Chancery Reverses Two Previous Rulings, Finds An Integration Clause Does Not Prevent Future Fraud Claims Based on Expressions of Intent | Morris James LLP

Trifecta Multimedia Holdings Inc. – WCG Clinical Services, CA No. 2023-0699-JTL (Del. Chapter June 10, 2024)

Savvy parties often include “anti-trust” clauses in transaction agreements; whereby one or both parties expressly refuse to rely on representations made outside the agreement. In this case, the Court of Chancery considered whether an integration clause would bar a fraud claim based on future expressions of intent in the absence of an express anti-reliance clause in the agreement. Unlike the two previous decisions, the Court concluded that the integration provision alone was not sufficient to prevent this type of fraudulent claim.

Defendants requested dismissal of plaintiff’s fraud claim based on an integration clause in the parties’ purchase agreement. Relying on two prior Court of Chancery decisions (Shareholder Representative Services LLC v. Albertsons Companies, Inc. and Black Horse Capital, LP v. The general rule is that it is hindered by language. Because the alleged fraudulent statements related to statements of future intentions and were not factual misrepresentations, Defendants argued that the integration clause barred these claims. The court rejected this claim. The Court ruled that both Albertsons and Xstelos rejected Abry Partners v. It announced that it was based out of F&W Acquisition LLC. The court stated that Albertsons and Xstelos misapplied Abry’s holdings. Therefore, the defendants’ defense failed because it was based on a misapplication of the law. Accordingly, the Court rejected the defendants’ request to dismiss.