LG Breached Contract in Firing Founders of Startup It Acquired

Two of ad tech firm Alphonso Inc.’s founders shouldn’t have been terminated under the terms of an agreement with an LG Electronics Inc. affiliate that acquired it, the Delaware Court of Chancery ruled Thursday.

The interim CEO of Alphonso, put in place by a board of directors controlled by LG, was nevertheless bound by a stockholders’ agreement to use “reasonable efforts” to protect the rights of the founders, Vice Chancellor Nathan A. Cook said, and he breached that clause of the agreement when the founders were terminated.

Although the interim CEO, Adam Sexton, was an employee of Alphonso and permitted ...