Tokai Internat. Holdings, Inc. v. Paul Hastings, L
A Delaware corporation retained a law firm to conduct due diligence and provide legal advice regarding its acquisition of a Japanese holding company that owned the stock of several subsidiary corporations. The acquisition agreement contained a clause under which the Japanese parent company selling the Japanese holding company agreed to indemnify the “Buyer” and its “Affiliates” for the “cost to correct any violations” of the environmental laws by the holding company “or its Subsidiaries.” To reduce tax liability for the acquisition, the Delaware corporation created its own Japanese subsidiary and assigned its rights to buy the Japanese holding company to its new subsidiary. The deal went through. Many years later, the Delaware corporation sued the law firm for malpractice.
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