Contractual Limits On Liability Only Go So Far In Delaware

On Aug.12, in Online HealthNow Inc. and Bertelsmann Inc. v. CIP OCL Investments LLC, Vice Chancellor Joseph Slights of the Delaware Court of Chancery denied the defendants' motion to dismiss a buyer's post-closing fraud claims arising from representations and warranties in a purchase agreement that allegedly were known to be false when made.

Vice Chancellor Slights noted that a seller may not use a limitation of liability clause in a contract obtained by fraudulent inducement to bar a buyer's fraudulent contract claim.

Background

During 2018, CIP Capital Fund LP, a private equity fund that indirectly owned CIP OCL Investments LLC, initiated an auction process to sell OnCourse Learning Corp. The auction process was managed by a working group that comprised representatives from CIP Capital's financial adviser, representatives of CIP Capital — the co-managing partner and a vice president of CIP Capital — and the CEO and chief financial officer of OCL.