The Eastern District of New York recently denied plaintiff’s request to vacate an arbitration award in a contractual dispute between Incredible Foods Group, LLC, (“IFG”) and Unifoods, S.A. de C.V., (“UF”) over a shared Sub-License Agreement (the “Agreement”). Pursuant to the Agreement, plaintiff and sub-licensee IFG were licensed to “manufacture, market, distribute and sell” a fruit beverage in various states throughout the United States. IFG identified an American manufacturer to manufacture the beverage, and sub-licensor UF approved the selection. Shortly after manufacturing commenced, the bottles containing the beverage bulged and leaked, affecting sales.

Once it was determined that the presence of yeast at the manufacturing site was interacting with the beverage recipe to cause the bottles to bulge, IFG commenced arbitration, alleging breach of contract over lost profits. The Arbitrator denied IFG’s claims in full because he found that IFG had failed to establish that any act or omission by UF breached the Agreement. IFG requested in district court that the award be vacated, arguing that the Arbitrator’s determination fails “to draw its essence from the agreement.” The district court noted that beyond the four grounds pursuant to 9 U.S.C. § 10(a) on which a court may vacate an arbitration award, the Second Circuit has “recognized a judicially-created ground, namely that an arbitral decision may be vacated when an arbitrator has exhibited a manifest disregard of law.” Nevertheless, the district court held that the arbitration award should stand because IFG had failed to demonstrate any of the five grounds for vacatur were implicated on these facts.

Incredible Foods Group, LLC v. Unifoods, S.A. de C.V., No. 14-cv-5207 (USDC E.D.N.Y. Sept. 29, 2015).