2. Renewal's counterclaim for damages associated with claims that Dreamstyle breached certain intellectual property provisions of the Retailer Agreements is dismissed with prejudice.
3. Except as provided in this Interim Award or the Final Award, all claims and counterclaims made in this arbitration are dismissed with prejudice.
4. No later than January 31, 2022, Dreamstyle shall complete the transfer of RbAFS.Com to Renewal.
5. Dreamstyle Remodeling Inc., a New Mexico corporation and Dreamstyle Remodeling LLC, a Delaware LLC, are awarded jointly against Renewal by Andersen, LLC: $5,935,635
(Consisting of $6,184,734 of damages awarded to Dreamstyle Remodeling, Inc., less or offset by $49,925, $62,544 and $136,630 damages awarded Renewal on its service restitution counterclaim, with interest to be determined as provided below.)
6. Dreamstyle Remodeling of San Diego, Inc., a California Corporation and Dreamstyle Remodeling of California LLC, a Delaware LLC, are awarded jointly against Renewal by Andersen, LLC: $418,929
(Consisting of $757,492 of damages awarded to Dreamstyle Remodeling of San Diego Inc., less or offset by $338,563 damages awarded Renewal on its service restitution counterclaim, with interest to be determined as provided below.)
7. The following Reasoning, including findings and conclusions contained therein, are a part of this Interim Award.
8. To assure correctness in respect to identifications of the parties provided in items 5 and 6 above, the undersigned reserve for the Final Award, and the hearing remains open for submissions in respect to, any necessary party-in-interest modifications, about which the parties shall confer and advise the undersigned of any concerns no later than January 17, 2022.
9. The undersigned reserve for the Final Award, and the hearing remains open for submissions in respect to, (a) any applications for an award of attorneys' fees, arbitration fees and/or costs, and (b) any applications for pre-award interest, any such applications due to the undersigned arbitrators no later than January 24, 2022. Any submission respecting attorneys' fees, arbitration fee and/or costs shall be limited to five pages and shall deal solely with the submitting party's claim of entitlement or its opposition to any claim of entitlement of the opposing party, with any submission respecting amounts to be reserved pending a determination, if warranted, of entitlement.
10. This Award shall remain in full force and effect until such time as a final Award is rendered.
Dated: January 3, 2022
a. New Mexico owned by Dreamstyle Remodeling Inc., a New Mexico corporation;
b. Tucson owned by Dreamstyle Remodeling Inc., a New Mexico corporation;
c. Northern Arizona owned by Home Resort Living Inc., an Arizona corporation;
d. San Diego owned by Dreamstyle Remodeling of San Diego, Inc., a California corporation; and
e. Boise owned by Dreamstyle Remodeling of Boise, L.L.C., an Idaho limited liability company.
For convenience, the above owner entities, except as otherwise noted, are collectively referred to herein as "Dreamstyle."
1. Motion to dismiss claims for tortious interference with contract: This motion was granted, as there was a failure of Dreamstyle to show any genuine dispute of fact as to whether there was a binding contract for the subject sale to the Esler Group, and a failure of Dreamstyle to prove any interference in any such sale or in the subject letter of intent. The motion of Dreamstyle to amend the arbitration demand to allege interference with prospective economic advantage was denied as futile, as the preponderance of the evidence showed that the failure of the subject sale to the Esler Group was not the result of actions by Renewal.
2. Motion to dismiss claims for violation of franchise statutes: This motion has been granted in the Interim Award, as Dreamstyle failed to sustain its burden of proof that Renewal required the payment of any fees which fees could be shown to have been payment for Dreamstyle's right to be, or continue as, a Renewal retailer.
3. Motion to dismiss claims for fraud: This motion was granted, as there was a failure of Dreamstyle to show there was any genuine dispute of fact as to any elements of fraud or misrepresentation or as to any harm that fraud or misrepresentation was a substantial factor in bringing about, and there was no evidence sustaining the same at the hearing.
4. Motion to dismiss claims of rescission damages: This motion was granted, as there was a failure of Dreamstyle to show there was any genuine dispute of fact as to whether such damages could be sustained under Minnesota law.
New Mexico: Term May 1, 2017, to April 30, 2022
San Diego: Term July 1, 2014, to June 30, 2019
Tucson: Term November 1, 2014, to October 31, 2019
Boise: Term June 8, 2015, to May 31, 2020
Northern Arizona: Term February 1, 2014, to January 31, 2019
We found that the willingness of Renewal to award new PMAs and to renew existing Retailer Agreements was evidence that Dreamstyle's sales, installations and customer satisfaction respecting Renewal's products were, at related times, sufficiently positive and aligned with the Retailer Agreements to warrant the award of new Agreements/locations and the renewal of existing Agreements/locations, in which locations Renewal agreed that Dreamstyle would be Renewal's exclusive sales channel.
Evidence at the hearing was that Dreamstyle spent up to $7,000,000 per year on advertising. And from sworn and undisputed interrogatory answers introduced at the hearing, the evidence was that Dreamstyle, in establishing and enhancing the Renewal markets and brand, spent some $34 million in all Dreamstyle's PMAs. Admittedly these expenditures provided for increased sales of Renewal products and in turn increased profits for both Dreamstyle and Renewal. However, much of the lasting value of these sunk costs was the enhanced Renewal markets and Renewal brand recognition in Dreamstyle's five PMAs. Much of this value and related worth of Dreamstyle's replacement window business would be materially devalued if Dreamstyle's Retailer Agreements ended, albeit such value would continue to benefit Renewal given the enhanced Renewal brand recognition in the five PMAs. Because of this wealth forfeiture of the retailer, and the wealth enrichment to Renewal, we had related concerns about certain provisions in the Retailer Agreements— particularly those dealing with the termination or non-renewal of the Agreements and the availability of any redress for wrongful termination or non-renewal, all as discussed below.
a. Marketing and selling Renewal products outside Dreamstyle's PMA;
b. Purchasing or starting businesses in the PMA of another Renewal retailer without informing Renewal;
c. Selling or offering to sell competitive products in the PMA of other Renewal retailers;
d. Opening a Renewal facility in Yuma, Arizona without Renewal's consent;
e. Selling or offering to sell competitive products in Dreamstyle's PMA;
f. Dreamstyle's handling of (customer) Hageman matter, including disparagement of Anderson products;
g. Failure to meet 2017 sales goals;
h. Failure to meet your 2018 Net Promoter score in San Diego and Tucson;
i. Recruiting or hiring employees from other Renewal retailers in violation of Renewal's Integrity in Hiring policy.
... for Renewal to provide window and door products to the retailer to fulfill the retailer's sale and installation of such products to the retailer's homeowner customer—the retailer thereby providing the sales channel from Renewal as manufacturer to the homeowner customer as end-user. Other primary purposes or core provisions of the Agreements were (a) that the retailer would sell and install Renewal's products in a given geographical territory known as the Primary Market Area ("PMA"), which PMA was defined largely by the enumeration of zip codes, (b) that the retailer would be the exclusive seller of Renewal's products in the retailer's PMA, (c) that the retailer and Renewal would from time to time agree on certain sales and customer satisfaction goals, (d) that the retailer's rights under the Agreement were for five-year terms with an option to renew the Agreement for an additional five-year term.
Accordingly, we concluded that any breach which impaired the above essence of the Agreement was material, and conversely that any breach which did not so impair, was not material.5 In addition and again, a party is estopped from asserting a breach about which the party has acquiesced and continued to receive benefits, and about which the other party has detrimentally relied.6
Any other agreement between you and us concerning your being a Renewal retailer at a location other than the premises listed in Appendix A will automatically terminate effective at the time of expiration or termination for any reason of this Agreement unless we notify you to the contrary in writing prior to the expiration or termination of this Agreement. (emphasis ours)
It was this paragraph on which Renewal, perhaps belatedly, based its September 2018 notice to essentially claim it could simultaneously terminate all Agreements—despite the five-year terms promised in the Agreements and despite the May 8, 2018, letter.15
I also wanted to remind you that the Retailer Agreement for the Northern Arizona market will expire January 31, 2019. Unless we reach some other arrangement, all of your other Retailer Agreements also will expire on that same date.
Under section 14 of the RA for the Northern Arizona market area, any other agreement between Renewal and DSR for another market area will automatically terminate upon the expiration of the Retailer Agreement for the Northern Arizona market area. Accordingly, the Retailer Agreement for New Mexico, and Tucson also expire on January 31, 2019 ... This letter constitutes notice that the Retailer Agreements for Boise and San Diego market areas are terminated for cause, including the breaches identified above.
A: "Any other agreement between you and us concerning your being a Renewal retailer at a location other than the premises listed in Appendix A will automatically terminate effective at the time of expiration or termination for any reason of this Agreement unless we notify you to the contrary in writing prior to the expiration or termination of this Agreement." (Emphasis ours)
And add to this the following two provisions B and C from paragraph 14:
B: "... constitutes cause for termination ... you fail to meet the sales and customer satisfaction goals that are set forth in your Business Plan ... ."
C: "Either party can terminate this Agreement and you as a Renewal retailer ... if you and we are unable to agree on future annual commitments for your sales and customer satisfaction goals when your Business Plan is updated pursuant to Section 8."
And finally, D from paragraph 30:
D: "Further, in no event will either party be liable to the other party, and neither party will seek to recover or enforce a judgment against the other party, for indirect, incidental, consequential or special damages, including without limitation, damages relating to loss of investment, indebtedness, loss of financing, loss of sales or profits, or business interruption, discontinuance or termination ... "
In calculating the award, we determined the percentage of each year in which there remained unexpired term in respect to each of the San Diego and New Mexico Agreements. We then determined from Mr. Nutten's Schedule 6 the percentage of lost but-for margin (prior to any interest add) for each of these two locations for each year in which there were unexpired terms, based on the percentage of but-for (window) revenue of each of San Diego and New Mexico as to total but-for (window) revenue. We then multiplied the percentage of each year's unexpired term for each of San Diego and New Mexico times the percentage of lost but-for margin for such year, to get the but-for margin lost for each such location for each year in which such location had a remaining unexpired term, and then added such amounts to arrive at the damages for the wrongful early termination of each of the San Diego and New Mexico Agreement/location. For purposes of further submissions respecting interest,28 whether pursuant to Minnesota Statute sec. 549.09--Minnesota's prejudgment statute, or otherwise, the following amounts were awarded in respect to the following years:
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