A recent post-trial decision from Delaware regarding alleged breaches of representations and warranties in an asset purchase agreement is noteworthy. First, the decision highlights how buyers may not be able to rely on claimed breaches of representations and warranties to solve real-world problems with the business that they purchase. Second, in an area of the law with few court decisions addressing causation and damages, the decision is an important data point; it reflects an inherent skepticism that courts may have in awarding damages to buyers for technical breaches of representation provisions when it seems clear that underlying weaknesses in the acquired business were the overriding cause of the losses.


AluminumSource, LLC v. LLFlex, LLC, 2023 WL 2547996 (Del. Super. Ct. Mar. 16, 2023), centered on the sale of an unprofitable aluminum rolling mill. To effectuate the sale, Defendant’s predecessor-in-interest, Oracle Flexible Packaging, Inc. (Seller) transferred the assets and liabilities associated with the mill into a new limited liability company (Alpha), the membership units of which were purchased by AluminumSource, LLC (Buyer), pursuant to a Membership Unit Purchase Agreement (MUPA). The parties also executed related agreements, including (1) a Transition Services Agreement (TSA), under which, among other things, Seller was to provide Alpha with the dedicated, full-time services of its director of sales — whose skills and contacts were, apparently, considered by Buyer to be critical to its turnaround plan and (2) a Product Supply Agreement (PSA), under which Alpha committed to supplying a defined amount of aluminum during the transition period.

Following the merger, Buyer was unable to raise the capital required to modernize and improve the mill’s performance. The mill struggled, and Alpha defaulted on a loan and missed payments to a primary metal supplier. With poor performance and an inability to meet customer needs, Buyer abandoned the project less than a year after closing the deal.

Buyer then sued Seller and brought, among other claims,[1] claims arising from alleged breaches of two representations: (1) a representation that Alpha owned or had the unencumbered right to use all of the assets and property listed on its balance sheet and (2) a representation that the assets purchased by Buyer constituted everything necessary to operate the business as presently conducted in all material respects (i.e., a “sufficiency-of-assets” representation). Buyer alleged that both representations were breached because, on the date of closing and during the transition period, certain industrial racks used in the aluminum rolling process remained with Seller, and Alpha never had access to all of the racks at any given time. In addition, Buyer alleged that the sufficiency-of-assets representation was breached because, during the transition period, the director failed to work full time for Alpha (as required by the TSA).

The Court’s Decision

Following trial, the court held that neither representation was breached and, even if they were, the mill’s failure was not attributable to those breaches (and so therefore Buyer failed to demonstrate causation).

With respect to the racks, the trial evidence supported the accuracy of the representations. Seller owned the racks at closing, and Buyer had sufficient racks to run the business (even if many remained in Seller’s custody post-sale). The court situated this dispute within the ordinary course of this particular business: racks routinely left the mill with the aluminum deliveries and returned from customers only when the aluminum was used. As the court put it, “[t]his situation was known and necessary.” Under the PSA, Buyer committed Alpha to supplying, and it in fact did supply, aluminum to Seller during the transition months. Consequently, Buyer should have expected that many of the racks would not be in its physical custody on the execution date. There was no breach of the representations because they were, in fact, accurate. At the time of transfer, Seller owned all the racks, even if they left its custody during the course of business. And so long as there were a sufficient number of racks to run the mill on the date of closing, the sufficiency-of-assets representation likewise was not breached.

As to the sales director’s failure to provide full-time services, the court pivoted to a more formalistic approach, concluding that the contractual duty flowed from the TSA, and only Alpha and Oracle — not Buyer — were parties to that agreement. Buyer’s theory was that the director’s failure breached the sufficiency-of-assets representation because the director’s full-time services were provided for in the TSA, and the TSA services were part of the MUPA’s sufficiency-of-assets representation. But the court strictly construed the MUPA and TSA, holding that Seller’s only obligation to Buyer under the MUPA (i.e., the agreement to which Buyer was actually party) was to deliver an executed TSA to Alpha, which it had done. Therefore, in the court’s words, “[Seller] provided all it was required to provide [i.e., the TSA]. It was [Buyer] that was not equipped to run the Mill.”

Finally, the court went out of its way to emphasize in the alternative that any breach of these representations had not caused the mill’s demise in any event (and therefore Buyer had not proved causation or damages). The court agreed with Buyer that there were “problems related to the availability of the annealing racks and the focus of [the director’s] services,” but it maintained that the mill’s failure could not be “solely attributed” to these problems. The evidence at trial had shown that the mill’s quality issues and insufficient capitalization caused its failure. Although the court was not explicit about the causation standard it applied,[2] causation is a focus throughout the decision. Indeed, the court’s legal analysis opens with an extended explanation of the causation issues, in which it contrasts in detail Buyer’s plans for raising money and making capital improvements to the mill ahead of the acquisition with how things (unsuccessfully) unfolded.


AluminumSource illustrates that claimed breaches of representations and warranties may do little to solve real, underlying problems with an acquired business. Moreover, as the court’s causation analysis demonstrates, even where a breach may exist, courts may be reluctant to find a seller liable where the more plausible account is that alleged damages arose out of the poor underlying economics of the business, as opposed to the alleged breach.