The Delaware Supreme Court affirmed a Court of Chancery ruling in *Fortis Advisors LLC v. Stillfront Midco AB*, a case that centered on the interpretation of alternative dispute resolution provisions in a merger agreement and their application to post-closing earnout payment disputes.
The case arose when Fortis Advisors LLC, acting solely in its capacity as seller representative, sued Stillfront Midco AB for breach of contract and breach of the implied covenant of good faith and fair dealing. The dispute focused on the calculation of post-closing earnout payments under a merger agreement between the parties.
According to court documents, the seller representative alleged that the buyer had materially breached the merger agreement by acting in bad faith to reduce the earnout amount and by failing to provide required information and access to personnel. These allegations struck at the heart of post-closing earnout disputes, which frequently arise in mergers and acquisitions when parties disagree over the calculation methodology for contingent payments tied to future performance metrics.
The buyer responded to the lawsuit by invoking an alternative dispute resolution provision contained in the merger agreement and moved to compel arbitration. The ADR provision specifically addressed disputes over earnout calculations by referring such matters to an accounting-firm arbitrator rather than traditional court litigation.
The seller representative challenged the buyer's motion to compel arbitration, arguing that the ADR provision represented only a narrow carve-out to the parties' broader agreement to have Delaware courts adjudicate disputes. The seller representative contended that the parties had agreed to have a Delaware court resolve "any action or proceeding arising out of or related to" the merger agreement, with the accounting-firm arbitration provision serving as a limited exception for specific calculation disputes.
This disagreement highlighted a common tension in merger and acquisition agreements between comprehensive dispute resolution clauses and specialized provisions for technical disputes. Many M&A contracts include broad forum selection clauses directing all disputes to particular courts while simultaneously creating carve-outs for specific types of disagreements, such as purchase price adjustments, working capital disputes, or earnout calculations.
The Court of Chancery sided with the buyer's interpretation of the ADR provision, ruling that the earnout calculation dispute fell within the scope of the arbitration requirement. The trial court's decision reflected the principle that parties to sophisticated commercial agreements should be held to their contractual commitments regarding dispute resolution mechanisms.
On appeal, Fortis Advisors challenged the Chancery Court's interpretation and ruling. The case was submitted to the Delaware Supreme Court on Oct. 22, 2025, and decided on Feb. 13, 2026. Chief Justice Seitz and Justices Valihura and Traynor heard the appeal.
The Delaware Supreme Court affirmed the lower court's decision without reversal, upholding the Chancery Court's interpretation of the ADR provision. The high court's affirmance reinforced the principle that Delaware courts will enforce alternative dispute resolution clauses as written, particularly in the context of sophisticated commercial transactions where parties have negotiated specific mechanisms for resolving technical disputes.
The case involved prominent legal representation on both sides. Fortis Advisors was represented by Philip Trainer Jr. and Samuel M. Gross of Ashby & Geddes in Wilmington, along with Lloyd Winawer, Daniel J. Bergeson, John D. Pernick, and Susan Bower of Bergeson LLP in San Jose, California. Stillfront Midco AB was represented by John L. Reed and Kelly L. Freund of DLA Piper LLP in Wilmington, along with Mallory Biblo of DLA Piper LLP in Dallas, Texas.
The decision carries implications for mergers and acquisitions practitioners and their clients. It underscores the importance of carefully drafting dispute resolution provisions in merger agreements and considering how different types of disputes should be handled. The ruling also demonstrates Delaware courts' willingness to enforce specialized arbitration provisions for technical disputes, even when parties may prefer broader court jurisdiction.
For parties involved in M&A transactions, the case serves as a reminder that alternative dispute resolution clauses will be interpreted and enforced according to their terms. When merger agreements include specific provisions for resolving earnout calculation disputes through accounting-firm arbitration, courts will generally compel such arbitration rather than allowing parallel litigation in court.
The case also highlights the ongoing importance of Delaware as a forum for resolving complex commercial disputes, particularly those involving mergers and acquisitions. While the parties agreed to specialized arbitration for calculation disputes, they maintained Delaware court jurisdiction for other aspects of their transaction, reflecting the state's continued prominence in corporate law and M&A dispute resolution.