Florida Environmental Services, Inc. v. Rentoumis

950 So. 2d 466, 2007 Fla. App. LEXIS 2396, 2007 WL 517667
CourtDistrict Court of Appeal of Florida
DecidedFebruary 21, 2007
DocketNo. 4D06-2358
StatusPublished
Cited by4 cases

This text of 950 So. 2d 466 (Florida Environmental Services, Inc. v. Rentoumis) is published on Counsel Stack Legal Research, covering District Court of Appeal of Florida primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Florida Environmental Services, Inc. v. Rentoumis, 950 So. 2d 466, 2007 Fla. App. LEXIS 2396, 2007 WL 517667 (Fla. Ct. App. 2007).

Opinion

HAZOUKI, J.

Appellant, Florida Environmental Services, Inc. (“FES”), appeals the trial court’s non-final order compelling arbitration on three counts of FES’s eight-count complaint against appellees, Michael and Cher Rentoumis, and staying the claims pending the outcome of the arbitration. We affirm without discussion the order of arbitration as to subsection (b) of count I as appellant concedes that this subsection is covered in the arbitration clause in the Purchase Agreement. We reverse the order compelling arbitration as to counts 1(a), II and IV because the arbitration clause in question applies to accounting determinations used in calculating the Net Book Value Adjustment Amount or the Additional Payment which are not the subject of the aforementioned counts.

The complaint alleges the following facts. Michael Rentoumis (“Rentoumis”) was the sole shareholder of Envirodyne, a corporation in the business of environmental testing and analysis of materials, including wastewater, water, soil, and hazardous waste. He was approached by W. David Kimbrell, the sole shareholder of FES, regarding the purchase of Enviro-dyne assets. Rentoumis indicated he was interested in selling, and Kimbrell performed due diligence, spending over $150,000 over four months. Rentoumis insisted the sale remain confidential and forbade Kimbrell from contacting employees and regulatory agencies, otherwise Ren-toumis would terminate the negotiations.

In February 2005, Rentoumis provided Kimbrell with Envirodyne’s December 31, 2004 Balance Sheet reflecting a book value of $1,764,844.17 and represented it was accurate. This amount was relied upon in determining a purchase price. The purchase price was to be subject to certain post-closing adjustments, one of which was to take into account any decline in Enviro-dyne’s book value since the end of 2004. The adjustment was calculated according to the difference between the book value stated in the December 31, 2004 Balance Sheet and the book value as of the closing date. Before April 2005, Rentoumis told Kimbrell that the December 31, 2004 Balance Sheet was incorrect and provided the March 31, 2005 Balance Sheet indicating a book value of $1,274,704.17 and agreed it was to be used as a preliminary closing balance sheet. The formula for adjusting the purchase price was modified.

On May 6, 2005, FES and Rentoumis executed the Purchase Agreement for the sale of Rentoumis’s Envirodyne stock to FES. He conveyed the stock to FES in exchange for $2,590,140. FES paid $1,087,059 of that to discharge a debt encumbering certain Envirodyne property. Rentoumis was paid $1,503,081. This amount was subject to a post-closing adjustment based upon the increase or decrease of Envirodyne’s book value since the end of 2004. FES hired an accounting firm, approved by Rentoumis, which prepared the Closing Date Balance Sheet and found a book value of $858,502.

Under the terms of the Purchase Agreement, Rentoumis was to remain employed by the company through May 6, 2006. They executed a separate Employment Agreement.

After the sale, FES discovered that Rentoumis had misrepresented Enviro-dyne’s history and status in that over the years the Florida Department of Health had found numerous deficiencies including fraudulent proficiency testing results. By order of the Department of Health, Envi-rodyne had lost the necessary licenses and certifications to conduct several of the testing procedures it regularly performed.

[469]*469Rentoumis was terminated for cause on October 7, 2005. FES found that he had altered test results and issued false laboratory reports.

FES attempted to compromise with the Department of Health in its decisions against Envirodyne but eventually FES was forced to enter into a stipulation and surrender its licenses and certifications, its most valuable assets, and then merge with another company.

In the Purchase Agreement, which was attached to the complaint, Section VII is entitled “Purchase and Sale.” In section 7.03, it defines the purchase price which included the Closing Payment plus or minus (A) the Adjusted Closing Payment, plus (B) the Additional Payment, if any. Other sections discuss how these amounts are to be determined and applied. Section 7.09 then provides:

7.09 Buyer and the Stockholder shall submit any dispute concerning the accounting determinations used in calculating the Net Book Value Adjustment Amount1 or the Additional Payment to a jointly selected accounting firm other than the Independent Accountant (the “Settlement Firm”) for resolution. If Buyer and the Stockholder cannot jointly agree on an accounting firm to serve as the Settlement Firm, each party shall submit the name of a national accounting firm (which firm shall not be either party’s accountants) to Buyer’s outside counsel, who shall select one of such firms by lot in the presence of a representative of the Stockholder. The determination of the Settlement Firm shall be final and binding on the parties and the award of the Settlement Firm (as accounting arbitrator) may be entered in any court of competent jurisdiction. The fees and expenses of the Settlement Firm shall be borne equally by the party whose stated position with respect [to] such disputed items is furthest in the aggregate from the final determination of the Settlement Firm. The Settlement Firm shall be provided with reasonable access to information necessary to resolve the dispute. The procedure described in this Section 7.09 is referred to herein as the “Dispute Resolution Mechanism.”

The trial court ordered arbitration on three counts of the complaint under this provision. Whether the trial court erred with respect to each count will be discussed in turn.

Count I of the complaint is an action for breach of contract and is divided into two parts. Part “a” is entitled “Breach of the Representations and Warranties” and contains nine subsections which name and describe each breach of the representations and warranties made by Rentoumis under section I of the contract. For example, FES first alleges that the contract represented and warranted that Rentoumis did not own directly or indirectly any interest or have any investment or profit participation in any corporation that was a competitor of or did business with Envirodyne. Rentoumis allegedly breached this warranty through his ownership or interest in a sanitary landfill located near Envirodyne’s property.

Subsection (a) of count I provides:

83. In paragraph 1.05 of the Purchase Agreement, Rentoumis represented and warranted that the Financial Statements were true, complete, correct, fairly presented the financial position and results of operations of the Compa[470]*470ny, and were prepared on a consistent basis with GAAP. In addition, Rentoum-is acknowledged that the December 31, 2004 Balance Sheet, which he provided, was relied upon by FES to value and analyze the financial condition of the Company and relied upon by FES in determining the Purchase Price.
84.

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Bluebook (online)
950 So. 2d 466, 2007 Fla. App. LEXIS 2396, 2007 WL 517667, Counsel Stack Legal Research, https://law.counselstack.com/opinion/florida-environmental-services-inc-v-rentoumis-fladistctapp-2007.