SOURCEHOV HOLDINGS, INC. and Pangea Acquisitions, Inc., Defendants Below, Appellants,
WESTERN STANDARD, LLC, Individually and as Stockholder Representative for Former BancTec, Inc. Common Stockholders, Plaintiff Below, Appellee.
August 22, 2019
decision has been designated as "Table of Decisions
Without Published Opinions." in the Atlantic Reporter.
Below-Court of Chancery of the State of Delaware, C.A. No.
VAUGHN, SEITZ, and TRAYNOR, Justices.
J. Seitz, Jr., Justice.
consideration of the notice of interlocutory appeal, the
supplemental notice of appeal, their exhibits, and the Court
of Chancerys order denying Defendants motion for
certification of an interlocutory appeal, it appears to the
The defendants below-appellants SourceHOV Holdings, Inc.
("SourceHOV") and Pangea Acquisitions, Inc.
("Pangea") (collectively, "Defendants")
have petitioned this Court under Supreme Court Rule 42 to
accept an interlocutory appeal from a Court of Chancery
decision denying Defendants motions to
2014, Pangea acquired BancTec, Inc. ("BancTec")
through a merger of BancTec and a Pangea subsidiary. The
merger agreement provides that contingent consideration, or
"earn-out," will be paid to former BancTec
stockholders in the event Pangeas controlling stockholder
realizes certain returns from its post-merger Pangea stock.
The merger agreement between Pangea and BancTec designates
plaintiff, Western Standard, LLC ("Western
Standard"), as the stockholder representative for
BancTec stockholders. Western Standard alleges that Pangea
improperly refused to pay the earn-out owed to former BancTec
stockholders after a merger between SourceHOV— which by
then had bought Pangea in a reverse triangular merger—
and Exela Technologies, Inc.
Defendants moved to dismiss Western Standards amended
complaint arguing, among other things, that Western Standard
failed to state a claim upon which relief may be granted
because the earn-out right was extinguished before any
alleged triggering transaction. Specifically, Defendants
argued the earn-out was moot because it was tied to specific
shares of stock that ceased to exist upon and as a result of
a reverse triangular merger between Pangea and SourceHOV. The
Court of Chancery denied the motions, concluding that (i) the
shares to which the earn-out right allegedly attached did not
conclusively cease to exist after the merger between Pangea
and SourceHOV; and (ii) the Pangea-BancTec merger agreements
earn-out provision was ambiguous as written.
August 5, 2019, Defendants asked the Court of Chancery to
certify an interlocutory appeal from the courts July 24,
2019 opinion and order. Defendants maintained that the Court
of Chancerys decision decided a substantial issue of
material importance. Defendants further argued that the
following Rule 42(b)(iii) factors weighted in favor of
granting interlocutory review: the opinion is in conflict
with Delaware case law;  the opinion relates to the
construction of § 251 of Delaware General Corporation
Law and should be settled promptly by the
Delaware Supreme Court;  and immediate review of the opinion
may terminate the litigation. Western Standard opposed
August 21, 2019, the Court of Chancery denied Defendants
application for certification of an interlocutory appeal. The
Court of Chancery found that its opinion had not decided an
issue that related to the merits of the case and, therefore,
did not merit interlocutory review. The Court of Chancery
also concluded that the Rule 42(b)(iii) factors did not weigh
in favor of certifying an interlocutory appeal. The court
rejected Defendants position that its opinion conflicts with
existing trial court decisions; rather, the court observed
that this case presented unique factual circumstances. The
court further found that the opinion did not purport to
construe § 251, noting the courts conclusions when
considering the motions to dismiss were premised on the
language of the agreements among the parties and Western
Standards amended complaint. Finally, the court found that
interlocutory review may not terminate the litigation due to
the existence of other outstanding issues in the case. We
agree with the Court of Chancery.
Applications for interlocutory review are addressed to the
sound discretion of the Court. Giving great weight to
the trial courts thoughtful analysis and in the exercise of
our discretion, this Court has concluded that the application
for interlocutory review does not meet the strict standards
for certification under Supreme Court Rule 42(b). Exceptional
circumstances that would merit interlocutory review of the
Court of Chancerys decision do not exist in this
case, and the potential ...