MARY ANN VIAL LEMMON, District Judge.
This matter is before the court on defendant's motion to vacate the arbitration award (Doc. #9) and plaintiff's motion to confirm the arbitration award (Doc. #19). Defendant, Kathy van Gogh, argues that the arbitration award should be vacated because the arbitrator exceeded his authority. Plaintiff, Jolie Design & Décor, Inc., argues that the arbitration award should be confirmed because the arbitrator acted within the scope of his authority.
Annie Sloan Interiors, Ltd. is a British corporation that owns Annie Sloan brand products, including ANNIE SLOAN CHALK PAINT. "CHALK PAINT" is a decorative paint used to give furniture an "antiqued" look by achieving a "chalky" matte finish.
On June 17, 2011, van Gogh and Jolie Design entered into the initial Retail Distribution Agreement (the "June RDA"). The June RDA was amended on October 5, 2011, by a subsequent Retail Distribution Agreement (the "October RDA"). The October RDA, which represents the entire agreement between the parties,
The October RDA included a "Dispute Resolution" clause which provided that any dispute arising out of the agreement would be submitted to arbitration in New Orleans, Louisiana, and that Louisiana law would apply. It also provided that the prevailing party in any dispute arising out of the agreement is entitled to recover its costs and expenses, including reasonable attorneys' fees.
In April 2012, Jolie Design sought to amend the October RDA to add more terms that van Gogh claims were unfavorable to her. Van Gogh, who did not agree to the terms of the amendment, provided written notice to Jolie Design on April 18, 2012, that she was terminating the parties' contract. That same day, van Gogh applied to register with the United States Patent and Trademark Office ("USPTO") the trademark "Kathy van Gogh Chalk Paint Collection." On April 21, 2012, van Gogh registered the domain name "vangoghchalkpaintcollection.com."
Thereafter, van Gogh challenged the validity of the Annie Sloan's "CHALK PAINT" trademark in various proceedings, and filed an opposition seeking to preclude the registration of the "CHALK PAINT" logo, before the Trademark Trial and Appeals Board ("TTAB"). Van Gogh also applied to register "Kathy van Gogh Chalk Paint Collection" with the United States Patent and Trademark Office ("USPTO"). When Annie Sloan Interiors opposed the application, van Gogh argued that "CHALK PAINT" is an invalid trademark.
On July 9, 2013, Jolie Design filed an arbitration demand against van Gogh alleging that she breached the parties' contract by continuing to "use the CHALK PAINT trademark following the termination of the Agreement." On September 30, 2013, Anthony M. DiLeo was appointed as the sole arbitrator. In the arbitration, Jolie Design sought to enjoin van Gogh from: challenging the validity of the "CHALK PAINT" trademark; using the term "CHALK PAINT" to identify her products; and, advertising, producing, offering or distributing any goods or services using the term "CHALK PAINT". Jolie Design also sought an order requiring van Gogh to: withdraw her application pending before the USPTO and the Canadian Intellectual Property Office for trademarks that use the term "CHALK PAINT"; immediately and permanently dismiss a Cancellation action pending before the TTAB in which she seeks to challenge the "CHALK PAINT" trademark; transfer to Jolie Design the domain name van Gogh took out that included the words "CHALK PAINT"; and the stop selling "van Gogh CHALK PAINT". Van Gogh countered that the "CHALK PAINT" trademark is invalid, and that this is matter for the USPTO to decide.
On December 17, 2013, Jolie Design filed a Motion for Dispositive Ruling asking the arbitrator to "dispose of the trademark validity issues — which are both meritless and irrelevant to the breach of contract claims at issue." Jolie Design characterized the question presented in the arbitration as "[w]heter Ms. van Gogh's continued use of the CHALK PAINT trademark following her termination . . . constitute[d] a breach of Ms. van Gogh's obligation per Section 6(a) of the contract." Van Gogh responded that the issue is "whether or not a trademark has been infringed."
In his July 9, 2014, Order Regarding Scope of Case and Interim Award, the arbitrator found that it was not appropriate to address the validity of the trademark or trade name in that forum. The only claim at issue was a breach of contract claim between Jolie Design and van Gogh, because Annie Sloan, the trademark owner, was not a party to the proceedings, and van Gogh did not file a counterclaim for a declaratory judgment regarding the invalidity of the trademark. The arbitrator noted that the proceedings before the TTAB would determine the ultimate ownership of the trademark and trade name, whereas the proceeding before him involved only a claim for breach of contract. The arbitrator found that "[t]he specific language of the contract contemplates restrictions on the use of the words `chalk paint' by" van Gogh, and that she breached the contract by attempting to register the trademark "KATHY VAN GOGH CHALK PAINT COLLECTION." The record remained open until August 8, 2014, for the parties to submit further materials regarding attorneys' fees or costs, specific performance and compensatory damages.
On January 19, 2015, the arbitrator issued is Order and Final Award Regarding Costs, Expenses and Attorneys' Fees. The arbitrator denied van Gogh's motion for reconsideration of the interim award, stating again that the only claim before him was Jolie Design's breach of contract claim against van Gogh. The arbitrator incorporated and reaffirmed the July 9, 2014, Order Regarding Scope of Case and Interim Award. He enjoined van Gogh from using the term "CHALK PAINT" as a product identifier and from advertising, producing, offering, or distributing any goods or services using the words "CHALK PAINT" as required by the contract. The arbitrator also awarded to Jolie Design $1,194.40 for the court reporter and transcript, $45,000 in attorneys' fees, $5,250 for the International Centre for Dispute Resolution's administrative fees and expenses, $16,028.50 for the arbitrator's compensation and expenses.
On March 6, 2015, Jolie Design filed this action in the United States District Court for the Eastern District of Louisiana seeking a confirmation of the arbitration award under the United Nations Convention for the Recognition and Enforcement of Foreign Arbitral Awards (June 10, 1958) 21 U.S.T. 2517, T.I.A.A. 6997, 330 U.N.T.S. 3 (the "New York Convention"), as implemented by the Federal Arbitration Act ("FAA"), 9 U.S.C. § 201, et seq. On April 20, 2015, van Gogh filed a Motion to Vacate the Arbitration Award (Doc. #9). She argues that the arbitration award is invalid because the arbitrator exceeded his authority. Van Gogh contends that the October RDA was not validly formed due to a lack of consent because she and Jolie Design did not have a meeting of the minds regarding the definition of "Intellectual Property." Van Gogh claims that she did not understand that the definition of "Intellectual Property" included the term "CHALK PAINT," which she asserts is generic. Instead, she thought that she was forbidden from using the term "ANNIE SLOAN CHALK PAINT" after the termination of the agreement. Van Gogh also argues that even if the October RDA was a valid contract, the arbitrator exceeded his authority by looking outside the October RDA to the June RDA to interpret the meaning of "Intellectual Property", and by awarding an unreasonable amount of attorneys' fees.
Jolie Design argues that the enforceability of the arbitration clause was a matter for the arbitrator, not the court, to decide. Further, Jolie Design argues that the arbitrator did not exceed his power by referencing the June 2011 agreement, and he did not award an unreasonable amount of attorneys' fees.
On May 11, 2015, Jolie Design filed a Motion to Confirm Arbitration Award (Doc. #19) in which it argues that none of the grounds for a court's refusing to recognize an arbitration award under the New York Convention are met. Jolie Design restates its position that van Gogh's argument regarding the meeting of the minds is a collateral attack on the arbitrator's interpretation of the contract, which is not permitted, and that the arbitrator acted within his authority.
In opposition to Jolie Design's motion to confirm, van Gogh argues that the court can decide de novo whether the October RDA exists, and that the agreement was not validly formed. She also argues again that the arbitrator exceeded his authority and awarded an unreasonable amount of attorneys' fees.
Jolie Design moved to confirm the arbitration award under the New York Convention. Van Gogh moved to vacate the arbitration award under the FAA.
The New York Convention is a treaty that "provides a carefully structured framework for the review and enforcement of international arbitral awards."
The New York Convention provides that it
New York Convention art. I(1). The arbitration award in this case was made in the United States, and Jolie Design seeks confirmation in the United States. Thus, the New York Convention will apply if the arbitration award is "not considered as domestic" in the United States.
The New York Convention does not define the meaning of non-domestic arbitration awards.
This case involves a United States corporation, Jolie Design, and a citizen of Canada, van Gogh. The contract at issue contemplated the sale of Annie Sloan brand products by van Gogh in Canada. Thus, this the arbitration award on which this action is predicated is a non-domestic award, and the New York Convention applies.
"Though its `essential purpose' relates to the recognition and enforcement of foreign arbitral awards, the underlying theme of the New York Convention as a whole is clearly the autonomy of international arbitration."
The New York Convention "`does not restrict the grounds on which primary-jurisdiction courts may annul an award, thereby leaving to a primary jurisdiction's local law the decision whether to set aside an award.'"
This court is a primary-jurisdiction court under the New York Convention because the underlying arbitration award was rendered in the United States. Thus, van Gogh's motion to vacate the arbitration award is governed by the FAA.
Because the FAA reflects a strong federal policy favoring arbitration, "`[j]udicial review of an arbitration award is extraordinarily narrow.'"
Section 10 of the FAA enumerates the exclusive "`grounds upon which a reviewing court may vacate an arbitrative award.'"
Van Gogh contends that the arbitrator exceed his authority in three ways. First, she argues that there was no contract due to a lack of consent, and thus no arbitration agreement. Next, she argues that the arbitrator improperly relied on the June RDA in interpreting the meaning of "Intellectual Property" in the October RDA. Finally, she argues that the arbitrator awarded an unreasonable amount of attorneys' fees.
Van Gogh contends that the arbitrator exceeded his authority because there was no valid contract, and thus, no valid arbitration agreement. Van Gogh argues that the October RDA was not a valid contract due to a lack of consent because there was no meeting of the minds on the meaning of "Intellectual Property." Van Gogh maintains that she thought "Intellectual Property" included the term "ANNIE SLOAN CHALK PAINT," not simply "CHALK PAINT," whereas Jolie Design contends that the term "CHALK PAINT" was included in the definition of "Intellectual Property." Van Gogh argues that this difference in interpretation of the term "Intellectual Property" is a vice of consent. As a result, there was no valid contract or agreement to arbitration, and the issue of contract formation is for the court, not the arbitrator, to decide.
Jolie Design argues that the arbitrator had the authority to rule on issue of the formation of the October RDA because the parties voluntarily submitted the issue to him. Jolie Design points out that van Gogh argued in the arbitration that there was no meeting of the minds as to whether "CHALK PAINT" was included in the meaning of "Intellectual Property."
"Arbitration is a matter of contract," and courts are required by the FAA to honor the parties' expectations.
In this case, van Gogh submitted the contract formation issue, particularly the parties' different understandings of the meaning of "Intellectual Property," to the arbitrator. In her arbitration pre-hearing submission, van Gogh argued that Annie Sloan did not have a trademark in the term "CHALK PAINT". In her arbitration closing submission, van Gogh argued that the "parties did not mutually agree, within the RDA, on restriction of the use of the phrase, `chalk paint[,]'" and that the contract is null due to a lack of common intent. Van Gogh also argued that the October RDA, which included the arbitration clause, was unenforceable because it was a contract of adhesion, and that the arbitration clause was void because she cancelled the contract. Van Gogh clearly understood that she could argue that the arbitration clause was invalid. However, van Gogh did not refuse to arbitrate on the ground that a valid contract was never formed due to a lack of consent. Instead, she submitted that issue to the arbitrator for consideration. Therefore, the arbitrator acted within his authority in ruling on the meaning of "Intellectual Property."
Van Gogh argues that the arbitrator exceeded his authority by relying on the June RDA to interpret the meaning of "Intellectual Property" in the October RDA. She argues that this was impermissible because the October RDA purports to be the entire agreement between the parties. Van Gogh also argues that the June RDA was not subject to arbitration because it did not have an arbitration clause.
Jolie Design argues that van Gogh consented to bringing the June RDA to arbitration by mentioning it in her submissions, and by testifying that she thought of the October RDA as an extension of the June RDA. Jolie Design also argues that the arbitrator had the authority to determine the scope of the arbitration. Further, Jolie Design argues that the arbitration award can stand without reference to the June RDA.
Van Gogh's argument concerns the following language from the Final Arbitration Award:
According to van Gogh, this passage means that the arbitrator based the arbitration award on the definition of "Intellectual Property" found in the June RDA. However, in the next sentence, the arbitrator quotes from paragraph 6 of the October RDA: "The provision of Intellectual Property specifically includes a license to use, not just a trade name and trademarks, but also "logos and other designations used by Annie Sloan, Jolie Design. . . ." The arbitrator then concludes that, "[a]mong those designations or logos or `proprietary rights' were the words `chalk paint.'" Thus, the arbitrator found that the "designations" and "logos" referenced in the October RDA included "chalk paint."
The June RDA and the October RDA both required van Gogh to discontinue use of the "Intellectual Property" immediately upon termination of the contract. In the Interim Award, the arbitrator quoted the paragraphs pertinent to defining "Intellectual Property" from both RDAs. The arbitrator concluded in the Final Arbitration Award that the term "Intellectual Property" as defined in the October RDA included "CHALK PAINT" because that phrase was a "designation" or "logo" used by Annie Sloan or Jolie Design. Regardless of whether it was proper for the arbitrator to consider the June RDA, his reference to the "proprietary rights" in the June RDA is superfluous to his ultimate finding that van Gogh breached the October RDA by continuing to use the phrase "CHALK PAINT", which was a "logo" or "designation" used by Annie Sloan or Jolie Design. The arbitrator did not exceed his power because his ruling is consistent with the "essence" of the contract.
Van Gogh argues that the arbitrator exceeded his authority by awarding an unreasonable amount of attorneys' fees. She argues that an award of $45,000 in attorneys' fees is unreasonable because there were no depositions taken and discovery was minimal in the arbitration proceeding. She also argues that it was unreasonable for Jolie Design to use the services of five attorneys when she was acting pro se during much of the arbitration proceeding.
Jolie Design argues that the attorneys' fees award is not unreasonable because the arbitrator reviewed submissions from both parties concerning the amount of attorneys' fees to be awarded and reduced Jolie Design's requested amount of $53,464 to $45,000. Jolie Design contends that van Gogh's attempt to transform the arbitration proceedings "into a proxy battle against the validity and enforceability of the CHALK PAINT trademark" increased the amount of attorneys' fees incurred by Jolie Design, and that the arbitrator recognized this in making the award.
Van Gogh does not argue that the arbitrator did not have the authority to enter an award of attorneys' fees, but rather, the amount awarded was unreasonable. "A court must defer to the arbitrators' findings as to the appropriate amount of attorneys' fees."
In this case, Jolie Design requested $53,464 in attorneys' fees and was awarded $45,000. The arbitrator noted that Jolie Design indicated that its attorneys spent 242.2 hours working on this matter over 12 months, and that the billing rates for the attorneys ranged from $185 to $485 per hour, but that the majority of the work was performed by attorneys with an average rate of $200 per hour. The award of $45,000 in attorneys' fees represents 225 hours of work billed at $200 per hour. Because the court must give deference to the arbitrator's findings regarding the appropriate amount of attorneys' fees, the court finds that the arbitrator's award of attorneys' fees was not unreasonable and he did not exceed his authority.
In sum, the arbitrator did not exceed his authority in any of the ways proffered by van Gogh. Thus, van Gogh's motion to vacate the arbitration award is DENIED. Section 9 of the FAA provides that the court must confirm an arbitration award "unless the award is vacated, modified, or corrected as prescribed" in the FAA. 9 U.S.C. § 9. Further, Section 207 of the implementing legislation of the New York Convention provides that "the court shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award."
Jolie Design seeks an award of attorneys' fees and costs incurred in bringing this confirmation proceeding. It argues that such an award is appropriate either under the October RDA's "Dispute Resolution" clause or jurisprudence holding that an award of attorneys' fees incurred in seeking confirmation of an arbitration award is appropriate where the party defending against enforcement is without justification. Van Gogh argues that such an award is inappropriate because she was justified in arguing that the arbitrator exceeded his authority.
Under the "American rule," attorneys' fees are not awarded to a prevailing party unless the award is specifically provided by contract, statute, or other provision of law.
Jolie Design argues that attorneys' fees for this confirmation proceeding are permitted by the terms of the October RDA's "Dispute Resolution" clause. The court must apply Louisiana state law to interpret the contract.
The "Dispute Resolution" clause provides:
(emphasis added). Pursuant to this clause, the prevailing party in an "action to enforce the Agreement" is entitled to recover costs, expenses and reasonable attorneys' fees. "Agreement" is defied in the contract as the October RDA. An action to enforce the "Agreement" logically includes litigation necessary to enforce the arbitration clause. Therefore, the Jolie Design is entitled to recover costs, expenses and reasonable attorneys' fees incurred in connection with this confirmation proceeding.
