IAC Can’t Bring Fraud Claim Over Investopedia Purchase

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By Michael Greene

Nov. 30 — An IAC/InterActive Corp. subsidiary can’t pursue a claim that it was fraudulently induced into overpaying for the Investopedia website, the Delaware Chancery Court ruled Nov. 30 ( IAC Search LLC v. Conversant LLC , 2016 BL 397489, Del. Ch., No. 11774-CB, 11/30/16 ).

IAC Search LLC in January 2014 bought six ValueClick Inc. subsidiaries for $90 million. One of the subsidiaries was Investopedia LLC, which operates a financial education website. IAC alleged that ValueClick—now known as Conversant LLC—misrepresented Investopedia’s advertisement sales during the due diligence phase.

IAC can’t bring its fraud claim because the parties’ agreement disclaimed reliance on statements made outside the contract, such as during the due diligence process, Chancellor Andre G. Bouchard ruled.

The decision provides further guidance on how the Delaware courts will treat non-reliance provisions—clauses stating that the parties haven’t relied on extra-contractual information. Bouchard found that certain provisions in the parties’ agreement added up to “a clear anti-reliance clause.”

The court cited its previous decisions in Prairie Capital III v. Double E Holding Corp., 2015 BL 386569, and FdG Logistics LLC v. A&R Logistics Holdings Inc., 2016 BL 50399, which clarify that there are no “magic words” to implement a clause stating that the buyer didn’t rely on extra-contractual statements. The decisions also found that the disclaimer must come from the buyer rather than the seller.

However, Bouchard allowed IAC to proceed with certain breach of contract allegations against ValueClick relating to the other subsidiaries. Those claims, unlike the fraud allegation, are subject to an $8 million indemnity cap under the parties’ agreement.

IAC, a New York-based online media company whose products and brands include HomeAdvisor, Vimeo, About.com, Dictionary.com and Match Group’s online dating portfolio, is also fighting another legal challenge at the chancery court unrelated to the ValueClick case. In that lawsuit, shareholders claim that IAC directors breached their fiduciary duties by agreeing to create a class of non-voting shares.

To contact the reporter on this story: Michael Greene in Washington at mGreene@bna.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bna.com

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