An acquirer tried to end two claims early. It's paying the seller's costs instead
An Ontario court has refused to strike allegations that an acquirer made it effectively impossible for a sold company's earnout targets to be met.
In a decision dated June 17, 2026, the Ontario Superior Court of Justice declined to dismiss the claims before trial.
The dispute traces to a share purchase. In August 2021, the acquirer bought the shares of a company that provides technology-enabled contents claim handling services. The price combined cash upfront with possible earnout payments tied to performance in 2022 and 2023.
The 2022 target was missed. The parties negotiated and, in August 2023, signed an amending agreement that released the 2022 earnout claims, redefined the performance target, and added new obligations. The revised target, moved to 2024, was also not reached, and no further amount was paid to the former shareholders.
The representative of the former shareholders started the action in July 2025. The claim alleges various breaches of contract that allegedly frustrated the revised 2024 target, along with negligent misrepresentation and oppression. The claim was later amended to add fraudulent misrepresentation, with negligent misrepresentation pleaded in the alternative.
The acquirer moved to strike the negligent misrepresentation and oppression claims, arguing they disclosed no reasonable cause of action. It said the misrepresentation claim rested on promises about future conduct, and that the oppression claim duplicated the contract case. The judge disagreed on both points.
Applying the "plain and obvious" test that governs motions to strike, the judge found the misrepresentation claim was not only about the future, because the seller pleaded that the buyer made representations it had no genuine intention of carrying out. On oppression, the judge called the claim close to the line but let it stand, noting the seller alleges the buyer used its exclusive control over the company's operations to make the earnout targets effectively impossible to achieve. The motion was dismissed, and the acquirer was ordered to pay $40,000 in costs within 30 days.
For advisors and the firms that counsel business-owner clients, the ruling is a useful marker. Nothing has been proven, and the court decided only that the claims can proceed. But it shows that a contractual release and a defined earnout formula do not automatically end misrepresentation and oppression claims, and that the oppression remedy can reach an acquirer's conduct after a deal closes. It is also a reminder that a motion to strike is not a guaranteed shortcut. Here, the bid to remove two claims early left the buyer covering the seller's costs.
