Delaware Court of Chancery Affirms Pro-Sandbagging Stance

Sandbagging, in the context of an M&A transaction, refers to a situation where the buyer closes an acquisition based on certain representations and warranties it knows to be false, and then seeks to hold the seller liable post-closing for breach of those same representations and warranties. In the recent Delaware Court of Chancery’s decision in Arwood v. AW Site Services, LLC, the court affirmed its pro-sandbagging stance in rejecting seller’s argument that buyer was foreclosed from asserting claims for contractual breach of representation and warranty in the acquisition agreement because buyer knew that such seller representations were false prior to closing. Review this guidance discussing the Arwood decision.   

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