Forall USA, Inc.

Background

Forall USA, Inc. sought confirmation of an arbitration award against Sarah LLC, Hala Subh, Suhad Albasha, Bachar Hamad, and Amar Hamad. The parties had entered into an agreement under which the respondents would manufacture, supply, and sell certain Forall products at a Las Vegas store. The agreement included a minimum-purchase requirement and required the respondents to maintain and operate the store for ten years. The store’s lease ended in 2016, and Forall claimed that the respondents had breached the agreement in several ways.

The respondents initiated arbitration in January 2018. After a four-day hearing in October 2020 and oral argument in December 2020, the arbitrator issued an award on January 25, 2021, in Forall’s favor for $2,850,620.25 plus interest. Forall petitioned the district court to confirm the award. The respondents answered and filed a cross-petition asking the court to vacate, or set aside, it.

Legal standard

The court explained that judicial review of an arbitration award is extremely limited. A court generally must confirm an award if the arbitrator acted within the authority granted by the parties’ agreement and the award is based on that agreement. A party seeking vacatur bears a heavy burden. One possible ground is “manifest disregard of the law,” meaning that the arbitrator ignored a clearly defined and clearly applicable legal rule after being made aware of its controlling nature. A mere legal or factual mistake is not enough.

Respondents’ challenges

The respondents argued that the arbitrator improperly rejected their claim that Forall had waived the minimum-purchase requirement. The court disagreed, noting that the arbitrator found no written support for the alleged waiver and did not find the respondents’ account of an undocumented agreement credible. The court also explained that whether conduct establishes waiver depends on the facts and that the arbitrator’s conclusion was not contrary to law.

The respondents also challenged the award of lost profits, arguing that purchases were no longer possible after the store closed, that Forall had not proved lost profits with reasonable certainty, and that Forall had failed to mitigate its damages. The court held that these arguments either challenged how the arbitrator applied the law to the facts or involved fact-intensive issues outside the court’s limited review. The court found at least a minimally reasonable basis for the damages award and stated that the arbitrator’s damages calculations could not be overturned on this record.

Finally, the respondents argued that they had not received an opportunity to challenge the requested fees. The court rejected that argument because the arbitration award stated that they had made no objection to the fee request, and they had time to challenge the fees in post-hearing submissions.

Ruling

Judge Victor Marrero granted Forall’s petition to confirm the arbitration award and denied the respondents’ cross-petition to vacate it. The court confirmed the award against the respondents in the amount of $3,109,474.77, calculated as of February 25, 2021. The court also directed Forall to submit a proposed order awarding attorneys’ fees and interest under the arbitration award; the respondents could object, and Forall could respond.