When an investment manager sends a prospective investor the subscription package for one of its funds, the documents almost always contain a so-called “non-reliance” clause requiring the investor to expressly disclaim reliance on any representation or statement not contained in the fund’s governing documents and private placement memorandum. That clause is intended to ward off potential liability arising from, among other things, statements made in meetings, teasers or pitch books concerning the merits of an investment in the fund. Enforceability of those clauses is nuanced, however, particularly under New York or Delaware law – commonly chosen to govern fund documents and disputes. In a guest article, Pryor Cashman partner Jonathan Shepard, counsel Eric Dowell and associate Lauren Cooperman discuss how non-reliance clauses are treated by New York courts, including in a recent instructive decision issued in the Southern District of New York; provide practical guidance on crafting appropriate non-reliance clauses; examine how managers can include additional protections in their fund documents to guard against investor misrepresentation claims; and review how the laws of New York and Delaware are more favorable to managers than those found in other states, most notably California. See “Contractual Provisions That Matter in Litigation Between a Fund Manager and an Investor
” (Oct. 2, 2014).