Court Grants Summary Judgment Dismissing Counterclaims Where Extrinsic Evidence Confirmed Earnout Could Not Fall Below Zero

Posted: July 13, 2026 / Written by: Jeffrey M. Eilender, Thomas A. Kissane, Samuel L. Butt, Joshua Wurtzel, Channing J. Turner / Categories Contract Interpretation, Summary Judgment, Breach of Contract

Court Grants Summary Judgment Dismissing Counterclaims Where Extrinsic Evidence Confirmed Earnout Could Not Fall Below Zero

On July 2, 2026, in Tromer v. PEAK6 Insurtech Holdings LLC, Index No. 653530/2023, Justice Andrew Borrok granted plaintiff's renewed motion for partial summary judgment dismissing two of defendant's counterclaims.

The dispute arose from a unit purchase agreement under which the sellers of an insurance business sold the business to defendant in exchange for a fixed cash price and a contingent “Earnout Amount.” The earnout formula in Section 2.5(b) contained a clause providing that “in no event shall the Earnout Amount be less than zero dollars ($0).” Defendant counterclaimed that, because two later-added components of the formula appeared after that clause, the earnout could be driven negative and become a payment obligation owed by the sellers to defendant. The court had earlier denied summary judgment and permitted limited discovery of the transaction counsel who negotiated and drafted the agreement. On the renewed motion, the supplemented record—including deposition testimony and the drafting history—established that the zero floor applied to the entire Earnout Amount, and defendant's counsel conceded he could identify no document or communication ever expressing to plaintiff that the earnout could go negative. In granting the motion, the Court explained:

In its opposition papers, the Defendant relies on Mr. Vance's after-the-fact assertion that the zero-floor applies only to prongs (i) through (iii), and that prongs (iv) and (v) may drive the Earnout Amount below zero. However, as discussed above, Mr. Vance concedes that he could not identify a single document, draft, markup, email, or conversation contemporaneously expressing such an understanding, nor any instance in which it was communicated to Plaintiff or his counsel . . . . Mr. Vance also could not point to any document or evidence to substantiate his assertion that the purpose of adding prongs (iv) and (v) were to provide the Defendant with full downside protection. (citation omitted)

Finding no triable issue of fact, the court dismissed the counterclaim for a declaratory judgment and the related counterclaim for breach of contract, reasoning that because the earnout could not be negative, plaintiff could not have breached by failing to pay a negative amount.

The attorneys at Schlam Stone & Dolan LLP have extensive experience litigating disputes over the interpretation of contracts. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning such issues.