Soft

Chapter 15 - The arbitration over Cole’s fee

Cole Advisory sued Warren for breach of contract.

Success fee:

$1.85 million.

Warren counterclaimed:

Contract voidable due undisclosed conflict.

Return of certain unsupported prior fees:

$294,000 claimed initially.

After audit:

Company narrowed to $168,000.

Why narrow?

Some services legitimate.

Good.

Arbitration clause.

Private commercial arbitration.

Evidence:

Amendment.

Conflict policy.

Ethan/Vanessa affair.

Potential future 15%.

Altered committee consent.

Then Vanessa’s side argued:

Warren benefited from sale.

Net $5.6 million liquidity.

Cole materially improved deal terms by:

Renegotiating environmental indemnity.

Reducing broker commission.

Resolving tenant termination.

Estimated value contribution:

$430,000–$610,000.

Independent expert agreed Cole created real value.

Not $1.85m.

Then contractual language:

22% of “net strategic liquidity created.”

Could be read as 22% of savings/value Cole created, not 22% of entire net sale proceeds.

Vanessa interpreted broader.

Ethan approved broader internal calculation.

Ambiguity.

Arbitrator pushed settlement.

Warren offer:

$325,000 additional payment inclusive of disputed ordinary fees.

Cole:

$750,000.

Gap.

Then prior $168k counterclaim.

Settlement possibilities.

No moral purity.

Then Margaret told me:

“Sometimes a company pays someone who behaved badly because contract risk exists.”

“I know.”

“You’re making that face.”

“I hate law.”

“You love law when it stops wires.”

Fair.

Then special committee decided:

Settle if under $500,000 net.

Why?

Legal fees projected.

Uncertain interpretation.

Reputational closure.

Operational focus.

Vanessa wanted $600k.

No deal.

Arbitration continued.

Then Ethan’s ownership stake.

15% Warren shares.

Separate premarital? He received some through compensation during marriage. Important for divorce.

He acquired:

5% before marriage as executive incentive.

10% during marriage through vested compensation grants.

Thus:

5% likely separate, subject appreciation.

10% marital or compensation property depending vesting.

Company valuation:

Enterprise after sale around $54 million.

Less debt $12m.

Equity around $42m.

15% nominal $6.3m before discounts/rights.

This was significant.

Our divorce now involved real money.

Could I “take his shares”?

Not automatically.

Operating agreement restricted transfers to outsiders/spouses.

Court could allocate value/equalization rather than direct transfer.

He offered company to redeem some of his marital shares.

Board considered.

No instant removal.

Then the financial story became personal.

If Ethan needed liquidity to settle divorce and legal costs, he might sell part of stake.

That could alter company control.

My trust held 60%.

No threat to control.

May you like

But employees/board cared.

Another active conflict.

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