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Under the parties’ merger agreement, the plaintiff (a representative of the sellers) was to receive additional compensation upon occurrence of certain milestone events. At issue was whether the first milestone event had been reached, which would occur upon the first clinical trial of a product. The defendants argued that the parties’ agreement mandated arbitration to decide whether a milestone event had been reached. The plaintiffs disputed this reading and instead argued that the provision was only an expert determination provision.
The Court examined the provision at issue and noted that at first glance it appeared internally contradictory; it used the terms “arbitration” and “arbitrate” but also called the decision-maker an expert. The Court went on to compare it to other provisions in the agreement that clearly stated when someone was acting as an expert only, not an arbitrator. The Court reasoned that, if the parties wanted to indicate that something was meant to be an expert determination only, then they could have used similar language. Furthermore, the provision also included procedural rules that afforded each party an opportunity to present its case, it empowered the decision-maker to decide a legal dispute, and the determination could result in liability, all of which indicated that the provision was an arbitration provision. As a result, the Court held that certain claims in the complaint were subject to arbitration.
