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Arbitrator’s Award

By: Derek Hawkins//January 22, 2018//

Arbitrator’s Award

By: Derek Hawkins//January 22, 2018//

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7th Circuit Court of Appeals

Case Name: Hyatt Franchising, LLC v. Shen Zhen New World I, LLC, et al.

Case No.: 17-2071

Officials: EASTERBROOK, ROVNER, and HAMILTON, Circuit Judges.

Focus: Arbitrator’s Award

Our first decision in this appeal affirmed a judgment enforcing an arbitrator’s award of approximately $9 million against Shen Zhen. 876 F.3d 900 (7th Cir. 2017). We concluded by observing that commercial parties that refuse to comply with an arbitrator’s decision presumptively must pay the attorneys’ fees that the prevailing party incurs in enforcement proceedings, in both the district court and the court of appeals. We thought, however, that it would be unnecessary to make an award as a sanction, because Shen Zhen had promised in the underlying contract to pay all of Hyatt’s fees. Just in case, however, we added that Hyatt may apply for a formal award.

Because Shen Zhen is unwilling to pay Hyatt’s fees as a matter of contract, we now order it to do so as a sanction for unnecessary and pointless litigation. Our initial opinion cited Continental Can Co. v. Chicago Truck Drivers Pension Fund, 921 F.2d 126, 128 (7th Cir. 1990), and 28 U.S.C. §1927. Continental Can requires the losing litigant to cover the winner’s legal expenses, and §1927 deals with the responsibility of counsel. The statute provides: “Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.” The scorched-earth tactics being employed by Shen Zhen’s counsel fall comfortably within that description

Shen Zhen’s lawyers (Bruce M. Cohen and Jonah D. King of Cohen & Lord in Los Angeles) have until January 26 to show cause why they should not be held jointly and severally responsible for these fees under §1927. Their response thus is due the same day as Shen Zhen’s. One final observation: Our mandate has issued, so the district court is free to entertain any application that Hyatt may make seeking an injunction against Shen Zhen’s duplicative litigation. A district court is entitled to prevent a litigant from trying to circumvent its orders, and an ongoing dispute about sanctions does not detract from that authority

Sanctions for Fees

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.

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