Belknap Holdings, LLC v. Midwest Prototyping, LLC

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
BELKNAP HOLDINGS, LLC, f/k/a )
PROTOCAM LLC & RONALD L. )
BELKNAP, )
)
Plaintiffs, ) C.A. No. N23C-10-199 EMD CCLD
)
v. )
)
MIDWEST PROTOTYPING, LLC )
)
Defendant. )
Submitted: July 24, 2024
Decided: October 8, 2024
Upon Defendant’s Motion for Summary Judgment
GRANTED
Upon Plaintiffs’ Motion for Judgment on the Pleadings
DENIED
Sarah E. Delia, Esquire, McCarter & English, LLP, Wilmington Delaware. Attorney for
Plaintiffs Belknap Holdings, LLC and Ronald L. Belknap.
Taylor A. Christensen, Esquire, John P. DiTomo, Esquire, Morris Nichols Arsht & Tunnell, LLP,
Wilmington Delaware. Attorneys for Defendant Midwest Prototyping, LLC.
DAVIS, J.
I. INTRODUCTION
This is a civil action assigned to the Complex Commercial Litigation Division of the
Court. Plaintiffs, Belknap Holdings, LLC f/k/a Protocam LLC (“Holdings” or “Seller”) and
Ronald L. Belknap1 seek a declaratory judgment against Defendant, Midwest Prototyping, LLC
(“Midwest” or “Buyer”).2 Specifically, Belknap seeks a declaration regarding certain disputed
1
Belknap Holdings, LLC and Mr. Belknap will be collectively referred to as “Belknap.”
2
See Complaint (“Compl.”) (D.I. No. 1).
terms in the parties’ Asset Purchase Agreement (“APA”), and a direction to the Resolution
Account (defined below) to apply the declaration as to those terms when resolving a dispute
under the APA.3
The parties have filed two dispositive motions: (i) Belknap’s Motion for Judgment on the
Pleadings (the “Belknap Motion”)4 filed on January 29, 2024; and (ii) Midwest’s Motion for
Summary Judgment (the “Midwest Motion”)5 filed on March 12, 2024 (collectively, the
“Motions”). The Court held a hearing on the Motions on July 24, 2024.6 At the conclusion of
the hearing, the Court took the Motions under advisement.7
For the reasons stated below, the Court GRANTS the Midwest Motion and DENIES the
Belknap Motion.
II. RELEVANT FACTS
A. THE PARTIES.
Mr. Belknap is the principal of Holdings.8 Holdings is a Pennsylvania LLC with its
principal place of business in Pennsylvania.9 Holdings was formed in 2013 and is an additive
manufacturing company.10
Midwest is a Wisconsin limited liability corporation with its principal place of business
in Wisconsin.11 Midwest is also an additive manufacturing company.12
3
Compl. at 12-13.
4
Plaintiffs’ Motion for Judgment on the Pleadings (“Pls.’ Mot. for J. on the Pleadings”) (D.I. No. 14).
5
Defendant’s Combined Answering Brief in Opposition to Plaintiffs’ Motion for Judgment on the Pleadings and
Opening Brief in Support of its Motion for Summary Judgment (“Def.’s Combined Br.”) (D.I. No. 20).
6
D.I. 31.
7
Id.
8
Compl. ¶ 1.
9
Id. ¶¶ 2-3
10
Id. ¶ 6.
11
Id. ¶ 4.
12
Id. ¶ 7.
2
B. THE ASSET PURCHASE AGREEMENT.
On May 27, 2022, Belknap and Midwest entered into the APA.13 Through the APA,
Midwest purchased all of Belknap’s rights, title, and interest in all assets and property of every
kind used in Belknap’s business, other than excluded assets.14 The APA included an Earnout
Provision.15
1. The Earnout Provision.
The Earnout Provision requires Midwest to pay Belknap an additional monetary amount
if Belknap’s “Qualifying Revenue” for 2022 exceeded specific thresholds.16 The “First Revenue
Threshold” required Qualifying Revenue to exceed $4.5 million.17 The “Second Revenue
Threshold” required Qualifying Revenue to exceed $5 million.18
“Qualifying Revenue” is:
[T]he revenue of the Business on sales made solely to Qualifying Customers,
provided that such sales to Qualifying Customers are made in the Ordinary Course
of Business including at prices and margins consistent with past practice.19
“Qualifying Customers” are defined as:
[T]hose customers of the Business that are sourced, whether before or after Closing
Date, solely through the Business Employees, and not through Buyer or any of its
Affiliates; provided, however, that after the Closing Date any customers sourced
solely through (a) the Transferred Employees or (b) personnel of the Business hired
after the Closing Date to perform services solely for the Business and not for any
other business of Buyer or its Affiliates, shall be deemed to have been sourced
13
Id. ¶ 8.
14
Id.
15
Id. ¶ 9. Compl., Ex. A (“APA”) at § 3.4.
16
Compl. ¶ 10. The Earnout Provision states: “As an additional component to the Purchase Price, the Seller will be
eligible to receive the Earnout Amount based on Qualifying Revenue (as defined below) meeting or exceeding the
applicable Revenue Threshold during the calendar year 2022 period (the “Earnout Period”). APA § 3.4.
17
APA § 3.4(a)(ii) (“‘First Revenue Threshold’ means $4,500,000, constituting the Qualifying Revenue for the 12-
month period ended December 31, 2022 and reflected on Exhibit 3.4(a)(ii) attached hereto.”). The threshold is
capped at $5 million.
18
APA § 3.4(a)(vi) (“‘Second Revenue Threshold’ means $5,000,000, constituting the Qualifying Revenue for the
12-month period ended December 31, 2022 and reflected on Exhibit 3.4(a)(ii) attached hereto.”).
19
APA § 3.4 (a)(v). Article 1 of the APA contains a list of definitions, “Ordinary Course of Business” is defined as
“any action taken that is consistent in nature, scope and magnitude with the past practices of the Seller and is taken
in the ordinary course of the normal, day-to-day operations of the Seller.” APA at 6.
3
through Seller and shall be included as Qualifying Customers; provided further,
however, Buyer and its Affiliates shall be included as Qualifying Customers with
respect to all revenue paid to or accrued to Seller prior to the Closing Date (but not
on or after the Closing Date).20
2. Disagreement regarding Earnout Amount.
Under the APA, Midwest would prepare and deliver a statement (the “Revenue
Statement”) setting forth its good faith calculations of the Qualifying Revenue and the
corresponding Incremental Revenue during the Earnout Period.21 The APA provides that
Belknap could deliver a written “Disagreement Notice” to Midwest if Belknap disputed the
Revenue Statement.22 The Disagreement Notice needed to provide detailed descriptions of the
disputes (the “Disagreements”).23
On March 31, 2023, Midwest provided the Revenue Statement to Belknap.24 In response,
Belknap sent a Disagreement Notice.25 In its Disagreement Notice, Belknap identified five
Disagreements with the Revenue Statement.26 Two seemed to have been resolved as only three
remain as of the filing of the Complaint.
First, Belknap contends that the Revenue Statement excluded revenue in the amount of
$39,496.50 related to work for Avkin (the “Avkin Sale”) that was performed in 2022 but was not
delivered until January 2023 at the request of Avkin.27 Belknap maintains that it sent the invoice
20
APA § 3.4 (a)(iv) (emphasis in original).
21
Compl. ¶ 18; APA § 3.4(b).
22
APA § 3.4(b) (“If the Seller Parties disagree with the calculation of the Qualifying Revenue or the Incremental
Revenue, the Seller Parties must deliver to Buyer a written Disagreement Notice within the Disagreement Period
setting forth, in reasonable detail, each Disagreement.”). The APA also stated that anything not objected to in the
Disagreement Notice is deemed accepted by the seller. Id.
23
APA § 3.4(b) (“If the Seller Parties disagree with the calculation of the Qualifying Revenue or the Incremental
Revenue, the Seller Parties must deliver to Buyer a written Disagreement Notice within the Disagreement Period
setting forth, in reasonable detail, each Disagreement.”). The APA also stated that anything not objected to in the
Disagreement Notice is deemed accepted by the seller. Id.
24
Compl. ¶ 19. Midwest sent a revised statement via email on April 3, 2023. Id. The March 31st statement is
attached as Exhibit B to the Complaint.
25
Id. ¶ 20. Compl., Ex. C (“Seller’s Disagreement Notice”).
26
See Seller’s Disagreement Notice.
27
Compl. ¶ 21.
4
for the Avkin Sale on December 27, 2022, and that the sale was made in 2022. As such, Belknap
claims that the Avkin Sale occurred during the Earnout Period and should have been included in
the Revenue Statement.28
Second, Belknap disputes the disqualification of $295,149 of revenue from Xometry,
claiming that Midwest misclassified Xometry as a Non-Qualifying Customer.29 Belknap
contends that Belknap sourced this sale (the “Xometry Sale”), and was solicited and accepted
through a portal that Belknap had established with Xometry prior to the execution of the APA.30
Midwest excluded the Xometry Sale from the Revenue Statement because Midwest found the
sale was not sourced solely by Belknap.31
Third, Belknap challenges Midwest’s designation of “Booked Revenue” as non-
Qualifying Revenue.32 Midwest deducted $116,145 in Booked Revenue from the Revenue
Statement as a prepayment and not revenue.33
The APA provides a dispute resolution process (the “Resolution Accountants Provision”)
involving qualified accountants (the “Resolution Accountants”).34 Instead of submitting the
Disagreements to the Resolution Accountants, however, Belknap filed this lawsuit. Belknap
contends that the dispute resolution provision does not apply to “legal questions of contractual
interpretation and construction.”35
28
Id. ¶ 22; Seller’s Disagreement Notice ¶ 1.
29
Compl. ¶ 24; Seller’s Disagreement Notice ¶ 2. Belknap argues that Xometry has been a customer since 2017.
Compl. ¶ 24.
30
Compl. ¶ 25.
31
Id. ¶ 26.
32
Id. ¶ 30; Seller’s Disagreement Notice ¶ 5.
33
Compl. ¶ 28.
34
Id. ¶ 31. APA § 3.4(c) (“If, after a period of 30 days following the date on which the Disagreement Notice is
delivered, the Seller Parties and Buyer have not resolved all Disagreements, then the remaining Disagreements will
be submitted to the Resolution Accountants.”).
35
Compl. ¶ 32.
5
C. THE CURRENT LITIGATION.
Belknap filed suit on October 25, 2023, seeking a declaration as to the legal interpretation
of the terms “Sourced” and “Sales Made” as used in the parties’ APA.36 Belknap also asks that
the Court “direct” the Resolution Accountants to apply any declaration regarding Sourced and
Sales Made in resolving Disagreements.37 Midwest filed its Answer on December 18, 2023, and
denied substantially of the claims made by Belknap, and asserted three affirmative defenses.38
On January 19, 2024, Belknap filed the Belknap Motion. On March 12, 2024, Midwest
filed the Midwest Motion asserting that the Resolution Accountants Provision controls the
instant matter.39 Midwest argues that the entirety of Belknap’s claims are covered by the
Resolution Accountants Provision in the parties’ APA, and the case should be dismissed
pursuant to Civil Rule 12(b)(1) in favor of the APA’s Resolution Accountants Provision
process.40 In response, Belknap filed a Combined Brief in Opposition to Midwest’s Motion and
in support of its own Motion for Judgment on the Pleadings on April 12, 2024.41 Midwest then
filed its Reply Brief in support of its Motion on April 30, 2024.42 The Court heard oral argument
on July 24, 2024. At the conclusion of the hearing, the Court took the Motions under
advisement.43
36
Id. ¶ 1.
37
Id. at 13.
38
See generally Answer (hereinafter “Ans.”) (D.I. 10).
39
Defendant’s Combined Answering Brief in Opposition to Plaintiffs’ Motion for Judgment on the Pleadings and
Opening Brief in Support of its Motion for Summary Judgment (“Def.’s Combined Br.”) (D.I. No. 20).
40
See generally Def.’s Combined Br.
41
Plaintiffs’ Combined Reply Brief in Support of their Motion for Judgment on the Pleadings and Answering Brief
in Opposition to Defendant’s Motion for Summary Judgment (“Pls.’ Combined Br.”) (D.I. 25).
42
Defendant’s Reply Brief in Support of its Motion for Summary Judgment (“Def.’s Reply Br.”) (D.I. 26).
43
D.I. No. 31.
6
III. STANDARD OF REVIEW
Upon a motion for judgment on the pleadings, “the Court considers all pleadings,
including the complaints, answers, ‘documents integral to the pleadings,’ such as those attached
as exhibits or incorporated by reference, and facts subject to judicial notice.”44 The Court will
grant a motion for judgment on the pleadings “when no material issue of fact exists and the
movant is entitled to judgment as a matter of law.”45
A motion for summary judgment will be granted when “after viewing the record in a light
most favorable to a nonmoving party, no genuine issues of material fact exist and the moving
party is entitled to judgment as a matter of law.”46 The Court, in considering a motion for
summary judgment, “examine[s] the record to determine whether genuine issues of material fact
exist, ‘but not to decide such issues.’”47 The moving party bears the burden of proving his claim
is supported by undisputed facts, if the motion is properly supported, then the burden shifts to the
non-moving party to demonstrate any material issues of fact.48
“These well-established standards and rules equally apply [to the extent] the parties have
filed cross-motions for summary judgment.”49 “Where cross-motions for summary judgment are
filed and neither party argues the existence of a genuine issue of material fact, ‘the Court shall
deem the motions to be the equivalent of a stipulation for decision on the merits based on the
record submitted with the motions.’”50
44
D’Antonio v. Wesley College, Inc., 2023 WL 9021767, at *2 (Del. Super. Dec. 29, 2023).
45
Desert Equities, Inc. v. Morgan Stanley Leveraged Equity Fund, II, L.P., 624 A.2d 1199, 1205 (Del. 1993).
46
Celgene Corp. v. Humana Pharmacy, Inc., 2023 WL 3944029, at *5 (Del. Super. May 31, 2023).
47
Genworth Fin., Inc. v. AIG Specialty Ins. Co., 2023 WL 6160426, at *8 (Del. Super. Sept. 21, 2023).
48
Celgene Corp., 2023 WL 3944029, at *5.
49
Genworth Fin., Inc. v. AIG Specialty Ins. Co., 2023 WL 6160426, at *8.
50
Id.7
IV. DISCUSSION
The Court holds that this dispute and Belknap’s claims fall within the Resolution
Accountants Provision in the APA. Moreover, the Court holds that the Disagreements can be
resolved by the Resolution Accountants without intervention or definition by the Court. As such,
the Resolution Accountants Provision is the appropriate mechanism for resolving the
Disagreements. The Court, therefore, will GRANT the Midwest Motion and DENY the
Belknap Motion.
Midwest provided Belknap with the Revenue Statement and its calculations during the
Earnout Period.51 In response, Belknap sent its Disagreement Notice to Midwest and the parties
began trying to resolve those Disagreements.52 The APA provides that if the parties were unable
to resolve those disagreements within 30 days, the remaining Disagreements should have been
submitted to the Resolution Accountants. The factual record demonstrates that the parties did
not submit the remaining Disagreements to the Resolution Accountants.53
Midwest contends that the three Disagreements asserted in the Complaint center around
accounting and defining revenue.54 Midwest characterizes this accounting and defining revenue
process as “obviously within the Resolution Accountants’ expertise.”55 Midwest argues that the
Court should defer to the Resolution Accountants Provision.
In support, Midwest relies on Specialty Dx Holdings, LLC v. Lab’y Corp. of Am.
Holdings.56 In Specialty Dx Holdings, LLC, the Court analyzed a similar provision, found it to
be narrow in scope, and held that because it was narrow in scope, that signified that the parties
51
Compl., Ex. B (hereinafter “Revenue Statement”).
52
Seller’s Disagreement Notice.
53
See APA § 3.4(c).
54
Def.’s Combined Br. at 25.
55
Id.
56
Specialty Dx Holdings, LLC v. Lab’y Corp. of Am. Holdings, 2020 WL 5088077, at *6 (Del. Super. Jan. 31,
2020).
8
had agreed to arbitrate disputes regarding earnout calculations.57 The provision in Specialty Dx
Holdings stated:
The independent accounting firm shall (i) address only the items in the Dispute
Notice (“Disputed Items”) or other manifest errors discovered by the independent
accounting firm, and (ii) re-calculate the First Earnout Statement or Second Earnout
Statement, as applicable and determine if Purchaser complied with the covenants
contained herein.58
The Court noted that “[a]n independent accounting firm is well-placed to resolve a dispute about
differing calculations of revenue, which will then be used to calculate an earn-out statement.”59
The Court in Specialty Dx Holdings also held that “the fact that the Adjustment Amount may
require the accounting firm to make a legal interpretation does not prevent the parties from
engaging an accounting firm.”60
Belknap, in its Opposition, agrees that the arbitration provision here is a narrow one and
that the parties are bound to submit their disagreements to the Resolution Accountants.61
However, Belknap argues that, because the suit seeks a declaration as to the “legal definitions”
of terms, the Court should resolve the dispute.62 Belknap posits that the Resolution Accountants
Provision is more akin to an expert determination and the disputes fall outside that expert’s
scope.
Belknap relies on Terrell v. Kiromic Biopharma, Inc.63 The Supreme Court in Terrell
noted, that “under Court of Chancery precedent, where an ADR provision contemplates a
process other than arbitration, such as when the parties have entrusted a discrete decision to an
expert, thus earning the label ‘expert determination,’ the court applies contract interpretation
57
Id.58
Id.59
Id. at *7.
60
Id. at *8.
61
See Pls.’ Combined Br. at 10.
62
See id. at 13.
63
297 A.3d 610 (Del. 2023).
9
principles to determine the ADR provision’s scope.”64 Belknap maintains that this dispute falls
into the latter, and the Court should apply contract interpretation principles to determine the
ADR provision’s scope. In Terrell, the Court found the following provision to be one for expert
determination:
Any dispute regarding the interpretation of this agreement shall be submitted by
Optionee or the Company to the Committee for review. The resolution of such a
dispute by the Committee shall be final and binding on the Company and
Optionee.65
The Terrell Court placed importance on whether the provision lacks procedural rules that
would afford “each side the opportunity to present their case” which is a “defining
characteristic of arbitration provisions.”66
The Court observes that in Archkey Intermediate Holdings Inc.,67 the Court of Chancery
found that there are two ends of the ADR Spectrum.
At one end is an arbitration that has the look and feel of a judicial proceeding,
except that it is handled privately and with less formality. At the other end is an
expert determination in which an expert with technical skills or knowledge makes
a determination, largely on its own, and with only limited party input.68
The Court of Chancery classified a provision as an expert determination when it “provides
parties with a quick and relatively inexpensive answer on an issue that calls for informed
judgment.”69 In Archkey, the Court of Chancery held that “if a dispute over timely notice turns
on reviewing correspondence between the parties and analyzing legal issues like waiver or
estoppel, then the inquiry likely goes beyond what the parties intended for the independent
64
Id. at 617.
65
Id.
66
Id. at 618-19.
67
302 A.3d 975 (Del. Ch. 2023).
68
Id. at 989.
69
Id. at 990. In Archkey, the court also found that a provision could also be classified as an Accountant True-up
Mechanism and went on to describe the typical characteristics of an Accountant True-up Mechanism. See id. at 991.
The court held that for Accountant True-up Mechanisms, the “principles of contract interpretation determine
whether a disputed issue falls within its scope.” Id. at 997.
10
accountant to resolve.”70 But, the Court of Chancery also stated that “[a] court need not construe
every word in a provision calling for an expert determination before the expert can do its
work.”71 “The more closely related the term or provision is to the expert’s area of expertise, the
more likely it is that an expert can interpret the term without judicial assistance.”72
Delaware courts do not have subject matter jurisdiction to hear claims that litigants have
agreed to arbitrate.73 The Court will dismiss an action for lack of subject matter jurisdiction if,
on its face, the dispute falls within an arbitration clause.74 Additionally, “[t]here is a strong
presumption in favor of arbitration.”75 To determine if a dispute is subject to arbitration, the
Court engages in a two-part inquiry:76
First, the Court must determine whether the arbitration clause is broad or narrow in
scope. Second, the Court must apply the relevant scope of the provision to the
asserted legal claim to determine whether the claim falls within the scope of the
contractual provisions that require arbitration.77
If the Court is evaluating a narrow arbitration clause, the Court will ask “if the cause of action
pursued directly relates to the right in the contract.”78 If the clause is broad, “the Court will defer
to arbitration on any issues that touch on contract rights or contract performance.”79 “An
arbitration clause is narrow if arbitration is limited to specific types of disputes.”80
The Court finds that the Resolution Accountants Provision in the APA is a narrow clause
as it only refers to matters concerning the Disagreement Notices. The Court need not determine
70
Id. at 993.
71
Id. at 997.
72
Id. at 998. The court in Archkey determined that the issue of what constitutes “past practice” is well within an
accountant’s expertise. Id.
73
Specialty Dx Holdings, LLC, 2020 WL 5088077, at *5.
74
Id.75
Id.76
Id.77
Id.78
Id.79
Id.80
Id. at *6.
11
whether the provision is a classic arbitration clause or one for expert determination because the
result is the same here—the APA designates that Disagreements should ultimately be resolved
by the Resolution Accountants. The relevant portion of APA provides:
If, after a period of 30 days following the date on which the Disagreement Notice
is delivered, the Seller Parties and Buyer have not resolved all Disagreements, then
the remaining Disagreements will be submitted to the Resolution Accountants.
Buyer will grant to the Resolution Accountants reasonable access, during regular
business hours and upon reasonable advance notice, to the Business’s books and
records, and each Party shall grant to the Resolution Accountants reasonable access
to such Party’s work papers . . . The Parties shall also instruct the Resolution
Accountants to (i) limit the scope of their review to only the unresolved
Disagreements, (ii) make their determination based solely on written submissions
by the Buyer and the Seller Parties which are in accordance with the guidelines and
procedures set forth in this Agreement (i.e., not on the basis of an independent
review) and (iii) include in their final report the Resolution Accountants’ reasoning
in reaching their determinations . . .81
Disagreement is defined in the APA as “disagreement by the Seller regarding the
calculation of (a) the PP Components set forth in Buyer’s Closing Statement or (b) the
Incremental Revenue set forth in Buyer’s Revenue Statement, as the case may be.”82
Incremental Revenue is defined as “for the Earnout Period, any amount, if any, by which
the Qualifying Revenue during the Earnout Period exceeds the applicable Revenue Threshold.”83
Qualifying Revenue is defined as “the revenue of the Business on sales made solely to
Qualifying Customers, provided that such sales to Qualifying Customers are made in the
Ordinary Course of Business including at prices and margins consistent with past practice.”84
Belknap ask the Court to render a decision that is unnecessary. The Resolution
Accountants are perfectly capable of determining whether revenue of a business should be
81
APA § 3.4 (c) (emphasis added).
82
Id. at 2.
83
APA § 3.4 (a)(iii).
84
Id. § 3.4 (a)(v).
12
Qualifying Revenue of not.85 It is well within a Resolution Accountants’ expertise to determine
what qualifies as Qualifying Revenue and who counts as a Qualifying Customer.86 Belknap has
made its objections clear in its Disagreement Notice and, in accordance with the APA, the
Resolution Accountants are best positioned to decide those Disagreements.87
Belknap argues that the relief sought from the Court is outside the scope of the APA and
the Resolution Accountant because the Resolution Accountants does not have the “authority to
make binding decisions on issues of law or legal claims.”88 Belknap relies on three cases to
make this argument.
The first is Chicago Bridge & Iron Company N.V. v. Westinghouse Electric Company,
LLC.89 The provision at issue in Chicago Bridge stated that the independent auditor was “to base
its conclusions solely on written submissions from Chicago Bridge and Westinghouse, had thirty
days to make its conclusion, and that conclusion was to come in the form of a ‘brief written
statement.’”90 The lawsuit in Chicago Bridge concerned what claims or disputes could be
brought before the independent auditor. The parties disputed whether the disagreements
concerned the calculation of net working capital or were instead breaches of representations that
had been expressly terminated by a liability bar in the contract.91 The Chicago Bridge court
found that because the actual challenge was one touching a breach of the agreement’s warranties,
85
The Resolution Accountant can be any of the following: “RSM US, LLP provided that RSM US, LLP is an
independent accounting firm that has not been engaged by either party in the last five (5) years, or . . . such other
nationally recognized, certified public accounting firm selected by the Parties.” APA at 7.
86
See Specialty Dx Holdings, LLC, 2020 WL 5088077, at *7 (“An independent accounting firm is well-placed to
resolve a dispute about differing calculations of revenue, which will then be used to calculate an earn-out
statement.”).
87
See Seller’s Disagreement Notice.
88
Pls.’ Combined Br. at 10.
89
166 A.3d 912 (Del. 2017).
90
Id. at 925.
91
Id.
13
the relief sought was outside of the scope of the independent accountant contractual charge.92
That is not the case here. There is no dispute that the current disagreements are disagreements
regarding anything other than the Earnout Provision—a provision that is explicitly to be resolved
by the Resolution Accountants.
Belknap next relies on Penton Business Media Holding, LLC v. Informa PLC,93 In
Penton Business Media Holding, LLC, the Court of Chancery held that the independent
accounting firm could not consider extrinsic evidence in evaluating the parties’ dispute.94 The
plaintiff sought a declaration “that the accountant has authority to determine what information it
can consider.”95 The Court of Chancery found that “[a]lthough parties could give an expert the
authority to interpret a contract, here they did not. Instead, the court must interpret the contract
to determine what the accountant can consider.”96 The Court of Chancery held that “[i]n each
case it is necessary to examine the contract itself in order to decide what the parties intended
should be a matter for the exclusive decision of the expert.”97
This case is distinguishable from Penton Business Media Holding, LLC. The Resolution
Accountants here are bound to:
(i) limit the scope of their review to only the unresolved Disagreements, (ii) make
their determination based solely on written submissions by the Buyer and the Seller
Parties which are in accordance with the guidelines and procedures set forth in this
Agreement (i.e., not on the basis of an independent review) and (iii) include in their
final report the Resolution Accountants’ reasoning in reaching their
determinations.98
92
Id. at 926.
93
252 A.3d 445 (Del. Ch. 2018).
94
Id. at 447.
95
Id.
96
Id. at 448.
97
Id. at 465.
98
APA § 3.4 (c).
14
The Disagreements are clear. The Disagreements challenge the classifications given to the
Avkin Sale, Xometry Sale, and the “Booked Revenue.”99 Belknap and Midwest can submit the
Disagreements directly to the Resolution Accountants for a determination on whether those
amounts were properly or improperly categorized by Midwest. APA Sections 3.3 and 3.4
establish the intent to have Disagreements submitted to the Resolution Accountants.100
Last, Belknap relies on AQSR India Private, Ltd. v. Bureau Veritas Holdings, Inc.,101 in
which the Court of Chancery held that the provision at issue only “triggered in the narrow
circumstance of the parties hav[ing] a disagreement over the contents of the final Closing
Statement generated at the end of the Review Process.”102 The Court of Chancery found that
“the Referee is to have a limited role: to apply her industry-specific knowledge to answer a
technical, industry-specific question that are properly teed up for the Referee through the parties’
own Review Process.”103 In AQSR India Private, Ltd., the Court of Chancery held that the
parties did not follow the Review Process and, as such, the Court of Chancery had to determine
what the parties’ respective rights were in light of the breakdown in the process.104
AQSR India Private, Ltd. is also distinguishable. Belknap and Midwest complied with
the APA’s Earnout Provisions, up until it was time to submit the Disagreements to the
Resolution Accountants. There is nothing for the Court to determine that is not stated in the
Earnout Provision or was not teed up in the Disagreement Notice for the Resolution Accountants
to decide.
99
See Seller’s Disagreement Notice.
100
This can also be seen by the jurisdiction and venue clause of the APA. Section 8.9 states, “[e]xcept for disputes
which will be resolved by the Resolution Accountant as set forth in Sections 3.3 and 3.4, the Parties irrevocable
consent and submit to the exclusive jurisdiction of the courts of the Delaware Court of Chancery (or, [] any state or
federal court within the State of Delaware).” APA § 8.9.
101
2009 WL 1707910 (Del. Ch. June 16, 2009).
102
Id. at *7.
103
Id.
104
Id. at *8.
15
The Court finds that there is no genuine dispute that the APA is an enforceable contract
that contains a Resolution Accountants Provision which governs the Disagreements. The Court
finds that the instant suit concerns Disagreements over the Earnout Calculations and as such the
parties are bound, by contract, to submit those disagreements to the Resolution Accountants.
V. CONCLUSION
For the reasons stated above, the Court GRANTS Midwest’s Motion for Summary
Judgment and DENIES Belknap’s Motion for Judgment on the Pleadings.
IT IS SO ORDERED.
October 8, 2024
Wilmington, Delaware
/s/ Eric M. Davis
Eric M. Davis, Judge
cc: File&ServeXpress
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