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CPR Telecom Corp., Inc. v. Bullseye Telecom, Inc.

United States District Court, E.D. Michigan, Southern Division

January 11, 2017

CPR Telecom Corp., Inc., and Kevin Parkford, Plaintiffs,
v.
Bullseye Telecom, Inc., Defendant.

          R. STEVEN WHALEN MAG. JUDGE.

          OPINION AND ORDER DENYING DEFENDANT'S MOTION TO VACATE THE ARBITRAL AWARD, GRANTING PLAINTIFFS' MOTION TO CONFIRM THE AWARD AND REQUEST FOR ATTORNEY FEES AND COSTS, AND DENYING PLAINTIFFS' REQUEST FOR SANCTIONS [19, 20]

          JUDITH E. LEVY United States District Judge.

         Before the Court are defendant Bullseye Telecom, Inc.'s motion to vacate the arbitral tribunal's award of attorney fees and costs, and plaintiffs CPR Telecom, Inc. and Kevin Parkford's motion to confirm the award. (Dkts. 19, 20.) Plaintiffs' motion also includes a request for attorney fees and costs associated with this challenge to the arbitral award and a request that the Court sanction defendant. (Dkt. 19 at 24.)

         For the reasons set forth below, defendant's motion to vacate the award is denied. Plaintiffs' motion to confirm the award and request for attorney fees and costs arising from the challenge to the arbitral award is granted, and their request for sanctions is denied.

         I. Background

         On December 6, 2006, plaintiffs and defendant entered into an Authorized Distributor Agreement (ADA) whereby plaintiffs, through an entity known as Telecom Worldwide, became authorized distributors of defendant's telecommunication products. (Dkt. 20 at 11; Dkt. 20-3 at 3.) On December 1, 2009, the parties entered into Addendum No. 1-A, which permitted plaintiffs to sell certain voice and internet services under the terms of the addendum and ADA. (Dkt. 20 at 14.) This addendum also modified the commission fee provisions of the ADA, providing for reductions in the fees under certain conditions. (Id.) In January 2010, the parties entered into another addendum that permitted plaintiffs to sell specific services to Domino's Pizza franchises. (Id.) Both of these addenda expressly incorporated the terms of the ADA. (See Dkt. 20-3 at 34-35.)

         In 2010, Michael Nelson, an agent of plaintiff Parkford, approached IBM about selling certain services to Domino's franchises. (Dkt. 20 at 15-16.) Negotiations between Mr. Parkford, Mr. Nelson, IBM, Domino's, and Bullseye Telecom ensued, and are recounted in detail in the arbitral tribunal's award. (See Dkt. 20-5.) In August 2011, IBM and defendant entered into the Non-Development Solutions Engagement Agreement (NDSEA) for the sale of IBM products through defendant to Domino's franchises. (Id. at 18.) In late September 2011, IBM decided not to work with Mr. Nelson regarding sales to Domino's. (Id. at 25.) Plaintiffs claimed that although they were not parties to the NDSEA, because the agreement involved sales to Domino's, they were entitled to receive commissions under the Domino's Franchise Agreement. (Id. at 29.) Defendant disagreed and did not pay the commission fees.

         In June 2013, plaintiffs filed a demand for arbitration. Plaintiffs claimed they were entitled to over five million dollars in unpaid commission fees under the ADA, and defendant counterclaimed that plaintiffs breached the ADA. (Dkt. 20-4 at 5.) The arbitral tribunal found plaintiffs were entitled to unpaid commissions totaling $480, 000, stating, “[Bullseye Telecom] knew [CPR Telecom] expected to be compensated for its services under the ADA and the Addenda thereto, ” and eventually “confirmed, in writing, [CPR Telecom's] right to commissions on the contract to be executed between [Bullseye Telecom]/IBM and Domino's.” (Id. at 5-6.)

         II. Legal Standard

         A court may vacate an arbitration award if, inter alia, “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.” 9 U.S.C. § 10(a)(4). However, “courts should play only a limited role in reviewing the decisions of arbitrators, ” and “[t]he Federal Arbitration Act presumes that arbitration awards will be confirmed.” Dawahare v. Spencer, 210 F.3d 666, 669 (6th Cir. 2000) (internal citations omitted). Thus, “[t]he burden of proving that the arbitrators exceeded their authority is great.” Solvay Pharm., Inc. v. Duramed Pharm., Inc., 442 F.3d 471, 476 (6th Cir. 2006) (quoting Nationwide Mut. Ins. Co. v. Home Ins. Co., 330 F.3d 843, 845 (6th Cir. 2003)). “The terms of the contract define the powers of the arbitrator, and ‘as long as the arbitrator is even arguably construing or applying the contract and action within the scope of his authority, that a court is convinced he committed a serious error does not suffice to overturn his decision.'” Id. at 476 (quoting United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29, 38 (1987)). A court, therefore, may not vacate an award “simply because the court . . . believes the arbitrator made a serious legal or factual error.” Id.

         Accordingly, “if the arbitrator's award ‘draws its essence from the . . . agreement, ' . . . the award is legitimate.” Id. (quoting United Steelworkers of Am. v. Enter. Wheel & Car Co., 363 U.S. 593, 597 (1960)). An award does not “draw its essence from the agreement when: (1) it conflicts with express terms of the agreement; (2) it imposes additional requirements not expressly provided for in the agreement; (3) it is not rationally supported by or derived from the agreement; or (4) it is based on ‘general considerations of fairness and equity' instead of the exact terms of the agreement.” Id. (quoting Beacon Journal Pub. Co. v. Akron Newspaper Guild, Local No. 7, 114 F.3d 596, 600 (6th Cir. 1997)).

         III. Analysis

         The parties have filed competing motions-one to confirm the award and one to vacate it. The Court will consider the motions together because under the Federal Arbitration Act, “the court must confirm the award where it is not vacated, modified or corrected.” Wachovia Sec., Inc. v. Gangale, 125 F. App'x 671, 676 (6th Cir. 2005).

         Defendant challenges only the award of attorney fees and costs, arguing Article 11.11 of the ADA was not ...


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