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Voltage Pictures, LLC v. Gulf Film, LLC, LACV 18-00696-VAP (C.D. Cal. Apr. 17, 2018) [click for opinion]

Between 2013 and 2015, Voltage Pictures and Gulf Film entered into eleven distribution license agreements concerning the distribution of eleven motion pictures in certain countries in the Middle East (the “Distribution Agreements”). The Distribution Agreements called for all disputes to be resolved by binding arbitration under the Independent Film & Television Alliance (“IFTA”) International Arbitration Rules.

A dispute arose between the parties and Voltage Pictures served a notice of arbitration with the IFTA International Arbitration Tribunal in February 2017. The Arbitrator consolidated all of Voltage Pictures’ claims into a single arbitration, which occurred in July 2017. At the conclusion of the hearing, the Arbitrator issued an interim arbitration award (the “Interim Award”), finding that Gulf Film materially breached the Distribution Agreements, and awarded payments and prejudgment interest to Voltage Pictures. After the parties submitted briefing regarding Voltage Pictures’ request for attorney’s fees and Gulf Film’s Motion to Stay Proceedings, the Arbitrator issued a Final Ruling and Award (the “Final Award”), in which the Arbitrator adopted in full the Interim Award, rejected Gulf Film’s Motion to Stay, and awarded attorney’s fees and expenses to Voltage Pictures.

Gulf Film filed a Motion to Modify and Correct the Final Award, which the Arbitrator denied. Voltage Pictures, in turn, filed a Motion for Confirmation in the district court of California. Gulf Film subsequently filed a Motion to Quash in the district court, arguing that Voltage Pictures failed to properly serve the Motion for Confirmation under Rule 4 of the Federal Rules of Civil Procedure. A few weeks later, Gulf Film filed a Motion to Vacate in the district court, arguing that the Final Award must be vacated or modified pursuant to Sections 10 and 11 of the Federal Arbitration Act (“FAA“).

Three motions, therefore, were at issue before the district court of California: (1) Gulf Film’s Motion to Quash; (2) Petitioner’s Motion for Confirmation; and (3) Gulf Film’s corresponding Motion to Vacate or Modify. As for the Motion to Quash, the court considered whether Gulf Film agreed to waive the requirements of Rule 4 by signing the Distribution Agreements, all of which contained a provision by which the parties agreed to accept service of process in accordance with IFTA Rules (which allows service by “any procedure authorized by applicable law”). The court ultimately found that Gulf Film had waived its Rule 4 notice rights by signing the Distribution Agreements, and that service of the Motion to Confirm had been properly effected pursuant to California law, which authorizes service on out-of-state persons by first-class mail.

As for the Motion for Confirmation and corresponding Motion to Vacate or Modify, the court first found that the Arbitrator did not act in excess of her powers or in manifest disregard of the law when she considered Gulf Film’s arguments but found them inapplicable. The court noted that even assuming that the Arbitrator reached incorrect legal conclusions, such a finding would still not justify federal court review of an arbitration award under Section 10 of the FAA, because arbitrators exceed their powers only when the award is completely irrational (i.e., where the arbitration decision fails to draw its essence from the agreement).

The court next rejected Gulf Film’s claim that it had been denied a fair hearing and found that there was no indication that the Arbitrator deprived Gulf Film of its right to submit evidence. Instead, the evidence demonstrates only that the Arbitrator considered and rejected Gulf Film’s arguments on the Motion to Stay, which is insufficient to show that the Arbitrator’s decision substantially prejudiced Gulf Film’s rights.

The court found that Gulf Film similarly failed to provide the requisite specific facts indicating that the Arbitrator was actually biased against it. The fact that the Arbitrator ruled in favor of Voltage Pictures on all issues is insufficient to establish evident partiality—to the contrary, the Arbitrator had carefully considered the arguments and evidence presented by both sides.

Finally, the court considered and rejected Gulf Film’s alternative request to modify the Final Award under Section 11 of the FAA. The court found that modification or correction was unwarranted because the Arbitrator had not made an evident material miscalculation, or based the award upon a matter not submitted to her.

For these reasons, the court denied Gulf Film’s Motion to Vacate and granted Voltage Pictures’ Motion to Confirm the Final Award.

A version of this post originally appeared in the July 2018 edition of Baker McKenzie’s International Litigation & Arbitration Newsletter, which is edited by David Zaslowsky and Grant Hanessian.

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