Cognac Ferrand S.A.S. v. Mystique Brands LLC

At a glance

Parties

Cognac Ferrand S.A.S. (France), petitioner and cross-respondent, v. Mystique Brands LLC (Delaware, United States), respondent and cross-petitioner

Case no.

No. 20 Civ. 5933 (PAE)

Court

U.S. District Court, Southern District of New York (Paul A. Engelmayer, District Judge)

Underlying award(s)

ICDR Final Award of 1 May 2020 by arbitrator Claudia T. Salomon, seated in New York; earlier interim award of June 2012 by arbitrator Philip D. O'Neill, Jr.

Forum and rules

New York Convention, applied through Chapter 2 of the Federal Arbitration Act (9 U.S.C. §§ 201–208); grounds for vacatur under 9 U.S.C. § 10

Treaty

Arbitration clause, § 21.1 of the parties' 2008 import and marketing agreement

Sector

Spirits import and distribution (cognac)

Outcome

The Court denied Ferrand's petition to vacate and confirmed the Award. It denied Mystique's requests for sanctions and denied Ferrand's motion for a preliminary injunction as moot.

Amount

The Award granted Mystique all its fees and costs, which the Court gives as USD 1,960,950 (Award ¶ 155 awards USD 1,873,490.80 as costs in the arbitration). Ferrand's claim of over USD 10,000,000 was dismissed, and its own costs claim of USD 989,433.75 plus ICDR fees was denied.

The dispute

In 2008 Ferrand, a French cognac producer, gave Mystique a five-year exclusive right to import and market some of its products in the United States. Mystique agreed to minimum yearly purchases and to a marketing deal with Snoop Dogg. Ferrand terminated the agreement in May 2009, citing Mystique's insolvency and unpaid royalties to Snoop Dogg. Mystique started an ICDR arbitration in 2010. The arbitration was stayed when Mystique filed for Chapter 7 bankruptcy and the ICDR later closed its file; it resumed as a new ICDR proceeding in December 2017 before a new arbitrator. That arbitrator dismissed all of Ferrand's counterclaims, found Mystique to be the "prevailing party" under § 21.1 of the agreement, and awarded it all its fees and costs. Ferrand asked the Court to vacate only the fee award. It argued that the arbitrator exceeded her powers, acted in manifest disregard of the agreement by ignoring the 2012 dismissal of Mystique's claims and the words "if any" in § 21.1, and issued an award that was not final and definite. Mystique cross-petitioned to confirm the Award and asked for sanctions.

Key holdings

1. The New York Convention governs because Ferrand is incorporated outside the United States. Because the arbitration took place in New York, the FAA's domestic grounds for vacatur apply. pp. 9–10
2. The arbitrator did not exceed her powers under 9 U.S.C. § 10(a)(4). Section 21.1 expressly let her decide which party, if any, prevailed and award that party all its costs and fees. Her view that Ferrand's failed claim for more than USD 10 million made Mystique the prevailing party was at least a "barely colorable justification" for the result. pp. 14–16
3. There was no manifest disregard of the agreement. Giving too little weight to the 2012 dismissal of Mystique's claims is at most a disregard of evidence, which is not a ground for vacatur. How the arbitrator read "dispute" and applied "prevailing party, if any" was contract interpretation, which belongs to her. The Court noted that on de novo review Ferrand's argument that neither party prevailed "might carry the day". pp. 16–19
4. The Award is final and definite. Footnote 158 says the arbitrator "does not need to address" Ferrand's costs in the first arbitration, but the Award expressly denied Ferrand's claim for costs (¶ 157(f)) and denied all claims not expressly granted. Remand for clarification was therefore not needed. pp. 20–23
5. Sanctions were refused under both 28 U.S.C. § 1927 and Rule 11. Ferrand had made no factual misrepresentations and had not acted in bad faith. Its arguments, though they failed "resoundingly", were not frivolous given the unusual facts of the prevailing-party question. pp. 27–31
6. Ferrand's motion for a preliminary injunction against Mystique's enforcement steps in France was denied as moot once the Award was confirmed. Those steps are consistent with confirmation. p. 31

Procedural history

1. March 2010Mystique began an ICDR arbitration in New York, claiming wrongful termination. Ferrand counterclaimed.
2. June 2012Interim award by Philip D. O'Neill, Jr. dismissed Mystique's claims and sent Ferrand's counterclaims to a hearing.
3. January 2013Mystique filed for Chapter 7 bankruptcy. The arbitration was stayed, and the ICDR closed its file in January 2014.
4. 11 December 2017After the bankruptcy closed, Ferrand filed a new notice of arbitration. Claudia T. Salomon was later selected as arbitrator.
5. 1 May 2020Final Award dismissed Ferrand's claims and granted Mystique its fees and costs.
6. 30 July 2020Ferrand petitioned the S.D.N.Y. to vacate the Award. Mystique cross-petitioned to confirm it on 9 September 2020 and sought sanctions.
7. 7 January 2021The Court denied Ferrand's application for a TRO against seizure of its assets in France.
8. 13 January 2021Opinion and Order: vacatur denied, Award confirmed, sanctions denied, preliminary injunction denied as moot.

Tribunal, counsel and experts

Decided by

• Paul A. Engelmayer Judge, U.S. District Court, Southern District of New York

For the claimant

Barry J. Friedberg · Pierre N. Abitbol

For the respondent

Malik Havalic · John Fellas

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Keywords

• New York Convention
• Federal Arbitration Act
• confirmation
• vacatur
• manifest disregard
• excess of powers
• prevailing party
• attorneys' fees
• final and definite award
• ICDR
• Rule 11 sanctions
• 28 U.S.C. § 1927
• preliminary injunction
• enforcement in France
• cognac
• Snoop Dogg
• distribution agreement
• bankruptcy stay

Summary generated with AI from the published documents — refer to the award for the authoritative text.