Title: T3 Enterprises v. Safeguard Business Sys

State: idaho

Issuer: Idaho Supreme Court (civil)

Document:

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IN THE SUPREME COURT OF THE STATE OF IDAHO   
Docket No. 45093 
T3 
ENTERPRISES, 
INC., 
an 
Idaho 
corporation, 
  
           Plaintiff-Respondent, 
 
           and 
 
THURSTON ENTERPRISES, INC., an 
Idaho corporation, 
 
           Plaintiff, 
v. 
 
SAFEGUARD 
BUSINESS 
SYSTEMS, 
INC., a Delaware corporation, 
 
           Defendant-Appellant, 
 
           and  
 
SAFEGUARD ACQUISITIONS, INC., et 
al.,  
           Defendants. 
 
 
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Boise, November 2018 Term 
 
Opinion Filed: February 21, 2019 
 
Karel A. Lehrman, Clerk 
 
Appeal from the District Court of the Fourth Judicial District, State of Idaho, Ada 
County.  Hon. Steven Hippler, District Judge.   
District court order denying motion to vacate and modify, affirmed. 
Hawley Troxell Ennis & Hawley LLP, Boise, and Weil, Gotschal & Manges LLP, Dallas,              
TX, for appellant.  Paul R. Genender argued. 
 
Givens Pursley LLP, Boise and Mulcahy LLP, Irvine, CA, for respondent.  James 
M. Mulcahy argued. 
                                _________________________ 
BURDICK, Chief Justice.  
 
This action arises out of Ada County and involves a distributorship agreement (the 
Distributor Agreement) between Appellant Safeguard Business Systems (SBS) and Respondent 
T3 Enterprises (T3). In 2006, T3 entered into the Distributor Agreement with SBS. In 2014, T3 
2 
 
filed suit alleging SBS had breached the Distributor Agreement by failing to prevent other SBS 
distributors from selling to T3’s customers and for paying commissions to the interfering 
distributors rather than to T3. The Distributor Agreement between SBS and T3 contained an 
arbitration clause indicating disputes must be resolved in a Dallas, Texas based arbitration 
procedure. The Distributor Agreement also contained a forum selection clause indicating that the 
Federal Arbitration Act (FAA) and Texas law would apply to any disputes between the parties. 
Pursuant to this agreement, SBS moved the district court to compel arbitration in Dallas. The 
district court determined the parties must submit to arbitration, but that the Dallas forum 
selection clause was unenforceable, and arbitration was to take place in Idaho. The Arbitration 
Panel (the Panel) found for T3 and the district court confirmed the award in the amount of 
$4,362,041.95. The district court denied SBS’s motion to vacate or modify the award. SBS 
timely appealed, and we affirm.       
I. 
FACTUAL AND PROCEDURAL BACKGROUND 
 
SBS is engaged in the distribution of Safeguard brand products (e.g., checks, envelopes, 
and business forms) and services (e.g., W-2 processing and drop shipping) through a nationwide 
network of distributors. In 2006, after working eleven years for Roger Thurston, another SBS 
distributor, Dawn Teply formed T3 and started her own distributorship with SBS. T3 purchased 
the exclusive rights to commissions on all sales made to 2,000 of Thurston’s customers. The 
purchase was approved by SBS which transferred the “Protected Customers” to T3. Around this 
same time, on July 28, 2006, T3 entered into the Distributor Agreement with SBS. Pursuant to 
the agreement, T3 obtained the rights, services, and SBS support that is given to SBS 
distributors. This included customer protection contractual rights and SBS’s enforcement of 
commission protection and commission rotation. This meant T3 was entitled to all commissions 
sold to its Protected Customers.  
 
In 2013, Safeguard Acquisitions (a holding company) was funded by SBS’s parent 
company, Deluxe, to acquire independent non-SBS distributor businesses that operated in the 
same market as SBS. Following the acquisitions, SBS operated the acquired businesses until a 
qualified buyer could be found to purchase the commission rights on those accounts. Two of the 
businesses SBS acquired were Form Systems, Inc., (DocuSource) and Idaho Business Forms 
(IBF). Both DocuSource and IBF were direct competitors of T3 in the same geographic market 
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in Idaho and selling a line of products that directly competed with T3’s sale of Safeguard 
products. Thus, T3 had a high volume of cross-over clients with DocuSource and IBF.  
 
In 2015, SBS entered into a Distributor Agreement with KMMR, (a staffing company to 
IBF), giving it customer protection rights for the same Protected Customers it had given T3 years 
earlier. This resulted in customer confusion as to whom they were supposed to order from and 
pay. SBS’s general counsel, Michael Dunlap, was tasked with managing the conflict resulting 
from the overlap in Protected Customers. In this role, Dunlap sent several email communications 
to various parties. In 2013 and 2014, Teply attempted, unsuccessfully, to get information from 
Mr. Dunlap and SBS for T3 about the cross-over accounts.  
 
In August 2014, T3 filed suit in Idaho alleging SBS breached its Distributor Agreement 
by failing to prevent other SBS distributors from selling to T3’s customers and for paying 
commissions to the interfering distributors rather than to T3. The Distributor Agreement 
contained an arbitration clause stating that: 
EXCEPT 
AS 
OTHERWISE 
PROVIDED 
IN 
SUBPARAGRAPH 
(A) 
[(ADDRESSING 
SBS’S 
INTERNAL 
DISPUTE 
RESOLUTION 
PROCEDURES)], 
ALL 
CONTROVERSIES, 
DISPUTES 
OR 
CLAIMS 
ARISING BETWEEN US . . . AND YOU . . . ARISING OUT OF OR 
RELATED TO: (1) THIS AGREEMENT OR ANY PROVISION THEREOF OR 
ANY RELATED AGREEMENT; (2) THE RELATIONSHIP OF THE PARTIES 
HERETO; (3) THE VALIDITY OF THIS AGREEMENT OR ANY RELATED 
AGREEMENT, 
OR 
ANY 
PROVISION 
THEREOF; 
OR 
(4) 
ANY 
SPECIFICATION, STANDARD OR OPERATING PROCEDURE RELATING 
TO THE ESTABLISHMENT OR OPERATION OF THE SAFEGUARD 
BUSINESS SHALL BE SUBMITTED FOR ARBITRATION TO BE 
ADMINISTERED BY THE DALLAS, TEXAS OFFICE OF THE AMERICAN 
ARBITRATION ASSOCIATION ON DEMAND OF EITHER PARTY. SUCH 
ARBITRATION PROCEEDINGS SHALL BE CONDUCTED IN DALLAS, 
TEXAS 
AND, 
EXCEPT 
AS 
OTHERWISE 
PROVIDED 
IN 
THIS 
AGREEMENT, SHALL BE CONDUCTED IN ACCORDANCE WITH THE 
THEN CURRENT COMMERCIAL ARBITRATION RULES OF THE 
AMERICAN ARBITRATION ASSOCIATION . . . .  
The Distributor Agreement also contained a forum selection clause that stated: 
This Agreement shall become effective when executed and accepted by us in 
Texas. All matters relating to arbitration will be governed by the Federal 
Arbitration Act . . . . Except to the extent governed by the Federal Arbitration Act, 
. . . or other federal law, this Agreement, the distributorship and the relationship 
between you and Safeguard will be governed and construed under and in 
accordance with the laws of Texas, except that the provisions of the Texas 
Deceptive Trade Practices Act (and the regulations thereunder) will not apply 
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unless its jurisdictional requirements are met independently without reference to 
this subsection.[1] 
 
SBS moved to compel arbitration of T3’s claims against it in Dallas, Texas. SBS also 
moved to stay proceedings pending the outcome of the arbitration proceeding. T3 initially 
conceded it was bound to arbitrate but sought to sever the forum provision from the arbitration 
clause. Later, T3 contended the invalid forum selection provision rendered the entire arbitration 
clause void. The district court determined that it had jurisdiction to consider the validity of the 
forum selection clause, that Texas law was applicable, and that under Texas law the forum 
selection clause was unenforceable. Thus, the court ordered the parties to arbitrate in Idaho and 
denied SBS’s motion to stay proceedings. The district court also granted T3’s motion to compel 
the Dunlap emails and ordered SBS to produce the documents. The Panel found for T3, and in a 
supplemental award, awarded T3 over $4.3 million in damages which included attorney fees. 
The district court confirmed the award and denied SBS’s motion to vacate or modify the award. 
SBS timely appealed.  
II. 
ISSUES ON APPEAL 
1. Whether the district court had jurisdiction to consider T3’s challenge to forum.  
2. Whether the district court erred in ordering the parties to arbitrate in Idaho as opposed to 
Dallas.  
3. Whether the district court abused its discretion in overruling SBS’s claims of attorney-
client privilege.  
4. Whether the district court erred in denying SBS’s motion to vacate based on the 
arbitration panel exceeding its powers under the FAA.   
5. Whether T3 is entitled to attorney fees and costs on appeal.  
III. 
STANDARD OF REVIEW 
 
“When ruling on a motion to compel arbitration, the district court applies the same 
standard as if ruling on a motion for summary judgment.” Wattenbarger v. A.G. Edwards & 
Sons, Inc., 150 Idaho 308, 317, 246 P.3d 961, 970 (2010). As a result, “[a]rbitrability is a 
question of law to be decided by the court.” Id. at 315, 246 P.3d at 968 (quoting Mason v. State 
Farm Mut. Auto. Ins. Co., 145 Idaho 197, 200, 177 P.3d 944, 947 (2007)). This Court 
“exercise[s] free review over questions of arbitrability and may draw [its] own conclusions from 
the evidence presented.” Id. “Whether the district court had subject matter jurisdiction is a 
                                                 
1 Later, at an arbitration evidentiary hearing, SBS conceded this attempted waiver of the Texas Deceptive Trade 
Practices Act (DTPA) was ineffective and unenforceable.  
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question of law over which this Court exercises free review.” H.F.L.P., LLC v. City of Twin 
Falls, 157 Idaho 672, 678, 339 P.3d 557, 563 (2014). 
 
“Trial courts have broad discretion over the admission of evidence at trial, including . . . 
determining whether or not to grant a motion to compel.” Kirk v. Ford Motor Co., 141 Idaho 
697, 700, 116 P.3d 27, 30 (2005). “Such decisions will only be reversed when there has been a 
clear abuse of discretion.” Id. at 701, 116 P.3d at 31. When this Court reviews whether a trial 
court has abused its discretion, the four-part inquiry is “[w]hether the trial court: (1) correctly 
perceived the issue as one of discretion; (2) acted within the outer boundaries of its discretion; 
(3) acted consistently with the legal standards applicable to the specific choices available to it; 
and (4) reached its decision by the exercise of reason.” Lunneborg v. My Fun Life, 163 Idaho 
856, 863, 421 P.3d 187, 194 (2018). 
 
“The scope of review for awards made pursuant to the [FAA] . . . parallels the review of 
arbitrations governed by Idaho’s Uniform Arbitration Act[.]” Barbee v. WMA Sec., Inc., 143 
Idaho 391, 396 n.4, 146 P.3d 657, 662 n.4 (2006); see also Hecla Min. Co. v. Bunker Hill Co., 
101 Idaho 557, 561 n.3, 617 P.2d 861, 865 n.3 (1980) (“We note that our view of the proper 
scope of judicial review of commercial arbitrator’s awards does not vary significantly depending 
upon which act applies.”). “When reviewing a district court’s decision to vacate or modify an 
award of an arbitration panel this Court employs virtually the same standard of review as that of 
the district court when ruling on the petition.” Moore v. Omnicare, Inc., 141 Idaho 809, 814, 118 
P.3d 141, 146 (2005). “Judicial review of arbitrators’ decisions is ‘limited to an examination of 
the award to discern if any of the grounds for relief stated in the [FAA] exist.’” Barbee, 143 
Idaho at 396, 146 P.3d at 662 (quoting Bingham Cnty. Comm’n v. Interstate Elec. Co., 105 Idaho 
36, 42, 665 P.2d 1046, 1052 (1983)). Pursuant to the FAA, when a party moves to confirm an 
arbitration award, a “court must grant such an order unless the award is vacated, modified, or 
corrected as prescribed in sections 10 and 11 of this title.” 9 U.S.C. § 9. This includes, among 
other things, “when arbitrators exceeded their powers . . . .” 9 U.S.C. § 10(a)(4).  
IV. 
ANALYSIS  
A.   
The district court had jurisdiction to consider the enforceability of the forum 
selection clause.    
SBS moved to compel arbitration of T3’s claims against it in Dallas, Texas. T3 
challenged the forum selection clause arguing it was unconscionable and unenforceable under 
Idaho Code section 29-110. T3 argued that whether a forum selection clause is enforceable is a 
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substantive matter for the court to decide, while SBS argued it is a procedural matter for the 
arbitrator to decide. The district court determined the matter was substantive and ordered the 
parties to arbitrate T3’s claims against SBS in accordance with the Distributor Agreement, but 
determined the Dallas forum selection clause was unenforceable and severable. Thus, the court 
ordered the parties to arbitrate in Idaho. The initial issue is whether the district court had 
jurisdiction to consider whether the Dallas forum selection clause was enforceable. For the 
reasons discussed below, the district court had jurisdiction to consider the enforceability of the 
forum selection clause.   
The FAA applies to arbitrations involving commerce and provides that:  
A written provision in . . . a contract evidencing a transaction involving 
commerce to settle by arbitration a controversy thereafter arising out of such 
contract . . . shall be valid, irrevocable, and enforceable, save upon such grounds 
as exist at law or in equity for the revocation of any contract.  
9 U.S.C. § 2. Thus, “the FAA places arbitration agreements on an equal footing with other 
contracts” and therefore “requires courts to enforce them according to their terms . . . .” Rent-A-
Ctr., W., Inc., v. Jackson, 561 U.S. 63, 67 (2010). And, “[l]ike other contracts, [arbitration 
agreements] may be invalidated by ‘generally applicable contract defenses, such as fraud, duress, 
or unconscionability.’” Id. at 68 (quoting Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 
(1996)). Pursuant to Section 4 of the FAA, a court must order the parties to proceed with 
arbitration if the making of the arbitration agreement is not at issue. 9 U.S.C. § 4.    
As both this Court and the United States Supreme Court have said, arbitrability is a 
question of law for the court to decide. Wattenbarger, 150 Idaho at 315, 246 P.3d at 968; 
Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002). However, procedural questions 
related to arbitrability are not for the Court to decide, but rather are for an arbitrator to decide. 
Storey Const. Inc. v. Hanks, 148 Idaho 401, 412, 224 P.3d 468, 479 (2009) (decision on 
rehearing). Thus, whether the district court had jurisdiction to consider the enforceability of the 
Dallas forum selection clause depends on whether the clause presented a “question of 
arbitrability”, as opposed to a question of procedural arbitrability. Id.  
The United States Supreme Court has said that “[t]he question whether parties have 
submitted a particular dispute to arbitration, i.e., the ‘question of arbitrability,’ is ‘an issue for 
judicial determination unless the parties clearly and unmistakably provide otherwise.’” Howsam, 
537 U.S. at 83. Put another way, “a gateway dispute about whether the parties are bound by a 
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given arbitration clause raises a ‘question of arbitrability’ for a court to decide.” Id. at 84 (citing 
First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943–46 (1995)). “Similarly, a 
disagreement about whether an arbitration clause in a concededly binding contract applies to a 
particular type of controversy is for the court.” Id.    
However, the Supreme Court has stated that the “question of arbitrability” does not 
encompass circumstances where the parties would “expect that an arbitrator would decide the 
gateway matter.” Id. “‘[P]rocedural questions which grow out of the dispute and bear on its final 
disposition’ are presumptively not for the judge, but for an arbitrator, to decide.” Id. (quoting 
John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 557 (1964)). The Supreme Court stated, 
“issues of procedural arbitrability, i.e., whether prerequisites such as time limits, notice, laches, 
estoppel, and other conditions precedent to an obligation to arbitrate have been met, are for the 
arbitrators to decide.” Howsam, 537 U.S. at 85 (emphasis removed) (quoting Revised Uniform 
Arbitration Act § 6, comment 2). Similarly, this Court has held that “issues of procedural 
arbitrability, such as a condition precedent . . . .” should be decided by arbitrators as opposed to 
the court. Storey Const. Inc., 148 Idaho at 412, 224 P.3d at 479.  
First, SBS argues the United States Supreme Court’s decision in Rent-A-Center is 
dispositive. In that case, the parties’ arbitration agreement provided that the arbitrator had 
exclusive authority to resolve disputes relating to the enforceability of the arbitration agreement 
(the “delegation provision”). Rent-A-Ctr., W., Inc., 561 U.S. at 71. The Supreme Court held that 
because the respondent had not challenged the “delegation provision” and rather had challenged 
the arbitration agreement as a whole, the Court would treat the delegation provision as valid and 
leave challenges to the validity of the agreement to the arbitrator. Id. at 72. Here, SBS argues that 
because its arbitration agreement with T3 provides that disputes related to the validity of the 
agreement will be submitted to arbitration, and T3 did not challenge that specific portion of the 
agreement, the outcome in this case is the same as in Rent-A-Center. This argument is 
unavailing. In Rent-A-Center, the Supreme Court also stated, the question of arbitrability “may 
be delegated to the arbitrator, so long as the delegation is clear and unmistakable.” Id. at 79 
(emphasis added). In this case, there was not a clear and unmistakable delegation based on 
provisions 21(B) and 21(C) in the arbitration agreement. While 21(B) provides that disputes 
related to the validity of the arbitration agreement are to be arbitrated, 21(C) provides that 
“dispute[s] between [T3] and [SBS] arising in connection with, or related to the interpretation of 
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this agreement or a claimed breach thereof . . . will be tried before a court of competent 
jurisdiction by a judge sitting without a jury.” Because 21(C) purports to give the court the 
authority to interpret the agreement, there is not a “clear and unmistakable” delegation of 
authority that would lead to the same conclusion as in Rent-A-Center. Id.2  
SBS next cites to several federal court of appeals cases and contends those cases stand for 
the proposition that “procedural matters such as forum are for an arbitrator to decide.” While 
some federal circuits have held that “venue” is a procedural issue for the arbitrator to decide, 
those cases are distinguishable from this case. For example, in Richard C. Young & Company v. 
Leventhal, the First Circuit Court of Appeals addressed whether an arbitration proceeding filed in 
Boston, the forum mandated by the forum selection clause, could be transferred to California, 
where one party resided. 389 F.3d 1, 5 (1st Cir. 2004). The court stated, “[t]he dispute between 
the parties in this case over the location of the arbitration raises not a question of arbitrability but 
a procedural question and is therefore for the arbitrator, not the court.” Id. at 4. However, the 
court expressly limited its holding to the situation in the present case; that is, whether the 
arbitration proceeding could be transferred from one state to another. Id. at 5. Next, the Second 
Circuit Court of Appeals dealt with whether a forum selection clause conflicted with a Financial 
Industry Regulatory Authority rule, and addressed an argument that, if the parties were required 
to arbitrate, the forum selection provision in the agreement required that arbitration take place in 
New York County. UBS Fin. Servs., Inc. v. W. Virginia Univ. Hosps., Inc., 660 F.3d 643, 654 
(2d Cir. 2011). The court held that “venue is a procedural issue” to be resolved by arbitrators and 
the “[d]istrict [c]ourt lacked jurisdiction to resolve it.” Id. at 655.  
The Fourth Circuit Court of Appeals has held that venue disputes are appropriate for 
arbitrator, rather than court, resolution. Cent. W. Virginia Energy, Inc. v. Bayer Cropscience LP, 
645 F.3d 267, 274 (4th Cir. 2011). However, in so holding, the Fourth Circuit was addressing a 
situation where the parties executed two separate arbitration agreements, with differing forum 
                                                 
2 We note that the recent United States Supreme Court decision in Henry Schein, Incorporated, et al., v. Archer and 
White Sales Incorporated, 586 U.S. ___(2019) does not impact our analysis. In Henry Schein, the Supreme Court 
addressed the “wholly groundless” exception applied by some federal courts to avoid sending a claim to arbitration 
when the “argument for arbitration is wholly groundless.” Id. at 4, slip op. The Supreme Court held the “wholly 
groundless” exception to be inconsistent with the FAA and reiterated that when a contract delegates arbitrability to 
an arbitrator, the court may not override that contractual agreement. Id. at 5, slip op. However, the Court also 
reaffirmed that such delegation to an arbitrator must do so by “clear and unmistakable” evidence. Id. at 6, slip op 
(quoting First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943–46 (1995)). As discussed above, in this case, 
there was not a clear and unmistakable delegation of authority to the arbitrator based on the conflict between 
provisions 21(B) and 21(C) in the arbitration agreement.  
9 
 
selection clauses. Id. at 269. Finally, in LodgeWorks, L.P. v. C.F. Jordan Construction, LLC, the 
parties had an arbitration clause that mandated arbitration take place in Wichita, Kansas. 506 F. 
App’x 747, 748 (10th Cir. 2012). The respondent filed a demand for arbitration in Wichita, and 
the appellant subsequently filed a demand for arbitration in Texas. Id. at 750. The respondent 
sought, and was granted, an injunction by the district court preventing the appellant from 
arbitrating outside of Wichita. Id. The Tenth Circuit Court of Appeals vacated the injunction, 
stating that “venue selection” is for an arbitrator, rather than a court, to decide. Id. at 750–51. 
However, in Lodgeworks, the forum selection clause was not challenged based on a contract 
defense, like unconscionability, as is the case here.  
While the foregoing cases deemed venue an issue for the arbitrator, those cases were not 
dealing with a challenge to the forum selection clause based on a contract defense like 
unconscionability. Other courts, including the Ninth Circuit Court of Appeals, have decided 
whether a forum selection clause is unenforceable based on contract defenses like 
unconscionability. These circuit courts suggest that when a forum selection clause is challenged 
based on a contract defense, the issue of forum selection is a substantive issue for the court. For 
example, in Nagrampa v. MailCoups, Incorporated, the appellant had challenged a forum 
selection clause in the arbitration agreement as unconscionable. 469 F.3d 1257, 1287 (9th Cir. 
2006). The Ninth Circuit stated that the “district court properly undertook to decide whether the 
arbitration provision in the . . .  agreement is valid and enforceable within the meaning of FAA § 
2 . . . .” Id. at 1294. However, the court went on to say “the district court erred by failing to 
analyze whether there is evidence of procedural unconscionability[.]” Id. Thus, the Ninth Circuit 
did not state that the district court lacked jurisdiction to consider the forum selection challenge, 
and rather stated the district court should have considered the unconscionability argument. Id. at 
1295.   
Similarly, the Seventh Circuit Court of Appeals has considered whether a forum selection 
clause contained in an arbitration agreement was unenforceable. Jackson v. Payday Fin., LLC, 
764 F.3d 765, 778 (7th Cir. 2014). The court stated, “[l]ike other contractual provisions, forum 
selection clauses—even those designating arbitral fora—are not immune from the general 
principle that unconscionable contractual provisions are invalid.” Id. This case again implies that 
courts, rather than arbitrators, have jurisdiction to consider the enforceability of forum selection 
clauses in arbitration agreements. Lastly, the Supreme Court of Washington has stated, 
10 
 
“Washington courts have regularly decided whether choice of law and forum selection clauses in 
arbitration clauses are enforceable.” Saleemi v. Doctor’s Assocs., Inc., 292 P.3d 108, 112 (Wash. 
2013).  
As the district court noted, the foregoing cases indicate that when a forum selection 
clause is challenged pursuant to a contract defense, as is the case here, then the issue is 
substantive and for the court to decide. This approach is consistent with Idaho law. In addressing 
whether a court should compel arbitration, this Court stated, “the court’s scope of review is 
confined to ascertaining whether the party seeking arbitration is making a claim which on its face 
is governed by the parties’ contract.” Mason v. State Farm Mut. Auto. Ins. Co., 145 Idaho 197, 
201, 177 P.3d 944, 948 (2007). Thus, under Mason, the district court needed to ascertain whether 
SBS was “making a claim which on its face [was] governed by the parties’ contract.” Id. Because 
SBS was moving to compel arbitration in Dallas, the district court needed to determine whether 
that claim was in accord with the parties’ contract. Id. And, because T3 challenged the forum 
selection clause based on unconscionability, the district court’s review of that clause was 
appropriate.   
Here the district court was deciding whether the forum selection clause was enforceable. 
Such a determination is distinguishable from procedural arbitrability issues “such as time limits, 
notice, laches, estoppel, and other conditions precedent to an obligation to arbitrate” which the 
Supreme Court has held “are for the arbitrators to decide.” Howsam, 537 U.S. at 85. Rather, the 
district court’s determination was akin to a determination of “whether the parties are bound by a 
given arbitration clause” which raises a “‘question of arbitrability’ for the court to decide.” Id. at 
84 (citation omitted). Accordingly, the district court had jurisdiction to consider the 
enforceability of the forum selection clause.      
B.      The district court did not err when it ordered arbitration to occur in Idaho instead of        
Dallas.  
 
After the district court determined it had jurisdiction to consider the enforceability of the 
Dallas forum selection clause, it determined that Texas law applied to the enforceability of the 
forum selection clause. Applying Texas law, the district court concluded that the forum selection 
clause was unenforceable and arbitration would occur in Idaho, not Dallas. In reaching its 
decision, the district court stated that a Texas court would consider Idaho’s strong public policy 
against forum selection clauses as evidenced in Idaho Code section 29-110(1), and thus not 
enforce the forum selection clause. Neither party challenges the district court’s determination 
11 
 
that Texas law applies to determine the enforceability of the forum selection clause. Rather, SBS 
contends the district court erred when it determined that the forum selection clause was 
unenforceable under Texas law. For the reasons discussed below, the district court did not err 
when it determined the forum selection clause was unenforceable under Texas law.   
    
As an initial matter, Texas courts generally enforce forum selection clauses. In re Lyon 
Fin. Servs., Inc., 257 S.W.3d 228, 232 (Tex. 2008). However, this general rule is not without 
exception. One such exception provides that a forum selection clause will not be enforced when 
the party opposing the forum selection clause clearly shows enforcement would be 
“unreasonable and unjust[.]” In re AIU Ins. Co., 148 S.W.3d 109, 112 (Tex. 2004) (quoting M/S 
Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972)). A forum selection clause comes within 
such exception when “enforcement [of the forum selection clause] would contravene a strong 
public policy of the forum where the suit was brought[.]” In re Lyon Fin. Servs., Inc., 257 
S.W.3d at 231–32; In re Int’l Profit Assocs., Inc., 274 S.W.3d 672, 675 (Tex. 2009). In that 
instance, a Texas court will not enforce the forum selection clause. In re AIU Ins. Co., 148 
S.W.3d at 112.    
 
The approach taken by Texas courts arises from the United States Supreme Court’s 
decision in Bremen, 407 U.S. at 1, 15. There, the United States Supreme Court dealt with an 
international forum selection clause that stated disputes between the parties were to be resolved 
“before the London Court of Justice.” Id. at 2. The Court stated, “[a] contractual choice-of-forum 
clause should be held unenforceable if enforcement would contravene a strong public policy of 
the forum in which suit is brought, whether declared by statute or by judicial decision.” Id. at 15. 
However, in Bremen the Supreme Court stated public policy concerns did “not reach” the case 
and therefore did not hold the clause unenforceable on that ground. Id. at 15–16.   
 
This Court has dealt with the enforceability of a forum selection clause in a case similar 
to the current case, though not in the context of arbitration, and applied Bremen’s reasoning to 
hold the clause unenforceable. See Cerami-Kote, Inc. v. Energywave Corp., 116 Idaho 56, 59–
60, 773 P.2d 1143, 1146–47 (1989). There, the parties had chosen Florida law to govern 
interpretation of their agreement. Id. at 58, 773 P.2d at 1145. This Court stated that because the 
“forum selection clause violates the public policy expressed in I.C. § 29-110, we conclude that 
the Florida courts would refuse to enforce the clause.” Id. at 60, 773 P.2d at 1147. In so noting, 
this Court quoted language stating that Florida courts would invalidate a forum selection clause 
12 
 
if it would violate a strong public policy in either the forum where suit is brought “or the forum 
from which suit has been excluded.” Id. (italics altered from original) (quoting Mar. Ltd. P’ship 
v. Greenman Advert. Assocs., Inc., 455 So. 2d 1121, 1123 (Fla. Dist. Ct. App. 1984)). The 
language regarding the “excluded” forum came from the Greenman case in Florida, and is not 
included in Bremen, which only contemplates the policy “of the forum in which suit is 
brought[.]” M/S Bremen, 407 U.S. at 15 (emphasis added). 
 
First, SBS contends the district court erred because in its decision that the forum selection 
clause was unenforceable, the district court cited to Bremen but included the “excluded” forum 
language from Greenman. While the district court misquoted or mis-cited Bremen, this mistake 
appears to be only a clerical error given the court’s further analysis. The district court’s analysis 
that follows is proper and applies Texas case law that has adopted the test articulated in Bremen. 
Thus, the incorrect quote or citation does not render the decision erroneous. In any event, as 
discussed below, the district court reached the correct outcome and is therefore affirmed. See 
Boise Tower Assocs., LLC v. Hogland, 147 Idaho 774, 782, 215 P.3d 494, 502 (2009) (“Where 
the lower court reaches the correct result by an erroneous theory, this Court will affirm the order 
on the correct theory.”); Henderson v. Henderson Inv. Properties, L.L.C., 148 Idaho 638, 645 
n.2, 227 P.3d 568, 575 n.2 (2010) (J. Jones dissenting) (“Even if the district court was required to 
specifically state that the [award] was based upon the valid assertion ground, the Court can apply 
the ‘right result, wrong reason,’ analysis we have often employed in such circumstances.”) 
(citation omitted).  
 
As noted above, Texas case law states that forum selection clauses will not be enforced 
when “enforcement [of the forum selection clause] would contravene a strong public policy of 
the forum where the suit was brought . . . .” In re Lyon Fin. Servs., Inc., 257 S.W.3d at 231–32; 
see also In re Int’l Profit Assocs., Inc., 274 S.W.3d at 675. Thus, when the forum where suit is 
brought has a strong public policy against forum selection clauses, Texas courts will not enforce 
such a clause. In re AIU Ins. Co., 148 S.W.3d at 112. Indeed, Idaho has a strong public policy 
against forum selection clauses as evidenced in Idaho Code section 29-110(1) which concerns 
the “[l]imitations on right to sue under contract or franchise agreement.” It provides in relevant 
part that:  
 
Every stipulation or condition in a contract, by which any party thereto is 
restricted from enforcing his rights under the contract in Idaho tribunals, or which 
limits the time within which he may thus enforce his rights, is void as it is against 
13 
 
the public policy of Idaho. Nothing in this section shall affect contract provisions 
relating to arbitration so long as the contract does not require arbitration to be 
conducted outside the state of Idaho.  
I.C. § 29-110(1). Thus, enforcement of the Dallas forum selection clause would contravene the 
strong public policy articulated in Idaho Code section 29-110(1). 
 
SBS argues that the district court’s decision “did not give proper effect to Idaho’s choice 
of law statute” Idaho Code section 28-1-301(a). SBS contends that because the parties validly 
chose Texas law to govern the agreement in accordance with Section 28-1-301(a), then the rest 
of Idaho law no longer applies, and Section 29-110(1) would be inapplicable. This argument is 
unavailing. The parties’ selection of Texas law is precisely why Section 29-110(1) was 
considered by the district court. As analyzed above, Texas law considers the public policy of the 
forum where suit is brought to determine if a forum selection clause is enforceable. In re Lyon 
Fin. Servs., Inc., 257 S.W.3d at 231–32. Here, T3 brought suit in Idaho. The district court, 
applying Texas law, cited to Idaho Code section 29-110(1) as evidence of the public policy in 
Idaho—the forum where suit was brought—disfavoring forum selection clauses. The district 
court did not ignore the selection of Texas law, and in fact applied Texas law in determining 
whether the forum selection clause was enforceable. Thus, SBS’s argument that Section 28-1-
301(a) was disregarded is without merit.  
 
Lastly, SBS argues that the arbitration award must be vacated under Section 5 of the FAA 
because Section 5 of the FAA was violated when arbitration did not take place in Dallas. This 
argument is without merit. Section 5 of the FAA states in pertinent part that, “[i]f in the 
agreement provision be made for a method of naming or appointing an arbitrator or arbitrators or 
an umpire, such method shall be followed . . . .” 9 U.S.C. § 5. SBS cites to PoolRe Insurance 
Corporation v. Organizational Strategies, Incorporated, to support its proposition that because 
the arbitrators in this case were not from Dallas the award must be vacated. 783 F.3d 256, 264 
(5th Cir. 2015). This argument is unavailing. First, the United States Supreme Court has held 
“that §§ 10 and 11 respectively provide the FAA’s exclusive grounds for expedited vacatur and 
modification.” Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 584 (2008). Thus, a claim 
under Section 5 of the FAA would not provide ground for vacatur. And, in PoolRe, the Fifth 
Circuit distinguished between “arbitrator-selection clauses” and “forum selection clauses[.]” Id. 
at 263–65. “Arbitrator-selection clauses” contained “contract-specified method[s]” for selecting 
arbitrators. See id. at 263–64 (stating arbitrator was to be “selected by the Anguilla, B.W.I. 
14 
 
Director of Insurance.”); see also Brook v. Peak Int’l, Ltd., 294 F.3d 668, 673–74 (5th Cir. 2002) 
(agreement required AAA submit a list of nine arbitrators that parties would take turns crossing 
off. Instead, AAA submitted a list of fifteen arbitrators and asked parties to strike impermissible 
ones, then rank in order of preference). Here, the arbitration agreement stated only that the 
arbitration would occur in AAA’s Dallas office. It did not contain a contract-specific provision 
stating how specific arbitrators would be chosen as in PoolRe. Thus, even if Section 5 of the 
FAA could serve as a basis for vacatur, it does not do so here.    
 
In sum, because enforcement of the parties’ Dallas forum selection clause would 
contravene the strong public policy articulated in Idaho Code section 29-110(1), the forum 
selection clause is unenforceable under Texas law. In re AIU Ins. Co., 148 S.W.3d at 112. The 
analysis under Section 5 of the FAA does not change this outcome. Accordingly, the district 
court did not err when it determined the forum selection clause was unenforceable.  
 
After the district court determined the forum selection clause was unenforceable, it went 
on to consider whether the clause was severable from the arbitration agreement, concluding that 
it was. Thus, the district court stated, the parties were required to arbitrate their claims in 
accordance with the agreement, absent the forum selection provision. SBS has not appealed the 
severability of the clause nor has it offered any argument on appeal that the district court erred in 
determining the offending forum selection clause was severable. See Akers v. Mortensen, 160 
Idaho 286, 288, 371 P.3d 340, 342 (2016) (“a party waives an appellate issue that is not 
supported with relevant argument or authority.”). Thus, the district court’s determination that the 
forum selection provision was severable need not be considered.   
C.  
The district court did not abuse its discretion in overruling SBS’s claim of 
 
attorney-client privilege.       
 
In March 2016, a few months prior to the arbitration proceeding, the district court ruled 
on both SBS and T3’s motions to compel documents being withheld pursuant to attorney-client 
privilege. After an in-camera review and subsequent hearing, the district court denied SBS’s 
motion to compel but granted T3’s motion to compel. SBS was required to produce 35 email 
communications between corporate representatives for SBS and its in-house counsel Michael 
Dunlap. The district court noted that Dunlap was not only in-house counsel for SBS, but also the 
corporate secretary. The court found the majority of the emails at issue concerned factual matters 
and business advice made in Dunlap’s role as corporate secretary rather than legal issues. On 
appeal, SBS contends the district court abused its discretion in ordering it to produce the 
15 
 
documents; however, SBS agrees to limit its appeal to the seven documents that form the crux of 
this issue. Those documents are Exhibits 157, 245, 267, 327, 336, 352, and 356. For reasons 
discussed below, SBS waived its right to appeal the attorney-client privilege issue by stipulating 
to the admission of the documents at arbitration.  
 
As a threshold matter, SBS waived the issue of privilege when it stipulated to the 
admission of the email documents at an evidentiary hearing that took place as part of the 
arbitration proceeding. This Court has said that it will not consider issues on appeal that were not 
objected to at the lower court. W. Heritage Ins. Co. v. Green, 137 Idaho 832, 838, 54 P.3d 948, 
954 (2002). Similarly, this Court has said that, “[n]ormally, a party waives an objection to the 
admission of evidence by failing to object at the time of its admission.” State v. Ellington, 151 
Idaho 53, 64, 253 P.3d 727, 738 (2011). In the context of a motion in limine, this Court has said 
that if “the trial court unqualifiedly rules on the admissibility of evidence prior to trial no further 
objection is required to preserve the issue for appeal.” Kirk, 141 Idaho at 702, 116 P.3d at 32. 
However, “[i]f the trial court decides to wait and hear the actual foundation laid before 
determining whether to admit or exclude evidence, the moving party is required to continue to 
object as the evidence is presented.” Id. at 701, 116 P.3d at 31. 
 
In this case, prior to arbitration, the district court ruled that the email documents SBS 
sought to conceal were not privileged, and thus ordered SBS to produce the documents. 
However, at arbitration, SBS stipulated to the admission of the documents. In the Panel’s interim 
award, the Panel states as a preliminary issue that during the evidentiary hearing “the parties 
stipulated to the admission of all exhibits except” for seven exhibits which are not the exhibits at 
issue in this appeal. Thus, SBS stipulated to the admission of the email exhibits it contends are 
privileged.   
 
SBS contends that it was not required to object on privilege grounds at arbitration 
because the district court had already ruled that the email documents were not privileged. SBS 
argues that objecting to the admission of the documents at arbitration would have “subjected 
SBS to antagonizing the panel” and cause the panel to “view SBS’s counsel with mistrust and 
suspicion for trying to get the Panel to rule contrary to the District Court.” This argument is 
unpersuasive. The district court compelled SBS to produce the email documents to T3; the 
district court did not state that the documents had to be admitted at arbitration. Additionally, not 
only did SBS not object to the admission of the email documents, but it actually stipulated to 
16 
 
their admission at arbitration. See Ellington, 151 Idaho at 64, 253 P.3d at 738 (“Normally, a 
party waives an objection to the admission of evidence by failing to object at the time of its 
admission.”). The approach taken by SBS is disingenuous, as it allows a party to stipulate to the 
admission of evidence, then later appeal and predicate error on the admission of that same 
evidence. Though SBS cites to Kirk for the proposition that it did not need to continue to object 
after the district court ordered it to produce the emails, Kirk dealt with the admissibility of 
evidence prior to trial. Kirk, 141 Idaho at 702, 116 P.3d at 32. Kirk did not address a motion to 
compel during a discovery dispute that results in a court decision that is prior to, and separate 
from, an arbitration or court proceeding. Thus, for the foregoing reasons, SBS waived the 
privilege issue when it did not object, and instead stipulated to, the admission of the email 
documents at the arbitration hearing.  
D.  
The district court did not err in denying SBS’s motion to vacate the arbitration 
 
award.   
 
In March 2017, the district court granted T3’s motion to confirm the arbitration award 
and denied SBS’s motion to vacate or, alternatively, modify the arbitration award. SBS argues 
the district court erred in denying its motion to vacate the award based on the Panel exceeding its 
powers. Specifically, SBS contends the Panel exceeded its powers by, 
(i) ignoring the parties’ choice of Texas law to declare the distributorship 
“constructively terminated” based on Connecticut/New Jersey statutes; (ii) 
irrationally ruling T3 could recover future losses as if the contract continued while 
also terminating the contract and excusing T3 from its post-termination 
obligations in the contract; (iii) awarding gross profits in manifest disregard of 
Texas law requiring proof of “net” loss; (iv) awarding 8-12 years of future 
damages despite an undisputed month-to-month term of the contract; and (v) re-
writing the contract to award attorneys’ fees and expenses on the basis of AAA 
procedural rules, and doubling the fees incurred by T3 to award an amount far 
beyond the express contractual limit of “actual damages for commercial loss.” 
T3 contends that SBS has not articulated any proper grounds for vacatur, or alternatively, that 
SBS’s arguments are without merit. For the reasons discussed below, we conclude the district 
court did not err when it denied SBS’s motion to vacate the arbitration award.   
 
As noted above, the Distributor Agreement provided that “[a]ll matters relating to 
arbitration will be governed by the [FAA.]” And, “except to the extent governed by the 
[FAA] . . . or other federal law, this Agreement, the distributorship and the relationship between 
[T3] and [SBS]” will be governed by the laws of Texas. The FAA provides that a court must 
17 
 
confirm an arbitration award “unless the award is vacated, modified, or corrected as prescribed in 
sections 10 and 11 of this title.” 9 U.S.C. § 9.   
 
The United States Supreme Court has stated that, “[u]nder the FAA, courts may vacate an 
arbitrator’s decision ‘only in very unusual circumstances.’” Oxford Health Plans LLC v. Sutter, 
569 U.S. 564, 568 (2013) (quoting First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 942 
(1995)). The Court explained “[t]hat limited judicial review . . . ‘maintain[s] arbitration’s 
essential virtue of resolving disputes straightaway.’” Id. (quoting Hall St. Assocs., L.L.C. v. 
Mattel, Inc., 552 U.S. 576, 588 (2008)).  “If parties could take ‘full-bore legal and evidentiary 
appeals,’ arbitration would become ‘merely a prelude to a more cumbersome and time-
consuming judicial review process.’” Id. at 568–69 (quoting Hall St., 552 U.S. at 588).    
 
Section 10(a)(4) of the FAA allows courts to vacate an arbitration award “where the 
arbitrators exceeded their powers . . . .” 9 U.S.C. § 10. However, the Supreme Court has 
cautioned, “[a] party seeking relief under [Section 10(a)(4)] bears a heavy burden. ‘It is not 
enough . . . to show that the [Arbitration Panel] committed an error—or even a serious error.’” 
Oxford Health Plans LLC, 569 U.S. at 569 (quoting Stolt-Nielsen S.A. v. AnimalFeeds Int’l 
Corp., 559 U.S. 662, 671 (2010)). The Supreme Court explained that “[b]ecause the parties 
‘bargained for the arbitrator’s construction of their agreement,’ an arbitral decision ‘even 
arguably construing or applying the contract’ must stand, regardless of a court’s view of its 
(de)merits.” Oxford Health Plans LLC, 569 U.S. at 569 (quoting Eastern Assoc. Coal Corp. v. 
Mine Workers, 531 U.S. 57, 62 (2000)). A court may overturn an arbitrator’s decision only when 
the award “‘simply reflects [the Arbitrator’s] own notions of economic justice’ rather than 
‘drawing its essence from the contract[.]’” Id. Thus, the Supreme Court has stated, “[u]nder § 
10(a)(4), the question for a judge is not whether the arbitrator construed the parties’ contract 
correctly, but whether he construed it at all.” Id. at 573.  
  
The Supreme Court continued to elaborate on the heavy burden a party faces in 
attempting to vacate an arbitration award under Section 10(a)(4) by stating,  
[s]o long as the arbitrator was “arguably construing” the contract . . . a court may 
not correct his mistakes under § 10(a)(4). The potential for those mistakes is the 
price of agreeing to arbitration. As we have held before, we hold again: “It is the 
arbitrator’s construction of the contract which was bargained for; and so far as the 
arbitrator’s decision concerns construction of the contract, the courts have no 
business overruling him because their interpretation of the contract is different 
from his.” The arbitrator’s construction holds, however good, bad, or ugly.  
18 
 
Id. at 572–73 (citations omitted).   
 
While Sections 10(a) and 11 provide the statutory bases for vacatur and modification 
under the FAA, certain circuit courts have delineated additional, non-statutory grounds for 
vacatur including if the award was a manifest disregard of law, completely irrational, and where 
an award violates public policy. Hall St., 552 U.S. at 583–84; Comedy Club, Inc. v. Improv W. 
Assocs., 553 F.3d 1277, 1290 (9th Cir. 2009). However, in 2008 the United States Supreme 
Court stated that Sections “10 and 11 respectively provide the FAA’s exclusive grounds for 
expedited vacatur and modification.” Hall St., 552 U.S. at 584 (emphasis added). However, the 
Supreme Court went on to say that “[i]n holding that §§ 10 and 11 provide exclusive regimes for 
the review provided by the statute, we do not purport to say that they exclude more searching 
review based on authority outside the statute as well.” Id. at 590. Following Hall Street, a circuit 
split developed as to whether the non-statutory grounds for vacatur were still valid.  
 
Some circuit courts, including the First, Fifth, Seventh, and Eleventh, follow the 
approach that non-statutory grounds for vacatur, including manifest disregard, can no longer 
form a basis for vacating an award under the FAA following Hall Street. The Fifth Circuit Court 
of Appeals stated, “manifest disregard of the law is no longer an independent ground for vacating 
arbitration awards under the FAA.” Citigroup Glob. Markets, Inc. v. Bacon, 562 F.3d 349, 350 
(5th Cir. 2009); see also Ramos-Santiago v. United Parcel Serv., 524 F.3d 120, 124 n.3 (1st Cir. 
2008)3 (stating in dicta, “[w]e acknowledge the Supreme Court’s recent holding in [Hall Street] 
that manifest disregard of the law is not a valid ground for vacating or modifying an arbitral 
award in cases brought under the [FAA].”). Similarly, the Eleventh Circuit Court of Appeals 
stated, “judicially-created bases for vacatur are no longer valid in light of Hall Street. In so 
holding, we agree with the Fifth Circuit that the categorical language of Hall Street compels such 
a conclusion.” Frazier v. CitiFinancial Corp., LLC, 604 F.3d 1313, 1324 (11th Cir. 2010); see 
also Affymax, Inc. v. Ortho-McNeil-Janssen Pharm., Inc., 660 F.3d 281, 284 (7th Cir. 2011) 
(“Th[e] list in [Section 10(a)] is exclusive; neither judges nor contracting parties can expand it.”).  
 
In contrast, other circuits, including the Second, Fourth, Sixth, and Ninth, have not held 
Hall Street to completely foreclose all application of non-statutory grounds for vacatur under the 
                                                 
3 However, the First Circuit Court of Appeals more recently stated, “[w]e need not and do not decide now whether 
manifest disregard remains as an available basis for vacatur. However, if it does survive, we agree with the courts 
that have held that Hall Street compels the conclusion that it does so only as a judicial gloss on § 10.” Ortiz-
Espinosa v. BBVA Sec. of Puerto Rico, Inc., 852 F.3d 36, 46 (1st Cir. 2017).  
19 
 
FAA. The Ninth Circuit stated, “[w]e have already determined that the manifest disregard 
ground for vacatur is shorthand for a statutory ground under the FAA . . . .” Comedy Club, Inc., 
553 F.3d at 1290. It went on to say, “[t]he Supreme Court did not reach the question of whether 
the manifest disregard of the law doctrine fits within §§ 10 or 11 of the FAA.” Id.; see also Stolt-
Nielsen SA v. AnimalFeeds Int’l Corp., 548 F.3d 85, 95 (2d Cir. 2008) (“[Hall Street] did not, we 
think, abrogate the ‘manifest disregard’ doctrine altogether.”) (rev’d on other grounds by Stolt-
Nielsen, 559 U.S. at 662). Similarly, the Sixth Circuit said that Hall Street “significantly reduced 
the ability of federal courts to vacate arbitration awards for reasons other than those specified in 
9 U.S.C. § 10, but it did not foreclose federal courts’ review for an arbitrator’s manifest disregard 
of the law.” Coffee Beanery, Ltd. v. WW, L.L.C., 300 F. App’x 415, 418 (6th Cir. 2008); see also 
Wachovia Sec., LLC v. Brand, 671 F.3d 472, 483 (4th Cir. 2012) (stating, “manifest disregard 
continues to exist as either an independent ground for review or as a judicial gloss” but not 
deciding between the two). 
 
Here, SBS argues the arbitration award should be vacated for several reasons including 
the non-statutory grounds of manifest disregard of law, complete irrationality, public policy, and 
the statutory ground of the arbitrators exceeding their powers. T3 contends that this Court should 
follow the Fifth Circuit’s reasoning and conclude that the exclusive grounds for vacatur are in 
Section 10 of the FAA, relevant here being whether the arbitrators exceeded their power. SBS 
responds that its arguments as to manifest disregard of law, complete irrationality, and public 
policy demonstrate how the arbitrators exceeded their powers, which is a valid ground for 
vacatur under Section 10(a)(4). The district court stated it “need not determine which circuit’s 
law governs since [SBS’s] motion would fail under either.” Thus, the district court applied the 
broader Ninth Circuit approach and denied SBS’s motion to vacate, thus confirming the award in 
full. We need not decide which circuit’s approach to take, as even under the Ninth Circuit 
approach, which considers the non-statutory grounds for vacatur, SBS’s arguments fail. Each of 
SBS’s arguments is addressed in turn below.     
1. Constructive Termination  
 
SBS first argues that the Panel exceeded its power by awarding T3 the value of the 
distributorship under a theory of “constructive termination” because it cited to state law outside 
of Texas. The Panel stated that when SBS gave the same “exclusive” account protection rights to 
T3, IBF, and DocuSource, SBS “diluted the value” of the Protection Rights given to T3 in the 
20 
 
Distributor Agreement. The Panel then string-cited to a Second Circuit case and cases from 
Connecticut, New Jersey, and Florida. The Panel concluded that SBS’s breach of the Distributor 
Agreement damaged T3’s business so much that the Distributor Agreement now “fails of its 
essential purpose” and stated T3 was entitled to constructive termination damages. The district 
court stated that the fact that the Panel cited to cases outside of Texas does not mean it failed to 
apply Texas law in accordance with the Distributor Agreement. The district court also noted that 
“while Texas has not expressly applied a constructive termination theory under the 
circumstances presented here, [SBS] has not pointed to any Texas authority contradicting” the 
Panel’s theory which the Panel intentionally ignored. For the reasons to be discussed, the district 
court did not err.  
 
First, the Panel awarded the value of the distributorship ($566,143.61) under three 
alternative theories: breach of contract, tortious interference, and the Texas DTPA. However, 
SBS has only challenged the award under the “constructive termination” theory, which was 
analyzed only under the breach of contract section. SBS does not challenge the award under the 
tortious interference theory or the Texas DTPA. This Court has said that, “[w]hen a decision is 
‘based upon alternative grounds, the fact that one of the grounds may be in error is of no 
consequence and may be disregarded if the judgment can be sustained upon one of the other 
grounds.’” Andersen v. Prof’l Escrow Servs., Inc., 141 Idaho 743, 746, 118 P.3d 75, 78 (2005) 
(quoting MacLeod v. Reed, 126 Idaho 669, 671, 889 P.2d 103, 105 (Ct. App.1995)). This Court 
went on to state that because the appellants in Anderson failed to “challenge on appeal the 
district court’s alternative grounds for granting . . . judgment against them, the dismissal of their 
case must be affirmed.” Id. Here, because SBS only challenges the constructive termination 
ruling of the Panel, but not the award of identical damages under the two other theories, the 
damages can be affirmed on the unchallenged theory. See id.  
 
Moreover, “manifest disregard . . .  requires ‘something beyond and different from a mere 
error in the law or failure on the part of the arbitrators to understand and apply the law.’” Bosack 
v. Soward, 586 F.3d 1096, 1104 (9th Cir. 2009) (quoting Collins v. D.R. Horton, Inc., 505 F.3d 
874, 879 (9th Cir. 2007)). “There must be some evidence in the record, other than the result, that 
the arbitrators were aware of the law and intentionally disregarded it.” Id. (quoting Lincoln Nat’l 
Life Ins. Co. v. Payne, 374 F.3d 672, 675 (8th Cir. 2004)). SBS has not shown that the Panel 
manifestly disregarded Texas law, which requires the Panel be “aware of the law and 
21 
 
intentionally disregard[] it.” Id. Here, the Panel states that Texas law governs the agreement and 
the face of the arbitration award states that the Panel is awarding damages pursuant to Texas law. 
The mere fact that other state cases were cited in the award does not rise to an “intentional 
disregard” of the law that amounts to manifest disregard. See Bosack, 586 F.3d at 1104.  
 
As to SBS’s argument that T3 did not seek a constructive termination, this argument is 
without merit. The Distributor Agreement provides that, 
(B) . . . THE ARBITRATORS SHALL HAVE THE RIGHT TO AWARD OR 
INCLUDE IN THEIR AWARD ANY RELIEF WHICH THEY DEEM PROPER 
IN THE CIRCUMSTANCES, INCLUDING WITHOUT LIMITATION, 
MONEY DAMAGES (WITH INTEREST ON UNPAID AMOUNTS FROM 
DATE 
DUE), 
SPECIFIC 
PERFORMANCE, 
INJUNCTIVE 
RELIEF. 
PROVIDED THAT THE ARBITRATOR DOES NOT HAVE THE RIGHT TO 
AWARD EXEMPLARY OR PUNITIVE DAMAGES.  
Thus, the Distributor Agreement itself states the Panel can “award any relief which [it] deems 
proper.” And, T3 put value of distributorship at issue when it sought revocation of acceptance, 
and additionally broadly requested relief as may be available and as justice requires. Thus, the 
district court did not err in finding the Panel did not exceed its authority in ordering damages 
based on constructive termination.  
2.   Double Recovery  
 
Next, SBS argues the Panel’s decision to terminate the contract and award future 
damages was double recovery and thus completely irrational. SBS contends the Panel awarded 
double recovery because T3 received both termination damages and damages for future losses. 
The district court stated the future account protection damages were based on IBF and 
DocuSource’s sales to T3’s protected accounts, while the value of the distributorship damages 
were based on T3’s sales to T3’s protected accounts. Thus, the court said, there was no overlap 
in damages, no double recovery, and no grounds for vacatur. 
 
 
Here again, SBS’s argument is limited to the Panel’s decision under breach of contract 
damages, but does not address that the panel awarded these identical damages under the theories 
of tortious interference and the Texas DTPA. Regardless, as stated above, the Supreme Court has 
cautioned, “[a] party seeking relief under [Section 10(a)(4)] bears a heavy burden. . . . ‘It is not 
enough . . . to show that the [Arbitration Panel] committed an error—or even a serious error.’” 
Oxford Health Plans LLC v. Sutter, 569 U.S. 564, 569 (2013) (quoting Stolt-Nielsen, 559 U.S. at 
671). The Supreme Court explained that “[b]ecause the parties ‘bargained for the arbitrator’s 
22 
 
construction of their agreement,’ an arbitral decision ‘even arguably construing or applying the 
contract’ must stand, regardless of a court’s view of its (de)merits.” Id. (citation omitted); see 
also D.R. Horton-Texas, Ltd. v. Bernhard, 423 S.W.3d 532, 534 (Tex. App. 2014) (“[A]n 
arbitrator does not exceed his authority simply because he may have misinterpreted the contract 
or misapplied the law.”).  
 
Here, SBS simply asks this Court to second guess the district court’s analysis. SBS has 
not carried its “heavy burden” and shown that the arbitral decision was not “arguably construing 
or applying the contract” and thus the decision must stand.  Oxford Health Plans LLC, 569 U.S. 
at 569 (citation omitted). As noted by the district court, the Panel awarded two categories of 
damages that were not duplicative. And, the “elements of damages are clearly derived from the 
parties’ agreement.” Thus, the Panel did not exceed its authority, and the district court did not err 
in so determining.  
3. Gross Profits  
 
SBS next argues the Panel manifestly disregarded Texas law when it awarded lost 
commissions based on gross profits rather than T3’s net commission. The district court stated 
that the Panel accepted the calculations from Robert Taylor, T3’s expert, who calculated the 
unpaid commission amount by taking “the product retail price paid to IBF and DocuSource by 
T3’s protected customer on each infringing order and deduct[ing] therefrom the IBF and 
DocuSource’s base price for the product[.]” The court went on to say that there was no indication 
the Panel manifestly disregarded the law in “accepting Mr. Taylor’s calculations. Rather, it found 
that the unrotated commissions earned by IBF and DocuSource on sales made to T3’s protected 
accounts qualified as direct contract damages to T3. . . . The Panel never indicated it was 
awarding such damages as lost profits.” The district court concluded SBS had not shown that the 
arbitrators recognized the correct law and refused to apply it, as is required to satisfy manifest 
disregard.  
 
As noted, “manifest disregard requires ‘something beyond and different from a mere 
error in the law or failure on the part of the arbitrators to understand and apply the law.’” Bosack, 
586 F.3d at 1104 (quoting Collins, 505 F.3d at 879). “There must be some evidence in the 
record, other than the result, that the arbitrators were aware of the law and intentionally 
disregarded it.” Id. (quoting Payne, 374 F.3d at 675). And, “[s]o long as the arbitrator was 
‘arguably construing’ the contract . . . a court may not correct his mistakes under § 10(a)(4). The 
23 
 
potential for those mistakes is the price of agreeing to arbitration.” Oxford Health Plans LLC, 
569 U.S. at 572–73 (citations omitted). “‘It is the arbitrator’s construction of the contract which 
was bargained for; and so far as the arbitrator’s decision concerns construction of the contract, 
the courts have no business overruling him because their interpretation of the contract is different 
from his.” Id. (citation omitted).  
 
Here, as noted by the district court, the Panel stated in awarding damages that “[e]ach of 
T3’s damage categories are recoverable under Texas law because they are actual damages for 
commercial loss that naturally flow from and were reasonably foreseeable consequences of 
SBS’s breach.” SBS has not carried its burden in showing the Panel recognized the correct law 
and intentionally disregarded it. See Bosack, 586 F.3d at 1104. Rather, the Panel accepted the 
calculations of T3’s expert, and stated it was awarding damages pursuant to Texas law. Thus, the 
district court did not err when it determined the Panel did not exceed its authority. 
4. Future lost commissions  
 
Next, SBS argues the Panel manifestly disregarded the month-to-month nature of the 
contract to award future lost commissions to T3. SBS contends the Panel erred when it accepted 
Mr. Taylor’s calculations based on the “one times annual revenue metric” as T3’s future losses 
were limited to the monthly term of the contract. The Panel stated that SBS “uses a metric of 
approximately one times annual revenue when it acquires distributors” and that metric was the 
same used when Teply purchased part of Thurston’s business. The Panel then stated it “finds that 
T3 and Taylor’s use of the one times annual revenue metric fairly represents the present value of 
future commission rights.” In so finding, the Panel cited to Texas law, AZZ Inc. v. Morgan, 462 
S.W.3d 284, 289–90 (Tex. App. 2015) (discussing Texas law on lost profits). The district court 
stated that “the Panel evidently found Mr. Taylor’s proffered metric satisfied” the standard 
articulated in Morgan. Thus, the district court stated SBS had not shown the Panel manifestly 
disregarded the law; rather, SBS had only shown that the Panel “did not follow SBS’s proposed 
measure of damages.”  
 
Here again, the analysis is the same as that for lost profits analyzed above. SBS has not 
carried its burden in showing the Panel recognized the correct law and intentionally disregarded 
it. See Bosack, 586 F.3d at 1104. Rather, the Panel cited to Texas law that supports its acceptance 
of Mr. Taylor’s calculations of lost future commissions. Thus, the district court did not err when 
it determined the Panel did not exceed its authority.  
24 
 
5. Doubling the award of attorney fees  
 
Lastly, SBS argues the Panel disregarded Texas law to award T3 doubled attorney fees 
and expenses. The Panel awarded T3 $2,449,208.14 in attorney fees and $437,126.28 in costs. 
The Panel stated it “finds that an award of attorneys’ fees and expenses is authorized by Texas 
law, under the Distributor Agreement, and because such a determination was submitted to the 
Panel by the parties.” The Panel also stated Section 21(B) of the Distributor Agreement provides 
that “the arbitrators shall have the right to award or include in their award any relief which they 
deem proper in the circumstances.” And, that “[AAA] Rule 47(c) provides that the Panel ‘may 
apportion such fees, expenses, and compensation among the parties in such amounts as the 
arbitrator determines is appropriate.’”  
 
SBS argues the Panel could not rely on AAA Rule 47 and that the doubled attorney fee 
amount violates the contractual limit of actual damages for commercial loss. The district court 
stated that SBS could not establish that the Panel had manifestly disregarded the law or that its 
decision was completely irrational. The court reasoned that the Panel was interpreting the 
Distributor Agreement as regards to fees and costs “and applied the law in accordance with its 
interpretation. While Safeguard argues that the distributorship agreement requires that Texas 
law—and only Texas law—governs the determination of fees and costs, the Panel found 
otherwise.” The district court also noted that the choice-of-law provision specifying Texas law 
does not state it will apply to a post-hearing determination of fees by an arbitrator. Instead, the 
court reasoned, such determination of fees was governed by 21(B) which allows arbitrators to 
award “any relief which they deem proper in the circumstances.” Thus, the court stated, because 
the Panel had interpreted the parties’ agreement, the Panel’s construction would not be vacated 
by the district court.  
 
Here again, “[i]t is not enough . . . to show that the [Arbitration Panel] committed an 
error—or even a serious error.” Oxford Health Plans LLC, 569 U.S. at 569 (quoting Stolt-
Nielsen, 559 U.S. at 671). “Because the parties ‘bargained for the arbitrator’s construction of 
their agreement,’ an arbitral decision ‘even arguably construing or applying the contract’ must 
stand, regardless of a court’s view of its (de)merits.” Oxford Health Plans LLC, 569 U.S. at 569 
(citation omitted). And, “manifest disregard . . .  requires ‘something beyond and different from a 
mere error in the law or failure on the part of the arbitrators to understand and apply the law.’” 
Bosack, 586 F.3d at 1104 (quoting Collins, 505 F.3d at 879). “There must be some evidence in 
25 
 
the record, other than the result, that the arbitrators were aware of the law and intentionally 
disregarded it.” Id. (quoting Payne, 374 F.3d at 675).  
 
In this case, the Panel was “arguably construing or applying the contract” as it referenced 
various provisions in the Distributor Agreement, and that it was applying them. See Oxford 
Health Plans LLC, 569 U.S. at 569. And, there is no evidence that the arbitrators “were aware of 
the law and intentionally disregarded it.” Bosack, 586 F.3d at 1104 (citation omitted). Rather, the 
Panel stated it “finds that an award of attorneys’ fees and expenses is authorized by Texas law, 
under the Distributor Agreement, and because such a determination was submitted to the Panel 
by the parties.” Accordingly, the district court did not err in determining SBS has not carried its 
burden in showing the Panel exceeded its authority in ordering doubled attorney fees.  
E. 
We do not award attorney fees on appeal.  
 
Both parties request costs on appeal, but only T3 requests attorney fees on appeal. 
Because SBS does not request attorney fees, and because SBS is not the prevailing party, SBS is 
not entitled to attorney fees on appeal. T3 contends it is entitled to attorney fees on appeal under 
Texas law for both its breach of contract and Texas DTPA claims “upon a remand back to the 
Arbitration Panel.” T3 also contends this Court can award it attorney fees under Idaho Code 
section 12-121 or Texas Appellate Rule 45, which both allow for attorney fees in frivolous 
appeals. For the reasons discussed below, we do not award attorney fees on appeal.   
 
T3 cites to Cap Rock Electric Cooperative Incorporated v. Texas Utilities Electric 
Company which states, “once a right to attorney’s fees is established, the award may include 
attorney’s fees for any appeal.”  874 S.W.2d 92, 102 (Tex. App. 1994). However, Cap Rock was 
not dealing with an award of attorney fees on appeal following arbitration. Id. Furthermore, T3’s 
argument ignores Texas case law stating that underlying causes of action dealt with in arbitration 
merge into the award and no longer form the statutory basis for an award of fees. See Kline v. 
O’Quinn, 874 S.W.2d 776, 785 (Tex. App. 1994), as supplemented on denial of reh’g (May 12, 
1994). Similarly, when an arbitration award contains an award of attorney fees “a trial court may 
not award additional attorney fees for enforcing or appealing the confirmation of the award . . . .” 
Crossmark, Inc. v. Hazar, 124 S.W.3d 422, 436 (Tex. App. 2004). Perhaps recognizing this, T3 
states it can be awarded fees “upon a remand back to the Arbitration Panel.” However, T3 cites 
no authority for such a remand. Accordingly, based on the lack of statutory support in the FAA, 
26 
 
as well as Texas case law, T3 is not entitled to attorney fees on appeal pursuant to its breach of 
contract and Texas DTPA claims. 
 
We also decline to award attorney fees on appeal pursuant to Idaho Code section 12-121 
or Texas Appellate Rule 45. This Court has said “if the award of attorney fees is a discretionary 
matter governed by statute, then it is considered to be procedural, requiring application of the 
forum law.” Carroll v. MBNA Am. Bank, 148 Idaho 261, 270, 220 P.3d 1080, 1089 (2009). 
Texas Appellate Rule 45 provides that if a court “determines that an appeal is frivolous, it may . . 
. award each prevailing party just damages.” Tex. R. App. P. 45. While not statutory, the Rule 
does impute discretion to the court. Thus, this Court could apply section 12-121. Houston v. 
Whittier, 147 Idaho 900, 911, 216 P.3d 1272, 1283 (2009). Pursuant to section 12-121, this 
Court, in any civil action, may award reasonable attorney fees to the prevailing party. I.C. § 12-
121; Doe v. Doe (2016-7), 161 Idaho 67, 79, 383 P.3d 1237, 1249 (2016). “This Court has held 
that attorney fees can be awarded on appeal under Idaho Code section 12-121 ‘only if the appeal 
was brought or defended frivolously, unreasonably, or without foundation.’” Id. (citation 
omitted). However, “[f]ees will generally not be awarded for arguments that are based on a good 
faith legal argument.” Easterling v. Kendall, 159 Idaho 902, 918, 367 P.3d 1214, 1230 (2016). 
 
In this case, we decline to award attorney fees on appeal. The issues as to district court 
jurisdiction and forum selection clause enforceability are novel issues and SBS provided cogent 
argument and authority for its issues presented on appeal. SBS’s arguments were not frivolous, 
unreasonable, or without foundation. Accordingly, we do not award attorney fees on appeal.   
V. 
CONCLUSION 
In sum, we hold that 1) the district court had jurisdiction to consider T3’s challenge to 
forum; 2) the district court did not err when it determined the forum selection clause was 
unenforceable; 3) SBS waived the issue of privilege when it stipulated to the admission of 
documents at the hearing; 4) the district court did not err in denying SBS’s motion to vacate or 
modify the arbitration award; and 5) no attorney fees are awarded on appeal. Costs to T3.  
Justices HORTON, BRODY, BEVAN and STEGNER, CONCUR.