Fortis Advisors, LLC v. Stillfront Midco AB, 2026 WL 406073 (Del. Feb. 13, 2026)
In Fortis v. Stillfront, the Delaware Supreme Court affirmed the decision of the Delaware Court of Chancery and declined to ignore a seller’s agreement to arbitrate issues related to post-closing earnout calculations. This appeal arose from a Court of Chancery decision that declined to apply a broad Delaware forum selection clause over a narrow alternative dispute resolution provision (“ADR Provision”) designed to govern disputes related to post-closing earnout calculations such as the one brought forth in the present action. The Delaware Supreme Court refused to acknowledge the seller’s representative’s reframing of its arguments on appeal in an attempt to escape the Court of Chancery’s unfavorable ruling and the seller’s prior commitments pursuant to the relevant merger agreement.
Kixeye (or the “Seller”) is an online video game company that creates, develops, and publishes strategy games for personal computers and mobile devices. On June 24, 2019, Stillfront Midco AB (“Stillfront” or the “Buyer”) acquired Kixeye through an Agreement and Plan of Merger dated June 3, 2019 (the “Merger Agreement”). The Merger Agreement provided for an earnout bonus payment to the Seller (the “Earnout Payment”) if Kixeye’s Adjusted EBITDA for the year ending December 31, 2019, exceeded $15 million. Additionally, the Merger Agreement included the following provisions that relate to the Earnout Payment:
- A provision that outlines a three-step procedure to calculate the Earnout Payment;
- A provision that provides for the surviving corporation’s independent auditor to deliver to Fortis Advisors, LLC (“Fortis”), a report with the surviving corporation’s financial statement for the year ending December 31, 2019 (the “Earnout Determination Report”);
- A provision that outlines the procedures available to Fortis if it disagrees with and wishes to dispute the Earnout Determination Report;
- A provision that sets forth the process to resolve disputes over the Earnout Payment calculation and provides that such disputes shall be referred to an arbitrator; and
- A provision that entitles Fortis to reasonable access to information.
Notably, the Merger Agreement’s definition of an “Arbitrator” requires that the arbitrator’s firm does not have a material relationship with Stillfront, Fortis, or Kixeye and sets forth operational covenants that prohibit the Buyer from taking any bad faith action to reduce the Earnout Payment. Further, pursuant to the Merger Agreement, the parties broadly consented to the exclusive jurisdiction of any Delaware state court in New Castle County or the US District Court for the District of Delaware for any action or proceeding arising out of or relating to the Merger Agreement (the “Forum Selection Clause”). Additionally, the parties included a narrow ADR Provision in the Merger Agreement that provided an expedited mechanism for the resolution of a dispute over the calculation of the Earnout Payment amount.
Fortis served as Kixeye’s seller representative under the Merger Agreement and, on October 8, 2021, brought an action against Stillfront in the Delaware Court of Chancery. The Chancery Court action alleged that the Buyer breached the Merger Agreement and the implied covenant of good faith and fair dealing by, among other things, acting in bad faith to reduce the Earnout Payment amount and failing to provide information and access to personnel. In response to Fortis’s claims, the Buyer moved to compel arbitration pursuant to the ADR Provision. Fortis opposed the Buyer’s motion to compel and argued that arbitration of its claims was not required because the Forum Selection Clause applied to its claims related to the Earnout Payment and not the ADR Provision. In reviewing the parties’ claims, the Court of Chancery agreed with the Buyer and granted its motion to compel arbitration. The court reasoned that the core of Fortis’s bad faith breach claims, despite relating to a dispute regarding the Earnout Payment amount, also inherently concerned a dispute over the Buyer’s calculation of the Earnout Payment—a subject that the parties agreed to arbitrate pursuant to the ADR Provision. Further, the court determined that Fortis’s information rights claim was, according to settled law, an issue of procedural arbitrability meant for an arbitrator to decide. Pursuant to the Court of Chancery’s order, the arbitrator issued a determination that Fortis was not entitled to any recovery. The Court of Chancery confirmed the arbitrator’s determination and entered judgment in favor of the Buyer.
On appeal, Fortis challenged the Court of Chancery’s grant of the Buyer’s motion to compel arbitration. Among other arguments, Fortis added a new argument to claim that the ADR Provision called for an expert determination of the Earnout Payment amount and not an arbitration, which would support its position that the arbitrator’s remit was narrow and did not consider its claims presented in the Court of Chancery. Further, in line with its reasons for opposing the arbitrator’s confirmation during the confirmation proceeding, Fortis challenged the Court of Chancery’s confirmation of the arbitrator’s determination on the basis that the arbitrator was acting under an undisclosed conflict of interest.
The Delaware Supreme Court affirmed the Court of Chancery and concluded, among other things, that Fortis’s bad faith breach claims fell within the bounds of the ADR Provision. In reaching its conclusion, the Court held Fortis to its framing of the issues in the Court of Chancery and, in particular, its acknowledgment that, pursuant to the Merger Agreement and ADR Provision, the parties agreed to arbitrate issues related to the Earnout Determination Report, which set forth the Buyer’s determination of the Earnout Payment amount. In line with this, the Court determined that the bad faith breach claims were properly deemed arbitrable by the trial court because they contested the accuracy of the Earnout Payment amount issued by the Buyer—a subject that the parties agreed to arbitrate in the ADR Provision. The Court further determined that Fortis’s information rights were also properly arbitrable and that the undisclosed relationship between the arbitrator’s firm and the Buyer’s firm did not require the Court of Chancery to vacate the arbitrator’s determination. The Court based its finding regarding Fortis’s information rights on, among other things, Fortis’s acknowledgment that the information it requested was critical to an arbitrator’s later consideration of its dispute of the Earnout Determination Report and therefore concerns what information an arbitrator must consider. Further, the Court found the existence of a relationship between the Buyer’s firm and the arbitrator’s firm based on: (1) the Buyer’s firm’s unmaterialized effort to retain the arbitrator’s firm on a separate matter, shortly after the arbitrator’s firm was engaged on the present matter; and (2) that the Buyer’s firm’s disclosure, in a federal bankruptcy proceeding, of its representation of other entities of the arbitrator’s firm did not amount to a sufficiently direct, definite, and intimate relationship that would warrant vacating the arbitrator’s award.
Fortis v. Stillfront is a reminder of the Delaware courts’ deep respect for parties’ freedom to contract. Practitioners and clients should remember to critically consider the types of disputes that they agree to subject to arbitration and what types of issues could be encompassed in those disputes. Although the Fortis v. Stillfront opinion relates to a post-closing earnout payment dispute being swept up in an arbitration provision, the general principle of disputes falling within the ambit of a narrow provision that applies more precisely than a broad provision is applicable in other corporate and commercial contexts.