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Ntch, Inc. v. Huawei Technologies Usa, Inc.

United States District Court, D. South Carolina, Columbia Division

June 23, 2016

NTCH, Inc. and PTA-FLA, Inc., Petitioners,
Huawei Technologies USA, Inc., Respondent.


          TERRY L. WOOTEN, Chief District Judge.

         The Petitioners, NTCH, Inc. and PTA-FLA, Inc. (collectively "Petitioners"), initiated this action against the Respondent, Huawei Technologies USA, Inc. ("Respondent" or "Respondent Huawei"), on September 8, 2015 seeking to vacate an arbitration award pursuant to Section 10 of the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq. (Doc. #1). Respondent filed a response opposing Petitioners' motion to vacate, and further moved the Court to confirm the arbitration award pursuant to Section 9 of the FAA. (Doc. #4). For the reasons set forth below, the Court grants Respondent's motion to confirm the arbitration award (Doc. #4), and denies Petitioners' motion to vacate (Doc. #1).


         A related case involving Petitioners and Respondent was previously before this Court for consideration of a Motion for Preliminary Injunction filed by Petitioners and, in response, a Motion to Compel Arbitration filed by Respondent. (Case No. 3:14-cv-01312-TLW). In that matter, after conducting a hearing, this Court issued an Order on July 2, 2014 ("July 2014 Order") granting Respondent's motion to compel arbitration, denying Petitioners' motion for preliminary injunction, and ordering the parties to arbitrate their dispute.[1] (See Case No. 3:14cv-01312-TLW; Doc. #24). Respondent Huawei made claims for breach of contract based on the nonpayment of orders placed pursuant to the Supply Contract for equipment in the amount of $313, 042.78; software licenses in the amount of $249, 401.11; and for professional services in the amount of $598, 000.00, for a total amount of $1, 160, 443.89, in addition to attorneys' fees, costs and expenses. (Doc. #1-2 at 4 ¶ 4).

         The Arbitration was commenced by Respondent Huawei in February of 2014. On April 21, 22 and 23, 2015, Petitioners and Respondent[2] participated in a commercial arbitration proceeding before the American Arbitration Association ("AAA"), Case No. 50 20 1400 0172 (hereinafter "the Arbitration Proceeding"). (Doc. #1). The Arbitration Proceeding was held before a panel of three mutually agreed upon arbitrators (hereinafter the "Arbitration Panel") in Atlanta, Georgia, pursuant to the arbitration provision in the parties' Supply Contract, as well as this Court's July 2014 Order compelling arbitration. (See Doc. #1).

         Following full briefing and three days of arbitration, the Arbitration Panel unanimously found in favor of the Respondent Huawei in the breach of contract action, and awarded a total of $2, 015, 845.57 to Respondent in two written awards, issued on June 19, 2015 and August 18, 2015 respectively. (Docs. #1-2; #1-8). In the first award, captioned "Partial Final Award of Arbitrators, Save Calculation of Attorney's Fees and Expenses and Interest, and Allocation of Arbitration Expenses, " the Arbitration Panel unanimously found Petitioners jointly and severally liable to Respondent Huawei for breach of the Supply Contract, and awarded Respondent $1, 160, 443.89 for "actual damages for the amounts due and owing on all unpaid invoices." (Doc. #1-2 at 7 ¶ a). The second and "Final Award of Arbitrators" awarded Respondent Huawei additional sums for attorneys' fees and other fees and expenses. (Doc. #1-8). As noted, the Arbitration Panel awarded Respondent Huawei a total of $2, 015, 845.57.


         Following the issuance of the Arbitration Award finding in favor of Respondent Huawei, Petitioners filed the instant action moving this Court to vacate the "Partial Final Award of Arbitrators and Final Award of Arbitrators" (hereinafter collectively referred to as the "Arbitration Award"), issued in the Arbitration Proceeding, Case No. 50 20 1400 0172. (See Docs. #1; #1-1 at 1). Petitioners assert that this Court "should vacate the [Arbitration] Award because the arbitral tribunal [] exceed their powers (sic) and manifestly disregarded the law." (Doc. #1-1 at 1).

         Section 10 of the FAA provides that a United States Court may vacate an arbitration award for the following limited grounds: "(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." FAA, 9 U.S.C. § 10. The Fourth Circuit has cautioned that courts should be "hesitant to read any of § 10's grounds for vacatur too broadly." Wachovia Sec., LLC v. Brand, 671 F.3d at 478.

         In addition, a reviewing court may vacate an arbitration award based on the assertion that the arbitrator acted in manifest disregard for the law where: "(1) the applicable legal principle is clearly defined and not subject to reasonable debate; and (2) the arbitrator[] refused to heed that legal principle." Wachovia Sec., LLC, 671 F.3d at 483. The Fourth Circuit Court of Appeals has held that, "[w]hether manifest disregard is a judicial gloss' or an independent ground for vacatur, it is not an invitation to review the merits of the underlying arbitration." Id.

         The scope of review of an arbitrator's decision is "substantially circumscribed" and is "among the narrowest known at law because to allow full scrutiny of such awards would frustrate the purpose of having arbitration at all-the quick resolution of disputes and the avoidance of the expense and delay associated with litigation." MCI Constructors, LLC v. City of Greensboro, 610 F.3d 849, 857 (4th Cir. 2010). "A court sits to determine only whether the arbitrator did his job-not whether he did it well, correctly, or reasonably, but simply whether he did it.'" Wachovia Sec., LLC v. Brand, 671 F.3d 472, 478 (4th Cir. 2012) (quoting U.S. Postal Serv. v. Am. Postal Workers Union, AFL-CIO, 204 F.3d 523, 527 (4th Cir. 2000)). Indeed, the United States Supreme Court has held that "as long as the arbitrator is even arguably construing or applying the contract and acting within the scope of his authority, that a court is convinced he committed serious error does not suffice to overturn his decision." United Paperworkers Int'l Union AFL-CIO v. Misco, Inc., 484 U.S. 29, 38 (1987); see also MCI Constructors, 610 F.3d at 700. Thus, a party challenging an arbitration award "must clear a high hurdle. It is not enough... to show that the [Arbitration Panel] committed an error-or even a serious error. It is only when the arbitrator strays from interpretation and application of the agreement and effectively dispenses his own brand of industrial justice that his decision may be unenforceable." Cent. W. Virginia Energy, Inc. v. Bayer Cropscience LP, 645 F.3d 267, 272 (4th Cir. 2011) (quoting Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 671 (2010)).

         As discussed below, Petitioners in the instant case seek to vacate the Arbitration Award based on allegations that the Arbitration Panel "ignored applicable law by both failing to apply the applicable statute of limitations and also by awarding attorneys' fees to [Respondent]." (Doc. #1-1 at 2).


         Petitioners essentially argue two grounds upon which to vacate the Arbitration Award: (1) the arbitration panel manifestly disregarded the law in connection with its application of the four-year statute of limitations period applicable to breach of contract actions under Texas law in connection with one invoice; and (2) the arbitration panel ...

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