Yes, NACCO can sue Harbinger for fraud. The judge explained that even though Harbinger's lies were in federal government filings, NACCO can still sue for regular fraud in state court because federal laws don't give liars a free pass from state laws. Harbinger's claim that it was 'just investing' was clearly false based on its own secret emails and takeover plans. NACCO reasonably believed Harbinger's official filings, and if it had known the truth, it could have taken steps to protect its deal. Harbinger's lie directly caused NACCO to lose because buying up stock on the cheap gave Harbinger an unbeatable head start in the bidding war.

Yes, the complaint says enough to claim that Harbinger messed up the deal between NACCO and Applica on purpose by lying in its official papers about why it was buying Applica stock. These lies were an important reason why Applica broke its promises in the merger agreement, and NACCO was hurt because of it.

The complaint also says enough to claim that Applica broke the merger agreement by not telling NACCO right away about what was going on with Harbinger, like it promised to do. Applica didn't talk to NACCO for long periods of time and even told NACCO things that weren't true when NACCO asked questions.

Delaware really cares about making sure companies it creates aren't used to cheat people. If Harbinger lied on purpose in a way that made NACCO believe the lies and rely on them, and NACCO was hurt because of it, then NACCO can sue Harbinger for fraud in Delaware.

"Delaware upholds the freedom of contract and enforces as a matter of fundamental public policy the voluntary agreements of sophisticated parties

Likewise, "Delaware has a powerful interest of its own in preventing the entities that it charters from being used as vehicles for fraud. Delaware's legitimacy as a chartering jurisdiction depends on it."

Delaware law generally elevates contract law... to allow parties to order their affairs and bargain for specific results

Given that (a) the SPA was terminated on December 5, 2014, soon after the alleged meetings,(b) ECL defendants already possessed the ability to terminate the SPA, ie, ECL defendants' alleged breach did not cause any damages, and (c) plaintiffs do not explain how this particular breach resulted in damages, the court finds that plaintiffs do not state a claim for breach of …

—stating that "the line when [] reliance became unreasonable is difficult to draw and is not something I will address on a motion to dismiss

The plaintiff can plead the existence of damages generally as long as the complaint supports a reasonable inference of harm.

—a losing bidder placed its termination fee in escrow and then brought claims against the target for breach of the merger agreement.[68]

"Although the elements of a claim are flexible, it is essential that there be an underlying wrongful act, such as a tort or statutory violation. A breach of contract is not an underlying wrong that can give rise to a civil conspiracy claim."

In addition to an intent by the defendant to induce reliance, common law fraud requires that the plaintiff "must in fact have acted or not acted in justifiable reliance on the representation

In the deal context, "[p] arties bargain for provisions in acquisition agreements because those provisions mean something."

Yes, a bidder states a claim for common law fraud by alleging that a competing bidder made false statements of investment intent in its federal Schedule 13D filings to gain an unfair advantage. The court held that state law common law fraud claims are not preempted by the federal Securities Exchange Act's grant of exclusive jurisdiction to federal courts for violations of the Act itself. The court found NACCO sufficiently pleaded all elements of fraud. Falsity was established by the detailed allegations of Harbinger's internal communications showing a clear intent to acquire control, which contradicted its public 'investment purposes' declarations. Justifiable reliance was adequately pleaded because NACCO was entitled to rely on Harbinger's public filings, and had it known the truth, it could have pursued protective measures, such as asking Applica to adopt a poison pill. Finally, causation and damages were plausible because Harbinger's fraud allegedly enabled it to amass a nearly 40% block at a low cost, creating an 'insurmountable advantage' that was the likely cause of NACCO losing the bidding contest.

Yes, the Complaint states a claim that Harbinger tortiously interfered with the Hamilton Beach Merger Agreement by making false statements in its Schedule 13D filings to hide its intent to acquire control of Applica. These false statements were a significant factor in causing Applica to breach the no-shop and prompt notice provisions of the merger agreement, without justification, resulting in injury to NACCO. 

The Complaint also states a claim that Applica breached the merger agreement by failing to provide prompt notice to NACCO about its dealings with Harbinger as required by the agreement. Applica went radio silent for long stretches and even provided false information to NACCO in response to inquiries.

Delaware has a powerful interest in preventing the entities it charters from being used as vehicles for fraud. Harbinger's disclosures must be evaluated as factual statements, separate from the federal disclosure requirements. If Harbinger intentionally made false statements in a context where it expected NACCO to rely on them, and NACCO reasonably did so to its detriment, a claim for fraud may proceed.

NACCO Industries, Inc. v. Applica Incorporated

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