I. FACTUAL AND PROCEDURAL BACKGROUND
SBS is engaged in the distribution of Safeguard brand products (e.g., checks, envelopes, and business forms) and services (e.g., W-2 processing and drop shipping) through a nationwide network of distributors. In 2006, after working eleven years for Roger Thurston, another SBS distributor, Dawn Teply formed T3 and started her own distributorship with SBS. T3 purchased the exclusive rights to commissions on all sales made to 2,000 of Thurston's customers. The purchase was approved by SBS which transferred the "Protected Customers" to T3. Around this same time, on July 28, 2006, T3 entered into the Distributor Agreement with SBS. Pursuant to the agreement, T3 obtained the rights, services, and SBS support that is given to SBS distributors. This included customer protection contractual rights and SBS's enforcement of commission protection and commission rotation. This meant T3 was entitled to all commissions sold to its Protected Customers.
In 2013, Safeguard Acquisitions (a holding company) was funded by SBS's parent company, Deluxe, to acquire independent non-SBS distributor businesses that operated in the same market as SBS. Following the acquisitions, SBS operated the acquired businesses until a qualified buyer could be found to purchase the commission rights on those accounts. Two of the businesses SBS acquired were Form Systems, Inc., (DocuSource) and Idaho Business Forms (IBF). Both DocuSource and IBF were direct competitors of T3 in the same geographic market in Idaho and selling a line of products that directly competed with T3's sale of Safeguard products. Thus, T3 had a high volume of cross-over clients with DocuSource and IBF.
In 2015, SBS entered into a Distributor Agreement with KMMR, (a staffing company to IBF), giving it customer protection rights for the same Protected Customers it had given T3 years earlier. This resulted in customer confusion as to whom they were supposed to order from and pay. SBS's general counsel, Michael Dunlap, was tasked with managing the conflict resulting from the overlap in Protected Customers. In this role, Dunlap sent several email communications to various parties. In 2013 and 2014, Teply attempted, unsuccessfully, to get information from Mr. Dunlap and SBS for T3 about the cross-over accounts.
In August 2014, T3 filed suit in Idaho alleging SBS breached its Distributor Agreement by failing to prevent other SBS distributors from selling to T3's customers and for paying commissions to the interfering distributors rather than to T3. The Distributor Agreement contained an arbitration clause stating that:
EXCEPT AS OTHERWISE PROVIDED IN SUBPARAGRAPH (A) [ (ADDRESSING
SBS'S INTERNAL DISPUTE RESOLUTION PROCEDURES) ], ALL CONTROVERSIES, DISPUTES OR CLAIMS ARISING BETWEEN US ... AND YOU ... ARISING OUT OF OR RELATED TO: (1) THIS AGREEMENT OR ANY PROVISION THEREOF OR ANY RELATED AGREEMENT; (2) THE RELATIONSHIP OF THE PARTIES HERETO; (3) THE VALIDITY OF THIS AGREEMENT OR ANY RELATED AGREEMENT, OR ANY PROVISION THEREOF; OR (4) ANY SPECIFICATION, STANDARD OR OPERATING PROCEDURE RELATING TO THE ESTABLISHMENT OR OPERATION OF THE SAFEGUARD BUSINESS SHALL BE SUBMITTED FOR ARBITRATION TO BE ADMINISTERED BY THE DALLAS, TEXAS OFFICE OF THE AMERICAN ARBITRATION ASSOCIATION ON DEMAND OF EITHER PARTY. SUCH ARBITRATION PROCEEDINGS SHALL BE CONDUCTED IN DALLAS, TEXAS AND, EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, SHALL BE CONDUCTED IN ACCORDANCE WITH THE THEN CURRENT COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION ....
The Distributor Agreement also contained a forum selection clause that stated:
This Agreement shall become effective when executed and accepted by us in Texas. All matters relating to arbitration will be governed by the Federal Arbitration Act .... Except to the extent governed by the Federal Arbitration Act, ... or other federal law, this Agreement, the distributorship and the relationship between you and Safeguard will be governed and construed under and in accordance with the laws of Texas, except that the provisions of the Texas Deceptive Trade Practices Act (and the regulations thereunder) will not apply unless its jurisdictional requirements are met independently without reference to this subsection.[1 ]
SBS moved to compel arbitration of T3's claims against it in Dallas, Texas. SBS also moved to stay proceedings pending the outcome of the arbitration proceeding. T3 initially conceded it was bound to arbitrate but sought to sever the forum provision from the arbitration clause. Later, T3 contended the invalid forum selection provision rendered the entire arbitration clause void. The district court determined that it had jurisdiction to consider the validity of the forum selection clause, that Texas law was applicable, and that under Texas law the forum selection clause was unenforceable. Thus, the court ordered the parties to arbitrate in Idaho and denied SBS's motion to stay proceedings. The district court also granted T3's motion to compel the Dunlap emails and ordered SBS to produce the documents. The Panel found for T3, and in a supplemental award, awarded T3 over $ 4.3 million in damages which included attorney fees. The district court confirmed the award and denied SBS's motion to vacate or modify the award. SBS timely appealed.
II. ISSUES ON APPEAL
1. Whether the district court had jurisdiction to consider T3's challenge to forum.
2. Whether the district court erred in ordering the parties to arbitrate in Idaho as opposed to Dallas.
3. Whether the district court abused its discretion in overruling SBS's claims of attorney-client privilege.
4. Whether the district court erred in denying SBS's motion to vacate based on the arbitration panel exceeding its powers under the FAA.
5. Whether T3 is entitled to attorney fees and costs on appeal.
III. STANDARD OF REVIEW
"When ruling on a motion to compel arbitration, the district court applies the same standard as if ruling on a motion for summary judgment."
"Trial courts have broad discretion over the admission of evidence at trial, including ... determining whether or not to grant a motion to compel." Kirk v. Ford Motor Co. ,
"The scope of review for awards made pursuant to the [FAA] ... parallels the review of arbitrations governed by Idaho's Uniform Arbitration Act[.]" Barbee v. WMA Sec., Inc. ,
IV. ANALYSIS
A. The district court had jurisdiction to consider the enforceability of the forum selection clause.
SBS moved to compel arbitration of T3's claims against it in Dallas, Texas. T3 challenged the forum selection clause arguing it was unconscionable and unenforceable under Idaho Code section 29-110. T3 argued that whether a forum selection clause is enforceable is a substantive matter for the court to decide, while SBS argued it is a procedural matter for the arbitrator to decide. The district court determined the matter was substantive and ordered the parties to arbitrate T3's claims against SBS in accordance with the Distributor Agreement, but determined the Dallas forum selection clause was unenforceable and severable. Thus, the court ordered the parties to arbitrate in Idaho. The initial issue is whether the district court had jurisdiction to consider whether the Dallas forum selection clause was enforceable. For the reasons discussed below, the district court had jurisdiction to consider the enforceability of the forum selection clause.
The FAA applies to arbitrations involving commerce and provides that:
A written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.
As both this Court and the United States Supreme Court have said, arbitrability is a question of law for the court to decide. Wattenbarger ,
The United States Supreme Court has said that "[t]he question whether parties have submitted a particular dispute to arbitration, i.e., the 'question of arbitrability,' is 'an issue for judicial determination unless the parties clearly and unmistakably provide otherwise.' " Howsam ,
However, the Supreme Court has stated that the "question of arbitrability" does not encompass circumstances where the parties would "expect that an arbitrator would decide the gateway matter."
First, SBS argues the United States Supreme Court's decision in Rent-A-Center is dispositive. In that case, the parties' arbitration agreement provided that the arbitrator had exclusive authority to resolve disputes relating to the enforceability of the arbitration agreement (the "delegation provision"). Rent-A-Ctr., W., Inc. ,
SBS next cites to several federal court of appeals cases and contends those cases stand for the proposition that "procedural matters such as forum are for an arbitrator to decide." While some federal circuits have held that "venue" is a procedural issue for the arbitrator to decide, those cases are distinguishable from this case. For example, in Richard C. Young & Company v. Leventhal , the First Circuit Court of Appeals addressed whether an arbitration proceeding filed in Boston, the forum mandated by the forum selection clause, could be transferred to California, where one party resided.
The Fourth Circuit Court of Appeals has held that venue disputes are appropriate for arbitrator, rather than court, resolution. Cent. W. Virginia Energy, Inc. v. Bayer Cropscience LP ,
While the foregoing cases deemed venue an issue for the arbitrator, those cases were not dealing with a challenge to the forum selection clause based on a contract defense like unconscionability. Other courts, including the Ninth Circuit Court of Appeals, have decided whether a forum selection clause is unenforceable based on contract defenses like unconscionability. These circuit courts suggest that when a forum selection clause is challenged based on a contract defense, the issue of forum selection is a substantive issue for the court. For example, in Nagrampa v. MailCoups, Incorporated , the appellant had challenged a forum selection clause in the arbitration agreement as unconscionable.
Similarly, the Seventh Circuit Court of Appeals has considered whether a forum selection clause contained in an arbitration agreement was unenforceable. Jackson v. Payday Fin., LLC ,
As the district court noted, the foregoing cases indicate that when a forum selection clause is challenged pursuant to a contract defense, as is the case here, then the issue is substantive and for the court to decide. This approach is consistent with Idaho law. In addressing whether a court should compel arbitration, this Court stated, "the court's scope of review is confined to ascertaining whether the party seeking arbitration is making a claim which on its face is governed by the parties' contract." Mason v. State Farm Mut. Auto. Ins. Co. ,
Here the district court was deciding whether the forum selection clause was enforceable. Such a determination is distinguishable from procedural arbitrability issues "such as time limits, notice, laches, estoppel, and other conditions precedent to an obligation to arbitrate" which the Supreme Court has held "are for the arbitrators to decide." Howsam ,
B. The district court did not err when it ordered arbitration to occur in Idaho instead of Dallas.
After the district court determined it had jurisdiction to consider the enforceability of the Dallas forum selection clause, it determined that Texas law applied to the enforceability of the forum selection clause. Applying
As an initial matter, Texas courts generally enforce forum selection clauses. In re Lyon Fin. Servs., Inc. ,
The approach taken by Texas courts arises from the United States Supreme Court's decision in Bremen ,
This Court has dealt with the enforceability of a forum selection clause in a case similar to the current case, though not in the context of arbitration, and applied Bremen's reasoning to hold the clause unenforceable. See Cerami-Kote, Inc. v. Energywave Corp. ,
First, SBS contends the district court erred because in its decision that the forum selection clause was unenforceable, the district court cited to Bremen but included the "excluded" forum language from Greenman . While the district court misquoted or mis-cited Bremen , this mistake appears to be only a clerical error given the court's further analysis. The district court's analysis that follows is proper and applies Texas case law that has adopted the test articulated in Bremen. Thus, the incorrect quote or citation does not render the decision erroneous. In any event, as discussed below, the district
As noted above, Texas case law states that forum selection clauses will not be enforced when "enforcement [of the forum selection clause] would contravene a strong public policy of the forum where the suit was brought ...." In re Lyon Fin. Servs., Inc. ,
Every stipulation or condition in a contract, by which any party thereto is restricted from enforcing his rights under the contract in Idaho tribunals, or which limits the time within which he may thus enforce his rights, is void as it is against the public policy of Idaho. Nothing in this section shall affect contract provisions relating to arbitration so long as the contract does not require arbitration to be conducted outside the state of Idaho.
I.C. § 29-110(1). Thus, enforcement of the Dallas forum selection clause would contravene the strong public policy articulated in Idaho Code section 29-110(1).
SBS argues that the district court's decision "did not give proper effect to Idaho's choice of law statute" Idaho Code section 28-1-301(a). SBS contends that because the parties validly chose Texas law to govern the agreement in accordance with Section 28-1-301(a), then the rest of Idaho law no longer applies, and Section 29-110(1) would be inapplicable. This argument is unavailing. The parties' selection of Texas law is precisely why Section 29-110(1) was considered by the district court. As analyzed above, Texas law considers the public policy of the forum where suit is brought to determine if a forum selection clause is enforceable. In re Lyon Fin. Servs., Inc. ,
Lastly, SBS argues that the arbitration award must be vacated under Section 5 of the FAA because Section 5 of the FAA was violated when arbitration did not take place in Dallas. This argument is without merit. Section 5 of the FAA states in pertinent part that, "[i]f in the agreement provision be made for a method of naming or appointing an arbitrator or arbitrators or an umpire, such method shall be followed ...."
In sum, because enforcement of the parties' Dallas forum selection clause would contravene the strong public policy articulated in Idaho Code section 29-110(1), the forum selection clause is unenforceable under Texas law. In re AIU Ins. Co. ,
After the district court determined the forum selection clause was unenforceable, it went on to consider whether the clause was severable from the arbitration agreement, concluding that it was. Thus, the district court stated, the parties were required to arbitrate their claims in accordance with the agreement, absent the forum selection provision. SBS has not appealed the severability of the clause nor has it offered any argument on appeal that the district court erred in determining the offending forum selection clause was severable. See Akers v. Mortensen ,
C. The district court did not abuse its discretion in overruling SBS's claim of attorney-client privilege.
In March 2016, a few months prior to the arbitration proceeding, the district court ruled on both SBS and T3's motions to compel documents being withheld pursuant to attorney-client privilege. After an in-camera review and subsequent hearing, the district court denied SBS's motion to compel but granted T3's motion to compel. SBS was required to produce 35 email communications between corporate representatives for SBS and its in-house counsel Michael Dunlap. The district court noted that Dunlap was not only in-house counsel for SBS, but also the corporate secretary. The court found the majority of the emails at issue concerned factual matters and business advice made in Dunlap's role as corporate secretary rather than legal issues. On appeal, SBS contends the district court abused its discretion in ordering it to produce the documents; however, SBS agrees to limit its appeal to the seven documents that form the crux of this issue. Those documents are Exhibits 157, 245, 267, 327, 336, 352, and 356. For reasons discussed below, SBS waived its right to appeal the attorney-client privilege issue by stipulating to the admission of the documents at arbitration.
As a threshold matter, SBS waived the issue of privilege when it stipulated to the admission of the email documents at an evidentiary hearing that took place as part of the arbitration proceeding. This Court has said that it will not consider issues on appeal that were not objected to at the lower court. W. Heritage Ins. Co. v. Green ,
In this case, prior to arbitration, the district court ruled that the email documents SBS sought to conceal were not privileged, and thus ordered SBS to produce the documents. However, at arbitration, SBS stipulated to the admission of the documents. In the Panel's interim award, the Panel states as a preliminary issue that during the evidentiary hearing "the parties stipulated to the admission of all exhibits except" for seven exhibits which are not the exhibits at issue in this appeal. Thus, SBS stipulated to the admission of the email exhibits it contends are privileged.
SBS contends that it was not required to object on privilege grounds at arbitration because the district court had already ruled that the email documents were not privileged. SBS argues that objecting to the admission of the documents at arbitration would have "subjected SBS to antagonizing the panel" and cause the panel to "view SBS's counsel with mistrust and suspicion for trying to get the Panel to rule contrary to the District Court." This argument is unpersuasive. The district court compelled SBS to produce the email documents to T3; the district court did not state that the documents had to be admitted at arbitration. Additionally, not only did SBS not object to the admission of the email documents, but it actually stipulated to their admission at arbitration. See Ellington ,
D. The district court did not err in denying SBS's motion to vacate the arbitration award.
In March 2017, the district court granted T3's motion to confirm the arbitration award and denied SBS's motion to vacate or, alternatively, modify the arbitration award. SBS argues the district court erred in denying its motion to vacate the award based on the Panel exceeding its powers. Specifically, SBS contends the Panel exceeded its powers by,
(i) ignoring the parties' choice of Texas law to declare the distributorship "constructively terminated" based on Connecticut/New Jersey statutes; (ii) irrationally ruling T3 could recover future losses as if the contract continued while also terminating the contract and excusing T3 from its post-termination obligations in the contract; (iii) awarding gross profits in manifest disregard of Texas law requiring proof of "net" loss; (iv) awarding 8-12 years of future damages despite an undisputed month-to-month term of the contract; and (v) re-writing the contract to award attorneys' fees and expenses on the basis of AAA procedural rules, and doubling the fees incurred by T3 to award an amount far beyond the express contractual limit of "actual damages for commercial loss."
T3 contends that SBS has not articulated any proper grounds for vacatur, or alternatively, that SBS's arguments are without merit. For the reasons discussed below, we conclude the district court did not err when it denied SBS's motion to vacate the arbitration award.
As noted above, the Distributor Agreement provided that "[a]ll matters relating to arbitration will be governed by the [FAA.]" And, "except to the extent governed by the [FAA] ... or other federal law, this Agreement, the distributorship and the relationship between [T3] and [SBS]" will be governed by the laws of Texas. The FAA provides that a court must confirm an arbitration award "unless the award is vacated, modified, or corrected
The United States Supreme Court has stated that, "[u]nder the FAA, courts may vacate an arbitrator's decision 'only in very unusual circumstances.' " Oxford Health Plans LLC v. Sutter ,
Section 10(a)(4) of the FAA allows courts to vacate an arbitration award "where the arbitrators exceeded their powers ...."
The Supreme Court continued to elaborate on the heavy burden a party faces in attempting to vacate an arbitration award under Section 10(a)(4) by stating,
[s]o long as the arbitrator was "arguably construing" the contract ... a court may not correct his mistakes under § 10(a)(4). The potential for those mistakes is the price of agreeing to arbitration. As we have held before, we hold again: "It is the arbitrator's construction of the contract which was bargained for; and so far as the arbitrator's decision concerns construction of the contract, the courts have no business overruling him because their interpretation of the contract is different from his." The arbitrator's construction holds, however good, bad, or ugly.
While Sections 10(a) and 11 provide the statutory bases for vacatur and modification under the FAA, certain circuit courts have delineated additional, non-statutory grounds for vacatur including if the award was a manifest disregard of law, completely irrational, and where an award violates public policy. Hall St. ,
Some circuit courts, including the First, Fifth, Seventh, and Eleventh, follow the approach that non-statutory grounds for vacatur, including manifest disregard, can no longer form a basis for vacating an award
In contrast, other circuits, including the Second, Fourth, Sixth, and Ninth, have not held Hall Street to completely foreclose all application of non-statutory grounds for vacatur under the FAA. The Ninth Circuit stated, "[w]e have already determined that the manifest disregard ground for vacatur is shorthand for a statutory ground under the FAA ...." Comedy Club, Inc. ,
Here, SBS argues the arbitration award should be vacated for several reasons including the non-statutory grounds of manifest disregard of law, complete irrationality, public policy, and the statutory ground of the arbitrators exceeding their powers. T3 contends that this Court should follow the Fifth Circuit's reasoning and conclude that the exclusive grounds for vacatur are in Section 10 of the FAA, relevant here being whether the arbitrators exceeded their power. SBS responds that its arguments as to manifest disregard of law, complete irrationality, and public policy demonstrate how the arbitrators exceeded their powers, which is a valid ground for vacatur under Section 10(a)(4). The district court stated it "need not determine which circuit's law governs since [SBS's] motion would fail under either." Thus, the district court applied the broader Ninth Circuit approach and denied SBS's motion to vacate, thus confirming the award in full. We need not decide which circuit's approach to take, as even under the Ninth Circuit approach, which considers the non-statutory grounds for vacatur, SBS's arguments fail. Each of SBS's arguments is addressed in turn below.
1. Constructive Termination
SBS first argues that the Panel exceeded its power by awarding T3 the value of the distributorship under a theory of "constructive termination" because it cited to state law outside of Texas. The Panel stated that when SBS gave the same "exclusive" account protection rights to T3, IBF, and
First, the Panel awarded the value of the distributorship ($ 566,143.61) under three alternative theories: breach of contract, tortious interference, and the Texas DTPA. However, SBS has only challenged the award under the "constructive termination" theory, which was analyzed only under the breach of contract section. SBS does not challenge the award under the tortious interference theory or the Texas DTPA. This Court has said that, "[w]hen a decision is 'based upon alternative grounds, the fact that one of the grounds may be in error is of no consequence and may be disregarded if the judgment can be sustained upon one of the other grounds.' " Andersen v. Prof'l Escrow Servs. , Inc.,
Moreover, "manifest disregard ... requires 'something beyond and different from a mere error in the law or failure on the part of the arbitrators to understand and apply the law.' " Bosack v. Soward ,
As to SBS's argument that T3 did not seek a constructive termination, this argument is without merit. The Distributor Agreement provides that,
(B) ... THE ARBITRATORS SHALL HAVE THE RIGHT TO AWARD OR INCLUDE IN THEIR AWARD ANY RELIEF WHICH THEY DEEM PROPER IN THE CIRCUMSTANCES, INCLUDING WITHOUT LIMITATION, MONEY DAMAGES (WITH INTEREST ON UNPAID AMOUNTS FROM DATE DUE), SPECIFIC PERFORMANCE, INJUNCTIVE RELIEF. PROVIDED THAT THE ARBITRATOR DOES NOT HAVE THE RIGHT TO AWARD EXEMPLARY OR PUNITIVE DAMAGES.
Thus, the Distributor Agreement itself states the Panel can "award any relief which [it] deems proper." And, T3 put value of distributorship at issue when it sought revocation of acceptance, and additionally broadly requested relief as may be available and as justice requires. Thus, the district court did not err in finding the Panel did not exceed its authority in ordering damages based on constructive termination.
Next, SBS argues the Panel's decision to terminate the contract and award future damages was double recovery and thus completely irrational. SBS contends the Panel awarded double recovery because T3 received both termination damages and damages for future losses. The district court stated the future account protection damages were based on IBF and DocuSource's sales to T3's protected accounts, while the value of the distributorship damages were based on T3's sales to T3's protected accounts. Thus, the court said, there was no overlap in damages, no double recovery, and no grounds for vacatur.
Here again, SBS's argument is limited to the Panel's decision under breach of contract damages, but does not address that the panel awarded these identical damages under the theories of tortious interference and the Texas DTPA. Regardless, as stated above, the Supreme Court has cautioned, "[a] party seeking relief under [ Section 10(a)(4) ] bears a heavy burden. ... 'It is not enough ... to show that the [Arbitration Panel] committed an error-or even a serious error.' " Oxford Health Plans LLC v. Sutter ,
Here, SBS simply asks this Court to second guess the district court's analysis. SBS has not carried its "heavy burden" and shown that the arbitral decision was not "arguably construing or applying the contract" and thus the decision must stand. Oxford Health Plans LLC ,
3. Gross Profits
SBS next argues the Panel manifestly disregarded Texas law when it awarded lost commissions based on gross profits rather than T3's net commission. The district court stated that the Panel accepted the calculations from Robert Taylor, T3's expert, who calculated the unpaid commission amount by taking "the product retail price paid to IBF and DocuSource by T3's protected customer on each infringing order and deduct[ing] therefrom the IBF and DocuSource's base price for the product[.]" The court went on to say that there was no indication the Panel manifestly disregarded the law in "accepting Mr. Taylor's calculations. Rather, it found that the unrotated commissions earned by IBF and DocuSource on sales made to T3's protected accounts qualified as direct contract damages to T3.... The Panel never indicated it was awarding such damages as lost profits." The district court concluded SBS had not shown that the arbitrators recognized the correct law and refused to apply it, as is required to satisfy manifest disregard.
As noted, "manifest disregard requires 'something beyond and different from a mere error in the law or failure on the part of the arbitrators to understand and apply the law.' " Bosack ,
Here, as noted by the district court, the Panel stated in awarding damages that "[e]ach of T3's damage categories are recoverable under Texas law because they are actual damages for commercial loss that naturally flow from and were reasonably foreseeable consequences of SBS's breach." SBS has not carried its burden in showing the Panel recognized the correct law and intentionally disregarded it. See Bosack ,
4. Future lost commissions
Next, SBS argues the Panel manifestly disregarded the month-to-month nature of the contract to award future lost commissions to T3. SBS contends the Panel erred when it accepted Mr. Taylor's calculations based on the "one times annual revenue metric" as T3's future losses were limited to the monthly term of the contract. The Panel stated that SBS "uses a metric of approximately one times annual revenue when it acquires distributors" and that metric was the same used when Teply purchased part of Thurston's business. The Panel then stated it "finds that T3 and Taylor's use of the one times annual revenue metric fairly represents the present value of future commission rights." In so finding, the Panel cited to Texas law, AZZ Inc. v. Morgan ,
Here again, the analysis is the same as that for lost profits analyzed above. SBS has not carried its burden in showing the Panel recognized the correct law and intentionally disregarded it. See Bosack ,
5. Doubling the award of attorney fees
Lastly, SBS argues the Panel disregarded Texas law to award T3 doubled attorney fees and expenses. The Panel awarded T3 $ 2,449,208.14 in attorney fees and $ 437,126.28 in costs. The Panel stated it "finds that an award of attorneys' fees and expenses is authorized by Texas law, under the Distributor Agreement, and because such a determination was submitted to the Panel by the parties." The Panel also stated Section 21(B) of the Distributor Agreement provides that "the arbitrators shall have the right to award or include in their award any relief which they deem proper in the circumstances." And, that "[AAA] Rule 47(c) provides that the Panel 'may apportion such fees, expenses, and compensation among the parties in such amounts as the arbitrator determines is appropriate.' "
SBS argues the Panel could not rely on AAA Rule 47 and that the doubled attorney fee amount violates the contractual limit of actual damages for commercial loss. The district court stated that SBS could not establish that the Panel had manifestly disregarded the law or that its decision was completely irrational. The court reasoned that the Panel was interpreting the Distributor Agreement as regards to fees and costs "and applied the law in accordance with its interpretation. While Safeguard argues that the distributorship agreement requires that Texas law-and only Texas law-governs the determination of fees and costs, the Panel found otherwise." The district court also noted that the choice-of-law provision specifying Texas law does not state it will apply to a post-hearing determination of fees by an arbitrator. Instead, the court reasoned, such determination of fees was governed by 21(B) which allows arbitrators to award "any relief which they deem proper in the circumstances." Thus, the court stated, because the Panel had interpreted the parties' agreement, the Panel's
Here again, "[i]t is not enough ... to show that the [Arbitration Panel] committed an error-or even a serious error." Oxford Health Plans LLC ,
In this case, the Panel was "arguably construing or applying the contract" as it referenced various provisions in the Distributor Agreement, and that it was applying them. See Oxford Health Plans LLC ,
E. We do not award attorney fees on appeal.
Both parties request costs on appeal, but only T3 requests attorney fees on appeal. Because SBS does not request attorney fees, and because SBS is not the prevailing party, SBS is not entitled to attorney fees on appeal. T3 contends it is entitled to attorney fees on appeal under Texas law for both its breach of contract and Texas DTPA claims "upon a remand back to the Arbitration Panel." T3 also contends this Court can award it attorney fees under Idaho Code section 12-121 or Texas Appellate Rule 45, which both allow for attorney fees in frivolous appeals. For the reasons discussed below, we do not award attorney fees on appeal.
T3 cites to Cap Rock Electric Cooperative Incorporated v. Texas Utilities Electric Company which states, "once a right to attorney's fees is established, the award may include attorney's fees for any appeal."
We also decline to award attorney fees on appeal pursuant to Idaho Code section 12-121 or Texas Appellate Rule 45. This Court has said "if the award of attorney fees is a discretionary matter governed by statute, then it is considered to be procedural, requiring application of the forum law." Carroll v. MBNA Am. Bank ,
In this case, we decline to award attorney fees on appeal. The issues as to district court jurisdiction and forum selection clause enforceability are novel issues and SBS provided cogent argument and authority for its issues presented on appeal. SBS's arguments were not frivolous, unreasonable, or without foundation. Accordingly, we do not award attorney fees on appeal.
V. CONCLUSION
In sum, we hold that 1) the district court had jurisdiction to consider T3's challenge to forum; 2) the district court did not err when it determined the forum selection clause was unenforceable; 3) SBS waived the issue of privilege when it stipulated to the admission of documents at the hearing; 4) the district court did not err in denying SBS's motion to vacate or modify the arbitration award; and 5) no attorney fees are awarded on appeal. Costs to T3.
Justices HORTON, BRODY, BEVAN and STEGNER concur.
Notes
Later, at an arbitration evidentiary hearing, SBS conceded this attempted waiver of the Texas Deceptive Trade Practices Act (DTPA) was ineffective and unenforceable.
We note that the recent United States Supreme Court decision in Henry Schein, Incorporated, et al., v. Archer and White Sales, Incorporated , 586 U.S. ----,
However, the First Circuit Court of Appeals more recently stated, "[w]e need not and do not decide now whether manifest disregard remains as an available basis for vacatur. However, if it does survive, we agree with the courts that have held that Hall Street compels the conclusion that it does so only as a judicial gloss on § 10." Ortiz-Espinosa v. BBVA Sec. of Puerto Rico, Inc. ,