Bloomberg BNA’s Corporate Law & Accountability Report is available on the Corporate Law Resource Center. This news service keeps corporate practitioners informed of legal developments of...
By Michael Greene
Feb. 3 — The Delaware Chancery Court Jan. 30 held that the failure to timely submit a certificate of dispute as required under a stock-purchase agreement is an issue of procedural arbitrability that must be decided by the arbitrator and not the court.
According to Vice Chancellor Donald F. Parsons Jr., that an agreement between the parties to arbitrate unresolved disputes “also delineates the procedural mechanism for perfecting such a ‘dispute' and presenting it to the arbitrator does not transform the procedural and formal requirements of that provision into ‘“gateway questions' of substantive arbitrability.”
Ultimately, the court granted the plaintiff's motion to compel arbitration and denied the defendant's motion to limit the issues that would be decided by the arbitrator.
Defendant Milliken Design Inc. entered into a stock-purchase agreement to acquire several entities owned by the plaintiff and his former business partners. The agreement provided for three potential post-closing earn-out payments.
After a dispute arose involving these post-closing price adjustments, the plaintiff filed a lawsuit seeking to compel arbitration of the earn-out dispute.
Vice Chancellor Parsons noted that the threshold question of whether the parties agreed to arbitrate, commonly referred to as “substantive arbitrability,” is an issue for the court to decide, whereas, “procedural arbitrability” questions are left for the arbitrator.
A portion of the agreement stated that calculations and related earn-out payments “shall be final and binding on the parties” after 30 days if the seller's representative does not properly submit a “Certificate of Earnout Dispute.”
Because this certificate was not delivered with respect to some of the plaintiff's claims, Milliken sought a declaration limiting the issues that could be arbitrated.
Vice Chancellor Parsons noted that Milliken's argument conceivably had merits, but he concluded that under controlling Delaware Supreme Court precedent, the only issue the court should decide was whether the subject matter of the dispute falls within the arbitration provision.
Accordingly, although the interpretation of that provision “may be ‘likely to affect the scope of the arbitration,'” the court held that the plaintiff's alleged failure to formally deliver a “Certificate of Earnout Dispute” involved a procedural question that the arbitrator should resolve.
To contact the reporter on this story: Michael Greene in Washington at email@example.com
To contact the editor responsible for this story: Ryan Tuck at firstname.lastname@example.org
The opinion is available at http://www.bloomberglaw.com/public/document/Weiner_v_Milliken_Design_Inc_No_9671VCP_2015_BL_23910_Del_Ch_Jan_.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)