Laws v. Morgan Stanley Dean Witter

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT June 9, 2006
______________________
Charles R. Fulbruge III
No. 05-20626 Clerk
______________________

RHEA H. LAWS,

Plaintiff - Counter Claimant - Appellant,

v.

MORGAN STANLEY DEAN WITTER,

Defendant - Counter Defendant - Appellee.

______________________

Appeal from the United States District Court
for the Southern District of Texas
_____________________

Before DEMOSS, BENAVIDES, and PRADO, Circuit Judges.

BENAVIDES, Circuit Judge:

The sole question in this appeal is whether an arbitration

panel committed misconduct when it denied the Appellant’s request

for a continuance. We agree with the district court that Appellant

has not shown misconduct and therefore affirm.

I. BACKGROUND

In October 2000, Appellee Morgan Stanley instituted

arbitration proceedings against Appellant Rhea Laws through the

National Association of Securities Dealers.1 Morgan Stanley sought

1
We draw our account of the basic facts in this case primarily
from the district court’s opinion. See Laws v. Morgan Stanley Dean
Witter, C.A. No. H-04-999, slip op. at 1–2 (S.D. Tex. June 3,
2005).
to recover an alleged deficit of $689,115.19 in Laws’s margin

account. The arbitration hearing was eventually set for February

4, 2003. After the arbitration had been pending for more than

three years, and only two months before the scheduled hearing, Laws

served his first request for documents on Morgan Stanley. Morgan

Stanley timely responded on December 29, 2003, but its response

contained numerous objections. On January 13, 2004, Laws moved to

compel production of the undisclosed documents.

On January 28th, the arbitration panel granted the motion to

compel in part. It directed Morgan Stanley to produce certain

documents by February 2nd, two days before the February 4th

hearing. Apparently, neither side objected to this deadline.

Between January 28th and January 30th, Morgan Stanley responded to

the order by issuing supplemental discovery.2 The day before the

hearing, Laws moved for a continuance. He argued that he needed at

least thirty days to review the materials Morgan Stanley had

produced. Morgan Stanley opposed the motion, and the panel

summarily rejected Laws’s request for further delay.

After the arbitration panel ruled against him, Laws filed suit

in district court. Laws sought vacatur, arguing that the

arbitration panel had committed misconduct in denying him a

2
In his brief, Laws claims that he received some discovery
after the February 2nd deadline. However, Laws fails to cite to
any record reference to support his claim. The district court
found no evidence that any documents were tendered late. See Laws,
C.A. No. H-04-999, at 6 n.1.

2
continuance. The district court ruled in favor of Morgan Stanley,

and this appeal followed.

II. STANDARDS FOR VACATUR

The Federal Arbitration Act allows federal courts to vacate an

arbitration award “where the arbitrators were guilty of misconduct

in refusing to postpone the hearing, upon sufficient cause shown

. . . or of any other misbehavior by which the rights of any party

have been prejudiced.” 9 U.S.C. § 10(a)(3) (2000). “To constitute

misconduct requiring vacation of an award, an error in the

arbitrator’s determination must be one that is not simply an error

of law, but which so affects the rights of a party that it may be

said that he was deprived of a fair hearing.” El Dorado Sch. Dist.

No. 15 v. Cont. Cas. Co., 247 F.3d 843, 848 (8th Cir. 2001)

(internal quotation marks omitted); see also Apex Fountain Sales v.

Kleinfeld, 818 F.2d 1089, 1094 (3d Cir. 1987) (“Under Federal law,

misconduct apart from corruption, fraud, or partiality in the

arbitrators justifies reversal only if it so prejudices the rights

of a party that it denies the party a fundamentally fair

hearing.”). We review the district court’s application of these

principles de novo. See Prestige Ford v. Ford Dealer Computer

Servs., 324 F.3d 391, 394 (5th Cir. 2003).

III. ANALYSIS

For the following reasons, we reject Laws’s claim under

section 10(a)(3). To begin with, Laws has not argued, much less

3
shown, that he suffered prejudice from the panel’s refusal to delay

the proceedings. Cf. United States v. Gourley, 168 F.3d 165, 172

n.11 (5th Cir. 2003) (“Our Court reviews a district court’s denial

of a motion for continuance for abuse of discretion resulting in

serious prejudice.”) (internal quotation marks omitted). His brief

does not indicate that the documents at issue were material to his

case. He has not explained how he would have presented his case

differently at the arbitration hearing had he been given more time

to review the documents. Absent even a representation that the

materials produced on the eve of arbitration were important to his

case or that a continuance might have altered the outcome of the

arbitration, we cannot conclude that Laws was deprived of a fair

hearing.

Even if Laws would have benefitted from a continuance, he

still could not show misconduct. Laws was not denied a fair

hearing because the record supports several bases on which the

panel reasonably could have denied him a continuance. See El

Dorado Sch. Dist., 247 F.3d at 848 (“Courts will not intervene in

an arbitrator’s decision not to postpone a hearing if any

reasonable basis for it exists.”); Scott v. Prudential Sec., 141

F.3d 1007, 1016 (11th Cir. 1998) (“In reviewing an arbitrator’s

refusal to delay a hearing, we must decide whether there was any

reasonable basis for failing to postpone the hearing . . . .”)

4
(internal quotation marks omitted).3 First, the panel reasonably

could have concluded that Laws failed to present good cause for

delay. See In re Arbitration Between: Trans Chem. & China Nat’l

Mach. Imp. & Exp., 978 F. Supp. 266, 307 (S.D. Tex. 1997), adopted

by Trans Chem. v. China Nat’l Mach. Imp. & Exp., 161 F.3d 314, 319

(5th Cir. 1998). Laws’s conclusory motion for continuance

represented that he was currently receiving discovery and argued

that he would need thirty days to “investigate” the production and

assess its “accuracy and application to this suit.” Laws failed to

present the panel with any showing that the documents he had

recently received were complex, voluminous, or important.

Second, the panel also might have reasonably denied the

continuance in light of the fact that the arbitration had been

pending for more than three years. It could have concluded “that

the proceeding had already been protracted so long as to violate

the policy of expeditious handling of such disputes.” Schmidt v.

Finberg, 942 F.2d 1571, 1574 (11th Cir. 1991).

Third, the panel reasonably could have decided that further

delay would be inequitable. Laws waited more than three years

3
See also Floyd County Bd. of Educ. v. EUA Cogenex Corp., 1999
WL 1023704, *2–3 (6th Cir. Nov. 5, 1999) (unpublished) (applying
the “any reasonable basis” test); Fogelman v. Testerman, 1998 WL
795194, *2 (4th Cir. Nov. 17, 1998) (unpublished) (same); Martin v.
Little, 1991 WL 34941, *1 (E.D. La. 1991) (unpublished) (“[T]he
test is whether ‘there exists a reasonable basis for the
arbitrator’s considered decision not to grant a postponement
. . . .’”) (quoting Storey v. Searle Blatt, Ltd., 685 F. Supp. 80,
82 (S.D.N.Y. 1988)).

5
(until only two months before the scheduled hearing) to institute

any discovery.4 Although Laws was ultimately unsatisfied with

Morgan Stanley’s responses, Morgan Stanley did respond to his

request in a timely fashion. Laws, however, neglected moving for

a continuance until the day before the hearing even though he knew

in advance that he would be receiving discovery on the eve of

arbitration. Accordingly, the panel may have concluded that

Laws—having waited for more than three years before initiating

discovery—was responsible for his situation. Further delay may

have been unfair to Morgan Stanley. See El Dorado Sch. Dist., 247

F.3d at 848 (holding that the arbitrator reasonably could have

determined “that postponement was inappropriate because the parties

had expended considerable time, effort and money based on the

hearing dates”). Indeed, Laws’s own motion for continuance

acknowledged that the attorneys in the case would have to cancel

flight plans at the last minute.

In light of these reasonable bases for denying Laws’s

continuance, the panel did not deny him a fair hearing.

IV. CONCLUSION

Laws has not shown misconduct. We will not disturb the

arbitration panel’s judgment.

AFFIRMED.

4
Laws’s brief provides no explanation for this delay in
seeking discovery.

6