$2 Million Arbitration Award for Violation of Non-Solicitation and Exclusive Sales Territory Agreement
Heat Controller International, LLC (“International”), had a global, with an emphasis on Asia, supply and distribution network for air conditioning equipment that had been developed over the course of many years. In 2002, International entered into a contract with Heat Controller, Inc. (“HCI”) to supply air conditioning goods to HCI and to sell HCI’s goods outside the U.S. and Canada. The contract precluded International from selling HCI name-brand products in the U.S. to anyone other than HCI and granted International the exclusive right to sell HCI’s name-brand air conditioners outside the U.S. and Canada. The agreement also required the parties to treat the identity of their respective customers and vendors as confidential; required them to treat each other as fiduciaries as to confidential information; and prohibited both parties from soliciting, buying from and/or selling to each other’s former, current or prospective customers and/or vendors during the term of the contract and for three years after its expiration (the “non-solicitation clause”).
During the term of the contract, HCI obtained the names and contacts of International’s vendors in Asia. After several years of abiding by the contract, HCI determined it could reduce its costs by purchasing products directly from International’s vendors. Accordingly, HCI attempted to negotiate a new deal with International or buy out of the non-solicitation clause, but the parties failed to reach an agreement. Despite their failure to agree to rescind the non-solicitation clause, HCI began to directly solicit and purchase from International’s vendors, many of whom had been introduced to HCI by International. International claimed that HCI usurped International’s vendor network and that HCI knowingly sold products to a distributor who intended to and did sell in International’s territory. International filed an arbitration action HCI for these and other breaches in the Fall of 2009, with other counsel. HCI filed 21 counterclaims for breach of contract including a claim for violating the non-competition provision as to sales of product to one of HCI’s customers in the U.S.
The parties engaged in full discovery over the next year including several depositions, document productions, and several rounds of written discovery. Unhappy with the performance of its original counsel, International retained The Miller Law Firm, P.C. to take over its representation. The Miller Law Firm substituted into the case a mere 68 days before the arbitration hearing and on the eve of expert discovery. Shortly after retaining The Miller Law Firm, International obtained several favorable interim rulings which provided access to relevant documents and other discovery.
The arbitration hearing took place over the course of nine days in May 2011. The arbitration panel issued a final award on September 8, 2011, ruling in favor of International on its primary claims for breach of the non-solicitation clause and breach of the exclusivity clause, in the amount of $2,316,982. Of its original 21 counterclaims, HCI abandoned or lost all but one, with the tribunal awarding HCI $306,000 related to the sales of product to one of its customers. International obtained a net award in its favor in the amount of $2,010,982.00.