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

Final Award

FINAL AWARD1

[1].
I, THE UNDERSIGNED ARBITRATOR, having been designated in accordance with the License Agreements effective on or about January 1, 2009, and the Stipulation entered into on December 12, 2012, between the above-named parties, and having been duly sworn, and having heard and duly considered the proofs and allegations of the above-named parties, do hereby DECIDE as follows:

1. Parties.

Claimants and Counter-Respondents are Kipling Apparel Corp. (Kipling'’) and VF Sportswear, Inc. ("VFS") (collectively Kipling"). Respondents and Counter-Claimants are HNC Stores Corp. and HNC Retail PLA Corp. (collectively "HNC").

2. Counsel.

The Parties are represented as follows:

AKERMAN LLP
Ira S. Sacks
Mark S. Lafayette
Scott M. Kessler
Erika Stallings
666 Fifth Avenue, 20th Floor
New York, NY 10103
Tel: (212) 880-3800
Fax: (212) 880-8965

Counsel for Kipling

ZARCO EINHORN SALKOWSKI & BRITO
Robert Zarco
Robert F. Salkowski
Morgan H. Geller
P.A. Miami Tower
100 S.E. Second St., Suite 2700
Miami, FL 33131
Tel: (305) 374-5418
Fax: (305) 374-5428

Counsel for HNC

3. Arbitrator

Hon. Garrett E. Brown, Jr. (Ret.)
JAMS
620 Eighth Ave., 34th Floor
New York, NY 10018
Tel: 212-607-2710
Fax: 212-751-4099
Email: gbrown@jamsadr.com

4. Case Manager.

Rekha Rangachari, Esq.
American Arbitration Association
150 E. 42nd St., 17th Floor
New York, NY 10017
Tel: (646) 240-4583
Fax: (212) 286-0383
Email: RekhaRangachari@adr.org

5. Arbitrability.

[2].
The Parties entered into five License Agreements that became effective on or about January 1, 2009.2 Section 34 of each License Agreement, entitled ARBITRATION", established the following:

Any and all claims, disputes, controversies or differences of opinion arising out of or in relation to this Agreement or the breach thereof, which cannot be amicably settled, shall be submitted to and finally settled by arbitration under the rules of the American Arbitration Association. The decision of the arbitrator or arbitrators shall be final and binding on the parties, and judgment may be entered for the execution of such award by any court having jurisdiction thereof.

(License Agreements at Section 34).

[3].
Additionally, on December 12, 2012, the Parties filed a Stipulation (the "Stipulation") in the related federal action pending before the Hon. Robert P. Patterson, Jr., U.S.D.J. in the United States District Court for the Southern District of New York (the "Federal Action"). (12/12/12 Stipulation: S.D.N.Y. Civ. No. 12-6859; Doc. No. 18). As relevant here, the Stipulation established that:

[HNC] agree[s] to arbitrate in the Arbitration all of the claims asserted in the Federal Action against the VF Defendants other than their claims against [V.F. Corporation] and [HNC’s] claims for punitive damages, treble damages, and attorney’s fees. VFS and Kipling agree that all of their claims against [HNC] (other than any claims for punitive damages) shall be decided in the Arbitration. The VF Defendants and [HNC] also agree that, with the exception of [HNC’s] claims against [V.F. Corporation] and their claims for punitive, treble damages, and attorney’s fees, all of [HNC’s] claims asserted against the VF Defendants in the First Amended Complaint [filed by HNC in the Federal Action] shall be decided in the Arbitration.

(Id. at ¶ 1). In a footnote to the foregoing, the Parties agreed that no action - other than certain discovery - would be taken in this Arbitration against the so-called "Lawyer Defendants" named by HNC in the Federal Action. (Id. at fn 1). Indeed, the Stipulation established that "[HNC] and the Lawyer Defendants have agreed to resolve their dispute after the Arbitration is completed ... (Id. at ¶ 1). Based upon that agreement, it appears that the Lawyer Defendants have remained parties to the Federal Action throughout the pendency of this Arbitration. (See id. at ¶¶ I, 2).

[4].
Lastly, pursuant to the Stipulation, the Parties agreed to the appointment of the undersigned as Arbitrator. (Id. at ¶ 4).

6. Applicable Law and Rules.

[5].
As noted, Section 34 of the License Agreements established that the rules of the American Arbitration Association ("AAA") would be applicable in any arbitration filed thereunder. (License Agreements at Section 34).
[6].
Additionally, the Stipulation established that fact discovery, expert discovery, and pre-hearing motion practice would be governed by the Federal Rules of Civil Procedure and the Local Civil Rules for the Southern District of New York, unless otherwise agreed by the Parties. (Id. at ¶¶ 8, 9 and 11). The Stipulation also established that [a]ny disputes regarding issues which arise from this Stipulation shall be resolved by the Arbitrator." (Id. at ¶ 12). Lastly, the laws of the State of New York are applicable to the Parties’ claims in this Arbitration pursuant to: (1) the identical choice-of-law provisions contained within each License Agreement entered into by the Parties; and (2) the Arbitrator’s January 7, 2014 Ruling and Order. (License Agreements at Section 32.2: 1/7/14 Ruling and Order at pp. 8-12).

7. Claims Summary and Procedural History.

[7].
On September 3, 2012, Kipling filed the Demand for Arbitration with the AAA which gave rise to this Arbitration. Shortly thereafter, on September 11, 2012, HNC filed the Complaint in the Southern District of New York which gave rise to the Federal Action. As noted above, on December 12, 2012, the Parties filed the Stipulation in the Federal Action, which among other things, manifested their agreement to arbitrate certain claims in this Arbitration. Judge Patterson "So Ordered" the Stipulation on December 12, 2012. (12/12/12 Stipulation at p. 7: S.D.N.Y. Civ. No. 12-6859; Doc. No. 18). Since that date, the Federal Action has been stayed in the Southern District of New York. (Id.)

A. Kipling’s Claims

[8].
Pursuant to the Stipulation, on December 20, 2012, Kipling filed its Further Amended Statement of Claim ("FASC"), which forms Kipling’s operative pleading in this Arbitration. (Stipulation at ¶ 5). In the FASC, Kipling fundamentally alleges that HNC violated various terms contained within the five "distinct, but nearly identical" License Agreements entered into by the parties in 2009. (FASC at ¶ 1, passim). Kipling asserts the following three specific causes of action against HNC in the FASC.
[9].
First, in Count I, Kipling claims that HNC is liable for Breach of Contract relative to the License Agreements based upon the following actions or inactions: failing or refusing to make certain payments due; selling Kipling products in violation of Kipling’s bulk sale policy; selling Kipling products for resale and transshipping; violating Kipling’s intellectual property rights by selling Kipling products for resale and transferring HNC’s rights to sell Kipling products to third-parties; vacating and ceasing to occupy HNC’s Kipling Stores; violating the leases with the landlords for HNC’s Kipling Stores; ceasing to sell Kipling products; placing Going Out of Business" signs in the windows for HNC’s Kipling Stores; and refusing to allow Kipling to examine HNC’s books and records in response to an audit request. (Id. at ¶¶ 78-90). Second, in Count II, Kipling claims that HNC is liable for Unjust Enrichment because HNC failed to pay for certain goods. (Id. at ¶¶ 93-97). Lastly, in Count III, Kipling claims that HNC is also liable for Goods Sold and Services Rendered, based upon HNC’s alleged payment default on September 12, 2012. (Id. at ¶¶ 98-99).

B. HNC's Claims

[10].
On December 19, 2012, also pursuant to the Stipulation, HNC filed its Statement of Claims ("SC"), which forms HNC’s operative pleading in this Arbitration. (Stipulation at ¶ 5). HNC’s SC names the following entities and individuals as Counter-Respondents: VFS; Kipling; Julie Dimperio; Matthew Puckett; David Hall; and Diego Ortiz (Dimperio, Puckett, Hall and Ortiz are collectively the "Individual Parties"). HNC’s SC contains a recitation of background factual allegations that purport to recount the history of HNC’s operations relative to its sale of Kipling products from the mid-1990’s. (SC at ¶¶ 27-238). In the SC, HNC fundamentally alleges that the actions or inactions of the various Counter-Respondents, individually or collectively, resulted in the ruination of HNC’s Kipling-product-based business. (Id.). HNC asserts the following twelve specific causes of action against HNC in the FASC.
[11].
HNC’s First Claim seeks a Declaratory Judgment that HNC has neither: (1) materially breached any of the five Licensing Agreements; nor (2) infringed upon any trademark rights established by federal or state law. (Id. at ¶¶ 239-251). HNC’s Second Claim seeks a Declaratory Judgment that Kipling has materially breached the Licensing Agreements in various ways. (Id. at ¶¶ 252-286). HNC’s Third Claim alleges Breach of Contract relative to the License Agreements against Kipling and VFS. (Id. at ¶¶ 287-292). HNC’s Fourth Claim alleges that Kipling and VFS breached the purported "July 2012 Credit Terms Agreement" and "Mark-Down Allowance Course of Dealing" between the Parties. (Id. at ¶¶ 293-316). HNC’s Fifth Claim alleges the tort of Property Destruction against all Counter-Respondents. (Id. at ¶¶ 317-328). HNC’s Sixth Claim alleges Prima Facie Tort against all Counter-Respondents. (Id. at ¶¶ 329-342). HNC’s Seventh Claim alleges Fraud against Kipling, VFS, Julie Dimperio and Matthew Puckett. (Id. at ¶¶ 343-360). HNC’s Eighth Claim alleges Fraudulent Inducement relative to the purported "July 2012 Credit Terms Agreement and the May 2012 Credit Terms Agreement" against Kipling, VFS, Julie Dimperio, David Hall and Diego Ortiz. (Id. at ¶¶ 361-377). HNC’s Ninth Claim alleges a Civil Conspiracy against all Counter-Respondents. (Id. at ¶¶ 378-389). HNC’s Tenth Claim alleges a violation of Florida’s Deceptive and Unfair Trade Practices Act against all Counter-Respondents. (Id. at ¶¶ 390-396). HNC’s Eleventh Claim alleges that all Counter-Respondents are liable for Unjust Enrichment. (Id. at ¶¶ 397-402). Finally, HNC’s Twelfth Claim alleges Unfair Competition under New York common law against all Counter-Respondents. (Id. at ¶¶ 403-411).

C. Kipling’s Motion for Judgment on the Pleadings

[12].
Throughout calendar-year 2013, the Parties proceeded with discovery. On September 19, 2013, the Arbitrator issued the Second Amended Scheduling Order in this Arbitration, which authorized Kipling to move for judgment on the pleadings regarding HNC’s counterclaims. Pursuant to that Order, on October 21, 2014, Kipling filed its Motion for Judgment on the Pleadings relative to the Fifth through Twelfth Claims in HNC’s SC. HNC opposed that Motion on November 18, 2013, and Kipling filed its reply on November 30, 2013. The Arbitrator heard the Parties’ oral arguments via teleconference on December 3, 2013.
[13].
Thereafter, on January 7, 2013, the Arbitrator issued a Ruling and Order (the "R&O") which granted Kipling’s Motion in all respects for the following reasons. (1/7/14 Ruling and Order). First, the Arbitrator ruled that pursuant to the choice of law provision in the License Agreements, New York law governs the causes of action asserted by HNC in its SC. (Id. at pp. 8-13: License Agreements at Section 32.2). Second, in light of that determination, the Arbitrator ruled that HNC could not state a claim for its Tenth Claim, violation of the Florida Deceptive and Unfair Trade Practices Act. (Id. at p. 12, fn 1). Third, the Arbitrator ruled that HNC could not plausibly allege its Seventh and Eight Claims - for Fraud and Fraud in the Inducement, respectively - because under New York law, HNC could not have reasonably relied upon an extraneous representation by any Counter-Respondent given the integration and modification clauses in the License Agreements. (Id. at at pp. 12-14: License Agreements at ¶¶ 30, 33). Fourth, the Arbitrator ruled that HNC’s Fifth Claim (Property Destruction), Sixth Claim (Prima Facie Tort), Ninth Claim (Unjust Enrichment), and Twelfth Claim (Unfair Competition under New York Common law), were dismissed based upon HNC’s stipulation thereof. Lastly, the Arbitrator ordered that the Individual Parties named by HNC in the SC - Julie Dimperio, Matthew Puckett, David Hall and Matthew Ortiz - be dismissed from the Arbitration because all Claims against them were dismissed.
[14].
Thus, following the Arbitrator's January 7, 2014 R&O, only Kipling and VFS remain as Counter-Respondents in this Arbitration. Further, only the first four Claims asserted by HNC in the SC remain at issue, in addition to the three causes of action asserted by Kipling in the FASC.

D. The Arbitration Hearing

[15].
The Parties completed fact and expert discovery in the winter and spring of 2014 pursuant to various orders issued by the Arbitrator. The Arbitration Hearing (the "Hearing") commenced on Monday, June 16, 2014, with the presentation of opening statements by Counsel for both Parties. Thereafter, during ten Hearing-days between June 16 and 27, 2014, the Parties presented their respective fact witnesses. Because of scheduling constraints, the Arbitrator and the Parties reconvened on September 9 and 10, 2014, for the presentation of expert damages testimony and closing arguments. In the interim, with the fact record having closed on June 27, 2014, the Parties submitted their respective Post-Hearing Memoranda on August 26, 2014.3 Finally, at the conclusion of the Hearing on September 10, 2014, the Parties agreed that the Arbitrator would issue this Final Award within 90-days, or not later than December 10, 2014.
[16].
Both sides were represented by skilled, well-prepared trial attorneys who advocated and presented their respective positions fully, completely and professionally. The Arbitrator thanks all counsel for their able and effective presentations of evidence and argument throughout these proceedings.

8. Standard of Review and Scope of Award.

[17].
Section 34 of the License Agreements established that the Commercial Arbitration Rules of the AAA (the "AAA Rules") are applicable in this Arbitration.4 Pursuant to AAA Rule 43(b), the Arbitrator has determined that a reasoned award is appropriate and necessary in this Arbitration.
[18].
To that end, the Arbitrator has considered all of the arguments raised and the evidence presented, and has determined its relevance, credibility and weight. On the basis of the credible evidence adduced at the Hearing, and the Parties' arguments made at the Hearing and in their written post-Hearing submissions, the Arbitrator now decides the Parties’ claims and defenses as set forth herein. This Award recites those facts found by the undersigned Arbitrator to be true and necessary to this Award. This Award is in full resolution of all claims and defenses submitted to this Arbitrator. (See Stipulation at ¶ 1; Section 5, above). To the extent that any arbitrable claim, counterclaim, defense or other request for relief is not specifically mentioned herein, it is denied.

9. Findings of Fact and Conclusions of Law.

[19].
During the course of twelve full Hearing-days in June and September 2014, the Parties developed a voluminous evidentiary record in this Arbitration. That magnitude of evidence, paired with the broad scope of the Parties’ dueling claims and counterclaims, has created a complex legal and factual landscape. Despite that complexity, the Arbitrator concludes that this Arbitration fundamentally presents the following critical issues: (1) whether the License Agreements should have been renewed; (2) whether Kipling breached the License Agreements; (3) whether HNC failed to pay Kipling for goods that it ordered and received; and (4) whether damages to either party have been proven. The Arbitrator will address and decide each of these fundamental issues in turn.

A. Whether The License Agreements Should Have Been Renewed

[20].
The first critical issue the Arbitrator must resolve is whether the License Agreements should have been renewed.5 In its Post-Hearing Memorandum, Kipling asserts that the License Agreements could not have been renewed because HNC did not satisfy the contractually-mandated criteria for renewal. For the reasons that follow, the Arbitrator agrees.

i. Relevant Facts

a. The Stores

[21].
Henry Leace, HNC’s founder and Chief Executive Officer, first encountered the Kipling brand of products during a family cruise in 1995. (Hrg. Tr. at 3409). During a port-call in Bermuda, Mr. Leace purchased two Kipling bags, which were colorful, lightweight, and "had a gimmicky little monkey hanging on every bag." (Id.) Mr. Leace "fell in love with the brand and the product." (Id.) When he returned home to South Florida, Mr. Leace contacted Tumi, Inc. ("Tumi"), the company that then distributed Kipling products in the United States. (Id.) Shortly thereafter, Mr. Leace obtained authorization from Tumi to open a Kipling "kiosk" in the Sawgrass Mills Mall ("Sawgrass Mills") in South Florida. (Id. at 3410-3411).
[22].
Mr. Leace operated the Kipling kiosk in Sawgrass Mills for several years, during which time it was a "top performer" in that mall. (Id. at 3412-3413). However, the kiosk was not an ideal retail vehicle for Kipling products, which were relatively "bulky". (Id. at 3412). In light of the kiosk’s limitations, when Sawgrass Mills expanded in or about 1998, Mr. Leace moved his Kipling-based business to a traditional "inline" store located within the mall’s new "Oasis" section (the "Sawgrass Mills Store"). (Id. at 3414). The new Sawgrass Mills Store was in close proximity to several other prominent retailers and restaurants, and both Tumi and Kipling-brand-founder Paul Van De Velde were in favor of the move. (Id. 3416-3417). Mr. Leace financed the construction of the Sawgrass Mills Store, which cost approximately $225,000. (Id.).
[23].
The Sawgrass Mills Store was profitable. (Id. at 3422). Based upon that success, in 1999 Mr. Leace opened a second Kipling store at the Bayside Mall ("Bayside") in South Florida (the "Bayside Store"). (Id. at 3422-3423). Because Bayside was located at the foot of a cruise ship port and contained a variety of restaurants, it drew both tourists from the cruise ships, and local shoppers from downtown Miami. (Id. at 3424). Mr. Leace believed that the patronage of tourists from Europe and South America was important, because of the Kipling brand's popularity internationally. (Id.). Mr. Leace financed the construction of the Bayside Store, which cost approximately $125,000. (Id. at 3425). Several years later, in 2002 or 2003, Mr. Leace moved the Bayside Store to a higher-traffic area of that mall, and renovated the Bayside Store in accordance with the latest Kipling prototype. (Id. at 3426). Mr. Leace financed the move and renovations of the Bayside Store, which cost approximately $150,000. (Id.).
[24].
In 2001, after the Bayside Store had opened, but before it was moved and renovated, Mr. Leace opened a third Kipling store in the Dolphin Mall in South Florida (the Dolphin Mall Store"). (Id. at 3431). A critical attribute of the Dolphin Mall was its placement within two miles of the Miami International Airport. (Id.). The Dolphin Mall Store was initially unprofitable because of the weakened retail economy after the 9/11/01 terrorist attacks, and elevated rent. (Id. at 3437-3438). However, after Mr. Leace obtained a rent reduction, the Dolphin Mall Store began performing successfully in 2003 or 2004. (Id.).
[25].
In 2003, Mr. Leace opened what he viewed as the "crown jewel" of his Kipling stores in the Aventura Mall in South Florida (the "Aventura Mall Store"). (Id. at 3443). The Aventura Mall was "located in an area unlike any of the other malls." (Id.). Specifically, the Aventura Mall was located on the east side of South Florida, near the line that separates Dade County (Miami) and Broward County (Fort Lauderdale). (Id. at 3443-3444). Because of that location, the Aventura Mall drew affluent shoppers from both counties, as well as tourists that were attracted to the concentration of premier retail brands within that mall. (Id. at 3444). Mr. Leace financed the construction of the Aventura Mall Store, at a cost of approximately $150,000. (Id. at 3454).

b. The Transition from Tumi to VFS

[26].
Beginning in 1995, when Mr. Leace opened his Kipling kiosk in Sawgrass Mills, Tumi was the exclusive supplier of Kipling product for Mr. Leace’s stores. (Id. at 3455). However, Mr. Leace does not recall having ever executed any contracts or written agreements with Tumi, and none were produced during the Hearing. (Id.) Instead, Mr. Leace testified that his transactions with Tumi accorded with certain terms for the payment of invoices and the extension of credit:

Q. What kind of credit terms did you have with Tumi prior to VF Corporation ... if you recall?

A. I do. We had net 60 day terms ....

Q. When the credit terms were net 60, how would they relate to the manner in which payments on the invoices were being paid - were being made, sorry?

A. Typical in the industry, if terms are net 60, at the 60th day it becomes due. Every day before that the terms - the invoices are not yet due. Between the first and 30th day after the due date would be considered the timing, that you would expect to prepare the check, mail the check and the vendor receive the check. That was standard operating procedure. However, given that we were spending a lot of money on opening stores, it was the only source of product we sold, there was very favorable and forgiving credit terms because they knew we had to pay them, we couldn’t buy goods from anybody else and that’s the way we operated.

(Id. at 3455-3457). Additionally, Mr. Leace testified that during his relationship with Tumi, if there were "issues" regarding payment or credit, "the credit manager would call me, we'd work out a credit plan and we’d move on." (Id. at 3458).

[27].
Mr. Leace’s relationship with Tumi ended in 2004, when VFS acquired the North American licensing rights for Kipling products. (Id. at 2960-2961). Mr. Leace was excited about the transition from Tumi to VFS. As he explained during the Hearing:

Q. [W]e were really excited about the opportunities that they brought because the brand needed a real steward who understood fashion and clearly VFS was a leader in the industry in that. They could support us from design, they could support it from delivery, from warehousing, from Electronic Data Interchange. They brought it to a whole new level and our business took off.

….

It was night and day [versus Tumi]. VFS was much more attentive, much more interested. We were kind of like a stepchild for the Tumi brand while they owned it. But VFS clearly had bigger goals, they were thinking differently than Tumi did. We were thrilled with the relationship and the partnership and I was under the impression for many years that they were thrilled with it too.

(Id. at 3473-3475).

[28].
For the first several years of their business relationship, or from approximately 2004 until 2007, Mr. Leace and VFS operated without any license agreements or other formative contracts. (Id. at 2963-2965). In 2007, Lisa Whitney, VFS’s Vice President and General Counsel, began to negotiate licensing agreements with Peter Gruber, HNC’s counsel. (Id. at 2965). Ultimately, after approximately two years of back-and-forth negotiations, the Parties executed the License Agreements in 2009. (Id.). By their terms, the License Agreements were made retroactive to January, 2009.6
[29].
The evidence adduced at the Hearing makes clear that HNC’s untimely payment of invoices was a chronic issue between the Parties throughout their performance under the License Agreements. Since early in their business relationship, HNC typically enjoyed net-60 day terms on all of its invoices from VFS.7 (Id. at 730-731). Thus, in practice, an invoice was dated on the date that the Kipling products were shipped to HNC, and payment was due 60 days thereafter. Those net 60-day terms were more favorable than the terms enjoyed by most other VFS customers. (Id. at 903). Despite that, from May, 2009 until July, 2012, HNC uniformly had outstanding invoices that were overdue beyond their payment terms. (See generally Id. at 729-772). Additionally, when HNC did make payments, anomalies were not uncommon - for instance, checks were sometimes dated days or weeks before they were received by VFS, checks sometimes bounced, and payments made by credit card were sometimes rejected.
[30].
Though payment issues persisted, the Parties appeared to operate under the License Agreements without other significant issues until approximately February, 2011. During a teleconference held on February 1, 2011, Julie Dimperio, President of Kipling North America, informed Mr. Leace that VFS was interested in purchasing his Kipling stores. (Id. at 3672). Ms. Dimperio asked that Mr. Leace "come up with a number" for which he’d agree to sell his stores, with supporting documentation, and forward that information to VFS as soon as possible. (Id.). Mr. Leace testified that as a result of this conversation, his "head was spinning." (Id. at 3674). Ultimately, after soliciting the assistance of a mergers and acquisitions expert, Mr. Leace submitted a letter of intent ("LOI") to VFS that offered to sell his five Kipling stores for $15 million. (Id. at 3680-3681: RX 56). Shortly thereafter, on February 13, 2011, Mr. Leace sent a follow-up email to VFS personnel that provided additional detail in support of his $15 million asking price. (RX 18).
[31].
On Tuesday, March 22, 2011, Matthew Puckett, then Vice President and Chief Financial Officer of VFS, formally responded to Mr. Leace’s LOI in an email that stated the following in pertinent part:

[W]e are so far apart in our expectations for a possible transaction there’s not much to discuss at the moment. I would reiterate to you that we will not open any additional stores through the store licensed model that the other stores operate under.

(CX 126).

[32].
Therefore, by late March, 2011, Mr. Leace had been informed that VFS would not allow him to open additional Kipling stores, and the Parties’ discussions regarding a potential acquisition of the HNC stores by VFS had reached an impasse. Despite that, on April 13, 2011, Mr. Leace submitted a letter to Ms. Dimperio that purported to request a renewal of all five License Agreements. That April 13, 2011 letter stated the following in pertinent part.

Please let this letter represent the election of the 5 year renewal term for the Retail License and Store Operation Agreement for the above locations [all five HNC Kipling stores], through 2019. Attached you will find a merchant plan for each store for the renewal period as is required in the existing operations agreement upon the election of renewal.

(RX 61). Subsequently, in an email to Julie Dimperio on April 25, 2011, Mr. Leace submitted "a revised business/merchant plan, including 5 yr renewal term." (CX 124).

[33].
The record reflects that VFS took no substantive action regarding Mr. Leace’s aforementioned correspondence of April 13 and 25, 2011. It is undisputed that the License Agreements were never renewed.

ii. Analysis

[34].
Section 18 of each License Agreement, entitled "TERM OF THE AGREEMENT", established the following in pertinent part:

18.1 The initial term of this Agreement shall be from January 1, 2009 through December 31, 2013 ("Initial Term"), unless otherwise terminated pursuant to the terms of this Agreement.

18.2 This Agreement may be renewed for one (1) five (5) year term from January 1, 2014 through December 31, 2018 (the "Renewal Term") ... if Licensee:

18.2.1 requests renewal in writing no later than January 1, 2013; and

18.2.2 at the time it requests renewal, is in compliance with all the terms of any and all agreements between Licensee and Licensor; and

18.2.3 up to the time it requests renewal on a pro-rata basis, has met the Minimum Net Purchase Requirements for each Contract Year during the Initial Term; and

18.2.4 agrees to meet the Minimum Net Purchases for the Renewal Term;

18.2.5 submits a comprehensive business plan, acceptable to Licensor, for the Renewal Term; and

18.2.6 has renewed the Premises Lease and it is still in effect and in good standing.

18.3 If the above referenced terms have been met, the renewal negotiation (including execution of all documents as may be necessary) shall, unless mutually agreed not exceed sixty (60) days from Licensor’s acceptance of Licensee's business plan. If a comprehensive business plan is not mutually agreed between the parties, this Agreement shall expire as of the date set forth in Section 18.1, unless earlier terminated as set forth in the Agreement. LICENSEE agrees that its failure to request renewal pursuant to this Section 18.2.1, shall be deemed an election by Licensee not to seek renewal hereof.

(License Agreements at Section 18).

[35].
The Arbitrator concludes that, viewed reasonably, Section 18 established the following mandatory three-tiered protocol for renewal of the License Agreements: (1) HNC must satisfy the requirements of Sections 18.2.1 - 18.2.6; (2) once those six requirements are met, renewal negotiations "shall" proceed; and (3) unless mutually agreed otherwise, those renewal negotiations "shall" conclude within 60 days of Kipling’s acceptance of HNC’s business plan. Notably, in addition to that protocol, Section 18.3 clearly established that unless both Parties agreed upon a comprehensive business plan, the License Agreements would not be renewed.
[36].
During the Hearing, Kipling produced persuasive evidence that on both April 13 and 25, 2011 - the dates on which Henry Leace plausibly requested renewal of the License Agreements pursuant to Section 18.2.1 via emails to Ms. Dimperio - HNC was not current on its payment obligations to Kipling, and therefore did not satisfy the requirements of Section 18.2.2. (See CX 555). It is beyond reasonable dispute that the payment terms of the invoices Kipling sent HNC for goods sold and shipped comprised "agreements" between the Parties. (See License Agreements at Section 20.2.11: see also Section 9(D)(ii), below). Despite that, the evidence makes clear that throughout April 2011, HNC was in arrears on numerous invoices that had stated net-60-day terms. (See id.) Thus, because HNC was not in compliance with "the terms of any and all agreements" between the Parties when renewal of the License Agreements was requested in April 2011, HNC did not satisfy the requirements of Section 18.2.2.8
[37].
Because HNC did not satisfy the requirements of Section 18.2.2, it necessarily failed to advance beyond the first-tier in the mandatory protocol for renewal. As a result, the second-tier "renewal negotiation" contemplated by Section 18.3 never commenced. Necessarily, therefore, the three-tiered protocol was never satisfied. In light of that, based upon the plain terms of Section 18, the License Agreements would have organically terminated on December 31, 2013, regardless of whether they were ultimately breached by either party.
[38].
In so concluding, the Arbitrator notes that HNC’s arguments to the contrary are unavailing. During the Hearing, Mr. Leace testified that he understood the License Agreements included a 10-year term, with a unilateral "option" for him to not renew them after five years. (Hrg. Tr. at 3587). To the extent that Mr. Leace harbored that understanding, it is wholly inconsistent with the plain terms of Section 18 of the License Agreements. Indeed, Section 18.3 required the mutual agreement of both Parties to effect renewal, and expressly contemplated the organic termination of the License Agreements after five years if no such agreement was achieved. Therefore, Mr. Leace’s contention that Section 18 established a purely unilateral renewal option that accrued to him is incorrect.
[39].
Further, by its terms, Section 18 did not require Kipling to engage in renewal negotiations with HNC unless and until the requirements of Section 18.2 were met. As explained above, those requirements were never met, and therefore renewal negotiations were never required. Importantly, had hypothetical good faith renewal negotiations commenced, there is no evidence in the record that Kipling would have found any "business plan" proffered by HNC acceptable given: (1) HNC’s years-long history of late payments on invoices; and (2) Kipling’s clearly manifested desire to move away from the license-model under which HNC’s stores operated. The plain terms of Section 18 would not have foreclosed Kipling from considering either of those factors. (See CX 126).
[40].
Therefore, for the foregoing reasons, the Arbitrator concludes that the License Agreements would have terminated on December 31, 2013, pursuant to Section 18 thereof regardless of whether they were ultimately breached by either party.

B. Whether Kipling Breached The License Agreements

[41].
The second critical issue the Arbitrator must resolve is whether Kipling breached the License Agreements prior to their termination. The Fourth Claim in HNC’s SC alleges that Kipling breached the purported "July 2012 Credit Terms Agreement" and "Mark-Down Allowance Course of Dealing" between the Parties. (SC at ¶¶ 293-316). Within that Fourth Count, HNC further asserts that Kipling "also breached the implied covenants of good faith and fair dealing contained in the July 2012 Credit Terms agreement by taking the actions against HNC described in [Sections V (A-F) of the SC]." (Id. at ¶ 310).
[42].
In the aforementioned Sections V (A-F) of the SC, HNC describes the following alleged actions or inactions by Kipling: (1) Kipling’s 2010 demand that HNC renovate the Aventura Mall, Dadeland Mall, and Dolphin Mall store locations (Id. at ¶¶ 89-103); (2) Kipling’s decision in March 2011 to end mark-down allowance payments to HNC (Id. at ¶¶ 104-120); (3) the Notice of Default sent to HNC by Kipling on March 25, 2011 (Id. at ¶¶ 121-139); (4) Kipling’s refusal to authorize the so-called "2012 Merchant Plan" presented by HNC in August 2011 (Id. at ¶¶ 140-160); (5) Kipling’s imposition of a $500,000 credit limit for HNC in July 2012 (Id. at ¶¶ 161-194); and (6) the Notice of Default sent to HNC by Kipling on August 17, 2012 (Id. at ¶¶ 195-238).
[43].
For the reasons that follow, the Arbitrator concludes that: (1) Kipling’s imposition of a $500,000 credit limit upon HNC in July 2012 (the "Credit Limit"); and (2) Kipling’s issuance to HNC of a Notice of Default on August 17, 2012 (the "August 17 Notice") breached the covenants of good faith and fair dealing implied within the License Agreements.9

i. The Credit Limit

a. Relevant Facts

[44].
Diego Ortiz has been the Director of Corporate Credit for VFS since approximately 2004. (Hrg. Tr. at 728). In that capacity, Mr. Ortiz "was responsible for the decisionmaking of all [VFS] accounts ... responsible for managing the collections, chargebacks and accounts receivable functions." (Id. at 780-781). Mr. Ortiz testified on direct that he managed the HNC account as follows:

Q. Did HNC have a formal credit limit?

A. They did not.

Q. Did they ever have a formal credit limit?

A. Yes, they did.

Q. When did they start having a formal credit limit?

A. In July of 2012.

Q. Did you manage the credit before July 2012?

A. We managed the account, yes.

Q. How did you manage the account without a formal credit limit?

A. It was an account, we knew the type of business we did with this account. We built the business with them over the years. As time grew, the business grew, we extended them a larger line of credit during that time. There were times when we had to hold orders because we did not receive payments.

When we got the Puerto Rico store obviously that increased the exposure that we would have with the customer, so we reviewed it then and we knew that our exposure would be going up on a monthly basis, especially as it pertains to certain seasons. It was just an account that was managed very closely by me and my department.

Q. How did you do that?

A. It was a - we managed it, we tried to get paid, we made sure we got paid when we were supposed to get paid. We were constantly going back and forth with the customer, but we tried to flow merchandise in as we could to keep the business afloat and still grow the business.

(Id. at 774-776). With regard to Kipling’s historical exposure related to HNC’s account, Mr. Ortiz further testified on cross as follows:

Q. And HNC, in your view, always had a credit limit; is that correct?

A. It had a - it didn’t have a hard coded limit. They had a line that we always tried to manage. It wasn’t a credit limit. But we did try to manage exposure.

Q. So you acknowledge that in fact HNC did not have a hard coded credit limit, correct?

A. That’s correct.

[....]

Q. Is it correct that in fact your exposure was usually in the $750,000 range?

A. Yes.

Q. And isn’t it correct, sir, that at times you permitted the exposure to increase and go beyond $1 million; isn’t that correct?

A. Yes.

(Hrg. Tr. at 955).

[45].
According to Mr. Ortiz, his management of the HNC account was unique. Mr. Ortiz testified that:

We afforded [HNC] certain I guess perks over the years. I treated them differently. They were a licensee. I treated them in a certain manner. I allowed them in some cases a little bit more than others. But no, we did not treat them the same as we did other customers.

Q. Better or worse?

A. We treated them much better.

(Id. at 903). To that end, Mr. Ortiz testified that in view of HNC’s growth and the Parties’ common goal of increasing sales revenue, Kipling’s extension of its exposure on the HNC account to $1,000,000 and beyond was acceptable, so long as HNC was "running current". (Id. at 965-966).

[46].
In practice, under Mr. Ortiz’s management, HNC’s account frequently carried total outstanding balances that approached or exceeded $1,000,000. According to Mr. Ortiz’s testimony and relevant supporting documents: in 2009, the first year the Parties operated under the License Agreements and the year HNC opened the PLA Store in Puerto Rico, HNC’s highest outstanding balance was $1,084,291 for the month-ended July; in 2010, HNC’s highest outstanding balance was $915,304 for the month-ended November; (4) in 2011, HNC’s highest outstanding balance was $1,215,796 for the month-ended August; and in 2012, HNC’s highest outstanding balance was $1,400,128 for the month-ended March. (Id. at 772-773: CX 557, 566).
[47].
As noted, by the end of March, 2012, HNC’s total outstanding balance was $1,400,128. Of that total outstanding balance, $1,148,614 was current, and $251,514 was past-due beyond the Parties’ usual net 60 day payment terms. (Id. at 867: CX 557, 566). It appears that elevated balance was attributable, in large part, to the following two factors: (1) HNC’s failure to adhere to one or more payment schedules that had been agreed-upon by the Parties; and (2) a charge of $229,177.61 to HNC’s American Express card that was declined on February 24, 2012. (Id. at 865-866).
[48].
Frustrated by these events, Mr. Ortiz sent the following, all-capitalized email to Henry Leace and other HNC employees on March 28, 2012:

IS ANYONE EVER GOING TO RESPOND TO ANY OF OUR EMAILS OR NUMEROUS PHONE MESSAGES???

YOUR ACCOUNT HAS A PAST DUE BALANCE OF OVER $311,169.69 OVER $171,531.57 OF WHICH WAS DUE IN FEBRUARY.

IT IS VERY OBVIOUS THAT THE TWO MARCH 15 PAYMENTS ($43,995 & 13,400.10) WERE NEVER ISSUED AND WE’VE TRIED SINCE MARCH 26TH TO PROCESS THE $234,452.07 YOU AUTHORIZED ONLY TO HAVE YOUR CREDIT CARD DECLINED. WE SOMEHOW WERE ABLE TO GET $77,481.75 APPROVED. HOWEVER THIS IS NOWHERE NEAR WHAT NEEDS TO BE PAID.

(CX 284) (emphasis in original).

[49].
After Kipling closed its books for the first fiscal quarter of 2012, Mr. Ortiz met with David Hall, VFS’s Chief Financial Officer, to conduct a quarterly review. Mr. Ortiz testified that during that review, he and Mr. Hall discussed the HNC account, and "all the issues that we had gone through, the credit card rejections, the fact that they weren't responding to our phone calls, and what we, what we were trying to do to get them paid." (Hrg. Tr. at 870-871). As a result of that discussion, Mr. Hall agreed that Mr. Ortiz "needed to try and see how we could get this account in line." (Id. at 871).
[50].
In April, 2012, Mr. Ortiz and Mr. Leace agreed to a new payment schedule that resulted in HNC "trading dollars" for Kipling merchandise. (Id. at 876). Specifically, the Parties agreed that throughout May, 2012, for every $2 HNC paid towards its outstanding invoices, Kipling would ship $1 of product. Thereafter, throughout June, 2012, the Parties agreed that for every $1 HNC paid towards its outstanding invoices, Kipling would ship $1 of product. Lastly, the Parties agreed that in July, 2012, HNC would make additional payments to Kipling of between $200,000 and $300,000, which would result in the renewed free-flowing of merchandise. (Id. at 877).
[51].
Mr. Ortiz testified that this arrangement was "the only way" to get HNC’s balance paid down. (Id. at 876). Importantly, when asked on direct why HNC’s account was not placed on hold in April, 2012, until it was entirely cunent, Mr. Ortiz testified:

I wanted to try and manage the business, I wanted to try and continue to flow some merchandise into his stores so that he could have some merchandise to sell. At that point in time, I needed to make sure that as a partner we tried to do that.

(Id.).

[52].
The Parties’ foregoing agreement was not executed seamlessly. By at least May 24, 2012, Mr. Ortiz and Mr. Leace were once again at-odds regarding payments. In an email sent on that date, Mr. Leace informed Mr. Ortiz that "in order to maintain the next scheduled payment of $246k for 5/25/12, I must inject personal capital into the company, as projected revenues have not held to accomplish accelerated schedule." (CX 345). In that email, Mr. Leace also requested that Kipling release approximately $45,000 in product based upon a payment, via HNC’s American Express card, of $52,132.95. (Id.). On the same day, Mr. Ortiz responded that Mr. Leace’s request to release product did not accord with the Parties’ 2-for-1 "dollar trading" agreement, and further, appeared to foretell unacceptable delays in future payments. (Id.).
[53].
By June 11, 2012, it appears that HNC was behind on its scheduled payments to Kipling. In an email sent on that date, Mr. Ortiz informed Mr. Leace that HNC was a week late on a scheduled payment of $144,296.32. (CX 371). In response, Mr. Leace informed Mr. Ortiz that HNC was in the process of "resubmitting orders with revised shipping dates", after which Mr. Leace would "authorize payment in writing." (Id.). Later that month, on June 25, 2012, a scheduled credit card payment to Kipling for $250,361.21 was rejected by American Express. (Hrg. Tr. at 888-889).
[54].
Despite these problems, Mr. Ortiz testified that by July 10, 2012, HNC was current on its total outstanding balance of $864,965.51. (Id. at 892-894). Of that total outstanding balance, $679,307 - or over 78% - was not due until August or September, 2012. (See CX 426). The remaining balance of $185,658 was due on various dates throughout July, 2012. (See id.). Notably, it appears that the net reduction of HNC’s overall balance by $535,162 between April 1, 2012, and July 10, 2012, was attributable in large part to Mr. Leace’s infusion of personal capital into HNC on at least two occasions. (See CX 345, 364).
[55].
On July 10, 2012, having succeeded in bringing the HNC account fully current, Mr. Ortiz sent an email to Mr. Hall and VFS President Julie Dimperio that noted Kipling was scheduled to ship approximately $1 million in orders to HNC through August, 2012. In light of that, Mr. Ortiz proposed "monitoring" HNC’s account as follows: (1) if HNC "is running 80% current with 20% one to 30 days", approve Kipling exposure of $1,200,000 to $1,500,000; (2) if more than 20% of HNC’s account balance goes beyond 31 days, limit Kipling exposure to under a million dollars; (3) if HNC’s account goes beyond 61 days, place a hold on the account. (Hrg. Tr. at 1084-1085: CX 567). Mr. Ortiz testified that he felt, if the account was running 80% current, exposure of $1,200,000 to $1,500,000 was "proper". (Hrg. Tr. at 1084). However, after apparently discussing the matter with Mr. Ortiz, Mr. Hall responded via email on July 12 that "based on our current information and the conversation we had this afternoon, we don’t want to ship anything further to this account, and don’t want to increase our exposure even $1 more than where we are today." (Id. at 1087).
[56].
Thereafter, sometime between July 10 and July 12, 2012, Mr. Ortiz decided to impose the $500,000 Credit Limit on HNC without regard to whether HNC was current with its payments. (Id. at 896). Mr. Ortiz testified that because HNC was scheduled to pay down their total outstanding balance to a number below $500,000 by the end of July, it was "the perfect time to implement this line." (Id. at 897). Mr. Ortiz further testified that:

based on what we had just gone through over the last few months, the constant trying to track him down for payment, the constant bounced checks, the constant credit cards that were declined, I just felt that it was, we were in a better place to try and manage the account and keep him at a certain level. I did not want to increase our exposure and put us in a position that would cost us some money.

(Id. at 899).

[57].
On July 16, 2012, Mr. Ortiz informed Henry Leace of the Credit Limit for the first time via phone. (See RX 105). Shortly thereafter, at 12:42 p.m. on July 16, 2012, Mr. Leace sent a brief email to Diego Ortiz entitled "Phone call this morning", which "CC’d" numerous VFS personnel, including Mr. Hall and Ms. Imperio. That email stated as follows in pertinent part:

A change to terms and limits with no notice in [the] height [of] our season, will sabotage our back to school season. I urge you to ease the transition to these new limits over a 90 day period. This is not how you treat a "partner" of 7 years.

(RX 105). Later on July 16, having apparently received no substantive response to his previous email, Mr. Leace sent a follow-up email to Mr. Ortiz that requested Kipling "advise in writing of newest demands placed on the relationship, discussed on your call to me on my cell." (CX 431).

[58].
Two days later, at 8:25 a.m. on July 18, 2012, having apparently still received no substantive response from Kipling, Mr. Leace sent the following email to David Hall entitled "Your recent decisions regarding Kipling business":

David,

You have rejected my request to meet with you last month. You have ignored a request to schedule a time to speak over the telephone. You have a hold on my orders in the middle of our biggest month of the year, while our company is current and our balance is a million dollars lower than its high this year.

We are your largest domestic customer of Kipling products, and you are our only supplier. You are sabotaging our business with these kinds of decisions. I don’t know what else to do. Our payment schedule has been set for July and August, and I am on family vacation through August.

I have advised my office to release a check that was signed, prior to my departure, to satisfy some immediate needs.

Please release our orders through August, as to not damage our business any further. Our purchase orders submitted through January 2013, carry 60 day terms and our operating agreements with VF indicate same. I am not sure what you are intending to accomplish by not responding to any attempts to communicate.

While I do understand you are new to the position, I have been a "partner" licensee for more [than] 7 years with VF, and 15 years with the Kipling brand. I have never experienced this type of treatment.

(CX 433). In response to Mr. Leace’s emails of July 16, Mr. Hall sent an email to Mr. Leace at 4:56 p.m. on July 18 that stated he was "[o]n vacation this week and have sketchy access to e-mail. You will hear from us early next week." (CX 434). Shortly thereafter, in an email sent on July 18 at 7:25 p.m., Mr. Leace responded to Mr. Hall as follows:

David,

With all due respect, next week is not good enough. I have cut my family vacation short, as I must deal with this immediately. To stop deliveries in mid July with no notice, then go on vacation is dumbfounding.

I have authorized early release of 150k check that I signed in advance of my trip. We are current as promised, and I would appreciate the release of July and August deliveries as scheduled until we meet next month as planned.

We are scheduled to meet the first week in August. A discussion of your new requirements could not wait until then? Please respond to this request at your next available email transmission opportunity.

(CX 434).

[59].
It appears that the first substantive response Mr. Leace’s emails elicited from Kipling was a formal letter on VFS letterhead sent by Mr. Ortiz and dated July 30, 2012 - two weeks after HNC had been informed that the Credit Limit would be imposed. (RX 111). In that July 30 letter, Mr. Ortiz stated that "[u]pon review of HNC’s difficult payment history with us over the years, it was necessary to reduce your credit limit to $500,000, as previously communicated to you." (Id.) Further, Mr. Ortiz noted that the Credit Limit was effective as of July 30, and that as of that date, HNC had a total open balance of $489,288.26 - all of which was apparently current. (Id.) Despite that, in the July 30 letter, Mr. Ortiz cautioned HNC as follows:

Please note that in order for us to release any merchandise, payment must be made prior to any orders being released in order to avoid exceeding your reduced credit limit. In other words, you will need to reduce your outstanding balance by the dollar amount of the order(s) to be released to insure your credit line of $500,000 is not exceeded.

(Id.). Mr. Ortiz testified on cross that he was instructed to not have any further communication with HNC after he sent the foregoing letter on July 30, 2012. (Hrg. Tr. at 1093).

[60].
The next day, July 31, 2012, Mr. Leace responded to the July 30 letter in the following email sent to David Hall and numerous VFS personnel:

Dear David,

I'm in receipt if the letter from Diego Ortiz, credit manager, a copy of which I’ve attached. I assume by my conversation with Diego that this came directly from you, given you are the new CFO of the coalition. As discussed, at our first opportunity to meet, the payment delays in the second quarter were directly attributed to our merchant plan including marketing support which never materialized from VF, and therefore left us dramatically overstocked.

We worked our inventory down to appropriate levels with your full knowledge and brought our account current by the end of June as promised. If you recall, you denied meeting with me until current status was achieved. Immediately thereafter I received a call from Diego informing me of your new credit guidelines, dropping my credit limit by more than $1,000,000 with no notice in the first week of our busiest month of the year. Please keep in mind you are our sole supplier of product for these stores.

I reached out to you immediately to find you were on vacation which further aggravated the situation. You promised me a call last week upon your return, but I have yet to hear from you. You promised me a meeting at August market, but Oscar has not [been] able to get a confirmation of same.

I returned home to Florida upon Diego’s call to address accelerating payments prior to due dates to satisfy this immediate demand. In fact, we moved up almost $400,000 to pay some August invoices, as I am sure you are well aware. We do not have another invoice[] due until September 10th, and our balance is lower than I could ever remember. In addition, we have analyzed the credit needs based upon payments being made on due dates. The newly imposed $500,000 credit limit will be sufficient for most of the year. However, during the months of July, August, September and January, we require a $1,000,000 seasonal increased limit. I ask of you today to authorize this seasonal limit with a promise that all invoices will be paid within 10 days of due date.

Please put yourself in my shoes, a partner of seven years, and the face of Kipling retail in South Florida for more than fifteen years.

I’ve copied a host of others to try and solicit a professional response to a serious issue.

(RX 109) (emphasis in original).

[61].
The following day, August 1, 2012, David Hall responded to Mr. Leace’s foregoing email as follows:

Dear Henry,

My apologies for the delay in getting back to you. We are in the midst of our strategic planning timeframe, as well as preparing for meetings with Corporate next week, so days have been pretty busy.

As it relates to the reduction in Harvard’s credit line to $500,000, this was necessitated by concerns about HNC’s troubled payment history with Kipling, and the ever increasing likelihood of a softening economy. Kipling cannot afford to finance HNC’s business thereby increasing our cost of doing business. You already enjoy payment terms that are not extended to the vast majority of our customers. Accordingly, we cannot increase your credit line beyond the $500,000 limit even on a seasonal basis. In Kipling’s view, we believe this this is in the best interest of both companies and insures the financial stability of both Kipling and HNC.

I understand you will be meeting with Julie next Wednesday, but unfortunately I will be tied up in meetings that day with our Corporate Senior Management team. I trust that you understand our position on this and thank you in advance for your cooperation.

(RX 112).

b. Analysis

[62].
In view of HNC’s claims based upon the covenant of good faith and fair dealing regarding the Credit Limit, the relevant portion of each License Agreement is Section 6, entitled "PURCHASE OF KIPLING PRODUCTS BY LICENSEE", which established the following in pertinent part:

6.1 Licensee shall purchase Kipling Products exclusively from Licensor’s parent, VF Sportswear, Inc. ("VFS") upon such sales terms and conditions as determined by VFS, and at VFS’s regular published wholesale prices, as determined from time to time by VFS; provided however, that such terms and conditions shall be Licensor’s regular terms and conditions generally available to other VFS customers for the Kipling Products in the United States.

(License Agreements at Section 6.1) (emphasis in original).

Under New York law, it is well-established that:

[A]ll contracts imply a covenant of good faith and fair dealing in the course of performance. This covenant embraces a pledge that "neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of its contract". While the duties of good faith and fair dealing do not imply obligations "inconsistent with other terms of the contractual relationship", they do encompass "any promises which a reasonable person in the position of the promise would be justified in understanding were included."

West 232nd Owners Corp. v. Jennifer Realty Corp., 98 N.Y.2d 144, 153 (2002) (citations omitted). The covenant, however, "does not impose obligations beyond those intended and stated in the language of the contract." Hildene Capital Mgmt., LLC v. Friedman, Billings, Ramsey Group, Inc., 2012 WL 3542196 at *7 (S.D.N.Y. Aug. 15, 2012) (citations omitted). Indeed, "a court cannot imply a covenant inconsistent with the terms expressly set forth in the contract, and a court cannot employ an implied covenant to supply additional terms for which the parties did not bargain." Id. (citations omitted). Lastly, "a breach of the covenant of good faith and fair dealing is considered to be a breach of the underlying contract." Combustion Engineering, Inc. v. Imetal, 235 F. Supp.2d 265, 270 (S.D.N.Y. 2002) (citations omitted).

[63].
Here, in view of the terms of Section 6.1 of the License Agreements and the Parties’ historical performance thereunder, the Arbitrator is persuaded that Kipling’s imposition of the Credit Limit ran afoul of the covenant of good faith and fair dealing under New York law.
[64].
The record in this case is replete with evidence that from at least January 1, 2009, on or about the date the License Agreements became effective, Kipling habitually and consistently extended flexible credit to HNC without any hard coded limit. The evidence makes clear that HNC routinely carried total credit balances well in excess of $1 million, and reached a maximum of over $1.4 million in March, 2012. Mr. Ortiz, the individual at VFS who determined HNC’s credit limit, testified that he was comfortable extending credit in excess of $1 million to HNC, because it was in the best interests of both HNC and Kipling to grow sales revenue. Further, Mr. Ortiz testified that as a "partner", he viewed Kipling’s extension of credit to HNC as a necessity. Indeed, apparently for those reasons, prior to July, 2012, Mr. Ortiz never imposed any credit limit on HNC, but instead closely "managed" the account in an effort to ensure that Kipling’s exposure remained current and within acceptable levels.
[65].
Viewed within that context, Kipling’s sudden imposition of the Credit Limit was drastic, and wholly devoid of any precedent throughout the Parties relationship. Moreover, the precise moment that Kipling chose impose the Credit Limit - i.e., at a crucial point in HNC’s annual retail-cycle, and with knowledge of significant pending orders from HNC - effectively insured that it would have critical, if not devastating financial effects. While Kipling clearly had the right under the License Agreements to demand that HNC made timely payments on its invoices, it just as clearly did not have the right to capriciously impose payment terms that were punitive.
[66].
Therefore, based upon Kipling’s years-long practice of extending HNC flexible credit without any hard coded limit, the Arbitrator concludes that HNC was "reasonably justified in understanding" that Kipling’s historical performance represented a "promise" as part of the purchase "terms and conditions determined by VFS" under Section 6.1 of the License Agreements. (See West 232nd Owners Corp. at 153). At the very least, HNC was "reasonably justified in understanding" that Kipling had effectively "promised" to not unduly restrict its ability to acquire the Kipling products it needed to supply its ongoing operations.10 As such, Kipling’s sudden unilateral decision to limit HNC’s credit to a hard coded $500,000 in July, 2012, amounts to a breach of the implied covenant of good faith and fair dealing under New York law.
[67].
Further, the evidence has clearly established that as a proximate result of Kipling’s breach - which severely limited HNC’s access to Kipling merchandise during the critical back-to-school retail season - HNC was deprived of its right to enjoy the fruits of the Licensing Agreements. On that point, indisputably and compellingly, all of HNC’s stores were closed within two months of Kipling’s imposition of the Credit Limit. (See Section 9(D)(i), below).
[68].
Perhaps most critically, based upon the evidence adduced at the Hearing, the Arbitrator cannot conclude that Kipling had any good faith basis for its imposition of the Credit Limit in July, 2012. Unquestionably, the evidence has made clear that HNC exhibited a long-standing pattern of paying invoices after their stated due-dates. However, the evidence has made equally clear that until litigation was imminent, HNC always ultimately rendered payment to Kipling in full. (Hrg. Tr. at 985).
[69].
Indeed, as of July 10, 2012 - just days before Mr. Ortiz decided to impose the $500,000 Credit Limit - HNC had succeeded in bringing its accounts current, and had reduced its total outstanding balance by a net amount of more than $500,000 in approximately three months. Logic dictates that HNC’s debt reduction would, if anything, have encouraged Kipling to ease credit terms. And that is exactly what happened - at first. On July 10, 2012, based upon the status of the HNC account, Mr. Ortiz recommended to Mr. Hall and Ms. Dimperio that Kipling grant HNC credit that approached or exceeded its maximum historical levels, so long as HNC remained reasonably current. That recommendation, which expressly referenced the nearly $1 million in critical back-to-school orders that HNC had placed through August, 2012, was wholly consistent with Mr. Ortiz’s view that HNC was a "partner", and that the flow of merchandise to HNC’s stores was "necessary" to allow both Parties to achieve their shared goal of increased sales revenues. Axiomatically, that recommendation was also wholly consistent with good faith performance and fair dealing under the License Agreements.
[70].
Mr. Ortiz, however, did not implement that recommendation. Instead, within just a few days, he completely reversed course, and decided upon the $500,000 Credit Limit because, as he explained during the Hearing, he "did not want to increase our exposure."11 (Hrg. Tr. at 899). The obvious practical effect of the hard coded $500,000 Credit Limit was that it would require HNC to pay cash for its critical back-to-school orders, given its outstanding balance of $489,288.26. In any commercial context, those terms would appear draconian. In this case, they were virtually impossible.
[71].
In order to pay down HNC’s total outstanding balance to the level demanded by Kipling between April and early July, 2012, Mr. Leace had strained HNC’s supplies of cash, and had injected significant amounts of personal capital into the business. In light of that, Kipling’s imposition of the Credit Limit would, at the very least, foreseeably limit the amount of back-to-school product that HNC would be able to purchase. Indeed, Mr. Ortiz testified that both his decision to impose the Credit Limit, and his subsequent decision to deny Mr. Leace’s request to temporarily ease the Credit Limit, were made with knowledge of the "orders we had in the hopper." (Id. at 1008). Therefore, the evidence has persuasively proven that Kipling decided to impose the Credit Limit on HNC with either the actual or constructive knowledge that it would materially impact HNC’s ability to acquire Kipling merchandise. Of course, without Kipling merchandise, HNC could not generate revenue. Based upon those facts, Kipling’s decision to impose the Credit Limit was wholly inconsistent with both its years-long practice of extending HNC credit as a "partner", and any reasonable conception of good faith.
[72].
Additionally, in light of the Parties’ years-long payment practices, the Credit Limit cannot be plausibly justified, or even credibly explained, by either of the following two post hoc explanations David Hall offered Mr. Leace in his August 1, 2012 email: (1) HNC’s "troubled payment history"; and (2) the "ever increasing likelihood of a softening economy". While HNC’s payment history may have periodically vexed Kipling personnel, that vexation neither explains nor justifies the capricious imposition of the unprecedented, fractional, hard coded Credit Limit with no notice, days after HNC had brought its account current. Further, there is no evidence in the record (or provided by commonsense) to support Mr. Hall’s claim that a "softening economy" justified the Credit Limit, especially in light of HNC’s flexible credit terms over the prior years, and the total absence of any testimony to that effect by Mr. Ortiz, who according to Kipling, decided to impose the Credit Limit.12
[73].
Lastly, given the material, if not severe impact the Credit Limit was almost certain to have on HNC, both Kipling’s declination to address the Credit Limit with HNC before it was unilaterally imposed, and Kipling’s refusal to negotiate or meaningfully discuss the Credit Limit with HNC after it was imposed, demonstrate a complete absence of good faith on Kipling’s part.
[74].
In sum, as Mr. Leace aptly noted in his July 18 email to David Hall, Kipling’s apparently willful decision to virtually paralyze HNC’s business operations on the eve of an indisputably critical retail season was, to put it mildly, "dumbfounding". For all of the foregoing reasons, the Arbitrator concludes that Kipling breached the covenant of good faith and fair dealing by its imposition of the Credit Limit on HNC in July 2012.
[75].
Finally, for completeness, the Arbitrator notes that Kipling’s two main legal arguments to the contrary are unpersuasive. First, Kipling argues that because Section 6.1 of the License Agreements did not compel Kipling to extend HNC any credit, Kipling’s decision to impose the Credit Limit cannot amount to a breach of the covenant of good faith and fair dealing. Second, and relatedly, Kipling argues that based upon the terms of Section 6.1, because HNC failed to prove that the credit terms Kipling extended to other customers in the United States were more favorable than the Credit Limit, HNC’s claim must fail. Both of these arguments are unavailing for the same reason.
[76].
The issue presented by HNC’s present claim is neither whether Section 6.1 established the credit terms that Kipling was required to extend to HNC, nor whether Kipling extended more favorable terms to other customers in the United States. Instead, pursuant to New York law, the issue is whether, consistent with the terms of Section 6.1, and in light of the factual circumstances, HNC "could be reasonably justified in understanding" that its credit with Kipling was flexible and exceeded $500,000. See West 232nd Owners Corp. at 153. As previously explained, the credible evidence in this case has persuaded the Arbitrator that HNC was reasonably justified in forming that understanding.

ii. The August 17 Notice

a. Relevant Facts

[77].
On August 17, 2012, counsel for Kipling sent HNC a "Notice of Default and Termination" (as previously noted, the "August 17 Notice"). The August 17 Notice stated that, pursuant to Section 19.2 of the License Agreements, HNC had five days to respond to the following allegations:

LICENSOR has obtained evidence of LICENSEE’S violation of Sections 8 and 12.5 of the License Agreement. Specifically, it has been determined that LICENSEE has made unauthorized wholesale sales to third parties of the Kipling Products in violation of the License Agreement. Apparently, offending sales have been made by Manual Barrera on a number of occasions including, but not limited to a sale in the amount of $6238.49 on August 14, 2012. Further, Manual Barrera accepted a 2012 Florida Annual Resale Certificate for Sales Tax and did not charge tax on the August 14, 2012 sale, and thus expressly acknowledged that the sale was to a party who intended to re-sale the same. These unauthorized sales constitute a material breach and interfere with LICENSOR’S ability to control the nature and quality of the re-sellers of Kipling Products. This material breach is incapable of being cured. Moreover, pursuant to Section 12.4 of the License Agreement, the unauthorized sales constitute trademark infringement in violation of the Lanham Act and corresponding state law.

While Section 19.2 of the License Agreement provides you with the right to respond and comment, nevertheless, the License Agreement shall terminate without further notice fifteen (15) days from the date hereof as provided in Section 20.2.5 unless the material defaults are cured in all respects.

(CX 474).

[78].
The factual basis for the August 17 Notice was acquired by Kipling via two private investigations.
[79].
First, in March, 2012, Kipling retained the services of North Carolina-based Vaudra Limited ("Vaudra") to investigate the appearance of Kipling merchandise in two non-licensed specialty stores in Orlando, FL. (Hrg. Tr. at 2049-2051). Ultimately, Vaudra’s inquiries regarding the supply of the illicit Kipling merchandise led to HNC’s Dolphin Mall outlet store ("Dolphin Mall Store"), and the manager of that store, Manuel Barrera. (Id. at 2059). The private investigator Vaudra assigned to the case, Orlando Sanchez, contacted Mr. Barrera and established that he could make a wholesale purchase of Kipling merchandise. (Id. at 2060). Thereafter, at the Dolphin Mall Store, Mr. Barrera sold Mr. Sanchez over 300 Kipling handbags for approximately $11,000, which was paid via both cash and credit card. (Id. at 2059-2076).
[80].
Second, in July, 2012, Kipling retained the services of Florida-based A Action Investigations & Securities, Inc. ("A-Action") to specifically investigate the Dolphin Mall Store. (Id. at 3285-3288). The private investigator A-Action assigned to the case, Eric Allen Berger, went to the Dolphin Mall Store on July 30, 2012, and made contact with Mr. Barrera. (Id. at 3288). Thereafter, at the Dolphin Mall Store on August 14, 2012, Mr. Barrera sold Mr. Berger numerous pieces of Kipling merchandise for $6,238.40, and agreed to waive Florida sales tax based upon a Florida tax resale certificate presented by Mr. Berger. (Id. at 3300-3303).
[81].
On May 1, 2012, upon first learning from Vaudra that HNC’s stores were a likely source of the unauthorized Kipling merchandise, Lisa Whitney noted in an email to Vaudra that "[w]e have a troubled relationship with Harvard, and in my view we would want to terminate them." (RX 123-A). During the Hearing, Ms. Dimperio testified that HNC’s account was not put on hold after the initial Vaudre investigation, because Kipling "wanted to confirm". (Hrg. Tr. at 2244). After the second investigation resulted in Mr. Barrera’s sale to Mr. Burger on Tuesday, August 14, 2012, Kipling issued the August 17 Notice later the same week, on Friday, August 17, 2012.

b. Analysis

[82].
In view of HNC’s claims based upon the covenant of good faith and fair dealing regarding the August 17 Notice, the relevant portion of each License Agreement is Section 9, entitled "MANAGEMENT OF THE KIPLING STORE AND SALES PERSONNEL", which established the following in pertinent part:

The Kipling Store shall be managed by a person (the "Floor Manager") hired by Licensee, who shall be an employee of Licensee. The Floor Manager shall be a person of store manager caliber, shall be responsible exclusively for the management of the Kipling Store, and shall devote 100% of his or her working time and attention to such activity. The Floor Manager shall be responsible for the performance and appearance of the Kipling Store. If Licensor has concerns about the manner in which the Floor Manager is performing his/her duties, then the LICENSOR shall discuss its concerns with Licensee and the Licensee shall address the concerns with the Floor Manager and resole Licensor’s concerns or assign the Floor manager to another HNC retail location other than a Kipling Store.

(License Agreements at Section 9).

[83].
Here, prior to the issuance of the August 17 Notice, the evidence provided to Kipling by both the Vaudra and A-Action investigations indicated only that Manuel Barrera, the manager of the Dolphin Mall Store, made sales that may have run afoul of certain restrictions within the License Agreements. As such, based upon the foregoing plain language of Section 9 of the License Agreements, it appears that Kipling was required, at least in the first instance, to contact HNC and address its concerns regarding Mr. Barrera with HNC’s leadership. Indeed, Mr. Leace testified that based upon the License Agreements and the Parties’ historical interactions, it was his understanding that if Kipling "observed or recognized that the HNC stores "were not being operated in the manner in which they deemed appropriate", Kipling would "pick up the phone or send an email and we would jump." (Hrg. Tr. at 3626). Therefore, based upon Section 9 of the License Agreements, the Arbitrator is persuaded that HNC was "reasonably justified in understanding" that Kipling had "promised" to take that action under the circumstances. See West 232nd Owners Corp. at 153.
[84].
Instead, Kipling engaged a course of conduct that was plainly targeted towards terminating all five of the License Agreements. Tellingly, upon learning from Vaudra that the HNC stores might be the source of unauthorized Kipling merchandise, Ms. Whitney stated that "in my view we would want to terminate them." (RX 123-A). Apparently to that end, the record reflects that Kipling took no action against HNC based upon the Vaudra investigation, and did not inform HNC that any investigation had taken place. Rather, in an effort "to confirm" - i.e., build a better case for termination - Kipling hired A-Action to replicate Vaudra’s findings. Within two business days after A-Action had done so, Kipling issued the August 17 Notice, and purported to terminate HNC.
[85].
The Arbitrator is persuaded that Kipling’s foregoing actions clearly demonstrate a pattern of bad faith conduct expressly designed to terminate the License Agreements. Kipling’s decision to sponsor multiple investigations of: (1) the same HNC store; (2) the same HNC store manager; (3) over the course of several months; and (4) without notifying HNC of any potential issue, is inconsistent with good faith performance pursuant to Section 9 of the License Agreements. Indeed, Kipling has offered no credible, good-faith-based business rationale for its conduct. Paired with Ms. Whitney’s frank acknowledgement regarding Kipling’s desire to terminate HNC, the Arbitrator concludes that Kipling’s bad faith in issuing the August 17 Notice is clear.
[86].
For all of the foregoing reasons, the Arbitrator concludes that Kipling breached the covenant of good faith and fair dealing when it issued the August 17 Notice.13

C. Whether HNC Failed to Pay Kipling For Goods That It Ordered and Received

[87].
Having concluded that Kipling breached the covenant of good faith and fair dealing implied within the License Agreements, the Arbitrator must address the three affirmative claims that Kipling lodges in its FASC. (FASC at ¶¶ 78-99). Those three affirmative claims - though styled as separate causes of action for Breach of Contract, Unjust Enrichment, and Goods Sold and Services Rendered, respectively - collectively seek the following basic remedy: that HNC is required to pay for Kipling goods it ordered and received.
[88].
Notwithstanding Kipling’s breach of the License Agreements, for the reasons that follow, the Arbitrator concludes that HNC is liable for the value of the goods it ordered and received from Kipling.

i. Relevant Facts

[89].
When Henry Leace was informed of the August 17 Notice, his "heart dropped." (Hrg. Tr. at 3949). During the Hearing, Mr. Leace testified that upon reading the August 17 Notice:

[T]hats the first time I realized, maybe I'd been being naive in believing nobody could ever do this, the first time I believed that after they tried to eliminate me from opening more stores, they tried to squeeze the price down to try to buy me and they can’t do that, that they’re just going to steal my company ....

Q. What was your reaction in terms of realizing what this was going to do to your business?

A. My business was done. It was over. They’re my only supplier. They already hadn't shipped [to] me in six weeks. They hadn’t shipped [to] me in the height of back to school. They asked me to pay down a credit limit below 500,000. I came up with about six, $700,000 to get it below that and they haven’t shipped me any goods even before this letter.

(Id. at 3949-3950).

[90].
Despite those realizations, Mr. Leace almost immediately took a series of actions to address the default referenced in the August 17 Notice.
[91].
First, on August 24, 2012, Mr. Leace’s cousin and then-counsel, Ben Leace, sent a letter to VFS (the "August 24 Letter") refuting the factual and legal bases of the August 17 Notice. (RX 161). That August 24 Letter, among other things, demanded that Kipling "immediately withdraw the [August 17, 2012] Notice of Default and Termination and instead, continue timely shipping product to HNC on prior credit terms." (Id.).
[92].
Second, HNC attempted to cure the default cited in the August 17 Notice by sending a letter to Eric Allen Burger, the private investigator with A-Action that had made the allegedly offending purchase from the Dolphin Mall Store on August 14, 2012. (Hrg. Tr. at 3952). Notably, the August 24 Letter sent to Kipling described HNC’s efforts to retrieve the merchandise Mr. Berger had purchased, and thereby "cure" the specific default upon which the August 17 Notice was based. (RX 161). HNC apparently never received a response from Mr. Berger, and it is undisputed that the merchandise was never returned to HNC.
[93].
Lastly, Mr. Leace undertook an internal investigation regarding the allegedly offending purchase at the Dolphin Mall Store on August 14, 2012, and further:

[W]e went to every employee and every store manager and asked for an explanation of what happened and retrained every employee on the bulk sale policy and made them sign a document that they understood the bulk sale policy and reconfigured the bulk sale policy which really was meant to go into a manual, I had [Oscar Mena] reconfigure it and post it to the retail consumer in every store in addition to just retraining, reprimanding, counseling and reviewing the bulk sale policy with every employee in the company.

(Hrg. Tr. at 3960-3961).

[94].
Kipling, however, refused to ship HNC any additional product for the remainder of August, and into early September, 2012, apparently based upon the August 17 Notice. (Id. at 3963). As a result, HNC’s inventory of Kipling merchandise was inadequate. (Id. at 3970-3971). In light of that, Mr. Leace decided to consolidate all of HNC’s remaining Kipling merchandise into the Sawgrass Mills Store, which Mr. Leace believed was the busiest of the five. (Id.). According to Mr. Leace, the Sawgrass Mills Store "sold out the balance of the inventory within a week or two." (Id.)
[95].
At or about the same time - i.e., late August and early September, 2012 - HNC’s business was winding down. During the Hearing, Mr. Leace testified as follows:

We moved inventory from one store to the next. We left each store in immaculate condition. Because we notified the landlords - I’ve testified earlier my relationship with the landlords and how long I’ve been in the retail business .... I could not afford to go dark or shut down a store and take my 30 years in the retail business and shut the doors on them. I sent letters out explaining what had happened beyond my control and I attempted to leave these stores with my head held high and apologize for any negative impact, but I assured them that they’d be hearing from Kipling very soon.

(Id. at 3971-3972).

[96].
On September 4, 2012, as HNC’s stores were winding down, Kipling’s counsel sent HNC a letter (the "September 4 Letter") that purported to withdraw the termination provisions within the August 17 Notice, and offered to ship HNC Kipling products up to the $500,000 Credit Limit. (CX 593). Though Kipling’s September 4, 2012 Letter came only 11 days after HNC’s August 24 Letter that demanded Kipling withdraw the August 17 Notice and continue "timely" shipments of product, Mr. Leace testified that by then, the game was effectively over: "There is no way I think I can get any kind of relationship going again with this company with the way they’ve treated me." (Id. at 3980).
[97].
HNC closed all of its stores in September, 2012. (Id. at 3986). On September 10, 2012, Lisa Whitney, on behalf of VFS, sent HNC a written Notice of Default pursuant to Section 20.1 of the License Agreements regarding $350,681.47 in overdue invoices (the "September 10 Notice"). (RX 163). On its face, the September 10 Notice related to a series of invoices that were due, based upon their agreed upon payment terms, between August 7 and September 7, 2012. (Id.). Further, the September 10 Notice asserted that "[t]his default was caused by Licensee’s reversal of credit card payments" for the invoices referenced therein, which Ms. Whitney alleged "was made under knowingly false pretenses". (Id.). During the Hearing, Mr. Leace testified as follows regarding the September 10 Notice:

Q. What was your reaction |to the September 10 Notice| considering by this time your stores were either all closed or most of them closed?

A. I figured it was some technicality to - technicality just to paper trail their hands since they were trying to withdraw their termination, that they were going to come up with some other kind of slick move.

Q. You considered this salt on an open wound?

A. It wasn’t even a wound, my - if you want the proper noun, my head was already cut off. I didn’t feel salt in the wound. It was gone beyond feeling anything at this point.

(Hrg. Tr. at 3988-3989).

[98].
Just two days later, on September 12, 2012, Lisa Whitney, again on behalf of VFS, sent HNC another written Notice of Default pursuant to Section 20.1 of the License Agreements regarding an additional $381,141.19 in overdue invoices (the "September 12 Notice"). (RX 164). On its face, the September 12 Notice related to a series of invoices that were due, based upon their agreed upon payment terms, between August 28 and September 11, 2012. (Id.).
[99].
During the Hearing, Mr. Leace acknowledged that: (1) he attempted to reverse a previously-authorized American Express charge for $350,681.47 related to the invoices referenced in the September 10 Notice; and (2) the $381,141.19 balance referenced in the September 12 Notice was, in fact, outstanding. (Hrg. Tr. at 3989, 3994). It is undisputed that American Express ultimately remitted $350,681.47 to Kipling, which fully satisfied the invoices referenced in the September 10 Notice. (Id. at 3992). Regarding the invoices referenced in the September 12 Notice, however, Mr. Leace testified as follows:

Q. Did you pay that $381,000?

A. No.

Q. Why not?

A. I was out of business.

....

Q. What was the reasoning as to why you did not pay the $381,000?

A. Well I believe we actually in advance notified counsel for VF not only that this was a setoff, but we also notified him in advance, if I’m correct of our intent to reverse the Amex before we did it. We told counsel of VFS if I am correct, we let them know that we’re reversing those charges. And we let them know that we’re taking this as a setoff against future damages in the lawsuit.

(Hrg. Tr. at 3994-3996).

[100].
On October 18, 2012, after sending HNC several other Notices of Default pursuant to various provisions within Section 20.1 of the License Agreements, Lisa Whitney, on behalf of VFS, sent HNC a written Notice of Failure to Cure and Termination (the "Termination Notice"). In pertinent part, the Termination Notice stated as follows:

By its letters, dated September 10, 2012 and September 11, 2012 ("Default Notices"), Licensor notified Licensee in great detail of its payment Events of Default in the amounts of three hundred and fifty thousand, six hundred and eighty-one dollars and forty-seven cents ($350,681.47) and three hundred and eighty-one thousand one hundred forty-one dollars and nineteen cents ($381,141.19), respectively, and provided Licensee with thirty (30) days within which to cure these serious Events of Default.

In view of Licensee’s failure to cure the Events of Default identified in the Default Notices, Licensor is hereby terminating the License Agreement, effective immediately.

(CX 505).

ii. Analysis

[101].
The evidence in the record has made clear that, as a proximate result of Kipling’s breach of the covenant of good faith and fair dealing in July and August, 2012, HNC’s Kipling-based business was destroyed. (See Sections 9(B) and 9(C)(i), above). In reality, by late August, 2012, as HNC’s Kipling stores were winding down, circumstances had inherently rendered the License Agreements form without substance. As such, Mr. Leace’s supposition that the September 10 Notice - and by extension, those that followed it - were mere "technicalities" does not appear unreasonable given the broader factual and legal tapestry of this matter. Indeed, the Arbitrator concludes that the myriad "technicalities" within the License Agreements - nominal violations of which largely buttress Kipling’s claim for Breach of Contract - need not be addressed or decided to award Kipling the quintessential remedy it seeks in this Arbitration. Rather, that quintessential remedy can and shall be awarded to Kipling for the following elemental reasons.
[102].
The Arbitrator has decided that the License Agreements would have terminated on December 31, 2013, based upon Section 18.1 thereof. (See Section 9(A), above). In light of that decision, the propriety and efficacy of the various Notices of Default and the Notice of Termination issued by Kipling are moot points. Instead, the relevant remaining question is whether HNC is liable for the unpaid invoices referenced in the September 12 Notice, as those invoices form the sole basis for Kipling’s claimed damages in this Arbitration.14 That question must be answered in the affirmative.
[103].
Section 20 of each License Agreement, entitled "EVENTS OF DEFAULT", established the following in pertinent part:

20.1 In the event of the occurrence of any "Event of Default" described in Section 20.2 hereof, provided the Licensee [HNC] fails to cure such Event of Default within the cure period specified within thirty (30) days unless otherwise specified herein (in calendar days) if any, following receipt of a written Notice of Default from Licensor [Kipling], Licensor may, at its option and without prejudice to any other rights or remedies provided for hereunder or by law, terminate this Agreement, pursuant to Section 19 hereof, with immediate effect. If any applicable law or rule requires a longer period of notice prior to termination, the notice required by such law or rule shall be substituted for the notice requirements stated herein.

20.2 Each of the following shall constitute an Event of Default:

....

20.2.11 Licensee’s failure to pay any Licensor invoice for Kipling Products according to its sixty (60) day payment terms within thirty (30) days from the due date [of] Licensor’s written notice, unless: (i) an extension of the original due date for the payment of such invoice has been agreed to in writing by Licensor; or (ii) a bona fide dispute exists with respect thereto and/or Licensee claims, in good faith, a bona fide right to a credit, or right to set-off any amount against such invoice and Licensee provides Licensor with substantiation for the legitimacy of facts requiring such credit or set-off.

(License Agreements at Section 20) (emphasis in original).

[104].
During the Hearing, Mr. Leace expressly acknowledged that: (1) the invoices referenced in the September 12 Notice were properly outstanding; (2) they were never paid; and (3) in his view, the outstanding balance referenced in the September 12 Notice is properly subject to set-off HNC’s damages in this Arbitration. (Hrg. Tr. at 3989, 3994-3996). It therefore appears undisputed that HNC ordered and received the goods that corresponded to the invoices referenced within the September 12 Notice, but to date, HNC has not paid for them. Moreover, given Mr. Leace’s testimony that HNC sold all of its remaining Kipling merchandise, it appears axiomatic that the goods in question were sold by HNC. (See id. at 3971-3972). In view of these facts, the Arbitrator concludes that HNC has breached the plain payment terms of the invoices referenced within the September 12 Notice, and as a result, breached Section 20.2.11 of the License Agreements. Indeed, by asserting set off, HNC appears to effectively concede its liability for the goods which it ordered, received and did not pay for.
[105].
Therefore, in sum, the Arbitrator concludes that Kipling has proven by a preponderance of the evidence that HNC is liable for Breach of Contract insofar as HNC failed to pay the invoices referenced in the September 12 Notice based upon their agreed upon payment terms in violation of Section 20.2.11 of the License Agreements.15 As a result of that conclusion, Kipling must prevail on the liability portion of Count I of its FASC against HNC for Breach of Contract. Further, as a logical corollary, HNC cannot prevail on the element of the First Count in its SC that seeks a Declaratory Judgment that HNC did not materially breach the License Agreements.

D. Whether Damages To Either Party Have Been Proven

i. HNC's Damages

[106].
The Parties’ dispute regarding damages is almost entirely focused upon the appropriate amount due to HNC as compensation for the economic consequences of Kipling’s breach. During two Hearing-days on September 10 and 11, 2014, the Parties' damages experts offered widely divergent opinions on that subject. HNC’s damages expert, Glenn Newman, CPA, opined that assuming Kipling’s liability, an appropriately-applied discounted lost profits methodology yielded damages to HNC of approximately $5.9 million, plus an additional $48,000 in lost security deposits related to HNC’s now-closed stores. (Hrg. Tr. at p. 4730). By contrast, Kipling’s damages expert, Joshua W. Lathrop, MBA, opined that assuming Kipling’s liability, an appropriately-applied business valuation methodology yielded damages to HNC of $581,000 through December 31, 2013 (the end of the initial term for the License Agreements), and $1.9 million through December 31, 2018 (the end of renewal term). (Hrg. Tr. at p. 4986).
[107].
In light of the experts’ divergent opinions, the threshold issue the Arbitrator must determine is the appropriate methodology to calculate HNC’s consequential damages. Based upon the facts of this case, precedent from the United States Court of Appeals for the Second Circuit instructs that the business valuation methodology utilized by Mr. Lathrop is applied.
[108].
In Sharma v. Skaarup Ship Mgmt. Corp., 916 F.2d 820 (2nd Cir. 1990), a Panel of the Second Circuit considered the appropriate damages calculation methodology to apply under New York law where a loss of income-producing-assets resulted from an alleged breach of contract. Based upon a survey of New York contract law, the Panel concluded that where the breach involves the deprivation of an item with a determinable market value, the market value at the time of the breach is the measure of damages." (Id. at 825) (citations omitted). In so concluding, the Panel expressly rejected the notion that a discrete lost profits methodology is appropriate. Instead, the Panel reasoned that:

Measuring contract damages by the value of the item at the time of the breach is eminently sensible and actually takes expected lost future profits into account. The value of assets for which there is a market is the discounted value of the stream of future income that the assets are expected to produce. This stream of income, of course, includes expected future profits and/or capital appreciation.

(Id. at 826). Finally, the Panel buttressed its conclusion by noting that under New York tort law, the same damages calculation methodology would be appropriate if the income producing assets had been negligently destroyed. (Id. at 827).

[109].
In this case, HNC seeks consequential damages for the total destruction of its income-producing-assets as a result of Kipling’s breach. As such, the decision in Sharma has established that the appropriate measure of Kipling’s consequential damages is the discounted market value of HNC’s business at the time of Kipling’s breach. As the Panel in Sharma noted, this methodology appropriately accounts for HNC’s lost future profits, and therefore obviates any independent lost profit analysis.
[110].
The Arbitrator is persuaded that the business valuation methodology utilized by Mr. Lathrop is the appropriate one to be applied. The Arbitrator is also persuaded that Mr. Lathrop clearly, logically and exhaustively applied the relevant credible facts to his business valuation methodology as expressed in his expert report. In particular, the Arbitrator agrees with Mr. Lathrop’s inherent conclusion that Kipling’s potential offer to purchase the HNC stores in late 2010 or early 2011 is irrelevant to any damages calculation in this matter as of July 1, 2012. As Mr. Lathrop explained during the Hearing, it is unclear whether Kipling actually intended or offered to purchase the HNC stores, and even if Kipling did so, whether the information and analysis upon which Kipling apparently relied in valuing the HNC stores was appropriate or reliable. (See generally, Hrg. Tr. at 5099-2013).
[111].
Additionally, based upon the Arbitrator’s previous conclusions, the Arbitrator is persuaded that Mr. Lathrop’s use of July 1, 2012, as the effective date of Kipling’s breach for the purpose of calculating HNC’s consequential damages is appropriate. Above, the Arbitrator concluded that Kipling breached the covenant of good faith and fair dealing by imposing the Credit Limit upon HNC on or about July 16, 2012. As such, the July 1, 2012 date utilized by Mr. Lathrop reflects, with reasonable accuracy, the point in time at which many of the key actions by Kipling that resulted in its breach had occurred.
[112].
Conversely, the Arbitrator is not persuaded by the evidence offered on HNC’s behalf by Mr. Newman. To be clear, that determination is in no way predicated upon Mr. Newman’s credentials or professionalism. Instead, as the Arbitrator has explained above, the lost profits methodology applied by Mr. Newman is simply not supportable in this case under applicable precedent. Additionally, methodology aside, Mr. Newman’s exclusion of various HNC-employee salaries from his damages calculus - most notably the significant annual salary of Henry Leace - was not supported by credible evidence, and inherently rendered Mr. Newman’s final conclusions unreliable.
[113].
Therefore, in sum, the Arbitrator concludes that Kipling has proven by a preponderance of the evidence that $581,000 - the result yielded by Mr. Lathrop’s business valuation methodology for HNC as of December 31, 2012, through the initial term of the License Agreements - will appropriately compensate HNC for the economic consequences of Kipling’s breach. Axiomatically, based upon the Arbitrator’s prior conclusion that the License Agreements would not have been renewed based upon their terms, the valuation established by Mr. Lathrop through the end of the initial term is appropriate.

ii. Kipling’s Damages

[114].
As compensation for HNC’s breach, Kipling seeks damages of $381,141.19, which stem from the final series of invoices that Kipling issued to HNC. (Kipling PH Memo at p. 50: CX 495). The Arbitrator has decided that there is no legitimate dispute regarding either the accuracy of the invoices at issue, or HNC’s non-payment thereof. (See Section 9(C)(ii), above.). Indeed, HNC ordered the goods, Kipling delivered them and HNC failed to pay for them. As such, the Arbitrator concludes that Kipling is entitled to $381,141.19 based upon HNC’s failure to pay bona fide invoices pursuant to the terms thereof. In light of that conclusion, the Arbitrator notes that Kipling’s two alternate, quasi-contract claims for Unjust Enrichment and Goods Sold and Services Rendered16, which are clearly duplicative of its Breach of Contract claim and seek the same damages, are moot and shall be denied. (See Woss, LLC v. 218 Eckford, LLC, 102 A.D.3d, 860, 862 (N.Y. App. Div. 2013) (noting that quasi-contract claims are not viable where express agreements indisputably exist between the parties).
[115].
Lastly, for completeness, the Arbitrator notes that to the extent Kipling has alleged that HNC is somehow liable for infringing its intellectual property rights under the License Agreements, Kipling offered no credible evidence that it was actually or proximally damaged by any infringement that may have occurred. Therefore, Kipling cannot prevail on any such claim as a matter of law. As a logical corollary, the second element of the First Count in HNC’s SC that seeks a Declaratory Judgment of Non-Infringement is moot and shall be denied. (SC at ¶¶ 239-251).

E. HNC’s Motion for Reconsideration.

[116].
Finally, on September 4, 2014, HNC filed its "Motion for Reconsideration of Ruling and Order Regarding Kipling’s October 21, 2013 Motion and/or to Amend the Pleadings to Conform with the Evidence." In that Motion, HNC fundamentally requests either of the following two forms of relief: (1) that the Arbitrator reconsider the January 7, 2014 R&O insofar as it dismissed HNC’s Seventh Count for Fraud against Kipling, VFS, Julie Dimperio and Matthew Puckett; or (2) that the Arbitrator allow HNC to revise its operative pleading and state a new claim for Fraud. Pursuant to the briefing schedule agreed upon at the Hearing, Kipling filed its opposition to HNC’s Motion on September 22, 2014, HNC filed a reply on September 29, 2014, and Kipling filed a sur-reply on October 6, 2014.
[117].
Procedurally, HNC’s Motion was filed without notice or leave: (1) approximately nine months after the R&O was issued on January 7, 2014; (2) approximately two months after the Parties’ presentation of fact witnesses during ten Hearing-days in June 2014; (3) approximately ten days after the Parties had submitted their Post-Hearing Memoranda; and (4) less than a week before the Parties and the Arbitrator reconvened for the presentation of expert damages testimony and closing arguments. Based upon that timeline, the fatal procedural flaws that afflict HNC’s Motion are self-evident, and have been persuasively asserted in Kipling’s opposition and sur-reply submissions.
[118].
In addition to those fatal procedural flaws, the Arbitrator shall deny HNC’s Motion for a more fundamental and substantive reason: during the Hearing, HNC did not prove that fraud of any type occurred. Under New York law, and indeed under the law of all or nearly all jurisdictions, fraud and fraud in the inducement must be proven by clear and convincing evidence. See State v. Industrial Site Services, Inc., 52 A.D.3d 1153, 1157 (N.Y. App. Div. 2008). Of course, that "evidentiary standard demands 'a high order of proof, and forbids the awarding of relief 'whenever the evidence is loose, equivocal, or contradictory.’" Abrahami v. UPC Const. Co., Inc., 224 A.D.2d 231, 233 (N.Y. App. Div. 1996).
[119].
In its Motion, HNC argues that the following relevant factual allegations in its SC relate to factual representations made by Kipling personnel after the execution of the License Agreements, and therefore state a plausible claim for fraud or fraud in the inducement:

89. In the summer of 2010, [Claimants] visited HNC’s store in South Florida and met with Leace ....

94. Leace ... advised [Claimants] that HNC wished to expand the number of their "All-Kipling" stores and apply their success, reputation within the local markets, and experience to new locations.

95. During this meeting, Leace also informed [Claimants] that HNC wished to renew the License Agreements.

96. In response, [Claimants] informed Leace that new store openings would proceed if HNC entirely remodeled and renovated the Aventura Mall, Sawgrass Mall and Dolphin Mall store locations ....

98. With the expectation that [Claimants] would authorize new locations for HNC upon the completion of the improvement, and renew all of the License Agreements, HNC fully remodeled the Aventura Mall, Sawgrass Mall and Dolphin Mall locations.

99. The improvements were completed ... at a cost to HNC in excess of Six Hundred Thousand ($600,000) Dollars.

100. HNC, however now believes and thus avers that Licensors had no intention of allowing HNC to expand or renew their License Agreements.

....

102. Requiring HNC to remodel the stores ... with [its] own money would upon license terminations give Licensors the opportunity [to] take over HNC’s successful "All Kipling" store locations with little or no investment, and allow Licensors to negotiate with the respective landlords to assume [HNC’s] "below market’ leases.

(HNC 9/4/14 Mot. Br. at 3) (citing HNC’s SC, passim).

[120].
Assuming arguendo that HNC’s foregoing factual allegations state a plausible claim for fraud or fraud in the inducement (and the Arbitrator found that they did not), HNC would have to prove by clear and convincing evidence: (1) the representation was actually made to Mr. Leace that he would be allowed to open additional stores if he renovated the three stores in question; (2) that representation was untrue; and (3) the person that made that representation either knew it was untrue, or made it recklessly. See Jo Ann Homes at Bellmore, Inc. v. Dworetz, 25 N.Y.2d. 112, 119 (N.Y. 1969).
[121].
In its Post-Trial Memorandum, HNC points to the following two pieces of evidence as proof of its foregoing fraud allegations. First, during the Hearing, Matthew Puckett testified as follows:

Q. Did the topic of HNC opening additional stores ever come up after September 2010?

A. Yes.

Q. How often?

A. I think at least for me, I didn’t have that many interactions, but the interactions that I had with Mr. Leace it probably came up at most if not all of those.

Q. And what did you say in response?

A. For a period of time I said the same message, which was we don’t have anything to discuss, we’re not going to open any new stores until we fix the ones that we have and we begin to pay within the terms.

Somewhere along the line that message changed a little bit to say that we weren’t going to open any new stores under the licensed model.

Q. Were you trying to trick Mr. Leace in 2010 by not telling him that at that point?

A. No, that was just an evolution of strategy I think and trying to figure out what made the most sense and, but no, absolutely not.

(Hrg. Tr. at pp. 242-243). Next, during the Hearing, Julie Dimperio, testified as follows:

Q. When you were there [at an HNC Kipling store in FL] did you tell him [Mr. Leace] that you were not going to even consider another licensed store being granted to HNC?

A. We were so appalled at the conditions of his existing store we focused on that. He dragged us to Dadeland because he was driving us and again, the art of the deal, try to, you know, manipulate us into agreeing to another store. I had been very clear that we would never open another store, ever.

Q. You told him that you would not let him open up other stores until such time as he renovated and remodeled the stores; isn’t that correct?

A. Matt [Puckett] told him that.

Q. And when did Matt tell him that?

A. I don’t recall. That’s what I heard in the testimony from Matt.

Q. What were Matt’s words when you heard him say to Mr. Leace I will let you open up other licensed stores if you renovate and remodel these stores?

A. Matt never said that because he never would because our intent was never to let him open up any stores.

Q. You heard him say it during the direct examination?

A. He said to Henry you need to get your existing stores into shape before we ever consider opening another store.

(Hrg. Tr. at pp. 2514-2516).

[122].
The Arbitrator concludes that neither the foregoing testimony, nor any other credible evidence in the record proves HNC’s fraud allegations by clear and convincing evidence. At most, the inconsistency that HNC alleges between the cited testimony of Mr. Puckett and Ms. Dimperio creates a question as to whether or not a factual representation was made to Mr. Leace that he would, as a certainty, be allowed to open new Kipling stores. The cited testimony, therefore, at best represents "loose, equivocal, or contradictory" evidence, and falls far short of the "high order of proof’ that New York’s clear and convincing evidence standard requires. Abrahami, 224 A.D.2d at 233.
[123].
Further, assuming arguendo that the cited testimony did prove clearly and convincingly that Mr. Puckett had made an express factual representation to Mr. Leace, the Arbitrator is persuaded that representation was expressly conditioned on HNC’s satisfaction of at least the following two conditions: (1) the renovation of HNC’s then-existing stores; and (2) that HNC "begin to pay within the terms" - or, as reasonably understood in this context, that HNC keep its total outstanding balance with Kipling "current". (Hrg. Tr. at 243, Ins. 11-16). Indeed, at the Hearing, Mr. Leace appears to have corroborated the existence of these conditions through the following testimony, which described the discussions between himself and Mr. Puckett in 2010 regarding whether new HNC stores would be allowed:

A. So let’s go back to that meeting June 2010. At that meeting we were asking for a new Dadeland store yet we had stores that needed to be remodeled, and Matt Puckett wanted to be proactive and he said to me I want to see a financial plan outlining the expansion, outlining the remodels, and showing the cash flow of the company able to support both the renewals, payment terms, and new store.

....

A. After our meeting he shared that before I can let you do the new stores I want to see your current stores up to current prototypes and the models completed.

....

Q. Was there any discussion with Mr. Puckett or Ms. Dimperio as to whether there were any conditions before the four additional locations would be permitted to be developed?

A. It was my understanding I had to complete the remodels of those stores and show we had the capital to open up the additional stores and continue to support the inventory requirements required to operate those stores.

(Hrg. Tr. at 3642; 3659-3660; 3666-3667).

[124].
Based upon Mr. Leace’s foregoing testimony, it is evident that both Mr. Puckett and Mr. Leace understood that before HNC could open any new stores, certain financial conditions had to be met. Mr. Puckett’s assertion that one such condition was the requirement that HNC "begin to pay within the terms", is both consistent with and not contradicted by Mr. Leace’s testimony. As explained above, the record has clearly established that HNC did not "begin to pay within terms" or be entirely "current" relative to its total outstanding balance with Kipling until July, 2012. As such, HNC did not satisfy one of the conditions established by Mr. Puckett for almost two years, and well over a year after Mr. Leace was definitively informed by Kipling that HNC would not be allowed to open any additional stores. Thus, even if Mr. Puckett had made a conditional promise to Mr. Leace, the evidence clearly indicates that HNC did not timely satisfy the requisite conditions to effectuate that promise.
[125].
In sum, therefore, the evidence presented by HNC during the Hearing is insufficient as a matter of law to support any claim by HNC for fraud or fraud in the inducement under New York law.
[126].
For that reason, HNC’s September 4, 2014 Motion for Reconsideration must be denied.

10. Fees, Costs and Expenses.

A. Procedural History

[127].
On December 10, 2014, the Arbitrator issued an Interim Award that reserved decision solely on the arbitrable question of "whether and in what amount fees, costs and expenses pursuant to AAA Rule 43(c) and interest pursuant to AAA Rule 43(d)(i) should be awarded to either Party." (Interim Award at Section 8). At the conclusion of the Interim Award, the Arbitrator established a schedule for the Parties to brief that question. (Id. at Section 10(11)).
[128].
On January 9, 2015, pursuant to the foregoing schedule established within Section 10(11) of the Interim Award, each Party filed a supplemental brief (the "Supplemental Briefs") that addressed the question of whether and how any fees, costs and expenses related to this Arbitration should be awarded.17
[129].
On January 14, 2015, HNC filed an "Amended" Supplemental Brief (the "Amended Brief) that was apparently intended to supersede HNC’s Supplemental Brief. Importantly, HNC’s January 14 Amended Brief nearly doubled the total amount of fees, costs and expenses that HNC had claimed in its original Supplemental Brief - viz., $459,188.00 (claimed per the Amended Brief) versus $245,004.68 (claimed per the Supplemental Brief). (HNC Amd. Br. at p. 12: HNC Supp. Br. at p. 12). On January 15, 2015, Kipling objected, and asserted that HNC’s Amended Brief was filed without prior notice or leave, and violated the schedule established within Section 10(11) of the Interim Award. In response, the Arbitrator conducted a teleconference on January 15, 2015, and after hearing the Parties’ arguments, ordered HNC’s Amended Brief stricken. (See Order of January 16, 2015). Thus, HNC’s Supplemental Brief remains operative.
[130].
On January 20, 2014, pursuant to the schedule established within Section 10(11) of the Interim Award, each Party filed its response to the other’s Supplemental Brief (the "Responsive Briefs"). The schedule established within Section 10(11) of the Interim Award did not contemplate oral argument. As such, the Arbitrator closed the record for this Arbitration on January 20, 2015.

B. The Parties’ Arguments

[131].
In its Supplemental Brief, Kipling primarily argues that because both Parties have prevailed upon certain affirmative claims, each Party should bear its own fees, costs and expenses related to this Arbitration. (Kipling Supp. Br. at Section I). In the alternative, Kipling asserts that it should be awarded its fees, costs and expenses because: (1) Kipling was awarded the so-called "central relief it sought in this Arbitration; and (2) HNC allegedly engaged in misconduct throughout the pendency of this Arbitration. (Id. at Section II).
[132].
To the contrary, in its Supplemental Brief, HNC does not endorse the argument that each Party should bear its own fees and costs. (HNC Supp. Br., passim). Instead, HNC appears to solely advocate for an award that requires Kipling to reimburse HNC for all fees, costs and expenses that it accrued in relation to this Arbitration. (Id.). In support of that outcome, HNC argues that: (1) it primarily prevailed in the Arbitration; (2) an award that requires HNC to bear its own fees, costs and expense would be inequitable; and (3) Kipling engaged in misconduct throughout the pendency of this Arbitration. (Id.).
[133].
In their Responsive Briefs, among other things, each Party argues that the fees, costs and expenses sought by the other Party are unreasonable, and insufficiently supported by documentary evidence.
[134].
Lastly, each Party requests that pre-judgment interest be added to their respective damages awards. (Kipling Supp. Br. at Section III: HNC Supp. Br. at Section C).

C. Analysis

[135].
In its Supplemental Brief, Kipling argues in the first instance that the Parties should bear their own fees, costs and expenses related to this Arbitration. For the reasons that follow, the Arbitrator agrees.
[136].
AAA Rule 43, entitled "Scope of Award", establishes in pertinent part that:

(a) The Arbitrator may grant any remedy or relief that the arbitrator deems just and equitable and within the scope of the agreement of the parties ....

(b) [Omitted]

(c) In the final award, the arbitrator shall assess the fees, expenses and compensation provided in [AAA Rules 49, 50, and 51].18 The arbitrator may apportion such fees, expenses, and compensation among the parties in such amounts as the arbitrator deems appropriate.

(AAA Rule 43).

[137].
Next, AAA Rule 49, entitled "Administrative Fees", establishes in pertinent part that:

The AAA shall prescribe an initial filing fee and a case service fee to compensate it for the cost of providing administrative services. [] The filing fee shall be advanced by the party or parties making a claim or counterclaim, subject to final apportionment by the arbitrator in the award. The AAA may, in the event of extreme hardship on the part of any party, defer or reduce the administrative fees.

(AAA Rule 49).

[138].
Finally, AAA Rule 50, entitled "Expenses", establishes in pertinent part that:

The expenses of witnesses for either side shall be paid by the party producing such witnesses. All other expenses of the arbitration, including required travel and other expenses of the arbitrator, AAA representatives, and any witness and the cost of any proof produced at the direct request of the arbitrator, shall be borne equally by the parties, unless they agree otherwise or unless the arbitrator in the award assesses such expenses or any part thereof against any specified party or parties.

(AAA Rule 50).

[139].
In their Supplemental Briefs, both Parties either expressly or impliedly acknowledge that the application of the foregoing AAA Rules is not subject to any external constraints. (Kipling Supp. Br. at 14: HNC Supp. Br. at 13-14). However, each Party asserts that the AAA Rules should be applied in view of different guideposts.
[140].
Specifically, Kipling urges that the AAA Rules should be applied in accordance with the "prevailing party" standard that is typically utilized in the Southern District of New York within the context of Federal Rule of Civil Procedure 54(d)(1). (Kipling Supp. Br. at p. 14). Applying that standard here, Kipling argues that each Party should bear its own fees, costs, and expenses because the Interim Award represents a "mixed decision" in which both Parties prevailed upon at least one affirmative claim. (Id.) (citing JA Apparel Corp. v. Abboud, 2010 WL 1488009 at *4 (S.D.N.Y. April 13, 2010)). Alternately, Kipling asserts that under the prevailing party standard, it should be awarded its fees, costs and expenses because it was awarded the entirety of the relief it sought in its operative pleading - whereas HNC was only awarded a fraction of its claimed damages, and was only successful on one of its numerous affirmative claims. Finally, Kipling argues that even if HNC is deemed a prevailing party, it should not be awarded its fees, costs and expenses because of its alleged abusive and vexatious litigation tactics throughout the pendency of this Arbitration.
[141].
HNC, on the other hand, primarily urges that the AAA Rules should be applied in a flexible manner, with a principal focus upon achieving an equitable result. Here, HNC asserts that the only equitable result is an award that requires Kipling to reimburse HNC for all of its fees, costs and expenses. More precisely, HNC argues that because the Interim Award found that Kipling had: (1) engaged in a pattern of bad faith misconduct relative to its performance under the License Agreements; and (2) that misconduct proximately resulted in the destruction of HNC’s Kipling-based business, equity demands that Kipling reimburse HNC. Additionally, HNC also alleges that Kipling exhibited a pattern of abusive and vexatious litigation tactics throughout the pendency of this Arbitration, and claims that factor further counsels in favor of an award in HNC’s favor.
[142].
Ultimately, the Arbitrator concludes that an appropriate application of the AAA Rules to the facts of this case yields the same result under the approach advocated by either Party.
[143].
First, with regard to the "prevailing party approach proffered by Kipling, it appears axiomatic that both Parties prevailed in this Arbitration to a material extent. Unquestionably, in the Interim Award, each Party was found liable to the other for money damages following the establishment of one discrete affirmative claim. Thus, based upon a commonsense understanding of the concept, both Parties "prevailed" in this Arbitration. The Arbitrator is unconvinced that a more detailed exegesis of the Interim Award to determine which Party "prevailed more" is either relevant or appropriate. Thus, pursuant to the foregoing analysis, each Party prevailed in this Arbitration, and each Party should therefore bear its own fees, costs and expenses.
[144].
Second, with regard to the "equitable" approach advocated by HNC, the same end must be achieved, albeit via a different analysis. To be sure, the Interim Award found that Kipling had engaged in a pattern of bad faith misconduct relative to its performance under the License Agreements, and that misconduct proximately resulted in the destruction of HNC’s Kipling-based business. In view of those findings, HNC’s equity-based arguments have some superficial appeal. However, a deeper examination thereof militates the conclusion that HNC’s position presents a non sequitur.
[145].
At bottom, HNC argues that because it was awarded only a fraction of the damages it sought, equity demands that Kipling reimburse HNC to effectively bolster HNC’s monetary recovery in this Arbitration. That argument, however, ignores the fact that HNC was not awarded the damages it sought because HNC failed to prove those damages were actually incurred. In view of that, the Arbitrator is unconvinced that as a matter of equity, HNC’s failure to carry its burden of proof on the issue of damages - and the alleged resultant fiscal extremis of HNC - is an appropriate basis for the de facto augmentation of HNC’s damages award via the reimbursement of its fees, costs and expenses.
[146].
For completeness, the Arbitrator notes HNC’s overarching argument that straddles both the "prevailing party" and "equitable" approaches; namely, that Kipling did not prevail in this Arbitration because HNC’s liability was never truly disputed - and in view of that and its bad faith misconduct - Kipling should bear both Parties’ fees, costs and expenses. That argument is unavailing because it is fundamentally based upon the false predicate that Kipling bore no burden of proof during the Hearing. To the contrary, Kipling was required to collect evidence in support of its claims, present that evidence, and persuade the Arbitrator that its claims had been proven. Kipling did so, and more than that, proved: (1) that HNC had ordered certain goods; (2) Kipling delivered those goods; (3) HNC sold those goods; and (4) never paid for them. Despite those facts, HNC has never agreed to reimburse Kipling for the goods in question. Instead, Kipling was required to initiate this Arbitration and litigate its claims for several years to obtain relief. Based upon those facts, the Arbitrator cannot conclude that the Parties’ efforts relative to Kipling’s ultimately-successful claims were trivial, or that equity demands that those efforts are overlooked in the present context, as HNC urges.
[147].
Lastly, the Arbitrator addresses both Parties’ arguments that their fees, costs and expenses should be awarded based upon the other Party's alleged pattern of abusive and vexatious litigation tactics throughout the pendency of this Arbitration. In the final analysis, the Parties’ Supplemental and Responsive Briefs demonstrate that at various times throughout the pendency of this Arbitration, both Parties engaged in conduct that proved wasteful. However, the Arbitrator is not persuaded that the conduct of either Party was disproportionately egregious to an extent that alters the foregoing conclusion.
[148].
Therefore, for the reasons noted above, the Arbitrator concludes that each Party shall bear its own fees, costs and expenses related to this Arbitration.

11. Interest

[149].
In their Supplemental Briefs, both Parties seek pre-judgment interest on their respective damages awards pursuant to New York C.P.L.R. Section 5001. (Kipling Supp. Br. at 19-20: HNC Supp. Br. at 17-18). It appears undisputed that pursuant to N.Y. C.P.L.R. 5004, the appropriate rate of interest is 9% per annum, which pursuant to N.Y. C.P.L.R. 5001(b) begins to accrue from the "earliest ascertainable date the cause of action existed ... ." Here, based upon the findings within the Interim Award, the Arbitrator concludes that interest should begin to accrue as follows: (1) for Kipling, from September 12, 2012, the date reflected on the Notice of Default that Kipling sent to HNC relative to the unpaid invoices at issue; and (2) for HNC, from July 16, 2012, the date Diego Ortiz first informed Henry Leace that the $500,000 Credit Limit would be imposed. (See Interim Award at 19, 32). Lastly, N.Y. C.P.L.R. 5001(c) mandates that pre-judgment interest shall accrue "to the date the verdict was rendered or the report or decision was made ... ." Thus, based upon the plain terms of the foregoing, the Parties shall calculate pre-judgment interest at 9% per annum beginning on the dates noted above, and ending on the date that this Final Award is entered.
[150].
Finally, to the extent that either Party seeks post-Award interest pursuant to N.Y. C.P.L.R. 5002 - i.e., interest calculated from the date that this Final Award is entered, until the date a final judgment is entered in the Federal Action - the Arbitrator concludes that issue is neither arbitrable, nor presently ripe for decision, and must therefore be resolved by the Court in the Federal Action.

12. Conclusion.

[151].
By way of summary and conclusion, the UNDERSIGNED ARBITRATOR hereby enters the following FINAL AWARD as follows:

(1) Kipling’s claim for Breach of Contract is ACCEPTED IN PART AND DENIED IN PART;

(2) Kipling’s claim for Unjust Enrichment is DENIED;

(3) Kipling’s claim for Goods Sold and Services Rendered is DENIED;

(4) HNC’s First Claim is DENIED;

(5) HNC’s Second Claim is DENIED;

(6) HNC’s Third Claim is DENIED;

(7) HNC’s Fourth Claim is ACCEPTED IN PART AND DENIED IN PART;

(8) Kipling is awarded damages of $381,141.19;

(9) HNC is awarded damages of $581,000;

(10) HNC’s September 4, 2014 Motion for Reconsideration is DENIED;

(11) The Parties’ respective requests for an award of fees, costs and expenses pursuant to the AAA Rules are DENIED;

(12) The Parties’ respective requests for pre-Award interest are GRANTED, and that pre-Award interest shall be calculated in accordance with the Arbitrator’s decision at Section 11, above;

(13) To the extent either Party has requested an award of post-Award interest, that request is DENIED;

(14) The administrative fees of the American Arbitration Association, totaling twenty-six thousand six hundred fifty dollars ($26,650.00), and the compensation and expenses of the Arbitrator, totaling two hundred eighty-eight thousand five hundred twenty dollars and thirty-four cents ($288,520.34), shall be borne AS INCURRED.

(15) This Final Award is in full settlement of all claims and counterclaims submitted to the UNDERSIGNED ARBITRATOR in this Arbitration. All claims and counterclaims not expressly granted herein are hereby denied with prejudice.

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