Issue No. 12 — October 26, 2026

Flannery v. London Stock Exchange Group plc — earnout fraud and contract claims survive dismissal (Del. Ch. Oct. 16, 2026, C.A. No. 2025-0547-MAA)

In May 2022, Refinitiv US LLC, a London Stock Exchange Group subsidiary, acquired MayStreet, a market-data start-up, for about $275 million plus an earnout of up to $175 million tied to annualized subscription value over a five-year period beginning nineteen months after closing, subject to margin conditions in the final three years. Co-founder and former chief executive Patrick Flannery sued as securityholders' agent. The amended complaint alleges that the buyer's pre-closing representations about integration and its global sales force led the founders to reject a Series B offer and sell instead, and that the buyer then failed to take more than twenty actions that the complaint says it had described as necessary to the earnout plan.

Judge Meghan Adams, sitting in the Court of Chancery by designation, denied the defendants' motion to dismiss. On the fraud claim, the court found an actionable statement pleaded and scienter adequately alleged on a reckless-indifference theory. On the contract claim, the court declined to choose at the pleading stage between the parties' readings of the “commercially reasonable efforts” clause; found it reasonably conceivable that LSEG, though not a signatory, had adopted the merger agreement; and held the claim ripe while the earnout period continues, because, on the allegations, growth starts from a smaller base. The defendants had pointed to projections of year-over-year growth in annualized subscription value. The allegations are accepted as true at this stage; nothing has been proved.

Greenfield One III v. Chaney (Fancurve) — the company liable by default; the founder not liable for the company's use-of-funds covenant (Del. Ch. Oct. 9, 2026, C.A. No. 2024-0663-LWW)

Greenfield, a German venture firm, led a late-2021 seed round in 1zer0 Labs, Inc. (Fancurve). After trial, the court found that founder and chief executive Chris Chaney transferred more than $2.7 million of the company's operating capital to repay his personal loans, that the NFT market crashed within months, and that the business would have failed irrespective of the company's compliance with the side letter. A default judgment against the company established its liability under the investors' SAFEs and Greenfield's side letter; the one issue tried was whether Chaney, who signed the side letter individually as well as for the company, was personally liable under it. Vice Chancellor Will held he was not: the use-of-funds obligations were the company's, not the founders', and Greenfield did not prove that Chaney breached the one relevant obligation he owed individually — to devote substantially all of his professional efforts to the company. Judgment was entered for Chaney, who may recover reasonable fees and costs as prevailing party under the side letter; relief against the company is reserved for supplemental submissions.

In brief — Lipp v. Mixedbread AI — a terminated co-founder's advancement affirmed (Del. Ch. Oct. 19, 2026, C.A. No. 2026-0493-DH)

Julius Lipp, a co-founder, director, and chief technology officer of Mixedbread AI, was terminated in June 2025 — for cause, according to the company — and sued in California federal court for breach of his employment agreement; the company's affirmative defense alleges that he disparaged its chief executive, created a toxic work environment, and failed to fulfill his obligations as chief technology officer. A Magistrate in Chancery found the fees of defending against that affirmative defense advanceable under the company's bylaws; on October 19 Vice Chancellor David denied the company's exceptions and adopted the report, including its fees-on-fees award. Advancement is interim and decides nothing about the underlying dispute; the allegations remain unadjudicated.

Mendoza v. Distributed Creation — a private company's cap table under the amended inspection statute (Del. Ch. Oct. 5, 2026, C.A. No. 2026-0580-CDW)

A post-trial report on a Section 220 demand. Alejandro Mendoza holds 10,976 shares — about 0.02 percent — of Distributed Creation, Inc., doing business as Splice. After receiving some financial materials, he served a March 2026 demand for eight categories of records — including capitalization tables, board materials on the company's April 2025 acquisition of a stake in Spitfire Audio and its financing, valuations, and related-party disclosures — for five stated purposes; during the litigation, the company produced 2025 monthly financial statements and a stockholder list. Magistrate in Chancery Christian Douglas Wright found valuation a proper purpose and treated the dilution and financial-condition purposes as aspects of it; found a proper purpose in determining whether any related-party transactions took place; and found no credible basis to investigate mismanagement, because poor financial performance alone does not support an inference of wrongdoing. On the capitalization table, the report concludes that a cap table is not among the “books and records” enumerated in Section 220(a)(1), but that the plaintiff showed, by clear and convincing evidence and with the compelling need Section 220(g) requires for records outside that list, that the current table is necessary and essential to valuing his interest, because the stockholder list does not show how value is allocated among common and preferred shares, including liquidation preferences and conversion rights. Historical tables, loan documents, and valuations were denied; board materials and independence questionnaires addressing whether the April 2025 deals involved related parties were ordered produced; the plaintiff bears his own costs, the report finding that no party prevailed. The report is not final, and exceptions may be taken only after a final report.

Questions addressed in the decisions

In Flannery, the court considered whether a seller's earnout fraud and contract claims were adequately pleaded and ripe while the earnout period continues; In re Saama Technologies (Issue No. 10) decided an earnout dispute after trial. In Greenfield, the court considered whether a founder who signed a side letter individually was personally liable for use-of-funds covenants written as the company's. In Mendoza, a Magistrate in Chancery applied Section 220 as amended in 2025, treating a cap table as outside the enumerated books and records but obtainable under the heightened standard for records outside that list. In Lipp, the court considered whether fees incurred responding to a company's for-cause affirmative defense are advanceable under its bylaws as expenses incurred by reason of the executive's corporate status.

Flannery — further proceedings • Greenfield — supplemental submissions on monetary relief and fees • Mendoza — final report and any exceptions • Cloudflare — the defendants' safe-harbor trial election, due within ten days of the Oct. 16 opinion (Issue No. 11) • Upstart — further proceedings on the surviving claims (Issue No. 11) • FanDuel — trial-court proceedings (Issue No. 11) • Linqto, Groq — responsive pleadings and related motion practice; Aerosonic v. Joby — post-trial developments (Issue No. 10) • ATP — funding orders and district-court appeal (Issue No. 5) • Musk v. OpenAI — judgment and appeal developments (Issue No. 4) • SEC v. Gao — final-relief proceedings (Issue No. 2).