After a $750 million acquisition, the parties ran the usual post-closing true-up that adjusts the price based on the target’s actual financials at closing. It turned out the seller had misapplied a revenue-recognition accounting standard in its pre-closing books, and once the standard was applied correctly the buyer owed roughly $38.3 million more. The buyer paid, then sued separately for indemnification, arguing the seller had promised its financial statements complied with accounting standards and that promise was false. The Delaware court agreed and let the buyer recover the extra payment.
The court rejected the seller’s arguments that the buyer should have caught the error in due diligence, that the claim belonged in the earlier case, or that a contract clause barring double recovery blocked it. Diligence is not an audit, the claim was not ripe until the true-up concluded, and the anti-duplication clause was meant to prevent collecting twice, not to eliminate indemnity claims. The court determined that a price true-up fixes the number but does not by itself decide who bears the cost of an inaccurate representation.
