Cbs, Inc. v. Ziff-Davis Publishing Co.,

75 N.Y.2d 496, 554 N.Y.S.2d 449, 553 N.E.2d 997 (1990)

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Nature of the Case

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Facts

Ziff-Davis (D) retained an investment banker and created a circular to solicit bids to purchase its business assets. The financials were prepared by Touche Ross & Co based on the representations in the offering circular, and CBS (P) submitted a bid of $362,500,000. That was the highest bid, and a bilateral purchase agreement was signed on November 19, 1984. D warranted that the financial reports for the 1984 fiscal year were prepared in accordance with GAAP and also that since the report there was no material adverse change in D's business. Based on all the information from its own accountant, Coopers, and Lybrand, P discovered that the certified financial statements and the subsequent reports were not prepared according to GAAP. P complained to D and D once again warranted that the reports and condition of the firm were proper and in accordance with GAAP. P then indicated that there was a clear dispute but that it had decided to proceed with the transaction anyway despite the irregularities but that it would close provided that closing would not constitute a waiver of any rights or defenses. The transaction was closed, and P sued D for a breach of warranty made regarding the profitability of the magazines. That fourth and fifth cause of action was dismissed by P's own admission in its letters that is did not rely upon the representations. P appealed.