Diverse Enterprises, Ltd. Co. v. Beyond Int ( 2020 )

Case: 19-51121 Document: 00515568129 Page: 1 Date Filed: 09/17/2020
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
September 17, 2020
No. 19-51121 Lyle W. Cayce
Summary Calendar Clerk
Diverse Enterprises, Limited Company, L.L.C.; Quick-
Sol Global, L.L.C.; Lawrence P. Lancaster,
Plaintiffs—Appellees,
versus
Beyond International, Incorporated; Pablo Gomez,
Defendants—Appellants.
Appeal from the United States District Court
for the Western District of Texas
USDC No. 5:16-CV-1036
Before Haynes, Willett, and Ho, Circuit Judges.
Per Curiam:*
Beyond International, Inc. and Pablo Gomez1 (collectively,
“Beyond”) appeal the district court’s order granting Plaintiffs’ motion to
*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
1
Pablo Gomez is the President of Beyond International, Inc.
Case: 19-51121 Document: 00515568129 Page: 2 Date Filed: 09/17/2020
No. 19-51121
confirm an arbitration award. For the following reasons, we AFFIRM the
district court’s order.
I. Background
Diverse Enterprises, Ltd., Co., LLC, Quick-Sol Global, LLC
(“QSG”), and Lawrence P. Lancaster (collectively, the “Plaintiffs”) entered
into a distribution agreement (“Agreement”) with Beyond. It contained a
clause requiring arbitration for “any claim or controversy arising out of or
relating to [the] Agreement.” The Plaintiffs terminated the Agreement after
Beyond breached it by failing to meet minimum sales requirements, and the
parties entered arbitration to resolve their various business conflicts.
The arbitration panel made findings in favor of the Plaintiffs on every
substantial issue. The panel also awarded $432,135.60 in attorneys’ fees to
the Plaintiffs.
Beyond moved to modify the attorneys’ fee award, which was based,
in part, on a $400 hourly rate for one of the Plaintiffs’ law firms. Though
Beyond initially stipulated to the hourly rate, it later discovered that the firm
in question only charged the Plaintiffs a rate of $225 per hour. Beyond
acknowledged that the firm was also entitled to 2% of the gross sales price of
QSG as additional compensation but remarked that it had “no information
that QSG ha[d] been sold.” Beyond thus argued a modification was needed
to correct this “computational error.” The panel denied Beyond’s motion.
Beyond renewed its excessive fee argument in its response to the
Plaintiffs’ motion to confirm the arbitration award in district court. Beyond
argued that the panel “exceeded the authority conferred to it in the . . .
Agreement to award attorneys’ fees” by ordering Beyond to “pay fees in
excess of those actually charged.” Beyond then asked the district court to
either: (1) vacate the award and remand back to arbitration for “proper
2
Case: 19-51121 Document: 00515568129 Page: 3 Date Filed: 09/17/2020
No. 19-51121
analysis on the issue of attorneys’ fees,” or alternatively, (2) modify and
correct the award “consistent with the attorneys’ fees actually incurred by”
the Plaintiffs because the award contained an “evident material
miscalculation of figures or evident material mistake in the description of any
person, thing or property referred to in the award” in violation of section
11(a) of the Federal Arbitration Act (“FAA”), 9 U.S.C. § 11(a).
The district court rejected Beyond’s argument and confirmed the
arbitration award. Diverse Enters. Co. v. Beyond Int’l, Inc., No. 5:16-CV-
01036-RCL, 2019 WL 5927311, at *1 (W.D. Tex. Nov. 12, 2019). It
concluded that the panel did not exceed its authority, noting the
“exceedingly deferential” standard of review and the lack of limiting
language concerning the arbitrator’s authority in the Agreement. Id. at *2.
The district court also rejected Beyond’s argument that there was “an
evident material miscalculation” or “mistake” in the award because the
panel “reasonably relied on the parties’ stipulation that attorneys’ fees
ranging from $200 to $400 would be reasonable.” Id. at *3. Accordingly,
the district court adopted the panel’s findings and conclusions and granted
the Plaintiffs’ motion to confirm the award. Id. Beyond timely appealed.
II. Standard of review
We review a district court’s confirmation of an arbitration award de
novo, using the same standards of the district court. Brown v. Witco Corp.,
340 F.3d 209, 216 (5th Cir. 2003). However, our review of an arbitration
award is “extraordinarily narrow.” Glover v. IBP, Inc., 334 F.3d 471, 473–74
(5th Cir. 2003). We may modify or vacate an arbitration award only if one of
the grounds enumerated in FAA §§ 10 or 11, 9 U.S.C. §§ 10–11, is satisfied.
See Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 584 (2008).
Here, Beyond contends that the attorneys’ fee award constitutes an
excess of authority, in violation of § 10(a)(4). Arbitrators exceed their power
3
Case: 19-51121 Document: 00515568129 Page: 4 Date Filed: 09/17/2020
No. 19-51121
when they “act contrary to express contractual provisions.” Rain CII
Carbon, LLC v. ConocoPhillips Co., 674 F.3d 469, 472 (5th Cir. 2012) (internal
quotation marks and citation omitted). We will vacate an award that ignores
a plain contractual limitation on the authority of an arbitrator. Id. However,
“limitations on an arbitrator’s authority must be plain and unambiguous.”
Id. (internal brackets and quotation marks omitted). If “there is ambiguity as
to whether an arbitrator is acting within the scope of his authority, that
ambiguity must be resolved in favor of the arbitrator.” Quezada v. Bechtel
OG & C Constr. Servs., Inc., 946 F.3d 837, 844 (5th Cir. 2020) (quotation
omitted); see Rain CII, 674 F.3d at 472 (“A reviewing court examining
whether arbitrators exceeded their powers must resolve all doubts in favor of
arbitration.” (quotation omitted)). If a rational interpretation exists that
supports the award, the award will be upheld, even if there is more than one
interpretation on how the arbitrator arrived at a final award. See Valentine
Sugars, Inc. v. Donau Corp., 981 F.2d 210, 214 (5th Cir. 1993).
III. Discussion
Beyond argues that the panel exceeded its contractual authority by
awarding the Plaintiffs attorneys’ fees that were based on a $400 hourly rate
when the actual rate charged was $225 per hour. Beyond maintains that the
panel was limited to awarding “reasonable fees” whereas “the authority to
award fee multiples was absent and could not be awarded.” Beyond also
maintains the panel violated Texas law by “awarding fees not actually
incurred, which were based . . . on a withdrawn stipulation and a misleading
billing summary.”2 Beyond characterizes the fees awarded as an
2
Beyond concedes that it stipulated to the $400 hourly rate, but it notes that it
withdrew this stipulation prior to the entry of the fee award. This withdrawn stipulation is
not a determinative factor in our analysis, so we do not address Beyond’s stipulation
argument. Furthermore, we decline to address Beyond’s argument that the Plaintiffs
4
Case: 19-51121 Document: 00515568129 Page: 5 Date Filed: 09/17/2020
No. 19-51121
impermissible “windfall,” prohibited by the Supreme Court in Hensley v.
Eckerhart, 461 U.S. 424, 455 (1983) (Brennan, J., concurring in part and
dissenting in part). We disagree with Beyond’s efforts to treat the review of
an arbitration award as if it is a regular appeal of a trial court decision. We
thus affirm the district court’s confirmation of the attorneys’ fee award.
On appeal, the single question we must answer is whether the
arbitration panel exceeded its contractual authority. To answer that
question, we focus on “whether the award, however arrived at, is rationally
inferable from the contract[,]” applying relevant (here, Texas) state law.
Glover, 334 F.3d at 474-75 (quotation marks and citation omitted); see Gilbert
Tex. Constr., L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118, 126
(Tex. 2010) (describing Texas rules of contract interpretation).
Two contract provisions are particularly relevant. The first provision
broadly authorizes arbitrators to settle “any claim or controversy arising out
of or relating to” the Agreement. We note that “[b]oth the Supreme Court
and this court have characterized similar arbitration clauses as broad
arbitration clauses capable of expansive reach.” See Pennzoil Expl. & Prod. Co.
v. Ramco Energy Ltd., 139 F.3d 1061, 1067 (5th Cir. 1998) (citing Prima Paint
Corp. v. Flood & Conklin Mfg. Co., 288 U.S. 395, 406 (1967)). The second
provision grants the prevailing party “reasonable attorneys’ fees (both trial
and appellate) and related costs and expenses.” The word “reasonable”
does not necessarily limit the parties to fees actually incurred. See Blanchard
v. Bergeron, 489 U.S. 87, 96 (1989) (noting “[t]he trial judge should not be
limited by the contractual fee agreement between plaintiff and counsel” in
determining reasonable attorneys’ fees under 42 U.S.C. § 1983); La. Power
“misrepresent[ed]” their fees. We observe that Beyond was provided the fee agreement,
stating the $225 hourly rate, along with thousands of other pages of documentation.
5
Case: 19-51121 Document: 00515568129 Page: 6 Date Filed: 09/17/2020
No. 19-51121
& Light Co. v. Kellstrom, 50 F.3d 319, 328–29 (5th Cir. 1995) (noting “the
actual amount paid in fees is not dispositive on the question of reasonable
rates”). Because there is no other relevant language, we hold that the district
court did not err in concluding that the Agreement creates no plain limitation
on the authority of the arbitrators in awarding attorneys’ fees greater than
those incurred by the Plaintiffs.
Since the arbitration award did not exceed the arbitration panel’s
contractual authority, we must sustain it.3 We do so without reaching the
merits of Beyond’s excessive fee claim because that argument goes beyond
our power to review the arbitration decision.4
AFFIRMED.
3
Even assuming arguendo that the arbitration panel mistakenly applied the law,
this error is not grounds for vacating or modifying an arbitral award. United Paperworkers
Int’l Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 38 (1987) (“Courts . . . do not sit to hear
claims of factual or legal error by an arbitrator as an appellate court does in reviewing
decisions of lower courts.”).
4
We need not determine whether $400 per hour is a reasonable rate because that
determination was within the power of the arbitration panel. Similarly, we lack the
authority to address Beyond’s “windfall” claim.
6