MCI Telecommunications Corp. v. Matrix Communications Corp.

United States Court of Appeals
For the First Circuit

Nos. 96-2246
97-1570

MCI TELECOMMUNICATIONS CORPORATION,

Plaintiff, Appellee,

v.

MATRIX COMMUNICATIONS CORPORATION,

Defendant, Appellant.

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Edward F. Harrington, U.S. District Judge]

[Hon. Patti B. Saris, U.S. District Judge]

Before

Boudin, Circuit Judge,

Coffin, Senior Circuit Judge,

and Dowd,* Senior District Judge.

Richard W. Miller with whom Stephen R. Miller, Andrew C.

Gately, John D. Hanify, and Joseph A. Cortellini were on brief

for appellant.
Paul M. Smith with whom Ross B. Bricker, Terri L. Mascherin,

Mark A. Berthiaume, Louis J. Scerra, Jr., and David J. Brecher

were on brief for appellee.

January 27, 1998

*Of the Northern District of Ohio, sitting by designation.

COFFIN, Senior Circuit Judge. The parties in this case have

been engaged in a heated battle over the proper setting for their

underlying legal dispute. Appellee MCI Telecommunications Corp.

insists that the conflict must be resolved through arbitration,

while appellant Matrix Communications Corp. asserts that the

arbitration clause in the parties' contract does not apply here,

and that it is entitled to a judicial forum for its claims. The

district court sided with MCI -- thus ordering arbitration -- and

then rejected Matrix's motion under Fed. R. Civ. P. 60(b) to set

aside that ruling based on newly discovered evidence. Matrix

appeals both the judgment on the merits and the Rule 60(b)

decision. After close review of the tangled procedural backdrop

and the substantive issues, we affirm.

I. Factual and Procedural Background

Little needs to be said about the companies' underlying

dispute, which arises from an October 1995 agreement (the "Agent

Agreement") in which MCI gave Matrix limited agency to sell MCI

services. The Agent Agreement provided for substantial

commissions if Matrix generated a specified minimum amount of

revenue for MCI. Matrix alleged, inter alia, that MCI improperly

terminated the Agent Agreement eight months later, in June 1996,

because Matrix was so successful in obtaining customers that MCI

owed it more than one billion dollars in commissions that the

corporation did not wish to pay. MCI countered that termination

was proper because Matrix breached the terms of the Agent

Agreement in various ways.

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Following MCI's termination, Matrix filed suit in

Massachusetts state court. MCI removed the action to federal

court. It then moved to stay the litigation and compel

arbitration, on the ground that the language of the arbitration

clause in the Agent Agreement unambiguously evidenced the

parties' intent to arbitrate all disputes arising from that

agreement. The provision, contained in paragraph 22 of the Agent

Agreement, states:

Any dispute relating to this Agreement shall be
submitted for binding arbitration in accordance with
the rules contained in MCI Tariff FCC No. 1 and
judgement[sic] on any award entered therein may be
entered in any court of competent jurisdiction.

Matrix opposed the motion to stay, arguing that, because MCI

Tariff FCC No. 1 ("the Tariff") expressly limited arbitration to

customer billing disputes of $10,000 or more, and Matrix neither

was a customer nor had a billing dispute of any amount with MCI,

the arbitration clause did not apply to its dispute.1

1 A tariff is a detailed compilation of charges, regulations
and other relevant information about the provision of
telecommunications services to the public that common carriers
like MCI are required to file with the FCC. MCI Tariff FCC No. 1
is a voluminous document whose "Section B," labeled "Rules and
Regulations," spans 34 pages and contains nineteen separate
rules. Rule No. 7 is labeled "Payment Arrangements" and has
twenty-one subsections. One of those subsections, B-7.13, is
entitled "Arbitration of disputes," and states, in part:

All disputes concerning or affecting payment of
invoices issued after February 28, 1994 for charges
totaling $10,000 and above may be resolved through
binding arbitration.

Subsection B-7.13 is further divided into numerous parts that
detail the procedures to be used in such arbitrations. Section
.1327, for example, requires the Responding Party to file a
written answer within 17 days after the arbitration commences;

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Judge Harrington of the United States District Court for

the District of Massachusetts held a hearing on MCI's motion to

compel arbitration on September 27, 1996. Later that day, he

signed an order granting the motion, concluding that the

arbitration clause unambiguously reflected an intention by the

parties to arbitrate all disputes relating to the Agreement. In

his view, the Tariff was referenced not to define the scope of

the agreement to arbitrate but to provide the procedural rules

under which any arbitration would take place.

The same day, Matrix filed a notice of voluntary dismissal

under Fed. R. Civ. P. 41(a)(1)(i).2 In a letter to Judge

Harrington, Matrix's counsel explained that the company had

decided to ask the arbitrator to rule on whether Matrix could

receive all the relief it sought through arbitration. If so,

Matrix would consent to continue the arbitration; if not, Matrix

would refile its action in federal court.

Judge Harrington dismissed the action. On September 30, the

day both the order compelling arbitration and the grant of

dismissal were entered on the docket, Matrix initiated the

section .133 directs the case manager to hold an administrative
conference within nine days of the arbitration's commencement;
under section .1341, the appointed arbitrator may be removed only
for bias or "other good cause"; section .135 provides for an
exchange of documents and other information within 23 days after
the arbitration commences; and section .1391 provides for the
privacy of all arbitration conferences and hearings.

2 Although Judge Harrington may have ruled before Matrix
filed for dismissal, it appears that Matrix did not learn of the
ruling until later, and believed at the time it filed that the
decision would not be made for several days.

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arbitration by filing a claim with J.A.M.S./Endispute ("JAMS"),

the arbitration administrator designated by MCI in its Tariff.

Matrix argued to the arbitrator, as it had to the court, that its

claims were not arbitrable, and again relied on a reading of the

arbitration clause that limited its scope to billing disputes

exceeding $10,000.

MCI responded two days later, on October 2, by filing its

own action in federal court seeking to compel arbitration of

Matrix's claims. Although Matrix was at that point participating

in arbitration, MCI was concerned that Matrix would not follow

through if the arbitrator decided the threshold questions against

Matrix's position. Because of his involvement in the earlier

proceeding, Judge Harrington was assigned the MCI action.

Without additional hearings or any responsive pleading from

Matrix, he entered an order on October 10 compelling Matrix to

arbitrate all of its claims and awarding MCI attorney's fees.

Meanwhile, the arbitration that Matrix had initiated went

forward, and, on December 10, 1996, the arbitrator ruled that

Matrix's claims were arbitrable but that certain types of relief

sought by Matrix, including multiple damages and attorney's fees,

were unavailable in the arbitration because the Tariff barred

such remedies. In February 1997, Matrix filed a motion in

district court under Fed. R. Civ. P. 60(b), seeking relief from

the October 10 order. Matrix contended that MCI had fraudulently

induced it to enter into the arbitration clause in the Agent

Agreement by concealing an agreement between JAMS and MCI that

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provided for a close working relationship between the two

companies and specified various payments and services to be given

by MCI to JAMS. Matrix argued that the MCI/JAMS Agreement

constituted newly discovered evidence of bias on the part of JAMS

in favor of MCI. MCI opposed the motion, filing affidavits and

other materials in support of its position that the JAMS

Agreement had not been concealed and did not evidence bias on the

part either of JAMS, or, more importantly, the arbitrator.

Following a hearing, District Court Judge Saris denied the

Rule 60(b) motion,3 concluding that Matrix had failed to show the

elements necessary for post-judgment relief, see Hoult v. Hoult,

57 F.3d 1, 5-6 (1st Cir. 1995). See infra at 16.

Matrix appeals from the October 10, 1996 order compelling

arbitration of its claims, and the March 27, 1997 denial of its

rule 60(b) motion.

II. Discussion

Before discussing the district court's October 10 judgment

and its subsequent rejection of Matrix's Rule 60(b) motion, we

must address a threshold issue raised by MCI. It claims that,

because Matrix voluntarily submitted the issue of arbitrability

to the arbitrator, who then determined that Matrix's claims are

arbitrable, Matrix cannot at this juncture challenge the

arbitrator's authority to hear the case. This appeal, MCI

contends, is moot.

3 The case had been reassigned to Judge Saris subsequent to
Judge Harrington's October 10, 1996 order.

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We have little difficulty in concluding that the appeal

should go forward. From the outset, Matrix explicitly advised

the district court that it would return to the courtroom if the

arbitrator ruled that Matrix could not obtain all the relief it

sought in the arbitral forum. Although MCI cites language

suggesting that Matrix later agreed to arbitrate its claims if

the arbitrator ruled that they were arbitrable, we are persuaded

that that language was unfairly drawn out of context and that

Matrix's actual position has been consistently in opposition to

resolving its claims through arbitration unless it were possible

to obtain full relief. Indeed, we think it disingenuous, and

bordering on effrontery, for MCI to suggest otherwise.

We now turn to the issues raised by Matrix on appeal.

A. The October 10 Ruling

At the outset of our analysis, it is worth recalling the

context of the district court's decision on October 10 to compel

arbitration. The motion on which the court ruled was filed by

MCI on October 2. Only three working days earlier, on September

27, the court had held a hearing on arbitrability pursuant to

Matrix's action, and had concluded that the Agent Agreement's

arbitration clause embraced all disputes. That decision was not

enforced then because, virtually contemporaneously, Matrix

dismissed its suit. Seeking to resolve the arbitrability

question, MCI jumped in with its own action, and the court

responded on October 10 by compelling arbitration, thereby

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effectively (though not technically) reinstating its earlier

decision.4

If review of that decision posed only the question whether

the court properly interpreted the Agent Agreement to compel

arbitration of the parties' dispute, our task would be

straightforward and relatively easy. But several factors affect

our analysis, two of which complicate the inquiry. First, the

court ruled before Matrix had answered MCI's complaint seeking to

compel arbitration, and without a hearing, although Section 4 of

the Federal Arbitration Act states that "[t]he court shall hear

the parties" before ordering arbitration to proceed.5 The second

difficulty is that Matrix's appellate challenge to the

arbitration clause includes arguments that the district court

never considered, an omission that typically forecloses us from

taking them into account. See United States v. Bongiorno, 106

F.3d 1027, 1034 (1st Cir. 1997). The two problems obviously are

4 Matrix complains that the district court wrongly "based"
its October 10 order on the September 27 order, which had become
a "nullity" once Matrix dismissed its suit. Although Judge
Harrington's October 10 order stated that it was "[i]n accordance
with" the earlier decision, we take that as a shorthand reference
to the content of that decision -- which he chose not to repeat -
- rather than as a statement of precedent governing the October
10 ruling.

5 The relevant portion of the statute states:

The court shall hear the parties, and upon being
satisfied that the making of the agreement for
arbitration or the failure to comply therewith is not
in issue, the court shall make an order directing the
parties to proceed to arbitration in accordance with
the terms of the agreement.

9 U.S.C. 4.

-8-

intertwined; Matrix logically points out that it had no

opportunity to make any arguments to the district court because,

in its view, the court ruled prematurely.

The third factor, somewhat simplifying our task, is that

Matrix asserts that it does not challenge any procedural flaws in

the district court's ruling, specifically waiving its complaints

about the speed of the court's judgment and its failure to hold a

hearing. It maintains that we should resolve "the underlying

issue of whether Matrix must arbitrate its claims against MCI

since such a determination is largely a question of law in which

no material facts are in dispute." Procedural errors alone,

therefore, are waived as a basis for vacating the district

court's judgment.6

We address first the straightforward issue: whether the

arbitration clause in the Agent Agreement applies to the present

conflict.7 We think it does, finding unpersuasive Matrix's

argument that the reference to the Tariff in that clause meant

that the Agent Agreement limited arbitration only to customer

billing disputes in excess of $10,000 -- the types of claims

specifically arbitrable under the Tariff. Like the district

court, we think the only sensible reading is that the Tariff was

incorporated to provide a set of procedural rules for

6 In any event, as we discuss infra at 13-14, Matrix's

failure to raise issues before the district court in a motion for
reconsideration bars them on appeal.

7 Our review on this question is de novo. See Keystone

Shipping Co. v. New England Power Co., 109 F.3d 46, 50 (1st Cir.

1997).

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arbitrations arising from the Agent Agreement. Not only is the

opening language of the arbitration clause in the Agent Agreement

broad -- "any" dispute relating to this agreement "shall" be

submitted for arbitration -- but the limited construction

proposed by Matrix would have the absurd result of entirely

negating the arbitration provision. Under Matrix's view, because

the Agreement established an agency relationship between MCI and

Matrix, and the Tariff provided for arbitration only of customer

billing disputes, no issue arising between the two parties to the

Agent Agreement could fall within the arbitration clause. Matrix

explains this disjunction by arguing that the clause was inserted

to specify the dispute resolution procedure for customers brought

to MCI by Matrix. We find this argument to be implausible.

Either the MCI Tariff would directly govern the customers' claims

-- making reference to the Tariff in the Agent Agreement

unnecessary -- or the customers themselves would have to agree to

arbitration.

The Tariff language, moreover, reinforces our reading of the

Agent Agreement's arbitration provision. In subsection 7.13, the

portion titled "Arbitration of disputes," see note 1 supra, the

Tariff states that arbitrations "shall be conducted under the

arbitration rules and procedures set forth in Sections B-7.131

through B-7.139 (Rules)," which account for more than four pages

of text. Thus, while all of Section B of the Tariff carries the

heading "Rules and Regulations," this portion of Rule 7, which

governs arbitration, makes another, limited use of the term

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"Rules" to denote the specific provisions relating to

arbitration. It is much more reasonable to construe the use of

the word "rules" in the Agent Agreement's arbitration clause to

refer to the limited set of rules concerning arbitration than to

all nineteen rules contained in Section B of the Tariff on a

broad range of subjects.

In addition, when viewed against the backdrop of the federal

policy favoring arbitration, see, e.g., Volt Info. Sciences, Inc.

v. Board of Trustees, 489 U.S. 468, 475-76 (1989); Moses H. Cone

Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25

(1983),8 and the generous reading given to broadly worded

commercial arbitration agreements, see, e.g., Raytheon Co. v.

Automated Bus. Sys., 882 F.2d 6, 9-11 (1st Cir. 1989), the

provision here cannot bear the interpretation Matrix seeks to

assign to it. We thus agree with the district court that the

arbitration provision contained in paragraph 22 applies to any

dispute relating to the Agent Agreement, and that the Tariff was

incorporated by reference merely "to guide an arbitrator as to

how he should conduct his hearing."

Having concluded that paragraph 22 requires arbitration

between these parties, we must confront Matrix's assertion that

it was duped into accepting the provision by representations from

8 The Supreme Court in Moses H. Cone Memorial Hosp. stated

that "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."
460 U.S. at 24-25.

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MCI officials that the clause applied only to billing disputes

involving customers brought to MCI by Matrix. Fraud in inducing

acceptance of the arbitration clause unquestionably would negate

the contractual agreement on that issue. See generally Prima

Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403-04 &

n.12 (1967); see also Three Valleys Mun. Water Dist. v. E.F.

Hutton & Co., 925 F.2d 1136, 1139-40 (9th Cir. 1991); Wick v.

Atlantic Marine, Inc., 605 F.2d 166, 168 (5th Cir. 1979)("[i]f .

. . the arbitration clause was induced by fraud, there can be no

arbitration").

As noted above, however, Matrix never raised this issue of

fraud before the district court,9 a default that implicates our

bedrock principle that new arguments may not be made on appeal.10

See Bongiorno, 106 F.3d at 1034; Lawton v. State Mut. Life

Assurance Co. of Am., 101 F.3d 218, 222 (1st Cir. 1996). But

applying this rule to these circumstances presents something of a

puzzle. Matrix maintains that it cannot be penalized for failing

to assert all theories because the district court gave it no

opportunity to offer any, having ruled without a hearing and

9 In fact, in its Memorandum in Opposition to Defendants'
Motion to Stay Action and Compel Arbitration (in the first,
Matrix-filed lawsuit), Matrix stated: "Matrix does not contend
that the parties have not agreed to arbitrate pursuant to the
Tariff Rules, and therefore raises no questions about the
existence or validity of the arbitration agreement generally."

10 In reviewing the district court's substantive ruling, we
may not consider materials added to the record in connection with
the Rule 60(b) motion. See J. Geils Band Employee Benefit Plan

v. Smith Barney Shearson, Inc., 76 F.3d 1245, 1250 (1st Cir.

1996).

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before Matrix answered MCI's complaint. Seeking to avoid a

remand, Matrix waives any claim that the court's procedure was

improper and contends that the questions we face are legal in

nature and thus suitable for resolution by the appellate court.

Although we do not wish to condone precipitous action by the

district court (and the procedural irregularities), we have some

difficulty with Matrix's position. First, while interpretation

of the arbitration provision presents a legal question that is as

suitable for our review as for the trial court's, the issue of

fraud is decidedly fact-based and thus inappropriately brought to

us first. We may not assume the trial court's role of

factfinder. In addition, Matrix's assertion that it had no

opportunity to raise the issue of fraud before the district court

is at least somewhat disingenuous. Only days before MCI filed

its action, the district court had held a hearing on the

enforceability of the Agent Agreement's arbitration provision --

with no suggestion of fraudulent inducement. Putting to one side

the technical errors, which Matrix waives, the court reasonably

could assume that Matrix's position with respect to the

arbitration clause would be the same a week later.

It is theoretically possible, of course, for Matrix to have

changed its strategy during that interim, and for the district

court's quick action thus to have deprived Matrix of its most

direct opportunity to air the claim of fraud. If that were the

case, however, we would expect Matrix to have alerted the court

to its new position through a motion for reconsideration.

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Particularly when a new theory turns on questions of fact, we are

disinclined to stray from our longstanding raise-or-waive rule.

If Matrix did not have the information within the post-trial

motion period, its only recourse was through its 60(b) motion.

In short, neglecting to seek reconsideration meant omission

before the trial court of the fraud theory upon which Matrix now

wishes to rely. Although the circumstances here are peculiar, we

conclude that Matrix's "failure to move for reconsideration of

the district court order should not be excused," Vanhaaren v.

State Farm Mut. Auto. Ins. Co., 989 F.2d 1, 5 (1st Cir. 1993).

Cf. Berkovitz v. Home Box Office, Inc., 89 F.3d 24, 31 (1st Cir.

1996) ("[T]his court from time to time has refused to permit

appellants to take advantage of supposed oversights that had not

been called to the district court's attention by way of a timeous

motion to reconsider."); United States v. Schaefer, 87 F.3d 562,

570 n.9 (1st Cir. 1996) (failure to move to reopen the

proceedings or for reconsideration undercuts claim of surprise

about use of police report in suppression hearing); Beaulieu v.

IRS, 865 F.2d 1351, 1352 (1st Cir. 1989) ("[I]t is a party's

first obligation to seek any relief that might fairly have been

thought available in the district court before seeking it on

appeal."). We therefore conclude that Matrix has forfeited its

claim that the arbitration clause should be invalidated on the

basis of MCI's alleged statements that the arbitration clause did

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not apply to the Agent Agreement.11 Consequently, we affirm the

district court's October 10 judgment compelling arbitration.12

B. The Rule 60(b) Motion

Matrix's effort to undo the October 10 decision via Rule

60(b) rests on the agreement establishing JAMS as the

administrator of MCI's arbitration program. Under Rule 60(b)(2),

11 We recognize that Matrix's waiver of procedural errors
was motivated by a desire to have its claims heard promptly, in
this court. Omission of the hearing required by Section 4 of the
Arbitration Act also could have been addressed by the district
court if brought to its attention on a motion for
reconsideration, and, even if the issue were not waived, we would
be inclined to view it as defaulted.

12 Equally unavailing is Matrix's new contention that the
Agent Agreement's arbitration clause is invalid because the
Tariff arbitration rules foreclose remedies, such as multiple
damages, to which it is entitled. Putting aside the question of
waiver, this argument must be brought to the arbitrator because
it does not go to the arbitrability of the claims but only to the
nature of available relief. See Great W. Mortgage Corp. v.

Peacock, 110 F.3d 222, 230-31 (3d Cir. 1997) ("Any argument that

the provisions of the Arbitration Agreement involve a waiver of
substantive rights afforded by the state statute may be presented
in the arbitral forum. It would be anomalous for a court to
decide that a claim should be referred to an arbitrator rather
than a court, and then, by deciding issues unrelated to the
question of forum, foreclose the arbitrator from deciding
them."); PaineWebber Inc. v. Elahi, 87 F.3d 589, 599 (1st Cir.

1996) ("[T]he signing of a valid agreement to arbitrate the
merits of the subject matter in dispute presumptively pushes the
parties across the `arbitrability' threshold; we will then
presume that other issues relating to the substance of the
dispute or the procedures of arbitration are for the
arbitrator.")
Matrix's reliance on Graham Oil Co. v. ARCO Prods. Co., 43

F.3d 1244 (9th Cir. 1994), is misplaced because, unlike the
plaintiffs there, Matrix's claims are not brought under a statute
specifically designed to protect bargaining rights. The
applicable precedent in our circuit is instead that parties may
contract to limit remedies in arbitration. See Raytheon Co. v.

Automated Bus. Sys., 882 F.2d 6, 12 (1st Cir. 1989); see also

Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 60-62

(1995) (finding that arbitration agreement did not include "an
unequivocal exclusion of punitive damages claims").

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the district court has discretion to vacate a judgment based upon

"newly discovered evidence which by due diligence could not have

been discovered in time to move for a new trial under Rule

59(b)." See Hoult, 57 F.3d at 5-6.13 To prevail, a moving party

must demonstrate that "the missing evidence was `of such a

material and controlling nature as [would] probably [have]

change[d] the outcome.'" Id. at 6 (citations omitted).

Matrix argues that the MCI/JAMS Agreement easily satisfies

both the "newly discovered" and "material and controlling" impact

prongs of this standard. First, it asserts that it had no

ability to discovered the concealed agreement, which it contends

13 Although Matrix relied on both subsections (2) and (3) of
Rule 60(b) in the district court, its briefs on appeal do not
refer to subsection (3), which provides for relief from judgment
based upon fraud, misrepresentation, or other misconduct. See

Anderson v. Cryovac, Inc., 862 F.2d 910, 924 (1st Cir. 1988)

(setting forth the standard applicable to 60(b)(3) claims:
retrial mandated only when the challenged misconduct has
"substantially" interfered with aggrieved party's ability to
fully and fairly prepare for and proceed at trial). Matrix's
reply brief contained no such argument even in the face of MCI's
assertion in its brief that the 60(b)(3) claim was waived.
Matrix does argue generally, however, that the district court
orders should be vacated because of fraudulent conduct and
misrepresentations by MCI. To the extent that Matrix has not
waived a 60(b)(3) claim by failing to brief it fully, we find no
abuse of discretion in the district court's rejection of that
claim, as we agree with its conclusion that lack of access to the
MCI/JAMS Agreement was inconsequential in the proceeding before
Judge Harrington. As Matrix posits, if the MCI/JAMS Agreement
had been brought to Judge Harrington's attention, he would have
had to consider, in addition to the contractual language,
"whether a reasonable person would have agreed to an arbitration
provision that called for JAMS to handle the arbitration of
certain disputes, in view of the MCI/JAMS Agreement." As our
discussion of Matrix's 60(b)(2) claim demonstrates, see infra,

access to the MCI/JAMS Agreement would not have added measurably
to Matrix's effort to invalidate the Agent Agreement's
arbitration provision.

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even JAMS' general counsel was unaware of until this litigation

commenced.14 Second, Matrix emphasizes that the MCI/JAMS

Agreement reveals an improper relationship involving "substantial

financial and reporting ties" between MCI and JAMS, and it argues

that the Agreement's terms are so obviously suggestive of bias in

favor of MCI that its mere existence is enough to invalidate the

contested arbitration provision.

The district court, after a hearing, found Matrix's argument

lacking in several respects. We may reject its judgment only

upon finding an abuse of discretion, see Ahmed v. Rosenblatt, 118

F.3d 886, 891 (1st Cir. 1997); Hoult, 57 F.3d at 3. We are

unable to do so.

Judge Saris initially concluded that Matrix had failed to

show that, with due diligence, it could not have discovered the

evidence earlier. She pointed out that Matrix conceded at oral

argument that corporate sponsored arbitration programs are

commonplace, and that the MCI Tariff named JAMS as the company's

arbitration administrator. Had Matrix been concerned about the

details of the arrangement, she observed, it could have sought to

discover them.

14 Although Matrix asserts that JAMS' general counsel
"professes he was unaware of the MCI/JAMS Agreement until this
litigation commenced," the attorney, Michael Young, actually
stated that he was unfamiliar with the terms of the agreement,

not that he was unaware of any contractual relationship.

Matrix's attorney states that he discovered the agreement in
November 1996 as a result of an offhand remark by an attorney in
an unrelated case.

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Matrix argues on appeal, however, that it was essentially

foreclosed from conducting discovery by the sequence of

proceedings in the district court. In the original Matrix

lawsuit, MCI secured an extension of time to comply with its

obligation to make the voluntary disclosures required under Fed.

R. Civ. P. 26, which had the effect of holding off other

discovery. The court then granted the motion to compel

arbitration before the extended time period had expired. Matrix

argues that MCI therefore managed to avoid producing any

documents, including the undisclosed MCI/JAMS Agreement. In the

subsequent MCI lawsuit, no opportunity for discovery was

presented because the court's ruling preceded any action by

Matrix.

We need not resolve whether the district court erred in

finding that Matrix did not exercise due diligence with respect

to the MCI/JAMS relationship because we conclude, infra, that the

Agreement between them was not likely to have had an effect on

Judge Harrington's decision. Before moving on to the materiality

discussion, however, we wish to note that MCI's failure to make

the Agreement available when it first was requested from JAMS in

November 1996 is incomprehensible to us.15 Its refusal to do so

15 Matrix on November 8 requested that a copy of the
Agreement be provided before a meeting scheduled with the
arbitrator for November 15. In a reply sent on November 15, the
JAMS case manager directed Matrix to request the document via
subpoena as provided in the Tariff Arbitration Rules. A
conference was held on November 22 with counsel for both parties
and the arbitrator. Matrix again requested a copy of the
Agreement, but MCI refused to turn it over unless Matrix signed a
strict confidentiality agreement. Matrix would not sign such an

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undoubtedly fueled the already bitter nature of this litigation,

and intensified the wrangling over the Agreement's contents.

Moreover, while the provisions of the MCI/JAMS agreement are not

sufficiently troublesome to warrant the extraordinary relief for

which Rule 60(b)(2) is reserved, they do include matters

unquestionably of interest and concern to parties contracting to

arbitrate with MCI. Our judgment should not be taken to condone

MCI's nondisclosure.

Even if we were to conclude that the district judge erred

in finding a lack of diligence, her judgment that "Matrix's

motion flunks the materiality test" would stand as a separate

barrier to relief. After noting that the burden is on the party

presenting the new evidence to demonstrate that it would probably

have changed the outcome, and that Matrix was not challenging the

impartiality of the arbitrator selected by JAMS, Judge Saris

considered the provisions of the MCI/JAMS Agreement that Matrix

claimed were pivotal. She found only one that caused her to

hesitate in finding that the Agreement was entirely immaterial.

That provision precluded the arbitrator from making findings of

fact and conclusions of law. See App. at 1190 (MCI/JAMS

Agreement at Section XIIE). Judge Saris ultimately concluded

that the provision had no significant effect, and we agree.

agreement. On December 10, the arbitrator entered an order that
all documents exchanged in the arbitration would be confidential,
but Matrix did not receive notice of the order until the next
conference with the arbitrator, on January 8, 1997. The MCI/JAMS
Agreement was given to Matrix at that conference.

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MCI is an institutional litigant and probably has no

interest in having an arbitrator spell out findings and legal

rulings that might be used against it in future cases with its

customers. But there is no reason whatever to think that Matrix

would have regarded such a position as material. Its contract

does not involve ordinary customer disputes, and Matrix is fully

capable of litigating the matters afresh whether before an

arbitrator or in court.

Indeed, Matrix' only explanation as to why it might have

cared about the provision involves a terse suggestion that

arbitrator findings and conclusions might help Matrix establish

willfulness, a requirement that Matrix says is necessary to avoid

a limitation on liability otherwise imposed by the Tariff. That

limitation provision is not part of the Tariff arbitration rules,

however, and is therefore inapplicable.16 MCI argued that the

liability limitation is clearly directed under the Tariff to

delays and installation and like matters involving MCI's

relations with its customers and has nothing to do with this

case, and Matrix is visibly silent on this issue in its reply

brief. And, as it happens, the arbitrator in this case does

propose to make findings and conclusions.

16 We note that, like the arbitration rules in the MCI
Tariff, the MCI/JAMS Agreement explicitly states that it covers
the arbitration of customer payment disputes over $10,000. The

parties seem to assume that the Agreement also applies to other
arbitrations administered by JAMS for MCI, and we likewise are
presuming its relevance here.

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An additional factor reinforces the conclusion that the

provision was immaterial. "It has long been settled that

arbitrators are not required to make formal `findings of fact' to

accompany the awards they issue. Indeed, `[a]rbitrators have no

obligation . . . to give their reasons for an award at all.'"

Raytheon Co., 882 F.2d at 8 (citation omitted). See also

Prudential-Bache Sec., Inc. v. Tanner, 72 F.3d 234, 240 n.9 (1st

Cir. 1995) ("It is well established that arbitrators are not

required to either make formal findings of fact or state reasons

for the awards they issue.") Moreover, errors in an arbitrator's

legal rulings or factual findings do not provide a basis for

reversal. See, e.g., Prudential-Bache, 72 F.3d at 239 & n.6;

Eljer Mfg., Inc. v. Kowin Dev. Corp., 14 F.3d 1250, 1253-54 (7th

Cir. 1994); Advest, Inc. v. McCarthy, 914 F.2d 6, 8 (1st Cir.

1990). We cannot see how prohibiting a feature of arbitration

that was not guaranteed to begin with could be deemed

sufficiently material to have negated a party's willingness to

arbitrate.

Matrix also highlights various payments and "perks" that the

MCI/JAMS Agreement requires to be furnished by MCI to JAMS,

including provision of "[f]ree MCI 800 numbers," a "free MCI Mail

Account," and "[t]wo free dedicated phone lines." These

services, however, are for use in connection with the tasks JAMS

is required to provide under the contract (such as 24-hour

electronic docketing and toll-free response to inquiries from MCI

customers about arbitration), and we see nothing sinister in the

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communications company contracting to provide the "tools" for the

work it seeks to obtain from its contractor, particularly when

those tools are its stock-in-trade. Likewise, the payments

specified in the MCI/JAMS Agreement are for services to be

provided, plus a $40,000 start-up fee "to cover administration

design, computer services and technical support". See App. at

1192-95.

Matrix knew from the outset, or should have known, that JAMS

had a substantial relationship with MCI simply by virtue of its

role as administrator of MCI's arbitration program. Matrix

should have known as well that the two parties must have spelled

out their working relationship in some form; we think it

virtually inconceivable that there would be no written contract

between them. Moreover, many of the terms that Matrix claims to

find shocking in the MCI/JAMS Agreement were included in MCI's

public request for bids for a contract to administer its

arbitration program, meaning that those aspects of MCI's

relationship with its arbitration administrator effectively were

public knowledge when Matrix entered the Agent Agreement.17

With this much reasonably presumed to be already on the

table, we are unpersuaded that the district court would have

17 For example, the MCI/JAMS Agreement requires JAMS to
provide weekly reports on the status of current arbitrations, 24-
hour electronic docketing containing any change in the status of
cases, deadlines the parties must meet and any decisions that
affect what the parties must do, a centralized case scheduling
system, and an 800 number to handle inquiries about arbitration
from MCI customers. All of these services were contained in the
bid request. See App. at 1828-1830.

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deemed the additional information contained in the MCI/JAMS

Agreement material to Matrix's decision to participate in the

arbitration. None of the contacts between MCI and JAMS specified

in the Agreement involve the arbitrators who are deciding

cases,18 and Matrix's suggestion that any arbitrator working for

JAMS would have an inherent bias toward MCI, as JAMS' customer,

is contradicted by Matrix's explicit assurance that it did not

doubt the impartiality of the arbitrator assigned to its case.19

We consequently hold that the district court did not abuse its

discretion in denying Matrix's Rule 60(b) motion.

In sum, Judge Harrington, as the appeal is presented to us,

committed no reversible error in issuing the October 10 order

granting MCI's motion to compel arbitration, and Judge Saris did

18 In fact, the MCI/JAMS Agreement states that arbitrators
will be selected based on, among other factors, "absence of
conflicts of interest with MCI," and "demonstrated neutrality and
impartiality in professional practice". See Section XII(A). The

Agreement also provides:

ENDISPUTE will ensure that arbitrators serving on the
MCI panel have been screened for potential conflicts of
interest with MCI prior to inclusion on the panel.
When appointed to a particular proceeding, arbitrators
will be required to disclose any conflicts of interest
with MCI which may have developed during the interim
since the arbitrator's inclusion on the panel. In
addition, arbitrators will be screened prior to
appointment to a particular arbitration for potential
conflicts with the MCI customer who is a party to the
case.

Id. at (C).

19 The arbitrator is the Honorable Robert L. Steadman,
former chief justice of the Massachusetts Superior Court.

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not abuse her discretion in rejecting a new trial under Fed. R.

Civ. P. 60(b).

Their judgments accordingly are affirmed. Each party to

bear its own costs.

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