United States District Court, N.D. California
International Petroleum Products and Additives Company, Inc., Petitioner,
Black Gold, S.A.R.L., Respondent.
ORDER GRANTING MOTION TO CONFIRM ARBITRAL AWARD AND
DENYING COUNTER-MOTION TO VACATE, MODIFY, OR CORRECT
ARBITRATION AWARD RE: DKT. NOS. 2, 27
GONZALEZ ROGERS UNITED STATES DISTRICT COURT JUDGE.
International Petroleum Products and Additives Company, Inc.
(“IPAC”) filed this motion to confirm the
arbitral award against respondent Black Gold, S.A.R.L.
(“Black Gold”) issued by Mark C. Dosker of the
American Arbitration Association (“AAA”).
Thereafter, Black Gold filed an opposition and counter-motion
requesting that the Court vacate, or in the alternative,
modify and/or correct the arbitration award.
carefully considered the papers submitted, and for the
reasons set forth more fully below, the Court
Grants IPAC's motion and
Denies Black Gold's
following background is taken from the Petition and the Final
Award of the Arbitrator unless otherwise noted.
a petroleum additives developer and manufacturer based in
Dublin, California. Black Gold is a Monegasque company that
sells and distributes petroleum products and additives. Its
sole employees and shareholders are husband and wife, Lorenzo
and Sophia Napoleoni.
current dispute arises out of three contracts which were
intended to govern Black Gold's role as sales
representative and distributor for IPAC. The first contract,
the “Sales Representative Agreement, ” became
effective on January 1, 2016. Pursuant to Section 1 of this
agreement, Black Gold became the sales representative for a
number of IPAC's existing and prospective customers.
Section 5(a) provided a term of three years and an automatic
renewal for an additional three years, unless properly
terminated earlier. The second contract, the “Exclusive
Distributor Agreement, ” also became effective January
1, 2016, and Section XV provided for a one-year term
(expiring January 1, 2017) unless properly terminated
earlier. Thereunder, Black Gold was designated the exclusive
distributor of certain IPAC products for several preexisting
IPAC customers. Section VII and Schedule B contemplated that
Black Gold would develop additional opportunities to sell
IPAC products in the petroleum additives resale market. Both
agreements required Black Gold to maintain the
confidentiality of IPAC's confidential
information and contained arbitration agreements.
(Sales Representative Agreement, § 19; Exclusive
Distributor Agreement, § XVI(E).)
March 1, 2018, the parties terminated the Sales
Representative Agreement with a Termination Agreement and
Mutual Release. (Dkt. No. 16, Ex. A (“Termination
Agreement”).) The Termination Agreement purported to
release both parties “from and against any and all
actions, claims, suits, payment obligations (except as
otherwise expressly set forth in Section 4 ) or other
obligations or liabilities of any nature whatsoever, whether
known or unknown . . . directly or indirectly arising out of
(or in connection with) the [Sales Representative]
Agreement[.]” (Id. § 3.) Notably, Section
4 of the Termination Agreement, to which the release
provision cited, provided that sections 8, 12, and 13 of the
Sales Representative Agreement would “continue in
accordance with their original terms beyond termination of
the Agreement.” (Id. § 4.) Further, it did
not contain a general release under California Civil Code
The Arbitration Proceedings
7, 2018, approximately two months after the parties
terminated their relationship, IPAC filed an arbitration
demand before AAA, claiming that Black Gold and the
Napoleonis breached the Sales Representative and Exclusive
Distributor Agreements, their duty of good faith and fair
dealing, and their duty of loyalty. IPAC also pursued claims
for tortious interference with contractual relations and
misappropriation of trade secrets. Specifically, IPAC alleged
that during the term of the agreements, Black Gold's CEO,
Mr. Napoleoni, formed a competitor company (PXL) with the
help of an ex-IPAC employee, using “sensitive and
confidential IPAC information.” IPAC alleged that
revenues from IPAC customer accounts assigned to Black Gold
suffered as a result of Mr. Napoleoni's work for PXL.
IPAC further alleged that after termination, Black Gold
retained IPAC confidential information and failed to make any
effort to transfer to IPAC viable business with respect to
Black Gold's distribution customers, all in violation of
their agreements. IPAC sought damages, attorneys' fees
and costs, and injunctive relief.
September 17, 2018, Arbitrator Dosker issued Preliminary
Order No. 3, wherein he determined that he had arbitral
jurisdiction over IPAC's claims brought under the Sales
Representative and Exclusive Distributor Agreements. (Dkt.
No. 16, Ex. B (“Prelim. Order”), at 3-6.)
Specifically, Arbitrator Dosker determined that “[t]he
Termination Agreement did not end the continuing obligations
of the Sales Representative Agreement associated with its
Sections 8, 12, and 13, ” and thus, he had arbitral
jurisdiction over claims arising out of the Sales
Representative Agreement. (Id. at 3, 8.) Likewise,
Arbitrator Dosker found that certain “pertinent
obligations under the Exclusive Distributor Agreement
continue[d] after the duration of that agreement.”
(Id. at 6.) Arbitrator Dosker found, however, that
he lacked arbitral jurisdiction over the claims brought
against the Napoleonis and the claim arising under the
Termination Agreement. (Id. at 6-7.)
IPAC and Black Gold participated in a three-day arbitration
hearing. On May 29, 2019, following the hearing and briefing
by the parties, Arbitrator Dosker issued an arbitration award
in favor of IPAC. In his order, Arbitrator Dosker found that
Black Gold, through Mr. Napoleoni, breached sections 8 and 12
of the Sales Representative Agreement and sections VIII.B.
and XV.C. of the Exclusive Distributor Agreement.
Specifically, Arbitrator Dosker made the following factual
the term of the parties' agreements, Mr. Napoleoni
discussed with then-IPAC employees Steven Plitt and Dr.
Jeffrey Crow the formation of a new business to compete with
IPAC. Despite Dr. Crow raising concerns that it would be
difficult to form such a business without misusing IPAC's
confidential information, Messrs. Napoleoni and Plitt
proceeded to form PXL, a company that formulated, made,
marketed, and sold products that directly competed with
IPAC's products. Further, IPAC's expert, whom the
arbitrator found to be experienced, independent, and
accurate, testified that PXL's products were “so
strikingly similar to IPAC's products that they [could]
be called knock-off products.” (Final Award at 21.)
Messrs. Napoleoni and Plitt formed PXL while in possession of
hundreds of documents containing IPAC's confidential
information. For example, during the relevant period, Mr.
Plitt e-mailed himself a confidential, password-protected
Microsoft Excel file detailing the identity, vendor, price,
and relative composition for each component in each of
light of the evidence, the arbitrator concluded that Black
Gold, through Mr. Napoleoni, caused IPAC's confidential
information to be misappropriated and misused to formulate,
make, market, and sell PXL products, which in turn, caused a
decline in IPAC's sales. (Id.) Black Gold failed
to “cooperate with IPAC, to surrender all records to
IPAC, and to do whatever [was] reasonably required by IPAC in
order to continue a viable business with IPAC customers
served by the distributor.” (Id. at 20-21.)
Arbitrator Dosker ordered Black Gold to pay IPAC $1, 094,
193.58, comprised of $687, 702.56 in damages, $305, 138.65 in
fees and costs, and $101, 352.37 in AAA fees and costs. In
addition, he enjoined Black Gold from, among other things,
using or disclosing IPAC's confidential information.
9 of the Federal Arbitration Act (“FAA”) provides
that when presented with an application to confirm an
arbitration award, the district court “must grant an
order unless the award is vacated, modified, or
corrected.” 9 U.S.C. § 9. “‘Neither
erroneous legal conclusions nor unsubstantiated factual
findings justify a federal court review of an arbitral
award[.]'” Bosack v. Soward, 586 F.3d
1096, 1102 (9th Cir. 2009) (quoting Kyocera v.
Prudential-Bache T Servs., 341 F.3d 987, 994 (9th Cir.
2003) (en banc)). Rather, grounds for vacating an award are
limited to those specified by statute. Hall St. Assocs.,
L.L.C. v. Mattel, Inc., 552 U.S. 576, 584 (2008)
(holding Section 10 provides the FAA's exclusive grounds
for vacatur of an arbitration award). Thus, the role of the
courts in reviewing arbitration awards is extremely
circumscribed. Southern California Gas Co. v. Utl.
Workers Union of Am., Local 132, AFL-CIO, 265 F.3d 787,
792 (9th Cir. 2001) (citing Stead Motors v. Auto.
Machinists Lodge, 886 F.2d 1200, 1208 n.8 (9th Cir.
1989) (en banc)). The confirmation of an arbitration award is
meant to be a summary proceeding. G.C. & K.B. Invs.,
Inc. v. Wilson, 326 F.3d 1096, 1105 (9th Cir. 2003).
authorizes courts to vacate an award when (1) the award was
procured by corruption, fraud, or undue means; (2) there was
evident partiality or corruption in the arbitrators, or
either of them; (3) 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 any other misbehavior by which the
rights of any party have been prejudiced; or (4) the
arbitrators exceeded their powers, or so imperfectly executed
them that a mutual, final, and definite award upon the
subject matter was not made. 9 U.S.C. § 10(a).
requests that the Court confirm the arbitration award on the
grounds that its motion to confirm was timely filed and none
of the exceptions to confirmation are applicable. In
addition, IPAC contends that it is entitled to attorneys'
fees and costs post-dating the arbitral award. Black Gold
counters that the Court should vacate, modify, or amend the
arbitration award on the grounds that (a) the award was
procured by corruption, fraud, or undue influence, and (b)
the arbitrator exceeded his powers. The Court considers each in
Corruption, Fraud, Or Undue Means
Gold argues for vacatur on the grounds the award was procured
by corruption, fraud, or undue means. For a claim of fraud, the
objecting party must show by clear and convincing evidence
that the fraud was not discoverable by due diligence before
or during the proceeding, and materially related to the
submitted issue. A.G. Edwards & Sons, Inc. v.
McCollough, 967 F.2d 1401, 1404 (9th Cir. 1992),
cert. denied, 506 U.S. 1050 (1993) (citing
Lafarge Conseils Et Etudes, S.A. v. Kaiser Cement &
Gypsum Corp., 791 F.2d 1334, 1339 (9th Cir. 1986)). An
appearance of impropriety is not sufficient to establish
fraud or bias under the FAA. Arizona Elec. Power Co-op.
v. Berkeley, 59 F.3d 988, 993 (9th Cir. 1995). Further,
to vacate an award on the grounds of “undue means,
” the proponent must show that the ground of
“undue means” was not discoverable before the
award was made and that it caused the award to be given.
Id. at 1404. Courts will vacate an award only where
the objecting party has demonstrated that the misconduct
actually prejudiced the party's rights. Weiner v.
Original Talk Radio Network Inc., No. 10-CV-05785 YGR,
2013 WL 1856568, at *7 (N.D. Cal. May 2, 2013),
aff'd, 620 Fed.Appx. 568 (9th Cir. 2015).
Gold asserts three specific objections. While ostensibly
proffered under the corruption, fraud, and undue means
exception, each is more aptly described as disagreements with
evidentiary rulings not sufficient to support vacatur. Thus:
Plitt Email and Attachment
Black Gold contends that the arbitrator improperly admitted
and considered as evidence an email and attachment that Mr.
Plitt sent to himself, which purportedly was never
authenticated or subject to cross-examination by a
authentication, Preliminary Order No. 4, issued by Arbitrator
Dosker prior to the merits hearing, provided that
“[f]ormal rules of evidence shall not apply in the
merits hearing of this arbitration” and “[t]he
authenticity of documents shall be presumed unless a specific
objection is raised.” (Dkt. No. 31-7, ¶ 20.) When
the referenced email was introduced during the hearing, Black
Gold's counsel objected, then agreed with the arbitrator
that it would address the objection in post-hearing briefing.
(Dkt. No. 31-3 at 9.) It is not clear whether Black Gold raised
this objection during post-briefing but, in either event,
such an evidentiary objection does not support a finding of
fraud or undue means.
respect to cross-examination, IPAC presents evidence
demonstrating that the referenced email and its attachment
were introduced during the direct examination of Dr. Crow,
one of IPAC's witnesses, who Black Gold's counsel
cross-examined. Black Gold's counsel also cross-examined
IPAC's CEO, Brian Cereghino, about the document's
attachment. Thus, Black ...