HAYDAY FARMS, INC. V. FEEDX HOLDINGS, INC.
55f4th1232
| 9th Cir. | 2022Background
- HayDay (California) and FeeDx (Cayman) contracted under an Exclusive Distribution and Processing Agreement (EDPA); HayDay’s president also contracted with FeeDx through Nippon (Samoa). The EDPA subjected HayDay and Nippon to joint and several liability and contained a California choice‑of‑law clause.
- The parties later signed a Settlement Agreement (SA) that modified but did not supplant the EDPA: HayDay would pay $8 million in installments, FeeDx would keep purchasing through 2016, and the prevailing party in any enforcement action would recover expenses and fees.
- FeeDx ceased purchases and HayDay paid only $1 million of the $8 million. The parties arbitrated claims about breach of the EDPA and the SA; the tribunal held the SA valid, found FeeDx breached, and declined to treat the SA as releasing pre‑settlement EDPA claims.
- The tribunal awarded HayDay and Nippon roughly $19.25 million in lost profits plus about $1.65 million in fees and costs, and refused to reduce the award by the $7 million balance HayDay would have owed under the SA.
- Petitioners sought confirmation in state court; FeeDx removed asserting diversity. The district court confirmed most of the award but vacated $7 million as a prohibited windfall under California Civil Code § 3358. Both sides appealed.
- On appeal the Ninth Circuit (1) concluded federal jurisdiction existed under the Convention (9 U.S.C. § 203), (2) held FAA vacatur grounds apply to Convention awards, and (3) reviewed whether the tribunal’s award was vacatable under 9 U.S.C. § 10(a)(4).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Subject‑matter jurisdiction — whether federal court had jurisdiction | HayDay/Nippon: confirmation action arises under the Convention, so Section 203 supplies federal jurisdiction | FeeDx: removal relied on diversity only; no complete diversity exists (foreign v. foreign) so federal jurisdiction lacking | Court: Section 203 applies because petition sought confirmation of an international award; federal jurisdiction proper |
| Availability of FAA vacatur (Section 10) for Convention awards | HayDay: FAA vacatur standards are applicable and deferential | FeeDx: FAA vacatur should not apply to Convention awards or should allow vacatur here | Court: FAA vacatur grounds apply to Convention awards (following other circuits) |
| Standard for vacatur — manifest disregard / completely irrational applied to pre‑settlement damages | HayDay: tribunal’s reading of SA/EDPA was plausible and drew its essence from the agreement | FeeDx: tribunal misread the SA and produced an award far exceeding what FeeDx would have owed, violating Cal. Civ. Code § 3358 | Court: the award was a plausible contract interpretation and not completely irrational; no manifest disregard shown; vacatur denied |
| Vacatur of $7M as windfall under California law (Cal. Civ. Code § 3358) | HayDay: tribunal did not manifestly disregard law; any windfall finding requires factbound inquiry | FeeDx: award produced a clear windfall contrary to § 3358, so vacatur required | Court: although award may create an apparent windfall, no evidence tribunal intentionally ignored § 3358 or legally dispositive facts; vacatur improper |
| Entitlement of Nippon to fees under SA fee clause | HayDay/Nippon: Nippon can be a prevailing party because it was jointly/severally liable and both sides brought enforcement actions | FeeDx: SA permits FeeDx or HayDay to recover fees; Nippon is not an eligible fee claimant | Court: tribunal’s interpretation that Nippon was a prevailing party is plausible and not completely irrational; fees to Nippon ok |
| Recovery of pre‑settlement EDPA attorneys’ fees given fees provision appeared in SA | HayDay: SA modified EDPA to import a fees provision (retroactive effect) so pre‑settlement EDPA fees are recoverable | FeeDx: only SA has fees clause; EDPA claims predating SA should not carry fees | Court: tribunal plausibly interpreted SA as modifying EDPA to include fees with retroactive effect; award of pre‑settlement fees not irrational |
Key Cases Cited
- Polimaster Ltd. v. RAE Sys., Inc., 623 F.3d 832 (9th Cir. 2010) (FAA authority may inform interpretation of Convention defenses)
- Goldgroup Res., Inc. v. DynaResource de Mexico, S.A. de C.V., 994 F.3d 1181 (10th Cir. 2021) (courts have applied FAA vacatur grounds to Convention awards)
- Yusuf Ahmed Alghanim & Sons v. Toys "R" Us, Inc., 126 F.3d 15 (2d Cir. 1997) (Article V(1)(e) permits domestic courts to apply domestic arbitral law grounds)
- Lagstein v. Certain Underwriters at Lloyd's, London, 607 F.3d 634 (9th Cir. 2010) (Section 10(a)(4) is a high, deferential standard for vacatur)
- Bosack v. Soward, 586 F.3d 1096 (9th Cir. 2009) (manifest disregard requires arbitrator knew and intentionally ignored the law)
- Comedy Club, Inc. v. Improv W. Assocs., 553 F.3d 1277 (9th Cir. 2009) (award must draw its essence from the contract; courts defer to plausible interpretations)
- Aspic Eng'g & Constr. Co. v. ECC Centcom Constructors LLC, 913 F.3d 1162 (9th Cir. 2019) (completely irrational standard defined and limited)
- Coutee v. Barington Cap. Grp., 336 F.3d 1128 (9th Cir. 2003) (arbitrator's failure to recognize undisputed, legally dispositive facts can show manifest disregard)
- Metro. Life Ins. Co. v. Taylor, 481 U.S. 58 (U.S. 1987) (well‑pleaded complaint rule for federal‑question jurisdiction)