LDC Parent v. Essential Utilities: DE court on who should resolve purchase price adjustment dispute

Corporate / M&A Decisions update series

In LDC Parent, LLC v. Essential Utilities, Inc. (C.A. No. N20C-08-127-MMJ-CCLD (Del. Super. Apr. 28, 2021)), the Delaware Superior Court held that a post-closing purchase price adjustment dispute had to be resolved by an accounting firm rather than a court under the parties’ purchase agreement. The case is an important reminder that Delaware courts may preclude litigation of post-closing disputes where the parties state in their agreement that such disputes are to be resolved by an accountant, even without determining whether the accountant would be acting as an expert or an arbitrator.

LDC Parent, LLC (LDC or Seller) and Essential Utilities, Inc. (Essential or Buyer) executed a purchase agreement in October 2018 whereby LDC agreed to sell one of its subsidiaries to Essential for a base price of US$4.275 billion. The agreement provided that the purchase price would be adjusted up or down if the acquired company’s actual capital expenditures differed from amounts set forth in the agreement. If the parties disagreed on whether an adjustment was needed or its amount, the agreement required that the dispute be submitted to an accounting firm, which was to issue a final and binding decision.

Following the closing, a dispute between Buyer and Seller arose as to whether a purchase price adjustment was required, as well as whether the dispute needed to be resolved by the agreed accounting firm or whether it could be resolved through litigation. LDC argued that the court could resolve the dispute because it concerned a legal issue: contract interpretation. Essential argued, on the other hand, that the issue was factual and reserved for the accounting firm under the parties’ agreement. Carefully considering Delaware Court of Chancery precedent, the court agreed that, under the agreement, the dispute had to be resolved by the accountant. The court declined to reach the question of whether the accountant would be acting as an expert or as an arbitrator, finding “it sufficient that the accountant is a third-party decision maker bound by the decision-making parameters set forth in the Purchase Agreement.”



Authored by Ryan M. Philp, David R. Michaeli, and Sam Dougherty.

David Michaeli
New York
Allison Wuertz
New York
Jon Talotta
Global Co-Lead
Northern Virginia
William Regan
New York


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