Explore the complexities of arbitration in business acquisitions involving real estate. Discover how arbitration clauses may not always prevent disputes from reaching court, as highlighted by the BLW Motors, LLC v. Vicksburg Ford Lincoln Mercury, Inc case. Gain insights into the importance of clear written agreements to avoid confusion in resolving disputes arising from different acquisition documents.
M&A Stories
September 29, 2020
Introduction:
In the world of business, when buying or selling, people often choose arbitration to resolve disputes. This is quicker and cheaper than going to court. However, having an arbitration clause in a business purchase document doesn’t always prevent attempts to take related disagreement to court.
The Situation:
A case in point involves the sale of a car dealership in Vicksburg, Mississippi. The seller had two companies: one for the real property and one for the dealership assets. The buyer formed two companies for the purchase, one for the real property and one for the rest of the assets. There were agreements signed, but the deal fell through.
The Lawsuit:
The buyer’s companies sued the seller’s companies in a Mississippi federal court to enforce the deal and claim damages. The seller asked the court to make the buyer’s group use arbitration, as per the asset purchase agreement. But the real estate agreement had no arbitration clause.
The Ruling:
The court sided with the buyer, agreeing that the real estate part of the deal couldn’t be forced into arbitration. While the asset purchase dispute would be resolved through arbitration, the real estate contract dispute could proceed in court.
This case is referred to as BLW Motors, LLC v. Vicksburg Ford Lincoln Mercury, Inc, Civil Action No. 3:19-CV-577-DPJ-FKB, United States District Court, S.D. Mississippi, Northern Division, (April 1, 2020)
Key Point:
When dealing with business acquisitions, especially if real estate is involved, things can get complicated. If different agreements involve different parties, even if they’re related, an arbitration clause in one agreement might not apply to disputes in another agreement. To avoid confusion, it’s essential for all parties involved to agree in writing to use arbitration for any disputes that arise from the various acquisition documents.
By John McCauley: I help people manage M&A risks involving privately held companies.
Email: jmccauley@mk-law.com
Profile: http://www.martindale.com/John-B-McCauley/176725-lawyer.htm
Telephone: 714 273-6291
Check out my book: Buying Assets of a Small Business: Problems Taken From Recent Legal Battles
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