Zeta Global Corp. v. Socialcom CA2/7
B327582
Cal. Ct. App.Apr 15, 2025Background
- Zeta Global Corp. acquired Sizmek, Inc.’s assets (including a DSP platform and receivables), and entered into a binding letter of intent with Socialcom, Inc. (AudienceX) for the transfer of certain clients and other terms.
- Under the letter of intent, AudienceX agreed to pay a 25% quarterly earnout on transferred accounts and potentially receive $3.6 million in Zeta stock; Zeta agreed to use its best efforts to transfer 217 client accounts to AudienceX.
- Disputes arose over AudienceX’s unpaid receivable to Sizmek ($1.2M), Zeta’s failure to transfer accounts and stock, and compensation for untransferred client revenues.
- Zeta sued AudienceX for breach of the Sizmek Partner Agreement and the letter of intent, seeking damages and attorney’s fees; AudienceX cross-claimed for Zeta’s failure to transfer stock and to use best efforts on client transfers.
- After a bench trial, the trial court ruled in Zeta’s favor on both contract claims (awarding Zeta $2.14M), awarded partial stock damages to AudienceX, found insufficient proof Zeta’s breach caused harm on client transfers, and awarded Zeta attorney fees; AudienceX appealed.
- The appellate court reversed in part, holding AudienceX did not breach the letter of intent by failing to pay Sizmek Receivable (it was a condition precedent, not a promise), AudienceX was entitled to full stock damages and prejudgment interest, and the award of attorney fees was vacated and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of Sizmek Partner Agreement | AudienceX owed and failed to pay full $1.2M | Debt reduced by $300K; novation existed | No novation proved; AudienceX owes $1.2M under Sizmek agreement |
| Breach of Letter of Intent (LOI) – Receivables | AudienceX’s nonpayment breached LOI | Payment was only a condition, not a promise | No breach—payment of receivable was a condition precedent under LOI |
| Zeta's Obligation to Grant Stock | AudienceX forfeited most stock by breach | Entitled to 100% of stock since no breach | AudienceX entitled to 100% stock; no breach of LOI by AudienceX |
| Zeta's Obligation to Use Best Efforts for Clients | No damage because client transfer speculative | Zeta's breach caused lost profits | No damages; evidence speculative on linkage between breach and lost profits |
| Prejudgment Interest on Stock Damages | Not warranted; damages unliquidated | Should be awarded from LOI date | Interest to be calculated from IPO date, when value ascertainable |
| Attorney Fees | Zeta prevailing party, should get fees | Should be recalculated due to reversed ruling | Fee award vacated; trial court to determine prevailing party on remand |
Key Cases Cited
- Berg v. Liberty Federal Savings and Loan Assn., 428 A.2d 347 (Del. 1981) (Burden of proof on party claiming novation; novation must be proved, not presumed)
- Aveta Inc. v. Bengoa, 986 A.2d 1166 (Del.Ch. 2009) (Elements of novation and contract formation interpreted by objective manifestation, not mere subjective belief)
- Delta Eta Corp. v. University of Delaware, 2 A.3d 73 (Del. 2010) (Prejudgment interest awarded as a matter of right in contract actions)
- Brandywine Smyrna, Inc. v. Millenium Builders, LLC, 34 A.3d 482 (Del. 2011) (Interest accrual is dictated by contract and date damages become ascertainable)
- Siga Technologies, Inc. v. PharmAthene, Inc., 132 A.3d 1108 (Del. 2015) (Damages must be proved with reasonable certainty, but absolute certainty is not required)