Earnouts, working-capital adjustments, and similar price-adjustment mechanisms in private deals or public company carveouts routinely assign certain disputes to an independent accountant — a device parties favor for speed, expertise, and finality. But a perennial question drags those efficient dispute assignments into court: how much can that accountant decide? This week, the Delaware Court of Chancery drew a line that bears close review, holding that the parties had agreed to an expert determination process and not an arbitration, so the accountant could resolve accounting questions but not legal questions the contract left to the Court. Calling the expert’s determination a binding “arbitration award” did not change the parties’ bargain.

In Georgia Security Solutions, LLC v. NewCBN, LLC (Del. Ch. Aug. 3, 2026), the sale of a video monitoring business included a potential $6 million earnout tied to recurring revenue. The agreement limited the buyer’s conduct during the earnout period, gave the seller information rights, and sent unresolved earnout disputes to an independent accountant for a binding determination “deemed to be an arbitration award.” When the buyer reported revenue just below the threshold, the seller alleged the buyer had sidelined the founder, reassigned key personnel, and caused accounting problems in breach of the agreement. The seller sued, and the buyer moved to dismiss, insisting the dispute instead belonged before the accountant as arbitrator.

The Court disagreed. Naming an accountant, prescribing an informal process, and confining the submission to accounting questions all pointed to expert determination. The “arbitration award” label did not expand the accountant’s remit. The accountant could apply GAAP, measure qualifying revenue, and interpret terms tied to the calculation. The Court, however, would first decide the claims relating to the measurement period, alleged covenant and information-rights breaches, and remedies, leaving the accountant then to calculate the earnout. According to the Court, a “sole recourse” clause did not alter that division, including because other provisions contemplated judicial enforcement and relief.

The decision underscores the importance of defining in the agreement how much authority an expert adjudicator should have over disputes. The agreement should state whether the accountant acts as an expert or arbitrator, who decides whether a dispute falls within its authority, which terms it may interpret, and what remedies it may grant. If accountants or other experts are meant to function as arbitrators, contracts should say so expressly, authorize them to decide legal and factual issues, and specify the arbitral rules. The design must also be tested against the chosen governing law, as courts outside Delaware vary in how they treat the “arbitration” label and determine whether a process constitutes arbitration under the Federal Arbitration Act or analogous law. Precise drafting can help to spare the parties the substantive and procedural risks of complexity, error, uncertainty, and delay presented by a two-front proceeding — before both a court and an accountant — that such widely used dispute-resolution mechanisms are meant to avoid.

This post is based on a Wachtell, Lipton, Rosen & Katz memorandum, “Delaware Chancery Draws the Line Between Expert and Arbitrator in Earnout Disputes,” dated August 6, 2026.