North Highland acquired a technology consulting firm in a $180 million deal - then locked the sellers out of their earnout data.
The Court of Chancery ruled on September 18 that North Highland breached the implied covenant of good faith and fair dealing by withholding internal pipeline and pricing data from the seller representative. The court declared the earnout's qualifying-project definition governed solely by the contract's revenue-based criterion - not extra-contractual carve-outs the buyer imposed.
The deal had started with big promises. North Highland's CEO made a "shut it down" offer to preempt competing bids and assured the target's leader the earnout targets would be a "layup." When it closed in December 2024, sellers received roughly $90 million in cash and $40 million in rolled equity. The remaining $50 million depended on an uncapped earnout tied to gross profit across two years.
The purchase agreement included a mechanism protecting sellers who had ceded operational control. It defined "qualifying projects" - new North Highland projects primarily involving technology or data analytics services, measured by revenue - and required the seller representative to flag them before client proposals went out.
That process needed data. North Highland did not share it.
Instead, the buyer provided curated pipeline reports - pre-filtered lists excluding certain regions and accounts. The reports showed a project's dollar value but not what was actually being sold. As the...
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