The dispute in Pilot Air Freight, LLC v. Manna Freight Systems, Inc., No. 2019-0992-JRS, 2020 WL 5588671 (Del. Ch. Sept. 18, 2020), arose out of an asset purchase agreement (the Agreement), whereby the plaintiff, Pilot Air Freight, LLC (Pilot), purchased substantially all the assets of the defendant, Manna Freight Systems, Inc. (Manna).
Under the Agreement, Manna, as the seller, made contractual representations and warranties to Pilot, the buyer, regarding the fitness of Manna’s trucking business. The parties agreed that Manna would indemnify Pilot for any breaches of the representations and warranties, and that any claim for indemnification must be filed within 15 months of the Agreement closing. Manna’s contractual representations and warranties included a statement that it had not received notice that any of its 30 largest customers for the previous calendar year would materially reduce their use of Manna’s services after the transaction closed. Apart from Manna’s contractual representations and warranties, Pilot disclaimed reliance on any extra-contractual representations.
The Agreement closed on July 16, 2018. Thereafter, Pilot alleged it discovered loss of most or all business from three of the designated key customers and one vendor, who had given Manna notice of material changes to their relationship. Pilot submitted an indemnification demand to Manna within 15 months of closing. Manna rejected the demand, resulting in Pilot filing suit against Manna more than 15 months after closing, on December 11, 2018. Pilot alleged breach of contract, breach of the implied covenant of good faith and fair dealing, fraud, and contractual indemnification against Manna.
Manna moved to dismiss Pilot’s claims. First, Manna argued the Agreement’s 15-month survival clause shortened the limitations period for claims alleging breach of representations and warranties. Second, Manna argued, among other things, that the fraud claims should fail because they were untimely for the same reason as the contractual representation and warranty claims and were barred by the anti-reliance language in the Agreement to the extent they alleged extra-contractual fraud.