## Facts

- An investor purchased Encorp, Inc. stock and warrants in a private placement after receiving a private placement memorandum (PPM) containing financial information and projections.
- The parties executed a written purchase agreement that included an integration clause and a non-reliance/disclaimer structure limiting representations to those contained in the agreement, including specified financial statements as of September 30, 2000.
- The investor alleged the offering materials and communications were misleading and omitted adverse developments, including deteriorating performance and loss of a significant customer.
- After the investment, Encorp proposed a repricing/settlement transaction offering additional shares to investors who executed broad releases; most investors accepted, but the plaintiff refused and alleged the proposal was coercive and discriminatory.
- Encorp implemented the settlement and related actions through stockholder written consents; the plaintiff alleged the consents failed to satisfy statutory formality requirements, including dated signatures.
- The plaintiff also challenged a voting agreement tied to approval of the transaction.
- Defendants moved to dismiss under Rule 12(b)(6), contesting the viability of extra-contractual fraud/contract theories and the sufficiency of fiduciary duty and statutory allegations.

## Issues

1. Whether integration and non-reliance provisions barred misrepresentation and contract claims based on PPM statements and other extra-contractual information.
2. Whether claims tied to information referenced in, incorporated into, or warranted by the purchase agreement were adequately pled.
3. Whether allegations attacking the repricing/settlement transaction as coercive and discriminatory stated a fiduciary-duty claim sufficient to overcome the business judgment rule at the pleading stage.
4. Whether alleged defects in stockholder written consents stated a claim that the resulting corporate actions were invalid under DGCL § 228(c).
5. Whether challenges to the voting agreement survived to the extent they depended on dismissed versus surviving theories.

## Decision

- The court dismissed misrepresentation and contract claims to the extent they relied on statements and materials not incorporated into the fully integrated purchase agreement.
- The court allowed misrepresentation and breach-of-contract claims to proceed to the extent they were grounded in representations, warranties, or information referenced in the purchase agreement.
- The court dismissed fiduciary-duty/unfairness claims challenging the settlement transaction because the complaint did not plead facts rebutting the business judgment rule (e.g., self-interest, lack of independence, or bad faith).
- The court denied dismissal of the DGCL § 228(c) claim, holding that allegations of undated or otherwise noncompliant written consents sufficiently stated a challenge to the validity of the corporate actions.
- The voting-agreement challenge was treated as dependent on the underlying theories: it did not survive insofar as it was merely part of the dismissed fiduciary-duty attack, but was not categorically foreclosed where tied to surviving contract/statutory claims.

## Legal Principles

- A clear integration clause and non-reliance/disclaimer provisions between sophisticated parties can bar claims premised on reliance on extra-contractual statements, including offering-memorandum projections not incorporated into the agreement.
- Contract and misrepresentation claims may proceed when they are based on representations and warranties contained in, or expressly referenced by, the written agreement governing the transaction.
- Under the business judgment rule, pleading-stage fiduciary-duty claims attacking board-approved transactions require particularized allegations showing disloyalty, lack of independence, bad faith, or similar facts sufficient to rebut the presumption of proper decisionmaking.
- Stockholder action by written consent is subject to strict statutory formalities; adequately pleaded noncompliance with DGCL § 228(c) (including dated signatures and related requirements) can support a claim that the corporate action is invalid.

## Conclusion

The court narrowed the case by enforcing contractual integration and non-reliance terms to eliminate extra-contractual fraud and related contract theories, dismissed the fiduciary-duty challenge to the settlement under the business judgment rule, and allowed litigation to proceed on claims tied to contractual warranties and on a statutory challenge alleging defective stockholder written consents under DGCL § 228(c).


H-M Wexford, LLC v. Encorp, Inc., 832 A.2d 129 (Del. Ch. 2003)