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Court of Chancery of Delaware
December 17, 2021, Submitted; March 9, 2022, Decided
C.A. No. 2019-0904-JRS
SLIGHTS, Vice Chancellor
Yogi Berra said, "You can observe a lot just by watching."1 The buyer in this post-closing fraud and breach of contract case apparently was not of this mindset as it approached the transaction at the heart of this dispute. That buyer, Defendant/Counterclaim Plaintiff, [*2] AW Site Services, LLC ("AWS"), was as informed about the businesses it sought to acquire as any buyer could be. The targets, waste disposal businesses founded and built by Plaintiff John D. Arwood, had not been prepared for sale when Arwood received AWS's expression of interest, and Arwood lacked the know-how or inclination to prepare financial records or to formulate useful valuations. Consequently, AWS was forced to take on full responsibility for valuing the sellers' assets. With no seller valuations, no seller financials, and no other datapoints in hand, AWS insisted upon, and was given, full and unfettered access to the businesses' raw financial and other records, including the personal finances of their owner, Arwood, so that it could value the businesses for itself and decide whether it wanted to acquire them.
Yet, when the businesses did not perform as AWS had hoped after the acquisition closed, it claimed fraud. That claim found no support in the trial evidence. Instead, the preponderance of evidence proved that, if this buyer did not appreciate the facts it now claims were fraudulently concealed from it, that incognizance was the product of [*3] its own reckless failure to observe what was right in front of it.
Arwood started in the waste business as a child collecting "aluminum cans and pop bottles" from the side of the road.2 After decades of operating various waste disposal companies, Arwood ultimately built an online dumpster and portable toilet rental/brokerage platform that attracted the attention of potential buyers, including the private equity firm Broadtree Partners, LLC. But there was a problem. While Arwood had developed an attractive and successful business plan, he did not know how to package a business to be sold. Arwood had not valued his businesses; in fact, he did not maintain any financial records, and he did not know how to prepare them.
Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.
2022 Del. Ch. LEXIS 57 *; 2022 WL 705841
JOHN D. ARWOOD, TOGETHER WASTE, INC., A.W. WASTE MANAGEMENT, INC., DUMPSTER.ME, LLC, DUMPSTER.ME OF WAKE COUNTY, LLC, PORTABLE TOILET RENTAL COMPANY, INC., ARWOOD WASTE, INC. and ARWOOD SITE SERVICES, INC., Plaintiffs, v. AW SITE SERVICES, LLC, Defendant.AW SITE SERVICES, LLC, Counterclaim Plaintiff, v. JOHN D. ARWOOD, TOGETHER WASTE, INC., A.W. WASTE MANAGEMENT, INC., DUMPSTER.ME, LLC, DUMPSTER.ME OF WAKE COUNTY, LLC, PORTABLE TOILET RENTAL COMPANY, INC., and ARWOOD WASTE, INC., Counterclaim Defendants, and STEVEN C. GOODE, Third-Party Defendant.
Subsequent History: Corrected: March 10, 2022. Amended: March 24, 2022
Motion granted by Arwood v. AW Site Servs., LLC, 2022 Del. Ch. LEXIS 71 (Del. Ch., Mar. 31, 2022)
customer, dumpster, buyer, seller, Entities, representations, Selling, damages, sandbagging, overage, haulers, parties, warranties, financial statement, estimating, employees, acquisition, due diligence, breached, records, weights, Counterclaim, practices, billing, portable toilet, escrow, liens, indemnification, argues, brokerage business
Torts, Fraud & Misrepresentation, Actual Fraud, Elements, Civil Procedure, Trials, Jury Trials, Province of Court & Jury, Evidence, Types of Evidence, Circumstantial Evidence, Inferences & Presumptions, Inferences, Business & Corporate Compliance, Breach, Breach of Contract Actions, Elements of Contract Claims, Contracts Law, Contract Interpretation, Good Faith & Fair Dealing, Contracts Law, Contract Conditions & Provisions, Express Warranties, Insurance Law, Liability & Performance Standards, Disclosure Obligations by Insureds, Warranties, Breach of Warranty, Types of Contracts, Negligence, Gross Negligence, Attorney Fees & Expenses, Basis of Recovery, American Rule