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Homeland Munitions, LLC v. Purple Shovel, LLC

United States District Court, D. Utah, Central Division

July 12, 2017



          Dee Benson United States District Judge

         This matter is before the Court on Defendant Purple Shovel, LLC's (“Purple Shovel”) Motion for Judicial Confirmation of the Arbitration Award. (Dkt. No. 25.) More specifically, Purple Shovel moves the Court pursuant to the Federal Arbitration Act, 9 U.S.C. §§ 6, 9, and the Utah Uniform Arbitration Act, Utah Code Ann. § 78B-11-123, to confirm the Final Award entered in favor of Purple Shovel by the International Institute of Conflict Prevention and Resolution in Arbitration No. G-17-20-C issued on June 2, 2017, and to enter judgment against Plaintiffs Homeland Munitions, LLC (“Homeland”); Birken Startree Holdings, Corp.; Kilo Charlie, LLC; and LC Defense, LLC (collectively “Plaintiffs” or “Homeland entities”) in the amount of $9, 986, 909.92.

         On June 27, 2017, Plaintiffs filed a timely opposition to the motion, and on July 3, 2017, Defendant replied, rendering the motion ready for decision. Pursuant to civil rule 7-1(f) of the United States District Court for the District of Utah Rules of Practice, the Court elects to determine the motion on the basis of the written memoranda and finds that oral argument would not be helpful or necessary. DUCivR 7-1(f).


         Defendant Purple Shovel, a government contractor that supplies services and products to the United States government, entered into a prime contract with a U.S. government agency in 2015. Purple Shovel later entered into a “Basic Ordering Agreement (BOA) Subcontract Agreement Number Sub-BOA-PS027" with Homeland. The BOA provided that Homeland would supply Purple Shovel with materials and services in support of Purple Shovel's prime contract. Homeland and Purple Shovel also entered into a separate Non-Circumvention Agreement which further reflected and reinforced their intention to enter into an exclusive relationship.

         The BOA included a “Dispute Resolution and Governing Law” clause, Article 20, which contained the following dispute resolution provision:

Each party agrees to timely notify the other party of any claim, dispute or cause of action arising under or related to this Agreement and Orders issued hereunder and to negotiate in good faith to resolve any such claim, dispute or cause of action. If a resolution is unable to be reached between both parties, the dispute may be resolved by arbitration. The arbitration will be conducted in accordance with the Rules for Non-Administered Arbitration of the International Institute for Conflict Prevention and Resolution then in effect. The arbitration will be conducted before an arbitrator who shall be an attorney experienced in federal procurement law. The arbitrator shall have no power to award non-monetary or equitable relief of any sort. It shall also have no power to award lost profits; or consequential, indirect, punitive, exemplary or special damages or any direct damages in excess of the liability cap set forth in the limitation of liability provision included in this Agreement.

(Dkt. No. 9, Ex. A at 14-15.)

         For purposes of this Order, suffice it to say, Homeland failed to perform its obligations under the BOA to provide ammunition to fulfill the orders awarded to Purple Shovel. As a result, Purple Shovel, in order to cover its contractual obligations, had to seek ammunition elsewhere and at a higher cost than had been quoted to it by Homeland, and in some instances Purple Shovel was unable to find the necessary cover. Purple Shovel considered this conduct by Homeland to be a complete breach of the BOA and Non-Circumvention Agreement.

         By letter dated August 5, 2016, Purple Shovel notified Homeland of its claim of breach of the BOA and the Non-Circumvention Agreement. It followed up with a demand letter dated August 22, 2016. Homeland did not respond to either. Accordingly, on September 12, 2016, Purple Shovel served a Notice of Arbitration, which included a full statement of claims asserted against Homeland, Birken Startree and Kilo Charlie pursuant to Article 20 of the BOA.[1] The Homeland entities did not file an answer and no attorney entered an appearance on their behalf. Although the parties had agreed to a “non-administered” arbitration - meaning that the parties would run the arbitration without the assistance of the International Institute of Conflict Prevention Resolution (“the CPR”) - when Homeland failed to participate, Purple Shovel invoked the CPR's assistance to select an arbitrator.

         In December 2016, some discussion ensued between the parties. No resolution resulted. Then, in January of 2017, the CPR selected Michael D. Zimmerman, former Chief Justice of the Utah Supreme Court, as the Arbitrator. Plaintiffs did not object to this appointment. Rather, on February 9, 2017, the Homeland entities filed a “limited appearance” and a Motion to Terminate or Stay the Arbitration. The motion argued the following: (1) that the reference to arbitration under the CPR Rules in Article 20 of the BOA was insufficient to contractually bind Homeland to arbitrate, and (2) that the BOA did not give the arbitral tribunal jurisdiction over Birken Startree and Kilo Charlie, non-parties to the BOA and Non-Circumvention Agreement.

         On February 23, 2017, after review of Homeland's motion to terminate arbitration, Homeland's reply to Purple Shovel's opposition to the motion, and a second motion to stay arbitration and extend time to respond to Purple Shovel's claims, the Arbitrator issued Order No. 2, denying Homeland's motions.[2] In Order No. 2, as a threshold matter, the Arbitrator determined he had authority to determine issues of arbitrability. Additionally, the Arbitrator addressed each of Homeland's arguments in detail and concluded (1) that the arbitration provision was binding on the parties (Order No. 2 at 3-5), [3] and (2) that all of the Respondents - Homeland Munitions, Birken Startree and Kilo Charlie - were bound to the arbitration provision in the BOA (Order No. 2 at 6).[4]

         In early March, the Arbitrator ordered the Homeland entities to either appear in the proceeding and pay the requisite fees or face default. (Order No. 4.) The Homeland entities were to respond by March 20, 2017. (Id.) Instead of filing a response by that date, Homeland moved to stay the arbitration or for an extension of time to respond. The Arbitrator provided an extension of time until April 5, 2017. (Order No. 7.) Homeland failed to respond by the new deadline.

         On April 7, after not receiving a response, the Arbitrator entered default against the Homeland entities, and set a final evidentiary hearing for April 24, 2017, for the purpose of argument on Purple Shovel's Motion for Determination of Breach and Amount of Damages. (Order No. 8.) Despite having been given notice, no one appeared for Homeland at the April 24 hearing and no filings were received from or on their behalf. At the hearing, the Arbitrator raised a number of questions and requested additional information from Purple Shovel. Purple Shovel complied with this request, filing a supplemental brief on May 9, 2017. On May 17, 2017, the Arbitrator held an additional hearing, addressing the issues in the supplemental brief, and then took the matter under advisement.

         On May 23, the Arbitrator issued Order No. 9, concluding that the Homeland entities were in breach of the contract with Purple Shovel, and fixing the amount of damages that would be awarded. The Arbitrator also awarded Purple Shovel “all costs of this arbitration, ” and directed Purple Shovel to submit an itemization of costs. (Order No. 9 at 8.)

         On May 31, 2017, after reviewing Purple Shovel's request for attorneys' fees and expenses, and based on the damage determinations made in Order No. 9, the Arbitrator issued a “Total Final Award” in the amount of $9, 986, 909.92 to Claimant Purple Shovel against Respondents Homeland Munitions, LLC, Birken Startree Holdings, Corp., Kilo Charlie, LLC, and LC Defense, LLC. (Order No. 10, Final Award.)

         As stated above, on June 5, 2017, Purple Shovel filed a Motion for Judicial Confirmation of the Arbitration Award. On June 27, 2017, new counsel entered an appearance on behalf of Homeland. That same day, Homeland filed an Opposition to Purple Shovel's motion, asserting that the arbitration award should be vacated under the Federal ...

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