DuPree Prods. v. RDE Inc.
| Docket Number | 21 C 01548 |
| Decision Date | 30 November 2021 |
| Parties | DuPree Productions, LLC, Plaintiff, v. RDE Inc., formerly known as uBid Holdings, Inc., and Ketan Thakker, Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
This matter concerns a final arbitration award entered on February 3, 2021 in favor of Plaintiff DuPree Productions, LLC and against Defendants RDE, Inc. (referred to herein by its predecessor's name, “uBid”) and Ketan Thakker (then-CEO of uBid). Plaintiff seeks confirmation of that award, while Defendants seek an order vacating or modifying it. For the reasons discussed below, the Court grants DuPree's petition, denies Defendant's counter-petition, and confirms the arbitration award.
DuPree Productions, through its owner Donald DuPree, produced a TV show called “A Piece of the Game.” In 2016 DuPree entered into a “Partial Equity Payment Agreement” (the “Agreement”) with uBid in connection with an advertising buy on DuPree's show. It is undisputed that rather than a cash payment, DuPree agreed to accept an equity stake in uBid in exchange for running uBid's advertising, and that uBid's ads aired during 13 episodes of the show. It also appears undisputed that at the time of the Agreement, the uBid shares at issue had an approximate face value of $60, 000.
According to DuPree, the value of the ad buy for the 13 shows was $195, 000 ($15, 000 per episode). DuPree claimed Defendants misrepresented at the time of the Agreement that uBid had a company valuation of $18, 150, 000 and that the shares “would be exponentially increasing in value due to an imminent public offering of uBid stock.” R. 12 ¶ 10. DuPree further alleged that it never actually received any uBid stock and that uBid's claims and documentation purporting to show a stock transfer were false.
Defendants claimed that uBid only agreed to pay for advertising on four shows at a rate of $15, 000 per show, for a total of $60, 000. R. 11 ¶ 10. They alleged that DuPree ran uBid's ads on 13 shows, without uBid's solicitation and in excess of the Agreement, “presumably because [DuPree] had no other takers for the ad time.” R. 11 ¶ 10. Defendants also disputed DuPree's contention that it never received any uBid stock, asserting that “on or about December 27, 2016, 24, 670 shares of uBid were registered in its corporate records as having been issued to DuPree Productions.” R. 11 ¶ 13.
This case turns on the Arbitrator's management of the arbitration proceedings, so the Court recounts them in detail. On January 29, 2020, DuPree commenced an arbitration proceeding before the American Arbitration Association in Chicago, asserting a claim for breach of contract and misrepresentation under the Agreement. As part of the proceedings, each party was permitted to serve 12 written requests for production of documents. DuPree sought documents relating to the value of uBid at the time of the Agreement and the shares purportedly transferred to DuPree.
On April 14, 2020, the Arbitrator ordered Defendants to respond to DuPree's written discovery by May 22, 2020. Defendants provided their responses on May 26, 2020, and DuPree sent a letter three days later identifying deficiencies in those responses. Defendants provided amended responses, and DuPree sent another letter identifying additional deficiencies. Eventually, DuPree filed a motion to compel the production of certain documents. Defendants filed a response in which they argued they should be allowed to present a dispositive motion rather than respond to the production requests. Defendants also objected, either in that response or separately, that at least some of DuPree's requests were outside the scope of relevant disclosure or precluded by the unambiguous Agreement between the parties.
On June 12, 2020, the Arbitrator granted DuPree's motion to compel and ordered Defendants to serve new written responses and produce all responsive documents on or before July 7, 2020. It also ordered Defendants to provide a sworn statement once production of all responsive documents was complete. Finally, it permitted either side to seek leave to file a dispositive motion on or before August 17, 2020. R. 12 Ex. 5.
Defendants produced additional documents on July 8, 2020. Their response did not include a sworn statement that all responsive documents had been produced. DuPree concluded that the production remained deficient and filed a motion for sanctions on July 22, 2020, in which it argued that Defendants had failed to comply with required disclosures and sought to preclude Defendants from offering evidence to refute DuPree's allegations in the arbitration. Defendants submitted a response on August 25.
R. 12 ¶ 26. The Arbitrator also ordered Thakker to provide an affidavit confirming that the production was “accurate and complete.” R. 12 ¶ 26. Defendants thereafter made an additional document production but once again did not include an affidavit from Thakker stating that production was “complete and accurate.”
On October 15, 2020, the Arbitrator issued an order in which it identified deficiencies remaining in Defendants' production relative to the September 24 order. Specifically, the Arbitrator identified several categories of documents that had not been produced, including “all bank statements for the years 2015 and 2016, profit and loss statements for 2015 and 2016, auditor's reports for 2015 and 2016, and tax returns for 2015 and 2016.” R. 12 Ex. 7. The Arbitrator further admonished Defendants' repeated failure to comply with discovery obligations:
Respondents have been given multiple opportunities to produce the requested documents, but they have failed to produce them and have failed to comply with several of the arbitrator's orders. Respondents' willful non-compliance with discovery orders goes to the heart of Claimant's claims of misrepresentation by Respondent Ketan Thacker [sic] and Respondent uBid Holdings Inc.[1]
R. 12 Ex. 7.
The Arbitrator ordered Defendants to cure the deficiencies by October 30, 2020. In the event Defendants failed to do so, DuPree would have until November 16, 2020 to submit affidavits or other evidence as proof of its allegations, as well as affidavits as to the amount of attorney's fees it had incurred up to that date. Defendants would then have until December 4, 2020 to “present, in writing, any evidence or legal arguments to show cause why an award should not be entered in favor of Claimant as a sanction for Respondents' willful non-compliance with discovery orders.” R. 12 Ex. 7. Both parties submitted affidavit evidence in connection with this order, but “no live testimony ever was taken from any witness in the arbitration.” R. 11 ¶ 28.
The Arbitrator subsequently reviewed Defendants' submissions, which included affidavits from Thakker, and found that they had not “cured or justified the basic defects in their production of requested documents which would likely prove or refute Claimant's claim of misrepresentations about the financial status of uBid.” By order on December 16, 2020, the Arbitrator found that DuPree had submitted sufficient evidence to prove its claim but permitted Defendants to provide additional information on or before January 4, 2021. R. 11 Ex. A.
On February 3, the Arbitrator entered a final order granting DuPree's motion for sanctions and its petition for an adverse inference and entry of judgment pursuant to AAA Rule 58. DuPree was awarded $195, 000 in damages plus attorney's fees and costs, for a final award amount of $223, 314.59. The final award was based on “all of the documents submitted.” R. 11 Ex. A.
Defendants challenge the Arbitrator's award under two provisions of the FAA.[2] The first governs petitions to vacate an arbitration award and provides, in relevant part:
9 U.S.C. § 10. The other governs the modification of arbitration awards and provides, in relevant part:
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