Fraud Carveouts in M&A Transactions Must be Crafted Carefully to Avoid Ambiguity

In a recent decision, the Delaware Chancery Court refused to throw out a lawsuit with post-closing claims for indemnification against the sellers of EMSI Holding Company, a medical information services business. The case involved allegations of fraudulent representations made by the company in the Stock Purchase Agreement. The court said “inelegant drafting” of the SPA created an ambiguity that prevented dismissal at this stage. The decision in EMSI Acquisition Inc. v. Contrarian Funds LLC illustrates the importance of clear drafting of fraud carve-outs in M&A transactions. Read more.