In a precedent-setting decision, the Third Circuit affirmed the district court’s dismissal of all claims

On February 3, 2026, Davis Polk secured an appellate victory for Nuvei Corporation in the Third Circuit. The Third Circuit affirmed the U.S. District Court for the District of Delaware’s dismissal of a lawsuit against Nuvei arising out of its acquisition of Paya Holdings, Inc. The appeal addressed the novel question of whether the Best Price Rule, 17 C.F.R. § 240.14d-10(a)(2), requires a tender offeror to purchase any tendered shares, including those subject to self-imposed transfer restrictions; in a precedential decision, the Third Circuit held that it does not.

The plaintiffs-appellants were holders of earnout shares in Paya, which had gone public through a de-SPAC transaction with Fintech Acquisition Corp. III, a special purpose acquisition company founded by the plaintiffs and their investment vehicles. As part of the de-SPAC transaction, the plaintiffs had entered into a sponsor support agreement, pursuant to which certain of their shares in the SPAC were converted to earnout shares in Paya. Under the terms of the sponsor support agreement, in the event of any future change of control where the price per share paid did not meet a specified threshold, the earnout shares would be automatically forfeited “immediately prior to” the change of control.

In January 2023, Nuvei entered into a merger agreement to acquire Paya for $9.75 per share, a price that would result in forfeiture of the earnout shares under the sponsor support agreement. The transaction was structured as a two-step merger under section 251(h) of the Delaware General Corporation Law (DGCL), which permits a corporation to effectuate a merger without requiring a separate shareholder vote to authorize the merger where the corporation first consummates a tender offer for all of the outstanding stock of the target corporation. Despite the forfeiture provision of the sponsor support agreement, the plaintiffs attempted to tender their earnout shares in the first-step tender offer. Consistent with the terms of the sponsor support agreement, those shares were not accepted as they were subject to forfeiture and could not be validly tendered.

On September 1, 2023, after their earnout shares were not accepted in the offer, the plaintiffs filed suit in Delaware federal court, asserting claims for violations of the All-Holder Rule and the Best Price Rule of the 1934 Act and of section 251(h) of the DGCL, and breach of the merger agreement. Davis Polk filed a motion to dismiss the complaint on November 15, 2023, arguing, among other things, that pursuant to the terms of the sponsor support agreement, the plaintiffs’ earnout shares were subject to transfer restrictions that made them ineligible for tender and, additionally, that they had been forfeited “immediately prior to” Nuvei’s acceptance of any shares for payment in the offer, whereby Nuvei gained control of Paya in a change of control transaction. The plaintiffs opposed the motion to dismiss and moved for summary judgment on the claims.

On October 17, 2024, Judge Gregory B. Williams of the United States District Court for the District of Delaware granted the motion to dismiss the complaint in the entirety, and denied as moot the plaintiffs’ motion for summary judgment. The plaintiffs subsequently appealed, challenging only the portion of the district court’s decision with respect to the Best Price Rule.

On appeal, the Davis Polk team argued, in relevant part, that the district court correctly held that the Best Price Rule, which requires a tender offeror to pay the same consideration for all securities tendered, was inapplicable in this case because it applies only to shares actually purchased. Davis Polk argued that the Best Price Rule did not require Nuvei to pay for the plaintiffs’ earnout shares, which were forfeited by agreement prior to the time of acceptance set forth in the tender offer and, therefore, could not have been purchased for any amount of consideration – or validly tendered in the first place.

The Third Circuit affirmed dismissal, agreeing that the Best Price Rule is “silent as to when, if ever, an offeror must purchase tendered shares or whether that offeror may include in the tender offer terms and conditions of acceptance, such as Nuvei’s requirement that the tendered shares be freely transferable or outstanding at the consummation of the change of control.” It also agreed that the Best Price Rule did not obligate Nuvei to pay for shares that it did not, and could not, purchase. Rather, the Third Circuit held that, “[b]ecause federal law is silent on the issue presented, it is governed by the parties’ private agreements formed under state law.”

The Davis Polk litigation team included partner Brian M. Burnovski (who argued the appeal), counsel Matthew Cormack, and associates Chui-Lai Cheung and Amara Macks Wilson. Partner Evan Rosen provided mergers and acquisitions advice. All members of the Davis Polk team are based in the New York office.

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