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Electricity Maine, LLC v. Freedom Logistics, LLC

United States District Court, D. Maine

August 22, 2014

ELECTRICITY MAINE, LLC, Plaintiff,
v.
FREEDOM LOGISTICS, LLC d/b/a FREEDOM ENERGY LOGISTICS, Defendant.

ORDER ON MOTION TO VACATE ARBITRATION AWARD

NANCY TORRESEN, District Judge.

This case comes before the Court on Plaintiff Electricity Maine, LLC's ("Electricity Maine") motion to vacate an arbitration award disposing of its contract dispute with Defendant Freedom Logistics, LLC d/b/a Freedom Energy Logistics ("Freedom Logistics") and remand the question of damages to a new arbitrator. (ECF No. 1). For the reasons that follow, the Court DENIES the Plaintiff's motion.

I. Background

Electricity Maine sells electricity to homes and small businesses. Freedom Logistics supplies electricity to commercial and industrial companies and provides energy-related consulting services. In July of 2011, Freedom Logistics and Electricity Maine entered into an Energy Management Services Agreement. Attach. 1 to Pl.'s Appl. to Vacate Arb. Award (the "Agreement") (ECF No. 1-1). Under the Agreement, Freedom Logistics would act as Electricity Maine's agent and representative in connection with Electricity Maine's intended licensure by the Maine Public Utilities Commission.[1] In exchange for Freedom Logistics' services, Electricity Maine agreed to pay Freedom Logistics a monthly fee based in part on Electricity Maine's power supply outputs, but in no event more than $25, 000 per month.

The parties initially drafted the Agreement to last for a term of one year, terminable by either party at any time, for any reason, upon thirty days' notice. Agreement ¶¶ 2, 3(A). However, the parties amended the initial draft to instead run for a term of three years. Agreement Amendment 12. The text of the amendment explained that Freedom Logistics sought the term change because while "[Freedom Logistics] is completely prepared to put its time and resources into working closely with Electricity Maine to build its residential supply effort, " it required "formal assurance that the relationship will not be ended prematurely." Agreement Amendment 12. The parties also amended the Agreement's termination provision, so that the three-year term could only be cut short due to: (1) the health, death or serious illness of principals; (2) unexpected financial downturn; (3) Electricity Maine's discontinuance of operations; or (4) adverse changes in business climate. Agreement Amendment 12.

Less than a year into the Agreement's three-year term, Electricity Maine sent Freedom Logistics a notice of termination, citing a potential unexpected financial downturn, an adverse change in business climate, and additional reasons not enumerated in the Agreement's termination provision (breach of contract, bad faith). Attach. 2 to Pl.'s Appl. to Vacate Arb. Award (ECF No. 1-2). In response, Freedom Logistics submitted a demand for arbitration in June of 2012, citing its rights under § 13 of the Agreement.[2] Attach. 3 to Pl.'s Appl. to Vacate Arb. Award (ECF No. 1-3).

The parties selected retired Maine Law Court Justice Paul L. Rudman to conduct the arbitration. Following some initial discovery, Justice Rudman issued a scheduling order, which stated in part:

The issues are bifurcated. In the first phase the Arbitrator will consider:

a. Whether the termination by [Electricity Maine] of its contract with [Freedom Logistics] was authorized by the agreement or otherwise, and
b. The amount of money owed by [Electricity Maine] to [Freedom Logistics] as of the date of the contract's termination.
In the second phase, to be scheduled at a time mutually agreeable to the parties, the Arbitrator will determine the amount, if any, due to [Freedom Logistics] as a result of [Electricity Maine's] termination of the Contract.

Attach. 8 to Pl.'s Appl. to Vacate Arb. Award (ECF No. 1-8).[3]

Following the "phase one" hearing, Justice Rudman found in favor of Freedom Logistics and determined that Electricity Maine's "attempted cancellation of the... Agreement... was without justification either by the explicit language of the contract or by any material breach of the contract by [Freedom Logistics]." Attach. 10 to Pl.'s Appl. to Vacate Arb. Award ¶ 1 (ECF No. 1-10). The arbitrator further stated that

[Freedom Logistics] is therefore entitled to damages and suggests that the proper measure of its damages is set forth in Section 236(1) RESTATEMENT (SECOND) CONTRACTS.[4] To the extent [Electricity Maine] asserts a different formula applies, [Electricity Maine] shall provide ...

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