LGM Holdings, LLC v. Gideon Schurder

IN THE SUPREME COURT OF THE STATE OF DELAWARE

LGM HOLDINGS, LLC and LGM §
SUBSIDIARY HOLDINGS, LLC, §
§ No. 314, 2024
Plaintiffs Below, §
Appellants, §
§ Court Below: Superior Court
v. § of the State of Delaware
§
GIDEON SCHURDER, MENDY § C.A. No. N23C-09-011
SCHURDER, LEAH CHITRIK, and §
IBS PHARMA, INC. §
§
Defendants Below, §
Appellees. §

Submitted: January 29, 2025
Decided: April 22, 2025

Before VALIHURA, TRAYNOR, and GRIFFITHS, Justices.

Upon appeal from the Superior Court. REVERSED AND REMANDED.

Thomas E. Hanson, Jr., Esquire, BARNES & THORNBURG LLP, Wilmington,
Delaware; Eric H. Sussman, Esquire (argued), BARNES & THORNBURG LLP,
Chicago, Illinois for Appellants LGM Holdings, LLC and LGM Subsidiary Holdings,
LLC.

Travis S. Hunter, Esquire, Gabriela Z. Monasterio, Esquire, RICHARDS, LAYTON
& FINGER, P.A., Wilmington, Delaware; Michael J. Payne, Esquire (argued),
FRANKEL, RUBIN, KLEIN, PAYNE & PUDLOWSKI, P.C., St. Louis, Missouri
for Appellee Gideon Schurder.

John M. Seaman, Esquire (argued), Florentina D. Field, Esquire, ABRAMS &
BAYLISS LLP, Wilmington, Delaware for Appellees Mendy Schurder, Leah
Chitrik, and IBS Pharma, Inc. (collectively, the “IBS Sellers”).
TRAYNOR, Justice:

The buyers of a pharmaceutical business appeal the Superior Court’s dismissal

of their fraudulent-inducement and indemnification claims against the sellers. In

short, the trial court determined that that the buyers had waived their fraudulent-

inducement claims and that the indemnification claim was time-barred.

The court’s waiver determination was based on its interpretation of a letter

agreement between the parties, which was executed several years after the buyers’

acquisition of the business and in the wake of governmental proceedings involving

FDA and Department of Justice investigations of the acquired business. According

to the sellers, the purpose of the letter agreement was to preclude further litigation

between the parties, including claims of the kind the buyers made in this case. The

buyers, on the other hand, understood the letter agreement not as waiving their fraud

claims but as simply limiting the size and scope of claims for the recovery of losses

attributable to the governmental proceedings. The Superior Court agreed with the

sellers and, in consequence, dismissed the buyers’ fraudulent-inducement claims.

We hold that the buyers’ interpretation of the letter agreement is reasonable, as is the

sellers’ and the trial court’s. Put another way, we find that the relevant provision of

the letter agreement is ambiguous and that it was therefore inappropriate for the court

to dismiss the buyers’ fraudulent-inducement claim. We conclude, too, that the

buyers adequately pleaded that the sellers had fraudulently concealed the facts

2
giving rise to the buyers’ indemnification claim such that the otherwise applicable

survival period for bringing the claim was tolled. Because it is reasonably

conceivable that the buyers’ indemnification claim was timely filed, the court erred

in dismissing it. Consequently, and as more fully explained below, we reverse the

Superior Court’s judgment and remand for further proceedings.

I

A

Gideon Schurder, Mendy Schurder, Leah Chitrik, and IBS Pharma, Inc.

(“IBS”) (collectively, the “Sellers”) owned three pharmaceutical companies (the

“Target Companies”).1 The Target Companies, one of which was LGM Pharma,

LLC (“LGM”), sourced and distributed active pharmaceutical ingredients (“API”)

from manufacturers and suppliers around the world.

On September 19, 2017, LGM Holdings, LLC and LGM Subsidiary Holdings,

LLC (collectively, the “Buyers”) entered into an agreement with the Sellers to

acquire the Target Companies (the “Purchase Agreement”). Specifically, the Buyers

agreed to purchase shares in the Target Companies in exchange for $23.4 million in

cash, an interest in LGM Holdings, LLC valued at $6.6 million, and two unsecured

1
Because Appellees Gideon Schurder and Mendy Schurder share a surname, this opinion refers to
them by their first names for the sake of clarity. No disrespect or familiarity is intended.

3
$2.5 million promissory notes to Gideon and IBS. Hence, the total value of the

acquisition was approximately $35 million.

In Article IV of Purchase Agreement, the Sellers made numerous

representations and warranties to the Buyers. Three of those representations and

warranties are relevant here. In Section 4.20, the Sellers represented that the Target

Companies and their facilities were in material compliance with applicable laws and

had been for the past seven years.2 In Section 4.21, the Sellers represented that the

Target Companies were in material compliance with “all Health Care Laws” and had

been for the past five years.3 And in Section 4.30, the Sellers represented that their

representations and disclosures were complete and accurate.4

Article XII of the Purchase Agreement contains indemnification provisions.

Section 12.1(b)(ii) provides, in pertinent part, that:

Subject to the limitations set forth herein, the Selling Parties shall
indemnify, protect, defend and hold and save the Buyer Parties
harmless, from and against the entirety of any Losses any of the Buyer
Parties may suffer, sustain or become subject to, including in
connection with any charges, complaints, actions, suits, proceedings,
hearings, investigations, claims, demands, judgments, orders, decrees,
stipulations, injunctions, through and after the date of the claim for
indemnification, including without limitation any Losses any of the
Buyer Parties may suffer, sustain, or become subject to, after the end of
the applicable Survival Period (if applicable) if a claim is made,
specifying the factual basis in reasonable detail before the end of such
Survival Period, resulting from, arising from or out of, or caused by:

2
App. to Opening Br. at A139.
3
Id. at A140.
4
Id. at A145.

4
(A) any breach or inaccuracy of any representation or warranty set
forth in Article IV of this Agreement . . . .5

Section 12.1(a)(iii) provides a five-year survival period for indemnification claims

relating to representations set forth in Section 4.21—the “Health Care

Representations.”6 Section 12.1(a)(iii) states:

All of the representations and warranties that constitute Health Care
Representations shall survive the Closing, and shall continue in full
force and effect until . . . sixty (60) months thereafter . . . after which
period such representations and warranties shall terminate and have no
further force or effect[.]7
Section 12.3(a) of the Purchase Agreement sets forth the procedure by which the

Buyers could seek indemnification from the Sellers. Section 12.3(a), titled “Claims

Procedure,” states:

An Indemnified Person shall give prompt written notice (a “Claim
Notice”) to the Indemnifying Person after the Indemnified Person first
becomes aware of any event or other facts that has resulted or that might
result in any Loss for which the Indemnified Person is entitled to any
indemnification under this Agreement . . . .8

Finally, Section 12.9, titled “Indemnification as Sole Remedy,” provides that “the

sole and exclusive remedy” for breaches of representation and warranties of the

Purchase Agreement is “the indemnification and reimbursement obligations of the

5
Id. at A165 (emphasis added).
6
See id. at A100 (defining “Health Care Representations” as the “representations and warranties
set forth in Section 4.21”).
7
Id. at A164 (emphasis added).
8
Id. at A166 (emphasis in original).

5
Parties set forth in [] Article XII.”9 It clarified, however, that “Section 12.9 shall not

[] prevent or limit a cause of action [] hereunder with respect to fraud, bad faith or

intentional misrepresentation . . . .”10

The acquisition closed on November 15, 2017. Following the acquisition,

Gideon took on the role of LGM’s Commercial Director and Mendy took on the role

of LGM’s Chief Operating Officer.

B

On September 17, 2018, less than one year after the parties entered into the

Purchase Agreement, the United States Food and Drug Administration (“FDA”)

inspected LGM’s facility in Erlanger, Kentucky. During its inspection, the FDA

discovered mislabeled shipments of API at LGM’s warehouse.11 According to the

Buyers, during the FDA’s investigation, Gideon actively concealed his role in the

mislabeling of API by withholding emails from the FDA and producing a false

product-investigation log.12 The FDA concluded its inspection in December 2018

and issued LGM a Form 483—a form issued when an FDA investigation reveals

potential regulatory violations.13 In the Form 483, the FDA listed eleven concerns

9
Id. at A170.
10
Id.
11
Specifically, the FDA focused on two shipments of cidofovir that had arrived at LGM’s facility
falsely labeled as tranexamic acid, which were then improperly relabeled by LGM. See id. at A27.
12
See id.
13
See generally FDA Form 483 Frequently Asked Questions, U.S. Food & Drug Administration
(Jan. 9, 2020), https://www.fda.gov/inspections-compliance-enforcement-and-criminal-

6
that had emerged during its inspection of LGM’s Kentucky facility, relating

primarily to the improper labeling of API, quality control deficiencies, and

inadequate internal controls.

The FDA allows recipients of a Form 483 to respond to the concerns raised

by the inspection and implement a corrective plan before the FDA takes further

action. To facilitate its response, LGM engaged outside counsel from Reed Smith

LLP to investigate the relabeling of API shipments. The investigation revealed

Gideon’s alleged role in the mislabeling of API and his attempts to hinder the FDA’s

investigation.14 In light of these discoveries, LGM terminated Gideon. LGM turned

the results of its internal investigation over to the FDA in January 2019.

The Form 483, meanwhile, had caught the attention of the United States

Department of Justice (“DOJ”). One year later, in January 2020, LGM received a

grand jury subpoena from the DOJ Criminal Division requesting information about

LGM’s purchase, receipt, and distribution of API. The Buyers retained Reed Smith

to review and produce tens of thousands of documents in response to the DOJ

subpoena. During this process, the Buyers purportedly uncovered numerous

instances of misconduct by Gideon and Mendy. Specifically, the Buyers claim to

have discovered that “Gideon and Mendy routinely violated health care laws,

investigations/inspection-references/fda-form-483-frequently-asked-questions.
14
Reed Smith determined that Gideon withheld and materially altered relevant documents and lied
to the FDA. See App. to Opening Br. at A30.

7
customs restrictions, and regulations in the U.S. and in other jurisdictions” and that

“many of these violations took place prior to [the Buyers’] acquisition of the Target

Companies.” 15 This caused the Buyers to conclude that the representations and

warranties that the Sellers made in Sections 4.20, 4.21, and 4.30 of the Purchase

Agreement were false.

C

After learning of Mendy’s misconduct, the Buyers removed him from his

position at LGM. In July 2020, LGM Holdings, LLC and LGM entered into a

confidential letter agreement (the “Letter Agreement”) with Gideon, Mendy, and

IBS. The Letter Agreement’s recitals state that “[Gideon, Mendy, and IBS] and

[LGM and LGM Holdings, LLC] desire to set forth certain mutual understandings

and agreements in relation to the relative rights and obligations of the Parties in the

Purchase Agreement and related transaction documentation in respect to the

Governmental Proceedings . . . .”16 The Letter Agreement defines “Governmental

15
Id. at A32. Specifically, the Buyers claim that the Sellers were not in material compliance with
all jurisdictions where they operated because the Sellers: “(1) shipped mislabeled API to the U.S.,
Isreal, and Switzerland, (2) returned API to manufactures with an incorrect product name, (3)
registered manufactures with the FDA without their knowledge or consent, (4) registered
intermediaries rather than manufacturers, (5) failed to declare full value of API shipments, and (6)
purchased API that the manufacturers specifically instructed suppliers should not be sold in the
U.S.” Id. at A32. In their complaint, the Buyers include excerpts from emails sent to and from
Gideon and Mendy to demonstrate their roles in this misconduct. See id. at A34–55.
16
Id. at A799.

8
Proceedings” to include the FDA Form 483, DOJ subpoena, and any potential state

actions related to either the Form 483 or the DOJ subpoena.17

As part of the Letter Agreement, the parties agreed to certain caps on

indemnification regarding “Losses attributable” to the Governmental Proceedings.

Section 4(a) of the Letter Agreement, which is at the center of the parties’ dispute,

reads as follows:

4. Indemnification. Notwithstanding anything to the contrary set
forth in the Purchase Agreement (including, without limitation, Article
XII of the Purchase Agreement):

(a) in the event Parent, Subsidiary Holdings, LGM (or one of
its Affiliates (other than the Sellers)) elects to seek indemnification from
the Sellers pursuant to Article XII of the Purchase Agreement in respect
of Losses attributable to (y) one or more of the Governmental
Proceedings or (z) any matter set forth on Schedule 12.1(b) of the
Purchase Agreement, LGM agrees that it and any other Buyer Party that
seeks indemnification thereunder shall be subject to an aggregate
indemnification cap of Six Million Dollars ($6,000,000); provided,
that, in the case of (y), LGM agrees, and shall cause each Buyer Party
to, seek indemnification therefor solely pursuant to Section
12.1(b)(ii)(A) of the Purchase Agreement in respect of a breach of one
or more Health Care Representations (i.e., applying an aggregate cap
of Six Million Dollars ($6,000,000) as set forth in Section 12.2(a)(iii));
provided; further, that, in respect of (y) and (z) above, the Basket shall
not apply. For the avoidance of doubt, the above $6,000,000 cap will
apply to any and all claims made by the aforementioned regarding (y)
and/or (z) above, and no claim with respect to (y) or (z) above shall
include a claim regarding fraud, intentional misrepresentation, or
willful misconduct of the Selling Parties.18

17
Id.
18
Id. at A803–04 (emphasis added).

9
D

On November 8, 2022, the Buyers sent the Sellers a claim notice in

accordance with Section 12.3(a) of the Purchase Agreement. 19 The claim notice

stated that the Buyers had incurred more than $6 million in fees as a result of the

Governmental Proceedings stemming from the Sellers’ illegal conduct. As a result,

the Buyers sought indemnification for legal and investigatory fees attributable to the

Sellers’ breaches of the representations and warranties in Article IV of the Purchase

Agreement. The claim notice also informed the Sellers that the Buyers believed they

have “a claim for fraud, intentional misrepresentation, and/or willful misconduct”

against the Sellers.20

Several weeks later, the Sellers responded to and rejected the Buyers’ claim

notice. 21 In their response, the Sellers stated that the Buyers “are attempting to

circumvent their undertakings (and the parties’ clear mutual understandings) under

the Letter Agreement by asserting claims and allegations they specifically waived

and/or agreed not to assert pursuant to the Letter Agreement . . . .”22 In brief, the

Seller’s denied the Buyers’ claim for indemnification and insisted that any potential

claims for fraud were waived under Section 4(a) of the Letter Agreement.

19
See id. at A913–18.
20
Id. at A917.
21
See id. at A920–21.
22
Id. at A920.

10
In January 2023, LGM and its senior executives entered into a Consent Decree

of Permanent Injunction with the DOJ Civil Division and the FDA.23 Among other

things, the Consent Decree required LGM to retain an independent expert to monitor

LGM and its compliance with the Consent Decree for the next four years.

E

On September 1, 2023, the Buyers filed a complaint in the Superior Court

against the Sellers for fraudulent inducement and indemnification. The Buyers’

complaint contained four counts that are relevant to this appeal.24 Counts I, II, and

III are all claims for fraudulent inducement under Sections 4.20, 4.21, and 4.30,

respectively, of the Purchase Agreement. In those counts, the Buyers allege that the

representations and warranties that the Sellers made in those sections were false at

the time of the acquisition and that, had the Buyers had known that, they would not

have purchased the Target Companies.25 As a remedy for fraudulent inducement,

the Buyers requested that the court enter judgment in their favor and against the

Sellers in excess of $35 million.26

23
It is unclear from the record as we have it what, if anything, happened as a result of the DOJ’s
criminal investigation.
24
The Buyers’ complaint originally contained five counts. Count V of the complaint, which
sought declaratory relief, was voluntarily dismissed by the Buyers after the Sellers filed their
motions to dismiss.
25
See App. to Opening Br. at A58, A61, A62.
26
See id. at A58, A61, A62–63. The Buyers also sought an award of compensatory and punitive
damages, recovery for fraud, attorney fees and costs to prosecute this matter, and consequential

11
In Count IV of their complaint, the Buyers sought indemnification in

accordance with Section 12.1(b)(ii) of the Purchase Agreement for legal and

investigatory fees they incurred attributable to the Sellers’ breaches of the

representations and warranties of Section 4.21 of the Purchase Agreement. The

Buyers claimed that they gave timely notice to the Sellers on November 8, 2022, as

required by the procedures set forth in Section 12.3 of the Purchase Agreement and

sought at least $6 million—the indemnification cap—from the Sellers to cover the

fees attributable to the Section 4.21 breaches.27

Mendy, Chitrik, and IBS jointly moved to dismiss the Buyers’ complaint in

November 2023, and Gideon later moved separately to dismiss in December 2023.

Both motions were based on the contention that the Buyers had waived their fraud

claims in Section 4(a) of the Letter Agreement because those claims related to the

Governmental Proceedings and that the Buyers indemnification claim was time-

barred.28

In response to the motions, the Buyers argued that “[t]he Letter Agreement

simply set certain caps and narrowed the scope for indemnification regarding

damages in the amount to be determined at trial, together, with other relief as the court deems
appropriate and just. See id. at A58–59, A61, A63.
27
The Buyers also sought an award of all damages permissible under the Purchase Agreement and
Letter Agreement, attorney fees and costs, and an award of consequential damages in an amount
to be determined at trial, together, with other relief as the court deems appropriate and just. Id. at
A65.
28
See LGM Hldgs., LLC v. Schurder, 2024 WL 3372509, at *4 (Del. Super. Ct. July 10, 2024)
[hereinafter “Opinion”].

12
‘Losses attributable’ to Governmental Proceedings” and that the Buyers “never gave

up the right to pursue fraud claims against [the] Sellers that were unrelated to ‘Losses

attributable’ to Governmental Proceedings.” 29 The Buyers also argued that their

indemnification claim was not time-barred because the Sellers’ concealment of their

fraud tolled the five-year survival period established by the Purchase Agreement.

Consequently, according to the Buyers, the five-year survival period did not begin

until 2020, making their September 2023 complaint timely.

The Superior Court granted the Sellers’ motions, dismissing Counts I through

IV with prejudice. 30 The Superior Court’s dismissal rests upon two critical

determinations, both of which the Buyers challenge on appeal. First, in dismissing

Counts I, II, and III, the court rejected the Buyers’ argument that Section 4(a) only

waives claims regarding “Losses attributable” to the Governmental Proceedings.

Instead, the court found that, because the phrase “Losses attributable” was not

included in the last sentence of Section 4(a), the Letter Agreement broadly waived

all fraud claims relating to the Governmental Proceedings—not just fraud claims for

“Losses attributable” to the Governmental Proceedings.31 And, according to the

court, because “there [wa]s sufficient overlap” between the Sellers’ actions

implicated in the fraudulent inducement claims and the Governmental Proceedings,

29
App. to Opening Br. at A939.
30
See Opinion at *1.
31
Id. at *5 n.72.

13
the fraudulent inducement claims were related to the Governmental Proceedings and

were waived under the Letter Agreement.32

Second, in dismissing Count IV, the court concluded that the Buyers’

indemnification claim was untimely because it was filed more than 60 months after

the closing of the acquisition and was therefore time-barred under Section

12.1(a)(iii) of the Purchase Agreement. The court reasoned that “the Purchase

Agreement’s plain language required the Buyers to file suit for indemnity claims

related to the Health Care Representations by November 15, 2022”—60 months after

the acquisition closed—and the Buyers failed to file suit until September 2023.33

The court rejected the Buyers’ argument that the Purchase Agreement’s five-year

survival period was tolled under the doctrine of fraudulent concealment and

equitable estoppel. Relying on Pilot Air Freight, LLC v. Manna Freight Systems,

Inc.,34 the court found that the doctrine of fraudulent concealment did not toll the

survival period because the Buyers were “indisputably on inquiry notice of the

[Sellers’] alleged breach[es] well within the limitations period.”35

32
Id. at *6.
33
Id. at *8.
34
2020 WL 5588671 (Del. Ch. Sept. 18, 2020).
35
Opinion at *8 (quoting Pilot Air, 2020 WL 5588671, at *15) (brackets added).

14
II

We review questions of contract interpretation de novo.36 Whether a claim is

time-barred is also a question of law that we review de novo.37 Likewise, we review

the Superior Court’s grant of a motion to dismiss under Rule 12(b)(6) de novo.38

When considering a motion under Rule 12(b)(6), we view the complaint “in the light

most favorable to the non-moving party” 39 and accept as true “all well-pled

allegations and the reasonable inferences flowing from those allegations . . . .”40 The

Superior Court’s “grant of a motion to dismiss is only appropriate when the ‘plaintiff

would not be entitled to recover under any reasonably conceivable set of

circumstances susceptible of proof.’”41 We will not “credit conclusory allegations

that are unsupported by specific facts or draw unreasonable inferences in the

plaintiff’s favor.”42

36
See Salamone v. Gorman, 106 A.3d 354, 367 (Del. 2014).
37
See Lehman Bros. Hldgs., Inc. v. Kee, 268 A.3d 178, 185 (Del. 2021).
38
See Ramirez v. Murdick, 948 A.2d 395, 399 (Del. 2008).
39
Valley Joist BD Hldgs., LLC v. EBSCO Indus., Inc., 269 A.3d 984, 988 (Del. 2021) (quoting
Clinton v. Enterprise Rent-A-Car Co., 977 A.2d 892, 895 (Del. 2009)).
40
Id. (citing Clinton, 977 A.2d at 895).
41
Windsor I, LLC v. CWCapital Asset Mgmt. LLC, 238 A.3d 863, 871–72 (Del. 2020) (quoting In
re General Motors (Hughes) S’holder Litig., 897 A.2d 162, 168 (Del. 2006)).
42
Allen v. Encore Energy P’rs, L.P., 72 A.3d 93, 100 (Del. 2013).

15
III

We are confronted with two issues in this appeal. First, we must determine

whether, when the Buyers entered into the Letter Agreement, they unambiguously

waived their right to bring claims for fraudulent inducement as stated in Counts I, II,

and III of the complaint. Next, we must consider whether Count IV of the complaint,

which seeks indemnification for fees attributable to the Sellers’ breaches of Section

4.21 of the Purchase Agreement, is time-barred because the Buyers failed to bring it

within the applicable survival period under Section 12.1(a)(iii). We address each of

these issues in turn.

A

When a motion to dismiss hinges on the interpretation of a contract, a trial

court may only grant the motion if the defendants’ interpretation of the contract is

“the only reasonable construction as a matter of law.”43 When interpreting a contract

on a motion to dismiss, “the trial court cannot choose between two differing

reasonable interpretations of ambiguous provisions.”44 “Language is ambiguous if

it is susceptible to more than one reasonable interpretation.”45 An interpretation of

a contract is considered unreasonable “if it produces an absurd result or a result that

43
See VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 615 (Del. 2003) (emphasis in
original).
44
Id.
45
Terrell v. Kiromic Biopharma, Inc., --- A.3d ---, 2025 WL 249073, at *3 (Del. Jan. 21, 2025)
(quoting Manti Hldgs., LLC v. Authentix Acq. Co., Inc., 261 A.3d 1199, 1208 (Del. 2021)).

16
no reasonable person would have accepted when entering the contract.”46 Even if

the court considers one party’s interpretation of a contract to be more reasonable, it

is error for the court, on a Rule 12(b)(6) motion, “to select the ‘more reasonable’

interpretation as legally controlling.”47

Not surprisingly, the Buyers and Sellers each proffer competing

interpretations of Section 4(a) and how it affects the Buyers’ rights to bring fraud

claims under the Purchase Agreement. The Buyers, on the one hand, argue that they

did not waive claims for fraudulent inducement when they signed the Letter

Agreement because Section 4(a) only relates to claims for “Losses attributable” to

Governmental Proceedings. According to the Buyers, Section 4(a) of the Letter

Agreement “was designed to outline how indemnification claims relating to ‘Losses

attributable’ to Governmental Proceedings should be handled.” 48 Under this

interpretation, the last sentence of Section 4(a) does not bar all fraud claims that

relate to the Governmental Proceedings, but only fraud claims seeking damages for

losses attributable to the Governmental Proceedings. The Buyers argue that,

because their fraudulent inducement claims concern the Sellers’ pre-closing activity,

46
Id. (quoting Manti Hldgs., 261 A.3d at 1208). See also Osborn ex rel. Osborn v. Kemp, 991
A.2d 1153, 1160 (Del. 2010).
47
Appriva S’holder Litig. Co., LLC v. EV3, Inc., 937 A.2d 1275, 1292 (Del. 2007) (citing
Vanderbilt Income and Growth Assocs., L.L.C. v. Arvida/KMB Managers, Inc., 961 A.2d 609 (Del.
1996)).
48
Reply Br. at 5.

17
their fraudulent inducement claims are unrelated to the losses attributable to the

Governmental Proceedings.

For their part, the Sellers argue that the Buyers waived their right to bring all

fraud claims related to the Governmental Proceedings and that, since the fraudulent

inducement allegations are interwoven with the Governmental Proceedings, those

claims are waived. According to the Sellers, the last sentence of Section 4(a)

constitutes a broad waiver of all fraud claims “with respect to” the Governmental

Proceedings, emphasizing the absence of the phrase “Losses attributable to” in the

last sentence. And because the Buyers’ fraud claims are “with respect to” the

Governmental Proceedings, the Sellers contend that the Buyers waived the claims

alleged under Counts I, II, and III when they entered into the Letter Agreement.

As mentioned above, the Superior Court rejected the Buyers’ argument that

Section 4(a) only waived fraud claims with respect to losses attributable to the

Governmental Proceedings, holding that Section 4(a) constitutes a broad waiver of

fraud claims relating to the Governmental Proceedings rather than a narrow waiver

relating only to “Losses attributable” to the proceedings. 49 We agree that this

represents a reasonable interpretation of the Letter Agreement. But it is not the only

reasonable interpretation.

49
See Opinion at *5 n.72.

18
In our view, the Buyers have proffered another reasonable interpretation of

Section 4(a), under which Section 4(a) only waived fraud claims with respect to

losses attributable to the Governmental Proceedings. The first sentence of Section

4(a) addresses situations where the Buyers may seek indemnification for “Losses

attributable to (y) one or more of the Governmental Proceedings . . .” and goes on to

limit indemnification for these losses to an aggregate cap of $6 million.50 The last

sentence of Section 4(a) states, “For the avoidance of doubt, . . . no claim with respect

to (y) . . . shall include a claim regarding fraud, intentional misrepresentation, or

willful misconduct of the Selling Parties,” where “(y)” is defined as “one or more

Governmental Proceedings.”51 The Sellers argue, and the Superior Court concluded,

that because (y) is defined to mean Governmental Proceedings and not losses

attributable to Governmental Proceedings that this last sentence constitutes a broad

waiver.

It is reasonable to conclude, however, that the last sentence was drafted to

clarify—“for the avoidance of doubt”—that any losses attributable to the

Governmental Proceedings must be recovered though an indemnification claim for

breach of the Health Care Representations. In other words, the last sentence could

reasonably be interpreted to mean that the Buyers would not be able to circumvent

50
App. to Opening Br. at A803–04.
51
Id.

19
the $6 million indemnification cap for losses attributable for Governmental

Proceedings by disguising an indemnification claim as a separate action for fraud,

intentional misrepresentation, or willful conduct. Furthermore, a reasonable

interpretation of the clause “[f]or the avoidance of doubt”52 is that it seeks to reiterate

the limited scope of the indemnification claim set forth earlier in the section, which

concerns losses attributable to Governmental Proceedings.53

Because the Letter Agreement is subject to more than one reasonable

interpretation, we find that the language of Section 4(a)—and, in particular, the last

sentence—is ambiguous. 54 At the motion to dismiss stage, a trial court cannot

52
The IBS Sellers contend that because the “Buyers did not make this argument about ‘For the
avoidance of doubt’ in the Superior Court, the court did not have the chance to consider it, and the
argument is waived.” IBS Sellers’ Answering Br. at 25. We reject this assertion. The Buyers
have consistently argued that Section 4(a) only related to “Losses attributable” to Governmental
Proceedings. Highlighting the phrase “For the avoidance of doubt,” does not raise a new argument
or theory, but rather an additional reason to support the Buyers steadfast argument that Section
4(a) only applies to “Losses attributable” to Governmental Proceedings. See Mundy v. Holden,
204 A.2d 83, 87 (Del. 1964) (quoting Kerbs v. Cal. E. Airways, Inc., 90 A.2d 652, 659 (Del. 1952))
(“We will not permit a litigant to raise in this court for the first time matters not argued below
where to do so would be to raise an entirely new theory of his case, but when the argument is
merely an additional reason in support of a proposition urged below, there is no acceptable reason
why in the interest of a speedy end to litigation the argument should not be considered.”).
53
See White v. Curo Tex. Hldgs., LLC, 2016 WL 6091692, at *21 (Del. Ch. Sept. 9, 2016) (“The
second part of the parenthetical phrase seeks to clarify the first by stating ‘but for the avoidance of
doubt . . . .’”).
54
The Sellers argue that the Buyers waived any argument relating to ambiguity by failing to raise
it in the Superior Court. First, the Buyers did not waive this argument. See App. to Opening Br.
at A937 (quoting Skye Min. Invs., LLC v. DXS Cap. (U.S.) Ltd., 2020 WL 881544, at *14 (Del.
Ch. Feb. 24, 2020)) (“. . . if there is more than one ‘reasonable construction’ of contractual
language, then the contract is ambiguous, and a defendant’s motions to dismiss cannot be
granted.”). Even so, the Buyers’ alleged failure to raise ambiguity below does not preclude this
Court from determining that contractual language at issue on appeal is ambiguous when both
parties present reasonable interpretations of that contractual language.

20
choose between two reasonable interpretations of an ambiguous contract. 55 A

motion to dismiss can only be granted when the moving party’s interpretation is the

only reasonable interpretation. 56 Consequently, the court erred in granting the

Sellers’ motions to dismiss as to Counts I, II, and III.

We turn next to the Superior Court’s conclusion that Count IV of the

complaint is time-barred.

B

Both the Buyers and the Sellers agree that the applicable survival period for

the Buyers’ indemnification claim is five-years, as established in Section 12.1(a)(iii)

of the Purchase Agreement. The parties disagree, however, as to when that five-year

survival period commenced. According to the Buyers, the five-year survival period

was tolled because the Sellers willfully concealed their false and misleading

statements and unlawful business practices from the Buyers. Invoking the doctrine

of fraudulent concealment, the Buyers contend that the five-year survival period was

tolled until they were on inquiry notice of their claim; this, the Buyers admit, they

had in the summer of 2020 when Reed Smith concluded its internal investigations.

Therefore, according to the Buyers, they had until the summer of 2025 to file their

indemnification claim.

55
See supra pp. 16–17.
56
See id.

21
The Sellers, on the other hand, contend that the survival period began to run

on November 15, 2017, when the acquisition closed and was not tolled because the

Buyers were on notice of their indemnification claim well within the five-year

survival period, which ended in November 2022. Additionally, the Sellers argue

that the Buyers’ complaint failed to sufficiently plead fraudulent concealment.57

Under the doctrine of fraudulent concealment, a statute of limitations—or in

this case a survival period58—can be “disregarded when a defendant has fraudulently

concealed from a plaintiff the facts necessary to put [the plaintiff] on notice of the

truth.”59 “Under this doctrine, a plaintiff must allege an affirmative act of ‘actual

artifice’ by the defendant that either prevented the plaintiff from gaining knowledge

of material facts or led the plaintiff away from the truth.”60 Where a plaintiff has

proved that the defendant fraudulently concealed facts necessary to put the plaintiff

on notice, the statute of limitations or survival period governing a claim will be

57
See IBS Sellers’ Answering Br. at 42–43; Gideon’s Answering Br. at 36–37.
58
In their briefs, the Sellers question whether the doctrine of fraudulent concealment applies to
survival periods created by contract in the same way that it applies to limitations created by statute.
See IBS Sellers’ Answering Br. at 39; Gideon’s Answering Br. at 37. Delaware courts have held,
however, that survival periods created by contract are not immune from tolling under the doctrine
of fraudulent concealment. See Wind Point P’rs VII-A, L.P. v. Insight Equity A.P. X Co., LLC,
2020 WL 5054791, at *8 (Del. Super. Ct. Aug. 17, 2020) (finding that a contractual “Survival
Clause does not foreclose a tolling analysis.”); AssuredPartners of Va., LLC v. Sheehan, 2020 WL
2789706, at *13 (Del. Super. Ct. May 29, 2020) (finding that a contractual limitations period “may
be tolled by Defendant’s alleged fraudulent concealment, which Plaintiff adequately pleads.”).
Furthermore, in Pilot Air, a case upon which the Sellers heavily rely, the Court of Chancery applied
the doctrine of fraudulent concealment to a contractual survival period. See Pilot Air, 2020 WL
5588671, at *15.
59
In re Tyson Foods, Inc., 919 A.2d 563, 585 (Del. Ch. 2007).
60
Id. (citing Ewing v. Beck, 520 A.2d 653, 667 (Del. 1987)).

22
tolled. 61 Tolling suspends or stops the running of a limitations period—“it is

analogous to a clock stopping and then restarting.”62 “The rationale for this doctrine

is to disallow a defendant from taking advantage of his own wrong in preventing a

plaintiff from [filing] a timely suit in the courts.”63

Fraudulent concealment does not, however, toll a statute of limitations or

survival period indefinitely. Delaware courts have consistently held that the doctrine

of fraudulent concealment does not toll a statute of limitations or survival period

“beyond the point where the plaintiff was objectively aware, or should have been

aware, of facts giving rise to the wrong.”64 Put differently, “the limitations period

begins to run when the plaintiff is objectively aware of the facts giving rise to the

wrong, i.e. on inquiry notice.”65

Here, the Superior Court did not address whether the Buyers had sufficiently

pleaded fraudulent concealment nor did it determine when the Buyers were put on

inquiry notice. Instead, the court found that the Buyers had actual notice on July 23,

2020, when they signed the Letter Agreement 32 months after closing. According

61
See In re Dean Witter P'ship Litig., 1998 WL 442456, at *5 (Del. Ch. July 17, 1998); 51 AM.
JUR. 2D. Limitation of Actions § 164 (Jan. 2025 Update) (Under the doctrine of fraudulent
concealment, “a statute of limitations may be tolled if the defendant fraudulently concealed the
existence of a cause of action in such a way that the plaintiff, acting as a reasonable person, did
not know of its existence.”).
62
51 AM. JUR. 2D. Limitation of Actions § 150 (Jan. 2025 Update).
63
Allen v. Layton, 235 A.2d 261, 265 (Del. Super. Ct. 1967).
64
Tyson Foods, 919 A.2d at 585 (citing Dean Witter, 1998 WL 442456, at *6 ).
65
Weiss v. Swanson, 948 A.2d 433, 451 (Del. Ch. 2008) (citing Dean Witter, 1998 WL 442456, at
*6).

23
to the court, because the Buyers had actual notice of their indemnification claim

“well within” five years after the acquisition—more than two years before the 60-

month survival period would expire—the Buyers could not invoke the doctrine of

fraudulent concealment to toll the five-year survival period.66 In so holding, the

court relied exclusively on the Court of Chancery’s decision in Pilot Air, a case

involving a similar contractual survival period to the one at issue here.

In Pilot Air, the plaintiff and defendants had signed an asset purchase

agreement, which included representations and warranties. 67 The agreement

provided that any claim for indemnification regarding the representations and

warranties was to be brought within 15 months of the agreement’s closing.68 The

plaintiff filed an indemnification claim in the Court of Chancery approximately 17

months after closing and argued that “contractual limitations period should be

tolled” because the defendants “acted affirmatively to conceal the wrong.”69 The

Court of Chancery rejected this argument, finding that the plaintiff was on inquiry

notice the day it took over the defendants’ business. The court explained that,

because the plaintiff was immediately on inquiry notice, the doctrine of fraudulent

concealment could not extend the contractual survival period beyond the 15 months

66
Opinion at *7.
67
Pilot Air, 2020 WL 5588671, at *1.
68
Id.
69
Id. at *15.

24
stated in the asset purchase agreement. As the Vice Chancellor put it, “by the time

[the plaintiff] took the helm at the Company, [the] ship’s alarms had been ringing

for months.”70

The Superior Court did not sufficiently attend to this key fact in Pilot Air,

focusing instead on the Vice Chancellor’s statement that fraudulent concealment

could not toll the survival period in Pilot Air because the plaintiff was “indisputably

on inquiry notice of the alleged breach well within the limitations period.”71 The

court seems to have taken this to mean that, if a plaintiff is put on inquiry notice

within a contractual survival period such that the plaintiff has sufficient time to file

a claim, then the doctrine of fraudulent concealment does not extend the survival

period beyond what is provided in the agreement. But that is not how the doctrine

of fraudulent concealment operates. If the plaintiff successfully proves fraudulent

concealment in this context, then the survival period begins on the day the plaintiff

was put on inquiry notice of the claim.72

Thus, to determine whether the Buyers’ indemnification claim is subject to

dismissal as time-barred, we must determine whether the Buyers sufficiently alleged

that the Sellers affirmatively acted to prevent the Buyers from gaining knowledge of

70
Id.
71
Id. (emphasis added).
72
See Weiss, 948 A.2d at 451 (citing Dean Witter, 1998 WL 442456, at *6).

25
facts giving rise to their claim or led the Buyers away from the truth.73 A defendant’s

“[m]ere silence is insufficient to establish fraudulent concealment.”74 A defendant’s

“partial disclosure of facts in a misleading or incomplete way, however, can rise ‘to

the level of actual artifice.’”75 The Superior Court did not address this issue below,

so we address it now for the first time on appeal.

We are satisfied that Buyers’ complaint adequately alleges that the Sellers

affirmatively acted to conceal their wrongdoing from the Buyers. The Buyers’

complaint alleges that the “Sellers caused significant damage to the Target

Companies and [the] Buyers by [the] Sellers’ false and misleading business

practices, all of which it willfully concealed from [the] Buyer.”76 The Buyers further

allege that the Sellers “hid [] information leading up to and after the acquisition” and

that it was not until the Buyers retained Reed Smith to conduct their own internal

investigations—in response to the FDA and DOJ investigations—that the Buyers

discovered that the Sellers had routinely violated federal law in the years leading up

to the acquisition.77

The Sellers contend that the Buyers’ complaint is factually deficient because

it lacks any allegations of affirmative acts by the Sellers that prevented the Buyers

73
See Pilot Air, 2020 WL 5588671, at *15 (quoting Tyson Foods, 919 A.2d at 585).
74
AssuredPartners, 2020 WL 2789706, at *17 (citing Krahmer v. Christie’s Inc. 911 A.2d 399,
407 (Del. Ch. 2006)).
75
Id. (quoting Tyson Foods, 919 A.2d at 588).
76
App. to Opening Br. at A58, A60, A62.
77
Id. at A16–17.

26
from learning of facts giving rise to their indemnification claim or led the Buyers

away from the truth.78 We disagree. The Buyers’ complaint alleges that the Sellers

intentionally made false statements to the Buyers during due diligence relating to

LGM’s compliance with the law and actively concealed their illegal activity from

the Buyers.79 This allegation is supported by the results of Reed Smith’s internal

investigations. Furthermore, the Buyers’ complaint alleges that Gideon “falsely

advised FDA inspectors that he was not aware of the mislabeled shipments” that

arrived at LGM’s warehouse “despite emails showing that [Gideon] had authorized

mislabeling” of one of the shipments. 80 The complaint also alleges that Gideon

“knowingly withheld these emails from the FDA in an effort to convince the FDA

that LGM did not have prior knowledge of the mislabeling” and that “Gideon

supervised the creation of a false product investigation log” to falsely represent to

the FDA that LGM has conducted an investigation into the mislabeled shipments.81

Given these allegations, it is reasonably conceivable that during the due diligence

process before the acquisition and again during the FDA’s investigation after the

acquisition, the Sellers fraudulently concealed facts that would have put the Buyers

on inquiry notice of their indemnification claim. It is, of course, for the plaintiffs to

78
See IBS Sellers’ Answering Br. at 43; Gideon’s Answering Br. at 36–37.
79
See App. to Opening Br. at A58.
80
Id. at A27.
81
Id.

27
muster admissible evidence sufficient to prove these allegations, but that is for

another day. All the same, dismissal of the Buyers’ indemnification claim at the

pleading stage as time-barred was erroneous.

Likewise, the parties are free to litigate the question of inquiry notice. We

can say nothing more at this point than, on the pleadings, it is reasonably conceivable

that the earliest possible date that the Buyers were on inquiry notice was September

17, 2018—the day the FDA launched its investigation of LGM’s Kentucky facility.

If that date holds, the indemnification claim would be timely because it was filed

less than five years later on September 1, 2023. We recognize that discovery and

fact-finding could prove otherwise.

IV

Accordingly, we reverse the Superior Court’s dismissal of the Buyers’

complaint and remand for further proceedings consistent with this opinion.

Jurisdiction is not retained.

28