Opinion
NO. 2021 CA 0881
02-25-2022
REVELRY FOOD GROUP, LLC v. NGUYEN PROPERTY INVESTMENT, LLC and Eric Nguyen
L. Etienne Balart, Lauren C. Mastio, Jennifer A. David, New Orleans, Louisiana, Attorneys for Plaintiff-Appellant, Revelry Food Group, LLC Sye J. Broussard, Houma, Louisiana, Attorney for Defendants-Appellees, Nguyen Property Investment, LLC and Eric Nguyen
L. Etienne Balart, Lauren C. Mastio, Jennifer A. David, New Orleans, Louisiana, Attorneys for Plaintiff-Appellant, Revelry Food Group, LLC
Sye J. Broussard, Houma, Louisiana, Attorney for Defendants-Appellees, Nguyen Property Investment, LLC and Eric Nguyen
BEFORE: McDONALD, LANIER, AND WOLFE, JJ.
WOLFE, J.
This is an appeal of a district court judgment partially vacating an arbitration award. We reverse in part, affirm in part, and render. BACKGROUND
This case arises out of a purported breach of a lease of commercial space intended for a restaurant in Houma, Louisiana. Revelry Food Group, LLC, as lessee, and Nguyen Property Investment, LLC, as lessor, executed a lease agreement on November 15, 2018, for a sixty-month term of the space. The lease agreement required Nguyen to construct and deliver the leased premises to Revelry within ninety days following the permit issuance date, with rent payments to commence ninety days after the premises were turned over. The lease agreement also provided for arbitration as the dispute resolution procedure. When Nguyen failed to deliver the leased premises as required by the lease agreement, Revelry instituted this action in the district court against Nguyen and its sole member, Eric Nguyen. The matter was stayed while the parties arbitrated their dispute.
Following a two-day hearing, the arbitrator ruled in favor of Revelry, finding that Nguyen breached the lease by failing to deliver the leased premises timely. The arbitrator further found that the breach was in bad faith due to Nguyen's failure to timely complete the required build-out and comply with the lease agreement. The arbitrator denied Revelry's claim for lost profits as speculative, because Revelry was a start-up company and had no record of profit earnings. In an interim award, the arbitrator awarded damages to Revelry totaling $139,145.89, and in a final award, added $59,545.65 in attorney fees, costs, and expenses, for a total award of $ 198,691.54. Revelry filed a motion to confirm the arbitration awards in the district court. Attached to Revelry's motion was a partial copy of the lease, the arbitration demand and claim, and the arbitrator's interim and final awards. Nguyen opposed Revelry's motion and filed a motion to vacate or modify the arbitration awards.
On March 26, 2021, the district court signed a judgment granting Revelry's motion to confirm the final arbitration award of $ 139,145.89 for damages, but denied confirmation of the $59,545.65 award for attorney fees, costs, and expenses. The district court determined that the arbitrator had exceeded his authority in awarding attorney fees because Revelry was not the "prevailing party" as defined in the lease agreement. Revelry appealed, seeking review of the portion of the district court's judgment that vacated the attorney fees, costs, and expenses.
Nguyen filed a brief in opposition to Revelry's appeal, but did not file an answer to the appeal. Therefore, Nguyen's request that this court vacate or modify other portions of the arbitrator's final award that allowed for Revelry's purported double recovery in the area of purchased equipment is not properly before us. See La. Code Civ. P. art. 2133 ("An appellee shall not be obliged to answer the appeal unless he desires to have the judgment modified, revised, or reversed in part or unless he demands damages against the appellant. In such cases, he must file an answer to the appeal, stating the relief demanded[.]") Since Nguyen did not formally answer the appeal as required by Article 2133, Nguyen is not entitled to the relief raised and requested in its brief.
RULE TO SHOW CAUSE
After the record was lodged, this court issued a show cause order concerning whether the district court's judgment was final and appealable since it referred to the arbitrator's final arbitration award, but did not attach that award to the judgment. The show cause order also questioned whether a La. Code Civ. P. art. 1915(B) certification was necessary. Revelry responded to this court's order, averring that the entirety of the claims between it and Nguyen were subject to arbitration, which the parties agreed would be final and binding upon them. Revelry maintains that the district court judgment contains the necessary decretal language rendering Nguyen responsible for the damage award. Revelry also noted that Louisiana's arbitration law, in La. R.S. 9:4212, provides that "[u]pon the granting of an order confirming, modifying, or correcting an award, judgment may be entered [by the district court] in conformity [with the arbitrator's award] in the court wherein the order was granted." Further, Revelry noted that the arbitration law specifies what documents from the arbitration must be included with the motion to confirm the arbitration award, which Revelry attached as required. Finally, Revelry pointed out that La. R.S. 9:4215 governs appeals to appellate courts, providing "[a]n appeal may be taken from an order confirming, modifying, correcting, or vacating an [arbitration] award, or from a judgment entered upon an award, as from an order or judgment in an action." Thus, Revelry asserts that the statute grants the right of direct appeal from the district court's judgment.
We agree with Revelry that the district court's judgment is appealable even though the final arbitrator's award was not attached to the judgment. The judgment confirms in part and vacates in part the arbitration award, sets out the specific part that is vacated, and indicates the specific amount that Nguyen is ordered to pay Revelry. The terms of the district court's judgment resolve all issues between the parties and is sufficient to determine the parties’ obligations without reference to the final arbitrator's award. Moreover, this court routinely recognizes the appealability of arbitration judgments. See Florida Gas Transmission Co., LLC v. Texas Brine Co., LLC, 2018-1098 (La. App. 1st Cir. 7/11/19), 281 So.3d 9, 11 n.1, writ denied, 2019-01455 (La. 11/12/19), 282 So.3d 227 (citing La. R.S. 9:4215). As such, we maintain the appeal and turn to a discussion on the merits.
Revelry also filed a motion to affix Nguyen's post-hearing briefing in the arbitration proceedings as an attachment to Revelry's appellate brief. However, an appellate court cannot review evidence that is not in the record on appeal and cannot receive new evidence. City of Hammond v. Parish of Tangipahoa, 2007-0574 (La. App. 1st Cir. 3/26/08), 985 So.2d 171, 176. The appellate record does not contain the briefs referenced in Revelry's motion to affix. Therefore, we deny Revelry's motion.
LAW AND ANALYSIS
The purpose of arbitration is to allow parties to achieve speedy settlement of their differences out of court. Bernard v. Hildebrand, 2008-0268 (La. App. 1st Cir. 8/6/08), 993 So.2d 678, 682. Arbitration is favored under both the Louisiana and the United States jurisprudence. Potier v. Morris Bart, L.L.C., 2016-0879 (La. App. 4th Cir. 3/15/17), 214 So.3d 116, 121, writ denied, 2017-630 (La. 6/5/17), 221 So.3d 45. Louisiana's statutory provisions echo the Federal Arbitration Act, 9 U.S.C. § 1 et seq., and Louisiana courts look to federal law in interpreting the Louisiana arbitration statutes. Firmin v. Garber, 353 So.2d 975, 977 (La. 1977) ; Potier, 214 So.3d at 122. The grounds upon which a district court may refuse to confirm an arbitration award are statutorily restricted, and are exclusively listed in La. R.S. 9:4210, providing that a district court "shall issue an order vacating the award":
A. Where the award was procured by corruption, fraud, or undue means.
B. Where there was evident partiality or corruption on the part of the arbitrators or any of them.
C. Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to
the controversy, or of any other misbehavior by which the rights of any party have been prejudiced.
D. Where the arbitrators exceeded their powers or so imperfectly executed them that a mutual, final, and definitive award upon the subject matter submitted was not made.
We begin our analysis with the important premise that arbitration awards are presumed to be valid. See Mack Energy Co. v. Expert Oil and Gas, L.L.C., 2014-1127 (La. 1/28/15), 159 So.3d 437, 441-442. A district court judgment vacating an arbitration award is reviewed de novo on appeal, with great deference given to the arbitrator's decision. Florida Gas, 281 So.3d at 12. A district court's ruling confirming or vacating an arbitration award, therefore, presents a legal issue. Potier, 214 So.3d at 124. An arbitration award must be confirmed by a district court unless the challenging party establishes the presence of at least one of the four statutory grounds listed in La. R.S. 9:4210. The burden of proof in such a proceeding is on the party attacking the arbitrator's award. Mack Energy Co., 159 So.3d at 442.
Relying on La. R.S. 9:4210(D), Nguyen argues that the district court properly vacated the arbitrator's ruling on the attorney fees/costs/expenses award, because the arbitrator exceeded his powers in making the award to Revelry who was not the prevailing party as defined by the lease agreement. An arbitrator exceeds his authority only if he acts outside the scope of his contractually delegated authority by issuing an award reflecting his own notions of economic justice rather than drawing its essence from the contract. Florida Gas, 281 So.3d at 13. Because the parties bargained for the arbitrator to interpret their lease agreement, a decision even arguably construing or applying the contract must stand, regardless of a district court's view of its demerits. Id. By consensually substituting arbitration for litigation, it is presumed that the parties accept the risk of procedural and substantive mistakes of either fact or law by the arbitrator, which mistakes are not reviewable by the district court. Goodrich Petroleum Co., LLC v. MRC Energy Co., 2013-1435 (La. App. 4th Cir. 4/16/14), 137 So.3d 200, 202-203, writ denied, 2014-1199 (La. 9/19/14), 149 So.3d 249. Errors of fact or law do not invalidate a fair and honest arbitration award. Mack Energy Co., 159 So.3d at 442.
In reviewing arbitral awards challenged under La. R.S. 9:4210(D), it is not the role of the judiciary to correct errors of fact or law; therefore, the calculation of damages is beyond our review. Mack Energy Co., 159 So.3d at 442. Thus, we are not revisiting how or why the arbitrator arrived at an award of attorney fees, costs, and expenses of $59,545.65. Instead, we examine whether the arbitrator had the contractual authority to issue that award. Id.
The lease agreement between the parties provided in pertinent part as follows:
15.03 ARBITRATION
In the event of any dispute ... such disputes shall be subject to arbitration ..., and the decision of the arbitrator, which may include the award of attorneys’ fees to the prevailing party, shall be final and binding[.]
* * * * *
16.03 PREVAILING PARTY
In any litigation or arbitration between the parties regarding this Lease, the losing party shall pay to the prevailing party all reasonable expenses and court costs, including attorneys’ fees and disbursements incurred by the prevailing party.... [T]he prevailing party shall mean the party receiving substantially
the relief desired, whether by settlement, dismissal, summary judgment or otherwise.
Nguyen argues that the arbitrator did not consider the definition of "prevailing party" when awarding attorney fees, costs, and expenses to Revelry, because Revelry sought over $700,000.00 in damages but only received $139,145.89 in damages. Therefore, Nguyen maintains that Revelry did not receive "substantially the relief desired." We find no merit to this argument. The arbitrator denied Revelry's claim for speculative lost profits. That partial denial of the total relief requested, however, does not change the arbitrator's decision that Revelry was the prevailing party.
After a de novo review, we determine that the arbitrator appropriately acted within the scope of authority contractually conferred by the parties in the lease agreement. The arbitrator did not exceed or imperfectly execute his powers in awarding Revelry attorney fees, costs, and expenses. We likewise find the arbitrator brought about a final and definite award upon the subject matter submitted, as required by La. R.S. 9:4210(D).
Nguyen has not made an adequate showing that the arbitrator's awards should be vacated. To hold otherwise would allow the merits of the underlying dispute between the parties to be re-litigated, which is contrary to the settled jurisprudence of this state. The grounds for challenging arbitration awards that are fairly and honestly made, do not include errors of law or fact. See JK Developments, LLC v. Amtek of Louisiana, Inc., 2007-1825 (La. App. 1st Cir. 3/26/08), 985 So.2d 199, 201, writ denied, 2008-0889 (La. 6/20/08), 983 So.2d 1276. Therefore, an allegation that the arbitrator misinterpreted a contract provision is not subject to judicial correction. District court judges are not entitled to substitute their judgment for that of the arbitrator chosen by the parties. Id. When an arbitrator resolves disputes regarding the application of a contract, and no dishonesty is alleged, the arbitrator's "improvident, even silly, factfinding" does not provide a basis for a reviewing court to refuse to enforce the award. Id. at 202 (quoting the United States Supreme Court in Major League Baseball Players Ass'n v. Garvey, 532 U.S. 504, 509, 121 S.Ct. 1724, 1728, 149 L.Ed.2d 740 (2001) (per curiam).)
CONCLUSION
For the stated reasons, we find that the district court erroneously concluded that the arbitrator exceeded his powers in awarding $59,545.65 for attorney fees, costs, and expenses to Revelry Food Group, LLC. Therefore, we reverse that portion of the district court judgment that vacated the $59,545.65 award for attorney fees, costs, and expenses in favor of Revelry Food Group, LLC, and against Nguyen Property Investment, LLC, and Eric Nguyen. The remainder of the district court judgment is affirmed. Thus, the arbitrator's final award is confirmed in full. All costs of this appeal are assessed against Nguyen Property Investment, LLC, and Eric Nguyen.