liabilities, condition (financial or otherwise), properties or results of operations of the Sellers relating to the Target Accounts in the aggregate, or to the ability of any Party to consummate timely the transactions contemplated hereby on it or which is reasonably expected to result in any effect, condition, circumstance or change that individually or when taken together with other conditions, effects or circumstances in the aggregate has had a material adverse effect on the Target Accounts, Purchased Assets (including intangible assets), liabilities, condition (financial or otherwise), properties or results of operations of the Sellers relating to the Target Accounts in the aggregate, or to the ability of any Party to consummate timely the transactions contemplated hereby;134
Complicating matters, the APA contains the Materiality Scrape, which is presented in Section 7.5(f):
For purposes of the indemnities . . . all qualifications and limitations set forth in the Parties’ representations and warranties
as to “materiality,” “Material Adverse Effect“, “Material Adverse Change” and words of similar import shall be disregarded in determining whether there shall have been any inaccuracy in or breach of any representations and warranties in this [APA].135
Under JanCo‘s interpretation, the Materiality Scrape‘s effect is to reduce JanCo‘s burden in asserting a claim under Section 4.10 such that JanCo need only prove that it suffered some adverse effect, but not necessarily a material one.136
If “materiality” or “words of similar import” are scraped from Section 4.10(e) after the definition of “Material Adverse Effect” is inserted, the result is as follows:
Since June 30, 2021, Sellers have operated only in the Ordinary Course of Business and have not suffered any damage, destruction, or Loss to any asset or suffered any other change, development, or event (individually or in the aggregate) that has had, or could be reasonably expected to have, any effect, condition, circumstance or change that individually or when taken together with other conditions, effects or circumstances in the aggregate has had an adverse effect on the Target Accounts;137
When the same treatment is applied to Section 4.10(l), the result is as follows:
Since June 30, 2021, Sellers have operated only in the Ordinary Course of Business and have not suffered or experienced any other event or circumstance which has resulted in any effect, condition, circumstance or change that individually or when taken together with other conditions, effects or circumstances in the aggregate has had an adverse effect on the Target Accounts, Purchased Assets (including intangible assets), liabilities, condition (financial or otherwise), properties or results of operations of the Sellers relating to the Target Accounts in the aggregate, or to the ability of any Party to consummate timely the transactions contemplated hereby on it or which is reasonably expected to result in any effect, condition, circumstance or change that individually or when taken together with other conditions, effects or circumstances in the aggregate has had an adverse effect on the Target Accounts, Purchased Assets (including intangible assets), liabilities, condition (financial or otherwise), properties or results of operations of the Sellers relating to the Target Accounts in the aggregate, or to the ability of any Party to consummate timely the transactions contemplated hereby;138
In both cases, the result is that advocated by JanCo—the materiality qualifier is removed from the Absence of Changes Representation—though JanCo skips the key step of implementing the full definition of Material Adverse Effect before scraping “material.”139
ISS argues this broad reading of the Section 4.10 representations is incorrect. ISS first contends the implementation of Section 7.5(f)‘s Materiality Scrape to Sections 4.10(e) and 4.10(l) reveals an ambiguity, as Sections 4.10(e) and 4.10(l) become nonsensical.140 As ISS presents Sections 4.10(e) and 4.10(l) after having removed “Material Adverse Effect“:
[Section 4.10(e):] Since June 30, 2021, Sellers have operated only in the Ordinary Course of Business and have not suffered any damage, destruction, or Loss to any asset or suffered any other change, development, or event (individually or in the aggregate) that has had, or could be reasonably expected to have, a [] on the Target Accounts;141 ...
[Section 4.10(l):] Since June 30, 2021, Sellers have operated only in the Ordinary Course of Business and have not suffered or experienced any other event or circumstance which has resulted in a [] on it or which is reasonably expected to result in such a [];142
Such a nonsensical result only occurs when one skips past the insertion of the definition of Material Adverse Effect and instead strikes the capitalized term before defining it.
The use of a defined term, “Material Adverse Effect,” indicates a shorthand implementation of the entire definition for “Material Adverse Effect.”143 Inserting the definition before employing the Materiality Scrape is the proper order of operations, as it prevents Sections 4.10(e) and 4.10(l) from becoming illegible.
ISS asserts JanCo‘s proposed reading of Sections 4.10(e) and 4.10(l)—a reading with which the Court functionally agrees—is unreasonable, as it renders the representations overbroad.144 This argument, however, ignores the existence of boundaries on indemnification, which evidences the Parties’ risk calculation in negotiating the APA.145
The vast potential for indemnification enabled by the broad Absence of Changes Representation is curtailed by the presence of a “basket” (a minimum indemnification threshold) and a “cap” (a maximum indemnification threshold). Under Section 7.4(a), JanCo is not entitled to any indemnification unless it can demonstrate its losses exceed $500,000—the “basket.”146 Under Section 7.4(b), JanCo may not collect more than 12.5% of the Purchase Price from indemnification—the “cap.”147 The indemnification limits presented in Section 7.4 do not apply to cases of fraud or willful misconduct.148
The existence of the basket and cap clauses indicates the Parties did not intend for a material adverse effect to be proven before indemnification is available; the lower “basket” threshold would likely be irrelevant if JanCo needed to show a material adverse effect, as JanCo would need to prove damages exceeding the cap imposed
The APA also provides that certain classes of damages, such as lost profits and diminution of value, are not indemnifiable, further evidencing the Parties’ risk calculation.150 Damages for breach of the Absence of Changes Representation are therefore limited by another provision in the APA, even if the breach condition is a low threshold.
For all of these reasons, the APA does not require JanCo to show a material adverse effect in order to prove a breach of the Absence of Changes Representation.
2. ISS breached the Absence of Changes Representation.
JanCo needed to prove that changes in the Business between June 30, 2021, and Closing resulted in some adverse effect. JanCo cleared this low hurdle by a preponderance of the evidence. Through an ISS chart that took center stage at trial, JanCo presented evidence indicating the Business suffered an increase in temporary labor as a percentage of revenue, which occurred between June 30, 2021 and Closing.151 JanCo further presented evidence indicating the People@ISS rollout (during July of 2021) did not go smoothly for ISS‘s HR department, “compound[ing]” ISS‘s operations and staffing issues.152
Ultimately, because the Absence of Changes Representation is so broad once materiality has been scraped, JanCo has proved that ISS breached the Absence of Changes provision. Nonetheless, as discussed below, although JanCo has shown that the condition of the Business changed, JanCo cannot prove the change resulted in particular damages or that its breach claim escapes the APA‘s restrictions on indemnification.
B. JanCo Failed to Prove ISS Provided False or Misleading Financial Statements.153
JanCo contends ISS breached the APA by providing false financial statements.154 Section 4.6 of the APA provides:
Attached hereto as Schedule 4.6 are Sellers’ (i) unaudited divisional balance sheets and (ii) unaudited divisional statements of income for the Target Accounts for the years ended December 31, 2019, December 31, 2020, and as of the period ending July 31, 2021 (the “Financial Statements“). The Financial Statements are true, complete and correct in all material respects, and present fairly in all material respects the financial condition and the results of operation of the Target Accounts as of the dates of such statements and for the periods then ended and have been prepared in accordance with International Financial Reporting Standards.155
Applying the Materiality Scrape, Section 4.6 of the APA provides:
Attached hereto as Schedule 4.6 are Sellers’ (i) unaudited divisional balance sheets and (ii) unaudited divisional statements of income for the Target Accounts for the years ended December 31, 2019, December 31, 2020, and as of the period ending July 31, 2021 (the “Financial Statements“). The Financial Statements are true, complete and correct in all [] respects, and present fairly in all [] respects the financial condition and the results of operation of the Target Accounts as of the dates of such statements and for the periods then ended and have been prepared in accordance with International Financial Reporting Standards.156
JanCo contends the financial statements provided by ISS did not accurately reflect the “actual labor costs needed to service clients due to ISS‘s understaffing, exacerbated by the inability to timely onboard new hires through People@ISS.”157
JanCo produced insufficient evidence that the specific financial statements discussed in Section 4.6 were false—that the math was facially incorrect or that the accounting methodology was flawed. JanCo‘s witnesses conceded they believed the financial statements were accurate.158
JanCo contends the financial statements are misleading but employs data showing the purported “actual labor costs” after the “as of” date listed in Section 4.6.159 The data on which JanCo relies is not included in the Section 4.6 representation. ISS cannot be held to have breached Section 4.6 based on data to which the Section 4.6 representation does not apply.
JanCo further contends APA Schedule 4.6 misleadingly failed to include the salaries of several highly compensated ISS employees.160 This allegation falls under APA Section 4.6 or APA Section 4.25, the Catchall Representation.
APA Section 4.25 provides: “No representation or warranty made by Sellers in this Article 4, nor any schedule attached hereto contains any untrue statement of material fact or omits to state a material fact necessary to make the statements contained therein not misleading.”161 After applying the Materiality Scrape,162 Section 4.25 provides: “No representation or warranty made by Sellers in this Article 4, nor any schedule attached hereto contains any untrue statement of [] fact or omits to
Higdon testified that the income statement presented in Schedule 4.6 failed to include the salaries of certain highly-compensated employees, because those employees’ salaries were not included as accounting inputs for the financial statements provided.164
Janco argues, in its Post-Trial Answering Brief, that “ISS introduced no documents proving that cell J-612 [of Defendant‘s Exhibit 495, which is a quality of earnings report used to create Schedule 4.6] contained the full salaries for Pitcock, Reader, and Hall.”165 This statement, however, is contradicted by the unrebutted trial testimony of Heding. Heding, discussing Defendant‘s Exhibit 495 (the quality of earnings report (used to create Schedule 4.6)), testified that the salaries in question were incorporated into the quality of earnings report.166 This unrebutted testimony demonstrates that the Consolidated P&L tab of the quality of earnings report documented the actual costs ISS incurred for the salaries Pitcock, Reader, and Hall in the line item “Div adm salaries.”167
Given this unrebutted testimony, the Court is unconvinced that Schedule 4.6 is “misleading.” Schedule 4.6 contains an accurate financial statement based on the inputs included, and JanCo presented insufficient evidence that the accounting methodology was misguided or misapplied.168 JanCo accordingly cannot prove a breach for “excess salaries.”169
JanCo has failed to prove a breach of Section 4.6 or Section 4.25 of the APA by a preponderance of the evidence.
C. JanCo Failed to Prove a Breach of Section 4.20(a) of the APA.
JanCo contends ISS breached Section 4.20(a) of the APA by failing to disclose “the deal bonuses promised to Pitcock and other operational leaders.”170 Section 4.20(a) provides:
Schedule 4.20(a) sets forth a complete and correct list of all salaried employees who provide services to the Target Accounts, showing for each: (i) name; (ii) hire date; (iii) current job title; (iv) actual base salary, bonus, commission or other remuneration paid during 2020; (v) 2021 base salary level and 2021 target bonus; (vi) whether such employee is on an active or inactive status; (vii) the
location at which such employee principally works; (viii) whether such employee is treated as exempt or non-exempt, (ix) any agreements, arrangements or benefits provided to such employee other than standard agreements, (x) other perquisites, including, without limitation, vehicle allowance or the provision of a company vehicle, and (xi) ISS employee identification number.171
The only bonus discussed at trial was that of Jason Pitcock.172 JanCo essentially alleges ISS‘s representation was false, as it failed to include Pitcock‘s bonus, but JanCo fails to articulate how it was injured by the same. JanCo‘s failure to allege damages from ISS‘s purported failure to disclose Pitcock‘s bonus is fatal to JanCo‘s claim under Section 4.20(a).173
D. JanCo Failed to Prove a Breach Under Sections 4.10 (f), (g) and (o).
JanCo contends ISS breached Sections 4.10 (f), (g) and (o) of the APA by entering into transaction bonus agreements after June 30, 2021.174 The relevant sections of the APA are as follows:
Since June 30, 2021, and solely with respect to the Purchased Assets and Assumed Liabilities, Sellers have operated only in the Ordinary Course of Business and have not:
...
(f) increased the rate of compensation payable or to become payable by it to any of its officers, directors, key employees, or agents, except for general hourly rate increases and normal merit increases in each case done in the Ordinary Course of Business;
(g) made or agreed to make any accrual or arrangement for or payment of any bonus, special compensation, or severance pay of any kind to any shareholder, officer, director, employee or agent;
...
(o) entered into any agreement or other obligation to do any of the foregoing.175
JanCo contends ISS entered into transaction bonus agreements with personnel after June 30, 2021, but does not provide evidentiary support for this claim.
Pitcock‘s bonus was included as part of his employment contract from May of 2021, before the start of the “Absence of Changes” period.176 Pitcock‘s bonus cannot support a breach of Section 4.10. JanCo provides no other evidentiary citation to support its claim that ISS entered into bonus agreements with “other personnel.”177 JanCo failed to prove a breach of Sections 4.10 (f), (g), or (o) by a preponderance of the evidence.
E. JanCo Failed to Prove a Breach of the APA Provisions Related to Work Authorization.
JanCo contends ISS breached the APA‘s provisions related to work authorization.178 APA Section 4.20(d) provides:
Each Seller is in compliance, in all respects, with all applicable laws relating
to the employment of labor with respect to any employees providing services to the Target Accounts employed by any Seller or any employees employed by a third party and leased to any Seller, including the Civil Rights Act of 1964 (Title VII) , theNational Labor Relations Act , theOccupational Safety and Health Act of 1970 , theFamily and Medical Leave Act of 1993 , theAge Discrimination in Employment Act , theFair Labor Standards Act , theAffordable Care Act , and any similar state laws. There are no charges that have been filed by the U.S. Equal Employment Opportunity Commission or any state Department of Labor or similar state Governmental Authority against any Seller. No Seller has received any notice or other communication from any Governmental Authority or other Person regarding any violation or alleged violation of any applicable law relating to hiring, recruiting, employing (or continuing to employ) anyone not authorized to work in the United States, solely relating to any Seller‘s provision of services to the Target Accounts.179
Section 4.20(i) provides:
With respect to each employee of Sellers, to Sellers’ Knowledge each such employee is either a United States citizen or has a current and valid work visa or otherwise has the lawful right to work in the United States. Each Seller is in compliance with and not in violation of the terms and provisions of applicable laws relating to immigration, including the
Immigration Reform and Control Act of 1986 , and all related regulations promulgated thereunder in all material respects.180
JanCo contends ISS hired employees who were not authorized to work in the United States.181 Each time JanCo asserts or implies this claim in its opening post-trial briefing, it fails to cite any evidence showing ISS hired employees who lacked proper authorization.182 Such conclusory statements do not satisfy JanCo‘s burden of proof.
JanCo asserts ISS failed to E-Verify employees.183 As the above language indicates, the APA does not require ISS to use E-Verify, it only contains representations that ISS‘s employees were authorized to work in the United States. ISS‘s alleged failure to use E-Verify cannot support a claim for breach.
JanCo asserts ISS‘s E-Verify account was terminated by DHS.184 ISS‘s Kimberly Wray testified that one of ISS‘s E-Verify accounts was terminated by DHS, but not the active account ISS used, and only after ISS sought to close the terminated account.185 The documents admitted into evidence support Wray‘s testimony, as it shows ISS‘s efforts to open a new E-Verify account, to terminate the old account, and E-Verify‘s confirmation of those same steps.186 The evidence does not indicate an ISS E-Verify account was terminated for misconduct before Signing or before Closing.187
JanCo contends ISS did not deliver the total number of employees JanCo expected.188 The APA contains no representation regarding the number of employees. As ISS notes, employee turnover was “around 100%,” so ISS instead represented the number of salaried employees.189 JanCo does not claim the list of salaried employees was inaccurate. Without a representation on the total number of employees, JanCo‘s claim regarding the employee count fails.
JanCo failed to prove any breach of APA Sections 4.20(d) and 4.20(i).
F. JanCo‘s Fraud and Willful Misconduct Claims Fail.
JanCo contends ISS committed fraud and willful misconduct by concealing the decline of the Business. Under Section 7.7 of the APA, any limitations on damages provided in the APA do not apply in the case of “fraud or willful misconduct.”190
JanCo alleges ISS made false representations in the APA knowing that they were false, and then deliberately concealed the truth from JanCo to induce a closing.191 JanCo further alleges ISS fraudulently represented that all of its employees had been audited through E-Verify and were authorized to work in the United States.192
As discussed above, many of JanCo‘s breach of contract claims regarding the APA‘s representations are unsuccessful. To the extent JanCo alleges ISS made those representations fraudulently, JanCo‘s fraud claims necessarily fail. If a contractual representation is not false, it cannot be actionable fraud.193 JanCo also cannot prevail under a willful breach theory in the absence of a breach.194
JanCo proved a breach of the Absence of Changes Representation but failed to prove its breach of contract claims for the APA‘s representation regarding the financial state of the Business, the APA‘s representations regarding employee bonuses, the APA‘s representations regarding work authorization, and the catchall representation.
1. JanCo fails to prevail on its claim of willful misconduct.
Willful misconduct is “intentional wrongdoing, not mere negligence or recklessness.”197 In order to demonstrate “willful misconduct,” a Plaintiff must prove the Defendant acted with scienter.198 For a breach of a contractual provision to be “willful,” the party must have taken an intentional action knowing that said action would breach the relevant contract.199
This APA contains an absence of changes representation which, due to the Materiality Scrape, provides that ISS‘s business has not suffered any adverse impact between June 30, 2021, and Closing.200 Such a representation is so broad because of the interplay of multiple contractual provisions. Above, this Court already faced contractual interpretation issues regarding the interaction between the Absence of Changes Representation and the Materiality Scrape. The relationship between the two clauses is presumably not obvious to the layman, especially since neither of the Parties’ explanation for the interplay of the clauses matches the Court‘s analysis.201
In order to prove that ISS committed “willful misrepresentation” in the APA, JanCo needed to show that ISS breached the APA‘s Absence of Changes Representation with knowledge that it was doing so.202 JanCo has not proved this knowledge by a preponderance of the evidence. None of the evidence presented by JanCo clearly persuades the Court that ISS knew it was breaching the Absence of Changes Representation or the APA in general.
The most meaningful evidence for JanCo‘s willful breach claim regarding the Absence of Changes Representation is the chat threads between Heding and Holloway, which show both executives were aware the Business had challenges during the Absence of Changes Period.203 Despite
Even accepting Heding and Holloway‘s awareness that the Business was facing challenges, the Court cannot declare ISS to have knowingly breached the APA. As recognized above, neither party correctly interpreted the APA and the interplay of the Materiality Scrape. Indeed, no witness testified at trial regarding the meaning of the Materiality Scrape. As such, it is unlikely for Heding and Holloway to have enabled ISS‘s knowing breach of the Absence of Changes Representation when even after post-trial briefs, oral argument, and supplemental briefs, neither party explained the application of the Materiality Scrape to the Absence of Changes Representation with complete correctness. Heding and Holloway cannot be expected to have understood the breadth of the Absence of Changes Representation, especially where none of the evidence indicates any ISS employees knew nondisclosure of the Business’ decline constituted a breach of the APA. ISS employees may have known the Business was struggling, but that does not prove they knew they were breaching the APA.
Nor can the Court look to the knowledge of any other ISS employees; several ISS employees testified that they had not reviewed the APA‘s representations prior to Closing, so those employees could not have known the parameters of the Absence of Changes Representation.205 Where ISS and its employees lack knowledge that the decline in the Business constitutes a breach of the APA, ISS cannot be found to have the requisite scienter for a willful breach.206
2. JanCo‘s fraud claims fail.207
Fraud consists of:
- a false representation, usually one of fact, made by the defendant;
- the defendant‘s knowledge or belief that the representation was false, or was made with reckless indifference to the truth;
- an intent to induce the plaintiff to act or to refrain from acting;
- the plaintiff‘s action or inaction taken in justifiable reliance upon the representation; and
- damage to the plaintiff as a result of such reliance.208
Fraud claims therefore require proof of “a certain level of scienter on the part of the defendant.”209
In its Complaint, JanCo grouped its fraud claims into three categories: “E-Verify,” “Profitability,” and “Employee Census.”210
JanCo alleges ISS fraudulently represented that ISS had E-Verified all its employees.211 The evidence does not show ISS represented, either inside or outside of the APA, that it had E-Verified the Business’ entire workforce, only that it runs all employees through E-Verify, eventually, as part of onboarding.212 JanCo contends ISS represented it was “100% E-Verify,” but relies on notes from JanCo‘s own employee who did not testify at trial.213 Such evidence does not persuade the Court that ISS made a representation that every employee of the Business was already E-Verified. It seems unlikely that ISS would be able to truthfully make such a representation given the potentially drawn-out E-Verify procedure214 and the Business’ high turnover rate.215
JanCo alleges ISS fraudulently represented that all of the Business’ employees were authorized to work in the United States.216 As discussed above, there is not sufficient evidence showing that ISS‘s employees were unauthorized to work in the United States, which therefore means there is insufficient evidence ISS made a false representation to that effect.
JanCo alleges ISS‘s Absence of Changes Representation was fraudulent, as the Business suffered a sharp decline before Closing, which ISS concealed.217 JanCo relies on various internal communications showing ISS knew the Business was struggling and contends JanCo was not informed of the decline.218 In order to prove fraud, JanCo must be able to show that its reliance on the Absence of Changes Representation was justified.219
Where an alleged fraud victim has information contradicting a false representation before acting in purported reliance on that representation, that alleged victim cannot demonstrate justifiable reliance.220 In Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, the Court of Chancery resolved a fraud claim in connection with a business acquisition.221 The Court of Chancery found an alleged fraudulent omission inactionable where the alleged victim was already aware of the omitted information.222 The court found the
JanCo contends its reliance on the Absence of Changes Representation was justified because the Absence of Changes Representation could not be contradicted by JanCo‘s due diligence.225 JanCo notes the Absence of Changes Representation is forward-looking, concerning events after June 30, 2021, when due diligence was already “primarily complete.”226
Even if the Court accepts JanCo‘s point regarding formal due diligence between June 30, 2021, and Closing—during the period to which the Absence of Changes Representation refers—JanCo‘s fraud claim still fails, as JanCo was informed of the increase in temporary labor and the issues posed by the implementation of People@ISS before entering the deal. At pre-Signing meetings in Atlanta, ISS operational leaders told JanCo that the Business had 400 to 500 open positions and was using temporary labor and overtime to cover the accounts.227 ISS further informed JanCo about the operational issues it faced due to the People@ISS rollout.228
Prior to Signing, JanCo‘s advisors warned JanCo of “overall labor shortages (consistent with the market) which has led to an increase in overtime hours.”229 The advisors also noted there was “not a non-trivial number” of open positions.230
JanCo‘s damages claim is based on the impact of JanCo‘s staffing issues (both those concerning temporary labor and People@ISS) on its profitability.231 ISS provided JanCo with an updated profit and loss statement, trial balances, and other financial reports for July, August, September, and October 2021 before Closing.232 The trial balances included all of ISS‘s general ledger accounts, including line items for temporary labor.233 JanCo was able to easily run its own monthly profit and loss statements from the trial balances,234 which enabled it to identify the increase in temporary labor in an email sent on November 21, 2021, nine days before Closing.235
Higdon and Maynord testified that the Business’ pre-Closing financials aligned with historical performance.236
It was not reasonable for JanCo, a sophisticated business entity that was informed before and after Signing that ISS was dealing with staffing and HR issues, to blindly rely on a representation that the Business had not declined at all between June 30, 2021, and Closing. JanCo knew about the staffing and HR issues before Signing and knew about those occurring during the Absence of Changes period.
This case is distinct from Maverick Therapeutics, Inc. v. Harpoon Therapeutics, Inc., where the evidence showed the fraud victim did not uncover the false representation before the deal. 2020 WL 1655948, at *30 (Del. Ch. Apr. 3, 2020) (emphasizing that justifiable requires the plaintiff not know the defendant made a false statement), judgment entered, (Del. Ch. 2020), judgment entered, (Del. Ch. 2021). JanCo was informed the Business was struggling and cannot have justifiably relied on a contractual representation to the contrary.
In a letter dated July 7, 2025, JanCo directs the Court to the Superior Court‘s recent decision in River Valley Ingredients, LLC v. Am. Proteins, Inc., in which the Court found fraudulent inducement. 2025 WL 1826656, at *7-9 (Del. Super. July 2, 2025). D.I. 242. In River Valley, the Court found justifiable reliance where the fraud victim had no reason to doubt the veracity of a fraudulent representation. Id. at *8. JanCo‘s case is distinct because JanCo had information before Closing which contradicted the allegedly fraudulent contractual representation.
Perhaps JanCo closed the deal without fuss after acknowledging the breadth of potential indemnification under the Absence of Changes Representation. As noted in Great Hill, such a broad indemnification remedy is a factor which weighs against a finding of justifiable reliance.239 ISS can be held liable for breach even where JanCo‘s reliance on the contractual representation was not justifiable, as justifiable reliance is not an element of breach of contract.240
The absence of justifiable reliance forecloses JanCo‘s fraud claim under the Absence of Changes Representation. Because JanCo can demonstrate neither fraud nor willful misconduct, JanCo‘s recovery is limited by the APA.241
G. JanCo Did Not Prove Damages for Breach of Contract by a Preponderance of the Evidence.
Even though JanCo sufficiently alleges a breach of contract, it must still satisfy the third element of a breach of contract claim: damages.242 “As a general matter, a remedy for breach of contract should seek to give the non-breaching party the benefit of its bargain.”243 The “traditional method of computing damages for a breach of contract claim is to determine the reasonable expectations of the parties.”244 While mathematical certainty is not required to prove damages, the plaintiff
“Where parties have agreed upon a particular remedy, Delaware law prioritizes their agreement.”246 As noted previously, the APA has an indemnification provision whereby ISS agreed to indemnify JanCo for “Losses” arising out of any breach of ISS‘s representations and warranties.247
Here, the Parties specifically excluded Losses that “include punitive, exemplary, treble, consequential, incidental, or other special damages, lost profits, or diminution in value, regardless of legal theory, unless they are part of a claim made by a third party.”248 This is consistent with well-settled Delaware law: “Under Delaware law, consequential damages in the form of good will, lost future profits, and lost customers are not awarded in breach of contract actions . . . . Delaware courts have consistently found these damages to be speculative in nature, and; therefore, have barred recovery for them.249
JanCo‘s damages theory—that “ISS delivered a company that was worth less than half of what JanCo paid” —relies upon an all-or-nothing damages calculation that encompasses both its fraud and breach of contract claims.250 Essentially, JanCo claims it its entitled to $43,169,783 whether it is successful either on its fraud or willful misrepresentation claims, and JanCo does not provide a separate damages theory for each claim.251 Specifically with respect to its breach of contract claims, JanCo does not attempt to apportion the alleged damages among the different breaches alleged in this case.252
JanCo cannot prove its entitlement to damages by a preponderance of the evidence. As a preliminary matter, JanCo did not prove its fraud and willful misrepresentation claims at trial, thereby meaning it is not entitled to damages for fraud or willful misrepresentation. More problematic, however, is the issue of JanCo‘s inability to specifically tie its damages to the breach of the Absence of Changes Representation.
Regarding damages for the Absence of Changes Representation: JanCo‘s all-or-nothing damages figure fails to identify damages for its one successful breach claim. While it is true that mathematical certainty is not required for a damage award, a party cannot have a damages expert calculate an omnibus damages figure for multiple fraud and breach of contract claims, fail to prove most of those claims, and then claim entitlement to the expert‘s omnibus damage award.
Here, the Court held that ISS breached the Absence of Changes Representation
Delaware law is clear that JanCo must demonstrate with “reasonable certainty that it was damaged by the challenged conduct.”256 While “reasonable certainty” does not mean “absolute certainty,” the damages calculation “must be taken out of the area of speculation.”257 When a party does not attempt to tie a damages calculation to a particular breach, that party fails to prove damages.258 Such is the case for JanCo here. APA Section 7.4(e) provides that indemnifiable Losses may not include losses based on “diminution of value.”259 The same clause prohibits indemnification for “lost profits.”260 JanCo‘s damages calculation alleges a diminution of value for the Business as a whole, as reflected by its lost profitability. Such damages for breach are barred by the APA.261
H. JanCo Owes ISS $3,390,119 for the Working Capital Adjustment.
Section 2.5 of the APA provides a mechanism for adjusting the Purchase Price
ISS contends that the actual working capital for the Business exceeded the target by $3,490,119, entitling ISS to a $3,390,119 increase to the Purchase Price.266
JanCo contends that it was forced to take a $3,554,694 non-cash write-off “given JanCo‘s inability to reconcile the opening books based on ISS‘s incomprehensible financial data.”267 JanCo contends that discrepancies in the books when JanCo took over the business “tie[] directly to a $3.5 million working capital imbalance as of Closing.”268
ISS counters: JanCo showed no evidence of improper accounting and accruals by ISS at trial.269 As ISS points out, JanCo‘s argument relies on speculation by JanCo‘s own witness, John Maynord.270
The Court is unconvinced that JanCo‘s $3,554,694 write-off explains away the working capital adjustment advocated by ISS. ISS identifies several documents demonstrating JanCo agreed to a $3,390,119 working capital adjustment.271 The APA provides that once the Parties agree on a working capital adjustment, the Purchase Price should be adjusted.272
The Parties agreed on an adjustment, and now JanCo must pay it. ISS demonstrated, by a preponderance of the evidence, that it is entitled to a $3,390,119 working capital adjustment.
I. ISS Failed to Prove its Entitlement to $165,271 for “LaSalle Equipment taxes.”
Relying entirely on Plaintiff‘s Exhibit 444, a document which was not admitted into evidence,273 ISS contends it is entitled to $165,271 for “the LaSalle Equipment taxes.”274 Because Plaintiff‘s Exhibit 444 was not admitted into evidence, it therefore cannot be relied upon for resolving ISS‘s claim regarding the LaSalle Equipment taxes.275 Having presented no admitted
J. JanCo Owes ISS $1,494,747 for the Ingram Micro Consent.
The APA provides that ISS was to acquire consent agreements from its top customers authorizing ISS‘s assignment of the customer contracts to JanCo.276 If ISS had not obtained consent agreements from customers by the time Closing was consummated, ISS would still be entitled to a Purchase Price adjustment for obtaining these consents after Closing, provided ISS obtained consent within 120 days of Closing.277 For obtaining the consent of Ingram Micro within 120 days of Closing, ISS would be entitled to $1,494,747.278
ISS obtained a consent agreement from Ingram Micro on January 30, 2022, which was within the 120-day post-Closing window.279 The following day, ISS received a reciprocal consent request from Ingram Micro in connection with their partial divestiture to CEVA Logistics.280 Pitcock forwarded it to JanCo‘s staff.281
After consenting to ISS‘s assignment to JanCo, Ingram Micro divested part of their business to CEVA, who ultimately discontinued purchasing services from JanCo.282
JanCo contends ISS is not entitled to a Purchase Price adjustment for the Ingram Micro Consent because ISS failed to “fully disclose” that Ingram Micro would be divesting half its business to CEVA Logistics and because of service failures by ISS that caused Ingram Micro to end its relationship with JanCo.283
The Court agrees with ISS that the evidence does not support JanCo‘s version of the story.284 The evidence presented does not indicate ISS intended to conceal the divestiture by Ingram Micro. Nor does the evidence indicate ISS knew about the divestiture before Ingram Micro executed the consent agreement. ISS obtained Ingram Micro‘s consent agreement and only then learned of the divestiture.
ISS acquired Ingram Micro‘s consent agreement within the deadline imposed by the APA.285 CEVA‘s subsequent decision to terminate JanCo‘s services has no bearing on ISS‘s successful satisfaction of the conditions for the Purchase Price adjustment for the Ingram Micro Consent. The record does not indicate ISS engaged in any misconduct concerning the Ingram Micro Consent. Under the terms of the APA, ISS is entitled to the $1,494,747 for obtaining the Ingram Micro Consent.
K. ISS is Entitled to the $5,000,000 Holdback Amount.
The APA provides that JanCo retains $5 Million as a Holdback Amount to be reduced by any indemnifiable losses.286 The balance of the Holdback Amount, less any indemnified losses, was to be remitted to ISS within five business days following the
L. JanCo Waived its Remaining Claims.
JanCo presented no briefing on its Counts III, VI, VII, and VIII.288 JanCo abandoned these claims.289
CONCLUSION
The Court finds as follows:
- JanCo proved, by a preponderance of the evidence, that ISS breached the Absence of Changes Representation, but failed to prove any damages for this claim.
- JanCo failed to prove its remaining claims.
- ISS proved its entitlement to $1,494,747 for the Ingram Micro Consent and $3,390,119 for the Working Capital Adjustment.
- ISS failed to prove its claim for a sum allegedly related to the “LaSalle Equipment taxes.”
- ISS is entitled to the $5 Million Holdback Amount.
If there are any open issues not addressed or mooted by this post-trial opinion, the Parties shall notify the Court by letter within five days. Otherwise, the Parties should prepare briefing on the issues surrounding attorney‘s fees and interest, as directed by the Court during post-trial oral argument.
IT IS SO ORDERED.
/s/ Meghan A. Adams
Meghan A. Adams, Judge