United States: Court Finds No Exceeding Of Powers Or Manifest Disregard Of The Law In Confirming Allegedly Speculative Arbitration Award

This case concerned an agreement by which Clos La Chance Wines, Inc., a wine producer, appointed AV Brands, Inc., a wine importer and wholesaler, as the exclusive brand agent and distributor of its wine products for the United States and Puerto Rico for a five year period. Pursuant to the agreement, AV Brands was required to use "best efforts" and "commercially reasonable efforts" in staffing the account and selling product, and was subject to yearly goals dictating the number of wine cases it was required to purchase. Several years into the arrangement and pursuant to the agreement's dispute resolution provision, Clos La Chance Wines filed a demand for arbitration alleging that AV Brands breached the agreement by failing to meet those marketing requirements.

In a final arbitration award, Retired Judge William J. Cahill found, among other things, that Clos La Chance Wines was entitled to damages in the amount of $1,739,681, which included $200,000 to compensate it for future time and costs associated with recapturing its market position. Clos La Chance Wines then sought confirmation of the award and this decision followed.

AV Brands challenged Judge Cahill's $200,000 award for lost market share, primarily arguing that in doing so, Judge Cahill (1) exceeded his powers, since contracts generally permit only the recovery of foreseeable damages, and (2) manifestly disregarded California law prohibiting breach of contract damages based on speculative evidence. With regard to the first ground, the court rejected AV Brands' argument, likening it to a claim that Judge Cahill misunderstood the applicable law, which the Court stated is not a valid reason for vacatur. Regarding the latter ground, the Court found that AV Brands overlooked Judge Cahill's finding that while much of the testimony regarding market share damages was speculative, some was not speculative and thus persuasive. Therefore, the Court refused to "re-weigh the evidence" and confirmed the award. Clos La Chance Wines, Inc. v. AV Brands, Inc., Case No. 5:16-cv-04047 (USDC N.D. Cal. June 23, 2017).

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