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Final Award

[1].
WE, THE UNDERSIGNED ARBITRATORS, having been designated by the above-named parties, and having been duly sworn, and having duly heard the proofs and allegations of such parties, do hereby issue this FINAL AWARD, as follows:
[2].
On November 8, 2021, the above matter came on for hearing before the below arbitrators. Representing Dreamstyle were Chris Lilly, Benjamin Clements and Guy Bluff, and representing Renewal were Aaron Scott, Tami McKnew and Patrick Fenlon. The hearing continued through November 19, 2021, during which 22 witnesses, including expert damage witnesses, testified, and hundreds of exhibits were received, resulting in some 2,000 pages of record. In accordance with determinations by the arbitrators and understandings with the parties, the arbitrators would issue an Interim Award, continuing the hearing after such Interim Award to receive submissions on any application for an award of attorney fees and costs, and on the issue of interest.
[3].
On November 23, 2021, a multi-hour post-hearing conference was held for the purpose of reviewing the issues and hearing argument of counsel. Subsequently, on December 6, 2021, extensive post-hearing submissions were received. Following the receipt of such submissions, party-in-interest issues were the subject of additional submissions and communications between counsel and the panel.
[4].
Prior to the hearing, Renewal made dispositive motions, some of which were ruled upon prior to the hearing, some of which were ruled upon during the hearing, and some of which were ruled upon in the Interim Award as described below.
[5].
On the evidence at the hearing, the argument and extensive submissions of the parties, and the files and proceedings herein, the undersigned arbitrators, without dissent, on January 23, 2022, made and issued their Interim Award and Reasoning, which is incorporated in and a part of this Final Award.
[6].
After and pursuant to an order in the Interim Award, the parties made submissions on the issues of pre-award interest and attorney fees, arbitration fees and costs.
[7].
After the Interim Award, the parties advised the undersigned arbitrators, and stipulated, that on January 28, 2022, Renewal made a payment of $4 million against and in partial satisfaction of the Interim Award.
[8].
Based on the Interim Award and its Reasoning, the post-Interim Award submissions, the parties’ above noted stipulation concerning Renewal’s January 28, 2022, partial payment of the Interim Award, and the files and proceedings herein, the undersigned arbitrators, without dissent, issue this:

Final Award

[9].
1. With respect to Renewal’s dispositive motions, Dreamstyle’s following claims are dismissed with prejudice: (a) violations of any franchise statute; (b) fraud; (c) interference with contract or economic advantage; and (d) rescission damages.

2. Renewal’s counterclaim for damages associated with claims that Dreamstyle breached certain intellectual property provisions of the Retailer Agreements is dismissed with prejudice.

3. Dreamstyle Remodeling Inc., a New Mexico corporation and Dreamstyle Remodeling LLC, a Delaware LLC, are jointly awarded against Renewal by Andersen, LLC, with added interest at $799.32 per day from and including January 29, 2022, until paid:

$2,917,512

4. Dreamstyle Remodeling of San Diego, Inc., a California Corporation and Dreamstyle Remodeling of California LLC, a Delaware LLC, are jointly awarded against Renewal by Andersen, LLC, with added interest at $56.41 per day from and including January 29, 2022, until paid:

$205,914

5. Dreamstyle Remodeling Inc., a New Mexico corporation and Dreamstyle Remodeling LLC, a Delaware LLC, are jointly awarded against Renewal by Andersen, LLC, as costs associated with expert Wesley Nutton:

$44,841

6. The Interim Award and its Reasoning, including findings and conclusions contained therein, are incorporated by reference and made a part of this Final Award.

7. The following Reasoning, including findings and conclusions contained therein, are a part of this Final Award.

8. The administrative fees and expenses of the American Arbitration Association, totaling $49,925, and the compensation and expenses of the Arbitrators, totaling $353,268.34, shall be borne as incurred, and except as provided in paragraph 5 above, each party shall bear its own costs and attorney fees.

9. Except as provided in the Interim Award or this Final Award, all claims or counterclaims made in this arbitration are denied and dismissed with prejudice.

10. Unless otherwise directed by the parties, the Arbitrators will retain all documents submitted until 90 days hereafter, at which time they shall be destroyed.

Dated: February 21, 2022.

REASONING

Attorney Fees, Expenses and Costs

[1].
Both Dreamstyle and Renewal, in their filings with the American Arbitration Association, have included in their requests for relief, an award of attorney fees— Dreamstyle in its requested relief in the federal lawsuit complaints, which became Dreamstyle's annexed demand in the AAA filing, and Renewal and Andersen Corporation in their AAA Answering statement.1 These requests thereby triggered Rule 47(d) of the AAA Commercial Rules, which provides for an award of attorney fees when all parties have requested the same.2
[2].
The same Rule 47(d) authorizes an award of attorney fees where authorized by the parties' arbitration agreement. In their October 14, 2020, Agreement to Arbitrate, the parties agreed to paragraph 29 of the Retailer Agreement's provisions concerning attorney fees, but also expressly agreed that there was no waiver of rights to argue that such paragraph 29 is unenforceable. Section 29 of the Retailer Agreements, while designed to look even-handed, is not. Rather, in ways similar to other provisions of the Retailer Agreements we found to be unconscionable, paragraph 29, with one exception, provides for a fee shift only for fees and expenses in defending a non-prevailing claim. The one exception is for prevailing affirmative claims in respect to those which in all likelihood would be claims of only Renewal, namely claims to protect confidential information or intellectual property or to collect money owed. As the power to terminate the retailer relationship without litigation is all in Renewal, and as the contractual obligations for money owed or intellectual property are all imposed on the Retailer, (a) the issues involving the defense of litigation will invariably be those only of Renewal defending claims of wrongful termination or non-renewal, and (b) the issues asserting affirmative claims respecting money owed or intellectual property also will invariably be those only of Renewal. In short, for all intents and purposes, the fee shift provisions in most instances provide attorney fee rights to only Renewal, no such rights being provided to the retailer. This arbitration is a perfect illustration.
[3].
We have determined that any award of attorney fees here, considering both parties' requests apart from paragraph 29 of the Retailer Agreements, as well as the provisions of paragraph 29 discussed above, should be considered on a prevailing party basis in respect to all claims and defenses. For reasons described below, we decline to award any attorney fees to either party, as we find that neither party has prevailed overall.
[4].
In Re Arb. Between Wells Fargo Bank, N.A. & WRM e-PIN, 2009 WL 10678607 (D. Minn. June, 22, 2009), report and recommendation adopted sub nom, and aff'd sub nom, 653 F.3d 702 (8th Cir. 2011), the court, in affirming the arbitration panel's award of fees and costs, noted that while the arbitration panel dismissed some of Wells Fargo's claims before trial, the arbitration panel nevertheless determined that Wells Fargo was the prevailing party on its primary claim for breach of contract:

"The court is not obligated to determine the wins and losses, count-by-count, claim-by-claim, total up each side's victories and losses, and award individual fees that either offset one another or survived as independent claims. Rather, the district court has discretion to look at the entire litigation to determine whether a party was successful or unsuccessful overall." (Emphasis added)

And in Minnesota Vikings Football Stadium, LLC v. Wells Fargo Bank, 193 F. Supp. 3d 1002, 1019 (D. Minn. 2016), the court, having granted summary judgment against the Minnesota Vikings' on their claim for rescission and a declaratory judgment, nevertheless concluded that, since the Minnesota Vikings "prevailed on the merits of its breach-of-contract claim – the claim that constituted the heart of this lawsuit–and it has prevailed on its request for permanent injunctive relief…[the Minnesota Vikings are] entitled to reasonable attorneys' fees and costs…." (Emphasis added).

[5].
Here we, having heard the case over two weeks, and the panel chair having overseen months of discovery related disputes, find that the heart of the case was the breach of contract claims and defenses, by whatever name, in respect to (a) whether early terminations (terminations prior to the renewal date) were or were not a Renewal breach of, or were or were not in accordance with Renewal's rights under, the Retailer Agreement(s), (b) whether the non-renewals were or were not a Renewal breach of, or were or were not in accordance with Renewal's rights under, such Agreement(s), and (c) whether and in what amount should there be damages in respect to any such breaches.
[6].
And while perhaps not the heart of the case, we find that important elements about which the overall dispute was waged, included (a) RbA's counterclaim for service reimbursements; (b) RbA's counterclaim for post-termination breaches; and (c) Dreamstyle's franchise law claims.
[7].
With respect to these primary issues, we have found that "overall" neither side has prevailed. Dreamstyle prevailed on its claim of wrongful early terminations in respect to three of the Retailer Agreements and its defense of Renewal's claim that such early terminations were contractually authorized, but did not prevail in respect to the other two. With respect to claims concerning non-renewal, Dreamstyle failed to prevail, although it did prevail in respect to its rights to the balance of existing terms in three of the five Agreements and in its defense of Renewal's claim of right under the simultaneous termination provision of such Agreements. With respect to the Boise Agreement, the result was something of a draw, as we found that the Boise Agreement was wrongly early terminated, but that there were no related damages.
[8].
As to damages, this issue too was one about which neither party fully prevailed "overall." Dreamstyle did not prevail in respect to its highest dollar claim respecting the most aggressive lost but-for margin, and did not prevail on its claim for damages underpinned by the claim of rights to renew for additional five-year terms. However, Dreamstyle prevailed on its claim for damages associated with alleged wrongful early termination of two of the five Agreements, and its defense of Renewal’s claims under the simultaneous termination provision of the Agreements.
[9].
Respecting the three additional claims of some but lesser significance than the termination/non-renewal claims, Dreamstyle prevailed defending against Renewal’s counterclaim for post-termination breaches, but did not prevail defending Renewal’s service reimbursement counterclaim, or on its affirmative franchise law claims.
[10].
In the end, we have found that neither party was fully "successful or unsuccessful overall," such that neither party should be awarded any attorneys’ fees from the other party. See In Re Arbitration between Wells Fargo Bank, N.A. & WRM, 2009 WL 10678607 at 6.
[11].
Respecting costs, we have found that the costs incurred in respect to evidence materially and successfully used at hearing—namely Dreamstyle’s $44,841costs for expert witness Nutton, should be assessed. We conclude there is no basis for an award of any other costs, and that any award to either party respecting arbitration fees or their costs of financing the dispute, should not be awarded for a number of reasons, prominently our mixed findings concerning prevailing party.

Interest

[12].
Minnesota law, the law chosen by the parties for application here, requires pre-award interest at 10% "from the time of the commencement of the action or a demand for arbitration, or the time of a written notice of claim, whichever occurs first," or "from the time when special damages were incurred, if later." See Minn. Stat. sec. 549.09. We have concluded that the earliest date of Dreamstyle’s full claim demand was November 20, 2019— the date of its second federal lawsuit against Renewal, Dreamstyle’s two federal lawsuits constituting the demand in this arbitration. We noted, however, that interest cannot run from such date on that part of the award associated with damages that did not occur until after November 20, 2019. Rather, such interest should run from the time incurred.
[13].
In our analysis of interest required by Minn. Stat. sec. 549.09, we did the following in respect to the Interim Award associated with each of the New Mexico and San Diego Agreements:

1. With respect to that part of the Interim Award consisting of 2018 damages, we accrued 10% interest from November 20, 2019, to January 28, 2022, the date Renewal made the $4 million payment against the Interim Award.

2. With respect to that part of the Interim Award consisting of 2019 damages occurring prior to November 20, 2019, we accrued 10% interest from November 20, 2019 to January 28, 2022, the date Renewal made the $4 million payment against the Interim Award.

3. With respect to that part of the Interim Award consisting of 2019 damages occurring after November 20, 2019, we accrued 10% interest from the date such damages were incurred to January 28, 2022, the date Renewal made the $4 million payment against the Interim Award.

4. With respect to that part of the Interim Award consisting of 2020, 2021 and 2022 damages, we accrued 10% interest from the date such damages were incurred (using mid-term amounts3) to January 28, 2022, the date Renewal made the $4 million payment against the Interim Award.

5. With respect to all interest accrued as described in paragraphs 1-4 above, we offset such total amounts with 10% interest which had accrued on damages awarded on Renewal’s service reimbursement counterclaims described in the Interim Award, accruing from the date such damages were incurred (again using mid-term amounts), thus determining the "net interest" obligation of Renewal under the statute.

6. We satisfied all of Renewal’s net interest obligation as of January 28, 2022, given the $4 million payment, with the balance of such payment reducing the then existing principal balances awarded in the Interim Award.

7. Such reduced principal balances described in paragraph 6 above became the Final Award amounts, to which 10% interest is added from and including January 29, 2022 until paid, as required by Minn. Stat. sec. 549.09.

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