Background
Joon Bum Yoo agreed to buy the Steps to Health website and related assets from Grupo MContigo S.L. for $250,000 through a brokered asset purchase agreement governed by Michigan law. The agreement contemplated a Migration Process for transferring the assets, followed by a 14-day Inspection Period during which Yoo could examine the assets and, under specified circumstances, terminate the deal. Once the Inspection Period expired, Yoo waived contingencies concerning changes in the business’s revenue, traffic, and other performance metrics, including changes occurring during migration.
The parties departed from the agreement’s contemplated sequence by completing the Inspection Period before beginning migration. After Grupo transferred the assets and relaunched the website, it allegedly failed to enable search-engine indexing. Website traffic dropped by 57%, and Yoo alleged that the business’s value fell from $250,000 to $55,000. He sued, claiming among other things that the indexing mistake breached Section 13(c) of the agreement, which prohibited Grupo from taking actions outside normal business practices during migration. The district court dismissed that claim under Rule 12(b)(6), and Yoo voluntarily dismissed his remaining claim with prejudice before appealing.
The Court’s Holding
The Sixth Circuit affirmed, holding that Yoo failed to plausibly allege a breach of the asset purchase agreement. By the time the indexing problem occurred, the Inspection Period had ended, triggering the agreement’s express waiver of claims concerning fluctuations or changes in website traffic, revenue, and other performance metrics. Yoo’s claim arose from precisely the kind of post-inspection performance decline covered by that waiver.
The court concluded that the parties modified the agreement by conducting inspection before migration, but the complaint did not plausibly show that they also modified the waiver provision. The agreement contemplated that migration could continue after inspection and nevertheless waived performance-related contingencies arising during migration. The court rejected Yoo’s arguments that the “as is” language applied only to warranties and that the waiver eliminated only his termination right, reasoning that the agreement’s broader language foreclosed the performance-based contract claim he asserted.
Key Takeaways
- An express waiver covering changes in traffic, revenue, and other performance metrics barred the buyer’s claim based on a post-inspection decline in website traffic.
- Changing the sequence of contractual performance did not, without more, establish that the parties also modified the agreement’s waiver provision.
- At the pleading stage, a contract claim may be dismissed when the agreement incorporated into the complaint unambiguously forecloses the asserted theory of breach.
Why It Matters
The decision underscores the importance of aligning inspection, migration, and payment procedures in agreements for digital-business acquisitions. A buyer who allows an inspection period to expire may lose remedies for later-discovered performance problems even when asset migration remains underway.
For transactional counsel, the case highlights the need to revise waiver and “as is” provisions expressly when parties alter the deal’s operational timeline. An informal change to the sequence of performance may leave the original risk-allocation terms intact.