Berkshire Place Associates LP et al v. MDG Real Estate Global Limited et al

Filing 19

ORDER: The Motion to Confirm the Arbitration Award (ECF 9 ) is GRANTED and the Cross Motion to Vacate the Arbitration Award (ECF 15 ) is DENIED. So Ordered by District Judge Mary S. McElroy on 9/8/2021. (Potter, Carrie)

Case 1:19-cv-00432-MSM-LDA Document 19 Filed 09/08/21 Page 1 of 8 PageID #: 1569

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
BERKSHIRE PLACE ASSOCIATES,
LP, and BERKSHIRE PLACE, LTD,
Plaintiffs,
v.
MDG REAL ESTATE GLOBAL
LIMITED, MDG REAL ESTATE
GLOBAL, LLC, and RIVERSIDE
ABSTRACT LLC,
Defendants.

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C.A. No. 1:19-cv-00432-MSM-LDA

MEMORANDUM AND ORDER
Mary S. McElroy, United States District Judge.
By way of background, the plaintiffs, Berkshire Place Associates, LP and
Berkshire Place, Lt. (“Berkshire”) own and operate a nursing home in Rhode Island,
which defendants, MDG Real Estate Global Limited and MDG Real Estate Global,
LLC (“MDG”), sought to purchase in 2018.

The parties entered into an Asset

Purchase and Sale Agreement (“Agreement”) and, later, after agreeing to several
contractual changes, executed the First Amendment to Asset Purchase and Sale
Agreement (“Amended Agreement”) which set out the requirements for terminating
the contract. 1 (ECF No. 9 at 2.) The Agreement contained a binding arbitration

The parties executed the Amended Agreement in March 2018 after MDG
attempted to terminate the contract. (ECF No. 2 at 11.) The Amended Agreement, in
relevant part, provides:
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clause to address disputes arising between the parties. Id. As part of the Agreement,
MDG made a $1,400,000 deposit of the $28,000,000 purchase price, which amount
was and is held in escrow by Riverside Abstract, LLC, the third defendant in this
case.

6. Paragraph 3 (a) (ii) of the Agreement is hereby deleted
and replaced with the following: (ii) If Buyer, in its due
diligence inquiry, determines that there are any facts or
circumstances which could cause Buyer to decide that ft is
no longer interested in concluding the transaction
Contemplated hereby ("Objections”), Buyer shall notify
Sellers in writing of the Objections on or prior to the Due
Diligence Deadline. The parties agree to meet in person or
via teleconference on or before the Due Diligence Deadline
to discuss the Objections. If the Objections cannot be
resolved by Buyer and Sellers to Buyer’s satisfaction on or
before the Due Diligence Deadline, in its sole discretion,
Buyer shall choose by notifying Sellers of such action in
writing not later than 5:00 p.m. Boston time on the Due
Diligence Deadline either (A) to cancel the transaction and
terminate this Agreement, or (B), to proceed with the
Agreement and accept such any Unresolved Objections
without a reduction in the Purchase Price. In the event that
Buyer shall terminate this Agreement pursuant to this
subsection 3(a)(ii), the entire Deposit shall be forthwith
returned to Buyer, this Agreement shall be null and void,
and none of the parties hereto will have any further
obligation to each other except with their obligations under
Sections 7(b), 7(j), 16, and 19(i) and their indemnification
with respect thereto. If Buyer does not terminate this
Agreement pursuant to the immediately previous sentence
on or before 5:00 p.m. Boston time on the Due Diligence
Deadline, Buyer shall be deemed to have chosen to proceed
with the Agreement and accept such any unresolved
Objections without a reduction in the Purchase Price.
(ECF No. 15-4 at 3.)

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While the finer details need not be repeated, MDG eventually terminated the
Agreement during the due diligence period and Berkshire brought an arbitration
demand to determine whether the $1,400,000 held in escrow would be retained by
Berkshire or returned to MDG. The arbitrators concluded that Berkshire should
retain the deposit amount having found MDG failed to comply with the termination
process requirements. (ECF No. 16 at 1-2.) The arbitration procedure consisted of
discovery, depositions, briefing by the parties, and a three-day evidentiary hearing.

Id. In its arbitration award (“Award”), the arbitration panel explained that “[f]or
MDG to obtain a refund of the deposit, there must have been either a Due Diligence
Termination or Seller’s Breach Termination.” If the elements of those terminations
were absent, then “there was not a Refundable Event and Berkshire is entitled to the
Deposit….” (ECF No. 15-2 at 12.) The panel evaluated the process for Due Diligence
Termination and found that MDG had not conformed to the contract’s terms. Id.
Following the arbitration, Berkshire brought a complaint in Rhode Island
Superior Court to enforce the arbitration award (“Award”). MDG removed the case
and Berkshire filed a Motion to Confirm Arbitration Award. (ECF No. 9.) Following
a stay in this case during the pendency of a related suit in the Eastern District of
New York, MDG filed a Cross-Motion to Vacate the Arbitration Award. (ECF No. 15.)
In its motion, MDG acknowledges that such measures are rarely taken and
that, in the great majority of cases, arbitration awards are confirmed. Still, MDG
urges that, in this case, the arbitration panel’s decision and award fall squarely
within the slim minority. Having undertaken a careful review of the Award, the

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Agreement, the Amended Agreement, the parties’ arguments, and the applicable law,
the Court hereby DENIES the Motion to Vacate and GRANTS the Motion to Confirm.
“Rhode Island has a strong public policy in favor of the finality of arbitration
awards.” Berkshire Wilton Partners, LLC v. Bilray Demolition Co., 91 A.2d 830, 835
(R.I. 2014) (citing N. Providence Sch. Comm. v. N. Providence Fed’n of Teachers, Local

920, Am. Fed’n of Teachers, 945 A.2d 339, 344 (R.I. 2008)). Applying Rhode Island
law, this Court may vacate an arbitration only under very specific and limited
circumstances. This highly deferential standard “requires ‘something beyond and
different from a mere error in the law or failure on the part of the arbitrators to
understand or apply the law.’” Nappa Const. Mgmt., LLC v. Flynn, 152 A.3d 1128,
1132 (R.I. 2017) (quoting Purvis Sys., Inc. v Am. Sys., Corp., 788 A.2d 1112, 1115 (R.I.
2005)). Vacatur, as MDG has requested, is appropriate only “‘[w]here the arbitrator
or arbitrators exceeded their powers, or so imperfectly executed them, that a mutual,
final, and definite award upon the subject matter submitted was not made.’” Id.
(quoting State Dep’t of Corr. v. Bhd. of Corr. Officers, 867 A.2d 823, 828 n.2 (R.I.
2005); R.I.G.L. 1956 § 28-9-18)) (alteration in original). Put more specifically, “[w]hen
an arbitrator ignores clear-cut contractual language or assigns to that language a
meaning that is other than that which is plainly expressed, the arbitrator has
exceeded his authority and the award will be set aside.” State v. R.I. Emp’t Sec. All.,

Local 401, SEIU, AFL-CIO, 840 A.2d 1093, 1096 (R.I. 2003) (citing R.I. Council 94,
AFSCME, AFL-CIO v. State, 714 A.2d 584, 594 (R.I. 1998)).

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Arbitrators are vested with “the power and the authority to interpret [a]
contract . . .” but “they [do] not have the power and authority to rewrite it.” Buttie v.

Norfolk & Dedham Mut. Fire Ins. Co., 995 A.2d 546, 549 (R.I. 2010) (quoting Town of
Coventry v. Turco, 574 A.2d 143, 147 (R.I. 1990)) (alterations in original). This Court
must determine whether the arbitration panel in this case effectively rewrote the
contract between MDG and Berkshire to the extent that the arbitration award should
be vacated. Id.at 550 (citing Turco, 574 A.2d at 147). “Absent a manifest disregard
of a contractual provision or a completely irrational result, [an arbitration] award will
be upheld.” Turco, 574 A.2d at 146.
In this case, the arbitrators concluded that MDG terminated the Agreement,
but that MDG’s termination did not fully comply with the contract terms.
In its Cross-Motion to Vacate, MDG divides its argument into four parts and
submits: (i) that the award must be vacated, (ii) that MDG made the required
objections, (iii) that the arbitration award improperly rewrote the Agreement, and
(iv) that the award is arbitrary and capricious. These discrete headings essentially
make one singular argument–that MDG complied with the contractual termination
process and that the arbitration panel ignored the Agreement’s plain language. (ECF
No. 15-1.)

In its Cross-Motion, MDG references the following clause from the

Amended Agreement:
If the Objections cannot be resolved by Buyer and Sellers
to Buyer’s satisfaction on or before the Due Diligence
Deadline, in its sole discretion, Buyer shall choose by
notifying Sellers of such action in writing not later than
5:00 p.m. Boston time on the Due Diligence Deadline either
(A) to cancel the transaction and terminate this

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Agreement, or (B), to proceed with the Agreement and
accept such any Unresolved Objections without a reduction
in the Purchase Price.
(ECF No. 15-1 at 4, 7, 13, 14.) More specifically, MDG repeatedly emphasizes that it
was within “its sole discretion” to terminate the Agreement.

That argument is

founded upon a carefully tailored excerpt from the Amended Agreement and critically
ignores the preceding language.
If Buyer, in its due diligence inquiry, determines that there
are any facts or circumstances which could cause Buyer to
decide that ft is no longer interested in concluding the
transaction Contemplated hereby ("Objections”), Buyer

shall notify Sellers in writing of the Objections on or prior
to the Due Diligence Deadline. The parties agree to meet
in person or via teleconference on or before the Due
Diligence Deadline to, discuss the Objections. If the

Objections cannot be resolved by Buyer and Sellers to
Buyer’s satisfaction on or before the Due Diligence
Deadline, in its sole discretion, Buyer shall choose by
notifying Sellers of such action in writing not later than
5:00 p.m. Boston time on the Due Diligence Deadline either
(A) to cancel the transaction and terminate this
Agreement, or (B), to proceed with the Agreement and
accept such any Unresolved Objections without a reduction
in the Purchase Price.

Id. at 3 (emphasis added).
As MDG requested, the Court has undertaken a close examination of the
Award and the contract terms.

The Award details the contractual relationship

between the parties, the events leading to the parties’ execution of the Amended
Agreement, and the panel’s reasoning for finding that MDG failed to properly
terminate the Agreement. In pertinent part, the Award interprets the termination
clause agreed to by the parties.

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Thus, both the original Agreement and the Amendment
provide that any termination during the Due Diligence
Period must be preceded by written notice of objections,
and followed by an in person or telephonic discussion
between the parties concerning those objections. Neither
the Agreement nor the Amendment permits the meeting
“to discuss" such objections to take place via email or with
anyone other than the Sellers (as defined).
(ECF No. 15-2 at 9.) The panel then evaluated the communications which MDG
contended had qualified as “written objections.” Id. at 11. The panel explained that
the emails and other communications, which referenced various topics (some of which
prompted the panel to question MDG’s identification of those topics as “objections” at
all as defined in the Agreement), did not afford an opportunity for the parties to
discuss “in person or telephonic[ally],” and were not necessarily directed to the sellers
or their authorized representatives. Id. at 11-12, 13 at n.2.
The panel deemed “[t]he termination provision, as amended, unambiguous.”

Id. at 13. “It requires MDG: (i) to notify Berkshire in writing of objections, and (ii)
to meet in person or via teleconference on or before the Due Diligence Deadline to
discuss the objections.” Id. The panel found that MDG had done neither. Id. 2

The panel was also unconvinced by MDG’s Seller’s Breach Termination
argument that MDG could not comply with the termination protocols due to
Berkshire’s material breach of the Agreement. Specifically, MDG suggested that
financial recordkeeping issues and a small land purchase constituted material
breaches of the Agreement by Berkshire. (ECF No. 15-2 at 14.) The Award addressed
each alleged breach in turn and found that Berkshire’s financial reporting system
had been adequately explained and disclosed to MDG and that the land purchase
had, if anything, increased rather than diminished the Property’s value and was not
prohibited by the Agreement. Id.
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The Court finds the Award reflects an appropriate execution of arbitrator
obligations. The plain language of the requirements for terminating the contract set
out in the Amended Agreement supports the panel’s contract interpretation. The
Court further finds that the panel has not “rewritten” the contract between the
parties, nor has the panel “manifestly disregarded” the contract. Quite the opposite,
the Award diligently evaluated the contractual language and parties’ performance,
and the Court is satisfied that the panel appropriately exercised its power and
authority. The Motion to Confirm the Arbitration Award (ECF No. 9) is GRANTED
and the Cross Motion to Vacate the Arbitration Award (ECF No. 15) is DENIED.

IT IS SO ORDERED.

_________________________________
Mary S. McElroy,
United States District Judge
September 8, 2021

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