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Chancery Concludes Accountant Provision in Stock Purchase Agreement Calls for Expert Determination Rather than Arbitration

ArchKey Intermediate Holdings Inc. v. Mona, C.A. No. 2021-0383-JTL (Del. Ch. Oct. 3, 2023)
Parties to a stock purchase agreement disputed post-closing price adjustments. The agreement called for an independent accountant to resolve such disputes and referred to the accountant as an “arbitrator.” As the parties litigated in the Court of Chancery, the purchaser moved to compel arbitration so that an independent accountant could resolve all disputes the seller raised. The seller contended that the agreement’s accountant provision called for an expert determination rather than an arbitration.

The Court concluded that the agreement called for an expert determination, not an arbitration. Even though the agreement referred to an independent accountant as an arbitrator, its terms were those of an accountant true-up mechanism which, absent provisions specifying an arbitral organization and designating a set of arbitral rules, is a form of expert determination. The agreement provided a narrow scope of authority for the accountant: only the items in a post-closing objection notice, not the parties’ dispute more generally, and only on the basis of parties’ written submissions, not involving a hearing. The Court stayed proceedings pending an independent accountant’s determinations over items within the accountant’s scope as established by the agreement.

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