Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_19-cv-02168/USCOURTS-casd-3_19-cv-02168-0/pdf.json

Nature of Suit Code: 896
Nature of Suit: Other Statutes - Arbitration
Cause of Action: 09:0205 Removal from State Court: Enforcement of Foreign Arbital Awards

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

AERYON LABS, INC., a 

Canadian Corporation,

Plaintiff,

v.

DATRON WORLD 

COMMUNICATIONS, INC., a 

California Corporation,

Defendant.

Case No.: 3:19-cv-02168-WQH-LL

ORDER

HAYES, Judge:

The matters pending before the Court are the Petition to Confirm the Arbitration 

Award filed by Plaintiff Aeryon Labs, Inc. (Ex. A to ECF No. 1) and the Petition to Vacate 

the Arbitration Award filed by Defendant Datron World Communications, Inc. (ECF No. 

2).

PROCEDURAL BACKGROUND

On October 30, 2019, Plaintiff Aeryon Labs, Inc. (“Aeryon”) initiated this action by 

filing a Petition to Confirm an Arbitration Award in the Superior Court of California for 

the County of San Diego, assigned case number 37-2019-00058740-CU-PA-NC, against 

Defendant Datron World Communications, Inc. (“Datron”). (Ex. A Part 1, ECF No. 1-2 at 

2). On November 13, 2019, Defendant removed the action to this Court pursuant to 28 

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U.S.C. § 1331, 28 U.S.C. § 1441(a), and 28 U.S.C. § 1446. (ECF No. 1 at 1). On 

November 18, 2019, Defendant filed a Response in opposition to the Petition to Confirm 

the Arbitration Award and a Petition to Vacate the Arbitration Award. (ECF No. 2). On 

December 13, 2019, Plaintiff filed a Reply in support to the Petition to Confirm the 

Arbitration Award. (ECF No. 5). On January 31, 2020, the Court heard oral argument. 

(ECF No. 8). 

THE ARBITRATION

Plaintiff is a Canadian company that “design[s], manufacture[s] and sell[s] UAVs, 

more familiarly known as drones.” (ECF No. 1-3 at 35). In 2009, Plaintiff launched its 

first commercial product (the Scout). Id. In 2013, Plaintiff “launched a new and updated 

model called the Sky Ranger.” Id. at 36. 

Defendant is a California corporation. Defendant “is the price performance leader 

for tactical military radio communications equipment for foreign militaries around the 

world.” Id. Defendant’s “core business and main market is the military, but it has also 

worked with governments, police and other domestic security type agencies.” Id. 

Defendant has “a network of resellers in over 80 countries.” Id.

On July 19, 2010, Defendant and Plaintiff entered into a Private Label Distribution 

Agreement (“PLDA”). Id. at 48. “The contract did not go smoothly and there were issues 

concerning channel conflicts between [Defendant]’s and [Plaintiff]’s representatives.” Id. 

at 51. On May 11, 2012, the 2010 PLDA was terminated. Id. “Several changes were made 

to the 2010 PLDA following its termination.” Id. at 52. In January 2013, the 2012 PLDA 

was signed and backdated to July 20, 2012. Id. at 53. “Problems continued under the 

2012 PLDA.” Id. “Channel conflict issues continued to arise.” Id. at 56. The 2012 PLDA 

“continued until it was finally terminated” on May 10, 2016. Id. at 58. 

In Defendant’s Statement of the Case, Defendant brought claims for breach of 

contract pursuant to the 2010 and 2012 PLDAs, breach of the covenant of good faith and 

fair dealing, promissory estoppel, intentional interference with prospective economic 

relations, negligent misrepresentation, intentional misrepresentation, and fraud. (ECF No. 

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1-3 at 62-64). Defendant sought declaratory relief, injunctive relief, and damages “not less 

than US $20,000.000.” Id. at 62.

The 2012 PLDA stated, in relevant part, that 

Any dispute, controversy or claim arising out of, relating to, or in connection 

with this Agreement, or the breach termination or validity thereof, which is

not settled by mutual agreement of the Parties involved in such dispute, 

controversy or claim within 30 days of written notice by one Party to the other 

of the nature of such dispute, shall be finally settled by Arbitration. ...

(ECF No. 1-2 at 25). The case was submitted to arbitration. 

The arbitrator issued a Partial Award which concluded that “[t]he termination of the 

Private Label Distribution Agreement dated 2012 as amended by the [Plaintiff]’s notice of 

termination dated 10 May 2016 was valid and lawful.” (ECF No. 1-3 at 251). The 

arbitrator rejected all of Defendant’s claims. Id. Plaintiff “claim[ed] the sum of US

$2,554,089 as the total of its legal fees and other costs.” Id. at 260. Defendant 

for its part claimed, excluding the arbitration costs, the sum of US

$520,902.50 in legal fees and US $154,350.36 for travel and related costs; 

other costs and expenses, including transcripts; and Datron time spent in the 

arbitration, giving a total of US $675,252.86.

Id. at 261. The arbitrator concluded that “[t]he award of legal and other costs in an 

arbitration is ultimately a matter for the discretion of the tribunal” and “is governed by 

Article 38 of the ICC Rules.” Id. at 266. The arbitrator awarded Plaintiff US $ 

1,997,445.75 for attorneys’ fees, paralegal costs, technician costs, and other costs. Id. at 

269. The arbitrator ordered that Defendant make the payment to Plaintiff by October 25, 

2019. Id.

CONTENTIONS OF THE PARTIES

Defendant contends that the arbitration award should be vacated. Defendant asserts

that the arbitrator refused to order discovery of Defendant’s requested documents. 

Defendant contends that it was prejudiced as a result of the arbitrator’s refusal when it was 

unable to sufficiently support its claims at the hearing. Defendant contends that the 

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arbitrator failed to follow the parties’ choice of law in their arbitration agreement and failed

to apply California law to the analysis of attorneys’ fees and costs. Defendant contends 

that the arbitrator failed to properly evaluate whether the rates, time spent, or costs were 

reasonable before awarding Plaintiff $2,127,445.75 in attorneys’ fees and costs. 

Plaintiff contends that the arbitration award should be confirmed. Plaintiff contends 

that Defendant was permitted to present all its evidence and was not denied a fair hearing. 

Plaintiff contends that Defendant sought more discovery than it was entitled to receive 

under the IBA rules. Plaintiff contends that Defendant was permitted to argue in support 

of its requests for production and to present evidence at trial which was not part of either 

party’s disclosures. Plaintiff contends that Defendant fails to identify any evidence that 

Defendant was prohibited from presenting. Plaintiff contends that this Court is not 

permitted to review the merits of the arbitrator’s discovery determinations. Plaintiff 

contends that the arbitrator did not exceed authority by applying agreed-upon standards of 

the 2012 PLDA and ICC Arbitration Rules to grant the attorney’s fee award. Plaintiff 

contends that the 2012 PLDA incorporated by reference the ICC Arbitration Rules, which 

grant the arbitrator broad and discretionary authority to award attorneys’ fees. 

STANDARD OF REVIEW

The Federal Arbitration Act (“FAA”) governs the role of federal courts in reviewing 

arbitration decisions. Section 9 of the FAA provides that a federal district court “must” 

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. Judicial review of an arbitration 

award is thus “both limited and highly deferential” and the arbitration award “may be 

vacated only if it is ‘completely irrational’ or ‘constitutes manifest disregard of the law.’” 

Comedy Club, Inc. v. Improv W. Assocs., 553 F.3d 1277, 1288 (9th Cir. 2009) (quoting 

Poweragent Inc. v. Elec. Data Sys. Corp., 358 F.3d 1187, 1193 (9th Cir. 2004)). “Neither 

erroneous legal conclusions nor unsubstantiated factual findings justify federal court 

review” of an arbitration award under the FAA. Aspic Eng’g & Constr. Co. v. ECC 

Centcom Constructors LLC, 913 F.3d 1162, 1166 (9th Cir. 2019) (quoting Bosack v. 

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Soward, 586 F.3d 1096, 1102 (9th Cir. 2009)). The “burden of establishing grounds for 

vacating an arbitration award is on the party seeking it.” U.S. Life Ins. Co. v. Superior Nat’l 

Ins. Co., 591 F.3d 1167, 1173 (9th Cir. 2010) (citing Employers Ins. of Wausau v. Nat’l 

Union Fire Ins. Co. of Pittsburgh, 933 F.2d 1481, 1489 (9th Cir. 1991)). 

DISCUSSION

I. Refusal to Order Disclosure - 9 U.S.C. § 10(a)(3)

Defendant asserts that the arbitrator refused to require Plaintiff to disclose certain 

documents pursuant to Defendant’s requests. Defendant asserts that its requests for 

documents were refused entirely or granted with limitations. Defendant contends that it 

was not undertaking a fishing expedition as the arbitrator claimed. Defendant contends that 

the requests were specific and the documents sought were relevant and material. Defendant 

contends that the arbitrator refused to hear pertinent and material evidence because the 

pertinent and material evidence was not required to be disclosed. 

Plaintiff contends that the arbitration award should be confirmed because Defendant 

was permitted to present all of its evidence and was not denied a fair hearing. Plaintiff 

contends that Defendant sought more discovery than it was entitled to receive. Plaintiff 

contends that Defendant was given a number of opportunities to argue in support for its 

requests for production. Plaintiff asserts that the arbitrator encouraged Defendant to modify 

its requests for production and that Defendant made three attempts to modify its requests 

for production with the arbitrator’s assistance. Plaintiff contends that Defendant focuses on 

the merits of the arbitrator determinations, which is not reviewable by this Court. 

Section 10 of the FAA permits a court to vacate an award “where the arbitrators were 

guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in 

refusing to hear evidence pertinent and material to the controversy; or of any other 

misbehavior by which the rights of any party have been prejudiced.” 9 U.S.C. § 10(a)(3). 

“Arbitrators enjoy ‘wide discretion to require the exchange of evidence, and to admit or 

exclude evidence, how and when they see fit,’” so long as they give “each of the parties to 

the dispute an ‘adequate opportunity to present its evidence and arguments.’” U.S. Life Ins., 

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591 F.3d at 1175 (citations omitted). To meet the standard for vacating the award, the 

arbitrator’s refusal to hear evidence must demonstrate “bad faith or [be] so gross as to 

amount to affirmative misconduct.” United Paperworkers Int’l Union, AFL-CIO v. Misco, 

Inc., 484 U.S. 29, 40 (1987). 

On December 16, 2017, the arbitrator issued the First Procedural Order. (Ex. 5 to 

Def.’s Resp. to Petition to Confirm Arbitration Award, ECF No. 2-5). The arbitrator stated

that “Parties are reminded that this is an international arbitration conducted under the Rules 

of the ICC and requests for broad categories of ‘all documents’ which are not narrowly 

focused to particular issues and timelines are unlikely to be allowed. ...” Id., ECF No. 2-5 

at 2. 

On November 14, 2018, the arbitrator issued a schedule of document requests in 

which the arbitrator issued rulings on Defendant’s document requests to Plaintiff. (Ex. 10 

to Def.’s Resp. to Petition to Confirm Arbitration Award, ECF No. 2-10). The arbitrator 

allowed requests 8-9, 11, 22-24, 27-29, 31, 33, 37-38, 41-44, 48, 53, 55 60-63, 74-75, 84, 

106, 115-16, 118-21, 123-29, 132-33, 151, and 164. The arbitrator refused requests 4-7, 

10, 12-21, 25-26, 30, 32, 34-36, 39-40, 45-47, 49-52, 54, 56-59, 64-73, 76-83, 85-105, 107-

14, 117, 122, 130-31, 136, 139, 141-50, 152-63, and 165-90. The arbitrator concluded that 

requests 134-35, 137-38, and 140 were duplicative requests. 

On November 21, 2018, the arbitrator issued the Order Regarding Disclosure 

Relating to Both the Application Made by Datron World Communications Inc. and Datron 

Holdings Inc. and that made by Aeryon Labs Inc. (Ex. 8 to Def.’s Resp. to Petition to 

Confirm Arbitration Award, ECF No. 2-8). The arbitrator stated that 

2. For the purpose of grounds for refusing disclosure, I have amalgamated 

what I might describe as a “fishing expedition” with non-compliance with the 

Article 3 of the IBA Rules on the Taking of Evidence in International 

Arbitration (“IBA Rules”) and the need for a request to be a “narrow and 

specific category” under the term “too broad.” By “fishing expedition” I mean 

the situation where a party seeks a broad range of documents often over a 

lengthy period without specificity which is not supported by a precise 

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allegation in its pleading and with which documents it seeks to bolster its case, 

yet where the onus of proof remains on the party making the allegation. 

3. Where I have refused a request it is because it is too broad and in many 

cases additionally too burdensome and/or not relevant or material to the 

outcome of the case. Other annotations as reasons for refusing disclosure are 

self-explanatory and ultimately mean that the documents requested are not of 

sufficient relevance to the case nor material to the outcome or are otherwise 

refused on grounds of procedural economy e.g. where the documents relate to 

the damages phase of the arbitration (assuming of course that this happens, a 

matter on which I cannot at this stage opine). ... 

8. I have ordered Datron to particularise certain parts of its pleading in a few 

requests and to do so within 48 hours of this order as I have found many of 

Datron’s requests far too wide and often duplicative. ... 

Id., ECF No. 2-8 at 2. 

After issuing the Order Regarding Disclosure, the arbitrator issued a provisional 

Further Clarification Order Regarding Disclosure. (Ex. 15 to Def.’s Resp. to Petition to 

Confirm Arbitration Award, ECF No. 2-15). The arbitrator stated that “before making this 

revised order final, I will give [Plaintiff] an opportunity to comment and [Defendant] an 

opportunity to add any specific pleaded allegation that I have missed but only where I have 

permitted this below ...” Id., ECF No. 2-15 at 2 (emphasis omitted). The arbitrator goes 

on to explain the holdings regarding Requests 99, 150, 151, 167, 168, 181, 190. Id., ECF 

No. 2-15 at 2-3. The arbitrator stated that 

... I appreciate why [Defendant] wants all this information, but in 

international arbitration, disclosure is limited, as previously explained, and 

one party cannot seek to bolster an unparticularised case by asking for 

innumerable documents from the other side. Fishing expeditions are not 

allowed.

Id., ECF No. 2-15 at 3. 

On December 2, 2018, the arbitrator issued a Final Order Regarding Clarification 

Regarding Disclosure. (Ex. 16 to Def.’s Resp. to Petition to Confirm Arbitration Award, 

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ECF No. 2-16). The arbitrator issued final rulings for Requests 167, 168, and 181 as well 

as for further disclosure. Id., ECF No. 2-16 at 2-3. 

On January 8, 2019, the arbitrator issued an Order Relating to Disclosure Issues. (Ex. 

19 to Def.’s Resp. to Petition to Confirm Arbitration Award, ECF No. 2-19). The arbitrator 

stated that 

Essentially Datron’s argument is that because there are a very large number 

of documents to be disclosed in the Canadian proceedings, the fact that far 

fewer have been disclosed in this arbitration indicates non-compliance with 

my orders. Datron has pointed to no specific failure to disclose other than this 

numerical disparity and the hope that when it trawls through the documents 

disclosed in the Canadian proceedings it might find a document which should 

have been disclosed in these proceedings. This is a far too speculative basis 

on which to make any allegation on non-compliance with my orders. ... 

Id., ECF No. 2-19 at 3. The arbitrator required a “qualified senior representative of Aeryon 

[to] confirm on behalf of Aeryon compliance with the orders for disclosure I have made and 

the absence of further documents responsive to such requests which confirmations will be 

relied upon by the Tribunal.” Id., ECF No. 2-19 at 4. On January 15, 2019, Plaintiff’s Chief 

Financial Officer confirmed that Plaintiff “has complied with th[e] Tribunal’s orders for 

disclosure and there are no further documents responsive to [Defendant]’s disclosure 

requests.” (Ex. 20 to Def.’s Resp. to Petition to Confirm Arbitration Award, ECF No. 2-

20).

In this case, the parties engaged in discovery. The arbitrator considered Defendant’s 

requests for discovery and issued a series of procedural orders specifically addressing 

discovery and ordering disclosure of documents. The arbitrator properly applied the ICC 

Rules as agreed upon by the parties. Defendant has failed to demonstrate that the 

arbitrator’s refusal to order disclosure of certain requested documents demonstrated 

deprived Defendant of an “adequate opportunity to present its evidence and arguments.” 

U.S. Life Ins., 591 F.3d at 1175 (citations omitted). The Court concludes that the arbitrator’s 

refusal to order disclosure of certain requested documents was not done in “bad faith” and 

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was not “so gross as to amount to affirmative misconduct.” United Paperworkers, 484 U.S. 

29 at 40. 

II. Application of ICC Rules - 9 U.S.C. § 10(a)(4)

Defendant contends that the arbitration award should be vacated because the 

arbitrator disregarded the parties’ choice of law governing the award of attorneys’ fees and 

costs. Defendant asserts that the arbitrator disregarded the 2012 PLDA choice of law 

provision identifying California law and applied ICC Rules instead. Defendant contends 

that the arbitrator’s errors regarding fees and costs were not harmless. Plaintiff contends 

that the arbitration award should be confirmed because the arbitrator did not exceed 

authority by applying ICC Rules to the award of attorneys’ fees and costs. Plaintiff contends 

that the arbitrator properly applied the ICC Rules to issue the fee award. 

Vacatur is also warranted “where the arbitrators exceeded their powers, or so 

imperfectly executed them that a mutual, final, and definite award upon the subject matter 

submitted was not made.” 9 U.S.C. § 10(a)(4). The Court of Appeals has held that 

“arbitrators ‘exceed their powers’ ... not when they merely interpret or apply the governing 

law incorrectly, but when the award is ‘completely irrational,’ ... or exhibits a ‘manifest 

disregard of law.’” Kyocera Corp. v. Prudential-Bache Trade Servs., Inc., 341 F.3d 987, 

997 (9th Cir. 2003) (citations omitted). An award is “completely irrational” “only ‘where 

[the arbitration decision] fails to draw its essence from the agreement.’” Comedy Club, 553 

F.3d at 1288 (quoting Hoffman v. Cargill Inc., 236 F.3d 458, 461-62 (8th Cir.2001)). “An 

[arbitration] award ‘draws its essence from the agreement if the award is derived from the 

agreement, viewed in light of the agreement’s language and context, as well as other 

indications of the parties’ intentions.’” Bosack, 586 F.3d at 1106 (quoting McGrann v. First 

Albany Corp., 424 F.3d 743, 749 (8th Cir. 2005)). Under this standard of review, the district 

court does not “decide the rightness or wrongness of the arbitrators’ contract interpretation.” 

Id. (quoting Pacific Reinsurance Mgmt. Corp. v. Ohio Reinsurance Corp., 935 F.2d 1019, 

1024 (9th Cir. 1991)). “These grounds afford an extremely limited review authority, a 

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limitation that is designed to preserve due process but not to permit unnecessary public 

intrusion into private arbitration procedures.” Kyocera Corp., 341 F.3d at 998.

The 2012 PLDA stated, in relevant part, 

19.1 This Agreement, its interpretation, validity, enforcement and any and all

disputes arising out of or related to this Agreement, shall be governed and 

construed in accordance with the laws of the State of California, except for its 

conflict of laws provisions. ... Any dispute, controversy or claim arising out 

of, relating to, or in connection with this Agreement, or the breach termination 

or validity thereof, which is not settled by mutual agreement of the Parties 

involved in such dispute, controversy or claim within 30 days of written notice 

by one Party to the other of the nature of such dispute, shall be finally settled 

by Arbitration. The Arbitration shall be conducted in accordance with the 

Rules of Conciliation and Arbitration of the ICC in effect at the time of the 

arbitration. ... 

19.3 The arbitral award shall be in writing and shall be final and binding on 

the Parties. The award may include an award of costs, including reasonable 

attorney’s fees and disbursements. ... 

(ECF No. 1-2 at 24-25). 

In Polimaster, the Court of Appeals reviewed an arbitration agreement which stated 

that “[i]n case of failure to settle the mentioned disputes by means of negotiations they 

should be settled by means of arbitration at the defendant’s site.” Polimaster Ltd. v. RAE 

Systems, Inc., 623 F.3d 832, 834 (9th Cir. 2010). The Court of Appeals found that “[t]he 

arbitration agreement was not ambiguous.” Id. at 837. The Court of Appeals found that 

“[t]he requirement of arbitration at the defendant’s site is effectively a forum selection 

clause, in which the parties agreed to arbitrate at the location of a defendant’s principal 

place of business” and “is presumptively enforceable.” Id. (citation omitted). The Court of 

Appeals concluded that the parties’ express agreement to submit disputes to arbitration at 

defendant’s site “effectively removed the decision regarding forum from the procedural 

decisions delegated to the arbitrator” and the arbitrator “could not override the parties’ 

express agreement in favor of general procedural rules.” Id. at 841. 

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In this case, the 2012 PLDA states that “[t]he [a]rbitration shall be conducted in 

accordance with the Rules of Conciliation and Arbitration of the ICC in effect at the time 

of the arbitration.” (ECF No. 1-2 at 25). Plaintiff and Defendant agreed upon the ICC Rules 

to govern arbitration. 

Pursuant to California law, “parties may validly incorporate by reference into their 

contract the terms of another document.” Slaught v. Bencomo Roofing Co., 25 Cal. App. 

4th 744, 748 (1994) (citing Baker v. Aubry, 216 Cal.App.3d 1259, 1264 (1989)). In order 

for the terms of another document to be incorporated into the parties’ contract, “the 

reference must be clear and unequivocal, the reference must be called to the attention of the 

other party and he must consent thereto, and the terms of the incorporated document must 

be known or easily available to the contracting parties.” Shaw v. Regents of University of 

California, 58 Cal. App. 4th 44, 54 (1997) (quoting Williams Constr. Co. v. StandardPacific Corp., 254 Cal. App. 2d 442, 454 (1967)).

The arbitration agreement “[is] not ambiguous.” See Polimaster, 623 F.3d at 837. 

The language of the arbitration agreement is “clear and unequivocal.” Shaw, 58 Cal. App. 

4th at 54 (quoting Williams Constr., 254 Cal. App. 2d at 454). The 2012 PLDA, “its 

interpretation, validity, enforcement and any and all disputes arising out of or related to this 

Agreement” are governed by California law. (ECF No. 1-2 at 24). “Any dispute, 

controversy or claim arising out of, relating to, or in connection with this Agreement, or the 

breach termination or validity thereof, which is not settled by mutual agreement of the 

Parties ... within 30 days ... shall be finally settled by Arbitration.” Id. at 25. “The 

Arbitration shall be conducted in accordance with the Rules of Conciliation and Arbitration 

of the ICC ....” Id. Any arbitral award shall be “in writing,” “final,” and binding. Id. Any 

arbitral award “may include an award of costs, including reasonable attorney’s fees ....” Id. 

Pursuant to the agreement, the award of attorneys’ fees in the arbitration award is governed 

by ICC Rules. Plaintiff’s President and Defendant’s President/CEO initialed the pages of 

the 2012 PLDA pertaining to choice of law and arbitration. The Court concludes that the 

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arbitrator did not exceed authority by applying ICC Rules to the award of costs, including 

attorneys’ fees, in the arbitration.

CONCLUSION

IT IS HEREBY ORDERED that the Petition to Confirm the Arbitration Award filed 

by Plaintiff Aeryon Labs, Inc. (Ex. A to ECF No. 1) is GRANTED 

IT IS FURTHER ORDERED that the Petition to Vacate the Arbitration Award filed 

by Defendant Datron World Communications, Inc. (ECF No. 2) is DENIED.

The Clerk of the Court shall enter judgment in favor of Plaintiff Aeryon Labs, Inc. 

and against Defendant Datron World Communications, Inc.

Dated: March 3, 2020

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