Oops I Did It Again Commercial
A few weeks ago, I blogged near the Arco Acquisitions, LLC, v Tiffany Plaza LLC et al. decision, in which Suffolk Canton Commercial Partition Justice Elizabeth Hazlitt Emerson held that the plaintiff'south fraud claims were barred by the specific disclaimer provisions contained in the parties' agreement to purchase commercial real property.
A recent decision from the First Department appears to follow adjust, as it recently affirmed New York County Justice Andrew Borrok's decision in Silver Signal Capital Fund, L.P. v Riviera Resource, Inc., in which he also dismissed plaintiffs' fraud claims considering they were barred by the limited language of the understanding betwixt the parties.
In Silverish Point, plaintiffs, highly sophisticated former minority shareholders ("Plaintiffs" or "Sellers") of defendant Riviera Resources, Inc. ("Defendant" or "Buyer") entered into a Stock Repurchase Understanding ("Repurchase Agreement") with Heir-apparent nether which they agreed to sell their shares to Buyer at a discount. In connection with the Repurchase Understanding, the parties entered into a "big boy" letter (the "Alphabetic character Agreement"), which contained a number of disclaimer provisions.
For instance, the Letter Agreement contained the post-obit language:
one. The Seller hereby acknowledges that information technology is aware that the Buyer may have admission to certain material, nonpublic data regarding the Buyer, its fiscal status, results of operations, businesses, properties, assets, liabilities, management, projections, appraisals, plans and prospects (the "Information"). Whatever such Information may be indicative of a value of the Common Stock that is essentially different than the purchase toll reflected in the Purchase.
three. The Seller acknowledges that the Buyer is relying upon this letter in engaging in the Purchase and would non appoint in the Purchase in the absence of this letter of the alphabet.
iv. Notwithstanding the Heir-apparent'due south possession of the Information and the absence of disclosure thereof to the Seller, the Seller wishes to enter into the proposed transaction. The Seller, to the extent that it is acting as an amanuensis and not as a chief, has fully advised its principal of the foregoing and the risks involved in participating in the proposed transaction.
The Letter Agreement also contained the post-obit disclaimer provision "[due north]otwithstanding anything that may be expressed or implied in this letter, the Seller covenants, agrees and acknowledges that it shall have no recourse hereunder or nether any documents or instruments delivered in connection herewith . . ."
In addition, the Seller waived
all warranties, express or implied, arising by law, equity or otherwise, with respect to its auction of the Common Stock, and hereby forever releases, discharges and dismisses any and all claims, rights, causes of activeness, suits, obligations, debts, demands, liabilities, controversies, costs, expenses, fees, or damages of any kind . . . against the Buyer or any of its affiliates . . . which are based upon or arise from the existence or substance of the Information and the fact that the Data has not been disclosed to the Seller.
Finally, and most pertinently, the Letter Agreement also contained the post-obit disclaimer provision:
8. Each of the Seller and the Buyer acknowledges and represents and warrants that (a) neither such party, nor any party acting on its behalf, has made any representation or warranty, whether limited or implied, of whatsoever kind or graphic symbol, regarding the sale and purchase of the Common Stock, except every bit expressly ready forth in this letter; and (b) the assignment and transfer of the Common Stock by the Seller to the Heir-apparent is irrevocable.
In the case earlier Justice Borrok, Sellers declared that Heir-apparent fraudulently induced them to sell all of their shares in the corporation iii weeks before information technology announced "an nugget sale of its almost valuable properties, after which share prices soared and defendant fabricated a substantial distribution to shareholders." Sellers further declared that it would not have entered into the Repurchase Agreement or signed the Letter Understanding had information technology known that Buyer was negotiating the sale of the property, which resulted in the $295 million transaction and the resulting $260 million shareholder distribution at outcome in the case.
In its defense, Heir-apparent relied on the express release language contained in the Letter Agreement in which Sellers acknowledged that Buyer may have textile nonpublic data regarding its properties and that such information "may be indicative of a value of the Common Stock that is substantially dissimilar than the purchase cost reflected in the Purchase."
Justice Borrok rejected Sellers' argument, final that, Sellers' claims were barred by the express terms of the Letter of the alphabet Understanding in which Seller acknowledged that the Buyer may have cloth nonpublic information concerning the properties, which included the subject property.
The courtroom likewise rejected Buyers' contention that the underlying real-estate transaction was not contemplated inside the definition "Information" considering "Information," as defined in the Letter Agreement, expressly included "certain material, nonpublic information regarding the Buyer, its financial condition, results of operations, businesses, properties, assets, liabilities, direction, projections, appraisals, plans and prospects." The courtroom therefore determined that the definition of "Information" clearly encompassed the underlying transaction, and that naught in the Letter of the alphabet Understanding served to cleave out any sales of Defendant's properties.
The court too reasoned that if the parties intended to include a carve-out exception for major sales of properties, they would take negotiated that exclusion. Justice Borrok ultimately held that Plaintiffs cannot now, ask the court afterward the fact to rewrite the parties' understanding.
The Commencement Department agreed and held that the Letter of the alphabet Agreement clearly, and in sufficient detail, gear up forth the type of information that may not have be disclosed in the class of the share repurchase to enable the parties to brand an informed determination as to whether or not to execute the Repurchase Understanding.
The holdings in Arco Acquisitions and in Silver Point both bring domicile the recently emphasized rule that release language in contracts may bar certain claims.
Source: https://www.nycomdiv.com/2021/12/oops-they-did-it-again-new-york-courts-continue-to-dismiss-lawsuits-based-on-contractual-disclaimers/
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