Douglas M. Chertok and SDTC Advisors LLC v. OnSolve, LLC

Summary

The Delaware Court of Chancery held that OnSolve breached the company’s certificate of incorporation by conditioning payment of merger consideration on a stockholder’s execution of a joinder and release agreement. The court concluded that the stockholder’s damages were limited to the merger consideration calculated under the merger agreement and that prejudgment interest was available as a matter of right. The court also held that SDTC Advisors lacked standing because it was not a stockholder at the time of the merger.

Holdings

1. SDTC lacked standing because it was not a stockholder of SWN at the time of the merger; any remaining interest in the warrant belonged to Chertok individually.
2. OnSolve breached the certificate of incorporation by conditioning payment of merger consideration on Chertok's execution and delivery of the joinder, indemnification, and release agreement.
3. Chertok's damages were limited to the merger consideration calculated under the merger agreement, including his pro rata share of escrow amounts actually released and acknowledged distributions; he was not entitled to a higher, differently computed per-share amount.
4. Because Chertok prevailed on his breach-of-contract claim, he was entitled to prejudgment interest as a matter of right, but the court had discretion to select the rate and determine whether interest would be compounded.
5. Plaintiffs were not entitled to attorneys' fees because they failed to show that OnSolve acted in bad faith or that another recognized exception to the American Rule applied.

Questions Presented

1. Whether SDTC Advisors LLC had standing to assert a breach-of-contract claim based on SWN's certificate of incorporation.
2. Whether OnSolve breached SWN's certificate of incorporation by conditioning payment of merger consideration on execution of the joinder and release agreement.
3. Whether Chertok's damages were governed by the merger agreement or could exceed the per-share merger consideration by avoiding transaction-expense and escrow deductions.
4. Whether Chertok was entitled to prejudgment interest and, if so, at what rate and whether it should be compounded.
5. Whether Plaintiffs were entitled to attorneys' fees under the bad-faith exception to the American Rule.

Disposition

other