Bull HN Information Systems, Inc. v. Hutson

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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