Confirmation / Vacation of Arbitration Awards

Third Circuit Affirms Dismissal of Petition to Confirm “Sham” Arbitration Award

August 13, 2021 by Michael Wolgin

A pro se plaintiff had sought to confirm a $116,313 award by “Sitcomm Arbitration Association,” which had allegedly ruled that TD Auto Finance LLC was liable for breach of contract. TD Auto Finance contested the petition by moving to dismiss, contending that the award was a “sham” related to the repossession of the plaintiff’s car and that it had never agreed to participate in an arbitration. The district court agreed with TD Auto Finance and dismissed the petition, finding that the plaintiff failed to submit a valid agreement to arbitrate and noting that the purported award was incomprehensible, lacked factual findings and legal conclusions, and did not support the existence of an agreement between the parties.

On appeal, the Third Circuit Court of Appeals rejected the plaintiff’s argument that TD Auto Finance was barred from challenging the award because it had not moved to vacate it within the three-month statutory time period. The court ruled that it was unnecessary to consider this issue, where, as here, the district court properly denied a petition to confirm that lacked “evidence of a genuine arbitration award and an agreement between the parties.”

Pena v. TD Auto Finance LLC, No. 21-1670 (3d Cir. July 15, 2021).

Eleventh Circuit Denies Petition to Vacate Arbitration Award Based on Alleged Bias Where Arbitrator’s Prior Employment by Opposing Law Firm Was Disclosed

August 12, 2021 by Benjamin Stearns

A pro se litigant sought to vacate an adverse summary judgment in arbitration that rejected her wrongfully termination claim. At the outset of the arbitration proceeding, the parties agreed on the selection of the proposed arbitrator, even though his curriculum vitae showed that he had previously served as the managing shareholder of an office of the law firm representing the employer adverse to the pro se litigant. This fact was further mentioned by the law firm in an email to the pro se litigant, and again by the arbitrator himself in another email to the parties.

After the arbitrator entered judgment for the employer, the pro se litigant sought to vacate the award, alleging that the arbitrator had failed to disclose his friendship with one of the lawyers representing the employer. The pro se litigant based her argument in part on the discovery of a photograph of the arbitrator and opposing counsel “standing arm in arm in celebration of [the arbitrator’s] 50th birthday” and further that this “undisclosed relationship and their friendship demonstrates bias.”

The Eleventh Circuit found these arguments insufficient to demonstrate the requisite bias. The court noted that the arbitrator’s prior employment by the law firm had been disclosed and stated that “it follows necessarily from this disclosure that he likely has friendships with many of [the firm’s] employees.” Further, to the extent the alleged friendship “should have been separately disclosed, we have explained that standing alone, the fact that an arbitrator had previous contacts with counsel for one of the parties does not suggest evident partiality.” To demonstrate bias, the pro se litigant had to produce some additional basis, such as “financial incentives” or “concurrent representations” involving opposing counsel that “might give a reasonable impression of partiality.” The evidence that was presented offered “mere speculation of unfair bias … which is too remote, uncertain and speculative to create a reasonable impression of partiality.”

Perez v. Cigna Health & Life Insurance Co., No. 20-12730 (11th Cir. July 13, 2021).

Court Refuses to Vacate Award Stemming From Workplace Personal Injury

August 5, 2021 by Brendan Gooley

The U.S. District Court for the Southern District of New York recently refused to vacate an arbitration award stemming from a workplace personal injury after the arbitrator concluded that the employee was primarily responsible for his own injuries.

Daniel Pacelli was working for Vane Line Bunkering Inc. (known as “Vane Brothers”), as a tankerman on one of Vane Brothers’ barges in New York Harbor when he slipped, fell, and was injured on ice while attempting to salt the deck of the barge. He initiated an arbitration action against Vane Brothers. A JAMS arbitrator heard the case and concluded that Pacelli had sustained $986,750 in damages and that both Pacelli and Vane Brothers were negligent. More specifically, the arbitrator concluded that Pacelli was 70% at fault while Vane Brothers was 30% at fault. The arbitrator therefore reduced Pacelli’s damages accordingly. Pacelli moved to vacate the award.

The district court declined to vacate the award. It rejected Pacelli’s arguments that the arbitrator had (1) manifestly disregarded the law; (2) been partial to Vane Brothers; (3) engaged in “misbehavior” by repeatedly delaying his decision; and (4) improperly failed to award interest.

With respect to manifest disregard, the court concluded that the arbitrator had applied the law regarding contributory negligence to the facts of the case and had supported his decision regarding comparative fault with evidence from the record, including evidence that Pacelli had acted carelessly by attempting to salt a narrow part of the deck at night and in freezing temperatures without seeking assistance. The court noted that the Second Circuit does not recognize manifest disregard of the evidence as a ground for vacating an award and refused to reweigh the evidence.

The court also rejected Pacelli’s argument that the arbitrator had been partial to Vane Brothers. After the arbitration hearing but months before the arbitrator issued his decision, the arbitrator disclosed that he had a small ownership interest in JAMS and JAMS disclosed that it had a small number of other arbitrations with Vane Brothers, its counsel, and/or its counsel’s law firm. The court noted that Pacelli had waived this argument by not raising it before the arbitrator. The court nevertheless also explained that the facts did not show improper partiality and rejected Pacelli’s argument that the arbitrator’s small ownership interest was material in any event.

Turning to Pacelli’s next argument — that the arbitrator’s delays warranted vacatur — the court noted that Pacelli had not pointed to any “authority to support his position that the arbitrator’s extension requests amounted to ‘misbehavior’ by the arbitrator such that Pacelli’s rights were prejudiced.” That was especially true because Pacelli had consented to the extensions.

Finally, the court rejected Pacelli’s contention that it should vacate the award because the arbitrator had not awarded prejudgment interest. Although the court acknowledged that it would have been proper for the arbitrator to award prejudgment interest, the court noted that Pacelli had failed “to point the Court to any case in which a district court vacated an arbitration award for failure to award prejudgment interest” and noted that courts had declined to do any such thing.

The court then went on to confirm the arbitration award.

Pacelli v. Vane Line Bunkering, Inc., No. 1:20-cv-09431 (S.D.N.Y. July 16, 2021).

Court Confirms Arbitration Decision Concluding That Discrimination Claims Were Time-Barred

June 18, 2021 by Brendan Gooley

A federal district court recently confirmed an arbitration decision concluding that a disgruntled former employee’s discrimination and retaliation claims under Title VII were time-barred because the former employee did not initiate arbitration in a timely fashion.

Clare Anagonye, a financial adviser, filed a charge with the EEOC claiming she was constructively discharged and discriminated and retaliated against on the basis of her race, color, and gender in violation of Title VII. The EEOC dismissed the charge on January 19, 2018, and advised Anagonye of the 90-day limitation period for filing a civil action at that time.

Anagonye filed a civil action within the 90-day time period, but her employment contract with her former employer contained an arbitration clause. The district court concluded that the clause was valid and enforceable and stayed Anagonye’s action pending arbitration. Anagonye subsequently filed a demand for arbitration on or about August 27, 2019.

Anagonye’s former employer argued that the arbitration clause in the employment contract required Anagonye to initiate arbitration, not a lawsuit, within 90 days of the EEOC’s dismissal.

An arbitrator panel of the American Arbitration Association (AAA) agreed and concluded that Anagonye’s demand for arbitration was time-barred and that it therefore lacked jurisdiction over her claim. Anagonye’s former employer moved to confirm the award and Anagonye, proceeding pro se, moved to vacate it.

The U.S. District Court for the Eastern District of Michigan confirmed the award. A magistrate judge concluded that Anagonye had “failed to establish any of the statutory grounds for setting aside the arbitration decision.” The judge noted that it had already rejected Anagonye’s primary claim that court, not arbitration, was the appropriate venue for her claims when it ordered a stay pending arbitration and that Anagonye had waived any challenge to that decision by failing to object to it. The judge also rejected Anagonye’s “conclusory statements and speculation” regarding alleged “corruption” by the AAA panel, noting that the record established that Anagonye had the opportunity to select arbiters despite her allegations to the contrary. Finally, the judge held that he was precluded from adjudicating the panel’s decision that Anagonye’s claim was time-barred because “the FAA does not provide for judicial review of an arbitrator’s legal conclusions.”

The district court adopted the magistrate judge’s recommendation.

Anagonye v. Mass Mutual Insurance Co., No. 2:18-cv-11170 (E.D. Mich. May 21, 2021).

Party Opposing Confirmation of Non-Domestic Arbitration Award Subject to Convention May Also Assert FAA Defenses If Award Rendered in the U.S. or Under U.S. Arbitral Law

May 18, 2021 by Carlton Fields

In 2006, Goldgroup and DynaResource entered into a contract relating to a gold mining operation in Mexico, which contained a dispute resolution provision requiring that the disputes be submitted to binding arbitration in Denver, Colorado, under the rules of the American Arbitration Association (AAA). Goldgroup initiated arbitration in Denver, but DynaResource refused to participate, relying on a Mexico City court’s ruling in 2015 that the arbitration agreement was unenforceable because Goldgroup had waived its right to arbitration by submitting to the jurisdiction of Mexico courts in prior disputes.

In 2016, the arbitrator ruled in Goldgroup’s favor and awarded it monetary and equitable relief. The arbitrator also found that the arbitration clause was valid and enforceable, that Goldgroup had not waived its right to arbitrate by participating in any other lawsuits, and that DynaResource engaged in forum shopping by asking the Mexico City court to rule on the arbitrability of Goldgroup’s claims.

Goldgroup then sought confirmation of the non-domestic arbitration award in the Colorado district court. DynaResource opposed recognition of the award under the Inter-American Convention on International Commercial Arbitration (the Convention) and moved to vacate the award under the Federal Arbitration Act (FAA), arguing that the award should not be confirmed because the arbitrator exceeded the scope of his authority by ruling on the issue of whether Goldgroup had waived its right to arbitrate and whether the Mexico City court’s ruling effectively annulled the subsequent award issued in the arbitration. The district court confirmed the award and entered final judgment against DynaResource. After unsuccessfully moving to alter or amend the judgment, DynaResource appealed.

On appeal, DynaResource argued that the district court erred in holding that waiver was a question for the court without making a factual determination as to whether Goldgroup in fact waived its right to arbitration. Goldgroup contended that DynaResource did not raise the issue with the district court and thus failed to preserve it. The Tenth Circuit Court of Appeals agreed, finding that the district court was not required to decide whether Goldgroup waived its right to arbitrate because the issue was not properly before it, and DynaResource had not preserved the issue for the appellate court’s review.

In addition, Goldgroup argued that even if DynaResource had preserved the issue, waiver is not available as a defense to confirmation of the award because FAA defenses, such as waiver, do not provide grounds for vacating an award subject to the Convention.

On an issue of first impression, the Tenth Circuit addressed whether the FAA’s vacatur standards apply when a U.S. court is considering the confirmation of a non-domestic arbitration award subject to the Convention and rendered in the United States or under U.S. arbitral law.

The Tenth Circuit rejected Goldgroup’s argument, holding that the Convention’s defenses for opposing the confirmation of a non-domestic arbitration award are not exclusive and that a party may also assert FAA defenses to oppose confirmation if the non-domestic arbitration award was rendered in the United States or under U.S. arbitral law.

Despite its holding that DynaResource could seek vacatur under the FAA, the Tenth Circuit rejected DynaResource’s argument under the FAA that the arbitrator exceeded his authority by ruling on the issue of arbitrability, finding that the contracting parties manifested a clear intent to arbitrate the issue of arbitrability by incorporating the AAA rules into their arbitration agreement. Moreover, the circuit court found DynaResource failed to show that any alleged error by the arbitrator in ruling on the waiver issue warranted vacatur.

The circuit court also rejected DynaResource’s argument under the Convention that the Mexico City court’s ruling effectively annulled the subsequent arbitration award, holding that the defense does not apply preemptively to awards not yet rendered. The circuit court also found the defense was inapplicable because the Mexico City court improperly applied Mexican law rather than U.S. law, where the arbitration was pending. Therefore, the Tenth Circuit affirmed confirmation of the award.

Goldgroup Resources, Inc. v. DynaResource de Mexico, S.A. de C.V., No. 20-1143 (10th Cir. Apr. 16, 2021).