Corporate – Merger agreement – Contingent earnout compensation

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Where a defendant that acquired all outstanding shares of a corporation paid the plaintiff shareholders $25 million of contingent earnout compensation, the defendant should be awarded summary judgment despite the plaintiffs’ contention that they were unlawfully deprived of the opportunity to earn the remaining contingent payments.

“Alere, Inc. acquired all outstanding shares of TwistDx, Inc., in 2010 and merged it with a wholly-owned subsidiary. TwistDx, which was based in the United Kingdom, was working on ways to use Recombinase Polymerase Amplification (‘RPA’) technology to detect pathogens that cause human diseases.

“Alere paid TwistDx’s stockholders (the ‘Shareholders’) $35 million at the closing. It also agreed to make further earnout payments, capped at $125 million, contingent on TwistDx meeting product development or revenue targets. Alere paid the Shareholders $25 million of this contingent earnout compensation, consisting of $20 million in product milestone payments plus $5 million based on 50/50 sharing of revenue from the licensing of Non-IVD Products. The Shareholders did not receive any other earnout payments. Abbott Laboratories acquired Alere in October 2017; it decided to discontinue funding for TwistDx and shut it down in May 2018.

“The Shareholders contend that Alere unlawfully deprived them of the opportunity to earn the remaining contingent payments. The Shareholders have sued Alere and the subsidiary through which the 2010 merger took place; the Court will refer to Alere and Innovacon, Inc., collectively as ‘Alere.’

“The Shareholders claim that Alere breached its express contractual obligations under the parties’ Merger Agreement, breached the implied covenant of good faith and fair dealing, and violated G.L.c. 93A, §11, by engaging in unfair or deceptive acts or practices. …

“Defendants’ motion for summary judgment (docket no. 61) is allowed. Final judgment shall enter in Defendants’ favor, providing that Plaintiffs shall take nothing on their claims.”

Mahanthappa v. Alere, Inc., et al. (Lawyers Weekly No. 09-023-26) (15 pages) (Salinger, J.) (Suffolk Superior Court) (Docket No. 2284CV00969-BLS2) (March 4, 2026).

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