Sur-Reply in Support of Cross-Petition to Confirm Arbitration Award — OTO Analytics v. Benworth

Record facts

U.S. District Court for the Northern District of California · No. 4:24-cv-03975-AMO · Doc. 63 · 2024-11-20 · Docket on CourtListener

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SUR-REPLY IN SUPPORT OF CROSS-PETITION TO CONFIRM ARBITRATION AWARD 
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UNITED STATES DISTRICT COURT 
NORTHERN DISTRICT OF CALIFORNIA 
SAN FRANCISCO DIVISION 
 
 
WILLKIE FARR & GALLAGHER LLP 
Alexander L. Cheney (SBN 302157) 
acheney@willkie.com 
Zoe Packman (SBN 347453) 
zpackman@willkie.com 
333 Bush Street, 34th Floor 
San Francisco, CA 94104 
(415) 858-7400 
 
Stuart R. Lombardi (admitted pro hac vice) 
slombardi@willkie.com 
787 7th Avenue 
New York, NY 10019 
(212) 728-8000 
 
Joshua S. Levy (admitted pro hac vice) 
jlevy@willkie.com 
1875 K Street, N.W. 
Washington, DC 20006-1238 
(202) 303-1000 
 
Attorneys for Petitioner 
Oto Analytics, LLC 
OTO ANALYTICS, LLC, 
Petitioner, 
v. 
BENWORTH CAPITAL PARTNERS LLC, 
Respondent. 
 Case No. 3:24-cv-03975-AMO 
 
SUR-REPLY IN SUPPORT OF CROSS-
PETITION TO CONFIRM 
ARBITRATION AWARD  
 
Hon. Araceli Martínez-Olguín 
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Pursuant to this Court’s November 5, 2024 Order (ECF No. 62), Petitioner Womply 
respectfully submits this sur-reply in further support of its Opposition to Respondent Benworth’s 
Petition to Vacate Arbitration Award (“Opposition” or “Opp.”; 3:24-cv-04840, ECF No. 25) and 
in response to Benworth’s Reply in support of its Petition to Vacate Arbitration Award (“Reply”; 
3:24-cv-04840, ECF No. 33).1 
PROCEDURAL BACKGROUND 
On June 26, 2024, Arbitrator Brainerd issued the Final Award in the JAMS arbitration 
captioned Oto Analytics, Inc. d/b/a Womply v. Benworth Capital Partners LLC, JAMS Ref. No. 
1210038203.  Womply filed a Petition to Confirm Arbitration Award on July 1, 2024, in the 
above-entitled action.  (ECF No. 1.)  On August 7, 2024, Benworth filed a Petition to Vacate 
Arbitration Award in a new action, Case No. 3:24-cv-04840.  The parties briefed both petitions.  
On October 23, 2024, the Court consolidated the two actions and terminated all pending motions.  
(ECF No. 57.)  Following a case management conference, and pursuant to the Court’s guidance, 
the parties agreed to streamline the briefing on October 31, 2024.  (ECF No. 61.)  The parties 
agreed, with the Court’s approval, to: (1) deem Benworth’s Petition to Vacate as the operative 
motion in this action; (2) construe Womply’s Opposition (Case No. 3:24-cv-04840, ECF No. 25) 
as both an Opposition to Benworth’s Petition to Vacate and a Cross-Petition to Confirm 
Arbitration Award; (3) construe Benworth’s Reply (Case No. 3:24-cv-04840, ECF No. 33) as 
both a Reply in support of Benworth’s Petition to Vacate and a Response to Womply’s Cross-
Petition to Confirm; and (4) permit Womply to file this sur-reply in support of its Opposition. 
ARGUMENT 
I. 
BENWORTH FAILS TO ESTABLISH THAT THE ARBITRATOR EXCEEDED 
HIS POWERS. 
Benworth has not met its burden of showing that the Arbitrator exceeded his powers by 
manifestly disregarding the law or issuing a completely irrational award.  (See Reply at 2–4.)2  In 
a tacit admission that it cannot meet these exacting standards to vacate an award under the Federal 
 
1 Capitalized terms not otherwise defined herein have the same meaning as in the Opposition.   
2 Pagination refers to pages in ECF. 
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Arbitration Act (“FAA”), Benworth argues that these standards do not apply in this case.  Indeed, 
it claims that—unlike in every other case concerning whether to confirm or vacate an arbitration 
award under the FAA—“this Court owes no deference to the Arbitrator’s conclusions” (id. at 2) 
because the parties specified the controlling substantive law in their choice-of-law provisions.  
Specifically, Benworth states that the parties’ Agreements required the Arbitrator:  “(1) to apply 
California law and ‘SBA Regulations’ (as that term is defined in the Agreements); (2) to give 
controlling effect to ‘SBA Regulations,’ notwithstanding any provision of the Agreements or 
California law to the contrary; and (3) to treat the ‘SBA Regulations’ as express terms of the 
Agreements.”  (Id. at 3.)  According to Benworth, to the extent the Arbitrator “strayed from 
the[se] limitations” on “the Arbitrator’s powers,” this Court must vacate the Final Award.  (Id. 
at 2–3.)  Benworth’s attempt to avoid the high standards for vacatur under the FAA fails.   
In any arbitration involving a contract dispute, an arbitrator must determine which 
substantive law to apply.  Whether the arbitrator determines the applicable law by reference to a 
choice-of-law provision, as was the case here, or a jurisdiction’s choice of law rules, the 
arbitrator’s interpretation and application of those substantive laws is not subject to judicial 
review under the FAA.  See Biller v. Toyota Motor Corp., 668 F.3d 655, 668 n.7 (9th Cir. 2012) 
(“[E]ven misstatements of the law followed by erroneous application of the law do not provide 
grounds upon which a reviewing court may vacate an arbitral award under the FAA. . . . 
[M]anifest disregard of the law for the purposes of the FAA occurs only where there is evidence 
that the Arbitrator knew the law but ignored it nonetheless.”).  Benworth does not cite any 
authority supporting its claim that this Court “owes no deference to the Arbitrator’s conclusions” 
simply because the parties included a choice-of-law clause in their Agreements.  Nor does 
Benworth cite any authority for its claim that an arbitrator’s conclusions are owed “no 
deference”—or even less deference—if the contract at issue incorporates laws or regulations by 
reference.3  Incorporating a law by reference simply makes the law a contract provision and gives 
 
3 The Agreements do not incorporate any laws or regulations by reference.  (See Opp. at 24.)  The 
choice-of-law provisions acknowledge that the Agreements are governed by California law and 
“subject to all Applicable Laws, including SBA Regulations” which are defined to include, 
among other things, “guidance” issued by the SBA.  (Pet. App’x 3984 § 9.)   
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the parties a breach of contract claim for its violation, see Poublon v. C.H. Robinson Co., 846 
F.3d 1251, 1269 (9th Cir. 2017), and it is well-settled that courts do not “decide the rightness or 
wrongness of the arbitrators’ contract interpretation,” nor do they consider whether “findings of 
fact are correct or internally consistent”; rather, courts review an arbitrator’s award to determine 
only “whether the award is ‘irrational’ with respect to the contract.”  Bosack v. Soward, 586 F.3d 
1096, 1106 (9th Cir. 2009) (cleaned up).  “[T]he court must defer to the arbitrator’s decision as 
long as the arbitrator even arguably construed or applied the contract.”  HayDay Farms, Inc. v. 
FeeDx Holdings, Inc., 55 F.4th 1232, 1241 (9th Cir. 2022) (quotation omitted).   
In short, Benworth’s claim that the Arbitrator’s decisions regarding laws or regulations 
referred to or incorporated by reference into the Agreements should not be afforded the usual 
deference mandated by the FAA is contrary to well-established law.  
A. 
The Arbitrator’s Finding That The Agent Fee Cap Did Not Apply To 
Womply’s Technology Fees Cannot Be Overturned. 
As explained in the Opposition, the Arbitrator rejected Benworth’s argument that 
Womply’s Technology Fees were illegal because they exceeded a regulatory cap on fees that 
agents can charge for providing “assistance in preparing an application for a PPP loan (including 
referral to the lender).”  (Opp. at 10.)  In its Reply, Benworth again quibbles with (i) the 
Arbitrator’s legal interpretation of this Agent Fee Cap as applying “only to fees for services an 
agent provided to a borrower” rather than a lender, and (ii) the Arbitrator’s factual finding that 
Technology Fees compensated Womply for services that benefited Benworth as a lender.  (Reply 
at 6.)  
This Court is not permitted to reconsider the Arbitrator’s interpretation of the Agent Fee 
Cap under the FAA.  See HayDay, 55 F.4th at 1241 (allowing courts to decide “only whether the 
arbitrator’s decision draws its essence from the contract, not the rightness or wrongness of the 
arbitrator’s contract interpretation”) (quotation omitted); see also Glob. Indus. Inv. Ltd. v. 1955 
Cap. Fund I GP LLC, 2022 WL 4371505, at *6 (N.D. Cal. Sept. 21, 2022) (“Respondents’ argument 
that de novo review is appropriate would also upend the FAA, ‘which enumerates limited grounds 
on which a federal court may vacate, modify, or correct an arbitral award.’”) (quoting Bosack, 586 
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F.3d at 1102).  In any event, the Final Award expressly provides that “Benworth d[id] not dispute 
that . . . the 1% Agent Fee Cap applies only to fees paid to Agents for ‘assist[ing] an eligible 
recipient’—i.e., a borrower—‘to prepare an application for a [PPP] loan.’”  (Final Award [Pet. 
App’x 3185] “FA” at 35 (emphasis added); see also Opp. at 15.)  Having accepted that 
interpretation during the Arbitration, Benworth should not now be heard to argue that the 
definition manifestly disregards the law or is “irrational.”  In addition, the Arbitrator’s 
interpretation of the Agent Fee Cap was not simply plucked out of the air—it was based on the 
legislative history of the Agent Fee Cap, which was briefed extensively in the Arbitration.  (Pet. 
App’x 349 at 11–17.)   
The Court also is precluded from second guessing the Arbitrator’s factual findings 
concerning Womply’s services.  See HayDay, 55 F.4th at 1241 (“We also must accept the 
arbitrator’s findings of fact.”); (see also FA at 37 (“[T]he substance of Womply’s Technology 
Services was, in fact, different from Womply’s referral services, and more specifically, the 
evidence proved that the Technology Services served the purpose of benefitting Benworth in 
accomplishing its underwriting functions . . . .”); id. at 38 (“All the services directly benefited 
Benworth and allowed it to process and make over 300,000 loans.  These services were distinct 
from and had nothing to do with assisting a potential borrower in completing an application.”).)  
Even if this Court could reconsider those factual findings, the Final Award cited substantial 
compelling evidence that the Technology Fees compensated Womply for services that assisted 
Benworth’s processing of applications and underwriting of loans, including testimony from 
Benworth’s own CEO.  (Id. at 37 (citing testimony from Bernardo Navarro); id. at 39 (citing 
Bernardo Navarro’s testimony that “Womply’s services ‘automated’ Benworth’s processing of 
loans”); see also id. at 26–27 (citing testimony from Benworth’s Operations Manager about the 
utility of Womply’s Technology Services).)  Benworth does not address that evidence at all in its 
Reply. 
Benworth again invokes Oto Analytics, Inc. v. Capital Plus Financial, LLC, 2022 WL 
1488441 (N.D. Tex. May 11, 2022), but Benworth’s position is not persuasive or even consistent.  
In its Petition, Benworth argues that Capital Plus does not “carry the precedential value ascribed 
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to it by the Arbitrator” (Pet. at 49) but, in its Reply, Benworth claims that “Womply should not 
be permitted to disclaim the precedential value of Capital Plus” (Reply at 6).  Whatever 
Benworth’s position may be, the fact remains that the Arbitrator concluded that the Technology 
Fees Benworth agreed to pay Womply were not subject to the Agent Fee Cap based on the 
evidence presented at the hearing regarding the nature of Womply’s services, and not based on 
the Capital Plus decision.  (See FA at 37–41.)  In its Reply, Benworth also asserts that “the 
Arbitrator blithely ignored Capital Plus’s legal analysis that broadly defined the term ‘preparing’ 
in reference to PPP loans under the SBA Regulations” (Reply at 7), but Benworth fails to explain 
how.  Nor can it.  Indeed, the Arbitrator held that, to the extent Womply was “preparing” 
applications or performing any of the other tasks subject to the Agent Fee Cap, Benworth 
compensated Womply with separate Referral Fees, which complied with the Agent Fee Cap.  (FA 
at 33–37; see also Opp. at 17–18 (“[T]he Referral Agreement provided that Womply would be 
compensated for its referral . . . with a Referral Fee of 1% of a loan’s principal amount (what was 
subject to and consistent with the Agent Fee Cap.”).)  Again, the Arbitrator did not disregard the 
law—Benworth just disagrees with how that law was applied in this case.  That is beyond the 
scope of this Court’s review.  Lagstein v. Certain Underwriters at Lloyd’s, London, 607 F.3d 
634, 641 (9th Cir. 2010) (“[T]he FAA does not sanction judicial review of the merits.”) (cleaned 
up).  
B. 
The Arbitrator Did Not Manifestly Disregard The Law In Finding That 
Womply Was Not An LSP. 
In the Arbitration, Benworth made the facially absurd argument that, despite using 
Womply’s services to process and fund more than 300,000 PPP loans, for which Benworth 
received more than $680 million from the federal government, Benworth should not have to pay 
Womply any fees under SBA rules.4  Benworth relied on a provision in the SBA’s Standard 
 
4 In the Arbitration, the parties vigorously disputed whether Womply or Benworth would have 
been responsible for submitting the Agreements to the SBA if Womply were an LSP.  Womply 
argued that Benworth understood it would have been responsible for submitting the Agreements 
to the SBA, because (among other reasons) Benworth had previously submitted to the SBA an 
LSP agreement it had with an LSP called Lendio.  (FA at 17.)   
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Operating Procedure 50 10 6 (“SOP”),5 which states that “[a]n LSP may only receive 
compensation from the 7(a) Lender for services provided under an SBA-reviewed LSP 
Agreement.”  (SOP at 185.)  SBA regulations define an LSP (short for Lender Service Provider) 
as “an Agent who carries out lender functions in originating, disbursing, servicing, or 
liquidating a specific SBA business loan or loan portfolio for compensation from the lender.”  
12 C.F.R. § 103.1(d) (emphasis added).  Benworth expressly agreed in its Agreements with 
Womply that “Womply is not a . . . lender service provider as defined by the SBA” (FA at 19) 
and represented to the SBA that Womply “is not an LSP” (id. at 44).  Despite this, Benworth 
asked the Arbitrator to conclude that Womply was in fact an LSP and therefore could not receive 
any compensation from Benworth because the Agreements with Womply were never submitted 
to the SBA.  (Id. at 30–31.)  The Arbitrator rejected that argument primarily because—consistent 
with the parties’ Agreements and Benworth’s own contemporary representations—he determined 
based on the facts presented at the hearing that Womply did not fit within the SBA’s definition 
of an LSP.  (Id. at 41–47.)   
In its Reply, Benworth simply restates the same arguments from its Petition.  Those 
arguments fail for the same reasons Womply stated in its Opposition, including because this 
Court is not permitted to reconsider the Arbitrator’s factual finding that Womply did not originate 
or underwrite loans.  See LPL Fin., LLC v. Gardner, 2022 WL 1750363, at *1 (N.D. Cal. May 
31, 2022) (“In reviewing an arbitral award, courts do not sit to hear claims of factual or legal 
error by an arbitrator as an appellate court does.”) (cleaned up).  In addition, the Arbitrator’s 
decision that Benworth—not Womply—originated loans using Womply’s technology is 
consistent with the express and unambiguous terms of the Agreements, and therefore cannot be 
“irrational.”  (See Referral Agreement [Pet. App’x 3982] § 2.2 (stating that Benworth would pay 
Womply fees “for each loan originated by Lender” (emphasis added); Order Form [Pet. App’x 
 
5 The nearly 600-page SOP is published by the SBA and contains “the SBA’s participation 
requirements for 7(a) Lenders and Certified Development Companies (CDCs) . . . and the policies 
and procedures governing the 7(a) and 504 loan programs.”  (SOP at 7.)  The PPP was one of the 
SBA’s 7(a) loan programs, which was implemented pursuant to Section 7(a) of the United States 
Small Business Act.  Paycheck Protection Program, 85 Fed. Reg. 20,811, 20,811 (Apr. 15, 2020). 
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3986] § 2.1 (providing that “Client [Benworth] shall pay Womply the technology fees described 
below for each loan originated by Client . . . .”) (emphasis added); FA at 42.)   
Benworth’s reliance on Coast Trading Co. v. Pacific Molasses Co., 681 F.2d 1195 (9th 
Cir. 1982), is misplaced.  Unlike here, that case involved a contract that expressly limited the 
remedies available in the event of a breach, and the Ninth Circuit vacated an arbitration award 
that provided other remedies beyond those permitted by the contract.  Id. at 1199. 
Benworth also relies on Aspic Engineering & Construction Co. v. ECC Centcom 
Constructors LLC, 913 F.3d 1162 (9th Cir. 2019), which supports confirmation of the Final 
Award.  There, a prime contractor on a project for the U.S. Army Corps of Engineers awarded 
two subcontracts to Aspic Engineering and Construction Company (“Aspic”), an Afghan 
company.  Id. at 1164.  The subcontracts incorporated by reference several Federal Acquisition 
Regulation (“FAR”) clauses, and there was no dispute that Aspic failed to comply with those 
clauses.  Id. at 1164, 1167–68.  Nevertheless, the arbitrator refused to enforce them because, in 
his view, “normal business practices and customs of subcontractors in Afghanistan were more 
‘primitive’ than those of U.S. subcontractors,” and “it was not reasonable to expect that 
Afghanistan subcontractors would be able to conform to the strict and detailed requirements of 
general contractors on U.S. Federal projects.”  Id. at 1166–67.  The Ninth Circuit explained that 
the arbitrator could have properly concluded, based on the past practices of the prime contractor 
and Aspic, that the parties did not intend that Aspic be held to the strict requirements of the FAR 
clauses.  Id. at 1168 (“This finding alone—if based on past practice—would be insufficient for 
us to vacate an arbitral award.”); see also id. at 1167 (“An arbitrator may interpret the contract 
‘in light of . . . indications of the parties’ intentions’ . . . .”).  However, because the arbitrator 
instead based his decision “upon his rationalization that to enforce the FAR clauses on Aspic 
would be unjust,” the Ninth Circuit vacated the award.  Id. at 1168. 
Here, the Arbitrator did not refuse to apply the SOPs in order to reach a result that it 
thought was fair to Womply.  (See FA at 54 (“The Arbitrator is somewhat sympathetic to 
Benworth’s argument . . . [but] it is not, actually, the Arbitrator’s role to decide what is ‘fair;’ he 
is instead merely tasked with interpreting the contract provisions.”).)  Instead, the Arbitrator 
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determined that Womply was not an LSP based on his interpretation of the Agreements, the 
parties’ past practices, and the applicable law, not “his own rough sense of justice.”  (Pet. at 57.)  
Indeed, the Arbitrator expressly stated that his finding that Womply was not an LSP was based 
in part on past practice and the intent of the parties:  (i) the parties’ Agreements explicitly state 
that Womply was not an LSP, (ii) Benworth’s CEO represented to the SBA that “Womply is not 
an LSP,” (iii) Benworth first claimed that Womply was an LSP after Womply commenced the 
Arbitration, and (iv) if Benworth believed Womply was an LSP, it knew how to enter into an 
LSP agreement and submit it to the SBA, as it previously had done in connection with its 
retention of an LSP called Lendio.  (FA at 44–45.)  These are the types of factual findings that 
the Aspic court held an arbitrator could rely on to interpret a contract and that would not justify 
vacating an award.  See Aspic, 913 F.3d at 1167–68.   
C. 
The Final Award Grants Relief Consistent With The Agreements.  
In its Petition, Benworth argues that the Final Award granted relief inconsistent with the 
Agreements because it awarded Womply fees that violated SBA regulations.  (Pet. at 68.)  This 
was simply a rehash of its disagreement with the Arbitrator’s rejection of its Agent Fee Cap and 
LSP arguments (see id. at 68–72), which Womply vehemently opposed (see Opp. at 15–19).  
Accordingly, Benworth’s claim that “Womply has no response” to Benworth’s argument that the 
Final Award grants relief not permitted by the Agreements (see Reply at 10) is wrong.   
II. 
THE FINAL AWARD DOES NOT VIOLATE PUBLIC POLICY. 
Benworth’s policy argument fails because it is based on the same faulty arguments about 
the Agent Fee Cap and LSPs that Womply disposes of in its Opposition and above.  See 
DeMartini v. Johns, 693 F. App’x 534, 537 (9th Cir. 2017) (refusing to vacate award on public 
policy grounds where doing so “would require the Court to revisit the arbitrator’s findings of fact 
and conclusions of law”). 
III. 
THE ARBITRATOR REASONABLY DECLINED TO STAY THE 
ARBITRATION. 
In its Reply, Benworth claims that by denying its stay motions, the Arbitrator “foreclosed 
Benworth from presenting pertinent evidence and materials” and “usurped the role of the SBA.”  
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(Reply at 11.)  But Benworth fails to identify any evidence or materials that it was unable to 
present at the Arbitration.  Instead, Benworth speculates that the SBA could in the future make a 
decision that would be relevant to the issues in the Arbitration, but Benworth cites no authority 
that such speculation is sufficient to vacate the Final Award.  Nor did the Arbitrator usurp the 
role of the SBA.  The Arbitrator resolved a contract dispute between the parties, and while 
Benworth raised arguments based on SBA regulations, it never argued that the Arbitrator did not 
have the authority or jurisdiction to resolve those issues.   
Naing International Enterprises, Ltd. v. Ellsworth Associates, Inc., 961 F. Supp. 1 
(D.D.C. 1997), on which Benworth heavily relies, is both instructive and materially different 
from this case.  Naing involved an arbitration between merger counterparties Naing International 
Enterprises, Inc. (“NIE”) and Ellsworth Associates, Inc. (“EAI”) and concerned NIE’s 
representations that it was “a small disadvantaged business eligible for participation in the SBA’s 
Section 8(a) Program.”  Id. at 2.  Less than two months before the hearing, the SBA’s Inspector 
General issued a report stating that it believed that NIE “should not have been admitted into the 
8(a) program,” and recommending that “the Assistant Administrator for the Division of Program 
Certification and Eligibility . . . initiate action to terminate NIE from the 8(a) program.”  Id. at 4.  
Importantly, the report set a deadline of May 10, 1996—less than one month after the scheduled 
arbitration hearing—“for the SBA to act on the report.”  Id.  On April 11 and 15, 1996, EAI 
moved for a continuance based on the Inspector General’s report but both requests were denied.  
Id.  On June 5, 1996, the arbitration panel issued an award in NIE’s favor.  Id. at 2.  
The Naing court vacated the award for reasons not present here.  The court found that 
NIE failed to disclose to the arbitration panel that it was in “active discussions” with the SBA 
about its “possible voluntary withdrawal” from the SBA’s Section 8(a) program.  Id. at 5.  In 
fact, on July 19, 1996, shortly after the panel issued its award in NIE’s favor, NIE “did voluntarily 
withdraw from the program.”  Id.  The court held that “an impartial arbiter might conclude” that 
NIE voluntarily withdrew from the program “to avoid the stigma of being involuntarily 
terminated from the program.”  Id.  Obviously concerned with NIE’s concealment of relevant 
information from the panel, the Ninth Circuit held that, “[o]n this record, the arbitration 
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proceeding should be re-opened so that the arbitration panel can consider these facts not 
previously disclosed to it.”  Id.  Thus, in order to allow the arbitrator to consider previously 
concealed evidence, the Ninth Circuit held that the panel should have given itself more time to 
hear from the SBA in light of the fact that the SBA was expected to take action just one month 
after the arbitration hearing.  Id. at 4. 
Unlike in Naing, the Arbitrator was not presented with persuasive evidence concerning 
the scope of the SBA’s investigation or when it would conclude—and in the more than 20 months 
since the hearing, there has been no indication that it is nearing a meaningful conclusion.  The 
record in Naing bears no resemblance to the facts of this case.    
CONCLUSION 
Womply respectfully requests that the Court deny Benworth’s Petition to Vacate and 
confirm the Final Award. 
 
Respectfully submitted, 
 
 
 
Dated:  November 20, 2024 
WILLKIE FARR & GALLAGHER LLP 
 
By: /s/ Alexander L. Cheney 
 
Alexander L. Cheney 
Stuart R. Lombardi (pro hac vice) 
Joshua S. Levy (pro hac vice) 
Zoe Packman 
 
Attorneys for Petitioner 
Oto Analytics, LLC 
Case 4:24-cv-03975-AMO     Document 63     Filed 11/20/24     Page 11 of 11

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