In Re Saama Technologies Litigation

majority opinion

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN RE SAAMA TECHNOLOGIES ) Consolidated

LITIGATION ) C.A. No. 2022-1045-LWW

MEMORANDUM OPINION

Date Submitted: June 1, 2026

Date Decided: September 28, 2026

A. Thompson Bayliss, Eric A. Veres & Clara E. Hubbard, ABRAMS & BAYLISS LLP, Wilmington, Delaware; Sean Baldwin, Will Rathgeber, Stephen Federowicz, Drake Reed, Patrick Holland & Xinchen Li, SELENDY GAY PLLC, New York,

New York; Attorneys for Plaintiff and Counterclaim Defendant Suresh Katta

Michael A. Pittenger, Matthew F. Davis, & Megan R. Thomas, POTTER

ANDERSON & CORROON LLP, Wilmington, Delaware; Daniel A. Mason,

Sabrina M. Hendershot & Emily V. Cox, PAUL, WEISS, RIFKIND, WHARTON &

GARRISON LLP, Wilmington, Delaware; Andrew G. Gordon, Geoffrey R. Chepiga & Tiana Voegelin, PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP,

New York, New York; Attorneys for Defendants and Counterclaim Plaintiffs Warrior Parent, LLC, Warrior Holdings Ltd., and Saama Technologies, LLC, and Defendants Scott Rogers and Vivek Sharma

WILL, Vice Chancellor

Saama Technologies, Inc. had immense promise. Under the leadership of its

founder, Suresh Katta, the company developed an innovative clinical data platform

that drew the attention of The Carlyle Group. When Katta agreed to sell control of

Saama to Carlyle in 2021, the parties bridged a valuation gap with a contingent

earnout. The maximum payout depended on Saama hitting a mandatory revenue

threshold and annual recurring revenue bookings targets by the end of the year.

Katta knew the targets were tight. Rather than build the business, he gamed

the system. He manipulated contract language to pull unearned revenue into the

earnout window. He then leveraged Saama’s software products division to sign

value-destructive contracts that superficially qualified for the earnout.

Carlyle grew wise to these tactics and, when Katta claimed he was due the

maximum earnout payment, formally objected. Katta responded with this lawsuit.

Over years of litigation, he pursued shifting claims, theories, and procedural

strategies to secure the earnout in court.

His strategy backfired. At trial, Katta failed to prove entitlement to the

earnout. Instead, Carlyle proved that Katta acted in bad faith and caused more than

$7 million in damages for the harm he inflicted on Saama’s software business.

I. BACKGROUND

Unless otherwise noted, the following facts were stipulated to by the parties

or proven by a preponderance of the evidence at trial.1

A. Saama Scales

Plaintiff Suresh Katta founded Saama Technologies, Inc. in 1997 to provide

custom data analytics services to varied industries.2 By 2010, Saama had grown to

nearly 600 employees and was generating $40 million in annual revenue.3 Around

that time, Saama developed the Fluid Analytics Engine—a big data analytics

platform that moved Saama from a services model toward a tech-enabled software

company.4

To scale this model, Saama secured a $35 million investment of outside capital

in 2015.5 That capital supported a new strategic focus on the life sciences industry

See Joint Pre-trial Stipulation and Order (Dkt. 412) (“PTO”). Trial occurred over five days, during which eleven fact witnesses and four expert witnesses testified live. Testimony of three fact witnesses was presented by deposition. See Trial Tr. Vols. I-V (Dkts. 445-49). Trial testimony is cited as “[Name] Tr. __.” The trial record contains 2,752 joint exhibits and 29 deposition transcripts. Exhibits are cited by the numbers provided on the parties’ joint exhibit list as “JX __,” unless otherwise defined. See Final Joint Ex. List (Dkt. 441). Deposition transcripts are cited as “[Name] Dep. __.” See Am. Notice of Lodging of Dep. Trs. (Dkt. 430).

JX 595 at 5; Katta Tr. 87; PTO ¶ 43.

Katta Tr. 93.

Id. at 96-97.

Id. at 97-99.

and the nascent field of artificial intelligence.6 Saama transformed the Fluid

Analytics Engine into a cloud-based application suite known as the Life Sciences

Analytics Cloud.7

The Life Sciences Analytics Cloud used artificial intelligence to address the

steep costs, manual errors, and timeline delays of clinical trial data management—

focusing on both analytical and submission pathways.8 Its analytical pathway

products included off-the-shelf applications (“Packaged Apps”) to monitor clinical

trial efficiency and improve “scope, schedule, and cost.”9 The submission pathway

products included Saama’s “Smart Series” suite, designed to prepare clinical trial

data for regulatory approval.10

Saama’s earliest Smart Series product was Smart Data Query (“SDQ”), which

it co-built with Pfizer Inc. and deployed in Pfizer’s 2020 COVID-19 vaccine trials.11

The technology was revolutionary, saving Pfizer six weeks of essential time in

bringing the vaccine to market.12 This high-profile success drew interest in Saama

from other pharmaceutical companies. Saama next worked to co-build a product

Id. at 99-100.

Id. at 100-01; PTO ¶¶ 45-46.

PTO ¶ 45; Anandakumar Tr. 484.

PTO ¶ 49; JX 595 at 5; Katta Tr. 88, 102-03, 107-08; Anandakumar Tr. 484. 10

Katta Tr. 103-04, 108; Anandakumar Tr. 484-86; see also PTO ¶ 49.

Katta Tr. 111-12, 115-16; Moneymaker Tr. 37; see also PTO ¶ 52.

JX 79 (native) 8.

called Smart Auto Mapper (“SAM”) with AbbVie Inc. to automatically map raw

clinical trial data onto regulator-standard frameworks.13

By 2021, Saama’s strategy was to sell its Packaged Apps to small- and midsized biopharmaceutical companies, with its Smart Series offerings directed at larger

customers.14 It aimed to complete its transformation into a product-oriented

business.15 To do so, Saama set out to secure additional growth capital.

B. Carlyle’s Investment

Saama initially sought a minority investment at a $1 billion valuation.16 In

May 2021, The Carlyle Group Inc. approached Katta to propose acquiring a majority

stake.17 Joe Bress, Carlyle’s Global Co-Head of Healthcare, was impressed by

Saama’s “[s]ignificant gross margin expansion due to growth” in the software

subscriptions business.18

By June, Saama had received several investment proposals, including from a

syndicate of life sciences companies to invest $75 to $105 million of growth capital

at a valuation of $620 million.19 On July 1, Bress and Carlyle technology partner

Moneymaker Tr. 37-39; Anandakumar Tr. 486.

PTO ¶ 54.

Id. ¶ 55.

Katta Tr. 128-30; JX 270 at 3; PTO ¶ 56.

Katta Tr. 131-32, 144; JX 270 at 3; see JX 2711.

JX 81 at 30; Bress Tr. 1343-44.

Katta Tr. 129-31, 136-38; PTO ¶¶ 61-63; see also JX 214.

Ashley Evans met with Katta and Vidya Sagar Anisingaraju, Saama’s Chief Strategy

Officer.20 Bress presented an offer for Carlyle to acquire 62.5% of Saama at a

valuation of $500 million.21 When Katta raised the syndicate’s proposal, Bress

suggested that the syndicate be included in any deal.22 The parties negotiated a term

sheet, and Katta countered with a $525 million total enterprise value.23

On July 22, 2021, Bress and his team—including Evans and Carlyle Vice

President Luna Yang—presented their evaluation of the deal in a “Heads Up Memo”

to Carlyle’s Investment Committee.24 The memo projected Saama’s 2021 software

subscription revenue at $20.4 million, which had been reduced from Saama’s sellside forecast of $27.9 million due to its first-half 2021 results.25 It listed an internal

rate of return (IRR) of 24.6%.26 Though the Investment Committee was concerned

about the risk of investing in a business undergoing a transformation, it approved

proceeding with due diligence.27

Katta Tr. 140-41; PTO ¶ 34; JX 224 at 1.

JX 224 at 2; JX 215 at 1; see Katta Tr. 140-42.

Katta Tr. 141-42.

JX 243; Bress Tr. 1431.

JX 270; JX 243; Bress Tr. 1431; PTO ¶¶ 59, 67, 70. A “Heads Up Memo” is “sort of an initial presentation” made internally at Carlyle when a deal team “want[s] to dedicate significant resources or spend money evaluating a new investment.” Bress Tr. 1349. 25

Bress Tr. 1354-55; JX 81 at 3.

JX 270 at 5; JX 265 at 3; Bress Tr. 1356-59.

Yang Tr. 953, 1079-80; PTO ¶ 71; see also Yang Dep. 73-75.

On July 23, 2021, Carlyle sent Katta a non-binding indication of interest,

followed by an updated letter a week later.28 It listed a preliminary valuation of $505

million for Saama, which was $20 million less than the amount Carlyle’s Investment

Committee had authorized Bress to bid.29 It also stated that Carlyle “expect[ed] that

its investment will fund $50 million of primary investment in the form of additional

cash to the balance sheet” at close.30 Bress then told Katta not to “read into this too

much,” as Carlyle “would be able to deploy . . . $75mm (or more) to drive

growth/M&A going forward.”31

C. The Earnout

During diligence, Yang noticed anomalies in Saama’s accounting. She tried

to tie Saama’s projected software subscription revenue back to executed customer

contracts, but found that “[m]anagement’s definition of [software] [s]ubscription

[revenue] also include[d] implementation services bundled in with the true

subscription fees.”32 Carlyle prioritized true software subscription revenue because

it was recurring, high-margin, and remained “sticky” with customers compared to

PTO ¶¶ 72-73.

JX 280 at 1, 5; see Bress Tr. 1349.

JX 280 at 5.

Id. at 1.

JX 360 at 5, 24; see Yang Tr. 961, 963; Bress Tr. 1362-63.

one-time implementation fees.33 With implementation services excluded, Saama’s

recurring software subscription revenue was 50% lower than projected.34

As a result, Carlyle lowered its projections for Saama’s software subscription

annual revenue to $12 million, and estimated Saama’s annual recurring revenue

(ARR) at between $14 and $15 million.35 The $12 million projection was a

significant reduction from the initial sell-side $27.9 million software revenue

forecast, which Carlyle had already reduced to $20.4 million in the “Heads Up

Memo.”36 Diligence also revealed that some Smart Series products, including SAM

and SDQ, were “still under core feature development.”37

These findings exposed a significant valuation gap. Carlyle refused to value

Saama at $505 million unless it was getting a business with the sort of bona fide

software earnings it wanted to underwrite.38 It reduced its upfront valuation of

Saama to $435 million.39 Bress proposed “an earnout structure to bridge back to the

$505” million valuation.40

Bress Tr. 1344; see Yang Tr. 962.

JX 360 at 5.

JX 374 at 1; Bress Tr. 1367-68.

JX 374 at 1; Bress Tr. 1367, 1387-88; see supra note 25 and accompanying text. 37

JX 364 at 8.

See Bress Tr. 1369-70.

Id. at 1364; JX 374 at 1; PTO ¶ 78; see also JX 366 at 1.

JX 374 at 1; PTO ¶ 78.

Carlyle proposed that Saama’s selling stockholders receive an earnout

payment if Saama generated $72 million of revenue in 2021—a target that tracked

Saama’s own revenue plan.41 The payment amount would be based on a multiple of

software subscription ARR from “signed contracts by” December 31, 2021.42

Saama’s baseline ARR was about $15 million.43 Adding $12 million in incremental

ARR for a total of $27 million would trigger a maximum earnout payment of $67.5

million.44

Bress found the earnout structure attractive, given its “short period, strict

terms, [and] well-defined metrics[.]”45 He was skeptical that Saama could achieve

the required ARR bookings by year end, but saw upside for Carlyle if Saama

succeeded.46 Earning the payout meant Carlyle had acquired a business with bona

fide software contracts, which would bring associated services revenue into 2022

and beyond.47

On August 18, Yang gave Katta, Anisingaraju, and Rajeev Dadia—Saama’s

Chief Client and Technology Officer—a presentation about the proposed parameters

JX 384 at 1.

Id.

JX 374 at 1-2; Bress Tr. 1367-68.

JX 374 at 1; JX 390 at 3.

JX 384 at 1; Bress Tr. 1374.

Bress Tr. 1371-72.

Id.; see JX 378.

and criteria for earnout-eligible ARR bookings.48 She explained that eligible

software subscription ARR must come from “ordinary course” contracts with

“typical margins” that were “clearly labeled” for software subscriptions and

excluded inducements, such as free implementation.49 At that time, typical product

margins for Packaged Apps were 70% to 90%, reflecting the gross profit historically

achieved on software subscriptions.50 These margins were similar to those projected

for future Smart Series applications.51

On August 20, Bress and Katta reached a “handshake deal” on economic

terms.52 About a week later, Bress told his team that in Carlyle’s base case, it would

owe an earnout payment of approximately $40 million.53

D. Pre-Closing Planning

While the parties negotiated a definitive agreement, Katta and Anisingaraju

restructured Saama’s internal focus toward achieving the earnout. Anisingaraju

renamed a weekly sales meeting the “72-27 Weekly Status Meeting” to track the

maximum earnout targets: $72 million in revenue and $27 million in software

JX 390 at 3-4; Yang Tr. 971-72.

JX 390 at 3-4; Yang Tr. 971-73.

Bress Tr. 1353-54; Yang Tr. 1051-53.

JX 270 at 5; see Yang Tr. 1084.

JX 402 at 1.

JX 437 at 1.

subscription ARR.54 According to Saama sales executive Jonathan Burr, the

“general sentiment” of the meetings shifted from standard sales practices to

“clos[ing] anything in any way that [Saama] could by the end of the year.”55

In September 2021, Saama was tracking toward just $70.58 million in 2021

revenue—over $1.4 million short.56 Bridging the gap required Saama to recognize

a substantial portion of the $4.55 million in projected revenue from the Smart Series

product it was co-developing with AbbVie.57 But Saama’s Vice President of

Customer Success, Ghananeel “Raj” Gondhali, noticed that the draft statement of

work attributed over half of the AbbVie contract’s prospective value to a “PrePayment for Future Discounted Subscription Fee.”58 Realizing that Saama could not

recognize such revenue in 2021, he changed the description to “Project Setup

Activities” so that Saama could attempt to pull $2.75 million into the earnout

window.59

Burr Tr. 1511-13; JX 404.

Burr Tr. 1515. Burr’s testimony was compelling and credible. Though he stands to participate in the earnout if Katta recovers in this litigation, he testified about Katta’s problematic post-closing behavior. See infra Section I.G.

JX 514 at 7.

JX 342 at 9; JX 568 at 6.

JX 461 at 1; JX 462 at 2, 16.

JX 461 at 1; JX 464 at 13; JX 510 at 3-4 (describing tweaks to the statement of work “that will allow Saama to recognize the revenue in a more advantageous way”); JX 474 at 1 (same).

Separately, Bress and the Carlyle deal team were preparing a memo to obtain

the Investment Committee’s final approval.60 After learning that Saama was tracking

below $72 million in revenue, Bress asked the team to model Saama hitting $68

million in 2021 revenue—$4 million short of the target.61 Carlyle’s Evans responded

by asking whether Saama’s revenue should be lowered to $68 million in the

Investment Committee base case scenario.62 Bress considered it, but his final memo

to the Investment Committee maintained the team’s initial case of $72 million in

2021 revenue with $16.9 million projected in software subscription ARR,

corresponding to a $40 million earnout payment.63 The memo noted that Saama

could “likely only reach $70 million [in 2021 revenue], which leads to a $435

[million] entry price and resets our base case.”64

On September 29, Dadia informed Katta that Saama’s revenue was still

trending short of the $72 million threshold.65 Katta pressed Dadia on what the sales

team was doing “different[ly] for getting . . . results towards 72-27”—Katta’s

internal shorthand for the earnout targets.66 Dadia confirmed sales employees were

Bress Tr. 1453; Yang Tr. 1144; PTO ¶ 83.

Bress Tr. 1454; JX 579 at 42.

Bress Tr. 1456-57; JX 581 at 1.

JX 595 at 7, 20, 25, 30.

Id. at 7, 20; Bress Tr. 1459; Yang Tr. 1156-58.

JX 614 at 2-3.

JX 613 at 2.

instructed that “typical margin limits d[id] not apply”—effectively abandoning

Saama’s historical pricing discipline—and that they should prioritize short-term

contracts that “need not be sustainable.”67 Katta approved this strategy.68

Underscoring his disregard for the earnout’s contingencies, Katta’s team

concurrently sent draft versions of the impending merger agreement to clients,

describing the earnout as a guaranteed “deferred payment.”69

On September 30, Bress’s deal team presented its $72 million revenue base

case to Carlyle’s Investment Committee.70 The Investment Committee authorized

Bress to finalize the transaction.71

E. The Merger Agreement

The parties signed the Merger Agreement two weeks later, on October 14.72

As a precondition to execution, Saama was required to sign two statements of work

with AbbVie.73

Id. at 1.

Id.

JX 2654 at 2; JX 2655 at 7; see Katta Tr. 170, 173.

JX 595 at 7, 20; Bress Tr. 1383, 1388-90; Yang Tr. 991-92.

Bress Tr. 1430; PTO ¶ 80; see JX 595 at 7.

PTO ¶ 87.

Id. ¶¶ 84-86.

Upon the merger, Saama converted to a Delaware limited liability company

wholly owned by a new entity, Warrior Parent, LLC.74 Through Warrior Holdings,

Ltd.—an entity controlled by Carlyle affiliates—Carlyle acquired 62% of Warrior

Parent’s outstanding units, the life sciences co-investor syndicate acquired 13%, and

Saama’s selling stockholders (the “Sellers”) rolled over the remaining 25%.75 The

transaction valued Saama at a total enterprise value of $435 million.76

The Merger Agreement established a minimum earnout threshold of $72

million in “2021 Revenue.”77 That term was defined as consolidated Generally

Accepted Accounting Principles (GAAP) revenue, net of discounts, determined in

accordance with the methodology and principles used in Saama’s 2019 and 2020

audited financial statements—or, if Carlyle objected to the earnout statement, as

determined by Saama’s auditor and reflected on Saama’s 2021 audited financial

statements.78 It confirmed that, if the revenue threshold were met, the earnout

payment would be a multiple of qualifying “ARR Bookings,” defined as “the

Id. ¶¶ 26-28, 30, 112.

Id. ¶¶ 40, 112. The Sellers received over $250 million in cash at closing. Id. ¶ 91. 76

Id. ¶ 90.

JX 669 (“Merger Agreement”) Annex A (defining “2021 Revenue”).

Id.; see Merger Agreement §§ 2.10(a), 3.6(a); PTO ¶ 95.

reasonably anticipated twelve (12) month software subscription revenue” from

qualifying software products sold during the earnout period.79

The Merger Agreement required Saama to operate “in good faith with respect

to” achieving the earnout from closing until December 31, 2021.80 Achieving the

maximum earnout targets would increase Saama’s total enterprise value by $90

million.81 Because the Sellers sold 75% of Saama and retained a 25% equity stake,

they were eligible to receive 75% of this incremental value in cash—a maximum

earnout payment of $67.5 million—realizing the remaining 25% in the form of

retained equity.82 Warrior Parent, acting on behalf of Warrior Holdings and the coinvestors, would make any earnout payment to the Sellers.83

The Merger Agreement also formalized several limitations on eligible ARR

Bookings, some of which were described in Yang’s August 18 presentation to Katta,

Anisingaraju, and Dadia, including the need for typical margins and the bar on free

implementation services.84 It required Saama to begin performing its obligations

Merger Agreement § 2.10(a); id. at Annex A (defining “ARR Bookings”).

Id. §§ 1.1(b), 2.10(d).

If Saama met the revenue threshold, the total enterprise value of Saama would increase by ten times the first $7 million in ARR Bookings plus an additional five times the next $4 million in ARR Bookings, for a total of $90 million in increased total enterprise value. Id. § 2.10(a).

PTO ¶ 93.

Id. ¶ 110.

JX 390 at 3-4; Merger Agreement Annex A (defining “ARR Bookings”).

under the applicable customer contracts before June 30, 2022 to count toward ARR

Bookings.85 The parties excluded certain preexisting contracts from counting toward

the earnout.86

After the earnout period closed on December 31, 2021, Katta—designated as

the “Stockholder Representative”—was required to deliver an earnout statement to

Carlyle, and Carlyle would have 30 days to make any objections.87 An objection

would defer the determination of the earnout payment until after Saama’s 2021 audit

was delivered, which triggered a further 30-day period for the parties to attempt to

resolve any disputes.88 Remaining items that the parties could not resolve would be

submitted to an accounting expert for resolution.89

F. The “Sanitized” Memo and Closing

Before executing the Merger Agreement, Katta asked Bress for copies of

Carlyle’s Investment Committee materials.90 Bress deferred until after the Merger

Agreement was signed.

Merger Agreement Annex A (defining “ARR Bookings”).

JX 674 at 288; see also JX 393 at 6.

Merger Agreement §§ 2.10(b), 9.1. Technically, the earnout statement would be delivered to and any objections would be made by the “Purchaser”—defined as Warrior Holdings. See id. at Preamble.

Id. § 2.10(b).

Katta Tr. 175-76.

On November 9, Carlyle sent Katta a 25-page “summary” of the final 50-page

Investment Committee memo.91 Carlyle internally described the summary as a

“sanitized version.”92 The summary removed strategic discussions and proprietary

information.93 It retained the $72 million base case, but omitted Carlyle’s

assessment that Saama “could likely only reach $70mm” in 2021 revenue.94

The transaction closed ten days later, on November 19.95

G. The 72-27 Campaign

After signing the Merger Agreement, Katta accelerated Saama’s strategy to

“aggressively win business” and “sell anything by the end of the year” to achieve

the earnout.96 Certain employees were offered “72-27 bonuses” based on their

contribution to ARR Bookings.97 Katta told VP of Customer Success Gondhali that

he needed to “aggressively” push the “72-27 goals” or risk being replaced, since

Katta needed someone “who [could] drive this upwards and onwards.”98

Katta’s plan to achieve the earnout had two main components.

JX 748 at 1; Katta Tr. 176; Bress Tr. 1392; see also JX 595.

JX 748; Yang Tr. 1165-69.

Compare JX 748 at 2-27, with JX 595 at 4-44; Yang Tr. 994-97; Bress Tr. 1392-94. 94

Compare JX 595 at 7, 20, with JX 748.

PTO ¶ 111.

Burr Tr. 1508.

Id. at 1523-24; JX 991.

JX 742 at 1.

First, Saama abandoned its historical pricing discipline. Before the earnout,

discounts on software products above 50% were atypical.99 Waiving implementation

fees was also unheard of.100 To win business, Katta had often used a pay-as-you-go

model he called “consumption-based pricing.”101 Consumption-based pricing would

not count toward the earnout, though, because it lacked guaranteed revenue.102 And

so Saama raised discounts, waived implementation fees, and abandoned

consumption-based pricing during the earnout period.103

For example, Saama withdrew its consumption-based pricing model for

Regeneron Pharmaceuticals, offering instead a 25% discount, free implementation,

and a free SAM product for a new contract.104 Pfizer was likewise offered “heavily

discounted pricing” conditioned on signing a contract before the end of 2021.105

Clients like PPD, Inc., IQVIA Holdings, Inc., and Novotech CRO also received deals

with pricing anomalies, including unprecedented discounts and waived

Katta Tr. 304-05; Gondhali Tr. 696-97; see also Gondhali Dep. 18 (noting that the largest discount he had historically given was 30%).

100

Burr Tr. 1509, 1523.

101

Katta Dep. 173; JX 2257 at 2.

102

Katta Tr. 267-68, 271-72; JX 653 (“[S]ince consumption based price has no guarantee, they will not give credit for that towards upside ARR (27M goal).”).

103

See JX 653.

104

JX 781 at 1, 2; JX 791 at 1, 2-3; JX 937 (native) (“ARR Bookings” tab); Anisingaraju Tr. 745-46.

105

JX 806 at 3.

implementation fees that yielded negative margins and made the contracts

unprofitable for Saama.106 Employees began to express concern that “the

commitments made in [certain] SoWs [statements of work] [we]re unrealistic and

set [them] up for failure.”107

Second, Katta directed his teams to rewrite contracts to artificially maximize

ARR. For example, a statement of work to complete a “custom software build” for

Pfizer’s “Sigma” program, which generated non-qualifying services revenue, was

rewritten as a software license agreement to claim ARR.108 Similarly, Katta

instructed the team to front-load a four-year contract with PHP and Areteia

Therapeutics, Inc. by inflating the subscription fee for the first three years—the only

years that counted toward earnout-qualifying ARR Bookings.109 The sales teams

also began bundling implementation services with subscription fees to inflate the

106

JX 864 at 2 (discussing offering PPD “very aggressive pricing” of $1,549,000 “for the duration of the [contracted] studies rather than having to pay every year”); JX 778 at 1 (discussing the “huge margin pressure” involved in the IQVIA pricing scheme); JX 885 at 4 (providing that in the event IQVIA exercises its option to renew the contract, “the pricing per study will not increase by more than the lesser of 5%”); Scaldaferri Dep. 148 (Saama sales executive testifying that “if the whole [IQVIA] contract would have been fulfilled, it is factual that it would not have been profitable”); JX 2279 (Katta noting Novotech and Saama have “agreed to start small with five studies . . . further discounted by another ~60%”); JX 888 at 2 (charging a $5,000 one-time implementation fee for all 425 studies to be ultimately conducted for Novotech over a period of three years).

107

JX 802 at 2.

108

Burr Tr. 1531-32; see Moneymaker Tr. 38; Sharma Tr. 1251-52.

109

JX 794 at 1; see Merger Agreement Annex A (defining “ARR Bookings”).

ARR Bookings value, despite the Merger Agreement’s exclusion of bundled

revenues from the earnout calculation.110

Saama’s aggressive strategy turned some customers away. GlaxoSmithKline

(GSK) plc rejected a 50% discount with free implementation because the pressure

for a year-end close was too great.111 Biohaven Pharmaceuticals, Inc. declined to

sign a deal by December 31, 2021, despite Saama’s multiple offers of discounts and

short-term subscriptions.112 Even when contracts were salvaged—such as with PPD,

due to Carlyle’s assistance—Katta’s heavy-handed approach caused frustration.113

H. The Watermelon Effect

Katta’s strategy to secure ARR Bookings encountered another problem: many

of the Smart Series products sold to customers either did not exist or were in earlystage development.114

110

Burr Tr. 1520-21; see Merger Agreement Annex A (excluding subscription revenues “bundled with implementation revenues in one line”).

111

Burr Tr. 1530-31; JX 740 at 1-2; JX 868 at 2; Yang Tr. 1001; Katta Tr. 199-200. 112

JX 707 at 1; JX 937 (native) (“ARR Bookings” tab).

113

See JX 795 (“Suresh [Katta] has ham-handed this whole PPD thing in his singular quest to get the earnout . . . It’s actually really aggravating because PPD really liked the demos but Suresh is trying to bully them into near-term bookings.”).

114

Scaldaferri Dep. 350-51 (Q: “Did all of the products Saama had contracted with customers to provide exist at the time you joined Saama?” A: “No.”).

SDQ, which had been custom-built for Pfizer in 2020, lacked the capability to

be transferred to other customer environments.115 Yet during the earnout period,

Saama sold SDQ to seven new customers.116 SAM, which was still to be co-built

with AbbVie, was sold to five other customers.117 Saama’s latest Smart Series

product, “SPACE,” was sold to two customers even though it “existed only in

slideware” (i.e., internal slide decks).118 Packaged Apps had greater maturity, but

certain early-stage apps were similarly sold to multiple customers before they were

fully functional.119

115

Moneymaker Tr. 37 (noting that SDQ was “highly performant for [Pfizer], really able to address their specific needs, but not able to be picked up and taken and sold to anybody else as is”); Rogers Tr. 921 (“They bought a custom solution that was built for Pfizer . . . .”); JX 1639 at 18 (listing SDQ as a “developing” product at the end of November 2021); PTO ¶ 52.

116

JX 858 (HilleVax, Inc. customer agreement); JX 880 (IQVIA change order); JX 819 (NGM Biopharmaceuticals, Inc. customer agreement); JX 884 (Novotech customer agreement); JX 842 (Population Health Partners customer agreement); JX 877 (PPD Development, L.P. customer agreement); JX 860 (Regeneron Pharmaceuticals customer agreement).

117

JX 1639 at 18 (listing SAM as “nascent” in product maturity at the end of November 2021); Moneymaker Tr. 39; JX 858 (HilleVax customer agreement); JX 880 (IQVIA change order); JX 884 (Novotech customer agreement); JX 881 (Pfizer statement of work); JX 842 (Population Health Partners customer agreement).

118

Moneymaker Tr. 41 (noting that SPACE did not exist even as of October 2022); JX 232 at 10; JX 881 (Pfizer Sigma statement of work); JX 880 (IQVIA change order). 119

Moneymaker Tr. 41 (“RBQM, similarly, did not exist as a product.”); JX 839 (selling RBQM to Day One Biopharmaceuticals, Inc.); JX 842 (selling RBQM to Population Health Partners). Similarly, Saama’s Clinical Insights Packaged App was not ready to be sold independently but was provided to multiple customers anyway. See Nimmagadda Dep. 31-33; JX 592 (Dadia stating that “our existing dashboards in Clinical Insights aren’t working properly, so there’s nothing new”); see, e.g., JX 839; JX 850; JX 858; JX 880; JX 819.

Dadia observed to Gondhali that these commitments embodied the

“[w]atermelon [e]ffect”: the contracts were “green” and seemingly healthy on the

outside, but “red” and failing beneath the surface.120 Others at Saama shared this

view, fearing that the company was under significant resource constraints and would

be unable to meet these new commitments.121

In December 2021, Katta, Anisingaraju, and Dadia met with Bress and Yang

to discuss Saama’s 2021 revenue and ARR Bookings.122 Katta announced that

Saama would exceed the $72 million threshold and likely hit $35 million in ARR

Bookings.123 Though the Saama team summarized certain new projects, it did not

offer a contract-by-contract review.124 Taking the presentation at face value, Bress

and Yang were pleased and believed that Saama was outperforming expectations.125

120

JX 592 at 2 (writing to Gondhali: “heard that term for the first time, Watermelon effect . . . but I love it”); Gondhali Tr. 715-17; see also Marius Ivanauskas, The Watermelon Effect: When Fear Turns Your Dashboards Green, Forbes (Dec. 23, 2025), https://www.forbes.com/councils/forbesbusinesscouncil/2025/12/23/the-watermeloneffect-when-fear-turns-your-dashboards-green/ (describing the “watermelon effect” in which “projects and business units that are green on the outside—bright, shiny and confidently reported as on target, but deep red on the inside”).

121

See JX 726 at 1 (November 2021 email among employees stating that “[w]e are out of people and out of time and need to prioritise vs. doing more”); JX 722 at 1-2 (one Saama employee noting that focusing on work for Pfizer “will affect other deliverables like AbbVie” and “will create performance issues in production and it will also be completely scrapped”); see also JX 592.

122

Katta Tr. 196-97.

123

Id. at 197-99; see JX 830 (native) 3.

124

Yang Tr. 1000-01; Dadia Tr. 831-32.

125

Katta Tr. 204-05.

In early January 2022, Dadia emailed Yang all statements of work signed

during the earnout period.126

I. The Earnout Statement

On January 14, Anisingaraju sent Carlyle Saama’s earnout statement,

following up with an amended statement the next day (the “Earnout Statement”).127

The Earnout Statement calculated Saama’s 2021 qualifying revenue at

$73,132,551, clearing the $72 million threshold by over $1.1 million.128

Approximately $4.55 million of that revenue was attributed to the implementation

of Saama’s “co-development investment” with AbbVie.129 The Earnout Statement

listed $32.3 million in signed ARR Bookings across 38 contracts signed during the

earnout period—a figure Yang found “eye-popping” since Saama’s historical

cadence had been one to two new customers per quarter.130 Based on these results,

the Sellers sought the full $67.5 million earnout payment.131

After receipt, Yang forwarded the Earnout Statement to accounting firm

PricewaterhouseCoopers (“PwC”) for review.132 The Merger Agreement mandated

126

Yang Tr. 1176-77.

127

JX 940 at 1 (Earnout Statement); see JX 973 (native); PTO ¶ 120.

128

JX 973 (native) (“Earnout Statement” tab).

129

Id. (“FB+LSAC Revenue” tab) (cell Y102).

130

Id. (“Earnout Statement” tab); Yang Tr. 1003-04.

131

PTO ¶ 121.

132

JX 978 at 12.

that 2021 Revenue be determined in accordance with U.S. GAAP.133 Although Yang

had anticipated meaningful revenue from the AbbVie contract, she was unsure that

$4.55 million was the proper GAAP figure.134 On January 19, PwC flagged for Yang

that the revenue attributed to AbbVie was unusual, observing that it appeared Saama

had “worked with AbbVie to front load the contract.”135

PwC opined that the AbbVie revenue had to be deferred to AbbVie’s 2022

subscription period. It believed that deferral was appropriate because the revenue,

which was derived from software implementation, was not distinct from Saama’s

software-as-a-service performance obligations under Saama’s revenue recognition

policy.136 To assess whether a deviation was warranted, PwC asked Saama questions

based on the Accounting Standards Codification Topic 606 (ASC 606) revenue

recognition factors.137 ASC 606 is a U.S. GAAP framework issued by the Financial

Accounting Standards Board that governs how businesses recognize revenue from

customer sales.138

133

Merger Agreement Annex A (defining “2021 Revenue”); see also Merger Agreement §§ 2.10(a), 3.6(a).

134

JX 978 at 10-11; Yang Tr. 1006-07.

135

JX 978 at 1, 11; Yang Tr. 1006-07.

136

JX 978 at 4-5; JX 438 at 1, 2, 29.

137

JX 980 at 5-7; JX 970 at 1-3; Yang Tr. 1186.

138

See JX 22 at 7; Wilks Tr. 421; JX 2134 (Expert Report of T. Jeffrey Wilks, Ph.D.) (“Wilks Opening Report”) 10-11 (explaining that the accounting standards that make up U.S. GAAP are codified within the ASC).

PwC first confirmed that Saama had not changed its revenue recognition

policy or received permission from its auditor to make an exception for the AbbVie

contract.139 PwC then asked Saama to explain “the rationale for recognizing ~$4.6

million of revenue” from AbbVie in 2021.140 Saama explained that its engagement

with AbbVie was for a “co-build construct” through which AbbVie could “get[] the

capabilities they were looking for by the end of 2021,” though “performance,

maintainability and core architecture needs” would not be delivered until 2022.141

Saama’s answers left PwC “confused.”142 On February 8, Yang convened a

call with PwC and Katta to better understand Saama’s accounting.143 Unsatisfied

with the discussion, PwC drafted an objection for Carlyle to challenge the AbbVie

revenue reported on the Earnout Statement.144 PwC maintained that revenue from

the AbbVie contract needed to be deferred into 2022, detailing the ASC 606 criteria

required for upfront recognition.145

139

JX 978 at 5; Yang Tr. 1010-12.

140

JX 978 at 6.

141

Id.

142

Id. at 4-5; Yang Tr. 1010-12.

143

JX 985 at 2; JX 984 at 1.

144

Yang Tr. 1017-18; JX 992 at 1.

145

JX 992 at 1.

On February 13, Carlyle lodged a formal objection to the Earnout Statement,

asserting that no earnout payment was due.146 It objected to 29 of the 38 ARR

Booking contracts, reducing ARR Bookings from $32.3 million to roughly $2.7

million.147 The objection contested contracts that were excluded from earning credit

under the Merger Agreement (ten contracts), were not signed in 2021 (seven

contracts), had atypical margins (three contracts), lacked reasonably anticipated

revenues (three contracts), included services revenue (two contracts), or claimed preearnout revenue (six contracts).148 In preparing the objection, Yang highlighted

facially obvious pricing violations.149 She otherwise gave management the benefit

of the doubt.150 Twenty-three of those contracts remain at issue.

J. Saama’s Declining Financial and Operational Health

Post-merger, Saama’s financial health deteriorated.151 Anticipating significant

growth, Saama increased headcount from about 1,080 at the start of 2021 to over

146

JX 1013 (native) (“Revenue Recon” tab); PTO ¶ 125.

147

JX 1013 (native) (“Earnout Statement” and “ARR Bookings” tabs). In drafting the objection, Yang created a tracking spreadsheet documenting a detailed, contract-bycontract review against each prong of the ARR Bookings definition and tracking Saama’s response to PwC’s questions. JX 993 (native) 4.

148

JX 1013 (native) (“ARR Bookings” tab).

149

Yang Tr. 1026-28.

150

Id. at 1030-31.

151

JX 81 at 78-79.

1,800 in early 2022.152 It also poured resources into research and development, with

expenses growing at twice the rate of Saama’s revenue.153

To stem the cash burn, Saama’s new Carlyle-recruited Chief Financial Officer,

Scott Rogers, instituted a hiring freeze in March 2022.154 Despite this measure, by

the end of the first quarter of 2022, Saama had lost more than $4.4 million in

EBITDA and subscription margins collapsed from 87.2% in the first quarter of 2021

to 58.4%.155 These results stood in stark contrast to Saama’s operating plan, which

predicted that subscription margins would reach 90%.156

By April 2022, Saama was far below plan. Its subscription bookings were

$1.5 million—$10.1 million behind goal—and its EBITDA declined to negative $6.3

million.157 After the results for the first half of 2022 came in, Saama reduced its

152

Rogers Tr. 843-44, 848; JX 1159 at 9.

153

JX 1070 at 1.

154

Zhuang Dep. 218-22; JX 1166 (native) 1; JX 1070 at 1; Gondhali Tr. 657; Rogers Tr. 843-45; PTO ¶ 123. Prior to Saama, Rogers was employed at PPD, a company that Carlyle had acquired in 2011 and sold in December 2021. PTO ¶ 124; Rogers Tr. 843. 155

JX 1173 at 26-27 (“unplanned subscription costs” and “[n]ew [h]ire [d]rag” contributed to lower gross margins); JX 1166 (native) 1 (noting that the “EBITDA OF -$-4.0mm” was “due to unexpected margin pressure driven by a miss on hiring and labor utilization”). 156

JX 1072 at 5-6, 9; Rogers Tr. 849-50; see JX 2137 (Opening Expert Report of Louis G. Dudney, CPA, CFF) (“Dudney Opening Report”) ¶ 24 & fig. 5.

157

JX 2256 (native) 4.

budget once more, projecting an annual EBITDA loss of $9 million and an annual

gross margin of 42.7%.158

Bress and Katta began to discuss accelerating Katta’s separation from the

company.159 Katta’s employment agreement contemplated that he would leave the

CEO role in early 2023, but Carlyle had the right to remove him at any time without

cause.160 Carlyle identified industry veteran Vivek Sharma as Katta’s successor.161

On June 27, 2022, Sharma officially replaced Katta as CEO.162

By this point, the consequences of Saama’s overcommitments had

materialized. Operationally, Saama was struggling. Fulfilling the AbbVie

commitments had placed “a huge burden” on Saama.163 But despite devoting

extensive resources to AbbVie, SAM remained in development.164 Similarly, Saama

could not “deliver a working, white-label environment” for IQVIA on the promised

158

JX 1318 at 36.

159

Bress Dep. 512; Katta Tr. 219-21.

160

JX 762 (employment agreement) 2, 4-5.

161

Katta Tr. 220; Bress Dep. 513; Sharma Tr. 1225-26, 1275-78.

162

PTO ¶ 127.

163

JX 1883 at 9 (stating that delivering on AbbVie commitments is “a huge burden” for Saama); see also Sharma Dep. 240.

164

Rogers Tr. 854-55; see JX 1270 at 1-2 (Gondhali reporting that AbbVie was “scared [as to] how . . . [its] first study [will] flawlessly go-live,” and that “customer sentiment really is 1 out of 10”).

timeline, prompting IQVIA to demand its money back.165 The customer team

salvaged that relationship by agreeing to work for a single client going forward.166

Fearing the worst, Gondhali asked Srinivasan Anandakumar, a senior director,

whether it was “[p]ossible to renegotiate” the signed earnout-period contracts,

warning that “the Q4 deals will drown us.”167 Gondhali’s fears were prescient.

Novotech, for instance, eventually canceled its contract after Saama could not

perform hundreds of committed implementations.168

K. The KPMG Audit and Contetra Memo

During this time, Saama awaited its 2021 audit from KPMG Assurance and

Consulting Services LLP (“KPMG India”).169 Saama’s failure to provide

information delayed the annual audit’s completion.170

165

JX 1282 at 1 (July 20, 2022 email noting that SAM had yet to be delivered to IQVIA, that there was still no delivery date for SDQ, and that the Clinical Insights and Operational Insights products were reportedly not working for IQVIA); JX 1304 at 1-2 (July 30, 2022 email discussing how IQVIA wanted “answers on why [Saama] ha[s] not given them a demo environment for them to demo to clients the solutions” and stating that IQVIA wanted “to revisit the contract since [Saama] can[’t] deliver”); JX 1374 at 1 (August 26, 2022 email where IQVIA states: “It sounds like Saama is unwilling to honor the terms of the existing arrangement and would like to renegotiate the agreement”). 166

Scaldaferri Dep. 367-69; JX 1412 at 1.

167

JX 1316 at 1 (“All q4 deals are messy.”); see Anandakumar Tr. 483.

168

Rogers Tr. 856-57; Sharma Tr. 1254-55; JX 1820 at 1-2; see JX 2349 at 1 (Gondhali stating on July 25, 2022: “[W]e are losing a lot of money on [N]ovotech.”). 169

JX 1019.

170

JX 1250.

On August 31, 2022, KPMG India issued its audit report, which it designated

“special purpose” and limited to internal use only (the “KPMG India Audit”).171

KPMG India presented its conclusions to the board of Saama’s Indian subsidiary—

not to Saama’s Board of Directors (the “Board”).172 Bress found this irregular,

having “never been in a situation where an audit w[as] not delivered to the board [of

the parent company] for review.”173

The KPMG India Audit reported 2021 revenue of $73,180,543, corroborating

the Earnout Statement.174 It relied on a memo from Contetra plc, which Saama had

engaged in early 2022 to review its ASC 606 accounting for the AbbVie contract (the

“Contetra Memo”).175 Rogers had given feedback on a draft of the Contetra Memo

that explained AbbVie had been given “off the shelf” Life Sciences Analytics Cloud

software licenses that were “capable of being distinct,” “used with little

customization,” and that could be self-implemented.176 Rogers later learned this

171

JX 1401 at 3 (“The accompanying consolidated financial statements . . . are special purpose financial statements . . . . These financial statements are meant for internal use of the Board of Directors.”); JX 1724 at 1-3 (“As previously discussed, I would like to highlight that our audit is a special purpose audit . . . . The financials are not meant for use as general purpose financial statements.”).

172

Katta Tr. 227; JX 1376 at 3.

173

Bress Tr. 1403.

174

JX 1396 at 8. Saama’s earnout statement listed 2021 revenue of $73,132,551—a $47,992 difference. See supra note 128 and accompanying text.

175

JX 1724 at 36-81; JX 920 at 1; PTO ¶ 119.

176

JX 1069 at 1; JX 1065.

information was false.177 AbbVie had received only an unusable demo environment

in 2021 and anticipated a custom product co-built with Saama.178 The Contetra

Memo bundled software, installation, and customization into a single performance

obligation and assumed this deliverable was implemented by the end of 2021.179

On September 7, Rogers delivered Saama’s response to Carlyle’s objection,

which relied on the KPMG India Audit and Contetra Memo.180 The response

conceded several ARR Bookings objections, reducing the total claimed ARR from

$32.3 million to $12.9 million,181 and proposed a reduced earnout payment of $64.9

million.182 At this point, based on the KPMG India Audit and Contetra Memo,

Rogers believed the AbbVie revenue had been properly recognized.183

L. The Second Opinion

In September 2022, Yang and Rogers requested additional information about

the Earnout Statement, including the accounting for the AbbVie contract.184

177

Rogers Tr. 928.

178

See Anandakumar Tr. 507-08, 510-11, 540-41; Rogers Tr. 921; Sharma Tr. 1253; JX 1046 at 2.

179

JX 1724 at 48, 57.

180

JX 1401 at 1; Rogers Tr. 870.

181

Compare JX 1401 (native) (“ARR Bookings” tab), with JX 937 (native) (“Earnout Statement” tab). Katta was involved in the formulation of the response. JX 1474 at 2. 182

JX 1401 (native) (“ARR Summary” tab).

183

Rogers Tr. 928-29.

184

Id. at 925-28; Yang Tr. 1211-12; see JX 1435.

Meanwhile, PwC reviewed the KPMG India Audit and Contetra Memo. PwC

advised Carlyle to maintain its objection, concluding that KPMG India—relying on

the Contetra Memo—failed to identify the correct performance obligations under

GAAP.185

Yang and Rogers spoke multiple times over the ensuing weeks. During these

conversations, Rogers shared initial drafts of Saama’s responses to Carlyle’s

questions about AbbVie and updates on communications with the Sellers.186 On

October 12, 2022, Yang drafted emails for Rogers to send to the Board and to KPMG

India that questioned the analyses underlying the KPMG India Audit.187 Rogers sent

the emails unchanged.188 Rogers and Sharma then asked KPMG India to change

“their audit to a general purpose audit.”189

At Yang’s recommendation, Rogers sought a second opinion on the KPMG

India Audit and identified accounting firms that were independent of Carlyle,

185

See JX 1488 at 2; JX 1462 at 19-20; Bress Tr. 1404; JX 1433 (native) 1-2. 186

Rogers Tr. 929-33; JX 1449 (Rogers scheduling recurring catch-ups with Yang and associate); JX 1454 (Rogers sharing a first cut of Saama’s responses to the AbbVie followup questions with Yang); JX 1467 (Rogers asking Yang if he can “update [her] on [his] conversation with the sellers”); JX 1458 (Rogers providing updated contracts to Yang); JX 1472 (Rogers providing an updated margin analysis to Yang).

187

Rogers Tr. 935-37; JX 1510.

188

JX 1512; JX 1516; JX 1518.

189

Rogers Tr. 937-38.

including Grant Thornton LLP.190 On October 28, the Board authorized Rogers to

engage a “third-party advisor to review Saama’s AbbVie contract, prepare a memo

on [its] findings[,] and report those findings back to the Board[.]”191

On November 22, Grant Thornton sent Rogers questions about the AbbVie

contract.192 Rogers sent his draft responses to several employees for review,

including Lisa Moneymaker, who had been hired as the Chief Technology and

Product Officer a month before.193 Moneymaker initially disputed Rogers’s view

that the Saama software products required significant customization and software

code changes before being implemented in AbbVie’s environment.194 Her feedback

was based on a misunderstanding of the context of Rogers’s questions.195

In his response to Grant Thornton, Rogers maintained that implementing the

software required significant customization, which indicated the AbbVie product

190

Id. at 874, 877-78 (“And that’s how [Yang] identified these three firms.”); Yang Tr. 1047 (“And in that process, to support Mr. Scott Rogers, I had pulled together a panel of three potential accounting experts for him to choose from.”); see JX 1513 at 1. 191

JX 1576 at 4-5; JX 1542 (Oct. 21, 2022 email from Rogers to the Board listing “3rd Party Advisor Proposals” as an agenda topic); Rogers Tr. 878. All directors voted for authorizing Rogers to retain a third-party advisor, except for Katta “in his capacity as shareholder representative.” JX 1576 at 5.

192

JX 1616 at 1.

193

Moneymaker Tr. 6.

194

JX 1631 at 1-3.

195

Moneymaker Tr. 80 (explaining that she retracted her comments after realizing that Grant Thornton was asking about what had been delivered to AbbVie rather than what was promised); see Rogers Tr. 883. Moneymaker’s explanation that she, as a new employee, misunderstood the issue was credible.

had not been fully implemented in 2021.196 On December 2, Grant Thornton

concluded that Saama could properly recognize only $1.47 million of the AbbVie

contract revenue in 2021, meaning that Saama had overstated its revenue by nearly

$3 million.197 Rogers shared Grant Thornton’s opinion with KPMG India and

Saama’s Board.198

M. The Deloitte Audit

On February 1, 2023, KPMG India declined to restate its audit.199 The

engagement partner told Rogers that “[e]ven assuming many of [KPMG India’s]

conclusions were inappropriate,” the audit assessed Saama from a specific

materiality standpoint.200 KPMG India added that the audit had been prepared on a

“special purpose” basis that prohibited anyone except the board of Saama India from

using it.201

In response, Rogers proposed that Saama’s Board engage Deloitte & Touche

LLP to conduct a “general use financial statement audit of 2021.”202 Concerned by

196

JX 1630.

197

JX 1723 at 82; PTO ¶ 133.

198

JX 1724 at 33, 58; PTO ¶ 133; JX 1660; Rogers Tr. 885-86, 889-90.

199

JX 1724.

200

Id. at 6-7.

201

JX 1724; JX 1401.

202

JX 1724 at 1.

the lack of a general-purpose audit, the Board authorized Deloitte’s retention on

February 16.203

Deloitte restated Saama’s 2021 financials and concluded that Saama achieved

$67.4 million in 2021 revenue, including $1.49 million from AbbVie—a conclusion

that tracked Grant Thornton’s.204 Additional revenue corrections identified by

Deloitte meant that, even if the Sellers were credited with the full $4.55 million for

the AbbVie contract, Saama’s total 2021 revenue would have reached $70.5

million.205 That is, Saama’s revenue fell short of the earnout threshold by at least

$1.5 million.

N. Saama’s Struggles

In April 2023, Saama’s Board formed a special committee to investigate

potential misconduct by current or former employees in connection with maximizing

the earnout.206

By May, Saama had just $6.7 million in cash—a burn of nearly $40 million

since the merger closed.207 With cash tight, on June 30, Saama took on debt through

203

PTO ¶ 134; Bress Tr. 1403-07; Rogers Tr. 888-91, 896-97; JX 1724 (Feb. 16, 2023 Board update).

204

PTO ¶ 135; Rogers Tr. 893; JX 1964 at 68.

205

See JX 2135 (Opening Expert Report of Gordon Klein) (“Klein Opening Report”) ¶ 19ii(a); see also JX 1964 at 57.

206

PTO ¶ 136.

207

JX 1855 at 5; JX 1166 (native) 6.

a Contribution Agreement with Warrior Parent and affiliates.208 The Board approved

additional financing up to $250 million for liquidity needs and potential M&A.209

Saama’s subscription gross margins also declined, falling from 71.8% in

November 2021 to 30.8% in July 2023.210

O. This Litigation

In November 2022, Katta filed this lawsuit to compel arbitration over the

earnout.211 That month, after expedited proceedings, I entered a partial judgment

granting Katta’s request to send the earnout dispute to an accounting expert—as the

Merger Agreement contemplated.212 Katta changed his mind. He moved to vacate

that partial judgment and file an amended complaint raising new theories, which I

granted in October 2024 under Court of Chancery Rule 54(b).213

208

JX 2083.

209

Rogers Tr. 898 (stating that Saama only had “enough cash for operations until June”); JX 1862 at 4-5; JX 1876 at 64. Carlyle and Saama management explored potential M&A exit strategies, including a prospective business combination with another Carlyle portfolio company in late 2024 and early 2025. Sambasivan Tr. 1323-24; Bress Tr. 1468. No transaction transpired.

210

JX 2125 (native) 1.

211

Dkt. 1.

212

Verified Compl. (Dkt. 1); Order Granting Pl.’s Mot. to Compel Arbitration (Dkt. 47). 213

Order Granting Pl.’s Mot. to Vacate the Court’s Partial J. and Amend and Suppl. Compl. (Dkt. 106); Verified Am. and Suppl. Compl. (Dkt. 107).

In January 2025, Katta’s complaint was amended once more, advancing

thirteen counts against numerous defendants.214 Defendants Warrior Holdings and

Warrior Parent responded by filing six counterclaims against Katta and

Anisingaraju.215

Both sets of parties cross-moved for partial dismissal on various claims and

counterclaims.216 On November 7, 2025, I granted the motions in part and denied

them in part.217 My ruling left several of Katta’s claims to be resolved, including for

a declaratory judgment that the earnout payment is owed based on breaches of the

Merger Agreement, breach of fiduciary duty, breaches of Saama’s limited liability

company agreement (“LLC Agreement”), and breaches of the Contribution

Agreement.218 As for the counterclaims, three remained against Katta—some

reduced to subparts—for breach of Section 2.10(d) of the Merger Agreement, breach

214

Verified Second Am. and Suppl. Compl. (Dkt. 130) (“Compl.”).

215

Verified Am. Countercl. and Third-Party Compl. (Dkt. 151) (“Countercl. Compl.”) ¶¶ 132-65.

216

Defs.’ Partial Mot. to Dismiss Pl.’s Verified Second Am. and Suppl. Compl. (Dkt. 157); Countercl. Def.’s and Third-Party Def.’s Mot. to Dismiss the Verified Am. Countercl. and Third-Party Compl. and Verified Compl. (Dkt. 168).

217

Telephonic Rulings Defs.’ Partial Mot. to Dismiss Second Am. Compl. and Countercl. Def. and Third-Party Def.’s Mot. to Dismiss Verified Am. Countercl. and Third-Party Compl. (Dkt. 304) (“MTD Hr’g Tr.”).

218

Id. at 42-43.

of the implied covenant of good faith and fair dealing, and a declaratory judgment

that no earnout payment is owed.219

Ahead of trial, I issued a letter opinion resolving three motions in limine,

declined to resolve another as premature, and deferred ruling on a motion for

spoliation sanctions.220 I issued another letter opinion denying Katta’s request—on

the eve of trial—to amend his complaint for the third time to add fraud and aiding

and abetting claims.221

Both parties filed their pre-trial briefs in February 2026.222 A five-day trial

was held from March 2 to March 6, 2026.223 Post-trial briefing was complete as of

May 21.224 Katta abandoned his claims regarding the LLC Agreement and

219

Id.

220

Letter Op. Resolving Mots. in Limine (Dkt. 402); Tr. of Feb. 18, 2026 Telephonic Hr’g (Dkt. 440) 49. The premature motion concerned a request to preclude Wilks from offering undisclosed expert opinions. That hypothetical situation did not come to pass; Wilks adhered to his disclosed expert position. See Wilks Tr. 416-79. The motion for spoliation sanctions concerned the alleged destruction of contemporaneous meeting notes by a Carlyle associate during internal deal team and Investment Committee meetings. See Pl.’s Mot. for Spoliation Sanctions (Dkt. 324). When deposed, the associate testified that she could not recall taking or deleting any such notes for the specific meetings at issue. See Zhuang Dep. 22, 139. At trial, Katta elicited no evidence that notes for those specific meetings ever existed—much less that they were recklessly or intentionally destroyed while a preservation obligation was in place. Katta’s spoliation motion is therefore denied. 221

Letter Op. Regarding Mot. for Leave to Amend (Dkt. 427).

222

Defs.’ and Countercl. Pls.’ Pre-trial Br. (Dkt. 399); Pl. and Countercl. Def.’s Pre-trial Br. (Dkt. 401) (“Pl.’s Pre-trial Br.”).

223

Dkts. 424, 439.

224

Pl. and Countercl. Def.’s Post-trial Br. (Dkt. 450) (“Pl.’s Post-trial Opening Br.”); Defs.’ and Countercl. Pls.’ Post-trial Br. (Dkt. 452) (“Defs.’ Post-trial Opening Br.”); Pl. and

Contribution Agreement by neglecting to address them in post-trial briefing.225

Post-trial argument was held on June 1, after which I took the matter under

advisement.226

II. ANALYSIS

Two of the claims Katta tried remain to be resolved: for a declaratory

judgment that the earnout is owed due to a breach of the Merger Agreement and for

breach of fiduciary duty against Rogers and Sharma.227 The other claims that

survived dismissal were waived or abandoned.228 The defendants also tried

counterclaims for breach of the Merger Agreement, breach of the implied covenant

of good faith and fair dealing, and a declaratory judgment that no earnout payment

is due.229

Countercl. Def.’s Post-Trial Reply Br. (Dkt. 455) (“Pl.’s Post-trial Reply Br.”); Countercl. Pls.’ Post-trial Reply Br. (Dkt. 457) (“Defs.’ Post-trial Reply Br.”). 225

See Defs.’ Post-trial Opening Br. 9, 70. Katta’s opening brief mentions the Contribution Agreement and his consent rights in the LLC Agreement only in passing. See Pl.’s Post-trial Opening Br. 60. He does not address either agreement in his reply brief. “Issues not briefed are deemed waived.” Emerald P’rs v. Berlin, 726 A.2d 1215, 1224 (Del. 1999). 226

See Tr. of June 1, 2026 Post-trial Oral Arg. (Dkt. 463) (“Post-trial Hr’g Tr.”). 227

PTO ¶ 141(a), (c).

228

See Emerald P’rs, 726 A.2d at 1224; Oxbow Carbon & Mins. Hldgs., Inc. v. CrestviewOxbow Acq., LLC, 202 A.3d 482, 502 n.77 (Del. 2019) (“The practice in the Court of Chancery is to find that an issue not raised in post-trial briefing has been waived, even if it was properly raised pre-trial.”); supra note 225 and accompanying text. Katta also dropped a claim concerning the creation of the special committee. PTO ¶ 146; see supra note 206 and accompanying text.

229

PTO ¶ 142(a)-(c).

The proponents bear the burden of proving their claims by a preponderance

of the evidence. “Proof by a preponderance of the evidence means proof that

something is more likely than not.”230 Under this standard, “certain evidence, when

compared to the evidence opposed to it, has the more convincing force and makes

[the court] believe that something is more likely true than not.”231

A. Katta’s Affirmative Claims

Katta’s primary claim is that Carlyle (specifically, Warrior Holdings) breached

the Merger Agreement because its objection to the Earnout Statement was not made

in good faith.232 As a result, he contends that the Earnout Statement became final

and the maximum $67.5 million earnout payment is due. Secondarily, he contends

that Sharma and Rogers breached their fiduciary duties by prioritizing Carlyle’s

interests ahead of Saama’s.233

Katta has failed to meet his burden on either claim. The evidence establishes

that Carlyle’s objection was made in good faith given the myriad problems with

230

Agilent Techs., Inc. v. Kirkland, 2010 WL 610725, at *13 (Del. Ch. Feb. 18, 2010) (quoting Del. Express Shuttle, Inc. v. Older, 2002 WL 31458243, at *17 (Del. Ch. Oct. 23, 2002)).

231

Id.

232

PTO ¶ 141(a); see Pl.’s Post-trial Opening Br. 69-74; see also infra note 240 (explaining that, at times, Carlyle and Warrior Holdings are referred to interchangeably). 233

PTO ¶ 141(c); see Pl.’s Post-trial Opening Br. 75-78. This theory is different than the claim pleaded in Katta’s Complaint, which primarily concerned Sharma and Rogers’ purported interference with the Earnout Statement’s dispute resolution process, including in relation to the 2021 audit process. Compl. ¶¶ 269-73.

Saama’s revenue accounting. Katta also did not prove that Sharma’s and Rogers’

challenged conduct was anything but ordinary business decisions.

1. Whether Carlyle Breached the Merger Agreement

Katta originally claimed that Carlyle breached both the Merger Agreement

and the implied covenant of good faith and fair dealing. As to the latter, he alleged

that the implied covenant prohibited Carlyle “from taking steps to manipulate and

delay the earnout calculation process to their benefit.”234 I dismissed that claim

because Section 2.10(b) of the Merger Agreement comprehensively addresses the

requirements governing the Earnout Statement, objections, and any accounting

arbitration; Section 2.10(c) addresses the timing of payment; and Section 2.10(d)

governs the “Conduct of the Company” in all earnout-related matters between

closing and December 31, 2021.235 Left for trial was Katta’s claim that Carlyle

breached the express obligations of the Merger Agreement.

“Under Delaware law, the elements of a breach of contract claim are: 1) a

contractual obligation; 2) a breach of that obligation by the defendant; and 3) a

resulting damage to the plaintiff.”236 The pertinent obligation is in Section 2.10(b)

234

Compl. ¶ 231.

235

See MTD Hr’g Tr. 24-25 (explaining that extending Section 2.10(d)’s good-faith obligation beyond its express temporal limit would be “rewriting the contract’s plain text” and that Section 2.10(b) provided a comprehensive, express remedy for earnout disputes). 236

H-M Wexford LLC v. Encorp, Inc., 832 A.2d 129, 140 (Del. Ch. 2003).

of the Merger Agreement, which states that any item in the Earnout Statement not

objected to “in good faith” becomes “final, conclusive and binding.”237 Katta argues

that Carlyle breached Section 2.10(b) because its February 13, 2022 objection to the

Earnout Statement was not made in good faith.238 If Carlyle’s objection was made

in bad faith, he contends that the Earnout Statement—which claimed over $73

million in 2021 revenue and over $31 million in ARR Bookings—became final,

conclusive, and binding, and the maximum earnout must “be promptly paid in

accordance with” the Merger Agreement.239

a. The Good Faith Obligation

Section 2.10(b) states, in relevant part:

If within thirty (30) days following receipt of the Earnout

Statement, [Carlyle] has not given [Katta] written notice of

objection to such Earnout Statement setting forth in reasonable

detail each disputed item . . . the Earnout Statement shall be final,

conclusive and binding . . . . Notwithstanding anything in this

Agreement to the contrary, any amount in the Earnout Statement

that is not disputed by [Carlyle] in good faith shall be promptly

paid . . . .240

237

Merger Agreement § 2.10(b).

238

Pl.’s Post-trial Opening Br. 68-70.

239

Merger Agreement § 2.10(b); see JX 940 at 1; JX 973 (native).

240

Merger Agreement § 2.10(b) (emphasis added). The Merger Agreement defines “Purchaser” as Warrior Holdings, and Stockholder Representative as “Katta.” See generally Merger Agreement, pmbl. Since Warrior Holdings is an entity created to effectuate Carlyle’s ultimate purchase of Saama, I refer to Warrior Holdings and Carlyle interchangeably.

Familiar principles of contract interpretation govern.241 “Delaware adheres to

the ‘objective’ theory of contracts, i.e., a contract’s construction should be that which

would be understood by an objective, reasonable third party.”242 Where a contract

is unambiguous, the court gives effect to the “plain meaning of the contract’s terms

and provisions.”243 It must assess the contract “as a whole and . . . give each

provision and term effect, so as not to render any part of the contract mere

surplusage.”244

Katta reads Section 2.10(b) to mean that Carlyle was prohibited from issuing

preplanned objections to avoid paying the earnout.245 He believes that when Bress

proposed the earnout, Carlyle already planned to object to Saama’s 2021 recognition

of revenue from the AbbVie agreement. The defendants, for their part, read the good

faith provision in Section 2.10(b) more narrowly. They construe it as a trigger for

241

See id. § 10.4 (selecting Delaware law to govern the Merger Agreement). 242

Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010) (quoting NBC Universal v. Paxson Commc’ns Corp., 2005 WL 1038997, at *5 (Del. Ch. Apr. 29, 2005)). 243

Id. at 1159-60; see also Rhone-Poulenc Basic Chems. Co. v. Am. Motorists Ins., 616 A.2d 1192, 1195 (Del. 1992) (“Clear and unambiguous language . . . should be given its ordinary and usual meaning.”).

244

Osborn, 991 A.2d at 1159 (quoting Kuhn Constr., Inc. v. Diamond State Port Corp., 990 A.2d 393, 396-97 (Del. 2010)).

245

Pl.’s Post-trial Opening Br. 70-71.

Carlyle’s obligation to pay any portion of the Earnout Statement that is not disputed

in good faith.246

Katta points to Carlyle’s internal modeling and financial desire to avoid the

earnout as evidence of bad faith.247 Those considerations may inform the assessment

of Carlyle’s motives, but they do not alone establish that Carlyle exercised its

objection right dishonestly. Section 2.10(b) requires good-faith objections—not that

Carlyle favor payment of the earnout.248

Carlyle’s reading, by contrast, honors the plain text and commercial reality of

Section 2.10.249 Section 2.10(b) outlines a multistep dispute resolution process that

contemplates—and is predicated upon—objections. It affords Carlyle thirty days to

review the Earnout Statement and issue a written notice detailing its disputes, which

defers the determination of the earnout pending the delivery of audited financial

statements, initiates a 30-day resolution period, and routes unresolved disagreements

to an accounting expert.250

246

Defs.’ Post-trial Opening Br. 80-81.

247

See Pl.’s Post-trial Opening Br. 70-72; Pl.’s Post-trial Reply Br. 53-57; see also Defs.’ Post-trial Reply Br. 36-38, 40 n.168.

248

Cf. Rhone-Poulenc, 616 A.2d at 1195 (“Delaware courts will not destroy or twist [contract] language under the guise of construing it.”).

249

GMG Cap. Invs., LLC v. Athenian Venture P’rs I, L.P., 36 A.3d 776, 779 (Del. 2012) (explaining that the court must interpret a particular contract provision by reference to “the agreement’s overall scheme” (citing E.I. du Pont de Nemours & Co. v. Shell Oil Co., 498 A.2d 1108, 1113 (Del. 1985))).

250

Merger Agreement § 2.10(b); see also id. §§ 2.10(c), (d).

The Merger Agreement must be read as a whole.251 Sections 2.10(b) and

2.10(d) constrain different conduct: the former governs objections to the Earnout

Statement, and the latter governs Saama’s operation of its business during the

specified post-closing period.252 Section 2.10(d) dictates that, from closing until

December 31, 2021, the “Final Surviving Company” must conduct the business in

good faith and not “intentionally take any action for the purpose of avoiding the

payment of, or reducing” the earnout.253 Section 2.10(b) governs the dispute

resolution process for the Earnout Statement, and does not extend the operating

restrictions imposed on the Final Surviving Company.254 It requires Carlyle to

exercise its objection right in good faith, meaning that motives remain relevant to

whether it honestly believed its objections were warranted.

“When a contract’s express terms incorporate a good faith requirement, the

trial court should focus on the meaning of that express contractual duty.” 255 “A

plaintiff contending that a party did not comply with its express contractual duty of

251

See Kuhn, 990 A.2d at 396–97 (“We will read a contract as a whole and we will give each provision and term effect, so as not to render any part of the contract mere surplusage.”).

252

Merger Agreement §§ 2.10(b), (d).

253

Id. The Merger Agreement defines the “Final Surviving Company” as Saama Technologies, LLC, the post-closing entity wholly owned by Warrior Parent, LLC. Id. at pmbl., §§ 1.1(a)(ii), 1.1(b)(ii), 1.1(c), 2.1(b)(i). Katta does not claim that Carlyle breached Section 2.10(d).

254

Id. § 2.10(b).

255

ev3, Inc. v. Lesh, 114 A.3d 527, 539 (Del. 2014).

good faith would typically have to show that the party acted in subjective bad

faith.”256 The court must analyze the good faith obligation in the context of the

“larger provision—or value—it sought to protect.”257

Here, the phrase “in good faith” in Section 2.10(b) serves as a contractual

backstop to prevent Carlyle from asserting baseless objections to avoid making a

payment and thwart the dispute resolution process. It does not deprive Carlyle of

the bargained-for right to advance a factually and legally supported challenge.258

The relevant inquiry is whether Carlyle honestly believed its objections had a basis

in the facts and the Merger Agreement. A desire to avoid an earnout payment is not

bad faith, provided Carlyle honestly believed its objections were warranted.

Katta attempts to demonstrate Carlyle’s bad faith in three ways. First, he

contends that Carlyle secretly predetermined its objection before the earnout period

even closed to satisfy its IRR targets.259 Second, he argues that Carlyle purposefully

256

Id.

257

DV Realty Advisors LLC v. Policemen’s Annuity and Ben. Fund of Chicago, 75 A.3d 101, 110 (Del. 2013).

258

See Nemec v. Shrader, 991 A.2d 1120, 1128 (Del. 2010) (“A party does not act in bad faith by relying on contract provisions for which that party bargained where doing so simply limits advantages to another party.”); Credit Lyonnais Bank Nederland, N.V. v. Pathe Commc’ns Corp., 1991 WL 277613, at *23 (Del. Ch. Dec. 30, 1991) (“Generally speaking, contracting parties are, to a large extent, entitled to act selfishly to promote their own interests under the contract. While in a relational contract it may be short-sighted and bad business to do so, they generally are entitled to push their claims of entitlement under a contract in an attempt to maximize their self-interest.”).

259

See Pl.’s Post-trial Opening Br. 29-30, 34-36.

avoided validating Saama’s recognition of the AbbVie revenue to preserve a

pretextual dispute.260 And third, he asserts that Carlyle baselessly objected to dozens

of ARR Bookings contracts.261

Katta failed to prove bad faith, as contemplated by Section 2.10(b), under any

of these theories. Rather, the trial record shows that Carlyle’s objections were made

in good faith because they were grounded in legitimate factual and contractual

deficiencies.

b. Carlyle’s Overarching Conduct

Katta asserts that the conduct of Carlyle’s deal team reflects a bad-faith intent

to evade the earnout. He contends that when Bress proposed the earnout structure

to “bridge” Carlyle’s $435 million valuation back to the initial $505 million, Katta

was led to believe that the earnout payment was guaranteed. In Katta’s view, the

earnout was nothing but a ruse for Carlyle to dupe Katta into a lower valuation and

reach a 25% IRR.262

Katta’s claim rests on a misconception of the parties’ bargain. Delaware law

does not require a buyer to hope that a seller achieves an earnout. The earnout was

negotiated by sophisticated commercial counterparties, each representing its own

260

See id. at 36-38, 52-55.

261

See id. at 57, 73-75.

262

Id. at 69; see also Pl.’s Post-trial Reply Br. 53.

economic interests.263 If Carlyle believed Saama was unlikely to hit the earnout

targets, that was Carlyle’s commercial prerogative. Carlyle had no obligation to

disclose its internal probability assessments. Saama, having greater visibility into

its own capabilities, had the prerogative to negotiate for targets it deemed appropriate

and realistic. Even if Katta’s theory were legally cognizable, the trial record belies

his narrative.

First, Carlyle’s $70 million reduction in its initial valuation was in response

to Saama’s underperformance and information learned during due diligence. The

confidential memorandum Saama preliminarily disclosed to potential buyers

projected 2021 software subscription revenue of $27.9 million.264 That figure was

reduced to $20.4 million in light of Saama’s actual results in the first half of 2021.265

Carlyle further reduced it to $12 million after diligence revealed anomalies in

Saama’s accounting, such as bundling implementation and subscription services.266

263

See Fortis Advisors LLC v. Johnson & Johnson, -- A.3d --, 2024 WL 4048060, at *21 (Del. Ch. Sept. 4, 2024) (“Buyers can mitigate valuation risk since the contingent payment is based on the seller's actual future performance rather than its projections. Sellers give up guaranteed cash but stand to gain a greater payment overall than they might otherwise receive upfront if defined milestones are met.”), aff’d in part, rev’d in part sub nom. Johnson & Johnson v. Fortis Advisors LLC, 352 A.3d 229 (Del. 2026); see also Chi. Bridge & Iron Co. N.V. v. Westinghouse Elec. Co. LLC, 166 A.3d 912, 927 (Del. 2017) (“The basic business relationship between parties must be understood to give sensible life to any contract.”).

264

JX 81 at 31.

265

Bress Tr. 1354-55.

266

JX 360 at 4-5, 24; JX 374 at 1; see Yang Tr. 961, 963; Bress Tr. 1362-63.

Carlyle told Saama before closing that it did not view bundling to be an appropriate

way to account for software subscription revenue.267 This understanding was later

confirmed in the Merger Agreement’s definition of qualifying ARR Bookings.268

Second, Carlyle did not trick or mislead Katta into accepting an earnout

structure. There is no credible evidence that Bress promised Katta the earnout

payment was guaranteed. Regardless, Katta’s testimony that the earnout was a

“deferred payment” bridging a “timing gap” is contrary to the negotiated, contingent

terms he agreed to in the Merger Agreement.269

Nor was Katta misled by the so-called “sanitized” Investment Committee

memo he was given after the Merger Agreement was signed.270 Carlyle was not

obligated to give Katta any portion of its Investment Committee materials—much

less its internal deliberations or proprietary analyses.271 Bress offered to give Katta

a summary, and he followed through.272

267

JX 374 at 1; see Bress Tr. 1363-64; JX 366 at 1; JX 390 at 3-4 (presentation given to Saama that states Saama “[c]annot bundle subscription and implementation revenues in one line”); Yang Tr. 971-73.

268

Merger Agreement Annex A (defining “ARR Bookings”) (“ARR Bookings shall not include software subscription revenues that are bundled with implementation revenues in one line . . . .”).

269

Katta Tr. 158-59, 164, 167, 240-41.

270

Pl.’s Post-trial Opening Br. 69.

271

Bress Tr. 1392-93 (testifying that Katta was told he would receive a “summary” of findings and that “full memos are like [Carlyle’s] proprietary thinking”). 272

On the eve of trial, Katta attempted to amend his complaint to add fraud and aiding and abetting claims based, in part, on the differences between the final Investment Committee

Finally, Katta argues that Carlyle covertly withheld its concerns about

Saama’s accounting until after the Earnout Statement was issued.273 But the Merger

Agreement lacks any affirmative obligation for Carlyle to steer Saama’s accounting

before the objection period. Instead, the Merger Agreement outlines a multi-step

process for raising objections post-Earnout Statement.274 Carlyle’s good faith is

measured in the context of these contract terms.275

c. Carlyle’s Objection to the AbbVie Contract Accounting

Revenue recognition for the AbbVie contract is the crux of Katta’s claim.

Carlyle objected that the $4.55 million of revenue attributed to the AbbVie contract

was improperly recognized under GAAP (ASC 606) for three reasons.276 It asserted

that the revenue: (1) should have been deferred because it matched amounts billed

rather than work completed; (2) contradicted Saama’s historical revenue recognition

memo and summary version provided to him. I denied that request in a letter opinion just before trial began, ruling on procedural grounds. See Letter Op. Regarding Mot. for Leave to Am. (Dkt. 427).

273

Pl.’s Post-trial Opening Br. 70.

274

Merger Agreement § 2.10(b); JX 390 at 3-4 (August 2021 presentation to Saama from Carlyle delineating what constitutes eligible ARR for the earnout). Katta argues that without arbitration or a court order, Bress could not authorize the earnout’s payment absent further Investment Committee approval, indicating Carlyle’s desire to impede its payment. Pl.’s Post-trial Reply Br. 27; see Bress Tr. 1473. He presented no evidence that Carlyle’s approval requirement reflects a scheme to impede payment rather than typical internal controls.

275

See supra notes 252-254 and accompanying text.

276

See JX 1013 (native) (“Revenue Recon” tab).

policy; and (3) involved software that required significant ongoing customization

and implementation services.277 Resolving this aspect of Katta’s claim is

determinative of whether any earnout payment is due.

Katta avers that “Carlyle knew” this objection would “not withstand scrutiny,”

and so it “never asked Saama the questions PwC (incorrectly) said needed to be

answered to determine correct recognition of the AbbVie revenue.”278 Had Carlyle

asked the “correct questions” about revenue recognition, Katta posits, it would have

known its objection was meritless.279 This theory did not bear out at trial.

i. Carlyle’s Good Faith Objection

As explained above, the relevant inquiry is whether Carlyle honestly believed

its objection had a basis in the facts and the Merger Agreement.280 The record

establishes that it did. Carlyle’s objection to the AbbVie revenue recognition was a

good-faith assessment grounded in professional accounting advice.

Carlyle did not fabricate the AbbVie objection. It engaged PwC to review the

Earnout Statement and evaluate Saama’s 2021 revenue calculations under GAAP.281

277

See JX 980; JX 992; Easton Tr. 1538-42, 1548-50, 1552-54, 1557-58.

278

Pl.’s Post-trial Opening Br. 70.

279

Id. at 70-71.

280

See supra Section II.A.1.a.

281

See Bress Tr. 1400. In initial communications with PwC, Yang attached an outdated bookings file that showed only $3.5 million was to be recognized for AbbVie in 2021, rather than $4.55 million. Yang Tr. 1008. Yang credibly testified that this was by mistake

It was PwC—not Carlyle—that flagged the $4.55 million AbbVie revenue as

potentially improper under ASC 606.282 After receiving this advice, Carlyle’s Yang

directed PwC to detail the basis for its concerns, convened a call between PwC and

Saama’s management, and asked whether PwC could “line up” Saama’s accounting

after hearing management’s explanations.283 When Saama’s responses did not

convince PwC that the AbbVie revenue could be recognized upfront under GAAP,

Carlyle relied on that professional advice to lodge its objection.284 An acquiror

relying on a major accounting firm to review technical software revenue recognition

issues illustrates a rational inquiry, not bad faith.285

and that PwC ultimately relied on and had access to the accurate number. Yang Tr. 1008-09.

282

Bress Tr. 1402; Yang Tr. 1010-13; see also JX 978 at 11 (PwC to Carlyle: “Seems they have worked with AbbVie to front load the contract so will need to better understand it and what is going on with that one as it is a big reason why they hit the number.”); id. at 8. 283

Yang Tr. 1015-17; see JX 984 at 1-2; JX 978 at 11 (Yang asking PwC if it was possible to “line up” the AbbVie revenue with information received from management); id. at 5-6; JX 985 at 1, 11; JX 980 at 5-7; JX 970 at 1-3.

284

See JX 992 at 1-2 (PwC informing Carlyle that it did not hear anything on the call to validate Saama’s accounting treatment); see also JX 984 (in response to information from Saama, PwC informing Carlyle: “we discussed the Abb[V]ie contract with our revenue recognition specialists and based on our understanding of the company’s historical practices and the services provided, we do not understand why the $4.5 million is not deferred over the subscription period”).

285

Katta takes issue with Yang’s purported failure to forward certain questions from PwC about the ASC 606 factors to Saama. Pl.’s Post-trial Opening Br. 70. Although Yang could not recall at trial whether the questions were asked, PwC and Saama connected directly during their February 8, 2022 call. Yang Tr. 1193-94; JX 985 at 1; JX 988 (native) 1-2 (“Email – Revenue Question” tab, cells A2, I41). There is no evidence that Yang withheld questions purposefully to prevent Carlyle’s objection from being resolved.

Carlyle’s objection was further justified by Saama’s own internal accounting

maneuvers to reposition the AbbVie contract revenue for recognition in 2021. For

example, in September 2021, Gondhali—Saama’s customer success lead—observed

that the draft AbbVie Statement of Work labeled a $2.75 million deliverable as a

“Pre-Payment for Future Discounted Subscription Fees.”286 Recognizing that this

label disqualified upfront accounting treatment, Gondhali asked internally: “can we

reword that? [I] bet you can[’]t realize for this milestone although you can bill.”287

Saama then revised the Statement of Work to relabel the AbbVie contract milestones

as “Project Setup Activities - Installation Complete” and “Configuration Complete”

to claim the full $4.55 million of revenue in the 2021 earnout window.288

Despite Gondhali’s creative semantics, the substance of the project remained

the same. The software delivered to AbbVie in 2021 was not a standalone,

off-the-shelf product capable of distinct functionality. It was an early

proof-of-concept co-build that required extensive integration with AbbVie’s

proprietary “Jarvis” system.289 Given these efforts to circumvent Saama’s revenue

286

JX 469 at 16.

287

JX 461 at 1; see Gondhali Tr. 636.

288

JX 484 at 18 (reflecting comments about accounting); see Gondhali Tr. 638-40. 289

See Rogers Tr. 854-55, 921; JX 928 (native) 3-4; Sharma Tr. 1253; Anandakumar Tr. 510-11, 540-41, 543-45; Hagins Dep. 254-55.

recognition policy, Carlyle’s objection to recognizing the $4.55 million in 2021 was

justified.

Carlyle’s continued objection after receiving the KPMG India Audit was

similarly justified. Section 2.10(b) of the Merger Agreement contemplated that

disputes could persist after the delivery of the audit and outlined a process for

resolution.290 Invoking that process does not reflect bad faith given the audit’s

substantive and structural defects. Substantively, KPMG India relied upon the

Contetra Memo, which Katta’s accounting expert acknowledged lacked “rigor” due

to its muddling of performance obligations.291 Structurally, the audit was a “special

purpose” review restricted by its terms to the board of Saama’s Indian subsidiary. 292

As KPMG India’s engagement partner confirmed to Rogers, the audit could not be

shared with Saama’s Board or converted into a general purpose audit.293 Due to

these flaws, PwC advised Carlyle that the audit failed to properly account for the

290

Merger Agreement § 2.10(b).

291

Wilks Tr. 459-61; see JX 1724 (Contetra memo) 48 (concluding “in the context of the contract AbbVie desires a combined deliverable of Software license + Installation + Customization,” such that the “components shall be considered as single performance obligation”); see id. at 57 (noting that Saama had “completed the delivery” of the AbbVie software license and customization by the end of December 2021).

292

JX 1724 at 1-3; Rogers Tr. 889-90.

293

JX 1955 at 7; Rogers Tr. 890-91.

AbbVie contract under ASC 606 and recommended that Carlyle continue to

object.294 Carlyle relied on that advice in good faith.

ii. Katta’s Flawed Bad-Faith Theory

Despite the evidence that Carlyle had legitimate grounds to object to Saama’s

recognition of the AbbVie agreement, Katta maintains that Carlyle’s objection was

pretextual. He points to a September 24, 2021 revenue projection showing Saama

would reach $72.2 million in 2021 revenue, which included $4.55 million in revenue

from the AbbVie contract.295 After a meeting where that projection was discussed,

Bress asked the Carlyle deal team to model a scenario where Saama achieved only

$68 million in 2021 revenue (rather than $72 million) with no earnout paid.296

Katta emphasizes that the $4 million drop Bress considered roughly matches

the $4.55 million AbbVie contract, meaning Bress assumed the revenue would be

lost.297 None of Carlyle’s witnesses could identify any other specific data points in

Saama’s bookings file that would support dropping the base case projection by $4

294

Bress Tr. 1401-05; Yang Tr. 1036-37, 1213-15; JX 1462.

295

JX 567 (September 22 bookings file email); JX 568 at 6 (September 23 agenda citing “$4.6mm of $6.6mm bridge to 2021E revenue of $70.8mm dependent on the achievement and recognition of AbbVie Smart Series revenue”); see Yang Tr. 1141; Bress Tr. 1453. 296

JX 581 at 1-3; JX 579 at 42 (draft Investment Committee memo attaching Bress’s comment: “$68mm 2021 revenue instead of $72mm, with no earnout”); see Bress Tr. 1454 (confirming he asked the team to model $68 million after the September 24 call); Yang Tr. 1144-45.

297

See Pl.’s Post-trial Opening Br. 34-35; Pl.’s Post-trial Reply Br. 24-25.

million.298 Saama’s actual projected shortfall at the time was $1.15 million, not $4

million.299 Based on these facts, Katta theorizes that Carlyle planned to challenge

the AbbVie revenue and avoid an earnout payment irrespective of Saama’s

accounting methodology.300

The contemporaneous evidence refutes this theory. When Bress suggested

modeling a $68 million base case, Saama’s third-quarter performance had come in

soft and management’s data showed Saama was tracking toward just $70.85 million

in annual revenue.301 Carlyle acted as any rational acquirer would: it modeled

downside sensitivities. As Bress credibly testified, the downside scenarios he

considered still “assumed [Saama] would get the AbbVie revenue” and were “based

on where the company was tracking in Q3.”302 The deal team debated whether to

present a $68 million or $70 million base case to the Investment Committee.303 The

final Investment Committee deck “modeled $72mm . . . to conservatively reflect the

298

See Bress Tr. 1455; Yang Tr. 1154.

299

JX 556; JX 557.

300

See Pl.’s Post-trial Opening Br. 70-72; Pl.’s Post-trial Reply Br. 54-56. 301

See Bress Tr. 1376-78, 1380-82, 1453-55; JX 568 at 6; JX 514 at 7.

302

Bress Tr. 1389-90; see also Bress Dep. 477 (testifying that “when you miss your budget in Q3 by over a million bucks, sometimes you can continue to miss it into Q4”). 303

JX 581 at 1-3.

earnout being realized” while noting that “Saama [wa]s most likely trending towards

$70mm of revenue.”304

More fundamentally, Katta’s suggestion that the $68 million model was a

proxy for a predetermined objection to the AbbVie revenue is belied by the timeline.

Carlyle’s deal team initially assumed, based on Katta’s representations, that the

contract would account for nearly $5 million in 2021 revenue. 305 During diligence,

Carlyle and PwC never analyzed the GAAP treatment of the AbbVie contract. Nor

could they; the contract was not executed until days before the Merger Agreement

was signed and no development work had started.306

iii. Expert Analyses

Carlyle’s objection was not only an appropriate, good-faith exercise of its

contract rights, but also substantively accurate. To recognize $4.55 million of

revenue, the software delivered to AbbVie had to constitute a distinct performance

obligation under ASC 606.307 ASC 606 outlines five steps to assess revenue

recognition, including “[i]dentify[ing] the performance obligations in the

304

JX 595 at 20.

305

Id. at 10 (Carlyle Investment Committee memo showing $4.8 million in “2021E” revenue for AbbVie).

306

See PTO ¶¶ 84-87; Yang Tr. 966, 1163.

307

JX 2196 (Rebuttal Expert Report of Gordon Klein) (“Klein Rebuttal Report”) ¶ 44; Easton Tr. 1557; Wilks Tr. 427.

contract.”308 Among other requirements, the software must be both (1) “capable of

being distinct” and (2) “distinct within the context of the contract.”309 There is

conflicting evidence on whether software delivered to AbbVie in 2021 met the first

requirement, but it did not meet the second.

First, there is reason to doubt that the software could be distinct. In 2021,

AbbVie received an early version of SAM and SDQ applications that resided in a

development environment.310 AbbVie could not extract an independent commercial

benefit from the software without Saama completing the bespoke build,

customization, and implementation process, which occurred in November 2022.311

Jeff Hagins—the defendants’ software-as-a-service expert—confirmed that the

highly customized nature of the platform meant only Saama could complete the

integration.312 Katta’s expert and Saama personnel disagree.313

308

JX 22 at 6 (ASC 606-10-05-4(b)).

309

Id. at 18 (ASC 606-10-25-19); Easton Tr. 1557; Wilks Tr. 427.

310

See supra note 289 and accompanying text; see also JX 1469 (native) 5. 311

JX 1599 at 1; JX 2212 (Am. Opening Expert Report of Jeff Hagins) (“Hagins Opening Report”) § V(A); Klein Rebuttal Report ¶ 44. Although Katta suggested that AbbVie could have hired a third party to finish the integration, he did not identify any entity willing and capable of doing so.

312

JX 2199 (Rebuttal Expert Report of Jeff Hagins) ¶ 24 (“In practice, unfinished implementation code—particularly without finished documentation and training materials, as was the case here—is not something that internal IT personnel or a third-party can simply pick up and complete, and without the original engineers’ context, design intent, and ongoing participation, that code has limited standalone value.”); see also Easton Tr. 1542, 1560-62; Moneymaker Tr. 58-60, 66.

313

See Wilks Tr. 428-30; Gondhali Tr. 647-50; Anandakumar Tr. 492, 505, 555-56.

Second, even if a third party could complete the integration process, the

software was not distinct within the context of the contract because Saama

significantly modified and integrated it in 2022.314 Although Katta’s expert, Dr. T.

Jeffrey Wilks, opined that changes to the underlying source code were required for

the software to be deemed non-distinct within the context of the contract, he

admitted on cross-examination that no accounting guidance specifically references

“code.”315 In any event, Wilks acknowledged that connecting the software to

AbbVie’s Jarvis system was necessary for the software to function, and that this

integration required actual code changes throughout 2022.316

The defendants’ expert—Dr. Peter Douglas Easton, an accounting professor—

opined that approximately $1.47 to $1.49 million of 2021 revenue could be

recognized under ASC 606 for the AbbVie contract.317 His opinion tracks the

contemporaneous analyses by Grant Thornton and Deloitte. Grant Thornton, which

was engaged by Saama to review the AbbVie contract, concluded that the

314

See Easton Tr. 1556-58, 1565-66, 1578; Wilks Tr. 448-49 (admitting that if the record establishes the software was changed or customized by subsequent 2022 implementation services, “then you would conclude that the software is not distinct within the context of the contract, so it would not be a separate performance obligation”); id. at 467-70. 315

Wilks Tr. 466-67; see also Easton Tr. 1542.

316

Wilks Opening Report ¶ 62 n.103; see also Hagins Opening Report 44-45 (opining that the software was unusable without changes made in 2022).

317

Easton Tr. 1545-46. The defendants substituted Dr. Easton as their testifying expert when their original expert, Professor Gordon Klein, became unavailable for reasons unrelated to the case. See Easton Tr. 1533; Dkt. 345.

implementation services were not distinct from the software and that only $1.47

million of revenue could be recognized in 2021.318 Deloitte, which was retained to

conduct a full, general-purpose audit of Saama’s 2021 financials, concurred with this

accounting treatment.319 Deloitte concluded that under GAAP, the AbbVie revenue

had to be deferred over the implementation period and restated Saama’s 2021

financials to leave only $1.49 million recognizable for that year.320

The shared agreement among three independent accounting firms and the

defendants’ expert that the full $4.55 million was not properly recognizable in 2021

is supported by the weight of the evidence.321 Katta’s contrary position, by contrast,

relies on the special-purpose KPMG India Audit, the flawed Contetra Memo, and an

expert who declined to affirmatively opine at trial that Saama had properly

318

JX 1723 at 82; PTO ¶ 133. Katta attempts to argue bad faith based on Rogers’ refusal to incorporate certain comments from Saama’s newly hired CTO, Moneymaker, before sending responses to Grant Thornton in November 2022. See Pl.’s Post-trial Opening Br. 65; JX 1630. This argument is unavailing. Rogers had served as Saama’s CFO since January 2022; Moneymaker joined the company just weeks before the relevant events in October. See PTO ¶ 36; Moneymaker Tr. 6, 14. Rogers’ decision to rely on the historical accounting narrative rather than Moneymaker’s initial comments is not troubling. That is particularly true because Moneymaker confirmed she retracted her comments after realizing Grant Thornton was evaluating software delivered to AbbVie in 2021 rather than the software Saama would deliver in the future. See Moneymaker Tr. 80. 319

JX 1964 at 68; PTO ¶ 134; Rogers Tr. 889-92.

320

JX 1964 at 68; PTO ¶ 135; Rogers Tr. 892-93.

321

See Easton Tr. 1536-37, 1545-46; JX 992 at 1; PTO ¶ 135; Rogers Tr. 893; JX 1964 at 68; see also supra notes 197, 204-205 and accompanying text.

recognized the AbbVie revenue.322 Against these facts, Katta cannot credibly claim

that Carlyle acted in bad faith by objecting to Saama’s revenue recognition for the

AbbVie contract.

d. Carlyle’s Objections to ARR Bookings

Katta’s assertion that Carlyle objected to the ARR Bookings in bad faith is

similarly inconsistent with the record.323 Under the Merger Agreement’s definition

of eligible ARR Bookings, contracts were required to “reflect typical margins for

software subscription revenues consistent with past practice” and could not offer free

implementation services or enhancements as inducements to secure software

subscriptions.324 Carlyle conducted a contract-by-contract review and objected to

agreements that appeared to violate these prerequisites, for total allowable ARR

322

See supra notes 179, 201; Wilks Tr. 470-71 (Q: “Having been on this case for months as an accounting expert, you cannot tell the Court that $4.55 million of AbbVie revenue recognized in the earnout statement was appropriate under GAAP; correct?” A. “I can say that it is one of two alternatives, yes.” Q. “But you cannot say that is the appropriate alternative; correct?” A. “Not based on the facts I have, no.”); see also Wilks Dep. 153 (testifying that “the record could tell both stories”). I note this fact not to criticize Wilks but to highlight his honest recognition of the conflicting facts in the record. 323

Katta argues that Carlyle’s bad faith is also shown by Bress’s decision to anchor the earnout proposal to a $27 million ARR forecast, despite Saama later revising that forecast down to $20 million. See Pl.’s Post-trial Opening Br. 24-25; Pl.’s Post-trial Reply Br. 16-17; see also JX 374; Bress Tr. 1437-38. As discussed, this theory is distinct from whether Carlyle acted in good faith when objecting to the Earnout Statement. See supra Section II.A.1.a. In any event, there is no evidence of bad faith. Bress was negotiating with a seller who initially demanded a valuation based on inflated projections. Carlyle was entitled, in its economic self-interest, to use the seller’s own initial forecast to justify a contingent earnout structure. Katta chose to accept those terms.

324

Merger Agreement Annex A (defining “ARR Bookings,” prong (x)).

Bookings of $2,742,388—well below the $11 million threshold for the maximum

earnout payment.325

On September 7, 2022, Saama issued a response to the objection that conceded

many of Carlyle’s challenges, reducing Saama’s claimed ARR Bookings from over

$32 million to approximately $13 million.326 Although Katta testified that he was

unaware of this response, his own contemporaneous correspondence reflects his

personal involvement.327 Katta’s litigation position that “all of Carlyle’s ARR

Bookings [o]bjections were not in good faith” is at odds with these facts.

As for the remaining contracts Saama did not previously concede, Katta failed

to prove that any of Carlyle’s objections were made in bad faith. For example,

Carlyle objected that the PHP-Pfizer contract revenues were not “reasonably

anticipated” in February 2022 and that no guaranteed work would commence by

June 30.328 Katta insists that these revenues were “confidently anticipated.”329 But

325

JX 1013 (native) (“ARR Bookings” tab).

326

Compare JX 1401 (native) (“ARR Bookings” tab), with JX 937 (native) 2 (“Earnout Statement” tab).

327

Katta Tr. 227; JX 1474 at 2; see also Rogers Tr. 870 (testifying that Katta was actively involved in preparing the response to Carlyle’s earnout objection).

328

See JX 1013 (native) (“ARR Bookings” tab, cell J15).

329

Pl.’s Post-trial Opening Br. 73.

Carlyle’s objection was sound. PHP’s ability to pay Saama depended on completing

an unclosed deal with Pfizer and securing uncommitted syndicate funding.330

Carlyle’s objections to the Novotech and Regeneron contracts due to

abnormal gross profit margins were also rooted in a good faith application of the

Merger Agreement.331 Saama’s historical margins were in the 70% to 90% range,

with its average subscription margin at 71.4%.332 Based on these figures, Carlyle

expected true subscription contracts to yield 70% to 90% gross margins

(benchmarked at ~80%) because the subscriptions carry low delivery costs

compared to labor-intensive customer services.333 The Novotech contract, however,

had a margin of negative 55.1% (meaning Saama was paying out of pocket), and two

330

See Meanwell Tr. 398-400, 407; Yang Tr. 1028-31; Merger Agreement Annex A (defining “ARR Bookings,” prong (w)). The contract was also canceled in August 2022, automatically reducing its ARR to $0 under the Merger Agreement and vindicating Carlyle’s refusal to credit it. See Merger Agreement Annex A (defining “ARR Bookings,” prong (z)(iii)); see Yang Tr. 1040.

331

Pl.’s Post-trial Opening Br. 73.

332

See Hagins Opening Report ¶ 70; Dudney Opening Report ¶ 23; see also Bress Tr. 1353-54; Yang Tr. 1051-53; JX 270 at 5 (“Saama expects to achieve 56% gross margin in 2021B (vs. 47% in 2020A), driven by its higher-margin life sciences [software-as-aservice] subscription business at ~80% gross margin.”).

333

See Bress Tr. 1343-44, 1353-54; Yang Tr. 960, 977.

Regeneron contracts had depressed margins of 29.4% and 53.9%.334 These low

margins deviated significantly from the historical ranges and were atypical.335

Carlyle’s objections to the Pfizer and PPD contracts were also made in good

faith. Carlyle objected because the contracts were unexecuted as of December 31,

2021.336 Katta asserts that execution is immaterial because statements of work had

been signed during the earnout period.337 But the statements of work were

contingent on other unexecuted documents and not binding.338

The same is true for the IQVIA contract. Carlyle objected that the contract’s

software subscription revenues were not “clearly labeled.”339 That was true. The

contract bundled service and implementation fees, contrary to the Merger

334

See Hagins Opening Report ¶ 88; Dudney Opening Report ¶ 24; Yang Tr. 1026-28 (“Novotech was well over 90 percent discounted with the full offering of products and just at a volume that we just didn’t understand how there could be any money made on the contract.”). Katta concedes that margins were lower than typical for Novotech and Regeneron. Pl.’s Post-trial Opening Br. 57-58.

335

See Burr Tr. 1507-16, 1520-21.

336

JX 1013 (native) (“ARR Bookings” tab, cells J11, J16).

337

Pl.’s Post-trial Opening Br. 74.

338

JX 875 at 1-2 (“Usually, we don’t send the signed [Pfizer] SOW until PO processing completion but I am sending you the signed copy, so you can fulfill your year end commitment.”); JX 881 at 21 (“Pfizer’s approval of the SOW is through an Approved Purchase Order issued to Provider. Provider shall not begin work before receiving an executed Pfizer Purchase Order.”); JX 940 (PPD SOW) 271 (“Each party’s acceptance of this Agreement was and is expressly conditional upon the other’s acceptance of the terms . . . and the subsequent master services agreement, to the exclusion of all terms.”). 339

JX 1013 (native) (“ARR Bookings” tab, cell J7).

Agreement’s directive.340 In any case, the IQVIA contract was also eventually

canceled, setting ARR Bookings at $0.341

* * *

Carlyle objected in good faith to the Earnout Statement’s recognition of $4.55

million in revenue from the AbbVie contract in 2021. The Earnout Statement

reported 2021 GAAP revenue of approximately $73.1 million, which exceeded the

$72 million earnout threshold by $1.1 million.342 Because revenue from the AbbVie

contract was overstated by approximately $3.06 million, Saama’s true 2021 GAAP

revenue could not have exceeded $70.08 million—and was restated by Deloitte to

just $67.4 million.343 Saama therefore fell well short of the $72 million threshold

required to trigger any earnout payment.

Katta’s failure to prove that Carlyle’s objections to ARR Bookings were made

in bad faith provides an independent basis to reject his claim for the maximum

earnout payment. To earn the maximum payment, Saama was required to secure at

340

JX 2737 (IQVIA contract) 17 (defining annual subscription fee as including “software installation, mapping, support, and upgrades”); see Hagins Opening Report ¶ 132. 341

JX 1374 at 1; Sharma Tr. 1254; JX 1412 at 1; Merger Agreement Annex A (definition of “ARR Bookings,” prong (z)(iii)).

342

JX 937 (native); JX 940; PTO ¶ 121.

343

PTO ¶ 121; JX 937. $4,550,000 (claimed) – $1,493,087 (restated) = $3,056,913 overstatement. See PTO ¶ 135 (stipulating that Deloitte restated Saama’s 2021 financial statements, determining that Saama earned $1,493,087 in 2021 revenue from AbbVie); JX 1964 at 68. If Grant Thornton’s allowable revenue figure of $1,472,983 is adopted, the overstatement increases to approximately $3.08 million. See PTO ¶ 133; JX 1660 at 30.

least $11 million in new, eligible ARR Bookings during the earnout period.344 With

Saama’s September 2022 concessions, claimed ARR Bookings dropped to $12.9

million.345 Since Carlyle advanced legitimate objections to additional contracts—

and contracts were canceled—the eligible ARR Bookings were even lower, falling

between $0 and $5.4 million.346

Accordingly, Katta did not prove that Carlyle breached the Merger

Agreement. Katta is not entitled to a declaratory judgment that any earnout payment

is owed. Judgment on this claim is in favor of the defendants.347

2. Whether Sharma or Rogers Breached Their Fiduciary Duties

Katta claims that Sharma and Rogers breached their fiduciary duties by

prioritizing Carlyle’s exit strategy over Saama’s best interests.348 “A claim

344

Merger Agreement § 2.10(a).

345

See supra note 326 and accompanying text.

346

See JX 1013 (native) (“ARR Bookings” tab); see also PTO ¶¶ 96-100, 121; Yang Tr. 1028-31, 1041-42, 1050-51; Defs.’ Post-trial Opening Br. 42-43, 93-96. 347

Katta argues in the alternative that Carlyle was obligated to pay “non-disputed items” upon delivery of the KPMG India Audit. Pl.’s Post-trial Reply Br. 53. This argument is also meritless. The Merger Agreement only compels payment of “any amount in the Earnout Statement that is not disputed by Purchaser in good faith.” Merger Agreement § 2.10(b) (emphasis added). Because Carlyle maintained a good faith objection that Saama missed the threshold revenue target—meaning zero earnout payment was due—there was no undisputed amount to pay.

348

Pl.’s Post-trial Opening Br. 75-78.

for breach of fiduciary duty requires proof of two elements: (1) that a fiduciary duty

existed and (2) that the defendant breached that duty.”349

The first element is not in dispute. Sharma was Saama’s CEO from June 2022

to February 2024.350 Rogers was Saama’s CFO from January 2022 to September

2025.351 As officers, both owed default fiduciary duties to Saama under its LLC

Agreement.352 Officers are “expected to pursue the best interests of the company in

good faith (i.e., to fulfill their duty of loyalty) and to use the amount of care that a

reasonably prudent person would use in similar circumstances (i.e., to fulfill their

duty of care).”353

Katta’s fiduciary duty claim is a moving target. His complaint alleged that

Sharma and Rogers interfered with Saama’s 2021 audit and affirmatively canceled

customer contracts.354 He abandoned those contentions at trial, pivoting to a theory

349

Beard Rsch., Inc. v. Kates, 8 A.3d 573, 601 (Del. Ch. 2010), aff’d sub nom. ASDI, Inc. v. Beard Rsch., Inc., 11 A.3d 749 (Del. 2010).

350

PTO ¶ 35.

351

Id. ¶ 36.

352

JX 767 § 8; id. at Annex I. Saama’s LLC Agreement provides that if “the title of any officer is one commonly used for officers of a business corporation formed under the Delaware General Corporation Law, the assignment of such title shall constitute the delegation to such person of the authorities and duties that are normally associated with that office.” Id. § 8. It also exculpates officers for actions taken in good faith, preserving liability only for “fraud, gross negligence, or willful misconduct.” Id. § 16. 353

Hampshire Gp., Ltd. v. Kuttner, 2010 WL 2739995, at *11 (Del. Ch. July 12, 2010). 354

Compl. ¶¶ 271-72.

that the officers breached their duty of loyalty by depriving Saama of resources and

focusing on M&A.355

I need not decide whether this unpleaded theory is procedurally barred under

Court of Chancery Rule 15(b). Even assuming the claim is properly before me, it

fails on the merits. The challenged conduct involves ordinary course business

decisions, and Katta failed to rebut the business judgment rule.

a. Standard of Review

The business judgment rule is Delaware’s default standard of review.356 It

“creates a presumption ‘that in making a business decision the [fiduciaries] of a

corporation acted on an informed basis, in good faith and in the honest belief that

the action taken was in the best interests of the corporation.’”357 “To avoid

application of the deferential business judgment standard, the plaintiff must produce

evidence that rebuts the business judgment presumption.”358 But “[i]f the proponent

fails to meet her burden of establishing facts rebutting the presumption, the business

355

Pl.’s Pre-trial Br. 60-61; Pl.’s Post-trial Opening Br. 58-63; see Sorrento Therapeutics, Inc. v. Mack, 2023 WL 5670689, at *23 n.210 (Del. Ch. Sept. 1, 2023). The argument section of his post-trial brief lacks the word “audit.” At post-trial argument, Katta’s counsel confirmed that the breach of fiduciary duty claim centers on how Rogers and Sharma ran the business. Post-trial Hr’g Tr. 27-28.

356

See Cinerama, Inc. v. Technicolor, Inc., 663 A.2d 1156, 1162 (Del. 1995). 357

Polk v. Good, 507 A.2d 531, 536 (Del. 1986) (quoting Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984)).

358

eBay Domestic Holdings, Inc. v. Newmark, 16 A.3d 1, 36 (Del. Ch. 2010).

judgment rule, as a substantive rule of law, will attach to protect the [fiduciaries] and

the decisions they make.”359

b. Alleged Breaches of Fiduciary Duty

Katta asserts that “Sharma and Rogers breached their duty of loyalty to

Saama.”360 He does not accuse Sharma or Rogers of self-dealing. Rather, he

contends that they were handpicked by Bress, reported to a Carlyle-controlled

Board, and could not “act independently” of Carlyle.361 When “the defendant

officers are not accused of self-dealing but of facilitating wrongful action by another

(here, [Carlyle]), the court must examine the officers’ state of mind to determine

whether they acted in bad faith for a purpose other than advancing the best interests

of the corporation.”362 To do so, the court “consider[s] all the objective facts,

including the relationships that subordinates have with their superiors” and “make

the difficult, but necessary, judgment of whether the subordinates acted loyally by

trying to do their job for proper corporate purposes in good faith.”363

Katta failed to prove that Sharma or Rogers acted with a disloyal state of mind.

359

Citron v. Fairchild Camera & Instrument Corp., 569 A.2d 53, 64 (Del. 1989). 360

Pl.’s Post-trial Opening Br. 75.

361

Id. at 78; Pl.’s Post-trial Reply Br. 60-61.

362

Hampshire, 2010 WL 2739995, at *12.

363

Id.

First, Katta offered no proof that Sharma or Rogers were conflicted.364 He

merely makes the conclusory argument that officers who report to a controlled board

generally lack independence from the controlling investor.365 The only purported

benefits he cites are 10-year option exercise extensions, but those extensions were

received after the challenged events and upon Sharma and Rogers’ departures from

Saama as part of their separation arrangements.366

364

At post-trial argument, Katta’s counsel asserted that Rogers’s actions during the abandoned audit dispute—specifically, sending emails to the Saama Board and KPMG India drafted by Yang—demonstrated a conflict. See Post-trial Hr’g Tr. 27-28. This argument conflates conduct with conflicts. The fact that an officer worked closely with or at the direction of a controlling member does not, without more, establish a disabling conflict of interest that strips the officer of the business judgment rule’s presumption. 365

See Pl.’s Post-trial Reply Br. 59-60 (citing pleading-stage decisions: Goldstein v. Denner, 2022 WL 1671006, at *51 (Del. Ch. May 26, 2022); Ezcorp Inc. Consulting Agreement Deriv. Litig., 2016 WL 301245, at *35 (Del. Ch. Jan. 25, 2016); Frederick Hsu Living Tr. v. ODN Hldg. Corp., 2017 WL 1437308, at *39 (Del. Ch. Apr. 14, 2017)); but see Hampshire, 2010 WL 2739995, at *12 (explaining that if “every subordinate would have to prove his loyalty when accused of disloyalty if the underlying matter also implicated the . . . interests” of a superior that they “owed their primary source of living” to, then that would be “outrageously unfair”). He also argues that “Sharma and Rogers’ positions as senior officers reporting to a Board controlled by Carlyle raise a presumption of partiality that was confirmed at trial.” Pl.’s Post-trial Reply Br. 60. There is no such presumption; rather, the business judgment rule applies. Further, these arguments were raised for the first time in Katta’s post-trial reply brief and are therefore waived. See In re IBP, Inc. S’holders Litig., 789 A.2d 14, 62 (Del. Ch. 2001) (noting that an argument not raised in an opening post-trial brief is deemed waived). Katta’s opening brief devoted just two and a half pages to arguing that Sharma and Rogers breached their fiduciary duties. Pl.’s Post-trial Opening Br. 75-78.

366

JX 1963 at 4; JX 2075; see Rogers Tr. 904-05.

Second, Katta’s claim amounts to a disagreement with ordinary business

decisions. He complains that Sharma and Rogers reduced employee headcount,367

did not ask “Carlyle to invest additional funds,”368 and considered a merger that was

never consummated.369 Decisions about staffing, capital allocation, and exploring

strategic alternatives are quintessential business judgments.370 Katta presented no

evidence that any such decisions were “so far beyond the bounds of reasonable

judgment” that they seem “essentially inexplicable on any ground other than bad

faith.”371 Sharma and Rogers also credibly testified that their actions were taken in

good faith with Saama’s best interests in mind.372 There are no grounds to rebut the

business judgment rule.

Thus, Katta did not prove that Sharma or Rogers breached their fiduciary

duties. Judgment on this claim is in favor of the defendants.

367

Pl.’s Post-trial Opening Br. 76-77.

368

Id. at 77.

369

Id. at 62, 77.

370

See Cent. Laborers’ Pension Fund v. Karp, 349 A.3d 1165, 1193 (Del. Ch. 2025) (explaining that “capital allocation decisions generally fall within a board’s business judgment”); see also In re Dura Medic Hldgs., Inc. Consol. Litig., 331 A.3d 796, 823 (Del. Ch. 2025) (finding no breach of fiduciary duty for headcount reductions). 371

Parnes v. Bally Ent. Corp., 722 A.2d 1243, 1246 (Del. 1999) (quoting In re J.P. Stevens & Co., Inc., 542 A.2d 770, 780-81 (Del. Ch. 1988)).

372

See Sharma Tr. 1247-48, 1274 (testifying that his focus was improving Saama’s financial and operational struggles, and that Carlyle had no role in Saama’s day-to-day business); Rogers Tr. 851, 901, 944 (testifying that he put his “heart and soul” into Saama, worked with Saama’s executive team to make resource-allocation decisions, and tried to stay neutral in the earnout dispute).

B. The Defendants’ Counterclaims

The defendants advanced three counterclaims against Katta at trial. 373 Two

counterclaims are rooted in the Merger Agreement: an express obligation in Section

2.10(d), and the implied covenant of good faith and fair dealing with respect to

Katta’s submission of the Earnout Statement. The third counterclaim seeks a

declaratory judgment that no earnout is due.

Saama and Warrior Parent originally brought an additional counterclaim for

breach of fiduciary duty against Katta and Anisingaraju. In November 2025, I

dismissed that counterclaim based on Katta’s argument that it was duplicative of the

claim for breach of his obligations in the Merger Agreement.374 Now, Katta insists

that he owes no such contractual obligation. To remedy this strategic shift, I revive

the fiduciary duty counterclaim against him.

As the defendants proved, Katta acted in bad faith by purposefully taking on

unsustainable commitments to maximize the earnout payment to Saama’s financial

and operational detriment. They also proved money damages of approximately $7.3

million. The defendants are entitled to a declaration that no earnout is due, which

moots their implied covenant counterclaim.

373

PTO ¶¶ 21, 142(a)-(c).

374

See MTD Hr’g Tr. 36-37.

1. Breach of Contract; Breach of Fiduciary Duty

Section 2.10(d) of the Merger Agreement provides that:

From the Closing until December 31, 2021, the Final Surviving

Company shall cause its business and that of its Subsidiaries to

be conducted in good faith with respect to the achievement of the

Aggregate Earnout Amount and shall not intentionally take any

action for the purpose of avoiding the payment of, or reducing,

the Aggregate Earnout Amount.375

The “Final Surviving Company” refers to Saama in its post-acquisition form as a

limited liability company.376 Section 2.10(d) is a post-closing operating covenant

restricting how Saama is permitted to run its business through December 31, 2021.377

Katta argues—in his post-trial reply brief, for the first time—that Section

2.10(d) binds only the Final Surviving Company, insulating him from liability.378

Whatever textual merit this argument might possess, it reflects litigation

gamesmanship. Earlier in this litigation, Katta advanced the opposite interpretation

375

Merger Agreement § 2.10(d) (emphasis added).

376

Id. at 1 (defining the “Company” as Saama Technologies, Inc.); id. § 1.1(a)(ii) (noting that “the Company will be the surviving corporation in the First Merger (sometimes hereinafter referred to as the ‘Initial Surviving Company’) and the separate corporate existence of the Company with all of its rights, privileges, immunities, powers and franchises will continue unaffected”); id. § 1.1(b)(ii) (noting that “the Initial Surviving Company will be the surviving corporation in the Second Merger (sometimes hereinafter referred to as the ‘Final Surviving Company’) and the separate existence of the Final Surviving Company with all of its rights, privileges, immunities, powers and franchises will continue unaffected by the Second Merger”); see supra note 253.

377

Merger Agreement § 2.10(d).

378

Pl.’s Post-trial Reply Br. 67-68.

of Section 2.10(d) to secure dismissal of the fiduciary duty counterclaim against

him.379

Katta argued that the fiduciary duty claim was “preempted by the Merger

Agreement itself” because Section 2.10(d) imposed an obligation to conduct

Saama’s business in good faith regarding the achievement of the earnout.380 Because

“every ‘notable’ example of alleged misconduct occurred during the period when

Defendants claim Katta was under a ‘good faith’ obligation under Section 2.10(d),”

he explained, “the fiduciary duty claims against him” warranted dismissal “as

duplicative.”381 I relied on that argument to dismiss the fiduciary duty

counterclaim.382 When the defendants moved for reconsideration, Katta doubled

379

See MTD Hr’g Tr. 36-37.

380

See Countercl. Def.’s and Third-Party Def.’s Opening Br. in Supp. of Mot. to Dismiss Verified Am. Countercl. and Mot. to Dismiss Third-Party Compl. (Dkt. 168) (“Countercl. Def.’s Opening MTD Br.”) 38-39 (“[A]ny fiduciary claims arising out of the same facts that underlie the contract obligations would be foreclosed as superfluous.” (quoting Nemec, 991 A.2d at 1129)). Warrior Holdings alleged in its breach of contract counterclaim that Katta had breached the obligation in Section 2.10(d). See Verified Am. Countercl. and Third-Party Compl. (Dkt. 151) ¶¶ 141-43.

381

Countercl. Def.’s Opening MTD Br. 40 (emphasis added); see also Countercl. Def.’s and Third-Party Def.’s Reply Br. in Further Supp. of Partial Mot. to Dismiss Verified Am. Countercl. and Mot. to Dismiss Third-Party Compl. (Dkt. 197) 31-32 (arguing for dismissal of the fiduciary duty claim as duplicative: “The breach of contract claim concerns Katta’s alleged wrongdoing with respect to entering into customer contracts and preparing the Earnout Statement. Counterclaim ¶¶ 138-45. As explained above, the only allegations which could support a claim for breach of fiduciary duty (setting aside their timeliness) concern the same alleged misconduct. See [i]d. ¶¶ 134-35. Thus, Defendants offer no meaningful distinction between the claims.”).

382

See MTD Hr’g Tr. 36-37.

down, arguing that “Section 2.10(d) imposes a good faith requirement on the former

stockholders’ conduct” and that the “same conduct, period, and obligations underlie

the duplicative claims.”383 I accepted that argument and denied reargument.384

Katta used Section 2.10(d) as a shield to secure dismissal of the fiduciary duty

claim only to disavow it post-trial to evade liability. So the defendants contend that

Katta should be judicially estopped from asserting an inconsistent position.385 There

is some appeal to this argument. Judicial estoppel “preclude[s] a party from

asserting a position inconsistent with a position previously taken in the same or

earlier legal proceeding” and applies when “the litigant’s [position] contradicts

another position that the litigant previously took and that the Court was successfully

induced to adopt in a judicial ruling.”386 Katta’s positions are inconsistent, and my

earlier rulings accepted his position that Section 2.10(d) supplied the obligation

governing his challenged conduct.387

383

Pl.’s Opp’n to Saama’s and Warrior Parent’s Mot. for Rearg. (Dkt. 300) ¶¶ 20, 29 (arguing there was no “daylight” between the contract and fiduciary duty claims against Katta) (emphasis added); see also id. ¶¶ 2, 16. Katta also testified at trial that he had a good faith obligation. Katta Tr. 265.

384

Order Denying Saama Technologies, LLC’s and Warrior Parent, LLC’s Mot. for Rearg. (Dkt. 316).

385

Defs.’ Post-trial Reply Br. 37-38.

386

Stone & Paper Invs., LLC v. Blanch, 2021 WL 3240373, at *35 (Del. Ch. July 30, 2021) (emphasis removed).

387

See id. at *36 (estopping a plaintiff from changing positions where it argued a claim “should be dismissed because the alleged wrongdoing was governed by Section 9.6 of the

Alternatively, the defendants ask that I revisit my interlocutory dismissal of

the breach of fiduciary duty counterclaim.388 Under Court of Chancery Rule 54(b):

any order or other decision, however designated, that adjudicates

fewer than all the claims or the rights and liabilities of fewer than

all the parties does not end the action as to any of the claims or

parties and may be revised at any time before the entry of a

judgment adjudicating all the claims and all the parties’ rights

and liabilities.389

The court’s power to vacate or revise an interlocutory ruling is “to be exercised as a

matter of discretion when justice so requires.”390 Though “orders should not be

modified without good cause, the Court is ‘under no stricture to comply with the

requirements of Rule 60(b)’ in modifying an interlocutory order.”391 “Good cause”

to do so exists where, as here, a litigant abandons a position that the court relied

upon in its interlocutory order.392

operating agreement” and prevailed, before changing course post-trial and arguing “that the very same allegations are not governed by Section 9.6”).

388

Defs.’ Post-trial Reply Br. 37.

389

Ct. Ch. R. 54(b).

390

Modlin v. Iselin, 1986 WL 202, at *1 (Del. Ch. June 5, 1986); see also CNH Indus. Am. LLC v. Am. Cas. Co. of Reading, 149 A.3d 242, 244 (Del. Super. 2016).

391

Southpaw Credit Opportunity Master Fund, L.P. v. Roma Rest. Hldgs., Inc., 2017 WL 3701232, at *1 (Del. Ch. Aug. 22, 2017) (quoting Farr Man & Co. v. M/V Rozita, 903 F.2d 871, 875 (1st Cir. 1990)).

392

Id.; see also Shron v. LendingClub Corp., 2020 WL 10223227 (S.D.N.Y. Nov. 30, 2020) (ORDER) (vacating an interlocutory order under Federal Rule of Civil Procedure 54(b) where doing so served the interests of justice).

Katta’s tactical pivot provides good cause to revisit my dismissal of the

fiduciary duty claim against him. My earlier ruling dismissed the claim against Katta

because Section 2.10(d) purportedly supplied the same good-faith obligation

governing his conduct.393 The Merger Agreement, Katta now asserts, does not

impose that obligation on him.394 Consequently, the contractual and fiduciary claims

against Katta do not overlap as contemplated by my earlier ruling: the contractual

obligation applies to Saama, and Katta’s fiduciary obligations arise independently

due to his officer role.395

Unlike judicial estoppel, vacating the interlocutory dismissal of the fiduciary

duty claim under Rule 54(b) does not require me to distort contract terms. Nor does

it substantially prejudice Katta, since—as he repeatedly argued—the same conduct

and obligations underlie both claims.396 Katta received notice of the defendants’

Rule 54(b) request and had an opportunity to respond at post-trial argument. He did

393

See supra notes 380-383 and accompanying text.

394

See supra notes 375-376 and accompanying text.

395

See Grunstein v. Silva, 2009 WL 4698541, at *6 (Del. Ch. Dec. 8, 2009) (“In determining whether a breach of fiduciary duty claim is duplicative of a corresponding breach of contract claim, the principal inquiry by Delaware courts is whether the fiduciary duty in the complaint arises from general fiduciary principles or from specific contractual obligations agreed upon by the parties.”); Schuss v. Penfield P’rs, L.P., 2008 WL 2433842, at *10 (Del. Ch. June 13, 2008) (explaining that a fiduciary duty claim can survive alongside a contract claim where the alleged harms arose from a fiduciary relationship outside of any contractual obligation).

396

See supra notes 380-381, 383 and accompanying text.

not request leave to file a sur-reply. Despite that opportunity, he did not identify a

single piece of evidence or a distinct defense that he would have presented had the

fiduciary duty claim been active before trial. The factual and legal questions relevant

to the bad-faith theory that I address below were fully litigated: Katta’s knowledge,

purpose, motivation, and whether he knowingly subordinated Saama’s interests to

the achievement of the earnout.397 It would be inequitable for Katta to evade liability

by taking contradictory litigation positions.

Accordingly, I vacate the interlocutory dismissal of the breach of fiduciary

duty claim against Katta.398 In doing so, I limit my analysis to whether Katta

397

See Leddy v. Standard Drywall, Inc., 875 F.2d 383, 386 (2d Cir. 1989) (holding that the failure to provide notice and an opportunity to address revived claims was harmless error because the appellants conceded that they had no other evidence to present); see also Southpaw, 2017 WL 3701232, at *1 (Del. Ch. Aug. 22, 2017) (noting that Court of Chancery Rule 54(b) is “nearly identical” to its federal counterpart); cf. Vichi v. Koninklijke Philips Elecs., N.V., 85 A.3d 725, 764 (Del. Ch. 2014) (permitting a post-trial amendment under Rule 15(b) to add a negligent misrepresentation claim that “effectively was tried with the tacit consent of the parties through the trial of [the] existing claims for fraud” because the defendant was on “notice of and had the opportunity to contest each of the disputed elements”).

398

The law-of-the-case doctrine does not preclude this vacatur. Under that doctrine, “[o]nce a matter has been addressed in a procedurally appropriate way by a court, it is generally held to be the law of that case and will not be disturbed by that court unless compelling reason to do so appears.” Zirn v. VLI Corp., 1994 WL 548938, at *2 (Del. Ch. Sept. 23, 1994). The court may revisit decisions under the doctrine when “justice compels departure from the doctrine due to clear error, injustice, or a change in circumstances.” Sciabacucchi v. Malone, 2021 WL 3662394, at *1 (Del. Ch. Aug. 18, 2021). Such circumstances are present. Katta procured an interlocutory partial dismissal by arguing that his conduct was exclusively governed by Section 2.10(d). His post-trial abandonment of that position constitutes a material change in circumstances. Binding the court to a ruling predicated on a position the prevailing party subsequently retracts would be unjust.

breached his duty of loyalty by acting in bad faith. The parties proceeded to trial on

the breach of contract theory, and post-trial briefing focused on whether Katta

breached the contractual standard of good faith by prioritizing his own interests over

Saama’s. The trial record presented the facts relevant to whether Katta acted in

subjective bad faith. I do not revive or adjudicate theories of fiduciary liability or

heightened equitable standards of review that were not tried after the fiduciary duty

claim was dismissed.399

a. Katta’s Duty of Good Faith

Saama became a Delaware limited liability company at closing, with Warrior

Parent serving as Saama’s sole member and direct parent.400 Under Section 16 of

Saama’s LLC Agreement, officers owe common law fiduciary duties and face

personal liability for “loss, damage, or claim incurred by reason of such [officer’s]

fraud, gross negligence, or willful misconduct.”401

399

Given this narrow approach, neither further briefing nor a reopening of the record is necessary.

400

PTO ¶¶ 26-28.

401

JX 767 §§ 8, 16; see supra note 352 and accompanying text (describing the fiduciary duties Saama officers owe under the LLC Agreement). He also owed fiduciary duties to Warrior Parent under its limited liability company agreement. JX 834 § 8.10.

Katta owed a fiduciary duty of loyalty to Saama while he was its CEO.402 A

failure to act in good faith is a breach of the duty of loyalty.403 Katta was obligated

to refrain from bad-faith conduct, including the pursuit of his self-interests rather

than “advancing the best interests of the corporation.”404

The defendants claim that Katta acted in bad faith by signing as many

contracts as possible to achieve the earnout, regardless of their economic or

commercial merits, knowing it would impair the company.405 Katta responds that

his sales and hiring efforts were aggressive, ordinary-course growth initiatives he

was entitled to pursue.406

There is a stark difference between an aggressive business strategy and a

disloyal one. A fiduciary may pursue a strategy that exposes the company to risk if

she believes, in good faith, that the potential benefits justify the risks.407 The line is

402

See Gantler v. Stephens, 965 A.2d 695, 709 (Del. 2009) (holding that “officers of Delaware corporations, like directors, owe fiduciary duties of care and loyalty, and that the fiduciary duties of officers are the same as those of directors”); Hampshire, 2010 WL 2739995, at *11.

403

See Stone v. Ritter, 911 A.2d 362, 370 (Del. 2006).

404

In re Walt Disney Co. Deriv. Litig., 906 A.2d 27, 67 (Del. 2006).

405

See Defs.’ Post-trial Opening Br. 72-73.

406

See Pl.’s Post-trial Reply Br. 9-10, 31-33, 68-69.

407

Cf. In re Citigroup Inc. S’holder Deriv. Litig., 964 A.2d 106, 130 (Del. Ch. 2009) (“It is well established that the mere fact that a company takes on business risk and suffers losses—even catastrophic losses—does not evidence misconduct . . . .”).

crossed when the fiduciary pursues the strategy while knowing it sacrifices the

corporation’s interests for another purpose.408

In the earnout context, an officer who also serves as the sellers’ representative

does not act in bad faith merely by pursuing a risk-bearing strategy to maximize the

contingent payment, provided she genuinely believes the strategy also benefits the

company. But that dual role does not grant the officer license to knowingly harm

the company to increase the sellers’ payout.409 Katta crossed that line and engaged

in willful misconduct for which he is not exculpated.

b. Katta’s Conduct During the Earnout Period

The defendants say that Katta issued “marching orders” to sign as many

contracts as possible during the earnout period to enrich himself at the expense of

Saama’s financial and operational health.410 Katta insists that his strategy was not

“value-destructive” but demonstrated “typical” pricing, and that the pace of earnout

contracts was consistent with the parties’ expectations on growing the Smart Series

408

See, e.g., Disney, 906 A.2d at 67 (“A failure to act in good faith may be shown, for instance, where the fiduciary intentionally acts with a purpose other than that of advancing the best interests of the corporation, where the fiduciary acts with the intent to violate applicable positive law, or where the fiduciary intentionally fails to act in the face of a known duty to act, demonstrating a conscious disregard for his duties.”). 409

Cf. Kahn v. Portnoy, 2008 WL 5197164, at *7 (Del. Ch. Dec. 11, 2008) (describing “classic, quintessential bad faith” as occurring when a fiduciary “acts with a subjective belief that her actions are not in the best interest of the corporation, such as when she is acting for the benefit of a related person at the expense of the company”). 410

Defs.’ Post-trial Opening Br. 71.

business.411 The record belies Katta’s narrative. The defendants proved that Katta

“pursued a bad faith course of conduct to enrich himself . . . without any regard for

the interests” of Saama.412

At the time of the merger, Saama had great promise. Pfizer’s deployment of

Saama SDQ software to process clinical trial data for the COVID-19 vaccine

generated positive attention and industry validation.413 Katta, too, had garnered

industry-wide respect.414

After closing, though, Katta became singularly focused on the earnout. His

strategy—including the “72-27 campaign,” contract manipulation, unprecedented

discounting, and overcommitment of early-stage products—culminated in an

unsustainable trajectory that impaired Saama’s product business. The

contemporaneous evidence shows that Katta knew these tactics were harmful to

Saama but pursued them anyway.

i. Katta’s “72-27” Campaign

In August 2021, after the earnout was agreed to, Anisingaraju—with Katta’s

blessing—renamed the weekly sales meeting the “72-27 Weekly Status Meeting.”415

411

Pl.’s Post-trial Reply Br. 68.

412

Auriga Cap. Corp. v. Gatz Props., LLC, 40 A.3d 839, 859 (Del. Ch. 2012). 413

PTO ¶ 52; Katta Tr. 115-17; see also Bress Tr. 1352-53.

414

Meanwell Tr. 380-81, 386-87.

415

JX 404.

This change set the tone for the earnout period.416 At trial, Katta initially testified

that “72-27” referred to Saama’s “yearly goal” and was not a code for the earnout

targets.417 That was false. Although the $72 million revenue threshold was in

Saama’s 2021 year-end revenue plan, the $27 million ARR Bookings goal was

solely derived from the earnout.418 Katta conceded this reality during crossexamination.419

Katta not only misrepresented the reason for the meeting change to the court,

but also misled the sales team, presenting “72-27” as a corporate performance

goal.420 Former sales executive Burr testified that, after the “72-27” meeting title

was adopted, sales meetings shifted from Salesforce tracking to custom Excel sheets

416

Id. (August 2021 email from Anisingaraju: “Till 12/31/21, we are changing this meeting to track our progress for 72-27 goals. ($72M Revenues & $27M Upside ARR)”). 417

Katta Tr. 270; see also id. at 257 (testifying that “72-27” referred to “complete company goals” and was a “corporate number”); id. at 287.

418

JX 2370 (native) 4; see also JX 244 at 4.

419

Katta Tr. 254, 270, 320. His insistence on this mistruth is further evidence that he knew his actions were wrongful.

420

Id. at 258 (admitting that he instructed Dadia not to disclose the Carlyle transaction to the sales team and to present 72-27 strictly as company/yearly goals); see also JX 2262; Anisingaraju Tr. 780, 781; Burr Tr. 1511, 1513. Katta insisted at trial that he withheld the true purpose of the meeting from the sales team due to confidentiality concerns. See Katta Tr. 256-58. That explanation is not credible. Katta was not forthcoming about the nature of the meeting. Given the contemporaneous communications, I find it more likely that he was also trying to mislead his subordinates.

focused exclusively on ARR.421 Katta gave explicit “marching orders” to close deals

by year end “no matter the cost” through steep discounts and free implementation.422

In October 2021, Katta approved Dadia’s directive to the sales team that

“typical margin limits d[id] not apply” and that contracts “need not be

sustainable.”423 He provided unprecedented “72-27” bonuses to incentivize sales

and threatened to replace subordinates who did not aggressively pursue the earnout

targets.424 These actions represent a purposeful subordination of Saama’s contract

margins to Katta’s short-term financial interests.

ii. Contract Manipulation

The earnout period under Katta was marked by contract manipulation.

Operating under Katta’s mandate to hit the “72-27” targets, Saama employees

altered software subscription agreements to facially meet the earnout criteria.425

421

Burr Tr. 1512-13, 1530; see JX 404; JX 937; JX 946.

422

Burr Tr. 1508-09, 1515-16, 1518, 1520; see also JX 613; JX 742.

423

JX 613 at 1.

424

Burr Tr. 1523-24; JX 991; JX 742 at 1 (Katta to Gondhali: “I’ve not seen anything from you over the past one week to move aggressively for 72-27 goals? . . . u r slowing down the company . . . Saama will be forced to change the leadership who can drive this upwards and onwards.”); JX 2387 at 5 (Gondhali writing about Katta: “he is only interested in 27 million” ARR as the fourth quarter of 2021 progressed); Gondhali Tr. 678-82. 425

See, e.g., JX 613 (Katta asking how to get “different results towards 72-27”); JX 653; JX 707; JX 794; Burr Tr. 1508, 1518, 1520-21, 1531-32; Katta Tr. 270-71, 320.

For example, sales leader Gondhali (who regularly communicated with Katta

on progress toward the earnout goals) ordered the draft AbbVie statement of work

rewritten when he concluded Saama could not “realize [revenue] for this milestone

although [Saama] can bill.”426 Saama reworded the document, without making any

substantive changes, for the sole purpose of “allow[ing] Saama to recognize revenue

in a more advantageous way.”427 After the change was complete, an employee told

Gondhali “I guess we are good for revenue recognition this year.”428 Katta was

aware of and fostered this pattern of metric tampering.429

The record is replete with similar examples. The Pfizer Sigma contract

originally contemplated a “custom software build,” which would generate services

revenue.430 Because services did not count toward ARR Bookings, Saama rewrote

the deal—with Katta’s approval—as a “license agreement rather than custom build

426

JX 461 at 1; see JX 2362 (August 2021 email from Saama employee Connor Dodds: “We can plan for the [SDQ] integration [for AbbVie] to happen in Jan 2022 but have the [statement of work] milestone/invoice date as Dec 31 for this piece.”). 427

JX 464 at 13; JX 510 at 3-4; JX 474 at 1.

428

JX 486 at 1.

429

See, e.g., JX 613; JX 742; JX 2262; JX 946; JX 902; JX 937; Burr Tr. 1515-16, 1523-24; Dadia Tr. 826-28 (testifying that any contract above a de minimis amount required formal review and approval by Saama’s deal review group (including Katta) during the earnout period); Katta Tr. 265-66, 278-79.

430

Burr Tr. 1531-32.

in order to satisfy the requirements of ARR” for the earnout.431 Katta also knew his

team front-loaded subscription fees in a four-year contract with PHP-Areteia

because only the first three years counted toward ARR Bookings.432

Katta’s subordinates—executing his earnout-at-all-costs directive—pushed to

redefine milestones and offer steep discounts to Biohaven in exchange for a

December 31 signature to “maximize for 72/27.”433 This persistent pressure to sign

caused the prospective client to abandon negotiations.434

Additionally, Katta instructed his team to artificially inflate ARR Bookings in

contracts by bundling implementation services with subscription fees.435 Bundling

implementation fees into subscription line items artificially disguised non-recurring

431

Id.; see also id. at 1525-26 (testifying that Katta was aware of pipeline deals, participated in Pfizer discussions, and approved the discounted pricing offered to Pfizer, which was conditioned on executing the agreement before December 31, 2021); Dadia Tr. 826-28. 432

JX 794 at 1; see Merger Agreement Annex A (defining “ARR Bookings”).

433

JX 707. There are other examples. See JX 740 at 1-2 (Burr to GSK: “I was hoping to have been able to complete the POC and contract with GSK for a number of pilot studies by the end of December. Do you think . . . maybe we can get a contract for somewhere around $1M?”); JX 868 at 2; Yang Tr. 1001; Katta Tr. 199-200; see also Burr Tr. 1531 (“I was now suddenly being asked to do an ARR target, which meant that we were signing one-year deals, not multi-year deals.”). Bress also expressed concern when Katta’s “bully[ing]” tactics upset client PPD. See JX 795 (“My sense is Saama won’t be successful with PPD until Suresh stops interacting with PPD folks and we get a sensible commercial approach.”).

434

JX 707.

435

Burr Tr. 1520-21.

service revenue as high-value, recurring software revenue.436 Saama also

underpriced the labor-intensive implementation services bundled into those

contracts, requiring it to absorb costs that depressed its gross margins.437

These deal manipulations lacked any independent business purpose. They

were engineered solely to fabricate earnout eligibility.

iii. Pricing Strategy

Katta overhauled Saama’s historical pricing strategy to maximize short-term

earnout metrics at the expense of the company’s software product profitability.438

He overrode the standard limits in Saama’s pricing book—the algorithmic tool used

to generate value-based discounts—in favor of extreme discounts and eliminated

margin limits.439 Doing so exposed Saama to operational risk.440 Katta knew that

436

See Bress Tr. 1343-45, 1362-63, 1366-67; Yang Tr. 977, 1022-26; Burr Tr. 1517-18, 1521-22.

437

See Rogers Tr. 842-43, 856-57; Moneymaker Tr. 21-22; Sharma Tr. 1245-46, 1250-51; Yang Tr. 977, 1053-54.

438

See Burr Tr. 1508-10, 1518, 1527-28.

439

Katta Tr. 304-05 (admitting under cross-examination that his pricing book did not provide for 50% discounts on SDQ and SAM, yet he approved deals with 50%+ discounts); see also JX 2691; JX 180; JX 613.

440

See JX 802 (internal email from Saama employees warning management regarding the steep implementation discounts offered on the PHP contracts that although they would “help us meet our 72-27 goals,” they were “unrealistic” and “set us up for failure”); JX 1316 (Anandakumar to Gondhali: “i remember u saying that the Q4 deals will drown us. and it is happening that way.”).

these tactics would strain the company’s engineering resources and that Saama

would struggle to deliver on its newly executed commitments.

First, Katta abandoned the “consumption pricing” he had personally

conceived of and implemented because it would not count toward the earnout,

instead directing his subordinates to offer extreme discounts.441 Saama’s pricing

book did not provide for 50% discounts on SDQ and SAM.442 Large discounts

maxed out at around 30%.443 But under the “72-27” strategy, the sales team overrode

the pricing book.444 As Hagins’ report details—and corroborating evidence

confirms—discounts skyrocketed, averaging 80% for implementation fees and 64%

for subscription fees.445

441

Katta Dep. 173; JX 2257 at 2; Katta Tr. 267-68, 271-72; JX 653 (“[S]ince consumption based price has no guarantee, they will not give credit for that towards upside ARR (27M goal).”); JX 615 (Dadia to Katta: “Suresh – Just wanted you to be aware that Utility based pricing could have Zero upside ARR if there is no floor in the agreement.”). Katta abandoned consumption-based pricing for client Regeneron as a result. JX 781; see supra note 104 and accompanying text.

442

Katta Tr. 304-05.

443

Gondhali Dep. 18; Burr Tr. 1509-10; Gondhali Tr. 696-97.

444

E.g., JX 2691 (October 2021 Email from Murali Krishnam to Katta: “Please find the attached order form for the PHP Sandbox . . . . I’ve also attached the pricing calculator which shows how I arrived at the number. The pricing calculator does not allow changes to implementation fee and I had to override it manually in the order form.”). 445

Hagins Opening Report ¶¶ 79-84; see also supra notes 104, 106 and accompanying text; JX 868 at 2 (email from sales to GSK: “The offer showcased in the order form reflects not only significant discounts for Smart Data Quality and Smart Auto Mapper, but also the inclusion of other software products needed for multiple datathon work streams at no additional cost . . . Saama will also absorb 100% of the implementation and setup costs.”). Hagins analyzed the contracts Katta claimed as ARR Bookings. Katta takes issue with Hagins’ analysis, arguing that his use of the contracts’ actual performance is “irrelevant”

Second, as previously noted, Katta approved a directive that “typical margin

limits do not apply” and that salespeople should focus on signing short-term

contracts that “need not be sustainable.”446 Before the earnout, Saama’s subscription

margin average was 71.4%.447 Katta’s own 2022 projected average margin was

90%.448 But by December 2022, the average subscription margin for earnout

contracts plummeted to negative 8.4%.449 As a result, Saama effectively paid its

own customers to provide services to them. AbbVie’s contract, for instance, had a

negative 218% margin in late 2022.450

because the Merger Agreement requires analysis of “the margins as priced in the contracts.” Pl.’s Post-trial Reply Br. 28. But the Merger Agreement states that the contracts must “reflect typical margins.” Merger Agreement Annex A (defining “ARR Bookings”). The costs actually incurred to perform those contracts are relevant evidence of whether their pricing reflected typical margins. The margin data used was also developed in the ordinary course by Saama’s finance team. See Yang Tr. 1049-53; JX 2125 (native) 1. Katta’s contention that Rogers “doctored” the margin data is not credible. See Pl.’s Post-trial Opening Br. 64-65. Rogers only worked on a draft spreadsheet to adjust it to include actual costs. See Yang Tr. 1047-50.

446

JX 613 at 1 (Katta responding: “This is a good list, Raj.”). Katta claims that these directives had nothing to do with the earnout. Katta Tr. 264-65. The earnout targets are repeatedly referenced in Dadia and Katta’s exchange, with Dadia explaining that the “margin and short term outcome” directives were aimed at “Revenue till December 31st till we comfortably hit 72 and then ARR is the focus.” JX 613 at 1-2.

447

Dudney Opening Report ¶¶ 23-24; Dudney Tr. 1605; see also JX 270 at 5 (“Saama expects to achieve 56% gross margin in 2021B (vs. 47% in 2020A), driven by its highermargin life sciences [software-as-a-service] subscription business at ~80% gross margin.”). 448

JX 1072 at 5; Rogers Tr. 849-50.

449

Hagins Opening Report ¶ 88.

450

JX 1577 at 48 (October 22 Board deck showing contract-level margins of -218% for AbbVie, -227.5% for Pfizer, -46.3% for IQVIA, and -38.4% for Novotech); JX 324 at

iv. Selling Nascent and Nonexistent Products

Katta also overcommitted Saama’s resources by promising customers

products that were still in early development or were nonexistent. The record

demonstrates that he knew Saama could not deliver on its promises. He made them

anyway with the intent to secure the maximum earnout payment.

When the earnout period began, Smart Series products were “still under core

feature development” and required substantial time, costs, and resources for Saama

to build and implement custom applications for each customer.451 Carlyle’s

diligence findings concluded that Saama was only equipped to sign one or two new

Smart Series customers per year from 2021 to 2026.452 Katta knew those products

were immature.453 During earnout negotiations, he expressed concern that obtaining

$12 million in additional ARR would be a stretch.454

Yet, driven by Katta’s “72-27” mandate, Saama signed its Smart Series

products at an unprecedented pace. During the earnout period, Saama sold SDQ to

seven customers, even though the version co-developed with Pfizer had to be

15-16 (noting that “AbbVie is the first big all-encompassing client (given 85% discount on SDQ and SAM)”).

451

See JX 364 at 8.

452

JX 429 at 7.

453

See Moneymaker Tr. 37-38; Rogers Tr. 884, 921; Sharma Tr. 1253; JX 1046 at 2. 454

JX 374 at 1.

“completely freshly built” to work for other customers.455 SAM did not exist as a

deployable product; AbbVie was its first customer and co-build partner, but SAM

was sold to five other customers.456 Saama also sold SPACE to two customers,

including IQVIA, even though it existed only in “slideware.”457

Saama naturally struggled to perform on these premature commitments.

AbbVie’s implementation was disastrous, proving to be a “huge burden” for

Saama.458 Gondhali wrote in contemporaneous emails that he was “scared” about

AbbVie’s deployment and low customer satisfaction.459

Other customers followed suit, expressing their dissatisfaction. Some

customer relationships, including Saama’s relationship with IQVIA, were badly

damaged.460 Other customers, including Novotech, were lost.461 These failures

455

See Moneymaker Tr. 37-38; Rogers Tr. 884, 921; Scaldaferri Dep. 350-51, 267-68; JX 1046 at 2.

456

See JX 595 at 36; JX 2362 (noting that as of August 2021, AbbVie still had questions on three big aspects of its offered products, including “How SDQ 2.0 (Edit Check Engine) will integrate with SAM to form the holistic solution” and noting that “it has been 2 weeks since kickoff and [Saama] ha[s] not yet provided a clear roadmap of what to expect/what activities [it] will take” to AbbVie).

457

Moneymaker Tr. 41 (noting that SPACE did not exist even as of October 2022); JX 232 at 10.

458

Rogers Tr. 854-55.

459

JX 1270 at 1; Sharma Dep. 240; see JX 1883 at 9 (stating that delivering on AbbVie commitments is “a huge burden” for Saama).

460

See supra notes 165-166 and accompanying text.

461

See supra note 168 and accompanying text; see also infra note 469.

stemmed from Katta’s disloyal decision to prioritize the earnout over Saama’s ability

to execute on contracts it was pushed to sign before the end of 2021.

* * *

Katta caused Saama to abandon its historical practices in favor of the “72-27”

campaign. He led from the top, pressuring his subordinates to execute software

subscription contracts at any cost. As he warned Saama employees, there was “no

scope for any silent passengers.”462

The artificial pace of these sales is underscored by Saama’s ARR history. By

September 2021, Saama had achieved just $12.7 million in ARR, and weeks earlier

Katta acknowledged that hitting $27 million in 2021 would be a stretch.463 By yearend 2021, Katta claimed to have generated $38 million in ARR in only four-and-ahalf months.464

Katta knew Saama could not meet the obligations he was contractually

committing it to.465 He pressed ahead despite warnings from employees about major

resource constraints.466 He also knew the push to sign contracts that facially met the

462

JX 404 (native) 6.

463

JX 606 at 25; JX 374 at 1.

464

JX 936 (native) 2 (“ARR Bookings” tab).

465

Burr Tr. 1524-25.

466

See JX 726 at 1 (“[W]e are out of people and out of time and need to prioritise vs. doing more[.]”); JX 722 at 1-2.

ARR Bookings criteria would lead to costly, unmanageable obligations for the

software subscription business. And it did. Saama’s subscription margins

plummeted.467

A fiduciary cannot knowingly sacrifice the corporation’s interests for personal

gain. Saama proved that Katta did just that. He consciously disregarded Saama’s

operational limits by overriding pricing guardrails, bundling and offering free

services, and selling nonexistent products to concoct earnout eligibility. He

prioritized his financial interests over the entity he was duty-bound to protect. This

was not a flawed business strategy; it was bad faith.

As Katta’s mandates were executed, Saama was forced to absorb laborintensive implementation costs.468 This effort drained engineering resources, drove

the average subscription margin on the earnout contracts to a negative 8.4% by late

2022, and sparked customer cancellations.469 I proceed to consider the proper

remedy for these harms.

467

See supra Section I.J.

468

See Rogers Tr. 844, 856-57; Moneymaker Tr. 21-22, 41; Sharma Tr. 1240, 1245-46; see also Yang Tr. 977; Burr Tr. 1521.

469

See Hagins Opening Report ¶ 88 (calculating the -8.4% average subscription margin for the earnout contracts); JX 1577 at 48 (documenting AbbVie’s -218.1% margin and Novotech’s -38.4% margin); Sharma Tr. 1254, 1261-63 (testifying to the Novotech and Merck cancellations).

c. Remedy

The Court of Chancery has “significant discretion . . . in fashioning an

appropriate remedy” for a breach of the duty of loyalty.470 “In determining damages,

the Court’s ‘powers are complete to fashion any form of equitable and monetary

relief as may be appropriate.’”471 The court may consider whether the breaching

party has engaged in “fraud, misrepresentation, self-dealing, deliberate waste of

corporate assets, or gross and palpable overreaching.”472 “Delaware law dictates that

the scope of recovery for a breach of the duty of loyalty is not to be determined

narrowly.”473

i. The Parties’ Experts

The defendants seek compensatory damages for Katta’s bad faith.474 In

support, they offer the expert opinion of Louis G. Dudney, who used a “but-for”

470

Bomarko, Inc. v. Int’l Telecharge, Inc., 794 A.2d 1161, 1184 (Del. Ch. 1999); see also Gesoff v. IIC Indus., Inc., 902 A.2d 1130, 1154 (Del. Ch. 2006) (“[T]he Court of Chancery has greater discretion when fashioning an award of damages in an action for a breach of the duty of loyalty.” (citation omitted)).

471

Bomarko, 794 A.2d at 1184 (quoting Weinberger v. UOP, Inc., 457 A.2d 701, 714 (Del. 1983)).

472

Weinberger, 457 A.2d at 714.

473

Thorpe v. CERBCO, Inc., 676 A.2d 436, 445 (Del. 1996).

474

Although the parties briefed damages under a breach of contract theory, the briefing and proffered expert analyses hold equivalent probative value for fiduciary duty damages. The parties presented arguments and evidence on contractual expectation damages— specifically, lost profit damages. See Defs.’ Post-trial Opening Br. 70-78; Defs.’ Post-trial Reply Br. 39-41; Pl.’s Post-trial Reply Br. 69; Dudney Opening Report ¶¶ 18, 37-43 & figs. 7-10; JX 2194 (“Manning Rebuttal Report”) ¶¶ 8, 36-56. In fact, Dudney’s report

analysis to compare Saama’s actual gross margins with the margins it would have

achieved absent Katta’s misconduct.475 Dudney calculated three scenarios over three

periods, quantifying the resulting harm at a maximum of $83.3 million.476

In rebuttal, Katta offers the opinion of Dr. Richard Manning.477 Manning

critiqued Dudney’s damages calculations as methodologically flawed and

economically disconnected from the record.478 He opined that Dudney overreached

by applying margin compression to company-wide revenue.479

ii. Dudney’s Analysis

Dudney calculated Saama’s damages based on the difference between its

expected (but-for) gross profit and its actual gross profit during the post-earnout

accounted for the defendants’ breach of contract and breach of fiduciary duty counterclaims, as both were in play when his report was submitted. See Dudney Tr. 1595-96; see also Defs.’ Post-trial Reply Br. 36-38, 40 n.172. Compensatory damages are “an appropriate means by which to remedy a breach of the duty of loyalty.” Ravenswood Inv. Co., L.P. v. Est. of Winmill, 2018 WL 1410860, at *20 (Del. Ch. Mar. 21, 2018); see also OptimisCorp v. Waite, 2015 WL 5147038, at *82 (Del. Ch. Aug. 26, 2015). 475

Dudney Opening Report ¶¶ 1, 18, 37-39. Dudney is a former PwC partner who is now a partner and Managing Director at AlixPartners, LLP, where he is the Global Leader of AlixPartners’ Investigations, Disputes, and Risk practice. Id. ¶¶ 1, 4. 476

Id. ¶¶ 18, 37-38, 40-42.

477

Manning Rebuttal Report ¶ 1. Dr. Manning is currently a Managing Director at Secretariat and a former assistant professor of economics at Brigham Young University. Id. at Attachment A-1a.

478

Id. ¶¶ 6, 8, 36-56.

479

Id. ¶¶ 8, 40-43.

period (2022 to 2024).480 He applied benchmark gross margin percentages to

Saama’s total company-wide revenues rather than apportioning damages only to the

23 earnout contracts directly affected by Katta’s bad faith misconduct.481

Dudney modeled three baseline margin scenarios and calculated the resulting

damages over one-, two-, and three-year horizons. His first scenario calculates what

Saama’s gross profit would have been if it had achieved the same gross margin

percentage it historically earned in 2020 and 2021.482 The second calculates what

Saama’s gross profit would have been if it had achieved the future gross margins

projected in Carlyle’s valuation model.483 The third calculates what Saama’s gross

profit would have been if it had achieved the gross margins reflected in Saama’s due

diligence projections.484

480

Dudney Opening Report ¶¶ 18, 37, 39, 40-42 & figs. 7, 9, 10; Dudney Tr. 1607-08. 481

Dudney Opening Report ¶¶ 10, 13-14, 19, 39 & fig. 7; Dudney Tr. 1602-03 (discussing how he looked at gross margins for the whole company because “the allegations were that the impacts from the alleged bad acts were broader than just in terms of their implications and how they affected the company, and one of those things would be, for example, brand or pricing expectations in the market and things of that nature or the reputation of overpromising and underdelivering”).

482

Dudney Opening Report ¶ 39.

483

Id. ¶ 41.

484

Id. ¶ 42.

Applying these baselines to company-wide revenue across the three periods

yields damages ranging from $11.2 million (under the one-year historical scenario)

to $83.3 million (under the three-year due diligence scenario).485

iii. The Proper Measure of Damages

At trial, Dudney testified that he used company-wide metrics because Katta’s

misconduct during the earnout period had broad reputational and operational

consequences.486 I decline to adopt this approach. Delaware courts “show a general

willingness to make a wrongdoer ‘bear the risk of uncertainty of a damages

calculation.’”487 Still, the court must have a reliable evidentiary basis from which to

award damages, such that they are “susceptible of proof and a remedy appropriate

to all the issues of fairness.”488 The claim’s proponent has the burden to prove “that

a sufficient causal linkage exists between the breach of duty and the remedy sought

to make the remedy an apt means of addressing the breach.”489 The defendants have

not met this burden for their enterprise-wide damages model.

Katta’s scheme to secure the earnout at the expense of Saama’s business was

disloyal. He imposed the “72-27” campaign, suspended typical margin limits to

485

Id. ¶¶ 39-42.

486

Dudney Tr. 1602-03.

487

In re Mobilactive Media, LLC, 2013 WL 297950, at *24 (Del. Ch. Jan. 25, 2013). 488

In re Fuqua Indus., Inc., 2005 WL 1138744, at *7 (Del. Ch. May 6, 2005). 489

Metro Storage Int’l LLC v. Harron, 275 A.3d 810, 859 (Del. Ch. 2022).

drive sales, and sold nascent products at unprecedented discounts while bundling

services.490 But his misconduct was aimed at inflating ARR in Saama’s software

subscription division. Extrapolating that harm to the entire company is economically

disconnected from the breach.

The defendants cite evidence showing that the undeliverable, deeply

discounted contracts caused Saama long-term negative consequences.491 Dudney’s

analysis, however, simply assumes that 100% of Saama’s margin compression was

caused by Katta.492 He performed no regression analysis, attribution modeling, or

assessment of the effects of new management’s policies, product changes, or market

headwinds.493 Applying an enterprise-wide margin drop would punish Katta for

unrelated declines in Saama’s legacy services business and ignore intervening

events.

490

See supra Section II.B.1.b.

491

See, e.g., JX 1501 at 1 (Gondhali to a customer success employee: “I don’t have resources to do this [customer proposal]. We have the most golives happening November and December and a lot of these pilots can’t happen so quick it needs a lot of engineering and product support who are very busy supporting [A]bbvie and Merck.”). 492

Dudney Opening Report ¶ 36.

493

See Manning Rebuttal Report ¶¶ 45-46, 50-51 (documenting peer group margin compression to 31.8% in Guggenheim valuation materials, post-COVID travel cost spikes of 1,200%, and non-price labor cost factors); Moneymaker Tr. 11-12, 17-22 (detailing CEO turnover, non-unified technology stacks, and technical debt integration friction); Gondhali Tr. 656-58; see also Pl.’s Post-trial Opening Br. 56-62.

Conversely, limiting damages to those directly caused by the 23 tainted

earnout contracts, as Manning suggests, does not capture the full scope of the

harm.494 Katta’s bad faith diverted engineering resources, damaged Saama’s

reputation, and impaired the subscription pipeline. These actions affected Saama’s

software subscriptions business well beyond the 23 executed contracts.

Although I rejected Dudney’s enterprise-wide model for failing to isolate the

effects of the breach, narrowing the analysis to the software subscription division in

2022 focuses the analysis on the business and period most directly affected by

Katta’s misconduct. Dudney’s report details that Saama’s historical subscription

margin averaged 71.4%.495 The 2022 product mix included early Smart Series

products, but the record establishes these products were projected to support margins

between 70% and 90%, making the 71.4% historical average a reasonable proxy.496

In 2022, actual subscription margins collapsed to 39.2% on $22,705,768 in

subscription revenue.497

494

Manning Rebuttal Report ¶ 43. Manning calculated damages from these 23 contracts using the defendants’ own historical company-wide margin baseline of 49.6%, rather than the 71.4% margin specific to the software subscription business. Manning Rebuttal Report ¶ 41 nn.129-31. Applying this margin to the $17,782,682 in aggregate revenue generated by the 23 tainted contracts yields a “but-for” gross profit of $8,820,210. Subtracting the actual gross profit generated by the 23 contracts ($5,475,799) leaves a lost profits shortfall of $3,344,411.

495

Dudney Opening Report ¶ 23 & fig. 4.

496

See supra notes 50-51, 332-333 and accompanying text.

497

Dudney Opening Report ¶ 24 & fig. 5.

This severe margin compression resulted in a gross profit shortfall of

$7,300,172.498 That amount reasonably measures Saama’s lost profits because the

expenses deducted from gross profit would have been materially the same absent

Katta’s breach.499 The reduction in gross profit therefore represents a corresponding

reduction in Saama’s net profits.

I award Saama damages in that amount. Applying the historical margin to

actual 2022 subscription revenue reasonably estimates the loss attributable to

servicing the tainted contracts and the increased costs of servicing other subscription

contracts as engineering resources were diverted to fulfill the tainted contracts’

commitments.500 The calculation does not separately compensate Saama for

reputational damage or lost sales opportunities, which would require a

reconstruction of the sales pipeline.501 The record shows that added technical debt,

498

To calculate this figure, the 71.4% historical margin is applied to the 2022 subscription revenue of $22,705,768, yielding an expected gross profit of $16,211,918. Subtracting the actual 2022 subscription gross profit of $8,911,746 (which reflects the depressed 39.2% margin) results in a gross profit shortfall of $7,300,172. See id. ¶¶ 23-24 & figs. 4-5. 499

See id. ¶¶ 18, 37-39 & nn.104-05; Manning Rebuttal Report ¶¶ 37, 44-46; Dudney Tr. 1605-08.

500

See, e.g., Yang Tr. 1053-54 (describing operational drag across the software business); Sharma Tr. 1245-46 (describing the massive resource demand and delays caused by overcommitted contracts); Rogers Tr. 849-50, 898-900 (describing customer problems and unplanned engineering labor without corresponding revenue); Moneymaker Tr. 54 (estimating significant resources would be required to achieve oversold commitments); see also JX 728; JX 753.

501

Cf. Duncan v. Theratx, Inc., 775 A.2d 1019, 1023-24, 1024 n.12 (Del. 2001) (observing that uncertainty over future events that are “impossible to know” should not be resolved

resource constraints, and operational restrictions that depressed Saama’s 2022

subscription margins were foreseeable consequences of Katta’s misconduct.502 In

estimating the loss caused by his misconduct, I resolve against him uncertainties that

his misconduct created.503 By limiting damages to the software subscription

business in 2022, I address the consequences of Katta’s disloyalty without including

divisions or time periods for which the record does not permit a reliable attribution

of losses to his breach.

iv. Interest

Prejudgment interest is awarded as a matter of right to compensate a party for

the loss of the use of its money.504 It generally accrues from the date of the wrong.505

against the defendant (citing Madison Fund, Inc. v. Charter Co., 427 F. Supp. 597, 608 (S.D.N.Y. 1977))).

502

See Moneymaker Tr. 22-23, 28, 43-45; Sharma Tr. 1245-46, 1255-56; Rogers Tr. 843-45, 898-900; JX 1070.

503

See Red Sail Easter Ltd. P’rs v. Radio City Music Hall Prods., Inc., 1992 WL 251380, at *7 (Del. Ch. Sept. 29, 1992) (“Responsible estimates that lack m[a]thematical certainty are permissible so long as the court has a basis to make a responsible estimate of damages.”); Siga Techs., Inc. v. PharmAthene, Inc., 132 A.3d 1108, 1131 n.132 (Del. 2015) (“Courts in Delaware and other jurisdictions have frequently applied the ‘wrongdoer rule’ where the wrongdoer's breach contributed to uncertainty over the amount of damages.”). 504

See Citadel Hldg. Corp. v. Roven, 603 A.2d 818, 826 (Del. 1992); Underbrink v. Warrior Energy Servs. Corp., 2008 WL 2262316, at *19 (Del. Ch. May 30, 2008) (explaining that prejudgment interest is awarded to “compensate plaintiffs for losses suffered from the inability to use the money awarded during the time it was not available” (citation omitted)).

505

See Brandywine Smyrna, Inc. v. Millennium Builders, LLC, 34 A.3d 482, 486 (Del. 2011).

100

The defendants request prejudgment interest beginning on January 14, 2022, when

Katta submitted the Earnout Statement.506 But the $7,300,172 damages award

compensates Saama for lost profits sustained through 2022. Applying interest to the

entire sum from January 14 would grant a windfall by compensating Saama for a

loss of funds it would not yet have possessed in the but-for world. In the exercise of

my discretion, prejudgment interest will accrue from a representative midpoint of

July 1, 2022 through the date of judgment.507 Post-judgment interest also will run

from the date of the entry of judgment to the date of payment.508

The Court of Chancery generally looks to the legal rate of interest—five

percentage points above the Federal Reserve discount rate—as the benchmark for

prejudgment interest.509 I select a variable rate to account for significant fluctuations

in interest rates during the relevant period and conclude that “the appropriate

compounding rate is quarterly.”510 Doing so “better reflects the financial realities of

506

See Defs.’ Post-trial Opening Br. 79 (asking for interest at the statutory rate compounded quarterly from January 14, 2022).

507

Cf. Fletcher Int’l, Ltd. v. Ion Geophysical Corp., 2013 WL 6327997, at *26 (Del. Ch. Dec. 4, 2013) (reducing the prejudgment interest rate in the exercise of the court’s discretion because of the plaintiff’s litigation misconduct). July 1, 2022 reasonably approximates when the lost profits would have accrued.

508

6 Del. C. § 2301(a); see Noranda Aluminum Hldg. Corp. v. XL Ins. Am., Inc., 269 A.3d 974, 978 (Del. 2021).

509

6 Del. C. § 2301(a).

510

Doft & Co. v. Travelocity.com Inc., 2004 WL 1152338, at *12 (Del. Ch. May 20, 2004); see Fortis Advisors, 2024 WL 4048060, at *54.

101

conducting business” than simple interest.511 Saama is therefore awarded

prejudgment interest on the $7,300,172 damages award at the fluctuating legal rate,

compounded quarterly, accruing from July 1, 2022 through the entry of judgment,

and post-judgment interest thereafter. The defendants must submit an updated

interest calculation with the proposed final order.

2. Declaratory Judgment

The defendants seek a declaratory judgment that Katta and the Sellers are

entitled to no earnout payment under the Merger Agreement.512 The Declaratory

Judgment Act permits courts to declare the rights and other legal relations of any

interested party seeking such a declaration.513 Here, an actual controversy exists

regarding whether the Sellers achieved the financial metrics necessary to trigger the

earnout.514

As established in the analysis of Katta’s breach of contract claim, the

defendants have proven that Saama failed to meet the prerequisites for an earnout

payment.515 Section 2.10(a) of the Merger Agreement conditions the “Aggregate

511

Murphy Marine Servs. of Del., Inc. v. GT USA Wilm., LLC, 2022 WL 4296495, at *24 (Del. Ch. Sept. 19, 2022).

512

PTO ¶¶ 142(c), 144(b).

513

See 10 Del. C. § 6501 et seq.

514

See id. § 6501; Stroud v. Milliken Enters., Inc., 552 A.2d 476, 479-80 (Del. 1989). 515

See supra Section II.A.

102

Earnout Amount” on Saama achieving a 2021 GAAP revenue of at least $72

million.516 Without the $3.06 million in improperly recognized revenue for the

AbbVie contract, Saama’s true 2021 GAAP revenue reached—at most—$70.08

million, and was formally restated by Deloitte to just $67.4 million.517 No earnout

payment is due. Further, even if the revenue threshold had been met, Saama’s

eligible ARR Bookings fell short of the $11 million required to earn the maximum

payout.518

Because Saama failed to satisfy the bargained-for financial conditions, Katta

and the Sellers have no contractual right to the earnout. I therefore grant the

defendants’ request for a declaratory judgment that no earnout payment is owed

under the Merger Agreement.

3. Breach of the Implied Covenant

The defendants’ final counterclaim is for breach of the implied covenant of

good faith and fair dealing.519 “The implied covenant of good faith and fair dealing

inheres in every contract and ensures that neither party acts arbitrarily or

516

Merger Agreement § 2.10(a).

517

See PTO ¶¶ 121, 135; supra note 343 and accompanying text.

518

PTO ¶ 103; see also Merger Agreement § 2.10(a); id. at Annex A (defining ARR Bookings); supra note 181 and accompanying text (noting that Saama conceded certain ARR Bookings as being ineligible).

519

PTO ¶ 142(b); see Merger Agreement § 2.10(b).

103

unreasonably to frustrate the fruits of their bargain.”520 The defendants claim that

Katta breached the implied covenant by submitting an Earnout Statement that he

knew to be false.521 As relief, the defendants seek a declaratory judgment that the

Sellers are not entitled to an earnout payment.522

I have determined that Saama failed to satisfy the financial conditions to an

earnout payment and granted the defendants a declaratory judgment to that effect.523

The defendants have therefore been awarded all the relief they seek for their implied

covenant claim. An adjudication of the implied covenant claim would have no

additional practical effect on the parties’ rights.524 The implied covenant

counterclaim is dismissed without prejudice as moot.525

III. CONCLUSION

For the reasons described above, judgment on Katta’s claims is in favor of the

defendants. On the breach of fiduciary duty counterclaim, judgment is entered

520

Johnson & Johnson v. Fortis Advisors LLC, 352 A.3d 229, 253 (Del. 2026). 521

Defs.’ Post-trial Opening Br. 73-75.

522

PTO ¶ 144(b); Defs.’ Post-trial Opening Br. 78-80.

523

See supra Section II.B.2.

524

See Garfield v. Allen, 277 A.3d 296, 360-61 (Del. Ch. 2022) (“[A] plaintiff cannot recover duplicative remedies.”).

525

See Medek v. Medek, 2009 WL 2005365, at *5 & n.40 (Del. Ch. July 1, 2009) (dismissing, post-trial, an alternative claim without prejudice as moot after granting full relief on a contract claim); see also In re Transamerica Airlines, Inc., 2007 WL 1555734, at *19 (Del. Ch. May 25, 2007).

104

against Katta and in favor of Saama in the amount of $7,300,172, plus pre- and postjudgment interest. The defendants are entitled to a declaratory judgment that no

earnout payment is due under the Merger Agreement. The defendants’ implied

covenant counterclaim is dismissed without prejudice as moot.

The parties are directed to confer on a form of final order, which must be filed

within 30 days.

105

In Re Saama Technologies Litigation

Authorities cited

Opinion · public domain