Astanza Design, LLC v. Giemme Stile, S.P.A., 1:16CV1238

• Decision Date: 15 December 2016
• Docket Number: 1:16CV1238
• Court: U.S. District Court — Middle District of North Carolina
• Parties: ASTANZA DESIGN, LLC, Plaintiff, v. GIEMME STILE, S.P.A. and Giemme USA, LLC; Defendants.

220 F.Supp.3d 641

ASTANZA DESIGN, LLC, Plaintiff,

v.GIEMME STILE, S.P.A. and Giemme USA, LLC; Defendants.

1:16CV1238

United States District Court, M.D. North Carolina.

Signed December 15, 2016

H. Brent Helms, Jeremy R. Demmitt, Robinson & Lawing, LLP, Winston–Salem, NC, for Plaintiff.

Alan B. Felts, J. Nathan Duggins, III, Jennifer P. Himes, Tuggle Duggins P.A., Greensboro, NC, for Defendants.

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. (Doc. 11.) The issues are fully briefed and ready for decision. 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. The parties participated in mediation, amended their 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"). (Doc. 3–1 at 1–3, 16.) The arbitration award found that Defendants breached the Representation Agreement and awarded monetary damages against them, jointly and severally, of $15,065.01 in unpaid 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 2–4) 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.) Astanza argues that the arbitrator was vested with authority to enter an award including attorneys' fees and that Defendants both waived any objection to, and invited, the decision. (Doc. 16 at 7–16.)

II. 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, 339 (4th Cir. 2016). Courts may modify, vacate, 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 of Am. , 475 U.S. 643, 651, 106 S.Ct. 1415, 89 L.Ed.2d 648 (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 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. , 842 F.3d at 340. 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." Oxford Health Plans LLC v. Sutter , ––– U.S. ––––, 133 S.Ct. 2064, 2068, 186 L.Ed.2d 113 (2013). "Because the parties ‘bargained for the arbitrator's construction of their agreement,’ an arbitral decision ‘even arguably construing or applying the contract’ must stand, regardless of a court's view of its (de)merits." Id. (citations omitted). Any doubt concerning the scope of the arbitrable issues or 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 Defendants, the arbitrator 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, 109 S.Ct. 1248, 103 L.Ed.2d 488 (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 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...