The Delaware Supreme Court’s recent opinion in Paragon Metals v. Smith[1] is a pointed reminder for M&A dealmakers: hints, partial disclosures, or due diligence “red flags” may not neutralize false contractual representations when the seller is actively concealing the truth. The case involved a CEO’s strategy to conceal damaging information about the target company while still attempting to avoid a fraud claim by providing enough hints about the situation to arguably put the buyer on inquiry notice about the issues. In reversing a trial court opinion, the Delaware Supreme Court held that the buyer could justifiably rely on the CEO’s representations despite imperfect due diligence because the CEO concealed critical customer-loss information and responded untruthfully when pressed. For M&A practitioners, the opinion sharpens several recurring issues, including when flawed due diligence becomes willful blindness, what standard of proof applies to Delaware fraud claims, how broadly a forward-looking “no material adverse effect” representation may reach, and what anti-reliance language can—and cannot—do.

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