COURT OF CHANCERY OF THE STATE OF DELAWARE L ORI W. W ILL V ICE C HANCELLOR L EONARD L. W ILLIAMS J USTICE C ENTER 500 N. K ING S TREET , S UITE 11400 W ILMINGTON , D ELAWARE 19801

- 3734

Date Submitted: March 23 , 202 2 Date Decided: June 21 , 202 2
F. Troupe Mickler IV , Esquire Ashby & Geddes 500 Delaware Avenue, 8th Floor P.O. Box 1150 Wilmington, Delaware 19801 Daniel J. Goettle , Esquire Jeffrey J. Lyons , Esquire Ba k er & Hostetler LLP 1201 North Market Street Suite 1402 Wilmington, Delaware 19801

RE: MHP Management, LLC. v. DTR MHP Management, LLC, et al.
, C.A. No. 2020

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Dear Counsel:

This letter decision addresses the parties’ cross

- motions for summary
judgment regarding a March 23, 202 0 arbitration award. The plaintiff seeks an order
confirming the award ; the defendants seek an order vacating it

. For the reasons
explained below, the plaintiff’s motion is granted and the defen dants’ motion is

denied.

I. FACTUAL BACKGROUND
Until recently, the principals of plaintiff MHP Management, LLC (“MHP”)

and of defendants DTR MHP Management, LLC (“DTR”), Colonial Kitchen, LLC
,
and WaterTree Capital, Inc. managed a group of investment funds that own andMHP Management, LLC v. DTR MHP Management, LLC, et al.

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operate mobile home parks throughout the United States. 1 On March 24, 2016
, the
parties formed Delaware limited liability company MHCA Management, LLC (the
“Company ” ) to manage one of the parties’ investment funds

— MHC America Fund,

LLC
, a $150 million fund holding interests in various mobile home communities

. 2

The Company wa s originally managed by MHP, DTR, Colonial Kitchen
, and

WaterTree , each of whom are signatories to a 201 6 Limited Liability Company
Agreement (the “LLC Agreement ” )

.
A. The 2017 Written Consent
On April 5 , 2017, a document titled “Written Action of the Members of
MHCA Management, LLC” was executed (the “2017 Written Consent ”)

. 3 The

1 Am. Compl. ¶ 10 (Dkt 20 )

. MHP is a Florida limited liability company that is managed by JRS MHP Management, LLC, a Florida limited liability company, that is itself managed by Jamie and Ryan Smith. See Transmittal Decl. of F. Troupe Mickler IV in Supp. of the Pl .’s Opening Br

. (“Mickler Decl.”) Ex. 1 (“ Award ”) at 3

- 4 (Dkt. 32)

. DTR is a Colorado limited liability company that is managed by Dave Reynolds. Id. Colonial Kitchen is a Texas limited liability company that is managed by Frank Rolfe. Id. W aterTree is a California corporation managed by Eric Siragusa. Id.

2 Am. Compl. ¶¶ 8, 10 ; see Mickler Decl. Ex. 2 (“ LLC Agreement ”) § 3.1

. 3 Decl. of Jeffrey J. Lyons in Supp. of Defs.’ Opening Br. (“Lyons Decl.”) Ex. C (Dkt. 36).MHP Management, LLC v. DTR MHP Management, LLC, et al.

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document purported ly appoint ed DTR as managing member of the Company

. 4 MHP
has disputed the validity of the 2017 Written Consent. 5

B. The Unsuitability Determination
In a letter dated September 5, 2018, MHP sent a Notice of Unsuitability to the

defendants. 6 The notice stated that MHP was issuing an “Unsuitability

Determination” because MHP had concluded that the defendants committed acts
constituting “Good Cause” under the LLC Agreement. 7 MHP’s stated reasons for
this determination included its belief that the defendants had engaged in a self

dealing transaction and had sold property witho ut MHP’s knowledge

. 8
The LLC Agreement defines “Unsuitability Determination,” in relevant part,

as the “U naffected Members’” determination that another member “has committed
any act or omission constituting Good Cause.” 9 “Good Cause” is defined to include
“a good faith determination that a Member has committed an act or omission
constituting: (i) a material breach of the Member ’ s duties or authority hereunder;

4 Id.

5 See Lyons Decl. Ex. E.

6 Lyons Decl. Ex. I.

7 Id.

8 Id.

9 LLC Agreement § 1.MHP Management, LLC v. DTR MHP Management, LLC, et al.

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(ii) willful or wanton misconduct; or (iii) fraud. ” 10 The LLC Agreement further
provides that a member who is the subject of an Unsuitability Determination “shall
automatically be removed” as a member of the Company. 11

C. The Arbitration
On September 13, 2018, the defendants (and purportedly the Company)
initiated arbitration proceedings against MHP to challenge the validity of the
Unsuitability Determination. 12 The LLC Agreement mandates binding arbitration

of any disputes between the parties and requires that Delaware law be applied to any
such dispute

. 13 The LLC Agreement also provides that an arbitrator lac k s “any
authority, power or right to alter, change, amend, modify, add to, or subtract from”
the LLC Agreement’s provisions. 14
In their Statement of Claims, the defendants argued that MHP’s Unsuitability
Determination was not made in good faith and sought a finding that the Unsuitability

Determination was invalid. 15 A panel of three arbitrators was selected by the parties,

10 Id.

11 Id. § 12.1.C.

12 Lyons Decl. Ex. K.

13 LLC Agreement § § 14.1 , 15.12.

14 Id . § 14.5.

15 See Lyons Decl . Ex s

. K, L ; see also id. Ex. Q

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which received multiple submissions and briefs during the arbitration

. A seven

- day
evidentiary hearing was held before the pane l in September 2019 . The record
considered by the panel included 433 documentary exhibits and the testimony of
eight witnesses.

On March 23, 2020, the arbitration panel issued the Arbitrators’ Reasoned

Award

— a 54

- page written decision (the “Award”) . Th e panel concluded that DTR,
Colonial Kitchen, and WaterTree did not carry their burden of show ing that the
Unsuitability Determination was not issued in good faith. 16 It determined that
MHP’s “September 5, 2018 Unsuitability Determination was valid

. ” 17 The panel

also concluded that it was unnecessary to determine the “legal effect” of the 2017

Written Consent in reaching its decision

. 18

E

. This Litigation
On May 13, 2020, t he plaintiff filed a Verified Complaint to Confirm

Arbitration Award in this court , alleging that the defendants had refused to accept
the Award and continued to act as members of the Company

. 19 The case was stayed

16 Award at 52

- 53.

17 Id. at 46

- 54.

18 Id. at 25, 43, 49, 51

- 52.

19 Dkt. 1.MHP Management, LLC v. DTR MHP Management, LLC, et al.

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by stipulation pending the outcome of ea rlier

- filed litigation in Florida state court,
whereby the defendants sought to vacate the Award

. 20 The Florida court dismissed

that action on October 28, 2020 and that decision was affirmed on appeal on August

24, 2021. 21

On August 29, 2021, t his court entered an order lifting the stay and the
plaintiff filed a n amended complaint the following day. 22 The defendants answered

th at complaint and advanced a counterclaim seeking to vacate the Award. 23

The parties proceeded to cross

- move for summary judgment on November 1,

2021. The plaintiff ’ s motion for summary judgment asks that the court confirm the

Award. 24 The defendants’ motion for summary judgment asks that the court vacate

the Award. 25 Briefing on the mo tions was completed on January 14, 2022 . Oral
argument was held on March 23, 2022.

20 Dkt. 11.

21 See Dkt. 19

22 Dkts. 19, 20.

23 Dkt . 23.

24 See Dkt. 32.

25 See Dkt. 34.MHP Management, LLC v. DTR MHP Management, LLC, et al.

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II. LEGAL ANALYSIS
Summary judgment is appropriate under Court of Chancery Rule 56 where
“there is no genuine issue as to any material fact and . . . the moving party is entitled
to a judgment as a matter of law.” 26 A summary judgment motion “provides an
appropriate judicial mechanism for reviewing an arbitration award, because the
complete record is before the court and no de novo hearing is permitted.” 27 This is

so under either the Delaware Uniform Arbitration Act or the Federal Arbitration Act
(“FAA”). 28
The parties’ arbitration agreement does not reference the Delaware Uniform

Arbitration Act and the parties have briefed the dispute under the FAA

. 29 The Court
of Chancery has jurisdiction to enforce or vacate arbitration awards that do n ot

reference the DUAA “in conformity with the [FAA] and such general principles of

26 Ct. Ch. R. 56(c).

27 Wier v. Manerchia , 1997 WL 74651, at *7 (Del. Ch. Jan. 28, 1997) ; see also Beebe Med. Ctr., Inc. v. InSight Health Servs. Corp. , 751 A.2d 426, 431 (Del. Ch. 1999) (explaining that a summary judgment motion is the “common [method] for this court to determine whether to vacate or confirm an arbitration award”).

28 See TD Ameritrade, Inc. v. McLaughlin, Piven, Vogel Secs. , Inc. , 953 A.2d 726, 730

- 31 (Del. Ch. 2008).

29 LLC Agreement § 14.MHP Management, LLC v. DTR MHP Management, LLC, et al.

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law and equity as are not inconsistent with that Act.” 30 Section 9 of the FAA
provides that if a party applies for an order confirming an arbitration award within

one year after the award is made, “the court must grant such an order unless the
award is vacated, modified, or corrected as prescribed in ” other provisions of the

FAA. 31
The Supreme Court has explained that only the statutorily enumerated
circumstances in the FAA provide grounds for a court to grant vacatur or

modification of an arbitration award. 32 “ Of course, ‘[n] either the FAA nor the
Delaware Uniform Arbitration Act derogates this Court’s inherent equity
jurisdiction to enforce, modify or vacate arbitration awards. ’ ” 33 The review it must

30 10 Del. C. § 5702 (c) ; see Gulf LNG Energy, LLC v. Eni USA Gas Mktg. LLC , 242 A.3d 575, 579 n.11 (Del. 2020) (“Because the parties [’] [agreement] did not designate the Delaware Uniform Arbitration Act, the FAA governs their arbitration.”).

31 9 U.S.C. § 9.

32 Hall St. Assocs. v. Mattel, Inc. , 552 U.S. 576, 584 (2008) (“We now ho ld that §§ 10 and 11 respectively provide the FAA’s exclusive grounds for expedited vacatur and modification.”); Gulf LNG Energ y , 242 A.3d at 583 (“Once an arbitration is completed, however, and the parties have agreed that the FAA controls their arbitrati on, Sections 10 and 11 of the FAA provide the exclusive means to vacate, modify, or correct the award.”).

33 TD Ameritrade , 953 A.2d at 732 (quoting SBC Interactive, Inc. v. Corp. Media P’rs
, 1998 WL 749446, at *1 (Del. Ch. Oct. 7, 1998) )

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conduct, however, is governed by “one of the narrowest standards of judicial review
in all of American jurisprudence.” 34
“Arbitration awards . . . are not lightly disturbed, and ‘[c]ourts must accor d

substantial deference to all decisions of arbitrators.’” 35 “It is not enough for
petitioners to show that the panel committed an error

— or even a serious error.” 36

Rather, “ [t] o successfully convince the Court to vacate the award of an arbitration
panel, the movant must show ‘something beyond and different from a mere error in
the law or failure on the part of the arbitrators to understand or apply the law.’” 37

The defendants contend that the Award must be vacated because the

arbitration panel exceeded its authority and because the panel’s Award was not final
and definite. The plaintiff disagrees. For the reasons discussed below, the
defendants’ arguments fall well short of the high bar they must meet to obtain

vacatur of the Award . Th e Award is confirmed.

34 Gov’t Empls. Ins. Co. v. Progressive Direct Ins. Co. , 2016 WL 6477026, at *4 (Del. Ch. Nov. 2, 2016) (citation omitted).

35 Agspring, LLC v. NGP X US Hldgs. , L.P. , 2022 WL 170068, at *3 (Del. Ch. Jan. 19, 2022) (quoting TD Ameritrade , 953 A.2d at 732).

36 Oxford Health Plans LLC v. Sutter , 569 U.S. 564, 569 (2013) (quoting Stolt

- Nielsen S.A. v. AnimalFeeds Int’l Corp. , 559 U.S. 662, 671 (2010 ) ).

37 Agspring , 2022 WL 170068, at *3 (quoting TD Ameritrade , 953 A.2d at 732

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A. The Arbitration Panel Did N ot Exceed Its Powers

The defendants argue that the Award should be vacated under Section 10(a)(4)

of the FAA , which states that a court may vacate an arbitration award “where the
arbitrators exceeded their powers

. ” 38 A party seeking to vacate an arbitration award

on that basis “ bears a heavy burden.” 39 The Delaware Supreme Court has explained

that an arbitrator exceeds its powers when acting “in manifest disregard of the

law.” 40 That is, vacatur is available where “ the arbitrator (1) knew of the relevant
legal principles, (2) appreciated that this princ iple controlled the outcome of the
disputed issue, and (3) nonetheless willfully flouted the governing law by refusing
to apply it.” 41

According to the defendants, the arbitration panel exceeded its powers by
ignoring the express terms of the LLC Agreement in favor of rewriting or modifying

them

. 42 The panel did so, the defendants contend, by e ffectively removing DTR as

38 9 U.S.C. § 10(a)(4).

39 Oxford Health , 569 U.S. at 569.

40 Auto Equity Loans of Del. , LLC v. Baird
, 232 A.3d 1293, 2020 WL 2764752, at *3 (Del. 2020) (TABLE).

41 Aspring , 2022 WL 170068, at *4 (quoting SPX Corp. v. Garda USA, Inc ., 94 A.3d 745, 750 (Del. 2014)).

42 Defs.’ Opening Br. 17

- 32 (Dkt. 32)

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the Company’s managing member in disregard of the 2017 Written Consent and by
modifying the unanimous consent requirement for an Unsuitability Determination

.
On the first issue , the parties would have the court wade into a debate about

whether the 2017 Written Consent was valid and, thus, whether DTR was the
managing member of the Company. But those factual disputes are irrelevant to my

determination of whether the Award should be confirmed or vacated. Simply put,

the 2017 Written Consent was not ignored or flouted by the panel.

The pa nel concluded that the 2017 Written Consent was not determinative of

the question presented to them for resolution. The Award explains that “[h]aving
considered the issue” of the legal effect of the 2017 Written Consent “at length
, ” the
panel did not beli eve it would be “prudent” to resolve it. 43 M oreover, the panel
“conclude[d] that a determination as to the technical legal effect of the 2017 [Written

Consent ] would not change its conclusion with respect to any issue” before it

. 44
Instead, the panel’s d ecision rested on “the validity, under the terms of the LLC
Agreement,” of MHP’s Unsuitability Determination

. 45

43 Award at 25.

44 Id.

45 Id

. Thus, whether the 2017 Written Consent was valid is not ( as the defendants argue ) a genuine issue of material fact precluding the entry of summary judgment in MHP’s favor. In determining whether an arbitration award should be vacated, t his court “is not to passMHP Management, LLC v. DTR MHP Management, LLC, et al.

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The arbitration panel read Article 12 of the LLC Agreement to provide that
if the Company’s “Unaffected Members” ( i.e ., the members not accused of
committing a material breach) made a good faith determination that another member
had committed a material breach of that member’s duties, the Unaffected Members
could make an Unsuitability Determination against the breaching member. 46 The

pane l went on to determine that MHP was the sole Unaffected Member under the
LLC Agreement and that MHP’s Unsuitability Determination was effective. 47

That reading of the LLC Agreement cannot properly be disturbed by this

court. When parties agree to submit q uestions of contract interpretation to an

an independent judgment on the evidence or applicable law.” TD Ameritrade , 953 A.2d at 733 (quoting Audio Jam, Inc. v. Fazelli , 1997 WL 153814, at *1 (Del. Ch. Mar. 20, 1997)). I therefore decline to address the various arguments about the significance, applicability, and effect of the 2017 Written Consent on the merits of the matter placed before the panel.

46 Section 12.2 of the LLC Agreement provides that “[u]pon the occurrence of an Unsuitability Determination [against a member] and after the expiration of any applicable cure (if any), the Company shall promptly exercise its right to redeem” the members interest in the company at a set price. LLC Agreemen t § 12.2.

47 The definition of the term “Unaffected Members” is not obvious under the plain language of the LLC Agreement. The term is defined to mean “those Members other than an Affected Member.” Id. § 1. The term “Affected Member” is defined to mean “ any Member that is an Unsuitable Person.” Id. But a vote of the Unaffected Members is required to find that a member is an Unsuitable Person. Id. Faced with this circular definition, the arbitration panel interpreted the LLC Agreement to provide that a member is not an Unaffected Member “with respect to any determination of its own Unsuitability and is also disqualified from deliberating or voting on determinations of Unsuitability for other Members if those determinations are based on ‘related matters. ’” Award at 41.MHP Management, LLC v. DTR MHP Management, LLC, et al.

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arbitrator, a court reviewing an arbitration award “ is confined to ascertaining

whether the award draws its essence from the contract .” 48 T he only question for the

court “ is whether the arbitrator (even arguably) interpreted the parties ’ contract, not
whether he got its meaning right or wron g.” 49 Here, that question must be answered

in the affirmative

.
T he panel similarly did not exceed its authority with regard to the second issue
of contract interpretation raised by the defendants

. 50 The defendants argue that the
panel “rewrote” Section 7.2 of the LLC Agreement by requiring unanimous consent
for actions taken by the Company that the LLC Agreement permitted to be
accomplished by a majority or super

- majority vote. The panel did not, however,

48 United Paperworkers Int’l Union, AFL

- CIO v. Misco, Inc. , 484 U.S. 29, 30 (1987); MarkDutchCo 1 B.V. v. Zeta Interactive Corp , 2021 WL 3503805, at *5 (3d Cir. Aug. 10, 2021) (“Because the Arbitrator ’ s decision ‘ dr[ew] its essence from the contract, ’ we are unpersuaded that he ‘ act[ed] outside the scope of his contractually delegated authority. ’” (quoting Oxford Health , 569 U.S. at 569)).

49 Oxford Health , 569 U.S. at 569 ; see also United Paperworkers , 484 U.S. at 30 (“As long as the arbitrator is even arguably construing or applying the contract and acting within the scope of his authority, the court cannot overturn his decision simply because it disagrees with his factual findings, contract interpretations, or choice of remedies.”)

. 50 Section 7. 2 of the LLC Agreement provides that “each Member . . . shall be entitled to vote on all matters that provide for a vote of the Members and in accordance with the Member ’ s Membership Interest.” LLC Agreement § 7.2. Certain actions require the unanimous consent of all of the m embers, while other actions require the consent of

m embers holding either a majority or super majority of the Company’s membership interests. Id.MHP Management, LLC v. DTR MHP Management, LLC, et al.

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conclude that unanimous consent was required for the transaction s that led to the
Unsuitability Determination

. Rather , the Award explained that the lack of a formal

vote “legitimize[d] MHP’s co ncerns that [the defendants] were able to act and had
acted without regard to MHP’s interests ” and supported the conclusion that the

MHP’s Unsuitability Determination was made in good faith

. 51

Accordingly , the panel did not exceed its powers . Its decision not to consider
any legal effect of the 2017 Written Consent falls short of the kind of error that could
justify vacatur. The panel’s determinations were plainly based on its interpretation
of the LLC Agreement. I therefore decline to vac ate the Award.

B. The Award Is Final and Definite

The defendants next contend that the arbitration panel did not execute a final

award

. Under Section 10(a)(4) of the FAA, a court may vacate an arbitration award
where the arbitrators “so imperfectly executed [ its powers] that a mutual, final, and
definite award upon the subject matter submitted was not made.” 52 A final
arbitration award must “evidence[] the arbitrators’ intention to resolve all claims

submitted in the demand for arbitration and

. . . resolve them definitively enough so

51 Award at 49.

52 9 U.S.C. § 10(a)(4).MHP Management, LLC v. DTR MHP Management, LLC, et al.

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that the rights and obligations of the two parties, with respect to the issues submitted,
do not stand in need of further adjudication. ” 53
Once again, the parties’ arguments concern the 2017 Written Consent

. The

defendants assert that the arbitration panel imperfectly executed its powers by
declining to consider and determine the effect of the 2017 Written Consent

. In
refuting this argument, MHP points to the language of the Award itself which
discusses the panel’s treatment of the 2017 Written Consent

.
A s discussed above, the panel stated that it had considered the matter of the
2017 Written Consent “at length.” 54 The Award acknowledged that “even after the
April 2017 Written Consent was signed, all of the members of [the Company] acted

in a manner consi stent with the terms of the LLC Agreement.” 55 The panel did not,
however, opine on the validity of the 2017 Written Consent or its legal effect.

But it did not need to do so to issue a final and definite award. T he validity

of the 2017 Written Consent w as not a claim submitted in the defendants’ demand

53 PG Publ’g, Inc. v. Newspaper Guild of Pittsburgh , 19 F.4th 308, 323 (3d Cir. 2021) (internal quotations omitted) ; Astrum Fund I GP, LP v. Maracci , 2022 WL 252343, at *6 (Del. Ch. Jan. 27, 2022) (“In general, ‘[a]n arbitration award is not final if it reveals that the arbitra tors have yet to resolve each issue that the parties have empowered the arbitrators to decide.’” ( quoting PG Publ’g , 19 F.4th at 323) ).

54 Supra at note 43 (quoting Award at 25).

55 Award at 25.MHP Management, LLC v. DTR MHP Management, LLC, et al.

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for arbitration. 56 T he defendant s’ sole claim concerned whether the plaintiff’s
Unsuitability Determination had been made in good faith

. 57 That issue was decided
by the panel, which concluded that a determination of the legal effect of the 2017

Written Consent was irrelevant to the outcome of the matters properly before it

. 58 It

does not fall to this court to second

- guess that decision.

III. C ONCLUSION

For the reasons stated above, there is no basis to vacate the arbitration panel’s

Award . The plaintiff’s motion for summary judgment seeking an order confirming
the Award is granted and the defendant s ’ motion for summary judgment seeking to

vac ate the Award is denied.
Sincerely yours , /s/ Lori W. Will

Lori W. Will Vice Chancellor

56 Lyons Decl . Exs. K, L.

57 Lyons Decl. Exs. K, L.

58 Award at 25.