Streamline Consulting Group LLC v. Legacy Carbon LLC dba Hawaiian Legacy Carbon et al

Filing 81

ORDER Denying Plaintiff's Motion To Vacate or Modify Arbitration Award and Granting Defendants' Countermotion To Confirm Arbitration Award re 73 75 .The court grants Defendants' motion to confirm the arbitration award and denies Plaintiff's motion to vacate or modify the arbitration award. The Clerk of Court is directed to enter judgment in favor of Defendants and to close this case. Signed by JUDGE SUSAN OKI MOLLWAY on 5/10/2019. (cib)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
STREAMLINE CONSULTING GROUP
LLC,

)
)
)
Plaintiff,
)
)
vs.
)
)
LEGACY CARBON LLC, dba
)
HAWAIIAN LEGACY CARBON;
)
)
HAWAIIAN LEGACY REFORESTATION )
INITIATIVE, dba HAWAIIAN
)
LEGACY HARDWOODS, dba
)
HAWAIIAN LEGACY FORESTS, dba, )
LEGACY FORESTS, dba LEGACY
)
TREES;
)
)
HLH LLC, aka HAWAIIAN LEGACY )
HARDWOODS, LLC;
)
)
LEGACY HARDWOODS, INC., aka
)
HAWAIIAN LEGACY HARDWOODS,
)
INC,;
)
)
LEGACY HOLDINGS LLC, aka
)
HAWAIIAN LEGACY HOLDINGS,
)
LLC;
)
)
JEFFREY DUNSTER; and
)
)
JOHN DOES,
)
)
Defendants.
)
____________________________ )

CIVIL NO. 15-00318 SOM/KSC
ORDER DENYING PLAINTIFF’S
MOTION TO VACATE OR MODIFY
ARBITRATION AWARD AND
GRANTING DEFENDANTS’
COUNTERMOTION TO CONFIRM
ARBITRATION AWARD

ORDER DENYING PLAINTIFF'S MOTION TO VACATE OR MODIFY ARBITRATION
AWARD AND GRANTING DEFENDANTS'
COUNTERMOTION TO CONFIRM ARBITRATION AWARD

I.

INTRODUCTION.
In 2016, this court referred to arbitration all claims

arising under the Services Agreement and Non-Circumvention
Agreement, reserving for later adjudication which parties had to
arbitrate the claims at issue.

The parties subsequently

stipulated to stay this proceeding pending arbitration and to
refer all claims against all Defendants to arbitration.

In

November 2018, the arbitrator awarded $273,930.14 to Defendants.
The stay of this case has been lifted, and Plaintiff Streamline
Consulting Group now moves to vacate or modify that award.
Defendants have filed a countermotion to confirm the award.

The

court denies Plaintiff’s motion and grants Defendants’ motion to
confirm the arbitration award without a hearing pursuant to Local
Rule 7.2(d).
II.

FACTUAL BACKGROUND.
The factual background for this case was set forth in

this court’s order of January 27, 2016.

See ECF No. 36.

background is incorporated herein by reference.

That

In the order,

this court determined that all claims arising under the Servicing
Agreement and Non-Circumvention Agreement had to be arbitrated,
but left for further determination which Defendants had to
participate in arbitration.

See id.

After this court declined

to reconsider that order, the parties stipulated to having all
claims against all parties arbitrated.
2

See ECF No. 59.

At the beginning of 2018, the parties signed an
Agreement to Participate in Binding Arbitration with Jerry Hiatt
as the arbitrator.

See ECF No. 73-1, PageID #s 722-24.

The

agreement stated:
Unless the parties’ agreement provides
otherwise, the Arbitrator shall determine all
issues submitted to arbitration by the
parties and may grant any and all remedies
that the Arbitrator determines to be just and
appropriate under the law. In the Award of
the Arbitrator, the Arbitrator shall issue a
determination on the issue of all
arbitration-related fees and costs,
including: Arbitrator’s compensation and
expenses; [Dispute Prevention & Resolution,
Inc.’s] fees and expenses; and, if provided
for in the parties’ agreement, the Submission
to Arbitration, or applicable laws or
statutes, attorney’s fees and costs.
Id., PageID # 722, 723.
According to the Pre-Hearing Stipulation and Order
Number 2, the arbitration was to be “governed by the Federal
Arbitration Act, 9 U.S.C. § 1 et seq.”

ECF No. 73-1, PageID

# 729.
Streamline asserted five claims against all Defendants
in the arbitration proceeding: Breach of the Services Agreement
(Count I); Breach of the Non-Circumvention Agreement (Count II);
Use of Photograph Without Giving Credit (Count III); Breach of
Implied Covenant of Good Faith and Fair Dealing (Count IV);
Misappropriation of Name and Likeness (Count V); Intentional
Interference with Economic Advantage (Count VI); and Unjust

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Enrichment (Count VII).

See ECF No. 76-6.

Apparently, Legacy

Carbon filed contract and tort counterclaims against Streamline
for allegedly deficient services.

See ECF No. 76-3, PageID

#s 1000-01 (Final Award of Arbitrator discussing counterclaims).
At the arbitration hearing on October 9, 2018, all
parties agreed that the arbitrator was to award attorneys’ fees
to prevailing parties with respect to contract claims and that
such attorneys’ fees were awardable under Hawaii’s assumpsit
statute.

See ECF No. 73-1, PageID # 779.

At the arbitration

hearing on October 12, 2018, the arbitrator confirmed with the
parties that, unless a different amount was provided for in the
parties’ contracts, attorneys’ fees would be awarded under
Hawaii’s assumpsit statute, which he said was limited to 25% of
the amount in controversy.

ECF No. 73-1, PageID # 742.

Counsel

for Defendants corrected him, stating that the amount should be
“25 percent of the judgment awarded or 25 percent of the claim
you successfully defend.”

Id.

The arbitrator responded, “Yes, I

think we have a common basic understanding.”
On or about October 22, 2018, Streamline argued in
arbitration its entitlement to an award of attorneys’ fees under
Hawaii’s assumpsit statute, section 607-14 of Hawaii Revised
Statutes.

See ECF No. 73-3, PageID # 897.

The same day,

Defendants argued that they were the parties entitled to
attorneys’ fees under section 607-14 of Hawaii Revised Statutes.

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See ECF No. 73-2, PageID # 791.

Given these circumstances, the

parties agreed that the arbitrator should award attorneys’ fees
pursuant to Hawaii’s assumpsit statute, section 607-14.
On or about November 28, 2018, the arbitrator issued
his Final Award of Arbitrator.

See ECF No. 76-3.

The arbitrator

determined that $263,000 represented a total reasonable amount of
attorneys’ fees for each side.

See ECF No. 76-3, PageID # 1001.

The arbitrator determined that each side incurred at least
$10,930.14 in costs.

Id.

With respect to the portion of Count I asserting
“Breach of the Services Agreement--failure to pay invoice,” the
arbitrator ruled that Legacy Carbon had breached the agreement by
failing to pay invoices.

The arbitrator awarded to Streamline

from Legacy Carbon $47,387.43 in damages and, pursuant to section
607-14 of Hawaii Revised Statutes, awarded 25% of that amount
($11,846.86) for attorneys’ fees.

The arbitrator also awarded to

Streamline from Legacy Carbon $10,930.14 in costs.
No. 76-3, PageID # 1007.

See ECF

However, the arbitrator determined that

the remaining five Defendants had not breached the Services
Agreement and awarded each of them 25% of the award ($11,846.86)
plus 1/6 of the total costs of $10,930.14 ($1,821.69), for a
total of $13,668.55 in favor of each of the other five Defendants
with respect to Count I.

The aggregate of the five awards in

5

favor of the five Defendants was $68,342.75 ($13,668.55 x 5 =
$68,342.75).

Id., PageID #s 1007-08.

With respect to a different claim under Count I
(“Breach of the Services Agreement--achievement fee”), the
arbitrator ruled against Streamline in favor of all Defendants.
Because Streamline had claimed $53,227.49 with respect to this
claim, the arbitrator awarded each of the six Defendants 25% of
that amount ($13,306.87) as attorneys’ fees.

Because all

Defendants but Legacy Carbon had already been awarded a
proportional share of the full costs ($1,821.69), the arbitrator
awarded Legacy Carbon only its proportional share of the full
costs--1/6 of the total costs ($1,821.69).

The total award

against Streamline with respect to Count I’s achievement fee
claim was $81,662.91 (($13,306.87 x 6) + $1,821.69 = $81,662.91).

The arbitrator also decided a commission claim arising
out of an “ICA” agreement, ruling that Hawaiian Legacy Hardwoods
owed Streamline $4,510.08 as damages, plus 25% of that amount
(the arbitrator awarded $1,127.50, rather than $1,127.52) for
attorneys’ fees, for a total award of $5,637.58.
3, PageID # 1010.

See ECF No. 76-

No costs were awarded because Streamline had

already been awarded all of its costs.

Id.

With respect to a portion of Count II (“Breach of the
Non-Circumvention Agreement--Jones Transaction”), the arbitrator

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awarded $10,022.40 in favor of Streamline and against Hawaiian
Legacy Hardwoods, as well as attorneys’ fees of $2,505.60 (25% of
the $10,022.40 award), for a total of $12,528.00.

However, the

arbitrator ruled in favor of the other five Defendants, awarding
each of them 25% of the award, for a total of $12,528.00.

See

ECF No. 76-3, PageID # 1011.
With respect to a different part of Count II (“Breach
of the Non-Circumvention Agreement--NC Fee on Carbon Credits
Certified by Gold Standard”), the arbitrator ruled in favor of
all Defendants and against Streamline.

Each of the six

Defendants was awarded 25% of the claimed amount of $186,599.40,
or $46,649.85 ($279,899.10 total).

See ECF No. 76-3, PageID

# 1014.
The arbitrator ruled in favor of Defendants on the
remaining counts (Counts 3 to 7) asserted by Streamline.

Because

these claims were based on torts, rather than contracts, the
arbitrator declined to award attorneys’ fees to Defendants.

The

arbitrator also declined to award costs for these claims because
the full amount of costs had already been awarded.

See ECF No.

76-3, PageID #s 1021, 23.
Finally, the arbitrator ruled in favor of Streamline
with respect to each of the counterclaims asserted by Legacy
Carbon.

With respect to Legacy Carbon’s breach of contract

claim, the arbitrator awarded Streamline $10,688.69 in attorneys’

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fees, 25% of the amount claimed by Legacy Carbon.

The arbitrator

did not award costs because the full amount of costs had already
been awarded to Streamline.

See ECF No. 76-3, PageID # 1024.

With respect to all of the other counterclaims asserted by Legacy
Carbon, the arbitrator declined to award attorneys’ fees because
the claims sounded in tort, and also declined to award costs
because the full amount of costs had already been awarded.

Id.,

PageID #s 1024-25.
When the arbitrator added up all of the awards to
Streamline and to Defendants, Streamline ended up owing
Defendants $343,414.06.

Because this amount exceeded the

reasonable fees and costs allowed by the arbitrator, the
arbitrator reduced this amount to $273,930.14, plus applicable
fees and costs of the arbitration.
# 1025-26.

See ECF No. 76-3, PageID

This amount equaled what the arbitrator had

determined was the total in reasonable fees and costs for the
case.
Streamline asked the arbitrator to modify or correct
the arbitration award, arguing that the amount awarded was in
error because the attorneys’ fees awarded under section 607-14
had not been limited to a collective recovery of 25% of the
amount in dispute.
argument).
# 1045.

See ECF No. 76-5, PageID # 1034 (summary of

The arbitrator denied the motion.

Id., PageID

In so ruling, the arbitrator acknowledged that there was

8

a history of Hawaii cases in which the 25% attorneys’ fees cap
was applied to a single side in state-court cases.

However, the

arbitrator stated that, based on a more recent Hawaii Supreme
Court case, Kona Village Realty, Inc. v. Sunstone Realty
Partners, XIV, LLC, 123 Haw. 476, 236 P.3d 456 (2010), that limit
did not apply to arbitration proceedings.

Id., PageID # 1041.

The arbitrator additionally denied the motion on the ground that
it failed to meet the standard for altering an arbitration award.
Specifically, the arbitrator noted that Streamline was citing new
authority that could have been cited earlier, that Streamline
itself had sought more than 25% of its claimed amounts, and that
equity supported the denial.
III.

Id., PageID #s 1043-44.

THE COURT CONFIRMS THE ARBITRATION AWARD.
Streamline asks this court to vacate or modify the

arbitration award.

Defendants, on the other hand, ask this court

to confirm the arbitration award.

The court denies Streamline’s

motion to vacate and grants Defendants’ motion to confirm.
“Arbitration offers flexibility, an expeditious result,
and is relatively inexpensive when compared to litigation.”
Schoenduve Corp. v. Lucent Techs., Inc., 442 F.3d 727, 731 (9th
Cir. 2006).

When parties agree to arbitrate their disputes, they

“trade[] the procedures and opportunity for review of the
courtroom for the simplicity, informality, and expedition of
arbitration.”

Gilmer v. Interstate/Johnson Lane Corp., 500 U.S.
9

20, 31 (1991) (quotation marks and citation omitted).

“To

protect the overall purpose of arbitration and avoid any tendency
of a court to impute its own strict and rigid practices onto
arbitration proceedings, Congress has limited the ability of
federal courts to review arbitration awards.”

Schoenduve, 442

F3d at 731.
This court’s review of an arbitration decision is
therefore “limited and highly deferential.”

Coutee v. Barington

Capital Group, L.P., 336 F.3d 1128, 1132 (9th Cir. 2003).
Motions to vacate arbitration awards are granted “only in very
unusual circumstances.”

This prevents arbitrations from becoming

“merely a prelude to a more cumbersome and time-consuming
judicial review process.”

Oxford Health Plans LLC v. Sutter, 569

U.S. 564, 568 (2013).
The scope of this confirmation proceeding is “extremely
limited” and governed by §§ 9 to 11 of the Federal Arbitration
Act.

See 9 U.S.C. §§ 9-11.

Under § 9, this court must confirm

an arbitration award “unless the award is vacated, modified, or
corrected as prescribed in sections 10 and 11 of this title.”

9

U.S.C. § 9; accord Hall St. Assocs., L.L.C. v. Mattel, Inc., 552
U.S. 576, 582 (2008) (“Under the terms of § 9, a court ‘must’
confirm an arbitration award ‘unless’ it is vacated, modified, or
corrected ‘as prescribed’ in §§ 10 and 11.”).
Under § 10, this court may vacate an arbitration award

10

when: it was procured by corruption, fraud, or undue means, 9
U.S.C. § 10(a)(1); the arbitrator was evidently partial or
corrupt, 9 U.S.C. § 10(a)(2); the arbitrator refused to postpone
a hearing, refused to hear evidence, or otherwise misbehaved, 9
U.S.C. § 10(a)(3); or the arbitrator exceeded his or her powers
or so imperfectly executed those powers that a mutual, final, and
definite award was not made, 9 U.S.C. § 10(a)(4).
Under § 11, this court may modify or correct an
arbitration award when: there was an evident miscalculation or a
mistake in the description of a person, thing, or property, 9
U.S.C. § 11(a); the arbitrator acted on a matter not submitted
for arbitration, 9 U.S.C. § 11(b); or the arbitration award has a
flaw that does not affect the merits, 9 U.S.C. § 11(c).
There are also judicially developed grounds for
vacating an award--when the award is irrational or involved a
manifest disregard of the law.

G.C. & K.B. Investments, Inc. v.

Wilson, 326 F.3d 1096, 1106 (9th Cir. 2003).

But something more

than “erroneous misinterpretations of law” is required before
this court may vacate an arbitration award.

As the Ninth Circuit

has cautioned, “It is not even enough that the arbitrator may
have failed to understand or apply the law.

An arbitrator’s

decision must be upheld unless it is completely irrational or it
constitutes a manifest disregard of the law.”

Id. at 1105

(alterations omitted); see also French v. Merrill Lynch, Pierce,

11

Fenner & Smith, Inc., 784 F.2d 902, 906 (9th Cir. 1986)
(confirmation of arbitration awards “is required even in the face
of erroneous findings of fact or misinterpretations of law”
(quotation marks and citation omitted)).

Accordingly, under the

Federal Arbitration Act, an arbitration award must be confirmed
if the arbitrator even arguably properly construed or applied the
law and acted within the scope of his authority.

See United Food

& Commercial Workers Int'l Union v. Foster Poultry Farms, 74 F.3d
169, 173 (9th Cir. 1995).
Streamline argues that the arbitration award should be
modified under 9 U.S.C. §§ 11(a) (evident miscalculation) and
11(c) (flaw not affecting the merits).

Additionally, Streamline

seeks to vacate the award under 9 U.S.C. §§ 10(a)(4) (arbitrator
exceeded powers).

The court rejects Streamline’s arguments, as

Streamline is really arguing that the arbitrator made a mistake
in construing the law.

That is not a sufficient ground for

vacating or modifying the award.
In awarding each Defendant 25% of the claimed amount
for attorneys’ fees under section 607-14 of Hawaii Revised
Statutes, rather than a maximum combined 25% of the claimed
amount, the arbitrator neither made an “evident miscalculation”
nor issued an award containing a flaw not affecting the merits
for purposes of 9 U.S.C. § 11(a) or

§ 11(c).

While Streamline

characterizes the arbitrator’s award as involving a

12

miscalculation, that characterization is based on the premise
that the arbitrator should have capped the aggregated attorneys’
fees at 25%, rather than at 25% per Defendant.

In other words,

Streamline is not really arguing that the arbitrator made a
miscalculation in his figures or incorporated some other flaw.
Streamline instead disagrees with how the arbitrator interpreted
the law.
This court need not address whether Streamline is
correct with respect to what state law provides because this
court may not modify the award based on Streamline’s argument.
See French, 784 F.2d at 906 (“confirmation is required even in
the face of erroneous findings of fact or misinterpretations of
law” (quotation marks and citation omitted)).

Accord Apex

Plumbing Supply, Inc. v. U.S. Supply Co., 142 F.3d 188, 194 (4th
Cir. 1998) (“courts have held generally that even a mistake of
fact or misinterpretation of law by an arbitrator provides
insufficient grounds for the modification of an award” under
§ 11(a)); UBS Fin. Servs., Inc. v. Riley, 2012 WL 1831720, at *3
(S.D. Cal. May 18, 2012) (“Section 11(c) does not allow the
district court to substitute its judgment for that of the
arbitrators, but allows the court to modify arbitration awards to
reflect the clear intent of the arbitrator.” (citation omitted)).
Nor does Streamline establish that the arbitration
award should be vacated under 9 U.S.C. § 10(a)(4), which

13

addresses an arbitrator’s exceeding of his or her power.
Streamline equates the arbitrator’s alleged misinterpretation of
law with his exceeding his powers, essentially arguing that the
parties submitted the matter to the arbitrator to have him
properly apply the law.

However, the “rule is, though the

arbitrators’ view of the law might be open to serious question,
(an award) which is one within the terms of the submission, will
not be set aside by a court for error either in law or fact.”
Coast Trading Co. v. Pac. Molasses Co., 681 F.2d 1195, 1198 (9th
Cir. 1982) (alterations, quotation marks and citation omitted).
The parties in this case agreed to the arbitrator’s
awarding of attorneys’ fees pursuant to section 607-14 of Hawaii
Revised Statutes.

Even if the arbitrator incorrectly calculated

the award, that would not mean that the arbitrator exceeded his
powers for purposes of § 10(a)(4).

The Ninth Circuit has

explained that “[a]rbitrators exceed their powers when they
express a manifest disregard of law, or when they issue an award
that is completely irrational.”
1104 (9th Cir. 2009).

Bosack v. Soward, 586 F.3d 1096,

For an arbitrator to manifestly disregard

the law, he or she must have recognized the applicable law and
then ignored it.

Id. Because the arbitrator’s alleged mistake of

law in this case was not irrational or a manifest disregard of
the law, this court confirms the arbitrator’s award.

Id.; see

also Todd Shipyards Corp. v. Cunard Line, Ltd., 943 F.2d 1056,

14

1060 (9th Cir. 1991) (“An arbitrator’s decision must be upheld
unless it is completely irrational, or it constitutes a manifest
disregard of law” (quotation marks and citation omitted)).
Even assuming that the arbitrator misinterpreted Kona
Village as allowing more than 25% of the judgment to be awarded
as attorneys’ fees in arbitrations, that misinterpretation of law
would not justify modifying his award.

As the Ninth Circuit has

noted:
The risk that arbitrators may construe the
governing law imperfectly in the course of
delivering a decision that attempts in good
faith to interpret the relevant law, or may
make errors with respect to the evidence on
which they base their rulings, is a risk that
every party to arbitration assumes, and such
legal and factual errors lie far outside the
category of conduct embraced by § 10(a)(4).
Kyocera Corp. v. Prudential-Bache Trade Servs., Inc., 341 F.3d
987, 1003 (9th Cir. 2003).
Streamline additionally argues that the arbitrator’s
award of fees should be vacated or modified because it is not
supported by evidence, given the alleged failure of some
Defendants to submit invoices to the arbitrator.

But an

“arbitration award cannot be vacated or modified because the
arbitrator’s findings are not supported by substantial evidence
or the arbitrator’s conclusions of law are erroneous.”

Freedom

Inv'rs Corp. v. Gantan, 2017 WL 8772097, at *4 (N.D. Cal. Sept.
7, 2017); see also Kyocera Corp., 341 F.3d at 994 (“Neither

15

erroneous legal conclusions nor unsubstantiated factual findings
justify federal court review of an arbitral award under the
statute, which is unambiguous in this regard.”).

Moreover, in

this case, counsel for all Defendants submitted a declaration in
support of the fees.

See ECF No. 73-2.

In that declaration,

counsel stated that “Respondents . . . incurred attorneys’ fees
and general excise tax thereon in the total amount of
$263,702.80.”

The declaration did not limit those fees to fewer

than all Defendants.

16

IV.

CONCLUSION.
The court grants Defendants’ motion to confirm the

arbitration award and denies Plaintiff’s motion to vacate or
modify the arbitration award.

The Clerk of Court is directed to

enter judgment in favor of Defendants and to close this case.

IT IS SO ORDERED.
DATED: Honolulu, Hawaii, May 10, 2019.

/s/ Susan Oki Mollway
Susan Oki Mollway
United States District Judge

Streamline Consulting Group v. Legacy Carbon LLC, et al., Civ. No. 15-00318
SOM/KSC; ORDER DENYING PLAINTIFF'S MOTION TO VACATE OR MODIFY ARBITRATION
AWARD AND GRANTING DEFENDANTS' COUNTERMOTION TO CONFIRM ARBITRATION AWARD

17