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SC&H Group, Inc. v. Altus Group US, Inc.

United States District Court, D. Maryland

July 13, 2016

SC&H GROUP, INC. et al.
v.
ALTUS GROUP U.S., INC

          SC&H Group, Inc., Plaintiff, represented by Jamar R. Brown, Rosenberg Martin Greenberg, LLP, T. Christine Pham, Rosenberg Martin Greenberg LLP & Benjamin Rosenberg, Rosenberg Martin Greenberg LLP.

          Stout, Causey & Horning State and Local Tax Consulting Services LLC, Plaintiff, represented by Jamar R. Brown, Rosenberg Martin Greenberg, LLP, T. Christine Pham, Rosenberg Martin Greenberg LLP & Benjamin Rosenberg, Rosenberg Martin Greenberg LLP.

          SC&H Appraisal Services, LLC, Plaintiff, represented by Jamar R. Brown, Rosenberg Martin Greenberg, LLP, T. Christine Pham, Rosenberg Martin Greenberg LLP & Benjamin Rosenberg, Rosenberg Martin Greenberg LLP.

          Altus Group U.S., Inc., Defendant, represented by Jerrold A. Thrope, Gordon Feinblatt LLC & Michael E. Maxwell, Hodgson Russ LLP, pro hac vice.

          MEMORANDUM

          WILLIAM M. NICKERSON, Senior District Judge.

         Before 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.

         Pursuant 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")[1] a number of Vendor's assets related to its business of providing state and local tax consulting services.[2] 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 date: the "Target Working Capital" and the "Closing Working Capital." Briefly stated, the "Target Working Capital" was the value of the Vendor's accounts receivable, plus any expenses or deposits satisfied by Vendor prior to the closing date, and minus any of Vendor's accounts payable and liabilities, as calculated based upon Vendor's 2011, 2012, and 2013 financial statements. Compl. ¶ 15, ECF No. 1. The "Closing Working Capital" was a figure that would be similarly calculated but would be based upon Vendor's 2014 financial statement through November 30, 2014, 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.

         Vendor 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.

         Vendor 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.

         Defendant 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).[3]

         In its 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 ...

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