Santa Barbara Polo Club, Inc. v. Lifestyle Licensing B.V.

• Court: District Court, C.D. California
• Decided: August 19, 2024
• Docket: 2:21-cv-07989
• Status: Unknown

Opinion

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES —- GENERAL

Present: The Honorable CHRISTINA A. SNYDER Catherine Jeang Deborah Parker N/A Deputy Clerk Court Reporter / Recorder Tape No. Attorneys Present for Plaintiffs: Attorneys Present for Defendants: Brad Estes Lukas Sosnicki Paul Llewellyn Proceedings: ZOOM HEARING RE: SANTA BARBARA POLO CLUB AND SB MEMBERS, LLC’S MOTION TO CONFIRM ARBITRATION AWARD AND FOR ENTRY OF JUDGMENT (Dkt. 40, filed on JULY 12, 2024) I. INTRODUCTION On October 6, 2021, Santa Barbara Polo Club Inc. (“SB Polo”) and SB Members, LLC (“SB Members’) (collectively, “petitioners”) filed a petition to compel arbitration against Lifestyle Licensing B.V. (“Lifestyle B.V.”) and Lifestyle Equities C.V. (“Equities C.V.”), (collectively, “respondents”). Dkt. 1. On April 11, 2022, respondents filed a notice of non-opposition to the petition to compel arbitration. Dkt. 17. Respondents noted that “[w]hile Respondents dispute the Petition’s factual and legal arguments, Respondents will consent to arbitrate before the American Arbitration Association (“AAA”). By this Non-Opposition, Respondents do not concede this Court’s jurisdiction (beyond that which is necessary to refer Petitioners’ arbitration demand to arbitration before the AAA). Respondents also do not consent to any other request in the Petition’s Prayer for Relief.” Id. at 2. On May 9, 2022, the Court stayed this action and reserved judgment on all other issues, including, but not limited to, this Court’s jurisdiction to enforce an arbitration award and attorneys’ fees. Dkt. 24. On October 31, November 1, and November 7-8, 2023, the arbitrator (“the Arbitrator’) conducted a four-day evidentiary hearing. Dkt. 40 (“Mot.”) at 10. On

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES —- GENERAL

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES —- GENERAL

BAR st Os Seg > F tie SPE ee POLO & RACQUET POLO CLUB CLUB’ Dkt. 1 §§ 13-14. At the time of the 1997 Agreement, BH Marketing owned the BHPC Marks. Id. § 15. BH Marketing later assigned rights in the BHPC Marks to entities controlled by the Haddad family, and ultimately, the rights to use the BHPC Marks in Europe were assigned and licensed to respondents—entities affiliated with Eli and Daniel Haddad. Id. B. Petitioners’ Allegations 1. Respondents Allegedly Seek Benefits From the 1997 Agreement Petitioners allege that respondents sought benefits from, and knowingly exploited, the 1997 Agreement. Id. 16. In April 2013, counsel for respondents’ parent company wrote to petitioners that “there may be a previous arrangement in place between the previous owners of our BHPC trademark and the owners of your Santa Barbara trademark.” Id. Upon respondents’ request for this agreement, petitioners provided it. Id. In June 2015, when respondents sought to register trademarks in Mexico, they requested that petitioners “sign [a] consent letter for Mexico in accordance with the coexistence agreement|.|” Id. (emphasis in original). Petitioners provided a consent

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES — GENERAL ‘Oo’ Case No. 2:21-cv-07989-CAS (AFMx) Date August 19, 2024 Title SANTA BARBARA POLO CLUB, INC. ET AL V. LIFESTYLE LICENSING B.V. ET AL letter which stated that respondents, through their predecessor entity, “are parties to a worldwide coexistence agreement dated October 6, 1997, and pursuant to that agreement [petitioners] consent to this registration.” Id. (emphasis in original). Petitioners allege that respondents accepted this letter and did not dispute their description as a party to the 1997 Agreement until 2019, when they began violating the Agreement. Id. 16-17. 2. The English Action On June 5, 2020, respondents brought an infringement action against petitioners in England. Id. § 18. Petitioners challenged the English High Court’s jurisdiction, arguing that the arbitration clause in the 1997 Agreement required that the dispute be adjudicated in arbitration before the AAA. Id. The arbitration clause set forth in the 1997 Agreement states, in relevant part: Any controversy, dispute or claim with regard to, arising out of, or relating to this Agreement, including but not limited to its scope or meaning, breach, or the existence of a curable breach, shall be resolved by arbitration in Los Angeles, California, in accordance with the rules of the American Arbitration Association. Any judgment upon an arbitration award may be entered in any court having jurisdiction over the parties. If any arbitration or other proceeding is brought for the breach, enforcement or interpretation of this Agreement, the successful or prevailing party or parties shall be entitled to recover its attorneys’ fees and other costs incurred in that action or proceeding, in addition to any other relief to which said party or parties may be entitled. Dkt. 1-1, Ex. 1 at 23. In response, respondents argued that they should not be bound by the arbitration clause because they are not signatories to the 1997 Agreement. Dkt. 1 4 18. The English High Court agreed with petitioners, held that the AAA has jurisdiction over the dispute, and stayed the action. Id. Specifically, the English High Court held: effect of the [Agreement] under Californian law and, in particular, the effect of its arbitration provision, is that the arbitration provision binds the [Respondents |’—the assignee and licensee of the trademarks covered by the agreement.” Id. § 19 (citing Dkt. 1-2, Ex. 2 996). In February 2021, respondents applied to the English Court of Appeal for permission to appeal the English High Court’s order. Id. {] 20. Permission to appeal

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES —- GENERAL

was granted, and the English High Court’s decision was affirmed. Id.; see also dkt. 40-1, Exh. 14 at 147. 3. Petitioners’ Arbitration Demand Respondents also filed a trademark infringement claim against petitioners in India and “have persistently attacked the AAA’s jurisdiction in Los Angeles.” Dkt. 1 § 21. On February 24, 2021, petitioners filed an arbitration demand with the AAA, seeking monetary damages and declaratory relief. Id. The declaratory relief claim seeks an order declaring that respondents are bound by the 1997 Agreement, and petitioners’ use of the SBPC Marks therefore does not infringe the BHPC Marks. Id. Petitioners also allege they were “damaged by Respondents’ interference with Petitioners’ contractual relations with their sublicensees by improperly claiming the SBPC Marks infringe upon the BHPC Marks.” Id. In response to petitioners’ arbitration demand, respondents filed a jurisdictional objection with the AAA, arguing that “|t]he question of whether a nonsignatory is a party to an arbitration agreement is one for the trial court in the first instance[.|” Id. § 22. Petitioners responded that the English High Court already determined that respondents are bound by the arbitration clause in the 1997 Agreement, which 1s all that California contract law requires for an arbitrator to exercise jurisdiction over petitioners’ claims. Id. Further, petitioners argued that the Arbitrator need only recognize the English High Court’s order under principles of international comity. Id. On July 9, 2021, the Arbitrator issued a jurisdictional order, staying the arbitration until one of three events occurred: “[T]he parties agree to proceed [in arbitration], there is a non-appealable decision in the English courts, or a US court compels respondents to proceed.” Id. (citing Dkt. 1, Ex. 8 § 70) (emphasis omitted). On October 6, 2021, in response to the Arbitrator’s jurisdictional order, petitioners brought the instant action to compel arbitration against respondents. See generally dkt. 1. Il. LEGAL STANDARD “T]he Supreme Court [has] set a standard that permits only a limited review of an arbitrator’s decision.” Local Joint Exec. Bd. of Las Vegas v. Riverboat Casino, Inc., 817 F.2d 524, 527 (9th Cir. 1987). Thus “it is not the court’s role to determine whether the

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES — GENERAL ‘Oo’ Case No. 2:21-cv-07989-CAS (AFMx) Date August 19, 2024 Title SANTA BARBARA POLO CLUB, INC. ET AL V. LIFESTYLE LICENSING B.V. ET AL arbitrator has reached the same result the court would have reached.” Id. Nor is it the court’s role “to decide the rightness or wrongness of the arbitrator’s contract interpretation.” Pacific Reinsurance Management Corp. v. Ohio Reinsurance Corp., 935 F.2d 1019, 1024 (9th Cir. 1991). “‘[T]he district court must accord considerable deference to the arbitrator’s judgment’ and should not ‘vacate the award because it interpreted the agreement differently.’” Id. (quoting New Meiji Market v. United Food and Comm’! Workers Local Union 905, 789 F.2d 1334, 1335 (9th Cir. 1986)). The Ninth Circuit has continuously held that judicial review of an arbitrator’s decision “is both limited and highly deferential.” Barnes v. Logan, 122 F.3d 820, 821 (9th Cir. 1997). An award must be confirmed if the arbitrator even “arguably construed or applied the contract and acted within the scope of [her] authority.” Id. The Federal Arbitration Act (“FAA”) embodies a strong federal policy favoring arbitration and provides only limited grounds upon which a district court may vacate, modify, or correct an arbitration award. Lagstein v. Certain Underwriters at Lloyd's, London, 607 F.3d 634, 640 (9th Cir. 2010). Moreover, the FAA “provides the exclusive grounds for challenging an arbitration award within its purview.” Lafarge Conseils Et Etudes, S.A. v. Kaiser Cement & Gypsum Corp., 791 F.2d 1334, 1338 (9th Cir. 1986). An arbitration award can be vacated only: (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.

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES —- GENERAL 679 F.2d 1293, 1297 (9th Cir. 1982)). Vacatur on the ground that arbitrators exceeded their powers is proper “only when arbitrators purport to exercise powers that the parties did not intend them to possess or otherwise display a manifest disregard of the law,” or “when the award is ‘completely irrational.’” Kyocera Corp. v. Prudential-Bache Trade Servs., Inc., 341 F.3d 987, 997, 1002-03 (9th Cir. 2003) (en banc) (quoting Todd Shipyards Corp. v. Cunard Line, Ltd., 943 F.2d 1056, 1059-60 (9th Cir. 1991)). “The burden of establishing grounds for vacating an arbitration award is on the party seeking it.” U.S. Life Ins. Co. v. Superior Nat’] Ins. Co., 591 F.3d 1167, 1173 (9th Cir. 2010). In considering whether to vacate an award, district courts apply “an extremely limited review authority.” Kyocera, 231 F.3d at 998. Additionally, the Court may make an order “modifying or correcting [an] award upon the application of any party to the arbitration”: (a) Where there was an evident material miscalculation of figures or an evident material mistake in the description of any person, thing, or property referred to in the award. (b) Where the arbitrators have awarded upon a matter not submitted to them, unless it is a matter not affecting the merits of the decision upon the matter submitted. (c) Where the award is imperfect in matter of form not affecting the merits of the controversy. The order may modify and correct the award, so as to effect the intent thereof and promote justice between the parties. 9US.C. § 11.

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES —- GENERAL

As an initial matter, petitioners argue that respondents’ combined opposition and motion is procedurally improper and that respondents violated Local Rule 7-3 by failing to confer regarding their personal jurisdiction objection. Reply at 9-10.

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES —- GENERAL

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES —- GENERAL

terms of any existing agreements burdening the trademark.”’); see also Quest Nutrition, LLC v. Nutrition Excellence, Inc., No. 2:18-CV-06976-ODWE, 2019 WL 1789880, at *4 (C.D. Cal. Apr. 23, 2019) (“While the formation of a contract with a nonresident defendant a/one is insufficient to establish minimum contacts, purposeful availment occurs when such an agreement creates continuing relationships and obligations.”) (emphasis in original). Second, the arbitration was “directed to the parties[’] rights and obligations under the 1997 Agreement” and thus arose out of respondents’ relationship with California entities and obligations under a California contract. Dkt. 40-1, Exh. 14 at 142. Third, it would be reasonable for the Court to exercise personal jurisdiction over respondents, particularly because respondents already spent two years participating in arbitration in California. Accordingly, the Court finds that 1t may exercise personal jurisdiction over respondents and declines to deny petitioners’ motion on this basis. The Court also notes that the appeal of the English High Court’s decision has been resolved in favor of petitioners. B. = Arbitration Petitioners request that the Court confirm the Final Award issued against respondents in Santa Barbara Polo Club, et al. v. Lifestyle Licensing B.V, et al., AAA Case No. 01-21-0002-0367.7 Mot. at 7. According to petitioners, the Arbitrator issued five scheduling orders governing submissions and discovery, questioned both parties and several witnesses throughout a four-day hearing, reviewed testimonial and documentary evidence and “nearly a dozen briefs,” and ultimately issued an 89-page Partial Final Award and a 32-page Final Award. Id. at 16. Petitioners argue that the Final Award was not irrational but based on the Arbitrator’s application of the relevant standards and analysis of both parties’ arguments. Id. at 15. They further contend that the Arbitrator “did not misunderstand or misapply the law, let alone manifestly disregard it; and there are no other “very unusual circumstances’ warranting vacating, modifying, or correcting the award.” Id. Because there is no basis for the Court not to enforce the Final Award, petitioners argue that the Court must confirm it and enter judgment against respondents. Id. at 16-17. As the prevailing party, they request that they be awarded the fees and costs

? Petitioners assert that they have satisfied the timeliness and jurisdictional requirements for confirmation of an arbitration award. Mot. at 11-12.

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES —- GENERAL

3 Paragraph 7 of the 1997 Agreement states: “If any arbitration or other proceeding is brought for the breach, enforcement or interpretation of this Agreement, the successful or prevailing party or parties shall be entitled to recover its attorneys’ fees and other costs incurred in that action or proceeding, in addition to any other relief to which said party or parties may be entitled.” Dkt. 40-1, Exh. 1 at 10.

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES —- GENERAL

4 Petitioners do not object to describing the amount awarded as “attorneys” fees” instead of “damages.” Reply at 32,n.9. The Court directs petitioners to make this change. > Accordingly, respondents request that the Court: “(1) deny [petitioners’] Motion; (2) vacate or, in the alternative, correct the Final Award to clearly state that nothing in the Award affects the right of any signatory country under the New York Convention (including India and the U.K.) to refuse recognition and enforcement of the Award for any of the reasons enumerated under the convention, including that the Award ‘would be contrary to the public policy of that country’; or, at a minimum, (3) correct the Final Award to remove the $309,475.54 in [petitioners’| expert costs improperly included in the Award and reflect the language used in the Award instead of [petitioners’ | interpretation thereof.” Opp. at 15.

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES —- GENERAL

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES — GENERAL ‘Oo’ Case No. 2:21-cv-07989-CAS (AFMx) Date August 19, 2024 Title SANTA BARBARA POLO CLUB, INC. ET AL V. LIFESTYLE LICENSING B.V. ET AL unless the Arbitrator assesses expenses against any specified party.” Id. § 104. In awarding expert costs, the arbitrator reasoned that the “AAA Rules . . . do not exclude recovery of reasonable expert witness fees [and] AAA Rule[] R-54 . . . allow/s] the Arbitrator discretion to allocate expenses.” Id. § 125. However, to the extent that the AAA rules govern, the rules do not appear to permit an arbitrator to award expert costs in this case. AAA Rule R-54 provides that: The expenses of witnesses for either side shall be paid by the party producing such witnesses. All other expenses of the arbitration, including required travel and other expenses of the arbitrator, AAA representatives, and any witness and the cost of any proof produced at the direct request of the arbitrator, shall be borne equally by the parties, unless they agree otherwise or unless the arbitrator in the award assesses such expenses or any part thereof against any specified party or parties. AAA Rule R-54 (emphasis added). Thus, R-54 appears to require parties to bear the costs of their own witnesses unless the witnesses were “produced at the direct request of the arbitrator.” Id. Here, there is no evidence that the arbitrator requested the use of expert witnesses. Accordingly, the Court exercises its power to “modify[] or correct] the award” on the basis that the “award is imperfect in matter of form not affecting the merits of the controversy.” 9 U.S.C. § 11. Petitioner may not recover expert costs that it incurred during the arbitration. The Court recalculates the total fees and expenses amount to be $1,114,047.15.°

© In the Final Award, the arbitrator awarded petitioner “fees and expenses in the amount of $1,377,101.00.” Dkt. 40-1 □□ 157. He reached this number by (1) starting with petitioner’s requested amount of $2,111,794.21; (2) reducing that amount to $1,679.504.25 to “exclude work and expenses from [|] other proceedings”; (3) reducing the amount further to $1,620,119.25 to exclude the $59,385.00 in arbitration costs that he considered separately: and (4) further reducing the amount by 15% to “reflect reductions for work specific to the tort claim and reductions for excessive and undocumented charges.” Id, Because the Court modifies the award to exclude expert fees, it recalculates the attorneys’ fees and expenses amount to be $1,114,047.15. It reaches this figure by (1) starting with petitioner’s requested amount of $2,111,794.21: (2) reducing that amount to $1,310,643.71 to exclude $432,289.96 in work and expenses

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES —- GENERAL

from other proceedings, $59,385.00 in arbitrations costs, and $309,475.54 in expert costs; and (3) reducing the amount further by 15% consistent with the arbitrator’s findings. 7 There are 113 days between April 29, 2024, the date of the Final Award, to August 20, 2024, the filing date of the instant order. The Court calculated simple interest as follows: (P xrxt) =($1,114,047.15 x 0.10 x (113/365)) = $34,489.68.