A Delaware court recently issued a decision in the case of Georgia Security Solutions LLC v. NewCBN, LLC, concerning a dispute over an earnout payment following the sale of a video monitoring business. The ruling affects both parties involved in the transaction, particularly Georgia Security Solutions, which is seeking compensation, and NewCBN, which is facing allegations of improper conduct. The outcome of this case is significant as it clarifies the interpretation of contractual obligations related to earnout payments in business sales.
The case originated from a membership interest purchase agreement between Georgia Security Solutions, formerly known as ControlByNet, and NewCBN, LLC, along with its affiliates. The agreement included a provision for a contingent earnout payment of up to $6 million, based on the company’s recurring revenue during a specified period. Disputes arose when Georgia Security Solutions claimed that NewCBN had breached the agreement by failing to properly calculate the recurring revenue and by not providing necessary documentation.
Georgia Security Solutions, led by its founder Ryan Strange, sold its business to NewCBN in August 2022. The deal included not only an upfront payment but also the potential for additional earnings based on the company’s performance over the following year. However, after the sale, Georgia Security Solutions alleged that NewCBN had sidelined key personnel, including Strange, and made operational changes that negatively impacted the company’s revenue.
As the earnout period ended, NewCBN reported that the recurring revenue fell short of the threshold required for the earnout payment. After unsuccessful attempts to resolve the disputes, Georgia Security Solutions filed a lawsuit in July 2025, claiming breach of contract and seeking specific performance to enforce the terms of the agreement.
In its ruling, the Delaware Court of Chancery addressed several key issues raised by NewCBN's motion to dismiss the case. The court ruled that the independent accountant mechanism outlined in the agreement does not serve as an arbitration provision, meaning that the court retains jurisdiction over the fundamental legal questions presented by Georgia Security Solutions. The judge stated, "The Seller’s disputes are mainly for this court to decide. Once the court has resolved them, the accountant can apply those rulings to calculate recurring revenue and the amount of any earnout payment." This ruling allows the court to address the claims directly rather than relegating them to an independent accountant.
However, the court did grant part of NewCBN's motion to dismiss regarding the implied covenant claim and certain breach of contract theories. This means that while some of Georgia Security Solutions' claims will proceed, others have been dismissed, narrowing the scope of the litigation.
The impact of this ruling is significant for both parties. For Georgia Security Solutions, the court's decision affirms its ability to challenge NewCBN's actions and seek damages related to the earnout payment. For NewCBN, the ruling exposes the company to further scrutiny regarding its conduct during the earnout period and its compliance with the contractual obligations outlined in the agreement.
This case may set a precedent for future business transactions involving earnout provisions, particularly in how courts interpret the roles of independent accountants versus judicial authority in resolving disputes. The ruling emphasizes the importance of clear contractual language and the need for parties to adhere to the terms of their agreements.
Looking ahead, the case is not yet resolved, as the court will need to determine the specifics of the disputes raised by Georgia Security Solutions. The court will address whether NewCBN breached its obligations under the agreement and the extent of any damages owed. Depending on the outcome, there may also be further appeals or related cases that arise from this decision.