Aeryon Labs, Inc. v. Datron World Communications, Inc.

CourtDistrict Court, S.D. California
DecidedMarch 4, 2020
Docket3:19-cv-02168
StatusUnknown

This text of Aeryon Labs, Inc. v. Datron World Communications, Inc. (Aeryon Labs, Inc. v. Datron World Communications, Inc.) is published on Counsel Stack Legal Research, covering District Court, S.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Aeryon Labs, Inc. v. Datron World Communications, Inc., (S.D. Cal. 2020).

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 AERYON LABS, INC., a Case No.: 3:19-cv-02168-WQH-LL Canadian Corporation, 12 ORDER Plaintiff, 13 v. 14 DATRON WORLD 15 COMMUNICATIONS, INC., a California Corporation, 16 Defendant. 17 18 HAYES, Judge: 19 The matters pending before the Court are the Petition to Confirm the Arbitration 20 Award filed by Plaintiff Aeryon Labs, Inc. (Ex. A to ECF No. 1) and the Petition to Vacate 21 the Arbitration Award filed by Defendant Datron World Communications, Inc. (ECF No. 22 2). 23 PROCEDURAL BACKGROUND 24 On October 30, 2019, Plaintiff Aeryon Labs, Inc. (“Aeryon”) initiated this action by 25 filing a Petition to Confirm an Arbitration Award in the Superior Court of California for 26 the County of San Diego, assigned case number 37-2019-00058740-CU-PA-NC, against 27 Defendant Datron World Communications, Inc. (“Datron”). (Ex. A Part 1, ECF No. 1-2 at 28 2). On November 13, 2019, Defendant removed the action to this Court pursuant to 28 1 U.S.C. § 1331, 28 U.S.C. § 1441(a), and 28 U.S.C. § 1446. (ECF No. 1 at 1). On 2 November 18, 2019, Defendant filed a Response in opposition to the Petition to Confirm 3 the Arbitration Award and a Petition to Vacate the Arbitration Award. (ECF No. 2). On 4 December 13, 2019, Plaintiff filed a Reply in support to the Petition to Confirm the 5 Arbitration Award. (ECF No. 5). On January 31, 2020, the Court heard oral argument. 6 (ECF No. 8). 7 THE ARBITRATION 8 Plaintiff is a Canadian company that “design[s], manufacture[s] and sell[s] UAVs, 9 more familiarly known as drones.” (ECF No. 1-3 at 35). In 2009, Plaintiff launched its 10 first commercial product (the Scout). Id. In 2013, Plaintiff “launched a new and updated 11 model called the Sky Ranger.” Id. at 36. 12 Defendant is a California corporation. Defendant “is the price performance leader 13 for tactical military radio communications equipment for foreign militaries around the 14 world.” Id. Defendant’s “core business and main market is the military, but it has also 15 worked with governments, police and other domestic security type agencies.” Id. 16 Defendant has “a network of resellers in over 80 countries.” Id. 17 On July 19, 2010, Defendant and Plaintiff entered into a Private Label Distribution 18 Agreement (“PLDA”). Id. at 48. “The contract did not go smoothly and there were issues 19 concerning channel conflicts between [Defendant]’s and [Plaintiff]’s representatives.” Id. 20 at 51. On May 11, 2012, the 2010 PLDA was terminated. Id. “Several changes were made 21 to the 2010 PLDA following its termination.” Id. at 52. In January 2013, the 2012 PLDA 22 was signed and backdated to July 20, 2012. Id. at 53. “Problems continued under the 23 2012 PLDA.” Id. “Channel conflict issues continued to arise.” Id. at 56. The 2012 PLDA 24 “continued until it was finally terminated” on May 10, 2016. Id. at 58. 25 In Defendant’s Statement of the Case, Defendant brought claims for breach of 26 contract pursuant to the 2010 and 2012 PLDAs, breach of the covenant of good faith and 27 fair dealing, promissory estoppel, intentional interference with prospective economic 28 relations, negligent misrepresentation, intentional misrepresentation, and fraud. (ECF No. 1 1-3 at 62-64). Defendant sought declaratory relief, injunctive relief, and damages “not less 2 than US $20,000.000.” Id. at 62. 3 The 2012 PLDA stated, in relevant part, that 4 Any dispute, controversy or claim arising out of, relating to, or in connection with this Agreement, or the breach termination or validity thereof, which is 5 not settled by mutual agreement of the Parties involved in such dispute, 6 controversy or claim within 30 days of written notice by one Party to the other of the nature of such dispute, shall be finally settled by Arbitration. … 7

8 (ECF No. 1-2 at 25). The case was submitted to arbitration. 9 The arbitrator issued a Partial Award which concluded that “[t]he termination of the 10 Private Label Distribution Agreement dated 2012 as amended by the [Plaintiff]’s notice of 11 termination dated 10 May 2016 was valid and lawful.” (ECF No. 1-3 at 251). The 12 arbitrator rejected all of Defendant’s claims. Id. Plaintiff “claim[ed] the sum of US 13 $2,554,089 as the total of its legal fees and other costs.” Id. at 260. Defendant 14 for its part claimed, excluding the arbitration costs, the sum of US $520,902.50 in legal fees and US $154,350.36 for travel and related costs; 15 other costs and expenses, including transcripts; and Datron time spent in the 16 arbitration, giving a total of US $675,252.86.

17 Id. at 261. The arbitrator concluded that “[t]he award of legal and other costs in an 18 arbitration is ultimately a matter for the discretion of the tribunal” and “is governed by 19 Article 38 of the ICC Rules.” Id. at 266. The arbitrator awarded Plaintiff US $ 20 1,997,445.75 for attorneys’ fees, paralegal costs, technician costs, and other costs. Id. at 21 269. The arbitrator ordered that Defendant make the payment to Plaintiff by October 25, 22 2019. Id. 23 CONTENTIONS OF THE PARTIES 24 Defendant contends that the arbitration award should be vacated. Defendant asserts 25 that the arbitrator refused to order discovery of Defendant’s requested documents. 26 Defendant contends that it was prejudiced as a result of the arbitrator’s refusal when it was 27 unable to sufficiently support its claims at the hearing. Defendant contends that the 28 1 arbitrator failed to follow the parties’ choice of law in their arbitration agreement and failed 2 to apply California law to the analysis of attorneys’ fees and costs. Defendant contends 3 that the arbitrator failed to properly evaluate whether the rates, time spent, or costs were 4 reasonable before awarding Plaintiff $2,127,445.75 in attorneys’ fees and costs. 5 Plaintiff contends that the arbitration award should be confirmed. Plaintiff contends 6 that Defendant was permitted to present all its evidence and was not denied a fair hearing. 7 Plaintiff contends that Defendant sought more discovery than it was entitled to receive 8 under the IBA rules. Plaintiff contends that Defendant was permitted to argue in support 9 of its requests for production and to present evidence at trial which was not part of either 10 party’s disclosures. Plaintiff contends that Defendant fails to identify any evidence that 11 Defendant was prohibited from presenting. Plaintiff contends that this Court is not 12 permitted to review the merits of the arbitrator’s discovery determinations. Plaintiff 13 contends that the arbitrator did not exceed authority by applying agreed-upon standards of 14 the 2012 PLDA and ICC Arbitration Rules to grant the attorney’s fee award. Plaintiff 15 contends that the 2012 PLDA incorporated by reference the ICC Arbitration Rules, which 16 grant the arbitrator broad and discretionary authority to award attorneys’ fees. 17 STANDARD OF REVIEW 18 The Federal Arbitration Act (“FAA”) governs the role of federal courts in reviewing 19 arbitration decisions. Section 9 of the FAA provides that a federal district court “must” 20 confirm an arbitration award “unless the award is vacated, modified, or corrected as 21 prescribed in sections 10 and 11 of this title.” 9 U.S.C. § 9. Judicial review of an arbitration 22 award is thus “both limited and highly deferential” and the arbitration award “may be 23 vacated only if it is ‘completely irrational’ or ‘constitutes manifest disregard of the law.’” 24 Comedy Club, Inc. v. Improv W.

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Aeryon Labs, Inc. v. Datron World Communications, Inc., Counsel Stack Legal Research, https://law.counselstack.com/opinion/aeryon-labs-inc-v-datron-world-communications-inc-casd-2020.