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Hancock Fabrics, Inc. v. Rowdec, LLC

United States District Court, Fifth Circuit

November 19, 2013

HANCOCK FABRICS, INC., Plaintiff,
v.
ROWDEC, LLC d/b/a WESTLAKE ASSOCIATES, Defendant, with ROWDEC LLC, Plaintiff,
v.
HANCOCK FABRICS, INC., Defendant.

MEMORANDUM OPINION

SHARION AYCOCK, District Judge.

Rowdec, LLC, d/b/a Westlake Associates (Westlake) filed a Motion to Confirm Arbitration Award [34].[1] After Hancock filed its response, and Westlake replied, Hancock requested the opportunity to file a sur-reply [41]. Because the Court has considered all briefing in this matter, the Motion for Leave to File Sur-Reply [41] is GRANTED, and Westlake's Motion to Confirm Arbitration Award [34] is GRANTED, but not to the extent requested.

Factual and Procedural Background

Westlake and Hancock Fabrics, Inc. (Hancock) entered into a Consulting and Sales Agreement on February 9, 2009. During the six year term of the contract, Hancock was to pay a guaranteed fee to Westlake the first two years for its consulting services, and thereafter to pay royalties on Hancock's net retail sales of "Identified Products." "Identified Products" were those "covered under this agreement that will be coded by [Hancock] in a mutually agreed upon manner to ensure that [Westlake] is credited with sales attributable to its work under this Agreement...." The Agreement further provided a dispute resolution procedure requiring consultation between the parties in the event of a disagreement or dispute arising under the Agreement or parties' performance thereunder. If a resolution could not be met, the Agreement provided that "either party may apply for binding and confidential arbitration of the Disputed Matter with the American Arbitration Association (AAA')."

During the course of the contract, Westlake and Hancock failed to successfully resolve their differences over the list of "Identified Products" from which Westlake's royalties were to be calculated under the Agreement. In August of 2011, after failed consultations, Westlake applied for binding arbitration to determine whether Hancock breached the Consulting and Sales Agreement by failing to pay royalties on the "Identified Products." The arbitration was conducted over four days, February 6-9, 2012, in Dallas, Texas. The arbitrator issued the award on March 22, 2012, and granted Westlake's declaratory judgment against Hancock. In addition to damages, the arbitrator additionally awarded $519, 328.60 to Westlake for its "reasonable and necessary attorney's fees, " costs of $4, 019.15, and administrative fees and expenses of the American Arbitration Association totaling $25, 485.22.

Within hours of the decision being announced, Hancock filed the instant action in the Lee County Circuit Court, which was then removed. Hancock asserted that the arbitrator exceeded his authority by awarding attorneys' fees and future payments based on litigation necessary to confirm the arbitrator's award. Westlake filed a confirmation action in Texas, which was then transferred to the Northern District of Mississippi and consolidated with the instant case. See Rowdec, LLC v. Hancock Fabrics, Inc., Cause No. 1:12cv222 (N.D. Miss. Oct. 18, 2012). The transferred cause of action seeks confirmation of the arbitrator's Award in all respects, including the imposition of attorneys' fees and costs, as well as post-arbitration fees for successfully responding to an objection to the confirmation of the award as provided in the arbitrator's award.

Westlake now files a Motion to Confirm Arbitration Award in both cases seeking a declaration that the arbitrator had authority to award attorneys' fees and post-arbitration fees, and that the Award required Hancock to pay royalties to Westlake on all Identified Products sold by Hancock in all stores and by internet. Hancock has responded bringing procedural issues as well as substantive arguments to light.

The Court's Obligation in Reviewing the Arbitration Award

The FAA provides the means for enforcing arbitral awards by way of a judicial decree confirming, vacating, modifying or correcting an award. See Hall St. Assocs., LLC. v. Mattel, Inc. , 552 U.S. 576, 582, 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008). Section 9 of the Federal Arbitration Act requires the Court, upon motion of a party, to confirm an arbitration award "unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of [the FAA]." 9 U.S.C. ยง 9; see Householder Grp. v. Caughran, 354 F.App'x 848, 850 (5th Cir. 2009) (citing Hall St. Assocs. , 552 U.S. at 582, 128 S.Ct. 1396); Schlobohm v. Pepperidge Farm, Inc. , 806 F.2d 578, 580 n.2 (5th Cir. 1986). The party moving to vacate the arbitral award bears the burden of proof. See In re Arbitration Between Trans Chem. Ltd. & China Nat'l Mach. Import & Export Corp. , 978 F.Supp. 266, 303 (S.D. Tex. 1997), aff'd, 161 F.3d 314 (5th Cir. 1998).

Section 10 of the FAA provides the exclusive grounds for which a Court may vacate an arbitration award:

(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 arbitrator exceeded his powers, or so imperfectly executed them that a mutual, final, and definite award upon the ...

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