Silvaco, Inc. vs. Andersen, et al

Case Background

On December 4, 2020, Plaintiff Silvaco, Inc., a Delaware corporation, filed a Breach of contract dispute lawsuit in the California State Superior Court of Santa Clara County (Case number:  20CV374355). Judge Charles F Adam presided over this case.

Cause

On March 2, 2018, Silvaco, Inc. entered into a Stock Purchase Agreement (SPA) to acquire the stock of Nangate, Inc., and Nangate Denmark ApS. The SPA aimed to secure all rights to Nangate’s intellectual property, including tools for creating, optimizing, characterizing, and validating standard cell library IP. In exchange, Silvaco paid an upfront amount and agreed to provide earn-out payments for five years, contingent on revenue generated from Nangate’s products. These payments specifically applied to Nangate tools, such as the Nangate Characterizer, when integrated with Silvaco’s SmartSpice product.

Despite the clear terms outlined in the SPA, a contract dispute arose between Silvaco and the defendants. The defendants included former Nangate shareholders and representatives. They claimed entitlement to broader compensation under the SPA. Silvaco argued that these claims were inconsistent with the agreement’s terms. Silvaco maintained that only products incorporating the Nangate Characterizer or its derivatives qualified for earn-out payments. This led to disagreements over the proper interpretation of the contract.

Injuries

The contract dispute caused significant operational and legal challenges for Silvaco, diverting resources from its core business activities. The defendants submitted untimely audit requests and initiated disputes over earn-out payments using methods that violated the SPA. These actions disrupted Silvaco’s business litigation efforts, created uncertainty regarding the earn-out process, and delayed resolution of the underlying issues.

Damages

Silvaco incurred substantial financial losses due to the contract dispute. Legal fees, internal resource allocation, and reputational harm added to the strain caused by the defendants’ untimely audit requests. The defendants also made baseless claims, which intensified the strain. The ongoing litigation disrupted Silvaco’s financial planning. It also created unnecessary tension with the defendants. These factors further compounded the damages resulting from the protracted contract dispute.

Key Arguments and Proceedings

Legal representation

  • Plaintiff(s): Silvaco, Inc., Delaware corporation
    • Counsel for Plaintiff: Andrea Levenson | Annie Nicholson | Jason T Lao | Kenneth Gerald Parker | Mark David Erickson | Mark R Yohalem
  • Defendant(s): Ole Christian Andersen, an individual | Jens Michelsen, an individual | JPTB Family Holding ApS, Danish corporation | Guilherme Simoes Schlinker, an individual | Does 1 through 10, inclusive
    • Counsel for Defendants: Brett M. Schuman | Faraz Behnamjou | Jennifer Briggs Fisher | Michael Chaocha Ting | Michaela C Ogden | Thomas J Gray | Jesse Y Cheng | Megan Deanne Bettles

Claims

Silvaco sought a declaratory judgment to clarify its rights and obligations under the SPA. Specifically, Silvaco argued that earn-out payments should only apply to new products incorporating the Nangate Characterizer or its derivatives. The company claimed that the defendants’ audit requests and dispute filings were untimely and inconsistent with the SPA. Silvaco urged the court to confirm its interpretation of the agreement to prevent further unfounded claims, emphasizing the need to uphold California civil law principles governing business litigation and contract disputes.

Defense

The defense contended that Silvaco failed to fulfill its obligations under the SPA by improperly calculating and withholding earn-out payments. They argued that Silvaco breached the SPA by excluding revenues from products and services that should have qualified for earn-out payments. The defense also accused Silvaco of acting in bad faith. They claimed Silvaco violated the implied covenant of good faith and fair dealing. Additionally, they argued that Silvaco withheld essential documentation necessary for audits. The defense contended that Silvaco’s actions caused financial harm by reducing their agreed compensation. They sought remedies under California law for the ongoing contract dispute.

Jury Verdict

On July 23, 2024, the jury ruled in favor of Nangate on several claims, awarding a total of $35,006,500 in damages. The jury determined that Silvaco breached the SPA by failing to perform its required obligations and engaging in prohibited actions, while Nangate had fulfilled its contractual duties. For this breach, the jury awarded $11.5 million in damages.

The jury also found that Silvaco breached the implied covenant of good faith and fair dealing, awarding Nangate an additional $11.5 million.

On the intentional misrepresentation and false promise claims, the jury concluded that Silvaco knowingly made false statements and promises with the intent for Nangate to rely on them. Nangate’s reliance was deemed reasonable. For these claims, the jury awarded $6 million in damages each.

The jury further determined that Silvaco’s actions involved malice, oppression, or fraud, which substantially harmed Nangate.

Regarding Kathy Petta, the jury found that she engaged in false representation and made promises without intending to perform them, causing harm to Nangate. For this, the jury awarded $6,500 in damages but declined to impose prejudgment interest. The jury also found her negligent misrepresentation lacked reasonable grounds and contributed to Nangate’s losses.

In total, Nangate was awarded $35,006,500 in damages, highlighting the significant financial repercussions of the contract dispute and the importance of adhering to the terms of a Stock Purchase Agreement.

Court Documents:

Documents are available for purchase upon request at jurimatic@exlitem.com