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Sabre GLBL, Inc. v. Shan

United States District Court, D. New Jersey

April 23, 2018

SABRE GLBL, INC. Plaintiff,
v.
MELODY SHAN, also known as SHAN MELODY XIAOYUN, Defendant.

          OPINION

          WILLIAM J. MARTINI, U.S.D.J.

         Plaintiff Sabre GLBL, Inc. (“Plaintiff” or “Sabre”) brought this contract and tort action against Defendant Melody Shan (“Defendant” or “Shan”) for breach of the parties' Employee Intellectual Property and Confidentiality Agreement (“EIPCA” or the “Agreement”) and for violating the New Jersey Trade Secrets Act (“NJTSA”).[1] The Court previously granted Sabre's motion to compel arbitration. Now pending before the Court are Sabre's motion to confirm the final arbitration award (the “Final Award”) and Shan's competing motion to vacate the award.[2] There was no oral argument. Fed.R.Civ.P. 78(b). For the following reasons, Shan's motion to vacate the arbitration award is GRANTED in part and DENIED in part, and Sabre's motion to confirm the arbitration award is GRANTD in part and DENIED in part. The Court confirms the Arbitrator's award of damages and injunctive relief but finds that he “exceeded his power” under Section 10 of the Federal Arbitration Act (“FAA”) by awarding attorneys' fees in direct contravention of the parties' Agreement, thereby subjecting that portion of the Award to vacatur.

         I. BACKGROUND

         A. Factual Background

         The following facts are drawn from the complaint and were largely recounted in the Court's April 2016 decision compelling arbitration. ECF No. 6. Defendant Shan, a New Jersey resident, was employed by Sabre Decision Technologies as a Consultant beginning in or around September 1996. In 2005, Shan was transferred to Sabre's Shanghai location to work as a Manager of Software Development. In cnnection with the transfer, Sabre and Shan entered into the EIPCA. In August 2013, Shan was transferred to Dallas Texas, whereupon the parties entered into a new version of this agreement (the “Employee Agreement” or “Agreement”). The Agreement substantively relates to confidentiality, non-solicitation, and non-competition, but three additional provisions of the Agreement are crucial to the pending motions. First, the Agreement states that “the State of Texas shall govern the construction, interpretation and enforcement of this Agreement.” Second, “any and all claims, disputes, or controversies arising out of or related to this Agreement, or breach of this Agreement, shall be resolved by binding arbitration . . . .” And third, the parties “shall bear their own attorneys' fees, and shall bear equally the expenses of the arbitral proceedings, including without limitation the fees of the arbitrator.” The Court will assess these provisions further below.

         Shortly after transferring to Dallas in 2013, Shan began working remotely from her home in New Jersey. In 2014, Shan terminated her employment with Sabre, and Shan proceeded to create her own competing business, Pi Solution, and in doing so breached the Employee Agreement. In November 2015, Sabre brought several contract and tort claims in New Jersey state court. ECF No. 1. The complaint asserted that Shan misappropriated its trade secrets and confidential information, including customer data, private employee information, and source code. Using the customer information, Shan allegedly solicited and offered services to existing and prospective Sabre customers, and the employee information was used to hire away a No. of Sabre employees. Lastly, Sabre asserts that Shan used the misappropriated source code to create a product similar to that developed and produced by Sabre.

         B. Arbitration

         Shan removed this action to federal court and subsequently moved to compel arbitration, which the Court granted on April 6, 2016. On January 6, 2018, Arbitrator Mark Whittington (the “Arbitrator”) issued an Interim Award. See Decl. Christine Amalfe, Ex. A. Applying Texas law (as directed by the choice-of-law provision), the Arbitrator found Shan liable for breaching the Agreement and for violating her fiduciary duty to Sabre. For the breach-of-contract claim, the Arbitrator awarded no damages but permanently enjoined Shan from “using or disclosing Sabre's confidential information, ” and further enjoined Shan from competing with Sabre for a six-month period ending March 12, 2018.[3] For Shan's breach of fiduciary duty, the Arbitrator awarded Sabre a $200, 000 salary disgorgement and $1, 173, 318 in “head-start” damages.[4] Final Award 11, ECF 18-3.

         Next, although Texas law governs the contract itself, the Arbitrator found Shan separately liable for misappropriating trade secrets in violation of the NJTSA. The Arbitrator declined to award additional damages under the NJTSA because they would have been duplicative of those already awarded under Texas law for breach of Shan's fiduciary duty. Importantly, however, NJTSA contains a fee-shifting provision. N.J.S.A. § 56:15-6. Indeed, the Arbitrator's Final Award, issued on February 12, directed Shan to pay “reasonable and necessary attorneys' fees related to Shan's violation of the NJTSA in the amount of $450, 000.00.” Shan's pending motion to vacate argues, inter alia, that the decision to award attorneys' fees under a New Jersey statute contradicted the Agreement's choice-of-law provision as well as the provision in the Agreement stating that each party would bear its own attorney's fees. On February 20, 2018, Sabre moved to confirm the Final Award. Shan has moved to vacate.

         II. LEGAL STANDARD

         Arbitration awards are subject to vacatur only in “exceedingly narrow circumstances.” Dluhos v. Strasberg, 321 F.3d 365, 370 (3d Cir. 2003) (internal quotations omitted). See Spinetti v. Service Corp Intern., 324 F.3d 212 (3d Cir. 2003) (discussing the “liberal federal policy favoring arbitration agreements.”). Section 10 of FAA provides an exclusive of lists of grounds for vacatur:

(1) where the award was procured by corruption, fraud, or undue means;
(2) where there was evident partiality or corruption in the arbitrators;
(3) where the arbitrators were guilty of misconduct in refusing to postpose the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by ...

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