Soaring Wind Energy, LLC v. Catic United States, Inc.

• Decision Date: 09 August 2018
• Docket Number: Civil Action No. 3:15-CV-4033-K
• Citation: 333 F.Supp.3d 642
• Parties: SOARING WIND ENERGY, LLC, Tang Energy Group, Ltd., the Nolan Group, Inc., Mary Young (Individually and as Independent Executrix of the Estate of Keith P. Young), Mitchell W. Carter, and Jan Family Interests, Ltd., Movants, v. CATIC USA, INC. (a.k.a. AVIC International USA, Inc.), Respondent.
• Court: U.S. District Court — Northern District of Texas

333 F.Supp.3d 642

SOARING WIND ENERGY, LLC, Tang Energy Group, Ltd., the Nolan Group, Inc., Mary Young (Individually and as Independent Executrix of the Estate of Keith P. Young), Mitchell W. Carter, and Jan Family Interests, Ltd., Movants,

v.CATIC USA, INC. (a.k.a. AVIC International USA, Inc.), Respondent.

Civil Action No. 3:15-CV-4033-K

United States District Court, N.D. Texas, Dallas Division.

Signed August 9, 2018

Lewis T. LeClair, McKool Smith, James Allen Moseley, William B. Chaney, Grey Reed & McGraw PC, Peter A. Kraus, Waters & Kraus, Deborah M. Perry, Munsch Hardt Kopf & Harr PC, David T. Denney, Paul W. Denney, Law Offices of David T. Denney PC, John T. Cox, III, Lynn Tillotson Pinker & Cox LLP, Jeffrey S. Lowenstein, Jesse Allan Okiror, Bell Nunnally & Martin LLP, Dallas, TX, for Movants.

Robert E. Sheeder, Bracewell LLP, Margaret Donahue Hall, Spencer Fane LLP, Eliot T. Burriss, Xenia Nicole Figueroa, McDermott Will & Emery LLP, James C. Bookhout, Robert M. Hoffman, Marina Stefanova, Matthew Thomas Nickel, Meagan Dyer Self, DLA Piper LLP, Richard D. Salgado, Dentons U.S. LLP, Steven K. Dewolf, DeWolf Law, Gregory Richardson Ave, Randall G. Walters, Walters Balido & Crain LLP, Dallas, TX, David G. Bayles, Malcolm McNeil, Arent Fox LLP, Los Angeles, CA, Cedric Chao, Isabelle Ord, DLA Piper LLP, San Francisco, CA, David Cheit, DLA Piper LLP, Sacramento, CA, Kellin Maurine Chatfield, San Diego, CA, Drew W. Marrocco, Dentons U.S. LLP, Washington, DC, for Respondent.

ORDER CONFIRMING ARBITRATION AWARD

ED KINKEADE, UNITED STATES DISTRICT JUDGE

Before the Court are: (1) Movants Soaring Wind Energy, LLC, Tang Energy Group, Ltd., The Nolan Group, Inc., Keith P. Young, Mitchell W. Carter, and Jan Family Interests Ltd.'s Motion to Confirm Arbitration Award Against Respondent AVIC International USA, Inc. and Motion to Confirm Arbitration Award Against All Other Respondents (Doc. No. 1); and (2) Respondent AVIC International USA, Inc.'s Motion to Vacate Arbitration Award (Doc. No. 157). The Court has carefully reviewed the motions, responses, replies, the extensive record, the applicable law, and the arbitration award. The Court finds no grounds upon which it must vacate, modify, or correct the arbitration award as to Respondent AVIC USA, Inc. ("AVIC USA"). See 9 U.S.C. §§ 9 - 11. The Court must confirm the arbitration award against AVIC USA because the arbitrators' ruling as to the liability of AVIC USA " ‘draws its essence’ " from the Soaring Wind Energy Agreement. Accordingly, the Court GRANTS Movants' Motion to Confirm Arbitration Award Against Respondent AVIC International USA, Inc. and DENIES Respondent AVIC USA's motion to vacate the arbitration award.

I. Factual and Procedural Background

In 2008, Soaring Wind Energy, LLC ("SWE") was created with a Limited Liability Company Agreement ("the Agreement" or "the SWE Agreement"). The members of SWE are Respondent AVIC USA, non-party Paul E. Thompson ("Thompson"), and Movants Tang Energy Group, LLC ("TEG"), Keith P. Young, Mitchell W. Carter, Jan Family Interests, Ltd., and The Nolan Group, Inc. (collectively "Movants"). AVIC USA held a 50% membership in SWE, while the five Movants held the other 50% membership in varying percentages. The Agreement defined the purpose and nature of SWE's business:

The purpose and nature of the business to be conducted by the Company shall be to provide worldwide marketing of wind energy equipment, services and materials related to wind energy including, but not limited to, marketing wind turbine generator blades and wind turbine generators and developing wind farms (the "Business"), and to engage in any other business or activity that now or hereafter may be necessary, incidental, proper, advisable or convenient to accomplish the foregoing purposes (including the borrowing of money and the investment of funds) and that is not forbidden by the law of the jurisdiction in which the Company engages in that business.

The Agreement also contains a Dispute Resolution section ("Arbitration Provision") requiring disputes to be resolved in binding arbitration. The Arbitration Provision of the Agreement provides for the following process:

(a) The Disputing Member desiring to initiate arbitration in connection with any Dispute shall notify the other Disputing Members in writing, which notice shall provide the name of the Arbitrator appointed by the Disputing Member, demand arbitration and include a statement of the matter in controversy.

(b) Within 15 days after receipt of such demand, each other Disputing Member receiving notice of the Dispute shall name an Arbitrator.... The Arbitrators so selected shall within 15 days after their designation select an additional Arbitrator.... In the event that there are more than two Disputing Members to the Dispute, then unless otherwise agreed by the Disputing Members, the Arbitrators selected by the Disputing Members shall cause the appointment of either one or two Arbitrators as necessary to constitute an odd number of total Arbitrators hearing the Dispute.

It defines "Disputing Member" as "each Member that is a party to such Dispute." "Member" is defined as "either a Class A Member or a Class B Member, or any Person hereafter admitted to the Company as a member as provided in this Agreement, but such term does not include any Person who has ceased to be a member in the Company."

In June 2014, TEG filed a Demand for Arbitration, joined by the other Movants, asserting a claim for breach of Agreement against the Respondents—Signatories AVIC USA and Thompson as well as the Non-Signatory Respondents Aviation Industry Corporation of China, China Aviation Industry General Aircraft Co., Ltd., AVIC International Holding Corp., AVIC International Renewable Energy Corp., and CATIC TED, Ltd. (collectively "Non-Signatories"). The Non-Signatories are foreign companies. After the arbitration demand was made, each SWE member selected an arbitrator for a total of seven (7) arbitrators being selected—one each by AVIC USA and Thompson, as well as one by each of the five Movants. Following the process set out in the Arbitration Provision, those seven arbitrators then selected two additional arbitrators, resulting in a nine-member arbitration panel ("the Panel") in the proceeding. The Panel later permitted SWE to intervene as a party to the Arbitration. The Non-Signatory Respondents objected to any attempt to subject them to arbitration, and provided notice that they would not participate in the arbitration.

On August 5, 2014, after the Panel had been composed but before an arbitration award had issued, AVIC USA filed a complaint for declaratory judgment, seeking the Court's intervention related to the composition of the Panel and also a stay of the arbitration proceedings. AVIC Int'l USA, Inc. v. Tang Energy Grp., Ltd. , Civil Action No. 14-CV-2815-K ("AVIC USA I case") (Doc. No. 1). The Court granted Defendant TEG's motion to dismiss, finding the Court had no jurisdiction to address AVIC USA's claims or grant the relief requested. AVIC Int'l USA, Inc. v. Tang Energy Grp., Ltd. , Civil Action No. 14-CV-2815-K, 2015 WL 477316, at 4-5 (N.D. Tex. Feb. 5, 2015). The Fifth Circuit affirmed this Court's ruling. AVIC Int'l USA, Inc. v. Tang Energy Grp., Ltd. , 614 F. App'x 218, 219 (5th Cir. 2015) (" AVIC USA I appeal").

On September 12, 2014, again before an arbitration award had issued, Ascendant Renewable Energy Corporation ("Ascendant"), a named Respondent in the arbitration but a non-signatory to the SWE Agreement, filed a complaint for declaratory judgment. Ascendant Renewable Energy Corp. v. Tang Energy Grp., Ltd. , Civil Action No. 14-CV-3314-K ("Ascendant case") (Doc. No. 1). Ascendant sought a stay of the arbitration and a declaration from the Court regarding its party status to the arbitration, including whether the Panel or a court must determine if Ascendant was a proper party to the arbitration as a non-signatory to the SWE Agreement which contained the arbitration provision. Id. (Doc. No. 1). On August 4, 2015, the Court granted Ascendant's motion for summary judgment, declaring:

(1) whether Ascendant, a non-signatory to the Agreement, can be subject to arbitration based on the arbitration clause of the Agreement is for a court, not the arbitration panel, to decide because Ascendant disputes the very existence of an agreement between these parties; and (2) because the existence of any agreement between these parties is in dispute, any determination by the arbitration panel as to the jurisdiction over Ascendant is not controlling on a court.

Ascendant Renewable Energy Corp. v. Tang Energy Grp., Ltd. , Civil Action No. 14-CV-3314-K, 2015 WL 4713240, at *3 (N.D. Tex. Aug. 4, 2015). The Court denied as moot the requested stay. No appeal was taken in that matter.

The arbitration hearing occurred August 10-14, 2015. On December 21, 2015, the Panel issued their Final Award. The panel concluded, in relevant part, that: (1) the SWE members vested the Panel with authority to determine their own jurisdiction, including arbitrability of any claim or defense, such as any dispute related to the interpretation or construction of any provision in the Agreement; (2) AVIC USA's "Affiliates", as defined in the Agreement, engaged in the "Business" of SWE in violation of the Agreement's covenant not to compete; (3) AVIC USA as a Signatory was liable for its Affiliates' breach of the Agreement; (4) the Movants were entitled to damages for lost profits relating to the breach and AVIC USA should be divested of its membership interest in SWE; (5) SWE properly intervened to assert its own claims for damages; (6) SWE was entitled to $62.9 million in damages and TEG was entitled to arbitration fees, attorneys' fees, and expenses (up through a final appeal to the United States Supreme Court) allocated against all Respondents except Thompson; and (7) the Movants were the "prevailing Members" as defined in the Agreement.

Before the Court now are the...