SMARTSKY NETWORKS, LLC v. WIRELESS SYSTEMS SOLUTIONS, LLC

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

SMARTSKY NETWORKS, LLC, a )

Delaware limited liability )

company, )

)

Plaintiff, )

)

v. ) 1:20-cv-000834

)

WIRELESS SYSTEMS SOLUTIONS, )

LLC, a Delaware limited )

liability company; DAG WIRELESS )

LTD, an Israeli company; DAG )

WIRELESS USA, LLC, a North )

Carolina limited liability )

company; LASLO GROSS, a North )

Carolina resident; SUSAN GROSS, )

a North Carolina resident; )

DAVID D. GROSS, a resident of )

Israel )

)

Defendants. )

)

MEMORANDUM OPINION AND ORDER

THOMAS D. SCHROEDER, Chief United States District Judge.

This matter comes before the court following an American

Arbitration Association (“AAA”) Tribunal’s (“Tribunal”) final

Arbitration Award issued on October 1, 2021 (the “Final Award”).

(Doc. 166-1.) Plaintiff SmartSky Networks, LLC (“SmartSky”) filed

the present Motion to Confirm Arbitration Award and for Entry of

Final Judgment pursuant to the Federal Arbitration Act (“FAA”), 9

U.S.C. § 9. (Doc. 166.) Defendants DAG Wireless, Ltd., DAG

Wireless, USA, and David Gross (collectively “the DAG Defendants”)

then moved to vacate the arbitration award pursuant to FAA § 10(a).

(Doc. 167.) Separately, Defendants Wireless Systems Solutions,

LLC (“Wireless Systems”), Laslo Gross, and Susan Gross

(collectively “the Wireless Systems Defendants”) filed a similar

Motion to Vacate and Modify the Final Arbitration Award. (Doc.

170.) The parties have also separately filed motions to seal

certain documents. (Docs. 177, 181.) In addition, the DAG

Defendants have filed a Motion to Dismiss or Compel Arbitration

dated June 30, 2021. (Doc. 160.)

For the reasons to follow, the motion to confirm the

Arbitration Award will be granted, the motions to vacate will be

denied, and because the arbitration has been completed, the motion

to dismiss will be denied as moot.

I. BACKGROUND

SmartSky develops air-to-ground wireless communications

networks. (Doc. 5 ¶¶ 9, 23.) Wireless Systems, controlled by

Susan and Laslo Gross, focuses on developing cellular capabilities

and producing components for use in wireless transmissions. (Id.

¶¶ 10, 30-31; Doc. 145 at 1-2.) Wireless Systems entered several

agreements with SmartSky to develop and build proprietary

components for use in SmartSky’s communications network. Central

to this case is the parties’ Teaming Agreement, which set forth

the contractual terms between SmartSky and Wireless Systems. (Doc.

5 ¶¶ 34-38, 44; Doc. 104 at 3.) During that same period, Susan

and Laslo Gross, along with their son David Gross, established DAG

Wireless Ltd., which is engaged in developing technology for

wireless communication. (Doc. 5 at ¶¶ 39-42.) This business

relationship between SmartSky and Wireless Systems soon soured,

and on September 10, 2020, SmartSky filed this lawsuit against the

Wireless Systems and DAG Defendants alleging ongoing breaches of

the intellectual property and confidentiality provisions of the

Teaming Agreement as well as misappropriation of trade secrets.

(Docs. 1, 5.)

Soon thereafter, pursuant to the Teaming Agreement -- which

required “disputes relating to or arising under this agreement” to

be resolved by binding arbitration -- SmartSky filed a Statement

of Claims with the AAA on September 14, 2020, asserting claims for

breach of contract. (Doc. 166 at 2.) On September 30, 2020,

Wireless Systems filed counterclaims against SmartSky in the

arbitration for various alleged breaches of the parties’

agreements and breach of the implied contractual duty of good faith

and fair dealing. (Id. at 3.) Wireless Systems later amended its

counterclaims to include claims against SmartSky for unfair and

deceptive trade practices and fraudulent inducement to contract.

(Id.)

On December 11, 2020, Wireless Systems filed a brief with the

Tribunal arguing that all claims and counterclaims between the

parties were subject to arbitration. Agreeing with Wireless

Systems, the Tribunal entered Procedural Order 8, stating that the

Teaming Agreement required all claims and counterclaims between

SmartSky and Wireless Systems be arbitrated. (Doc. 166-2.) On

January 13, 2021, following Procedural Order 8, the parties agreed

to consolidate all pending claims and counterclaims into the

arbitration, and all Defendants agreed to submit to the

jurisdiction of the Tribunal and to be bound by the arbitration.

(Doc. 166-1 at ¶ 48; Doc. 166-3.) On January 19, 2021, SmartSky

amended its claims against the Defendants to include claims for

breach of the Teaming Agreement, breach of non-disclosure

agreements between SmartSky, Wireless Systems, and DAG,

misappropriation of trade secrets, unfair and deceptive trade

practices, false advertising under the Lanham Act, and alter ego

and estoppel liability against DAG as an alter ego of Wireless

Systems. (Doc. 166-1 at ¶ 50.)

On January 18, 2021, the Wireless Systems Defendants moved to

stay this case pending arbitration. (Doc. 144.) On March 11,

2021, this court stayed the case pending arbitration, denied a

motion to dismiss filed by DAG USA, and denied without prejudice

a motion filed by SmartSky seeking a preliminary injunction because

arbitration was rapidly approaching. (Doc. 149.) On January 22,

2021, the Tribunal issued Procedural Order 11, which set forth an

expedited discovery process for the arbitration. (Doc. 166-1 at

¶ 53.) Discovery resulted in the exchange of “hundreds of

thousands of pages of documents” and more than ten depositions,

including those of expert witnesses. (Doc. 166 at 5.)

The Tribunal scheduled the final arbitration hearing to begin

on May 10, 2021. (Doc. 166-1 at ¶ 77.) However, by as late as

April 14, the Defendants had not paid their share of deposits to

the AAA for the costs of the arbitration. (Id. at ¶ 70.) SmartSky

advanced the costs and moved to strike or dismiss Wireless Systems’

counterclaims with prejudice because of nonpayment. (Id.) In

response, Wireless Systems withdrew all counterclaims against

SmartSky. (Id. at ¶ 72.) The Tribunal then issued Procedural

Order 24 directing Wireless Systems to advise the Tribunal whether

the withdrawal of its counterclaims was with or without prejudice.

(Id. at ¶ 74; Doc. 166-4.)

Somewhat confusingly, Wireless Systems advised the Tribunal

that withdrawal of its counterclaims “was not with or without

prejudice.”1 (Doc. 166-1 at ¶ 75.) This prompted the Tribunal to

1 The practical effect of Wireless Systems’ withdrawal of its

counterclaims is clear. The Teaming Agreement required all claims

arising from the agreement to be heard in arbitration as the Tribunal

determined. (Doc. 166-4 at ¶ 7.) If Wireless Systems were allowed to

withdraw its counterclaims without prejudice, it would then be able to

attempt to revive those claims before an entirely different arbitration

panel, thus restarting the arbitration process anew. This scenario would

defeat the purpose of arbitration, which is “the quick resolution of

disputes and the avoidance of the expense and delay associated with

litigation.” Apex Plumbing Supply, Inc. v. U.S. Supply Co., Inc., 142

F.3d 188, 193 (4th Cir. 1998). Moreover, Wireless Systems does not

contend that the Tribunal lacked the legal authority to enter legal

determinations such as this, which the Tribunal was clearly authorized

to do. See Rule 33 AAA Commercial Rule (“The arbitrator may allow the

filing of and make rulings upon a dispositive motion”); Sherrock Bros.,

Inc. v. DaimlerChrysler Motors Co., LLC, 260 F. App’x 497, 502 (3d Cir.

2008) (noting that arbitration panels can make determinations on

issue Procedural Order 25, which declared that, because the Teaming

Agreement did not contemplate “serial or overlapping

arbitrations,” Wireless Systems’ “withdrawal of its counterclaims

was thus effectively with prejudice.” (Doc. 166-4 at ¶ 7.) The

Tribunal stated plainly, “[t]his arbitration, as [Wireless

Systems] itself argued at the start of these proceedings, is the

sole mechanism for deciding such disputes.” (Id.)

Arbitration then proceeded as scheduled. Between May 10 and

May 21, 2021, the parties participated in in-person arbitration in

Charlotte, North Carolina, presenting over ten days of evidence,

348 exhibits and thirteen witnesses, including four experts. (Doc.

166 at 6; Doc. 166-1 at ¶ 77-79.) At the close of arbitration on

May 21, the Tribunal entered an order “temporarily restraining

Respondents and each of them from the conduct set forth in the

Proposed Interim Injunction Order” filed by SmartSky. (Id. at

¶ 81.) On June 7, 2021, the Tribunal advised that the May 21 Order

would remain in effect until it was superseded by the Final Award.

(Id. at ¶ 83.) In the following months, all parties submitted

post-hearing briefing, exhibits, applications for attorneys’ fees

and costs, and responses to those applications. (Id. at ¶ 87, 88-

89.)

dispositive motions, including on motions for summary judgment, and

collecting cases). Therefore, the Tribunal’s determination that

Wireless Systems’ dismissal was with prejudice was within its purview.

On October 1, 2021, the Tribunal issued the Final Award

denying in part and granting in part SmartSky’s claims. (Doc.

166-1 at ¶ 347.) The Final Award is 81 single-spaced pages

consisting of 427 findings of fact and conclusions of law. On

SmartSky’s claim for breach of contract, the Tribunal awarded

SmartSky $10,000,000 against Wireless Systems. (Id. at ¶ 276.)

The Tribunal awarded the following relief against all Defendants

jointly and severally:

1. $1,963,676.59 for legal fees and expenses

2. $525,215.45 for AAA arbitration costs

3. $60,000 in sanctions for violating interim Orders of the

Tribunal

(Id. at ¶¶ 353-424, 427(B)-(C).) The Tribunal ordered these sums

to be paid on or before fifteen (15) business days from the date

of the Final Award, or by October 22, 2021. (Id. at ¶ 427(C)(2).)

The Tribunal also ordered that within the same time period, the

Defendants “ensure that the Federal Communications Commission

(“FCC”) expeditiously transfers control of any and all FCC

certification grants with grantee code 2AWXX” to SmartSky and

“destroy all ‘Confidential Information’ of SmartSky Networks, LLC,

‘SSN IP,’ and ‘Developed IP’ (as those terms are defined in the

Teaming Agreement . . . ) currently in their possession . . . and

provide written certification” to SmartSky that the material was

destroyed. (Id. at ¶ 427(A)(3).)

In addition, the Tribunal awarded a permanent injunction

against the Defendants, enjoining them and any “entities acting in

concert or participation with them” as well as any successors or

assigns from:

a. making, causing to be made, developing, certifying or

attempting to certify with any government agency, using,

copying, modifying, marketing, promoting, offering to

sell, selling, or distributing any or all “Product” or

“Developed IP” (as those terms are defined in the Teaming

Agreement executed by SmartSky Networks, LLC and

Wireless Systems Solutions, LLC) developed or produced

by Wireless Systems Solutions, LLC, DAG Wireless Ltd.,

and/or DAG Wireless USA, LLC pursuant to or in connection

with any agreement executed between by SmartSky

Networks, LLC and Wireless Systems Solutions, LLC, or

derivatives of such “Product” or “Developed IP,” for use

within the “SSN Field of Use” (as that term is defined

in the Teaming Agreement executed by SmartSky Networks,

LLC and Wireless Systems Solutions, LLC);

b. making or causing to be made any use or disclosure of

any or all “Confidential Information” of SmartSky

Networks, LLC, “SSN IP,” or “SSN Tools” (as those terms

are defined in the Teaming Agreement executed by

SmartSky Networks, LLC and Wireless Systems Solutions,

LLC), or derivatives thereof;

c. making or causing to be made any use or disclosure of

information of SmartSky Networks, LLC subject to a non-

disclosure agreement which they, or any of them,

executed with SmartSky Networks, LLC, including that

Non-Disclosure Agreement dated January 15, 2019;

d. passing off all or any part of SmartSky Networks, LLC’s

“Confidential Information,” “Product,” “SSN IP,” “SSN

Tools,” or “Developed IP” (as those terms are defined in

the Teaming Agreement executed by SmartSky Networks, LLC

and Wireless Systems Solutions, LLC), including

derivatives thereof, as the property of Wireless Systems

Solutions, LLC, DAG Wireless Ltd., DAG Wireless USA,

LLC, Laslo Gross, Susan Gross, and/or David D. Gross,

including their successors and assigns; and/or

e. engaging in any other false or misleading commercial

advertising, promotions, or representations, including

but not limited to statements made directly or

indirectly through the use of pseudonyms or proxies, on

websites, in press releases, or in interviews, which:

i. state or suggest that Wireless Systems Solutions,

LLC, DAG Wireless Ltd., DAG Wireless USA, LLC,

Laslo Gross, Susan Gross, and David D. Gross, or

any of them or their successors or assigns, have

developed, have obtained regulatory certification

of, or have or will have available for purchase or

sale any air-to-ground wireless communications

system or product that uses or is based upon

SmartSky Networks, LLC’s “Confidential

Information,” “Product,” “SSN IP,” “SSN Tools,” or

“Developed IP,” or derivatives thereof, in the “SSN

Field of Use” (as those terms are defined in the

Teaming Agreement executed by SmartSky Networks,

LLC and Wireless Systems Solutions, LLC);

ii. attempt to pass off or represent any “Confidential

Information” of SmartSky Networks, LLC, “SSN IP,”

“SSN Tools,” “Developed IP,” or “Product” (as those

terms are defined in the Teaming Agreement executed

by SmartSky Networks, LLC and Wireless Systems

Solutions, LLC), or derivatives thereof, as

developed by or belonging to Wireless Systems

Solutions, LLC, DAG Wireless Ltd., DAG Wireless

USA, LLC, Laslo Gross, Susan Gross, and/or David D.

Gross, or their successors or assigns; and/or

iii. disparage SmartSky Networks, LLC or attempt to

discourage any person or entity from doing business

with SmartSky Networks, LLC.

(Id. at ¶¶ 427(A)(2)-(2)(e)(iii).)

SmartSky filed the present motion to confirm the Final Award

and enter final judgment pursuant to the FAA, 9 U.S.C. § 9. (Doc.

166.) The DAG Defendants and the Wireless Systems Defendants move

to vacate the Final Award (Docs. 167, 170.)

II. ANALYSIS

A party moving to vacate a final arbitration award faces a

“heavy burden.” Three S Del., Inc. v. DataQuick Info. Sys., Inc.,

492 F.3d 520, 527 (4th Cir. 2007). The scope of judicial review

for an arbitrator’s decision “is among the narrowest known at law

because to allow full scrutiny of such awards would frustrate the

purpose of having arbitration at all — the quick resolution of

disputes and the avoidance of the expense and delay associated

with litigation.” Apex Plumbing Supply, Inc. v. U.S. Supply Co.,

Inc., 142 F.3d 188, 193 (4th Cir. 1998). This court “is limited

to determine whether the arbitrators did the job they were told to

do — not whether they did it well, or correctly, or reasonably,

but simply whether they did it.” Remmey v. PaineWebber, Inc., 32

F.3d 143, 146 (4th Cir. 1994) (internal quotations omitted). The

FAA provides only four limited grounds on which a court may vacate

an arbitration award: (1) where the award was procured by

corruption, fraud, or undue means; (2) where there was evident

partiality or corruption in the arbitrators, or either of them;

(3) where the arbitrators were guilty of misconduct in refusing to

postpone the hearing, upon sufficient cause shown, or in refusing

to hear evidence pertinent and material to the controversy; or of

any other misbehavior by which the rights of any party have been

prejudiced; or (4) where the arbitrators exceeded their powers, or

so imperfectly executed them that a mutual, final, and definite

award upon the subject matter submitted was not made. 9 U.S.C.

§ 10(a). The Defendants do not allege the Final Award was procured

by corruption or that the Tribunal itself was corrupt, but

principally that the Tribunal exceeded its powers.

Beyond the FAA, common law grounds for vacating a final

arbitration award “include those circumstances where an award

fails to draw its essence from the contract, or the award evidences

a manifest disregard of the law.” Patten v. Signator Ins. Agency,

Inc., 441 F.3d 230, 234 (4th Cir. 2006). This high bar is reached

only where the disputed legal principle is “clearly defined” and

“not subject to reasonable debate,” and “the arbitrator refused to

apply that legal principle.” Jones v. Dancel, 792 F.3d 395, 402

(4th Cir. 2015). A district court may not overturn an arbitration

award “just because it believes, however strongly, that the

arbitrators misinterpreted the applicable law.” Wachovia Sec.,

LLC v. Brand, 671 F.3d 472, 478 n. 5 (4th Cir. 2012). As the

parties seeking relief from the Final Award, the Defendants “bear[]

the heavy burden of showing that the arbitrator acted outside the

scope of authority granted by the parties in their contract, by

issuing an award that simply reflects his own notions of economic

justice.” Jones, 792 F.3d at 405 (internal quotations omitted);

Jih v. Long & Foster Real Estate, Inc., 800 F. Supp. 312, 317 (D.

Md. 1992) (noting “[t]he party moving to vacate the award bears

the burden of proof and the showing required to avoid summary

confirmation is high” (internal quotations omitted)). Absent a

showing of the four limited grounds for vacating the award pursuant

to the FAA or a showing of a manifest disregard of the law, a

district court may not vacate an arbitration award. See 9 U.S.C.

§ 9; Three S Del., Inc. v. DataQuick Info. Sys., Inc., 492 F.3d

520, 527 (4th Cir. 2007).

With these high burdens in mind, the court now addresses the

pending motions, beginning with those seeking to alter or vacate

the Final Award.

A. DAG Defendants’ Motion to Vacate Final Award

The DAG Defendants argue the Tribunal exceeded its authority

in finding DAG liable for SmartSky’s attorneys’ fees, because DAG

cannot be liable for: 1) attorneys’ fees incurred before DAG was

a party to the arbitration; 2) unallocated fees which contain fees

for claims against other parties; or 3) attorneys’ fees where no

damages were awarded against DAG. (Doc. 168 at 5-7.)

Additionally, the DAG Defendants argue the Tribunal exceeded its

authority in finding DAG liable for SmartSky’s legal costs and

expenses as well as in assessing the costs of arbitration against

DAG. (Id. at 9-11.) SmartSky responds, arguing that the Tribunal

did not exceed its authority. (Doc. 184 at 4.)

1. Attorneys’ fees before DAG was a party to the

Arbitration

The DAG Defendants argue that DAG is not liable for attorneys’

fees assessed prior to January 13, 2021, when the DAG Defendants

were first included as parties to the arbitration. (Doc. 168 at

5.) According to the DAG Defendants, “[i]t goes without saying

that DAG can not be responsible for attorneys’ fees of [SmartSky]

in the arbitration prior to DAG being parties to the Arbitration.”

(Id.) SmartSky responds noting the “Tribunal had substantial

discretion to award fees, and this Court is not free to substitute

its judgment for that of the arbitrators.” (Doc. 184 at 6.)

Pursuant to AAA Rule-47(a), “the arbitrator may grant any

remedy or relief that the arbitrator deems just and equitable and

within the scope of the agreement of the parties.” It is not for

this court to question the allocation of attorneys’ fees by the

Tribunal. See Wells Fargo Advisors, LLC v. Watts, 540 F. App’x

229, 232 (4th Cir. 2013) (noting “a court must defer to the

arbitrators’ factual findings on attorneys’ fees even if the

arbitrators do not explain a basis for the precise amount.”)2 This

is especially true where the Tribunal considered and rejected the

same arguments the DAG Defendants provide in their motion to

vacate. See Wells Fargo Advisors, LLC v. Watts, 858 F.Supp.2d

591, 599 (W.D.N.C. 2012) (deferring to arbitrators as the “issue

raised by Watts in support of his motion to vacate was raised

2 While the Fourth Circuit does not ordinarily accord precedential value

to its unpublished opinions, it has noted that they “are entitled only

to the weight they generate by the persuasiveness of their reasoning.”

See Collins v. Pond Creek Mining Co., 468 F.3d 213, 219 (4th Cir. 2006)

(citation omitted).

before and decided by the panel.”) rev’d in part on other grounds,

540 F. App’x 229 (4th Cir. 2013).

Specifically, the Tribunal found that the DAG entities

“operated as alter egos of Respondent [Wireless Systems].” (Doc.

166-1 at ¶ 385.) No Defendant disputes this “alter ego” finding

that DAG and Wireless Systems are “one and the same operational

enterprise” and the DAG Defendants are “mere instrumentalities of

[Wireless Systems].” (Id. at ¶ 300.) Moreover, the Tribunal held

all Defendants jointly and severally liable for the underlying

misconduct that sparked this dispute and awarded attorneys’ fees

as it deemed proper. (See id. at ¶ 259) (“[T]he Tribunal holds

that [Wireless Systems] (and any alter egos), . . . breached the

restrictions in the Teaming Agreement.”) Holding an alter ego

liable for the same attorneys’ fees as the parent enterprise fails

to rise to the threshold of requiring vacatur of the Final Award.

The DAG Defendants have not alleged any facts showing, nor do the

Tribunal’s holdings evince, any corruption, misconduct, abuse of

power, or manifest disregard for the law. As such, there is no

basis upon which to vacate the Final Award’s allocation of

attorneys’ fees.

2. Unallocated fees

The DAG Defendants next argue that the Tribunal erroneously

awarded $1,496,473.65 in attorneys’ fees, “despite [SmartSky] not

specifically allocating its time in pursuit of any claim against

DAG or any other party.” (Doc. 168 at 6.) After receiving

SmartSky’s requested attorneys’ fees of $1,731,147.50, the

Tribunal then reduced that amount based on certain fees it deemed

unreasonable, resulting in a fee amount of $1,662,748.50. (Doc.

166-1 at ¶ 389.) The Tribunal then imposed a ten percent reduction

in that amount because the performance breach claims “are not

subject to statutory fee-shifting and involved development and

presentation of certain evidence, even if quite limited, that did

not overlap with the statutory claims.” (Id. at ¶ 398.) According

to the DAG Defendants, “the Tribunal was required to apportion

fees in pursuit of [SmartSky’s] claims,” because the breach of

contract claim against Wireless Systems and the statutory claims

against all Defendants were not derived from a common nucleus of

facts. (Doc. 168 at 6.) SmartSky responds by noting that the

Tribunal did find that the claims arose from a common nucleus of

facts, the Tribunal is in the best position to determine the

allocation of attorneys’ fees, and its “decision is due significant

deference.” (Doc. 184 at 10.)

Again, the DAG Defendants have failed to allege any

corruption, abuse of power, or manifest disregard for the law.

The Tribunal found that there was a “quite limited” amount of

evidence presented for the breach of contract claims that did not

overlap with the statutory claims. (Doc. 166-1 at ¶ 398.) In an

effort to account for that limited amount, the Tribunal reduced

the overall award of attorneys’ fees by ten percent. (Id.) In

reaching that decision, the Tribunal considered “the record before

[it] and all circumstances of the case, including [its] own review

of how the evidence and arguments submitted by the parties related

to individual counts stated by [SmartSky.]” (Id.) This

discretionary reduction in attorneys’ fees is within the purview

of the Tribunal and is accorded significant deference. See Jones

v. Dancel, 792 F.3d 395, 405 (4th Cir. 2015) (rejecting an argument

that an arbitrator impermissibly disregarded the law in failing to

award attorneys’ fees, because “[w]hile it may be debatable whether

the arbitrator performed this task ‘well,’ the record in this case

shows that the arbitrator undertook careful analysis of the

applicable legal principles”); Okwara v. Dillard Dep’t Stores,

Inc., 525 S.E.2d 481 (N.C. Ct. App. 2000) (noting that under North

Carolina law, a trial court need not apportion attorneys’ fees

where the plaintiff’s claims were inextricably interwoven because

“much of counsel’s time will be devoted generally to the litigation

as a whole, making it difficult to divide the hours expended on a

claim-by-claim basis.”)

For these reasons, the DAG Defendants have not carried their

heavy burden in showing that the Tribunal exceeded its authority

in declining to apportion attorneys’ fees.

3. Attorneys’ fees absent damages

The DAG Defendants’ third alleged ground for vacating the

Final Award is that DAG cannot be liable for any attorneys’ fees

because no monetary damages were awarded against DAG. (Doc. 168

at 7.) According to the DAG Defendants, the Tribunal “lacked any

authority to find that [SmartSky] was the prevailing party on its

[Unfair Deceptive Trade Practices Act] claim where it was not

awarded damages.” (Id.) SmartSky responds by contending the

Unfair Deceptive Trade Practices Act (“UDTPA”) does not require an

award of monetary damages for a party to be recognized as the

prevailing party and the Tribunal’s decision is thus consistent

with North Carolina law. (Doc. 184 at 12.)

The UDTPA authorizes awards of attorneys’ fees as follows:

In any suit instituted by a person who alleges that the

defendant violated G.S. 75-1.1, the presiding judge may,

in his discretion, allow a reasonable attorney fee to

the duly licensed attorney representing the prevailing

party, such attorney fee to be taxed as a part of the

court costs and payable by the losing party, upon a

finding by the presiding judge that:

(1) The party charged with the violation has

willfully engaged in the act or practice, and there

was an unwarranted refusal by such party to fully

resolve the matter which constitutes the basis of

such suit; or (2) The party instituting the action

knew, or should have known, the action was

frivolous and malicious.

N.C. Gen. Stat. 75-16.1.

A prevailing party must have “suffered actual injury as a

result of the violation” of the UDTPA. See Mayton v. Hiatt’s Used

Cars, Inc., 262 S.E.2d 860, 864 (N.C. App. 1980). The DAG

Defendants have pointed to no authority that states “actual injury”

requires an award of monetary damages. Rather, showing actual

injury is a step before and separate from recovering damages. In

order to recover damages for a claim pursuant to the UDTPA,

SmartSky must prove it “suffered actual injury as a result of

defendants’ unfair and deceptive act.” Belcher v. Fleetwood Ent.,

Inc., 590 S.E.2d 15, 18 (N.C. App. 2004). Therefore, while the

Tribunal did not award monetary damages based on SmartSky’s UDTPA

claim against all Defendants, it did note that SmartSky “is clearly

the prevailing party and indeed prevailed on virtually all counts

stated in its Amended Statement of Claims.” (Doc. 166-1 at ¶ 390.)

As a reflection of SmartSky’s prevailing claims, the Tribunal

entered a permanent injunction against the Defendants. (Id. at ¶

331.) The Tribunal found SmartSky suffered actual injury as a

result of the Defendants’ actions and awarded attorneys’ fees

pursuant to the UDTPA upon that basis. (See id. at ¶ 330) (listing

the harms which SmartSky suffered because of the Defendants’

practices). The Final Award does not reflect a manifest disregard

for the law, as the Tribunal’s decision to award attorneys’ fees

to SmartSky, having determined that SmartSky was “clearly the

prevailing party,” is consistent with North Carolina law and

similarly deserves significant deference. (Id. at ¶ 390.)

The DAG Defendants present similar arguments for the

Tribunal’s award of attorneys’ fees for SmartSky’s false

advertising claims, contending this is not an “exceptional case”

as required by the Lanham Act. (Doc. 168 at 8); see 15 U.S.C.

§ 1117(a). The DAG Defendants point out that “DAG has made clear

. . . that DAG would stipulate that they would not violate the

Lanham Act in the future,” which makes this case unexceptional.

(Id.) SmartSky in response argues the Tribunal found this to be

an exceptional case and the Tribunal did not exceed its authority

in so finding. (Doc. 184 at 16.)

Pursuant to the Lanham Act, courts “in exceptional cases may

award reasonable attorney fees to the prevailing party.” 15 U.S.C.

§ 1117(a). An exceptional case “is simply one that stands out

from others with respect to the substantive strength of a party’s

litigating position (considering both the governing law and the

facts of the case) or the unreasonable manner in which the case

was litigated.” Octane Fitness, LLC v. ICON Health & Fitness,

Inc., 572 U.S. 545, 554 (2014); see Ga.-Pac. Consumer Prods. LP v.

von Drehle Corp., 781 F.3d 710, 721 (4th Cir. 2015) (noting that

while Octane Fitness centered on § 285, “there is no reason not to

apply the Octane Fitness standard when considering the award of

attorneys’ fees under § 1117(a)”). When determining the

exceptionality of a case, “[t]here is no precise rule or formula

for making these determinations, but instead equitable discretion

should be exercised in light of the considerations [the Supreme

Court] ha[s] identified.” Fogerty v. Fantasy, Inc., 510 U.S. 517,

534 (1994) (internal quotations omitted); see Octane Fitness, 572

U.S. at 554 (noting that, while Fogerty focused on the meaning of

exceptional in terms of the Copyright Act, the Lanham Act’s fee-

shifting provision is a “comparable context”).

Here, the Tribunal found that the Defendants engaged in

numerous instances of misconduct and, based on those findings,

concluded “this is an ‘exceptional case’ of false advertising.”

(Doc. 166-1 at ¶ 342.) Specifically, the Tribunal found that the

Defendants’ false advertising “goes well beyond simply overstating

an attribute or making a false statement about a competing

product.” (Id. at ¶ 366.) The Defendants’ actions resulted in

“confusion in the marketplace as to the availability of competing

[air-to-ground] Systems, interference with important negotiations

[SmartSky] was having with [potential investors], and loss of

investor confidence in [SmartSky].” (Id. at ¶ 367.) The Tribunal

determined there was sufficient evidence to support a finding that

this was an “exceptional case” for purposes of the Lanham Act, and

the Defendants have failed to carry their burden in showing that

this conclusion reflects a manifest disregard of the law. See

Apex Plumbing Supply, Inc. v. U.S. Supply Co., Inc., 142 F.3d 188,

194 (4th Cir. 1998) (noting that “even a mistake of fact or

misinterpretation of law by an arbitrator provides insufficient

grounds for the modification of an award.”).

Additionally, as SmartSky points out, while DAG would

stipulate to not violating the Lanham Act in the future, “agreeing

to not break the law in the future has no bearing” on whether the

current misconduct is exceptional. (Doc. 184 at 17.) Because the

DAG Defendants have failed to carry their heavy burden and the

Tribunal’s conclusion shows no manifest disregard for the law, the

Tribunal did not exceed its authority in awarding attorneys’ fees

for SmartSky’s Lanham Act claim.

The DAG Defendants present an ancillary argument that the

Tribunal erred in awarding SmartSky attorneys’ fees for its

statutory misappropriation claims as the Tribunal found those

claims were waived against DAG. (Doc. 168 at 8.) SmartSky

contends in response that the Tribunal awarded no attorneys’ fees

against the DAG entities for misappropriation, but rather awarded

fees against the individual members of the Gross family and found

that all of the Defendants willfully misappropriated SmartSky’s

intellectual property such that the Defendants were liable for

attorneys’ fees under the UDTPA and the Lanham Act. (Doc. 184 at

15.)

The Tribunal found that, pursuant to the Teaming Agreement,

the parties had waived any statutory claims for misappropriation.

(Doc. 166-1 at ¶ 315.) This waiver applied to claims between

SmartSky and Wireless Systems as signatories to the Teaming

Agreement as well as DAG Israel and DAG USA as alter egos of

Wireless Systems. (Id. at ¶ 316.) The Teaming Agreement waiver

does not apply to the Gross family, and claims for misappropriation

“may, however, be asserted against the Grosses who were not party

to the Teaming Agreement.” (Id. at ¶ 360.)

Although DAG is not liable for claims of misappropriation

beyond the Teaming Agreement, it may still be held liable for

attorneys’ fees pursuant to the UDTPA (if SmartSky is the

prevailing party) and the Lanham Act (if this is an “exceptional

case”) even if SmartSky received no monetary damages from DAG. As

discussed above, the Tribunal found that SmartSky was the

prevailing party and that this is an exceptional case. Therefore,

while the DAG entities are not liable for damages for the statutory

misappropriation claims, the Teaming Agreement does not absolve

them of joint and several liability for the attorneys’ fees.

Additionally, there is no evidence that the Tribunal’s decision to

allocate the attorneys’ fees represents a manifest disregard for

the law or results from corruption or partiality. As such, the

DAG Defendants’ motion to vacate on this ground is denied.

4. Liability for legal costs and arbitration

The DAG Defendants lastly contend that the court should vacate

the Final Award because the Tribunal exceeded its authority in

finding DAG liable for SmartSky’s costs and for the cost of

arbitration. (Doc. 168 at 9-10.) SmartSky responds that AAA Rule

47 authorizes the Tribunal to grant the relief it deems just and

that the allocation of costs is the result of the Tribunal

determining an equitable outcome. (Doc. 184 at 19.)

The Tribunal awarded SmartSky $467,202.94 in legal costs and

expenses against all Defendants. (Doc. 166-1 at ¶ 402.) That

award consists of:

1. $265,934.00 for SmartSky’s technical expert, Jim

Proctor;

2. $115,894.28 for SmartSky’s damages expert, Bryce Cook;

3. $46,570.18 for SmartSky’s hotel expenses;

4. $21,056.35 in deposition expenses; and

5. $17,748.12 in court reporter fees for the arbitration.3

(Doc. 168 at 10.)

The DAG Defendants argue that under North Carolina law

SmartSky is only entitled to expert fees for the time the expert

spent providing testimony at trial. (Doc. 168 at 10); N.C. Gen.

Stat. 7A-305(d). Alternatively, the DAG Defendants argue, if

federal law were to apply, SmartSky cannot recover expert fees

because they cannot be assessed as a cost. (Id.); 28 U.S.C.

§ 1920. SmartSky responds, noting that neither statute applies;

rather, the AAA Rules govern the ability of the Tribunal to award

fees and costs.

North Carolina law cited by the DAG Defendants only applies

to “civil action in the superior or district court.” N.C. Gen.

Stat. 7A-305(d). As this is a Final Award entered after a private

3 The DAG Defendants concede that court reporter fees for depositions

and the arbitration would be recoverable. (Doc. 168 at 10.)

arbitration hearing outside of a superior or district court, the

statute is inapplicable. The same is true for 28 U.S.C. § 1920,

which only relates to costs that a “judge or clerk of any court in

the United States may tax.” Arbitration proceedings are governed

by the FAA, the AAA Commercial Rules, and any agreements made

between the parties.

SmartSky points to AAA Rule 47(a) as setting forth the

Tribunal’s ability to award costs. Rule 47(a) provides:

(a) The arbitrator may grant any remedy or relief that

the arbitrator deems just and equitable and within the

scope of the agreement of the parties, including, but

not limited to, specific performance of a contract.

By its express language, Rule 47(a) itself places no limits on the

relief the Tribunal may provide other than that such relief be

within the scope of the agreement of the parties. The DAG

Defendants offer no counter to Rule 47(a)’s broad language other

than directing the court to Rule 47(c) which provides:

(c) In the final award, the arbitrator shall assess the

fees, expenses, and compensation provided in Sections R-

53, R-54, and R-55. The arbitrator may apportion such

fees, expenses, and compensation amount the parties in

such amounts as the arbitrator determines is

appropriate.

(Doc. 191 at 2.)

Rule 47(c) appears to be an additional consideration to Rule

47(a, providing that the Tribunal may grant “any remedy or relief

that it deems just” pursuant to Rule 47(a) and must also assess

any applicable “fees, expenses, and compensation provided in

Sections R-53, R-54, and R-55” pursuant to Rule 47(c). Rule 53

focuses on administrative fees and is thus inapplicable here.

Similarly Rule 55 relates to the compensation of the arbitrators

and is inapplicable. The DAG Defendants’ argument thus rests on

Rule 54, which provides:

The expenses of witnesses for either side shall be paid

by the party producing such witnesses. All other

expenses of the arbitration, including required travel

and other expenses of the arbitrator, AAA

representatives, and any witness and the cost of any

proof produced at the direct request of the arbitrator,

shall be born equally by the parties, unless they agree

otherwise or unless the arbitrator in the award assesses

such expenses or any part thereof against any specified

party or parties.

The DAG Defendants thus argue that the Tribunal lacked

authority under North Carolina law, Federal law, and the AAA Rules

to award expert fees and “[a]s a result, the entire arbitration

award must be vacated.” (Doc. 191 at 3.) However, the Tribunal

informed the parties well before entering the Final Award that it

would “exercise its authority to allocate the costs of arbitration

in its final award in light of the full factual record established

at the hearing as well as the circumstances of these proceedings.”

(Doc. 166-4 at ¶ 8.) Because of the Defendants’ actions, the

Tribunal found that SmartSky was required “to prove through

percipient and expert witnesses and voluminous documents, inter

alia, its ownership of the [air-to-ground] Products and

derivatives, Respondents’ improper use of [SmartSky’s]

Intellectual Property, and [SmartSky’s] need for temporary and

permanent injunctive relief.” (Doc. 166-1 at ¶ 393.) As permitted

by Rule 47(a), and consistent with the Tribunal’s factual findings,

the Tribunal determined awarding expert fees and costs was a just

and equitable form of relief. Rule 54 functions in the event

expenses of witnesses are not considered under Rule 47(a). For

instance, had the Tribunal not determined that an award of expert

fees to SmartSky was just and equitable pursuant to Rule 47(a), it

would be prohibited from assessing those costs pursuant to Rules

47(c) and 54. However, the Tribunal determined that shifting those

costs to the Defendants was warranted in this case, and it is not

for this court to determine whether the Tribunal’s allocation of

costs is correct. It “is enough that the Arbitrator grappled with

and resolved [the issue at hand] at all,” and nothing indicates

the Tribunal baselessly allocated these costs. Goins v. TitleMax

of Va., Inc., No. 1:19CV489, 2021 WL 3856149, at *2 (M.D.N.C.

Aug. 27, 2021).

For the foregoing reasons, because the DAG Defendants have

failed to carry their heavy burden of showing one of the limited

grounds for vacating an arbitration award provided by the FAA or

by showing any manifest disregard of the law as required at common

law, the DAG Defendants’ Motion to Vacate the Final Award (Doc.

167) is denied.

B. Wireless Systems Defendants’ Motion to Vacate Final

Award

The Wireless Systems Defendants’ contentions can be separated

into two categories. First, the Wireless Systems Defendants argue

that the Tribunal did not properly consider evidence they presented

and erred in refusing to allow the Defendants to engage in

discovery and obtain evidence on certain claims. (Doc. 174 at 6-

23.) Second, they present nearly identical arguments as the DAG

Defendants, arguing that the Tribunal exceeded its power in finding

that Wireless Systems’ dismissal of counterclaims was with

prejudice, in awarding SmartSky’s expenses and costs, and by not

properly allocating SmartSky’s attorneys’ fees amongst claims and

between defendants. (Id. at 23-25.) SmartSky responds by arguing

that the Tribunal did not disregard the law in denying the Wireless

Systems Defendants’ attempt to engage in discovery and that the

Tribunal’s decision should receive significant deference. (Doc.

180 at 14.) As to the Wireless Systems Defendants’ second category

of claims, SmartSky presents the same arguments as set forth in

its opposition to the DAG Defendants’ motion to vacate the award

discussed above. (Id. at 18.)

To the extent the Wireless Systems Defendants argue the

Tribunal erred in denying various procedural motions, their motion

to vacate the Final Award must be denied, as it is not for this

court to relitigate the claims presented in the arbitration.4 A

court “must defer to the [arbitration] panel’s discovery and

evidentiary rulings even if the court would have ruled

differently.” Wells Fargo Advisors, LLC v. Watts, 858 F.Supp.2d

591, 599 (W.D.N.C. 2012) (citing Remmey v. PaineWebber, Inc., 32

F.3d 143, 146 (4th Cir. 1994) (noting “[c]ourts are not free to

overturn an arbitral result because they would have reached a

different conclusion if presented with the same facts.”)) rev’d in

part on other grounds, 540 F. App’x 229 (4th Cir. 2013). An

“arbitrator’s procedural ruling may not be overturned unless it

was in bad faith or so gross as to amount to affirmative

misconduct.” Wachovia Sec., LLC v. Brand, 671 F.3d 472, 479 (4th

Cir. 2012). Vacatur of a final award based on the procedural

orders issued by the Tribunal during arbitration requires proof

that the Tribunal “intentionally contradicted the law,” rather

4 Specifically, the Wireless Systems Defendants challenge the Tribunal’s

decision to deny their application to file a cease-and-desist motion and

a motion to compel discovery relating to allegations that SmartSky had

“hacked” products purportedly belonging to Wireless Systems. (Doc. 174

at 6.) The Tribunal reached this determination because DAG had filed

the motion well into the discovery process just weeks before the hearing.

Nevertheless, the Tribunal did allow DAG to put on extensive evidence

on the issue of hacking during the hearing and ultimately concluded that

SmartSky had not hacked Wireless Systems’ software, but rather SmartSky

“overwrote” some of Wireless Systems’ software. (Doc. 166-1 at ¶ 338.)

Importantly, the motion to compel discovery was filed by DAG, not

Wireless Systems; therefore, it is unclear why Wireless Systems seeks

to vacate the Final Award based on a motion it did not file. (Doc. 166-

1 at ¶ 74.) The Wireless Systems Defendants also argue that the Tribunal

erroneously found that Wireless Systems’ dismissal of its counterclaims

was with prejudice. (Doc. 174 at 21.) The court addressed this

contention earlier. See n. 1 supra.

than simply made a “mistake.” (Id.) To allow the Wireless Systems

Defendants to participate in a thorough arbitration hearing and

then relitigate the same procedural issues in this court “would

frustrate the purpose of having arbitration at all.” Apex Plumbing

Supply, Inc. v. U.S. Supply Co., Inc., 142 F.3d 188, 193 (4th Cir.

1998). To be sure, the Wireless Systems Defendants assert no

factual allegations of intentional misconduct undertaken by the

Tribunal. See Wachovia Sec., LLC, 671 F.3d at 479 (“Wachovia’s

challenge to the Panel’s procedure would nevertheless fail because

it does not allege misconduct.”)

Because the Tribunal’s decision on procedural issues such as

discovery disagreements and the presentation of evidence garners

significant deference and the Wireless Systems Defendants have

alleged no specific instances or facts tending to show the Tribunal

engaged in affirmative misconduct, the Wireless Systems

Defendants’ motion to vacate based on the procedural category of

their arguments is denied.

As to the second category of grievances put forth by the

Wireless Systems Defendants, they are identical to the arguments

raised by the DAG Defendants in relation to the Tribunal’s award

of expenses, costs, and attorneys’ fees to SmartSky. (Doc. 174 at

23-25.) Specifically, the Wireless Systems Defendants argue the

Tribunal exceeded its power in imposing expert fees in

contravention of North Carolina and federal law and by not

separately allocating attorneys’ fees to each party for each claim.

(Id.) To the extent the Wireless Systems Defendants’ motion is

based on the same arguments presented by the DAG Defendants, it is

denied for the reasons set forth above.

C. Smartsky’s Motion to Confirm Final Award

SmartSky argues there is no basis to modify, vacate, or

correct the Final Award and, because the court has jurisdiction to

confirm the Final Award, it should do so. (Doc. 166 at 11.)

Pursuant to the FAA, to prevail on a motion to confirm a final

award, the movant must petition the court within one year of the

arbitration award, provide notice to the adverse party, and file

the award order, the arbitration agreement, and any time extension

with the motion. See 9 U.S.C. §§ 9, 13. Here, SmartSky filed its

motion containing all required documents four days after the Final

Arbitration Order. (Doc. 166.) Notice of this motion was provided

to the Defendants. (Id. at 16.)

Having reviewed the Final Award, and finding no evidence of

fraud, corruption, misconduct, or manifest disregard of the law,

the court must confirm the award. See 9 U.S.C. § 9; Benchmark

Elecs., Inc. v. Myers, No. GJH-19-242, 2019 WL 6528587, at *7 (D.

Md. Dec. 3, 2019) (“Because the Court will not vacate the

arbitration award, it must confirm it.”); JTH Tax LLC v. Pitcairn

Franchise Dev., LLC., No. 2:21cv135, 2021 WL 3173572, at *9 (E.D.

Va. July 27, 2021) (“Therefore, the court must grant an arbitration

award unless the award is vacated, modified, or corrected.”

(internal quotations and alterations omitted)). Because there is

no cause to vacate the Final Award, SmartSky’s motion is granted.

Smiley v. Forcepoint Fed., LLC, No. 3:21CV500, 2021 WL 5143898, at

*3 (E.D. Va. Nov. 3, 2021) (confirming arbitration award because

it was not vacated).

D. Motions to Seal

The Wireless Systems Defendants seek to seal certain exhibits

filed with their Brief in Support of Their Motion to Vacate and

Modify the Arbitrators’ Final Award “and to seal the Brief that

quotes the exhibits.” (Doc. 177.) SmartSky responds by agreeing

that the Proposed Sealed Documents included in the Wireless Systems

Defendants’ motion “should be sealed by the Court to the extent

necessary to avoid disclosure on the public docket,” but that many

of the documents are “irrelevant to the pending Motion to Vacate,

and should therefore be struck,” pursuant to Local Rules 5.4 and

5.5. (Doc. 179 at 2.) SmartSky separately moves for leave to

file sealed portions of its reply in opposition to the Wireless

Systems Defendants’ motion to vacate the arbitrator’s Final Award.

(Doc. 182.)

When a party makes a request to seal judicial records, a

district court “must comply with certain substantive and

procedural requirements.” Va. Dep’t of State Police v. Washington

Post, 386 F.3d 567, 576 (4th Cir. 2004). Procedurally, the court

must (1) give the public notice and a reasonable opportunity to

challenge the request to seal; (2) “consider less drastic

alternatives to sealing”; and (3) if it decides to seal, make

specific findings and state the reasons for its decision to seal

over the alternatives. Id. “As to the substance, the district

court first must determine the source of the right of access with

respect to each document, because only then can it accurately weigh

the competing interests at stake.” Id. (internal quotation marks

and alteration omitted). “While the common law presumption in

favor of access attaches to all judicial records and documents,

the First Amendment guarantee of access has been extended only to

particular judicial records and documents.” Stone v. Univ. of Md.

Med. Sys. Corp., 855 F.2d 178, 180 (4th Cir. 1988) (internal

quotations and citations omitted). Generally, the public interest

in disclosure heightens as the underlying motions are directed

more to the merits and as the case proceeds toward trial. See

Washington Post, 386 F.3d at 578–79 (observing that the public has

a First Amendment right of access to materials submitted in

connection with a summary judgment motion in a civil action (citing

Rushford v. New Yorker Magazine, Inc., 846 F.2d 249, 253 (4th Cir.

1988)).

“The burden to overcome a First Amendment right of access

rests on the party seeking to restrict access, and that party must

present specific reasons in support of its position.” Id. at 575;

see Press–Enterprise Co. v. Superior Ct. of Ca. for Riverside

Cnty., 478 U.S. 1, 15 (1986) (“The First Amendment right of access

cannot be overcome by [a] conclusory assertion.”). The public's

right of access “may be abrogated only in unusual circumstances.”

Stone, 855 F.2d at 182. Evaluating whether these “unusual

circumstances” exist in a particular case is a fact-based inquiry

conducted in light of the “specific facts and circumstances” of

the case at issue. See Washington Post, 386 F.3d at 579.

“One exception to the public's right of access is where such

access to judicial records could provide a ‘source[] of business

information that might harm a litigant's competitive standing.’”

Woven Elecs. Corp. v. Advance Grp., Inc., 1991 WL 54118, at *6

(4th Cir. Apr. 15, 1991) (quoting Nixon v. Warner Commc’ns, Inc.,

435 U.S. 589, 598 (1978)). “[M]any courts have considered the

trade secret status of testimony or materials submitted to a court

a significant private interest to be weighed against the common

law, or even the First Amendment, right of public access that would

otherwise apply to them.” Level 3 Commc'ns, LLC v. Limelight

Networks, Inc., 611 F. Supp. 2d 572, 581–82 (E.D. Va. 2009)

(collecting cases)); Woven Elecs. Corp., 1991 WL 54118, at *6-7

(holding the district court erred in denying motion to close the

courtroom to prevent disclosure of trade secrets at trial and

remanding the case for determination as to what portions of the

district court record must be sealed in order to prevent further

disclosure); ATI Indus. Automation, Inc. v. Applied Robotics,

Inc., 801 F. Supp. 2d 419, 427-28 (M.D.N.C. 2011) (finding the

public had a First Amendment right of access to documents submitted

in connection with motions to dismiss for lack of personal

jurisdiction and improper venue, but holding that the sealing of

eight exhibits was appropriate in order to protect trade secrets

contained therein); Longman v. Food Lion, Inc., 186 F.R.D. 331,

335 (M.D.N.C. 1999) (noting documents could “be sealed even given

the public access requirements because they contain Defendants’

trade secrets, confidential business information, or information

protected by attorney-client privilege”).

The Wireless Systems Defendants assert that many of the

exhibits listed, while not necessarily confidential themselves,

included testimony or references to otherwise confidential

exhibits. (Doc. 177 at 2.) At the start of arbitration, all

parties agreed that the entire arbitration hearing and the

resulting transcript would be treated as confidential pursuant to

a Protective Order governing confidential information. (Id.) The

claims forming the basis of this case revolve around trade secrets

and closely held and highly valuable intellectual property, and

from the beginning both parties maintained the importance of

confidentiality. For instance, the Wireless Systems Defendants

advise that they seek to seal the listed exhibits because they “do

not want to inadvertently violate the Protective Order,”

especially because SmartSky had already “filed a motion against

them for sanctions during the arbitration proceeding for violating

the Protective Order.” (Id.)

SmartSky contends that many of these documents are irrelevant

to the pending motion and should be struck. (Doc. 179 at 2.)

However, motions to strike are appropriate only for pleadings and

not for these documents. See 5A C. Wright and A. Miller, Federal

Practice and Procedure: Civil, § 1380 (3d ed. 2021); Charleston

Waterkeeper v. Frontier Logistics, L.P., 488 F. Supp. 3d 240, 260

(D.S.C. 2020); Delta Consulting Grp., Inc. v. R. Randle Const.,

Inc., 554 F.3d 1133 (7th Cir. 2009). Furthermore, because the

court considered these documents in ruling on the cross motions to

vacate or confirm the award and relied on some of the background

information provided by the designated exhibits in deciding the

motions to vacate, it cannot say these documents are irrelevant.

Therefore, the Wireless Systems Defendants’ motion to seal certain

exhibits (Doc. 177) is granted and SmartSky’s request to strike

documents is denied.5

SmartSky seeks to file under seal portions of its brief in

opposition to the Wireless Systems Defendants’ motion to vacate

the arbitrator’s Final Award, and for similar reasons its motion

5 SmartSky also recognizes that to the extent the court does not strike

the documents, they should be sealed “to ensure the sensitive and

confidential business information contained therein is not publicly

displayed.” (Doc. 179 at 2.)

is granted. (Doc. 182.) The Defendants have filed no brief in

opposition. SmartSky advises that its opposition brief includes

“confidential, proprietary, and sensitive business information,”

and disclosure “would potentially violate a contractual

confidentiality agreement” between SmartSky and Wireless Systems.

(Id. at 1-2.) The information contained in SmartSky’s opposition

brief details confidential information, including names of

prospective clients, SmartSky’s customer solicitation efforts, and

its overall business strategy in a highly competitive and fast-

moving industry. Because sealing is necessary to protect the

confidentiality of the proprietary business information contained

in SmartSky’s opposition brief, Smartsky’s motion to seal (Doc.

181) is granted. See LifeNet Health v. LifeCell Corp., No.

2:13cv486, 2015 WL 12516758, at *2 (E.D. Va. Jan. 9, 2015) (stating

“in a case involving trade secrets, [] the record should ‘be sealed

to the extent necessary to prevent the release of trade secrets.’”

(quoting Woven Elecs., 1991 WL 54118, at *6.)); Valley Broad. Co.

v. United States Dist. Court for Dist. of Nev., 798 F.2d 1289,

1294 (9th Cir. 1986) (noting the presence of “trade secret

materials” would “counsel[] against” the common law right of public

access); Brown & Williamson Tobacco Corp. v. F.T.C., 710 F.2d 1165,

1179 (6th Cir. 1983) (“[c]ourts have carved out several distinct

but limited common law exceptions to the strong presumption in

favor of openness, including trade secrets which are a recognized

exception to the right of public access to judicial records”

(internal quotations omitted)).

III. CONCLUSION

For the foregoing reasons,

IT IS HEREBY ORDERED that the DAG Defendants’ Motion to

Dismiss or Compel Arbitration of Complaint and Amended Complaint

(Doc. 160) is DENIED as moot; the DAG Defendants’ Motion to Vacate

Arbitration Award (Doc. 167) is DENIED, and the Wireless Systems

Defendants’ Motion to Vacate and Modify the Arbitrators Final Award

(Doc. 170) is DENIED.

IT IS FURTHER ORDERED that the Wireless Systems Defendants’

Motion to Seal Exhibits (Doc. 177) is GRANTED, and SmartSky’s

Motion to Seal (Doc. 181) SmartSky’s Opposition to the Wireless

Systems Defendants’ Motion to Vacate and Modify the Arbitrators’

Final Award (Doc. 180) is GRANTED.

IT IS FURTHER ORDERED that SmartSky’s Motion to Confirm

Arbitration Award and for Entry of Final Judgment (Doc. 166) is

GRANTED and the Final Award is CONFIRMED.

IT IS FURTHER ORDERED that in accordance with the confirmation

of the Award, FINAL JUDGMENT BE ENTERED AS FOLLOWS in favor of

SmartSky and against the Defendants Wireless System Solutions, LLC

(“Wireless Systems”), DAG Wireless Ltd. (“DAG Wireless”), DAG

Wireless USA, LLC (“DAG Wireless USA”), Laslo Gross, Susan Gross,

and David Gross (collectively “Defendants”):

1. SmartSky is awarded a judgment for damages and other

monetary relief against the Defendants as follows

a. Ten Million Dollars ($10,000,000.00) in damages

against Wireless Systems on SmartSky’s claims for breach of

the April 11, 2019 Teaming Agreement (the “Teaming

Agreement”) between SmartSky and Wireless Systems and for

breach of other agreements between SmartSky and Wireless

Systems; and

b. the following amounts are awarded to SmartSky

against all of the Defendants (Wireless Systems, DAG

Wireless, DAG Wireless USA, Laslo Gross, Susan Gross, and

David Gross), jointly and severally:

i. $1,963,676.59 for legal fees and expenses

incurred by SmartSky;

ii. $525,215.45 for Arbitration costs incurred by

SmartSky; and

iii. $60,000.00 in sanctions for the Defendants’

violations of interim orders of the Tribunal appointed

in the Arbitration.

2. Wireless Systems, DAG Wireless, DAG Wireless USA, Laslo

Gross, Susan Gross, and David Gross, and each of them, as well as

persons or entities acting in concert or participation with them

or otherwise on their behalf, including their successors or

assigns, shall immediately cease and desist and are hereby

permanently enjoined from engaging, directly or indirectly, in any

of the following activities or conduct:

a. making, causing to be made, developing, certifying

or attempting to certify with any government agency, using,

copying, modifying, marketing, promoting, offering to sell,

selling, or distributing any or all “Product” or “Developed

IP” (as those terms are defined in the Teaming Agreement and

as the definitions are incorporated below) developed or

produced by Wireless Systems, DAG Wireless, or DAG Wireless

USA pursuant to or in connection with any agreement executed

by SmartSky and Wireless Systems, or derivatives of such

“Product” or “Developed IP,” for use within the “SSN Field of

Use” (as those terms are defined in the Teaming Agreement and

as the definitions are incorporated below);

b. making or causing to be made any use or disclosure

of any or all “Confidential Information” of SmartSky, “SSN

IP,” or “SSN Tools” (as those terms are defined in the Teaming

Agreement and as the definitions are incorporated below), or

derivatives thereof;

c. making or causing to be made any use or disclosure

of information of SmartSky subject to a non-disclosure

agreement which they, or any of them, executed with SmartSky

including that Non-Disclosure Agreement dated January 15,

2019;

d. passing off all or any part of SmartSky’s

“Confidential Information,” “Product,” “SSN IP,” “SSN Tools,”

or “Developed IP” (as those terms are defined in the Teaming

Agreement and as the definitions are incorporated below),

including derivatives thereof, as the property of Wireless

Systems, DAG Wireless, DAG Wireless USA, Laslo Gross, Susan

Gross, and/or David D. Gross, including their successors and

assigns; and/or

e. engaging in any other false or misleading

commercial advertising, promotions, or representations,

including but not limited to statements made directly or

indirectly through the use of pseudonyms or proxies, on

websites, in press releases, or in interviews, which:

i. state or suggest that Wireless Systems, DAG

Wireless, DAG Wireless USA, Laslo Gross, Susan Gross, and

David Gross, or any of them or their successors or assigns,

have developed, have obtained regulatory certification of, or

have or will have available for purchase or sale any air-to-

ground wireless communications system or product that uses or

is based upon SmartSky’s “Confidential Information,”

“Product,” “SSN IP,” “SSN Tools,” or “Developed IP,” or

derivatives thereof, in the “SSN Field of Use” (as those terms

are defined in the Teaming Agreement and as the definitions

are incorporated below);

ii. attempt to pass off or represent any

“Confidential Information” of SmartSky, “SSN IP,” “SSN

Tools,” “Developed IP,” or “Product” (as those terms are

defined in the Teaming Agreement and as the definitions are

incorporated below), or derivatives thereof, as developed by

or belonging to Wireless Systems, DAG Wireless, DAG Wireless

USA, Laslo Gross, Susan Gross, and/or David Gross, or their

successors or assigns; and/or

iii. disparage SmartSky or attempt to discourage

any person or entity from doing business with SmartSky.

3. The Court sets forth the following definitions from the

Teaming Agreement as referenced in the permanent injunction above:

a. “Product” is defined as “the production units

[SmartSky] commissions [Wireless Systems] to develop,

procure, integrate, produce, deliver, and support exclusively

for [SmartSky] for the SSN Field of Use as defined herein.”

b. “SSN Field of Use” is defined as “communications

networks, information exchange, and enabling information

tools, all for use in aviation related operations including

air-to-surface, surface-to-air, and air-to-air

communications.”

c. “SSN IP” is defined as follows:

“(a) all Intellectual Property of [SmartSky] existing prior

to, or invented or developed by, for, or on behalf of

[SmartSky] independent of this Agreement, (b) Work Product

and Developed IP (except as otherwise provided in a SOW), (c)

any Intellectual Property as described in the applicable SOW

[Statement of Work] as SSN IP and owned by SSN, and (c) any

Intellectual Property set forth in the attached Exhibit A.”

d. “Intellectual Property” is defined as:

“Intellectual Property means all of the following, whether

protected, created or arising under the laws of any domestic

or foreign jurisdiction: (a) patents, patent applications

(along with all patents issuing thereon), statutory invention

registrations, and divisions, continuations, continuations-

in-part, and substitute applications of the foregoing, and any

extensions, reissues, restorations and reexaminations of the

foregoing, and all rights therein provided by international

treaties or conventions including, without limitation, the

exclusive right to make, use and sell, (b) know-how, ideas,

processes, discoveries, methods, copyrights, mask work rights,

database rights and design rights, whether or not registered,

published or unpublished, and registrations and applications

for registration thereof, and all forms of intellectual

property rights therein whether provided by international

treaties or conventions or otherwise, (c) trade secrets, (d)

Marks, (e) all rights arising from or in respect of domain

names and domain name registrations and reservations, and (f)

all other applications and registrations related to any of the

rights set forth in the foregoing clauses (a)-(f) above.”

e. “Developed IP” is defined as:

“For each SOW [Statement of Work agreed to by {SmartSky} and

{Wireless Systems}], the Parties agree to cooperate in good

faith to identify and detail the scope of the work to be

performed under the applicable SOW and to specify the

ownership rights to all Work Product. The Parties agree that

in the absence of any such specification of ownership in the

applicable SOW, any Work Product (and all Intellectual

Property rights contained therein) produced for such SOW,

excluding any WSS IP, shall be owned by [SmartSky]. Any Work

Product, and Intellectual Property rights contained therein,

owned by [SmartSky] shall be referred to hereafter as

‘Developed IP’. Further, [Wireless Systems] hereby

acknowledges and agrees that [SmartSky] shall own all right,

title and interest in and to the Product, and all Intellectual

Property rights contained therein, except for [Wireless

Systems’] ownership rights in any WSS IP incorporated into

the Product, which [SmartSky] shall have a license to pursuant

to Section 8.03. Additionally, and notwithstanding anything

in the Agreement or a SOW that may be interpreted to the

contrary, [Wireless Systems] hereby acknowledges and agrees

that [SmartSky] shall be the exclusive owner of all right,

title and interest in and to any and all developments,

improvements, enhancements, or derivatives to any SSN IP,

including without limitation, [SmartSky’s] patent portfolio

set forth in Exhibit A.”

f. “Work Product” is defined as follows:

“all inventions, including improvements/enhancements,

discoveries, ideas, technologies, know-how, work product,

concepts, material, methods, processes, disclosures,

Software, firmware, Materials, molds, fixtures, test

equipment, computer language, programming aids,

documentation, or any other property conceived, developed,

originated, fixed or reduced to practice in connection with,

or as a result of, the services as ordered through a Purchase

Order and performed under a SOW, whether or not patentable,

copyrightable or subject to mask work rights or other forms

of protection.“

g. “Confidential Information” is defined as:

“... the terms and conditions of this Agreement, the existence

of the discussions between the Parties, any information

disclosed in connection with the development and integration

projects being undertaken as described above, and any

proprietary information a Party considers to be proprietary,

including but not limited to, information regarding each

Party’s product plans, product designs, product costs,

product prices, finances, marketing plans, business

opportunities, personnel, research and development

activities, know-how and pre-release products; provided that

information disclosed by the disclosing Party (‘Disclosing

Party’) in written or other tangible form will be considered

Confidential Information by the receiving Party (‘Receiving

Party’) if such information is conspicuously designated as

‘Confidential,’ ‘Proprietary’ or a similar legend, or if the

circumstances of disclosure would reasonably indicate such

treatment. Information disclosed orally shall only be

considered Confidential Information if: (i) identified as

confidential, proprietary or the like at the time of

disclosure, and (ii) confirmed in writing within thirty (30)

days of disclosure.”

h. “SSN Tools” is defined as:

“Any such Materials, tools, equipment or facilities furnished

to [Wireless Systems] by or on behalf of [SmartSky] or

purchased by [SmartSky] from [Wireless Systems] (through a

separate Purchase Order or as an item under a SOW) for use in

connection with the performance by [Wireless Systems]

hereunder (collectively the ‘SSN Tools’) shall be held by

[Wireless Systems] as [SmartSky’s] property and shall not be

used by [Wireless Systems] except for the purpose of [Wireless

System’s] performance under the applicable Purchase Order and

SOW.”

4. The Award also required the Defendants to do the

following within fifteen (15) business days from the date of the

Award (or by October 22, 2021), which is also confirmed as part of

this Order and Final Judgment:

a. take all actions necessary to ensure that the

Federal Communications Commission (“FCC”) expeditiously

transfers control of any and all FCC certification grants

associated with the grantee code 2AWXX to SmartSky pursuant

to the procedures set forth in 47 C.F.R. § 2.929(d) and FCC

Office of Engineering and Technology Knowledge Database

publication no. 204515; and provide SmartSky with the

current, valid Grantee Code Registration Number for grantee

code 2AWXX; and

b. at their own expense, destroy all “Confidential

Information” of SmartSky, “SSN IP,” and “Developed IP” (as

those terms are defined in the Teaming Agreement) currently

in their possession or in the possession of entities

controlled by, affiliated with, or directed by them, and

provide written certification to SmartSky that all such

material has been destroyed.

It IS FURTHER ORDERED that all of Wireless Systems’

counterclaims alleged against SmartSky in this lawsuit are

DISMISSED WITH PREJUDICE.

/s/ Thomas D. Schroeder

United States District Judge

February 7, 2022