IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN RE SWERVEPAY ) Consolidated C.A. No.
ACQUISITION, LLC ) 2021-0447-KSJM
POST-TRIAL OPINION ADDRESSING LIABILITY AND DAMAGES
Date Submitted: July 10, 2025
Date Decided: July 31, 2026
Peter J. Walsh, Jr., Nicholas D. Mozal, Ryan M. Crowley, POTTER ANDERSON & CORROON LLP, Wilmington, Delaware; Orion Armon, COOLEY LLP, Denver, Colorado; Luke Cadigan, Timothy Cook, COOLEY LLP, Boston, Massachusetts; Caroline Pignatelli, Alessandra Rafalson, Katelyn Kang, COOLEY LLP, New York, New York; Matthew Martinez, COOLEY LLP, San Diego, California; Bradley Levison, Carrie A. Herschman, HERSCHMAN LEVISON PLLC, Chicago, Illinois; Counsel for SPOSC Investment Holdings, LLC, Jaeme Adams, Katrina Adams, and Christopher Hamilton.
A. Thompson Bayliss, Caleb Theriot, ABRAMS & BAYLISS LLP, Wilmington, Delaware; Jay P. Lefkowitz, Dan Cellucci, Mary T. Reale, Amal El Bakhar, KIRKLAND & ELLIS LLP, New York, New York; Anna Rotman, KIRKLAND &
ELLIS LLP, Houston, Texas; Jeremy Fielding, KIRKLAND & ELLIS LLP, Dallas, Texas; Counsel for OSC Investment, L.P., OSC Investment GP, LLC, New Mountain Capital, LLC, New Mountain Partners V, L.P., New Mountain Investments V, LLC, BSIP OS, LLC, Eir Partners LLC, and Robert Wechsler.
McCORMICK, C.
This case arises from an acquisition of a payment processing software and
services company, or “PayFac.” The buyers paid cash and stock at close and agreed
to make post-closing cash and stock earnout payments contingent on the PayFac
achieving financial milestones. For a PayFac’s services, merchants pay the PayFac
a percentage of all payments facilitated by the PayFac, or a slice of the overall pie.
Payments volume represents the overall pie and is thus a key financial metric for
PayFacs. The sellers therefore pressed for information on the buyers’ payments
volume before agreeing to the deal. The parties also structured the consideration and
revenue-based earnout targets on the buyers’ representations concerning payments
volume.
Ultimately, the buyers did not have the payments volume they represented to
the sellers, the acquired company did not hit the revenue targets, and the sellers
never received the earnout payments. Through this lawsuit, the sellers claim that
the buyers fraudulently induced them into the acquisition by misrepresenting their
payments volume. This post-trial decision enters judgment for the sellers, awarding
damages in the amount of the earnouts that they would have received had the
misrepresented payments volume been true, as well as the increased value of their
rollover units.
I. FACTUAL BACKGROUND
Trial took place over five days. The record comprises 2,267 trial exhibits, live
testimony from twelve fact and three expert witnesses, deposition testimony from three fact witnesses, and 81 stipulations of fact. These are the facts as the court finds
them after trial.1
A. New Mountain Diligences Ontario’s Payments Volume Before
Acquiring Ontario.
Ontario Systems, LLC (“Ontario”) sells software that helps its customers
manage their revenue cycle workflow, including accounts receivable.2 In August
1 This decision refers to OSC Investment, L.P.; OSC Investment GP, LLC; New Mountain Capital, LLC; New Mountain Partners V, L.P.; New Mountain Investments V, LLC; BSIP OS, LLC; Eir Partners LLC; and Robert Wechsler collectively as “Buyers” and to SPOSC Investment Holdings, LLC; Jaeme Adams; Katrina Adams; and Christopher Hamilton collectively as “Sellers.” This decision cites to: C.A. No. 2021-0447-KSJM docket entries (by docket “Dkt.” number); trial exhibits (by “JX-” number); the parties’ demonstratives, Dkts. 624, 625 (by “PDX-” number for Sellers and by “DDX-” number for Buyers); the trial transcript, Dkts. 611–14, 626 (“Trial Tr.”); and stipulated facts in Section II of the Parties’ Stipulation and Pre-Trial Order, Dkt. 584 (“PTO”). The parties called the following fact witnesses: Jaeme Adams (SwervePay CEO); Katrina Adams (SwervePay Director of Operations); Brett Carlson (Eir Partners CEO); Alberto “Joe” Delgado (New Mountain Managing Director); Matthew Dubbioso (New Mountain Managing Director); John Durrett (Blue Star Partner); Christopher Hamilton (SwervePay Chief Technical Officer); Daniel Malven (4490 Ventures Partner); Tim O’Brien (Ontario CEO); Michael Oshinsky (New Mountain Vice President); Robert Wechsler (Blue Star President); and Jennifer Zaja (SwervePay Director of Administration). The parties called the following expert witnesses: Yvette Austin (Buyers’ damages expert); Murray Beach (Sellers’ damages expert); Anthony Hayes (Buyers’ payments expert). The parties lodged the deposition transcripts of the witnesses who appeared at trial and called the following witnesses by deposition only: David Franklin (Ontario COO) (by video); Jennifer Richmond (Worldpay Compliance Manager) (by video); and Malcolm Thorne (4490 Ventures Partner) (by video). The deposition transcripts are cited by using the witnesses’ last names and “Dep. Tr.”
2 PTO ¶ 79. Ontario is now named “Finvi.” Id. ¶ 83.
2
2019, private equity firm New Mountain Capital (“New Mountain”) acquired
Ontario.3 Eir Partners LLC partnered with New Mountain for the acquisition.4
New Mountain believed that Ontario could increase its revenue by acquiring a
PayFac and selling PayFac services as an add-on to its existing software.5 For
payment processing software and services provided by PayFacs, merchants pay a
percentage of all payments facilitated by the PayFac.6 This fee is called the
“merchant discount rate.”7 From that fee, the PayFac passes through payment of:
(i) an interchange fee; (ii) a network fee; and (iii) a processor fee (also called the “buy
rate”). The portion of the merchant’s payment that the PayFac retains is called the
PayFac’s “take rate.” The percentage of the interchange fee, network fee, and buy
rate—and thus also the take rate—varies depending on the transaction and the
PayFac’s pricing approach.8 But it suffices to say that overall payments volume is a
key financial metric for PayFacs.9
To test their investment thesis, New Mountain conducted due diligence on
Ontario’s payments volume during the summer of 2019. During that process, New
Mountain received a description of Ontario’s payments volume from Ontario’s
3 Id.“A [New Mountain] fund acquired an indirect interest in Ontario by purchasing units in OSC Investment, L.P., which indirectly wholly owned Ontario.” Id. 4 Id. ¶ 82.
5 See JX-290 at 4.
6 PTO ¶ 56.
7 JX-1819 (“Hayes Rebuttal Report”) ¶ 81.
8 Id. ¶ 92.
9 Trial Tr. at 16:5–10 (J. Adams).
3
investment banker, Robert W. Baird & Co. Baird stated that Ontario touched nearly
$170 billion in payments volume, about $34 billion of which came from consumer
payments.10
New Mountain first received this description through an internal presentation
circulated in early July.11 The presentation included a slide showing a preliminary
breakdown of Ontario’s “Payments Monetization Opportunity.”12 The slide included
a $34 billion figure listed as “Patient Payments that Ontario Facilitates (Direct
Contact).”13 This slide combined this figure with $48 million of patient payments
“Outside of Ontario Direct Contact” and $88 billion of insurance payments to create
a $170 billion figure representing “Total Payments on Ontario Platform.”14 The slide
did not identify these figures as estimates. The only figure on the slide that was listed
as an “estimate” was $195.8 million of “Estimated Healthcare payments made via
Ontario solution today based on $2.4M Ontario revenue for 2019E.”15
The New Mountain and Eir Partners teams wanted to understand the source
of these figures. On July 9, Eir Partners CEO Brett Carlson reached out to Baird to
ask for “payment volume data on the [healthcare] side that is more than a swag [that
is, a scientific, wild-*ss guess][.]”16 Carlson also emailed the New Mountain team
10 JX-57 at 207–08; JX-209 at 1–2; see also Trial Tr. at 1383:3–6 (Carlson).
11 JX-201.
12 Id. at 10.
13 Id.
14 Id.
15 Id.
16 JX-208 at 1.
4
that he estimated that Ontario “has $60BN+ of self pay ($34BN) and balances after
billing (check me here but I think ~$30BN) and have the right clients.”17 He stated
that there was “$1.25BN of total patient payments” running through Ontario’s
system.18 All told, he felt “it is safe to assume that Ontario will be involved in $80 -$100BN+ of consumer payment transactions during our investment period.”19
In response to Carlson’s request for statistical backup on healthcare figures,20
the Baird team provided the following support:
Ontario has quantified the payments flowing through the
system as $33.9 billion in consumer payments, $87.4 billion
in third party payer payments and another $48.4 billion in
healthcare payments that Ontario documents and tracks
but would not service (i.e. Ontario has insight into what
triggered the payment and where it came from, which is
direct to the provider from a consumer or third party).21
The Baird team explained its assumptions as follows:
Consumer Payments
1) 7,000 provider agents performing self-pay (half the
licensed seats) securing 3 payments per hour for 8 hours
per day for 260 working days with average payment size of
$175 = $7.64B
2) 100,116 [debt collection] Agents securing 10 payments
per day for 260 days = 260,301,600 payments with an
average payment size of $100 = $26.03 billion in payments
3) Related to court systems payments Ontario receives an
average of 2,015 payments per day with an average size of
17 JX-209 at 3.
18 Id.
19 Id.
20 See JX-206.
21 JX-208 at 1.
5
$420 for a total per day of $855,244. Assuming the
standard 260 days translates to $222.0 million annually.
Note the portal operates 365 days per year but most
Sunday and Holidays are light so we are using our
standard of 260 days.
Third Party Payer Payments
4) 7,000 provider agents securing 6 claims per hour for 8
hours a day for 260 working days with an average payment
size of $1,000 = $87.4 billion in Payments[.]22
Baird based its assumptions on data it received from Ontario’s co-founder,
Ronald Fauquher.23 Fauquher did not base his numbers on the volume of payments
actually flowing through Ontario. Rather, he based his numbers on industry-wide
benchmarks from a report created by the Association of Credit and Collection
Professionals (“ACA”).24 Fauquher described the figures as “averages of averages.”25
This description, however, did not appear in Baird’s reply to Carlson.26 Rather,
Baird’s analysis suggested that there were $34 billion of consumer payments “flowing
through” Ontario’s systems that Ontario had yet to monetize.27
Carlson did not read the analysis as providing “averages of averages.” Rather,
after he received Baird’s reply, Carlson updated New Mountain’s Managing Director
22 Id. (emphasis in original).
23 See JX-492 at 1; compare JX-206 with JX-492; see also Trial Tr. at 998:13–1000:1
(Durrett).
24 JX-499 at 1–2.
25 JX-492 at 3.
26 JX-208 at 1.
27 Id.
6
Matthew Holt, John Woody, the CEO of BKO Capital, LLC,28 and the New Mountain
team over email. He stated that the “$33.9BN” of consumer “payments flowing
through [Ontario’s] system” number provided by Baird represented “what is
addressable today with Ontario’s current product.”29 Carlson believed it would “grow
in excess of 10% per year based on their clients and consumer tailwinds.”30
Carlson further stated that, at the time, Ontario participated in a revenue
share on $1.25 billion of total patient payments.31 This representation made New
Mountain Vice President Michael Oshinsky skeptical of the “$33.9BN” figure.32
Oshinsky suggested contacting Baird to “get an understanding of what is in the
$33.9B of consumer payments” figure, compared to the $1.25 billion of estimated
currently monetized payments.33 He stated that “[c]learly if you believe any of this
the deal is a no brainer,” but he noted that he was “skeptical” that another private
equity firm would leave this type of opportunity on the table.34 Over the next several
days, New Mountain and Eir Partners had calls with Baird to understand the
assumptions behind the $34 billion number.35
28 BKO Capital is a non-party and limited partner in OSC Investment, L.P. PTO ¶ 74.
29 JX-209 at 1–2.
30 Id.
31 Id. at 3.
32 Id. at 1.
33 Id.
34 Id.
35 JX-214 at 1; Trial Tr. at 845:1–10 (Oshinsky).
7
New Mountain and Ontario also respectively engaged consulting firms
McKinsey & Company and L.E.K. Consulting to estimate Ontario’s total addressable
market (“TAM”).36 To that end, McKinsey produced a “Market Sizing” slide
estimating that the market for processing credit card, debit card, and electronic
transfer payments could be as large as $57 billion.37 L.E.K. estimated that, of $235
billion of annual payments made by U.S. healthcare providers, electronic payment is
utilized for 65%, creating a TAM for healthcare payments of approximately $150
billion.38 For debt collection, L.E.K. also estimated a TAM of roughly $150 billion.39
These analyses were market estimates; neither McKinsey’s nor L.E.K.’s analysis
investigated or analyzed the volume of payments flowing through Ontario’s system.40
On July 26, 2019, New Mountain’s deal team circulated its final post-diligence
slide deck.41 In the slides explaining the investment thesis, the team described
Ontario as “a stable platform occupying valuable real estate with high barriers to
entry.”42 The slide stated that the platform “[p]rocesses $170B+ payments ($34B
patient payments) and tracks $1T+ receivables along with 1B+ consumer
36 Trial Tr. at 845:11–17 (Oshinsky).
37 JX-230 at 67 (summing credit card, debit card, and “ACH / EFT” payment markets).
38 JX-145 at 139.
39 Id.; Dubbioso Dep. Tr. at 85:3–25.
40 See Dubbioso Dep. Tr. at 85:22–25 (describing L.E.K.’s TAM estimate as a “payments volume[] for an entire market of [debt collection] customers, inclusive of those that Ontario serves and those that it does not”).
41 JX-243.
42 Id. at 8.
8
interactions.”43 In a slide on the “5-Year Vision for Ontario,” the team stated there
was “$1.25B of payments volume currently processed – mostly from [collection
agencies] – at below market economics” and that by 2024 Ontario would have a
“[s]ubstantial foothold in healthcare payments with large and growing portion of
$34B in captive payments processed through Ontario’s workflow.”44
In August 2019, New Mountain and Eir Partners acquired Ontario at an
enterprise valuation of $425 million.45 A New Mountain fund, New Mountain
Partners V, L.P. (“Fund V LP”), paid $300 million for a 98% stake in Ontario’s holding
entity OSC Investment, L.P.46 In its letter announcing the deal to investors, New
Mountain stated that “Ontario touches $170 billion of healthcare payments annually,
of which $34 billion are consumer paid.”47
B. Blue Star Invests In Ontario.
BSIP OS LLC (“Blue Star”) is a “private equity firm that invests in software
and payments businesses.”48 After acquiring Ontario, New Mountain recruited Blue
Star and its founder and managing director Robert Wechsler to help advise on
payments issues and analyze the payments opportunity.49
43 Id.
44 Id. at 10.
45 See JX-290 at 3.
46 Id.; PTO ¶ 83.
47 JX-290 at 6.
48 Trial Tr. at 920:8–10 (Durrett).
49 Id. at 815:18–21 (Oshinsky); id. at 923:16–20 (Durrett); PTO ¶ 69.
9
Before Blue Star invested, Wechsler asked “[h]ow much volume is there to
monetize” on Ontario’s platform.50 In fact, he asked multiple questions designed to
get a better understanding of the $34 billion figure.51 In response, Oshinsky provided
Wechsler with information from BillingTree, Ontario’s then-largest paymentprocessing partner.52 Oshinsky described the “Billing Tree report” as “our best
granular info” on individual customer payment accounts.53
Wechsler forwarded that email to John Durrett, his payments analyst.54 Based
on their experience, they assumed only two-thirds of the $34 billion would be
credit/debit available for conversion, of which Ontario could control only half.55
Wechsler presented New Mountain with this payments opportunity analysis,
ultimately concluding that Ontario may be able to monetize $12.5 billion of the
purported $34 billion payments volume.56
In October 2019, Blue Star invested $5 million in Ontario under the
assumption that Ontario would acquire payments technology.57 Wechsler took a seat
on Ontario’s board,58 and he was granted options that vested when New Mountain
50 JX-292 at 2.
51 Id.; Trial Tr. at 1126:6–24, 1135:6–20 (Wechsler).
52 JX-1843 at 3.
53 Id.; see also Trial Tr. at 1036:8–18 (Wechsler) (testifying that BillingTree data “was
the best we had”).
54 JX-1843 at 2.
55 Trial Tr. at 1128:16–1129:6 (Wechsler); JX-1843 at 2.
56 JX-1842 at 1.
57 Trial Tr. at 1129:11–15, 1130:17–20 (Wechsler).
58 Id. at 1129:11–15, 1130:13–16 (Wechsler).
10
achieved a set return multiple upon a change of control.59 Blue Star also received
$100,000 a month to consult on the investment.60 Wechsler, Blue Star contractor
Matthew Steffe, and Durrett then began assessing PayFac acquisition opportunities
with New Mountain’s Matthew Dubbioso and Oshinsky.61
C. Ontario Offers To Acquire SwervePay.
SwervePay62 was an Illinois-based PayFac founded by spouses Jaeme and
Katrina Adams in 2010.63 Jaeme, Katrina, and Christopher Hamilton (collectively,
the “Individual Sellers”) all held executive roles with SwervePay.64 Jaeme served as
SwervePay’s CEO.65 Katrina served as SwervePay’s Director of Operations.66 And
Hamilton joined SwervePay in 2013 as Chief Technology Officer and wrote most of
SwervePay’s software.67
59 JX-1917 at 27.
60 Trial Tr. at 1129:23–1130:2 (Wechsler).
61 PTO ¶ 84; see, e.g., JX-1852 at 2.
62 Before the SwervePay acquisition, SwervePay, LLC (“Legacy SwervePay”) owned
the SwervePay business. PTO ¶¶ 55–56. Legacy SwervePay changed its name to SPOSC Investment Holdings, LLC on February 26, 2020. Id. ¶ 55. An entity called SwervePay Acquisition, LLC (“New SwervePay”) then acquired the business from Legacy SwervePay. Id. ¶ 81. New SwervePay changed its name from SwervePay Acquisition, LLC to SwervePay, LLC on April 8, 2020. Id. For simplicity, this decision refers to the business and its operations generally as “SwervePay.” 63 Id. ¶¶ 56–57, 59; Trial Tr. at 6:13–14 (J. Adams). This decision refers to Jaeme and Katrina Adams by their first names. The court intends no familiarity or disrespect.
64 PTO ¶¶ 57–59.
65 Id. ¶ 57.
66 Id. ¶ 59.
67 Id. ¶ 58; Trial Tr. at 12:1–5 (J. Adams).
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Ontario and SwervePay had a business relationship before Buyers acquired
SwervePay. SwervePay had partnered with Ontario beginning in May 2019 to
integrate its payment application into Ontario’s software.68 And New Mountain
began discussions with SwervePay about combining with Ontario before New
Mountain acquired Ontario.69
Carlson first reached out to Jaeme in the summer of 2019. Although Carlson
had “not look[ed] at Ontario-specific data at this time,”70 he told Jaeme that Ontario
had an “unbelievable” amount of payments volume to monetize, and asked whether
Jaeme was interested in discussing a partnership.71 Jaeme later had a call with
Carlson and Ontario’s then-president Jason Harrington to discuss the idea.72 In July
2019, Harrington and Jaeme discussed Ontario’s platform and the payments volume
available for monetization.73 During those conversations, Harrington represented
there was “$170 billion of payments volume running through [Ontario’s] system.”74
By early October 2019, the New Mountain/Eir Partners/Blue Star team was
focused on either acquiring one of their PayFac partners with “a scalable book of
business” or acquiring a “small and under-marketed” PayFac that they could develop
68 Trial Tr. at 21:22–22:4 (J. Adams).
69 Id. at 25:6–22 (J. Adams); id. at 1381:14–17 (Carlson); JX-156.
70 Trial Tr. at 1383:7–12 (Carlson).
71 JX-179; see also Trial Tr. at 25:6–17 (J. Adams); id. at 1382:20–23 (Carlson).
72 Trial Tr. at 25:20–26:6 (J. Adams).
73 Id. at 22:9–23:7 (J. Adams).
74 Id. at 23:3–7 (J. Adams).
12
on a reasonable timeline.75 To explore whether SwervePay was the right target,
Jaeme, Carlson, and Steffe met in Las Vegas on October 29, 2019.76
SwervePay and Blue Star had a business relationship before Blue Star
invested in Ontario. In March 2019, a mutual acquaintance had connected Jaeme to
Wechsler and Steffe through email.77 The acquaintance described Wechsler as
someone who had been in Jaeme’s shoes, because he had also “built, ran and sold
numerous payments & software companies to strategics and multiple private equity
firms.”78 The acquaintance advised that Wechsler and Steffe were now “investing
their personal capital” through Blue Star and that Jaeme should view them as people
“you could lean on for advice, if you ever chose to do anything.”79
Over the ensuing months, Wechsler and Jaeme began discussing a potential
investment by Blue Star in SwervePay. SwervePay even invited Wechsler to join its
board of directors.80 And Jaeme told Wechsler that SwervePay closed a partnership
with Ontario, which he stated had “170 billion running through them for healthcare,
utilities and municipalities and have not monetized it.”81 Wechsler declined the
invitation to join SwervePay’s board, reassured Jaeme that he would “always be just
75 JX-1844 at 4.
76 PTO ¶ 86.
77 JX-129 at 3.
78 Id.
79 Id.
80PTO ¶ 85; Trial Tr. at 30:17–19, 32:24–33:10 (J. Adams); id. at 1115:10–14 (Wechsler).
81 JX-213 at 3.
13
a phone call away - whatever you need,” and then finalized Blue Star’s $5 million
investment in Ontario two months later.82
Jaeme learned about Wechsler’s move to Ontario just before the October 29,
2019 meeting. Carlson emailed Jaeme early on October 29 that Ontario had brought
Wechsler on as an investor and board member and that he “mentioned you guys know
each other well.”83 This was the first Jaeme heard of Wechsler’s investment
relationship with Ontario.84 Jaeme was frustrated to learn that Wechsler joined
Ontario’s board after Jaeme alerted him to their relationship with Ontario.85
Jaeme wanted to understand Wechsler’s role in the negotiation dynamics, and
Wechsler was intentionally vague on that topic for much of the negotiations. Jaeme
asked how Blue Star’s Ontario investment would change his relationship with
Wechsler, who had previously presented himself as an ally and sounding board.86
Wechsler responded stating that he still wanted to do a deal with SwervePay.87
Jaeme asked Wechsler to confirm that the “deal” he was referring to was between
SwervePay and New Mountain, not SwervePay and Ontario.88 Wechsler replied that
“it could be either or both.”89
82 JX-2191.
83 JX-332 at 2.
84 Trial Tr. at 34:4–19 (J. Adams).
85 Id. at 34:20–24, 37:5–11 (J. Adams).
86 Id. at 35:10–21, 37:7–13 (J. Adams); JX-1845 at 1.
87 JX-1845 at 2.
88 Id.
89 Id.
14
After the meeting, Carlson told Jaeme that he “love[d] the dynamic” between
the parties and that they could “work on an attractive business combination between
all of us as partners.”90 Carlson reported to New Mountain that he wanted to keep
the deal “tight for the time being” because “Jaeme is more comfortable with people he
know[s] - gets guarded otherwise.”91 Carlson noted that another company was
pursuing SwervePay and that he “[m]ight invite Jaeme to New Mountain at the right
time.”92
After the meeting, Jaeme sent a joint-venture proposal to Wechsler.93 New
Mountain and Eir Partners favored an acquisition and rejected the proposal.94 As
they discussed putting together a deal on November 23, 2019, Wechsler texted
Carlson that Blue Star was “close to [Jaeme] and he trusts us.”95 He advised them to
be “aggressive but not binary.”96
On November 28, New Mountain and Eir Partners sent over a letter of intent
on behalf of Ontario.97 Under its proposed terms, SwervePay would receive $17.5
million up front and up to $32.5 million across two earnouts.98 Ontario would retain
90 JX-1969 at 2.
91 Id. at 1.
92 Id.
93 Trial Tr. at 37:14–38:21 (J. Adams); JX-347.
94 See Trial Tr. at 39:13–40:23 (J. Adams).
95 JX-398 at 1.
96 Id.
97 JX-1849 at 2.
98 Id.
15
SwervePay’s team to lead the post-acquisition company and would work with Jaeme
to “develop post-closing employment and compensation plans.”99 In the cover email,
Steffe indicated that they wished to start diligence immediately.100 Jaeme responded
by setting up a call with Carlson to discuss the terms.101 The following morning,
Jaeme called Wechsler to discuss the earnout terms before speaking with Carlson.102
As Jaeme negotiated the earnout over the phone with Carlson, Wechsler “was on the
other line,” in Wechsler’s words, “playing the ‘friend’ insider.”103
SwervePay rejected the initial offer.104 New Mountain sent a revised letter of
intent on December 2, 2019. The revised letter upped the valuation from $50 million
to $75 million and provided for $55 million in payments across two earnouts.105 When
Jaeme shared the revised letter, he said that Wechsler advised him that if they did
not make a deal, New Mountain would look to quickly acquire another payments
business.106 SwervePay’s board rejected the deal and countered with an all-equity
proposal so that they could benefit from the monetization upside.107 As 4490
99 Id.
100 Id. at 1 (proposing to “kick off diligence next week, if possible”).
101 JX-416 at 2.
102 Id. at 1.
103 Id.
104 JX-422 at 1.
105 Id. at 2.
106 Id. at 1.
107 Trial Tr. at 40:24–41:8 (J. Adams); id. at 457:19–458:2 (Malven).
16
Ventures108 partner Daniel Malven testified, “our understanding was that there was
[$]40 to $50 billion of unmonetized payment volume being controlled by Ontario
software. If we were able to monetize that, that would create a tremendous amount
of equity value. So we wanted to ride that equity value up.”109
On December 5, New Mountain and Eir Partners responded with an updated
letter of intent.110 This proposal valued SwervePay at $75 million, provided a $20
million upfront payment in a mix of cash and equity, and provided an additional $55
million across two earnouts.111 SwervePay accepted and the parties executed the
letter of intent.112
D. Durrett Analyzes Ontario’s Payments Opportunity.
After Ontario and SwervePay executed the letter of intent, Blue Star continued
to explore Ontario’s payments opportunity and tasked Durrett with identifying new
payments revenue drivers for the go-to-market strategy.113 In November 2019,
Durrett reached out to Ontario’s CEO because he was “particularly interested in
mapping out how much volume is being processed outside our systems and how we
might get control of it.”114
108 4490 Ventures owned equity in Legacy SwervePay. PTO ¶ 70. 109 Trial Tr. at 457:21–458:2 (Malven).
110 JX-453 at 2.
111 Id.
112 Id. at 1.
113 See, e.g., JX-2182; Trial Tr. at 924:7–15, 951:13–20 (Durrett); id. at 1110:2–11
(Wechsler).
114 JX-374 at 1.
17
Durrett stated that he felt that there was “a big opportunity” but it was “going
to take some work to piece it all together.”115 He started by exercising New
Mountain’s and Blue Star’s contractual audit rights to obtain data from Ontario’s
four most prominent processing partners.116 Throughout November and December
2019, Blue Star and New Mountain struggled to get the necessary data, and Carlson
commented that these issues made him “want to buy SwervePay ASAP.”117
Durrett also looped in an Ontario executive and co-founder, Steve Blount,
asking for back-up data to help validate the $34 billion volume figure.118 On
December 12, Blount responded that there was not an automated way to get Ontariospecific customer data from its software and that Ontario reached the $34 billion
figure using averages from the ACA report.119 Blount explained to Durrett the
“averages of averages” problem—that the $34 billion figure was all “assumption
based,” pulled together from various benchmarks and statistics based on averages,
and that there was no longitudinal study over time.120
Durrett then performed a “bottoms-up” analysis of Ontario’s payments
volume, using real customer data to try and accurately size the payments opportunity
flowing through Ontario’s system.121 Durrett took a month’s worth of data from
115 Id.
116 JX-505 at 5–6.
117 Id. at 1.
118 JX-1851.
119 JX-499 at 1–2.
120 Id.
121 Trial Tr. at 933:3–21, 938:4–939:22 (Durrett).
18
Ontario’s four primary payments vendors and built up an estimate of the payments
volume.122 Durrett arrived at a figure of just over $5.2 billion. 123 Of this volume, he
estimated that there was about $3.3 billion worth of monetizable payments volume
flowing through Ontario’s systems.124
On December 17, 2019, when Durrett circulated his analysis internally, he
warned that it was limited because it was based on the data that Ontario’s vendors
shared.125 He told the team that he would treat the estimate “as another example of
how the data they’re sharing doesn’t seem to jibe with what we’d expect, and make
them explain it.”126
On December 23, Oshinsky noted that based on the data, “[w]e are showing a
much lower rev per seat than industry standards” and that they needed to figure out
why.127 He speculated that one vendor was “‘hiding’ nearly $5m from us” and
questioned the $5.2 billion figure.128 On January 16, Oshinsky updated the team that
“we are very light on details of the actual payments buildup” and were working on
additional valuation frameworks that relied on consolidated financials provided by
122 JX-638 at 1.
123 JX-666 at 6 (“Summary Analysis” tab, Row 26, Column F); Trial Tr. at 1001:16–
18 (Durrett).
124 Trial Tr. at 1001:6–13 (Durrett).
125 JX-544 at 1.
126 Id.
127 Id.
128 Id.
19
vendors.129 Nevertheless, by January 2020, New Mountain internally worked under
the assumption that Ontario touched approximately $5 billion in payments.130 And
New Mountain began to use the $5 billion estimate when comparing Ontario to other
potential acquisition targets.131
E. SwervePay Diligences Ontario’s Payments Volume.
Blue Star, New Mountain, and SwervePay had begun diligence by early
December 2019.132 Between December 9 and December 23, the parties held at least
three diligence calls.133 At the December 9 kick-off call, representatives from Blue
Star and New Mountain stated to Jaeme and Hamilton that Ontario had between
$40 and $50 billion of processing volume “captive to the platform.”134 On December
27, SwervePay sent over its first set of diligence requests.135
129 JX-586 at 1.
130 See, e.g., id. (referring to “Ontario’s ~$5.5B in current volume”); JX-603 at 1 (“With
Ontario, . . . $5B overall sitting there.”); JX-734 at 1 (describing New Mountain’s “lowend estimate” of Ontario’s “annual volume potential” available for conversion as $5.5 billion), but see Trial Tr. at 970:21–971:13 (Durrett) (noting that he meant to write $5.2 billion rather than $5.5 billion)). Buyers used several figures around $5 billion when referring to Durrett’s analysis. This decision thus uses the figures $5 billion, $5.2 billion, and $5.5 billion interchangeably depending on the context. But each figure is based on Durrett’s analysis.
131 See JX-586 at 1; JX-603 at 1.
132 JX-470 at 1.
133 Id.; PTO ¶¶ 88, 90.
134 Trial Tr. at 314:13–315:3 (Hamilton); see also id. at 43:21–44:7 (J. Adams).
135 JX-556.
20
On January 25, 2020, New Mountain’s Oshinsky sent New Mountain’s
projected financials and model for Ontario to Jaeme.136 The materials included a
slide deck containing New Mountain’s initial investment thesis, which stated that
Ontario processed over $170 billion of payments.137
SwervePay requested an in-person diligence meeting, which the parties set for
January 31. Leading up to the meeting, Oshinsky advised Wechsler, Woody, Blount
and Ontario’s then-CTO Michael Wolfe by email that
Jaeme was pretty direct with his goal for the meeting.
From their side, they want to understand how Ontario is
going to be able to move payments volume technically,
commercially and contractually on the platform. . . . His
goal is ‘to be able to go back to his Board and confidently
say they can hit the earnouts.’138
Durrett responded with a proposed “agenda/script to convince Swerve they can hit
their earnout.”139 He suggested the team lead with the technical part “no matter
what” and have the contractual and commercial parts “in our back pocket.” 140 On
those subjects, he noted that “[w]e’ve identified at least $5.5 B in payments volume”
and that “we only have to get 80% of volume moved to hit [the earnout] target - and
we intend to get >90% of the volume [because] . . . we can move ALL of it.”141 Wechsler
136 JX-609 at 1.
137 Id. at 8.
138 JX-620 at 2.
139 Id. at 1.
140 Id.
141 Id. at 2.
21
felt that they did not need to be “selling” because they had SwervePay “where they
need to be.”142
On January 31, Jaeme, Hamilton, Durrett, Oshinsky and others met at the
Chicago O’Hare Hilton.143 At the meeting, New Mountain and Blue Star continued
to represent that there was between $40 and $50 billion worth of payments volume
running through Ontario’s platform.144 This was so although they had received
Durrett’s bottoms-up analysis and had been discussing it internally.
After the meeting, Durrett observed that SwervePay “believes in the
opportunity and wants to get it done” and identified a few “problems we need to solve
to get max payments penetration.”145 He described getting SwervePay customers to
a place where they would adopt the Ontario payments solution as a top priority. 146
He estimated that about a third of existing customers would make the switch, another
third would move happily if Ontario added some new features, and the last third
might require some “cajoling.”147 He raised the possibility of forced conversion
without discussing what that would involve, but he concluded that “a lot of the base
can be moved voluntarily and happily with the right carrots.”148
142 JX-619 at 1.
143 PTO ¶ 92.
144 Trial Tr. at 317:24–318:7 (Hamilton).
145 JX-630 at 1.
146 Id.
147 Id.
148 Id.
22
On February 4, Jaeme sent Oshinsky follow up questions about Ontario’s
processing volume.149 He asked for “a summary of all monthly payment processing
volume separated by processing platform” and noted that the “[i]mportant data points
we are interested in include successful transaction volume and transaction count
(and/or average ticket size).”150
Oshinsky forwarded the email to Blount, asking who could answer the
questions.151 Blount responded with Durrett’s analysis, noting that they “had pulled
together a month’s worth of data from our 4 primary payments vendors” and Durrett
“then built out the estimated Ontario Payments opportunity sizing” attached.152 He
advised that “[w]e might want to speak with [] Durrett about how best to present this
to Jaeme and Chris [Hamilton] at SwervePay.”153
On February 6, Oshinsky looped in Durrett, asking whether sending
anonymized data reflecting October’s processing volume was “an appropriate
response.”154 Although Blount considered it appropriate, Durrett asked if there was
“[a]ny reason not to just provide the Summary Analysis tab [from his analysis], so
[Jaeme] doesn’t have to do all the XLS work to get to that same point?” 155 He noted
149 JX-655 at 2–3.
150 Id. at 3.
151 JX-642 at 3–4.
152 Id. at 3.
153 Id.
154 Id. at 2.
155 Id. at 1.
23
that “at least that way he sees the volume is real and based on defensible
assumptions.”156
Oshinsky initially agreed with Durrett’s approach.157 But he later changed his
mind.
That evening, Oshinsky pitched a new strategy to Blount and Durrett.158 He
said that he “want[ed] to lead [SwervePay] to make their own assumptions” because
“[t]hey might wind up with an expected payments volume number way bigger than
ours.”159 He reasoned that Buyers “can communicate that we think there’s $5B of
volume if they push back on the earnouts but I’d like to keep that in our back pocket
for now.”160 He also “[w]ant[ed] to avoid the argument of whether 66% conversion of
our payments volumes onto their platform is a reasonable earnout or not.”161 Durrett
agreed, noting that “[w]e can always come back with our #s if they don’t conclude the
right thing.”162 Oshinsky assured the team that “[i]f they’re low we’ll steer them
up.”163
156 Id.
157 Id.
158 JX-652 at 1.
159 Id.
160 Id. (emphasis added).
161 Id.
162 Id. (emphasis added).
163 Id. (emphasis added). At trial, Oshinsky testified that he decided not to share Durrett’s analysis with Sellers because he did not want to provide inaccurate information. Trial Tr. at 832:24–834:3 (Oshinsky). The contemporaneous evidence does not support this testimony.
24
The next day, Oshinsky responded to Jaeme with a revised version of the data
from Durrett’s analysis, noting that the data represented “only customers for which
Ontario receives reporting.”164 Oshinsky stated that “[t]he total payment volume
running through our workflow on a monthly basis is multiples of these numbers.”165
After he received Oshinsky’s email, Jaeme messaged Hamilton that Oshinsky
sent over what he expected, but noted that they should have more volume data, which
“is what we want to know.”166 He also wanted further detail on what Ontario made
on the volume it broke out.167 To Jaeme and Hamilton, if Ontario’s platform was
processing $40 to $50 billion, Ontario should have had data on those payments.168
Hamilton commented that if Ontario did not have this information, “it’s really hard
to see how they came up with any of their volume numbers in the first place.”169
The morning of February 7, Wechsler texted Jaeme that he had heard Jaeme
was not yet comfortable.170 He said, “I can’t wait any longer. I told you the volume
will get done and we have everything we need.”171 He stated that he had “too much
time invested here and [had] to win. So if we aren’t going to close - I need to proceed
164 JX-655 at 2.
165 Id.
166 JX-658 at 1.
167 Id. at 2–3.
168 Id. at 1–2.
169 Id. at 2–3.
170 JX-662 at 1.
171 Id.
25
elsewhere.”172 Jaeme asked Wechsler to push Oshinsky to respond to his questions
in anticipation of a SwervePay board meeting the following Monday and asked if
Wechsler would speak directly with some of the SwervePay board members.173
Wechsler responded that he had “no problem” talking to anyone.174
Around 5:00 p.m. that evening, Oshinsky texted Jaeme to schedule a call for
the following morning.175 Oshinsky noted that “[w]e put together a good framework
to estimate” the questions he raised in his email and offered that Durrett was “best
positioned” to handle Jaeme’s questions.176
Around 10:00 p.m., Jaeme emailed Oshinsky additional questions, asking him
to further break down the data he previously provided.177 In that February 7 email,
Jaeme clarified what SwervePay sought to validate: “In conversations thus far, we’ve
come to understand that ~$1B in payments have been monetized by Ontario and that
there is an additional $40B-$50B that have not. We’re trying to get the clearest picture
possible of where that volume exists by platform/segment and how that may or may
not impact the ability for us to move it quickly to the PayFac.”178 Jaeme asked for
“processing volumes that run through the Ontario platforms” but that were not
172 Id.
173 Id. at 1–2.
174 Id. at 2.
175 JX-657 at 1.
176 Id. at 2.
177 JX-655 at 1.
178 Id. (emphasis added).
26
presently monetized so that he could “identify the existing TAM within the Ontario
platform” available for conversion.179
F. The February 8 Email
Oshinsky raised Jaeme’s latest round of questions with the broader team on
February 8. Oshinsky cautioned that Jaeme was “oriented around a $40-50B
payments volume number[.]”180 Oshinsky expressed “concern[] that if we send
[Durrett’s analysis] without any context there might be a bad reaction.”181 Oshinsky
asked his team for the basis of the $40 to $50 billion representation, noting that even
the “most aggressive/high level analysis got to $34B.”182 Oshinsky questioned
whether there was “any intellectually honest way to show the $34B in a build up.”183
Although Steffe responded with the background to the $40 to $50 billion figure,
Carlson advised the team not to “over work this.”184 Carlson instructed Oshinsky to
“[s]how [Jaeme] a big oppty and tell him we need to get going,” reasoning that “[h]e’s
also running out of cash pretty fast . . . and absolutely needs to do this deal.”185
Wechsler agreed, noting that “I spent time with [Jaeme] yesterday saying enough is
enough.”186 Wechsler noted that Buyers could offer SwervePay some back-end
179 Id. (emphasis added).
180 JX-676 at 1.
181 Id.
182 Id.
183 Id.
184 JX-681 at 2.
185 Id.
186 Id.
27
minimum in the $5 to $10 million range as a solution, but felt that “we have to be
firm and show him we are done chasing here.”187
Dubbioso suggested that Wechsler or Steffe “catch Jaeme live today” and
“signal the number is closer to $35B of volume opportunity and even a subset of that
(i.e., 5-10B) makes a massive opportunity for him and his shareholders.”188 Dubbioso
deferred to the others on strategy but stated that he wanted the team “to be
responsive to his questions.”189
Wechsler urged that a response to Jaeme’s outstanding questions needed to
come from Oshinsky.190 Wechsler instructed Oshinsky to give Jaeme “a little ‘deal
fatigue’ sense.”191
Oshinsky said he would pass on the deal fatigue message and proposed
“pointing to the $34B with appropriate caveats and saying ‘this is it and we’re done
with reverse” due diligence.192 Carlson agreed to the plan, saying “[p]oint to the
$34BN but we are closing business, etc. You get it.”193 Oshinsky responded, “Roger.
We’re aligned[.]”194
187 Id.
188 Id.
189 Id.
190 Id. at 1.
191 Id.
192 Id.
193 JX-673 at 1.
194 Id.
28
Wechsler spoke to Jaeme by phone and reported by email to his team around
noon on February 8.195 He said: “Here is my recommendation. Extend the earnout
period an additional 12 months to achieve. He will take that and we will close. We
are not out anything.”196 Carlson and Wechsler responded expressing frustration
with Jaeme holding up the deal, but Wechsler was confident they could “get[] it done”
if they extended the earnout period.197 Carlson questioned whether they should let
Jaeme “push [them] around,” given that Jaeme “b*tched so we gave him profit
interests” and “now wants the earnout extended. Next thing he wants something
else. His board is lucky we are at the table.”198 Wechsler maintained that he would
rather “say sign or f*ck off. He and his board would cave.”199 Carlson offered to call
Jaeme, while Dubbioso cautioned that they “can’t lose the deal.”200
Oshinsky also spoke to Jaeme the morning of February 8.201 He reported back
to his team around 4:00 p.m. that afternoon.202 He advised that Jaeme “pushed hard
on needing to understand/validate the opportunity. I do think it’s a fair ask and I
don’t think he’s going to settle for us just [to] point to a high level headline.”203
195 JX-674.
196 Id. at 2.
197 Id. at 1.
198 Id.
199 Id.
200 Id.
201 JX-669 at 1.
202 Id.
203 Id.
29
Oshinsky then cut and pasted the text of the $34 billion build-up that Ontario
and its advisor had created during the July 2019 diligence.204 Oshinsky asked
whether it was “at all reasonable to send[.]”205 He said he was “[o]pen to other ideas,”
and was “just trying to arrive at the best way to substantiate the big opportunity.”206
Around the same time, Dubbioso texted Oshinsky that “now that [Wechsler]
signed off on the $34B I think we do have some degree of CYA[.]”207
In an email exchange with Carlson that evening, Wechsler pushed for hardline
tactics. He wanted to tell Jaeme the deal was called off, referring to the tactic as
“deal judo” that “[a]lways works.”208
Oshinsky emailed Jaeme a spreadsheet containing the $34 billion build-up just
before midnight.209 Oshinsky copied Dubbioso, Wechsler, Steffe, and Carlson on the
email.210 The email (the “February 8 Email”) did not include any caveats.211 It did
not attach the Durrett analysis.212 Nor did it identify the spreadsheet’s source
material or methodology.213 The email noted that “there is significant additional
204 Id.
205 Id.
206 Id.
207 JX-122 at 1.
208 JX-678 at 1.
209 JX-685.
210 Id.
211 See id.
212 See id.
213 See id.
30
upside embedded from recent new key logos” and that there was “[o]bviously a
massive embedded opportunity.”214 Of course, just hours earlier, Oshinsky stated on
an internal New Mountain email thread that Ontario had “existing ~$5B of
volumes.”215
Wechsler followed up with the team the next morning, asking for reactions to
his suggestion to extend the earnout.216 Carlson was defensive of Jaeme, noting that
“[h]e committed to the deal 100% over and over again. He really just wanted
something to show his board . . . .”217 Carlson did not think that they needed to extend
the earnout period to get the deal done.
Dubbioso advised against extending the earnout because Jaeme “will just keep
asking for more.”218 He felt the $34 billion volume build-out would satisfy Jaeme’s
request and asked whether Jaeme had the message that he should be moving toward
closing on February 14.219
Wechsler responded: “What [Oshinsky] gave [Jaeme] is meaningless. This
entire thing is a red herring.”220
Like a red herring, the $34 billion representation was misleading. Throughout
February 2020, Durrett continued his analysis of the payment opportunity and
214 Id. at 1.
215 JX-691 at 2.
216 JX-689 at 1.
217 JX-692 at 1.
218 JX-689 at 1.
219 Id.
220 Id.
31
SwervePay’s ability to reach an earnout. Around February 10, he told Blue Star
executives that their assumptions were “aggressive,” but he felt their targets were
achievable by 2024.221 In an email, Durrett referred to the $5.5 billion figure as their
“low-end estimate [] of annual volume potential today,” which was higher than the
$3.5 billion New Mountain modeled internally.222 Durrett felt that with SwervePay,
Ontario could convert the majority of its payments volume and “grow to $40MM+ over
[the] investment horizon.”223
In a February 19 email to Blue Star executives, Durrett shared that he believed
the payments opportunity at Ontario was “more likely in the $6B-10B range”––still
far short of the $34 billion figure.224 On February 23, Blount emailed Durrett’s
analysis to Ontario’s new CEO Tim O’Brien to discuss Ontario’s investment thesis.225
The following afternoon—the day the SwervePay acquisition closed—Blount told
O’Brien that “if asked,” New Mountain and Wechsler would say $5.2 billion was “the
total amount of payments being collected on [Ontario’s] platform.”226
221 JX-719 at 1–2.
222 JX-733 at 1.
223 Id. (emphasis added).
224 JX-797 at 1.
225 JX-851 at 3.
226 Id. at 1.
32
G. SwervePay Approves The Acquisition.
Meanwhile, Wechsler continued to press for a deal with SwervePay, although
he grew increasingly frustrated.227 When Wechsler texted Jaeme on February 9, he
offered to extend the earnout, which he described as a “huge give.”228
That afternoon, Wechsler continued to push internally for extending the
earnout, arguing that Jaeme was “a good guy, but weak and influenced by his board”
and that Jaeme “always says the right things and then it changes.”229 Wechsler
reasoned that “doing a bunch of calls with each board member saying $34B in volume
etc just prolongs it.”230
Wechsler also spoke with Malven that afternoon. Malven was on the
SwervePay board and a partner of one of SwervePay’s largest investors, 4490
Ventures.231 Malven inquired about Ontario’s projections of $43 million in revenue
by 2024.232 Malven noted that Ontario’s projections suggested that Ontario’s
payments volumes were insufficient for SwervePay to achieve the earnout.233 But
Wechsler reassured him that the $43 million of projected revenue by 2024 did not
include any synergies with SwervePay.234
227 See, e.g., JX-692 at 1.
228 JX-708 at 1.
229 JX-690 at 1.
230 Id.
231 PTO ¶¶ 70, 77; Trial Tr. at 448:22–449:5 (Malven).
232 JX-717 at 1–3.
233 Id.; see also Trial Tr. at 470:1–23 (Malven).
234 Trial Tr. at 470:1–23 (Malven).
33
On February 10, Wechsler and Steffe had a conference call with Jaeme and
some members of the SwervePay board.235 Wechsler relayed that he had “strong
equity incentives to drive EBITDA at Ontario based on a 2 year earn-out and that he
was 4 months into the earn-out.”236 He suggested his “earnout would dovetail closely
with the expected outside date for the proposed [SwervePay] earnout.”237 He also
noted that he was hiring people from his prior, successful teams to help accelerate
revenue and that he had handpicked Ontario’s new CEO, who had more payments
experience than the current one.238 On the call, “Wechsler made it painfully clear
that [SwervePay] did not have the luxury of trying to negotiate a significantly better
deal or delay timing on a finalized deal.”239
At SwervePay’s two-day board meeting on February 11 and 12, Jaeme
expressed doubts about remaining an independent company, noting that he had seen
multiple situations where go-to-market partners preferred to control payments
volume for themselves or expressed concern about SwervePay’s size and stability.240
He noted that if SwervePay rejected the deal, SwervePay would need to start looking
for additional funding and risked a down round.241 According to Malven, SwervePay
235 JX-738 at 1.
236 Id.
237 Id.
238 Id. at 1–2.
239 Id. at 2.
240 Id.
241 Id.
34
had between 14 and 16 months of runway left at that time.242 Jaeme also argued that
the companies that had previously shied away from SwervePay would want to work
with them post-acquisition, given Ontario’s financial backing and validation.243 To
assuage concerns about the viability of the earnout, he noted that if SwervePay “could
capture a relatively small piece of the $34,000,000,000 in payments that is estimated
to run through Ontario,” it could achieve the earnout.244 SwervePay’s board
approved the acquisition on February 12, 2020.245
H. Ontario Acquires SwervePay.
On February 24, 2020, OSC Investment, L.P. acquired SwervePay (the
“Acquisition”) under a Membership Interest Purchase Agreement (the “Purchase
Agreement”).246
In exchange for SwervePay, Sellers received (i) $9.9 million in cash, (ii) 1,000
Class A Units in parent company OSC Investment, L.P., valued at $100 per unit (the
“Rollover Units”), and (iii) potential earnouts consisting of cash payments between
$17,500,000 and $43,750,000 (the “Cash Earnout”) and 100,000 Class A Units in OSC
Investment, L.P. (the “Equity Earnout,” and together with the Cash Earnout, the
“Earnouts”).247
242 JX-745 at 1.
243 JX-738 at 6.
244 Id.
245 JX-745 at 1; Trial Tr. at 515:5–24 (Malven).
246 JX-841 (Purchase Agreement).
247PTO ¶¶ 6, 117; Purchase Agreement §§ 2.01, 2.10, 2.11. Legacy SwervePay became a limited partner in OSC Investment, L.P. pursuant to a joinder to OSC
35
The Earnouts were contingent on SwervePay’s post-closing performance
between January 1, 2021 and December 31, 2021 (the “Earnout Period”). 248
SwervePay would achieve the Cash Earnout if it generated at least $17.5 million in
net payments revenue (as defined in the Purchase Agreement) by converting
Ontario’s existing payments volume within the Earnout Period.249 Above $17.5
million, SwervePay would receive a Cash Earnout equal to the net payments revenue
it generated from converting Ontario clients, capped at $43.75 million.250 SwervePay
would achieve the second earnout milestone if it generated at least $10 million in net
revenue from new customers.251 If SwervePay met either threshold, it would receive
100,000 units of OSC Investment, L.P. in the Equity Earnout, which the parties
valued at $10 million.252
Also on February 24, 2020, Jaeme, Katrina, and Hamilton entered into
employment agreements with SwervePay (the “Employment Agreements”).253 As
Investment, L.P.’s Limited Partnership Agreement. Purchase Agreement § 2.11(b); JX-279 (Limited Partnership Agreement); JX-1341 at 244.
248 PTO ¶ 115.
249 Id.
250 Id. ¶ 117.
251 Id. ¶ 115.
This litigation centers on whether SwervePay would have received the Cash Earnout and, as a result, the Equity Earnout. Sellers do not contend that they would have met this new-customer earnout.
252 Id.
253 Id. ¶ 119; see also JX-845, JX-846, JX-848.
36
part of their employment, Jaeme and Hamilton each were awarded 7,250 profit
interest units (“PIUs”), with vesting conditions on continued employment.254
I. Issues With Worldpay Emerge.
SwervePay contracted with third-party vendors like Worldpay LLC for its
payments infrastructure. The Purchase Agreement identified Worldpay as a
“Material Vendor” and the contract with Worldpay (the “Worldpay Contract”) as a
“Material Contract.”255
In the summer of 2020, Worldpay informed Jaeme that it had been acquired,
and that it no longer wanted to process any debt collection.256 That summer,
Worldpay began shutting down service to SwervePay’s collection clients and rejected
Jaeme’s attempt to onboard a new collection agency.257
By November, SwervePay decided to migrate clients off Worldpay’s
infrastructure.258 And Jaeme negotiated a contract with another processor, Base
Commerce.259 In mid-November, Ontario executives signed off on a plan for
completing the client transition to Base.260 Ontario gave Jaeme freedom to do
254 JX-1122 at 4–5, 22–23.
255 Purchase Agreement §§ 3.14(a)(xi), (b), 3.22; JX-842 at Schedules 3.14(a), 3.22.
256 Trial Tr. at 270:15–24, 298:7–12 (J. Adams).
257 JX-1154; JX-1207.
258 JX-1283 at 1; JX-2109 at 1.
259 JX-1319; JX-1354 at 3; Trial Tr. at 305:14–19 (J. Adams).
260 JX-2109 at 1.
37
whatever he needed for the transition because “it saves us costs over what”
SwervePay paid Worldpay.261
When SwervePay tried switching clients to the Base platform, SwervePay
experienced technical issues that had widespread impact.262 On December 9,
Worldpay shut down services to all of the SwervePay clients it had identified as debt
collectors, including clients SwervePay had not yet transitioned to Base.263
In the end, when Ontario executives discussed bonuses the following month,
they praised Jaeme for “proactively managing” the Worldpay transition and felt his
efforts “set us up for cross-sell success.”264
J. Relationships Sour.
In the spring of 2020, Ontario began discussing strategic shifts.265 The Ontario
board contemplated reductions-in-force and organizational redesign.266
O’Brien put Jaeme in charge of investigating the volume for the payments
opportunity.267 He tasked other employees, Blue Star, and McKinsey with the same
exercise.268 On April 29, 2020, Jaeme emailed Blue Star asking for their volume data
because “everyone is struggling trying to find the $30B as discussed during our
261 Id.
262 Trial Tr. at 403:21–404:3 (Hamilton); see also JX-2188 at 15.
263 JX-2111 at 5–7.
264 JX-1333 at 1.
265 JX-1984.
266 Id. at 7–16.
267 Trial Tr. at 214:4–11 (J. Adams).
268 Id. at 66:17–67:12 (J. Adams).
38
diligence” and he was “hitting brick walls.”269 That month, SwervePay initiated its
“phase 1 rollout” of new software, offering SwervePay as a processing option for
Ontario customers.270 A few months later, Ontario began to lay off employees,
including members of the SwervePay team.271
By June, the teams still could not validate the $34 billion figure: McKinsey had
arrived at a $26 billion estimate and Blue Star got to around $10 billion. 272 On
June 1, Durrett sent an email to Jaeme and other Ontario team members
summarizing his previous discussions with McKinsey.273 In that email, Durrett
stated that Ontario had a “top-down” estimate of approximately $30 billion that
Blount had provided to them, but that they also had a $5.5 billion “bottoms-up,”
customer-by-customer estimate that Durrett had created.274
Jaeme, Durrett, and Ontario team members had a call with McKinsey to refine
their estimates on June 8. On the call, Durrett mentioned his “bottoms-up”
estimate.275 And although Durrett had to drop from the call early, he circulated a
269 JX-973 at 1.
270 Trial Tr. at 1469:23–1470:16 (Hamilton).
271 Id. at 70:24–71:21 (J. Adams).
272 JX-1052 at 1–2.
273 JX-1035.
274 Id.; see also Trial Tr. at 922:16–923:4 (Durrett) (describing a “top-down” estimate
as leveraging “independent third-party data [and] benchmarks,” and a “bottoms-up” estimate as a customer-by-customer build up leveraging internal data and data from payment partners).
275 Trial Tr. at 224:15–21 (J. Adams).
39
Google Sheets link to his “bottoms-up” estimate—his analysis from December 2019
showing a $5.2 billion payments volume—to Jaeme and the team.276
Although Durrett still felt there was a big opportunity, O’Brien could not see
it.277 On June 27, O’Brien expressed to other executives that Jaeme could achieve
the Cash Earnout, but felt it was “going to be really tough” because “[t]he TAM is not
there.”278
Ontario’s restructuring plans crystalized in July, when Ontario rolled out a
reorganization and reduction-in-force in line with McKinsey’s recommendations on
cost cutting.279 As part of the reorganization, Ontario laid off 58 employees, including
three Legacy SwervePay employees, and demoted Jaeme.280 Jaeme no longer
reported directly to O’Brien, led payments at Ontario, or made key business decisions
for payments.281 Ontario removed all of Jaeme’s direct reports, including top
salespeople.282 Ontario moved Hamilton from payments to a different project. 283
Conversions to SwervePay’s software slowed to an average of 2.5 customers per
month.284
276 JX-1058; see also Trial Tr. at 224:15–227:19 (J. Adams).
277 JX-1052 at 2–3.
278 JX-1094 at 2.
279 JX-1110 at 2; Trial Tr. at 70:17–23 (J. Adams).
280 JX-1984.
281 Trial Tr. at 72:24–73:1, 74:1–13 (J. Adams).
282 Id. at 71:6–21 (J. Adams).
283 Id.; JX-1214 at 1.
284 JX-1787 (“Beach Opening Report”) ¶¶ 59–60.
40
In light of these and other changes, Jaeme asked to modify the Cash Earnout
by eliminating the distinctions between different revenue sources, adjusting the
earnout calculation, and changing the award to a mix of equity and cash.285 As
justification, he cited Ontario’s decision to focus on other projects, a previously
undisclosed contract with another PayFac that limited SwervePay’s ability to convert
captive accounts to its software, and the parties’ determination that Ontario’s actual
payments volume was somewhere between $6 and $8 billion.286 O’Brien said that he
would go to bat for the SwervePay team, but New Mountain, Blue Star, and Ontario
ultimately refused to engage in the discussion.287
In a September 17 update to the Ontario board, O’Brien acknowledged that
they were exhausting the payments conversion to Ontario and that they needed to
pursue acquisitions to grow revenue.288 In a draft presentation regarding acquisition
discussions, Dubbioso lowered the Ontario payments volume estimate from $34
billion to $20 billion and then ultimately to $10 billion.289
In October, Ontario retained Houlihan Lokey to value the SwervePay
acquisition, including the Earnouts, as of the date the acquisition closed.290 Houlihan
285 JX-1214 at 2.
286 Id. at 1–2.
287 Trial Tr. at 69:19–70:4 (J. Adams); id. at 490:16–24 (Malven).
288 JX-1962 at 11.
289 JX-1231 at 3; JX-1240 at 1.
290 JX-1249 at 3.
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Lokey valued the Earnouts at approximately $4.3 million—functionally “worthless,”
according to Houlihan Lokey’s internal communications.291
Around this time, before the Earnout Period began, an Ontario employee who
had previously worked for SwervePay told Jaeme that Houlihan Lokey stated that
Ontario would have zero liability on the books for the Earnouts. 292 This prompted
Jaeme to engage legal counsel.293
In November, New Mountain executives privately acknowledged that
SwervePay would not achieve the Earnouts.294
K. The Individual Sellers Leave Ontario.
By January 2021, the Individual Sellers had sent legal correspondence to
Buyers.295 In response, O’Brien offered Jaeme and Hamilton an “Incentive Proposal”
of up to approximately $3.35 million ($2.1 million for Jaeme, and $1.25 million for
Hamilton) on March 2, 2021.296 The offer required Jaeme and Hamilton to release
all claims against Buyers and transfer any rights under the Earnouts to them.297
Jaeme and Hamilton refused Ontario’s offer.298
291 JX-1320 at 33; JX-1293 at 1.
292 Trial Tr. at 79:14–80:6 (J. Adams).
293 Id. at 80:9–11.
294 JX-1960 at 9.
295 JX-1370 (referencing a 1/29/21 demand letter).
296 JX-1376 at 2.
297 Trial Tr. at 83:1–84:2 (J. Adams); id. at 342:17–343:3 (Hamilton).
298 Id.
42
On March 25, 2021, Jaeme was reviewing his emails in an effort to understand
why the relationship with Buyers had broken down.299 He found Durrett’s June 8
email containing the link to a Google Sheet.300 Jaeme did not recall reviewing the
email when it was sent.301 Jaeme clicked through the history of the spreadsheet to
see how it was made and concluded that Buyers knew long before the acquisition
closed that the $34 billion was based upon assumptions “10x” what Ontario’s data
was showing, and that Ontario’s actual customer data reflected only a $5.2 billion
payments volume opportunity.302
Tensions escalated after Jaeme and Hamilton refused the proposal.303 By
April, O’Brien was texting other Ontario executives about “getting rid of Jaeme
Adams.”304 According to the Individual Sellers, Ontario executives began demanding
that they immediately transfer knowledge and work, and Ontario also flooded them
with tasks unrelated to converting payments volume or achieving SwervePay’s
Earnouts.305
Litigation seemed likely. On May 6, 2021, Jaeme, Katrina, and Hamilton
signed litigation consultant agreements with SPOSC Investment Holdings, LLC
299 Id. at 80:12–81:16 (J. Adams).
300 Id.
301 Id. at 226:16–18, 228:5–18 (J. Adams).
302 Id. at 80:15–81:16 (J. Adams).
303 Id. at 82:2–20 (J. Adams).
304 Trial Tr. at 1455:15–1456:12 (O’Brien); JX-1428 at 2.
305 Trial Tr. at 82:2–20 (J. Adams); id. at 341:4–342:16 (Hamilton); id. at 432:8–22
(K. Adams).
43
(“SPOSC”).306 SPOSC engaged all three as “consultant[s] regarding a lawsuit
between SwervePay and Ontario” and paid them annual salaries to pursue the
litigation.307
On May 7, 2021, Alex Forman, Ontario’s General Counsel, sent Jaeme and
Hamilton another settlement and incentive agreement, which included a bonus
component.308 This proposal once again required Jaeme and Hamilton to release any
claims related to SwervePay’s Earnouts.309
On May 17, 2021, Ontario launched a five-day internal investigation into
Jaeme, Katrina, and Hamilton.310 The report recommended firing all three.311 They
were neither informed of nor interviewed for the investigation.312
Jaeme, Katrina, and Hamilton resigned on May 26, 2021.313 They provided
notice in a letter from their attorney, citing an increasingly hostile work environment
and the fallout from their litigation against New Mountain.314 There were still over
six months left in the Earnout Period.315
306 JX-79; JX-80; JX-81.
307 JX-79 at 1; JX-80 at 1; JX-81 at 1.
308 JX-1436.
309 Id.; Trial Tr. at 1457:1–5 (O’Brien).
310 JX-1485 at 1.
311 Id. at 2.
312 Trial Tr. at 445:13–18 (K. Adams).
313 JX-1492.
314 Id. at 1–2.
315 PTO ¶ 115.
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L. Litigation Ensues.
In May 2021, Sellers commenced this action against SwervePay Holdings,
LLC; OSC Investment, L.P.; OSC Investment GP, LLC; OSC Payments, Inc.; New
SwervePay (collectively, the “HoldCo Entities”); Blue Star Innovation Partners GP,
LLC; New Mountain; Wechsler; Oshinsky; and Dubbioso.316 Three of the HoldCo
Entities filed a competing complaint against Jaeme, Hamilton, and SPOSC in July
2021.317 The court consolidated the actions on August 31, 2021.318 Each side
amended their complaint multiple times,319 resulting in two dismissal decisions.320
Sellers’ operative complaint contains eight counts.321 Post-trial, however,
Sellers narrowed their claims to five.322 In Count I, Sellers bring a claim for
fraudulent inducement against Buyers as it relates to the Purchase Agreement. In
Count II, Sellers bring a claim for conspiracy to commit fraud against Buyers. In
316 Dkt. 1.Sellers later added the following defendants: Fund V LP; New Mountain Investments V, LLC (“Fund V GP”); Blue Star; and Eir Partners (collectively, the “Newly Added Defendants”). Buyers argued that the claims against the Newly Added Defendants are time-barred, and the court addressed this argument in a separate decision. See Dkt. 658 (the “Laches Decision”) at 3–11.
317 C.A. No. 2021-0666-KSJM.
318 Dkt. 36.
319 See Dkt. 51 (Buyers’ First Am. Compl.); Dkt. 236 (Buyers’ Second Am. Compl.);
Dkt. 238 (Sellers’ First Am. Compl.); Dkt. 325 (Sellers’ Second Am. Compl.); Dkt. 391 (Buyers’ Third Am. Compl.); Dkt. 590 (Buyers’ Fourth Am. Compl.).
320 Dkt. 74 (In re Swervepay Acq., LLC, 2022 WL 3701723 (Del. Ch. Aug. 26, 2022));
Dkt. 470.
321 Sellers’ Second Am. Compl.
322 Sellers dropped Counts VI and VIII seeking declaratory relief in connection with
restrictive covenants in the Purchase Agreement and Employment Agreements. Sellers waived those claims by failing to pursue them. Emerald P’rs v. Berlin, 726 A.2d 1215, 1224 (Del. 1999) (“Issues not briefed are deemed waived.”).
45
Counts III, IV, and V, Jaeme, Hamilton, and Katrina each bring a claim against
Buyers for fraudulent inducement as to the Employment Agreements (together with
Count I, the “Fraud Claims”).
Buyers’ operative complaint contains four counts of contractual fraud.323 By
the time of trial, however, Buyers had narrowed their case to a single issue concerning
Sellers’ relationship with, and representations and statements concerning,
Worldpay.324 Sellers argued that Buyers’ sole remaining claim was time-barred, and
the court entered judgment for Sellers on that claim in a separate decision.325
Discovery was hard-fought. The parties filed many motions to compel.326 The
court appointed Ryan P. Newell as Special Discovery Magistrate.327 He did a great
job. The court held trial from October 28 through November 1, 2024, and on February
323 Dkt. 590.
324 See Dkt. 573 (“Buyers’ Pre-Trial Opening Br.”) at 43–50.
325 Laches Decision at 11–14.
326The parties filed five motions to compel before the court appointed a Special Discovery Magistrate. Dkt. 151 (Sellers’ First MTC); Dkt. 152 (Sellers’ Second MTC); Dkt. 153 (Sellers’ Third MTC); Dkt. 206 (Buyers’ First MTC); Dkt. 207 (Buyers’ Second MTC); Dkt. 301 (appointing Special Discovery Magistrate). On July 15, 2024, Sellers filed a motion for sanctions over Buyers’ spoliation, stating that Wechsler, Durrett, and Steffe had deleted texts while on litigation hold. Dkt. 474. On September 12, the Special Discovery Magistrate issued a report recommending that the court grant the motion in part and elevate the burden of proof by one level where Buyers bear the burden. Dkt. 517. The court did not impose this sanction. 327 Dkt. 301; Dkt. 305.
46
13, 2025.328 The court heard post-trial argument on June 24, 2025,329 and the parties
submitted their joint schedule of evidence on July 10, 2025.330
II. LEGAL ANALYSIS
Sellers assert four counts of fraud and one for civil conspiracy to commit fraud.
“Under Delaware law, the elements of fraudulent inducement and fraud are the
same.”331 To prove fraud, Sellers must show:
(1) a false representation, usually one of fact, made by the
defendant; (2) the defendant's knowledge or belief that the
representation was false, or made with reckless
indifference to the truth; (3) an intent to induce the
plaintiff to act or to refrain from acting; (4) the plaintiff's
action or inaction taken in justifiable reliance upon the
representation; and (5) damage to the plaintiff as a result
of such reliance.332
Sellers bear the burden of proving each element by a preponderance of the
evidence.333
For each Count, Sellers rely on the same predicate—that Buyers fraudulently
induced them to enter into the Purchase Agreement and Employment Agreements by
misrepresenting Ontario’s payments volume as $34 billion. Because the same
328 Dkt. 610; Dkt. 623.
329 Dkt. 650.
330 Dkt. 649.
331 Great Hill Equity P’rs IV, LP v. Sig Growth Equity Fund I, LLLP, 2018 WL 6311829, at *31 (Del. Ch. Dec. 3, 2018).
332 Stephenson v. Capano Dev., Inc., 462 A.2d 1069, 1074 (Del. 1983).
333 Revolution Retail Sys., LLC v. Sentinel Techs., Inc., 2015 WL 6611601, at *9 (Del.
Ch. Oct. 30, 2015), judgment entered, (Del. Ch. 2015), order clarified, (Del. Ch. 2015).
47
fraudulent act forms the basis of each of Sellers’ counts, this decision streamlines the
liability analysis, addressing each of Sellers’ Counts together.334
A. Material, False Representations
The first element of fraud requires Sellers to show that Buyers made false
representations (or omissions) of material fact.335 “A misrepresentation is an
assertion that is not in accordance with the facts and is material if it would induce a
reasonable person to manifest his assent.”336 Further, a party can be liable for fraud
through silence when they have a duty to speak.337 A duty to speak can arise where
a party learns its prior representations are misleading and “disclosures are necessary
to prevent statements actually made from being misleading.”338
Sellers have proven that the HoldCo Entities, New Mountain, and Wechsler
made material, false representations concerning Ontario’s monetizable payments
volume during negotiations or failed to correct material misrepresentations
necessary to prevent fraud.
334 See Dkt. 637 (“Buyers’ Post-Trial Opening Br.”) at 87–88 (arguing that the civil
conspiracy and fraud claims rise and fall together).
335 E.I. DuPont De Nemours & Co. v. Fla. Evergreen Foliage, 744 A.2d 457, 461–62
(Del. 1999).
336 Martin v. Med-Dev Corp., 2015 WL 6472597, at *12 (Del. Ch. Oct. 27, 2015).
337 Fortis Advisors LLC v. Johnson & Johnson, 2024 WL 4048060, at *45 (Del. Ch.
Sep. 4, 2024), rev’d on other grounds sub nom., Johnson & Johnson v. Fortis Advisors LLC, 352 A.3d 229 (Del. 2026).
338 In re Enstar Corp., 593 A.2d 543, 550 (Del. Ch. 1991), overruled on other grounds,
604 A.2d 404 (Del. 1992); see also Brody v. DCiM Sols., LLC, 2025 WL 1802239, at *8 (Del. Ch. June 30, 2025).
48
Payments volume is a key financial metric for PayFacs.339 In exchange for
their payment-related services, customers remit a percentage of all payments
facilitated through the PayFac.340 Information on payments volume is material, and
Buyers do not make arguments to the contrary.341
Buyers misrepresented Ontario’s payments volume to Sellers. Through much
of negotiations, Sellers understood Ontario to have as much as $40 to $50 billion of
payments volume flowing through its systems.342 Oshinsky only sent the February 8
Email with the $34 billion representation after Jaeme “pushed hard” in diligence “to
understand/validate” the payments volume opportunity.343
Oshinsky sent the February 8 Email in response to Jaeme’s request for “a
summary of all monthly payment processing volume separated by processing
platform.”344 Jaeme stated that Sellers understood that “~$1B in payments have
been monetized by Ontario and that there is an additional $40B-$50B that have
not.”345 He explained that Sellers were “trying to get the clearest picture possible of
where that volume exists by platform/segment and how that may or may not impact
339 Trial Tr. at 16:5–10 (J. Adams); id. at 1135:6–16 (Wechsler).
340 PTO ¶ 56.
341 See generally Buyers’ Post-Trial Opening Br.
342Trial Tr. at 36:8–22, 44:1–7 (J. Adams); id. at 314:22–315:3, 317:24–318:7 (Hamilton).
343 JX-669 at 1.
344 Id. at 4.
345 JX-655 at 1.
49
the ability for us to move it quickly to the Payfac.”346 Jaeme also stated that he was
trying to “identify the existing TAM within the Ontario platform” available for
conversion.347 It was clear that Jaeme was looking for information on monetizable
payments flowing through Ontario’s platform.
But the $34 billion figure did not represent existing payments volume. And
Oshinsky sent it with no caveats.348 Because Jaeme asked for “existing” payments
volume “within” Ontario’s systems,349 and Oshinsky responded with an estimate
untethered to Ontario’s existing volume, the February 8 Email misrepresented
Ontario’s monetizable payments volume.
Oshinsky copied Dubbioso, Wechsler, Steffe, and Carlson on the February 8
Email.350 They all knew that the figure was inaccurate. None of them corrected it.
Buyers argue that Sellers failed to prove that the $34 billion estimate was false
and “fraudulently conceived, from the get-go.”351 And they go to great lengths to show
346 Id.
347 Id. (emphasis added).
348 JX-685 at 1.At trial, Oshinsky testified that he had a call with Jaeme during the morning of February 8, before he sent the February 8 Email. He testified that he provided caveats to the $34 billion estimate on that call. Trial Tr. at 840:16–841:9 (Oshinsky). Jaeme had no recollection of this conversation. Id. at 307:12–308:5 (J. Adams). And Oshinsky’s testimony on this point does not square with his emails to the broader New Mountain and Blue Star team, including his email asking the broader team if the $34 billion estimate was “at all reasonable to send.” JX-669 at 1. The court, therefore, cannot rely on Oshinsky’s recollection.
349 JX-655 at 1.
350 JX-685 at 1.
351 Buyers’ Post-Trial Opening Br. at 54 (quoting Trenwick Am. Litig. Tr. v. Ernst &
Young, L.L.P., 906 A.2d 168, 209 (Del. Ch. 2006), aff’d sub nom. Trenwick Am. Litig. Tr. v. Billett, 931 A.2d 438 (Del. 2007)).
50
that the $34 billion was a reasonable and well-supported industry-level estimate.352
But, again, Oshinsky did not provide the $34 billion figure as an industry-level
estimate. He provided the figure in response to Jaeme’s request for a summary of
“existing” payments volume “within” Ontario’s platform.353
Buyers also claim that Oshinsky sent Jaeme “exactly what he requested” and
that Jaeme was aware that the $34 billion figure in the February 8 Email was an
estimate.354 They rely on Oshinsky’s text exchange with Jaeme on February 7, during
which Oshinsky noted that Buyers had “put together a good framework to estimate”
the questions Jaeme raised in his email.355 But, again, the $34 billion used industrywide assumptions and was unrelated to data showing what payments volume existed
“within” Ontario’s platform, which is what Jaeme unambiguously requested.356
Sellers have proven that Buyers made a material, false representation.
B. Scienter
“As a matter of Delaware law, fraud ‘require[s] a certain level of scienter on
the part of the defendant; a misrepresentation must be made either knowingly,
intentionally, or with reckless indifference to the truth.’”357 To succeed on the Fraud
352 Id. at 54–56.
353 JX-655 at 1.
354 Buyers’ Post-Trial Opening Br. at 28, 30, 60.
355 JX-657 at 2.
356 JX-655 at 1.
357 Arwood v. AW Site Servs., LLC, 2022 WL 705841, at *20 (Del. Ch. Mar. 9, 2022)
(quoting Metro Commc’n Corp. BVI v. Advanced Mobilecomm Techs. Inc., 854 A.2d 121, 143 (Del. Ch. 2004)).
51
Claims, Sellers must prove that Buyers acted with scienter—that is, that they knew
the $34 billion representation was false.
Buyers do not dispute that they at least knew that the $34 billion figure was
based on assumptions, benchmarks, and guesswork.358 Nor could they. By December
2019—when Durrett conducted his analysis—Buyers knew that the $34 billion figure
was not representative of the volume of payments flowing through Ontario’s
systems.359 Indeed, in January and February 2020, New Mountain was working
under the assumption that Ontario touched approximately $5 billion in monetizable
payments, leveraging Durrett’s analysis rather than the $34 billion estimate.360 New
Mountain began to use the $5 billion estimate when comparing Ontario to other
potential acquisition targets.361
Sellers have proven that Buyers knew that the $34 billion representation was
problematic, not just because it was based on guesswork, but because it was false.
Before sending the $34 billion build-up, Oshinsky asked internally whether it was “at
all reasonable to send,” implying that he knew that it was not.362 Oshinsky also asked
Durrett, Wechsler, Dubbioso, and Steffe if there was “any intellectually honest way
358 See Buyers’ Post-Trial Opening Br. at 59–66.
359 See, e.g., JX-666 at 1 (contrasting analysis building up to estimate of $5 billion in
payment volume with $34 billion figure); JX-544 at 1.
360 See, e.g., JX-586 at 1; JX-603 at 1; JX-734 at 1.
361 See JX-586 at 1 (describing “Ontario’s ~$5.5B in current volume”); JX-603 at 1
(describing Ontario as sitting on “$5B overall” of volume).
362 JX-669 at 1.
52
to show the $34B in a build up,”363 implying that there was not. Indeed, no one
responded that the $34 billion estimate was, in fact, an “intellectually honest” way to
respond to Jaeme’s request.364 Dubbioso described Wechsler’s sign-off on the
communication as a “CYA,”365 which no one needs for forthright conduct. And the
day after Oshinsky sent the $34 billion build-up, Wechsler emailed acknowledging
that “what [Oshinsky] gave [Jaeme] is meaningless.”366 Indeed, Oshinsky sent the
February 8 Email although, just hours earlier, Oshinsky stated on an internal New
Mountain email thread that Ontario had “~$5B” in existing volume.367 Moreover,
throughout February 2020, Buyers continued modeling internally payments volume
figures far lower than $34 billion.368
A preponderance of the evidence shows that Buyers were aware that the $34
billion representation was inaccurate. Sellers have proven scienter.369
363 JX-666 at 1.
364 See JX-673 at 1–2.
365 JX-122 at 1.
366 JX-689 at 1.
367 JX-691 at 2.
368 JX-733 at 1 (Durrett referring to the $5.5 billion figure as their “low-end estimate
[] of annual volume potential today,” which was higher than the $3.5 billion New Mountain modeled internally); JX-797 at 1 (Durrett stating his belief that the payments opportunity at Ontario was “more likely in the $6B-10B range”). 369 Buyers argue that Oshinsky’s knowledge and actions cannot be imputed to New
Mountain, Fund V LP, or Fund V GP because Sellers did not prove that Oshinsky was acting on their behalf during negotiations. They claim Oshinsky was acting on Ontario’s behalf. Buyers’ Post-Trial Opening Br. at 88–89. But Oshinsky was employed by New Mountain and was a member of Fund V GP. PTO ¶ 71. He was not employed by Ontario. And Oshinsky took direction from New Mountain director Dubbioso when sending the February 8 Email. See JX-689 at 1–2. Dubbioso
53
C. Intent To Induce
To make out a fraud claim, a plaintiff must also prove that the fraudulent
statements were made to induce the plaintiff into acting.370 Sellers thus must prove
that Buyers misrepresented the payments volume intending to induce Sellers to enter
into the Purchase Agreement and Employment Agreements.
Sellers have done so. Buyers knew that Jaeme wanted this data to relay to his
board to obtain approval of the Acquisition.371 Their internal communications reflect
this. Reporting on a January 27 meeting with Jaeme, Oshinsky advised Wechsler,
Woody, Blount, and Wolfe that
Jaeme was pretty direct with his goal for the meeting.
From their side, they want to understand how Ontario is
going to be able to move payments volume technically,
commercially and contractually on the platform. . . . His
goal is ‘to be able to go back to his Board and confidently
say they can hit the earnouts.’372
communicated to Buyers that Oshinsky had done as instructed. Id. at 1. Oshinsky thus was acting in the scope of his employment at New Mountain and therefore an agent of New Mountain, Fund V GP, and the entities they controlled. “Under Delaware law, ‘the knowledge of an agent acquired while acting within the scope of his or her authority and the acts of agents in that scope are imputed to the principal.’” Cumming ex rel. New Senior Inv. Gp., Inc. v. Edens, 2018 WL 992877, at *26 (Del. Ch. Feb. 20, 2018) (cleaned up) (quoting Metro. Life Ins. Co. v. Tremont Gp. Hldgs., Inc., 2012 WL 6632681, at *19 (Del. Ch. Dec. 20, 2012)). The other Buyers further claim that even if Oshinsky is found to be acting on behalf of New Mountain, Fund V LP, and Fund V GP, Sellers did not prove that those entities took part in negotiations between Ontario and SwervePay. But neither Dubbioso nor Oshinsky communicated that they were participating in negotiations solely on Ontario’s behalf. Again, neither individual was an Ontario employee. PTO ¶¶ 71–72. And they held themselves out as New Mountain team members.
370 Gaffin v. Teledyne, Inc., 611 A.2d 467, 472 (Del. 1992).
371 See JX-620 at 2; JX-662 at 1–2; JX-692 at 1, 3.
372 JX-620 at 2 (emphasis added).
54
When Jaeme pressed for information on payments volume, Oshinsky
expressed concern that sending Durrett’s analysis showing $5.2 billion in
monetizable payments could elicit a “bad reaction.”373 Buyers worried that Jaeme
was “oriented around a $40-50B payments volume number.”374 So Carlson, Durrett,
Wechsler, Dubbioso, and Steffe focused on negotiation tactics. They suggested that
Oshinsky “[p]oint to the $34BN” to “satisfy [Jaeme’s] request” and that he express
“deal fatigue” so that they could end Sellers’ diligence into Ontario’s payments volume
and close the deal.375 Wechsler “signed off” on this approach.376 Put differently,
Buyers gave Jaeme a number that would “satisfy” him, which they knew to be false,
for Jaeme to show to his board and secure deal approval.
Plain as day, Buyers acted with an intent to induce Sellers. Sellers have
proven the third element of their fraud claim.
D. Reasonable Reliance
“As part of any successful claim based on fraud or misrepresentation, there
must be a showing that a false statement was made and that the complaining party’s
conduct was in justifiable reliance upon the misrepresentation.”377 Sellers must
prove that they relied on the $34 billion estimate when they decided to sign the
Purchase Agreement and the Employment Agreements. Delaware courts measure
373 JX-676 at 1.
374 Id.
375 JX-689 at 1–3 (emphasis added).
376 See JX-681 at 1; JX-122 at 1.
377 Hynansky v. Vietri, 2003 WL 21976031, at *5 (Del. Ch. Aug. 7, 2003).
55
reliance in two ways. Courts assess reliance “as a matter of fact” and using a
reasonableness standard.378 Sellers have proven both.
1. Reliance In Fact
Sellers proved that they relied on Buyers’ representation of $34 billion in
payments volume when agreeing to enter into the Purchase Agreement and the
Employment Agreements. Sellers agreed to the Acquisition because achieving the
Earnouts presented a profitable opportunity.379
When presenting the deal to SwervePay’s board, Jaeme explained that “if
[SwervePay] could capture a relatively small piece of the $34,000,000,000 in
payments that is estimated to run through Ontario,” SwervePay should be able to
achieve the maximum Cash Earnout.380 On February 10, 2020, 4490 Ventures’
Malven contacted Wechsler out of concern that Ontario’s projected $43 million of
revenue by 2024 suggested a payments volume that was insufficient for SwervePay
to achieve the Cash Earnout.381
Buyers claim that Sellers did not in fact rely on the $34 billion estimate for
three reasons.
First, they argue that Sellers would have agreed to the Acquisition regardless
of Buyers’ representations because they needed the sale for SwervePay’s business to
378 Arwood, 2022 WL 705841, at *23–24.
379 See generally JX-738.
380 Id. at 6.
381 See JX-723; Trial Tr. at 469:23–470:23 (Malven).
56
survive.382 But there is no evidence that suggests that SwervePay had no other
options—in fact, 4490 Ventures’ Gregory Robinson felt that SwervePay had financing
options superior to what Ontario provided.383 Buyers’ contention does not overcome
the evidence to the contrary.
Second, Buyers say that Sellers knew SwervePay could not process most of
Ontario’s payments volume because the Worldpay Contract did not allow payment
processing for collection agencies, which constituted 75% of Ontario’s total
addressable market.384 But regardless of the terms of the Worldpay Contract, Sellers
had been using Worldpay to process payments from collection agencies long before
the acquisition. As Sellers stated to Worldpay after the sale: “SwervePay has been
boarding collection agencies with Worldpay for the last several years.”385 Sellers did
not view the practice as prohibited under the Worldpay Contract.386 And Sellers had
every expectation that they would continue to serve collection agency customers using
the Worldpay platform.387
Third, Buyers argue that Sellers did not rely on the represented $34 billion
payments volume because they only needed a small slice of that payments volume to
hit their earnouts.388 This is not a serious argument—the size of a slice depends on
382 Buyers’ Post-Trial Opening Br. at 66.
383 Robinson Dep. Tr. at 68:11–19.
384 Buyers’ Post-Trial Opening Br. at 41–42, 66–67.
385 JX-1216 at 8; see also Trial Tr. at 274:1–14 (J. Adams).
386 See generally Trial Tr. at 250:6–256:6, 265:14–19 (J. Adams).
387 JX-2137; see also Trial Tr. at 274:1–14, 297:11–298:12, 301:7–21 (J. Adams).
388 Buyers’ Post-Trial Opening Br. at 67.
57
the size of the pie. And Sellers were hyper-focused on payments volume in deal
negotiations for that reason. Buyers knew that Jaeme intended to relay the
payments volume to his board, which he did.389
Sellers have proven reliance in fact.
2. Reasonable Reliance
Sellers also have proven that their reliance was reasonable.390 “Whether
reliance was justified is a contextual inquiry and is ‘judged by reference to the
plaintiff’s knowledge and experience’ and ‘the relationship between the parties.’” 391
A plaintiff that knows a misrepresentation is false cannot at the same time justifiably
rely on it.392 Due diligence efforts that fail to uncover the truth, on the other hand,
can be evidence of reasonable reliance.393 Conducting pre-closing due diligence
means the plaintiff has “made efforts to verify the representation and discovered no
reason to doubt its truth.”394
389 JX-620 at 2; JX-690 at 1–2; JX-738 at 6.
390 The terms “reasonable reliance” and “justifiable reliance” are used interchangeably under Delaware law to describe the same legal concept. See Arwood, 2022 WL 705841, at *23 n.237 (“I need not distinguish between the two here because, in Delaware, ‘reasonable reliance is equivalent to justifiable reliance.’” (cleaned up) (quoting Reserves Dev. LLC v. Crystal Props., LLC, 986 A.2d 362, 368 (Del. 2009))). 391 Id. at *23 (footnote omitted).
392 Id. at *24 (“[I]t is axiomatic that a plaintiff does not justifiably rely on a defendant’s misrepresentation if the plaintiff knows that the representation is false.”).
393 Great Hill, 2018 WL 6311829, at *33.
394 Id.
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Buyers did not give Sellers access to Ontario’s internal payments volume
information other than through Buyers’ statements.395 That is why Jaeme pressed
to verify the data, and why Buyers ultimately sent the $34 billion build-up through
the February 8 Email. Sellers’ efforts to validate the repeated oral representations
of $40 to $50 billion in existing payments volume by requesting a written summary
were diligent efforts to verify Ontario’s payments volume, and Sellers had no reason
to doubt the $34 billion estimate provided in the February 8 Email.
Buyers quibble with Sellers’ diligence efforts. They raise arguments describing
steps that Sellers could have taken instead of relying on the February 8 Email,
including speaking to management, retaining advisors, or speaking with Durrett. 396
But the court’s inquiry is not whether Sellers could have eventually discovered the
truth had they continued to dig. The inquiry is whether Sellers’ reliance on the false
representation was reasonable.
It was. Sellers inquired about Ontario’s monetizable payments volume several
times.397 Sellers then asked to see data allowing them to verify Buyers’ statements
395 Trial Tr. at 888:1–16 (Oshinsky).
396 Buyers’ Post-Trial Opening Br. at 67–69. Buyers also claim that Sellers waited until late in negotiations to investigate Ontario’s payments volume. But Buyers’ own witnesses attest that Jaeme was focused on Ontario’s payments volume early on in the process. See, e.g., Steffe Dep. Tr. at 108:18–109:18 (describing Jaeme as “trying to figure out what was there” to support the $40–$50 billion estimates from “Day 1”); Trial Tr. at 1394:21–1395:22 (Carlson) (describing Jaeme as “focused on the addressable market” at the October 2019 meeting in Las Vegas).
397 See, e.g., Trial Tr. at 36:8–22, 44:1–7 (J. Adams); id. at 314:22–315:3, 317:24–318:7
(Hamilton).
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about $40 to $50 billion of payments volume.398 Oshinsky would not have sent the
February 8 Email containing the $34 billion estimate if Jaeme had not asked for it.
Oshinsky’s response, though false, was thus the result of Sellers’ adequate diligence
efforts, and it was reasonable for Sellers to rely on the February 8 Email.
Buyers cite DeBakey Corp. v. Raytheon Service Co. for the proposition that a
party cannot prove reasonable reliance where their own diligence efforts proved
inadequate.399 But that case is inapposite. In DeBakey, the defendants brought a
counterclaim for fraudulent inducement, claiming to have relied on the plaintiffs’
misrepresentations concerning the size of the telemedicine market, even though they
had also conducted a low-budget study on market size.400 The court entered judgment
against the counterclaimants, reasoning that they “did not rely solely on [the
plaintiffs’] representations, but, instead had performed due diligence (however
perfunctory) on their own.”401
Here, Sellers did not seek diligence regarding the payments market generally.
Rather, they sought information specific to Ontario—the payments volume within
Ontario’s system. Buyers were the most reliable source for that information and
Sellers acted reasonably in relying on Buyers’ representations.
398 JX-655 at 1.
399 2000 WL 1273317 (Del. Ch. Aug. 25, 2000), cited at Buyers’ Post-Trial Opening
Br. at 68.
400 2000 WL 1273317, at *25.
401 Id. at *26 (emphasis in original).
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Buyers also argue that Sellers’ failure to secure a contractual representation
regarding Ontario’s payments volume weighs against a finding of reasonable
reliance.402 This argument also fails. Parties to merger transactions can
contractually circumscribe exposure to post-closing claims of fraudulent inducement.
But Delaware law requires that they do so explicitly through unambiguous antireliance language.403 Buyers do not dispute that the Purchase Agreement contains
no anti-reliance language.
Buyers again rely on DeBakey, which is again distinguishable.404 In DeBakey,
the court found the plaintiffs were not justified in relying on the defendants’ oral,
extracontractual statements that they would provide additional financing for a joint
venture.405 But there, the joint venture agreement explicitly limited the defendants’
funding commitment and granted the defendants discretion to terminate the
agreement when they had met their funding obligations.406 The defendants’ promises
to provide additional funding were expressly disclaimed by the joint venture
agreement, and the court thus concluded that the plaintiffs “had to know that in any
402 Buyers’ Post-Trial Opening Br. at 69.
403 See Park7 Student Hous., LLC v. PR III/Park7 SH Hldgs., LLC, 340 A.3d 614, 618
(Del. Ch. 2025) (“Delaware law has resolved this tension by requiring specific and unambiguous anti-reliance language to preclude a fraudulent inducement claim based on the defendant’s pre-contract statements.”).
404 Buyers’ Post-Trial Opening Br. at 69 (citing Debakey, 2000 WL 1273317, at *27–
28).
405 Id. at *22.
406 Id.
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contested proceeding the [] Agreement would control.”407 The court also noted that
plaintiffs should have negotiated for the defendants’ oral promise to be included in
the agreement, because “the plaintiffs knew that they were subject to the very real
risk that [the defendants] would rely upon the plain language of the written
Agreement to terminate the joint venture.”408
Here, nothing in the Purchase Agreement contradicted Buyers’
representations regarding Ontario’s existing payments volume. The DeBakey court’s
reasoning is thus inapplicable.
Sellers have proven that they reasonably relied on Buyers’ false
representations.
E. Damages
The final element of a fraud claim is causally related damages.409 To show
causation, a plaintiff must prove the fact of damages “with reasonable certainty” 410
and “by a preponderance of the evidence.”411 Once a plaintiff proves causation, the
plaintiff must provide “a reasonable method to calculate damages.”412 “In cases of
fraud and fraudulent inducement, Delaware courts recognize two primary
407 Id.
408 Id.
409 Stephenson, 462 A.2d at 1074.
410 Maverick Therapeutics, Inc. v. Harpoon Therapeutics, Inc., 2021 WL 1592473, at
*10 (Del. Ch. Apr. 23, 2021); cf. Siga Techs., Inc. v. PharmAthene, Inc., 132 A.3d 1108, 1111 (Del. 2015), as corrected, (Dec. 28, 2015) [Siga II].
411 Maverick, 2021 WL 1592473, at *9.
412 Id. at *10.
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approaches for measuring the harm proximately caused by the defendant’s fraud—
benefit-of-the-bargain damages and out-of-pocket damages.”413 “In Delaware,
prejudgment interest is awarded as a matter of right and computed the day payment
is due.”414
Sellers request five categories of damages, each tied to the consideration they
would have received but for the fraud: the full value of the Cash Earnout, or
$43,750,000;415 the value of the Equity Earnout, which they calculate as $103.1
million to $218.6 million;416 the increased value of the 1,000 Rollover Units that
Sellers received at closing, which they calculate as $0.9 million to $2.1 million;417 the
value of Jaeme’s and Hamilton’s PIUs, which they calculate as $12.9 million to $29.7
million;418 and payment equal to the salaries and bonuses that they would have
received had they not been constructively discharged.419
This section proceeds in three parts, addressing: (1) causation, (2) damages
valuation methodology and calculation, and (3) prejudgment interest.
The parties relied on experts for their damages cases. Sellers relied on the
expert opinion of Murray Beach. Beach is highly qualified. He has over 45 years of
413 Id. at *9.
414 Brown v. Ct. Square Cap. Mgmt., L.P., 2024 WL 1655418, at *2 (Del. Ch. Apr. 17,
2024), aff’d, 331 A.3d 1270 (Del. 2024).
415 Dkt. 634 (“Sellers’ Post-Trial Opening Br.”) at 69.
416 Id.; Beach Opening Rep. ¶ 3(b).
417 Sellers’ Post-Trial Opening Br. at 69; Beach Opening Rep. ¶ 3(c).
418 Sellers’ Post-Trial Opening Br. at 69; Beach Opening Rep. ¶ 3(e).
419 Sellers’ Post-Trial Opening Br. at 69.
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experience as an investment banker, financial analyst, and C-suite executive, and is
accredited in business appraisal.420 Buyers proffered two rebuttal experts: damages
expert Yvette Austin and payments expert Anthony Hayes. Each is highly qualified.
Austin is a senior director at economic consulting firm Compass Lexecon. She has
several years of experience in M&A valuation and credit and solvency analyses. 421
Hayes has worked as a management consultant for the payments industry for
approximately 30 years, including as a founder of his own payments consulting firm
and as a partner at Oliver Wyman.422
1. Causation
The parties dispute what Sellers must prove to demonstrate causation. As a
reminder, the Purchase Agreement based the Earnouts on net payments revenue
targets.423 Those revenue targets depended on three key metrics: payments volume,
take rate, and conversion rate.424 Expressed as a formula: (net payments revenue) =
(monetizable payments volume) × (take rate) × (conversion rate).
420 Beach Opening Rep. ¶¶ 5–8.
421 JX-1820 (“Austin Rebuttal Report”) ¶¶ 1–7.
422 Hayes Rebuttal Rep. ¶ 1.
423See supra § I.H.1. With some exclusions not relevant to this dispute, “Net Payments Revenue” is defined in the Purchase Agreement as “all payments based revenue generated from fees on payments transaction volume” less certain costs, charges, and negative amounts assessed. Purchase Agreement at 12, 16 (defining “Gross Payments Revenue” and “Net Payments Revenue”).
424 See generally Beach Opening Rep. ¶¶ 70–75.
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The purpose of benefit-of-the-bargain damages is to put Sellers “in the position
[they] would have held if [Buyers’ representations] were true.”425 Due to Buyers’
fraud, therefore, Sellers are entitled to use the represented monetizable payments
volume of $34 billion in the above formula for purposes of calculating damages.
Buyers do not dispute that the court should accept the misrepresentation as true for
the purpose of calculating damages if Sellers prove fraud.
Sellers also argue that they may rely on the parties’ pre-transaction
expectations regarding other take and conversion rates for the purpose of calculating
damages. They advance this argument although Sellers did not prove (and did not
set out to prove) that Buyers misrepresented either metric. Sellers cite case law for
the proposition that “[a] party is damaged in fact when it enters into an agreement it
otherwise would not have but for the fraud.”426 According to Sellers, the causation
element requires that they prove with reasonable certainty a single fact: that they
entered into agreements that they otherwise would not have.427 Once proven, Sellers
425 Fortis Advisors, 2024 WL 4048060, at *52 (internal quotation marks omitted).
426 Sellers’ Post-Trial Opening Br. at 66 (citing, among others, Maverick, 2021 WL
1592473, at *10).
427 Id. at 66–68.Buyers rely on Smash Franchise Partners, LLC v. Kanda Holdings, Inc., 2023 WL 4560984 (Del. Ch. July 14, 2023), aff’d sub nom. McLaren v. Smash Franchise Partners, LLC, 319 A.3d 909 (Del. 2024), to argue that Sellers must prove that Buyers’ misrepresentations were “a sufficiently significant cause of the earnout miss to impose liability.” Buyers’ Post-Trial Opening Br. at 73 (cleaned up). But that is not what the court held in Smash Franchise Partners. Rather, Vice Chancellor Laster found no liability for the defendants, focusing on causation but declining to address many other elements of fraud. Notably, the Vice Chancellor never found that the defendant induced the plaintiff to act. Smash Franchise P’rs, 2023 WL 4560984, at *18–19.
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contend that they are entitled to the benefit of all their reasonable expectations
entering the agreements ex ante. Applied here, Sellers argue that they are entitled
to rely on the parties’ pre-transaction expectations regarding take rate and
conversion rate.
Sellers’ framing of the issue, however, reduces Sellers’ burden to
demonstrating the but-for and not the proximate cause. As this court explained in
Smash Franchise Partners, a claimant must demonstrate both to prove causally
related damages:
The necessary causal connection has two dimensions.
First, the misrepresentation must be a factual cause of the
harm—generally called a but-for cause—meaning that the
harm would not have occurred but for the
misrepresentation. Second, the misrepresentation must be
the legal cause of the harm—generally called the
proximate cause—meaning that the misrepresentation
must be a sufficiently significant cause of the harm to
impose liability.428
Entering into the agreements based on representations of payments volume is
the factual or but-for cause of the harm. It is not necessarily the “sufficiently
significant” or “proximate” cause.
Sellers have proven factual causation by proving that they relied on Buyers’
$34 billion payments-volume representation when entering into the Purchase
Agreement and Employment Agreements. Buyers dispute this point, arguing that
Sellers would have sold SwervePay regardless of Ontario’s payments volume.429 But
428 Id. at *19 (footnotes omitted).
429 See Buyers’ Post-Trial Opening Br. at 72.
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as discussed above, Sellers were consistent in their testimony that they would not
have done the deal if they had known the $34 billion was false.430 Sellers proved the
point with reasonable certainty and by a preponderance of the evidence.
Sellers must also prove proximate causation. To do so, Sellers must prove that
the misrepresentation was “a sufficiently significant cause”431 of the Earnouts miss
on which they base damages. In this context, Sellers must demonstrate that the
earnout miss was a consequence of the alleged fraud as opposed to other nonculpable
factors.432
According to Buyers, Sellers cannot prove proximate causation because
SwervePay did not meet the take and conversion rates necessary to achieve the
revenue targets entitling them to the Earnouts.
Buyers urge the court to rely on actual take and conversion rates from the
Earnout Period. To show actual take and conversion rates, Buyers rely on an earnout
statement that Buyers created during this litigation (the “Earnout Statement”).433
430 See supra § II.D.1 (discussing reliance in fact); Trial Tr. at 55:23–56:12 (J. Adams);
id. at 326:6–16 (Hamilton); id. at 482:1–14 (Malven).
431 Smash Franchise P’rs, 2023 WL 4560984, at *19.
432 See Fortis Advisors, 2024 WL 4048060, at *35; see also LaPoint v. AmerisourceBergen Corp., 2007 WL 2565709, at *9–10 (Del. Ch. Sep. 4, 2007), aff’d, 956 A.2d 642 (Del. 2008) (holding that the acquirer breached its contractual duties to promote the target’s products, but that the target failed to show that this breach caused the target to miss its earnouts).
433See, e.g., Buyers’ Post-Trial Opening Br. at 73–74; Trial Tr. at 714:18–715:3, 729:14–730:4, 782:15–783:23, 785:16–789:4 (Hayes); id. at 1299:15–1300:17, 1304:10–23, 1319:2–17 (Austin); JX-1673; JX-1676 (together with JX-1673, the Earnout Statement); JX-1677.
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The Earnout Statement reflects take and conversion rates for 2021 of 0.17% and
12.5%, respectively.434 But the Earnout Statement deserves no evidentiary weight
due to Buyers’ spoliation, as held in a separate decision.435
Scant evidence on take and conversion rates pepper the rest of the record. All
indicators, however, suggest that the real metrics fell below pre-Acquisition
expectations but exceeded the figures reflected in the Earnout Statement.
Before the Acquisition, the parties expected a take rate in the range of 0.7% to
1% or greater and a conversion rate sufficient for Sellers to meet the net revenue
targets for the Earnouts.
Sellers anticipated take rates of 1% or greater.436 This is most clearly
evidenced in the financial model prepared by SwervePay board member Malven when
434 Buyers’ Post-Trial Opening Br. at 73–74 (citing Trial Tr. at 729:22–730:4 (Hayes);
id. at 621:24–622:5 (Beach); id. at 1299:15–1300:17 (Austin); DDX-7.10; Austin Rebuttal Rep., Ex. 2).
435 See Dkt. 657 (the “Evidentiary Decision”). Before trial, Sellers moved to preclude the Earnout Statement. See Dkt. 528; Dkt. 547. The Earnout Statement is hardcoded. See generally JX-1673. Sellers identified several errors or discrepancies in the Earnout Statement’s calculations. See, e.g., Dkt. 528 ¶¶ 8, 11–12; Dkt. 547 ¶¶ 15–16. Because Buyers failed to preserve or produce the Earnout Statement’s source documents, Sellers lacked the ability to test the accuracy of its calculations, including the take and conversion rates. The court denied Sellers’ motion without prejudice to Sellers reasserting their arguments at trial, to allow a fully developed trial record to inform the court’s assessment of prejudice and the weight to assign the evidence. Dkt. 609 at 43:3–20. Post-trial and with the benefit of a fully developed record, the court determined in the Evidentiary Decision to give the take rate and conversion rate aspects of the Earnout Statement no weight. Evidentiary Decision at 9.
436 See generally Trial Tr. at 47:12–48:2, 57:7–17 (J. Adams); Jaeme Dep. Tr. at 338:4–
339:8 (testifying that he forecasted that SwervePay could achieve the full earnout by converting 13% to 14% of the $34 billion monetizable payments volume, implying a 1% take rate); Beach Opening Rep. ¶ 77.
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analyzing the transaction for the SwervePay board (the “Malven Model”). In that
analysis, Malven modeled a 1% EBITDA contribution rate, implying a take rate of
1% or greater.437
Buyers expected a take rate between 0.7% and 1%, with most evidence pointing
to a rate higher than 0.9%.438 A July 12, 2019 presentation by McKinsey to New
Mountain showed a 1% take rate.439 In January 2020, Blue Star’s Durrett emailed
Wechsler a script “to convince Swerve they can hit their earnout.”440 It included
figures implying a 0.7% take rate “on the low end,” with 0.85% achievable.441 In a
February 2020 email seeking Durrett’s feedback, Oshinsky modeled around a 1% take
rate.442 Other internal communications among Buyers are to the same effect. 443
Buyers’ representatives confirmed these expectations during depositions.444 And it
was Ontario’s policy, after the acquisition, that conversions could not be priced at a
437 JX-1729 (Malven Model). As discussed below, whereas take rate is a measure of net revenue, EBITDA contribution rate deducts direct and operating expenses not already reflected in net revenue. See infra § II.E.2.b.i(a).
438 JX-226 at 56; JX-619 at 2; JX-666; JX-667 at 14; JX-791 at 5; JX-851 at 2; O’Brien
Dep. Tr. at 188:7–189:14; Carlson Dep. Tr. at 364:3–20.
439 JX-226 at 47, 56.
440 JX-619 at 1.
441 Id. at 2.
442 JX-666 at 1.
443 See, e.g., JX-667 at 14 (1%); JX-791 at 7 (1.3%).
444 See O’Brien Dep. Tr. at 188:7–189:14 (testifying that “everything that I heard is
the take rate should have been around 1 percent”); Carlson Dep. Tr. at 364:3–20 (testifying that, although he believed at the time that the 1% take rate was “not far off,” a 0.8% to 0.9% take rate would have been his assumption for the Ontario payments volume being converted to the SwervePay platform).
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take rate of less than 0.9% without approval from an executive committee because a
lower rate was below what Ontario “would consider a healthy deal.”445
The range of the parties’ pre-Acquisition expectations regarding conversion
rate is broader,446 but everyone expected that SwervePay would convert enough
volume to achieve the Earnouts. Assuming $34 billion or more in payments volume,
and a 1% or greater take rate, Sellers could have achieved the minimum net revenue
targets with conversion rates as low as 5.5%. Sellers believed that the conversion
rate would be significantly higher. Jaeme testified that he anticipated that one-third
of customers would convert after 30 days’ notice, one-third would require strongarming, and one-third would be a harder sell.447 Malven assumed that SwervePay
would convert “all or nearly all” of the payments volume.448 Buyers too aimed to
convert 100% of the payments volume and expected to achieve at least 80%, as a
January 2020 exchange between Oshinsky and Durrett reflects.449 As of February
10, 2020, New Mountain assumed that SwervePay would convert 50% of Ontario’s
payments volume by 2020 and 100% by the end of the Earnout Period.450
445 Rhodes Dep. Tr. at 76:2–77:17, 85:14–86:1; JX-1065 at 1.
446 See, e.g., JX-620 at 2; JX-714 at 1, 3; JX-851 at 3; JX-885 at 13; J. Adams Dep. Tr.
at 200:7–20, 212:7–19, 338:4–339:8; Malven Dep. Tr. at 250:23–251:3; Durrett Dep. Tr. at 191:11–18; Blount Dep. Tr. at 299:25–300:21.
447 Trial Tr. at 45:16–46:8 (J. Adams); Jaeme Dep. Tr. at 200:7–20, 212:7–19.
448 Malven Dep. Tr. at 250:23–251:3.
449 JX-620 at 1–2.
450 JX-714 at 1, 3.
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No one disputes that the parties’ pre-Acquisition expectations on take and
conversion rates did not pan out, although the real numbers are difficult to pin down
in the evidentiary record.
Buyers’ documents from 2021 suggest that Ontario had an actual take rate of
0.61% to 0.92%, far above the 0.17% reflected in the Earnout Statement. An October
2021 investor deck created by Blue Star discussing year-to-date performance
projected a take rate of 0.92%.451 And Ontario’s February 3, 2022 board presentation
reporting 2021 results stated a 2021 take rate of 0.61%.452 Buyers argue that the
0.61% and 0.92% figures are blended rates that include customers that would not be
counted under the Earnouts.453 But there is nothing reliable in the record supporting
this argument or isolating the actual figures for Cash Earnout customers, due in part
to Buyers’ spoliation.
Evidence reflecting the actual conversion rate for the relevant period is
similarly lacking, but what exists shows figures higher than the 12.5% reported in
the Earnout Statement. SwervePay’s internal tracker as of October 2020 reflected
that it had converted or “won” approximately 15.7% of the Ontario customers it had
contacted.454 As framed by Sellers, the document shows that SwervePay was on an
451 JX-1690 at 15 (“Payments Margin 92 BPS”).
452 JX-1624 at 6.
453 Dkt. 533 ¶ 43; see also Trial Tr. at 1326:2–1327:20 (Austin).
454JX-1243 (“Summary” tab, Row 12, Column B (62 customers “won”); Row 25, Column B (395 “Grand Total”)); see also Hayes Rebuttal Rep. ¶¶ 177–78.
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upward trajectory, converting roughly 16 customers per month.455 And by May 2021,
SwervePay had already converted nearly 20% of Ontario’s OSG segment—the
primary driver of the business456—with 12% of OSG customers in the active
pipeline.457 Had Sellers continued converting at this rate (16 customers per month),
Sellers would have converted approximately 54% by the Earnout Period’s
conclusion.458
The parties point to many reasons for SwervePay’s failure to achieve preAcquisition expectations on take rate and conversion rate. Sellers blame Buyers, and
Buyers blame Sellers or nonculpable factors.
Sellers blame Buyers in myriad ways.
First, Sellers point to the reduction in force that began in the middle of 2020,459
after which conversion rates dropped.460 Sellers argue that: Buyers failed to prioritize
455 Trial Tr. at 579:14–580:14 (Beach); PDX-1.23–24.
456 Trial Tr. at 186:14–187:3 (J. Adams) (agreeing that OSG was the “primary driver
of the business” and that it accounted for $26b of the $34b payments volume); JX-679 at 7; JX-1437 at 1–2; see also Trial Tr. at 390:20–23 (Hamilton); id. at 695:13–696:8 (Hayes).
457 Trial Tr. at 1364:17–1365:17 (Dubbioso); JX-1437 at 1.
458 Trial Tr. at 582:10–583:2 (Beach); PDX-1.24.
459 According to Sellers, beginning in April 2020 and through the summer, Ontario
reduced SwervePay’s team of eleven by terminating several SwervePay employees, including one of SwervePay’s top salesmen. Sellers’ Post-Trial Opening Br. at 40 (citing Trial Tr. at 70:17–71:3, 71:6–21 (J. Adams)). And Ontario “demoted [Jaeme] so he no longer reported directly to Ontario’s CEO, was no longer head of payments, and was no longer involved in making key business decisions for payments.” Id. (citing Trial Tr. at 72:24–73:1, 74:1–13 (J. Adams)). Ultimately, Adams had no direct reports. Id. (citing Trial Tr. at 74:1–13 (J. Adams)).
460 See Beach Opening Rep. ¶¶ 55–59.
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the payments business, which they would have done if Ontario had $34 billion in
payments volume;461 Ontario would have devoted more resources to a forced
conversion if Ontario had $34 billion in payments volume;462 and increased payments
volume would have increased take rate.463 Aspects of Sellers’ arguments resonate—
the court cannot know what Ontario would have done had it had $34 billion in
payments volume. But it is difficult to assess the magnitude of these arguments. It
seems unlikely that even a $34 billion payments volume would have caused Ontario
to totally abandon its companywide reorganization and reduction in force.464 And
Ontario was still invested in the conversion effort after the reorganization—it hired
four employees to help with payments.465 These arguments, therefore, deserve
consideration but do not weigh in favor of adopting Sellers’ pre-Acquisition
expectations in full.
Second, Sellers argue that Buyers’ fraud on payments volume necessarily
infected take and conversion rates in other ways.466 For this argument, Sellers rely
on expert testimony that Beach did not disclose in his opening report and portions of
Buyers’ rebuttal expert’s testimony that do not directly address the issue. 467 To the
461 Sellers’ Post-Trial Opening Br. at 74.
462 Id. at 75.
463 Id. at 90–91; Trial Tr. at 77:17–78:4 (J. Adams).
464 JX-1984 at 7–16.
465 Trial Tr. at 718:22–719:9 (Hayes).
466 Sellers’ Post-Trial Reply Br. at 59–60 & n.36.
467 Sellers’ Post-Trial Opening Br. at 90 (citing Beach’s trial testimony discussing
Hayes’s deposition testimony), 101 n.43 (not disputing that Beach’s opinions on this
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extent this argument stands independent from Sellers’ first point, it does support
adopting Sellers’ pre-Acquisition expectation as a whole.
Third, Sellers claim that Jaeme, Katrina, and Hamilton were constructively
discharged in May 2021, which further impeded SwervePay’s ability to achieve the
Earnouts.468 To show constructive discharge, Sellers must prove “working conditions
so intolerable that a reasonable person would have felt compelled to resign.”469
Sellers argue that Buyers created hostile working conditions after Adams and
Hamilton refused an incentive proposal in exchange for a release of their claims
against Buyers.470 Jaeme testified that the looming litigation made conditions
“awkward,” and that he received “multiple emails from multiple directions.” 471 But
“awkward” does not cut it; a claim of constructive discharge requires something more.
The remaining evidence establishes strained working conditions at best, not enough
to compel resignations.472
subject were not disclosed in his opening report); Sellers’ Post-Trial Reply Br. at 59, 65–67.
468 Sellers’ Post-Trial Opening Br. at 48–50, 73; see also Sellers’ Post-Trial Reply Br.
at 57 n.34 (citing Smith v. Del. State Univ., 47 A.3d 472, 477 (Del. 2011) (“Under the constructive discharge doctrine, an employee’s reasonable decision to resign because of unendurable working conditions is assimilated to a formal discharge for remedial purposes.”)).
469 Del. State Univ., 47 A.3d at 477.
470 Sellers’ Post-Trial Opening Br. at 48–50.
471 Trial Tr. at 82:5–20 (J. Adams).
472 Id.; id. at 341:16–342:16 (Hamilton); id. at 432:8–22 (K. Adams). Further, although Ontario conducted investigations into Sellers’ job performance, Sellers did not learn of this fact until after they resigned. Id. at 84:3–11 (J. Adams); id. at 445:7– 18 (K. Adams); id. at 1459:21–1460:4 (O’Brien). An undisclosed investigation thus could not have contributed to their decision to resign.
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Buyers blame Sellers or argue that multiple nonculpable factors depressed
SwervePay’s take and conversion rates.
First, Buyers note that because Ontario lacked the technical ability to force
customer conversion, SwervePay had to convert customers one-by-one.473 And some
of Ontario’s customers were not receptive to converting to SwervePay because of
unattractive pricing, limited functionalities, loyalty to other PayFacs, and other
reasons.474 So Ontario slashed prices to generate sales, resulting in losses.475 Buyers
proved aspects of this narrative, including that Ontario lacked the technical ability
to force conversion. But Buyers did not prove that this alone, or with other factors,
was a significant intervening cause of the missed Earnouts.
Second, Buyers argued that Worldpay’s termination of services to SwervePay
diverted Ontario’s attention away from converting customers to SwervePay.476 But
by the end of 2020, Ontario was praising Jaeme for how he handled the Worldpay
migration.477 And even amid the issues with Worldpay, SwervePay’s internal tracker
473 Id. at 961:6–20 (Durrett) (testifying that a forced conversion “did not turn out to
be possible for the vast majority of the customers” because “on a technical basis, many of the customers had on-premise software. . . . you can’t force a customer to change their software if you don’t have control of the software itself”). 474 Buyers’ Post-Trial Opening Br. at 76.
475 Id.
476 Id. at 74–75.
477 JX-1333 at 1 (1/11/21 email summarizing “2020 Bonus Recommendations,” stating: “Jaeme set us up for cross-sell success, was proactively managing to diversify our processing relationships so that we were prepared when Worldpay turned us off and then also identified a big margin opportunity for this coming year. know we wished he had done more on the payment strategy stuff through the summer. I net this out to hitting his target.”).
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reflected a trend in conversion rates that placed SwervePay on target to hit the
Earnouts.478
Putting it all together, each side’s efforts to blame the other or nonculpable
reasons for lower take and conversion rates resonates to a degree. The record reflects
at least a few nonculpable pressures affecting those metrics, but none of those
pressures alone or in combination with the others could be viewed as the proximate
cause of the missed Earnouts. And ultimately, one cannot know what business
decisions Ontario would have made if the lie was true and they had $34 billion in
payments volume.
The evidentiary landscape on take and conversion rates is best described as a
treacherous wasteland. In search of secure footing in this space to analyze causation,
the court reaches for hard evidence reflecting conservative reports of actual take and
conversion rates. The most conservative actual figures supported by the record are
the 0.61% blended take rate reflected in Buyers’ board presentation reporting on
year-end, and the 15.7% conversion rate reflected by Sellers’ October 2020 tracker.
Using those conservative figures, Sellers would have achieved net revenue of
over $34.6 million—far in excess of the $17.5 million minimum. Sellers have thus
proven based on a preponderance of the evidence that the misrepresentation in
payments volume was a significant and proximate cause of harm in the form of lost
Earnouts. That is, Buyers’ fraud was thus the but-for and proximate cause of damage
to Sellers. Sellers have proven causation with reasonable certainty.
478 See Trial Tr. at 579:14–580:14 (Beach); PDX-1.23–24.
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At least, Sellers have proven causation with reasonable certainty as to harm
connected to the missed Earnouts. Causation as to three categories of harm warrants
further analysis.
The first concerns damages attributable to the Rollover Units. Although
Sellers retained the Rollover Units, they argue that Buyers’ fraud reduced the value
of the Rollover Units, entitling Sellers to the difference between the units’
represented value and their actual value.479 Because the Rollover Units were granted
to Sellers at closing, they are not dependent on the Earnouts. Buyers’ arguments
regarding proximate causation thus do not apply. Sellers have shown causation as
to that category.
The second concerns damages attributable to the PIUs. Continuous
employment was a vesting condition of the PIUs,480 and thus Jaeme and Hamilton
forfeited their PIUs when they left the company. Sellers argue in briefing that Jaeme
and Hamilton were constructively discharged, effectively wielding their constructive
discharge theory as a variant of the prevention doctrine.481 But as discussed above,
Sellers failed to prove this point.
Last, Sellers seek damages for “salaries and bonuses they would have received
in the but-for world.”482 Sellers’ claim for lost salaries and bonuses rests on their
479 Sellers’ Post-Trial Opening Br. at 69, 75–79.
480 JX-1169 at 5 §§ 1.3(a), 1.3(c)(ii); JX-1170 at 5 §§ 1.3(a), 1.3(c)(ii).
481 Sellers’ Post-Trial Reply Br. at 57; see generally Snow Phipps Gp., LLC v. KCake
Acq., Inc., 2021 WL 1714202, at *52 (Del. Ch. Apr. 30, 2021) (discussing prevention doctrine).
482 Sellers’ Post-Trial Opening Br. at 69.
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constructive discharge theory and fails for that reason.483 Sellers also failed to make
any effort to quantify the amount of these damages in briefing or otherwise develop
evidence at trial to support this category of relief. Sellers thus did not prove
entitlement to this category of damages.484
2. Methodology And Calculation
Although a plaintiff must prove causation with reasonable certainty, a plaintiff
need not prove a sum certain in damages. Once a plaintiff has proven harm resulting
from fraud, “[t]he amount of damages can be an estimate.”485 “The scope of fraud
damages under [Delaware] law is broad.”486 And “Delaware courts place the burden
of uncertainty where it belongs . . . on the wrongdoer, not the wronged.”487
This discussion proceeds in two parts, first addressing damages tied to the
Cash Earnout and then turning to damages based on the Equity Earnout and
Rollover Units.
483 See Sellers’ Post-Trial Reply Br. at 57 (“Additionally, Individual Sellers were damaged by loss of their salaries and bonuses when they were constructively discharged shortly after refusing to sign away their fraud claims.” (emphasis added) (footnote omitted)).
484 Sellers also waived their claim to this relief by failing to meaningfully develop
their position in briefing. Emerald P’rs, 726 A.2d at 1224 (“Issues not briefed are deemed waived.”).
485 Siga II, 132 A.3d at 1111 (emphasis in original).
486 Maverick, 2021 WL 1592473, at *9.
487 Great Hill, 2020 WL 948513, at *20.
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a. Cash Earnout
Under the Purchase Agreement, Sellers would achieve the Cash Earnout if
SwervePay generated at least $17.5 million in net payments revenue from converting
Ontario’s existing payments volume within the Earnout Period.488 Above $17.5
million, SwervePay would receive a cash payout equal to the net payments revenue
it generated from converting Ontario clients, capped at $43.75 million.
To prove causation, Sellers demonstrated that they would have achieved the
2021 net-revenue target of $17.5 million had Buyers’ misrepresentation been true.
At a minimum, therefore, Sellers are entitled to damages for the Cash Earnout in the
amount of the $17.5 million they would have earned absent fraud. But the court did
not address (and did not need to address) when analyzing causation what level of net
revenue Sellers would have achieved above the $17.5 million target. The level of net
revenue dictates the level of Cash Earnout and thus the amount of damages for the
Cash Earnout. The court must therefore broach the issue.
Sellers contend that they expected to earn the full Cash Earnout of $43.75
million when they entered into the Purchase Agreement and thus seek damages for
the Cash Earnout in that amount.489 As discussed in the causation analysis, Sellers
have proven that they held this expectation.490 Indeed, the contemporaneous
evidence is compelling. As just one example, when presenting the Acquisition to
488 PTO ¶ 115.
489 Sellers’ Post-Trial Opening Br. at 69.
490 See supra § II.E.1.
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Legacy SwervePay’s board, Jaeme explained that if SwervePay “could capture a
relatively small piece of the $34,000,000,000 in payments that is estimated to run
through Ontario,” it could achieve the earnouts.491
Buyers argue that awarding Sellers damages in the amount of the maxed-out
Cash Earnout based solely on Sellers’ pre-Acquisition expectations would be unfair.
They advance two arguments on this point. First, they contend that Sellers’ preAcquisition expectations must be risk-adjusted. Second, they say that a maxed-out
Cash Earnout overcorrects for Buyers’ fraud by assuming financial metrics that did
not materialize in part for nonculpable reasons.
Buyers’ first argument is that Sellers’ pre-Acquisition expectations should be
risk-adjusted.492 Although Sellers expected to achieve the Earnouts, the Earnouts
were not certain. Earnouts never are. Indeed, the purpose of contingent, post-closing
consideration is to allocate risk related to uncertain future performance.493
Buyers make an excellent point. But they offer no reliable basis on which to
quantify that risk. Buyers argue for a sizeable risk adjustment based on a draft letter
by one of SwervePay’s largest investors, a venture capital fund called 4490 Ventures.
The draft letter was to 4490 Ventures’ limited partners. In it, 4490 Ventures assigned
491 JX-738 at 6.In fact, Jaeme expected SwervePay to reach the maximum Cash Earnout amount by the beginning of the Earnout Period. J. Adams Dep. Tr. at 338:4– 339:8.
492 Buyers’ Post-Trial Opening Br. at 84–86.
493 Fortis Advisors, 2024 WL 4048060, at *1 (“Earnout provisions are common risk
allocation tools in merger agreements. . . . This contingent approach lessens the buyers’ risk of overpaying where the seller’s future performance is uncertain.”).
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only a 33% probability to earning the Cash Earnout and a 10% probability to earning
the Equity Earnout.494 Buyers point to this letter as supporting a 67% discount to
Sellers’ expectations as to the Cash Earnout and a 90% discount to Sellers’
expectations as to the Equity Earnout, PIUs, and Rollover Units.495 But the letter
was drafted in June 2020, months after the Acquisition, never sent externally, and
ultimately discarded because the author viewed the supporting model as flawed.496
Even Buyers’ expert acknowledged that the letter’s 33% probability for the Cash
Earnout represented a combined probability of achieving the maximum of both
Earnouts.497
Plus, applying a 67% discount to the maxed-out Cash Earnout would result in
a figure below the $17.5 million minimum, which Sellers have already proven they
would have received. Thus, the 67% and 90% risk adjustments advocated by Buyers
are both unsupported and unreasonable.
Moreover, applying an overall risk adjustment would effectively discount the
direct subject of the fraud—payments volume—thereby placing the burden of
uncertainty on the wronged and not the wrongdoer.
Buyers’ second argument echoes their proximate cause argument and speaks
more directly to the goal of expectation damages. That goal is to correct for the fraud
494 JX-1040 at 5.
495 Buyers’ Post-Trial Opening Br. at 86 n.20.
496 Trial Tr. at 487:2–19 (Malven); compare JX-1060 (final letter) with JX-1040 (draft
letter on which Buyers rely).
497 Austin Dep. Tr. at 106:5–22, 109:10–13.
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by placing the victim of the fraud in the position it would have held if the
misrepresentations were true.498 As Sellers argue, the value of expectations damages
is thus “the difference between the actual and the represented values of the object of
the transaction.”499 If Buyers’ misrepresentations were true, then Ontario would
have had $34 billion in payments volume. But there is no reason to fully credit
Sellers’ pre-Acquisition expectations as to other key metrics that were not risk
adjusted, not misrepresented, and not achieved in part for nonculpable reasons. That
would not compensate Sellers for the represented value of the transaction; rather, it
would overcompensate Sellers based on reasonable but un-risk-adjusted and
unmaterialized expectations.
Buyers again make an excellent point. And in a perfect world, the court would
attempt to isolate the direct subject of the fraud—the payments volume—by using
actual or risk-adjusted results for the other metrics. But that perfect world is not
perfectly achievable here. As discussed above in this section, Buyers present no
reliable way to quantify risk generally or as to specific inputs. And as discussed in
the causation analysis, one cannot assume that Ontario would have made the same
business decisions if it had the huge opportunity presented by $34 billion in payments
volume. Plus, the record lacks clear indications of actual results on many key metrics,
in part due to Buyers’ spoliation.
498 Fortis Advisors, 2024 WL 4048060, at *52.
499 Id. (quoting LCT Cap., LLC v. NGL Energy P’rs LP, 249 A.3d 77, 91 (Del. 2021)).
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Ultimately, this court has broad discretion in setting an amount of damages
where, as here, a plaintiff has established causation and thus liability.500 And Buyers’
objections support downward adjustments to Sellers’ damages model.
Thus, to set damages for the Cash Earnout, the court adopts the blended take
rate of 0.61%. The court also selects the very bottom of the range of conversion
rates—50%—relied on by Sellers’ expert.501 This figure loosely aligns with Sellers’
2020 conversion rate—had Sellers continued converting at this rate (16 customers
per month), Sellers would have converted approximately 54% by the Earnout Period’s
conclusion.502 Finally, the court makes the conservative assumption that payments
volume would remain flat at $34 billion throughout the Earnout Period.503
For the Cash Earnout, therefore, Sellers are entitled to damages based on the
representation that Ontario had $34 billion in payments volume, a 0.61% take rate,
and a 50% conversion rate. The solution exceeds the $43.75 million Cash Earnout
cap. Sellers are thus entitled to damages in the amount of the full Cash Earnout.
500 Trascent Mgmt. Consulting, LLC v. Bouri, 2018 WL 4293359, at *19 (Del. Ch. Sep.
10, 2018) (reflecting that remedies and liability flow from a finding of causation). 501 Beach Opening Rep. ¶¶ 164, 171.
502 Trial Tr. at 582:10–583:2 (Beach); PDX-1.24.
503 As discussed infra § II.E.2.b, the $34 billion representation was as to the 2019
payments volume. All parties assumed payments volume would grow. But Sellers’ expert does not apply a growth rate to the payments volume when analyzing damages for the Cash Earnout. See Beach Opening Rep. ¶¶ 105–17. The court thus uses the $34 billion figure.
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b. Equity Earnout And Rollover Units
Sellers seek damages based on the three equity-based components of the deal:
the Equity Earnout, the Rollover Units, and the PIUs.504 Because Sellers did not
prove causation as to the PIUs, this analysis values damages as to the Equity Earnout
and Rollover Units, referred to generally as the “equity-based damages.”
Sellers selected a valuation date of December 31, 2024 (the “Valuation
Date”).505 They derive this date from models relied on by SwervePay’s board when
approving the Acquisition that assumed that Legacy SwervePay would exit its
investment in Ontario on December 31, 2024.506 Buyers do not take issue with
Sellers’ Valuation Date.507 This decision thus values the equity-based damages as of
December 31, 2024.
Sellers value the equity-based damages as of the Valuation Date based on their
pro rata portion of the expected equity value of a combined SwervePay and Ontario
entity. To calculate the combined company’s value, Sellers proffer two guideline
public companies analyses—one prepared by 4490 Ventures’ Malven pre-Acquisition
(the Malven Model, discussed above),508 and one prepared by Sellers’ damages expert
504 OSC Investment, L.P. is the entity that holds SwervePay and Ontario’s standalone
business, so the parties refer to what this decision defines as the Equity Earnout as the “OSC Earnout.” PTO ¶¶ 23, 65.
505 Beach Opening Rep. ¶ 118.
506 JX-780; see also Beach Opening Rep. ¶¶ 43, 118.
507 See, e.g., Trial Tr. at 1322:9–1323:2 (Austin); Buyers’ Post-Trial Opening Br. at 84
& n.19, 86–87.
508 See Sellers’ Post-Trial Opening Br. at 79–80 (claiming that the Malven Model is
“an independent basis for Sellers’ damages”).
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Murray Beach (the “Beach Model”). A guideline public companies analysis values a
private company as of a valuation date by multiplying the private company’s EBITDA
by contemporaneous measures of multiples of enterprise value to EBITDA drawn
from comparable public companies.509
Malven created his model for SwervePay before the Acquisition using pro
forma financials provided by Buyers and the represented $34 billion payments
volume. He calculated that the Acquisition would generate an exit value totaling
approximately $214 million in five years.510 Beach drew on Malven’s assumptions as
an indication of Sellers’ pre-Acquisition expectations, and his damages computations
landed in a similar range. Beach valued (i) the Equity Earnout of 100,000 units at
$103.1 million to $218.6 million,511 and (ii) the 1,000 Rollover Units at $0.9 million to
$1.2 million.512
Buyers attack Sellers’ damages models in three ways. First, they contend that
Sellers are not entitled to damages for the Equity Earnout because they would not
have achieved the net revenue targets, but this decision has already rejected that
argument.513
Second, they contend that each of Sellers’ models should be rejected as overly
speculative. In this criticism, Buyers do not argue that a guideline public companies
509 Aswath Damodaran, Investment Valuation 453–67, 695–98 (Wiley, 3d ed.).
510 Trial Tr. at 480:5–17 (Malven).
511 Beach Opening Rep. ¶ 180.
512 Id. ¶ 182.
513 See supra § II.E.1.
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analysis is an inherently flawed method for calculating damages. Rather, they argue
that the Malven Model is inherently speculative. And at trial, Malven admitted as
much, agreeing that his model “wasn’t scientific at all.”514 He believed at the time of
closing it was “[t]oo early to speculate” whether Sellers would receive any Earnout
consideration.515 Buyers likewise note that the Beach Model draws on the Malven
Model and results in broad damages ranges. In essence, Buyers argue that Malven’s
imprecision and Beach’s broad ranges warrant rejecting both models entirely.
Rejecting both of Sellers’ models entirely would be extreme and unreasonable.
It is true that the Malven Model was never intended to be relied on as a damages
model, and it thus lacks the methodological rigor of an expert opinion. But that is
why Sellers introduced a damages expert, and Beach corrects for Malven’s
informality by applying a more thoughtful methodology. For this reason, the court’s
analysis focuses on the Beach Model.
Beach’s failure to calculate a sum certain does not render his model inherently
unreliable. Once a party has established that it has been harmed, the calculation of
its damages need not be determined with “mathematical accuracy and are often at
best approximate.”516 “Where the injured party has proven the fact of damages . . .
less certainty is required of the proof establishing the amount of damages. In other
words, the injured party need not establish the amount of damages with precise
514 Trial Tr. at 523:2–524:23 (Malven).
515 JX-835 at 1.
516 Siga II, 132 A.3d at 1133 n.138; see also Maverick, 2021 WL 1592473, at *10
(noting damages must be reasonably calculated but not mathematically certain).
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certainty ‘where the wrong has been proven and injury established.’”517 The fact that
Beach proffered ranges—even broad ones—is not a reason to outright reject his
model.
Last, Buyers challenge Beach’s inputs. And this decision meets the parties on
that playing field. In calling balls and strikes on the inputs to the guideline public
companies analysis, the court searched for the most reliable inputs with the aim of
compensating, but not overcompensating, Sellers for Buyers’ fraud. For reasons
already stated, Sellers’ model requires downward adjustments. So where
appropriate, the court selected figures in the lowest end of the range of inputs relied
on by Sellers’ expert. But where Sellers’ expert proffered no range or the range is
overstated, the court turns to Buyers’ supported alternative or reliable evidence of
actual performance as a mechanism for risk adjustment.518 This approach results in
a mishmash of inputs—some based on pre-Acquisition expectations and others based
on post-Acquisition performance. This theoretically eccentric approach is what the
idiosyncrasies of the trial record—and the goals of fashioning expectation damages
517 Siga II, 132 A.3d at 1131 (emphasis original) (footnote and internal quotation
marks omitted); see Total Care Physicians, P.A. v. O’Hara, 2003 WL 21733023, at *3 (Del. Super. July 10, 2003) (“The quantum of proof required to establish the amount of damage is not as great as that required to establish the fact of damage.”). 518 “Damages are measured at the time of the fraudulent transaction.” Maverick, 2021 WL 1592473, at *9. And this decision measures damages at the time of the transaction, using post-Acquisition performance as substitutes for risk adjustment given the lack of alternative options.
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in this context—demand.519 And the idiosyncrasies of this trial record underscore
why a trial court is granted broad discretion in setting the amount of damages.
Beach’s guideline public companies analysis has three parts. First, Beach
estimates the EBITDA of the combined SwervePay/Ontario at the time of the
Valuation Date, assuming the misrepresentations were accurate. Second, he applies
valuation multiples derived from a guideline public companies analysis to the
combined EBITDA to generate the enterprise value. Last, he deducts net debt and
adds cash from the exercise of options and incentive units to get equity value and
then calculates the pro rata value of the equity Sellers would have received.
i. Combined EBITDA
To calculate the EBITDA of a combined SwervePay/Ontario entity as of the
Valuation Date (the “Combined EBITDA”), the Beach Model first calculates the
EBITDA that SwervePay would have achieved had the misrepresentation been true
(the “Incremental EBITDA”). To do so, he uses assumptions for growth, conversion,
and contribution rates and then converts his estimate to an annual figure by adding
the increasing per-month EBITDA figures through a last-twelve-month calculation
(the “LTM Adjustment”). He then adds the adjusted Incremental EBITDA to
Ontario’s projected standalone EBITDA (the “Standalone EBITDA”), which generates
the Combined EBITDA.
519 Merlin P’rs LP v. AutoInfo, Inc., 2015 WL 2069417, at *7 (Del. Ch. Apr. 30, 2015)
(“The Court may . . . make adjustments to a proffered model[.]”).
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(a) Incremental EBITDA
To calculate the Incremental EBITDA as of 2024, Beach assumed a 2019
monetizable payments volume of $34 billion. To project the payments volume five
years out, he multiplied the $34 billion volume by a selected growth rate plus one,
raised to the fifth power. To calculate EBITDA that would have resulted from that
payments volume, he multiplied the result by a conversion rate and an EBITDA
contribution rate.520 Expressing Beach’s approach as a formula: (Incremental
EBITDA) = (2019 monetizable payments volume) × (1 + annual growth rate)^5 ×
(conversion rate) × (EBITDA contribution rate).
Beach argues that it is appropriate to base each input on the parties’
reasonable expectations at the time of the Acquisition, and Buyers criticize that
approach for reasons already discussed—accepting all expectations without isolating
the misrepresentation and without risk-adjustment results is a windfall to Sellers.
As discussed above, Buyers’ criticisms warrant downward adjustments to Beach’s
calculations.
Growth Rate. The growth rate is the yearly growth in payments volume
between 2019 through the Valuation Date.521 Beach selected an 8% growth rate
based on Sellers’ pre-Acquisition expectations reflected in the Malven Model.522
Malven based his assumption on his research into the historical growth of medical
520 Beach Opening Rep. ¶¶ 118–19, 129–40.
521 Id. ¶ 118.
522 Id. ¶ 164.
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debt.523 The bulk of the Buyers’ internal communications, however, show that they
expected 5% annual growth.524 These communications include discussions of advisorled diligence before New Mountain acquired Ontario, 525 and a deck from a strategy
session held after New Mountain acquired Ontario, where New Mountain, Ontario,
McKinsey, and Eir Partners discussed the payments opportunity.526 Given the
relative reliability of Buyers’ internal models, and Beach’s failure to risk-adjust
Sellers’ expectations, the court adopts a 5% growth rate.527
523 Malven Dep. Tr. at 198:18–199:6.
524 See, e.g., JX-297 at 60 (slide deck from 9/18/19 meeting of New Mountain, Ontario,
McKinsey, and Eir Partners, reflecting 5% annual growth in payments volume); JX228 at 2 (7/17/19 email from New Mountain’s Dubbioso to Carlson and Oshinsky discussing Ontario diligence, modeling a payments volume growth rate of 5% per year); JX-234 at 6 (7/21/19 email from New Mountain’s Dubbioso regarding Ontario diligence modeling a payments volume growth rate of 5% per year); JX-236 at 54 (7/22/19 presentation assuming 5% annual growth rate in payments volume). 525 JX-228 at 2; JX-234 at 6; JX-236 at 54.
526 JX-297 at 60.
527 Beach opines in his report that the 5% growth rate does not account for Ontario
acquiring additional sources of payments volume after the Acquisition. Beach Opening Rep. ¶ 165. And there was reason to believe that Ontario would do so. For example, Eir Partners stated in 2018 that they had “created an active list of over 35 acquisition candidates into a potential SwervePay platform; 4 are under NDA and 6 in active discussions / meetings.” Id. ¶ 166; JX-386 at 5. Oshinsky also wrote an email to Jaeme and others in February 2020, identifying large “key logos” whose payments volume would be convertible post-Acquisition. Beach Opening Rep. ¶¶ 168–69; JX-695 at 1. Sellers were also aware of New Mountain’s intended acquisition of RevSpring, which would have added $6 billion in monetized payments volume. Beach Opening Rep. ¶ 170; J. Adams Dep. Tr. at 376:15–22. But Beach does not show whether those acquisitions were likely or to what extent those acquisitions would have added to the annual payments volume growth rate.
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Conversion Rate. The conversion rate is the percentage of monetizable
payments volume that would be converted by the Valuation Date.528 Beach selected
a range of conversion rates of 50% to 80% based on the parties’ pre-Acquisition
expectations, subject to a sensitivity range.529 Consistent with the effort to riskadjust Sellers’ expectations, and further in line with aspects of Buyers’ criticisms of
Beach’s range, this decision assumes a conversion rate of 50%.530
Contribution Rate. The EBITDA contribution rate is the percentage of
EBITDA that Ontario would earn on its converted payments volume.531 The EBITDA
contribution rate is similar to, but typically lower than, the take rate.532 This is
because, unlike the take rate, the EBITDA contribution rate takes into account direct
and operational costs.533 Beach selected a range of EBITDA contribution rates of
528 Trial Tr. at 562:8–18 (Beach).
529 Beach Opening Rep. ¶ 164; see also supra § II.E.1 (discussing the parties’ preAcquisition expectations on conversion rate).
530 Buyers argue for an even lower conversion rate, contending that it is reasonable
to assume that SwervePay would have a declining conversion rate over time. In his report, Hayes explains that PayFacs commonly experience a decline in conversion rates. Hayes Rebuttal Rep. ¶¶ 212–17. Hayes’ testimony is compelling, but he does not testify as to a rate of decline or a final value for conversion rates. By selecting the lowest conversion rate in the range proffered by Sellers’ expert, the court accounts for this objection and appropriate risk adjustment.
531 Beach Opening Rep. ¶ 118.
532 Id. ¶ 118 & n.191.
533 Id.
Buyers often expressed EBITDA as a percentage of net payments revenue. Id. That percentage was referred to as the EBITDA margin. Id. As an example, if New SwervePay facilitated $1 billion of payments and earned a 1% take rate, net revenue would equal $10 million. Id. After accounting for direct and operational costs, Buyers determined the EBITDA margin was 75%. Id. That equates to $7.5 million in EBITDA earned by the payments business. Id. The EBITDA contribution rate is
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0.67% to 1%.534 He relied foremost on the Malven Model, which assumed a 1%
EBITDA contribution rate based on Malven’s discussions with Wechsler. 535 He also
relied on evidence discussed in the Cash Earnout analysis reflecting that Buyers
expected a 0.67% to 0.75% EBITDA contribution rate.536 Consistent with the court’s
analysis of Cash Earnout damages, and the notion that the EBITDA contribution rate
is typically no higher than take rate, this court uses a contribution rate of 0.61%.
(b) LTM Adjustment
Beach backs out annual EBITDA for 2024 using a last twelve month (“LTM”)
calculation. Beach’s annualized Incremental EBITDA reflects the run rate achieved
at the end of 2024, not the EBITDA earned throughout that year.537 Because his
model assumes that EBITDA increased evenly from March 2020 through the
then calculated by determining what percentage of the facilitated payments volume ($1 billion) became EBITDA ($7.5 million). Id. In the hypothetical case, that would be 0.75% ($7.5 million / $1 billion). Id.
534 Id. ¶ 164.
535 Id. ¶ 146; JX-1732.
536 Beach Opening Rep. ¶ 144. Buyers initially expected an EBITDA contribution rate of about 0.64%. JX-234 at 5; JX-236 at 54; JX-297 at 60; JX-429 at 33. But they increased their expectations by mid-December 2019. For example, Durrett took a “first cut at opportunity sizing” in December 2019, estimating that Ontario’s EBITDA contribution rate was 0.99%. JX-519 at 1. He noted in a January 2020 email that the estimated EBITDA contribution rate was 0.75%. JX-578 at 2; see also Ward Dep. Tr. at 227:13–23 (Ontario Senior Vice President representing that, as of July 2024, Ontario’s take rate was approximately 0.91%). Austin calculated the EBITDA contribution rate using the 2022 EBITDA margin for the entire company (8.7%). Trial Tr. at 1328:3–7 (Austin); PDX-1.50, 53–56. But that approach ignores that the appropriate EBITDA margin is the payments business EBITDA margin, which was 69.2% in 2022. This is because entire-company EBITDA includes one-time charges and other expenses that have nothing to do with payments. Trial Tr. at 611:21– 612:11 (Beach); PDX-1.53–56.
537 Beach Opening Rep. ¶¶ 175–77.
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Valuation Date, Beach treats each month of 2024 as a progressively higher point
along that 58-month ramp. To calculate total EBITDA in 2024, he developed a
formula that averages the monthly EBITDA attributable to January and December
2024 and multiplies that average by twelve to calculate the Incremental EBITDA
generated during the last twelve months.538 This adjustment avoids overstating
EBITDA by assuming that the December 2024 run rate existed throughout the entire
year. This approach is reasonable.539
(c) Standalone EBITDA
Beach did not offer a range for the Standalone EBITDA. Based on preAcquisition expectations, he pegs Ontario’s Standalone EBITDA on the Valuation
Date at $76.6 million.540 He derived this figure from an Ontario slide deck prepared
for Jaeme during February 2020 diligence stating that Ontario’s projected 2024
“Organic EBITDA” was $86.6 million.541 Following Malven’s lead, he then subtracted
$10 million from the projected figure. Malven did this to prevent double-counting
538 Id. ¶ 176 & n.281. Expressed as a formula: LTM EBITDA = Monthly EBITDA Increment × Average Month Placement × Number of Months, or
[A/(12T)]×[(S+E)/2]×(E−S+1), where A is the annualized EBITDA run rate at the end of the ramp, T is the total number of months in the ramp, and S and E are the placements of the first and last months in the LTM period. Here, the ramp extends for 58 months, January and December 2024 occupy positions 47 and 58, and the LTM period contains 12 months. The formula is therefore [A/(12×58)]×[(47+58)/2]×12. The Beach Report contains a typo when describing this formula—it should have read that 47 equals the number of months between March 2020 and January 2024. See id. 539 Nowhere do Buyers dispute this methodology. See Buyers’ Post-Trial Opening Br.,
Buyers’ Post-Trial Reply Br.
540 Beach Opening Rep. ¶ 177.
541 JX-632 at 3; Beach Opening Rep. ¶ 177.
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“some amount of payments value.”542 Beach did so to account for losses associated
with terminating a revenue sharing agreement with BillingTree.543 Buyers’ expert
Austin replaced Beach’s assumptions with actual post-closing results, using a
Standalone EBITDA of $29.7 million.544 This decision follows Austin’s approach to
avoid awarding damages for equity based on an exaggerated value and un riskadjusted expectations.545
ii. EBITDA Multiple
Beach determined the expected EBITDA multiple was between 18x and 20x.546
Documents prepared at the time of the Acquisition show that Sellers expected
multiples between 18x and 40x,547 and Buyers expected multiples between 17x and
20x.548 New Mountain’s fourth-quarter valuation of its interest in Ontario contained
542 See Trial Tr. at 478:10–23 (Malven) (discussing Malven Model).
543 JX-666 (“Summary Analysis” tab); Beach Opening Rep. ¶ 177 n.283 (“. . . $1.52
million in expected revenue share in 2019 based on $1.094 billion in payments volume, which translates to a $2.24 million expected revenue share in 2024. $2.24 million = $1.52 million x (1 + 8%)^5.”). Beach applied an 8% growth rate when evaluating Sellers’ decision to deduct $10 million for the BillingTree losses, concluding that the deduction is “both reasonable and conservative.” Id. 544 Austin Rebuttal Rep. ¶ 85.
545 See Buyers’ Post-Trial Opening Br. at 86; Austin Rebuttal Rep. ¶ 52.
Austin based
this input on a March 31, 2024 investment memo that represented Ontario’s enterprise value as “$585.9 million” or 19.7x “2024 PF EBITDA (run-rate).” See Austin Rebuttal Rep. ¶ 52 & n.83 (citing JX-1764 at 2 and Delgado Dep. Tr. at 208:7– 15 (explaining that the purpose of the memo is to report to New Mountain investors on the valuations of portfolio companies)).
546 Beach Opening Rep. ¶¶ 153–62; Trial Tr. at 599:5–20 (Beach).
547 Beach Opening Rep. ¶ 154; JX-632 at 5; JX-1732; JX-835.
548 A June 2019 introductory presentation given within New Mountain stated Ontario
could reach a 20x multiple with an embedded payments business. JX-189 at 11;
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an analysis of multiples for healthcare technology companies and payments
technology companies.549 The report used several multiples, including a ratio of the
companies’ enterprise value to their last twelve months’ EBITDA.550 The healthcare
technology companies had median and average enterprise value to last twelve months
EBITDA multiples of 20.1x and 21.3x, respectively.551 The payments technology
companies had median and average multiples of 24.7x and 29.7x, respectively.552
Combining the companies in a single sample resulted in median and average
multiples of 21.4x and 25.2x.553 A multiple at the high end of Beach’s range, 20x, is
thus is reasonable and supported by the record.
Putting it all together: if Buyers’ representations about $34 billion of payments
volume were true, Ontario’s monetizable payments volume on the Valuation Date
would be $43,393,573,125.554 SwervePay would have converted 50% of that payments
volume to payments facilitated through its platform.555 That is $21,696,786,563.
Beach Opening Rep. ¶ 158. A July 2019 New Mountain presentation stated that comparable healthcare technology companies trade at approximately 17x and payments companies trade at approximately 20x. JX-236 at 9; see Beach Opening Rep. ¶ 159. A February 2020 New Mountain presentation informed Ontario’s board that companies comparable to Legacy SwervePay trade at 20x. JX-791 at 5; see Beach Opening Rep. ¶ 162.
549 JX-576.
550 Id.
551 Id. at 4.
552 Id.
553 Id.
554 $34 billion × (1+.05)5. See supra § II.E.2.b.i(a).
555 Id.
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Multiplying the payments volume SwervePay would have converted by the EBITDA
contribution rate of 0.61% equals $132,350,398. Converting that figure to annual
2024 EBITDA using the LTM Adjustment yields $119,799,929.556 Adding Standalone
EBITDA of $29.7 million yields Combined EBITDA of $149,499,929. Applying a 20x
multiple yields an enterprise value of $2,989,998,585.557
iii. Equity Value And Pro Rata Calculation
To derive equity value, the court must first deduct net debt from enterprise
value and add in cash from the exercise of incentive unit options.558 Beach used
$129.3 million as net debt based on the parties’ pre-Acquisition expectations.559
Buyers do not meaningfully dispute this figure.560
The per-unit damages price is a function of a numerator (the equity value) and
denominator (total outstanding units). The total number of exercised options and
PIUs affects both the numerator and the denominator. Beach included these figures
in Exhibit 3 to his report. It reflects 3,229,850 outstanding units and 807,903 options
or PIUs as of the Valuation Date.561 Beach assumed that all outstanding options and
556 See id. § II.E.2.b.i(b).
557 The court’s underlying calculations are not rounded.
558 Damodaran, supra note 509, at 440.
559 Beach Opening Rep. ¶ 179; JX-632 at 6.
560 Austin uses net debt of $243.5 million based on a March 31, 2024 investment
memo. Austin Rebuttal Rep. ¶ 82 n.113. It would lower damages in the court’s adjusted model by nearly $3 million. The $243.5 million figure, however, is buried in a footnote in Austin’s expert report and not addressed anywhere in briefing. Id. The court thus declines to adopt it.
561 Beach Opening Rep., Ex. 3.
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PIUs would be exercised, although that was far from given. This approach, however,
has the overall effect of lowering Sellers’ total damages. So this court accepts Sellers’
approach, with one adjustment. The court has already found that Sellers’ PIUs would
not vest, so the court backs that number out of both the numerator and the
denominator price when computing damages to Sellers for the Rollover Units.562
The table below shows the work described above.
562 Hamilton and Jaeme’s 14,500 PIUs are removed from the denominator. The proceeds from those PIUs, $2,030,000, are removed from the numerator. See JX-1045 at 8, 18 (showing their number of PIUs and their respective exercise prices).
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Beach Model Beach Model
Low563 High564 Adjustments
2019 Monetizable
Payments Volume 34,000,000,000 34,000,000,000 34,000,000,000 Growth Rate 8% 8% 5% 2024 Monetizable
Payments
Volume565 49,957,154,611 49,957,154,611 43,393,573,125 Conversion Rate 50% 80% 50% 2024 Converted
Volume566 24,978,577,306 39,965,723,689 21,696,786,563 EBITDA
Contribution Rate 0.67% 1.00% 0.61% Incremental
SwervePay
EBITDA567 167,356,468 399,657,237 132,350,398 LTM Adjustment568 151,486,458 361,758,706 119,799,929 Standalone Ontario
EBITDA 76,600,000 76,600,000 29,700,000 Combined
SwervePay/Ontario
EBITDA569 228,086,458 438,358,706 149,499,929 Exit Multiple 18 20 20 Enterprise Value 570 4,105,556,245 8,767,174,116 2,989,998,585 Net Debt 129,300,000 129,300,000 129,300,000 Cash from Exercise
of Options and PIUs 186,010,900 186,010,900 183,980,900 Total Equity
Value571 4,162,267,145 8,823,885,016 3,044,679,485 Total Units 4,036,943 4,036,943 4,022,443 Unit Price 1,031 2,186 757
Equity Earnout $103,104,432 $218,578,390 $75,692,297
Rollover Units $931,044 $2,085,784 $656,923
3. Prejudgment Interest
“In Delaware, prejudgment interest is awarded as a matter of right and
computed from the day payment is due.”572 This court has the discretion to set the
interest rate and compounding interval.573
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Buyers argue for zero prejudgment interest. Under Delaware law, when
parties agree to “contractually express[] an interest rate, the Court will abide by that
expressed interest rate.”574 Buyers contend that the parties contractually agreed to
an interest rate of zero. They base this argument on Section 2.10(e) of the Purchase
Agreement, which states that “no interest is payable with respect to any Earnout
Payment.”575 This language would control if Sellers claimed breach of contract. But
this language does not inform whether a party can recover prejudgment interest in
563 Beach Opening Rep. ¶¶ 164–82; id. ¶ 179, table 13 (showing an expected value of
the Equity Earnout of $103.1 million at an 8% growth rate, 50% conversion rate, and 18x EV/EBITDA multiple).
564 Id.; see also id. ¶ 179, table 13 (showing an expected value of the Equity Earnout
of $218.6 million at an 8% growth rate, 80% conversion rate, and 20x EV/EBITDA multiple).
565 2019 Monetizable Payments Volume × (1 + Growth Rate)5.
566 2024 Monetizable Payments Volume × Conversion Rate.
567 2024 Converted Volume × EBITDA Contribution Rate.
568LTM EBITDA = Monthly EBITDA Increment × Average Month Placement × Number of Months, or [Incremental SwervePay EBITDA/(12x58)]×[(47+58)/2]×(58−47+1). See supra § II.E.2.b.i(b). This formula is reorganized for clarity. See Beach Opening Rep. at 79 n.281.
569 LTM Adjustment + Standalone Ontario EBITDA.
570 Combined SwervePay/Ontario EBITDA × Exit Multiple.
571 Enterprise Value – Net Debt + Cash from Exercise of Options and PIUs.
572 Ct. Square, 2024 WL 1655418, at *2.
573 See id., 2024 WL 1655418, at *1, *5 n.39.
574 See Parexel Int’l (IRL) Ltd. v. Xynomic Pharm., Inc., 2021 WL 3074343, at *19
(Del. Super. Ct. July 21, 2021).
575 Purchase Agreement § 2.10(e)(ii).
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the event of fraud. It therefore does not overcome Sellers’ presumptive right to
prejudgment interest under Delaware law.
Payment was due on the Cash Earnout 40 days from delivery of the revised
Earnout Statement, which was August 17, 2022.576 Beach’s methodology for
calculating the equity-based damages assumed an exit date of December 31, 2024.
Payment was “due” on the equity-based damages as of December 31, 2024.
Prejudgment interest will therefore be computed as of August 17, 2022, for damages
on the Cash Earnout, and as of December 31, 2024, on the equity-based damages.
Consistent with the practice of this court, prejudgment interest will be at the
statutory rate,577 compounded quarterly.
III. CONCLUSION
Sellers have proven the Fraud Claims against Buyers. Judgment on Counts I
through V is entered for Sellers. The court awards Sellers damages in the amounts
of $43,750,000 for the Cash Earnout, $75,692,297 for the Equity Earnout, and
$656,923 for the Rollover Units. Sellers are entitled to prejudgment interest,
576 Sellers received the revised Earnout Statement on July 8, 2022. See JX-1676. Sellers had thirty days under the Purchase Agreement to object to the revised Earnout Statement, but they failed to do so. See Purchase Agreement § 2.10(d). That meant the Earnout Statement became final 30 days following Sellers’ receipt of the revised Earnout Statement, August 7, 2022. See id. Ten days after, August 17, 2022, Sellers were entitled to payment of any accrued Earnouts. See Purchase Agreement § 2.10(a) (requiring payment of the Earnouts within ten business days following the Earnout Determination Date); id. at 9 “Earnout Determination Date” (defining the term as the date on which the Earnout Statement becomes final and binding under § 2.10(d)); id. § 2.10(d) (entitling Legacy SwervePay to 30 days to review the Earnout Statement and lodge an objection).
577 6 Del. C. § 2301; see generally Ct. Square, 2024 WL 1655418.
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compounded quarterly. For the damages on the Cash Earnout, prejudgment interest
will accrue from August 17, 2022. For damages on the Equity Earnout and Rollover
Units, prejudgment interest will accrue from December 31, 2024. Sellers are entitled
to post-judgment interest.578 The parties are ordered to submit a form of order or
competing forms of order implementing this decision and the Laches Decision within
twenty business days. Sellers’ request for attorneys’ fees is denied.579
578 6 Del. C. § 2301(a); see also NGL Energy P’rs LP v. LCT Capital, LLC, 319 A.3d
335, 337 (Del. 2024) (holding that prejudgment interest is included in the “judgment upon which post-judgment interest is to accrue”).
579 Sellers request attorneys’ fees on two grounds. First, they argue that they are entitled to attorneys’ fees under the Limited Partnership Agreement’s prevailingparty provision. Sellers’ Post-Trial Opening Br. at 81; Limited Partnership Agreement § 16.14. But Sellers never asserted claims under the Limited Partnership Agreement; thus, fee-shifting on that basis is not warranted. Second, Sellers argue that they are entitled to fees and costs incurred while defending against Buyers’ allegations, which they describe as frivolous. Sellers’ Post-Trial Opening Br. at 81– 82. Although this litigation was contentious, Buyers’ allegations were not frivolous. Horsey v. Horsey & Sons, Inc., 2016 WL 1274021, at *1 (Del. Ch. Mar. 21, 2016) (explaining that courts will shift “fees only where bad faith is manifest, as where the litigation appears clearly vexatious or without a good-faith belief”).
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