Haney v. Blackhawk Network Holdings, Inc., C.A. No. 10851-VCN (Del. Ch. Feb. 26, 2016) (Noble, V.C.)
In this memorandum opinion, the Court of Chancery granted in part and denied in part Defendant Blackhawk Network Holdings, Inc.’s (“Blackhawk”) motion to dismiss in an action brought on behalf of stockholders of CardLab, Inc. (“CardLab”) who sold their interests in CardLab to Blackhawk pursuant to a merger agreement. Plaintiff alleged that Blackhawk failed to disclose an exclusivity provision that precluded a prospective contract of CardLab upon execution of the merger agreement causing a reduction of post-closing earn-out payments the stockholders expected to receive.
In support of its motion to dismiss Plaintiff’s fraud claim based on the lack of disclosure, Blackhawk contended that claims for fraud were barred by an integration clause in the merger agreement. The Court rejected this argument, observing that a contract cannot preclude fraud claims based on extra-contractual statements unless there is “a clear anti-reliance clause by which the plaintiff has contractually promised that it did not rely upon statements outside the contract’s four corners in deciding to sign the contract.” The Court did not find such “anti-reliance” language in the merger agreement’s integration clause or elsewhere in the agreement.
Next, the Court held that Plaintiff had adequately alleged fraudulent conduct to survive Blackhawk’s motion to dismiss. The parties disagreed as to whether Blackhawk knew or was in a position to know of the exclusivity provision and whether CardLab had justifiably relied on their omissions – both elements of a fraud claim. The Court held that the Blackhawk executives’ familiarity with the industry and the revision of the merger to make $2.5 million of the merger consideration contingent on a finalized contract supported reasonable inferences to meet these elements.
Plaintiff also asserted a claim that Blackhawk breached the implied covenant of good faith and fair dealing by deliberately acting to keep CardLab from receiving the earn-out payment and failure to disclose the exclusivity provision. The Court dismissed this claim, explaining that the implied covenant “only applies where a contract lacks specific language governing an issue and the obligation the court is asked to imply advances, and does not contradict, the purposes reflected in the express language of the contract.” Here, the Court held, Blackhawk’s obligations were contained in the express provisions of the merger agreement.
Finally, the Court held that Plaintiff had adequately stated a claim for unjust enrichment by sufficiently alleging fraud in connection with the merger agreement and seeking equitable remedies. The Court noted that “[a]lthough merely suggesting that the validity of a contract may be in doubt is insufficient to support a claim for unjust enrichment, a claim that the underlying agreement is subject to rescission due to fraudulent conduct or omissions is sufficient to do so.”