Background
Apex Energy Group, a replacement-window sales company, sold substantially all of its assets to Great Day Improvements in November 2020. The asset purchase agreement entitled Apex to post-closing earnout payments based on the acquired assets’ 2021 EBITDA and required Great Day to provide an earnout statement, supporting detail, and access to relevant books and records.
The agreement required unresolved accounting disputes to be decided by an independent accounting firm. After Apex challenged Great Day’s calculations and initially objected to Cohen & Co. serving as the decision maker, the parties jointly retained Crowe LLP as arbitrator. Crowe ultimately determined that Apex owed Great Day $794,299 for final net working capital and customer-deposit adjustments, while Great Day owed Apex $2,313,912 on the earnout.
The Court’s Holding
The court affirmed the common pleas court’s confirmation of Crowe’s award and denial of Great Day’s request to vacate or modify it. The parties’ engagement letter authorized Crowe to resolve the submitted post-closing accounting disputes, request additional information, and conduct proceedings it considered appropriate. The award addressed the net-working-capital and earnout issues identified in the asset purchase agreement and arbitration agreement, so it drew its essence from the parties’ agreement.
Great Day’s challenge to the calculation based on “net revenue” also failed. The court concluded that Great Day had not raised that argument during arbitration; it first did so after the final award. Great Day therefore waived the point and did not establish an evident material miscalculation warranting correction under R.C. 2711.11(A).
Key Takeaways
- Courts give arbitration awards narrow review and will not revisit alleged factual or contractual errors when the award has a rational connection to the parties’ agreement.
- An arbitrator may conduct hearings and request information when the arbitration agreement authorizes those procedures.
- A party cannot seek to modify an award based on a calculation argument it did not present during the arbitration.
Why It Matters
The decision reinforces the importance of fully presenting accounting theories and supporting evidence during an earnout arbitration. Post-award objections cannot be used to introduce a theory that was available during the proceedings.
It also illustrates that a detailed arbitral process does not exceed an accounting arbitrator’s authority when the parties’ agreement permits the arbitrator to manage the proceedings needed to resolve the submitted dispute.