Shareholder Representative Services, LLC v. Alexion Pharmaceuticals, Inc.

COURT OF CHANCERY
OF THE
STATE OF DELAWARE
MORGAN T. ZURN LEONARD L. WILLIAMS JUSTICE CENTER
VICE CHANCELLOR 500 N. KING STREET, SUITE 11400
WILMINGTON, DELAWARE 19801-3734

October 23, 2025

Michael A. Barlow, Esquire David E. Wilks, Esquire
Quinn Emanuel Urquhart & Sullivan, LLP Wilks Law, LLC
500 Delaware Avenue, Suite 220 4250 Lancaster Pike, Suite 200
Wilmington, Delaware 19801 Wilmington, Delaware 19805

RE: Shareholder Representative Services, LLC v. Alexion Pharmaceuticals, Inc.,
Civil Action No. 2020-1069-MTZ

Dear Counsel,

As you know, the Court has issued post-trial opinions on liability for failure
to pay a milestone payment and breach of an efforts clause (the “Liability
Opinion”),1 and damages for breach of that efforts clause (the “Damages Opinion,”
and with the Liability Opinion, the “Opinions”).2 The Damages Opinion adopted
the “modern approach” of a floating legal rate, compounded quarterly, for both pre-
and post-judgment interest.3 It directed the parties to confer “on an interest
calculation consistent with the methodology adopted in [the Damages Opinion]” and
submit a proposed stipulated order implementing this Court’s holdings announced
in the Opinions.4 Neither party moved for reargument or reconsideration. But the
parties were unable to agree on the interest calculation, and submitted supplemental
briefing on August 8, 2025.5
1
S’holder Representative Servs. LLC v. Alexion Pharms., Inc., 2024 WL 4052343 (Del.
Ch. Sep. 5, 2024) [hereinafter “Liability Op.”].
2
S’holder Representative Servs. LLC v. Alexion Pharms., Inc., 341 A.3d 513 (Del. Ch.
2025) [hereinafter “Damages Op.”].
3
Id. at 551.
4
Id.
5
Citations in the form of “DB” refer to Alexion Pharmaceutical Inc’s Memorandum
Concerning Prejudgment Interest, available at docket item (“D.I.”) 422. Citations in the
form “PB” refer to Plaintiff and Counterclaim Defendant’s Supplemental Brief in Support
of Pre- and Post-Judgment Interest Calculation, available at D.I. 423.
S’holder Representative Servs. LLC v. Alexion Pharms., Inc.,
C.A. No. 2020-1069-MTZ
October 23, 2025
Page 2 of 8

This letter resolves the parties’ disputes. The first is whether interest on the
unpaid milestone should be simple or compound. The second concerns the rate and
accrual date for interest on damages from the breached efforts clause. This letter
assumes familiarity with the earlier Opinions and their defined terms.

A. Unpaid Milestone

For Milestone 1, the parties agree (1) the payment due date is October 6, 2022,
(2) the interest rate in Section 3.8(e) of the Merger Agreement applies to
prejudgment interest, and (3) the applicable rate of interest is 7.25%.6 Section 3.8(e)
states:

“The Buyer shall pay interest on any Earn-Out Payment that is not paid
on or before the date such payments are due under this this [sic]
Agreement at an annual rate equal to one percent 1% plus the prime
rate as published in The Wall Street Journal in effect on the date such
payment was required to be made calculated on the total number of days
payment is delinquent.”7

The parties dispute how interest should be calculated. SRS seeks quarterly
compounding consistent with the Damages Opinion, while Alexion contends
Section 3.8(e)’s phrase “calculated on the total number of days payment is
delinquent” implies simple per diem interest.8 SRS prevails.

As the Damages Opinion explained in the context of the breached efforts
clause, this Court’s “modern approach calls for compounding interest.” 9 Section
3.8(e)’s plain text does not call for anything different for Milestone 1. The language
directing interest be “calculated on the total number of days payment is delinquent”
specifies a per diem or daily accrual basis, not whether interest is simple or

6
DB 10; PB 5–6.
7
JX 1 § 3.8(e) [hereinafter “Merger Agr.”].
8
DB 10–11; PB 5–8.
9
Damages Op., 341 A.3d at 551 (citing ITG Brands, LLC v. Reynolds Am., Inc., 2025 WL
670818, at *12–14 (Del. Ch. Mar. 3, 2025) (collecting cases)).
S’holder Representative Servs. LLC v. Alexion Pharms., Inc.,
C.A. No. 2020-1069-MTZ
October 23, 2025
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compound.10 Compound interest is also appropriate for Milestone 1 based on market
realities and Alexion’s sophistication; Alexion makes no argument otherwise.11

The interest for payment on Milestone 1 shall accrue from the agreed due date,
at the agreed contract rate, compounded quarterly. I trust the parties can do the math
from here.

B. Efforts Clause

The Damages Opinion awarded SRS the lost present expected value of
Milestones 2 through 8, which were not achieved.12 In post-trial briefing, SRS used
Section 3.8(e)’s “prime rate” for interest on Milestone 1 as well as Milestones 2
through 8.13 The Damages Opinion specified the legal rate, without comment on
any contractual rate.14 Alexion did not move for reargument.

In supplemental briefing, the parties dispute whether Section 3.8(e)’s interest
rate supplants the legal rate for unachieved Milestones. SRS argues Section 3.8(e)’s
contract rate applies only to Milestones that were actually achieved, and the legal
rate applies to the rest. Alexion urges the Court to use Section 3.8(e)’s contract rate
for all Milestones.

In pursuit of getting this right, and in the absence of prejudice to either party
given the opportunity for briefing, I will set aside SRS’s flipflop on position and

10
See, e.g., Fortis Advisors LLC v. Johnson & Johnson, 2024 WL 4048060, at *54 (Del.
Ch. Sep. 4, 2024) (interpreting language requiring interest “calculated on the basis of the
actual number of days elapsed over three hundred sixty (360) from the date such amount
should have been paid” to calculate interest on a daily accrual basis, compounded in the
Court’s discretion).
11
See Brandin v. Gottlieb, 2000 WL 1005954, at *29 (Del. Ch. July 13, 2000); Fortis, 2024
WL 4048060, at *54 (concluding “[the defendant]’s sophistication, plus the years that it
benefitted from non-payment of the earnout, support compound rather than simple
interest”).
12
Damages Op., 341 A.3d at 551.
13
D.I. 364 at 71, 77 n.7, 78 n.8.
14
Damages Op., 341 A.3d at 551.
S’holder Representative Servs. LLC v. Alexion Pharms., Inc.,
C.A. No. 2020-1069-MTZ
October 23, 2025
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Alexion’s failure to move for reargument,15 and take up the issue as the parties
presented it for the first time in supplemental briefing.16 SRS’s reading has some
support. Section 8.3(e) specifies the interest rate “on any Earn-Out Payment that is
not paid on or before the date such payments are due.”17 Milestones 2 through 8
never came due. I cannot conclude the parties to the Merger Agreement expressly
agreed to apply the contract rate to lost expected value arising from a breach of the
efforts provision.

But the principles of expectation damages support using the contract rate.
“Under Delaware law, the standard remedy for breach of contract is based on the
reasonable expectations of the parties that existed before or at the time of the
breach.”18 “This principle of expectation damages is measured by the amount of
money that would put the promisee in the same position as if the promisor had
performed the contract.”19 When determining expectation damages, Delaware
courts award an amount that gives the injured party “the benefit of its bargain[,]”20
by putting “the nonbreaching party in as good a position as he would have been in
had the contract been performed, and no better.”21 Excessive interest is an

15
This Court has discretion to consider a late-filed argument if the opposing party “suffered
no prejudice” from the delay and its consideration. See Rostowsky v. Hirsch, 2024 WL
4491902, at *7 n.111 (Del. Ch. Oct. 15, 2024).
16
See e.g., Dishmon v. Fucci, 32 A.3d 338, 346 (Del. 2011).
17
Merger Agr. § 3.8(e).
18
PharmAthene, Inc. v. Siga Techs., Inc., 2014 WL 3974167, at *7 (Del. Ch. Aug. 8, 2014),
aff’d, 132 A.3d 1108 (Del. 2015).
19
Duncan v. Theratx, Inc., 775 A.2d 1019, 1022 (Del. 2001).
20
Leaf Invenergy Co. v. Invenergy Renewables LLC, 210 A.3d 688, 695 (Del. 2019).
21
Damages Op., 341 A.3d at 526; Dan B. Dobbs, Law of Remedies: Damages—Equity—
Restitution § 12.1(1), at 23 (2d ed. 1993) (footnotes omitted); see Duncan, 775 A.2d at
1022, 1022 n.6; Brandin v. Gottlieb, 2000 WL 1005954, at *29 (Del. Ch. July 13, 2000)
(“Each element of the monetary damages I have awarded consists of funds that [defendant]
diverted to his advantage and that-but for his breach of his obligations to [plaintiff]-would
have been [. . .] paid out to [plaintiff].”).
S’holder Representative Servs. LLC v. Alexion Pharms., Inc.,
C.A. No. 2020-1069-MTZ
October 23, 2025
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“undeserved windfall for the plaintiffs and an unjustified penalty for the
defendants.”22

Had Alexion performed its obligations and any of Milestones 2 through 8 been
achieved, any overdue earnout payment would have accrued interest at
Section 3.8(e)’s agreed rate of prime plus 1%. That rate represents the benefit of the
bargain––the measure of expectation damages, and no more. Syntimmune’s
stockholders bargained for that rate in the event of delayed payments, so they should
not now receive the windfall of a higher interest rate. During the relevant period,
the statutory rate has been approximately 1% higher than the contract’s prime-plus-
1% rate.23

Fortis is again instructive. There, the merger agreement also provided a
prime-based interest rate for late earn-out payments upon “the achievement” of
milestones, specifying that rate applied “[i]f any Earnout Payment . . . is not paid
in full” by the contractual deadline.24 Fortis applied the contract’s prime-based rate
22
Ryan v. Tad’s Enters., Inc., 709 A.2d 682, 705 (Del. Ch. 1996), aff’d, 693 A.2d 1082
(Del. 1997).
23
6 Del. C. § 2301 (defining Delaware’s legal rate as 5% over the Federal Reserve discount
rate); U.S. Prime Rate History, FedPrimeRate, http://www.fedprimerate.com/wall_street_
journal_prime_rate_history.htm; Federal Discount Rate (DISC) Historical Data, Nasdaq,
https://www.nasdaq.com/market-activity/fixed-income/disc/historical?page=16&rows_
per_page=10&timeline=y5.
24
Fortis Advisors LLC v. Johnson & Johnson, C.A. No. 2020-0881-LWW, Transmittal
Declaration of Elizabeth A. Mullin Pursuant to 10 Del. C. Section 3927 in Support of
Opening Brief in Support of Defendants’ Partial Motion to Dismiss (with Certificate of
Service), at D.I. 24, Ex. A § 2.07(d)(vii) (“If any Earnout Payment payable pursuant to
this Section 2.07 is not paid in full within ten (10) business days after Parent shall have
delivered notice to the Stockholders’ Representative of the achievement of the applicable
Milestone pursuant to Section 2.07(c) (or, if any Milestone is otherwise determined to be
payable pursuant to this Section 2.07 but Parent failed to provide such required notice),
then interest shall accrue on such unpaid amount at a rate per annum equal to the prime
rate of interest reported from time to time in The Wall Street Journal, calculated on the
basis of the actual number of days elapsed over three hundred sixty (360), from the date
such amount should have been paid pursuant to the terms of this Agreement (assuming for
this purpose that the applicable notice required pursuant to Section 2.07(c) was timely
delivered) to the date of actual payment in full of such amount.”) (emphasis added).
S’holder Representative Servs. LLC v. Alexion Pharms., Inc.,
C.A. No. 2020-1069-MTZ
October 23, 2025
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to the contract damages for each milestone, including those never achieved, because
the prime-based rate “was not only agreed upon by the parties, but also considered
the best measure of the commercial lending rate used by banks for loans to
creditworthy customers.”25 So too here.

SRS and Alexion also dispute whether interest should run from the date of
breach of the efforts provision, or the date each Milestone would be due. On this,
Delaware law is clear: the date payment was due.26 Prejudgment interest is measured
from the date on which damages began to accrue; in other words, the date on which
the plaintiff was owed funds the defendant should have paid.27 This is a matter of
law, not discretion.28 Where the underlying obligation to make payment arises from

25
Fortis, 2024 WL 4048060, at *54–55 (applying the contract rate to contract claims and
the legal rate to fraud claim).
26
Citadel Holding Corp. v. Roven, 603 A.2d 818, 826 (Del. 1992) (“In Delaware,
prejudgment interest is awarded as a matter of right. Such interest is to be computed from
the date payment is due.”) (citation omitted).
27
Vivint Solar, Inc. v. Lundberg, 2024 WL 2755380, at *37 (Del. Ch. May 30, 2024); Am.
Gen. Corp. v. Cont’l Airlines Corp., 622 A.2d 1, 13–14 (Del. Ch. 1992), aff’d, 620 A.2d
856 (Del. 1992) (holding “[t]he date of the breach[ ] is not the appropriate starting point
for the computation of interest” and instead the appropriate date from which to measure
prejudgment interest is “the date on which [ ] damages began to accrue”); Delphi
Petroleum, Inc. v. Magellan Terminal Holdings, L.P., 2017 WL 6371162, at *2 (Del. Dec.
12, 2017) (TABLE) (“Generally, pre-judgment interest accumulates from the date payment
was due to a party, or alternatively ‘when the plaintiff first suffered a loss at the hands of
the defendant.’”); Brandywine Smyrna, Inc. v. Millennium Builders, LLC, 34 A.3d 482,
486 (Del. 2011) (“[I]n addition to the principle that prejudgment interest in Delaware cases
is awarded as a matter of right, the general rule is that interest accumulates from the date
payment was due the plaintiff, because full compensation requires an allowance for the
detention of the compensation awarded and interest is used as a basis for measuring that
allowance.”) (internal quotations and citations omitted); In re Mindbody, Inc., S’holder
Litig., 2023 WL 7704774, at *10 (Del. Ch. Nov. 15, 2023) (noting “the compensatory and
disgorgement purposes of prejudgment interest arise from the premise that the damages
award was ‘plaintiff’s money’—money that the plaintiff would have had in her possession
absent wrongdoing”).
28
Citadel, 603 A.2d at 826.
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contract, the Court looks to the contract itself to determine when interest should
begin to accrue.29

Again, Fortis paves the way. There, this Court similarly discounted each
milestone payment to the date of breach to reflect its present value, but calculated
interest from the contractual payment deadlines.30

This framework aligns with the idea behind expectation damages: had the
contract been performed, the milestone payments would not have been owed before
their due dates. Alexion’s breach did not deprive SRS of funds it was entitled to
receive before those due dates. And SRS and Syntimmune’s stockholders did not
suffer any loss from not being paid before those dates. Awarding interest before the
due dates would place SRS in a better position than it would have been in had the
contract been fully performed. Alexion’s calculation confirmed this point.31

The Merger Agreement specifies when each earnout payment would be due if
earned.32 The trial record provides evidence as to when those payments would be
earned absent the breach; the Damages Opinion identified Milestone Expected

29
Id.
30
Fortis, 2024 WL 4048060, at *54–55.
SRS’s cited authorities are inapposite. In Delphi Petroleum, Inc. v. Magellan
Terminal Holdings, L.P., the plaintiff paid a monetary overcharge on a specific date, so the
loss occurred that day when the plaintiff’s money left its hands. 2017 WL 6371162, at *1–
2. Delphi does not hold that the breach date always starts interest calculations even if the
monetary loss happens later. SRS also cites two cases addressing breach of an obligation
to negotiate in good faith, without any fixed payment date: lacking a concrete accrual
point, the courts treated the breach date as the most practical proxy for when the loss
occurred. See generally PharmAthene v. SIGA Techs., Inc., 2011 WL 4390726 (Del. Ch.
Sep. 22, 2011), aff’d in part, rev’d in part, 67 A.3d 330 (Del. 2013); PharmAthene, Inc. v.
SIGA Tech., Inc., 2014 WL 3974167 (Del. Ch. Aug. 8, 2014), aff’d, 132 A.3d 1108 (Del.
2015); Murphy Marine Servs. of Del., Inc. v. GT USA Wilmington, LLC, 2022 WL 4296495
(Del. Ch. Sep. 19, 2022).
DB 5–6 (stating that SRS’s proposed method for calculating interest adds a windfall of
31

more than $46 million).
32
Merger Agr. §§ 1.1, 3.8(b), 3.8(e).
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October 23, 2025
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Achievement Dates and Payment Due Dates determined by a preponderance of the
evidence.33 Prejudgment interest should accrue only from Payment Due Dates that
have passed: only in those instances has Alexion’s breach deprived SRS of money
Alexion would have otherwise paid.34 Only Milestones 2 (projected due July 30,
2025) and 3 (projected due September 29, 2025) would have expired before the
expected judgment date. The remaining milestones (due beginning May 17, 2028)
have not yet matured and so do not accrue prejudgment interest.

Thus, for Milestones 2 and 3, interest shall be calculated at the contract rate
of prime plus 1%, accruing as of the respective Payment Due Dates, compounded
quarterly. From here, I trust the parties can do the math. The parties should attempt
again to submit a stipulated implementing order consistent with this methodology.

Sincerely,

/s/ Morgan T. Zurn

Vice Chancellor

MTZ/ms

cc: All Counsel of Record, via File & ServeXpress

33
Damages Op., 341 A.3d at 545–46.
34
Id.