GTY Technology Holdings in Lawsuit with Prior Target

Hell hath no fury like a government-tech company scorned?

What a mess…

GTY Technology Holdings (GTYH) and OpenGov, a prior target company of GTYH, are suing each other over, among other things, fraud and breach of contract.  According to Govtech.com, the company OpenGov, was GTYH’s original target, but was subsequently left out of the proposed business combination to acquire six other government tech companies.

The crux of the suit appears to be that after OpenGov signed a non-disclosure agreement, it divulged its strategy to roll up six companies, of which, are now the six that are involved with GTYH.  However, GTYH wound up passing on OpenGov and now OpenGov is pissed.

Here’s where it gets tricky and it becomes a “he said, she said” type of situation.  OpenGov is claiming that GTYH stole their strategy, but GTYH is claiming that a roll-up strategy is not proprietary information and further to that, after GTYH reviewed OpenGov, they didn’t like the company.  Plus, OpenGov apparently never responded to any of their requests in a timely fashion even though GTYH’s SPAC clock was ticking.

However, OpenGov is not happy about GTYH establishing a competing company, so it is asking the court for monetary damages as well as to establish “a constructive trust over OpenGov’s interest in [GTY], or over their increased value due to the business combination, or over their profits,” as well as “disgorgement of (GTY’s) unjust enrichment.”

However, GTYH beat OpenGov to the punch by filing their own lawsuit one day prior to OpenGov, stating that GTY never breached the contract and that the information OpenGov gave it wasn’t proprietary.  However, their suit also stated that OpenGov had already approached GTYH and demanded $50 million.

Regardless of who is right here, this is going to slow GTYH down and they only have until May 1, 2019 to complete their deal.  Plus, there is the risk that the entire acquisition falls apart or, this gets tied up in the court system and GTYH has to extend their deadline ad nauseam.

In any scenario, this is not good.  We’ll update as further information becomes available.