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May 9, 2024
By: James J. Riebandt, Dominic G. Erbacci

Shareholder James J. Riebandt and Associate Dominic G. Erbacci successfully obtained a final award entered in court ordered binding mediation that requires an equal shareholder to pay $380,000.00 to the estate of a deceased shareholder for certain stock in the parties’ company. The two equal shareholders filed claims against one another in the Circuit Court of DuPage County under the Illinois Business Corporation Act of 1983 alleging the existence of corporate deadlock. The trial court found that the parties were deadlocked and ordered the parties to participate in binding mediation. After months of negotiation, the parties reached an accord on the material terms of a settlement wherein Shareholder One agreed to purchase Shareholder Two’s stock for a sum certain. However, Shareholder Two died prior to the parties memorializing their agreement in a signed writing. Shareholder One refused to honor the settlement arguing that no agreement was reached because the parties never executed a written settlement agreement.

Shareholder One argued that the terms of a stock repurchase agreement controlled following the death of Shareholder Two. The stock repurchase agreement provided that Shareholder One was entitled to purchase the stock at a fraction of the negotiated value. In response, Shareholder Two’s estate filed a motion to enforce the settlement agreement arguing that, as a matter of law, the parties entered into a binding and enforceable settlement agreement prior to Shareholder Two’s death. The mediator agreed that the parties had settled their dispute prior to Shareholder Two’s death subject to a single issue being clarified. Accordingly, the mediator entered a final award requiring Shareholder One to purchase the stock from the estate of Shareholder Two based upon the parties’ agreement. The mediator slightly reduced the amount to be paid for the stock to account for the disparity between the agreed upon value and the value set by the stock repurchase agreement, with the stock repurchase agreement controlling on terms that were not expressly addressed in the parties’ express settlement