AES Corp. v. Dow Chemical Co.
United States Court of Appeals for the Third Circuit
325 F.3d 174 (2003)
AES Corporation (plaintiff) agreed to buy a subsidiary of Dow Chemical Company (Dow) (defendant). AES expected to reap a $31 million profit from the deal. The sale contract contained a nonreliance clause stipulating that (1) Dow gave no warranties as to the accuracy or completeness of representations made in the contract, (2) AES would hold Dow harmless for any inaccuracies or incompleteness in those representations, and (3) AES relied on no representations other than those contained in the sale contract itself. After the sale, AES discovered that it had purchased a $70 million money loser. AES sued Dow under Security and Exchange Commission (SEC) Rule 10b-5, alleging that Dow knowingly withheld information that would have contradicted key contractual representations on which AES had reasonably and detrimentally relied. The federal district court accepted Dow’s defense that the contract’s nonreliance clause barred AES’s claim as a matter of law and dismissed the case. AES appealed to the Third Circuit.
Rule of Law
Holding and Reasoning (Stapleton, J.)
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