      IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

FdG LOGISTICS LLC,                    )
                                      )
           Plaintiff/Counterclaim     )
           Defendant,                 )
                                      )
     v.                               )            C.A. No. 9706-CB
                                      )
A&R LOGISTICS HOLDINGS, INC.,         )
                                      )
           Defendant/Counterclaimant, )
                                      )
     v.                               )
                                      )
FdG ASSOCIATES LP, DAVID S.           )
GELLMAN, JAMES E. BEDEKER,            )
CYNTHIA M. BRANKIN, STEVEN R.         )
BRANTLEY, NORMAN C. BUCK, JOHN P. )
CISZEK, ROBERT N. DOTSON, PAUL        )
GARBER, MICHAEL J. HOGAN, JEREMY      )
K. LOHRENS, ANDREW J. MANTEY,         )
JEFFREY J. O’CONNOR, BRIAN R.         )
REICHERT, LEEANNE RICE, STEPHEN W. )
ROBINSON, PAUL D. SWEEDEN, and        )
RICHARD THOMPSON,                     )
                                      )
           Additional Counterclaim    )
           Defendants.                )


                                    OPINION

                        Date Submitted: November 16, 2015
                         Date Decided: February 23, 2016


David J. Margules and Evan W. Krick, BALLARD SPAHR LLP, Wilmington, Delaware;
Julian W. Friedman, BALLARD SPAHR LLP, New York, New York; Philip J. Kessler,
Joseph Aviv, Bruce L. Segal, Jennifer Zbytowski Belveal, and B. Michael Ortwein III,
HONIGMAN MILLER SCHWARTZ AND COHN LLP, Detroit, Michigan; Counsel for
Plaintiff/Counterclaim Defendant FdG Logistics LLC and Counterclaim-Defendants FdG
Associates LP and David S. Gellman.
Philip Trainer, Jr. and Toni-Ann Platia, ASHBY & GEDDES, P.A., Wilmington,
Delaware; Counsel for Counterclaim-Defendants James E. Bedeker, Cynthia M. Brankin,
Norman C. Buck, John P. Ciszek, Robert N. Dotson, Paul Garber and Paul D. Sweeden;
Patrick T. Brankin, SCHAIN, BANKS, KENNY & SCHWARTZ, LTD., Chicago,
Illinois; Co-Counsel for Counterclaim Defendants James E. Bedeker and Cynthia M.
Brankin.

C. Barr Flinn and Tammy L. Mercer, YOUNG CONAWAY STARGATT & TAYLOR,
LLP, Wilmington, Delaware; Robert A. Chapman and Shannon T. Knight, CHAPMAN
SPINGOLA, LLP, Chicago, Illinois; Counsel for Counterclaim Defendants Jeffrey J.
O’Connor and Brian R. Reichert.

Michael F. Bonkowski and Nicholas J. Brannick, COLE SCHOTZ PC, Wilmington,
Delaware; Vance L. Liebman, Damon E. Dunn and Neil M. Rosenbaum,
FUNKHOUSER VEGOSEN LIEBMAN & DUNN LTD., Chicago, Illinois; Counsel for
Counterclaim Defendant Andrew J. Mantey.

Peter B. Ladig, Patricia A. Winston and Elizabeth A. Powers, MORRIS JAMES LLP,
Wilmington, Delaware; Counsel for Counterclaim Defendants Steven R. Brantley,
Michael J. Hogan, Jeremy Lohrens and Stephen W. Robinson.

Henry E. Gallagher, Jr. and Ryan P. Newell, CONNOLLY GALLAGHER LLP,
Wilmington, Delaware; David K. Herzog and James P. Hanlon, FAEGRE BAKER
DANIELS LLP, Indianapolis, Indiana; Counsel for Defendant/Counterclaimant A&R
Logistics Holdings Inc.

BOUCHARD, C.
      This action arises out of a private equity firm’s 2012 purchase of a trucking

company now owned by A&R Logistics Holdings, Inc. (“A&R” or the “Buyer’) through

a merger transaction. FdG Logistics LLC (“FdG Logistics”) initiated this action as the

representative of the selling securityholders (the “Securityholders”) to recover a pre-

closing tax refund.   In response, Buyer asserted counterclaims for indemnification,

violation of the Delaware Securities Act, common law fraud, and unilateral mistake. This

opinion resolves the Securityholders’ motion to dismiss certain parts of the counterclaim,

and FdG Logistics’ motion for summary judgment concerning the tax refund.

      The Securityholders seek to dismiss Buyer’s common law fraud claim insofar as

that claim asserts fraud based on extra-contractual statements made to Buyer before it

entered the merger agreement. This aspect of the Securityholders’ motion is denied

because the merger agreement does not contain an affirmative disclaimer of reliance by

Buyer sufficient to preclude it from asserting a claim for fraud based on representations

outside the four corners of the merger agreement under this Court’s precedents.

      Buyer’s claim under the Delaware Securities Act fails to state a claim for relief

because Buyer has not established the requisite factual nexus between the challenged

merger and Delaware to trigger application of the Act. Given the absence of such a

nexus, Buyer makes the novel argument that the parties to the merger agreement made

the Delaware Securities Act apply automatically by including in the merger agreement a

Delaware choice of law provision stating that the merger agreement “will be governed by

and construed in accordance with the laws of the State of Delaware.” I conclude that

Buyer’s interpretation of the choice of law provision is not a reasonable construction.
Among other things, such an interpretation would lead to the bizarre result of converting

a blue-sky statute that the Legislature intended to regulate intrastate securities

transactions into one that would regulate interstate securities transactions.

       Buyer’s claim of unilateral mistake also fails to state a claim for relief because it

would not be unconscionable to enforce the merger agreement, which was the product of

arm’s-length negotiations between sophisticated parties. This count also fails to state a

claim because it would not be possible in my view to return the parties to the status quo

through rescission of the merger more than three years after it closed.

       Finally, I grant FdG Logistics’ motion for summary judgment concerning the tax

refund claim based on the undisputed facts of record and the plain language of the merger

agreement, which expressly states that pre-closing tax refunds are the “property” of the

Securityholders and are to be paid to their representative “promptly” after receipt.

I.     BACKGROUND

       The facts for purposes of the Securityholders’ motion to dismiss come from

A&R’s Verified Amended Counterclaim dated April 10, 2015 (the “Counterclaim”),

documents incorporated therein, or facts of which the Court may take judicial notice.

Because the issues left for decision on the motion to dismiss are fairly discrete, only a

general summary of the factual background of this case is necessary. 1

1
  The Securityholders also moved to dismiss Buyer’s common law fraud claim under
Court of Chancery Rule 9(b) for failure to plead fraud with particularity. I summarily
denied that aspect of their motion during the hearing held on November 16, 2015,
because both parties injected numerous documents (over 100 in total) outside the
pleadings in briefing that issue, making it impossible as a practical matter to resolve the
Rule 9(b) issues on a motion to dismiss. See Tr. of Oral Arg. 7-9 (Nov. 16, 2015).

                                              2
       The facts relevant to FdG Logistics’ motion for summary judgment are limited in

number and admitted in A&R’s Amended Answer dated April 10, 2015 (the “Answer”).

       A.     The Parties

       A&R Logistics Holdings, Inc. is a Delaware corporation headquartered in

Louisville, Kentucky. It is the holding company for A&R Logistics, Inc., a trucking

company located in the Midwest (the “Trucking Company”). A&R is a leading provider

of dry bulk transportation and logistics solutions serving the plastics, chemical, and food

industries in North America. It owns and operates a network of approximately twenty-

five terminals and warehouses across the United States.

       A&R was the surviving corporation following a merger with A&R Merger Corp.,

a subsidiary of Mason Wells, a private equity firm based in Milwaukee, Wisconsin. In

this opinion, I refer to A&R as it existed before the merger as “Old A&R,” and I refer to

the surviving entity as “A&R” or “Buyer.”

       FdG Associates LP (“FdG Associates”) is a Delaware limited partnership

headquartered in New York, New York.            FdG Logistics, LLC, a Delaware limited

liability company, was the primary vehicle through which FdG Associates held its

ownership interest in Old A&R. 2 As of the date of the merger, that ownership interest

amounted to approximately 62.15% of Old A&R’s stock. Most if not all of the remaining

shares of Old A&R were owned by individuals who were made parties to this case in

response to A&R’s Counterclaim.

2
 FdG Associates actually held its ownership stake in Old A&R through a series of shell
companies. Counterclaim ¶ 11. Those entities are not relevant to the present motions.

                                            3
      In its Counterclaim, A&R asserts claims against FdG Associates, FdG Logistics,

and eighteen individuals. One of these individuals, David S. Gellman, is the founder and

a manager of FdG Associates. Gellman also was a director and a Vice President and

Secretary of Old A&R. The other seventeen individuals held stock or options in Old

A&R before the merger, and served in one or more capacities as a director, officer or

employee of Old A&R.         For simplicity, I use the term “Securityholders” to refer

collectively to FdG Associates, FdG Logistics, and the eighteen individuals named as

counterclaim defendants. 3

      A&R Merger Corp., Old A&R, FdG Logistics (as the Securityholders’

Representative), and certain of the Securityholders are parties to an Agreement and Plan

of Merger dated as of December 18, 2012 (the “Merger Agreement”).

      B.     The History of Old A&R

      James E. Bedeker founded Old A&R in 1969. Bedeker began his career as a truck

driver and started his company with three trucks.           Over several decades, Bedeker

expanded Old A&R’s operations, acquiring additional facilities and trucks and targeting

the dry-bulk transportation market. During Bedeker’s tenure, Old A&R became one of

the largest dry-bulk carriers operating in North America.

      Around 2007, FdG Associates invested in Old A&R, recapitalizing it through a

purchase of over 60% of its equity from Bedeker. FdG Associates created FdG Logistics

3
  In doing so, I recognize that no allegation is made that Gellman personally held any
stock or options in Old A&R, and it appears that FdG Associates’ interest in Old A&R
was held through FdG Logistics, but these details are not important for purposes of this
decision.

                                            4
to hold its investment in Old A&R. FdG Associates was an active manager of Old A&R,

and several of its employees are alleged to have worked closely with Old A&R from

2007 to 2012. More specifically, Buyer alleges that FdG Associates exerted control and

domination over Old A&R, dictating how Old A&R was to operate and imposing various

initiatives at the company, including cost-saving and cost-cutting programs, frequently

without Old A&R management’s consent, feedback, or input.

         C.    The Sale Process

         During the summer of 2012, Old A&R’s board solicited interest to sell Old A&R

through an auction process with the assistance of Harris Williams & Co., an investment

bank, and BB&T Capital Markets, a financial advisor. In connection with this process, a

73-page confidential information memorandum was prepared in July 2012 to tell Old

A&R’s story and generate interest in the market. It touted Old A&R’s market leadership

in dry-bulk transportation, stating that Old A&R had the “highest quality fleet of

specialized trucks, trailers, and other equipment in the industry.” 4

         On September 13, 2012, representatives of Buyer met with Old A&R’s senior

management team at the company’s headquarters. During the meeting, they received a

38-slide PowerPoint presentation from management.             This presentation touted Old

A&R’s “high-quality, specialized fleet of trucks, trailers, and other equipment,” and




4
    Counterclaim ¶ 478.

                                              5
emphasized that “A&R’s optimized network, specialized equipment, and ‘can do’ culture

provide customers with exceptional service.” 5

         On October 12, 2012, representatives of Buyer submitted a letter outlining the

basic terms of a proposed acquisition of Old A&R, including a transaction price, and

requesting acknowledgement and agreement to the terms from Old A&R and FdG

Logistics. On October 14, 2012, Gellman signed Buyer’s letter of intent on behalf of

both Old A&R and FdG Logistics. The parties then entered into a period of exclusivity,

during which Buyer conducted due diligence, additional information was made available

to Buyer, and the parties negotiated the terms of a deal.

         In connection with the sale process, an online data room was established to house

certain information about Old A&R. Although the data room had been made available to

all prospective bidders during the sale process, including Buyer, additional information

was made available to Buyer via the data room after the exclusivity period began.

         A key component of the parties’ negotiations involved the preparation of more

than 80 pages of disclosure schedules that form the factual basis for various

representations and warranties in the Merger Agreement. On October 31, 2012, Jeffrey J.

O’Connor, President and Chief Executive Officer of Old A&R, began work on the

disclosure schedules and the representations and warranties. In an email he sent to

certain members of management that day, O’Connor emphasized the importance of




5
    Id. ¶¶ 488-89.

                                             6
reviewing these provisions carefully. Old A&R management met numerous times over

the following weeks to discuss the disclosure schedules.

         On December 17, 2012, the day before the Merger Agreement was signed,

O’Connor emailed a revised draft of the disclosure schedules to eight individuals, which

included Old A&R’s founder (Bedeker) and senior members of its management, stating:

“If anyone has any additional items for the disclosure statements based on our

conversation yesterday I need to know them now. Thanks and please advise….ASAP.” 6

O’Connor and these eight individuals 7 each signed “Knowledge Certificates,” in which

they certified to Old A&R that:

         I have carefully reviewed the representations and warranties and schedules
         to the Agreement and Plan of Merger dated as of December __, 2012, by
         and among A&R Merger Corp., A&R Logistics Holdings, Inc., FdG
         Logistics LLC and the Securityholders named therein (the “Merger
         Agreement”), and I have reviewed such representations and warranties with
         all of the applicable direct reports listed on Schedule 1 of the Merger
         Agreement (such person, the “Direct Reports”).

         To the best of my knowledge, after reviewing the representations and
         warranties in the Merger Agreement with the Direct Reports, as modified
         by the schedules, such representations and warranties are true, correct, and
         complete and do not omit to state anything, the omission of which could
         make the Representations misleading. 8

6
    Counterclaim ¶¶ 532-33.
7
  The eight individuals who signed Knowledge Certificates in addition to O’Connor were
Brian R. Reichert, Chief Financial Officer; Andrew J. Mantey, Chief Operating Officer of
the Transportation Division; Robert N. Dotson, Chief Operating Officer of the Packaging
& Distribution Division; John P. Ciszek, Chief Operating Officer of the Global Logistics
Division; Paul D. Sweeden, Senior Vice President of Sales and Marketing; Michael J.
Hogan, Vice President of Sales and Marketing; Jeremy J. Lohrens, Controller; and James
E. Bedeker, Chairman of the Board.
8
    Counterclaim ¶ 534.
                                              7
       D.     The Merger Agreement

       On December 18, 2012, A&R Merger Corp. (as Buyer) entered into the Merger

Agreement with Old A&R and two of the Securityholders: FdG Logistics and Bedeker,

which held approximately 62.15% and 19.24% of Old A&R’s stock, respectively. The

Merger Agreement designated FdG Logistics as the “Securityholders’ Representative.”

The merger closed on December 18, the same day the Merger Agreement was signed.

       Under the Merger Agreement, each share of each class of Old A&R’s capital stock

the Securityholders owned immediately before the closing was canceled and extinguished

and converted into the right to receive a cash payment, as well as a pro rata share of any

amounts delivered to FdG Logistics under the Merger Agreement for disbursement to the

Securityholders. As a condition of receiving their share of the merger consideration, 9

each of the Securityholders who did not sign the Merger Agreement was required to sign

a Letter of Transmittal acknowledging their indemnification obligations under the Merger

Agreement.

       In Article 5 of the Merger Agreement, Old A&R made a series of representations

and warranties with respect to Old A&R and each of its subsidiaries, including the

Trucking Company. The last provision of Article 5 (Section 5.27), which is quoted in

full and discussed later in this opinion, states in uppercase letters that Old A&R makes no

representations or warranties except as expressly set forth in Article 5.

9
  The total amount of the merger consideration was the “(i) Enterprise Value [$203
million], minus (ii) the Closing Company Group Indebtedness, plus (iii) the Working
Capital Adjustment, minus (iv) the amount of Transaction Expenses that are unpaid
immediately prior to the Closing.” Merger Agreement § 1.1 at 13.

                                              8
         Section 9.2(A) of the Merger Agreement provides that each of the Securityholders,

severally but not jointly, will indemnify A&R for certain losses it may incur for any

inaccuracy in or breach by Old A&R of any representations or warranties made set forth

in the Merger Agreement, including those set forth in Article 5. Subject to certain

exceptions, the Securityholders’s indemnification obligations are not triggered until the

losses exceed $1 million and are subject to a cap of $20.3 million, but these limitations do

not apply in cases of “fraud or intentional breach.” 10 Section 9.4(F) provides, with

certain exceptions, that the indemnification rights set forth in Article 9 shall be the

parties’ “sole and exclusive remedies with respect to any and all claims (other than claims

for fraud or intentional breach) relating to the subject matter” of the Merger Agreement.

         The Merger Agreement also contains several provisions relating to how A&R, as

the surviving company, would treat tax refunds for pre-closing periods received after the

closing. Section 9.6(B) of the Merger Agreement requires the surviving corporation to

“prepare and cause to be timely filed, all Tax Returns of any member of the Company

Group that are due after the Closing Date for any period ending on or before the Closing

Date.”     Section 9.6(B) further provides procedures by which FdG Logistics, as the

Securityholders’ Representative, shall review and comment on any such tax returns

before filing. Section 9.6(E) of the Merger Agreement acknowledges that tax refunds for

pre-closing tax periods are the “property” of the Securityholders and are to be paid to

them “promptly” after receipt:


10
     Merger Agreement § 9.2(A).

                                             9
         All refunds of Taxes (whether in the form of a direct payment or as a credit
         or other offset against other Taxes payable) for Pre-Closing Tax Periods (to
         the extent not included in Closing Net Working Capital as finally
         determined) shall be property of the Securityholders in accordance with
         their Pro Rata Share. To the extent that any member of the Company Group
         receives a refund that is property of Securityholders (whether as a direct
         payment or as a credit or other offset against other Taxes payable), the
         Surviving Corporation shall promptly pay, or cause the Company Group
         promptly to pay, the amount of such refund (plus related interest received
         by the Company Group) to the Securityholders’ Representative on their
         behalf. 11

         E.    Buyer Asserts Indemnification Claims and Alleges that Illegal and
               Fraudulent Practices at Old A&R Were Concealed from It

         Less than six months after the merger closed on December 18, 2012, Buyer began

sending a series of notices of claims for indemnification to FdG Logistics, for itself and

as the Securityholders’ Representative.       Buyer sent at least twelve indemnification

notices. 12 The Securityholders dispute these indemnification claims.

         In this action, Buyer more broadly asserts that it discovered after the merger

closed that Old A&R had engaged in an extensive series of illegal and improper activities

that were concealed from it during pre-merger due diligence before Buyer entered the

Merger Agreement. Examples of these alleged activities include the following:

         •     The Trucking Company’s drivers systematically falsified their hours-of-

               service logs, in violation of federal regulations, to increase their daily miles

               driven by 30-40%.

11
     Merger Agreement § 9.6(E).
12
   Specifically, Buyer sent notices on May 10, 2013, May 17, 2013, May 25, 2013, June
3, 2013, October 24, 2013, December 24, 2013, March 21, 2014, May 5, 2014, May 16,
2014, June 17, 2014, June 18, 2014, and October 7, 2014. Counterclaim Exs. 3-14.

                                              10
      •      The Trucking Company intentionally manipulated its drivers’ scale tickets

             and time stamps.

      •      The Trucking Company’s tank wash facility in Joliet, Illinois discharged

             industrial wastewater in violation of environmental laws.

      •      FdG Logistics directed a massive operation to cut truck maintenance costs

             by nearly half before the merger, which caused personnel to falsely report

             regular maintenance as capital expenditures to avoid budget caps in order to

             keep the trucks running.

      •      The Trucking Company systematically created fake “wash tickets”

             indicating that its trucks had been properly cleaned before hauling sensitive

             loads and fraudulently charged customers for these never-performed

             services.

      •      Two of the Trucking Company’s facilities were badly impaired structurally,

             requiring over $2 million in repair costs for each.

      •      The Trucking Company hired aliens who were not authorized to work in

             the United States.

      F.     A&R Files for, and Receives, the 2012 Tax Refund

      A&R received extensions of time to file its 2012 federal and state tax returns. On

August 22, 2013, after receiving copies of the 2012 federal and state tax returns, FdG

Logistics provided comments on them. A&R later filed the 2012 federal and state tax

returns, which relate to pre-closing tax periods. At some point before April 10, 2015,


                                           11
when it amended its answer in this action, Buyer received refunds with respect to the

2012 federal and state tax returns totaling $2,080,650 (the “2012 Tax Refund”).

       G.     Procedural History

       On May 28, 2014, FdG Logistics filed a complaint asserting a single claim for

breach of the Merger Agreement for failing to remit the 2012 Tax Refund to the

Securityholders’ Representative. On October 7, 2014, A&R filed its initial answer and

counterclaim, which it amended on April 10, 2015. As amended, the Counterclaim,

which covers 596 paragraphs, asserts four claims based on the allegedly illegal and

improper activities summarized above. Count I asserts a claim for indemnification for

alleged inaccuracies in and breaches of numerous representations and warranties in the

Merger Agreement.      Counts II and III assert claims for fraud under the Delaware

Securities Act and the common law, respectively. Count IV asserts a claim for rescission

based on an alleged unilateral mistake.

       On May 29, 2015, FdG Logistics moved for summary judgment on its 2012 Tax

Refund claim. On July 10, 2015, the Securityholders moved to dismiss Counts II, III and

IV of the Counterclaim. 13

13
    One individual defendant (Andrew J. Mantey) also moved to dismiss the
indemnification claim in Count I under Court of Chancery Rules 8(a) and (e) for failure
to state a “short and plain” claim for indemnification because of, in essence, the length of
the Counterclaim, which spans 174 pages and contains 596 paragraphs. This argument is
rejected. Although brevity in pleadings is admirable, the length of the Counterclaim is
largely due to the need to satisfy the particularity requirements of Rule 9(b) for purposes
of the fraud claims A&R has asserted in Counts II and III. Mantey, moreover, provides
no analysis to explain why any of the specific grounds for indemnification recited in the
Buyer’s indemnification notices, which are attached to the Counterclaim and
incorporated into Count I, fail to state a claim for relief. See Counterclaim ¶ 578.

                                            12
II.      LEGAL ANALYSIS

         This opinion first addresses the motions to dismiss Counts II, III and IV of the

Counterclaim and then addresses FdG Logistics’ motion for summary judgment.

         A.     The Securityholders’ Motions to Dismiss

         Under Court of Chancery Rule 12(b)(6), a motion to dismiss for failure to state a

claim must be denied “unless the plaintiff would not be entitled to recover under any

reasonably conceivable set of circumstances.” 14 “In determining whether a pleading

meets this minimal standard, this Court draws all reasonable inferences in the plaintiff’s

favor, accepts all well-pleaded factual allegations as true, and even accepts ‘vague

allegations in the Complaint as ‘well pleaded’ if they provide the defendant notice of the

claim.’” 15

                1.     Count II of the Counterclaim Fails to State a Claim for Violation
                       of the Delaware Securities Act

         In Count II of its Counterclaim, A&R asserts that the Securityholders’ statements

and omissions during the sale process and in the Merger Agreement violated the

Delaware Securities Act, which imposes liability on anyone who “[o]ffers, sells or

purchases a security by means of any untrue statement of a material fact.” 16         The

Securityholders contend that Count II fails to state a claim for relief because the

14
  Cent. Mortg. Co. v. Morgan Stanley Mortg. Capital Hldgs. LLC, 27 A.3d 531, 535
(Del. 2011); see also Winshall v. Viacom Int’l., Inc., 76 A.3d 808, 813 n.12 (Del. 2013).
15
 Seinfeld v. Slager, 2012 WL 2501105, at *2 (Del. Ch. June 29, 2012) (quoting Cent.
Mortg. Co., 27 A.3d at 536)).
16
     6 Del. C. § 73-605(a)(2).

                                            13
transaction at issue lacks a sufficient nexus to Delaware to trigger application of the

Delaware Securities Act. 17 I agree with the Securityholders.

       Enacted in 1973, the Delaware Securities Act is Delaware’s “blue-sky” law. This

term generally refers to state legislation regulating the sale of securities. 18 The primary

purpose of the Delaware Securities Act is “to provide a basis for stopping intrastate

securities fraud.” 19

       In Singer v. Magnavox Co., which appears to be the first case construing the

Delaware Securities Act, the Delaware Supreme Court noted that there is “a presumption

that a law is not intended to apply outside the territorial jurisdiction of the State in which




17
   Defendants also contend that the Delaware Securities Act does not apply to merger
transactions. See 6 Del. C. § 73-103(a)(17)(d) (excluding from definition of “sale” or
“sell” “any act incident to a vote by stockholders . . . pursuant to the certificate of
incorporation, or the provisions of Title 8, on a merger . . . in consideration of the
issuance of securities of the same or another corporation.”). A&R disagrees on the theory
that the Act only exempts stock-for-stock mergers. Because I conclude that Count II fails
to state a claim for relief for lack of a sufficient nexus to Delaware to trigger application
of the Delaware Securities Act, I do not address this issue.
18
   See generally Paul G. Mahoney, The Origins of the Blue-Sky Laws: A Test of
Competing Hypotheses, 46 J.L. & Econ. 229 (2003); see also id. 229 (Noting that such
laws “are known as ‘blue-sky’ laws, purportedly because one of their supporters claimed
that many securities salesmen were so dishonest that they would sell ‘building lots in the
blue sky.’”) (citing Louis Loss & Edward M. Cowett, Blue Sky Law 7 n.22 (1958)).
19
   1 R. Franklin Balotti & Jesse A. Finkelstein, The Delaware Law of Corporations and
Business Organizations § 17.7[A], at 17-43 (3d ed. Supp. 2014). See also 6 Del. C.
§ 73-101(b) (“The purpose of the Delaware Securities Act is to prevent the public from
being victimized by unscrupulous or overreaching broker-dealers, investment advisers
and other agents in the context of selling securities or giving investment advice, as well
as to remedy any harm caused by securities law violations.”)

                                             14
it is enacted” and specifically held that the Act does not apply to a Delaware corporation

simply by virtue of the act of incorporating in Delaware:

           [W]e read the Securities Act as a Blue Sky Law governing transactions
           which are subject to Delaware jurisdiction under traditional tests. To state
           it another way, we do not read the Act as an attempt to introduce Delaware
           commercial law into the internal affairs of corporations merely because
           they are chartered here. Of course, a Delaware corporation is bound by the
           Act, if it is otherwise applicable. But it is not bound simply because the
           company is incorporated here. 20

Singer involved a stockholder challenge to the merger of a Delaware corporation. The

plaintiff stockholders were residents of Pennsylvania.          They were not solicited in

Delaware, and there was no indication that the merger agreement was negotiated in

Delaware or that any part of the alleged “sale” of their securities occurred in Delaware. 21

From this record, the Supreme Court concluded that “[i]t follows that the Delaware

Securities Act does not apply.” 22 Applying Singer, this Court has held that the Delaware

Securities Act “only applies where there is a sufficient nexus between Delaware and the

transaction at issue.” 23


20
  380 A.2d 969, 981 (Del. 1977), overruled on other grounds by Weinberger v. UOP,
Inc., 457 A.2d 701 (Del. 1983).
21
     Id.
22
     Id.
23
  Vichi v. Koninklijke Philips Elecs. N.V., 2009 WL 4345724, at *19 (Del. Ch. Dec. 1,
2009); Eurofins Panlabs, Inc. v. Ricerca Biosciences, LLC, 2014 WL 2457515, at *18
(Del. Ch. May 30, 2014) (same); see also Dofflemyer v. W.F. Hall Printing Co., 558 F.
Supp. 372, 377 (D. Del. 1983) (Delaware Securities Act did not apply because “[t]he
parties have not suggested any connection between the events challenged . . . and the
State of Delaware, other than the fact that the defendant corporations are incorporated” in
Delaware). The Uniform Securities Act, upon which the Delaware Securities Act is
based, is also understood to generally enforce such a nexus requirement. See 12 Joseph
                                               15
           This Court recently confirmed the need to demonstrate a nexus to Delaware to

trigger application of the Delaware Securities Act in Eurofins Panlabs, Inc. v. Ricerca

Biosciences, LLC. 24 In that case, a buyer of a business argued that the Act applied to the

transaction based on a contractual choice of law provision stating that “all disputes [ ] be

resolved according to Delaware law in the Delaware Court of Chancery.” 25 In a brief

footnote, the Court held that “[c]ertainly, an analysis of whether the Delaware Securities

Act applies is an application of Delaware law and therefore complies with the choice of

law provision.” 26 The Court then analyzed whether the buyer had pled sufficient facts in

its complaint to establish the requisite nexus to trigger application of the Delaware

Securities Act.      Finding that the buyer had not, the Court dismissed its Delaware

Securities Act claim. The implied rationale of the Court’s approach in Eurofins is that, if

one assumes that a generic Delaware choice of law provision encompassed the Delaware

Securities Act, it is reasonable to assume that the parties (at least absent expressing a

contrary intent) intended to incorporate the Act “as is,” which would include the

jurisdictional limitations inherent in the Act.




C. Long, Blue Sky Law § 4:2 (2015) (“the drafters of the Uniform Act consciously
rejected citizenship or residence within a particular state as the policy base for application
of the Uniform Act. Instead, they elected a territorial base, requiring that a transaction
have some physical nexus with a state.”)
24
     2014 WL 2457515, at *18 (Del. Ch. May 30, 2014).
25
     Id. at *18 n.136.
26
     Id.

                                              16
       Here, A&R does not attempt to identify any of the type of facts one would

typically consider in determining whether the requisite nexus exists to trigger the

application of a Blue Sky Law. A&R does not assert, for example, that it was solicited to

purchase the securities of Old A&R in Delaware, or that any of the negotiations over the

Merger Agreement occurred in Delaware. Instead, similar to the plaintiff in Eurofins,

A&R argues that the Delaware Securities Act applies because of the choice of law

provision in the Merger Agreement. That provision states that “[a]ll issues concerning

the Transaction Documents . . . will be governed by and construed in accordance with the

laws of the State of Delaware, without giving effect to any choice of law or conflict of

law provision or rule . . . that would cause the application of the law of any jurisdiction

other than the State of Delaware.” 27 In an effort to distinguish the summary rejection of

this argument in Eurofins, A&R invokes 6 Del. C. § 2708, which the Court in Eurofins

did not consider.

       Section 2708 was adopted in 1993, twenty years after the Delaware Securities Act

became law. It provides, in relevant part, that:

       The parties to any contract, agreement or other undertaking . . . may agree
       in writing that the contract, agreement or other undertaking shall be
       governed by or construed under the laws of this State, without regard to
       principles of conflict of laws . . . if the parties, either as provided by law or
       in the manner specified in such writing are, (i) subject to the jurisdiction of
       the court of, or arbitration in, Delaware and (ii) may be served with legal
       process. The foregoing shall conclusively be presumed to be a significant,



27
  Merger Agreement § 10.9. The term “Transaction Documents” includes the Merger
Agreement. Id. § 1.1 at 15.

                                              17
         material and reasonable relationship with this State and shall be enforced
         whether or not there are other relationships with this state. 28

Section 2708 only applies to contracts involving $100,000 or more. 29 Before Section

2708 was enacted, a Delaware court ordinarily would have analyzed a parties’ contractual

choice of law under the Restatement (Second) of Conflict of Laws, enforcing the parties’

choice unless:

         (a) the chosen state has no substantial relationship to the parties or the
         transaction and there is no other reasonable basis for the parties’ choice, or
         (b) application of the law of the chosen state would be contrary to a
         fundamental policy of a state which has a materially greater interest than
         the chosen state in the determination of the particular issue and which,
         under the rule of § 188, would be the state of the applicable law in the
         absence of an effective choice of law by the parties. 30

Using similar language as the Restatement, Section 2708 essentially stipulates that for

purposes of deciding whether to apply a Delaware choice of law provision, courts may

assume a negative answer to both of these exceptions. 31

         At its core, Section 2708 is intended to provide certainty to parties who are subject

to jurisdiction in Delaware that their choice of Delaware law regarding the construction

and enforceability of their contracts will be respected. That is the conclusion then-Vice

Chancellor Strine reached in Abry Partners V, L.P. v. F & W Acquisition LLC, 32 in

28
     6 Del. C. § 2708(a).
29
     Id. § 2708(c)(2).
30
     Restatement (Second) of Conflict of Laws § 187(2).
31
  See Larry E. Ribstein, Delaware, Lawyers and Contractual Choice of Law, 19 Del. J.
Corp. L. 999, 1004.
32
     891 A.2d 1032 (Del. Ch. 2006).

                                              18
construing a choice of law provision similar to the one at issue here 33 to encompass not

only the contract law of Delaware to interpret the contract, but also Delaware’s tort law

for purposes of determining the enforceability of the contract:

         Parties operating in interstate and international commerce seek, by a choice
         of law provision, certainty as to the rules that govern their relationship. To
         hold that their choice is only effective as to the determination of the
         contract claims, but not as to tort claims seeking to rescind the contract on
         grounds of misrepresentation, would create an uncertainty of precisely the
         kind that the parties’ choice of law provision sought to avoid.

                                           *****

         When parties have chosen a state’s contract law to govern their contract, it
         is illogical to assume that they wished to have the enforceability of that
         contract judged by another state’s law. Section 2708 of Title 6 of the
         Delaware Code represents our General Assembly’s intent to prevent
         perverse dichotomies in the linguistics used to determine the meaning and
         enforceability of contracts. When satisfied, as here, § 2708 also establishes
         that this State has a material relationship sufficient to satisfy § 187 of the
         Restatement (Second) of Conflict of Laws. 34

         Consistent with the Court’s analysis in Abry and other cases applying the statute,35

I view Section 2708 as intending to permit contracting parties to incorporate the law of


33
  The choice of law provision in Abry stated that the stock purchase agreement “shall be
governed by, and construed in accordance with the Laws of the State of Delaware,
regardless of the Laws that might otherwise govern under applicable principles of
conflicts of law.” Id. at 1046.
34
     Id. at 1048, 1049.
35
   See, e.g., Transdigm Inc. v. Alcoa Global Fasteners, Inc., 2013 WL 2326881, at *4-5
(Del. Ch. May 29, 2013) (following Abry to apply Delaware common law to fraud claims
arising from stock purchase agreement with Delaware choice of law provision); QTP
Fund LP v. Eurohypo Capital Funding LLC I, 2011 WL 2672092, at *8 (Del. Ch. July 8,
2011) (applying Delaware common law to determine interpretation of term “preference
shares” as used in LLC and trust agreements with Delaware choice of law provisions);
Greetham v. Sogima L-A Manager, LLC, 2008 WL 4767722, at *14 (Del. Ch. Nov. 3,
2008) (following Abry to apply Delaware common law to both contract and promissory
                                              19
Delaware, which primarily would concern its common law, to decide questions

concerning the interpretation and enforceability of a contract. What Section 2708 does

not stand for, in my view, is a mechanism for the wholesale importation of every

provision of Delaware statutory law into the commercial relationship of contracting

parties. Significantly, A&R cites no authority construing Section 2708 in this manner,

which would risk absurd results contrary to basic principles of statutory construction. 36

Would, for example, a Delaware choice of law provision stating that a merger agreement

is to “be governed by” Delaware law trigger application of the Delaware tax code to a

merger where it otherwise would not apply? Could entities incorporated outside of

Delaware find themselves bound by the Delaware General Corporation Law’s

requirements for stockholder approval of a merger by including such a provision in their

merger agreement, contrary to the internal affairs doctrine? 37 It is difficult to imagine

that this was the intention of Section 2708 or that parties to a merger agreement ever



estoppel claims under LLC operating agreement containing Delaware choice of law
provision); Pharmathene, Inc. v. Siga Techs., Inc., 2008 WL 151855, at *7-8 (Del. Ch.
Jan. 16, 2008) (citing Abry, Restatement Section 187 and 6 Del. C. § 2708 to apply
Delaware common law to contract, tort and promissory estoppel claims where merger
agreement contained Delaware choice of law provision).
36
   See State v. Cooper, 575 A.2d 1074, 1076 (Del. 1990) (“Literal or perceived
interpretations, which yield illogical or absurd results, should be avoided in favor of
interpretations consistent with the intent of the legislature.”); see also Reddy v. PMS Ins.
Co., 20 A.3d 1281, 1288 n.33 (Del. 2011) (same) (collecting authorities).
37
   See McDermott Inc. v. Lewis, 531 A.2d 206, 215 (Del. 1987) (“The internal affairs
doctrine requires that the law of the state of incorporation should determine issues
relating to internal corporate affairs.”) (citing First Nat’l City Bank v. Banco Para el
Comercio Exterior de Cuba, 462 U.S. 611, 621 (1983)).

                                            20
would have intended these outcomes by virtue of including a choice law provision similar

to Section 10.9 of the Merger Agreement here.

      More to the point, construing Section 10.9 as A&R advocates would lead to the

bizarre result of allowing contractual parties to convert a blue-sky law that was intended

to regulate intrastate commerce into one that would apply to interstate commerce. A&R

has not cited any authority suggesting that the General Assembly intended to rewrite the

Delaware Securities Act in such a radical way sub silentio through the later adoption of

Section 2708, and I decline to do so. 38      Indeed, this outcome not only would be

inconsistent with the legislative intent of the Delaware Securities Act as discussed in

Singer, but also would implicate issues of federal preemption. 39 Accordingly, I conclude

that it would be unreasonable to construe Section 10.9 of the Merger Agreement to

encompass the Delaware Securities Act and make it apply automatically in this case.



38
   The synopsis of the legislation resulting in Section 2708 does not mention the
Delaware Securities Act. It states, in relevant part: “In many commercial transactions
that have material relationships with jurisdictions other than Delaware, the parties choose
Delaware law to govern their agreements. This Bill is designed to give maximum effect
to the principle of freedom of contract and the enforceability of such provisions in
contracts previously made and to be made, and to provide the parties to such agreements
with certainty that courts sitting in Delaware will enforce such choice of law provisions.”
69 Del. Laws ch. 127, § 1 (1993).
39
  See, e.g., Edgar v. MITE Corp., 457 U.S. 624, 641-43 (1982) (finding invalid Illinois
blue-sky law “purport[ing] to regulate directly and to interdict interstate commerce,
including commerce wholly outside the state”) (“The Court’s rationale for upholding
blue-sky laws was that they only regulated transactions occurring within the regulating
States. . . . The Commerce Clause also precludes the application of a state statute to
commerce that takes place wholly outside of the State’s borders, whether or not the
commerce has effects within the State.”).

                                            21
Instead, the applicability of the Act must depend on whether a sufficient nexus exists

between Delaware and the merger transaction at issue.

         Turning to that analysis, the merger here was negotiated on the buy side by Mason

Wells, a private equity firm, and on the sell side by FdG Logistics, the majority owner of

Old A&R. Mason Wells is based in Milwaukee, Wisconsin. 40 FdG Logistics is a

subsidiary of FdG Associates, which is based in New York City. 41 The headquarters of

Old A&R at the time was in Morris, Illinois. 42 No negotiations concerning the merger

are alleged to have taken place in Delaware, and none of the allegedly underlying

fraudulent business practices or violations is alleged to have occurred in Delaware. The

sole connection that A&R can draw to Delaware—that the merger parties were

incorporated here—is insufficient under Singer and its progeny to demonstrate the

required nexus. As the Court stated in Eurofins, “an allegation based solely on the status

of certain parties to the litigation is insufficient to allege a nexus capable of stating a

claim under the Delaware Securities Act.” 43 In sum, A&R has failed to allege a sufficient

nexus to Delaware to sustain a claim under the Delaware Securities Act. Count II is thus

dismissed for failure to state a claim for relief.




40
  The Court takes judicial notice of the headquarters of Mason Wells listed in the
“Notices” section of the Merger Agreement. See Merger Agreement § 10.2.
41
     Counterclaim ¶ 11.
42
     See id. ¶ 484.
43
     2014 WL 2457515, at *18.

                                               22
                2.     Count III States a Claim for Common Law Fraud Relating to
                       Pre-Merger Materials

         In Count III of its Counterclaim, Buyer asserts a claim for common law fraud

against each of the Securityholders based, in part, on alleged misrepresentations and

omissions concerning certain documents they provided to Buyer before it entered into the

Merger Agreement. These documents, which I refer to as the “Pre-Merger Materials,”

include the July 2012 confidential information memorandum, the September 2012

management presentation, and other materials provided in due diligence.

         To state a fraud claim under Delaware common law,

         the plaintiff must plead facts supporting an inference that: (1) the defendant
         falsely represented or omitted facts that the defendant had a duty to
         disclose; (2) the defendant knew or believed that the representation was
         false or made the representation with a reckless indifference to the truth; (3)
         the defendant intended to induce the plaintiff to act or refrain from acting;
         (4) the plaintiff acted in justifiable reliance on the representation; and (5)
         the plaintiff was injured by its reliance. 44

The Securityholders move to dismiss Count III for failure to state a claim for relief

insofar as it relates to alleged misrepresentations outside the four corners of the Merger

Agreement. More specifically, the Securityholders argue that Buyer cannot establish as

a matter of law that it justifiably relied on any representations in any of the Pre-Merger

Materials because of the effects of Sections 5.27 and 10.7 of the Merger Agreement.

         Section 5.27, which is quoted in full below, states that Old A&R (defined in the

Merger Agreement as the “Company”) was not making any representation or warranty

outside of the Merger Agreement and, more specifically, that it was not making any

44
     DCV Hldgs., Inc. v. ConAgra, Inc., 889 A.2d 954, 958 (Del. 2005).

                                               23
representation or warranty about any “projections, estimates or budgets” or “any other

information or documents” with respect to Old A&R that were made available to the

Buyer or its representatives:

         EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE 5, THE
         COMPANY MAKES NO REPRESENTATION OR WARRANTY,
         EXPRESS OR IMPLIED, AT LAW OR IN EQUITY AND ANY SUCH
         OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY
         EXPRESSLY     DISCLAIMED    INCLUDING   ANY   IMPLIED
         REPRESENTATION OR WARRANTY AS TO CONDITION,
         MERCHANTABILITY, SUITABILITY OR FITNESS FOR A
         PARTICULAR PURPOSE. NOTWITHSTANDING ANYTHING TO
         THE CONTRARY, (A) THE COMPANY SHALL NOT BE DEEMED TO
         MAKE TO BUYER ANY REPRESENTATION OR WARRANTY
         OTHER THAN AS EXPRESSLY MADE BY THE COMPANY IN THIS
         AGREEMENT AND (B) THE COMPANY MAKES NO
         REPRESENTATION OR WARRANTY TO BUYER WITH RESPECT
         TO (I) ANY PROJECTIONS, ESTIMATES OR BUDGETS
         HERETOFORE DELIVERED TO OR MADE AVAILABLE TO BUYER
         OR ITS COUNSEL, ACCOUNTANTS OR ADVISORS OF FUTURE
         REVENUES, EXPENSES OR EXPENDITURES OR FUTURE
         FINANCIAL RESULTS OF OPERATIONS OF THE COMPANY
         UNLESS    ALSO      EXPRESSLY    INCLUDED   IN    THE
         REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS
         ARTICLE 5, OR (II) EXCEPT AS EXPRESSLY COVERED BY A
         REPRESENTATION AND WARRANTY CONTAINED IN THIS
         ARTICLE 5, ANY OTHER INFORMATION OR DOCUMENTS
         (FINANCIAL OR OTHERWISE) MADE AVAILABLE TO BUYER OR
         ITS COUNSEL, ACCOUNTANTS OR ADVISORS WITH RESPECT TO
         THE COMPANY. 45

The integration clause in Section 10.7 of the Merger Agreement states as follows: “This

Agreement, the Transaction Documents and the documents referred to herein and therein

contain the entire agreement between the Parties and supersede any prior understandings,



45
     Merger Agreement § 5.27.

                                          24
agreements or representations by or between the Parties, written or oral, which may have

related to the subject matter hereof in any way.” 46

          Delaware law enforces clauses which identify the specific information on which a

party has relied and foreclose reliance on other information. 47 Numerous decisions of

this Court have analyzed the enforceability of such clauses. 48 Most significantly, the law

in this area is largely defined by then-Vice Chancellor Strine’s decision in Abry, where he

carefully considered the need to strike an appropriate balance between holding

sophisticated parties to the terms of their contracts and simultaneously protecting against

the abuses of fraud. 49 Surveying the case law at the time, the Vice Chancellor explained

that:

          [t]he teaching of this court, through cases such as Great Lakes; H–M
          Wexford; Progressive, and Kronenberg is that a party cannot promise, in a
          clear integration clause of a negotiated agreement, that it will not rely on
          promises and representations outside of the agreement and then shirk its




46
     Id. at § 10.7.
47
  See, e.g., RAA Mgmt., LLC v. Savage Sports Hldgs., Inc., 45 A.3d 107, 116-17 (Del.
2012).
48
  See, e.g., Prairie Capital III, L.P. v. Double E Hldg. Corp, 2015 WL 7461807 (Del.
Ch. Nov. 24, 2015); Anvil Hldg. Corp. v. Iron Acquisition Co., Inc., 2013 WL 2249655
(Del. Ch. May 17, 2013); Abry P’rs V, L.P. v. F & W Acquisition LLC, 891 A.2d 1032
(Del. Ch. 2006) (Strine, V.C.); Kronenberg v. Katz, 872 A.2d 568 (Del. Ch. 2004)
(Strine, V.C.); H-M Wexford LLC v. Encorp, Inc., 832 A.2d 129 (Del. Ch. 2003);
Progressive Int’l. Corp. v. E.I. Du Pont de Nemours & Co., 2002 WL 1558382 (Del. Ch.
July 9, 2002) (Strine, V.C.); Great Lakes Chem. Corp. v. Pharmacia Corp., 788 A.2d 544
(Del. Ch. 2001).
49
     Abry, 891 A.2d at 1058.

                                              25
         own bargain in favor of a ‘but we did rely on those other representations’
         fraudulent inducement claim. 50

On the other hand, as the Court further explained, because of the venerable public policy

to guard against fraud, we will not insulate a party from liability for its counterparty’s

reliance on fraudulent statements made outside of an agreement absent a clear statement

by that counterparty—that is, the one who is seeking to rely on extra-contractual

statements—disclaiming such reliance:

         [T]his court has consistently respected the law’s traditional abhorrence of
         fraud in implementing this reasoning. Because of that policy concern, we
         have not given effect to so-called merger or integration clauses that do not
         clearly state that the parties disclaim reliance upon extra-contractual
         statements. Instead, we have held, as in Kronenberg, that murky
         integration clauses, or standard integration clauses without explicit anti-
         reliance representations, will not relieve a party of its oral and extra-
         contractual fraudulent representations. The integration clause must contain
         “language that . . . can be said to add up to a clear anti-reliance clause by
         which the plaintiff has contractually promised that it did not rely upon
         statements outside of the contract’s four corners in deciding to sign the
         contract.” This approach achieves a sensible balance between fairness and
         equity—parties can protect themselves against unfounded fraud claims
         through explicit anti-reliance language.        If parties fail to include
         unambiguous anti-reliance language, they will not be able to escape
         responsibility for their own fraudulent representations made outside of the
         agreement’s four corners. 51

         Two recent decisions illustrate how this Court has applied the principles

articulated in Abry. In Anvil Holding Corp., a case on which Buyer relies, a buyer of a

company asserted fraud claims based on extra-contractual statements where the purchase

agreement stated that neither the subject company nor any seller “makes any other

50
     Id. at 1057.
51
     Abry, 891 A.2d at 1058-59 (quoting Kronenberg, 872 A.2d at 593).

                                              26
express or implied representation or warranty with respect to the Company” and that the

agreement “constitutes the entire Agreement among the Parties.” 52 Refusing to dismiss

the fraud claims, the Court reasoned that these provisions were not expressed from the

point of view of the buyer, and thus did not “reflect a clear promise by the Buyer that it

was not relying on statements made to it outside of the Agreement to make its decision to

enter the Agreement.” 53

         More recently, in Prairie Capital III, L.P. v. Double E Holdings Corp., 54 the Court

reached the opposite conclusion in dismissing fraud claims that a buyer of a company

asserted based on extra-contractual representations. Critically, unlike in Anvil, the Court

found that the provisions at issue 55 reflected an affirmative expression by the aggrieved

buyer that it had relied only on the representations and warranties in the purchase

agreement:

         The Exclusive Representations Clause is not framed negatively. It does not
         say that the Buyer did not rely on any representations other than those set
         forth in the SPA [Stock Purchase Agreement]. Instead it is framed
         positively. It represents affirmatively that the Buyer only relied on the

52
     2013 WL 2249655, at *8.
53
     Id. (emphasis added).
54
     2015 WL 7461807 (Del. Ch. Nov. 24, 2015).
55
  One of those provisions stated, in relevant part, that “[i]n making its determination to
proceed with the Transaction, the Buyer has relied on (a) the results of its own
independent investigation and (b) the representations and warranties of the Double E
Parties expressly and specifically set forth in this Agreement” and that “THE BUYER
UNDERSTANDS, ACKNOWLEDGES, AND AGREES THAT ALL OTHER
REPRESENTATIONS AND WARRANTIES OF ANY KIND OR NATURE EXPRESS
OR IMPLIED . . . ARE SPECIFICALLY DISCLAIMED BY THE DOUBLE E
PARTIES.” Id. at *7.

                                              27
          representations and warranties in the SPA. If a party represents that it only
          relied on particular information, then that statement establishes the universe
          of information on which that party relied. Delaware law does not require
          magic words. In this case, the Exclusive Representations Clause and the
          Integration Clause combine to mean that the Buyer did not rely on other
          information. They add up to a clear anti-reliance clause. 56

          Here, similar to Anvil but unlike Prairie Capital, the critical language missing

from Sections 5.27 and 10.7 of the Merger Agreement is any affirmative expression by

Buyer of (1) specifically what it was relying on when it decided to enter the Merger

Agreement or (2) that it is was not relying on any representations made outside of the

Merger Agreement. Instead, Section 5.27 amounts to a disclaimer by the selling company

(Old A&R) of what it was and was not representing and warranting. Moreover, the

integration clause contained in Section 10.7 merely states in general terms that the

Merger Agreement constitutes the entire agreement between the parties, and does not

contain an unambiguous statement by Buyer disclaiming reliance on extra-contractual

statements.

          The difference between a disclaimer from the point of view of a party accused of

fraud and from the point of view of a counterparty who believes it has been defrauded

may seem inconsequential, like two sides of the same coin. The difference is critical,

however, because of the strong public policy against fraud. As explained in Abry, the

Court will not bar a contracting party from asserting claims for fraud based on

representations outside the four corners of the agreement unless that contracting party

unambiguously disclaims reliance on such statements. The language to disclaim such

56
     Id. at *8.

                                               28
reliance may vary, as the Court noted in Prairie Capital, 57 but the disclaimer must come

from the point of view of the aggrieved party (or all parties to the contract) to ensure the

preclusion of fraud claims for extra-contractual statements under Abry and its progeny.

Because the language of Section 5.27 and 10.7 of the Merger Agreement does not contain

this type of unambiguous anti-reliance disclaimer by Buyer, those provisions are not

sufficient to preclude its common law fraud claim relating to the Pre-Merger Materials.

       Finally, attempting to reconcile this case with Abry, the Securityholders assert that

Section 5.27 of the Merger Agreement closely tracked the agreement at issue there

because the seller in that case disclaimed making any contractual representations. 58 This

argument is meritless. The Securityholders glaringly overlook a separate provision in

Abry in which the buyer expressly agreed that it was not relying on any representations

outside of the agreement:

       Acquiror acknowledges and agrees that neither the Company nor the
       Selling Stockholder has made any representation or warranty, express or
       implied, as to the Company or any Company Subsidiary or as to the
       accuracy or completeness of any information regarding the Company or
       any Company Subsidiary furnished or made available to Acquiror and its
       representatives, except as expressly set forth in this Agreement . . . and
       neither the Company nor the Selling Stockholder shall have or be subject to
       any liability to Acquiror or any other Person resulting from the distribution
       to Acquiror, or Acquiror’s use or reliance on, any such information or any
       information, documents or material made available to acquirer in any “data
       rooms,” “virtual data rooms,” management presentations or in any other

57
  2015 WL 7461807, at *9 (“Language is sufficiently powerful to reach the same end by
multiple means, and drafters can use any of them to identify with sufficient clarity the
universe of information on which the contracting parties relied.”).
58
   See Countercl. Defs.’ Reply Br. Supp. Mot. to Dismiss 26-27 n.10 (quoting Section
3.23 of the stock purchase agreement in Abry).

                                            29
           form in expectation of or in connection with, the transactions contemplated
           hereby. 59

The above-quoted clause was the “critical provision” in Abry because it operated to

“define what information the Buyer relied upon in deciding to execute the Agreement”

and, “[b]y its plain terms, the Buyer promised that neither the Company nor the Seller

had made any representation or warranty as to the accuracy of any information about the

Company except as set forth in Agreement itself.” 60 Indeed, because of the potency of

this provision, the buyer in Abry did not seek relief based on extra-contractual

representations but instead amended its complaint “to premise its claims solely upon

alleged misrepresentations of fact that are represented and warranted in the Stock

Purchase Agreement itself.” 61 This kind of affirmative disclaimer from the point of view

of Buyer is the critical piece that is missing in this case. 62 Accordingly, the motion to

dismiss Count III is denied.

                 3.     Count IV of the Counterclaim Fails to State a Claim for
                        Unilateral Mistake

           In Count IV of its Counterclaim, A&R seeks to rescind the Merger Agreement

based on its alleged unilateral mistake. Rescission of a transaction because of a unilateral

mistake is an extraordinary remedy. It is only available under Delaware law when a party


59
     Abry, 891 A.2d at 1041 (emphasis added).
60
     Id.
61
     Id.
62
  Because the other cases on which the Securityholders rely were considered in Abry,
which defines the operative standard, it is not necessary to consider them separately.

                                               30
can demonstrate that “(1) the enforcement of the agreement would be unconscionable; (2)

the mistake relates to the substance of the consideration; (3) the mistake occurred

regardless of the exercise of ordinary care; and (4) it is possible to place the other party in

the status quo.” 63 Count IV fails to state a claim for relief because A&R has failed to

plead facts demonstrating that enforcement of the Merger Agreement would be

unconscionable, and because it would not be possible to return the parties to the status

quo over three years after the closing.

                      a. Enforcement of the Merger Agreement Would Not Be
                         Unconscionable

         When analyzing unconscionability under Delaware law, “[t]he traditional test is

this: a contract is unconscionable if it is such as no man in his senses and not under

delusion would make on the one hand, and as no honest or fair man would accept, on the

other.” 64   As then-Vice Chancellor Strine noted in Progressive, “[t]he doctrine of

unconscionability is sparingly used in the law . . . .” 65 Continuing, he explained:

         For a contract clause to be unconscionable, its terms must be so one-sided
         as to be oppressive. Put another way, unconscionability has generally been
         recognized to include an absence of meaningful choice on the part of one of
         the parties together with contract terms which are unreasonably favorable to
         the other party. Courts have been reluctant to apply the doctrine,
         recognizing among other things that the parties’ bargaining power will


63
  In re ENSTAR Corp., 604 A.2d 404, 411 (Del. 1992) (citing 13 Williston on Contracts
§ 1573 (3d ed. 1970)), overruled on other grounds by Scion Breckenridge Managing
Member, LLC v. ASB Allegiance Real Estate Fund, 68 A.3d 665 (Del. 2013).
64
  Tulowitzki v. Atl. Richfield Co., 396 A.2d 956, 960 (Del. 1978) (internal quotation
marks omitted).
65
     2002 WL 1558382, at *2 (Del. Ch. July 9, 2002).

                                              31
         rarely be equal. Further, courts are particularly reluctant to apply the
         doctrine in favor of sophisticated corporations. 66

         Here, sophisticated parties engaged in arm’s-length negotiations over the terms of

the Merger Agreement. 67 It is not alleged, nor would it be credible to suggest, that the

Securityholders wielded such overwhelming bargaining power as to present Mason

Wells, a private equity firm, with an absence of meaningful choice. Assuming all of its

allegations to be true, Buyer may have vastly overpaid for Old A&R, but a dispute over

price alone—even a substantial one—is not grounds for finding an agreement between

sophisticated parties to be unconscionable. 68

         A&R relies on two cases for the proposition that “a sale is unconscionable if the

buyer grossly overpays.” 69 First, A&R characterizes In Re ENSTAR Corp. as a case

where “a buyer’s paying approximately double the value of what it purchased meant that

‘enforcement of the parties’ agreement would be unconscionable.’” 70          In ENSTAR,


66
  Id. at *11 (citing Farnsworth on Contracts § 4.28 (2d ed. 2000)) (internal quotation
marks and modifications omitted).
67
   See, e.g., Tr. of Oral Arg. at 97 (Nov. 16, 2015) (counsel for A&R: “We had
sophisticated parties here. These weren’t mom-and-pop operations.”); id at 187 (counsel
for FdG Logistics: “. . . let’s start with the fact that the merger agreement is an
agreement between sophisticated parties . . .”).
68
  See, e.g., Bryant v. Way, 2012 WL 1415529, at *12 (Del. Super. Apr. 17, 2012) (“Here,
both parties are real estate brokers and former partners. There is no disparity in
bargaining power. There is nothing unreasonable about the memorandum. While the
date discrepancy has resulted in a dispute over a substantial sum, the financial
implications alone do not make the agreement unreasonable.”)
69
     A&R’s Ans. Br. Opp’n Mot. to Dismiss 44.
70
     Id. at 44 (quoting In Re ENSTAR, 604 A.2d at 413).

                                             32
however, it was not the price discrepancy that the Court found unconscionable, but rather

the fact that sellers of securities mistakenly were “being paid for the value of their shares

twice.” 71 The other case on which A&R relies involved an overpayment in an appraisal

action based on “two computational errors, which caused the Court to overstate the fair

value of the shares by $2.27 per share.” 72 The Court sensibly found that “[d]efendants

are only entitled to the fair value determined by the Court, not an inflated value based on

miscalculations.” 73

          Neither of the cases on which Buyer relies is remotely similar to the situation here.

Based on the facts alleged in the Counterclaim, it is not reasonably conceivable that A&R

can demonstrate that it would be unconscionable to enforce the Merger Agreement.

                        b. Rescission Would Not Be Feasible

          Count IV also fails to state a claim for relief because it would not be possible in

my view to return the parties to the status quo.           “[T]he ordinary rule is that it is

impractical to unwind a consummated merger.” 74 As this Court stated in Winston v.

Mandor, when assessing the feasibility of rescission:



71
   In Re ENSTAR, 604 A.2d at 413 (“[E]nforcement of the parties’ agreement would be
unconscionable because it would result in the Belzbergs being paid for their shares twice,
a result which even the Belzbergs do not advocate.”).
72
  Am. Bottling Co. v. Crescent/Mach I P’rs, L.P., 2009 WL 3290729, at *1 (Del. Super.
Sept. 30, 2009).
73
     Id. at *4.
74
   Goodwin v. Live Entm’t, Inc., 1999 WL 64265, at *6 n.3 (Del. Ch. Jan. 25, 1999),
aff’d, 741 A.2d 16 (Del. 1999).

                                               33
         Two factors must go into the analysis: 1) the current circumstances of the
         challenged transaction, and 2) whether, the plaintiff would be unfairly
         prejudiced in some way by determination at this early stage of litigation,
         that he is foreclosed from obtaining a particular form of relief.
         Consideration of the first factor necessarily includes, among others, the
         time elapsed since completion of the challenged transaction; the complexity
         of that transaction, and thus the difficulty of undoing it; whether the
         transaction involves publicly traded securities and the percentage and
         number of such shares in public hands; possible unfair prejudice to the
         defendant(s) if the transaction were rescinded. The second factor is a
         relatively straightforward inquiry: Assuming plaintiff were to prevail on all
         of the claims as alleged in the complaint, would plaintiff be unfairly
         prejudiced in some way by relegation to a monetary equivalent
         (i.e. rescissory damages) rather than the equitable relief originally sought. 75

         Examining the first factor, the current circumstances of the challenged transaction

weigh decisively against the feasibility of rescission.         To start, A&R did not seek

rescission until about 22 months after the merger closed. Over three years have now

passed since the closing, which is a lifetime in the operation of a business. 76 During that

period, Buyer relocated the company’s headquarters, replaced the entire management

team, and sold the tank wash in Joliet, Illinois, which features prominently in Buyer’s

allegations of fraud. 77 Unwinding the merger would be unduly complicated due to these

and other changes A&R has made since taking over the company. Put differently, if

forced to return the merger consideration and to retake ownership of the Trucking

Company, the Securityholders would own a company fundamentally different from the

one they sold over three years ago.
75
     710 A.2d 831, 833-34 (Del. Ch. 1996).
76
  The Court in Winston found that the passage of “one full year . . . weigh[ed] against
undoing the transactions.” Id. at 834.
77
     Counterclaim ¶¶ 8, 53-55, 258, 484.

                                               34
         As to the second Winston factor, an award of money damages would not unduly

prejudice A&R if it prevails on its fraud claims. In fact, A&R’s Counterclaim explicitly

seeks damages as an alternative to rescission. 78         If A&R proves its fraud claims,

moreover, the amount of damages it may recover is not limited under the Merger

Agreement, which carves out from the indemnification cap losses arising in respect of

“fraud or intentional breach.” 79 Given A&R’s ability to recover an uncapped amount of

damages if it can prove its fraud claims, it would not suffer unfair prejudice by the

absence of a rescission remedy.

         Finally, A&R argues it is inappropriate to rule out the feasibility of rescission on a

motion to dismiss. I disagree. This Court has not hesitated to make this call on a motion

to dismiss where, as here, it is apparent that the remedy of rescission would “be

impracticable and the dismissal of that remedy in light of the requested alternatives, not

unfairly prejudicial.” 80 Here, I “can conceive of no possible circumstance in which I

would rescind the Merger,” 81 which closed more than three years ago. Accordingly,

Count IV of the Counterclaim is dismissed for this reason as well as A&R’s failure to

plead facts demonstrating that enforcement of the Merger Agreement would be

unconscionable.

78
     Id. at 182(c). See also Tr. of Oral Arg. at 184 (Nov. 16, 2015).
79
     Merger Agreement § 9.3(D).
80
  Winston v. Mandor, 710 A.2d 831, 832-35 (Del. Ch. 1996) (granting motion to dismiss
rescission claim); see also RGC Int’l Investors, LDC v. Greka Energy Corp., 2000 WL
1706728, at *16 n.59 (Del. Ch. Nov. 8, 2000) (Strine, V.C.) (same).
81
     RGC Int’l Investors, 2000 WL 1706728 at *16 n.59.

                                               35
       B.     FdG Logistics’ Motion for Summary Judgment

       The complaint that started this action asserts a single claim demanding that A&R

promptly remit to FdG Logistics, as the Securityholders’ Representative, the 2012 Tax

Refund under Section 9.6(E) of the Merger Agreement, which governs the disposition of

pre-closing tax refunds. FdG Logistics has moved for summary judgment on this claim.

This motion is straightforward.

       Under Court of Chancery Rule 56(c), summary judgment “shall be rendered

forthwith if the pleadings, depositions, answers to interrogatories and admissions on file,

together with the affidavits, if any, show that there is no genuine issue as to any material

fact and that the moving party is entitled to a judgment as a matter of law.” The evidence

must be viewed in the light most favorable to the non-moving party, and summary

judgment is warranted only where no rational trier of fact would fail to find that the

moving party is entitled to judgment. 82

       Section 9.6(E) of the Merger Agreement plainly states that any tax refunds

received after closing for pre-closing periods are the “property” of the Securityholders

and that they should be paid “promptly” to the Securityholders’ Representative on behalf

of the Securityholders. When “a writing is plain and clear on its face, i.e. its language

conveys an unmistakable meaning, the writing itself is the sole source for gaining an




82
   See Cerberus Int’l, Ltd. v. Apollo Mgmt., L.P., 794 A.2d 1141, 1150-51 (Del. 2002)
(“[T]he judge as gate-keeper merely considers whether the finder of fact could come to a
rational conclusion either way . . . .”).

                                            36
understanding of intent.” 83 A&R does not contend that Section 9.6(E) is ambiguous in

any respect.

         There also is no dispute as to any material fact concerning the 2012 Tax Refund.

A&R admits that A&R’s 2012 federal and state tax returns relate to pre-closing tax

periods, that A&R has received $2,080,650 in refunds in connection with those filings,

and that it has not remitted those refunds to FdG Logistics as the Securityholders’

Representative. 84 Based on a straightforward application of these undisputed facts and

the plain language of the contract, A&R has breached Section 9.6(E) of the Merger

Agreement by refusing to pay over the 2012 Tax Refund to FdG Logistics as the

Securityholders’ Representative.

         Unable to identify any ambiguity in the text of Section 9.6(E) or any genuine issue

of material fact, 85 A&R opposes the entry of summary judgment based on its demand for

rescission, which it seeks under the Delaware Securities Act and based on a unilateral



83
  City Investing Co. Liquidating Trust v. Cont’l Cas. Co., 624 A.2d 1191, 1198 (Del.
1993) (citing Citadel Hldgs. Corp. v. Roven, 603 A.2d 818, 822 (Del. 1992).
84
     Answer ¶¶ 17-18, 21.
85
   In opposition to the summary judgment motion, A&R submitted an affidavit under
Court of Chancery Rule 56(f) in which it asserts that discovery “is in the early stages”
and “Buyer does not have access to many of the facts needed to flesh out its
counterclaims, or the corresponding defenses to plaintiff’s claims.” The affidavit
describes the need for discovery to support A&R’s fraud claims and is not relevant to
FdG Logistics’ claim for summary judgment on the 2012 Tax Refund. Thus, I decline to
deny the motion for summary judgment based on this affidavit. See Intrepid Invs., LLC
v. Selling Source, LLC, 2015 WL 6157318, at *4 (Del. Ch. Oct. 20, 2015) (“Because
discovery within the context of Rule 56(f) would not be material to the Court’s summary
judgment decision, Intrepid’s motion for relief under that rule is denied . . . .”).

                                             37
mistake. According to A&R, if the Merger Agreement were rescinded, A&R would owe

no contractual obligation to remit the 2012 Tax Refund to the Securityholders’

Representative. 86 A&R also argues that, even if it could not obtain rescission under the

Delaware Securities Act, FdG Logistics would not be entitled to summary judgment as

long as A&R can establish any right to relief under the Act.         That is because the

Delaware Securities Act provides that “[n]o person who has made or engaged in the

performance of any contract in violation of any provision of this chapter . . . may base

any suit on the contract.” 87 In short, all of the grounds A&R advances to defeat the

motion for summary judgment depend on the viability of its claims under the Delaware

Securities Act and for rescission based on a unilateral mistake. Because I have concluded

that A&R fails to state a claim for relief on both of those grounds, A&R has no defense to

FdG Logistics’ motion and summary judgment will be entered in FdG Logistics’ favor.

         As part of its summary judgment motion, FdG Logistics requests the entry of a

partial final judgment under Court of Chancery Rule 54(b) so that it may receive the

payment for the 2012 Tax Refund now and not have to wait until the remaining claims in

this case have been adjudicated. A&R counters that an interlocutory payment to FdG

Logstics would be inappropriate because the damages A&R seeks in its Counterclaim far

exceed the amount of the 2012 Tax Refund. According to A&R, it “rarely makes sense


86
  There is no equity in this argument. Even if the merger were rescinded, A&R still
would have no right to the 2012 Tax Refund because, in that event, the refund would
belong to Old A&R, the ownership of which would return to the Securityholders.
87
     6 Del. C. § 73-605(f).

                                           38
to order payment on a smaller claim until it is known whether it will be swallowed up by

a larger one.” 88 A&R grounds this argument on what it describes as “principles of

offset—and of common sense,” 89 rather than citing any binding authority mandating the

result it seeks.

          The flaw in A&R’s argument is that it cannot be squared with the plain language

of the Merger Agreement. As discussed above, Section 9.6(E) of the Merger Agreement

expressly provides that A&R “shall promptly pay” pre-closing tax refunds to the

Securityholders’ Representative. A&R, a sophisticated contracting party, could have

bargained for the right to delay payment of the tax refunds pending the resolution of its

indemnification or other claims arising out of Merger Agreement. It did not do so. To

the contrary, it agreed when it signed the Merger Agreement to “promptly” remit pre-

closing tax refunds to the Securityholders’ Representative while simultaneously agreeing

that $10.4 million of the merger price would be withheld and placed in an escrow account

as security for indemnification claims. 90     It would be inappropriate to rewrite the

unambiguous terms of the Merger Agreement governing pre-closing tax refunds to have

it serve A&R’s current strategic interests in delaying payment of an obligation that is now

owed. 91



88
     A&R’s Ans. Br. Opp’n Mot. Summ. J. 28.
89
     Id. at 27.
90
     Merger Agreement §§ 2.13(B)(5), 9.5.
91
 See Fletcher Int’l, Ltd. v. Ion Geophysical Corp., 2011 WL 1167088, at *5 (Del. Ch.
Mar. 29, 2011) (“Fletcher, a sophisticated contracting party, could have bargained for the
                                             39
       There is, in short, no just reason to delay payment of the 2012 Tax Refund to the

Securityholders’ Representative. Accordingly, I will enter a partial final judgment under

Court of Chancery Rule 54(b) requiring that payment of the 2012 Tax Refund, plus

interest, be made to the Securityholders’ Representative within ten days after the entry of

judgment. I also will enter a final judgment under Rule 54(b) concerning the dismissal of

A&R’s claims under the Delaware Securities Act and for rescission based on unilateral

mistake (Counts II and IV of the Counterclaim) because A&R argues that they provide a

defense to the 2012 Tax Refund claim. In this way, all of the issues potentially relevant

to the 2012 Tax Refund claim may considered together if A&R wishes to seek appellate

review.

III.   CONCLUSION

       For the foregoing reasons, the Securityholders’ motions to dismiss Counts II and

IV of the Counterclaim are granted, and denied as to Count III of the Counterclaim. FdG

Logistics’ motion for summary judgment is granted. A form of implementing order

accompanies this opinion.




right it now in effect claims . . . . It did not, and this court is not empowered to rewrite
an unambiguous contract in order to have it meet Fletcher’s current business needs.”).

                                            40
