United States Court of Appeals
For the First Circuit
____________________
No. 00-1190
BULL HN INFORMATION SYSTEMS, INC.
Plaintiff, Appellee,
v.
CHARLES J. HUTSON
Defendant, Appellant.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Robert B. Collings, U.S. Magistrate Judge]
____________________
Before
Torruella, Chief Judge,
Boudin and Lynch, Circuit Judges.
____________________
Michael J. Liston, with whom Carr & Liston was on brief, for
appellant.
David B. Chaffin, with whom Kathleen A. Kelley and Hare & Chaffin
were on brief, for appellee.
____________________
October 6, 2000
____________________
LYNCH, Circuit Judge. Arbitration sometimes fails to fulfill
its promise of efficient, inexpensive dispute resolution. Charles J.
Hutson, believing his employer, Bull HN Information Systems, owed him
commissions and had underpaid certain benefits, sought to arbitrate the
dispute as required under the terms of his contract. After winning two
rounds of arbitration but twice losing in district court review of the
awards, Hutson appeals the court order vacating the latest arbitration
award in his favor for unpaid commissions. That award results from the
first stage of an arbitration; benefits-related claims are to be
arbitrated later. Specifically, in the first phase of the arbitration,
the arbitrator determined that Hutson's request for arbitration was
timely and that he was, indeed, entitled to payment of the commission
he sought.
A magistrate judge of the district court, applying the
Federal Arbitration Act, 9 U.S.C. § 1 et seq., held on round one that
the arbitrator exceeded his authority and so vacated and remanded the
finding that Hutson's request for arbitration was timely. Following
the court's remand, the arbitrator again concluded that Hutson's
request was timely; the court vacated the modified award and remanded
the entire case to a new arbitrator. Hutson has not yet arbitrated his
benefits-related claims, some of which turn on the timeliness of his
demand.
Hutson argues that the district court improperly vacated the
arbitrator's finding of timeliness, along with his commissions award.
We agree. Because the district court went beyond the applicable
"exceedingly deferential" standard of review when it overturned the
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arbitration award, we reverse the order and direct entry of judgment
confirming the arbitral award for Hutson on the issues of the
timeliness of his demand and the compensation due, and remand for
arbitration of Hutson's benefits-related claims.
Hutson's appeal also gives rise to a question of first
impression in this circuit of whether the FAA's provisions allowing
appeal from certain orders concerning arbitration cover an order
vacating and remanding a partial award. Permitting appeal in this case
would not offend the strong federal policies favoring arbitration and
disfavoring piecemeal litigation, and we conclude that appellate
jurisdiction exists.
I.
Hutson began working as a sales representative for Bull in
1989. Bull's 1990 Sales Compensation Plan included Section VI,
entitled "Interpretation and Dispute Resolution," which, in turn,
contained sections with different headings. Section VI.D, entitled
"Arbitration of Certain Disputes," required covered employees to submit
to arbitration "[a]ll disputes which involve claims for $3,000 or more,
and which arise out of the participant's course of employment or out of
the termination thereof." That section also provided that "[t]he
Commercial Arbitration Rules of the American Arbitration Association
shall apply to all aspects of the arbitration between the parties."
The Plan did not list the applicable AAA rules or otherwise make them
available to participants. A different section, VI.E, entitled
"Controlling Law", included a choice of law provision, which provided
that the Plan would be "governed in all respects by" Massachusetts law.
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A separate section, Section VI.F, entitled "Limitations of Actions,"
required claimants to demand arbitration of disputes arising out of the
Plan within two years after the claim arose. The basic dispute between
the parties is whether this aggregation of sections required that
notice of demand for arbitration be filed with the AAA, as AAA rules
state, or simply sent to the employer.
In 1991, while Hutson was hospitalized following a liver
transplant, his wife twice sent letters to Bull on his behalf, once by
certified mail, asserting that Hutson was due commissions for work on
an account in 1990 and requesting arbitration of the dispute in
accordance with the provisions of the Plan. The letters read, in
relevant part:
Under the terms of the Sales Compensation Plan we
are to ask for arbitration within two years of
the occurrence. The non-payment of this matter
came to our attention in mid-October 1990. This
letter and the attached statement is Chuck's
official request for this arbitration and his
explanation of why this commission is due.
Please forward this request to the appropriate
arbitration committee under the terms of the
Plan. . . .
. . . A speedy response to this matter would be
appreciated.
Bull did not respond.1 These letters demanded arbitration within the
two-year period.
Hutson eventually elected deferred disability retirement from
Bull, effective February, 1994. In 1995, Hutson served a formal Demand
1 Although Bull says there is a question as to whether it ever
received those letters, the arbitrator resolved that question of fact
against Bull.
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for Arbitration on Bull seeking recalculation of his benefits base and
repayment of certain benefits, as well as the 1990 commission claim.
The demand was filed at the regional AAA office. Bull did not dispute
the matter going to arbitration but defended that Hutson's claims were
barred because he failed to follow the procedures required for a formal
arbitration demand within the Plan's two-year filing period as to the
1991 letters. It said the 1995 Demand was simply too late.
Arbitral Proceedings
When the parties proceeded to arbitration in 1995, by
stipulation the arbitrator divided the case into two phases. In Phase
1, the arbitrator was to determine: 1) whether Hutson's claim was
barred for failing to file a claim for arbitration under the Plan's
two-year limitation provision; and 2) if Hutson was not barred, whether
any compensation and/or commission was due on the 1990 sale.2 After a
two-day hearing including testimony from several witnesses, the
arbitrator ruled that the Plan's two-year limitations period did not
bind Hutson because the Plan was " not a contract" and that "the parties
are deemed to have submitted this matter to arbitration under Rule 7 of
the AAA Commercial Arbitration Rules." The arbitrator apparently
misread the language of the Plan which specified that Bull employees
were at-will employees and that the Plan did not create a contract for
employment for a specific period. That language, of course, could not
mean that there was no contract to pay compensation owed or to send
2 Phase 2 was to include all his remaining claims, most of
which are benefits-related.
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such disputes to arbitration. The arbitrator also determined that
Hutson, "by his wife, twice filed a timely demand for arbitration to
which [Bull] failed to respond. [Hutson], therefore, has met any
statute of limitation applicable in this matter." On the merits of
Hutson's commissions claim, the arbitrator found that Hutson was
entitled to $52,605.57 plus 10% interest from January 1, 1991.
On Bull's petition, the magistrate judge vacated the
arbitrator's Phase 1 Award, ruling that the arbitrator had exceeded his
authority by invalidating the Plan's limitations period. See Bull HN
Information Systems, Inc. v. Hutson, 983 F. Supp. 284, 292 (D. Mass.
1997). The court remanded the case to the arbitrator for determination
of the timeliness issue according to the Plan's two-year provision.
The magistrate judge, in his initial opinion, asserted that the
arbitrator never considered whether there was a timely demand in light
of his "no contract" ruling. Because there was no appeal from that
initial opinion, we do not consider whether that conclusion was
correct. The magistrate judge then went on, in dicta,3 to define the
issue on remand as whether there had been a "timely, i.e., within two
3 Bull tries to bootstrap from this dicta to an argument that
the language is the law of the case and so Hutson is bound. The law of
the case doctrine does not apply to dicta. See, e.g., Dedham Water
Co., Inc. v. Cumberland Farms Dairy, Inc., 972 F.2d 453, 459 (1st Cir.
1992) ("Dictum constitutes neither the law of the case nor the stuff of
binding precedent."). In any event, it has an equitable component and
it would be unfair, under the circumstances, to hold Hutson to the
error by the district court. See, e.g., United States v. Ticchiarelli,
171 F.3d 24, 29 (1st Cir.) (doctrine has flexibility where error by
district court would cause "serious injustice"), cert. denied, --- U.S.
---, 120 S. Ct. 129 (1999).
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years provided by the contract, demand for arbitration as defined in
Rule 6." Id. (emphasis added). The magistrate thus inappropriately
assumed the answer to an issue of contract interpretation which was
properly committed to the arbitrator. The arbitrator's response must
be understood in this context.
In the second arbitration proceeding, the arbitrator again
refused to enforce the Plan's limitations clause, this time because he
found that the Plan was an "archetypal contract of adhesion." The
arbitrator also found that Hutson had "by his wife, twice filed demands
for arbitration to which [Bull] failed to respond" and concluded that
"[t]he demand for arbitration was, therefore, made in a timely manner
under all of the circumstances of this matter."
Hutson sought to confirm the award. Bull once again sought,
in the original action, to vacate the arbitrator's decision. Its
application to vacate the "Modified Phase 1 Award" was dismissed for
lack of jurisdiction. The court said it had entered final judgment in
the previous action vacating the first Phase 1 Award and had not
retained jurisdiction. Bull instituted a new action requesting that
the court vacate the award. Once again, the magistrate judge ruled
that the arbitrator exceeded his authority and manifestly disregarded
the law. The court also ruled that remand to a new arbitrator was
warranted because the arbitrator "has yet again chosen to create his
'own notions of industrial justice' rather than follow the terms of the
agreement and the governing law."
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Hutson thereafter moved twice for clarification of the
court's order, seeking determination of whether the entire award was
vacated or whether certain claims survived. The court clarified that
its order vacated the entire Modified Phase 1 Award and that the new
arbitrator was to decide not only those issues determined in the
Modified Phase 1 Award but also all issues that had not yet been
arbitrated, although any of the arbitrator's rulings other than those
vacated by the court remained intact. Hutson appeals from this amended
judgment.
II.
A. Jurisdiction
Two jurisdictional questions are presented: whether this
court has appellate jurisdiction over Hutson's appeal and whether Bull
meets the amount in controversy required to assert diversity
jurisdiction.4
1. Appellate Jurisdiction and the Federal Arbitration Act
In turn, two questions of appellate jurisdiction are
presented: whether the fact that the order remands for a new arbitral
4 In this new action, Bull originally requested that the court
vacate the award but enter judgment for Bull. Hutson successfully
moved to dismiss Bull's application for lack of subject matter
jurisdiction because the amount in controversy, measured by the value
of an order vacating the award, was less than $75,000. The court
thought it appropriate to focus only on the amount of the award
granted. After the court granted Bull leave to amend, Bull added a
request for remand, the potential value of which would arguably exceed
$75,000.
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proceeding makes it an interlocutory order and whether the fact that it
is only a partial award makes it an unappealable, piecemeal
interlocutory order. Each is a question of first impression here.
The Federal Arbitration Act, 9 U.S.C. § 1 et seq., permits
appeal from certain orders concerning arbitration which otherwise would
not qualify as final judgments under the traditional final judgment
rules of 28 U.S.C. § 1291 (1994). See Hewlett-Packard Co., Inc. v.
Berg, 61 F.3d 101, 104 (1st Cir. 1995) (order confirming arbitration
award "is appealable now because Congress directed in the statute
governing arbitration-related appeals that such an 'order' . . . should
be immediately appealable"). Under the FAA, immediate appeal may be
taken from, inter alia, an order denying confirmation of an award, 9
U.S.C. § 16(a)(1)(D), and an order vacating an award, id. §
16(a)(1)(E). Appeal from an interlocutory order directing arbitration
to proceed, however, is precluded under § 16(b) in order to further the
federal policy promoting arbitration. See Seacoast Motors of
Salisbury, Inc. v. Chrysler Corp., 143 F.3d 626, 628-29 (1st Cir.)
("pro-arbitration purposes of the FAA and the institutional goal of
avoiding piecemeal appeals and systemic delays" served by not
permitting appeal from interlocutory orders), cert denied, 525 U.S. 965
(1998).5
5 This case is distinguishable from one like Seacoast, which
dealt with appeal from an order compelling arbitration. In that type
of case, we have held that we "lack jurisdiction under the FAA to
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Hutson's appeal of the district court's order denying
confirmation of the arbitrator's Modified Phase 1 Award falls squarely
within § 16(a)(1)(D), which permits an appeal from an order "denying
confirmation of an award or partial award." Id. (emphasis added). The
other part of the district court's order, which vacated the award and
remanded the entire matter to a new arbitrator, appears to be covered
by § 16, although the statutory language provides for appeal from
orders "vacating an award." § 16(a)(1)(E). The statute does not
expressly mention remands, and so the question arises whether this
remand order renders the order a nonappealable interlocutory order.
While this court has not yet spoken on this question, other courts of
appeals that have done so "routinely assume . . . that an order
vacating an arbitrator's decision but remanding for additional
arbitration is appealable under § 16(a)(1)(E) . . . ." Perlman v.
Swiss Bank Corp. Comprehensive Disability Protection Plan, 195 F.3d
975, 980 (7th Cir. 1999); see also Jays Foods, L.L.C. v. Chemical &
Allied Product Workers Union, Local 20, AFL-CIO, 208 F.3d 610, 613 (7th
Cir. 2000) (observing that the FAA make orders vacating and remanding
arbitral awards appealable immediately); Forsythe Int'l, S.A. v. Gibbs
Oil Co. of Texas, 915 F.2d 1017, 1020 (5th Cir. 1990) ("Where the
review whether the court's order compelling arbitration was proper."
Id. at 629. Interlocutory orders compelling arbitration are not final
under § 16. See id. at 627.
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district court has vacated an award and ordered new arbitration by a
different panel, its vacatur becomes reviewable pursuant to 9 U.S.C. [§
16(a)(1)(E)]."); Virgin Islands Housing Auth. v. Coastal Gen. Const.
Services Corp., 27 F.3d 911, 914 (3rd Cir. 1994) (vacatur and remand
order that requires reevaluation of the entire controversy is
reviewable).
The reasoning of those courts is persuasive, and we hold that
an order of the district court which vacates and remands an arbitral
award is not thus made an interlocutory order. Allowing the appeal
furthers the "pro-arbitration policy designed to expedite confirmation
of arbitration awards" articulated by Congress when it amended the FAA
to allow appeal from certain orders concerning arbitration.
Hewlett-Packard, 61 F.3d at 104. This is not like an order remanding
to the arbitrator merely for clarification. Compare Landy Michaels
Realty Corp. v. Local 32B-32J, Serv. Employees Int'l Union, AFL-CIO,
954 F.2d 794, 797-98 (2d Cir. 1992) (remand to arbitrator to reconsider
calculation of damages not appealable under FAA). A remand for a new
arbitration proceeding, unlike an unappealable interlocutory order
within the scope of § 16(b), does not offend "the policies disfavoring
partial resolution by arbitration," see Forsythe Int'l, 915 F.2d at
1020 n.1, but instead encourages finality and completeness.
The second question is whether § 16(a)(1)(E), which does not
expressly mention partial awards, provides appellate jurisdiction. The
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arbitrator's Phase 1 Award could be characterized as a partial order
because it contemplates further arbitration proceedings in Phase 2.
The statute expressly provides an appeal may be taken from orders
denying or confirming partial awards. We think that the statute read
as a whole contemplates an appeal when there is an order vacating an
award, including partial awards.
2. Diversity Jurisdiction
Because the FAA itself does not create a basis for federal
subject matter jurisdiction, there must be an independent basis for
federal jurisdiction. See PCS 2000 LP v. Romulus Telecomm., Inc., 148
F.3d 32, 34-35 (1st Cir. 1998) (no federal jurisdiction over FAA action
where plaintiff failed to demonstrate federal question as independent
basis for federal subject matter jurisdiction). Bull asserts subject
matter jurisdiction based on diversity of citizenship. Because the
party asserting federal jurisdiction, once challenged on the issue,
bears the burden of demonstrating its existence, see Department of
Recreation and Sports of Puerto Rico v. World Boxing Ass'n, 942 F.2d
84, 88 (1st Cir. 1991), Bull must demonstrate that it meets the $75,000
minimum amount-in-controversy requirement to invoke this court's
diversity jurisdiction under § 1332. Review of questions of subject
matter jurisdiction is de novo. See BIW Deceived v. Local S6, 132 F.3d
824, 831 (1st Cir. 1997). Hutson says there is no subject matter
jurisdiction for failure to meet the jurisdictional amount. The
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subject matter jurisdictional amount is plainly met here for reasons we
discuss shortly.
Hidden in the issue is another issue which we note but do not
resolve. That is whether the amount requirement is met where the sums
at issue before the arbitrator at the start of the arbitration exceed
$75,000, the final (non-partial) award is for less than $75,000, and
the federal judicial relief sought is merely vacating and dismissing or
merely confirming the award. (We put to one side for now the fact that
the award here was only a partial award.) One approach would be to
analogize this to the situation where the claim in a court complaint
exceeds $75,000 but the jury awards less than $75,000. Under these
circumstances, there is diversity jurisdiction. See Coventry Sewage
Associates v. Dworkin Realty Co., 71 F.3d 1, 4-5 (1st Cir. 1995) (once
diversity jurisdiction is established, subsequent changes in amount in
controversy will not divest the court of jurisdiction). The analogy
would be made in recognition of the close connection between
arbitration and subsequent enforcement proceedings and also to carry
out the federal policies in favor of arbitration. A contrary result
could be thought to undermine these policies. A contrary result would
mean a loss of diversity jurisdiction that would have otherwise been
present if the case had been litigated rather than arbitrated (or even
if a motion to compel arbitration had been brought).
There is an argument for the other view. It proceeds on the
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basis that arbitration is independent of judicial proceedings, that
enforcement jurisdiction is not given by the FAA but must be
established independently, and that the "legal certainty" that
plaintiff's claim is less than the jurisdictional amount is established
by the arbitral award. See St. Paul Mercury Indem. Co. v. Red Cab Co.,
303 U.S. 283, 289 (1938). That is apparently the view taken by the
district court here and by the Eleventh Circuit in Baltin v. Alaron
Trading Corp., 128 F.3d 1466, 1472 (11th Cir. 1997), cert. denied, 525
U.S. 841 (1998).
But, as we have said, the jurisdictional amount is met here
for several reasons: the remand sought as to the commissions alone
meant that Hutson might recover the sums he sought, in excess of
$75,000,6 and, in any event, the issue of benefits, with a value in
excess of $75,000, remained to be arbitrated. Even if a remand had not
been sought, the total amount at issue in the entire arbitration
exceeded $75,000. When a bifurcated arbitration results in a partial
6 The district court dismissed Bull's first petition to vacate
the modified award based on the fact that Bull did not seek remand,
which the court concluded meant that the amount in controversy
determination was limited to the value of the arbitral award Bull
sought to vacate, $52,605.57. See Bull HN Information Systems, Inc. v.
Hutson, 98-10998, 1998 WL 426047, at *5 (D. Mass. July 24, 1998). As
a result, the court did not take account of the remaining benefits
issues in its calculation. It should have. An order vacating the
arbitrator's award meant that Hutson's demand was untimely, barring
arbitration of his remaining benefits-related claims. Thus, the value
to Bull of having the arbitrator's award vacated was properly measured
by including those amounts in determining whether the amount-in-
controversy requirement was met.
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award and enforcement proceedings under the FAA are brought as to the
partial award, we think the better rule is to measure the amount in
controversy by the amount at stake in the entire arbitration. Any
other rule would impose a penalty -- loss of federal jurisdiction -- on
the use of procedural devices such as bifurcation, devices meant only
to simplify and expedite proceedings. The purpose of arbitration in
large part is to have simplified, expedited proceedings and courts
should be reluctant to adopt rules which interfere with the
accomplishment of those purposes.
Because we conclude that the amount-in-controversy
requirement is satisfied, we only touch briefly on Bull's argument that
the interest on the Hutson's Modified Phase 1 Award should be included
in our calculation of the amount in controversy. That argument is
contrary to the express words of the statute and well-established case
law. See Velez v. Crown Life Ins. Co., 599 F.2d 471, 473 (1st Cir.
1979) (noting "established rule" that interest not included).
Moreover, this case does not fall within the exception for cases where
interest is an integral part of the damages at the time the claim arose
and therefore "cannot be included as a part of the jurisdictional
amount because it is incurred only because of the delay in payment and
is incidental to the main amount claimed." Id. at 473-74.
B. Timeliness of Bull's Application to Vacate
Hutson argues that Bull's application to vacate the Modified
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Award was untimely because it was not filed within Massachusetts' 30-
day filing period for applications to vacate arbitral awards. Mass.
Gen. Laws ch. 251, § 12(b). Hutson's contention is that the filing
period is jurisdictional and therefore unwaivable. There is contrary
case law that filing periods are akin to statutes of limitations, which
are routinely subject to waiver when parties fail to raise them, Cf.
Zipes v. Trans World Airlines, Inc., 455 U.S. 385, 393 (1982) (filing
timely charge within EEOC filing period like a statute of limitations,
subject to waiver, estoppel, and equitable tolling), and we have
referred to the FAA filing period as a "limitations period," see
Fradella v. Petricca, 183 F.3d 17, 19 (1st Cir. 1999). The question is
also raised of whether the Massachusetts or federal filing period
applies in this case.
But Hutson's argument is an afterthought. It was not raised
before the district court and so it is waived.
C. The District Court's Order Vacating the Arbitrator's Award and
Remanding to a New Arbitrator
There are bifurcated standards of review. We review the
district court's ruling on an arbitration award de novo, but we also
are mindful that the district court's review of arbitral awards must be
"extremely narrow and exceedingly deferential." Wheelabrator
Envirotech Operating Services Inc. v. Massachusetts Laborers Dist.
Council Local 1144, 88 F.3d 40, 43 (1st Cir. 1996). Indeed,
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"[a]rbitral awards are nearly impervious to judicial oversight."
Teamsters Local Union No. 42 v. Supervalu, Inc., 212 F.3d 59, 61 (1st
Cir. 2000). A court's review of an arbitration award is highly
deferential because the parties "have contracted to have disputes
settled by an arbitrator" and thus, "it is the arbitrator's view of the
facts and of the meaning of the contract that they have agreed to
accept." United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29,
37-38 (1987). While the arbitrator's award must "draw its essence from
the contract," as long as the arbitrator is "even arguably construing
or applying the contract and acting within the scope of his authority,
that a court is convinced he committed serious error does not suffice
to overturn his decision." Id. at 38.
Courts do retain limited authority to vacate an arbitrator's
award. Section 10 of the FAA lists the circumstances in which a court
has the authority to vacate an award, including certain types of
misconduct by the arbitrator or where the arbitrator "exceeded [his]
powers." 9 U.S.C. § 10(a)(4). To determine whether an arbitrator has
exceeded his authority under § 10, however, courts "do not sit to hear
claims of factual or legal error by an arbitrator as an appellate court
does in reviewing decisions of lower courts," United Paperworkers
Int'l, 484 U.S. at 38, and "[e]ven where such error is painfully clear,
courts are not authorized to reconsider the merits of arbitration
awards," Advest, Inc. v. McCarthy, 914 F.2d 6, 8 (1st Cir. 1990)
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(internal quotation marks omitted).
Beyond the specific grounds enumerated in § 10, courts
"retain a very limited power to review arbitration awards." Id.
Essentially, arbitral awards are subject to review "where an award is
contrary to the plain language of the [contract]" and "instances where
it is clear from the record that the arbitrator recognized the
applicable law -- and then ignored it." Id. at 9. In the parlance of
this and other circuits, a reviewing court may vacate an arbitral award
if it was made in "manifest disregard" of the law. See id. The
district court's order in this case vacating the Modified Phase 1 Award
is based on its finding that the arbitrator exceeded his authority, see
9 U.S.C. § 10(a)(4), and ignored the law, see Advest, 914 F.2d at 9.
The arbitral award had two essential components: a finding
that, for various reasons, there was no time-bar to the arbitration and
a finding as to the amount of commissions owed. Bull has not
challenged the commissions portion of the award in this appeal.
The sole issue for our review, therefore, is the district
court's rejection of the arbitrator's conclusion that Hutson's demand
for arbitration was timely. Bull contends that Hutson was bound by the
procedural requirements of AAA Commercial Arbitration Rule 6, which
requires that a claimant's written notice of its intention to arbitrate
"shall contain a statement setting forth the nature of the dispute, the
amount involved, if any, the remedy sought, and the hearing locale
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requested" and that the claimant "shall file at any regional office of
the AAA three copies of the notice and three copies of the arbitration
provisions of the contract." Bull asserts that Hutson's claims are
barred because he failed to file three copies of his 1991 requests with
the American Arbitration Association and failed to specify the locale
requested. Thus, Bull says, only the 1995 claim is operable, and that
claim was too late.
In his Modified Phase 1 Award, the arbitrator found that the
claim for arbitration was not untimely. That conclusion must be upheld
unless it was made in manifest disregard of the law or we are convinced
that the arbitrator exceeded his authority. Neither of these
conditions exist.
The arbitrator referred to the contract as one of adhesion
but, of course, even a contract of adhesion is enforced unless
unconscionable or unfair. See Lechmere Tire & Sales Co. v. Burwick,
277 N.E.2d 503, 506 & n.3 (Mass. 1972) (adhesion contracts generally
enforceable unless unconscionable, offend public policy, or shown to be
unfair in the particular circumstances), cited in Chase Commercial
Corp. v. Owen, 588 N.E.2d 705, 708 (Mass. App. Ct. 1992). We think,
however, that what the arbitrator rather clearly meant is that
effective notice was given to the company even if not in precisely the
formal terms that were specified in the contract; that the contract was
drafted by the company and the cross-reference to the arbitration rules
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was not as informative as it should have been; and that in substance
the company got the gist of what it had bargained for and that was
enough to satisfy the contract. Under Massachusetts law, the governing
law here, contracts of adhesion are construed strictly against the
drafter and the risks of ambiguity fall on the drafter. See 17 R.
Bishop, Massachusetts Practice, § 2.2, at 15 (4th ed. 1997). After
all, the interpretation by the Hutsons, lay people, that they were
"demanding" arbitration by sending letters to the company asking for
arbitration is an eminently sensible one.7
The magistrate judge also incorrectly concluded that the
arbitrator had exceeded his authority. The parties' stipulation
expressly set forth the issues to be decided -- timeliness and
compensation due -- authorizing the arbitrator to interpret the
contract's time-limitation provision.8 The arbitrator's inquiry
7 The nature of judicial review of arbitral action is
complicated by the fact that arbitrators need not state any reason for
their decision, United Steelworkers of America v. Enterprise Wheel &
Car Corp., 363 U.S. 593, 598 (1960), and, if they choose to say
anything, are often remarkably terse. In light of the arbitrator's
earlier odd statement in the first order that there was no contract at
all and the rather bare reference to the contract of adhesion in the
modified order, the view taken by the magistrate judge is
understandable (although wrong).
8 This case is distinguished from one in which a court asked
to compel arbitration determines, in the first instance, whether the
parties agreed to arbitrate their dispute at all. See Coady v.
Ashcraft & Gerel, No. 99-2165, --- F.3d ---, 2000 WL 1072386 (1st Cir.
Aug. 8, 2000). In that type of case, "the court is to make this
determination by applying the federal substantive law of arbitrability,
applicable to any arbitration agreement within the coverage of the Act
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rationally encompassed what the clause required, whether it was
enforceable, and whether Hutson complied with it. As other courts have
noted, "the arbitrator's interpretation of the scope of the issue
submitted to him is to be treated with great deference," Federated
Dept. Stores v. United Food & Commercial Workers Union, Local 1442, 901
F.2d 1494, 1498 (9th Cir. 1990), and "must be upheld so long as it is
rationally derived from the parties' submission." Richmond,
Fredericksburg & Potomac R.R. Co. v. Transportation Communications
Int'l Union, 973 F.2d 276, 280 (4th Cir. 1992); see also Mobil Oil
Corp. v. Independent Oil Workers Union, 679 F.2d 299, 302 (3d Cir.
1982).
As such, there is no basis for the matter to be remanded to
a different arbitrator. We have reversed the finding that the former
arbitrator manifestly disregarded the law and exceeded his authority,
and there is no showing of bias or prejudice that would warrant
remanding the case to a new arbitrator. Cf. Grand Rapids Die Casting
Corp. v. Local Union No. 159, 684 F.2d 413, 417 (6th Cir. 1982)
. . . . [A]lthough questions of arbitrability must be addressed with a
healthy regard for the federal policy favoring arbitration . . . . The
Arbitration Act establishes that, as a matter of federal law, any
doubts concerning the scope of arbitrable issues should be resolved in
favor of arbitration, whether the problem at hand is the construction
of the contract language itself or an allegation of waiver, delay, or
a like defense to arbitrability." Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985) (internal quotation
marks and citations omitted).
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(arbitrator's "outburst against the language of the contract
compromise[d] appearance of impartiality"); Stroehmann Bakeries, Inc.
v. Local 776 Int'l Brotherhood of Teamsters, 762 F. Supp. 1187, 1189-90
(M.D. Pa. 1991) (arbitrator expressed personal opinions derogatory to
victim of sexual assault, used inappropriate language, and exhibited
personal bias), aff'd, 969 F.2d 1436 (3d Cir.), cert. denied, 506 U.S.
1022 (1992).
III.
We reverse the vacatur of the arbitrator's "Modified Phase
1" Award, direct entry of judgment confirming that arbitral award, and
direct that the case to be remanded for arbitration of all remaining
issues.
So ordered.
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