YF Franchise LLC et al. v. Jun Kil An
Filing
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ORDER CONFIRMING ARBITRATION AWARD (ECF No. 4 ) AND GRANTING PETITIONERS' MOTION FOR ENTRY OF JUDGMENT (ECF No. 7 ) and DENYING PETITIONERS' REQUEST FOR ATTORNEYS' FEES AND COSTS. Signed by JUDGE HELEN GILLMOR on 2/27/2015. (ecs, ) CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
YF FRANCHISE LLC; YOGEN FRÜZ
U.S.A. INC.,
Petitioners,
vs.
JUN KIL AN,
Respondent.
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Civ. No. 14-00496 HG-KSC
ORDER CONFIRMING ARBITRATION AWARD (ECF No. 4) AND GRANTING
PETITIONERS’ MOTION FOR ENTRY OF JUDGMENT (ECF No. 7)
and
DENYING PETITIONERS’ REQUEST FOR ATTORNEYS’ FEES AND COSTS
Petitioners YF Franchise LLC and Yogen Früz U.S.A. Inc.
move to confirm a Final Arbitration Award issued in their
favor against Respondent Jun Kil An for breach of contract.
Petitioners request an entry of judgment confirming the award
and seek attorneys’ fees and costs.
Petitioners’ Application to Confirm Arbitration Award
(ECF No. 4) and Motion for Entry of Judgment (ECF No. 7) are
GRANTED.
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The Arbitrator’s Final Award in International Centre for
Dispute Resolution Case No. 50 114 T 00920 12, issued on
January 15, 2014, is CONFIRMED.
Petitioners’ request for attorneys’ fees and costs is
DENIED.
PROCEDURAL HISTORY
On October 31, 2014, Petitioners filed with this Court an
Application to Confirm Arbitration Award issued by the
American Arbitration Association’s International Centre for
Dispute Resolution.
(ECF No. 1).
On November 5, 2014, Petitioners amended their
Application to Confirm Arbitration Award.
(ECF No. 4).
On November 7, 2014, Petitioners filed Proof of Service
of their Application.
(ECF No. 6).
On December 12, 2014, Petitioners filed a MOTION FOR
ENTRY OF JUDGMENT.
(ECF No. 7).
On December 16, 2014, the Court issued a briefing
schedule for Petitioners’ Motion for Entry of Judgment.
No. 8).
(ECF
The Court elected to decide the Motion without a
hearing, pursuant to Local Rule 7.2(d).
Petitioners were instructed to file the parties’
underlying agreements to arbitrate and any additional
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documents required pursuant to the Federal Arbitration Act.
(Id.)
On December 26, 2014, Petitioners filed their Franchise
Agreements with Respondent and the arbitration documents from
the International Centre for Dispute Resolution, as instructed
by the Court’s December 16, 2014 Minute Order.
(ECF No. 9).
Respondent was given until January 23, 2015, to file an
Opposition to Petitioners’ Motion.
(ECF No. 8)
No Opposition
was filed.
BACKGROUND
Petitioners YF Franchise LLC and Yogen Früz U.S.A. Inc.
(“Petitioners”) are franchisors of proprietary frozen yogurt,
ice cream, and related products.
(Application to Confirm
Arbitration Award at ¶ 1, ECF No. 4).
On August 30, 2010, Petitioners entered into franchise
agreements with Coolland, Inc. and Respondent Jun Kil An
(“Respondent An”).
(Id. at ¶¶ 1, 8-9; Franchise Agreements,
attached as Exs. B and C to Petitioners’ Supplemental
Declaration filed on 12/26/14, ECF No. 9; Final Award at ¶¶ 36, Ex. A, ECF No. 4-2).
Respondent An was the president of Coolland, Inc. and
personally guaranteed in writing Coolland, Inc.’s obligations
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under the Franchise Agreements.
(Final Award at ¶ 8, Ex. A,
ECF No. 4-2; Franchise Agreements, Exs. B and C, ECF No. 9).
Respondent An operated a franchise outlet using
Petitioners’ products in Minnesota.
(Application to Confirm
Arbitration Award at ¶¶ 1, 12, ECF No. 4; Final Award at ¶¶ 35, Ex. A, ECF No. 4-2).
On August 24, 2012, Petitioners sent a notice to
Coolland, Inc. and Respondent An that they had breached their
franchise agreements by failing to pay royalties, advertising
fund contributions, invoices for purchased products, and
development costs.
(Final Award at ¶ 10, Ex. A, ECF No. 4-2).
On December 13, 2012, Petitioners filed an arbitration
demand with the American Arbitration Association’s
International Centre for Dispute Resolution, pursuant to their
franchise agreements.
(Id. at ¶ 11).
On November 8, 2013, an arbitration hearing was held in
Ontario, Canada, pursuant to the terms of the Parties’
franchise agreements.
(Final Award at ¶ 15, ECF No. 4-2).
Neither Coolland Inc. nor Respondent An participated in the
arbitration hearing, despite receiving notice of the
proceedings.
(Id.)
On January 15, 2014, the Arbitrator issued a Final Award
in Petitioners’ favor against Coolland, Inc. and Respondent
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Jun Kil An.
(Id.).
The Arbitrator awarded Petitioners
$340,246.471 in damages assessed jointly and severally against
Coolland, Inc. and Respondent An.
(Id. at p. 4, ¶ 1).
The
Arbitrator also ordered Coolland, Inc. and Respondent An to
reimburse Petitioners the sum of $22,335.21 in administrative
fees and expenses.
(Id. at p. 4, ¶ 2).
Petitioners seek to confirm the Arbitrator’s rulings and
request entry of final judgment pursuant to the Federal
Arbitration Act, 9 U.S.C. § 1, et seq. (Application to Confirm
Arbitration Award at p. 2, ECF No. 4; Motion for Entry of
Judgment at p. 2, ECF No. 7).
LEGAL STANDARDS
The Parties have the ability to choose an applicable
legal standard in an arbitration agreement.
Fid. Fed. Bank,
FSB v. Durga Ma Corp., 386 F.3d 1306, 1312 (9th Cir. 2004).
Parties may choose which law governs the contract, the
arbitration, and review of an arbitration award.
See id.
The
parties’ choice of law, however, is subject to some
limitations.
Hall St. Associates, L.L.C. v. Mattel, Inc., 552
U.S. 576, 586 (2008). Private parties cannot, for instance,
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In their Application to Confirm Arbitration Award,
Petitioners incorrectly state that the Final Award provided
for $578,825.00 in damages. (Application at p. 7, ECF No. 4).
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create their own standard for confirming or vacating an
arbitration award.
Id.
Choice of Rules to Govern Arbitration
The Franchise Agreements provide that disputes arising
from the agreement shall be settled through arbitration.
The
Agreements provide that the American Arbitration Association’s
Commercial Arbitration Rules govern the arbitration procedure.
The Franchise Agreements provide:
Any dispute arising out of or relating to this
Agreement, or breach, termination or validity
thereof shall be settled by final and binding
arbitration in accordance with the American
Arbitration Association’s Commercial Arbitration
Rules by a sole arbitrator. The Arbitrator shall
hear the dispute in the Province of Ontario, Canada,
and may properly consider any and all matters
related thereto that would be admissible in a nonjury trial.
(Franchise Agreement for Yogen Früz U.S.A. Inc. at p. 39,
¶ B, attached as Ex. B, ECF No. 9-1; Franchise Agreement for
YF Franchise LLC at p. 43, ¶ B, attached as Ex. C, ECF No. 92).
The Final Arbitration Award was conducted by a sole
arbitrator in Ontario, Canada, pursuant to the Commercial
Arbitration Rules of the American Arbitration Association, as
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required by the terms of the Franchise Agreement.
(Final
Arbitration Award at p. 1, ECF No. 4-2).
Standard Governing Judicial Review of an Arbitration Award
The Franchise Agreements do not provide particular
procedural rules for confirmation of an arbitration award.
The Franchise Agreements provide: “Judgment upon the
award of the Arbitrator shall be binding and may be entered in
a court of competent jurisdiction.”
(Franchise Agreement for
Yogen Früz U.S.A. Inc. at p. 39, ¶ B, attached as Ex. B, ECF
No. 9-1; Franchise Agreement for YF Franchise LLC at p. 43, ¶
B, attached as Ex. C, ECF No. 9-2).
Parties to a contract may elect which procedural rules
shall govern an arbitration, as well as the confirmation
process of an arbitration award.
Fid. Fed. Bank, FSB., 386
F.3d at 1312.
The Federal Arbitration Act provides the default standard
for judicial review of an arbitration award, when a contract
does not evince a clear intent to incorporate some other
standard.
Johnson v. Gruma Corp., 614 F.3d 1062, 1066 (9th
Cir. 2010); Metzler Contracting Co. LLC v. Stephens, 774 F.
Supp. 2d 1073, 1077 (D. Haw. 2011) aff'd, 479 Fed. Appx. 783
(9th Cir. 2012).
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The contract must specifically state what rules or law
shall be utilized to conduct the judicial review of an
arbitration award in order to overcome the presumption that
the Federal Arbitration Act applies.
Donnelly v. Jewel of
Kahana, LLC, 2013 WL 1337134, *6-7, Civ. Nos. 12-00347HG-KSC,
12-00419HG-KSC, (D. Haw. Mar. 28, 2013).
The Franchise Agreements do not evince a clear intent to
overcome the presumption favoring the Federal Arbitration Act
standard for judicial review of an arbitration decision.
Petitioners do not contest that the Federal Arbitration
Act applies.
Petitioners specifically request that the Court
confirm the award pursuant to the Federal Arbitration Act, 9
U.S.C. § 1, et seq.
(Application to Confirm Arbitration Award
at p. 2, ECF No. 4; Motion for Entry of Judgment at p. 2, ECF
No. 7).
The Federal Arbitration Act governs Petitioners’
Application to Confirm the Final Arbitration Award (ECF No. 4)
and their Motion for Entry of Judgment (ECF No. 7).
The Federal Arbitration Act’s Standard for Confirming an
Arbitration Award
The Federal Arbitration Act promotes a national policy
favoring arbitration.
582.
Hall St. Assocs., L.L.C., 552 U.S. at
Arbitration is favored for its ability to respond to the
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parties’ wishes.
Kyocera Corp. v. Prudential-Bache Trade
Services, Inc., 341 F.3d 987, 998 (9th Cir. 2003).
Arbitration offers greater flexibly and speed than litigating,
and is considered to be more cost-effective.
Id.
Judicial review of an arbitration award, pursuant to the
Federal Arbitration Act, is strictly limited, in order to
prevent unnecessary public intrusion into private arbitration
procedures.
Id.
The limitations on judicial review are
designed to preserve due process, without undermining the
benefits of arbitration, by rendering it “merely a prelude to
a more cumbersome and time-consuming judicial review process.”
Hall, 552 U.S. at 587 (quoting Kyocera Corp., 341 F.3d at
998).
Pursuant to the Federal Arbitration Act, the Court must
confirm an arbitration award unless it is vacated, corrected,
or modified.
See 9 U.S.C. § 9.
If an award is not vacated, pursuant to § 10 of the
Federal Arbitration Act, or modified, pursuant to § 11
(allowing modification for miscalculations or imperfection of
form, which are not at issue here), confirmation is required,
even if the award contains erroneous findings of fact or
misinterpretations of law.
See Lagstein v. Certain
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Underwriters at Lloyd's, London, 607 F.3d 634, 640 (9th Cir.
2010).
ANALYSIS
I.
Final Arbitration Award is Confirmed
Petitioners seek to confirm the Arbitrator’s Final Award
in International Centre for Dispute Resolution Case No. 50 114
T 00920 12, issued on January 15, 2014.
Confirm Arbitration Award, ECF No. 4).
(Application to
In the Final Award,
the Arbitrator ruled:
1.
Within (30) thirty days from the date of
transmittal of this Final Award to the Parties,
Respondents, Coolland, Inc. and Jung Kil An,
jointly and severally, shall pay to Claimants,
YF Franchise LLC and Yogen Früz U.S.A. Inc., the
sum of US $340,246.47. The particulars of this
amount are set forth in paragraph 19 above.
2.
The administrative fees and expenses of the
International Centre for Dispute Resolution
(ICDR) totaling $4,050.00 and the compensation
and expenses of the sole arbitrator totaling
$18,285.21 shall be borne entirely, jointly and
severally by Respondents, Coolland, Inc. and
Jung Kil An. Therefore, the Respondents,
Coolland, Inc. and Jung Kil An, jointly and
severally, shall reimburse Claimants, YF
Franchise LLC and Yogen Früz U.S.A. Inc., the
sum of $22,335.21, representing that portion of
said fees and expenses in excess of the
apportioned costs previously incurred by
Claimants YF Franchise LLC and Yogen Früz U.S.A.
Inc.
(Final Award at p. 4, ¶¶ 1-2, ECF No. 4-2).
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Petitioners seek an Entry of Judgment in accordance with
the Federal Arbitration Act, incorporating and confirming the
rulings of the Arbitrator.
(ECF No. 7).
An arbitration award must be confirmed if it has not been
modified, corrected, or vacated.
See 9 U.S.C. § 9; Donnelly,
2013 WL 1337134, *18.
Respondent has not filed any Opposition to Petitioners’
Application to Confirm the Arbitration Award or their Motion
for Entry of Judgment.
The Arbitrator’s Final Award having not been modified,
corrected, or vacated, is CONFIRMED.
Petitioners’ Motion for Entry of Judgment is GRANTED.
II.
Petitioners Are Not Entitled to Attorneys’ Fees
Petitioners additionally request that the Court award
“their costs and expenses, including attorneys’ fees, incurred
in this action in connection with the Award’s confirmation.”
(Motion For Entry of Judgment at p. 3, ECF No. 7).
Here, the Federal Arbitration Act governs the judicial
review of the Final Award.
Attorneys’ fees are not available
when a party seeks confirmation of an arbitration award in the
federal courts pursuant to the Federal Arbitration Act.
v. Monchecourt, 17 F.3d 1007, 1009 (7th Cir. 1994).
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Menke
In Metzler v. Stephens, the Ninth Circuit Court of
Appeals affirmed the district court’s denial of attorneys’
fees.
479 Fed. Appx. 783, 785 (9th Cir. 2012).
The appellate
court held that the district court properly determined that
the Federal Arbitration Act, which governed the evaluation of
the party’s motion to confirm the arbitration award, did not
provide for attorneys’ fees.
Id. (affirming Metzler v.
Stephens, Civ. No. 10-00516ACK-BMK, 774 F.Supp.2d 1073, 1089
(D. Haw. Feb. 28, 2011)).
Petitioners’ request for attorneys’ fees and costs is
DENIED.
CONCLUSION
Petitioners YF Franchise LLC and Yogen Früz U.S.A. Inc.’s
Application to Confirm Arbitration Award (ECF No. 4) and
Motion for Entry of Judgment (ECF No. 7) are GRANTED.
The Arbitrator’s Final Award in International Centre for
Dispute Resolution Case No. 50 114 T 00920 12, issued on
January 15, 2014, is CONFIRMED, as it states:
1.
Within (30) thirty days from the date of
transmittal of this Final Award to the Parties,
Respondents, Coolland, Inc. and Jung Kil An,
jointly and severally, shall pay to Claimants,
YF Franchise LLC and Yogen Früz U.S.A. Inc., the
sum of US $340,246.47. The particulars of this
amount are set forth in paragraph 19 above.
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2.
The administrative fees and expenses of the
International Centre for Dispute Resolution
(ICDR) totaling $4,050.00 and the compensation
and expenses of the sole arbitrator totaling
$18,285.21 shall be borne entirely, jointly and
severally by Respondents, Coolland, Inc. and
Jung Kil An. Therefore, the Respondents,
Coolland, Inc. and Jung Kil An, jointly and
severally, shall reimburse Claimants, YF
Franchise LLC and Yogen Früz U.S.A. Inc., the
sum of $22,335.21, representing that portion of
said fees and expenses in excess of the
apportioned costs previously incurred by
Claimants YF Franchise LLC and Yogen Früz U.S.A.
Inc.
Petitioners’ request for attorneys’ fees and costs is
DENIED.
The Clerk of the Court is directed to enter a Final
Judgment, incorporating and confirming the Arbitrator’s Final
Award, and to close the case.
IT IS SO ORDERED.
DATED: February 27, 2015, Honolulu, Hawaii.
/s/ Helen Gillmor
Helen Gillmor
United States District Judge
YF Franchise LLC and Yogen Früz U.S.A. Inc. v. Jun Kil An;
Civ. No. 14-00496HG-KSC; ORDER CONFIRMING ARBITRATION AWARD
(ECF No. 4) AND GRANTING PETITIONERS’ MOTION FOR ENTRY OF
JUDGMENT (ECF No. 7) and DENYING PETITIONERS’ REQUEST FOR
ATTORNEYS’ FEES
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