Clark Hill’s Michael Croghan Secures Judgment in Earnout Litigation

Clark Hill litigation member Michael Croghan recently secured a $2.4 million judgment in the U.S. District Court for the District of Delaware.

The case stems from the sale of a COVID-tracking Software-as-a-Service business in 2021. In May 2023, Clark Hill initiated litigation on behalf of the seller to recover money damages for breach of the purchase agreement’s earnout provision. The lawsuit alleged that the buyer invested little to no resources to generate revenues or grow the COVID-tracking business post-close, completely changed its business model from a subscription health tracking service to speculation in the lithium mining industry, and changed its name during a critical phase of the earnout period. After a hearing to establish damages during which Croghan presented the seller’s expert witness, United States District Judge Richard Andrews entered judgment for the full amount sought.

“This was an important win for our client. The testimony of our expert witness was clear that it would have hit the full earnout if the defendant had not violated the post-closing operational covenants. Earnouts can serve an important function in M&A, but post-closing operational provisions are critical,” Croghan said.

Clark Hill attorneys Michael Croghan, Molly DiBianca, and Nicole Prefontaine represented the client in this matter.