News & Analysis as of

Breach of Contract Earn-Outs

Goodwin

Life Sciences Licensing and M&A Update: Catching Up on Recent Decisions Affecting Commercially Reasonable Efforts Definitions and...

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Recently, the Delaware Chancery Court and the Third Circuit issued three significant decisions on key issues affecting licensing and M&A transactions in the life sciences industry....more

Benesch

Earnout Held to Violate NY Fee Splitting Prohibition

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A pivotal decision by a New York Appellate Division court holding that earnouts based on the future revenue of a dental practice violated the NY Fee Splitting Prohibition could substantially impact the structuring of health...more

J.S. Held

[Webinar] Post-Merger & Acquisition Dispute Resolution - December 7th, 12:30 pm - 1:30 pm EST

J.S. Held on

Global Investigations expert Frank Lazzara, CPA, CFF, ABV, CFE, and Economic Damages & Valuations expert David Golbahar, CPA, CFF, CGMA, will present a one-hour* course, which will cover: - An overview of purchase price...more

Morris James LLP

Chancery Holds That Claim Based on Purposeful Tanking of Merger Agreement Earnout Is Breach of Contract Claim

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Shareholder Representative Services LLC v. Albertson’s Companies, C.A. No. 2020-0710-JRS (Del. Ch. June 7, 2021) - Many merger agreements include earnout provisions under which the stockholders in the acquired company are...more

White & Case LLP

Notable decisions from Delaware courts

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Williams: Court of Chancery Finds Poison Pill Unenforceable - In February, the Delaware Court of Chancery held that a shareholder rights plan (a "poison pill") adopted by The Williams Companies, Inc. at the onset of the...more

Stinson - Corporate & Securities Law Blog

Buyer Potentially Liable for Earnout Even Though it had Right to Operate Target in its Discretion

In Shareholder Representative Services LLC v Albertsons Companies, Inc., the aggrieved former shareholders of DineInFresh, Inc., d/b/a Plated, sought recovery of earnout consideration from Plated’s acquirer, Defendant,...more

Morris James LLP

Chancery Refuses to Enforce Alleged Contractual Rights Not Obtained at the “Negotiating Table”

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Obsidian Fin. Grp., LLC v. Identity Theft Guard Solutions, Inc., C.A. No: 2020-0485-JRS (Del. Ch. Apr. 22, 2021) - Delaware is “more contractarian” than many other jurisdictions. Accordingly, as this case illustrates, a...more

Faegre Drinker Biddle & Reath LLP

Make Sure the Language in Your Earnout Provision Accounts for the Obstacles to Receiving Those Future Payments

In M&A transactions, the buyer and seller often disagree about the value of the business or asset being sold. A popular solution is an earnout clause that entitles either the seller or buyer to future payments from the...more

White and Williams LLP

M&A Wars Continued: Does the Seller Have an Exit Strategy?

A great deal has been written about the M&A wars, including our prior alerts regarding the issues that arise when a buyer attempts to terminate a deal as a result of a seller material adverse effect (MAE) or the inability of...more

Morris James LLP

Delaware Superior Court Finds Purchase Agreement Language Limits the Scope of Possible Claims Concerning Earn-Out Dispute

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Collab9, LLC v. En Pointe Technologies Sales, LLC, C.A. No. N16C-12-032 (MMJ) (CCLD) (Del. Super. Sept. 17, 2019). Under an asset purchase agreement (“APA”), the purchaser (“PCM”) acquired substantially all of the assets...more

K&L Gates LLP

Earn-Out Provision Of Merger Agreement Requires Extrinsic Evidence To Aid Interpretation

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In Western Standard, LLC, v. SourceHOV Holdings, Inc. and Pangea Acquisitions, Inc., C.A. No. 2018-0280-JRS (Del. Ch. July 24, 2019), the Delaware Court of Chancery (the “Court”) refused to the grant SourceHOV Holdings, Inc....more

Morris James LLP

Chancery Denies Motion to Dismiss Claim for Breach of Earn-Out When Unable to “Divine any Meaning” From Provision

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Western Standard, LLC v. SourceHOV Holdings, Inc., C.A. No. 2018-0280-JRS (Del. Ch. July 24, 2019). Defendant Pangea acquired BancTec through a merger agreement that provided for an earn-out to former BancTec stockholders...more

A&O Shearman

Delaware Court Of Chancery Denies Motion To Dismiss Breach Of Contract Claim For Failure To Use "Commercially Reasonable Efforts"...

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On December 28, 2018, Vice Chancellor Sam Glasscock III of the Delaware Court of Chancery declined to dismiss a breach of contract claim brought by former stockholders of Ception Therapeutics, Inc. (“Ception”) against...more

Morris James LLP

Court Of Chancery Explains Contract Reformation Law In Earn-Out Context

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Glidepath Limited v. Beumer Corporation, C.A. No. 1220-VCL (Del. Ch. June 4, 2018) - This decision addresses two contracting parties’ divergent expectations relating to whether a delayed closing affected the agreement’s...more

Morris James LLP

Court Of Chancery Applies Limitations Outside Of Arbitration

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HBMA Holdings LLC v. LSF9 Stardust Holdings LLC, C.A. 12806-VCMR (December 8, 2017) - This decision illustrates the dangers of not following the limited contractual time to file a dispute and instead relying on an...more

Morris James LLP

Court Of Chancery Favors Plain Language In Earn-Out Dispute And Declines To Imply Contractual Terms

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Greenstar IH Rep. LLC v. Tutor Perini Corporation, C.A. No. 12885-VCS (Oct. 31, 2017) - With every contract under Delaware law comes the obligation to not act so as to deprive the counter party of the benefit of its...more

Cadwalader, Wickersham & Taft LLP

Delaware Court Allows Claims For Breach Of Implied Good Faith Covenant In Earn-Out Case

A recent Delaware Chancery Court opinion in American Capital Acquisition Partners, LLC, et. al. v. LPL Holdings, Inc., et.al. held that a seller’s claim that its buyer diverted opportunities from the acquired business to a...more

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