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Slavin v. Imperial Parking U.S., LLC

United States District Court, D. Maryland, Southern Division

June 19, 2017

MARC R. SLAVIN, et al., Plaintiffs/Counter-Defendants,
IMPERIAL PARKING U.S., LLC, Defendant/Counterclaimant.


          Paul W. Grimm United States District Judge.

         Plaintiffs/Counter-Defendants MarcParc Valet, Inc., and MarcParc, Inc. and their sole shareholder, Marc R. Slavin (collectively, “MarcParc”), filed suit against Defendant Imperial Parking (U.S.), LLC (“Impark”), claiming breach of contract in Count I and seeking to confirm and enforce an arbitration award against Defendant in Count II. Compl., ECF No. 2. Impark removed to this Court, ECF No. 1, and filed a Counterclaim ECF No. 33, which it later amended to clarify the relief it sought, without altering its counterclaims, ECF No. 52. Impark counterclaims for breach of two contracts: an Asset Purchase Agreement (Count I) and a Transition Services Agreement (Count II), fraudulent inducement (Count III), breach of duty of good faith and fair dealing (Count IV), tortious interference with contractual relations and prospective economic advantage (Count V), and civil conspiracy (Count VI). Am. Countercl. Pending is MarcParc's Motion to Confirm Arbitration Award, seeking entry of judgment in its favor on Count II and to have that judgment made final pursuant to Rule 54(b), Pls.' Confirmation Mot., ECF No. 35, as well as MarcParc's Motion to Dismiss Count I of Defendant's Amended Counterclaim in part and to dismiss Counts III, IV, and VI in their entirety, Pls.' Dismissal Mot., ECF No. 41.[1] Because I find that Impark's challenge to the award is untimely, I will grant MarcParc's Motion to Confirm Arbitration Award and enter judgment in MarcParc's favor on Count II, although I will not enter a final judgment pursuant to Rule 54(b). Impark concedes that Count I of its Amended Counterclaim should be dismissed in part if MarcParc's Motion to Confirm Arbitration Award is granted. Additionally, res judicata bars Counts III, IV, and VI of the Amended Counterclaim. Accordingly, I will grant MarcParc's Motion to Dismiss Count I of Defendant's Amended Counterclaim in part and to dismiss Counts III, IV, and VI in their entirety. This lawsuit will proceed with regard to the remaining claims - Count I of Plaintiffs' Complaint and Counts II, V, and part of Count I of Impark's Amended Counterclaim. Discovery is set to close on June 26, 2017, and a status report is due July 10, 2017, after which I will schedule a status conference.


         MarcParc and Impark entered into an Asset Purchase Agreement (“APA” or “Purchase Agreement”) on March 10, 2015, under which MarcParc, a company that operated public parking lots and garages in Washington, D.C., Virginia, and Maryland, “sold substantially all of its assets” to Impark. Pls.' Confirmation Mem. ¶¶ 1-2; Def.'s Opp'n to Confirmation 3; APA 1, ECF No. 35-2. The Purchase Agreement set the price at $7, 430, 000.00, but the parties agreed that the “amount was to be adjusted, depending on various subsequent events.” Pls.' Confirmation Mem. ¶ 5; APA §§ 3.1, 6.1(a). Relevantly, Impark paid $6, 430, 000.00 at closing (minus deductions not relevant here), with the understanding that the initial payment could be augmented by a “Holdback Amount, ” with MarcParc receiving up to an additional $1 million if none of MarcParc's leases and/or management agreements for its parking facilities was cancelled within 120 days after March 10, 2015 (the “Holdback Period”); that amount would be reduced by the stipulated economic values of any parking facilities with such cancellations, and MarcParc could end up owing money to Imperial if the total value of the facilities with cancellations exceeded $1 million. Pls.' Confirmation Mem. ¶ 6; Def.'s Opp'n to Confirmation 3-4; APA § 6.8(a).

         According to MarcParc, “the parties also orally agreed that MarcParc would receive a credit for any new contracts obtained during the Holdback Period due to MarcParc's efforts, ” which “could be offset against any deduction from the Holdback Amount owed to Impark but could not result in an affirmative increase in the Purchase Price.” Pls.' Confirmation Mem. ¶ 7. MarcParc asserts that “[t]he agreement concerning MarcParc's credit was memorialized in an email exchange a few hours after execution of the APA.” Id.; Mar. 10, 2015 Email, ECF No. 35-3 (email from MarcParc's attorney Steven Friedman to Impark's attorney Brian Schlect, copied to Marc Slavin and Impark's other attorney Darren Nakata, noting that “neither Section 6.8(a) nor Schedule S w[as] changed to incorporate the concept that if MarcParc pick[ed] up any new business during the 120 holdback period, that new business could offset the holdback amount, ” a concept that Friedman had raised in a previous email to Impark's attorneys; responsive email from Schlect, stating that Nakata would “confirm with [Friedman] Impark's agreement to the concept”). Impark insists that, to the contrary, the Purchase Agreement had a “zipper clause, ” APA § 27.1, and provided that “[n]o amendment, modification, supplement, termination or waiver of any provision of this Agreement will be effective unless in writing signed by the appropriate party [and] . . . [e]-mails shall not change, modify, alter or affect the terms and conditions of this Agreement, ” thereby precluding any oral or e-mailed amendment. Def.'s Opp'n to Confirmation 4 n.3 (quoting APA § 27.2).

         The Purchase Agreement provided that Impark would deliver its calculation of the Holdback Amount to MarcParc thirty days after the conclusion of the Holdback Period. Pls.' Confirmation Mem. ¶ 8; APA § 6.8(b). Then, if the parties disagreed about the Holdback Amount and were unable to resolve their dispute, they would “submit the disputed matters to Grossberg Company . . . (the ‘Independent Accountants'), to make a final determination of the calculation.” Pls.' Confirmation Mem. ¶¶ 9-10; APA § 6.8(b)(iii). The Purchase Agreement further provided:

The Parties shall instruct the Independent Accountants promptly to determine solely with respect to the disputed items and amounts so submitted whether and to what extent, if any, the calculation requires adjustment. [Impark] and [MarcParc] shall make available to the Independent Accountants all relevant books and records and other items reasonably requested by the Independent Accountants. The Parties shall request that the Independent Accountants deliver to [Impark] and [MarcParc], as promptly as practicable but in no event later than 30 days after its retention, a report which sets forth its resolution of the disputed items and amounts and its calculations. The decision of the Independent Accountants shall be final, conclusive and binding on the Parties, except for fraud, manifest error or failure to adhere to the [stipulated economic values]. The costs and expenses of the Independent Accountants shall be borne pro rata by the Parties in accordance with the difference between each Party's proposed calculations and the calculation calculated by the Independent Accountants. Each Party agrees to execute, if requested by the Independent Accountants, a reasonable engagement letter, including customary indemnities in favor of the Independent Accountants.

APA § 6.8(b)(iii). The parties agree that this is an arbitration clause, even though it refers to an independent accountant rather than an arbitrator. See Pls.' Confirmation Mem. ¶ 26; Def.'s Opp'n to Confirmation 1-2.

         In calculating the Holdback Amount, Impark determined that it was not obligated to pay any of the $1 million to MarcParc, and instead, MarcParc owed it $108, 803.80. Holdback Refund Sched., ECF No. 35-4. MarcParc disputed the amount, believing that it was entitled to the full $1 million. Holdback Refund Dispute Notice, ECF No. 39-1; Dec. 10, 2015 Ltr. to Grossberg 7, ECF No. 39-2. MarcParc asserted that the Holdback Refund Schedule did “not reflect and/or take into account any new revenue generated from and attributable to new parking facility locations that were added to the inventory of locations since the Asset Purchase Agreement was signed and closed, ” insisting that the new revenue was “supposed to be taken into account as off-sets against any loss of revenue resulting from the termination of any contracts during the Holdback Period.” Holdback Refund Dispute Notice 2. According to MarcParc, the new revenue exceeded $1 million. Dec. 10, 2015 Ltr. to Grossberg 7.

         Unable to resolve the dispute, MarcParc submitted it to Richard Hill of Grossberg Company (“Grossberg”) on December 10, 2015 and notified Impark of the submission. Dec. 10, 2015 Ltr. to Grossberg. Although MarcParc had identified Grossberg as an independent accountant when Impark asked it to identify one for purposes of dispute resolution, Grossberg had “provided income tax and consulting services to MarcParc, Inc. for approximately eight years.” Engagement Ltr. 2, ECF No. 35-7. Impark insists that, contrary to MarcParc's assertions (Pls.' Confirmation Mem. ¶ 11 (“Plaintiffs contend this was disclosed to Impark when Section 6.8(b)(iii) was drafted. . . . Additionally, Slaving contends he personally notified Impark on numerous occasions through telephone and email communications that Grossberg was his accountant . . . .”)), MarcParc never notified Impark of its relationship with Grossberg.[2] Nakata Aff. ¶¶ 5-7, ECF No. 39-6. Thus, unaware of the relationship, Impark made its submission to Grossberg by letter on January 27, 2016, ECF No. 35-5, and email on January 28, 2016 at 5:14 p.m., ECF No. 39-3.

         Two hours later, at 7:33 p.m. on January 28, 2016, Doug Grieve, Impark's Vice President and Controller, sent an email to Impark's attorney, Nakata, and others at Impark, stating that he “just became aware that the Independent accountant being used[, ] Richard Hill, is Marc and Marcparc's regular accountant and has been involved with the account, year end and taxes of Marcparc for numerous years, ” and wondering if the relationship presented a conflict of interest. ECF No. 39-4. According to Nakata, he first learned about Impark's relationship with Grossberg when he received that email, and he and “certain senior executives at Impark . . . determined that Impark should no longer participate in any arbitration proceeding regarding to ‘Holdback Amount' before Mr. Hill because Mr. Hill was not an ‘Independent Accountant.” Nakata Aff. ¶ 7.

         Meanwhile, Grossberg had mailed an engagement letter to the parties on January 27, 2016 and sent the same by email to their attorneys on January 29, 2016, disclosing that it had provided and continued to provide accounting services for MarcParc. Engagement Ltr. 2. Impark did not respond to Grossberg's engagement letter or later inquiries for more information regarding analysis of the Holdback Amount. See Jan. 28, 2016 - Feb. 20, 2016 Email Chain, ECF No. 35-8 (emails from Hill to Nakata without response); Feb. 26, 2016 Email, ECF No. 35-10 (email from Hill to the parties, noting “Impark's decision not to respond to our requests for comments and additional information”). Nakata did, however, inform MarcParc's attorney, Friedman, by phone on February 9, 2016 “that Impark objected to Mr. Hill serving as the ‘Independent Accountant.'” Nakata Aff. ¶ 8. He also stated that “Impark remained prepared to proceed with arbitration, provided that the parties selected a truly ‘Independent Accountant, '” Id. ¶ 9.

         In a February 17, 2016 email to Nakata, which was copied to Friedman, Hill stated that he learned from MarcParc's counsel that Impark had “expressed concerns about Grossberg Company handling the arbitration.” Jan. 29, 2016 - Feb. 20, 2016 Email Chain 1-2, ECF No. 39-5. Hill wrote:

We did not ask to be a part of this, but agreed to when asked. Although Marc is a client, we take our responsibility seriously to decide the issues in accordance with the agreement signed by both parties, not based on our business relationship. Our process will be to have an independent partner at the firm (one who is not involved with Marc's work) review the decision and affirm agreement or require changes before we issue the decision. Our participation in the process is solely in accordance with the agreement of both parties at the time of Impark's acquisition of MarcParc's assets. It is a difficult position for us as well, but we will seek to fulfil it faithfully.

Id. at 2.

         On February 20, 2016, Grossberg provisionally agreed with MarcParc and entered an arbitration award (“Arbitration Award”) of $1 million in favor of MarcParc and against Impark. Arbitration Award, ECF No. 35-9. Grossberg invited the parties' “prompt response.” Jan. 29, 2016 - Feb. 20, 2016 Email Chain 1. Nakata, instead of responding to Grossberg, emailed MarcParc's counsel that day that he was “surprised” that Grossberg was “moving forward at all.” Id. On February 26, 2016, after receiving additional information from MarcParc that did not change its decision, and no information from Impark, Grossberg finalized its decision. Feb. 26, 2016 Email.

         Thereafter, in a March 2, 2016 phone call, memorialized in a March 9, 2016 letter to Friedman, Nakata “reiterated [his] concerns about Mr. Hill's lack of independence” and stated again that Impark was willing to proceed with arbitration “before a truly ‘Independent Accountant.'” Nakata Aff. ¶¶ 10, 11; see Mar. 9, 2016 Ltr., ECF No. 35-11. He stated that the parties agreed “to submit any holdback dispute to an independent accountant, ” but “[i]t is difficult to understand how anyone could reasonably conclude that Richard Hill could serve as an independent accountant given his long history of providing accounting services to MarcParc and Marc Slavin, ” and “because of this history, [Impark did] not believe that another accountant at Grossberg Company could be considered independent either.” Mar. 9, 2016 Ltr.

         MarcParc filed suit to confirm the Arbitration Award on May 18, 2016, and Impark removed to this Court on July 7, 2016. ECF Nos. 1, 2. Prior to opposing MarcParc's pending Motion to Confirm Arbitration Award, Impark did not move to vacate the Arbitration Award or otherwise formally oppose it.

         Choice of Law

         MarcParc seeks to confirm the Arbitration Award, while Impark argues that the award should be vacated instead of confirmed. According to MarcParc, “the parties specifically provided in their APA that future disputes between them would be governed by both the District of Columbia's substantive and procedural rules, ” and the procedural rules include the D.C. arbitration act.[3] Pls.' Confirmation Reply 4-5. As they see it, this means that the District of Columbia's arbitration law applies, id., and “[u]nder District of Columbia law, the Court must confirm the Arbitration Award since Impark never filed a post-Award motion to modify or vacate the award and the time for doing so is now long past, ” Pls.' Confirmation Mem. 8. They insist that, even if the Maryland Uniform Arbitration Act applied, the Court still would have to confirm the Arbitration Award because Impark did not file “a timely post-award motion.” Id. at 14.

         In Impark's view, the choice of law provision does not clearly state that the D.C. arbitration act would apply in lieu of the Federal Arbitration Act (“FAA”), and therefore the FAA applies because “arbitration provisions in contracts involving commerce, such as the APA, apply . . . FAA[] procedures unless there is a clear and unequivocal intent to apply the state's arbitration act.” Def.'s Opp'n to Confirmation 1.

         The APA's choice of law provision explicitly states that “[t]he substantive and procedural laws, without regard to conflicts of law principles, of the District of Columbia will govern all questions concerning the construction, validity and interpretation of this Agreement and the performance of the obligations imposed by this Agreement.” APA § 24.1. Viewing arbitration law as procedural and general choice of law provisions as ones that only specify the substantive law to apply, MarcParc insists that the APA's provision is more than a “general contractual choice of law clause” and therefore applies to arbitration law. See Pls.' Confirmation Reply 3, 4 (“[A] general contractual choice of law clause is not in itself sufficient evidence that the parties have chosen to be bound by the applicable jurisdiction's procedural law, such as its arbitration act, in addition to its substantive law . . . .”). But, the FAA is substantive as well as procedural. See Dewan v. Walia, 544 Fed. App'x 240, 244 (4th Cir. 2013) (“[The FAA] supplies not simply a procedural framework applicable in federal courts; it also calls for the application . . . of federal substantive law regarding arbitration.”) (quoting Preston v. Ferrer, 552 U.S. 346, 349 (2008)); Glass v. Kidder Peabody & Co., 114 F.3d 446, 451-52 (4th Cir. 1997) (noting that the FAA provides “the substantive and procedural law associated with arbitration cases and the enforceability of arbitration agreements found valid by the district court”); Hill v. Peoplesoft USA, Inc., 412 F.3d 540, 543 (4th Cir. 2005) (“The Supreme Court has directed that we ‘apply ordinary state-law principles that govern the formation of contracts, ' First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 . . . (1995), and the ‘federal substantive law of arbitrability.' Moses H. Cone Mem'l Hosp. [v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)].”). Therefore, if a general choice of law clause covered all substantive law, it would cover arbitration law as well, contrary to the clear Fourth Circuit case law holding that general choice of law provisions selecting state substantive law do not apply to arbitration law. See Porter Hayden Co. v. Century Indem. Co., 136 F.3d 380, 383 (4th Cir. 1998).

         Moreover, the relevant question of what a choice of law clause covers is not substantive versus procedural law but rather law in general versus arbitration law in particular. See Id. (a choice-of-law provision requiring the application of state substantive law “to resolve disputes arising out of the contractual relationship” is not “an unequivocal expression of the parties' intent to invoke [state], rather than federal, arbitration law” (emphasis added)); UBS Fin. Servs., Inc. v. Padussis, 127 F.Supp.3d 483, 492-93 (D. Md. 2015) (same), aff'd, 842 F.3d 336 (4th Cir. 2016). Thus, “absent a clear[ ] expression of the parties' intent to invoke state arbitration law, [the Fourth Circuit] will presume that the parties intended federal arbitration law to govern.” Porter Hayden Co., 136 F.3d at 383 (emphasis added).

         Here, the APA does not specify which arbitration law to apply, and as a result, there is not a “clear[] expression of the parties' intent to invoke [D.C.] arbitration law.” See Id. Therefore, the FAA governs. See Id. Yet, given that there was an agreement to arbitrate, as discussed at length below, this is a distinction without a difference because the same three-month statute of limitations applies pursuant to D.C. and federal arbitration law. Compare 9 U.S.C. § 12 (“Notice of a motion to vacate, modify, or correct an award must be served upon the adverse party or his attorney within three months after the award is filed or delivered. . . .”), with D.C. Code Ann. § 16-4423(c) (“A motion [to vacate an arbitration award] shall be filed within 90 days after the movant receives notice of the award . . . or . . . a modified or corrected award . . ., unless the movant alleges that the award was procured by corruption, fraud, or other undue means, in which case the motion shall be made within 90 days after the ground is known or by the exercise of reasonable care would have been known by the movant.”).[4]

         Review of Arbitration Award

         “Judicial review of an arbitration award in federal court is ‘substantially circumscribed.'” Three S Del., Inc. v. DataQuick Info. Sys., Inc., 492 F.3d 520, 527 (4th Cir. 2007) (quoting Patten v. Signator Ins. Agency, Inc., 441 F.3d 230, 234 (4th Cir. 2006)). Indeed, given that “full scrutiny of such awards would frustrate the purpose of having arbitration at all-the quick resolution of disputes and the avoidance of the expense and delay associated with litigation, ” a court's review of an arbitration award “is among the narrowest known at law.” Id. (quoting Apex Plumbing Supply, Inc. v. U.S. Supply Co., 142 F.3d 188, 193 (4th Cir. 1998)). The FAA provides:

If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration, and shall specify the court, then at any time within one year after the award is made any party to the arbitration may apply to the court so specified for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title. If no court is specified in the agreement of the parties, then such application may be made to the United States court in and for the district within which such award was made.

9 U.S.C. § 9.

         “If there is a valid contract between the parties providing for arbitration, and if the dispute resolved in the arbitration was within the scope of the arbitration clause, then substantive review is limited to those grounds set out in [9 U.S.C. § 10].” Choice Hotels Int'l, Inc. v. Shriji 2000, No. DKC-15-1577, 2015 WL 5010130, at *1 (D. Md. Aug. 21, 2015) (citing Apex Plumbing, 142 F.3d at 193). If “any party to the arbitration” files a motion to vacate, a court may vacate the arbitration award

(1) where the award was procured by corruption, fraud, or undue means;
(2) where there was evident partiality or corruption in the arbitrators, ...

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