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Court Allows Claims to Proceed Based on Lack of Disclosure in Purchase Agreement for Casino

By Francis G.X. Pileggi

Ameristar Casinos Inc. v. Resorts International Holdings LLC, C.A. No. 3685-VCS (Del. Ch. May 11, 2010), read opinion here.

Issue Addressed
Was a lack of full disclosure regarding a substantially increased tax liability both fraud and a breach of factual representations in the context of a Purchase Agreement to buy a casino, when the assessment became known after the Purchase Agreement was signed but was not fully disclosed prior to the closing? Answer: The claims were allowed to proceed to trial.

Overview
This decision should be read by anyone who seeks to argue that lack of adequate disclosure of a liability in connection with a Purchase Agreement was either fraud or a breach of representations made in the agreement.

Discussion
The Court discussed the detailed facts that were not disclosed prior to the closing but which arose during the 3-month period after the Purchase Agreement was signed. See pages 9 and 10.

The following key points were addressed.

• The equitable fraud claim was rejected due to the absence of a request for any equitable remedy and the absence of any fiduciary relationship, but common law fraud claims were allowed to proceed.
• Claims for quantum meruit and unjust enrichment were dismissed because the terms of the Purchase Agreement governed the dispute of the parties.
• The Court engaged in a detailed factual analysis to explain why the claims for the breach of representations were allowed to proceed and why the Motion to Dismiss of those claims was denied.

 

Full post as published by Delaware Corporate and Commercial Litigation Blog on May 15, 2010 (boomark / email).