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Delaware Chancery Vacates Accounting Expert Determinations That Implicated Legal Indemnity Claims
06/17/2025On June 3, 2025, Vice Chancellor Lori W. Will of the Delaware Court of Chancery granted in part and denied in part respective cross-motions for summary judgment in a dispute between a Bitcoin mining company (the “Buyer”) and a data center company (the “Seller”) regarding an accounting expert’s determinations in the post-closing price adjustment process for the transaction. Northern Data AG v. Riot Platforms, Inc., 2023-0650-LWW (Del. Ch. June 3, 2025). After closing, the parties disagreed on the final price and submitted several issues to an accounting expert. The expert resolved four issues in favor of the Buyer and the Seller then sued to vacate the expert’s determinations. As to two of the four issues, the Seller claimed that the accounting expert defied his contractual mandate by adhering to generally accepted accounting principles (GAAP) to the exclusion of the Seller’s historical accounting practices. On the other two issues, the Seller insisted that they dealt with indemnity claims that fell outside the accounting expert’s authority. The Court granted summary judgment to the Buyer on the first set of issues and granted the summary judgment to the Seller on the second set.
As to the first set of issues, the Seller argued that, in resolving a dispute about whether certain payments should be recognized as deferred revenue as of closing, the expert only conducted his analysis under GAAP and ignored the Seller’s historical practices for recording revenue. The parties’ Share Purchase Agreement (SPA) required that the expert’s analysis be “in accordance with GAAP, in a manner in accordance and consistent with” the Seller’s own accounting statements. In reviewing the accounting expert’s findings under the manifest error standard, the Court held that the expert did not deviate from the requirements of the SPA because the Seller’s revenue recognition methodology was inconsistent with GAAP and the SPA only required that the Seller’s accounting practices being taken into account if “there [we]re multiple ways to apply GAAP” on a particular accounting issue.
As to the second two issues, the Seller alleged that the expert exceeded his authority by providing opinions as to two items that related to indemnity claims—regarding the Seller’s alleged double billing of a client and the Seller’s liability to pay a disputed invoice from its electricity provider—rather than accounting methodologies. The issues respectively implicated the nature and scope of the Seller’s accounts receivable and indebtedness, both of which the Seller represented and warranted to in the SPA. The SPA required that claims for breaches of representations and warranties be resolved through specified indemnity provisions. The Court held that “[t]hese are indemnity claims that involve legal issues” and thus that the accounting expert “lacked the authority to resolve such matters” even if they “related to an accounting matter.”
