FILED
United States Court of Appeals
Tenth Circuit
August 19, 2011
UNITED STATES COURT OF APPEALS
Elisabeth A. Shumaker
Clerk of Court
FOR THE TENTH CIRCUIT
KERRY R. HICKS,
Plaintiff-Appellee,
v. No. 10-1575
(D.C. No. 1:04-CV-02616-ZLW-KLM)
DANIEL C. CADLE, (D. Colo.)
Defendant-Appellant,
and
THE CADLE COMPANY; BUCKEYE
RETIREMENT CO., LLC, LTD.;
WILLIAM E. SHAULIS,
Defendants.
ORDER AND JUDGMENT *
Before HARTZ, Circuit Judge, and HOLLOWAY and PORFILIO, Senior
Circuit Judges.
*
After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and
collateral estoppel. It may be cited, however, for its persuasive value consistent
with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
Defendant Daniel C. Cadle appeals from a district court order confirming
an arbitration award of $3.15 million, plus prejudgment interest, against him on
plaintiff Kerry R. Hicks’s claims of defamation and intentional infliction of
emotional distress. While couched in various ways, all of Mr. Cadle’s objections
concern whether the dispute was properly referred to arbitration. The district
court rejected Mr. Cadle’s objections for alternative reasons, holding that he was
judicially estopped from challenging the arbitrator’s authority and that the dispute
was in any event properly referred to arbitration. On de novo review, McWilliams
v. Logicon, Inc., 143 F.3d 573, 575 (10th Cir. 1998), we affirm on the basis of
judicial estoppel and hence do not address any issues unrelated to that rationale.
I. THREE PHASES OF ARBITRATION
A summary of the successive phases of arbitration between the parties will
put this appeal, involving the third phase, in context. See Hicks v. Bank of Am.,
N.A. (Hicks I), 218 F. App’x 739 (10th Cir. 2007) (appeal from first phase), and
Hicks v. Cadle Co. (Hicks II), 355 F. App’x 186 (10th Cir. 2009) (appeal from
second phase). In 2002, Buckeye Retirement Company (Buckeye), alter ego of
the Cadle Company (Cadle Co.), 1 purchased a $1 million promissary note held by
Bank of America (BOA). While Mr. Hicks was nominally liable, jointly and
1
Buckeye and Cadle Co. were recognized as alter egos by this court in the
decisions cited above. References herein to “Cadle defendants” include Buckeye,
Buckeye manager William Shaulis, Cadle Co., and Daniel C. Cadle.
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severally, for the full amount of the initial version of the (twice-renewed) note, in
light of a collateral agreement between him and BOA, he was not liable on the
renewed $1 million note, and BOA so informed Buckeye. Buckeye nevertheless
sued Mr. Hicks on the note in Tennessee federal district court in 2003.
The note has an arbitration clause providing that
any controversy or claim between or among the parties hereto
including but not limited to those arising out of or relating to this
instrument, agreement or document or any related instruments,
agreements or documents, including any claim based on or arising
from an alleged tort, shall be determined by binding arbitration in
accordance with the Federal Arbitration Act[.]
Aplt. App. Vol. I at 8-9. Invoking this clause, Mr. Hicks initiated arbitration in
Colorado against BOA for fraud and against Cadle defendants for bringing suit
against him in Tennessee in violation of the clause and for tortious collection
activities. BOA repurchased the $1 million note from Buckeye, leading to the
dismissal of the suit in Tennessee. But the Colorado arbitration against Cadle
defendants for their conduct in attempting to collect on the note continued.
In the meantime, Buckeye’s manager sent letters to the Tennessee and
Colorado Attorneys General suggesting that Mr. Hicks be investigated for bank
fraud. This prompted Mr. Hicks to file suit in Colorado against BOA and Cadle
defendants, seeking redress for abuse of process, defamation, and intentional
infliction of emotional distress relating to the letters as well as for the alleged
wrongdoing already under review in the Colorado arbitration proceeding. BOA
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removed the suit to federal court and then, joined by Cadle defendants and
opposed by Mr. Hicks, moved for a stay on the ground that the suit had to proceed
by way of arbitration in light of the arbitration clause in the underlying note.
After the stay was granted, the arbitrator bifurcated the expanded proceeding
before him into a phase one, involving the claims arising out of the Tennessee
collection suit, and a phase two, involving the claims arising out of the letters
sent to the state attorneys general.
The first phase concluded with an award of $400,000 in damages plus fees
for Mr. Hicks. The district court confirmed the award, rejecting a challenge to
the arbitrator’s authority over Cadle Co., which had not purchased the note or
filed the suit to collect on it and argued that it could not be bound by the
arbitration provision it contained. We affirmed the district court’s rejection of
this challenge for two reasons: “First, there was abundant evidence . . . that
Cadle and Buckeye operated as alter-egos.” “Second, and more importantly,
Cadle vigorously participated in the arbitration, advancing a counterclaim against
Hicks and joining in BOA’s motion to stay pending completion of the
arbitration.” Hicks I, 218 F. App’x at 746. As to the second point, we invoked
waiver/estoppel principles that are relevant to the instant appeal:
Cadle defendants asserted that this action must be arbitrated because
the arbitration clause in the note clearly encompassed all of the
issues and claims Hicks asserted. Cadle therefore waived its
objection to arbitration and is estopped from arguing that the
arbitrator lacked personal jurisdiction to enter an award against it.
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Id.
The second phase of arbitration also concluded favorably to Mr. Hicks.
The arbitrator allowed him to amend his claims to conform to evidence showing
another fourteen defamatory communications regarding bank fraud and perjury,
and then awarded him nearly $2 million in compensatory and punitive damages,
with interest. The district court confirmed the damages award, rejecting again
Cadle defendants’ objections that the arbitrator lacked jurisdiction over them and
the tort claims asserted against them. We agreed. Regarding Cadle defendants’
objection that Mr. Cadle could not be subject to the arbitration clause since he
was never a party to the note, we held he was “bound by the arbitration clause as
agent[] of The Cadle Co. and Buckeye.” Hicks II, 355 F. App’x at 193. And we
had this to say in rejecting Cadle defendants’ objection that the arbitration clause
“did not provide a basis for arbitration jurisdiction over [them] for the new tort
claims” based on conduct directed toward Mr. Hicks “after [he] had been released
from liability under the note”:
We agree with the district court that the second-phase claims
were within the jurisdiction of the arbitrator. The note’s arbitration
clause applied to all controversies arising out of and relating to the
note. The note was binding on [BOA’s] successors. Defendants’
tortious actions are directly tied to the note. Defendants engaged in a
continuous course of wrongful conduct all arising from a note with a
broad arbitration clause.
Id. (citations omitted). Most importantly for our purposes here, in addition to
these direct rejoinders, we also held Cadle defendants were judicially estopped
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from challenging the arbitrator’s jurisdiction, even citing our prior holding to that
effect in Hicks I as law of the case. Id.
The third phase of arbitration began while the second was under judicial
review. The district court permitted Mr. Hicks to file a supplemental complaint,
promptly referred to the arbitrator, alleging tortious conduct by Mr. Cadle similar
to prior acts but occurring after the second-phase award. He had sent more letters
accusing Mr. Hicks of fraud and perjury, this time to attorneys general for Ohio
and California in addition to Tennessee and Colorado, as well as letters to the
Comptroller of the Currency and the Internal Revenue Service. In short, he “kept
on pursuing his crusade” against Mr. Hicks, Aplt. App. Vol. II at 263 (Arbitration
Award for third phase), through “a repetition and expansion of his acts in the
[second-phase] arbitration,” id. at 275. As the arbitrator recognized, “the conduct
in question [in the third phase] is substantially similar to that in th[e] previous
arbitration hearings” and “the core issues that gave rise to the arbitration [in the
second and third phases] are the same.” Id. at 260. The arbitrator awarded
Mr. Hicks $1.25 million in compensatory damages and $1.9 million in punitive
damages against Mr. Cadle.
II. JUDICIAL ESTOPPEL
Mr. Cadle challenged the third-phase award on the same grounds he raised,
unsuccessfully, in opposition to the first two phases, nevertheless insisting that
this time he should prevail. We agree with the district court that Mr. Cadle is
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again judicially estopped from denying that the arbitration clause covers the
claims asserted.
The district court held Mr. Cadle estopped from disputing the arbitrator’s
authority over the third-phase claims for the same reason he was estopped from
disputing the same point with respect to the substantively similar second-phase
claims referred to arbitration at his own insistence:
The claims in the [second phase] were compelled to arbitration based
on judicial estoppel because Defendants had stated to the Court their
position that the relevant arbitration clause “clearly encompasses all
issues and claims” asserted in the Amended Complaint. The “issues
and claims” in the Supplemental Complaint [i.e., the third-phase
claims] differ only in that they pertain to acts performed three years
later. . . . Thus, because Defendants, including Cadle, were
judicially estopped from asserting that the arbitrator lacked
jurisdiction over the claims in the [second phase], Cadle also is
judicially estopped from asserting that the arbitrator lacked
jurisdiction over the claims against him in the Supplemental
Complaint.
Id. at 360. Unable to gainsay the substantive commonality of the tort claims
involved in the second and third phases of arbitration, Mr. Cadle points to their
one distinguishing feature–chronology–and insists that it makes all the difference
in the applicability of judicial estoppel. He contends that because the referral to
arbitration instigated at his insistence involved only the second-phase claims, the
estoppel consequences of his action must be so limited and cannot be the basis for
holding him to the arbitration of the later-asserted third-phase claims.
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Mr. Cadle’s view of judicial estoppel, limiting it to specific claims rather
than applying it to the legal position he took in connection with those claims, is
unduly constricted, as revealed by comparison with the Supreme Court’s
controlling estoppel decision in New Hampshire v. Maine, 532 U.S. 742 (2001).
That case involved a dispute between New Hampshire and Maine regarding an
inland river boundary. While it was the first time they had litigated competing
claims over the river, twenty-five years earlier they had litigated rival claims over
lobster-fishing rights in the marine waters off the nearby coast. In the earlier
litigation, New Hampshire took the legal position that a 1740 English decree, as
jointly interpreted by the parties, should control boundary disputes in the area.
The marine boundary was fixed accordingly. But in the litigation over the river
boundary, New Hampshire sought an advantageous ruling by asserting a contrary
view of the 1740 decree. The Supreme Court rejected this gambit on judicial
estoppel grounds. For present purposes, it is most significant that the Court did
so without hesitating over the fact that the specific rights in dispute in the two
cases were different; the material point was that New Hampshire sought a
litigation advantage by taking incompatible legal positions in the cases.
The Court’s general articulation of the judicial estoppel principle reflects
this same focus on change of legal position:
Where a party assumes a certain position in a legal proceeding,
and succeeds in maintaining that position, he may not thereafter,
simply because his interests have changed, assume a contrary
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position, especially if it be to the prejudice of the party who has
acquiesced in the position formerly taken by him. . . . This rule,
known as judicial estoppel, generally prevents a party from
prevailing in one phase of a case on an argument and then relying on
a contradictory argument to prevail in another phase.
Id. at 749 (alteration omitted) (internal quotation marks omitted).
As we have seen, Mr. Cadle was able to force Mr. Hicks into arbitration on
his tort claims for defamation and intentional infliction of emotional distress by
taking a clear-cut legal position: Mr. Hicks’s tort claims arising from Mr. Cadle’s
accusations of fraud and perjury concerning Mr. Hicks’s liability on the
promissary note trigger the note’s arbitration provision. And in Hicks II we held
Mr. Cadle to that legal position when he tried to argue that the arbitration
provision did not apply. Now, in response to more claims of the same type based
on his continuation of similar tortious conduct, Mr. Cadle again tries to argue that
the arbitration provision should not apply. But this time, he insists, he is not
estopped from taking this self-contradicting position, because these were not the
same specific tort claims he previously succeeded in forcing into arbitration. The
weakness in this argument should be apparent from what we have already said
about the thrust of the New Hampshire decision: the focus of the estoppel
analysis is not on the particular claims at issue (coastal-versus-inland boundaries
in New Hampshire; initial-versus-later tort claims here), but on the litigant’s
tactical about-face in legal position (as to the effect of the 1740 decree in New
Hampshire and the effect of the arbitration provision here).
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Mr. Cadle has not cited any authority undercutting the guidance we have
drawn from the language and substance of the New Hampshire decision. We
therefore see no reason for questioning the application of judicial estoppel based
on the fact that the tort claims in the third-phase proceedings accrued and were
brought into the litigation after Mr. Cadle had successfully forced the
second-phase claims into arbitration.
Mr. Cadle also advances a much broader objection to the use of judicial
estoppel here. Indeed, he argues that the principle is unavailable per se in the
arbitration context, because it constitutes a compulsory override of the consent
that is the basic precept of arbitration under the Federal Arbitration Act (FAA),
see generally Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758,
1773-74 (2010). He is unable to cite any authority for this categorical position,
however, and of course it is contrary to our decisions in Hicks I and Hicks II. We
now make explicit what is tacit in those decisions: judicial estoppel here is
premised on Mr. Cadle’s own request for arbitration based on his position
regarding the effect of the arbitration clause, and it would be a perverse
understanding of the concept of consent to hold that a party has not consented to
arbitration that it voluntarily sought. Judicial estoppel does not override consent;
it enforces past consent by preventing tactical after-the-fact retraction. It is worth
noting that in Granite Rock Co. v. International Brotherhood of Teamsters,
130 S. Ct. 2847 (2010), a recent case repeatedly cited by Mr. Cadle, the Court
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considered the merits of an argument for arbitration by “waiver or estoppel”
without any indication that such legal principles were categorically inapposite in
that context, id. at 2863 (rejecting argument on the facts). In the absence of more
compelling argument and/or authority, we will not adopt a broad rule barring
application of estoppel principles to the question of arbitration.
We therefore agree with the district court that Mr. Cadle is estopped from
challenging the arbitrability of the tort claims asserted herein by Mr. Hicks. 2
The judgment of the district court is AFFIRMED.
Entered for the Court
John C. Porfilio
Senior Circuit Judge
2
Because arbitration “necessarily waives jury trial,” Harrington v. Atl.
Sounding Co., 602 F.3d 113, 126 (2d Cir. 2010), cert. denied, 131 S. Ct. 1054
(2011), our conclusion that this case was properly referred to arbitration
undercuts Mr. Cadle’s objection that he was wrongly denied a jury trial–a point
we recognized on his last appeal, see Hicks II, 355 F. App’x at 194 n.3.
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