The Principals of Zaffera LLC are suing the company, alleging Cognizant Technology Solutions cheated them out of millions of dollars in earn-out payments.
The lawsuit, filed in US District Court for the District of New Jersey, stems from Cognizant Technology Solutions acquisition of Zaffera LLC in late 2011. In the complaint, Zaffera LLC claims that the litigation "arises out of Cognizant’s unlawful and bad faith scheme to deprive Zaffera's former principals of millions of dollars in earn-out payments due" under the 2011 acquisition agreement.
Zaffera LLC prior to being acquired was a strategic consulting and software company specifically focused on SAP Retail. They were acquired by Cognizant to bolster their SAP consulting practice.
The financial terms of the deal were not disclosed at the time of the transaction, but according to the complaint, Cognizant Technology Solutions made a base payment of $22 million to Zaffera's principals as part of the deal.
The deal also provided Zaffera's principals earn-out payments of up to $10 million based on the company hitting certain revenue targets and integration criteria.
The lawsuit, alleges that Cognizant Technology Solutions, however, "did not comply with its contractual obligations in good faith" by "failing to provide a correct calculation of the revenue attributable to Zaffera, and refusing to devote necessary resources to sales and product development, and disregarding Zaffera's repeated requests for critically needed integration support for its unit as Cognizant didn’t have the systems and processes available to support the Zaffera integration."
According to the claim Cognizant knew and acknowledged the issues with the integration but did little or nothing to fix them.
Zaffera seeks compensatory damages of at least $10 million with interest, and monetary damages to be determined during a trial.
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