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Hansen Beverage Co. v. DSD Distributors

December 12, 2008


The opinion of the court was delivered by: Honorable Larry Alanburns United States District Judge


This action for confirmation of an arbitration award, relying on the Federal Arbitration Act ("FAA"), 9 U.S.C. § 9, and the parties' contractual arbitration provision, is before the Court on the motion of Defendant DSD Distributors, Inc. to dismiss or stay Plaintiff Hansen Beverage Company's Petition To Confirm Arbitration Award. Defendant asserts that this Court lacks subject matter jurisdiction because Plaintiff cannot meet the amount-in-controversy requirement to obtain diversity jurisdiction. DSD further contends the case should be dismissed or stayed pending resolution of a parallel Wisconsin state court action to partially vacate the arbitration award.

Defendant's Motion [doc. no. 5] was filed on April 16, 2008, and an Opposition [doc. no. 7] was filed by Plaintiff on May 23, 2008. On June 2, 2008, DSD filed a Reply [doc. no. 9]. The Motion was thereafter taken under submission pursuant to Civil Local Rule 7.1(d)(1). [Doc. No. 10.] After the Motion as taken under submission, Hansen filed an Ex Parte Application requesting permission to file a short surreply [doc. no. 11], which Defendant opposed [doc. no. 15]. Hansen's Ex Parte Application is hereby GRANTED; the Court has considered both the Surreply and DSD's Response in deciding the present Motion. Finally, Defendant has also filed a Supplemental Declaration of Julie Lewis [doc. no. 16], a Second Supplemental Declaration of Julie Lewis [doc. no. 17], and a Supplemental Declaration of Leila Nourani [doc. no. 18]. Defendant's three supplemental declarations were filed to update the Court regarding the status of the proceedings in Wisconsin state court.

Defendant's Motion contains a request that the Court take judicial notice of the documents attached to the Declaration of Leila Nourani. (DSD's Mem. P. & A. Supp. Mot. 2 n.1.) Plaintiff objects to the Exhibit A to the Nourani declaration, which is a Motion filed in Wisconsin state court dated April 4, 2008 with exhibits attached. (See Hansen's Objection to Request for Judicial Notice [doc. no. 7-4].) Hansen alleges the document is not complete because several of the exhibits are not attached. A complete copy of the document is attached as Exhibit 1 to the Declaration of Tanya Schierling [doc. no. 7-2]. Plaintiff's objection is sustained; the Court will consider the complete Motion attached to the Schierling declaration rather than the abridged version attached to the Nourani declaration. The remaining documents of which judicial notice is requested consist of documents, including motions and orders, filed in the Wisconsin state court action and a separate lawsuit in the Central District of California. The Court grants the parties' requests to take judicial notice of these documents. See Kolocotronis v. Benefits Health Care, 2007 WL 2710366, at *3 n.3 (D. Mont. Sept. 13, 2007) (citing inter alia Smith v. Duncan, 297 F.3d 809, 815 (9th Cir. 2002) ("The Court may take judicial notice of matters of public record . . ., including pleadings or documents filed in state or federal courts").

After reviewing the arguments of counsel and the evidence submitted, and for the reasons expressed below, Defendant's Motion is GRANTED.

I. Background

Plaintiff Hansen Beverage Company is a beverage manufacturer based in California, and Defendant DSD is a beverage distributor in Wisconsin. On December 1, 2004, the parties entered a distribution agreement, under which DSD was permitted to distribute eight specifically-listed Hansen products, including three products in the "Monster Energy" line, in certain areas of Wisconsin. (See Distrib. Agreement Exs. A, B.) The contract included an arbitration provision which provided that any disputes arising from the contract would be settled by binding arbitration "conducted by JAMS/Endispute ('JAMS') in accordance with JAMS Comprehensive Arbitration Rules and Procedures" in California. (Distrib. Agreement ¶ 19.) It further provided, "Judgment upon any award rendered may be entered in any court having jurisdiction thereof." (Id.)

On April 25, 2007, Hansen served DSD with a demand for arbitration in San Diego, California. (Schierling Decl. Ex. 1 at 54-55.) Plaintiff alleged DSD had breached the distribution agreement by distributing a competing product. (Id. at 25, 35.) Hansen sought damages for breach of contract and a declaration that the Wisconsin Fair Dealership Law did not apply to the parties' business relationship and Hansen was entitled to terminate the distribution contract. (Id. at 59-60.) The same day, Hansen also filed a complaint in the U.S. District Court for the Central District of California seeking a declaration that the arbitration clause was valid, enforceable, and binding with regard to the parties' dispute. (Id. at 30-38.) Thereafter, DSD filed suit in Wisconsin state court on July 20, 2007, seeking a declaration that the Wisconsin Fair Dealership Law applied to the dispute. (Schierling Decl. Ex. 2 at 2.) DSD also sought a temporary injunction preventing any other distributors from distributing Hansen products within DSD's territory. (Id. at 11-13.) Upon Hansen's motion, the Wisconsin state court stayed proceedings to permit the arbitration and the federal lawsuit pending in the Central District to go forward. (Nourani Decl. Exs. C, D.)

The parties proceeded to arbitration before the Honorable J. Richard Haden, retired judge and arbitrator for JAMS. An evidentiary hearing was held on January 22-25, 2008, and an interim award was issued on February 21, 2008. Due to the arbitration, the action in the Central District was dismissed as moot on April 1, 2008. (Nourani Decl. Ex. F.) In the arbitration proceedings, DSD asserted that Hansen's breach of contract claims were without merit, and additionally it sought a determination that DSD was entitled to distribute a new product manufactured by Hansen -- "Java Monster" -- and that Hansen had constructively terminated the contract by hiring a different distributer for Java Monster in DSD's exclusive territory. (Id. at 72-75.)

The final arbitration award was issued on April 4, 2008. (See Final Award [doc. no. 4, filed under seal].) The arbitrator found DSD was protected as a "dealer" under the Wisconsin Fair Dealership Law, DSD had not breached the dealership contract, and Hansen did not have good cause to terminate the contract. (Final Award at 17-18.) Judge Haden also found, however, that DSD was not entitled to distribute the Java Monster product and Hansen did not constructively terminate the contract. (Id. at 18.) Thus, no monetary damages or attorneys' fees were awarded to either party. (Id.)

On April 4, 2008, the day the final arbitration award was issued, DSD filed a motion in the Wisconsin state court action to partially vacate or modify the award, alleging that the denial of damages or attorneys' fees to DSD violated Wisconsin public policy. (Schierling Decl. ¶ 2, Ex. 1.) Also on April 4, 2008, Hansen filed its Petition to Confirm Arbitration Award in this Court. The present Motion to Dismiss or Stay was filed on April 16, 2008.

On May 15, 2008, the Wisconsin state court issued an order declining to exercise jurisdiction over Defendant's motion to partially vacate the arbitration award. (Lewis Decl. Supp. Reply Ex. A at 5-7.) The order stated the following:

[I]t is my opinion that the arbitration should be completed and finalized in Federal Court in the State of California without intervention of this Court. After the matter has been completed, if there still exists issues to be determined by this Court, we will entertain those issues. However, to do so at this point is premature.

It is my understanding that there will be a hearing in federal court regarding the arbitrator's decision. It is my further understanding that that will take place in June, 2008. After the determination has been made, any party who wishes to come before this Court for what you believe would be further relief under the jurisdiction of this Court may do so. (Id. at 7.) DSD petitioned for leave to appeal the Wisconsin court's order, but leave to appeal was denied. (Id. at 3; Supplemental ...

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