Hawaiian Host, Inc. v. Citadel Pac. Ltd.

• Decision Date: 31 October 2022
• Docket Number: Civ. 22-00077 JMS-RT
• Parties: HAWAIIAN HOST, INC., Petitioner, v. CITADEL PACIFIC LTD.; CITADEL FOOD GROUP HAWAII LLC; CITADEL WINDBREAK LLC, Respondents.
• Court: U.S. District Court — District of Hawaii

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HAWAIIAN HOST, INC., Petitioner, v. CITADEL PACIFIC LTD.; CITADEL FOOD GROUP HAWAII LLC; CITADEL WINDBREAK LLC, Respondents.

Civ. No. 22-00077 JMS-RT

United States District Court, D. Hawaii

October 31, 2022

ORDER GRANTING PETITIONER'S MOTION TO CONFIRM ECF NO. 1-3, AND DENYING RESPONDENTS' COUNTER-MOTION TO VACATE, ECF NO. 16, ARBITRATION AWARD

J Michael Seabright, Chief United States District Judge.

I. INTRODUCTION

Petitioner Hawaiian Host, Inc. (“Hawaiian Host” or “Petitioner”)^[1]moves under the Federal Arbitration Act (“FAA”) to confirm a March 29, 2022, Amended Final Arbitration Award (the “Arbitration Award”) decided by Arbitrator Kale Feldman (the “Arbitrator”) and administered through Dispute Prevention & Resolution, Inc. (“DPR”), in Honolulu, Hawaii, under the commercial rules of the American Arbitration Association (“AAA”).^[2] See ECF No. 1-3; ECF No. 12-1. Hawaiian Host originally filed its Motion to Confirm Arbitration Award and for Entry of Judgment (“Motion to Confirm”) in the Circuit Court of the First Circuit of the State of Hawaii (“State Court”), but Respondents Citadel Pacific Ltd., Citadel Food Group Hawaii LLC, and Citadel Windbreak LLC (collectively, “Citadel” or “Respondents”) removed the action to this U.S. District Court for the District of Hawaii. See ECF No. 1. After removal, Citadel filed its Opposition and Counter-Motion to Vacate the Arbitration Award (“Counter-Motion to Vacate”). ECF No. 16.

By and large, much of what Citadel asks the court to do in its Opposition and Counter-Motion to Vacate amounts to an analysis that an appellate court might take in evaluating an appeal after a civil trial. But such a review of an arbitration award is entirely improper under the FAA. As explained to follow, this proceeding is meant to be a narrow and limited review of a private arbitration award. Anything further violates the FAA's statutory regime and the Supreme Court's repeated guidance that courts are not to “take full-bore legal and evidentiary appeals” in reviewing arbitration awards under the FAA. Oxford Health Plans LLC v. Sutter, 569 U.S. 564, 568-69 (2013) (citation and internal quotation marks omitted).

Applying the FAA's standards-recognizing that the underlying arbitration was long and complex-the court has reviewed the voluminous record consisting of hundreds of exhibits and thousands of pages. It has considered the extensive original and supplemental briefing, and the oral arguments of the parties. Based on the following, the court GRANTS Hawaiian Host's Motion to Confirm, ECF No. 1-3, and DENIES Citadel's Counter-Motion to Vacate, ECF No. 16.

II. STANDARDS OF REVIEW

Before setting forth the essential background, the court first explains the lens through which it reviews the Arbitration Award. The court begins with the standards of review because, upon analyzing the nature of the Arbitration Award and the questions of law it presents, the applicable legal standards are somewhat different than what the parties have assumed (although the standards ultimately lead to the same results).

The FAA consists of three chapters. Chapter 1, 9 U.S.C. §§ 1-16, covers domestic arbitrations; Chapter 2, 9 U.S.C. §§ 201-208, covers nondomestic arbitrations under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958; and Chapter 3, 9 U.S.C. §§ 301-307, covers arbitrations under the Inter-American Convention on International Commercial Arbitration of January 30, 1975. See, e.g., TermoRio S.A. E.S.P. v. Electranta S.P., 487 F.3d 928, 933 (D.C. Cir. 2007). The Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38-which Congress implemented in Chapter 2 of the FAA-is often referred to (and the court does so here) as the “New York Convention,” as it was facilitated by the United Nations and adopted in New York. See, e.g., Ministry of Def. of Islamic Republic of Iran v. Gould Inc., 887 F.2d 1357, 1362 (9th Cir. 1989).

A. Chapter 2 of the FAA Applies

The parties have briefed the Motions assuming that the Motions are governed by the standards in Chapter 1 of the FAA, specifically 9 U.S.C. §§ 9-11. See, e.g., ECF No. 1-3 at 3, PageID.14 (Petitioner invoking, among other grounds, 9 U.S.C. § 9); ECF No. 16-1 at 14-15, PageID.119-20 (Respondents applying 9 U.S.C. §§ 10(a) and 11); and ECF No. 27 at 18-19, PageID.1897-898 (Petitioner citing Kyocera Corp. v. Prudential-Bache Servs, Inc., 341 F.3d 987, 994 (9th Cir. 2003), which applied 9 U.S.C. §§ 1-16, as “enumerat[ing] limited grounds on which a federal court may vacate, modify, or correct an arbitral award”).

At first glance, relying on those standards here makes sense because, as to confirmation, Chapter 1 of the FAA treats confirming and vacating as opposite sides of the same coin. Specifically, 9 U.S.C. § 9 provides in part that, upon application, “the court must grant such an order [confirming the award] unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title.” And, in turn, 9 U.S.C. § 10(a) provides the following standards for vacating an award:

In any of the following cases the United States court in and for the district wherein the award was made may make an order vacating the award upon the application of any party to the arbitration-

(1) where the award was procured by corruption, fraud, or undue means;

(2) where there was evident partiality or corruption in the arbitrators, or either of them;

(3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or

(4) 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.

Likewise, 9 U.S.C. § 11 sets forth the limited situations in which a court may modify or correct an arbitration award.

But here, Citadel removed the action from State Court, basing federal jurisdiction on 9 U.S.C. § 203-the New York Convention-as well as on diversity of citizenship under 28 U.S.C. § 1332.^[3] See ECF No. 1 at 3, PageID.3. Citadel's Notice of Removal established that the three Respondents (Citadel Pacific Ltd., Citadel Food Group Hawaii LLC, and Citadel Windbreak LLC) all have citizenship in the Cayman Islands, and that at least the primary Respondent, Citadel Pacific Ltd., has a principal place of business in Manila, Philippines. See ECF No. 1 at 4, PageID.4. Citadel therefore asserted that the Arbitration Award falls under the New York Convention because Citadel has foreign citizenship and because the Arbitration Award is based on a “commercial relationship.” See id. at 3-4, PageID.3-4 (citing 9 U.S.C. § 202) (other citations omitted).

Upon review of the Notice of Removal and the Arbitration Award, the court agrees that the Arbitration Award is non-domestic and thus falls under the New York Convention. See, e.g., Gould, 887 F.2d at 1362 (explaining that to fall under the New York Convention “the [arbitration] award (1) must arise out of a legal relationship (2) which is commercial in nature and (3) which is not entirely domestic in scope”); Asignacion v. Rickmers Genoa Schiffahrtsgesellschaft mbH & Cie KG, 783 F.3d 1010, 1015 (5th Cir. 2015) (“An award's enforcement is governed by the [New York] Convention, as implemented at 9 U.S.C. § 201 et seq., if the award arises out of a commercial dispute and at least one party is not a United States citizen.”); Indus. Risk Insurers v. M.A.N. Gutehoffnungshutte GmbH, 141 F.3d 1434, 1441 (11th Cir. 1998) (holding that “an arbitral award made in the United States, under American law, falls within the purview of the New York Convention-and is thus governed by Chapter 2 of the FAA-when one of the parties to the arbitration is domiciled or has its principal place of business outside of the United States”).^[4] Moreover, Chapter 2 of the FAA applies notwithstanding the existence of diversity of citizenship. See Indus. Risk, 141 F.3d at 1439-40 (“The district court proceeded in the belief that its jurisdiction was grounded in diversity, and that its treatment of the arbitral proceedings was therefore controlled by Chapter 1 of the [FAA], which covers domestic arbitral proceedings. We conclude that the district court was in error, and hold that the case is controlled by Chapter 2 of the FAA, 9 U.S.C. §§ 201-208, which covers international arbitral proceedings.”).

B. 9 U.S.C. § 207 and Article V of the New York Convention

Accordingly, because the court applies Chapter 2 of the FAA, the court addresses confirmation by applying 9 U.S.C. § 207-not 9 U.S.C. § 9.^[5] In this regard, § 207 provides:

Within three years after an arbitral award falling under the [New York] Convention is made, any party to the arbitration may apply to any court having jurisdiction under this chapter for an order confirming the award as against any other party to the arbitration. The court shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the said Convention.

9 U.S.C. § 207 (emphasis added). In turn, Article V of the New York Convention specifies the “grounds for refusal or deferral of recognition or enforcement of the award” in § 207. See, e.g., Ministry of Def. & Support for the Armed Forces of the Islamic Republic of Iran v. Cubic Def. Sys., Inc., 665 F.3d 1091, 1096 (9th Cir. 2011). Article V provides:

(1) Recognition and enforcement of the award may be refused at the request of the party against whom it is invoked, only if that party

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