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Lawyers, other representatives, expert(s), tribunal’s secretary

Final Award

I. INTRODUCTION

A. Parties

1.
Claimant Cognac Ferrand SAS ("Ferrand" or "Claimant") is a French company that produces and sells Cognac under the brand "Cognac Landy" and other brands, other distilled spirits, such as gin and rum, and fruit liquors.1
2.
Claimant is represented by the following counsel:

Barry J. Friedberg
Leonard A. Rodes
Trachtenberg Rodes & Friedberg LLP
545 Fifth Avenue
New York, NY 10017
(212) 972-2929
bfriedberg@trflaw.com

Pierre N. Abitbol
Abitbol & Cherry, LLP
545 Fifth Avenue
New York, NY 10017
(212) 682-7111
pierre.a@abitbolaw.com

3.
Respondent Mystique Brands, LLC ("Mystique" or "Respondent") is a limited liability company organized and existing under the laws of the state of Delaware that imports and markets certain liquors and spirits in the United States.2 Among the investors in Mystique was Royal Wine Corp. ("Royal Wine"), a family-owned kosher wine company.3
4.
Respondent is represented by the following counsel:

John Fellas
Malik Havalic
Joanne Liu
Hughes Hubbard
One Battery Park Plaza
New York, NY 10004
(212) 837-6000
john.fellas@hugheshubbard.com
malik.havalic@hugheshubbard.com
joanne.liu@hugheshubbard.com

Prof. Jack J. Coe Jr.
Pepperdine University
24255 PCH
Malibu, CA 90263
jack.coe@pepperdine.edu

5.
Ferrand and Mystique are collectively referred to as the "Parties" and each individually as a "Party."

B. The Arbitrator

6.
On March 30, 2018, the International Center for Dispute Resolution ("ICDR") appointed Claudia T. Salomon as the sole arbitrator ("Arbitrator"). Ms. Salomon's contact details are as follows:

Claudia T. Salomon
Latham & Watkins
885 Third Ave
New York, NY 10022
+1,212,906.1230
Claudia.Salomon@lw.com

C. Arbitration Agreement, Governing Law and Procedural Rules4

7.
The jurisdiction of the Arbitrator is derived from the arbitration agreement contained in Section 21.1 of the Exclusive Importing and Marketing Agreement entered as of March 5, 2008 (the "Agreement"),5 which states:

Any dispute or claim arising out of or related to this Agreement, or the interpretation, making, performance, breach, validity, or termination hereof, which has not been resolved by negotiation, shall be finally settled by binding arbitration under the then applicable International Arbitration Rules of the American Arbitration Association International Center for Dispute Resolution (the "AAA Rules") by one (1) arbitration appointed in accordance with the AAA Rules. The arbitration shall be held in New York, New York. The arbitrator shall have the power to decide all questions of arbitrability. The arbitration proceedings shall be governed procedurally by the AAA Rules, without reference to state arbitration law, and at the request of either party, the arbitrator will enter an appropriate protective order to maintain the confidentiality of information produced or exchanged in the course of the arbitration proceedings. The final judgment of the arbitrator shall be in the form of a reasoned, written opinion, and shall be issued within sixty (60) days of the conclusion of the arbitration proceeding. Judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction…

8.
The Agreement is governed by the laws of the State of New York. Section 18 of the Agreement states:

This Agreement shall be governed by with [sic] the laws of the State of New York, without reference to conflict of laws principles.

9.
The applicable procedural rules governing this proceeding are the ICDR's International Arbitration Rules.6

II. PROCEDURAL HISTORY

A. First Arbitration

10.
On March 2, 2010, Mystique initiated ICDR Case No. 50-155 T 00150 10 (the "First Arbitration,") against Ferrand, asserting that Ferrand improperly terminated the Agreement, among other claims.7 In its Answer and Counterclaims, filed April 14, 2010, Ferrand asserted that it was contractually entitled to terminate the Agreement because Mystique was insolvent.8 Ferrand also asserted counterclaims, arguing, inter alia, that Mystique breached the Agreement by failing to make certain royalty payments, and that Mystique committed fraud when it induced Ferrand to enter into the Agreement based upon representations of financial solvency and induced Ferrand not to terminate the Agreement earlier.9
11.
On July 12, 2010, Philip D. O'Neill, Jr. ("O'Neill") was appointed as the sole arbitrator in the First Arbitration, and the Parties subsequently amended their claims and counterclaims.10 Specifically, Mystique asserted a breach of contract claim for Ferrand's alleged wrongful termination of the Agreement and alleging, inter alia, that Ferrand was required to pay $251,949, or in the alternative $7,908,000. Ferrand denied the allegations and asserted counterclaims for fraud or in the alternative for negligent misrepresentation, and breach of contract, alleging, inter alia, that Mystique failed to make the required royalty payments to Snoop Dogg, failed to cause Royal Wine to purchase the required minimum amounts of the product, failed to advise Ferrand that it was insolvent, and failed to advise Ferrand that it had terminated operations. In its counterclaims, Ferrand sought damages in an amount not less than $4.5 million.
12.
In the First Arbitration, Ferrand and Mystique each requested summary judgment or partial summary judgment. Ferrand sought summary dismissal of Mystique's claims on the ground that Ferrand's termination of the Agreement was lawful pursuant to Section 14.1(i)-(ii) of the Agreement due to Mystique's insolvency and/or uncured material breach.
13.
Mystique sought partial summary judgment, seeking dismissal of Ferrand's first three counterclaims, namely for breach of contract, fraudulent misrepresentation in the inception of the relationship and negligent misrepresentation. On June 1, 2012, O'Neill issued the Interim Award in the First Arbitration.11
14.
O'Neill granted Ferrand's motion for summary judgment and dismissed Mystique's claims, finding that Ferrand's termination of the Agreement was lawful pursuant to Section 14.1(i)-(ii) of the Agreement due to Mystique's insolvency and/or uncured material breach. On the question of insolvency, the Interim Award states that "the undisputed material facts show [Mystique] was insolvent at the time of termination in early May 2009, if not before."12 O'Neill rejected the three affirmative defenses raised by Mystique, namely, first, that Section 365(e) of the Bankruptcy Code precludes Ferrand's reliance on Section 14.1 of the Agreement; second, the doctrine of waiver, and third, the position that Ferrand violated the implied covenant of good faith and fair dealing by conspiring to and actually undermining Mystique's ability to perform under the Agreement.13
15.
With regard to the third affirmative defense (breach of implied covenant of good faith and fair dealing), O'Neill found that:

[Ferrand] had an express right to terminate under the Agreement for insolvency and properly exercised it, as found and concluded above. In that circumstance, the claimed breach of the implied covenant of good faith does not nullify the express contractual term or exercise thereof as a matter of law... In short, [Ferrand] was within its rights to terminate and did so properly such that, as a matter of law, depriving [Mystique] of the right to receive the "fruits of the contract" was not wrongful, but instead was justified in fact and under the law.14

16.
On the question of uncured material breach, the Interim Award states that "[t]here is no genuine issue of fact as to [Mystique's] actual awareness of [Ferrand's] contention that it was in material breach for failure to pay the endorsement royalty, or that money was owed."15 The Interim Award further states that Mystique "further admits non-payment of the Snoop Dogg endorsement royalties."16 The Interim Award then concludes:

Accordingly, since [Ferrand] substantially complied with the 30 day notice/cure requirement of the Agreement (Ex. 29) by actual notice to [Mystique] at its most senior levels of control, and terminated (Ex. 45) pursuant to paragraph 14.1(ii) of the Agreement, in circumstances where [Mystique] admits it did not pay the endorsement royalties, and its excuse of needing a tax identification number is without any factual basis (since the uncontradicted evidentiary record reflects the necessary information was actually provided), summary judgment in favor of [Ferrand] is appropriate on this claim, as well as on insolvency grounds, as explained above.17

17.
On Mystique's motion for partial summary judgment, seeking dismissal of Ferrand's breach of contract claim, O'Neill rejected Mystique's contract interpretation arguments and stated, Ferrand's "termination was proper on the ground of [Mystique's] insolvency, as reflected above," and "to the extent that [Mystique] seeks summary determination on [Ferrand's] breach of contract claim in so far as it relates to the Snoop Dogg endorsement obligations, the initial portion of this INTERIM AWARD also resolves that issue against [Mystique] for the reasons stated."18
18.
The dispositive portion of the Interim Award states that Ferrand's counterclaim for fraud in the inception was dismissed, "but solely to the extent that, if at all, it is grounded upon a duty arising from an implied contractual obligation of good faith and fair dealing," and dismissed Ferrand's counterclaim "for damages beyond those permitted under paragraph 19 of the Agreement, but without prejudice to possible assertion in an appropriate judicial forum,"19 and "[Ferrand]'s other counterclaims and remedies sought for them are to be tried on remaining contested issues, except to the extent there is issue preclusion by virtue of findings and conclusions set forth in this INTERIM AWARD."20
19.
On October 2, 2012, Ferrand produced an expert report from Pascal Poulain, KPMG, which concludes that Ferrand suffered lost profits of $5,491,000 ("Poulain Report").21
20.
On December 21, 2012, the ICDR issued a notice of a three-day evidentiary hearing for April 23-25, 2013.22 Also on December 21, 2012, O'Neill asked the Parties to identify the issues in dispute to be decided in the subsequent phase of the First Arbitration.23 As reflected in the January 4, 2013 letter from Mystique's counsel to O'Neill, the Parties were in dispute at that time regarding which issues remained to be decided. Notably, the Parties disagreed whether it was still to be decided inter alia "[w]hether the failure to pay Snoop Dogg was a 'material breach' for the purpose of calculating damages, as distinguished from affording Cognac Ferrand the right to terminate," and "[w]hether Mystique had a continuing obligation to purchase after Cognac Ferrand made the decision to terminate the Agreement, and consequently whether Cognac Ferrand can recover damages for such period of time."24

B. Bankruptcy and Closure of First Arbitration

21.
On January 22, 2013, Mystique filed for Chapter 7 Bankruptcy in the Southern District of New York (No. 13-10187 (SMB) (the "Bankruptcy Proceedings").25 The schedule filed with the Petition listed 99 creditors holding unsecured, nonpriority claims, including Ferrand's claim of $5,491,000.26 Ferrand's claim was the only one shown as "disputed."27
22.
On January 28, 2013, the ICDR placed the First Arbitration in "abeyance... by virtue of the Notice of Chapter 7 Bankruptcy Case."28
23.
On March 4, 2013, Ferrand filed a Proof of Claim in the Bankruptcy Proceedings in the amount of $5,491,000, plus interest, costs and attorneys' fees, with a Rider specifying that the claim is identical to its arbitration claim.29 At the same time, Ferrand filed a motion to lift the automatic stay as it applied to the First Arbitration.30 Then, on April 4, 2013, a hearing was held in the Bankruptcy Proceedings, in which the Bankruptcy Judge indicated that he was "not inclined to grant the motion" to lift the automatic stay.31
24.
The following week, on April 11, 2013, Ferrand informed the ICDR of the status of the motion.32 On May 28, 2013, while Ferrand's motion to lift the stay was still pending, the ICDR notified the Parties that the First Arbitration "was placed in abeyance pending the bankruptcy hearing in Early May."33 In that same email, the ICDR requested a "status update" from the Parties following the bankruptcy hearing.34
25.
On June 14, 2013, in the Bankruptcy Proceedings, Ferrand withdrew "without prejudice" its motion to lift the automatic stay.35
26.
On June 18, 2013, Ferrand responded to the ICDR's request for a status update as follows:

"This is to inform you that Cognac Ferrand has withdrawn its motion [to lift the automatic stay] before the bankruptcy court. This effectively ends the arbitration proceeding. I would appreciate it if the ICDR could return to me any unused portion of the fees advanced by Cognac Ferrand in a check made to 'Abitbol & Cherry, LLP, as attorneys.'"36 Pursuant to Ferrand's request, the ICDR refunded the unused portion of the fees.37

27.
On November 20, 2013, the ICDR wrote to the Parties in the First Arbitration, stating that the First Arbitration was placed in "abeyance on or about January 28, 2013" by virtue of the Bankruptcy Proceedings, and asking the Parties to inform the ICDR "if there is any reason our file should remain open" or otherwise, "the ICDR will close its file."38 No reason was provided, and the ICDR subsequently closed its file in the First Arbitration.
28.
The Bankruptcy Trustee subsequently filed claims against Royal Wine,39 but those claims were dismissed with prejudice. On June 1, 2017, the Trustee filed a "Report of No Distribution," reporting that "there is no property available for distribution from the estate[…]"40 On October 25, 2017, the Bankruptcy Proceedings were closed,41 and the automatic stay was thus lifted.

C. Current Arbitration

29.
On December 1, 2017, Ferrand sought to reinstate the First Arbitration and re-schedule the evidentiary hearing on its counterclaim.42 On December 5, 2017, the ICDR responded that the First Arbitration was "closed administratively on or around January 24, 2014" and advised Ferrand that "once a case is marked closed, it may only be reopened by filing a new Notice of Arbitration along with the appropriate filing fee."43 The ICDR also explained that it destroys any case records after 18 months of closure per its file destruction policy and thus does not have access any longer to any documents that were filed in the First Arbitration."44
30.
On December 19, 2017, Ferrand filed this arbitration against Mystique, supported by what was styled as "Amended and Restated Counterclaims."45 In its Counterclaims, Ferrand states that it "renews" its counterclaims from 2010 and asserts claims for breach of contract and attorneys' fees and costs. Specifically, Ferrand asserts that "the Interim Award has already established that Mystique is liable to Ferrand for breach of contract in an amount to be determined at an evidentiary hearing."46
31.
In early 2018, Royal Wine filed a declaratory judgment action in New York State Supreme Court (the "New York Action"), seeking a declaration that it is not the alter ego of Mystique. In that case, Royal Wine sought a temporary restraining order and preliminary injunction to stay this arbitration, which was subsequently denied.47
32.
After the Arbitrator was appointed, the parties were asked to confer on various procedural and logistical issues, including scheduling. On May 8, 2018, the Parties each made respective submissions, in which (a) Ferrand took the position that the Interim Award resolved most of the matters at issue, and this arbitration should address the quantum of Ferrand's direct lost profits damages claim and its claim for an award of costs and fees; and (b) Mystique took the position that there are three threshold issues that needed to be resolved by the Arbitrator: (i) whether Ferrand waived its right to arbitrate against Mystique when it terminated its prior arbitration against Ferrand; (ii) whether this arbitration should be stayed pending the outcome of the New York Action; and (iii) if this arbitration is to continue, what was determined in the Interim Award and whether those determinations are entitled to preclusive effect (collectively, the "Preliminary Issues").
33.
On May 9, 2018, a Preparatory Conference was attended by counsel for the Parties, and the Arbitrator issued Procedural Order No. 1, setting out the Procedural Timetable for addressing the Preliminary Issues. Mystique's Opening Brief was filed on May 30, 2018; Ferrand's Response was filed on June 20, 2018; Mystique's Reply was filed on July 6, 2018; and Ferrand's Sur-Reply was filed on July 12, 2018 (dated July 13, 2018).
34.
On July 24, 2018, a hearing on the Preliminary Issues was held at the New York office of Latham & Watkins, attended by counsel for the Parties. On August 10, 2018, following a request from the Arbitrator, the Parties each submitted briefing, addressing the preclusive effect, if any, of the Interim Award if this arbitral proceeding is considered a new arbitration, rather than a continuation of the First Arbitration; and on August 15, 2018, the Arbitrator received the transcript of the hearing on the Preliminary Issues.
35.
On October 1, 2018, after considering the Parties' submissions and argument at the hearing, the Arbitrator issued Procedural Order No. 2, concluding as follows: (a) Ferrand had not waived its right to pursue its claims in this arbitration; (b) Mystique's request that this arbitration be stayed is rejected; (c) the Interim Award in the First Arbitration did not establish Mystique's liability on Ferrand's breach of contract claims; rather, the Interim Award more narrowly addressed the Parties' motion for summary judgment and partial summary judgment, and Ferrand never moved for summary judgment on its breach of contract claim; instead, Ferrand moved for summary judgment on the question of whether it was entitled to terminate the Agreement, which is a separate question and presents different standards of proof; moreover, the Interim Award did not dispose of Mystique's affirmative defenses; instead, the Interim Award states that Mystique's affirmative defenses failed as a matter of law when deployed to support Mystique's breach of contract claim against Ferrand, but they were not considered in the context of a defense against Ferrand's breach of contract claim against Mystique; therefore, this arbitration will entail a hearing on the merits and not solely on the damages phase; (d) Ferrand's claim in the Bankruptcy Proceeding is not res judicata with regard to its damages claim in this arbitration; (e) the Parties are ordered to meet and confer on the appropriate pre-hearing procedures and procedural timetable and provide a report to the Arbitrator on their areas of agreement and disagreement by October 10, 2018; and (f) all cost allocation issues are reserved.
36.
On December 6, 2018, Ferrand filed its Second Amended and Re-Stated Counterclaims; on January 14, 2019, Mystique filed its Answering Statement and Counterclaims; and on March 22, 2019, Ferrand filed its Reply to Counterclaims.
37.
On March 19, 2019, the Arbitrator issued Procedural Order No. 3, with the Procedural Timetable for the remainder of the proceedings, including, inter alia, a document production phase, deadlines to make requests for third-party discovery, pre-hearing submissions, and an evidentiary hearing (the "Procedural Timetable"). Procedural Order No. 3 provided that the exchange of documents shall be guided by the Rules on the Taking of Evidence in International Commercial Arbitration issued by the International Bar Association (the "IBA Rules"), and the Parties shall submit their respective positions to the Arbitrator regarding document requests in the form of Redfern Schedules.
38.
On March 29, 2019, Ferrand submitted a letter, seeking leave, pursuant to Article 29.1 of the ICDR Rules to make a motion to dismiss certain of Mystique's defenses and counterclaims asserted in its Answering Statement and Counterclaims. On April 5, 2019, Mystique submitted a letter, opposing Ferrand's application for leave to file a motion to dismiss. On April 7, 2019, the Arbitrator issued Procedural Order No. 4, denying Ferrand's request for leave to file a motion to dismiss.
39.
On April 18, 2019, the Arbitrator issued subpoenas to W.J. [Person 1] & Sons Ltd., and [Person 2], requested by Mystique, which were not objected to by Ferrand. By agreement of the parties, Mystique obtained the testimony of Mr. [Person 1] and Mr. [Person 2] via deposition, rather than during an evidentiary hearing, without the Arbitrator present.
40.
On April 25, 2019, the Parties submitted to the Tribunal two Redfern Schedules, and on April 26, 2019, the Arbitrator issued Procedural Order No. 5, attaching the Redfern Schedules reflecting the Arbitrator's dispositions of the Parties' disclosure disputes.
41.
On May 6, 2019, the Arbitrator issued a Confidentiality Order, agreed by the Parties on May 3, 2019.
42.
In accordance with the Procedural Timetable, the Parties submitted the following pre-hearing briefs, along with witness statements, expert reports and documentary evidence: Claimant's Opening Pre-Hearing Brief, dated August 9, 2019; Respondent's Pre-Hearing Brief, dated September 20, 2019; Claimant's Pre-Hearing Reply Brief, dated October 18, 2019; Respondent's Pre-Hearing Reply Brief, dated November 15, 2019.
43.
Ferrand submitted the following witness statements: Direct Testimony of [Person 3] dated August 9, 2019; Reply Statement of [Person 3] dated October 18, 2019. Mystique submitted the following witness statements: Witness Statement of [Person 4] dated September 20, 2019; Reply Witness Statement of [Person 4] dated November 15, 2019; Witness Statement of [Person 5] dated November 15, 2019.
44.
Ferrand submitted the following expert reports: Expert Report of Sylvie David dated August 2, 2019; Response to the report issued by A. Flower, by Sylvie David dated October 17, 2019. Mystique submitted the following expert reports: Expert Report of Andrew Flower dated September 20, 2019; Second Expert Report of Andrew Flower dated November 15, 2019.
45.
On December 4, 2019, the Arbitrator held a pre-hearing conference call with counsel for the Parties in preparation for the hearing on the merits. Prior to the call, the Parties submitted a Joint Report addressing certain issues set forth in the Arbitrator's agenda for the call circulated to the Parties. Later on December 4, 2019, after hearing from counsel for the Parties, the Arbitrator issued Procedural Order No. 6, detailing the hearing procedure.
46.
On December 9, 2019, the Parties submitted the Joint Bundle.
47.
On December 16-17 and 19, 2019, hearings were held in New York, New York (the "Hearing"). The Parties' witnesses (except [Person 5], who Ferrand decided not to cross-examine) and experts were examined, followed by closing arguments.48
48.
On February 7, 2020, the Parties submitted cost applications, and on February 14, 2020, Mystique filed a supplemental cost submission (Ferrand declined to do so).

III. SUMMARY OF THE PARTIES' POSITIONS AND REQUESTS FOR RELIEF

49.
The following is a summary of the Parties' positions and is not intended as a comprehensive statement of every argument or allegation made by the Parties. The Arbitrator addresses the contentions made by the Parties, and the evidence in the record, only to the extent relevant to her decisions. The Arbitrator's decisions are based on the entire record in this matter, and the Arbitrator has considered all statements, submissions, arguments and evidence, both oral and written, made by the Parties.

A. Summary of Ferrand's Claims

50.
In its Second Amended and Restated Counterclaims, Ferrand contends that Mystique breached the Agreement by failing to initiate orders in the minimum amounts and by failing to make the required Snoop Dogg royalty payments; both breaches were material and remain uncured at least thirty (30) days following written notice; and Mystique repudiated the entire Agreement and conclusively demonstrated its inability to perform under the remainder of the Initial Term. Ferrand also contends that it was entitled to terminate the Agreement and claim for damages for breach of the entire contract.

B. Summary of Mystique's Defenses and Counterclaims

51.
In its Answering Statement and Counterclaims, Mystique asserted that it complied at all times with the minimum purchase requirements. It also asserted that while any breach of the Agreement regarding Mystique's failure to pay Snoop Dogg may have permitted termination of the Agreement, Ferrand has failed to allege any cognizable damage arising from Snoop Dogg not receiving payment, and the failure to pay Snoop Dogg royalties is causally irrelevant to Ferrand's damages claims, which relate to alleged lost profits corresponding to the minimum purchase requirements, an obligation that Mystique never breached. Mystique also asserts that Ferrand failed to mitigate its damages by entering into an agreement with the Arba Group, which was predicated on the same terms as the Agreement.
52.
Mystique asserted the following counterclaims: 1) tortious interference with the fiduciary duties of Mystique's former CEO, Mr. [Person 2], to Mystique, resulting in cognizable harm; and 2) breach of the covenant of good faith and fair dealing.49

C. Summary of Ferrand's Defenses to Mystique's Counterclaims

53.
Ferrand denied the allegations in Mystique's counterclaims.50

D. Ferrand's Requests for Relief

54.
In its Second Amended and Restated Counterclaims, Ferrand seeks the following relief: an award (i) in Ferrand's favor in the amount of $5,491,000, plus interest and attorneys' fees and costs; (ii) denying Mystique's counterclaims in their entirety; and (iii) granting any such other and further relief that the Arbitrator finds is just and reasonable under the circumstances.
55.
In its Pre-Hearing Brief, Ferrand revised its damages claim, seeking an award of not less than $5,411,000, plus interest and attorneys' fees in an amount to be determined at the close of the arbitration proceedings. And in its Reply, Ferrand further revising its damages claim, seeking an award "in the amount of $5,400,000," plus interest and attorneys' fees in an amount to be determined at the close of the arbitration proceedings. Ferrand claims that it will be entitled to an award "in excess of $10,000,000."51 In both its Pre-Hearing Brief and Reply, as detailed below, Ferrand asserts that its damages are premised on the net profits arising from the minimum purchase requirements in the Agreement.52

E. Mystique's Requests for Relief

56.
Mystique seeks the following relief: an award (i) dismissing Ferrand's claims in their entirety; (ii) finding Ferrand liable for breach of the implied covenant of good faith and fair dealing and tortious interference with fiduciary duties; and (iii) ordering Ferrand to pay Mystique's attorneys' fees and costs.53

IV. FACTUAL BACKGROUND

A. The Agreement

57.
The Agreement granted Mystique a five year exclusive right (the "Initial Term") to import and market certain products listed in Appendix 1 (collectively, the "Products" or "Landy").54
58.
Section 4.2 of the Agreement provides that Mystique would cause its Agent (Royal Wine) to place orders in the following minimum amounts:
Period/YearDatesMinimum Amounts
1 3/5/08 - 3/31/09 US$3,000,000
2 4/1/09 - 3/31/10 US$3,600,000
3 4/1/10 - 3/31/11 US$4,320,000
4 4/1/11 – 3/31/12 US$5,184,000
5 4/1/12 – 3/31/13 US$6,220,800
59.
Section 4.2 of the Agreement further provides:

Should Importer [Mystique] fail to reach the following percentages of the minimum order amounts, Producer [Ferrand] may, in its sole discretion, terminate this Agreement, or exclude Canada and/or Mexico from the scope of this Agreement, upon sixty days' written note:

Period (i) 90%

Period (ii) 90%

Period (iii) 95%

Period (iv) 95%

Period (v) 100%

Should Importer [Mystique] fail to meet any of the minimums stated in Section 4.2(i) through (v) as modified by the relevant percentage set forth above, it will have 30 days from receipt of Importer's [Mystique's] notice to cure such failure. Such failure may be cured by Producer [Ferrand] receiving a valid Purchase Order from Importer [Mystique] or the Agent for the quantity necessary to reach the minimum order amount required by this Agreement as modified by the applicable percentage.

60.
Section 8 of the Agreement grants Mystique the right to use certain Trademarks for the Term of this Agreement but provides in relevant part: "Upon termination of this Agreement, Importer [Mystique] acknowledges that all such Trademarks shall remain the sole and exclusive property of Producer [Ferrand] and Importer [Mystique] shall have no rights therein."
61.
Section 12 of the Agreement provides Mystique's marketing obligations as follows:

Importer [Mystique] shall enter into an endorsement agreement or similar marketing agreement with the artist Calvin Broadus a/k/a "Snoop Dogg" for the promotion of "Cognac Landy" and "Drama".... Importer [Mystique] shall assume all costs related to any such agreement, including royalty payments. Producer shall have the right to terminate this Agreement if Importer is unable to enter into said agreement within the first Year of this Agreement. It is understood and agreed that Producer shall sign such endorsement agreement with the limited purpose of paying the royalty due the artist in the event of a termination of this Agreement.

All marketing, advertising and promotional expenses relating to the Products in the Territory shall be Importer's sole responsibility.

62.
Section 14 of the Agreement provides the Parties' rights to terminate as follows:

14.1 Producer shall have the right to terminate this Agreement: (i) upon the filing of a petition in bankruptcy, insolvency or reorganization against or by Importer [Mystique] or the Agent, or Importer or the Agent becoming subject to a composition for creditors, whether by law or agreement or Importer going into receivership or otherwise becoming insolvent; or (ii) if Importer or the Agent commits a "material breach" of this Agreement and such breach, if curable by action of Importer, remains uncured thirty (30) days after Producer delivers written notice of such breach.

14.2 (i) for purposes of this Section 14, a "material breach" shall mean (in addition to the clauses contained in Sections 4, 7 and 12):

[...]

63.
Section 15.2 provides: "The expiration or termination of this Agreement shall be without prejudice to any right or claim either party may have against the other arising out of any breach of the Agreement which may have occurred prior to such termination. The expiration or termination of this Agreement shall not operate to affect any of the provisions of this Agreement as are expressed to operate or have effect thereafter."
64.
Section 19 is a limitation of liability provision as follows: "With regard to claims between the Parties, neither Party shall be liable to the other for any incidental, special, consequential, punitive or exemplary damages arising out of any obligation, breach, act or omission in connection with performance of the Agreement, regardless of whether the claim is for breach of contract, breach warranty, tort (including negligence), strict liability."
65.
Section 25 provides that the "terms and conditions herein contained constitute the entire agreement between the Parties and supersede and terminate all previous agreements and understandings, whether oral or written, between the Parties hereto with respect to the subject matter hereof."
66.
The Parties agree that the all of the provisions of the Agreement at issue in this arbitration are unambiguous.55 Therefore, the Arbitrator interprets the Agreement without reliance on extrinsic evidence.56
67.
Lastly, it is noted that Section 28 of the Agreement provides that "This Agreement has been negotiated and drafted by the parties and their respective counsel and shall be fairly interpreted in accordance with its terms and without any rules of construction relating to which party drafted the Agreement being applied in favor or against either party."

B. Brief Chronology

68.
Without attempting to summarize all of the facts of the case, which have been taken into account in the preparation of the Final Award, below is a brief chronology of some of undisputed facts:
69.
In August 2007, Mystique hired Mr. [Person 2] as its CEO.57 Immediately before joining Mystique, Mr. [Person 2] had worked at Ferrand, reporting to its President, Mr. [Person 3].58
70.
On March 5, 2008, Mystique and Ferrand entered into the Agreement.59
71.
After the Agreement was executed, Mystique began placing orders for Landy products, and in the first year of the contract, Mystique purchased 29,211 cases of Ferrand products, equivalent of $3.4 million in purchases.60
72.
Mystique and Ferrand later jointly entered into an Endorsement Agreement with Snoop Dogg's loan out corporation.61 Pursuant to the Agreement, Mystique was to pay Snoop Dogg royalties on product sales.62
73.
By the end of 2008, Mystique was reporting a loss of $4 million.63
74.
At the beginning of 2009, the Board of Directors of Mystique had identified Arba Group ("Arba") as a potential investor in Mystique, and members of Royal Wine and Mr. [Person 2] began negotiations with Arba, with the aim of recapitalizing Mystique.64
75.
On April 2, 2009, Ferrand's attorney Pierre Abitbol sent a letter to [Person 6] stating, "We have been informed that Mystique is becoming or is already insolvent. We have also been informed that Mystique is currently in breach of its payment obligations to Snoop Dogg under the Endorsement Agreement."65
76.
On April 27, 2009, Mr. [Person 2] resigned as CEO.66
77.
On May 6, 2009, Cognac Ferrand sent a letter to Royal Wine (and not Mystique) terminating the Agreement effective May 8, 2009.67 The basis for termination was Mystique's purported insolvency and the unpaid Snoop Dogg royalty.68
78.
That same day, Ferrand's counsel, Pierre Abitbol, sent another letter, stating that the May 6 termination would be rescinded if Snoop Dogg was paid, the new investor (i.e., Arba) committed $1.5 million in new capital, and Mr. [Person 2]'s employment situation was resolved.69
79.
On June 29, 2009, Mr. [Person 2] joined W.J. [Person 1], and on July 15, 2009, W.J. [Person 1] announced its new spirits division, led by Mr. [Person 2], and exclusively representing and marketing Landy with the support of Snoop Dogg and E-40.70

V. ANALYSIS OF CLAIMS

A. Did Mystique breach the minimum purchase obligations in Section 4.2 of the Agreement?

The Parties' Positions

80.
In its Second Amended and Restated Counterclaims, Ferrand asserts two claims: the first, for breach of contract, and the second, for attorneys' fees.71 Within the breach of contract claim, Ferrand alleges that Mystique breached the Agreement "by failing to initiate orders in the 'minimum' amounts required and by failing to make the required Snoop Dogg royalty payments."72
81.
In its Pre-Hearing Brief, Ferrand does not articulate a claim for anticipatory repudiation, but instead argues that its principal claim is for the damages from Mystique's breach of the minimum purchase requirements in Section 4.2 of the Agreement.73 Ferrand, however, only sets out the elements of a breach of contract claim and asserts that the Agreement is binding and enforceable and that Ferrand fulfilled its obligations; Ferrand never sets out in what way Mystique breached its obligation by failing to place (or cause Royal Wine to pay for) the requisite minimum purchase amounts for Landy products under the Agreement.74
82.
In its Pre-Hearing Brief, Mystique detailed how it satisfied all of its minimum purchase requirements under the Agreement.75 Specifically, Ferrand demonstrated that Mystique purchased more than the minimum purchase obligations for year one, and when Ferrand terminated the Agreement effective on May 8, 2009, Mystique still had until March 31, 2010 to satisfy the second year's requirements and thus could not have been in breach.76 Indeed, weeks after Ferrand terminated the Agreement, Mr. [Person 3] confirmed that Mystique was up to date in their payment.77
83.
Relying on Section 15 of the Agreement, which sets out the rights and obligations of the parties on termination of the Agreement, discussed in more detail below, Mystique also emphasized that once the Agreement was terminated, it had no further purchase obligations. Mystique argues that when a party enters into a contract, it assumes obligations it did not have before the contract, and when the contract was terminated, those obligations are extinguished unless the contract provides otherwise (for example, confidentiality provisions sometimes survive termination). Section 15.2 of the Agreement provides that "[t]he expiration or termination of this Agreement shall not operate to affect any of the provisions of this Agreement as are expressed to operate or have effect thereafter." Mystique argues this provision makes clear that for a provision to survive or have effect post-termination, it must be expressed, and there are provisions that do in fact survive termination, but none of the obligations at issue in this arbitration survive termination.78
84.
In its Reply, Ferrand made overarching statements regarding Mystique's liability for breach of contract, but never articulated how Ferrand specifically breached the minimum purchase requirements of Section 4.2 of the Agreement (instead arguing that once Mystique repudiated the Agreement, Ferrand was entitled sue for damages for total breach).79
85.
At the hearing, Ferrand conceded that "[t]here's no question [Mystique] complied with the first year requirements."80 Ferrand also acknowledged that it terminated the Agreement at the start of the second year, before Mystique was required to have satisfied the second year requirements.81

Arbitrator's Analysis

86.
The elements of breach of contract with regard to the minimum purchase requirements in Section 4.2 of the Agreement are clearly not satisfied here. There is no dispute that Mystique satisfied the first year requirements and terminated the Agreement long before Mystique was required to satisfy the second year requirements. Nor is Ferrand arguing that once the Agreement was terminated, Mystique had an obligation to satisfy the minimum purchase requirements, which it failed to fulfill. Indeed, Ferrand could not have breached Section 4.2 of the Agreement post-termination because Section 15.2 of the Agreement makes clear that such provision does not survive post-termination. Consequently, Ferrand's claim that Mystique breached the minimum requirements in Section 4.2 of the Agreement is denied.

B. Did Mystique repudiate the Agreement?

The Parties' positions

87.
In its Reply, Ferrand shifts from its claim that Ferrand breached the minimum purchase obligations in Section 4.2 of the Agreement and instead argues that Mystique repudiated the Agreement through its "admitted insolvency and inability to meet even its most basic obligations under the Agreement triggering Ferrand's right to terminate and to sue for damages for total breach."82 Ferrand argues that "[i]t is black letter New York law that a repudiation of a contract by one party before the time for performance entitles the non-repudiating party to terminate and immediately claim damages for total breach."83
88.
Ferrand argues that no magic words are required; the law is clear that a party can repudiate a contract by words or deeds.84 Moreover, according to Ferrand, In re Beeche Sys. Corp, relied upon by Mystique, does not stand for the proposition that insolvency is not sufficient to establish anticipatory repudiation.85
89.
Ferrand argues that in March 2009, Mystique's CEO, Mr. [Person 2], called Mr. [Person 3] of Ferrand to tell him that Mystique could not pay Snoop Dogg, which alarmed Mr. [Person 3], who described it as a "house-on-fire" moment and wanted to meet the chairman of the board of Mystique.86 They subsequently meet on April 2, 2009 over dinner, during which they discussed the status of the Arba investors in Mystique, and Mystique advised Ferrand that payment would be made.87 In short, by the end of April 2009, Mystique did not have any money, employees, infrastructure and was not in a position to carry out its business, coupled with the statements that Mystique made to Mr. [Person 3], constitutes anticipatory repudiation, which entitles Ferrand to sue for breach of the entire agreement, including the failure of Mystique to satisfy the minimum purchase agreements into the future; according to Ferrand, once Mystique demonstrated that it could not perform its obligation to pay Snoop Dogg, Ferrand was entitled to terminate and did not have to wait until the following year to see if Mystique would perform the minimum purchase requirements.
90.
Mystique sets out the requirements of anticipatory repudiation as follows: "An anticipatory repudiation of a contract has occurred when there has been an 'overt communication of intention' not to perform... There must be a clear demonstration of an intent not to perform when the time for performance arrives. Furthermore such a repudiation must be positive and unequivocal."88 Mystique argues that Ferrand does not identify any such overt communication or intention but instead relies on Mystique's allegedly insolvent nature in March 2009; however, according to Mystique, insolvency is not a sufficient condition to invoke the anticipatory repudiation doctrine.89
91.
Mystique also argues that the record contradicts Ferrand's premise, even in light of Mystique's uncontested troubles because at the time when Mystique purportedly "repudiated" its intent to market Landy, it spent thousands of dollars on marketing and remained capable of ordering and paying for Landy product, regardless of its own cash flow issues, due to the Service Agreement between Royal and Ferrand.90 Mystique argues that Ferrand has adopted a "nonsensical position," arguing that Royal's refusal to make further purchases after Ferrand had already terminated the Agreement is "indicia of repudiation."91
92.
Mystique further argues that Ferrand's effort to plead anticipatory repudiation on the basis of Mystique insolvency runs headlong into the plain terms of the Agreement, in which the parties to the Agreement made specific provision for the consequences of insolvency. Specifically, if Mystique became insolvent, Ferrand could terminate the Agreement, but the Agreement does not provide that damages for all future performance would then become due.92
93.
Mystique also argues that under Section 4.2 of the Agreement, Mystique had from April 1, 2009 to March 31, 2010 to make the minimum purchase requirements, but that this is an annual obligation (with no requirement to make certain purchases per month). Ferrand terminated the Agreement, however, just one month into the second year, with 11 months remaining for Mystique to fulfill its obligations. In addition, Mystique emphasizes that even if it had not fulfilled its purchase obligations as of March 31, 2010, pursuant to Section 4.2, it had 30 days from receipt of importers notice to cure such failure. In other words, even if Mystique had failed to fulfill its obligations, Ferrand would not have been able to claim breach unless it provided written notice and 30 days to cure – and therefore should not have been able to simply terminate based on a view that Mystique might breach.
94.
Lastly, in support of its claim of repudiation, Ferrand cites to a litany of facts included in Mr. [Person 3]'s witness statement regarding Mystique's financial position, concluding that "starting in March 2009, Mystique was in fact dead in the water."93 But Mystique argues that Mr. [Person 3] admits that such evidence was not known to Ferrand at the time and even included documents from June 2009, months after Ferrand terminated the Agreement.94 Instead, all of those documents were produced by Mystique during discovery in this arbitration.

The Arbitrator's Analysis

95.
Ferrand initially conflated the argument of whether Mystique repudiated the Agreement with the question of whether lost profits can be awarded, but before addressing the question of which damages, if any, might be warranted, the threshold question is one of liability and specifically whether Mystique repudiated the Agreement.
96.
There is no dispute regarding the elements of anticipatory repudiation under New York law: there must be an overt communication of intention not to perform; a clear demonstration of an intent not to perform when the time for performance arrives; and the repudiation must be positive and unequivocal.95
97.
As Mystique detailed in its Reply, the cases that Ferrand cites in support of its repudiation argument illustrate the sharp contrast between what is required under New York law to demonstrate the high level of intention not to perform necessary to invoke the doctrine and what Ferrand strained to piece together.96
98.
Here, Ferrand was not able to demonstrate such intent in March 2009, when it claims the repudiation took place. Notably, Mystique received funding at the end of March 2009; Landy shipments were being paid;97 Mystique was spending on marketing of Landy products;98 and trying to get additional funding. None of these steps are "positive and unequivocal" steps by Mystique that support repudiation.
99.
And the evidence Ferrand relies upon that Mystique ceased operating was not in fact known to Ferrand at the time. It cannot be the case that Mystique repudiated the Agreement in March 2009 by "its inability to discharge even its most basic obligations," as Ferrand asserts, because the information that Ferrand cites in support of this assertion were not in fact known to Ferrand at the time but were learned by Ferrand during the course of this arbitration or otherwise occurred after Ferrand terminated the Agreement. Any facts that Ferrand cites about Mystique's financial status or ability to perform its contractual obligations after termination cannot be relevant to this analysis because what is determinative is what Mystique overtly communicated or demonstrated at the time of the alleged repudiation.
100.
To the extent Ferrand relies upon the conversation that Mr. [Person 3] states that he had with Mr. [Person 2] regarding Mystique's financial difficulties, this evidence is insufficient to support a claim for repudiation. While Mr. [Person 3] considered the discussion alarming, and subsequently sought to meet with Mystique, Mr. [Person 3] does not go so far as to say that Mystique made clear that it would no longer satisfy its obligations under the Agreement. And subsequent communications from Mr. [Person 3], in which he confirmed that Mystique's payments are up to date, and communications from Ferrand's counsel, in which Ferrand terminated the Agreement for insolvency and for Mystique's failure to pay Snoop Dogg, are inconsistent with a conclusion that Ferrand had made a clear demonstration of its intent not to perform.
101.
Moreover, all of the information that Ferrand purportedly had as of March 2009 must be considered in the context of timing, where it is evident that Mystique would have had an entire year from April 1, 2009 to March 31, 2010 to fulfill its second year minimum purchase requirements, plus the notice and cure period.
102.
Moreover, Section 4.2 of the Agreement makes clear that Ferrand could not have terminated the Agreement even if Mystique had failed to satisfy the minimum purchase requirements by the deadline for any one year, because termination for breach of this provision is only permitted upon written notice and Mystique's failure to cure within the 30 day period. It cannot be the case that such a notice and cure period requirement is required for termination when there is an actual breach but could be ignored when Ferrand determined that Mystique would not perform.

C. Does Ferrand's termination of the Agreement on the grounds of Mystique's insolvency give rise to Mystique's liability?

The Parties' Positions

103.
Ferrand devotes significant briefing to the question of whether Mystique was insolvent, and by when.99 Ferrand relies on Sections 15.2 and 19 of the Agreement to assert that its termination of the Agreement on May 6, 2009 entitles Ferrand to "general damages for breach...."100
104.
Section 15.2 of the Agreement provides that the "termination of this Agreement shall be without prejudice to any right or claim either party may have against the other arising out of any breach of the Agreement which may have occurred prior to such termination." Ferrand argues that while Section 19 expressly limits the liability of either party for "incidential, special, consequential, punitive or exemplary damages," the parties imposed no limit on general damages for breach of contract."101 Ferrand then bolsters its claim by arguing that the Agreement has no provision limiting Ferrand's remedy in the event of termination for insolvency to the loss of exclusivity.102
105.
Ferrand also relies on Section 4.2, which provides that if Mystique fails to purchase the minimum order amounts, Ferrand "may, in its sole discretion, terminate this Agreement..." Ferrand argues that the language "may," rather than "shall," makes clear that termination is not an obligation, nor a sole remedy.103
106.
Mystique argues that "[e]ven if Mystique was insolvent and Cognac Ferrand was justified in terminating the contract under Section 14.1, such a termination cannot give rise to a breach of the Agreement."104 Mystique argues that Section 14.1 distinguishes between termination for reasons of insolvency (subsection (i)), and termination for reasons of "material breach" (sub-section (ii)). Mystique argues that by distinguishing insolvency and material breach, "the Agreement makes clear that insolvency is not a material breach, or else the contract's effort to make the distinction would be rendered meaningless."105

Arbitrator's Analysis

107.
The issue in this arbitration is not whether Ferrand was entitled to terminate the Agreement on the grounds of Mystique's insolvency, but the consequences of that termination.106
108.
Section 14.1 of the Agreement makes clear that Ferrand is entitled to terminate the Agreement in the event Mystique is insolvent. But Mystique's insolvency is not a breach of the Agreement or give rise to a claim for damages.
109.
As Mystique noted, Section 14.1 distinguishes between termination for reasons of insolvency and termination for "material breach," thus making clear that insolvency is not a "material breach." Section 15.1 then sets out the rights and obligations of the Parties upon the expiration or "earlier termination of this Agreement." And by the express terms of the Agreement, termination released the parties from future obligations, as if the Agreement had simply expired or the parties had mutually agreed to terminate the Agreement. None of the other provisions in Section 15 related to the consequences of termination (or elsewhere in the Agreement) suggest that termination gives rise to a claim for damages for the balance of future performance.
110.
Likewise, Section 15.2 of the Agreement does not support Ferrand's argument that insolvency is a material breach or termination itself gives rise to a claim for damages. Section 15.2 provides: "The expiration or termination of this Agreement shall be without prejudice or any right or claim either party may have against the other arising out of any breach of the Agreement which may have occurred prior to such termination." (emphasis added). From the plain language of Section 15.2, it is clear that termination does not preclude either party from pursuing a claim it might otherwise have had arising out of a breach of the Agreement, which occurred prior to the termination of the Agreement. But Section 15.2 does not give Ferrand a claim for Mystique's future obligations that were discharged by the termination itself.
111.
Moreover, Ferrand's reliance on the language in Section 4.2, which provides that Ferrand "may" terminate the Agreement for breach of the minimum purchase requirements is a non-sequitur here, given that Ferrand did not in fact terminate the Agreement for breach of the minimum purchase requirements but for insolvency and breach of the obligation to pay Snoop Dogg. And as discussed above, prior to the termination of the Agreement, there was no breach of the minimum purchase requirements.
112.
Ferrand made the decision to terminate the Agreement, thus releasing Mystique of its obligations under the Agreement, including in minimum purchase obligations. Having done so, Ferrand is foreclosed from recovering from the benefit of the minimum purchase obligations.

D. Did Mystique have an obligation to market, advertise and/or promote the Products under the Agreement (other than the Snoop Dog endorsement agreement)? If so, did Mystique breach this obligation?

The Parties' positions

113.
Ferrand argues that Section 12 of the Agreement does not just provide that Mystique shall "assume" the costs associated with the Snoop Dogg endorsement; Section 12 provides in a separate paragraph that "[a]ll marketing, advertising and promotion expenses relating to the [Landy] Products in the Territory shall be [Mystique's] sole responsibility."107 Ferrand argues that this provision imposes an obligation on Mystique to market, advertise and promote the Landy Products, and Mystique failed to fulfill that obligation. Ferrand argues that Mystique's breaches of Section 12 went far beyond the failure to pay Snoop Dogg. Rather, according to Ferrand, Mystique shut down as an operating entity in March 2009 and thereafter, failed to even attempt to "market," "advertise" and "promote" Landy in the marketplace.108
114.
Mystique argues that the Agreement does not specify any minimum level of required marketing, advertising or promotional effort that Mystique is required to undertake.109 Mystique argues that Section 9 of the Agreement makes clear that marketing is left to Mystique's business judgment, providing that Mystique "may freely implement its own business policies in the Territory and may freely select the sales channels and sales force to meet its obligations under the Agreement." Similarly, Section 12 has an even broader provision, providing that "[a]ll marketing, advertising and promotional expenses relating to the Products in the Territory shall be [Mystique's] sole responsibility."
115.
Mystique also argues that Ferrand offered no evidence that Mystique breached any of its obligations in the Agreement that leave marketing to it business judgment, but to demonstrate how far off the mark this claim is, Mystique submitted extensive evidence which it submits demonstrates how it devoted more to advertising and promotion than is typical in the industry.110

Arbitrator's Analysis

116.
Ferrand belatedly asserted this claim for breach of Section 12, without providing a substantive contract analysis or evidence to support its claim, and Ferrand pursued the claim although it was not asserting any damages arising from the alleged breach.111
117.
Section 12 of the Agreement cannot be read to impose an obligation on Mystique to incur any threshold level of expense related to marketing, advertising or promotion; Section 12 simply states that such expenses are Mystique's sole responsibility. And when read with Section 9, which provides that Mystique is entitled to use its business judgment and freely select the sales channels and sales force to meet its obligations under the Agreement, it is clear that Mystique has discretion regarding the expenses it incurs for marketing, advertising and promotion.
118.
Ferrand's claim for breach of Section 12 fails.

E. What damages did Mystique's failure to pay Snoop Dogg's royalties cause Ferrand?

The Parties' Positions

119.
Ferrand argues that Mystique's failure to pay Snoop Dogg $35,000 in royalties owed entitles Ferrand to damages for breach of the entire Agreement, i.e., net profits arising from the minimum purchase requirements.112 Ferrand argues that the Interim Award determined that Mystique's failure to pay Snoop Dogg constitutes a material breach, but even if the Interim Award does not have preclusive effect on that issue, it is clear that Section 14.2 of the Agreement, which defines "material breach" includes Ferrand's failure to pay Snoop Dogg.113
120.
Mystique argues that its failure to pay Snoop Dogg permits Ferrand to terminate the Agreement and recover for breaches predating the termination, i.e., its out of pocket losses for covering the royalty payments, but not for losses for the balance of performance of the entire Agreement.114 Mystique argues this outcome is expressly contemplated by the Agreement's requirement that Ferrand be a party to the Snoop Dogg endorsement contract for the sole purpose of paying "the royalty due the artist in the event of a termination of this Agreement."115 In other words, if the Agreement is terminated, Ferrand would take over the responsibility for Snoop Dogg royalty payments, and Mystique would be liable for payments it failed to make in the past, but not in the future. Mystique would be released from such obligations by virtue of Ferrand's termination.
121.
Mystique also argues that even if the failure to pay Snoop Dogg was considered a "material breach" of the Agreement for purposes of termination,116 such breach could not reasonably give rise to liability for breach of the entire Agreement because it would produce an absurd, commercially unreasonable result, contrary to the reasonable expectation of the parties.117
122.
Moreover, Mystique argues that the damages that Ferrand seeks are "causally unmoored" from the only cognizable breach of the Agreement, which is the breach of the Snoop Dogg obligations.118 Mystique argues that causation is an essential element of damages in a breach of contract case, but Ferrand does not address causation at all.
123.
Lastly, Mystique argues that Ferrand is not even entitled to $35,000 reimbursement for the payment to Snoop Dogg because Mr. [Person 3], not Ferrand, paid Snoop Dogg with a personal check.119 Mr. [Person 3] is not a party to this arbitration, and there is no evidence that Ferrand reimbursed Mr. [Person 3] or otherwise incurred that liability.

Arbitrator's Analysis

124.
The Interim Award determined that Mystique's failure to pay Snoop Dogg constitutes a material breach of the Agreement sufficient to terminate the Agreement.120 But, as detailed in Procedural Order No. 2, the Interim Award did not resolve the question of whether Mystique's failure to pay Snoop Dogg is a material breach for any other purpose.121
125.
Section 14.2 of the Agreement defines "material breach" for purposes of how that term is used in Section 14.1, which provides that Ferrand has the right to terminate the Agreement if Mystique commits a "material breach" of the Agreement and such breach is not cured within thirty (30) days after Ferrand delivers written notice of such breach. The definition of "material breach" is limited to termination. But it has no implication for damages, and certainly cannot displace normal principles of damages.
126.
As a threshold issue, Ferrand failed to seriously address, let alone establish, causation - a necessary element of any breach of contract claim. The numerous cases that Ferrand cites, distinguishing between general and special damages, are inapposite. The principle that general damages are those which are the natural and probable consequence of the breach is not in dispute. The issue here is that Ferrand has failed to demonstrate that its net profits claim flowing from the purchase requirements is casually related to Mystique's failure to pay Snoop Dogg. Notably, in Biotronik, the primary case upon which Ferrand relies, the court did not award lost profits but only decided that the claim for lost profits (should they be provable) was not foreclosed by a contract provision prohibiting 'consequential' damages,122 an issue not in dispute here. Establishing that Ferrand breached the Agreement by failing to pay Snoop Dogg does not permit Ferrand to seek losses for the balance of performance of the entire Agreement.
127.
And to the extent Ferrand seeks reimbursement of the $35,000 paid to Snoop Dogg, Ferrand has failed to establish that it suffered such loss. Mr. [Person 3], not Ferrand, paid Snoop Dogg, and there is no evidence that Ferrand reimbursed Mr. [Person 3] or otherwise suffered any loss.

F. Does the N.Y. U.C.C. apply?

128.
Although Ferrand failed to establish liability on any of its various theories, the Arbitrator will address whether Ferrand would otherwise be entitled to the damages it seeks by addressing first, whether the N.Y. U.C.C. applies and second, whether Ferrand has otherwise established its damages.123

The Parties' Positions

129.
Ferrand relies on Biotronik A.G. v. Conor Medystems,124 for the proposition that damages flow from the breach of the contract itself.125 Ferrand argues that the N.Y. U.C.C. does not apply because the Agreement was much more than a simple contract for a purchase and sale of goods; the Agreement provided for a five-year relationship during which Mystique was responsible for development of the Landy brand and had other marketing obligations.126 In short, according to Ferrand, the N.Y. U.C.C. cannot apply to a long-term import and marketing agreement.127 But even if the N.Y. U.C.C. applied, the remedy under Section 2-708(1), which Mystique asserts applies, is "inadequate," according to Ferrand, and therefore, damages should be measured by Section 2-708(2).128
130.
Mystique argues that the Agreement was a contract for the purchase and sale of goods, and therefore, the N.Y. U.C.C. governs, and the default remedy is established by N.Y. U.C.C. § 2-708(1), which requires computing damages as the difference between the contract price of the goods versus the market price of the goods, but Ferrand has not made any attempt to make such a computation.129 Mystique argues that Ferrand is not entitled to seek lost profits under Section 2-708(2) because the U.C.C. permits only certain types of sellers, such as lost volume sellers who have unlimited production capacity to invoke that section, and Ferrand does not qualify as such.130 Instead, the remedy is the difference in the price for the goods that Mystique would have paid versus what the goods would otherwise fetch on the market.131

Arbitrator's Analysis

131.
It is clear that the Agreement is predominantly for the purchase and sale of goods, and therefore, under black letter law in New York, the N.Y. U.C.C. applies, even if there are collar service components, such as the Snoop Dogg marketing obligation.132 The Agreement is for the purchase and sale of millions of dollars of alcohol over the course of five years, with just a small fraction of that amount paid to Snoop Dogg in the form of a marketing royalty. The only section of the U.C.C. that refers to a seller's lost profits, Section 2-708 provide as follows:

(1) subject to subsection (2) and to the provisions of this Article with respect to proof of market price (section 2-723), the measure of damages for non-acceptance or repudiation by the buyer is the difference between the market price at the time and place for tender and the unpaid contract price together with any incidental damages provides in this Article (Section 2-710), but less expenses saved in consequence of the buyer's breach.

(2) If the measure of damages provided in subsection (1) is inadequate to put the seller in as good a position as performance would have done then the measure of damages is the profit (including reasonable overhead) which the seller would have made from full performance by the buyer, together with any incidental damages provided in this Article (Section 2-710), due allowance for costs reasonably incurred and due credit for payments or proceeds of sale.

132.
It is also clear that the remedy of lost profits under Section 2-708(2) is not available. Only certain types of sellers, such as lost volume sellers who have unlimited production capacity are entitled to invoke Section 2-708(2), and Ferrand does not qualify.133 As Mystique explained, "there is a ready market for cognac and recovering the difference in the price for the goods that Mystique would have paid, versus what the good would otherwise fetch on the market, is precisely the remedy that New York statutory law dictates for a seller whose buyer has breached a contract, as Ferrand accuses Mystique."134

G. Has Ferrand established its damages?

Ferrand's damages claim

133.
Relying on the David Report, Ferrand seeks $5,491,000 in net profits,135 plus pre-award interest at the rate of 9%, for an award that Ferrand claims would be "in excess of $10,000,000."136
134.
To prepare her Report, Ms. David reviewed the Poulain Report, which was issued in 2012 in the First Arbitration, and the annexures thereto, and states that she concurs with its assumptions, analysis and findings.137 In her opinion, "the total amount of profits lost by Cognac Ferrand as a result of the failure of Mystique to make the minimum required purchases under the [Agreement] was US$5,491,000 for the reasons stated in the Report."138
135.
The lost profits calculated in the Poulain Report includes $35,000 that Mr. [Person 3] paid to Snoop Dogg, and $45,000 that Ferrand paid to Heller Ehrman "as a result of Mystique Brands' commitments relating to the contracts for 'Snoop Dogg' and his entourage."139
136.
Ferrand criticizes Mystique's damages analysis, noting that Mystique's damages expert, Andrew Flower, has no experience in the spirits industry, erroneously attributes the costs of marketing, advertising and promotional expenses to Ferrand in express contradiction with the terms of the Agreement; assumes that Ferrand's gross margin would have eroded over the duration of the Agreement, although Ferrand had the right to increase its prices without a cap to accommodate any increase in the cost of production or overhead; and erroneously considers the products sales mix under [Person 1], when the marketing strategies, circumstances and companies are different.140 Ferrand also argues that Mr. Flower's argument that KPMG did not reconcile its conclusions with the underlying accounting records is erroneous because the KPMG report refers to specific accounting record.141

Mystique's Defense

137.
Mystique argues that Ferrand has failed to satisfy its burden of proof with respect to damages.142 Relying on the expert report of Andrew Flower, Mystique argues that Ms. David's report amounts to a "back of the envelope methodology that opportunistically ignored fundamental inputs."143 Mystique further argues that Ms. David's report suffers from "profound methodological deficiencies," including that: (a) she failed to account for the Agreement's allowance for short falls in the minimum purchase obligations; (b) she assumes that the sales mix remains the same, even though the actual sales mix over the life of the contract is available (and different from KPMG's assumptions); (c) she assumes that Landy would have maintained a single constant margin on all Landy sales going forward, even though the profitability of Landy products varied significantly from item to item and from year to year; (d) she assumes the cost of producing Landy products will remain the same over the life of the Agreement, even though actual historical data shows significant variation in costs; and (e) she failed to reconcile the various accounting records used to arrive at its calculations with the underlying accounting records of the business or to its audited financial statements, making it impossible to vouch for the completeness or accuracy of the data KPMG has used.144
138.
Ms. David did not update the Poulain Report, prepared in 2012, with data that had become available since, nor with data that was available when in fact the report was first prepared.145 Had she done so, according to Mystique, the analysis would have shown that Ferrand would have lost money over the remaining life of the Agreement, due to increasing alcohol costs, among other inputs.146 Rather than accounting for these costs in her second report, according to Mystique, Ms. David simply insists that Ferrand could have passed on the costs increases to Mystique and its customers, without taking into consideration what the market would bear by way of price increases.147 But as Mystique argues, relying on Mr. Flower's second report, even assuming some reasonable increase in sales price, Landy would still have only netted Ferrand a fraction of Ferrand's sought-after windfall.148

Arbitrator's Analysis

139.
To the extent Ferrand would otherwise be entitled to net profits, Ferrand failed to satisfy its burden of proof with respect to those damages.149 Ferrand's damages case relies on Ms. David's testimony, but she essentially provides no report at all. She relied on the Poulain Report from 2012, without re-verification. Moreover, Mr. Poulain had signed off on Ferrand's financial statements from 2007 – 2013, calling into question his independence – and thus Ms. David's independence. Indeed, Ms. David herself has been working for Ferrand four years and has some responsibility over Ferrand's financial statements.150
140.
Even setting aside the question of independence, Ms. David did not do what would be expected in a lost profits analysis. Fundamentally, she did not update the Poulain Report to take into account actual data, including the sales mix, price evolution or the actual costs of production incurred by Ferrand during the relevant period. Instead, she assumed that there was no change in the sales mix over the contract term, when the actual data demonstrates that is false.151
141.
While Ferrand argues against using the [Person 1]'s sales mix, it is the best evidence available as to what the actual sales mix would have been, especially given that [Person 1] had the same CEO as Mystique and to a degree, the sales mix is driven by market demand, even if, as Ferrand notes, [Person 1] may have been in a different posture than Mystique at the time. Ms. David assumes sales prices would have stayed at the same levels as year 1, although actual sales prices were known and in fact decreased.152 Likewise, regarding production costs, Ms. David calculates production costs by reference to invoices from year 1 and assumed a constant margin over the remaining contract term, when Ferrand's actual costs of production demonstrate an overall increase in production costs (uninfluenced by purchaser, Mystique or [Person 1]),153 and there are significant variations in costs of production year-on-year. On promotional costs, the Arbitrator is persuaded by Mr. Flower's critique of the data, given the unanswered questions regarding how the costs were attributable to the Landy brand and Ms. David arrived at the costs allocated to the Landy brand.154
142.
The Arbitrator finds Ferrand's criticism of Mr. Flower's expertise unpersuasive. The fact that Mr. Flower does not have significant experience in the wine or spirits industry or with Cognac in particular has no import. He has extensive experience providing damages evidence in a range of distribution disputes around the globe, which was what was relevant here. Ms. David's familiarity with the Cognac region and business adds nothing to her analysis.
143.
Taking all of these issues into account, even if Ferrand had otherwise established liability and that it was entitled to net profits, it is clear that Ferrand's damages analysis is speculative and Ferrand has failed to establish its damages for net profits arising out of the minimum purchase requirements.155

VI. FERRAND'S COUNTERCLAIMS/AFFIRMATIVE DEFENSES

144.
In light of Ferrand's failure to establish its claims, it is unnecessary to address Mystique's counterclaims, which are the same as its affirmative defenses.156

VII. COSTS OF THE ARBITRATION

145.
Ferrand seeks a recovery of $774,150.79 incurred in this arbitration for attorneys' fees and expenses and expert fees and expenses. Ferrand also seeks recovery of its attorneys' fees and costs totaling $215,282.96 incurred in the First Arbitration, plus the ICDR fees and expenses and Arbitrator compensation and expenses incurred in the First Arbitration and this arbitration.
146.
Mystique seeks recovery of $1,873,490.80, incurred in this arbitration, for attorneys' fees and expenses and expert fees and expenses. Mystique also seeks recovery of the ICDR fees and expenses and Arbitrator compensation and expenses incurred in this arbitration.
147.
The administrative fees and expenses of the ICDR total $37,950.00, and the compensation and expenses of the Arbitrator total $136,969.63, for a total of $174,919.63.
148.
Section 21.1 of the Agreement provides that "[t]he arbitrator may award to the prevailing party, if any, as determined by the arbitrator, all of its costs and fees, including without limitation, AAA administrative fees, arbitrator fees, travel expenses, out-of-pocket expenses (including, without limitation, such expenses as copying, telephone, facsimile, postage and courier fees), witness fees, and reasonable attorneys' fees and other professional fees."
149.
Article 34 of the ICDR rules provides that the "arbitral tribunal shall fix the costs of arbitration in its award(s)" and "may allocate such costs among the parties if it determines that allocation is reasonable, taking into account the circumstances of the case."
150.
The Arbitrator agrees with Mystique that New York law does not adopt a formalistic approach to determining who is the prevailing party but instead requires the Arbitrator to consider the "true scope of the dispute litigated" and compare that with "what was achieved within that scope."157
151.
In this case, Ferrand pursued a claim for more than $10 million against Mystique, so the assessment of who is the prevailing party, if any, must be assessed by considering the claim against the relief that Ferrand achieved.
152.
Here, Ferrand's claim fails entirely. Consequently, Mystique is the prevailing party.
153.
As Mystique emphasized, had Ferrand had a claim for only $35,000, it is inconceivable that this arbitration would have gone forward. Instead, Ferrand pursued its net profits claim, skirting over the fundamental questions of liability and essential elements of causation, shifting its theories when it became apparent that its original claims did not withstand scrutiny, and then failing to properly substantiate its damages claim, relying on a less than independent expert witness, defending an outdated and inadequate analysis. In these circumstances, whether Mystique would succeed on its counterclaims is irrelevant, given that they track Mystique's affirmative defenses, and asserting them did not require additional expenditure.
154.
Here, the hourly rates charged by Mystique's counsel are consistent with the rates of other leading law firms and practitioners with similar experience in international arbitration. The fact that Mystique incurred more costs in defending itself against Ferrand's claims than Ferrand incurred pursuing them does not change this conclusion. Ferrand decided to bring its claim on a small budget, but Mystique did not need to follow that same approach.
155.
Having considered all of the relevant factors, the Arbitrator awards Mystique $1,873,490.80 as costs in this arbitration.158
156.
In addition, the administrative fees and expenses of the ICDR and the compensation and expenses of the Arbitrator totaling $136,969.63 shall be borne by Ferrand. Therefore, Ferrand shall reimburse Mystique the sum of $87,459.81, representing that portion of said fees and expenses incurred by Mystique.

VIII. DISPOSITION AND AWARD

157.
The Arbitrator:

a. Denies Ferrand's claim that Mystique breached the minimum purchase requirements of Section 4.2 of the Agreement;

b. Denies Ferrand's claim that Mystique repudiated the Agreement;

c. Denies Ferrand's claim that Mystique breached the Agreement by virtue of its insolvency;

d. Denies Ferrand's claim that Mystique breached Section 12 of the Agreement with regard to marketing, advertising and promotional expenses;

e. Denies Ferrand's claim for monetary damages in net profits on the minimum purchase requirements in Section 4.2 of the Agreement;

f. Denies Ferrand's claim for costs; and

g. Grants Mystique's claim for costs of $1,960,950.61.

This Final Award renders a final decision on the merits of all claims submitted in this arbitration. All claims not expressly granted in this Final Award are denied.
The Arbitrator hereby certifies that, for the purposes of Article I of the New York Convention of 1958, on the Recognition and Enforcement of Foreign Arbitral Awards, this Final Award was deemed to be made at the seat of the arbitration, New York, New York, U.S.A.
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