“Sandbagging” in the acquisition context refers to a situation where a buyer closes an acquisition on the basis of representations in the purchase agreement it knows to be false, then proceeds to sue the seller post-closing based on a breach of those same representations. Although Delaware was historically regarded as a pro-sandbagging jurisdiction, the Delaware Supreme Court’s stance on sandbagging came into question following dicta contained in a 2018 decision, Eagle Force Holdings, LLC v. Campbell. In Eagle Force, a footnote by Justice Valihura stated that the Supreme Court had not resolved the “interesting question” of “whether a party can recover on a breach of warranty claim where the parties know that, at signing, certain of them were not true,” while then-Chief Justice Strine in his partial dissent expressed “doubt” that a plaintiff can “turn around and sue because what he knew to be false remained so.” But we now have a (mostly) clear statement on the subject from the Chancery Court. In Arwood v. AW Site Services, LLC, Vice Chancellor Slights upheld a buyer’s claim for breach of representations, notwithstanding the sellers’ sandbagging objections based on the buyer’s extensive due diligence.
The Arwood decision arose out of a post-closing dispute over an alleged fraudulent billing scheme that caused a substantial overstatement of revenue. After the closing, the sellers sued the buyer to release funds held in escrow. The buyer countered with claims for fraud and...
A person in his 30s who demanded compensation for alleged foreign substances in cup noodles and the absence of meat in stir-fried pork was sentenced to prison in both the first trial and the appel...