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MWN Group, Inc. v. MAG USA

August 8, 2007

IN THE MATTER OF THE ARBITRATION BETWEEN MWN GROUP, INC., PETITIONER,
v.
MAG USA, INC., RESPONDENT.



The opinion of the court was delivered by: Thomas W. Phillips United States District Judge

MEMORANDUM OPINION

Petitioner, MWN Group, Inc., moves the court for an order, pursuant to Tenn. Code Ann. § 29-5-301 et seq, or alternatively, §§ 9 and 13 of the Federal Arbitration Act, confirming the Final Award of the arbitrator in favor of MWN Group in the matter of the arbitration between MWN Group and MAG USA, made on June 12, 2006.

Background

On July 30, 2002, the parties entered into a Representative Agreement in writing whereby MWN agreed to represent MAG as an independent manufacturer's sales representative, and MAG agreed to pay MWN commissions on sales in accordance with the terms of the Agreement. Paragraph 16 of the Agreement contained an arbitration clause, which stated:

MAG USA and the Representative [MWN} shall work together in good faith to amicably settle any disputes which may arise in connection with this Agreement. In the event the parties to this Agreement fail to reach an amicable resolution for any disputes, the parties agree to seek resolution by arbitration under the Rules of Conciliation and Arbitration of the International Chamber of Commerce. Such arbitration shall be conducted at Knoxville, Tennessee and the language shall be English.

In November 2003, a dispute arose between MWN and MAG whereby MWN claimed MAG breached the contract by unlawfully and prematurely terminating it prior to the expiration date of April 14, 2006. MWN alleges that MAG failed to pay required preand post-termination commissions as called for in § 6 of the Agreement. In accordance with the arbitration clause of the Agreement, the parties submitted the dispute to arbitration pursuant to the Rules of the International Chamber of Commerce (ICC) in Knoxville, Tennessee. The ICC appointed William P. Alexander III as the sole arbitrator to determine all issues in accordance with the arbitration clause in Paragraph 16 of the Agreement, and pursuant to the ICC rules, the parties agreed to the terms of reference for the arbitration proceedings.

As part of the arbitration proceeding, the parties engaged in discovery, submitted briefs, and attended hearings at which both parties presented testimonial and documentary evidence for the arbitrator's consideration. The hearings were held January 9, 2006 through January 12, 2006, in Knoxville, Tennessee, and after considering all the evidence, the arbitrator made his Final Award in writing. The arbitrator found that MAG terminated the parties' contract without cause, and awarded damages to MWN as follows:

(1) $37,301 for MAG's filing suit against MWN in Michigan rather than instituting arbitration proceedings, with interest at 10% per annum from January 13, 2005 until the date of payment; (2) $1 as moral damages for failure of MAG to return proprietary information, with interest at 10% per annum from January 13, 2005 until the date of payment; (3) $2,385,128 for commissions due upon improper termination of the Agreement, with interest at 10% per annum from October 6, 2004 until the date of payment; (4) $54,381 representing a portion of the costs of arbitration, with interest at 10% per annum from June 12, 2006 until the date of payment; and (5) $135,608.92 for 50% of MWN's attorney fees and costs, with interest at 10% per annum from June 12, 2006 until the date of payment.

On July 11, 2006, MAG filed an application for correction and interpretation of the Award with the ICC pursuant to Article 29(2) of the Rules. On August 11, 2006, the arbitrator issued his decision on MAG's application for correction which left the Award fully intact. MAG has no further recourse under the ICC rules.

MWN avers that confirmation of the Award is proper pursuant to Tenn. Code Ann. § 29-5-312. The parties' consent to the entry of judgment on the Award is mandatory pursuant to the statute, and is consistent with the arbitration clause in the Agreement. Alternatively, MWN avers confirmation is proper under the Federal Arbitration Act (FAA) because the Agreement evidences a transaction involving commerce within the meaning of §§ 1 and 2 of the FAA. Therefore, MWN moves the court for an order confirming the Award of the arbitrator, directing that judgment be entered thereon.

MAG opposes the confirmation of the arbitration award, arguing that the Award is in clear and manifest disregard of the law. Specifically, MAG alleges that the arbitrator awarded MWN its gross commissions in full, failing to offset those commissions by $450,000 in annual logistics costs or $164,000 in annual MWN cost savings that MWN would have incurred to perform its part of the contract.

Analysis

Upon application of a party to the arbitration to confirm the award, Tenn. Code Ann. § 29-5-312 provides that "the court shall confirm an award, unless, within the time limits hereinafter imposed, grounds are urged for vacating or modifying or correcting the award, in which case the court shall proceed as provided in §§ 29-5-313 and 314." It is well settled that when the parties agree to arbitrate, they are bound by the terms of that arbitration provision. International Talent Group, Inc., v. Copyright management Inc., 769 S.W.2d 217, 218 (Tenn.App. 1989).

In the June 12, 2006 arbitration award, the arbitrator awarded MWN $2,385,128 in future commissions. As noted by the parties, the arbitrator awarded MWN its gross commissions in full, and he refused to offset those commissions by the $450,000 in annual logistics costs or the $164,000 in annual MWN costs savings that MWN ...


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