United States District Court, D. Maryland
SC&H GROUP, INC. et al.
ALTUS GROUP U.S., INC.
William M. Nickerson Senior United States District Judge
the Court is Defendant’s Motion to Dismiss and Compel
Arbitration. ECF No. 8. The motion is ripe. Upon review of
the parties’ submissions and the applicable law, the
Court determines that no hearing is necessary, Local Rule
105.6, and that the motion should be granted.
to an Asset Purchase Agreement dated December 1, 2014,
(Agreement) Defendant Altus Group U.S., Inc. agreed to
purchase from Plaintiffs (hereinafter Plaintiffs or simply
“Vendor”) a number of Vendor’s assets related
to its business of providing state and local tax consulting
services. The purchase price of the assets was $36,
000, 000, but that price was to be adjusted based upon the
difference between two figures as of the closing, once that
financial statement became available. Id. ¶ 16.
As characterized in the Complaint, “[s]imply stated, if
the Closing Working Capital exceeds the Target Working
Capital, [Defendant] is required to pay Plaintiffs for the
excess Working Capital (the “Excess Working
Capital”) to the extent [Defendant] collected
Vendor’s Accounts Receivable after the Closing
Date.” Id. ¶ 18.
alleges in the Complaint that, after the closing of the
Agreement, Defendant collected payments of $907, 106.00 from
MedImmune LLC, one of Vendor’s clients, and that these
payments constituted Excess Working Capital under the terms
of the Agreement. Defendant, however, has refused to remit
that amount to Vendor. Vendor asserts in Count I of the
Complaint that Defendant’s failure to make that
remittance is a breach of contract.
also alleges that Defendant has been attempting to collect
accounts receivable from a different client, International
Paper Company, and that, once collected, those receipts would
also constitute Excess Working Capital under the terms of the
Agreement. Vendor has attempted to have Defendant confirm
that, once collected, Defendant would wire those funds to
Vendor but Defendant has refused to provide that
confirmation. Based upon those allegations, Vendor seeks a
declaratory judgment that Defendant has a duty to collect and
remit those accounts receivable. Compl., Count II.
has moved to dismiss the Complaint pursuant to the
Agreement’s arbitration clause. That clause provides:
Any dispute relating to this Agreement, other than
pursuant to Section 2.4, will be settled by binding
arbitration in accordance with the Rules for Non-Administered
Arbitration of the International Institute for Conflict
Prevention and Resolution (‘CPR’). The
arbitration proceeding, including the rendering of an award,
will take place in New York, New York, will be administered
by the CPR and the arbitrators will fix the time and place
for the purpose of hearing such evidence and representation
as any party to the arbitration may present.
Agreement § 11.1 (emphasis added).
Motion to Dismiss, Defendant anticipated, correctly, that
Vendor would argue that this suit is brought pursuant to
§ 2.4 of the Agreement and, therefore, is not subject to
arbitration. Section 2.4 is that section of the Agreement
that explains the calculation of the “Working Capital
Adjustment” described above. Subsections 2.4(a)-(d) set
out the timetable for: the production of the financial
reports, the production of the Working Capital Report, the
raising of any objections thereto by the submission of a
written “Adjustment Objection Notice, ” and the
submission of any response to those objections. Subsection
2.4(e) provides that,
[i]f the Vendor and [Defendant] cannot resolve all disputed
matters arising out of the Working Capital Report, . . .
within 10 Business Days after [Defendant] receives the
Adjustment Objection Notice, the disputed matters will be
referred to a mutually agreed upon nationally or regionally
recognized independent accounting firm (the
“Independent Accountant”) to fully and finally
resolve all unresolved objections (provided, that if the
parties are unable to agree, then either party may ask the
American Arbitration Association to appoint an Independent
Accountant, which will be the deemed mutually-agreed upon
Subsection also sets out the manner in which the Independent
Accountant would be compensated. The remaining Subsections of
Section 2.4, Subsections 2.4(f)-(i), detail how and when
payments should be made to the Vendor or to the Defendant
depending upon whether the Closing Working Capital is greater
than or less than the Target Working Capital.
motion, Defendant posits that reference in the arbitration
clause to Section 2.4 represents a “narrow carve out,
” which excludes from arbitration only those issues
related to the “mathematical calculations” in the
Working Capital Report. ECF No. 8-1 at 8. As support,
Defendant cites to language in Subsections 2.4(c) and (d).
Subsection 2.4(c) provides that the Vendor would have 20
Business Days to review the Working Capital Report
“with a view to assessing the correctness of the
calculations thereof.” Id. § 2.4(c)
(emphasis added). If no objections are received within that
time period, that subsection further provides that
“the calculation of the Closing Working
Capital reflected in the Working Capital Report . . . will be
deemed to have been approved.” Id. (emphasis
added). Subsection 2.4(d) states that if the Vendor
“objects to  the Closing Working Capital
calculation as set out in the Working Capital
Report, ” it will provide notice of such objection in
the Adjustment Objection Notice. Id. § 2.4(d)
also suggests that, if the Court should interpret the
exclusion in the arbitration clause more broadly than just
disputes over mathematical calculations such that any dispute
in any way related to Section 2.4 would be deemed to fall
outside of the arbitration clause, Plaintiffs’ claims
would still be subject to dismissal. Under the terms of
Section 2.4(e), quoted above, any disputed matter arising out
of the Working Capital Report is subject to resolution, not
by litigation, but by the Independent Accountant. Thus, if
not subject to arbitration by the three members of the
arbitral tribunal mandated under Section 11.1,
Plaintiffs’ claims must be submitted to arbitration by
an Independent Accountant as set forth in Section 2.4.
Motion to Dismiss and Compel Arbitration, Defendant relies on
the provisions of the Federal Arbitration Act, 9 U.S.C.
§ 1 et seq. (FAA). ECF No. 8-1 at 3-4.
Plaintiffs, citing the “Governing Law” provision
in the Agreement (Section 11.8), which provides that the
Agreement will be governed by the laws of the State of New
York, rely almost exclusively on New York law. ECF No. 12
passim. Plaintiffs do opine, however, that
“[t]he FAA, if applicable, ” would lead to the
same result. Id. at 10. Although the parties do not
seriously address the question as to whether ...