Buy This Entire Record For
Sourcehov Holdings, Inc. v. Western Standard, LLC
Supreme Court of Delaware
September 3, 2019
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.
Submitted: August 22, 2019
Below-Court of Chancery of the State of Delaware C.A. No.
VAUGHN, SEITZ, and TRAYNOR, Justices.
COLLINS J. SEITZ, JR. JUSTICE.
consideration of the notice of interlocutory appeal, the
supplemental notice of appeal, their exhibits, and the Court
of Chancery's order denying Defendants' motion for
certification of an interlocutory appeal, it appears to the
(1) 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
(2) In 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 Pangea's
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.
(3) Defendants moved to dismiss Western Standard's
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
agreement's earn-out provision was ambiguous as written.
(4) On August 5, 2019, Defendants asked the Court of Chancery
to certify an interlocutory appeal from the court's July
24, 2019 opinion and order. Defendants maintained that the
Court of Chancery's 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
and should be settled promptly by the Delaware Supreme
Court; and immediate review of the opinion may
terminate the litigation. Western Standard opposed the
(5) On 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 court's conclusions when considering the
motions to dismiss were premised on the language of the
agreements among the parties and Western Standard's
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.
(6) Applications for interlocutory review are addressed to
the sound discretion of the Court. Giving great weight to the
trial court's 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 Chancery's decision do not exist in this case,
the potential benefits of interlocutory review do not
outweigh the inefficiency, disruption, and probable costs
caused by an interlocutory appeal.
THEREFORE, IT IS ORDERED that the interlocutory appeal is