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AL Maya Trading Establishment v. Global Export Marketing Co. Ltd.

United States District Court, S.D. New York

March 17, 2017

AL MAYA TRADING ESTABLISHMENT, Petitioner,
v.
GLOBAL EXPORT MARKETING CO., LTD., Respondent.

          OPINION & ORDER

          RONNIE ABRAMS, United States District Judge.

         Petitioner Al Maya Trading Establishment ("Al Maya") petitions for confirmation of an arbitral award entered in its favor against Respondent Global Export Marketing Co., Ltd. ("GEMCO") pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., and the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "New York Convention" or "Convention"), 21 U.S.T. 2517, codified at 9 U.S.C. § 201 et seq. GEMCO moves to vacate the award pursuant to 9 U.S.C. § 10(a)(3).[1] Al Maya contends that GEMCO's motion is frivolous and intended to cause delay, and thus moves for sanctions pursuant to Federal Rule of Civil Procedure 11. For the reasons set forth below, the Court confirms the award. GEMCO's motion to vacate and Al Maya's motion for sanctions are denied.

         BACKGROUND

         Al Maya is a United Arab Emirates ("UAE") company with its headquarters and principal place of business in Dubai. Pet. ¶ 3; Karlan Decl. Ex. A ("Final Award") ¶ 10.[2] It is a family-owned business that distributes food products in the UAE and elsewhere. Pet. ¶ 3; Final Award ¶ 10. GEMCO is a New York domestic business corporation with its principal place of business in New York City. Pet. ¶ 4; Final Award ¶ 10. GEMCO, which is also a family-owned company, is in the business of exporting foodstuffs and related products. Pet. ¶ 5; Final Award ¶ 10.

         On June 16, 1999, Al Maya and GEMCO entered into an Agency Agreement pursuant to which Al Maya served as the exclusive distributor of GEMCO's American Garden ("AG") line of food products in the UAE. Final Award ¶¶ 1-2; Karlan Decl. Ex. C (the "Agreement").[3] The duration of the Agreement was two years, but it provided for automatic renewal unless either party chose to terminate it no later than three months before the renewal date. Final Award ¶ 15; Agreement ¶ 8. Paragraph 9 of the Agreement provided that "[a]ll disputes and or differences that may arise between the parties [to the Agreement] out of or in relation to or in connection with [the Agreement] or for any breach thereof shall be settled through arbitration." Agreement ¶ 9.

         The relationship between Al Maya and GEMCO deteriorated over time due to a variety of alleged breaches of the Agreement by Al Maya. See Final Award ¶¶ 17-26. In late 2012, GEMCO decided to terminate its relationship with Al Maya and began negotiating with other distributors. Id. ¶ 26. The Agreement was set to renew automatically on June 16, 2013. See Final Award ¶ 15; Agreement ¶ 8. However, despite the fact that "[t]he reasons underlying [GEMCO's] decision had all materialized prior to early 2013, " GEMCO did not terminate the Agreement prior to the March 16, 2013 termination deadline. Final Award ¶ 26. Instead, GEMCO stopped fulfilling Al Maya's orders during the summer of 2013, and informed Al Maya during a meeting on September 26, 2013 that GEMCO was terminating the Agreement. Id. ¶¶ 27-28.

         Al Maya asserted breach of contract and tortious interference claims, and, on January 14, 2014, filed a petition to compel arbitration in the United States District Court for the Southern District of New York. Final Award ¶ 3; Karlan Decl. Ex. D. The petition to compel arbitration was assigned to the Honorable Paul A. Engelmayer. Pet. ¶ 18. Despite initially disputing the authenticity of the Agreement, see Final Award ¶ 3, on August 25, 2014, GEMCO signed a Stipulation and Order agreeing to arbitrate Al Maya's claims, and conceded "[t]he authenticity, validity, and enforceability of the [Agreement], " at least for purposes of the arbitration, Karlan Decl. Ex. B. The Stipulation and Order provided that the American Arbitration Association (the "AAA") would administer the arbitration pursuant to its Rules for Commercial Arbitration and that New York law would apply in the arbitration as to all procedural and substantive issues. Id. Judge Engelmayer so-ordered the Stipulation and Order on August 27, 2014. Id.

         On September 4, 2014, Al Maya filed a Demand for Arbitration with the AAA, which GEMCO answered on September 22, 2014. Pet. ¶¶ 24-25; Karlan Decl. Exs. E-F. On April 3, 2015, a three-member arbitration panel (the "Panel") was confirmed. Pet. ¶ 26; Final Award ¶ 4. The Panel held a preliminary hearing by telephone on April 22, 2015 during which "[t]he parties confirmed that the Commercial Arbitration Rules of AAA/ICDR, and New York substantive and procedural law [would] appl[y]" to the arbitration. Final Award ¶ 5. During the preliminary hearing, "[t]he parties . . . indicated that they wish[ed] to reach a speedy and efficient resolution of their dispute, " and that "there need[ed] to be focused disclosure of documents, consistent with Rule 22 of the Commercial Arbitration Rules of AAA." Shapiro Decl. Ex. K.[4]

         The present dispute is about the scope of discovery. On June 1, 2015, after reviewing Al Maya's previous productions, GEMCO asked Al Maya to provide "Profit and Loss Statements for the entity (or entities) that sold AG . . . and for any related entity where expenses relating to the sales, marketing and distribution of AG may appear." Mawji Decl. Ex. E. GEMCO explained that these statements would "allow [GEMCO] to determine [Al Maya's] incremental costs, which [GEMCO] need[ed] in order to determine the lost incremental profit, if any, that Al Maya would have earned resulting from any lost incremental AG sales." Id. After Al Maya failed to produce the requested materials, GEMCO sent a letter to the Panel seeking an order compelling Al Maya to produce them, explaining that they were necessary for an accurate calculation of Al Maya's lost incremental profit. Id. Ex. F. On June 17, 2015, the Panel ordered Al Maya to "produce profit and loss statements for the entities that sold [AG] brands products" from 2010 through 2013, as well as any "documents reflecting" "expenses or costs relating to the sales, marketing, and distribution of [AG] products in the UAE." Id. Ex. I. The Panel gave the parties until July 1, 2015 to "request a ruling on the production of focused additional documents" if their experts believed that they needed them. Id. However, the Panel reminded the parties that they were participating in "an arbitration under the Commercial Arbitration Rules, not a domestic litigation." Id.

         On June 30, 2015, Al Maya produced the profit and loss statements (the "P&Ls"). Shapiro Decl. ¶ 14. The P&Ls covered the period from 2004 to 2015 (year-to-date), and were generated from Al Maya's financial accounting system. Id.; Mawji Decl. Ex. V ("Hr'g Tr.") 763:2-8, 782:3-8. On July 1, 2015, GEMCO wrote a letter to the Panel explaining that "GEMCO ha[d] no ability to verify the accuracy and completeness of the allocations" in the P&Ls "below the gross profit level, " and asking the Panel to compel Al Maya to provide various supporting documentation. Mawji Decl. Ex. K. On July 6, 2015, Al Maya opposed this request as untimely, cumulative, and unduly burdensome. See Id. Ex. L. On July 7, 2015, GEMCO responded to Al Maya's letter via e-mail, conceding that the P&Ls complied with the Panel's June 17 order, but arguing that GEMCO needed the additional information that it was requesting "to verify the accuracy and completeness of the allocations" in the P&Ls. Id. Ex. M. On July 8, 2015, the Panel denied GEMCO's request without explanation (the "July 8 Ruling"). See Id. Ex. N.

         The Panel ultimately found that GEMCO had breached the Agreement. Final Award ¶ 60. Both parties offered expert testimony on the calculation of lost profits. Id. ¶ 61. The Panel adopted the analysis of GEMCO's expert, Maureen Loftus, partly because of the extensive reliance that Al Maya's expert, Carlyn Irwin, had placed on the P&Ls, which the Panel viewed as having "significant problems." See Id. ¶¶ 61, 63, 65-69.[5] The Panel thus adopted the damages calculation submitted by Loftus, who had adjusted her lost profits analysis to account for perceived "anomalies" and "understatements" in the P&Ls. Id. ¶ 69; Mawji Decl. Ex. R, at 19.

         On March 4, 2016, the Panel issued the Final Award. The Panel awarded Al Maya a total of $5, 733, 023.52, which was compromised of $4, 254, 000 in damages, $379, 023.52 in prejudgment interest, and $1, 100, 000 in legal fees and costs. Pet. ¶ 35; Final Award at 22.

         DISCUSSION

         Two issues are before the Court: (1) whether to confirm or vacate the Final Award; and (2) whether to sanction GEMCO pursuant ...


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