The opinion of the court was delivered by: Leisure, District Judge:
This action concerns the scope of an arbitrable dispute
arising from the sale of a business. Petitioner, Stena Line
(U.K.) Limited ("Stena") seeks an order compelling arbitration
concerning a dispute over a balance sheet dated March 31, 1990,
on which a post-closing adjustment to the purchase price is to
be based. Respondents Sea Containers Ltd. ("Sea Containers")
and its wholly owned subsidiary Ferry and Port Holdings Limited
("Holdings") do not object to arbitration, but ask this Court
to limit the scope of the arbitration.
In March 1990, Stena agreed to purchase from Sea Containers,
through its subsidiary Holdings, a group of ferry businesses
operating between England and the continent of Europe and
between England and Ireland. Pursuant to the stock purchase
agreement between the parties (the "Agreement"), there was to
be a post-closing adjustment to the purchase price of $380
The adjustment was to be determined using two balance sheets,
each balance sheet to be prepared by the entity managing the
business when the relevant financial data became available.
Thus, the first balance sheet, dated December 31, 1989, was to
be prepared by Holdings, and the second, dated March 31, 1990,
was to be prepared by Stena.
Section 1.3(a) of the Agreement required that the December 31
Section 1.3(c) of the Agreement imposed the same requirements
on the March balance sheet, with the additional proviso that it
"be prepared on a consistent basis with the policies set forth
in the notes to the December 31 Balance Sheet." Id. at 16.
Section 1.4 of the Agreement provides for a "Post Closing
Adjustment," which will adjust the sale price to account for
changes in the business occurring during the period between the
payment of initial consideration and the closing. This
adjustment is to incorporate a calculation based in part on the
"Losses," or decline in the figure designated as "net equity"
from the December to the March balance sheet, with a cap of $20
million. See Agreement § 1.3(c), at 17. Thus, even if the
difference were greater than $20 million, Stena's recovery
would be based on the lower figure.
The party receiving each balance sheet was given 60 days
after receipt to advise the opposing party in writing of the
amounts and descriptions of any adjustments that the receiving
party felt were necessary. Agreement at 12, 17. The Agreement
provides for expedited arbitration of unresolved differences,
in which they are to be submitted to an independent accountant
of national standing in England.*fn2 Agreement § 1.3(d), at
The closing was held on April 9, 1990. On April 5, 1990,
Holdings delivered the December 31 balance sheet to Stena.
Stena informed Holdings by telex of their belief that the
December balance sheet was not prepared in accordance with the
terms of the Agreement, but Stena did not dispute the matter
formally at that time. Stena claims that this was because they
had concluded that the operating losses for the quarter ending
March 31 would easily exceed the $20 million cap, and that "if
losses equaled or exceeded the $20 million cap, the December 31
balance sheet would have no economic impact on the parties."
Petitioner's Memorandum of Law in Support of Its Motion to
Compel Arbitration ("Pet. Mem.") at 5. Therefore, Stena decided
not to go to the expense of auditing and arbitrating the
However, Stena did state the following in its telex:
The purpose of this letter is to advise you that
we do not object to the net equity of December 31
Balance Sheet solely for the purpose of
determining losses. Notwithstanding the foregoing,
we do not agree or in any way concede that the
December 31 Balance Sheet was prepared in
accordance with the terms of Stock Purchase
Agreement and do not waive any rights ...