Airborne Athletics, Inc. v. Shoot-A-Way, Inc.

Background

Airborne Athletics, Inc. and Shoot-A-Way, Inc. both design and manufacture basketball training devices. After earlier patent litigation, the parties entered a 2013 settlement agreement. The agreement required claims to proceed first through informal discussion and mediation, and then to arbitration under the American Arbitration Association’s commercial rules. It also included a fee-shifting provision for an unsuccessful arbitration plaintiff.

In a first arbitration, Shoot-a-Way prevailed on a patent-infringement claim and received $51,300 in damages. Airborne later claimed that it was entitled to attorneys’ fees because its final offer during the mediation was worth more than that award. The first arbitrator declined to decide the fee issue because Airborne raised it after the arbitration had closed, but explained that Airborne could pursue the issue in a separate arbitration. A federal court later confirmed the first arbitration award.

Airborne then demanded a second arbitration and sought attorneys’ fees. Arbitrator Cheryl Agris determined that Airborne’s final mediation offer was $800,000 and included a covenant not to sue. She valued that non-monetary promise at between $150,000 and $300,000, making the offer’s total monetary value between $500,000 and $650,000—more than the $51,300 first-arbitration award. She awarded Airborne $2,649,737.25 in attorneys’ fees and costs from the first arbitration.

Arbitrator Agris also awarded Airborne $1,233,308.55 for fees from the second arbitration. She concluded that the award was authorized because both parties requested attorneys’ fees in their arbitration filings, among other grounds. She awarded prejudgment interest on the first-arbitration fee award and $86,423.25 in arbitration-related costs.

The parties’ motions

Airborne petitioned for confirmation of the second arbitration award under the Federal Arbitration Act, a federal law governing arbitration agreements and awards. Shoot-a-Way moved to vacate the award, arguing that Arbitrator Agris exceeded her authority by deciding that Airborne’s mediation offer was valid, awarding fees for the second arbitration, and awarding prejudgment interest.

Court’s analysis

The court explained that judicial review of an arbitration award is extremely limited. Under the Federal Arbitration Act, a court may vacate an award when the arbitrator exceeded her powers, including by departing from the contract or clearly identifying and then ignoring governing law. A court may not overturn an award merely because the arbitrator made a serious legal or factual error.

As to the fees from the first arbitration, the court held that Shoot-a-Way was disagreeing with Arbitrator Agris’s application of Minnesota contract law, not showing that she ignored the law. The court therefore confirmed that portion of the award and awarded Airborne $2,649,737.25.

As to the fees from the second arbitration, the court held that the American Arbitration Association’s commercial rules authorized an award when all parties requested attorneys’ fees. Because both Airborne and Shoot-a-Way requested fees in their filings, Arbitrator Agris did not exceed her authority. The court confirmed that portion of the award and awarded Airborne $1,233,308.55.

As to prejudgment interest, the court held that Shoot-a-Way had not shown that Arbitrator Agris clearly ignored governing law. The court determined that Airborne was entitled to interest from December 19, 2022, the date of written notice of its fee claim. Applying Minnesota’s 10% annual rate to the first-arbitration fee award, the court awarded $861,702.65 in prejudgment interest.

The court also granted Airborne’s unopposed request for $86,423.25 in arbitration-related costs and granted postjudgment interest from the date judgment was entered until the judgment was satisfied, at the rate required by federal law.

Disposition

The court granted Airborne’s motion to confirm the arbitration award. It granted Airborne’s request for postjudgment interest and denied Shoot-a-Way’s motion to vacate the arbitration award. The confirmed amounts were $2,649,737.25 in first-arbitration attorneys’ fees, $1,233,308.55 in second-arbitration attorneys’ fees, $861,702.65 in prejudgment interest, and $86,423.25 in costs.