ASTANZA DESIGN, LLC. V. GIEMME STILE, S.P.A., ET AL.
Filing
25
MEMORANDUM OPINION AND ORDER signed by JUDGE THOMAS D. SCHROEDER on 12/15/2016, that Defendants' motion to vacate, modify, or correct the arbitration award (Doc. 11 ) is DENIED; that Astanza's amended motion to confirm the arbitration a ward (Doc. 3 ) is GRANTED and that the arbitration award is CONFIRMED; and that judgment be entered in favor of Plaintiff and against Defendants, jointly and severally, in the amount of $165,803.61, plus 8 percent interest as of September 23 , 2016. FURTHER ORDERED that Astanza's request for an award of reasonable attorneys' fees is GRANTED insofar as it relates to its prosecution of its motion to confirm and its opposition to Defendants' motion to vacate, modify, or correct the arbitration award. Astanza shall file any application for attorneys' fees within sixty (60) days pursuant to the requirements of the applicable rules and law, including this court's local rules. L.R. 54.2. (Garland, Leah)
IN THE UNITED STATES DISTRICT COURT FOR THE
MIDDLE DISTRICT OF NORTH CAROLINA
ASTANZA DESIGN, LLC,
Plaintiff,
v.
GIEMME STILE, S.p.A. and
GIEMME USA, LLC;
Defendants.
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1:16CV1238
MEMORANDUM OPINION AND ORDER
THOMAS D. SCHROEDER, District Judge.
Plaintiff Astanza Design, LLC (“Astanza”) seeks to confirm an
arbitration award against Defendants Giemme Stile, S.p.A. and
Giemme USA, LLC arising out of a contractual relationship among
them.
(Doc. 3.)
Defendants oppose the motion and move to vacate,
modify, or correct the award pursuant to the Federal Arbitration
Act (“FAA”), 9 U.S.C. § 10.
briefed and ready for decision.
(Doc. 11.)
The issues are fully
For the reasons set forth below,
Defendants’ motion will be denied and the arbitration award will
be confirmed.
I.
BACKGROUND
This action arises out of a dispute between the parties as to
the interpretation of a March 1, 2011 Representation Agreement
(Doc.
12-2)
whereby
Plaintiff
was
to
serve
as
the
exclusive
representative for sales of Defendants’ furniture to the Church of
Jesus Christ of Latter-Day Saints (“LDS Church”).
(Doc. 6-1.)
At
some point, the LDS Church sought to deal directly with Defendants,
thus reducing its cost by eliminating the commission owing to
Astanza.
(Doc. 3-1 at 7-9; Doc. 12 at 4-7; Doc. 16 at 3.)
Defendants acquiesced to that arrangement, and Astanza objected.
(Doc. 3-1 at 7-9; Doc. 12 at 4-7; Doc. 16 at 3.) After unsuccessful
discussions, Astanza submitted a petition for arbitration pursuant
to the terms of the Representation Agreement, which provided that
any disputes would be addressed by the International Centre for
Dispute Resolution (the “ICDR”) and its Rules of Procedure.
(Doc.
12-2 at 8, ¶ 13(C).)
The arbitration proceeding was comprehensive.
participated
in
mediation,
amended
their
The parties
filings,
conducted
discovery, held hearings, and had a final arbitration on June 6
and 7, 2016.
(Doc. 3-1 at 1.)
Thereafter, the arbitrator directed
the parties to submit briefs on certain issues, including Astanza’s
claim for attorneys’ fees.
Responsive briefs were also filed.
The record was closed on July 8, 2016, and on August 16, 2016
(following an agreed upon extension), the arbitrator issued his
Final Award (the “arbitration award”).
The
arbitration
award
Representation
Agreement
them,
and
jointly
found
and
severally,
that
awarded
of
2
(Doc. 3-1 at 1-3, 16.)
Defendants
monetary
$15,065.01
breached
damages
in
unpaid
the
against
earned
commissions and interest; $44,554.00 in lost future commissions;
$86,447.10 in attorneys’ fees; and $19,737.50 in fees and costs of
the arbitrator, with 8% interest.
(Id. at 15.)
Post-arbitration
motions of the parties to modify and clarify the award were denied.
(Doc. 16-13.)
Astanza filed its motion to confirm the arbitration award in
the
North
Carolina
General
Court
of
Justice,
Superior
Court
Division, Guilford County, on September 21, 2016 (Doc. 1-1 at 24) and amended the motion on October 14 (id. at 31-35).
Shortly
before a scheduled hearing to confirm the arbitration award (Doc.
16 at 5), Defendants removed the action to this court based on
diversity jurisdiction.
(Doc. 1.)
In this court, Astanza quickly moved to attach Defendants’
assets in North Carolina, and Defendants resisted.
The court
issued an order of attachment on November 18, 2016, and amended
the order on December 8, 2016.
(Docs. 15, 22.)
Meanwhile,
Defendants moved to vacate, modify, or correct the arbitration
award.
(Doc. 11.)
Defendants’ challenge is directed to the
arbitrator’s award of attorneys’ fees, as to which Defendants
contend the arbitrator lacked authority to enter and nevertheless
was not reasoned. 1
(Doc. 12 at 8-11.)
1
Astanza argues that the
At a status hearing on December 12, 2016, Defendants conceded, as the
record demonstrates, that their briefing has not addressed the
compensatory portion of the award. Thus, Defendants’ general prayer for
3
arbitrator was vested with authority to enter an award including
attorneys’ fees and that Defendants both waived any objection to,
and invited, the decision.
II.
(Doc. 16 at 7-16.)
ANALYSIS
A.
Motion to Vacate, Modify, or Confirm Arbitration Award
The arbitration award was entered in this district, and the
court has subject matter jurisdiction over the dispute. 2 28 U.S.C.
§ 1332.
Therefore, removal to this court was proper.
9 U.S.C.
§§ 9, 10, 11 (authorizing federal court in district where award
entered to enter order confirming, vacating or modifying award).
The Fourth Circuit has recently reiterated that the scope of
judicial review of an arbitration award “is among the narrowest
known at law.”
UBS Fin. Servs., Inc. v. Padussis, 842 F.3d 336,
2016 WL 6871906, at *2 (4th Cir. 2016).
Courts may modify, vacate,
relief to vacate the complete award is unsupported by any argument and
will be denied. See L.R. 7.2(a).
2
Astanza is a limited liability company organized under the laws of
Colorado. (Doc. 1 at 2.) Its managing member is Pemaquid, LLC, also a
Colorado limited liability company, whose managing member is James M.
Sweet, a citizen and resident of Colorado.
(Id.)
Defendant Giemme
Stile, S.p.A. is a for-profit Italian corporation, organized and existing
under the laws of Italy, with a principal place of business in Vicenza,
Italy. (Id.) Defendant Giemme USA, LLC is a North Carolina limited
liability company whose members are Bentonvest, S.A., a Luxembourg
corporation, and Furniture Showroom Properties, LLC, a North Carolina
limited liability company whose members are Roberto Molon, a citizen and
resident of One di Fonte, Italy, and Bentonvest, S.A., a Luxembourg
corporation. (Id.) Thus, the parties satisfy the diversity requirement,
and the amount in controversy exceeds $75.000. 28 U.S.C. § 1332; Gen.
Tech. Applications, Inc. v. Exro Ltda, 388 F.3d 114, 121 (4th Cir. 2004)
(limited liability company “citizenship is that of its members”).
4
or correct an award only under the limited circumstances set forth
in the FAA, 9 U.S.C. §§ 10-11, “or under the common law if the
award ‘fails to draw its essence from the contract’ or ‘evidences
a manifest disregard of the law.’” Id. (quoting Patten v. Signator
Ins. Agency, Inc., 441 F.3d 230, 234 (4th Cir. 2006)).
The court’s
duty is “to determine whether the arbitrators did the job they
were told to do – not whether they did it well, or correctly, or
reasonably, but simply whether they did it.”
Id. (quoting Three
S Del., Inc. v. DataQuick Info. Sys., Inc., 492 F.3d 520, 527 (4th
Cir. 2007)).
In determining whether the arbitrators acted within their
authority, the court is permitted, therefore, to determine whether
the arbitrators “exceeded their powers,” 9 U.S.C. § 10(a)(4), and
in pursuing this inquiry may decide whether the parties agreed to
arbitrate a particular dispute.
AT&T Techs., Inc. v. Commc’ns
Workers
651
of
Am.,
475
U.S.
643,
(1986).
However,
“[a]n
arbitration award is enforceable even if the award resulted from
a misinterpretation of law, faulty legal reasoning or erroneous
legal
conclusion,
and
may
only
be
reversed
when
arbitrators
understand and correctly state the law, but proceed to disregard
the same.”
Upshur Coals Corp. v. United Mine Workers of Am., Dist.
31, 933 F.2d 225, 229 (4th Cir. 1991) (citations omitted).
Apart
from these fundamental questions of arbitrability, courts must
5
defer to the arbitrators as to the merits of a dispute and any
procedural questions arising from them, even if they bear on the
final result.
UBS Fin., 2016 WL 6871906, at *3.
To do otherwise
“would frustrate the purpose of having arbitration at all.”
Apex
Plumbing Supply, Inc. v. U.S. Supply Co., Inc., 142 F.3d 188, 193
(4th Cir. 1998).
The Supreme Court has said that a party seeking relief under
§ 10(a)(4) of the FAA bears “a heavy burden.”
LLC v. Sutter, 133 S. Ct. 2064, 2068 (2013).
Oxford Health Plans
“Because the parties
‘bargained for the arbitrator's construction of their agreement,’
an arbitral decision ‘even arguably construing or applying the
contract’
must
(de)merits.”
scope
of
the
stand,
regardless
of
Id. (citations omitted).
arbitrable
issues
or
a
court's
view
of
its
Any doubt concerning the
the
arbitrator’s
remedial
authority must be resolved in favor of the arbitrator.
Three S
Del., 492 F.3d at 531.
Here, Defendants’ challenge is limited to the arbitrator’s
award of $86,447.10 in attorneys’ fees. 3
Defendants argue that
the arbitrator exceeded his powers in reaching the fee issue.
(Doc.
12
at
8.)
According
to
3
Defendants,
the
arbitrator
Astanza argues that Defendants have waived their right to appeal the
arbitration award in its entirety because the ICDR Rules prohibit
judicial review of awards. (Doc. 16 at 7; Doc. 16-14 at 33.) Because
the court finds that Defendants’ arguments fail on the merits, it need
not address this argument.
6
disregarded the terms of the Representation Agreement, which was
the subject of the dispute and which Defendants contend was silent
on the issue of attorneys’ fees and costs.
(Id. at 8-11.)
Defendants also contend that the arbitrator manifestly disregarded
the law, pointing to Astanza’s reliance on North Carolina’s Uniform
Declaratory Judgment Act, N.C. Gen. Stat. § 1-263, which has
recently been construed as not creating an independent grant for
an award of fees.
(Id. at 13-14.)
Defendants request that the
attorneys’ fees dispute be submitted to a new arbitration tribunal
or, alternatively, that this court modify and correct the award to
eliminate any fee recovery.
(Doc. 10 at 3-4.)
The parties agree that arbitration of their dispute and the
Representation Agreement are to be governed by the terms of the
Representation Agreement, the FAA and ICDR procedures, and North
Carolina law.
As to the contract, the FAA requires courts to
enforce privately negotiated agreements “in accordance with their
terms.”
Volt Info. Scis. v. Leland Stanford Jr. Univ., 489 U.S.
468, 478 (1989).
“The terms of the contract define the powers of
the arbitrator.”
Solvay Pharms., Inc. v. Duramed Pharms., Inc.,
442
F.3d
471,
476
(6th
Cir.
2006).
These
are
of
course
supplemented by the rules and procedures of the ICDR and applicable
law.
Section
13
of
the
Representation
7
Agreement
provided
the
remedies of the parties.
It declared that any dispute between the
parties “shall be referred to arbitration under the American
Arbitration Association (“AAA”) International Center for Dispute
Resolution (ICDR) Rules of Procedure.”
(Doc. 12-2 at 8, ¶ 13(C).)
The parties retained “all rights and remedies available at law or
in equity, including the right to damages”; provided, however,
that
“[n]either
party
shall
be
liable
to
the
other
for
any
consequential or incidental damages or punitive damages arising
from any default under this Agreement.”
(Id. at 8, ¶¶ 13(A), (B).)
Defendants argue that the absence of any reference to attorneys’
fees, as well as the express inclusion of attorneys’ fees in
section
8
of
the
Representation
Agreement
addressing
certain
indemnifications, means that the parties never intended to submit
the attorneys’ fee issue to the arbitrator.
(Doc. 12 at 16.)
As
Astanza correctly points out, there are several flaws in this
position.
Importantly, the parties’ contract expressly declared that
all disputes would be resolved by arbitration under the ICDR Rules
of Procedure.
(Doc. 12-2 at 8, ¶ 13(C).)
Article 34 of the Rules
of Procedure provides that the arbitral tribunal “shall fix the
costs of arbitration in its award(s).”
(Doc. 16-14 at 35.)
That
Article proceeds to itemize the covered costs, which include the
expenses and fees of the arbitrators (Article 34(a)) – which
8
Defendants do not contend are precluded by the Representation
Agreement – and “the reasonable legal and other costs incurred by
the parties” (Article 34(d)).
(Id.)
Courts have held, as the
arbitrator in this case concluded (Doc. 3-1 at 14), that this
provision
grants
attorneys’ fees.
arbitrators
independent
authority
to
award
See, e.g., Stemcor USA, Inc. v. Maracero, S.A.
DE C.V., 66 F. Supp. 3d 394, 400-01 (S.D.N.Y. 2014) (refusing to
disturb attorney fee award where the parties’ agreement to abide
by the ICDR Rules of Procedure created, at most, an ambiguity and
the arbitrators’ decision to award them was “at least reasonable,
and certainly ‘barely colorable’” (citation omitted)); DigiTelCom,
Ltd. v. Tele2 Sverige AB, 2012 WL 3065345, at *5 (S.D.N.Y. July
25, 2013) (finding, as to arbitrators’ attorney fee award under
Article 31 (predecessor to Article 34), that “[t]here is nothing
to suggest that the Tribunal's award was even inconsistent with
the
ICDR
rules,
much
less
that
it
constituted
a
‘manifest
disregard’ of the law”); F. Hoffmann-La Roche Ltd. v. Qiagen
Gaithersburg, Inc., 730 F. Supp. 2d 318, 330-31 (S.D.N.Y. 2010)
(rejecting challenge to arbitrator’s authority to award fees on
the grounds that “ICDR Article 31 [now 34] plainly allows for
attorney’s fees and costs to the successful party”); Apache Bohai
Corp., ODC v. Texaco China B.V., No. H-01-2019, 2005 WL 6112664,
*23 (S.D. Tex. Feb. 28, 2005) (awarding attorney fees under Article
9
31 (now 34) and rejecting contention that the American Rule is
incorporated into the ICDR Rules of Procedure).
As Defendants point out, it is true that Astanza cited North
Carolina’s
Declaratory
Judgment
Act
additional authority for the award.
to
the
arbitrator
But the arbitrator eschewed
any reliance on it in favor of his authority under the ICDR.
3-1 at 14 n.2.)
as
(Doc.
Therefore, the North Carolina Court of Appeals’
recent decision finding that the statute does not create a right
to attorneys’ fees, Swaps, LLC v. ASL Props., Inc., __ N.C. App.
__, 791 S.E.2d 711 (2016), is irrelevant, and Defendants’ objection
on this basis is meritless.
Defendants
argue
that
the
arbitrator
misconstrued
the
Representation Agreement’s provisions, based on the fact that the
indemnification
section
addressed
attorneys’
pertinent remedies section did not.
fees
(Doc. 12 at 16.)
and
the
Defendants
argue that this is “strong evidence” that the parties chose not to
provide for a fee award in this case.
entirely.
(Id.)
This misses the point
The parties bargained for the arbitrator's construction
of their agreement, and the arbitration award, “‘even arguably
construing or applying the contract’ must stand,” regardless of
this court's view of its merits.
S. Ct. at 2068 (citations omitted).
Oxford Health Plans LLC, 133
The arbitrator did not stray
from his task of interpreting the Representation Agreement, which
10
he
concluded
incorporated
the
ICDR
Rules
of
Procedure.
The
arbitrator’s award drew its essence from the contract and was far
from a manifest disregard of the law.
3065345,
at
inconsistent
*5
with
(finding
the
disregard of the law).
nothing
ICDR,
much
DigiTelCom, Ltd., 2012 WL
to
suggest
less
fee
constituted
award
was
manifest
Even if the Representation Agreement was
ambiguous in this regard, Defendants’ overture to lenity against
Astanza as its author (Doc. 12 at 13-17) is misplaced, because the
parties are bound by an arbitrator’s interpretation of ambiguous
terms that, on this record, is at least reasonable.
Defendants’ argument that the arbitrator lacked authority to
decide the issue of attorneys’ fees also appears to be a recent
invention, now that Defendants find themselves on the losing side
of the arbitration award.
During their filings to the arbitrator,
Defendants not only acknowledged the arbitrator’s authority to
award fees, but affirmatively sought an award for themselves.
In
their prayer for relief, Defendants requested:
Giemme
prays
that
the
American
Arbitration
Association . . . award Giemme all its attorneys’ fees,
costs and expenses as allowed by the Agreement and
applicable law.
(Doc. 16-1 (answer) at 6; Doc. 16-2 (amended answer) at 6.)
Defendants’ post-hearing brief, they acknowledged:
The relevant case law points clearly to the conclusion
that Rule 34 will govern the issue of attorneys’
fees . . . .
11
In
(Doc. 16-3 at 10.)
Rule 34 should govern the issue[] of whether to award
attorneys’ fees to the prevailing party as part of the
costs award.
(Id. at 11.)
Petitioner [Astanza] correctly concludes that Rule 34
grants the arbitrator discretion to allocate legal costs
. . . .
(Id.)
Giemme is not arguing that the arbitrator lacks
authority to award fees in this case, but is simply
arguing that the requisite circumstances giving rise to
a fee award have not been met in this case.
(Id. at 12 n.10.)
And in their response to Astanza’s post-hearing
brief, Defendants agreed:
Article 34, entitled “Costs of Arbitration” give[s] the
Arbitrator discretion to allocate costs between the
parties, of which legal fees and expenses are a part,
“if it determines that allocation is reasonable, taking
into account the circumstances of the case.”
(Doc. 16-4 at 9.)
Not only did the arbitrator have the authority to award
attorneys’ fees, therefore, Defendants by their conduct agreed to
submit the issue to him for his consideration.
Kamakazi Music
Corp. v. Robbins Music Corp., 684 F.2d 228, 231 (2d Cir. 1982)
(finding
that
if
the
arbitration
clause
did
not
encompass
plaintiff’s claims, “it is hornbook law” that, by their conduct,
the parties agreed to submit their claim for attorneys’ fees to
12
arbitrator); F. Hoffmann-LaRoche, 730 F. Supp. 2d at 331 (finding
that party acquiesced to arbitrator’s power to award fees through
its
request
for
attorneys’
fees
in
its
prayer
for
relief);
InterChem Asia 2000 Pte. Ltd v. Oceana Petrochemicals AG, 373 F.
Supp. 2d 340, 354 (S.D.N.Y. 2005) (finding issue properly submitted
to arbitrator where both parties requested attorneys’ fees in their
arbitration submissions).
Defendants’ attempt to walk back their
requests for fees as having been made “perfunctorily” because,
they now say, they “believ[ed] at every step that the intent of
the parties . . . was to bear their own fees and costs” (Doc. 12
at 10-11 n.7) is, to say the least, unconvincing.
Defendants further argue that, even if the arbitrator had the
authority
to
award
fees,
“exceptional circumstances.”
he
could
do
so
(Doc. 12 at 13.)
only
if
he
found
Defendants rely on
a misreading of Apache Bohai Corp., which contained a discussion
to that effect, but no such requirement.
23.
2005 WL 6112664, at *22-
Defendants also point to North Carolina law, on which the
arbitrator did not rely because he derived his authority from
Article 34.
(Doc. 3-1 at 14 n.2.)
Article 34 provided the
arbitrator authority to award fees as part of costs “if [he]
determine[d] that allocation is reasonable, taking into account
the circumstances of the case.”
(Doc. 16-14 at 35.)
grounds are meritless.
13
Thus, these
Apart from their challenge to the authority to issue a fee
award, Defendants also argue that the arbitrator failed to issue
a “reasoned award” (Doc. 12 at 8-11), which, if true, could merit
an order vacating the award pursuant to 9 U.S.C. § 10(a)(4). 4
Cat
Charter, LLC v. Schurtenberger, 646 F.3d 836, 844 (11th Cir. 2011)
(discussing district court’s discretion to vacate an arbitration
award that is not “reasoned,” but concluding that arbitrator’s
decision providing “detailed reasons regarding one claim” to be
sufficient).
Defendants argue that the arbitrator’s award was not
“well-reasoned” because he acknowledged he was “clothed with the
authority to render an award of attorneys’ fees” under the ICDR,
reviewed
Astanza’s
‘reasonable.’”
An
evidence,
and
“simply
declared
the
award
(Doc. 12 at 11.)
arbitration
is
not
a
federal
court
resulting award is not a judicial opinion.
precisely why many resort to arbitration.
lawsuit,
and
the
Indeed, that is
The Supreme Court has
held that arbitrators generally need not state reasons for reaching
a particular result.
United Steelworkers of Am. v. Enter. Wheel
& Car. Corp., 363 U.S. 593, 598 (1960) (“Arbitrators have no
obligation to the court to give their reasons for an award.”).
4
Section 10(a)(4) provides that the district court “may” vacate an award
“where the arbitrators exceeded their powers, or so imperfectly executed
them that a mutual, final, and definite award upon the subject matter
submitted was not made.”
14
Parties are free to contract for the level of explanation required.
Here,
Defendants
point
to
the
Representation
Agreement’s
incorporation of the ICDR Rules of Procedure, Article 30 of which
requires that the award be in writing and that arbitral tribunal
“state the reasons upon which an award is based, unless the parties
have agreed that no reasons need be given.”
(Article 30).) 5
(Doc. 16-14 at 33
Even “[a] reasoned award requirement does not
obligate the arbitrator to discuss every single piece of evidence
or ‘to show how every single proposition [he] adopted could be
derived from first principles.’”
Carmody Bldg. Corp. v. Richter
& Ratner Contracting Corp., No. 08Civ.9633(SHS), 2013 WL 4437213,
at *4 (S.D.N.Y. Aug, 19, 2013) (citations omitted).
It has been
described as providing a standard that is “something short of
findings and conclusions but more than a simple result.”
Sarofim
v. Tr. Co. of the W., 440 F.3d 213, 215 n.1 (5th Cir. 2006).
Moreover, a failure to give a reasoned award does not always merit
vacatur.
MCI Constructors, Inc. v. Hazen & Sawyer, P.C., No.
1:02CV396, 2009 WL 632930, at *7 (M.D.N.C. Mar. 9, 2009) (“An award
being unreasoned is not a basis for vacatur under § 10(a)(4),” as
“awards are generally vacated under § 10(a)(4) only where the
arbitrators failed to resolve an issue presented to them or the
5
Of course, Defendants’ reliance on the ICDR in this fashion undermines
their argument that the Representation Agreement’s failure to mention
attorneys’ fees precludes reliance on ICDR Article 34 for that purpose.
15
award is ambiguous or unclear.” (citations omitted)); see also
U.S. ex rel. Coastal Roofing Co. v. P. Browne & Assocs., Inc., 771
F. Supp. 2d 576, 583 (D.S.C. 2010).
The arbitrator easily satisfied the ICDR standard and the FAA
here.
After a lengthy arbitration process, two days of hearings,
and post-hearing submissions, the arbitrator issued a 16-page
arbitration award that summarized the facts and addressed the
parties’ varied contentions on seven different issues.
1.)
(Doc. 3-
As to the attorneys’ fee issue, the arbitrator acknowledged
his authority under Article 34 to make such an award, noted that
all parties had requested attorneys’ fees in their pleadings,
stated that he understood his authority under Article 34 to render
an award as he deemed necessary “considering the circumstances of
the case,” and noted the record evidence he reviewed in considering
the award, which included evidence of attorneys’ fees adduced at
the evidentiary hearing.
also
observed
that
(Doc. 3-1 at 14-15.)
Defendants
did
not
argue
The arbitrator
that
requested legal fees were “unreasonable or excessive.”
Astanza’s
(Id.)
He
then concluded that he found the fees to be “reasonable” and
“properly supported by affidavit.” (Id.) Consequently, he entered
an award in the amount of $86,447.10.
(Id.)
Overall, the arbitrator recited the facts and issues disputed
between the parties (Doc. 3-1 at 2-4), applied established rules
16
of law in analyzing the facts (id. at 6, 9), and set forth his
analysis when concluding that Defendants breached the contract and
that Astanza was therefore entitled to recover certain amounts
based on evidence of calculable expenses (id. at 4-16).
Courts
have found “reasoned awards” when assessing similar facts.
Rain
CII Carbon, LLC v. ConocoPhillips Co., 674 F.3d 469, 474 (5th Cir.
2012) (concluding that the arbitrator gave a “reasoned award” where
it “laid out the facts, described the contentions of the parties,
and decided which of the two proposals should prevail”); W. Liberty
Foods, L.L.C. v. Moroni Feed Co., 1 F. Supp. 3d 951, 956-58 (S.D.
Iowa 2014) (finding that arbitration panel’s compensatory award of
prejudgment
interests
“mathematically
was
calculable
a
“reasoned
based
on
award”
fixed
because
losses
and
it
was
other
ascertainable variables”).
On this record, where Defendants conceded the arbitrator’s
authority to enter a fee award under Article 34, did not argue
that
Astanza’s
fee
application
was
either
unreasonable
or
excessive, and do not contend that the award is unsupported by the
evidentiary record before the arbitrator, 6 the sole attack appears
6
This precludes relief under 9 U.S.C. § 11(a), which permits modification
or correction “[w]here there was an evident material miscalculation of
figures.” It also appears to comply even with North Carolina’s judicial
standard for an award of attorneys’ fees.
See Aetna Health of the
Carolinas v. Piedmont Endocrinology Med. Assocs., P.A., 212 N.C. App.
419, 713 S.E.2d 792, at *6 (2011) (affirming trial court order confirming
arbitration award and attorneys’ fee award under § 1-569.25(c) where
trial court found that the “fees are reasonable based on the information
17
to be the arbitrator’s failure to have provided specific reasons
for the exercise of his discretion to award attorneys’ fees based
on the circumstances of the case.
argue
that
the
arbitrator
exceeded
Put another way, Defendants
his
powers
by
“not
doing
enough.”
(Doc. 12 at 10 (citing Cat Charter, LLC, 646 F.3d at 843
n.14).)
An arbitrator can always provide more, but “had the
parties wished for a greater explanation, they could have requested
that the Panel provide findings of fact and conclusions of law.”
Cat Charter, LLC, 646 F.3d at 845.
Moreover, it is difficult to
see what else should be required under the circumstances.
The
arbitrator in thirteen pages of decision explained in detail why
he ruled for Astanza on virtually every issue. 7
Those were the
“circumstances of the case” upon which the award was based.
the deference due arbitral awards, this surely suffices.
Given
Rain CII
Carbon, 674 F.3d at 474-75 (refusing to vacate as not “reasoned”
arbitrator’s
award
adopting
one
side’s
argument,
where
provided in the affidavit” of plaintiffs’ counsel). Importantly here,
Defendants, who bear the burden of proof, do not demonstrate that
Astanza’s supporting documentation of its attorneys’ fee request failed
to contain the adequate underlying information to support the award.
7
Issue 1 - rejecting Defendants’ lack of consideration argument; Issue
2 – rejecting Defendants’ argument that Representation Agreement was too
vague and ambiguous as to termination date; Issue 3 – finding Defendants
wrongfully terminated Astanza; Issue 4 – rejecting Defendants’
contention that Astanza failed to submit invoices to be paid commissions;
Issue 5 – awarding commissions to Astanza; Issue 6 – rejecting claim
that future commissions were waived, but limiting them to two years of
sales; Issue 7 – awarding attorneys’ fees to Astanza. (Doc. 3-1.)
18
arbitrator’s
decision
explained
both
arguments);
Green
v.
Ameritech Corp., 200 F.3d 967, 974-76 (6th Cir. 2000) (reversing
vacatur
minimal,
of
it
six-page
was
arbitration
nevertheless
award
on
adequate
to
grounds
that
satisfy
while
agreement
requiring arbitrator to “explain” award).
In summary, the court rejects all of Defendants’ arguments
and finds that the arbitrator’s decision complies with the parties’
Representation Agreement, the ICDR’s Rules of Procedures, and
applicable law, and draws its essence from the parties’ contract.
The court will not disturb it.
B.
Motion to Confirm Arbitration Award
Having rejected Defendants’ motion to vacate, modify, or
correct the arbitration award, the court turns to Astanza’s amended
motion to confirm the award. 8 (Doc. 3.)
Defendants’ sole response
to the motion was their motion to vacate.
(Doc. 10.)
The FAA
provides that a court “must” confirm an award unless it is vacated,
modified, or corrected.
9 U.S.C. § 9 (court “must grant such an
order unless the award is vacated, modified, or corrected as
prescribed in sections 10 and 11 of this title”); Hall Street
Assocs., LLC v. Mattel, Inc., 552 U.S. 576, 582 (2008) (same).
Consequently, the court finds that the arbitration award should be
8
At the December 12, 2016 hearing, the parties agreed the motion was
ripe for decision.
19
confirmed.
C.
Request for Attorneys’ Fees for Present Action
Finally, Astanza requests an award of attorneys’ fees for its
efforts to confirm the arbitration award in this court and to
defend against Defendants’ motion to vacate, modify, or correct
it.
(Doc. 3 at 3; Doc. 16 at 16.)
Astanza contends it is entitled
to an award as part of costs under both North Carolina’s Revised
Uniform Arbitration Act, N.C. Gen. Stat. § 1-569.25(c), and the
court’s inherent authority, citing International Chemical Workers
Union (AFL-CIO), Local No. 227 v. BASF Wyandotte Corp., 774 F.2d
43, 47 (2d Cir. 1985) (“As applied to suits for the confirmation
and enforcement of arbitration awards, the guiding principle has
been stated as follows: ‘when a challenger refuses to abide by an
arbitrator's decision without justification, attorney's fees and
costs may properly be awarded.’” (citation omitted)).
18.) 9
(Doc. 16 at
Defendants acknowledge the applicability of the Revised
Uniform Arbitration Act but address it only insofar as it permits
an arbitrator to exercise his discretion to award attorneys’ fees.
(Doc. 12 at 14-15.)
Otherwise, Defendants maintain that their
9
In its amended motion, Astanza also sought fees under N.C. Gen. Stat.
§ 1-567.65 – North Carolina’s International Commercial Arbitration and
Conciliation Act. (Doc. 3 at 3.) Defendants contest the applicability
of that act as to Giemme USA, LLC. (Doc. 12 at 14.) Because Astanza
has not briefed recovery under this provision and the court finds that
North Carolina’s Uniform Arbitration Act applies, the court need not
reach whether this act provides a basis for a fee award.
20
opposition to the fee award is not “unjustified.”
(Doc. 17 at 9.)
Because this action is before the court on the basis of
diversity jurisdiction, the court must apply the substantive law
of the forum State.
Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938).
The right to an award of attorneys’ fees is considered a matter of
substantive law.
Alyeska Pipeline Serv. Co. v. Wilderness Soc'y,
421 U.S. 240, 259 n.31 (1975); RLS Assocs., LLC v. United Bank of
Kuwait PLC, 464 F. Supp. 2d 206, 213 (S.D.N.Y. 2006).
North
Carolina General Statute § 1-569.25(c) applies to agreements made
after January 1, 2004, and provides in relevant part that a
court may award reasonable attorneys' fees and other
reasonable expenses of litigation incurred in a judicial
proceeding after the award is made to a judgment
confirming, vacating without directing a rehearing,
modifying, or correcting an award.
This provision therefore vests the court with discretion to award
attorneys’ fees to Astanza associated with the present proceeding
unless it is otherwise preempted by the FAA.
The exercise of State authority in a field traditionally
occupied by State law will not be deemed preempted by a federal
statute absent
the
clear
manifestation
of
Congress.
Atlantic Richfield Co., 435 U.S. 151, 157 (1978).
Ray
Even where a
federal statute does displace State authority, it
rarely occupies a legal field completely, totally
excluding all participation by the legal systems of the
states . . . Federal legislation, on the whole, has been
conceived and drafted on an ad hoc basis to accomplish
21
v.
limited objectives. It builds upon legal relationships
established by the states, altering or supplanting them
only so far as necessary for the special purpose.
Southland Corp. v. Keating, 465 U.S. 1, 18 (1984) (quoting P. BATOR
ET AL.,
HART
AND
WECHSLER'S THE FEDERAL COURTS
(2d ed. 1973)).
AND THE
FEDERAL SYSTEM 470–71
“The limited objective of the Federal Arbitration
Act was to abrogate the general common law rule against specific
enforcement of arbitration agreements.”
Southland Corp., 465 U.S.
at 18; see S. REP. NO. 68-536 at 2–3 (1924).
Beyond this purpose,
there is no clear intent to displace State authority.
Corp., 465 U.S. at 18.
Southland
Without a clear mandate from Congress to
preempt the field, this court must be cautious in construing the
FAA lest it “excessively encroach on the powers which Congressional
policy, if not the Constitution, would reserve to the states.”
Metro Indus. Painting Corp. v. Terminal Constr. Co., 287 F.2d 382,
386 (2d Cir. 1961) (Lumbard, C.J., concurring).
While the FAA does not authorize a district court to award
attorneys’
fees
to
a
party
who
successfully
confirmed
an
arbitration award in federal court, Menke v. Monchecourt, 17 F.3d
1007, 1009 (7th Cir. 1994), it also does not displace State law
allowing for such awards. Id. (recognizing two bases for deviating
from the rule that each party bear its own fees: (1) statutory
authority for fee shifting and (2) contractual agreement between
the parties); Harter v. Iowa Grain Co., 220 F.3d 544, 557 (7th
22
Cir. 2000).
Consequently, federal courts have found it consistent
with the purpose of the FAA to award attorneys’ fees for litigation
commenced to confirm or vacate an arbitration award under the FAA,
even under their inherent powers.
See, e.g., Bell Prod. Eng’rs
Ass’n v. Bell Helicopter Textron, Div. of Textron, Inc., 688 F.2d
997, 999-1000 (5th Cir. 1982); see also Int’l Union, United Auto.,
Aerospace and Agric. Implement Workers of Am. v. United Farm Tools,
Inc., Speedy Mfg. Div., 762 F.2d 76, 77 (8th Cir. 1985) (per
curiam)
(holding
that
an
unjustified
refusal
to
abide
by
an
arbitrator’s award may constitute bad faith for the purpose of
awarding attorneys’ fees); Com. Refrigeration, Inc. v. Layton
Const. Co., 319 F. Supp. 2d 1267, 1271 (D. Utah 2004) (awarding
attorneys’ fees while noting that “[w]hile losing an arbitration
may
be
unpleasant . . . the
experience
is
not
significantly
improved by the instigation of a doomed — and no doubt costly —
legal action”).
A court may award attorneys’ fees “when a party
opposing confirmation of [an] arbitration award ‘refuses to abide
by an arbitrator’s decision without justification.’”
The N.Y.C.
Dist. Council of Carpenters Pension Fund v. E. Millenium Constr.,
Inc., No. 03 Civ. 5122, 2003 WL 22773355, at *2 (S.D.N.Y. Nov. 21,
2003) (quoting Int’l Chem. Workers Union, 774 F.2d at 47.)).
Here,
the
court
need
not
determine
whether
opposition to the arbitration award was “unjustified.”
23
Defendants’
Section 1-
569.25(c)’s express allowance for an award of attorneys’ fees to
Astanza in connection with its efforts to confirm the arbitration
award and oppose Defendants’ motion to vacate, modify, or correct
the award are consistent with the purposes of the FAA and should
be given effect.
The statute expressly authorizes an award of
reasonable attorneys’ fees to the “prevailing party.”
The Uniform
Law Comment provided with the statute notes that the provision is
designed
to
“promote[]
the
statutory
policy
of
finality
of
arbitration awards” by allowing recovery of expenses and fees to
the prevailing party in contested judicial actions precisely like
the present and thereby to discourage “all but the most meritorious
challenges of arbitration awards.”
N.C. Gen. Stat. § 1-569.25(c)
cmt. 3; 10 see also Aetna Health of the Carolinas, 212 N.C. App.
419, 713 S.E.2d 792, at *6 (affirming trial court order confirming
arbitration award and attorneys’ fee award based on “prevailing
party” status under § 1-569.25(c)).
This is a contested judicial proceeding.
that
Astanza
should
prevailing party.
be
awarded
its
And the court finds
attorneys’
fees
as
the
Therefore, the court will grant Astanza’s
request for reasonable fees associated with the present motions.
Because the statute does not provide a basis for an award for
10 The right to recovery of attorneys’ fees does not apply where there is
“entirely passive” resistance to an award, e.g., where a party simply cannot
pay. Id. cmt. 4. That is not the case here.
24
attorneys’
fees
related
to
Astanza’s
attachment
however, the award shall not extend to them.
proceedings,
Astanza may submit
a properly supported application for attorneys’ fees for the
court’s consideration.
III. CONCLUSION
For the reasons set forth above,
IT IS ORDERED that Defendants’ motion to vacate, modify, or
correct the arbitration award (Doc. 11) is DENIED; that Astanza’s
amended motion to confirm the arbitration award (Doc. 3) is GRANTED
and that the arbitration award is CONFIRMED; and that judgment be
entered in favor of Plaintiff and against Defendants, jointly and
severally, in the amount of $165,803.61, plus 8 percent interest
as of September 23, 2016.
IT IS FURTHER ORDERED that Astanza’s request for an award of
reasonable attorneys’ fees is GRANTED insofar as it relates to its
prosecution
of
its
motion
to
confirm
and
its
opposition
to
Defendants’ motion to vacate, modify, or correct the arbitration
award.
within
Astanza shall file any application for attorneys’ fees
sixty
(60)
days
pursuant
to
the
requirements
of
the
applicable rules and law, including this court’s local rules. L.R.
54.2.
/s/ Thomas D. Schroeder
United States District Judge
December 15, 2016
25
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