Court Opinion

ID: 7798344
Source: CourtListenerOpinion
Date Created: 2022-08-05 18:00:36.478332+00
Date Added: 2024-06-11T16:28:47.377055
License: Public Domain

Case: 21-30225    Document: 00516420817        Page: 1   Date Filed: 08/05/2022

          United States Court of Appeals
               for the Fifth Circuit                              United States Court of Appeals
                                                                           Fifth Circuit

                                                                         FILED
                                                                    August 5, 2022
                                No. 21-30225
                                                                    Lyle W. Cayce
                                                                         Clerk

   Paradies Shops, L.L.C.,

                                         Plaintiff—Appellant/Cross-Appellee,

                                    versus

   Brothers Petroleum, L.L.C.,

                            Defendant—Appellee/Cross-Appellant,
   ______________________________

   Brothers Petroleum, L.L.C.,

                                         Plaintiff—Appellee/Cross-Appellant,

                                    versus

   Paradies Shops, L.L.C.,

                                       Defendant—Appellant/Cross-Appellee.

                 Appeal from the United States District Court
                    for the Eastern District of Louisiana
                  USDC Nos. 2:20-CV-1278, 2:20-CV-3260

   Before Richman, Chief Judge, and Higginbotham and Elrod,
   Circuit Judges.
Case: 21-30225       Document: 00516420817             Page: 2      Date Filed: 08/05/2022

                                        No. 21-30225

   Per Curiam:*
          Paradies Shops (“Paradies”) plans and operates retail concessions at
   airports. Brothers Petroleum (“Brothers”) is a convenience store in the New
   Orleans metro area. Paradies dropped Brothers as one of its proposed brands
   in the retail space for the Louis Armstrong New Orleans International
   Airport (“the airport”). Brothers demanded arbitration while Paradies
   sought a declaration that there was no arbitration agreement and moved for a
   preliminary injunction under 28 U.S.C. § 1651 pending trial of that decision.
   There was no trial. In denying the injunction, the district court found there
   was an enforceable contract to arbitrate and refused to stay the arbitration.
   The district court then declined to revisit the issue of whether there was an
   agreement to arbitrate after arbitration concluded. Accordingly, we remand
   so that the district court can determine whether there was an arbitration
   agreement.
                                              I.
          In 2016, the airport solicited bids for concessions for a new terminal.
   Paradies began negotiating an agreement with Brothers to include a Brothers
   convenience store in its bid to the airport. Paradies provided Brothers the
   following documents: a letter of authorization (“LOA”), an addendum to the
   LOA (“Addendum”), and a non-disclosure agreement. “Exhibit B Form of
   License Agreement” from the Addendum included an arbitration provision. 1
           In October 2016, Paradies emailed an initial version of the documents
   to Brothers requesting immediate signature for all the documents aside from

           *
            Pursuant to 5th Circuit Rule 47.5, the court has determined that this
   opinion should not be published and is not precedent except under the limited
   circumstances set forth in 5th Circuit Rule 47.5.4.
           1
             The arbitration provision required that “[i]f any dispute arises under this
   Agreement, the parties shall seek to resolve any such dispute between them . . . through
   binding arbitration in New Orleans, Louisiana.”

                                              2
Case: 21-30225       Document: 00516420817            Page: 3     Date Filed: 08/05/2022

                                       No. 21-30225

   Exhibit B. Exhibit B was marked as “[r]eview and comment but not required
   to be submitted with our proposal.”
          On November 1, Brothers signed all the documents, including Exhibit
   B. That same day, Karen Suttle, in-house counsel for Paradies, emailed
   Brothers clarifying that “we won’t execute the License now—only if we win.
   The LOA and Addendum (which includes the license as a template) are the
   controlling documents.” A third-party who was facilitating communications
   between the parties requested that Suttle “[h]old the License agreement
   until Paradies win[s] the bid but a blank copy should be attached to the
   LOA.” Suttle then provided the third-party with corrected copies of the
   documents including the “Addendum to LOA (fully executed with form of
   negotiated License attached).” Paradies won the airport bid in 2017. Over the
   next nearly two years, Paradies and Brothers continued to work on the layout
   of the convenience store.
          In 2019, Paradies learned that two Brothers principals were indicted
   on six dozen federal criminal counts, including charges related to their
   operation of the Brothers stores. Suttle wrote Brothers informing them that
   Paradies decided “to rescind the licensing opportunity set forth in the Letter
   of Authorization and associated Addendum dated October 31, 2016.”
   Brothers then filed a demand for arbitration pursuant to Exhibit B. In July
   2019, Paradies filed a declaratory judgment action arguing that there was no
   arbitration agreement. 2 In May 2020, Paradies sought to enjoin the
   arbitration proceeding pending the resolution of the declaratory judgment

          2
             The action was originally filed in Georgia state court. The action was then
   removed to the United States District Court for the Northern District of Georgia and
   transferred to the United States District Court for the Eastern District of Louisiana.

                                             3
Case: 21-30225           Document: 00516420817              Page: 4       Date Filed: 08/05/2022

                                            No. 21-30225

   action. After a hearing, the district court denied Paradies’s motion for
   injunctive relief.
           Because the final arbitration hearing was set for July 2020, Paradies
   appealed the district court’s denial of injunctive relief. This Court dismissed
   the appeal for lack of jurisdiction. The arbitration proceeded, and the
   arbitrator entered a final award in favor of Brothers in October 2020. In
   district court, Brothers moved to confirm the arbitration award while
   Paradies moved to vacate the arbitration award. The district court modified
   the arbitrator’s final award in part. Both parties appealed.
           Paradies argues that the district court erred in not granting Paradies’s
   motion to vacate as there was no arbitration agreement. Brothers argues that
   the district court erred in modifying the arbitrator’s final award and in
   considering a letter from the airport’s general counsel suggesting that the
   airport would not allow Paradies to use Brothers’ “marks,” or logos and
   branding, as the letter was not presented in the arbitration proceeding. 3
                                                  II.
           In reviewing the district court’s denial of a motion to vacate an
   arbitration award, we review de novo questions of law. 4 We review findings
   of fact for clear error. 5

           3
            The district court modified the award “on the grounds that specific performance
   [was] impracticable,” excluding the portions of the arbitrator’s award requiring Paradies
   to use Brothers’ marks in the branded airport shop and to pay the license fee from June
   2020 until October 2026.
           4
               Prescott v. Northlake Christian Sch., 369 F.3d 491, 494 (5th Cir. 2004).
           5
               Id.

                                                   4
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                                           No. 21-30225

                                                III.
           Because it is not clear whether there is an arbitration agreement, we
   remand for the limited purpose that the district court make this
   determination.
           Under the Federal Arbitration Act (FAA), if the party against
   arbitration puts “the making of the arbitration agreement . . . in issue, the
   court shall proceed summarily to the trial thereof. If no jury trial be demanded
   by the party alleged to be in default . . . the court shall hear and determine
   such issue.” 6 While we have “not established the precise showing a party
   must make” to put the making of the arbitration agreement in issue, a party
   “must make at least some showing that under prevailing law, he would be
   relieved of his contractual obligation to arbitrate if his allegations proved to
   be true,” and “he must produce at least some evidence to substantiate his
   factual allegations.” 7
           Paradies has met this burden. First, the contractual language in the
   LOA and Addendum suggest that the parties planned to execute a definitive
   license agreement in the future and that Exhibit B was provided merely as an
   example license agreement. 8 Second, Suttle testified that Paradies

           6
               9 U.S.C. § 4.
           7
              Dillard v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 961 F.2d 1148, 1154 (5th Cir.
   1992) (citation omitted). See also Chester v. DIRECTV, L.L.C., 607 F. App’x 362, 364–65
   (5th Cir. 2015) (per curiam) (finding that a party met this burden when he introduced an
   affidavit claiming that he did not remember signing an arbitration agreement and that, had
   he been given an arbitration agreement, he would have not signed it unless he was
   threatened with termination).
           8
             The Addendum provides that “If Paradies is awarded a master lease . . . then
   Paradies and Licensor will negotiate in good faith a definitive product supply and license
   agreement (the ‘License Agreement’).” The Addendum also referred to Exhibit B as “the
   form of License Agreement to be utilized by the parties.”

                                                  5
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                                         No. 21-30225

   “deliberately did not offer [the license agreement] contract to Brothers.”
   Finally, Suttle sent multiple emails to Brothers during the document
   exchange suggesting that the parties intended to formally execute a license
   agreement at a later time.
           The district court’s hearing was insufficient to determine whether
   there was an arbitration agreement after Paradise put the making of an
   arbitration agreement in issue. The district court only considered “the
   materials that [the parties] supplied . . . in connection with the original
   complaint, the motion for injunctive relief, and the responses as well as
   replies.” Additionally, the district court failed to revisit this issue later as it
   believed it already determined that there was an arbitration agreement at the
   preliminary injunction hearing. This hearing fell short of the trial
   contemplated by the FAA after a party puts the making of an arbitration
   agreement in issue. 9
                                             IV.
           Accordingly, we REMAND for the limited purpose that the district
   court determine whether there was an agreement to arbitrate.

           9
             See 9 U.S.C. § 4. For example, in Chester, after the party put the making of the
   arbitration agreement in issue, the district court held a bench trial to determine whether
   there was an arbitration agreement, considering both submitted evidence as well as
   testimony from witnesses. Chester, 607 F. App’x at 365–66.

                                               6