Third District Court of Appeal
State of Florida
Opinion filed May 1, 2019.
Not final until disposition of timely filed motion for rehearing.
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No. 3D18-1155
Lower Tribunal No. 18-3297
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Comvest IMC Holdings, LLC, et al.,
Appellants,
vs.
IMC Group, LLC, et al.,
Appellees.
An Appeal from non-final orders from the Circuit Court for Miami-Dade
County, Beatrice Butchko, Judge.
Gunster and Angel A. Cortiñas and Jonathan H. Kaskel; McDermott Will &
Emery and Jeffrey E. Stone, William P. Schuman, Michael G. Austin and Kamal
Sleiman, for appellants.
Waldman Barnett and Glen H. Waldman, Michael A. Azre and Jeffrey R.
Lam; Kula & Associates and Elliot B. Kula, W. Aaron Daniel and William D.
Mueller, for appellees.
Before EMAS, C.J., and SALTER and FERNANDEZ, JJ.
SALTER, J.
This appeal presents a recurring, familiar issue in the world of sizeable
commercial transactions—dispute resolution after the closing of the transaction as
between (1) a non-judicial authority and procedure specified by the disputants in
their carefully-drawn legal documents prepared before the dispute arose, and (2) a
state or federal court chosen by one of the parties once the dispute has arisen.
In this case, we affirm the circuit court’s order accepting the role of
gatekeeper and adjudicator in this multi-million dollar dispute between a group of
corporate sellers/plaintiffs (the appellees: IMC Group, LLC and Jose M. “Pepe”
Garcia; collectively, “IMC Group”), and a group of corporate buyers/defendants
(the appellants: Comvest IMC Holdings, LLC; IMC Holdings, LLC; IMC Medical
Group Holdings, LLC; Roger Marrero; Marshall Griffin; John Randazzo; and
Kevin Blank; collectively, “Comvest Group”). We vacate our previously-issued
stay of the circuit court case, permitting the resumption of proceedings in that
tribunal.
Our decision is based on the detailed provisions of the purchase agreement
entered into by the parties. Although the IMC Group as seller and the Comvest
Group as buyer outlined an alternative dispute resolution procedure for a post-
closing adjustment to the purchase price that might have been determined by an
agreed, neutral accountant, they did not specify that the procedure was mandatory
or the exclusive means for resolution.
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The Transaction and the Dispute
The parties moved the trial court and this Court to protect the confidential
business terms of the transactions by sealing the briefs and appendices in this case,
and those motions were granted. This opinion will generalize those confidential
terms to the extent practicable.
In November 2016, IMC Group agreed to sell to the Comvest Group an
80%, controlling interest in the corporate entities owning Interamerican Medical
Center Group, LLC, and its 19 Florida medical centers and affiliated health care
entities. The transaction closed on February 1, 2017. The Comvest Group agreed
to purchase those controlling interests for a nine-figure cash price computed as a
designated multiple of the IMC Group’s operating business earnings.
Valuing a business based on a net earnings multiplier is common, and the
acronym for one method of computing such earnings—“earnings before interest,
tax, depreciation, and amortization” —is “EBITDA.”
A limitation in using EBITDA and a multiplier is that the components of
EBITDA may not be available in a company’s audited, or at least final (if
unaudited), financial statements for the company’s fiscal year1 within which the
transaction is closed. Here, as in many such transactions, the parties negotiated a
“post-closing adjustment” to address this issue. The purchase agreement and
1 The IMC entities prepared their annual statements on the basis of a fiscal year
January 1 – December 31, a calendar year basis.
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closing occurred on the basis of the 2015 financial statements and the EBITDA
derived from them. As of the January 16, 2017, closing of the transaction, the
parties also had available to them various interim financials and pro forma
EBITDA computations, but not the final year-end 2016 financial statements or
EBITDA derived from such statements.
The parties agreed to a variety of pre-closing and post-closing price
adjustments in Sections 1.4 and 1.5 of their purchase agreement. In the case of the
post-closing adjustment of the purchase price based on a multiple of EBITDA,
they agreed to include the EBITDA derived from the audited consolidated 2016
financial statement of the operating companies when finalized. The final 2016
EBITDA adjustment to the purchase price was termed the “EBITDA Contingent
Statement” in the purchase agreement, and was to be delivered by the Comvest
Group to the IMC Group for its review. In the event of objections by the IMC
Group and a disagreement regarding the adjustment or “true-up” in the purchase
price, the purchase agreement required the parties to confer in good faith. It also
provided a mechanism for non-judicial resolution of the dispute.
The parties did indeed disagree regarding the 2016 EBITDA and resultant
post-closing adjustment, culminating ultimately in the circuit court complaint filed
by the IMC Group and the Comvest Group’s immediate motion to compel
compliance with the non-judicial dispute procedure. This appeal followed.
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Jurisdiction
We have jurisdiction to review non-final orders determining “the
entitlement of a party to arbitration.” Fla. R. App. P. 9.130(a)(3)(C)(iv). The IMC
Group maintains that the non-judicial dispute resolution methodology laid out in
the parties’ written agreements is not an “arbitration.” The motions panel
assigned to the case before oral argument carried the IMC Group’s motion to
dismiss for lack of jurisdiction with the case.
The Comvest Group contends that the designation of a neutral accountant
and procedure specified in the purchase agreement fits within the definition of
“arbitration” in section 44.1011(1), Florida Statutes (2018): “a process whereby a
neutral third person or panel, called an arbitrator or arbitration panel, considers the
facts and arguments presented by the parties and renders a decision which may be
binding or nonbinding as provided in this chapter.”
This trial court’s resolution of this threshold dispute did, however, determine
that the Comvest Group is not entitled to the arbitration of the issues sought to be
adjudicated by the trial court by the IMC Group in its “motion to advance” its
claim for declaratory judgment. The IMC Group declaratory judgment claim
includes requests that the trial court determine: whether the accounting
methodology employed by the Comvest Group in the 2016 audit is in compliance
with the purchase agreement and corporate governance duties; whether the
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Comvest Group provided access to the necessary documents specified by the
purchase agreement, sufficient to permit the IMC Group to formulate all of its
objections to the EBITDA Contingent Statement; and whether certain escrow
funds subject to the purchase agreement and other documents were handled in
conformance with the purchase agreement.
It follows that the trial court’s order (a) denying the Comvest Group’s
motion to compel compliance with the purchase agreement’s non-judicial
arbitration or alternative dispute resolution procedure (which Comvest Group
contends is “arbitration” as defined in section 44.1011(1)), and (b) accepting
jurisdiction to proceed with the declaratory issues raised by the IMC Group, is a
non-final order determining the entitlement of the Comvest Group to “arbitration,”
and that we have jurisdiction to consider the non-final order under Rule
9.130(a)(3)(C)(iv).
Standard of Review
We review the denial of a motion to compel arbitration de novo. 13 Parcels
LLC v. Laquer,
104 So. 3d 377, 379 (Fla. 3d DCA 2012). In doing so, however,
this Court is “mindful that arbitration provisions are favored by the courts and that
all doubts should be resolved in favor of arbitration.” CT Miami, LLC v. Samsung
Elecs. Latinoamerica Miami, Inc.,
201 So. 3d 85, 90 (Fla. 3d DCA 2015).
Analysis
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The Comvest Group’s arguments for a non-judicial process to produce a
binding, nonappealable “Final EBITDA Report” are defeated by several small, but
clear and important, words in the text of Section 1.5 of the purchase agreement.
First, Section 1.5(b) states that, following the Comvest Group’s delivery of
the EBITDA Contingent Statement, the IMC Group’s formulation of objections,
and the parties’ “attempt in good faith to resolve their dispute,” the parties “may”
retain the Accountant (a term defined in Section 1.4) to resolve any remaining
disputes. (Emphasis provided). The use of the term “may” rather than “shall” in
this provision, following the identification of both the IMC Group as seller and the
Comvest Group as buyer, means that mutual assent to the retention of the
Accountant is required for the retention. See The Florida Bar v. Trazenfeld,
833
So. 2d 734, 738 (Fla. 2002).
Second, this reading of the text is reinforced by the conditional nature of the
process for a “final, binding, nonappealable, and conclusive” “Final EBITDA
Report” in Section 1.5(c) of the purchase agreement. The Section begins, “(c)
Accountant Retained. If the Accountant is retained, then. . . .” (Emphasis
provided). The use of the terms “may” and “if” betray the elective, not mandatory,
nature of the non-judicial procedure, and the IMC Group has flatly rejected that
option. There is no subsection following Section 1.5(c) captioned, “If Accountant
Not Retained,” but that possibility, a judicial resolution of the disputes, is spelled
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out clearly in Section 14.24 of the purchase agreement, the waiver of jury trial
provision. That provision specifies in upper case letters that “THE PARTIES
WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER
THAN ARBITRATION RULES),” and that “THE PARTIES DESIRE THAT
THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS.”
Third and finally, buried in the 25th line of the single-spaced provision
applicable “if” the Accountant is retained, Section 1.5(c) specifies that, “In
resolving any Contested Amount(s), the Accountant . . . shall act as an expert and
not as an arbitrator. . . .” This clause, applied to a conditional dispute resolution
procedure that was rejected by one of the parties, explicitly takes the Accountant
out of the definition of “arbitration” and the process whereby “a neutral third
person. . . called an arbitrator” renders a decision, as provided in section
44.1011(1).
Simply stated, the Accountant could have been, but was not, retained by
mutual agreement of the parties to provide a non-judicial resolution of the post-
closing purchase price dispute. And if retained, the Accountant would have served
as an expert rather than an arbitrator.
Conclusion
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Applying the Florida Supreme Court’s tests for arbitrability and guidelines
for the appropriate roles of arbitrator and court, Seifert v. U.S. Home Corp.,
750
So. 2d 633 (Fla. 1999), there is not a binding, unconditional agreement to arbitrate;
there is no issue explicitly subject to arbitration; and waiver of a party’s right to
arbitration is not a consideration in the present case because the right never arose.
Though the subject matter of the parties’ primary dispute—an accounting
issue of considerable complexity—is well suited for resolution by an accounting
expert, the trial court correctly applied the contract provisions requiring mutual
consent to such a non-judicial procedure by the parties after the dispute arose, and
characterizing the “Accountant” as an expert, if retained, rather than an arbitrator.
The non-final order denying the Comvest Group’s motion to compel and
granting the IMC Group’s motion to proceed with its declaratory judgment and
breach claims is affirmed. We vacate the stay pending review entered prior to the
conclusion of briefing and oral argument, permitting the case to resume
proceedings in the circuit court.
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