A New York federal court has dismissed a lawsuit filed by Fleming Intermediate Holdings against James River Group Holdings, alleging misrepresentation in the US$300 million sale of its reinsurance subsidiary, JRG Re.
Fleming, a Cayman Islands-based firm, had signed a stock purchase agreement in 2023 to acquire JRG Re from James River.
Under the terms of the agreement, James River was to receive US$277 million, comprising US$138 million paid by Fleming and up to US$139 million to be paid by JRG Re before the deal closed, contingent on the subsidiary’s net worth at the time of closing.
Fleming alleged that the transaction had been expedited to close by year-end, arguing that James River had done so to prevent discovery of what it described as “flagrant violations” and misrepresentations that allegedly inflated the company’s value.
The deal closed on April 16, 2024, after which Fleming initiated a post-closing investigation into the transaction. This review led to the filing of a 113-page complaint alleging that James River and several of its executives withheld key financial details, manipulated reserves, and deprived Fleming of information that could have influenced the purchase decision.
In a revised complaint, Fleming claimed that James River’s Reserve Committee had suppressed loss reserves at JRG Re, thereby artificially inflating the company's net worth. Fleming argued that this action increased the pre-closing payment by up to US$139 million, a figure linked directly to JRG Re’s reported financial condition at the time.
The suit also named James River’s CEO Frank D’Orazio and CFO Sarah Doran as individual defendants, in addition to the parent company. The claims included alleged violations of federal securities law, breach of contract, and common-law fraud.
In her ruling, US District Judge Jennifer Rochon sided with James River, finding that US securities laws did not govern the transaction. She noted that the deal involved private parties based outside the United States and that the legal framework was “predominantly foreign.”
The judge also pointed to ongoing proceedings in Bermuda and said they presented a “potential for incompatibility between US and foreign law.”
Claims brought under the Securities Exchange Act were dismissed with prejudice, meaning they cannot be refiled. State law claims were dismissed without prejudice, allowing Fleming to pursue those in another forum if it chooses to do so.
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