Del. Supreme Court: Missed Contractual Delivery of Audited Financials Triggers Inquiry Notice, Barring Investor Fraud Claims

Litigation attorneys Patrick Reagin and Abigail Grise co-authored an article for the Delaware Business Court Insider examining a recent Delaware Supreme Court decision addressing when investors are put on inquiry notice of potential fraud. In Cornice Ventures I v. Silberstein, the court affirmed the dismissal of fraud, negligent misrepresentation and unjust enrichment claims brought by two venture investors, finding that the company's failure to timely provide contractually required audited financial statements was a sufficient red flag to trigger inquiry notice and start the clock on the applicable statute of limitations. Patrick and Abigail explain that although the case arose from a venture financing, its reasoning may extend to mergers and acquisitions (M&A) transactions involving post-closing financial deliverables. They advise parties to treat missed or deficient deliverables as potential warning signs, promptly exercise contractual information and audit rights, and carefully track limitations periods from the date a required deliverable is missed rather than when the full extent of a potential claim becomes known.

READ: Del. Supreme Court: Missed Contractual Delivery of Audited Financials Triggers Inquiry Notice, Barring Investor Fraud Claims (Subscription required)