Opinion

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIDA

FORT MYERS DIVISION

WENDELLA69, INC., f/k/a

SOUTHWEST FLORIDA

VETERINARY SPECIALISTS

INC.; WENDY G. ARSENAULT;

and MICHAEL J. ARSENAULT,

Plaintiffs,

v. Case No: 2:22-cv-539-JES-KCD

PETVET OPERATING, LLC,

f/k/a PETVET CARE CENTERS

(FLORIDA), LLC,

Defendant.

OPINION AND ORDER

This matter comes before the Court on defendant’s Amended

Motion to Dismiss Count I of Plaintiffs’ Second Amended Complaint.

(Doc. #148). Plaintiffs filed a Response in Opposition. (Doc.

#150.) Also before the Court are Responses (Docs. ##152, 153) to

the Court’s Order to Show Cause (Doc. #151.) For the reasons set

forth below, the motion is granted and Count I of the Second

Amended Complaint (Doc. #146) is dismissed without prejudice.

I.

The Second Amended Complaint and documents the Court may

consider at the motion to dismiss stage of the proceedings

establish the following:

The parties are Plaintiffs Wendella69, Inc. (f/k/a/ SW. Fla.

Veterinary Specialists, Inc.), Wendy G. Arsenault, and Michael J.

Arsenault (collectively “Sellers” or plaintiffs) and Defendant

PetVet Operating, LLC (f/k/a PetVet Care Centers (Fla.), LLC)

(“Buyer”, PetVet or defendant). On December 24, 2019, Sellers

sold their veterinary practice (the “Business”) to Buyer pursuant

to an Asset Purchase Agreement (the “Agreement”). Exhibit A of

the Agreement (Exhibit A) provides that, in addition to substantial

payments due at Closing, the Buyer may be obligated to pay an

“Earnout Payment” at the end of a two year “Earnout Period.” This

essentially provided Sellers an additional two years after Closing

for the Business’s sales price to increase. (Doc. #53-1, p. 35.)

The Earnout Payment was to be calculated by a formula that

subtracted “Target EBITDA” from “EBITDA” at the end of the Earnout

Period and multiplied the result by five. (Id.) Thus, if the

EBITDA exceeded the Target EBITDA, Buyer was required to pay Seller

an additional amount (the “Earnout Payment”) equal to the EBITDA,

minus the Target EBITDA, multiplied by five. (Earnout Payment =

(EBITDA – Target EBITDA) X 5).

If there was a disagreement over the Earnout Payment, Exhibit

A provided a detailed, multi-step dispute resolution process. (Id.

at p. 35.) Step One required Buyer to deliver its EBITDA

determination to Sellers “no later than sixty (60) days after the

end of the Earnout Period.” (Id.) Step Two allowed Sellers

“reasonable access” to Buyers’ books and records “relating to the

calculation of EBITDA,” but only “during regular business hours”

and only “for the sole purpose of verifying Buyer’s computations

of the EBITDA.” (Id.) Step Three gave Sellers “thirty (30) days”

after receiving Buyers’ EBITDA determination to submit a “Notice

of Disagreement” should they “disagree[] in good faith with Buyer’s

determination of EBITDA.” (Id.) The Notice of Disagreement was

required to “set forth in reasonable detail the basis for the

disagreement.” (Id.) Step Four required that Sellers and Buyer

“shall attempt in good faith to resolve and finally determine the

amount of EBITDA.” (Id.) Step Five provided that if Sellers and

Buyer could not resolve their disagreement within “fifteen (15)

days” after Buyer’s receipt of the Notice of Disagreement, “the

parties shall retain the services of [a] Neutral Auditor to resolve

the disagreement and make a determination with respect thereto.”

(Id.)

Section (g) of Exhibit A defined “Neutral Auditor” as “an

independent accounting firm selected by Buyer which does not have

a material relationship with Buyer or Seller.” (Id.) Section (d)

of Exhibit A provided:

. . . The Neutral Auditor shall then determine the

EBITDA and such determination by the Neutral Auditor

shall be binding upon the parties hereto, provided,

however, that EBITDA determined by the Neutral Auditor

shall be no greater than EBITDA determined by Seller and

no less than EBITDA determined by Buyer. The

determination of the Neutral Auditor shall be made as an

expert and not as an arbiter and shall be based solely

on the written submissions by Buyer and Seller and their

respective representatives and any other communication

requested by the Neutral Auditor, and the determination

shall not be by independent review. Buyer and Seller

shall use their commercially reasonable efforts to cause

the Neutral Auditor to complete its review thereof

within fifteen (15) days of its appointment. If such a

review by a Neutral Auditor is conducted, then the party

(i.e., Buyer, on the one hand, or Seller, on the other

hand) whose calculation of EBITDA is furthest from

EBITDA determined by the Neutral Auditor shall pay all

fees and expenses of the Neutral Auditor associated with

such review.

(Id.) Section (d) closes with the parties’ agreement that the

Auditor’s “determination . . . shall be conclusive, final and

binding.” (Id.)

On March 25, 2022, Buyer delivered its EBITDA determination

to Sellers. (Doc. #148, p. 4, citing Doc. #146, ¶ 22.) Within

thirty days, Sellers sent Buyer a Notice of Disagreement. (Doc.

#1-3.) The Notice of Disagreement stated that Sellers “do not

agree with the EBITDA calculation” and set forth the Sellers’

reasons. Buyer and Sellers did not resolve their disagreement

within fifteen days, and Buyer selected a Neutral Auditor. (Doc.

#148, p. 4.)

On July 26, 2022, prior to any determination by the Neutral

Auditor, Sellers filed a Complaint in state court (Doc. #1-2),

which Buyer timely removed to federal court based on the complete

diversity of citizenship. (Doc. #1, ¶¶ 3–4; Doc. #1-2, p. 58.)

Because of the pending lawsuit, the Neutral Auditor never rendered

a determination of the EBITDA or Earnout Payment. (Doc. #146, ¶

41, Doc. #148, p. 3.) In due course Buyer filed its Answer and

Affirmative Defenses to that Complaint. (Doc. #24.) In its Third

and Fourth Affirmative Defenses, Buyer asserted that:

The Complaint is subject to dismissal for improper

venue, and Plaintiffs are not entitled to any relief

because the [Agreement] provides that the “determination

of the Neutral Auditor shall be conclusive, final and

binding upon the parties.”

[ . . . ]

Plaintiffs are not entitled to any relief in this

action because they have failed to satisfy conditions

precedent to commencing this action, including complying

with and exhausting the dispute resolution procedures

set forth in Section 7.15 of the [Agreement], and, to

the extent that the audit process set forth in the

[Agreement] is reviewable by the Court, completing the

same. Therefore, Plaintiffs’ claims are not ripe for

adjudication.

(Id. at 8.)

On October 4, 2023, Buyer filed a sealed motion for judgment

on the pleadings, asserting that Sellers “are barred from

adjudicating, in this Court, any claim that [Buyer] improperly

calculated EBITDA or the Earnout Payment and seeking damages based

on any alleged difference between [Sellers’] and [Buyer]’s

calculations.” (Doc. #53, p. 2.) The Court ultimately denied the

motion, concluding that the case as pled in the original Complaint

was only a “books and records” dispute and lacked any “allegations

challenging the determination of EBITDA.” (Doc. #123, pp. 8–9.)

A settlement conference held on December 2, 2024, was

unsuccessful. (Docs. ##126, 134.)

Sellers thereafter filed an Amended Complaint (Doc. #144),

which was superseded by the now-operative Second Amended Complaint

(“SAC”) (Doc. #146.) The SAC contains two counts, both alleging

breach of contract. Count I asserts that Buyers breached the

Agreement in four ways: (1) failing to deliver a timely

determination of EBITDA for the calculation of the Earnout Bonus;

(2) failing to provide Sellers reasonable access to Buyer’s records

for the purpose of determining EBITDA and Target EBITDA under the

Agreement and challenging Buyer’s determination of EBITDA; (3)

failing to calculate EBITDA properly using the same formula or

accounting principles used to determine Target EBITDA; and, (4)

failing to calculate the Earnout Bonus properly under the

Agreement. (Id., ¶ 67.) In Count I Sellers seek damages for

having not timely received a proper Earnout Bonus (Id., ¶ 68) and

damages for the determination of EBITDA and payment of the Earnout

Bonus. (Id., ¶ 70.)

In Count II, Sellers re-allege one of the breach of contract

claims alleged in Count I - failure to provide reasonable access

to books and records as required by the Agreement. Sellers seek

injunctive relief to compel Buyers to provide them with reasonable

access to Seller’s books and records, including “the original

documents from which any excel spreadsheet was created, relating

to the calculation of the Target EBITDA and calculation of the

EBITDA for purposes of the Earnout Payment.” (Id. at pp. 15-16,

“Wherefore” clause.)

II.

Buyer asserts that Count I must be dismissed because the

contract required Sellers to resolve the claimed breaches relating

to the EBITDA through the Neutral Auditor provision in Exhibit A.

Buyer further asserts that this results in both a lack of subject

matter jurisdiction and the failure to state a claim upon which

relief may be granted. While this Court does have subject matter

jurisdiction, Count I fails to state a claim upon which relief may

be granted and must be dismissed without prejudice.

A. Prior Court Order

As a preliminary matter, Buyer argues that Count I must be

dismissed because a prior Order of the Court stated that

“[p]lainly, the only ‘disagreement’ subject to the Neutral

Auditor’s review is the calculation of EBITDA.” (Doc. #123, p. 2.)

But this language addressed the original Complaint, which the Court

found did not assert an EBITDA calculation claim. Nothing in that

prior Order compels a particular result in the resolution of the

present motion addressing the current version of the complaint.

B. Subject Matter Jurisdiction

Buyer next relies on the Neutral Auditor provision of the

Agreement to support its assertion that the Court lacks subject

matter jurisdiction to resolve the dispute over the calculation of

the EBITDA. It is certainly true that without jurisdiction a

federal court “cannot proceed at all in any cause.” Johnson v.

United States Cong., 151 F.4th 1287, 1291 (11th Cir. 2025).

“Federal courts are courts of limited jurisdiction” that “possess

only that power authorized by the Constitution and statute.” Id.

Here, that subject matter jurisdiction is supplied by Article III

of the Constitution and the diversity jurisdiction statute found

at 28 U.S.C. § 1332. The Court therefore has jurisdiction to

consider the claims in the SAC.

C. Neutral Auditor Contractual Provision

While the Court has subject matter jurisdiction, parties are

able to contractually withdraw a dispute from judicial

determination. The parties have done so in their Agreement.

The parties agreed that, except for Section 5, the Agreement

“shall be governed by and construed in accordance with the internal

laws of the State of Delaware.” (Doc. #53-1, Sec. 7.3.) The

substantive law governing the relevant contractual disputes in

this case is therefore the law of Delaware.

Delaware law establishes that contracting parties are bound

by their contractual choices. See Nemec v. Shrader, 991 A.2d 1120,

1125 (Del. 2010) (“[W]e must [not] appease a party who later wishes

to rewrite a contract he now believes to have been a bad deal.

Parties have a right to enter into good and bad contracts” — “the

law enforces both”); Libeau v. Fox, 880 A.2d 1049, 1056–57 (Del.

Ch. 2005), aff’d in pertinent part, 892 A.2d 1068 (Del. 2006)

(“When parties have ordered their affairs voluntarily through a

binding contract, Delaware law is strongly inclined to respect

their agreement, and will only interfere upon a strong showing

that dishonoring the contract is required to vindicate a public

policy interest even stronger than freedom of contract. Such

public policy interests are not to be lightly found, as the wealth-

creating and peace-inducing effects of civil contracts are

undercut if citizens cannot rely on the law to enforce their

voluntarily-undertaken mutual obligations.”).

Under Delaware law, an alternative dispute resolution

provision may be enforced after careful consideration of and

deference to the precise methodologies chosen by the parties. See

Viacom Int’l, Inc. v. Winshall, 72 A.3d 78, 83 (Del. 2013)

(collecting cases); Mehiel v. Solo Cup Co., No. CIV.A. 1596-N,

2005 WL 3074723, at *1 (Del. Ch. Nov. 3, 2005), aff’d, 906 A.2d

806 (Del. 2006); see, generally ArchKey Intermediate Holdings Inc.

v. Mona, 302 A.3d 975, 992 (Del. Ch. 2023). Alternate dispute

resolution methodologies exist on a “spectrum,” with “classic” or

“legal” arbitration at one end and “expert determination” at the

other end. ArchKey, 302 A.3d at 990. Parties may tailor their

choice of methodology so that it falls somewhere in between and

borrows features from each. Id. at 990–91. Where a provision

falls on the spectrum triggers varying laws which displace a

court’s power. Terrell v. Kiromic Biopharma, Inc., 297 A.3d 610,

617 (Del. 2023).

In 2023, the Delaware Supreme Court found the following

guidance was “useful” in making the determination:

[T]he fundamental difference between an expert

determination and arbitration can be found in the type

and scope of authority that is being delegated by the

parties to the decision maker. In the case of a typical

expert determination, the authority granted to the

expert is limited to deciding a specific factual dispute

concerning a matter within the special expertise of the

decision maker, usually concerning an issue of

valuation. The decision maker’s authority is limited to

its mandate to use its specialized knowledge to resolve

a specified issue of fact. The parties agree that the

expert’s determination of the disputed factual issue

will be final and binding on them. The parties are not,

however, normally granting the expert the authority to

make binding decisions on issues of law or legal claims,

such as legal liability.

If the proceeding is an arbitration, this means that the

parties have intended to delegate to the decision maker

authority to decide all legal and factual issues

necessary to resolve the matter. The grant of authority

to an arbitrator, but not to an expert, is analogous to

the powers of a judge in a judicial proceeding. The

parties expect the arbitrator to rule on legal claims,

legal causes of action and to award a legal remedy, such

as damages or injunctive relief. The parties, by

agreeing to arbitration, are selecting a form of dispute

resolution that by its very definition is understood as

granting the decision maker the authority to make

binding decisions of both law and fact.

Terrell, 297 A.3d at 618. The Court also explained that “a

hallmark of expert determinations” is that they are “attended by

a larger measure of informality[,] and [that experts] are not bound

to the strict judicial investigation of an arbitration.” Id.

(quoting Penton Bus. Media Holdings, LLC v. Informa PLC, 252 A.3d

445, 463 (Del. Ch.), judgment entered, (Del. Ch. 2018)). See also

Terrell, 297 A.3d at 619 (concluding that an alternate dispute

resolution clause provided for expert determination when it “only

authorize[d] . . . a limited, albeit critical, legal determination

[and] d[id] not empower the . . . award[ing] [of] relief, as one

would expect in an arbitration”).

Here, the Neutral-Auditor provision clearly falls at or near

the expert determination end of the spectrum. As described above,

if there was a disagreement over the Earnout Payment, Exhibit A

provided a detailed, multi-step dispute resolution process: The

Buyer delivered its EBITDA determination to Sellers within sixty

(60) days of the end of the Earnout Period; Sellers were allowed

reasonable access to Buyers’ relevant books and records to verify

Buyer’s computation of the EBITDA; Sellers had thirty (30) days

after receiving Buyers’ EBITDA determination to submit a good faith

Notice of Disagreement with Buyer’s determination of EBITDA

setting forth in reasonable detail the basis for the disagreement;

Sellers and Buyer were then required to attempt in good faith to

resolve and finally determine the amount of EBITDA; if there was

no resolution of the disagreement within fifteen (15) days after

receipt of the notice of disagreement, the parties were required

to retain a Neutral Auditor to “resolve the disagreement and make

a determination with respect thereto.” Specifically, Section (d)

of Exhibit A provided:

. . . The Neutral Auditor shall then determine the EBITDA

and such determination by the Neutral Auditor shall be

binding upon the parties hereto, provided, however, that

EBITDA determined by the Neutral Auditor shall be no

greater than EBITDA determined by Seller and no less

than EBITDA determined by Buyer. The determination of

the Neutral Auditor shall be made as an expert and not

as an arbiter and shall be based solely on the written

submissions by Buyer and Seller and their respective

representatives and any other communication requested by

the Neutral Auditor, and the determination shall not be

by independent review. Buyer and Seller shall use their

commercially reasonable efforts to cause the Neutral

Auditor to complete its review thereof within fifteen

(15) days of its appointment. If such a review by a

Neutral Auditor is conducted, then the party (i.e.,

Buyer, on the one hand, or Seller, on the other hand)

whose calculation of EBITDA is furthest from EBITDA

determined by the Neutral Auditor shall pay all fees and

expenses of the Neutral Auditor associated with such

review.

(Doc. #53-1, p. 35.) The Auditor’s “determination . . . shall be

conclusive, final and binding.” (Id.)

D. Waiver of Neutral Auditor Provision

Sellers argue, however, that Buyer has “waived any right to

demand arbitration . . . as to the calculation of EBITDA . . . by

actively participating in this litigation, taking actions

inconsistent with the right to demand arbitration and otherwise

acting in a manner that would make arbitration inequitable.” (Doc.

#146, ¶ 62.) While an alternate dispute resolution provision can

be waived, the record does not support a waiver in this case.

The Eleventh Circuit has stated that “[o]ur waiver doctrine

is typically implicated when parties have ‘invoked the litigation

machinery’ before reversing course and claiming that arbitration

was the proper avenue all along.” Payne v. Savannah Coll. of Art

& Design, Inc., 81 F.4th 1187, 1201 (11th Cir. 2023), quoting

Gutierrez v. Wells Fargo Bank, NA, 889 F.3d 1230, 1236 (11th Cir.

2018) (alteration adopted and quotation omitted). Delaware law

also recognizes that an arbitration provision may be waived by

litigating. CSC Upshot Ventures I, L.P. v. Gandhi-Kapoor, 326

A.3d 369 (Del. 2024)(“This Court has identified three elements

that must be satisfied to support a finding of waiver: (1) there

must be a requirement or condition to be waived, (2) the waiving

party must know of the requirement or condition, and (3) the

waiving party must intend to waive that requirement or

condition.”)(citations omitted.)

From the start of the case (and before), Buyer has constantly

asserted that the Earnout Payment must be determined by the Neutral

Auditor. (Doc. #24, p. 8; Doc. #53, p. 2.) Judge Badalamenti

determined that Sellers’ original complaint gave “no basis” for

finding that their disagreement pertained to the “determination of

EBITDA.” (Doc. #123, p. 8.) Sellers concede that their Amended

Complaint (Doc. #146) “expanded Count I . . . to clearly seek

damages including the determination of EBITDA and the Earnout

Bonus.” (Doc. #150, p. 1.) Once that Amended Complaint was filed,

Buyer immediately filed a motion to dismiss. (Doc. #148.) Buyer

has consistently attempted to avoid

“the litigation machinery” in this case, which conduct is clearly

not indicative of waiver of the Neutral Auditor provision.

E. Neutral Auditor’s Authority Over Count I Claim/Relief

The next issue is whether the claim and requested relief in

Count I fall within the scope of the Neutral Auditor’s authority

as vested by the Agreement. Count I of the SAC alleges that Buyers

breached the Agreement in four ways: (1) failing to deliver a

timely determination of EBITDA for the calculation of the Earnout

Bonus; (2) failing to provide Sellers reasonable access to Buyer’s

records; (3) failing to calculate EBITDA properly; and (4) failing

to calculate the Earnout Bonus properly. (Doc. #146, ¶ 67.)

Sellers seek damages consisting of the Earnout Bonus (Doc. #146,

¶ 70) and damages for the delay in receiving a proper Earnout

Bonus. (Id., ¶ 68.)

Neither the components of the breach of contract claim nor

the requested damages are disputes which may properly be resolved

by the Court. The Agreement clearly requires the amount of the

EBITDA and the Earnout Payment to be determined by the Neutral

Auditor, and that determination is final and conclusive. Here,

all the alleged breaches of the Agreement fall within the purview

of the Neutral Auditor as components of determining the Earnout

Payment. See e.g. Stone v. Nationstar Mortgage LLC, 2020 WL

4037337 (Del. Ch. Jul. 6, 2018) (finding claims within the purview

of the expert independent accountant where they “involve[d]

critical inputs to the core determination that the Independent

Accountant must make[.]”); Belknap Holdings, LLC v. Midwest

Prototyping, LLC, 2024 WL 4441958, at *3-4 (Del. Super. Oct. 8,

2024) (finding disputes ancillary to the calculation of an earnout

payment including (1) qualifying sales, (2) qualifying customers,

and (3) qualifying revenue within the purview of the accounting

firm charged with calculating the earnout payment.); Alliant

Techsystems, Inc. v. MidOcean Bushnell Holdings, L.P, 2015 WL

1897659, at *11 (Del. Super. Jan. 31, 2020) (finding that disputes

regarding accounting methodology were appropriately for the expert

because “the parties would not have selected an [independent

accounting firm] to serve as an ‘expert’ if all they wanted that

firm to do was to engage in a bean-counting exercise.”).

F. Count II of SAC

Buyer’s Motion to Dismiss does not address Count II, which

seeks an injunction compelling reasonable access to Buyer’s books

and records pursuant to Exhibit A. Count II seems problematic to

the Court for several reasons. First, the only basis for the

claimed injunctive relief - the alleged failure to comply with the

contractual provision governing access to records for the

calculation of the EBITDA amount – has now been determined to be

an issue for the Neutral Auditor. Second, under Delaware law the

ordinary remedy for breach of contract is an award of damages, and

injunctive relief may not be available. Third, even if the issue

was for the Court and injunctive relief is an available remedy,

the matter appears to be moot because Sellers have now received

access to all the books-and-records required by the Agreement.1

Purpose Built Fams., 95 F.4th at 1352 (explaining that mootness

occurs when “later events deprive the court of the power to grant

meaningful relief”). The Court will direct the parties to advise

the Court as to their views of the status of Count II.

Accordingly, it is now

ORDERED:

1. Defendant PetVet Operating, LLC, f/k/a PetVet Care Centers

(Fla.), LLC’s Amended Motion to Dismiss (Doc. #148) is

1 The Court has ordered Buyer to produce, inter alia: (1) “[a]ll

documents relating to the calculation of Target EBITDA,” (Doc.

#105, ¶ 1.a; Doc. #85, p. 12); (2) “[a]ll financial reports,

financial statements, attachments, schedules, supporting

documents, and other preparatory workpapers used to calculate

Target EBITDA of $1,390,420,” (Doc. #105, ¶ 1.b; Doc. #85, p. 13);

(3) subject to certain parameters, “[e]lectronic backup of or

electronic access to QuickBooks, QuickBooks Online, Sage, Quicken

or any other electronic bookkeeping, accounting or financial

recordkeeping software programs maintained by or on the Business’

behalf, together with any applicable password(s), if password

protected, (Doc. #105, ¶ 1.c; Doc. #85, p. 15); (4) subject to

certain parameters, “[a]nnual . . . and monthly [purchase] and

sales journals, revenue journals, [inventory reports,] or other

records, specific to the operations of the Business substantiating

revenues from sales, services, [inventory purchases,] and any

other sources, from January 2020 through present date, printed in

pdf format and then also exported to Excel, reflecting dates of

service, client/customer names, services or sales amounts, payment

details, services provided, cost associated with service,

[purchase dates, vendor names, quantity, cost, payment details,

usage dates,] Entered/Last Modified detail, account split detail,

and with expanded columns to ensure all information is legible,”

(Doc. #105, ¶ 1.d; Doc. #85, pp. 16–17); (Doc. #105, ¶ 1.e; Doc.

#85, p. 17.)

GRANTED.

2. Count I of Plaintiffs Wendella69, Inc. f/k/a/ Sw. Fla.

Veterinary Specialists, Inc., Wendy G. Arsenault, and

Michael J. Arsenault’s Second Amended Complaint (Doc. #146)

is DISMISSED WITHOUT PREJUDICE.

3. The parties shall advise the Court within TEN (10) DAYS of

the date of this Opinion and Order as to their views as to

the status of Count II.

DONE AND ORDERED at Fort Myers, Florida, this 24th day of

October 2025.

— OL

adi EF. STEELE

SHNIOR UNITED STATES DISTRICT JUDGE

Copies: Parties of record

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