Rule 10b-5 and reasonable reliance: Why courts should abandon focus on non-reliance clauses

In a typical privately negotiated merger or acquisition, the parties involved will be engaged in months of negotiations prior to the closing of their deal. Over the course of such, many projections, agreements, documents, oral representations and warranties (hereinafter “information”) will undoubtedly be exchanged by both sides. In the final purchase agreement, a seller typically lists detailed representations and warranties about its business, and includes a proviso that the buyer is not relying on any other information. Inclusion of this “non-reliance clause” (hereinafter “NRC”) is intended to restrict a buyer’s ability to bring a fraud claim under Rule 10b-5.