Page 77 - M & A Disputes

litigation process also allows the parties to submit expert reports to aid in the presentation of their case.
Parties in arbitration rarely conduct discovery of the litigation type unless the only reason they opted for
arbitration was to retain the privacy of the proceeding without regard to timing or cost. Most neutral
practitioner engagements have much less discovery. Such engagements are often limited to the exchange
of documents and computer files and accessing the parties’ employees (if permitted by the acquisition
agreement).

The extent of discovery can be (and often is) agreed to by the parties. In the event that the parties cannot
reach agreement regarding the exchange of information, such discovery disputes can be resolved in one
of two ways. First, the parties can ask the neutral practitioner to hear the discovery dispute and rule
about what information or access to employees is required. Second, the parties can opt to go before a
judge or legal arbitrator to rule upon the discovery issues. In our experience, unless the matter has a sig-
nificant economic impact on one or both parties, the parties usually opt for the neutral practitioner to
rule on the production of information. The practitioner should discuss the discovery issues in the prelim-
inary conference to understand each parties’ position with respect to discovery and properly address any
discovery issues in the engagement letter. Some practitioners insist on having the ability to resolve all
discovery disputes to ensure that they maintain control of the process. Such control both increases effi-
ciency and ensures that information relevant to the disputed issues is shared by all parties. Further, as
previously noted, the neutral practitioner possesses certain powers granted to him or her under various
statutes, including the ability to subpoena witnesses to testify or produce documents.

It is also important to note that the acquisition agreement may contain language regarding access to in-
formation. For example, in our sample purchase price adjustment clause, the parties agreed that after the
buyer delivers that closing statement, the "[b]uyer shall provide seller and its representatives with timely
access to the employees and records of buyer and the work papers, trial balances, and similar materials
used in the preparation of the Closing Statement." This contractual language can be used as guidance
about what the parties intended in the way of access to information to allow the seller, in this example,
access to the information used in preparing the closing balance sheet, including employees.

Written Statements

After the parties have the necessary preliminary conference(s) and have exchanged information through
the discovery process previously discussed, the parties should have the necessary information to prepare
and submit written statements of their positions to the neutral practitioner. These written statements of
position should provide the practitioner with a summary of the transaction and set forth each party’s po-
sition regarding each of the disputed items upon which the neutral practitioner will render a decision. A
written statement submitted by a party should contain its arguments, supporting documents, and refer-
ence to relevant accounting literature and acquisition agreement provisions. Additionally, the parties
may include declarations of witnesses and expert reports, if appropriate.

The written statements submitted to the neutral practitioner may be submitted on a simultaneous basis,
meaning that both parties submit their statements on the same day. The written statements may also be
submitted on a staggered basis, meaning that one party submits its statement, and then, the other party
has an agreed-upon period of time in which to review such statement and submit its own statement.
Simultaneous submissions can be effective when there are few disputed items, the parties have all the in-
formation required to adequately present their positions, and the parties prefer a quicker resolution.
However, complications may arise when parties use simultaneous submissions in large disputes with
many complicated disputed items. The staggered submissions allow the parties to make specific coun-
terarguments to points raised in the opposing parties’ submission. This format, although resulting in a

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