Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP
CA 7906-VCG
Del. Ch.Jul 26, 2017Background
- In September 2011 Great Hill purchased Plimus (now BlueSnap) for $115 million by merger. After the deal closed, Plimus lost key processor relationships with Paymentech and PayPal, which Plaintiffs say greatly reduced company value.
- Plaintiffs (Great Hill) sued for fraud, aiding and abetting fraud, conspiracy, indemnification, and unjust enrichment against Plimus insiders (CEO Hagai Tal, founders Herzog and Kleinberg), SIG (largest stockholder and its agents), a former VP (Irit Itshayek), and two charity stockholders who received donated Plimus shares.
- Plaintiffs allege defendants concealed material information about deteriorating processor relationships and that certain payments (a “Side Letter”) constituted hush money to hide Tal’s lack of confidence, causing Great Hill to overpay.
- Defendants moved for partial summary judgment on discrete facts (Side Letter, processor terminations, and available damages/indemnification limits), arguing no material disputes remain.
- The Court denied the motions, finding that many disputed issues—particularly motive, intent, and the scope of indemnification/liability—are factual and best resolved after a full trial record.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether summary judgment is appropriate on claims tied to the Side Letter and withheld processor information | The Side Letter and concealment of processor problems show fraudulent scheme rendering summary adjudication improper | Evidence is undisputed on key facts; no material issue warrants trial on those discrete matters | Denied — intent/motive and related facts require trial; summary judgment inappropriate |
| Whether defendants’ state of mind (fraud/recklessness) can be resolved on summary judgment | Plaintiffs assert fraudulent intent and conspiracy by multiple defendants | Defendants contend absence of scienter or reckless indifference; facts are uncontroverted in their favor | Denied — court emphasizes when motive or intent is material, summary judgment is ordinarily inappropriate |
| Whether the charity stockholders can be held jointly and severally liable beyond escrow/indemnity caps | Plaintiffs argue contractual limits may not bar fraud-based recovery and charities understood potential liability | Charity defendants argue their liability is capped by merger escrow/letters of transmittal and undisputed contractual terms | Denied — ambiguity in merger agreement and parties’ understanding of indemnification warrants trial to determine limits and liability |
| Whether the merger agreement’s indemnification and escrow terms limit damages as a matter of law | Plaintiffs argue fraud can negate contractual caps; facts about parties’ understanding are disputed | Defendants claim contractual language limits indemnity and damages, supporting partial judgment | Denied — merger language ambiguous; resolution requires factual development at trial |
Key Cases Cited
- Cont'l Oil Co. v. Pauley Petroleum, 251 A.2d 824 (Del. 1969) (standard that summary judgment inappropriate where factual disputes exist)
- Vanaman v. Milford Mem'l Hosp., Inc., 272 A.2d 718 (Del. 1970) (summary judgment standard)
- Abry Partners V, L.P. v. F & W Acquisition LLC, 891 A.2d 1032 (Del. Ch. 2006) (court’s respect for anti-fraud principles in chancery matters)
- Freeman v. Topkis, 15 A. 174 (Del. Super. Ct. 1893) (expressing the law’s abhorrence of fraud)