The U.S. Court of Appeals for the Third Circuit affirmed a district court's dismissal of a securities lawsuit against Nuvei Corporation, ruling that the Securities and Exchange Commission's Best Price Rule does not override private contractual restrictions on share transfers during tender offers.
In *Pawneet Abramowski v. Nuvei Corp.* (3d Cir. 2026), the appeals court upheld Judge Gregory B. Williams' decision from the U.S. District Court for the District of Delaware. The case centered on whether companies conducting tender offers must accept shares that are subject to private transfer restrictions under the SEC's Best Price Rule.
The dispute arose from Nuvei Corporation's tender offer for Paya Holdings, Inc., a company that went public through a SPAC merger in August 2020. The appellants, Pawneet Abramowski and other former SPAC sponsors of Fintech Acquisition Corp. III, had received "Earnout Shares" in Paya as part of the merger transaction.
These Earnout Shares were subject to significant transfer restrictions under a Sponsor Support Agreement (SSA) the appellants had signed with Paya. The shares were nontransferable until October 16, 2025, with limited exceptions. The SSA included a provision that the shares would become transferable upon "the first Change in Control to occur during the Earnout Period" only if the price per share paid was above $15.00. If the price fell below that threshold, the shares would remain restricted and would be automatically forfeited.
When Nuvei made its tender offer for Paya shares, the appellants attempted to tender their Earnout Shares for payment. However, Nuvei rejected the shares, citing the transfer restrictions in the private SSA. The company argued that the shares were invalidly tendered under the parties' existing contractual agreements.
The appellants filed suit, claiming that Nuvei's rejection violated the SEC's Best Price Rule. This regulation requires that tender offerors pay the same price to all shareholders who tender their shares, preventing discriminatory treatment among shareholders in tender offers. The appellants argued that by rejecting their shares while accepting others, Nuvei was effectively providing different treatment to different shareholders, violating the rule's equal treatment mandate.
The district court dismissed the lawsuit, finding that the appellants' claims lacked merit. Judge Williams determined that the SEC's Best Price Rule did not require Nuvei to accept shares that were subject to valid private transfer restrictions.
On appeal, the Third Circuit panel consisting of Circuit Judges Porter, Freeman, and Chung heard oral arguments on October 22, 2025, before issuing their decision on February 3, 2026. Circuit Judge Porter wrote the opinion for the court.
The appeals court focused on the scope and application of the SEC's Best Price Rule in the context of private contractual restrictions. The court noted that the Best Price Rule is "silent as to whether tender offerors may enforce restrictions on the transfer of tendered shares." This silence, the court found, was significant in determining how the rule should be applied.
The Third Circuit's analysis centered on the relationship between federal securities regulations and private contractual obligations. The court determined that the Best Price Rule's silence on the issue of private transfer restrictions meant that tender offerors could continue to enforce such restrictions without violating SEC regulations.
This ruling has important implications for SPAC transactions and other corporate deals involving shares with transfer restrictions. Many SPAC structures include earnout provisions and lock-up agreements that restrict when and how certain shareholders can transfer their shares. The Third Circuit's decision clarifies that these private contractual arrangements remain enforceable even during tender offers, provided they were validly entered into.
The decision also provides guidance for companies conducting tender offers when some shareholders hold restricted shares. The ruling suggests that tender offerors can reject shares that are subject to valid transfer restrictions without running afoul of the Best Price Rule, as long as the restrictions are based on legitimate contractual provisions rather than discriminatory treatment.
The case highlights the complex interplay between federal securities regulations and private contractual arrangements in modern corporate transactions. As SPAC transactions have become increasingly common, questions about how federal regulations interact with the unique structural features of these deals have become more frequent.
For practitioners advising clients on SPAC transactions and tender offers, the Third Circuit's ruling provides important clarity about the enforceability of transfer restrictions during change of control events. The decision suggests that carefully drafted earnout and lock-up provisions will generally be respected, even in the context of subsequent tender offers.
The appellants have not indicated whether they plan to seek further review of the decision. The case represents the latest development in the ongoing evolution of securities law as it applies to newer transaction structures like SPACs and earnout arrangements.