Page 81 - M & A Disputes

pay the neutral practitioner’s fees in the inverse proportion to success in disputing the items. That calcu-
lation should be performed by the neutral practitioner, and a directive should be issued for one party to
reimburse the other to effectuate the proper allocation of fees. This process allows the neutral practition-
er to bill and collect their fees on a 50/50 basis and then true-up the fee allocation once the decision is
released.

Fee and billing arrangements in the engagement letter should comport with the specific provisions set
forth in the transaction agreement, unless the parties agree to amend those arrangements.

General Guidelines and Professional Standards

The applicable professional standards that govern the performance of services pursuant to a neutral arbi-
tration assignment are the general standards of the AICPA’s Code of Professional Conduct and State-
ment on Standards for Forensic Services (SSFS) No. 1 (FS sec. 100).

Although generally outside the scope of the ability of the neutral practitioner to influence or control, the
practitioner should be aware of award enforceability issues that may arise pursuant to the neutral practi-
tioner’s final decision.

Enforceability of Awards

The acquisition agreement and engagement letter usually require that the neutral practitioner’s decision
is final and binding; however, there are limited circumstances when a neutral practitioner’s decision can
be challenged and potentially overturned by the courts.

FAA

Section 10 of the FAA provides exceptions whereby a neutral practitioner’s decision may be challenged;
however, these exceptions are rarely applicable because they require extreme circumstances, such as
fraud or bias.

When a party feels aggrieved by a domestic arbitration or neutral award, that party’s avenue of relief
may be through the FAA. The FAA defines certain exceptional circumstances under which a party can
successfully vacate a damaging award. Essentially, fraud or serious error must be shown before an
award will be negated. Section 10 of the FAA delineates these circumstances for vacating an award:

(a) In any of the following cases, the United States court in and for the district wherein the award
was made may make an order vacating the award upon the application of any party to the arbitra-
tion —

(1) where the award was procured by corruption, fraud, or undue means;

(2) where there was evident partiality or corruption in the arbitrators, or either of them;

(3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon
sufficient cause shown, or in refusing to hear evidence pertinent and material to the con-
troversy; or of any other misbehavior by which the rights of any party have been preju-
diced; or

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