James T. Kowatch v. ACI Learning Holdings, LLC

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE JAMES T. KOWATCH, JAMES N. ) KOWATCH, DONALD SCHEELER, ) BRP2 LLC, and NPVI, LLC, ) ) Plaintiffs, ) ) v. ) C.A. No. 2025-1398-SKR ) ACI LEARNING HOLDINGS, LLC, ) INFOSEC LEARNING, INC. (f/k/a) ) ISL INTERMEDIATE, LLC, ) BOATHOUSE CAPITAL LP, ) BOATHOUSE CAPITAL ) CONTINUATION FUND LP, ) and CHONG MOUA, ) ) Defendants. ) Submitted: May 22, 2026 Decided: August 13, 2026 MEMORANDUM OPINION AND ORDER Upon Consideration of Defendants’ Motion to Dismiss the Complaint: GRANTED-IN-PART AND DENIED-IN-PART Allison M. Neff, Esquire, SAUL EWING LLP, Wilmington, DE, Stephen Ma, Esquire, SAUL EWING LLP, Los Angeles, CA. Attorneys for Plaintiffs. Aaron E. Moore, Esquire, MARSHALL DENNEHEY, P.C., Wilmington, DE, Josh J.T. Byrne, Esquire, MARSHALL DENNEHEY, P.C., Philadelphia, PA, Attorneys for Defendants. Rennie, J.1 1 Sitting as a Vice Chancellor of the Court of Chancery by designation.  I. INTRODUCTION In December 2023, Plaintiffs sold their cybersecurity company to Defendants in exchange for cash, two earnouts, and equity in the acquiring company. Because the value of the earnouts and the equity depended on the acquiring company’s success, Plaintiffs conducted due diligence. During this process, Defendants provided a spreadsheet that allegedly misrepresented the company’s earnings. Further, they failed to disclose that, just weeks before closing, they were notified that a government program accounting for 40% of the company’s revenue was “exhausted” and that the company could no longer onboard new participants. Separately, after closing, Defendants executed a series of transactions allowing purported insiders to purchase new shares in the acquiring company on overly favorable terms, which diluted Plaintiffs’ equity. Plaintiffs sued for fraud and breach of fiduciary duty, and Defendants now move to dismiss. The results are mixed. Defendants correctly argue that the misrepresentations were extracontractual; however, only two of the parties’ three agreements contain anti-reliance language. Because the Share Purchase Agreement lacks such language, the fraud claims may proceed on that basis. Therefore, as to the fraud-related claims, the Motion is GRANTED in part and DENIED in part. Because Plaintiffs fail to sufficiently allege either a direct or derivative claim, the Motion is GRANTED as to the breach of fiduciary duty claims.  II. BACKGROUND 2 A. The Parties This case arises out of the December 6, 2023, acquisition of Infosec Learning, Inc. (“Infosec”), a Colorado-based cybersecurity company,3 by Defendant ACI Learning Holdings, LLC (“ACI”).4 Prior to the acquisition, Infosec was owned by Plaintiffs James T. Kowatch; James N. Kowatch; Donald Scheeler; BRP2 LLC; and NPVI, LLC (collectively, “Plaintiffs”). 5 ACI, the acquirer, is a portfolio company. 6 At the time of the acquisition its managing member was Defendant Boathouse Capital LP (“Boathouse Capital”).7 Shortly after the transaction, Boathouse Capital was replaced as managing member by Defendant Boathouse Capital Continuation Fund LP (“Boathouse CCF” and, together with Boathouse Capital, “Boathouse”). 8 Defendant Chong Moua (“Moua”) serves as the chair of ACI’s board and is managing partner of both Boathouse entities.9 2 The facts are drawn from the well-pled allegations in the Verified Complaint (the “Complaint”) (Docket Item (“D.I.”) 1) [hereinafter “Compl.”], as well as the parties’ Stock Purchase Agreement (the “SPA”) (D.I. 15 Ex. B) [hereinafter “SPA § __”] incorporated therein. 3 Compl. at ¶¶ 11, 18. 4 Id. at ¶ 1. 5 Id. at ¶¶ 5–9. 6 Id. at ¶ 19. 7 Id. at ¶ 12. 8 Id. at ¶ 13. 9 Id. at ¶ 14. 2  B. The Acquisition On December 6, 2023, (the “Closing”) the parties executed a Stock Purchase Agreement (the “SPA”). 10 In exchange for their equity in Infosec, Plaintiffs received $9,500,000 in cash at closing and the opportunity to earn up to $6,500,000 across two earnouts (the “2023 Earnout” and “2024 Earnout”). 11 Concurrently with the execution of the SPA, Plaintiffs James T. Kowatch and BRP2 LLC (the “Rollover Plaintiffs”) rolled over a portion of their proceeds into ACI equity valued at $4,000,000 (the “Rollover Equity”), pursuant to two separate rollover agreements (the “Kowatch Rollover Agreement” and the “BRP2 Rollover Agreement,” together the “Rollover Agreements”). 12 Two provisions of the SPA are relevant to the pending motion. Section 5.6 of the SPA (“Section 5.6”) contains a general release and waiver that Defendants contend bars Plaintiffs from asserting fraud claims arising out of the negotiation, execution, or performance of the SPA.13 Section 5.6 also contains a representation by Plaintiffs that they possessed adequate information to make an informed investment decision, investigated all facts and claims to their satisfaction, and 10 Id. at ¶ 2. 11 Id. at ¶ 20. 12 Id. at ¶¶ 2, 27–28 (providing details). 13 SPA § 5.6. 3 assumed the risk of “unknown or anticipated” claims that, if known at Closing, may have materially affected their decision to enter the SPA. 14 Additionally, Section 4.7 of the SPA states that the buyers make no express or implied representations or warranties, including as to the “accuracy or completeness” of any information furnished regarding ACI or as to ACI’s “future revenue, profitability, or success[.]”15 Finally, the Rollover Agreements contain express anti-reliance language, providing that each Rollover seller “relied solely upon its own investigation and the express representations and warranties” set forth therein.16 C. The Due Diligence Deceptions The transaction began in earnest three months prior to Closing, when the parties executed a Letter of Intent and commenced due diligence. 17 Plaintiffs allege that, during the due diligence period, Defendants committed two forms of fraud through both affirmative misrepresentations and material omissions. First, on October 9, 2023, Moua circulated a financial workbook detailing ACI’s historical performance over the preceding five years, including its earnings before interest, taxes, depreciation, and amortization (“EBITDA”) (the “Investment 14 SPA §§ 5.6(d), (e). 15 Id. at § 4.7. 16 See Section 4(m) of each Rollover Agreement. 17 Compl. ¶¶ 20–22. 4 Workbook”).18 The Investment Workbook represented that ACI’s 2022 EBITDA was $14.1 million.19 However, on December 11, 2023, five days after Closing, ACI issued its October 2023 Financial Statements (the “Financial Statements”). 20 These financial statements revealed that the Investment Workbook had significantly overstated ACI’s historical earnings. Specifically, while the Investment Workbook reflected a 2022 EBITDA of $14.1 million, the Financial Statements revealed the actual figure was $6.9 million.21 Similarly, ACI’s trailing twelve-month adjusted EBITDA as of May 2023 was adjusted downward from the $13.9 million represented in the Investment Workbook to $8.3 million.22 Plaintiffs allege that in July 2025, Moua explained that certain ACI executives had improperly recorded prospective business as earned revenue in the Investment Workbook, an error that was allegedly discovered and corrected by the time the Financial Statements were issued.23 Second, Plaintiffs alleged fraud by omission regarding a federal program known as “VET TEC,” which historically accounted for approximately 40% of 18 Id. at ¶¶ 25, 41. 19 Id. at ¶ 42. 20 Id. At oral argument, Defendants’ counsel incorrectly stated that Plaintiffs received the Financial Statements before Closing. Oral Argument Transcript (D.I. 30) at 6:14 and 10:13–18. 21 Id. 22 Id. at ¶ 43. 23 Id. at ¶ 58. 5 ACI’s revenue.24 In August 2023, prior to executing the Letter of Intent, Defendants learned that the VET TEC program would be discontinued in April 2024.25 Thereafter, in November 2023, immediately preceding the Closing, the federal government notified Defendants that VET TEC’s funding was exhausted, and directed ACI to cease onboarding new contracts under the program.26 Defendants did not disclose these developments.27 Consequently, Plaintiffs remained unaware of VET TEC’s termination until after Closing.28 D. The Rollover Equity Dispute In addition to their pre-Closing fraud claims, Plaintiffs allege that Defendants intentionally diluted the Rollover Equity through a series of post-Closing corporate restructurings. In early 2024, Defendants executed an internal “continuation vehicle” transaction that transferred control of ACI from Boathouse Capital to Boathouse CCF and authorized the issuance of new ACI equity units (the “ACI CV Transaction”). 29 In April 2024, Defendants provided the Rollover Plaintiffs with a revised capitalization table and an amended ACI operating agreement.30 These 24 Id. at ¶ 52. 25 Id. 26 Id. 27 Id. at ¶ 53. 28 Id. at ¶ 52. 29 Id. at ¶ 29. 30 Id. at ¶ 32. 6 documents disclosed that: (i) preferred units senior to the common stock (such as the Rollover Equity) had been created and were entitled to priority distributions, (ii) an “equity incentive plan” had been moved into ACI, and (iii) the Rollover Plaintiffs’ stake in ACI had fallen from 3.49% to 2.82%. 31 In November 2024, the Rollover Plaintiffs received a further amended operating agreement, establishing Class A and Class B preferred stock. 32 These senior units carried liquidation preferences of approximately $65,000 and $36,000 per-share, respectively, which required complete satisfaction before any distributions could be made to common stockholders.33 Finally, in July 2025, ACI issued unsecured convertible promissory notes to Boathouse affiliates (“Convertible Notes”). 34 These notes convert into Class A preferred units, an event Plaintiffs allege will be highly dilutive to ACI’s minority members.35 In sum, Plaintiffs allege that Defendants utilized these preferred equity structures to issue senior securities to Boathouse and its affiliates on preferential 31 Id. at ¶ 33. 32 Id. at ¶ 36. 33 Id. 34 Id. at ¶ 37. 35 Id. 7 terms, systematically diluting the Rollover Plaintiffs’ economic interests and subordinating their distribution priority. 36 E. Procedural History Plaintiffs filed their Verified Complaint on December 2, 2025,37 asserting five causes of action: (“Count I”) common law fraudulent inducement against all Defendants for misrepresentations and omissions made during due diligence;38 (“Count II”) negligent misrepresentation against Boathouse and Moua for the same due diligence conduct;39 (“Count III”) breach of fiduciary duty against Boathouse and Moua for diluting the Rollover Plaintiffs’ ACI shares through the ACI CV Transaction and subsequent transactions;40 (“Count IV”) aiding and abetting breaches of fiduciary duty against ACI and Infosec; 41 and (“Count V”) civil conspiracy to commit both fraud and breach of fiduciary duty against all defendants. 42 On January 28, 2026, Defendants filed their Motion to Dismiss the Complaint (the “Motion”).43 Plaintiffs filed their response on February 27, 2026 (the 36 Id. at ¶ 39. 37 Id. at ¶ 1. 38 Id. at ¶¶ 60–69. 39 Id. at ¶¶ 70–79. 40 Id. at ¶¶ 80–86. 41 Id. at ¶¶ 87–92. 42 Id. at ¶¶ 93–96. 43 See Motion (D.I. 15) [hereinafter “Mot.”]. 8 “Answering Brief”),44 and Defendants filed their reply on March 13, 2026 (the “Reply Brief”).45 The Court heard oral argument on May 22, 2026. 46 III. LEGAL STANDARD When considering a motion to dismiss for failure to state a claim upon which relief can be granted under Court of Chancery Rule 12(b)(6), this Court applies a plaintiff-friendly pleading standard. 47 The Court accepts as true all well-pleaded allegations as true and draws all reasonable inferences in favor of the plaintiff.48 Dismissal is warranted only if the plaintiff would not be entitled to recover “under any reasonably conceivable set of circumstances.”49 IV. ANALYSIS The Court proceeds in four parts. First, the Court addresses whether Plaintiffs adequately stated a claim for fraudulent inducement based on the affirmative financial misrepresentations in the Investment Workbook. Second, the Court conducts a parallel fraudulent inducement analysis regarding Defendants’ failure to disclose the operational status of the VET TEC program. Third, the Court addresses whether the Complaint adequately alleges a civil conspiracy to commit these 44 See Answering Brief (D.I. 23) [hereinafter “Ans. Br.”]. 45 See Reply Brief (D.I. 25) [hereinafter “Reply Br.”]. 46 As previously noted, the Court references the oral argument by its transcript (D.I. 30) [hereinafter “Tr. --:--”]. 47 Labyrinth, Inc. v. Urich, 2024 WL 295996, at *7 (Del. Ch. Jan. 26, 2024). 48 Cent. Mort. Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27 A.3d 531, 535 (Del. 2011). 49 Id. 9 wrongs. Fourth, the Court addresses the Rollover Plaintiffs’ claims for breach of fiduciary duty arising from post-closing equity dilution. A. Plaintiffs Allege Fraudulent Inducement by the Investment Workbook Plaintiffs allege that Defendants fraudulently induced them to execute the SPA and the Rollover Agreements by supplying an Investment Workbook that contained “material misrepresentations regarding ACI’s historical revenue and adjusted EBITDA.”50 Defendants move to dismiss this claim, arguing that the Investment Workbook constitutes an extra-contractual representation disclaimed by the transaction documents, and that the allegations fail to satisfy the heightened pleading standards of Court of Chancery Rule 9(b). 51 To state a claim for common law fraud under Delaware law, a plaintiff must allege facts plausibly demonstrating five elements: (1) a false representation, usually one of fact, made by defendant; (2) the defendant's knowledge or belief that the representation was false, or was made with reckless indifference to the truth; (3) an intent to induce the plaintiff to act or to refrain from acting; (4) the plaintiff's action or inaction taken in justifiable reliance upon the representation; and (5) damage to the plaintiff as a result of such reliance. 52 Court of Chancery Rule 9(b) imposes a heightened standard for pleading certain aspects of a fraud claim.53 It requires that “[i]n all averments of fraud ..., the 50 Compl. ¶ 61. 51 Mot. pp. 21–22. 52 In re P3 Health Gp. Hldgs., LLC, 2022 WL 15035833, at *3 (Del. Ch. Oct. 26, 2022). 53 Labyrinth, 2024 WL 295996, at *8 (reciting standard). 10 circumstances constituting fraud ... shall be stated with particularity. [But,] [m]alice, intent, knowledge, and other conditions of mind of a person may be averred generally.”54 1. Plaintiffs Allege the First Three Elements of Fraud To identify a false representation with the requisite particularity, a plaintiff must allege “(1) the time, place, and contents of the false representation; (2) the identity of the person making the representation; and (3) what the person intended to gain by making the representations.” 55 The allegations concerning the Investment Workbook satisfy Rule 9(b)’s particularity standard. Plaintiffs allege that on October 9, 2023, Moua emailed the Investment Workbook to Plaintiffs’ financial advisor to provide historical financial information data for ACI.56 It specifically represented that ACI’s 2022 EBITDA was $14.1 million and its trailing twelve-month adjusted EBITDA as of May 2023 was $13.9 million.57 Plaintiffs have adequately alleged the falsity of these figures by referencing the corrected financial information issued by ACI just five days after Closing.58 54 Id. (quoting Ct. Ch. R. 9(b)). 55 Bamford v. Penfold, L.P., 2020 WL 967942, at *12 (Del. Ch. Feb. 28, 2020) (quoting in full Abry P'rs V, L.P. v. F&W Acq. LLC, 891 A.2d 1032, 1050 (Del. Ch. 2006)). 56 Compl. ¶ 25. 57 Id. at ¶ 41. 58 Defendants have consistently maintained that Closing occurred not on December 6, 2023, but on December 26, 2023. Accordingly, they argue, Plaintiffs received the corrected financials well 11 ACI’s own October 2023 Financial Statements revealed the Company’s actual 2022 EBITDA was 6.9 million,59 and its May 2023 adjusted EBITDA was $8.3 million.60 The significant magnitude of these discrepancies, paired with the timing of the corrected disclosures, supports a reasonable inference that Defendants knew the Investment Workbook was false when disseminated, or recklessly failed to correct it prior to Closing.61 Plaintiffs have further alleged general intent by asserting that Defendants utilized these overstated metrics to induce Plaintiffs to accept a non-cash consideration consisting of unachievable earnout terms and $4 million in Rollover Equity. 62 2. The SPA Lacks Clear Anti-Reliance Language, but the Rollover Agreements Bar Reliance Defendants contend that even if the Complaint satisfies Rule 9(b), the fraud claims fail as a matter of law because the Investment Workbook is an extra- contractual document, and reliance thereon is contractually barred. 63 before Closing, thus undermining their reliance argument. See Tr. 10:15–17. However, the paragraph Defendants cite in support of this contention—Complaint Paragraph 26—represents that Closing was December 6, not December 26. Even setting aside the deference afforded the allegations at this juncture, the SPA itself is dated December 6, 2023. Mot. Ex. B. p. 1. 59 Compl. ¶ 42. 60 Id. at ¶ 43. 61 Id. at ¶ 66. 62 Id. at ¶ 68. Defendants do not dispute scienter for purposes of their Motion. Mot. p. 29. 63 Mot. p. 22. 12  As an initial matter, Plaintiffs did not dispute in their briefs that the Investment Workbook is extra-contractual. 64 At oral argument, however, Plaintiffs asserted for the first time that the Investment Workbook was rendered intra-contractual by virtue of the SPA’s earnout provisions. 65 This argument was waived. Under long-standing Delaware law, a party cannot raise an argument at oral argument that it failed to raise in briefing.66 The Court, therefore, limits its review to the issue presented on the papers: whether the text of the transaction agreement contains an enforceable disclaimer of reliance. 67 64 Ans. Br. p. 10. 65 Tr. 33:14. 66 See Emerald P’rs v. Berlin, 726 A.2d 1215, 1224 (Del. 1999) (holding that issues not briefed are deemed waived). In Origis USA LLC v. Great American Insurance Co., the Delaware Supreme Court held that if a trial court discusses the merits of an otherwise-waived argument, such analysis “may be sufficient to fairly present [the issue] to the trial court and enable this Court’s review on appeal.” 345 A.3d 936, 954 n.78 (Del. 2025) (quoting in full Mundy v. Holden, 204 A.3d 83, 87 (Del. 1964)); see also In re Tesla, Inc. Deriv. Litig., 351 A.3d 1005 (TABLE), 2025 WL 3689114, at *10 n.92 (Del. Dec. 19, 2025). Accordingly, the Court must decide whether it can—without the benefit of opposing briefing—resolve the issue. Such a determination could align with the Delaware courts’ long-standing preference for resolving issues on the merits. See, e.g., Keener v. Isken, 58 A.3d 407, 409 (Del. 2013) (holding that a particular rule is “liberally construed because of the policy favoring trials on the merits.”). However, the injudicious application of this discretion could inadvertently incentivize parties to take the strategic risk of withholding positions on issues—like contract interpretation—with which the Court is intimately familiar and regularly resolves as a matter of law. The Court therefore declines to address the substance of Plaintiffs’ new argument. Even if the argument before the Court may be sufficient to resolve the issue, the circumstances under which an issue could be “fairly presented” even when one party is deprived of its opportunity to engage are vanishingly rare. 67 See Johnson & Johnson v. Fortis Advs. LLC, 352 A.3d 229, 274 (Del. 2026) (noting that the foundational case on reliance—Abry Partners—offers distinct frameworks for intra- and extra- contractual fraud). 13  Because Delaware maintains a strong public policy against fraud, a party seeking to disclaim reliance on extra-contractual statements must do so in clear, precise, and unmistakable terms. 68 Indeed, the “core requirement” under Abry Partners (and its progeny) for a party to waive its extra-contractual fraud claims is that the agreement must contain an affirmative statement by that party disclaiming reliance on any representations outside the four corners of the governing contract.69 Defendants concede that the SPA does not “specifically disclaim reliance.”70 Rather, they argue that Sections 4.7 and 5.6 operate together to disclaim reliance, pointing to language they contend is analogous to provisions enforced in RAA Management, LLC v. Savage Sports Holdings, Inc.71 Plaintiffs do not address RAA Management. The Court, upon its own review, finds that case legally and factually distinguishable. Section 4.7 of the SPA contains a representation by Defendants stating that they have not made any extra-contractual representations or warranties “as to the accuracy or completeness of any information regarding [ACI] furnished to 68 Johnson & Johnson, 352 A.3d at 273. 69 Id. 70 Mot. p. 26. 71 Id. (citing RAA Mgmt., LLC v. Savage Sports Hldgs, Inc., 45 A.3d 107, 112 (Del. 2012); Prairie Cap. III, L.P. v. Double E Hldg. Corp., 132 A.3d 35, 51 (Del. Ch. 2015)). 14 [Plaintiffs] . . . or as to the future revenue, profitability or success of [ACI].”72 Notably, this is a representation Defendants made about themselves. Under Abry, for an anti-reliance provision to be effective, the party claiming to have relied on a representation must have disclaimed its own reliance on such representations. 73 In RAA Management, the defendant made a similar representation to the one in the SPA, but the clause included an explicit acknowledgement from the plaintiff: “[The plaintiffs] understand and acknowledge that neither [the defendant] nor [its representative] is making any representation or warranty, express or implied, as to the accuracy or completeness” of the relevant materials.74 Because Section 4.7 lacks any parallel acknowledgment or disclaimer by Plaintiffs, it constitutes an unfulfilled attempt by Defendants to unilaterally disclaim Plaintiffs’ reliance. A review of the surrounding contractual framework confirms that the omission of a plaintiff-side anti-reliance clause was a function of deliberate drafting. In Section 4.6 of the SPA, Defendants expressly represented that they entered into the transaction “solely upon [their] own investigation and the express representations and warranties of the Company and [Plaintiffs] set forth in this Agreement[.]”75 The 72 SPA § 4.7. 73 See Johnson & Johnson, 352 A.3d at 273; FdG Logistics LLC v. A&R Logistics Hldgs., Inc., 131 A.3d 842, 860 (Del. Ch. 2016) (“[T]he disclaimer must come from the point of view of the aggrieved party (or all parties to the contract)[.]”). 74 RAA Mgmt., 45 A.3d at 110. 75 SPA § 4.6 (emphasis added). 15 parties were clearly capable of formulating enforceable anti-reliance provisions, but Defendants failed to secure a reciprocal representation from Plaintiffs. 76 Section 5.6 is equally ineffective as an anti-reliance defense. In that Section, Plaintiffs acknowledge that they “investigated to [their] complete satisfaction all facts and potential claims” arising out of, among other things, any acts during the negotiation, execution, or performance of the SPA, and that they are “assuming the risk” that they “will discover . . . claims that were unknown or unanticipated at the time this Agreement was executed.”77 An assumption of the risk for unknown or unanticipated claims does not satisfy the demanding standard for anti-reliance language; it does not clear-sightedly waive claims predicated on a counterparty’s active, pre-Closing fraudulent concealment. The Rollover Agreement, however, commands a different result. In both the Kowatch and BRP2 Rollover Agreements, the respective Rollover Plaintiff expressly represents that it has relied “solely upon its own investigation and the express representations [of Defendants] set forth . . . and neither the Parent, the Buyer nor any other Person has made any representation or warranty, except as 76 See Paragon Metals Hldgs. LLC v. Smith, --- A.3d ----, 2026 WL 1898766, at *8 (Del. July 1, 2026) (holding that only the “intended beneficiary” of an anti-reliance clause can enforce it); see also Vaughn v. Allstate Prop. & Casualty Ins. Co., 351 A.3d 974 (TABLE), 2025 WL 3563289, at *3 n.12 (Del. Dec. 12, 2025) (quoting Torrent Pharma., Inc. v. Priority Healthcare Distribution, Inc., 2022 WL 3272421, at *9 (Del. Super. Aug. 11, 2022) (“Where one contract section omits a term present in another, the omission is presumed intentional.”)). 77 SPA § 5.6(e). 16 expressly set forth herein.” 78 This language explicitly satisfies the requirements of Abry. Accordingly, because the SPA lacks an effective anti-reliance provision, Plaintiffs’ core fraud claims regarding the transaction survive. 79 The clear anti- reliance language in the ancillary Rollover Agreements may limit the scope of available non-cash damages at a later stage, but it does not warrant threshold dismissal of the fraud claim in its entirety. Defendant’s Motion to Dismiss Count I is therefore DENIED. 3. Plaintiffs Adequately Allege Justifiable Reliance on the Investment Workbook Because the SPA lacks an effective anti-reliance provision, the Court must evaluate whether Plaintiffs have adequately alleged that their reliance on the Investment Workbook was legally justified. To satisfy this element at the pleading stage, a complaint “must allege facts making it reasonably conceivable that the plaintiff acted based on the material representation or omission.” 80 This inquiry is inherently “context-dependent” and fact intensive, rendering it generally unsuitable 78 See Section 4(o) of the Rollover Agreements, available at D.I. 15 Exhibits C (Kowatch) and D (BRP2). 79 See Ashall Homes Ltd. v. ROK Ent. Gp. Inc., 992 A.2d 1239, 1250 n.56 (Del. Ch. 2010) (“related contemporaneous documents should be read together” and “writings executed at the same time and relating to the same transaction are construed together as a single contract[.]”). 80 Trifecta Multimedia Hldgs. Inc. v. WCG Clinical Servs. LLC, 318 A.3d 450, 465 (Del. Ch. 2024). 17 for resolution on a motion to dismiss “unless a fully integrated contract contains an explicit anti-reliance representation.”81 Defendants argue that Plaintiffs’ reliance was unreasonable as a matter of law because the Complaint fails to allege that Plaintiffs independently investigated the financial figures or were actively prevented from doing so. 82 Although Plaintiffs did not address this point in their briefing, Defendants’ argument fails under the applicable standard of review. Determining what constitutes “reasonable” reliance requires a nuanced assessment situating the reliance along the spectrum between actual knowledge and mere negligence. 83 Such an evaluation merits the benefit of a developed evidentiary record.84 It is not facially apparent from the four corners of the Complaint that Plaintiffs were willfully blind to inaccuracies in the Investment Workbook or that they otherwise failed to conduct adequate due diligence. Further, the generic acknowledgement in Section 5.6 that Plaintiffs investigated the transaction to their own satisfaction cannot be leveraged to insulate Defendants from liability for an alleged active fraud. 85 81 Id. 82 Mot. p. 30. 83 Paragon Metal Hldgs. LLC, 2026 WL 1898766, at *9. 84 Id. 85 See id. at *8 (concluding that diligence satisfying a party’s subjective standard of completeness was insufficient to bar that party’s reliance on the intra-contractual warranties in the governing agreement). 18  Because Defendants do not dispute that the final element of compensable damages is adequately pled,86 Plaintiffs have stated a viable claim that the Investment Workbook fraudulently induced them into entering the transaction. 4. Plaintiffs Allege Negligent Misrepresentation in Connection with the Investment Workbook Count II asserts a claim for negligent misrepresentation. Under Delaware law, negligent misrepresentation—frequently characterized as equitable fraud—is closely related to common law fraud and requires proof of the same underlying elements with the sole exception that a plaintiff need not demonstrate that the misstatement was made knowingly or recklessly.87 Because negligent misrepresentation shares these identical elements with a reduced state of mind requirement, where a plaintiff has successfully alleged common law fraud, the parallel negligent misrepresentation claim likewise survives. 88 Accordingly, Plaintiffs’ negligent misrepresentation claim regarding the Investment Workbook may also proceed past the pleadings. 86 Mot. p. 30 (“[D]efendants do not rely on that element in seeking dismissal at this stage.”). 87 Dunn v. FastMed Urgent Care, P.C., 2019 WL 4131010, at *12 (Del. Ch. Aug. 30, 2019); see also Fortis Advs. LLC v. Dialog Semiconductor PLC, 2015 WL 401371, at *9 (Del. Ch. Jan. 30, 2015). 88 Corp. Prop. Assocs. 14 Inc. v. CHR Hldg. Corp., 2008 WL 963048, at *8 (Del. Ch. Apr. 10, 2008). 19  B. The Failure to Disclose VET TEC’s Status Constitutes Fraud by Omission Plaintiffs separately allege that Defendants’ failure to disclose the imminent termination and defunding of VET TEC is actionable under theories of fraudulent concealment (Count I) or, in the alternative, negligent misrepresentation (Count II), as well as conspiracy to commit fraud (Count III). 1. Plaintiffs Allege a Fraudulent Omission Unlike the alleged affirmative misrepresentations contained in the Investment Workbook, the allegations concerning the VET TEC program run on a theory of fraud by omission. Under Delaware law, a defendant is equally culpable of fraud where it fails to reveal material information that it has an obligation to disclose.89 A duty to speak arises before the consummation of a business transaction when a party acquires information that is “necessary to prevent [a] partial or ambiguous statement of the facts from being misleading.”90 “One such duty to speak arises when the party learns of subsequently acquired information that the party knows will render a prior statement untrue or misleading.”91 89 See Stephenson v. Capano Dev., Inc., 462 A.2d 1069, 1074 (Del. 1983). 90 NetApp, Inc. v. Cinelli, 2023 WL 4925910, at *13 (Del. Ch. Aug. 2, 2023) (citing Restatement (Second) of Torts § 551(2)(b) (1977)). 91 Wildenberg v. Sign-Zone Hldgs L.P., 350 A.3d 637 (TABLE), 2025 WL 2945823, at *2 (Del. Oct. 17, 2025) (citing In re Wayport, Inc. Litig., 76 A.3d 296, 323 (Del. Ch. 2013)). 20  The Complaint satisfies this standard. Plaintiffs allege that the federal government notified Defendants in November 2023—prior to the Closing—that the VET TEC program had exhausted its funding and instructed ACI to immediately cease enrolling new participants. 92 Despite the fact that this program historically accounted for approximately 40% of ACI’s total revenue, Defendants remained silent. Plaintiffs have adequately pled that Defendants had an affirmative duty to speak. Defendants had previously supplied historical financial data showing that VET TEC was an ongoing source of recurring revenue.93 This historical data formed the baseline for a transaction structure that included two earnouts and a significant rollover equity component, neither of which accounted for the sudden elimination of nearly half of the Company’s revenue stream.94 Defendants counter that the Complaint fails to identify any affirmative contractual representation guaranteeing that the VET TEC program would continue post-Closing, arguing that they had no duty to disclaim the general principle that past performance does not guarantee future results.95 This argument is unpersuasive. 92 Compl. ¶ 52. Plaintiffs also allege that Moua first learned the program would be discontinued in August 2023. Id. 93 See Ans. Br. pp. 11–12. 94 Id. at p. 12. That Defendants were allegedly aware of the VET TEC program’s dissolution in August 2023 does not change their obligation to inform Plaintiffs of the November 2023 communication. 95 Reply Br. p. 9. Defendants further argue that Plaintiffs should have known that VET TEC was winding down, because it “was public knowledge and easily accessible to anyone with a search 21  Having provided detailed historical revenue metrics to induce Plaintiffs to accept non-cash consideration, Defendants could not sit idly by once they received definitive confirmation that 40% of ACI’s revenue stream was about to dry up. Defendants had a duty to disclose that the Company was about to lose its primary revenue driver. 2. Plaintiffs Allege the Remaining Elements of Omission-Based Fraud With respect to the remaining elements of fraud, Defendants do not contest scienter at this stage, and the element of damages is sufficiently alleged. Defendants raise a final defense regarding justifiable reliance, asserting that Plaintiffs’ failure to uncover the status of the VET TEC program during due diligence constitutes a failure to conduct adequate due diligence.96 Defendants rely on two decisions to argue that the Court should bypass the fact-specific nature of justifiable reliance and dismiss the omission claims at the threshold. 97 Both cases are readily distinguishable. In Carey v. Shellburne, Inc., this Court entered judgment against the plaintiffs only after evaluating a complete evidentiary record at the conclusion of trial. 98 It offers no guidance on a motion to dismiss under Rule 12(b)(6). In Harris v. Innovate Biopharmaceuticals, Inc., the engine” that VET TEC was a pilot program with a fixed end date. Id. at p. 10. The Court does not reach this conclusion at the pleadings stage. 96 Mot. p. 30. 97 Reply Br. p. 10. 98 215 A.2d 450, 507 (Del. Ch. 1965). 22 Superior Court dismissed a claim where a stockholder argued that he was harmed by corporate counsel’s delay in providing legal guidance regarding the marketing of his shares.99 The Court found that the company owed no duty to provide independent legal advice to a stockholder.100 Here by contrast, Defendants received critical operational notice regarding a regulatory program that was within their exclusive possession and control. The fraud claim arising from the VET TEC disclosure survives. 3. Plaintiffs Allege Negligent Misrepresentation in Connection with VET TEC As discussed above, negligent misrepresentation requires proof of the same underlying elements as fraud except that the plaintiff need not demonstrate that the misrepresentation was made knowingly or recklessly.101 Because the Complaint sets forth a viable claim for omission-based fraud regarding the VET TEC program, it satisfies the pleading requirements for the parallel negligent misrepresentation claim set forth in Count II. In sum, because the SPA contains no clear or enforceable disclaimer of reliance by Plaintiffs, the core claims for pre-closing fraud and negligent misrepresentation are sufficiently pled under Rule 12(b)(6). Accordingly, Defendant’s Motion to Dismiss is DENIED as to Count I and Count II. 99 2019 WL 5173782, at *8 (Del. Super. Oct. 15, 2019). 100 Id. 101 See Dunn, 2019 WL 4131010, at *12. 23  C. Plaintiffs Adequately Allege Civil Conspiracy to Commit Fraud To state a claim for civil conspiracy, “a plaintiff must allege ‘(1) the existence of a confederation or combination of two or more persons; (2) that an unlawful act was done in furtherance of the conspiracy; and (3) that the conspirators caused actual damage to the plaintiff.’” 102 Defendants move to dismiss Count V on two grounds. First, they argue that the conspiracy claim must fail because Plaintiffs have failed to state a claim for an underlying independent tort. 103 Second, they assert that the claim is barred by the intra-corporate conspiracy doctrine.104 The first argument is unavailing; as determined above, Plaintiffs have adequately alleged an underlying claim for fraud. The Court therefore turns to the applicability of the intra-corporate conspiracy doctrine. Defendants argue that the alleged conspiracy runs afoul of the intra-corporate conspiracy doctrine because the individual and entity defendants operate in a singular commercial capacity as managers, affiliates, and controllers of ACI or as a wholly owned subsidiary, in the case of Infosec. 105 Defendants further