In re SwervePay Acquisition, LLC, Consol. C.A. No. 2021-0447-KSJM, Del. Ch. (July 29, 2026), full opinion (PDF)
Buyers in a Delaware fraud trial rested their causation defense on one document, and the Court of Chancery has now given that document’s key figures no weight. The accounting data behind it was deleted when a third party stopped paying for the software that held it, after Sellers had twice moved to compel exactly that data.
The court found every element of spoliation satisfied under Court of Chancery Rule 37(e)(1) and then declined to impose sanctions. The remedy arrived through the weight of the evidence. A party can lose the benefit of its most important exhibit without a sanctions motion ever being granted.
What Happened
OSC Investment, L.P. acquired SwervePay, LLC on February 24, 2020 through a Membership Interest Purchase Agreement. The agreement provided three potential earnouts, each contingent on net payments revenue targets during the period of January 1, 2021 through December 31, 2021. Those targets depended on payment volume, take rate, and conversion rate. Sellers claim Buyers fraudulently induced them into entering the purchase agreement, and that claim proceeded to trial.
On July 8, 2022, after Sellers initiated the litigation, Buyers sent Sellers an Earnout Statement. It implies a 2021 take rate of 0.17% and a conversion rate of 12.5%. Sellers moved to compel the documents supporting those figures on July 7, 2023, and again on February 16, 2024. Buyers represented that all responsive documents had been or would be produced. Sellers moved a third time on June 18, 2024, and the court-appointed discovery magistrate recommended granting the motion.
Buyers then disclosed why the documents had never come. The transaction data and invoices sat in Intacct, the accounting software used by Ontario Systems, LLC, and that information was inadvertently deleted in February 2024 when Ontario did not renew the company’s Intacct subscription.
The Court’s Analysis
Court of Chancery Rule 37(e)(1) reaches ESI a party was obligated to preserve that “is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery”. The court applied a four-part framework covering the duty to preserve, loss, reasonable preservation efforts, and prejudice.
Buyers contested only loss and prejudice. Because they created the Earnout Statement while the litigation was pending and made it the cornerstone of their proximate causation argument, the duty to preserve its inputs went undisputed. On loss, Buyers argued the relevant information had been produced, but they conceded they “no longer have access to the Intacct platform”. On reasonableness, timing decided the question. Sellers had moved to compel twice by February 2024, and the court held that Buyers were on notice of that data’s relevance by the time they let the subscription lapse.
Prejudice took the most analysis. Sellers needed the lost data to verify the Earnout Statement’s calculations, and other documents gave them reason to doubt it. Ontario’s own board presentations stated that its December 2021 year-to-date take rate was 0.61%, and a Blue Star investor presentation prepared in November 2021 stated that the take rate was 0.92%. The court observed that the lower of those two figures alone would have made the damages case much easier for Sellers to prove. Both of Buyers’ experts confirmed at trial that they used the 0.17% take rate drawn from the Earnout Statement, relied on its accuracy, and did not independently review the underlying invoice and transaction data. Without that data, the court found, neither Sellers nor the court itself could verify the two rates at the customer level.
That left the remedy. With the benefit of a fully developed trial record, “the court declines to impose sanctions but finds that Sellers’ concerns speak to the weight of the evidence”. The take rate and conversion rate got no weight.
Why It Matters
Preservation duties travel to vendors and portfolio companies. The data here sat in accounting software belonging to Ontario Systems, and the subscription lapsed while the litigation was live. A litigation hold that stops at the client’s own systems misses the systems that generate the client’s numbers.
A subscription renewal is a preservation event. Cloud data can disappear on a billing schedule rather than through a deliberate deletion. Inventory the platforms holding relevant data, then put their renewal dates on the hold calendar.
Motions to compel start the notice clock. Two motions aimed at the Earnout Statement’s supporting documents were already on file when the subscription lapsed, and that sequence decided the reasonableness question. Once an opponent has asked for specific data in writing, the argument that its relevance was unforeseeable is gone.
Watch the weight determination, not only the sanctions motion. The court declined to preclude the Earnout Statement before trial and imposed no sanctions after it, and the exhibit’s key figures still counted for nothing. In a bench trial, a Rule 37(e) record can do its work through the fact-finder’s assessment of the evidence.
The full opinion is available as a PDF.
