Disputing is pleased to introduce its Year-End Highlights series. During this month, we will discuss 2009 developments in case law and legislation regarding arbitration and mediation. Stay tuned! Karl Bayer, Holly Hayes, and Victoria VanBuren
Continue reading...In The Householder Group v. Caughran, No. 09-40111 (5th. Cir. Nov. 11, 2009), the court summarizes the facts as follows: [A] panel of arbitrators with the National Association of Securities Dealers, Inc. (“NASD”) awarded Householder Group $39,500 in compensatory damages for breach of a promissory note, $50,000 in compensatory damages for breach of a Branch Office Agreement, and $70,000 in attorneys fees. Thereafter, Householder Group filed a motion in the district court to confirm the award, and Caughran filed a motion for vacatur. On September 17, 2008, the district court granted Householder Group’s motion, denied Caughran’s motion, and confirmed the arbitration award. Subsequently, Caughran filed this pro se appeal contending that the district court erred by denying his motion to vacate and by confirming the award. The Fifth Circuit noted that judicial review of arbitral awards is “exceedingly deferential, and vacatur is available only for the limited reasons outlined in Section 10(a) of the FAA.” The court also said that it has no authority to review the merits of the award. Since Caughran did not allege the FAA grounds, the court construed his claims under Sections 10(a)(2) and (3). First, Caughran argues that he did not receive a fair hearing because the panel did not allow him to introduce certain evidence. But the Fifth Circuit agreed with the reasoning of the district court: The arbitrator is not bound to hear all of the evidence tendered by the parties; however, he must give each of the parties to the dispute an adequate opportunity to present its evidence and argument. An evidentiary error must be one that is not simply an error of law, but which so affects the rights of a party that it may be said that he was deprived of a fair hearing. The court then addressed Caughran’s second argument that the panel was biased. Specifically, Caughran claims that: (1) the panel refused to force Householder Group to comply with the panel’s discovery orders; (2) the panel’s rulings were one-sided and against Caughran; (3) the panel wanted him to lose despite overwhelming evidence favoring Caughran; and (4) the panel awarded $50,000 for the breach of the Branch Office Agreement in order to punish Caughran for filing forty motions for evidence. The Fifth Circuit stated that “evident partiality based on actual bias is an onerous burden” because the party must show that “the alleged arbitrator partiality was direct, definite, and capable of demonstration.” The court concluded that Caughran failed to meet his burden because he did not produce specific facts to support these allegations. Lastly, the Fifth Circuit discussed Caughran’s claim that his Seventh Amendment rights had been violated. The court stated that “[I]f claims are properly before an arbitral forum pursuant to an arbitration agreement, then the Seventh Amendment right to a jury trial vanishes.” Accordingly, the Fifth Circuit affirmed the lower court’s decision to confirm the arbitral award. Technorati Tags: arbitration, ADR, law, Fifth Circuit
Continue reading...In re Golden Peanut Co., (Texas 2009) (No. 09-0122) deals with family members who brought a wrongful death action against Grant Drennan’s employer, Golden Peanut Company, LLC. (“Golden Peanut”). Golden Peanut did not subscribe to worker’s compensation insurance, but provided an Employee Injury Benefit Plan which called for binding arbitration of employment-related claims. Golden Peanut filed a motion to compel arbitration. The trial court denied the motion and Golden Peanut appealed. The Texas Supreme Court, citing In re Labatt Food Service, L.P., __S.W.3d __ (Tex. 2009), held that wrongful death beneficiaries nonsignatories to an arbitration agreement must be compelled to arbitrate when the decedent’s claims would had been arbitrated. Technorati Tags: arbitration, ADR, law, Texas Supreme Court
Continue reading...[Hat tip to our blog contributor Peter S. Vogel] The United States Court of Appeals for the Tenth Circuit held that an arbitrator did not act with manifest disregard of the law when he turned to extrinsic evidence to determine the parties’ intent. The court also granted sanctions to compensate the company for unnecessary legal fees incurred when the other party appealed the arbitral award. I. Background In DMA Int’l, Inc. v. Qwest Communications Int’l, Inc., No. 08-1392 (10th Cir. Nov. 4, 2009), DMA International, Inc. (DMA) contracted to provide database research services to Qwest Communications International, Inc. (Qwest) in April 2004. Their contract contains the following fee provision: [F]ees for Services rendered hereunder are as follows: Twenty-five dollars and twenty cents ($25.20) per circuit satisfactorily completed. (Fee is based on an hourly rate of forty-five dollars ($45) with 1.8 circuits completed per hour). Eight months later, when the contract expired, DMA billed Qwest for $5.4 million, which included a $1.6 million deduction representing fees already paid by Qwest. Qwest refused to pay the final balance claiming that the $1.6 million paid to DMA was enough to satisfy its obligations under their contract. DMA submitted the dispute to arbitration and the arbitrator ruled against DMA. Then, DMA filed a motion to vacate the award in district court. The district court held that DMA had no basis for vacatur and confirmed the arbitral award. DMA now appeals. DMA claims that the amount due under the contract should be based on the number of circuits completed. At $25.20 per circuit, for 285,000 circuits resulting on a final balance due of $5.4 million. On the other hand, Qwest insists that the parties intended the services to be paid per hour, at the rate stated in parenthesis. That is, $45 per hour at a rate of 1.8 circuits per hour yields a final price of $1.7 million. II. Manifest Disregard of the Law The Tenth Circuit first addressed DMA’s main argument that the arbitrator manifestly disregarded the law. The court highlighted the standard stating that “[T]he record must show the arbitrator knew the law and explicitly disregarded it.” The court explained that the arbitrator found the contract provision ambiguous and appropriately considered extrinsic evidence, in accord with Colorado contract law. The evidence included an eleven-day arbitration hearing in which 16 witnesses testified and 140 exhibits were admitted. At the end, the arbitrator concluded that the parties intended for DMA to be paid at the rate of $45 per hour. Therefore, the court agreed with the district court that the arbitrator “correctly stated the law governing contract interpretation and applied it to the fees provision.” Interestingly, the court also noted on footnote 2 that: Qwest contends that this argument is foreclosed by Hall Street Associates v. Mattel, Inc., 128 S. Ct. 1396 (2008), in which the Supreme Court held that 9 U.S.C. § 10 provides the exclusive grounds for expedited vacatur of an arbitration award. 128 S. Ct. at 1403. Whether manifest disregard for the law remains a valid ground for vacatur is an interesting issue, but as the district court noted, one not central to the resolution of this case. As described below, the arbitrator did not act with manifest disregard of the law or in any other way that would justify vacatur. (emphasis added) III. Attorney Fees Next, the court turned to Qwest’s motion for attorney fees under 28 U.S.C. § 1927 (Counsel Liability for Excessive Costs). The court noted that the Federal Rule of Appellate Procedure 38 (Damages and Costs for Frivolous Appeal) also authorizes the court to “award just damages and single or double costs to the appellee if [the court] determine[s] that an appeal is frivolous.” Then, citing Lewis v. Circuit City Stores, Inc., 500 F.3d 1140, 1153 (10th Cir. 2007), the court said that “[b]ecause arbitration presents such a ‘narrow standard of review,’ Section 1927 sanctions are warranted if the arguments presented are ‘completely meritless.’” The court distinguished Lewis and found that the facts of present case are more similar to B.L. Harbert International LLC v. Hercules Steel Co., 441 F.3d 905 (11th Cir. 2006). The court warned that “protracted attempts to vacate arbitration awards destroy the ‘promise of arbitration’ and will not be tolerated.” Finally, the court reasoned that DMA’s argument amounts to say that the arbitrator clearly erred in interpreting the contract provision, and that even a showing of clear error is not enough to vacate an arbitral award. Accordingly, the court held that DMA’s appeal of the arbitral award met both of the standards (28 U.S.C. § 1927 and Rule 38) and remanded the case for the district to determine the attorney fees and costs. Technorati Tags: arbitration, ADR, law
Continue reading...Disputing is published by Karl Bayer, a dispute resolution expert based in Austin, Texas. Articles published on Disputing aim to provide original insight and commentary around issues related to arbitration, mediation and the alternative dispute resolution industry.
To learn more about Karl and his team, or to schedule a mediation or arbitration with Karl’s live scheduling calendar, visit www.karlbayer.com.
Disputing is published by Karl Bayer, a dispute resolution expert based in Austin, Texas. Articles published on Disputing aim to provide original insight and commentary around issues related to arbitration, mediation and the alternative dispute resolution industry.
To learn more about Karl and his team, or to schedule a mediation or arbitration with Karl’s live scheduling calendar, visit www.karlbayer.com.