Southern Tire Services, Inc. v. Virtual Point Development, LLC

798 So. 2d 303, 2000 La.App. 4 Cir. 2301, 2001 La. App. LEXIS 2169, 2001 WL 1203342
CourtLouisiana Court of Appeal
DecidedSeptember 26, 2001
DocketNo. 2000-CA-2301
StatusPublished
Cited by10 cases

This text of 798 So. 2d 303 (Southern Tire Services, Inc. v. Virtual Point Development, LLC) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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Southern Tire Services, Inc. v. Virtual Point Development, LLC, 798 So. 2d 303, 2000 La.App. 4 Cir. 2301, 2001 La. App. LEXIS 2169, 2001 WL 1203342 (La. Ct. App. 2001).

Opinion

1Judge DAVID S. GORBATY.

This appeal arises from a judgment confirming an arbitration award in favor of plaintiff Southern Tire Services, Inc., and against defendant Virtual Point Development, LLC. The trial court judgment also denied defendant’s motion to vacate and modify the arbitration award. For the following reasons, we affirm.

FACTS:

Virtual Point Development, LLC, (hereinafter VPD), is an Arizona corporation formed to market a software program to sellers of tires and wheels. Southern Tire Services, Inc., d/b/a U.S. Auto Enterprises (hereinafter USAE), is a Louisiana corpo[305]*305ration operating as an automobile dealership and service facility in New Orleans.

On May 15, 1997, VPD and USAE entered into a software licensing agreement that provided for USAE to have the right to market the software for a three-year period. For this right, USAE would pay VPD a percentage based upon actual sales.

| ¡According to VPD, it learned two years into the contract that USAE was marking up the price of the software beyond the price contemplated in the agreement, and was not including this mark-up in the percentage share guaranteed to VPD. VPD requested an accounting of all sales to date, but USAE refused. VPD notified USAE by letter that it was terminating the contract. Despite this notice of termination, USAE continued to market and sell the software from remaining inventory and unauthorized copies of the software.

USAE admits that it further developed the software supplied by VPD, providing graphic and data material to enhance the product, and developing website programs to display the software, neither of which was prohibited by the contract. Because its customers required technical support to implement the software, USAE began to charge an extra $150.00 extra for the technical support. It asserts that its customers were informed that the extra charge was over and above the cost of the software. VPD believed that USAE was simply charging a higher price for the basic software package, and terminated the contract. As a result of the termination, VPD refused to ship software upgrades to USAE for distribution to its customers who had already paid for the upgrades.

Because of VPD’s alleged improper termination of the contract, USAE filed an arbitration complaint. USAE sought specific performance, injunctive relief, and damages as a result of VPD’s actions.

VPD filed an answer and counter-claim denying USAE’s allegations and alleging that the technical support explanation put forth by USAE was merely an 13attempt to cover up its scheme to retain a disproportionate share of the revenues. VPD sought damages for its contractual share of surplus charges and an accounting.

USAE admits that it wrongfully copied the upgrades of the software from existing inventory, but did so because VPD refused to supply the upgrades that USAE’s customers already had purchased. During the course of discovery, USAE voluntarily agreed to stop copying the VPD upgrades.

The arbitrator found that VPD’s letter of termination to USAE was insufficient to terminate the contract. As such, VPD’s refusal to ship the upgrades was a breach of the contract. He also found that USAE had breached the contract with VPD on several counts, including wrongfully copying the software upgrades. The arbitrator awarded damages of $135,000 to USAE for estimated net lost sales and reliance damages. He also terminated the contract, and awarded VPD $6,300 for its estimated lost percentage share of sales. VPD’s request for an accounting to determine the exact amount of loss was denied by the arbitrator.

USAE filed a motion in Civil District Court to have the arbitration award confirmed, and a rule to show cause why the award should not be made the judgment of the court. VPD opposed the motion, and filed a motion to have the arbitration award vacated and modified. After a hearing, the district court maintained USAE’s motion and denied the motion filed by VPD. This appeal followed.

DISCUSSION:

|4We first address USAE’s challenge of VPD’s right to appeal. USAE argues that the contract between the parties contained the following language:

[306]*306... Any decision or award rendered by the arbitrator shall be conclusive and binding upon the parties hereto; provided, however, that any such decision or award shall be accompanied by a written opinion of the arbitrator giving the reasons for the award. This provision for arbitration shall be specifically enforceable by the parties and the decision of the arbitrator in accordance herewith shall be final and binding and there shall be no right of appeal therefrom .... (emphasis added)

Ordinarily the terms of a contract are binding upon the parties. However, there are statutory provisions to challenge an award on certain procedural grounds. La. Rev. Stats. 9:4210, 9:4211. Further, La. Rev.Stat. 9:4215 provides that “[a]n appeal may be taken from an order confirming, modifying, correcting, or vacating an award, or from a judgment entered upon an award, as from an order or judgment in an action.” Thus we find no merit to USAE’s argument.

Nonetheless, although statutes provide that an appeal may be perfected, it is well settled that an arbitration award may be challenged only on the grounds specified in the statute. A reviewing court may not substitute its own judgment for that of the arbitrator. Hill v. Cloud, 26,391, p. 9 (La.App. 2 Cir. 1/25/95), 648 So.2d 1383, 1388; Transcontinental Drilling Co., Inc., v. Davis Oil Co., 354 So.2d 235 (La.App. 4 Cir.1978). A reviewing court cannot review the merits of an arbitrator’s award. Firmin v. Garber, 353 So.2d 975 (La.1977). Unless there exist valid grounds for vacating, modifying or correcting the award, the award must be confirmed. Montelepre v. Waring Architects, 2000-0671 (La.App. 4 Cir. 5/16/01), 787 So.2d 1127; Spencer v. Hoffman, 392 So.2d 190 (La.App. 4 Cir. 1980). The burden of proof is on the party attacking the award, which can be challenged only on statutory grounds. Firmin, supra; Montelepre, supra.

VPD seeks to have the arbitration award vacated or modified because it claims the arbitrator was guilty of misconduct as defined by La.Rev.Stat. 9:4210 C and D. Specifically, VPD argues that the award should be vacated or modified because the arbitrator refused to grant its motions to compel compliance with discovery and for continuance.

Louisiana Revised Statute 9:4210 provides in part:

In any of the following cases the court in and for the parish wherein the award was made shall issue an order vacating the award upon the application of any party to the arbitration.
* * *
C. 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.
D. 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.

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798 So. 2d 303, 2000 La.App. 4 Cir. 2301, 2001 La. App. LEXIS 2169, 2001 WL 1203342, Counsel Stack Legal Research, https://law.counselstack.com/opinion/southern-tire-services-inc-v-virtual-point-development-llc-lactapp-2001.