Opposition Brief — Cullen v. Paine, Webber, Jackson & Curtis, Inc.

Suprame Court, US. |

FILED

9 wae 1, 88

No. 88-1699 yosePt £. seve

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In The oo ee

Supreme Court of the United States

October Term, 1988

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THOMAS P. CULLEN,

Petitioner,

VS.

PAINE, WEBBER, JACKSON & CURTIS, INC.

n/k/a PAINEWEBBER INCORPORATED,

Respondent.

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On Petition For Writ Of Certiorari To The United States

Court Of Appeals For The Eleventh Circuit

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BRIEF OF RESPONDENT IN OPPOSITION TO

PETITION FOR WRIT OF CERTIORARI

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*STEVE J. Davis

TerrRY R. Weiss

VAUGHAN, Davis, BircH & MurrHy

One Ravinia Drive

Suite 1500

Atlanta, Georgia 30346

(404) 395-6550

*Counsel of Record

COCKLE LAW BRIEF PRINTING CO.,, (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTIONS PRESENTED

1. Whether the Eleventh Circuit Court of Appeals

erred in ruling that Thomas P. Cullen (“Cullen”) could

not oppose the motion of Paine, Webber, Jackson &

Curtis, Inc. (“PaineWebber”) to Confirm Arbitration Deci-

sion because Cullen filed his Opposition and Cross-

Motion to Vacate weli beyond the three-month time

period that is expressly provided by Section 12 of the

Federal Arbitration Act.

2. Whether the Eleventh Circuit Court of Appeals

erred in ruling that Cullen’s pursuit of settlement nego-

tiations beyond the three-month time period did not

operate as a “due diligence” exception to Section 12

because Cullen never demonstrated that he was pre-

cluded from filing a motion to vacate within the three-

month time period.

ii

PARTIES

Thomas P. Cullen

Paine, Webber, Jackson & Curtis, Inc.

PaineWebber Incorporated

PaineWebber Group, Inc.

ili

TABLE OF CONTENTS

Page

SS 4 SS Ot Sr i

SSS Sa ii

SG ba iii

SE G04 9 | iv

OPINIONS AND JUDGMENTS BELOW ............ 1

a ee 2

Bd oe 2

EE a GE OFS) 2

SUMMARY OF THE ARGUMENT ................. 5

ee TG 6

A. The Federal Courts of Appeals Have Uni-

formly Held That The Expiration Of The

Three-Month Period Operates As An Absolute

Ee a ae 7

B. No Federal Court of Appeals Has Adopted A

“Due Diligence” Exception To A Timely Motion

oe vecere Under Section 12.................. 11

hee as poh sg ye dds ese ees ss ese ees 12

iv

TABLE OF AUTHORITIES

Page

Cases

American Postal Workers Union, AFL-CIO v. United

States Postal Service, 823 F.2d 466 (11th Cir. 1987) ..... 8

Arizona v. Maricopa County Medical Society, 457

ER. Me 2 > Soe ES pea ree re Pe eee 7

Brotherhood of Teamsters & Auto Truck Drivers, Local

Number 70 of Alameda County v. Celotex Corp.,

FOR Fae GOO Cie Cie BOG). ook. ikea ceesss ss 8

Chauffeurs, Teamsters, Warehousemen & Helpers,

Local Union Number 135 v. Jefferson Trucking Co.,

628 F.2d 1023 (7th Cir. 1980), c rt. denied, 449

Ria SEM LEER ae edn ne Rear terete er Eetees 8, 10

Detroit Edison Co. v. National Labor Relations Board,

OO RED ee GR ace cate ee or ae cee trees 7

Florasynth, Inc. v. Pickholz, 750 F.2d 171 (2d Cir.

SOY 6555-545 er dN AE AEE ene aa een 8, 9, 10

International Brotherhood of Electrical Workers, Local

Union Number 969 v. Babcock & Wilcox, 826 F.2d

Oe Cee Fe irs has ees Sues Vee decaces 8

Marks v. United States, 430 U.S. 188 (1977)......... 7, 20

Mobil Oil Corp. v. Higginbotham, 436 U.S. 618 (1978) .... 12

Occidental Chemical Corp. v. International Chemical

Workers Union, 853 F.2d 1310 (6th Cir. 1988)...... $, 9

Paul Allison, Inc. v. Minikin Storage of Omaha, Inc.,

52 F Saee. S72 >. Me. 2978) un. coho vs kansas 10

Piccolo v. Dain, Kalman & Quail, Inc., 641 F.2d 598

(Re Gan SOD oe cae eae eee eae ce ees 8, 11

TABLE OF AUTHORITIES - Continued

Page

Riko Enterprises, Inc. v. Seattle Supersonics Corp.,

Jaf F. Supp. S20 DS. POSE oka rk ceo Sess 10

Service Employees International Union, Local Number

36, AFL-CIO v. Office Center Services, Inc., 670

Fae S06 CO CE TOR ek cs irtedev te tentiae, 8, 9, 10

Shearson/American Express, Inc. v. McMahon, 482

TA ye er wry erry Soren ries kane 12

Stewart Organization, Inc. v. Ricoh Corp., 108 S.Ct.

ee SE ine Fee nO eee a a ee ae 12

Taylor v. Nelson, 788 F.2d 220 (4th Cir. 1986)....... 8, 11

The Hartbridge, 57 F.2d 672 (2d Cir. 1932)............ 10

Valley Forge Christian College v. Americans United

for Separation of Church and State, Inc., 454 U.S.

WG CRONE os io oss Fee aan VS aaa nee 7

STATUTES

ek ee EP rr ey eT Tre rerT res rrr rire. te fr 2, 4

DP US aes via ela one eee 2, 4

DT UA Oks 55 5 stato issesnest oe eee passim

TREATISE

M. Domke, Commercial Arbitration § 35:01 (1984).... 10

No. 88-1699

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In The

Supreme Court of the United States

October Term, 1988

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THOMAS P. CULLEN,

Petiticier,

VS.

PAINE, WEBBER, JACKSON & CURTIS, INC.

n/k/a PAINEWEBBER INCORPORATED,

Respondent.

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On Petition For Writ Of Certiorari To The United States

Court Of Appeals For The Eleventh Circuit

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BRIEF OF RESPONDENT IN OPPOSITION-TO

PETITION FOR WRIT OF CERTIORARI

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OPINIONS AND JUDGMENTS BELOW

The opinion of the Eleventh Circuit Court of Appeals

(P.A.-16-22) is reported at 863 F.2d 851. The opinion of the

District Court (P.A.-12-15) is unreported but may be

obtained at the United States District Court, Northern

District of Georgia, Atlanta Division, Civil No. 1:84-

cv-502-ODE entered on April 7, 1988.

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JURISDICTION

The judgment of the United States Court of Appeals

for the Eleventh Circuit was entered on January 17, 1989.

The Petition for Writ of Certiorari was filed on April 17,

1989. Jurisdiction of this Court is invoked under 28 U.S.C.

§ 1254(1).

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STATUTES INVOLVED

9 U.S.C. § 9 in pertinent part:

If the parties in their agreement have agreed that

a judgment of the court shall be entered upon the

award made pursuant to the arbitration, and shall

specify the court, then at any time within one year

after the award is made any party to the arbitration

may apply to the court so specified for an order

confirming the award, and thereupon the court must

grant such an order unless the award is vacated,

modified, or corrected as prescribed in sections 10

and 11 of this title. If no court is specified in the

agreement of the parties, then such application may

be made to the United States court in and for the

district within which such award was made.

9 U.S.C. § 10:

in either of the following cases the United States

court in and for the district wherein the award was

made may make an order vacating the award upon

the application of any party to the arbitration —

(a) Where the award was procured by corruption,

fraud, or undue means.

(b) Where there was evident partiality or corruption

in the arbitrators, or either of them.

(c) Where the arbitrators were guilty of misconduct

in refusing to postpone the hearing, upon suffi-

cient cause shown, or in refusing to hear evi-

dence pertinent and material to the controversy;

or of any other misbehavior by which the rights

of any party have been prejudiced.

(d) Where the arbitrators exceeded their powers, or

so imperfectly executed them that a mutual,

final, and definite award upon the subject mat-

ter submitted was not made.

(e) Where an award is vacated and the time within

which the agreement required the award to be

made has not expired the court may, in its dis-

cretion, direct a rehearing by the arbitrators.

9 U.S.C. § 12 in pertinent part:

Notice of a motion to vacate, modify, or correct

an award must be served upon the adverse party or

his attorney within three months after the award is

filed or delivered.

STATEMENT OF THE CASE

Petitioner Thomas P. Cullen (“Cullen”) is a former

employee and investment executive of Respondent Paine,

Webber, Jackson & Curtis, Inc. (“PaineWebber”). In Feb-

ruary, 1984, Cullen initiated this action in the Superior

Court of Fulton County, State of Georgia and alleged that

PaineWebber had engaged in certain tortious conduct and

that a promissory note between them was void (P.A.-17).

The suit was subsequently removed to the United States

District Court for the Northern District of Georgia,

Atlanta Division (the “District Court”) and was stayed

pending arbitration of all disputes between the parties.

(P.A.-2-3; P.A.-10).

On June 23 and 24, 1987, the Parties arbitrated their

respective claims before an agreed-upon panel of arbitra-

tors of the New York Stock Exchange, Inc. (P.A.-12). Fol-

lowing the two-day hearing, the Arbitrators issued a

written decision on June 24, 1987 awarding PaineWebber

$216,932.83. (P.A.-11). PaineWebber filed a timely motion

to reopen and to confirm the arbitration decision in the

District Court on November 20, 1987 pursuant to Section

9 of the Federal Arbitration Act, 9 U.S.C. § 9. (P.A.-12). On

December 9, 1987, over five months after the Arbitrators

had issued their award against Cullen, Cullen responded

to that motion by serving a cross-motion to vacate pur-

suant to Section 10 of the Federal Arbitration Act, 9

US.28 WW. 1F.A.-T2p.

In an Order dated April 5, 1988, the District Court

denied Cullen’s Section 10 motion on the ground that it

was time barred by the three-month limitation period of

Section 12 of the Federal Arbitration Act, 9 U.S.C. § 12.

(P.A.-15). The District Court also rejected Cullen’s argu-

ment that his failure to move to vacate within the statu-

tory three-month period should be forgiven under what

he termed as a “due diligence” exception to Section 12.

(P.A.-14-15). Accordingly, the District Court granted

PaineWebber’s motion to confirm and entered final judg-

ment against Cullen in the amount of $216,932.83.

(P.A.-15).

The Eleventh Circuit Court of Appeals affirmed.

(P.A.-22). Like the other Courts of Appeals that have

addressed the issue, the Eleventh Circuit ruled that the

failure of a party to move to vacate an arbitration award

within the three-month limitation period of Section 12

precludes him from contending that the award is invalid

even if it is asserted as a defense to a motion to confirm.

(P.A.-21). The Eleventh Circuit also was “unpersuaded”

by Cullen’s “due diligence” argument because he cited no

case in which such an exception was the basis for over-

turning an untimely motion to vacate and, even if it was a

recognized exception, Cullen had alleged insufficient

facts to show that he was prevented from filing a timely

motion to vacate. (P.A.-22). In summary, the Eleventh

Circuit found Cullen’s arguments to be “meritless” and

affirmed the judgment of the District Court. (P.A.-22 n. 5).

SUMMARY OF THE ARGUMENT

This Court should not grant certiorari because the

issues involved have been expressly resolved by Con-

gress in Section 12 of the Federal Arbitration Act, 9 U.S.C.

§ 12, and uniformly confirmed by all of the Courts of

Appeals to address those issues. Section 12 provides an

absolute bar to any attempt to vacate an arbitration deci-

sion beyond three months from the date that the Arbitra-

tors’ decision was filed or delivered. The strict mandate

of Section 12 applies to an untimely motion to vacate and

late opposition to motions to confirm. Petitioner’s failure

to meet a clear but generous filing deadline is not the

tvpe of matter that should be before this Court.

Moreover, despite Petitioner’s arguments to the con-

trary, there is no “due diligence” exception to Section 12’s

three-month time period. No Court of Appeals has

adopted one, and this Court should not establish such a

precedent on behalf of someone who failed to meet a

clear deadline established by Congress.

Finally, even if such an exception exists, Petitioner

has failed to satisfy it. The few courts which have even

considered the remote possibility of a due diligence

exception indicate that even if such an exception is

proper, it can only be met through a showing of best

efforts to file, excusable neglect and absence of prejudice

to the opposing party. In the present case, Petitioner has

failed to make such a showing. Accordingly, this Court

should deny the Petition for Writ of Certiorari.

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ARGUMENT

Petitioner asks this Court to address a question that

has received the same answer from all of the Courts of

Appeals to have reached it! and is expressly mandated by

Section 12 of the Federal Arbitration Act, 9 U.S.C. § 12.

This is not a case involving an important federal ques-

tion, implicating far-reaching national concerns which

might necessitate consideration by this Court. Rather, this

is simply a casewhere Petitioner failed to meet a clearly

1 Cullen specifically claims that the decision of the Elev-

enth Circuit below “is in conflict with another appellate court

case... ,” (P.-3), but does not cite a single case in support of

this argument. Similarly, it is absolute sophistry for Cullen to

claim that the Eleventh Circuit decision was based on a

“changed interpretation” of Section 12 (P. 7, 8) when he has

presented no authority from a single Court of Appeals demon-

strating an interpretation that was different from that of the

Eleventh Circuit. .

established and generous filing deadline. Accordingly,

further review is unwarranted.?

A. The Federal Courts Of Appeals Have Uniformly

Held That The Expiration Of The Three-month

Period Operates As An Absolute Bar

Section 12 of the Federal Arbitration Act provides an

aggrieved party a strict time limit of three months within

which to file a motion to vacate. Section 12 mandates:

Notice of a motion to vacate . .. must be served upon the

adverse party or his attorney within three months after

the award is filed or delivered.” 9 U.S.C. § 12.

Without exception, the federal Courts of Appeals

have ruled that the expiration of the three-month period

absolutely precludes any attempt to vacate an arbitration

2 Significantly, nowhere in the Petition for Writ of Cer-

tiorari does Cullen even attempt to argue that the instant case

satisfies the character of reasons in favor of granting certiorari

as stated in Rule 17.1 of the Rules of this Court. In fact,

Petitioner does not even cite one case from this Court in which

certiorari was granted under similar circumstances. See, e.g.,

Arizona v. Maricopa County Medical Society, 457 U.S. 332, 336

(1982) (granting certiorari because the undisputed facts dis-

closed a violation of a statute); Valley Forge Christian College v.

Americans United for Separation of Church and State, inc., 454 U.S.

464, 470 (1982) (granting certiorari because of the unusually

broad and novel view adopted by a Court of Appeals); Detroit

Edison Co. v. National Labor Relations Board, 440 U.S. 301, 304

(1979) (granting certiorari to consider an important question of

federal law); Marks v. United States, 430 U.S. 188, 189 (1977)

(granting certiorari to resolve a conflict in the Circuits).

8

decision. The three-month statute of limitations of Sec-

tion 12 also bars a party from opposing a motion to

confirm an arbitration award because such opposition is

viewed as tantamount to a motion to vacate.* The ration-

ale for the three-month rule under Section 12 is the rapid

resolution of arbitrated disputes. See American Postal

Workers Union, AFL-CIO v. United States Postal Service, 823

F.2d 466, 476 (11th Cir. 1987). As the Sixth Circuit Court

of Appeals has emphasized,

[a]n action to vacate an award challenges the under-

lying validity of the arbitration proceeding and

award. The policy of quickly resolving disputes sub-

ject to arbitration, . . . favors a short limitations

period for such challenges. Occasionally, in the

implementation process, however, parties to an arbi-

tration may be willing or find it necessary to readjust

the terms- of the arbitration award before seeking its

3 See, e.g., Occidental Chemical Corp. v. International Chemi-

cal Workers Union, 853 F.2d 1310, 1316, 1317 (6th Cir. 1988);

Taylor v. Nelson, 788 F.2d 220, 225 (4th Cir. 1986); Florasynth, Inc.

v. Pickholz, 750 F.2d 171, 175 (2d Cir. 1984); Brotherhood of

Teamsters & Auto Truck Drivers, Local Number 70 of Alameda

County v. Celotex Corp., 708 F.2d 488, 490 (9th Cir. 1983); Piccolo

v. Dain, Kalman & Quail, Inc., 641 F.2d 598, 600 (8th Cir. 1981).

See also International Brotherhood of Electrical Workers, Local

Union Number 969 v. Babcock & Wilcox, 826 F.2d 962, 965-66

(10th Cir. 1987); Service Employees International Union, Local

Number 36, AFL-CIO v. Office Center Services, Inc., 670 F.2d 404,

412 (3d Cir. 1982); Chauffeurs, Teamsters, Warehousemen &

Helpers, Local Union Number 135 v. Jefferson Trucking Co., 628

F.2d 1023, 1025 (7th Cir. 1980), cert. denied, 449 U.S. 1125 (1981).

4 Occidental, 853 F.2d at 1317; Babcock & Wilcox, 826 F.2d at

966; Taylor, 788 F.2d at 225; Florasynth, 750 F.2d at 175; Celotex,

708 F.2d at 490; Office Center Services, 670 F.2d at 412.

confirmation. Recognizing the realities of the mar-

ketplace, [the United States Congress] may with good

reason have allowed a longer period of time for the

confirmation of a concededly valid award without

forcing the parties to resort to judicial involvement.

Occidental Chemical Corp. v. International Chemical Workers

Union, 853 F.2d 1310, 1314 (6th Cir. 1988) (quoting Service

Employees International Union, Local Number 36, AFL-CIO

v. Office Center Services, Inc., 670 F.2d 404, 412 (3d Cir.

1982)).

In the present case, Cullen did not move to vacate

and raise his affirmative defenses to PaineWebber’s

motion to confirm until well over five months after the

Arbitrators issued their award. (P.A.-14).> Under the strict

mandate of Section 12, and the universal holdings of the

Courts of Appeals, Cullen was late in raising his objec-

tions and lost any right to move to vacate the arbitration

award.®

Despite the ciear mandate of Section 12 and the uni-

form decisions by the Circuit Courts of Appeals, Cullen

still contends that his motion was timely filed based upon

5 Although Section 12 states that the three-month period

does not begin to run until the arbitration award is “filed” or

“delivered,” courts interpret that the three-month time period

commences when the arbitrators issue their award. See, e.g.,

Florasynth, 750 F.2d at 177.

6 Cullen improperly argues that the arbitration award

should have been vacated supposedly because “[t]he arbitra-

tors’ conduct showed partiality and constituted misconduct

which prejudiced Mr. Cullen’s rights to a fair arbitration... .”

(P.-9). The Court is respectfully urged not to consider these

arguments because neither the District Court nor the Eleventh

Circuit below made any finding of fact or conclusion of law on

these points.

10

two district court opinions, Riko Enterprises, Inc. v. Seattle

Supersonics Corp., 357 F. Supp. 521 (S.D.N.Y. 1973) and

Paul Allison, Inc. v. Minikin Storage of Omaha, Inc., 452 F.

Supp. 573 (D. Neb. 1978). Of course, even if these deci-

sions were persuasive, they do not create a conflict

among the Circuit Courts of Appeals which would war-

rant this Court to consider granting certiorari. See, e.g.,

Marks v. United States, 430 U.S. 188, 189 (1977). Neverthe-

less, the courts in Riko and Paul Allison incorrectly errived

at their conclusions because they misconstrued a decision

of the Second Circuit Court of Appeals which_was-essen- —

tial to their respective holdings-Fae Hartbridge, 57 F.2d

672 (2d Cir. 1932).7 In fact, the Second Circuit Court of

Appeals in Florasynth overruled Riko and held that a

party who fails to move to vacate within the three-month

period loses the right to oppose an arbitration decision.

750 F.2d at 174-75. In light of the overwhelming rejection

of these two district court decisions and Cullen’s lack of

compelling authority, Cullen has asserted no grounds

whatsoever that should convince the Court to grant.

certiorari.§

7 Other courts have also underscored the misinterpreta-

tion of Tne Hartbridge by the Riko and Paul Allison courts. See,

e.g., Office Center Services, 670 F.2d at 411; Jefferson Trucking, 628

F.2d at 1026.

8 Cullen also cites M. Domke, Commercial Arbitration

§ 35:01 (1984), in support of his argument that his motion to

vacate was timely. Commercial Arbitration, however, is also

unpersuasive because it relies only on Paul Allison in drawing

its conclusion. See M. Domke, Commercial Arbitration § 35:01

awe #

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B. No Federal Court of Appeals Has Adopted A “Due

Diligence” Exception To A Timely Motion To Vacate

Under Section 12.

Section 12 of the Federal Arbitration Act does not

provide any exception whatsoever to the three-month

time limitation. See 9 U.S.C. § 12. Yet, Cullen, once again,

misinterprets the law and argues that “courts may yet

recognize a due diligence exception ... .” (P.-10) (citing

Taylor, 788 F.2d at 225). In fact, like the Eleventh Circuit

below, the Fourth Circuit Court of Appeals in Taylor

questioned the existence of an exception to Section 12

because it is “not implicit in the language of the statute,

and cannot be described as [a] common-law exception[ ]

because there was no common-law analogue to enforce-

ment of an arbitration award.” 788 F.2d at 225.

Moreover, like the aggrieved party to the arbitration

in Taylor, Cullen’s actions should not satisfy any such

“due diligence” exception. The few courts which have

even considered the possibility of a due diligence excep-

tion suggest that a due diligence defense will not be

successful absent a showing of best efforts to file, excus-

able neglect and absence of prejudice to the opposing

party. See, e.g., Taylor, 788 F.2d at 225; Piccolo, 641 F.2d at

601. Cullen has not made such a showing. There is no

reason why Cullen could not have filed his motion to

vacate within the statutory time frame in order to protect

his rights in the event that his settlement negotiations fell

through. (P.A.-22). Even Cullen does not argue that he

could not have filed his motion earlier. Moreover,

PaineWebber would have been prejudiced by the delay

because it had relied on the fact that the dispute had

finally ended. Accordingly, the Eleventh Circuit Court of

12

Appeals correctly rejected Cullen’s unfounded claim that

he met a so-called “due diligence” exception. (/d.).9

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CONCLUSION

For the foregoing reasons, Respondent PaineWebber

respectfully requests the Court to deny Cullen’s Petition

for Writ of Certiorari.

Respectfully submitted,

VAUGHAN, Davis, BircH & MurpPHyY

Steve J. Davis*

TeRRY R. Weiss

Attorneys for Respondent

PaineWebber Incorporated

One Ravinia Drive

Suite 1500

Atlanta, Georgia 30346

(404) 395-6550

*Counsel of Record

? Cullen spuriously contends that this Court’s decision in

Shearson/American Express, Inc. v. McMahon, 482 U.S. 220 (1987),

will somehow open the “floodgates to dispute resolution

through arbitration thereby necessitating guidance on the

duties of arbitrators and the various interpretations of the

section 12 statute of limitations.” (P.-11). As this Court

undoubtedly is aware, to follow the path as argued by Cullen

would be tantamount to this Court “rewriting” the Federal

Arbitration Act and impermissibly invading the province of

Congress. Mobil Oil Corp. v. Higginbotham, 436 U.S. 618, 625-26

(1978); see also Stewart Organization, Inc. v. Ricoh Corp., 108 S.Ct.

2239, 2242 (1988).