Timothy H. Meyers v. Zimmer Biomet Holdings, Inc. and Embody, Inc.

── Timothy H. Meyers v. Zimmer Biomet Holdings, Inc. and Embody, Inc. ── Court: Court of Chancery of Delaware Date: May 01, 2026 Category: General IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE TIMOTHY H. MEYERS, Securityholder ) Representative, solely in his capacity as ) representative of the former Embody, ) Inc. Securityholders, ) ) Plaintiff, ) ) v. ) C.A. No. 2025-0732-BWD ) ZIMMER BIOMET HOLDINGS, INC. ) and EMBODY, INC., ) ) Defendants. ) MEMORANDUM OPINION RESOLVING MOTION TO DISMISS Date Submitted: April 1, 2026 Date Decided: May 1, 2026 Patricia L. Enerio and Brendan Patrick McDonnell, HEYMAN ENERIO GATTUSO & HIRZEL LLP, Wilmington, DE; OF COUNSEL: James D. Herschlein, Angela R. Vicari, Rebecca Zoller, ARNOLD & PORTER KAYE SCHOLER LLP, New York, NY; Attorneys for Plaintiff Timothy H. Meyers. Jody C. Barillare, MORGAN, LEWIS & BOCKIUS LLP, Wilmington, DE; OF COUNSEL: Troy S. Brown, Su Jin Kim, Shawn F. Summers, MORGAN, LEWIS & BOCKIUS LLP, Philadelphia, PA; Attorneys for Defendants Zimmer Biomet Holdings, Inc. and Embody, Inc. DAVID, V.C.  The plaintiff in this action, the designated securityholder representative under a merger agreement, seeks to recover earnout consideration and other damages under theories of fraud, breach of a contractual obligation to use commercially reasonable efforts to achieve earnout milestones, and breach of the implied covenant of good faith and fair dealing. Embody, Inc. (“Embody”) was a Virginia corporation developing medical devices to treat soft tissue injuries. Zimmer Biomet Holdings, Inc. (“Zimmer”) proposed to acquire Embody. As alleged in the complaint, Zimmer represented in negotiations that it was hiring, and had budget approval to hire, 94 sports medicine sales representatives over the next two years, positioning Embody to become the centerpiece of its expanding sports medicine business. Zimmer allegedly also represented to Embody that it would be “comfortable” implementing Embody’s existing plans to develop its products. According to the plaintiff, however, Zimmer never intended to hire 94 sales representatives and did not have budget approval to do so, nor would it follow Embody’s plans for product development. The parties negotiated a merger agreement under which Zimmer acquired Embody for an initial cash payment of $155 million plus possible earnout payments over a three-year period. The merger agreement obligated the surviving entity in the merger to use commercially reasonable efforts to achieve the earnout milestones but otherwise afforded it discretion to direct and control the production, marketing, 1 promotion, sale, and commercialization of the acquired company’s products. After closing, the surviving entity partially achieved the earnout milestones, entitling Embody securityholders to approximately $72.5 million out of a potential $120 million in earnout payments. For reasons explained below, the plaintiff’s complaint fails to state a claim for fraud, with one exception. The complaint also fails to state claims for breach of the commercially reasonable efforts provision or the implied covenant of good faith and fair dealing in the merger agreement. I. BACKGROUND1 A. Zimmer And Embody Consider A Potential Transaction. In 2014, nonparty Jeff Conroy founded Embody, a Virginia corporation, to develop medical device products using collagen-based biofabrication techniques to support healing of soft tissue injuries. Am. Compl. ¶ 26. Embody makes three products: TAPESTRY® (“Tapestry”), a microfibrous bioengineered implant used for tendon and ligament repair; TAPESTRY® RC (“Tape