Wagner Hicks co-founder Benjamin Hicks was published in Law360 on Nov. 6. Ben’s article, Earnout Contract Considerations After NC Good Faith Ruling, discusses key points from a recent North Carolina Supreme Court decision that considered the question of whether and to what extent the implied covenant of good faith and fair dealing applied in an M&A earnout dispute.
The case, Value Health Solutions Inc. v. Pharmaceutical Research Associates Inc., involved an asset sale transaction in which the seller argued that the buyer violated the implied covenant and that as a result the seller was entitled to certain milestone-based earnout payments.
“The ruling in this case demonstrates the critical importance of paying careful attention in M&A transactions that utilize milestone-based earnouts to the drafting of deal-specific milestone concepts,” Ben stated.
In the article, Ben notes that the case provides M&A practitioners with a “cautionary tale” about how courts may “unpredictably apply the implied covenant.”
See the article in its entirety here.