Tricon Energy Ltd v. Vinmar International Ltd

Filing 84

MEMORANDUM AND ORDER entered DENYING 63 MOTION to Strike MOTION to Strike or, in the Alternative, Response to Tricon's Motion for Award of Attorneys' Fees, DENYING 60 MOTION for Attorney Fees (Signed by Judge Lee H Rosenthal) Parties notified.(leddins, )

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
TRICON ENERGY, LTD.,
Plaintiff,
v.
VINMAR INTERNATIONAL, LTD.,
Defendant.

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CIVIL ACTION NO. H-10-05260

MEMORANDUM AND ORDER
Tricon Energy, Inc. filed this petition under 9 U.S.C. § 207 to confirm an arbitration award
against Vinmar International Ltd. The award arose from an alleged breach of a contract for Vinmar
to purchase 5000 metric tons of mixed xylene (“MX”) from Tricon for delivery in Asia. A threejudge arbitration panel empaneled by the American Arbitration Association concluded that Vinmar
had contracted to purchase the chemical from Tricon and had breached its contractual obligations
by failing to declare a discharge port. The panel found Vinmar liable for breach of contract and
awarded $1,338,776.72 in damages, plus prejudgment interest, costs, and $50,000 in attorneys’ fees
if Vinmar sought to have the arbitration award vacated in federal district court. In response to the
petition to confirm the award, Vinmar filed a counterclaim seeking to vacate. Vinmar also filed a
motion to vacate in Texas state court. Tricon removed that case and it was consolidated into the case
pending in this court.
When the motions practice was concluded, this court had rejected Vinmar’s argument that
this court lacked subject-matter jurisdiction over these proceedings under the enabling statute for
the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York

Convention”), 9 U.S.C. §§ 201 et seq., an argument based on the Vinmar’s assertion that there was
an insufficient commercial relationship to a foreign state to meet the statutory requirement for
jurisdiction. This court also rejected Vinmar’s assertion that the AAA arbitration panel lacked
jurisdiction to resolve the parties’ dispute because there was no contract and no agreement to
arbitrate between the parties. Finally, this court rejected other statutory grounds Vinmar raised for
vacating the award.
Within 14 days after this court entered final judgment confirming Tricon’s award, Tricon
filed a motion under Rule 54(d) of the Federal Rules of Civil Procedure. Tricon seeks an additional
$72,133.43 in fees based on the court’s inherent power to award attorney’s fees for work required
by an unjustified refusal to abide by an arbitration award. (Docket Entry No. 60.) Vinmar has
moved to strike the motion and, alternatively, responded to it, arguing that the legal positions it took
to oppose confirmation were justified and that there is no basis for the fees Tricon seeks. (Docket
Entry No. 63.)
Rule 54(d) of the Federal Rules of Civil Procedure permits a party to move for attorney’s
fees and provides that the moving party “must . . . specify . . . the statute, rule, or other grounds
entitling the movant to the award.” Fed. R. Civ. P. 54(d)(2)(B). Under the “American rule,” a
prevailing party is ordinarily not entitled to attorney’s fees except where expressly provided by
statute. See Int’l Chem. Workers Union (AFL-CIO), Local No. 227 v. BASF Wyandotte Corp., 774
F.2d 43, 47 (2d Cir. 1985). In exception to the general rule, a court may award fees pursuant to its
inherent equitable authority when a “party has ‘acted in bad faith, vexatiously, wantonly, or for
oppressive reasons.’” Kerin v. U.S. Postal Serv., 218 F.3d 185, 190 (2d Cir. 2000) (quoting Alyeska
Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 258–59 (1975)). Appellate courts have held

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that, in the context of a petition to confirm an arbitration award, fees may be awarded pursuant to
this inherent authority “‘when a challenger refuses to abide by an arbitrator’s decision without
justification.’” Int’l Chem. Workers Union, 774 F.2d at 47 (quoting Bell Prod. Eng’rs Ass’n v. Bell
Helicopter Textron, 688 F.2d 997, 999 (5th Cir. 1982)); see also Int’l Union of Petroleum & Indus.
Workers v. W. Indus. Maint., Inc., 707 F.2d 425, 428 (9th Cir. 1983); Dries & Krump Mfg. Co. v.
Int’l Ass’n of Machinists & Aerospace Workers, Dist. No. 8, 802 F.2d 247, 254–55 (7th Cir. 1986);
DMA Int’l, Inc. v. Qwest Commc’ns Int’l, Inc., 585 F.3d 1341, 1346 (10th Cir. 2009). A party’s
failure to pay an arbitral award immediately does not necessarily constitute bad faith. See, e.g.,
Bruce Hardwood Floors, Div. of Triangle Pac. Corp. v. UBC, S. Council of Indus. Workers, 103
F.3d 449, 453 (5th Cir. 1997) (“Because we have concluded that the arbitrator exceeded his
contractual authority, we do not find that Bruce's refusal to abide by the arbitration decision was
without justification.”); In re Arbitration Between Westchester Fire Ins. Co. v. Massamont Ins.
Agency, Inc., 420 F. Supp. 2d 223, 227 (S.D.N.Y. 2005). Even if a court rejects a party’s challenge
to an arbitration award, that does not mean the challenge was “without justification.” Teamsters
Gen. Drivers Warehousemen v. Greif Packaging, LLC, No. 4:09–CV–2252, 2010 WL 1417889, at
*7 (S.D. Tex. Apr. 7, 2010).
Although Tricon initially sought fees under Rule 11 of the Federal Rules of Civil Procedure
as well, it has since acknowledged that it has no basis for such recovery. (Docket Entry No. 65, at
2 n.1.) The issue is whether the current record warrants the award of an additional $72,133.43 in
fees Tricon incurred in this confirmation litigation because Vinmar’s refusal to pay the arbitration
award was “without justification.”

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After a careful review of the motion, response, and reply; the parties’ submissions; the
record; and the applicable law, this court concludes that Tricon is not entitled to recover the
$72,133.43 in fees it seeks. Tricon is seeking most of the fees it incurred after receiving the
favorable award from the AAA Panel on November 3, 2010. Tricon has not sought fees for legal
work on postjudgment interest. Nor has Tricon sought fees for work on the supersedeas bond issue.
Tricon is seeking its fees for all the other legal work it did as part of the confirmation litigation in
this court.
The problem with Tricon’s motion for attorney’s fees is that some of the arguments Vinmar
made to challenge the award, while not successful, cannot be said to have lacked substantial
justification. For example, Tricon challenged the existence of an agreement between the parties that
included an arbitration clause. Absent an agreement to arbitrate, there is no basis for arbitration or
for the arbitration award. The issue of whether the email exchange between the parties not only
resulted in a contract but also a modified version of that contract containing an arbitration clause
required a careful examination by the parties and by this court of the text of the emails, the record
evidence about the contracting process in the aromatics trade industry, and the contract-formation
principles of the Texas Uniform Commercial Code. This court found that Vinmar assented to the
arbitration clause that was proposed in an email sent after a contract had been formed. (Docket
Entry No. 47, at 14–15.) This result required careful analysis of whether those involved in the
communications had authority to negotiate or change the agreement, and whether a different type
of signature was required for the formation of the contract containing the arbitration clause. (Id. at
17–20.) This court found that the record and the applicable authorities supported Tricon’s argument
that there was a valid and enforceable agreement to arbitrate. As a result, this court denied Vinmar’s

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motion to vacate the arbitral award on the ground that the parties had not entered into an agreement
to arbitrate. But the argument was not frivolous and the motion to vacate the AAA award did not
lack substantial justification.
There were other challenges Vinmar raised that rested on a far weaker basis. Those included
the assertion of other statutory grounds for refusing confirmation and obtaining vacatur. But
Tricon’s response to the added grounds was that no further briefing was necessary. This court
agreed and summarily disposed of those challenges. (See Docket Entry No. 50.)
Tricon’s motion seeks to recover all the time and work spent on obtaining confirmation in
this court, except for the time spent on the postjudgment interest and supersedeas bond issues.
Because a large amount of the time appears to have been spent on at least one issue that was neither
frivolous nor raised in bad faith, and did not lack “substantial justification,” the motion to recover
fees for that time under Rule 54(d) and this court’s inherent authority is denied
SIGNED on August 1, 2012, at Houston, Texas.

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Lee H. Rosenthal
United States District Judge

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