jump to navigation

Arbitration Provisions and Post Closing Disputes 12/04/2013

Posted by Morse, Barnes-Brown Pendleton in Corporate, Public Companies.
Tags: , , ,
trackback

Corporate Attorney Joseph MarrowBy: Joseph Marrow

Many business acquisition agreements provide that post-closing disputes relating to earn-outs, working capital adjustments and other purchase price adjustments are to be submitted to an independent third party (i.e., an accounting firm) for resolution. A recent decision of the Delaware Supreme Court, Viacom Int’l, Inc. v. Winshall, No. 513, 2012, 2013 WL 367878786 (Del. July 16, 2013) (“Viacom”), reaffirms the enforceability and binding nature of the alternative dispute resolutions procedures chosen in these agreements. In Viacom, the parties to a merger agreement agreed to submit a dispute regarding an earn-out issue to arbitration subject to resolution by an independent accounting firm which decision would be final, binding and conclusive. The accounting firm made a determination adverse to Viacom and Viacom filed an action in state court seeking a declaration that the arbitration award was erroneous.

The Delaware Supreme Court upheld the arbitration award. The Court noted that the challenge to the arbitration award was governed by the Federal Arbitration Act. Absent a determination that the decision “was procured by fraud” or was subject to “manifest error”, the Court could not vacate the award. The Court rejected Viacom’s arguments of fraud or manifest error.

The Viacom decision lends support to the ability of parties to rely on the enforceability of alternative dispute resolution provisions in business acquisition agreements to resolve post-closing disputes as long as such disputes fall within the scope of the independent arbitrator’s scope of review.

For more information on this topic, please feel free to contact Joe.

Comments»

No comments yet — be the first.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: