Belmont Partners Llc v. Mina Mar Group Inc.

741 F.Supp.2d 743

BELMONT PARTNERS, LLC, Plaintiff,

v.MINA MAR GROUP, INC., et al., Defendants.

Case No. 3:10–mc–00005.

United States District Court, W.D. Virginia,Charlottesville Division.

Oct. 1, 2010.

Edward Jay Tolchin, Fettmann, Tolchin & Majors, P.C., Fairfax, VA, for Plaintiff.Kenneth Walter Curtis, Allred Bacon Halfhill & Young PC, Fairfax, VA, for Defendants.

ORDER

NORMAN K. MOON, District Judge.

This matter is before the Court on Plaintiff's Motion to Confirm Arbitration Award (docket no. 1) and Motion for Sanctions (docket no. 31), and on Defendants' Motion to Suspend Arbitration Award and Compel Stock Transfer (docket no. 7), Motion to Vacate the Arbitration Award (docket no. 19), and request for sanctions contained within its Response in Opposition to Motion for Sanctions (docket no. 32).

The Court has fully considered the arguments and authorities set forth in the parties' filings, as well as those presented at the June 28, 2010 hearing. For the following reasons, the Court will grant Plaintiff's motion to confirm the arbitration award and will deny Defendants' motions to suspend and vacate the award. Further, the Court will deny both requests for sanctions.

I. Background

The parties to this dispute, Plaintiff Belmont Partners, LLC (“Belmont”), and Defendants Mina Mar Group, Inc. and Miro Zecevic (collectively “Mina Mar”) are engaged in the business of buying and selling clean shell corporations. Belmont is a Virginia limited liability company, which has its principal place of business in Washington, Virginia, and Joseph Meuse is its Managing Member. Mina Mar is a Canadian corporation with its principal place of business in Toronto, Ontario, Canada and Miro Zecevic is the President of Mina Mar and an individual residing in Toronto. Clean shell corporations “have no sales, no liabilities, and no assets. Their value comes from the fact that their shares can be readily traded and private operating companies can merge with [them] and ‘go public.’ ” Mina Mar Mot. to Suspend Confirmation of Arbitration Award 1–2, Mar. 15, 2010 (docket no. 7).

In the instant dispute, Belmont and Mina Mar entered into three Common Stock Purchase Agreements (“CSPAs”), pursuant to which Belmont agreed to sell Mina Mar the stock of the following three clean shell corporations: Aztec Technology Partners, Inc., a public vehicle organized in the state of Delaware and traded under the symbol “AZTC” (“Aztec”) ¹; King Resources, Inc., a public vehicle organized in the state of Delaware and traded under the symbol “KING” (“King”); and VShield Software Corporation, a company organized in the state of Delaware and traded under the symbol “VHSE” (“VShield”). Under the terms of the CSPAs, Mina Mar agreed to pay a total of $600,000 ² for a controlling block of stock in these companies ($200,000 for a controlling block in each company). See Belmont Pet. to Confirm Arbitration Award Exs. 1–3, Feb. 16, 2010 (docket no. 1).

After the parties entered into the three CSPAs, a dispute arose concerning the quality of the clean shell corporations and the parties' performance of obligations under the CSPAs. Mina Mar claimed, inter alia, that Belmont had never transferred the majority shares of stock in Aztec, King, and VShield to Mina Mar, as required by the CSPAs. Belmont claimed it had properly transferred all stock required. As a consequence, Mina Mar only paid $75,000 as a deposit for the purchase price, rather than the full sum, and issued a press release allegedly disparaging Belmont.

Each of the CSPAs contains an arbitration clause, which provides as follows:

Binding Arbitration. In the event of any dispute, claim, question, or disagreement arising from or relating to this agreement or the breach thereof, the Parties hereto shall use their best efforts to settle the dispute, claim question [sic], or disagreement. To this effect, they shall consult and negotiate with each other in good faith and, recognizing their mutual interests, attempt to reach a just and equitable solution satisfactory to both parties. If they do not reach such a solution within a period of sixty (60) days, then, upon notice by either party to the other, all disputes, claims, questions, or disagreements shall be settled by arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules including the Option Rules for Emergency Measures of Protection, and judgment on any award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.

See Belmont Pet. to Confirm Arbitration Award Exs. 1–3.

Belmont then filed a Statement of Claim with the American Arbitration Association's International Centre for Dispute Resolution, seeking the money allegedly owed it under the CSPAs for the purchase of Aztec, King, and VShield. Mina Mar counterclaimed for money damages and rescission of the CSPAs. Thereafter, the parties reached a settlement. Under paragraphs one to four of the Settlement Agreement, the parties agreed that 1) Mina Mar would issue a press release clarifying its earlier public statements regarding Belmont, 2) Belmont would keep the $75,000 already paid to it, 3) Mina Mar would return all interests in Aztec to Belmont, and 4) Belmont would dismiss the arbitration action. Further, the Settlement Agreement stated:

Upon filing of these dismissals, and except for the obligations arising under this Agreement, the parties mutually and completely release each other from any and all claims and demands made or which could have been made ... or which otherwise concerns the CSPAs or the Companies.

The Settlement Agreement did not end the dispute. Mina Mar refused to comply with the Settlement Agreement until Belmont transferred stock certificates totaling 50.001% of King and 51% of VShield. Mina Mar believed Belmont had promised, in pre-settlement email communications, to make those stock transfers. In response, Belmont filed a Request for Enforcement of Settlement Agreement and Award of Costs and Fees in the Arbitration, taking the position that the terms of the Settlement Agreement did not explicitly require any transfer of stock and released all other claims.

John Connolly, an arbitrator for the American Arbitration Association, International Centre for Dispute Resolution, entered an Award on January 11, 2010 in Alexandria, Virginia (“the Award”). The Award stated that “[w]ithin thirty (30) days from the date of transmittal of this Award to the Parties, [Mina Mar] will comply fully with the language set forth in paragraphs 1, 2, 3, and 4 of the October 23, 2009 Settlement Agreement between the Parties [.]” Further, the arbitrator held that “[t]his award is in full settlement of all motions, claims, and counterclaims submitted to this Arbitration. All claims not expressly granted herein are hereby, denied.”

After the arbitration concluded, two separate proceedings commenced—one in Ontario and the other in this Court. Upon motion by Mina Mar, the Superior Court of Justice in Ontario (“Ontario Superior Court”) recognized the Award in an order entered March 30, 2010. Mina Mar had also moved for an order to stay enforcement of the Award until Belmont completed the requested transfer of stock and for an order to vary the Award to require fulfillment of the terms of the Award within thirty days of the requested transfer of stock. The Ontario Superior Court denied both of those motions.

In this Court, Belmont filed a Petition to Confirm Arbitration Award (docket no. 1), which sought a judgment from the Court confirming and enforcing the Award pursuant to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958 (the “New York Convention”), 21 U.S.T. 2517, T.I.A.S. No. 6997, implemented at 9 U.S.C. § 207 et seq.

After the hearing before the Ontario Superior Court concluded, Mina Mar filed in this Court a Motion to Suspend Confirmation of Arbitration Award and to Compel Belmont to Transfer Control Blocks of Stock of the Subject Entities to Mina Mar (docket no. 7). After briefing on this Motion was complete, Mina Mar moved to vacate the arbitration award (docket no. 19). Belmont filed the instant Motion for Sanctions (docket no. 31).

II. Applicable Law

This action arises under the New York Convention and the provisions of the Federal Arbitration Act, 9 U.S.C. § 1 et seq. The Federal Arbitration Act provides:

Within three years after an arbitral award falling under the Convention is made, any party to the arbitration may apply to any court having jurisdiction under this chapter for an order confirming the award as against any other party to the arbitration. The court shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the said Convention.

9 U.S.C. § 207.

The extent of federal judicial review of an arbitration award is “substantially circumscribed.” Patten v. Signator Ins. Agency, Inc., 441 F.3d 230, 234 (4th Cir.2006). In fact, the scope of judicial review for an arbitrator's decision “is among the narrowest known at law because to allow 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.” Three S Del., Inc. v. DataQuick Info. Sys., Inc., 492 F.3d 520, 527 (4th Cir.2007). The party moving to vacate “must sustain the heavy burden of showing one of the grounds specified in the Federal Arbitration Act.” Id.³

Mina Mar seeks to vacate the Award pursuant to 9 U.S.C. § 10(a)(1), which provides that a court “may make an order vacating the award ... where the award was procured by corruption, fraud, or undue means[.]” In order to prevail under that section, the movant must show that the corruption, fraud, or undue means was “not discoverable upon the exercise of due diligence prior to the arbitration” or during the arbitration,...