In Fortis Advisors, LLC v. Stillfront Midco AB, the Delaware Supreme Court strictly enforced an arbitration clause in a merger agreement, finding that a seller’s bad faith claims regarding earnout manipulation fell within the alternative dispute resolution (ADR) provision’s scope because they were fundamentally a dispute about the calculation of the earnout. The court looked at the substance of the claims concluding that “why” the earnout calculation was wrong cannot be severed from an arbitration clause covering calculation disputes. The decision is a strong reminder to dealmakers to precisely delineate which disputes are reserved for courts versus arbitration, and to draft ADR provisions with enough specificity to avoid costly threshold litigation over arbitrability.
