Orrick Secures Victory in Hotly-Contested Earnout Dispute in Insurance Industry

An Orrick team led by Richard Jacobsen and Gregory Beaman secured a key win in a hotly-contested, David vs. Goliath earnout dispute involving the insurance industry when the New York Supreme Court, Commercial Division, granted our client’s motion for summary judgment dismissing the defendant’s counterclaims for a negative earnout.

American Lawyer recognized the win in its Litigators of the Week column.

• The dispute stems from the plaintiff’s 2021 sale of his suite of insurance companies to a major investment firm. One component of the deal was that the plaintiff would get an earnout tied to the performance of one of the companies, which could increase if the company outperformed expectations or decrease if it underperformed, subject to a floor of $0. When our client filed suit against the defendant alleging that it breached various of its earnout covenants in operating the business post-closing, the defendant counterclaimed that the earnout amount could “go negative” and alleged that our client owed the defendant millions of dollars in a “negative earnout.”
• Manhattan Supreme Court Justice Andrew Borrok granted Orrick’s motion for summary judgment, dismissing the defendant’s “negative earnout” counterclaims. Justice Borrok found that, based on the record before him, which included attestations and depositions of the parties’ transaction counsel on the deal, it was “beyond doubt that the Defendant’s position is a litigation position.” The case is expected to go to trial on our client’s claims that the defendant breached its earnout covenants in operating the business.

The case is Tromer v. PEAK6 InsurTech Holdings LLC, No. 653530/2023 (NY Supreme Ct., Commercial Division, NY County).