Earth Science Tech, Inc. v. Impact UA, Inc.

CourtCourt of Appeals for the Eleventh Circuit
DecidedApril 14, 2020
Docket19-10118
StatusUnpublished

This text of Earth Science Tech, Inc. v. Impact UA, Inc. (Earth Science Tech, Inc. v. Impact UA, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eleventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Earth Science Tech, Inc. v. Impact UA, Inc., (11th Cir. 2020).

Opinion

Case: 19-10118 Date Filed: 04/14/2020 Page: 1 of 18

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT ________________________

No. 19-10118 ________________________

D.C. Docket No. 9:14-cv-81622-RLR

EARTH SCIENCE TECH, INC.,

Plaintiff - Appellant,

versus

IMPACT UA, INC., CROMOGEN BIOTECHNOLOGY CORPORATION, SLAVIK NENAYDOKH, MICHAEL BRUBECK,

Defendants - Appellees.

________________________

Appeal from the United States District Court for the Southern District of Florida ________________________

(April 14, 2020)

Before ROSENBAUM, JILL PRYOR, and BRANCH, Circuit Judges.

PER CURIAM: Case: 19-10118 Date Filed: 04/14/2020 Page: 2 of 18

This appeal concerns a dispute between Appellant Earth Science Tech, Inc.

(“Earth Science”), a Florida-based company that distributes cannabidoil (“CBD”)-

rich hemp-oil products throughout the United States, and Appellee Cromogen

Biotechnology Corporation (“Cromogen”), 1 an El Salvador-based company that

supplies hemp-based biotechnology.

On June 5, 2014, Cromogen entered into a Distribution Agreement with Earth

Science, allowing Earth Science to exclusively distribute Cromogen’s CBD oil. The

parties’ relationship, however, quickly soured. As we recount below, just four

months later, Cromogen served Earth Science with a Demand for Arbitration and

asserted breach of contract, conversion, and tortious interference. Earth Science

responded with its own state-court breach-of-contract claim. After removal to

federal court, the district court stayed the action pending the completion of

arbitration. Over three years later, an arbitration panel (the “Tribunal”) ruled in

Cromogen’s favor on all issues relevant here.

1 In the original action Earth Science, Inc., filed in state court, defendants included Appellee Cromogen Biotechnology Corporation; Slavik Nenaydokh, an officer, agent, and employee of Cromogen; Michael Brubeck, an officer, agent, and employee of Cromogen; and Impact UA, Inc., a company that invoiced Earth Science for some of the CBD oil Cromogen sent it. Before Cromogen, Nenaydkh, and Brubeck were served, Impact removed the case to federal court. The district court stayed the case to allow the parties to conduct arbitration proceedings. Once arbitration proceedings concluded, Cromogen took the lead for the defendants, explaining that, “[t]hough [Earth Science] sued multiple defendants, the true dispute was always between [Earth Science] and Defendant Cromogen.” Because no defendants other than Cromogen made any filings following the district court’s lifting of the stay in this case, this opinion discusses only Cromogen. 2 Case: 19-10118 Date Filed: 04/14/2020 Page: 3 of 18

It is that arbitration decision that concerns us here. Specifically, once the

Tribunal entered its award (the “Final Award”), Cromogen moved the district court

to confirm the award, and Earth Science moved to vacate or modify the award,

arguing that the tort claims were not arbitrable, and even if they were, the damages

awarded on those counts were excessive. The district court rejected Earth Science’s

arguments and affirmed the Tribunal’s Final Award. After careful review of the

record and the briefs, we also affirm.

I.

As noted, Cromogen entered into a Distribution Agreement with Earth

Science in mid-2014. That Distribution Agreement appointed Earth Science as an

exclusive distributor to formulate, market, and sell Cromogen’s CBD oil to other

companies. In general, the Distribution Agreement obliged Cromogen to provide

conforming quantities of CBD oil and Earth Science to purchase CBD oil from

Cromogen and resell it within the United States, with the two companies sharing

revenue from Earth Science’s sales. As particularly relevant here, the Distribution

Agreement also included an arbitration clause:

Governing Law and Venue. This Agreement and performance by the parties hereunder shall be construed in accordance with the laws of the State of New York, U.S.A., without regard to provisions on the conflicts of laws. Both parties submit to exclusive International Arbitration through JAMS International using UNCITRAL rules in New York, New York. U.N.

3 Case: 19-10118 Date Filed: 04/14/2020 Page: 4 of 18

Convention on International Sale of Goods shall not apply to this Agreement.

Earth Science received its first two shipments of CBD oil from Cromogen in

July and August 2014. Though the August shipment also contained four samples of

CBD oil, Cromogen was obligated to deliver those samples to another customer,

CBD Oil Depot. Cromogen needed the samples to demonstrate that performance

indicators were met as part of a deal with CBD Oil Depot. Earth Science was advised

of this on numerous occasions and agreed to forward the samples, but it never did.

On August 21, 2014, Earth Science canceled the Distribution Agreement,

accusing Cromogen of breaching the Distribution Agreement because the product

shipped in the first two deliveries was not pure CBD oil. Cromogen disagreed and

asserted that it was Earth Science that had breached the Distribution Agreement by

canceling it and by failing to pay the second half of the amount owed for the two

shipments.

That October, Cromogen served its arbitration demand. About one month

later, Earth Science responded with its state-court complaint. On December 31,

2014, Earth Science’s lawsuit was removed to the United States District Court for

the Southern District of Florida, pursuant to 9 U.S.C. § 302. The district court then

stayed the proceedings pending the completion of arbitration.

In June 2015, Cromogen filed a Statement of Claim, which included causes

of action against Earth Science for breach of contract, conversion of the samples,

4 Case: 19-10118 Date Filed: 04/14/2020 Page: 5 of 18

and tortious interference with contractual relations. As relevant here, Earth Science

countered that Cromogen’s tort claims fell outside the scope of the Distribution

Agreement’s arbitration provision.

The Tribunal rejected Earth Science’s position and found in favor of

Cromogen on all three of its claims.

First, the Tribunal dismissed Earth Science’s contention that the conversion

and tortious-interference claims were beyond the scope of the arbitration provision.

In its reasoning, the Tribunal noted the “strong policy favoring arbitration” and the

fact that “arbitration clauses are construed as broadly as possible, resolving any

doubts concerning the scope of the arbitrable issues in favor of arbitration.” The

Tribunal rejected Earth Science’s “narrow” interpretation because it “never would

have received these samples were it not for its [Distribution] Agreement with

Cromogen.” And it explained that the text of the arbitration clause itself supported

the conclusion that the tort claims were included among the claims to be arbitrated:

A plain reading of the clause, which not only refers to the [Distribution] Agreement but the “performance of the parties hereunder,” supports a broad interpretation of the clause. In addition, the second part of the clause requires both parties to submit to “exclusive International Arbitration through JAMS International using UNCITRAL Rules in New York, NY” thus stating that all disputes between the parties would exclusively be resolved in arbitration.

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Earth Science Tech, Inc. v. Impact UA, Inc., Counsel Stack Legal Research, https://law.counselstack.com/opinion/earth-science-tech-inc-v-impact-ua-inc-ca11-2020.