Addressing the false representation prong of the fraud claim, the Court dismissed statements made by WCG during negotiations such as WCG’s being “the best partner to accelerate growth” and that WCG would “support [Trifecta] with over 100 sales and marketing staff” as mere puffery, a form of corporate optimism to boost its appeal. But the Court found the scienter (intent) element was satisfied when soon after closing, personnel was prevented from speaking with potential customers, Trifecta’s key integrated product was split into two, and the sales staff was reduced to one full-time employee for those products, each action contradicting material representations made during negotiations as oral promises or in the letter of intent. Finally, the Court clarified that Delaware law followed the majority rule concerning justifiable reliance, another element of fraud, holding that because reliance is a highly contextual inquiry, only explicit and unambiguous nonreliance language would constitute a contractual bar to a fraud claim and an integration clause stating which agreements control is insufficient. With these elements met, the Court found that the fraud claim survived the motion to dismiss, as these facts established Trifecta justifiably relied on WCG’s material oral representations in entering the purchase agreement.
On the other hand, the Court dismissed the breach of the implied covenant of good faith and fair dealing claim, which Trifecta argued occurred when WCG engaged in activities that frustrated the ability of Trifecta to achieve the earn-out revenue milestones. Trifecta argued that WCG had an implied obligation to act in good faith to achieve the earn-out revenue milestones because an express requirement was removed in negotiations after WCG counsel’s statements that such a clause was already implied under Delaware law. The Court disagreed, holding that because the clause was specifically negotiated and the parties mutually agreed not to include it in the agreement, there was no gap to be filled by the implied covenant as necessitated by Delaware law. Furthermore, the Court held that the mutually agreed understanding would be barred by the parole evidence rule because, unlike the fraud exception that applied to the misrepresentations, no exception applied and the integration clause controlled.
