Lazard Technology Partners, LLC v. Qinetiq North America Operations, LLC
Delaware Supreme Court
114 A.3d 193 (2015)
- Written by Tammy Boggs, JD
Facts
Under a merger agreement, Qinetiq North America Operations, LLC (Qinetiq) (defendant) paid $40 million upfront to the former stockholders (the sellers) (plaintiff) of Cyveillance Inc. and promised to pay up to another $40 million if the company’s revenues reached a certain level (earnout payment). Section 5.4 of the merger agreement (section 5.4) prohibited Qinetiq from taking any action to divert or defer Cyveillance’s revenue “with the intent of reducing or limiting” the earnout payment. Cyveillance’s revenue did not reach the level required for the sellers to obtain the earnout payment. The sellers sued Qinetiq, arguing that Qinetiq breached section 5.4 or the implied covenant of good faith and fair dealing by failing to take certain actions that allegedly would have resulted in the company’s achieving the level of revenue required to generate an earnout payment. After a bench trial, the court found that Qinetiq did not breach section 5.4 because Qinetiq did not engage in conduct with the intent to reduce or limit the earnout payment, nor did the implied covenant of good faith and fair dealing operate to nullify the express-intent requirement of section 5.4. The court dismissed the sellers’ action. The sellers appealed.
Rule of Law
Issue
Holding and Reasoning (Strine, C.J.)
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